United States v. Kellogg , 494 F. App'x 888 ( 2012 )

FILED
United States Court of Appeals
Tenth Circuit
August 21, 2012
UNITED STATES COURT OF APPEALS
Elisabeth A. Shumaker
Clerk of Court
TENTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff - Appellee, No. 11-1429
v. (D. Colorado)
BROOKS L. KELLOGG, (D.C. No. 1:10-CR-00563-CMA-1)
Defendant - Appellant.
ORDER AND JUDGMENT *
Before MURPHY, EBEL, and HARTZ, Circuit Judges.
Defendant Brooks L. Kellogg pleaded guilty in the United States District
Court for the District of Colorado to traveling in interstate commerce with the
intent that murder for hire be committed. See 18 U.S.C. § 1958(a). The court
imposed a sentence of 72 months’ imprisonment, two years of supervised release,
and a $100,000 fine. Defendant appeals his fine, arguing that it was both
procedurally and substantively unreasonable. Exercising jurisdiction under
*
After examining the briefs and appellate record, this panel has determined
unanimously to honor the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent except under the doctrines of law of the case, res judicata, and
collateral estoppel. It may be cited, however, for its persuasive value consistent
with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
28 U.S.C. § 1291, we affirm Defendant’s fine because the district court
adequately explained why it imposed the fine and the amount of the fine was
reasonable.
I. BACKGROUND
In 2006 Defendant and others settled a lawsuit brought against them by
First Land Development, LLC (First Land). In 2010, however, First Land alleged
a breach of the agreement, and a Colorado state court entered a judgment against
Defendant and others. Later that year, Defendant confided in a friend that he
wished to harm Stephen Bunyard, a principal of First Land. The conversation
started a chain of events that eventually led Defendant to travel to Denver to pay
a third party (an undercover FBI agent) to kill Mr. Bunyard.
A federal grand jury indicted Defendant on five counts for offenses relating
to the proposed murder for hire. He reached an agreement with the government
under which he pleaded guilty to one count on April 28, 2011. The presentence
report (PSR) calculated a total offense level of 29 and a criminal history category
of I. This resulted in an advisory guideline sentence of 87 to 108 months’
imprisonment, see USSG ch. 5, pt. A, and a fine of $15,000 to $150,000, see id.§ 5E1.2(c)(3). To determine Defendant’s ability to pay, a probation officer gave
Defendant a financial packet. The packet apparently contained a Declaration of
Accuracy of Financial Statement (Declaration) to be signed by Defendant, but the
officer understood that the information would be completed by Defendant’s
-2-
accountant. Although the record on appeal does not contain a completed financial
packet, the PSR states that Defendant submitted a summary of his assets and
liabilities completed by his wife. The summary asserted that Defendant had no
savings and a negative net worth of more than $38 million dollars. Defendant did
not submit the Declaration; his counsel sent an email explaining that Defendant
was “not able to participate in this endeavor in any meaningful way.” R., Vol. 4
pt. 1 at 24 (internal quotation marks omitted). The officer sent another
Declaration, but Defendant did not return it.
The probation officer conducted an investigation, which raised questions
about the submitted financial summary: The Chadwick Real Estate website listed
him as a managing member; an online reference site stated that he owned Fox
Pavilion LLC in Hays, Kansas. His resume stated that he was active with Beth
Corporation in Libertyville, Illinois. In 2008 he had given a deferred gift of more
than $10 million to the University of Illinois Foundation. And in the same year
he had donated $500,000 to an educational foundation associated with a fraternity
at Fort Hays State University in Kansas; a character reference sent to the district
court by a dean at the university said that Defendant and his wife fund a
scholarship. Finally, Defendant’s credit report estimated that he was making
monthly debt payments of $20,513.
Defendant filed written objections, arguing that his financial summary
sufficiently demonstrated his inability to pay a fine. In particular, he insisted that
-3-
his finances were complex and that it would be “imprudent to sign a sworn
statement on the accuracy of financial information which the Defendant is not in a
position to compile . . . .” Id. at 230. He also asserted that the $500,000 gift was
a pledge that had not yet been paid.
After learning of Defendant’s repeated failure to submit the Declaration,
the district court sua sponte issued an order on June 29, 2011, continuing the
sentencing hearing and requiring Defendant to provide a certified financial
statement. Defendant then complied by signing the Declaration on July 1. Also,
his counsel responded to inquiries from the probation officer about Defendant’s
monthly income and employment status, asserting that Defendant had no monthly
income because none of his businesses operated at a profit; that Defendant’s
wife’s income comes from Social Security and property owned by her; and that
Defendant had no active role in Chadwick Real Estate.
At the sentencing hearing on September 1, 2011, the district court
expressed its concern about Defendant’s “lack of cooperation” in providing
necessary information to the probation officer and indicated that the information
he did offer “seem[ed] to be overly exaggerated and somewhat lacking in candor.”
Id., Vol. 3 at 15. The court noted that defense counsel had told the probation
officer that Defendant could not participate in the gathering of financial
information prepared by his wife even though she apparently visited him weekly;
that Defendant signed the Declaration after previously refusing to do so; and that
-4-
he never attempted to hire an accountant to complete and certify his submissions
to the court. The court stated:
The additional information that was submitted only raises more
questions regarding whether the defendant has fully and accurately
disclosed all of his holdings and his income. The probation officer
inquired as to an accounting of monthly income that was due to the
defendant as a result of many businesses and properties in which he
has an interest. In response to the probation officer to those inquiries
regarding income, the businesses owned by defendant include, as far
as I could tell, a restaurant, a wedding complex, bars, leased parking
spaces, multi-tenant office buildings. And the defendant’s response
is that none—none of these assets generate any profit whatsoever.
Given the rather lavish lifestyle that the defendant lived
previously before his arrest in this case, such an unsupported
statement simply does not appear credible to me. I find it hard to
believe that someone who lives in a personal residence valued at
more than $2.66 million, and who 3 years ago could commit himself
to a $10,000,00[0] contribution to a higher ed. institution, now has
absolutely no assets of any value.
....
In addition, the financial information that was provided does
not appear to be complete based on the probation officer’s search of
public records. The defendant was still listed as an active participant
in the Chadwick Real Estate Group. He was still listed as the owner
of the Fox Pavilion in Hays, Kansas. He was affiliated in some way
to the Old Pilot Building. In 2008, he made a $500,000 donation to a
fraternity at Fort Hays University, and announced that he and his
wife had given a deferred gift in excess of $10,000,00[0] to the
University of Illinois.
These properties, while some were mentioned, they were really
not accounted for in the financial information submitted by the
defendant’s wife. For these reasons, the Court finds that the
defendant failed to meet his burden of proving that he is unable to
pay a fine.
Id. at 16–18. Turning to the offense itself, the court then stated:
With respect to the [18 U.S.C. §] 3553(a) factors, the Court finds that
the defendant’s conduct in this case was extremely egregious. The
-5-
defendant essentially contracted with an undercover agent to kill the
victim in this case. And the reason he wanted the victim to be killed
was because of a dispute over money.
Id. at 19.
Defense counsel objected, stating that his client’s finances were in disarray
because he had many properties in foreclosure; that Defendant could provide
further documentation to prove that he is in debt (although counsel stated later
that he did not seek a continuance); and that given Defendant’s age and the
improbability of future employment, he would not be able to pay a fine. After
hearing from the government and the intended victim, the court pronounced
sentence:
Now, for the reasons previously stated by this Court, the Court
will impose a fine. And I note from the financial statement that was
submitted by [Defendant], he has a 50 percent interest in his personal
residence, which is valued at $1,334,845. Claims to only have about
$1,400 in other personal property. I don’t know what happened to all
of the furniture and everything else that would be in that $2.6 million
home, and he does have a lot of liabilities, but he also has a lot of
equity in other properties that are listed on the second page here.
As a result, for the reasons that I previously stated, I am going
to impose a fine in the amount — I was going to impose at the top of
the range of $150,000. Based on [Defense counsel’s] arguments, I
will reduce that by what I consider to be a significant amount. I am
going to impose a fine of $100,000.
Id. at 44. The court also granted Defendant’s request for a sentence variance and
imposed 72 months’ imprisonment and two years’ supervised release.
Shortly after filing a notice of appeal on September 14, 2011, Defendant
filed two district-court motions in which he asserted that he could not afford an
-6-
attorney. One asked the court to appoint counsel to represent him on appeal. The
other asked that he be provided a sentencing-hearing transcript at the
government’s expense. In an order dated November 22, the court found that
Defendant was financially unable to obtain counsel, but denied the motion to
appoint counsel. On December 21 the court granted the motion for a free
transcript.
On appeal Defendant asserts that imposition of a fine was procedurally
unreasonable because (1) the district court failed to provide an adequate
explanation or make adequate findings to support the fine, (2) it made
contradictory findings regarding his financial condition, and (3) it relied on
erroneous “facts” in finding that he failed to meet his burden to show inability to
pay. He also asserts that the fine was substantively unreasonable because (1) his
liabilities and lack of future ability to pay rendered a fine improper, and the court
did not give meaningful weight to his financial condition and the burden of a fine,
as required by 18 U.S.C. § 3572(a); and (2) the court impermissibly considered
his prior socioeconomic status.
II. DISCUSSION
A. Procedural Reasonableness
When a party challenges a sentence for procedural reasonableness, our
standard of review is abuse of discretion, under which we review the district
court’s legal conclusions de novo and its factual findings for clear error. See
-7-
United States v. Mollner, 643 F.3d 713, 714 (10th Cir. 2011); United States v.
Vigil, 644 F.3d 1114, 1123 (10th Cir. 2011) (applying abuse-of-discretion
standard to imposition of fine).
The Guidelines provide that “[t]he court shall impose a fine in all cases,
except where the defendant establishes that he is unable to pay and is not likely to
become able to pay any fine.” USSG § 5E1.2(a).
If the defendant establishes that (1) he is not able and, even with the
use of a reasonable installment schedule, is not likely to become able
to pay all or part of the fine . . . , or (2) imposition of a fine would
unduly burden the defendant’s dependents, the court may impose a
lesser fine or waive the fine.
Id. § 5E1.2(e). “As the plain language of Section 5E1.2 indicates, the defendant
bears the burden of demonstrating an inability to pay a fine.” Vigil, 644 F.3d at
1123 (brackets and internal quotation marks omitted).
In deciding whether to impose a fine and the amount of the fine, a district
court must consider not only the familiar § 3553(a) factors, but also those in
18 U.S.C. § 3572(a), which require the court to consider, among other things, “the
defendant’s income, earning capacity, and financial resources[.]” 1 Id. Similarly,
1
18 U.S.C. § 3572(a) states:
Factors to be considered.—In determining whether to impose a fine,
and the amount, time for payment, and method of payment of a fine,
the court shall consider, in addition to the factors set forth in section
3553(a)—
(1) the defendant’s income, earning capacity, and financial resources;
(2) the burden that the fine will impose upon the defendant, any
(continued...)
-8-
USSG § 5E1.2(d) provides that in determining the amount of the fine, the court
must consider, among other factors, 2 “any evidence presented as to the
1
(...continued)
person who is financially dependent on the defendant, or any other
person (including a government) that would be responsible for the
welfare of any person financially dependent on the defendant,
relative to the burden that alternative punishments would impose;
(3) any pecuniary loss inflicted upon others as a result of the offense;
(4) whether restitution is ordered or made and the amount of such
restitution;
(5) the need to deprive the defendant of illegally obtained gains from
the offense;
(6) the expected costs to the government of any imprisonment,
supervised release, or probation component of the sentence;
(7) whether the defendant can pass on to consumers or other persons
the expense of the fine; and
(8) if the defendant is an organization, the size of the organization
and any measure taken by the organization to discipline any officer,
director, employee, or agent of the organization responsible for the
offense and to prevent a recurrence of such an offense.
2
USSG § 5E1.2(d) states:
In determining the amount of the fine, the court shall consider:
(1) the need for the combined sentence to reflect the seriousness of
the offense (including the harm or loss to the victim and the gain to
the defendant), to promote respect for the law, to provide just
punishment and to afford adequate deterrence;
(2) any evidence presented as to the defendant’s ability to pay the
fine (including the ability to pay over a period of time) in light of his
earning capacity and financial resources;
(3) the burden that the fine places on the defendant and his
dependents relative to alternative punishments;
(4) any restitution or reparation that the defendant has made or is
obligated to make;
(5) any collateral consequences of conviction, including civil
obligations arising from the defendant’s conduct;
(6) whether the defendant previously has been fined for a similar
(continued...)
-9-
defendant’s ability to pay the fine . . . .” Id. § 5E1.2(d)(2).
We now turn to Defendant’s particular claims of procedural
unreasonableness.
1. Adequacy of Findings
Defendant contends that the district court failed to make adequate findings
regarding his ability to pay a fine in light of his contrary evidence and argument.
He asserts that Vigil requires specific findings in that context. See 644 F.3d at
1124. And, although acknowledging that United States v. Foote states that
“[d]istrict courts are not required to make specific findings in cases where
uncontested evidence establishes the defendant’s ability to pay[,]” 413 F.3d 1240,
1253 (10th Cir. 2005), he says that the opinion required specific findings on the
defendant’s ability to pay in that case because there, as here, the defendant
“disputed his ability to pay and presented evidence in support of his position.”
Id.We are not persuaded. In this case the district court discussed at length
Defendant’s ability to pay and considered his evidence and arguments at the
sentencing hearing. The court then explained why he failed to carry his burden of
2
(...continued)
offense;
(7) the expected costs to the government of any term of probation, or
term of imprisonment and term of supervised release imposed; and
(8) any other pertinent equitable considerations.
The amount of the fine should always be sufficient to ensure that the
fine, taken together with other sanctions imposed, is punitive.
-10-
proving his inability to pay. Our case law does not require more than what the
court said.
2. Conflicting Factual Findings
Defendant further argues that the district court’s finding that he failed to
demonstrate inability to pay was clearly erroneous in light of its later finding that
he was unable to afford counsel on appeal. We admit to being perplexed about
why, less than three months after sentencing, the district court changed its mind
about Defendant’s financial condition. But even if a court changes its mind about
the persuasiveness of the same evidence, it cannot revise the sentence sua sponte
three months later, see Fed. R. Crim. P. 35; and we must affirm a prior reasonable
decision. A decision is not procedurally unreasonable just because another judge
(or even the same judge) could later reach a contrary, albeit reasonable, decision.
3. Whether Defendant Met His Burden To Show Inability To
Pay
Defendant contends that the district court, in finding that he failed to meet
his burden to show inability to pay, relied on erroneous information. First, the
district court based its determination partly on his lack of cooperation and candor,
but Defendant maintains that the record shows that he dutifully submitted
documents that the probation officer and the court had requested. Second, the
court indicated that the financial summary submitted by Defendant’s wife seemed
incomplete, but Defendant argues (1) that the summary was complete; (2) that the
-11-
$500,000 donation to the educational foundation at Fort Hays State University
was not included because it was an unpaid pledge; and (3) that in any event, the
court should rely primarily on submissions by Defendant rather than that of his
wife. Third, the court relied on the fact that Defendant still had a 50% interest in
his house, some personal property, and “a lot of equity[,]” R., Vol. 3 at 44, but
Defendant argues that it failed to consider adequately his liabilities and lack of
cash flow.
These arguments are unavailing. The validity of the evidence he proffers
depends on his credibility, which the district court doubted. It had ample reason
to do so, given Defendant’s evasiveness and the absence of any detail in his
accounting of his assets. In light of the record, we hold that the district court did
not clearly err in finding that Defendant did not meet his burden to prove his
inability to pay a fine.
B. Substantive Reasonableness
Defendant contends that the fine was unreasonably harsh. We review
sentences—including fines—for substantive reasonableness under an abuse-of-
discretion standard, giving “substantial deference to district courts.” United
States v. Sells, 541 F.3d 1227, 1237 (10th Cir. 2008) (internal quotation marks
omitted); see also United States v. Perez-Jiminez, 654 F.3d 1136, 1146 (10th Cir.
2011) (reviewing fine under same substantive-reasonableness standard). “A
district court abuses its discretion when it renders a judgment that is arbitrary,
-12-
capricious, whimsical, or manifestly unreasonable.” Sells, 541 F.3d at 1237(internal quotation marks omitted). A within-guideline fine is entitled to a
presumption of reasonableness, which Defendant may rebut by demonstrating that
it is unreasonable when viewed against the statutory factors that the court must
consider in imposing the fine. See id.; Perez-Jiminez, 654 F.3d at 1146–47.
Defendant’s arguments fail to rebut the presumption of reasonableness.
First, Defendant contends that his negative net worth, liabilities, and lack
of any future ability to pay preclude imposition of the fine and that “the district
court did not give any meaningful weight to the admitted burden a fine would
impose on defendant relative to other alternatives, or the dire state of his income,
earning capacity, and financial resources . . . .” Aplt. Br. at 28. But this
argument is merely a rehash of his complaint that the court did not adopt his
argument that he could not afford a fine. It amounts to a challenge to the court’s
fact finding and is essentially a procedural-reasonableness argument, one we have
already rejected.
Second, Defendant contends that the district court impermissibly
considered Defendant’s prior socioeconomic status by giving too much weight to
his “lavish lifestyle” and charitable contributions, R., Vol. 3 at 17. He relies on
USSG § 5H1.10, which states that “Socio-Economic Status” is “not relevant in
the determination of a sentence.” But the Guidelines are not binding in assessing
substantive reasonableness; a court can impose a sentence that varies from the
-13-
Guidelines without being substantively unreasonable. See United States v.
Alapizco-Valenzuela, 546 F.3d 1208, 1216 (10th Cir. 2008) (Even if a district
court varies from the guideline range, “we simply consider whether the length of
the sentence is substantively reasonable utilizing the abuse-of-discretion standard.
We do not apply a presumption of unreasonableness to the sentence, and instead
must give due deference to the district court’s decision that the § 3553(a) factors,
on a whole, justify the extent of the variance.” (citation and internal quotation
marks omitted)). More importantly, the district court did not indicate that its
sentencing decision was based on Defendant’s class or social position. The
court’s comment about a “lavish lifestyle,” R., Vol. 3 at 17, was made only when
expressing skepticism that Defendant could be impecunious so soon after having
huge amounts of money to spend. The court’s concern was Defendant’s ability to
pay; it did not set Defendant’s punishment based on his status. We need not
decide whether Defendant’s lavish-lifestyle argument relates to procedural, rather
than substantive, reasonableness.
III. CONCLUSION
We AFFIRM Defendant’s fine.
ENTERED FOR THE COURT
Harris L Hartz
Circuit Judge
-14-