U.S. v. Cheal

• Decision Date: 15 November 2004
• Docket Number: No. 03-1333.,03-1333.
• Citation: 389 F.3d 35
• Parties: UNITED STATES of America, Appellee, v. Nancy J. CHEAL, Defendant, Appellant.
• Court: U.S. Court of Appeals — First Circuit

389 F.3d 35

UNITED STATES of America, Appellee, v. Nancy J. CHEAL, Defendant, Appellant.

No. 03-1333.

United States Court of Appeals, First Circuit.

Heard April 8, 2004.

Decided November 15, 2004.

COPYRIGHT MATERIAL OMITTED

William A. Gilmore, Jr., for appellant.

Diane C. Freniere, with whom Michael J. Sullivan, U.S. Attorney, was on brief, for appellee.

Before TORRUELLA, Circuit Judge, GIBSON, Senior Circuit Judge^*, and LIPEZ, Circuit Judge.

LIPEZ, Circuit Judge.

The defendant-appellant in this case, Nancy J. Cheal, pleaded guilty to five counts of mail fraud (18 U.S.C. § 1341) and two counts of wire fraud (18 U.S.C. § 1343), after being charged with bilking investors out of more than $2 million in an "international bank trading" scheme. The District Court then sentenced Cheal to a term of imprisonment of 87 months, with three years of supervised release to follow. The District Court also ordered Cheal to pay restitution in the amount of $2.1 million.

Cheal now raises four issues on appeal: (1) the compliance of her change-of-plea hearing with the requirements of Rule 11 of the Federal Rules of Criminal Procedure; (2) the evidentiary basis for the court's enhancement for obstruction of justice; (3) the court's failure to grant a downward departure on the basis of her alleged reduced mental capacity; (4) the timeliness of the court's entry of a restitution order.

Cheal's argument about the timing of her restitution order raises an issue of first impression in this circuit. Congress passed the Mandatory Victims Restitution Act of 1996, Pub.L. No. 104-132, 110 Stat. 1227 (codified as amended in scattered sections of 18 U.S.C.), to provide full restitution to identifiable victims of certain crimes, including mail and wire fraud, regardless of a defendant's ability to pay. One provision of that act, 18 U.S.C. § 3664(d)(5), directs that "the court shall set a date for the final determination of the victim's losses, not to exceed 90 days after sentencing." Cheal argues that the restitution order in this case, which was entered 127 days after sentencing, was invalid. As we explain below, any error that the district court may have committed by entering Cheal's restitution order after the 90-day period did not constitute plain error. We therefore affirm Cheal's convictions and sentence in their entirety.

I.

We take the facts from the presentence report ("PSR"), the transcript of the plea hearing, and the district court's findings. See United States v. Voccola, 99 F.3d 37, 43 (1st Cir.1996).¹

At the time of her criminal conduct, Nancy Cheal was 60 years old and lived in a five-bedroom double-wide trailer home along with her second husband and four great-grandchildren. She describes herself as the pastor to a small, nondenominational church in her hometown of Bunnell, Florida.

Beginning approximately eight years before the criminal conduct at issue in this case, Cheal ran a business out of her home called Relief Enterprise, Inc. Cheal claimed to run several private clubs somehow connected to Relief Enterprise with such names as the "Get America Out of Debt Private Club," the "Fatherless Children Private Club," and the "Senior Citizens' Private Club." Although the purpose served by these clubs is not clear, they seemed to be perpetually short of the funds that Cheal solicited on their behalf.

In October 1999, Cheal organized and began to advertise the investment scheme that led to her criminal convictions.² Its basic nature was simple fraud: by falsely asserting that she was an experienced trader in international securities and had the help of another experienced trader, Cheal induced thousands of investors to send her money in the hopes of an astronomical return on their investment. She told investors that the scheme paid 100% of the initial investment per week for twelve weeks.

Cheal was vague about the mechanism behind these remarkable numbers, referring only to "overseas trading" of some kind and the services of a renowned trader of international securities, one of only seven people in the world licensed to trade in a certain (unspecified) kind of investment. She also claimed to have trading experience herself. Cheal insisted that investors' money would not itself be used for the trades; instead, she would place it in a "safekeeping, non-depletion" account, which meant that it would not be risked in the deal.

Cheal also laced the scheme with religious and charitable elements, sometimes claiming that Relief Enterprise had bought a bank in Oklahoma, which, because it was on an "Indian Reservation," would not be subject to the usual federal regulations and could therefore offer mortgages at extremely low rates to help poor people buy homes. At other times, Cheal claimed that the purpose of the enterprise was to raise money to build a church. Although the precise charitable purposes varied, Cheal consistently maintained that she wanted to benefit the public and "help the little guy."

Along with other employees of Relief Enterprise working at her direction, Cheal disseminated her investment offer through faxes, e-mails, letters, and telephone calls. A referral fee of 1 to 5% also provided an incentive for people to spread the word. As a result of these efforts, Relief Enterprise managed to raise more than $2 million in a few months.

Not surprisingly, Relief Enterprise did not make its promised payments. Originally, the first payouts were to come in late October or early November 1999. As those dates came and went, Cheal offered excuses for the delay, ranging from a death in the trader's family to the Y2K computer bug. Then Cheal's scheme came to the attention of law enforcement.

On October 27, 1999, a disgruntled investor contacted the U.S. Secret Service with complaints about Relief Enterprise. Because of the use of the mails to carry out the scheme, the Secret Service passed the complaints on to the U.S. Postal Service. On October 28, a postal inspector, Louis Keith, met Cheal at a convenience store near her home for an interview. Cheal signed two declarations stating that she "initially had a solicitation to obtain loans to build a church" and that others had modified this solicitation without her knowledge or consent. Estimating that Relief Enterprise had so far collected between three and four thousand dollars, she said that she would refund the money by November 1 that had been sent to her by wire transfer and would return to the inspector all funds received in letters and packages. Finally, she promised "to cease receiving letters and packages relating to this solicitation and return them to the sender," and she authorized the Postal Service to intercept and return any future packages on her behalf.

On November 8, 1999, Cheal met again with Inspector Keith and gave him a box containing 1,296 checks totaling approximately $171,000.³ At this meeting, Inspector Keith confronted Cheal with evidence that she had made the 1200% (100% per week over twelve weeks) offer herself to at least one investor. She admitted that she had and that she "may" have made the offer to others.

Cheal, however, was deceiving Inspector Keith at this meeting. Rather than returning to him all of the funds that Relief Enterprise had so far collected, she had in fact instructed her employees to segregate investments into those worth less than $400 and those worth more. The smaller investments she gave to Inspector Keith; the larger investments, equaling at that point at least $1.3 million, she kept.

Subsequently, Cheal contacted the senders of the smaller investments to explain her legal difficulties and to ask them to send their money again by a private courier such as Federal Express or UPS. In some cases, one of Cheal's employees even explained that she had given the postal inspector only checks for less than $400 and had kept the rest and asked the investors to keep this information a secret.⁴ Cheal continued soliciting new investments as well.

Cheal used the proceeds from her investment scheme in a variety of ways. She paid off more than $100,000 in personal debt, gave $110,000 to a friend, gave bonuses to her attorney and employees, and made numerous purchases, including a minivan, a new trailer home for $67,000, and a big-screen TV. At one point, she tried to buy a $400,000 home with cash but was turned down.

On February 28, 2001, a grand jury sitting in the U.S. District Court for the District of Massachusetts returned an indictment charging Cheal with defrauding others of more than $2.1 million. The indictment listed five counts of mail fraud under 18 U.S.C. § 1341 and two counts of wire fraud under 18 U.S.C. § 1343. Cheal was arrested on March 2, 2001, in the Middle District of Florida and released on bond. On March 13, 2001, Cheal appeared for arraignment before the U.S. District Court in Massachusetts, which appointed counsel for her.

On September 6, 2001, the District Court ordered a psychiatric evaluation of Cheal. On January 8, 2002, after psychiatrists hired by the government and the defense had both advised that Cheal was competent to stand trial, the District Court agreed and the case moved forward.

On October 15, 2002, the first day of trial, Cheal pleaded guilty to all seven counts against her, and the court held a change-of-plea hearing as required by Rule 11 of the Federal Rules of Criminal Procedure. The Probation Office then prepared a PSR recommending a total offense level of 31 under the federal sentencing guidelines: a base offense level of 6, plus 13 because the total cost of the scheme to victims was more than $2.5 million, plus 2 for more-than-minimal planning, plus 2 because the crimes involved mass-marketing, plus 2 because Cheal misrepresented herself as acting on behalf of a charitable or religious agency. In addition, the PSR determined that Cheal should receive a four-level upward adjustment for her leadership role and a two-level upward adjustment for willful obstruction of...