§226 Commercial Bribery, Counterfeiting, Forgery, VIN Numbers
5th Circuit values statue according to commercial value, not restoration cost. (226) At defendant’s sentencing for injuring a cultural heritage resource, the district court based defendant’s offense level under § 2B1.5 on the purchase price of the statue. The Fifth Circuit affirmed, holding that the purchase price of the statue was its “commercial value,” even though the restoration cost was less than the commercial value of the statue. U.S. v. Haggerty, __ F.3d __ (5th Cir. May 7, 2021) No. 20-50303.
7th Circuit applies increase for using computer and template to produce fake IDs. (226) Defendant pled guilty to multiple counts of bank fraud and one count of identity theft. Guideline §2B1.1(b)(11) requires a two-level enhancement if the offense involved the possession or use of device-making equipment and production of counterfeit access devices. The district court imposed the two-level enhancement, finding that defendant produced fake IDs using his computer and a computer-based template. Defendant argued that U.S. v. Doss, 741 F.3d 763 (7th Cir. 2013), precluded the §2B1.1(b)(11) increase because it held that Note 2 to §2B1.6 bars a trafficking increase where the trafficking also constitutes a transfer of a means of identification. The Seventh Circuit distinguished Doss, noting that in this case the increase was based on defendant’s possession or production, not trafficking. Defendant possessed device-making equipment—his computer equipped with state identification templates—and used that equipment to produce fake IDs. On these facts, the district court did not err in imposing §2B1.1(b)(11)’s two-level enhancement. U.S. v. Jones, __ F.3d __ (7th Cir. July 9, 2015) No. 14-3103.
8th Circuit says consecutive sentences for counterfeiting and fraud charges were reasonable. (226)(650) Defendant pled guilty to counterfeiting and mail fraud charges, and was sentenced to three consecutive ten-month sentences. The Eighth Circuit held that the 30-month sentence was procedurally and substantively reasonable. The district court found that incremental punishment for defendant’s three fraud offenses was warranted given her major role in the conspiracy offenses, and the sentences imposed on other conspirators. The court accurately described as an “aggravating circumstance” that defendant had engaged in a new check counterfeiting conspiracy almost immediately after being arrested for her primary role in the first conspiracy. This explanation was more than sufficient to show that the court adequately considered the §3553(a) factors. The court considered the mitigating factors defendant raised, but found that her quick return to fraud after being arrested and her central role in the counterfeiting conspiracies outweighed these mitigating factors. U.S. v. Williamson, __ F.3d __ (8th Cir. Apr. 6, 2015) No. 14-2518.
1st Circuit approves loss based on $10,000 in counterfeit bills. (226) Defendant was convicted of possessing counterfeit obligations. The district court applied an enhancement under § 2B1.1(b)(1)(C) for a loss in excess of $10,000. It found as a factual matter that defendant was responsible for the counterfeit money in the truck he was driving when arrested, as well as counterfeit bills found by the side of Oak Pond Road, totaling $10,270, based on his possession of “pattern” bills and his fingerprints on the Oak Pond bills. The First Circuit found that these facts were a sufficient basis to infer by a preponderance of the evidence that defendant was responsible for producing over $10,000 in counterfeit bills. The court did not err in applying § 2B1.1(b)(1)(C). U.S. v. Almeida, 710 F.3d 437 (1st Cir. 2014).
1st Circuit upholds enhancement for manufacture or production of counterfeit notes. (226) Defendant was convicted of possessing counterfeit obligations. The serial numbers on some of the genuine bills in defendant’s wallet matched the serial numbers on several counterfeit bills found. A Secret Service agent testified at trial that these genuine bills were “pattern notes” used to manufacture the matching counterfeit bills. Section 2B5.1 provides for a two-level enhancement if the defendant “manufactured or produced any counterfeit obligation or security of the United States, or possessed or had custody of or control over a counterfeiting device or materials used for counterfeiting.” Defendant argued that “pattern notes” were not “a counterfeiting device or materials used for counterfeiting.” The First Circuit upheld the enhancement, since it was not based on a finding that the pattern notes were a “counterfeiting device,” but on the court’s finding that defendant “did manufacture or produce counterfeit obligations.” It based this conclusion on defendant’s possession of the pattern notes and the counterfeit bills that were produced with them. This conclusion was supported by the evidence. U.S. v. Almeida, 710 F.3d 437 (1st Cir. 2014).
1st Circuit holds that manufacturing enhancement was not double counting. (226) Defendants manufactured and distributed unauthorized copies of movies from several video stores. The district court assigned them a base level of 8 for infringement under § 2B5.3(a), and then added several enhancements, including a two-level increase under § 2B5.3(b)(3) because the offense involved the manufacture of infringing items. The First Circuit rejected defendant’s claim that the manufacturing enhancement was double counting. The guidelines give a base level for the generic offense of copyright infringement with adjustments for aggravating activities such as manufacturing. Since not all infringement involves manufacturing, there was no double counting. U.S. v. Beltran, 503 F.3d 1 (1st Cir. 2007).
1st Circuit holds commercial bribery guideline does not include abuse of trust component. (226) Defendant, a national sales manager for Honda Motors, accepted bribes from prospective Honda dealers in exchange for lucrative dealership rights. Defendant was sentenced under the commercial bribery guideline § 2B4.1. He received an abuse of trust enhancement. Defendant argued that this was improper because the offense level for commercial bribery already “included” an abuse of trust component. The First Circuit upheld the enhancement, ruling that the commercial bribery guideline does not include an abuse of trust component, even though no abuse of trust enhancement is permitted in a public bribery case. Not every mail fraud conspiracy involves an abuse of trust. Also, the absence of an explicit provision restricting the abuse of trust enhancement in commercial bribery cases undercut defendant’s analogy. U.S. v. Josleyn, 99 F.3d 1182 (1st Cir. 1996).
1st Circuit says value of release from guaranty was not face value of loan. (226) Defendant, a bank officer, arranged a series of loans by his bank to his partners in a real estate venture, made with the understanding that the partners would use the loaned funds to buy out defendant’s interests in the partnership. The true nature of the loans was not revealed to the bank. The buyout agreement contained a provision releasing defendant from his personal guaranty on an earlier $12.4 million loan to the partnership from another bank. The district court found that defendant received bribes totaling $12,650,000. This reflected defendant’s release from personal liability on the $12.4 million personal loan. The First Circuit approved the use of the release in calculating the value of the bribes, but rejected the use of the loan’s face value. The actual value of defendant’s release from his personal guaranty depended on such factors as the likelihood of default and the worth of the collateral securing the loan. U.S. v. Wester, 90 F.3d 592 (1st Cir. 1996).
1st Circuit affirms $10 million loss from forged bank documents despite no actual loss. (226) Defendant was arrested in possession of forged cashier’s checks and demand drafts with a face value of more than $18 million. He testified that he hoped to get 80 percent of the face amount, but might accept as little as 40 percent. The 1st Circuit affirmed an enhancement under section 2B5.2 and 2F1.1 for a loss of $10 to $20 million even though there was no actual loss and no known victim. The fraud guideline includes intended loss, which need not be precise. Defendant intended to use the forged instruments to obtain between $10 and $20 million from someone. This was an intended loss to someone, since defendant knew the bank would never have honored the checks. Finally, the provision in note 4 to section 1B1.3 excluding harm that is merely risked refers to risks of harm other than “intended harm,” since the fraud guideline clearly indicates that intended harm is to be considered. U.S. v. Resurreccion, 978 F.2d 759 (1st Cir. 1992).
2nd Circuit upholds calculation of benefit to be conferred from bribes to defense contractor. (226) Defendant was the president of a corporation that supplied helicopter parts to a defense contractor that sold assembled helicopters to the government and other parties. Defendant bribed two of the contractor’s purchasing agents in order to obtain increased business for his own company. Section 2B4.1 bases the offense level on the greater of the value of the bribe or the improper benefit to be conferred. The district court calculated the benefit to be conferred by taking initial price estimates prepared for each of the sales to the defense contractor and subtracting these amounts from the ultimate prices negotiated with the contractor. The Second Circuit held that the district court’s approach was fully supported by the evidence at trial and well within the court’s discretion. There was testimony that the bribes enabled defendant’s company not only to obtain the contracts but also to inflate the price estimates. Although defendant challenged the accuracy and reliability of the initial price estimates, these same challenges were made at trial and the district court was in a position to assess their validity. U.S. v. Purdy, 144 F.3d 241 (2d Cir. 1998).
2nd Circuit says counterfeit currency need not be of passable quality to count under guidelines. (226) Defendant possessed $18.5 million in counterfeit currency. Fifteen million of it had been washed in a clothes washing machine and defendant asserted that the washed counterfeit was unusable garbage that was merely awaiting destruction. The 2nd Circuit affirmed that it was proper to include the $15 million of washed currency in its calculation of defendant’s offense level under sections 2B5.1(b) and 2F1.1(b)(1). Counterfeit currency need not be of passable quality. Defendant’s conviction was for the manufacture of counterfeit currency. The washed currency may have come off the presses defective or for other reasons may have been headed for the trash heap; however, its production was part of the same course of conduct and occurred during the commission of the offense of conviction. U.S. v. Rodriguez, 989 F.2d 583 (2nd Cir. 1993).
2nd Circuit affirms use of retail value of bootleg videotapes. (226) Defendant was convicted of copyright offenses for copying and distributing videotapes without the consent of the copyright owners. Guideline section 2B5.3 directs a district court to increase the base offense level if the retail value of the infringing items exceeded $2,000. Defendant challenged the district court’s calculation of the retail price, contending that the court should have relied upon testimony that bootleg movies sell for $10 to $15. The 2nd Circuit affirmed the use of the retail price, rather than the lower bootleg price paid by those who are aware that the copies they are buying are not legitimate. The unauthorized copies were prepared with sufficient quality to permit defendant to distribute them through normal retail outlets. The question would have been different if the copied tapes were of inferior quality and sold to consumers who paid a reduced price for them. U.S. v. Larracuente, 952 F.2d 672 (2nd Cir. 1992).
2nd Circuit upholds grouping misapplication of bank funds and giving of bribes separately from accepting bribes. (226) Defendant bank presidents entered into an arrangement by which each defendant caused his own bank to give the other defendant large unsecured loans for the purpose of bank stock speculation. In calculating each defendant’s offense level, the district court divided each defendant’s offense level into two groups: first, misapplication of bank funds together with the giving of bribes, and second, the acceptance of bribes. The 2nd Circuit found that the first grouping was appropriate because, as to each defendant, the offenses involved the same property and the same bank as victim. The acceptance of bribes did not involve either the same property or the same victim, and therefore it was proper for the district court to consider this offense a separate group. U.S. v. McElroy, 910 F.2d 1016 (2nd Cir. 1990).
3rd Circuit counts incomplete bills as “counterfeit items.” (226) While searching defendant’s residence, authorities discovered counterfeit currency with a face value in excess of $207,000. Approximately 90 percent of the bills found were completed on only one side, and $20,000 worth were completed on both sides. Authorities also discovered materials used to manufacture counterfeit currency. Defendant pleaded guilty to one count of counterfeiting. The district court applied a 12-level increase under § 2B5.1(b)(1)(B), finding that the face value of the counterfeit currency exceeded $200,000. The Third Circuit affirmed, holding that the incomplete bills were “counterfeit items,” and noting that every other court of appeals that has addressed this question has held that they should count. U.S. v. Woronowicz, 744 F.3d 848 (3d Cir. 2014).
3rd Circuit holds that counterfeiting increase cannot be based on intended loss. (226) Defendant attempted to persuade a potential victim that a stack of black paper was U.S. currency that had been dyed black to keep it from being used by foreign rebels. He said the black dye could be removed by a special solvent, and proceeded to clean two of the papers, which were revealed to be two genuine $100 bills. Defendant repeated the cleaning for an undercover Secret Service agent posing as a potential buyer. Other than the four genuine $100 bills, the rest of the paper was black construction paper. Defendant pled guilty to possession of altered currency and conspiracy. Section 2B5.1(a) provides for enhancements based on the face value of the counterfeit items. The district court applied an eight-level increase for amounts between $70,000 and $100,000, ruling that the enhancement could be based on the loss defendant intended to cause. The Third Circuit reversed, holding that the § 2B5.1 increase could not be based on intended loss – the guideline specifically refers to the face value of the counterfeit items. While the court might be able to achieve the same result by departing or varying upward, this was for the district court to determine in the first instance. U.S. v. Wright, 642 F.3d 148 (3d Cir. 2011).
3rd Circuit remands where court may have believed enhancement automatically attached to gun possession. (226) Defendant was convicted of counterfeiting charges after he passed counterfeit currency at a casino in Atlantic City. When he was questioned by a state trooper, he admitted that he had a gun in the pocket of his jacket, and claimed he had put it in there for protection at an earlier date and simply forgot that he was carrying it when he entered the casino that evening. The district court applied a § 2B5.1(b) (4) increase for possessing a dangerous weapon in connection with the offense. Defendant argued that the district court incorrectly believed that U.S. v. Loney, 219 F.3d 281 (3d Cir. 2000) mandated the § 2B5.1 increase whenever a defendant possessed a gun during an “in-person transaction.” The Third Circuit agreed that it was unclear whether the court believed that the circumstances of defendant’s possession were sufficient to find that he possessed the gun “in connection with” the counterfeiting or whether the court merely concluded that the enhancement for doing so automatically attached to the possession. The district court never clearly stated that it found that the gun was possessed in connection with the offense based on the undisputed facts. The court’s statement that it was not making any factual finding and that appellate review would be de novo suggested a misreading of Loney. U.S. v. Gregory, 345 F.3d 225 (3d Cir. 2003).
3rd Circuit holds that improper benefit is value to entity on whose behalf individual paid bribes. (226) Defendant was a meat salesman for Butler Foods, a wholesale meat distributor. He and other Butler salesmen made illegal cash payments to customers’ meat managers to induce them to purchase from Butler. Section 2B4.1(b)(1) bases an enhancement on the greater of “the value of the bribe or the improper benefit to be conferred.” At sentencing, the government argued that the phrase “improper benefit” referred to the net value Butler gained as a result of defendant’s payment of kickbacks. However, the district court agreed with defendant that the phrase referred to the money defendant himself pocketed as a result of the kickbacks. The Third Circuit reversed, holding that “improper benefit” refers to the net value accruing to the entity on whose behalf the individual paid the bribe. Note 2 to § 2B4.1 defines “improper benefit” as “the value of the action to be taken or effected in return for the bribe.” At sentencing, the government presented evidence that defendant’s kickbacks induced one customer to purchase $10,000,000 worth of meat from Butler, whose seven percent margin yielded a profit of $700,000. On remand, the district court must specifically address this evidence. U.S. v. Cohen, 171 F.3d 796 (3d Cir. 1999).
3rd Circuit approves loss estimate in counterfeiting case where recovered bills had common source. (226) Defendants printed counterfeit currency using an extremely high capability computer, a top-of-the-line color printer and an accurate commercial paper cutter. The bills were printed with magnetic ink so that they would be accepted by slot machine bill validators in casinos. The Third Circuit affirmed an 11-level § 2B5.1(b)(1) enhancement for a loss of between $800,000 and $1.5 million. A secret service expert testified that virtually all of the $1.2 million in counterfeit notes recovered had a “common origin” and were made from a “common source.” Another expert testified that all of the notes were printed using the same brand of computer equipment purchased by one defendant. Although one agent actually examined only a handful of the notes at issue, her testimony was sufficient to support a finding that all $1.2 million originated from a common source. Note 4, which states that subsection (b)(2) does not apply to persons who photocopy notes or otherwise produce items that are obviously counterfeit, was not applicable here. Note 4 is limited by its terms to enhancements under subsection (b)(2) of § 2B5.1 while the court here sentenced defendant under subsection (b)(1). U.S. v. Taftsiou, 144 F.3d 287 (3d Cir. 1998).
4th Circuit directs court to examine counterfeit notes where only one in seven were successfully passed. (226) Defendant made seven color photographs of both sides of a 50 dollar bill at a copy center. He used scissors to cut out the photographed notes, gluing the front and back sides together to create counterfeit notes. Defendant was able to successfully pass one of the seven notes. The district court applied a § 2B5.1(b)(2) enhancement for manufacturing the counterfeit notes, but the enhancement does not apply where the notes are so obviously counterfeit that they are unlikely to be accepted. The Fourth Circuit directed the district court to physically examine the counterfeit notes or take testimony regarding their quality. The evidence supported the court’s finding that defendant manufactured counterfeit notes, but the court needed to revisit the issue of the quality of the notes. Physical inspection or testimony is not required where the large number of counterfeit notes passed give strong indicia of their quality. This was not such a case. U.S. v. Miller, 77 F.3d 71 (4th Cir. 1996).
4th Circuit reverses district court’s application of fraud offense characteristics to counterfeiting offense. (226) Defendant was sentenced under guideline section 2B5.1 for counterfeiting. Section 2B5.1(b)(1) provides that if the face value of the counterfeit items exceeded $2,000, then the base offense level should be increased using the table at section 2F1.1. In addition to increasing defendant’s offense level using the table at section 2F1.1(b), the district court also applied section 2F1.1(b)(2), which provides a two-level increase for more than minimal planning. The 4th Circuit reversed. The language of section 2B5.1(b)(1) plainly refers only to the table at section 2F1.1(b)(1), not all of the specific offense characteristics incorporated in section 2F1.1. Section 1B1.5, which provides that unless otherwise indicated, an instruction to apply another guideline refers to the entire guideline, was not applicable. Here the language used expressly indicates the table, not the entire guideline. U.S. v. Payne, 952 F.2d 827 (4th Cir. 1991).
4th Circuit rules that acquittal of counterfeiting charge does not preclude offense level enhancement following conviction of dealing with counterfeit obligations. (226) Defendant was convicted of dealing with counterfeit obligations, but the jury acquitted him of the more serious offense of counterfeiting. He argued that it violated the due process clause for the court to enhance his offense level from 9 to 15 according to § 2B5.1(b)(2). The 4th Circuit affirmed the enhancement, holding that merely because the jury acquitted the defendant of the more serious count, it was not improper for the guidelines to consider evidence connected with that count in sentencing. This is especially true given the fact that a lower standard of proof applies at sentencing. “A verdict of acquittal demonstrates only a lack of proof beyond a reasonable doubt; it does not necessarily establish the defendant’s innocence.” Furthermore, the reference to a defendant’s intent in § 1B1.3(a)(4) [relevant conduct] does not mandate proof beyond a reasonable doubt that the defendant possessed the necessary mens rea as required by the count for which he was acquitted when he is sentenced on the count of conviction. U.S. v. Isom, 886 F.2d 736 (4th Cir. 1989).
5th Circuit upholds decision to credit testimony linking defendant to counterfeiting activity. (226) Defendant was convicted of attempting to pass a forged $100 bill at a store. The district court applied a two-level enhancement under § 2B5.1(b)(2)(A) for manufacturing or producing a counterfeit obligation or possessing a counterfeiting device or materials, and increased defendant’s base offense level to 15 pursuant to § 2B5.1(b)(3). Defendant argued that there was insufficient evidence connecting him to counterfeiting money. The Fifth Circuit found no error. The district court heard testimony from various witnesses and decided to credit the testimony connecting defendant to the counterfeiting. Defendant did not show that the district court’s credibility determinations were clearly erroneous. U.S. v. Davis, __ F.3d __ (5th Cir. June 6, 2014) No. 13-40612.
5th Circuit upholds increase for offense committed outside United States. (226) Defendant attempted to purchase a dirt bike using counterfeit $100 bills. He admitted to police that he had entered into an arrangement with a Nigerian man who defendant had met on the Internet. The Nigerian man sent defendant the counterfeit notes, and defendant agreed use them to purchase items that he would then sell at a profit. Defendant would then send the Nigerian man 30 percent of any profits earned. The Fifth Circuit upheld a § 2B5.1(b)(5) enhancement, which applies if any part of the offense was committed outside the United States. Defendant failed to show how applying § 2B5.1(b)(5) to his counterfeiting offense would be inconsistent with federal law or an abuse of the Sentencing Commission’s discretion. U.S. v. Goncalves, 613 F.3d 601 (5th Cir. 2010).
5th Circuit holds that loss was properly based on infringing product that defendant produced and intended to sell. (226) Defendant conspired with others to import cigarette rolling papers falsely trademarked as “Zig-Zags” for resale in the U.S. The conspirators used prison inmates in Mexico to produce over one million counterfeit booklets. The district court found the infringement amount under § 2B5.3(a) to be $1.25 million for the one million counterfeit books, and increased his offense level by 16. The Fifth Circuit affirmed, ruling that he was responsible for the full amount of the infringing items the produced with intent to sell. The infringing amount was not limited to the number of infringing items the government could prove he actually sold. U.S. v. Beydoun, 469 F.3d 102 (5th Cir. 2006).
5th Circuit holds that record did not support basing enhancement on retail value of infringed item. (226) Defendant trafficked in counterfeit goods that he received from China and sold in his discount retail store. Section 2B5.3(b) bases an enhancement on the “infringement amount,” which is the retail value of the infringing item (the counterfeit item itself), except in certain enumerated instances that call for using the retail value of the infringed item (i.e. the sale price of the legitimate item). The district court applied the retail value of the infringed items as the infringement amount, and did not identify which subsection it believed supported using the infringed item value. However, the record suggested that the court relied on Note 2(A)(iii) (retail value of the infringed item provides a more accurate assessment of the pecuniary harm to the copyright or trademark owner than the retail value of the infringing item). The Fifth Circuit reversed. The record did not contain evidence of the pecuniary harm to the victim companies. The victim companies did not respond to the probation officer’s request for victim impact statements, and the court rejected an upward departure based on substantial harm to the victim. Given the lack of evidence on the harm suffered by the victim, the district court’s finding that the retail value of the infringed item provided a more accurate assessment of the pecuniary harm was unreasonable. U.S. v. Yi, 460 F.3d 623 (5th Cir. 2006).
5th Circuit upholds manufacturing increase where photocopied currency was not obviously counterfeit. (226) Defendant used a color copier/printer to produce counterfeit currency. Section 2B5.1(b)(2) provides for an increased offense level if the defendant manufactured or produced the counterfeit currency. Note 3 states that subsection (b)(2) does not apply to “persons who merely photocopy notes or otherwise produce items that are so obviously counterfeit that they are unlikely to be accepted even if subjected to only minimal scrutiny.” Defendant argued that the § 2B5.1(b)(2) enhancement did not apply to him because he used a photocopier. The Fifth Circuit held that the § 2B5.1(b)(2) enhancement should be applied to photocopied counterfeit currency unless the quality is so poor that it is unlikely to be accepted when subjected to “minimal scrutiny.” Otherwise, the most successful of counterfeiters would be protected solely because their method of production was photocopying. Although there was evidence in the record concerning the quality of the currency, the determination of whether the currency is “so obviously counterfeit” should be made by the district court. U.S. v. Wyjack, 141 F.3d 181 (5th Cir. 1998).
5th Circuit agrees that note was not obviously counterfeit where judge personally examined it. (226) Defendant pled guilty to making a counterfeit $100 bill. The district court applied § 2B5.1(b)(2) for manufacturing the counterfeit currency. Section 2B5.1(b)(2) does not apply to persons who “produce items that are so obviously counterfeit that they are unlikely to be accepted even if subjected to only minimal scrutiny.” The Fifth Circuit affirmed the district court’s finding that the note defendant created was not obviously counterfeit. Such a decision is factual in nature and should be reviewed under the clearly erroneous standard. Factors to consider include (1) physical inspection of the note, (2) whether any were successfully passed, (3) the number of notes successfully passed, (4) the proportion of notes successfully passed to the number attempted to be passed, and (5) the testimony of witnesses. Here, the district court examined the note. The government did not present evidence that any of the counterfeit notes were passed, successfully or otherwise. However, the government asserted that a Secret Service agent would be available to testify regarding the quality of the notes, although no testimony was presented at the hearing. No one factor is dispositive. The district court made a common-sense judgment as to the quality of the note, and the decision was not clearly erroneous. U.S. v. Bollman, 141 F.3d 184 (5th Cir. 1998).
5th Circuit refuses to deduct indirect costs from gross value of bribe. (226) Defendant, a sales representative, made cash bribes totaling $10,000 to employees of his clients. As a result, his company netted over $1 million in contracts. The district court found the company made a gross profit of $204,071 from the contracts, determined by deducting the price the company paid for its products from the contract price. The Fifth Circuit rejected defendant’s argument that the court should have deducted a share of the company’s overhead from the gross profit. The examples in the commentary to § 2C1.1 show that only direct costs should be deducted from gross value to determine a net value. However, indirect costs such as overhead are not deducted from gross value because they have no impact on the harm caused by the illegal conduct. For both parties, the benefit of an additional contract is measured by gross revenue minus direct costs. By definition, indirect costs do not affect that value. U.S. v. Landers, 68 F.3d 882 (5th Cir. 1995).
5th Circuit finds insufficient evidence linking defendant to additional counterfeit bills. (226) Defendant was convicted passing six counterfeit $20 bills identified by the government as “14923” bills. He received an enhancement under the guidelines for passing more than $2,000 in counterfeit currency, even though the offense of conviction only involved $120. The enhancement was based on testimony by a government agent that 107 of the 14923 bills had been passed in South Texas during the same period. The agent testified that she had attended the counterfeiting trial of defendant’s brother, who lived in Michigan. At that trial, the printer of the bills stated that he had sent the brother $60,000 in 14923 bills. The 5th Circuit ruled that the agent’s testimony was insufficient to support the enhancement. Of the many establishments where the 107 bills had been recovered, in only nine cases did employees identify defendant as ever having been in the establishment. No link was ever established between defendant and the other 98 counterfeit bills. U.S. v. Acosta, 972 F.2d 86 (5th Cir. 1992).
5th Circuit uses retail value of counterfeit item to calculate 2B5.4(b)(1) enhancement. (226) Section 2B5.4(b)(1) provides for an increase in a defendant’s offense level based upon the “retail value of the infringing items.” The 5th Circuit reversed the district court’s determination that the retail value to be used was the retail value of the legitimate item rather than the counterfeit item. The phrase “retail value of the infringing items” should be given its ordinary meaning, and thus referred to the counterfeit merchandise. Nonetheless, remand was unnecessary because the retail value of the genuine articles was relevant to determine the retail value of the counterfeit articles. There was not enough other evidence to calculate the value of the counterfeit items. Although defendant gave agents a price list, the district court was unable to consider it because neither party presented it at sentencing. Moreover, it contained wholesale prices, not retail prices. U.S. v. Kim, 963 F.2d 65 (5th Cir. 1992).
6th Circuit upholds estimate that half of defendant’s salary was loss to government. (226) Defendant and another man, both county officials, participated in a number of bribery and fraud schemes involving various Cleveland-area favor-seekers. To calculate the loss under § 2C1.1(b)(2), the district court estimated that defendant spent half of his time performing legitimate government work in the county auditor’s office, and rest on the conspiracy. The government therefore lost 50 percent of defendant’s salary and benefits for each of his five years in the county’s employ. The Sixth Circuit upheld the estimate. A co-worker testified that defendant worked only “an hour or two a day” and that he spent the bulk of his time “doing stuff for [his co-conspirator].” The county auditor testified that defendant ran “a lot of errands for [the co-conspirator]” during the workday. Another witness testified that he saw defendant swimming at the co-conspirator’s house “[t]wo to three times [each work] week.” The co-conspirator once told a witness that defendant “puts in very little time” at the office, calling the job a “jackpot” for defendant. On this record, the district court could have attributed far more than half of defendant’s salary and benefits as loss. U.S. v. Dimora, 750 F.3d 619 (6th Cir. 2014).
6th Circuit affirms that bills were not “obviously” counterfeit. (226) Defendant used an all-in-one printer to create multiple $50 counterfeit bills. He used one of the bills at a convenience store. Later that day, he attempted to use another one at a different store, but the clerk concluded the bill was fake and called the police. Defendant objected to a two-level increase under § 2B5.1(b) (2)(A) for manufacturing the counterfeit bills, because Application Note 4 says the increase does not apply “to persons who produce items that are so obviously counterfeit that they are unlikely to be accepted even if subjected to only minimal scrutiny.” The Sixth Circuit found no error. The district court examined the bills and compared their appearance and feel to genuine bills, concluding that a layperson would accept the notes. A Secret Service agent also testified that the bill quality was “decent” and they would “probably” pass if subjected to minimal scrutiny. Moreover, defendant admitted that he successfully passed at least two other bills. U.S. v. Webb, 616 F.3d 605 (6th Cir. 2010).
6th Circuit holds that defendant need not possess specific knowledge of acts committed outside US. (226) Defendant was convicted of conspiracy to commit an offense against the US by causing counterfeit currency to be brought into the country, in violation of 18 U.S.C. § 472. Section 2B5.1(b)(5) provides that for a two-level increase if “any part of the offense was committed outside the United States.” Defendant argued that the evidence was insufficient to establish that he had knowledge of the foreign origin of the counterfeit currency. The Sixth Circuit refused to read a knowledge requirement into the guideline – the plain language of the provision does not require that a defendant possess express knowledge of any acts occurring outside of the country. Moreover, even if the guideline were so construed, the record contained ample evidence to impute knowledge of the currency’s origin to defendant. For example, one conspirator testified that the counterfeit money originated in Colombia, and that on at least two occasions defendant wired payments for the counterfeit money directly to Colombia. There was no evidence offered to refute this testimony. U.S. v. Hover, 293 F.3d 930 (6th Cir. 2002).
6th Circuit counts face amount of counterfeit bills lacking final seals and numbers. (226) Defendant was convicted of counterfeiting currency. A portion of the currency recovered by police was unfinished—it lacked a Treasury seal, Federal Reserve seal, and Federal Reserve numbers. Note 3 to § 2B5.1 says that counterfeit “means an instrument that purports to be genuine but is not, because it has been falsely made or manufactured in its entirety.” The Sixth Circuit ruled that the “counterfeit” definition requires something less than bills of “passable” quality. See, e.g. U.S. v. Webster, 108 F.3d 1156 (9th Cir. 1997). At least two circuits have found that bills printed on only one side “purported to be genuine.” See U.S. v. Ramacci, 15 F.3d 75 (7th Cir. 1994) and U.S. v. Lamere, 980 F.2d 506 (8th Cir. 1992). Defendant’s unfinished notes were near enough to completion to “purport to be genuine.” Thus, the district court properly included the unfinished notes in its offense level calculation. U.S. v. Kelly, 204 F.3d 652 (6th Cir. 2000).
6th Circuit holds that photocopies were good enough to be treated as counterfeit money (226) Section 2B5.1(b)(2) increases the offense level of a defendant who manufactures or produces a counterfeit note. However, under note 3, this does not apply to persons “who merely photocopy notes . . . that are so obviously counterfeit that they are unlikely to be accepted even if they are subjected to only minimal scrutiny.” Defendant produced counterfeit bills using a sophisticated laser color copier. About $4,700 of these bills were actually passed in the community as currency. The 6th Circuit upheld the application of the enhancement to defendant, since even if his bills were produced with a copier, they were not obviously counterfeit. U.S. v. Stanley, 23 F.3d 1084 (6th Cir. 1994).
6th Circuit upholds valuation of infringing videocassettes based upon amount paid for legitimate videocassettes. (226) Defendant was convicted of duplicating and distributing copyrighted movies. He argued that the district court erred in using the actual amount he paid for legitimate videocassettes to determine the appropriate value of the infringing tapes for sentencing purposes. He contended that the district court should have used the lower prices reflected in a readily available retail catalog instead, but he did not offer any evidence to suggest that he purchased any videocassettes at the lower price or that he was even aware of the catalog. The 6th Circuit found that defendant offered “a plausible argument,” but that there was no clear error. U.S. v. Cohen, 946 F.2d 430 (6th Cir. 1991).
7th Circuit reverses “outside of U.S.” increase where defendant passed counterfeit bills mailed to her from Nigeria. (226) In response to a mass email originating in Nigeria, defendant agreed to forge some checks. She sent about 40 checks to Agbolade, a man in Nigeria. As payment for the checks, she received in the mail $3,000 in counterfeit bills. Defendant recognized that the bills were not genuine but decided to spend them anyway. She pled guilty to distributing counterfeit currency. The Seventh Circuit reversed a §2B5.1(b)(5) enhancement for an offense committed outside the United States. Defendant was only charged with passing counterfeit currency, not with forging checks. Defendant schemed with Agbolade to utter forged checks, but she did not agree with him to engage in international counterfeiting. To the contrary, she was a victim rather than a beneficiary of Agbolade’s counterfeiting, which she did not anticipate. U.S. v. Alldredge, 551 F.3d 645 (7th Cir. 2008).
7th Circuit includes in intended loss, the image of a million dollar check on defendant’s computer. (226) Defendant pled guilty to charges relating to his possession and use of unauthorized credit cards. The Seventh Circuit upheld the district court’s decision to include in the intended loss calculation a $1,000,000 check found on defendant’s home computer. Although defendant argued throughout that he never intended to print or cash this check, the district court was under no obligation to accept defendant’s word for this. The district court found that given defendant’s conduct and the possibility of negotiating a check of that size in other countries, the check was not produced as a joke, but with the hope that at some point it could be printed out and negotiated. U.S. v. Pira, 535 F.3d 724 (7th Cir. 2008).
7th Circuit says counterfeiting guideline did not apply to defendant who altered genuine bills. (226) Defendant removed the ink from genuine $5 bills with a chemical solution and used an inkjet printer to produce facsimiles of $100 bills on the blank sheets. The district court calculated his sentence under § 2B1.1, the generic provision for frauds. The court found the counterfeiting guideline, § 2B5.1, was inapplicable, based on Note 3 to § 2B5.1. Note 3 provides that “‘Counterfeit,’ as used in this section, means an instrument that purports to be genuine but is not, because it has been falsely made or manufactured in its entirely. Offenses involving genuine instruments that have been altered are covered under § 2B1.1 (Theft, Property, Destruction, and Fraud).” The Seventh Circuit agreed that under this Note, the counterfeiting guideline did not apply to defendant’s offense. The outcome was “unsettling” because it meant a lower sentence for someone like defendant, whose crime was harder to detect than that of a counterfeiter who starts with plain bond paper. Although Note 3 was probably not written with this sort of counterfeiting in mind, defendant was a beneficiary of it, even if an accidental one. U.S. v. Schreckengost, 384 F.3d 922 (7th Cir. 2004).
7th Circuit uses of retail price of copyrighted software where infringing item was equivalent to infringed item. (226) Defendant belonged to a group dedicated to the unauthorized dissemination of copyrighted software over the Internet. The 1998 version of § 2B5.3(b)(1) directed a court to use the loss table in § 2F1.1 if the retail value of the loss exceeded $2000. Under Note 1, the value of the loss was measured by the retail value of the “infringing items,” defined as “the items that violate the copyright or trademark laws.” In non-software cases, the Seventh Circuit has calculated the value of infringing items based on the retails value of those goods on the black market. The Seventh Circuit ruled that where there is little or no evidence of the value of the infringing item, the court may consider the retail value of the infringed item. The use of the retail price of the copyrighted software was reasonable here, since the pirated programs were exact digital copies, and thus the virtual equivalent of the original copyrighted program. U.S. v. Slater, 348 F.3d 666 (7th Cir. 2003).
7th Circuit says enhancement for conduct outside the U.S. not limited to convictions under one statute. (226) Defendant and her accomplice obtained counterfeit U.S. currency from a source in Peru and then smuggled it into the U.S. After defendant attempted to pass a counterfeit $100 bill at a store, she was arrested and convicted of conspiracy, 18 U.S.C. § 371, and of possessing and concealing counterfeit obligations of the U.S., 18 U.S.C. § 472. Guideline § 2B5.1(b)(5) provides for a two-level enhancement “[i]f any part of the offense was committed outside the United States …” The district court concluded that the (b)(5) enhancement did not apply to defendant’s § 472 conviction because the Sentencing Commission adopted that enhancement in response to a Congressional directive that concerned only 18 U.S.C. § 470 (making or possessing counterfeit currency outside the U.S.). The Seventh Circuit rejected this interpretation, ruling that enhancement was applicable to all U.S. Code sections within the ambit of § 2B5.1, not just § 470. The circumstances suggested that the Sentencing Commission knew that the enhancement applied to more sections of the U.S. Code than the section specifically noted by Congress. The district should have applied the enhancement here. U.S. v. Hernandez, 325 F.3d 811 (7th Cir. 2003).
7th Circuit says court erred in equating foreseeability with knowledge. (226) Defendant was involved in a counterfeiting conspiracy. The district court found that $4300 in counterfeit currency found in a co-conspirator’s house was not foreseeable to defendant and therefore excluded it from the amount attributable to her. The Seventh Circuit concluded that the district court erred in its foreseeability determination because it equated foreseeability with knowledge. A defendant need not know of a co-conspirator’s actions for those actions to be reasonably foreseeable to the defendant. The district court stated: “So the issue therefore is the issue of foreseeability, … and that is, did [defendant] reasonably know that the conduct of the other conspirator … included bringing in $12,500 in March of 2001?” The court concluded: “There’s nothing that would fairly support an inference that [defendant] was knowledgeable about that amount [the $4300 found at the co-conspirator’s house].” Such a requirement that defendant have had “knowledge” of the amount of counterfeit currency was an error of law. . U.S. v. Hernandez, 325 F.3d 811 (7th Cir. 2003).
7th Circuit says two fraud defendants were properly sentenced under bribery and kickback guideline. (226) Defendants were convicted of mail fraud stemming from an illegal kickback scheme. They argued that the district court erred by proceeding under the commercial bribery and kickbacks guideline, § 2B4.1, rather than the guideline covering fraud and deceit, § 2F1.1. Although the Statutory Index listed § 2C1.7 (not applicable) and § 2F1.1 as the potentially applicable guidelines, the application notes to § 2F1.1 permit the court to use a guideline other than § 2F1.1 if “the indictment … establishes an offense more aptly covered by another guideline.” The conduct of defendants Hendershot and Battista was “more aptly” covered by the commercial bribery and kickbacks guideline than by the fraud and deceit guideline. Both Henderson and Battista, acting as purchasing agents, solicited and accepting bribes from various sellers and so deprived the customer of their honest services. With regard to Lanas, however, the commercial bribery and kickbacks guideline was more of an awkward fit. Although Lanas paid bribes to Hendershot and Battista, the paying of bribes was not the “essence” of his offense. Rather, it was a case of fraud made possible by the bribe. Therefore, the Seventh Circuit disagreed with the court’s decision to apply the bribery and kickback guideline to Lanas. However, the error was harmless, because if defendant were sentenced under § 2F1.1, he would have been subject to a two-level increase for more than minimal planning. § 2F1.1(b)(2) (A). This would have resulted in defendant’s receiving the exact same offense level as under the commercial bribery guideline. U.S. v. Lanas, 324 F.3d 894 (7th Cir. 2003).
7th Circuit applies manufacturing increase to photocopied bills that were not “obviously counterfeit.” (226) Defendants produced counterfeit currency with a ink jet printer that they had stolen from an office supply store. The district court applied a § 2B5.1(b)(2) enhancement for manufacturing or producing the counterfeit currency. At the time, Application Note 4 provided that the increase did not apply “to persons who merely photocopy notes or otherwise produce items that are so obviously counterfeit that they are unlikely to be accepted even if subject to only minimal scrutiny.” Defendants argued that the increase did not apply to them because they produced their counterfeit bills through photocopying. The Seventh Circuit held that the note merely exempted from enhancement those individuals who made obvious forgeries. “The proper inquiry for exclusion from U.S.S.G. § 2B5.1(b)(2) is not how the bills were made, but rather how well they were made.” The notes here were not “obviously counterfeit.” None of the merchants rejected the counterfeit currency and defendants produced the fake notes with “heavier bonded paper, which made them very realistic,” and that they produced the money with colored ink as opposed to black and white ink. U.S. v. Hughes, 310 F.3d 557 (7th Cir. 2002).
7th Circuit applies counterfeit currency increase where defendant scanned bills onto computer. (226) Defendant produced more than $1600 by scanning the front and back of genuine bills onto his computer. After 15 attempts, he finally produced ones that were good enough to fool employees at four different commercial establishments before arousing suspicion. Guideline § 2B5.1(b)(2) provides for an increased base offense level if the defendant “manufactured or produced” the counterfeit currency. The Seventh Circuit rejected defendant’s claim that the word “manufacture” in subsection (b)(2) requires a defendant be a large-scale producer. Subsection (b)(1) already provides for an enhancement if the amount counterfeited is more than $2000, so it would be redundant to read (b)(2) as providing an enhancement for producers of an undefined “large amount” of currency.” The panel also rejected defendant’s claim that the subsection (b)(2) increase applies only to counterfeiters who use sophisticated methods to produce the counterfeit items. At the time of sentencing, Note 4(b) excluded from the enhanced offense level counterfeiters who either (1) produced fake bills by photocopying, or (2) produced an obvious forgery by some other method. This note only creates one exception to § (b)(2): when the method used by the counterfeiter produces an obvious forgery, whether by photocopying or some other method. The proper inquiry is not how the bills were made, but rather how well they were made. U.S. v. Baronia, 287 F.3d 607 (7th Cir. 2002).
7th Circuit refuses to reduce improper benefit by amount of bribe. (226) Defendant was responsible for liquidating furniture that Sears could not sell in its stores. Defendant sold furniture to a shell corporation formed by Israel at 10 cents on the dollar, and Israel resold the furniture to Knippel for 50 cents on the dollar. Defendant and Israel then split the profit. The Seventh Circuit held that the improper benefit under § 2B4.1 was the difference between the price Knippel paid for the furniture and the amount Sears received, or roughly $625,000. Cases cited by defendant for the proposition that an enhancement does not apply if there is no actual loss to the victim were inapplicable because they involved fraud under §§ 2B1.1 or 2F1.1. Defendant was sentenced under § 2B4.1, the commercial bribery guidelines, which directs the judge to measure the “greater of the value of the bribe or the improper benefit to be conferred.” In this case, Sears, not defendant, was entitled to the full amount that Knippel was willing to pay for the furniture. Finally, the court properly refused to reduce the improper benefit by the amount of the bribe (i.e. the amount paid to defendant). The shell corporation received a $625,000 benefit from which it paid a $306,000 bribe. However, the improper benefit was still $625,000, not $319,000. U.S. v. Montani, 204 F.3d 761 (7th Cir. 2000).
7th Circuit criticizes counsel for not inspecting bills before arguing they were “obviously counterfeit.” (226) Section 2B5.1 (b)(2) requires an increase if the defendant manufactured counterfeit bills, unless, under application note 4, they “are so obviously counterfeit that they are unlikely to be accepted even if subjected to only minimal scrutiny.” Defendant argued for the first time on appeal that note 4 was applicable to him. The Seventh Circuit criticized appellate counsel for raising this issue without ever looking at the counterfeit bills involved. Since defendant was able to pass nine of his counterfeit bills, counsel’s argument required the court to believe that the nine people who accepted defendant’s counterfeit bills were illiterate, severely astigmatic, or terminally careless. The only evidence of that implausible proposition would be the bills themselves. Defense counsel admitted at argument that she made no effort to procure the bills and in fact had never seen any of them. Her failure to do so put her in the position of raising an issue that she had no reason to think had any merit. Had counsel inspected the sample bill before preparing her brief, she would not have mentioned note 4. The problem was “systemic” since the government’s appellate lawyer had also never seen the bills. U.S. v. Barnes, 188 F.3d 893 (7th Cir. 1999).
7th Circuit calculates “benefit” from juror bribe as amount jury awarded plaintiff. (226) Defendant, a juror in a civil case, solicited a $2500 bribe from one of the litigants—a company—to sway the jury in the litigant’s favor. In calculating the § 2C1.1 “benefit” that the company would have received if defendant had remained on the jury, the court used the $933,000 that the jury awarded the plaintiff. The Seventh Circuit affirmed. Section 2C1.1 requires a court to enhance the offense by the higher of the (a) the payment (i.e. the bribe), (2) the benefit to be received for the bribe, or (3) the loss to the government. The bribe was $2,500, the benefit was the company being relieved of a $933,000 damage award, and the government did not sustain a monetary loss. Although the value of the benefit to be received might be speculative, particularly in criminal cases where a jury’s verdict does not involve monetary damages, this was not such a case. U.S. v. Muhammad, 120 F.3d 688 (7th Cir. 1997).
7th Circuit rules offense was more like fraud than commercial bribery. (226) Defendant bribed the purchasing agent for an advertising firm to pay hundreds of thousands of dollars for unneeded cleaning supplies, at exorbitant prices. The Seventh Circuit held that defendant was properly sentenced under the fraud guideline rather than the commercial bribery guideline. In the usual case of commercial bribery, either the person giving the bribe is being shaken down by a customer’s purchasing agent, or, if the briber is the one taking the initiative, his objective is merely to get “his share” of the customer’s business. His prices, quality and quantities may be as good as those of his competitors, so the loss to the employer of the bribed individual is negligible. Here, defendant sold unneeded supplies at prices one-third to two-thirds above their value. Thus the bribery was the means used to defraud the customer of a substantial amount of money. U.S. v. Hauptman, 111 F.3d 48 (7th Cir. 1997).
7th Circuit again remands to decide whether defendant intended to sell additional counterfeit goods. (226) Defendant bought 1110 gallons of a liquid that resembled an existing hair care product, and used the liquid to fill 17,600 bottles that resembled the original. He obtained 20,600 spray bottle caps and 20,000 shipping cartons. The district court held defendant accountable for 240,000 counterfeit bottles (20,000 cartons times 12 bottles per carton). In U.S. v. Sung, 51 F.3d 92 (7th Cir. 1995), the Seventh Circuit directed the district court to determine with “reasonable certainty” whether defendant intended to sell 240,000 bottles. On remand, the district court refused to address this issue and imposed the same 48‑month sentence. On defendant’s second appeal, the appellate court again directed the district court to determine whether there was a reasonable certainty that defendant intended to sell 240,000 bottles. The district court also improperly refused to reduce defendant’s offense level under § 2X1.1(b)(1). This reduction is required unless defendant was “about to complete all necessary acts but for apprehension.” Since defendant lacked the materials to fill more than 17,600 bottles, and previous customers were displeased with his product’s quality, any finding that defendant was about to fill and sell another 222,400 bottles would be clearly erroneous. U.S. v. Sung, 87 F.3d 194 (7th Cir. 1996).
7th Circuit directs court to decide whether defendant intended to sell additional counterfeit goods. (226) Defendant bought 1,110 gallons of a liquid that resembled an existing hair care product. He used the liquid to fill 17,600 bottles that resembled the original. He obtained 20,600 spray bottle caps and 20,000 shipping cartons that bore the product’s trademark. Section 2B5.3(b)(1) enhances a sentence (using the table in § 2F1.1) based on the retail value of the infringing products. The district court held defendant accountable for 240,000 counterfeit bottles (20,000 cartons times 12 bottles per carton). Defendant argued that he was only accountable for the 17,600 bottles he actually sold. The Seventh Circuit remanded to determine whether defendant intended to sell 240,000 bottles. Section 2X1.1(a) (referenced in note 7 to § 2F1.1) directs a court in attempt cases to compute the offense level for the completed crime, including all intended offense conduct that can be established with reasonable certainty. Defendant’s attempt was sufficient to count the retail value of the 240,000 bottles (subject to a three level deduction under 2X1.1(b)(1) for an uncompleted offense) if his intent to sell was established with “reasonable certainty.” U.S. v. Sung, 51 F.3d 92 (7th Cir. 1995).
7th Circuit agrees that defendant was responsible for over $10,000 in counterfeit currency. (226) Defendant was convicted of possessing counterfeit obligations, but acquitted of manufacturing them. The 7th Circuit agreed that she had possession of over $10,000 in counterfeit money. There was evidence that she participated in the manufacture of the counterfeit bills and in the scheme to distribute them, and she anticipated making enough bills that she and her boyfriend could retire. Defendant expressly referred to 12 or 13 thousand dollars that her boyfriend had printed. U.S. v. Bolin, 35 F.3d 306 (7th Cir. 1994).
7th Circuit includes uncompleted counterfeit bills. (226) Defendant pled guilty to conspiracy to counterfeit over $600,000 in U.S. currency, and was sentenced under guideline section 2B5.1(b)(1). The 7th Circuit approved adding $260,000 in uncompleted bills (printed on one side only), to the value of the counterfeited currency. The guideline contains no requirement that the bills be complete. Application note 2, which requires the bills to be falsely made “in its entirety,” does not require the false instrument to be complete, but only that it not be a genuine instrument that has been altered. A proposed application note that would have directed the district court to discard defective items was never adopted. U.S. v. Ramacci, 15 F.3d 75 (7th Cir. 1994)
8th Circuit reverses where court used amount of loss to victims rather than improper benefit conferred. (226) Defendant was convicted of aiding and abetting a violation of the Medicare anti-kickback statute, and related charges. The district court found that defendant’s conduct had caused a total loss to the victims of $1.4 million, and that the total benefit to defendant was $383,735. Using the loss table in § 2B1.1(b)(1), the district court found a total loss figure of $1.4 million, and increased defendant’s offense level by 16 levels. The Eighth Circuit held that the district court erred by using the amount of loss to victims, rather than the amount of the improper benefit conferred on the defendant. Section 2B4.1(b)(1) directs the court to use “the greater of the value of the bribe or the improper benefit conferred,” not the amount of loss to victims, when applying an enhancement through the § 2B1.1 table. The “value of the improper benefit to be conferred” is “the value of the action to be taken or effect in return for the bribe.” Here, because the value of the improper benefit to defendant exceeded the value of the payments, the court should have used the amount of the improper benefit conferred on defendant in return for the kickbacks – $383,735. U.S. v. Yielding, 657 F.3d 688 (8th Cir. 2011).
8th Circuit affirms 16-level increase for “infringement” loss from cable TV descramblers. (226) Defendants were convicted of manufacturing cable TV descramblers intended to be used for unauthorized interception of cable signals, in violation of 47 U.S.C. §553(a)(2). The district court increased their sentences by 16 levels under § 2B5.3, Application Note 2(A), for an infringement amount between $2.5 million and $7 million. The court found that it was not possible to determine the number or value of infringing items so it made a reasonable estimate based on defendant’s company’s gross revenues of $6 million as a starting point. On appeal, the Eighth Circuit found no error, noting that the descramblers were sold at wholesale, so consumers paid even more, and consumers would not have bought descramblers unless they planned to steal much more cable TV programming than the value of the descrambler. This was confirmed by a government expert who testified that the loss to cable companies was over $62 million. The 18-level increase was affirmed. U.S. v. Sweeney, 611 F.3d 459 (8th Cir. 2010).
8th Circuit holds that descramblers are infringing items. (226) Defendants were convicted of manufacturing cable TV descramblers intended for unauthorized interception of cable signals. Guideline § 2B5.3(b)(3) directs a sentencing court to increase the base offense level by two levels “if the offense involved the manufacture . . . of infringing items.” Application Note 1 says that the infringing item is “the item that violates the copyright or trademark laws.” Defendant argued that because descramblers do not themselves violate copyright or trademark laws, they cannot be infringing items. The Eighth Circuit rejected the argument, holding that descramblers are infringing items because they are analogous to modified satellite access cards and other types of intercepting devices. U.S. v. Sweeney, 611 F.3d 459 (8th Cir. 2010).
8th Circuit relies on defendant’s admission to support calculation of counterfeit money. (226) Defendant was involved in a ring that distributed a large amount of counterfeit money throughout the Kansas City, Missouri area. The court found under § 2B5.1 that defendant was involved with more than $120,000 and less than $200,000 in counterfeit money. The Eighth Circuit held that this estimate was supported by defendant’s admission to police that he had distributed $125,000 in counterfeit money. U.S. v. Jordan, 150 F.3d 895 (8th Cir. 1998).
8th Circuit holds court properly refused to consider kickbacks for referrals of non-Medicare patients. (226) Defendant, a psychologist, was convicted of violating mail fraud and Medicare anti-kickback statutes by receiving payments from a psychiatric hospital for referring patients to that hospital. Over a 15-month period, the hospital paid a total of $40,500 to defendant for 49 patient referrals, only one of which was a Medicare beneficiary. Section 2B4.1 mandates an increased offense level if an improper benefit exceeding $2000 was conferred upon the defendant. The government argued that all of the $40,500 in referral payments should have been counted as relevant conduct because there was one common scheme or plan. The Eighth Circuit held that the court properly refused to consider the kickbacks for the non-Medicare patients. Relevant conduct for sentencing purposes must be criminal conduct. At the time in question, Medicare did not reimburse payments for psychological services, so there was no factual basis to presume that the fee arrangement targeted Medicare patients. U.S. v. Jain, 93 F.3d 436 (8th Cir. 1996).
8th Circuit says increases for leadership and being “in the business” were not double counting. (226) Defendant owned a body shop involved in a conspiracy to steal cars and replace their VINs with numbers from salvage vehicles. He received a § 2B6.1(b)(2) enhancement for being in the business of receiving and selling stolen property and a § 3B1.1(a) enhancement for being a leader or organizer of the criminal activity. The Eighth Circuit held that the “in the business” enhancement and the leadership enhancement did not constitute double counting. Although defendant’s ownership of the body shop facilitated his leadership role in the conspiracy, it did not require such a role. Defendant could have run an illegal re‑tagging operation in which stolen vehicles were received and sold without directing his employees to steal the vehicles that he would later sell. U.S. v. Reeves, 83 F.3d 203 (8th Cir. 1996).
8th Circuit agrees that defendant was responsible for over $200,000 loss from stolen car scheme. (226) Through his occasional work at his brother’s body shop, defendant became involved in a scheme in which the true VINs from stolen vehicles were replaced with numbers from salvage vehicles. The district court found defendant participated in the conspiracy from June 1991 until May 1993, during which 33 vehicles having a value of $316,000 were stolen. The Eighth Circuit affirmed an eight level enhancement under § 2B6.1 for vehicles with a value in excess of $200,000. Defendant’s mother testified that defendant suffered a serious accident in April 1991 and was incapacitated and heavily medicated for some time after that. However, even assuming defendant was not involved in the conspiracy during the six months following the accident, the amount chargeable to him still exceeded $200,000, and thus his sentence would not change. Direct trial testimony linking defendant to the conspiracy during the entire year of 1992 precluded any further reduction. U.S. v. Reeves, 83 F.3d 203 (8th Cir. 1996).
8th Circuit says bribery enhancement should be based on value of benefit conferred. (226) Defendant, an attorney, formed sham corporations through which a financial company passed money for the purpose of misrepresenting its financial affairs. The misrepresentations were intended to induce the SBA to provide loans to the company. In return, the company loaned money to defendant’s client. Defendant eventually pled guilty to bribing an official of a financial institution. The Eighth Circuit held that the district court improperly based a § 2B4.1(b)(1) enhancement on the face amount of a loan obtained through bribery, rather than on the value of the benefit conferred by that loan. The severity of a bribery offense is measured by the amount of improper benefit conferred in return for the bribe (or the amount of the bribe, if greater). When a bank official is bribed to obtain a loan, the improper benefit to the person making the bribe may be greater than any resulting loss incurred by the lending institution. The record suggested that the value of the loan to the client was far less than its face amount of $137,000. U.S. v. Fitzhugh, 78 F.3d 1326 (8th Cir. 1996).
8th Circuit relies on computer equipment not admitted at trial for counterfeiting enhancement. (226) Defendant was convicted of passing counterfeit money. The district court enhanced his sentence under § 2B5.1(b)(2) for manufacturing the counterfeit bills or possessing a counterfeiting device. Defendant argued that the district court improperly relied on computer equipment found in his home because the equipment was not admitted at trial. The Eighth Circuit held that the computer equipment, a co-conspirator’s testimony, defendant’s possession of the master bills, as well as the recovery of a copied portion of a counterfeit bill from defendant’s residence all constituted reliable evidence that defendant manufactured counterfeit bills. The court properly considered the computer equipment. The court only overruled the admission of computer equipment during trial because the government failed to disclose the evidence to the defense before trial. The issue of a witness’s credibility is “virtually unreviewable on appeal.” U.S. v. Malone, 49 F.3d 393 (8th Cir. 1995).
8th Circuit upholds consideration of partially completed counterfeit bills. (226) In determining the face value of the counterfeit currency, the district court included some bills with backs only and some with fronts only. The 8th Circuit affirmed that the partially completed bills were properly considered under section 2B5.1(b)(1). The fact that the currency was relocated and hidden for safekeeping, suggested defendants attributed value to the bills. Unlike section 2B5.1(b)(2), which requires that the counterfeit be capable of escaping detection when subjected to minimal scrutiny, section 2B5.1(b)(1) contains no such requirement. Application note 2 to section 2B5.1 also did not bar the consideration of partially completed bills. The statement that “counterfeit” items are those that have been falsely made or manufactured in their entirety was an attempt to distinguish items falsely made from “whole cloth” (counterfeit instruments), from genuine items that had been changed or altered (forged instruments). U.S. v. Lamere, 980 F.2d 506 (8th Cir. 1992).
8th Circuit affirms reference to underlying commentary to interpret a referred-to guideline section. (226) The counterfeiting guideline, 2B5.1, provides that if the face value of the counterfeit currency exceeds $2,000, the offense level shall be increased according to the table in section 2F1.1. This table increases an offense based on the amount of loss. Application note 7 says the loss should be the greater of the intended or actual loss. The 8th Circuit rejected defendants’ claim that consideration of application note 7 was error. Some cases have held that the reference in section 2B5.1 to the table limits the court to the table only, and not the application note. However, the court merely referred to the commentary for guidance in interpreting the word “loss,” which appears in the table. It was not error for the district court, when instructed to refer to a particular subsection, to look to the underlying commentary for guidance. U.S. v. Lamere, 980 F.2d 506 (8th Cir. 1992).
8th Circuit holds that distributors are as culpable as manufacturers of counterfeit money. (226) Defendant contended that since he was a mere distributor of counterfeit bills, he was a minor participant in the overall counterfeiting operation in which he played a part. The 8th Circuit disagreed, holding that “[w]e do not believe, as a general matter, that a distributor is less culpable than a manufacturer; adequate distribution is as essential to a counterfeiting scheme as is efficient production.” U.S. v. Goebel, 898 F.2d 675 (8th Cir. 1990).
9th Circuit allows downward variance from 41 months to community service. (226) Defendant was convicted of selling more than $1 million in counterfeit access cards that allowed defendant’s customers unauthorized access to satellite television signals. The district court calculated his Guidelines range at 41-51 months. At sentencing, the district imposed a sentence of 1,000 hours community service, restitution of $50,000, and five years’ supervised release. The court considered evidence that defendant had repented since his conviction, that he had devoted himself to his own business, and that his eight-year-old daughter was dependent on him. The government appealed, but a divided panel of the Ninth Circuit affirmed, holding that the district court had considered appropriate factors in determining what sentence to impose on defendant and that the court of appeals could not substitute its judgment for the district court’s. U.S. v. Whitehead, 532 F.3d 991 (9th Cir. 2008).
9th Circuit says enhancement for possession of counterfeiting materials applies only when they are linked to actual counterfeiting. (226) Defendant pleaded guilty to selling counterfeit $100 bills pursuant to a plea agreement that provided for the use of § 2B5.1, but did not provide for the enhancement in § 2B5.1(b)(2)(A) for manufacturing counterfeit obligations or possessing devices used for counterfeiting. Because there was evidence that defendant possessed some materials used for counterfeiting, the district court applied this enhancement. The Ninth Circuit held that the enhancement in § 2B5.1(b)(2)(A) applies only when there is some linkage between the possession of counterfeiting materials and the actual production of counterfeit obligations. Mere possession of devices or materials that could be used for counterfeiting does not trigger the enhancement. U.S. v. Allen, 434 F.3d 1166 (9th Cir. 2006).
9th Circuit upholds increase for use of a dangerous weapon in a counterfeiting offense. (226) In attempting to escape arrest for selling counterfeit money, defendant climbed into the passenger side of the pickup truck and stuck his cellular phone into the driver’s back, claiming it was a gun. The Ninth Circuit found that using a cellular phone in this way rendered it a “dangerous weapon” and upheld the district court’s increase in sentence for use of a dangerous weapon in connection with a counterfeiting offense under § 2B5.1(b)(3). U.S. v. Michael, 220 F.3d 1075 (9th Cir. 2000).
9th Circuit increases sentence in copyright case by “retail value” of infringing items, not “loss.” (226) Defendant was convicted of printing counterfeit Microsoft Windows 95 manuals. The Ninth Circuit agreed with the Fifth Circuit’s opinion in U.S. v. Cho, 136 F.3d 982, 983-84 (5th Cir. 1998) that “retail value” and “loss” are distinguishable and that only the retail value should be used to determine the proper increase under the § 2F1.1 table, when a defendant is sentenced for copyright infringement under § 2B5.3. Further, the increase should be based on the retail value of the counterfeit product, rather than the value of the genuine product. See U.S. v. Kim, 963 F.2d 65, 68 (5th Cir. 1992). Here, the court properly used the retail value, but erred in valuing the manuals at the $50 price they would have sold for once the software on a CD-ROM was included. A government witness testified that comparable genuine manuals sold individually at a retail value of $12, and this is the value the court should have used. U.S. v. Bao, 189 F.3d 860 (9th Cir. 1999).
9th Circuit holds that uncut sheets were counterfeit currency for sentence enhancement. (226) Section 2B5.1(b)(1) directs the court to apply an upward adjustment under § 2F1.1 if the face value of the counterfeit currency exceeds $2,000. In this case, the Ninth Circuit held that uncut $20 bills were “counterfeit” and properly counted for purposes of the sentence enhancement. Section 2B5.1 (b)(1) does not require the counterfeit bills to be of “passable” quality. They must “purport” to be genuine, but need not be mistakable as such. In this case, the defendant intended to eventually pass the uncut bills as genuine. To do so, he had only to cut them. Other circuits have held that incomplete or imperfect counterfeit bills are counted under § 2B5.1(b)(1). U.S. v. Webster, 108 F.3d 1156 (9th Cir. 1997).
9th Circuit says only existing counterfeit bills can be counted toward the $2,000 requirement. (226) Section 2B5.1(b)(1) provides for an increase in the offense level if the face value of the counterfeit items exceeds $2,000. The district court held that because defendant intended to produce $400,000 worth of counterfeit currency, a nine level enhancement was appropriate by reference to the fraud table. The Ninth Circuit reversed, holding that only exiting counterfeit bills can be counted toward the $2,000 requirement. Because the counterfeit bills in this case did not exceed $2,000 the enhancement was erroneous, and the sentence was reversed. U.S. v. Eshkol, 108 F.3d 1025 (9th Cir. 1997).
9th Circuit upholds enhancement in counterfeiting case even though defendant only used a photocopier. (226) Guideline section 2B5.1(b)(2) provides that the offense level for counterfeiting should be increased to 15 where the defendant manufactured or produced counterfeit obligations or had possession, custody or control over a counterfeiting device or materials used for counterfeiting. However, application note 3 states that this subsection does not apply to persons “who merely photocopy notes or otherwise produce items that are so obviously counterfeit that they are unlikely to be accepted even if subjected to only minimal scrutiny.” Defendant argued that this application note should apply to all situations in which a photocopier is used for counterfeiting. The 9th Circuit rejected the argument, relying on U.S. v. Bruning, 914 F.2d 212 (10th Cir.). U.S. v. Taylor, 991 F.2d 533 (9th Cir. 1993).
9th Circuit uses market value of counterfeited tapes in setting copyright offense level. (226) Defendants were convicted of conspiracy to traffic in counterfeit labels and criminal infringement of copyright after customs agents discovered 2.6 million counterfeit audio tape labels, 11,700 counterfeit cassette tapes and tape duplicating machines. The court calculated the probable or intended loss under 2F1.1 as $10,454,400 by multiplying $4 per tape times 2,613,600 labels. On appeal, the 9th Circuit rejected the defendant’s argument that the district court should have used the profit lost by the victims, i.e. the recording industry, rather than the market value of the tapes. Reliance on the market value of the counterfeited tapes was reasonable in a copyright case. U.S. v. Hernandez, 952 F.2d 1110 (9th Cir. 1991).
9th Circuit holds that government bears burden of proving possession of firearm in counterfeiting case. (226) In U.S. v. Howard, 894 F.2d 1085, 1090 (9th Cir. 1990) the 9th Circuit held that the government bears the burden of proving the facts necessary to establish the base offense level. “Once the base offense level is established, the party seeking to alter the base offense level bears the burden of proving the necessary facts. In this case, the court increased the base offense level by nine points, finding that defendant possessed a firearm in connection with the crime of possession of counterfeit currency. The 9th Circuit held that the government bore the burden of proof on this issue, and that the evidence was sufficient to support the district court’s finding. The defendant was holding a loaded handgun when the agent’s returned to arrest him after the informant purchased counterfeit currency from him. U.S. v. Oliveros-Orosco, 942 F.2d 644 (9th Cir. 1991).
10th Circuit holds that defendant was aware of health risks from counterfeit weight-loss products. (226) Defendant sold counterfeit versions of various weight-loss products. The district court applied a two-level enhancement under § 2B5.3(b)(5) for conduct that involved “the conscious or reckless risk of death or serious bodily injury.” Defendant claimed he was not consciously aware of the serious health risks posed by the counterfeit products he was producing. The Tenth Circuit held that the mens rea requirement of § 2B5.3(b)(5) was the same as the mens rea requirement for fraud and theft offenses § 2B1.1(b)(14). Thus, the enhancement required defendant “to have been conscious of or reckless as to the existence of the risk created by his or her conduct.” Defendant was aware of two FDA alerts describing the serious health risks posed by one of the ingredients in his counterfeit products. The warnings specifically addressed the health risks of his particular counterfeit drugs. Defendant discussed these warnings with undercover agents in person and via email. Because defendant was aware of the FDA warnings, it was reasonable to infer that he was also subjectively and consciously aware of the information contained in the warnings. U.S. v. Shengyang Zhou, 717 F.3d 1139 (10th Cir. 2013).
10th Circuit upholds restitution for manufacturer’s efforts to protect name and reputation. (226) Defendant sold counterfeit versions of various weight-loss products. The district court ordered him to pay restitution of $417,396.39 under the Mandatory Victims Restitution Act, 18 U.S.C. § 3663A, to Glaxo Smith Kline (GSK), the manufacturer of the weight loss product Alli. Defendant appealed $385,216.75 of this amount for expenses incurred by GSK in responding to the counterfeit Alli. These efforts included: alerting consumers to the dangers posed by, and how to identify, the fraudulent drugs; monitoring and tracking consumer reports of the counterfeit product; and retaining the services of a public relations firm to assist in crisis management. The Tenth Circuit upheld the restitution order. Restitution under § 3663A(b)(1)(B) is not limited to damage done to a victim’s tangible property; it also includes damage to intangible property, such as the registered trademarks for Alli and the reputation and goodwill of GSK. Although the expenses incurred by GSK in mitigating and repairing the damage done by defendant were not an exact measure of the harm he caused, they were an acceptable proxy for the actual damage to GSK’s trademarks, reputation, and goodwill. U.S. v. Shengyang Zhou, 717 F.3d 1139 (10th Cir. 2013).
10th Circuit upholds use of specific counterfeiting guideline rather than general attempt guideline. (226) Defendant sold counterfeit versions of various weight-loss products. He was arrested after he made several sales to undercover agents, but before he delivered 10,000 additional units ordered by the agents. The district court included these additional 10,000 units in calculating the “infringement amount” under § 2B5.3(b)(1). The court held that under Note 2(A)(vii), the 10,000 units should be counted because the counterfeit boxes, booklets and labels for these units had already been produced and were in defendant’s control at the time of his arrest. Defendant argued that under § 2X1.1, in order to include the 10,000 unfinished units, the district court was required to determine it was “reasonably certain” that he was about to complete all the acts necessary for successful completion of these units but for his arrest. The Tenth Circuit found no error. Section 2X1.1 applies to attempts “not covered by a specific offense guideline.” The district court properly determined that Note 2(A)(vii) to § 2B5.3 constituted a specific guideline covering attempt in the context of trafficking counterfeit goods and accordingly applied it in lieu of § 2X1.1. U.S. v. Shengyang Zhou, 717 F.3d 1139 (10th Cir. 2013).
10th Circuit upholds estimate of retail value of counterfeit goods. (226) Defendant participated in a conspiracy to traffic in counterfeit goods. The offense level for criminal counterfeiting under the 1998 guidelines was based on the retail value of the infringing goods, which the district court found to be the total retail value of all counterfeit items sold by defendant. Because an exact record of defendant’s sales was not available, the district court calculated the retail value of the infringing goods by adding the value of the counterfeit goods seized by the government to the total value of defendant’s bank account deposits and cashed checks during the relevant time period. The court then subtracted defendant’s documented income from legitimate sources and reduced the resulting value by 10 percent to reflect its determination that no more than that proportion of goods sold at his store constituted non-counterfeit merchandise. In the absence of more accurate information indicating the retail value of the counterfeit goods sold by defendant, the Tenth Circuit held that the court’s decision to include bank account transactions in its calculation did not constitute clear error. District courts have “considerable leeway in assessing the retail value of the infringing items,’ and “need only make a reasonable estimate of the loss, given the available information.” U.S. v. Foote, 413 F.3d 1240 (10th Cir. 2005).
10th Circuit says member of bribery conspiracy only liable for bribes that he agreed to jointly undertake. (226) Defendant, a hospital executive, was convicted of conspiracy and violating the Medicare Antikickback Act, for his role in the hospital’s payments to two doctors for referring patients to the hospital. The government contended that in a previous appeal, U.S. v. McClatchey, 217 F.3d 823 (10th Cir. 2000), the court held that defendant joined the conspiracy in the summer of 1991, when he oversaw the negotiations for the 1993 contract, and thus he was responsible for all bribes paid from the summer of 1991 forward. The Tenth Circuit found that the government misunderstood § 3B1.3. Although the previous opinion stated that the evidence supported defendant’s conviction as a member of the conspiracy, such a finding, by itself, was not sufficient to hold him responsible for all reasonably foreseeable bribes paid by his co-conspirators. The scope of defendant’s jointly undertaken criminal activity was not necessarily the same as the scope of the entire conspiracy. The previous opinion did not determine the precise boundaries of the criminal activity defendant agreed to “jointly undertake.” Although a reasonable person could have found that defendant had agreed to all bribes beginning as early as 1991, the evidence did not compel this conclusion. The district court’s finding that defendant agreed only to jointly undertake the bribes paid under the 1993 contract was not clearly erroneous. U.S. v. McClatchey, 316 F.3d 1122 (10th Cir. 2003).
10th Circuit upholds court’s determination of value of services provided by doctors who accepted bribes. (226) Defendant, a hospital executive, was convicted of conspiracy and violating the Medicare Antikickback Act, for his role in the hospital’s payments to two doctors for referring patients to the hospital. The parties agreed that the amount of the bribe under § 2B4.1 should be calculated as the amount paid to the doctors less the value of the lawful services they provided. The payments to the doctors under the contract in question was $150,000. At the sentencing of a co-defendant, the district court decided that the doctors rendered $100,000 worth of services, but were paid $150,000. Therefore, at least $50,000 of the money paid to the doctors was a bribe. The government argued that the entire $150,000 paid under the 1993 contract was a bribe, because the doctors performed virtually no services for the hospital. The Tenth Circuit found no clear error. Although there was “ample testimony” that the doctors performed minimal services for the hospital, there also was evidence supporting the court’s conclusion that the doctors rendered services worth $100,000. The hospital’s medical director and various doctors and nurses testified that the doctors performed important services for the hospital. The district court’s determination of the value of the bribe paid under the 1993 contract was not clearly erroneous. U.S. v. McClatchey, 316 F.3d 1122 (10th Cir. 2003).
10th Circuit excludes counterfeit money from reverse sting that began after defendant’s arrest. (226) Defendant was recruited to help locate a suitable building for a counterfeiting operation and to loan the counterfeiter a truck and an employee to help move equipment. Federal agents arrested defendant and the associate as they were removing tracking devices placed on their vehicles. After the arrest, the associate worked with the Secret Service to set up a reverse sting to investigate a Texas investor who financed the operation. The reverse sting ultimately printed over $30 million in counterfeit money. Defendant did not participate in any of this activity and the Tenth Circuit ruled that he could not be held accountable for it. After defendant’s arrest, the original agreement was abandoned and was replaced by the reverse sting which was funded and equipped by the government to investigate a co-conspirator who defendant had never met. Although it was foreseeable that the counterfeiter would print a large sum of money, the post-arrest metamorphosis was not within the scope of the original counterfeiting plan. U.S. v. Melton, 131 F.3d 1400 (10th Cir. 1997).
10th Circuit finds photocopied counterfeit bills were sophisticated enough to justify enhancement. (226) Under application note 3 to section 2B5.1, an enhancement for manufacturing counterfeit documents does not apply to persons who “merely photocopy notes or otherwise produce items that are so obviously counterfeit that they are unlikely to be accepted even if subjected to only minimal scrutiny.” The 10th Circuit upheld the enhancement for a defendant who photocopied $20 bills and then used ink to dye the bills to make them more realistic. Although the counterfeit bills were unsophisticated, defendant was able to pass 33 of them at various establishments in the area before being arrested. Thus, they were not “so obviously counterfeit that they were unlikely to be accepted.” U.S. v. Gaither, 1 F.3d 1040 (10th Cir. 1993).
10th Circuit finds no plain error in valuing truck when stolen rather than when VIN was altered. (226) Defendant was convicted of altering motor vehicle identification numbers. Guideline section 2B6.1 provides for an enhanced offense level if the retail value of the vehicle exceeded $2,000. Defendant argued for the first time on appeal that it was error to base the enhancement on the value of the truck at the time it was stolen rather than four years later when he altered the VIN, since he was not convicted of stealing the truck. The 10th Circuit rejected the argument, finding no plain error. However, the court did not preclude the possibility that in future cases, where the issue was properly raised, it would refuse to reverse where the valuation was computed at some time other than when the VIN was tampered with. U.S. v. Herndon, 982 F.2d 1411 (10th Cir. 1992).
10th Circuit reverses offense level increase based upon involvement in organized scheme to steal vehicles. (226) Defendant was sentenced for altering motor vehicle identification numbers. The district court increased defendant’s offense level from 8 to 14 under guideline § 2B6.1(b)(3), based on its determination that the offense involved an organized scheme to steal vehicles or vehicle parts. The 10th Circuit reversed. There was insufficient evidence to determine that the alteration or removal of the motor vehicle numbers by defendant was in furtherance of a scheme to receive stolen vehicles or vehicle parts. Defendant removed the identification number plates and placed them on other vehicles to give the impression that the vehicle was a later model. This practice, in combination with the alteration of odometer readings, furthered defendant’s scheme to sell the cars to unsuspecting buyers at inflated prices. U.S. v. Walker, 931 F.2d 631 (10th Cir. 1991).
10th Circuit finds exception to sentence enhancement for counterfeiting does not apply to all who use photocopy machines. (226) Guideline § 2B5.1(b)(2) provides for a sentence enhancement for certain counterfeiting offenses. However, the enhancement does not apply “to persons who merely photocopy notes or otherwise produce items that are so obviously counterfeit that they are unlikely to be accepted even if subjected to only minimal scrutiny.” Defendant contended that the enhancement did not apply to any person who produced a counterfeit note by photocopying. The 10th Circuit rejected this interpretation, noting that it “would protect even the most successful counterfeiters from the enhanced penalties . . . based solely on the method of production, photocopying.” Instead, the court read the language to exclude from sentence enhancement “those defendants who produce notes, by photocopying or other means, that ‘are so obviously counterfeit that they are unlikely to be accepted even if subjected to only minimal scrutiny.’” U.S. v. Bruning, 914 F.2d 212 (10th Cir. 1990).
11th Circuit includes loss from relevant conduct in bribery enhancement. (226) Defendant bribed doctors and others to obtain prescriptions that allowed pharmacies to obtain fraudulent Medicare reimbursements. Defendant received kickbacks from the pharmacies. In addition, although it was not charged in the indictment, defendant submitted similar, fraudulent Medicare claims on behalf of her own company, PRN Home Health Care, which provided medical equipment to Medicare beneficiaries. Section 2B4.1(b) provides for an enhancement based on the “greater value of the bribe or the improper benefit to be conferred.” Although the improper benefit conferred on the pharmacies was between $200,000 and $400,000, the district court included as relevant conduct $2.7 million in loss from the PRN scheme, resulting in a total intended loss of more than $3 million and an 18-level enhancement. The Eleventh Circuit held that the district court did not clearly err by finding that the PRN scheme was relevant conduct, and thus the 18-level increase was proper. U.S. v. Valladares, 544 F.3d 1257 (11th Cir. 2008).
11th Circuit uses commercial bribery guideline for fraud involving bribing of Medicare recipients. (226) Defendant bribed doctors and Medicare beneficiaries to obtain medically unnecessary prescriptions that allowed pharmacies to submit fraudulent Medicare reimbursement claims. Defendant received kickbacks from the pharmacies. The Eleventh Circuit held that the district court properly sentenced defendant under the commercial bribery guideline, §2B4.1, rather than the fraud guideline, §2B1.1. This case involved “fraud achieved through bribery” of the Medicare recipients rather than “straight fraud.” U.S. v. Valladares, 544 F.3d 1257 (11th Cir. 2008).
11th Circuit upholds use of retail value of infringed parts in U.S. rather than Latin America, where majority of sales occurred. (226) Defendant was a wholesale distributor of counterfeit cell phone parts and accessories. Section 2B5.3 provides for an enhancement based on the amount of the infringement. Defendant argued that the correct computations should have reflected the value of the counterfeit items in the market in which those goods were sold, which in this case was Latin America, rather than the Manufacturer’s Suggested Retail Price in the U.S., which was much higher. They argued that the district court’s computation resulted in a fictional loss amount far beyond that actually caused by their fraud. The Eleventh Circuit held that (1) the use of the retail value of the infringed item, rather than the counterfeit item, was proper and supported by the guidelines; and (2) use of the products value in the United States was supported by the evidence and appropriate under the guidelines. U.S. v. Lozano, 490 F.3d 1317 (11th Cir. 2007).
11th Circuit holds that firm’s year-end employee bonuses could not be subtracted as direct costs from net benefit from bribes. (226) Defendant, a financial advisor for Fulton County, Georgia, accepted bribes from an investment banking company to select the company as underwriter for a bond refinancing project. The commercial bribery guideline, § 2B1.4, provides for a sentencing enhancement based on the greater of the value of the bribe or the net value of the improper benefit conferred. Because a bribe is generally smaller than the net benefit, the bribe amount should be used only when the net benefit cannot be estimated. Here, the district court used the bribe amount because the government did not consider year-end bonuses paid to company employees in calculating the net benefit. The Eleventh Circuit reversed, holding that year-end bonuses were not a direct cost that should be subtracted from profits to determine the net improper benefit. Year-end bonuses usually depend on employee performance throughout the year and cannot be readily apportioned to a particular bond deal. The district court improperly equated year-end bonuses with commissions, which can be apportioned to a given transaction. U.S. v. DeVegter, 439 F.3d 1299 (11th Cir. 2006).
11th Circuit holds that defendant who bleached genuine bills should be sentenced under § 2B1.1 rather than 2B5.1. (226) Defendant bleached genuine lower denomination Federal Reserve Notes and then transferred onto the bleached paper an image of higher-denomination Federal Reserve Notes. The district applied § 2B5.1, entitled “Offenses Involving Counterfeit Bearer Obligations of the United States.” The Eleventh Circuit agreed with defendant that because he merely “altered” genuine Federal Reserve Notes, the court should have applied § 2B1.1 instead of § 2B5.1. The commentary to § 2B5.1 states that offenses involving genuine instruments that have been altered are to be sentenced under the provisions of § 2B1.1, and those that are manufactured in their entirety are to be sentenced under § 2B5.1. U.S. v. Inclema, 363 F.3d 1177 (11th Cir. 2004).
11th Circuit holds that scheme more closely resembled commercial bribery than fraud. (226) Defendant, a financial advisor for Fulton County, Georgia, accepted money from an underwriting firm to ensure that the firm’s bond proposal was selected by the county. Application Note 14 to § 2F1.1, the fraud guideline, provides that in certain wire or mail fraud cases, a court should use another guideline if “the indictment or information setting forth the count of conviction … establishes an offense more aptly covered by another guideline.” The Eleventh Circuit held that defendant’s conduct more closely resembled commercial bribery than a straight fraud, and therefore, the court should have sentenced defendant under § 2B4.1, the commercial bribery guideline rather than § 2F1.1. Other courts have applied the commercial bribery guidelines to fraud convictions. See, e.g. U.S. v. Cohen, 171 F.3d 796 (3d Cir. 1999); U.S. v. Josleyn, 99 F.3d 1182 (1st Cir. 1996). U.S. v. Poirier, 321 F.3d 1024 (11th Cir. 2003).
11th Circuit adopts totality of the circumstances for determining applicability of “in the business” increase. (226) Over a span of ten years, defendant’s husband stole more than 70 vehicles. Defendant assisted by applying for and obtaining documents for the vehicles in three counties. The district court applied a § 2B6.1(b)(2) enhancement for “being in the business” of receiving and selling stolen property. The Eleventh Circuit adopted a totality of the circumstances test for applying the “in the business” enhancement in § 2B6.1(b)(2). Such a test examines the regularity and sophistication of the defendant’s operation, and is less subjective than the competing “fence” test. However, even under the totality of the circumstances test, the increase applies only if the defendant fenced stolen property. The evidence supported a finding that defendant both received and sold stolen vehicles. Defendant sold the stolen cars – her signature appeared on the bills of sale, and she participated in transporting and delivering the vehicles to purchasers. Moreover, some of the stolen cars were titled in defendant’s name, thus giving rise to circumstantial evidence of prior receipt. The evidence also supported a finding that defendant was “in the business” of buying and selling stolen cars. Her illegal activity spanned at least four years, and caused a total loss of over $250,000. Thus, her fencing activities were regular, frequent and voluminous. U.S. v. Saunders, 318 F.3d 1257 (11th Cir. 2003).
11th Circuit values counterfeit cigars by relying in part on value of genuine cigars. (226) Defendants were convicted of trafficking in counterfeit cigars. The Eighth Circuit held that it was proper to consider the “infringing items” to be the cigars themselves, rather than the counterfeit labels, in valuing them for sentencing purposes. Moreover, the Eighth Circuit upheld the district court’s reliance in part on the value of genuine cigars in valuing the counterfeit cigars. However the district court erred by basing the number of “infringing items” on the number of labels found on the premises of each defendant, because it had based the value of “infringing items” on the value of cigars, not labels. U.S. v. Guerra, 293 F.3d 1279 (11th Cir. 2002).
11th Circuit rejects narrow interpretation of when gun is possessed “in connection with” crime. (226) Defendant sold counterfeit currency to an informant from his car. When police attempted to apprehend him, defendant fled, throwing a gun from his car during the ensuing chase. The district court applied a § 2B5.1(b)(3) enhancement for possessing a dangerous weapon “in connection with” the offense. Relying on U.S. v. Fadipe, 43 F.3d 993 (5th Cir. 1995), defendant argued that the mere presence of a firearm in the car used by him to deliver counterfeit currency was not sufficient to show a connection between that gun and the counterfeit money sold to the informant. However, in U.S. v. Young, 115 F.3d 834 (11th Cir. 1997), the Eleventh Circuit rejected a narrow interpretation of the “in connection with” language that would require the firearm to serve a purpose related to the crime. The Young court held that the phrase “in connection with”, as used in § 4B1.4(b)(3)(A), should be given an expansive interpretation, according to its ordinary and natural meaning. Following Young, the Eleventh Circuit affirmed the § 2B5.1(b)(3) enhancement. It was reasonable to conclude that defendant possessed the pistol to prevent theft during a close, face-to-face encounter with a person he did not know well. U.S. v. Rodriguez-Matos, 188 F.3d 1300 (11th Cir. 1999).
11th Circuit holds printing is a special skill. (226) Defendant was convicted of conspiracy to possess counterfeit currency and making counterfeit currency. The Eleventh Circuit held that printing is a special skill under § 3B1.3 and that the enhancement was properly applied to defendant. The special skill enhancement extends to defendants who commit their crimes by using unique technical skills not necessarily acquired through formal education. Printing is a skill not possessed by members of the general public. Although it does not require licensing or formal education, it is a unique technical skill that clearly requires special training. A layperson on the street would not be competent to prepare and operate a printing press, or perform other activities required in the printing process. Defendant clearly possessed this skill. He had worked for about a year in a legitimate printing business. He came to the United States with serial numbers and negatives needed to further the printing process, he helped set up and calibrate the printing machinery, and he assisted in the operation of the printing machines. U.S. v. Foster, 155 F.3d 1329 (11th Cir. 1998).
11th Circuit requires considering full value of cars stolen for parts. (226) Defendants were involved in a conspiracy to possess stolen vehicles and parts and remove or alter their VINs. In determining loss, the district court considered only the value of the parts, not the vehicles from which they were taken. The Eleventh Circuit held that the loss should have been based on the worth of the stolen cars tied directly to defendants. A district court may consider, for sentencing purposes, relevant conduct not contained in the indictment. A convicted car thief testified that defendants admitted to him that they stole cars, describing their methods. The owner of a stolen car identified defendant as someone he had seen closely examining his car, the parts of which police later found, covered with defendants’ fingerprints, in a warehouse rented by defendants. In addition, police found parts of cars that defendants admitted to stealing. U.S. v. Exarhos, 135 F.3d 723 (11th Cir. 1998).
11th Circuit finds no requirement to use lighter sentence from different statute. (226) Defendants were convicted of assisting in the unauthorized decryption of satellite cable programming in violation of 47 U.S.C. § 605(e)(4). They were sentenced under section 2B5.3, the guideline applicable to violations of 47 U.S.C. § 605. Defendants argued that because their conduct could have been prosecuted under 18 U.S.C. § 2512, a part of the Wiretap Act that overlaps § 605(e)(4), the district court should have imposed the lighter sentence they would have received under that guideline. The 11th Circuit rejected this contention. When an act violates more than one criminal statute, the government may prosecute under either so long as it does not discriminate against any class of defendants. In exercising that discretion, the prosecutor may consider the penalties available upon conviction. The guidelines do not limit this prosecutorial discretion. U.S. v. Howard, 13 F.3d 1500 (11th Cir. 1994).
11th Circuit affirms that counterfeit currency detector is a “counterfeiting device” under § 2B5.1(b)(2). (226) The 11th Circuit affirmed the district court’s decision to enhance defendant’s sentence under guideline § 2B5.1(b)(2) for possessing a “counterfeiting device.” The device possessed by defendant was an inexpensive detector costing about $20, and used by many legitimate businesses in the Miami area to detect counterfeit currency. Defendant contended that the enhancement was improper because he merely distributed the counterfeit currency. The 11th Circuit rejected this argument, holding that to permit enhancement for possession of a counterfeiting device, it is not necessary for the government to prove that the defendant was engaged in the production of counterfeit currency, or that the device possessed was ever used. The detector device could be used by counterfeiters as a means of quality control. Therefore, it was not unreasonable to find that it was a counterfeiting device. U.S. v. Castillo, 928 F.2d 1106 (11th Cir. 1991).
Commission increases penalties for counterfeit drugs and military parts. (226) Two separate laws recently amended 18 U.S.C.§ 2320. In the National Defense Authorization Act for Fiscal Year 2012, Pub. L. 112–81 (enacted December 31, 2011) Congress increased the penalties for counterfeit military goods and services. In response, the Commission amended §2B5.3 to provide a 2-level enhancement at (b)(7) and a minimum offense level of 14 for offenses involving counterfeit military goods or services. The Commission also responded to changes made by section 717 of the Food and Drug Administration Safety and Innovation Act, Pub. L. 112–144 (enacted July 9, 2012) by adding a 2-level increase at §2B5.3(b)(5) for offenses involving a counterfeit drug. An upward departure was authorized if the offense resulted in death or serious bodily injury. Finally, the Commission referenced to guideline §2N1.1 the new offense in 21 U.S.C. §333(b)(7) for intentionally providing adulterated drugs. Amendment 3, effective Nov. 1, 2013.
Commission increases penalties for theft of trade secrets and economic espionage. (226) Responding to a directive in the Foreign and Economic Espionage Penalty Enhancement Act of 2012, Pub. L. 112–269 (enacted January 14, 2013), the Commission increased the offense levels for convictions under 18 U.S.C. § 1831 (economic espionage),and 18 U.S.C. § 1832 (theft of trade secrets), by revising the specific offense characteristic at §2B1.1(b)(5) in two ways. First, it provided a 2-level increase for trade secret offenses in which the defendant knew or intended that the trade secret would be transported or transmitted out of the United States. Second, it provided a 4-level enhancement and a minimum offense level of 14 for trade secret offenses in which the defendant knew or intended that the offense would benefit a foreign government, foreign instrumentality, or foreign agent. The enhancement also was redesignated as subsection (b)(13). Amendment 1, effective November 1, 2013.
Commission clarifies counterfeiting guidelines regarding “bleached notes.” (226) A bleached note is genuine United States currency stripped of its original image through the use of solvents or other chemicals and then reprinted to appear to be a note of higher denomination. Courts in different circuits have resolved differently the question of whether an offense involving bleached notes should be sentenced under §2B5.1 (Counterfeiting) or §2B1.1 (Offenses Involving Altered or Counterfeit Instruments Other than Counterfeit Bearer Obligations). Compare U.S. v. Schreckengost, 384 F.3d 922 (7th Cir. 2004) (holding that bleached notes should be sentenced under §2B1.1), and U.S. v. Inclema, 363 F.3d 1177 (11th Cir. 2004) (same), with U.S. v. Dison, 2008 WL 351935 (W.D. La. Feb. 8, 2008) (applying §2B5.1 in a case involving bleached notes), and U.S. v. Vice, 2008 WL 113970 (W.D. La. Jan. 3, 2008) (same). The Commission resolved this issue by providing that an offense involving bleached notes is sentenced under §2B5.1. Amendment 731, effective November 1, 2009.
Commission applies death increase to intellectual property crimes. (226) In response to the Prioritizing Resources and Organization for Intellectual Property Act of 2008, Pub. L. 110–403, the commission amended §2B5.3 (Criminal Infringement of Copyright or Trademark) at subsection (b)(5) to clarify that the enhancement in that subsection, which applies when the offense involved the risk of serious bodily injury, also applies when the offense involved the risk of death. This brings the language of that enhancement back into parallel with the corresponding enhancement in subsection (b)(13) of §2B1.1. Accordingly, the amendment also increases the minimum offense level in §2B5.3(b)(5) from level 13 to level 14, bringing it back into parallel with the minimum offense level in §2B1.1(b)(13). Amendment 735, effective November 1, 2009.
Commission makes intellectual property amendment permanent. (226) The Commission made permanent the temporary, emergency amendment (effective Sept. 12, 2006) that implemented the emergency directive in section 1(c) of the Stop Counterfeiting in Manufactured Goods Act, Pub. L. 109–181 (2006). The amendment added subdivision (vii) to Application Note 2(A) of § 2B5.3 (Criminal Infringement of Copyright or Trademark) to provide that the infringement amount is based on the retail value of the infringed item in a case under 18 U.S.C. § 2318 or § 2320 that involves a counterfeit label, etc. In such a case, the “infringed item” is the identifiable, genuine good or service. In addition to re-promulgating the emergency amendment, the amendment responded to the directive by addressing violations of 17 U.S.C. §§ 1201 and 1204 involving circumvention devices, and by expanding the sentencing enhancement in § 2B5.3 (b)(3) to include convictions under 17 U.S.C. §§ 1201 and 1204 for trafficking in circumvention devices. The amendment also strikes language in Application Note 3 mandating an adjustment under § 3B1.3 (Abuse of Position of Trust or Use of Special Skill) in every case in which the defendant de-encrypted or otherwise circumvented a technological security measure to gain initial access to an infringed item. Instead, the note indicates that application of the adjustment may be appropriate in such a case because the Commission determined that not every case involving de-encryption or circumvention requires the level of skill contemplated by the special skill adjustment. Finally, the amendment modifies Application Note 4 to address downward departures. Amendment 704, effective November 1, 2007.
Commission confirms increased penalties for uploading copyrighted materials. (226) The Commission made permanent the October 24, 2005, emergency amendment to § 2B5.3, increasing sentences for uploading files that infringe copyrights. Amendment 687, effective November 1, 2006.
Commission increases penalties for copyright crimes. (226) In response to the directive in section 105 of the Family Entertainment and Copyright Act of 2005, Pub. L. 109–9, the Commission adopted a temporary emergency amendment effective October 24, 2005, providing a two-level enhancement in § 2B5.3(b) if the offense involved a “pre-release work.” Application Note 2 was amended to explain that the infringement amount for pre-release works should be determined by using the retail value of the infringed item, rather than any premium price attributed to the infringing item because of its pre-release status. The amendment also built on the current definition of “uploading” to include making an infringing item available on the Internet by storing it in an openly shared file. Application Note 3 was deleted as unnecessary, and Application Note 2 was further amended to permit the court to make a reasonable estimate of the infringement amount where the court cannot determine the number of infringing items. Finally, the new offense at 18 U.S.C. § 2319B was referenced in Appendix A (Statutory Index) to § 2B5.3. 2005 Amendment 675 effective October 24, 2005.
Commission requires comparable sentences for both domestic and foreign bribery cases. (226) The Commission amended the statutory references to the Foreign Corrupt Practices Act in §§ 2B4.1 and 2C1.1 to recognize that public corruption of foreign officials are more akin to public corruption cases than to commercial bribery cases. The change was also made to comply with the mandate of a treaty which requires signatory parties to impose comparable sentences in both domestic and foreign bribery cases. Amendment 639, effective November 1, 2002.
Commission increases penalties for counterfeiting. (226) Responding to the increase in counterfeiting due to sophisticated digital technology, the Commission added a two-level enhancement for manufacturing counterfeit currency or documents, in addition to the minimum offense level of level 15 for manufacturing. There is an additional two-level increase (which would apply alternatively to the manufacturing enhancement) for possessing or controlling (1) paper that is similar to a distinctive paper used by the United States, or (2) a feature or device that is essentially identical to a distinctive counterfeit deterrent used by the United States for its currency, obligations, or securities. In addition, the amendment deletes the language in the commentary of § 2B5.1 that suggests that the manufacturing adjustment does not apply if the defendant “merely photocopies.” Amendment 618, effective November 1, 2001.
Commission increases penalties for copyright and patent infringement. (226) The No Electronic Theft (NET) Act of 1997 directed the Commission to provide for consideration of the retail value of the infringed item. The amendment directs the court to use the “infringement amount,” which is calculated using a formula set out in the application notes and which will typically be the retail value of the “infringed item.” The amendment also adds two new specific offense characteristics and minimum offense levels to address (1) the manufacture, importation, or uploading of infringing items; and (2) the conscious or reckless risk of serious bodily injury or possession of a dangerous weapon in connection with the offense. A downward adjustment is provided if the offense was not committed for commercial advantage or private financial gain. The amendment also provides two upward departure provisions and a new application note regarding the interaction of this guideline and § 3B1.3 (Abuse of a Position of Trust or Use of Special Skill). This is an emergency amendment effective May 1, 2000 and will become permanent on November 1, 2000. Amendment No. 590, effective May 1, 2000.
Commission provides enhancement for weapon in counterfeiting and forgery. (226) In Amendment 513, effective November 1, 1995, the Commission added sections 2B5.1(b)(3) and 2F1.1(b)(4) increasing the offense level for counterfeiting and forgery by two levels (to at least level 13) if a dangerous weapon was possessed in connection with the offense.
Commission adds new guideline for fraud involving deprivation of the intangible right to the honest services of public officials. (226) The November 1, 1991 amendment creates a new guideline 2C1.7 with a base offense level of ten to cover certain broad offenses that involve public corruption. An eight level enhancement is provided if the offense involved an elected official or any official holding a high level decision making or sensitive position. Application note 5 authorizes an upward departure where the court finds that the defendant’s conduct was part of a systematic or pervasive corruption of a governmental function, process, or office that may cause loss of public confidence in government.