United States v. Eidson ( 1997 )

United States Court of Appeals,
Eleventh Circuit.
No. 94-2330.
UNITED STATES of America, Plaintiff-Appellee,
v.
Charles A. EIDSON, Sandra A. Eidson, Defendants-Appellants.
March 31, 1997.
Appeal from the United States District Court for the Middle
District of Florida. (No. 92-00094-CR-T-25(A), Lee P. Gagliardi,
Visiting Judge.
Before ANDERSON, Circuit Judge, and KRAVITCH and HENDERSON, Senior
Circuit Judges.
KRAVITCH, Senior Circuit Judge:
The Clean Water Act ("CWA" or "the Act") prohibits the
addition of any pollutant into navigable waters from any point
source. 33 U.S.C. §§ 1311(a), 1362(12). It defines "navigable
waters" to mean "waters of the United States, including the
territorial seas." 33 U.S.C. § 1362(7). The primary issue before
this court is whether the drainage ditch into which appellants'
company discharged industrial wastewater was a "navigable water"
within the meaning of § 1362(7).
I. Background
Cherokee Trading Partners, Inc. ("Cherokee") was a Delaware
corporation with its principal place of business at 5118 Ingraham
Street in Tampa, Florida.1 Charles Eidson was the president of
Cherokee and his wife, Sandra Eidson, was its secretary and
1
From 1985 until 1989, the Eidsons were corporate officers
of Cherokee Oil Co. Ltd. When this company was dissolved in 1989,
Cherokee Trading Partners took over its operations. Both
companies will be referred to in this opinion as "Cherokee."
registered agent. Cherokee operated a used oil recycling and
wastewater disposal business. The company collected used oil from
businesses for free or for a small fee, brought the oil back to its
facility, reduced the water content if necessary, and then resold
the oil to other businesses. For a slightly higher fee, Cherokee
collected and agreed to dispose properly of industrial wastewater.
On April 25, 1990, a Tampa police officer observed a Cherokee
truck parked at the intersection of Ingraham and O'Brien Streets,
approximately 100 yards from the company's facility. The officer
noticed a "sludge substance" being pumped from the truck into a
storm sewer that drained into a storm drainage ditch connecting
Ingraham and Commerce Streets. At the time of discharge, a light
flow in the storm drainage ditch continued northward into a nearby
drainage canal that ran east-west along Commerce Street and that
eventually emptied into Tampa Bay.
While the officer was observing the scene, Sandra Eidson
approached him. She stated that she was vice-president of Cherokee
and that she had told the driver of the truck to pump the substance
into the storm sewer. She further informed the officer that the
liquid had come from an underground fuel tank in a gasoline station
and had been used to rinse the tank to eliminate any residual
gasses,2 but that Cherokee had permission to pump into the sewer.
When questioned by an environmental inspector later that day,
Charles Eidson stated that he had given Sandra Eidson permission to
have the driver dump the contents of the truck into the sewer.
2
Subsequent laboratory tests revealed that the substance
pumped from the truck into the sewer contained a number of
priority pollutants.
The unauthorized discharge of pollutants on April 25, 1990 was
hardly an isolated incident at the Cherokee site. Upon the
instruction of Charles and Sandra Eidson, Cherokee employees
routinely discharged industrial wastewater from trucks onto the
ground at the Cherokee site or into the woods and bushes of an
adjacent lot. Cherokee employees also went to great lengths to
conceal these discharges from environmental regulators. In company
documents, they inventoried wastewater that had been discharged
onto the ground in a fictional "Tank 8." In anticipation for one
announced environmental inspection, Cherokee employees imported
truckloads of dirt to hide the site's gross soil contamination. At
the same time that it was discharging industrial wastewater in
violation of its operating permits and governing environmental
laws, Cherokee was routinely assuring its customers that it was
treating and disposing of contaminated wastewater in accordance
with all applicable environmental laws, regulations, and permits.
Charles and Sandra Eidson were indicted and charged with one
count of violating the CWA, 33 U.S.C. §§ 1311(a), 1319(c), by
knowingly discharging or causing the discharge of pollutants into
navigable waters of the United States. They were also charged with
three counts of violating the mail fraud statute, 18 U.S.C. § 1341,
by devising and implementing a scheme to defraud in which they used
false representations to solicit business customers for Cherokee's
wastewater disposal business.3 Following conviction by a jury on
all counts, Charles and Sandra Eidson were sentenced to 70 and 37
3
The three separate counts of mail fraud stem from the
mailing of invoices for the disposal of wastewater to three
different companies in August and September 1990.
months, respectively. This appeal followed.
Concluding that the drainage ditch connecting Ingraham and
Commerce Streets is a "navigable water" under the CWA and rejecting
appellants' other challenges, we AFFIRM their convictions. Finding
an insufficient factual basis for two of the sentence enhancements
imposed by the district court, we VACATE their sentences and REMAND
for resentencing.
II. Discussion
A. Count I: Clean Water Act
With respect to their CWA convictions, appellants claim that
the district court erred in denying their motions for judgment of
acquittal made pursuant to Fed.R.Crim.P. 29(a). Most
significantly, they claim that the government provided insufficient
evidence to prove that the storm drainage ditch connecting Ingraham
and Commerce Streets was a "navigable water" within the meaning of
§ 1362(7) of the CWA.4 We consider appellants' legal claim de novo,
reviewing the evidence in the light most favorable to the
government. United States v. Mejia, 97 F.3d 1391, 1392 (11th
Cir.1996).
Congress enacted the CWA "to restore and maintain the
chemical, physical, and biological integrity of the Nation's
4
Appellants also assert that there was insufficient evidence
to prove that they were responsible for the discharges and that
the discharged substance was a pollutant. These claims are
without merit. Witnesses testified that both defendants admitted
responsibility for the discharge of the substance into the storm
sewer. In addition, the "sludge substance" discharged from the
Cherokee truck, which had been used to remove gasses from an
underground storage tank at a gasoline station, tested positive
for numerous substances classified as pollutants by the
Environmental Protection Agency ("EPA").
waters." 33 U.S.C. § 1251. In order to implement this daunting
mandate, Congress "chose to define the waters covered by the Act
broadly." United States v. Riverside Bayview Homes, Inc., 474 U.S.
121, 133, 106 S. Ct. 455, 462, 88 L. Ed. 2d 419 (1985). Courts have
agreed that Congress intended the definition of navigable waters
under the Act "to reach to the full extent permissible under the
Constitution." See United States v. Lambert, 695 F.2d 536, 538
(11th Cir.1983).
The CWA defines "navigable waters" as "waters of the United
States, including the territorial seas." 33 U.S.C. § 1362(7).
This broad definition "makes it clear that the term "navigable' as
used in the Act is of limited import" and that with the CWA
Congress chose to regulate waters that would not be deemed
navigable under the classical understanding of that term.
Riverside Bayview Homes, 474 U.S. at 133, 106 S.Ct. at 462; see
also United States v. Ashland Oil and Transportation Co., 504 F.2d
1317, 1325 (6th Cir.1974) (holding that non-navigable tributary of
navigable river is a "navigable water" under § 1362(7)).
Therefore, we can easily dispose of appellants' contention that the
drainage ditch was not a "navigable water" solely because it was
not navigable-in-fact.5
It is by now well established that Congress intended to
regulate the discharge of pollutants into all waters that may
eventually lead to waters affecting interstate commerce. In
5
Appellants' reliance on Lykes Brothers, Inc. v. United
States Army Corps of Engineers, 821 F. Supp. 1457 (M.D.Fla.1993),
aff'd, 64 F.3d 630 (11th Cir.1995), is misplaced. That case
dealt with a provision of the Rivers and Harbors Act, 33 U.S.C. §
403, which is inapplicable here.
adopting the present definition of "navigable waters," Congress
recognized that "[w]ater moves in hydrologic cycles and it is
essential that discharge of pollutants be controlled at the source.
Therefore, reference to the control requirements must be made to
the navigable waters, portions thereof, and their tributaries."
S.Rep. No. 92-414, at 77 (1972), reprinted in, 1972 U.S.C.C.A.N.
3668, 3742-43. In accordance with this legislative intent, EPA has
defined "waters of the United States" to include tributaries to
waters that "may be susceptible to use in interstate or foreign
commerce," 40 C.F.R. § 230.3(s),6 and courts repeatedly have
6
40 C.F.R. § 230.3(s) provides:
The term "waters of the United States" means:
(1) All waters which are currently used, or were used
in the past, or may be susceptible to use in interstate or
foreign commerce, including all waters which are subject to
the ebb and flow of the tide;
(2) All interstate waters including interstate
wetlands;
(3) All other waters such as intrastate lakes, rivers,
streams (including intermittent streams), mudflats,
sandflats, wetlands, sloughs, prairie potholes, wet meadows,
playa lakes, or natural ponds, the use, degradation or
destruction of which could affect interstate or foreign
commerce including any such waters:
(i) Which are used or could be used by interstate
or foreign travelers for recreational or other
purposes; or
(ii) From which fish or shellfish are or could be
taken and sold in interstate or foreign commerce; or
(iii) Which are or could be used for industrial
purposes by industries in interstate commerce;
(4) All impoundments of waters otherwise defined as
waters of the United States under this definition.
(5) Tributaries of waters identified in paragraphs (1)
recognized that tributaries to bodies of water that affect
interstate commerce are "waters of the United States" protected by
the CWA. See, e.g., United States v. Texas Pipe Line Co., 611 F.2d
345, 347 (10th Cir.1979) (tributary to navigable river); Ashland
Oil, 504 F.2d at 1324 (tributary that eventually flowed into river
that was navigable-in-fact); State of Georgia v. City of East
Ridge, 949 F. Supp. 1571, 1578 (N.D.Ga.1996) (unnamed tributary of
interstate creek); United States v. Saint Bernard Parish, 589
F. Supp. 617, 620 (E.D.La.1984) (canal flowing into wetland).
There is no reason to suspect that Congress intended to
regulate only the natural tributaries of navigable waters.
Pollutants are equally harmful to this country's water quality
whether they travel along man-made or natural routes. The fact
that bodies of water are "man-made makes no difference.... That
the defendants used them to convey the pollutants without a permit
is the matter of importance." United States v. Holland, 373
F. Supp. 665, 673 (M.D.Fla.1974); see also Leslie Salt Co. v.
United States, 896 F.2d 354, 358 (9th Cir.1990) (noting that
protection of the CWA "does not depend on the how the property at
issue became a water of the United States"), cert. denied, 498 U.S.
1126, 111 S. Ct. 1089, 112 L. Ed. 2d 1194 (1991). Consequently,
courts have acknowledged that ditches and canals, as well as
streams and creeks, can be "waters of the United States" under §
1362(7). See, e.g., United States v. Velsicol Chemical Corp., 438
F. Supp. 945, 947 (W.D.Tenn.1976) (sewers that lead to Mississippi
River); Holland, 373 F. Supp. at 673 (mosquito canals that empty
through (4) of this section; ...
into bayou arm of Tampa Bay).
Likewise, there is no reason to suspect that Congress
intended to exclude from "waters of the United States" tributaries
that flow only intermittently. Pollutants need not reach
interstate bodies of water immediately or continuously in order to
inflict serious environmental damage.7 As the Tenth Circuit noted
in Texas Pipe Line, "[i]t makes no difference that a stream was or
was not at the time of the spill discharging water continuously
into a river navigable in the traditional sense." 611 F.2d at 347.
Rather, as long as the tributary would flow into the navigable body
of water "during significant rainfall," it is capable of spreading
environmental damage and is thus a "water of the United States"
under the Act. Id.; see also Quivira Mining Co. v. United States
Environmental Protection Agency, 765 F.2d 126, 130 (10th Cir.1985)
(upholding regulation because "during times of intense rainfall,
there can be a surface connection" between tributary and
navigable-in-fact streams), cert. denied, 474 U.S. 1055, 106 S. Ct.
791, 88 L. Ed. 2d 769 (1986); United States v. Phelps Dodge Corp.,
391 F. Supp. 1181, 1187 (D.Ariz.1975) ("waters of the United States"
include "normally dry arroyos" from which water could flow to
public waters).
With these principles in mind, we turn to the evidence
presented in this case concerning the drainage ditch between
Ingraham and Commerce Streets. As Cherokee was discharging
pollutants into the storm sewer system on April 25, 1990, a light
7
As the court noted in Ashland Oil, the government need not
prove that the pollutant actually reached the navigable body of
water. 504 F.2d at 1329.
flow was traveling from the sewer drain into the open drainage
ditch that connected Ingraham and Commerce Streets. The flow
continued northward in this ditch until it reached Commerce Street,
where it passed underneath the street and into a drainage canal
that ran parallel to Commerce Street. The sewer, the ditch, and
the canal were all part of a storm drainage system that was
designed to discharge storm water into Tampa Bay. During heavy
rainfall and during high tide,8 water flows from the drainage ditch
connecting Ingraham and Commerce Streets into the Commerce Street
drainage canal, which empties into Picnic Island Creek, a tributary
to Tampa Bay.
We hold that this evidence is sufficient to establish that the
drainage ditch into which Cherokee discharged its pollutants is a
tributary of Tampa Bay and is thus a "water of the United States"
under § 1362(7). To hold otherwise and to allow polluters to
contaminate this drainage system would defeat the intent of
Congress and would jeopardize the health of our nation's waters.
Appellants also contend, without any supporting case law,
that the CWA's definition of pollutant is unconstitutionally vague
because it does not provide someone discharging petroleum-based
products with fair notice that this behavior is prohibited. A
statute is not unconstitutionally vague as long as it "define[s]
the criminal offense with sufficient definiteness that ordinary
people can understand what conduct is prohibited and in a manner
that does not encourage arbitrary and discriminatory enforcement."
8
At high tide, water reached approximately the half-way
point of the ditch between Commerce and Ingraham Streets.
Kolender v. Lawson, 461 U.S. 352, 357, 103 S. Ct. 1855, 1858, 75
L. Ed. 2d 903 (1983). We review the CWA's definition of pollutant in
light of the particular facts of this case. See United States v.
Waymer, 55 F.3d 564, 568 (11th Cir.1995), cert. denied, --- U.S. --
--, 116 S. Ct. 1350, 134 L. Ed. 2d 519 (1996) (noting that vagueness
challenges that do not involve the First Amendment are examined in
light of facts before the court).
Section 1362(6) defines pollutant as:
dredged spoil, solid waste, incinerator residue, sewage,
garbage, sewage sludge, munitions, chemical wastes, biological
materials, radioactive materials, heat, wrecked or discarded
equipment, rock, sand, cellar dirt and industrial, municipal,
and agricultural waste discharged into water.
Although this definition of pollutant is broad, it is not unduly
vague. The liquid discharged by the Cherokee truck had been used
as a cleaning agent for an underground storage tank at a gas
station and was described as having a strong petroleum odor and a
dirty, oily appearance. Given these facts, we do not hesitate to
conclude that an ordinary person should have been able to
understand that the petroleum-based, sludge-like substance was
industrial waste within the meaning of the Act. Because the statute
provided the Eidsons with adequate notice that their conduct was
prohibited, we reject appellants' constitutional challenge.9
B. Counts II-IV: Mail Fraud
9
Appellants also contend that the Act is unduly vague
because it does not specify what content level of petroleum would
make a discharged liquid a pollutant. The CWA prohibits "the
discharge of any pollutant." 33 U.S.C. § 1311(a) (emphasis
added). Again, we find the Act broad rather than vague.
Considering the sludge-like qualities of the liquid discharged by
Cherokee, appellants cannot reasonably contend that the statute
did not provide them with adequate notice that the discharge was
prohibited.
Appellants also contend that there was insufficient evidence
to support their convictions for mail fraud. In order to prove a
violation of 18 U.S.C. § 1341, the government must establish that
appellants: (1) intentionally participated in a scheme to defraud
or to obtain money by fraudulent pretenses and representations;
and (2) used the United States mails to further that scheme.
United States v. Wingate, 997 F.2d 1429, 1433 (11th Cir.1993).
Appellants argue that the government failed to establish a
fraudulent scheme because there was no evidence that they made
false representations to their customers. Based on a thorough
review of the record, we find ample evidence to support appellants'
mail fraud convictions.
A scheme to offer services in exchange for a fee, with the
intent not to perform those services, constitutes a fraudulent
scheme under § 1341. United States v. Paccione, 949 F.2d 1183,
1196 (2d Cir.1991), cert. denied, 505 U.S. 1220, 112 S. Ct. 3029,
120 L. Ed. 2d 900 (1992). Upon instructions from Charles and Sandra
Eidson, Cherokee representatives regularly informed prospective
customers that Cherokee had proper licenses and permits to dispose
of wastewater. Cherokee documents displayed permit numbers and
Cherokee contracted to dispose of wastewater in accordance with all
applicable laws, codes, and regulations. Despite these
representations, Charles and Sandra Eidson instructed Cherokee
employees to dump the collected industrial wastewater on the ground
at and around the Cherokee facility in direct violation of their
operating permits and applicable environmental laws and
regulations. We hold that this evidence is sufficient to support
appellants' mail fraud convictions.10
C. Sentencing Issues
Appellants also raise a number of claims regarding their
respective sentences. We review the factual findings of a district
court at sentencing for clear error, and review its interpretation
of the Sentencing Guidelines de novo. United States v. Holland,22
F.3d 1040, 1045 (11th Cir.1994), cert. denied, --- U.S. ----, 115
S. Ct. 898, 130 L. Ed. 2d 782 (1995).
With respect to their count one convictions, appellants first
challenge the district court's decision to increase their offense
levels pursuant to U.S.S.G. § 2Q1.2(b)(1)(A)(1993). That section
provides for a six-level increase if the "offense resulted in an
ongoing, continuous or repetitive discharge." Appellants contend
that there was only one discharge into waters of the United States.
However, Sandra Eidson admitted that there had been another
discharge into the sewer approximately one week before the April
25, 1990 discharge. We find that this admission is sufficient to
support an offense-level increase under § 2Q1.2(b)(1)(A). See
United States v. Catucci, 55 F.3d 15, 18 (1st Cir.1995) (holding
that two discharges on separate days sufficient to support increase
§ 2Q1.2(b)(1)(A)); United States v. Strandquist, 993 F.2d 395, 401
10
Appellants also contend that the government violated
Fed.R.Crim.P. 16(c) and Brady v. Maryland, 373 U.S. 83, 83 S. Ct.
1194, 10 L. Ed. 2d 215 (1963), by not furnishing them with copies
of documents that agents seized from Cherokee's office when they
executed a search warrant in March 1992. Appellants have
presented no evidence to support these claims. In a letter dated
September 17, 1992, the prosecutor informed appellants that they
could pick up the seized documents that the government did not
plan to use at trial. Although informed of their availability,
neither appellant made any attempt to retrieve or review the
seized documents before trial.
(4th Cir.1993) (two separate incidents sufficient to support upward
adjustment under analogous provision of § 2Q1.3(b)(1)(A)).
Appellants also contend that the district court erred in
imposing an offense-level increase pursuant to U.S.S.G. §
2Q1.2(b)(3)(1993). Section 2Q1.2(b)(3) provides for a four-point
increase if "cleanup required a substantial expenditure."
Application Note 7 states that this section governs cases where
"cleanup at substantial expense has been required." U.S.S.G. §
2Q1.2 comment. (n. 7). Appellants argue that because both the
guideline and the application note refer to cleanups in the past
tense, the district court erred in basing the upward adjustment on
an estimate of future cleanup costs.
Section 2Q1.2(b)(3) makes a defendant's sentence dependant on
the nature of contamination caused by the environmental offense.
The costs of cleanup are but one method a court can use to measure
the seriousness of contamination. Section 2Q1.2(b)(3) also
provides for an offense-level increase if the discharge resulted in
"disruption of public utilities or evacuation of a community." We
find it unlikely that Congress intended that a defendant guilty of
serious environmental contamination should receive a lesser
sentence merely because the conviction occurred before the
appropriate environmental agency could undo the harm. Such a
reading would thwart Congress's intent to punish defendants
according to the level of environmental degradation caused by their
criminal offenses.
Moreover, in this case, the Florida Department of
Environmental Regulation already had incurred significant cleanup
costs at the time of sentencing. It had conducted a preliminary
site survey and liquid sample retrieval of Cherokee's site, which
indicated that Cherokee's illegal discharge had caused gross
contamination of the surficial sediments and the surficial aquifer.
The costs incurred for this preliminary examination, which exceeded
thirty thousand dollars, are properly considered cleanup costs.
See United States v. Bogas, 920 F.2d 363, 369 (6th Cir.1990)
(holding that cleanup expenditures under § 2Q1.2(b)(3) include site
testing, studies, and other indirect costs of site remediation).
Based on its preliminary investigation, the department
concluded that complete cleanup of the Cherokee site would cost
several hundred thousand dollars. Because this estimate was based
on a thorough preliminary examination of the site, we are satisfied
that it represents an accurate and reliable measure of the degree
of contamination caused by appellants' discharges. We also
conclude that the contamination in this case was quite serious.
Accordingly, we hold that the preliminary investigation and cleanup
estimate provide an adequate basis for an upward adjustment under
§ 2Q1.2(b)(3). See Bogas, 920 F.2d at 369 (noting that the
government need not provide an exact accounting of cleanup costs in
order to demonstrate "substantial expenditure" under this section);
United States v. Paccione, 751 F. Supp. 368, 376 (S.D.N.Y.1990)
(estimate of future cleanup costs is sufficient to support §
2Q1.2(b)(3) increase), aff'd on other grounds, 949 F.2d 1183 (2d
Cir.1991), cert. denied, 505 U.S. 1220, 112 S. Ct. 3029, 120 L. Ed. 2d
900 (1992).
Charles Eidson also contends that the district court erred in
imposing an offense-level increase under U.S.S.G. § 3B1.1(a)(1993)
for his role as an "organizer or leader of a criminal activity that
involved five or more participants or was otherwise extensive."11
The district court increased Eidson's offense level by four points
for his role in the CWA violation and for his role in the mail
fraud scheme because it found that Cherokee employed an average of
five or more persons. Eidson claims that the district court erred
because there was insufficient evidence to conclude that these
employees were participants in the illegal discharge and fraudulent
scheme.
In determining the number of participants in a criminal
activity, courts count all individuals, including the defendants,
who were criminally responsible for the commission of the offense
even though they might not have been convicted. United States v.
Holland, 22 F.3d 1040, 1045 (11th Cir.1994), cert. denied, --- U.S.
----, 115 S. Ct. 898, 130 L. Ed. 2d 782 (1995); U.S.S.G. § 3B1.1
comment. (n. 1). With respect to the mail fraud counts, there is
ample evidence to support the district court's finding. Appellants
regularly instructed Cherokee employees to dump the wastewater on
the ground and to refer fraudulently to the ground as "Tank 8".
They also instructed employees to inform prospective customers that
Cherokee had all the necessary permits and licenses. Two Cherokee
employees testified that they knowingly participated in the
fraudulent scheme and also referred to other drivers and a yard
foreman who participated in the scheme to defraud Cherokee
11
Sandra Eidson did not receive an upward adjustment under
this section.
customers. Based on this record, we conclude that the district
court did not clearly err in increasing Eidson's offense level for
his mail fraud convictions.
The district court's upward adjustment for the CWA conviction
presents a more difficult question. As we noted in United States
v. Rodgers, a sentencing court cannot enhance an offense level
merely because a defendant "acted with others for the other charges
against him." 951 F.2d 1220, 1221 (11th Cir.)(citing
United States
v. Tetzlaff, 896 F.2d 1071, 1074 (7th Cir.1990)), modified in part,
972 F.2d 1253 (11th Cir.1992). In other words, a court should only
consider "conduct immediately concerning" the offense of conviction
in determining an adjustment under § 3B1.1(a). See Holland, 22
F.3d at 1046 n. 10.12 For purposes of the offense-level increase for
the CWA conviction, we will not consider the number of participants
involved in the mail fraud scheme because those discharges did not
"immediately concern" the CWA offense.
Both appellants and the driver of the Cherokee truck can be
classified as participants in the April 25 discharge. There is no
12
Rodgers apparently was based on the pre-November 1990
version of § 3B1.1 that did not include the introductory
commentary directing courts to consider relevant conduct pursuant
to § 1B1.3 in determining a defendant's role in the offense.
Nevertheless, its holding appears to continue to govern cases
dealing with the post-amendment version of § 3B1.1. See Holland,
22 F.3d at 1046 n. 10 (applying 1991 version and distinguishing
Rodgers ). In the event that the November 1990 amendment somehow
altered the law of this circuit in such a way that would increase
Eidson's punishment, it would not apply because Eidson committed
this offense before the commentary became effective. See United
States v. Wilson, 993 F.2d 214, 216 (11th Cir.1993) ("We apply
the version of the sentencing guidelines and commentary in effect
on the date of sentencing, unless a more lenient punishment would
result under the guidelines version in effect on the date the
offense was committed.") (citations omitted).
factual basis in the record, however, to identify other
participants in this particular offense. None of the former
Cherokee employees who testified at trial were employed at the time
of this illegal discharge and none of them testified about other
discharges into "waters of the United States." Although a
bookkeeper presumably prepared a manifest and invoice for this
delivery, there is no reason to believe that he or she was aware
that the pollutant was dumped into a "water of the United States"
rather than onto the Cherokee lot with most of the other
pollutants. Therefore, we conclude that there was insufficient
evidence in the record to conclude that the illegal discharge of a
pollutant into "waters of the United States" involved five or more
participants.
Section 3B1.1 allows for an offense-level increase, however,
on the alternative ground that the criminal activity was "otherwise
extensive." Although the presentence report, adopted by the
district court, did not specify that it found the criminal activity
"otherwise extensive," we examine the record to determine if such
a finding would have been justified.
Neither the Guidelines nor the cases interpreting § 3B1.1
provide a precise definition of "otherwise extensive." Such a
finding depends on a number of factors including "the length and
scope of the criminal activity as well as the number of persons
involved." Holland, 22 F.3d at 1046 (noting that criminal activity
that extended over three years and involved the assistance of
several individuals raised a question as to whether it was
"otherwise extensive"); see also United States v. Rodriguez, 981
F.2d 1199, 1200 (11th Cir.) (finding drug operation that extended
from Colombia to New York and involved 100 kilos of cocaine
"otherwise extensive"), cert. denied, 508 U.S. 955, 113 S. Ct. 2455,
124 L. Ed. 2d 671 (1993).13
The district court made no such factual findings in this
case. The record indicates only that one other similar discharge
into a "water of the United States" occurred a week before the
April 25 discharge. We conclude that this evidence is insufficient
to establish that the criminal activity involved in the CWA
conviction was "otherwise extensive."
Finally, appellants challenge the district court's factual
finding that the loss caused by their fraudulent scheme exceeded
two hundred thousand dollars. Based on this finding, the district
court increased their offense levels by eight points pursuant to
U.S.S.G. § 2F1.1(b)(1)(I)(1993). Again, the district court merely
adopted the factual findings contained in the presentence report
and made no specific factual findings to support the upward
adjustment.14
The presentence report, without any underlying factual
support, concluded that Cherokee had fraudulently billed Mobil Oil,
Diamond Products Company, and the B & E Equipment Company
13
"In assessing whether an organization is "otherwise
extensive,' all persons involved during the entire course of the
offense are to be considered. Thus, a fraud that involved only
three participants but used the unknowing services of many
outsiders could be considered extensive." U.S.S.G. § 3B1.1
comment. (n. 3).
14
The transcript for Sandra Eidson's sentencing hearing is
not part of this record on appeal. Nevertheless, the order of
judgment indicates that the district court adopted the
presentence report's factual findings.
$215,427.22 for services that were not rendered. Apparently, the
presentence report incorrectly interpreted a government chart,
entitled "Waste Water Transactions of Cherokee Oil, Inc.1985-1991,"
which valued Cherokee's total wastewater revenues at $215,427.22.15
Although losses incurred by other Cherokee customers are includable
in a § 2F1.1 calculation, there must be some factual basis for the
conclusion that these losses were the result of fraud. See
U.S.S.G. § 2F1.1 comment. (n. 7) (1993) ("[L]oss is the value of
money, property, or services unlawfully taken.") (emphasis added).
Former Cherokee employees testified that Cherokee regularly
billed customers for wastewater disposal that it did not conduct
from May 1990 to November 1991. There was no factual basis in the
record, however, to conclude that the wastewater disposal practices
of Cherokee from 1986 to May 1990 were equally fraudulent. The
only witness to testify about Cherokee's practices before 1990,
Albert Martell, worked with the company for only four months in
1986 and specifically disavowed any knowledge as to how wastewater
pickups were disposed.16 Based on this record, we conclude that the
district court committed clear error in concluding that the
fraudulent scheme caused over two hundred thousand dollars in
15
This chart was offered as evidence at trial by the
government, but was rejected by the district court on relevancy
grounds. Its exclusion at trial does not, however, preclude its
use at sentencing. See U.S.S.G. § 6A1.3 (1991) (noting that at
sentencing district court may consider reliable information
without regard to its admissibility at trial).
16
Martell did indicate that in his four months as bookkeeper
he never came across any bills that Cherokee paid for proper
disposal of wastewater. However, this fact standing alone cannot
support the inclusion of all gross wastewater revenues from 1986-
1990.
losses.17
III. Conclusion
We AFFIRM appellants' convictions, VACATE their sentences, and
REMAND the case to the district court for resentencing.
17
The government argues that this deficiency in proof can be
remedied by contemplating the costs that the defrauded companies
may incur if they are required to contribute to cleanup costs
pursuant to Section 107 of the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. § 9607. The
presentence report, however, does not reference the potential
liability of former Cherokee customers. In the event such
liability could be properly considered under this section, we
conclude that at present it is too speculative to support an
enhancement.