Monday, August 15, 2005

Government Did Not Breach Plea Agreement Where Overall Circumstances Indicate that It Did Not Take Position Contrary to that Taken in Agreement

United States v. Allan F. Peters et al., Docket No. 03-1435-cr (2d Cir. July 26, 2005) (Walker, Leval, Katzmann) (Op. by Leval): This case primarily holds that so long as the Government's conduct, when looked at in light of all the circumstances, does not reasonably appear to constitute an effort to influence the sentencing court in a manner inconsistent with the plea agreement, there will be no finding of a breach. It also contains some encouraging dicta concerning the applicability of the sophisticated means enhancement where the defendant himself did not know about the use of such means by other participants in the scheme.

Here, the Circuit found no breach despite the fact that (1) the Government initially told the court erroneously that it agreed with everything in the PSR -- even though the PSR included 2 enhancements not included in the plea agreement; and (2) the Government's subsequent submissions to the court -- in response to the defendant's objections to the 2 enhancements recommended by Probation -- contained a discussion of the law governing these enhancements and included numerous citations to cases supporting application of the enhancements. The Government's conduct did not constitute a breach, the Circuit held, because (1) the Government quickly retracted its statement that it agreed with the PSR and then explicitly stated on numerous occasions that it was not advocating for the 2 enhancements, and (2) the Government had the right, even under the plea agreement, to "explain the law concerning" these enhancements so long as it did not advocate for them.

The Court did clarify, however, that it "does not mean to suggest that a government disclaimer, to the effect that it is not arguing for an adjudtment where prohibited by its agreement from doing so, will necessarily protect it from a finding that its commentary constituted an argument and thus a breach of its agreement." Op. at 6 n.2 (citing United States v. Vaval, 404 F.3d 144, 153 (2d Cir. 2005)). Rather, each case "must be carefully studied in context, and where the government's commentary reasonably appears to seek to influence the court in a manner incompatible with the agreement, we will not hesitate to find a breach, notwithstanding formal language of disclaimer." Id.

Finally, the Court suggests, but does not ultimately decide, that the 2-level enhancement for use of sophisticated means in a fraud offense (under U.S.S.G. § 2F1.1(b)(6)(C)) can be imposed only where the defendant himself personally employed sophisticated means, or else was aware of the use of such means by co-conspirators. In United States v. Lewis, 93 F.3d 1075 (2d Cir. 1996), the Circuit affirmed the imposition of a similar enhancement under the tax fraud statute (USSG § 2T1.1(b)(2)) despite the defendant's lack of knowledge as to the use of sophisticated means by others involved in the scheme. As the Court noted, however, this conclusion "rested in part on the government's vital interest in collecting taxes and the consequent need for a strong deterrent to the use of sophisticated tax fraud schemes which would make detection difficult and thus interfere with the process of tax collection." Op. at 11. Such considerations, however, "have no application to a Guideline covering the use of sophisticated means in an ordinary fraud unrelated to the effective functioning of government." Id. The Court thus "wonder[ed] whether our Circuit would adhere to the full breadth of the proposition asserted in Lewis, especially as applied to a different Guideline unrelated to the collection of taxes, if confronted with a minor participant who had neither awareness nor notice of the use of sophisticated means by others in committing the offense." Id.

The ultimate question did not need to be answered in this case, however, because there was no dispute that defendant Peters knew full well that sophisticated means were being used to conceal the scheme.

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