NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

_____________ No. 19

- 2063

_____________ UNITED STATES OF AMERICA

v. EUGENE SMITH ,

Appellant

_____________ APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

(D.C. Cr im

. No. 2

- 18

- c r
- 00306

- 001 ) District Judge: Honorable R. Barclay Surrick

______________ Argued: July 15 , 2021

______________ Before: M c KEE, GREENAWAY, JR., and RESTREPO , Circuit Judges

(Opinion Filed: September 10, 2021 ) Richard Coughlin Karina D. Fuentes [ARGUED] Office of Federal Public Defender 1002 Broad Street Newark, NJ 07102

Counsel for Appellant
Jennifer Arbittier Williams Robert A. Zauzmer Joan E. Burnes Anita D. Eve Bernadette A. McKeon [ARGUED]2

Office of United States Attorney 615 Chestnut Street Suite 1250 Philadelphia, PA 19106

Counsel for Appellee

______________ OPINION *

______________ GREENAWAY, JR., Circuit Judge

. Appellant Eugene Smith appeals his sentence and challenges : (1) the application
of a two

- level role enhancement, pursuant to United States Sentencing Guidelines (“U.S.S.G.”) § 3B1.1(c) ; (2) the application of a two

- level enhancement for use of sophisticated means, pursuant to U.S.S.G. § 2B1.1(b)(10)(C) ; (3) the calculation of the loss amount used to calculate the guidelines range; and (4) the reasonableness of the final

sentence. T he District Court did not clearly err in applying the sophisticated means enhancement or in calculating the loss amount . However , because the District Court did not provide sufficient explanation and factual findings to enable our review of the application of the role enhancement, we will vacate the judgment of conviction and remand for resentencing.

* This disposition is not an opinion of the full Court and pursuant to I.O.P. 5. 7 does not constitute binding precedent.3

I. BACKGROUND From at least December 2016 through January 2018, Smith organized the production, sale, and distribution of counterfeit tickets to popular events , including National Collegiate Athletic Association football and basketball games, National Football League ga mes, and concerts. The counterfeit tickets displayed the trademarks of several organizations and agencies that are registered with the United States Patent and
Trademark Office. As part of this scheme, Smith purchase d a genuine ticket to an event
and req uested that a nother individual , the printer, produce counterfeit versions of the
tickets that bore the features of the genuine ticket , including specific seat and section
numbers. Smith and three other individuals would then travel to events nationwide to sell
the counterfeit tickets. These events included : the 2017 College National Championship game in Tampa, Florida ; the 2017 Super Bowl in Houston, Texas ; the 2017 NBA All

- Star Game in New Orleans, Louisiana ; the 2017 Army

– Navy Game in Philadelphia, Pennsylvania ; and the 2018 Super Bowl in Minneapolis, Minnesota, among others.
A fter Smith’s scheme was uncovered, a grand jury returned an indictment, charging Smith with one count of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349; one count of wire fraud, and aiding and abetting wire fraud, in violation of 18 U.S.C. §§ 1343 and 2; one count of conspiracy to traffic in counterfeit goods, in violation of 18 U.S.C. § 2320; and one count of trafficking in counterfeit goods, and aiding and abetting the trafficking, in violation of 18 U.S.C. §§ 2320(a)(1) and 2. Smith entered a plea of guilty to all four counts.4

The Probation Office provided the District Court with a Presentence Investigation Report (“PS R”). The Probation Office set the total offense level at nineteen, including (1) a two

- level enhancement for Smith’s role and (2) a ten

- level enhancement based on the infringement amount of $173,250. The Probation Office did not include an
enhancement fo r the use of sophisticated means. Based on Smith’s criminal history and this offense level calculation, the Probation Office determined that the appropriate guideline s range was forty

- six to fifty

- seven months. Both the Government and Smith
filed objections to the PSR. The District Court conducted a sentencing hearing. After hearing from the parties,
the District Court (1) applied the role enhancement, (2) applied the sophisticated means
enhancement because the offense occurred over several years, involved various
individuals , targeted events across the country , and employed a ticket selling process that

w as “somewhat complicated, somewhat complex , ” and ( 3 ) found that the loss was in excess of $150,000

. App 190. Consequently, the District Court sentenced Smith to fifty

one months in prison, followed by three years of supervised release. The District C ourt also ordered restitution in the amount of $77,850 and a special assessment of $400. This timely appealed fo llowed.
II. JURISDICTION AND STANDARD OF REVIEW The District Court had jurisdiction pursuant to 18 U.S.C. § 3231. This Court has jurisdiction pursuant to 28 U.S.C. § 1291 and 18 U.S.C. § 3742 (a)

. We exercise plenary review over challenges to a district court ’ s interpretation and application of the Federal5

Sentencing Guidel ines

. United States v. Grier , 475 F.3d 556, 570 (3d Cir. 2007) (en banc). We review any associated factual determinations for clear error. United States v. Bierley , 922 F.2d 1061, 1064 (3 d Cir. 2009). In reviewing sentencing guidelines determinations for clear error, this Court reverses “only if [it is] left with a definite and firm conviction that a mistake has been committed.” United States v. Lessner , 498 F.3d 185, 199 (3d Cir. 2007). “Where there are two permissible views of the evidence, the
factfinder ’ s choice between them cannot be clearly erroneous.” United States v. Beckett , 208 F.3d 140, 148 (3d Cir. 2000) (quoting Anderson v. Bessemer City , 470 U.S. 564, 574 (1985) )

. III. DISCUSS ION

A. ROLE ENHANCMENT Smith first argues that the District Court erred when it applied a two

- level role enhancement pursuant to U.S.S.G. § 3B1.1

. Section 3B1.1 (c) allows for a two

- level enhancement if the defendant was a “ an organizer, leader, manager, or supervisor in any criminal activity .” To qualify for the enhancement , “ the defendant must have been the organizer, leader, manager, or supervisor of one or more other participants. ” § 3B1.1, cmt. 2. A “participant” is defined as “ a person who is criminally responsible for the commission of the offense, but need not have been convicted. A person who is not criminally responsible for the commission of the offense (e.g., an undercover law enforcement officer) is not a participan t.” § 3B1.1, cmt. 1.6

Smith objected to the inclusion of the role enhancement in the PSR. Th e District
Court stated: “Mr. Smith was in fact the leader of this situation, the organizer/leader of
the situation . . .

. ” App. 191. Absent from the District Court’s statement is any factual finding.
Smith contends that the District Court failed to sufficiently explain its decision to apply the enhancement. We agree.
A district court must “ adequately explain the chosen sentence to allow for meaningful appellate review

. ” Gall v. United States , 552 U.S. 38, 50 (2007)

. Our review of the District Court’s application of the r ole enhancement is deferential, see United
States v. Fountain , 792 F.3d 310, 321 (3d Cir. 2015) (reviewing the application of the
role enhancement for clear error ) , but we cannot defer to the District Court’s brief
conclusion , which is devoid of the requisite factual findings

. For instance, the District
Court never made a factual finding as to who was the “participant” required for the § 3B1.1 enhancement to apply

. 1 See § 3B1.1, cmt. 2. While the Government may be correct that there is enough info rmation in the record to support a proper conclusion that the enhancement applies, our precedent advises that this Court should not speculate

1 The printer and the other individuals who sold the counterfeit tickets are possible participants, but this Court has no way of knowing who, if anyone, the District Court determined was the participant who was orga nized, led, managed or supervised by Smith. The Probation Office noted that the printer and the three individual sellers were all participants, but the Government argues that only the printer was a participant for the purposes of the § 3B1.1(c) enhancemen t. The Government asks us to guess that the District Court based the enhancement on Smith’s relationship to the printer, and not to the others as discussed in the PSR.7

regarding what facts the District Court relied upon. See United States v. Tai , 750 F.3d 309, 319 (3d Cir. 2014) ( “Under our precedent, the culpable participation of the person being supervised is central to the applicability of an upward adjustment for role. The question here then is whether the absence of such a finding of criminal culpability of a participan t constitutes plain error. We conclude that it does.” ). 2
W e cannot discern whether the District Court committed error because it provided

an insufficient explanation on the record . Accordingly , we will vacate and remand to the
District Court for resentencing.

B. SOPHISTICATED MEANS ENHANCEMENT Next, Smith contends that the District Court erred in applying an enhancement for use of sophisticated means pursuant to U.S.S.G. § 2B1.1(b)(10 ) (C). The S entencing
G uidelines prescribe a two

- point enhancement if an offense “involve[s] sophisticated

means and the defendant intentionally engaged in or caused the conduct constituting

2 Our sister courts have come to the same conclusion. S ee United States v. Burnley , 988 F.3d 184, 187

- 88 (4th Cir. 2021) (determining that “the district court’s explanation [for applying the § 3B1.1 enhancement] is insufficient to facilitate meaningful appe llate review, so we remand for further fact

- finding and resentencing”); United States v. Ware , 577 F.3d 442, 4 51

– 52 (2d Cir. 2009) (noting that “the sentencing court must make specific findings as to why a particular subsection of § 3B1.1 adjustment applie s,” that these findings “must be sufficiently specific to permit meaningful appellate review,” and that “[i]t is not enough for the court merely to repeat or paraphrase the language of the guideline and say conclusorily that the defendant meets those crite ria”); United States v. Tai , 994 F.2d 1204, 1212 (7th Cir. 1993) (rejecting the government’s argument that the record included sufficient support for the enhancement because “it is not [the appellate] court ’ s role to make the factual findings necessary to support a sentencing calculation; that is a task for the district court”)

.8

sophisticated means.” § 2B1.1(b)(10)(C) (emphasis added). The commentary defines “sophisticated m eans” as conduct that is “e specially complex or especially intricate .” §
2B1.1 cmt. 9(B). The commentary include s specific examples of what would constitute sophisticated means , such as hiding assets or transactions or using fictitious entities, corporat e shells, or offshore financial accounts. Id. Yet the commentary does not limit the ways a defendant could use sophisticated means to facilitate his crime. See i d. This
Court has said that factors to consider when making this determination include “t he duration of a scheme, the number of participants, the use of multiple accounts, and efforts
to avoid detection ,” and that the “ enhancement is appropriate where a defe ndant ’ s conduct ‘ shows a greater level of planning or concealment than a typical fraud of its
kind. ’” Fountain , 792 F.3d 310 at 319 (quoting United States v. Fumo , 655 F.3d 288, 315 (3d Cir. 2011) ).
A t the sentencing hearing, after both the Government and Smith presented their views on the applicability of this enhancement, the District Court stated: After hearing all of the evidence and after hearing counsel’s respective positions with regard to it, I’m satisfied that the sophistic ated means enhancement is appropriate in this situation. The crime here occurred over an extended period of time, a couple years. There were a number participants in it

. . . . The scope of the endeavor was nationwide, actually.

. . . And I’m satisfie d that this is not just a simple criminal endeavor. It was somewhat complicated, somewhat complex: getting a ticket, getting [the printer] to do the right thing, distributing those tickets in different areas. So I’m satisfied under all the circumstances that the sophisticated means enhancement is appropriate. App. 190.9

The District Court’s determination here was not clearly erroneous. The District Court commented on the duration of the scheme, its nationwide scope, the number of people involved, the work that went into creating counterfeit tickets, and it concluded that
Smith caused the printer to create the “right thing.” Id. G iven t hese findings , we do not
find a reason to upset the District Court’s application of the sophisticated means
enhancement

.

C. LOSS CALCULATION Finally , Smith contends that the District Court and Probation Office wrongly calculated the loss attributable to him for the purposes of computing his offense level.
The Probation Office advised that the loss amount should be calculated to reflect the aggregate face value of the counterfeit tickets in accordance with U.S.S.G. § 2B 5.3 , and that this produced a $173,250 loss amount. 3 The Government also calculated the loss

amount at $173,250, but it did so pursuant to U.S.S.G. § 2B1.1. 4 The District Court adopted this calculation

.

3 Section 2B5.3 of the Guidelines, which governs offenses involving counterfeits, defines an “infringing item” as one “that violates the copyright or trademark laws.” U.S.S.G. § 2B5.1 cmt. 1. Section 2B5.3(b)(1)(B) counsels that if the infringement amount exceeds $6,500, the offense level should be increased in accordance with the ta ble in § 2B1.1.

4 Section 2B1.1 of the Guidelines enhances fraud sentences based on the amount of “loss.” § 2B1.1(b)(1). The commentary defines “loss” as “the greater of actual loss or intended loss.” § 2B1.1 cmt. 3(A). “Actual Loss” is defined as “t he reasonably foreseeable pecuniary harm that resulted from the offense.” § 2B1.1 cmt. 3(A)(i). “Intended Loss” is defined as “(I)

. . . the pecuniary harm that the defendant purposely sought to inflict; and (II) includes intended pecuniary harm that wou ld have been10

Pursuant to § 2B5.3, “ [t] he infringement amount is the retail value of the infringed item, multiplied by the number of infringing items” where “the infringing item (I) is, or appears to a reasonably informed purchaser to be, identical or substantially equivalent to the infringed item; or (II) is a digi tal or electronic reproduction of the infringed item.” § 2B5.1 n.2(A)(i). Here, the District Court did not err in determining the loss amount
attributable to Smith was $173,250

. P ursuant to § 2B5.3, the face value , or retail value, of the counterfeit tickets was the “infringement amount,” and therefore the appropriate loss amount. T he infringing
items were the counterfeit event tickets , printed at Smith’s direction, that had a price on
the ir face. Similarly, the District Court di d not err if § 2B1. 1 had solely applied. 5 Section
2B1.1 directs courts to utilize “the greater of actual loss or intended loss.” The “actual loss” (the amount Smith received, $77,850) is less than the “intended loss” (defined as “the pecuniary harm that the defendant purposely sought to inflict , ” § 2B1.1 cmt. 3(A)(ii) , which was determined to be the $ 173,250 face value of the tickets).

impossible or unlikely to occur (e.g., as in a government sting operation, or an insurance fraud in which the claim exceeded the insured value).” § 2B1.1 cmt. 3(A)(ii).

5 To the extent there is ambiguity in the record regarding the section e mployed by the District Court, it does not hamper our review because in this case loss under either section is based on the same predicate facts (the tickets’ face value) , as to which the District Court made express findings

.11

Therefore, the D istrict C ourt did not clearly err in determining that the loss
attributable to Smith was $173,250

. 6
IV. CONCLUSION 7 For the foregoing reasons , we will vacate the District Court’s judgment of
sentence and remand for resentencing . The District Court need not reconsider the two

level sentence increase for use of sophisticated means or revisit the loss calculation.

6 Relying on Judge Bibas’ s concurrence in United States v. Nasir , 982 F.3d 144 (3d Cir. 2020) , Smith argues that “this situation calls for the rule of lenity and the least harsh interpretation.” Appellant’s Br. 34 (quotation mark s and citations omitted). It is true that th e commentary in the Guidelines relied upon here more than doubled the loss amount attributed to Smith

— the actual loss was $77,850 (the amount Smith received for the tickets), which would add eight levels, whereas the retail value used by the District Court was $173,250, which added ten levels. See §2B1.1. However, this argument is unavailing because, even if the concurring opinion was binding, the commentary here specifically states that the greater of actual or intentional loss should be applied, acknowl edging that in some cases the amount of loss will be higher than the amount intended

. See § 2B1.1 cmt. 3(A).

7 Smith also argues the final sentence imposed by the District Court was substantively unreasonable. Given that we are vacating and remanding S mith’s sentence on other grounds, we need not reach this argument at this posture

. See e.g., United States v. Merced , 603 F.3d 203, 214 (3d Cir. 2010) (“ If the district court commits procedural error, our preferred course is to remand the case for resentencing, without going any further .”); United States v. Douglas , 885 F.3d 145, 154 n.6 (3d Cir. 2018) (“ Because we will remand for resentencing due to the erroneous application of the enhancement

. . . , we need not address the substantive reasonablene ss of the sentence .”)

.