Federal Sentencing Guidelines

• Publication year: 2018

Federal Sentencing Guidelines

Thomas D. Church

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Federal Sentencing Guidelines

by Thomas D. Church^*

I. Introduction

In 2017, the United States Court of Appeals for the Eleventh Circuit continued its efforts to untangle the complex web of laws known as the Federal Sentencing Guidelines.¹ The year saw a number of precedential decisions interpreting its provisions, including those governing specific offenses such as drug trafficking and fraud, as well as those setting forth the proper methodology for establishing a defendant's criminal history.

This Survey identifies and summarizes the important holdings from these decisions. Section II begins with the decisions reviewing an application of the Guidelines provisions for specific offenses, and the different enhancements available for certain classes of crimes. Section III then focuses on the general adjustments that apply irrespective of the specific offense type, such as those based on a defendant's role in an offense or the number of victims in an offense. Finally, Section IV addresses cases involving the proper determination of a defendant's criminal history category. As our justice system continues striving for fairness in sentencing, it is important to take note of the changes in the Guidelines, which, though advisory, are at minimum a crucial starting point for judges endeavoring to impose just sentences.

II. Specific Types of Offenses

A. Basic Economic Offenses

The Guidelines for sentencing defendants convicted of basic economic offenses such as fraud, theft, and bribery are found in Chapter Two, Part B. ² In 2016, almost 25% of offenders sentenced in the Eleventh Circuit

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were sentenced for fraud, larceny, or other white-collar crimes.³ It should come as no surprise, then, that the Eleventh Circuit addressed several Guideline provisions governing these types of crimes in 2017.

1. Calculating Actual and Intended Loss Amounts under USSG § 2B1.1

In offenses involving fraud, larceny, or embezzlement, the amount of money a defendant actually deprives or intends to deprive a victim of is often the most important factor in properly calculating a defendant's offense level. United States Sentencing Guidelines (USSG) § 2B1.1(b)(1)⁴ provides a table featuring several ranges for the "loss amount" of an amount, and each range corresponds to an increase in the defendant's offense level.⁵ While it is uncontroversial that a defendant who steals one million dollars should be sentenced more harshly than one who steals a hundred, issues arise when defendants claim they did not cause a particular loss or that they were unaware of losses caused by their co-defendants.

The Eleventh Circuit addressed these kinds of issues in 2017. In United States v. Castaneda-Pozo,⁶ for example, a defendant convicted of bank fraud argued that he should not be held "accountable for the scheme's entire intended loss amount," which included losses attributable to his co-conspirators.⁷ In the scheme, the co-conspirators drove rental cars through apartment complexes and stole residents' rent checks out of mailboxes, which the defendant would then deposit. At sentencing, the defendant argued that the losses stemming from his co-conspirators' actions should not be held against him because he was unaware of what his co-conspirators did with the cars, and he was unaware that the checks he deposited were stolen.⁸

The Eleventh Circuit rejected his argument, restating the law that "[w]hen an offense involves jointly undertaken criminal activity, relevant conduct includes all reasonably foreseeable acts and omissions of others in furtherance of the jointly undertaken criminal activity."⁹ At trial, the defendant's co-conspirators testified that the defendant was the

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"ringleader of the scheme," and had rented the cars for them.¹⁰ Accordingly, he was held accountable for those foreseeable losses.¹¹

While calculating the loss amount in Castaneda-Pozo was relatively straightforward, figuring out the loss amount in United States v. Wright¹² was decidedly trickier. In Wright, the defendant challenged the district court's finding that the defendant was responsible for $7.7 million in intended losses by virtue of a "special rule" that counts a defendant's unlawful possession of personally identifiable information (PII) towards the total intended loss amount.¹³

In Wright, the defendant filed over 700 fraudulent tax returns, accounting for more than $800,000 of the total loss amount.¹⁴ The issue was whether the defendant's unlawful possession of PII of over 13,811 people, including credit and debit card numbers, social security numbers, and other unspecified forms of PII could count towards the rest of the loss amount.¹⁵ Under the "Special Rules" of § 2B1.1, any charge a defendant makes with a counterfeit or unauthorized "access device," such as a credit card or personal identification number, is counted towards the defendant's total loss amount, and even if an access device is never used, its mere possession by a defendant is factored into the intended loss amount for "at least $500 per access device."¹⁶

The ultimate issue before the Eleventh Circuit in Wright was whether the PII, or "compromised identities," in the defendant's possession constituted counterfeit or unauthorized access devices, and thus, whether the government could prove the intended loss beyond the $800,000 in fraudulent tax returns.¹⁷ Of the 13,811 "identities" in the defendant's possession, the court noted there were 331 debit or credit cards, which the Eleventh Circuit previously deemed qualify as "access devices."¹⁸ Each of these cards thus contributed $500 to the total loss amount.¹⁹

But perhaps the most important part of the opinion was the court's inquiry into whether the "numerous" social security numbers in the

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defendant's possession constituted unauthorized access devices. Noting that it had never before decided the issue in a published opinion, and crediting persuasive opinions from other circuits, the court officially held that "a social security number qualifies as an 'access device' under the definition in 18 U.S.C. § 1029(e)(1)²⁰ and for purposes of applying the Special Rules in the Sentencing Guidelines."²¹

Even though the social security numbers in the defendant's possession could be counted towards the total loss amount, the court nonetheless vacated the defendant's sentence for the following reasons: (1) there was no specific quantity of social security numbers alleged, and thus no way to calculate them towards the loss amount under the Special Rules; and (2) the government had not shown that the rest of the PII included personal identification numbers or other types of access devices.²² Since the court could not readily determine how many social security cards to count towards the loss amount or the contents of the remaining PII, only the fraudulent tax returns and the credit and debit card numbers in the defendant's possession could be counted towards the total intended loss amount, which fell below the "over $3,500,000" range attributed to the defendant at sentencing.²³

In addition to the intended loss amount, the Eleventh Circuit took up an important case regarding how to properly calculate the actual loss amount in fraud offenses. In United States v. Stein,²⁴ the defendant, a lawyer, was convicted of securities fraud after he "fabricated press releases and purchase orders to inflate the stock price of his client Signalife, Inc."²⁵ The court vacated the defendant's sentence, however, because the government failed to prove the losses suffered by Signalife's investors were actually or legally caused by the defendant's conduct.²⁶

Since the government did not try to establish an intended loss amount, it had the burden of proving the "actual loss attributable to the defendant's conduct" by a preponderance of the evidence.²⁷ While this calculation does not have to be specific and individualized for each victim, a court's estimate of an actual loss amount must be "based 'on reliable

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and specific evidence' rather than mere speculation."²⁸ In Stein, that meant the government had to prove that "in deciding to purchase Signalife stock, investors relied on the fraudulent information Mr. Stein disseminated."²⁹

Specifically, the government had to prove that the defendant's fraud was both the "but for" and the "proximate" cause of the investor's putative losses.³⁰ In determining whether the defendant's offense was the "but for" cause of the investors' pecuniary losses, the court stated that the government could prove "but for" causation by either introducing "direct evidence that each individual investor read the false information and relied on it when deciding to purchase stock" or by offering "specific circumstantial evidence . . . that all of the investors relied on the defendant's fraudulent information."³¹ In Stein, the government failed to provide either.³²

At sentencing, the government tried to prove that all 2,415 investors who purchased Signalife stock during the time of the defendant's offense did so in reliance on the defendant's fraudulent representations.³³ The government's evidence included testimony from one investor who relied on one of the defendant's press releases, a victim's statement at sentencing to the same effect, other victim statements suggesting reliance on general press releases and publicly available information, and an inference that some investors relied on the defendant's misrepresentations because "the only place to get information about Signalife stock was from press releases and public filings."³⁴ Not only was this evidence insufficient to assume reliance by every investor, the court held, but it was "the kind of speculation forbidden by the Sentencing Guidelines."³⁵

The court also held that the government had failed to prove that the defendant's fraud was the proximate or legal cause of the investors' losses.³⁶ This required proving that...