U.S. v. Monostra

• Decision Date: 25 September 1997
• Docket Number: No. 96-2050,96-2050
• Parties: UNITED STATES of America v. Alfred MONOSTRA, III, Appellant
• Court: U.S. Court of Appeals — Third Circuit

Page 183

125 F.3d 183

UNITED STATES of America v. Alfred MONOSTRA, III, Appellant

No. 96-2050.

United States Court of Appeals, Third Circuit.

Argued July 23, 1997.

Decided Sept. 25, 1997.

Anita D. Eve (argued), Office of the U.S. Attorney, Philadelphia, PA, for Appellee.

Thomas A. Bergstrom (argued), Malvern, PA, for Appellant.

Before: SCIRICA and NYGAARD, Circuit Judges, and DEBEVOISE, District Judge. ^*

OPINION OF THE COURT

NYGAARD, Circuit Judge:

Alfred Monostra, III, appeals his conviction on one count of bank fraud, arguing that he was indicted under the wrong subsection of 18 U.S.C. § 1344. Because we find that indictment under subsection (1) of the statute was not erroneous, we will affirm the conviction.

Monostra also challenges the addition of two points to the calculation of his sentence under U.S.S.G. § 3A1.1, because the president of the company he victimized was visually impaired. We agree that the district court erred by imposing the "vulnerable victim" enhancement, for the reason that the record lacks any evidence that the president's visual impairment facilitated Monostra's scheme. Consequently, we will vacate the sentence. On remand, the district court may conduct further factfinding to determine whether the company itself was a "vulnerable victim" or if Monostra did, in fact, take advantage of Landis' impairment.

I. FACTS AND PROCEDURE

Diverse Technical Lines, Inc., is a small, closely-held corporation that primarily sells group health insurance plans to other small businesses. Diverse Technical Lines administers the plans by billing the customers, collecting the premiums and forwarding the premiums to the insurance providers. Diverse Technical Lines' president, David T. Landis, decided that the company needed an individual with an accounting background to run the finance department, which collected and dispersed the premiums. He hired Alfred Monostra, a young man with a college degree in business administration who claimed to have earned a master's degree as well.

Soon after assuming his duties at Diverse Technical Lines, Monostra embarked on a scheme to steal money from the company. Diverse Technical Lines maintained two corporate accounts with Cheltenham Bank and one with Core States Financial Corporation. ¹ Both institutions were FDIC insured. Although Landis and company vice-president Michael J. Foley were the only individuals with signature authority over the bank accounts, the checkbooks were kept by the bookkeeper, who sat next to Monostra, and Monostra was authorized to prepare some checks for signature by Landis and Foley. Between March 1993 and September 1994, Monostra wrote fourteen checks on Diverse Technical Lines' accounts with Cheltenham and Core States for amounts totaling $657,160.69, and forged Landis' signature on them. The checks were made out to "ABM Enterprises," a fictitious entity, and deposited into Monostra's personal bank account at Meridian Bank. Monostra avoided detection until September 1994 by removing the canceled checks when they returned to Diverse Technical Lines, writing "VOID" on the corresponding check stubs, and delaying the payment of premiums to the insurance providers so that those funds would be available to cover the forged checks. When the scheme was eventually uncovered by an alert employee in the finance department, Monostra confessed to Landis and Foley that he had stolen the money, and returned $239,000.

A grand jury indicted Monostra on one count of bank fraud under 18 U.S.C. § 1344(1) and one count of interstate transportation of stolen checks under 18 U.S.C. §§ 2 & 2314. The United States subsequently dropped the second charge. Monostra waived his right to a trial by jury. By order of June 24, 1996, Monostra was found guilty of bank fraud. A motion for judgment of acquittal was denied on the same day.

The presentence investigation report calculated a total offense level of seventeen, including a two-point enhancement under U.S.S.G. § 3B1.3 for abusing a position of trust, and a two-point reduction for acceptance of responsibility. The court corrected a mistake in the calculation of amount of money lost, thereby increasing the total offense level by one point. The court also added two points under U.S.S.G. § 3A1.1, finding that Landis was an unusually vulnerable victim because of his visual impairment. Monostra was sentenced to thirty-six months' imprisonment, five years' supervised release, and he was required to make restitution to Diverse Technical Lines in the amount of $307,000.

II. LEGAL ANALYSIS

On appeal, Monostra raises two claims. First, he contends that he was improperly indicted under 18 U.S.C. § 1344(1). Second, he argues that the record does not support the two-point enhancement of his sentence for exploiting a vulnerable victim. Both issues were preserved below, and we consider each in turn.

A. Bank Fraud

The federal bank fraud statute states:

Whoever knowingly executes, or attempts to execute, a scheme or artifice--

(1) to defraud a financial institution; or

(2) to obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises;

shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.

18 U.S.C. § 1344. Monostra was indicted and convicted under 18 U.S.C. § 1344(1). This was an error, Monostra argues, because he never intended to defraud Cheltenham or Core States of their money or property. Rather, Monostra asserts that he intended to defraud Diverse Technical Lines of money it had in its bank accounts, and that the deposits in those accounts were sufficient to cover the checks he forged. If anything, Monostra urges, he is only guilty of violating 18 U.S.C. § 1344(2), which prohibits schemes to obtain "moneys, funds, credits, assets, securities or other property ... under the custody or control of[ ] a financial institution."

Monostra assumes that the two subsections of the statute are entirely disjunctive, but analysis of the text as well as the legislative history indicates otherwise. For instance, both subsections prohibit schemes or artifices fraudulently to obtain money or property owned by a financial institution, for as the Supreme Court has stated, the words "to defraud", used in § 1344(1), "commonly refer 'to wronging one in his property rights.' " McNally v. United States, 483 U.S. 350, 359, 107 S.Ct. 2875, 2881, 97 L.Ed.2d 292 (1987) (quoting Hammerschmidt v. United States, 265 U.S. 182, 188, 44 S.Ct. 511, 512, 68 L.Ed. 968 (1924)). Similarly, while not every scheme to defraud will be accomplished with the aid of "false or fraudulent pretenses, representations, or promises," United States v. Schwartz, 899 F.2d 243, 246 (3d Cir.1990), as prohibited by § 1344(2), the use of such devices may certainly constitute a scheme to defraud under § 1344(1) as well, since fraud is a broad concept that "is measured in a particular case by determining whether the scheme demonstrated a departure from fundamental honesty, moral uprightness, or fair play and candid dealings in the general life of the community," United States v. Goldblatt, 813 F.2d 619, 624 (3d Cir.1987).

The legislative history of the statute also indicates that subsection (2) may be regarded in part as a clarification of subsection (1). The authors of the bank fraud statute modeled it after the wire and mail fraud statutes, 18 U.S.C. §§ 1341 & 1343. S.Rep. No. 98-225, at 378 (1983), reprinted in 1984 U.S.C.C.A.N. 3182, 3519. As the Judiciary Committee noted, "Like these existing fraud statutes, the proposed bank fraud offense proscribes the conduct of executing or attempting to execute 'a scheme or artifice to defraud' or to take the property of another 'by means of false or fraudulent pretenses, representations, or promises.' " Id.; cf. 18 U.S.C. § 1341 ("Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises...."); 18 U.S.C. § 1343 (same). Since the bank fraud statute drew important phrasing from the mail and wire fraud statutes, the history of the latter statutes is relevant to interpreting the act before us.

In McNally v. United States, the Supreme Court scrutinized the legislative history of 18 U.S.C. § 1341. It noted that as first enacted in 1872, the mail fraud statute merely contained a general proscription against "any scheme or artifice to defraud." 483 U.S. at 356, 107 S.Ct. at 2879. Then, in 1909, Congress amended the statute by adding the phrase "or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises" after the original phrase "any scheme or artifice to defraud." Id. at 357, 107 S.Ct. at 2880 (citing Act of Mar. 4, 1909, ch. 321, § 215, 35 Stat. 1130). The McNally court concluded that the second phrase was a codification of intervening Supreme Court precedent ² added "simply [to make] it unmistakable that the statute reached false promises and misrepresentations as to the future as well as other frauds involving money or property." Id. at 359, 107 S.Ct. at 2881. Thus, when Congress copied the phraseology of the mail and wire fraud statutes into the bank fraud statute, it adopted two provisions that never were intended to be mutually exclusive.

Nevertheless, Congress did not adopt the wording of the mail and wire fraud statutes in their entirety. Specifically, the mail and wire fraud statutes do not penalize the victimization of specific persons; rather, they are directed at the instrumentalities of fraud. In contrast, the bank fraud statute was expressly "designed to provide an effective vehicle for the prosecution of frauds in which the victims are financial institutions that are federally created, controlled or insured." S.Rep. No. 98-225, at 377, 1984 U.S....