Appeal from the United States District Court for the District of Arizona David C. Bury, District Judge, Presiding D.C. No. 4:08-cr-00212-DCB-BPV-4
The opinion of the court was delivered by: Silverman, Circuit Judge
Argued and Submitted February 16, 2012-San Francisco, California
Before: A. Wallace Tashima and Barry G. Silverman, Circuit Judges, and Lynn S. Adelman, District Judge.*fn1
Opinion by Judge Silverman
One cannot be guilty of embezzlement if the alleged victim did not own the funds that were supposedly embezzled. In this case, an insurance agency had a contract with an insurance company that allowed the agency to commingle collected insurance premiums with its other funds in its general operating account. The contract also obligated the agency to remit the total amount of premiums due the company each month, whether or not the agency had collected the premiums. Furthermore, if the agency were delinquent in the amount it was to remit to the company, interest would accrue monthly on the unpaid balance. The government contends that the premiums collected by the agency were the property of the insurance company and held "in trust" by the agency; it alleges that when the funds were not remitted but used for other purposes, they were embezzled by the agency's treasurer, defendant Dwayne Lequire.
We hold today that under long-standing Arizona law, the contract between the agency and the company, which permitted agency commingling, required monthly agency payments whether premiums were collected or not, and created a right to interest on late payments, created a creditor-debtor relationship, not a trust. The agency had contractual and fiduciary duties to the company, but was not a trustee. Because the funds in question were not held "in trust" by the agency as a matter of law, an essential element of embezzlement was lacking. We reverse the denial of the defendant's motion for judgment of acquittal.
Lequire was charged with ten counts of embezzlement of insurance premiums, in violation of 18 U.S.C. § 1033(b)(1), and one count of conspiracy to commit embezzlement.
Patriot Insurance Agency, owned by former Congressman Rick Renzi and his wife Roberta and regulated by the Arizona Department of Insurance, brokers property and liability insurance through insurance underwriters at group rates to nonprofit organizations. During the relevant time period, defendant Lequire was Patriot's treasurer.
After he was elected to Congress in 2002, Renzi placed Patriot in his wife's name but stayed involved with the company. Testimony established that Renzi was in charge; he instructed Patriot's staff whom to pay and when to pay them.
In 2005, Renzi, with Lequire's help, formed Spirit Mountain Insurance Company. Spirit was formed as a "risk retention group," a way for similarly situated entities, like the nonprofit groups for whom Patriot brokered policies, to self-insure against risk. Though licensed in the District of Columbia, Spirit was able to operate nationally. Lequire was Spirit's treasurer as well.
Spirit contracted with Risk Services, LLC to serve as captive manager for Spirit. As captive manager, Risk Services was responsible for handling Spirit's regulatory filings, accounting and financial reporting, and various legal and administrative services. Risk Services was also the conduit between Spirit and the D.C. Department of Insurance, Securities and Banking (DISB). Risk Services was independent from Spirit and Patriot, though it had one overlapping director. Neither Lequire, Renzi, nor Renzi's wife had a role in Risk Services.
Patriot and Spirit entered into a Program Administrator Agreement, an agency agreement signed by Roberta Renzi for Spirit and Lequire for Patriot. As Spirit's program administrator in Arizona, Patriot performed policy-related services for Spirit including underwriting, paying claims, and charging and collecting premiums. Pursuant to the Agreement, Patriot collected ...