Sentencing Commission Issues Long-Awaited Report on the Continuing Impact of United States v. Booker on Federal Sentencing Part 2

Posted by Chris Morales on Wed, Mar 06, 2013 @ 01:51 PM

Sentencing Commission Issues Long-Awaited Report on the Continuing Impact of United States v. Booker on Federal Sentencing Part 2

Offense Conduct
(Chapter 2)
United States v. Roussel 2013 WL 173422 (5th Cir. 2013)
Estimate of expected benefit of fraud was unreasonable

The defendant, a New Orleans Police Captain, and a co-defendant (“Branch”), were charged with five counts of wire fraud and one count of conspiracy. Their scheme involved receiving kickbacks, in the form of “finder’s fees,” related to fees charged to supply security guards to Entergy Services, Inc. (“Entergy”), a New Orleans-based utilities provider. The defendants arranged with Entergy’s security manager, who was working undercover for the FBI, to supply security guards at a rate that was $15.00 higher than normal, with the extra being split three ways. Branch pled guilty and testified against the defendant at trial. The jury convicted the defendant of conspiracy and two wire fraud counts, acquitting him on one wire fraud count, and was undecided on the remaining two wire fraud counts. The PSR recommended a 16-level increase under §2C1.1, stating that the reasonably expected benefits from the scheme were between $1,000,000 and $2,500,000. This figure was based on Entergy’s payments for security guards during the 2008 hurricane season, which included Hurricanes Ike and Gustav, two abnormally costly storms. At sentencing, the district court adopted the PSR’s calculation of a sentencing range of 235 to 293 months, but then varied downward to a sentence of 136 months. The defendant appealed, arguing that to calculate the expected benefits, the district court should have used Entergy’s actual applicable security needs for the one year the fraudulent contract was to be in place, or June 16, 2010 until June 15, 2011. The Fifth Circuit agreed, finding that “district court’s calculation of expected benefit was purely speculative.” The calculation used by the district court was based on the previous hurricane season, which happened to be one of the costliest in United States history. During the year in question, there no hurricanes and only one incident of the Mississippi flooding. Had the district court used the actual applicable security needs, the benefit to the defendants would have only been $231,570.00, meriting a 12-level enhancement. “We are firmly convinced that the district court erred in its calculation of the expected benefit, and that the correct amount would have called for only a 12-level sentencing guidelines enhancement and not the 16-level enhancement imposed.”

United States v. Hall 2013 WL 160276 (8th Cir. 2013) Sale/transfer of patients’ information did not constitute “use” under §2B1.1(b)(2)(B) 

The defendant worked as an office assistant in a medical clinic and was authorized to access patient files and copy patient information. She copied patient names, dates of birth, Social Securitynumbers, and medical information and provided it to co-defendants. She was told that she would receive $200 for each individual’s information or $1000 if the information was used to successfully create a fraudulent account. She ultimately received only $200 total in compensation, although she supplied information for approximately 65 to 141 individuals. The district court calculated a sentencing range of 27 to 33 months, which included a four-level enhancement under §2B1.1(b)(2)(B) because the offense involved more than 50 but less than 250 victims. The number of victims was determined by the number of patients whose information was supplied by the defendant. The defendant objected, arguing that only 12 of the patients’ information was used fraudulently by her co-defendants, therefore the other patients were not victims because their information was not used. The district court disagreed, but varied downward and sentenced her to 14 months. The defendant raised the same argument on appeal. The Eighth Circuit framed the issue as: “whether the unauthorized transfer of an individual’s identifying information to another party involves the actual use of that information for a fraudulent purpose such that the individual whose identifying information was transferred is a victim under §2B1.1(b)(2)(B).” The court pointed out that there was no question that the 12 individuals whose information was used to obtain fraudulent credit cards were “victims,” but whether the remaining individuals were “victims” under the enhancement depended on whether their identification “was used” as defined the Application Notes (a “victim means any individual whose means of identification was used unlawfully or without authority.”). Using the rules of statutory construction, the appeals court found that the term “used” implied “action and implementation” where “transfer . . . means something distinctly different.” Consequently, the “mere transfer of the personal identifying information, without more action, did not employ that information for the purpose for which the conspiracy was intended the procurement of fraudulent credit cards and cash advances. The personal identifying information was not used, as that term is ordinarily understood, until [the] coconspirators secured the fraudulent credit cards. At that point, the 12 individuals whose personal  information was compromised became victims for the §2B1.1(b)(2) enhancement.” The court concluded that transferring the information was not the equivalent to the actual use for a fraudulent purpose. “Accordingly, we hold that the plain language of the sentencing guideline at issue does not apply to [the defendant’s] mere sale or transfer of the patients’ identifying information.” Instead, the two-level enhancement under §2B1.1(b)(2)(A) was appropriate “because the purpose of the conspiracy was realized when the conspirators used the 12 patients’ identifying information to obtain the fraudulent credit cards.”

United States v. Sethi 2013 WL 68884 (8th Cir. 2013)

Sophisticated means enhancement was warranted and was not “double counting”
when applied with §3B1.1(a) enhancement The defendant was president and owner of a temporary staffing services agency (“DES”) and provided human resource and accounting functions for its client employers, such as staffing fulfillment, compensation management, and furnishing workers’ compensation insurance. In an effort to lower his workers’ compensation costs, between February 2006 and February 2009, the defendant carried out a scheme to defraud two insurance companies by manipulating various factors such as total wages to be covered, job classifications, and an employer’s past history of work-related injuries. Among other things, he instructed his director of finance shift payroll from high premium job classifications to lower premium job classifications, and created shell corporations to deflect DES’s high rating for work-related injuries. At sentencing, the district court applied a sophisticated-means enhancement, under §2B1.1(b)(10)(C), as well as a role-in-the-offense adjustment, under §3B1.1(a). On appeal, the defendant claimed that his actions were not sophisticated “based on the characteristics of the staffing industry,” and that his shifting payroll was “neither complex nor especially intricate.” The Eighth Circuit explained that “sophisticated means” is defined as “especially complex or especially intricate offense conduct pertaining to the execution or concealment of an offense. Conduct such as hiding assets or transactions, or both, through the use of fictitious entities, corporate shells, or offshore financial accounts also ordinarily indicates sophisticated means.” The court affirmed the enhancement, noting that the evidence showed that the defendant “not only directed the shifting of payroll to less expensive job classifications in multiple reports over several years, but also created two shell corporations, utilizing names and addresses of unwitting, or at the very least uninvolved, individuals as ostensible ‘owners.’ [The defendant] even assumed the identities of these other individuals by signing documents and answering phone inquiries in their stead . . . [and] went to great lengths to manipulate the workers’ compensation premium calculation factors. The district court did not err in applying the enhancement here.” The defendant also argued that imposing a rolein- the-offense adjustment under §3B1.1(a), in conjunction with the sophisticated means enhancement, amounted to double counting because the district court relied on the same factual findings to support both enhancements. “Double counting occurs when one part of the Guidelines is applied to increase a defendant’s punishment on account of a kind of harm that has already been fully accounted for by application of another part of the Guidelines.” “Double counting may be allowed, however, where (1) the Sentencing Commission intended the result and (2) each statutory section concerns conceptually separate notions relating to sentencing.” The court found no double counting in this case because the two enhancements “concern conceptually separate notions relating to sentencing.” The sophisticated-means enhancement concerns the “how” an offense was committed, where the leadership-role enhancement was concerned with the “how far” and “who” of the offense. “Here, the sentencing court was careful to bifurcate these enhancements to ensure that each was uniquely supported by the facts, especially noting the ‘extreme additional activity with regard to the amount of the loss [and] the number of other people that were used in the process’ to support the  ‘otherwise extensive’ aspect of the leadership-role enhancement, wholly separate from the ‘how’ of the operation that supported the sophisticated-means enhancement. Accordingly, the court did not err in applying the role-in-the-offense enhancement on these facts.”

United States v. Allmendinger
2013 WL 264662 (4th Cir. 2013) 

Losses suffered after defendant sold his ownership in company were still attributable to him The defendant and a co-defendant (Oncale) founded a company, A&O, that sold “bonded life settlements” (interests in life insurance policies) directly to investors. The investments were for fixed terms of between four and seven years and if the insured died during the term, the life insurance company would pay a benefit, but if the insured remained alive, a reinsurance bond was designed to pay out and take over the policy (so long as the policy premiums were current). In 2005, they hired another co-defendant (Abdulwahab) to help market the products. He was later made a partner in A&O. In marketing the products, both orally and through written materials, they lied about many critical facts including that investor funds were placed in a segregated account to pay premiums up front. In reality, although the premiums were paid, there was no separate account and the defendants misappropriated millions of dollars for themselves. They also misrepresented the size of A&O, the staff, and the amount of earnings for its investors. After regulators began to send inquiries regarding A&O’s life settlement product, the defendants agreed to sell A&O to “Blue Dymond.” Allegedly unknown to the defendant, his partners had a secret plan to purchase A&O themselves and continue running it. To that end, Blue Dymond was little more than a shell company set up by Abdulwahab and Oncale. The sale to Blue Dymond closed on August 31, 2007, and continued to operate in much the same manner as before, including using the fraudulent marketing materials the defendant had created. In the fall of 2007, the company stopped making premium payments on many of the policies, causing them to lapse. The company was eventually placed in bankruptcy in early 2008, but not before Abdulwahab and Oncale received $11,000,000 of the company’s funds. A jury found the defendant guilty of mail fraud conspiracy, court determined that the amount of loss was n$93,920,635.46, which represented the loss for the entire time the company operated, resulting in a 24- level increase in the base offense level. Combined with other enhancements, the total offense level was 43. The district court ultimately imposed a sentence of 540 months. On appeal, the defendant argued that the amount of loss should not have included any loss that occurred after he sold his share of the company because at the time he left, the premiums for all of the policies were current. The Fourth Circuit affirmed the sentence, holding that the defendant “built a business permeated by fraud in which the principals, instead of paying the premiums immediately or putting the money in escrow, placed them in an account that they used as their own piggy bank.” Further, the court agreed with the district court’s finding that the defendant “knew that, even after the ‘sale’ of the business, Abdulwahab was going to continue working there and the mode of operation that the [defendant] had set in motion would continue.” “Not only was it reasonably foreseeable that the premiums might never be paid under this system, but hiding this potentiality was the whole point of the coconspirators’ lies that they were prepaying the premiums.”

United States v. Diallo
2013 WL 150125 (3rd Cir. 2013)

Basing intended loss on aggregate credit limit of all counterfeit credit cards was error On December 26, 2008, the defendant used a counterfeit credit card to purchase 26 gift cards, each valued at $100, at a supermarket in Pennsylvania. The following day, he returned to that supermarket and was arrested. At the time of his arrest, he possessed $920 in cash, a counterfeit North Carolina driver’s license, and a counterfeit credit card. The police searched the defendant’s vehicle and recovered 53 counterfeit credit cards, a counterfeit Louisiana driver’s license, 24 gift cards, a Global Positioning System, a laptop computer, a thumb drive, and a skimming device, which is a hand-held device that copies, stores, and encodes credit card information from a credit card’s  magnetic strip. Searches of the laptop and thumb drives revealed over 200 compromised Discover, Visa, and MasterCard credit card accounts. The defendant pled guilty to knowingly possessing 15 or more counterfeit access devices, with intent to defraud. The PSR recommended a 16-level enhancement for an intended loss of over $1 million but not more than $2.5 million, which was based on the aggregate credit limit of all of the compromised credit card numbers. At sentencing, a Secret Service agent testified that he had contacted the financial institutions to determine the credit limit for each account number the defendant had possessed and determined that the aggregate credit limit totaled $1.6 million, but that only $160,000 in fraudulent activity could be attributed to the defendant. The district court adopted the PSR and imposed a sentence of 70 months. On appeal, relying on United States v. Manatau, 647 F.3d 1048 (10th Cir. 2011), the defendant contended that it was error to calculate the amount of loss based simply on an aggregation of the credit limits of stolen credit card numbers. The Third Circuit reversed, finding that the district court’s intended loss amount was “speculation.” The court held that “it is error for a district court simply to equate potential loss and intended loss without deeper analysis. Here, there was no deeper analysis by the District Court as to whether [the defendant] intended the maximum potential loss by maxing out each and every credit card number that he fraudulently possessed.” “[W]e must remand to the District Court to determine the intended loss amount and whether a departure is warranted based on the intended loss amount overstating or understating the seriousness of the offense.”

United States v. Catchings 2013 WL 149863 (6th Cir. 2013)

Obtaining and using credit cards for business was not relevant conduct for loss amount
purposes The defendant ran a business, U.S. Investments & Construction (“USIC”), helping people obtain mortgages. He pled guilty to one count of identity theft. His offense involved fraudulently opening personal credit-card accounts using his former clients’ personal information without their knowledge. In connection with running USIC, the defendant applied for, obtained, and used other credit cards for “legitimate business transactions.”The PSR calculated a loss amount of greater than $70,000 but less than $120,000. Included in that amount was $38,197.81 of losses associated with the defendant’s use of the USIC credit cards. Over the defendant’s objection, the district court adopted the PSR and sentenced the defendant to 51 months. On appeal, the defendant argued that the loss on the USIC credit cards was non-criminal conduct, not relevant conduct under §1B1.3, and thus should not have been included. The appeals court noted that “relevant conduct under §1B1.3 must be criminalconduct. If not, such conduct is not relevant for the purpose of calculating a defendant’s Guidelines range.” The government asserted that the defendant’s conduct related to the USIC cards “involved the same pattern of fraud or modus operandi.” The court disagreed, finding that the defendant’s conduct related to the USIC cards was distinguishable from his use of the other cards because the USIC cards were not obtained fraudulently. “There was insufficient evidence to support the conclusion that [the defendant] engaged in criminal conduct in obtaining or using the [USIC]. Therefore, the district court erred in including those cards as relevant conduct in calculating the amount of loss.” The sentence was vacated and remanded.

United States v. Bueno 2013 WL 57853 (7th Cir. 2013)

Enhancement for maintaining “drug house” under §2D1.1(b)(12) affirmed The defendant, Gonzalez-Aavala, was a member of a Chicago-based distribution cell of the La Familia Michoacana drug trafficking organization. It was determined that the cell’s drug activity generated proceeds exceeding $20 million for the Organization. The defendant personally supervised the distribution of 420 kilograms of cocaine and the collection of over $5.7 million in drug proceeds and maintained several stash houses, including a house in Joliet, Illinois, where 54 kilograms of cocaine  were found on the day of his arrest, and a house in Plainfield, Illinois, where $1.3 million in cash drug proceeds were discovered. The defendant pled guilty to conspiracy to possess with intent to distribute five kilograms or more of cocaine. The PSR recommended a base offense level of 38 and a two-level enhancement under §2D1.1(b)(12) for maintaining a premises to distribute a controlled substance. The defendant did not file any objections to the PSR. The district court imposed a sentence 480 months. On appeal, the defendant claimed that the evidence was insufficient to sustain the enhancement under §§2D1.1(b)(12) because the district court did not specifically inquire into the factors listed in the commentary to §2D1.1, cmt. n. 28 (“whether the defendant held a possessory interest in the premises and the extent to which the defendant controlled assess to, or activities at, the premises”). Reviewing for plain error, the Seventh Circuit affirmed the enhancement, finding no clear error. “At his change of plea hearing, [the defendant] admitted that he had been a leader of the Chicago cell from December 2008 to June 2009, and that his oversight of the Chicago distribution cell included obtaining and maintaining stash houses for the purpose of storing cocaine and cash drug proceeds. He also admitted to maintaining two specific stash houses in Plainfield and Joliet where drugs and drug proceeds were found on the day of his arrest. The PSR provided similar details regarding [the defendant’s] role in the Chicago cell and the stash houses, and [he] did not have any objections to the PSR and declined to suggest any changes or corrections when offered the opportunity to do so at his sentencing hearing. Given these admissions and his failure to object to the PSR’s findings, the district court did not clearly err in finding the evidence sufficient to support this enhancement.”

Published By Joaquin & Duncan, L.L.C.;
A Law Firm of Federal Sentencing Attorneys 

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