Sentencing Partners - April 2014 (Part I)

Posted by Chris Morales on Fri, May 02, 2014 @ 11:10 AM

Sentencing Partners - April 2014

Sentencing Commission Votes To Reduce Drug Trafficking Sentences

Commission Sends Amendments to Congress

On April 10, 2014, the Sentencing Commission voted unanimously to amend the guidelines to lower the base offense levels in the Drug Quantity Table across drug types by two levels. The drug guidelines under the amendment would remain linked to statutory mandatory minimum penalties. The Commission also voted to prepare a study of the impact of making the drug amendment retroactive. The full News Release is available at: dvisories/press-releases/20140410_Press_Release.pdf.

Smarter Sentencing Act Slowly Progresses Through Congress
The Smarter Sentencing Act (H.R. 3382) is a bipartisan bill sponsored by Representatives Raul Labrador (R-ID) and Bobby Scott (D-VA). The bill will not repeal any federal mandatory minimum sentences, but instead will reduce prison costs and populations by creating fairer, less costly minimum terms for nonviolent drug offenders. The bill has a Senate companion (S. 1410) that passed the Senate Judiciary Committee on January 30, 2014. The House bill is pending in the House Judiciary Committee. If passed, the House version will do three things:

1. Reduce certain 20-year, 10-year, and 5-year mandatory minimum drug sentences to 10, 5, and 2 years, respectively, but it will not be retroactive, will not repeal any mandatory minimum sentences, and it will not change any mandatory minimum sentences for drug crimes that result in death or serious bodily injury to any other person;

2. Slightly expand the existing federal “safety valve,” for drug offenses to allow drug offenders who have no more than 3 criminal history points to qualify for the safety valve. It will not change the way that criminal history points are currently added under the sentencing guidelines; and

3. Permit 8,800 federal prisoners (87% of which are black) who are imprisoned for crack cocaine crimes to return to court to seek fairer punishments in line with the Fair Sentencing Act. Sentence reductions will not be automatic. 

The full text of the bill is available at: 

New Clemency Initiative Announced by Justice Department

Case Summaries

U.S. Supreme Court
Paroline v. United States
2014 WL 1612426 (2014)

Proximate-cause requirement applied to all losses for restitution for child pornography
Restitution should be awarded in amount comporting with defendant’s relative role in causal process underlying victim’s general losses

Respondent “Amy” was sexually abused as a young girl in order to produce child pornography.
When she was 17, she learned that images of her abuse were being trafficked on the Internet, in effect repeating the original wrongs. Petitioner pled guilty to possessing images of child pornography, which included two of Amy, who sought restitution under §2259, requesting nearly $3 million in lost income and about $500,000 in future treatment and counseling costs. The district court declined to award restitution, concluding that the government had not met its burden of proving what losses, if any, were proximately caused by Petitioner’s offense. The Fifth Circuit, en banc, held that §2259 did not limit restitution to losses proximately caused by the defendant, and that each defendant who possessed the victim’s images should be made liable for the victim’s entire losses from the trade in her images. The Supreme Court granted certiorari on the question: “how to determine the amount of restitution a possessor of child pornography must pay to the victim whose childhood abuse appears in the pornographic materials possessed.” The Court reversed, holding: (1) Restitution is proper under §2259 only to the extent the defendant’s offense proximately caused a victim’s losses; (2) applying the statute’s causation requirements, victims should be compensated and defendants should be held to account for the impact of their conduct on those  for the consequences and gravity of their own conduct, not the conduct of others; (3) where it can be shown both that a defendant possessed a victim’s images and that a victim has outstanding losses caused by the continuing traffic in her images but where it is impossible to trace a particular amount of those losses to the individual defendant utilizing a more traditional causal inquiry, a court should order restitution in an amount that comports with the defendant’s relative role in the causal process underlying the victim’s general losses; and (4) district courts should do their best to apply the statute as written and use their discretion to apply the causal standard defined here without further detailed guidance.

General Information

(Chapter 1)
United States v. Ortiz-Vega
2014 WL 943247 (3rd Cir. 2014)

Defendant was eligible for sentence reduction In 2004, the defendant pled guilty to multiple
counts of crack cocaine possession and distribution, as well as possession of a firearm in furtherance of a drug trafficking offense. Although he was subject to a mandatory minimum of 120 months for the drug charges, the mandatory minimum sentence was not asked for by the government, and was not applied by the district court. Instead, the court sentenced him to 108 months on the drug charges, a mandatory, consecutive 60 months on the firearm count. The government did not challenge the sentence. After the the Fair Sentencing Act (“FSA”) was passed, and Amendment 750 was promulgated and made retroactive, the defendant moved for a reduction in his sentence because his sentencing range was reduced to 78 to 97 months rather than 97 to 121 months. At the modification proceeding, the government argued, and the district court accepted, that the defendant was not eligible for a reduction because such a reduction was blocked by operation of the 120 month mandatory minimum sentence that should have been, but was not, applied. The district court relied on United States v. Doe, 564 F.3d 305 (3d Cir. 2009), which was controlling precedent at the time. However, not long after denying the defendant relief, the Third Circuit decided United States v. Savani, 733 F.3d 56 (3d Cir. 2013), holding that Doe had been superseded by the 2010 amendments to the guidelines. On appeal, the issue was “whether a defendant, who would otherwise be eligible for a sentence reduction based on a change in Guideline ranges, is rendered ineligible for the reduction by a relevant mandatory minimum sentence, despite the fact that the mandatory minimum was not actually applied in his or her case.” The court explained that after the November 2011 amendments, the commentary to §1B1.10 defines “applicable guideline range” as “the guideline range that corresponds to the offense level and criminal history category determined pursuant to §1B1.1(a), which is determined before consideration of any departure provisions in the Guidelines Manual or any variance,” suggesting that “applicable guideline range in §1B1.10 means the sentencing range corresponding to the defendant’s offense level and criminal history category, not in terms of a mandatory minimum sentence if the mandatory minimum was not actually applied.” The court held that the justification for denying relief was no longer applicable after Savani. The government argued that although the mandatory minimum was not actually applied, he was nonetheless “subject to” it and therefore his sentence was not “based on a sentencing range that has subsequently been lowered.” The defendant countered that while the mandatory minimum should have been applied, it was not, and he was therefore not “subject to” it. The court sided with the defendant, holding: “the more plausible interpretation would require that the mandatory minimum actually be applied - that the defendant be subjected to it - for the defendant to be ineligible for modification.”

Offense Conduct
(Chapter 2)

United States v. Morris
2014 WL 975146 (9th Cir. 2014)
Credit against loss was only amount banks actually recovered from sale

In 2007, the defendant applied for three loans from three financial institutions to purchase three properties in Riverside, California. In the loan applications, the defendant claimed securities and assets that he did not own, employment he did not have, and income he did not earn. He supplied the three banks with false documents to substantiate these false statements. He also did not tell any of the banks that he was applying for loans from the other two. The defendant made only one mortgage payment. Two of the banks foreclosed and sold the properties at a loss, while the defendant sold the remaining property in a short sale, at a loss to the third bank. The defendant pled guilty to wire fraud, and making a false statement on a loan application. The district court imposed a sentence of 63 months, based in large part on the loss amount of $1,033,500. On appeal the defendant argued that the district court should have calculated loss as the value of the loans less the reasonably foreseeable value of the properties at the time the loans were obtained because he could not have reasonably foreseen the drastic housing market downturn of 2008-2009. The Ninth Circuit explained that “actual loss” is “the reasonably foreseeable pecuniary harm that resulted from the offense” and “reasonably foreseeable pecuniary harm” means “pecuniary harm that the defendant knew or, under the circumstances, reasonably should have known, was a potential result of the offense.” The court found that the defendant’s suggested method to calculate actual loss conflicted to the how the guidelines “dictate how to measure loss in mortgage fraud cases that involve collateral. In such cases, the ‘credits against loss’ provision mandates that the initial measure of loss (actual or intended loss) be reduced by the amount the victim has recovered at the time of sentencing from disposition of the collateral’ or, if the collateral has  value of the collateral as of the date of conviction.” “In calculating loss in mortgage fraud cases . . . , the first step is to calculate the greater of actual or intended loss, where actual loss is the reasonably foreseeable pecuniary harm from the fraud. This amount will almost always be the entire value of the principal of the loan. The second step is to apply the ‘credits against loss’ provision and deduct from the initial measure of loss any amount recovered or recoverable by the creditor from the sale of the collateral. This second calculation is made without any consideration of reasonable foreseeability. The resulting amount is the final loss amount.” Three other circuits have used this method and the Ninth Circuit adopted it in this case. See United States v. Crowe, 735 F.3d 1229 (10th Cir. 2013); United States v. Wendlandt, 714 F.3d 388 (6th Cir. 2013); United States v. Turk, 626 F.3d 743 (2d Cir. 2010). “Such an approach is not only dictated by the plain language of the Guidelines . . . but also necessary to ensure that defendants who fraudulently induce financial institutions to assume the risk of lending to an unqualified borrower are responsible for the natural consequences of their fraudulent conduct, no more, no less.”

United States v. Evans
2014 WL 929164 (10th Cir. 2014)
Loss prior to commencement of fraud not included in actual loss;

Defendant’s infusion of cash into investment did not apply to reduce amount of loss

The defendant was a property manager and organizer of real estate investment funds. From May 2003 until August 2005, he solicited investors for three limited partnerships that acquired, renovated, and operated low-income apartment complexes. Investors purchased limited partnership interests and certificates (debt) bearing interest at 12% with an expected maturity of seven years. He raised over $16 million and served as general partner of each limited partnership. After the properties started experiencing cash flow problems, and the defendant was unable to make the payments to investors, he contributed $4.5 million his own funds to the projects. When this did not turn the ventures around, the defendant started using funds from each offering to pay operational expenses of others, changing some of the income and expenses reported by the entities, and making false journal entries in monthly financial statements. The false reports were provided to investors, lending institutions, and others. In April 2007, the defendant was removed as property manager and an appointed receiver took control of the projects. The receiver recommended that one of the remaining properties be abandoned to foreclosure, but believed that two others could be salvaged. By September 2009, the value of the properties dropped significantly, and the receiver allowed the remaining properties to fall into foreclosure. The defendant pled guilty one count of conspiracy to commit mail and wire fraud. In the defendant’s sentencing memo, he argued that the government’s loss amount of $12 million was incorrectly calculated because it did not take into account the impact of extrinsic factors such as there was no fraud in the inducement of the investors, the actions of the receiver, and market conditions on the investors’ loss. He also argued no actual loss because there was no causal link between the criminal conduct and the investors’ losses. The district court adopted the government’s loss calculation and found irrelevant the fact that there was no fraud in the inducement of the investments. The court sentenced him to 168 months. On appeal, the Tenth Circuit agreed with the defendant that the loss calculation should have considered the lack of fraud in the inducement of the investments. “The court should have accounted for the fact that between May 2003 and April 2005 there was no criminal conduct. Any decrease in the value of the properties during that time period cannot constitute harm that resulted from the offense.” See §2B1.1 cmt. n. 3(A)(i). “The district court should have inquired into what loss, if any, the investors would have suffered if [the defendant] had come clean regarding the status of the securities (and the underlying properties) in April 2005.” Further, because the real estate projects were the underlying assets of the limited partnerships, the value of the limited partnership interests and certificates “was tied to the health of the ventures, the economy, and what might be received on sale or foreclosure of the properties. In this way, the investors’ interests were akin to equity.” Therefore, the loss calculation must be determined based on “the reasonably foreseeable amount of loss to the value of the securities caused by [the defendant’s] fraud, disregarding any loss that occurred before the fraud began, and accounting for the forces that acted on the securities after the fraud ended.” The defendant also argued that the loss should have been reduced by the $4.5 million he personally infused into the partnerships, asserting they were “services rendered” to his investors. The court rejected this argument, noting that although “§2B1.1 cmt. n. 3(E)(i) provides that loss shall be reduced by the value of ‘the services rendered . . . by the defendant . . . to the victim before the offense was detected,’” the money infused by the defendant didnot provide any ultimate benefit to the investors and prolonged the fraud. See United States v. Byors, 586 F.3d 222 (2d Cir. 2009). “As such, the $4.5 million should not be credited against loss.”

United States v. Vargem
2014 WL 1266298 (9th Cir. 2014)
Base offense level miscalculated;
Six-level multiple-gun enhancement was plain error

San Jose police responded to a domestic assault call at the the defendant’s residence where his wife reported that he had physically assaulted her. The defendant was no longer at the house. The police obtained an ex parte, emergency protective order (“EPRO”) on the wife’s behalf, which prohibited the defendant from any contact with his wife. The EPRO stated the defendant was prohibited from owning, possessing, purchasing, receiving, or attempting to purchase or receive a firearm. Later, a police officer searched a database and discovered that the defendant had twelve firearms registered in his name. Police contacted the defendant’s wife, who stated that the firearms were in safes to which she did not have access. The officer contacted the defendant and told him that pursuant to the EPRO all firearms must be surrendered. The defendant responded that he did not know what weapons were in the house. A patrol unit later drove by the defendant’s house and the officers saw the defendant loading unknown items into his van. The officers initiated a traffic stop, arrested the defendant for violating the EPRO, searched the van, and found an unloaded pistol. A later search of the house revealed 28 firearms, including an unregistered machine gun. The defendant was charged with unlawful possession of a machine gun, and unlawful possession of an unregistered firearm. He waived his right to a jury trial and agreed to a stipulated-testimony bench trial, which included his admission that he had converted the firearm from semi-automatic to automatic. The defendant was convicted of the two charged counts. At sentencing, the court calculated a base offense level of 20 for possession of a machine gun by a prohibited person, under §2D2.1(a)(4)(B). The court added a six-level enhancement for multiple firearms, based upon the 28 firearms found in the defendant’s home, under §2K2.1(b)(1)(C). From a sentencing range of 70 to 87 months, the court varied downward and imposed a sentence of 30 months. On appeal, the defendant raised two arguments: 1) the base offense level was miscalculated; and 2) the enhancement for multiple firearms did not apply. Reviewing for plain error, the Ninth Circuit agreed on both fronts. The court began by explaining that §2K2.1(a)(4)(B) applied to persons convicted of possessing a machine gun or other firearm who were also prohibited persons under 18 U.S.C. §922(g)(8). However, §922(g (8)(A) covers persons subject to restraining orders, but only when such orders were issued after notice and a hearing. “Here, it is undisputed that the EPRO was issued without either notice or a hearing. Accordingly, the government properly concedes that Section 922(g)(8) did not apply, that [the defendant] was not a prohibited person under §2K2.1, and the base offense level should have been 18 pursuant to §2K2.1(a)(5).” As for the six-level enhancement, the court explained that the enhancement under §2K2.1(b)(1) “was predicated upon the PSR’s conclusions that the guns were seized ‘[d]uring the course of the offense,’ and that [the defendant] ‘was prohibited from possessing any firearm.’” However, neither the PSR nor the district court explicitly considered whether each of the weapons constituted “relevant conduct” under the guidelines. “Because we conclude that possession of the remaining firearms was not ‘relevant conduct’ in relation to [the defendant’s] offense of conviction - ownership of an unregistered machine gun - we find that the six-level enhancement was erroneous.” The court dismissed the government’s argument that the defendant’s possession of the 28 firearms was part of a common scheme or plan and the same course of conduct. Applying the definition of a common scheme or plan under §1B1.3, the court found that “there were no common victims or accomplices with respect to the 28 firearms in question. Nor was there a common purpose or modus operandi. Similarly, [the defendant’s] possession of other weapons was not part of the same course of conduct, as there was no ‘single episode, spree, or ongoing series of offenses.’ Instead, numerous weapons were rendered temporarily unlawful by an alleged assault that bore no relationship in time, purpose, or mode to the machine gun offense.” “Accordingly, it was error for under §2K2.1(b)(1). We further find, for substantially the same reasons set forth above regarding miscalculation of the base offense level, that application of a full six-level enhancement violated [the defendant’s] substantial rights. As this error may well have resulted in a longer sentence, it also affected the fairness of the judicial proceedings. We therefore vacate [the] sentence, and remand to the district court for further proceedings.”

United States v. Salgado
2014 WL 988537 (11th Cir. 2014)
Conduct in underlying drug offense could not be used for enhancement when calculating money laundering offense level

The defendant was part of a Mexican drug trafficking organization that was transporting cocaine and heroin into Atlanta, distributing it to street-level dealers, then smuggling the cash back into Mexico. The defendant went to trial on three charges: (1) conspiracy to distribute drugs; (2) conspiracy to launder money; and (3) possession with intent to distribute at least one kilogram of heroin. The juryfound the defendant guilty on all three counts. The PSR began calculating the guidelines range by grouping the three convictions under §3D1.2(c), because the distribution and possession convictions were the underlying offenses from which the laundered funds were derived, as set out in §2S1.1 cmt. n. 6. Instead of determining which of the three grouped convictions had the highest adjusted offense level, the PSR, without explanation, used §2S1.1, the money laundering guideline, to determine the base offense level., recommending a base offense level of 34, based on the defendant being responsible for three kilos of heroin. It then added 2 levels under §2S1.1(b)(2)(B) because the defendant was convicted of money laundering, and added another 2 levels under §3B 1.1(c) because the defendant’s role in brokering the heroin deal and other transactions qualified him as a manager, leader, or supervisor. This resulted in a sentencing range of 235 to 293 months. The district court sustained the defendant’s drug quantity objection, but included the PSR’s other two enhancements, which resulted in a sentencing range of 188 to 235 months, and imposed a sentence of 188 months. On appeal, the issue was whether the district court misapplied the guidelines by using the defendant’s conduct in the underlying drug conspiracy to impose a role enhancement when calculating his adjusted offense level for money laundering under §2S1.1(a)(1). The Eleventh Circuit explained that under Application Note 2(C) of §2S1.1, “when setting an offense level under §2S1.1(a)(1), a court should make Chapter Three adjustments based on the defendant’s conduct in the money laundering offense itself, not based on his conduct in the offense from which the money that was laundered was obtained.” “That application note’s meaning for this case is straightforward: When the district court calculated [the defendant’s] offense level under §2S1.1(a)(1), it could base a role enhancement on his conduct in the money laundering conspiracy but not on his conduct in the underlying drug conspiracy.” The matter was remanded with the following instructions: “the district court should calculate the offense levels for each of [the defendant’s] three grouped offenses, which will include determining what role adjustment, if any, he should receive when calculating his offense level under §2S1.1(a)(1). Once the district court identifies  the guideline that yields the highest adjusted offense level, it should use that offense level to calculate the guidelines range and proceed accordingly.”

United States v. Foulks
2014 WL 943454 (5th Cir. 2014)
Enhancement for importation of methamphetamine proper

In United States v. Rodriguez, 666 F.3d 944 (5th Cir. 2012), the Fifth Circuit explained that “[t]he scope of actions that involve the importation of drugs is larger than the scope of those that constitute the actual importation. We concluded that the defendant’s proximity, familiarity, and repeated business with the importers justifie[d] the enhancement” under §2D1.1(b)(5). Based on Rodriguez, the defendant argued on appeal that the enhancement applied only if a defendant has proximity, familiarity, and repeated business with the importers. The court disagreed holding that Rodriguez did not hold that these factors were required. Further, in United States v. Serfass, 684 F.3d 548 (5th Cir. 2012), “we held that the enhancement applied to a defendant who possessed and distributed imported methamphetamine, even absent any showing that he knew it was imported” and “applied the enhancement even though the person from whom the defendant purchased the methamphetamine had not personally imported it.” In the present case, the court made “explicit what was at least implied in Serfass, . . .: distribution (or possession with intent to distribute) of imported methamphetamine, even without more, may subject a defendant to the §2D1.1(b)(5) enhancement.” See also United States v. Biao Huang, 687 F.3d 1197 (9th Cir. 2012) (“[A] defendant need not be personally involved in the importation of illegal drugs to receive an enhancement under §2D1.1(b)(5); it is enough for the government to show that the drugs were imported.”). Because the methamphetamine the defendant possessed was imported from Mexico, the enhancement was properly applied.

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