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.