Sentencing Partners - September 2015 (Part I)

Posted by Chris Morales on Sun, Sep 27, 2015 @ 10:20 PM

We would like to thank our friends Joaquin & Duncan, L.L.C. for sharing this information with us.

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

S e n t e n c i n g  P a r t n e r s

September 2015

Sentencing Commission Overview of Federal Criminal Cases Fiscal Year 2014

The Sentencing Commission has published an overview of the 75,998 federal criminal cases in which the offender was sentenced in fiscal year 2014. Among these cases, 75,836 involved an individual offender and 162 involved a corporation/“organizational” offender. In fiscal year 2014:

• 24,011 drug cases were reported to the Commission, accounting for 31.7 percent of all cases. Most of these cases involved drug trafficking offenses.

• There were 22,238 immigration cases, accounting for 29.3 percent of the total federal caseload.

• There were 7,925 firearms cases reported to the Commission in fiscal year 2014,

• The vast majority of offenders plead guilty. 97.1 percent of all convicted defendants pleaded guilty.

• Among those who pled guilty, 51.9 percent received a sentence below the applicable sentencing guideline range, either at the request of the government, at their own request, or initiated by the court.

• Sixty percent of the below range sentences were requested by the government, usually because the defendant had provided substantial assistance or had agreed to have the case handled as part of an early disposition

• In the 2.9 percent of cases where the offender did not plead guilty, 48.1 percent received a sentence below the guideline range, although only 9.7 percent of these below range sentences were requested by the government.

• Of those convicted of a felony or Class A misdemeanor 87 percent received a sentence of incarceration, and another 7.2 percent received a sentence of probation (no confinement was imposed). The remainder either received a split sentence (2.8 percent) or a combination of imprisonment and community confinement, such as in a half-way house or through home confinement (3 percent)

• Overall, 71.1 percent of offenders received a sentence of less than five years, 16.5 received a sentence of five years or longer but less than ten years, and 12.4 percent received a sentence of ten years or longer.

• 135 federal offenders were sentenced to life imprisonment while five offenders were sentenced to death.

•The average length of supervised release imposed was 48 months

The report is available on the Commission’s website at: http://www.ussc.gov/sites/default/files/pdf/research-and-publications/research-publications/2015/FY14_Overview_Federal_Criminal_Cases.pdf

Case Summaries

General Information
(Chapter 1)

United States v. Kupper
2015 WL 4926885 (10th Cir. 2015)
District court used wrong guideline for conspiracy to steal federal property

The defendant and his wife conspired to enable Dr. Armando Gutierrez (a media
consultant) to increase his compensation under a State contract without any additional work. In exchange for the increase, Dr. Gutierrez allegedly gave kickbacks to the defendant through the defendant’s consulting company. The government alleged that Dr. Gutierrez had disguised the kickbacks as payments for the defendant’s work on a separate media campaign involving voter awareness. A jury found the defendant guilty of stealing and participating in a conspiracy to steal federal government property. He was found guilty of tax evasion in a separate trial. The district court, relying on the trial evidence to identify the offense of conviction, determined the base offense level using §2C1.1, based on the conspiracy. This resulted in a sentencing range of 121-151 months. On appeal, the defendant argued that the district court, pursuant to §1B1.2 , should have used §2B1.1. The Tenth Circuit agreed, noting that Amendment 591 clarified that the defendant’s actual conduct bears on “relevant conduct,” which comes into play only after the court selects the offense of conviction. The district court used the pre-amendment method when selecting the offense of conviction. “Under Amendment 591, a district court may consider other relevant conduct later in the guideline calculation process, but not when selecting the offense of conviction.” See United States v. Boney, 769 F.3d 153 (3rd Cir. 2014); United States v. Almeida, 710 F.3d 437 (1st Cir. 2013). Using §2B1.1, the correct sentencing range would have been 78 to 97 months. “That error requires reversal.”

United States v. Maiello
2015 WL 4931982 (11th Cir. 2015)
Section 1B1.10(e) applied to motion for
reduction under 18 U.S.C. §3582(c)(2) and Amendment 782

The defendant pled guilty to a single count of conspiracy to possess with intent to
distribute, and to distribute 1000 kilograms or more of marijuana and 5 kilograms or more of cocaine. He was sentenced to 108 months prior to November 1, 2014, the date that Amendment 782 became effective. Based upon his sentence, his release date is February 5, 2016. He moved for a reduction of his sentence pursuant to section 3582(c)(2) and Amendment 782 and requested that the reduction be granted “without application of §1B1.10(e)” which states that any reduction under Amendment 782 could not be made effective until November 1, 2014. The defendant argued that had the reduction been granted at the time of his motion, he would be eligible for release. The district court granted the motion in part, reducing the sentence to 80 months or time served, but declined to suspend the application of §1B1.10(e), such that the defendant’s projected early release date would be November 2, 2015. On appeal, the defendant raised several arguments, including: (1) the district court violated 18 U.S.C. §3582(a) by declining to suspend the application of §1B1.10(e); (2) the Sentencing Commission exceeded its statutory authority under the Administrative Procedure Act (“APA”) in passing §1B1.10(e); and (3) the Sentencing Commission’s selection of November 1, 2015 as the earliest possible release date was arbitrary and capricious. The Eleventh Circuit addressed each argument and affirmed the district court’s ruling. First, the defendant’s reliance on §3582(a) was “misplaced as that code section has a materially different purpose than section 3582(c) which applies here.” Further, the defendant was “simply wrong” in his argument that the district court should have ignored §1B1.10(e). Next, the court joined four other circuits that have held that the APA does not apply to the Commission’s actions Sentencing Commission. See United States v. Tercero, 734 F.3d 979 (9th Cir. 2013); United States v. Johnson, 703 F.3d 464 (8th Cir. 2013); United States v. Berberena, 694 F.3d 514 (3rd Cir. 2012); Wash. Legal Found. v. U.S. Sentencing Comm’n, 17 F.3d 1446 (D.C. Cir. 1994). As for the last argument, “[i]n deciding to make Amendment 782 retroactive, the Commission explained that the one-year delay would, among other things, allow courts sufficient time to evaluate the motions individually, allow the early-release offenders to receive the same transitional services that other federal inmates receive before their release, and allow the probation office adequate time to marshal resources to effectively supervise the thousands of newly released offenders. The Commission’s provision of a one-year delay in implementing Amendment 782 is reasonable and practical. It is neither arbitrary nor capricious.”

Offense Conduct

(Chapter 2)

United States v. Simpson
2015 WL 4760208 (5th Cir. 2015)
Enhancements for stolen property, improper obtaining electronic mail addresses, misrepresentation during bankruptcy proceeding, and 10 or more victims were all warranted

The defendant and 18 co-defendants were indicted in 2009 in a complex conspiracy that
involved defrauding telecommunications companies by using routing codes that made long distance or toll-free calls appear to be local calls, thus avoiding paying larger telephone
service providers for use of their networks. The conspiracy also stole network capacity and
diverted customer payments from an employer, engaged in both lease fraud and insurance fraud, and entered into contracts for commercial telecommunications services, leases, and other agreements for goods and services that were not paid for. A jury convicted the defendant of conspiracy to commit mail and wire fraud; aiding and abetting the transmission of spam; obstruction of justice; and false registration of a domain name. The district court imposed a sentence of 480 months. On appeal, the Fifth Circuit reversed one of the convictions and remanded for re-sentencing. On remand, the district court reimposed the 480-month sentence, which included four different Chapter 2 enhancements. The defendant challenged each of the enhancements on appeal.

1. The district court imposed a two-point enhancement under §2B1.1(b)(4) for receiving
stolen property while being “in the business of receiving and selling stolen property” finding that the defendant was in the business of receiving and selling stolen property. The defendant argued on appeal that §2B1.1(b)(4) did not apply to him because it is “intended as a punishment for fences, people who buy and sell stolen goods, thereby encouraging others to steal, as opposed to thieves who merely sell the goods which they have stolen” and also did not apply to “intangibles like telephone minutes or services.” The Fifth Circuit noted that the defendant cited no authority for this proposition, and it was unable to find any. “We see no basis in the text of §2B1.1(b)(4) for limiting its applicability to tangibles.” The evidence showed that the defendant “bought and sold stolen telecommunications services, and the district court did not clearly err in finding that [he] was in the business of receiving and selling stolen property, even assuming a larger proportion of [his] business was legitimate.”

2. The district court imposed a two-level enhancement under what is now §2B1.1(b)(6),
which applies when “the offense involved obtaining electronic mail addresses through improper means.” The defendant argued that the evidence did not support the enhancement. The court disagreed, explaining that trial testimony established that the defendant used “dictionary attacks,” which automatically generated e-mail addresses that were likely to belong to real people. Further, under the CANSPAM Act of 2003, it is unlawful to send email to addresses obtained by a dictionary attack. “The district court did not err by assessing this two-level sentence enhancement.”

3. Next the defendant challenged the twolevel enhancement under §2B1.1(b)(9)(B),
which applies if the “offense involved . . . a misrepresentation or other fraudulent action during the course of a bankruptcy proceeding.” He contended that the evidence did not support the PSR’s factual assertion that a misrepresentation was made in a bankruptcy proceeding. The court found that the evidence did support the enhancement, noting that the defendant sold one of his companies, Symatec, to Randy Wilson, who was doing business as Express Telephone Services (ETS). Wilson transferred ETS’s customers to Symatec, with the defendant’s knowledge, with the intent of shielding ETS’s assets from creditors. ETS subsequently declared bankruptcy and the defendant was paid for his participation in this scheme to hide ETS’s assets. The district court did not clearly err by finding that Simpson’s offense involved fraudulent action during the course of a bankruptcy proceeding.

4. The district court imposed a two-level enhancement under §2B1.1(b)(2)(A) for
offenses “involv[ing] 10 or more victims.” The defendant argued that the enhancement did not apply because the list of victims was inaccurate because it “includes a large number of
businesses concerning which appellant had neither involvement nor knowledge, and certainly no control.” The court explained that the guidelines define a “victim” as “any person who sustained any part of the actual loss determined under subsection (b)(1).” Further, “actual loss” is defined as “the reasonably foreseeable pecuniary harm that resulted from the offense.” Finally, “reasonably foreseeable pecuniary harm” is defined as “pecuniary harm that the defendant knew or, under the circumstances, reasonably should have known, was a potential result of the offense.” The PSR identified ten or more victims of offenses committed by the defendant and the amounts of loss that each suffered as a result of his actions or omissions or as a result of his complicity in and awareness of the acts or omissions of others. Here, the defendant did not rebut “the factual assertions in the PSR with any evidence regarding at least ten of the victims identified. The district court did not clearly err when it imposed the sentence enhancement for ten or more victims.”

United States v. Martin
2015 WL 4664855 (9th Cir. 2015)
Loss could not include entire amount of government contracts awarded to defendant

The defendant owned a construction company, MarCon, that specialized in installing
steel guardrails and concrete barriers on public highways. She fraudulently obtained government contracts by misrepresenting her assets to qualify for programs designed to aid disadvantaged businesses. Between 1999 and 2006, MarCon received nearly $20 million from 85 contracts awarded through Disadvantaged Business Enterprise (“DBE”), and three contracts worth nearly $3 million through the Small Business Administration program. The company successfully performed all of the contracts. The defendant was found guilty of fraud and tax evasion. Relying on the “government benefits rule” found in application note 3(F)(ii) of §2B1.1, the government advocated for a loss amount equal to the total value of the contracts (about $22 million) and the resulting 22-level enhancement. The defendant, relying on the “procurement fraud rule” found in application note 3(A)(v)(II) of §2B1.1, argued for a loss amount of zero. The district court held that the government benefits rule applied, but set the loss amount at $3 million, the profit from the defendant’s fraudulently obtained contracts. This resulted in a sentencing range of 108 to 135 months. Acknowledging that its focus on profit was possibly erroneous, the district invoked application note 20(C), found that a higher loss amount would “overstate the actual loss” and imposed a sentence of 84 months. On appeal, the defendant argued that the district court miscalculated the loss amount. The Ninth Circuit agreed in part, holding that the procurement fraud rule applied. That rule states: “In the case of a procurement fraud . . . reasonably foreseeable pecuniary harm includes the reasonably foreseeable administrative costs to the government and other participants of repeating or correct [sic] the procurement action affected, plus any increased costs to procure the product or service involved that was reasonably foreseeable.” Because the defendant fully performed all of the contracts, the government received considerable value and “it would be unjust to set the loss resulting from her fraud as the entire value of the contracts, as the district court itself recognized.” However, the court disagreed with the defendant, finding that th loss amount was not zero. “The DBE and SBA programs are designed to benefit disadvantaged businesses. It is conceivable that the government paid a premium contract price above what it would pay for other contracts under normal competitive bidding procedures. Any such difference would be an actual loss resulting from [the defendant’s] fraud. There was some evidence at trial suggesting that prices paid on DBE and SBA contracts may be higher than those paid for similar services outside those programs. On remand, the government may attempt to prove any actual or intended losses resulting from [the defendant’s] fraud, including whether there was any pecuniary harm to the government from paying a premium on top of the normal contract price for services comparable to those MarCon provided.” “On remand, the losses resulting from [the defendant’s] fraud should be calculated under the general rules of application note 3(A) of §2B1.1 rather than under any of the special rules of application note 3(F), and re-sentencing should be on an open record to permit both the government and [the defendant] to submit evidence supporting their theories of loss.”

United States v. Black
2015 WL 4882055 (7th Cir. 2015)
Penalties and interest could not be included in tax loss calculation

After the IRS conducted an audit of the defendant’s income for tax years 1997 and
1998, it assessed approximately $3.89 million in taxes, penalties and interest (approximately $2.2 million in taxes alone). Between November 2002 and August 2003, the IRS filed liens for $ 1 ,4 6 7 ,1 6 8 .3 3 , $1,417,80 4 .1 8 , and $4,954,049.40, and the defendant responded by sending the IRS a fraudulent check or bill of exchange in the lien amounts. At some point, the IRS assessed $505,993.68 for additional penalties and interest, and the defendant sent the IRS a bad check for that amount too. A jury found the defendant guilty of one count for corruptly obstructing and impeding the IRS in its collection of taxes, penalties, and interest, and three counts for passing or presenting the United States with fictitious instruments appearing to be financial instruments with the intent to defraud. The district court determined that the tax loss was over $14 million, which included the taxes, penalties, and interest owed. Using the §2T4 .1, the sentencing range was calculated to be 70 to 87 months. The defendant was sentenced to 71 months. On appeal, the defendant argued that the district court erred by including penalties and interest as part of the tax loss calculation. The Seventh Circuit agreed, explaining that under §2T1.1 cmt. n. 1, the general rule is that the tax loss calculation “does not include interest or penalties” except in two instances that did not apply in this case (§7201 and §7203). “The district court included penalties and interest in the tax loss calculation and did so because [the defendant’s] conduct was similar to conduct criminalized by §7201 and §7203. However, since the statute of conviction was not §7201 or §7203, the plain language of the guideline commentary compels a finding that the district court erred by including penalties and interest in the tax loss amount.”

United States v. Garcia
2015 WL 4878620 (5th Cir. 2015)
Reliance on testimony from co-conspirator’s separate trial was error

The defendant was involved in a car chase with two other vehicles. At one point, a codefendant, Alvarado, who was not in the defendant’s car, opened fire upon one of the
other vehicles. It turned out that the occupant of the fired-upon vehicle was a Homeland Security Special Agent. The defendant pled guilty to conspiracy to possess more than 100 kilograms of marijuana with intent to distribute. The PSR recommended a sentencing range of 188 to 235 months, which included a two-level enhancement for possession of a firearm under §2D1.1(b)(1), based on a claim by Alvarado that he had seen a rifle and a night-vision scope in the defendant’s car. The district court, which had presided over Alvarado’s trial, imposed the enhancement based on testimony from Alvarado’s trial. On appeal, the issue was: “whether the district court erred by using testimony from a separate criminal trial that was not contained in the PSR to enhance [the defendant’s] sentence without prior notice.” Citing United States v. Townsend, 55 F.3d 168 (5th Cir. 1995), the Fifth Circuit reversed, holding that “when a court intends to rely on testimony from a different proceeding in its resentencing decision, the court must timely advise the defendant in advance of its decision that it has heard or read and is taking into  account that testimony, such that the defendant has the opportunity to contest the testimony.” Because the defendant was not notified prior to his sentencing that the district court intended to enhance his sentence based on information that was not contained in the PSR, the defendant had no meaningful opportunity to present evidence to impeach or contradict the testimony.“Therefore, we hold that the district court’s reliance on testimony from a separate criminal trial that was not contained in the PSR to enhance [the] sentence without prior notice and of which [the defendant] had no actual knowledge violated the notice requirements of Rule 32 and §6A1.3.”

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