Sunday, February 27, 2011

Restoration Comedy

United States v. Pescatore, No. 10-0520-cr (2d Cir. February 23, 2011) (Kearse, Winter, Hall, CJJ)

In connection with a plea agreement that covered both a long-running chop-shop operation and an extortion scheme, Michael Pescatore agreed to accept a 132 month sentence, a $2.5 million forfeiture and “no less than $3 million” in restitution. The agreement specified that the prosecutors would recommend that the forfeited assets be transferred to the victims, a process known as “restoration,” but that the ultimate decision lay with the Department of Justice, which would “make its decision in accordance with applicable law.”

At Pescatore’s 2008 sentencing, the court imposed the agreed-upon sentence, including $3 million in restitution, to be paid in full by the end of 2009. The written Judgment reflected this order, but did not contain the names of the victims to whom Pescatore owed restitution or the amounts to which they were entitled. In early 2009, the government wrote to the district court and asked it to correct the Judgment to incorporate the victim-loss tables in the PSR, and the court granted the motion, filing an amended Judgment that incorporated this information.

In April of 2009, the government notified Pescatore that the DOJ had denied the restoration request. Six months later, he moved in the district court for “specific performance” of the restoration portion of the plea agreement, and also sought to be relied from the $3 million in restitution, arguing that the total loss to his victims was less than that amount. The district court held a hearing on these applications in January of 2010 and denied them both. It noted that Pescatore had not made any restitution payments even though the deadline had passed, and gave him thirty days to pay the $3 million. Pescatore then sought a stay of the restitution order from the circuit, which denied it. But he still never paid the money.

On appeal, Pescatore pursued these same claims. The circuit affirmed but, because it was true that the total loss to the victims was less than $3 million, the court remanded the case for further proceedings.

The court first found no merit to Pescatore’s complaint about the government’s decision to retain the forfeited assets instead of restoring them to his victims. The statute, 18 U.S.C. § 981(e), permits the Justice Department to do either based on an exercise of its own discretion. And there was nothing in Pescatore’s plea agreement that placed any constraints on that discretion. The line prosecutors were obligated only to “recommend” restoration, which they did, and the promise that the DOJ would act “in accordance with applicable law” was not a “promise to grant restoration so long as it is not prohibited.” Without deciding whether this type of decision is subject to judicial review, the appellate court noted that the government had put on the record a reason for the refusal - Pescatore “actually does have assets” - and that Pescatore did not contest this.

As for restitution, the circuit agreed that the true amount of the loss to Pescatore’s victims was not $3 million, it was more like $2.56 million, and rejected the government’s claim that the amended Judgment was already in this amount. While the amended Judgment incorporated the PSR’s victim-loss tables, those tables did not contain a total, and the total amount specified in the amended Judgment remained at $3 million.

But, because Pescatore did not object to this amount when he was originally sentenced, the circuit reviewed only for plain error and concluded that he met only three of the four parts of the plain error test. The incorrect restitution amount was an “error,” that was “plain,” and affected Pescatore’s “substantial rights.” But it did not “seriously affect the fairness, integrity or public reputation” of the proceedings because, as far as the circuit was concerned, Pescatore simply “flouted” the restitution order by refusing to comply with it without obtaining a stay.

Even after the circuit denied his application for a stay, he made no effort to expedite the appeal. To the contrary, he missed two filing deadlines that resulted in dismissals and reinstatements. His “election” to “disobey the Judgment” therefore caused him to flunk final prong of the plain error test.

Even so, the court sent the case back for further proceedings. Pescatore must now pay the full $3 million, and will be subject to statutory interest and financial penalties as a result of his tardiness. If the total of the principal, interest and penalties is less than $3 million he will be entitled to a refund of the difference.


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Rook and Role

United States v. Skys, No. 09-5204-cr (2d Cir. February 23, 2011) (Jacobs, Kearse, Straub, CJJ)

In August of 2007, Eric Skys approached Citigroup and claimed that his company, Kaiser-Himmel Corp., owned 13.4 million shares of Sprint Nextel Corp. stock, with a market value of approximately $240 million. He told Citigroup that transfer of the shares was restricted for another fourteen months, but that he wanted to raise immediate cash by pledging the shares to Citigroup in exchange for an $83 million dollar loan. Citigroup’s due diligence revealed that Skys’ claims were false and that the documents he had presented were forgeries. Skys approached three other financial institutions with the same scheme, again without success. He ultimately
pled guilty to securities, wire and bank fraud.

At sentencing, his presentence report described additional, albeit uncharged, fraudulent conduct. Skys solicited investments in a fake software company and also cheated a Florida dentist out of $300,000, then tried to take him for another $2 million, again claiming he owned 13.4 million shares of Sprint stock.

At sentencing, over objection, the district court included a two-level enhancement for ten or more victims and a four-level enhancement for aggravating role. These contributed to a final range of 235 to 293 months. The district court varied downward, and imposed a below-Guideline prison term of 130 months.

On appeal, Skys raised the same sentencing issues, and the circuit agreed with him to some extent. While it did not hold that the court should not have applied the enhancements, it concluded that the district court’s findings were insufficient. It accordingly vacated the sentence and remanded the case so that the district court could supplement the record and, if necessary, resentence Skys.

For the ten-victim enhancement, only victims that suffer an actual loss qualify. Here, the district court did little more than adopt the fact findings in the presentence report, which indicated only that Skys tried to defraud four financial institutions, none of which suffered an actual financial loss. And, while some of the individuals victimized by the uncharged conduct suffered an actual loss, there was no evidence that there were ten or more of them. Thus, the court of appeals concluded that there was no way it could engage in “meaningful review” of the enhancement.

It reached a similar conclusion for the role enhancement. The aggravating role enhancement applies where the defendant was an organizer or leader of a criminal activity that involved five or more participants or was “otherwise extensive.” Here, the district court applied only the “otherwise extensive” theory, concluding that “this was an extensive scheme.” Here, again, the circuit found the findings to be insufficient.

The circuit has interpreted the “otherwise extensive” language to refer primarily to the number of persons involved, either knowing or unknowing, and the extent to which the the unknowing participants were necessary to the success of the scheme. Here, the district court did not identify a single other “participant” - a person with criminal responsibility for the commission of the offense - and gave no “objectively reviewable explanation” for its conclusion that Skys’ criminal activity was “extensive.”

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Tuesday, February 22, 2011

PC World

United States v. Chowdhury, No. 09-3442-cr (2d Cir. February 22, 2011) (Cabranes, Chin, CJJ, Crotty, DJ) (per curiam)

The controlled substance known as BZP, when combined with another chemical, known as TFMPP, which is not a controlled substance, is frequently sold as MDMA (ecstasy) and has a somewhat similar effect on the user. However, there is no Guideline in U.S.S.G. § 2D1.1 for BZP or the BZP/TFMPP combination.

When sentencing for a drug "not specifically referenced" in the Guidelines, application note 5 to § 2D1.1 directs the use of the "most closely related" controlled substance, and gives three criteria for comparison - chemical structure, effect on the central nervous system and potency.

In this opinion, the court affirms the district court's conclusion that BZP/TFMPP is most closely related to ecstasy.

Sunday, February 20, 2011

The Youth Won’t Set You Free

United States v. Conca, No. 09-4475-cr (2d Cir. February 15, 2011) (Miner, Straub, Livingston, CJJ)

The Second Circuit has long held that a New York State youthful offender adjudication (a “y.o.”), counts as an adult conviction in the Sentencing Guidelines. In this long opinion, which covers absolutely no new ground, the court says so again.

In New York, first offenders between sixteen and nineteen years old are eligible for treatment as a youthful offender. If granted, the conviction is set aside and replaced with a y.o. adjudication, which carries more lenient penalties, is not treated as a conviction and does not trigger certain civil disabilities. However, unlike a juvenile offender, if sentenced to imprisonment, a youthful offender serves the sentence in an adult facility.

Conca received a long federal sentence for failing to register as a sex offender. Both in the district court and in the court of appeals he complained about three criminal history points assessed for a 1996 y.o., for which he was sentenced to 106 days’ time served, five years’ probation and, ultimately, one to three years’ imprisonment on a probation violation.

The circuit had little trouble concluding that this belonged in Conca’s criminal history score. Indeed, the outcome was dictated both by the Guidelines and by circuit precedent, under which Conca was “convicted as an adult,” even though he was under eighteen, and “received” a sentence of more than one year and one month.

For length of the y.o. sentence, the district court correctly followed the instructions in U.S.S.G. § 4A1.2(k), under which the original sentence and the violation sentence are aggregated to calculate the length of the sentence “received.” Here, that was clearly in excess of thirteen months. The district court also correctly concluded that Conca was “convicted as an adult.” The original y.o. sentence to probation was revoked and Conca served the violation sentence in an adult facility. Accordingly, given the nature of the proceeding, the type of sentence and the place of incarceration, Conca was indeed convicted as an adult.

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Saturday, February 19, 2011

PC World

United States v. Acoff, No. 10-285-cr (2d Cir. February 10, 2011, amended February 11, 2011) (Calabresi, Lynch, CJJ, Murtha, DJ)

In this case, the defendant was convicted of a crack cocaine offense that, under the old law, carried a five-year mandatory minimum. But the district court refused to impose it. He gave the defendant fifteen months, holding that the 100-to-1 penalty ratio between crack cocaine and powder "does not make any sense at all."

The court held that the below-minimum sentence was illegal and vacated it. It also, as it has in a few other recent opinions, rejected the argument that the 2010 Fair Sentencing Act, under which the sentence would have been lawful, applied retroactively.

Of particular note in this decision, however, are the concurring opinions.

Judge Calabresi, in his, suggested a means for courts to address statutory schemes - such as the old crack cocaine penalties - that, over time, come to raise constitutional concerns: a "dialogue" with the legislature. In his view, it is possible to see the Congress' response to the "dialogue" over the crack penalties as a "response to a suggestion by the courts that the sentencing statutes were heading towards unconstitutionality." Perhaps this would then raise a question as to "whether the traditional presumption against retroactivity should apply." Rather, in a situation like this, it might be appropriate to reverse the ordinary presumptions and presume that the change is retroactive unless Congress expressly says otherwise. However, he concluded by recognizing that this approach has been rejected in the Second Circuit and that he is bound by that precedent.

Judge Lynch, in his concurrence, agreed that there is a "reasonable argument that Congress' recognition that the prior law was unfair should have led to complete retroactivity." He also recognized, however, the practical difficulties of that, given the large number of cases already disposed of under the old law. To him, the fair middle ground would have been for Congress to make the new law retroactive to those cases that were "still pending" when the FSA went into effect, even if the conduct had been completed before that date. "Such defendants still need to be sentenced, and there are few persuasive reasons why they should be sentenced pursuant to an unjust law when Congress has already replaced it with a more just one." Concluding that this was likely the result of "Congressional inattention," he urged Congress to take a second look.

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Abbott Hole

United States v. Tejada, No. 07-5289-cr (2d Cir. February 9, 2011) (Leval, Raggi, CJJ, Gleeson, CJ)

The defendant here received a 120-month drug sentence and a consecutive 60-month § 924(c) sentence. On appeal, he argued that this was illegal under the court's decisions in Williams and Whitley. And indeed it was. However, as this decision recognizes, those cases were abrogated by the Supreme Court in Abbot v. United States, 131 S.Ct. 18 (2010).

At issue is an inscrutable phrase in § 924(c): "Except to the extent that a greater minimum sentence is otherwise provided by this subsection or by any other provision of law," a person convicted of violating § 924(c) must receive a specified mandatory minimum sentence and that sentence must be consecutive to any other term of imprisonment. Whitley held that this language meant that the § 924(c) sentence did not apply if the defendant received a higher mandatory minimum sentence for gun possession - in that case a 15-year Armed Career Criminal Act sentence. Williams held that the § 924(c) sentence did not apply if the defendant, as here, received a higher mandatory minimum sentence for drug trafficking.

But Abbott held that the "except" clause in § 924(c) related only to "the conduct § 924(c) itself proscribes, i.e., possessing a firearm in connection with a predicate crime." Under Abbott, the exemption from the § 924(c) sentence only applies where the defendant is subject to an "even greater mandatory minimum" under § 924(c). Since that was not the case for the defendant here, the circuit affirmed.

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Attempting Offer

United States v. Sabir, No. 07-1968-cr (2d Cir. February 4, 2011) (Winter, Raggi, CJJ, Dearie, DJ)

Rafiq Sabir, an American doctor, was convicted of conspiring to and attempting to provide material support - in the form of his own medical services - to al Qaeda. Sabir raised a multitude of issues on appeal, including a challenge to the constitutionality of the material support statute and complaints about the racial composition of the jury, the trial court’s evidentiary rulings, and the government’s rebuttal summation.

But of particular interest are the opinion’s discussion of sufficiency of his conviction for attempt, an issue that the court does not not often consider in depth, and the diverging views of the two opinions on the issue.

The case against Sabir arose from a terrorism investigation of Sabir’s longtime friend, Tarik Shah, that began in 2001. An FBI CI “Saeed,” cultivated a relationship with Shah, in which Shah spoke about his commitment to jihad and identified Sabir as his “partner.” Saeed eventually introduced Shah to an undercover FBI agent, Ali Soufan, who posed as a recruiter for al Qaeda. Shah told Soufan about Sabir, describing him as a doctor who was committed to the same cause.

In 2005, Sabir met with Saeed and Agent Soufan at Shah’s apartment. Sabir, who had been in Saudi Arabia, said he would soon be returning there and agreed to provide emergency medical care to wounded mujahideen. Sabir gave Soufan his personal and work telephone numbers so that those needing medical assistance would be able to contact him directly. He and Shah then swore an oath of allegiance to al Qaeda and its leaders.

On appeal, Sabir argued that his offer to provide medical assistance, even coupled with his giving Soufan his telephone numbers, was legally insufficient to constitute an attempt to provide material support. A bitterly divided panel affirmed.

The majority began by reviewing the law of attempt. Federal criminal law requires only a “substantial step” in furtherance of the intended crime. This concept derives from the Model Penal Code, which introduced the formulation in order to expand attempt liability. The Second Circuit adopted it in 1976, noting that it was satisfied by conduct, even if not proximate to the completion of the crime, that was “strongly corroborative of the firmness of the defendant’s criminal intent.” Thus, while a substantial step must be more than “mere preparation,” it may be less than the “last act necessary” before the commission of the crime.

These standards, however, do not always provide “bright lines for application,” since the identification of a “substantial step” is necessarily a matter of degree. For an offense such as attempt to provide material support, the focus is on the defendant’s “efforts to supply.” For this offense, the underlying conduct is the provision of support, even benign support, for a terrorist organization, and need not be planned to culminate in terrorist harm.

Accordingly, the majority concluded that the evidence was sufficient to show that Sabir attempted to provide material support in the form of personnel - “specifically, himself” - to work for al Qaeda as a doctor on-call to treat wounded jihadists in Saudi Arabia. Sabir met with what he thought was an al Qaeda member, swore an oath of allegiance to the organization, promised to be on call, and gave his contact numbers so that al Qaeda members could reach him in Saudi Arabia when they needed treatment. This conduct “planned to culminate in his supplying al Qaeda with personnel, thereby satisfying he substantial step requirement.”

Judge Dearie vigorously dissented. In his view, “the substantive crime was so remote in time, place and objective that one is left only to speculate as to what, if anything, would have happened had Sabir in fact been in a position to pursue the conspiratorial goal.” In his view, the majority’s conclusion that merely “pledg[ing] to work under the direction of the organization” could constitute an attempt to provide material support was “without precedent and hinges upon ... a seriously flawed interpretation of the material support statutes.”

Judge Dearie took particular issue with the majority’s conclusion that Sabir committed the crime of attempt “simply by agreeing to commit the crime and providing a phone numbers.” The giving of the phone numbers, was of little significant since it did not occur at or near an actual jihadist camp or battleground. Sabir was 7,000 miles away, and no preparations to be “on call” had been made or even discussed. This left the “actual provision of material support entirely a matter of speculation and surmise.”

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Sunday, February 13, 2011

The Chose Tattoo

United States v. Greer, No. 09-4362-cr (2d Cir. February 4, 2011) (Walker, Cabranes, CJJ, Koeltl, DJ)

Michael Greer was convicted of possessing a gun and its ammunition. The gun was recovered in a trash can along with the keys to a Hyundai Sonata, while the ammunition was found in the car itself. The Sonata had been rented by someone named Tangela Hudson, and a police officer testified that Greer had a tattoo on his left arm that said “Tangela.” On appeal, he argued that using the tattoo to connect him to the car violated his Fifth Amendment right against self-incrimination.

The circuit agreed that the tattoo was “testimonial.” The mere exhibition of a physical trait is not testimonial because it is not a communication that contains an assertion of fact or belief. But here, the tattoo was “used to a very different end” - not to identify Greer, but rather its content - the name “Tangela” - was used to prove that Greer had a relationship with a person of that name, and thus as circumstantial evidence that he had constructive possession of the ammunition in a car rented by Tangela Hudson. It was accordingly both testimonial and incriminating.

But there was nevertheless no Fifth Amendment violation because the tattoo was “not compelled by the government,” even if force or compulsion might have been used by the police to reveal it. The court likened the use of the tattoo to the IRS’ ability to compel production of voluntarily prepared papers. The “voluntary tattooing of an incriminating word to Greer’s arm was, like the voluntary preparation of [tax] documents, not the product of government compulsion.”

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