## Facts

- Dwayne Lequire was treasurer of Patriot Insurance Agency, which had a program administrator agreement with Spirit Mountain Insurance Company.
- Patriot collected insurance premiums and was required to make monthly payments to Spirit.
- The agreement described Patriot as a “fiduciary” and stated it would hold funds received “as a fiduciary of Spirit.”
- The agreement permitted commingling of premium funds with Patriot’s operating funds, did not require a separate trust account, required Patriot to remit amounts due monthly even if premiums had not been collected from insureds, and imposed interest on delinquent payments.
- Over roughly two years, Patriot was frequently late in remitting amounts due, and more than $750,000 was transferred from Patriot to the owner’s personal account for personal use.
- The government charged Lequire with conspiracy and multiple counts of embezzlement of insurance premiums under 18 U.S.C. § 1033(b)(1), proceeding on the theory that collected premiums were held “in trust” for Spirit.
- A jury convicted Lequire of conspiracy and eight embezzlement counts; the district court denied his Rule 29 motion for judgment of acquittal.

## Issues

1. Whether, under Arizona law and the parties’ agreement, premiums collected by Patriot were held “in trust” for Spirit such that they were Spirit’s property for purposes of 18 U.S.C. § 1033(b)(1).
2. Whether the evidence was legally sufficient to sustain embezzlement convictions when the contract terms indicated a creditor–debtor relationship rather than a trust.

## Decision

- The Ninth Circuit reversed the denial of Lequire’s Rule 29 motion for judgment of acquittal on the embezzlement counts.
- The court held that, as a matter of law, the agreement and Arizona law established a creditor–debtor relationship, not a trust.
- Because Spirit did not own the specific funds alleged to have been misappropriated, an essential element of embezzlement under § 1033(b)(1) was missing.
- The court treated witness testimony characterizing the relationship as a “trust” as insufficient to overcome the legal effect of the contract and governing state law.

## Legal Principles

- Embezzlement under 18 U.S.C. § 1033(b)(1) requires misappropriation of property that belongs to the insurer; there is no embezzlement if the alleged victim did not own the funds at issue.
- State law informs whether an insurer has a property interest in specific premiums collected by an agent or only a claim for payment.
- Under Arizona law, contract terms permitting commingling, requiring fixed periodic remittance regardless of collection, and providing interest for late payments indicate a creditor–debtor relationship rather than a trust.
- A contractual label such as “fiduciary” does not, by itself, create a trustee relationship; fiduciary duties can exist without the agent holding identifiable property in trust.

## Conclusion

The Ninth Circuit concluded that the premium arrangement created a debtor–creditor obligation rather than a trust, so the premiums were not the insurer’s property within the meaning of § 1033(b)(1), requiring reversal of the embezzlement convictions for legally insufficient proof of an essential element.


United States v. Lequire, 672 F.3d 724 (9th Cir. 2012)