Wednesday, May 05, 2021

When calculating intended loss, the question is not whether the defendant could have sold the items at the prices claimed by the government but whether the defendant intended to do so

The defendant in United States v. Kirschner,  __ F.3d __, 2021 WL 1570250 (3d Cir. April 22, 2021), imported counterfeit coins and bullion and then, posing as a federal law enforcement agent, sold them as genuine articles to unsuspecting customers. While most of the counterfeit coins and bars were common collector items, priced at approximately $100 each, a small minority of the coins were counterfeits of exceptionally rare coins. Despite the extreme rarity of the coins, the government attempted to estimate the fair market value of the rare coins as it had the fair market value of the common collector coins. The government estimated that the intended loss of the rare coins accounted for approximately 97 percent of the total estimated intended loss.

On appeal, Kirschner argued that the district court never found that he purposely sought to inflict the losses the government argued he intended to inflict on the rare coins because he never had access to the markets presupposed by the government's fair market value methodology, i.e., ultra-wealthy collectors like King Farouk of Egypt, never attempted to access such markets, had no knowledge of the prices for which genuine versions of the rare coins had sold, and never would have attempted to sell the coins at those prices.

The Third Circuit agreed. While the district court focused on what Kirschner intended to do with the rare coin counterfeits, it never found Kirschner intended to sell the rare coin counterfeits for the prices the government claimed. The principal question for the Third Circuit was not whether Kirschner could have sold the high-value counterfeits at the prices claimed by the government. The question is whether he intended to. Indeed, the District Court admitted that it did not know “[w]hat [Kirschner] intended to do specifically, logistically, with these valuable coins,” only that, “by a preponderance of the evidence, at some point he was going to try to sell those coins as legitimate coins.” 

The Third Circuit held that, in order to estimate the losses a defendant intended to cause his victims under U.S.S.G. § 2B1.1 cmt. n.3(C), a district court must conduct a “deeper analysis” to make sure the defendant purposely sought to inflict each component of the losses the government claims he intended to inflict. In conducting that analysis, the court is free to make reasonable inferences about the defendant's mental state from the available facts. The government need only prove a defendant's intent by a preponderance of the evidence, and the court need only make a “reasonable estimate” of the intended loss. If the losses associated with the defendant's past conduct are easily extrapolated to losses the defendant intended to cause in the future (as in stealing credit cards and charging the same amount on each before discarding), the district court is free to estimate intended losses using one governing methodology (say, number of stolen but unused cards times dollar amount charged on used and discarded cards). But if the losses associated with the defendant's past conduct do not neatly map to intended future losses, the district court must finely tune its methodology to ensure it does not underestimate or overestimate a defendant's intended losses. Accordingly, the Third Circuit vacated Kirschner's sentence and remanded for reconsideration of the intended loss.

Kirschner also challenged two other enhancements, for abuse of position of trust and sophisticated means. The Third Circuit rejected both challenges. First, the Court found that Kirschner's impersonation of federal law enforcement officer played a significant role in execution of his scheme, for purpose of application of abuse-of-trust enhancement, since impersonation protected his counterfeits or money earned from them from robbery. Second, the Court found that Kirschner's offense level could be increased for use of sophisticated means because although Kirschner did not create counterfeits he sold or intricate packaging in which he sold them and his conduct could have been more sophisticated, he deployed various other strategies to conceal his fraud by using pseudonym to conceal his identity, and he created fake businesses, social media accounts, and sale invoices to give his scheme veneer of legitimacy and played major roles in commission and concealment of his crimes

** Note: The Third Circuit noted that only Application Note 3(A) to §2B1.1, not the Guidelines' text, says that defendants can be sentenced based on the losses they intended. By interpreting “loss” to mean intended loss, it is possible that the commentary “sweeps more broadly than the plain text of the Guideline.” United States v. Nasir, 982 F.3d 144, 177 (3d Cir. 2020) (en banc) (Bibas, J., concurring). However, Kirschner assumed the comment was correct, so the Circuit did too. 

Tuesday, May 04, 2021

Reminding a sentencing court that the §3553(a) factors are important, having the defendant request probation and even making a proportionality argument may breach a provision of a plea agreement prohibiting a party from requesting departures or variances below the guideline range.

 

            The Third Circuit found defendants breached the terms of their plea agreements and vacated the sentences in United States v. Yusuf and United States v. Campbell, 993 F.3d 167 (3d 2021).  These cases involved plea agreements that prohibited either party from seeking departures or variances.  The defense in these two cases made very different sentencing arguments that the government argued violated that provision of the plea agreement.  Both defendants received below guideline range sentences and the government appealed.

 

            Appellant Campbell was charged with being a felon in possession of a firearm in violation of 18 U.S.C. 922(g), after a gun was discovered in his car following a traffic stop.  Despite agreeing not to request any departures or variances, defense counsel reminded the court of the importance of §3553(a) factors, that the guidelines were only a “starting point,” and further submitted letters of support asking for leniency.  When Appellant addressed the court, he asked for a probationary sentence.  The government objected to these arguments.  Nevertheless, the District Court granted a very significant variance, sentencing Campbell to only a third of the time calculated in the guideline range. On appeal, the Third Circuit ruled that Campbell’s request for a non-custodial sentence, after being prompted by his attorney, was an explicit request for a below the guideline sentence in violation of the plea agreement.  The circuit court further held that nothing in Federal Rule of Criminal Procedure 32(i) allows a defendant to ask the court to apply the §3553(a) factors when the plea agreement clearly prohibits the parties from seeking variances.  The sentence was vacated, and the case remanded. 

             In the second case, counsel for Appellant Yusuf, who was charged with wire fraud and aggravated identity theft, acknowledged the plea agreement but then asked the District Court to consider the co-conspirator’s sentence.  Specifically, the defense told the court that it should not ignore that the co-conspirator’s sentence was below the bottom of Yusuf’s range, despite similar conduct and culpability.  The government countered that the difference in ranges was due to their respective criminal histories, and then argued that the defense had breached the plea agreement by asking the court to consider the co-conspirator’s sentence.  In response to the government’s objections, the District Court ruled that the defense’s “proportionality” argument did not breach the terms of the plea, and then proceeded to depart downwards and grant a variance below the guideline range.  The Third Circuit described this as a “closer question.”  Defense counsel did not cross a line simply by bringing the co-conspirator’s sentence to the court’s attention.  However, by arguing that the co-conspirator’s sentence made the bottom of the guideline range unreasonable for Yusuf, the defense did indeed breach the terms of the plea agreement. The case was remanded for resentencing.   

             Lastly, Campbell also appealed the denial of his motion to suppress the weapon found in his car during the traffic stop.  Campbell was pulled over because his license plates were partially obscured.  Also, after police ran the plates, they discovered he was driving with a suspended license.  During the stop, the officer thought he saw a gun while Campbell was looking for his registration and a current insurance card.  After suggesting he look in the central console, the officer confirmed his suspicions and then spotted another gun when Campbell opened the glove compartment.  The Third Circuit rejected Campbell’s argument that the officer unconstitutionally prolonged the stop, noting that only five minutes transpired between the time Campbell was pulled over to the time he was arrested.  Moreover, the officer suggesting Campbell look in the central console for the insurance card was a valid request during a traffic stop.   

Tuesday, April 27, 2021

District Court procedurally erred in rejecting leadership and obstruction enhancements and neither error was harmless. Yet, each enhancement required further factfinding so that the Third Circuit would not order these enhancements be applied on remand either.

 In United States v. Francis Raia, 2021 WL 1257790, Appeal No. 20-1033 (3d Cir. Apr. 6, 2021), https://www2.ca3.uscourts.gov/opinarch/201033p1.pdf, the Third Circuit vacated the sentence and remanded for resentencing. Raia was convicted of a conspiracy to bribe voters. The District Court declined to impose two enhancements sought by the government: (1) a 4-level “organizer, leader, manager, or supervisor” enhancement under U.S.S.G. § 3B1.1(a), The Court rejected the 4-level enhancement because there was no evidence of any consequence for disobedience, but it found a 2-level enhancement applied. (2) a 2-point obstruction enhancement under § 3C1.1. The Court did not make findings about falsity, materiality, and willfulness because there was no evidence clearly corroborating the three incredible or biased cooperators. 

The District Court found the total offense level was 14, the guideline range was 15 to 21 months, and imposed a sentence of three months. The Third Circuit agreed that the District Court committed procedural error in not applying both of these enhancements. When criminal activity involves 5 or more participants, a trial court can only apply a 4-level enhancement, a 3-level enhancement, or no enhancement. See United States v. Kirkeby, 11 F.3d 777, 778–79 (8th Cir. 1993). Raia conceded the 2-point enhancement was error. For obstruction, the Third Circuit requires a Court to make explicit factual findings as to each element when the government seeks to have the enhancement applied, even when the district court declines to apply it, because such findings are necessary for meaningful appellate review. United States v. Napolitan, 762 F.3d 297, 314-15 (3d Cir.  2014).

The Court would not instruct the District Court to impose either enhancement. The 4-level enhancement required additional factfinding into control or degree of planning that would distinguish between “organizer or leader” and “manager or supervisor.” The element of falsity to prove obstruction was not clear from the record because the fact that Raia instructed his campaign workers to bribe voters was not necessarily implicit in the general verdict. 

However, neither did the Court find either error to be harmless. There are two instances where the proponent of maintaining the sentence can assure an appellate court “that an erroneous Guidelines calculation did not affect the sentencing process and the sentence ultimately imposed.” See United States v. Langford, 516 F.3d 205, 219 (3d Cir. 2008)). First, an erroneous calculation is harmless where a district court explicitly states that it would have imposed the same sentence even under the correct Guidelines range. Second, a guidelines miscalculation is harmless where the district court “chose to disregard the Guidelines as too severe in such a way that we can be certain that the miscalculation had no effect on the sentence imposed.” Langford, 516 F.3d at 218. Raia could not meet the second instance where the District Court did not follow the post-Booker three step sentencing procedure nor make detailed findings of fact or law.

 

Insufficient evidence for criminal contempt, underlying District Court order invalid because it compelled testimony in violation of Fifth Amendment

 

In United States v. Nilda Morton, 2021 WL 1287562, Appeal No. 18-3270 (3d Cir. Apr. 7, 2021), https://www2.ca3.uscourts.gov/opinarch/183270p.pdfthe Third Circuit reversed a contempt conviction under plain error review. Morton had pled guilty to drug offenses, entered into a narrow cooperation agreement, and testified for the government in several cases. She then invoked her right to remain silent when called to testify at a co-conspirator’s supervised release revocation hearing. The District Court ordered her to testify, and warned her against invoking her Fifth Amendment right, but she declined to answer 27 times. Morton was then indicted for and convicted of criminal contempt. At that trial, the District Court did not let in evidence relevant for its determination of whether Morton reasonably believed her testimony could incriminate herself (1) the plea or cooperation agreements, and (2) testimony by Morton’s attorney about his advice and Morton’s fear of new and different charges. The Third Circuit held the evidence was insufficient to support the contempt conviction because: (1) the government was required to prove the defendant disobeyed a "valid" court order; (2) where a defendant invokes the right against compelled self-incrimination, and the district court overrules the invocation and orders  a defendant to testify, the court's order is “valid” only if the record of the proceeding makes it "perfectly clear" that witness’s answers "cannot possibly" have a tendency to incriminate her; (3) here, the district court did not create the record necessary to meet this standard; (4) because the evidence was insufficient to prove that Morton violated a "valid" court order, see 18 U.S.C. § 401(3), the government failed to establish an essential element of the offense. The Court decided this error met all the prongs of plain error review, vacated Morton’s contempt conviction, and reversed the District Court’s denial of Morton’s motion for judgment of acquittal.

Friday, March 19, 2021

Amendment 801 to § 2G2.2(b)(3)(F) is a substantive change to the Guidelines, and does not apply retroactively under § 2255

United States v. Maximus Prophet, 2021 WL 800384 (Mar. 3, 2021), 

https://www2.ca3.uscourts.gov/opinarch/183776p.pdf

           Prior to 2016, a Circuit split arose over whether the Guideline enhancement under § 2G2.2(b)(3)(F) for distribution required a finding of mens rea.  In 2016, the Sentencing Commission promulgated Amendment 801, revising the language in subsection (F) to state “If the defendant knowingly engaged in distribution.” U.S. Sent'g Guidelines Manual app. C, amend. 801.

          Prophet filed motions seeking relief under both § 2255 and § 2241 in October 2017, arguing that the amendment should apply retroactively.  The district court adopted the report and recommendation of the magistrate which found that the amendment was not retroactive. 

          To begin, the Court found that the appeal was not moot, despite Prophet’s release, because he remained on supervised release and a resentencing could merit credit against that term. 

          Moving to the substantive issue, the Court began with the legal standard for retroactive application of an amendment:  “a post-sentencing amendment to a sentencing guideline or its comments should be given effect if it ‘clarifies’ the guideline or comment in place at the time of sentencing.  If, however, the amendment effects a substantive change in the law, the defendant does not receive the benefit of the change.” (cleaned up) (quoting United States v. Marmolejos, 140 F.3d 488, 490 (3d Cir. 1998)).  This determination is made by reference to “the language of the amendment, the amendment's purpose and effect, and whether, as a matter of construction, the guideline and commentary in effect at that time is really consistent with the amended manual.” Id. at 491. 

          In concluding that Amendment 801 is not clarifying or retroactive, the Court found that 1. Adding a mens rea to the actual text rather than the commentary suggested aa substantive change; 2. The amendment did not fill an explanatory gap, but changed the application of the enhancement; 3. The purpose of the amendment, that “Based on testimony, public comment, and data analysis, the Commission determined that the 2-level distribution enhancement is appropriate only in cases in which the defendant knowingly engaged in distribution,” suggests that the earlier view was that a finding of knowledge was not required, and 4. The description of the change as “generally adopt[ing] the approach of the Second, Fourth, and Seventh Circuits” which had required a showing of knowledge to apply the enhancement, signified the amendment “is effectuating a change that adds something new.”

          Of note:  The circuit split as to the meaning or the application of the Guideline, and resolving an ambiguity may indicate either a clarification or a substantive change, and the Commission’s word choice between “clarification” and “revision” is of little importance.


Blog post written by: Christy Martin

ATT HAR / HAR Crimes of Violence under Section 924(c); Good Faith Exception to Warrant Requirement; Confrontation Clause on Work involving Collaboration

United States v. Walker, 2021 WL 833994 (Mar. 5, 2021) (Jordan, Krause, Roth), 

https://www2.ca3.uscourts.gov/opinarch/154062p.pdf

          In Walker, the Third Circuit ruled that both Hobbs Act robbery and attempted Hobbs Act robbery are 924(c) predicates.  Although Walker itself involved only a question of attempted Hobbs Act robbery, the issue of substantive Hobbs Act robbery remained undecided after an earlier decision in United States v. Copes was issued unpublished.  The Court rejected Walker’s argument that  Hobbs Act robbery cannot be a crime of violence because it can be completed by taking money from a victim “through fear of injury to the victim's intangible property” without the use or threatened use of force.  Looking to the history of the statute, the Court found that a physical act is a key component of the offense, and that “a non-forcible taking based on fear of injury to intangible property would not be sufficient to satisfy the force requirement of Hobbs Act robbery, since Hobbs Act robbery is simply a common law robbery that affects interstate commerce.” 

          Next, the Court looked to the elements of attempt: 1. an act with the intent to violate the statute, and 2. an act believed to be a substantial step in the commission of the crime; and found those elements aligned with the force element of a 924(c) crime of violence, “an element the use, attempted use, or threatened use of physical force.”  Essentially the Court held that an attempted attempt at use of force, is an “attempted use” of force.  While agreeing that “an intent to act” is not the same as an “attempt to act,” the Court found that the Congressional intent behind the statute “meant for all attempted crimes of violence to be captured by the elements clause of § 924(c), and courts are not free to disregard that direction and hold otherwise.’

          Note: There remains a circuit split on whether attempted HAR is a 924(c) predicate.  See United States v. Taylor, 979 F.3d 203, 209-10 (4th Cir. 2020).

          Additionally, the Court held that cell site location information (CSLI) evidence obtained without warrant came within the “good faith” exception to exclusionary rule, where government agents obtained the evidence in reliance on then-valid judicial order, which was issued in accordance with then-valid statute and then-binding appellate authority, prior to Carpenter v. United States, 138 S. Ct. 2206 (2018), which held that compliance with the Stored Communications Act alone is not sufficient to legally access historical cell-site records because the showing required by the government does not meet the probable cause standard required for a warrant.

          Finally, the Court held that the testimony of an investigator regarding the CSLI did not violate the Confrontation Clause because 1. the witness was arguably discussing his own work, and 2. any error was not plain where there was no consensus concerning the bounds of the Confrontation Clause when multiple people collaborate to make a testimonial statement. 


Blog post written by: Christy Martin

Sunday, February 28, 2021

  

Failure to group certain counts as required by the Sentencing Guidelines is plain error requiring resentencing even if the sentencing court imposed a downward variance




 

In United States v. Ahuirre-Miron, No 19-3134 (3d Cir. 2/23/2021),

The defendant pled guilty to five child-pornography crimes: three counts of production, in violation of 18 U.S.C. § 2251(a), (e); one count of receipt, in violation of 18 U.S.C. § 2252(a)(2), (b)(1); and one count of possession, in violation of 18 U.S.C. § 2252(a)(4)(B), (b)(2). At sentencing, without objection, the District Court adopted the P.S.R.’s calculation of the Sentencing Guidelines. After it imposed a downward variance to offense level 42, reducing the Guidelines sentence from 360 months to life to 360 months, the District Court imposed a sentence of 360 months.

 

The Sentencing Guidelines require that the production counts be grouped with the receipt and possession counts according to U.S.S.G. § 3D1.2(c)— all counts involving substantially the same harm must be grouped. Counts involving “substantially the same harm” when one of the counts embodies conduct treated as a specific offense characteristic in, or other adjustments to, the guideline applicable to another of the counts must be grouped for calculation purposes. A “pattern enhancement” is imposed under the Sentencing Guidelines under U.S.S.G. §2G2.2(b)(5) if the offender engages in a pattern of activity involving the sexual abuse or exploitation of a minor. If the District Court had properly grouped the production counts when computing the offense level, the offense level would have been 42 rather than 43.

 

Third Circuit precedent, United States v Ketcham, 80 F.3d 789, 794 (3d Cir. 1996) required grouping of the production counts in this case. The panel rejected the government’s argument that Ketchum’sholding about grouping was dicta.

 

Conducting a plain-error analysis, the panel looked to the holding in Molina-Martinez v. United States, 136 S.Ct. 1338, 1345 (2016) that regardless of the ultimate sentence, being sentenced under the wrong guidelines range satisfies the third prong of plain-error review. As the defendant met the first two prongs of plain-error review— that there was an error and it was plain— resentencing was ordered.

 

Congrats to Abigail Horn & Brett Swetzer of the EDPa Federal Defenders for a nice win.

 

N.B. fd.org has great resources for all sorts of sentencing issues and should be consulted whenever reviewing a P.S.R.’s sentencing calculations. The United States Sentencing Commission website also allows the download of the current Sentencing Guidelines and updates. It also offers a Guidelines calculator, which, when used in tandem with the fd.org materials, helps untangle federal criminal law’s version of the uncertainty principle

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Tuesday, February 09, 2021

District court erred by: (1) failing to inquire into reasons for defendant's dissatisfaction with appointed counsel; (2) failing to make independent determination regarding consulation between defendant and appointed counsel about PSR; (3) imposing certain conditions of supervised release; and imposing special assessment under JVTA

 Defendant Charles Senke was convicted after trial for attempted sex offenses involving a minor. He raised four objections on appeal. The Third Circuit affirmed his convictions, but vacated and remanded for further proceedings surrounding sentencing. United States v. Senke, __ F.3d __, 2021 WL 244056 (3d Cir. Jan. 25, 2021).

(1) Although Senke did not specifically request substitute counsel in his pro se pretrial motion complaining about his attorney, the district court was required to inquire into reasons for defendant's dissatisfaction with his appointed attorney. Senke's communication to district court raised serious issues, including that attorney was not preparing for trial or reviewing evidence with defendant, attorney brought strained relationship to district court's attention at pretrial conference that defendant did not attend, explaining that conflict stemmed from his refusal to file additional pretrial motions and defendant's insistence that he do so, and district court had no good reason to believe that communication issues were resolved. However, Senke's claim did not constitute one of structural error requiring per se reversal. He could not assert he was deprived of counsel of choice because he had appointed counsel. He also was not claiming that he had been deprived of his right to represent himself. Instead, he claimed he was deprived of ineffective assistance of counsel. Acting in accordance with its general procedure, the Third Circuit declined to entertain Senke's claim of ineffective assistance of counsel on direct appeal where Senke did not attempt to show prejudice and district court had not yet evaluated the matter. Instead, it upheld Senke's conviction without prejudice to his ability to bring an ineffective assistance of counsel claim in a 28 U.S.C. § 2255 proceeding. 

(2) District court plainly erred in failing to independently determine that defendant had opportunity to discuss presentence investigation report (PSR) with counsel as required by Fed. R. Crim. P. 32(i)(1)(A). Though counsel submitted sentencing memorandum and defendant separately submitted objections to PSR, indicating that both had read the PSR, the district court did not verbally ask defendant if he read and discussed PSR with his attorneys, sentencing memorandum did not state that defendant and counsel discussed the PSR, counsel submitted his objection to probation officer before receiving defendant's objections, and counsel only mentioned his own objection at sentencing and not defendant's objections. Despite the error, Senke suffered no prejudice as would warrant reversal of sentence. Though Senke asserted that, if he had discussed the PSR with counsel, he could have challenged the recommendation of certain special conditions of supervised release and recommendation of special assessment fee, neither of those matters could have affected Senke's criminal history category, nor his applicable Sentencing Guidelines range, and Senke was sentenced to the statutory mandatory minimum.

 (3) The Third Circuit vacated 5 separate conditions of supervised release prohibiting Senke from possessing or using computers or other electronic communications or data storage devices or media, and requiring him to obtain permission from his probation officer to use the internet, to have monitoring software installed on his computer, and to submit to searches of his electronic devices. The Court found the conditions were not sufficiently tailored to goal of restricting internet and computer use to keep Senke from preying on children. Instead, the restrictions prohibited Senke from participating in all sorts of activities, while doing nothing to further public safety. In a dissenting opinion, Judge McKee admonished district court judges to stop imposing "knee-jerk and overly broad restrictions" on computer and internet usage despite repeated admonitions against them. 

(4) Finally, the Third Circuit reversed imposition of a $10,000 special assessment under the Justice for Victims of Trafficking Act of 2015 (JVTA) based on a violation of the ex post facto clause. All of Senke's convictions were based on offenses committed prior to JVTA's 2015 enactment.

Despite equitable concerns, property was not subject to criminal forfeiture where third party's interest in forfeited property was superior to defendant's interest

Defendant Lucas was convicted of wire fraud and related offenses for attempting to take control of Burke Farm. Lucas consented to forfeiture of Burke Farm because it was purchased with proceeds of his fraud. Diamond Developers, a third party company, interceded in the forfeiture proceedings, arguing that it held a superior interest in Burke Farm because Diamond Developers owned the farm prior to Lucas's crimes. Diamond Developers acquired Burke Farm in 2004. Lucas submitted a fraudulent loan application to acquire Diamond Developers in 2009. He fraudulently obtained a mortgage on the farm in February 2010. Lucas, his wife, and father-in-law acquired Diamond Developers one month later.  The District Court granted the forfeiture order over Diamond Developers' objection.

 In United States v. Lucas, __ F.3d __, 2021 WL 193073 (3d Cir. Jan. 20, 2021), the Third Circuit reversed the District Court's decision, finding that if third party's interest in forfeited property, at time of criminal acts, was superior to criminal defendant's interest—or if third party had interest and defendant did not—then third party's right outweighs interest that government acquires when it steps into defendant's shoes at time of offenses. While the Court recognized the government's concerns about the equities of the case, the plain language of the statute controlled. The Court also noted that the government could have sought criminal forfeiture of Lucas's interest in Diamond Developers and civil forfeiture of his wife and father-in-law's interests. Because the government did not follow the rules or the plain language of the forfeiture statute, it was not entitled to confiscate the property.

Heightened standard of proof for "willfully" element does not apply to every charge brought under the Federal Election Commission Act (FECA)

 Defendant Smukler was convicted on multiple charges of fraud and false statements under the Federal Election Commission Act (FECA). On appeal, United States v. Smukler, __ F.3d __, 2021 WL 245262 (Jan. 26, 2021), Smukler argued that the district court erred in not applying a heightened "willfully" standard to his charges under FECA. The Third Circuit noted that "willfully" has at least three levels of interpretation: (1) defendant acted intentionally, knowingly, or voluntarily, as distinguished from accidentally; (2) defendant acted not merely voluntarily, but with a bad purpose, that is, with knowledge that his conduct was, in some general sense, unlawful; and (3) defendant actually knew of the specific law prohibiting the conduct. The middle level of willfully - defendant acted with bad purpose - operates in most criminal cases. In some rare instances, however, involving a highly technical statute or complex statute, the highest level of willfully - defendant actually knew of specific law prohibiting the conduct - is required for conviction.

Relying on United States v. Curran, 20 F.3d 560 (3d Cir. 1994), the Court agreed that the heightened standard of willfully applied to prosecutions under the aiding and abetting (18 U.S.C. § 2) and false statements (18 U.S.C. § 1001) statutes in the federal election law context given that election offenses are rarely prosecuted in tandem under these two statutes. But the Court found no similar level of rarity or complexity in substantive charges brought under FECA. It found those rules to be reasonably straightforward, written in common terms, intuitive, and less complex than the anti-structuring or tax law cases where the heightened standard for willfully had previously been applied. Accordingly, and consistent with precedent, the Third Circuit applied the ordinary reading of willfully to Smukler's substantive offenses under FECA.  

Thursday, January 21, 2021

Convictions vacated against bank executives: government must prove a statement false under each objectively reasonable interpretation of an ambiguous reporting requirement

United States v. Harra, --- F.3d ---, 2021 WL 97446, Appeal Nos. 19-1105, 19-1136, 19-1190, 19-1237 (Jan. 12, 2021); https://www2.ca3.uscourts.gov/opinarch/191105p.pdf

Wilmington Trust financed commercial real estate/construction projects. Extensions were common: the loan documents reserved its right to “renew or extend (repeatedly and for any length of time) this loan . . . without the consent of or notice to anyone.” Wilmington called this the “waiver process” and its internal policy did not classify loans in the “waiver process” as past due if the loans were in the process of renewal and interest payments were current. Even though regulatory agencies required Wilmington to report loans that were “contractually past due,” Wilmington excluded loans in the “waiver process” from those it reported as “past due” to the SEC and the Federal Reserve. Around 2009, these commercial loans were a large feature of Wilmington’s portfolio and represented over $300 million in loans. The defendant bank executives argued that under a reasonable interpretation of the reporting requirements, they properly excluded these loans from the “past due” classification. The District Court denied their requests to introduce evidence concerning or instruct the jury about that alternative interpretation. The jury convicted on all counts, including conspiracy to defraud the United States, commit securities fraud, and make false statements to regulators, 18 U.S.C. § 371; securities fraud, 18 U.S.C. § 1348; making false statements to the SEC and Federal Reserve, 18 U.S.C. § 1001 and 15 U.S.C. § 78m; and falsely certifying financial reports, 18 U.S.C. § 1350.

The Third Circuit found that, to prove falsity beyond a reasonable doubt, the government must prove a statement false under each objectively reasonable interpretation of an ambiguous reporting requirement. That is, the government must prove either (1) that its interpretation of the reporting requirement is the only objectively reasonable interpretation or (2) that the defendant’s statement was also false under the alternative, objectively reasonable interpretation. To hold otherwise would violate Due Process and the government’s burden to prove each element: because falsity and knowledge are distinct elements, the government must prove a statement was false beyond a reasonable doubt, regardless of the defendant’s subjective intent to lie.

Under this standard, the evidence was insufficient on the false statements convictions and the Court entered a judgment of acquittal. The Court found sufficient evidence of an alternative theory of liability on the conspiracy and securities fraud convictions, improper short-term mass waivers, but the error as to the false statements theory of liability infected all counts and was not harmless and so the conspiracy and securities fraud convictions were vacated and remanded for retrial.

 

 

 

 

 

 

 

 

 

 


Enticement of a minor and travel case: sufficient evidence, no misstatement of law, no entrapment, no plain error in sentencing enhancement for misrepresenting age and sexual orientation

United States v. Davis, --- F.3d ----, 2021 WL 97427, Appeal No. 19-1696 (3d Cir. Jan. 12, 2021); https://www2.ca3.uscourts.gov/opinarch/191696p.pdf

Davis answered a Craigslist ad supposedly about an 18-year old “Wild Child” and then chatted over an eight-day period with an undercover officer acting as a 14-year old minor about sex and other things. Davis ultimately drove from New York to meet the minor in a parking lot in Pennsylvania, bringing condoms with him. He was charged with attempting to entice a minor to engage in sexual conduct, 18 U.S.C. § 2422(b), and for traveling with intent to engage in illicit sexual conduct, 18 U.S.C. § 2423(b). His defenses were that he thought he was role-playing with an adult and that he was entrapped. He was convicted by a jury on both counts and sentenced to 127 months imprisonment. The Third Circuit rejected four points on appeal.

The evidence was sufficient: Attempt requires proof of a requisite intent and a substantial step. Although sometimes a substantial step may supply unequivocal evidence of criminal intent, it need not always do so. If the government presents evidence (need not be unequivocal) of criminal intent independent of a defendant’s substantial step, then the substantial step need only corroborate criminal intent. Davis’s post-arrest confession to knowing the minor’s age and their text communications are each evidence of criminal intent independent of that demonstrated by his substantial steps (travel to the prearranged meeting place and possession of condoms).  

The prosecutor did not misstate the law in closing: The government did not err in arguing that post-enticement acts like travel or the possession of condoms could be a substantial step for enticement of a minor. The substantial step inquiry corroborates criminal intent and establishes that a defendant went beyond mere planning. The substantial step must relate to but need not be the exact conduct criminalized by the statute. Here travel and condom possession related to the enticing communications because they demonstrated the communications were not “all hot air.”

Davis was not legally entrapped: The Court found Davis was not entrapped as a matter of law. To disprove the affirmative defense of entrapment, the government can show predisposition by “a willingness to commit the crime for which he is charged as evidenced by the accused’s ready response to the inducement.” The Court found the chats showed that when Davis discovered he was corresponding with a 14-year-old who posted a personals ad for sex, his “ready response” acknowledged her age and asked if she wanted to meet that day. Also, his reluctance to engage in sexually explicit conversation may be evidence of a misguided attempt to avoid incriminating himself, not necessarily evidence of his non-predisposition to violate § 2422(b). 

The sentencing enhancement was not plain error: The Court ruled it was not plain error to apply a two-level sentencing enhancement for misrepresenting age and sexual orientation to influence a minor to engage in sexual conduct. See U.S.S.G. § 2G1.3(b)(2)(A) (enhancement when conduct involves knowing misrepresentation of a participant’s identity to . . . induce the travel of a minor to engage in prohibited sexual conduct). It did not matter that Davis ultimately corrected the misrepresentation of his age if he lied about it in an effort to make the minor feel comfortable. His objection to the enhancement based on a lie about sexual orientation failed under plain error because the government’s theory was reasonable: he misrepresented his sexual orientation to assure the minor he was not a sexual threat in his continued effort to meet her.

When calculating intended loss, the question is not whether the defendant could have sold the items at the prices claimed by the government but whether the defendant intended to do so

The defendant in United States v. Kirschner ,  __ F.3d __, 2021 WL 1570250 (3d Cir. April 22, 2021), imported counterfeit coins and bullion ...