Opposition Brief — Griffey v. United States

a FEB 20 1992

No. 91-991

In the Supreme Court of the Giited States

OCTOBER TERM, 1991

} Suprene Court, +o |

2 ee es

ALLEN GRIFFEY, PETITIONER

v.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

BRIEF FOR THE UNITED STATES

IN OPPOSITION

KENNETH W. STARR

Solicitor General

ROBERT S. MUELLER, III

Assistant Attorney General

KAREN SKRIVSETH

Attorney

Department of Justice

Washington, D.C. 20530

(202) 514-2217

QUESTIONS PRESENTED

1. Whether the Sentencing Guidelines apply to a con-

spiracy in which the conspirators committed overt acts

in furtherance of the profitmaking objectives of the con-

spiracy after the effective date of the Guidelines.

2. Whether the Sentencing Guidelines apply to peti-

tioner even though his active participation in the con-

spiracy ended prior to the effective date of the

Guidelines.

(I)

TABLE OF CONTENTS

a aac reeesanigpemnensanlieivapeii

ESE eT RE

TABLE OF AUTHORITIES

Cases:

Fiswick v. United States, 329 U.S. 211 (1946) oo.

Grunewald v. United States, 353 U.S. 391 (1957) oo.

Hyde v. United States, 225 U.S. 347 (1912).......ccccesesceseseesesees

United States v. Arboleda, 929 F.2d 858 (1st Cir. 1991) .........

United States v. Bafia, 949 F.2d 1465 (7th Cir. 1991) ....0........

United States v. Doherty, 867 F.2d 47 (1st Cir.), cert. denied,

a schcncsboniacrominteons

United States v. Fitzpatrick, 892 F.2d 162 (1st Cir. 1989)......

United States v. Fletcher, 928 F.2d 495 (2d Cir.), cert. denied,

a. sahusnitreebrnipiusiendteveneenis

United States v. Lash, 937 F.2d 1077 (6th Cir.), cert. denied,

i esaisihonnmtnsviinennenswnnines

United States v. LeQuire, 943 F.2d 1554 (11th Cir. 1991).......

United States v. Masters, 924 F.2d 1362 (7th Cir.),

GUE eG, EEE B. CE S018 (IGG) on... cc cnccscccccecesceseescesceescoees

United States v. Meitinger, 901 F.2d 27 (4th Cir.),

cert. denied, 111 S. Ct. 519 (1990) ..............cccccccccssccesscesceceeess

United States v. Mennutti, 679 F.2d 1032 (2d Cir. 1982)........

United States v. MMR Corp., 907 F.2d 489 (5th Cir. 1990),

RI ED GR, Sen BOI CLUE oo cescicecevccesccnceserncesesncsccnvesccns

United States v. Nerlinger, 862 F.2d 967 (2d Cir. 1988) .........

United States v. Steele, 685 F.2d 793 (3d Cir.), cert. denied,

EE

United States v. Story, 891 F.2d 988 (2d Cir. 1989) ........0.0.0..

(IIT)

IV

Cases—Continued:

United States v. U.S. Gypsum Co., 438 U.S. 422 (1978)..........

United States v. Walker, 653 F.2d 1343 (9th Cir. 1981),

cork. Contin, GEG Ue, SOB CI ccceccevccseversetsrtecevecrensscsvevenveneene

United States v. White, 869 F.2d 822 (5th Cir.), cert. denied,

A ee I actidecienncadseniacantiaodioapsicuestetbhicannmsessesnnaneaiions

United States v. Williams, 897 F.2d 1034 (10th Cir. 1990),

Cart. Gdonded, 113 SB. Ct. BOGE (IGG) ...cccccccnecerecesesecseeserscssseceseses

Statutes and regulation:

gb” ee | REN EE Coastal ediaheribasaanpenancceatdiidlaiinaheamteattebiasaiiaaatan

Fr SII erssantatiesscasesdinscoicncsculntsgncnSrtshackciveniadinasedaespsiieaiamiaiininndasentetoienn

er ae, NT cic cissnncacasalaciceitiaiipiilipaininteptiaiescesiaibdaleaeenisiiepaaiialaod

BO Ce Ben Ree Ce oierer cect cenenecnsnvininnrniantecaonieieenmntitgiamnmintntons

wa th NS

i)

In the Supreme Court of the United States

OCTOBER TERM, 1991

No. 91-991

ALLEN GRIFFEY, PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

BRIEF FOR THE UNITED STATES

IN OPPOSITION

OPINION BELOW

The opinion of the court of appeals, Pet. App. A3-

A25, is reported at 943 F.2d 428.

JURISDICTION

The judgment of the court of appeals was entered on

August 19, 1991. A petition for rehearing was denied

on September 19, 1991. Pet. App. Al-A2. The petition

for a writ of certiorari was filed on December 17, 1991.

The jurisdiction of this Court is invoked under 28

U.S.C. 1254(1).

(1)

2

STATEMENT

Following a jury trial in the United States District

Court for the Eastern District of Virginia, petitioner

was convicted of conspiring to defraud and make false

statements to the Department of Housing and Urban

Development (HUD) and the Federal Housing Admin-

istration (FHA), in violation of 18 U.S.C. 371, and of

making false statements to those agencies, in viola-

tion of 18 U.S.C. 1001.! He was sentenced to 14 months

in prison, to be followed by two years of supervised

release, and a $7,000 fine.

l.a. Petitioner was a real estate agent at the

Carton condominium complex in Arlington, Virginia.

He conspired with two investors, Adolph J. Barsanti

and Harold M. Kline,2 and others in the following

fraudulent scheme: To obtain favorable owner-occu-

pier HUD-insured mortgages for condominiums,?

certain real estate agents at the Carlton, including

petitioner, assisted Barsanti and Kline in finding

“straw purchasers” who were willing to act as

condominium purchasers but did not intend to occupy

the units. Barsanti and Kline would later acquire the

ostensible buyers’ interests and rent the units to

! Petitioner was charged with one count of conspiracy and

six counts of making false statements. The government moved

to dismiss three of the substantive counts before trial, and the

jury acquitted petitioner on two of the remaining substantive

counts. Gov’t C.A. Br. 4 & n.2.

2 Barsanti and Kline were each convicted of conspiracy and

three counts of making false statements. Gov’t C.A. Br. 4 n.2.

% Under pertinent HUD regulations, an owner-occupier of

a single-family condominium was able to obtain a HUD-insured

mortgage covering up to 97% of the value of the property,

whereas a non-occupant investor’s mortgage could not exceed

85% of the property’s value. 24 C.F.R. 234.27 (1985).

3

other individuals through their partnership, BK

Associates. Pet. App. A5-A6; Gov’t C.A. Br. 5.

Five of the six transactions involved individuals

who had considered purchasing units in the Carlton

but decided against doing so. After the putative buyer

decided against purchasing a unit, petitioner or

another Carlton real estate agent would tell the indi-

vidual that he or she could earn money by entering

into a shared-equity arrangement with Barsanti or

Kline. The would-be buyer and either Barsanti or

Kline would jointly apply to HUD for an owner-occu-

pier mortgage. To obtain the mortgage, both the

“straw purchaser” and either Barsanti or Kline

would sign a HUD form certifying that one of them

was to occupy the unit. After loan approval, Barsanti

or Kline would purchase the other party’s interest,

usually for $1500. Pet. App. A5-A6. Petitioner earned

$1206 in commissions for two of the units sold in that

manner. Presentence Report (PSR) ¥ 39.

In the sixth transaction, a couple (the Ohris)

entered a purchase agreement for a unit at the

Carlton. When the Ohris subsequently decided that

they did not want to complete the transaction, peti-

tioner placed them into contact with Barsanti, who

agreed to purchase the condominium from them. The

Ohris applied for a HUD-insured mortgage and certi-

fied that they would occupy it. They transferred their

interest to Barsanti without ever occupying the unit

as represented. Gov’t C.A. Br. 15-16. For that deal,

petitioner received an $800 commission. PSR ¥ 39.

b. The indictment alleged a conspiracy beginning in

approximately April 1984 and continuing until

December 13, 1989, the date of the indictment. All of

the purchases and false certifications to HUD

occurred in 1984 and 1985. The indictment charged

that the objectives of the conspiracy included: (a)

enriching petitioner and his co-conspirators and the

4

business entities with which they were affiliated by

fraudulently obtaining HUD-insured loans; (b) pre-

venting HUD and the FHA from learning that the

units were not owner-occupied; (c) generating profits

for Barsanti and Kline through their ownership and

rental of the units continuously from the date of

acquisition to the date of the indictment; and (d) pro-

viding Barsanti and Kline with the benefits of the

favorable HUD-insured mortgages during that

period. Indictment 7-8. The indictment charged as

overt acts not only the actions taken in connection

with the acquisition of the units in 1984 and 1985, id.

at 12-30, but also the continuous ownership of the

units, the receipt of rental payments, and the payment

of installments on the HUD-insured mortgages. /d. at

30-32. The indictment further alleged that the co-con-

spirators, including petitioner, warned the “straw

purchasers” not to reveal the circumstances sur-

rounding the acquisitions of the units. /d. at 21 (¥ 43),

24 ({ 66), 27 (4 80), 30 (F4 96, 98).

2. At sentencing, petitioner and his co-defendants

argued that the Sentencing Guidelines, which took

effect on November 1, 1987, should not be applied to

the conspiracy count because the conspiracy ended in

1985, when the last of the six HUD-insured mort-

gages was acquired.’ The district court, however, held

that “the retention of the units under their insured

mortgage status, the making of mortgage payments,

receipt of rents from others, that is others than those

who signed up as ostensible occupants, all are acts in

furtherance of the conspiracy.” Pet. /.pp. A7-A8.

3. The court of appeals affirmed. Pet. App. A3-A25.

The court noted that the Sentencing Guidelines apply

to conspiracies that started before but continued after

4 The district court did not apply the Sentencing Guidelines

to the substantive counts. Gov’t C.A. Br. 45 n.30.

5

the November 1, 1987, effective date of the Guidelines.

Id. at Al4-A15. The court concluded that the district

court did not commit clear error, 18 U.S.C. 3742(e), in

finding that the conspiracy extended beyond Novem-

ber 1, 1987. In so holding, the court of appeals

observed that petitioner had made a proposal to

Barsanti and Kline in which he projected a 40%

return on condominiums that they held for three

years. Because the units were purchased in 1984 and

1985, the court concluded that the conspiratorial

agreement contemplated a conspiracy continuing

beyond November 1, 1987.5 The court also determined

that, after the effective date of the Guidelines,

Barsanti and Kline continued to engage in concerted

activity to accomplish the objectives of the conspir-

acy. Through their partnership, Barsanti and Kline

made mortgage payments, collected rents, and man-

aged the properties after that date. Pet. App. A13-A19.

The court of appeals further held that the district

court properly applied the Guidelines to petitioner.

“Although his active conduct in the conspiracy had

ceased before the effective date of the Guidelines,” the

court noted, “the conspiracy itself continued after

that date.” Pet. App. Al9. Because petitioner had

offered “no evidence that he acted to defeat or disavow

the purposes of the conspiracy” before November 1,

1987, the court found that he remained a member of

the conspiracy after the effective date of the Guide-

lines. [bid.

ARGUMENT

1. Petitioner contends that the Sentencing Guide-

lines were not applicable to the conspiracy because it

terminated when the final mortgage commitments

* The evidence at trial showed a significant appreciation in

the value of the units. Pet. App. Al5.

6

were fraudulently secured in 1985—before the effec-

tive date of the Guidelines. Pet. 13-32.6 This Court

has held that a conspiracy requiring proof of an overt

act continues after a particular date if one of the con-

spirators commits an overt act in furtherance of the

conspiracy after that date. Grunewald v. United

States, 353 U.S. 391, 396-397 (1957). For purposes of

that inquiry, “the scope of the conspiratorial agree-

ment * * * determines both the duration of the con-

spiracy, and whether the act relied on as an overt act

may properly be regarded as in furtherance of the

conspiracy.” Id. at 397.

The courts of appeals have consistently held that

when one of the objectives of a conspiracy is to secure

a payoff or profit for a conspirator, acts calculated to

bring about the anticipated result are in furtherance

of the conspiracy.’ As the court of appeals determined

6 Petitioner acknowledges, Pet. 17, that the courts of

appeals have uniformly applied the Guidelines to conspiracies

that continue past the effective date of the Guidelines. See, e.g.,

United States v. Arboleda, 929 F.2d 858, 871 (Ist Cir. 1991);

United States v. Meitinger, 901 F.2d 27, 28 (4th Cir.), cert.

denied, 111 S. Ct. 519 (1990); United States v. Story, 891 F.2d

988, 991-996 (2d Cir. 1989); United States v. White, 869 F.2d

822, 826 (5th Cir.), cert. denied, 490 U.S. 1112 (1989).

7 See, e.g., United States v. Fletcher, 928 F.2d 495, 500 (2d

Cir.) (because “the conspiracy contemplated a division of

profits among the co-conspirators,” the execution of a note to

secure a co-conspirator his share of the profits “furthered one

of its chief goals”), cert. denied, 112 S. Ct. 67 (1991); United

States v. Fitzpatrick, 892 F.2d 162, 167-168 (1st Cir. 1989)

(final bribery payoffs are overt acts in furtherance of

conspiracy); United States v. Mennutti, 679 F.2d 1032, 1035 (2d

Cir. 1982) (although the main conspiratorial objective of

insurance fraud had been achieved, paying off a co-conspirator

by selling him property at a low price was within the scope of

the conspiracy); United States v. Walker, 653 F.2d 1343, 1346-

1347 (9th Cir. 1981) (the last overt act in a bid-rigging

7

here, one object of the conspiracy in which petitioner

participated was to earn Barsanti and Kline a profit

through their holding of the unlawfully acquired con-

dominiums during a period in which the units were

expected to appreciate in value. Petitioner told

Barsanti and Kline that if they held the units for

three years, they could earn a 40% return on each

unit; thus, the conspiratorial agreement contemplated

holding the units acquired in 1985 until 1988.8 After

November 1, 1987, moreover, Barsanti and Kline,

through their partnership, BK Associates, committed

numerous overt acts in furtherance of the

conspiracy’s profitmaking objective—including the

maintenance of their ownership interest through the

collection of rents, payment of mortgage install-

ments, and management of the unlawfully acquired

properties.’ Pet. App. A15-A19. The court of appeals

conspiracy was not filing the false certifications of no bid

rigging, but was reselling the illegally acquired property and

dividing the excess profits among the co-conspirators), cert.

denied, 455 U.S. 908 (1982).

8 Petitioner contends that the conspiracy might in theory

have lasted up to 30 years if Barsanti and Kline had not sold the

units at any point during the term of the HUD-insured loans.

Pet. 31-32. Contrary to his suggestion, Pet. 31, the mere possi-

bility that co-conspirators may act to achieve their conspirato-

rial objectives over a lengthy period of time does not extend

the statute of limitations.

® Petitioner argues that “[wJhile it was implicit [in the con-

spiracy] that someday the property would be sold and in the in-

terim, the property would be rented, managed and otherwise

lawfully maintained, these acts were not the objective of the

fraudulent conduct and false statements.” Pet. 23. That argu-

ment is beside the point; the management of the unlawfully

acquired properties furthered the conspiratorial objective of

earning and dividing the profits from the ultimate sale of the

favorably financed HUD-insured properties. Petitioner is also

unjustified in ascribing, Pet. 29, significance to the fact that

8

therefore properly held that overt acts in furtherance

of the conspiracy were committed after the effective

date of the Guidelines.'°

managing the properties was itself lawful; otherwise lawful acts

may be overt acts in furtherance of an unlawful conspiracy.

See, e.g., Fletcher, 928 F.2d at 500 (execution of promissory

note to pay co-conspirator’s share of profits); Fitzpatrick, 892

F.2d at 168 (payment for remodeling work done as payoff for a

bribe); Walker, 653 F.2d at 1347 (reselling timber acquired

through bid rigging). Petitioner also errs in asserting, Pet. 23-

24, 29-31, that the management of the units should not be

treated as being in furtherance of the conspiracy because

Barsanti and Kline in fact benefited the government by servic-

ing the HUD-insured loans. The government, however, was

harmed on a continuing basis by the conspiracy because the

retention of units under falsely obtained HUD-insured mort-

gages diverted HUD’s resources from qualifying projects.

10 Petitioner errs in relying, Pet. 21-24, on Grunewald v.

United States, 353 U.S. 391 (1957), in which this Court held

that concealment of a conspiracy whose objectives have other-

wise been accomplished does not extend the duration of the

conspiracy. Jd. at 399-405; accord Fiswick v. United States, 329

U.S. 211, 217 (1946) (conspiracy to falsify alien registration

forms was not extended by concealment). Here, the court of

appeals did not rely on concealment of the conspiracy in

upholding the district court’s application of the Guidelines.

Rather, the court relied on the fact that Barsanti and Kline, by

managing the properties, committed overt acts in furtherance

of the profitmaking objectives of the conspiracy after the effec-

tive date of the Guidelines.

Petitioner also errs in asserting, Pet. 24-29, that the decision

below is inconsistent with United States v. Doherty, 867 F.2d 47

(Ist Cir.), cert. denied, 492 U.S. 918 (1989). There, the court

held that a conspiracy to obtain a fraudulent civil service pro-

motion was not extended by the conspirator’s receipt of a

higher salary over time, even though the salary increase was

an objective of the conspiracy. The court reasoned that “where

receiving the payoff merely consists of a lengthy, indefinite

series of ordinary, typically noncriminal, unilateral actions,

such as receiving salary payments, and there is no evidence

that any concerted activity posing the special dangers of con-

9

2. Petitioner also contends that the Sentencing

Guidelines should not be applied to him because he had

no further dealings with Barsanti or Kline after he

left employment at the Carlton in 1985. Pet. 32-36.

The courts of appeals have consistently held that

when a conspiracy continues after the effective date

of the Sentencing Guidelines, the Guidelines apply to

a co-conspirator unless he or she affirmatively with-

drew from the conspiracy prior to November 1, 1987,

even if the particular conspirator personally commit-

ted no acts in furtherance of the conspiracy after that

date. See, e.g., United States v. Bafia, 949 F.2d 1465,

1477 (7th Cir. 1991), United States v. Arboleda, 929

F.2d 858, 870-871 (1st Cir. 1991); United States v.

Williams, 897 F.2d 1034, 1040 (10th Cir. 1990), cert.

denied, 111 S. Ct. 2064 (1991). Mere cessation of

activity in the conspiracy does not constitute

withdrawal. See, e.g., Hyde v. United States, 225 US.

347, 368-370 (1912); Bafia, 949 F.2d at 1477; United

States v. Lash, 937 F.2d 1077, 1083 (6th Cir.), cert.

denied, 112 S. Ct. 397 (1991). Rather, to withdraw from

a conspiracy, a defendant must take affirmative acts

inconsistent with the its object and do so in a manner

reasonably calculated to reach other conspirators.

See, e.g., United States v. U.S. Gypsum Co., 438 U.S.

422, 464-465 (1978); United States v. LeQuire, 943 F.2d

1554 (11th Cir. 1991); United States v. MMR Corp.,

907 F.2d 489, 500 (5th Cir. 1990), cert. denied, 111

S. Ct. 1388 (1991); see also Bafia, 949 F. 2d at 1477

spiracy is still taking place, we do not see how one can reason-

ably say that the conspiracy still continues.” 867 F.2d at 61. As

the court of appeals held in this case, Pet. App. A16-A17,

Doherty has no application here because Barsanti and Kline

continued to act in concert, through BK Associates, to achieve

the profitmaking objectives of the conspiracy after November

1, 1987.

10

(“Withdrawal requires an affirmative act to either

defeat or disavow the purposes of the conspiracy, such

as making a full confession to the authorities or

communicating to co-conspirators that one has

abandoned the enterprise.”).

The court of appeals properly held that petitioner

remained a member of the conspiracy after November

1, 1987, because he had offered no evidence establish-

ing his withdrawal. Pet. App. A1l9. Citing United

States v. Nerlinger, 862 F.2d 967 (2d Cir. 1988), peti-

tioner relies entirely on the proposition that leaving

his job at the Carlton and ceasing to deal with

Barsanti and Kline in 1985 constituted withdrawal

from the conspiracy. Pet. 33-35. Petitioner’s reliance

on Nerlinger, however, is unavailing. In that case, the

defendant, a salesman at the First Community Corpo-

ration of Boston, Inc. (FCCB), was involved in a com-

plex mail fraud conspiracy through which FCCB’s

head trader, Tony DeAngelis, would divert profitable

trades to an account that Nerlinger maintained in his

fiancee’s name. Nerlinger left his position at FCCB

for reasons unrelated to the conspiracy. Before leav-

ing, he asked DeAngelis if he could keep his account

open after he left. DeAngelis said that Nerlinger

could. maintain the account, but Nerlinger later

closed it, disabling himself from further participation

in the diversion scheme. 862 F.2d at 970. The court of

appeals held that Nerlinger had withdrawn from the

conspiracy because “the closing of the account in the

face of DeAngelis’s invitation to continue it is an

explicit withdrawal from the conspiracy.” Jd. at 975.

Here, by contrast, petitioner left the Carlton

because the sales office closed. Pet. 34. There was no

evidence that he did anything to defeat the continued

success of the conspiracy, whose objectives extended

beyond the mere acquisition of the units and contem-

plated the future profits of Barsanti and Kline.

11

Where, as here, a conspirator departs from the posi-

tion through which he or she actively participated in

the conspiracy for reasons that do not indicate a

renunciation of the conspiracy, the departure does not

constitute withdrawal. See, e.g., Lash, 937 F.2d at

1083-1084 (no withdrawal where employee left because

employer’s local office closed); United States v.

Masters, 924 F.2d 1362, 1368 (7th Cir.) (no withdrawal

where police captain lost his job), cert. denied, 111 S.

Ct. 2019 (1991)."' Accordingly, petitioner was properly

sentenced under the Guidelines because he remained

a party to a conspiracy that continued after November

1, 1987.

1! In United States v. Steele, 685 F.2d 793, 803-804 (3d Cir.),

cert. denied, 459 U.S. 908 (1982), the court of appeals held that

the resignation of a high-level General Electric employee

effected his withdrawal from a conspiracy to secure certain

government contracts through bribery. The court concluded

that the defendant had made a prima facie showing of

withdrawal from the conspiracy because he “resigned and per-

manently severed his relationship with GE.” 685 F.2d at 804.

Steele is not inconsistent with the decision below. Because peti-

tioner left his position at the Carlton in connection with the

closing of its sales office, Pet. 34, his departure cannot readily

be equated with a renunciation of the conspiracy in which he

participated through that position. In any case, the defendant

in Steele was engaged in a conspiracy whose primary objective

was to enrich the company from which he later permanently

resigned. Here, by contrast, the conspiracy’s objectives primar-

ily benefited Barsanti and Kline, rather than’ petitioner’s

employer. The termination of petitioner’s employment does not

indicate an abandonment of the conspiracy’s purposes.

12

CONCLUSION

The petition for a writ of certiorari should be

denied.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

ROBERT S. MUELLER, III

Assistant Attorney General

KAREN SKRIVSETH

Attorney

FEBRUARY 1992