United States v. Pielsticker , 678 F. App'x 737 ( 2017 )

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT February 7, 2017
_________________________________
Elisabeth A. Shumaker
Clerk of Court
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v. No. 15-5105
(D.C. No. 4:14-CR-00153-GKF-1)
JAMES DOUGLAS PIELSTICKER, (N.D. Okla.)
Defendant - Appellant.
_________________________________
ORDER AND JUDGMENT*
_________________________________
Before BALDOCK and PHILLIPS, Circuit Judges.**
_________________________________
James Douglas Pielsticker was the president and chief executive officer
(“CEO”) of Arrow Trucking Company (“Arrow”), a freight-hauling service. In
response to a Superseding Information, Pielsticker pleaded guilty to both its counts.
*
This order and judgment is not binding precedent, except under the doctrines
of law of the case, res judicata, and collateral estoppel. But it may be cited for its
persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
**
The Honorable Neil Gorsuch heard oral argument but did not participate in the
order and judgment. The practice of this court permits the remaining two panel judges, if
in agreement, to act as a quorum in resolving the appeal. See 28 U.S.C. § 46(d); see also
United States v. Wiles, 106 F.3d 1516, n* (10th Cir. 1997) (noting this court allows
remaining panel judges to act as a quorum to resolve an appeal); Murray v. National
Broadcasting Co., 35 F.3d 45, 48 (2d Cir. 1994), cert. denied, 513 U.S. 1082 (1995)
(remaining two judges of original three judge panel may decide petition for rehearing
without third judge).
Count 1 charged that Pielsticker (i) conspired to impede the IRS in collecting federal
taxes, and (ii) conspired to commit bank fraud by submitting inflated invoices to
Arrow’s lending bank. Count 2 charged that he evaded federal taxes. The district
court sentenced him to 90 months in prison to be followed by three years of
supervised release, and it further ordered him to pay restitution. On appeal,
Pielsticker challenges the procedural reasonableness of his sentence and the amount
of restitution. We affirm.1
BACKGROUND
I. Charged Crimes
On February 4, 2015, Pielsticker pleaded guilty to one count of conspiracy and
one count of tax evasion. The conspiracy charge set forth two independent crimes:
(1) conspiracy to defraud the United States by not providing the IRS payroll taxes
collected from Arrow’s employees; and (2) conspiracy to commit bank fraud by
obtaining bank funds with fraudulently inflated invoices for Arrow’s accounts
receivable. Though it did not name coconspirators in the Superseding Information,
the government established that from January 2009 to December 2009, Pielsticker
had conspired with Joseph Mowry, Arrow’s legal counsel, and Jonathan Moore,
Arrow’s chief financial officer, among others.
Beginning in 2008, Arrow struggled to pay its expenses. It bounced checks to
its lenders, employees, and vendors. Despite this, Pielsticker received an annual
1
We grant Pielsticker’s motion to seal portions of the appendix.
2
$1,200,000 salary and drew personal expenses from Arrow totaling $3,563,436.58,
for such things as payments for his Porsche, Bentley, and Maserati automobiles.
From 2009 to 2011, Pielsticker underreported his wages and failed to pay his federal
income taxes, creating a personal tax debt of $1,050,956.
In January 2009, after Arrow missed a payment, Arrow’s payroll-service
provider dropped Arrow as a client. Rather than hire another provider, Pielsticker and
Moore decided to self-report. For the rest of the year, Arrow withheld payroll taxes2
from its employees’ salaries but never sent these collections to the IRS or filed the
corresponding tax returns. In total, Arrow withheld and failed to remit to the IRS
$9,562,121.95 in payroll taxes.
In November 2008, Transportation Alliance Bank (the “Bank”) entered into an
agreement with Arrow in which Arrow sold its accounts receivable to the Bank to
obtain advanced funds. Before the Bank purchased Arrow’s accounts receivable, it
required that Arrow submit its customer invoices, listing—among other
information—the total amount owed, the account debtor’s name, and the payment’s
due date. After receiving the invoices, the Bank would pay Arrow a percentage of the
total amount owed in exchange for the exclusive right to collect on the accounts. If an
account debtor failed to pay its account within ninety days of the payment due date,
2
Payroll taxes are federal income taxes that an employer must deduct and
withhold from its employees’ wages. See 26 U.S.C. §§ 3102(a), 3402. An employer is
liable for paying these taxes and for reporting the amounts withheld on its payroll tax
returns. Id. § 3403. Returns for and payments of payroll taxes are due each calendar
quarter. 26 C.F.R. § 31.6011(a)-1.
3
the Bank could force Arrow to repurchase the account (we refer to the repurchased
accounts as “Recourse Accounts”).
In March 2009, an Arrow billing clerk sent the Bank an invoice accidentally
overstating an account receivable by about $100,000. The Bank advanced this sum to
Arrow. When Moore learned of the overstated invoice, he told Mowry. Mowry
advised against notifying the Bank. In May 2009, during a meeting about Arrow’s
finances, Pielsticker told Moore, “[w]e just need to create another invoice like we did
the first time,” referencing the mistakenly overstated invoice. Appellant App. vol. 3
at 459. In previous meetings, Moore suggested that Pielsticker decrease his personal
expenses, but Pielsticker adamantly refused. So based on Pielsticker’s request and the
need to cover cash-flow shortages, Moore directed an Arrow billing clerk to overbill
an invoice before sending it to the Bank.
Arrow then began intentionally overbilling invoices. Moore would determine
the amounts needed to cover expenses and ask either Mowry or Pielsticker for
authorization to submit inflated invoices.3 Then, Mowry or Moore would direct the
billing clerks to overstate the invoices sent to the Bank. The invoices varied in
amounts, but Arrow kept track of all the overstated amounts. Initially, the clerks
would inflate just one or two invoices by large amounts. But as the conspiracy
continued, Moore told the billing clerks to inflate more invoices but at a lesser
amount. In this way, the conspirators tried to evade the Bank’s detection during
3
During the sentencing hearing, Moore testified that he inflated the invoices
about six to twelve times without consulting Pielsticker or Mowry.
4
audits. Meanwhile, Pielsticker’s personal spending increased and he continued
siphoning money from Arrow for himself.
By September 2009, the Bank was suspicious and demanded to verify the
accuracy of Arrow’s invoices by calling Arrow’s account debtors directly. Initially,
Pielsticker refused to allow this, but when the Bank insisted, Pielsticker, Mowry, and
Moore devised a scheme to have Arrow employees answer the Bank’s calls. To get
away with this, they provided the Bank with a list of account debtor’s fictitious
phone numbers. In fact, all of the phone numbers belonged to out-of-state cell phones
that Pielsticker, Mowry, and Moore had obtained to deceive the Bank. Then, they
staged four to five Arrow employees who would answer the Bank’s calls, identify
themselves as account debtors, and confirm the overbilled invoices. In December
2009, Pielsticker, Mowry, and Moore executed the scheme a second time after the
Bank wanted to verify more invoices. That same month, the bank-fraud conspiracy
ended when Mowry told the Bank about the fraudulent invoices. In total, Arrow
submitted false invoices to the Bank totaling at least $20,900,000.
By January 2010, Moore had begun cooperating with law enforcement. In
December 2014, he pleaded guilty to conspiracy to defraud the United States and to
commit bank fraud, in violation of 18 U.S.C. § 371. Hopeful that the government
would recommend a more lenient sentence, Moore testified as a government witness
at Pielsticker’s sentencing hearing. Though Mowry also assisted law enforcement, he
died before facing charges.
5
II. Sentencing
In February 2015, Pielsticker pleaded guilty. Soon after, the probation office
prepared a Presentence Investigation Report (PSR).4 The PSR calculated a total
offense level of 28 and a criminal-history category of I, rendering an advisory
guideline range of 78 to 97 months of imprisonment. On the bank-fraud conspiracy,
under U.S. Sentencing Guidelines Manual § 2B1.1 (U.S. Sentencing Comm’n 2014),
he received a base offense level of 6. The Bank submitted a victim impact statement,
claiming losses of $11,464,560.08. Finding that Pielsticker entered the bank-fraud
conspiracy in late 2009, the PSR reduced the Bank’s claimed loss of $11,464,560.08
down to $7,537,948.25. Based on this amount, it assigned a 20-level increase. See
USSG § 2B1.1(b)(1)(K) (providing for a 20-level increase when loss is more than $7
million but not more than $20 million). For his role as manager or supervisor of the
bank-fraud conspiracy, Pielsticker received a three-level increase under USSG
§ 3B1.1(b). The total adjusted-offense level for the bank-fraud conspiracy was 29.
For the tax-fraud conspiracy, the PSR adopted the government’s loss amount
of $9,562,121.95. Based on this amount, it assigned a base offense level of 26. See
USSG § 2T1.1(a)(1); USSG § 2T4.1(K) (providing an offense level of 26 for tax
losses of more $7 million but not more than $20 million). Because Pielsticker failed
4
The PSR applied the 2014 edition to the United States Sentencing
Commission Guidelines Manual. Here, all references to the guidelines refer to the
2014 edition unless otherwise indicated.
6
to report his taxes, he received a two-level increase under USSG § 2T1.1(b)(1). Thus,
the total adjusted-offense level for the tax-fraud conspiracy amounted to 28.
The PSR then applied additional adjustments to the greater of the two
adjusted-offense levels, which was 29. First, because the conspiracy and tax-evasion
counts were within four levels of each other, Pielsticker received a two-level increase
under USSG § 3D1.4(a). Second, for his acceptance of responsibility, he received a
three-level reduction under USSG § 3E1.1(a) and (b). Pielsticker’s criminal-history
score of zero placed him in Category I, resulting in a guidelines range of 78 to 97
months.
Both parties objected to the PSR and submitted depositions, records, and other
information to the probation office. In addition, Pielsticker filed two motions for
variance, a motion for departure, and a sentencing memorandum. The government
also filed a sentencing memorandum and responded to each of Pielsticker’s motions.
During the sentencing hearing, the government called Moore to testify and
introduced several exhibits. When the evidentiary portion of the hearing concluded,
the district court made findings on the parties’ objections to the PSR and denied each
of Pielsticker’s objections. The district court then heard arguments from both parties
on Pielsticker’s motions and denied all three motions. Applying the offense level of
28, the district court imposed a 90-month sentence, to be followed by three years of
supervised release, and ordered Pielsticker to make restitution for $21,026,682.03 on
Count 1 and $1,050,956 on Count 2. Pielsticker appealed.
7
DISCUSSION
We review Pielsticker’s sentence for reasonableness under a “deferential
abuse-of-discretion standard.” United States v. Mollner, 643 F.3d 713, 714 (10th Cir.
2011) (quoting United States v. Alapizco-Valenzuela, 546 F.3d 1208, 1214 (10th Cir.
2008)). “Reasonableness review is a two-step process comprising a procedural and a
substantive component.” Mollner, 643 F.3d at 714 (quoting United States v. Verdin-
Garcia, 516 F.3d 884, 895 (10th Cir. 2008)) (internal quotation marks omitted). A
challenge to the district court’s application of the sentencing guidelines tests the
sentence’s procedural reasonableness. Id. Pielsticker raises four grounds to challenge
the procedural reasonableness of his sentence. For the first two grounds, he disputes
the district court’s loss calculation under USSG §§ 2B1.1 and 2T1.1 and the amount
of restitution. Third, he challenges the district court’s denial of his variance motions.
Fourth, he contests the district court’s imposing an aggravating-role adjustment for
his acting as a manager or supervisor of at least five participants in the bank-fraud
conspiracy. Below, we consider each of Pielsticker’s arguments and affirm.
I. Loss Calculation for Guidelines Purposes
For Count 1’s bank-fraud conspiracy, the district court found that the Bank
suffered a loss of $11,464,560.08; and for Count 2’s individual tax-fraud (grouped
with Count 1’s tax-fraud conspiracy), it found that the IRS suffered a loss of
$10,613,077.95. Based on its finding that Pielsticker entered these offenses from the
outset, the district court attributed the total bank-fraud and tax-fraud losses to him.
8
Pielsticker raises different challenges to the district court’s bank- and tax-fraud
loss calculations. For the bank-fraud losses, Pielsticker challenges (1) the district
court’s calculation methodology; (2) its finding that the total loss was
$11,464,560.08; and (3) its finding that Pielsticker entered the bank-fraud conspiracy
from its outset. For the tax-fraud calculation, Pielsticker challenges the district
court’s finding that he entered the tax-fraud conspiracy from its outset.
When a defendant objects to the district court’s loss calculation, we review
the district court’s factual findings for clear error and its calculation methodology de
novo. United States v. Howard, 784 F.3d 745, 748 (10th Cir. 2015). “[W]e will not
disturb the district court’s factual findings unless they have no basis in the record,
and we view the evidence and inferences therefrom in the light most favorable to the
district court’s determination.” United States v. Hoyle, 751 F.3d 1167, 1174 (10th
Cir. 2014).
A. The Bank-Fraud Conspiracy
Under the sentencing guideline for fraud, the amount of loss heavily influences
the offense level. See USSG § 2B1.1(b)(1). Here, the district court found that
Pielsticker’s relevant conduct included $11,464,560.08 in bank-fraud losses. Under
USSG § 2B1.1(b)(1)(K), Pielsticker received a 20-level increase for losses exceeding
$7 million but not more than $20 million. Pielsticker challenges (1) the district
court’s calculation methodology; (2) its finding that the total loss was
$11,464,560.08; and (3) its finding that Pielsticker entered the bank-fraud conspiracy
9
from its outset. We hold that the district court did not err in calculating the amount of
loss and that the record supports its factual findings.
1. Calculation Methodology
Pielsticker challenges the district court’s loss-calculation methodology
associated with the bank-fraud conspiracy, arguing that the district court failed to
“articulate any methodology whatsoever.” Appellant Opening Br. at 50. “Loss” under
the guidelines is the greater of intended or actual loss. USSG § 2B1.1, cmt. n.3(A).
Actual loss is “the reasonably foreseeable pecuniary harm that resulted from the
offense.” Id., cmt. n.3(A)(i). And pecuniary harm is harm that is monetary or readily
measureable in money. Id., cmt. n.3(A)(iii). In calculating loss, the district court
“need only make a reasonable estimate of the loss . . . . [and its] loss determination is
entitled to appropriate deference.” Id., cmt. n.3(c).
Pielsticker argues that the district court erred by failing to state its
methodology. But the district court first found that Arrow’s inflated invoices totaled
$20,922,058.25, and then subtracted Recourse Accounts and credits to arrive at the
Bank’s total loss of $11,464,560.08. From this, we have no problem identifying the
district court’s methodology in calculating actual loss. And this methodology met
§ 2B1.1’s direction to reduce loss by “the money returned.” USSG § 2B1.1, cmt.
n.3(E)(i).
Thus, we find that Pielsticker has failed to demonstrate that the district court
employed an improper loss-calculation methodology.
10
2. Amount of the Bank-Fraud Loss
Pielsticker challenges the district court’s finding that the Bank suffered
$11,464,560.08 in bank-fraud loss, arguing that this amount lacks evidentiary
support. Based on the Bank’s May 1, 2015 victim-impact statement, the PSR
calculated $11,464,560.08 in loss. In response, Pielsticker objected to the Bank’s
“bare conclusion of its loss, without any supporting back-up.” Appellant App. vol. 4
at 672. He also objected to the PSR, mentioning that the Bank had asserted different
loss amounts over time and questioning whether the Bank had reduced its claim by
legitimate invoice amounts and collections after the fraud. In its revised PSR, the
probation office rejected Pielsticker’s objection, explaining in an addendum that the
Bank’s loss calculations had decreased after “accounting for recourses and payment
of legitimate invoices.” Appellant App. vol. 5 at 919. The probation office
acknowledged that the Bank’s loss calculation had fluctuated, but noted that the
calculated losses averaged $12,284,523.
Had the record ended here, we might sympathize more with Pielsticker’s
position. But instead the record shows that four days before Pielsticker’s October 8,
2015 sentencing, Pielsticker’s counsel entered into a “Stipulation Regarding
Testimony of [the Bank] Representatives” to enable the court to accept the
stipulation’s contents as the Bank’s testimony in lieu of having a representative
11
testify.5 Appellant App. vol. 3 at 621. Included within this testimony was the
following:
During the course of the scheme, Arrow submitted false invoices to [the
Bank] totaling at least $20,900,000. As a result, [the Bank] suffered a
loss of at least $11,400,000. This is a conservative calculation of [the
Bank’s] losses resulting directly from the Accounts Receivable . . . .
This loss takes into account all collection activity, including collateral
obtained after Arrow closed.
Appellant App. vol. 3 at 622.
This testimony supports the district court’s bank-fraud loss finding by
bolstering the Bank’s victim-impact statement with testimony. Using a “conservative
calculation,” the Bank’s written testimony estimates the Bank’s losses near the
Bank’s slightly higher6 figure in its victim-impact statement from four months
earlier. Appellant App. vol. 3 at 623. And, because Pielsticker stipulated to the
written statement as the Bank’s testimony, the district court was entitled to rely on it
as evidence. United States v. Spann, 515 F.2d 579, 580-83 (10th Cir. 1975) (stating
5
At oral argument, Pielsticker’s counsel cryptically justified the decision to
stipulate but later maintain his present position as being for tactical reasons. Oral
Argument at 4:30-4:32. Whatever tactical reason Pielsticker had for stipulating—to
require a remand for a more precise calculation?—his stipulation certainly means that
he chose not to cross-examine the Bank’s witnesses about the bases for their loss
figure. His stipulating led to his present complaint—and hurt the district court’s
ability to hear more precise information on loss.
6
For some reason, the Bank, in the written testimony stipulated for admission
to the district court, rounded its losses to $11.4 million, rather than use the more
precise $11,464,560.08 given in its victim-impact statement and used in the PSR. The
Bank’s written testimony described its rounded number as a “conservative estimate.”
Appellant App. vol. 3 at 623.
12
that a jury may rely on testimony admitted into evidence by the parties’ stipulation in
reaching its decision).
Now Pielsticker attacks the Bank’s written testimony as unreliable for stating
an unsupported conclusion. He argues that to calculate the bank-fraud losses
properly, the district court would need to analyze each of the “hundreds, if not
thousands, of inflated invoices” for fraud, for recourse payments, and for any other
collections. Appellant Opening Br. at 46. In other words, Pielsticker challenges the
worth of the very evidence he stipulated be admitted at sentencing. By stipulating and
forfeiting any cross-examination of live testimony from Bank witnesses, Pielsticker
deprived the district court, and us, of the Bank’s proof in response. In this
circumstance, with the Bank’s written testimony properly before it, the district court
had a sufficient basis to establish guideline loss. See United States v. Abbo, 515 F.
App’x 764, 770 (10th Cir. 2013) (unpublished) (stating that a stipulation to admit
into evidence a witness’s testimony in lieu of live testimony “waive[s] any right to
challenge the admissibility of the evidence on foundational grounds”) (citing United
States v. Aptt, 354 F.3d 1269, 1281 (10th Cir. 2004)).
Because the district court properly received the Bank’s written testimony, the
district court could rely on it in making its bank-fraud loss calculation.
3. Date of Entry into the Bank-Fraud Conspiracy
Pielsticker raises an additional challenge to the district court’s bank-fraud loss
calculation by disputing its finding that he entered the bank-fraud conspiracy from its
outset. He asserts that he entered the bank-fraud conspiracy late, and thus was
13
responsible for a portion of the total bank-fraud loss, specifically $7,537,948.25 (as
the PSR found), or less. To find that Pielsticker entered the bank-fraud conspiracy
from the outset, the district court relied on Moore’s testimony from the sentencing
hearing. Moore testified that by May 2009, when the bank-fraud conspiracy began,
Pielsticker had decided “[Arrow] just need[ed] to create another invoice like . . . the
first time.” Appellant App. vol. 3 at 459. And from that point on, either Mowry or
Pielsticker authorized the inflated amounts that Arrow billing clerks sent the Bank.
Pielsticker doesn’t dispute that Moore’s testimony supported the district
court’s finding. Rather, he argues that the district court erred in finding Moore
credible. When the district court bases its findings on determinations regarding the
witnesses’ credibility, “Rule 52(a) demands even greater deference to the trial court’s
findings; for only the trial judge can be aware of the variations in demeanor and tone
of voice that bear so heavily on the listener’s understanding of and belief in what is
said.” Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 575 (1985). Unless the
witness’s story is internally inconsistent or contradicted by objective evidence or
documents, we will “virtually never” reverse for clear error. Id.
On three grounds, Pielsticker argues that Moore’s testimony was not credible.
First, Pielsticker asserts that Moore gave conflicting testimony about the number of
times that Pielsticker authorized the inflated amounts. The record shows that on
direct examination, Moore testified that either Mowry or Pielsticker authorized the
inflated invoices. On cross-examination, Moore clarified that Pielsticker, as opposed
to Mowry, authorized the inflated invoices about 25-30 percent of the time. Despite
14
Pielsticker’s contention, Moore’s apportionment between Mowry and Pielsticker is
consistent with his statement that either Mowry or Pielsticker authorized the inflated
amounts.
Second, Pielsticker contends that an e-mail Moore sent on August 15, 2009
contradicts his testimony. In his August 15 e-mail, referring to the inflated invoices,
Moore stated, “I have no guilt about the fluff.” Appellant App. vol. 3 at 509. On
direct, he testified that Pielsticker was a “tyrant.” Appellant App. vol. 3 at 433. These
statements aren’t inconsistent.
Third, Pielsticker contends that statements from other Arrow employees
contradicted Moore’s testimony. The district court’s decision to credit one
individual’s testimony over another’s is “virtually never . . . clear error.” Anderson,
470 U.S. at 575. And our review of the record shows that at least one of these Arrow
employees lacked personal knowledge of Pielsticker’s involvement in the bank-fraud
conspiracy.7
Because Pielsticker has failed to show that Moore’s testimony was “so
internally inconsistent or implausible on its face,” id., the district court could find
Moore credible. Thus, the district court did not clearly err in finding that Pielsticker
entered the bank-fraud conspiracy from the outset based on Moore’s testimony.
7
For example, Arrow’s billing clerk, Michelle Bullard, stated in her Bank
interview that she never communicated with Pielsticker about the practice of inflating
invoices.
15
Therefore, we affirm the district court’s finding that the Bank suffered
$11,464,560.08 in bank-fraud loss.
B. Date of Entry into Tax-Fraud Conspiracy
Pielsticker disputes the district court’s finding that the IRS suffered
$9,562,121.95 in loss for Count 1’s tax-fraud conspiracy.8 He argues that this amount
lacks evidentiary support. Similar to his bank-fraud loss argument, Pielsticker
specifically challenges the district court’s finding that he entered the tax-fraud
conspiracy from its outset. Here, too, Pielsticker asserts that he entered the tax-fraud
conspiracy late, and thus is responsible for only a portion of the total tax-fraud loss.
To find that Pielsticker entered the tax-fraud conspiracy from the outset, the district
court relied on Moore’s testimony from the sentencing hearing. Pielsticker argues
that Moore’s testimony was insufficient to establish that Pielsticker knowingly
participated in the tax-fraud conspiracy from the outset.
“A defendant convicted of conspiracy is accountable for reasonably
foreseeable conduct in furtherance of the jointly undertaken criminal activity.”
United States v. Dazey, 403 F.3d 1147, 1176 (10th Cir. 2005). The district court must
make “particularized findings about, the scope of the specific agreement the
individual defendant joined in relation to the conspiracy as a whole.” Id. (quoting
United States v. Melton, 131 F.3d 1400, 1404 (10th Cir. 1997)). A defendant is not
accountable for the conduct of coconspirators “prior to the defendant joining the
8
Pielsticker does not challenge the tax-loss amount for Count 2’s individual
tax-fraud, which was $1,050,956.
16
conspiracy, even if the defendant knows of that conduct.” Id. (quoting USSG
§ 1B1.3, cmt. n.2). For sentencing purposes, the government’s burden of proof is by a
preponderance of the evidence. United States v. Cook, 550 F.3d 1292, 1294-95 (10th
Cir. 2008).
The evidence was sufficient to establish that Pielsticker participated in the tax-
fraud conspiracy from the outset. At Pielsticker’s sentencing, Moore testified that he
conversed daily with Pielsticker about Arrow’s cash-flow problems and that
Pielsticker decided the order in which to pay Arrow’s creditors. Moore also testified
that Pielsticker knew from the outset (January 2009) that Arrow was withholding
payroll taxes from its employees’ wages without remitting these withholdings to the
IRS, yet Pielsticker still directed Arrow to pay his personal expenses ahead of the
IRS. As mentioned above, the district court did not err in finding Moore credible.
Thus, the record supports the district court’s finding that Pielsticker entered the tax-
fraud conspiracy from its outset.
II. Restitution
Under the Mandatory Victims Restitution Act (MVRA), 18 U.S.C. § 3663A,
the district court ordered Pielsticker to pay $21,026,682.03 in restitution, jointly and
severally with Moore on Count 1, and $1,050,956 on Count 2. Pielsticker challenges
the $21,026,682.03.9 This amount represented the $11,464,560.08 owed to the Bank
and the $9,562,121.95 owed to the IRS for Count 1’s tax-fraud conspiracy. The
9
Pielsticker doesn’t challenge the Count 2 restitution for $1,050,956.
17
district court determined this amount based on its bank-fraud and tax-fraud loss
calculations. Pielsticker argues that the government insufficiently proved its loss and
restitution. We conclude that the record supports the district court’s restitution order.
“We review the district court’s application of the MVRA de novo and its
factual findings for clear error.” United States v. Ferdman, 779 F.3d 1129, 1131
(10th Cir. 2015). We ultimately assess a district court’s restitution amount for an
abuse of discretion. Id.
Restitution seeks to ensure that victims, if possible, “are made whole for their
losses.” United States v. Parker, 553 F.3d 1309, 1323 (10th Cir. 2009) (quoting
United States v. Arutunoff, 1 F.3d 1112, 1121 (10th Cir. 1993)). Restitution restores
actual loss but does not “unjustly enrich crime victims or provide them a windfall.”
Ferdman, 779 F.3d at 1132. “[T]he determination of an appropriate restitution
amount is by nature an inexact science.” United States v. James, 564 F.3d 1237, 1247
(10th Cir. 2009) (quoting United States v. Williams, 292 F.3d 681, 688 (10th Cir.
2002)) (internal quotation marks omitted). The district court may “draw inferences
from the totality of the circumstances through . . . ‘logical and probabilistic
reasoning.’” United States v. Ahidley, 486 F.3d 1184, 1189 (10th Cir. 2007) (quoting
United States v. Atencio, 435 F.3d 1222, 1232 (10th Cir. 2006)). Because the MVRA
requires “information sufficient for the court to exercise its discretion in fashioning a
restitution order,” 18 U.S.C. § 3664(a), “[s]peculation and rough justice are not
permitted.” Ferdman, 779 F.3d at 1133 (quoting United States v. Anderson, 741 F.3d
938, 954 (9th Cir. 2013)). In arriving at a restitution amount, district courts decide
18
disputes using a preponderance-of-evidence standard, and assign the government the
burden of proof. See 18 U.S.C. § 3664(e); Parker, 553 at 1323.
Contesting the restitution amount, Pielsticker complains that the district court
(1) “rubber stamped” the PSR’s conclusory statement of the bank-fraud loss; (2)
based the bank-fraud and tax-fraud losses on its erroneous finding that Pielsticker
entered the conspiracies at the outset; and (3) failed to articulate any calculation
methodology. Appellant Opening Br. at 27.
For his first ground—that the district court simply “rubber stamped” the PSR’s
bank-fraud loss without sufficient evidence—Pielsticker relies on Ferdman. In
Ferdman, the defendant was convicted of fraudulently procuring Sprint phones. 779
F.3d at 1131. Before sentencing, Sprint representatives submitted an unsworn and
unverified letter to the probation office, listing Sprint’s losses. Id. at 1133. Although
it claimed lost sales, Sprint never provided affidavits or receipts verifying these lost
sales. Id. at 1134. Despite this, in making its restitution recommendation, the PSR
adopted Sprint’s lost-sales claim. Id. Like Pielsticker, the defendant in Ferdman
challenged the sufficiency of proof of the loss amount. Id. Faced with the defendant’s
objection, the government simply relied on the PSR and didn’t introduce supporting
evidence. Id. at 1135. After the district court adopted the PSR’s restitution figure, we
reversed, concluding that “[t]he record contains no actual proof, not even an
affidavit, of what those expenses were.” Id. at 1140.
Pielsticker’s restitution order is stronger in at least two ways. First, unlike in
Ferdman, here the district court had testimony to support its loss finding. After
19
Pielsticker first challenged the Bank’s figures for its bank-fraud losses, he stipulated
to the Bank’s written testimony, bolstering the PSR’s and victim-impact statement’s
figure. Because the district court may “draw inferences from the totality of the
circumstances” in exercising its discretion, Ahidley, 486 F.3d at 1189, it could infer
that the Bank rounded its loss estimate to $11,400,000 in its written testimony and
gave the precise amount of $11,464,560.08 in its victim-impact statement. We also
note that Pielsticker himself credited the precise figure in his objections to the PSR
estimating the loss attributable to him as “38.36 percent of $11,464,560.” Appellant
App. vol. 5 at 918. Thus, we cannot say that the district court abused its discretion in
relying on the testimony and ordering the sum it did as restitution. Second, unlike in
Ferdman, the district court had no need to value property such as phones or to
determine a valuation method for lost profits. 779 F.3d at 1134. Here, the district
court’s task was much simpler—to determine the total overbillings and then subtract
recourses or credits. The district court did just that. And, in doing so, it could rely on
the calculation set out in the Bank’s testimony that Pielsticker stipulated be admitted
into evidence. Once the district court had this sufficient basis behind its restitution
amount, it acted in its discretion to adopt that amount.10
10
To show an abuse of discretion on appeal, Pielsticker needs to show that he
did more at sentencing than generally object. Pielsticker chose not to cross-examine a
Bank witness offering live testimony about the restitution calculation. In addition, he
chose to present nothing undermining the Bank’s evidence that he stipulated be
admitted as a government exhibit at the sentencing hearing. In this regard, we
observe that Pielsticker knew which invoices Arrow had inflated and which debtors
20
Pielsticker’s second ground—that the district court erred in finding that
Pielsticker entered the conspiracies at the outset—is a factual finding that we review
for clear error. United States v. Masek, 588 F.3d 1283, 1287 (10th Cir. 2009). In
finding as it did, the district court found Moore credible and relied on his testimony.
“We give the district court’s determinations regarding the credibility of witnesses
great deference.” Id. at 1288 (quoting Wessel v. City of Albuquerque, 463 F.3d 1138,
1145 (10th Cir. 2006)). Under our deferential review, we find no error in the district
court’s finding that Pielsticker entered the conspiracies at the outset.
For his third ground, Pielsticker asserts that the district court failed to
articulate a calculation methodology. Under the MVRA, the district “court must use
actual loss as its metric.” Id. As we stated above, where the district court first found
that Arrow’s inflated invoices totaled $20,922,058.25, and then subtracted Recourse
Accounts and credits to arrive at the Bank’s total loss of $11,464,560.08, we see the
district court’s methodology clearly. Thus, the district court did not abuse its
discretion in ordering Pielsticker to pay $21,026,682.03 in restitution on Count 1.
III. Motions for Variance
Pielsticker filed two pre-sentence motions for variance.11 After hearing
arguments from both parties at sentencing, the district court denied the motions. We
associated with those invoices could testify about credits and recourses. After all,
Moore and the billing clerks kept track of the overbilled amounts on a spreadsheet.
11
Pielsticker also filed a motion for downward departure, which the district
court denied. He failed to challenge this on appeal.
21
review the district court’s decision to grant or deny a request for variance for an
abuse of discretion. United States v. Haley, 529 F.3d 1308, 1311 (10th Cir. 2008)
(reviewing the district court’s denial of a variance motion for an abuse of discretion).
A district court abuses its discretion when it renders a judgment that is arbitrary,
capricious, whimsical, or manifestly unreasonable. Id.
A. Medical-Condition Variance
Pielsticker based his first motion for variance on his heart condition. He argues
that the district court unreasonably denied the motion for variance by failing to
consider the 18 U.S.C. § 3553(a) factors. In his motion and during sentencing,
Pielsticker presented evidence that he relies on an implant to shock his heart when it
fails or becomes arrhythmic; and that he needs to replace the implant. His treating
cardiologist stressed that Pielsticker was at a “GREAT risk of death” and worried
how prison might affect his medical condition. Appellant App. vol. 1 at 73-74.
As a matter of procedural reasonableness, because Pielsticker’s sentence falls
within the advisory Guidelines’ range, § 3553(c) requires that the district court state
“the reasons for its imposition of the particular sentence.” 18 U.S.C. § 3553(c);
United States v. McComb, 519 F.3d 1049, 1054 (10th Cir. 2007). The district court
meets this threshold when it provides a “general discussion”12 of the § 3553(a)
factors. Geiner, 498 F.3d at 1113. Despite Pielsticker’s contention that the district
12
Though we also noted that this “is not necessarily the best practice.” United
States v. Geiner, 498 F.3d 1104, 1113 (10th Cir. 2007).
22
court failed to consider the § 3553(a) factors, the record shows that the district court
provided more than a general discussion.
Without explicitly listing the § 3553(a) factors, the district court considered
the need “to provide the defendant with . . . medical care.” 18 U.S.C.
§ 3553(a)(2)(D). Based on a Bureau of Prisons’ (the “Bureau”) representation, the
district court found that Pielsticker could have his implant replaced in a federal
medical facility. It also found that Pielsticker’s “heart condition is not so
extraordinary or unusual as to distinguish [his] case from typical cases covered by the
guidelines.” Appellant App. vol. 3 at 585. Evidence from the record supported this
finding, including (1) Pielsticker’s failure to have surgery within the eight months
leading up to sentencing; (2) the Bureau’s representation that it had a federal medical
facility capable of performing the replacement;13 and (3) Pielsticker’s ability to
engage in normal life activities. Thus, the district court did not abuse its discretion in
denying Pielsticker’s first motion for variance.
13
Pielsticker argues that the Bureau’s representation is “a double hearsay ex
parte communication about a mission-critical fact.” Appellant Opening Br. at 43. But
at sentencing, the district court can credit “relevant information without regard to its
admissibility . . . provided that the information has sufficient indicia of reliability to
support its probable accuracy.” USSG § 6A1.3(a); see United States v. Friedman, 499
F. App’x 807, 810-11 (10th Cir. 2012) (unpublished) (finding that the record
suggested no prejudice from an assumed ex parte communication with the United
States Marshals).
23
B. Anticipated-Amended Loss Table
Pielsticker based his second motion for variance on a pending amendment to
the 2015 sentencing guidelines. As mentioned above, the district court applied the
2014 sentencing guidelines, which imposed a 20-level enhancement for losses of
more than $7 million and not more than $20 million. USSG § 2B1.1(b)(1)(K).
Beginning November 1, 2015, an amendment to the fraud-loss table in USSG § 2B1.1
increased the threshold for a 20-level enhancement from $7 million to $9.5 million.
USSG § 2B1.1(b)(K) (U.S. Sentencing Comm’n 2015). Based on Pielsticker’s
assuming that the district court erred by finding that he entered the bank-fraud
conspiracy at its outset, he argues that the district court ignored the “parsimony
principle” of § 3553(a) by not applying the 2015 guidelines. Appellant Opening Br.
at 38. This argument fails because the district court did not abuse its discretion in
finding that Pielsticker joined the conspiracy at its outset, see supra Discussion
Sections I(A)(2), and (3).
IV. Manager or Supervisor Enhancement
For his role as a “manager or supervisor” of a conspiracy consisting of five or
more participants, Pielsticker received a three-level increase under USSG
§ 3B1.1(b).14 Pielsticker argues that the district court clearly erred in finding that he
was a manager or supervisor of the bank-fraud conspiracy under USSG § 3B1.1(b)
14
USSG § 3B1.1(b) states in part as follows: “If the defendant was a manager
or supervisor (but not an organizer or leader) and the criminal activity involved five
or more participants or was otherwise extensive, increase by 3 levels.” (emphasis
added).
24
because the evidence was insufficient to support the enhancement. He contends that
(1) the conspiracy consisted of fewer than five participants, and (2) that Moore
supervised or managed the conspiracy.
We review the district court’s fact findings for clear error. United States v.
Zar, 790 F.3d 1036, 1056 (10th Cir. 2015). In doing so, we view the evidence in the
light most favorable to the district court’s finding. United States v. Mozee, 405 F.3d
1082, 1088 (10th Cir. 2005). Only if “on the entire evidence, we are left with a
definite and firm conviction that a mistake has been committed” will we reverse. Zar,
790 F.3d at 1056 (quoting United States v. James, 592 F.3d 1109, 1113 (10th Cir.
2010)).
First, in determining the number of participants, the guidelines define
“participant” as “a person who is criminally responsible for the commission of the
offense, but need not have been convicted.” USSG § 3B1.1(b), cmt. n.1. Because the
defendant counts as a participant, the district court properly counted Pielsticker as
one of the five participants. United States v. Hardwell, 80 F.3d 1471, 1496 (10th Cir.
1996) (“In determining whether there were five or more participants, the defendant is
included.”). And Pielsticker acknowledges that Moore and Mowry also counted; but
he contests whether other Arrow employees qualified. Over Pielsticker’s contention,
we find that the record supports the district court’s finding that Elaine Cox, Michelle
Bullard, and Tom Webster also acted as participants.
As for criminal responsibility, in their interviews with the Bank, Cox and
Bullard admitted that they inflated invoices for Arrow. Specifically, Cox testified
25
that, “each day either Michelle or myself was given a dollar amount we were
supposed to bill for that day.” Appellee App. at 38. And Bullard testified that, “we
would just inflate like two invoices, maybe just one invoice, for a very large dollar
amount.” Appellee App. at 12. Similarly, in his FBI interview, Webster said that he
had answered calls for the Bank audit, posing as an Arrow customer to reassure the
Bank that the inflated invoices were legitimate. Thus, the record supports the district
court’s finding that the bank-fraud conspiracy involved at least five participants.
Second, Pielsticker disputes whether he was a manager or supervisor of the
bank-fraud conspiracy. If Pielsticker “exercised any degree of direction or control
over someone subordinate to him,” then he qualifies as a manager or supervisor.
United States v. Backas, 901 F.2d 1528, 1530 (10th Cir. 1990). His supervision of
just one other participant satisfies the definition. United States v. Cruz Camacho, 137
F.3d 1220, 1224 (10th Cir. 1998).
The record supports the district court’s finding that Pielsticker was a
supervisor or manager of at least one other participant. In his FBI interview, Webster
recounted answering the Bank’s audit calls to validate the inflated invoices. After
answering calls the first time, he told Pielsticker that Moore had asked him to answer
calls a second time. To this, Pielsticker responded, “do it.” Appellant App. vol. 2 at
230. This command shows that Pielsticker exercised some degree of direction or
control over Webster. Thus, the district court properly found that Pielsticker was a
manager or supervisor.
26
CONCLUSION
For the reasons stated above, we AFFIRM Pielsticker’s sentence and the
district court’s restitution order.
Entered for the Court
Gregory A. Phillips
Circuit Judge
27