USA v. Kubick, s. 98-30082

• Decision Date: 10 December 1999
• Docket Number: 98-30097,Nos. 98-30082,98-30083,s. 98-30082
• Citation: 205 F.3d 1117
• Parties: (9th Cir. 1999) UNITED STATES OF AMERICA, Plaintiff-Appellee, v. ROBERT W. KUBICK, Defendant-Appellant. UNITED STATES OF AMERICA, Plaintiff-Appellee, v. WILLIAM D. HERRON, Defendant-Appellant. UNITED STATES OF AMERICA, Plaintiff-Appellant, v. ROBERT W. KUBICK, WILLIAM D. HERRON, Defendants-Appellees
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1117

205 F.3d 1117 (9th Cir. 1999)

UNITED STATES OF AMERICA, Plaintiff-Appellee, v. ROBERT W. KUBICK, Defendant-Appellant.

UNITED STATES OF AMERICA, Plaintiff-Appellee, v. WILLIAM D. HERRON, Defendant-Appellant.

UNITED STATES OF AMERICA, Plaintiff-Appellant, v. ROBERT W. KUBICK, WILLIAM D. HERRON, Defendants-Appellees.

Nos. 98-30082, 98-30083, 98-30097

U.S. Court of Appeals for the Ninth Circuit

Argued and Submitted November 1, 1999

Filed December 10, 1999

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

COUNSEL: Michael S. Taggart, Deputy Federal Public Defender, Anchorage, Alaska, for defendant-appellant-cross-appellee Herron.

Alan Ellis, Peter Goldberger, and Pamela A. Wilk, Law Offices of Alan Ellis, Sausalito, California, for defendant-appellant-cross-appellee Kubick.

James Barkeley and Joseph W. Bottini, Assistant United States Attorneys, Anchorage, Alaska, for the plaintiff-appellee-cross-appellant.

Appeals from the United States District Court for the District of Alaska, John W. Sedwick, District Judge, Presiding.

Before: Pamela Ann Rymer, Michael Daly Hawkins, and M. Margaret McKeown, Circuit Judges.

OPINION

RYMER, Circuit Judge:

Robert W. Kubick and William D. Herron appeal the sentences imposed following their convictions on guilty pleas to one count of conspiracy to commit bankruptcy fraud and one count of conspiracy to impede and impair the Internal Revenue Service (IRS), each in violation of 18 U.S.C.S 371. Among other United States Sentencing Guidelines issues that are raised, both contend that the adjustment for "violation of any judicial . . . process," U.S.S.G. S 2F1.1(b)(4)(B), should not be applied to concealment of assets in a bankruptcy fraud. We have already held that the adjustment is applicable to bankruptcy proceedings, and we now join other circuits in concluding that it may be used to increase the offense level of a defendant who conceals assets in violation of the bankruptcy process. In addition, the United States cross-appeals the district court's ruling that application of the Mandatory Victim Restitution Act of 1996 (MVRA), 18 U.S.C.S 3663A, which requires full restitution without consideration of the defendant's ability to pay, would violate the ex post facto prohibition because no overt acts in furtherance of the conspiracy occurred after the Act's effective date. We disagree with the district court in this case, because Kubick and Herron admitted in their plea agreements that the conspiracy continued beyond the effective date of the Act. Accordingly, we affirm the sentences, except for restitution, on which we reverse.

I

Kubick was a successful Anchorage real estate developer who experienced serious financial difficulties following the collapse of the Alaskan oil market in the mid-1980s. As the value of his real estate holdings fell, Kubick's debt (as guarantor on the loans financing his holdings) increased. He conceived a plan to conceal whatever assets he could while discharging his substantial debt in bankruptcy. To this end, he enlisted family members and friends, accountants and attorneys, including two Fort Worth, Texas attorneys, William Herron and Carol Birdwell. In the bankruptcy fraud, Kubick transferred assets to shell corporations, placed assets in the names of friends and family, directed his coconspirators to conceal assets for him, and buried cash and diamonds to hide them from creditors.¹ Herron helped him by creating and running corporations that had no legitimate business purpose to hold assets.

Kubick filed a Chapter 7 bankruptcy petition on August 30, 1991, in Fort Worth; however, his creditors moved the venue to Alaska. He failed to disclose numerous assets that he controlled or owned, including $150,000 laundered through Herron's firm in preparation for bankruptcy, a 1991 Range Rover that was purchased for $48,000 with money in Herron's trust account, his big game trophy collection, jewelry, furs, buried money, funds received or used by the corporate entities he created for his benefit (such as those filtered through Tinker, Inc. and Timer, Inc., which were Texas corporations used to hold $1.75 million in certificates of deposit for Kubick, and Vintage Villas, Inc., a Kubick nominee in the Adamsville Assignment), and various other properties totaling over $4.6 million in value.

On November 22, 1996, a 28 count indictment was returned against Kubick, Herron, and Birdwell. Trial was set for May 1, 1997. Knowing that he had been indicted, Kubick went to Mexico and tried unsuccessfully to negotiate a promise of pretrial release as a condition of surrender. Mexico eventually revoked his passport and Kubick was returned to Alaska in April of 1997. Trial was reset for October 1. On September 17, 1997, Herron pled guilty to counts 1 (conspiracy to commit bankruptcy fraud) and 28 (conspiracy to impede and impair the IRS), and Birdwell pled guilty to count 28. Kubick followed suit on September 19, 1997 by pleading guilty to counts 1 and 28.

The district court sentenced Kubick to 58 months in prison. Three aspects of the sentencing are relevant on appeal. First, the district court denied a U.S.S.G. S 3E1.1(b) third level reduction for acceptance of responsibility because Kubick's stay in Mexico was so protracted that he did not timely provide information or timely notify authorities of his intention to plead guilty such that the government could benefit from it. Second, Kubick's sentence was enhanced by four-levels for his leadership role in an "otherwise extensive " criminal activity. See U.S.S.G. S 3B1.1(a). And third, the district court found that Kubick's fraud upon the bankruptcy court warranted a two-level enhancement under U.S.S.G. S 2F1.1(b)(4)(B).

Herron was sentenced to 36 months in custody. His offense level was also increased by two levels for violation of a judicial process under U.S.S.G. S 2F1.1(b)(4)(B), and by another two levels under U.S.S.G. S 3B1.3 for "use of a special skill" in concealing Kubick's assets. The district court refused to award a two-level reduction for a "minor" role in the conspiracy. See U.S.S.G. S 3B1.2. Finally, the court held Herron accountable for loss to creditors caused by concealment of three assets (the $48,000 used to buy the Range Rover; the $150,000 transferred from his trust account to Kubick's Anchorage lawyers for Kubick; and the Adamsville real estate partnership interest) on the ground that Herron's involvement in each was relevant conduct. See U.S.S.G.S 2F1.1.

The court initially ordered Kubick to pay $600,000 in restitution pursuant to the MVRA and Herron to pay $150,000. Acting suasponte pursuant to Federal Rule of Criminal Procedure 35(c), the court held that applying the MVRA violated the Ex Post Facto Clause of the United States Constitution, Art. I, Sec. 9, cl. 3, because the illegal acts upon which restitution was based had occurred prior to the MVRA's effective date of April 24, 1996. Accordingly, it invoked pre-MVRA law, 18 U.S.C. S 3663 exercised discretion in light of the need for rehabilitation and ability to pay, and resentenced Kubick to make restitution in the amount of $24,000 and Herron, $6,000.

Both Kubick and Herron timely have appealed their sentences (except restitution), and the government has cross-appealed the order of restitution.

II

We turn first to the application of U.S.S.G.S 2F1.1(b)(4)(B),² which authorizes a two-level increase to the base offense level for fraud if the offense involved "violation of any judicial or administrative order, injunction, decree, or process not addressed elsewhere in the guidelines." The district court held that there was a judicial process underway, the bankruptcy proceeding, and that Kubick and Herron each acted to conceal assets in that process. Both argue that application of this enhancement is improper where, as here, the defendant did not violate any specific order, decree, summons or subpoena directed at him. Even if applicable to concealing assets, Herron contends that the adjustment can only be applied to the debtor, not to a third-party who assists the debtor, and that in any event his own role in the bankruptcy fraud was already taken into account when the district court enhanced his sentence for use of his special skill as an attorney.

A

Although we have never considered whether S 2F1.1(b)(4)(B) applies to concealment of assets in a bankruptcy proceeding, we have held that it does apply to specific adjudicatory processes, such as bankruptcy proceedings, not addressed elsewhere in the guidelines. See, e.g., United States v. Welch, 103 F.3d 906 (9th Cir. 1996). In Welch, the defendant participated in a scheme to defraud the bankruptcy court by preparing and filing fraudulent bankruptcy petitions for tenants facing eviction in order to invoke the automatic stay against eviction. The district court found that Welch violated the judicial process of the bankruptcy courts when she filed these false petitions. Like Kubick and Herron, Welch argued on appeal that she did not violate any judicial process because the word "process" refers only to a summons, complaint or writ, not a specific adjudicatory process. We rejected this argument, instead endorsing the Eighth Circuit's conclusion in United States v. Lloyd, 947 F.2d 339 (8th Cir. 1991), that the two-level enhancement under S 2F1.1(b)(3)(B) applies to a defendant who fraudulently concealed assets from the bankruptcy court. As we explained, "[t]hough the defendant `did not violate a specific judicial order, injunction, or decree,' he `did violate a judicial process by fraudulently concealing assets from bankruptcy court officers.' " Welch, 103 F.3d at 908 (quoting Lloyd, 947 F.2d at 340).

Kubick maintains that Welch is distinguishable in that it involved proceedings that were fraudulent from their inception, and the defendant there was not subject to the bankruptcy court's orders and decrees since she was neither the debtor nor a creditor. We do...