United States v. Allan, Patrick ( 2008 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 07-1911
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
PATRICK ALLAN,
Defendant-Appellant.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division
No. 05 CR 927—John F. Grady, Judge.
____________
ARGUED NOVEMBER 8, 2007—DECIDED JANUARY 18, 2008
____________
Before EASTERBROOK, Chief Judge, and FLAUM and
KANNE, Circuit Judges.
KANNE, Circuit Judge. Patrick Allan pled guilty to one
count of mail fraud, see 18 U.S.C. § 1341, and was sen-
tenced to 41 months’ imprisonment. On appeal he chal-
lenges his sentence, which the district court calculated
after increasing his offense level because he employed
“sophisticated means” when perpetrating the fraud. See
U.S.S.G. § 2B1.1(b)(9)(C). We affirm the sentence im-
posed by the district court.
2 No. 07-1911
I. HISTORY
In order to promote sales of its products, computer giant
Hewlitt-Packard (“HP”) implemented an “Influencer
Program,” which paid out commissions to HP “referral
partners”—individuals and companies that sold HP
computers to third-party buyers. After each referred sale,
the buyer would return a form to HP that indicated the
name of the referral partner, as well as the buyer’s name
and contact information. Once HP received this form,
it would mail a check to the listed referral partner.
In early 2004, Allan enrolled as a referral partner in the
Influencer Program, doing business as “Allanent.” At the
same time, Allan developed an employee contact at HP.
This insider contact provided Allan with the names of
customers from large institutions, such as hospitals and
universities, who had purchased large quantities of
computers without the use of a referral partner. Allan, in
turn, faxed falsified forms to HP that listed “Allanent” as
the referral partner for these purchases. Allan also
fabricated identities, e-mail addresses, and telephone
numbers, which he listed on the forms so that any effort
to verify the phony purchasers would be routed back
to him.
To further this scheme, Allan created e-mail addresses
and telephone numbers that would appear sufficiently
genuine to deceive HP. For example, Allan disguised a
fictitious buyer for the University of Massachusetts—
which uses e-mail addresses ending in “umass.edu”—by
listing a counterfeit e-mail address that ended in
“umass.org.” Allan also altered the headers on facsimile
transmissions so they would appear to have originated
with the actual HP buyers, and forged signatures on the
forms for his invented purchasers. Between April 2004
and January 2005, Allan utilized this chimerical scheme
to claim nearly $547,000 in referral commissions from
No. 07-1911 3
HP, and received checks from HP for approximately
$484,000.
In early 2005, HP noticed that Allan had received an
unusually large number of commissions, and decided to
conduct an audit of his sales. HP’s investigation revealed
that neither Allan nor Allanent were responsible for
any of the sales that Allan claimed in the forms. In
January 2005, HP terminated Allanent as a referral
partner and sent him a letter that demanded he return
the monies HP had paid to him. But Allan had already
squandered his illicit gains, and a few months later, Allan
re-enrolled in the HP Influencer Program, this time doing
business as “Central Computers.” In May 2005, Allan
employed the same apparatus he had used as Allanent
to claim over $35,000 in fraudulent commissions for
Central Computers. HP paid the full amount to Allan, even
though, again, Allan had not actually influenced the HP
sales. HP once again discovered this, terminated Allan as
a referral partner, and then reported his conduct to the
government.
In November 2005, a grand jury indicted Allan on two
counts of mail fraud in violation of 18 U.S.C. § 1341.
Eventually, Allan agreed to plead guilty to one count of
violating § 1341. After Allan pled guilty, the probation
officer prepared a presentence investigation report (PSR),1
in which he computed Allan’s base offense level at 7
because § 1341 carries a statutory maximum term of
imprisonment of 20 years. See U.S.S.G. § 2B1.1(a)(1). To
this, the probation officer added 14 levels based on Allan’s
intended pecuniary harm to HP ($582,263). See id.
§ 2B1.1(b)(1)(H). However, the probation officer did not
1
The 2006 edition of the United States Sentencing Guidelines
Manual was used in calculating both the PSR and sentence
in this case.
4 No. 07-1911
adjust Allan’s offense level upward because of the “sophis-
ticated means” Allan employed to perpetuate his fraud—in
the officer’s view, Allan’s behavior constituted “mere
dishonesty” and not sophisticated means. See id.
§ 2B1.1(b)(9)(C). The probation officer then subtracted a
total of three levels because Allan had accepted responsi-
bility for his actions: two levels were deducted because
Allan entered a plea agreement and ultimately pled
guilty, and one additional level was deducted upon a
motion by the government because Allan’s plea was
timely. See id. § 3E1.1. These calculations resulted in a
total offense level of 18. This total offense level, when
combined with Allan’s Criminal History Category of I,
yielded a guidelines imprisonment range of 27 to 33
months. The probation officer recommended a sentence
of 27 months’ imprisonment.
At Allan’s sentencing hearing in April 2007, the dis-
trict court discussed the PSR and recommendation with
the parties, but then declined to adopt either the PSR’s
offense level calculation or the officer’s recommended
sentence. The district court decided that Allan’s base
offense level should be increased by two levels because
Allan had created false identities and fictitious con-
tact information, which, in the court’s view, constituted
sophisticated means. As a result, the court recalculated
Allan’s sentence using a total offense level of 20; this
yielded a new guidelines range of 33 to 41 months’ impris-
onment. After considering the parties’ arguments regard-
ing the length of sentence to impose and the factors
articulated in 18 U.S.C. § 3553(a), the district court
announced that a sentence on the high-end of the guide-
lines range was warranted given Allan’s greed and the
extent of his fraud, as well as the need to promote general
deterrence and respect for the law. See Rita v. United
States, 127 S. Ct. 2456, 2468 (2007); United States v. Dean,
414 F.3d 725, 729 (7th Cir. 2005). Accordingly, the dis-
No. 07-1911 5
trict court sentenced Allan at the top of the guidelines
range to 41 months’ imprisonment.
II. ANALYSIS
In this appeal, Allan challenges only the district court’s
application of the sophisticated means offense-level
increase, see U.S.S.G. § 2B1.1(b)(9)(C), when calculating
his guidelines imprisonment range. Allan claims that his
actions exhibited “mere dishonesty” rather than sophis-
tication, and he argues that the probation officer’s rec-
ommendation supports this assertion.
We review the district court’s findings of fact and
applications of the Sentencing Guidelines for clear error.
United States v. Stitman, 472 F.3d 983, 986 (7th Cir.
2007). “A finding of fact is clearly erroneous only if,
based upon the entire record, we are left with the definite
and firm conviction that a mistake has been committed.”
United States v. Gallardo, 497 F.3d 727, 740 (7th Cir.
2007) (quoting United States v. Chamness, 435 F.3d 724,
726 (7th Cir. 2006)). And, of course, we review the dis-
trict judge’s sentencing findings notwithstanding any
disparity between those findings and the probation officer’s
recommendation, which the judge remains free to reject.
See, e.g., United States v. Blue, 453 F.3d 948, 951 (7th Cir.
2006).
We do not believe that the district court clearly erred
when it applied a two-level increase to Allan’s offense level
on the basis of his crime involving sophisticated means.
Application Note 8(B) to U.S.S.G. § 2B1.1 states in full:
Sophisticated Means Enhancement.—For purposes
of subsection (b)(9)(C), “sophisticated means” means
especially complex or especially intricate offense
conduct pertaining to the execution or concealment of
an offense. For example, in a telemarketing scheme,
6 No. 07-1911
locating the main office of the scheme in one jurisdic-
tion but locating soliciting operations in another
jurisdiction ordinarily indicates sophisticated means.
Conduct such as hiding assets or transactions, or
both, through the use of fictitious entities, corporate
shells, or offshore financial accounts also ordinarily
indicates sophisticated means.
The parties concede that this note does not provide an
exhaustive list of examples of sophisticated means. See
United States v. Madoch, 108 F.3d 761, 766 (7th Cir. 1997).
Rather, the note reflects that a wide range of criminal
conduct might be deemed sophisticated.
In this case, Allan used fictitious business entities,
“Allanent” and “Central Computers,” to conceal his offense
from HP, a sophisticated company. In addition, he evaded
discovery for over a year by doctoring fax headers and
fashioning phony e-mail addresses to resemble legitimate
contact information. Moreover, after HP detected the
fraud and removed Allanent from its list of referral
partners, Allan perpetrated a similar scheme as Central
Computers for another month.
Allan’s scheme parallels conduct that we have
previously deemed “sophisticated.” See United States v.
Rettenberger, 344 F.3d 702, 709 (7th Cir. 2003) (finding
sophistication where defendant fooled “a skilled neurolo-
gist and 14 insurers”); cf. Madoch, 108 F.3d at 766(finding sophistication under § 2T1.1(b)(2), the analog of
§ 2B1.1(b)(9)(C) in tax fraud cases, where defendant
falsified tax forms and used false Social Security num-
bers); United States v. Wu, 81 F.3d 72, 73-74 (7th Cir.
1996) (finding sophistication under §2T1.1(b)(2) where
defendant falsified business records, used false names,
and provided misleading tax information). And the dis-
trict court did not clearly err merely because Allan could
have taken more elaborate steps to conceal his fraud. See
No. 07-1911 7
Madoch, 108 F.3d at 766. Therefore, in our view, Allan’s
conduct falls well within the range outlined by
§ 2B1.1(b)(9)(C). See also Stitman, 472 F.3d at 987 (noting
the well-established rule that guidelines application
notes are binding authority).
At the end of his brief, Allan offers a perfunctory chal-
lenge to the reasonableness of his sentence under United
States v. Booker, 543 U.S. 220, 264 (2005). We presume
that Allan’s 41-month sentence is reasonable because
it falls within the correctly calculated guidelines range
of 33 to 41 months. See Rita, 127 S. Ct. 2456 at 2465;
United States v. Sanchez, 507 F.3d 532, 539-40 (7th Cir.
2007); United States v. Mykytiuk, 415 F.3d 606, 608
(7th Cir. 2005). And because Allan has offered nothing
to indicate that his sentence offends the § 3553(a) factors,
he has failed to rebut the presumption that his Guide-
lines sentence is reasonable. Mykytiuk, 415 F.3d at 608.
III. CONCLUSION
For the foregoing reasons, the sentence imposed by the
district court is AFFIRMED.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—1-18-08