2012 D e c i sion s O p inion s of the U nit e d S t a t e s C our t of Appe al s for the Thir d C ir c uit

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D ock e t N o . 11-2254

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w . v i l l a no v a . e du/thir dc ir c uit_2012/542NOT PRECEDENTIAL UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

____________

No. 11-2254

____________ UNITED STATES OF AMERICA

v. DONALD ANTHONY YOUNG, Appellant

____________ On Appeal from the United States District Court for the Eastern Distri ct of Pennsylvania (No. 1-10-cr-00199-1) District Judge: Honorable Juan R. Sanchez

____________ Argued August 14, 2012 Before: MOTZ,  DAVIS,  and WALKER,  Circuit Judges (Filed: August 24, 2012 ) Brett G. Sweitzer (Argued) Assistant Federal Defender Federal Community Defender Office for the Eastern District of Pennsylvania

 Honorable Diana Gribbon Mo tz, Circuit Judge of the United States Court of Appeals for the Fourth Circ uit, sitting by designation.

 Honorable Andre M. Davis, Circuit Ju dge of the United States Court of Appeals for the Fourth Circ uit, sitting by designation.

 Honorable John Walker, Jr., Senior Circu it Judge of the United States Court of Appeals for the Second Circu it, sitting by designation.2 601 Walnut Street, Suite 540 West – Curtis Center Philadelphia, Pennsylvania 19106 Counsel for Appellant Paul L. Gray (Argued) Assistant United States Attorney Office of United States Attorney 615 Chestnut Street, Suite 1250 Philadelphia, Pennsylvania 19106

____________ OPINION OF THE COURT

____________

PER CURIAM: Donald Anthony Young plead ed guilty to mail fraud a nd money laundering. On appeal, he raises a single issue. Young contends that the district court erred in applying an obstruction-of-justice enhancement to his sentence pursuant to United States Sentencing Guideline § 3C1.1. For the reasons that follow, we hold that the court did err in applying the enhancement to Young’s sentence and so we vacate the ju dgment of the district court and remand for re-sentencing.

I. For many years, Young was the managing member of an investment advising company named Acorn Capital Management, LLC (“Acorn”) and also controlled two investment entities, Acorn Capital Manageme nt II LP and Acorn II LP. Using these entities as well as a predece ssor entity, Young oper ated a Ponzi scheme beginning by3 November 1999. Over the course of near ly a decade, Young stole approximately $25
million of investors’ funds fo r his own personal benefit. On January 13, 2009, the SEC’s Offi ce of Compliance Inspections and Examinations (“OCIE”) inform ed Young that it would conduct an on-site examination of Acorn beginning on January 21, 2009. The no tice requested that certain records, which SEC regulations required Acorn to maintain, be made available fo r inspection on that date. The SEC’s on-site examination last ed through January 30 , 2009. During the examination, Young produced some, but not all, of the requested record s. On the last day of the site visit, the examiners provided You ng with a list of 35 requested documents that he had not yet provided, including some that the examiners deemed crucial, including investor lists and quarterly reports. Over the next two months, the OCIE ex aminers, Young, and Young’s counsel corresponded about these documents. In th is correspondence, Young promised to produce the requested documents. Ultimately, however, he failed to turn over all of the documents. According to an SE C representative, if Young had made all of the requested documents immediately available to the SEC, the agency would have been able to file an enforcement action sooner. Instead, the exam iners were forced to spend time seeking documents from various third parties, includi ng Acorn’s trading broker and accountant. The documents received from third parties were incons istent with some of Young’s disclosures and, therefore, suggested fraudule nt behavior by Young. During this time period, Young continued to operate his Ponzi scheme, and it was later determined that he caused investors an additional loss of approximately $74,000.4 On April 17, 2009, the SEC filed a ci vil enforcement ac tion against Young alleging violations of the securities laws and requesting the return of ill-gotten gains. Almost immediately thereafte r, Young voluntarily initiated c ontact with the Government, which resulted in a meeting on April 22, 2009 with SEC officials and government prosecutors in which Young c onfessed his wrongdoing. He also admitted that he had deliberately withheld document s from the OCIE examiners. He subsequently cooperated in all respects with the criminal investigation. On April 1, 2010, almost a year after the SEC filed its civil enforcement action, a federal grand jury returned an indictment ch arging Young with one count of mail fraud in violation of 18 U.S.C. § 134 1 and one count of money la undering in violation of 18 U.S.C. § 1957. The indictment alleged that Young engaged in a massive fraudulent scheme from November 1999 to April 2009. Notably, the indictment listed Young’s concealment of documents from the OCIE examin ers as an overt act in this scheme to defraud. Young pled guilty to both mail fraud and m oney laundering. He stipulated to causing a loss of more than $20 million and ag reed to Guidelines enhancements to his sentence based on that amount, the number of hi s victims, his use of sophisticated means pertaining to the execution or concealment of the offense, his abuse of a position of private trust, and his conv iction for money laundering. 1 However, Young refused to

1 The stipulated Guidelines calculation also included downw ard adjustments for acceptance of responsibility.5 stipulate that his conduct during the OCIE examination merited th e imposition of a U.S. Sentencing Guidelines § 3C1.1 enhancement for obstruction of justice. The district court nonetheless applied that enhancement, dete rmining that Young’s deliberate failure to produce documents during the OCIE examination constitute d obstruction of justice within the scope of U.S.S.G. § 3C1.1. The inclusion of the obstruction enhancement increased Young’s suggested Guideline sentence from a ra nge of 135 to 168 months imprisonment to a range of 168 and 210 months of imprisonment. The district court sentenced Young to a 210-month term of imprisonment. Yo ung now appeals.

II. Because Young challenges only the distri ct court’s interpretation and application of the obstruction-of-justice enhancement and non e of the underlying facts, we review the judgment of the district court de novo . United States v. Jenkins , 275 F.3d 283, 286 (3d Cir. 2001). The U.S. Sentencing Guide lines provide the following enhancement for conduct that obstructs the administration of justice: If (1) the defendant willfully obstructed or impeded, or attempted to obstruct or impede , the administration of justice with respect to the investigation, prosecution, or sentencing of the instant offense of conviction, and (2) the obstructive conduct related to (A) the defe ndant's offense of conviction and any relevant conduct; or (B ) a closely related offense, increase the offense level by 2 levels. U.S.S.G. § 3C1.1. The commentary to this guideline provides examples of the kinds of conduct to which this enhancement applies, including witness and juror intimidation,6 perjury, destroying or concealin g evidence material to an offici al investigation or judicial proceeding, and providing materially false info rmation to a judge or to a probation office with respect to a presentence or other investigation. Id. § 3C1.1, cmt. n.4. On appeal, Young advances two arguments as to why the district court erred by applying the obstruction-of-justice enhancemen t to his sentence. Because we find the first dispositive, we need not address the second. The parties seem to agree that United States v. Clark , 316 F.3d 210 (3d Cir. 2003) governs resolution of Young’s first argument. In Clark , the Third Circuit held conduct constituting “a constituent part” of the underlying charged offense cannot support an obstruction enhancement under § 3C1.1. Id. at 211. Young argues that his failure to produce documents during the OCIE’s examina tion constitutes “a constituent part” of his underlying fraud offense, and so, under Clark , this conduct cannot provide the basis for a § 3C1.1 obstruction enhancement. The Government counters that Clark is a narrow holding that does not prevent Young’s alle gedly obstructive conduct from receiving an obstruction enhancement. In Clark , the defendant pled guilty to represen ting himself falsely as a citizen of the United States. Id. The district court imposed an obstruction enhancement under § 3C1.1 to the defendant’s sentence because, inaddition to his oral misrepresentations of his citizenship status, he subs equently produced a fake birth certificate that allegedly impeded an INS investigation into his citizenship claim. Id. The district court determined that the defend ant’s production of the birth certificate was “additional criminal conduct separate and apart from the basic underlying offense of falsely7 representing identity and nationality,” which constituted obstruction of justice meriting a § 3C1.1 enhancement. Id. The Third Circuit re versed, explaining that “the conduct that is cited as an obstruction is actually activ ity that is part of the underlying charged offense.” Id. at 213. The Clark court pointed out that the assertedly obstructive conduct occurred during the period of criminal activity alleged in the indictment and “thus is encompassed within the tim e the crime was said to have occurred.” Id. In doing so, the Clark court recognized a circuit sp lit over the proper application of the obstruction enhancement and adopted the view of the Ei ghth Circuit over that of the Sixth Circuit. Id. The Clark court initially examined United States v. Sabino , 307 F.3d 446 (6th Cir. 2002), in which the Sixth Circuit upheld the app lication of a § 3C1.1 obstruction enhancement based on the defendan ts’ perjury to the gr and jury even though that perjury was part of the charged conspiracy to defraud. See Clark , 316 F.3d at 212. The Clark court contrasted this holding with that in two Eighth Circuit cases -- United
States v. Lamere , 980 F.2d 506, 517 (8th Cir. 19 92) and United States v. Lloyd , 947 F.2d 339, 340 (8th Cir. 1991). Both held that an obstruction enha ncement pursuant to § 3C1.1 did not apply to conduct that was part of the underlying crime. Lamere , 980 F.2d at 517 (explaining that circuit preceden t holds that section 3C1.1 “does not appl y to conduct that is part of the crime itself”); Lloyd , 947 F.2d at 940 (“Section 3C1.1 does not apply to conduct that is part of the cr ime itself.”). After examining the facts and rationale of the Sixth Circuit in Sabino and the Eighth Circuit in Lloyd and Lamere , the Third Circuit declared that it was not persuaded by the Si xth Circuit’s approach and instead aligned itself with the contrary view of the Eighth Circuit. See Clark , 316 F.3d at 213.8 In the case at hand, as in Clark , Young’s assertedly obstructive conduct occurred during the period of criminal activity alle ged in the indictment. The indictment specifically charges that the scheme to de fraud continued during the time of the OCIE investigation, i.e. , from November 1999 through April 2009 . Moreover, the indictment also charges the asserted obstructive conduct as an overt act, alle ging that beginning in January 2009, Young “attempted to thwart the investigation by refusing to supply the SEC with documents he was requi red to supply . . . .” Inclusion of this conduct in the indictment is hardly unusual; crimes involving fraud frequen tly include conduct constituting “false or fraudulent pretenses[ a nd] representations.” 18 U.S.C. § 1341; cf. United States v. Werlinger , 894 F.2d 1015, 1017 (8th Cir. 1990) (rejecting an obstruction-of-justice enhancement based on the defendant’s entreaties to his co-workers to help conceal his embezzlement in advanc e of an internal audit and noting that the “offense of bank embezzlement itself encomp asses elements of fraud, deceit, and concealment” and “[i]t is difficult to imagin e an embezzler who does not take some affirmative steps to conceal his wro ngdoing”). Thus, he re, as in Clark , “the conduct that is cited as an obstruction is actually activ ity that is part of the underlying charged offense.” Clark , 316 F.3d at 213. 2

2 The Government maintains that Clark is in fact a “very narrow” holding that applies only in cases in which the a llegedly obstructive conduct is identical to the underlying offense. The Government bases this contention on the Clark court’s passing observation that there (unlike the case at hand), the assertedly ob structive conduct -- production of a false birth certificate -- was itsel f a violation of the re levant statute and so “had precisely the same effect” as the charged crime. Clark , 316 F.3d at 213. The Government makes too much of this one sentence. For, if the Clark holding were so (Continued)9 Accordingly, we must reject the Governme nt’s contention here that the obstructive conduct in this case is se parate from the charged crime, and thus cons titutes a proper basis for the obstruction enhancement. In sum, we conclude that Clark requires us to hold that the district court erred by applyi ng an obstruction-of-justice enhancement to Young’s sentence. 3

III. We recognize that the district court may d ecide that, pursuant to proper application of the 18 U.S.C. § 3553(a) factors (which may take into account Young’s conduct with respect to the SEC investigation), Young no netheless merits a longer sentence than provided by the new guideline calculation, including a sentence of 210 months. But given that the court sentenced Young using an improper Gu ideline calculatio n, we must vacate the judgment of the districtcourt and remand for resentencing.
narrow, the court’s analysis of relevant precedent from the Sixth and Eighth Circuits would have been superfluous an d the court would not have needed to reach the circuit split. We are persuaded that Clark held that obstructive conduct need only be “part of the underlying charged offens e” to avoid the § 3C1.1 enhancement. Id.

3 The Government also asserts that U.S. Sentencing Guidelin e Application Note 4(D) covers Young’s conduct. Application Note 4 provides examples of conduct covered by § 3C1.1, including “concealing . . . eviden ce that is material to an official investigation .” U.S.S.G. § 3C1.1, cmt. n.4(D) (emphasis added). The Government insists that Young’s conduct fa lls squarely within this example, but th e record provides no support for the conclusion that OCIE’s examination into Acorn was anything other than routine regulatory oversight. It seems unlikely that such an examination constitutes an “official investigation” with in the meaning of A pplication Note 4(D). But even if the OCIE’s examination is an “offi cial investigation,” the Clark rationale would still preclude the application of the enhanc ement in the case at hand.