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Parties Involved:
John G. Broumas
Appellant
United States of America
Appellee

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 6, 1995 Decided November 21, 1995

No. 95-3037

UNITED STATES OF AMERICA,

APPELLEE

v.

JOHN G. BROUMAS,

APPELLANT

Appeal from the United States District Court

for the District of Columbia

(No. 94cr00442-01)

John A. Briley, Jr., appointed by the court, argued the cause and filed the briefs for appellant.

MatthewG. Olsen, Assistant United States Attorney, argued the cause for appellee. With him on the

brief were Eric H. Holder, Jr., United States Attorney, John R. Fisher and William S. Block,

Assistant United States Attorneys.

Before: WILLIAMS, GINSBURG and RANDOLPH, Circuit Judges.

Opinion for the court filed by Circuit Judge GINSBURG.

GINSBURG, Circuit Judge: John Broumas pled guilty to a one-count indictment charging him

with misapplication of funds by a bank officer or employee in violation of 18 U.S.C. § 656. At

sentencing, the district court increasedBroumas's offense levelbytwo, pursuant to U.S.S.G. § 3B1.3,

for "abuse of a position of trust," and by another two for "more than minimal planning," pursuant to

U.S.S.G. § 2F1.1(b)(2). We conclude that the facts of this case support both increases. We also

reject the appellant's argument that abuse of a position of trust isitself an element of the crime, which

would make the enhancement of his sentence for such an abuse improper by the terms of U.S.S.G.

§ 3B1.3. Accordingly, we affirm the sentence in full.

I. Background

Until May 1990 John Broumas was the Chairman of the Board of Madison Bank of Virginia

(MB-VA) and a Director ofJames Madison Limited, the holding company that controlled both MBUSCA Case #95-3037 Document #163799 Filed: 11/21/1995 Page 1 of 8
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VA and Madison National Bank of Washington, D.C. At that time Broumas had a substantial net

worth, most of which was in the form of stock in the holding company. His fortune was declining,

however, along with the value of his James Madison shares. The Madison banks ultimately failed in

1991.

During the first half of 1990 Broumas maintained personal accounts at MB-VA, Madison

National Bank, and Heritage Bank. Heritage Bank, with which Broumas had no professional

relationship, had a general policy of giving immediate credit on deposits. By virtue of his position

with MB-VA, Broumas was given immediate credit on checks deposited to his accountsthere as well;

this benefit, referred to as the "red star privilege" because the depositor exercisesit by having a teller

stamp a red star upon the deposited check, was made available only to officers and directors of MBVA and to significant depositors.

In April 1990 Broumas, finding himself in increasingly dire financial straits, embarked upon

a check-kiting scheme that exploited the red star privilege he held by virtue of his office. Taking

advantage of the two- to five-day "float period" between the time that a check is deposited and the

time that the bank of deposit collects the funds from the drawee bank, Broumas was able artificially

to inflate the balances in his accounts at the two Madison banks and at Heritage Bank. He would

write a check on an account at one bank for an amount in excess of the collected fundsin the account

and deposit it into an account at a second bank, where he would be given an immediate credit.

Before that check made its way back to the first bank, Broumas would write another over-balance

check on a third account and deposit it, again receiving an immediate credit that would prevent the

first check from being dishonored for insufficient funds. Broumas used the checks drawn against

these artificially inflated balances to meet stock margin calls and for other personal expenses.

Broumas practiced this scheme over a period of two months. Some days the amount of his

overdrafts exceeded $200,000. When the scheme was discovered on June 1, 1990, Broumas's

overdraft at MB-VA was more than $71,000. Broumas repaid that amount to the bank the following

month and later pled guilty to a single count of misapplication of funds by a bank officer or employee

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*Section 656 provides as follows:

Whoever, being an officer, director, agent or employee of, or connected in any

capacity with any ... insured bank, ... embezzles, abstracts, purloins or willfully

misapplies any of the moneys, funds or credits of such bank ... shall be fined not

more than $5,000 or imprisoned not more than five years, or both....

18 U.S.C. § 656. 

in violation of 18 U.S.C. § 656.*

As recommended in the presentence report, the district court increased Broumas's offense

level by two points on the ground that he had abused a position of trust, see U.S.S.G. § 3B1.3, and

by another two points on the ground that the offense involved more than minimal planning, see

U.S.S.G. § 2F1.1(b)(2). The court also decreased the offense level by three points for acceptance

of responsibility. See U.S.S.G. § 3E1.1. In consideration of Broumas's advanced age, health, family

circumstances, and otherfactors, the district court departed downward fromthe Guidelinesrange and

sentenced Broumas to three months of imprisonment in a community confinement center, to be

followed by nine months of "house arrest" and three years of supervised release. Execution of the

sentence has been stayed pending Broumas's appeal.

On appeal Broumas argues that neither enhancement is appropriate on the facts of this case.

The only evidence that he abused a position of trust, he argues, is that he abused the red star

privilege. Because he exercised this privilege in his capacity as a bank customer, not as an officer or

director, and because the privilege was also available to significant depositors who held no position

with the bank, his abuse ofthe privilege does not, he says, bespeak an abuse of his undoubted position

of trust. Merely having been a bank officer at the time of the crime, he goes on, cannot support the

enhancement for abuse of a position of trust, as that itself is an element of the offense defined in §

656, not an aggravating circumstance in a particular case. Finally, Broumas argues that the

enhancement of his sentence for more than minimal planning is not supported by the record because

each instance of check-kiting was an isolated and unplanned event ("purely opportune" in the words

of U.S.S.G. § 1B1.1 appl. note 1(f)), not in furtherance of a continuing scheme.

II. Analysis

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We review the district court's application of the Sentencing Guidelines in accord with the

trichotomy prescribed by the Congress and explicated by this court in United States v. Kim, 23 F.3d

513 (D.C. Cir. 1994):

[P]urely legal questions are reviewed de novo; factual findings are to be affirmed

unless "clearly erroneous"; and we are to give "due deference" to the district court's

application of the guidelines to facts. "Due deference" presumably is meant to fall

somewhere between de novo and "clearly erroneous," a standard of review that

reflects an apparent congressional desire to compromise between the need for

uniformityin sentencing and the recognition that the district courtsshould be afforded

some flexibility in applying the guidelines to the facts before them.

23 F.3d at 517. Therefore, we review de novo the question whether the enhancement for abuse of

a position of trust duplicates an element of the offense described in 18 U.S.C. § 656. The district

court's application of the two enhancements, however, receives due deference.

A. Abuse of a Position of Trust

Under § 3B1.3 of the Sentencing Guidelines, the district court must enhance by two levels

the sentence of any person who has "abused a position of public or private trust ... in a manner that

significantly facilitated the commission or concealment of the offense." In order to apply this

provision the district court must determine "(1) whether the defendant occupied a position of trust;

and (2) whether the defendant abused that position in a manner that significantly facilitated the

commission or concealment of the offense." United States v. West, 56 F.3d 216, 219 (D.C. Cir.

1995).

1. Position of Trust. Application note 1 accompanying § 3B1.3, as amended in 1993,

indicates that the defining characteristic of a "position of trust" is "professional or managerial

discretion (i.e., substantial discretionary judgment that is ordinarily given considerable deference)."

To illustrate, the commentary provides that a bank teller who steals from the till is not subject to the

enhancement because his or her position does not entail professional or managerial discretion. See

id.; see also West, 56 F.3d at 221 (holding that courier is not in position of trust). On the other

hand, because a bank executive is entrusted with substantial discretion, his fraudulent loan scheme

or embezzlement could be considered an abuse of a position of trust. U.S.S.G. § 3B1.3 appl. note

1.

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Broumas unquestionably held a position of trust throughout the period in which he pursued

his check-kiting scheme. He was Chairman of the Board of MB-VA, a position that entails perhaps

the broadest managerial discretion to be found in a corporate organization and the occupant of which

is subject to little or no direct supervision.

It is also clear that Broumas's use of the red star privilegea privilege available to him solely

by virtue of his position of trustsignificantly facilitated his check-kiting scheme. If the defendant's

position of trust made it easier for him to carry out or conceal his crime, then the position has

"significantly facilitated" the crime. Cf. United States v. Craddock, 993 F.2d 338, 341-42 (3d Cir.

1993). Broumas's access to immediate credit significantly lessened the risk that a check would

"bounce" and thereby expose the entire scheme. Indeed, by virtue of the red star privilege Broumas

was able to practice the scheme undetected for two months.

2. Abuse of Position. The more difficult question in this case is whether Broumas's use of the

red star privilege can be considered an abuse of his position. Broumas argues that in exercising this

privilege he was acting not in his capacity as a bank officer but as a mere bank depositor; in this

regard he points out that the privilege was intended for use in the privilege holder's private banking

transactions and that it is also available to some customers who are not bank officers or directors.

The examples provided in the commentary and, as Broumas points out, the facts in many of

the cases applying the enhancement for abuse of a position of trust involve situations in which the

defendant abused a discretion inherent in the exercise of his professional or managerial duties. See,

e.g., United States v. Georgiadis, 933 F.2d 1219 (3d Cir. 1991) (defendant diverted funds from

mortgage settlements into own account by falsifying deposit slips); United States v. McElroy, 910

F.2d 1016 (2d Cir. 1990) (defendants, employed by two different banks, approved loans to one

another without making appropriate internal reports); see also U.S.S.G. § 3B1.3 appl. note 1.

In this case Broumas abused a trust incidental to rather than inherent in his position as

Chairman of the Board of MB-VA. It was nonetheless solely because of his position that the bank

extended the red star privilege to him; indeed, the privilege was but a manifestation of the bank's

trust in Broumas as an officer and a director. That the privilege was intended for use in his personal

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banking shows only that the bank's trust in its officers and directors was not limited to their conduct

of the bank's business but extended also to their personal dealings with the bank. By abusing this

privilege, that is, by using it in a context of transactions for which it was clearly not intended,

Broumas took advantage, to the bank's detriment, of its trust in him.

Broumas next contends that because the bank makes the red star privilege available to

significant depositors as well as to bank officers and directors, he cannot be said even to have "used

his position" (i.e., much less abused his position) in the conduct of his personal banking. This is a non

sequitur. At his plea hearing, Broumas agreed to the Government's statement that he had access to

the privilege "as a bank officer." We have no basis for concluding that he might have had access to

the privilege for any other reason. We must agree with the district court, therefore, that Broumas's

abuse of the privilege was an abuse of his position.

Finally, Broumas suggests that the abuse of trust enhancement cannot be applied in this case

because the Sentencing Guidelines specifically limit the application of the enhancement to cases in

which an abuse of trust is not "included in the base offense level or specific offense characteristic."

U.S.S.G. § 3B1.3. There seem to be two points here. Following upon his claim that his use of the

red star privilege did not amount to an abuse of a position of trust, Broumasfirst arguesthat the only

evidence supporting the enhancement in this case isthat he was a bank officer throughout the course

of his check-kiting scheme. Because being a bank officer is an element of the offense described in

§ 656, he argues, the enhancement in this case is duplicative and is therefore barred by the portion

of the Guidelines quoted above. We rejected the premise of this argument when we held that his

abuse of the red star privilege constituted an abuse of a position of trust.

Insofar as Broumas seems also to suggest that the enhancement is duplicative because a

violation of § 656 necessarily involves the defendant's abuse of a position of trust, we do not agree.

Section 656 penalizes theft, embezzlement, or misapplication of bank funds by an "officer, director,

agent, or employee" of a banking institution. Therefore, the statute applies by its terms to a bank

employee who does not hold a position that entails managerial or professional discretionthat is, an

employee who does not hold a position of trust. The commentary to U.S.S.G. § 3B1.3, however,

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specifically provides that the enhancement for abuse of a position of trust "would not apply in a case

of an embezzlement or theft by an ordinary bank teller ... because such positions are not characterized

by [professional or managerial discretion]." U.S.S.G. § 3B1.3 appl. note 1.

More pertinent to Broumas's situation as Chairman of the MB-VA Board, the enhancement

does not apply to an officer or director who is convicted under § 656 for an embezzlement that did

not depend upon his having and abusing a position of trust. The enhancement for abuse of a position

of trust applies only if "the position of trust [has] contributed in some significant way to facilitating

the commission or concealment of the offense." U.S.S.G. § 3B1.3 appl. note 1.

Every circuit that has considered the duplication argument hasrejected it for one or the other

of these reasons. See McElroy, 910 F.2d at 1027 ("Since not all [the positions listed in § 656] are

necessarily positions oftrust, abuse oftrust is not necessarily a part ofthe offense"); Georgiadis, 933

F.2d at 1225 ("Since it is not necessary for the government to prove an abuse of trust (within the

meaning of the Guidelines) in order to convict under 18 U.S.C. § 656, we reject [appellant's] theory

that an abuse of trust is, for purposes of the Guidelines, an element of embezzlement already taken

into account by the base offense level of four imposed by U.S.S.G. § 2B1.1(a)"); United States v.

Fisher, 7 F.3d 69, 70 (5th Cir. 1993) (per curiam); United States v. Dion, 32 F.3d 1147, 1149-50

(7th Cir. 1994); United States v. Christiansen, 958 F.2d 285, 287 (9th Cir. 1992). We now join

them in holding that the enhancement for abuse of a position of trust does not duplicate an element

of the base offense of misappropriation of funds by a bank officer or employee under § 656.

B. More than Minimal Planning

Broumas also objects to the two-level enhancement for more than minimal planning, which

the district court must apply "in any case involving repeated acts over a period of time, unless it is

clear that each instance was purely opportune." U.S.S.G. § 1B1.1 appl. note 1(f). According to

Broumas, his obviously repeated acts of check-kiting come within the exception for the "purely

opportune." Each instance of check-kiting, he says, was an isolated event.

The facts simply do not support the contention that each instance of check-kiting was

opportunistic; Broumas points to no fortuitous circumstances that prompted him to act. He had

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accessto immediate credit throughout the period in question, and he used it repeatedly with skill and

daring. In view of the two-month duration of Broumas's check-kiting operation and the remarkable

fact that no check had ever "bounced" when his $71,000 overdraft position was discovered, the

district court had ample bases upon which to conclude that the misconduct here involved more

planning than does the offense of misappropriation of funds in its simplest form.

III. Conclusion

In sum, we conclude that the facts of this case support the application of sentence

enhancements both for abuse of a position of trust and for more than minimal planning. Because we

also hold that the enhancement for abuse of a position of trust does not duplicate an element of the

offense of misapplication of funds by a bank officer or employee, as described in 18 U.S.C. § 656,

the appellant's sentence is

Affirmed.

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