United States v. Huberfeld ( 2020 )

19-436(L)
United States v. Huberfeld
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
____________________
August Term, 2019
(Argued: February 4, 2020 Decided: August 4, 2020)
Docket No. 19-436 (L)
____________________
UNITED STATES OF AMERICA,
Appellee,
v.
NORMAN SEABROOK, MURRAY
HUBERFELD,
Defendants-Appellants.
____________________
Before: POOLER, LYNCH, and MENASHI, Circuit Judges.
Appeal from United States District Court for the Southern District of New
York (Alvin K. Hellerstein, J.), convicting Murray Huberfeld, after a guilty plea,
of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 371. We hold that
the district court erred at sentencing by applying the commercial bribery
sentencing guideline based on an uncharged bribery scheme that the government
dropped in exchange for Huberfeld pleading guilty to the wire fraud. Vacatur is
warranted because we cannot be confident, despite the district court’s statement
to the contrary, that it would have imposed the same sentence had it instead
used the correct guideline.
We also hold that the district court erred by ordering $19 million in
restitution to be paid to the Corrections Officers Benevolent Association
(“COBA”), an entity that was not a victim of the convicted conduct under the
Mandatory Victims Restitution Act (“MVRA”), 18 U.S.C. § 3663A.
Accordingly, we vacate and remand for Huberfeld’s resentencing and
reverse the restitution order. We decide Norman Seabrook’s appeal through
summary order, which we issue simultaneously with this opinion.
Vacated and remanded in part; and reversed in part.
____________________
KANNON K. SHANMUGAM, Paul, Weiss, Rifkind,
Wharton & Garrison LLP (Masha G. Hansford,
Katherine S. Stewart, Amanda C. Weingarten, on the
brief), Washington DC, for Defendant-Appellant Huberfeld.
2
RICHARD W. LEVITT, Levitt & Kaizer, New York, NY,
for Defendant-Appellant Norman Seabrook
MARTIN S. BELL, Assistant United States Attorney
(Russell Capone, Lara Pomerantz, Won S. Shin,
Assistant United States Attorneys, on the brief), for
Audrey Strauss, Acting United States Attorney for the
Southern District of New York, New York, NY, for
Appellee.
POOLER, Circuit Judge:
Appeal from United States District Court for the Southern District of New
York (Alvin K. Hellerstein, J.), convicting Murray Huberfeld, after a guilty plea,
of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 371. We hold that
the district court erred at sentencing by applying the commercial bribery
sentencing guideline based on an uncharged bribery scheme that the government
dropped in exchange for Huberfeld pleading guilty to the wire fraud. Vacatur is
warranted because we cannot be confident, despite the district court’s statement
to the contrary, that it would have imposed the same sentence had it instead
used the correct guideline.
We also hold that the district court erred by ordering $19 million in
restitution to be paid to the Corrections Officers Benevolent Association
3
(“COBA”), an entity that was not a victim of the convicted conduct under the
Mandatory Victims Restitution Act (“MVRA”), 18 U.S.C. § 3663A.
Accordingly, we vacate and remand for Huberfeld’s resentencing and
reverse the restitution order. We decide Norman Seabrook’s appeal through
summary order, which we issue simultaneously with this opinion.
BACKGROUND
I. Factual Background
In the early 2000s, Huberfeld co-founded the Manhattan-based hedge
fund, Platinum Partners. By 2011, Huberfeld had stepped down from a
management role at Platinum and assumed a legacy role as limited partner. His
primary responsibility in that role was to solicit investors and refer potential
clients to the then-current management team.
Defendant Norman Seabrook was the long-time president of COBA, New
York City’s largest union for corrections officers. He wielded immense influence
over the union’s operations. His control of COBA extended to its finances,
including the administration of its Annuity Fund, a retirement benefits program
for corrections officers with holdings of more than $70 million.
4
In late 2013, Platinum experienced significant levels of redemptions from
its investors. Huberfeld understood that this meant Platinum needed to find new
clients. Around this time, he told Jona Rechnitz, a real-estate businessman and
mutual acquaintance of Seabrook and Huberfeld, that Platinum was looking to
attract institutional investors such as unions. Rechnitz, who had spent time
cultivating relationships in law enforcement leadership circles, suggested that he
might be able to recruit COBA as a client by courting Seabrook.
Rechnitz invited Seabrook on a vacation to the Dominican Republic where
Rechnitz proposed investing COBA’s money into Platinum. Seabrook agreed, but
he wanted to get paid for it. When Rechnitz relayed this to Huberfeld, he was
amenable to the arrangement. Huberfeld devised a formula whereby Platinum
would pay Seabrook a portion of the profits from COBA’s investment, estimating
an annual payment between $100,000 and $150,000.
Seabrook immediately took steps to ensure COBA would invest in
Platinum. At first, he went through the motions of having Platinum make a pitch
to COBA’s Annuity Fund board. The board directed its financial advisors and
attorneys to conduct due diligence, and authorized Seabrook to invest up to $10
million if the advisors concluded that the investment was prudent. When some
5
of the attorneys expressed concern, however, Seabrook concealed those warnings
from the board. In March 2014, COBA invested $10 million from its Annuity
Fund in a Platinum fund. After the initial investment, COBA made two
additional $5 million investments.
At the end of 2014, when it came time to make the first payment to
Seabrook, Huberfeld told Rechnitz that the fund had underperformed, and
Seabrook would only get $60,000. Rechnitz agreed to personally pay out the cash
to Seabrook, and Huberfeld agreed that Platinum would reimburse him for it.
Before meeting Seabrook, Rechnitz stopped at Salvatore Ferragamo on Fifth
Avenue in Manhattan and bought an expensive handbag. He stuffed the $60,000
of cash inside and handed it to Seabrook, who was parked in his car a few blocks
away. In order to paper over the reimbursement, Rechnitz, through his company,
invoiced Platinum for courtside tickets to eight New York Knicks games.
Rechnitz forwarded the invoice by email to Huberfeld. Three days later,
Platinum sent a check to Rechnitz for $60,000, ostensibly to cover the cost of the
Knicks tickets.
In 2015, Huberfeld, through another mutual associate, continued to lobby
Seabrook for investments. But, after a former COBA board member filed a
6
lawsuit against the union that mentioned the Platinum investments, and after the
government’s investigation of Seabrook became known, COBA made no
additional investments.
In June 2016, the FBI arrested Rechnitz, Seabrook, and Huberfeld. Federal
agents also executed a search warrant at Seabrook’s home. They recovered,
among other things, over $20,000 in cash and the Salvatore Ferragamo bag. Six
months later and two years after COBA’s initial investment, Platinum filed for
bankruptcy and COBA lost $19 million of its $20 million investment.
II. Procedural History
On July 7, 2016, a federal grand jury sitting in the United States District
Court for the Southern District of New York returned an indictment charging
Seabrook and Huberfeld with honest services wire fraud and conspiracy to
commit honest services wire fraud. The indictment alleged a commercial bribery
scheme that “deprive[d] members of COBA of their intangible right to the honest
services of SEABROOK, its President. . . .” App’x at 18. In late October 2017,
Seabrook and Huberfeld were tried jointly before the Hon. Andrew L. Carter, Jr. 1
1
On March 15, 2017, Rechnitz pled guilty to one count of conspiracy to commit
honest services wire fraud through a separate charging instrument. He later
7
That trial ended in a hung jury. For administrative reasons, the matter was
reassigned to the Hon. Alvin K. Hellerstein.
Following the mistrial, the government approached Huberfeld with a plea
offer. Huberfeld agreed to plead guilty to a superseding information that
charged him only with conspiracy to commit wire fraud for presenting the false
$60,000 invoice to Platinum, instead of the overarching bribery scheme that was
charged in the superseding indictment. The only reference to COBA in the
information was the allegation that Huberfeld and Rechnitz knew that “the
actual purpose of the payment [of $60,000] was to reimburse Rechnitz for having
paid Norman Seabrook . . . for Seabrook’s efforts to get COBA to invest millions
of dollars in Platinum.” App’x at 42.
In the plea agreement, the parties stipulated that the applicable sentencing
guideline was U.S.S.G § 2B1.1, the fraud guideline. After a two-level reduction
for Huberfeld’s acceptance of responsibility, the parties stipulated that, based on
a $60,000 loss, the final offense level was 10, resulting in a Guidelines range of 6
to 12 months’ imprisonment.
played a prominent role in the prosecution’s case against Huberfeld and
Seabrook.
8
On May 25, 2018, the parties appeared before the district court for a plea
hearing. The government explained that the scheme involved Huberfeld
“defrauding Platinum Partners out of this $60,000 that was used to pay Mr.
Seabrook” and that the payment’s purpose was “to cover the cost of
compensating Mr. Seabrook for his efforts in securing the union’s investment in
the hedge fund.” App’x at 68, 69. Initially, the district court expressed
“reservations” about accepting the plea because the superseding information did
not charge the overarching bribery scheme. App’x at 73. The district court
discussed the false invoice as a “constituent part of a larger fraud,” and stated
that Huberfeld was “an agent in paying a bribe in order to procure an
investment.” App’x at 70. The government disagreed with this characterization,
at least as it related to the contents of the charging instrument:
[THE GOVERNMENT]: But to be clear, your Honor, the superseding
information doesn’t charge the broader scheme. It charges --
THE COURT: That’s my trouble, Mr. Bell. That’s exactly my trouble.
[THE GOVERNMENT]: I’m not sure I understand, your Honor.
THE COURT: He’s pleading guilty to the information. But to
understand the plea of guilty, you have to go into a larger picture and
that was the purpose of it.
[THE GOVERNMENT]: But I respectfully, your Honor --
9
THE COURT: You allege as the purpose of the conspiracy in
paragraph two the to wit phrase on the top of page two.
[THE GOVERNMENT]: Yes, your Honor.
THE COURT: That Huberfeld and Rechnitz caused Platinum Partners
to pay $60,000 to Rechnitz through a false representation to which Mr.
Huberfeld was aware. When, in fact, the actual purpose of the
payment was to reimburse Rechnitz for having paid Seabrook for
Seabrook’s efforts to get the pension plans that he controlled to invest
money in Platinum. That’s the overall picture.
[THE GOVERNMENT]: That’s correct, your Honor. I think what I'm
noting for these purposes --
THE COURT: The fraud is not a $60,000 fraud.
[THE GOVERNMENT]: Well, the fraud charged, your Honor, is a
$60,000 fraud.
THE COURT: Exactly.
[THE GOVERNMENT]: Because the fraud charged is defrauding
Platinum.
THE COURT: But the description of the fraud is not alleged as a
$60,000 fraud. It doesn’t specify the amount of the fraud. The
information clearly alleges the purpose of the information, but the
guidelines calculations differ, because it talks about a $60,000 loss.
[THE GOVERNMENT]: Well, perhaps, your Honor, the most helpful
way to do this would be to break it down as follows. The information
alleges a particular fraud with a particular victim. The victim of the
fraud conduct alleged in the superseding information S2 is the
Platinum Partners hedge fund.
With respect to the degree, with respect to the extent of that fraud, we
10
have stipulated and the facts support that they were defrauded to the
tune of the $60,000 that they got on false pretenses as a result of the
conspiracy between Mr. Huberfeld and Mr. Rechnitz. That is the
fraud alleged in the superseding information. And that is the fraud
for which there is an identifiable victim within the instrument. That's
Platinum Partners. They were defrauded to the tune of $60,000.
THE COURT: It’s hard to think that Platinum Partners was a victim.
[THE GOVERNMENT]: Well, respectfully, your Honor, as a legal
matter, they are . . . .
App’x at 71-73.
Notwithstanding its concerns, the district court accepted Huberfeld’s guilty
plea.
In early August 2018, Seabrook was retried—this time as the only
defendant. Two weeks later, the jury returned guilty verdicts on both the
conspiracy and substantive counts of honest services wire fraud.
On October 30, 2018, in advance of Huberfeld’s sentencing, the district
court issued an order directing the parties to discuss, in relevant part, whether
the court had discretion to consider COBA’s loss; how much of that loss should
Huberfeld have reasonably foreseen given Platinum’s financial condition at the
time of the fraud; and whether the court could order restitution to COBA as a
11
victim. 2 Huberfeld disputed that the loss of $19 million was foreseeable to him at
the time of COBA’s investment and attached expert reports that took the same
position. He also requested an evidentiary hearing in the event that the district
court was considering the $19 million loss to COBA with respect to either his
sentencing or restitution.
In late 2018, the Probation Office prepared Huberfeld’s presentence report.
As did the plea agreement, the Probation Office calculated a Guidelines range of
6 to 12 months’ imprisonment. However, Probation recommended an upwards
variance to 24 months’ imprisonment in part because the Guidelines range did
not adequately take into account the full scope of the overall scheme.
In February 2019, Huberfeld appeared for his sentencing. 3 At the outset,
the district court made it clear that it was not satisfied using the agreed-upon
2
Following the issuance of that order, COBA filed a motion requesting
restitution. Huberfeld thereafter entered into an agreement with COBA to pay it
$7 million. COBA acknowledged that this payment “fully and completely
compensate[d] and satisf[ied] COBA with respect to Huberfeld,” and it formally
withdrew its restitution motion. App’x at 88-89. The parties agreed that the
district court could take into account this voluntary redress.
3
One week earlier, the district court sentenced Seabrook to 58 months’
imprisonment and $19 million in restitution to COBA, owed jointly and severally
with Huberfeld and Rechnitz, neither of whom had yet been sentenced.
12
fraud guideline to calculate the sentencing range. The district court insisted that
“[s]omehow, in some way, we must take into consideration the purpose of the
papering of the Platinum Partners file.” App’x at 105.
Both parties asserted that the district court could not rely on the uncharged
conduct in determining the appropriate offense guideline section. The district
court disagreed:
As I indicated at the allocution of the plea and now, I think that [the
fraud] guideline is inadequate. The gravamen of this offense and why
it is so pungent is the bribery of a union leader to invest a substantial
amount of pension money and expense money in a risky investment,
an investment which told the investor that the investment is
speculative and the offering involves substantial risks of loss as
described in the document.
App’x at 112.
The district court then concluded that, although it was permitted to take
account of COBA’s $19 million loss as “relevant conduct” under Section 1B1.3,
the fraud guideline still was inadequate because when the $19 million loss was
applied to the fraud guideline, it yielded a sentencing range that was
“excessive.” 4 Instead, the district court decided to use U.S.S.G. § 2B4.1, the
4As the district court explained, applying the fraud guideline to a $19 million
loss resulted in a sentencing range of 51 to 63 months’ imprisonment.
13
commercial bribery guideline. As it explained:
That [fraud guideline range] comes out to my mind excessive. But it
is something that must stick in one’s mind. The purpose of this
investment by someone who had to know better and had already
been involved in frauds was to bribe someone to get money, to put a
stumbling block, as it were, before a blind man and to blind the eyes
of wise men and pervert the words of the righteous, which is what a
bribe does.
I urge that this is inappropriate because it is commercial bribery and
really I should look at a different guideline, a guideline specifically
tailored for commercial bribery.
App’x at 115.
In order to apply the commercial bribery guideline, the district court
invoked one of the fraud guideline’s “cross references,” U.S.S.G. § 2B1.1(c)(3),
which allows the court to use another guideline if that offense’s conduct is
alleged in the indictment or information. Presumably reasoning that the
superseding information alleged the bribery conduct, the court cross referenced
the commercial bribery guideline. It started with a base level of 8 and added “the
fees that would be generated by a $20 million investment” as the value of the
improper benefit conferred on Huberfeld by the bribe. Id. The district court
explained that:
Hedge funds . . . operate on a 2 percent and 20 percent formula: 2
14
percent each year of total money invested and 20 percent of gain as
figured by the accountants of the hedge fund, counting not only
market gain but also gain that has a book value nature because the
investments are considered more valuable. Let’s look only at the 2
percent. 2 percent times let’s say 1 year of investment comes to
$400,000 of additional fees.
App’x at 115-16.
The district court referred to the benefits table in the Guidelines and
determined that it should add 14 levels based on the $400,000 amount, leading to
what the district court mistakenly calculated as a range of 30 to 37 months’
imprisonment. 5
The district court ultimately sentenced Huberfeld to 30 months’
imprisonment. It stated that it would have arrived at the same sentence
irrespective of whether it used the fraud guideline or the commercial bribery
guideline: “Whether I start with a 12-month guideline and vary upwards from it
or whether I use the guideline calculation that led to 30 to 37 months of a
guideline, I sentence Mr. Huberfeld to 30 months in custody.” App’x at 151.
At the end of the hearing, the district court addressed restitution. The
court took the view that COBA was a victim of the charged wire-fraud offense
5 As discussed below, the district court evidently misread the benefits table.
15
because reimbursing Rechnitz for the bribe was the purpose of the wire fraud
and the bribe was a “mechanism” for “profit[ing] from th[e] crime.” App’x at
154. It ordered Huberfeld to pay restitution to COBA in the amount of $19
million, jointly and severally with Seabrook and Rechnitz.
This appeal followed.
DISCUSSION
Huberfeld argues that the district court erred by (1) applying the
sentencing guideline for commercial bribery based on the uncharged bribery
scheme—and by misapplying that guideline on its own terms; (2) imposing a
substantively unreasonable sentence; and (3) ordering $19 million in restitution
to COBA, an entity that was not a victim of the convicted wire-fraud offense. He
also argues that the matter should be reassigned to another district court judge.
We address each of these arguments in turn.
I. Reasonableness of Sentence
We review a sentence on appeal for procedural and substantive
reasonableness. United States v. Cavera, 550 F.3d 180, 189 (2d Cir. 2008). A district
court commits procedural error when, among other ways, it makes a mistake in
16
its Guidelines calculation. Id. at 190. “Where we find significant procedural error,
one proper course would be to remand to the district court so that it can either
explain what it was trying to do, or correct its mistake and exercise its discretion
anew.” Id.
A. Procedural Error
Huberfeld argues that the district court erred by calculating his Guidelines
range under the commercial bribery guideline because he was not charged with
bribery and the superseding information did not allege the elements of any
commercial bribery charge. The government concedes that the court used the
wrong guideline but argues that the error was harmless because the district court
stated that it would have imposed the same sentence under either guideline. We
agree with Huberfeld that we cannot be confident that the district court would
have imposed the same sentence if it had applied the correct guideline.
“A district court should normally begin all sentencing proceedings by
calculating, with the assistance of the Presentence Report, the applicable
Guidelines range.” Cavera, 550 F.3d at 189. In light of “[t]he Guidelines’ central
role in sentencing,” an error related to the Guidelines range “can be particularly
serious.” Molina-Martinez v. United States, 136 S. Ct. 1338, 1345 (2016). “A district
17
court that improperly calculates a defendant’s Guidelines range . . . has
committed a significant procedural error.” Id. at 1345-46 (internal quotation
marks, brackets, and citation omitted).
The district court was obligated to use the fraud guideline as “the offense
guideline section . . . applicable to the offense of conviction.” U.S.S.G. § 1B1.2(a). 6
The parties stipulated to using the fraud guideline in their written plea
agreement. The Probation Office also determined that the fraud guideline was
the correct one, and that it yielded a sentencing range of 6 to 12 months’
imprisonment.
Although the district court is free to cast aside the stipulations in the plea
agreement and recommendations in the Presentence Report, it cannot ignore our
direction on how to apply the Guidelines. Under our precedent, it was improper
for the court to cross reference the commercial bribery guideline. The cross
reference provision permits a district court to use a different guideline only when
6
A sentencing court must “[d]etermine the offense guideline section . . .
applicable to the offense of conviction.” U.S.S.G. § 1B1.2(a). The offense of
conviction here was conspiracy to commit wire fraud, 18 U.S.C. § 371, and the
substantive offense was wire fraud, 18 U.S.C. § 1343. Wire fraud is governed by
Section 2B1.1, see U.S.S.G. § 2B1.1 cmt.; U.S.S.G. App. A at 565.
18
“the conduct set forth in the count of conviction establishes an offense
specifically covered by another guideline[].” U.S.S.G. § 2B1.1(c)(3). Use of the
cross reference is limited to circumstances where the conduct set forth in the
convicted count of the charging document “actually constitutes an offense
covered by another guideline.” United States v. Genao, 343 F.3d 578, 584 (2d Cir.
2003). In other words, for the cross reference to be available here to allow the
district court to apply the commercial bribery guideline, there must have been
conduct set forth in the superseding information alleging that Huberfeld
committed a commercial bribery offense.
But the count of conviction in the superseding information does not
establish the elements of any commercial bribery offense. As the government
itself underscored during the plea colloquy, “the superseding information
doesn’t charge the broader [bribery] scheme.” App’x at 71. The information does
not allege that Huberfeld acted with corrupt intent or that he solicited or made
payment in exchange for a benefit, as is generally required by the commercial
bribery statutes. See, e.g., 18 U.S.C. § 215; see also United States v. McElroy, 910 F.2d
1016, 1021 (2d Cir. 1990) (“The term ‘corruptly’ is ordinarily understood as
referring to acts done voluntarily and intentionally and with the bad purpose of
19
accomplishing either an unlawful end or result, or a lawful end or result by some
unlawful method or means.”) (internal quotations, brackets, and citation
omitted). Rather, the information alleges only that the purpose of the $60,000
payment was not the stated purpose of purchasing Knicks tickets—a detail that
the government noted was “just a description.” App’x at 107. Accordingly,
because the count of conviction in the superseding information does not allege
conduct that establishes the elements of any commercial bribery offense, the
district court was not permitted to invoke the cross reference to apply the
commercial bribery guideline.
Of course, after determining the correct guidelines range, the district court
may vary from that range and may look elsewhere, including to other sentencing
guidelines provisions, to set a benchmark for how much to vary upwards or
downwards. See Kimbrough v. United States, 552 U.S. 85, 110 (2007); see also Spears
v. United States, 555 U.S. 261, 266 (2009); Cavera, 550 F.3d at 196. But the district
court erred after it applied the commercial bribery guideline. In order to calculate
the Guidelines range under the commercial bribery guideline, the district court
was required to identify the value of the “improper benefit to be conferred,” and
to use that value to calculate the range. See U.S.S.G. § 2B4.1(b)(1). In identifying
20
the value of the benefit, the district court seemed to arrive at its $400,000 figure
by estimating the fees earned by management at a hypothetical hedge fund,
using a formula which was not part of the parties’ sentencing submissions or the
presentence report. Even assuming arguendo that the court’s method of
determining that figure was appropriate, a proposition of which we are dubious,
it plainly made a mistake in deriving the offense level from that figure. A 14-level
increase in the offense level is warranted only when the benefit conferred is
greater than $550,000 (but less than $1,500,000); a $400,000 benefit conferred
supports an increase of only 12 levels. See U.S.S.G. §§ 2B1.1(b)(1)(G)-(H),
2B4.1(b)(1). That error elevated Huberfeld’s sentencing range from 24 to 30
months (based on an offense level of 17) to 30 to 37 months (based on an offense
level of 19).
We note that the district court cannot insulate its sentence from our review
by commenting that the Guidelines range made no difference to its
determination when the record indicates that it did. The Guidelines, although
advisory, are not a “body of casual advice, to be consulted or overlooked at the
whim of a sentencing judge.” United States v. Crosby, 397 F.3d 103, 113 (2d Cir.
2005). We have often recognized the powerful “anchor[ing]” effect of a
21
“miscalculated Guidelines range” on a district court’s thinking about the
appropriate sentence, even where the court “asserted it was ‘not moved by’ the
Guidelines.” United States v. Bennett, 839 F.3d 153, 163 & n.8 (2d Cir. 2016).
Tellingly, here the district court repeatedly acknowledged the importance of the
Guidelines, stating “I need to find the guidelines first. I’m required to make a
finding on the guidelines,”—and that to “find a just punishment,” the guidelines
“are a means of getting there.” App’x at 102. It declined the government’s
suggestion that it take the bribery conduct into account in its Section 3553(a)
analysis rather than in its selection of a guideline.
The district court “returned multiple times” to the Guidelines range in
framing its choice of the appropriate sentence. See Bennett, 839 F.3d at 163. At a
minimum, it appears that the district court’s error “may well have anchored [its]
thinking as to what an appropriate sentence would be.” Id. It is certainly not
“clear” from this record, see Molina-Martinez, 136 S. Ct. at 1347, that the
miscalculation had no influence on the sentence, see United States v. Dorvee, 616
F.3d 174, 182 (2d Cir. 2010) (“If the district court miscalculates the typical
sentence at the outset, it cannot properly account for atypical factors and we, in
turn, cannot be sure that the court has adequately considered the §
22
3553(a) factors”); cf. United States v. Guzman, 282 F.3d 177, 183 (2d Cir. 2002)
(vacating a sentence where the district court “began its computation” with “the
offense level for the uncharged federal offense of bribery, rather than . . . the level
prescribed for the offense of conviction.”).
The importance of the correct Guidelines range is particularly evident in
this case because the sentence was “conspicuous for its position as the lowest
sentence within what the District Court believed to be the applicable range.” 7
Molina-Martinez, 136 S. Ct. at 1347. Further, had the district court applied the
fraud guideline, which provided for a sentencing range of 6 to 12 months, it
would have had to vary upward by more than double the applicable range to
reach the sentence, 30 months, that it imposed. The court did not explain why
such a significant variance was appropriate. Absent such an explanation, we
cannot be certain that the court’s calculus would not have been altered had it
7
Notably, the correctly calculated range under the commercial bribery
guideline—albeit the incorrect guideline, but the one of which the district court
was cognizant throughout the hearing—provided 24 months rather than 30
months as the lowest sentence in the applicable range. That was also,
incidentally, the same sentence recommended by the Probation Office. We
cannot be confident that this too would not have affected the district court’s
thinking.
23
appreciated the full extent of the upward variance it was contemplating. We
therefore cannot be “confident,” despite the district court’s assertion to the
contrary, that if the proper Guidelines range was before it—or even if it had
properly calculated the commercial-bribery guideline range—the court would
have imposed the same sentence of 30 months’ imprisonment. See e.g., United
States v. Malki, 609 F.3d 503, 511 (2d Cir. 2010) (“Although [the district court] also
stated that a lesser sentence would be ‘inappropriate,’ we cannot be confident
that [it] would have imposed the same sentence had [it] understood that the
bottom of the correct guideline was 58 months less than the bottom of the
guideline [it] thought was applicable.”).
Even assuming, arguendo, the district court would have imposed the same
sentence under the fraud guideline by varying upward, it did not state its
justifications with enough specificity to allow us to affirm on this ground. A
district court must “determine whether to impose a Guidelines or a non-
Guidelines sentence.” United States v. McGinn, 787 F.3d 116, 129 (2d Cir. 2015). A
district court that chooses to “impos[e] a non-Guidelines sentence . . . should say
why [it] is doing so,” bearing in mind that “a major departure from the
Guidelines should be supported by a more significant justification than a minor
24
one.” Cavera, 550 F.3d at 193 (brackets, internal quotation marks, and citation
omitted). A non-Guidelines sentence requires a written statement of reasons that
lays out the justification for a non-Guidelines sentence “with specificity.” Id. at
192-93 (citation omitted); see 18 U.S.C. § 3553(c)(2). This requirement is not an
empty formality. See Gall v. United States, 552 U.S. 38, 46, 49-50 (2007).
Accordingly, we vacate and remand for Huberfeld’s resentencing. On
remand, the district court must use Section 2B1.1, the fraud guideline, as “the
offense guideline section . . . applicable to the offense of conviction.” U.S.S.G. §
1B1.2(a). If the district court desires to impose an upward variance based on the
seriousness of the crime, it may. “Notwithstanding the Sentencing Commission’s
assessment, reflected in the correctly applied Guidelines, of the seriousness of the
offense, in selecting an appropriate sentence the district court may make its own
evaluation of the characteristics of the defendant, and the need of the sentence to
punish, deter, and protect the public.” United States v. Wernick, 691 F.3d 108, 119
(2d Cir. 2012). Moreover, in selecting the appropriate sentence, the district court
is also required to consider “the nature and circumstances of the offense,” 18
U.S.C. § 3553(a)(1) (emphasis added), and thus may consider the factual context
of the fraud as well as the statutory elements of the offense. It must do so,
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however, by complying with the various procedural requirements, set forth
above, which both ensure that the sentencing court carefully considers the need
for a variance, and allows for meaningful appellate review. See 18 U.S.C. §
3553(c)(2).
B. Substantive Reasonableness
Huberfeld argues that his custodial sentence is substantively unreasonable
because the district court focused exclusively on the uncharged bribery offense
rather than the offense of conviction. He also argues the district court gave
insufficient weight to certain Section 3553(a) factors.
Because we hold that Huberfeld must be resentenced due to procedural
error, we decline to rule on the issue of substantive unreasonableness. See Gall,
552 U.S. at 51 (the appellate court “must first ensure that the district court
committed no significant procedural error,” and “[a]ssuming that the district
court’s sentencing decision is procedurally sound, the appellate court should
then consider the substantive reasonableness of the sentence”).
II. Restitution
Huberfeld next argues that the district court erred in ordering him to pay
$19 million in restitution to COBA because COBA was not a direct or proximate
26
victim of the wire-fraud offense. The MVRA requires a sentencing court to order
that “the defendant make restitution to the victim of the offense” for certain
crimes, including where (a) the offense was “committed by fraud or deceit” and
(b) “an identifiable victim or victims has suffered a physical injury or pecuniary
loss.” 18 U.S.C. §§ 3663A(a)(1), (c)(1)(A)(ii), (c)(1)(B). “Section 3663A(a)(1) does
not authorize the court to order a defendant to pay restitution to any person who
was not a victim of the offense of which the defendant was convicted.” United
States v. Reifler, 446 F.3d 65, 121 (2d Cir. 2006). The MVRA defines a victim as “a
person directly and proximately harmed as a result of the commission of an
offense for which restitution may be ordered.” 18 U.S.C. § 3663A(a)(2).
As we did with respect to the district court’s Guidelines analysis, we
similarly conclude that it erred by imposing a restitution order against Huberfeld
as if he were convicted of the uncharged bribery scheme. Our precedent
forecloses such an expansive view of a “victim” under the MVRA. See In re Local
#46 Metallic Lathers Union & Reinforcing Iron Workers & Its Associated Benefit &
Other Funds, 568 F.3d 81, 85-86 (2d Cir. 2009).
In Local #46, a business owner issued checks to fictitious vendors; cashed
those checks; and used the proceeds to pay his employees in cash, thereby
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avoiding obligations to the IRS and to the employees’ union. Id. at 82-83. He was
initially charged with money laundering and defrauding the union, but the
government agreed not to bring the latter charge in exchange for his guilty plea.
Id. at 83-84. At the defendant’s sentencing, the union sought restitution, claiming
that it was a victim of the money-laundering scheme because the money
laundering was undertaken with the purpose of making cash payments to
employees, which deprived the union of “benefits due under collective
bargaining agreements.” Id. at 85.
We affirmed the district court’s denial of the union’s restitution request,
noting that the defendant “admittedly had a plan to obtain laundered money
and then use that money to pay [the company’s] employees in cash and
simultaneously avoid paying taxes and union obligations.” Id. at 86. But
“[n]otwithstanding what [the defendant] planned to do with the laundered
funds once he had them in his possession, the ‘offense’ to which he pleaded
guilty was solely and exclusively the conspiracy to engage in money
laundering.” Id. at 87. The union’s “expanded definition of ‘victim,’” we said,
“ignores the term ‘offense’ in § 3663A and would force the sentencing court to
ascertain some overarching uncharged scheme or conspiracy, one element of
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which is the specific offense to which the defendant pleaded guilty.” Id. Rejecting
that approach, we determined that the union was not entitled to restitution
under the MVRA. See id. at 88.
Local #46 resolves this issue in Huberfeld’s favor. 8 The government does
not dispute that “none of the conduct within the charged wire fraud conspiracy
itself injured COBA.” Appellee’s Br. at 79. Instead, it emphasizes that the
purpose of the charged scheme was to mask the bribe, which ultimately hurt
COBA. But that rationale grafts an “overarching uncharged scheme” onto a
8Contrary to the government’s argument, Local #46 does not reflect a “flawed
approach” to interpreting the MVRA, which this Court has abandoned in
subsequent decisions. Appellee’s Br. at 80. Rather, the decisions on which the
government relies are cases in which we found that it was appropriate for
restitution to encompass losses that were imposed in service of the offense of
conviction. See, e.g., United States v. Desnoyers, 708 F.3d 378, 390 (2d Cir. 2013);
United States v. Archer, 671 F.3d 149, 171-72 (2d Cir. 2011); United States v. Paul,
634 F.3d 669, 676-77 (2d Cir. 2011). In Local #46, as in Huberfeld’s case, the fraud
of conviction was arguably in service of a larger scheme that caused the union’s
losses, but those losses were not effectuated in furtherance of the fraudulent
scheme itself. See 568 F.3d at 87. Thus, Local #46 is fully consistent with and
distinguishable from the cases on which the government relies. In each of those
cases, therefore, the conviction was for the overarching scheme, and restitution
was sought for actions that were within and necessary to that “single scheme,”
Archer, 671 F.3d at 171-72, but here it is the opposite: the conviction was for a
scheme that was outside of the uncharged, overarching scheme of defrauding
COBA.
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charging instrument that fails to allege that scheme. Local #46, 568 F.3d at 87. In
short, it is not enough for the ultimate purpose of the alleged wire fraud to be
detrimental to COBA. Under the MVRA, COBA must have been directly and
proximately harmed by the convicted conduct.
COBA’s losses could not have been caused by the convicted wire-fraud
conduct because the wire fraud postdated COBA’s investment. While the
superseding information alleges that the purpose of the wire fraud was to
reimburse Rechnitz for paying off Seabrook, the convicted wire fraud could not
have influenced whether the investment was made in the first instance. Our
recent decision in United States v. Calderon supports this conclusion. 944 F.3d 72,
97 (2d. Cir. 2019) (finding that restitution was inappropriate because the charged
fraud occurred “after [the domestic banks] had already decided to offer loans to
the relevant foreign banks.”). Although the government argues that the charged
scheme stretched from 2013 to 2015 “as alleged in the Superseding Indictment,”
Appellee’s Br. at 81, the government references the wrong charging instrument.
Huberfeld pled guilty to the superseding information limited to events in
December 2014: it stated that Huberfeld “conspire[d]” with others “[i]n or
around December 2014” and listed overt acts that occurred that same month.
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App’x at 41-43. Accordingly, COBA does not qualify as a victim under the
MVRA. We therefore reverse the district court’s $19 million restitution award to
COBA.
III. Reassignment
Finally, Huberfeld argues for reassignment to a different district court
judge. Reassignment is not warranted. “We will grant a request for reassignment
on remand only in ‘unusual circumstances.’” United States v. Singh, 877 F.3d 107,
122 (2d Cir. 2017) (quoting United States v. Brennan, 395 F.3d 59, 75 (2d Cir. 2005)).
Huberfeld has failed to show that this is the type of rare circumstance where the
distinguished district court judge would not follow our guidance.
CONCLUSION
For the foregoing reasons, we vacate the district court’s judgment of
conviction and reverse the restitution order. We remand for futher proceedings
consistent with this opinion.
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