UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v. No. 97-4106

WILLIAM MARSHALL REECE,

Defendant-Appellant.

Appeal from the United States District Court

for the Eastern District of North Carolina, at Raleigh.

James C. Fox, District Judge.

(96-CR-122-F)

Argued: January 30, 1998

Decided: March 17, 1998

Before HAMILTON and LUTTIG, Circuit Judges, and

VOORHEES, Chief United States District Judge

for the Western District of North Carolina,

sitting by designation.

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Affirmed by unpublished per curiam opinion.

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COUNSEL

ARGUED: Tracy Chappell Curtner, HAFER, MCNAMARA,

CALDWELL, CUTLER & CURTNER, Raleigh, North Carolina, for

Appellant. Daniel Pearce Butler, Senior Trial Attorney, Public Integrity Section, UNITED STATES DEPARTMENT OF JUSTICE,

Washington, D.C., for Appellee. ON BRIEF: Richard T. Gammon,
DEMENT, ASKEW, GAMMON, DEMENT & OVERBY, Raleigh,

North Carolina, for Appellant. Janice McKenzie Cole, United States

Attorney, Public Integrity Section, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See

Local Rule 36(c).

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OPINION

PER CURIAM:

Defendant-appellant William Reece was an official at the Bureau

of Alcohol, Tobacco and Firearms (ATF) who abused his position in

order to embezzle money from the agency. Reece eventually pled

guilty to one count of mail fraud and one count of tax evasion, and

at his sentencing hearing, the district court departed upward four

levels from the sentencing guideline range. Reece appeals his sentence, and we affirm.

Over a period of several years, Reece orchestrated and implemented a fraudulent scheme that employed several persons and corporate entities to embezzle money from the government. Reece was

employed by the ATF as the Program Manager for the Air Operation

Section, a position which vested him with the responsibility for leasing certain aircraft to be used by the Section. Reece submitted requisition forms to ATF Headquarters in order to obtain approval of

particular leases. Each form usually listed three companies and their

respective bids for the particular aircraft lease. Reece, however, also

rigged the bidding; the low bidder on each form was always a business secretly controlled by Reece. Reece then approved and caused

invoices to be submitted for payment for the airplanes leased through

this arrangement, even though Reece and the companies that he controlled did not actually provide any aircraft for use by the ATF. In

payment for the services it never received, ATF Headquarters issued

United States Treasury Checks to the company listed on each respec-

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tive invoice. Those checks were mailed to post office boxes that were

set up by associates of Reece who were acting under his direction.

The funds were eventually deposited into bank accounts of companies

controlled by Reece. In total, Reece received approximately $550,672

through this fraud. Furthermore, in 1990, Reece received $183,873 in

income from this scheme that he did not report on his personal or corporate tax returns.

For his role in this fraud perpetrated against the taxpayers, Reece

was eventually named in a two count criminal information filed in the

Eastern District of North Carolina. Count I charged him with mail

fraud in violation of 18 U.S.C. §§ 1341 and 1346, and Count II

charged him with tax evasion in violation of 26 U.S.C. § 7201. Reece

subsequently pled guilty to both counts pursuant to a written plea

agreement.

During Reece's sentencing hearing, the district court notified the

defendant that it was considering an upward departure from the sentencing guideline range, and the court continued the hearing in order

to provide the parties with an opportunity to present additional evidence regarding factors that might make departure appropriate. Eventually, the court departed upward two levels under U.S.S.G. § 2C1.7

Application Note 5, and two levels under § 3B1.1 Application Note

2. The addition of these four offense levels established a total criminal

offense level of 27 which, when combined with Reece's criminal history Category I, yielded a sentencing range of 70 to 87 months. The

court then imposed a sentence of 87 months in addition to three years

of supervised release and $195,723 of restitution to the ATF. In this

appeal, Reece challenges both sets of upward departures. We conclude that the district court did not abuse its discretion by departing

upward four levels from the guidelines range.

Section 2C1.7 is entitled "Fraud Involving Deprivation of the

Intangible Right to the Honest Services of Public Officials; Conspiracy to Defraud by Interference with Governmental Functions." Application Note 5, which is the provision relied upon for the § 2C1.7

departure here, provides that,

[w]here the court finds that the defendant's conduct was part

of a systematic or pervasive corruption of a governmental

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function, process, or office that may cause loss of public

confidence in government, an upward departure may be

warranted. See Chapter Five, Part K (Departures).

Appellant argues that the district court abused its discretion by departing upward two levels based upon § 2C1.7 Application Note 5

because his only crime was simple theft from the government which

falls within the "heartland" of § 2C1.7, thus rendering any departure

unwarranted. Reece further argues that departure under the Application Note was unwarranted because the sentencing court made insufficient findings to support its conclusion that Reece's criminal conduct

was part of a "systematic or pervasive corruption" that "may cause

loss of public confidence in government."

We find neither of these two arguments persuasive. First, although

Reece's conduct of embezzling money from the government may fall

within the ordinary meaning of § 2C1.7, departure here was entirely

justified because appellant's conduct also fits easily within the language of Application Note 5 since Reece did not simply steal once,

but rather, embezzled large sums of money over a period of years and

took elaborate steps to avoid detection.

Second, there were clearly sufficient facts before the district court

to justify departure under Application Note 5. For instance, the evidence that justified the district court's conclusion that Reece's scheme

amounted to "systematic or pervasive corruption," included the following: the scheme resulted in a reported loss to the government of

$1.45 million which the sentencing judge termed the"largest internal

theft in ATF history," J.A. at 116; the scheme apparently spanned 5

years, and involved 22 different submissions to the ATF to set up

rigged and fraudulent contracts; J.A. at 147; the scheme involved the

use of phony invoices and fraudulent VISA charges, J.A. at 147; and

the investigation and prosecution of the theft diverted funds from

legitimate law enforcement functions of the ATF. J.A. at 147. There

was also substantial evidence supporting the district court's conclusion that Reece's scheme "may cause loss of public confidence in

government," in particular, the fact that there were multiple news

reports of Reece's fraud, J.A. at 121, as well as the fact that Reece's

fraud diverted a substantial amount of resources from other purposes

because of the time and money necessary to investigate and prosecute

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Reece. J.A. at 116-17. On the basis of this and other evidence, the district court quite reasonably concluded that,

 [w]hen you have people who are high ranking and people

in government, the head of a division, it makes one wonder

about the quality or makes one wonder whether the citizens'

faith in the government is undermined, such high level people engage in criminal activity. It seems to me it is almost

a given that when you have people in positions of trust, they

bring shame upon the leadership roles that they occupy. It

is a very difficult thing. I think it does incalculable harm to

the government in the sense that it breeds a lack of respect

for those who are engaged in it, not to mention the cost of

investigation in sorting it out. It takes tremendous assets

away from the bureau to make investigations that would be

available for other useful purposes. I would guess several

hundred thousand dollars at least the government spent in

investigating this man could have been put to good use

investigating alcohol, tobacco and firearm crimes.

J.A. at 129-30. Viewing these findings of fact by the district court, we

are convinced that the district court did not abuse its discretion by

departing upward under Application Note 5 by two levels. Although

Reece contends that these factual conclusions do not support the

departure because the judge's language was speculative and equivocal

("it makes one wonder," "it seems to me," etc.), the language of

Application Note 5 renders departure appropriate where the defendant's conduct "may" destroy public confidence in government, and

we conclude that the facts here certainly establish that it was not an

abuse of discretion for the district court to conclude that such a large

and highly publicized scheme of public corruption"may cause loss of

public confidence in government."

The district court also departed upward two levels under § 3B1.1

Application Note 2. Section 3B1.1, which is entitled"Aggravating

Role," provides:

(a) If the defendant was an organizer or leader of a criminal activity that involved five or more participants or

was otherwise extensive, increase by 4 levels.

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(b) If the defendant was a manager or supervisor (but not

an organizer or leader) and the criminal activity

involved five or more participants or was otherwise

extensive, increase by 3 levels.

(c) If the defendant was an organizer, leader, manager, or

supervisor in any criminal activity other than described

in (a) or (b), increase by 2 levels.

U.S.S.G. § 3B1.1. The district court did not employ an adjustment

under any of these subsections, but rather, performed an upward

departure based upon Application Note 2 of this section which provides that,

[t]o qualify for an adjustment under this section, the defendant must have been the organizer, leader, manager, or

supervisor of one or more other participants. An upward

departure may be warranted, however, in the case of a

defendant who did not organize, lead, manage, or supervise

another participant, but who nevertheless exercised management responsibility over the property, assets, or activities of

a criminal organization.

U.S.S.G. § 3B1.1 Application Note 2 (emphasis added).

Reece insists that there are no findings to support this departure

upward under Application Note 2. We disagree. In the course of perpetrating his fraud, Reece committed the following acts: (1) he established four bogus corporate entities, J.A. 63-74, J.A. 84-85, J.A. 93-

94; (2) he used several individuals as fronts for the companies, J.A.

63, J.A. 85, J.A. 147; (3) he used individuals to open post office

boxes and to use those boxes to receive fraudulently obtained government checks, J.A. 78, J.A. at 84, J.A. 147; (4) he used individuals as

signatories on bank accounts for the corporate entities, J.A. 147; and

(5) he used other companies to perpetrate VISA card fraud against the

government, J.A. 63-66, J.A. 115. Given these facts, the district court

did not abuse its discretion by concluding that Reece "exercised management responsibility over the property, assets, or activities of a

criminal organization"; Reece exercised management responsibility

over the property, assets, and activities of an organization, and that

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organization engaged in criminal activity, namely, Reece's aircraft

lease fraud. Although Reece insists that this organization is not a

"criminal organization" within the meaning of Application Note 2

because it did not further any other criminal enterprises beyond the

ATF fraud, we see nothing in the term "criminal organization" that

limits its application to organizations that further multiple criminal

purposes.

Accordingly, we affirm appellant Reece's sentence.

AFFIRMED

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