United States v. Pacheco-Martinez

2015 | Cited 0 times | First Circuit | June 23, 2015

United States Court of Appeals For the First Circuit No. 13-2154





Defendant, Appellant.


[Hon. Aida M. Delgado-Colón, U.S. District Judge]


Howard, Chief Judge, Selya and Lynch, Circuit Judges.

Robert Herrick for appellant. Susan Z. Jorgensen, Assistant United States Attorney, with whom Rosa Emilia Rodríguez-Vélez, United States Attorney, and Nelson Pérez-Sosa, Assistant United States Attorney, Chief, Appellate Division, were on brief, for appellee.


June 15, 2015 ____________________

Lynch, Circuit Judge. Defendant Alfredo Pacheco-

Martinez was convicted of various offenses arising from his multi-

year effort to swindle scores of unsuspecting victims out of over

a million dollars and to manipulate the U.S. Bankruptcy Code in

order to shield his ill-gotten gains from creditors. He now

appeals from one of the counts of conviction, arguing that there

was insufficient evidence to support the jury's guilty verdict.

He also attacks his sentence, arguing that the district court

improperly calculated the applicable Sentencing Guidelines range

and imposed a procedurally and substantively unreasonable

sentence. We find no merit in any of these contentions and affirm

Pacheco's conviction and sentence.


Because Pacheco challenges the sufficiency of the

evidence supporting his conviction on one count, we recite the

facts relevant to that claim in the light most favorable to the

jury verdict. See United States v. Burgos-Montes, ___ F.3d ___,

2015 WL 2223304 , at *1 (1st Cir. May 13, 2015). In discussing

facts relevant to Pacheco's claims of sentencing error, we rely in

part on unchallenged portions of the Presentence Investigation

Report (PSR). See United States v. Vázquez-Larrauri, 778 F.3d

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276, 291 (1st Cir. 2015). We confine our discussion here to the

background necessary to frame the issues raised on appeal.

In 2003,1 Pacheco formed a limited liability company,

International Business Group and Affiliates (IBGANV), in Nevada

through a registered agent service, Corporate Services of America

(CSA). CSA offered a "virtual headquarters program" that gave

entities which were not physically in Nevada a legal presence in

the state. Pacheco was listed as the sole manager of IBGANV.

Also in 2003, Pacheco formed a corporation in Puerto

Rico called International Business Group and Affiliates (which we

will call simply IBGA), for which he was the president and

registered agent. Pacheco's daughter Leyda was listed as the vice

president of IBGA, and his other daughter Mayra was listed as the

treasurer. IBGA was not registered to make investments in Puerto


Finally, in July 2005, Pacheco formed a third entity,

Liberty Dollars of Puerto Rico, Inc. (LDPR). Pacheco was listed

as LDPR's registered agent and its only director and officer. The

1 Pacheco has a history of dubious dealings that began well before the conduct that gave rise to this conviction. In 2002, the Puerto Rico entity responsible for securities regulation filed a cease and desist order against Pacheco based on his marketing of "rebate coupons" that purported to allow the purchaser to be relieved of his or her mortgage in three to five years. Pacheco was ultimately fined $50,000 for a violation of Puerto Rico's securities laws.

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corporation's physical address was a P.O. Box in Yauco, Puerto


Pacheco used these entities to engage in two fraudulent

schemes: the "Liberty Dollar program" and the "Debt Elimination

program." Under the first program, Pacheco sold medallions with

a small silver content to individuals as a "substitute form of

coinage." He obtained the Liberty Dollars from NORFED, a "national

organization dedicated to the repeal of the Federal Reserve Act

and the Internal Revenue [C]ode." Pacheco marketed the Liberty

Dollars as protection against inflation, telling potential buyers

that the Liberty Dollars, unlike U.S. currency, could not lose

value based on the actions of the Federal Reserve. Pacheco also

marketed a variant on the Liberty Dollar called the "Boricua

Dollar" that specifically targeted Puerto Rico.

The evidence at trial demonstrated that the Liberty

Dollars and Boricua Dollars operated much like a pyramid scheme:

IBGA "would sell them through distribution channels, with each

subsequent buyer paying a higher amount until the [dollars] reached

a final user." Pacheco told prospective buyers that they could

either market the Liberty Dollars or use them as currency at

certain businesses. The marketing materials Pacheco issued in

connection with the Liberty Dollars predicted that the annual

returns for buyers would range from 6 percent to over 25 percent.

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In 2006, the U.S. Mint notified Pacheco that the

introduction of Liberty Dollars into circulation was illegal, but

he nevertheless continued to market and sell the coins. Pacheco's

companies ultimately received $59,512 from the sale of the Liberty

Dollars and Boricua Dollars to the public.

Under the Debt Elimination program, IBGA marketed and

sold, for a fee of $3,000-$3,500, a program which purported to

allow buyers to pay off their debts in a short amount of time.

IBGA obtained the program from a company called Mortgage

Alternatives. Between 2004 and 2005, some 225 people bought the

debt elimination program, but their debts were not relieved. The

program in fact "did not work."

Pacheco also sold "Investment Contracts" pursuant to

which an individual would buy "blocks" of investments for $25,000

each. Pacheco represented that the money would be used to promote

the marketing and sales of the debt elimination program, and

guaranteed investors a minimum return of $500 per month or 24

percent per year for each "block."

Pacheco provided prospective investors with a "Proposal

and Business Plan" in Spanish and a copy of the Investment Contract

in English. The two documents differed in crucial ways: the

contract itself included a section advising that the investment

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was "speculative" and involved a "substantial degree of risk of

loss," while the Spanish document omitted any mention of risk.

Pacheco told prospective investors "that he was IBGANV's

representative in Puerto Rico, working under the local subsidiary

IBGA[]." He thus led the investors to believe that he was backed

by a large United States corporation, when in fact "no actual

business programs or operations took place out of IBGANV." After

an individual invested with him, Pacheco would for a short period

of time make "lulling" interest payments to the investor in order

to give him or her the mistaken impression that the investment was

safe and would generate the promised return. But the investments

were never fully -- or even mostly -- repaid. Twelve individuals

ultimately invested over $1 million with Pacheco and sustained

losses of over $750,000.

While these fraudulent schemes were ongoing, in

September 2003, Pacheco and his wife filed a joint petition for

Chapter 13 bankruptcy. During the pendency of that bankruptcy

proceeding, Pacheco opened a bank account with the former Western

Bank in the name of "IBGA" and an account with Wells Fargo in the

name of "IBGA, LLC." The bankruptcy case was dismissed with no

discharge in May 2004 on the recommendation of the Trustee.

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A month later, in June 2004, Pacheco and his wife once

again filed for Chapter 13 bankruptcy. This case, too, was

dismissed with no discharge on the recommendation of the Trustee.

On October 4, 2005, the couple filed for bankruptcy a

third time, this time under Chapter 7. The case was assigned to

a different Trustee, and that Trustee granted the discharge of

Pacheco's debts. In connection with the third bankruptcy

proceeding, Pacheco represented (untruthfully) that he had no

interest in any incorporated or unincorporated businesses. He

failed to disclose his position or ownership interest in IBGANV,

IBGA, or LDPR, and likewise failed to disclose the activities in

which he had been engaging through those entities.

On October 5, 2005, the day after the third bankruptcy

petition was filed, several checks were drawn from the Western

Bank checking account Pacheco had opened in the name of IBGA.

Pacheco had his daughters use some of those funds (all proceeds of

Pacheco's fraudulent schemes) to buy, in IBGA's name, an office

condominium which Pacheco had previously lost to foreclosure.

In December 2005, while the third bankruptcy proceeding

was pending, Pacheco opened three more bank accounts: one in the

name of "IBGAPR," one in the name of LDPR, and one in the name of

"IBGA-GEFC." Various checks were drawn on these accounts

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referencing what the government characterizes as "thinly-disguised

personal uses."

The FBI ultimately uncovered Pacheco's fraud after an

investigation. Pacheco was arrested and charged with securities

fraud, mail fraud, conspiracy to conceal assets and make fraudulent

transfers, concealment of assets, fraudulent transfer, uttering

coins, and money laundering. A jury convicted Pacheco on all

counts and the district court sentenced him to a top-of-the-

guidelines sentence of 235 months imprisonment. The court's

guidelines calculation included a two-level enhancement for abuse

of a position of trust and a two-level enhancement for

sophisticated means.


Pacheco first challenges the district court's denial of

his Rule 29 motion for judgment of acquittal on Count 8 of the

indictment, which charged him with making a fraudulent transfer in

violation of 18 U.S.C. §§ 2, 152(7). We review the denial of a

Rule 29 motion "de novo, examining the evidence in the light most

favorable to the verdict, and asking whether a rational jury could

find guilt beyond a reasonable doubt." Burgos-Montes, 2015 WL

2223304 , at *13 (citations omitted).

The statute of conviction, § 152(7), makes it illegal

for any person to

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in a personal capacity or as an agent or officer of any person or corporation, in contemplation of a case under [the Bankruptcy Code] by or against the person or any other person or corporation, or with intent to defeat the provisions of [the Bankruptcy Code], knowingly and fraudulently transfer[] or conceal[] any of his property or the property of such other person or corporation[.]

Count 8 of the indictment alleges that Pacheco

in his personal capacity and as an agent of IBGA[], with the intent to defeat the provisions of [the Bankruptcy Code], knowingly and fraudulently transferred and concealed property belonging to him, without authorization and unbeknownst to the bankruptcy trustee, creditors, and the United States Trustee, to wit: the defendant used IBGA[] monies, approximately [$50,000], to purchase an office building, Condominio Las Torres Navel, Yauco, Puerto Rico.

Pacheco argues that "IBGA's purchase of the office condominiums

could not constitute a fraudulent transfer of Pacheco's own

property" (emphasis added), and so he should have been granted a

judgment of acquittal on Count 8.

Pacheco's conduct fits the statute like a glove. He

commenced a bankruptcy proceeding, failed to disclose his interest

in an entity which he owned, and then used that entity's funds

(funds Pacheco had obtained by defrauding investors) to buy back

a property which he had previously owned but had been foreclosed

upon. In other words, Pacheco, "in a personal capacity or as an

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agent [of IBGA] . . . with intent to defeat the provisions of [the

Bankruptcy Code], knowingly and fraudulently transfer[ed] or

conceal[ed]. . . his property or the property of [IBGA]." 18

U.S.C. § 152(7).

As we read Pacheco's brief, he does not dispute this

analysis. Instead, his argument is that his conduct did not fit

the language of the indictment, which charged him with transferring

or concealing his own property, rather than IBGA's property. We

reject this contention for two reasons.

First, a jury could have reasonably found that the money

Pacheco used to buy the foreclosed condominium was Pacheco's

property, even though it was nominally in a bank account under

IBGA's name. The evidence presented at trial showed that the money

Pacheco obtained by duping investors flowed freely among Pacheco,

his relatives, and the various corporations that he set up.

Indeed, it was precisely because Pacheco put the money in the IBGA

account that he was able to shield it from his creditors in the

bankruptcy proceeding (through his failure to disclose his

interest in IBGA) and use it to buy back the condominium.2 As we

said in United States v. Ledée, 772 F.3d 21 (1st Cir. 2014), "[i]t

2 For this reason, Pacheco's claim that "the purchase of the office condominium had no conceivable effect on Pacheco's bankruptcy estate" is flatly wrong.

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is inconceivable that such a blatant scheme to manipulate an estate

asset could be insulated from criminal consequences simply because

the funds at issue" were nominally held in IBGA's name rather than

Pacheco's. Id. at 34.

Second, even if we were to assume that the money did not

belong to Pacheco, it would mean only that there was a variance

between the crime charged in the indictment and the evidence

adduced at trial. See United States v. Yelaun, 541 F.3d 415 , 419

(1st Cir. 2008). But a variance warrants reversal only if "it is

prejudicial, e.g., by undermining the defendant's right 'to have

sufficient knowledge of the charge against him . . . to prepare an

effective defense and avoid surprise at trial, and to prevent a

second prosecution for the same offense.'" Id. (alteration in

original) (quoting United States v. DeCicco, 439 F.3d 36 , 47 n.4

(1st Cir. 2006)). There was no prejudice here. Pacheco knew

exactly what he was charged with doing. The indictment could

hardly have spelled it out more clearly: it alleges that "the

defendant used IBGA[] monies, approximately [$50,000], to purchase

an office building, Condominio Las Torres Navel, Yauco, Puerto


3 Pacheco obliquely suggests in a footnote in his reply brief that a constructive amendment of the indictment took place. This argument is waived for lack of adequate briefing. See United

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The district court did not err in denying Pacheco's Rule

29 motion.


We now turn to Pacheco's claims of sentencing error.

The district court calculated Pacheco's total offense level as 36

and his criminal history category as I, yielding a guidelines range

of 188 to 235 months in prison. The court sentenced Pacheco to a

top-of-the-guidelines sentence of 235 months.

Pacheco argues that the district court erred in its

guidelines calculation in two ways: in applying a two-level

enhancement for abuse of a position of trust, U.S. Sentencing

Guidelines § 3B1.3 (2012), and in applying a two-level enhancement

for a fraud offense "involv[ing] sophisticated means," id.

§ 2B1.1(b)(10)(C). He also contends that the court failed to take

account of key mitigating factors in sentencing him and imposed a

sentence that was procedurally and substantively unreasonable.

In considering challenges to a sentence, we review legal

conclusions de novo and factual findings for clear error. United

States v. Zehrung, 714 F.3d 628 , 631 (1st Cir. 2013). We review

a district court's "application of the guidelines to a particular

case on a 'sliding scale,' with the intensity increasing the 'more

States v. Torres, 162 F.3d 6 , 11 (1st Cir. 1998); United States v. Zannino, 895 F.2d 1 , 17 (1st Cir. 1990).

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law-oriented' -- as opposed to 'fact-driven' -- the judge's

conclusion is." Id.; see also United States v. Sicher, 576 F.3d

64 , 70 (1st Cir. 2009). With respect to the procedural

reasonableness inquiry, "we look to whether the district court

properly calculated the Guidelines range, treated the Guidelines

as advisory, considered the various 18 U.S.C. § 3553(a) factors,

and adequately explained the chosen sentence." United States v.

Morales-Machuca, 546 F.3d 13 , 25 (1st Cir. 2008). And we review

the substantive reasonableness of a sentence "under a highly

deferential abuse of discretion standard." Id.

Applying these standards, we find no merit to any of

Pacheco's arguments as to his sentence.

A. Abuse of a Position of Trust Enhancement

"To apply the [abuse of a position of trust] enhancement,

'the district court must first decide that the defendant occupied

a position of trust and then find that [he] used that position to

facilitate or conceal the offense.'" Sicher, 576 F.3d at 71

(quoting United States v. Gill, 99 F.3d 484 , 489 (1st Cir. 1996)).

The guidelines commentary provides that a position of trust "is

'characterized by professional or managerial discretion.'" Id. at

72 (quoting U.S. Sentencing Guidelines § 3B1.3 cmt. n.1 (2012)).

We may also consider whether the defendant used a personal

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relationship with the victim in order to facilitate the fraud.

See United States v. O'Connell, 252 F.3d 524 , 529 (1st Cir. 2001).

Pachecho contends that the district court erred in

applying the abuse of trust enhancement because he did not have a

special relationship with his investors. Instead, Pacheco argues,

he merely "relied on his powers of persuasion" and "distinguished

bearing" in order to induce individuals to give him their money.

Pacheco has not persuaded us that the district court

erred. As the government correctly notes, Pacheco did have

preexisting relationships with at least some of his victims.4 One

victim was a family friend who "rel[ied] on [Pacheco's] word" that

the Investment Contract (which was in English) was consistent with

the Spanish-language document Pacheco gave her. Pacheco

represented to the victim that he was giving her "an exclusive

opportunity" because he knew her uncle. Pacheco in fact had

4 For this reason, the cases upon which Pacheco relies are inapposite. In neither United States v. Jolly, 102 F.3d 46 (2d Cir. 1996), nor United States v. Mullens, 65 F.3d 1560 (11th Cir. 1995), did the defendant have a preexisting personal relationship with his victims. See Jolly, 102 F.3d at 49 (noting that the record did not "disclose any relationship with particular investors in which [the defendant] occupied a position of influence beyond that enjoyed by garden-variety borrowers"); Mullens, 65 F.3d at 1566 (noting that there was no "evidence suggesting that Mullens had a special, close, or personal attachment, or fiduciary relationship, with any member of the country club that significantly contributed to his ability to perpetrate or conceal the ponzi scheme").

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persuaded the uncle and his wife to invest with him as well. These

victims gave Pacheco the authority to "invest" large amounts of

their money, based on their friendship with him and on Pacheco's

assurances of the returns that would accrue.

Based on this evidence, the district court reasonably

concluded that Pacheco occupied a position of trust as to at least

some of his victims and abused that trust to further his scheme.

See United States v. Willeumier, 98 F. App'x 558 , 560 (7th Cir.


B. Sophisticated Means Enhancement

The guidelines commentary describes the sophisticated

means enhancement as follows:

"[S]ophisticated means" means especially complex or especially intricate offense conduct pertaining to the execution or concealment of an offense. For example, in a telemarketing scheme, locating the main office of the scheme in one jurisdiction but locating soliciting operations in another jurisdiction ordinarily indicates sophisticated means. Conduct such as hiding assets or transactions, or both, through the use of fictitious entities, corporate shells, or offshore financial accounts also ordinarily indicates sophisticated means.

U.S. Sentencing Guidelines § 2B1.1 cmt. n.8(B) (2012). The list

in the commentary of conduct that warrants the enhancement is not

exhaustive. The defendant need not have done any of the things

listed in order to qualify for the enhancement, so long as the

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offense as a whole shows "'a greater level of planning or

concealment' than a typical fraud of its kind." United States v.

Knox, 624 F.3d 865 , 870-72 (7th Cir. 2010) (quoting United States

v. Wayland, 549 F.3d 526 , 528-29 (7th Cir. 2008)).

The district court's conclusion that this enhancement

applied is unassailable. Pacheco set up multiple corporate

entities in order to facilitate his fraudulent schemes and hide

his ill-gotten gains from creditors during the bankruptcy

proceeding. He convinced investors to participate in a scheme by

having them sign a contract in English that differed from the

Spanish-language document they had been given, and he made

"lulling" payments to them at the outset so they would think that

their investment would in fact make a return. We could go further,

but we need not. These facts provide an ample basis for

application of the enhancement. Cf. United States v. Foley, 783

F.3d 7 , 25-26 (1st Cir. 2015) (upholding district court's

application of the enhancement where the defendant used fake checks

and fictitious payments in order to make his "'scheme more

effective and difficult to thwart'" (quoting United States v.

Evano, 553 F.3d 109 , 113 (1st Cir. 2009)).

C. Procedural and Substantive Reasonableness

Pacheco's basic argument as to the reasonableness of his

sentence is that "the district court failed to consider crucial

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mitigating factors," such as Pacheco's age, his "efforts to bring

the coin scheme into compliance with federal law," and the fact he

himself was purportedly "deceived by the charlatans who actually

conceived the investment vehicles."

As to the latter two purported "mitigating factors," the

district court simply rejected the premises. It found that

Pacheco, far from being a victim, was a "leader and organizer" of

the fraudulent scheme. And it found that Pacheco did not merely

fail to comply with the law with respect to the "coin scheme"; he

"defiantly continued" the scheme even after the U.S. Mint ordered

him to stop. Those findings are supported by the evidence.

The district court also explicitly considered Pacheco's

age. But it considered other relevant factors too -- Pacheco's

history of fraudulent conduct, his targeting of vulnerable

individuals, his repeated attempts to manipulate the proceedings,

his total lack of remorse -- and decided that a sentence of 235

months was appropriate. That conclusion easily passes muster under

our deferential standard of review.

Indeed, Pacheco's age could cut both ways in the

sentencing calculus. It is true that, in general, "[t]he

propensity to engage in criminal activity declines with age," and

so persons convicted of a crime late in life may be unlikely to

recidivate. United States v. Johnson, 685 F.3d 660 , 661-62 (7th

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Cir. 2012). Perhaps for this reason, the guidelines explicitly

provide that advanced age may warrant a downward departure in

sentencing. See id. But it is also true that "engaging in criminal

activity at such an age provides evidence that [the defendant] may

be one of the few oldsters who will continue to engage in criminal

activity until [he] drop[s]." Id. at 662.5 That may well be the

case here; Pacheco has been swindling unwary victims for years and

has shown no sign of changing his ways. At the sentencing hearing,

he used his opportunity to allocute not to express any contrition,

or apologize to the victims whose life savings he stole, but rather

to assert that the court lacked jurisdiction over him. Cf. J.W.

Barnard, Securities Fraud, Recidivism, and Deterrence, 113 Penn

St. L. Rev. 189, 223 (2008) (listing the following factors as

predictive of future misconduct in the securities fraud context:

"(1) a pattern of wrongdoing as opposed to an isolated act; (2)

lack of remorse or contrition; (3) possession of specific skills,

coupled with conditions providing opportunity for harm (such as

employment as an investment advisor or in a brokerage firm); and

(4) recent conduct indicating an intent to recidivate"). The

5 Indeed, while the recidivism rate declines with age, the decline is much less pronounced among those individuals with a significant criminal history. See U.S. Sentencing Comm'n, Measuring Recidivism: The Criminal History Computation of the Federal Sentencing Guidelines 28 (2004).

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district court could have reasonably found that only a sentence of

this magnitude would potentially deter Pacheco from returning to

his illicit pursuits.



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