PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

UNITED STATES OF AMERICA,

Plaintiff-Appellant,

v. No. 99-4886

JOHN STEVEN LEROSE,

Defendant-Appellee.

Appeal from the United States District Court

for the Southern District of West Virginia, at Charleston.

Robert J. Staker, Senior District Judge.

(CR-99-80)

Argued: May 3, 2000

Decided: July 13, 2000

Before MOTZ and TRAXLER, Circuit Judges, and

Frank W. BULLOCK, Jr., United States District Judge for the

Middle District of North Carolina, sitting by designation.

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Vacated and remanded by published opinion. Judge Traxler wrote the

opinion, in which Judge Motz and Judge Bullock joined.

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COUNSEL

ARGUED: Susan Marie Arnold, Assistant United States Attorney,

Charleston, West Virginia, for Appellant. Benjamin Lee Bailey, BAILEY & GLASSER, L.L.P., Charleston, West Virginia, for Appellee.

ON BRIEF: Rebecca A. Betts, United States Attorney, Charleston,

West Virginia, for Appellant.

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OPINION

TRAXLER, Circuit Judge:

The United States appeals the district court's downward sentencing

departure in the case of John Steven LeRose ("LeRose"). We vacate

the sentence and remand for resentencing.

I.

On June 10, 1999, LeRose pled guilty to a two-count information.

Count One accused LeRose of executing, aiding and abetting a

scheme and artifice to defraud a financial institution in violation of 18

U.S.C.A. § 1344 (West 2000). Count Two accused LeRose of filing

a false income tax return in violation of 26 U.S.C.A. § 7206(1) (West

1989). These charges stemmed from an elaborate check-kiting

scheme in which three of LeRose's brothers also participated.1

As the owners of several automobile dealerships and other business

interests, the LeRose family occupied a prominent position in the

community of Summersville, West Virginia. LeRose served as mayor

of the town from 1985 until his conviction in 1999. However, evidence presented to the grand jury indicated that the LeRose brothers

frequently used corporate funds to pay for extravagant personal

expenses. As the businesses became less profitable, the LeRose brothers concocted a check-kiting scheme, involving personal and business

checking accounts, in order to keep the businesses afloat. The three

banks used by the LeRoses were First Community Bank, Inc. ("First

Community" or "the Bank"), United National Bank, and Bank One.

The kiting scheme began on a small scale in January 1995 and grew

to such an extent that the massive number of checks involved generated approximately $64,000 in insufficient funds fees per year at First

Community alone. Unaware of the scope of the scheme and believing

that the LeRose family would eventually rectify the problems with

their accounts, the chief executive officer of the Summersville branch

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1 "Check kiting, at root, is a plan designed to separate the bank from

its money by tricking it into inflating bank balances and honoring checks

drawn against accounts with insufficient funds." United States v.

Doherty, 969 F.2d 425, 428 (7th Cir. 1992).

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of First Community avoided a confrontation with the LeRoses over

their irregular banking practices. The kiting scheme was eventually

uncovered by accident when a United National Bank employee incorrectly coded a LeRose check which led to an internal review. United

National Bank and Bank One then returned checks written on other

LeRose accounts, primarily accounts at First Community, and thus

protected themselves from loss. In the end, First Community suffered

a loss of $3,364,958.

In sentencing LeRose, the district court adopted the guideline

application in the presentence report, which imposed a base offense

level of six for the kiting scheme, see U.S. Sentencing Guidelines

Manual ("U.S.S.G.") § 2F1.1(a) (1998), increased by thirteen levels

based upon the $3,364,958 loss to First Community. See U.S.S.G.

§ 2F1.1(b)(1)(N). LeRose received an additional two-level enhancement because the fraud involved more than minimal planning, see

U.S.S.G. § 2F1.1(b)(2), resulting in a total offense level of twenty-one

for Count One. LeRose's base offense level for Count Two, which

resulted in a $7,678.24 tax loss to the federal government, was nine.

See U.S.S.G. §§ 2T1.1(a)(1), 2T4.1(D). However, because the two

offenses were closely related, they were grouped pursuant to U.S.S.G.

§ 3D1.2 for an offense level of twenty-one. LeRose then received a

three-level decrease for acceptance of responsibility, see U.S.S.G.

§ 3E1.1, yielding a total offense level of eighteen. With a Category

I criminal history, LeRose's guideline range was twenty-seven to

thirty-three months incarceration. See U.S.S.G. Ch.5, Pt.A (Sentencing Table).

Departing from the guidelines, the district court sentenced LeRose

to only twelve months and one day in prison. The court gave two reasons for its action. First, the court was of the opinion that the

$3,364,958 loss to First Community overstated the seriousness of the

offense. See U.S.S.G. § 2F1.1, comment. (n.11). Second, the court

decided that LeRose was entitled to a reduction for substantial assistance under U.S.S.G. § 5K1.1 even though the government declined

to make such a motion. The government appeals both grounds for

departure.

II.

We review the sentencing court's downward departure for abuse of

discretion. See Koon v. United States, 518 U.S. 81, 91 (1996) (holding

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that "appellate court[s] should not review the departure decision de

novo, but instead should ask whether the sentencing court abused its

discretion"); see also United States v. Barber, 119 F.3d 276, 283 (4th

Cir. 1997) (en banc) (observing that the Supreme Court in Koon

"made clear that it intended to adopt a traditional abuse of discretion

standard").

A.

First, the government alleges that the district court abused its discretion when it departed from the guidelines on the belief that the calculation of loss overstated the seriousness of LeRose's fraudulent

conduct. The commentary to U.S.S.G. § 2F1.1 provides:

In a few instances, the loss determined under subsection

(b)(1) may overstate the seriousness of the offense. This

may occur, for example, where a defendant attempted to

negotiate an instrument that was so obviously fraudulent

that no one would seriously consider honoring it. In such

cases, a downward departure may be warranted.

U.S.S.G. § 2F1.1, comment. (n.11). In determining that the

$3,364,958 loss to First Community overstated the seriousness of the

offense, the district court cited four factors:

- the Bank, upon discovering that something was amiss

with the LeRoses' checking accounts, delayed taking

effective action because it believed the LeRoses had the

financial wherewithal to pay;

- the Bank's conduct led the LeRoses to believe that their

actions were "less unlawful and involving far less culpability than the law attributes to check kiting";

- the Bank's chief executive officer mistakenly believed

that the Bank profited from the fees generated by overdrafts; and

- the Bank reached a settlement with the LeRoses on

repayment.

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J.A. 261. At the outset we note that despite the district court's disagreement with the Bank's handling of the LeRoses' accounts, there

is absolutely no evidence that anything done by the Bank affected the

amount of its loss. In fact, there is no dispute that prompter action by

First Community once the scheme was discovered would not have

affected the amount of loss. See United States v. Carey, 895 F.2d 318,

323 (7th Cir. 1990) (holding that when "defendant individually

orchestrated and carried out the fraud on the bank," departure for the

loss overstating the seriousness of the offense was unwarranted

because defendant's "actions were the sole cause of the loss to the

bank"). The $3,364,958 loss was real, not inflated, and in no way

overstated the seriousness of the LeRoses' intricate scheme. Moreover, the LeRoses' kiting bears no resemblance to the example given

in the guideline where "no one would seriously consider honoring" an

obviously fraudulent instrument. U.S.S.G. § 2F1.1, comment. (n.11).

The various checks were drawn on accounts at three reputable financial institutions and were facially valid. Consequently, the district

court's reliance upon U.S.S.G. § 2F1.1, comment. (n.11) to depart

was without foundation.

However, our inquiry does not end here. The district court enumerated four specific reasons why a downward departure was warranted.

Though used by the district court to support departure based on an

overstatement of the seriousness of the offense, the enumeration more

accurately reflects a belief that there was victim misconduct and

extraordinary restitution. Accordingly, we will examine these grounds

to determine if they afford a basis for departure.

A district court must "impose a sentence of the kind, and within the

range" resulting from a proper application of the guidelines "unless

the court finds that there exists an aggravating or mitigating circumstance of a kind, or to a degree, not adequately taken into consideration by the Sentencing Commission in formulating the guidelines

that should result in a sentence different from that described." 18

U.S.C.A. § 3553(b) (West Supp. 2000). In analyzing the consideration given by the Commission to a potential ground for departure, "a

sentencing court must focus on whether the factor is taken into

account by the guidelines, policy statements, or commentary and

whether it is encompassed within the heartland of situations to which

the applicable guideline was intended to apply." Barber, 119 F.3d at

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280. The heartland, crucial to a proper analysis, is defined as "a set

of typical cases embodying the conduct that each guideline

describes." U.S.S.G. Ch.1, Pt.A, intro. comment. 4(b). In deciding

whether a factor is an appropriate ground for departure, a sentencing

court must ascertain whether the factor is forbidden, encouraged, discouraged, or unmentioned by the Sentencing Commission as a ground

for departure. See Koon, 518 U.S. at 94-95; see also Barber, 119 F.3d

at 280. If the factor is encouraged, as are victim misconduct and restitution, see U.S.S.G. §§ 5K2.10, 3E1.1, comment. (n.1(c)), "the court

is authorized to depart if the applicable Guideline does not already

take it into account." Koon, 518 U.S. at 96. However, if the applicable

guideline has taken the encouraged factor into account, a court may

depart "only if the factor is present to an exceptional degree or in

some other way makes the case different from the ordinary case

where the factor is present." Id.

1. Victim Misconduct

The conduct of First Community was central to the district court's

determination that a departure in sentencing was warranted. According to the guidelines, "[i]f the victim's wrongful conduct contributed

significantly to provoking the offense behavior, the court may reduce

the sentence below the guideline range to reflect the nature and circumstances of the offense." U.S.S.G. § 5K2.10. The factors enumerated in § 5K2.10 are tailored to crimes involving violence, and the

guideline makes clear that only in unusual cases will victim misconduct "warrant a reduced penalty in the case of a non-violent offense."

Id. By way of example of an appropriate non-violent case warranting

departure, the guideline states that "an extended course of provocation

and harassment might lead a defendant to steal or destroy property in

retaliation." Id. In interpreting § 5K2.10, we have emphasized that not

only must the victim's conduct be provocative, but"the victim must

actually have done something wrong." United States v. Morin, 80

F.3d 124, 128 (4th Cir. 1996).

The allegations of misconduct in the present case were based on

the Bank's delay in confronting the LeRoses and the chief executive

officer's mistaken belief that fees generated by overdrafts were profitable. Finding that "the so-called and alleged victim invited what happened to it," the district court concluded that the case fell outside the

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heartland of U.S.S.G. § 2F1.1. J.A. 220. We believe that the district

court abused its discretion in departing from the guidelines based on

the Bank's handling of the LeRose accounts. The Bank was not a "socalled and alleged victim," but an actual victim that lost $3,364,958

because of an elaborate check-kiting scheme. In cases of non-violent

offenses, the guideline provides that "provocation and harassment" of

the defendant may warrant a departure for victim misconduct.

U.S.S.G. § 5K2.10. Provocation necessarily involves deliberate conduct that stirs a defendant to action, and such misconduct is simply

absent from the present case--the Bank in no way goaded the

LeRoses into launching the kiting operation. On the contrary, the

record reveals that the LeRoses spent a great deal of time planning

and coordinating their efforts to defraud the three banks.

Labeling First Community as a provocateur also ignores the fact

that kiting schemes work because the different banks involved do "not

see what [is] going on with each of the other . . . accounts--that [is]

how the kite [is] able to fly." United States v. Yoon, 128 F.3d 515, 525

(7th Cir. 1997). We find completely unavailing the argument by

LeRose that the Bank's inaction somehow lessens his culpability so

as to entitle him to a reduction in sentence. Clearly, the LeRoses'

mastery of manipulation rather than the Bank's conduct accounts for

the enormous loss.

Furthermore, LeRose can take no solace in the fact that the chief

executive officer of the Summersville branch believed that overdraft

fees were profitable. Bank officers from First Community testified

before the grand jury that overdraft fees represented "reimbursement

for overhead that a bank must utilize to return checks" and in no way

represented profit to the bank. J.A. 84. In fact, one officer testified

that the $64,000 assessed in fees during the last year of the checkkiting scheme was inadequate and that the Bank actually lost $44,000

in the wash because it was forced to borrow money to fund the

LeRose accounts. Morever, undue emphasis on the chief executive

officer's attitude toward fees gives the illogical appearance that the

bank gladly exchanged $3 million for $64,000 in fees. Again, this

ignores the deception employed by the LeRoses and the efficacy of

a kiting scheme which defrauds multiple banks having no knowledge

of account activity at the other financial institutions. See Yoon, 128

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F.3d at 525. Thus, the chief executive officer's misconception concerning overdraft fees is of no help to LeRose.

In sum, the evidence did not establish that First Community's lack

of action provoked or led to the fraud. Consequently, there was no

"misconduct" by the victim as contemplated by the guidelines and

therefore no grounds for departure based on the Bank's conduct.

Hence, the district court abused its discretion in basing its decision to

depart on the Bank's response to the problem LeRose created.

2. Restitution

The district court also relied for its departure on the July 29, 1999

final settlement with the Bank which entailed the LeRoses executing

a note and agreeing to repay the $3,364,958. If all payments are made

as scheduled, the Bank will be made whole in approximately four or

five years. This court has stated that "restitution, although taken into

account in the guideline permitting a reduction for acceptance of

responsibility [U.S.S.G. § 3E1.1, comment. (n.1(c))], can provide a

basis for a departure when present to such an exceptional degree that

it cannot be characterized as typical or `usual.'" United States v. Hairston, 96 F.3d 102, 108 (4th Cir. 1996).

In Hairston, we held that restitution equaling less than half of the

embezzled funds and resulting from the generosity of friends was not

exceptional. Id. at 108-09. We further noted that payment of such a

small percentage of the sum owed normally does not"constitute an

exceptional circumstance meriting departure." Id. at 108. Indeed,

extraordinary efforts at making restitution are readily apparent when

they occur. For example, the Eighth Circuit recently upheld a departure when the defendant began making restitution one year before the

indictment, worked sixteen hours per day to maintain the value of his

assets, relinquished his life insurance policy and his wife's certificate

of deposit, gave up his home, and paid nearly ninety-four percent of

the amount owed to the victim before sentencing. See United States

v. Oligmueller, 198 F.3d 669, 672 (8th Cir. 1999). In the present case,

the LeRoses have merely promised to make full restitution to First

Community by some date four or five years in the future. Though we

have no reason to doubt that the LeRoses will eventually make full

restitution, there is nothing exceptional about the settlement agreement with the Bank. The LeRoses fraudulently obtained from the

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Bank in excess of $3 million and have agreed to repay the funds. This

shows some responsibility with regard to their obligations, but not to

a degree "that is truly extraordinary and substantially in excess of that

which is ordinarily present." United States v. Weinberger, 91 F.3d

642, 645 (4th Cir. 1996) (internal quotation marks omitted). Hence,

the district court abused its discretion in departing downward based

on the restitution agreement.

B.

The district court also departed from the guidelines because it concluded that LeRose "was entitled to a motion for substantial assistance on his behalf from the Government." J.A. 247.2 The guidelines

provide that "[u]pon motion of the government stating that the defendant has provided substantial assistance in the investigation or prosecution of another person who has committed an offense, the court

may depart from the guidelines." U.S.S.G. § 5K1.1 (emphasis added).

As a general rule, "[t]he government has the power to make such

motions, but not a duty to do so." United States v. Maddox, 48 F.3d

791, 796 (4th Cir. 1995); see also United States v. Schaefer, 120 F.3d

505, 508 (4th Cir. 1997) ("Unlike all other grounds for departure, in

order for a district court to base a departure upon a defendant's substantial assistance to law enforcement authorities, the Government

must first move the district court to do so."). Nonetheless, courts may

review a prosecutor's refusal to file a motion for substantial assistance

and grant relief if the refusal is based on an unconstitutional motive

such as race or religion, or is not rationally related to a permissible

government objective. See Wade v. United States , 504 U.S. 181, 185-

86 (1992); Maddox, 48 F.3d at 795.

Before a court may order discovery or hold an evidentiary hearing

on the government's refusal to make the motion, the defendant must

first make a "substantial threshold showing" that the refusal resulted

from improper or suspect motives. Wade, 504 U.S. at 186 (internal

quotation marks omitted). Mere allegations of unconstitutional

motives on behalf of the prosecutor are not enough to carry this burden. See United States v. Wallace, 22 F.3d 84, 87 (4th Cir. 1994)

(explaining that "Wade imposes upon a defendant the burden to do

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2 LeRose does not argue that he was entitled to the substantial assistance motion because of a provision in the plea agreement.

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more than merely allege unconstitutional motive in order to require

judicial inquiry").

In attempting to make a threshold showing, LeRose argued that the

assistance he provided to the government was almost identical to that

provided by his brother Rodney who received a substantial assistance

motion. LeRose averred that he and Rodney were directed by the

same federal agents, approached many of the same suspects, subjected their families to similar dangers, and performed their assigned

duties in good faith. Based on these assertions, LeRose contended that

the government's refusal to make a substantial assistance motion for

him was not rationally related to a legitimate government end.

As an initial matter the proffer by LeRose was clearly insufficient

to identify and demonstrate any improper basis for the government's

decision, and at this point the court's inquiry should have ended.

However, instead of deciding whether LeRose had made a "substantial threshold showing," the district court impermissibly shifted to the

hearing portion of the Wade framework and directed the government

to respond with reasons for refusing to make the motion on LeRose's

behalf. The government explained that it had evaluated the assistance

of both brothers and concluded that LeRose's assistance was not as

substantial as Rodney's. The government pointed out that LeRose's

cooperation, though undertaken in good faith, did not lead to any

charges, arrests, or filings of informations. The government further

observed that LeRose never testified at trial or in front of a grand jury.

As for the comparison with Rodney's efforts, the government noted

that Rodney offered extensive assistance in an investigation of a corrupt state senator who later pled guilty to various charges. In the

course of the investigation, Rodney participated in the taping of

approximately thirty-five or forty meetings with the senator. While

LeRose also played a role in the investigation of the senator, the

materials submitted by LeRose to the district court indicated that this

was limited to "telephone tag" and that LeRose never made contact

with the senator.

After hearing the government, the district court concluded that the

government's conduct deprived LeRose of "due process and equal

protection under the specific facts of this case, and . . . no legitimate

government objective is served by such disparate treatment of

[LeRose]." J.A. 234. We disagree. First, as previously stated, LeRose

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failed to make a substantial threshold showing as required by Wade.

The lion's share of the information provided to the district court simply cataloged LeRose's efforts. Explanations of the extent of a defendant's assistance do not entitle a defendant to a hearing. See Wade,

504 U.S. at 187. Nor does the mere fact that the government made the

motion for one brother, but refused to make it for the other brother,

absent a suspect reason, establish a substantial threshold showing.

"[M]otions for substantial assistance do not require the government to

reward the least culpable or the most helpful codefendant." Maddox,

48 F.3d at 796. When a defendant does not demonstrate an improper

refusal by the government to make a § 5K1.1 motion, the inquiry

comes to an end. Second, even if we were to conclude that LeRose

carried his burden and made a substantial threshold showing, the government's decision was clearly rationally related to a legitimate government end. Rodney's significant efforts in obtaining the conviction

of the state senator obviously played a large part in the government's

decision to make a motion for substantial assistance and cannot be

compared to LeRose's unsuccessful attempts to establish contact with

the senator. In this important regard, LeRose's assistance simply did

not match that of his brother. See United States v. Doe, 170 F.3d 223,

224 (1st Cir. 1999) (noting that when the government receives no

benefit from a defendant's efforts or information, the government's

refusal to make a substantial assistance motion is rationally related to

a legitimate government end). Affirmation of the district court's

departure based on LeRose's assistance would encourage criminal

defendants to challenge the government's refusal to make such a

motion on the mere ground that they cooperated, a result contrary to

the established law of this circuit. See Wallace , 22 F.3d at 87 (concluding that full and truthful cooperation does not by itself entitle a

defendant to a substantial assistance motion).

In sum, the district court erred in departing from the guidelines on

the ground that LeRose was entitled to a substantial assistance motion

from the government.

III.

For the foregoing reasons, we vacate LeRose's sentence and

remand for resentencing in accordance with this opinion.

VACATED AND REMANDED

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