A federal appeals panel Monday overturned the embezzlement convictions of an associate of former Rep. Rick Renzi, the Arizona congressman indicted in 2008 on 48 counts of fraud, conspiracy and other charges.
Dwayne Lequire was convicted in 2010 of conspiracy and eight counts of embezzlement after he took Patriot Insurance Agency funds and transferred “over $750,000 to Renzi” instead of sending them to Spirit Mountain Insurance Co. Renzi, in turn, “used those funds for personal expenditures,” according to court documents.
But a three-judge panel of the 9th U.S. Circuit Court of Appeals ruled Monday that while Patriot owed money to Spirit, it was not holding the money in trust for Spirit. Lequire could not be convicted of embezzling the money since Spirit did not own it in the first place, the court ruled.
“One cannot be guilty of embezzlement if the alleged victim did not own the funds that were supposedly embezzled,” the ruling said. “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 court returned the case to district court with an order to enter a judgment of acquittal against Lequire.
A spokesman for the U.S. Attorney’s Office in Arizona would only say Monday that the office had “received the decision, we’re reviewing it and we’re weighing our options.”
While the government could appeal, Lequire’s attorney said he hoped the ruling would mean the end of the case.
“The three judges that heard the case spoke unequivocally,” said Barry Pollack, of the Washington, D.C., firm Miller and Chevalier. “The facts simply do not support a charge of embezzlement . . . . This should be the end of this case.”
Lequire was the treasurer for Patriot, which Renzi owned before turning control over to his wife after he was elected to Congress in 2002. Lequire was also treasurer for Spirit, which he and Renzi formed in 2005.
Spirit contracted with Patriot to act as its program administrator in Arizona, writing policies, paying claims and collecting premiums, according to the court. Under the agreement, Patriot was to regularly pay Spirit premiums that were due, even if it had not yet collected those premiums, and it faced penalties if the payments were late.
Even though the agreement prohibited “any personal or corporate use” of the funds, it allowed Patriot to put the premium funds into its general operating account.
While Renzi had turned Patriot over to his wife, he was still “in charge; he instructed Patriot’s staff whom to pay and when to pay them,” the court said. After Spirit was set up, Renzi ordered premiums Patriot collected to be deposited into Patriot’s general operating account. From there, Lequire transferred funds to Renzi’s personal account, even as the insurance agency “routinely failed” to pay premiums to Spirit.
The whole time that Patriot was delinquent in its payments, Lequire was filing reports to regulators accurately outlining the failure to pay.
“It’s not as if any of this money was hidden,” Pollack said. “Lequire was extremely thankful that the court recognized what he has been saying all along. He never intended to commit a crime and he never did commit a crime.”
Just because Patriot was late making monthly payments to Spirit, does not mean the agency was embezzling money from the insurance company by spending it elsewhere, Pollack said.
The appeals court agreed, ruling that the Patriot-Spirit relationship was one of debtor-creditor, not a trust. It noted that the agreement between the two firms, “allowed for commingling, required premium payments to be paid to Spirit regardless of whether or not Patriot had collected them and allowed Spirit to collect an interest payment on late premium payments.”
“Because Patriot did not hold premium payments ‘in trust,’ Lequire cannot be guilty of embezzlement,” the ruling said.
Pollack compared it to the decisions that all bill-payers face.
“The time that I’m late on my mortgage payment and I buy myself lunch, that doesn’t make it embezzlement,” he said. “I’m spending money at the time I owe money to somebody else.”
Pollack said his client was grateful the court acknowledged Lequire had been “open and transparent” with the entire process.
An employee at Patriot Insurance Agency in Sonoita, Ariz., said Monday that Lequire was not available.