United States v. Betts ( 2007 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA,  No. 06-50205
Plaintiff-Appellee, D.C. No.
v.  CR-04-00172-
MARCUS BRANDON BETTS, DOC-3
Defendant-Appellant.
 OPINION
Appeal from the United States District Court
for the Central District of California
David O. Carter, District Judge, Presiding
Argued and Submitted
January 10, 2007—Pasadena, California
Filed December 14, 2007
Before: Andrew J. Kleinfeld, Ronald M. Gould, and
Milan D. Smith, Jr., Circuit Judges.
Opinion by Judge Kleinfeld
16405
16408 UNITED STATES v. BETTS
COUNSEL
James H. Locklin, Deputy Federal Public Defender, Los
Angeles, California, for the appellant.
Douglas F. McCormick, Assistant U.S. Attorney, Santa Ana,
California, for the appellee.
OPINION
KLEINFELD, Circuit Judge:
We review several conditions of supervised release.
FACTS
Marcus Betts worked for TransUnion LLC, one of the three
major credit reporting agencies. He was the leader of the unit
that decided disputes, where people claimed that some black
mark on their credit score was inaccurate. He took bribes to
conspire with his codefendants to falsely improve people’s
UNITED STATES v. BETTS 16409
credit scores. His coconspirators would take money from peo-
ple who wanted to improve their credit, and send letters that
Betts would put in TransUnion’s database in such a way as to
delete negative entries. It was a kind of private sector ticket-
fixing scheme, with the outside people calling themselves
“Second Chance Financial Services,” designed to make it eas-
ier for people with bad credit records to borrow money. Betts
did not create or direct the conspiracy, but was the essential
inside man at TransUnion and helped his coconspirators com-
pose an effective form letter. Betts falsified 654 credit histo-
ries, generating around a million dollars in losses to lenders
who got stuck with the bad risks.
He pleaded guilty to conspiracy under 18 U.S.C. § 371, and
raises no issues on appeal except with regard to sentencing.
He claims that some of the conditions of supervised release
are too restrictive. The judgment applies these conditions to
the entire three-year period of supervised release.
ANALYSIS
We review conditions of supervised release for abuse of dis-
cretion.1
1. The Employment Restriction.
The two most onerous conditions challenged were justified
by the record in this case. The district court restricted Betts’s
employment after his release from prison to keep him away
from his employers’ money, and required him to allow
searches without warrant.
The employment restriction that Betts challenges says that
“the defendant shall not be employed in any capacity wherein
he has custody, control, or management, of his employer’s
1
United States v. Weber, 451 F.3d 552, 557 (9th Cir. 2006) (quoting
United States v. Williams, 356 F.3d 1045, 1052 (9th Cir. 2004)).
16410 UNITED STATES v. BETTS
funds, lines of credit, or any similar sources of monies.” Betts
argues that this condition was an abuse of discretion because
his crime did not involve stealing from his employer, so the
condition unduly restricts his employability. Also, he argues,
the district court did not expressly determine whether the con-
dition is necessary to protect the public, and if so, what mini-
mum time and extent would sufficiently protect the public.
[1] Betts was an employee of a credit reporting company,
but his fraud would harm, at least in the short run, only the
banks that loaned money to the debtors whose history he
faked, not his employer. Nevertheless, as an employee, he
owed the credit reporting company a fiduciary duty of loyalty.2
An employee’s duty of loyalty includes a duty to act solely
for the interests of his employer within the business area for
which he is employed, account to the employer for money
received in connection with his work, and avoid undisclosed
interests that might affect his conduct as an employee.3 An
employee who takes a bribe to benefit some third party vio-
lates his duty to his employer, even if the harm induced by the
bribe is to a third party. Betts took bribes to use his employ-
ment duties in a way that would distort the credit reports his
employer provided, with obvious potential harm to lenders
who relied on the reports.
[2] The applicable statutes and guidelines enabled the judge
to restrict employment as he did. The district court may, sub-
ject to other statutory provisions and sentencing guidelines,
impose as a condition of supervised release any of the discre-
2
Restatement (Second) of Agency § 387 (“Unless otherwise agreed, an
agent is subject to a duty to his principal to act solely for the benefit of
the principal in all matters connected with his agency.”).
3
Warren A. Seavey, Law of Agency § 147 (1964) (“[W]ithin the area of
his employment and when not acting in the protection of a superior or
equal interest, [an agent’s] duty is to give single-minded attention to the
principal’s affairs and to subordinate personal interests, except with the
principal’s consent.”).
UNITED STATES v. BETTS 16411
tionary conditions available for probation.4 Among these are
that the defendant “refrain . . . from engaging in a specified
occupation, business, or profession bearing a reasonably
direct relationship to the conduct constituting the offense, or
engage in such a specified occupation, business, or profession
only to a stated degree or under stated circumstances.”5
The applicable sentencing guideline in substance repeats
the statutory provision and adds some restraint on its use. The
condition has to be “reasonably necessary to protect the pub-
lic because there is reason to believe that, absent such restric-
tion, the defendant will continue to engage in unlawful
conduct similar to that for which the defendant was convicted.”6
The purpose of the occupational restrictions is to prevent
crime but facilitate lawful employment, so occupational
restrictions must be used prophylactically rather than as punish-
ment.7
[3] The question here is how close the crimes protected
against by the employment restriction have to be to the crimes
of conviction. The answer implied by the statutes and guide-
lines, is, close enough to protect the public from reasonably
similar crimes. An employee such as Betts, who has taken
bribes to betray his employer, has sufficiently demonstrated
his untrustworthiness in the employment relationship to be
kept away from employers’ money for three years. That the
crime of embezzlement differs from the crime of conspiracy,
and that Betts’s conspiracy used the employer as a vehicle
rather than as the victim, do not eliminate the “reasonably
direct” relationship needed. It is not sufficient, for purposes of
protecting the public, that the barn door only be locked
against the commission of a substantially identical crime. The
public is entitled to be protected against crimes flowing from
4
18 U.S.C. § 3583(d).
5
18 U.S.C. § 3563(b)(5).
6
U.S. Sentencing Guidelines Manual § 5F1.5(a)(2) (2006).
7
U.S. Sentencing Guidelines Manual § 5F1.5 cmt. background (2006).
16412 UNITED STATES v. BETTS
the same character trait demonstrated by the crime. Betts was
a dishonest employee who betrayed his employer.
The judge expressly stated his view that the employment
restriction had a connection to the crime committed, and that
Betts’s employment in any capacity needed scrutiny to protect
against fraud. Betts argues that this explanation was inade-
quate but has cited no authority requiring the judge to say
more. Circuit law establishes that a sentencing judge is not
required “to articulate on the record at sentencing the reasons
for imposing each condition”8 of supervised release, where we
can determine from the record whether the court abused its
discretion.
2. Warrantless Searches.
The judgment provides that “the defendant shall submit
person and property to search and seizure at any time of the
day or night by any law enforcement officer, with or without
a warrant.” The judge said that the reason for this condition
was “the underlying crime itself, and the fraudulent nature of
that crime.”
[4] Betts argues that the court abused its discretion because
he had no prior convictions and had fully accepted responsi-
bility for his crime. We cannot characterize the judge’s exer-
cise of discretion as an abuse, even though it is very intrusive.
First, the public is entitled to protection against the possibility
that Betts’s conduct may not have been so aberrational as he
contends, and considering his skill and success in committing
this subtle fraud, protection will not be easy.
[5] Second, the Supreme Court recently held in Samson v.
California, that a similarly worded condition imposed by stat-
ute on all California parolees did not violate the Fourth
Amendment, even though the condition did not require rea-
8
United States v. Rearden, 349 F.3d 608, 619 (9th Cir. 2003).
UNITED STATES v. BETTS 16413
sonable suspicion.9 The Court considered the high risk of
recidivism for people convicted of crimes, and the problem
that “[i]mposing a reasonable suspicion requirement . . .
would give parolees greater opportunity to anticipate searches
and conceal criminality.”10 Because the blanket requirement
imposed by California on state parolees did not violate the
Fourth Amendment, a fortiori the individualized requirement
imposed in this case on supervised release does not. There is
no sound reason for distinguishing parole from supervised
release with respect to this condition. The federal system has
abolished parole, and uses supervised release to supervise fel-
ons after they get out of prison.11 People on supervised release
have not completed their sentences, they are serving them.
The Court in Samson itself drew the analogy to supervised
release.12 After Samson, there is no room for treating the
search condition in this case as an abuse of discretion.
3. Windfalls.
The judgment provides that “as directed by the Probation
Officer, the defendant shall apply monies received from
income tax refunds, lottery winnings, inheritance, judgments,
and any anticipated or unexpected financial gains to the out-
standing Court-ordered financial obligation.”13 The “Court-
ordered obligation” is the $967,340 restitution order, which is
itself not challenged.
With respect to this condition, the district court erred by
delegating what would be done to the probation officer. The
problem is not that part or all of the money will be applied to
restitution, but rather that the probation officer instead of the
judge will decide how much.
9
Samson v. California, 126 S.Ct. 2193, 2202 (2006).
10
Id. at 2201.
11
Pub.L. No. 98-473, 98 Stat. 2177 (1984).
12
Samson, 126 S.Ct. at 2201.
13
Emphasis added.
16414 UNITED STATES v. BETTS
The controlling statute says that “the court” must make the
decisions about the terms of restitution.14 The statute specifi-
cally provides that “the court” makes the decision on changes
in terms because of changes in the defendant’s financial cir-
cumstances. The defendant has to notify the court and the
prosecution, and then the court decides on motion of either
party or on its own motion what changes to make.15
[6] We remanded twice in the same case, United States v.
Gunning,16 holding that the district judge erred by delegating
the scheduling of restitution payments, first to the probation
officer and then to the Bureau of Prisons. We held, in accord
with our sister circuits, that “fixing the terms for making resti-
tution . . . is non-delegable,”17 and we said as clearly and
emphatically as we could that “the district court simply does
not have the authority to delegate its own scheduling duties
[for paying restitution] — not to the probation office, not to
the BOP, not to anyone else.”18 The sentence has to be
vacated and remanded because the district court erred by dele-
gating to the probation office how large restitution payment
terms would be affected by windfalls.
[7] The motion procedure outlined in section 3664(k) does
leave open a practical problem, that a windfall will be spent
14
18 U.S.C. § 3664(f)(2).
15
18 U.S.C. § 3664(k) (“A restitution order shall provide that the defen-
dant shall notify the court and the Attorney General of any material
change in the defendant’s economic circumstances that might affect the
defendant’s ability to pay restitution. The court may also accept notifica-
tion of a material change in the defendant’s economic circumstance from
the United States or from the victim . . . . Upon receipt of the notification,
the court may, on its own motion, or the motion of any party, including
the victim, adjust the payment schedule, or require immediate payment in
full, as the interests of justice require.”).
16
United States v. Gunning, 401 F.3d 1145 (9th Cir. 2005); United
States v. Gunning, 339 F.3d 948 (9th Cir. 2003).
17
Gunning, 401 F.3d at 1149.
18
Id. at 1150.
UNITED STATES v. BETTS 16415
or hidden before the notification and motion process is com-
pleted. That problem can be solved by altering the windfall
condition to require the defendant to turn over every penny of
a tax refund, payment on a judgment, inheritance, lottery win-
nings, etc., to the probation officer for deposit in a court
account until the court issues its order pursuant to section
3664(k). Such a condition would preserve the money while
the court, not the probation officer, decided how it should be
applied. For inheritances, settlements and judgments received
during incarceration, the statute dictates that all the money be
applied to restitution,19 but there may be more room for judi-
cial discretion for income tax refunds and for money received
after incarceration ends.
4. Alcohol.
The judgment commands that “the defendant shall abstain
from using illicit drugs or alcohol and abusing prescription
medications during the term of supervised release.” No issue
is raised regarding illicit drugs or abusing prescription medi-
cations, but Betts challenges the requirement that he “abstain
from using . . . alcohol.” On the record before us, he is cor-
rect.
There is nothing in the record to suggest that the judge
thought there was any past abuse of alcohol, or any relation-
ship between alcohol and Betts’s crime. Betts appears to have
lost this liberty because of a policy disagreement between the
federal defender’s office and the court, and a misallocation of
the burden of proof. Presentence reports always have a para-
graph about substance abuse, and in Betts’s report the proba-
tion officer wrote that “[o]n the advice of counsel, Betts
declined to discuss his past or current use of illicit substances
or alcohol.” The supervised release statute requires urinalysis
for drugs as an explicit condition of supervised release unless
the judge exercises discretion otherwise. The probation officer
19
18 U.S.C. § 3664(n).
16416 UNITED STATES v. BETTS
recommended that drug testing be suspended because “the
defendant poses a low risk of future substance abuse,” and the
judge accepted his recommendation.
[8] In United States v. Weber, we acknowledged that “a dis-
trict court’s discretion [in imposing conditions of supervised
release] is not . . . boundless.”20 We identified 18 U.S.C.
§ 3583 as the “principal statute governing a district court’s
ability to impose conditions . . . .”21 After examining § 3583
and the statutes referenced therein, we concluded that
“[u]nder this statutory scheme, . . . conditions of supervised
release ‘are permissible only if they are reasonably related to
the goal of deterrence, protection of the public, or rehabilita-
tion of the offender’ ” and “involve ‘no greater deprivation of
liberty than is reasonably necessary for the purposes’ of
supervised release.”22 And we explained that this determina-
tion must be an “individualized” one based on “the nature and
circumstances of the offense and the history and characteris-
tics of the defendant.”23 The requirement of individualization
leaves no room for blanket policies applicable without indi-
vidualized consideration regarding discretionary conditions.
[9] Betts contends that the condition prohibiting him from
drinking alcohol fails the test set out in Weber.24 We agree.
No one suggests that alcohol played any role in Betts’s crime.
And there was no evidence that Betts had any past problems
with alcohol. Under these circumstances, we think it impossi-
20
United States v. Weber, 451 F.3d 552, 557 (9th Cir. 2006).
21
Id.22
Id. at 558 (quoting United States v. T.M., 330 F.3d 1235, 1240 (9th
Cir. 2003) (internal quotation marks omitted)).
23
Weber, 451 F.3d at 566 (9th Cir. 2006) (quoting 18 U.S.C.
§§ 3583(d)(1), 3553(a)(1)).
24
In addition to the condition prohibiting Betts from drinking any alco-
hol at all, the judge imposed a condition prohibiting Betts from using alco-
hol excessively. Betts did not appeal the prohibition on excessive drinking
and our decision does not affect its validity.
UNITED STATES v. BETTS 16417
ble to say that the condition imposed bears a reasonable rela-
tionship to rehabilitating the offender, protecting the public,
or providing adequate deterrence.
In so concluding, we join the other two circuits to have
faced this precise question. In United States v. Prendergast,
the Eighth Circuit vacated a no alcohol condition, concluding
that it did not “reasonably relate to the goals of rehabilitation
and protection” because “[t]here is no evidence indicating that
Prendergast suffers from alcoholism or that the use of alcohol
in any way contributed to the commission of the offense . . . .
The district court failed to make any specific findings . . . that
the defendant . . . otherwise is in need of any substance abuse
rehabilitation.”25 Similarly, in United States v. Modena, the
Sixth Circuit vacated a no alcohol condition, concluding that
it did “not bear a reasonable relationship to either rehabilitat-
ing Modena or protecting the public” because “[n]either alco-
hol nor drug use played a role in Modena’s crime,” and the
record does not “indicate that Modena has any substance
abuse problem.”26
It is true that our circuit has, on several occasions, upheld
the imposition of a no alcohol condition. However, in each of
these cases, we upheld the condition because there was some
evidence of prior alcohol, drug, or prescription medicine
abuse. In United States v. Miller, we upheld the condition
because “[i]nasmuch as Miller’s previous history was indica-
tive to the [t]rial [j]udge that alcohol was a substantial con-
tributing factor to his legal transgressions the imposition of
the condition is certainly protective of the public interest” and
may help to rehabilitate the offender by ending his addiction
to alcohol.27 In United States v. Johnson, we upheld a “re-
quirement that [the defendant] submit to drug abuse treatment
and mental health counseling and refrain from alcohol use
25
United States v. Prendergast, 979 F.2d 1289, 1293 (8th Cir. 1992).
26
United States v. Modena, 302 F.3d 626, 636 (6th Cir. 2002).
27
United States v. Miller, 549 F.2d 105, 107 (9th Cir. 1976).
16418 UNITED STATES v. BETTS
during and after treatment” because, inter alia, the defendant
had “a long history of substance abuse and violent aggres-
sion” and “the record . . . shows that [he] has been involved
in alcohol-related incidents.”28 In United States v. Maciel-
Vasquez, we upheld a no alcohol condition because we
rejected the defendant’s contention that he “has never been
convicted of an alcohol-related crime” and that “there is noth-
ing to suggest that alcohol has ever caused problems in his life.”29
We did so because the record showed that the defendant had
a prior conviction for driving under the influence, a prior
arrest for possession of an open bottle of alcohol, and a his-
tory of drug abuse.30 And, most recently, in United States v.
Sales, we upheld a no alcohol provision only because “the
record . . . revealed [the defendant’s] history of substance
abuse and his need for outpatient substance abuse treatment,
as well as his history of depression.”31
The best case for the government is United States v. Carter.32
In Carter, we upheld the no alcohol condition even though
Carter had “no history of drug or alcohol abuse.”33 But we
only did so because “there was . . . evidence before the district
court that Carter had attempted suicide by overdosing on
migraine medication” and because “the district court noted
that Carter’s behavior had been unstable.”34 Indeed, we specif-
ically distinguished Carter from the Eighth Circuit’s holding
in United States v. Prendergast because the defendant in that
case had not “displayed Carter’s erratic behavior” and had not
28
United States v. Johnson, 998 F.2d 696, 699 (9th Cir. 1993).
29
United States v. Maciel-Vasquez, 458 F.3d 994, 996 (9th Cir. 2006).
30
Id.31
United States v. Sales, 476 F.3d 732, 735-36 (9th Cir. 2007).
32
United States v. Carter, 159 F.3d 397 (9th Cir. 1998).
33
Id. at 401.
34
Id.UNITED STATES v. BETTS 16419
“attempted suicide by overdosing on prescription medica-
tions.”35
[10] For essentially the same reasons, Carter is not applica-
ble here. There was absolutely no evidence of any type of
substance abuse or any erratic behavior of the kind in Carter.
And the judge expressly noted that he did not think Betts had
a problem with drugs or alcohol and that he did not consider
Betts to be at risk of future substance abuse. In short, contrary
to the rationale of our opinions affirming the imposition of the
no alcohol condition, nothing suggests that the condition is
related to (or necessary for) protecting the public, rehabilitat-
ing Betts, or providing adequate deterrence.
At the sentencing hearing, the judge said to the federal
defender, “I know the blanket position of your office concern-
ing search and seizure conditions and alcohol conditions and
narcotics conditions,” and “I am not going to harm your client
because of it,” but in telling clients not to answer questions
about these things, “you leave the court defenseless [so] there
has to be some presumption that it’s really the client’s respon-
sibility to disclose.” The judge went on to say that his “guess
is that you don’t have any narcotics background or any alco-
hol background, but if you did, it might be de minimis.”
Thus the judge made it perfectly clear that the alcohol
abstention requirement had nothing to do with any thought
about Betts as an individual and the risk of alcohol abuse con-
tributing to further crime. Rather, he told defense counsel “I
find fault with that blanket policy on your office’s part,” and
“[u]nless you give me something to work with, then I am
going to find these conditions and impose them time after
time. So you might rethink it. Not you personally, but your
office, and carry that message.” The judge expressly stated
that he imposed the alcohol abstention requirement because
“the court has no information, nor a description from you,
35
Id. at n.4.
16420 UNITED STATES v. BETTS
concerning any past alcohol abuse,” and “there has to be an
affirmative duty on the defendant . . . to be completely candid
and truthful with the court through the probation office.”
There could not be a clearer case of imposing a discretion-
ary condition without a reason relating to the individual
defendant.
This was error. The statute permits a discretionary super-
vised release condition to be imposed only “to the extent that
such condition . . . involves no greater deprivation of liberty
than is reasonably necessary for the purposes set forth” in sec-
tions 3553(a)(2)(B), (C), and (D).36 Moderate consumption of
alcohol does not rise to the dignity of our sacred liberties,
such as freedom of speech, but the freedom to drink a beer
while sitting in a recliner and watching a football game is
nevertheless a liberty people have, and it is probably exer-
cised by more people than the liberty to publish a political
opinion. Liberties can be taken away during supervised
release to deter crime, protect the public, and provide correc-
tional treatment,37 but that is not why it was taken away in this
case.
The court explains that it took away this liberty to change
federal defender office policy by imposing the burden on
defendants to answer probation officers’ questions about
drugs and alcohol. We need not reach any constitutional ques-
tion that might arise under the Fifth Amendment, because the
parties have not raised such a question and the statute does
not support the burden to volunteer information that the court
imposed. We do not understand how a federal defender’s
office or private law firm could, consistent with a lawyer’s
ethical duties, adopt a policy sacrificing a client’s interest to
the interests of criminal defendants as a class, but this is also
a question we need not reach.
36
18 U.S.C. § 3583(d)(2).
37
18 U.S.C. §§ 3553(a)(2)(B),(C) and (D), and 3583(d)(2).
UNITED STATES v. BETTS 16421
[11] The bureaucratic reason for the sentence, to set court
policy against federal defender office policy in order to com-
pel a change in federal defenders’ office policy, is prohibited
in the context of sentencing by the requirement in 18 U.S.C.
§ 3553(a)(1) that the court must consider “the history and
characteristics of the defendant.” Sentencing must, under sec-
tion 3553, be individualized.38 Congress can make non indi-
vidualized policies, but not judges. We squarely rejected the
proposition that the defendant has the burden to come forward
with information in a decision that came down after the sen-
tencing in this case, United States v. Weber.39 We held in
Weber that the government bears the burden to demonstrate
that the discretionary supervised release condition is appropri-
ate for the particular case.40 The defendant does not bear the
burden to demonstrate that a discretionary condition is unneces-
sary.41
This is not to say that there is anything wrong generally
with supervised release conditions requiring abstention from
alcohol. Many people commit crimes when they drink too
much, and such conditions are often necessary to protect the
public and provide correctional treatment. We have upheld
abstention conditions where there is some indication in the
record of a problem of abuse.42 Frequently the need for
abstention is obvious from the defendant’s criminal history,
and the court does not need any admissions from the defen-
dant, because of such past offenses as drunk driving.43 But the
decision has to be individualized, not a matter of policy appli-
cable without regard to the individual defendant.
38
Weber, 451 F.3d at 566 (9th Cir. 2006) (quotation omitted).
39
Id. at 558.
40
Id. at 558-59.
41
Id.42
Maciel-Vasquez, 458 F.3d at 996.
43
Id.16422 UNITED STATES v. BETTS
CONCLUSION
The employment and the search conditions were proper.
The windfall and the abstention conditions were error. We
therefore VACATE the sentence and REMAND for resen-
tencing.