Not what you're
looking for? Try an advanced search.
Buy This Entire Record For
U.S. v. RHODES
May 1, 2002
UNITED STATES OF AMERICA, PLAINTIFF,
BRUCE W. RHODES, DEFENDANT.
The opinion of the court was delivered by: Richard Mills, United States District Judge
"No man profiteth but by the loss of others."
Montaigne: Essays, I.xxi.
Evidently taking Montaigne's words to heart, Bruce W. Rhodes swindled
over 240 investors out of $1,104,557.39.
However, he will spend the next 37 months of his life in the custody of
the Bureau of Prisons because of his actions.
First, Rhodes misused customers' money by directing funds which were
in, or intended to be placed in, the customers' accounts to be deposited
into one of his accounts so that he could use that money for personal
expenses (hereinafter "the direct embezzlement victims").*fn1 Second,
Rhodes misused customers' funds by directing, in certain instances, that
the customers' money be used to purchase investments which the customers
did not request (such as long-term callable certificates of deposit and
annuities) but which paid him and Magna Investments a higher commission
than would have been paid on the investments which the customers had
requested (hereinafter "the unrequested investment victims").*fn2 To
cause the misdirection of customers' funds, Rhodes, on several
occasions, made false statements, prepared false documents, and made use
of the United States mails in order to facilitate his fraudulent scheme.
On January 4, 2001, a federal grand jury returned a six count
Indictment against Rhodes as a result of this conduct. Counts I through
IV charged him with mail fraud in violation of 18 U.S.C. § 1341;
Counts V and VI charged him with wire fraud in violation of
18 U.S.C. § 1343. On July 2, 2001, Rhodes changed his plea before
United States Magistrate Judge Byron G. Cudmore from not guilty to guilty
to one Count of mail fraud in violation of 18 U.S.C. § 1341.*fn3 On
July 18, 2001, the Court accepted Magistrate Judge Cudmore's Report and
Recommendation regarding Rhodes' adjudication of guilt. At his
sentencing hearing, Rhodes raised the following unresolved objections to
his Presentence Investigation Report ("PSR").
II. OBJECTIONS AND FINDINGS
Rhodes objects to paragraph 21because he denies that he wrongfully
diverted any funds from his grandmother, Grace Shrive. In support of his
argument, Rhodes points to a letter written by his grandmother to the
Court wherein Mrs. Shrive denies that Rhodes ever diverted any funds from
her account into his.
However, even assuming that Rhodes did divert money from his
grandmother without her permission, neither paragraph 21 nor any other
paragraph within the PSR employs that money in calculating the amount of
loss for Sentencing Guidelines purposes or for purposes of calculating
restitution. Accordingly, because Rhodes' objection to paragraph 21 does
not affect his sentencing, the Court declines to make a factual finding
on that objection pursuant to Federal Rule of Criminal Procedure
B. Paragraphs 105, 106, 111, & 112
Rhodes objects to paragraphs 105, 106, 111, and 112 wherein he receives
an eleven level increase, pursuant to U.S.S.G. § 2F1.1(b)(1)(L), to
his base offense level because the amount of loss attributable to him is
more than $800,000.00 but less than $1,500,000.00. Rhodes argues that
the Court should find the appropriate guideline section to be U.S.S.G.
because the correct amount of loss which his fraud
caused is more than $20,000.00 but less than $40,000.00, thereby adding
only four additional points to his base offense level. Rhodes makes
three arguments in support of this position.
First, Rhodes asserts that his offense of conviction and his alleged
relevant conduct are so separate and distinct that they cannot constitute
part of the same course of conduct, common scheme, or plan.
Specifically, Rhodes contends that he only pleaded guilty to fraudulently
converting funds from Roy Bertelli and June Myers (two of the direct
embezzlement victims) which are crimes akin to theft by deception or
embezzlement. Rhodes claims that this conduct is vastly different than
his conduct regarding the 240 unrequested investment victims. Rhodes
claims that the Government has presented no evidence that the
embezzlement victims and the unrequested investment victims are in any
way connected by a common factor such as a common victim, common
accomplices, a common purpose, or a similar modus operandi.
Second, Rhodes argues that his conduct did not cause any loss to the
240 unrequested investment victims; rather, he suggests that the only
reason that these investors lost any money at all was due to the rising
interest rates which resulted in a decline in the market value of
long-term certificates of deposit — a decline which was not
reasonably foreseeable. In fact, Rhodes claims that, had interest rates
fallen, the victims would have made more money on the investments which
he made for them versus the investments which they had requested. In any
event, Rhodes contends that his sentence should not depend upon the
fortuity of the interest rate fluctuations because it would make one of
the Sentencing Guidelines' purposes (i.e., uniformity) virtually
Third, Rhodes argues that Magna Investments is not a "victim" for
purposes of the Sentencing Guidelines. Because Magna Investments was
under no legal obligation to do so but, rather, voluntarily elected to
reimburse the investors for the losses which they realized on the re-sale
of the long-term callable certificates of deposit in which he had
invested their money and for the surrender charges incurred in connection
with the rescission of the unrequested annuity contracts, Rhodes asserts
that Magna Investments has only suffered "consequential damages" which
are excluded from the amount of loss calculation. U.S.S.G. § 2F1.1,
comment., (n. 8(c)); United States v. Marlatt, 24 F.3d 1005, 1007 (7th
Cir. 1994). Rhodes claims that Magna Investments reimbursed these
investors in order to protect its own business interests in fending off
law suits, adverse publicity, and the wrath of regulators.
Moreover, because Magna Investments decided when to sell the victims'
unrequested, long-term certificates of deposit and annuities, Rhodes
argues that Magna Investments was the architect of its own losses. Had
Magna waited until the interest rate market reversed itself, Rhodes
claims that the amount of loss would not have been as great. As such,
Rhodes contends that this reimbursement money paid by Magna Investments
to its customers who received investments which they had not requested
should not be considered in calculating the amount of loss for sentencing
Buy This Entire Record For