USCA1 Opinion

August 18, 1993

UNITED STATES COURT OF APPEALS

FOR THE FIRST CIRCUIT
____________________

No. 92-1959
UNITED STATES,
Appellee,
v.
RICHARD L. ROWE,
Defendant, Appellant.
____________________
ERRATA SHEET
The opinion of
amended as follows:

this

Court issued

on

July 22,

On page 2, footnote 1, lines 4-5, replace "29

1131;" with "29 U.S.C.
1023, 1024, and 1131;".

1993,
U.S.C.

is

July 30, 1993

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
_____
No. 92-1959
UNITED STATES,
Appellee,
v.
RICHARD L. ROWE,
Defendant, Appellant.
___________
ERRATA SHEET
The opinion of
amended as follows:

this

Court issued

On page 4, line 7 from the bottom:

52(a)."
On page 4, last line:

on

July 22,

strike "Fed. R.

1993,

is

Civ. P.

change "q" in "quideline" to "g"

UNITED STATES COURT OF APPEALS

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
FOR THE FIRST CIRCUIT
____________________
No. 92-1959
UNITED STATES,
Appellee,

v.
RICHARD L. ROWE,
Defendant, Appellant.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. William G. Young, U.S. District Judge]
___________________
____________________
Before
Boudin, Circuit Judge,
_____________
Campbell, Senior Circuit Judge,
____________________
and Stahl, Circuit Judge.
_____________
____________________

Susan E. Silver with whom Jack F. St. Clair and Joseph, St. Cl
_______________
__________________
______________
& Cava were on brief for appellant.
______
Victor A. Wild, Assistant United States Attorney, with whom
_______________
John Pappalardo was on brief for appellee.
_______________
____________________
July 22, 1993
____________________

BOUDIN, Circuit Judge.

______________
Richard

Rowe

stemming

pled

from

guilty

his role

scheme whose victims

their employees.1
employer
rates

to

in

numerous

companies,

criminal

plan

and which

insurance
and

administered a multi-

which offered
to

charges

of small businesses

Rowe developed and

coverage comparable

insurance

plea agreement,

fraudulent health

were a number

health insurance

for

Pursuant to a

that

below-market

provided by

was falsely

other

represented as

being a tax-exempt ERISA plan "approved" by the United States

Department

of Labor.

mismanaged

the operation and converted plan assets and, as a

result, many

Rowe and others involved in the scheme

subscribers to the

plan were left

with unpaid

medical bills.
Rowe

was sentenced

imprisonment,
ordered
appeals,
a

to

to

three

pay up

to

an aggregate

years

of supervised

to $1,903,386

challenging the following

two-level increase

vulnerability,
obstruction

in his

U.S.S.G.

of justice,

____________________

six-year term

in

release,

restitution.

U.S.S.G.

and

He now

sentencing calculations:

base offense level

3A1.1; a

of

for victim

two-level

increase for

3C1.1; and

a one-level

1Rowe pled guilty to all counts against him which

included conspiracy, 18 U.S.C.
371; mail fraud, 18 U.S.C.
1341; ERISA theft, 18 U.S.C.
664;
ERISA false
statements, 18 U.S.C.
1027; failure to file certain ERISA
statements, 29 U.S.C.
1023, 1024, 1131; and ERISA
kickback, 18 U.S.C.
1954.
ERISA is the acronym for the
Employment Retirement Income Security Act of 1974, 29 U.S.C.
1001 et seq.
______
-2-2-

upward departure for

causing the

loss of

U.S.S.G.

2F1.1,

important institution,
10(e).

confidence in
application

an
note

We set aside the enhancement for victim vulnerability

and otherwise affirm.

Victim Vulnerability.
____________________
Guidelines

directs

the

Section
sentencing

3A1.1 of the
court

to

Sentencing
increase

defendant's base offense level by two levels:

If the defendant knew or should have known that a
victim of the offense was unusually vulnerable due
to age, physical or mental condition, or that a
victim was otherwise particularly susceptible to
the criminal conduct . . . .
The commentary
applies

"where

to the

guideline states that

an unusually

target of criminal

vulnerable

activity by the

the adjustment

victim

defendant."

is made
U.S.S.G.

3A1.1, application
that

an

where,

note 1.

adjustment for
for

example,

ineffective cancer

The

victim

commentary further explains

vulnerability

defendant

is warranted

fraudulently markets

cure or targets a

an

handicapped person for

robbery, but not where a fraud is aimed at the general public

and "one of the victims happened to be senile."
The government made two
in support of

obtain

as those

affordable

making them
health

arguments in the district court

the enhancement.

businesses such

health

First, it

solicited
insurance

Second,

the

said that

by Rowe
for

particularly susceptible to

insurance.

Id.
__

small

are unable

their

employees,

offers of

government

to

low-cost

argued

that

once

they

-3-3-

individual

employees

were

rendered

vulnerable

developed medical problems because they then faced the choice

of either

continuing their payments to

Rowe's plan, despite

its nonpayment or delayed payment of their medical bills,

else possibly

losing their health insurance.

or

Rowe contends

that the district court erred in accepting these arguments as

a

basis for imposing an enhancement under section 3A1.1.

says

that

government

the
to

district
produce

court

should

evidence

that

have
the

He

required

the

employers

and

employees were in fact unusually vulnerable instead of taking

_______
the government's assertions at face value.
In our

view, it may

be fair to

We agree.

assume as a

matter of

reasonable inference that a number of the small businesses to

whom the insurance was sold were motivated by need as well as
by

the prospect

of savings.

It is

even more

likely that

those subscribers who were already ill when the plan faltered
would be inclined to remain longer with
alternatives.

The district

not restricted

to formal

inferences,
aside

as well

as

the plan for lack of

court in sentencing

evidence, and the

direct findings,

only if "clearly erroneous."

Federal Practice and Procedure

______________________________

See 9
___

matters is

court's factual
are normally

set

Wright & Miller,

2573, at 689,

2587 (1971 &

1993 Supp.).
Nevertheless, we think as
the guideline, cf.
__

a matter of interpretation of

United States v.
_____________

-4-4-

Sabatino, 943 F.2d

________

94,

102 (1st Cir. 1991),

this

case.

quick to reverse enhancements

class membership,

need for

"unusual[]"

susceptibility.

of individual

the case law has emphasized

vulnerability and

U.S.S.G.

reversed the enhancement

based on the

without a showing

circumstances; and, in addition,

the

apply in

In construing this guideline, the circuit courts

have been rather

victims'

that the enhancement does not

3A1.1.2

"particular[]"

In Wilson, the
______

for one who fraudulently

court

solicited

for "relief" funds in a town stricken by a tornado, saying:

[I]f we were to adopt the government's position,
virtually every defendant convicted of a crime
involving fraudulent solicitation would be subject
to an upward adjustment under
3A1.1. Those who
engage in this criminal activity usually target
their solicitations at those they think most likely
to respond to the requests for money.
We do not
think, however, that the Sentencing Commission
intended on that account to impose an upward
adjustment on virtually all defendants convicted of
fraudulent solicitation.
913 F.2d at 138.
We

think

assumption that
sources
that

that

susceptibility

if

we

accept

small businesses are often

for securing

measure of

even

insurance, this

"unusual"
of victims

or

the

government's

limited in their

does not

itself show

"peculiar" vulnerability

needed to

invoke the

or

guideline.

____________________
2See, e.g., Sabatino, 943 F.2d at 103; United States v.
_________ ________
_____________
Paige, 923 F.2d 112, 113-114 (8th Cir. 1991); United States
_____
______________
v. Creech, 913 F.2d 780, 781-82 (10th Cir. 1990);
United
______
______
States v. Wilson, 913 F.2d 136, 138 (4th Cir. 1990). Compare
______
______
_______
United States v. Pavao, 948 F.2d 74, 78 (1st Cir. 1991)
______________
_____
(enhancement upheld where district court heard evidence of
drug user's actual vulnerability to crime).
-5-5-

Apart

from directing his offers to the group "most likely to

respond,"
record

Wilson, 913 F.2d at

______

to suggest

precariously

that

placed

Rowe focused

victims--conduct

measure of criminal
severely punish."

138, there is

depravity which
United States
_____________

nothing in the

special attention
evincing
3A1.1

v. Moree,
_____

the

on

"extra

intends to more
897 F.2d

1329,

1335 (5th Cir. 1990).

We

do

not

say

that

vulnerability may never be

the

commentary

under

the

guideline

special

derived from class membership; as

states, "market[ing]

an

ineffective cancer

cure"

would

qualify for

application

note 1.

measure of

enhancement.

But

U.S.S.G.

where there

is only

increased likeliness to respond

3A1.1,

an ordinary

in the solicited

group, and no evidence that the defendant selected individual

victims

based

on

special

enhancement does not

susceptibility,

apply.

we

think

the

It is hard to articulate a more

precise standard where so much turns on degree.

The emerging

case law will pick out the pattern.

As

for

the

individual employees

medical conditions, we

who

later developed

agree with the government that

probably safe to assume that

these individuals had more than

the usual incentive to continue paying their premiums.

may

well

be

stricken
been

among

this group

and unusually

some

small

it is

some

who

vulnerable, just

businesses

truly

were

especially

as there

desperate

There

may have
to

obtain

-6-6-

insurance.
insurance was
initial

Although

individuals who

sold were

solicitations,

became ill

hardly a special
it

may

be

that

after the

target of
their

Rowe's

subsequent

inability to

switch plans contributed in some

manner to his

profits.
But in this case the thrust of the wrongdoing with which
Rowe was charged was the initial fraudulent solicitations and
the

mismanagement or looting of the plan's assets.

The near

certainty that some of the subscribers would be more enmeshed

than others appears to
wrongdoing.

have been a collateral aspect

Indeed, the

situation is rather

of the

close to

the

case in which a fraud is aimed at the general public and some

of the victims are senile or otherwise unusually susceptible.
Yet

in

that

instance the

guideline

commentary

expressly

precludes an enhancement, U.S.S.G. 3A1.1, application note 1,

presumably

because there

victims and the

is

added impact

no special

targeting of

is incidental.

We think

such
the

same result follows in this case.3

Obstruction of Justice.
______________________
related charges that

Rowe's guilty plea

were brought in Atlanta and

that were later consolidated.

encompassed
Boston and

After Rowe's arrest in Boston

____________________
3At oral argument before this court, the government
implied that Rowe's company told individual subscribers with
medical problems that they had no choice, given their
existing conditions, other than to stay with its plan despite
late payment of their claims. However, no evidence to this
effect was presented to the district court.
-7-7-

on

January

23,

condition,

1990,

he

among others,

was

released

that

proceedings as required.

on

he appear

bond

for all

Two days later

on

the

judicial

Rowe was arraigned

in the Atlanta case in the Northern District of Georgia.

Shortly thereafter Rowe fled
for

his

arrested

arrest was

issued

federal

on April

in Denmark by Danish

and returned the next

case in Rowe's absence.

a

While Rowe

remained in

was out

of the

in Georgia heard motions

in the

Rowe's action in fleeing the country

two-level

justice, U.S.S.G.

Rowe was

authorities on June 16, 1990,

bail.

country, the district court

in

13, 1990.

month to Atlanta where he

custody without

resulted

the country, and a warrant

enhancement

for

obstruction

of

3C1.1, which Rowe now appeals.

The government argues that Rowe has waived any objection

to

the enhancement

written

objection

presentence
hearing.
asked

for obstruction
to the

report

was

Rowe's

counsel

enhancement
not

At the outset

of justice

repeated

of the hearing,
whether

corrections"

to

make

to

incorporated

an

enhancement

he

the
for

had

because his

as

proposed in

at

the

the

sentencing

the district judge

any

presentence
obstruction

"additions
report,
of

or

which

justice.

Rowe's

lawyer

replied that

the

only

correction concerned

Rowe's assets and liabilities, and the discussion then turned

to the defendant's assets and to other issues.

-8-8-

Notably, the government,

said

that it had no

though

it

had

into one of
that

its own
When

to make, even

objections

the district court

those objections, the prosecutor

additional matters the government

__________

the Court

as opposed

to argue

lawyer

might

matter

of Rowe's assets was

not

written

question,

to

the

then inquired
told the judge

he had "understood the Court to be asking whether there

were any
to

additions or corrections

filed

presentence report.

when asked the same

pursue

have reached

the

matter

the

to the

same

wanted to submit
Court."

conclusion since

a newly-raised issue.
because

Rowe's

the

the

We need

enhancement

was

appropriate.
Rowe argues

that the

obstruction enhancement

does not

apply to

flights from

U.S.S.G.
is

arrest that

3C1.1, application

do not

endanger others.

note 4(d), and

3C1.2.

This

a generally correct statement of the law but an erroneous

description
received

of

the

the reason
enhancement

judicial proceedings.
report.

point

increase

appear, as

for

Rowe's

enhancement.

his failure

to

appear

to

the

obstruction guideline

of Rowe's sentencing provides for

for

ordered,

Rowe
for

This was made clear in the presentence

The commentary

effect at the time

for

defendant's

for a

"willfully

judicial

in

a two-

failing

to

proceeding."

U.S.S.G.

in effect

when Rowe

3C1.1, application note 3(e) (1990).

-9-9-

Although
fled to
1989

this commentary

was not

Denmark, no ex post facto problem is presented.

_____________

version of

the

guidelines were

disappeared in early

1990.

that

judicial

flight

from

The

in

The

effect when

Rowe

courts have uniformly

held

proceedings

constitutes

an

obstruction

of

Guidelines.
(D.C.

justice

under

United States
_____________

Cir.

1993)

the

1989

v. Monroe,
______

(canvassing

version

of

990 F.2d 1370,

cases);

the
1375

United States
______________

v.

McCarthy, 961 F.2d 972, 979-80 (1st Cir. 1992).

________
Rowe's

only

enhancement is

response

authorities learned

he had

the

that he was unaware

to obtain his passport.

his response

to

actual

Denmark when

passport.
prevent
country.

Rowe's

the probation

Rowe

from

We find

that

purpose of

avoiding

In

office

However, as Rowe's

argument in this court, one

release was

The obvious

country.

Rowe explained that

began its efforts to secure his passport.

of

the

It was during these proceedings that

to the presentence report,

counsel conceded at oral

for

of probation proceedings

of Rowe's absence from the

already left for

conditions

basis

he

turn

of the
over his

the requirement

prosecution

no error in the district

by

was to

leaving

the

court's decision

to enhance Rowe's sentence for obstruction of justice.

Loss of Confidence in an Important Institution.
______________________________________________
affirm

the district

level for loss

court's decision

of confidence in

-10-10-

to depart

We also

upward one

an important institution.

The commentary to

the fraud

guideline says

that an

upward

departure may be warranted if the amount of the loss involved

does

not

fully

capture

the harm

or

seriousness

conduct, and then gives several examples of when a

may be appropriate.
One of the

U.S.S.G.

2F1.1,

examples is where "the

confidence in

an important

of

the

departure

application note 10.

offense caused a loss

institution."

of

Id., application
___

note 10(e).
In

its

presentence

memorandum, the

articles and congressional

government

testimony describing the

cited
growing

threat to the health insurance industry, and in particular to

multi-employer arrangements
fraudulent
argues

for small businesses,

operators posing

that

there was

occasioned a loss of

no

as legitimate
evidence

caused by

insurers.

that his

own

Rowe
conduct

confidence in the health industry.

In

our view no such evidence was required.

We

think

it

obvious

that

the

many

businesses

and

employees defrauded by Rowe must have had their confidence in

health insurers shaken as
cannot be seriously

a result of their experience.

doubted that they and others

It

made aware

of the scheme are now likely to be more wary of insurers, and

especially of legitimate but relatively

unknown insurers who

cater to small businesses.

The district court did

to hear evidence to reach this conclusion.

v.

Fousek, 912 F.2d 979,

______

981 (8th Cir.

not need

See United States

___ _____________
1990) (evidence not

-11-11-

necessary to show
funds caused

that bankruptcy trustee's embezzlement

loss of

confidence

in the

institution

of
of

bankruptcy trustees).
We
stand but
The

conclude that
that the

sentence is

the vulnerability

other challenges

vacated and
_______

to the

the case

sentencing consistent with this opinion.

It is so ordered.
________________

enhancement cannot
sentence fail.

is remanded
________

for re-

-12-12-