US v. Bunchan, (1st Cir. 2009)

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United States Court of Appeals

For the First Circuit

No. 08-1022

UNITED STATES OF AMERICA,

Appellee,

v.

JAMES A. BUNCHAN,

Defendant, Appellant.

 

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Richard G. Stearns, U.S. District Judge]

 

Before

 Lynch, Chief Judge,

Boudin and Lipez, Circuit Judges.

    James M. Fox, for appellant.

    Jack W. Pirozzolo, Assistant United States Attorney, with

whom Michael J. Sullivan, United States Attorney, was on brief,

for appellee.

 

 

September 2, 2009

 

 

         LIPEZ, Circuit Judge. Appellant James Bunchan

masterminded a devastating pyramid scheme that stole nearly twenty

million dollars from over five hundred people, most of them of

Cambodian origin living in the United States. Following a jury

trial, he was convicted of conspiracy, sixteen counts of mail

fraud, and fifteen counts of money laundering. He was sentenced to

a term of imprisonment of thirty-five years and ordered to pay

restitution in the amount of $19,103,121.73. He now challenges:

1) his convictions, arguing that he was deprived of a fair trial

due to the district court's restriction on impeachment of a

government witness, and 2) the reasonableness of his sentence. We

affirm.

I.

         We recount the facts in the light most favorable to the

jury's verdict. United States v. Gonzalez-Ramirez, 561 F.3d 22, 24

(1st Cir. 2009). Appellant was the founder, owner, and director of

two "multilevel marketing companies," World Marketing Direct

Selling ("WMDS") and Oneuniverseonline ("1UOL"). Bunchan

represented to investors that the companies made a profit through

selling cosmetics, health and diet supplements, and other products.

In reality, the companies sold little of anything and generated

money almost exclusively through the recruitment of new investors,

or "members."

         Appellant met co-defendant Seng Tan in 1999, around the

time that he started WMDS, at a WMDS promotional seminar. Tan

quickly became the principal recruiter of new investors, and was

eventually given the title of "CEO Executive National Marketing

Director" on WMDS and 1UOL promotional materials. Appellant and

Tan were married in 2002.

         Also in 1999, appellant met Christian Rochon, who was a

neighbor in his apartment complex. He asked Rochon to help him

create promotional materials for WMDS. Appellant, who is from

Cambodia, said he wanted an "American face" for the company and

soon made Rochon "President" of WMDS. (Rochon, who is originally

from Canada, is Caucasian.) After taking Rochon to be

professionally photographed, appellant put Rochon's photograph on

WMDS's promotional materials. When 1UOL was created in about 2001,

Rochon was also made "President" of that company.

[1]

Correspondence

to investors often carried Rochon's name and signature, although

Rochon was instructed not to interact with investors.

         Appellant and Tan, who is also Cambodian, marketed

investments in WMDS and 1UOL primarily to members of the Cambodian

community living in the United States. Many of the investors spoke

poor English and had little formal education. To recruit new

investors, appellant and Tan held informational seminars, usually

hosted by Tan at the homes of investors. They often spoke to the

prospective investors in Khmer, the Cambodian language, and

emphasized their shared experiences as Cambodian immigrants.

          Appellant and Tan represented that WMDS and 1UOL were

profitable because they generated revenues from the sales of

products, and that members earned commissions based on their sales.

Investors could achieve different levels within the company, either

by making sales, providing a lump-sum payment, recruiting new

investors, or doing some combination of the three. For example,

investors could skip the "Distributor" level -- and avoid the

requirement of selling products -- by investing $26,347.86 and

becoming a "Director I". "Director I's" were told that they would

receive an immediate "bonus" of $2,797, followed by a $300 monthly

payment for the rest of their lives and, some were told, through

the lives of their children and grandchildren. Appellant created

a document that described the "Director I" level to distribute at

promotional seminars. The document read, in part:

You will get $300.00 each and every month for

the rest of your life and pass on down to your

children after your death . . . You will see

this money working for you while you are

sleeping . . . . Our National Marketing

Director of W.M.D.S., Inc., knowing exactly

how you feel about your $26,347.86 which

becomes a permanent investment with

W.M.D.S. . . . you should not be worry [sic]

about loosing [sic] your one [sic] of a life

time $26,347.86 investment at all. W.M.D.S.,

Inc., has an absolute responsibility to take

care you [sic] and your family for life. Your

investment can be inherited to your children

and their generation to come . . . . Because

you are the owner of the W.M.D.S., Inc., it is

completely different from investing in stock

that will go up or down and loose [sic] money.

. . . Do not forget that you are a special

person who has the best opportunity to meet

this company first . . . . W.M.D.S. urges you

to sign up now or you will miss your best

chance of fulfilling your American Dream.

 

Investors were also encouraged to become "Gold Directors" by

investing $130,000 to $160,000. Gold Directors were promised

$2,500 in unending monthly payments.

         Appellant and Tan encouraged people who did not have

enough cash to borrow money by taking out second mortgages and home

investment loans, and many investors did so. The government

submitted at sentencing that more than 150 people had secured

mortgages or borrowed from their retirement accounts to finance

their investments in WMDS or 1UOL.

         Internal Revenue Service ("IRS") Special Agent Troy Niro

testified at trial that while investors were contributing money to

WMDS, appellant was using the company coffers like a personal bank

account to pay for personal expenses and furnish a lavish

lifestyle. He owned several luxury cars, a home in Miami, Florida,

and an expensive yacht named after himself (the "James B"). Other

expenses reflecting his lavish lifestyle, as testified to by Agent

Niro, included: $5,000 spent on hotel room service for two people

in one night, $150,000 spent on diamonds, and $23,000 spent on

hairpieces.

[2]

Between 2000 and 2005, appellant also spent over $3.8

million at casinos. He often wrote large checks to casinos from

company accounts containing investor funds, at one time writing a

single check for $238,370 from the 1UOL account to a Las Vegas

casino.

[3]

Agent Niro's investigation revealed that Bunchan

appropriated at least $3.7 million of investors' funds for himself

and spent an additional $280,000 of investor money on his ex-wife

and other family members.

[4]

Appellant also kept family members,

such as his ex-wife and his son, on the payroll of the company even

though they did not work there.

         Beginning in early 2005, Bunchan and Tan began having

difficulties recruiting enough new members to meet WMDS and 1UOL's

obligations to existing members. By June 2005, the companies had

altogether ceased making monthly payments to most of their

investors, and investors began to complain. On August 15, 2005,

Bunchan had a letter sent to investors falsely blaming the delay on

technological problems and asking for investors' patience until

September. In September, appellant directed that another letter be

sent to investors, again blaming the delay on technological

problems, and explaining that the company was installing "costly"

new upgrades to its check-writing technology. Meanwhile, Tan told

investors that the delay was caused by computer problems and,

later, by a disruption in the companies' bank accounts caused by

Hurricane Katrina. During this time, appellant hired attorneys to

threaten investors who were complaining about their missed

payments. The letters stated, in part, "[Y]our continued

interference with WMDS and 1UOL's business affairs will be met with

the full force of the law and WMDS and 1UOL will make you pay for

your transgressions with all of your personal assets, including

your personal residence."

         In mid-November 2005, appellant, Tan, and Rochon were

arrested by the federal authorities for mail fraud due to their

activities with WMDS and 1UOL. While in jail awaiting trial,

appellant initiated a murder-for-hire plot that targeted people he

believed might testify against him, such as Rochon, several

investors who had vociferously complained, and eventually the

Assistant United States Attorney prosecuting his case. Appellant

discussed his intentions with another inmate, who eventually

notified the authorities and agreed to cooperate as a confidential

informant in an undercover investigation. In the course of the

investigation, undercover operators gave appellant the name of a

"hit man," actually an undercover FBI agent, to whom appellant

mailed a list of people he wanted killed. He had grouped his

targets into three tiers, in order of priority, and included the

prices he was willing to pay for each "hit" (ranging from $10,000

to $20,000). The FBI also recorded a conversation between the

confidential informant and appellant in which appellant explained

that he also wished the hired killer to assassinate the spouses and

children of several people named on the list.

[5]

         A federal grand jury returned a second superseding

indictment against appellant, Tan, and Rochon on August 17, 2006.

Appellant was indicted on all forty counts of the indictment, which

included one count of conspiracy in violation of 18 U.S.C. § 371,

twenty-four counts of mail fraud in violation of 18 U.S.C. § 1341,

and fifteen counts of engaging in monetary transactions in proceeds

of an unlawful activity, a form of money laundering, in violation

of 18 U.S.C. § 1957. On June 4, 2007, the first day of trial,

Rochon agreed to plead guilty to seven counts of the indictment,

including the conspiracy count, some mail fraud counts, and some

counts of engaging in monetary transactions in proceeds of an

unlawful activity. Rochon testified for the government during the

eleven-day jury trial. The jury convicted appellant of conspiracy,

sixteen counts of mail fraud, and fifteen counts of money

laundering. Tan was convicted of conspiracy, sixteen counts of

mail fraud, and four counts of money laundering.

[6]

          The Office of Probation prepared a presentence report

("PSR") calculating appellant's base offense level ("BOL") at

seven.

[7]

To this BOL, the PSR added: a twenty-level enhancement

because the offense involved a loss of more than $7 million but

less than $20 million (U.S.S.G. § 2B1.1(b)(1)(K)); a six-level

enhancement because the offense involved more than 250 victims

(U.S.S.G. § 2B1.1(b)(2)(C)); a six-level enhancement because the

offense involved the use of sophisticated means (U.S.S.G.

§ 2B1.1(b)(9)(C)); a two-level enhancement because the offense

substantially endangered the solvency or financial security of 100

or more victims (U.S.S.G. § 2B1.1(b)(13)(B)(iii))

[8]

; a two-level

enhancement for abuse of a position of trust (U.S.S.G. § 3B1.3); a

four-level enhancement because appellant was the organizer of a

criminal activity that was extensive (U.S.S.G. § 3B1.1(a)); a two-level enhancement because the offense targeted vulnerable victims

(U.S.S.G. § 3A1.1(b)(1)); and, finally, a two-level enhancement for

obstruction of justice because appellant initiated the murder-for-hire plot targeting witnesses against him and the prosecutor of his

case (U.S.S.G. § 3C1.1). These enhancements produced a total

offense level ("TOL") of forty-seven, which exceeds the highest TOL

contemplated by the Sentencing Guidelines' sentencing table. The

PSR placed appellant in Criminal History Category I ("CHC I"). The

resultant Guideline Sentence Range ("GSR") was life imprisonment.

         On November 28, 2007, the district court conducted a

sentencing hearing in appellant's case. The government, noting

that a TOL of forty-seven is "literally off the chart" because the

maximum TOL contemplated by the Guideline sentencing table is

forty-three,

[9]

nonetheless recommended that the court impose a

below-guideline sentence of thirty-five years. Appellant argued

that, due to his age (fifty-eight at the time of sentencing), even

a thirty-five year sentence was equivalent to "putting him in

prison for the rest of his life," and would be disproportionate to

the sentences in other financial fraud cases. He requested a

maximum sentence of ten years of imprisonment. The district court

accepted the government's recommendation and sentenced appellant to

thirty-five years of imprisonment, to be followed by two years of

supervised release, and restitution in the amount of

$13,728,985.52, to be paid jointly and severally with Tan and

Rochon. On February 14, 2008, the district court amended the

judgment of restitution to $19,103,121.73, also to be paid jointly

and severally with Tan and Rochon.

         This appeal followed.

II.

         Appellant argues that he was deprived of a fair trial

because the district court erroneously restricted his impeachment

of a witness against him, Christian Rochon. We review the district

court's evidentiary ruling restricting impeachment for abuse of

discretion. United States v. Shinderman, 515 F.3d 5, 16 (1st Cir.

2008).

         Appellant sought to cross-examine Rochon about criminal

charges that were currently pending against him in Massachusetts

state court for indecent assault and battery of a child. The

charges alleged that Rochon had engaged in illegal sexual contact

with his nephew, a minor. Before trial, the government sought to

exclude reference to the state charges or, in the alternative, to

limit the inquiry about the charges. Appellant opposed the motion,

arguing that the inquiry was permissible under Federal Rule of

Evidence 608(b) as a specific instance of prior conduct relevant to

the witness's character for truthfulness, and, further, relevant to

show bias because Rochon might believe that he would receive better

treatment on the state charges if he testified favorably for the

United States in the federal criminal case.

         Although the district court initially granted the

government's motion to preclude the inquiry, it reconsidered its

ruling at trial. After a voir dire of Rochon, the district court

permitted appellant to examine Rochon about the pending state court

assault charges but ordered that he could not inquire into the

nature of the charges, stating "I am going to let you ask the

question about whether there is an assault charge pending in the

Attleboro District Court. I am not going to permit any reference

to the nature of the assault. I find that far too prejudicial under

Rule 403." Appellant challenges that ruling.

         Federal Rule of Evidence 403 provides that "[a]lthough

relevant, evidence may be excluded if its probative value is

substantially outweighed by the danger of unfair prejudice,

confusion of the issues, or misleading the jury, or by

considerations of undue delay, waste of time, or needless

presentation of cumulative evidence." Because "Rule 403 judgments

are typically battlefield determinations, and great deference is

owed to the trial court's superior coign of vantage," Shinderman,

515 F.3d at 17, "[o]nly rarely -- and in extraordinarily compelling

circumstances -- will we, from the vista of a cold appellate

record, reverse a district court's on-the-spot judgment concerning

the relative weighing of probative value and unfair effect."

Freeman v. Package Mach. Co., 865 F.2d 1331, 1340 (1st Cir. 1988).

         We find no abuse of discretion in the district court's

restriction of appellant's cross-examination of Rochon. The

district court's ruling allowed appellant to raise the possibility

that Rochon had a motive to ingratiate himself with the government

by testifying against appellant. Appellant inquired into whether

Rochon perceived that he would receive lighter treatment on the

state charges if he testified favorably for the government.

Exposing the nature of the pending state charges was not necessary

to establish the potential of bias resulting from Rochon's

expectations.

         Furthermore, Rule 608(b) only permits inquiry into prior

conduct if the conduct is probative of the witness's character for

truthfulness or untruthfulness. The district court's determination

that the nature of the sexual assault charges was not sufficiently

probative of Rochon's character for truthfulness to outweigh the

serious danger of prejudicing the jury against him was well within

its discretion. See United States v. Span, 170 F.3d 798, 803 (7th

Cir. 1999) (holding that the district court did not abuse its

discretion in restricting impeachment of government witness to

inquiry about the existence of felony charges against him when

restriction prohibited defendant from exposing that the charge was

for first degree sexual assault of a child); United States v.

Rabinowitz, 578 F.2d 910, 912 (2d Cir. 1978) ("We fail to see the

logical relevance of the evidence sought to be adduced [--] prior

acts of sodomy upon young children and consequent psychiatric

treatment therefor [--] to the credibility of the witness. The

evidence's bearing on the witness's propensity to tell the truth

was simply too tenuous for us to hold that the district judge

abused his discretion in excluding it.").

         Finding no error in the district court's limitations on

cross-examination, we affirm appellant's conviction.

[10]

III.

         Appellant also challenges his sentence, arguing that it

was unreasonable. We review the reasonableness of a sentence

"under a deferential abuse-of-discretion standard." Gall v. United

States, 128 S.Ct. 586, 591 (2007).

         In determining a sentence, district courts should first

calculate a defendant's GSR, which "serve[s] as the sentencing

court's 'starting point' or 'initial benchmark.'" United States v.

Martin, 520 F.3d 87, 91 (1st Cir. 2008) (quoting Gall, 128 S.Ct. at

596). But "the sentencing court may not mechanically assume that

the GSR frames the boundaries of a reasonable sentence in every

case." Id. at 91. The court is obligated to consider whether a

guideline sentence is appropriate, taking into account the factors

set forth in 18 U.S.C. § 3553(a)(2) to ensure that the sentence is

"sufficient, but not greater than necessary." 18 U.S.C. § 3553(a).

Those factors include, inter alia, the seriousness of the offense,

the need for deterrence, and the need "to protect the public from

further crimes of the defendant."

         The district court first calculated appellant's GSR --

life imprisonment -- and then varied downward from the GSR after

considering the section 3553 factors and the recommendation of the

government. Appellant argues that the district court should have

varied further downward from the GSR. We conclude that the

district court did not abuse its discretion in imposing a thirty-five-year term of imprisonment.

         During trial and at sentencing, the district court heard

several victims' stories of the crushing losses they suffered as a

result of appellant's crime. For example, one victim explained at

sentencing that he had lost $220,000 and his home and was living in

a shelter without heat or a kitchen. Another victim testified at

sentencing that due to her lost investment of $130,000 she had her

car repossessed and was having trouble paying her mortgage.

Another spoke of how she had invested $446,000 and now described

herself as "homeless." Several other victims testified or had

their stories included in the PSR, but still their voices

represented only a small fraction of the 500 people targeted by

appellant's scheme. According to the PSR, over 150 victims had

refinanced their homes or used retirement savings to make

investments.

         The district judge remarked at sentencing that he was

"impressed with the large lack of remorse" on the part of

appellant. He also noted that he had "considered the enormity of

the harm done to the victims in this case" and further explained

that:

I have also been influenced by the fact that I

agree having heard the government's case

presented at trial, that the scheme at issue

was a fraud . . . virtually from its

inception. I have considered the particular

vulnerability and susceptibility of the

victims of the scheme to the appeals that were

made to them based on ethnicity and a shared

background of tragic life experiences . . . .

I have also considered the flagrant manner in

which the defendants, particularly Mr.

Bunchan, diverted the proceeds of the scheme

to their personal enrichment and amusement. I

have considered the necessity of protecting

the public and others from schemes like this

in the future, which I believe calls for a

high component of deterrence in any sentence

imposed . . . . Finally, I respect, and

ordinarily agree, with Mr. George's

proportionality argument, which has persuaded

me before in other sentencings. What makes

Mr. Bunchan's case different, however, in my

judgment, is his involvement and attempt to

involve himself in the gravest form of

obstruction of justice; the murder of

witnesses and the prosecutor in the case.

That, to a court system, is an absolutely

unforgivable crime over and above the crimes

for which the defendant is now convicted.

[11]

         Even after noting these aggravating aspects of

appellant's case, the district court decided to accept the

government's recommendation to vary downward from the GSR,

sentencing appellant to thirty-five years of imprisonment. We

recognize that, due to appellant's age, the thirty-five year

sentence is practically equivalent to a life sentence, and that

appellant has also been ordered to pay substantial restitution in

addition to imprisonment. Nonetheless, we conclude that "[t]he

sentence imposed here is grounded on a sensible (though not

obligatory) view of the circumstances and the outcome -- given

those circumstances and the length of the sentence actually imposed

-- is plainly defensible." Martin, 520 F.3d at 96. There was no

abuse of discretion in the district court's imposition of a thirty-five year term of imprisonment, two years of supervised release,

and restitution in the amount of $19,103,121.73.

         Affirmed.

Footnotes

[1] '  1UOL was first presented to investors as the retail-store arm

of WMDS's operation, whereby investors would open stores to sell

WMDS products. Toward the end of the pyramid schemes, however,

1UOL was described as a passive investment vehicle, just like WMDS.

[2] '  Appellant inappropriately labeled much of his spending, such

as his children's tuition and tennis lessons, gambling, purchases

from Louis Vuitton, and his hairpieces, as "business expenses" on

company records.

[3] '  About $500,000 of the money appellant spent on casinos came

from Bunchan's personal accounts, while the rest came from company

accounts containing investor funds. Of the $3.8 million spent on

casinos, $1.2 million was sent back to appellant's personal bank

account from the casinos; appellant later put some, but not all, of

that money back into the companies' accounts. Agent Niro was not

able to identify any source of income to appellant during 2000-2005

other than WMDS and 1UOL.

[4] '  Approximately $500,000 of the investor funds went to Seng

Tan and $300,000 to Christian Rochon.

[5] ' On May 4, 2009, following a jury trial, appellant was

separately convicted in the District Court of Massachusetts of

using a facility of interstate commerce to commit murder-for-hire,

18 U.S.C. § 1958, and solicitation of a crime of violence, 18

U.S.C. § 373, for this conduct. He was sentenced to twenty-five

years imprisonment, with the first five years of that sentence to

be served concurrently with his sentence in this case. United

States v. Bunchan, No. 07-cr-10085-DPW (D. Mass.).

[6] '  Tan initiated an appeal to this court, but later moved to

voluntarily dismiss the appeal pursuant to Federal Rule of

Appellate Procedure 42. Her appeal was dismissed on September 5,

2007.

[7] '  The PSR applied the 2007 Guidelines, and we cite to those

Guidelines.

[8] '  Although the endangerment of the solvency or financial

security of 100 or more victims would normally occasion a four-level enhancement, U.S.S.G. § 2B1.1(b)(13)(B)(iii), the guidelines

state that the cumulative adjustments from sections 2B1.1(b)(2) and

2B1.1(b)(13)(B) shall not exceed eight levels. U.S.S.G.

§ 2B1.1(b)(13)(C). Because a six-level enhancement was applied

pursuant to 2B1.1(b)(2), the Office of Probation only recommended

a two-level enhancement pursuant to subsection (b)(13). (We note

that as of the 2008 edition of the Guidelines, the enhancement for

endangerment of the solvency or financial security of 100 or more

victims is found at U.S.S.G. § 2B1.1.(b)(14)(iii)).

[9] '  No matter a defendant's CHC, the Guidelines prescribe "life"

(and not a true sentencing range such as "360 months - life") for

an offense level of forty-three.

[10] '  Although appellant tries to elevate his evidentiary

argument to a constitutional claim under the Sixth Amendment right

of confrontation, that argument is advanced so perfunctorily that

we deem it waived. United States v. Zannino, 895 F.2d 1, 17 (1st

Cir. 1990). In any event, our analysis of the district court's

appropriate exercise of its discretion answers any possible

constitutional claim.

[11] ' Appellant makes a poorly developed argument that the

district court improperly punished appellant "for attempted murder

without jury trial and conviction, by way of the guidelines

enhancement for obstruction of justice." This argument is waived

because of its perfunctory quality. Zannino, 895 F.2d at 17

("[I]ssues adverted to in a perfunctory manner, unaccompanied by

some effort at developed argumentation, are deemed waived.").

Nonetheless, we note that there was no error in the district

court's finding of facts by a preponderance of the evidence to

support the U.S.S.G. § 3C1.1 enhancement for obstruction of

justice, as facts supporting such enhancements may be found by a

preponderance of the evidence. See United States v. Gonsalves, 435

F.3d 64, 72 (1st Cir. 2006) ("[J]udicial fact-finding alone does

not violate a defendant's sixth amendment rights so long as the

defendant is sentenced at or below the statutory maximum for the

offense of conviction.").

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