### INTHE UNI TED S TATESCOU RT OFAPPEALS FORTHE FIFTH CIRCU IT

N o. 08- 20269
UN I TE D S TA TE S OF AM ERI CA , P l ai n t i f f - A pp el l ee v. S TE VEN J AY S CHER , D efen d a n t - A p p ell a n t

A pp ealf

rom t h e U n i t ed S t ates D i st ri ctC ou rt f or t h e Sou t h ern D i st ri ctof T exas
B ef ore H IG G IN B O T H A M , G A R Z A , an d P R A D O , C i rcui tJu dg es . E M ILIO M
. G A R Z A , C i rcui tJu dg e: S t e p h e n J a yS c h e r , at r a v e la g e n t , wa s c o n v i c t e do f wi r e f r a u df o ru s i ng u naut ho r i z e d waive rc o de s t o o bt ai n i l l e ga ldi s c o unt s o n Cont i ne nt alAi r l i n es f l i ght s . C om pl ai ni ng t hatt he j ur y i ns t r uc t i o ns i m pr o pe r l y am e nde d t he i n di ct m en tan d that t h e l oss cal cul ati on m et h od u n reasona bl y i n f l ated C o n tin e n ta l’ s lo s s e s , S c h e ra p p e a ls
. I Cont i ne nt als e l l s a i r l i ne t i c ke t s t o c o ns um e r s i n s e ver alw ay s , i nc l udi ng t h rough t i cketi n g agen t s at ai rport s and t h rough i n dep en den tt ravelagen ci es. T o a llo w s e le c te dtr a v e l a g e n ts to is s u e tic k e ts a t r e d u c e d p r i c e s n o r m a lly ava i l able w i t h cer t ai n l i m i t ati on s, C on t i n en t al provi des “ w aiver codes. ” Th ese United States Court of App eals

Fifth Circuit 

### F I L E D Ma rc h 23, 2010 Cha rl es R. F ulb ru g e II I Clerk Case: 08-20269 Document: 00511059265 Page: 1 Date Filed: 03/23/2010N o. 08- 20269

2 codes, w h en entered i n t o C on t i n en t al ’ s r eservat i on syst em , w aive ot h e rw i se ap pl i cabl e l i m i t ati on s on redu ced fares. F or exam pl e, i f a t ravelagen tprom i ses a custom er a cert ai n rat e an d then fai l s t o book the tr avel earl y en ou gh t o sec u re t h e redu ce d fare, t h e w aiver code al l ow s t h e agen tt o sec u re t h e adv an ced p u r c h a s e re d u c e dfa r e e v e n th o u g h it is n o lo n g e ra v a ila b le
. C o n tin e n ta l se cu ritya g e n ts r e v iew C o n tin e n ta l’ s re co rd s to ide n tify po s s ibl e a bus e s o f

t he w aive rco de sy s t e m . D ur i ng o ne o f t he s e r e vi e w s , a n a ge nt determ i n ed that 926 u n au t h ori zed w aiver codes h ad been usedby T ravelC en t er of N ew J ersey. E ven t u al l y, the ag en tt raced t h ese un au t h ori zed codes t o Sch er. S c h e rw a s u s i n gt h e u n a u t h o r i z e dc o d e s t o i s s u e t i c k e t s a tar e d u c e dfa r e . H e c har ge d hi s c us t o m e r s apr i ce l ow er t han t he a c t ualf ul l

- far e c o ac h pr i c e b ut h i gh er t h an t h e un au t h ori zed redu ced fare he obtai n ed w i t h t h e w aiver codes. S cher an d h i s acc om pl i ces kep tt h e di f ference betw een t h e unautho ri zed redu ced fare an d t h e pri ce t h e cust om ers pa i d. C on t i n en t all ostt h e di f ference betw een th e a c tu a l fu ll-fa r e co a c h p r ic e a n dth e u n a u th o r iz e dre d u c e dfa r e . Th e g ove r nm enti ndi c t ed Sc he r o n fi ve c ount s of w i r e f r aud, al l egi ng a schem e t o obtai n m on ey an d p ropert y by u t i l i zi n g t h e u n au t h ori zed w aiver codes to is s u e u n a u th o r iz e dr e d u c e dfa r e t ic k e ts . A t tr ia l, S c h e ra d m itt e dt h a t h e p a id Jo s e N i e t o , a Cont i ne nt alt i c ke t i ng ag e nt , f o rt he una ut ho r i z e d waive rc o de s a nd t hatt he w aive r s a l l o w e d f o ras i gnif

i c ants av i ngs o ve rt he c o s t o f a f ul l far e . The ju r yco n v ic te dS c h e ro n a ll fiv e co u n ts : (1 ) c o n s p ir a c yto co m m it w ir e fr a u din vi ol ati o n o f 1 8 U
. S
. C
. §§ 371 an d 13 43; an d ( 2) –( 5) w i re f rau d i n vi ol ati on of § § 1 3 4 3 , 1 3 4 6 , a n d2
. Th e pr es ent enc e r epo r t(“ PS R ” ) c al c ul at ed an advi so r y gui del i nes r ange o f f o r t y- o ne t o f

i f t y- o ne m o nt hs
. The m o s t s i gnif i c ant fac t o ri n de t e r m i ni ng t he ad vi s o r y r ange w as the l o s s c al c ul at i o n, w hi c h r e s ul t e d i n af o ur t e e n- po i nt i n crease t o Sch er’ s base of fen se l evelu n der U
. S
. S
. G
. § 2F 1. 1(b) ( 1) ( O )
. Sch er obj ect ed to the m et h odol ogy u sed t o com pu t e the l oss an d presented h i s ow n l oss Case: 08-20269 Document: 00511059265 Page: 2 Date Filed: 03/23/2010N o. 08- 20269

3 es t i m at e b as ed o n d at a pr ovi ded byan avi at i on c ons ul t i ng gr oup. U l t i m at ely, t h e di st ri ctcourtadop t ed the P S R l oss cal cul ati on . Th e courtdi d, how ever, gr anta t w o- poi nt r educ t i on i n Scher ’ s of fens e l eve lf

orac c ept i ng r es ponsibi l i t y. T h e courtsentenced S cher t o t h i rt y- t h ree m on t h s of i m pr iso n m en tan d three ye ar s o f s upe r vi s e d r e l e as e , o r de r e d r e s t i t ut i o n i n t he a m o untof $ 1, 21 1, 01 1, a nd
m a d e as p e c ia l a s s e s s m e n t o f $ 5 0 0
. S c h e rfile datim e lyn o tic e o f a p p e a l. II A T h e di st ri ct court i n st ructed t h e j u ry t h at i t coul d f i n d S cher gu i l t y of

w i re f r audi f i tf o und be yo nd ar e as o n able do ubtt hatSc he rkno w i ngly c r e at e d a
sc hem e t o o bt ai n m oney, pr ope r t y, orot hert hi ngs of val ue. Scherar gues t hat t he i nc l us i o n o f

t he ph rase “ot he rt hi ngs o f v al ue ” c o ns t r uc t ive l y am e nde d t he in d ic tm e n t b ya d d in gab a s is fo rco n v ic tio n n o t a lle g e din th e in d ic tm e n t. S cher di d n otrai se t h i s a rg u m e n t d u ri n g t ri al
. Th u s, our revi ew i s f or p la in e r r o r . Un i t ed S t ate s v. R eyes , 102 F
. 3d 136 1, 136 4 ( 5th C i r. 199 6)
. U n der th e p la in e r r o rs ta n d a r d , w e w ill r e v e r s e o n ly if “(1 ) th e r e is a n e r r o r , (2 ) th a t is cl ear o rob vi ou s, an d( 3 ) th a t aff ects [t h e d efen d a n t’ s] su b stan ti a lri gh ts. ” Un i t ed S t ate s v. F

erguson , 2 11 F
. 3d 8 78, 8 86 ( 5th C i r. 2 000 )
. E ven if these fact ors are m et , “ t h e deci si on t o corr ect t h e f orf ei t ed errori s w i t h i n t h e soun d d i scr et i on of t h e court , an d the court w i l lnot exerc i se t h at di scr et i o n u n les s t h e err or se r i ous l y af

fec t s t he fai r nes s, i nt egr i t y, orpubl i c r eput at i on o f j udi c i al p roce ed i n gs . ” Id
. (c i t i ng Uni t e d St at e s v . O lano , 507 U
. S. 725, 735

) 3 6 (19 9 3 )). Aconst r uct ive am endm entoc c urs w hen t he t r i alc our t“ t hro ugh i ts i ns t r uc t i o ns a nd fac t s i tper m i t s i n ev i de nc e , al l o w s pr o o f of a n e s s e nt i ale l e m e nt o f th e cr im e o n a n a lte r n a tiv e b a s is p r o v id e db yth e s ta tu te b u t n o t c h a r g e din th e ind ic tm e n t.” Uni t e d St at e s v . Phi l l i ps , 477 F. 3d 215, 222 ( 5t h C i r . 2007) ( quot at i on o m i t t ed)
. I n evalua ti ng w het hera c ons t r uct ive am endm enthas occurred, w e consi der “ w h et h er t h e j u ry i n st ructi on , t ak en as a w h ol e, i s a Case: 08-20269 Document: 00511059265 Page: 3 Date Filed: 03/23/2010N o. 08- 20269

4 co r r e c ts t at e m e nto f t he l aw and w he t he ri tc l e ar l y i ns t r uc t s j ur o r s a s t o t he p ri n ci p l es o f th e l a w a p p l i ca b l e to th e factu a li ssu es co n fron ti n g th em . ” Un i t ed S t ate s v. G u i d ry , 4 0 6 F .3 d3 1 4 , 3 2 1 (5 th C i r . 2 0 0 5 ) (q u o ta tio n o m itt e d ). W e

“ s c r ut i ni ze a ny dif

fe r e nc e b e t w e e n a n i ndi c t m e nta nd aj ur y i ns t r uc t i o n” a nd “w il l rev e rs e on ly if th a t d iff e re n ce a ll o w s th e d e fe n d a n t to b e co n v icte dof a sep a ra te crim e f

rom th e on e f

or w h i ch h e w a s i n d i cted
. ” Un i t ed S t ate s v. Nu n ez , 18 0 F. 3d2 27 , 2 31 ( 5t h Ci r . 1 99 9)
. Ot he r w i s e , a def e nda ntm us t“ s ho w ho w t he
v a r ia n c e in th e la n g u a g e b e tw e e n t h e ju r yc h a r g e a n dth e in d ic tm e n t s o s e v e r e ly p r eju d ic e d h is d e fe n s e th a t it r e q u ir e s r e v e r s a l u n d e r h a r m le s s e r r o rr e v i e w .” I d. H e r e , th e b a la n c e o f th e in s tr u c tio n s fo c u s e dth e ju r y ’ s a tt e n tio n s q u a r e ly o n t he c o rre c tl e ga ls t and ar d. Cor r e c ts t at e m e nt s o f t he l aw bo o ke nde d t he di s t r i c tc o ur t ’ s i nc o r r e c ts t at e m e nt . Fi r s t , t he di s t r i c tc o ur ts ai d t hatCountO ne cha rged S cher w i t h conspi ri n g t o obtai n “ m o ne y an d p ropert y. ” N ext, t h e di st ri ct c o ur ts ai d t hatCount s Tw o t hr o ughFive a l s o c har ge d Sc he rw i t h pe r pe t r at i ng a s c he m e t o o bt ai n “ m o ne y o rpr o pe r t y. ” Af t e rt ho s e cor rects t at e m e nt s , t he di str ict courti n corr ect l y st ated t h at t h e j u ry shou l d f i n d S cher gu i l t y of i nvo lve m e nt i n a “ s c he m e t o de f r aud” unde r 18 U
. S. C. § 13 43 i f i tf o und t hathe
s c he m e d t o o bt ai n “ m o ne y, propert y, o ro t he rt hi ngs o f v al ue . ” Fi nall y, t he d i stri ct cou rt correctly stated th a t a “sch em e t o defra u d ” i n cl u d es a n y sch em e to de pr ive a no t he ro f

m o ne y o rpr o pe rt y. Sc he r ’ s a r gum e nt , t hatt he i ndi c t m e nt w as c o ns t r uc t ive l y am e nde d b e c aus e th ec o u r t ’ s d e f i n it i o no f

“ s c he m e t o de f

r aud”
o n o ne o c c as i o n i nc l ude d t he l ang uag e “ o ro t h er thi n gs o f v al ue , ” i gno r e s t he b a la n c e o f th e in s t r u c tio n s , w h ic h w e r e o n th e w h o le co r r e c t. Seee . g. , Un i t ed St at e s v . Le ahy , 82 F. 3d 624, 631 ( 5t h C i r . 1996) (f i ndi ngn o c ons t r uct ive am e ndm e ntw he r e o ne m i s s t at e m e nto f t he l aw w as m ad e butt he b al anc e o f t he in str u ctio n s w e re co rr e ct). Case: 08-20269 Document: 00511059265 Page: 4 Date Filed: 03/23/2010N o. 08- 20269

Scher argues thatde novo review applies because he is challenging the loss calculation 1 metho dolo gy . Althou ghhe i s correct that de novo review applies when the metho dolo gyis 5 Fu r t her , t he go ver nm entdi d nots ee k t o e xpand the i ndi c t m entby presenti n g a theory t h at Scher defr au ded C on t i n en t alof “ ot h er t h i n gs of

val u e” such as goodw i l l
. A t t rial , t h e governm en tpresented sub st an t i alevi den ce of C on t i n en t al ’ s l oss of

m on ey. I n deed , t h e enti re t ri al f ocused on how Sch er used t he c ode s t o s el lt i c ket s bel ow c os ts o t hathe c oul d i l l egall y pr of i tat C on t i nent al ’ s expe nse . The go ver nm entr ef er r ed r epe at edly t o m oney i n i ts s u m m a tio n , a n dth e d e fe n s e a ls o c h a r a c te r iz e d th e e ffe c t of th e w a iv e rco d e s in t e r m s o f

pr i c e . Si m ply put , “ t he o ve r r i di ng andpr e do m i nantt he o r y o f t he g o v e r n m e n t’s ca s e ” o n th e fr a u dco u n ts in v o lv e dC o n tin e n ta l’ s lo s s o f m o n e y . Un i t ed S t ate s v. R i cherson , 8 3 3 F .2d 1 1 4 7 , 1 1 5 7 (5t h C ir. 1 9 8 7 ). B ecau se, given t h e evi den ce presented, Sch er c ou l d n otha ve been c o n v ic t e do f a c r im e o t h e rt h a n t h a tfo rw h ic h h e w a s i n d ic t e d , t h e tr ia l c o u r t ’s si n gl e ref

erence t o “ ot h er t h i n gs of value ” i n an ot h erw i se c orrec tj u ry i n st ructi on does n otconst i t u t e a con st ructive am en dm en t . A ccor di n gl y, w e w i l lnot r everse Sc he r ’ s c o nvi c t i o n. B Sc he ra l s o c hall e nge s t he di s t r i c tc o ur t ’ s l o s s c al c ul at i o n m et ho d f o rt he pur po s e s o f

b o t h t he a m o unt
- o f

- l o s s e nhan c e m e nta nd r e s t i t ut i o n. To de t e r m i ne t h e am ou n tof

l oss t o C on t i n en t al, th e d istr i ctcourtst art ed w i t h t h e f u l l

- fare, on e-w a y p ri ce for ea ch ti ck et, the n su b tracted th e a m ou n t actu a l l y p a i dto C on t i n en t al , as w el l as an y ap pl i cabl e di scoun t s. S cher argu es t h at t h i s m et h od o f lo s s ca lc u la tio n g r o s s lyin fla te dC o n tin e n ta l’ s lo s s e s .
“ T h i s c ou rtrevi ew s a di st ri ctcourt ’ s fa ctu alf i n di n gs at sentenci n g f or cl ea r erro r an di ts lega lan a l ys i s d e n ov o.” Un itedS ta tes v. O lis , 429 F. 3d 540, 54 5 ( 5t h Ci r . 2 00 5)
. A di s t r i c tc o ur t ’ s l o s s c al c ul at i o n und e rt he Se nt e nc i ng G u i del i n es i s a fa ctu a lf i n di n g revi ew ed f

or c l ear err or. Uni t e d S t at e s v. 1 Case: 08-20269 Document: 00511059265 Page: 5 Date Filed: 03/23/2010N o. 08- 20269

ch allenged , see Un ited Statesv . Ran dal l , 15 7 F .3d 3 28, 330(5th Cir. 199 8), the parties do not disputemethodology. Scher and the gove rnm ent agree that the proper metho dolo gyfor calculating

the loss to Co nt in en t alis to subtract the after-waiver p rice that Scher p aid to Continental from the actual value of the ticket absent the ille gal waiver. Inother wor ds, the disagreement center s onthe actual value of the tickets absent the illegal waiver. The court’s determinationof the actu al valueis a factual finding that we review for clear error . 6 B i eganow s ki , 313 F .3d 264 , 294 –95 ( 5th C i r. 200 2)
. “ F act u alf i n di n gs are not c l e a r lye r r o n e o u s if th e ya r e p la u s ib le inligh t o f th e re c o r dre a da s aw h o le .” Un itedS ta tes v. Ay a la , 4 7 F .3d 6 8 8 , 6 9 0 (5t h C ir. 1 9 9 5 ).

“ O r di nar i l y, w he n pr o pe r t y i s t ak e n . . . t he l o s s i s t he fairm ar ke tv al ue o f th e p a r tic u la rp r o p e r tya t is s u e .” U .S .S .G . § 2 B 1 .1 cm t. n .2 (2 0 0 0 ); seealso Uni t e d S t at e s v. O nyi ego , 286 F
. 3d 249 , 255 ( 5th C i r. 200 2)
. W h ere , as here,
m arket val u e i s di f f i cul tt o deter m i n e, a sentenci n g court m ay u se “ ot h er rea son a b l e m ea n s to a scer tain th e l ev el of l oss to the victi m . ” O nyi ego , 286 F. 3d
a t 2 5 6 (c ita tio n o m itt e d ); seealso U
. S
. S
. G
. § 2F 1. 1 n
. 9 ( 200 0) (“ F or t h e pu rposes of subsect i on (b) ( 1) , t h e l oss n eed n ot be determ i n ed w i t h preci si on . Th e court n e e do n lym a k e are a s o n a b le e s t i m a t e o f th e lo s s , g iv e n th e a v a ila b le in fo r m a tio n .”). I n m a k in gfa c tu a l d e te r m in a tio n s a t s e n te n c in g , th e d is tr ic t c o u r t is en t i t l ed to rely u pon t h e i n f orm ati on i n t h e P S R a s l on g as the i n f orm ati on bears
s o m e in d ic ia o f r e lia b ility
. Un i t ed S t ate s v. S h i pley , 963 F
. 2d 56, 59 ( 5th C i r. 1 9 9 2 ). T h e d efen d a n t bea rs th e b u rd en of p rese n ti n g re b u ttalev i d en ce to dem on st rat e t h at t h e i n f orm ati on in the P S R is inaccurate or m ater i al l y u n t rue. Un i t ed S t ate s v. W

ash i ngt on , 4 8 0 F .3 d3 0 9 , 3 2 0 (5 th C ir . 2 0 0 7 ). I n t he i ns t antc as e , Sc he rdi d no tpr o vi de r e but t ale vi de nc e tha tt he di s t r i c tc o ur tde e m e d s uf f i c i e ntt o und e r m i ne t he i nf o r m at i o n i n t he PSR. The P S R reli ed on t h e evi denc es ubm it t e d att ri al , specif i cal l y spread sheets produ ced byCont i ne nt al ’ s f

r audi nve s t i ga t o r , de t ail i ng t he f r aud ul e ntt i c ke t s i s s ue d a nd t h ei r c orres pon di n g value t o C on t i n en t al
. Sch er nei t h er p ro vi ded t h e di st ri ct Case: 08-20269 Document: 00511059265 Page: 6 Date Filed: 03/23/2010N o. 08- 20269

7 c o ur tw i t h av i ab l e a l t e r nat ive nor dem o ns t r at e d t hatt he i nf o r m at i o n i n t he PSR w as i nac c ur at e o rm at e r i al l y unt r ue . Al t ho ughSc he rdi d c o m m i s s i o n a c o n s u ltin gg r o u p to m a k e a n a lte r n a tiv e lo s s ca lc u la tio n , n e ith e r S c h e r n o rh is cou n sel seem ed to u n d ersta n dthe m ost b a sic p r e c e p ts of th e a l tern a te
m e t ho do l o gyt hatpr o duc e d t he i rl o s s e s t i m at e o r seem ed a bl e t o i de nt i f y t he p r ic e d a ta u p o n w h ic h it r e lie d
. T h e irla c k o f u n d e r s ta n d in gco u ldce r ta in ly
u n derm i n e t h e di st ri ctcour t ’ s c o nf i de nc ei n t h e proposed a l t erna t ive an d the l oss c a lc u la tio n itp r o d u c e d
. S ee V an G orp M

f g. , I n c. v. T ow n ley I

n d u s. P last i cs, I

n c. , 46 4 F. 2d1 6, 1 9 ( 5t h Ci r . 1 97 2) (no t i ng t hatl ac k o f b as i c und e r s t and i ng r e g a r d in gs u bje c t o f te s tim o n yu n d e r m in e s its v a lid ity). I n hi s b r i e f

i ng, Sc he rpr e s e nt s a num be r o f pl aus ibl e ar gum e nt s t hatt he l os s am ountw as t oo hi gh

)) ( 1) t h at S ch e r’ s un au t h ori zed pri ce di scr i m i n ati on br o u g h tCo n t i n e n t a la d d i t i o n a lr e v e n u e t h a to f fs e ta n yl o s s ; ( 2 ) t h a tt he gov er nm ent ’ s use of one- w ay far es r es ul t ed i n hi gherl os s am ount s t han can be at t r ibut e d t o t he ro und- t r i p far e s a c t uall y pur c has e d; a nd ( 3) t hats e ve r alo f t he far es use d i n t he di st r i c tc our t ’ s c al c ul at i on w er e m uch hi ghert han w hat c ust om er s w oul d have ac t ual l y pai d. Bu t , t he ar gum ent s ar e nots upport ed by evi den ce. I n deed , i n res pon se t o si m i l ar obj ect i on s i n codefen da n t N i et o’ s c ase, C on ti n en tal re- ex a m i n ed i ts i n i ti a ll oss am ou n t i n the i n stan t case , tak i n g in to a c c o u n t t h e p o te n tia l fo r r e d u c e d fa r e s , a n dre v is e dd o w n w a r db ya p p r o x im a te ly $ 1 0 0 , 0 0 0 to arrive at th e cu rren t f i gu re. F u rth er, n eit h er C on ti n en tal’ s p ro fit
m ar gi n no r t he pr o s pe c t t hat pa s s e nge r s w o ul d hav e f l o w n wi t h a no t he ra i r l i ne w i t houtt he l ow erfar e pr ovi ded byt he w a i ve r c od e m i t i gat es Scher ’ s c r i m i nal
a c tiv itie s . A l t h ou gh w e ha ve som e m isgivi n gs abou tt h e cal cul ated val u e of Cont i ne nt al ’ s l o s s , Sc he rs i m ply fail e d t o pr o duc e r e l i ab l e e vi de nc e s upp o r t i ng an al t er nat e num beror d em ons t r at i ng t hatt he i nf or m at i on i n t he PS R w as i nacc urat e or m at er i al l y untr ue. A s Scher fai l ed t o pre se nt suf f i c i entrebutt al Case: 08-20269 Document: 00511059265 Page: 7 Date Filed: 03/23/2010N o. 08- 20269

8 e vi de nc e , w e c annots ayt hatt he di s t r i c tc o ur tc l e ar l y e r r e d i n a do pt i ng t he P S R ’ s fa c tu a l fin d in g r e g a r d in gth e lo s s a m o u n t. S ee Un i t ed S t ate s v. T ampic o , 2 9 7 F .3d 3 9 6 , 4 0 4 (5t h C ir. 2 0 0 2 ). Bec aus e t he di s t r i c tc ou rtu s e d t he s am e f i gur e s t o c al c ul at e t he rest i t u t i on am ou n tt h at itusedt o cal cul ate t h e d a m a g e s a m ou n t , w e l i kew i se f i n d that Sch er has n otprodu ced suff i ci en tevi den ce t o show t h at t h e res t i t u t i on a w a r dw a s a n a b u s e o f d is c r e tio n . SeeO nyi ego , 2 8 6 F .3 da t 2 5 6
. AF F I RMED. Case: 08-20269 Document: 00511059265 Page: 8 Date Filed: 03/23/2010