2012 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

8-24-2012

USA v. Donald Young

Precedential or Non-Precedential: Non-Precedential

Docket No. 11-2254

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Recommended Citation

"USA v. Donald Young" (2012). 2012 Decisions. Paper 542.

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NOT PRECEDENTIAL 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 District 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 Motz, Circuit Judge of the United States Court of 

Appeals for the Fourth Circuit, sitting by designation.

 Honorable Andre M. Davis, Circuit Judge of the United States Court of 

Appeals for the Fourth Circuit, sitting by designation.

 Honorable John Walker, Jr., Senior Circuit Judge of the United States Court of 

Appeals for the Second Circuit, 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 pleaded guilty to mail fraud and 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 judgment 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 Management II LP and Acorn II LP. Using these 

entities as well as a predecessor entity, Young operated a Ponzi scheme beginning by 
3

November 1999. Over the course of nearly a decade, Young stole approximately $25 

million of investors’ funds for his own personal benefit. 

On January 13, 2009, the SEC’s Office of Compliance Inspections and 

Examinations (“OCIE”) informed Young that it would conduct an on-site examination of 

Acorn beginning on January 21, 2009. The notice requested that certain records, which 

SEC regulations required Acorn to maintain, be made available for inspection on that 

date. The SEC’s on-site examination lasted through January 30, 2009. During the 

examination, Young produced some, but not all, of the requested records. On the last day 

of the site visit, the examiners provided Young 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 examiners, Young, and Young’s counsel 

corresponded about these documents. In this correspondence, Young promised to 

produce the requested documents. Ultimately, however, he failed to turn over all of the 

documents. According to an SEC 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 examiners were forced to spend time seeking 

documents from various third parties, including Acorn’s trading broker and accountant. 

The documents received from third parties were inconsistent with some of Young’s 

disclosures and, therefore, suggested fraudulent 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 civil enforcement action against Young 

alleging violations of the securities laws and requesting the return of ill-gotten gains. 

Almost immediately thereafter, Young voluntarily initiated contact with the Government, 

which resulted in a meeting on April 22, 2009 with SEC officials and government 

prosecutors in which Young confessed his wrongdoing. He also admitted that he had 

deliberately withheld documents 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 charging Young with one count of mail fraud in 

violation of 18 U.S.C. § 1341 and one count of money laundering 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 examiners as an overt act in this scheme to 

defraud. 

Young pled guilty to both mail fraud and money laundering. He stipulated to 

causing a loss of more than $20 million and agreed to Guidelines enhancements to his 

sentence based on that amount, the number of his 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 conviction for money laundering.1

 However, Young refused to 

 1

 The stipulated Guidelines calculation also included downward adjustments for 

acceptance of responsibility. 
5

stipulate that his conduct during the OCIE examination merited the imposition of a U.S. 

Sentencing Guidelines § 3C1.1 enhancement for obstruction of justice. The district court 

nonetheless applied that enhancement, determining that Young’s deliberate failure to 

produce documents during the OCIE examination constituted 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 range 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. Young now appeals. 

II. 

 Because Young challenges only the district court’s interpretation and application 

of the obstruction-of-justice enhancement and none 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 Guidelines 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 defendant'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 concealing evidence material to an official investigation or judicial 

proceeding, and providing materially false information 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 enhancement 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 examination 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 allegedly obstructive conduct from receiving an 

obstruction enhancement. 

 In Clark, the defendant pled guilty to representing 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, in addition to his oral misrepresentations of 

his citizenship status, he subsequently produced a fake birth certificate that allegedly 

impeded an INS investigation into his citizenship claim. Id. The district court 

determined that the defendant’s production of the birth certificate was “additional 

criminal conduct separate and apart from the basic underlying offense of falsely 
7

representing identity and nationality,” which constituted obstruction of justice meriting a 

§ 3C1.1 enhancement. Id. The Third Circuit reversed, explaining that “the conduct that 

is cited as an obstruction is actually activity 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 time the crime was said to have occurred.” Id.

In doing so, the Clark court recognized a circuit split over the proper application 

of the obstruction enhancement and adopted the view of the Eighth 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 application of a § 3C1.1 

obstruction enhancement based on the defendants’ perjury to the grand 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. 1992) and United States v. Lloyd, 947 F.2d 

339, 340 (8th Cir. 1991). Both held that an obstruction enhancement 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 precedent holds that section 3C1.1 “does not apply 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 crime 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 Sixth 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 alleged in the indictment. The indictment 

specifically charges that the scheme to defraud 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, alleging that beginning in 

January 2009, Young “attempted to thwart the investigation by refusing to supply the 

SEC with documents he was required to supply . . . .” Inclusion of this conduct in the 

indictment is hardly unusual; crimes involving fraud frequently include conduct 

constituting “false or fraudulent pretenses[ and] 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 advance of an internal audit and noting that the 

“offense of bank embezzlement itself encompasses elements of fraud, deceit, and 

concealment” and “[i]t is difficult to imagine an embezzler who does not take some 

affirmative steps to conceal his wrongdoing”). Thus, here, as in Clark, “the conduct that 

is cited as an obstruction is actually activity 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 allegedly 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 obstructive conduct -- 

production of a false birth certificate -- was itself a violation of the relevant 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 Government’s contention here that the obstructive 

conduct in this case is separate from the charged crime, and thus constitutes a proper 

basis for the obstruction enhancement. In sum, we conclude that Clark requires us to 

hold that the district court erred by applying an obstruction-of-justice enhancement to 

Young’s sentence.3

III. 

We recognize that the district court may decide 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 nonetheless 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 Guideline calculation, we must 

vacate the judgment of the district court and remand for resentencing. 

 

narrow, the court’s analysis of relevant precedent from the Sixth and Eighth Circuits 

would have been superfluous and 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 offense” to avoid the § 3C1.1 enhancement. Id.

3

 The Government also asserts that U.S. Sentencing Guideline Application Note 

4(D) covers Young’s conduct. Application Note 4 provides examples of conduct covered 

by § 3C1.1, including “concealing . . . evidence 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 falls squarely within this example, but the 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” within the meaning of Application Note 4(D). But even if the 

OCIE’s examination is an “official investigation,” the Clark rationale would still preclude 

the application of the enhancement in the case at hand.