§300 Fraud
(U.S.S.G. §2B) (formerly §2F)
First Circuit
Second Circuit
Third Circuit
Fourth Circuit
Fifth Circuit
Sixth Circuit
Seventh Circuit
Eighth Circuit
Ninth Circuit
Tenth Circuit
Eleventh Circuit
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Miscellaneous
1st Circuit applies “gross receipts” increase where defendant enjoyed fraud proceeds issued to his wife. (300) Defendant was convicted of bank fraud after he used forged documents to obtain and later refinance a mortgage in his wife’s name. Guideline § 2B1.1(b) (13)(a) provides for a two-level enhancement if “the defendant derived more than $1,000,000 in gross receipts from one or more financial institution as a result of the offense.” Defendant argued that this “gross receipts” enhancement did not apply because the gross receipts were derived by his wife, not him. A prenuptial agreement with his wife provided that property and assets obtained by her were to be and remained her personal property. The First Circuit upheld the application of the gross receipts enhancement. The guideline may be applied where the defendant either controlled (even though indirectly) the fraud proceeds attributed to him or where he causes them to be lodged in another with the expectation that he will enjoy the benefits. Defendant easily met this standard. He used the borrowed money to finance a lavish lifestyle for himself and his family, and clearly enjoyed the fruits of the scheme to defraud. Although one of the lenders was a “private mortgage lender,” it still qualified as a financial institution under the guidelines’ definition in Note 1 to § 2B1.1. U.S. v. Edelkind, 467 F.3d 791 (1st Cir. 2006).
1st Circuit, en banc, finds reasonable basis for fraud sentence exceeding guideline maximum. (300) The district court sentenced defendant, who plead guilty to wire fraud, to 96 months’ imprisonment, which was 33 months above the top of his guideline sentencing range. The First Circuit, following the approached it outlined in U.S. v. Jimenez-Beltre, 440 F.3d 514 (1st Cir. 2006), abrogated by Rita v. U.S., 551 U.S. 338, 127 S.Ct. 2456 (2007), ruled that the sentence was reasonable. The court first examined the reasons given by the district court for sentencing above the guideline range. The court discussed defendant’s exploitation of personal relationships, the harm caused, his misuse of his skills, his extravagant use of the funds stolen, and his history of dishonest conduct. The court said the sentence was to deter such conduct and protect the public needed. Defendant did not challenge these factors, only claiming that mitigating factors were ignored. However, the fact that the district court did not elaborate on them (it said it took them into account) did not preclude the inference that the court found that government’s counter-arguments persuasive. The court had a reasonable basis for exceeding the guideline maximum, and the extent of the variance was not out of line with other upward variances in egregious cases. U.S. v. Scherrer, 444 F.3d 91 (1st Cir. 2006) (en banc).
1st Circuit holds that bank president’s fraud involved more than minimal planning. (300) Defendant, the president of a bank, was convicted of various fraud counts in connection with his use of bank funds to pay off a personal debt. Section 2F1.1(b)(1)(A) of the 1998 guidelines, which were in effect when he committed his offense, contained a four-level enhancement if the offense involved more than minimal planning. There is no provision in the 2001 guidelines for a more than minimal planning increase, and the district court found that defendant’s adjusted offense level under the 2001 guidelines was 12. Defendant argued that his offense did not involve more than minimal planning, his adjusted offense level under the 1998 guidelines would only have been 10, and therefore, the application of the 2001 guidelines violated the ex post facto clause. The First Circuit found that defendant’s offense involved more than minimal planning under the 1998 guidelines, and therefore the application of the 2001 guidelines did not violate the ex post facto clause. Defendant’s actions exceeded the amount of planning typical for a commission of bank fraud in a simple form. First, defendant established a working relationship with multiple members of a family involved in the fraud. These prior dealings provided a model for the fraudulent transaction involved in the offense of conviction. The transaction itself required considerable paperwork and involved the unwitting participation of an outside party, the bank officer who prepared the false documents at the direction of defendant. U.S. v. Colon-Munoz, 318 F.3d 348 (1st Cir. 2003).
1st Circuit affirms more than minimal planning increase for repeated acts over seven months. (300) Defendant was a dairy farmer. On at least five occasions over a seven-month period, defendant, together with delivery truck drivers, participated in a scheme to add water and salt to the milk produced at his farm. The water was added to increase the amount of milk sold and salt was added to mask the addition of water and avoid detection of the adulterated milk at the processing plant. The district court found that defendant had engaged in more than minimal planning under § 2F1.1(b)(2)(a) based on his affirmative steps to conceal the offense. The sole purpose of adding the salt was to conceal the milk adulteration. Moreover, defendant’s repeated acts, occurring over a period of seven months, could not be characterized as “purely opportune.” Defendant had the salt ready and had prefilled the milk vats with water in preparation for the adulteration. The First Circuit found no clear error in the enhancement. U.S. v. Lopez-Lopez, 295 F.3d 165 (1st Cir. 2002).
1st Circuit rejects using obstruction guideline for false statement conviction. (300) Application Note 14 to guideline § 2F1.1 says that when a conviction establishes an offense “more aptly covered by another guideline,” that guideline should be applied rather than 2F1.1. Here, defendant was convicted of making a false statement to the FBI in violation of 18 U.S.C. § 1001. The district court relied on Application Note 14 to sentence him under the obstruction of justice guideline, § 2J1.2, reasoning that his conviction established a violation of 18 U.S.C. § 1503. The First Circuit reversed, holding that Application Note 14 applies only when the conviction or the stipulated facts in the PSR establish the essential elements of a crime to which another guideline applies. Here, there was nothing to show that defendant knew there was a pending proceeding that his false statements would obstruct. The district court did not find that he knew of the pending grand jury proceeding or that his statements would be provided to the grand jury. U.S. v. Scungio, 255 F.3d 11 (1st Cir. 2001).
1st Circuit holds that check-kiting scheme involved more than minimal planning. (300) Defendant lived with his employer. After a dispute over medical bills, defendant became angry and left his employment and his employer’s home, taking with him the company’s business checkbook. Defendant then engaged in a check-kiting scheme using the stolen checks. He wrote several checks to himself for varying amounts, and during a two-day period and at four different branches, he either cashed the checks and/or made withdrawals from the amounts previously deposited into his account. During a two-day period, defendant defrauded the bank of $11,405 before it discovered the scheme. Defendant challenged a more than minimal planning increase under § 2F1.1(b)(2), contending that his actions were impulsive and opportunistic. The First Circuit found the increase appropriate, since defendant’s repeated transactions at different bank branches were not “purely opportune.” “Although [defendant] obviously took advantage of having recently obtained his employer’s checks, and it may seem unlikely that it occurred to him to engage in this scheme at any time prior to his taking the checks and leaving, it nonetheless took two days for him to complete the process of deposits and withdrawals that were the basis of his bank fraud charge.” U.S. v. Chapman, 241 F.3d 57 (1st Cir. 2001).
1st Circuit holds that attempts to obtain advances on letter of credit involved more than minimal planning. (300) Defendant presented fraudulent documentation to a bank so that his company could draw on a $109,411 letter of credit set up for the company by a customer. The letter of credit was only to be drawn upon after defendant’s company had shipped certain products to the customer. Defendant challenged a more than minimal planning enhancement, claiming that the letter of credit inadequately described the products to be shipped and that his repeated deceptive acts were merely opportunistic. The First Circuit affirmed the more than minimal planning increase. Defendant’s deceitful actions began with his misuse of a $75,000 advance from the same customer given months earlier. He involved other company employees in creating the fraudulent documents, and made repeated efforts to fraudulently induce the bank to issue the monies authorized by the letter of credit. Defendant’s actions were not merely opportunistic or “spur of the moment.” U.S. v. Agne, 214 F.3d 47 (1st Cir. 2000).
1st Circuit applies enhancement to defendant who ignored court order to disclose assets. (300) Defendant failed to reveal on a bankruptcy petition his ownership interest in a house. The district court applied an enhancement under § 2F1.1(b)(3)(B) for violating a judicial order or process. Under U.S. v. Shadduck, 112 F.3d 523 (1st Cir. 1997), the enhancement does not apply automatically whenever someone fails to follow a general set of instructions in a bankruptcy form or rule. Instead, the enhancement applies only to those who receive a more specific command from the bankruptcy court and break it. The First Circuit affirmed the enhancement because defendant violated such a specific order. Defendant’s petition for bankruptcy did not include a list of his assets. Recognizing this deficiency, the bankruptcy court sent defendant a notice advising him to disclose his assets in their entirety by filing a Statement of Financial Affairs. Unlike a notice of hearing or another informational announcement that a debtor might receive as a matter of course upon filing for bankruptcy, this notice was specifically directed at defendant with a tailored command to cure the defects in his original petition. Defendant chose to violate the notice by continuing to conceal his interest in the house. U.S. v. Rowe, 202 F.3d 37 (1st Cir. 2000).
1st Circuit rejects more than minimal planning for depositing bad checks in own bank account. (300) Defendant was approached by a stranger who offered him an unspecified amount of money to cash some checks. When defendant agreed, the stranger gave him six checks, and then asked defendant if he knew anyone else who would cash checks. Defendant agreed. He deposited two of the checks in his own bank account, gave two to someone he knew as “Samman,” and gave two to someone he did not know. The day after he deposited the checks, he withdrew $5,000 from that account, collected money from the other two individuals, and gave the total sum to the stranger, who then paid defendant $500. The First Circuit rejected a § 2F1.1(b)(2) enhancement for more than minimal planning. The crime was simple and short-lived. The fact that defendant went to the bank twice to complete the simple act of depositing checks and withdrawing funds was not a complication of the basic crime. Although defendant recruited two others to negotiate four of the six counterfeit checks, he did so at the stranger’s request. Defendant complied with the request as part of the same criminal act during the same short period. U.S. v. Phath, 144 F.3d 146 (1st Cir. 1998).
1st Circuit uses fraud guideline where environmental crime was incidental by-product of fraud. (300) Defendant operated a business that recycled virgin petroleum-contaminated soil into asphalt. His permit limited the amount of contaminated soil that could be stored at the site at 3000 tons, but he soon exceeded this. He was convicted of mail and wire fraud for defrauding customers of money by representing that the company could lawfully receive and recycle customers’ virgin petroleum-contaminated soil. The First Circuit held that defendant was properly sentenced under § 2F1.1, the fraud guideline, rather than under § 2Q1.2, which covers environmental crimes. Defendant’s objective was to make money, and in the process he engaged in an environmental crime, which was an incidental by-product of his fraudulent conduct. U.S. v. Henry, 136 F.3d 12 (1st Cir. 1998).
1st Circuit holds that bankruptcy rules and official forms are not judicial orders. (300) Defendant concealed from the bankruptcy trustee several checks he received as advances on insurance policies and from his pension plan. The district court enhanced his sentence under § 2F1.1(b)(3)(B) for violating a judicial order by repeatedly flouting the bankruptcy rules and official forms. The First Circuit held that a bankruptcy rule or official form is not a “judicial order” under § 2F1.1(b)(3)(B). The bankruptcy judge never entered an order specifically directing defendant to disclose property. The universal admonitions in the various official forms and bankruptcy rules which are applicable to all debtors in bankruptcy proceedings are not judicial or administrative orders. The enhancement applies to defendants who have demonstrated a heightened mens rea by violating a prior judicial or administrative order. If the official forms and rules were a judicial order, the enhancement would apply in all bankruptcy fraud cases. On remand the court may consider whether defendant violated a judicial “process.” U.S. v. Shadduck, 112 F.3d 523 (1st Cir. 1997).
1st Circuit holds that individual creditors are victims of bankruptcy fraud. (300) Defendant concealed from the bankruptcy trustee several checks he received as advances on insurance policies and from his pension plan. The district court enhanced his sentence under § 2F1.1(b) (2)(B) for engaging in a scheme to defraud more than one victim. The First Circuit rejected defendant’s claim that the trustee alone was victimized by the concealment. The primary victims of a bankruptcy fraud are for the most part the individual creditors. U.S. v. Shadduck, 112 F.3d 523 (1st Cir. 1997).
1st Circuit finds second fraudulent loan used to pay off first fraudulent loan was relevant conduct. (300) Defendant was convicted of bank fraud after he inflated the purchase price of a warehouse in order to receive a loan for the full purchase price of the warehouse. He also submitted to the bank falsified rental agreements for tenants at the warehouse. In order to pay off this first loan, he used proceeds from a second loan that he obtained with four other men. In obtaining this loan, defendant forged the signatures of the men’s wives on a guarantee form. The First Circuit upheld the court’s consideration of the forgery and the fraudulent nature of the second as relevant conduct for the first loan. The use of the forgery to obtain the second loan was part of the same scheme or plan as defendant’s fraudulent efforts to obtain the first loan. Defendant used the proceeds from the second loan to pay off the first loan. U.S. v. U.S. v. D’Andrea, 107 F.3d 949 (1st Cir. 1997).
1st Circuit finds more than minimal planning in repeated acts over several months. (300) Defendant was involved in a scheme to transport tobacco from a Native American reservation in upstate New York into Canada without paying the taxes and excise duties levied by Canadian laws. The First Circuit agreed that the scheme involved more than minimal planning because it involved multiple acts over a several month period. For example, the conspirators bribed the police chief. U.S. v. Boots, 80 F.3d 580 (1st Cir. 1996), overruling on other grounds recognized by U.S. v. Richardson, 421 F.3d 17 (1st Cir. 2005).
1st Circuit finds defendant’s fraud was within heartland of § 2C1.7. (300) Defendant, a city alderman, gave gifts and gratuities to other aldermen so they would award a lucrative construction contract to the company for which he worked. He pled guilty to using the mails to defraud the city of its right to the honest service of its public officials, in violation of 18 U.S.C. §§ 1341 and 1344. The court sentenced defendant under § 2C1.7 (Fraud Involving Deprivation of Intangible Right to Honest Services of Public Officials). Defendant argued that the court misunderstood its authority to depart downward, by analogy, to § 2C1.3 (Conflict of Interest). The First Circuit held that defendant’s conduct fell within the heartland of § 2C1.7. Defendant lobbied board members after his recusal from the committees that awarded the contract. He secretly delivered gratuities and information about the company without disclosing his actions to other board members. Although defendant may not have received a direct monetary benefit, he clearly deprived the citizens of their right to the honest services of their government. U.S. v. Grandmaison, 77 F.3d 555 (1st Cir. 1996), superseded on other grounds by guideline as stated in U.S. v. Mikutowicz, 365 F.3d 65 (1st Cir. 2004).
1st Circuit directs that victim impact statement be given to defendant before resentencing. (300) Defendant was convicted of seven counts of fraud; the first five counts were reversed on appeal. Defendant challenged the loss attributable to the two remaining counts. Although defendant conceded a loss of $308,481, the probation officer recommended a loss of $431,176 based on a victim impact statement. The victim impact statement was not attached to the PSR, and defendant claimed he never received a copy. In remanding for resentencing on the two remaining counts, the First Circuit directed the government to provide the victim impact statement to defense counsel before resentencing if it wanted to use the larger of the two figures. The district court’s basis for using the larger figure could not be discerned from the record. U.S. v. Lopez, 71 F.3d 954 (1st Cir. 1995).
1st Circuit says seven false book entries involved more than minimal planning. (300) Defendant and other officers of an insurance company defrauded the company by running a false claim scheme. Defendant, as vice president for claims, reopened previously closed files so fictitious claims could be made against those accounts. Another co-defendant assigned cash reserves for those accounts. Finally, another co-defendant who was an attorney submitted fictitious claims on behalf of non-existent clients, which were paid by the company and charged against the reserves assigned to the reopened accounts. The First Circuit agreed that the scheme, which required defendant to make at least seven false book entries, involved more than minimal planning. U.S. v. Santiago-Gonzalez, 66 F.3d 3 (1st Cir. 1995).
1st Circuit upholds § 2F1.1(b)(3)(B) enhancement for knowing violation of previously imposed consent order. (300) Defendant fraudulently acquired an insurance company and diverted $400,000 of its funds to his personal use. Before the purchase, the company had been facing financial difficulties and had entered into several consent orders with the state concerning its operations. Defendant violated a consent order restricting the use of the company’s assets. The Second Circuit upheld a § 2F1.1(b)(3)(B) enhancement for a knowing violation of the consent order, even though the order was not directed at defendant personally. Although the order was entered into before defendant purchased the company, he was subject to the enhancement because he controlled the company, knew of the order, and acted in deliberate contravention of it. U.S. v. Newman, 49 F.3d 1 (1st Cir. 1995), superseded on other grounds by statute as stated in U.S. v. Hensley, 91 F.3d 274 (1st Cir. 1996).
1st Circuit concludes bank fraud continued beyond effective date of amendment. (300) Defendant participated in a conspiracy that fraudulently obtained millions of dollars in real estate loans from two credit unions. He argued that a § 2F1.1(b)(6)(A) enhancement for jeopardizing the safety and soundness of a financial institution violated the ex post facto clause. The Second Circuit found no ex post facto violation since the conspiracy continued past the effective date of the amendment, November 1, 1990. Although all of the loans described in the indictment had closed before that date, the conspiracy extended into 1991, when defendant actively misled the credit union regarding the status of one of the loans. U.S. v. Smith, 46 F.3d 1223 (1st Cir. 1995).
1st Circuit says last date of offense, not relevant conduct, controls for ex post facto purposes. (300) Defendant obtained a series of fraudulent loans–the first in August 1988 and the last in October 1989. Effective November 1, 1989, the loss table in guideline section 2F1.1 was amended. In April 1990, defendant created and placed in one of the loan files documents that falsely showed that a mortgage for this loan had been recorded in 1989. The 1st Circuit held that defendant was properly sentenced under the 1988 guidelines. Application note 2 to section 1B1.11 states that the last date of the offense of conviction is the controlling date for ex post facto purposes. Relevant conduct that occurs after a guideline amendment does not change this. Defendant’s creation of false documents in April 1990 was merely relevant conduct, and thus not controlling for ex post facto purposes. U.S. v. Bennett, 37 F.3d 687 (1st Cir. 1994).
1st Circuit upholds more than minimal planning enhancements for bank fraud scheme. (300) Defendants were involved in a scheme to obtain bank loans by fraudulently representing the existence of down payments. In light of the complex and sophisticated scheme, the 1st Circuit found defendants’ challenges to the more than minimal planning enhancements under § 2F1.1(b)(2)(A) to be “far-fetched.” The scheme involved more planning than was typical for commission of the offense in its simple form, and involved repeated acts by defendants. U.S. v. Brandon, 17 F.3d 409 (1st Cir. 1994).
1st Circuit upholds using lower appraisal to value collateral for fraudulently obtained loan. (300) Defendants were involved in a scheme to obtain bank loans by fraudulently representing the existence of down payments. The district court reduced the amount of loss caused by the fraud by the amount of the collateral securing the loans. The 1st Circuit upheld the district court’s use of a 1991 appraisal of the collateral, which was significantly lower that a 1989 appraisal. Although defendants argued that the earlier appraisal was more accurate because it was closer to the crime, there was no error in relying on the later appraisal, which was professionally prepared. U.S. v. Brandon, 17 F.3d 409 (1st Cir. 1994).
1st Circuit holds conspirators liable for all losses caused by fraudulent scheme. (300) Defendants were involved in a scheme to obtain bank loans by fraudulently representing the existence of down payments. They argued that they were improperly sentenced for the entire loss regardless of their degree of participation. The 1st Circuit affirmed, ruling that the district court properly found that most of the defendants could foresee the entire amount of the loss. There were no discernable limits to the scope of the criminal venture in which the defendants agreed to participate. Although three defendants did not become involved in the conspiracy until later, any error in holding them accountable for the full amount of loss was harmless. Even if the losses from loans made prior to their entry into the conspiracy were excluded, the loss attributable to these late coming defendants would still be well over $5 million, the highest level under the 1988 version of § 2F1.1. U.S. v. Brandon, 17 F.3d 409 (1st Cir. 1994).
1st Circuit uses cost of valid bond to approximate loss from forged bond. (300) Defendant was awarded a government contract on the basis of his low bid of $1,000,200. However, he was convicted of fraud charges because the bid was accompanied by several improper and counterfeit surety bonds. The district court calculated loss under section 2F1.1 as the difference between defendant’s bid price and the price at which the contract was eventually awarded. The 1st Circuit rejected this calculation, since the government never showed that it could have secured a bid from a properly bonded contractor at the price offered by defendant. A more accurate estimate was the cost of a valid bond. However, restitution was a different matter. Intended or probable loss cannot be the measure of restitution. The only actual loss was the $250 administrative cost of reawarding the contract. U.S. v. Stern, 13 F.3d 489 (1st Cir. 1994).
1st Circuit holds that considering loss and leadership role was not double counting. (300) Defendant was involved in two fraud schemes. He contended that it was improper double counting for his sentence to be enhanced under § 2F1.1(b) for the amount of the loss, and also under § 3B1.1(a) for his leadership role. The 1st Circuit rejected his claim. First, he failed to raise the claim below. Second, there was no double counting because the two enhancements measure different things. Section 2F1.1(b) measures the gravity of an offense, with loss serving as a proxy for the seriousness of an offense. Section 3B1.1 measures the culpability of a defendant’s conduct, increasing or decreasing his punishment in rough proportion to his involvement. Although the two enhancements have a degree of relatedness, this did not constitute improper double counting. U.S. v. Lilly, 13 F.3d 15 (1st Cir. 1994).
1st Circuit holds that losses in one fraud scheme were relevant conduct to other scheme. (300) Defendant operated two not-for-profit corporations that contracted with the Commonwealth of Massachusetts to provide services for mentally handicapped persons. He was charged with defrauding the Commonwealth by failing to disclose certain information and making excessive reimbursement requests. Pursuant to a plea agreement, charges relating to one corporation were dismissed, and he pled guilty to charges relating to the other corporation. The 1st Circuit affirmed that the dismissed counts were relevant conduct and thus the losses could be considered at sentencing. The schemes shared a great deal in common: (a) the same victim, (b) the same method of operation, and (c) the same three principals. The schemes were sufficiently comparable in character, cast and plot to warrant similar treatment under section 1B1.3. U.S. v. Williams, 10 F.3d 910 (1st Cir. 1993).
1st Circuit rules pre-offense planning of concealment not necessary for more than minimal planning enhancement. (300) Defendant deposited a stolen tax refund check containing forged signatures into his own bank account. When confronted by investigators, defendant claimed he received the check from a Hispanic man as partial payment for a car. A friend corroborated this story. The 1st Circuit upheld an enhancement for more than minimal planning under section 2F1.1(b)(2)(A), rejecting the need for direct evidence of pre-offense planning of the concealment of the offense. Although a defendant’s subsequent cover-up activity may be so disassociated from the earlier crime as to make the more than minimal planning enhancement unreasonable, such a determination is one of fact for the district court. Here, defendant put his name and address on the stolen check, and thus knew he would later be questioned by authorities. The false story he told, and the elaborate steps he took to support it, were integral to the original offense. The offense could properly be said to have involved the later cover-up activity. Judge Bownes dissented. U.S. v. Beauchamp, 986 F.2d 1 (1st Cir. 1993).
1st Circuit upholds use of intended, rather than actual, loss in bank fraud case. (300) Defendant presented two fraudulent sight drafts totaling $62,508.50 to his bank to pay delinquent real estate mortgages. When the bank discovered the fraud, they refused to discharge the mortgages and eventually were forced to foreclose. After accounting for the proceeds from foreclosure, the bank suffered a loss of $20,248.10, plus costs of $5,511.30 in fending off defendant’s attempts to force the bank to honor the fraudulent drafts. The 1st Circuit affirmed that the amount of loss under section 2F1.1 was the $62,508.50 that defendant intended to fraudulently obtain from the bank, rather than the bank’s smaller actual loss. Under application note 7 to section 2F1.1, intended loss should be used if it can be determined and is greater than actual loss. Defendant’s case did not fall within an exception narrowly created for loan application and contract procurement cases. U.S. v. Haggert, 980 F.2d 8 (1st Cir. 1992).
1st Circuit says plan to sell forged instruments involved more than minimal planning. (300) Defendant was arrested in possession of forged cashier’s checks and demand drafts with a total face value of more than $18 million. Defendant testified that he hoped to get 80 percent of the face amount of the checks, but that he might accept as little as 40 percent of face value. The 1st Circuit affirmed an enhancement for more than minimal planning, since the offense “obviously involved a complex plan.” U.S. v. Resurreccion, 978 F.2d 759 (1st Cir. 1992).
1st Circuit affirms $10 million loss from forged bank documents despite no actual loss. (300) 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).
1st Circuit holds that 23 forged travel expense vouchers involved more than minimal planning. (300) Over a period of four years, defendant defrauded the Commonwealth of Massachusetts by falsifying his travel expense vouchers and altering the underlying support documents. The 1st Circuit reversed the district court’s determination that the mail fraud offense did not involve more than minimal planning under section 2F1.1(b)(2). Defendant’s fraudulent scheme involved repeated acts over a four-year period, and could not be characterized as purely opportune. Conduct is purely opportune only if it is spur of the moment conduct, intended to take advantage of a sudden opportunity. The intricate detail involved with some of the alterations, as well as the necessity that defendant undertake several steps in order to secure payment for the fraudulent vouchers, belied his claim that the alterations were done on the spur of the moment. U.S. v. Rust, 976 F.2d 55 (1st Cir. 1992).
1st Circuit affirms denial of evidentiary hearing on determination of victim loss. (300) The 1st Circuit held that defendant did not demonstrate that an evidentiary hearing under 6A1.3 would be the only reliable way to resolve the victim loss calculation under section 2F1.1, or that one would be useful. The sentencing judge, having presided at trial, was intimately familiar with the only relevant evidence to which defendant alluded in his hearing request. At no time did defendant identify any evidence which would be presented at a hearing so as to enable the district court to evaluate the usefulness of an evidentiary hearing. Although defendant made the conclusory assertion that he had figures which would establish his entitlement to a victim loss set-off, none were ever submitted, either below or on appeal. U.S. v. Shattuck, 961 F.2d 1012 (1st Cir. 1992).
1st Circuit rules that multiple causes of victim loss may only be considered as grounds for downward departure. (300) Defendant contended that the victim loss caused by his fraud had been distorted by real estate market conditions. The 1st Circuit ruled that defendant waived this issue by failing to request a downward departure on this basis. Although the victim loss table in section 2F1.1 presumes that the defendant alone is responsible for the entire amount of the loss, any portion of the total loss extraneous to the defendant’s criminal conduct is not deducted from total victim loss prior to the determination of the applicable guideline range. Rather, as explained in note 10 to section 2F1.1, a downward departure may be warranted where extraneous causes distort the victim loss calculation. Since defendant did not request a downward departure based on multiple causation, he waived this claim. U.S. v. Shattuck, 961 F.2d 1012 (1st Cir. 1992).
1st Circuit calculates victim loss on total amount of unsecured fraudulent loans. (300) Defendant, a bank officer, was convicted of bank fraud and embezzlement in connection with the misapplication of bank funds in five commercial real estate transactions. Defendant challenged the calculation of victim loss under section 2F1.1, contending that it should not be based upon the total amount fraudulently disbursed. The 1st Circuit rejected this argument, since the fraud cases cited by defendant all dealt with fraudulent loans for which the defendant pledged valuable collateral to secure their repayment. Here, when defendant misapplied bank funds to unauthorized persons or purposes, he did not provide the bank with collateral to secure repayment of the unauthorized advances. Thus, the full amount of the loans was the proper measure of the loss. U.S. v. Shattuck, 961 F.2d 1012 (1st Cir. 1992).
1st Circuit upholds sentence where possible error in victim loss calculation would not change offense level. (300) The district court set the total victim loss from defendant’s bank fraud at $721,000, which under section 2F1.1(b)(1) triggered an eight level enhancement. Defendant argued that amounts which were misapplied by defendant but remained with the bank should not be included in the calculation because they were never “taken.” The 1st Circuit declined to determine whether this argument had merit since even if correct, the net victim loss would be still be over $522,000. This would still justify the eight level enhancement under section 2F1.1. U.S. v. Shattuck, 961 F.2d 1012 (1st Cir. 1992).
1st Circuit finds no error in denial of motion to continue sentencing hearing. (300) Defendants asserted that the trial court erred in denying their motion for a continuance at sentencing so that they could offer proof of the amount of the victim loss caused by their fraud. Defendants had ample opportunity to present evidence to the court regarding valuation of victim loss. The sentencing judge made a determination that defendants were not entitled to an evidentiary hearing to present further proof of loss. Further, defendants would have had to show that the district court’s valuation erred by $450,000 in order to reach the next lower level. The only evidence cited in their briefs alleged an error of $79,000, well below the threshold necessary to change their offense level. Moreover, even if defendants had prevailed and received the offense level reduction, their sentences still would fall within the present guideline range. Thus any error in the calculation of loss was harmless. U.S. v. Concemi, 957 F.2d 942 (1st Cir. 1992).
1st Circuit affirms that 11 fraudulent loan applications involved more than minimal planning. (300) Defendant, a real estate broker, pled guilty to 11 counts of filing false residential mortgage loan documents. The 1st Circuit affirmed that defendant’s conduct involved more than minimal planning. Application note 1(f) to guideline section 1B1.1 provides that more than minimal planning is present in any case involving repeated acts over a period of time, unless it is clear that each instance was purely opportune. The court rejected defendant’s claim that his repeated preparation and submission of false statements constituted “spur of the moment” conduct. Each of the 11 loan transactions involved several steps: arranging for the mortgage financing, concealing the second mortgage financing in the first mortgage loan documents, and submitting the loan documents to the bank. U.S. v. Gregorio, 956 F.2d 341 (1st Cir. 1992).
1st Circuit upholds unguided downward departure for multiple causation of loss. (300) Defendant received a six-level enhancement under guideline section 2F1.1(b)(1) for causing victim loss of between $100,000 and $200,000. The district court departed downward from defendant’s guideline range, relying upon application note 10 to section 2F1.1, which authorizes a departure where there are multiple causes of the victim’s loss. The 1st Circuit affirmed, rejecting defendant’s contention that defendant’s share of the loss should have been determined as part of the process of determining defendant’s offense level. The Sentencing Commission’s identification of multiple causation as a grounds for a downward departure left the structure and dimension of the departure to the discretion of the sentencing court. U.S. v. Gregorio, 956 F.2d 341 (1st Cir. 1992).
1st Circuit rules defendant waived right to appeal loss calculation. (300) Defendant submitted a written objection to the presentence report’s calculation of the loss caused by his fraud. The district court rejected defendant’s objection and upheld the methodology used in the presentence report. Defendant failed to renew his objection in his appellate brief. Therefore, the 1st Circuit ruled that defendant had waived the objection. He also could not challenge the calculation on different grounds for the first time on appeal. U.S. v. Dietz, 950 F.2d 50 (1st Cir. 1991).
1st Circuit includes in loss the value of house which fraud victim lost when she could not make mortgage payments. (300) Defendant was convicted of impersonating a DEA agent. During the impersonation, he convinced one woman’s father to invest $8,760 in his business, and convinced the women to quit their jobs and come work at his business, paying them with checks that often bounced. He was sentenced under the fraud guideline. The 1st Circuit affirmed the addition of four points under section 2F1.1(b)(1)(E) because the victims’ loss was between $20,000 and $40,000. The father would not have given defendant the $8,760 had he not believed defendant was a DEA agent trying to help his daughter. The record also indicated that one of the women lost her house due to a failure to keep up her mortgage payments. Defendant was responsible for at least some of this loss, for he insisted that she move, that she leave her former job, and that she go to work for him. He often paid her wages with checks that bounced, leaving her without money to make the mortgage payments. The district court’s attribution to defendant of $15,000, half of the value of her loss, was reasonable. U.S. v. Pavao, 948 F.2d 74 (1st Cir. 1991).
1st Circuit upholds application of fraud guideline to defendant who impersonated a DEA agent. (300) Defendant pled guilty to impersonating a DEA agent. The impersonation guideline, section 2J1.4(c)(1), states that if the impersonation was to facilitate another more serious offense, the guideline for an attempt to commit that offense should be applied. The attempt guideline, section 2X1.1(b)(1) instructs a court to apply the guideline for the actual offense (fraud) where all the necessary acts were completed. Accordingly, the district court sentenced defendant under the fraud guideline, section 2F1.1, and the 1st Circuit affirmed. Defendant falsely told two women that he was a DEA agent, that he would help them avoid arrest, and that they must follow his orders or drug “kingpins” would harm them. He convinced one woman’s father to invest $8,760 in his business, and obtained his credit card numbers and authority to manage his bank accounts. He convinced the women to quit their jobs and work at his business, paying them with checks that often bounced. Even if obtaining money by fraud was not defendant’s primary purpose for the impersonation, the impersonation did facilitate the offense. U.S. v. Pavao, 948 F.2d 74 (1st Cir. 1991).
1st Circuit affirms upward departure for defendant who fraudulently obtained identification to escape prosecution. (300) While on parole for sexual battery, defendant fled his hometown to escape prosecution for sexually molesting two young girls. Defendant unlawfully adopted a dead man’s identity and fraudulently obtained the dead man’s social security card, driver’s license and birth certificate. Defendant lied on his passport application and continued to lie after being arrested and identified by the FBI. The applicable guideline range was 15 to 21 months. The district court properly departed upward and sentenced defendant to 36 months, based on the deception used and the fact that the monetary loss caused by defendant’s fraud did not capture the harmfulness of defendant’s conduct. The 1st Circuit upheld the departure, finding both the grounds and the extent of the departure reasonable. U.S. v. Scott, 915 F.2d 774 (1st Cir. 1990).
1st Circuit holds that obtaining fraudulent loans from a bank involves more than minimal planning. (300) The 1st Circuit held that it was proper to find that it took more than minimal planning to fraudulently obtain loans from a bank where defendant worked, thus leading to an enhancement of her offense level. It could not conceive of anyone obtaining even one fraudulent loan without more than minimal planning since a chain of false information must be provided. The court stated that the definition of ‘more than minimal planning,’ as set forth in § 1B1.1 Application Note 1(F) was clearly met in this case. The district court’s finding on this issue was not clearly erroneous. U.S. v. Fox, 889 F.2d 357 (1st Cir. 1989).
2nd Circuit orders defendant convicted of fraudulent possession of credit cards to pay restitution for fraudulent use of credit cards. (300) Defendant pled guilty to fraudulently possessing unauthorized access devices. He challenged an order to pay over $42,000 in restitution, since these damages arose not from his possession of those unauthorized access devices (the crime of conviction), but from their use. The Second Circuit held that the restitution was proper. A “victim” is defined as “a person directly and proximately harmed as a result of the commission of an offense for which restitution may be ordered including, in the case of an offense that involves as an element a scheme, conspiracy, or pattern of criminal activity, any person directly harmed by the defendant’s criminal conduct in the course of the scheme, conspiracy, or pattern.” This language made clear Congress’s intent to include losses resulting from harmful acts committed in the course of inchoate crimes. The statute of conviction, 18 U.S.C. § 1029(a)(3), includes as an element that the possession be “with intent to defraud.” Intent to defraud is a “scheme,” as used in § 3663A, and thus losses suffered as the result of the fraudulent use of a credit card whose illegal possession with intent to defraud is charged under § 1029(a)(3) are compensable by restitution under § 3663A (a)(1). U.S. v. Oladimeji, 463 F.3d 152 (2d Cir. 2006).
2nd Circuit holds that 25-year sentence for CEO involved in securities fraud was reasonable. (300) Defendant was the Chief Executive Officer of WorldCom, Inc, a publicly traded global telecommunications company. He engineered a scheme to disguise WorldCom’s declining operating performance by falsifying its financial reports. The Second Circuit upheld his 25-year sentence. Although co-defendants received much shorter sentences, the disparity was based on the varying degrees of culpability and cooperation between the various defendants. All of the co-conspirators cited by defendant cooperated and pled guilty, defendant did not. Moreover, each was a subordinate of defendant. Defendant, as CEO, had primary responsibility for the fraud. The 25-year sentence for the white-collar crime was reasonable, although it was longer than the sentences routinely imposed by many states for violent or serious crimes. The sentence was actually below the guideline level. The guidelines reflect Congress’ judgment as to the appropriate national policy for such crimes. Moreover, the securities fraud here was not puffery or even a misguided attempt to protect the company’s shareholders from a temporary downturn in business. Rather, the fraud was motivated by defendant’s personal financial circumstances. U.S. v. Ebbers, 458 F.3d 110 (2d Cir. 2006).
2nd Circuit remands for findings to support departure. (300) Defendant, a worker on a foreign oil tanker, falsified log entries to conceal the ship’s discharge of oil-contaminated bilge water into international waters. He pled guilty to making a materially false statement on a matter within the jurisdiction of the U.S., in violation of 18 U.S.C. § 1001. At sentencing, the government urged the court to add a six-level enhancement because a substantial part of the scheme occurred outside the U.S. Without explicitly deciding whether the enhancement applied, the court determined that if it were to adopt the government’s version of the facts, and thus apply the enhancement, that it would grant defendant a six-level downward departure on the ground that § 2B1.1 (b)(8)(B) contemplates sophisticated conduct, and that defendant’s conduct fell outside this heartland. The Second Circuit disagreed. Defendant’s conduct, as described in the government’s proffer, was sophisticated. The government alleged that he made false entries in two oil records books on 30 separate occasions. These entries concealed the fact that defendant routinely instructed his subordinates to dump oily water directly into sea, most often at night. These falsified entries had numerous technical components. However, the court did not find these facts; its simply assumed them to be true. On remand, the court should specifically rule on the following issues: (1) whether defendant’s conduct fell within § 2B1.1 (b)(8)(B); (2) whether defendant should receive an adjustment for acceptance of responsibility; (3) whether the facts as the court finds them justify a departure on the grounds originally used, and (4) whether defendant should receive a departure based on a combination of circumstances, the ground he originally proposed. U.S. v. Kostakis, 364 F.3d 45 (2d Cir. 2004).
2nd Circuit says “foreign investment company” refers to company’s geographic location. (300) Section 2F1.1(b)(6) (B) provides for a four-level enhancement for an offense that “affected a financial institution” and from which “the defendant derived more than $1,000,000 in gross receipts.” Note 14 to § 2F1.1 says that “any state or foreign … investment company” in a financial institution for purposes of the guideline, as is “any similar entity.” Defendant pled guilty to defrauding Mezzonen, a tax-exempt private corporation organized under the laws of Luxembourg. The Second Circuit held that “foreign investment company” should be defined under U.S. federal law. The term “foreign” modifies “investment company” and is not used to incorporate foreign law. Moreover, “foreign” is no more than a geographic connotation, and the definition of a “foreign investment company” in the Internal Revenue Code is not applicable. Rather, “investment company” in Note 14 includes a company substantially engaged in the business of investing in securities of other company. Finally, the “similar entity” clause of the note is not unconstitutionally vague as applied to defendant. Thus, if, upon remand the district court concludes that Mezzonen is not a foreign investment company, it can still apply § 2F1.1 (b)(6)(B) increase if it determines that Mezzonen was an “entity” that was “similar” to a “state or foreign investment company.” U.S. v. Savin, 349 F.3d 27 (2d Cir. 2003).
2nd Circuit rejects enhancement where no evidence that defendant engaged in joint criminal activity. (300) Over a several month period, defendant used false identification at different bank branches to make unauthorized withdrawals of money from other people’s accounts. She also used altered identification documents of other persons, specifically drivers licenses and credit cards, to commit these acts. The Second Circuit ruled that a § 2B1.1(b)(3) increase for an offense involving “theft from the person of another” was clearly erroneous. To support the enhancement, the government was required to prove that: (1) the documents used by defendant were obtained by a third party through pick-pocketing, purse snatching or other theft from the person; (2) defendant had entered into an agreement with the third party to obtain the identification documents; (3) the third party’s theft of documents was in furtherance and within the scope of defendant’s agreement; and (4) the third party’s theft was reasonably foreseeable to defendant. The government presented no evidence that defendant engaged in joint criminal activity. The fact that defendant obtained documents relating to seven victims over a nine-month period was equally consistent with numerous non-joint activities, such as purchasing the documents on the black market. U.S. v. Rizzo, 349 F.3d 94 (2d Cir. 2003).
2nd Circuit says overlap between guidelines might justify downward departure. (300) Defendant, a medical doctor, fraudulently obtained reimbursement from insurance companies for fertility treatments he performed on patients whose insurance did not cover such treatments. The district court refused to apply an enhancement under § 2F1.1(b)(8)(B) for affecting a financial institution and deriving more than one million dollars in gross receipts from the offense, ruling that the defrauded insurance companies did not constitute financial institutions. The Second Circuit reversed, since Note 19 to § 2F1.1 specifically lists “insurance company” among the types of institutions included within the definition of “financial institution.” Moreover, since the court ordered restitution of more than three million dollars, the court necessarily determined that defendant derived more than one million dollars in gross receipts. Thus, the § 2F1.1(b)(8) (B) enhancement should have been imposed. However, the panel suggested that a downward departure might be warranted because of the cumulation of enhancements based on the large amount of fraud proceeds involved. While the guidelines permit the use of a § 2F1.1(b)(8)(B) enhancement in addition to a large loss enhancement, “the cumulation of such substantially overlapping enhancements, when imposed upon a defendant whose adjusted offense level translates to a high sentencing range,” permitted the sentencing judge to make a downward departure. U.S. v. Lauersen, 348 F.3d 329 (2d Cir. 2003).
2nd Circuit affirms increase for risk of serious bodily injury from staged car accidents. (300) Defendant was convicted of federal health care fraud in connection with a series of staged automobile accidents. The district court enhanced her offense level under § 2F1.1(b)(4)(A) of the 1997 guidelines (now codified at § 2B1.1(b)(11) (A)) for an offense involving “the conscious or reckless risk of serious bodily injury.” Defendant argued that the guidelines require a finding that she was conscious of or in reckless disregard of a risk of serious bodily injury, but the Second Circuit found no error. The panel agreed with the Ninth Circuit’s conclusion that a defendant does not have to subjectively know that his conduct created a serious bodily risk. See U.S. v. Johansson, 249 F.3d 848 (9th Cir. 2001). Rather, “for the 1997 § 2F1.1(b)(4)(A) enhancement to apply, a defendant’s fraudulent conduct must have created a risk that others would suffer serious bodily injury; moreover, said risk must have either been known to the defendant (conscious), or, if unknown to the defendant, the type of risk that is obvious to a reasonable person and for which disregard of said risk represents a gross deviation from what a reasonable person would do (reckless).” The enhancement was proper here: defendant intended to participate in a staged, deliberate car accident, and the district court found that the serious risk of bodily injury was inherent to this type of criminal activity. U.S. v. Lucien, 347 F.3d 45 (2d Cir. 2003).
2nd Circuit affirms increase for offense affecting financial institution and more than one million dollars in gross receipts. (300) Defendant was a used-car dealer who was involved in a scheme to make money by securing auto loans for customers and cars that did not exist. The district court applied a four-level enhancement under § 2F1.1(b)(7)(b) enhancement because the offense “affected a financial institution” and defendant derived more than one million dollars in “gross receipts” from his crime. The Second Circuit rejected defendant’s challenge to the increase. The court properly included in “gross receipts” certain loans, even though the companies involved did not claim a loss. Defendant received a check from these companies because he submitted fraudulent loan applications, and he did not claim that he never received these checks or that he paid the money back. Moreover, the district court’s ultimate calculation may have understated defendant’s gross receipts. The court reduced the receipts by the 10 percent fee defendant paid to the check-cashers. However, the amount a defendant pays to negotiate a fraudulently obtained check should not be deducted from the loss any more than if he had deposited those checks in his own account and the bank charged him a fee for deposits. U.S. v. Khedr, 343 F.3d 96 (2d Cir. 2003).
2nd Circuit holds that cross-reference applies only if elements of another offense are established by conduct set forth in indictment. (300) Defendant pled guilty to one count of making false statements to representatives of the U.S. Attorney’s office and the FBI, in violation of 18 U.S.C. § 1001. At sentencing, the government argued that U.S.S.G. § 2B1.1(c)(3), a cross-reference provision, permitted the court to sentence defendant under U.S.S.G. § 2J1.2(c)(1), the obstruction of justice guideline, rather than under § 2B1.1, the fraud guideline that applied to § 1001 violations. The Second Circuit held that the § 2B1.1(c)(3) cross-reference applies only if the elements of another offense are established by conduct set forth in the count of conviction and proven by a preponderance of the evidence. The cross-reference was not applicable here. The indictment did not set forth a sufficient nexus between defendant’s false statements and a federal judicial proceeding to set forth a violation of 18 U.S.C. § 1503. The indictment also did not establish a violation of 18 U.S.C. § 1512, which requires a specific intent to interfere with the communication of information to authorities. However, the fact that the cross-reference was not applicable did not bar the district court from departing under Note 15 to § 2B1.1, which permits a departure where the primary objective of the offense was an aggravating non-monetary objective. The district court incorrectly concluded that Note 15 could not be used “as a back door to allowing an upward departure” that was otherwise prohibited by the inapplicability of the § 2B1.1(c)(3) cross-reference. U.S. v. Genao, 343 F.3d 578 (2d Cir. 2003).
2nd Circuit refuses to subtract value of bank liens from “gross receipts of the offense.” (300) Guideline § 2F1.1(b)(8)(B) provides for an enhancement if the offense “affected a financial institution,” and the defendant “derived more than $1,000,000 in gross receipts from the offense.” Defendant arranged for nominees, often using stolen identities, to obtain mortgage loans that were used to purchase real properties. Defendant conceded that he controlled these real properties, and that their value, when added to the cash proceeds he obtained from his offense, exceeded one million dollars. He argued, however, that the full value of these real properties should not be considered “gross receipts” because the victim banks secured mortgages on the properties, which reduced defendant’s equity and afforded the bank a cushion against full loss. Thus, he claimed that the value of the liens should be subtracted from the value of the properties when calculating his gross receipts. The Second Circuit disagreed. Note 21 to § 2F1.1 broadly defines “gross receipts from the offense” to include “all property, real or personal, tangible or intangible, which is obtained directly or indirectly as a result of such offense.” It was undisputed that defendant obtained use of the real properties as a result of his offense. Therefore, the court properly looked not only at defendant’s cash receipts, but to the value of these real properties in determining whether his “gross receipts from the offense” exceeded one million dollars. U.S. v. Mingo, 340 F.3d 112 (2d Cir. 2003).
2nd Circuit rules misleading checks and false statements supported more than minimal planning increase. (300) Defendant fraudulently transferred money from an account belonging to Durr to another account belonging to Durr where he had investment authority. He then invested the money and lost most of it. He challenged a more than minimal planning enhancement because he “did not open or establish new accounts,” because his crime was “stupid,” and because an enhancement based on his multiple wire frauds constituted double counting. The Second Circuit found no error. On three separate occasions after he had moved the money, he tendered checks to Durr from a fictional entity. Defendant also failed to respond to request from Durr and her associates for statements on her account. The misleading checks and false statements formed a “pattern of false statements” that, standing alone, warranted application of a § 2F1.1(b)(2) increase, independent of the multiple wire frauds. U.S. v. Coriaty, 300 F.3d 244 (2d Cir. 2002).
2nd Circuit upholds separate grouping of fraud and money laundering offenses. (300) Defendants were involved in an extensive securities fraud scheme. The Second Circuit upheld the district court’s decision to group the fraud and money laundering counts separately. The victims of the fraud and money laundering offenses were distinct – the individual investors suffered defendants’ fraud, while the public as a whole was the victim of defendants’ attempts to conceal their relationship to one another and the source of their illegally obtained funds. For example, when asked about the source of the funds obtained from one entity, defendant lied to the NASD, claiming that the funds were compensation for consulting services. This impeded the discovery of the source of the funds, and delayed the revelation of the fraudulent scheme to the public. U.S. v. Szur, 289 F.3d 200 (2d Cir. 2002).
2nd Circuit finds more than minimal planning in bank fraud case. (300) The Second Circuit found it unnecessary to decide whether defendant’s sentence was improperly increased based on multiple victims, because the two-level increase was also based on the district court’s finding that defendant’s scheme involved more than minimal planning. The court found that the scheme “involved a great deal of planning because he requisitioned, obtained, forged, and cashed seventeen separate checks.” Because § 2F1.1(b)(2) calls for the enhancement on either ground, there was no error. U.S. v. Crisci, 273 F.3d 235 (2d Cir. 2001).
2nd Circuit affirms mass-marketing increase. (300) Defendant pled guilty to mail fraud charges. The Second Circuit ruled that the district court did not err in finding that defendant used mass marketing to commit his offense. USSG § 2F1.1 (b)(3). Defendant used printed advertisements and brochures to solicit large numbers of potential customers whom he then defrauded. This type of conduct falls squarely within the meaning of “mass-marketing,” which is defined as “a plan, program, promotion, or campaign that is conducted through solicitation by telephone, mail, the Internet, or other means to induce a large number of persons to purchase goods or services.” Note 3 to § 2F1.1. Nothing in this definition limits its applicability to telemarketing or Internet scheme or excludes mass-marketing tactics that are followed by in-person sales efforts. U.S. v. Deming, 269 F.3d 107 (2d Cir. 2001).
2nd Circuit upholds increase where defendant indirectly received more than one million in proceeds. (300) Defendant committed a variety of frauds through his family’s business. The PSR documented fraudulent bank borrowings of $407 million to defendant’s company, transfers of $1 billion from the company to a shell company owned by defendant and his brother, and distributions of $13 million from the shell company to defendant’s personal bank and brokerage accounts. The Second Circuit affirmed a § 2F1.1(b)(7)(B) increase because the frauds “affected a financial institution and the defendant received more than $1,000,000 in gross receipts from the offense.” Although defendant claimed that he “received no direct personal benefit” from the bank loans, the enhancement is available for a defendant who derives at least $1 million “indirectly as a result of the offense.” § 2F1.1, Note 18. There was no serious dispute that the fraudulent bank loans facilitated the fraudulent schemes that enabled defendant to shift millions of dollars from his family’s company to his shell corporation and then into his personal accounts. U.S. v. Bennett, 252 F.3d 559 (2d Cir. 2001).
2nd Circuit finds no double counting where multiple fraud victims were involved. (300) Defendant committed a variety of frauds through his family business. He challenged a § 3B1.1(a) leadership enhancement because he also received a § 2F1.1(b)(2) increase for more than minimal planning. The Second Circuit held that both increases did not constitute improper double counting. Section 2F1.1(b)(2) provides that the two-level enhancement may be premised on more than minimal planning or the fact that more than one victim was defrauded. Both grounds applied to defendant. Where, as here, there are multiple fraud victims, defendant’s role as a planner could be used under § 3B1.1(a) without precluding application of § 2F1.1(b)(2). U.S. v. Bennett, 252 F.3d 559 (2d Cir. 2001).
2nd Circuit says unauthorized use of bankruptcy estate’s funds was not violation of judicial process. (300) Defendant, the president of a company that filed for bankruptcy, wrote unauthorized checks on a company account that was the property of the bankruptcy estate. He pled guilty to bankruptcy fraud. The district court refused to apply a § 2F1.1(b)(4)(B) enhancement for violation of a judicial process, citing language in U.S. v. Carrozzella, 105 F.3d 796 (2d Cir. 1997) suggesting that the increase does not apply to the concealment of bankruptcy assets. The Second Circuit found that the district court improperly relied on Carrozzella. The cited language was dicta, and a recent case has held that the concealment of assets in a bankruptcy proceeding constitutes a violation of judicial process. See U.S. v. Kennedy, 233 F.3d 139 (2d Cir. 2001). However, the second reason cited by the district court (defendant’s lack of aggravated criminal intent), was a proper ground for rejecting the enhancement. This case did not fit within either of the two general categories of wrongs recognized by this circuit as leading to the enhancement. Defendant did not disobey a specific order of the bankruptcy court or any other court. Also, there was no evidence that defendant made a false statement or misrepresentation as to the existence or nature of the account or the funds he deposited into the account. U.S. v. Berg, 250 F.3d 139 (2d Cir. 2001).
2nd Circuit applies obstruction of justice guideline to defendant who posed as attorney in criminal cases. (300) For about six year, defendant, who was not licensed to practice law and who never attended law school, masqueraded as an attorney. In addition to representing parties in civil cases, he made court appearances or filed papers indicating that he was an attorney in more than a dozen criminal cases. He pled guilty to making false statements during matters within the jurisdiction of judicial and executive branches, in violation of 18 U.S.C. § 1001. The Second Circuit held that the district court properly sentenced defendant under § 2J1.2, a provision applicable to obstructions of justice, rather than under § 2F1.1, which generally governs frauds. Note 14 to § 2F1.1 states that § 1001 is a general statute, and that if the offense is also covered by a more specific statute for which a different guideline would be more apt, the court should apply the more apt guideline rather than § 2F1.1. Given the nature of defendant’s conduct, which deprived defendants in criminal cases of their constitutional rights to be represented by a bona fide attorney, there was no doubt that the obstruction of justice guideline more aptly covered his conduct. U.S. v. Kurtz, 237 F.3d 154 (2d Cir. 2001).
2nd Circuit holds that concealing assets from bankruptcy court violates “judicial process.” (300) Defendant was convicted of bankruptcy fraud, including concealing assets from the bankruptcy court. Section 2F1.1(b)(4)(B) provides for a two-level increase for a defendant’s “violation of any judicial or administrative order, injunction, decree, or process not addressed elsewhere in the guidelines.” The district court found, as a matter of law, that § 2F1.1(b)(4)(B) did not apply to defendant’s concealment of assets in a bankruptcy proceeding. The Second Circuit reversed, adopting the view of a majority of circuits that the concealment of assets in a bankruptcy proceeding constitutes a violation of judicial process within the meaning of § 2F1.1(b)(4). Language suggesting a contrary in U.S. v. Carrozzella, 105 F.2d 796 (2d Cir. 1997) was dicta, and the panel rejected Carrozzella’s suggestion. The plain meaning of the phrase “violation of a judicial process” includes within its scope “violations” of the bankruptcy “process.” Elsewhere, the guidelines refers to legal proceedings generally. Moreover, such a broad construction is consistent with the overall structure and intent of the guidelines. U.S. v. Kennedy, 233 F.3d 157 (2d Cir. 2000).
2nd Circuit holds that Sentencing Commission was authorized to expand definition of financial institution. (300) Guideline § 2F1.1(b) (7)(A) provides for a four-level increase for fraud offenses that “substantially jeopardized the safety and soundness of a financial institution.” Application Note 16 defines “financial institution” to include “any state or foreign bank … and any similar entity, whether or not insured by the federal government.” The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) directed the Sentencing Commission to increase the penalties for frauds jeopardizing the safety of federally insured financial institutions. The Second Circuit concluded that the Sentencing Commission had the legal authority to adopt a broader definition of a financial institution than in the FIRREA. The FIRREA is not the sole source of the Commission’s authority to define a financial institution. The broad definition was promulgated under the Commission’s general statutory powers in § 994(a) of the Sentencing Reform Act. Under this broad definition, premium finance companies were sufficiently bank-like to qualify as financial institutions under § 2F1.1(b)(7)(A). Premium finance companies offer loans to commercial insurance customers so that they can pay the annual premium on their commercial insurance on its due date. “[W]hen it walks and talks like a financial institution … it is … covered by [§ 2F1.1(b)(7)].” U.S. v. Randy, 81 F.3d 65 (7th Cir. 1996). U.S. v. Ferrarini, 219 F.3d 145 (2d Cir. 2000).
2nd Circuit applies increase even though defendants were authorized to solicit funds for charity. (300) Section 2F1.1(b)(4) authorizes a two-level increase if the offense involved “a misrepresentation that the defendant was acting on behalf of a charitable, educational, religious, or political organization.” Defendants’ company contracted to solicit contributors for DEANY, a New York non-profit organization that educated police officers. Salesmen made numerous misrepresentations to potential contributors, including that the donations would go to drug education for children and bullet-proof vests for police officers, that the salesmen themselves were police officers, and that their advertising would appear in a journal that was never produced. Moreover, DEANY only received a fraction of the funds raised. The Second Circuit, agreeing with U.S. v. Bennett, 161 F.3d 171 (3d Cir. 1998), held that § 2F1.1(b)(4) applied even though defendants were authorized to solicit funds for DEANY. The enhancement is not limited to situations where the “charitable” organization is fraudulent. Defendants’ misrepresentations as to the use of the donated funds, the publication of the journals, and their identities, were designed to enhance personal gain and thus came within the meaning of § 2F1.1(b)(4). The court rejected U.S. v. Frazier, 53 F.3d 1105 (10th Cir. 1995), which limits § 2F1.1(b)(4) to cases in which “the defendant exploits his victim by claiming to have authority which in fact does not exist.” U.S. v. Kinney, 211 F.3d 13 (2d Cir. 2000).
2nd Circuit says more than minimal planning and abuse of trust increases not double counting. (300) Defendant embezzled money from her employer. She argued that enhance-ments for both abuse of trust and more than minimal planning constituted impermissible double counting, since both enhancements were allegedly based on the repetitiveness of her acts of theft. The Second Circuit held that defendant failed to demonstrate that the enhancements were duplicative. The abuse of trust enhancement was based on defendant’s use of her managerial discretion to pilfer company funds, not on the repetitiveness of the pilfering itself. The more than minimal planning enhancement was based both on the repetitiveness of defendant’s thefts and on the planning entailed in the numerous affirmative steps. U.S. v. Allen, 201 F.3d 163 (2d Cir. 1999).
2nd Circuit groups money laundering and fraud counts separately. (300) Defendant participated in a scheme to lure foreign buyers to make sizeable deposits for the delivery of non-existent cigarettes. The Second Circuit held that the district court properly refused to group his fraud and money laundering counts together under either § 3D1.2(b) or (d). Section 3D1.2(b) only allows for grouping when counts involve the same victim. Section 3D1.2(d) requires grouping when “the offense level is determined largely on the basis of the total amount of harm or loss … or some other measure of aggregate harm …” Note 6 says that two counts that measure harm in quantities should be grouped only if the counts are also of the “same general type.” The offense level for fraud depends primarily on the amount of loss involved. By contrast, because the money laundering guideline sets the base offense level at either 20 or 23, the total offense level is based primarily on the base offense level, rather than the amount of money involved. Finally, grouping fraud and money laundering counts would produce anomalous result in cases where only a small portion of the funds obtained by a fraud are laundered. Grouping such counts would actually increase the defendant’s sentence. U.S. v. Napoli, 179 F.3d 1 (2d Cir. 1999).
2nd Circuit says six-year embezzlement scheme involved more than minimal planning. (300) Over a six-year period, defendant embezzled $714,000 from his employer. Defendant submitted false invoices and check requests to the company’s accounting department. When he received the checks, he forged the payee endorsement, endorsed the check to either himself or his wife, and deposited the funds in a personal account he shared with his wife. Using this method, defendant acquired about 100 false checks. The Second Circuit held that the fraud scheme involved more than minimal planning because defendant repeatedly created false invoices over a six-year period. Even if defendant’s crime was not complex, he took “detailed and deliberate action” in committing the offense. U.S. v. Barrett, 178 F.3d 643 (2d Cir. 1999).
2nd Circuit upholds bankruptcy fraud increase for violating informal administrative process. (300) Defendant worked for Braniff Airlines, which filed for bankruptcy. When a corporate successor later attempted to restart the airline, the Department of Transportation (DOT) required the airline to provide sworn affidavits that defendant would hold no position and have no involvement with Braniff. Despite these representations, defendant remained heavily involved both before and after Braniff filed for bankruptcy yet again. Defendant was convicted of bankruptcy fraud for attempting to conceal payments from the airline to him. The Second Circuit upheld a § 2F1.1(b)(3)(B) enhancement for violating “any judicial or administrative order, injunction, decree or process.” Although there was no formal adversary “proceeding” before the DOT resulting in a formal administrative order or decree, there was an extensive negotiation with DOT, culminating in an agreement, evidenced by the affidavits. There was an informal administrative “process” of negotiation and an informal “decree” that if the affidavits were not submitted and the promises therein not kept, the DOT would revoke the airline’s operating certificate. U.S. v. Spencer, 129 F.3d 246 (2d Cir. 1997).
2nd Circuit holds defendant accountable for co-conspirators’ misrepresenting that they worked for government. (300) Defendant participated in a fraudulent telemarketing scheme that operated from three different boiler room” companies. One of the companies used a government recovery pitch” to extract additional money from previous victims of the scam. Posing as attorneys working for the government, the conspirators claimed that the government had sued the telemarketing companies and had received a large settlement. To receive their share of the settlement, the victims were instructed to send their share of the attorneys’ fees to the conspirators. The Second Circuit affirmed a § 2F1.1(b)(3)(A) enhancement for misrepresenting that the defendant was acting on behalf of a government agency. The court rejected defendant’s claim that he was not sufficiently connected to the particular company that engaged in the government recovery pitch. Defendant attended meetings to set up this company, helped finance its inception, and expected a share of the profits. This company was a secret company formed by the top salesmen at the other two companies to generate more money. The use of the government recovery pitch was reasonably foreseeable to defendant, even if he did not personally go to this third company, and even if the pitch was not conducted under his explicit direction. U.S. v. Escotto, 121 F.3d 81 (2d Cir. 1997).
2nd Circuit rules relevant conduct required increase for more than one victim. (300) Defendant pled guilty to making a false statement in connection with a loan application. However, from 1988 to 1990, defendant actually defrauded three banks. In determining the amount of restitution, the district court found that defendant’s scheme to defraud the other two banks constituted relevant conduct. However, it declined to apply a § 2F1.1(b)(2)(B) enhancement for defrauding more than one victim, stating that the enhancement was not applicable because there was only one victim in the count to which defendant pled guilty. The Second Circuit ruled that the court should have applied the more than one victim enhancement based on the relevant conduct. Once the district court found that the schemes to defraud the other two banks constituted relevant conduct, it was not free to disregard those schemes in determining whether to apply the § 2F1.1(b)(2)(B) enhancement. U.S. v. Shumard, 120 F.3d 339 (2d Cir. 1997).
2nd Circuit says fake lease supporting false loan application showed more than minimal planning. (300) Defendant, a real estate attorney, applied for several bank loans between 1988 and 1990, both to fund real estate projects he was developing and to obtain a home mortgage. He was convicted of making false statements to the bank in connection with the mortgage loan application, including misrepresenting that the source of his down payment was savings, omitting several outstanding loans or lines of credit, misrepresenting his income, and misrepresenting that the house he was vacating had been rented to an associate’s company. He even submitted to the bank a sham lease that he claimed constituted the rental agreement for the house. The Second Circuit agreed that the offense involved more than minimal planning, based on the series of prior false statements on loan applications leading up to the offense of conviction. The fact that the jury acquitted defendant of these charges did not preclude the court from considering the same conduct for guidelines purposes. In addition, he created and submitted to the bank a false lease to support the false statements he made in the instant offense. U.S. v. Walsh, 119 F.3d 115 (2d Cir. 1997).
2nd Circuit says filing false accounts with probate court did not violate judicial process. (300) Defendant induced clients to entrust money to him for investment. When the investments began to perform poorly, defendant misrepresented to his investors that the investments were doing well and continued to solicit new funds. He also filed false accounts with Connecticut probate courts. The district court applied a § 2F1.1(b)(3)(B) enhancement for violating a judicial or administrative order. The Second Circuit reversed, holding that the filing of false accounts with the probate court did not violate judicial process. A “violation” of judicial process is much narrower than an “abuse” of judicial process. “Violation” strongly suggests the existence of a command or warning followed by disobedience. Although defendant violated a command not to file false accounts, the command was a rule applicable to all trustees and not specifically directed to him. Moreover, defendant’s conduct in filing false probate accounts was addressed elsewhere in the guidelines because it fit within § 3B1.3, abuse of trust. U.S. v. Carrozzella, 105 F.3d 796 (2d Cir. 1997).
2nd Circuit says last date alleged in indictment controls for ex post facto purposes. (300) Defendant was the vice president of a company that contracted to provide computer products and services to NASA. He failed to disclose to NASA the company’s true costs of fulfilling the contract. He challenged the use of the 1993 guidelines to compute his sentence, arguing that the 1988 guidelines were in effect at the time of all the acts he personally committed. The Second Circuit held that the last date of the offense alleged in the indictment is controlling for ex post facto purposes. Count 20 of the indictment charged defendant with wiring $258,292 on October 1, 1990. The 1989 guidelines in effect on that date contained the same 12-level enhancement as the 1993 guidelines used by the district court. Therefore there was no ex post facto violation. U.S. v. Broderson, 67 F.3d 452 (2d Cir. 1995).
2nd Circuit rejects upward departure because defendant’s bank fraud was not money laundering. (300) Defendant’s associates were involved in a scheme to deposit counterfeit checks in a Swiss bank account, and transfer the proceeds back to the United States. The conspirators were unable to negotiate any of the fraudulent checks. However, with defendant’s help, they were able to cash a small number of stolen checks at a Texas bank and obtain $500,000. Defendant pled guilty to bank fraud. His associates were also convicted of international money laundering charges. The district court departed upward under note 13 to § 2F1.1, believing that defendant’s offense essentially involved money laundering, rather than bank fraud. The Second Circuit reversed, since engaging in a domestic financial transaction with the proceeds of a simple theft is not money laundering under 18 U.S.C. § 1956(a)(1). While bank fraud is a specified unlawful activity under the money laundering statute, it was not the source of proceeds in this case. U.S. v. Napoli, 54 F.3d 63 (2d Cir. 1995), superseded by guideline on other grounds as stated in U.S. v. Genao, 343 F.3d 578 (2nd Cir. 2003).
2nd Circuit holds that arson/insurance fraud scheme involved more than minimal planning. (300) Defendant destroyed a building he owned in an attempt to collect insurance proceeds. The Second Circuit upheld a more than minimal planning enhancement. The acts of defendant’s co-conspirators in planning and committing the arson constituted more than minimal planning, and defendant could foresee that such planning would occur to destroy such a sizable property. Furthermore, defendant himself was involved in more than minimal planning as to the arson. Defendant insured the property at replacement cost, hired and paid accomplices, decided the timing of the fire, and submitted the $14 million insurance claim. U.S. v. Mizrachi, 48 F.3d 651 (2d Cir. 1995).
2nd Circuit requires finding as to scope of criminal activity defendant agreed upon. (300) Defendant was employed as a commissioned telephone solicitor for five and one-half weeks. Clearly by the end of his employment he knew that the operation was a fraudulent advance-fee “bucket shop,” but there was no evidence that his involvement extended beyond his own sales efforts. The Second Circuit held that the guidelines require the district court to make “a particularized finding of the scope of the criminal activity agreed upon by the defendant. The court said this holding is consistent with U.S. v. Anderson, 39 F.3d 331 (D.C. Cir. 1994) [overruled on rehearing en banc, 59 F.3d 1323 (D.C. Cir. 1995)], and U.S. v. Evbuomwan, 993 F.2d 70 (5th Cir. 1993). The evidence in the record indicated that defendant’s agreement did not encompass the fraudulent activity of the other sales representatives. The case was remanded to permit the government to present contrary evidence. U.S. v. Studley, 47 F.3d 569 (2d Cir. 1995).
2nd Circuit approves upward departure for possession of numerous counterfeit access devices. (300) Defendant and his accomplices arranged for a phony ATM to be put in a mall. They used the information received from the phony ATM to manufacture hundreds of counterfeit ATM cards. They used the counterfeit cards to withdraw over $107,000 in cash from legitimate ATMs. Note 11 to § 2F1.1 states that in an offense involving access devices, an upward departure may be warranted where the actual loss does not adequately reflect the seriousness of the conduct. The Second Circuit upheld a two level departure, concluding that defendant’s production and possession of counterfeit ATM cards created a risk of loss far greater than the actual loss caused by the ATM scheme. The cards he and his accomplices created would have allowed them to withdraw much larger sums than the $107,000. U.S. v. Greenfield, 44 F.3d 1141 (2d Cir. 1995).
2nd Circuit says possible recovery from co-signers does not reduce loss from fraudulent loan. (300) Defendant fraudulently obtained loans secured by collateral that was worthless. The 2nd Circuit upheld a loss calculation based on the entire amount defendant obtained from the financial institutions. Notwithstanding Application Note 7(b) to section 2F1.1, the court refused to require the district court to reduce the loss simply because the institutions might have rights against co-signers on the loans. The physical collateral that defendant used to obtain the loans was worthless and, as of sentencing, the defrauded institutions had not recovered any part of the moneys. The district court did not abuse its discretion in finding that any expectation of recovery from co-signers was too speculative to warrant a reduction. U.S. v. Mayo, 14 F.3d 128 (2nd Cir. 1994).
2nd Circuit upholds estimate of loss from bribes for issuing driver’s licenses. (300) Defendant worked for the New York DMV processing applications for “reciprocal” driver’s licenses, which are issued when a person surrenders his or her valid out-of-state license in exchange for a New York license. Defendant fraudulently processed applications for reciprocal driver’s licenses in return for cash bribes. The district court estimated the total loss at $250 per license application, and multiplied that figure by 159 applications. It then added $450 for an undercover officer’s payments for a nondriver ID card, for a total loss of $40,200. The 2nd Circuit affirmed. While some of the 159 applications may have lacked necessary background documentation due to clerical error rather than fraud, the district court took this into consideration by adopting a figure of $250 per application. This figure was far lower than that given by the overwhelming majority of testifying witnesses. U.S. v. Sutton, 13 F.3d 595 (2nd Cir. 1994).
2nd Circuit rejects loss calculation for lack of findings of actual or intended loss. (300) Defendant, an investment officer at a trust company, sent several clients statements showing a fraudulently inflated value for certain bonds held on behalf of the clients. As the price of the bonds continued to decline, the inaccurate price was discovered, and the trust company was forced to redeem the bonds at full par value and absorb the loss. The district court based the loss on the difference between the value of all the bonds held by the trust company’s clients when the first fraudulent statement was sent, and the value of the bonds when the fraud was discovered. The 2nd Circuit remanded for specific findings concerning actual and intended loss. The court was troubled by the fact that not all the customers received the fraudulent information. Only the loss to customers who received the fraudulent statements could be considered in determining actual loss. There was no finding that defendant intended to defraud all of the trust clients who held the bonds. U.S. v. Stanley, 12 F.3d 17 (2nd Cir. 1993).
2nd Circuit bases loss on face value of forged money orders. (300) Defendant was arrested for selling money orders with imprinted values totaling $47,330 to a government agent in exchange for $2,500. The 2nd Circuit held that under the commentary to sections 2B1.1 and 2F1.1, the district court correctly calculated defendant’s offense level based on the face value of the seized instruments. The district court’s refusal to adjust defendant’s base offense level under application note 10 to section 2F1.1 constituted a non-appealable refusal to depart downward. U.S. v. Agwu, 5 F.3d 614 (2nd Cir. 1993).
2nd Circuit rejects aggregating dishonored checks where later checks replaced earlier checks. (300) Defendant used false information to obtain a credit card, and over three months, charged $34,000 to the card. To keep the account open, defendant sent the creditor nine checks, all of which bounced. However, because of the creditor’s policy of giving immediate credit upon receipt of each check, pending collection, each dishonored check maintained the active status of the account and increased defendant’s credit line. The 2nd Circuit rejected $114,000 as the loss under section 2F1.1, since it was determined by adding together all of the dishonored checks. Defendant’s scheme was designed to increase his credit limit by replacing a dishonored check with another check for a greater amount, as in check kiting. Each check, in effect, replaced all the previous checks and was not cumulative. Defendant only defrauded the creditor of $34,000. U.S. v. Deutsch, 987 F.2d 878 (2nd Cir. 1993).
2nd Circuit affirms that defendant held himself out to be attorney in violation of a judicial order. (300) The 2nd Circuit affirmed an enhancement under section 2F1.1(b)(3)(B) since there was abundant evidence that defendant had held himself out as an attorney in violation of a judicial order. A federal agent testified that, at the time of his arrest, defendant called himself an attorney. During the course of his fraud, he used his credit card to pay state bar fees. At a hearing, defendant told the district judge to his face that he was an attorney, had attended law school and was quite knowledgeable about criminal law. U.S. v. Deutsch, 987 F.2d 878 (2nd Cir. 1993).
2nd Circuit affirms application of environmental guideline to mail fraud defendants. (300) Defendants were convicted of RICO and mail fraud charges in connection with their operation of an environmentally hazardous landfill. The district court sentenced them under the environmental guideline, section 2Q1.2, relying on application note 15 to the 1988 version of section 2F1.1, which provided that where the mail fraud statute is used primarily as a jurisdictional basis to prosecute other offenses, the most analogous guideline should be applied. The 2nd Circuit affirmed, but held that the application note was in conflict with the requirement in section 1B1.2(a) that the offense level be based on the offense of conviction. This conflict was resolved by a 1989 amendment (now numbered application note 13) directing the court to apply a section other than section 2F1.1 only if the other offense was “established” in the information or the indictment. The 2nd Circuit found it unnecessary to resolve the conflict because the district court stated that even if section 2F1.1 applied, it would depart upward to 26 based on the environmental harm. Since there was no indication that the mail fraud guidelines took into account the massive environmental damage proven here, a departure would not be an abuse of discretion. U.S. v. Paccione, 949 F.2d 1183 (2nd Cir. 1991).
2nd Circuit bases amount of loss on total defendant could have obtained through telephone solicitations. (300) Defendant set up a commodity futures sales office and employed four to six sales persons who made between 750 and 1000 “cold canvas” calls soliciting potential investors to invest a minimum of $3,000 each. Defendant contended that the actual loss suffered by the victims was only $87,000, and that this was the proper measure of the “loss” his crimes caused under section 2F1.1. The 2nd Circuit rejected this contention. Had all of the telephone solicitations been successful, defendant would have obtained between $2,250,000 and $3,000,000. Through these solicitations, defendant was “attempting to inflict” upon his victims a “probable or intended” loss of that amount. That loss, which the presentence report “conservatively” reduced to one to two million dollars, fully justified the nine-level enhancement. U.S. v. Lohan, 945 F.2d 1214 (2nd Cir. 1991).
2nd Circuit holds that defendant’s intent to repay fraudulent loan did not require downward departure. (300) Defendant fraudulently obtained a loan by misstating his financial situation. He contended, based on application note 10 of § 2F1.1, that the district court should have departed downward because the amount of the loan overstated the seriousness of his offense. The 2nd Circuit rejected this argument, since a district court’s refusal to depart downward is not appealable unless the refusal was based upon the court’s mistaken belief that it did not have the discretion to do so. Defendant’s assertion that note 10 “requires” a reduction in the amount of the actual loss if the accused intends to repay was a misreading of the note, which provides that in some instances a downward departure may be warranted. U.S. v. Brach, 942 F.2d 141 (2nd Cir. 1991).
2nd Circuit upholds more than minimal planning enhancement. (300) The 2nd Circuit affirmed that defendant’s fraud scheme merited a two-point enhancement for more than minimal planning. Defendant “concoct[ed]” a scheme to move a business that he did not own to a new town and received a $250,000 advance from the town. The money that defendant received was preceded by extensive negotiations and travel by both the town representatives and defendant over many months. It was based upon a false financial statement that was “anything but a simple planning device.” The district court did not improperly consider uncharged conduct in making the more than minimal planning determination. Although the district court did refer to other frauds which defendant perpetrated, this was done merely to “illustrate [defendant’s] penchant for developing ‘elaborate’ schemes that are ‘drenched in fraud.” The court did not suggest that defendant’s other fraudulent activities per se played a part in his scheme to defraud the town. U.S. v. Brach, 942 F.2d 141 (2nd Cir. 1991).
2nd Circuit affirms value of loss based upon face value of loan defendant fraudulently obtained. (300) Defendant misrepresented his financial condition in order to obtain a $250,000 loan. When his lender became suspicious and contacted the FBI, defendant repaid the money. The 2nd Circuit affirmed that the amount of “loss” involved under guideline § 2F1.1(a) should be based upon the face value of the loan rather than on the temporary use of the $250,000. Even if defendant intended to repay the loan, this would not change the analysis. Defendant’s crime was complete once he transmitted the false financial information and obtained the loan. Under the guideline, “loss” includes the value of all property taken, even if all or part of it was returned. U.S. v. Brach, 942 F.2d 141 (2nd Cir. 1991).
2nd Circuit finds that misrepresentation that defendant was a government official involved more than minimal planning. (300) Defendant had numerous contacts with a real estate broker over a period of several weeks during which defendant misrepresented that he was employed by the U.S. State Department. In his assumed identity, defendant provided false information concerning his security needs and the government’s role in securing and financing an apartment he was attempting to purchase. Defendant was convicted of making a false statement, and his base offense level was increased under guideline § 2F1.1(b)(2)(A) because the offense involved more than minimal planning. The 2nd Circuit agreed with this, finding that defendant’s repeated acts over a period of several weeks justified the enhancement. U.S. v. Bakhtiari, 913 F.2d 1053 (2nd Cir. 1990).
3rd Circuit approves upward variance based on criminal history although court did not follow departure methodology. (300) Over a twenty-year period, defendant engaged in identity theft, using the social security number and date of birth of another man with the same name, and causing losses exceeding $166,000. Although defendant’s guideline range was 30-37 months, the district court sentenced him to 72 months. He argued that the court erred by not following the methodology established prior to Booker for imposing a sentence above the guideline range. When departing upward based on an Underrepresentation of criminal history, district court are required to apply U.S.S.G. § 4A1.3 and consider each higher criminal history category in sequence. See U.S. v. Kikumura, 918 F.2d 1084 (3d Cir. 1990). If the court were under the pre-Booker mandatory guideline scheme, the failure of the district court to have expressly followed that approach would have required remand because the appellate court would have assumed prejudice. Post-Booker, the Third Circuit ruled that it would not presume prejudice, but would review the sentence for plain error. The court here provided an adequate explanation for the sentence on the record. It gave extensive attention to the circumstances of defendant’s life and offense and the harm done to the victim. Defendant was a career criminal who was not deterred by prosecution in state or federal court. A lengthy prison sentence was clearly warranted to prevent and deter defendant from re-offending. Because the district court “did in fact touch all the bases required,” the panel affirmed the sentence imposed. Nonetheless, it emphasized that “the sentencing courts in this circuit should continue to follow the requirement to ‘consider’ the guidelines by calculating a guidelines sentence as they would have before Booker, including formally ruling on the motions of both parties and stating on the record whether they are granting a departure and how that departure affects the guidelines calculation, and taking into account this Circuit’s pre-Booker caselaw, which continues to have advisory force.” U.S. v. King, 454 F.3d 187 (3d Cir. 2006).
3rd Circuit holds that defendant’s offense was “more aptly” covered by tax guideline than fraud guideline. (300) Defendant was convicted of filing false claims for refunds with the IRS and aiding and abetting presentations of false claims, in violation of 18 U.S.C. §§ 287 and 2. He argued on appeal that his attorney was ineffective at sentencing for failing to object to the court’s application of the tax guidelines found in §§ 2T1.4 and 2T4.1 instead of the fraud guideline, § 2F1.1. He noted that Appendix A to the sentencing guidelines lists only § 2F1.1 as applicable to a § 287 offense. The Third Circuit found no error because Note 14 to § 2F1.1 makes clear that a different guideline should be used if an “offense [is] more aptly covered by another guidelines.” Section 2T1.4 covers Aiding, Assisting, Procuring, Counseling, or Advising Tax Fraud, and thus described the offenses defendant committed. Thus, it was more apt for use in sentencing here than § 2F1.1. Thus, defendant’s attorney could not have been ineffective for failing to contend that § 2F1.1 should have been applied. U.S. v. Barnes, 324 F.3d 135 (3d Cir. 2003).
3rd Circuit holds that sophisticated means increase violated ex post facto clause. (300) Defendant argued for the first time on appeal that the district court violated the ex post facto clause by applying a two-level sentence enhancement for the commission of fraud by “sophisticated means” under § 2F1.1(b)(5)(C). The sophisticate means enhancement did not become effective until November 1, 1998, more than a year after the last conduct charged in the indictment. The government conceded that the district court plainly erred by applying the enhancement. However, it contended that defendant’s substantial rights were not prejudiced by the error because the range of possible sentences under the correct sentencing level (level 19 and a range of 30-37 months) overlapped with the range of sentences under the erroneous sentencing level (level 21 and a range of 37-46 months). However, in U.S. v. Knight, 266 F.3d 203 (3d Cir. 2001), a Third Circuit panel held that under plain error review, “an error in application of the Guidelines that results in use of a higher sentencing range should be presumed to affect the defendant’s substantial rights.” Here, the Third Circuit ruled that the government failed to rebut the presumption of prejudice. The error “too seriously affect[ed] the fairness, integrity, or public reputation of judicial proceedings” to be left uncorrected. U.S. v. Syme, 276 F.3d 131 (3d Cir. 2002).
3rd Circuit upholds use of money laundering guideline, rather than fraud guideline. (300) Someone stole from the mail ten blank “convenience checks” attached to the bottom of credit cards statements. Defendant opened three savings accounts at different banks under false names. Thereafter, all ten of the stolen checks were deposited, either by mail or teller deposit, into the savings account. After the banks credited the accounts with the deposits, defendant began withdrawing funds from the accounts. He pled guilty to several mail fraud counts and was convicted of eight money laundering counts. The Third Circuit held that defendant was properly sentenced under the money laundering guideline rather than the fraud guideline. First, the eight teller window withdrawals were separate from the underlying crime of obtaining and mailing the convenience checks to the various banks. Second, defendant’s conduct involved a concerted effort to conceal or legitimize the funds obtained through the mail fraud. The deposits were intended to conceal the source and nature of the proceeds and create an appearance of their legitimacy. Moreover, defendant laundered the proceeds through accounts using two different aliases, further compounding his attempts to conceal the funds and his control over them. U.S. v. Omoruyi, 260 F.3d 291 (3rd Cir. 2001).
3rd Circuit approves departure for psychological injury and endangering solvency of fraud victims. (300) Defendant participated in two separate fraudulent schemes that bilked investors out of more than $880,000. The district court departed upward by five levels after determining that defendant caused psychological injury to his victims and knowingly endangered their solvency. The Third Circuit affirmed. Note 11 to § 2F1.1 specifically authorizes a departure where the loss did not fully capture the harmfulness of the conduct. See also USSG § 5K2.3 (authorizing departure for psychological injury). Defendant’s victims included blue collar workers near retirement who lost their entire life savings, and would be forced to live their retirement years in destitution. Two of the victims were on depression medication and saw a mental health professional in order to deal with their trauama. In addition, the fraud guideline encourages departures when a defrauding party endangers the solvency of at least one victim. See Note 11(f). Actual insolvency is not required – an upward departure is proper when the defendant knew, or should have known, that the fraud potentially endangered the victim’s solvency. This standard may be satisfied even where the risk is limited to the victim’s liquid assets. Here, defendant divested one victim of all her liquid assets, amounting to $45,444. The fact that she retained her house, worth $65,000, was irrelevant. U.S. v. Jarvis, 258 F.3d 235 (3d Cir. 2001).
3rd Circuit holds that money laundering defendant should be sentenced under fraud guideline. (300) Defendant, one of the owners of a vocational school, directed employees to prepare and mail falsified forbearance and deferment forms to lenders in the name of former students who had obtained financial assistance and were close to defaulting. This allowed the school to continue to participate in federal student loan programs. She was convicted of fraud and money laundering charges. The Third Circuit, applying U.S. v. Smith, 186 F.3d 290 (3d Cir. 1999), superseded by rule as stated in U.S. v. Omoruyi, 260 F.3d 291 (3d Cir. 2001), ruled that defendant should have been sentenced under the fraud guideline rather than the money laundering guideline. In light of recent amendments, Smith is no longer good law for those defendants sentenced after November 2000. However, for those cases not governed by the November 2000 guidelines, Smith says that the money laundering guidelines are not applicable to ordinary cases of routine fraud, to the simple receipt and deposit or use of illegally obtained funds, or to cases in which any money laundering is not separate from the underlying fraud. Here, defendant never used the proceeds of her fraud to promote additional criminal conduct. This was a simple receipt and deposit case to which § 2S1.2 should not apply. U.S. v. Diaz, 245 F.3d 294 (3d Cir. 2001).
3rd Circuit says increase does not require defendant to derive more than $1 million from a single institution. (300) Defendant was responsible for defrauding 14 banks and other financial institutions out of more than $6 million. Section 2F1.1(b)(7)(B) provides for a four-level increase if the offense “affected a financial institution and the defendant derived more than $1,000,000 in gross receipts from the offense.” Note 16 defines “gross receipts from the offense” to include “all property, real or personal, tangible or intangible, which is obtained directly or indirectly as a result of such offense.” The Third Circuit held that § 2F1.1(b)(7)(B) does not require that defendant receive more than $1 million from any single affected institution. The requirement that a financial institution be affected and the requirement that the defendant derive more than $1 million in gross receipts from the offense are separate and distinct prerequisites. U.S. v. Greene, 212 F.3d 758 (3d Cir. 2000).
3rd Circuit holds that bankruptcy proceeding is not a judicial “process.” (300) Defendant was convicted of concealing bankruptcy-estate assets. The district court applied a § 2F1.1(b) 4)(B) enhancement for violating a “judicial or administrative order, injunction, decree, or process.” The Third Circuit reversed, rejecting the view of some circuits that a bankruptcy proceeding constitutes a “judicial process.” See, e.g., U.S. v. Lloyd, 947 F.2d 339 (8th Cir. 1991). Although the term “judicial process” could be read to encompass an entire judicial proceeding, it was likely intended to be applied in a more limited manner. The term “violation” strongly suggests the existence of a command or warning followed by disobedience. This “suggests that the term ‘process’—the command or warning violated—is used, not in the sense of legal proceedings generally, but in the sense of a command or order to a specific party, such as a summons or execution issued in a particular action.” Moreover, the Rules and Forms of the Bankruptcy Court are not judicial orders, injunctions, decrees or processes. The rationale for the enhancement is to redress the “aggravated criminal intent” inherent in violating a prior order specifically enjoining the defendant from engaged in certain fraudulent conduct. U.S. v. Thayer, 201 F.3d 214 (3d Cir. 1999).
3rd Circuit approves use of conduct outside statute of limitations. (300) From 1974 until September 1995, defendant cashed 257 Social Security checks issued to her dead father. She was only charged with fraudulently cashing 43 benefit checks, since the other 214 checks were cashed outside the statute of limitations. Nonetheless, the district court considered these 214 checks in determining the total loss. The Third Circuit agreed that conduct outside the statute of limitations may be considered as relevant conduct in determining the appropriate guideline sentence. The court also rejected defendant’s claim that the court’s findings regarding the 214 checks was based on unreliable information. Defendant admitted cashing the 214 checks, but argued that she did not commit fraud because she was cashing the checks for a cousin who she believed was authorized to receive the money. However, defendant could not give an address or date of birth for the alleged cousin, and defendant’s son said he had never heard of any cousin and did not believe his mother. U.S. v. Stephens, 198 F.3d 389 (3d Cir. 1999).
3rd Circuit says fraudulent reinsurance contracts jeopardized soundness of insurance company. (300) Defendant leased worthless stocks to Teale, who represented the leased stocks as assets available to pay claims under reinsurance contracts with World Life. When these assets were called upon to pay outstanding medical reinsurance claims, the stocks were deemed worthless. The district court rejected a § 2F1.1(b)(6) enhancement for “substantially jeopardizing the safety and soundness of a financial institution,” since World Life was insolvent before defendant’s conduct. The Third Circuit held that defendant substantially jeopardized the safety and soundness of World Life by (1) substantially reducing benefits to World Life’s insureds, and (2) placing World Life in a position where it was unable to refund premiums that were paid in exchange for non-existent coverage. Defendant and the others received several million dollars of premiums from World Life that should have gone towards paying insureds’ claims or refunding their premiums. U.S. v. Yeaman, 194 F.3d 442 (3d Cir. 1999).
3rd Circuit finds letters from policyholders insufficient to prove loss of confidence in insurance industry. (300) Defendant leased worthless stocks to Teale, who represented the stocks as assets available to pay claims under reinsurance contracts with World Life. When these assets were called upon to pay outstanding medical reinsurance claims, the stocks were deemed worthless. Note 10(e) to § 2F1.1 authorizes a departure where a defendant’s fraud causes a loss of confidence in an important institution. The government argued that the scheme had caused a loss of confidence in both the insurance industry and the stock market. It submitted a series of letters from policyholders of World Life and a letter from McLucas, the SEC’s Director of Enforcement. The Third Circuit found that the policyholder letters did not support a departure, since they demonstrated nothing more than the policyholders’ frustration with World Life. None of the letters suggested that the insureds would be unlikely to purchase medical insurance in the future. However, the McLucas letter supported a finding of loss of confidence in the stock market. The letter contained an expert opinion that manipulation of the market through such a scheme can destroy confidence in the securities market. The government was not required to produce someone whose confidence in the institution had diminished as a result of the scheme. U.S. v. Yeaman, 194 F.3d 442 (3d Cir. 1999).
3rd Circuit affirms enhancement for misrepresentation of acting on behalf of charity. (300) Defendant committed the largest charity fraud in history, a six-year scheme in which he solicited over $350 million in contributions for a bogus “matching” program. The Third Circuit affirmed a § 2F1.1(b)(3)(A) enhancement for defendant’s misrepresentation of acting on behalf of a charity. Defendant secured a favorable IRS rating for his corporation by submitting fraudulent documents, he enticed participants to provide funds with false statements that anonymous donors would match their donations, and he used the company’s charitable image to divert funds to his private businesses. Even if the corporation was a genuine charitable organization in some respects, it was clear that defendant used his position there to ensnare donors with falsehoods designed to generate contributions. The enhancement is not limited to “charitable” organizations that are fraudulent from their inception and in every facet of their operation. U.S. v. Bennett, 161 F.3d 171 (3d Cir. 1998).
3rd Circuit holds that fraud scheme affected financial institution. (300) Defendant committed the largest charity fraud in history, a six-year scheme in which he solicited over $350 million in contributions for a bogus “matching” program. The Third Circuit upheld a § 2F1.1(b) (6)(B) enhancement for deriving more than $1 million in gross receipts from an offense that affected a financial institution. Both the PSR and the district court found that defendant personally derived more than $1 million from his criminal conduct. For example, he transferred over $4 million to businesses in which he possessed a 100 percent interest. The offense affected several financial institutions, most directly one particular lender from whom defendant obtained a $50 million loan. He then defrauded investors by telling them the funds were deposited in “quasi-escrow” accounts at the lender. The bankruptcy trustee sued the lender for over $150 million. The lender ultimately agreed to pay $18 million to settle litigation resulting from the collapse of defendant’s corporations. U.S. v. Bennett, 161 F.3d 171 (3d Cir. 1998).
3rd Circuit rejects departure based on judicial speculation about harm to victims. (300) When Hurricane Hugo hit the Virgin Islands, defendant’s fraudulently underfunded insurance company was unable to meet the claims of its policyholders. The district court departed one level under note 9 to § 2F1.1 for the psychological harm risked or caused by the offense and one level for the loss of confidence in an important institution. The Third Circuit reversed since the departures were based on speculation rather than evidence. Although a court has considerable deference in assessing psychological impact on victims, the court must not merely speculate regarding psychological harm. There was no evidence here regarding physical or psychological harm to the victims. The departure based on harm to the insurance industry was not based sworn testimony, but on an unsupported judicial conclusion. Such judicial speculation cannot provide the basis for an upward departure. U.S. v. Neadle, 72 F.3d 1104 (3d Cir. 1995), amended, 79 F.3d 14 (3d Cir. 1996).
3rd Circuit rejects upward departure based on amount of loss and large number of victims. (300) Defendant, the president of an investment firm specializing in the management of “pre-need” funeral funds, was convicted of mail fraud and income tax evasion. The district court departed upward based on the large number of victims (31) and the amount of monetary loss ($4.9 million), purportedly following § 2F1.1(b) (2)(B). The 3rd Circuit reversed, finding that the guidelines adequately considered both the number of victims and the amount of loss. The $4.9 million loss fit squarely within the loss table’s range of $2000 to $80 million. Although 31 victims was far more than necessary to trigger the two level enhancement under § 2F1.1(b)(2), it was not so extraordinarily large a number in a case of this type that it fell outside the heartland of the fraud provisions. U.S. v. Copple, 24 F.3d 535 (3rd Cir 1994).
3rd Circuit approves downward departure where loss table overstated criminality. (300) Because defendant’s company was short of cash, defendant prepared false labor sheets which enabled the company to receive about $140,000 in accelerated payments from the government. When the company’s bank took over, it placed the company in Chapter 7 bankruptcy. As a result, what would have been merely an interest free loan from early payments became a loss of over $381,000 to the government. The 3rd Circuit upheld a downward departure based on overstatement of criminality by the loss tables, relying on note 11 to section 2F1.1. Defendant’s intent was not to steal money from the government, but to expedite payments that would have been due at some future time. Without the bankruptcy, it was possible that the loss to the government would have been far less. U.S. v. Monaco, 23 F.3d 793 (3rd Cir. 1994).
3rd Circuit affirms loss equal to face value of cancelled checks to be used in counterfeiting scheme. (300) Defendant obtained cancelled checks of corporations and used them to order blank checks from a check printing company. He then issued checks in fictitious names and deposited the checks into bank accounts opened under those fictitious names. He negotiated to sell cancelled checks to an undercover agent which the agent could put to the same use. At his arrest, defendant had two cancelled checks with a combined face value in excess of $1.5 million. The 3rd Circuit affirmed the use of $1.5 million as the amount of the loss under section 2F1.1. The court rejected defendant’s claim that there was no “loss” because the checks had already been credited to the payees and were about to be debited to the accounts of the drawers. The purpose of the cancelled checks was not to draw on them but to use them in a counterfeiting scheme which could easily have led to a loss in the neighborhood of the amount of the cancelled checks themselves. U.S. v. Holloman, 981 F.2d 690 (3rd Cir. 1992).
3rd Circuit includes in loss calculation full amount of bogus accounts receivable. (300) Defendants telephoned their own 900-telephone service thousands of times to create the illusion that the service had large, bona fide accounts receivable. They then negotiated a contract to sell up to $250,000 worth of these bogus accounts receivable to a factor. In addition, they ran up a $126,000 service charge bill from their telephone company, MCI. The 3rd Circuit affirmed the district court’s determination that the loss was $373,600: slightly less than the sum of the $250,000 factoring limit plus MCI’s unpaid service charges. There was sufficient evidence that defendants inflicted a loss of at least $126,000 on MCI and intended to inflict a loss of at least $250,000 on the factor. U.S. v. Katora, 981 F.2d 1398 (3rd Cir. 1992).
3rd Circuit affirms use of defendant’s “gross gain” to calculate loss caused by defendant’s fraud. (300) In his capacity as bank president, defendant approved loans to several real estate developers on condition that the developers use on their construction projects one or more electrical companies in which defendant or his family had an interest. The district court calculated the loss caused by defendant’s fraud by adding together the amounts of the three electrical contracts awarded by the developers to the family companies. The 3rd Circuit affirmed, holding that under the circumstances of this case, it was appropriate to look to the gain that defendant received, rather than the amount of the bank’s loss. The case was distinguishable from U.S. v. Kopp, 951 F.2d 521 (3rd Cir. 1991), disapproval recognized by U.S. v. Wood, 486 F.3d 781 (3d Cir. 2007), which held that fraud loss is the amount of money the victim has actually lost, estimated at the time of sentencing. Here, the gravamen of the offense, unlike the situation in Kopp, was the benefit defendant received from the developers. Judge Weis dissented, agreeing that the offender’s “gross gain” was the appropriate standard, but believing that it should be reduced by the companies’ cost of performing the contracts. U.S. v. Badaracco, 954 F.2d 928 (3rd Cir. 1992).
3rd Circuit rules loss under fraud guideline is greater of actual, intended or probable loss. (300) Defendant induced a bank to make $13.75 million loan for a shopping center by falsely inflating the rental income from the center. After defendant defaulted, the bank received a deed in lieu of foreclosure and eventually sold the shopping center for $14.5 million, $750,000 more than the loan. The 3rd Circuit vacated the district court’s determination that $13.75 million was the appropriate measure of loss under section 2F1.1, the fraud guideline. Loss under the fraud guideline is different than loss under section 2B1.1, the theft guideline. All thefts involve an intent to deprive the victim of the full value of the property taken, while fraud may not. In this case, defendant did fraudulently obtain $13.75 million, but he gave something in return: a mortgage of the property. Loss under the fraud guideline should be calculated as actual loss (measured at the time of sentencing), unless the intended or probable loss is greater and is determinable. The court rejected defendant’s claim that the loss should be reduced further to reflect other causes of the loss beyond the defendant’s control. However, to the extent actual loss had other causes, the district court might depart downward to reflect this. U.S. v. Kopp, 951 F.2d 521 (3rd Cir. 1991), disapproval recognized by U.S. v. Wood, 486 F.3d 781 (3d Cir. 2007).
3rd Circuit rejects increase for both more than minimal planning and fraud involving more than one victim. (300) Defendant was convicted of wire fraud. At the time of his sentencing, guideline § 2F1.1(b)(2) provided that “[i]f the offense involved (A) more than minimal planning, or (B) a scheme to defraud more than one victim, increase [the offense level by] 2 levels.” The district court found that both more than minimal planning and more than one victim was involved, and accordingly increased defendant’s offense level by four. The 3rd Circuit found that imposing a four level increase when both these factors were present would “undermine the intent of § of 2F1.1(b)(2),” and that only a two level increase was appropriate. U.S. v. Astorri, 923 F.2d 1052 (3rd Cir. 1991).
3rd Circuit upholds separately grouping fraud and tax evasion counts. (300) Defendant pled guilty to one count of wire fraud and one count of income tax evasion in connection with a fraudulent stock brokerage scheme. The 3rd Circuit found that the district court properly increased defendant’s offense level for his tax evasion conviction. The tax evasion and fraud counts did not involve the same victims and thus grouping under guideline § 3D1.2(a) was inappropriate. The fraud count did not embody the conduct treated as a specific offense characteristic under the tax evasion count, and thus grouping under guideline § 3D1.2(c) was inappropriate. U.S. v. Astorri, 923 F.2d 1052 (3rd Cir. 1991).
3rd Circuit determines amount of loss from base amount of stolen treasury checks. (300) Defendant contended that the district court could not calculate amount of loss by looking at the face value of stolen treasury checks. The 3rd Circuit held that the court properly determined the amount of loss by looking at the face value of the checks and not the amount defendant received for them. The court also found the amount of loss schedule entirely neutral as to the socioeconomic status of offenders as required by 28 U.S.C. § 944(d). Finally, the district court properly considered, under the relevant conduct section 1B1.3, checks (sold by an acquitted co-defendant) for which defendant was not charged. This allows a sentencing court to consider unadjudicated conduct. U.S. v. Cianscewski, 894 F.2d 74 (3rd Cir. 1990).
4th Circuit holds that 480% increase above guideline range was not reasonable. (300) Defendant embezzled $77,222 from her employer. She pled guilty to one count of bank fraud, resulting in an advisory guideline range of 24-30 months. The Fourth Circuit held that the 144-month sentence imposed by the district court, which represented a 480% increase over the high end of the guideline range, was not reasonable. The main § 3553(a) factor cited by the district court, defendant’s risk of recidivism and the need to protect the public, supported a variance. Defendant’s prior convictions were for similar offenses, and she was still serving the term of supervised release from the second offense when she was arrested and charged in this case. The district court found that defendant was a “habitual thief. “ However, the court did not articulate sufficiently compelling reasons to justify the extent of the variance. The court did not explain how it concluded that a 144-month sentence was necessary to serve the goals of § 3553(a). Many of the bases articulated by the court were already contemplated by the guidelines. U.S. v. Tucker, 473 F.3d 556 (4th Cir. 2007).
4th Circuit rejects 70 percent downward variance based on theory that ran counter to jury verdict. (300) Defendant used the Internet auction site eBay to buy and sell large volumes of coins. After several years, when he was on the verge of financial ruin, he advertised for sale gold coins that he did not possess, receiving $148,000 from 21 buyers for 381 coins. He delivered only 44 of the coins. He was convicted of multiple counts of mail and wire fraud, and the district court sentenced him to 12-month terms on each count, to be served concurrently. This amounted to a 70% variance below the 41-51 month advisory guideline range. The Fourth Circuit held that the sentence was unreasonable. First, the district court stated that defendant did not at the outset intend to defraud the buyers, but this ran counter to the weight of the evidence and the jury’s verdict. The second reason for the variance was defendant’s restitution. However, defendant’s restitution was insufficient to justify a 70% variance. Defendant did not begin making restitution until the jury convicted him of the charges. Thus, in paying restitution, he was not accepting responsibility for his actions, particularly since he always maintained his innocence. Defendant merely complied with an order of restitution that he likely knew was forthcoming. While it might be worthy of some consideration, it did not justify so large a variance from the advisory guidelines. U.S. v. Curry, 461 F.3d 452 (4th Cir. 2006).
4th Circuit approves more than minimal planning increase proper for appraising assets and transferring them to auction houses. (300) The district court applied a 2F1.1(b)(2)(A) more than minimal planning enhancement to a bankruptcy fraud defendant who concealed assets based on the following: Defendant “engaged an appraiser. He arranged for auction houses. He actually transferred the assets, some of them at least himself, attended the auctions …. [H]e was clearly involved in trying to get these assets sold and get proceeds, again, all the time, not disclosing.” Given the multiple steps taken by defendant to have his wife’s assets transferred to the auctions houses and appraised, the Fourth Circuit held that the district court did not clearly err in applying the more than minimal planning enhancement. U.S. v. Hughes, 401 F.3d 540 (4th Cir. 2005).
4th Circuit applies increase where defendant had controlling interest in corporation that received fraud funds. (300) Defendant was the founder, owner and president of Centech, a general contracting firm. Some of Centech contracts required it to acquire surety bonds issued by a third-party. Defendant was convicted of a variety of fraud counts in connection with his drafting and using false performance and payment bonds for two projects for which he was unable to otherwise obtain bonding. The district court applied a four-level enhancement under § 2F1.1 (b)(8)(B) because defendant received at least $1,000,000 in gross revenue from the fraud and the fraud affected a financial institution. Defendant argued for the first time on appeal that only Centech, rather than defendant himself, derived the gross receipts. Because defendant maintained a controlling interest in the corporation, and thus controlled the fraudulently acquired funds, the Fourth Circuit found that the enhancement was not plain error. See U.S. v. Stolee, 172 F.3d 630 (8th Cir. 1999) (applying enhancement to defendant who was sole owner and president of corporation that received fraudulently obtained funds); U.S. v. Colton, 231 F.3d 890 (4th Cir. 2000) (refusing to attribute corporate receipts to shareholder who only had 50 percent share in corporation). U.S. v. Pendergraph, 388 F.3d 109 (4th Cir. 2004).
4th Circuit rules court properly grouped fraud and money laundering counts. (300) Defendant was convicted of wire fraud and money laundering based on his efforts to obtain investors for a bogus scheme to market a drug that was supposed to treat AIDS and cancer. Defendant argued that because this was essentially a fraud case, the district court erred in referring to the money guideline instead of just the fraud guidelines. The Fourth Circuit disagreed. The Statutory Index (Appendix A) directed the court to the money laundering guidelines, § 2S1.1, for defendant’s convictions for money laundering under 18 U.S.C. § 1956, and to the fraud guidelines, § 2F1.1, for his convictions for wire fraud under 18 U.S.C. § 1343. The district court properly grouped the money laundering and fraud counts together under § 3D1.2(d), and applied the higher offense level for money laundering under § 3D1.3(b). At the time of defendant’s sentencing, the law in this circuit was that fraud and money laundering offenses could be grouped together when they were “closely related.” Amendment 634, which completely changed the way the offense level for money laundering is calculated, did not become effective until November 1, 2001, two days after sentencing. Since it did not apply retroactively, defendant could not benefit from it. U.S. v. Caplinger, 339 F.3d 226 (4th Cir. 2003).
4th Circuit rules that enhancement for violating judicial process is substantive, not clarifying. (300) The 1998 version of USSG § 2F1.1(b)(4)(B) provides for a two-level enhancement for a violation of “any judicial or administrative order, injunction, decree, or process.” Although the Fourth Circuit has not addressed this issue, the other circuits are divided on the question of whether this enhancement applies bankruptcy fraud. The majority has concluded that it does. Compare U.S. v. Saacks, 131 F.3d 540 (5th Cir. 1997) with U.S. v. Shadduck, 112 F.3d 523 (1st Cir. 1997). A few days before defendant’s sentencing for bankruptcy fraud, the Sentencing Commission amended the guideline to explicitly apply the increase to a “misrepresentation or other fraudulent action during the course of a bankruptcy proceeding.” Without mentioning the amendment, the district court refused to apply the enhancement to defendant. The Fourth Circuit held that the district court properly based defendant’s sentence on the old guideline without reference to the 2000 amendment. Given the pre-amendment lack of authority in this circuit, and the fact that the amendment constituted an entirely new provision, not just new commentary, the panel accepted the Commission’s characterization of the amendment as substantive, not clarifying. However, the district court erred in interpreting the old guideline. Bankruptcy fraud constitutes an abuse of “judicial … process” under § 2F1.1(b)(4)(B). U.S. v. Butner, 277 F.3d 481 (4th Cir. 2002).
4th Circuit holds that defendant with non-controlling stake did not “receive” money paid to corporation. (300) The fraud victim made out a $2,052,000 check payable to “Marlboro [sic] Colton Laskin,” which was deposited into Marlborough’s corporate account. From these accounts, defendants Colton and Laskin each received $300,000 individually; the remainder was used to satisfy corporation obligations of Marlborough and defendants’ other business ventures. Because only $300,00 was given to defendant Colton directly, and the rest went to a co-defendant or Marlborough, the district judge found that defendant Colton did not “derive more than $1,000,000 in gross receipts” under § 2F1.1(b)(7)(B). The government challenged the court’s refusal to apply the enhancement, noting that defendant owned 50 percent of Marlborough, and thus “indirectly” received half of the more than $2 million from the fraud. Note 18 to § 2F1.1 defines “gross receipts from the offense” to include “all property, real or personal or, tangible or intangible, which is obtained directly or indirectly as a result of such offense.” The Fourth Circuit rejected the government’s argument, since defendant held a non-controlling stake in the corporation–his fifty percent interest in the corporation did not give him “control” of, or rights to, fifty percent of the proceeds from the fraud. Under black-letter corporate law, the property of the corporation is its property and not that of the shareholders. Defendant could not unilaterally use the funds for his individual purposes. U.S. v. Colton, 231 F.3d 890 (4th Cir. 2000).
4th Circuit applies multiple victim enhancement where defendants failed to report fraud proceeds on tax returns. (300) Defendants, officers of the United Way of America, were convicted of fraud and tax evasion charges stemming from their improper use of UWA money for personal gain. The Fourth Circuit upheld a two-level increase under § 2F1.1(b)(2) (B) for a scheme to defraud more than one victim. Each defendant intended to obtain something of value from more than one person or entity, i.e. the UWA and the U.S. government. For example, one defendant obtained money from UWA by submitting bogus expense receipts, and then avoided paying federal income taxes on that money. The other defendant helped the first defendant defraud UWA and aided him in avoiding payment of federal taxes on that money. U.S. v. Aramony, 166 F.3d 655 (4th Cir. 1999).
4th Circuit applies misrepresentation increase to United Way officer who improperly used charity’s funds. (300) Defendant, chief executive officer of the United Way of America, was convicted of fraud and tax evasion charges stemming from his improper use of UWA money for personal gain. Section 2F1.1(b)(3)(A) provides a two-level enhancement if the offense involved a misrepresentation that the defendant was acting on behalf of a charitable, educational, religious, or political organization, or a government agency. Defendant contended that the enhancement is appropriate only if the defendant misrepresents his own ability to act on behalf of a particular organization. The Fourth Circuit, relying on its previous decision in U.S. v. Marcum, 16 F.3d 599 (4th Cir. 1994), held that the § 2F1.1(b)(3)(A) enhancement is appropriate even if the defendant did not misrepresent his authority to act on behalf of a particular organization, but rather only misrepresented that he was conducting an activity wholly on behalf of such organization. In this case, defendant did not misrepresent his authority to act on behalf of UWA, but he did misrepresent that he was acting wholly on behalf of UWA in soliciting donations. U.S. v. Aramony, 166 F.3d 655 (4th Cir. 1999).
4th Circuit applies § 2F1.1(b)(3)(A) to falsely claiming to act for foreign government. (300) As part of an elaborate fraud scheme, defendant represented to the victim that he was acting on behalf of the Nigerian Finance Ministry. Defendant argued that the § 2F1.1(b)(3)(A) enhancement for falsely claiming to act on behalf of a government agency does not apply to those who claim to act for a foreign government. The Fourth Circuit disagreed, holding that § 2F1.1(b)(3)(A) applies to those who falsely represent that they act on behalf of either domestic or foreign government agencies. Therefore, the enhancement was proper. U.S. v. Achiekwelu, 112 F.3d 747 (4th Cir. 1997).
4th Circuit approves upward departure for exceptionally complex fraud scheme. (300) In a complicated fraud scheme, defendant and others promised their victim a 15 percent commission on $28.5 million that they were allegedly owed by the Nigerian government. The victim paid almost $4.2 million to various “agencies” to facilitate the transfer, and never received any of the $28.5 million. The Fourth Circuit approved a two-level departure based on the exceptional complexity of the scheme. Because complexity is already a factor in finding more than minimal planning under § 2F1.1(b)(2)(A), a departure is permitted only for exceptionally complex frauds. That standard was met here. Defendant and his cohorts lured the victim to Nigeria, introduced him to several others posing as government officials and took him to an office building they claimed was the Central Bank of Nigeria. They prepared false documents that appeared to be official Nigerian government certificates and arranged for the money to be sent to foreign countries where it would be more difficult to trace. U.S. v. Achiekwelu, 112 F.3d 747 (4th Cir. 1997).
4th Circuit says false certification of miners’ training involved risk of serious bodily injury. (300) Defendant and her husband paid a mine safety instructor to falsely certify that he provided safety training to the coal miners working for defendant. The Fourth Circuit agreed that the offense involved conscious or reckless risk of serious bodily injury under § 2F1.1(b)(4)(A). The fact that no accidents were attributable to the lack of training did not make the conduct any less reckless. Defendant’s miners did not receive any mine‑specific safety information concerning the mine’s roof or ground control plans, ventilation plans or safety devices. Even before the false certifications, defendant’s mine was one of the least safe mines in the country, receiving hundreds of safety violations and reporting numerous accidents. U.S. v. Turner, 102 F.3d 1350 (4th Cir. 1996).
4th Circuit remands to reconsider increase for jeopardizing soundness of financial institution. (300) In order to avoid having their insolvent insurance company shut down for inadequate reserves, defendants placed worthless or overvalued assets on the books of the company. The district court refused to apply a § 2F1.1(b)(6) enhancement for jeopardizing the safety and soundness of a financial institution, reasoning that the institution was already insolvent. The Fourth Circuit remanded because the district court applied the wrong legal standard. Note 15 lists four types of damage flowing from an offense that may constitute “jeopardizing the safety and soundness of a financial institution.” The district court did not consider three of the bases for enhancement. U.S. v. Krenning, 93 F.3d 1257 (4th Cir. 1996).
4th Circuit says fraud was completed by depositing worthless checks in bank account. (300) Defendant wrote 47 bad checks totaling $69,000 and deposited them in his girlfriend’s bank account. He withdrew about $11,000 from the bank before they discovered the scheme. He argued that for sentencing purposes he did not complete the fraud since he only withdrew about $11,000 of the $69,000 that he deposited and therefore he should have been sentenced under § 2X1.1. The Fourth Circuit disagreed, finding defendant failed to distinguish between completing a fraud and inflicting all the loss that one intended to inflict by means of that fraud. A loss can be complete without ultimately inflicting the full, intended loss on the victim. Here the $69,000 intended loss was attributable to a completed fraud. Defendant was convicted of fraud for depositing worthless checks in the total amount of $69,000, not for withdrawing funds from the account. While $11,000 was the actual loss, $69,000 was the intended loss fully attributable to defendant. U.S. v. Williams, 81 F.3d 1321 (4th Cir. 1996).
4th Circuit finds more than minimal planning and abuse of trust for skimming from bingo games. (300) Defendant, president of the local sheriff’s association, skimmed proceeds from the public bingo games conducted by the association. The 4th Circuit upheld more than minimal planning and abuse of trust enhancements. More than minimal planning is present in any case involving repeated acts over a period of time, unless it is clear that each instance was purely opportune. Defendant’s skimming was not an isolated act. He ran the game twice a week over a period of nearly two years with the intent to skim the proceeds each evening. The abuse of trust enhancement was also proper. Defendant misrepresented to the public that he was conducting the bingo games solely on behalf of the sheriff’s association, a charitable organization. However, he was acting in part for himself and his fellow deputies. U.S. v. Marcum, 16 F.3d 599 (4th Cir. 1994).
4th Circuit upholds loss calculation based on brokerage fees for fraudulently-obtained contracts. (300) Defendants served as matchmakers between government contractors and sureties who guaranteed the contractors’ performance. In return, defendants received a fee equal to a percentage of the contract price. Defendants filed false forms certifying the sureties’ net worth. The 4th Circuit upheld a loss calculation under section 2F1.1 based on the $2.9 million in brokerage fees paid out by the government to defendants. Although each contract had one other surety, at the time defendants engaged in their enterprise, federal regulations required two individual sureties to secure a bond. Thus, the court properly concluded that the government did not get what it paid for, so the amount paid out in fees fairly constituted actual loss under section 2F1.1. U.S. v. West, 2 F.3d 66 (4th Cir. 1993).
4th Circuit rules that potential consequences of default determines loss in fraudulent loan case. (300) Defendants made fraudulent misrepresentations to obtain a $168,700 mortgage on their home. The 4th Circuit reversed the determination that the loss under section 2F1.1 should be based on the amount of the fraudulently obtained loan; instead, it should be based on the potential consequences of default. Thus, because defendants conveyed a security interest in the real estate to the bank when they obtained the loan, the value of the security interest should be deducted from the amount of the loan in determining loss. Payments made by defendants should also be considered. The court found that U.S. v. Rothberg, 954 F.2d 217 (4th Cir. 1992) was indistinguishable. U.S. v. Baum, 974 F.2d 496 (4th Cir. 1992), appeal after remand, 16 F.3d 412 (4th Cir. 1994).
4th Circuit holds that payment to a lender by a third-party guarantor should be included in calculating loss. (300) Defendant provided a false financial statement to his lender. When defendant’s company finally ceased production, the lender was owed in excess of $275,000. The lender sued and recovered $125,000 from a third-party guarantor. The 4th Circuit held that the $125,000 recovered from the third-party guarantor was properly included in the calculation of loss under section 2F1.1. As payment by a guarantor, the $125,000 was akin to restitution: the defendant, through a third party, was returning that which he took. However, the case was remanded for resentencing because the district court did not determine the amount of loss related to the false statement. Generally, the loss attributable to the false statement is the amount of the outstanding loan, less any amount recouped by the bank from assets pledged against the loan, less the estimated amount the bank would have lost had the statement not been false. U.S. v. Wilson, 980 F.2d 259 (4th Cir. 1992).
4th Circuit holds that uncharged fraud was not part of same course of conduct. (300) Defendant was convicted of aiding and abetting his brother’s fraud scheme for making fraudulent misrepresentations to his brother’s creditor. The 4th Circuit reversed the district court’s determination that defendant’s involvement with his brother’s separate fraud scheme against several life insurance companies was relevant conduct for purposes of determining the amount of loss under section 2F1.1. The life insurance fraud was not “part of the same course of conduct or common scheme or plan” as the offense of conviction. The significant elements to be evaluated are similarity, regularity and temporal proximity between the offense of conviction and the uncharged conduct. The fact that the same three individuals were involved in the two schemes did not make the schemes sufficiently similar. In addition, defendant’s willingness to aid his brother’s fraudulent endeavors did not provide a sufficient link between the frauds. Moreover, the distinctions between the schemes were quite significant. U.S. v. Mullins, 971 F.2d 1138 (4th Cir. 1992).
4th Circuit rules actual loss caused by fraudulent loan was not too speculative to calculate. (300) Defendant was convicted of obtaining credit from a bank by fraud, and making a false statement on a loan application. The loan was in the amount of $480,000, and was secured by a deed of trust on a condominium appraised at $600,000. The 4th Circuit reversed the district court’s refusal to enhance defendant’ sentence under section 2F1.1 based upon the amount of loss. The district court’s finding that defendant intended no loss was not clearly erroneous. However, contrary to the district court’s determination, the actual loss was not too speculative to calculate. The amount recovered or reasonably anticipated to be recovered from collateral that secures a loan should be considered in calculating the amount of actual loss. However, speculative amounts the title insurance company that covered the bank’s loss might be able to recover in a civil proceeding from defendant’s other assets need not be considered, since this was akin to restitution. The evidence concerning the value of the condominium at the time the offense was discovered and the reasonable expenses incurred by the title company was sufficient to permit the district court to calculate a reasonable estimate of the range of loss. U.S. v. Rothberg, 954 F.2d 217 (4th Cir. 1992).
5th Circuit holds that Medicare is not a “financial institution.” (300) Defendants were convicted of multiple crimes related to fraud on the Medicare program. The district court applied a two-level increase under the 2001 version of U.S.S.G. § 2B1.1(b)(12)(A) for deriving “more than $1,000,000 in gross receipts from one or more financial institutions as a result of the offense.” The court also applied a four-level increase to another defendant under the 2000 version of U.S.S.G. § 2F1.1(b)(8)(B). The government conceded that under a recent decision, Medicare is not a “financial institution” within the meaning of the relevant guideline. See U.S. v. Soileau, 309 F.3d 877, 881 (5th Cir. 2002). While Soileau dealt with the 2000 guidelines, the relevant provision is in pertinent part identical in the 2001 guidelines. The Fifth Circuit vacated the sentences containing this incorrect enhancement. U.S. v. Miles, 360 F.3d 472 (5th Cir. 2004).
5th Circuit holds that Medicare is not a “financial institution.” (300) Defendant, the owner of a hospital management corporation, defrauded Medicare by billing for services provided by satellite clinics which were not Medicare certified. Guideline § 2F1.1(b)(8)(B) provides for an enhancement if the offense “affected a financial institution and the defendant derived more than $1,000,000 in gross receipts from the offense….” The Fifth Circuit held that Medicare is not a financial institution under § 2F1.1. The definition of financial institution in Application Note 19 is much broader than the definition of 18 U.S.C. § 20, however, it does not include the Medicare program in the list of “financial institutions” covered under § 2F1.1(b) (8)(B), nor do any of the sections of the United States Code cross-referenced in Note 19 mention Medicare. Although the government argued that Note 19 includes entities similar to Medicare, such as private insurance associations, this argument is useless because 18 U.S.C. § 20 includes nothing remotely similar to Medicare, and Medicare cannot be considered a bank as referenced in the Crime Control Act of 1990. U.S. v. Soileau, 309 F.3d 877 (5th Cir. 2002).
5th Circuit holds that ads in tabloid newspaper supported mass-marketing increase. (300) Defendant operated an advance fee scheme, placing ads in grocery store tabloid newspapers promising interest-free loans. After collecting “application fees” and “deposits,” defendant kept the money for his own use and did not extend a loan to any applicant. Defendant challenged a § 2F1.1(b)(3) increase for using “mass-marketing” in the commission of his offense, arguing that the increase is limited to “active” rather than “passive” marketing. The Fifth Circuit rejected this restrictive view. The guidelines define mass-marketing as a “plan, program, promotion, or campaign that is conducted through solicitation by telephone, mail, the Internet, or other means to induce a large number of persons to (A) purchase goods or services; … or (C) invest for financial profit.” The plain meaning of solicitation is to “solicit orders or trade, as for a business house.” Moreover, two of the mediums listed in the commentary – mail and the Internet – are themselves passive. A mass mailing to 300,000 people is no more active than an ad in the newspaper. U.S. v. Magnuson, 307 F.3d 333 (5th Cir. 2002).
5th Circuit reaffirms that bankruptcy fraud is a violation of judicial or administrative order. (300) Defendants entered into a stock subscription agreement with a bankrupt business under which defendants’ company was provide the business with needed capital. Shortly after the stock subscription agreement was incorporated in the bankruptcy court’s order, defendants began fraudulently diverting various payments due the business. Defendants were convicted of wire fraud and bankruptcy fraud. The Fifth Circuit approved a § 2F1.1(b)(3) enhancement for an offense involving a violation of a judicial or administrative order. Defendants argued that their actions did not violate any specific order of the district court. This argument was foreclosed by U.S. v. Saacks, 131 F.3d 540 (5th Cir. 1997), which held that bankruptcy fraud is in itself a violation of a judicial or administrative order. U.S. v. Izydore, 167 F.3d 213 (5th Cir. 1999).
5th Circuit affirms more than minimal planning enhancement for repeated acts. (300) Defendant was friends with an officer of a corporation that provided management services for properties which had been placed in receivership. Under the terms of its contracts, the corporation was barred from hiring related companies to perform services at the properties without acquiring approval. Defendant helped the corporation defraud the RTC and the FDIC by falsely posing as the owner of a company bidding on repair work, and accepting checks issued to this company. The Fifth Circuit affirmed a more than minimal planning enhancement because defendant engaged in repeated criminal acts. U.S. v. Burns, 162 F.3d 840 (5th Cir. 1998).
5th Circuit holds creditors and bankruptcy trustee were victims of bankruptcy fraud. (300) Defendant committed bankruptcy fraud by concealing corporate assets from the bankruptcy trustee and failing to reveal that he and his father had assumed personal liability for the corporation’s debts. Defendant challenged a § 2F1.1(b)(2)(B) enhancement for engaging in a scheme to defraud more than one victim, claiming that the bankruptcy estate alone, and not the corporation’s creditors, was the victim of the fraud. The Fifth Circuit held that creditors and the bankruptcy trustee are victims of bankruptcy fraud. Thus, the multiple victim enhancement was proper. U.S. v. Saacks, 131 F.3d 540 (5th Cir. 1997).
5th Circuit says bankruptcy fraud inherently involves violation of judicial or administrative process. (300) Defendant committed bankruptcy fraud by concealing corporate assets from the bankruptcy trustee and failing to reveal that he and his father had assumed personal liability for the corporation’s debts. The district court applied a § 2F1.1(b)(3)(B) enhancement for violating a judicial or administrative order, injunction, decree or process. The Fifth Circuit, although acknowledging the significant minority view, joined the majority of courts which have held that bankruptcy fraud implicates the violation of a judicial or administrative order or process within the meaning of § 2F1.1(b)(3)(B). U.S. v. Saacks, 131 F.3d 540 (5th Cir. 1997).
5th Circuit agrees that defendant jeopardized safety and soundness of financial institution. (300) Defendant was convicted of mail and bank fraud in connection with his operation of an insurance company. The district court applied a § 2F1.1(b)(6)(A) enhancement for substantially jeopardizing the safety and soundness of a financial institution. Defendant argued that this was improper because the insurance company was impaired and insolvent when he took it over in 1989. Therefore, his scheme to forestall regulatory action in order to continue operation could not have caused its insolvency. The Fifth Circuit affirmed the enhancement. The district court found that defendant’s conduct rendered the insurance company insolvent, made it unable to fully refund deposits and investments, and so depleted the company’s assets as to force the company to merge with another institution. U.S. v. Blocker, 104 F.3d 720 (5th Cir. 1997).
5th Circuit applies financial institution increase even though company was insolvent before fraud. (300) Defendant was the president, CEO and principal stockholder of an insurance company. He was convicted for his role in a scheme to infuse fraudulent securities into the company to disguise its insolvency. The district court rejected a § 2F1.1(b)(6)(A) enhancement for jeopardizing the safety and soundness of a financial institution, because the company was already insolvent at the time of the fraud due to the failure of its re-insurer. On the government’s appeal, the Fifth Circuit reversed. reaffirming its previous holding that prior insolvency does not negate the possibility of a § 2F1.1(b)(6)(A) enhancement. Note 15 does not define safety and soundness solely in terms of the institution’s solvency. The enhancement does require a causal connection between the loss and the fraud. Here, once the district court determined that $5 to $10 million in unpaid claims and unrefunded premiums were attributable to defendant’s fraud, it was obligated to apply the enhancement. U.S. v. McDermot, 102 F.3d 1379 (5th Cir. 1996).
5th Circuit approves upward departure for non-monetary harm to fraud victims. (300) While employed as a substitute teacher, defendant searched through the desks of teachers for whom she was substituting, obtaining personal information and social security numbers. She used this information to obtain credit cards in her victims’ names, and used the cards to make purchases. The Fifth Circuit affirmed an upward departure based on the non‑monetary harm suffered by the victims of defendant’s fraud. The victims lost days from work, feared arrest, were forced to appear in court, struggled to repair their credit rating, and were not able to use the credit cards in their possession. The victims were forced to spend enormous time and energy to clear their credit, and faced embarrassment from stores and collection agencies. The application notes to § 2F1.1 specifically authorize a departure for non‑monetary harm and psychological harm. The three month upward departure was reasonable under the circumstances. U.S. v. Wells, 101 F.3d 370 (5th Cir. 1996).
5th Circuit agrees that intricacy and repetitiveness of bank fraud warranted upward departure. (300) Defendant was hired by her mother’s employer to perform various accounting and bookkeeping functions. Over a ten month period, she embezzled large sums of money from three different bank accounts by forging her mother’s name and depositing the proceeds in her own accounts. The Fifth Circuit agreed that the degree of intricacy of the scheme was not accounted for by the more than minimal planning enhancement in § 2F1.1 and justified an upward departure. The offense involved multiple acts of forgery, fraudulent representations to set up an unauthorized account to route the embezzled funds, repeated acts of embezzlement from various accounts, the transfer of embezzled funds into several accounts belonging to defendant or her alter egos at different banks, and the skillful shifting of funds among all the accounts to conceal the embezzlement. The repetitiveness, intricacy, and sophistication of defendant’s scheme were substantially in excess of that which is ordinarily involved in bank fraud. U.S. v. Kay, 83 F.3d 98 (5th Cir. 1996).
5th Circuit vacates where court made no finding on intent to repay fraudulent loans. (300) Defendant made false statements on applications for educational grants. He argued that he intended to repay the money, while the government contended that he had no such intent. The Fifth Circuit remanded because the district court failed to make a finding as to whether defendant would pay back the loans. Without such a finding, the enhancement under § 2F1.1 based on a loss in excess of $10,000 was improper. U.S. v. Quaye, 57 F.3d 447 (5th Cir. 1995).
5th Circuit holds that prisoners’ money order scheme involved more than minimal planning. (300) Defendant, a prison guard, was involved in an altered money order scheme organized by the prison’s inmates. The Fifth Circuit held that the scheme involved more than minimal planning under § 2F1.1. The elaborate plan required the inmates to form a relationship with a victim, purchase and alter money orders, transmit the illegal proceeds through the mails, and smuggle the funds into prison. Moreover, defendant’s offense involved more than one victim since the funds she carried into the prison were traced back to two different victims. U.S. v. Scurlock, 52 F.3d 531 (5th Cir. 1995).
5th Circuit holds conspirator liable for 75% of fraudulently filed tax returns. (300) Defendant was involved in a sizable conspiracy to file fraudulent income tax returns. The returns were filed electronically through the rapid refund system by one tax return business. Defendant argued that the court erred when it based his sentence on 75% of the returns filed through this business. The Fifth Circuit found no error. There was substantial evidence that defendant joined the conspiracy in the beginning and had a central role in it. Defendant did not present any evidence suggesting that he was a late-comer to the scheme. The PSR recommended that defendant be held responsible for 90% of the loss. U.S. v. Okoronkwo, 46 F.3d 426 (5th Cir. 1995)..
5th Circuit says gun found in car was not used “in connection with” bank fraud. (300) Defendant submitted a fraudulent credit application to a bank. The Secret Service made a controlled delivery of blank checks to defendant’s mail box. Police arrested defendant as soon as he retrieved the checks and drove out of his apartment complex. The officers recovered a loaded gun from the front passenger area of the car. Defendant was convicted of bank fraud and unlawful possession of a firearm. The Fifth Circuit reversed a § 2K2.1(b)(5) enhancement, holding that the facts failed to show that defendant used the gun “in connection with” his bank fraud. There was no connection between the gun and the fraud other than the gun’s presence in defendant’s car, along with other tools of defendant’s bank fraud trade. The presence of a gun near instruments of bank fraud does not create the same automatic increase in danger that exists when drugs and guns are present together. U.S. v. Fadipe, 43 F.3d 993 (5th Cir. 1995).
5th Circuit rules that mail fraud is not a continuing offense. (300) Defendant was convicted of multiple counts of mail fraud. The mailings occurred both before and after the effective date of the guidelines. The sentences for his guidelines offenses ran consecutively to the sentences for his pre-guidelines offenses. He argued that because the guideline commentary required grouping of mail fraud offenses, the district court was bound to order concurrent sentences for all counts. The 5th Circuit upheld the consecutive sentences for the guidelines and pre-guidelines offenses. The commentary is only binding with respect to offenses actually covered by the guidelines. The guidelines only apply to crimes committed after November 1, 1987. Defendant’s offense did not “straddle” the guidelines’ effective date because mail fraud is not a continuing offense. Each mailing constitutes a completed offense. U.S. v. Miro, 29 F.3d 194 (5th Cir. 1994).
5th Circuit holds that defendant did not show court punished him for unextradicted crimes. (300) Defendant was in Spain when he was indicted for mail fraud and money laundering. Spain extradited defendant but limited prosecution to the mail fraud counts because the charge for money laundering did not state an offense under Spanish law. Defendant argued for the first time on appeal that the district court imposed a greater sentence because the government could not prosecute him for money laundering. The 5th Circuit found no plain error. The PSR did not recommend that the court take into account as relevant conduct the unextradicted counts. The court’s comments at sentencing simply showed that the court was unsympathetic toward a fugitive. The court plainly had the discretion to impose consecutive sentences for guidelines and pre-guidelines counts. U.S. v. Miro, 29 F.3d 194 (5th Cir. 1994).
5th Circuit says enhancements for organizer role and more than one fraud victim are not double counting. (300) Defendant argued that his organizer enhancement under § 3B1.1(a) and his enhancement under § 2F1.1(b)(2) for more than minimal planning or involvement in a scheme to defraud more than one victim was double counting. The 5th Circuit affirmed both enhancements. Even if U.S. v. Romano, 970 F.2d 164 (6th Cir. 1992) was the law in this Circuit, it was distinguishable. Section 2F1.1(b)(2) allows an increase if defendant engaged in more than minimal planning or engaged in a scheme to defraud more than one victim. The district court found that defendant’s conduct fit either of the two options. In such a circumstance, even the 6th Circuit does not follow the Romano rule. scheme to defraud more than one victim. U.S. v. Godfrey, 25 F.3d 263 (5th Cir. 1994).
5th Circuit rejects commentary barring consideration of interest in amount of loss. (300) Defendant was an officer and chairman of the board of directors of a bank. He acted as loan officer on two loans to a friend without disclosing to the board that he held a secret interest in the property that was the subject of the loan. The district court included in the loss calculation under § 2F1.1 the interest on both loans. The 5th Circuit affirmed, finding that note 7 to § 2F1.1, which forbids the inclusion of the interest the victim could have earned on the funds, was too broad. If the note were applied in this case, it would be inconsistent with § 2F1.1. Interest should be included if, as here, the victim had a reasonable expectation of receiving interest from the transaction. U.S. v. Henderson, 19 F.3d 917 (5th Cir. 1994).
5th Circuit holds intended loss is zero where defendant intends to repay loan. (300) Defendant was an officer and chairman of the board of directors of a bank. He acted as loan officer on two loans to a friend without disclosing that he held a secret interest in the property that was the subject of the loan. The district court calculated the loss under § 2F1.1 as the face value of both loans, finding that this was the intended loss. The 5th Circuit rejected this interpretation. Where a defendant intends to repay a loan or replace fraudulently obtained property, the intended loss is zero. On remand, the district court must determine if defendant actually intended to cause of loss, and if so, the amount of the intended loss. Only if this value is greater than the actual loss to the banks should it be used to determine defendant’s sentence. U.S. v. Henderson, 19 F.3d 917 (5th Cir. 1994).
5th Circuit includes in loss attorneys’ fees incurred by bank defending defendant’s lawsuit. (300) In order to obtain a bank loan, defendant pledged as collateral a CD equal to 10 percent of the loan balance. When the loan went into default, defendant filed a civil suit against the bank to recover the CD, claiming he believed the CD was merely a cash deposit without a pledge. The 5th Circuit upheld a loss calculation under section 2F1.1 that included the intended loss of the CD and the attorneys’ fees incurred by the bank in defending defendant’s lawsuit. The court rejected defendant’s claim that the civil suit was not directly related to the charged offense. Defendant’s scheme was to get his pledged document back from the bank in the event that the loan went into default. Filing a civil suit was part of that scheme. Defendant was not entitled to a reduction under section 2X1.1 for a partially completed offense. Although his scheme failed, he completed all of the necessary acts when he filed suit against the bank. U.S. v. Blackburn, 9 F.3d 353 (5th Cir. 1993).
5th Circuit holds that prison money order scam involved more than minimal planning. (300) Defendant, a contract food manager for a prison, was involved in a scheme by the prisoners to cash altered money orders. The 5th Circuit affirmed that the scheme involved more than minimal planning under section 2F1.1(b)(2). The scheme involved significant planning to obtain and alter money orders, to target and manipulate specific victims, to conceal the offense, and to smuggle the proceeds into prison. The guidelines do not require the government to prove that the offense was somehow more elaborate than comparably elaborate offenses, but rather that it involved more planning than a “simple form” of the offense. U.S. v. Brown, 7 F.3d 1155 (5th Cir. 1993).
5th Circuit includes in loss two uncashed Western Union drafts. (300) Defendant was involved in a scheme by federal prisoners to cash altered money orders. He received three Western Union drafts totaling $5000 from one of the fraud victims. He was able to cash only one of the drafts in the amount of $1000; the other two were never cashed. Nonetheless, the 5th Circuit held that the amount of loss under section 2F1.1 should include the two uncashed drafts. Section 2F1.1 states that if the intended loss is greater than actual loss, the intended loss should be used. Defendant clearly intended the victim to suffer a loss of $5,000. He should not be rewarded simply because police thwarted his plans. U.S. v. Brown, 7 F.3d 1155 (5th Cir. 1993).
5th Circuit approves assigning blank checks an average value of other checks actually produced. (300) Defendants were convicted of using and possessing counterfeit checks. The district court determined loss by adding together the value of four checks defendants cashed or attempted to cash, five uncashed checks found in their getaway car, and 16 checks which a typewriter ribbon showed they had produced, for a total of $4,296.29. It added to this the value of 51 blank checks found in defendants’ car and hotel room, determined by assigning to each the average value of the checks actually recovered. The 5th Circuit approved the district court’s use of the average value of the other checks actually produced as the value of the blank checks. Here, in addition to the 25 counterfeit checks in their possession, defendant had a booklet detailing a plan to pass as many as 155 checks in an effort to procure as much as $300,000. The district court’s assessment of intended loss was conservative and not clearly erroneous. U.S. v. Chappell, 6 F.3d 1095 (5th Cir. 1993).
5th Circuit bases loss on cost to state from failure of insurance company. (300) Defendant purported to assign $13 million worth of certain securities which did not belong to him to an associate, who then assigned these securities to an insurance company as a capital contribution. The effect of this assignment was to make the insurance company appear to be solvent. In a subsequent audit by the state of Louisiana, defendant represented that he held the securities on behalf of the associate. As a result, the accounting firm issued a favorable audit. The 5th Circuit affirmed a loss calculation of between five and 10 million dollars based on the cost to the state of Louisiana from the failure of the insurance company. It was not clearly erroneous to assume that if the accounting firm had not issued a favorable audit, Louisiana would have acted to liquidate the firm at an earlier date and minimized the losses. U.S. v. Robichaux, 995 F.2d 565 (5th Cir. 1993).
5th Circuit upholds departure in fraud involving many victims. (300) Defendant insinuated himself into the good graces of between 31 and 56 women over an extended period of time and then got each to cash sizeable bad checks for him. He argued the district court erred in departing upward based on the number of victims. The 5th Circuit disagreed, holding that 2F1.1(b)(2), which permits a two-point enhancement when the scheme to defraud involves more than one person, does not preclude departure in this case. The court also upheld the scope of the departure in light of the extended period of time over which the fraud took place, the amount of planning involved, and the failure of the defendant’s criminal history score adequately to reflect foreign convictions. U.S. v. Barakett, 994 F.2d 1107 (5th Cir. 1993).
5th Circuit includes in loss calculation entire amount of overdrafts from check-kiting scheme. (300) When defendant’s businesses began to fail, he devised a check-kiting scheme to keep them running until he could sell them as ongoing businesses. A total of $1.5 million in checks were posted by the bank as overdrafts. The 5th Circuit affirmed that the entire amount of the overdrafts was properly used to calculate loss under section 2F1.1. The fact that defendant executed a promissory note to the bank for the full amount of the overdraft, secured by a lien on defendant’s businesses, did not reduce the bank’s actual loss. The court rejected defendant’s claim that check-kiting should be treated as equivalent to a fraudulent loan transaction. Check kiting is more akin to simple theft than to a fraudulent loan transaction. U.S. v. Frydenlund, 990 F.2d 822 (5th Cir. 1993).
5th Circuit upholds upward departure where fraud caused many to lose life savings. (300) Defendant was involved in an extensive fraud scheme involving 2000 investors and eleven million dollars. The district court departed upward because of the “devastating impact” defendant, as the CEO of an investment trust company, had on investors, many of whom lost their life savings. The court also cited the scope of the scheme to defraud as a reason for the departure. The 5th Circuit affirmed, ruling that section 2F1.1 did not consider the factors cited by the district court, particularly that the scheme caused thousands to lose their life savings. The 1987 version of section 2F1.1 only considered the amount of loss and certain other non-relevant factors. U.S. v. Stouffer, 986 F.2d 916 (5th Cir. 1993).
5th Circuit says reliance on amended guideline to justify departure violated ex post facto clause. (300) Defendant received almost $800,000 as proceeds from her mail fraud scheme. After the offense was committed, section 2F1.1(b)(1) was amended (effective 1992) to increase the offense level for frauds involving $800,000. Although the 1988 guideline was applicable to defendant, the presentence report recommended an upward departure based upon the amendments to the guideline. The 5th Circuit held that the district court’s reliance on the 1992 amended version of section 2F1.1(b)(1) violated the ex post facto clause. The court distinguished U.S. v. Bachynsky, 949 F.2d 722 (5th Cir. 1991), in which the district court merely used the amendment to guide its permitted discretion to depart upward. Here, the district court appeared to ignore the applicable pre-amendment provisions, which did not permit an upward departure if only $800,000 was defrauded. U.S. v. Davidson, 984 F.2d 651 (5th Cir. 1993).
5th Circuit affirms extensive planning, rejects amount of fraud number of victims, as grounds for departure. (300) Defendant, her husband and her brother caused a sailboat to explode and falsely reported that the husband was killed. As a result, defendant received almost $800,000 in insurance and pension benefits from seven insurance companies. After a mock funeral and five years of active concealment, including a remarriage to the wife under the assumed name, the scheme was exposed. Although defendant had a guideline range of 15 to 21 months, the district court departed to a 24-month sentence, citing (a) the extensive planning and elaborate execution of the fraud, (b) the multiple victims, and (c) the large amount of money defrauded. The 5th Circuit affirmed the departure, although it found that the amount of money and the number of victims involved were not proper grounds for departure. The amount of money, $800,000, was well within the parameters in section 2F1.1(b)(1). The number of victims was not extraordinarily large. However, the elaborate planning and meticulous execution did justify a departure since it was “substantially in excess” of that generally found in mail fraud cases. U.S. v. Davidson, 984 F.2d 651 (5th Cir. 1993).
5th Circuit relies on auto dealer’s guide to determine value of cars sold. (300) Defendant was convicted of odometer tampering. Section 2N3.1(b)(1) refers sentencing courts to the fraud guideline when the offense involves more than one car. Note 7 to section 2F1.1 provides that in cases involving misrepresentation of the quality of a consumer product, loss is the difference between the amount paid by the victim for the product and the amount for which the victim could resell the product received. The National Automobile Dealers Association (NADA) guide stated that the reduction of value for high mileage should not exceed 40 percent of a car’s value. The 5th Circuit affirmed the district court’s use of the 40 percent loss of value figure from the NADA guide to determine loss. The court determined that the average purchase price of a car sold by defendant was $10,000, and arrived at a loss of $4,000 per car. U.S. v. Whitlow, 979 F.2d 1008 (5th Cir. 1992).
5th Circuit affirms large departure based on murder of theft victim. (300) Defendant pled guilty to theft of a U.S. treasury check and was sentenced under section 2F1.1. Her offense level was increased to 13 under section 2F1.1(4) because the offense involved the conscious or reckless risk of serious bodily injury. This resulted in a guideline range of 15 to 21 months. The district court found that defendant had murdered the theft victim. It departed upward under section 5K2.1 to the maximum statutory sentence of 120 months. The 5th Circuit affirmed, holding that the serious-bodily-injury adjustment did not preclude a departure for death. The extent of the departure, while large, was also approved. The court declined to determine whether such a large departure requires proof by a preponderance of the evidence or by clear and convincing evidence, since the evidence that defendant murdered the victim was ample under either standard. U.S. v. Billingsley, 978 F.2d 861 (5th Cir. 1992).
5th Circuit affirms that defendant was responsible for loss caused by brother in joint fraud scheme. (300) Defendant and his brother each made numerous false claims on various insurance policies on the same car. The 5th Circuit affirmed that the value of the loss caused by defendant’s conduct under section 2F1.1 properly included the fraudulent claims made by his brother, since the brother’s conduct could be considered relevant conduct. The district court found that defendant’s brother’s conduct was part of a joint scheme or plan which defendant aided and abetted. While the court did not expressly state that it found the brother’s conduct was reasonably foreseeable to defendant, the meaning of the court’s finding was clear. U.S. v. Lghodaro, 967 F.2d 1028 (5th Cir. 1992).
5th Circuit upholds use of intended loss rather than actual loss in insurance fraud scheme. (300) Defendant and his brother each made numerous false claims on various insurance policies on the same car. Together, defendant and his brother filed claims totaling $58,816.07, although the amount actually received from the insurance companies was much less. The 5th Circuit affirmed that under comment 7 to section 2F1.1, it was proper to use the intended loss of $58,816.07 as the amount of loss, rather than the smaller amount actually received. Defendant’s contention that intended loss is only to be used if actual loss is difficult to determine was incorrect. U.S. v. Lghodaro, 967 F.2d 1028 (5th Cir. 1992).
5th Circuit considers loss, rather than retail value, in determining enhancement under section 2B6.1. (300) Defendant was convicted of altering motor vehicle identification numbers. Section 2B6.1 directs that if the retail value of the motor vehicles or parts involved exceeded $2,000, the base offense level should be increased by the corresponding number of levels from the fraud table in section 2F1.1. The fraud table provides for increases if the loss exceeded $2,000. The 5th Circuit rejected defendant’s argument that the district court should have used retail value, rather than loss, in determining the amount of enhancement under section 2B6.1. Section 2B6.1 clearly directs a district court, upon finding that the retail value exceeded $2,000, to use the amount of loss in applying the loss table in section 2F1.1. Neither section 2B6.1 nor 2F1.1 mention using retail value in applying the loss table in section 2F1.1. U.S. v. Thomas, 963 F.2d 63 (5th Cir. 1992).
5th Circuit rules wire fraud is not a continuing offense. (300) The district court imposed a $1 million fine under the Criminal Fine Enforcement Act of 1984, then codified at 18 U.S.C. section 3623. Section 3623 provided for a fine of $250,000 for any felony committed between January 1, 1985 and November 1, 1987, and $1,000 per count for any wire fraud offense committed before January 1, 1985. All six wire transfers for which defendant was convicted occurred in 1984. The 5th Circuit held that the $1 million fine violated the ex post facto clause, rejecting the government’s claim that although the actual fraudulent wire transfers for which defendant was convicted occurred in 1984, the scheme to defraud continued into 1985 and should be treated as a continuing offense. Each wire transmission in furtherance of a scheme to defraud constitutes a separate crime. It is not the scheme to defraud but the use of the mails or wire that constitutes mail or wire fraud. U.S. v. St. Gelais, 952 F.2d 90 (5th Cir. 1992).
5th Circuit upholds five level departure based on over $5 million in loss caused by fraud. (300) The 5th Circuit affirmed a five level upward departure in offense level based upon the district court’s determination that the loss caused by defendant’s fraud was well in excess of $5 million. The record supported the determination that the loss substantially exceeded $5 million. The presentence report calculated the loss at between $15 and $37 million, and defendant presented no evidence to controvert the government’s figures. Guideline section 2F1.1 in effect when defendant was sentenced contemplated losses of $5 million or less. It was reasonable for the district court to consider proposed amendments to section 2F1.1 as a yardstick to measure the appropriate number of levels to depart. U.S. v. Bachynsky, 949 F.2d 722 (5th Cir. 1991).
5th Circuit upholds application of fraud guideline to illegal steroid offense. (300) Defendant pled guilty to conspiring to sell and selling steroids. Defendant’s violation was addressed by guideline section 2N2.1, (food and drug violations). Nevertheless, the district court found that the Sentencing Commission had not considered a conviction for trafficking in steroids with the intent to defraud or mislead, and accordingly departed from section 2N2.1 and applied the fraud guideline, section 2F1.1. The 5th Circuit affirmed, although it found that it was unnecessary for the district court to depart. Application note 2 section 2N2.1 provides that if the offense involved theft, fraud, bribery, revealing trade secrets or destruction of property, the court is to apply the guideline applicable to the underlying offense. The district court specifically found that fraud was involved in defendant’s offense. U.S. v. Arlen, 947 F.2d 139 (5th Cir. 1991).
5th Circuit upholds calculation of loss in bank fraud case. (300) Defendant was the vice-president of a credit union. He offered to return to a borrower, for the sum of $150,000, a $1.5 million note to the credit union, marked “Paid.” Defendant contended that the amount of loss should only be $150,000, rather than $1.5 million, since under state law the credit union would still have been able to recover the $1.5 from the borrower without the original note. The 5th Circuit rejected this argument, since the potential loss to the credit union was the entire $1.5 million. U.S. v. Hooten, 933 F.2d 293 (5th Cir. 1991).
5th Circuit applies fraud guideline to false statements in bankruptcy. (300) Defendant pled guilty to making a false declaration under penalty of perjury in a bankruptcy proceeding. Defendant contended that the district court erred in sentencing him under the fraud guideline, § 2F1.1, rather than the perjury guideline, § 2J1.3. The 5th Circuit rejected this argument, finding that the Statutory Index specified the fraud guideline. A court may not look beyond the guideline listed in the Index unless that guideline is inappropriate in light of the statute or offense of conviction. Although defendant made his statement under penalty of perjury, his conduct constituted fraud because he attempted to conceal funds from the bankruptcy court. The 5th Circuit also rejected defendant’s argument that sentencing him under the fraud guideline violated due process because of his expectation that he would be sentenced under the perjury guideline. Since defendant stipulated to facts that established a factual basis for fraud, under guideline § 1B1.2(a), defendant could be sentenced to the higher offense. U.S. v. Beard, 913 F.2d 193 (5th Cir. 1990).
5th Circuit holds that 75 months imprisonment and $290,000 fine for mail fraud and falsification of social security number does not constitute cruel and unusual punishment. (300) Defendant pled guilty to mail fraud and falsifying a social security number in connection with a swindling scam. The first offense was subject to a guideline sentence, the second was not. He received consecutive sentences of 15 months and a $40,000 fine on the first count and the 5 year maximum term and $250,000 fine on the second. The 5th Circuit rejected the 8th Amendment appeal. The court held that the guideline sentence (and fine) were not disproportionate. “Developed from empirical research with the goal of making the punishment fit the crime, the guidelines are a convincing objective indicator of proportionality.” Here, the defendant made no showing to the contrary, and the sentence was affirmed. The court also held that the imposition of the maximum statutory punishment (custody, fine) on the non-guidelines count was neither a precipitous punishment nor disproportionate to the offense, given the facts of this case. U.S. v. Sullivan, 895 F.2d 1030 (5th Cir. 1990).
5th Circuit approves enhancement for obstruction of justice for defendant guilty of bank fraud. (300) Defendant was convicted of bank fraud. He argued that he was punished twice when U.S.S.G. § 3C1.1 covering obstructive conduct was applied in conjunction with the fraud guideline U.S.S.G. § 2F1.1. The 5th Circuit disagreed, ruling that only when the offense is contempt, obstruction of justice, perjury or bribery can obstructive conduct not be used for sentence enhancement. Defendant’s destruction of evidence and giving a false name after arrest were actions not covered by 2F1.1, nor were they substantial elements of the crime of bank fraud to which defendant pled guilty. Thus, defendant was not punished twice for the same conduct. U.S. v. Irabor, 894 F.2d 554 (2nd Cir. 1990).
6th Circuit finds sentence reasonable as either upward criminal history departure or variance. (300) Defendant pled guilty to bank fraud. The applicable guideline range was 33-41 months, but based on defendant’s understated criminal history, he was sentenced to 84 months. The sentence was the result of either a § 4A1.3(a)(4)(B) departure or a § 3553(a) variance. The Sixth Circuit found the sentence reasonable under either method. The court properly calculated the applicable guideline range, and then adequately explained its justifications for a higher sentence, including the fact that there were only two five-year periods during defendant’s adult life when he was not under supervision, incarceration, or involved in criminal activity. His first conviction was over 40 years earlier, but he had only had brief respites from prison, supervision and commission of new offenses. The court noted that previous sentences had not deterred defendant, and that without an upward departure his sentence would be shorter than many of his previous sentences. U.S. v. Hill, 513 F.3d 894 (6th Cir. 2008).
6th Circuit holds that increase not limited to defendants who solicit funds by misrepresentation. (300) Defendant, the chief administrative officer of the American Cancer Society of Ohio (ACS), was convicted of various fraud charges for converting ACS funds for his own use. Guideline § 2F1.1(b)(4)(A) provides for a two-point enhancement if the offense involved “a misrepresentation that the defendant was acting on behalf of a charitable … organization.” The district court applied the increase because defendant misrepresented to the bank that he was acting on behalf of ACS when he instructed them to transfer nearly $7 million of the charity’s money to a bank account in Austria, ostensibly to fund research grants, but in reality for his own personal use. Defendant argued that the enhancement applies only where defendants solicit funds by misrepresentation. The Sixth Circuit disagreed with this narrow interpretation. The plain language of the rule clearly encompasses defendant’s offense, and contains no textual support for limiting the rule to solicitation by misrepresentation. The examples listed in the application notes are obviously illustrative, not exhaustive, and thus provide no mandate for limiting the scope of the enhancement’s actual language. U.S. v. Wiant, 314 F.3d 826 (6th Cir. 2003).
6th Circuit says enhancement applies even if financial institution was minimally “affected.” (300) Defendant, the chief administrative officer of the American Cancer Society of Ohio (ACS), instructed ACS’s bank to transfer nearly $7 million of the charity’s money to a bank account in Austria, ostensibly to fund research grants, but in reality for his own personal use. Guideline § 2F1.1(b)(7)(B) provides for a four-point enhancement if the offense “affected a financial institution and the defendant derived more than $1,000,000 in gross receipts from the offense.” The district court applied the increase, finding that the bank paid unspecified legal fees in Austria in order to recover the funds improperly transferred by defendant. Defendant argued that, as a matter of law, there should be some threshold requirement for what it means to “affect” a financial institution, and that the bank here was only minimally affected by his fraud. The Sixth Circuit found no basis for reversing the court’s finding that defendant’s offense affected the bank. The term “affect,” as defined in Black’s Law Dictionary, does not imply an de minimus limitation. The breadth of the definition indicates that the guideline is intended to encompass even minimal impacts. The key limitation of the enhancement is that the defendant derive more than $1,000,000 in gross receipts from the offense. U.S. v. Wiant, 314 F.3d 826 (6th Cir. 2003).
6th Circuit upholds use of money laundering guideline for group that included fraud counts. (300) Defendant was convicted of 12 counts relating to the manufacture and sale of unauthorized satellite television access devices. The offenses were deemed related and therefore were grouped for sentencing. The district court sentenced defendant using the offense level for the most serious of the counts, money laundering. Relying on U.S. v. Smith, 186 F.3d 290 (3d Cir. 1999), superseded by rule as stated in U.S. v. Omoruyi, 260 F.3d 291 (3d Cir. 2001), defendant argued that the elements of money laundering present in the scheme were incidental to what was basically a pattern of fraud, and that his sentence should have been calculated under the more lenient fraud guidelines. However, the Sentencing Commission recently deleted the language in the Appendix that the Smith court relied on and made it clear that a court is to use the guideline referenced in the Statutory Index. After this case was briefed and argued, the Sixth Circuit decided U.S. v. Chilingirian, 280 F.3d 704 (6th Cir. 2002) and U.S. v. Rashid, 274 F.3d 407 (6th Cir. 2001), which rejected Smith and held that the district court did not err by finding a defendant’s conduct had remained in the heartland even though it did not involve proceeds from drug trafficking or organized crime. The Sixth Circuit found Chilingirian and Rashid on point, and concluded that the district court did not err in sentencing defendant under the money laundering guidelines. U.S. v. Lewis, 296 F.3d 487 (6th Cir. 2002).
6th Circuit finds court erred in applying fraud guideline to money laundering count. (300) Defendant, an attorney, was convicted of conspiracy to commit money laundering. Relying on U.S. v. Smith, 186 F.3d 290 (3d Cir. 1999), superseded by rule as stated in U.S. v. Omoruyi, 260 F.3d 291 (3d Cir. 2001), the district court sentenced him under the fraud guideline rather than the money laundering guideline. Smith held that the money laundering guidelines were too harsh to apply to what it described as a routine fraud case in which the money laundering activity was an “incidental by-product” of a kick-back scheme. The Sixth Circuit reversed and remanded with instructions to resentence defendant under the money laundering guidelines. Even if this circuit were to apply Smith, the money laundering in this case was not minimal nor incidental – the laundered money was funneled through defendant’s client trust account in order to make it appear legitimate and to further his clients’ fraud scheme. Moreover, the Smith approach is no longer relevant. Smith relied on Appendix A, which used to direct a court in atypical cases to use the guideline most applicable to the nature of the conduct charged in the count of conviction. Effective November 2000, a sentencing court is required to use the guideline that Appendix A says is applicable. U.S. v. Chilingirian, 280 F.3d 704 (6th Cir. 2002).
6th Circuit upholds decision to sentence defendant under money laundering guideline. (300) Defendant pled guilty to money laundering and his attorney was found guilty on that count by the trial court. The judge sentenced both defendants. However, the judge sentenced the attorney under the fraud guideline, § 2F1.1, and sentenced defendant under the money laundering guideline, § 2S1.1. Defendant argued, based on U.S. v. Smith, 186 F.3d 290 (3d Cir. 1999), superseded by rule as stated in U.S. v. Omoruyi, 260 F.3d 291 (3d Cir. 2001), that the district court should have applied the fraud guideline. In Smith, the Third Circuit held that the money laundering guidelines were too harsh to apply to what it described as a routine fraud case in which the money laundering activity was an “incidental by-product” of a kick-back scheme. The Sixth Circuit noted that it has previously rejected the idea that an offense is outside of the heartland of the money laundering guidelines merely because it involves proceeds from illegal activities other than drug trafficking and organized crime. See U.S. v. Ford, 184 F.3d 566 (6th Cir. 1999). In the current case, wire and mail fraud were the underlying illegal activities that generated the proceeds at issue, and both offenses are included within the money laundering statutes as “specified unlawful activities.” See 18 U.S.C. § 1956(c)(7)(A). Thus, the district court did not err in denying defendant’s motion to be sentenced under the fraud guideline. U.S. v. Rashid, 274 F.3d 407 (6th Cir. 2001).
6th Circuit holds that court was not required to make set-off of amounts recovered on defaulted loans. (300) Defendants, who operated a financial entity which made mortgage loans co-insured by the federal government, were convicted of conspiring to defraud the government, including making false claims to HUD. They contested the computation of the loss involved in the false claims counts because it failed to set-off amounts collected on defaulted loans, monies paid by the company in annualized amounts for each loan to cover losses, or the value of the notes assigned to the government in exchange for payment of the claims. The Sixth Circuit found this argument insufficient to invalidate the loss calculation. Loss need not be determined with precision. Also, where the intended loss is greater than the actual loss incurred, the district court should used the intended loss. See Note 8 to § 2F1.1. The district court properly included in the loss 335 additional claims submitted by co-conspirators, even those claims not charged in the indictment. Although defendant argued that the government failed to establish that these 335 loan files contained any materially false documents, the additional false claims were identified at trial by a government witness. In addition, HUD investigators confirmed that the files did contain false claims. U.S. v. Logan, 250 F.3d 350 (6th Cir. 2001).
6th Circuit rejects attempt reduction because bankruptcy fraud was complete upon filing of petition. (300) Defendant filed a voluntary petition for bankruptcy that failed to disclose $979,677.63 in net assets. The bankruptcy trustee discovered the fraud shortly thereafter, and no actual loss resulted. Defendant pled guilty to bankruptcy fraud, in violation of 18 U.S.C. § 157(1). The district court granted him a three-level reduction under § 2X1.1(b)(1) for an attempted offense. The Sixth Circuit reversed, since defendant’s bankruptcy fraud offense was complete upon his filing of the bankruptcy petition. The case relied upon by the district court, U.S. v. Watkins, 994 F.2d 1192 (6th Cir. 1992), did not hold that failure to complete all of the acts necessary to produce the full amount of intended loss mandates a § 2X1.1(b)(1) reduction. Instead, the inquiry is whether “the defendant completed all the acts the defendant believed necessary for successful completion of the substantive offense ….” The relevant substantive offense was the fraud itself, not fraudulent deprivation of a particular sum. Here, the substantive offense of bankruptcy fraud was complete when defendant filed the fraudulent bankruptcy petition. Although defendant would have had to take additional acts in order to inflict the loss he intended, these additional acts would have subjected him to additional counts of bankruptcy fraud. Attempted bankruptcy fraud can arise only in the usual situation of an unsuccessful attempt to file the bankruptcy petition itself. U.S. v. DeSantis, 237 F.3d 607 (6th Cir. 2001).
6th Circuit holds that fraud guideline only supplements theft offenses if listed in Appendix A. (300) Defendant was convicted of embezzling from an employee benefit plan, in violation of 18 U.S.C. § 664. Embezzlement and other forms of theft are usually sentenced under § 2B1.1. However, Note 2 states that where the offense involved making a fraudulent loan, the loss is to be determined under § 2F1.1. Defendant claimed that his embezzlements were actual loans, and thus he should have been sentenced under § 2F1.1. In U.S. v. Lucas, 99 F.3d 1290 (6th Cir. 1996), the court followed Note 2 to use § 2F1.1 in connection with an 18 U.S.C. § 656 offense, even though the commentary to § 2F1.1 did not include § 656 as a statute to which it applied. Lucas also considered the fact that Appendix A included § 2F1.1 and § 2B1.1 as guidelines applicable to § 656. This case was distinguishable from Lucas, because Appendix A does not list § 2F1.1 as an applicable guideline for § 664. The Sixth Circuit concluded that by listing § 2F1.1 as applicable to § 656 and not § 664, the Sentencing Commission did not intend Note 2 to apply to § 664 offenses. Note 2 directs a court to supplement § 2B1.1 with § 2F1.1 only for those statutes in Appendix A which list both guidelines. Since Appendix A lists only § 2B1.1 as a guideline for a § 664 convictions, defendant’s sentence was proper. U.S. v. Krimsky, 230 F.3d 855 (6th Cir. 2000).
6th Circuit upholds sentencing prison employee for depriving citizens of right to honest services. (300) Defendant, the Chief of Security for an Ohio prison, entered into unauthorized business agreements with an inmate, and provided the inmate with preferential treatment and special favors. He was convicted under 18 U.S.C. §§ 1341 and 1343 for a scheme to deprive Ohio of its right to his honest services. The Sixth Circuit held that the district court properly sentenced defendant under § 2C1.7 (Fraud Involving Deprivation of the Intangible Right to the Honest Services of Public Officials) rather than § 2C1.2 (Offering, Giving , Soliciting, or Receiving a Gratuity). Although defendant did solicit and receive gratuities from the inmate, such as a plane ticket and a bottle of scotch, defendant also had an extensive business relationship with the inmate, performed personal favors for the inmate and provided him with preferential treatment. In the process, defendant violated several provisions of the prison’s employee conduct code for long term financial gain, thereby depriving the prison and the citizens of Ohio of their right to defendant’s honest services as Chief of Security. U.S. v. Mack, 159 F.3d 208 (6th Cir. 1998).
6th Circuit holds that repeated mailings over three-year period involved more than minimal planning. (300) Defendant, a licensed dentist, was convicted of mail fraud for a scheme to defraud the Medicaid program. He submitted thousands of forms by mail certifying that he had performed dental procedures on Medicaid patients which he had not in fact performed. To attract additional Medicaid patients, he also offered them medically unnecessary prescriptions for narcotics. He argued that a more than minimal planning enhancement was improper because he engaged in nothing more than the minimum necessary to commit the offense of mail fraud. The Sixth Circuit found more than minimal planning because defendant engaged in repeated acts over a three-year period of submitting fraudulent claims to the Medicaid program. More than minimal planning can be deduced from repeated acts. U.S. v. Lewis, 156 F.3d 656 (6th Cir. 1998).
6th Circuit upholds separate grouping of tax evasion and bankruptcy fraud charges. (300) Defendant pled guilty to tax evasion and bankruptcy fraud. The bankruptcy fraud charge was based on defendant’s false claim in a bankruptcy petition that he had filed tax returns for 1986 and 1987. He argued that the tax evasion count and the bankruptcy fraud counts should have been grouped under § 3D1.2(d) because the applicable guidelines fall under the “are to be grouped” rubric. The Sixth Circuit upheld the separate grouping. Counts are not automatically grouped simply because those counts are on the “are to be grouped” list. Where the applicable guidelines for separate counts measure the harm differently, those counts need not be grouped. The guidelines do not calculate the offense level for the defendant’s bankruptcy fraud on the basis of the amount of loss. Defendant’s bankruptcy fraud did not misrepresent the funds available to the bankrupt estate. Rather, he made a false oath or account in relation to a case filed under Title 11 of the U.S. Code. Defendant’s tax evasion offense level derived from the “tax loss,” i.e. the amount of harm the government suffered. The offense levels for the two counts were not measured in the same fashion, and did not pass the threshold test in § 3D1.2(d). U.S. v. Williams, 154 F.3d 655 (6th Cir. 1998).
6th Circuit approves upward departure based in part on SCAMS act. (300) Defendant worked for a telemarketing company that defrauded hundreds of elderly victims out of money by convincing them they had won a valuable prize. The district court departed upward for five reasons: (1) the large number of victims (336), (2) the financial and psychological damage to the victims, (3) defendant’s repeated victimization of the same individuals, (4) defendant’s lack of remorse, and (5) the SCAMS Act. The Sixth Circuit affirmed. The purpose of the SCAMS act is to enhance the punishment for illicit telemarketers who target senior citizens. Given this purpose, there was no merit to defendant’s claim that the relevant conduct and role in the offense enhancement adequately addressed his fraudulent conduct. The vulnerable victim enhancement under § 3A1.1(b) also did not adequately address his conduct. The SCAMS Act is specifically designed to combat and punish severely the conduct in which defendant engaged, conduct that falls outside the heartland of cases addressed by the vulnerable victim guideline. The SCAMS Act authorized the district court to impose an additional ten-year sentence. Instead of doing so, the district court merely departed two levels, which increased defendant’s sentence by two years. U.S. v. Brown, 147 F.3d 477 (6th Cir. 1998).
6th Circuit holds that “judicial process” includes bankruptcy proceedings. (300) After a judgment was entered against defendant, he and his wife transferred six real properties by quitclaim deeds to his secretary. Defendant filed these deeds. The secretary then prepared six quitclaim deeds that transferred the properties back to defendant. Defendant did not register these deeds. He then filed for bankruptcy, and did not disclose to the bankruptcy trustee his interest in the properties. He pled guilty to concealing assets in a bankruptcy proceeding. The district court applied a two-level enhancement under § 2F1.1(b)(3)(B) for violating a judicial process. The Sixth Circuit held that the term “judicial process” as used in § 2F1.1(b)(3)(B) includes bankruptcy proceedings. Because defendant violated a judicial fraud upon the bankruptcy court, the district court did not err in imposing an enhancement under § 2F1.1(b)(3)(B). U.S. v. Guthrie, 144 F.3d 1006 (6th Cir. 1998).
6th Circuit finds defendant derived a million dollars from offense that affected financial institutions. (300) Defendant was convicted of various fraud charges for manipulating the financial records of his drugstore chain. Section 2F1.1(b)(6)(B) provides a four level increase if the offense affected a financial institution and the defendant derived more than $1 million in gross receipts from the offense. Defendant argued that this enhancement did not apply to his case because he did not derive a million dollars from the offenses that affected the financial institutions. The Sixth Circuit held that the enhancement only requires that defendant derive a million dollars from the offense, not from the financial institutions. The enhancement applied even if the defendant received the million dollars in an indirect manner. There was no dispute that as a result of his criminal activity, defendant received more than a million dollars. The district court properly grouped the fraud counts together. Thus, defendant received a million dollars from an offense that affected financial institutions. U.S. v. Monus, 128 F.3d 376 (6th Cir. 1997).
6th Circuit rejects departure intended to overcome harsh guidelines for minor white-collar offenders. (300) Defendant, a letter carrier for the postal service, stole credit cards from the mail and used them to charge $11,000. The district court, sua sponte, departed downward based on the guidelines’ disparate treatment of defendant, a relatively minor white-collar offender, as compared with a more egregious offender who committed bank fraud in excess of $300,000. The Sixth Circuit held that the disproportionately harsh treatment of “minor” white-collar offenders as opposed to “serious” offenders was not a proper ground for departure. The Sentencing Commission intentionally gave low-level offenders sentences that appear harsh when compared with high-level fraud because of its belief that low-level fraud should be classified as “serious.” The Commission was concerned that in pre-guidelines practice, such offenders were often sentenced to probation. The Commission believed that the definite prospect of prison, even though for a short time, would serve as a significant deterrent to such offenders. The fact that this arrangement produces disproportionate results between high- and low-level offenders cannot serve as the legal basis for a downward departure absent unusual circumstances. U.S. v. Weaver, 126 F.3d 789 (6th Cir. 1997).
6th Circuit approves upward departure for decade‑long fraud scheme. (300) For a decade, defendant defrauded his family and others of over $1 million by pretending to operate an investment firm. The district court departed upward based on (1) the non-monetary harm and serious psychological injury suffered by the victims; (2) the jeopardizing of the victims’ solvency; and (3) the repetitive and prolonged nature of the scheme. The Sixth Circuit affirmed. Note 10 to § 2F1.1 lists as a justification for departure each of the reasons relied on by the district court. The district court heard at sentencing from numerous victims of the crime, and a number of letters from victims were incorporated into the record by stipulation. U.S. v. Dobish, 102 F.3d 760 (6th Cir. 1996).
6th Circuit says bodily injury enhancement only applies where risk resulted from fraud itself rather than flight. (300) Defendant and her husband committed bank fraud in several states. When defendant was discovered by a bank employee, she returned to her hotel, and left in a van driven by her husband. They led police on a lengthy high-speed chase that ended in a crash. She pled guilty to bank fraud. The Sixth Circuit reversed a § 2F1.1(b)(4) bodily injury enhancement, since it only applies where the risk of bodily injury results from the fraud itself and not from events that happen while fleeing from the crime. A different provision, § 3C1.2, penalizes reckless endangerment during flight. However, this enhancement might be inappropriate here. Defendant was not driving the car, and there was substantial evidence that defendant was acting under the control and coercion of her husband. U.S. v. Hall, 71 F.3d 569 (6th Cir. 1995).
6th Circuit finds evidence insufficient to support risk of serious bodily injury enhancement. (300) For over ten years, defendant assumed false identities and used phony credentials to obtain jobs as a physician’s assistant. The district court applied a § 2F1.1(b)(4) enhancement for an offense involving the conscious or reckless risk of serious bodily injury. The Sixth Circuit found insufficient evidence to support the enhancement. The only portion of the PSR considered by the court noted that defendant’s duties included the diagnosis and treatment of geriatric psychiatric problems. This conclusory paragraph was based on an FBI report that the defendant was not allowed to review. When a contested sentencing factor appears in the PSR and is not proved by the government at the hearing, the court must insure that the factor is otherwise proved by reliable evidence. Here, the district court failed to ensure that the FBI report was reliable and did not require the government to produce other evidence. U.S. v. Greene, 71 F.3d 232 (6th Cir. 1995).
6th Circuit finds no double counting in multiple victim and organizer enhancements. (300) The district court applied a § 3B1.1(c) enhancement for being an organizer and a § 2F1.1(b) (2) (B) enhancement because the offense involved a scheme to defraud more than one victim. Defendant argued that this was double counting under U.S. v. Romano, 970 F.2d 164 (6th Cir. 1992). The Sixth Circuit disagreed. Romano held that a more than minimal planning enhancement under § 2F1.1(b)(2) and an organizer enhancement were double counting because more than minimal planning is necessarily required to be an organizer or leader of more than five persons. However, the district court here enhanced defendant’s sentence under the more than one victim prong of § 2F1.1(b)(2) rather than the more than minimal planning prong of that section. That enhancement does not violate Romano because the multiple victim element is not part of a §3B1.1 enhancement. U.S. v. King, 55 F.3d 1193 (6th Cir. 1995).
6th Circuit rejects use of perjury guideline for false statement offense. (300) Defendant made false statements about his finances on a financial affidavit filed with the court, and was convicted of making a false statement to a court. The 6th Circuit held that the district court improperly applied the perjury guideline, § 2J1.3, instead of the fraud and deceit guideline, § 2F1.1, to establish defendant’s base offense level. Under the Statutory Index, the guideline applicable to a false statement offense is § 2F1.1. The commentary to § 2F1.1 provides that other guideline sections may be applied where they more aptly cover the offense. Here, the circuit’s financial affidavit form did not state that the information was submitted under oath or penalty of perjury. Although titled an affidavit, it was not really an affidavit since it was not “sworn to or affirmed before some person legally authorized to administer an oath or affirmation.” Thus, defendant did not commit perjury by filing the form and his conduct was not more aptly covered by the perjury guideline. U.S. v. Duranseau, 19 F.3d 1117 (6th Cir. 1994).
6th Circuit reduces loss from fraudulently obtained car loan by amount lender received for selling car. (300) Defendant fraudulently obtained a $30,000 loan to purchase a car by misrepresenting his employment status. After he failed to make payments, the car was repossessed and sold at an auction. As a result of the loan and forced sale, the bank lost $6,000. The district court determined that the loss under § 2F1.1 was the amount of the loan. The 6th Circuit reversed. The loss in the case of fraudulently induced bank loans should be based on the actual or expected loss rather than the total amount of the loan. Thus, the correct measure of loss in this case was $6,000: the full amount of the loan defendant received (the amount not repaid at the time the offense was discovered), reduced by the amount the bank recovered by selling the repossessed car (the asset pledged to secure the loan). U.S. v. Lavoie, 19 F.3d 1102 (6th Cir. 1994).
6th Circuit finds more than minimal planning for medical benefits obtained under false name. (300) Defendant, who had no health insurance, was seriously injured in an accident. His friend took him to the hospital and admitted him under the friend’s name and insurance plan. Defendant was hospitalized for several weeks under his friend’s name and insurance plan. The 6th Circuit upheld a more than minimal planning enhancement under section 2F1.1(b)(2). Defendant took significant affirmative steps to conceal the conspiracy, such as responding to personnel and signing forms under his friend’s name at the three different hospitals. The concealment of the conspiracy included repeated acts furthering the conspiracy. U.S. v. Milligan, 17 F.3d 177 (6th Cir. 1994).
6th Circuit uses medical bills as loss even though hospital would have given same care to uninsured patient. (300) Defendant and his wife were covered by a generous health insurance plan. Their co-defendant was uninsured. One day the co-defendant was seriously injured. Defendant and his wife took co-defendant to the hospital, and identified the co-defendant as defendant. The co-defendant was hospitalized for several weeks, using defendant’s name and health insurance. The district court used the medical bills of $41,000 to calculate the estimated loss and restitution under § 2F1.1. Defendants argued there was no actual loss since the health care providers claimed they would have rendered the same care regardless of ability to pay. The 6th Circuit upheld the use of the medical bills to calculate the loss and restitution figures. The district court found the defendant intended to obtain medical services regardless of cost, and thus the loss equaled the cost of equivalent medical services to general paying consumers, rather than the amounts paid by indigents. U.S. v. Milligan, 17 F.3d 177 (6th Cir. 1994).
6th Circuit rules that multiple victim and leadership enhancement is not double counting. (300) Defendant received a leadership enhancement under section 3B1.1(a) and an enhancement under section 2F1.1(b)(2) for an offense involving more than minimal planning or multiple victims. Defendant argued that the more than minimal planning enhancement was impermissible double counting under U.S. v. Romano, 970 F.2d 164 (6th Cir. 1992). The 6th Circuit rejected the argument since section 2F1.1(b)(2) requires an enhancement when either of two elements is present: more than minimal planning or more than one victim. While the minimal planning element is penalized by section 3B1.1(a), the multiple victim element is not. Here, unlike Romano, the district court found both elements were present. U.S. v. Aideyan, 11 F.3d 74 (6th Cir. 1993).
6th Circuit calculates enhancement for partially completed offense. (300) Defendant argued that three stolen checks found at his apartment should not have been included in the loss calculation under section 2F1.1 because he never attempted to cash them. The 6th Circuit upheld consideration of the uncashed checks. Note 7 to section 2F1.1 states that intended loss should be used if greater than the actual loss. However, note 7 must be read with section 2X1.1(b)(1), which governs attempts. Under note 4 to section 2X1.1, the offense level is the greater of (a) the offense level for the intended offense minus three levels, or (b) the offense level for the part of the offense for which the necessary acts were completed. Although defendant did not complete all the acts necessary to cash the stolen checks, he did complete all of the acts necessary to fraudulently obtain $19,837.13. His sentence should have been enhanced based on this total, because the corresponding three level enhancement under section 2F1.1(b)(D) is greater than the five level enhancement required by section 2F1.1(b)(F) for the total intended loss of $40,337, less three levels. U.S. v. Aideyan, 11 F.3d 74 (6th Cir. 1993).
6th Circuit remands to consider amount of repayment before discovery of fraud. (300) Defendant used the names and social security numbers of her family and customers to obtain bank loans. She made regular payments on each of the obligations and was only discovered when one of the people whose name she used tried to refinance a mortgage. The 6th Circuit remanded because the district court refused to consider the amount defendant repaid before discovery of the fraud, and thus failed to make the required finding on the amount of actual loss. Under application note 7 to section 2F1.1, in a fraudulent loan application case, the victim’s loss means the actual loss, i.e. that amount of the loan not repaid at the time the offense is discovered. U.S. v. Buckner, 9 F.3d 452 (6th Cir. 1993).
6th Circuit suggests reconsideration of findings of intended and actual loss. (300) Defendant challenged the district court’s determination of loss in a check-kiting scheme. Since the case was to be remanded on other grounds, the 6th Circuit suggested that on remand, the district court should consider the requirements set forth in U.S. v. Watkins, 994 F.2d 1192 (6th Cir. 1993) regarding necessary findings both as to intended and actual loss under section 2F1.1. U.S. v. Carr, 5 F.3d 986 (6th Cir. 1993).
6th Circuit reverses planning and leadership adjustments as improper double counting. (300) Defendant argued that under U.S. v. Romano, 970 F.2d 164 (6th Cir. 1992), his enhancements under section 2F1.1(b)(2) for more than minimal planning and section 3B1.1(a) for leadership role constituted impermissible double counting. The 6th Circuit agreed. It rejected the government’s suggestion that the enhancements could be upheld since section 2F1.1(b)(2) provides an alternative basis for the enhancement based on a scheme to defraud multiple victims. The district court did not rely on the alternative basis suggested by the government. U.S. v. Carr, 5 F.3d 986 (6th Cir. 1993).
6th Circuit upholds consideration of uncharged frauds in determining loss. (300) Defendant was part of a multi-state check writing conspiracy; however, his indictment only charged him with his activities in Iowa. Nonetheless, the 6th Circuit held that it was proper to include the uncharged acts in the amount of loss under §2F1.1(b)(1). The activities occurring in the other states were part of the same course of conduct as the Iowa scheme. Although the plea agreement stated that the relevant conduct was limited to the defendant’s Iowa activities, a plea agreement entered into between the government and the defendant is not binding on the court. U.S. v. Velez, 1 F.3d 386 (6th Cir. 1993).
6th Circuit says that “more than minimal planning” must be based on overall scheme, not the role of an individual offender. (300) The 6th Circuit held that a more than minimal planning enhancement is determined on the basis of an overall scheme, not on the role of an individual offender. Here, the bank fraud scheme clearly involved more than minimal planning. The offense involved substantial planning in order to pass instructions from the bank officer through his sister to defendant and to establish a phony company and bank account. There were significant affirmative acts to conceal: the use of intermediaries to avoid detection of the bank officer’s identity and role, the use of a phony bank account in the name “IRS,” and the destruction of the bank’s records. Finally, the scheme also involved repeated acts over a period of time, none of which were “purely opportune.” The fact that defendant did not personally do more planning than typical to commit the offense was not relevant. U.S. v. Ivery, 999 F.2d 1043 (6th Cir. 1993).
6th Circuit excludes fraud that motivated offense of conviction from consideration as relevant conduct. (300) Defendant was convicted of fraud in securing loans from banks. One motive for defendant’s conduct was to secure money to pay obligations owed to a college because of defendant’s past misrepresentations. The district court included the college’s losses in calculating the loss figure for defendant’s offense of conviction, but the 6th Circuit concluded that such inclusion was clearly erroneous. The first fraud’s role in motivating the second did not suffice to make the first fraud relevant conduct in sentencing for the second fraud. U.S. v. Moored, 997 F.2d 139 (6th Cir. 1993).
6th Circuit finds fraud involved more than minimal planning where defendant provided false documents. (300) Defendant was convicted of making false statements in connection with a loan application. Defendant argued that he should not have been given an enhancement for more than minimal planning because his offense involved no more planning than was required to commit the offense of conviction. Disputing defendant’s characterization of his offense, the 6th Circuit affirmed the enhancement, noting that defendant had supplied a forged letter of credit and a phony purchase order for his stock to support his loan application. U.S. v. Moored, 997 F.2d 139 (6th Cir. 1993).
6th Circuit says defendant who obtained false driver’s license violated a judicial order. (300) Defendant received a 99-year suspension of his driver’s license from the State of Ohio, after numerous convictions for driving while intoxicated. Using someone else’s birth certificate and social security number, he obtained an Ohio driver’s license. While using this false license, defendant was again arrested for drunk driving. He pled guilty in federal court to using a false social security number. The 6th Circuit upheld an enhancement under section 2F1.1(b)(3)(B) for violating a standing judicial order. Defendant was subject to a court order preventing him from operating a motor vehicle for at least 99 years. His only apparent purpose in obtaining a false social security number was to obtain a driver’s license. U.S. v. Eve, 984 F.2d 701 (6th Cir. 1993).
6th Circuit rules false statement which enabled defendant to commit similar offense six years later was not relevant conduct. (300) In 1983, defendant obtained a job with the U.S. Postal Service by lying about his previous back injury. He later reinjured his back, became disabled, and began to receive federal employee disability payments. In 1989, he stated on a Labor Department that he had not been employed during the previous 15 months, which was a lie. Defendant was convicted of making false statements to a U.S. agency in connection with his 1989 statements to the Labor Department. The 6th Circuit reversed the district court’s determination that the 1983 false statement concerning his back was relevant conduct for the instant offense. The two offenses were unrelated acts separated by the passage of six years. Although defendant may not have been in a position to commit the second offense if he had not committed the first offense, this did not, by itself, make the second offense part of the same course of conduct or common scheme or plan as the first offense. U.S. v. Kappes, 936 F.2d 227 (6th Cir. 1991).
6th Circuit affirms upward departure based upon extent of harm and number of victims. (300) Defendant established a fraudulent investment company through which he solicited more than 3.8 million dollars from over 600 investors in 22 states. Although the guideline range for the counts governed by the guidelines was 27 to 33 months, the district court departed upward to 60 months. The 6th Circuit upheld the departure, based on the extremely large scope of the fraud, the number of victims, and the extent of the harm. The guidelines acknowledge that the dollar loss caused by a defendant’s fraud often does not fully capture the harmfulness and seriousness of a defendant’s conduct. Defendant’s criminal activities continued for nearly five years, resulting in the loss of over 3 million dollars from more than 600 investors, many of whom were disabled or elderly. U.S. v. Benskin, 926 F.2d 562 (6th Cir. 1991).
6th Circuit finds victim’s net out of pocket loss is proper basis for computing loss. (300) Defendant, a claims adjuster, inflated the cost of boat repair in a scheme to defraud an insurance company. Defendant’s offense level was increased by six upon a finding that the loss to the insurance company exceeded $100,000. The insurance company had paid the insured $140,000 for the loss, and received $34,001 in salvage for the boat. Defendant argued that the loss was not in excess of $100,000, because even without the fraud the insurance company would have been obligated to pay the insurer $90,000.00 for repairs to the boat. The 6th Circuit rejected this argument, since defendant’s fraudulent acts prevented the insurance company from settling the claim for $90,000.00. U.S. v. Sloman, 909 F.2d 176 (6th Cir. 1990).
7th Circuit agrees that fraud defendant used sophisticated means. (300) Defendant fraudulently obtained commissions from Hewlett-Packard (HP) by submitting paperwork to make it look as if he had sold HP computers to third party buyers. The Seventh Circuit upheld a § 2B1.1(b)(9)(C) sophisticated means enhancement. Defendant used fictitious business entities to conceal his offense from HP, a sophisticated company. He evaded discovery for over a year by doctoring fax headers and fashioning phony email addresses to resemble legitimate contact information. Moreover, after HP detected the fraud and removed defendant from its list of referral partners, defendant perpetrated a similar scheme with another company for another month. U.S. v. Allan, 513 F.3d 712 (7th Cir. 2008).
7th Circuit holds that court’s overemphasis on restitution and unspecified charitable works resulted in unreasonable sentence. (300) Defendant, the president of a federally insured bank, used his position to misappropriate bank funds for himself and his friend. Despite an advisory range of 41-51 months’ imprisonment, and the prosecutor’s recommendation of 24 months (in its § 5K1.1 motion), the district court sentenced him to just one day in prison, three years’ supervised release, and a $100,000 fine. The court found that there was no need to protect the public from defendant, that defendant had done unspecified “good works,” and there was no need to rehabilitate him or deter him from committing future crimes. Moreover, because the crime was money-motivated, the court thought that just punishment for defendant would be to hit him in the pocketbook. The Seventh Circuit reversed. First, the court did not explain why it granted the § 5K1.1 motion or how much of the reduced sentence was attributable to defendant’s substantial assistance as opposed to the other factors cited by the court. Second, although the court sufficiently considered the § 3553(a) factors, the court’s consideration of these factors resulted in an unreasonable sentence. Charitable works must be exceptional before they will support a more-lenient sentence – it is not unusual to find white collar defendants who are high-ranking executives involved as a leader in community charities and civic organizations. In addition, the amount of restitution defendant actually paid under the complex settlement agreement was unclear. The repayment of stolen funds figures into the adjustment for acceptance of responsibility, but only extraordinary efforts to make restitution support a reduced sentence. U.S. v. Repking, 467 F.3d 1091 (7th Cir. 2006).
7th Circuit says defendant liable for client losses caused by his own conduct but not losses from auditors’ malpractice. (300) Defendant was convicted of two securities laws violations for operating his registered broker-dealership without enough money in its reserve accounts. The Seventh Circuit upheld the district court’s loss calculation. Most of the $1.2 million in loss was attributable to relevant conduct that was part of defendant’ scheme to operate his brokerage firm without enough money on hand to comply with securities law requirements. When the authorities shut the company down, there was not enough money to pay clients what they were owed. Insurer’s payments were made to cover these client losses, and the district court did not clearly err by including them in the loss amount calculation. However, the $190,000 payment by the brokerage firm’s auditors’ malpractice carrier should not have been included in the loss calculation. This money was attributable to losses sustained by the brokerage’s clients as a result of the auditor’s acts or omissions, not defendant’s. Finally, the district court properly applied a § 2F1.1(b)(6)(A) increase for substantially jeopardizing the safety and soundness of a financial institution. The court did not have to consider defendant’s relevant conduct, since operating the brokerage even for a single day meant that it could not pay its debts on demand. U.S. v. Frith, 461 F.3d 914 (7th Cir. 2006).
7th Circuit holds that fraudulent investment company was “financial institution.” (300) Defendant and others incorporated Gateway Association and used it as a conduit to fraudulently raise millions of dollars from investors. The district court applied a four-level increase under the 1997 version of § 2F1.1(b)(6) for “substantially jeopardiz[ing] the safety and soundness of a financial institution,” or “affect[ing] a financial institution and … deriv[ing] more than $1,000,000 in gross receipts from the offense.” Defendant challenged the increase, arguing that “investment companies” are not “financial institutions”, and that Gateway was not a victim, but a conduit used to facilitate the fraud scheme. The Seventh Circuit disagreed. The expanded definition of “financial institutions” in the 1997 guidelines expressly includes investment companies. See Note 14 to § 2F1.1. Moreover, in U.S. v. Randy, 81 F.3d 65 (7th Cir. 1996), the court rejected the argument that a financial institution created solely for the purpose of defrauding investors cannot be considered a victim of a scheme to defraud. The Sentencing Commission extends the protections of § 2F1.1(b) (6) broadly to cover threats to the fiscal security of a corporation as well as the loss of individual investors. Section 2F1.1(b)(6) applies to conduct that victimizes both legitimate and fraudulent corporations. U.S. v. Collins, 361 F.3d 343 (7th Cir. 2004).
7th Circuit says statement prepared by postal service was not prior administrative order. (300) When the U.S. Postal Inspection Service (USPIS) learned that defendant was using the U.S. mail to commit fraud, they met with him and had him sign a “Statement of Voluntary Discontinuance” prepared by the USPIS, which was basically a promise by defendant that he would not engage in similar fraudulent behavior in the future. He did, and less than a year later, pled guilty to seven counts of mail fraud. Guideline § 2B1.1(b)(7) provides for a two-level enhancement if the offense involved “a violation of any prior, specific judicial or administrative order, injunction, decree, or process….” The Seventh Circuit held that this statement did not rise the level of a “prior specific judicial or administrative order, injunction, decree or process,” and thus did not warrant the increase. There were no extensive negotiations prior to defendant’s signing the prepared statement, and no official action taken by the USPIS. The statement was more akin to a warning, than an administrative order, injunction, decree or process. While an “agreement” may be considered an “informal process,” see U.S. v. Mantas, 274 F.3d 1127 (7th Cir. 2001), not all actions classified as an “informal process” are sufficient for the enhancement. Fact patterns must be examined on a case-by-case basis. U.S. v. Wallace, 355 F.3d 1095 (7th Cir. 2004).
7th Circuit says remands for state law determination of defendant’s accountability of company’s receipts. (300) Defendant managed a company that built single-family homes. The company defrauded its customers and their lender by making false certifications in order to obtain progress payments for uncompleted work. Former § 2F1.1(b)(7)(B) (1998) provided for a four-level increase if the offense “affected a financial institution and the defendant derived more than $1,000,000 in gross receipts from the offense.” Note 18 provided that the enhancement should be based on the gross receipts to the defendant individually, rather than to all participants. Defendant’s company obtained more than $1,000,000 from the bank as a result of the premature certifications, but the money entered the corporation’s coffers, not defendant’s pocket, and mostly was distributed to pay the expenses of construction. The district court found that such corporate formalities should be disregarded for closely held firms, or those dominated by one person. The Seventh Circuit remanded for determination of whether under state law, defendant was personally accountable for the receipts and obligations of his company. States have developed substantial bodies of law addressing whether corporate receipts or debts may be imputed to investors or managers. How the proceeds were carved up among the three defendants – defendant, his son, and the corporation, did not appear to be vital to federal sentencing policy. U.S. v. Castellano, 349 F.3d 483 (7th Cir. 2003).
7th Circuit holds that reference to other relevant conduct subsections does not include “trailing” clause. (300) Guideline § 1B1.3(a)(1) provides that relevant conduct include certain acts and omissions by the defendant, and in the case of jointly undertaken criminal activity, certain joint conduct “that occurred during the commission of the offense of conviction, preparation for that offense, or in the course of attempting to avoid detection or responsibility for that offense.” Section 1B1.3(a)(2), which applies to offenses for which § 3D1.2 requires grouping, states that relevant conduct includes “all acts and omission described in subdivision (1)(A) and (1)(B) above that were part of the same course of conduct or common scheme or plan as the offense of conviction.” The district court held that § (a)(2)’s reference to sections (a)(1)(a) and (a)(1)(B) also incorporated the “trailing clause” of the entire (a)(1) section – in other words, to constitute relevant conduct, the conduct must have occurred “during the commission of the offense of conviction, the preparation for that offense, or in the course of attempting to avoid detection or responsibility for that offense.” The Seventh Circuit held that the district court misinterpreted § 1B1.3. The reference to subsections (1)(A) and (1)(B) in § 1B1.3(a)(2) refers only to the subsections themselves and not the trailing clause. Thus, in the context of a groupable offense, when evaluating whether some action constitutes relevant conduct, a court must look to see whether the acts and omissions “were part of the same course of conduct or common scheme or plan as the offense of conviction.” U.S. v. Johnson, 347 F.3d 635 (7th Cir. 2003).
7th Circuit holds that faking disability for insurance fraud involved sophisticated means. (300) Defendant and his wife defrauded insurers plus the Social Security Administration by pretending that defendant was disabled. The Seventh Circuit agreed that “sophisticated means” had been used to bilk the insurers. According to U.S.S.G. § 2B1.1(b)(8)(C), Application Note 6 and its predecessor § 2F1.1(b)(6)(C), Application Note 18, means are sophisticated when they entail “especially complex or especially intricate offense conduct pertaining to the execution or concealment of an offense.” Defendant fooled a skilled neurologist and 14 insurers, which required intricate maneuvers. Defendant and his wife had to present a picture consistent with the head injury defendant allegedly suffered. His wife had to describe the conduct both in writing and in interviews with physicians, and defendant had to mimic it on demand. Careful execution and coordination over an extended period enabled defendant to bilk more insurers and reduce the risk of detection. The fact that defendant eventually slipped up, and the deception was caught as a result of his errors, plus the private investigation, did not make the scheme any less complex. U.S. v. Rettenberger, 344 F.3d 702 (7th Cir. 2003).
7th Circuit upholds findings that uncharged frauds were related. (300) Defendant was convicted of mail fraud in connection with a scheme to secure student loans with false information. The district court considered evidence of two other frauds as relevant conduct. The government’s evidence relating to the two other frauds included names and social security numbers found in defendant’s apartment which were used to apply for the loans. The addresses listed for the loan application were located in the same neighborhood in the same area of New Jersey as the other addresses used by defendant, and the fraud victims lived near defendant’s other New Jersey victims. The district court found that each of these frauds bore a “remarkable similarity, in fact, virtual identity [sic] to the other frauds.” The court stated that these additional frauds “point almost in an identifying way as a fingerprint, or signature, or unique characteristic, common scheme and plan … for this defendant.” Further, “the overlap with respect to use of addresses and … technique … is so strikingly similar that it could be no one else.” The Seventh Circuit ruled that this written statement of reasons was sufficient to support using the uncharged frauds as relevant conduct. It was clear from the court’s statement regarding the “strikingly similar” technique that the judge had weighed the evidence relating to the frauds. The court’s finding was not clearly erroneous. U.S. v. Ojomo, 332 F.3d 485 (7th Cir. 2003).
7th Circuit says two fraud defendants were properly sentenced under bribery and kickback guideline. (300) 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 holds that bribery guideline should have applied to fraud. (300) Defendants, officers of a labor organization, collaborated on three schemes involving the misappropriation of the unions’ funds. In a “loans-for-deposits” scheme, defendants deposited large sums of union money in various banks. In exchange, the two received overly generous terms and conditions on personal loans. They were also involved in a more complicated hotel loan kickback scheme. The district court calculated defendants’ sentences under § 2F1.1 (fraud), but the government argued it should have applied § 2E5.1 (benefit plan bribery). The Seventh Circuit agreed with the government that the court should have sentenced defendant under § 2E5.1. Guideline § 1B1.2 encourages a court to find an appropriate guideline section to fit the conduct, not just the charge. Note 13 to the 1990 version of § 2F1.1 notes that where an indictment or information establishes an offense more aptly covered by another guideline, the court should apply that guideline rather than § 2F1.1. The indictment charged that one defendant “sought and received a substantial personal benefit and kickback in exchange for influencing” the bank to provide a $6.5 million loan, which is closer to bribery than mail fraud. Similarly, the loans-for-deposits scheme was basic bribery, with defendant promising union deposits to the banks in exchange for favorable personal loans. U.S. v. Serpico, 320 F.3d 691 (7th Cir. 2003).
7th Circuit holds that amendment for fraud “affecting” financial institution was substantive. (300) At the time defendant was sentenced § 2B1.1(b)(12)(A) provided for an increase if “the offense … affected a financial institution and the defendant derived more than $1,000,000 in gross receipts from the offense.” The guideline was later amended to provide for an increase if “the defendant derived more than $1,000,000 in gross receipts from one or more financial institutions as a result of the offense.” The Sentencing Commission did not characterize the amendment as a clarification but rather as a modification and revision. See Supplement to Appendix C, Amendment 617, at 184. Because the amendment substantively changed an unambiguous provision and the Sentencing Commission did not characterize it as a clarification, the Seventh Circuit ruled that the amendment should not be applied in sentencing defendant. The government proved that defendant “affected” a financial institution. He used the bank to facilitate his crime and exposed the bank to liability for accepting his forged and sometimes unendorsed checks for deposit. As a result of his conduct, the bank settled a claim brought against it by the fraud victim for $150,000. Defendant’s fraud clearly affected the bank. Defendant used the bank to commit the fraud and as a result, the bank was forced to pay $150,000 to the victim to extract itself from civil liability for its actions in inadvertently assisting defendant’s scheme. U.S. v. Hartz, 296 F.3d 595 (7th Cir. 2002).
7th Circuit says violation of informal decree supported enhancement for violating official process. (300) After discovering unsanitary conditions at defendant’s meat warehouse, a compliance officer with the Illinois Department of Agriculture (IDA) placed a “red tag” on one cooler, indicating an official seizure. While inspectors were still in the warehouse, defendant sold meat from the red-tagged cooler. The Seventh Circuit affirmed a § 2F1.1(b)(4)(C) increase for violating an official process based on defendant’s sale of goods from the red-tagged cooler. The court agreed with the Second Circuit that an informal administrative process resulting in an informal decree is enough to trigger the enhancement. See U.S. v. Spencer, 129 F.3d 246 (2d Cir. 1997). Here, like the defendant in Spencer, defendant received informal process through the USDA and IDA inspections. The IDA red tag was an informal decree notifying defendant that selling the tagged goods would violate state law. U.S. v. Mantas, 274 F.3d 1127 (7th Cir. 2001).
7th Circuit applies fraud guideline to mislabeling and/or adulteration of pharmaceuticals. (300) Defendants were convicted of offenses related to the manufacture and distribution of mislabeled and/or adulterated pharmaceutical products. They argued that they should have been sentenced under § 2N2.1(a) rather than § 2F1.1, the fraud guideline. Section 2N2.1(a) covers violations of statutes and regulations dealing with, among other things, drug products, and assigns a base offense level of six to such violations. However, subsection (b)(1) directs a court to apply § 2F1.1 if the offense involved fraud. The Seventh Circuit found no error, since there was substantial evidence of fraud here. Defendant’s wrongs were not merely “technical” violations of the Federal Food, Drug and Cosmetic Act. U.S. v. Bhutani, 266 F.3d 661 (7th Cir. 2001).
7th Circuit holds that possession of credit access devices completed crime. (300) Defendant was arrested while attempting to make a $1500 purchase with a counterfeit credit card. He was later arrested in possession of a computerized list of 414 cloned telephone numbers with corresponding electronic serial numbers and handwritten directions explaining how to clone cellular phones. He also turned over to postal inspectors some 60 cards and equipment he used to make phony credit cards, and acknowledged that he previously possessed an additional 140 phony cards. The district court calculated the loss under § 2F1.1 by adding the actual charges ($8500) defendant made on the cards seized from him, the $1500 charge defendant was trying to make on when he was arrested, $100 for each of the 414 cloned cell phone numbers for a total of $41,400, and $200 for each of the 200 counterfeit cards, or $20,000. Defendant argued that he deserved a three-level reduction under § 2X1.1 because he had not completed all acts necessary to carry out the frauds, i.e. he had not yet cloned any cell phones and the 200 credit cards were not used. The Seventh Circuit disagreed, ruling that defendant’s mere possession of the credit access devices completed the crime. The fact that defendant never used the cell phone numbers or phony credit cards was irrelevant. U.S. v. Scott, 250 F.3d 550 (7th Cir. 2001).
7th Circuit upholds more than minimal planning increase for eight-year embezzlement scheme. (300) Over an eight-year period, defendant embezzled money from the bank where he was employed. He concocted a scheme of issuing money orders from customer accounts without authorization and misappropriating cash entrusted to him by customers for deposit. The Seventh Circuit ruled that defendant’s repeated acts over an eight-year period supported a § 2F1.1(b)(2)(A) more than minimal planning increase. The district court was permitted to adopt the facts in the PSR, whose accuracy and reliability defendant did not contest. The court properly relied on the PSR alone in finding that defendant’s acts were not purely opportune but rather constituted evidence of more than minimal planning. The PSR described in detail defendant’s embezzlement scheme, involving hundreds of transactions, generally in $2000 to $3000 increments, into and out of ten bank accounts over more than eight years. Because defendant used his knowledge of bank operations to shape the pattern, frequency and amounts of his illegal transactions, his acts were not “purely opportune,” but instead deliberate and calculated to maximize his deception. U.S. v. Sonsalla, 241 F.3d 904 (7th Cir. 2001).
7th Circuit holds that increase for violating judicial order was not double counting. (300) Defendant, a former attorney, perpetrated a number of fraud schemes. In so doing, he violated three separate court orders, including an order from the Illinois Supreme Court disbarring him. Defendant argued that an enhancement under § 2F1.1(b)(4)(B) for violating a judicial order constituted impermissible double counting. He claimed that since his status as an attorney was important to the success of his fraud scheme, the order of disbarment was critical to his receipt of enhancements for abuse of trust under § 3B1.3, more than minimal planning under § 2F1.1(b)(2), role in the offense under § 3B1.1(c), and vulnerable victims under § 3A1.1(b)(1). The Seventh Circuit found no double counting problem. The increase for violating a judicial order applies for not conforming with the requirements of judicial process. The abuse of trust increase did not fully cover his violating a judicial order that disbarred him from practicing law. It is possible that he both abused the trust of his victims while simultaneously violating a judicial order. “Double counting occurs when identical conduct is described in two different ways so that two different adjustments apply.” Defendant did not provide any concrete example of how the abuse of a position of trust enhancement or any of the other enhancements resulted in impermissible double counting based upon “identical conduct” being “described in two different ways.” U.S. v. Parolin, 239 F.3d 922 (7th Cir. 2001).
7th Circuit rejects financial institution increase after Commission refuses to clarify intent. (300) In U.S. v. Tomasino, 206 F.3d 739 (7th Cir. 2000), the Seventh Circuit found that a 1991 amendment to § 2F1.1(b) defining the term “financial institution” to include pension funds may have been based on the Sentencing Commission’s misreading of the underlying statute. The panel remanded the case for resentencing “after giving the Commission a reasonable opportunity to clarify its intentions in promulgating” § 2F1.1(b) (7)(B). The Sentencing Commission refused to clarify its intent out of fear that it “could cause the Commission to be burdened by a stream of judicial requests for clarification. Such a burden would impact negatively on the ability of the Commission to respond to legislative directives, resolve circuit conflicts, and promulgate other amendments pursuant to its mandate from Congress.” Thus, the Seventh Circuit withdrew the last two paragraphs of the opinion, which solicited the Commission’s view. For the reasons stated elsewhere in the original opinion, the panel still believed that § 2F1.1(b)(7)(B) may have been based on a misunderstanding and therefore did not support the enhanced punishment for defendant. Judge Easterbrook dissented from the denial of rehearing, believing it improper to depart from what the Commissioners promulgated. U.S. v. Tomasino, 230 F.3d 1034 (7th Cir. 2000).
7th Circuit approves upward departure based on SCAMS Act violation. (300) Defendants contacted over 65 people and informed them they had won prizes which they could only claim by sending defendants money for “taxes” and “fees.” The district court departed upward in part because defendants’ fraud violated the Senior Citizens Against Marketing Scams (SCAMS) Act, 18 U.S.C. § 2325 et seq. Defendant argued that the guidelines already adequately took into account the harm targeted by the SCAMS Act, noting that after Congress passed the Act, the Commission issued a report stating that it would review the Act, make any necessary changes, and submit those changes to Congress by May 1, 1995. Since that time, the Commission has not made any amendment that references the SCAMS Act. The Seventh Circuit was unconvinced that the Commission’s lack of action was proof that the SCAMS Act was considered by the Commission, and affirmed the departure. The existing guidelines, even including the 1998 amendment adding a two-level increase for use of mass marketing, do not contain the sharply increased penalties called for by Congress in the SCAMS Act. The conduct prohibited by the SCAMS Act merits more severe punishment than the guidelines provide, and the Commission has yet to adequately consider the increased punishments recommended by Congress and incorporate them into the guidelines. U.S. v. Coe, 220 F.3d 573 (7th Cir. 2000).
7th Circuit holds that SCAMS Act departure and increase for vulnerable victims not double counting. (300) Defendants contacted more than 65 people and informed them they had won prizes which they could only claim by sending defendants money for “taxes” and “fees.” They argued that the district court engaged in impermissible double counting when it departed upward based on the Senior Citizens Against Marketing Scams (SCAMS) Act, 18 U.S.C. § 2325 et seq., and enhanced their sentences under § 3A1.1(b)(1) for targeting vulnerable victims. The Seventh Circuit found no double counting. The district court departed under the SCAMS Act because defendants (1) targeted the elderly, (2) used telemarketing to perpetuate their scam, and (3) victimized ten or more people over the age of 55. The court applied the § 3A1.1 enhancement because defendants used “lead lists” to target persons they believed were especially vulnerable because they had been victimized in the past. Thus, the departure and the enhancement were based on two different features of defendants’ conduct. U.S. v. Coe, 220 F.3d 573 (7th Cir. 2000).
7th Circuit agrees that doctor’s insurance fraud scheme created risk of serious bodily injury. (300) Defendant, a medical doctor, involved as many as 130 patients in a complicated scheme to defraud insurance companies by charging for services he did not provide. The district court found that the medical treatment defendant provided, or failed to provide, placed some of his patients at risk of serious bodily injury, and applied a two-level increase under § 2F1.1(b)(6)(a). The Seventh Circuit affirmed. The risk of injury from defendant’s failure to supervised an unlicensed employee providing electric muscle stimulation was slight. In addition, while applying heat to bruised areas might increase the internal bleeding from the bruising, this did not meet the standard of serious bodily injury. However, the medical procedures defendant failed to perform were more troubling. To conceal his fraud, defendant engaged in rudimentary examination procedures better designed to generate additional visits than to diagnose injury. On multiple occasions, defendant failed to perform basic diagnostic tests, such as taking blood pressure, on patients who later proved to be at risk. By failing to examine these patients properly, defendant created a risk that, had these patients suffered serious injuries, their injuries would remain untreated. U.S. v. Vivit, 214 F.3d 908 (7th Cir. 2000).
7th Circuit says defendant not entitled to additional departure for lack of personal gain. (300) Defendant, the controller for her family’s business, made false reports to the company’s lender in order to increase the company’s available credit. The court based her offense level on a stipulated loss of between $850,000 and $1.5 million. Defendant argued that the district judge wrongly concluded that a lack of personal gain from the crime could not be the basis of a downward departure. The Seventh Circuit found no error. First, the analysis in U.S. v. Seacott, 15 F.3d 1380 (7th Cir. 1994), a case in which the court reversed a downward departure based on lack of personal gain, was consistent with Koon v. United States, 518 U.S. 81 (1996). Second, defendant did receive a personal gain from the fraud. The business defendant set about to save was a family business: her father was a founder and owner, her brother worked for the company, and defendant herself earned a $56,000 salary. Finally, defendant already received consideration based on the circumstances of her crime. The court made a two-level departure because the loss overstated the seriousness of her conduct. Defendant’s claim that the loss overstated the seriousness of the offense was mixed in with her claim about the lack of personal gain. U.S. v. Corry, 206 F.3d 748 (7th Cir. 2000).
7th Circuit has no jurisdiction to review refusal to depart for overstated loss. (300) Note 7(b) to § 2F1.1 applies to fraudulent loan application cases and provides that when the loss significantly understates or overstates the seriousness of the defendant’s conduct, an upward or downward departure may be warranted. The Seventh Circuit held that it lacked jurisdiction to review the district court’s refusal to depart under note 7(b). Defendant did not challenge the district court’s valuation of loss but simply claimed that the court erred in failing to depart downward under note 7(b). An appellate court lacks jurisdiction to review a district court’s discretionary refusal to grant a downward departure. Appellate courts will presume that a district court knew it had authority to depart downward and simply exercised its discretion not to do so. The defendant bears the burden of rebutting this presumption. Defendant failed to offer any rebuttal evidence and in fact, defense counsel conceded at oral argument that the district judge knew he had the ability to depart under note 7(b). U.S. v. Hegge, 196 F.3d 772 (7th Cir. 1999).
7th Circuit holds that guidelines are not susceptible to attack under vagueness doctrine. (300) Defendant, the president of a credit union, pled guilty to making false entries in the credit union’s books. Section 2F1.1(b)(6)(1) provides for an increased offense level if the offense “substantially jeopardized the safety and soundness of a financial institution.” Defendant argued that this section was unconstitutionally vague. The Seventh Circuit held that the Sentencing Guidelines are not susceptible to attack under the vagueness doctrine. The vagueness doctrine says that a person cannot be held liable for conduct he could not be reasonably be expected to know was a violation of law. The guidelines do not establish the illegality of any conduct. They are directives to judges for their guidance in sentencing convicted criminals. With the exception of capital cases, a defendant has no constitutional right to such directives. Since there is no constitutional right to sentencing under the guidelines, the discretionary limits the guidelines place on the sentencing judge do not violate a defendant’s right to due process by reason of vagueness. U.S. v. Brierton, 165 F.3d 1133 (7th Cir. 1999).
7th Circuit upholds enhancement for substantially jeopardizing credit union’s safety and soundness. (300) Defendant, the president of a credit union, pled guilty to charges stemming from her creation of a fictitious loan to cover up the existence of an account with a negative balance. She challenged, for the first time on appeal, a § 2F1.1(b)(6)(A) enhancement for substantially jeopardizing the safety and soundness of a financial institution. The Seventh Circuit found no plain error. The district court did not, as defendant claimed, rely solely on net capital ratio statistics as the basis for the enhancement. Although the court referred to the low net capital ratio as a basis for its conclusions, it also cited the “improper transactions, risky loans, falsifications of documents and concealment of material information from the credit union board” as bases for determining that defendant placed the credit union in substantial jeopardy of insolvency. Although the credit union was not actually insolvent at the time defendant resigned, note 15 lists several types of damage flowing from an offense that may be deemed to substantially jeopardize the safety and soundness of a financial institution, only one of which is insolvency. Thus, insolvency is not required. U.S. v. Brierton, 165 F.3d 1133 (7th Cir. 1999).
7th Circuit holds departure did not meet requirements of fraud commentary. (300) Defendant bribed a mayor in order to obtain support for a bond offering. Defendant was convicted of RICO conspiracy and fraud charges. Section 2C1.1(b)(2)(A) references the § 2F1.1 fraud table if the value of the payment, the benefit to be received, or the loss to the government exceeds $2,000. Although defendant’s benefit was between $5 million and $10 million, corresponding to a 14-level increase, the district court only applied a seven-level increase. Note 7(b) to § 2F1.1 authorizes a departure where the loss significantly overstates the seriousness of the defendant’s conduct. The Seventh Circuit held that in applying the cross-reference, the court was entitled to consider the application notes to the fraud table. However, the departure here did not satisfy note 7(b)’s requirements. Rather than addressing the seriousness of defendant’s conduct, the judge departed simply because he believed the sentence should depend on the loss to third parties rather than the gain to the perpetrator. In addition, there was a loss. The bonds issued were tax-free. The U.S. Treasury lost a dollar in tax revenue for every dollar defendant saved from the lower interest rate. U.S. v. Krilich, 159 F.3d 1020 (7th Cir. 1998).
7th Circuit holds that pension plan qualified as financial institution. (300) Defendant, an employee benefits manager, diverted $15 million in pension fund money to con men running a Ponzi scheme. Section 2F1.1(b)(6)(B) provides for enhancement if the offense “affected a financial institution.” The enhancement was adopted in response to Congress’s directive to the Commission in the 1990 Crime Control Act to enhance the punishment for offenses affecting a financial institution, as defined in 18 U.S.C. § 20. Section 20 defines a financial institution as any of nine different types of institutions, which are mainly banks, but not pension funds. However, note 14 to guideline § 2F1.1 defines “financial institution” to include a host of other institutions, including insurance companies, mutual funds, broker-dealers and union or employee pension funds. The Seventh Circuit held that a pension plan qualified as a financial institution and therefore the court should have applied a § 2F1.1(b)(6)(B) enhancement. U.S. v. Lauer, 148 F.3d 766 (7th Cir. 1998).
7th Circuit approves upward departure for involving minor in fraud scheme. (300) Defendant, a licensed stockbroker, misappropriated money entrusted to him by clients for investment. The Seventh Circuit approved a two-level upward departure for involving a minor in one of his mail fraud schemes. The fact that the Sentencing Commission chose to authorize an enhancement when a defendant involves a minor in certain drug offenses under § 2D1.2 did not mean that the involvement of a minor in other crimes cannot be the basis for a departure. The validity of the departure was bolstered by a 1995 amendment to § 3B1.4, which provides for a two-level enhancement for using a minor in the offense. The court’s reliance on the subsequent amendment to § 3B1.4 did not violate the ex post facto clause. The district court merely referenced the amendment to bolster its view that the version of the guidelines in effect at the time of defendant’s crime did not adequately consider defendant’s use of a minor. U.S. v. Porter, 145 F.3d 897 (7th Cir. 1998).
7th Circuit requires mail fraud and money laundering counts to be grouped together. (300) Defendant, an employee of the U.S. Postal Service, hired contractors to perform work on post offices in exchange for kickbacks of money, vehicles, services and real estate. He was convicted of mail fraud, conspiracy and money laundering. The Seventh Circuit held that the district court erred in refusing to group the mail fraud and money laundering convictions together. In U.S. v. Wilson, 98 F.3d 281 (7th Cir. 1996), the court held that mail fraud and money laundering convictions should be grouped as closely related counts under § 3D1.2 because the money laundering served the necessary purpose of concealing the fraud, keeping the scheme afloat, and perpetrating the scheme that produced the laundered funds. Wilson rejected the notion that mail fraud and money laundering should not be grouped because those crimes harm different victims. In addition, defendant was indicted and convicted under the “promotion” prong of the money laundering statute. Defendant laundered the proceeds of his mail fraud scheme with the intent of promoting that illegal scheme. Wilson involved the “concealment” prong of the money laundering statute. Merely concealing the proceeds of criminal activity evidences a lesser connection to the underlying criminality than actually promoting the activity. U.S. v. Emerson, 128 F.3d 557 (7th Cir. 1997).
7th Circuit says more than one victim is not inherent in possessing 15 or more access devices. (300) Defendant pled guilty to possessing 15 or more unauthorized “access devices” with intent to defraud. He argued that a § 2F1.1(b)(2)(B) enhancement for more than one victim was improper because it was inherent in the nature of the substantive offense—i.e. when 15 or more access devices are involved, there will always be more than one victim. The Seventh Circuit held that the more than one victim enhancement was not double counting since the substantive offense did not necessarily involve more than one victim. An access device is defined broadly and it is certainly possible that a person could obtain 15 or more account numbers or other access devices from a single bank or corporation. Moreover, the enhancement could rest on § 2F1.1(b)(2)(A) for more than minimal planning. The district court explicitly found defendant’s offense involved elements under both subsections of § 2F1.1(b)(2). U.S. v. Moore, 127 F.3d 635 (7th Cir. 1997).
7th Circuit holds that enhancement for violating consent decree was not double counting. (300) Defendant, a lawyer, sold fraudulent second mortgage promissory notes through the mail. The district court applied a § 2F1.1(b)(3)(B) increase after finding the fraud was in violation of a 1995 consent decree from the Illinois Secretary of State. Defendant argued for the first time on appeal that the enhancement constituted double counting since the same conduct that comprised the offense of conviction also violated the consent decree. The Seventh Circuit found no error. A district court does not engage in double counting when it enhances a defendant’s sentence for separate elements of the same act, provided that it does not enhance the defendant’s sentence twice for the same element. Defendant’s base offense level did not take into account the additional fact that defendant sold the fraudulent securities while under a consent decree not to sell such securities. His violation of the consent decree was a separate element of the offense. U.S. v. Burke, 125 F.3d 401 (7th Cir. 1997).
7th Circuit holds that attorney who helped bankruptcy client hide assets violated judicial process. (300) Defendant, an attorney, helped a bankruptcy client fraudulently conceal assets from the bankruptcy trustee. The Seventh Circuit affirmed a § 2F1.1(b)(3)(B) for violating a “judicial or administrative order, injunction, decree, or process.” The knowing concealment of assets during bankruptcy proceedings constitutes a violation of a judicial process under § 2F1.1(b)(3)(B). The fact that defendant was not the debtor did not matter. Defendant was the attorney who prepared and filed his client’s fraudulent bankruptcy forms and deceived the trustee by stating that this was a “no-asset” case. Defendant then represented the client later in making an insurance claim on the very property he told the bankruptcy court a year earlier had been transferred to another. U.S. v. Webster, 125 F.3d 1024 (7th Cir. 1997).
7th Circuit treats hiring scheme as single count of fraud. (300) Defendant, a county undersheriff, devised a scheme to provide jobs for personal or political reasons. One part of the scheme involved hiring favored individuals for various law enforcement positions, even though they had failed the qualifying examinations. The other part of the scheme consisted of hiring individuals who defendant knew would do little or no work in their designated positions. The district court departed upward based on the foreseeable non-monetary harm and the loss of public trust caused by putting unqualified people in the sheriff’s department. Defendant argued that court departed only because the government improperly charged him with just a single count of mail fraud. He argued that there were really two schemes—(1) a ghost payrolling scheme and (2) an unqualified hiring scheme, and that if the government had charged him with two fraud counts, they would have been grouped for sentencing, and the court would not have departed upward. The Seventh Circuit found no error. The scheme had a single purpose—to provide political “payoffs.” The result of both parts of the scheme was that qualified applicants were denied positions which were given to individuals who were either unqualified or who performed no work. U.S. v. Dvorak, 115 F.3d 1339 (7th Cir. 1997).
7th Circuit rules offense was more like fraud than commercial bribery. (300) 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 upholds increase for claiming to represent the Mexican government. (300) Defendant and his co‑conspirators arranged to print $11 billion in promissory notes purporting to be guaranteed by the Mexican government. Defendant attempted to sell the notes by falsely claiming they belonged to the President of Mexico, that defendant was major general of the Army and a member of the Executive Committee of PRI, the ruling political party of Mexico, and that he was working for the President and government of Mexico, The Seventh Circuit affirmed a § 2F1.1 (b)(3)(A) enhancement for misrepresenting that defendant was acting on behalf of a charitable, educational, religious, or political organization or a government agency. The examples listed in note 4 are not exhaustive. The enhancement is not limited to defendants who exploit their victims’ charitable impulses. The cases relied on by defendant involved defendant who misrepresented their authority to act on behalf of charitable organizations. U.S. v. Ferrera, 107 F.3d 537 (7th Cir. 1997).
7th Circuit holds that embezzlement of client’s funds involved more than minimal planning. (300) Defendant was an investment consultant who had the authority to order expenditures, investments and transfer funds entrusted to him by his clients. Defendant forged a signature to transfer funds belonging to a municipal pension fund into another account. When the city treasurer noticed the unauthorized transfers, defendant made up a fictitious story. When the year‑end audit revealed the discrepancy, defendant told the treasurer he had purchased two $100,000 certificates of deposit. He then prepared two documents directing a transfer of $200,000 to a bank, and added $15,000 (to simulate the interest a CD would earn) from another client’s account. He used the $215,000 to collateralize a loan to a company, and then transferred the money back to the original client. The Seventh Circuit agreed that defendant’s wire fraud involved more than minimal planning. Defendant committed repeated criminal acts over time and made substantial efforts to conceal them. He performed four fraudulent wire transfers over 11 months, provided seven months worth of false reports and made verbal assurances to the city treasurer to conceal the fraud. U.S. v. Viemont, 91 F.3d 946 (7th Cir. 1996).
7th Circuit approves upward departure based on nature and degree of harm to victims. (300) Defendants established a sham business to obtain a completed mortgage loan application. They used the social security numbers and other personal information contained in the applications to obtain credit cards, bank loans and checking accounts. They then used the cards, lines of credit and accounts to obtain cash, goods and services. The Seventh Circuit approved a two‑level upward departure based on the nature and degree of harm suffered by the victims of the scheme. The court did not make an improper analogy to the vulnerable victim guideline to justify the departure; the court examined § 3A1.1 only to determine the extent of the departure. Note 10 to § 2F1.1 states that a departure may be warranted where the financial loss does not fully capture the harmfulness of the defendant’s conduct. This was such a case. The victims testified about the aggravating and extremely time‑consuming credit problems they had as a result of the fraud. U.S. v. Akindele, 84 F.3d 948 (7th Cir. 1996).
7th Circuit rules mail fraud scheme affected a financial institution. (300) Defendant purchased a “bank” licensed by the government of Montserrat. When the license was revoked for failure to maintain $300,000 minimum capital requirements, defendant purchased another corporation in Grenada. He advertised with brokers across the country offering them the opportunity to earn high commissions through the sale of international and domestic CDs. Defendant spent most the money people invested on himself. The Seventh Circuit affirmed a § 2F1.1(b)(6) enhancement for an offense that affected a financial institution. Application note 14 is sufficiently broad to include defendant’s sham bank within the definition of a financial institution. For the enhancement to apply, it is not necessary to satisfy both subsections (A) (substantially jeopardized the safety and soundness of a financial institution) and (B) (affected a financial institution and defendant derived more than $1 million in gross receipts). Either one is sufficient. U.S. v. Randy, 81 F.3d 65 (7th Cir. 1996).
7th Circuit says workers compensation fraud involved more than minimal planning. (300) Defendant injured his back at home one weekend. The following day, he and a co‑worker faked an accident so that defendant could file a worker’s compensation claim. Defendant’s wife joined her husband in filling out the forms, which falsely claimed that defendant hurt his back at work. The Seventh Circuit held that the worker’s compensation fraud scheme involved more than minimal planning under § 2F1.1(b)(2)(A). Defendant did more than exaggerate an otherwise valid claim. He staged an accident, and persuaded his wife and a co‑worker to back his claim. He exaggerated his injury to medical professionals, lied to insurance adjusters, filed a lawsuit against his employer based on the injury and testified falsely at the hearing. U.S. v. Bush, 79 F.3d 64 (7th Cir. 1996).
7th Circuit upholds enhancement for violation of judicial order. (300) Defendant was convicted of fraud arising from her operation of a travel promotion business that did not deliver the packages her customers purchased. She challenged a § 2F1.1(b)(3)(B) enhancement for violation of a judicial order, claiming she never knew of the June 9, 1992 court order permanently enjoining her from acting as a travel promoter. The Seventh Circuit affirmed the enhancement, because during the sentencing hearing she admitted learning of the injunction as early as December 1992. Although she claimed she did not know what she was enjoined from doing, she admitted she knew she was enjoined from any travel business activities, not just certain aspects of the business. Defendant violated the injunction by using false names to conceal fraudulent schemes, using counterfeit cashier’s checks, and using customer’s credit card account to charge unauthorized travel expenses or debts owed to various cruise lines. U.S. v. Gist, 79 F.3d 52 (7th Cir. 1996).
7th Circuit upholds departure based on special harm to fraud victims. (300) Defendant, the founder and officer of a business school, converted federal financial aid funds and student loans for his own use. The district court made a two-level upward departure based upon the special impact of defendant’s fraud on his victims. The Seventh Circuit affirmed under note 10 to § 2F1.1. Note 10 authorizes a departure where the loss does not fully capture the seriousness of the defendant’s conduct, including the knowing endangerment of the solvency of one or more victims, and foreseeable, substantial non-monetary harm. Almost all of the school’s students received federal financial aid. Where students withdrew from school but were fraudulently deprived of refunds, they remained liable for their loan obligations even though they never received an education. For many students, the crushing weight of their student loans meant certain insolvency. Many had tax refunds withheld, credit ruined, and personal property seized. These students were ineligible to receive further educational assistance, and thus could never attend another school. U.S. v. Ross, 77 F.3d 1525 (7th Cir. 1996).
7th Circuit upholds more than minimal planning where lender required a series of smaller loans. (300) In an attempt to secure a government loan, defendant offered as collateral some electronic parts that his company owned in India. He manufactured invoices that falsely stated that the collateral was worth $321,000, when in fact it was only worth $89,581. Because the lender was skeptical, it decided to protect itself by using multiple loan closings and making several smaller loans. In each of four transactions, defendant completed identical paperwork, making the same misrepresentation. Defendant challenged a more than minimal planning enhancement for “repeated acts,” arguing that he only misrepresented the value of the collateral once and should not be accountable for repeated acts simply because the lender chose to issue four separate loans. The Seventh Circuit upheld the enhancement because defendant committed more than two acts. He misrepresented the value of the collateral on four separate occasions. The guidelines permit enhancement for this additional conduct. U.S. v. Channapragada, 59 F.3d 62 (7th Cir. 1995).
7th Circuit says defendant cannot avoid more than minimal planning increase by having agent do the work. (300) Defendant instructed his horse trainer to “do what you have to do” to make an unproductive show horse “disappear” so that defendant could collect insurance proceeds. The trainer hired a professional horse killer. The killer transported the horse to another city and killed the horse by electrocution. Defendant reported to his insurance company that the horse was found dead in its stall and the company sent him $50,000. Defendant challenged a more than minimal planning enhancement, arguing that all he did besides mail the claim was instruct the trainer to get rid of the horse. The Seventh Circuit affirmed the enhancement based on the actions of defendant’s subordinates–a criminal cannot avoid the more than minimal planning enhancement by operating through underlings. The enhancement focuses on the planning involved in the offense rather than on the planning done by the particular offender. U.S. v. Levinson, 56 F.3d 780 (7th Cir. 1995).
7th Circuit says enhancement for violating judicial order was not double counting. (300) Defendant operated a car dealership that went into bankruptcy. He agreed to turn over to his lender all post-petition assets, including all vehicle inventory and proceeds from all vehicle sales. The agreement was approved by the bankruptcy court and entered as its order. Defendant was convicted of bankruptcy fraud for violating the agreement by giving another dealer the proceeds from the sale of two trucks the dealer had provided defendant. The Seventh Circuit held that a § 2F1.1(b)(3)(B) enhancement for violating a judicial order was properly applied and was not double counting. A person who defies a specific court-directed course of conduct shows a more aggravated criminal intent than one who violates the general laws against fraud. For the same reason, the enhancement was not double counting. The violation of a judicially approved agreement is sufficiently more serious than some other § 2F1.1 crimes to warrant a stiffer penalty. U.S. v. Gunderson, 55 F.3d 1328 (7th Cir. 1995).
7th Circuit finds concealing and selling forgeries were distinct acts for double counting purposes. (300) Defendant, the owner and operator of a chain of art galleries, sold numerous forgeries as originals. Under a settlement with the FTC, defendant agreed to surrender certain work and agreed not to make misrepresentations in the sale of artwork. Defendant did not turn over all the artwork as required. He subsequently sold nine prints to one customer, at least one of which was a fake. He argued that an obstruction of justice enhancement for violating the FTC order by concealing certain prints and records was double counting, since he received a § 2F1.1(b)(3)(B) enhancement for violating the FTC injunction by selling the prints. The Seventh Circuit held that the enhancements were not double counting since they were based on different conduct. The sale for which defendant received the § 2F1.1(b)(3)(B) enhancement was factually distinct from his concealing the prints from the FTC. Although the concealment enabled him to make the sale, the concealment and sale were distinct acts. U.S. v. Austin, 54 F.3d 394 (7th Cir. 1995).
7th Circuit holds that bankruptcy fraud involved more than minimal planning. (300) Defendant pled guilty to bankruptcy fraud after failing to disclose assets to the bankruptcy trustee, failing to disclose the receipt of proceeds from the sale of assets, lying about one of the disclosed assets, and using money from his business to pay his personal bills. The Seventh Circuit agreed that the fraud involved more than minimal planning under § 2F1.1(b)(2). Defendant engaged in a protracted course of conduct which served to conceal assets from both the bankruptcy trustee and his creditors for over four years. When he sold the concealed assets, he planned the transactions to avoid detection. He also carefully monitored the cash level of his store and siphoned proceeds whenever he thought balances were too high. Finally, he presented two false documents to the trustee about the value of a disclosed asset, including a phony appraisal written on an appraisal company’s stationary. Moreover, he engaged in a scheme to defraud more than one victim—the bankruptcy trustee and defendant’s creditors. U.S. v. Michalek, 54 F.3d 325 (7th Cir. 1995).
7th Circuit agrees that bankruptcy fraud violated a judicial process. (300) Defendant committed bankruptcy fraud by concealing assets from the trustee, failing to disclose the receipt of proceeds, and other misconduct. The district court enhanced his sentence under § 2F1.1(b)(3) (B) for violating a judicial order, commenting that the enhancement was appropriate in all bankruptcy fraud cases. The Seventh Circuit agreed that defendant’s fraudulent representations to the bankruptcy court and its trustee violated the judicial process of the court. The fact that defendant did not violate an identifiable order, injunction, decree or process did not matter. Bankruptcy proceedings are different from other types of litigation. Defendant sought protection under the shelter of bankruptcy court and then abused the bankruptcy process and hindered the orderly administration of the bankruptcy estate. Moreover, defendant’s conduct violated the automatic stay provision in 11 U.S.C. § 362. That provision is, for purposes of this guideline, a judicial order. U.S. v. Michalek, 54 F.3d 325 (7th Cir. 1995).
7th Circuit finds no double counting in increase for violating judicial order in bankruptcy fraud case. (300) Defendant was convicted of multiple counts of bankruptcy fraud for concealing his assets in the bankruptcy. He argued that an enhancement under § 2F1.1(b) (3)(B)for violating a judicial order was double counting because his conviction was based on a finding that he violated the bankruptcy court’s order not to sell his company’s assets. The Seventh Circuit found no double counting. Defendant’s conviction resulted from his concealing company assets from the bankruptcy trustee and creditors. The enhancement recognized that in addition, he violated a specific judicial order within the bankruptcy proceedings. U.S. v. Mohammad, 53 F.3d 1426 (7th Cir. 1995).
7th Circuit holds that employer of defendant’s accomplice can be victim of crime. (300) Defendant falsely represented to a title insurance company employee that he sent checks to his lender to satisfy its mortgage on various lots. The employee, contrary to title company policy, issued clear title commitments without verifying that the mortgages had been satisfied. Defendant argued that the title company was not a victim who suffered a loss under § 2F1.1 because a title company employee was his accomplice in the crime. The Seventh Circuit held that the employee’s actions could not be imputed to the title company since the title company was not aware of his actions and did not benefit from them. The employee’s actions were a deviation from company policy, and there was no suggestion that the title company authorized them. Thus, the title company qualified as a victim under § 2F1.1. U.S. v. Barrett, 51 F.3d 86 (7th Cir. 1995).
7th Circuit agrees that mail fraud involved more than minimal planning. (300) Defendants engaged in a fraudulent “Ponzi” scheme. They pled guilty to a single count of mail fraud based on a mailing to one investor. The Seventh Circuit agreed that the fraud involved more than minimal planning. Defendants sought out investors, sold shares in various properties they did not own, and used this fresh money to pay dividends to previous investors. The scheme was complicated, involving repeated acts over a long period of time, and the duration and nature of the Ponzi scheme entailed careful planning. Even if the mailing that was the subject of the offense of conviction was “simple,” the indictment also charged that the mailing was part of defendants’ scheme to defraud. U.S. v. Brown, 47 F.3d 198 (7th Cir. 1995).
7th Circuit says § 2F1.1 applies to fraud against FDA for selling unregistered drugs. (300) Defendants operated a veterinary clinic and ran a “side” business in veterinary drugs. The drugs were sold in homemade packaging to defendants’ customers and were also used in their veterinary practice. Defendants pled guilty to manufacturing drugs and failing to register with the FDA in violation of the Food, Drug and Cosmetic Act, 21 U.S.C. § 331(p) and § 333(a) (2). They argued that the district court erred in sentencing them under § 2F1.1 (Fraud) instead of § 2N2.1 (Food and Drug Act violations). The Seventh Circuit approved the use of the fraud guideline, holding that fraud against a regulatory agency is sufficient to invoke § 2F1.1. Section 2N2.1 directs a court to apply § 2F1.1 if the offense involved fraud. Although defendants may not have defrauded their customers, they defrauded the FDA by mislabeling drugs and altering invoices, rerouting shipments to avoid detection and misrepresenting current and intended future actions. The FDA represents the public, and a deliberate attempt to mislead the FDA is a fraud as clearly as an attempt to mislead customers or other individuals. U.S. v. Andersen, 45 F.3d 217 (7th Cir. 1995).
7th Circuit holds that check kiting scheme involved more than minimal planning. (300) Defendant kited numerous checks between three different bank accounts over a seven-month period. He argued that an enhancement under § 2F1.1(b)(2)(A) for more than minimal planning was improper because the district court focused on the number and dollar amount of the checks he kited and on his level of sophistication, rather than on the offense itself. The Seventh Circuit upheld the enhancement. The volume and face amount of the checks, combined with defendant’s business experience, tended to prove that the kiting was not “purely opportune.” The district court properly considered these factors under § 2F1.1 and no additional evidence of more extensive planning was necessary. U.S. v. Mau, 45 F.3d 212 (7th Cir. 1995).
7th Circuit says § 2B1.1 applies to misapplication of bank funds. (300) Defendant, an installment loan officer, wrote six fraudulent loans and used the proceeds to pay personal obligations. The 7th Circuit held that § 2B1.1, and not 2F1.1, applied to defendant’s conviction for misapplying bank funds in violation of 18 U.S.C. § 656. Section 2B1.1 addresses larceny, embezzlement and other forms of theft. Defendant’s conduct fit the common law form of embezzlement. In addition, the commentary to § 2B1.1 lists § 656 as an applicable statutory provision. Section 2F1.1 applies to bank customers who use fraud to obtain bank loans. Defendant never obtained bank loans. He merely prepared the loan documentation to prevent his superiors from discovering his crime. The bank did not loan defendant the money. He stole it. Judge Cudahy dissented, since defendant intended to repay the money and was making payments on the illegal loans. U.S. v. Dion, 32 F.3d 1147 (7th Cir. 1994).
7th Circuit upholds enhancements despite use of same enhancements in previous prosecution. (300) Defendant was convicted of conspiracy to commit bank fraud and money laundering. He had earlier been convicted of conspiracy to commit wire fraud and bank fraud. He claimed that enhancements under § 2S1.1(b) (2)(A) for the amount of money laundered and under § 3B1.1(a) for his leadership role violated double jeopardy since the earlier court had already relied on some of the same facts (a $350,000 loss and two common participants). The 7th Circuit found no double jeopardy violation since the convictions were for separate offenses. While the offenses involved the same type of scheme, the banks and most of the participants were distinct. U.S. v. Brown, 31 F.3d 484 (7th Cir. 1994).
7th Circuit upholds loss as difference between true minority bid and defendants’ bid. (300) Defendants’ company received a Postal Service contract by misrepresenting that the company was a minority-owned business. The district court found that the fairest measure of loss under section 2F1.1 was to subtract the amount which the Postal Service would have paid a true minority corporation from the amount paid to the company. The 7th Circuit found this permissible. Defendants’ claim that there was no loss was rejected. The trial judge specifically found that the Postal Service paid a premium price to the company for the purpose of furthering the policy of increased minority entrepreneurship. Awarding the contract to defendants’ company did not advance that aim, and therefore the Postal Service was fraudulently induced into paying for something which it did not receive. U.S. v. Loscalzo, 18 F.3d 374 7th Cir. 994).
7th Circuit holds organizer responsible for total amount obtained from insurance companies. (300) Defendant was the organizer of a scheme in which he and his co-defendants staged automobile accidents and other incidents and then collected on fraudulent insurance claims. The 7th Circuit held that it was proper to calculate the loss caused by defendant’s conduct based on the total amount of money fraudulently obtained from the insurance companies (about $668,000), rather than defendant’s share of the proceeds (about $266,000). Given section 2F1.1’s emphasis on a victim’s loss rather than the defendant’s profit, defendant may be held responsible for fraudulent claims that he assisted in some way, even if he did not share in the proceeds. Moreover, § 1B1.3(a)(1)(B) directs the sentencing court to consider all reasonably foreseeable acts of others in furtherance of jointly undertaken activity. U.S. v. Colello, 16 F.3d 194 (7th Cir. 1994).
7th Circuit says value of collateral need not be subtracted where bank not likely to recover it. (300) Defendant was convicted of making false statements to a bank to obtain $52,000 in loans and of using a false social security number. Because the fraud was discovered before the loan proceeds were disbursed, the bank incurred no actual loss. The 7th Circuit upheld the loss as $52,000, the total amount defendant tried to obtain. Loss should be the greater of (1) the amount the victim actually lost, estimated at the time of sentencing, and (2) the amount defendant intended to inflict on the victim, or the amount of probable loss, if either loss is estimable. Here, the court properly refused to reduce the loss by the amount of the collateral because defendant’s control over the collateral and his pattern of deceptive conduct diminished the bank’s chance of ever recovering the value of the collateral if the fraud had reached fruition. U.S. v. Johnson, 16 F.3d 166 (7th Cir. 1994).
7th Circuit holds false credit application was not relevant conduct to other fraudulent credit attempts. (300) In June 1988, defendant obtained credit to purchase furniture using a false name and social security number. In February 1989, she applied for a credit card using the same false name and social security number. In December 1989, she obtained a loan using a slightly different name and the same false social security number. In February 1991, defendant applied for a car loan using a new false name and another false social security number. She pled guilty to the June 1988 offense. The 7th Circuit reversed the district court’s determination that the February 1991 offense was relevant conduct for the June 1988 offense. The lengthy time interval tended to indicate conduct that could be separated into discrete units, rather than behavior that was part of the same course of conduct or common scheme or plan. Moreover, the acts were not sufficiently repetitive to call the conduct “regular.” U.S. v. Sykes, 7 F.3d 1331 (7th Cir. 1993).
7th Circuit rejects additional forgeries which did not result in loss as grounds for upward departure. (300) Defendant stole nearly $2.4 million from several companies that employed her as a bookkeeper. For concealment purposes only, defendant forged more than 200 checks worth $4 million, but these checks did not result in any additional loss to the companies. The district court departed upward, finding that defendant’s offense level under section 2F1.1 did not account for the additional checks defendant had forged for concealment purposes since they resulted in no actual loss. The 7th Circuit reversed. The background commentary to section 2F1.1 makes clear that the Sentencing Commission intended that offense levels for fraud be linked to the amount of loss. Application note 10 does permit departures where the loss involved does not fully capture the harmfulness of the conduct. However, in all the examples provided, the fraud caused some harm in addition to monetary loss. U.S. v. Panadero, 7 F.3d 691 (7th Cir. 1993).
7th Circuit remands to consider whether applying amended guideline would violate ex post facto clause. (300) Until November 1, 1991, section 2F1.1(b)(6) provided for an enhancement if the fraud offense “substantially jeopardized the safety and soundness of a financial institution.” Effective November 1, 1991, the guideline was amended to also provide an enhancement where the offense “affected a financial institution” and the defendant derived more than $1 million from the offense. Defendant argued for the first time on appeal that applying the amended guideline to him violated the ex post facto clause. The 7th Circuit remanded for consideration of this issue, even though defendant had not raised the issue below, because of the gravity of the constitutional concerns. Defendant’s guilty plea to a scheme running from May 1988 continuing until “on or about November 1991” was not an admission that his activities continued beyond the effective date of the amendment. U.S. v. Kopshever, 6 F.3d 1218 (7th Cir. 1993).
7th Circuit remands to determine how much loss from consolidated loan was due to fraudulent loan. (300) Defendant fraudulently obtained a $65,000 loan. The loan was later consolidated with other outstanding loans and no separate records were kept on the $65,000 note. The consolidated loan totaled $1,065,966, and defendant made payments of at least $297,000. Defendant argued that in determining the loss from the fraudulent loan, the percent paid on the consolidated loan should have been prorated against the $65,000, leaving only $46,930 outstanding. The 7th Circuit remanded for the district court to consider evidence on the timing and terms of the consolidated loan agreement, the bank’s usual accounting practices in reducing consolidated loans (how the bank would have applied defendant’s payments to the $65,000 note if it was not the result of fraud), and include in its calculations all payments made by defendant by the time of sentencing. U.S. v. Chevalier, 1 F.3d 581 (7th Cir. 1993).
7th Circuit applies antitrust guidelines, rather than fraud guidelines, to mail fraud counts. (300) Defendant was convicted of one count of criminal antitrust conspiracy for fixing the price of new steel drums and two counts of mail fraud for concealing and making false statements to cover the collusion. The 7th Circuit held that §2R1.1, the antitrust guideline, rather than §2F1.1, the fraud guideline, should have applied to the mail fraud counts. The nature of the conduct charged in the mail fraud counts dealt with price-fixing rather than with mail fraud. Therefore, application note 13 to §2F1.1 required that defendants be sentenced under §2R1.1, even though the Statutory Index lists §2F1.1 as the guideline ordinarily applicable. The court noted that its holding was limited to the facts of the case, and was not a bright-line ruling for all indictments charging price-fixing and mail fraud. U.S. v. Rubin, 999 F.2d 194 (7th Cir. 1993).
7th Circuit applies entire guidelines manual in effect at time of offense. (300) Under the version of 2F1.1 in effect at the time of sentencing, a fraud of defendant’s magnitude carried a higher offense level than under the version in effect at the time of the crime. However, the version in effect at the time of the crime specifically listed as a basis for upward departure the confluence of multiple victims and more than minimal planning, a basis not mentioned in later versions of the guidelines. The 7th Circuit upheld the district court’s use of the later guideline manual in its entirety, rejecting defendant’s argument that he should benefit from the more favorable aspects of each guideline manual. This result is consistent with the current “one book” rule in §1B1.11. U.S. v. Boula, 997 F.2d 263 (7th Cir. 1993).
7th Circuit permits use of later fraud guideline to guide upward departure. (300) Defendant could not be sentenced under the version of 2F1.1 in effect on the date of sentencing because it called for a higher offense level than the version in effect on the date of defendant’s offense. However, the district court departed upward from the offense level under the earlier version by three levels, equaling the offense level under the new version of 2F1.1. The 7th Circuit found the departure justified by the sentence that would have been imposed under the newer version, and that reliance on the new version did not violate the ex post facto clause. U.S. v. Boula, 997 F.2d 263 (7th Cir. 1993).
7th Circuit rules defendant did not have permission to transfer company’s funds. (300) Defendant embezzled money from his employer and invested it, intending to pay back the money with his profits. However, the two men he invested it with were con men. After his employer discovered the embezzlement, defendant persuaded the employer not to report him immediately in the hopes of receiving a return on the investment. He continued to make investments with company funds without his employer’s permission. The 7th Circuit upheld the inclusion of these latter funds in the amount of loss under section 2F1.1. The employer did sign a document purporting to authorize the previous transfers, after being told that all the money was coming in a couple of days. However, the fact that the employer was so desperate to get something out of the mess and was so naive to sign a statement agreeing to possible future and all past transfers did not make the earlier illegal transfers legal. U.S. v. Berna, 995 F.2d 711 (7th Cir. 1993).
7th Circuit bases loss in insurance fraud case on value of submitted, but unpaid, claims. (300) Defendant was convicted of filing false insurance forms with the U.S. Department of Agriculture. The 7th Circuit held it was proper to consider the entire value of the false claims defendant submitted, even though the insurance company never paid the claims. Under section 2F1.1, the sentence is based on the larger of intended or actual damages. However, the district court should have deducted a $74,000 premium from the $838,900 in false claims, since the insurance company would have deducted this premium from any amount paid. U.S. v. Simpson, 995 F.2d 109 (7th Cir. 1993).
7th Circuit considers full amount of fraudulently deposited funds as intended loss. (300) Over three visits, defendant deposited bogus checks totaling $405,000 into a bank account, and managed to withdraw and spend $36,000. The 7th Circuit upheld including in the loss calculation under section 2F1.1 the full $405,000 deposited into the account, rather than just the $36,000 defendant actually withdrew from the account. Under note 7 to section 2F1.1, if an intended loss can be determined, it should be used if it is larger than the actual loss. Defendant’s activities left no doubt that the intended loss was the full $405,000 he fraudulently deposited. Only his arrest, barely one month after he set his scam in motion, prevented defendant from spending the rest of the fraudulently deposited funds. Defendant also did not qualify for a three level reduction under section 2X1.1 for merely attempting to defraud the bank of the full $405,000. Defendant completed his fraud when he set up the fraudulent accounts. U.S. v. Strozier, 981 F.2d 281 (7th Cir. 1992).
7th Circuit requires enhancement where planning was more than “minimal” even if it was “typical.” (300) Defendant maintained two checking accounts. He purchased some stock, paying his brokerage house with a bad check drawn against one of his accounts. The next day he deposited into the first account a bad check drawn on his second account. Later, he deposited a check drawn on the first account into the second account. He continued this check kiting scheme for one month until he was caught. The 7th Circuit reversed the district court’s determination that the offense did not involve more than minimal planning under 2F1.1(b)(2)(A). The court was willing to defer to the district court’s determination that the offense did not involve more planning than is typical for the offense. However, the enhancement is also proper if the offender’s crimes involved “repeated acts over a period of time, unless it is clear that each instance was purely opportune.” Drafting 40 checks during a single month, few if any of which appeared to be purely opportune, fit this profile. U.S. v. Doherty, 969 F.2d 425 (7th Cir. 1992).
7th Circuit says that loss caused by theft of World Series tickets includes difference between the face value and market price of tickets. (300) Defendant arranged to purchase 30 strips of tickets to the post-season games of the Minnesota Twins. The tickets were to be stolen by the seller from the vault of the Twins. So that the Twins would not detect the theft and invalidate the tickets, the seller intended to replace the tickets with $12,000, the face value of the tickets. Defendant, however, was to pay the seller $30,000 for the tickets. Defendant argued that the loss to the Twins under section 2F1.1 caused by his offense was zero, since the $12,000 to be placed in their vault would have reimbursed them in full for the face value of the tickets. The 7th Circuit rejected this argument, finding that the difference between the face value and market price of the tickets was an element of value. The team had business reasons to set the face value of the tickets at a price below market and would derive value (out of which defendant attempted to defraud it) by selling the tickets to its loyal fans at that lower price. U.S. v. Mount, 966 F.2d 262 (7th Cir. 1992).
7th Circuit says 2S1.3(a) applies to defendant who lied to customs officer about currency. (300) While boarding a flight out of the United States, defendant misrepresented to a customs officer that he was only carrying $6-7,000 in cash, when in fact he was carrying $24,000. Defendant was convicted of making false statements, in violation of 18 U.S.C. section 1001. The 7th Circuit affirmed that defendant was properly sentenced under the currency reporting guideline section 2S1.3, rather than 2F1.1, the guideline applicable to false statements. Although section 2F1.1 normally applies to false statements under section 2F1.1, application note 13 states that if the indictment establishes an offense more aptly covered by another guideline, apply that guideline. The government tried defendant on the theory that he lied to the customs officer to evade the currency reporting requirements. U.S. v. Obiuwevbi, 962 F.2d 1236 (7th Cir. 1992).
7th Circuit affirms loss amounts caused by negligence of intervening actors. (300) Defendants fraudulently obtained HUD-insured mortgage loans totaling $662,920 which they used to purchase several buildings. Defendants sold the buildings to a third party, who failed to make payments and HUD purchased the loans at a loss of $658,268. The 7th Circuit affirmed an enhancement under section 2F1.1(b)(1) based on a loss of between $500,001 and $1,000,000. Defendants argued that any losses suffered by HUD were unforeseeable and directly caused by intervening actors — the new owner and HUD, which sold the properties at a fraction of their previous value. The 7th Circuit rejected the argument, holding that a victim’s failure to mitigate and the negligence of intervening actors does not prevent attributing to a defendant the full amount of the loss. However, as discussed in former application note 11, where the total dollar loss that results from the offense overstates its seriousness, a downward departure may be justified. The district court did just that, departing downward by two levels based on its finding that some losses should not be attributed to defendants. U.S. v. Miller, 962 F.2d 739 (7th Cir. 1992).
7th Circuit affirms loss calculation based on total attempted fraud. (300) Defendant submitted a false financial statement as part of his loan application to purchase a $26,319.29 car. When defendant brought the car back to the dealer for service, at the bank’s request the dealer refused to release the car to defendant. Defendant subsequently applied for a $250,000 loan at another bank, again submitting a false financial statement. The 7th Circuit affirmed the district court’s addition of nine points to defendant’s offense level because the total value of the attempted loss was $276,319.29. The court rejected defendant’s argument that there was no possibility of his obtaining the $250,000 loan. Section 2X1.1(b)(1) provides that a decrease for an unsuccessful attempt does not apply when a defendant completes all of the acts he believed necessary to successfully complete the substantive offense. U.S. v. De Felippis, 950 F.2d 444 (7th Cir. 1991).
7th Circuit affirms using insider trading enhancement where defendant used stolen information to trade stocks. (300) Defendant unlawfully entered the finance department of a bank and obtained confidential information which he used to trade on the stock market. Defendant received a base offense level of six under § 2F1.1(6), the guideline for fraud and deceit. The district court then increased the base level by seven points under § 2F1.1 to reflect a total gain of between $201,000 and $500,000, based on § 2F1.2, the insider trading guideline, which directs a court to increase a defendant’s offense level based upon the table in § 2F1.1. The 7th Circuit affirmed. Even though defendant was convicted of mail fraud rather than insider trading, the commentary to § 2F1.2 states that other offenses that involve the misuse of inside information for personal gain may also be covered by the guideline. It was also appropriate to use defendant’s gain as a measure of the loss he caused the bank and its customers. The whole point of § 2F1.2 is to allow the court to place a monetary value on losses that are hard to identify. It was also proper to use the gains of others to whom defendant recommended trades. U.S. v. Cherif, 943 F.2d 692 (7th Cir. 1991).
7th Circuit affirms that “loss” included money defendant received through administrative error. (300) Defendant obtained benefits from the Social Security Administration and HUD by failing to disclose his true employment. After being confronted by a government investigator, defendant advised them that he was employed full time. Due to an administrative error defendant continued to receive the Social Security benefits through direct deposit. The 7th Circuit held that in calculating the loss caused by defendant’s fraud under guideline § 2F1.1(b)(b)(1), the district court properly included approximately $2,000 he received after he notified the Social Security Administration of his employment. Even though defendant knew that the money was being deposited into his account due to an administrative error, he did nothing to alert the agency and continued to convert the funds to his own use for five months. Defendant could not claim that thought he was entitled to the funds, given the information he received from the government investigator. U.S. v. Hintzman, 937 F.2d 1196 (7th Cir. 1991).
7th Circuit vacates 10-level upward departure based upon large number of fraud victims. (300) Defendants were convicted of conducting a massive mail fraud, resulting in an offense level of 21 under the guidelines. The 7th Circuit departed upward to level 31 on the ground that (a) the offense involved both more than minimal planning and more than one victim, (b) there were a large number of victims, and (c) the $7 million loss exceeded the $5 million floor in the highest loss category for fraud offenses. The 7th Circuit upheld the first ground for departure under application note 2F1.1, which specifies that departure may be warranted if two or more of the § 2F1.1(b)(2) provisions are satisfied. However, it rejected the latter two grounds. The number of victims is accounted for in the fraud guideline provisions for total dollar loss, rather than the number of victims. Moreover, although departure may be appropriate if the actual loss “substantially exceeds” the $5 million floor, the $7 million loss did not qualify, given the $3 million difference between the last two loss levels in the table. Therefore, although one of the grounds for departure was warranted, the 10-level upward departure was an inappropriate degree of departure. U.S. v. Boula, 932 F.2d 651 (7th Cir. 1991).
7th Circuit rules government failed to prove any “loss” caused by contractor’s fraud. (300) Defendant and his wife obtained two government contracts by fraud. In the husband’s case, the court calculated the loss as the difference between defendants’ bids and the increased prices at which the two contracts were ultimately awarded to other contractors. In the wife’s case, the court simply added together the defendants’ two bids. The 7th Circuit found that not only was there was no rational reason to treat the two defendants differently, but that both calculations of “loss” were incorrect. The amount bid is not a reasonable estimate of loss where the contract is terminated before any money is paid. Moreover, the defendants did not intend to pocket the entire proceeds of the contract without performing services. The government may have incurred expenses in terminating the contract or in obtaining a substitute contract, but the government failed to present any evidence of such expenses. Thus, it was improper to increase either defendants’ offense level based upon the amount of loss caused. U.S. v. Schneider, 930 F.2d 555 (7th Cir. 1991).
7th Circuit upholds calculation of loss where defendant failed to challenge calculation at sentencing hearing. (300) Defendant made false claims of travel and moving expenses to the Army. On appeal, he challenged the district court’s calculation of loss under guideline § 2F1.1, contending that the amount of loss was $9,635.38, rather than $10,780.35. The 7th Circuit upheld the district court’s calculation, finding that the calculation of loss was a factual determination subject to clearly erroneous review. Defendant had the opportunity at the sentencing hearing to offer an alternative method of calculating the loss, but appeared to agree with the judge’s calculation. He cannot, on appeal, offer new facts to show that the district court’s calculation was incorrect. U.S. v. Haddon, 927 F.2d 942 (7th Cir. 1991).
7th Circuit rules that defendant cannot challenge loss amount on appeal unless issue was raised below. (300) Defendant’s counsel conceded the accuracy of the amount of dollar loss involved in a credit card fraud. On appeal, defendant claimed the figure was unsubstantiated. The 7th Circuit refused to consider the issue, finding a demand that the government detail its calculation could not be made on appeal unless such a demand was first made in the District Court. U.S. v. Smith, 897 F.2d 909 (7th Cir. 1990).
7th Circuit finds false claim of gun ownership involved more than minimal planning. (300) Defendant was the business partner of a man charged with possession of a firearm by a felon. After the partner’s arrest, defendant approached the man who sold the gun to the partner, advised the seller that the partner had actually purchased the gun on defendant’s behalf, and obtained a receipt. Defendant then employed an attorney who wrote to the police and requested that the weapon be returned to defendant since it belonged to defendant, not the partner. Defendant was later approached by government agents and advised them that he was the owner of the gun. Defendant was convicted of making a false statement to a federal agent, and received a sentence enhancement under guideline § 2F1.1(b)(2)(A) for more than minimal planning. The 7th Circuit upheld the enhancement, finding that defendant’s establishment of a paper trail removed his conduct from the ambit of “simple” perjury. U.S. v. Lennick, 917 F.2d 974 (7th Cir. 1990).
8th Circuit approves upward variance for defendant who previously received lenient state sentences. (300) Defendant pled guilty to fraudulent use of an unauthorized access device. Although the Guidelines recommended a sentence of 15-21 months, the district court sentenced defendant to 48 months. The court noted that courts had been lenient to defendant in the past, yet she continued to commit crimes of fraud and theft. The court believed that a guideline range sentence would not stop the criminal activity. The Eighth Circuit, affirmed the sentence as reasonable, noting that Gall v. U.S., 552 U.S. __ (2007) rejected the argument that “extraordinary” circumstances were required to justify a sentence outside the Guidelines range. In addition, the Court rejected “the use of a rigid mathematical formula that uses the percentage of a departure as the standard for determining the strength of the justifications required for a specific sentence.” The district court properly considered the factors in § 3553(a) when it imposed defendant’s sentence. U.S. v. Braggs, 511 F.3d 808 (8th Cir. 2008).
8th Circuit holds that five-year probationary sentence for fraud was reasonable given defendant’s need for dialysis. (300) Defendant pled guilty to mail fraud charges. The court varied from the 18-24 month advisory guideline range to impose a sentence of five years probation, citing defendant’s chronic health problems (he required three-hour dialysis treatments three times a week) and the fact that defendant was the sole caretaker for an adopted adult son who suffered from fetal alcohol syndrome. The Eighth Circuit ruled that the probationary sentence was reasonable. Cases cited by the government rejecting probationary sentences were distinguishable, and did not stand for a blanket rule that all such variances are unreasonable. A district court can impose a non-prison sentence when a defendant has serious medical needs. Section 3553(a)(2)(D) states that the effective provision of necessary medical care is an appropriate factor for the district court’s consideration in sentencing. The district court had the discretion to decide that it would be more efficient and effective for defendant to receipt treatment from his current health care provider. Defendant’s family responsibilities to his adult son, while not sufficient by themselves to warrant the variance, was properly one of multiple grounds for the variance, and the court did not abuse its discretion in giving it weight under § 3553(a)(1). U.S. v. Wadena, 470 F.3d 735 (8th Cir. 2006).
8th Circuit upholds increase for representing to victims that defendant was acting on behalf of charitable business. (300) Defendant was convicted of a variety of fraud counts. The government presented evidence that, in seeking “bridge loans” from two investors, defendant represented her business as a non-profit, humanitarian project providing legal services to indigent criminal defendants. In addition, she represented to them that she was in the process of gaining primary funding for her project from another source. She promised them high returns on their loans when her primary investment source paid out. Also, she submitted a letter to the victims from a third party stating that defendant would received two million dollars a week for 40 weeks and that part of this money would be used for humanitarian projects. Based on these representations, the Eighth Circuit upheld a two-point enhancement under § 2F1.1(b)(40(A) of the 2000 guidelines for a misrepresentation that the defendant was acting on behalf of a charitable, educational, religious or political organization. U.S. v. Edelmann, 458 F.3d 791 (8th Cir. 2006).
8th Circuit finds multiple victims of single fraud scheme rather than separate fraud schemes. (300) Defendant was convicted of a variety of fraud counts, and received an enhancement under § 2F1.1(b)(2)(B) of the 2000 guidelines for an offense involving a scheme to defraud more than one victim. She argued that there was not one scheme to defraud multiple victims but three separate schemes, each with one victim. The Eighth Circuit found no error. The government presented evidence that defendant used her business as a front to swindle three different parties out of money within a very short time frame. First, she used similar business records with each victim, such as false profit and loss statements, tax records, bank statements and letters, and documents relating to her anticipated earnings from an overseas program. The frauds were committed within a three-month period, and two of the frauds took place within the same time frame and for the same purpose. The scheme to defraud two of the victims “were inextricably intertwined.” U.S. v. Edelmann, 458 F.3d 791 (8th Cir. 2006).
8th Circuit approves 56 percent upward departure for “one man crime wave.” (300) Defendant committed bank fraud in South Dakota while on supervised release for several Massachusetts federal convictions. The district court departed upward under § 4A1.3 from a guideline range of 92-115 months to a sentence of 180 months. The Eighth Circuit ruled that the extent of the departure was reasonable. Although the 56 percent departure was “significant,” the district court did not exceed the bounds of its discretion. As the court noted defendant’s “behavior suggest[ed] an addiction to deceiving people.” Describing defendant as a “one man crime wave,” and pointing to defendant’s “heinous” conduct of stealing his deceased brother’s life insurance proceeds from his mother and bring his mother into legal jeopardy by forging her name on checks and withdrawals, the court stated it had not seen “a more dedicated history of criminal activity” by someone only 38 years old. U.S. v. Hacker, 450 F.3d 808 (8th Cir. 2006).
8th Circuit says probation for bank fraud was unreasonable sentence. (300) Defendant’s guideline range for his bank fraud offense was 24-30 months, but the district court sentenced defendant to time served (he had served no time) and five years’ of supervised release, which included a 12-month term of house arrest. The Eighth Circuit found the record insufficient to support such a “substantial deviation from the results contemplated by Congress” and thus the sentence was unreasonable. The court cited defendant’s post-offense rehabilitation and considered other facts it believed took the case out of heartland of bank fraud cases, including the social concerns of the rural agricultural communities struggling to make ends meet, prompting men like defendant to resort to fraud, the fact that placing defendant in jail would jeopardize his new position of running a cattle operation for the community, and that the bank was partially responsible because it should have known that defendant’s numbers were not right and thus should not have extended the loans. However, defendant’s alleged post-offense rehabilitation was not extraordinary. The socio-economic status of the rural midlands and any insinuation that the bank somehow shared the blame with defendant was irrelevant. Finally, limiting defendant’s jail time in order to help him retain his worth in the community, while relevant, did not support the extent of the departure here. U.S. v. Givens, 443 F.3d 642 (8th Cir. 2006).
8th Circuit agrees that defendant used “sophisticated means” to conceal mail fraud. (300) Defendant induced his fraud victims to invest more than one million dollars in his company. He diverted nearly 2/3 of the investments to his personal use, investing the remainder in an undisclosed and highly risky company, World Network Holdings, and used the commingled funds of later investors to pay interest to earlier investors. After numerous complicated transactions, World Network Holdings morphed into another company, Mali-Suisse Mining, which issued bonds to replace investors’ stakes in World Network Holdings. Defendant challenged a § 2F1.1(b)(5)(C) (1998) sophisticated means enhancement, arguing that this was a mere Ponzi scheme. The Eighth Circuit affirmed the enhancement, since defendant used sophisticated means to conceal his elaborate mail fraud. When defendant became convinced that his investments with World Network Holdings might be worthless, he advised his victims that their investments would be replaced with Mali-Suisse bonds if they signed a release absolving defendant of all liability. Victims were told various false information about Mali-Suisse. These tactics helped conceal defendant’s fraud because, before contacting authorities, many victims asked attorneys and other advisors for help in determining the value of the worthless Mali-Suisse bonds. U.S. v. Anderson, 349 F.3d 568 (8th Cir. 2003).
8th Circuit holds that court correctly refused to group defendant’s mail fraud and tax fraud counts. (300) Defendant pled guilty to mail fraud, structuring cash transactions to evade reporting requirements, and filing false tax returns. He argued that the tax fraud counts should have been grouped together with the mail fraud offenses, but the Eighth Circuit upheld the separate grouping. Subsections (a), (b) and (c) of § 3D1.2 were not applicable because (1) defendant’s mail fraud and tax fraud had different victims (his creditors and niece and nephew for one group, and the U.S. Treasury for the other), and (2) defendant’s offense level for his tax fraud counts was not increased based upon his conduct that was punished as mail fraud. Section 3D1.2(d) requires the grouping of counts for which “the offense level is determined largely on the basis of the total amount of harm or loss.” The Second Circuit has held that grouping of tax fraud and mail fraud is proper under § 3D1.2(d), see U.S. v. Gordon, 291 F.3d 181 (2d Cir. 2002), but other circuits disagree. While the offense levels for defendant’s mail fraud and tax fraud offenses are both largely based on the amount of harm or loss, to be grouped under § 3D1.2(d), the offenses must also be “of the same general type.” Note 6 to § 3D1.2. When the loss tables for two offenses punish the same amount of loss differently, the offenses are not “of the same general type” for purposes of § 3D1.2(d). See U.S. v. Hildebrand, 152 F.3d 756 (8th Cir. 1998). U.S. v. Shevi, 345 F.3d 675 (8th Cir. 2003).
8th Circuit holds that fraud guideline was most analogous guideline for violation of consent judgment. (300) Defendant fraudulently sold business opportunities to customers, knowing that they would not receive some of all of the things he had promised. When customers began complaining, defendant would restart his scheme under a new company with a different name. In response to a 1983 lawsuit brought by the Federal Trade Commission, defendant entered into a consent agreement with the United States. In spite of a consent judgment entered by the district court, defendant continued to operate and close eight additional companies. He pled guilty to contempt of court, in violation of 18 U.S.C. § 401, for violating the 1983 court order. Section 2J1.1, the guideline applicable to § 401 violations, directs a court to apply § 2X5.1. Section 2X5.1 applies when there is no expressly applicable guideline, and directs the court to apply the most analogous guideline. The Eighth Circuit upheld the district court’s decision to sentence defendant under the fraud guideline, § 2F1.1, rather than the obstruction of justice guideline, § 2J1.2. The essence of defendant’s conduct was fraud. U.S. v. Ferrara, 334 F.3d 774 (8th Cir. 2003).
8th Circuit holds that larceny of store 12 miles away involved more than minimal planning. (300) Defendant stole American Indian merchandise from a trading post located in a town 12 miles from his residence. Because he had no access to a car, he walked the 12 miles to the town carrying a large backpack containing a hammer. After committing the crime, he walked the 12 miles back and hid the stolen merchandise in an abandoned home near his residence. The Eighth Circuit found numerous facts supporting a more than minimal planning enhancement. These included defendant’s forethought in committing the larceny; his 12-mile walk for that purpose; his plan to use a large backpack and hammer to commit the larceny; his circumvention of the bars on the first floor doors and windows of the store by climbing a tree and then clawing an opening in the siding; and his act of hiding the stolen merchandise. Defendant took discrete steps in furtherance of his plan before he actually stole the merchandise and took another affirmative step after committing the larceny to conceal the offense. U.S. v. Young, 272 F.3d 1052 (8th Cir. 2001).
8th Circuit affirms upward departure where guideline loss did not adequately reflect loss caused by fraud. (300) Defendant convinced victims that he could solve their tax problems and negotiate Offers of Compromise with the IRS. Defendant did not file or obtain any Offers of Compromise, but forged documents indicating that he had. The victims paid directly to defendant the amounts allegedly owed to the IRS, in addition to defendant’s fees. Defendant did not forward any of the funds to the IRS. Defendant also prepared taxes for individuals. In some cases he inflated the amount owed and then failed to submit the returns to the IRS. The Eighth Circuit affirmed an upward departure from a range of 18-24 months to a sentence of 48 months. Note 11 to § 2F1.1 authorizes a departure where the guideline loss does not fully capture the harmfulness of defendant’s conduct. Here, the victims suffered complicated tax issues as a result of defendant’s conduct. The guideline loss did not take into account the substantial financial steps taken by the victims as a result of defendant’ conduct, that defendant’s past conviction for impersonating a federal employee was not included in his criminal history, and that defendant’s failure to handle one victim’s child support payments exposed the victim to criminal liability. U.S. v. Kingston, 249 F.3d 740 (8th Cir. 2001).
8th Circuit agrees that two false credit applications and 8 jewelry purchases was more than minimal planning. (300) Defendant submitted two fraudulent credit applications under two different names with a jewelry store. Through the fraudulent accounts, defendant made eight separate purchases of jewelry with a total value of $109,180. He made only a single $100 payment on the accounts and the jewelry was never recovered. The Eighth Circuit affirmed a more than minimal planning increase for making false financial statements, opening credit accounts under two different names, and making eight separate jewelry purchases. The fact that the jewelry store kept sending jewelry ordered by defendant or an agent on the fraudulent accounts and that defendant kept accepting the jewelry without making payment did not create a “purely opportune” circumstances. Instead, it indicated criminal actions by design. U.S. v. Lim, 235 F.3d 382 (8th Cir. 2000).
8th Circuit upholds separate grouping of fraud and “reinvestment” money laundering. (300) In U.S. v. O’Kane, 155 F.3d 969 (8th Cir. 1998), the Eighth Circuit held that fraud and money laundering counts cannot be grouped together under § 3D1.2(b) because those crimes have different victims. Defendant argued that O’Kane should be limited to “concealment” money laundering, noting that other circuits have held that the victims of “reinvestment” money laundering are the same as the victims of the underlying fraud. See, e.g., U.S. v. Leonard, 61 F.3d 1181 (5th Cir. 1995); U.S. v. Cusumano, 943 F.2d 305 (3d Cir. 1991). Rejecting these opinions, the Eighth Circuit held that the O’Kane analysis applies to all types of money laundering. Thus the district court properly refused to group defendants’ reinvestment money laundering counts with the underlying fraud counts. While reinvestment money laundering is more closely related to the underlying fraud than other kinds of money laundering, the offenses still entail different proscribed conduct, are punishable on different scales, and harm distinct and different victims. Reinvestment does not make the victim of money laundering the same as the victim of the fraud. Whether the criminal uses the fraud proceeds to buy an item for personal use or to pay promotion costs to further the fraud, money laundering invades society’s interest in deterring and detecting crime. In both cases, the funds have been given the appearance of legitimacy through laundering. U.S. v. Green, 225 F.3d 955 (8th Cir. 2000).
8th Circuit approves departure based on emotional trauma suffered by victims of identity theft. (300) Defendant engaged in an elaborate financial fraud and identity theft scheme that caused her victims to lose more than $70,000. Note 11(c) specifically permits a departure if “the offense caused reasonably foreseeable, physical or psychological harm or severe emotional trauma.” Two of defendant’s victims testified at sentencing regarding the degree of disruption and turmoil in their lives caused by defendant’s actions. One victim testified about spending hours on the phone and going in person trying to prove her real identity, being treated like a criminal, being rejected credit, having checks refused, and almost being arrested after a minor traffic accident because of warrants listed under her social security number. She testified about suffering anger, fear, anxiety and humiliation from these events that would leave her scarred forever. The other victim’s testimony was similar. The Eighth Circuit affirmed an upward departure under Note 11 based on the victims’ severe emotional distress and trauma. Although defendant might not have been able to understand the precise effects of the harm caused by her actions, she could foresee the level of personal upheaval likely to result from an identity theft scheme. U.S. v. Sample, 213 F.3d 1029 (8th Cir. 2000).
8th Circuit holds that court departed under fraud notes rather than § 5K2.3. (300) Defendant engaged in an elaborate financial fraud and identity theft scheme that caused her victims to lose more than $70,000. Her PSR stated that an upward departure might be warranted based upon the factors listed in USSG § 2F1.1, Notes 11 and 12. Notes 11 and 12 authorize a court to depart upward if the court finds that the loss does not reflect the seriousness of the defendant’s conduct. Note 11(c) specifically permits a departure if “the offense caused reasonably foreseeable, physical or psychological harm or severe emotional trauma.” The district court departed based on the degree of psychological harm that defendant inflicted on her victims. Defendant argued that the district court did not give her proper notice that it was considering an upward departure under § 5K2.3, which authorizes a departure if a victim suffered psychological injury much more serious than that normally resulting from the offense. The Eighth Circuit concluded that the district court based its departure on the factors outlined in Notes 11 and 12 to § 2F1.1. The court identified emotional harm as the reason for the departure and stated that such harm was reasonably foreseeable. Such a departure basis is consistent with the departure factors outlined in Note 11. Thus, defendant received proper notice of the departure. U.S. v. Sample, 213 F.3d 1029 (8th Cir. 2000).
8th Circuit departs for number of victims and schemes, abuse of trust, damage to law firm and legal profession. (300) Defendant, a shareholder in a law firm, embezzled about $2.4 million from clients, referring attorneys, and his own law firm. The Eighth Circuit affirmed an upward departure based on: (1) the large number of vulnerable victims; (2) the extraordinary manner defendant manipulated the victims to gain their trust; (3) the number of methods he used to defraud his victims; (4) the damage to his law firm’s goodwill and standing in the legal community; and (5) the adverse impact on the legal profession and the system of justice. A defendant qualifies for a § 3A1.1(b) increase if he has only one vulnerable victim; defendant defrauded at least 33 clients who met the criteria of § 3A1.1(b). Although defendant received a § 3B1.3 abuse of trust enhancement, the means defendant used to gain their trust exceeded that contemplated by the guidelines. He mowed his clients’ lawns, took them to movies, sent them flowers and wedding presents, and used his religion to create the impression that he was a man of integrity. Although defendant received a more than minimal planning increase under § 2F1.1(b)(2)(A), his level of planning was exceptional when compared to that contemplated by the guidelines. His law firm’s goodwill with the public and standing in the legal community were irreparably harmed. Defendant’s conduct also damaged the legal profession and the public’s confidence in the justice system. U.S. v. Moskal, 211 F.3d 1070 (8th Cir. 2000).
8th Circuit approves increase for more than one victim. (300) Defendant, a licensed insurance agent, misappropriated several insurance premium payments she received from elderly clients. The district court imposed a two-level increase under § 2F1.1(b)(2)(A) and (b) because her fraud offense involved more than minimal planning, or a scheme to defraud more than one victim. Although defendant argued that her offense did not involve more than minimal planning, she did not deny that she defrauded more than one victim. The Eighth Circuit held that the district court’s finding of more than one victim was sufficient to support the § 2F1.1(b)(2) increase. U.S. v. Baker, 200 F.3d 558 (8th Cir. 2000).
8th Circuit approves departure for unusual amount of loss and multiple victims. (300) Defendants were convicted of RICO charges stemming from the fraudulent operation of several insurance companies. The district court departed for each defendant under § 5K2.0 based upon the unusual amount of fraud loss and the large number of fraud victims. Note 10(c) and (f) encourage upward departures if the loss “does not fully capture the harmfulness and seriousness of the conduct,” such as when the offense involves “the knowing endangerment of the solvency or one or more victims,” or causes “reasonably foreseeable, physical or psychological harm.” The court heard testimony from health insurance claimants whose medical bills were never paid in full and heard evidence that the insurance companies controlled by defendants became insolvent. The district court found that defendants’ actions caused $5 million in debts to one company, $13 million in debts owed by their companies, and at least $1 million in unpaid insurance claims with resulting “emotional harm to sick and debilitated individuals.” On this record, the Eighth Circuit held that the upward departure was not an abuse of discretion. U.S. v. Coon, 187 F.3d 888 (8th Cir. 1999).
8th Circuit says money received by defendant’s corporation could be attributed to defendant. (300) Section 2F1.1(b)(6)(B) provides for an enhancement if the defendant’s fraud “affected a financial institution and the defendant derived more than $1,000,000 in gross receipts from the offense.” Defendant argued that because the money in the offense went to a corporation, and not him personally, the enhancement was inapplicable. The Eighth Circuit held that the enhancement was proper because defendant indirectly benefited from the illegally derived funds. Note 16 to § 2F1.1 says that “[g]ross receipts from the offense” includes all property “obtained directly or indirectly” from the offense. Defendant was the sole owner and president of the corporation. Defendant arranged for the funds to be deposited into an account he controlled, and he directed how the money was used. Thus, he indirectly benefited from the illegally derived funds. U.S. v. Stolee, 172 F.3d 630 (8th Cir. 1999).
8th Circuit holds that concealing assets from bankruptcy court violates judicial process. (300) Defendant originally was awarded more than $260,000 in life insurance proceeds paid on the death of her ex-husband. After the judgment was reversed on appeal, the district court ordered defendant to repay the proceeds to her ex-husband’s estate. Defendant did not comply and engaged in a series of transactions to conceal the remaining insurance proceeds from her stepson, a beneficiary of the estate. She filed four bankruptcy petitions and failed to disclose cash and other assets in her possession. She pled guilty to one count of bankruptcy fraud. She challenged a § 2F1.1(b)(3)(B) enhancement for violating a judicial or administrative order, claiming that the court order to repay the proceeds were not relevant to the bankruptcy fraud. The Eighth Circuit did not reach this question since as a matter of law, the offense of concealing assets on a bankruptcy petition warrants the § 2F1.1(b)(3)(B) enhancement. U.S. v. Miller, 161 F.3d 977 (6th Cir. 1998).
8th Circuit says money laundering and fraud counts should have been grouped separately. (300) Defendant, a baseball card collector, worked as an assistant manager of a grocery store. He ordered large volumes of cards on the store account, intercepted the shipments, took them home, sold some, and kept the remainder. He intercepted payments from dealers, deposited them into various bank accounts under his control, and used a portion of his ill-gotten gains to purchase a computer and a pickup truck. He pled guilty to fraud and money laundering. The Eighth Circuit held that the district court erred by grouping the fraud count together with the money laundering count. The counts could not be grouped under § 3D1.2(b), which requires that the same person or entity be the victim of both crimes. Defendant’s employer was the victim of his fraud. However, the victim of the money laundering was society–money laundering harms society’s interest in discovering and deterring criminal conduct. The court rejected defendant’s claim that the counts should be grouped because his act of money laundering involved the purchase of a truck that he used to facilitate his fraud. Defendant began his fraud and money laundering activities over a year before he purchased the pickup truck. Also, he pled guilty to a violation of 18 U.S.C. § 1957, a less serious form of money laundering that does not require the laundering activity to promote the underlying crime. U.S. v. O’Kane, 155 F.3d 969 (8th Cir. 1998).
8th Circuit finds bank fraud and embezzlement involved more than minimal planning. (300) Defendant, the largest stockholder and president of an Arkansas bank, was convicted of bank fraud, embezzlement and related counts. In one instance, he created false documents to move $14,000 from the bank’s data processing account to an account of a business he created with five other bank officers. Later, he and two other bank officers each withdrew $4,000 from the account as a “personal bonus.” On another occasion, he took a $30,000 loan from the bank, and in a complicated set of transfers, eventually used bank funds to repay the bank $30,027.86. The Eighth Circuit affirmed a more than minimal planning enhancement, noting that the examples of more than minimal planning listed in Application Note 1(f) to § 1B1.1 were very close to what occurred here. The numerous false documents created in false transactions were “significant affirmative steps” to hide the offense. Repetition is not required to show more than minimal planning. U.S. v. Patterson, 148 F.3d 1013 (8th Cir. 1998).
8th Circuit applies risk of serious injury enhancement for falsifying truck driver logs. (300) Defendant was the president and sole shareholder of an interstate trucking company whose employees systematically falsified truck driver logs to conceal non-compliance with hours-of-service regulations. The Eighth Circuit affirmed a § 2F1.1(b)(4)(A) enhancement for a fraud offense that involved the “conscious or reckless risk of serious bodily injury.” The enhancement is not limited to convictions for procurement fraud under 18 U.S.C. § 1031¾it applies to all fraud offenses. A nationwide study found accident rates increase as drivers go beyond eight hours of continuous driving. However, this did not, by itself, support the enhancement. The government must also prove that each defendant was aware of and consciously or recklessly disregarded that risk. To prove criminal recklessness, the government must show particularized proof of a defendant’s knowledge of the safety risk involved in his conduct. Here, the government did not establish such recklessness because it did explain defendant’s role in the falsification of records and did not refute the company’s excellent safety record during the applicable period. However, the court questioned defendant at length before ruling on this issue. Defendant, an experienced truck driver, admitted his company had been found guilty of similar violations in the past, admitted knowing the practice had continued, admitted knowing it was wrong, and failed to end the practice. U.S. v. McCord, Inc., 143 F.3d 1095 (8th Cir. 1998).
8th Circuit affirms increase for falsely claiming to act on behalf of charity. (300) Defendants were principals in a telemarketing firm that induced victims to spend $400-$800 on anti-drug materials that cost the firm $40 and to donate them to a local church or school. The victims were also promised various prizes if they purchased the anti-drug materials. The Eighth Circuit affirmed a § 2F1.1(b)(3)(A) enhancement for misrepresenting that they were acting on behalf of a charity. The telemarketing script indicated that the anti-drug materials bought by victims of the scheme were going to schools and churches. The script also used the term “donation” to describe the transfer of funds from the victims to defendants’ organization. A vulnerable victim enhancement was also proper. Defendants targeted the elderly and those who were known to be susceptible to the sort of operation that defendants ran. The firm purchased so-called “response leads” that listed customers who would “buy from anyone and everyone that has sales ability.” There also was evidence that one defendant described these customers as “dupes.” U.S. v. Whatley, 133 F.3d 601 (8th Cir. 1998).
8th Circuit says more than minimal planning focuses on offense rather than defendant’s role. (300) Defendants were convicted of making a materially false statement to a bank. In refusing to apply a more than minimal planning enhancement, the district court noted that if there was more than minimal planning, it was on the part of another man rather than these three defendants. The Eighth Circuit held that the district court should have focused on the nature of the offense rather than the nature of defendant’s role in that offense. The court clearly erred in not assessing the more than minimal planning enhancement. The conspiracy spanned more than 3 years, involved more than 90 sales of contracts, and featured personal participation by each defendant in forging guarantees with their wives’ names. U.S. v. Wells, 127 F.3d 739 (8th Cir. 1997).
8th Circuit approves departure for knowingly endangering solvency of defrauded victims. (300) Defendant, a licensed insurance salesman and securities broker, sold over $2.2 million worth of counterfeit certificates of deposit to his customers. He also diverted substantial sums of money from his customers, including money intended for insurance premiums and investments in mutual funds. The Eighth Circuit approved an upward departure under note 10(f) for knowingly endangering the solvency of one or more victims. In many instances, defendant defrauded victims whose investments in defendant’s counterfeit CDs seriously endangered their solvency. Some of these people were at or near retirement age, relying on small, fixed incomes in conjunction with their investments to maintain solvency. Others were dealing with serious medical conditions and were depending on their investments to pay medical bills. Still others were depending on their investments to pay their college education. Defendant knew some of his victims quite well, since they were his friends and relatives. The district court could reasonably infer defendant knew his criminal activity endangered the solvency of at least one victim. U.S. v. Hogan, 121 F.3d 370 (8th Cir. 1997).
8th Circuit holds that banker’s fraud involved more than minimal planning. (300) Defendant, a banker, helped two brothers commit fraud by making it appear that his bank had lent the brothers a large sum of money. The Eighth Circuit agreed that the fraud involved more than minimal planning. Defendant approved the bank “loan” to a shell corporation, he put a hold on the shell’s and the subsidiary’s bank account, and he represented that the subsidiary had obtained financing from the bank for the purpose of purchasing equipment, and that the equipment had been purchased. These acts were thoughtful and complex, and extended over a period of several months. U.S. v. Gjerde, 110 F.3d 595 (8th Cir. 1997).
8th Circuit approves upward departure for criminal history and anguish to elderly victim. (300) Defendant and his drug addict accomplices opened bank accounts in different names, deposited bogus checks and withdrew cash before the checks bounced. The Eighth Circuit approved an upward departure based on defendant’s criminal history and the anguish he caused an elderly victim of the fraud. Defendant’s extensive criminal history put him outside the heartland of offenders in category IV. Defendant was 52 years old. He began committing serious crimes at age 16. Many of these offenses were excluded from his criminal history due to their age. He had been incarcerated one-half of his adult life and resumed criminal activity promptly upon release from prison. The four level departure under § 5K2.0 was based on the fictitious account defendant opened in the name of an elderly waitress. This fraud only resulted in a small loss to the bank, but caused a warrant to be issued in the woman’s name, and police questioned her at home before concluding she was innocent. Note 11 to § 2F1.1 states that departure may be warranted where the actual loss does not adequately reflect the seriousness of the conduct. U.S. v. Washington, 109 F.3d 459 (8th Cir. 1997).
8th Circuit agrees that defendant continued his fraudulent conduct while on release. (300) Defendant sold franchises by misrepresenting what the buyers would receive for their money and by exaggerating the amount of money the buyers would be able to make through operating the franchises. After defendant was indicted and while he was out on bond, he sold more franchises under a different name. The court considered the post-indictment business dealings as relevant conduct, thus increasing defendant’s offense level, taking away his acceptance of responsibility reduction, and assessing more points for obstruction of justice. Defendant argued that while on bond he operated his business lawfully and was no longer making misrepresentations to potential clients. The Eighth Circuit held that the evidence supported the district court’s conclusion that defendant continued his fraudulent conduct while on release. The evidence was conflicting on whether the software he sold clients actually worked as promised. However, there was no clear error in the court’s conclusion that defendant continued his past pattern of selling franchise packages that the franchisees were not able to use as promised. U.S. v. Choate, 101 F.3d 562 (8th Cir. 1996).
8th Circuit finds more than minimal planning for concealing first fraud to induce later investment. (300) Defendant brokers induced an investor to invest $50,000 toward the purchase of woolen mill equipment that a Mexican buyer had supposedly committed to repurchase, and another $28,000 to purchase and resell commercial sewing machines. The Eighth Circuit agreed that the offense involved more than minimal planning, given the efforts to conceal the first offense from the victim in order to be able to induce him to invest in the later scheme. U.S. v. Schwalb, 83 F.3d 1039 (8th Cir. 1996).
8th Circuit approves multiple enhancements. (300) Defendant started a business that purported to provide services to persons seeking commercial financing. She used false documentation and oral misrepresentations to persuade five individuals to wire her a total of $320,000 for investment purposes. The investors never saw their money again, although they sometimes received communications from an associate of defendant’s regarding the status of their investments. At trial, defendant denied making the representations described by the government’s witnesses. She portrayed her role as that of an intermediary between her associate and the investors. She maintained that she had always believed her representations were truthful. The Eighth Circuit upheld enhancements under §2F1.1(b)(2) for a scheme to defraud more than one victim, § 3B1.1(c) for being the organizer or leader of a criminal conspiracy, and § 3C1.1 for obstructing justice by perjuring herself at trial, and denied an acceptance of responsibility reduction. The court’s factual findings were supported by the evidence. U.S. v. Wonderly, 70 F.3d 1020 (8th Cir. 1995).
8th Circuit says § 2F1.1(b)(3)(B) increase for abuse of bankruptcy process is not double counting. (300) Defendant lied to the bankruptcy court about her attempts to hide assets. She argued that a § 2F1.1(b)(3)(B) enhancement for abusing a judicial process was double counting since her lies to the bankruptcy court formed the basis for her bankruptcy fraud conviction. Thus, she could not have committed her offense without also violating the judicial process. The Eighth Circuit held that the § 2F1.1(b)(3)(B) enhancement was not double counting since the base offense level in § 2F1.1 did not account for her violation of the judicial process. The Sentencing Commission intended her sentence to be enhanced under § 2F1.1(b)(3)(B) because her abuse of the bankruptcy process made her more culpable, and thus distinct from, others who commit offenses under § 2F1.1. U.S. v. Cheek, 69 F.3d 231 (8th Cir. 1995).
8th Circuit says multiple victim argument did not breach promise not to recommend more than minimal planning enhancement. (300) Defendant’s plea agreement obligated the government not to take any position with regard to a more than minimal planning enhancement under § 2F1.1(b)(2). Defendant argued that the government breached this promise by arguing to the probation officer that his offense involved more than one victim. The Eighth Circuit disagreed, since the plea bargain referred to a more than minimal planning enhancement under subsection (A), not a more than one victim enhancement under subsection (B). The government’s comments only referred to the multiple victim aspect of § 2F1.1(b)(2). U.S. v. Cohen, 60 F.3d 460 (8th Cir. 1995).
8th Circuit says enhancement does not require threat to safety and soundness of financial institution. (300) Defendant pled guilty to fraud and embezzlement crimes. Section 2F1.1(b)(6) provides a four level enhancement if the offense (A) substantially jeopardized the safety and soundness of a financial institution, or (B) affected a financial institution and the defendant derived more than $1 million in gross receipts from the offense. The district court enhanced defendant’s sentence under subsection (B). The 8th Circuit held that the § 2F1.1(b)(6) enhancement was written in the disjunctive; therefore a defendant could receive the enhancement under subsection (B) without a showing that the offense jeopardized the safety and soundness of a financial institution. U.S. v. Wilson, 41 F.3d 399 (8th Cir. 1994).
8th Circuit agrees that insurance fraud involved more than minimal planning. (300) Defendant falsely reported to his insurance company that his truck had been stolen. He then disguised the truck by partially rebuilding it with parts from other trucks that he had previously stolen. The 8th Circuit agreed that the offense involved more than minimal planning under § 2F1.1(b)(2)(A). Defendant developed an elaborate scheme involving the staged theft of his vehicle in New Orleans and the subsequent masking of the vehicle so it could not be identified and he could continue to use it. This conduct, designed to avoid detection, constituted “significant affirmative steps” taken to conceal the offense. U.S. v. Ballew, 40 F.3d 936 (8th Cir. 1994).
8th Circuit holds that bank fraud involved more than minimal planning. (300) After defendant’s checking accounts were closed, the bank’s president allowed defendant to continue to write checks on the closed accounts. The checks were cleared by drawing on defendant’s line of credit. To reduce the amount outstanding before a bank audit, defendant deposited in the line of credit insufficient funds checks written on another bank account. The president credited the line of credit before the checks were presented to the second bank for payment. Defendant eventually pled guilty to a single bank fraud count relating to an insufficient funds check written on the second bank account. The 8th Circuit agreed that the offense involved more than minimal planning. The scheme existed for more than a year and involved substantial contact between defendant and the bank president. Moreover, defendant actively worked with the president to avoid detection of their activity. U.S. v. Sheahan, 31 F.3d 595 (8th Cir. 1994).
8th Circuit applies fraud guideline to defendant who mislabeled meat. (300) Defendant was the president of a meat wholesaler and a beef packing plant. He mislabeled meat sold by these companies to retail and wholesale customers. The 8th Circuit held that defendant was properly sentenced under the fraud guideline, § 2F1.1, rather than the food and drug guideline, § 2N2.1. Application note 2 to § 2N2.1 (1988) states that if the offense involved a fraud, a court must apply the guideline applicable to the underlying conduct. Defendant was convicted of fraud for his role in the mislabeling scheme. U.S. v. Strassburger, 26 F.3d 860 (8th Cir. 1994).
8th Circuit includes in loss amount repaid prior to discovery of bank fraud. (300) Defendant was the CEO and director of a bank. Defendant, her husband and her nephew defrauded the bank by drawing insufficient funds checks on one account and depositing them into another to make it reflect a positive balance, and then issuing cashier’s checks to themselves. The district court excluded from the loss calculation $156,000 which was repaid at defendant’s request by a bank employee in order to conceal the overdrafts from bank regulators. The repayment was made prior to the discovery of the overdrafts. The 8th Circuit held that it was erroneous to exclude the $156,000 from the loss calculation. Under § 2F1.1, the offense level should be based on either the actual loss resulting from the fraudulent conduct, or the amount of loss the defendant intended to inflict, whichever is greater. The district court erroneously interpreted note 7(b) to § 2F1.1. U.S. v. Morris, 18 F.3d 562 (8th Cir. 1994).
8th Circuit says intended loss was additional credit bank extended due to false statements. (300) Defendant, the controller of a corporation, altered the company’s financial records and submitted false financial statements to the company’s bank. As a result, the bank continued to increase the company’s line of credit. In addition, in reliance on the false statements, the company paid bonuses to defendant and three other employees. The 8th Circuit held that since the bank suffered no actual loss (all loans were repaid by the company in a timely fashion), loss under § 2F1.1 should have been based on intended loss. The measure of loss that defendant intended to inflict was the difference between the amount of credit the bank extended based on the false representations and the amount of credit the bank would have extended had it known the company’s true financial condition. The court also properly included in the loss calculation the bonuses paid by the company. Kok v. U.S., 17 F.3d 247 (8th Cir. 1994).
8th Circuit holds that slow-speed auto accidents involved risk of serious bodily injury. (300) Defendant would drive in front of slow-moving cars, slam on his brakes, cause a collision, feign injuries, and submit fraudulent medical bills and wage-loss statements to insurance companies. The 8th Circuit upheld an enhancement under section 2F1.1(b)(4) for creating a conscious or reckless risk of serious bodily injury. Such risk is inherent in the auto accidents defendant arranged. The government did not have to show that defendant intended serious bodily injury, only that he intended to cause accidents. The court rejected defendant’s claim that the victims of the fraud, in this case insurance companies, had to face the risk of injury for the enhancement to apply. Section 2F1.1(b)(4) does not specify that any particular person must face the risk of injury. U.S. v. Hoffman, 9 F.3d 49 (8th Cir. 1993).
8th Circuit says more than minimal planning enhancement and upward departure were not double-counting. (300) The 8th Circuit rejected defendant’s claim that it was impermissible double-counting to both adjust his offense level under § 2F1.1(b)(2)(A) and depart upward for more than minimal planning. A two-level adjustment is required under § 2F1.1(b)(2) if any one of four specific offense characteristics are present. If several of the enumerated factors are present, then upward departure might be warranted. Defendant’s offense level was adjusted upward two levels for the first factor, more than minimal planning. The district court then found that three of the four factors were present — defendant had engaged in more than minimal planning, he had defrauded more than one victim (57 investors), and he had violated an administrative decree issued by the Minnesota Department of Commerce. Relying on the additional factors, the district court properly departed upward. U.S. v. Beatty, 9 F.3d 686 (8th Cir. 1993).
8th Circuit refuses to reduce loss by amount recovered by bank victims before sentencing. (300) Defendant pled guilty to bank fraud. He argued that the amount of loss under section 2F1.1 should not be fixed at the time the offense was discovered, but should be adjusted to reflect amounts the victim banks recovered before sentencing. The 8th Circuit rejected the argument. The focus under section 2F1.1 is on the loss defendant intended to inflict on his victims. Application note 7(b) directs that the amount of the loss in fraudulent loan cases may be reduced by the amount the lending institution has recovered from any assets pledged to secure the loan. Because defendant did not pledge assets to secure the loans at issue, the loss was the amount of the loans outstanding at the time the offense was discovered. U.S. v. Jindra, 7 F.3d 113 (8th Cir. 1993).
8th Circuit bases loss on difference between contract price and normal wholesale price. (300) Defendants controlled a number of institutional pharmacies through which they were able to purchase pharmaceuticals from drug manufacturers at prices as low as 25 percent of the prices the manufacturers sell drugs to other customers. Defendants received large profits by reselling to wholesalers drugs purchased from manufacturers at institutional prices. The 8th Circuit found that the district court did not commit plain error in calculating loss under section 2F1.1 based on the difference between the contract price paid by institutional pharmacies for the resold drugs and the normal wholesale price for the drugs. The amount of loss to the drug manufacturer was the difference between these two amounts — the additional amount that the manufacturer would have received if the drugs had been sold at wholesale prices. U.S. v. Costanzo, 4 F.3d 658 (8th Cir. 1993).
8th Circuit says leadership and more than minimal planning enhancements were not double counting. (300) Disagreeing with the 6th Circuit’s decision in U.S. v. Romano, 970 F.2d 164 (6th Cir. 1992), the 8th Circuit held that an enhancement under §3B1.1 for being a leader of criminal activity involving five or more participants did not double count conduct used to support a more than minimal planning enhancement under §2F1.1(b)(2). The two sections consider different aspects of a defendant’s conduct. The court agreed with the dissent in Romano that “if the crime has its base offense level increased for more than minimal planning it should be enhanced again if the defendant is the one who organized or led the planning of the offense.” U.S. v. Willis, 997 F.2d 407 (8th Cir. 1993).
8th Circuit refuses to reduce loss by amounts defendants repaid to defrauded bank. (300) Defendant and his partners persuaded third parties to obtain bank loans on the partners’ behalf without disclosing the real recipient of the funds or the true purpose of the loans. For the most part, the partners were not able to repay these loans as they came due. Defendant argued that under the 1991 version of note 7(b) to §2F1.1, loss should have based on the actual net loss suffered by the bank after defendant and his partners had repaid part of the nominee loans. The 8th Circuit refused to use net loss, holding that the application note still allowed loss to be based on the amount of loss intended by the defendant. This was supported by the 1992 version of note 7, which expressly states that where the intended loss is greater than actual loss, the intended loss is to be used. The evidence indicated that defendant intended to defraud the bank of the entire amount of the nominee loans. U.S. v. Willis, 997 F.2d 407 (8th Cir. 1993).
8th Circuit affirms that equity skimming scheme involved more than minimal planning. (300) Defendant contended that the crimes of mail fraud and equity skimming involve extensive planning, and thus, an enhancement for more than minimal planning under section 2F1.1(b)(2)(A) constituted double counting. The 8th Circuit upheld the enhancement. Defendant’s scheme consisted in part of purchasing 10 residences over a 16-month period. Defendant handled almost all of the rent payments and continually covered up his true intentions from the sellers, the subsequent renters, and the lenders. Moreover, the scheme involved multiple victims which would also justify the enhancement under section 2F1.1(b)(2). U.S. v. Ravoy, 994 F.2d 1332 (8th Cir. 1993).
8th Circuit includes loss from property sold to third party in loss from equity skimming scheme. (300) Defendants pled guilty to equity skimming. They bought properties with selling prices lower than the current balance on the mortgages, assumed the mortgages, received a cash “buy-down” from the sellers, and then defaulted on the mortgages. The 8th Circuit affirmed the inclusion of amounts relating to a residence that defendants resold to a third party, whose eventual failure to pay the mortgage resulted in foreclosure. Defendants had skimmed the equity from this property by receiving a cash “buy-down.” Defendants rented the property, received monthly rent payments, and never made a mortgage payment on this property. But for the sale of the property to a third party, there was no doubt that when defendants bought the property they intended to treat it the same way as the other properties. U.S. v. Ravoy, 994 F.2d 1332 (8th Cir. 1993).
8th Circuit finds practice of depositing checks into own account showed more than minimal planning. (300) Defendant pled guilty to concealing assets from a bankruptcy trustee. He received an enhancement for more than minimal planning based on his concealment of 36 checks over a six-month period. Defendant argued that there was no particular planning, but merely a continuation of an established pattern. The 8th Circuit affirmed the enhancement. When defendant admitted that his company had the continuing practice of depositing the checks into company accounts, he conceded the point. Moreover, the district court found that there were repeated acts over a period of time, and that defendant took significant, affirmative steps to conceal the offense. U.S. v. Little, 990 F.2d 1090 (8th Cir. 1993).
8th Circuit refuses to give credit in loss calculation to amount victim may have owed defendant. (300) Defendant pled guilty to concealing $246,000 in assets from a bankruptcy trustee. He contended that since his company was entitled to half of this amount as commission, he could not have intended a loss of more than half ($123,000) the amount at issue. The 8th Circuit affirmed the district court’s refusal to credit defendant with the amount he alleged the trustee owed his company. The focus for sentencing purposes under section 2F1.1 should be on the amount of possible loss the defendant attempted to inflict on the victim or the actual loss, whichever is greater. At sentencing, the district court noted that defendant had wrongfully deposited over $200,000 into his accounts, and there was no evidence that this amount was ever disclosed to the trustee, or was being held “hostage” to negotiations as to fees or to contested amounts that were due to defendant. The district court properly concluded that the amount of loss exceeded $200,000. U.S. v. Little, 990 F.2d 1090 (8th Cir. 1993).
8th Circuit affirms that fraud loss need not be based on actual harm to victims. (300) IBM sold new computer TCMs for $50,000 to $140,000. However, it allowed its customers to exchange failing TCMs for replacement TCMs on a “like-for-like” basis, at a cost of $17,000 for the new TCM. Defendants placed labels from its newer, more expensive TCMs, on its older, lower-value TCMs, and received new TCMs for $17,000, rather than the usual $50,000 to $140,000 sales price. The district court subtracted the $17,000 exchange price from the sales price for each of the switched-label TCMs, and found that the loss associated with the fraudulent conduct under section 2F1.1 was $1,746,000. The 8th Circuit affirmed, even though the district court failed to credit defendants with the value of the returned TCMs. The court reaffirmed that loss under the fraud guideline is the greater of intended loss or the actual loss resulting from the fraudulent conduct. Although IBM received used TCMs as part of its exchange program, it did not buy or want the used TCMs. Similarly, the court was not required to credit defendants with the $1.7 million in restitution they made to IBM two years prior to indictment. U.S. v. Nelson, 988 F.2d 798 (8th Cir. 1993).
8th Circuit refuses to reduce loss calculation by amount defendant repaid to fraud victims. (300) Defendant, fraudulently acting as a legitimate lender, collected commitment fees from prospective borrowers. Once the scheme began to unravel, defendant took some of the fees other borrowers had paid to him and sent it to the borrowers who threatened legal action. Defendant received over $1.5 million in fees from over 71 different borrowers. He repaid approximately $750,000 in total to those borrowers who threatened legal action. Relying on U.S. v. Prendergast, 979 F.2d 1289 (8th Cir. 1992), the 8th Circuit affirmed that the amount of loss under section 2F1.1 should not have been reduced by the amount defendant returned to the victims before being criminally charged. The loss under section 2F1.1 should be based on the amount of loss the defendant intended to inflict or the actual loss, whichever was greater. U.S. v. Mills, 987 F.2d 1311 (8th Cir. 1993).
8th Circuit refuses to credit defendant with amount returned to defrauded creditors. (300) Defendant ran a company which purchased wholesale automobiles and leased them to a related corporation. The operation was financed by pledging the automobiles as collateral. Defendant inflated the value of the cars on the invoices that the company received when it bought the cars, and then received loans based on the inflated values. He contended that the district court erred in calculating the loss caused by his fraud under section 2F1.1 because it did not consider evidence that the banks recovered a substantial portion of the money they lent to him. Defendant cooperated in returning collateral and liquidating cars that had been purchased by the company, returning to the banks about 83 percent of the amount lent on the cars. The 8th Circuit affirmed the loss calculation. The amount of loss relevant for sentencing purposes is either the amount of loss that the defendant intended to inflict or the actual loss resulting from the fraudulent conduct, whichever is greater. U.S. v. George, 986 F.2d 1176 (8th Cir. 1993).
8th Circuit affirms that bank fraud involved more than minimal planning. (300) The 8th Circuit affirmed that defendant’s bank fraud involved more than minimal planning under section 2F1.1(b)(2). The case involved more than simply writing a check on a closed account. Defendant opened an account at one bank using an alias, then closed it six months later. The following month he opened an account at a second bank using a different alias, and later directed an acquaintance to deposit a check drawn on the closed first account into the second account. The second bank honored the bad check and thus suffered a loss. U.S. v. Starr, 986 F.2d 281 (8th Cir. 1993).
8th Circuit rejects enhancement for misrepresenting that defendant was acting for charity. (300) Defendant committed bank fraud by opening two bank accounts using different aliases, closing one of the accounts, and then depositing a check from the closed account into the other account. The first account was opened under the name of an authentic charitable organization with documents signed by the executive director of the organization. The 8th Circuit rejected an enhancement under section 2F1.1(b)(3)(A) because the government failed to show that defendant misrepresented that he was acting on behalf of a charitable organization. Defendant claimed that he had entered into a valid contract to solicit funds for the charity. An agent of the charity was ready to testify that he entered into a one-year contract with a man using defendant’s alias to solicit funds for the charity. The government introduced no contrary evidence. U.S. v. Starr, 986 F.2d 281 (8th Cir. 1993).
8th Circuit holds that losses from uncharged fraud should have been considered relevant conduct. (300) Defendant sold fraudulent promissory notes over interstate phone lines. He was charged with selling notes to three individuals, but he also defrauded two additional investors not listed in the charging information. The 8th Circuit held that two uncharged acts of fraud were relevant conduct to the offense of conviction, and thus the losses inflicted upon the two unlisted investors should have been included in the calculation of loss under section 2F1.1. The district court also incorrectly calculated the loss based on the net loss to each investor, i.e. the actual value of the fraudulent notes sold to the investors less the amount defendant repaid the investors. The amount of loss used to increase the offense level under the fraud guideline may be either the intended loss or the actual loss, whichever is greater. Here, the loss should be the amount of possible loss the defendant attempted to inflict upon his victims. U.S. v. Prendergast, 979 F.2d 1289 (8th Cir. 1992).
8th Circuit limits amount of loss in bankruptcy fraud case to amount of debt. (300) Defendant, an attorney, committed bankruptcy fraud by helping his bankrupt client sell his business to a third party buyer without the knowledge of the bankruptcy court. The district court properly used the going-concern value of the business rather than its liquidation value in calculating the value of the concealed assets. Additionally, the amount the third party buyer was willing to pay for the business was a valid measure of the business’s value. But the 8th Circuit held that the court erred in treating the amount the client was to receive under an employment agreement as part of the purchase price for the business. This amount was clearly compensation to the client for post-sale services. It was also error to determine the loss without consideration of the amount of the bankrupt client’s debts. The amount of debt places a cap on the intended loss when an individual debtor or the sole owner of a corporate debtor is the party who benefits from the concealment of assets. U.S. v. Edgar, 971 F.2d 89 (8th Cir. 1992).
8th Circuit affirms more than minimal planning enhancement for offense involving “simple book entry.” (300) In order to disguise the fact that defendant’s bank was violating a bank regulator’s order by loaning $40,000 to a related company, defendant falsely entered in the bank records that the $40,000 payment was to purchase furniture and fixtures from the company. The 8th Circuit affirmed enhancements for the $40,000 loss under 2F1.1(b)(1)(E), for more than minimal planning under 2F1.1(b)(2)(A), for abuse of trust under section 3B1.1. Although the court was concerned about the more than minimal planning enhancement for an offense which was committed by a “simple book entry,” the district court’s findings were not clearly erroneous. U.S. v. Pooler, 961 F.2d 1354 (8th Cir. 1992).
8th Circuit holds that “loss” includes checks which defendant’s girlfriend covered. (300) Defendant wrote $6537.16 in bad checks, of which $6,045.24 were not returned NSF because defendant’s girlfriend, a bank employee, covered the checks with her own money. The 8th Circuit rejected defendant’s contention that the $6,045.24 should not be included in the calculation of the loss caused by his fraud because the bank did not lose that money. The dollar value associated with his conduct does not turn upon actual loss, and the fact that his girlfriend covered some of his checks did not effect the calculation of the loss. Under note 7 to section 2F1.1, the focus for sentencing purposes should be on the amount of the possible loss which the defendant attempted to inflict. U.S. v. Saunders, 957 F.2d 1488 (8th Cir. 1992).
8th Circuit rules that loss under fraud guideline must be based on all relevant conduct. (300) Defendant pled guilty to three counts of mail fraud in connection with the sale of three cars with altered odometer readings. In exchange for his plea, the government dismissed a conspiracy count involving over 300 cars with altered odometer readings brought to defendant’s car auction by other car dealers. The district court determined the amount of loss caused by defendant’s offense under guideline section 2F1.1(b) based solely upon the three cars involved in the offense of conviction. The court refused to hear evidence relating to defendant’s involvement in the conspiracy. The 8th Circuit ruled that the loss resulting from the conspiracy could be included in the loss calculation if the conspiracy was part of the same course of conduct or common scheme or plan as the mail fraud counts. The case was remanded because it was unclear whether the district court refused to consider the conspiracy evidence because it believed the conspiracy was not relevant conduct, or because it believed that loss under section 2F1.1(b) could only be based upon the offense of conviction. The court rejected the government’s contention that the conspiracy was part of the offense of conviction because the mail fraud counts to which defendant pled guilty contained a preamble incorporating by reference assertions contained in the conspiracy count. U.S. v. Morton, 957 F.2d 577 (8th Cir. 1992).
8th Circuit affirms basing “more than minimal planning” enhancement on the offense rather than defendant’s role. (300) Defendant contended that an enhancement for more than minimal planning under guideline section 2F1.1(b)(2) was improper because he only took instructions from another co-conspirator. The 8th Circuit rejected this argument, because it improperly focused on the nature of defendant’s role in the offense, rather than the nature of the offense itself. The government presented evidence that the pattern of fraudulent activity extended over a period of at least eight months, and involved a significant amount of planning. U.S. v. Earles, 955 F.2d 1175 (8th Cir. 1992).
8th Circuit upholds calculation of fraud loss to include amount of stopped check. (300) Defendant and others were involved in a mail order fraud conspiracy in which they received down payments on goods and equipment never delivered to the victims. The 8th Circuit affirmed the addition of six points for victim loss between $100,000 and $200,000, rejecting defendant’s claim that only one $5,000 check endorsed by him could be used to establish victim loss. The government presented evidence that the conspiracy in which defendant participated defrauded victims of over $100,000. Following application note 7 to guideline section 2F1.1, the district court properly included the amount of one check which did not result in actual loss because the victim was able to stop payment on the check. U.S. v. Earles, 955 F.2d 1175 (8th Cir. 1992).
8th Circuit affirms that defendant who concealed assets from bankruptcy officers violated a judicial “process.” (300) Guideline section 2F1.1(b)(3)(B) provides for a two level enhancement if the underlying offense involved the “violation of any judicial or administrative order, injunction, decree or process.” The 8th Circuit affirmed an enhancement under this section, ruling that a defendant who committed bankruptcy fraud did violate a judicial “process” by fraudulently concealing his assets from bankruptcy court officers. U.S. v. Lloyd, 947 F.2d 339 (8th Cir. 1991).
8th Circuit finds more than minimal planning in defendant’s concealment of change of circumstances in disability claim. (300) Defendant received disability benefits from the Social Security Administration (SSA) on behalf of her disabled infant granddaughter who lived with her. After the infant was removed from the home because of neglect, defendant never notified the SSA about the change in status or advised the granddaughter’s foster mother about the disability payments. Defendant completed and signed a statement with the SSA indicating there were no changes in the number of people in her household. Although the granddaughter was eventually adopted by her foster mother, defendant continued to receive the disability payments and use them for her own benefit. The 8th Circuit affirmed an enhancement under guideline § 2F1.1(b)(2)(A) for more than minimal planning. While defendant’s receipt of the checks may have been purely opportune, her concealment of the granddaughter’s absence and her continued use of the checks required the necessary repeated acts over a period of time to justify the enhancement. U.S. v. Callaway, 943 F.2d 29 (8th Cir. 1991).
8th Circuit finds more than minimal planning where offense lasted more than two years. (300) Defendant contended that the district court erred in increasing his offense level by two because his fraud involved more than minimal planning under guideline § 2F1.1(b)(2). Defendant argued that he was not involved in the more extensive aspects of the fraud. The 8th Circuit rejected this argument since it went more to defendant’s role in the offense than to the nature of the offense itself. Almost any crime that consists of a pattern of activity over a long period of time will qualify as an offense involving more than minimal planning. Since it was not disputed that the fraudulent scheme involved more than minimal planning and that defendant was involved in the scheme for almost two years, the application of § 2F1.1(b)(2) was not clearly erroneous. U.S. v. West, 942 F.2d 528 (8th Cir. 1991).
8th Circuit affirms that “loss” is not reduced by settlement credit or funds withheld by victim. (300) Defendant was convicted of fraudulently selling adulterated meat to the State of Missouri. The 8th Circuit affirmed the district court’s determination that the total amount of the loss to the victim under guideline § 2F1.1(b)(1) was about $285,000, the price of the total amount of meat that the state contracted to buy. The court rejected defendant’s claim that the loss should be reduced by the credit given to the state by defendant’s company after recalling 62,000 pounds of the meat, or the cost of the amount of meat on which the state withheld payment, or the $20,000 that defendant paid to the state in settlement of a civil suit. The guidelines establish that loss includes “probable or intended loss.” The court also rejected defendant’s claim that he should receive credit for the proportion of the product sold that was actually good meat, since in this case, the good was mixed with the bad in the form of sausage and ground meat. U.S. v. West, 942 F.2d 528 (8th Cir. 1991).
8th Circuit finds that forgery and possession of stolen mail were properly grouped together. (300) Defendant was involved in stealing and forging United States treasury instruments and pled guilty to forgery and possession of stolen mail. The 8th Circuit found that since both counts arose from defendant’s theft of the treasury instruments, the counts were sufficiently linked to group them together under guideline § 3D1.2(d). U.S. v. Manuel, 912 F.2d 204 (8th Cir. 1990).
8th Circuit upholds upward departure for bankruptcy trustee who embezzled funds. (300) Defendant pled guilty to embezzlement by a bankruptcy trustee. The district court departed upward on the basis of Application Note 9(e) to § 2F1.1, which provides that an upward departure may be warranted when the offense causes a loss of confidence in an important institution. Defendant argued this was improper, because in setting the sentencing ranges for embezzlement the Sentencing Commission took into consideration the possibility of a defendant’s abusing a position such as a bankruptcy trustee. The 8th Circuit rejected this argument, finding that since neither the guidelines, the policy statements, nor the official commentary indicated that the Commission considered the circumstance of a bankruptcy trustee embezzling estate funds, embezzlement by a bankruptcy trustee was atypical of the embezzlement contemplated by the Commission. The 8th Circuit also rejected defendant’s argument that in order to consider the impact of his crime upon the institution of bankruptcy trustee, there must be evidence that there was a loss of confidence in the bankruptcy trustee system. U.S. v. Fousek, 912 F.2d 979 (8th Cir. 1990).
8th Circuit holds that U.S. government and its agencies can be victims under guideline § 2F1.1(b)(2)(B). (300) Defendant fraudulently attempted to obtain a social security card. When arrested, he gave a false name to immigration authorities and to a U.S. district court. The district court found that defendant had been involved in a scheme to defraud more than one victim, and increased defendant’s offense level pursuant to guideline § 2F1.1(b)(2)(B). The 8th Circuit held that the United States government and its agencies can be victims under this section. In addition, where the interests promoted by different agencies are distinct, the agencies can be separate victims. Since defendant’s scheme involved three different victims, the Social Security Administration, the Immigration and Naturalization Service and the district court, it was proper to increase defendant’s offense level by two under § 2F1.1(b)(2)(B). U.S. v. Reyes, 908 F.2d 281 (8th Cir. 1990).
8th Circuit finds concealing identity by obtaining numerous pieces of false identification constituted more than minimal planning. (300) Defendant entered the country illegally and acquired at least 12 pieces of false identification in order to conceal his identity. The 8th Circuit upheld a finding that defendant committed an offense with more than minimal planning. Defendant obtained more than one piece of identification, and the government seized additional material from defendant’s locker useful in obtaining additional false identification. Defendant attempted to conceal the fact that he was in the country illegally by giving authorities a false name. Therefore, it was proper to increase defendant’s offense level by two pursuant to guideline § 2F1.1(b)(2)(A). U.S. v. Reyes, 908 F.2d 281 (8th Cir. 1990).
8th Circuit upholds fraud offense level based on the amount of a possible loss attempted by the defendant. (300) Defendant pled guilty to making false statements in application for two bank loans. She had used a false driver’s license and social security card to obtain two bank loans, each of which was ultimately used to purchase a car. Although the first car, was repossessed by the bank, it was subsequently stolen and the bank recovered the value of the car from its insurance company. The second car was repossessed and sold and the bank lost approximately $4,000 on the transaction. The trial court, in setting defendant’s offense level under § 2F1.1, relied upon the total amount of credit fraudulently extended. Defendant claimed that the trial court should have relied upon the actual losses suffered. The Eighth Circuit affirmed, holding that a defendant’s offense level should “not turn on whether or not the banks recovered some of their potential loan losses.” Rather, the focus should be on the amount of the possible loss which the defendant attempted to inflict on the bank. U.S. v. Johnson, 908 F.2d 396 (8th Cir. 1990).
8th Circuit holds that U.S. government and its agencies can be victims under guideline § 2F1.1(b)(2)(B). (300) Defendant fraudulently attempted to obtain a social security card. When arrested, he gave a false name to immigration authorities and to a U.S. district court. The district court found that defendant had been involved in a scheme to defraud more than one victim, and increased defendant’s offense level pursuant to guideline § 2F1.1(b)(2)(B). The 8th Circuit held that the United States government and its agencies can be victims under this section. In addition, where the interests promoted by different agencies are distinct, the agencies can be separate victims. Since defendant’s scheme involved three different victims, the Social Security Administration, the Immigration and Naturalization Service and the district court, it was proper to increase defendant’s offense level by two under § 2F1.1(b)(2)(B). U.S. v. Reyes, 908 F.2d 281 (8th Cir. 1990).
8th Circuit upholds departure based on dismissed counts and non-criminal conduct in bankruptcy fraud case. (300) Defendants pled guilty to one count of a three-count indictment for bankruptcy fraud. The district court departed upwards due to defendants acts of concealment before and after bankruptcy, as well as activities of a non-criminal nature that intimated a “deep attachment to obtaining money or property at the expense of others.” The defendants contended the departures were improper because the factors were merged in the count to which they pled guilty and that several factors were not violations of law. The 8th Circuit affirmed the departure, holding that conduct in dismissed counts could be used in calculating adjustment to base offense levels. The non-criminal conduct was also properly considered because it reflected the attitude that led defendants to engage in criminal activity and was not given “undue weight” by the district court. U.S. v. Snover, 900 F.2d 1207 (8th Cir. 1990).
8th Circuit holds that phrase “more than minimal planning” is not ambiguous. (300) Defendants pled guilty to mail fraud and received a two level increase for more than minimal planning, § 1F1.1. During an 8 month period defendants had created a fictitious business name and opened both a bank account and post office under that name. Seventy fraudulent payment requests or drafts were submitted by defendants. On appeal, defendants argued that there was no benchmark to measure their conduct since mail fraud necessarily involves several acts and is never impulsive or unplanned. The 8th Circuit disagreed, holding that “more than minimal planning means more planning than is typical for commission of an offense. Mail fraud requires only a single overt act and defendants’ activities exceeded a single act. The court held that the guidelines define the phase “more than minimal planning” with clarity, provide helpful illustrations and are not inherently ambiguous. U.S. v. Hearrin, 892 F.2d 756 (8th Cir. 1990).
9th Circuit finds 135-month sentence for fraud scheme is not unreasonable. (300) Defendant was convicted of masterminding a scheme that fraudulently solicited $37 million from investors. The district court sentenced defendant to 135 months’ imprisonment, which was 53 months below the Guideline range. In imposing sentence, the court considered the nature and circumstances of defendant’s offense, and it rejected defendant’s claim that his psychological state and age required a lower sentence. The Ninth Circuit held that the sentence was not unreasonable. U.S. v. Garro, __ F.3d __ (9th Cir. Feb. 28, 2008) No. 06-50513.
9th Circuit says applying sophisticated means and more than minimal planning is not double counting. (300) Defendant engineered a scheme to defraud investors of $37 million. At sentencing, the district court enhanced defendant’s sentence because he used “sophisticated means” (under former § 2F1.1(b)(2)(A)) and because the scheme involved more than minimal planning (under former § 2F1.1(b)(5)(C)). The Ninth Circuit held that application of both enhancements to defendant was not impermissible double counting. U.S. v. Garro, __ F.3d __ (9th Cir. Feb. 28, 2008) No. 06-50513.
9th Circuit says that thief who sells goods he stole is not in stolen property business. (300) The guideline for fraud and theft offenses, § 2B1.1(b)(4), requires a two-level enhancement “if the offense involved receiving stolen property, and the defendant was a person in the business of receiving and selling stolen property.” Defendant engaged in a scheme to defraud computer suppliers by establishing lines of credit, then buying computer equipment without paying for it. The Ninth Circuit vacated defendant’s sentence enhancement under § 2B1.1(b)(4), holding that a thief who sells goods that he has stolen is not in the business of receiving and selling stolen property. U.S. v. Kimbrew, 406 F.3d 1149 (9th Cir. 2005).
9th Circuit applies enhancement for using stolen “means of identification.” (300) Defendant used six stolen Social Security numbers to manufacture bogus identification documents on his computer. The bogus documents were in his name or the name of a fictitious individual. He pleaded guilty to unlawfully producing more than five identification documents, in violation of 18 U.S.C. § 1028. At sentencing, the court enhanced the offense level under § 2B1.1(b)(9)(c), which applies when a defendant uses a “means of identification,” including a Social Security number, to produce or obtain another means of identification or when a defendant possesses five or more means of identification produced from a stolen means of identification. For the enhancement to apply, the source and produced means of identification must be of actual persons, other than the defendant. The Ninth Circuit held that the enhancement applies when a defendant uses stolen identification numbers to produce bogus identification documents, regardless of whether the documents produced are in defendant’s name. U.S. v. Melendrez, 389 F.3d 829 (9th Cir. 2004).
9th Circuit reverses enhancement for violating a judicial order. (300) Guideline § 2F1.1(b)(3) (B) (1997) provided for an enhancement in fraud cases for any fraud that involved “violation of any … judicial order.” Defendant participated in a telemarketing fraud organized by a co-defendant who had been enjoined from engaging in telemarketing. The injunction applied to the co-defendant and any employee who received actual notice of the injunction. Evidence showed that defendant had known the co-defendant for many years and had worked together in multiple telemarketing operations. The Ninth Circuit held that this evidence did not show that defendant had actual notice of the injunction and vacated the district court’s imposition of the enhancement. U.S. v. Woods, 335 F.3d 993 (9th Cir. 2003).
9th Circuit reverses enhancement for possession of false identification. (300) Under § 2F1.1(b)(5)(C)(ii), a defendant convicted of fraud offenses is subject to an enhancement if he possessed five or more means of false identification. The application notes state that to trigger the enhancement, the false identification must be for actual, as opposed to fictitious, persons. At defendant’s sentencing, a government agent testified that some of the names on the false identification seized from defendant were for actual persons, and some were not. The Ninth Circuit held that this evidence was not sufficient to support the enhancement. U.S. v. Riley, 335 F.3d 919 (9th Cir. 2003).
9th Circuit says increase for posing as government official applies to defendant posing as a corrupt official. (300) Posing as an INS official, defendant defrauded immigrants by telling them that she could circumvent INS procedures in return for a payment. Defendant was convicted of impersonating a federal official, in violation of 18 U.S.C. § 912. Because she committed the offense to facilitate a fraud, her offense level was determined under § 2F1.1. That guideline requires an enhancement if the defendant misrepresented herself as a government official. The Ninth Circuit upheld this enhancement, rejecting defendant’s argument that it should apply only when the defendant pretends to act in a proper government capacity and not when, as here, the defendant poses as a government official to solicit bribes. U.S. v. Romero, 293 F.3d 1120 (9th Cir. 2002).
9th Circuit upholds risk-of-injury enhancement for false certification involving military aircraft parts. (300) Over a 20-year period, defendant corporation falsely certified that it had properly tested aluminum alloy parts used in highly sensitive and complicated military aircraft and weaponry. The district court enhanced defendant’s sentence under § 2F1.1(b)(7)(A) on the ground that defendant’s conduct involved “the conscious or reckless risk of serious bodily injury,” because defendant knew that it was providing aircraft parts that could be defective. Reviewing for plain error, the Ninth Circuit rejected defendant’s argument that the enhancement was improper because only a small number of parts were found to be defective over the life of the fraud. It found that defendant “knew that it was putting the men and women of the United States armed forces in harm’s way.” U.S. v. West Coast Aluminum Heat Treating Co., 265 F.3d 986 (9th Cir. 2001).
9th Circuit finds prior offense involving same bank account was not “taken into account” in current offense. (300) At sentencing for a mail fraud scheme, the court imposed a sentence consecutive to a previous fraud sentence in another state. On appeal, defendant argued that this violated § 5G1.3(b), which requires a concurrent sentence where the other offense was “fully taken into account” in the instant offense. The Ninth Circuit held that even though the previous fraud offense used the same bank accounts as the instant offense, the offense was distinct from the instant offense and did not require a concurrent sentence. U.S. v. King, 257 F.3d 1013 (9th Cir. 2001).
9th Circuit applies “mass marketing” increase for fraudulent classified ad on the Internet. (300) Defendant placed four separate classified ads on an Internet web site, each soliciting buyers for a different type of computer that he never intended to deliver. Although only three people actually responded to the advertisements, a divided Ninth Circuit upheld a two-level increase under § 2F1.1(b)(3) for committing the offense “through mass marketing.” The majority noted that by placing a classified ad on the Internet, defendant “was able to solicit funds instantaneously and continuously from over 200 million individuals worldwide.” Relying on the commentary to the guideline, the majority said that this conduct clearly constituted “solicitation by . . . the internet . . . to induce a large number of persons to [ ] purchase goods.” Judge Berzon dissented, arguing that “passive placement” of the ad did not constitute “solicitation.” U.S. v. Pirello, 255 F.3d 728 (9th Cir. 2001).
9th Circuit finds no double counting of different aspects of harm from telemarketing. (300) The Ninth Circuit rejected defendant’s argument that imposing a § 3A1.1 increase for a “large number” of vulnerable victims was improper double counting. However, the Ninth Circuit noted that double counting is permitted when it accounts for more than one type of harm: “Enhancing for the amount of monetary loss, degree of planning, mass marketing, victimizing vulnerable victims during telemarketing, and impacting a large number of vulnerable victims, as the court did here, accounts for different aspects of the harm that [defendant’s] conduct caused.” Further, “there is nothing wrong with ‘double counting’ when it is necessary to make the defendant’s sentence reflect the full extent of the wrongfulness of his conduct.” U.S. v. Reese, 2 F.3d 870, 895 (9th Cir. 1993). The sentence was affirmed. U.S. v. Kentz, 251 F.3d 835 (9th Cir. 2001).
9th Circuit reverses “sophisticated concealment” for smuggling operation that was “very basic.” (300) Guideline § 2T3.1(b)(1) provides for a two-level increase if the smuggling involved sophisticated concealment. In this case, the Ninth Circuit reversed the enhancement because defendant’s smuggling of pharmaceutical drugs across the border was “crude and very basic.” The factors on which the district court relied were common, not especially sophisticated, and were employed, not to conceal, but simply to carry out the smuggling scheme. Using bank deposits, which could be traced, instead of direct hand-to-hand payments of cash, did not conceal the scheme, but enabled it to be detected and its scope documented. The district court’s application of the sophisticated concealment enhancement was “clearly erroneous.” U.S. v. Montano, 250 F.3d 709 (9th Cir. 2001).
9th Circuit says falsifying log books to conceal hours-of-driving violations involved “risk of serious bodily injury. (300) Defendant pled guilty to conspiring to violate regulations which limit the number of hours truck drivers may drive and concealing the violations by falsifying records. The district court increased his sentence under § 2F1.1(b)(6)(A) for the conscious or reckless risk of serious bodily injury. On appeal, the Ninth Circuit disagreed with the Eighth Circuit’s interpretation of the word “reckless” in U.S. v. McCord, 143 F.3d 1095, 1097 (8th Cir. 1998). However, the court found it unnecessary to decide whether defendant’s offense involved a reckless risk of injury because creating false log books to conceal hours-of-driving violations clearly involved a “conscious” risk of serious bodily injury. Defendant did not stop the practice even after twice being advised that the violations were occurring, and he instructed his subordinates to conceal the accurate hours-of-driving information from the company’s safety department. U.S. v. Johansson, 249 F.3d 848 (9th Cir. 2001).
9th Circuit declines to group fraud and money laundering counts. (300) Defendant fraudulently induced investors to send him over $4.5 million, of which approximately $1.78 million was invested into the scheme. He was convicted of both money laundering and fraud. He argued that under § 3D1.2(d), the district court should have grouped these counts together at sentencing. The Ninth Circuit rejected the argument, noting that U.S. v. Taylor, 984 F.2d 298 (9th Cir. 1993) and U.S. v. Hanley, 190 F.3d 1017, 1033 (9th Cir. 1999) held that fraud and money laundering counts should not be grouped for sentencing because the guidelines for fraud and money laundering “measure harm differently.” The court distinguished U.S. v. Rose, 20 F.3d 367 (9th Cir. 1994) on the ground that in that case there was “complete identity” between the laundered and the fraudulently obtained funds. The panel also rejected defendant’s argument that the counts should have been grouped under § 3D1.2(b), rather than (d) which requires grouping where the counts “involve the same victim” or a “common scheme or plan.” The offenses did not involve the same victim because “society” is the victim of money laundering. U.S. v. Syrax, 235 F.3d 422 (9th Cir. 2000).
9th Circuit chooses tax guidelines, rather than fraud guidelines, for false claims conviction. (300) Defendant was convicted of presenting false claims in violation of 18 U.S.C. § 287 after he filed 1,500 false tax returns seeking refunds. The Statutory Index in Appendix A to the Guidelines Manual recommends using the fraud guideline for a violation of 18 U.S.C. § 287. However, the Ninth Circuit noted that the guidelines referenced in the Statutory Index are not mandatory. U.S. v. Fulbright, 105 F.3d 443, 453 (9th Cir. 1997). The Index “merely points the court in the right direction. Its suggestions are advisory: what ultimately controls is the ‘most applicable guideline.’” U.S. v. Cambra, 933 F.2d 752, 755 (9th Cir. 1991). Here, the offense conduct was a scheme to file fraudulent tax returns and thus “could be considered on par with” tax fraud. Therefore, the district court did not err in employing the tax guidelines rather than the fraud guidelines. U.S. v. Aragbaye, 234 F.3d 1101 (9th Cir. 2000).
9th Circuit denies “attempt” reduction where defendant completed all acts necessary for fraud. (300) In this bank fraud case, defendant argued that the district court should have reduced his sentence by three levels under § 2X1.1 because the bank never credited his account for the bad checks. Thus, he was unable to obtain the money he “deposited.” The Ninth Circuit found no merit in this argument, because § 2X1.1 “clearly provides that the reduction is unavailable if the defendant completed all the acts he believed necessary to commit the substantive offense, or was about to do so when the completion was interrupted.” Here, defendant was about to complete all the acts he believed necessary when he was interrupted by the bank’s safeguards. U.S. v. King, 200 F.3d 1207 (9th Cir. 1999).
9th Circuit finds uncharged check was “relevant conduct” in bank fraud case. (300) Shortly before depositing one of the fraudulent checks charged in the indictment, defendant issued a worthless check for $47,000 to pay for a shipment of prize notification postcards from Barbados to the United States. The Ninth Circuit upheld counting this check as relevant conduct under § 1B1.3. Under U.S. v. Hahn, 960 F.2d 903, 910 (9th Cir. 1992), the court must consider the conduct’s “similarity, regularity and temporal proximity” to the charged offenses. Although the element of “regularity” was missing here, the “similarity” and “temporal proximity” elements were strong, so there was no clear error. U.S. v. King, 200 F.3d 1207 (9th Cir. 1999).
9th Circuit refuses to “group” wire fraud and money laundering counts. (300) In U.S. v. Taylor, 984 F.2d 298, 303 (9th Cir. 1993), the Ninth Circuit held that because “the guidelines for wire fraud and money laundering measure harm differently … the dismissed wire fraud count cannot be grouped with the monetary transaction count under § 3D1.2(d).” In the present case, however, defendants argued that U.S. v. Rose, 20 F.3d 367 (9th Cir. 1994) created an exception to Taylor where there is a “complete identity” between the fraudulently obtained funds and the laundered funds. The Ninth Circuit rejected the argument, holding that Rose simply permits trial courts to treat fraudulently derived funds as “relevant conduct” for sentencing purposes under § 2S1.1 when such funds are coextensive with the sums involved in money laundering. However, “Rose does not require grouping in those circumstances.” Accordingly, the district court did not err by refusing to group defendants’ wire fraud and money laundering counts. U.S. v. Hanley, 190 F.3d 1017 (9th Cir. 1999).
9th Circuit upholds vulnerable victim increase plus departure for targeting elderly victims. (300) The Ninth Circuit upheld a two-level departure because defendant targeted the elderly in his advance-fee “sweepstakes” telemarketing scheme, even though the district court also increased the offense level because the victims were vulnerable under § 3A1.1. The district court used the rationale behind the recently passed Senior Citizens Against Marketing Scams Act (the “SCAMS Act”), 18 U.S.C. § 2335 et seq. The SCAMS Act and the vulnerable victim enhancement are sufficiently distinct to avoid double counting. The court thus agreed with the Sixth and Tenth Circuits in U.S. v. Brown, 147 F.3d 477, 487 (6th Cir. 1998) and U.S. v. Smith, 133 F.3d 737 (10th Cir. 1997). [Ed. Note: Effective Nov. 1, 1998, §2F1.1 was amended to provide increased penalties for “sophisticated means,” and a two-level increase for mass-marketing offense conduct. In addition, §3A1.1 was amended to add two levels for offenses that involve a large number of vulnerable victims.] U.S. v. Scrivener, 189 F.3d 944 (9th Cir. 1999).
9th Circuit upholds finding that defendant used trust account to evade bankruptcy rules. (300) The defendant established the Investors Realty Trust ostensibly as a education trust fund for his children. In this fraud case, the jury was unable to decide whether defendant was guilty of concealing the trust when he omitted it from his bankruptcy petition. However, the district court found at sentencing that he concealed the trust. In a 2-1 opinion, the Ninth Circuit found this factual finding was not clearly erroneous. A preponderance of the evidence showed that defendant did not intend to create an irrevocable trust and instead used the trust as his personal bank account so as to evade the bankruptcy rules and conceal his assets. Judge Kleinfeld dissented, arguing that the evidence simply showed that defendant looted his children’s trust. “But even if he stole his children’s money, that did not make what was left of it his creditor’s money.” U.S. v. Lawrence, 189 F.3d 838 (9th Cir. 1999).
9th Circuit finds more than minimal planning in environmental crime. (300) Defendant was convicted of mail fraud and environmental crimes after he disposed of sewage sludge in violation of his company’s permit with the City of San Diego. The district court increased his sentence for more than minimal planning under § 2F1.1(b)(2)(a), stating “this was an ongoing scheme to submit false weighmaster certificates to the City. It was extensive. It was sophisticated.” The Ninth Circuit found no clear error. U.S. v. Cooper, 173 F.3d 1192 (9th Cir. 1999).
9th Circuit prohibits double-counting amount lost by a financial institution. (300) In U.S. v. Kohli, 110 F.3d 1475 (9th Cir. 1997), the Ninth Circuit held that if the government wished to attribute loss to one defendant for purposes of applying the increase for loss to a financial institution under § 2F1.1(b)(6)(B), it must show that the amount received by one defendant was not also attributed to another defendant. In the present case, however, even though the co-defendant stipulated that he derived more than $1,000,000 from his offense, it was not necessary for the district court to apply to the co-defendant any of the 2.3 million dollars attributed to defendant. Thus the district court could apply the enhancement without double counting the funds already applied to the co-defendant for purposes of the same enhancement. U.S. v. Nesenblatt, 171 F.3d 1227 (9th Cir. 1999).
9th Circuit upholds increase for affecting a financial institution by embezzling more than $1,000,000. (300) While working as a bank teller, defendant embezzled $1,468,205. She pleaded guilty to bank fraud under 18 U.S.C. § 1344. At sentencing, the court increased her offense level under § 2F1.1(b)(6)(B) for “affecting” a financial institution where the defendant derived more than $1,000,000 in gross receipts. On appeal, defendant argued that the word “affect” in the guideline was vague and ambiguous. The Ninth Circuit rejected the argument, holding that the guideline gives fair notice to a person of ordinary intelligence that it would apply to one who defrauds a bank of more than $1.4 million. The court found that the bank was “affected,” although it recovered much of the financial loss from restitution and its bonding company. The bank suffered an unreimbursed financial loss of approximately $500,000, including a $50,000 deductible under the bank’s fidelity bond, legal expenses, auditor’s fees, and wages for extra staff hours spent dealing with the offense. In addition, defendant’s thievery “damaged employee morale and customer relationships, marred the bank’s reputation and influenced the bank’s immediate and long term operations and policies. Employees spent substantial time dealing with the fraud, and as a result of the incident, the bank revised its policy on government relations and hired a full time internal auditor.” U.S. v. Johnson, 130 F.3d 1352 (9th Cir. 1997).
9th Circuit reverses departure for number of victims and more than minimal planning. (300) Application Note 1 to the fraud guideline suggests that an upward departure might be warranted if both factors listed in § 2F1.1(b)(2) apply, i.e., (1) more than minimal planning and (2) more than one victim. The district court departed upward because both factors were present. On appeal, the Ninth Circuit reversed, agreeing with the Third and Fifth Circuits that because the enhancements in § 2F1.1(b)(2) are “alternative rather than cumulative,” a court “may not stack multiple (b)(2) factors.” The fact that there were thirty victims and more than minimal planning did not take this case outside the heartland of the guidelines. U.S. v. Stein, 127 F.3d 777 (9th Cir. 1997).
9th Circuit upholds departure for psychological and emotional distress to patients of fake doctor. (300) Defendant impersonated a doctor at various medical clinics and a plasma center. The district court departed upward by two levels under Commentary Note 10(a) and (c) to § 2F1.1 because “the offense caused reasonably foreseeable, physical or psychological harm or severe emotional trauma.” The court based its decision on “copious explanatory material” provided by the government, including numerous letters submitted by defendant’s victims concerning the emotional and physical impact of his fraud. U.S. v. Barnes, 125 F.3d 1287 (9th Cir. 1997).
9th Circuit says applying same adjustments to each “grouped” offense was improper double counting. (300) The district court adjusted defendant’s fraud offense level for vulnerable victim and abuse of position of trust. It then used the same adjustments to increase the offense level for money laundering. The result was that when both offenses were “grouped” under section 3D1.4, the fraud group was treated as one “unit” rather than ½ “unit.” In a 2-1 opinion, the Ninth Circuit held that this was improper double counting because “the effect is to add prison time twice for exactly the same abuse of trust and vulnerable victims.” District Judge Brewster dissented, arguing that double counting is permissible where, as here, the Commission intended it. U.S. v. Calozza, 125 F.3d 687 (9th Cir. 1997).
9th Circuit adopts rule to decide what “group” furnishes the base offense level. (300) Under guideline section 3D1.4 the rule for choosing which group furnishes the base offense level is to use “the offense level applicable to the Group with the highest offense level.” In this case, defendant argued that the fraud guideline rather than the money laundering guideline, should have been used to set the base offense level because the vulnerable victim and abuse of position of trust adjustments should have been considered only with respect to fraud. The Ninth Circuit rejected this argument, relying on U.S. v. Duran, 15 F.3d 131, 134 (9th Cir. 1994), and U.S. v. Haggard, 41 F.3d 1320 (9th Cir. 1994). Under these cases, “the test for whether such adjustments as vulnerable victim and abuse of position of trust can be applied is whether they are ‘relevant conduct’ as defined by the guidelines, not whether they apply to the victim or the criminal’s position with respect to the crime to which the adjustments are being applied.” Because defendant’s money laundering was relevant conduct to his offense of fraud, it was proper to use money laundering as the base offense level and apply the adjustments to that offense level. U.S. v. Calozza, 125 F.3d 687 (9th Cir. 1997).
9th Circuit holds bank fraud is a continuing offense, but making false statements to a bank under § 1014, is not. (300) In U.S. v. Niven, 952 F.2d 289, 291 (9th Cir. 1991), the Ninth Circuit held that mail and wire fraud are not continuing violations because those offenses punish each use of the mail or wires. In the present case, the Ninth Circuit distinguished Niven, noting that bank fraud in violation of 18 U.S.C. § 1344 punishes the execution of a scheme to defraud or obtain money; “language that suggests the violation should be treated as continuing.” On the other hand, defendant was also convicted of making false statements to a bank in violation of 18 U.S.C. § 1014, which does not require a scheme to defraud, but instead punishes each false statement. Therefore the Ninth Circuit concluded that § 1014 is not a continuing offense. Accordingly, since no offenses were committed after the effective date of the sentencing guidelines, November 1, 1987, the guidelines did not apply. U.S. v. Nash, 115 F.3d 1431 (9th Cir. 1997).
9th Circuit says increase for million dollar fraud need not come from single financial institution. (300) Section 2F1.1(b)(6)(B) provides a four level enhancement if the offense “affected a financial institution and the defendant derived more than $1,000,000 in gross receipts from the offense.” The Ninth Circuit rejected defendant’s argument that the million dollars must come from a single financial institution, relying on Application Note 16. However, the court held that each defendant individually must receive one million dollars from the scheme, relying on Application Note 11. “[T]hat the defendants were convicted of conspiracy does not impose joint liability on them for purposes of the financial institution’s enhancement.” In this case, one defendant received more than a million dollars from the scheme, including money transferred from his codefendant. However, since the government attributed the transferred money to the first defendant, it could not also attribute that money to the codefendant, so the four level increase for the codefendant was vacated. U.S. v. Kohli, 110 F.3d 1475 (9th Cir. 1997).
9th Circuit says mail fraud is not a continuing offense so ex post facto clause required resentencing. (300) Defendant was convicted of five counts of mail fraud, spanning the period between August, 1986 and July, 1990. The fraud table in guideline § 2F1.1 was increased on November 1, 1989, after four of the counts were completed, but before the fifth count. Section § 1B1.11(b)(3), requires the November 1, 1989 guideline manual to be applied to all offenses, but the Ninth Circuit held that this would violate the ex post facto clause because mail fraud is a “completed rather than a continuing offense.” Thus, the court said that there are “in fact five separate crimes; each carries its own punishment, even if the sentences are all run concurrently to the extent that they overlap.” On remand, the district court was directed to sentence defendant under the 1988 guidelines on counts one through four and under the 1994 guidelines on count five. U.S. v. Ortland, 109 F.3d 539 (9th Cir. 1997).
9th Circuit upholds grouping 17 false statement convictions into 6 groups. (300) Defendant, a DEA informant, was convicted of seventeen counts of making false statements to the DEA in violation of 18 U.S.C. § 1001. The district court decided to group these seventeen counts into six groups after analyzing his offenses under several categories: the number of persons accused of drug involvement, the number of reported drug transactions, the number of locations where investigations were carried out, and the number of individuals and agencies lied to. Six was the lowest number of groups under these categories. According due deference to the district court’s application of guideline § 3D1.2(b) to the facts, the Ninth Circuit affirmed the court’s finding of six groups. U.S. v. Edmonds, 103 F.3d 822 (9th Cir. 1996).
9th Circuit says increase for violating “judicial process” is not limited to a specific judicial order. (300) Guideline § 2F1.1(b)(3) (B) provides for a two level increase “[i]f the offense involved . . . violation of any judicial or administrative order, injunction, decree, or process not addressed elsewhere in the guidelines.” The district court found that defendant violated the judicial process of the bankruptcy courts when she filed several false bankruptcy petitions. Defendant argued that she did not violate any judicial process because the word “process” refers only to a summons, a complaint, or a writ, not a specific ajudicatory process. The Ninth Circuit said defendant’s argument had been rejected in U.S. v. Linville, 10 F.3d 630 (9th Cir. 1993), which held that “process must be construed to be a directive based upon the kind of formalities that undergird orders, injunctions and decrees.” This is broad enough to include the filing of a false bankruptcy petition. The court noted that the Seventh and Eighth Circuits are in accord. U.S. v. Welch, 103 F.3d 906 (9th Cir. 1996).
9th Circuit finds that defendant completed all acts necessary for the offense. (300) Guideline § 2X1.1(b) provides for a three level reduction for an attempt or conspiracy “unless the defendant completed all the acts the defendant believed necessary for successful completion of the substantive offense.” In the present case, defendant hacked into the computers of Heller Financial and obtained the codes to make a wire transfer. He then telephoned two bomb threats as a distraction, and while the building was evacuated, he executed a $150,000 wire transfer from Heller to an account at Union Bank. The next day Heller discovered the transfer and managed to seize the $150,000 before it was removed from Union Bank. The district court found that defendant had completed all the acts necessary for the crime, and on appeal the Ninth Circuit affirmed. U.S. v. Petersen, 98 F.3d 502 (9th Cir. 1996).
9th Circuit holds that a blank credit card is an “access device” under 18 U.S.C. § 1029(e)(1). (300) Blank credit cards are plastic cards that have not yet been assigned to a particular account holder and do not contain the embossed name or identifying information on the magnetic strip. Defendant argued that a card without a number could not gain access to an account and therefore was not an “access device” within the meaning of 18 U.S.C. § 1029(e)(1). The Ninth Circuit rejected the argument, holding that under the statute, an “access device” includes “any card . . . that can be used, alone or in conjunction with another access device, to obtain money, goods, [or] services.” The court noted that a blank credit card could be used “in conjunction with another access device” — an account number — in order to gain access to an account or to obtain goods or services. Accordingly, defendant’s sentence under Guideline § 2F1.1 based on $100 per blank card was affirmed. U.S. v. Nguyen, 81 F.3d 912 (9th Cir. 1996).
9th Circuit permits consecutive sentences even though pre-guidelines conduct was counted twice. (300) In an earlier opinion in this case, U.S. v. Scarano, 975 F.2d 580 (9th Cir. 1992) the Ninth Circuit relied on U.S. v. Niven, 952 F.2d 289 (9th Cir. 1991), to hold that consecutive sentences for pre-and post-guidelines fraud conduct violated the double jeopardy clause because the pre-guidelines conduct was counted as relevant conduct in the sentence for the post-guidelines count. On remand, a different judge again imposed consecutive sentences. On appeal, the Ninth Circuit held that the Supreme Court’s opinion in Witte v. U.S., 515 U.S. 389 (1995), had overruled Niven, Scarano, and U.S. v. Caterino, 29 F.3d 1390, 1396 (9th Cir. 1994). Witte held that the use of relevant conduct to increase the punishment for a charged offense within statutory limits does not “punish” the offender for the relevant conduct for double jeopardy purposes. Similarly, in the present case, the fact that defendant’s pre-guidelines fraud conduct was counted as relevant conduct in setting his offense level on the guidelines count did not prevent the district court from making his sentence on the pre-guidelines count consecutive to the guidelines count. U.S. v. Scarano, 76 F.3d 1471 (9th Cir. 1996).
9th Circuit remands downward departure in Medicare fraud case for better findings. (300) Defendant, an eye surgeon, was convicted of Medicare fraud. The district court departed downward to two months confinement, four months home detention, and three years of supervised release. The district court did not explain the basis for the departure other than to say, “under the totality of what’s going to happen here and what has happened and almost certain to happen in the future, I think that’s adequate.” Even the parties at the sentencing hearing were confused as to whether the court had departed downward and what conduct it had considered. The case was remanded to the district court for more specific findings. U.S. v. Erickson, 75 F.3d 470 (9th Cir. 1996).
9th Circuit reverses 2-level departure for jeopardizing soundness of financial institution. (300) The district court departed upward by two levels for jeopardizing the safety and soundness of a federally insured financial institution, noting that a later revision of the guidelines mandated a four level adjustment for similar conduct. The Ninth Circuit reversed, because the $11 million loss caused by the defendants in this case represented only 2% of the roughly $500 million in bad debts suffered by the financial institution. “An upward departure is not warranted simply because the victim’s suffered from a multitude of ills, but must instead be based upon harm that can reasonably be linked to the Defendants.” U.S. v. Sarno, 73 F.3d 1470 (9th Cir. 1995).
9th Circuit prohibits departure based on later amendment that alters rather than clarifies guideline. (300) The district court justified a four level upward departure by reference to a later amendment to § 2F1.1 imposing stiffer penalties for amounts of loss greater than $5 million. The Ninth Circuit held this was erroneous because the later version of the loss table in § 2F1.1 “alters rather than merely clarifies pre-existing law.” Under U.S. v. Martinez, 946 F.2d 100, 102 (9th Cir. 1991), a court may not analogize its departure to subsequently enacted amendments to the guidelines where the amendment alters rather than clarifies existing law. Nevertheless, the sentence was affirmed because the district judge gave an independently valid reason for the departure. Judge Reinhardt dissented. U.S. v. Vargas, 67 F.3d 823 (9th Cir. 1995).
9th Circuit finds defendant was organizer of five or more in counterfeit credit card scheme. (300) Contrary to defendant’s claims, the evidence supported the district court’s findings that defendant organized the operation to deal in counterfeit access devices, and that he organized or managed five or more participants. Defendant possessed the instrumentalities of credit card counterfeiting, including stolen account numbers and an embossing machine for printing counterfeit cards. U.S. v. Camper, 66 F.3d 229 (9th Cir. 1995).
9th Circuit permits reliance on post-offense conduct in departing upward. (300) Defendant pleaded guilty to fraudulently obtaining more than $144,000 from a family. While awaiting sentencing, she was rearrested on a charge of having obtained $1,690 by wire fraud. The district court departed upward under § 4A1.3 on the ground that this post-offense conduct demonstrated that defendant’s criminal history category significantly underrepresented the likelihood that she would commit further crimes. On appeal, the 9th Circuit affirmed, noting that every other circuit that has ruled on the question has held that § 4A1.3 authorizes a court to take into consideration a defendant’s post offense, presentence conduct as a possible ground for departing upward. The extent of the departure—one criminal history category—was reasonable because that is where defendant’s post offense conduct would have placed her had she actually been charged with and convicted of that crime before sentencing. U.S. v. Myers, 41 F.3d 531 (9th Cir. 1994).
9th Circuit reverses consecutive sentences for failure to apportion loss between pre- and post-guidelines counts. (300) In U.S. v. Niven, 952 F.2d 289 (9th Cir. 1991), the 9th Circuit held that it violated double jeopardy for a court to count the same fraud loss when determining both the preguideline sentence and the guidelines sentence and then to impose the two sentences consecutively. Niven prohibits the court from applying consecutive sentences for pre- and post-guidelines conduct unless it first apportions the losses attributed to each. In this case, the losses were not apportioned and therefore the district court erred in imposing consecutive sentences on the pre- and post-guidelines counts. U.S. v. Caterino, 29 F.3d 1390 (9th Cir. 1994), overruled on other grounds by Witte v. U.S., 515 U.S. 389 (1995).
9th Circuit finds more than minimal planning based on repeated acts of bankrupt. (300) Defendant filed bankruptcy petitions to avoid being evicted from property he had purchased. The district court increased his offense level finding “more than minimal planning.” The Ninth Circuit upheld the increase even though the offense was simple in the sense it was effectuated by failing to provide required information on bankruptcy documents. The element of planning was sophisticated and the underlying behavior was repeated over an extended period of time. U.S. v. Lindholm, 24 F.3d 1078 (9th Cir. 1994).
9th Circuit upholds restitution order based on unpaid rents. (300) The district court ordered restitution based on the amount of rent and mortgage payments defendant failed to pay to the victims of his bankruptcy fraud. The Ninth Circuit upheld the restitution order finding defendant was financially capable of complying with the order. The unpaid rent and mortgage payments were the actual damages in the case. Defendant’s payment of storage costs for his personal property and the negotiations to get defendant off the property were not settlements affecting restitution. U.S. v. Lindholm, 24 F.3d 1078 (9th Cir. 1994).
9th Circuit upholds grouping of fraud and money laundering funds. (300) Two defendants were convicted of various fraud and money laundering counts arising out of fraudulent money lending and laundering activities of two companies they organized and operated. In determining the “value of funds” laundered under § 2S1.1(b)(2)(G), the district court “grouped” under § 3D1.2(d) the moneys involved in the fraud and money laundering counts including uncharged amounts. The Ninth Circuit upheld this calculation, finding all the moneys were relevant conduct. This case was distinguished from U.S. v. Taylor, 984 F.2d 298 (9th Cir. 1993) and U.S. v. Johnson, 971 F.2d 562 (10th Cir. 1992) where the courts precluded grouping of fraud and money laundering offenses. In those cases, the money schemes were related, but not relevant conduct. U.S. v. Rose, 20 F.3d 367 (9th Cir. 1994).
9th Circuit rejects departure based on disparity between fraud and money laundering guidelines. (300) Defendant was convicted of various fraud and money laundering counts. He was sentenced under the more harsh money laundering guidelines, with the fraud moneys calculated as part of the “value of funds” under § 2S.1. Defendant requested a downward departure to minimize the sentencing disparity between the fraud and money laundering guidelines. Without deciding the issue of reviewability, the Ninth Circuit upheld the district court’s refusal to depart finding the disparity was intended by the Sentencing Commission. Therefore there was no mitigating factor upon which to base a departure. U.S. v. Rose, 20 F.3d 367 (9th Cir. 1994).
9th Circuit says selling “Free to Good Home” pets for medical research did not violate administrative process. (300) Defendant fraudulently obtained pets from owners who placed “Free to Good Home” ads in local newspapers. She claimed she wanted the animals as pets, when in fact she planned to sell them to a kennel for resale for medical research purposes. She received warning letters from the USDA notifying her that she was impermissibly selling dogs and cats to USDA licensed dealers without a license. She was ultimately convicted of conspiracy to defraud the Department of Agriculture in violation of 18 U.S.C. § 371, and sentenced to 8 months imprisonment and two months home detention. Her sentence was increased by two levels under § 2F1.1(b)(3)(B), on the ground that, by continuing to sell animals after receiving warning letters from the USDA, she was in “violation of any judicial or administrative order, injunction, decree or process.” On appeal, the 9th Circuit reversed, ruling that the warning letters did not constitute “orders” or “process.” U.S. v. Linville, 10 F.3d 630 (9th Cir. 1993).
9th Circuit holds customs guideline was more “apt” than currency guideline for lying about exporting money. (300) Defendant lied to a customs agent in an effort to smuggle $51,000 cash out of the country. He pled guilty to 18 U.S.C. §1001, for which the applicable guideline is §2F1.1. Application note 13 authorizes the use of other guidelines instead, if they fit the facts of the case more closely. It gives as an example, “false statements to a customs officer, for which section 2T3.1 likely would be more apt.” Nevertheless, the district court sentenced defendant under the currency guideline, §2S1.4. On appeal, the 9th Circuit reversed, following its earlier decision in U.S. v. Carrillo-Hernandez, 963 F.2d 1316 (9th Cir. 1992), which reversed on almost identical facts. The court held that section 2T3.1 was the appropriate guideline to be applied. U.S. v. Mendoza-Fernandez, 4 F.3d 815 (9th Cir. 1993).
9th Circuit holds that “intended loss” is not necessarily the gross amount of the loan. (300) Commentary Note 7 to §2F1.1 of the 1989 Guidelines Manual instructs the court to use the highest of the “actual” or “probable or intended” loss. The 9th Circuit noted that in U.S. v. Brach, 942 F.2d 141 (2nd Cir. 1991) the 2nd Circuit equated “intended” and “probable” loss with the gross amount of the loan, making intent to repay largely immaterial. Other courts, best exemplified by the 3rd Circuit in U.S. v. Kopp, 951 F.2d 521, 523 (3rd Cir. 1991), disapproval recognized by U.S. v. Wood, 486 F.3d 781 (3d Cir. 2007) have concluded that “loss” is not “possible” loss but actual loss, or probable or intended loss, whichever is greater. The 9th Circuit agreed with the 3rd Circuit (and the 4th, 10th and 11th Circuits), holding that the amount of the “intended” loss was the amount the defendant subjectively intended for the bank to lose. The defendant’s sentence was reversed and the case was remanded to determine “how much, if any, the bank actually lost, and the extent to which, if at all, [defendant] subjectively intended to repay what he had borrowed.” U.S. v. Shaw, 3 F.3d 311 (9th Cir. 1993).
9th Circuit rejects argument that “relevant conduct” guideline violates statutory mandate. (300) Defendant pled guilty to two counts of a multi-count bank fraud and false claims indictment. The plea agreement identified a total loss of $4.3 million from all of the indicted charges. However, defendant was sentenced based on $8.3 million, which included losses from crimes for which defendant was not indicted. In a 2-1 decision, the Ninth Circuit found that the sentence was properly based on the total losses in the scheme and rejected defendant’s argument that the “relevant conduct” provisions in §1B1.3 exceeded the Sentencing Commission’s statutory mandate. In so holding, the court concurred with the Eighth Circuit’s decision in U.S. v. Galloway, 976 F.2d 414 (8th Cir. 1992) (en banc) that 28 U.S.C. §994(c)(2) gave the Commission full authority to adopt a relevant conduct guideline. The dissent argued that the Commission exceeded its rule-making authority in promulgating the relevant conduct guideline. U.S. v. Wong, 2 F.3d 927 (9th Cir. 1993).
9th Circuit holds defendant responsible for coconspirators’ intended tax loss. (300) The district court added thirteen points to defendant’s base offense level because his coconspirator falsely claimed approximately $4.9 million in tax refunds. The 9th Circuit found no error, noting that under guideline section 1B1.3(a)(1)(B), defendant was responsible for the reasonably foreseeable conduct of his coconspirators. The court noted that the 9th Circuit has rejected the contention that “loss” under section 2F1.1 means only actual loss. The government need only show the intended loss, and the intended loss “does not have to be realistic.” Nor does the fact that the claimed refund “was obviously fraudulent” reduce the amount of loss. U.S. v. Lorenzo, 995 F.2d 1448 (9th Cir. 1993).
9th Circuit reiterates that dismissed “groupable” counts can be considered. (300) In a case involving the harassment and intimidation of multiple interracial couples, defendant pled guilty to one count of mail fraud, one count of mailing a threatening communication and one count of threatening the President. Although the 9th Circuit found nothing to indicate the district court actually based the sentence on the conduct involving victims in dismissed mail fraud counts, it reiterated that dismissed “groupable” counts can be considered in sentencing. Mail fraud counts are “groupable” under the multiple count rules in §3D1.2. This was the holding in U.S. v. Fine, 975 F.2d 596 (9th Cir. 1992 (en banc). Therefore, even if the district court considered the overall fraudulent conduct or conduct against a specific victim in a dismissed count, it would have been proper to do so. U.S. v. McAninch, 994 F.2d 1380 (9th Cir. 1993)
9th Circuit upholds doubling of expected revenues as reasonable estimate of loss in steroid case. (300) Defendant was convicted of counterfeiting steroids. In determining loss under §2F1.1, the district court doubled defendant’s expected revenues from the steroid scheme, finding that retail prices were a better measure of loss than wholesale prices and the number of vials seized represented only a fraction of defendant’s steroid business. The 9th Circuit affirmed, finding the method of calculating loss was reasonable. While fair market value is the ordinary method of determining loss, other methods are proper if the fair market value under estimates the loss to the victims. It did not matter that this measure of loss exceeded defendant’s gain. U.S. v. Kelly, 993 F.2d 702 (9th Cir. 1993).
9th Circuit finds “more than minimal planning” and aggravating role not double counting in fraud case. (300) In determining the offense level for defendant’s steroid counterfeiting conviction, the district court increased for both “more than minimal planning” and aggravating role. The 9th Circuit affirmed application of both enhancements finding it did not result in impermissible double counting. The increase for “more than minimal planning” results from the complexity of the overall scheme and the aggravating role increase is a result of defendant’s role within the group of conspirators. The crime of fraud does not automatically include “more than minimal planning” or aggravating role. U.S. v. Kelly, 993 F.2d 702 (9th Cir. 1993).
9th Circuit upholds calculation of fraud loss from frequent flyer credits. (300) Defendants were convicted of conspiracy to defraud American Airlines by electronically transferring frequent flier miles to fictitious accounts and then cashing in those accounts for free airline tickets. The presentence report calculated the loss as $1.3 million and the district court discounted that figure to between $500,000 and $1,000,000 to reflect the fact that the defendants did not profit from every ticket obtained. The 9th Circuit rejected the defendant’s argument that the loss was only 1% of this amount, noting that it is the “probable or intended loss resulting from a crime, however, not the actual loss suffered that a district court must determine for sentencing purposes.” The district court’s loss calculation was adequate under the circumstances. U.S. v. Mullins, 992 F.2d 1472 (9th Cir. 1993).
9th Circuit calculates criminal history from date of relevant conduct, not just counts included in plea. (300) Defendant was convicted of student loan fraud and placed on probation on June 1, 1989. Thereafter, it was discovered that he had engaged in a second fraudulent scheme, which lasted from before his prior sentencing through October of 1989. He pled guilty to three counts involving acts that took place prior to June 1, 1989. Five later counts were dismissed. The district court increased his criminal history by three points under § 4A1.1(d)-(e) for committing the instant offense while on probation for another crime. On appeal, defendant pointed out that the three acts to which he pled guilty occurred before he was placed on probation for the other crime. Nevertheless, the 9th Circuit ruled the enhancement proper because the term “instant offense” under § 4A1.1(d)-(e) includes “relevant conduct” under § 1B1.3. The court rejected defendant’s argument that dismissed counts could not be considered as relevant conduct, relying on U.S. v. Fine, 975 F.2d 596 (9th Cir. 1992) (en banc). U.S. v. Smith, 991 F.2d 1468 (9th Cir. 1993).
9th Circuit bases sentence on “parked profits” in stockbroker’s account regardless of victim. (300) Defendant, a stockbroker, stole money from an account. The indictment charged that the client was the victim, but defendant argued that the money was “parked profits” which really belonged to his employer, Prudential Bache. The 9th Circuit found the argument unpersuasive, noting that in calculating the amount of loss the district court was required to consider “all such acts and omissions that were part of the same course of conduct or common scheme or plan as the offense of conviction.” Thus, in this case “parking his profits in the Stroe’s account was part of the same course of conduct as the offense of conviction, regardless of whether the indictment identified the Stroes or Pru-Bache as the victim.” U.S. v. Donine, 985 F.2d 463 (9th Cir. 1993).
9th Circuit holds that stockbroker’s thefts over a year and a half showed more than minimal planning. (300) Defendant argued that he simply took the money out of his customer’s account and used it for himself without planning. The 9th Circuit rejected the argument, noting that “more than minimal planning is deemed present in any case involving repeated acts over a period of time.” U.S.S.G. section 1B1.1, Application Note 1(f). Defendant’s thefts were repeated over at least a year and a half, involved the use of phony letters of authorization from customers, and some disguise of defendant’s bank accounts. “The thefts were not the work of a master criminal but they were neither simple nor unsophisticated.” The enhancement for more than minimal planning was appropriate. U.S. v. Donine, 985 F.2d 463 (9th Cir. 1993).
9th Circuit includes uncharged loans as relevant conduct in fraud case. (300) Defendant was convicted of fraudulently obtaining two automobile loans and a home mortgage loan. The 9th Circuit held that the district court did not err by including in its calculation of loss under section 2F1.1(b)(1) losses attributable to counts the government agreed not to prosecute. There was no dispute that these losses arose out of a common scheme, and therefore they were “relevant conduct” under 1B1.3. The court found it unnecessary to decide whether it was proper to include losses attributable to dismissed counts because these losses did not change the offense level. The district court properly considered the entire fraudulent scheme, whether charged or not, in concluding that the defendant was involved in a scheme to defraud more than one victim. The two-level increase under section 2F1.1(b)(2)(B) (June 1988) was proper. U.S. v. Galliano, 977 F.2d 1350 (9th Cir. 1992).
9th Circuit considers gross amounts of fraudulent loans defendant did not intend to repay. (300) Defendant pled guilty to fraudulently obtaining two automobile loans and a home mortgage loan. The banks recovered the property and reduced the amount of their actual losses by selling the cars and the house. The 9th Circuit held that because the defendant did not intend to repay the loans, it was proper to look to the gross amount of the loans obtained by the fraud to determine the intended loss for sentencing purposes. In so holding, the court did not reach the question of whether a person who does intend to repay a loan obtained by fraud is accountable for sentencing purposes for the full amount of the loan. U.S. v. Galliano, 977 F.2d 1350 (9th Cir. 1992).
9th Circuit, en banc, holds fraud losses underlying dismissed counts are relevant conduct. (300) The panel opinion in this case, U.S. v. Fine, 946 F.2d 650 (9th Cir. 1991) held that mail fraud losses underlying counts dismissed in a plea agreement could not be considered as “relevant conduct” under Section 1B1.3 of the Sentencing Guidelines. The Ninth Circuit granted rehearing en banc, and unanimously reversed the panel. The en banc court followed the earlier decision in U.S. v. Turner, 898 F.2d 705, 711 (9th Cir. 1990), which held that quantities of drugs in dismissed were properly aggregated with the counts of conviction as relevant conduct. The court distinguished U.S. v. Castro-Cervantes, 927 F.2d 1079 (9th Cir. 1990) and U.S. v. Faulkner, 952 F.2d 1066 (9th Cir. 1991), on the ground that the dismissed (or uncharged) conduct there was used to depart. The en banc court left the remainder of the panel opinion intact. U.S. v. Fine, 975 F.2d 596 (9th Cir. 1992) (en banc).
9th Circuit upholds reliance on relevant conduct to sentence for all losses arising out of mail fraud scheme. (300) Defendant argued that his offense level should have been calculated by the amount of the check mailed in count one, i.e. $580, rather than the amount of the total scheme to defraud, $38,906. He contended that his stipulation that the total losses exceeded $120,000 could not bind him to a sentence unauthorized by law. The 9th Circuit rejected the argument, relying on the “relevant conduct” section of the guidelines, section 1B1.3, and the cases of U.S. v. Newbert, 952 F.2d 281, 283-84 (9th Cir. 1991) and U.S. v. Niven, 952 F.2d 289, 291 (9th Cir. 1991). The court said that because “there was no dispute that the losses associated with counts I and II arose out of a common scheme or plan, the district court was required to take into account all losses associated with both counts when determining the appropriate offense level under section 2F1.1(b). U.S. v. Scarano, 975 F.2d 580 (9th Cir. 1992).
9th Circuit reverses consecutive sentences where loss on pre-guidelines count was included in guideline count. (300) Defendant was convicted of two counts of fraud, one of which occured before the effective date of the guidelines. The district court imposed consecutive sentences, even though in computing the offense level for the guidelines count, it included losses attributable to the pre-guidelines count. On appeal, the 9th Circuit held that this resulted in double punishment in violation of the Double Jeopardy Clause. The sentence was vacated with instructions either to impose concurrent sentences or to keep the losses from the two counts separate in computing the offense level. U.S. v. Scarano, 975 F.2d 580 (9th Cir. 1992).
9th Circuit holds that violation of “judicial order” in 2F1.1(b)(3)(B) does not include bail order. (300) Guideline Section 2F1.1(b)(3)(B) provides: “If the offense involved . . . violation of any judicial or administrative order, injunction, decree or process, increase by two levels.” The defendant here committed his mail fraud offenses while under a bail order containing a condition that he commit no crimes. The district court concluded that the bail order was a “judicial order” and increased his base offense level by two. On appeal, the 9th Circuit reversed, holding that the Sentencing Commission did not intend to include general bail conditions under the judicial orders covered by section 2F1.1. The court noted that two other guideline sections were applicable. Section 2J1.7 requires a three level enhancement for offenses committed while on release, and 4A1.3 allows the district court to depart upward if “the defendant was pending trial, sentencing or appeal or another charge at the time of the instant offense.” U.S. v. Scarano, 975 F.2d 580 (9th Cir. 1992)
9th Circuit affirms offense level based on “intended loss” rather than “probable loss.” (300) Defendants gained access to ATM account and personal identification numbers and were arrested in possession of approximately 1,480 encoded counterfeit ATM cards, 4,100 card with magnetic tape that had not yet been encoded and 800 cards to which magnetic tape had not yet been attached. The district court increased their offense level by 10 points, finding that the cumulative loss intended exceeded $2 million. Application Note 7 to section 2F1.1 provides that “if a probable or intended loss . . . can be determined, that figure [should] be used if it [is] larger than the actual loss.” On appeal, the conspirators argued that the figures were speculative and not realistic. The 9th Circuit rejected the argument, holding that section 2F1.1 only requires a calculation of “intended loss” and does not require that the intention be realistic. U.S. v. Koenig, 952 F.2d 267 (9th Cir. 1991).
9th Circuit finds attempt guideline 2X1.1 inapplicable in setting fraud offense level under 2F1.1. (300) Defendants were convicted of conspiracy to produce counterfeit ATM cards. They argued that they were entitled to a three-level reduction under section 2X1.1(b) because they had not completed the crime. The 9th Circuit rejected the argument, ruling that section 2X1.1 does not apply if the offense is covered by a more specific guideline, here section 2F1.1. Moreover, the crime of which the defendants were convicted, 18 U.S.C. section 1029, “expressly covers conspiracies and attempts to commit fraud.” The court noted that the Sentencing Commission amended Commentary Note 9 to section 2F1.1 effective November 1, 1991 to require specifically that the “offense level” for “partially completed” offense “be determined in accordance with the provisions of 2X1.1.” But the court ruled that this amendment amounted to a substantive change that was not in effect at the time of sentencing in this case. U.S. v. Koenig, 952 F.2d 267 (9th Cir. 1991).
9th Circuit includes $5 million check in loss despite argument that check could not have been taken seriously. (300) Commentary Note 10 to Guideline Section 2F1.1 says that the total dollar loss may overstate the seriousness of the offense when “an instrument . . . was so obviously fraudulent that no one would seriously consider honoring it . . . . In such instances a downward departure may be warranted.” The 9th Circuit stated that this comment does mean that the check should not be included in the base offense level. Accordingly the court upheld the district court’s inclusion of a $5 million check written on defendants Merrill Lynch account, finding that the defendants “intended to inflict a $5 million loss by attempting to pass the check.” The court stated that the district court’s decision not to depart downward was not reviewable on appeal. U.S. v. Joetzki, 952 F.2d 1090 (9th Cir. 1991).
9th Circuit upholds enhancement for more than minimal planning in bank fraud case. (300) Defendant argued that because his conviction stemmed from only a single taking, an upward adjustment for more than minimal planning under section 2F1.1(b)(2)(A), was erroneous. The 9th Circuit rejected the argument, noting that the bank embezzlement and conspiracy for which the defendant was convicted involved more than “a single taking accomplished by false book entry.” The defendant reopened a previously inactive account into which a miscoded check was to be deposited. Another accomplice then opened a bank account at the same branch using a fictitious name. Most of the money was then withdrawn from the account over the next 15 days. The defendants also took significant affirmative steps to conceal the offense. U.S. v. Deeb, 944 F.2d 545 (9th Cir. 1991).
9th Circuit rules that trustee is not the only victim of bankruptcy fraud. (300) Defendant argued that the only victim of his bankruptcy fraud was the trustee of his estate, not his creditors, and that therefore the district court should not have increased his base offense level for involvement in a scheme to defraud more than one victim under § 2F1.1(b)(2)(B). The 9th Circuit rejected the argument, agreeing with the district court that defendant’s secured creditors as well as the bankruptcy trustee were the victims of his fraud. U.S. v. Nazifpour, 944 F.2d 472 (9th Cir. 1991).
9th Circuit rules that loss from bankruptcy fraud included money in account closed prior to filing bankruptcy. (300) The 9th Circuit ruled that the fact that defendant closed his account on November 19, 1987, one day prior to filing his bankruptcy petition on November 20, 1987 “does not change the fact that he did not report its existence when he prepared the Schedules of Assets and Liabilities under penalty of perjury on November 6, 1987.” U.S. v. Nazifpour, 944 F.2d 472 (9th Cir. 1991).
9th Circuit upholds use of fraud guideline for selling misbranded steroids. (300) Defendant was convicted of selling counterfeit steroids, misbranded human growth hormone, and anabolic steroids in violation of 21 U.S.C. sections 331 and 333. The statutory index to the guidelines, Appendix A, states that guideline § 2N2.1 applies to violations of 21 U.S.C. sections 331 and 333. Nevertheless, the 9th Circuit upheld the district court’s sentence under the fraud and deceit guideline, § 2F1.1. Defendant “sold products counterfeited to represent different products made by reputable manufacturers.” Thus, the district court was justified in concluding that the offense involved fraud and deceit. U.S. v. Cambra, 933 F.2d 752 (9th Cir. 1991).
9th Circuit upholds use of monetary table for fraud even though government was the victim. (300) The monetary table in the fraud guideline is intended to reflect “the harm to the victim and the gain to the defendant.” Federal agencies may be the victims of fraud in counterfeiting and misbranding drugs. The 9th Circuit ruled that there is no meaningful distinction between the government as victim and individual consumer victims. Accordingly it was appropriate for the court to adjust the guideline range based on the amount involved. U.S. v. Cambra, 933 F.2d 752 (9th Cir. 1991).
9th Circuit upholds use of arson guidelines in mail fraud case. (300) Defendant pled guilty to mail fraud. Pursuant to guideline § 1B1.2, he stipulated that he conspired to blow up his store to collect the insurance proceeds. The district court sentenced him using the arson guidelines instead of the mail fraud guidelines, resulting in a sentence of five years — the statutory maximum. The 9th Circuit affirmed, noting that guideline § 1B1.2 expressly provides that a stipulation may establish a more serious offense than the offense of conviction, and that Application Note 13 to § 2F1.1 specifically suggests that a state arson offense might be prosecuted as a mail fraud where a fraudulent insurance claim is mailed. The court also found that the plea in this case was not inconsistent with guideline § 6B1.2, which requires courts to accept only pleas that reflect the seriousness of the conduct. U.S. v. Bos, 917 F.2d 1178 (9th Cir. 1990).
9th Circuit holds that amendment to 2F1.1 did not change the meaning of “loss.” (300) Before its revision effective June 15, 1988, U.S.S.G. 2F1.1(b)(1) provided for an increase in the offense level if the “estimated probable or intended” loss exceeded $2,000. Defendant argued that the elimination of the words “estimated probable or intended” meant that the victim must suffer an actual loss before the base offense level of the offense must be increased. The 9th Circuit rejected the argument noting that the guideline added a reference to the definition of “loss” contained in the commentary to U.S.S.G. 2B1.1. The commentary retained the old language. Thus the meaning of “loss” was unchanged. U.S. v. Wilson, 900 F.2d 1350 (9th Cir. 1990).
9th Circuit upholds valuation of loss caused by industrial espionage. (300) Defendant was convicted of mail fraud after he offered to sell financial information and research data belonging to the biotechnology firm for which he worked. He argued that the loss should have been based upon the $200,000 for which he offered to sell the information. The 9th Circuit rejected the argument upholding the district court’s valuation of the intended loss at $1,000,000. The court held that the guidelines do not require a strict market approach, because that “measures only the gain to the defendant while virtually ignoring the harm suffered by the victim.” The court gave “due deference” to the district court’s decision to measure the loss according to the company’s development costs. U.S. v. Wilson, 900 F.2d 1350 (9th Cir. 1990).
9th Circuit holds that sales tax and shipping charges were properly included in calculating “loss” for sentencing. (300) Defendant challenged the probation report, which showed losses exceeding $107,000 in computer equipment obtained by use of fraudulent credit card numbers. Defendant claimed the loss did not exceed $50,000, which would call for four points to be added to the sentence level (U.S.S.G. 2F1.1(b)(1)(E)). $100,001 to $200,000 calls for six points (2F1.1(b)(1)(G)). Defendant claimed that “fair market value” (Commentary to 2B 1.1) is “the amount a willing buyer will pay for an item,” and that this amount did not include sales tax or shipping charges because these costs do not go to the seller. The 9th Circuit, in a per curiam opinion, held to the contrary, since what “a willing buyer will pay” has nothing to do with who receives it. U.S. v. Burns, 894 F.2d 334 (9th Cir. 1990).
9th Circuit upholds reliance on attempted or intended loss in setting offense level. (300) Application Note 7, commentary to U.S.S.G. § 2F1.1 directs the district court to use the amount of the probable or intended loss that the defendant was intending to inflict, for sentencing purposes. In this case, the government presented evidence that defendant had attempted to order $25,000 of additional equipment from a seller who did not send the goods because of dawning suspicion about the defendant. The 9th Circuit upheld the district court’s reliance on this evidence. U.S. v. Burns, 894 F.2d 334 (9th Cir. 1990).
9th Circuit holds offense level is governed by the “intended” loss rather than the “actual” loss. (300) Defendant argued that the judge should have considered only the actual monetary loss that his offense caused. The 9th Circuit rejected the argument, holding that guideline § 2F1.1 allows the judge to calculate the offense level by the “estimated, probable or intended loss.” The fact that the defendant was arrested while attempting to obtain additional money did not prevent consideration of that amount. U.S. v. Wills, 881 F.2d 823 (9th Cir. 1989).
10th Circuit upholds guideline sentence as reasonable even though court did not specifically mention § 3553(a) factors. (300) Defendant was involved in an interstate fraud scheme in which co-conspirators would open fraudulent bank accounts, purchase electronic goods with checks, and then empty the bank account before the checks cleared. The district court sentenced defendant to 37 months, at the bottom of his 37-46 month guideline range. The Tenth Circuit held that the sentence was reasonable. The court is not required to “recite any magic words” to show that it considered the factors required by § 3553(a). Here, the district court reviewed the guidelines calculation, and, after the defense and prosecution presented their arguments, explained that it was adopting a sentence at the low end of the applicable guideline range. Although the court did not specifically mention the factors in § 3553(a), neither did defendant made a “nonfrivolous argument that the § 3553(a) factors warrant[ed] a below-guideline sentence” that would have triggered the court’s obligation to address the factors on the record. U.S. v. Paredes, 461 F.3d 1190 (10th Cir. 2006).
10th Circuit approves increase for relocating fraud scheme to evade police. (300) Defendant recruited others, primarily from New York, to come West for work. Upon arriving, the recruits would open bank accounts with cash provided by defendant and purchase electronic equipment at local retailers using checks on the account. Before the checks cleared, the money was withdrawn. The Tenth Circuit affirmed a § 2F1.1(b)(9)(A) (now § 2B1.1(b)(9)(a)) increase which applies if “the defendant relocated, or participated in relocating, a fraudulent scheme to another jurisdiction to evade law enforcement or regulatory officials.” One of the recruits testified about an occasions when the participants, including defendant, and a U-Haul full of fraudulently obtained goods, moved from Utah to Idaho because Utah became “hot” after one of the recruits was arrested. This testimony was sufficient to establish that the relocation was “to evade law enforcement.” The fact that defendant himself may not have relocated did not matter. The language of the guideline clearly refers to the relocation of the scheme, not the defendant. There was no requirement in the guideline that defendant be the driving force behind the relocation. U.S. v. Paredes, 461 F.3d 1190 (10th Cir. 2006).
10th Circuit upholds separate grouping of money laundering and fraud under 1995 guidelines. (300) Defendants ran an investment fraud scheme, taking in almost $14 million by promising investors that they would double their money. Money from later investors was used to pay earlier investors. The Tenth Circuit upheld the district court’s refusal to group the money laundering and fraud counts together under § 3D1.2. While some circuits take a different approach, under Tenth Circuit precedent such grouping is not permitted. See U.S. v. Johnson, 971 F.3d 562 (10th Cir. 1992); U.S. v. Kunzman, 54 F.3d 1522 (10th Cir. 1995). The rationale of those cases, which both involved Ponzi schemes, is that the relevant money laundering guideline focused not on loss to any particular group but on the total volume of money laundered, and the “victim” of fraud-related money laundering was not the particular victim of the fraud, but rather “society in general.” Because they measure different types of harm to different victims, the fraud and money laundering offenses could not be grouped. The fact that the 2001 guidelines make it clear that money laundering of fraud proceeds should be grouped with the underlying fraud did not matter. The application 2001 guidelines would not be favorable to defendant, and to avoid ex post facto problems, the court applied the 1995 guidelines. U.S. v. Aptt, 354 F.3d 1269 (10th Cir. 2004).
10th Circuit rejects double counting claim where enhancements did not necessarily overlap. (300) Defendant was convicted of a variety of fraud counts. At the time of his sentencing, guideline § 2F1.1(b)(2) provided for a two-level increase for “a scheme to defraud more than one victim,” and § 2F1.1(b)(3) provided for another two-level increase for an offense “committed through mass-marketing.” Defendant argued that the imposition of both of these enhancements constituted impermissible double counting. The Tenth Circuit found no double counting because the two provisions do not necessarily overlap. Although it is usually the case that an offense that involves mass-marketing will also involve a scheme to defraud more than one victim, the converse is not necessarily true. “A successful double counting claim must demonstrate that the two enhancements necessarily overlap in every conceivable instance, not just that they overlap often.” It was not difficult to imagine a scheme to defraud three or four victim which did not involve mass-marketing. U.S. v. Fredette, 315 F.3d 1235 (10th Cir. 2003).
10th Circuit holds that fraud involved more than minimal planning. (300) Posing as a wealthy rancher, defendant responded to Cook’s ad to sell his ranch. After a series of phone calls with Cook, defendant visited Cook the auspices of purchasing the ranch. During the visit, defendant made several false representations regarding his trading abilities in cattle futures. Cook eventually sent defendant $50,000 to invest, and defendant converted the money for his own personal expenses. The Tenth Circuit found that the district court committed several errors in imposing a § 2F1.1(b)(2) more than minimal planning increase, but nonetheless affirmed the enhancement. First, it was unclear what “significant affirmative acts” the court found that defendant took to conceal the offense. The court also misconstrued the intent of the language “repeated acts over a period of time.” This language refers to a series of acts each of which would be criminal standing alone, rather than referring to a crime that requires the completion of a series of steps. However, the increase was still proper because defendant’s actions demonstrated a greater amount of planning than required to defraud an individual of $50,000 in its simple form. The success of defendant’s scheme depended upon his ability to ingratiate himself to Cook. This required several contacts by phone, flying to Denver to meet Cook, development and use of false stores concerning his success in trading cattle futures, and several request for money. Taken together, these actions showed a level of planning in excess of the amount of necessary to commit the crime in its simple form. U.S. v. Proffit, 304 F.3d 1001 (10th Cir. 2002).
10th Circuit holds that use of false ID to open account did not involve more than minimal planning. (300) Defendant, together with an accomplice, entered a bank and used the identification card of her deceased sister to open a checking account in the sister’s name. She returned the following day to pick up starter checks for the account. Thereafter, the accomplice cashed checks and obtained money through the fraudulently opened account. The district court applied a § 2F1.1(b)(2) more than minimal planning increase because there “was nothing spontaneous” about defendant’s crime, which involved the deliberate opening of a fraudulent account, using a false name, and holding the account with false identification. The Tenth Circuit reversed, ruling that defendant’s conduct reflected nothing more than the planning necessary to commit bank fraud in its simplest form. Fraud is a specific intent crime. Bank fraud requires that the fraud be achieved through “a scheme or artifice” that is “executed” by the defendant. If the elements of the crime include the obtaining of funds “by means of false or fraudulent pretenses,” then defendant’s use of her sister’s identification did not constitute anything more than the minimal planning necessary to “execute” a scheme or artifice to obtain those funds. Since defendant could not have committed bank fraud unless she actually obtained money, the fact that she returned the next day to obtain the starter checks was nothing more than the minimum conduct required to establish bank fraud. U.S. v. Archuletta, 231 F.3d 682 (10th Cir. 2000).
10th Circuit agrees that stolen check scheme involved more than minimal planning. (300) Halladay asked defendant to help her cash a stolen check. Hill instructed Halladay to forge the name of the payee and then endorse the check to him. After depositing the stolen check in his own checking account, defendant made five withdrawals from the account over a period of about 10 days. The Tenth Circuit upheld a § 2F1.1(b)(2)(A) enhancement for more than minimal planning because the criminal conduct involved repeated acts over a period of time. The scheme was developed over a period of two days during a phone conversation and an in-person meeting between defendant and Halladay. The scheme was then executed over a period of about 10 days by Halladay endorsing the check, defendant endorsing the check and depositing into his account, defendant checking with the bank to see if the check had cleared, defendant making a series of withdrawals, and defendant distributing the cash to his co-conspirators. U.S. v. Hill, 197 F.3d 436 (10th Cir. 1999).
10th Circuit says more than minimal planning not inconsistent with minimal participant reduction. (300) Defendant argued that his § 2F1.1 enhancement for more than minimal planning was inconsistent with the reduction he received under § 3B1.2 for being a minimal participant. The Tenth Circuit disagreed, because the two provisions address different concerns. The minimal participant inquiry is a measure of the participant’s role in the concerted criminal activity. The more than minimal planning adjustment is a measure of the extent or nature of the criminal activity itself. U.S. v. Schluneger, 184 F.3d 1154 (10th Cir. 1999).
10th Circuit applies more than minimal planning enhancement for repeated acts. (300) Defendant presented a document to the U.S. Marshal’s Office which falsely indicated that he had prevailed in a civil action against a bank, when in fact, the action had been dismissed. This document, titled “Special Execution and Order,” indicated that the lawsuit entitled him to possession of certain real property. The Tenth Circuit agreed that defendant’s repeated acts warranted a more than minimal planning enhancement. Defendant took a form from the U.S. Attorney’s office and adopted it into his Special Order and Execution document, complete with detailed property descriptions; he presented the document to the district court clerk’s office and convinced a deputy clerk to sign it; he then submitted the document to the U.S. Marshal’s Office and, after he was informed he needed additional money for processing fees, he had another person resubmit the document three weeks later with the proper fees. He followed this up with a telephone call to the Marshal’s Office, a letter to the district judge who had presided over his civil case, and a letter to the U.S. Marshal demanding action on the seizure. U.S. v. Ensminger, 174 F.3d 1143 (10th Cir. 1999).
10th Circuit upholds more than minimal planning enhancement for repeated fraudulent forms. (300) Defendant injured his back while working for the Bureau of Prisons and was awarded disability benefits. For several years, he failed to report to the workers compensation office modest amounts of income that he earned as a result of his self-employment. Defendant challenged a more than minimal planning enhancement, saying that the government sent him forms, and he merely completed and returned them in a “purely opportune” fashion. He further contended that the government “stacked” charges against him by requiring him to repeatedly fill out the forms over several years. The Tenth Circuit upheld the more than minimal planning enhancement. There was no evidence that the workers compensation office was engaged in a “nefarious scheme to ensnare” defendant. The fact that defendant simply responded to questions did not render the statements “purely opportune.” U.S. v. Henry, 164 F.3d 1304 (10th Cir. 1999).
10th Circuit finds organization was not charitable despite tax-exempt status. (300) Defendant was employed as a telephone solicitor for Say No Now, an organization that had tax-exempt status from the IRS. Telephone solicitors represented the organization to potential donors as a charity devoted to helping children stay off drugs. The solicitors also told donors they would receive their “fair share” of $75,000 in prizes and awards. Defendant challenged a § 2F1.1(b) (3)(A) enhancement for misrepresenting that he was acting on behalf of a charitable organization, because the organization qualified for tax exempt status. The Tenth Circuit affirmed, finding that Say No Now was not a charitable organization. Soliciting donations for a bogus charity is tantamount to soliciting for a non-existent charity. The fact that Say No Now had tax exempt status did not, by itself, make it a charitable organization. The organization collected over $915,000, but made only one charitable contribution of $45 and returned only $26,000 in awards to donors. Contributors were not referred to as donors, but as “mooches,” a term of derogation. U.S. v. Smith, 133 F.3d 737 (10th Cir. 1997).
10th Circuit finds departure based on SCAMS Act was double counting, but harmless. (300) Defendant worked as a telephone solicitor for a bogus charitable organization. The district court departed upward based on the Senior Citizens Against Marketing Scams Act of 1994 (SCAMS Act), which enhances the penalties for telemarketing offenses if the victims are over 55 years old. The Tenth Circuit held that defendant’s conduct clearly fell within the SCAMS Act because he was convicted of offenses listed in the Act, he used interstate phone calls to induce more than 50 victims over the age of 55 to contribute to the scheme, and the scheme had the elements of a contest or sweepstakes. However, the multiple victim enhancement in § 2F1.1(b)(2)(B) overlapped with the mass victimization on which the SCAMS Act departure was based in part. Nevertheless, the district court’s error in double counting this aspect of defendant’s behavior was harmless, because the sentencing court also found the case fell outside the heartland of fraud offenses. Defendant’s conduct was “particularly predatory,” and defendant’s victims were psychologically, emotionally and financially devastated as result of his conduct. U.S. v. Smith, 133 F.3d 737 (10th Cir. 1997).
10th Circuit again rejects grouping money laundering with underlying crimes. (300) Defendant was convicted of three counts of uttering forged checks and three counts of money laundering. She argued that the district court should have grouped the counts of uttering forged checks with the money laundering counts. The Tenth Circuit noted that although other circuits have adopted this position, it has expressly and repeatedly rejected her argument. U.S. v. Allen, 129 F.3d 1159 (10th Cir. 1997).
10th Circuit requires separate grouping of money laundering and fraud counts. (300) Defendant was convicted of mail fraud, conspiracy and money laundering. He argued that § 3D1.2 required the grouping of the mail fraud and money laundering counts. The Tenth Circuit held circuit precedent required separate grouping because money laundering and fraud involve different harms and different victims. Although the court might be inclined to agree with defendant were this a case of first impression, one panel of the court may not overrule another. U.S. v. Hargus, 128 F.3d 1358 (10th Cir. 1997).
10th Circuit finds more than minimal planning for advance planning to mislead bank inspector. (300) Defendant borrowed money from a bank to finance his farming and ranching activities. The loan was secured by defendant’s cattle, crops, farm, and equipment. Defendant showed a bank inspector a herd of about 464 head of cattle, most of which he did not did not own. The Tenth Circuit agreed that the offense involved more than minimal planning. Defendant planned in advance to mislead the inspector, taking him to several different locations, and subsequently concealed the misrepresentations. U.S. v. Copus, 110 F.3d 1529 (10th Cir. 1997).
10th Circuit finds bankruptcy fraud violated judicial process. (300) Defendant concealed various assets from the bankruptcy court. He challenged a § 2F1.1(b) enhancement for violating a judicial process. The Tenth Circuit held that bankruptcy fraud constitutes a violation of judicial process under § 2F1.1(b). The court refused to read the term “process” as a “specific judicial mechanism such as a subpoena or summons.” U.S. v. Messner, 107 F.3d 1448 (10th Cir. 1997).
10th Circuit rejects § 2F1.1(b)(3)(A) enhancement for non-profit’s president who misapplied funds. (300) Defendant, the president of a non-profit corporation funded by the Department of Labor, misused government funds for unauthorized purposes. The district court found that defendant misrepresented that he was acting on behalf of a educational organization under § 2F1.1(3)(A). The Tenth Circuit rejected the enhancement since defendant was, in fact, authorized to act on behalf of the organization. The enhancement applies when a defendant induces victims to act on their charitable impulses by misrepresenting that he has authority to act on behalf of a charitable or educational organization. The defendant here simply used funds to which the organization was entitled for unauthorized purposes. The court disagreed with the Fourth Circuit’s opinion in U.S. v. Marcum, 16 F.3d 599 (4th Cir. 1994). Judge Baldock dissented. U.S. v. Frazier, 53 F.3d 1105 (10th Cir. 1995).
10th Circuit agrees that “unbundling” medical procedures was not relevant conduct to submitting false claims. (300) Defendant was a licensed doctor employed as a full-time civilian “partner” in a medical insurance program at an army hospital. He was convicted of billing for procedures performed by other doctors. The 10th Circuit upheld the district court’s determination that defendant’s practice of “unbundling” medical procedures was not relevant conduct. Unbundling involves billing twice for the same procedure –billing once for an inclusive procedure (such as delivering a baby, which includes admission history, physical exam and post-partum care), and separately billing for the procedure’s component procedures (i.e. admission history, physical exam and post-partum care). The government did not establish that unbundling was the same scheme or plan as the charged conduct. Unbundling could have occurred by mistake or misunderstanding. U.S. v. Custodio, 39 F.3d 1121 (10th Cir. 1994).
10th Circuit agrees that unnecessary surgery resulted in serious bodily injury. (300) Defendant, a doctor, was convicted of mail fraud for having performed unnecessary surgery pursuant to a fraudulent double billing scheme. The 10th Circuit upheld an enhancement under § 2F1.1(b)(4) for an offense involving serious bodily injury. Defendant performed a tubal ligation on a patient four weeks after he delivered her child by caesarian section. Because of the second operation, the patient developed a distended abdomen and had to be hospitalized a third time. Normally a tubal ligation is performed at the same time as the caesarian section, and there was no medical reason not to have performed the procedure when the caesarian was done. The evidence was sufficient to show that defendant postponed the tubal ligation pursuant to his fraudulent double billing scheme, and that this caused serious bodily injury to his patient. U.S. v. Laughlin, 26 F.3d 1523 (10th Cir. 1994).
10th Circuit finds more than minimal planning and role enhancement was not double counting. (300) The 10th Circuit, rejecting the 6th Circuit and following the majority of circuits that have addressed this issue, concluded that a more than minimal planning enhancement under § 2F1.1(b)(2) and a role in the offense enhancement under § 3B1.1 did not constitute impermissible double counting. The enhancement for more than minimal planning is intended to distinguish between relatively simple crimes and more sophisticated ones, while the role in the offense enhancement addresses concerns about the relative responsibilities of those involved in the offense. U.S. v. Smith, 13 F.3d 1421 (10th Cir. 1994).
10th Circuit holds that enhancements for violation of judicial order, more than minimal planning and vulnerable victims were not double counting. (300) Defendant fraudulently solicited investments from his tax clients, many of whom were retirees and unsophisticated investors. The 10th Circuit upheld enhancements for more than minimal planning under section 2F1.1(b)(2)(A), for vulnerable victims under section 3A1.1, and for violating a judicial or administrative order under section 2F1.1(b)(3)(B). The more than minimal planning enhancement was proper because the case involved repeated acts over a period of time. The vulnerable victim enhancement was proper since defendant preyed on elderly, inexperienced investors who were particularly reliant on these funds for their retirement. The additional enhancement for violating a Oklahoma cease and desist order was not double counting, because the enhancements involved here were distinct, did not necessarily overlap, and served different purposes. U.S. v. Lowder, 5 F.3d 467 (10th Cir. 1993).
10th Circuit includes in loss 12 percent rate of return defendant promised investors. (300) Defendant fraudulently solicited investments, promising his investors that his corporation was a low-risk investment with a guaranteed 12 percent rate of return. He then used the investments for his own personal use. The 10th Circuit held that the loss to investors under section 2F1.1 included the 12 percent interest that defendant promised them. The 1991 version of application note 7 bars the inclusion of interest the victim could have earned on his funds had the loss not occurred. This was interpreted to disallow opportunity cost interest, or the time-value of money stolen from victims. Here, however, defendant defrauded his victims by promising them a guaranteed interest rate of 12 percent. He induced their investment by essentially contracting for a specific rate of return. U.S. v. Lowder, 5 F.3d 467 (10th Cir. 1993).
10th Circuit permits departure where defendant responsible for only part of loss, but reverses extent. (300) The district court departed downward from an offense level of 20 to an offense level of 10 because defendant was not involved in all of his co-conspirators’ efforts to defraud investors, causing the loss figure to overstate defendant’s culpability. The 10th Circuit affirmed the appropriateness of a departure on the grounds designated by the district court, but remanded for reconsideration of the scope of the departure. The district court did not clearly specify the amount of the loss from the fraud that it attributed to defendant. At one point, however, the district court suggested that defendant profited from the scheme to the tune of $110,000. If that figure were used as the loss attributable to defendant, his offense level would have been higher. U.S. v. Arutunoff, 1 F.3d 1112 (10th Cir. 1993).
10th Circuit includes in loss calculation charges made by defendant’s innocent husband. (300) Defendant, who worked for a company that provided credit services, issued to herself and her husband a credit card on an inactive account. She charged $1,621 on the card; her husband charged $8,209. The 10th Circuit affirmed including the husband’s charges in the calculation of loss under §2F1.1, even though the husband was unaware of the scheme. His purchases were clearly relevant conduct under §1B1.3(a)(3). The husband’s charges constituted “harm” suffered by the company, and the harm was the direct result of defendant’s fraudulent acts. Defendant issued the card in her husband’s name with the intent that he use it, and he did. U.S. v. Fox, 999 F.2d 483 (10th Cir. 1993).
10th Circuit holds that loss cannot exceed what it would have been if fraud had succeeded. (300) Defendant misrepresented to his insurer that his car had been stolen, and submitted an affidavit claiming $11,000 for the car. In fact, the car’s blue book value was $4800, which was the highest amount the insurer would have paid under its policy. The 10th Circuit reversed a determination that $11,000 was the intended loss under section 2F1.1, holding that whatever a defendant’s subjective belief, an intended loss under section 2F1.1 cannot exceed the loss the defendant would have caused if the fraud had been entirely successful. The guidelines imply that the fair market value of the property taken, whether by deceit, fraud or otherwise, is the upper limit of any loss valuation upon which a sentencing enhancement may be based. A valuation or estimate of loss that exceeds that limit ignores economic reality. U.S. v. Santiago, 977 F.2d 517 (10th Cir. 1992).
10th Circuit holds that bank’s actual loss should not exceed amount in settlement agreement. (300) Defendant submitted false financial statements to a bank in order to obtain a $1.25 million line of credit. The district court determined that the amount of loss under section 2F1.1(b)(1) was the entire $1.25 million. The 10th Circuit remanded for reconsideration of this issue. Under U.S. v. Smith, 951 F.2d 1164 (10th Cir. 1991), the greater of actual or intended loss may be used to enhance, but actual loss should be measured by the net value, not the gross value, of what was taken. The bank reduced its claim against defendant in a settlement agreement to $312,340. It would be “incongruous” to hold that the actual loss to the bank was greater than the amount the bank now sought to collect. The settlement agreement could be viewed as an offset: defendant has forgone his claims against the bank in exchange for a reduction of the debt owing to bank. U.S. v. Gallegos, 975 F.2d 710 (10th Cir. 1992).
10th Circuit reviews loss determination under clearly erroneous and de novo standard. (300) The 10th Circuit held that a district court’s determination of loss under section 2F1.1 is reviewed under the clearly erroneous standard, but the factors a district court may properly consider are reviewed de novo. U.S. v. Gallegos, 975 F.2d 710 (10th Cir. 1992).
10th Circuit affirms that doctor’s Medicare/Medicaid fraud involved more than minimal planning. (300) Defendant, a doctor, committed numerous acts of fraud involving Medicare and Medicaid. The 10th Circuit affirmed that his offense involved more than minimal planning under guideline section 2F1.1. Defendant submitted numerous false billings involving many different patients, and his fraudulent practices were aimed at three different federal programs with distinct billing procedures, different regulations, and coverage for different services. The nature of the fraud varied: some billings were for services not performed at all, some for services done by a different provider, and some for services claimed to have been performed when in fact others were performed. His staff was directed to file false claims, and threatened with job loss if they did not do so. U.S. v. Abud-Sanchez, 973 F.2d 835 (10th Cir. 1992), appeal after remand, 996 F.2d 312 (10th Cir. 1993).
10th Circuit rejects loss estimate that included amounts caused by defendant’s civil fraud. (300) Defendant’s plea agreement stipulated that he would pay $100,000 to the government in satisfaction of all civil claims, and that the loss to the government for the criminal offenses was less than $2,000. Based on the probation officer’s estimate of loss as $188,036, and the stipulation, the district court calculated defendant’s sentence under section 2F1.1(b)(1)(G) based on a loss of $100,000. The 10th Circuit reversed, finding that this improperly included amounts caused by defendant’s civil fraud. A loss under the guideline cannot be the result of civil fraud for which a person cannot be imprisoned. Any calculation of loss must involve a determination that defendant’s billing error rose to the level of criminal activity. The only evidence of loss directly attributable to defendant’s criminal conduct was the stipulated amount of $2,000. U.S. v. Abud-Sanchez, 973 F.2d 835 (10th Cir. 1992), appeal after remand, 996 F.2d 312 (10th Cir. 1993).
10th Circuit upholds determination of loss in bankruptcy fraud case. (300) Defendants were convicted of various charges stemming from a multitude of acts they committed to defraud their creditors during the course of bankruptcy proceedings. The 10th Circuit affirmed that the loss caused by defendants’ fraud was in excess of $2 million under section 2F1.1. The parties stipulated that the inventory and accounts receivable of defendants’ business had a value of $1.7 when defendants declared their insolvency, and that the secured parties would have suffered no loss had they exercised their rights to the collateral at this time. Instead, they permitted defendants to conduct a liquidation sale, at the end of which there was no money to pay creditors. Further, defendants embezzled in excess of $400,000 from the employees’ pension and profit sharing plans and then concealed these monies from their creditors. These two amounts alone were sufficient to place the loss at over $2 million. U.S. v. Levine, 970 F.2d 681 (10th Cir. 1992).
10th Circuit bases loss in consumer fraud case on consumer’s net out-of-pocket loss. (300) Defendant induced people to buy water purification systems at grossly inflated prices by promising them a misleading vacation prize. The district court computed the loss under guideline section 2F1.1 by subtracting the wholesale cost of the water purification system ($50) and of the prize ($30) from the price each victim paid ($400), resulting in a net loss of $320 per victim. Since a total of 150 systems were sold, the total loss was found to be $48,000. The 10th Circuit affirmed, holding that this determination of each victim’s net out-of-pocket loss more closely corresponded to the definition of loss in the guidelines than a “benefit of the bargain” computation. The court rejected defendant’s claim that the district court should have used the manufacturer’s suggested retail price ($598) as the value of the system, and that the value of the vacation prize (a list of timeshare condominiums) depended upon how much an individual used it. The measure of the value of goods is the fair market value. The fact that the manufacturer of the water system recommended a retail price 12 times the wholesale price did not necessarily determine the fair market value. U.S. v. Gennuso, 967 F.2d 1460 (10th Cir. 1992).
10th Circuit upholds loss calculation based upon finding in presentence report. (300) Defendant claimed that since the four substantive counts to which he pled guilty all alleged that he had obtained a fraudulent loan of $5 million, the “loss” for purposes of guideline section 2F1.1 was $5 million. The 10th Circuit affirmed the district court’s use of the “more than $80,000,000” in calculating the loss, based upon the presentence report’s determination that the net total damages reflecting actual losses to RTC from defendant’s involvement totaled $127,665,742. U.S. v. Burger, 964 F.2d 1065 (10th Cir. 1992).
10th Circuit affirms reliance on probable loss estimate in presentence report. (300) The 10th Circuit rejected defendant’s argument that the loss caused by his fraud under section 2F1.1 should be based solely upon the actual loss of the victims. Guideline commentary indicates that if the probable or intended loss can be determined, that figure should be used if it is larger than the actual loss. At sentencing, the district court adopted the probable and intentional monetary loss figures in the presentence report. Although this information was hearsay, it had sufficient indicia of reliability to support its probable accuracy. As an officer of the court, the probation officer may be considered a reliable source. Also, bankers who furnished information as to possible or probable loss which defendant was attempting to inflict by fraudulent loan applications could be considered reliable sources. In addition, the trial judge was entitled to use the knowledge acquired while presiding over defendant’s trial. U.S. v. Hershberger, 962 F.2d 1548 (10th Cir. 1992).
10th Circuit rejects ex post facto challenge to aggregation of losses from pre-guidelines and post-guidelines offenses. (300) Counts 1 through 7 were pre-guidelines offenses and counts 8 through 10 were post-guidelines offenses. The 10th Circuit rejected defendant’s claim that it violated the ex post facto clause to calculate the loss caused by his crime under guideline sections 2B1.1 and 2F1.1 based upon the total loss involved in both the pre- and post-guidelines offenses. Enhancement of a guidelines sentence based on losses associated with pre-guidelines offenses does not violate the ex post facto clause. U.S. v. Haddock, 956 F.2d 1534 (10th Cir. 1992), unaffected on rehearing, 961 F.2d 933 (10th Cir. 1992), abrogated on other grounds by U.S. v. Wells, 519 U.S. 482, 117 S.Ct. 921 (1997).
10th Circuit rejects use of defendant’s gain where not reasonable estimate of victim’s loss. (300) Defendant, CEO of a bank and a finance company, was convicted of bank fraud and filing false financial statements for loans. He contended that the court erred by considering his gain from all counts rather than the victim’s loss. The 10th Circuit noted that application note 8 to § 2F1.1 permits the court to estimate actual loss by measuring the defendant’s gain. But gain may only be used as an “alternative estimate” of loss; if it does not correspond to actual, intended or probable loss, it may not be used. Here, the government proved an actual and intended loss of $76,000. The district court calculated defendant’s gain at $328,523. Only $50,000 of that was actually profit to defendant. The remaining $278,523 was excess borrowing beyond what defendant needed to buy the loan packages. The lender may have been under secured as a result, but the government did not attempt to quantity that risk. Thus, the loss enhancement should have been based on the actual loss involved. U.S. v. Haddock, 956 F.2d 1534 (10th Cir. 1992), unaffected on rehearing, 961 F.2d 933 (10th Cir. 1992), abrogated on other grounds by U.S. v. Wells, 519 U.S. 482, 117 S.Ct. 921 (1997).
10th Circuit remands for district court to determine whether any actual, intended or probable loss resulted from fraudulent loans. (300) Defendant fraudulently obtained several bank loans. The district court determined that the amount of loss under guideline section 2F1.1 was the amount of the loans. The 10th Circuit remanded for resentencing because the district court did not attempt to determine whether any actual, intended or probable loss was caused by defendant’s conduct. Instead, loss was assumed to be the amount of loans defendant obtained as a result of his fraudulent conduct. U.S. v. Haddock, 956 F.2d 1534 (10th Cir. 1992), unaffected on rehearing, 961 F.2d 933 (10th Cir. 1992), abrogated on other grounds by U.S. v. Wells, 519 U.S. 482, 117 S.Ct. 921 (1997).
10th Circuit upholds loss in contractor fraud case as the difference between actual and altered subcontractor bids. (300) Defendant, a government contractor, received bids from his subcontractors on a government project, falsely inflated the bids, and then submitted those falsified bids to the managing contractor of the project. Defendant was convicted of making false statements to the government. The 10th Circuit upheld the calculation of the loss caused by defendant’s crime as the difference between the true and altered bids. The court rejected defendant’s claim that there was no actual loss because the actual value of the construction services was equal or greater than the altered bids submitted by defendant. Loss is not simply a measure of the net monetary damage to the victim. Its purpose is to gauge the severity of a particular offense. Here, defendant obtained $20,969 more in payments than he was entitled to receive absent the altered bids. This was an appropriate measure of loss. U.S. v. Lara, 956 F.2d 994 (10th Cir. 1992).
10th Circuit holds “loss” caused by fraudulent loans must be reduced by value given to lender. (300) On six different occasions, defendant, who constructed and sold single family homes, represented to federally-insured lenders that his buyers had made specified down payments when they had either made substantially smaller down payments or none at all. The cumulative value of these loans was $440,896. At the time of sentencing, not a single loan was in default. The district court imposed a nine-level enhancement under section 2F1.1 for a loss of $440,896, ruling that even though there was no actual loss, this was the amount of the intended loss. The 10th Circuit reversed, finding no factual basis for the $440,896 figure. Although defendant did receive all of the loan proceeds, he delivered to the lenders something in return: the security interest in the houses and the promises of the borrowers to repay the loans. There was no factual basis for concluding that the $440,896 was the intended or probable loss. The court did not believe “the possibility that some loss might occur on one or more of the six loans in the future amount[ed] to the ‘probable’ loss contemplated by section 2F1.1. U.S. v. Smith, 951 F.2d 1164 (10th Cir. 1991).
10th Circuit finds that use of stolen credit card on 15 separate occasions involved more than minimal planning. (300) Defendant’s brother and his brother’s girlfriend were U.S. Postal Service employees who took credit cards from the mails and gave them to family and friends. Defendant personally used “his” stolen card 15 times in 15 different locations during a one month period. Each purchase involved “several calculated falsehoods including a forged signature.” The 10th Circuit concluded that the district court’s determination that defendant’s offense involved more than minimal planning was not clearly erroneous. The 10th Circuit also rejected defendant’s argument that he was a minor participant. Defendant was not convicted of conspiracy, he pled guilty only to his own fraudulent use of the card. Therefore, he was solely responsible for his crime. Moreover, defendant clearly had knowledge of his brother’s and his wife’s activities with respect to the credit cards. He even recruited his wife to become involved in the scheme. U.S. v. Sanchez, 914 F.2d 206 (10th Cir. 1990).
10th Circuit finds that loss caused by fraud in option to purchase house is measured by value of the option. (300) Defendant fraudulently entered into a lease of a house with an option to purchase. Defendant contended that it was error to include the full value of the house in the loss caused by his fraud. The 10th Circuit agreed, rejecting the government’s argument that defendant’s purchase of the option equated to an attempt to purchase the home itself. Since it was far from certain whether defendant would exercise the option, the proper measure of loss was the value of the option only. U.S. v. Whitehead, 912 F.2d 448 (10th Cir. 1990).
11th Circuit holds that Department of Transportation Notice of Claim was not prior administrative order. (300) Defendant was convicted of fraud, extortion, and conspiracy involving moving companies he owned. The district court applied a two-level enhancement under § 2B1.1(b)(7)(B) for violating a Notice of Claim defendant received from the Department of Transportation (DOT). The court held that the Notice of Claim was a “prior, specific judicial or administrative order, injunction, decree or process.” The Eleventh Circuit reversed. After defendant received the Notice of Claim, defendant’s attorney sent a written request for a hearing. The hearing was never held because criminal charges were pending. DOT never adjudicated its case against defendant. Defendant had a legal right to contest the allegations in the Notice of Claim and he did so. There was no final adjudication. The Notice of Claim was merely a warning that defendant’s activities were illegal. The notice failed to meet the requirements of § 2B1.1(b)(7)(c). U.S. v. Malol, 476 F.3d 1283 (11th Cir. 2007) No. 05-10688.
11th Circuit holds that 23-level downward departure resulting in seven-day sentence was unreasonable. (300) Defendant, a former executive of a large health care corporation, pled guilty to a variety of securities and mail fraud charges. Both parties agreed defendant’s advisory guideline range was 108-135 months’ imprisonment, and that his substantial assistance to the government warranted a § 5K1.1 downward departure. The government recommended a departure to 42 months’ imprisonment, which equated to a nine-level departure. Instead, the court granted defendant a 23-level departure and imposed a sentence of seven days’ imprisonment. The Eleventh Circuit held that the departure and resulting sentence were not reasonable. Although defendant’s cooperation might have been extraordinary, it was “not a get-out-of-jail free card.” Moreover, the court misinterpreted § 5K1.1(a)(4), which permits a court to consider whether the defendant suffered “any injury,” or “any danger or risk of injury to the defendant or his family resulting from his assistance.” The injury does not, as the court appeared to believe, include defendant’s civil liability to the victims of his fraud. The length of the sentence was shockingly short, and wholly failed to take into account the nature and circumstances of the offense and the need for the sentence to reflect the seriousness of crime. See 18 U.S.C. § 3553(a)(1), (a)(2)(A). The panel remanded to a different judge, in light of several other cases in which the court reversed the same judge for extraordinary downward departures. U.S. v. Martin, 455 F.3d 1227 (11th Cir. 2006).
11th Circuit holds that five-hour sentence for fraud defendant was unreasonable. (300) As the comptroller of a corporation, defendant participated in a fraudulent scheme that bilked a bank out of nearly half a million dollars. The government moved for a downward departure based on defendant’s assistance in the prosecution of the company’s president. When the court indicated its intent to sentence defendant to probation, the government pointed out that the law required incarceration. The district court modified the sentence to five hours in custody. The Eleventh Circuit held that the five hour sentence was unreasonable. In deciding how much to depart on substantial assistance grounds, the court not only considered the need for restitution, but it gave that factor controlling weight. The court did not discuss any of the § 5K1.1(a) assistance-related factors, such as the significance and usefulness of the assistance, or the nature and extent of the assistance. In addition, the leap from the post-departure guideline range of 6-12 months down to five hours was excessive. The court imposed the sentence to evade the strictures of the law forbidding a probationary sentence. However, the sentence was not a real sentence of incarceration, and violated 18 U.S.C. § 3561(a) (probation may not be imposed for Class B felony). Five hours imprisonment for an offense that caused almost half a million dollars in loss was unreasonable. U.S. v. Crisp, 454 F.3d 1285 (11th Cir. 2006).
11th Circuit rejects departure based on combination of improper factors. (300) The district departed downward based on a combination of factors. Because several of the grounds relied upon by the district court were impermissible grounds for a departure, the Eleventh Circuit remanded for resentencing. Under U.S. v. Kim, 364 F.3d 1235 (11th Cir. 2004), extraordinary remorse and restitution is a discouraged but not prohibited ground for departure. The district court did not have the benefit of Kim when it made its ruling, and the appellate court would not speculate how the district court would have weighed the Kim factors. Under § 2F1.1, the use of sophisticated means is penalized with an enhancement. Therefore, lack of criminal sophistication is not a ground for departure; a defendant who does not use sophisticated means simply avoids the enhancement. The government did not move for a § 5K1.1 departure; therefore, any assistance defendant provided was not a permissible ground for departure. Finally, while departure may be proper where the loss overstates the defendant’s criminality, the other improper factors considered by the court required remand. U.S. v. Crawford, 407 F.3d 1174 (11th Cir. 2005).
11th Circuit says five-year fraud plan with hundreds of transactions involved more than minimal planning. (300) Defendant owned and operated a food store that purchased WIC vouchers from a conspirator, redeemed the vouchers, and then divided the profits with the conspirator. The district court refused to apply a § 2F1.1(b)(2)(A) more than minimal planning increase, finding that each of the over 100 instances in which defendant bought vouchers from the conspirator was purely opportune. The Eleventh Circuit reversed, finding this determination clearly erroneous. The sheer number of transactions alone made it highly unlikely that each transaction was purely opportune. Defendant wrote 184 checks to his conspirator over a five-year period, totaling $434,032. Over this five-year period, defendant had many opportunities to consider the consequences of his actions, yet he did not voluntarily cease his participation in the scheme. The district court clearly erred in finding defendant did not engage in more than minimal planning. U.S. v. Crawford, 407 F.3d 1174 (11th Cir. 2005).
11th Circuit says account information was “means of identification” for enhancement purposes. (300) guideline § 2B1.1(b)(9)(C)(i) requires a two-level enhancement where an offense involved “the unauthorized transfer or use of any means of identification unlawfully to produce or obtain any means of identification.” An American Express employee provided defendant with the account number of an American Express customer. Defendant had herself added to the victim’s account as a secondary cardholder and changed the account’s address so that she could receive a credit card in her name. The Eleventh Circuit upheld the application of the § 2B1.1(b)(9)(C)(i) increase to defendant, finding that the victim’s account number uniquely identified a cardholder. Defendant’s receipt of the victim’s account information gave her a “means of identification.” The fact that defendant used her own name on the credit cards and used existing lines of credit rather than opening new ones was irrelevant. By getting her own name placed on the victims’ account, defendant simply provided evidence that she used one means of identification (account numbers) to obtain another (credit cards). U.S. v. Auguste, 392 F.3d 1266 (11th Cir. 2004).
11th Circuit upholds use of fraud guideline for bid rigging conspiracy. (300) Defendant was convicted of various charges in connection with a scheme to rig bids on Egyptian construction contracts financed by the U.S. He argued that the court improperly applied U.S.S.G. § 2F1.1, the fraud guideline, rather than § 2R1.1, the bid rigging guideline, to calculate his sentence. The Eleventh Circuit found no error. Although defendant engaged in bid rigging, the purpose of the bid rigging was to defraud the government. Bid rigging was merely a means to an end. Section 2F1.1 was the proper guideline to apply. U.S. v. Anderson, 326 F.3d 1319 (11th Cir. 2003).
11th Circuit holds that scheme more closely resembled commercial bribery than fraud. (300) 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 holds that defendants who misrepresented clinical data endangered clinical-trial volunteers. (300) Defendants participated in a scheme to falsify and misrepresent data from clinical studies on a drug to treat CTCL, a relatively rare and potentially fatal form of skin cancer. The 11th Circuit affirmed a § 2F1.1(b)(6)(A) increase for knowingly endangering the clinical-trial volunteers. The guidelines do not require that the victim actually suffer serious bodily injury. Rather, the question was whether the defendant placed the victim at such a risk. Treatment is essential in slowing CTCL’s progress to later, and more deadly, stages. Volunteers testing the CTCL treatments at issue here were required to forego other treatments. Two patients testified that they volunteered for the second, six-month study based upon the falsified results of the first, six-week study. CTCL meets the definition of serious bodily injury, and defendants’ conduct qualified as creating a conscious and reckless risk of such injury. U.S. v. Snyder, 291 F.3d 1291 (11th Cir. 2002).
11th Circuit affirms increase where substantial part of “call sell” scheme was committed outside U.S. (300) Defendant and his co-conspirators in Kuwait engaged in a “call sell” scheme to defraud various long distance and local telephone service providers. The district court applied a two-level increase under § 2F1.1(b) (6)(B), because a substantial part of the fraudulent scheme was committed from outside of the U.S. Defendant argued that the increase is only justified if a substantial part of the scheme originated from outside the U.S. and that the increase did not apply here because every fraudulent telephone call originated from the U.S., the fraudulent telephone service accounts were established in the U.S., and the three-way calling connection was made by an operator within the U.S. The Eleventh Circuit rejected this interpretation, finding that the guideline only requires that a substantial portion of the scheme be committed from outside of the U.S.; it does not require that the scheme originate from outside of the U.S. The defendant need not personally take action from outside of the U.S. in order for the enhancement to apply. There was ample evidence here to support the increase. One telephone company representative testified that 99 percent of the calls attributed to defendant were international calls, and 90 percent were placed to Kuwait and then used the telephone’s three-way calling feature to connect the Kuwaiti party with a party in another country. U.S. v. Singh, 291 F.3d 756 (11th Cir. 2002).
11th Circuit applies fraud guideline for distributing prescription drug without prescription. (300) Defendant was convicted of distributing and conspiring to distribute in interstate commerce a prescription drug without a prescription with the intent to defraud or mislead. The guidelines identify two different sections that apply to violations of 21 U.S.C. § 333(a)(2): § 2F1.1 and § 2N2.1. If the offense involves fraud, the court is directed to apply § 2F1.1. The Eleventh Circuit held that defendant was properly sentenced under § 2F1.1, the fraud guideline, rather than § 2N2.1, the guideline applicable to violations of statutes dealing with food and drugs. An essential element of defendant’s conviction was that the offense involved fraud. It is proper to apply § 2F1.1 to defendants who commit fraud against a government agency. U.S. v. Kimball, 291 F.3d 726 (11th Cir. 2002).
11th Circuit agrees that health care fraud involved more than minimal planning. (300) Defendants were convicted of charges stemming from a conspiracy to submit false claims to the Civilian Health and Medical Program of Uniformed Services (CHAMPUS) and Medicare. The Eleventh Circuit agreed that the scheme involved more than minimal planning. The offenses occurred over a two-year period at two facilities and involved the treatment of numerous patients covered by CHAMPUS and Medicare. Unquestionably, it involved repeated acts over a period of time, none of which was merely opportune. U.S. v. Renick, 273 F.3d 1009 (11th Cir. 2001).
11th Circuit affirms use of money laundering rather than fraud guideline. (300) Relying on U.S. v. Smith, 186 F.3d 290 (3d Cir. 1999), superseded by rule as stated in U.S. v. Omoruyi, 260 F.3d 291 (3d Cir. 2001), defendant argued that the district court should have computed his offense level under the more lenient fraud guideline because his money laundering was a minor, incidental part of his scheme, and thus outside the heartland of the money laundering guideline. However, the Eleventh Circuit has previously rejected this approach. See U.S. v. Adams, 74 F.3d 1093 (11th Cir. 1996). Moreover, money laundering was integral to defendant’s scheme. The jury returned a special verdict finding that defendants engaged in money laundering in order to conceal the origins of the illicit proceeds and to continue the bank fraud scheme. U.S. v. De La Mata, 266 F.3d 1275 (11th Cir. 2001).
11th Circuit cumulates enhancements for more than minimal planning and sophisticated means. (300) Deciding an issue of first impression among the circuits, the Eleventh Circuit held that the enhancement for more than minimal planning under § 2F1.1(b)(2)(A) is to be applied cumulatively and not in the alternative to the enhancement for sophisticated means in subsection (b)(5)(C). The court noted that more than minimal planning does not necessarily involve sophisticated means. However “[a] defendant who uses sophisticated means will always receive, in addition, an enhancement for more than minimal planning.” The defendant here engaged in a complicated embezzlement scheme and it was proper to increase his sentence based on both enhancements. U.S. v. Humber, 255 F.3d 1308 (11th Cir. 2001).
11th Circuit affirms increase for defendant who kept gun in car while recruits cashed counterfeit checks. (300) Defendant recruited young girls to cash counterfeit checks at various bank branches and business locations. Police arrested defendant and two of the women after they cashed several counterfeit checks. A search of the vehicle driven by defendant revealed almost $5000 in cash and a firearm. One of the women told the FBI that defendant always kept the gun in the car, either under or beside his seat, when he drove to cash checks. The Eleventh Circuit upheld the district court’s finding that defendant possessed a firearm “in connection with” the fraud offense. USSG § 2F1.1(b)(7)(B). Defendant was supervising a lucrative counterfeit check-cashing scheme, and was thus responsible for large amounts of cash. He was relatively unfamiliar with the young recruits he was sending into banks and grocery stores to negotiate sizeable payroll checks. It was certainly reasonable to infer that defendant carried the gun to protect himself from a “rip-off.” U.S. v. McClain, 252 F.3d 1279 (11th Cir. 2001).
11th Circuit says grouping of fraud and money laundering not required. (300) Defendant was convicted of Medicaid fraud and money laundering. The Eleventh Circuit upheld separate grouping of the fraud and money laundering offenses. The mere listing of both of these guidelines under § 3D1.2(d) as offenses that “are to be grouped” does not automatically necessitate grouping. Note 6 to § 3D1.2 says that “[c]ounts involving offenses to which different offense guidelines apply are grouped together under subsection (d) if the offenses are of the same general type or otherwise meet the criteria for grouping under this subsection.” Thus, in cases involving Ponzi schemes where the laundered funds were paid out to old investors as false profits, the fraud and money laundering convictions can be grouped under § 3D1.2(d), because both were “integral cogs in continuing the scheme.” See, e.g. U.S. v. Mullens, 65 F.3d 1560 (11th Cir. 1995). In the present case, much of the $3 million at issue was either funneled to one of defendant’s businesses or withdrawn for personal use. The main connection between the laundered funds and the fraud scheme was that the money represented the proceeds of the fraud. If this connection alone was sufficient to justify grouping, “every act of money laundering would be closely related to the underlying crime which produced the money to be laundered.” U.S. v. McClendon, 195 F.3d 598 (11th Cir. 1999).
11th Circuit approves departure based on number and vulnerability of fraud victims. (300) Defendant, a housekeeping employee at a children’s hospital, used personal information about hospitalized children to obtain false credit cards, bank accounts and identification cards in the names of the children. The Eleventh Circuit upheld a 15-level departure based on the large number of victims and the vulnerability of the victims. The § 2F1.1(b)(2) multiple victim enhancement defendant received accounted solely for the two financial institutions and the telephone provider that defendant defrauded. See note 4(d) (“victim” under subsection (b)(2)(B) “refers to the person or entity from which the funds come directly”). Thus, the adjustment did not consider the indirect victims, the children and their families, who suffered because of defendant’s scheme. Although defendant received a § 3A1.1 vulnerable victim enhancement, a sentencing court may depart based on a considered factor if the factor is “present to an exceptional degree.” The judge found defendant’s offense was “exceptional” in that it was “reprehensible and gravitates at or near the very bottom of the rung of human behavior that I have had the occasion to see.” The 15-level departure was not unreasonable. Defendant received a 120-month sentence, while the statutory maximum was 300 months. U.S. v. Melvin, 187 F.3d 1316 (11th Cir. 1999).
11th Circuit rules court should have applied bribery guideline, not fraud guideline. (300) Defendant operated treatment programs for drug addicts. He was convicted under the anti-kickback provisions of the Social Security Act for paying “referral fees” to employees of the state health services agency for referring pregnant drug addicts to his company. The Eleventh Circuit held that the district court should have sentenced him under the § 2F1.1 fraud guideline rather than the § 2C1.1 bribery guideline. Under Appendix A, three guidelines sections apply to 42 U.S.C. § 1320a-7b(b): § 2B1.1 (Larceny); § 2B4.1 (Commercial Bribery); and § 2F1.1 (Fraud). The parties agreed that §§ 2B1.1 and 2B4.1 were inapplicable. However, there was no reason to view § 2F1.1 as any more applicable. A central part of § 2F1.1 is determining the loss suffered by the defrauded victim. Defendant did not steal from anyone. Section 2C1.1 was more applicable to defendant’s kickback scheme. The term “induce” in § 1370a-7b(b)(2) can reasonably be understood to connote bribery. The Anti-Kickback statute explicitly refers to kickbacks, bribes or rebates as prohibited forms of remuneration for referrals. Finally, by paying for referrals, defendant sought to corrupt the employees execution of their duties as state employees and workers in a federal program—just the sort of corrosive activity § 2C1.1 is designed to punish. U.S. v. Starks, 157 F.3d 833 (11th Cir. 1998).
11th Circuit holds embezzlement from employee benefit plan involved more than minimal planning. (300) Defendant operated a company that administered self-funded health benefit plans for employers. He converted for his own use $295,359.90 that should have been used for one of his client’s health plans. He also fraudulently acquired two banks loans. The Eleventh Circuit found that defendant’s crimes warranted a more than minimal planning enhancement. His embezzlements occurred over a period of nearly five years, and constituted “repeated acts over a period of time” that were not merely opportune. Defendant also committed two acts of bank fraud. This by itself may have justified the enhancement. U.S. v. Daniels, 148 F.3d 1260 (11th Cir. 1998).
11th Circuit holds previous fraud scheme was not relevant conduct to current fraud. (300) In 1989, defendant participated in the CCC fraud in which the Crystal Clear Corporation solicited investors through newspaper ads and toll-free numbers to purchase and install bottled-water-vending machines. The company took investors’ money, but did not install or operate the vending machines, and did not pay the investors any return. Between 1993 and 1994, defendant participated in the NNI fraud in which National Nurseries, Inc. solicited investors through newspaper ads to purchase greenhouses. NNI falsely claimed it had contracts with major accounts to purchase plants grown by the investors. In 1995, defendant pled guilty to the CCC fraud, and the court did not consider the NNI fraud at sentencing. Defendant later pled guilty to the NNI fraud. The Eleventh Circuit upheld consecutive sentences under § 5G1.3(b), finding that the CCC fraud was not relevant conduct to the NNI fraud. The fact that both schemes involved fraud did not make them related. They involved different subject matter, different parties, and different victims. They were also separated in time, and differed in scope. U.S. v. Blanc, 146 F.3d 847 (11th Cir. 1998).
11th Circuit applies § 2L2.1 to making false social security cards for illegal aliens. (300) Defendant, a service representative for the Social Security Administration, produced and sold social security cards to illegal immigrants. The Eleventh Circuit held that the court should have sentenced defendant under § 2L2.1 rather than the fraud guideline, § 2F1.1. Although defendant was convicted under a general fraud statute, comment 13 to § 2F1.1 states that where the indictment establishes an offense more aptly covered by another guideline, the court should apply that guideline. The descriptive language in § 2L2.1 more specifically characterizes defendant’s offense. Defendant’s fake social security cards qualified as “Documents Relating to Naturalization, Citizenship, or Legal Resident Status.” Comment 11 to § 2F1.1 says that where the primary purpose of the false identification offense is to violate immigration laws, the court should apply § 2L2.1 or § 2L2.2, as appropriate. Finally, the structure of § 2F1.1 is awkward to apply here because the “loss” was suffered by the government. U.S. v. Kuku, 129 F.3d 1435 (11th Cir. 1997).
11th Circuit holds that more than minimal planning enhancement can apply to embezzlement offenses. (300) Defendant, an assistant vice president and branch manager of a bank, embezzled over $100,000 from her employer. She initially took out a $75,000 loan in the name of an actual customer, pledged that customer’s savings account as collateral and pocketed the proceeds. Two months later she repeated the process and embezzled another $19,000. Two months after that, she embezzled another $15,000. The district court found that a more than minimal planning enhancement would be redundant because embezzlement necessarily entails a certain amount of planning. The Eleventh Circuit held that the district court erred as a matter of law in refusing to apply a more than minimal planning enhancement. Note 1(f) to § 1B1.1 clearly contemplates that the more than minimal planning enhancement is intended to apply to embezzlement cases such as this one. It is hard to imagine a scenario in which obtaining even one fraudulent loan would not require more than minimal planning. The other factors relied on by the court (the victim did not want defendant incarcerated, society would not gain from defendant’s incarceration, and defendant did not deserve more punishment) were irrelevant to the more than minimal planning inquiry. U.S. v. Bush, 126 F.3d 1298 (11th Cir. 1997).
11th Circuit rejects departure based on statute left out of telemarketing Act. (300) Defendant operated a telemarketing scam that defrauded numerous elderly victims. He pled guilty to 10 counts of transporting stolen money in violation of 18 U.S.C. § 2314. The Senior Citizens Against Marketing Scams Act of 1994, contained in 18 U.S.C. § 2326 (the SCAMs Act), provides for a sentencing enhancement for six listed telemarketing offenses if the victims were over 55. Section 2314 is not one of the listed statutes. The district court departed upward on the ground that Congress had by oversight failed to include § 2314 under the SCAMs Act, and that the Sentencing Commission had not adequately considered the concerns expressed in the SCAMS act. The Eleventh Circuit held that an upward departure could not be based on the ground that the Sentencing Commission failed to consider the factors contained in the SCAMs Act. Defendant’s argument would require courts to rewrite § 2326 to permit enhancement for conviction of any offense in connection with a telemarketing scheme that victimized or targeted people over 55. If Congress had wanted to so provide it would have been easy to do so. U.S. v. White, 118 F.3d 739 (11th Cir. 1997).
11th Circuit holds that § 2F1.1 does not apply to RICO conspiracy. (300) Defendants pled guilty to a RICO conspiracy for a scheme in which, using phony credit cards, they made large purchases of expensive goods from luxury stores. The Eleventh Circuit rejected a 3-level reduction under notes 7 and 9 to § 2F1.1. The district court correctly held that § 2F1.1 does not apply since RICO conspiracy is specifically covered in the guidelines for RICO offenses. U.S. v. Wai-Keung, 115 F.3d 874 (11th Cir. 1997).
11th Circuit agrees that defense contractor’s fraud involved more than minimal planning. (300) Defendant, the general manager of a defense contractor, used false documents to obtain payments on government contracts that defendant knew his company had not performed to military specifications. The Eleventh Circuit agreed that the fraud involved more than minimal planning. First, defendant took affirmative steps to conceal the offense. Defendant altered certification forms from other contracts to conceal the substitution of nonconforming materials. Second, the charged acts involved numerous contracts spanning a 4 1/2 year period. Although defendant was acquitted of some of these acts, the district court could properly consider this conduct, as long as the government proved them by a preponderance of the evidence. U.S. v. Cannon, 41 F.3d 1462 (11th Cir. 1995).
11th Circuit finds use of nonconforming materials in contract involved reckless risk of serious bodily injury. (300) Defendant, the general manager of a defense contractor, used false documents to obtain payments on government contracts that defendant knew his company had not performed to military specifications. The Eleventh Circuit approved an enhancement under § 2F1.1(b)(4) for an offense involving “the conscious or reckless risk of serious bodily injury.” Defendant ordered nonballistically tested titanium to make armor plating on helicopters. The Air Force paid for titanium that had passed the ballistics test. Further, an expert testified that defendant substituted inferior bearings on propeller parts, and that these inferior bearings would crack under pressure. U.S. v. Cannon, 41 F.3d 1462 (11th Cir. 1995).
11th Circuit holds concealment of assets during bankruptcy is violation of judicial order. (300) Defendant pled guilty to two counts of bankruptcy fraud. The district court enhanced his sentence under § 2F1.1(b)(3)(B) because he knowingly concealed assets during the bankruptcy proceedings. The enhancement applies when the offense involves a violation of a judicial order, injunction, decree or process. The 11th Circuit held that the concealment of assets in a bankruptcy proceeding is a violation of a “judicial order” within the meaning of the guideline. The Bankruptcy Rules and Official Forms repeatedly mandate that a debtor disclose assets and liabilities and that those disclosures be truthful. This mandate falls within the definition of an “order.” The mandate was in the context of formal, adversary court proceedings. U.S. v. Bellew, 35 F.3d 518 (11th Cir. 1994).
11th Circuit, en banc, holds duration and extent of fraud was considered by guidelines. (300) The district court departed upward based on defendant’s numerous acts of fraud, the length of the fraud, and the large number of victims. The 11th Circuit, en banc, held that the duration and extent of defendant’s fraudulent activity were adequately considered by the guidelines. Defendant defrauded eight financial institutions of almost $500,000. His fraudulent activities were not atypical; his conduct was not outside the heartland of cases considered by the Sentencing Commission. Although a future atypical case might warrant a departure, this was not such a case. U.S. v. Alpert, 28 F.3d 1104 (11th Cir. 1994) (en banc), superseding 989 F.2d 454 (11th Cir. 1993).
11th Circuit says loss should include funds fraudulently deposited but not withdrawn from banks. (300) Defendant engaged in a check kiting scheme using false identification to open accounts at banks. He argued that the district court should have reduced his loss under section 2F1.1 by the amount of funds remaining in the accounts at his arrest. The 11th Circuit upheld a calculation of loss based on the aggregate value of the forged checks deposited into the accounts. The district court properly refused to reduce the loss by the amount of funds defendant had not yet withdrawn from the banks. U.S. v. Chukwura, 5 F.3d 1420 (11th Cir. 1993).
11th Circuit holds defendant accountable for losses attributable to others in fraud scheme. (300) Defendant and others were involved in a fraudulent scheme in which they would contact potential victims by phone, advise them they had won a large cash prize, and then persuade the victims to wire them money to pay taxes on the prize. The various participants in the scheme. although acting on their own behalf, aided and abetted one another by sharing lead sheets of potential victims and sharing telephones. Each participant was aware of the activities of the others. The 11th Circuit affirmed that defendant was accountable for the amount of loss attributable to the other participants. The government proved by a preponderance that defendant was involved in a conspiracy and the amount of the losses was reasonably foreseeable. U.S. v. Hall, 996 F.2d 284 (11th Cir. 1993).
11th Circuit upholds government agency enhancement for defendant who collected “tax” on prize. (300) Defendant and others contacted potential victims by phone, advised them they had won a large cash prize, and then persuaded the victims to wire them money to pay taxes on the prize. The 11th Circuit affirmed an enhancement under section 2F1.1(b)(3) for misrepresenting that defendant was acting on behalf of a government agency. The collection of taxes must be definition be on behalf of a government agency. The fact that defendant did not represent that he was employed by a government agency was not determinative of the issue. U.S. v. Hall, 996 F.2d 284 (11th Cir. 1993).
11th Circuit excludes incidental or consequential damages from loss calculation for fraud. (300) Defendants defrauded their victims by claiming to be successful loan brokers. Rather than calculating defendants’ loss figure under 2F1.1 by reference to the fees defendants charged for their useless services, the district court chose a higher amount in light of the damage defendants’ scheme caused to victims, including in one case foreclosure on the family home. Departing from the view of the 6th Circuit, the 11th Circuit held that such incidental or consequential injury was not properly included in the loss calculation. Though the guidelines permit such calculations in government procurement and product substitution frauds, they are inappropriate in the case of ordinary frauds. While the district court remained free to consider on remand whether the victims’ losses justified a departure, the court expressed doubt that the feelings of foolishness, anger, and disappointment relied on in part by the district court would justify a departure. U.S. v. Wilson, 993 F.2d 214 (11th Cir. 1993).
11th Circuit says defendant not responsible for unforeseeable conduct. (300) Defendant Fuentes joined a stolen credit card conspiracy when he purchased two stolen credit cards from an undercover agent and used them to buy merchandise. One week earlier, a co-conspirator had also bought a stolen credit card and charged $2725 on it. The 11th Circuit held that in calculating the loss and number of victims involved in his offense under section 2F1.1(b), defendant could not be held responsible for the co-conspirator’s acts because they were not reasonably foreseeable to defendant. A conspiracy defendant can only be sentenced for co-conspirator acts that are committed in furtherance of the conspiracy and are reasonably foreseeable. U.S. v. Fuentes, 991 F.2d 700 (11th Cir. 1993).
11th Circuit holds that, as to other defendant, use of stolen credit card was reasonably foreseeable. (300) The 11th Circuit held that, as to defendant Colon, the losses caused by his co-conspirator’s use of a stolen credit card were reasonably foreseeable and thus, he could be held responsible for those losses. Colon was present when his co-conspirator bought a stolen credit card from an undercover agent. Later the conspirator charged $2,725 on the card. The district court’s finding that Colon could have reasonably foreseen that the co-conspirator would use the stolen credit card was not clearly erroneous. U.S. v. Fuentes, 991 F.2d 700 (11th Cir. 1993).
11th Circuit relies on post-conduct amendment to commentary. (300) In November 1991, after defendant was sentenced, application note 7(b) was added to section 2F1.1, explaining how to calculate loss in the case of fraudulent loan applications and contract procurement. The 11th Circuit viewed the amendment as merely clarifying. Because the court had not yet interpreted the guideline, it referred to the amendment to guide its interpretation of the guideline in effect at the time defendant was sentenced. It concluded that the district court had properly applied the guideline. U.S. v. Menichino, 989 F.2d 438 (11th Cir. 1993).
11th Circuit calculates loss in fraudulent loan case. (300) Defendant was convicted of fraud in connection with his use of a false appraisal to secure an excessive loan for purchase of a boat. Though defendant agreed to sell the boat for $240,000, he induced an appraiser to value the boat at $350,000, expecting that the buyer would use the appraisal to secure a $280,000 loan, $40,000 of which the buyer would keep. The 11th Circuit upheld calculation of the intended loss under 2F1.1 as $40,000 — the difference between the loan amount and the sale price. The court noted that an application note had disapproved those cases that had calculated loss in fraudulent loan cases as the total amount of the loan. It rejected defendant’s argument that it had to find that defendant believed the loan would not be repaid in order to affirm the district court’s calculation. U.S. v. Menichino, 989 F.2d 438 (11th Cir. 1993).
11th Circuit affirms that proceeds from fraudulently transferred house were properly considered as loss under fraud guideline. (300) Defendant transferred property to his wife in an effort to avoid a tax lien. He contended that no loss enhancement should apply under section 2F1.1 because his wife was the one who received the proceeds of the sale of the house. The 11th Circuit affirmed that the $24,663 actually gained from the sale of the house was the amount of loss. Defendant agreed that he intended to cause a loss to the IRS by transferring his real property to his wife. That his wife actually received proceeds from the sale was irrelevant to the loss defendant caused the IRS. The intended loss arguably could have been $106,790, the assessment on the lien notice that defendant attempted to void by altering and refiling it. U.S. v. Shriver, 967 F.2d 572 (11th Cir. 1992).
11th Circuit upholds application of fraud guideline to defendant who attempted to evade collection of tax lien. (300) Defendant obtained a certified copy of a federal tax lien filed by the IRS against property which he had transferred to his wife. He stamped the words “VOIDED BY FLORIDA STATUTES” on the lien, forged a signature, and filed the altered lien notice. He was convicted of attempt to obstruct the IRS, in violation of 26 U.S.C section 7212(a). He challenged the application of section 2F1.1, the fraud guideline, to his offense, arguing that the applicable guidelines were those listed in the statutory index, section 2A2.2 (Aggravated Assault) and section 2A2.3 (Minor Assault). The 11th Circuit upheld the application of section 2F1.1 to the offense. The introduction to the statutory index states that if in an atypical case, the guideline section indicated for the statute of conviction is inappropriate, the court is to use the guideline most applicable to the nature of the offense. Nothing in the facts suggested that defendant ever assaulted anyone in trying to meet his objective of defrauding the IRS. The district court’s decision to apply the fraud guideline was appropriate. U.S. v. Shriver, 967 F.2d 572 (11th Cir. 1992).
11th Circuit holds that loss calculation should include amounts involved in dismissed counts. (300) The 11th Circuit rejected defendant’s claim that it was improper to include amounts involved in dismissed counts in the calculation of loss under section 2F1.1. Application notes 6 and 7 to section 2F1.1 clearly indicate that the cumulative loss produced by a common scheme or plan should be used in determining the offense level for fraud, regardless of the number of counts of conviction. Section 1B1.3, concerning relevant conduct, also supports this conclusion. The records indicated that the methods which defendant used to defraud the government were part of the same course of conduct and displayed a common scheme. U.S. v. Rayborn, 957 F.2d 841 (11th Cir. 1992).
11th Circuit affirms adjustments based on amount of loss, role in the offense and more than minimal planning. (300) Defendant defrauded the government out of over $20,000, but because he had to share the proceeds, he only received $5,000 from the scheme. The 11th Circuit rejected defendant’s contention that the loss calculation under section 2F1.1 should be limited to his $5,000 profit. The court also rejected his claim that since his sentence was increased for his role in the offense and for more than minimal planning, a total loss figure greater than $5,000 would punish him twice for the same conduct. The guideline provides for cumulative, not alternative, punishment. U.S. v. Rayborn, 957 F.2d 841 (11th Cir. 1992).
11th Circuit holds that defendant who burned boat for insurance fraud stipulated to arson offense. (300) Defendant pled guilty to fraud and deceit in connection with burning a boat in order obtain insurance benefits. The district court sentenced him under the arson guidelines, rather than the fraud guidelines, because it found that defendant had stipulated to the more serious arson offense. The 11th Circuit ruled that the facts in defendant’s plea agreement specifically established the more serious offense of arson, and thus guideline section 1B1.2 authorized the sentencing court to sentence defendant under guideline section 2K1.4, the arson guideline. A district court is not required to find that a case is “atypical” before applying section 1B1.2. The district court also correctly determined that under guideline section 2K1.4, defendant’s base offense level was 20, because he created a substantial risk of death or serious bodily injury. The court could conclude that the firefighters faced a substantial risk of death or serious bodily injury. U.S. v. Day, 943 F.2d 1306 (11th Cir. 1991).
11th Circuit affirms district court’s actions despite failure to make explicit findings of fact and conclusions of law. (300) Defendant argued that the district court failed to make explicit findings of fact and conclusions of law regarding controverted matters at sentencing as required by guideline § 6A1.3(b) and Fed. R. Crim. P. 32(c)(3)(D). The 11th Circuit found that there was adequate evidence to support the district court’s summary disposition of defendant’s objections. Defendant’s argument for a downward departure under guideline § 5K1.1 was meritless because the government specifically declined to move for such a departure. Defendant’s claim that an enhancement for more than minimal planning was prohibited because he already received an enhancement under guideline § 2F1.1(b)(2)(A) was also meritless. The commentary indicating that the adjustment was alternative, rather than cumulative, referred only to guideline § 2F1.1(b)(3). Finally, defendant’s claim of acceptance of responsibility had no support in the record. Although defendant acknowledged responsibility for his criminal behavior, since his release on bond he committed nine additional offenses and faced trial in at least four cases involving seven additional charges. U.S. v. Villarino, 930 F.2d 1527 (11th Cir. 1991).
D.C. Circuit holds that repeated acts in fraudulent loan case were not purely opportune. (300) The district court applied a more than minimal planning increase based on repeated acts that were not purely opportune. See Note 1(f) to USSG § 1B1.1. Satisfaction of the repeated acts criterion requires at least three acts over a period of time. See U.S. v. Kim, 23 F.3d 513 (D.C. Cir. 1994). The D.C. Circuit found at least three deliberate acts by defendant that supported the more than minimal planning increase. In September 1993, defendant submitted a loan application that falsely understated her liabilities. In October 1993, defendant submitted a letter from one of her company’s suppliers, which defendant altered to falsely state the amount of waste paper they expected to provide to defendant’s company. In November 1993, at the loan closing, defendant signed a certification falsely stating that there had been no substantial adverse change since the original application, when in fact the supplier had decided to stop using defendant’s company. These acts were not “purely opportune.” Defendant initiated the loan application and had ample time to contemplate the financial data she included. Altering the supplier’s letter require defendant to take a series of component steps, each evincing deliberation. Finally, the supplier’s decision to stop using defendant’s company was made several days before the loan closing, and defendant was aware that the supplier’s projection was critical to the bank. U.S. v. McCoy, 242 F.3d 399 (D.C. Cir. 2001).
D.C. Circuit says increases for manager role and planning were not double counting. (300) Defendant co-owned a health care agency that provided home nursing care to Medicaid and Medicare patients. At the direction of defendant and a co-defendant, the agency billed Medicaid and Medicare for $106,506 in services it did not perform. Defendant argued that enhancing her sentence for managerial role and more than minimal planning punished her twice for the same conduct. The D.C. Circuit found no double counting because the enhancements were based on different elements of the offenses. The role enhancement was based on defendant’s directing nurses to falsify records of treatment visits while the more than minimal planning enhancement was based on the fraudulent billing scheme defendant engineered. Defendant was not found to have engaged in more than minimal planning because she supervised others and was not found to have supervised others because she engaged in more than minimal planning. U.S. v. Bapack, 129 F.3d 1320 (D.C. Cir. 1997).
D.C. Circuit holds fraudulent credit offense was not relevant conduct to counterfeit check offense. (300) Defendant pled guilty to cashing five counterfeit checks using a false name. Three other fraud counts were dismissed: 1) a count based on defendant’s use of a counterfeit check to open a brokerage account under another alias; 2) a count based on his use of another counterfeit check drawn on the same fictitious account to purchase a car; and 3) a count based on his use of two aliases to file a fraudulent credit card application. The D.C. Circuit held that the two counts involving counterfeit checks were relevant conduct, but the count involving the fraudulent credit card application was not. In each of the check cases, defendant, using an alias, presented a counterfeit check to obtain cash or an automobile. The offenses involved similar instruments and a similar method. However, the credit card fraud was not part of the same course of conduct. It was of a different nature than the counterfeit check fraud. The fact that they both involved fraud to obtain money was not sufficient. U.S. v. Pinnick, 47 F.3d 434 (D.C. Cir. 1995).
D.C. Circuit remands case where district court failed to adequately explain reasons for upward departure. (300) Defendant pled guilty to possession of 15 unauthorized credit cards with intent to defraud. His unauthorized use of the cards had resulted in a total loss of approximately $5,165. The district court departed upward on the grounds that the dollar value of the loss did not fully capture the harmfulness and seriousness of defendant’s conduct, and that defendant possessed the credit cards in order to facilitate the commission of another offense. The district court failed to specify why the amount of loss did not fully represent the harmfulness of defendant’s conduct, and therefore the case was remanded for the district court to further explain why this ground of departure was applicable. The D.C. Circuit also found that although committing an offense in order to facilitate the commission of another offense is a proper ground for departure under guideline § 5K2.9, the district court had failed to state what other offense defendant intended to commit. The D.C. Circuit speculated that the district court was referring to defendant’s intended use of the credit cards for fraudulent purposes. Since defendant was charged with possession of the credit cards with intent to defraud, this would be an improper ground for departure, since the contemplated conduct was already an element of the offense charged. U.S. v. Ogbeide, 911 F.2d 793 (D.C. Cir. 1990).
District court finds odometer fraud loss should not include value added by legitimate improvements. (300) Several defendants pled guilty to odometer fraud in violation of 15 U.S.C. section 1984. In general, defendants purchased used cars, rolled back the odometers to show less mileage and then resold the cars at auctions. Defendants also performed legitimate detailing and rehabilitation work which improved the value of the cars. District Judge Walker rejected the government’s argument that the loss calculation subtract the defendants’ purchase prices from the ultimate resale prices. This would improperly incorporate into victim loss the legitimate distributional activities of defendants. The district court suggested several options to the probation officer to consider in calculating loss including consulting valuation reports or auction houses or deducting defendants’ costs. U.S. v. Alborz, 818 F.Supp. 1306 (N.D. Cal. 1993).
Colorado District Court finds no “loss” from fraud “sting” but departs upward. (300) In a “sting” operation, an undercover FBI agent posed as a business man who was interested in forming a worthless “shell” corporation, increasing the apparent value of its shares by manipulation, and offering the shares as security for a bank loan. The defendants took part in putting together the shell and manipulating its share price through controlled trades. The FBI arranged that there would be no actual loss to any member of the public, and therefore the district court found that the intended loss was “zero.” Nevertheless, the court departed upward to an offense level which reflected a loss figure based on the anticipated gain which each defendant negotiated for himself. U.S. v. Sneed, 814 F.Supp. 964 (D. Colo. 1993).
California District Court declines to base “loss” on total amount of loans obtained by fraud. (300) Defendant conspired to present falsified loan applications to purchase homes for himself and his coconspirators and their relatives. There was no expectation that any of the loans would go into default. In fact, some of the homes were later sold at a profit, and other loans were in good standing, secured by more than enough equity to cover them. District Judge Shubb refused to increase the offense level by the amount of the loans, absent some showing that this was the actual, intended, probable or expected loss. The court pointed out that the background notes to the bribery section, 2B4.1, state that if a bank officer agrees to take a $25,000 bribe to approve a $250,000 loan, the offense level is based on the “greater of the $25,000 bribe and the savings in interest over the life of the loan compared with alternative loan terms.” The court reasoned that if “the full amount of the loan is not used to increase the offense level in cases where the bank officer approves the loan pursuant to a bribe, it would make little sense to use the full amount of the loan to increase the offense level where the officer causes the loan to be approved through fraud.” U.S. v. Hughes, 775 F.Supp. 348 (E.D. Cal. 1991).
Commission amends guidelines for veterans’ memorials, plants, diamonds, injury to an unborn child and misdemeanors. (300) First, in response to a new offense at 18 U.S.C. § 1369 prohibiting destruction of veterans’ memorials, the Commission referred the offense to both §§ 2B1.1 and 2B1.5 and broadened the two-level increase under both §§ 2B1.1(b)(6) and 2B1.5(b) (2) to include veterans’ memorials. Second, in response to the new offense under 7 U.S.C. § 7734 for knowingly importing or exporting plants, plant products, biological control organisms, and like products for distribution or sale, the Commission modified Application Note 3 of § 2N2.1 to allow an upward departure for convictions under 7 U.S.C. § 7734. Third, to address the Clean Diamond Trade Act and Executive Order 13312, the Commission referred the new offense at 19 U.S.C. § 3907 to § 2T3.1, and added language referencing “contraband diamonds” to the introductory commentary. Fourth, to respond to the new offense at 18 U.S.C. § 1841 for causing death or serious bodily injury to a child in utero while engaging in conduct that violates any of over 60 offenses, the Commission referred the new offense to the homicide guidelines, §§ 2A1.1, 2A1.2, 2A1.3, and 2A1.4. Fifth, the amendment created a new guideline at § 2X5.2 to cover all Class A misdemeanors not otherwise referenced to a more specific Chapter Two guideline. The base offense level is 6. Amendment 685, effective November 1, 2006.
Commission adopts new guideline for identity theft. (300) In response to the Identity Theft Penalty Enhancement Act of July 15, 2004, the Commission adopted a new guideline, §2B1.6, for aggravated identity theft. The guideline is consistent with the new statute, 18 U.S.C. §1028A, that provides for consecutive mandatory minimum sentences of two and five years, depending on the underlying associated offense involving the misuse of stolen identification. In addition, in response to a directive from Congress, the Commission amended §3B1.3 (Abuse of Trust or Use of Special Skill) in Application Note 2 to include a “defendant [who] exceeds or abuses the authority of his or her position in order to obtain unlawfully or use without authority any means of identification.” 2005 Amendment 677, effective November 1, 2005.
Article provides authoritative legislative history for 2001 economic crime amendments. (300) Effective November 1, 2001, the theft and fraud guidelines were consolidated into a single guideline in § 2B1.1, and former § 2F1.1 was deleted. The “loss” concept at the heart of economic crime sentencing was completely redefined and the Commission adopted a series of special rules to address circuit conflicts and disputes about the application of loss in particular classes of cases. Professor Frank Bowman was involved at every stage of the process that produced these amendments, and he has written the authoritative legislative history. His article analyses each aspect of the new amendments including the theory underlying them, the procedure that led to their adoption, and the issues that were resolved along the way. Frank O. Bowman, III, The 2001 Federal Economic Crime Sentencing Reforms: An Analysis and Legislative History, 35 Indiana L. Rev. 5 (2001).
Articles provide history behind the 2001 Economic Crime Package which rewrote guidelines 2B and 2F. (300) The 2001 Economic Crime Package – a sweeping consolidation and rewriting of guideline sections 2B and 2F – becomes effective November 1, 2001. Professor Frank O. Bowman, III was a moving force behind the amendments, and in an issue of the Federal Sentencing Reporter, he provides “a set of materials to assist lawyers and judges in understanding and tracing the genesis of the reforms contained in the economic crime package.” The issue includes articles by Catharine Goodwin, Attorney Advisor for the Administrative Office of the Courts, defense attorneys Barry Boss and Jude Wikramanayake, and Second Circuit Judge Jon O. Newman. In addition, the issue includes draft documents, briefing papers, and transcripts which led up to the amendments that were finally adopted by the Commission and sent to Congress on May 1, 2001. Despite the indicated date of publication, the material was compiled after May 1, 2001. Frank O. Bowman, III, The 2001 Economic Crime Package: Resolving Issues of Severity, Definition, and Flexibility, 13 Fed. Sent. Rptr. 3 (July/Aug 2000).
Commission combines theft and fraud guidelines. (300) In a sweeping modification of the guidelines for economic crimes, the Commission combined the guidelines for theft, fraud, and property destruction into a revised § 2B1.1. The combined theft and fraud Loss Table applies to all economic crimes, decreasing penalties at the low end of the Table and increasing penalties at the high end. The amendment resolves numerous circuit conflicts over the meaning of “loss,” redefining “actual loss” as “reasonably foreseeable pecuniary harm,” and clarifying related issues in specific kinds of cases. The Commission deleted the two-level increase for more than minimal planning and replaced it with victim-related increases. The amendment also resolves circuit conflicts over (1) being “in the business of” receiving and selling stolen property, (2) claiming to act on behalf of a charity or government agency. Amendment 617, effective November 1, 2001.
Commission proposes options for considering aggravating and mitigating factors in theft and fraud cases. (300) This amendment proposes two options to provide for the consideration of a number of aggravating and mitigating factors that may be present in theft and fraud cases. Option One provides for a four-level increase if the offense involved significantly aggravating factors, a two-level increase if the offense involved aggravating factors, a two-level decrease if the offense involved mitigating factors and a four-level decrease if the offense involved significantly mitigating factors. Option Two provides an exhaustive list of aggravating and mitigating factors that may trigger application of the enhancement. 2001 Proposed Amendment 13.
Commission proposes to revise definition of loss for theft and fraud guidelines. (300) The proposed amendment provides two major options to create one definition of loss for offenses sentenced under the theft and fraud guidelines. The first option was prepared by the Commission and is intended to invite comment on the major issues related to the definition of loss, including those presented in the second option. The second option was prepared by the Criminal Law Committee of the Judicial Conference and is included for publication in its entirety “in recognition of the years of effort that the members of that committee have put into the preparation of a new definition of loss.” 2001 Proposed Amendment 12C.
Commission proposes options for combining theft, fraud and tax tables. (300) This amendment proposes three options for a loss table for the proposed consolidated theft and fraud guideline and two options for a tax loss table. If a decision is made to use the same table for theft, fraud, and tax, the effect would be to sentence the offenses under both guidelines in a similar manner. According to the Commission, this would represent a change from the current relationship in which tax offenses generally face slightly higher offense levels for a given loss amount than fraud and theft offenses. 2001 Proposed Amendment 12B.
Commission proposes to consolidate guidelines for theft, property destruction and fraud. (300) As part of its Economic Crime Package, the Commission proposes to consolidate the three guidelines covering theft (§ 2B1.1), property destruction (§ 2D1.3), and fraud (§ 2F1.1). The proposal responds to concerns raised by probation officers, judges and practitioners over several years. The issues were among those discussed during Commission public hearings in 1997 and 1998 on difficulties posed by having different commentary in the theft and fraud guideline applicable to the calculation and definition of loss and related issues. The proposal calls for a base offense level of six and a consolidated loss table with two-level increments for increasing loss amounts beginning at $5,000. The proposal deletes the enhancement for more than minimal planning due to the potential overlap between this enhancement and the sophisticated means enhancement. The proposal also makes other changes. 2001 Proposed Amendment 12A.
Commission repromulgates telemarketing amendment. (300) The Commission made permanent the temporary emergency amendment submitted to Congress on Sept. 23, 1998, in response to directives contained in the Telemarketing Fraud Protection Act of 1998. The amendment provided (1) an enhancement in § 2F1.1 (fraud) for offenses that involve sophisticated means; and (2) an enhancement in § 3A1.1 (vulnerable victim) for offenses that involve a large number of vulnerable victims. The amendment, particularly the sophisticated means enhancement, built on and broadened the amendment submitted on May 1, 1998, which created an enhancement in § 2F1.1 for sophisticated concealment. Amendment No. 595, effective November 1, 2000.
Commission resolves conflict in bankruptcy fraud cases regarding violation of judicial order. (300) The circuits have been divided over whether the § 2F1.1(b)(4)(B) fraud enhancement for “violation of any judicial or administrative order, injunction, decree or process” applies to defendants who falsely complete bankruptcy schedules and forms. The new amendment adds an enhancement for making a false statement in a bankruptcy proceeding. In addition, a change in the commentary makes clear that in cases other than bankruptcy fraud, an enhancement for violation of a judicial order or process only applies if a defendant violates a prior specific order to take or not take a specified action. Amendment 597, effective November 1, 2000.s
Commission provides enhancement for weapon in counterfeiting and forgery. (300) 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 amends commentary in fraudulent loan and contract procurement cases. (300) Effective November 1, 1992, the Sentencing Commission amended the commentary to section 2F1.1 to state that in fraudulent loan application and contract procurement cases, the loss is the “actual loss to the victim (or if the loss has not yet come about, the expected loss).” “For example, if a defendant fraudulently obtains a loan by misrepresenting the value of his assets, the loss is the amount of the loan not repaid at the time the offense is discovered, reduced by the amount the lending institution has recovered (or can expect to recover) from any assets pledged to secure the loan.”