United States v. Joseph Antonucci ( 2016 )

Case: 15-20171 Document: 00513560973 Page: 1 Date Filed: 06/22/2016
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 15-20171 United States Court of Appeals
Fifth Circuit
FILED
UNITED STATES OF AMERICA, June 22, 2016
Lyle W. Cayce
Plaintiff–Appellee, Clerk
v.
JOSEPH S. ANTONUCCI,
Defendant–Appellant.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:14-CR-18-1
Before WIENER, PRADO, and OWEN, Circuit Judges.
PER CURIAM:*
Defendant–Appellant Joseph Antonucci pleaded guilty, without a plea
agreement, to all counts of a 21-count indictment. The indictment charged him
with embezzling money from his employer, Patriot Managed Care Solutions,
Inc. (“Patriot”). He appeals his sentence, restitution order, and personal money
judgment, arguing that the district court erred when it calculated Patriot’s loss
by including legitimate business expenses that he incurred on behalf of Patriot.
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
Case: 15-20171 Document: 00513560973 Page: 2 Date Filed: 06/22/2016
No. 15-20171
We VACATE Antonucci’s sentence, restitution order, and personal money
judgment, and REMAND for resentencing.
I. FACTUAL AND PROCEDURAL BACKGROUND
Antonucci served as the executive vice president and treasurer of Patriot,
a Houston-based company that provided information technology support to
healthcare businesses. According to the Presentence Report (“PSR”), he ran
Patriot’s daily operations. His job duties included “servicing existing
customers, obtaining new customers, monitoring the company’s financial
status, and supervising other Patriot employees.”
As charged in the indictment to which Antonucci pleaded guilty, from
approximately January 2007 through September 2012, Antonucci defrauded
Patriot “by making unauthorized transfers and withdrawals of Patriot funds
and directing the money to his own purposes.” He embezzled these funds in
several ways, including by using Patriot’s debit card to pay for personal
expenses, writing checks to himself that drew from Patriot’s accounts, and
wiring funds from Patriot’s accounts to his personal account. To conceal his
fraud, Antonucci created “false financial documents [that] misrepresented key
Patriot accounting figures” and “overstated the company’s net worth.”
In January 2014, Antonucci was charged in a 21-count indictment. The
indictment alleged 15 counts of wire fraud in violation of 18 U.S.C. § 1343, five
counts of engaging in financial transactions involving proceeds of unlawful
activity in violation of 18 U.S.C. § 1957, and one count of making materially
false statements to a federal agent in violation of 18 U.S.C. § 1001. In October
2014, Antonucci pleaded guilty to all counts without a written plea agreement.
However, at the time of his plea, Antonucci did not admit to a specific loss
amount, and instead, the parties informed the district court that they would
“argue about that fact at sentencing.”
2
Case: 15-20171 Document: 00513560973 Page: 3 Date Filed: 06/22/2016
No. 15-20171
According to the PSR, Antonucci was responsible for a loss of
$2,918,261.38. The PSR indicated that this amount equaled the total funds
that Antonucci had withdrawn from Patriot and used for his own purposes
between 2007 and 2012. Based on this figure, the PSR recommended an 18-
level increase to Antonucci’s offense-level total pursuant to U.S.S.G.
§ 2B1.1(b)(1)(J), which applied to loss over $2,500,000 under the then-
applicable U.S. Sentencing Guidelines (the “Guidelines”). See U.S.S.G.
§ 2B1.1(b)(1)(J) (2014). After factoring in other adjustments, the PSR
concluded that Antonucci’s Guidelines range for imprisonment was 51 to 63
months. The PSR also recommended that Antonucci pay restitution in the
amount of $2,918,261.38 under the Mandatory Victims Restitution Act
(“MVRA”), 18 U.S.C. § 3663A(c).
On March 4, 2015, Antonucci filed his objections to the PSR, disputing
its loss estimation. He asserted that because handling clients was one of his
responsibilities, “travel, entertainment, and dining expenses were routine
parts of the job.” The PSR, according to Antonucci, provided insufficient
evidence to show that particular payments were for personal expenses as
opposed to business-related ones. He elaborated that when he contacted the
probation office seeking clarification regarding the PSR’s loss total, the
probation officer said that “she had relied entirely on charts provided by the
government.” Antonucci acknowledged that the Government had provided “a
54-page chart of Patriot expenses it ascribe[d] to [his] fraud” but argued that
the chart provided “almost no description or explanation as to why the
individual charges are deemed fraudulent.” Antonucci cited seven transactions
on the chart’s first page that he claimed were examples of business expenses
that the Government had not proven were losses. For instance, he cited a
$63.85 payment to G7 Productivity System, a software, ink, and paper
supplier, and two payments made in Minnesota for $26.82 and $33.04 that
3
Case: 15-20171 Document: 00513560973 Page: 4 Date Filed: 06/22/2016
No. 15-20171
occurred around the time that Antonucci had sought to meet with a prospective
client in that area.
The Government filed its response on March 30, 2015, the day before
sentencing. It argued that all payments made with Patriot’s debit card, which
included the Minnesota transactions and the G7 Productivity System expense,
caused a loss to Patriot because Patriot had a policy that prohibited employees
from using its corporate debit card to pay for expenses directly. Patriot instead
required employees to seek reimbursement after paying for expenses out-of-
pocket.
At sentencing, Antonucci’s counsel reasserted his objection that the
Government had not carried its burden to prove $2.9 million in loss, although
he conceded that there was “clearly [a] loss.” When the district court asked if
there was an amount to which Antonucci would admit, Antonucci’s counsel
responded that he had “no doubt” that the Government could prove loss for
“the expenses and . . . gambling in Vegas,” which he said could be $700,000 to
$800,000. 1 He also stated that it was not until “last night” that the Government
disclosed that the loss estimation was based in part on Patriot’s policy that
prohibited employees from using its debit card to pay for business expenses.
The Government responded that it was willing to have FBI financial
analyst Roxanne Sebring testify about how she prepared the 54-page chart,
which provided the loss figure of $2,918,261.38 that the probation office used
in preparing the PSR. The district court asked Antonucci’s counsel how he
wanted to proceed. After a recess, his counsel requested “an opportunity to
respond in writing” to the 54-page chart. The Government objected. It argued
that any filing by Antonucci would be unable to “undercut particular line
1 The PSR indicated that Antonucci had caused $691,340.36 in loss to pay for
gambling.
4
Case: 15-20171 Document: 00513560973 Page: 5 Date Filed: 06/22/2016
No. 15-20171
items” because Patriot’s owner, Joe Schuchert, would testify that “corporate
expenses weren’t supposed to be charged using a debit card” because Patriot
required employees to charge “expenses to their own cards, and then submit
an expense report.” 2
The district court granted the Government’s request to have Sebring
testify about how she created the 54-page chart. Sebring said that she reviewed
records from Patriot’s and Antonucci’s bank accounts, American Express, and
Schuchert. The chart, according to her, reflected “all of the charges that Mr.
Antonucci used that debit card to, in essence, live off of . . . us[ing] the proceeds
from the monies that were received from the clients.”
On cross examination, Antonucci’s counsel asked Sebring about her
methodology for calculating loss. In response to counsel’s questioning, she
agreed that it was her understanding that any expense made with Patriot’s
debit card was a loss and “the mere fact” that Antonucci had used a debit card
“is what initiated much of these [transactions] to be on this chart.” When asked
about the two charges made in Minnesota, Sebring agreed that she considered
those expenses losses because of “the process by which [Antonucci] incurred
the charge,” namely, that he used Patriot’s debit card.
Antonucci’s counsel then objected to Sebring’s loss methodology. He
argued that whether Antonucci followed Patriot’s debit-card policy was a
“separate question” from whether he caused a loss to Patriot as a result. The
district court overruled his objection, holding that the Government had met its
burden that the amounts “as to which testimony was adduced are . . . loss.” It
imposed a sentence of 60 months’ imprisonment for each count to run
concurrently and ordered restitution in the amount of $2,918,261.38. It also
2 The Government also noted that the 54-page chart had been available to Antonucci
for approximately a year.
5
Case: 15-20171 Document: 00513560973 Page: 6 Date Filed: 06/22/2016
No. 15-20171
entered a personal money judgment in favor of the United States in the amount
of $2,895,830.16, which equaled Patriot’s “full loss amount” less the $22,431.22
that had already been administratively forfeited.
II. STANDARD OF REVIEW
The amount of loss resulting from fraud increases the base offense level
under the Guidelines. U.S.S.G. § 2B1.1(b)(1). “[L]oss is the greater of actual
loss or intended loss.” Id. cmt. n.3(A). As relevant here, actual loss is the
“reasonably foreseeable pecuniary harm that resulted from the offense.” Id.
cmt. n.3(A)(i). The district court’s finding as to the loss amount is a question of
fact we review for clear error. United States v. Klein, 543 F.3d 206, 213–14 (5th
Cir. 2008). However, we review de novo “how the court calculated the loss,
because that is an application of the guidelines, which is a question of law.” Id.
at 214. “In fact, before assessing the court’s loss estimate, we ‘first determine
whether the trial court’s method of calculating the amount of loss was legally
acceptable.’” Id. (alteration omitted) (quoting United States v. Olis, 429 F.3d
540, 545 (5th Cir. 2005)).
“The MVRA authorizes restitution to a victim ‘directly and proximately
harmed’ by a defendant’s offense of conviction.” United States v. Sharma, 703
F.3d 318, 322 (5th Cir. 2012) (quoting 18 U.S.C. § 3663A(a)(2)). “We review the
legality of restitution awards de novo, and if the award is legally permitted, we
review the amount for abuse of discretion.” Klein, 543 F.3d at 215 (quoting
United States v. Mann, 493 F.3d 484, 498 (5th Cir. 2007)). Under the MVRA,
restitution is limited to the victim’s actual loss. Sharma, 703 F.3d at 322.
Further, “excessive restitution awards cannot be excused by harmless error;
every dollar must be supported by record evidence.” Id. at 323.
III. DISCUSSION
On appeal, the Government concedes that the loss amount contained in
the PSR and adopted by the district court is erroneous. Specifically, it
6
Case: 15-20171 Document: 00513560973 Page: 7 Date Filed: 06/22/2016
No. 15-20171
acknowledges that FBI financial analyst Sebring incorrectly characterized
several transactions totaling $70,900 as actual loss when those transactions in
fact may have represented amounts that Antonucci deposited into Patriot’s
accounts. It also concedes that we must vacate the restitution order and
remand to allow the district court to determine whether that $70,900 amounts
to actual loss.
Thus, the only question is the scope of our remand. According to the
Government, we should limit our remand solely to resolve whether the $70,900
in charges constituted actual loss for purposes of Antonucci’s restitution order.
The record, it claims, is sufficient to support holding that all other transactions
contained in the 54-page chart represented Antonucci’s use of Patriot funds for
his own purposes that caused actual loss to Patriot. Antonucci responds that
the Government’s loss calculation was defective in other ways. In particular,
he claims the chart overstated the loss amount because it included payments
made with Patriot’s debit card that were deemed losses simply because they
were “procedurally improper” but without regard to whether they caused
pecuniary harm. He argues we must vacate the sentence in its entirety because
this error affects his term of imprisonment, restitution order, and personal
money judgment.
Based on the record before us, we cannot agree with the Government
that its only error was its inclusion of those payments totaling $70,900. FBI
financial analyst Sebring admitted at sentencing that she included debit-card
payments as losses solely because they were made in violation of Patriot’s
policy that employees must personally pay expenses and then seek
reimbursement. By implication, she did not consider whether such payments
were for Antonucci’s personal expenses—and thus caused Patriot an actual
loss—or were for legitimate business expenses that he incurred on behalf of
7
Case: 15-20171 Document: 00513560973 Page: 8 Date Filed: 06/22/2016
No. 15-20171
Patriot. 3 Therefore, because Sebring did not account for whether such
payments caused Patriot actual loss, Sebring used an impermissible
methodology to calculate the total loss. See id. at 322.
Further, the Government has changed the position it took at sentencing
with respect to Patriot’s debit-card policy. It no longer contends that the debit-
card payments that violated Patriot’s policy automatically caused an actual
loss. Instead, on appeal, it argues that the PSR overcame any flaw in Sebring’s
loss methodology. According to the Government, the PSR independently
concluded the figure of $2,918,261.38 accounted for funds that Antonucci used
for his own purposes, and the district court accepted this finding. We find this
argument unpersuasive given the record. The PSR’s loss estimation matches
exactly Sebring’s loss calculation of $2,918,261.36. The district court adopted
this figure in full. Notably, the Government concedes that the 54-page chart
was the “evidentiary support underlying the [PSR’s] loss calculation.” As such,
we must conclude that by accepting Sebring’s loss estimation in toto, the
district court and PSR also adopted her impermissible loss methodology.
Accordingly, the loss methodology applied here—which we review de
novo—was erroneous. See Klein, 543 F.3d at 214 (finding error where the
district court adopted the PSR, which had accepted an investigator’s flawed
loss calculation). This methodology formed the basis for the restitution order,
3The fault in Sebring’s loss methodology is reflected by specific charges. For example,
there is a debit-card charge to “Judy Diamond Associate[s],” which totaled $560. When
Antonucci’s counsel asked Sebring about this charge at sentencing, she said that she
“assume[d] it’s a purchase at a jewelry store.” However, on appeal, Antonucci points out that
this company is not a jewelry store but rather sells employee benefit and retirement plans.
8
Case: 15-20171 Document: 00513560973 Page: 9 Date Filed: 06/22/2016
No. 15-20171
the Guidelines loss estimation, 4 and the personal money judgment assessment.
Consequently, we vacate entirely the restitution order, term of imprisonment,
and personal money judgment. See id. at 215–16.
We offer two points of clarification for remand. First, we do not hold that
the Government is precluded from introducing evidence to prove a loss amount
equal to the amount contained in the PSR. Rather, we hold only that the loss
methodology as articulated by Sebring was impermissible insofar as Sebring
did not measure actual loss based only on the pecuniary harm suffered by
Patriot.
Second, the Government argues that although it usually bears the
burden to prove the victim’s loss, the protracted nature of Antonucci’s fraud
justifies shifting the burden to Antonucci to prove what amounts, if any,
constitute legitimate business expenses that did not cause an actual loss. See
United States v. Mahmood, 820 F.3d 177, 196 (5th Cir. 2016) (citing 18 U.S.C.
§ 3664(e)) (noting that although “the MVRA places the burden on the
Government to prove a victim’s actual loss,” the district court “may shift that
burden to the defendant as justice requires”); United States v. St. John, 625 F.
App’x 661, 668 (5th Cir. 2015) (per curiam) (observing that the burden-shifting
approach may be applied to proving loss under the Guidelines), cert. denied,
136 S. Ct. 911, and cert. denied, 136 S. Ct. 912 (2016). However, we do not
resolve this issue. Instead, we leave it to the district court on remand to decide
4 We review for harmlessness any error in calculating loss for the purpose of
determining the defendant’s Guidelines range. United States v. Harris, No. 15-50106, 2016
WL 1720046, at *16 (5th Cir. Apr. 28, 2016). In this case, the Government has not carried its
“heavy burden” to prove harmlessness. Id. (quoting United States v. Ibarra–Luna, 628 F.3d
712, 717 (5th Cir. 2010)). In its brief, it does not explain why erroneously calculating certain
losses based solely on Antonucci’s violations of Patriot’s debit-card policy was harmless.
Rather, it simply argues there was no such error. Further, we cannot conclude the error was
harmless given the Government’s emphasis at sentencing that such violations were integral
to the PSR’s loss estimation.
9
Case: 15-20171 Document: 00513560973 Page: 10 Date Filed: 06/22/2016
No. 15-20171
in the first instance whether a burden-shifting approach is warranted. See
United States v. De Leon, 728 F.3d 500, 509 (5th Cir. 2013).
IV. CONCLUSION
For the foregoing reasons, we VACATE Antonucci’s sentence, restitution
order, and personal money judgment and REMAND for resentencing
consistent with this opinion.
10