United States v. Cianci ( 1998 )

Opinions of the United
1998 Decisions States Court of Appeals
for the Third Circuit
8-20-1998
United States v. Cianci
Precedential or Non-Precedential:
Docket 97-5619
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1998
Recommended Citation
"United States v. Cianci" (1998). 1998 Decisions. Paper 199.
http://digitalcommons.law.villanova.edu/thirdcircuit_1998/199
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 1998 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.
Filed August 21, 1998
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 97-5619
UNITED STATES OF AMERICA
v.
ANTHONY CIANCI,
Appellant
On Appeal from the United States District Court
for the District of New Jersey
(D.C. Crim. No. 0312-2: 97-cr-00174)
Argued July 9, 1998
Before: SLOVITER and ROTH, Circuit Judges, and
FULLAM,* District Judge
(Filed August 21, 1998)
Kevin J. McKenna (Argued)
Mark A. Berman
John J. Gibbons, Of Counsel
Gibbons, Del Deo, Dolan, Griffinger
& Vecchione, P.C.
Newark, New Jersey 07102
Attorneys for Appellant
_________________________________________________________________
* Hon. John P. Fullam, Senior United States District Judge for the
Eastern District of Pennsylvania, sitting by designation.
Faith S. Hochberg
United States Attorney
Newark, New Jersey 07102-2535
George S. Leone (Argued)
United States Attorney
Newark, New Jersey 07102-2535
Attorneys for Appellee
OPINION OF THE COURT
SLOVITER, Circuit Judge.
Anthony L. Cianci, who pled guilty to two counts of tax
evasion, challenges the district court's consideration of
uncharged conduct involving the generation of the
unreported income in applying a two-level sentencing
enhancement for the use of sophisticated means to impede
discovery and a two-level enhancement for abuse of a
position of trust. Cianci also asserts ineffective assistance
of counsel at the sentencing proceeding.
I.
Factual History
On September 9, 1997, Cianci entered a guilty plea to
two counts of tax evasion stemming from Cianci's failure to
report income he obtained through embezzlement and
kickbacks on his 1989 and 1990 tax returns. During this
time, Cianci worked for the Panasonic Company, a
manufacturer of consumer electronics, as the General
Manager for the Northeast group. In 1986, Cianci and his
two co-defendants, Mark Ross, also a Panasonic executive,
and Mark Manevitz, purchased Drake Brothers, a wholesale
and retail distributor of Panasonic products, with Manevitz
holding the interest of Cianci and Ross in a secret trust.
Manevitz was the owner of record of Drake and ran its day-
to-day affairs. Cianci and Ross used Drake to sell goods
they embezzled from Panasonic.
2
Cianci obtained some of the income on which he failed to
pay taxes by diverting embezzled Panasonic merchandise to
Drake by shipping them to Drake under a "bill to/ship to"
order by which Panasonic products were billed to one major
distributor but shipped by Panasonic to another
distributor. To facilitate nondisclosure of the diversion of
the merchandise through this mechanism, Cianci
eliminated the mailing of monthly statements to its
distributors. As part of the scheme, Cianci created a series
of false offsets to the accounts of the distributors who had
been billed in the form of fictitious advertising invoices,
diverted volume rebates, and false mark downs which
completely eliminated the cost of the products shipped to
Drake from the distributors' accounts.
Once these goods were received by Drake, Manevitz
transported them to independent retailers and sold them
for cash; the transactions corresponding to the"billed
to/shipped to" scheme were not recorded in Drake's books.
Cianci received some of the profits and gave some to Ross.
Manevitz was paid $1,200 per month for his participation.
From approximately January 1989 through approximately
December 1990, Cianci received approximately $175,
360.81 as his share of the cash generated through the sale
of Panasonic merchandise by Drake.
Cianci received yet other money as kickbacks from
executives at Odeon Distributors, a distributor of consumer
electronic merchandise in New York and a customer of
Panasonic, in return for preferential treatment in receiving
Panasonic merchandise, which was then in high demand
and short supply. Some of these kickbacks were in the form
of leases of automobiles used by Cianci at the rate of
$14,778.12 per year for the years 1989 and 1990 for a total
of $29,556.24. In addition, Cianci received direct payments
from Odeon and other Panasonic customers' executives in
the form of money orders, which totaled $42,109.45.
Cianci was charged with obtaining and concealing
$247,025 in income and evading $77,123 in taxes. In
Cianci's plea agreement, he stipulated, inter alia, that his
base level offense should be enhanced two levels pursuant
to S 2T1.1(b)(2) of the Sentencing Guidelines for the use of
sophisticated means to impede discovery of the offense. In
3
its draft of the PSR the probation office rejected the
sophisticated means enhancement, and instead
recommended a two-point abuse of a position of trust
enhancement under S 3B1.3 that had not been mentioned
in the plea agreement.
At sentencing, the district court, applying the 1990
Sentencing Guidelines, calculated Cianci's base offense
level at 12. See U.S.S.G. S 1B1.11. The court increased
Cianci's base offense level by a total of six points: two
points for his failing to report income exceeding $10,000
pursuant to U.S.S.G. S 2T1.1(b)(1), two points for his use of
sophisticated means to impede discovery of the offense
pursuant to S 2T1.1(b)(2), and two points for his abuse of a
position of trust pursuant to S 3B1.3. The court rejected the
government's S 5K1.1 motion for an additional departure to
reflect Cianci's substantial assistance to the government,
finding "nothing of a substantial or significant means
wherein the Government has profited from the ``cooperation'
of Mr. Cianci." App. at 61.
Based upon an offense level of 16 and a criminal history
category of I, the district court sentenced Cianci to
concurrent 22-month terms of imprisonment, which fell at
the lower end of the applicable 21-to-27-month range, a
total fine of $40,000, a special assessment of $100 and a
supervised release term of 3 years on each count, to run
concurrently. Cianci appeals.
II.
Discussion
A.
Sophisticated Means Enhancement
Cianci argues that the district court erred in enhancing
his offense level by two points pursuant to U.S.S.G.
S 2T1.1(b)(2), because it was improperly premised upon its
analysis of the embezzlement scheme that generated the
income to Cianci rather than the subsequent tax evasion
4
offense to which he pled guilty. The standard of review to
be exercised over legal questions about the meaning of the
Sentencing Guidelines is plenary. United States v. Rudolph,
137 F.3d 173, 176 (3d Cir. 1998). A clearly erroneous
standard should be applied to factual determinations
underlying the application of the Guidelines. United States
v. Veksler, 62 F.3d 544, 550 (3d Cir. 1995).
Under S 2T1.1(b)(2), a 2-level upward adjustment is
warranted "[i]f sophisticated means were used to impede
discovery of the nature or extent of the offense." U.S.S.G.
S 2T1.1(b)(2). The commentary to S 2T1.1 states that
"sophisticated means" includes "conduct that is more
complex or demonstrates greater intricacy or planning than
a routine tax-evasion case." U.S.S.G. S 2T1.1, Application
Note 6. The Background Commentary to S 2T1.1 recognizes
that while "tax evasion always involves some planning,
unusually sophisticated efforts to conceal the evasion
decrease the likelihood of detection and therefore warrant
an additional sanction for deterrence purposes." U.S.S.G.
S 2T1.1, Background Commentary P 4. Cianci argues that
the district court erred in focusing its analysis on the
sophistication of Cianci's embezzlement activities, and was
instead required to find that he used sophisticated means
to hide from the government the income generated from his
embezzlement activities.
Cianci's guilty plea agreement contains a stipulation that
"[s]ophisticated means were used to impede the discovery of
the existence or extent of the offense" and as such "the
offense level should be increased to 17." Presentence
Investigation Report at 10. The plea agreement contained a
statement that "[t]o the extent that the parties do not
stipulate, each reserves the right to argue the effect of any
fact upon sentence." App. at 13 (emphasis added).
Under the law of this circuit, Cianci cannot renege on his
agreement. In United States v. Melendez, 55 F.3d 130 (3d
Cir. 1995), we rejected a defendant's attempt to dispute a
stipulation regarding the appropriate sentencing range.
Similarly, in United States v. Parker, 874 F.2d 174 (3d Cir.
1989), we declined to allow a defendant to argue facts
which contradicted those he agreed to in his plea
agreement. The agreement encompassed both the number
5
of parcels taken from the mail and their value, and Parker
had confirmed in court that was his understanding. Parker
could not be heard to contest the value thereafter. We
noted that in sentencing Parker the district judge used
precisely the valuation he had stated he would use when
Parker pleaded guilty, and Parker did not reserve the right
to challenge the facts he had confirmed. Id. at 177-78. We
stated that under these circumstances, we had "no
difficulty in holding [the defendant] to the plea agreement
for he seeks the benefits of it without the burdens." Id. at
178.
In this case, before accepting Cianci's guilty plea, the
district court summarized the stipulations agreed to by
Cianci, including that relating to the use of sophisticated
means, and asked Cianci if he knew what he was doing and
if anything was left out. See App. at 31-33. Cianci, after
conferring with his attorney, raised no objections. As the
sophisticated means enhancement Cianci received was
exactly what he stipulated to, we here also conclude that
the district court was justified in holding Cianci to his
stipulation that he used "sophisticated means" to impede
the offense.
Even if we were inclined to look beyond Cianci's
stipulation, there is adequate support for the district
court's finding that Cianci employed sophisticated means to
conceal his tax evasion from the IRS. Cianci did much more
than merely conceal relatively open transactions. He
established an elaborate scheme which involved the use of
a shell corporation, falsified documents, and failure to
record cash payments. According to the Guidelines, a
sophisticated means enhancement would be applicable
where the defendant used offshore bank accounts or
engaged in transactions through corporate shells. U.S.S.G.
S 2T1.1, Application Note 6; see also United States v.
Furkin, 119 F.3d 1276, 1285 (7th Cir. 1997) (failing to keep
records concerning income and using cash transactions are
indicia of sophisticated means).
Admittedly, the methods devised by Cianci impeded
discovery by Panasonic of his embezzlement, but they also
facilitated concealment of the income derived from the
embezzlement and thereby the necessity to report it to the
6
government and pay taxes on it. Moreover, some of the
methods used by Cianci were independent of the
embezzlement, such as his acceptance of a car leased for
him by Odeon and payments in the form of money orders
to impede discovery of his kickback income.
Also, as the government points out, had Cianci been
motivated only to conceal the embezzlement from
Panasonic, there would have been no reason to take the
intricate steps to conceal the transactions on Drake's
books, as those books were not available to Panasonic.
However, they would have been available to the IRS and the
absence of full and accurate records facilitated concealment
from the government.
For the reasons set forth, we will affirm the district
court's application of the sophisticated means
enhancement.
B.
Enhancement for Abuse of a Position of Trust
Cianci's other objection to his sentence is to the two-level
enhancement imposed by the court upon finding that
Cianci "abused a position of trust" under U.S.S.G. S 3B1.3
(1990). Under S 3B1.3, "[i]f the defendant abused a position
of public or private trust . . . in a manner that significantly
facilitated the commission or concealment of the offense,
increase by 2 levels." U.S.S.G. S 3B1.3. The notes
accompanying this section state that "[t]he position of trust
must have contributed in some substantial way to
facilitating the crime and not merely have provided an
opportunity that could as easily have been afforded to other
persons." U.S.S.G. S 3B1.3, Application Note 1. Cianci
argues that the district court improperly premised its
conclusion upon facts unrelated to the tax evasion offense
to which he pled guilty.
Generally, determining whether the district court
employed an erroneous legal theory in finding that a
defendant held and abused a position of trust is a legal
question subject to de novo review. See United States v.
7
Coyle, 63 F.3d 1239, 1250 (3d Cir. 1995) (citing United
States v. Craddoch, 993 F.2d 338, 340 (3d Cir. 1993)). In
this case, however, Cianci made no objection to this
adjustment at the district court level, so we review the
ruling only for plain error. See United States v. Carr, 25
F.3d 1194, 1209 (3d Cir. 1994). To establish plain error,
Cianci must show that the district court committed error,
that the error was "obvious" and "clear under current law,"
that the error "affected the outcome of the district court
proceedings," United States v. Olano, 507 U.S. 725 (1993),
and that it "seriously affect[ed] the fairness, integrity or
public reputation of judicial proceedings," Johnson v. United
States, 117 S. Ct. 1544, 1549 (1997) (quotations omitted).
Cianci must first show that error in fact occurred. See
Johnson, 117 S. Ct. at 1549. Cianci does not argue that he
could not be found to have abused a position of trust with
Panasonic, where he was a high-ranking official, and used
the discretion vested in him to generate the income that he
failed to report for taxes. Instead he argues that Panasonic
was not the victim of tax evasion, which was the offense of
conviction, and that he had no trust relationship with the
government or Internal Revenue Service. The government
responds that Cianci's abuse of his position of trust with
Panasonic is relevant conduct which may be considered for
this purpose.
This court has not previously decided whether the
sentencing court may consider uncharged conduct in
applying the abuse of a position of trust enhancement. In
United States v. Bhagavan, 116 F.3d 189 (7th Cir. 1997),
the Seventh Circuit squarely held that it may. Id. at 193. In
Bhagavan, the defendant, president and largest shareholder
of a small engineering and surveying firm, was convicted of
tax evasion arising from his diversion of a substantial
amount of money nominally due the firm into his personal
bank accounts and failure to report the money as income
on his personal or the firm's tax returns. Id. at 190-91. The
court, over one dissent, held that the defendant occupied a
position of trust vis-a-vis the minority shareholders, who
were victims of the defendant's scheme to enrich himself
and avoid paying taxes on the secret income. Affirmance of
the enhancement entailed rejection of the notion, inherent
8
in Bhagavan's argument, that the United States can be the
only victim of a tax evasion scheme. Id. at 193.
The contrary view was taken in United States v. Barakat,
130 F.3d 1448 (11th Cir. 1997), where the Eleventh Circuit
held that an enhancement for the abuse of the position of
trust could be justified only if the abuse was connected to
the offense of conviction. Id. at 1455. The Barakat court did
not give any explanation for its holding that the word
"offense" in S 3B1.3, which requires that the defendant's
abuse of trust "significantly facilitate the commission or
concealment of the offense," must be read as"offense of
conviction" in order to maintain consistency with the
definition of relevant conduct in S 1B1.3(a). Id. The court
ruled that an enhancement was improper because it would
"broaden the crime of tax evasion to include the manner in
which the income was obtained." Id.
Cianci calls to our attention United States v. Broderson,
67 F.3d 452 (2d Cir. 1995), cited in the dissenting opinion
in Bhagavan. Although the court there disallowed the
abuse of a position of trust enhancement, the factual
situation was far different. Broderson was a vice president
of Grumman Data Systems Corporation who negotiated a
multi-million dollar contract with NASA for a
supercomputer. He ultimately negotiated a lower interest
rate on the financing than originally quoted but failed to
inform NASA, as required under the applicable statute and
regulation. Following his conviction of various counts of
fraudulent conduct directed at the United States
government, the district court added the two-level
enhancement for abuse of a position of trust. The court of
appeals reversed, holding that Broderson did not occupy a
position of trust vis-a-vis the government. Id. at 455-56.
There was no discussion by the Broderson court nor
could there have been about the relevance of any abuse of
trust vis-a-vis Broderson's employer because there was no
such abuse. Broderson did not profit personally nor did he
victimize his employer. Quite the contrary, the opinion
makes clear that Broderson acted so that Grumman, which
was in financial difficulty, would have the benefit of the
extra funds. Id. at 455, 459. In addition, the appellate court
9
noted that the enhancement was inapplicable because it
was already included in the base offense. Id. at 455.
In contrast, Cianci's conduct vis-a-vis his employer was
characterized by the same type of abuse of a trust
relationship that led us to hold such an enhancement
fitting in United States v. Lieberman, 971 F.2d 989 (3d Cir.
1992). As we stated in United States v. Hickman, 991 F.2d
1110 (3d Cir. 1993), "[t]o abuse a position of trust, a
defendant must, by definition, have taken criminal
advantage of a trust relationship between himself and his
victim." Id. at 1112. Admittedly, the employer-victim here
was not the victim of the offense of conviction, but no
language in the applicable sentencing guideline so
circumscribes the enhancement.
Consideration of the trust relationship with the victim for
purposes of the enhancement is consistent with the
treatment of "relevant conduct" in the Guidelines. In our
recent decision in United States v. Rudolph, 137 F.3d 173
(3d Cir. 1998), we rejected the defendant's claim that
uncharged conduct is not "relevant conduct" under the
Guidelines. Id. at 177. Although S 3B1.1 was amended in
1991 to clarify that the "offense" means the offense of
conviction and all relevant conduct under S 1B1.3, unless a
different meaning is specified or is otherwise clear from the
context, relevant conduct was also a relevant consideration
under the 1990 Guidelines which governed Cianci's
sentence. Section 1B1.2(b) instructed the sentencing judge,
"[a]fter determining the appropriate offense guideline
section pursuant to subsection (a) of this section, determine
the applicable guideline range in accordance with S 1B1.3
(Relevant Conduct)." U.S.S.G. S 1B1.2(b). In further
commentary, the Sentencing Commission instructed that
"[i]n many instances, it will be appropriate that the court
consider the actual conduct of the offender, even when
such conduct does not constitute an element of the
offense." U.S.S.G. S 1B1.2, Application Note 3. Included
among the instances for consideration of relevant conduct
is the court's determination of "various adjustments." Id.
Indeed, the Background Commentary accompanying the
Relevant Conduct section states that "[c]onduct that is not
formally charged or is not an element of the offense of
10
conviction may enter into the determination of the
applicable Guideline sentencing range." U.S.S.G. S 1B1.3,
Background Commentary P 1. Thus, any suggestion by
Cianci that relevant conduct could not be considered in
adjusting his base offense level is plainly wrong.
The 1990 Guidelines are explicit in authorizing
consideration of "all acts and omissions committed or aided
and abetted by the defendant, or for which the defendant
would be otherwise accountable, that occurred during the
commission of the offense of conviction, in preparation for
that offense, or in the course of attempting to avoid
detection or responsibility for that offense, or that otherwise
were in furtherance of that offense," when determining
whether to apply Chapter Three adjustments. U.S.S.G.
S 1B1.3(a)(1). The Application Notes accompanying this
section state that conduct "for which the defendant would
be otherwise accountable" includes "conduct that the
defendant counseled, commanded, induced, procured, or
willfully caused." U.S.S.G. S 1B1.3, Application Note 1. It
follows that Cianci's abuse of his position of trust with
Panasonic by conducting the complex transactions that
facilitated his uncharged criminal conduct leading to his
receipt of the income he failed to report may properly be
considered as relevant conduct.1
It would be contrary to the scheme of the Sentencing
Guidelines to restrict the concept of "relevant conduct." An
article written by the former Chairman and General
Counsel of the Sentencing Commission refers to the
relevant conduct section as the "cornerstone" of the
Guidelines. William W. Wilkins, Jr. & John R. Steer,
Relevant Conduct: The Cornerstone of the Federal
Sentencing Guidelines, 41 S.C. L. Rev. 495, 496 (1990).
_________________________________________________________________
1. Cianci argues that our decision in United States v. Pollen, 978 F.2d 78
(3d Cir. 1992), supports his contention that relevant conduct was
improperly considered in enhancing his sentence. That case merely
reflects the rule that relevant conduct is not properly considered when
a particular guideline contains a more explicit instruction, see S 1B1.3,
Background Commentary P 2 (1990), and held relevant conduct would
not be considered in applying a S 3B1.1(a) enhancement for that reason.
See Pollen, 978 F.2d at 88. There is no similar language to preclude the
consideration of relevant conduct in S 3B1.3 at issue here.
11
Other commentators have noted that the Guidelines
required "the sentencing courts to base the sentence on all
conduct relevant to the offense of conviction." Roger W.
Haines, Jr., Kevin Cole & Jennifer C. Woll, Federal
Sentencing Guidelines Handbook 49 (1991 ed.). In light of
the above, we conclude there was no plain error in
enhancing Cianci's offense level for abuse of a position of
trust.
C.
Ineffective Assistance of Counsel
Finally, Cianci urges this court to vacate his sentence
because the representation he received from his trial
counsel at sentencing was allegedly ineffective. Specifically,
Cianci asserts that his trial counsel was insufficiently
familiar with the Sentencing Guidelines as they applied to
him.
This court "has long followed the practice of declining to
consider a defendant's claim of ineffective assistance of
counsel on direct appeal." United States v. Cocivera, 104
F.3d 566, 570 (3d Cir. 1996) (finding the issue more
appropriate for collateral attack); see United States v.
Gaydos, 108 F.3d 505, 512 n.5 (3d Cir. 1997) (stating
preference that ineffective assistance of counsel be raised in
collateral proceeding); United States v. Oliva, 46 F.3d 320,
325 (3d Cir. 1995) (declining to address ineffective
assistance of counsel claim on direct appeal).
We will therefore dismiss that portion of Cianci's appeal
without prejudice to his right to raise the issue on collateral
review.
III.
Conclusion
For the reasons set forth, we will affirm the judgment of
conviction and sentence.
12
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
13