United States v. Kushner ( 2002 )

Opinions of the United
2002 Decisions States Court of Appeals
for the Third Circuit
9-24-2002
USA v. Kushner
Precedential or Non-Precedential: Precedential
Docket No. 01-3549
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PRECEDENTIAL
Filed September 24, 2002
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 01-3549
UNITED STATES OF AMERICA,
v.
RAYMOND KUSHNER,
Appellant.
On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. Criminal No. 99-221)
District Judge: Hon. Robert J. Cindrich
Argued May 2, 2002
BEFORE: ROTH and STAPLETON, Circuit Judges,
and POLLAK,* District Judge
Filed September 24, 2002
James H. Love (Argued)
Bonnie R. Schlueter
Office of United States Attorney
633 U.S. Post Office & Courthouse
Pittsburgh, PA 15219
Attorneys for the Appellees
_________________________________________________________________
* Honorable Louis H. Pollak, District Judge for the United States District
Court for the Eastern District of Pennsylvania, sitting by designation.
Stephen F. Capone (Argued)
Stephen F. Capone & Associates
210 Grant Street, Suite 300
Pittsburgh, PA 15219
Attorney for the Appellant
OPINION OF THE COURT
POLLAK, District Judge.
On December 20, 1999, Raymond Kushner ("Kushner")
pled guilty to bank fraud, in violation of 18 U.S.C.S 1344(1),1
and conspiracy to commit bank fraud, in violation of 18
U.S.C. S 371. He appeals the District Court’s calculation of
his sentence under the 1998 Sentencing Guidelines ("the
Guidelines"), and its determination that it lacked discretion
to depart downwards from that calculation. We affirm in
part and reverse in part.
I
In his guilty plea, Kushner admitted to having
participated in a conspiracy to "produce" 2 and cash
counterfeit checks between March 28, 1998 and roughly
July 20, 1998. Donald Jones, a co-conspirator, "produce[d]"
the checks. Kushner’s role was to recruit individuals who
agreed to be listed as payees on the checks and to provide
their names to Jones. Kushner delivered preprinted
counterfeit checks to the individuals he recruited, and then
accompanied those individuals when they cashed the
checks. He would take 90% of the cash, leaving them 10%.
Kushner also presented two counterfeit checks for payment
_________________________________________________________________
1. 18 U.S.C. S 1344(1) provides:
Whoever knowingly executes, or attempts to execute, a scheme or
artifice--(1) to defraud a financial institution .. . shall be fined not
more than $1,000,000 or imprisoned not more than 30 years, or
both.
2. The indictment alleged that Donald Jones, a co-conspirator of
Kushner’s, "would and did produce counterfeited checks purporting to
be actual checks for various amounts issued."
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in his own name. In total, the members of the conspiracy
negotiated $38,452.95 worth of checks in this manner.
Late in the course of the conspiracy, Kushner learned
that federal agents were investigating the scheme, and that
they had arrested one or more of his co-conspirators.
Before a warrant was issued for his own arrest, Kushner
surrendered to the Secret Service and admitted his
wrongdoing. He also handed over 219 preprinted checks,
with a face value of $455,102.29, which had not yet been
presented for payment.
At sentencing, the District Court applied the 1998
Sentencing Guidelines. Kushner’s base offense level was 6,
pursuant to S 2F1.1(a). Subpart (b)(1) of that section
increases the base offense level by an amount dependent on
the amount of monetary loss. The presentence investigation
report ("PSIR") prepared by the probation office reported
that the conspiracy had produced a total of 274 counterfeit
checks, with a total face value of $498,300.64, but that
only $38,452.95 worth of checks had actually been
deposited. The PSIR stated that the monetary loss should
be measured, for sentencing purposes, by the amount of
loss Kushner intended to cause, and that the amount of
loss he intended to cause should in turn be measured by
the face value ($498,300.64) of the checks. Under
S 2F1.1(b)(1)(J), his offense level should therefore be
increased nine levels. Kushner objected, arguing that, for
purposes of S 2F1.1, the amount of loss should be the value
of the checks actually cashed rather than the total face
value of all the checks. He pointed out that, at the time of
his surrender, he did not intend to deposit any of the
uncashed checks, and that it would be unfair to penalize
him for turning them over to the government.
The District Court ruled that the proper loss figure was
the one suggested by the PSIR and endorsed by the
government--$498,300.64. The District Court therefore
applied S 2F1.1(b)(1)(J) to adjust Kushner’s base offense
level upwards by nine levels. Kushner’s total offense level,
including other adjustments, was seventeen; when
combined with Kushner’s criminal history, that figure
yielded a sentencing range of 27 to 33 months of
incarceration. Kushner requested a downward departure
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pursuant to Application Note 11 of U.S.S.G. S 2F1.1,
contending that the District Court’s calculation of the
intended loss overrepresented the seriousness of his crime.
The District Court denied that motion and sentenced
Kushner to 27 months of incarceration.
II
On appeal, Kushner challenges the District Court’s
calculation of the amount of loss caused by his activities
and its refusal to grant him a downward departure. We give
plenary review to the District Court’s interpretation and
application of U.S.S.G. S 2F1.1 and we review loss
calculations and other factual conclusions for clear error.
See United States v. Titchell, 261 F.3d 348, 353 (3d Cir.
2001).
A
Kushner’s first contention on appeal is that the trial
court erred in its application of S 2F1.1(b) of the Guidelines.
Kushner contends that his withdrawal from the conspiracy
made it improper to include, in the S 2F1.1 loss calculation,
the face value of the unused counterfeit checks that he
surrendered to authorities. Put another way, he contends
that when he surrendered he did not "intend" to cause any
loss greater than the $38,452.95 he had already caused.
The District Court recognized that the timing of the intent
inquiry was crucial: at some point during the conspiracy
Kushner did intend to cash the full value of the checks, but
he also changed his mind at a later time. However, relying
upon "the history of the law of intent and attempt and
abandonment," the District Court held that the intended
loss should be measured by Kushner’s intent at the time
the conspiracy was still proceeding.
As an initial matter, we note that, in its application of
S 2F1.1, the District Court was correct to focus its inquiry
on the loss intended by the conspiracy. Application Note 8
to the 1998 version of U.S.S.G. S 2F1.1 states:
Valuation of loss is discussed in the Commentary to
S2B1.1 (Larceny, Embezzlement, and Other Forms of
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Theft). As in theft cases, loss is the value of the money,
property, or services unlawfully taken; it does not, for
example, include interest the victim could have earned
on such funds had the offense not occurred. Consistent
with the provisions of S2X1.1 (Attempt, Solicitation, or
Conspiracy), if an intended loss that the defendant was
attempting to inflict can be determined, this figure will
be used if it is greater than the actual loss. Frequently,
loss in a fraud case will be the same as in a theft case.
For example, if the fraud consisted of selling or
attempting to sell $40,000 in worthless securities, or
representing that a forged check for $40,000 was
genuine, the loss would be $40,000 . . .
(emphasis added).
This court has examined the meaning of the phrase
"intended loss" before. In United States v. Geevers, 226
F.3d 186 (3d Cir. 2000), we considered the appeal of Martin
Geevers, who had pled guilty to conducting a check-kiting
scheme. Geevers’s scheme was to deposit checks from
closed bank accounts or accounts with insufficient funds
into new accounts he created, and then to withdraw the
deposited money before the victim banks discovered the
fraud. He contended that because he could not have
successfully withdrawn all the fraudulently deposited funds
even if he had wanted to, the District Court erred in
concluding that his intended loss was represented by the
face value of the checks he had deposited--a sum in excess
of $2,000,000. On appeal, Chief Judge Becker, writing for
the panel, agreed that "a district court errs when it simply
equates potential loss with intended loss without deeper
analysis." Id. at 192 (citing United States v. Kopp, 951 F.2d
521, 529 (3d Cir. 1991) (rejecting sentencing based on
"worst-case scenario potential loss") (emphasis in original)).
However, Chief Judge Becker also ruled that the sentencing
court could reasonably have concluded that Geevers would
have taken the full amount of the deposited checks if it
were possible. The government’s introduction of evidence
regarding the face value of Geevers’s deposits constituted a
prima facie showing of that intent, and without a showing
by Geevers that he intended to cause a smaller loss, the
District Court was entitled to rely on the prima facie
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showing. See also Titchell, 261 F.3d at 354 ("[T]he rule
established by Geevers is that intended and potential loss
may be the same (and a district court can draw an
inference to that effect), but it is error for a district court
simply to equate the two without ‘deeper analysis.’ ")
(emphasis in original).
Geevers and Titchell touch on the problem here but do
not resolve it. The District Court did conduct a careful
inquiry to determine the intended loss. The question before
us is whether it correctly determined that Kushner
"intended" to cause the loss associated with the uncashed
counterfeit checks even though he voluntarily surrendered
those checks to the government. Put another way, the
question is when S 2F1.1 contemplates examination of
Kushner’s intentions--during the active course of the
conspiracy or at his surrender. We hold that it is the
former. Under the law of conspiracy, a defendant is liable
for his own and his co-conspirators’ acts for as long as the
conspiracy continues unless he withdraws prior to the
conspiracy’s termination. See 1 Sarah N. Welling et al.,
Federal Criminal Law and Related Actions S 2.17 at 93-94
(1998). Withdrawal takes more than cessation of criminal
activity. "The defendant must present evidence of some
affirmative act of withdrawal on his part, typically either a
full confession to the authorities or communication to his
co-conspirators that he has abandoned the enterprise and
its goals." United States v. Steele, 685 F.2d 793, 803-04 (3d
Cir. 1982). But even upon withdrawal, a defendant remains
liable for his previous agreement and for his own and his
co-conspirators’ previous acts in furtherance of the
conspiracy--the crime is in the agreement, not in the
achievement of its criminal end. See United States v.
Lothian, 976 F.2d 1257, 1262 (9th Cir. 1992) ("[O]nce an
overt act has taken place to accomplish the unlawful
objective of the agreement, the crime of conspiracy is
complete and the defendant is liable despite his later
withdrawal."); United States v. Read, 658 F.2d 1225, 1233
(7th Cir. 1981) ("Withdrawal becomes a complete defense
only when coupled with the defense of the statute of
limitations.").
In finding a defendant guilty based on his criminal intent
during a conspiracy despite his later withdrawal, the
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criminal law ignores a defendant’s later change of heart. We
conclude that the law of the guidelines does the same in
calculating a defendant’s "intended loss." Even when a
defendant’s intent changes as he withdraws from the
conspiracy, the loss that should be considered for
sentencing purposes remains the loss that the defendant
intended during his active participation in the conspiracy.
We therefore affirm the District Court’s loss calculations
under S 2F1.1(b)(1).
B
Kushner’s second contention on appeal is that the
District Court erred in ruling that it had no discretion to
depart downwards pursuant to Application Note 11 of
S 2F1.1. That note provides that "[i]n cases in which the
loss determined under subsection (b)(1) does not fully
capture the harmfulness and seriousness of the conduct,
an upward departure may be warranted," and lists six
examples of such cases. The note then states:
In a few instances, the loss determined under
subsection (b)(1) may overstate the seriousness of the
offense. This may occur, for example, where a
defendant attempted to negotiate an instrument that
was so obviously fraudulent that no one would
seriously consider honoring it. In such cases, a
downward departure may be warranted.
At sentencing, Kushner contended that because he had
himself surrendered the unnegotiated checks that were
being used by the government to support an enhanced
sentence, the "intended loss" they represented overstated
the seriousness of his offense. The District Court disagreed,
describing Kushner’s argument as "circular." The District
Court’s position was that allowing a downward departure
under Application Note 11 because Application Note 8
produced an unwarrantedly harsh sentence "is in effect to
say I disagree with the Application Note 8, which I can’t
do." The District Court therefore found that, under S 2F1.1,
it lacked the discretion to depart downwards where the
proposed rationale for such downward departure was that
Kushner’s "intended loss" overrepresented the seriousness
of his offense.
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We believe that the District Court took an unnecessarily
restricted view of Application Note 11. The language of that
note indicates that there may be situations where the loss
determined under subsection (b)(1) understates or
overstates the seriousness of an offense. The fact that
Application Note 8 clarifies that the "loss" referred to in
subsection (b)(1) is the "intended loss," where that figure
can be ascertained, does not limit the reach of Note 11;
"intended loss" can understate or overstate the seriousness
of an offense just as much as "actual loss." The example
provided in the second part of Note 11 proves this point:
only a very dull criminal could believe that an"obviously
fraudulent" instrument will cause loss, and yet Note 11
contemplates that in such situations--that is, where the
only measurable loss is an "intended loss"--the sentence
mandated by the S 2F1.1(b)(1) loss calculation may be
adjusted downwards.
Application Note 11 stands on an equal footing with
Application Note 8; neither one restricts the meaning of the
other. We therefore conclude that when Note 8 informs a
district court’s calculation under S 2F1.1(b)(1), Note 11
allows the court to depart from that calculation if it finds
that the calculation overstates or understates the
seriousness of the offense. See United States v. Coffman, 94
F.3d 330, 336-37 (7th Cir. 1996) ("[T]he place for mitigation
on the basis of a large discrepancy between intended and
probable loss is, under the guidelines, in the decision
whether to depart downward, rather than in the calculation
of the intended loss."). In this case, the District Court,
concluding that it lacked discretion to consider the issue,
never reached the factual question posed by Application
Note 11. We conclude that the District Court did have
discretion to consider the issue. Accordingly, we will vacate
Kushner’s sentence and remand for resentencing in
accordance with this opinion.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
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