Argued and Submitted, Seattle, Washington June 17, 2014.
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Appeal from the United States District Court for the District of Arizona. D.C. No. 4:08-cr-00212-DCB-BPV-1, D.C. No. 4:08-cr-00212-DCB-BPV-2. David C. Bury, District Judge, Presiding.
The panel affirmed the convictions and sentences of former Congressman Richard Renzi and his friend and business partner James Sandlin in a case in which Renzi, who owned and operated an insurance agency, misappropriated clients' insurance premiums to fund his congressional campaign, and lied to insurance regulators and clients to cover his tracks.
The panel rejected Renzi's contention that the government failed to prove that he or Sandlin solicited or received " something of value" in exchange for Renzi's promise to support land exchange legislation, and that the evidence was therefore insufficient to sustain his extortion and honest-services fraud convictions. Observing that the Ninth Circuit's pattern jury instruction for bribery merely recommends that the district court specifically describe the thing of value, the panel found no error in the uncontested jury instructions.
The panel held that, if a member of Congress offers evidence of his own legislative acts at trial, the government is entitled to introduce rebuttal evidence narrowly confined to the same legislative acts, and such rebuttal evidence does not constitute questioning the member of Congress in violation of the Speech and Debate Clause. The panel held that Renzi's introduction of testimony concerning Renzi's support for certain legislation opened the door for the government to introduce rebuttal evidence on these narrow points, and that Renzi was not impermissibly questioned about his legislative acts in violation of the Clause. The panel held that the district court properly declined to balance another congressman's Speech or Debate Clause privilege against Renzi's right to present a defense.
The panel held that the district court did not abuse its discretion in excluding classified information, where Renzi introduced ample similar evidence supporting his theory of the case, the district court handled the issue appropriately in conformance with the Classified Information Procedures Act, and there was no constitutional violation.
The panel held that no violation of Napue v. Illinois occurred during the government's direct examination of two witnesses, where the statements at issue were not material.
Regarding Renzi's insurance-fraud conviction, the panel rejected Renzi's contentions (1) that the government failed to prove that Renzi & Company, an insurance agency specializing in obtaining insurance coverage for non-profit organizations and crisis pregnancy centers, was " engaged in the business of insurance" within the meaning of 18 U.S.C. § 1033(f); (2) that two letters sent to insurance regulators do not qualify as " financial" documents within the meaning of 18 U.S.C. § 1033(a)(1)(A); and (3) that the district court erred in instructing the jury on the definition of " financial reports or documents."
Regarding Renzi's RICO conviction, the panel held that the government was not required to show that Renzi & Company " misappropriated" funds held " in trust" for another in order to prove mail or wire fraud, this additional language in the indictment was surplusage, and the district court did not constructively amend the indictment by omitting the " in trust" language from the jury instructions.
The panel upheld the district court's calculation under U.S.S.G. § 2C1.1(b)(2) of the value of a payment Renzi received in exchanged for influence exerted to the sale of property. The panel rejected Renzi and Sandlin's contention that the district court erred by concluding that the value of the payment was $200,000 (the amount of a debt to Renzi that Sandlin paid off) rather than zero (the net value to Renzi).
The panel concluded that there was sufficient evidence to support Sandlin's convictions for conspiracy to engage in wire fraud, Hobbs Act extortion, and engaging in monetary transactions with criminally derived funds, where there was powerful proof of criminal intent, and the jury rejected Sandlin's defense that money he received was the result of a legitimate, innocent property sale.
Specially concurring, Judge Ikuta disagreed with the majority's overbroad reading of § 1033, which could impose criminal liability not just on an insurer but also on any third party who interacts with insurers. She agreed with the result because Renzi & Company engaged in a range of activities as an insurance broker, some of which may be evidence that it acted as an agent of the insurer.
Dan Himmelfarb (argued), Kelly B. Kramer, Stephen Lilley, Joseph P. Minta, Mayer Brown LLP, Washington, D.C.; Chris S. Niewoehner, Steptoe & Johnson LLP, Washington, D.C., for Defendant-Appellant Richard G. Renzi.
Gary Udashen (argued), Sorrels, Udashen & Anton, Dallas, TX, for Defendant-Appellant James Sandlin.
David A. O'Neil, Acting Assistant Attorney General; David V. Harbach, II, Deputy Chief, Public Integrity Section; David M. Bitkower, Deputy Assistant Attorney General; Stephan E. Oestreicher, Jr. (argued), Attorney, Appellate Section, United States Department of Justice, Criminal Division, Washington, D.C.; John S. Leonardo, United States Attorney; Gary Restaino, Assistant United States Attorney, District of Arizona, for Plaintiff-Appellee United States of America.
Kerry W. Kircher (argued), General Counsel; William Pittard, Deputy General Counsel; Todd B. Tatelman, Mary Beth Walker, Eleni M. Roumel, and Isaac B. Rosenberg, Assistant Counsel, Office of General Counsel, United States House of Representatives, Washington, D.C., for Amicus Curiae Bipartisan Legal Advisory Group of the United States House of Representatives.
Before: Richard C. Tallman, Consuelo M. Callahan, and Sandra S. Ikuta, Circuit Judges. Opinion by Judge Tallman; Special Concurrence by Judge Ikuta. IKUTA, Circuit Judge, specially concurring.
TALLMAN, Circuit Judge:
Congressmen may write the law, but they are not above the law. Former Arizona Congressman Richard Renzi learned this lesson the hard way when he was convicted by jury on charges of conspiracy, honest-services fraud, extortion, money laundering, making false statements to insurance regulators, and racketeering. Now Renzi and codefendant James Sandlin appeal their convictions and sentences, asserting that the evidence was insufficient to support the verdict. Renzi further argues that his convictions were predicated on serial violations of his constitutional rights, including violations of his Congressional Speech or Debate Clause privilege. We reject their arguments and affirm both convictions and sentences.
The United States brought insurance fraud charges against Renzi, public corruption charges against Renzi and Sandlin, and a racketeering charge against Renzi. The evidence showed that Renzi, who owned and operated an insurance agency, misappropriated clients' insurance premiums to fund his congressional campaign, and lied to insurance regulators and clients to cover his tracks. The public corruption
charges were based on Renzi and Sandlin's involvement in a conspiracy to extort private businesses to purchase land owned by Sandlin in exchange for Renzi's promise to support favorable federal land exchange legislation. Finally, the evidence established that Renzi used his insurance business as an enterprise to conduct a pattern of racketeering activity by diverting clients' insurance premiums for his personal use, facilitating an extortionate land transfer, and laundering its proceeds.
In the early 2000s, Renzi owned and operated Renzi & Company (R& C), an insurance agency specializing in obtaining insurance coverage for non-profit organizations and crisis pregnancy centers. R& C obtained group insurance coverage for its clients through brokers who worked on behalf of insurance carriers. R& C used two primary brokers: (1) North Island Facilities, which secured insurance coverage through Safeco Insurance Company, and (2) Jimcor Agency, which secured insurance coverage through both United States Liability Insurance Company and Royal Surplus Lines Insurance Company. R& C collected yearly premiums from its clients and, after keeping a small percentage as a profit, remitted those premiums to the broker. After taking their commission, the broker (either North Island or Jimcor) remitted the remainder of the premium to the insurer--either Safeco, United States Liability, or Royal Surplus.
On December 10, 2001, Renzi publicly announced his candidacy for a seat in the United States House of Representatives serving Arizona's First Congressional District. The very next day, Renzi began diverting cash from R& C to fund his congressional campaign. Between December 2001 and March 2002, Renzi transferred over $400,000 from R& C to his " Rick Renzi for Congress" account. To avoid campaign disclosure regulations, Renzi claimed the money as a personal loan to the Renzi campaign. But most of the diverted funds were directly traceable to insurance premiums R& C had collected from clients.
In April 2002, North Island sent R& C an invoice for $236,655.90 to bind annual Safeco coverage for R& C's clients. R& C had already collected the insurance premiums from its clients. But it had funneled those premiums to Renzi's congressional campaign. Because R& C no longer had the money, Renzi did not allow Aly Gamble, R& C's Senior Underwriter, to pay North Island. Two months later,
Safeco warned R& C that it planned to cancel R& C's policies for nonpayment. Another month passed with no response from R& C.
In July 2002, Safeco began sending cancellation notices to R& C's clients. With cancellation notices in hand, worried clients began calling R& C. Gamble fielded these calls. To respond to client concerns, Renzi dictated a letter to Gamble, which she sent to clients later that month. The letter stated that, because " spiritual counseling was no longer covered" under Safeco's policy, R& C had " replaced" Safeco with " the Jimcor Insurance Company." The letter promised that clients would experience " no lapse in coverage." Attached to each letter was a new certificate of liability insurance ostensibly from " Jimcor Insurance Company." The certificate listed a policy number, policy limits, and effective policy dates.
None of this was true: Jimcor was not an insurance company, and the new certificates were entirely fabricated. Gamble testified that at Renzi's request, she inserted random policy numbers, cut and pasted Safeco's policy limits, and chose Safeco's August 2002 cancellation date as the effective date of the new fake policy. Then, at Renzi's direction, Gamble sent out at least 74 of these letters and phony insurance certificates, but only to clients who had called R& C to voice concern.
North Island continued to formally demand payment of premiums from R& C. In October 2002, with no payments in hand and no response from R& C, North Island notified state insurance regulators in Virginia and Florida of R& C's nonpayment. Clients began receiving calls from these state insurance regulators.
In early November, R& C sent another letter to its clients, signed by Gamble on behalf of R& C's Interim President Andrew Beardall. The letter again reassured clients that they were " properly insured" with " no lapses in coverage." These statements were also false--at that time clients had no insurance coverage at all. Instead, between August and November 2002, R& C adjusted all insurance claims internally, paying clients directly for any outstanding claims.
On November 5, 2002, Renzi was elected to the United States House of Representatives. A few weeks later, Renzi received a $230,000 gift from his father. That same day, R& C paid the full amount due to North Island: $236,655.90. After receiving full payment, Safeco decided to retroactively reinstate all of R& C's policies.
But R& C's troubles were just beginning. In early 2003, R& C received a letter from the Virginia State Corporate Commission Bureau of Insurance. In the letter, the Bureau of Insurance asked R& C to explain why it had collected client premiums but failed to remit them to North Island, and why it had issued certificates of insurance showing that coverage had been placed through Jimcor, which is not an insurance company. In March
2003, Renzi responded by letter on behalf of R& C. Renzi's letter attributed the withheld payments to an ongoing coverage dispute with Safeco, and claimed that " a member of the office staff" had " mistakenly typed 'Jimcor'" when generating the certificates. The letter characterized the mistake as an " inadvertent computer slip."
In early spring, R& C received another letter--this time, from the Florida Department of Insurance--inquiring as to why premiums collected by R& C had not been remitted to Safeco. R& C responded in a letter signed by Beardall. Again, R& C blamed the faulty certificates on a " computer error by a member of the office staff." R& C stated that the Safeco insurance policies were " in force for the whole year without any lapses." At trial, Gamble testified that there was no " inadvertent computer slip." She confirmed that Renzi himself had instructed her to create the fake certificates, insert the false coverage information, and send the certificates to complaining clients.
In May 2003, R& C surrendered its Virginia insurance license to avert penalties. R& C chose not to renew its Florida license. As a result, the Florida Department of Insurance took no further action against R& C.
The public corruption counts arose out of Renzi and Sandlin's long-time friendship and business relationship. From 2001 to 2003, Renzi and Sandlin were partners in a real estate development company, Fountain Realty and Development, Inc., based in Kingman, Arizona. In February 2003, shortly after his election to Congress, Renzi sold Sandlin his share of the company. Sandlin paid Renzi in part with an $800,000 promissory note, payable in annual installments through September 2007 at five percent interest.
During this time, Sandlin also owned a 640-acre parcel (the " Sandlin tract" ) in southeastern Arizona, near the San Pedro River and within the watershed of the United States Army's Fort Huachuca (" the Fort" ). Sandlin had been leasing the tract to an alfalfa farmer, who was using an excessive amount of water (1,846 acre feet per year) in a region that was facing chronic water shortages. Water conservation was a high priority for Fort Huachuca because the Fort conducted important training and was facing local controversy over its water usage. At the same time, the Fort was being reviewed by the Base Realignment and Closure Commission (" BRACC" ) and was under a federal court order to reduce its water consumption.
In 2004, the Resolution Copper Company (" RCC" ) acquired land and mineral rights to a large copper deposit located near Superior, Arizona. RCC was planning to extract the copper, but first wanted to secure ownership of an adjacent parcel of land owned by the United States Forest Service. RCC began talking with Congressman James Kolbe about sponsoring a federal land exchange bill. But Kevin Messner, Renzi's Chief of Staff, told Renzi that he should be the one to introduce RCC's exchange, as Messner believed that the exchange could help Renzi gain political support during Renzi's upcoming reelection campaign. The RCC land exchange proceeded no further that year, but
RCC and Renzi agreed to touch base again after the election.
By the time Renzi was reelected to Congress in early 2005, he had secured a seat on the House Natural Resources Committee, which was responsible for land exchanges requiring legislative approval. At a private meeting in January 2005, RCC executive Bruno Hegner asked Renzi which lands RCC should consider purchasing to exchange with the government for the Forest Service parcel. Renzi " nonchalant[ly]" mentioned the Sandlin tract, but he did not disclose his relationship with Sandlin, nor did he disclose the fact that Sandlin owed him $700,000 in principal on the $800,000 note. Hegner testified that, although RCC would not have been interested in the Sandlin property absent Renzi's suggestion, RCC began negotiating with Sandlin.
Renzi and Hegner met again in February 2005. Hegner testified that in this meeting, Renzi was insistent about the importance of RCC acquiring the Sandlin property and including it in the land exchange. Renzi stressed that acquiring the Sandlin property would benefit national security, because decreasing water usage on the Sandlin property was critical to Fort Huachuca's sustainability. Tom Glass, an RCC consultant who also attended the meeting, asked Renzi if he had a business relationship with Sandlin. Hegner testified that Renzi became visibly aggravated and insisted that, although he had sold a piece of property to Sandlin many years ago, " there was no business relationship."
Ultimately, RCC's negotiations with Sandlin were not fruitful. In March 2005, Hegner advised Renzi that RCC was unable to reach an agreement with Sandlin because Sandlin was insisting upon unreasonable terms. Later that day, Sandlin sent Hegner a fax stating, " I just received a phone call from Congressman Renzi's office. They have the impression I haven't been cooperative concerning this water issue. I feel I have been very cooperative . . . . I still want to cooperate."
Negotiations continued, albeit unsuccessfully. When Hegner told Renzi that he was continuing to have trouble with Sandlin, Renzi responded with the key ultimatum: " No Sandlin property, no bill." Hegner immediately understood this to mean that Renzi would not sponsor RCC's legislative land swap proposal unless RCC included the Sandlin property in the land exchange. Hegner asked, " What if I can't get this done?" Renzi replied, " That would be a topic for another conversation," and hung up. In shock, Hegner mailed himself a sealed note memorializing the conversation. That same day, Hegner learned that Renzi and Sandlin had been joint shareholders in an Arizona business. As a result, RCC decided not to pursue the Sandlin tract.
In May 2005, Renzi introduced a federal land exchange bill featuring RCC that did not include the Sandlin property. No action was ever taken on the bill.
In April 2005, Philip Aries of The Aries Group approached Joanne Keene, Renzi's District Director, to discuss the possibility of Renzi sponsoring a federal land exchange bill. Keene put Aries in contact with Sandlin, and Aries and Sandlin spoke on the phone on April 14 for about 28
minutes. That same day, Sandlin exchanged nine phone ...