Articles Posted in Federal Sentencing

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Here is a recap of some recent victories from the Sixth Circuit. Good to see vigilant defense counsel using foresight to prevent undue restrictions resulting from sentencing conditions.

United States v. Arnold. Sixth Circuit: A jury convicted Appellant of being a felon in possession of a firearm. At sentencing, the district court departed upward, at least in part, because of its concern that a longer term of imprisonment was needed to ensure that Appellant received appropriate mental health treatment. Specifically, the district court found that Appellant’s “anger” warranted an upward departure to promote public safety, but also that Appellant so needed a “psychiatric intervention” that the Court felt compelled “to grant the government’s motion to go outside and above the sentencing guidelines” to ensure the Appellant would receive that treatment. The Sixth Circuit found that the district court abused its discretion.

United States v. Kelly. Sixth Circuit: Appellant violated his terms of supervised release by failing to register as a sex offender. As part of its Judgment, the district court imposed that district’s rote conditions of supervised release for sex offenders. But the Appellant’s last sex offense predated the revocation by 26 years. Moreover, the record demonstrated that Appellant had a low likelihood of recidivism (for sex offenses), had no mental disorder, had benefitted from previous therapy, and the age had lessened the risk of re-offending. Under such circumstances, the district court abused its discretion and the sentence was substantively unreasonable. The case further highlights the need for Counsel to be vigilant when Courts seek to impose “standard” conditions of supervised release.

United States v. Wilson. Sixth Circuit: A jury convicted Appellants of conspiracy to defraud the United States and providing false information to the Social Security Administration. Appellants sought to demonstrate their good faith reliance on the advice of their accountant, but the district court precluded that effort. Specifically, the district court found that Appellants had not sufficiently made an offer of proof sufficient for the defense to be presented to the jury. The Sixth Circuit, finding that the district court abused its discretion, found that an offer of proof unnecessary. Rather, Appellants needed only to inform the court of the substance of the evidence to be presented. As a second finding of error, the Sixth Court found that the district court failed to articulate its reasoning for a leadership enhancement, which required reversal.

Robert Dietrick represents criminal defendants in the federal Courts of Appeals.

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Bonifacio Toribio-Almonte was indicted on two counts: (1) conspiracy to import five kilos or more of cocaine and one or more kilos of heroin into the U.S., and (2) conspiracy to possess and distribute five kilos or more of cocaine and one or more kilos of heroin on board a vessel within U.S. customs waters.  On the morning his trial was set to begin, he pled guilty without a plea agreement.

Mr. Toribio-Almonte’s guideline range was 188-235 months in prison.  He requested a sentence below the guidelines, or at the very least, his minimum mandatory sentence, which was 120 months.  The Government requested a 235 month sentence.  To support its request for a sentence at the high end of the guideline range, the Government claimed Mr. Toribio-Almonte was a leader or organizer of the conspiracy.  The problem for the Government was that it had no evidence whatsoever to back up its claim.

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If a defendant takes the stand during a pre-trial evidentiary hearing, or during a trial, and provides testimony that is materially false, it can form the basis for a two point sentencing guidelines enhancement for obstruction of justice. In 1993 the U.S. Supreme Court in U.S. v. Dunnigan, stated that when deciding whether to apply this enhancement, the court must use the federal perjury statute (18 U.S.C. 1621) as a guide. The trial court must review the evidence and make an independent finding that material testimony was not only false but also intentionally misleading.

In a December 9, 2015 opinion entitled U.S. v. Thompson, the Second Circuit granted the Defendant’s appeal and found that the district trial judge failed to make a finding of specific intent to obstruct justice by simply adopting the general conclusions of the pre sentencing report.

When the DEA executed an arrest warrant for Thompson, he allegedly consented to a search of his home. Later he was indicted for conspiracy to possess with the intent to distribute controlled substances. Thompson challenged the search of his home seeking to suppress the digital scales and cash recovered. During an evidentiary hearing Thompson testified that the DEA agents said that if he did not consent to searching his home, his sister and girlfriend would be arrested thereby improperly coercing his consent. Continue reading →

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On December 15th the D.C. Circuit overturned for plain procedural error a severe sentence in another of those child pornography sting operation cases that appear with some frequency in this jurisdiction.

In a split opinion that is somewhat remarkable for its composition (Senior Circuit Judge Edwards and Circuit Judge Henderson comprising the majority with Senior Circuit Judge Sentelle dissenting) the Circuit reversed the conviction of James Brown, a defendant with a seeming penchant for sexual relations with underage females, including his daughter and at least one granddaughter. The Court found that the district court had plainly erred in sentencing Mr. Brown to a 144-month prison term, which was 47 months in excess of a jointly-requested low end of the Guidelines range and 23 months above the high end. In finding procedural error, the court sidestepped the appellant’s alternative claim of substantive unreasonableness. In particular, the panel found that the lower court’s explanation for an above-Guidelines sentence was inadequate under United States v. Akhigbe, 642 F.3d 1078, 1085-86 (D.C. Cir. 2011)).

Writing for the majority, Judge Edwards found that the district court had plainly failed to provide adequate in-court and written explanations for imposing a sentence that neither the prosecution nor the defendant had sought. Describing the Trial Judge’s in-court characterization of Brown’s conduct “spare and unparticularized,” the panel pointed out that the lower court’s explanation for the above-Guidelines sentence to have been a “‘mere recitation of . . . § 3553(a) factor[s] without application to the defendant being sentenced [which] does not demonstrate reasoned decisionmaking or provide an adequate basis for appellate review.’” (slip op. at 12) (quoting Akhigbe, 642 F.3d at 1086). Nor did the trial judge’s “unparticularized references to “actual abuse of children’ and ‘predatory conduct’ provide [any] basis for suggesting why the conduct described was more harmful or egregious than that accounted for in the Guidelines calculation, let alone why that conduct merited a sentence 23 months in excess of the applicable Guidelines range.” (slip op. at 12-13). In a similar vein, the Court found “unenlightening” the trial judge’s comment that “the combination of behaviors to which Brown pled is ‘not conduct we normally get around here,’” for that comment failed to explain why Brow’s behavior “was more egregious or harmful than that accounted for by the applicable Guidelines calculation.” (Id. at 3-14).

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Gregory McLeod pleaded guilty to being a felon in possession of a firearm. The Government sought an enhanced penalty under the Armed Career Criminal Act (ACCA), arguing that Mr. McLeod had at least three prior violent felony convictions, all of which were South Carolina second-degree burglaries. If the Government was right, and the District Court believed it was, Mr. McLeod faced a prison term of fifteen years to life. If Mr. McLeod was right, he faced no more than ten years in prison. The Fourth Circuit doesn’t tell us more about the facts of his offense because what we really care about is what happened in South Carolina state court in 1998.[1]

Mr. McLeod had a total of five convictions for second degree burglary. The District Court found that all five convictions were violent felonies. The indictments in “those cases charged McLeod with breaking and entering a commercial building with the intent to commit a crime.” Seems simple enough, right? But sometimes a state burglary isn’t a federal burglary.

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In white-collar cases, loss drives the sentencing guidelines. If a person is convicted of a federal fraud charge, probably the single biggest legal issue that will matter to that person’s sentence is what the loss amount is.

By contrast, the biggest thing about the case that will matter is what judge the person draws. It’s better to have a great sentencing judge and a high loss amount than a low loss amount with a judge who sentences more aggressively.

But I digress.

money-choise-concept-1439274-m.jpgThe government’s view of most fraud cases, in my experience, benefits from the clarity of hindsight. After everything has fallen apart, it’s easy to see that, say, a person selling an investment vehicle was using a new investor’s funds to pay someone who is clamoring for his or her money back.

In hindsight, it’s easier to see a Ponzi scheme than it may be in the crush of the moment. Some people plan to run Ponzi schemes, others fall into them through circumstance. Such is the way of the world.

In any event, loss for a Ponzi scheme can be tricky. Generally, the loss amount under the sentencing guidelines is the amount of money that was reasonably foreseeable to be lost by the victims. And it’s what’s reasonably foreseeable for the person committing the crime.

Ok, fair enough. The trouble is with the “credit against loss” rule. The sentencing guidelines explain that when the person being sentenced has paid some money back before the authorities or the victims cottoned onto the scheme, that money should be deducted from the loss amount.

This makes sense. If my son steals $20 from my wallet, but feels bad and puts it back before I notice, he should get some credit for that.

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Hiring is always hard, especially in a small office.

You have work that needs to be done. You can’t do it all. Maybe you’re a professional, like a doctor, and some of the work isn’t the best use of your time.

So you hire someone to help. Really, how much do you know about a person as the result of a hiring process? Yet, despite that, you give them responsibility over a portion of your business.

And you trust them.

As the First Circuit’s case in United States v. Zehrung shows, sometimes that trust is not repaid in the way you expect.

69133_medical_exam_equipment.jpgDawn Zehrung worked in a doctor’s office. While the doctor was seeing patients – he had 14,000 patients – she was responsible for sending the office’s bills to Medicare, the state of Maine’s Medicaid program, and other insurance companies.

She also had unsupervised control of the firm’s checkbook, accounts payable, and copays from patients.

In what I suspect the doctor now sees as folly, Ms. Zehrung was paid a bonus if the firm did well.

Shortly after she took over the billing, the firm’s monthly revenues went up 33%. The good doctor asked her why they were making so much more money all of a sudden. Ms. Zehrung said she was simply working back accounts receivable.

The doctor accepted this explanation. I’d like to think he drove off in a new sports car after hearing it.

Later, the doctor thought the continued increase was as a result of laser hair removal procedures that they had started doing.

As it happens, Ms. Zehrung was not just working the receivables. And, doubtless there’s money to be made in laser hair removal, but that’s not how the money in this office was being made.

It was, instead, being made through simple upcoding.

Ms. Zehrung would take the doctor’s notes about what had been done, then she would submit bills for procedures that paid more.

Also, she would destroy some of the records that showed what was actually done.

Finally, the doctor was alerted by a nurse who spotted the problem. I’d like to think he was reached by the nurse on his cell phone, while he was sitting beachside drinking something with an umbrella in it.

He asked Ms. Zehrung to explain herself. Eventually, he made a serious of calls that wound up with Ms. Zehrung being arrested, charged, and pleading guilty to healthcare fraud.

At sentencing, there was, apparently, only one disputed issue – whether Ms. Zehrung should be subject to an abuse of position of trust enhancement.

The government said she should – she abused the good doctor’s trust. He trusted her and she betrayed that trust.

She said she shouldn’t – the enhancement is normally appropriate for folks who have some special skill with discretion, like a lawyer, who abuses the trust that comes with that skill.

It’s clear that, say, a bank teller who embezzles is not eligible for an abuse of position of trust enhancement.

So, was Ms. Zehrung’s trust anything more than one finds in a run of the mill employee – someone who is trusted to do an important job in a small business?

The district court applied the enhancement. As the court of appeals explained, the court reasoned:

She did the billing with “no supervision,” the judge added – “[t]here was no direct oversight, no review,” he repeated again – and “she assumed complete financial control within the office.” And, the judge suggested, her position made it significantly easier for her to commit the crime charged.

The First Circuit reversed and remanded for more factfinding. These remarks, it concluded, were not enough to explain whether the enhancement was justified.

This case is a nice slalom through the different ways the abuse of position of trust enhancement can apply. And it’s a lovely read.

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Erica Hall was an office assistant at an OB/GYN office in Coral Springs, Florida. The job may not have paid well, because Ms. Hall was trying to make some extra cash on the side by selling patient information to some folks who would use it to get fake credit cards.

1385735_sterilisation.jpgMs. Hall was told by the folks the government described as her coconspirators that for every patient’s personal information she handed over, she’d be paid $200. If the information was able to be used to create a credit card that could be used, she’d be paid $1000 for that patient information.

Even though Ms. Hall handed over information for between 65 to 141 folks, and that 16 of those people had information that could be used to make fake credit cards, she was only paid $200.

If you can’t trust a co-conspirator, who can you trust.

Ms. Hall pled guilty to conspiracy to commit bank fraud, conspiracy to identity theft, and wrongfully obtaining and transferring someone’s health information.

When the probation officer wrote her presentence report, she was given a four-level enhancement for the offense involving more than 50 victims.

Ms. Hall objected to the “more than 50 victim” enhancement – she argued that a “victim” for the purposes of the fraud guidelines, is only someone who suffers and actual loss.

The district court didn’t agree though. The district court “concluded that the intentional transfer of information in exchange for consideration constituted actual use for the purposes of § 2B1.1(b)(2)(B).”

The Eleventh Circuit, in United States v. Hall, reversed the district court and vacated the sentence based on this application of the number of victims enhancement.

First, as the court of appeals pointed out,

Application Note 4(E) provides that a “‘victim’ means (i) any victim as defined in Application Note 1; or (ii) any individual whose means of identification was used unlawfully or without authority.”

So, when the identity information was transferred, was that a use of the information?

The Eleventh Circuit said no:

When we apply the rules of statutory construction to the enhancement, we disagree with the district court’s interpretation. We first consider the plain meaning of the word “used” as elaborated upon in Application Note 4E. As the Supreme Court noted in Bailey, the word “use” means “to convert to one’s service,” “[t]o employ,” “to avail oneself of,” and “to carry out a purpose or action by means of.” 516 U.S. at 145, 116 S. Ct. at 506. In other words, “use” is the “application or employment of something . . . for the purpose for which it is adapted.” Black’s Law Dictionary 1681 (9th ed. 2009). “These various definitions of ‘use’ imply action and implementation.” Bailey, 516 U.S. at 145, 116 S. Ct. at 506. On the contrary, the definition of “transfer” is “[t]o convey or remove from one place or one person to another; to pass or hand over from one to another, esp. to change over the possession or control of” and “[t]o sell or give.” Black’s Law Dictionary 1636. Transfer means something distinctly different than use.

If I transfer my car to you, that doesn’t necessarily mean that I use it – I could just sign over the title. So, as the court of appeals found, transferring identity information – as Ms. Hall did – is a separate thing than using identity information – the thing that gets you the enhancement for the number of victims.

And Ms. Hall will go back for resentencing.

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The federal sentencing guidelines are probably the most problematic in three areas – fraud, child pornography, and drugs.

Today’s case, United States v. Diallo, illustrates two of the big problems with the fraud guidelines. First, they’re really complicated – so complicated that federal prosecutors sometimes don’t really understand how they work. In this case, the prosecutor at sentencing took a position so clearly inconsistent with the guidelines that the government abandoned it for the appeal.

(An astute reader will notice that this means the district court went along with the federal prosecutor’s flawed guidelines understanding. It’s a shame, but c’est la guerre.).

Second, the fraud guidelines are driven by what the “intended loss” is. And “loss” for sentencing guidelines purposes is a squishy notion. And squishy notions are bad when you’re trying to figure out how much prison time to give someone.

785364_creditcard.jpgCredit Card Problems

Issa Diallo had a problem with credit cards. Sure, like many Americans, he charged more than he should of. Unlike many Americans, he put these charges on cards that weren’t issued to him.

He went into a Wegman’s (it’s a grocery store, for our geographically diverse readers) and bought 26 gift cards with a counterfeit credit card. The next day he came back to do it again and was arrested.

Law enforcement went into his car with a warrant. They found a treasure trove of stolen identity documents:

53 counterfeit credit cards, a counterfeit Louisiana driver’s license, 24 gift cards, a Global Positioning System (GPS), a laptop computer, a thumb drive, and a skimming device, which is a hand-held device that copies, stores, and encodes credit card information from a credit card’s magnetic strip. A subsequent search by Secret Service agents resulted in the discovery of a second thumb drive and another gift card. Searches of the laptop and thumb drives revealed over 200 compromised Discover, Visa, and MasterCard credit card accounts.

He pled guilty to having counterfeit credit cards under 18 U.S.C. § 1029(a)(3). In the plea, there was no agreement about the number of victims or the amount of the loss. These are, of course, massively important to figuring out the guidelines range under U.S.S.C. § 2B1.1.

What’s It Take To Be A Victim?

At sentencing, a Secret Service agent testified that there were credit cards for 51 financial institutions in Mr. Diallo’s possession.

There’s a four-level guidelines enhancement if there are more than 50 victims.

The government said that meant there were more than 50 victims, so the enhancement for more than 50 victims should apply.

The defense lawyer argued that “victim” for purposes of the number of victims enhancement, means people who actually lost money as a result of Mr. Diallo’s criminal conduct.

What’s the loss amount?

The Secret Service Agent testified that only $160,000 was actually charged on the cards that Mr. Diallo had. Though when you add up the credit limits for each of the cards, the total amount that could have been charged was $1.6 million.

So, since “loss” for the guidelines purposes means the higher of actual loss or “intended loss” – the amount that a person could reasonably think could have been lost as a result of the office – the government said that Mr. Diallo should have known that the loss could have been $1.6 million.

Mr. Diallo’s attorney was able to get the agent to acknowledge that there was no way Mr. Diallo could have known what the credit limit on the cards was absent a subpoena.

The District Court Speaks

These were hotly contested questions. There was testimony and argument. The Third Circuit reports that:

The Court’s analysis on these two issues consisted of the following: “The intended loss for credit cards he personally used and the cards he manufactured and provided to others totaled $1.6 million. Over 50 financial institutions were affected by his actions. So obviously it is a very serious offense.”

It’s not the most satisfying way to grapple with a hotly litigated legal issue.

The Appeal

On appeal, the government – perhaps reading the commentary for the sentencing guidelines that applied to this case relating to the number of victims enhancement for the first time – acknowledged that “victim” means “someone who suffered a loss.”

Since not all of the financial institutions had cards that were actually used by Mr. Diallo, there weren’t 50 or more companies that were actually harmed. So the government abandoned the “number of victims” argument.

Good on them for admitting their error. Perhaps it would have been better to do that before the sentencing hearing, but better late than never.

Turning to the loss amount issue, the Third Circuit started by setting the stage

This appeal requires us to determine how sentencing courts should calculate what “pecuniary harm was intended to result” from credit card fraud when the fraud’s perpetrator did not know the credit limit, which is the potential loss amount from the stolen credit card.

The appellate court reasoned that if the district court had really done a searching analysis and decided that there was a reasoned basis for thinking that Mr. Diallo meant to take the full limit of each card, that could be supported, perhaps, depending on how good the reasoning was.

But that’s not what happened here. And the Third Circuit was really not impressed with what the district court did.

from the District Court’s statement at sentencing–“The intended loss for credit cards he personally used and the cards he manufactured and provided to others totaled $1.6 million” App. 30-31–we would be speculating as to what evidence or argument was the basis for the District Court’s finding that $1.6 million was Diallo’s intended loss amount. This type of “speculation ‘is inappropriate’ in light of the inherently discretionary nature of the sentencing court’s decision.”

The case was sent back for resentencing.

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Michael Roussel used to be a Captain in the New Orleans Police Department. As you might expect, he was convicted of bribery.

After his conviction at trial, he went to sentencing. The judge determined that an enhancement for receiving more than one bribe was warranted. The Fifth Circuit, in United States v. Rousel, disagreed.

419055_rainy_night_in_the_french_quar.jpgSynergy

Mr. Roussel was friends with Joey Branch. As a result of Mr. Branch’s plea and cooperation agreement with the federal government, one suspects that they are no longer friends.

But back in 2008, Mr. Branch was an entrepreneur trying to place private security guards and Mr. Roussel was a police official with deep connections in a police force that has a tradition of officer’s moonlighting as private security guards.

There was synergy in their relationship.

Of course, the thing about success is that one naturally wants it to continue and build. What was once an exciting threshold quickly starts to look like a stale plateau. And so it was with Mr. Branch and Mr. Roussel. Soon, they were working together to try to get more business for Mr. Branch’s company. And that involved recorded calls to a confidential informant.

The informant worked for an energy company, and part of his job was to hire security guards during natural disasters. Roussel, Branch, and the informant agreed that uncertified, but falsely represented as certified, guards would be hired by the informant’s company in exchange for the three splitting the profits and a fake job for the informant’s wife.

Mr. Roussel ultimately gave $1,000 to the informant as earnest money of a sort. He and Mr. Branch were arrested soon after that – no other money was made.

Is Each Payment A Separate Bribe?

At sentencing, the district court determined that Mr. Roussel should receive a guidelines enhancement for being involved in multiple bribes.

Here’s what the district court said:

[w]hat was intended was a series of actions over a period of time. This contract was to continue for some period of time in the future . . . . It could not be anticipated exactly when they would occur, but whenever there would be a presidentially declared natural catastrophe or emergency and Entergy would be required to immediately beef up its security force, then . . . Gladius, would be called upon to supply security officers, . . . but in any event, it seems to me that that is very different from a one-time agreement to pay a bribe that is then just paid over in installments. This was going to be a series of actions. Effectively another bribe to be paid every time there was another event that occurred.

If you’re bribing a public official and tell him that you’re going to give him, say $10,000 for selecting your bid for a federal contract, and you pay him in two installments of $5,000, is that one bribe or two? One can see how this could be a hard question.

Here, though, the Fifth Circuit thought it wasn’t that tricky – in counting the number of bribes, you don’t look at all the stuff that could have happened if the full deal went through. Instead, you look at what actually happened.

Or, as the court of appeals said

Simply put, the government proved the payment of only one bribe–the $1,000 “good faith” money to Dabdoub. The rest was all speculative.

Mr. Roussel is going back for resentencing.