16‐2738‐cr U.S. v. Hoey

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURTʹS LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION ʺSUMMARY ORDERʺ). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 8th day of March, two thousand eighteen.

PRESENT: GUIDO CALABRESI, DENNY CHIN, SUSAN L. CARNEY, Circuit Judges. ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x

UNITED STATES OF AMERICA, Appellee,

v. 16‐2738‐cr

THOMAS HOEY, JR., Defendant‐Appellant.

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FOR APPELLEE: DANIEL B. TEHRANI, Assistant United States Attorney (Kristy J. Greenberg, Karl N. Metzner, Assistant United States Attorneys, on the brief), for Geoffrey S. Berman, United States Attorney for the Southern District of New York, New York, New York.

Appeal from the United States District Court for the Southern District of

New York (Engelmayer, J.).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,

ADJUDGED, AND DECREED that the judgment of the district court is AFFIRMED as

to Hoeyʹs conviction and VACATED as to his sentence, the restitution order is

AFFIRMED, and the case is REMANDED for further proceedings.

Defendant‐appellant Thomas Hoey, Jr., appeals from a judgment of

conviction and an order of restitution, both entered July 29, 2016. Hoey was convicted

by a jury of embezzlement from an employee benefit plan,

, interstate

transport of stolen money,

, wire fraud,

, and money

laundering,

. On appeal, he challenges, inter alia, the district courtʹs

evidentiary rulings, order of restitution, and sentence. We assume the partiesʹ

familiarity with the underlying facts, procedural history, and issues on appeal.

Hoey is the owner of a New York‐based banana importation company

(the ʺCompanyʺ). In 1991, the Company, at the time managed by Hoeyʹs father,

instituted an employee profit sharing plan (the ʺPlanʺ), which was subject to the

Employee Retirement Income Security Act of 1974 (ʺERISAʺ). The Company, at its

discretion, would place funds in the Plan, and the Companyʹs employees, upon vesting

or leaving the company, could redeem their portion of the Planʹs proceeds. Hoey was

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trustee of the Plan and therefore had a fiduciary duty to manage the Plan for the benefit

of its participants. Additionally, Hoey was prohibited from borrowing money from the

Plan by ERISA.

Beginning in 2009, as the Company was struggling financially, Hoey

began to transfer money from the Plan into the Companyʹs accounts. In 2009, Hoey

transferred $350,000 from the Plan to the Company, followed by another $415,000 in

2010. Later in 2011, Hoey repaid the Plan $75,548 only to take out another $73,000 in

2012. The remainder of the money has still not been repaid to the Plan.

In 2015, the Government, based on these transactions, indicted Hoey on

four counts as set forth above. After a five‐day trial, on March 18, 2016, Hoey was

found guilty on all four counts.

On July 25, 2016, the district court sentenced Hoey principally to sixty

monthsʹ imprisonment on Count One and eighty‐four monthsʹ imprisonment on Counts

Two, Three, and Four, all four to run concurrently with each other, but sixty‐six months

of which were ordered to run consecutively to a separate sentence imposed in another

prosecution. The district court also imposed restitution in the amount of $650,936.20,

which represented the losses by the Plan participants except those who personally

benefitted from Hoeyʹs criminal conduct (i.e., Hoey and his wife). Hoey did not

challenge the restitution order before the district court.

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On appeal Hoey attacks the district courtʹs judgment on several fronts,

arguing that (1) the district court erred in admitting evidence of Hoeyʹs lavish spending

habits, (2) the district court erred in rejecting Hoeyʹs requests for a Kastigar hearing, see

Kastigar v. United States,

(1972), and (3) the district court incorrectly

awarded restitution based on acts that occurred outside the relevant statute of

limitations. Hoey also contends that the sentence must be vacated and remanded for

resentencing due to the recent reversal of his state court conviction. We will address

each contention in turn.

1. Evidentiary Challenge

Hoey contends that the district court erroneously admitted evidence of his

personal spending habits, suggesting that the evidence was unduly prejudicial under

Federal Rule of Evidence 403. ʺWe review a district courtʹs evidentiary rulings under a

deferential abuse of discretion standard, and we will disturb an evidentiary ruling only

where the decision to admit or exclude evidence was manifestly erroneous.ʺ United

States v. Litvak,

(2d Cir. 2015) (internal quotation marks omitted).

When considering a challenge under Rule 403, ʺso long as the district court has

conscientiously balanced the proffered evidenceʹs probative value with the risk for

prejudice, its conclusion will be disturbed only if it is arbitrary or irrational.ʺ United

States v. Awadallah,

(2d Cir. 2006). We apply a deferential standard

because the district court is in a ʺsuperior position to assess relevancy and to weigh the

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probative value of evidence against its potential for unfair prejudice.ʺ United States v.

Abu‐Jihaad,

(2d Cir. 2010).

Here, the district courtʹs decision was not manifestly erroneous, arbitrary,

or irrational. The district judge carefully considered Hoeyʹs Rule 403 challenge through

a motion in limine and concluded that while evidence of Hoeyʹs lavish spending habits

would be allowed, evidence of his spending on illegal activities (e.g., drugs and

prostitutes) would be barred. Hoeyʹs spending habits coupled with the depletion of the

Companyʹs funds due to financial struggles was highly probative of Hoeyʹs motive for

taking money from the Plan and was used to rebut Hoeyʹs defense that he had a good

faith belief that the money he took was being used for the benefit of the Plan

beneficiaries. Though evidence of Hoeyʹs spending, particularly of payments to his

girlfriend, undoubtedly was prejudicial, it was not manifestly erroneous for the district

judge to find that this prejudice was greatly outweighed by the probative value of the

evidence.

2. Kastigar Hearing

On three separate occasions Hoey argued that he was entitled to a hearing

pursuant to Kastigar,

, to determine whether the instant investigation and

prosecution was tainted by law enforcementʹs exposure to privileged information from

a separate, earlier criminal investigation that resulted in Hoey pleading guilty to

narcotics violations. During this earlier investigation, law enforcement officials

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obtained the investigative file of a private investigator hired by Hoey, which Hoey

argued was protected by privilege and work product protections. At least one law

enforcement official from the earlier narcotics case later became involved in the instant

embezzlement case.

Even assuming arguendo that the investigative file was privileged, Hoeyʹs

argument fails. ʺA district courtʹs determination of whether the government

improperly has used privileged information in a criminal prosecution is an issue of fact

that will not be reversed unless the district courtʹs finding is clearly erroneous.ʺ United

States v. Schwimmer,

(2d Cir. 1991). To force the government to make

an affirmative demonstration that it derived its evidence from legitimate, independent

sources, Hoey had to show a factual connection between the allegedly privileged

information and the charges in this case. United States v. Blau,

, 72‐73 (2d Cir.

1998). Hoey failed to do so.

Hoey first suggests that without access to the investigative file law

enforcement agents would have never learned that Hoeyʹs driver was a potential

witness against him. He presents no evidence that suggests this connection, however.

The record belies this point as the private investigator makes no specific mention of

Hoeyʹs driver. Moreover, it would be fairly routine for law enforcement to interview a

suspectʹs personal driver in the course of an investigation.

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Hoey also points to an e‐mail by a law enforcement agent involved in both

cases providing commentary on a potential witness. Hoey fails to explain how this e‐

mail could have any connection to potentially privileged information from the first

investigation. Lastly, Hoey argues that the presence of the same agent in both cases

itself warrants a Kastigar hearing. We disagree. Hoey had to show a connection or at

least make a plausible showing as to how privileged information from the first

investigation influenced the second investigation. He failed to do so and the district

court did not clearly err in denying his requests for a Kastigar hearing.

3. Order of Restitution

Hoey challenges the district courtʹs order of restitution, arguing that it

miscalculates the amount of restitution by including money that he removed from the

Plan in June 2009, purportedly outside the applicable statute of limitations. This

argument was not raised before the district court.

ʺOrdinarily, we review a district courtʹs order of restitution . . . for abuse

of discretion. However, where, as here, a defendant fails to object to the restitution

order at the time of sentencing, our review is for plain error.ʺ United States v. Zangari,

(2d Cir. 2012) (citations omitted). An error is plain when it is a clear and

obvious error, which affected the appellantʹs substantial rights, and ʺseriously affect[s]

the fairness, integrity or public reputation of judicial proceedings.ʺ

(citation

omitted).

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The district court may order restitution only for losses ʺdirectly caused by

the conduct composing the offense of conviction.ʺ United States v. Silkowski,

(2d Cir. 1994) (suggesting that restitution may be based only on conduct within the

applicable statute of limitations unless the offense is a continuing offense). Therefore,

the June 2009 conduct could have been considered as a basis for restitution only if it was

part of a continuing offense.

; United States v. All Star Indus.,

(5th Cir. 1992); United States v. Dupre, No. 04 Cr. 267 (DLC),

, at *5

(S.D.N.Y. June 4, 2007), affʹd, 296 F. Appʹx 113 (2d Cir. 2008).

An offense is continuing if ʺthe explicit language of the substantive

criminal statute compels such a conclusion, or the nature of the crime involved is such

that Congress must assuredly have intended that it be treated as a continuing one.ʺ

Toussie v. United States,

(1970). It was not plain error for the district

court to conclude that Hoeyʹs wire fraud from 2009 to 2012 constituted a continuing

offense, and thus the June 2009 conduct was properly considered by the district court

for restitution purposes. See, e.g., United States v. Abrams,

, 383‐84

(S.D.N.Y. 1982). The transfers from 2009 to 2012 were of a similar nature and continued

in succession, and had each transfer been exposed the subsequent transfer would have

been less likely to occur. See United States v. Yashar,

, 875‐876 (7th Cir. 1999)

(ʺThe hallmark of the continuing offense is that it perdures beyond the initial illegal act,

and that ʹeach day brings a renewed threat of the evil Congress sought to prevent.ʹʺ

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(quoting Toussie,

)). Accordingly, the district court did not commit plain

error in its order of restitution.1

4. Sentencing

Hoeyʹs presentence report determined that he fell within Criminal History

Category III, in part due to his conviction under New York state law for assault in the

third degree. After sentencing in this case, however, Hoeyʹs state conviction was

reversed on appeal. See People v. Hoey,

(1st Depʹt 2016). Without the

state conviction, Hoeyʹs Criminal History Score is reduced from six to three, and his

Criminal History Category is reduced from III to II. Accordingly, a remand for

resentencing is appropriate. United States v. Cox,

, 130‐32 (2d Cir. 2001)

(remanding case for resentencing where prior state conviction was dismissed); see also

United States v. Doe,

(2d Cir. 2001) (per curiam) (ʺ[D]efendants who

successfully attack state convictions may seek review of federal sentences that were

enhanced on account of such state convictions.ʺ). 2

1 Hoey also suggests that the money owed by the Plan to his father, a plan beneficiary, should be deducted from the amount of restitution due based on a letter his father to the district court wrote disclaiming that he was a victim. The district court carefully considered this argument and concluded that the fatherʹs after‐the‐fact letter consisted of generic statements, no doubt made out of his love for his son, which did not amount to permission to remove any money from the Plan. This was not plain error. 2 The government consents to a remand for resentencing.

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Accordingly, we AFFIRM Hoeyʹs conviction and the order of restitution,

we VACATE his sentence, and REMAND for resentencing as set forth above.

FOR THE COURT: Catherine OʹHagan Wolfe, Clerk

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