U.S. v. Milwitt
| Decision Date | 05 February 2007 |
| Docket Number | No. 05-10344.,05-10344. |
| Citation | 475 F.3d 1150 |
| Parties | UNITED STATES of America, Plaintiff-Appellee, v. John MILWITT, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Michael Shepard and James Mink, Heller Ehrman LLP, San Francisco, CA, for the defendant-appellant.
Kevin V. Ryan, Barbara Valliere, and Shawna Yen, United States Attorney's Office, San Jose, CA, for the plaintiff-appellee.
Appeal from the United States District Court for the Northern District of California; Charles R. Breyer, District Judge, Presiding. D.C. No. CR-04-00002-CRB.
Before J. CLIFFORD WALLACE, MICHAEL DALY HAWKINS, and SIDNEY R. THOMAS, Circuit Judges.
John Milwitt ("Milwitt") appeals his conviction of five counts of bankruptcy fraud and his sentence of twenty-four months imprisonment and three years supervised release. Milwitt challenges his conviction on several bases, including sufficiency of the evidence. Because the evidence presented was insufficient to sustain the verdict, we reverse the conviction.
Sometime prior to March 1997, Milwitt placed an advertisement in the yellow pages of the phone book under the headings of "Attorneys" and "Landlord Tenant Law." The advertisement was for a company called "AP Assistance" and suggested that the company could provide both legal services through attorneys as well as assistance for individuals representing themselves. The advertisement was one of the few, if not the only, that explicitly mentioned "tenants' rights." Milwitt never attended law school and has never been admitted to practice law.
Based on the advertisement in the yellow pages, several tenants, including the six tenants described in the indictment, who were having problems with their landlords, contacted Milwitt. The tenants paid Milwitt varying amounts of money for his assistance with defending their unlawful detainer actions. Each of the tenants testified that Milwitt represented himself as an attorney and that he seemed to know what he was talking about. Milwitt advised the tenants that they were entitled to withhold rent from their landlords. In addition, Milwitt told one of the tenants that she could use money that she withheld from her landlord to pay his fees.
Milwitt collected fees from each of the tenants. The tenants believed that Milwitt was going to represent them in unlawful detainer actions filed against them by their landlords. Although Milwitt collected fees from the tenants with the understanding that he would represent them in court, Milwitt only filed papers on their behalf. He did not appear in court for any of the unlawful detainer actions, and default judgments were entered in favor of each of the landlords.
Although Milwitt listed each of the tenants as appearing pro per on their court documents, the tenants believed that Milwitt was their attorney and taking care of their cases. Further, Milwitt listed a street address which actually corresponded to a general public mail services business where he rented a mailbox as the tenants' address on all documents he filed with the courts. Therefore, all correspondence relating to the cases was forwarded to Milwitt rather than to the tenants, slowing their discovery of Milwitt's failure to represent them.
Milwitt filed bankruptcy petitions on behalf of several of the tenants, without their authorization or knowledge. These bankruptcy petitions listed the relevant landlords as well as fabricated creditors. While the tenants did not know about or authorize the filing of these petitions, Milwitt did tell them that for various reasons they did not have to pay judgments entered against them or move out after receiving eviction notices. The petitions were filed under Chapter 13 of the United States Bankruptcy Code, and the petitions indicated that the debtors would be filing a plan for repayment of the debts.
In 1999, Milwitt was indicted and convicted on charges of the unauthorized practice of law in California state court. Milwitt was released from state custody in February 2002. On March 21, 2002, Milwitt was indicted on six counts of bankruptcy fraud in violation of 18 U.S.C. § 157.1 These charges were based on the bankruptcy petitions he filed on behalf of the tenants. In particular, the indictment states that between March 1997 and November 1998, Milwitt made "false and fraudulent representations, claims and promises concerning or in relation to a proceeding under [the Bankruptcy Code]" in relation to a scheme to defraud. The indictment describes the scheme in the following language:
2. Defendant Milwitt represented to persons threatened with eviction by their landlords that he would fight their eviction in court or negotiate an arrangement with their landlord.
3. Based on his solicitations a number of persons retained the defendant's services to stop the eviction process. Defendant Milwitt normally charged fees for his services, as well as reimbursement for filing fees and other expenses.
4. As a part of and in furtherance of his scheme, defendant Milwitt filed voluntary petitions with the United States Bankruptcy Court. . . . Under a provision of the United States Bankruptcy Code, the filing of a bankruptcy petition automatically suspends all judgments, collection activities, foreclosures, and repossessions of property, and prevents foreclosure on the property of a debtor until such time as the landlord or lender obtains relief from this stay or the bankruptcy is dismissed.
5. In fact, the bankruptcy petitions were shams: the clients did not grant defendant Milwitt permission to file for bankruptcy on their behalf. Rather, with intent to deceive and for the purpose of filing the bankruptcies identified above, the defendant forged the names of the clients on documents filed without their knowledge or consent. As a further part of the scheme to defraud, he frequently supplied false social security numbers on the petitions.
6. By filing the sham petitions, the defendant fraudulently interfered with the process of the United States Bankruptcy Court,2 and fraudulently obstructed the creditors' legal right to collect back rents, and repossess the properties.
7. On or about the dates listed below, the defendant John Milwitt, having devised a scheme to defraud, for the purpose of executing and concealing the scheme and attempting to do so, concerning or in relation to a proceeding under Title 11 of the United States, did file bankruptcy petitions in the Northern District of California in the following debtors' names using false and fraudulent representations, each such act being a separate violation of 18 U.S.C. Section 157.3
At the end of a two day jury trial, Milwitt was convicted of five counts of bankruptcy fraud.4 Milwitt timely filed a notice of appeal.
The evidence is sufficient to support a conviction if, "viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt." Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 61 L.Ed.2d 560 (1979). Milwitt challenges the sufficiency of the evidence to sustain the bankruptcy fraud conviction, contending that the government proved that he acted with the intent to defraud the tenants rather than "the intent to defraud a creditor" of the tenants as charged in the indictment.
Although "[m]odern bankruptcy's origins are in English criminal law," in our country, "the criminal side of bankruptcy has assumed a more modest role." 1 Collier on Bankruptcy ¶ 7.01 (Alan N. Resnick & Henry J. Sommer, 15th ed. rev.2006). Indeed, "every state legislature[has] enacted statutory and constitutional provisions that limit[ ] or entirely prohibit[ ] imprisonment for debt." Becky A. Vogt, State v. Allison: Imprisonment for Debt in South Dakota, 46 S.D. L. Review 334, 335 (2001) (internal quotation and citation omitted). The bankruptcy act passed by Congress in 1841 was the first in world history allowing individuals to obtain voluntary discharge of their debts. Jason K. Kilborn, Mercy, Rehabilitation, and Quid Pro Quo: A Radical Reassessment of Individual Bankruptcy, 64 Ohio St. L.J. 855, 858-59 (2003).
Although American bankruptcy law affords honest debtors civil remedies as a substitute for criminal punishment, Congress has always provided for the imposition of criminal penalties for those who abuse the bankruptcy system. The early enactments of Congress criminalized fraudulent and perjurious acts by debtors and creditors in connection with a bankruptcy. Craig Peyton Gaumer, Bankruptcy Fraud: Crime and Punishment, 43 S.D. L.Rev. 527, 532 (1998). With some modifications, these core bankruptcy criminal provisions have remained intact to this date, with the essential components codified into 18 U.S.C. § 152. Id. at 532-33.
In 1994, as part of the Bankruptcy Reform Act of 1994, Pub.L. No. 103-394, Congress enacted a new bankruptcy crime statute. The centerpiece of the new criminal provisions, as codified in 18 U.S.C. § 157, was intended to "deter[ ] a person from using the bankruptcy process to further[ ] fraudulent schemes." Gaumer, 43 S.D. L. Review at 535. Section 157 was "consciously patterned on the federal mail fraud statute." 1 Collier on Bankruptcy ¶ 7.07[1][a].
As opposed to the historic bankruptcy crimes, as exemplified in § 152, which concerns acts committed in the bankruptcy context, the focus of § 157 is a fraudulent scheme outside the bankruptcy which uses the bankruptcy as a means of executing or concealing the artifice. Specifically, § 157, the bankruptcy fraud statute under which Milwitt was charged, provides that:
A person who, having devised or intending to devise a scheme or artifice to defraud and for the purpose of executing or concealing such a scheme or artifice or attempting to do so—
(1) files a petition under title 11, including a fraudulent involuntary bankruptcy petition under ...
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