United States v. Tehin

• Decision Date: 22 August 2012
• Docket Number: No. CR 03-00236 SI,CR 03-00236 SI
• Parties: UNITED STATES OF AMERICA, Plaintiff, v. NIKOLAI TEHIN, Defendant.
• Court: U.S. District Court — Northern District of California

UNITED STATES OF AMERICA, Plaintiff,

v.NIKOLAI TEHIN, Defendant.

No. CR 03-00236 SI

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA

Dated: August 22, 2012

ORDER DENYING MOTION TO

VACATE, SET ASIDE, OR CORRECT SENTENCE

Before the Court is defendant's motion to vacate, set aside, or correct his sentence pursuant to 28 U.S.C. § 2255. On October 14, 2004, a jury convicted defendant Nikolai Tehin of six counts of mail fraud and nine counts of money laundering. On April 19, 2005, Tehin was sentenced to 170 months in prison. Tehin now challenges his conviction on the basis that one of the theories of mail fraud under which he was convicted - the "honest services" theory of mail fraud - has been deemed unconstitutionally vague by the Supreme Court in Skilling v. United States, 130 S. Ct. 2896 (2010) when applied to any conduct other than bribery and kickbacks, neither of which is applicable here. Tehin also argues that the money laundering counts present a "merger problem" with the mail fraud counts and are therefore invalid under United States v. Santos, 533 U.S. 507 (2008). Finally, Tehin argues that the mail fraud statute as applied here is beyond the Federal Government's jurisdiction and enumerated powers. The government has filed an opposition. Having considered the parties' papers and arguments therein, and for the reasons set forth below, the Court hereby DENIES defendant's motion.

BACKGROUND

I. Factual Background

Defendant Tehin, admitted to practice law in California in 1972, was a civil plaintiff's attorney with his own San Francisco-based firm ("Tehin + Partners") specializing in medical and legal malpractice, personal injury, and commercial disputes. From 2001 to 2002, Tehin used funds in the client trust account for personal and business expenses. When clients demanded that Tehin release their settlement payments, Tehin paid them with funds belonging to other clients. By the end of 2002, Tehin was under investigation by the State Bar of California, and, in July of 2003, he was indicted by a federal grand jury and charged with six counts of mail fraud and nine counts of money laundering.

The central witness in the case against Tehin was his assistant and office manager, Melissa De La Rosa. She testified that settlement checks from resolved cases would be placed in the firm's trust account. 7 RT 1040.¹ Tehin would tell De La Rosa which bills to pay from the firm's accounts. 7 RT 1046. Money from the client trust account was "considered in the overall picture of how much money was available to pay bills." 7 RT 1047. Bills paid from the firm's accounts - including money in the trust account that was owed to clients - included Tehin's personal bills, such as his mortgage payments, yacht club fees, electric bills, and membership dues. 7 RT 1050, 1053. There were often insufficient funds in the clients' account to pay all of the clients. 7 RT 1051. Because there were insufficient funds, clients were paid based on "whoever was yelling the loudest." 7 RT 1094.

For example, in the Vintage Ranch Case, Tehin represented more than 100 low-income tenant families, mainly Spanish-speaking farm workers in Napa, California, who sued the owners of the apartment buildings in which they lived for maintaining sub-standard living conditions. Tehin was brought into the case by Legal Aid of the North Bay. The case settled in early 2001 for $2 million; the settlement funds were given to Tehin + Partners and were deposited into the firm's client trust accounts. After taking his fees and making an agreed-upon donation to Legal Aid, Tehin was required to retain $1.3 million of the settlement for distribution to the Vintage Ranch tenants. The $2 million in settlement proceeds from the case were deposited in the firm's trust accounts on July 31, 2001. 11 RT 2075.However, by November 30, 2001, the balance in the client trust account was down to $784.94. 11 RT 2078. Only $6,500 in Vintage Ranch settlement funds had been distributed to a single Vintage Ranch client. 11 RT 2078-79.

Tehin eventually paid most of the Vintage Ranch clients; however, he used settlement money from other clients to do so. For example, in a medical malpractice case, Tehin represented the mother of a woman named Mary Ferry, who was sent home untreated and later refused admittance by a hospital despite severe psychiatric problems. The case settled in 2001 for $200,000. De La Rosa testified that Tehin used the Ferry funds to pay various Vintage Ranch tenants. 7 RT 1114. Though Tehin had received the Ferry settlement check and deposited it in January 2002, he did not inform Nancy Ferry (Mary's mother) that he had received the funds until April 2002. 4 RT 561. Ferry eventually received a check for $103,000, which represented a portion of what was owed her. 4 RT 563. An accounting provided along with the checks included fees for seven expert witnesses, which Ferry considered "unusual" and "seem[ed] excessively high." 4 RT 570. Ferry did not believe the expert witnesses had ever worked on the case, and complained to the State Bar. 4 RT 577. The State Bar launched an investigation. 7 RT 1121. De La Rosa testified that Tehin then told her to "make up some check requests" for the experts. 7 RT 1123. She did so, backdating the check requests to substantiate the expert fees. Id. Tehin eventually sent Ferry a "second amended attorney's accounting" excluding the expert fees and stating that Ferry was owed another $28,000. 4 RT 576. Tehin never paid Ferry the money owed. 4 RT 577-578.

The government provided evidence that between March 1st and December 1st 2001, Tehin paid approximately $600,000 toward his mortgage payments from the firm's trust and operating accounts, as well as more than $205,000 to a boat repair company for repairs to his yacht. 11 RT 2092, 2096. Numerous clients never received their settlement funds.

II. Procedural Background

A superseding indictment was filed on July 13, 2004. Counts One through Six - the mail fraud counts - alleged that Tehin

knowingly and willfully devised and intended to devise a scheme and artifice: (A) to defraud; (B) to obtain money and property by means of materially false and fraudulent pretenses, representations, promises, and omissions; (c) and to deprive his clients of their intangible right to his honest services as their attorney.

Opp'n Ex. A (Indictment) at 3. The mail fraud counts are based on both a "money and property" theory of mail fraud (subsection B) as well as an "honest services" theory of mail fraud (subsection C). Counts Seven through Eleven - the first five money laundering counts - alleged that Tehin "did knowingly conduct financial transactions which affected interstate commerce with the proceeds of a specified unlawful activity - namely, mail fraud, . . . with the intent to promote the carrying on of the specified unlawful activity." Indictment at 10. Counts Twelve through Fifteen - the latter four money laundering counts - alleged that Tehin "did knowingly engage in monetary transactions which affected interstate commerce in criminally derived property of a value greater than $10,000 and derived from specified unlawful activities - namely, mail fraud." Indictment at 11. The predicate act for the money laundering counts was mail fraud.

During the seven-week trial, the Government presented witnesses and evidence supporting the two theories of mail fraud: the money or property theory, and the honest-services theory. Now-retired Judge Vaughn Walker instructed the jury that it could convict on either theory. 24 RT 4198. As the elements of money or property mail fraud, Judge Walker informed the jury that the Government must prove that

1) the defendant knowing devised or intended to devise a scheme or plan for obtaining property; 2) the defendant executed the plan or scheme for obtaining property either A) by making promises or statements, knowing that the promises or statements were false . . . or, B) by omitting to disclose information that he had a duty to disclose, knowing that he had a duty to disclose the information . . . . 3) the promises, statements, or omissions were material; 4) the defendant acted with the intent to defraud; and 5) the defendant used or caused someone to use the mails to carry out or attempt to carry out an essential part of the scheme."

RT at 4199-4200. To convict on an honest-services theory of mail fraud, Judge Walker instructed the jury that it must find that

1) the defendant knowingly devised or intended to devise a scheme or plan to deprive his client of a right to honest services; 2) . . . the defendant acted with the intent to deprive his client of a right to honest services; 3) the defendant stood in a relationship to his client that gave rise to a duty of loyalty comparable to that owed by an employee to his employer; 4) the defendant purported to act for and in the interest of his client; 5)but instead the defendant secretly acted in his own interest; 6) this was accomplished by a material misrepresentation made or material omission of information disclosed to the client . . . ; 7) the defendant acted with the intent to defraud; and 8) the defendant used, or caused someone to use, the mails to carry out or to attempt to carry out the scheme or plan.

RT at 4200-01.

The jury returned verdicts of guilt on the six counts mail fraud in violation of 18 U.S.C. §§ 1341, 1346, and 2, the five counts of money laundering in violation of 18 U.S.C. §§ 1956(a)(1)(A)(I) and 2, and the four counts of money laundering in violation 18 U.S.C. §§ 1957 and 2. On a special verdict form, the jury indicated that it was convicting Tehin of mail fraud on both the money or property theory and the honest-services theory. Opp'n Ex. C at 2-7. Tehin was sentenced to 170 months in prison.

Tehin appealed his conviction and sentence. Tehin argued that the district court erred by denying his Rule 29 Motion for a Judgment of Acquittal on the ground that, because he was legally required to send the...