United States Court of Appeals For the First Circuit No. 13-2154
UNITED STATES OF AMERICA,
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO
[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
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
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
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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