United States v. Carpenter

Decision Date06 June 2016
Docket NumberCase No. 3:13-CR-226(RNC)
Citation190 F.Supp.3d 260
CourtU.S. District Court — District of Connecticut
Parties United States v. Daniel Carpenter

David E. Novick, Neeraj Patel, U. S. Attorney's Office, New Haven, CT, for Plaintiff.

Richard R. Brown, Brown, Paindiris & Scott, Hartford, CT, for Defendant.

VERDICTS AND SPECIAL FINDINGS

Robert N. Chatigny, United States District Judge

This criminal case is before the Court for decision following a bench trial. Defendant Daniel Carpenter is charged with devising and executing a scheme to defraud life insurance companies by using misrepresentations to induce them to issue high-value universal life insurance policies to straw insureds,1 which the companies would not have issued had they known the policies constituted "stranger-originated life insurance" ("STOLI") policies.2 This document sets forth the Court's verdicts and special findings in accordance with Federal Rule of Criminal Procedure 23(c).

A STOLI policy differs from a regular policy in that it is obtained not for estate planning purposes but for transfer to an investor with no insurable interest in the life of the insured.3 "[E]ssentially, it is a bet on a stranger's life." United States v. Binday, 804 F.3d 558, 565 (2d Cir.2015), petition for cert. filed, (U.S. Mar. 10, 2016) (No. 15-1140). Life insurance providers are opposed to STOLI business and have taken steps to ensure that STOLI policies will not be issued. But STOLI policies can be obtained through misrepresentations concerning the insured's intent to resell the policy, the existence of third-party funding of premiums, and other matters, which are characteristic of "stealth STOLI" or "STOLI in disguise."

Schemes to defraud life insurance providers by causing them to issue STOLI policies based on misrepresentations have recently been the subject of federal prosecutions. See id. In this case, the 57-count superceding indictment charges Mr. Carpenter with mail and wire fraud, conspiracy to commit mail and wire fraud, illegal monetary transactions, money laundering, conspiracy to commit money laundering and aiding and abetting the foregoing substantive offenses.4 The indictment alleges that the fraudulent scheme involved several steps. Insurance agents recruited older persons to act as straw insureds, often with the promise of free insurance for two years and a share of the profits from the sale of the policy. The agents then completed life insurance applications that contained misrepresentations concerning the insured's motivation for procuring the policy, along with false denials concerning the possibility of a policy sale, third-party funding of premiums and the performance of life expectancy reports. The indictment alleges that the applications were submitted and caused to be submitted to the life insurance providers by Mr. Carpenter and others. See, e.g., Super. Ind. (ECF No. 53) ¶ 38.

At the trial, Mr. Carpenter testified that he was aware of the "evils of STOLI" when the applications underlying the indictment were submitted to providers. He did not dispute that the applications contained STOLI-related misrepresentations. He testified, rather, that he was deceived concerning the nature of the policies by people he trusted.

The evidence establishes beyond a reasonable doubt that from the outset of the conspiracy charged in the indictment, Mr. Carpenter knew the policies were being procured for resale to investors after the two-year contestability period expired. It also establishes that at his direction and on his behalf, misrepresentations were made in applications in order to thwart the providers' attempts to ensure that STOLI policies would not be issued. For these and other reasons explained below, I conclude that the government has sustained its burden of proving Mr. Carpenter's guilt beyond a reasonable as to each count in the indictment.5

I. Elements of the Charged Offenses
A. Mail and Wire Fraud

The superceding indictment charges Mr. Carpenter with thirty-two counts of mail fraud in violation of 18 U.S.C. § 1341 and wire fraud in violation of 18 U.S.C. § 1343. Because these statutes use the same relevant language, they are analyzed the same way. United States v. Schwartz, 924 F.2d 410, 416 (2d Cir.1991). The essential elements of both offenses are "(1) a scheme to defraud, (2) money or property [as the object of the scheme], and (3) use of the mails [or wires] to further the scheme." Fountain v. United States, 357 F.3d 250, 255 (2d Cir.2004) (alterations in original).6

The first element, a scheme to defraud, requires the government to prove "(i) the existence of a scheme to defraud, (ii) the requisite scienter (or fraudulent intent) on the part of the defendant, and (iii) the materiality of the misrepresentations." United States v. Pierce, 224 F.3d 158, 165 (2d Cir.2000) (citations omitted). With regard to the fraudulent intent requirement, "[i]t need not be shown that the intended victim of the fraud was actually harmed; it is enough to show defendants contemplated doing actual harm, that is, something more than merely deceiving the victim." Schwartz, 924 F.2d at 420. To satisfy the materiality requirement, the government must establish that the misrepresentations or omissions "ha[d] the natural tendency to influence or [were] capable of influencing the [victim] to change its behavior." United States v. Rybicki, 354 F.3d 124, 147 (2d Cir.2003) (en banc).

With regard to the second element, money or property as the object of the scheme, it is well-established in the Second Circuit that the "interests protected by the statutes include the interest of a victim in controlling his or her own assets." United States v. Carlo, 507 F.3d 799, 802 (2d Cir.2007) ; see alsoUnited States v. Rossomando, 144 F.3d 197, 201 n. 5 (2d Cir.1998). The government can satisfy this element by proving that the defendant's scheme "den[ied] the victim the right to control its assets by depriving it of information necessary to make discretionary economic decisions." Rossomando, 144 F.3d at 201 n. 5. The information in question "either must be of some independent value or must bear on the ultimate value of the transaction." Id.(quoting United States v. Dinome, 86 F.3d 277, 284 (2d Cir.1996) ) (internal quotation mark omitted).

To satisfy the third element, the "in furtherance" requirement, the government must establish that the mails and wires were used "incident to an essential part of the scheme." Schmuck v. United States, 489 U.S. 705, 711, 109 S.Ct. 1443, 103 L.Ed.2d 734 (1989) (quoting Pereira v. United States, 347 U.S. 1, 8, 74 S.Ct. 358, 98 L.Ed. 435 (1954) ) (internal quotation marks omitted). That the defendant did not personally participate in a mailing or wiring does not insulate him from liability if it was "reasonably foreseeable that the charged transmission would occur in the execution of the scheme." United States v. Bahel, 662 F.3d 610, 642 (2d Cir.2011). Moreover, the timing of a mailing or wiring is of no moment if it "further[ed] the scheme." United States v. Slevin, 106 F.3d 1086, 1090 (2d Cir.1996).

B. Money Laundering

Mr. Carpenter is charged with ten counts of money laundering in violation of 18 U.S.C. § 1956(a)(1)(A)(i). These counts require the government to prove that the defendant, "knowing that the property involved in a financial transaction represent[ed] the proceeds of some form of unlawful activity, conduct[ed] or attempt[ed] to conduct ... a financial transaction which in fact involve[d] the proceeds of specified unlawful activity ... with the intent to promote the carrying on of specified unlawful activity." 18 U.S.C. § 1956(a)(1)(A)(i). The statute defines "financial transaction" as "a transaction which in any way or degree affects interstate or foreign commerce" or "a transaction involving the use of a financial institution which is engaged in, or the activities of which affect, interstate or foreign commerce in any way or degree." 18 U.S.C. § 1956(c)(4). "Specified unlawful activity" includes mail fraud in violation of 18 U.S.C. § 1341 and wire fraud in violation of 18 U.S.C. § 1343. See18 U.S.C. § 1956(c)(7)(A) ; 18 U.S.C. § 1961(1).

C. Illegal Monetary Transactions

Mr. Carpenter is charged with thirteen counts of illegal monetary transactions in violation of 18 U.S.C. § 1957(a). To establish a violation of this statute, the government must show that the defendant "knowingly engage[d] or attempt[ed] to engage in a monetary transaction in criminally derived property of a value greater than $10,000," and that the property was derived from "specified unlawful activity." 18 U.S.C. § 1957(a). The statute defines a "monetary transaction" as "the deposit, withdrawal, transfer, or exchange, in or affecting interstate or foreign commerce, of funds ... by, through, or to a financial institution." 18 U.S.C. § 1957(f)(1). "Criminally derived property" means "any property constituting, or derived from, proceeds obtained from a criminal offense." 18 U.S.C. § 1957(f)(2). And, like the identical phrase in the money laundering statute, "specified unlawful activity" includes mail and wire fraud. See18 U.S.C. § 1957(f)(3) ; 18 U.S.C. § 1956(c)(7)(A) ; 18 U.S.C. § 1961(1).

D. Conspiracy

Mr. Carpenter is charged with conspiracy to commit mail and wire fraud in violation of 18 U.S.C. § 1349 and conspiracy to commit money laundering in violation of 18 U.S.C. § 1956(h). These statutes impose liability on "[a]ny person who ... conspires to commit" the substantive offenses. 18 U.S.C. §§ 1349, 1956(h). "To prove conspiracy, the government must show that the defendant agreed with another to commit the offense" and "that he knowingly engaged in the conspiracy with the specific intent to commit the offenses that were the objects of the conspiracy." United States v. Huezo, 546 F.3d 174, 180 (2d Cir.2008) (quoting United States v. Monaco, 194 F.3d 381, 386 (2d Cir.1999) ) (internal quotation mark omitted). It must be established "that there was a conspiracy to commit a...

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