United States 1st Circuit Court of Appeals Reports
U.S. v. CRUZ-ARROYO, 461 F.3d 69 (1st Cir. 2006) UNITED
STATES of America, Appellee, v. Jose Gerardo CRUZ-ARROYO,
Defendant, Appellant. No. 05-1681. United States Court of
Appeals, First Circuit. Heard June 7, 2006. Decided August
24, 2006.
Appeal from the United States District Court for the
District of Puerto Rico, Carmen Consuelo Cerezo, J. Page
70
Rafael F. Castro Lang, for appellant.
Jacqueline D. Novas, Assistant United States Attorney, with
whom H.S. Garc?a, United States Attorney, and Nelson
P?©rez-Sosa, Assistant United States Attorney (Senior
Appellate Attorney), were on brief, for appellee.
Before SELYA, LIPEZ and HOWARD, Circuit Judges.
SELYA, Circuit Judge.
Following a lengthy trial, a petit jury convicted
defendant-appellant Jose Gerardo Cruz-Arroyo on four counts
involving Hobbs Act extortion and related money laundering.
In this venue, the appellant challenges the sufficiency of
the evidence and the constitutionality of convictions based
mainly on evidence neither identified in the indictment nor
previewed before the grand jury. We affirm.
I. BACKGROUND
Because the appellant mounts a challenge to the sufficiency
of the evidence, we rehearse the relevant facts in the
light most hospitable to the verdict, consistent with
record support. See United States v. S??nchez-Berr?os, 424
F.3d 65, 71 (1st Cir. 2005). Page 71
In the 1990s, Puerto Rico began the substantive process of
privatizing government-owned hospitals. See P.R. Laws Ann.
tit. 24 §§ 3301-3325 (repealed 2003). The
enabling legislation, among other things, authorized the
Department of Health (the DOH) to contract out certain
health-care services and to sell off public hospitals. That
aspect of the legislation required the DOH, acting in
concert with the Government Development Bank (the GDB), to
approve each such transaction. See id. § 3303.
Sales of public hospitals typically had to be accomplished
through competitive bidding. See id. If, however, a
financially sound investor already was administering the
affairs of a particular public hospital, the DOH could
short-circuit the bidding process and negotiate directly
with that investor for a sale of the hospital. See id.
§ 3306. In an effort to take advantage of the
direct-sale option, Caribbean Anesthesia Services, Inc.
(CAS) sought to assume an existing contract for the
administration of the Dr. Alejandro Otero L??pez Hospital
(the Hospital) in Manat?, Puerto Rico. The contract was, at
the time, held by Caribbean Hospital Corporation (CHC).
As part of a push to gain the DOH’s approval for the
contract assumption, a CAS consultant arranged a luncheon
between CAS shareholders and the appellant, who was the
chief legal adviser to the Secretary of Health (the
Secretary) and the director of the DOH’s law department. At
this luncheon — attended on CAS’s behalf by, among
others, Jos?© De Jes??s-Toro, Jos?© Ivan Ramos Cubano, and
Alvin Ramirez Ortiz — the appellant learned of CAS’s
interest in taking over the Hospital’s management contract
and, ultimately, in purchasing the facility outright. When
the meeting ended, the appellant said that he would help
CAS in whatever way he could. The CAS shareholders
thereafter agreed that De Jes??s-Toro would shepherd the
relationship with the DOH generally and with the appellant
specifically.
From that point forward, the appellant served as CAS’s ears
and eyes in the government, keeping De Jes??s-Toro abreast
of all developments. CAS soon learned of two potential
snags. First, there were other groups interested in
acquiring the Hospital. Second, the GDB’s counsel had
issued an opinion that highlighted a dispute over whether
CAS would be responsible for monies owed to the DOH by its
assignor (CHC). This dispute was significant both because
of the size of the debt and because, under Puerto Rico law,
an entity in debt to the DOH could not take advantage of
the direct-sale option. See id. § 3306. Since the
management contract had only a short time left to run, the
GDB’s counsel argued that the Hospital should be auctioned
off through an open bidding process.
In October of 1997, the DOH overrode the GDB’s objections,
approved CAS’s proposed acquisition of the management
contract, and gave CAS until June 30, 1998 to negotiate
terms for a direct sale of the Hospital. CAS took over
management of the facility the next month.
On November 25, 1997, while the direct-sale negotiations
were in full flower, De Jes??s-Toro wired $15,000 from a CAS
account to the appellant’s bank account. On January 10,
1998 — more than a month later — the
appellant instructed his bank to return the money because it
did not belong to him. However, a mere four days
thereafter, De Jes??s-Toro withdrew $35,000 from a CAS
account and used the funds to procure fourteen money
orders, each in the amount of $2,500. Without exception,
the proceeds of these money orders found their way into the
appellant’s possession before the direct-sale deadline. The
appellant used the funds for a variety of personal purposes
(e.g., to make a down Page 72 payment on a new automobile,
to pay for his children’s private schooling, and to augment
individual retirement accounts held by him and his wife).
In June of 1998, CAS sent a letter of intent for the
Hospital purchase to the GDB and the DOH. Although the
privatization committee found CAS to be a suitable
purchaser, an auditor’s report indicated that the debt
dispute had not been resolved. A meeting was arranged
between the GDB, the DOH, the Governor’s chief of staff,
and CAS. Jos?© Quir??s, who held a twenty percent equity
interest in CAS, met with the appellant beforehand in order
to present his views on the matter. When the four-way
meeting occurred, the Governor’s chief of staff requested
that the appellant draft a legal opinion to resolve the
uncertainty.
In an initial opinion, dated September 4, 1998, the
appellant found that CAS was responsible for the debts
amassed by its predecessor-in-interest (CHC). Shortly
thereafter, the appellant did an about-face and prepared a
revised opinion, dated September 14, 1998, in which he
concluded that CAS was not responsible for the debts amassed
by CHC. The revised opinion was accepted by the agencies
involved and made CAS eligible to purchase the Hospital
without the hindrance of competitive bidding. The parties
closed on the direct sale three days later (although CAS
and the DOH continued to debate financial issues that arose
out of CAS’s earlier management of the Hospital).
At the same time that the DOH was dickering with CAS over
the debt issue, the appellant was negotiating sub rosa to
become in-house counsel for Pinnacle (a company controlled
by Quir??s). In those negotiations, the appellant presented
Pinnacle with a wish list that included a $144,000 annual
salary, a luxury car, a retirement plan, health benefits,
sick leave, paid vacation, and summer camp for his
children. In Quir??s’s words, he and De Jes??s-Toro “felt
obliged” to hire the appellant, notwithstanding the fact
that his demands far exceeded what Pinnacle had budgeted
for the position.
In August of 2000, while both the appellant’s employment
negotiations and CAS’s debt negotiations were ongoing, De
Jes??s-Toro leased an Audi for the appellant’s use. CAS not
only footed the bill but also gave the appellant the use of
a gasoline credit card, free of charge.
On October 6, 2000, Pinnacle, through Quir??s, formally
offered the appellant the in-house counsel position. CAS
and the DOH resolved their remaining financial issues the
next month. The appellant started work at Pinnacle in
January of 2001. The jury supportably could have found that
these events were not merely coincidental but, rather,
inextricably intertwined; Pinnacle managed two medical
centers, including CAS’s newly acquired Hospital, and these
two institutions jointly paid the salaries of all
Pinnacle’s employees (including Pinnacle’s neophyte
in-house counsel).
In due course, a federal grand jury indicted the appellant
and four codefendants (including De Jes??s-Toro, Ramos
Cubano, and Ramirez Ortiz). The indictment charged the
appellant with two counts of extortion (viz., one count of
conspiracy to interfere with commerce by extortion and one
count of interference with commerce by extortion) and two
counts of conspiracy to commit money laundering. See 18
U.S.C. §§ 1951, 1956. After a forty-one day
trial, a petit jury found the appellant guilty across the
board. This timely appeal ensued.
II. ANALYSIS
Before us, the appellant advances three assignments of
error. First, he argues that the evidence was insufficient
to support Page 73 the verdict on the Hobbs Act extortion
charges (counts 1 and 2). Second, and relatedly, he
maintains that this same dearth of evidence undermines his
convictions for money laundering (counts 3 and 4) because
the alleged extortion served as the underlying predicate
offense on which those charges were based. Third, he posits
that his convictions on all four counts must be set aside
due to a fatal variance: those convictions were premised on
evidence neither submitted to the grand jury nor referenced
in the indictment. We address the three components of this
asseverational array sequentially.
A. Counts 1 and 2.
We review challenges to the sufficiency of the evidence de
novo, assessing the proof in the light most hospitable to
the verdict. See United States v. Vega Molina, 407 F.3d
511, 526 (1st Cir. 2005); United States v. Valle, 72 F.3d
210, 216 (1st Cir. 1995). The test is whether the evidence,
including all reasonable inferences therefrom, would permit
a rational juror to conclude beyond a reasonable doubt that
the defendant was guilty of the crime charged. See United
States v. Maldonado-Garc?a, 446 F.3d 227, 231 (1st Cir.
2006). We administer the test without any independent
evaluation of the credibility of the witnesses. See United
States v. Franky-Ortiz, 230 F.3d 405, 407 (1st Cir. 2000).
Finally, we caution that to achieve a passing grade on this
test, the prosecution need not have succeeded in negating
every possible theory consistent with the defendant’s
innocence. See Maldonado-Garc?a, 446 F.3d at 231.
The Hobbs Act criminalizes conduct that “in any way or
degree obstructs, delays, or affects commerce or the
movement of any article or commodity in commerce, by
robbery or extortion or attempts or conspires so to do.” 18
U.S.C. § 1951(a). To support the Hobbs Act charges in
this case then, the government needed to establish that the
appellant committed extortion and that his actions affected
interstate or international commerce. See id. We consider
the sufficiency of the evidence as to each such element.
1. Extortion. The Hobbs Act defines extortion as “the
obtaining of property from another, with his consent,
induced by wrongful use of actual or threatened force,
violence, or fear, or under color of official right.” Id.
§ 1951(b)(2). The indictment charged the appellant
with extortion both under color of official right and
through inducement by economic fear. The “color of official
right” and “fear” prongs provide alternative, independently
sufficient grounds for finding extortion; thus, adequate
proof of one obviates any need for proof of the other. See
United States v. Bucci, 839 F.2d 825, 827 (1st Cir. 1988)
(explaining that “the prosecution can establish a violation
by showing that a defendant induced payment either through
the use of . . . fear, or under color of official right”);
United States v. Hathaway, 534 F.2d 386, 393 (1st Cir.
1976) (similar).
The appellant contends that in a Hobbs Act “color of
official right” case, the government must show that the
official somehow “induced” the payment. This emphasis
exaggerates the government’s burden. To establish guilt for
extortion under color of official right, the prosecution
must show only that the defendant, a public official, has
received an emolument that he was not entitled to receive,
with knowledge that the emolument was tendered in exchange
for some official act. See Evans v. United States, 504 U.S.
255, 268, 112 S.Ct. 1881, 119 L.Ed.2d 57 (1992); United
States v. Cruzado-Laureano, 404 F.3d 470, 481 (1st Cir.
2005). The government is not required to prove any
affirmative act of inducement on the part of the Page 74
corrupt official. See Evans, 504 U.S. at 268, 112 S.Ct.
1881.
Here, the evidence reveals that the appellant accepted
$35,000 in serial money orders derived from a CAS account.
He received and spent these funds while the DOH’s approval
of CAS’s proposal to acquire the Hospital hung in the
balance. Given the appellant’s pivotal role in the DOH’s
triage of hospital purchase proposals, the importance
attached to his opinion by the Governor’s chief of staff,
and his resultant power to impact CAS’s financial
interests, the jury reasonably could have inferred that the
money orders were intended as reciprocity for official
acts, past or future — and that the appellant knew
as much.
In an effort to blunt the force of this reasoning, the
appellant suggests that these payments were simply the
fruits of his “special relationship” with De Jes??s-Toro.
That relationship, the appellant muses, inspired De
Jes??s-Toro to make a generous, no-strings-attached gift. We
need not dwell on the inherent implausibility of such an
explanation; it suffices to say that the government need not
refute every alternative theory consistent with the
defendant’s innocence in order to defeat a sufficiency of
the evidence challenge. See United States v. Woodward, 149
F.3d 46, 56 (1st Cir. 1998). In this instance, the jury
acted well within its proper province in rejecting the
somewhat fanciful claim that the appellant received a
considerable sum of money due to friendship with a man who
just happened to be a beneficiary of his official acts. Cf.
United States v. Ortiz, 966 F.2d 707, 712 (1st Cir. 1992)
(explaining that “jurors are neither required to divorce
themselves from their common sense nor to abandon the
dictates of mature experience”).
We have said enough on this score. Since a plausible view
of the evidence supports a finding that the appellant
accepted the money orders in exchange for official acts,
the proposition that the government failed to establish
extortion under color of official right necessarily fails.
Although this finding, without more, establishes the
extortion element, we note for the sake of completeness
that the evidence also suffices to ground a finding of
extortion induced through fear. We explain briefly.
Under the Hobbs Act, “fear” encompasses fear of economic
loss, including the loss of business opportunities. See
Bucci, 839 F.2d at 827. To establish that kind of fear, the
government must show that the victim reasonably feared that
noncompliance with the putative extortionist’s terms would
result in economic loss. See United States v. Rivera
Rangel, 396 F.3d 476, 483 (1st Cir. 2005). The evidence in
this case satisfies that criterion.
CAS made a substantial investment when it assumed the
management contract for the Hospital — and it risked
forfeiting both that investment and the prospect of future
profits if the DOH did not endorse its purchase proposal.
The appellant played a key role in the negotiating pavane
and, thus, had the potential to influence (perhaps to
dictate) the success or failure of CAS’s business plan. A
rational jury surely could have inferred that, given the
circumstances, De Jes??s-Toro and Quir??s would have been
apprehensive that noncompliance with the appellant’s
demands (such as his esurient terms for future employment at
Pinnacle) would result in the foreclosure of a lucrative
business opportunity. The plausibility of this inference
was strengthened by Quir??s’s testimony that he had been
considering a more experienced candidate for the Pinnacle
in-house counsel position; that he had budgeted a lower wage
for that post; but that he nonetheless “felt obliged” to
hire the appellant at the more munificent salary that Page
75 the appellant stipulated. In this regard, the jury
reasonably could have thought that “fe[eling] obliged” was
a euphemism for fearing the consequences of rejecting the
appellant’s demands.
To cinch matters, the events that transpired demonstrate
beyond hope of contradiction that CAS’s economic fear was
reasonable. The appellant’s initial opinion letter, which
was unfavorable to CAS, attained the Secretary’s
endorsement. It was only when the appellant reversed field
and revised his legal opinion (which otherwise would have
barred any direct sale) that a pathway opened for CAS’s
acquisition of the Hospital. The timing amply illustrates
the salience of this about-face: the parties closed on the
sale of the Hospital a scant three days after the appellant
issued his revised opinion.
We hold, therefore, that the government provided sufficient
evidence for the jury to conclude that the appellant was
guilty of extortion induced by fear of economic loss. Cf.
United States v. Doyle, 981 F.2d 591, 595 (1st Cir. 1992)
(warning that “[o]ne would have to believe in the Tooth
Fairy to think [a particular sequence of events] merely
coincidental”).
2. Commerce. In addition to establishing extortion, the
government also must show that the extortionate conduct
obstructed, delayed, or affected interstate or
international commerce. See 18 U.S.C. § 1951(a). As
to this prong, the case law erects a low threshold: a de
minimis interference with commerce is enough to sustain a
Hobbs Act conviction. See Vega Molina, 407 F.3d at 527.
The appellant advances two contentions in hopes of showing
that the government failed to cross even this modest
threshold. Neither contention is persuasive.
The appellant’s principal argument is that there was no
effect on interstate commerce because the money orders that
he received were purchased by De Jes??s-Toro personally.
Since De Jes??s-Toro earned his livelihood as a physician
and only practiced his profession in local hospitals, this
thesis runs, an extortion of his funds could not have
interfered with interstate commerce. This exercise in legal
legerdemain does not withstand scrutiny.
While De Jes??s-Toro bought the money orders, the record
confirms that he first withdrew a sum equal to their cost
— $35,000 — from a CAS account. He then used
the appropriated funds to buy the money orders. Hence, the
distinction between business and personal funds that the
appellant relies on here is purely one of form, not of
substance.
The jurisprudence of the Hobbs Act does not recognize that
kind of artificial distinction. See, e.g., United States v.
Devin, 918 F.2d 280, 293-94 (1st Cir. 1990) (finding an
effect on interstate commerce when defendant had received
money from the president of a corporation who, in turn, had
derived the money from the coffers of the corporation
— which was engaged in interstate commerce). A
temporary interval of personal possession may serve to
weaken the causal connection between funds and interstate
commerce, but that connection remains strong enough to
forge the necessary link — a de minimis effect on
interstate commerce. See id. at 293.
The appellant’s fallback argument is that the government
failed to prove that any of CAS’s funds entered into the
stream of interstate commerce. This argument comprises
little more than whistling past the graveyard. The
government establishes a cognizable effect on interstate
commerce if it shows that the extortionate conduct depleted
the assets of a business engaged in interstate commerce.
See United States v. Rodr?guez-Casiano, 425 F.3d 12, 15
(1st Cir. 2005) (upholding a finding of an effect on
interstate commerce where money stolen in housebreaks
belonged Page 76 to businesses — a hardware store
and a gas station, respectively — that purchased
products out of state).
That principle is determinative in the instant case. The
government adduced evidence showing that the money orders
the appellant accepted could be traced to a CAS account;
that CAS managed, and later owned, the Hospital; and that
the Hospital bought much of its equipment from the United
States mainland. This evidence formed a sufficient predicate
for an inference that any payments that depleted CAS’s
assets affected interstate commerce.
To sum up, we conclude, without serious question, that the
government provided adequate proof to establish both of the
elements needed to ground convictions on the Hobbs Act
counts: the commission of extortion and a concomitant
interference with interstate commerce.
B. Counts 3 and 4.
The appellant’s second claim of error stands or falls on
the merits of the appellant’s first claim of error. The
applicable money laundering statute, 18 U.S.C. §
1956, imposes criminal liability on any person who,
“knowing that the property involved in a financial
transaction represents the proceeds of some form of
unlawful activity,” engages in a financial transaction that
constitutes money laundering. Id. § 1956(a)(1). In
fine, the statute requires proof of the commission of some
antecedent offense (the specified “unlawful activity”), the
avails of which are then “laundered” by the defendant.
Here, the relevant counts in the indictment (counts 3 and
4) charged the extortion as the antecedent offense.
Seizing on this tiered statutory structure, the appellant
claims, in effect, that the evidence was insufficient to
support a finding of extortion and that, therefore, the
absence of the linchpin predicate offense rendered the
evidence insufficient to support his money laundering
convictions. This claim is hopeless. After all, we already
have rebuffed the appellant’s challenge to the sufficiency
of the evidence in connection with the extortion charges.
See supra Part II(A). Consequently, his challenge to his
money laundering convictions collapses of its own weight.
C. Variance.
The appellant next complains that the verdict cannot stand
on any of the four counts of conviction because it rests
predominantly on facts that the government failed either to
present to the grand jury or to plead in the indictment. We
first sketch the background for this plaint and then
address its merits.
In responding to a question on the verdict form, the petit
jury found that the offenses of conviction involved
$35,000. In the appellant’s view, that calculation means
that the jury found him liable only for the money orders
that De Jes??s-Toro passed along to him. But the government
did not adduce any evidence about this alleged bribe before
the grand jury; and the grand jury, in turn, did not
mention the money orders in the indictment. Building on
this foundation, the appellant argues that his convictions
rest upon a prejudicial variance, thereby violating his
rights under the Fifth, Sixth, and Fourteenth Amendments.
Though vigorously advanced, this argument lacks force.
First and foremost, the fact that the jury found the
appellant liable for $35,000 is by no means a conclusive
indication that the money orders constituted the only
evidence upon which the jury found him guilty. See, e.g.,
United States v. Casas, 425 F.3d 23, 64 n. 56 (1st Cir.
2005) (stating that there is no foolproof way of telling
what parts of the evidence the jury credited when it did
not make specific findings on the overt acts alleged Page
77 in the indictment). And even were we to assume,
favorably to the appellant, the validity of his premise
anent the money orders, the conclusion that he reaches
would not follow.
A variance occurs “when the facts proved at trial differ
from those alleged in the indictment.” United States v.
Fisher, 3 F.3d 456, 462 (1st Cir. 1993). Even if a variance
occurs, however, that fact alone does not suffice to
displace a conviction. Rather, a variance requires that a
conviction be set aside only when it is prejudicial, that
is, when it affects the defendant’s substantial rights. See
United States v. Tormos-Vega, 959 F.2d 1103, 1115 (1st Cir.
1992); United States v. Fermin Castillo, 829 F.2d 1194,
1196 (1st Cir. 1987). There is no prejudicial variance so
long as an indictment provides the defendant with
sufficient detail to allow him to prepare a defense, avoid
unfair surprise at trial, and plead double jeopardy when
appropriate. See Tormos-Vega, 959 F.2d at 1115. The law
recognizes that the government need not lay out the whole
of its proof in the indictment. See United States v.
Marrero-Ortiz, 160 F.3d 768, 773 (1st Cir. 1998).
That brings us to the case at bar. Here, the indictment
limned the nucleus of operative facts giving rise to the
charges against the appellant. It not only listed some
overt acts referable to the charged conspiracies (e.g., it
described the $15,000 payment that the appellant received
and returned,[fn1] the Audi that De Jes??s-Toro leased for
him, and his cushy employment arrangement with Pinnacle)
but also referred to the general agreement among CAS’s
shareholders that “De Jes??s-Toro would take care of the
payments to [the appellant].” Taken in the ensemble, these
allegations served to put the appellant on notice that any
pecuniary benefit he had received from or through De
Jes??s-Toro might be relevant to the government’s case. See,
e.g., United States v. Innamorati, 996 F.2d 456, 478 (1st
Cir. 1993) (finding no prejudicial variance when an
indictment charged a defendant with conspiring to
distribute drugs and the government introduced proof of two
deals not listed as overt acts because the evidence fell
“squarely within the scope of th[e] alleged conspiracy”).
In short, the indictment gave the appellant fair warning as
to the nature of the charges that he faced and allowed him
to defend intelligently against those charges. No more was
exigible. Consequently, no variance (or, at the least, no
prejudicial variance) occurred. See Marrero-Ortiz, 160 F.3d
at 773.
III. CONCLUSION
We need go no further. For aught that appears, the
appellant was fairly tried and justly convicted. His
appeal, therefore, cannot prosper.
Affirmed.
[fn1] The appellant insists that his return of this payment
conclusively demonstrates his innocence. In view of his
subsequent receipt and retention of a larger sum, however,
the jury was free to conclude that his return of the
$15,000 payment may have had some other, less attractive
explanation (say, a belief either that the amount was too
paltry or that the source of the funds was too easily
traced). Page 78