Tuesday, April 01, 2008

“Identity theft” sentencing enhancement does not apply to altering addresses on clients’ financial statements

Update: On April 22, 2008, the Court filed the amended opinion. It appears to be substantially the same as the original.

Update: On April 17, 2008, the Court vacated its opinion and judgment sua sponte, explaining that an amended opinion will be filed forthwith.

In United States v. Hawes, No. 06-3334 (3d Cir. Mar. 27, 2008), the Court of Appeals held that the district court erroneously applied a two-level "identity theft" enhancement under § 2B1.1(b)(9)(C)(i) [now § 2B1.1(b)(10)(C)(i)] because the defendant’s conduct did not qualify for the enhancement. Hawes, an investment advisor, was convicted of defrauding his clients of monies that they had entrusted to him. As part of his fraudulent conduct, he changed the addresses to which his clients’ account statements were mailed so that the statements were sent directly to his office address. The Court held that changing an address does not constitute "produc[ing] or obtain[ing] any other means of identification," as required under § 2B1.1(b)(9)(C)(i). It explained that changing an address is similar to the application note’s examples of conduct that does not constitute identity theft, such as stealing an existing credit card or cashing a check from an existing bank account. It rejected the government’s contention that a "means of identification" includes a name plus any other piece of information; rather, the means of identification must be specific or unique. It also noted that "the change of address was to thwart the discovery of, not enable, the illicit activity." Finally, the Court held that Hawes did not "establish new credit or ‘breed’ new forms of identification, as contemplated by Congress and the Sentencing Commission in enacting this enhancement."

The Court further held that this error was not harmless and remanded for resentencing. It affirmed the lower court’s application of the vulnerable victim enhancement and the order of restitution.

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