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United States of America v. Gary Wayne

March 27, 2012

UNITED STATES OF AMERICA, DAE-KSC PLAINTIFF-APPELLEE,
v.
GARY WAYNE RODRIGUES, DEFENDANT-APPELLANT.



Appeal from the United States District Court for the District of Hawaii D.C. No. 1:10-cv-00406 David A. Ezra, District Judge, Presiding

The opinion of the court was delivered by: Trott, Circuit Judge:

FOR PUBLICATION

OPINION

Argued and Submitted February 15, 2012-Honolulu, Hawaii

Before: Alfred T. Goodwin, Stephen S. Trott, and Mary H. Murguia, Circuit Judges.

Opinion by Judge Trott

3461

OPINION

"Oh what a tangled web we weave when first we practice to deceive!"

Sir Walter Scott, Marmion, Canto VI, Stanza 17.

In his capacity as the State Director of the United Public Workers, AFSCME, Local 646, AFL-CIO ("UPW") Petitioner Gary Wayne Rodrigues negotiated contracts with dental and health insurance providers, ostensibly on behalf of UPW members and their families. The providers were Hawaii Dental Services ("HDS") and Pacific Group Medical Association ("PGMA"). At Rodrigues's request, the providers included in these contracts what purported to be "consultant's fees." These fees were effectively to be paid by UPW members as part of their insurance premiums to the insurance providers, but the fees eventually ended up in the pockets of persons Rodrigues designated as the "consultants." As it turned out, the purported consultants were (1) the stepfather of Rodrigues's girlfriend and secretary, Al Loughrin, and (2) shell companies of which Rodrigues's daughter, Robin Haunani Rodrigues Sabatini ("Sabatini"), was the sole shareholder, only Director, and simultaneously the President, Vice President, Secretary, and Treasurer. During the investigation of these relationships and transactions, it was discovered that neither designated consultant did any real consulting work on these contracts, and that part of the "consultant's fees" were diverted to Rodrigues's personal use - circumstances unknown to the UPW.

A jury convicted Rodrigues of fifty counts of "theft of honest services" from the UPW and its members. The jury also convicted him of conspiracy, embezzlement, money laundering, and health care fraud.

After we affirmed his conviction on appeal, United States v. Rodrigues, 237 Fed. Appx. 178 (9th Cir. June 11, 2007) (unpublished), the Supreme Court decided in Skilling v. United States, ___ U.S. ___, 130 S. Ct. 2896 (2010), that the crime of theft of the intangible right of honest services, as described in 18 U.S.C. § 1346 and alleged in Counts 1-50, is limited to conduct that encompasses "bribes and kickbacks," id. at 2932, because any broader construction would be unconstitutionally vague, id. at 2929. The jury in Rodrigues's case had not been so instructed, leaving us here with an instructional omission of constitutional proportions regarding an element of the crime of which he was convicted. We must now decide, as commissioned by the Court in Skilling, whether that trial error was harmless, or not.

Following a searching examination of the record, we conclude beyond a reasonable doubt that this error had no "substantial and injurious effect or influence in determining the jury's verdict," Brecht v. Abrahamson, 507 U.S. 619, 623 (1993) (internal quotation marks omitted); see also Hedgpeth v. Pulido, 555 U.S. 57, 61-62 (2008) (per curiam) (whether a defendant suffered prejudice from an instructional error is governed by the Brecht standard); Neder v. United States, 527 U.S. 1, 15 (1999) (harmlessness with respect to the omission of an element of the offense from the instructions must be demonstrated beyond a reasonable doubt). Accordingly, we affirm the theft of honest services, money laundering, and health care fraud judgments of conviction against Rodrigues and the denial of his petition by the district court.

BACKGROUND

The serial consultants Rodrigues designated in this scheme were Al Loughrin ("Loughrin"), and later, effectively Rodrigues's daughter Robin Haunani Rodrigues Sabatini ("Sabatini"), whose companies at different times received the disputed consultant's fees from UPW. Loughrin was the "UPW Consultant" from October 2, 1992 until March 16, 1994. Loughrin, to whom Petitioner owed $10,000, was also the stepfather of Petitioner's one-time girlfriend and secretary, Georgietta Carol. Between 1992 and 1994, HDS paid Loughrin $14,430.21 in "consultant's fees." This money went to extinguish a personal debt Rodrigues owed to Loughrin, a debt that had no connection to UPW business. Loughrin's widow and Carol both testified that Loughrin did not perform any consulting work for UPW in exchange for the fees.

On March 16, 1994, after the personal debt to Loughrin had been satisfied, Petitioner informed HDS that Loughrin was no longer a UPW consultant. Rodrigues then directed that all consultant's fees should be held until a new consultant was designated. Thereafter, Petitioner designated his daughter's company, Four Winds RSK, Inc. ("Four Winds") of Kapaa, Kauai as the "consultant." Four Winds was not incorporated until February 13, 1996. At that point, HDS "cleared its books" with respect to the accrued consultant's fees by writing a check in the amount of $25,381.19 to Four Winds on March 25, 1996, covering premiums paid by UPW for the period from January 1994 through December 1995-before Four Winds was incorporated. Beginning on March 26, 1996 and through 1997, HDS continued to make quarterly payments to Four Winds. At trial, various UPW witnesses testified that they had no contact with Four Winds other than to send it checks, and that they had never seen any work produced by Sabatini.

In late 1997, adverse attention was drawn by the media to Four Winds, so Sabatini transferred Four Winds' assets to a new company called Auli'i, Inc., which was incorporated using only her middle and maiden names. At Rodrigues's direction, HDS then began indirectly to make payments to Auli'i, Inc. in 1998 by paying the consultant's fees to Voluntary Employees Benefit Association of Hawaii ("VEBAH"). VEBAH then paid the fees to Management Applied Programming ("MAP"), which in turn paid Auli'i, Inc. Sabatini at this time tried to make it seem as though she had performed con- sulting work, but in actuality all the documentation and work she submitted to MAP had been done by UPW employees.

JURY INSTRUCTION

The jury was instructed with respect to mail fraud as charged in Counts 1-50 as follows:

First, the defendant knowingly devised a scheme or artifice to deprive UPW and its members of their right to Defendant Gary Rodrigues' honest services as the state director of UPW; Second, the defendant acted with the intent to deprive UPW and its members of their right to the honest services of Gary Rodrigues; Third, the defendant knew or reasonably should have foreseen that the scheme could cause some economic or pecuniary harm to the UPW and its members. Pecuniary harm may include, but is not limited to, loss of services that were due; and Fourth, in advancing, or furthering, or carrying out, or attempting to carry out an essential part of the scheme, the defendant caused the use of the United States mails.

Pursuant to Skilling, the appropriate instruction for this charge is now found in our 2010 Ninth Circuit Model Criminal Jury Instructions ...


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