U.S. v. Sokolow

• Citation: 91 F.3d 396
• Decision Date: 26 July 1996
• Docket Number: 95-1292,Nos. 95-1367,s. 95-1367
• Parties: 44 Fed. R. Evid. Serv. 972 UNITED STATES of America v. Craig B. SOKOLOW, Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Page 396

91 F.3d 396

44 Fed. R. Evid. Serv. 972

UNITED STATES of America v. Craig B. SOKOLOW, Appellant.

Nos. 95-1367, 95-1292.

United States Court of Appeals, Third Circuit.

Argued Jan. 22, 1996.

Decided July 26, 1996.

John Rogers Carroll, Johanna E. Markind, Carroll & Carroll, Philadelphia, PA, Peter Goldberger (argued), Anna M. Durbin, Pamela A. Wilk, Ardmore, PA, for appellant.

Michael R. Stiles, United States Attorney, Walter S. Batty, Jr., Chief of Appeals, Joseph T. LaBrum, III (argued), Maryanne Donaghy (argued), Sarah L. Grieb, Assistant United States Attorneys, Philadelphia, PA, for appellee.

Before: MANSMANN and SCIRICA, Circuit Judges, and RESTANI, Judge, Court

of International Trade. ^*

ORDER

MANSMANN, Circuit Judge.

It is hereby ORDERED that the opinion dated April 18, 1996, in the above case is hereby vacated.

It is further ORDERED that the petition for panel rehearing filed by appellant in the above entitled case having been substituted to the judges who participated in the decision of this court, and no judge who concurred in the decision having asked for rehearing, is denied.

It is further ORDERED that the Clerk shall file the enclosed opinion.

OPINION OF THE COURT

RESTANI, Judge.

Defendant Craig B. Sokolow ("Sokolow") appeals from his conviction in the United States District Court for the Eastern District of Pennsylvania following a two month jury trial. On March 18, 1994, Sokolow was convicted of 107 counts of mail fraud in violation of 18 U.S.C. § 1341 (1988), 17 counts of money laundering in violation of 18 U.S.C. § 1957 (1988), and one count of criminal forfeiture in violation of 18 U.S.C. § 982 (1988). Following several sentencing hearings, the district judge sentenced Sokolow to 92 months in prison, to be followed by three years supervised release, and ordered a $50,000 fine, $6200 in special assessments, $690,246.34 in restitution, and the forfeiture of $2.1 million. On appeal, defendant challenges both his conviction and sentencing. For the reasons stated herein, we will affirm the conviction, sentencing, and the order of forfeiture, but remand for reconsideration of the restitution order.

I. BACKGROUND

The events leading to Sokolow's indictment and subsequent conviction occurred between May 1, 1987 and July 23, 1990. Sokolow, an attorney and licensed insurance agent, offered health benefits plans to the public in Pennsylvania and several other states through a series of corporations that he established and controlled, but primarily through the National Independent Business Association, Inc. ("NIBA"). ¹ The plans were marketed to small business employers, their employees, and their families. Association Insurance Marketing, Inc. ("AIM"), a corporation established and controlled by Sokolow, served as the primary marketing arm of NIBA. Through AIM, Sokolow received commissions on all premiums received for the sale of NIBA policies.

Prior to May 1987, NIBA members were fully insured by NIBA's group insurance contract with World Life and Health Insurance Company ("World Company"). On May 1, 1987, Sokolow replaced World Life with Independence Blue Cross and Pennsylvania Blue Shield to administer and process NIBA's health care claims. Sokolow purchased stop-loss coverage from Blue Cross, whereby NIBA assumed responsibility for the payment of NIBA members' medical care claims up to the first $25,000. Blue Cross would pay any remaining claims in excess of $25,000. The indictment charged that Sokolow falsely represented to the public that NIBA was fully-insured by Blue Cross, when, in fact, it was a self-funded plan, thus defrauding members of their premiums. In addition, Sokolow allegedly used the Blue Cross logo on marketing and billing materials, in violation of NIBA's agreement with Blue Cross, to foster the impression that NIBA was the equivalent of a Blue Cross fully-insured health benefits plan.

On June 30, 1988, Blue Cross terminated its service plan with NIBA when Sokolow failed to pay approximately $2 million in claims for which Blue Cross sought reimbursement. Sokolow then contracted with another company for higher stop-loss coverage that required NIBA to pay the first $50,000 of a member's medical care claims. The indictment alleged that Sokolow again misrepresented that NIBA was fully insured by the new coverage, when, in fact, it was self-funded.

After receiving complaints concerning NIBA's claims administration in late 1988, the Pennsylvania Insurance Department (the "Department") began to investigate NIBA's operations. The Department determined that Sokolow had been operating NIBA as an illegal, unlicensed insurer in Pennsylvania. Sokolow objected to the Department's inquiries on the basis that NIBA was a Multi-Employer Welfare Arrangement ("MEWA") that could file a benefits plan under ERISA and, thus, was not subject to state regulation. ² The Department disagreed with Sokolow's contentions and, on May 2, 1989, suspended NIBA's operations. On August 31, 1989, the Commonwealth Court of Pennsylvania ruled that NIBA did not constitute a valid MEWA plan, but was a commercial enterprise "marketing insurance, without the benefit of a licensed company status, while purporting to be a valid ERISA plan, such that state licensing would not be necessary." ³ Appellant's App. [hereinafter "App."] at 1193. Consequently, NIBA was ordered liquidated by the commonwealth court on February 15, 1990.

Sokolow collected more than $34 million in premiums from NIBA plan members who were allegedly defrauded by Sokolow during the period covered by the indictment. The indictment alleged that Sokolow converted approximately $4 million of the premiums for his personal benefit. He received $2,239,575.67 in commissions through AIM and two other related insurance companies ⁴ ($1,837,152.30 of those commissions went to AIM) and $1,806,259.23 in salary, officer's loans, and other disbursements. These monies were deposited into AIM and NIBA accounts. The indictment alleged that Sokolow laundered these funds through a number of bank and brokerage accounts, as well as real property and mortgages.

The jury trial commenced on January 10, 1994, and concluded on March 18, 1994, with the return of guilty verdicts on all counts considered by the jury. Sentencing proceedings were held on January 6 and 11, and February 6, 1995, during which sentencing issues were argued, and evidence of forfeiture, loss calculations, and restitution was presented. On March 14, 1995, the district court filed three separate Memorandum Opinions and Orders, inter alia, determining the Sentencing Guidelines calculations, and ordering the restitution and forfeiture obligation. Following entry of judgment, Sokolow filed this timely appeal challenging both his conviction and sentence.

II. CHALLENGES TO THE CONVICTION

A. Evidentiary Challenges

Sokolow challenges three evidentiary rulings made by the district court. Sokolow claims that the district court (1) erred in admitting into evidence Government Exhibit B-110 ("Gov't Ex. B-110"), a summary of unpaid insurance claims of NIBA members; (2) improperly allowed evidence of NIBA's alleged operation as an unlicensed insurance company; and (3) abused its discretion in admitting irrelevant and highly prejudicial victim impact testimony. To the extent the district court's admission of evidence was based on an interpretation of the Federal Rules of Evidence, our standard of review is plenary. See United States v. Furst, 886 F.2d 558, 571 (3d Cir.1989), cert denied, 493 U.S. 1062, 110 S.Ct. 878, 107 L.Ed.2d 961 (1990). Our review of a district court's ruling to admit or exclude evidence, if premised on a permissible view of the law, however, is only for an abuse of discretion. See id.; see also United States v. Versaint, 849 F.2d 827, 831 (3d Cir.1988). We will address each of Sokolow's evidentiary challenges in turn.

1. Government Exhibit B-110

Sokolow contends that Gov't Ex. B-110 is inadmissible hearsay. Gov't Ex. B-110 is a compilation and summary of over $7 million in unpaid insurance claims of NIBA members. The document was prepared for the Department in July 1992 by Inservco, a third-party administrator hired to adjust the unpaid claims after the commonwealth court ordered the liquidation of NIBA. Originally, NIBA members' claims were documented in the course of regularly conducted business by NIBA's third party administrators--National Benefits Corp., Insurance Benefits Services ("IBS"), and Independent Insurance Administrators ("IIA"). The companies processed NIBA claims and kept records on behalf of NIBA, which Sokolow later authorized to be turned over to the Department's Statutory Liquidator in connection with NIBA's liquidation. As custodian of the NIBA plan records, the Statutory Liquidator made the records available to Inservco for the adjustment of unpaid claims.

Over Sokolow's objection, the district court admitted the exhibit as an admission by Sokolow, under Federal Rule of Evidence 801(d)(2)(C). ⁵ The district court reasoned:

Inservco summarized information held by the Statutory Liquidator, who in turn obtained the information from another administrator hired by Sokolow. Each entity that held the information had the express authorization of [Sokolow]. As such, Exhibit B-110 is a party admission....

United States v. Sokolow, No. 93-394-01, 1994 WL 613640, at * 5 (E.D.Pa. Nov.1, 1994). We disagree with the district court's reasoning.

Rule 801(d)(2)(C) specifically excludes from the definition of hearsay any statements used against a party which were made by another person authorized by the party to make a statement concerning the subject. Fed.R.Evid. 801(d)(2)(C); Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153, 1198 (3d Cir.1993). We find, and the government admits, that Inservco's adjustments to the NIBA members' claims were not "done with Sokolow's consent or at his direction," and, thus, are not admissions by Sokolow. See Appellee's Br. at 23. The...