Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca3-07-01544/USCOURTS-ca3-07-01544-0/pdf.json

Parties Involved:
Adam Levinson
Appellee
United States of America
Appellant

Document Text:

PRECEDENTIAL

IN THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_____________

No. 07-1544

_____________

UNITED STATES OF AMERICA,

 Appellant,

v.

ADAM LEVINSON

 Appellee.

_____________

On Appeal from the United States District Court

for the District of Delaware

(D.C. No. 06-cr-00062)

District Judge: Honorable Sue L. Robinson

_______________

Argued June 4, 2008 

Before: FISHER, JORDAN, and VAN ANTWERPEN,

Circuit Judges

(Filed September 18, 2008)

_______________

Case: 07-1544 Document: 00312068684 Page: 1 Date Filed: 09/18/2008
2

Colm F. Connolly

Ilana H. Eisenstein [ARGUED]

Office of United States Attorney

1007 N. Orange Street - #700

Wilmington, DE 19801

Counsel for Appellant

Edmund D. Lyons, Jr. [ARGUED]

The Lyons Law Group

1526 Gilpin Avenue

Wilmington, DE 19801

Counsel for Appellee

_____________

OPINION

_____________

JORDAN, Circuit Judge.

Adam Levinson pleaded guilty to one count of wire

fraud, in violation of 18 U.S.C. § 1343, and one count of

filing a false income tax return, in violation of 26 U.S.C. §

7206(1). During his sentencing hearing, the United States

District Court for the District of Delaware granted him a

variance from the recommended United States Sentencing

Guidelines (“Guidelines”) range of 24 to 30 months of

imprisonment and sentenced him to two concurrent 24-month

terms of probation, in addition to supervised release,

restitution, and a special assessment. The government appeals

and argues that the District Court failed to adequately explain

Case: 07-1544 Document: 00312068684 Page: 2 Date Filed: 09/18/2008
3

the chosen sentence. We agree and will vacate Levinson’s

sentence and remand for resentencing. 

I. Background

 Levinson was the manager and twenty-percent owner

of CoolerSmart, LLC (“CoolerSmart”), a Delaware company

that provided filtered drinking water to residences and

businesses. CoolerSmart’s majority owner was WaterWorld

Ventures, Inc. (“WaterWorld”), a wholly-owned subsidiary of

Elkay Manufacturing Company (“Elkay”). Between June

2000 and August 2002, Levinson falsely reported

CoolerSmart’s financial status and operational performance,

representing that the company was successful, when in fact it

was not. Elkay relied on those reports when it invested

millions of additional dollars into CoolerSmart’s business.

In 2001, Elkay reviewed CoolerSmart’s operations and

finances. In preparation for the review, Levinson

implemented a scheme to cover up the falsehoods he had

already told about CoolerSmart’s performance. He created a

second set of financial and operational books and altered

CoolerSmart’s general ledger and customer lists. He also

hired an outside company to enter false customer information

into CoolerSmart’s databases. At his direction, CoolerSmart

employees shredded documents, deleted e-mail and other

electronic records, created false sales reports, recorded

unauthorized expenditures, and falsely reported financial

information. Levinson punished employees who refused to

participate in his cover-up scheme, and, in at least one

Case: 07-1544 Document: 00312068684 Page: 3 Date Filed: 09/18/2008
4

instance, he cut an employee’s salary in half and eliminated

her benefits.

In 2002, Elkay received an anonymous tip warning of

misconduct by CoolerSmart’s management. Elkay responded

by hiring an accounting firm to conduct a forensic audit of

CoolerSmart. The audit not only uncovered Levinson’s

fraudulent reporting practices, it also revealed that Levinson

had used over $177,000 of CoolerSmart’s revenue for his own

benefit – to make personal loan payments, to pay for repairs

on his home, to take vacations, and to make personal credit

card bill payments. Levinson failed to report his use of those

funds as additional revenue on his 2000, 2001, or 2002 federal

income tax returns. As a result, the government’s aggregate

tax loss for those years was approximately $44,000.

On June 6, 2006, Levinson was indicted on one count

of wire fraud and three counts of filing a false income tax

return. He entered into a plea agreement that stated he would

plead guilty to the wire fraud count and to one count of filing

a false income tax return in the year 2002. Prior to his

sentencing hearing, Levinson settled a civil fraud suit brought

against him by Elkay by paying Elkay $350,000 and

relinquishing his twenty-percent ownership interest in

CoolerSmart. However, as to the wire fraud count, the

government and Levinson agreed that, for purposes of

calculating Levinson’s offense level under § 2B1.1(b) of the

Guidelines and for calculating restitution for the fraud, they

would use the amount Levinson took from CoolerSmart for

his personal use, which was $177,289. After adjusting

Levinson’s base offense level of 6 upward by ten points to

Case: 07-1544 Document: 00312068684 Page: 4 Date Filed: 09/18/2008
5

account for the $177,289 loss to CoolerSmart, his offense

level of 16 was further increased by two points pursuant to §

3B1.1 for his role as the organizer, leader, manager, or

supervisor of the offense. His adjusted base offense level of

18 was further increased by two points pursuant to § 3B1.3

for his use of special skill in facilitating and concealing his

crime, resulting in a final offense level of 20 for the wire

fraud count.

Levinson’s base offense level for filing the false

income tax return was 14, pursuant to § 2T4.1, given that the

tax loss was between $30,000 and $80,000. That was

adjusted upward by two points under § 2T1.1 for his failure to

report more than $10,000 in income derived from criminal

activity, resulting in an adjusted offense level of 16. 

At sentencing, the District Court used the greater of the

two offense levels to compute Levinson’s sentence under the

Guidelines, as required by § 3D1.3(a). The Court then

reduced that offense level of 20 by three levels, in

consideration of his acceptance of responsibility, for a total

offense level of 17. Because Levinson had no prior criminal

record, the Court determined that he fell within Guidelines

Criminal History Category I. Therefore, the Court calculated

that the recommended sentencing range under the Guidelines

was 24 to 30 months imprisonment, two to three years of

Case: 07-1544 Document: 00312068684 Page: 5 Date Filed: 09/18/2008
 1

The upper end of the fine range was defined as twice the

gross gain or loss from the crimes, 18 U.S.C. § 3571(d), and

the Court used the $177,289 loss as the basis for its fine

calculation.

 2

Section 3553(a) provides that a court is to consider the

following factors when imposing a sentence:

(1) the nature and circumstances of the offense

and the history and characteristics of the

defendant;

(2) the need for the sentence imposed (A) to

reflect the seriousness of the offense, to promote

respect for the law, and to provide just

punishment for the offense; (B) to afford

adequate deterrence to criminal conduct; (C) to

6

supervised release, a fine of $5,000 to $354,578,1 restitution

in the amount of $177,289, and a $200 special assessment.

Levinson moved for a downward departure based on

what he claimed was his diminished mental capacity resulting

from bipolar disorder. The District Court declined to grant

the motion, concluding that Levinson’s actions belied the

claim of diminished capacity because his fraud was

sophisticated and complex, as were his detailed and extensive

efforts to conceal his misrepresentations from Elkay.

After determining the recommended sentence for

Levinson under the Guidelines, the District Court heard both

parties’ arguments regarding the application of the sentencing

factors set forth in 18 U.S.C. § 3553(a).2

 The government

Case: 07-1544 Document: 00312068684 Page: 6 Date Filed: 09/18/2008
protect the public from further crimes of the

defendant; and (D) to provide the defendant

with needed educational or vocational training,

medical care, or other correctional treatment in

the most effective manner;

(3) the kinds of sentences available;

(4) the kinds of sentence and the sentencing

range established for ... the applicable category

of offense committed by the applicable category

of defendant as set forth in the guidelines ...;

(5) any pertinent policy statement ... issued by the

sentencing commission ...;

(6) the need to avoid unwarranted sentence

disparities among defendants with similar

records who have been found guilty of similar

conduct; and 

(7) the need to provide restitution to any victims of the

offense.

7

maintained that a sentence within the Guidelines was

appropriate because of the seriousness of the offense,

Levinson having engaged in an elaborate, ongoing scheme

that violated Elkay’s trust in him as CoolerSmart’s manager

and minority shareholder. The government also pointed out

that, as part of his scheme to defraud Elkay, Levinson

extorted and manipulated CoolerSmart employees by

threatening to demote or fire them and to terminate their

benefits if they refused to participate. Finally, the

government emphasized that, once Levinson realized that

Elkay was about to uncover the fraud, he tried to conceal it

Case: 07-1544 Document: 00312068684 Page: 7 Date Filed: 09/18/2008
8

while simultaneously negotiating the sale of his CoolerSmart

shares to a third party without Elkay’s consent.

Levinson argued for a sentence of home or community

confinement, as opposed to incarceration. He presented the

Court with mitigating factors, expressed in a large number of

letters written on his behalf by his family, friends, and

members of the community, particularly emphasizing his role

as a father, his contributions to society and, in particular, his

involvement with a Jewish family service organization. Other

mitigating factors he pressed included his prompt payment of

$350,000 to Elkay to settle the civil suit, his loss of

employment if he were imprisoned, and the financial and

emotional toll his imprisonment would have on his young

family, especially his learning-disabled son.

The Court then considered the § 3553(a) factors. It

acknowledged the many letters written on Levinson’s behalf,

which urged leniency both for the sake of his family and

because he was a good person who had made poor decisions.

According to the District Court, those considerations did not

distinguish Levinson from other criminals. The District Court

did, however, determine that Levinson’s case could be

distinguished from other cases involving white-collar crime

because his victim was not the public at large but was instead

a private business entity that had already settled its civil

lawsuit against Levinson. Coming to its conclusion on

sentencing, the District Court stated:

 [Levinson] was a businessman who stole from

his business partners for his own benefit. He

Case: 07-1544 Document: 00312068684 Page: 8 Date Filed: 09/18/2008
9

was and remains, however, a person who

contributes to the community, his family and

friends. 

In the end, it seems to me that we have an

individual who put the appearance of prosperity

above his respect for the law. Balanced against

this is the propriety of putting into jail at a

substantial cost to the public a nonviolent

offender who poses little or no threat to the

public and whose crimes had little impact

beyond his business partners and his family. 

... [W]hen I look at the costs associated with

putting someone like Mr. Levinson [in] jail in

this day and age compared to the harm he has

caused, which has been resolved amicably with

his business and which certainly will impose

even more harm on his family, I just can’t see

that it makes much sense. I just do not.

(App. at 38-39.) 

The Court thus declined to impose a sentence of

imprisonment and instead sentenced Levinson to 24 months

of probation for the wire fraud count, with a concurrent 24-

month term of probation for filing a false income tax return,

100 hours of community service, $177,289 in restitution, and

a $200 special assessment. Levinson was also sentenced to a

six- month period of home confinement with electronic

monitoring. The government then filed this appeal.

Case: 07-1544 Document: 00312068684 Page: 9 Date Filed: 09/18/2008
 3

The District Court had subject matter jurisdiction over this

case pursuant to 18 U.S.C. § 3231. We have jurisdiction over

the government’s appeal pursuant to 18 U.S.C. § 3742 and 28

U.S.C. § 1291. 

10

II. Discussion3

The government argues that the District Court failed to

articulate sufficiently compelling reasons to support its

variance from the Guidelines recommendation, and that the

Court erred by relying upon clearly erroneous and

inconsistent factual findings and on factors unrelated to the

sentencing considerations outlined in § 3553(a). According to

the government, the District Court committed procedural and

substantive errors in imposing Levinson’s sentence, and the

case should be remanded with instructions to impose a

sentence within the advisory Guidelines range. We do not

perceive all of the flaws alleged by the government, but we do

agree that this case needs to be remanded. Although the

District Court may ultimately conclude that the sentence now

on appeal should be re-imposed at Levinson’s resentencing,

the Court must provide us with enough analysis on the record

to permit meaningful appellate review, which it so far has not. 

A. Roles of District and Appellate Courts

By now, the three-step sentencing procedure set forth

in United States v. Gunter, 462 F.3d 237, 247 (3d Cir. 2006)

(“Gunter I”), has become familiar and has been effectively

ratified by the Supreme Court’s decision in Gall v. United

Case: 07-1544 Document: 00312068684 Page: 10 Date Filed: 09/18/2008
11

States, 128 S. Ct. 586 (2007). A district court must begin the

process by first calculating the applicable Guidelines range. 

After that initial calculation, the court must then rule on any

motions for departure and, if a motion is granted, state how

the departure affects the Guidelines calculation. Finally, after

allowing the parties an opportunity for argument, the court

must consider all of the § 3553(a) factors and determine the

appropriate sentence to impose, which may vary from the

sentencing range called for by the Guidelines. United States

v. Wise, 515 F.3d 207, 216-17 (3d Cir. 2008) (citing Gall, 128

S. Ct. at 596-97; Gunter I, 462 F.3d at 247).

Our responsibility on appellate review of a criminal

sentence is limited yet important: we are to ensure that a

substantively reasonable sentence has been imposed in a

procedurally fair way. As directed by the Supreme Court, we

take up the procedural review first, looking to see that the

district court has committed no significant error by, for

example, “failing to calculate (or improperly calculating) the

Guidelines range, treating the Guidelines as mandatory,

failing to consider the § 3553(a) factors, selecting a sentence

based on clearly erroneous facts, or failing to adequately

explain the chosen sentence – including an explanation for

any deviation from the Guidelines range.” Gall, 128 S. Ct. at

597. If the sentencing decision passes that first stage of

review, we then, at stage two, consider its substantive

reasonableness. Id. An estimation of the outer bounds of

what is “reasonable” under a given set of circumstances may

not always be beyond debate, but the abuse-of-discretion

Case: 07-1544 Document: 00312068684 Page: 11 Date Filed: 09/18/2008
 4

Although we use an abuse-of-discretion standard when

reviewing a district court’s decision, “the amount of deference

we give will depend on the type of procedural error asserted

on appeal.” Wise, 515 F.3d at 217. Thus, we will conclude

that the district court abused its discretion regarding factual

findings only if those findings are clearly erroneous. Id. In

contrast, if the procedural error is purely legal, we do not

defer to the district court. Id.

12

standard by which that estimation must be judged limits the

debate and gives district courts broad latitude in sentencing.4

Obviously, procedural problems may lead to

substantive problems, so there are times when a discussion of

procedural error will necessarily raise questions about the

substantive reasonableness of a sentence. United States v.

Goff, 501 F.3d 250, 256 (3d Cir. 2007) (“[T]hese ...

substantive problems ... are a product of the District Court's

procedurally flawed approach.”). After all, if one cannot

justify a result by the reasons given, that result is, by

definition, not a substantively reasonable conclusion to the

logical steps provided. But the guidance we get from Gall is

to focus in the first instance on the procedural aspect of a

sentencing decision. See 128 S. Ct. at 597 (“[The appellate

court] must first ensure that the district court committed no

significant procedural error ... .”).

B. Explanation as Key to Appellate Review

One implication of Gall is that we should treat a failure

to “adequately explain the chosen sentence – including an

explanation for any deviation from the Guidelines range” – as

Case: 07-1544 Document: 00312068684 Page: 12 Date Filed: 09/18/2008
13

a problem that can typically be addressed by giving the

sentencing judge an opportunity to better explain the

reasoning behind the decision. It will be a rare case when it is

clear that no acceptable reasoning can justify a given

sentence. Yet even rightly admired judges may make a

decision which we believe is unsupportable, and we are

obligated to point that out when it occurs. See Goff, 501 F.3d

at 262 (deciding that “a sentence of four months is ...

unreasonable in light of the facts and circumstances revealed

in the record”); United States v. Pugh, 515 F.3d 1179, 1191 (11th

Cir. 2008) (“[Gall] leave[s] no doubt that an appellate court

may still overturn a substantively unreasonable sentence,

albeit only after examining it through the prism of abuse of

discretion, and that appellate review has not been

extinguished.”). In general, however, when we are reviewing

a sentence and find ourselves unable to see how the reasons

articulated lead to the punishment imposed, we will be

focused on trying to obtain a better understanding of the

district court’s reasoning. 

We do not seek to second guess. Given the widely

recognized institutional advantages that district courts have in

access to and consideration of evidence, we would be foolish

to try. See Kimbrough v. United States, 128 S. Ct. 558, 574

(2007) (citing as “discrete institutional strengths” the district

court’s “superior position to find facts and judge their import

under § 3553(a) in each particular case” (internal citation and

quotation marks omitted)). In each case, however, we must

have an explanation from the district court sufficient for us to

see that the particular circumstances of the case have been

given meaningful consideration within the parameters of §

Case: 07-1544 Document: 00312068684 Page: 13 Date Filed: 09/18/2008
 5

In Rita, the Supreme Court emphasized the importance of

district courts providing sufficient explanations of their

sentencing decisions, and the latitude those courts have in

deciding what is sufficient in a given case: 

The sentencing judge should set forth enough to

satisfy the appellate court that he has considered

the parties’ arguments and has a reasoned basis

14

3553(a). The Supreme Court has explained that there must be

“an individualized assessment based on the facts presented.”

Gall, 128 S. Ct. at 597. A necessary corollary of that

responsibility is the further obligation to provide sufficient

justifications on the record to support the sentencing

conclusion. See id. at 597 (“After settling on the appropriate

sentence, [the sentencing judge] must adequately explain the

chosen sentence to allow for meaningful appellate review and

to promote the perception of fair sentencing.”); Rita v. United

States, 127 S. Ct. 2456, 2468 (2007) (“The sentencing judge

should set forth enough to satisfy the appellate court that he

has considered the parties’ arguments and has a reasoned

basis for exercising his own legal decisionmaking

authority.”). While the Guidelines are no longer mandatory,

United States v. Booker, 543 U.S. 220, 245 (2005), and no

“extraordinary circumstances” are needed to justify a sentence

that varies from their recommended results, Gall, 128 S. Ct. at

595, and while there is no mathematical formula for

determining whether a district court’s justifications for a

variance are sufficient, id. at 594-95, we nonetheless must be

satisfied that, broadly speaking, an adequate justification is

provided on the record. In the absence of that, we must

remand.5

Case: 07-1544 Document: 00312068684 Page: 14 Date Filed: 09/18/2008
for exercising his own legal decisionmaking

authority. Nonetheless, when a judge decides

simply to apply the Guidelines to a particular

case, doing so will not necessarily require

lengthy explanation. Circumstances may well

make clear that the judge rests his decision upon

the Commission’s own reasoning that the

Guidelines sentence is a proper sentence (in

terms of § 3553(a) and other congressional

mandates) in the typical case, and that the judge

has found that the case before him is typical. 

Unless a party contests the Guidelines sentence

generally under § 3553(a) – that is argues that

the Guidelines reflect an unsound judgment, or,

for example, that they do not generally treat

certain defendant characteristics in the proper

way – or argues for departure, the judge

normally need say no more. ...

Where the defendant or prosecutor

presents nonfrivolous reasons for imposing a

different sentence, however, the judge will

normally go further and explain why he has

rejected those arguments. Sometimes the

circumstances will call for a brief explanation;

sometimes they will call for a lengthier

explanation. Where the judge imposes a

sentence outside the Guidelines, the judge will

explain why he has done so. ...

By articulating reasons, even if brief, the

sentencing judge not only assures reviewing

15

Case: 07-1544 Document: 00312068684 Page: 15 Date Filed: 09/18/2008
courts (and the public) that the sentencing

process is a reasoned process but also helps that

process evolve. 

127 S. Ct. at 2468-69 (citations omitted).

 6

As an example of the challenge, there are somewhat mixed

messages that can be drawn from Gall. On the one hand, we

are told that proportionality between the extent of a variance

and the extent of the justification for the variance is not

required, 128 S. Ct. at 595 (rejecting an approach “that uses

the percentage of a departure as the standard for determining

the strength of the justifications required for a specific

sentence”), while, on the other hand, we are advised that a

major variance “should be supported by a more significant

justification than a minor one,” id. at 597. 

16

We do not pretend that the foregoing observations

provide much, if any, guidance. Indeed, we find it difficult to

give direction when we are ourselves endeavoring to

understand our role in reviewing sentences after Booker, Rita,

Gall, and Kimbrough.

6

 In the end, though, we think this much

is clear about sentencing in the post-Booker era: appellate

review, limited though it is by the abuse-of-discretion

standard, remains and requires district courts to plainly state

the reasoning behind each sentence. Moreover, in deciding

on appeal whether the reasons provided by a district court are

adequate, the degree that a sentence varies from the

recommendation given in the Guidelines matters. See Gall at

594-95 (“In reviewing the reasonableness of a sentence

outside the Guidelines range, appellate courts may ... take the

Case: 07-1544 Document: 00312068684 Page: 16 Date Filed: 09/18/2008
17

degree of variance into account and consider the extent of a

deviation from the Guidelines.”). Hence, while we eschew

any requirement of direct proportionality, we may look for a

more complete explanation to support a sentence that varies

from the Guidelines than we will look for when reviewing a

sentence that falls within a properly calculated Guidelines

range. Cf. United States v. Smalley, 517 F.3d 208, 215 n.9

(3d Cir. 2008) (“Because of the appellate court’s duty to

review the sentence for reasonableness, Gall made it clear that

‘failing to adequately explain the chosen sentence - including

an explanation for any deviation from the Guidelines’ was

procedural error.”).

C. The Sentencing at Issue

In this case, as is typical in sentencing hearings, the

District Court ruled from the bench, following arguments by

counsel and the defendant’s allocution. The Court began by

correctly calculating the advisory Guidelines range, which,

without objection, it determined to be a sentence that included

incarceration of 24 to 30 months. It considered, as our

precedent requires, Gunter I, 462 F.3d at 247, the defendant’s

motion for a downward departure, deciding that his claim of

diminished capacity was not persuasive. The Court went on

to give a thoughtful explanation of the § 3553(a) sentencing

factors it had weighed. 

In particular, the District Court considered the nature

and circumstances of Levinson’s crimes, explaining in detail

his elaborate fraud and the cover-up scheme he had

orchestrated:

Case: 07-1544 Document: 00312068684 Page: 17 Date Filed: 09/18/2008
18

Mr. Levinson did engage in a detailed,

extensive and thorough effort to conceal from

Elkay ... numerous fraudulent

misrepresentations regarding CoolerSmart’s

performance for more than two years. In order

to convince Elkay that CoolerSmart was

operating successfully, Mr. Levinson

manipulated sales reports and falsified financial

information. He hired temporary employees to

create a false set of books and sanctioned

CoolerSmart employees who would not help

him in his fraudulent scheme. He shredded

documents and deleted electronic data. He did

such a good job, in fact, of covering up his

fraudulent activities that Elkay did not discover

them through its routine audits. Only through

an anonymous tip was defendant’s conduct

finally disclosed.

It’s also apparent from the record that Mr.

Levinson engaged in this complex course of

conduct not just to keep his job and his

company going[;] he used over $175,000 of the

ill-gotten proceeds to lease a luxury car for his

personal use, to travel to the beach, to Florida,

... for personal expenses with unauthorized

company money.

(App. at 35-36.)

Case: 07-1544 Document: 00312068684 Page: 18 Date Filed: 09/18/2008
19

The Court then turned to Levinson’s personal history

and characteristics:

With respect to Mr. Levinson’s history and his

characteristics, by all accounts, he is engaging,

energetic and productive, as a member of the

community and as a family member and friend. 

Likewise, the criminal activity which brings us

to court today necessarily demanded these same

characteristics. 

(Id. at 36.) In considering Levinson’s personal circumstances,

the Court specifically acknowledged the many letters of

support from Levinson’s friends and family and their pleas for

leniency. The Court stated that the characterization of

Levinson in the letters as a good person who just happened to

make some poor decisions did not make him stand out,

because most defendants are not bad people and “like Mr.

Levinson have made poor choices, motivated by a variety of

ills.” (Id. at 37.) The Court also acknowledged the accuracy

of the letter-writers’ concern that Levinson’s family would

suffer if he were imprisoned. That Levinson’s family “would

suffer most if he goes to jail,” did not distinguish him from

other white-collar criminals sentenced to terms of

imprisonment, the Court said, because “[t]hat sad outcome is

endemic to most criminal cases, as most defendants have

families who suffer because their loved one wasn’t thinking

about them during the criminal activity.” (Id.)

However, as previously noted, the District Court did

say that Levinson’s case could be distinguished on the basis

Case: 07-1544 Document: 00312068684 Page: 19 Date Filed: 09/18/2008
20

that Levinson’s crimes did not inflict financial harm on the

public. The Court stated:

It is important to note, however, that Mr.

Levinson’s victim was a private business

entity,[whose] principals have resolved their

dispute for a sum of money. In other words,

Mr. Levinson did not harm the public from a

financial point of view. 

(Id. at 37.) The Court asserted that only Elkay, the

corporation with which Levinson had co-owned CoolerSmart,

had been harmed, and that the corporation’s losses had

already been addressed by a $350,000 civil settlement paid by

Levinson. (Id. at 37-38.) 

The Court’s peroration bears repeating:

[W]hen I look at the costs associated with

putting someone like Mr. Levinson [in] jail in

this day and age compared to the harm he has

caused, which has been resolved amicably with

his business and which certainly will impose

even more harm on his family, I just can’t see

that it makes any sense. I just do not.

(Id. at 38-39.) The Court concluded that it would “reject the

advisory guideline range of imprisonment” and order

probation. (Id. at 39-40.) 

Case: 07-1544 Document: 00312068684 Page: 20 Date Filed: 09/18/2008
21

The government raises several issues regarding the

Court’s reasoning and the resulting sentence. We think it

sufficient to focus on two.

1. Clearly Erroneous Factual Foundation

First, the government argues that the District Court

based its decision on the clearly erroneous premise that

Levinson had inflicted no financial harm on the public. There

were two counts of conviction, the fraud count, which the

Court discussed at some length, and the tax count, which, the

government says, the Court entirely ignored. According to

the government, since Levinson admitted guilt for filing a

false tax return, and since the District Court had concluded

that the tax loss associated with that count exceeded $44,000,

the Court erred in basing Levinson’s sentence on the assertion

that “Mr. Levinson did not harm the public from a financial

point of view.” (Id. at 37.) Levinson endeavors to justify the

District Court’s comments about private versus public harm

by saying that there in fact is no public harm since, “with

restitution of the wire fraud proceeds to the victim ... , the

Defendant would be entitled to a deduction and thus owe the

Government no net taxes by virtue of the ‘evasion.’” 

(Appellee’s Br. at 3.)

We are compelled to conclude that the government has

much the better of those positions. Even if Levinson were

correct as to the technical feasibility of the deduction he says

he plans to claim on future tax returns, and we make no

comment on that at all, his argument is still flawed. It

attributes to the District Court a reason that is nowhere stated

Case: 07-1544 Document: 00312068684 Page: 21 Date Filed: 09/18/2008
22

or even implied in the Court’s discussion of the case; there is

simply nothing to indicate that the Court had in mind a

“defraud now, deduct later” rationale for bypassing comment

on the tax count of conviction. More importantly, however,

Levinson’s argument fails to address the principal problem

identified by the government, which is that there is no

explanation by the District Court for how this case can be said

to entail purely private harm when there is a tax fraud

conviction involving a specific dollar loss to the United States

Treasury. We thus agree with the government that the

District Court rested its sentencing decision on an unsound

factual foundation. See Concrete Pipe & Prods. of Cal., Inc.

v. Constr. Laborers Pension Trust for S. Cal., 508 U.S. 602,

622, 113 S.Ct. 2264, 124 L.Ed.2d 539 (1993) (“A finding is

clearly erroneous when although there is evidence to support

it, the reviewing body on the entire evidence is left with the

definite and firm conviction that a mistake has been

committed.”) (internal quotation marks and citation omitted).

2. Inadequate Explanation for Variance

The second issue raised by the government is the

adequacy of the District Court’s explanation for varying

downward from a sentence including 24 to 30 months

imprisonment to a sentence with no imprisonment. Again, we

agree that the record is problematic, and, even if there were

no issue regarding the unmentioned tax conviction, we would

need to return this case to the District Court for a more

complete explanation of its decision to significantly vary from

the recommended sentence of imprisonment. That conclusion

rests on two concerns. One is the lack of explanation of how

Case: 07-1544 Document: 00312068684 Page: 22 Date Filed: 09/18/2008
23

this defendant or his crimes differ in any way that warrants

the special leniency shown. The other concern, which is

related to the first, is that, if there is no real distinction

between Levinson and other white-collar defendants, then the

District Court appears to have rested its decision on a policy

disagreement with the Guidelines, which it did not articulate

or explain.

As to the first concern, the Court’s sentencing decision

expressly declares that Levinson does not differ from typical

defendants, either in regard to his general character or the

effect that his incarceration would have on his family. We

can imagine some surprise in the courtroom, then, as the

direction shifted from what appeared to be a conclusion that

Levinson’s case would naturally fall within the Guidelines to

the very different conclusion that a probationary sentence was

warranted. While the Court did make the already noted

comments about public versus private harm, we do not

understand it to have been saying that that distinction made

Levinson personally different from other defendants. Rather,

those comments appear to bear on the policy disagreement

that we will turn to shortly. To the extent the Court

commented on the personal characteristics of Levinson and

the particulars of his crimes, all it said was that Levinson was

not atypical, so there was, in that regard, no adequate

explanation for the relatively wide variance between the

applicable Guidelines range and the sentence the Court

pronounced. See Gall, 128 S. Ct. at 597 (“We find it

uncontroversial that a major departure should be supported by

a more significant justification than a minor one.”); cf. United

States v. Howe, --- F.3d ----, ----, [citation forthcoming] (3d

Case: 07-1544 Document: 00312068684 Page: 23 Date Filed: 09/18/2008
24

Cir. 2008) (upholding downward variance after reviewing

reasons advanced by district court to justify the variance). 

Nor did the Court identify any other basis for varying, except

for its observation that the costs of incarcerating a non-violent

offender who had already paid some restitution to the victim

left the Court believing that a prison sentence “makes no

sense.” (App. at 39.)

Those comments about cost, and the earlier comments

about public and private harm, make it appear that the Court

left the realm of weighing the particulars of this case and

entered into a consideration of general penal policy. Policy

considerations are not off-limits in sentencing, see

Kimbrough, 128 S. Ct. at 570 (quoting government

concession that “as a general matter, ‘courts may vary [from

Guidelines ranges] based solely on policy considerations,

including disagreements with the Guidelines’”), but care must

be taken in reaching the conclusion that the District Court did

here, because the public versus private harm distinction is not

without nuance and because considering costs of incarceration

will likely contravene very deliberate policy choices

embedded in the Guidelines.

The identity of the principal victim as a private

corporation should not necessarily lead to the conclusion that

there has been no harm to the public. In the broadest sense,

all crime involves public harm, since crimes are crimes for the

very reason that they involve a violation of public norms and

require something more than the correction of a private

wrong. In a narrower sense, crimes against private entities

can and do inflict public harm, as, for example, when a

Case: 07-1544 Document: 00312068684 Page: 24 Date Filed: 09/18/2008
 7

Note, however, that at other points the Guidelines equate

public and private harm, as in § 3B1.3, which directs that an

offense level be increased by two points if a defendant has

abused a position of either public or private trust. 

Significantly, the District Court in this case applied the

increase called for in § 3B1.3, although the reason it gave was

that “the defendant abused a special skill to facilitate the

commission or concealment of the instant offense.” (App. at

10.) We tend to agree with the conclusion in the Presentence

Report that the increase is also applicable because Levinson

abused a position of private trust. See Presentence Report at

12 (“[T]his enhancement is applicable to the offense, because

Mr. Levinson occupied a fiduciary position in CoolerSmart,

and used that position to commit and conceal the offense.”).

25

publicly traded corporation has been defrauded and there is

consequent damage to public trust in our nation’s capital

markets. That does not mean that private versus public harm

is a meaningless distinction. The Guidelines themselves take

account of that distinction at times. See USSG § 2A6.1(b)(4)

(directing offense level be increased by four levels if offense

resulted in substantial disruption of public functions or

services); USSG § 5K2.14 (providing for upward departure

“[i]f national security, public health, or safety was

significantly endangered” by the defendant).7

 But to say that

the Guidelines’ policies on incarceration are inapplicable to

white-collar crime directed at private entities would be an

extraordinary assertion of judicial power, impermissible in the

Case: 07-1544 Document: 00312068684 Page: 25 Date Filed: 09/18/2008
 8

Kimbrough made it clear that district courts may weigh the

applicability of general Guidelines policies as part of the

individualized sentencing determination made to satisfy §

3553(a)’s requirement that the sentence for a specific

defendant be “sufficient, but not greater than necessary,” to

comply with the statute’s aims. 128 S. Ct. at 570. However,

nothing in Kimbrough or in our own jurisprudence leaves a

district court free to state its own general sentencing policies

in contravention of the Guidelines. Cf. United States v. Ricks,

494 F.3d 394, 403 (3d Cir. 2007) (“[A] district court may ...

view the sentencing disparity [imposed by the crack vs.

powder cocaine Guidelines] as too vast. However, it must do

so as applied to the particular defendant that appears before

the court. In terms of sentencing process, a court must give its

reasons for why it views the ratio as too harsh when applied to

the defendant.”).

26

abstract,8 and, even when confined to a specific case, certainly

requiring a thorough explanation. 

The Sentencing Commission recommended terms of

imprisonment for economic crimes like Levinson’s because of

its concern that sentencing for white-collar crime had been

ineffectual. See USSG § 1A1.1, Ch. 1, Pt. A.4(d) (2006)

(“Under [pre-Guidelines] sentencing practice, courts

sentence[d] to probation an inappropriately high percentage of

offenders guilty of certain economic crimes, such as theft, tax

evasion, antitrust offenses, insider trading, fraud, and

embezzlement, that in the Commission’s view are ‘serious.’”). 

In addition, it has been noted that probationary sentences for

white-collar crime raise concerns of sentencing disparities

according to socio-economic class. See United States v.

Case: 07-1544 Document: 00312068684 Page: 26 Date Filed: 09/18/2008
27

Mueffelman, 470 F.3d 33, 40 (1st Cir. 2006) (“Restitution is

desirable but so is the deterrence of white-collar crime (of

central concern to Congress), the minimization of

discrepancies between white- and blue-collar offenses, and

limits on the ability of those with money or earning potential

to buy their way out of jail.”). Presumably, the Commission

was aware of the costs of incarceration when it made its

judgment that white-collar criminals generally should be sent

to prison. To use the Commission’s characterization, whitecollar crimes such as wire fraud and tax fraud are “serious,”

and typically will warrant serious punishment, including

prison time. Thus, if a district court wants to vary from the

Guidelines for a reason that is contrary to the Commission’s

stated position, it must explain why the general policy should

not apply in the particular case before it. See United States v.

Gunter, 527 F.3d 282, 286 (3d Cir. 2008) (district court is

“free to disagree with the policy underlying the crack/powder

ratio as applied to that particular defendant and make an

appropriate downward variance in its sentence. ... [But]

[t]here must be meaningful consideration of the § 3553(a)

factors and the particular circumstances of the case before a

variance is made.” (emphasis omitted)).

That was not done here. Instead, the District Court

simply said that it had reviewed its past sentencing decisions

and found prison appropriate when some public, as opposed

to private, harm had been inflicted. That statement is not

enough to tell us why the Guidelines, which, even after

Booker, remain “the starting point and initial benchmark” for

sentencing, Gall, 128 S. Ct. at 596, should not apply to

Levinson. 

Case: 07-1544 Document: 00312068684 Page: 27 Date Filed: 09/18/2008
28

It may be that the District Court has reasons we have

not understood for varying widely from the recommended

Guidelines range of sentences in this case. We do not say that

a sentence of probation would be, on this record, plainly

outside the boundaries of permissible discretion. We hold

only that the justifications given for the sentence are

inadequate for us to recognize them as reflecting a proper

exercise of discretion.

III. Conclusion

Accordingly, we will vacate the sentence and remand

the case for further proceedings in accordance with this

opinion.

Case: 07-1544 Document: 00312068684 Page: 28 Date Filed: 09/18/2008