Tuesday, October 11, 2016

Pennsylvania Drug Priors Not Necessarily Qualifying Predicates for Recidivist Enhancements

In Singh v. Attorney General, No. 15-2274, the Court reverses the Board of Immigration Appeals’ determination that an alien's prior Pennsylvania drug offense was an “aggravated felony” making him subject to removal and ineligible for discretionary relief.  In both this immigration context and those presented by recidivist enhancements such as the Sentencing Guidelines’ career offender provision, the court must determine whether the prior conviction was for an offense matching the “generic” federal definition of the pertinent crime.  If the state offense sweeps more broadly, it is not a predicate.

With regard to Pennsylvania's principal controlled substance law at 35 Pa. C. S. § 780-113(a)(30), that requirement can present an issue inasmuch as the state’s controlled substance schedules at § 780-104 include drugs not embodied in the federal schedule at 21 U.S.C. § 802.  A prior conviction therefore cannot be deemed a predicate unless the sentencing court (or immigration judge) is permitted to inquire into underlying judicial records to determine what substance formed the basis for the defendant’s prior Pennsylvania conviction.  For such inquiry to be permissible, § 780-113(a)(30) must be “divisible,” meaning that drug type must be an element of the offense.

Here, the Court quotes its recent decision in Bedolla Avila v. Attorney General, No. 15-1860 (June 23, 2016), to confirm that § 780-113(a)(30) is “divisible ‘with regard to both the conduct and the controlled substances to which it applies,’” i.e., that the type of substance is one element of the offense, and the mode of trafficking — for example, “manufacturing” vs. “delivering” — is another.  Accordingly, courts may make inquiry into the limited class of judicial documents cognizable on the “modified categorical approach” under Shepard v. United States, 544 U.S. 13 (2005).

In Singh’s case, the cognizable portions of the underlying judicial record featured language one would imagine was formulated to keep the conviction from triggering immigration consequences: his offenses were said to involve a “PA Counterfeit Substance – Non Fed.”  Rejecting the government’s view that state courts and prosecutors lack authority to determine what substances are or are not within the scope of the federal Controlled Substances Act, the Court reads the “Non Fed” language to permit a conclusion that "whichever drug identity Singh’s previous conviction involved, it was not a drug identity listed as a federal controlled substance.”

The Court also rejects an end-run ventured by the Board of Immigration Appeals, which had held that Pennsylvania drug priors constitute aggravated felonies as a categorical matter.  According to the BIA, “no ‘reported decision of a Pennsylvania court’” indicates any defendant has been convicted for “conduct involving a substance that was not included in the Federal controlled substance schedules.”  The Board thus concluded that Pennsylvania drug offenses qualify as predicates because there is no “realistic probability” that “Pennsylvania actually prosecutes people under § 780-113(a)(30) for misconduct involving substances that are not federally controlled.”  In rejecting that conclusion, the Court explains that no such “realistic probability” inquiry is appropriate where the elements of the state and federal offenses do not match.  In the case of  35 Pa. C. S. § 780-113(a)(30), the different penalties provided by state law for different substances, as well as discussion in a Superior Court decision, supply the correct points of reference to hold that drug type is an element, such that no match appears.

Unusual Bankruptcy Fraud Case Yields Guidance on Sentencing and Proof Issues

In the rare bankruptcy fraud case to reach it, United Statesv. Free, No. 15-2939, the Court confronts an instance of a defendant who filed for voluntary reorganization under Chapter 13 despite having adequate assets to repay his creditors in full.  The proceeding was later converted into a Chapter 7 action and the creditors made whole.  Defendant Michael Free was meanwhile found guilty by a jury of making false statements in filings and testimony in the bankruptcy proceedings.  At sentencing, the government sought a 16-level enhancement under the 2014 Sentencing Guidelines for a loss amount of between $1 and $2.5 million.  The sum represented an accounting of the value of certain assets concealed by Free from the bankruptcy court.  (Note that by amendment effective November 1, 2015, Section 2B1.1 now requires a loss $1.5 to $3.5 million to trigger a 16-level bump.)

Section 2B1.1 of the Guidelines, pertaining to fraud and other economic crimes, defines “loss” as the greater of the “reasonably foreseeable pecuniary harm that resulted from the offense” or, to abbreviate slightly, “the pecuniary harm that was intended to result from the offense.”  If “there is a loss but it reasonably cannot be determined,” the sentencing court is to use “the gain that resulted from the offense as an alternative measure.”  In Free’s case, the district court made no explicit finding of any intent to cause pecuniary harm to the creditors; rather, the Circuit suggests, Free’s aim had been to protect his extensive store of valuable World War II-era firearms from liquidation.  The district court nonetheless applied the 16-level enhancement, reading the Guidelines to “reflect the commonsense proposition ‘that there would be a higher loss calculation when there is a significantly higher amount of assets that are concealed from the Bankruptcy Court[.]’”  Given “the tens of thousands of bankruptcy cases just filed here in Pittsburgh, let alone around the country,” the judicial system must “absolutely rely on people telling the truth because we can’t ferret it out any other way.”

The Circuit reverses.  Loss cannot simply be the amount of assets the debtor hides from the trustee and creditors.  Instead, the sentencing court must determine the “pecuniary harm, actual or intended, to [the defendant’s] creditors, or what he sought to gain from committing the crime.”  Despite disagreeing with the district court’s “view that the concept of ‘loss’ under the Guidelines is broad enough to cover injuries like abstract harm to the judiciary,” the Court emphasizes the relevance of this concern.  Indeed, the decision even goes so far as to contemplate an upward departure for conduct resulting in “a significant disruption of a governmental function” under Section 5K2.7 of the Sentencing Guidelines.  Separately, the Court states in a footnote that loss amount may include “administrative expenses” incurred by the bankrupt estate.

The Court otherwise rejects the defendant’s challenge to the sufficiency of the evidence.  Quoting a Sixth Circuit decision for the proposition that under the bankruptcy statute at 18 U.S.C. § 157, “filing itself is the forbidden act,” the Court concludes that the evidence Free filed fraudulent documents was “overwhelming.”  It would thus appear that in bankruptcy fraud cases there need be no proof that the defendant intended to deprive creditors of money or property.

Wednesday, September 21, 2016

No Requirement of Actual Harm for Vulnerable Victim Enhancement

     In United States v. Adeolu, No. 14-3610, 2016 WL 4728003, the Circuit affirmed Adeolu’s sentence, holding that the vulnerable victim enhancement at U.S.S.G. § 3A1.1(b)(1), does not require actual harm to the victim, only a nexus between the victim’s vulnerabilty and the crime’s success.

     Adeolu, a tax preparer, prepared fraudulent tax returns by having his clients claim false dependents.  Adeolu was ultimately convicted of conspiracy to defraud and aiding and abetting the preparation of materially false tax returns (18 U.S.C. § 371 and 26 U.S.C. § 7206(2)).  At sentencing, the court applied the vulnerable victim sentencing enhancement set forth in § 3A1.1(b)(1) based on Adeolu's use of young children's personal information. On appeal, Adeolu argued that the children were not vulnerable victims because they did not experience “actual” harm.

     In rejecting the actual harm requirement, the Circuit states that any issue regarding harm is encompassed within the analysis of the nexus between a victim's vulnerability and the crime's success.  This allows the court to assess whether a victim has been “taken advantage of” in a manner that facilitates the defendant's scheme.  Actual harm is inconsequential to this analysis.  
The Court noted that the purpose of § 3A1.1 is to “acknowledge that, . . . defendants know or should know of their victim's particular vulnerability and are therefore more blameworthy for knowingly or even negligently harming them.” (citation omitted).  “But a defendant is not more or less blameworthy for the purposes of this enhancement based on the amount of harm that a victim experiences. Applying the enhancement in such a manner would create a disparity in the punishments for defendants who are more successful (and cause more harm) and those who are less successful.”
In light of those points the Court held that there is no requirement of “actual” harm.

     In this case, the victim’s youth gave rise to their vulnerability:  “Given a child's inability to guard against theft of personal information, we find that the first element of this test is satisfied.”  Second, Adeolu knew the victims' vulnerability and that their ages were integral to qualifying as dependents on the fraudulent returns.  Accordingly, there was a “nexus” between the victims' vulnerability and the success of the scheme. 

Friday, September 02, 2016

Repeat and Dangerous Sex Offender Guideline / Categorical Approach

In United States v. Dahl, No. 15-2271 (3d Cir., Aug. 17, 2016), the district court committed plain error by failing to apply the categorical approach in determining whether Dahl’s Delaware first- and third-degree unlawful sexual contact convictions constitute federal sex offense convictions under the federal repeat offender statute, 18 U.S.C. § 2426(b)(1)(B), and therefore subjected him to an increased sentence under the career sexual offender guideline embodied at U.S.S.G. § 4B1.5. Section 2426(b)(1)(B) refers to a “conviction for an offense . . . consisting of conduct that would have been an offense” under certain federal statutes, and § 4B1.5 refers to a “sex offense conviction” as “any offense [under 18 U.S.C. § 2426(b)(1)(B)], if the offense was perpetrated against a minor.” However, the Supreme Court’s decisions in Descamps, Johnson, Mathis, and Nijhawan v. Holder, 557 U.S. 29 (2009) demonstrate that the factual inquiry triggered by the qualifying language in the statute is limited to the facts relevant to the qualification itself. Therefore, the district court could make a factual inquiry into whether the victim of Dahl’s offenses were minors, but was required to apply the categorical approach to the underlying elements of the predicate offenses.  

Applying the categorical approach, the Court determined that Dahl’s Delaware convictions were broader than the aggravated sexual abuse statutes embodied at 18 U.S.C. § 2241 in two ways, and therefore could not count as predicates for an enhanced sentence under U.S.S.G. § 4B1.5. First, the sexual contact prohibited under Delaware law encompassed touching genitalia and other specified areas through clothing, whereas the federal statute requires penetration or skin-to-skin contact between various body parts. Second, the Delaware third-degree unlawful sexual contact statute prohibited consensual contact the defendant nonetheless knew was “offensive to the victim,” whereas the federal aggravated sexual abuse statute requires a nonconsensual act.
Dahl was entitled to resentencing under plain error review. The error was plain in light of recent Supreme Court precedents, it affected Dahl’s substantial rights because it subjected him to a much harsher guideline range, and the Court typically exercises its discretion to recognize a misapplication of the Guidelines as affecting the fairness, integrity, or public reputation of judicial proceedings.

Collateral Attack of Sentence Not Permitted at Supervised Release Revocation Hearing

In United States v. Jones, No. 15-1636 (3d Cir., Aug.17, 2016), Defendant sought to challenge the classification of his underlying conviction during his supervised release revocation hearing. Specifically, Defendant attempted to argue that, in light of Johnson v. United States, 559 U.S. 133 (2010) and Johnson v. United States, 135 S.Ct. 2551 (2015), his ACCA conviction should be graded as a Class C felony instead of a Class A felony. The Third Circuit rejected Defendant’s argument in short order, by announcing that it was joining several of its sister circuits who have ruled that the validity of an underlying conviction may not be collaterally attacked in a supervised release revocation proceeding. Such challenges may only be raised on direct appeal or through a habeas corpus proceeding. The Third Circuit rejected Defendant’s claim that he sought only to challenge the decision rendered by the district court during the present revocation hearing. The Court concluded that, as the underlying conviction had been properly classified when Defendant was initially sentenced, he could not challenge this proper classification during a subsequent revocation hearing.

Friday, August 19, 2016

Court Decides Indictment Error SOR, Evaluates Speedy Trial Claim

United States v. Terrell Stevenson, No. 15-1942, concerns a “hip-hop heroin hub” called Hood Promo.  Following a federal investigation, 8 people were indicted on drug and weapons charges.  All of them pled guilty, except Stevenson.  On appeal, Stevenson argued that the Court, which granted his Speedy Trial motion, should have dismissed the indictment with prejudice.  He also argued that the indictment failed to allege all the elements of the crime of fraud in relation to identification documents, and he appealed the District Court’s denial of his motions to suppress, the propriety of the district court’s conduct at trial, and the reasonableness of his 360-month sentence.

The Speedy Trial Act, 18 U.S.C. §§ 3161–3174, requires that a trial start “within seventy days from the filing date (and making public) of the information or indictment.  § 3161(c)(1). This deadline is not absolute, however, because certain periods of delay “shall be excluded . . . in computing the time within which the trial . . . must commence.” 18 U.S.C. § 3161(h).  The most common form of “excludable” delay results from the filing and disposition of pretrial motions. 18 U.S.C. § 3161(h)(1)(D).  When a violation is found, the court may dismiss the indictment with or without prejudice, depending on three factors (1) seriousness of the offense; (2) reason for the delay; and (3) administration of justice.  18 U.S.C. § 3162(a)(2).  The Court found that the offense here was serious, that the delay was largely due to the repeated delays and chaotic nature of the litigation (which it blamed on the 8 defendants, finding that any government contribution was relatively innocent and harmless), and it found no prejudice to Stevenson from the delay (the fact that a case gets stronger over time – including by coD pleas – is not prejudice, for purposes of the statute).  The district court did not err in looking at the number of excludable days in the context of factor (2).

The Court also addressed what it called a “close case” of sufficiency of the indictment on fraud in relation to identification documents.  The Court found an implied reference to interstate commerce in the indictment’s description of interstate activity.  But it found that any failure would have been harmless (and applied harmless error review here, because Supreme Court guidance in analogous circumstances – citing Neder on jury instructions – suggests defective indictments do not constitute “structural” error).

Monday, August 15, 2016

Circuit Addresses Definition of "Investment Advisor" for First Time

In United States v. Miller, No. 15-2577, the Court affirmed Miller’s securities fraud and tax evasion sentence for selling fake promissory notes to investors and squandering their money ($41 million worth).  In its first opinion addressing the definition of “investment advisor” under the Investment Advisers Act of 1940, 15 U.S.C. § 80b-2(a)(11), the Court held that the district court properly applied the investment advisor enhancement, U.S.S.G. § 2B1.1(b)(19)(A)(iii), because Miller was an investment advisor.  In addition, the Court found that the government had not breached the plea agreement and that the sentence was substantively reasonable.

The Court held that, considering the broad definition of “investment advisor” in the statute, the fact that no exception in the statute applied to Miller, and that the Sentencing Guidelines adopt the definition from the statute, Miller’s activities qualified him for the enhancement.  The statute defines “investment advisor” as any person who, for compensation, engages in the business of advising others on investments.  Miller conceded that he gave personal advice to some victims.  The advice given by others to the remaining victims constituted relevant conduct.  Miller was in the business of advising, because he held himself out as an advisor, and was registered as such.  And, he received compensation including the principal provided by investors, which he converted to his own use.

The Court’s review of the other issues was less substantive.  The breach of plea was reviewed on plain error, because the objection wasn’t clear.  The Court found no breach, because the government, at worst, wavered in response to pressure from the district court.  The Court found the 120-month sentence reasonable, given that the district court accounted for Miller’s poor health, and because of the “predatory and pernicious” nature of the crime.

Thursday, August 11, 2016

Term of Imprisonment is Synonymous with Sentence of Imprisonment under U.S.S.G. §4A1.2

Commonwealth v Hector Rengifo, N. 15-1779, August 5, 2016

           This case answers the burning question, “When does a Pennsylvania time served to twelve month sentence equal of sentence of almost two and one-half years for the purposes of the U.S.S.G.?” Mr. Rengifo pled guilty to distributing heroin in violation of 21 U.S.C. §841(a)(1). Prior convictions though subjected him to the possibility of an enhanced sentence as a “career offender” under U.S.G. 4B1.1(a). Key to whether or not one of those convictions actually counted towards making him a career offender was a prior Pennsylvania conviction for possession of marijuana with intent to distribute and for which he received a sentence of time served to twelve months that evolved, by virtue of two parole violations and sentences, into a prior sentence of imprisonment exceeding one year and one month, whenever imposed, that resulted in the defendant being incarcerated during any part of fifteen years within the time the defendant’s instant offense occurred.  U.S.G.G. §§ 4A1.2(e)(1), (e)(2).
            Even though Mr. Rengifo, as the result of his parole violation served only 365 days, i.e., every day of his sentence, the Government contended and the District Court agreed, that U.S.G.G. §4A1.2(k)(1), which states how to measure prior terms of imprisonment, requires adding the time serbed as a result of the violations— 294 days—  not to the original 71 days he served, but to the twelve month sentence he received. Even though “term of imprisonment” is not defined in the guidelines, the Court of appeals that “term of imprisonment” and “sentence of imprisonment” are interchangeable in U.S.G.G. §§ 4A1.2(e)(1), (e)(2) and §4A1.2 (k)(1). The Court of Appeals in fact concluded that as a result of its interpretation of the term of imprison, Mr. Rengifo actually served much more than the government contended, because in the Court’s calculation, just as you counted both the time served and the time left on parole in the original sentence, the District Court was required to do the same with the parole violations, i.e., increase the “term of imprisonment” calculation by adding both the time served after the violation and time left on parole after reparole. In other words, the time from the commencement of a defendants’ sentence until he is ultimately release from supervision and incarceration are lumped together to determine the sentence— 833 days as opposed to the government’s calculation of 659 days. (Perhaps sentences consecutive to a grant of parole grant a reprieve, but I would not count on it.)

Saturday, August 06, 2016

Bribery case against Senator Menendez can proceed: advocacy for physician friend is not protected under the Speech and Debate clause of the U.S. Constitution

In United States v. Menendez, 15-3459,
http://www2.ca3.uscourts.gov/opinarch/153459p.pdf, 2016 WL 4056037 (3d Cir. July 29, 2016), the Third Circuit rejected Senator Menendez’s appeal that his indictment should be dismissed. The issue was whether advocacy on behalf of two concerns of Menendez’s physician friend, Dr. Melgen, was protected under the Speech and Debate Clause, U.S. Const. Art. 1, §6, cl. 1. The two issues were (1) allegations that Dr. Melgen overbilled the Center for Medicaid and Medicare Services (CMS) $ 8.9 million from 2007 to 2008 and (2) a contract (x-ray technology) dispute between Dr. Melgen and a company in the Dominican Republic. Menendez narrowed the issue to 5 allegedly legislative acts: meetings, calls, and staff communications with high-ranking Executive officials in the Department of Health and Human Services.

The Court explained that the Speech and Debate clause, which states that "members of Congress shall not be questioned in any other Place for any Speech or Debate in either House," extends to legislative acts. First, a court must determine if an act is clearly legislative (i.e., subpoeanaing records for committee hearings) and so protected, or clearly non-legislative (i.e., legitimate constituent services or illegitimate bribe taking) and so not protected. If an act is ambiguous (i.e., a trip by a legislator), then the Court looks to the particular circumstances to analyze content, purpose and motive. The Court rejected the government’s hardline rule that the Speech and Debate clause does not protect legislative attempts to influence the Executive, which would place legitimate policy-based efforts under the specter of indictment.

Notwithstanding their constitutional relevance, the historical facts found by the District Court were reviewed for clear error with the burden on Menendez. The Third Circuit found clear error was not evident: the disputed acts basically amounted to lobbying on behalf of a particular party and so non-legislative and not protected. The Court rejected the factual challenges based on (1) the actual content of the meetings, (2) the preparation for the meetings, (3) Dr. Melgen’s interest in following up with Menendez after the meetings, and (4) rejecting Menendez’s narrow lens when reciting the facts. Moreover, Menendez’s staff’s request for information from the Executive which would be protected was too bound up in specific advocacy, and so the entire communication was analyzed, and found to be non-legislative.

The Court also rejected a separation-of-powers and speech-and debate-clause challenge that violation of a Senate financial disclosure rule could only be punishable in the Senate, not by the Executive under 18 U.S.C. §1001. The Court addressed the venue issue (D.C., not N.J., was the proper venue) with regard to the financial disclosure under mandamus review and denied it because the allegations were sufficient that material facts were concealed in N.J. before the document was filed in D.C.