United States v. Hawes ( 2008 )

Opinions of the United
2008 Decisions States Court of Appeals
for the Third Circuit
4-22-2008
USA v. Hawes
Precedential or Non-Precedential: Precedential
Docket No. 06-3334
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 06-3334
UNITED STATES OF AMERICA
v.
BRYAN J. HAWES
a/k/a FINANCIAL MANAGEMENT
ADVISORY SERVICES, INC.
a/ka/ FINANCIAL MANAGEMENT SERVICES, INC.
Bryan J. Hawes,
Appellant
Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. Criminal No. 04-cr-00082)
District Judge: Honorable Donetta W. Ambrose
Argued November 1, 2007
Before: RENDELL, WEIS and NYGAARD, Circuit Judges.
(Filed: April 22, 2008)
James J. Brink, Esq. [ARGUED]
428 Forbes Avenue, Suite 220
Lawyers Building
Pittsburgh, PA 15219
Counsel for Appellant
Robert L. Eberhardt, Esq.
Michael L. Ivory, Esq. [ARGUED]
Office of United States Attorney
700 Grant Street, Suite 4000
Pittsburgh, PA 15219
Counsel for Appellee
OPINION OF THE COURT
RENDELL, Circuit Judge.
Brian Hawes appeals from his sentence imposed after a
plea of guilty to two counts of mail fraud in violation of 18
U.S.C. § 1341. He was sentenced to a term of 78 months’
imprisonment. Hawes argues that the District Court improperly
calculated the applicable Guideline range. We agree and will
vacate the sentence imposed by the District Court and remand
for resentencing.
2
I. F ACTS AND P ROCEDURAL H ISTORY
Brian Hawes was a registered investment advisor and
owner and president of two investment advisory services,
Financial Management Advisory Services (“FMAS”) and
Financial Management Services, Inc. (“FMS”). In 1997, he
became an authorized representative of Fidelity Investments
Investment Advisors Group (“Fidelity”).
From 1988 through 2003, Hawes used his position as an
investment advisor to defraud his clients of monies that they had
entrusted to him. He would agree to purchase annuities on
behalf of his clients, but instead would keep the money for
personal use or buy the annuities as instructed but later liquidate
them for his own use. To conceal his theft, he created false
account statements, indicating higher account balances, and
submitted them to his clients.
In 1998, Hawes persuaded a number of his clients to
move their assets into investment products offered by Fidelity.
For these investment product accounts, Fidelity would mail
account statements at regular intervals directly to a client’s
residence or address of choice. Until 2002, Hawes would also
issue statements to his clients through his investment advisory
service, FMAS, that accurately reflected the Fidelity
investments. As a financial advisor, he was authorized to use
his clients’ social security numbers and other identifying
information to access their Fidelity accounts and did so in the
regular course of business.
3
Beginning in 2002, however, Hawes used his access to
client accounts without his clients’ permission and changed the
addresses to which his clients’ Fidelity account statements were
mailed. In some instances, he mailed change of address forms
to Fidelity Investments, indicating that future statements should
be sent to his office address. In others, he accessed his clients’
online accounts and changed the addresses. Hawes then notified
his clients that Fidelity would no longer be issuing paper
statements and that FMAS would continue to issue paper
account statements reflecting their balances with Fidelity.
Hawes then began to divert and transfer client funds into
an account for his personal use. To avoid discovery of his theft,
he would transfer funds from one client account to another.
Through FMAS, he would then issue and provide statements to
his clients that did not report the transfers and falsely overstated
the value of the Fidelity accounts. Having ensured that his
clients would not receive accurate account statements from
Fidelity, Hawes was able to hide the fraud from his clients.
In 2003, after his father’s death, Hawes’ mother
discovered that he had been stealing money that his parents had
entrusted with him for investment and submitting statements to
them that falsely reflected that annuities had been purchased and
were earning money. She threatened to report his crime unless
the money was repaid, and Hawes agreed to repay a total of
$780,000 pursuant to a payment schedule. In order to make the
first payment to his mother, Hawes stole $125,000 from other
clients’ accounts.
On October 31, 2003, Hawes’ fraud was uncovered and
4
his accounts frozen. On April 9, 2004, a two-count information
was filed, alleging two counts of mail fraud in violation of 18
U.S.C. § 1341. On that same date, Hawes pleaded guilty to both
counts. On August 4, 2004, he was sentenced to a term of 98
months’ imprisonment, followed by a three-year period of
supervised release, and ordered to pay restitution in the amount
of $2,601,961.60. In the wake of the Supreme Court’s decision
in United States v. Booker, 543 U.S. 220 (2005), Hawes filed a
motion for summary remand on May 3, 2005, and, on August 9,
2005, this Court affirmed Hawes’ conviction and remanded for
resentencing. The trial court held sentencing hearings on
January 30, March 29, and June 29, 2006. App. 78-417.
During the course of the hearings, the District Court
heard from Angelica Banta, the probation officer who prepared
Hawes’ PSR.1 She testified that, in her opinion, an identity theft
enhancement under U.S.S.G. § 2B1.1(b)(9)(C)(i) was proper
because Hawes used the social security numbers of his clients to
change their addresses so that he would receive the statements
indicating the real balances of their investment accounts.
Obtaining a change of address was regarded by Ms. Banta as
obtaining another form of identification–his clients’ mail–and,
therefore, subject to the identity theft enhancement. Counsel for
the government argued that the name and address was a means
1
The relevant part of the sentencing hearing transcript refers
to her as “Angelica Canvann.” However, it appears that this was
a transcription error, Appellant’s Br. 13 n.6, and both the PSR
and other portions of the sentencing hearing transcripts identify
the probation officer as Angelica Banta.
5
of identification and changing an address was producing another
means of identification. Hawes testified that his clients
willingly provided him with certain information, including
name, address, social security number, date of birth, phone
number, and were assigned a unique identification number by
the financial institution. He further testified that he had
discretionary control over the accounts and prior authorization
to engage in any transaction he deemed necessary. Moreover,
after Hawes changed a client’s address online, by fax, or by
email, Fidelity would send a confirmation of the change of
address to the client’s former address.
At the sentencing hearings, the government presented
testimony as to the appropriateness of a vulnerable victim
sentence enhancement under U.S.S.G. § 3A1.1(b). Clients
defrauded by Hawes were elderly, ill, and unsophisticated. App.
399, 403. In particular, testimony showed that Hawes diverted
$87,500 from an account belonging to Dorothy McKinney who,
as he was aware, was in a nursing home and suffered from
Alzheimer’s disease. He did so in order to repay his mother for
the funds he had stolen and to prevent her from reporting him to
the authorities.
The District Court ruled that by changing the addresses
of his clients, Hawes did illegally use a means of identification
“to produce or alter duplicate means of identification” and
applied a two-level enhancement under U.S.S.G. §
2B1.1(b)(9)(C)(i). The District Court also applied a vulnerable
victim enhancement under U.S.S.G. § 3A1.1(b) upon finding
that some of the victims were persons with whom Hawes had a
close relationship and others were retired, elderly and suffering
6
from Alzheimer’s. The calculated Guideline Range was 70 to
87 months’ imprisonment.
Hawes was ultimately sentenced to 78 months’
imprisonment, followed by a three-year period of supervised
release, and ordered to pay $2,276,565.31 in restitution to his
victims. Hawes timely appealed his sentence.
II. D ISCUSSION
Hawes raises a number of objections to his sentence: (1)
that the District Court erroneously applied a two-level “identity
theft” enhancement to his Base Offense Level under U.S.S.G. §
2B1.1(b)(9)(C)(i); (2) that the District Court erroneously applied
a two-level “vulnerable victim” enhancement to his Base
Offense Level under U.S.S.G. § 3A1.1(b)(1); (3) that his
sentence is unreasonable; and (4) that the District Court did not
consider the factors set forth in 18 U.S.C. § 3663 in determining
the amount of restitution.
We will consider each of these arguments in turn. We
review the District Court’s application of the Guidelines to the
facts for abuse of discretion. United States v. Cooper, 437 F.3d
324, 327-28 (3d Cir. 2006). To the extent that Hawes argues
that the District Court made a legal error in its interpretation of
the Guidelines, we conduct plenary review. See United States
v. Newsome, 439 F.3d 181, 184 (3d Cir. 2006); United States v.
Moorer, 383 F.3d 164, 167 (3d Cir. 2004). As to contentions
that Hawes did not preserve in the District Court, we use the
7
more exacting plain error standard. See United States v.
Merlino, 349 F.3d 144, 161 (3d Cir. 2003).
A. The Identity Theft Enhancement
Hawes contends that his conduct in concealing his fraud
does not qualify for a two-level enhancement under U.S.S.G. §
2B1.1(b)(9)(C)(i). To determine whether the District Court
erred in interpreting the identity theft enhancement to include
Hawes’ changing of his clients’ addresses, we begin by looking
to the language of the Guideline and the statutory language
referenced therein.
Under the Guidelines, a two-level enhancement to a
defendant’s Base Offense Level is appropriate where the offense
involved “the unauthorized transfer or use of any means of
identification unlawfully to produce or obtain any other means
of identification.” U.S.S.G. § 2B1.1(b)(9)(C)(i).2 The
Guideline refers to 18 U.S.C. § 1028(d)(4) (now codified at 18
U.S.C. § 1028(d)(7)), which provides that:
the term “means of identification” means any name or
number that may be used, alone or in conjunction with
any other information, to identify a specific individual,
including any--
2
This citation is to the 2002 edition of the Federal Sentencing
Guidelines Manual, which was used by the District Court and
probation office in sentencing Hawes; this section is now at
U.S.S.G. § 2B1.1(b)(10)(C)(i).
8
(A) name, social security number, date of birth, official
State or government issued driver’s license or
identification number, alien registration number,
government passport number, employer or taxpayer
identification number;
(B) unique biometric data, such as fingerprint, voice
print, retina or iris image, or other unique physical
representation;
(C) unique electronic identification number, address, or
routing code; or
(D) telecommunication identifying information or access
device (as defined in section 1029(e))3
Hawes contends that “the act of changing a person’s address is
not engaging in the ‘unauthorized transfer or use of any means
of identification unlawfully to alter or duplicate or assemble [an]
alternate hybrid means of identification’ or using a means of
identification to ‘produce an altered duplicate means of
3
The Commentary to U.S.S.G. § 2B1.1 provides that: “‘Means
of identification’ has the meaning given that term in 18 U.S.C.
1028(d)(4), except that such means of identification shall be of
an actual (i.e., not fictitious) individual, other than the defendant
or person for whose conduct the defendant is accountable”
under U.S.S.G. § 1B1.3. This is not at issue in this case as the
means of identification used were of actual individuals, Hawes’
clients.
9
identification.’” Appellant’s Br. 21 (quoting United States v.
Newsome, 439 F.3d 181, 185-86 (3d Cir. 2006)).
We begin by asking whether the statute’s plain terms
address the precise question of whether changing an address
constitutes producing or obtaining “any other means of
identification.” As the Court of Appeals for the Ninth Circuit
has observed, “the enhancement is rather awkwardly written.”
United States v. Melendrez, 389 F.3d 829, 832 (9th Cir. 2004).
“Means of identification” is defined both in general terms as
“any name or number that may be used, alone or in conjunction
with any other information, to identify a specific individual” and
in specific terms as an extensive list of particular means of
identification. 18 U.S.C. § 1028(d)(7). The text, however, is
ambiguous as to whether changing an address falls within its
ambit. What is clear is that the statute does not include mail or
an address within the list of means of identification; nor are the
examples easily analogized to a piece of mail or an address.
There is a paucity of helpful case law, largely because
this sentencing enhancement was only enacted in 2000. Neither
we nor any other court has had occasion to address the issue of
whether changing an address constitutes obtaining or producing
a new means of identification. In United States v. Auguste,
however, where the defendant had added herself to another
person’s credit card account as a secondary cardholder and had
changed the account’s address in order to receive the secondary
card, the enhancement applied not because she had changed the
address but because she had taken an account number and added
her own name to it, thereby creating a new means of
identification. 392 F.3d 1266, 1267-68 (11th Cir. 2004).
10
We have issued only one decision interpreting this
Guideline, United States v. Newsome, 439 F.3d 181 (3d Cir.
2006), which both parties cite and upon which the District Court
relied to conclude that the enhancement applied. In Newsome,
defendants obtained personal contact and account information
of Fleet Bank customers and used it to produce drivers’ licenses
with photographs of defendants and the victims’ information,
which they then used to withdraw funds from the accounts. Id.
at 183. The district court held that “Newsome had illegally used
one means of identification to produce another,” and we agreed
that the enhancement was properly allowed. Id. at 184. The
fraud victim’s information–name, birth date, driver’s license
number, and employee identification number–was a means of
identification under 18 U.S.C. § 1028(d)(7). Id. The question
was whether the information on the new drivers’ licenses
constituted “any other means of identification.” Newsome
argued that what he did was use an existing means of
identification to obtain cash, not to obtain a new means of
identification, like a social security number or a loan account
number. We disagreed, reasoning that U.S.S.G. §
2B1.1(b)(9)(C)(i) can be read as requiring the enhancement for
“the unauthorized transfer or use of any means of identification
unlawfully to alter or duplicate or assemble any alternate hybrid
means of identification.” Id. at 185.
However, in Newsome, the means of identification
produced, a driver’s license, is specifically mentioned in the
commentary to the Guideline. Furthermore, it involved the sort
of “breeding” of means of identification that is targeted by the
enhancement. Id. at 186; see Commentary to U.S.S.G. § 2B1.1,
Background (noting that the enhancement “focuses principally
11
on an aggravated form of identity theft known as ‘affirmative
identity theft’ or ‘breeding’). Neither of the aspects here, a
person’s mail and address, are specifically mentioned in the
Guidelines, nor is Hawes’ conduct easily categorized as the
breeding of means of identification.
Faced with ambiguities in the identity theft enhancement,
courts have looked to the application notes, which set forth
examples of the types of conduct to which the identification
enhancement applies or does not apply.4 Accordingly, we turn
to them for guidance. The application notes provide:
(i) In General.--Subsection (b)(10)(C)(i) applies in a case
in which a means of identification of an individual other
than the defendant (or a person for whose conduct the
defendant is accountable under 1.3 (Relevant Conduct))
is used without that individual’s authorization unlawfully
to produce or obtain another means of identification.
(ii) Examples.--Examples of conduct to which subsection
(b)(10)(C)(i) applies are as follows:
4
See, e.g., United States v. Auguste, 392 F.3d 1266, 1268
(11th Cir. 2004) (looking first to application notes and then to
the plain language of the guideline); United States v. Melendrez,
389 F.3d 829, 835 (9th Cir. 2004) (looking to application notes
and reasoning that “[n]either set of examples perfectly matches
Melendrez’s crime, but we conclude that his actions are more
like those in the first set of examples.”).
12
(I) A defendant obtains an individual’s name and
social security number from a source (e.g., from
a piece of mail taken from the individual’s
mailbox) and obtains a bank loan in that
individual’s name. In this example, the account
number of the bank loan is the other means of
identification that has been obtained unlawfully.
(II) A defendant obtains an individual’s name and
address from a source (e.g., from a driver’s
license in a stolen wallet) and applies for, obtains,
and subsequently uses a credit card in that
individual’s name. In this example, the credit
card is the other means of identification that has
been obtained unlawfully.
(iii) Nonapplicability of Subsection
(b)(10)(C)(i).--Examples of conduct to which subsection
(b)(10)(C)(i) does not apply are as follows:
(I) A defendant uses a credit card from a stolen
wallet only to make a purchase. In such a case,
the defendant has not used the stolen credit card
to obtain another means of identification.
(II) A defendant forges another individual’s
signature to cash a stolen check. Forging another
individual’s signature is not producing another
means of identification.
Application Note 9(C) to U.S.S.G. § 2B1.1.
13
The Application Note examples are confined to a
common sense meaning of identity theft through breeding a new
means of identification. The examples of when the
enhancement applies involve the production of a specific form
of identifying information, which is then used for improper
purposes, i.e., taking another’s identity to use as one’s own. In
the first example, the defendant uses the victim’s name and
social security number to obtain a bank loan, the “means of
identification” bred. In the second example, the defendant uses
the victim’s name and address to apply for and obtain a credit
card, another unique “means of identification.” Where courts
have held that the guideline applies to conduct not contained in
these examples, the facts have been closely analogous to the
examples. See, e.g., Melendrez, 389 F.3d at 829. By contrast,
in the examples of when the enhancement does not apply, the
defendant has not generated any additional identifying
information or engaged in the “breeding” targeted by the
enhancement.
Changing an address is not easily analogous to the
examples in the application notes. In comparison to the facts in
other cases, Hawes’ conduct seems closer to the Application
Note’s examples of conduct that does not constitute identity
theft, such as stealing an existing credit card or cashing a check
from an existing bank account. Discussing these examples in
the application notes, the Court of Appeals for the Sixth Circuit
observed that “while the use of someone’s credit card to make
a purchase is a punishable offense, the nature of the harm is
different from that which results from using someone’s
identifying information to establish new credit.” United States
v. Williams, 355 F.3d 893, 900 (6th Cir. 2003). Similarly,
14
although stealing from client accounts he was authorized to
manage is deserving of punishment, the harm caused by Hawes
was not the breeding of new identification information or
running up new credit, but rather the theft of funds entrusted to
him. The change of address was to thwart the discovery of, not
enable, the illicit activity.
We conclude that Hawes’ conduct does not qualify for
the identity theft enhancement. An address or piece of mail does
not seem to fit the Guideline’s definition of “means of
identification.” The government suggests that the general
definition of “means of identification” includes a name plus any
other piece of information and thus includes a name plus an
address. To take the government’s argument to its logical
conclusion, a name plus shoe size or hair color could constitute
a means of identification. We believe that the statute, as the
language suggests, requires that the means of identification be
just that, a means of identification, not merely an attribute of
one’s identity.
The examples enumerated in 18 U.S.C. § 1028(d)(7) are
unique means of identification, primarily numbers. A social
security number, account number, and the other examples
provided within the statute specifically and uniquely identify
one particular individual. Accordingly, when addressing the
argument that bank accounts are not means of identification, the
Court of Appeals for the Eighth Circuit found it determinative
that “a bank account number is a unique identification number.”
United States v. Scott, 448 F.3d 1040 (8th Cir. 2006).
At sentencing, the government argued that the name and
15
address was a means of identification because it was “the way
that Fidelity identified clients in this case.” App. 381. From a
common sense standpoint, we find this argument difficult to
accept. Financial institutions identify their clients, not by name
or address (which can be non-unique identifiers), but rather by
account number. As Hawes testified, Fidelity was given certain
information about clients to set up an account and “[t]he way
Fidelity identified a client after that was by the account
number.” App. 384.
Our conclusion is bolstered by the legislative history of
the Identity Theft and Assumption Deterrence Act of 1998, Pub.
L. No. 105-318, 112 Stat. 3007 (1998) (“ITADA”).5 The
ITADA was enacted to make “fraud in connection with
identification information [not just identification documents] a
crime.” S. Rep. No. 105-274, at 5 (1998) (“Today, criminals do
not necessarily need a document to assume an identity; often
they just need the information itself to facilitate . . . crimes . . .
. [T]his statute can keep pace with criminals’ technological
advances.”). The ITADA provided that although “there exists
no clear definition of identity fraud,” it typically “involves
‘stealing’ another person’s personal identifying information . .
5
Because the statutory meaning is unclear, the legislative
history can aid us in discerning the Guideline’s purpose and
interpreting it appropriately. See Patterson v. Shumate, 504 U.S.
753, 761 (1992) (stating that resort to statutory history is
appropriate where language of statute is ambiguous or
confusing); United States v. Pollen, 978 F.2d 78, 85 (3d Cir.
1992).
16
. to fraudulently establish credit, run up debt, or to take over
existing financial accounts.” Id. at 7.
In enacting the ITADA, the Sentencing Commission
explained that subsection (b)(10)(C):
focuses principally on an aggravated form of identity
theft known as “affirmative identity theft” or “breeding”,
in which a defendant uses another individual’s name,
social security number, or some other form of
identification (the “means of identification”) to “breed”
(i.e., produce or obtain) new or additional forms of
identification.
Commentary to U.S.S.G. § 2B1.1, Background. As we said in
Newsome, “Congress wanted to provide increased punishment
for identity theft that involved creation of means of counterfeit
identification rather than the plain vanilla type of identity theft
that occurs when person A steals and uses person B’s credit
card. ... This multiplication of means of identification is the type
of identity theft that Congress believed deserved greater
punishment.” Newsome, 439 F.3d at 186. As other courts of
appeals have observed, “[t]he ‘nature of the harm’ meant to be
targeted by this enhancement is, in part, ‘that which results from
using someone’s identifying information to establish new
credit.’” United States v. Oates, 427 F.3d 1086, 1090 (8th Cir.
2005) (quoting United States v. Williams, 355 F.3d 893, 900
(6th Cir. 2003)).
Given the purpose of the enhancement, we will not read
the Guideline to apply to Hawes’ conduct in changing the
17
addresses on his clients’ account statements lest we produce
absurd or unintended results “demonstrably at odds with the
intentions of [the statute’s] drafters.” Griffin v. Oceanic
Contractors, Inc., 458 U.S. 564, 571 (1982). Here, Hawes
misused his clients’ accounts and abused their trust. He did not,
however, establish new credit or “breed” new forms of
identification, as contemplated by Congress and the Sentencing
Commission in enacting this enhancement. Hawes’ conduct
does not qualify for the two-level enhancement under U.S.S.G.
§ 2B1.1(b)(9)(C)(i). We therefore find that the District Court
erred in imposing the enhancement.
B. Harmless Error Analysis and Guideline
Calculation
The government urges us to hold that the erroneous
application of the identity theft enhancement to the calculation
of Hawes’ Guidelines Range was harmless. Our recent decision
in United States v. Langford, 516 F.3d 205 (3d Cir. 2008),
controls our analysis of this issue. 6 For us to uphold Hawes’
sentence, “it must be clear that the error did not affect the
district court’s selection of the sentence imposed.” Id. at 215.
As the party defending the sentence imposed, the government
6
Although the error at issue in Langford concerned a
miscalculation of the criminal history level rather than the
offense level, there is no reason to treat one type of
miscalculation of the Guidelines differently from another.
Regardless of the nature of the error, it may affect the Guideline
range chosen and the sentence ultimately imposed.
18
bears the burden of “persuad[ing] the court of appeals that the
district court would have imposed the same sentence absent the
erroneous factor.” Williams v. United States, 503 U.S. 193, 203
(1992).
In the present case, based on the identity theft
enhancement, the District Court calculated the total offense
level to be 27, instead of 25, which resulted in a Guideline
Range of 70 to 87 months’ imprisonment, rather than 57 to 71
months. The Court acknowledged that the advisory Guideline
range of 70 to 87 months was the starting point for any sentence
she would impose. The judge indicated her belief that “a
sentence within the advisory guideline range does appropriately
concern and address all of the concerns of sentencing” and
stated her intention to “sentence within that range.” App. 411.
On the basis of its evaluation of the § 3553(a) factors, the Court
then imposed a sentence of 76 months in the middle to low end
of the advisory Guidelines range it had calculated.7
The government has not met its burden of showing that
7
In Langford, we noted the possibility that, based on a
miscalculation, a District Court might compare a defendant to
others who actually have higher offense levels. That possibility
became a reality here, as the District Court indicated that the
sentence she imposed avoided “impos[ing] a sentence that
would result in disparities among other people who have
engaged in like conduct.” However, given the proper range, the
sentence she imposed resulted in the disparity she was seeking
to avoid.
19
the error was harmless. It is by no means “unambiguous” that
Hawes’ sentence would be the same regardless of whether the
identity theft enhancement applied. See Langford, 516 F.3d at
217. It is clear from the record that the sentencing court
intended to and did in fact select Hawes’ sentence from the
calculated range. Hawes’ sentence was in the mid- to low- point
of the calculated range. Because the enhancement was
erroneously applied, the Court imposed a sentence outside the
proper Guideline range of 57 to 71 months. In order to impose
a 76-month sentence, the Court would have had to depart
upward from the Guidelines, reasoning through the § 3553(a)
factors and explaining why the defendant merited a greater term
of imprisonment than that contemplated by the Guidelines.
Here, by contrast, the Court made clear that a within-Guidelines
range was appropriate for Hawes based on its § 3553(a)
analysis.
The miscalculation of the Guideline range by the District
Court also affected the arguments that the parties made at
sentencing. After the Court decided that the enhancement
would apply and the range would be 70 to 87 months, defense
counsel argued for a sentence at the bottom of the Guidelines,
that is, a 70-month sentence. Under the correct range, counsel
would have urged the Court to impose a 57-month sentence
instead.
Because the error was not harmless, we will remand to
the District Court for resentencing in light of the foregoing.
20
C. Hawes’ remaining objections to his sentence
Because we will remand for resentencing, we must
address the other errors that Hawes alleges were committed by
the District Court in calculating his Guideline range.
1. Vulnerable victim enhancement
Hawes challenges the District Court’s decision to impose
a two-level enhancement under U.S.S.G. § 3A1.1(b)(1), which
provides for such enhancement “[i]f the defendant knew or
should have known that a victim of the offense was a vulnerable
victim....” A vulnerable victim “means a person (A) who is a
victim of the offense of conviction and any conduct for which
the defendant is accountable under § 1B1.3 (Relevant Conduct);
and (B) who is unusually vulnerable due to age, physical or
mental condition, or who is otherwise particularly susceptible to
the criminal conduct.” U.S.S.G. § 3A1.1(b)(1), Application
Note 2.
Hawes argues that the District Court failed to comply
with our decision in United States v. Iannone, 184 F.3d 214 (3d
Cir. 1999). In Iannone, we set forth a three-factor test to
determine whether conduct merits the application of the
vulnerable victim enhancement:
(1) the victim was particularly susceptible or vulnerable
to the criminal conduct; (2) the defendant knew or should
have known of this susceptibility or vulnerability; and (3)
this vulnerability or susceptibility facilitated the
defendant’s crime in some manner; that is, there was “a
21
nexus between the victim’s vulnerability and the crime’s
ultimate success.”
184 F.3d at 220 (quoting United States v. Monostra, 125 F.3d
183, 190 (3d Cir. 1997). In particular, Hawes argues that the
District Court failed to find that there was “a nexus between the
victim’s vulnerability” and the success of his fraudulent scheme.
The District Court did not cite Iannone in finding that the
vulnerable victim enhancement applied. Its failure to use the
case name during sentencing in open court does not, however,
indicate that the application of the enhancement was error.
Indeed, the record supports the District Court’s finding
that Hawes’ offense qualified for this enhancement. First, the
victims of Hawes’ fraud met the standard for vulnerability. The
District Court referred to the victims’ impact statements and
“the close personal relationship the Defendant has had with
some of his clients, not only his parents, who could not be more
susceptible, but also to other clients who he personally knew or
who were referred to him by friends and relatives.” App. 402.
It also found that “many of these individuals were retired,
elderly, some suffering from diseases.” App. 403. Second,
Hawes knew of his victims’ vulnerability. Many of his clients
were known to him personally or referred to him by friends or
relatives. As regards one of his victims, Dorothy McKinney,
Hawes knew that she was in a nursing home suffering from
Alzheimer’s and was legally blind. Third, there was a nexus
between the vulnerability of the victims and the continued
success of his fraud. The vulnerable status of Ms. McKinney in
particular made it easier to continue the fraud. Specifically,
22
when Hawes’ mother discovered that Hawes had stolen
hundreds of thousands of dollars and demanded that he repay
$125,000 immediately, Hawes procured the bulk of this sum
from Ms. McKinney’s account, knowing that her particular
vulnerabilities made it more likely the theft would go
undetected. Taking this money to pay his mother was meant to
prevent his family from reporting the theft and allow it to
continue.
We, therefore, find that the District Court did not err in
enhancing Hawes’ offense level under § 3A1.1(b) and affirm its
application of the vulnerable victim enhancement.
2. Failure to consider 18 U.S.C. § 3663 in entering the
restitution order
Hawes contends that the District Court failed to consider
“the financial resources of the defendant, the financial needs and
earning ability of the defendant, and the defendant’s dependents,
and such other factors as the court deems appropriate” as
required by 18 U.S.C. § 3663(a)(1)(B)(i)(II). The parties agree
that Hawes failed to raise this objection at sentencing. We,
therefore, review the order of restitution for plain error. Fed. R.
Crim. P. 52(b); United States v. Lloyd, 469 F.3d 319, 320 (3d
Cir. 2006).
We find no plain error on the record here. Hawes entered
into a plea agreement with the government pursuant to which
the parties agreed to the amount of loss and restitution. The
Second Addendum to the Presentence Report included a
spreadsheet reflecting the agreed-to amounts and was adopted
23
by the District Court when it issued the restitution order. During
the sentencing hearing, the Court was informed that, with the
exception of two victims, the parties had “agreed to what the
restitution is and ... agreed to what the amount of loss
attributable to each victim is.” App. 370. Hawes’ current or
future ability to pay restitution was never before the District
Court. Although the Court was not required to accept the
parties’ agreement as to restitution, the Court committed no
plain error in accepting it. We will therefore affirm the order of
restitution.
3. Reasonableness of Hawes’ sentence
Hawes also argues that his sentence was unreasonable
because the District Court gave presumptive weight to the
guidelines and imposed a sentence greater than necessary to
meet the purposes of sentencing. Because we find that the
miscalculation of the Guideline range was not harmless error,
we cannot review the sentence for reasonableness. See
Langford, 516 F.3d at 214-15, 220. We are confident that the
District Court will not give presumptive weight to the
Guidelines on remand as the Supreme Court has recently made
clear that this is error. Gall v. United States, 128 S. Ct. 586, 597
(2007).
III. C ONCLUSION
For the foregoing reasons, we will vacate Hawes’
sentence and remand to the District Court for resentencing.
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Weis, J., Circuit Judge, Concurring.
I agree that the identification enhancement should not
have been factored into the Guidelines calculation.
The Guidelines are advisory, not mandatory, and an error
in the Guidelines computation may be neutralized by the
overarching scrutiny required by the sentencing court’s
application of 18 U.S.C. § 3553(a).
The sentence here is substantively reasonable. The
District Court set out in detail the factors that affected the
sentence. In her remarks from the bench at the hearing, the
judge said, in part,
“The law requires that I impose a sentence
that is sufficient to but not greater than necessary
to fulfill the purpose of sentencing. . . .
First of all, the nature and seriousness of
the offense. Quite frankly, the offense is awful.
It’s awful. To ruin peoples’ lives, to be held in
trust and to betray. These are serious
offenses. . . .
[T]his is a very serious offense, and just
punishment is required under the law. Because
you have done such a terrible thing to so many
people you have to be deterred and others have to
be deterred who might consider engaging in like
conduct. There is a need to be protected from any
25
additional crimes that you might commit and to
do that it is my belief that you should be provided
with correctional treatment that can most
effectively help you to understand what it is that
you have done and what the repercussions and
consequences are.
The starting point for any sentence . . . is
the advisory guideline range which I have
indicated to you is a level 27, category 1, 70-87
months.”
It is obvious that the district judge intended to impose a
substantial sentence. She then explained, “I believe that a
sentence within the advisory guideline range does appropriately
concern and address all of the concerns of sentencing that I have
mentioned this afternoon.”
In my view, our ruling that the Guidelines calculation
was erroneous has created substantial uncertainty over the
District Court’s intent in sentencing defendant. If the judge
believed, after performing the overall review, that under
§ 3553(a) a sentence of 76 months was the appropriate
punishment regardless of whether that number came within the
Guidelines range, the sentence should be affirmed. On the other
hand, if the judge believed that the appropriate sentence must be
within the correct Guidelines range, whatever that may be, and
did not mean to deviate from it, precedents of this Court would
seem to require a remand.
The District Court may have believed that the appropriate
26
sentence under § 3553(a) was a term of 76-months
imprisonment and, coincidentally, concluded that the figure was
within the erroneous Guidelines computation. The record is
ambiguous on this point.
Because they can override the advisory Guidelines,
district judges should carefully articulate their rationale in
arriving at a sentence under the § 3553(a) calculus in order to
avoid unnecessary resentencing.
Because on the record before us I am unable to determine
the sentencing judge’s intention, I join in the order to remand.
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