United States v. Schmidt

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES CO URT O F APPEALS
August 10, 2007
FO R TH E TENTH CIRCUIT Elisabeth A. Shumaker
Clerk of Court
U N ITED STA TES O F A M ER ICA,
Plaintiff-Appellee,
v. No. 06-1412
(D.C. No. 04-CR-103-REB)
JAN NICE M CLA IN SCH M IDT, (D . Colo.)
Defendant-Appellant.
OR D ER AND JUDGM ENT *
Before H E N RY and A ND ER SO N, Circuit Judges, and BROR BY, Senior Circuit
Judge.
Jannice M cLain Schmidt pleaded guilty to two counts of Securities Fraud
and Aiding and Abetting in violation of 15 U.S.C. §§ 77q(a)(1) and 77x and
18 U.S.C. § 2. 1 The district court sentenced her to 60 months imprisonment on
the first count and 48 months on the second count, to be served consecutively, for
*
After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and
collateral estoppel. It may be cited, however, for its persuasive value consistent
with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
1
She also admitted to one count of Criminal Forfeiture under 18 U.S.C.
§§ 981, 1956, and 1961, and 28 U.S.C. § 2461.
a total sentence of 108 months. She appeals from the district court’s judgment
and sentence. W e vacate her sentence and remand.
FACTS
This case arises from a Ponzi scheme in which Schmidt participated. The
government estimates the aggregate intended loss to victims from the scheme at
over $50 million. Investors w ere told that they were investing in a high-yield
investment program and that their investments would be insured against loss. In
reality, investor funds were used for other purposes, including payments to earlier
investors and to those who ran the scheme.
Schmidt’s plea agreement described her participation in the scheme:
In the first part of 2001, [Schmidt] was solicited by defendant
Charles Lewis to invest money in the Smitty’s, LLC high-yield
investment program. [Schmidt] initially understood that the program
used investor funds to trade medium term notes (M TNs) with little or
no risk because funds invested were maintained in a non-depleting
bank account and insured against loss. In the fall of 2001, [Schmidt]
became the bookkeeper for Smitty’s, which entailed performing the
accounting necessary for the preparation of monthly statements,
preparing checks for signature, and sending checks to investors
seeking to withdraw money, all at the direction of defendant Norman
Schmidt. At or about the same time, [Schmidt] began to solicit
investors in the Smitty’s high-yield investment program and to
receive commissions for persons whom she brought into the program.
[Schmidt] later became aware that similar investment programs were
being marketed through [other] entities.
During the time that [Schmidt] was involved w ith these
programs, Norman Schmidt was the principal and operator of
Smitty’s and the other entities named above, Charles Lewis solicited
investors, and George Alan W eed purportedly arranged for the
insurance on the investment. [Schmidt] learned at some point that
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M ichael Smith was involved with Charles Lewis and Capital
Holdings. George Beros was known to [Schmidt] as a partner of
Norman Schmidt in M onarch Capital Holdings and the trader of the
medium term notes.
[Schmidt] continued to assist in the operation of Smitty’s,
including soliciting investors, maintaining investor accounts, and
preparing and sending monthly statements to investors w hich falsely
represented the status of the investment, up to and until the execution
of various search and seizure warrants stemming from the
investigation of this case on M arch 7, 2003. She also participated in
soliciting investments through and sending monthly statements to
investors in other entities[.] During this period, [Schmidt] became
aware that investors’ funds were not being deposited into non-
depleting accounts, were not being used for the purposes represented
to investors . . . and that no trading of M TNs had taken place.
R., doc. 750, at 4-5.
The two counts to which Schmidt pled guilty involved a comparatively
small sum of money, $30,000. 2 The plea agreement listed several sentencing
2
Count I involved her helping Charles Lewis to persuade a previous
acquaintance of Schmidt’s to invest $5,000 in the Smitty’s high-yield investment
program. Schmidt failed to disclose a material fact to the victim in connection
with the solicitation: that Lewis had a prior Colorado felony conviction.
Count II involved an incident that occurred after the United States
government seized the Smitty’s, LLC bank accounts. An investor provided a
cashier’s check in the amount of $25,000 to Smitty’s. Because of the seizure of
Smitty’s bank accounts, this check could no longer be negotiated. Schmidt and
Norman Schmidt drove to the victim’s home to persuade him to provide a
cashier’s check to replace the original check. Schmidt did not disclose to the
victim Lewis’s felony conviction, that the funds would not be used to trade
M TNs, and that the Smitty’s bank accounts had been seized by federal law
enforcement agents. Schmidt and Norman Schmidt accompanied the victim to a
bank, where a check was drawn payable to a different entity. Schmidt later
assisted in opening a new account in the name of that entity, from which the
(continued...)
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factors on which Schmidt and the government disagreed, including the amount of
loss to be attributed to Schmidt for advisory sentencing guideline purposes. The
government contended that the entire intended loss of more than $50 million
should be attributed to Schmidt, raising her offense level by 24 levels. Schmidt
noted her disagreement, but did not initially provide an alternate figure.
The probation department prepared a Presentence Investigation Report
(PSIR). The PSIR stated that after additional analysis, the government now
believed that the total intended loss attributable to Schmidt’s participation in the
scheme was between $20 million and $50 million. This adjustment was
appropriate, the PSIR opined, because Schmidt had not been involved in the
initial part of the scheme to defraud. PSIR, at 4. The PSIR further stated that
“[d]efense counsel advised the probation officer that he believes . . . the loss to be
significantly less, but has not yet provided the probation officer a written
statement explaining his final loss calculation.” Id.Based on additional information supplied by the government, the probation
department later calculated the intended loss attributable to Schmidt at
$27,276,442.93. Id. at 16. This figure was based on the investor deposits into the
“non-depleting accounts.” Id. The PSIR further noted that defense counsel and
2
(...continued)
victim’s funds were later withdrawn with Schmidt’s assistance and used for
purposes inconsistent with the representations made to the victim.
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the government agreed that this amount should be reduced by the principal
returned to investors. The government did not believe, however, that the repaid
principal would reduce the loss amount below $20 million. For an intended loss
between $20 million to $50 million, the Guidelines provided for an increase of 22
levels. The PSIR adopted this loss range in its calculations.
The PSIR thus calculated Schmidt’s advisory guideline sentence as follow s:
Base Offense Level: 6
Enhancement based on intended loss of $20,000,000 +22
but less than $50,000,000
Enhancement for 50 or more victims +4
Enhancement for use of “sophisticated means” +2
Adjusted Offense Level: 34
Id. at 21-23. The Adjusted Offense Level was then reduced by three levels
because Schmidt accepted responsibility for her crimes, resulting in an aggregate
level of 31.
Schmidt had no prior criminal history points. Accordingly, her criminal
history category was I, which, when combined with the Adjusted Offense Level of
31, yielded an advisory guideline range of imprisonment of 108 to 135 months.
But because the statutory maximum penalty for the two offenses was only five
years each, the PSIR reduced the high end of the range to 120 months, yielding an
advisory guideline sentence of 108 to 120 months. See id. at 31.
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Schmidt filed objections to the PSIR, in which she stated “the Defendant
does not yet know what amount of deduction to the gross loss number should be
applied. . . . If the deduction takes the loss below[] $20,000,000, the calculation
changes[.]” Defendant’s Objections, at 2. She also requested a departure from
the advisory guideline sentencing calculation, arguing that the government’s
figure “vastly exceeds the Defendant’s participation in this investment scheme,”
which in her view should have been limited to investment funds deposited in the
Smitty’s investment accounts and not those monies raised by other entities
“known as Capital Holdings, M onarch Capital Holdings, [and the] N orthwestern
Group.” Id. at 5. Schmidt calculated the loss resulting from this more limited
participation at $11,384,617. Id.The probation department prepared an addendum to the PSIR. It noted that
the government had supplied a revised loss figure, adjusted for return to investors,
of $25,656,958.96. Addendum, at A-1. This revised figure would have no effect
on the advisory guideline computation, since the amount of loss still exceeded
$20 million. The probation department further rejected Schmidt’s argument that
her participation should be limited to the Smitty’s accounts, noting that she w as a
registered agent of M onarch Capital Holdings, LLC, and that money was
transferred into FastTrack, LLC, an entity she controlled.
During the sentencing hearing, Schmidt did not specifically renew her
objection that the loss calculation should be limited to the Smitty’s accounts.
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Sentencing Tr. at 25-29. The district court briefly addressed her previous
objections to the loss calculation, however, stating that they were “overruled . . .
generally for the reasons stated, arguments advanced, and authorities cited by the
probation officer and the government.” Id. at 41. The court then accepted “the
presentence report and its concomitant addenda, including the advisory sentencing
guideline applications and calculations therein, as an integral part of [its] findings
of fact.” Id. It further declined to depart downward from the advisory guideline
range, again referring to “the reasons stated, arguments advanced, and authorities
cited by the probation officer and the government.” Id. at 42. After considering
the factors contained in 18 U.S.C. § 3553, the district court sentenced Schmidt as
described above.
ANALYSIS
Schmidt contends that the district court erred by relying solely on the PSIR
to determine the amount of loss. She further argues that there was an insufficient
factual basis to hold her accountable for a loss in excess of $20 million.
1. Standard of Review
The parties disagree concerning the standard of review , but it is now well
established. After United States v. Booker, 543 U.S. 220 (2005), we review
sentences for reasonableness. United States v. Kristl, 437 F.3d 1050, 1053
(10th Cir. 2006) (per curiam). “[A] sentence that is properly calculated under the
Guidelines is entitled to a rebuttable presumption of reasonableness.” Id. at 1054;
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see also Rita v. United States, 127 S. Ct. 2456, 2462-63 (2007) (concluding that a
court of appeals may apply a presumption fo reasonableness to a
within-Guidelines sentence). In considering the district court’s application of the
Guidelines, we review its factual findings for clear error and its legal
determinations de novo. Kristl, 437 F.3d at 1054. W e review compliance with
the Rules of Criminal Procedure de novo. United States v. Rodriguez-Delma,
456 F.3d 1246, 1253 (10th Cir. 2006), cert. denied, 127 S. Ct. 1338 (2007).
2. Reliance on PSIR
Federal Rule of Criminal Procedure 32(i)(3)(B) requires a sentencing court
to make a ruling on any disputed portion of the presentence report, unless it
determines that a ruling is unnecessary because the controverted matter will not
affect sentencing. See also U.S. Sentencing Guidelines M anual § 6A1.3(b) (2002)
(requiring resolution of disputed sentencing factors at sentencing). Schmidt
contends that the district court did not satisfy the Rule because it failed to make a
“clear and independent ruling” on the disputed amount of loss and instead
“merely adopt[ed] the factual findings and guideline applications of the PSIR.”
U nited States v. William s, 374 F.3d 941, 947 (10th Cir. 2004).
The district court “may accept any undisputed portion of the presentence
report as a finding of fact.” Fed. R. Crim. P. 32(i)(3)(A). W hen a defendant
alleges a factual inaccuracy in the PSIR, however, the district court must resolve
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the factual dispute and may not simply refer back to the PSIR itself to defeat the
objection. Rodriguez-D elm a, 456 F.3d at 1253.
In her objections to the PSIR, Schmidt disputed her involvement with the
entities known as Capital Holdings, M onarch Capital Holdings, and the
Northwestern Group. The district court did not make a finding concerning
whether Schmidt was involved with these entities. Instead, it simply adopted the
PSIR’s findings and the government’s arguments on this point. Under W illiam s
and other pertinent authority, this was not a sufficient finding. A remand for an
appropriate finding is therefore required.
The government raises several arguments in opposition to remand. First, it
argues that Schmidt waived or conceded her challenge to her participation in the
entities other than Smitty’s by failing to raise the objection in her initial
submission prior to issuance of the PSIR and by failing to renew the argument at
the sentencing hearing. W e do not find her argument waived, however. The
PSIR specifically acknowledged and addressed the argument in question, which
was raised in Schmidt’s objections. See Fed. R. Crim. P. 32(f)(1) (establishing
procedure for objections). The PSIR’s factual finding remained in contention at
sentencing, where the district court ruled upon it without the necessary factual
finding.
Second, the government argues that Schmidt did not raise an authentic
factual dispute, but merely disputed the district court’s application of the
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Guidelines. Challenges to the district court’s application of the Guidelines alone
do not implicate Rule 32’s requirement of a specific finding as to the accuracy of
disputed facts. Rodriguez-D elm a, 456 F.3d at 1253; United States v. Windle,
74 F.3d 997, 1002 (10th Cir. 1996). But while Schmidt’s challenge addressed the
application of the Guidelines, requesting a downward departure, it also raised a
disputed factual issue for resolution: whether Schmidt participated in the fraud
perpetrated through entities other than Smitty’s. The district court was therefore
required to make a finding to resolve this factual dispute.
Third, the government argues that Schmidt was required to offer evidence
beyond her own personal denials to trigger the district court’s further inquiry into
the loss issue. It was the government’s burden to prove the enhancement in
Schmidt’s base offense level resulting from her participation in the scheme.
W illiam s, 374 F.3d at 947 (stating government bears burden of establishing
sentence enhancements under Guidelines). 3 Using the government’s own data,
Schmidt arrived at a specific but substantially smaller loss figure than that
contained in the PSIR. This provided a sufficient evidentiary basis to establish a
disputed issue of fact, requiring a specific finding by the district court.
3
W e acknowledge that Schmidt presented her factual dispute in the context
of a request for a downw ard departure rather than as a direct attack on her offense
level. Nevertheless, the factual dispute goes to the nature of relevant conduct to
be attributed to her, a factor relevant also to determining the enhancement
requested by the government.
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The evidence showed that Schmidt was originally recruited as a victim into
the scheme, and only later became a participant. The plea agreement lacks detail
concerning her participation in specific aspects of the scheme. Given her
objection to the PSIR, the nature and extent of her participation were key factors
to be resolved in determining the appropriate advisory Guideline range and her
appropriate sentence. See U .S. Sentencing Guidelines M anual §§ 1B1.3(a)(1)(A )
and (B) (2002) (addressing relevant conduct), 2B1.1 cmt. 2 (addressing loss
calculation).
3. Sufficiency of Evidence
Schmidt also argues that the evidence was insufficient to justify the
enhancement. She contends that the district court could only rely on conduct to
which she pleaded guilty or which was proved to a jury beyond a reasonable
doubt. This is not the law, however. “[S]o long as the district court applies the
Guidelines in an advisory, rather than a mandatory, fashion, it may rely on facts
found by a judge to be true based on a preponderance of the evidence.” United
States v. Bustamante, 454 F.3d 1200, 1202 (10th Cir. 2006). The district court
treated the Guidelines as advisory and could therefore find facts by a
preponderance in sentencing Schmidt. While its finding here was insufficient in
light of the factual dispute, Schmidt’s admission to the relevant conduct was not
required.
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Schmidt also complains that the district court impermissibly relied on
hearsay evidence, in the form of bank deposit information submitted by the
government. For hearsay to serve as a basis for a sentencing enhancement, the
Sentencing Guidelines require that the statement possess “sufficient indicia of
reliability to support its probable accuracy.” U.S Sentencing Guidelines M anual
§ 6A1.3(a) (2002); see also United States v. Dazey, 403 F.3d 1147, 1177 n.7
(10th Cir. 2005) (citation omitted). This is not a high standard, for it requires only
“minimal indicia of reliability.” United States v. Fennell, 65 F.3d 812, 813
(10th Cir. 1995) (citing United States v. Beaulieu, 893 F.2d 1177, 1181 (10th Cir.
1990)). The evidence before the district court concerning the amount of loss
appears to possess sufficient indicia of reliability to support its probable accuracy
concerning the actual losses incurred by the victims. W e decline to address at
this time, however, whether this evidence would have been sufficiently reliable to
support a proper finding on the disputed participation issue, had one been made.
On remand for the additional findings w e have ordered, the district court should
determine whether further proceedings or the reception of additional evidence on
this question are required.
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W e VACATE the district court’s sentence, and REM AND for further
proceedings in accordance with this order and judgment.
Entered for the Court
Stephen H. Anderson
Circuit Judge
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