USCA1 Opinion

UNITED STATES COURT OF APPEALS

FOR THE FIRST CIRCUIT
____________________
No. 93-1661
UNITED STATES OF AMERICA,
Plaintiff, Appellee,
v.
STEPHEN E. WILLIAMS,
Defendant, Appellant.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. William G. Young, U.S. District Judge]
___________________
____________________
Before
Torruella, Circuit Judge,
_____________
Bownes, Senior Circuit Judge,
____________________
and Cyr, Circuit Judge.
_____________
____________________

William J. Genego for appellant.

_________________
Roberta T. Brown, Assistant United States Attorney, with whom
_________________
John Pappalardo, United States Attorney, and Michael K. Louc
________________
_________________
Assistant United States Attorney, were on brief for appellee.
____________________
December 3, 1993
____________________

CYR,
CYR,

Circuit Judge.
Circuit Judge.
_____________

Pursuant

to

a plea

agreement,

appellant Stephen Williams pled guilty to fourteen counts of mail

fraud,

whereupon other charges

sentenced to
challenges,

seven months'

were dismissed and

imprisonment.

among other things,

Williams was

On appeal,

the district court's

Williams

denial of

his request for an evidentiary hearing and its determination that

certain criminal acts alleged in the dismissed counts constituted

"relevant conduct"
error, we affirm.

under the counts

of conviction.

Finding no

I
I
FACTS
FACTS
_____
In 1980,
S.E.R.V.E.S.S.,
corporation
entered

Williams and codefendant Bruce

Inc. (SERVESS),

a Massachusetts

which operated homes

into at-cost contracts

_______

Kotek founded

not-for-profit
______________

for the handicapped.

with the Commonwealth

SERVESS

of Massa-

chusetts (Commonwealth) for the placement of mentally handicapped

persons in SERVESS group homes.

These contracts entitled SERVESS

to reimbursement for its expenses but

ing

a profit.

directors,
Inc.

In 1984, while

Williams and

(CSI), a for-profit
__________

Kotek

prohibited it from realiz-

serving on the

SERVESS board of

established Community

corporation which would

Services,

contract with

companies like SERVESS to operate their group homes in return for

a

management fee.

In July 1984,

capacity as SERVESS directors:

Williams and

Kotek, in their

(1) voted to enter into a manage-

ment contract with CSI; (2) promoted a

SERVESS employee, William

Polis,

to serve

resigned from

as SERVESS's

new executive

the SERVESS Board

September 1, 1984, the

director; and

(3)

effective August 31, 1984.

On

day after the Williams and Kotek resigna-

tions became effective,

the SERVESS-CSI management contract

executed by Polis on behalf of SERVESS.

tenure, at the
into

instance of

trusts

controlled by

Although only
Kotek,

Kotek SERVESS

of property owned

the third

Alexander received

Williams and

In 1985, during Polis's

Williams and

several long-term leases

was

entered

by real estate

codefendant,

Robert Alexander.

income from

these properties,

Alexander were

all residual

beneficiaries

under the real estate trusts.

In January

1986,

Williams and

Kotek founded

another

not-for-profit corporation called D.A.R.S.O., Inc. (DARSO), which

______________
operated day-care centers for mentally handicapped persons.
SERVESS,

DARSO

contracted

directly with

the

Like

Commonwealth for

reimbursement of its at-cost expenses, and leased several parcels

of real property from
purchased furniture
interest.

Williams

the same real

from a
served

estate trusts.

company
as

in which

a director

DARSO

also

Williams held

an

DARSO from

its

of

inception.
Massachusetts
corporation

submitting

Commonwealth disclose

law

requires

expense
whether the

that

any

not-for-profit

reimbursement requests
expense was

to

incurred with

the

"related person," defined as "[a] person or organization which is

associated or affiliated with or
by the

has control of or is controlled

___ _______ __

[not-for-profit corporation] or

is related to

the [not-

for-profit

corporation] or

partner or

administrator of the [not-for-profit

common ownership or
267(b), (c).]"
In
various

any director,

stockholder, trustee,

control or in a manner

corporation] by

specified in [I.R.C.

See 114.5 Mass. Reg. 3.02 (emphasis added).

___

November 1990, Williams,

Kotek, Alexander, and the

corporate entities were indicted for RICO violations, 18

U.S.C.

1962(c),

multiple counts

RICO

conspiracy, 18

of mail fraud,

U.S.C.

18 U.S.C.

1962(d), and

1341,

in connection

with the alleged SERVESS and DARSO schemes to defraud the Commonwealth.

The indictment

disclose:
Polis,
into

(1)

that

he and

based

on Williams's

Kotek, through

"controlled" SERVESS at the

__________
their management contract;

leased

failure

to

executive director

time CSI and SERVESS entered

and (2) that

both corporations

property from real estate trusts whose beneficiaries were

"related parties."
DARSO

was

The

reimbursement

Williams

and Kotek

"hidden profits"

government charged that the

requests

exceeded their

defrauded the

to improve,

and

SERVESS and

costs,

Commonwealth
acquire equity

and

by using
in, the

that

these

real

estate leased to SERVESS and DARSO by the real estate trusts.

At sentencing,
missed

SERVESS

counts

the government
as

"relevant

1B1.3 and introduced a transcript

of

William Polis,

liams's

"control"

to the effect
when

he signed

characterized the
conduct"

under

of the grand jury

that he was
the

dis-

U.S.S.G.

testimony

acting under Wil-

SERVESS-CSI

management

contract in

September 1984.1

Williams argued that

the SERVESS

scheme was too remote in time and context to constitute "relevant

conduct" under
hearing

the DARSO

for the purpose

counts, and

requested an

of cross-examining

jury testimony concerning the

evidentiary

Polis on

issue of "control."

The

his grand

district

court denied the request for an evidentiary hearing and found the
loss occasioned by

the SERVESS counts to be

"relevant conduct."

Williams appeals the resulting seven-month prison sentence.2

____________________

1The gross loss occasioned the Commonwealth by the mail

fraud directly related to the SERVESS counts was estimated at
between $500,000 and $1 million, while the DARSO counts involved
estimated loss of $50,000 to $100,000.
See U.S.S.G.
2F1.1.
___
The district court imposed an 8-level enhancement, based on the
$500,000 to $1 million loss occasioned by the SERVESS scheme, as
"relevant conduct," see id.
1B1.3, in connection with Wil___ ___
liams's sentencing on the DARSO scheme counts to which he pled
guilty.
2The pre-November 1989
as follows:

Sentencing Guideline calculation was

Base offense level ( 2F1.1)

+ Loss between $500,000 and $1 million
+ More than minimal planning
+ Abuse of trust position
- Acceptance of responsibility

6
+8
+2
+2
-2

Adjusted offense level

Adjusted offense level

16
16

GSR (Criminal History Category I)

Downward departure for Substantial
Assistance

21-27 mos.

Sentence
Sentence

-14 mos.
7 mos.
7 mos.

II
II

DISCUSSION
DISCUSSION
__________
The

crux

of

Williams's grievance

agreement with the government, which

SERVESS counts, resulted

is

that

his plea

led to the dismissal of the

in no lower sentence

since the Common-

wealth loss relating to the SERVESS counts was

considered "rele-

vant conduct"

for purposes

of sentencing

on the DARSO

counts.

Our cases, see, e.g., United States v. Wright, 873 F.2d 437, 440___ ____ _____________
______
42 (1st Cir. 1989),

long since have recognized the

ness

"relevant

of just

such

conduct"

Moreover, unlike "relevant conduct"

to erode the intended benefit
United States v. Fox, 889
_____________
___
also Kinder
____ ______

cases and noting

was
treat

as

these.

adjustments that may

appear

on notice

F.2d 357, 362-63 (1st Cir. 1989);

see
___

2292-93 (1992)

certiorari) (collecting

this case Williams

government would

the SERVESS-related loss

DARSO counts.3 Finally,

Ct. 2290,

from a denial of

circuit split), in
that the

adjustments

of a defendant's plea bargain, see

___

v. United States, 112 S.

______________

(White, J., dissenting

appropriate-

request the

plainly

court to

as "relevant conduct"

under the

while the government reserved

its right

____________________
3The plea agreement provides:
Williams agrees that the United States may
argue that the loss suffered . . . from all
of the fifteen charged schemes to defraud set
forth in predicate acts one through fifteen
of Count One of the indictment [i.e., the
____
SERVESS-related conduct] may be included by

the court in its calculation of the loss

suffered by the Commonwealth of Massachusetts.
The Government agrees that Mr. Williams may argue that the Court should not do
6

to

recommend a "relevant conduct" adjustment, the plea agreement

afforded Williams
inter
_____

alia,
____

significant benefit.

to move

counts, and to

to

dismiss all

to a

Ultimately,

and RICO-conspiracy

The government also left

downward departure

of course,

departure for

RICO

government agreed,

recommend a sentence at the low-end of the appli-

cable guideline sentencing range.

door open

The

the district

for substantial
court

substantial assistance, see

___

government's recommendation.
Thus, our

See U.S.S.G.
___

review discloses

the letter

The fact that the district

scrupulous

the

caselaw,

did not

grant

warrant appellate relief.

appellant

all he

on the

5K1.1.

that both

Sentencing

downward

supra note 2,
_____

tial benefit to Williams.

of

assistance.

granted a

spirit of the plea agreement was observed, resulting

observance

the

in substan-

Guidelines
had

and

court, in
and

our

hoped does

not

1.
1.

"Relevant Conduct"
"Relevant Conduct"
________________
Absent a mistake

findings for clear

403 (1st
burden

of law, we review

error.

Cir. 1991).

"relevant conduct"

United States v. Wood,

_____________
____

Only after

of establishing, by

924 F.2d 399,

the government

a preponderance of

has met

its

the evidence, "a

sufficient nexus between the [extraneous] conduct and the offense

__________ _____
of conviction," may
tion, make

the sentencing court,

a "relevant

in its sound

conduct" adjustment.

discre-

United States v.
______________

____________________
so.
7

Sklar, 920 F.2d 107, 110

_____

(1st Cir. 1990) (emphasis added).

The

district court supportably found the required nexus in this case.

The principal

argument advanced by Williams

is that the conduct allegedly

too dissimilar

to be

on appeal

involved in the SERVESS scheme was

considered "relevant"

to

the conduct

of

conviction involved in the DARSO counts.4

larity springs

from the

fact that

Williams's alleged

liability under the dismissed SERVESS

determination
SERVESS

that

This supposed dissimi-

criminal

counts was predicated on a

Williams controlled

Polis,

thereby causing

to violate its obligation to disclose "related parties,"

whereas criminal liability

for the DARSO scheme

rested directly

on the conduct of Williams and his codefendants.

The
common:

SERVESS and DARSO

(1) the

same method of
Commonwealth
the

schemes shared a

same victim, i.e.,

____

great deal in

the Commonwealth;

operation, i.e., SERVESS's improper

____
reimbursement of the

rental fees paid

for the real

(2) the

requests for

management fees paid

CSI, or

estate trusts; (3)

the same

three principals, i.e., Williams and Kotek as influential "insid____

ers," Alexander

as the

underlying substantive
identify the

"outsider" recipient;
offense, i.e., the
____

defendant's "related

party"

and (4)

the same

fraudulent failure to
status in

accordance

____________________

4Appellant's other arguments warrant little discussion.

First, he questions the temporal proximity between the DARSO and
SERVESS schemes.
But this argument ignores the nature of the
underlying crime. Assuming arguendo that the SERVESS contract
________
with CSI was executed before DARSO came into existence, the mail
fraud, based on the continuing non-disclosure of Williams's
______________
"related party" status, continued well beyond that date. Appellant's second contention
that any control exercised over Polis
was "intermittent"
is likewise inapposite.
8

with 114.5 Mass. Reg. 3.02.

Thus, the district court reasonably

could conclude that the DARSO

and SERVESS schemes, while not one

and the same, were nonetheless sufficiently comparable in character, cast and

plot, to warrant similar billing

under U.S.S.G.

1B1.3.
2.
2.

Sufficiency of the Evidence

Sufficiency of the Evidence
___________________________

The second argument Williams makes is that the evidence

was insufficient
level
the

to link him to the

adjustment under U.S.S.G.

government's

contention

SERVESS scheme.

The eight-

1B1.3 was based exclusively on

that

Williams controlled

Polis's

approval of the CSI management contract, and the long-term leases

with the
"control"

real estate

trusts, on

evidence introduced

jury testimony, which

behalf of

SERVESS.

at sentencing

The

only

was Polis's

grand

Williams correctly characterizes as

hear-

say.

Williams insists that the grand jury testimony was rendered

even

less

reliable because

the

hostile or leading questions to

Moreover, Williams argues, Polis
resignations

from the

SERVESS

prosecutor posed

series of

Polis on the issue of "control."

testified that following
Board

in

August

1984

their

neither

Williams nor Kotek had the power to remove Polis as the executive

director of SERVESS, and

tors, increased his

that Polis named a new board

own salary, and

of direc-

leased other properties

in

which Williams had no ownership interest.

Given the deferential "clear error" standard of review,

United States v. Zuleta-Alvarez, 922 F.2d 33, 36 (1st Cir. 1990),

_____________
______________
cert. denied, 111
_____ ______

S. Ct. 2039 (1991), and the

modest burden and

quality of proof
at 37
Cir.

incumbent on the government

(citing United States

_____________

v. Mocciola,
________

1989)), Williams's claim founders

U.S.S.G.

at sentencing, id.
___

891 F.2d 13,

17 (1st

on the plain language in

6A1.3(a):
In resolving any reasonable dispute concerning a factor important to the sentencing
determination, the court may consider relevant information without regard to its admissibility under the rules of evidence applicable at trial, provided that the information
has sufficient indicia of reliability to
support its probable accuracy.
Under U.S.S.G.

reliance on
examination,

prior hearsay
so long

6A1.3(a), we

repeatedly have

testimony never

as there

were

subjected to

other adequate

upheld

cross-

indicia of

reliability.

See, e.g.,
___ ____

Wright, 873
______

F.2d at

441.

Here,

the

Polis testimony was given under oath, subject to the penalties of

perjury,

in a

formal

grand jury

proceeding

that resulted

in

Williams's indictment on the DARSO counts, as well as the SERVESS

counts which were dismissed pursuant
district court was provided with
Polis grand jury

to the plea agreement.

The

the complete transcript of

the

testimony, wherein Polis admitted,

that Williams was still "calling

years Polis served as President

inter alia,
_____ ____

the shots" during the first two

of SERVESS.5

The Polis testimo-

____________________
5Polis testified as follows:
Q:
But, Mr. Polis, [why did you sign] a
document [the SERVESS-CSI management contract] you had never seen before, a document
in which you played no role in the negotiation of on your first day on the job, which
obligated your entity to five years relationship with [CSI].
What is the reason you
signed it?
A:
I didn't really feel I had the choice.
10

ny

was the

only direct

evidence before

Williams's influence upon Polis.

the Polis testimony was also

the district

court on

So far as the record discloses,

the only direct evidence before the

grand jury on the issue of Williams's "control," and would appear

to have

been critical to

the "probable cause"

which Williams's indictment on the

determination on

SERVESS counts was based.

____________________
Q:
And what was
what was it that was
taking away your ability to have a choice?
A:
Stephen Williams and Bruce Kotek.
Q:
How?
A:
The fact that they had the contracts and
the control.
* * *
Q:
Mr. Polis, in the sort of natural scheme
of human relationships, two people who are
running an entity don't voluntarily relinquish all control over it to somebody else on
the faint hope that person will turn control
right back to them in a consulting agreement
or leave control with them by letting them do
what they want to do in terms of who they
execute leases with and the like.
Is it your testimony that there was no
conversation . . . in which you indicated
that you would continue to do their bidding
as director of SERVESS?
A:
There was a discussion about they had
gone to the state, they had gone to an attorney, they were coming up with an agreement
and that they wanted it signed and that they
would become the management entity and I
would run the programs.
Q:
Well didn't somebody ever say at any
point in time you're going to continue to do
as we tell you to do, Bill. We're making you
executive-director but we still call the
_____ ____ ___
shots here.
_____
A:
That's obviously how they felt.
Q:
And that for a while, that's obviously
what happened Mr. Polis?
A:
Yes.
Q:
True?
A:
True.
(emphasis added).
11

In

these circumstances, we
the

Polis

grand

jury testimony

permit reliance by
Alvarez,
_______

think there can be

was

sufficiently

the sentencing court.

922 F.2d at

little question that

reliable to

Compare, e.g., Zuleta_______ ____ _______

37 (upholding consideration

of grand jury

testimony where sentencing

judge presided over trial

independent

reliability),

assessment of

Harris, 982 F.2d

______
on

grand jury

with United States v.

____ ______________

317 (8th Cir. 1992) (upholding

testimony

where

and formed

sentencing

refusal to rely

judge

doubted

its

veracity).
The sentencing

judge was

highly conversant

the facts of the case and Williams's association

with his

codefendants in the SERVESS

liams was

sentenced, the judge not

scheme.

both with

and involvement
By

the time Wil-

only had the benefit

of the

presentence investigation report and Williams's written response,

but the understanding gained from more than two years of pretrial
proceedings.
sentenced
counts.

Indeed,

Alexander

a few

weeks earlier

and Kotek

Cf. Zuleta-Alvarez,
___ ______________

on

the

922 F.2d at

hanced deference was due findings

the same

SERVESS and
___
37 (holding

judge had
the

DARSO

that en-

of fact where sentencing judge

had presided at trial).

The

district

court

actions on behalf of SERVESS

supportably

found

that

Polis's

in entering into the CSI management

contract were controlled by Williams.

3.
3.

Evidentiary Hearing
Evidentiary Hearing
___________________
Finally,

refusal

Williams

to allow an

argues

that

the district

evidentiary hearing,

at which

court's

Polis could

12

have been cross-examined, constituted an abuse of discretion.

We

have yet to hold that it is an abuse of discretion to deny crossexamination

in the

sentencing context.

See
___

United States v.
______________

Regan, 989 F.2d 44, 47 (1st Cir. 1993).

_____
Williams
here.

See
___

alleges,
to

Garcia, 954
______

F.2d at

19.

an abuse

Even

of discretion

though, as

Williams

the Polis grand jury testimony on "control" was central

the "relevant

counts,

has not demonstrated

we cannot

conduct" adjustment
say that

relating

the district

to the

SERVESS

court, which

had the

benefit of the grand jury transcript and its own long-term familiarity

with these proceedings,

basis

for conducting an evidentiary

ground.

Williams

writing, the

was accorded

additional
examining

an opportunity

to contest,

by denying

in

Yet he neither

nor alleged or identified

grand jury testimony by Polis,

Polis's testimony

a compelling

hearing to revisit the same

government's evidence of "control."

proffered rebuttal evidence

any false

but simply disputed the import of

"control" without

suggesting what

or different information might be gleaned from crossPolis.

Williams's

request was not enough.

more

was presented with

concrete

sheer earnestness in

pursuing the

In these circumstances, and absent some

proffer, the

district

court did

discretion in denying an evidentiary hearing.

Affirmed.
Affirmed.
________

13

not

abuse its