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. e du/thir dc ir c uit_1998/1Filed January 6, 1998

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

NO. 94-2210

UNITED STATES OF AMERICA

v.

JOSEPH FIORELLI Appellant

On Appeal From the United States District Court For the Eastern District of Pennsylvania (D.C. Crim. Action No. 94-cr-00146)

Argued October 14, 1997

BEFORE: STAPLETON, ALITO and ROSENN, Circuit Judges

(Opinion Filed January 6, 1998)

Michael R. Stiles U.S. Attorney Robert E. Courtney III Deputy U.S. Attorney Walter S. Batty, Jr. Assistant U.S. Attorney Robert K. Gordon (Argued) Assistant U.S. Attorney Office of U.S. Attorney

615 Chestnut Street Philadelphia, PA 19106 Attorneys for AppelleeBarnaby C. Wittels (Argued)

Stephen R. LaCheen & Associates

225 South 15th Street 3100 Lewis Tower Building Philadelphia, PA 19102 Attorney for Appellant

OPINION OF THE COURT

STAPLETON, Circuit Judge:

This is an appeal by Joseph Fiorelli from a final j udgment of conviction and sentence following a criminal jur y trial in

the United States District Court for the Eastern Di strict of Pennsylvania. We will vacate Fiorelli's sentence an d remand for resentencing.

I.

From 1967 to 1991, Fiorelli was employed as the business representative of Drywall Finishers Local Union

1955 of the International Brotherhood of Painters a nd

Allied Trades. Fiorelli also served as a trustee fo r the Local

1955 Health and Welfare Fund and several other unio n benefit funds. As business representative, Fiorelli was responsible for overseeing the daily operation of t he union, whose members were employed by contractors and construction companies engaged in drywall finishing . The job of a drywall finisher is to complete the instal lation of drywall in a residential or commercial building usi ng tape and joint compound.

A federal grand jury returned a 15-count indictment against Fiorelli, charging him with demanding and accepting illegal payments and gifts from contracto rs during his service as business representative. Afte r trial, a petit jury found Fiorelli guilty of most of the cou nts in the indictment, including racketeering, conspiracy to v iolate the Taft-Hartley Act, unlawful request and receipt of m oney by a union official, extortion, embezzlement, and obst ruction of justice. The jury also ordered forfeiture of $68,98 4 in racketeering proceeds. The district court sentenced Fiorelli

2to 121 months of imprisonment, followed by three ye ars of

supervised release, a fine of $12,500, and special assessments totaling $600. This appeal followed.

The government's case at trial consisted of a parad e of builders and contractors who testified that they ma de periodic payments to Fiorelli or to James Siesser, his associate, on Fiorelli's behalf. These payments wer e made, for the most part, because the witnesses believed i t was in their economic interest to do so. Some said they wa nted to assure themselves of a good supply of qualified uni on workers or to avoid trouble over their having used nonunion workers. Others paid because they believed th e payments would guarantee labor peace and acceptable contracts. These witnesses did not report express t hreats of violence or economic harm but indicated that, based on their contact with Fiorelli and Siesser, they feare d labor trouble if they did not pay.

One witness, William Sampsel, testified that, upon arriving in Philadelphia to oversee his firm's exec ution of a contract to do the drywall work in a 19-story build ing, Fiorelli demanded $38,000 in return for assuring th at he would have a supply of good workers. Siesser visite d the job site a number of times to pressure Sampsel and ulti mately threatened him with bodily harm if he reported Fior elli's demands to the FBI. The government did not contend that Fiorelli ever obtained money or anything else of va lue from Sampsel.

Fiorelli testified in his own behalf. He admitted t hat he received payments that he regarded as Christmas gif ts and vacation money from contractors and builders who th ought well of him and wanted to give him what he called " tips." He insisted, however, that he had never threatened violence or economic harm to any of the builder/contractor witnesses. He also specifically denied ever asking Sampsel for money.

The record affirmatively reflects that the district court considered Fiorelli's written objections to the pre sentence report and that it afforded counsel ample opportuni ty at two sentencing hearings to address those objections and any other he wished to make. Ultimately, the court, with

3one exception not here relevant, adopted the factua l

findings and guideline application set forth in tha t report. In accordance with the adopted guideline applicatio n, the court grouped the offenses in ten groups. Each exto rtion offense against a particular victim was placed in a separate group. The obstruction of justice offense, which re lated to an effort by Fiorelli to cover up his embezzlement of union funds to pay personal dental expenses, was not plac ed in a separate group but served as the basis for an enhan cement of the offense level for the underlying embezzlemen t. After applying the multiple-count adjustment of U.S.S.G. S 3D1.4, the court determined that 27, the base off ense level for group seven, was the "greater adjusted of fense level." Adding five levels under U.S.S.G. S 3D1.4, reflecting the groups of offenses, the district court conclude d that the combined adjusted offense level was 32 and that the guideline range for imprisonment is 121 months to 1 51

months.

Fiorelli, in addition to challenging the presentenc e report in a number of respects, moved for a downward depar ture based on extraordinary family circumstances. This m otion was premised on the fact that Fiorelli played an im portant role in the life of his granddaughter who suffers f rom cerebral palsy. The district court heard extensive evidence in support of this motion, but ultimately exercised its discretion to deny it.

II.

Since it is clear that the district court recognize d that it had discretion to depart downward on the basis of extraordinary circumstances, we have no jurisdictio n to review its decision not to depart. See United State s v. Denardi, 892 F.2d 269, 272 (3d Cir. 1989). Accordin gly, we turn to Fiorelli's challenges to the district court 's calculation of the guideline range. All, save one, of those challenges present no substantial issue.

First, Fiorelli contests the district court's failu re to group the extortion offenses. He insists that they must b e grouped together because they were all alleged in the RICO count to be part of a pattern of racketeering activity. U.S. S.G.

4S 3D1.2 provides the governing rules regarding grou ping,

however, and where the offenses involved are extort ion offenses, there are different victims, and no count involves conduct that is treated as a specific offense chara cteristic in, or adjunct to, the guideline for another count, S 3D1.2 does not authorize grouping. The fact that the exto rtions are a part of a pattern of racketeering activity is simply irrelevant to the grouping issue under these circum stances.

Turning to the crucial calculation of the offense l evel for group seven, Fiorelli asserts that the district cou rt made no findings to support its specific offense characteri stic enhancement under U.S.S.G. S 2B3.2(b)(1) for threat ening bodily injury, its role in the offense adjustment u nder U.S.S.G. S 3B1.1(c) for being an organizer and supe rvisor, or its role in the offense adjustment for abusing a position of trust under U.S.S.G. S 3B1.3. This is simply not the case. The district court adopted express findings (1) tha t "Sampsel threatened to go to the FBI and Siesser, u nder Fiorelli's direction, threatened bodily injury and death if Sampsel went to the FBI" (PSR at 24); (2) that "Fio relli recruited and supervised James Siesser" (PSR at 25) ; and (3) that "Fiorelli was the business manager of Loca l 1955 and in that position he was afforded substantial ju dgment that is ordinarily given considerable deference . . . and [he] used this position to coerce and extort money from contractors" (PSR at 25). None of these findings is clearly erroneous. Moreover, Fiorelli is also in error in a rguing that

"abuse of trust is an element inherent in the offen se extortion" so that an adjustment for such abuse wou ld somehow amount to double counting.

III.

A more serious issue is presented by the district c ourt's two level adjustment of the offense level of group seven for an obstruction of justice through perjured testimon y at
trial.

A. The Controlling Law

An adjustment is authorized by U.S.S.G. S 3C1.1 "[i ]f the defendant willfully obstructed or impeded, or attem pted to

5obstruct or impede, the administration of justice d uring the

investigation, prosecution, or sentencing of the in stant offense." Perjurious testimony by a defendant at tr ial can clearly constitute such an obstruction of justice. Application Note 3(b); United States v. Dunnigan, 5 07 U.S. 87 (1993).

At the time of Fiorelli's crime and at the time of his sentencing, Application Note 1 to S 3C1.1 read, in relevant part, as follows:1

This provision is not intended to punish a d efendant for the exercise of a constitutional right. A defendant's denial of guilt (other than a denial of guil t under oath that constitutes perjury) . . . is not a bas is for application of this provision. In applying t his provision in respect to alleged false testimony or sta tements by the defendant, such testimony or statements should be evaluated in a light most favorable to the d efendant.

The Supreme Court and this court have provided a gl oss on S 3C1.1 that is helpful here. We begin with Unit ed States v. Dunnigan, 507 U.S. 87 (1993). The Court there he ld that "the Constitution permits a court to enhance a defe ndant's sentence under [S 3C1.1] if the court finds the def endant committed perjury at trial." Id. at 88-89. Because fear of an unjustified enhancement may chill exercise of the defendant's constitutional right to testify in his own defense, however, there was an important caveat to this holding: "the trial court must make findings to sup port all the elements of a perjury violation in the specific case," id. at 97, that is, factual findings that the defendant (1) gave false testimony (2) concerning a material matter (3 ) with the willful intent to provide false testimony. Id. at 9 4.

We first had occasion to apply the teachings of Dun nigan in United States v. Boggi, 74 F.3d 470 (3d Cir. 199 6). We there held that "express separate findings are not required" under Dunnigan. Id. at 479. We explained that where "the record establishes that the district court's applic ation of the enhancement necessarily included a finding as to th e

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1. This segment of Application Note 1 was amended, effective November 1, 1997. See footnote 3, infra.

6elements of perjury, and those findings are support ed by

the record, we will not remand merely because the d istrict court failed to engage in a ritualistic exercise an d state the

obvious for the record." Id.

Boggi, like Fiorelli, was a union official who had been found guilty of extorting money and services from contractors. When reviewing the perjury enhancement imposed by the district court under S 3C1.1, we str essed that the record reflected that Boggi took the stand in his own defense and specifically denied receiving anyth ing of

value from each of the contractors named in the indictment. Id. at 478-79.2 The district court, at sentencing,

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2. The colloquy we cited in support of this proposi tion as follows:

Q. Okay, Mr. Boggi, you've been charged with accept ing money from Mr. and Mrs. Magac. Did you ever accept any money f rom Mr. and Mrs. Magac?

A. No, I did not.

Q. You've been charged with accepting money from Mr . Meister or Philmont Contractors. Did you ever accept any money from him or them

or it?

A. No, I did not.

Q. You've been charged with accepting money from Sa muel Kaufman, Inc. Did you ever accept any money from Mr. Kaufman or his corporation?

A. No, I did not.

Q. You've been charged with accepting money from St uart Gray or Denver Drywall Company, Inc. Did you ever accept an y money from it or

him?

A. No, I did not.

Q. You've been charged with accepting kitchen cabin ets from Calvanese Corporation, CGC Corporation -- CJC Corpo ration, excuse me, or Carmen Calvanese. Did you ever accept as a g ift any kitchen cabinets from Mr. Calvanese, from Calvanese Corpora tion or from CJC Construction Company?

A. No, sir.

Q. You've been charged with accepting a gift of two tickets to the Super Bowl from 1990 from Mr. Wyatt. Did you receiv e the two ticket -- two Super Bowl tickets from Mr. Wyatt?7recognized that " `a guilty verdict . . . binds the sentencing

court to accept the facts necessarily implicit in t he verdict.' " Id. at 478-79 (quoting United States v. Weston, 960 F.2d 212, 218 (1st Cir. 1992)). It understandab ly concluded: "I don't see how, in view of his flat de nials and the jury's conviction, that you can find otherwise than that he testified falsely on the stand." Id. at 478. Giv en that receipt of something of value was an essential elem ent of the charges against Boggi, his testimony on this is sue "was necessarily material" as a matter of law. Id. at 47 9. Moreover, given his specific and unambiguous "flat denials" concerning an issue that was the central focus of t he trial, the record provided ample assurance "that Boggi pro vided false testimony with willful intent, `rather than a s a result of confusion, mistaken or faulty memory.' " Id. at 479 (quoting Dunnigan, 507 U.S. at 94). Thus, while the re were no express findings of the district court in Boggi on materiality and willfulness, "the record establishe [d] that [its] application of the enhancement necessarily in cluded a finding as to the elements of perjury." Id.

In United States v. Arnold, 106 F.3d 37 (3d Cir. 19 97), we turned our attention to Application Note 1 to S 3C1 .1. There, the district court had made a finding that s pecific testimony of the defendant going to a critical issu e at his trial had been willfully false. The defendant insis ted on appeal, however, that S 3C1.1 and Application Note 1 required the government to prove each of the elemen ts of perjury by "a higher standard than a preponderance of the evidence." Id. at 44. We agreed and found it necess ary to remand for resentencing because there was "no indic ation in the record that the district judge . . . placed the burden of proof upon the government and viewed the evidenc e in the light most favorable to Arnold." Id. We instruc ted that

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A. Yes, I did.

Q. Mr. Boggi, did you ever accept any money from an y contractor with whom you had dealings as a union representativ e?

A. No, I did not.

Boggi, App. at 1118-19.

8"[o]n remand, the district court must use the clear and

convincing standard, place the burden of proof upon the government, and support its decision with the findi ngs required by the Supreme Court's decision in Dunniga n." Id.3

Since Arnold, we added further to our gloss on S 3C 1.1 in

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3. Application Note 1 was amended, effective Novemb er 1, 1997, to substitute the following for the concluding sentenc e quoted above in the

text:

In applying this provision in respect to all eged false testimony or statements by the defendant, the court shoul d be cognizant that inaccurate testimony or statements sometimes may result from confusion, mistake, or faulty memory and, th us, not all inaccurate testimony or statements necessarily reflect a willful attempt to obstruct justice.

The Sentencing Commission adopted this change so th at the Application Note "no longer suggests the use of a h eightened standard of proof. Instead, it clarifies that the court should be mindful that not all inaccurate testimony or statements reflect a willfu l attempt to obstruct justice." U.S.S.G. Appendix C, Amendment 566 (1997)

.

Although the eliminated sentence can accurately be described as ambiguous with respect to whether a clear and convi ncing standard is required and although the Commission's explanation for its amendment uses the word "clarifies," this is not a situation in which the Commission has amended an application note to resolve an ambig uity by explaining what the intent behind the ambiguous provision was. The Commission's explanation acknowledges that the concluding senten ce of the prior version, which originated in 1990, suggested a stan dard higher than a preponderance of the evidence and indicates that it was stricken to eliminate that suggestion for the future. Moreover, it is clear from a comparison of the texts of the new sentence and the stricken one that

the new sentence was not intended to set forth the intended meaning of the stricken one. Rather, the new sentence is inten ded to clarify the intended application of the guideline and the appli cation notes by calling attention to the 1993 teachings of the Supreme Cour t in United States v. Dunnigan, 507 U.S. 87 (1993). Accordingly, this is not a situation in which we, as a panel, are free to reexamine our dec ision in United States v. Arnold, 106 F.3d 37 (3d Cir. 1997), in light of the subsequent amendment to Application Note 1. Cf. United States v. Joshua, 976 F.2d 844 (3d Cir. 1992). The 1990 version of Application Note 1 is applicable here, and we are bound by its interpretation in Arn old. See United States v. Bertoli, 40 F.3d 1384 (3d Cir. 1994); United Sta tes v. Menon, 24 F.3d 550 (3d Cir. 1994).

9United States v. McLaughlin, 126 F.3d 130 (3d Cir. 1997).

McLaughlin was convicted of income tax evasion. At trial, he testified that a particular bank account was a r eserve against future warranty claims and that its balance therefore was being treated as accrued income over a ten year period. As a result, McLaughlin contended that there was no tax loss attributable to the income deposite d in that

account.

At the sentencing hearing in McLaughlin, the distri ct court imposed a S 3C1.1 enhancement. It concluded i n conclusory fashion that McLaughlin was guilty of "a willful impediment to obstruction of justice." Id. at 139. It then gave the following, sole example:

For example, . . . Mark McLaughlin testified . . . that, in order to add additional money to "the res erve," "we formed a bank account in South Jersey into w hich we deposited cash into that account." The defen se concedes that the jury convicted the Defenda nts of failing to report this income . . . .

Id.

We held that the enhancement was "clear error." Id. at 140. We first noted that the jury had "returned a g eneral verdict of guilty that [did] not distinguish betwee n the [various] accounts." Id. at 138. It thus did "not d isclose whether the jury rejected all or only part of Mark' s testimony." Id. at 140 n.11. Accordingly, the falsi ty of McLaughlin's testimony regarding the First Fidelity account was not necessarily implicit in the verdict.

We went on to point out that even if the falsity of this testimony had been necessarily inherent in the jury 's verdict, "the jury's having disbelieved him" would not "alone . . . support a finding that Mark testified `with t he willful intent to provide false testimony.' " Id. at 140 (e mphasis supplied). The record did not contain evidence from which

a conclusion of willfulness was unavoidable and the district court provided no explanation as to whether or why it had become clearly convinced that the referenced testim ony was willfully false. Accordingly, we held that the dist rict court had "failed to hold the government to [the clear an d

10convincing] burden of proof" standard required by A rnold.

Id.

In the course of making the point that a jury findi ng of falsity does not necessarily mean there has been pe rjury, we quoted from our pre-Dunnigan decision in United States v. Colletti, 984 F.2d 1339 (3d Cir. 1992). We itali cized the portion of the quoted sentence which supported that point. Another portion of that sentence repeated dicta fro m Colletti to the effect that the government must prove not on ly perjury to support a S 3C1.1 adjustment but also th at the perjury was so "far-reaching as to impose some incr emental burdens upon the government." 126 F.3d at 140. Fior elli points to this portion of McLaughlin in support of his argument that the government's case here was defici ent. We decline to recognize this requirement as part of the law

of our circuit.

The quotation in McLaughlin regarding the necessity of an

"incremental burden" was dicta in that case as well as in

Colletti. Our confidence that it was not advanced b y the McLaughlin court as a basis for the conclusion reac hed comes not only from the text of the opinion but als o from the fact that such a holding would have been clearl y inconsistent with the application notes and the dec ision of the Supreme Court in Dunnigan. At the time McLaughl in was decided, and at the time of Fiorelli's sentenci ng, as is true today, Application Note 3(b) expressly stated that "committing . . . perjury" was "conduct to which th is enhancement applies." The Supreme Court took note o f this fact in Dunnigan. It then went on to observe:

Were we to have the question before us with out reference to this commentary, we would have to acknowledge that some of our precedents do n ot interpret perjury to constitute an obstructi on of justice unless the perjury is part of some greater d esign to interfere with judicial proceedings.

Dunnigan, 507 U.S. at 93. The Supreme Court conclud ed, however, that a construction of S 3C1.1 that would require more than proof of the existence of perjury would b e "inconsistent with its accompanying commentary." Id . at 94.4 Thus, even if our statement in Colletti had not bee n dicta,

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4. We note, as well, that in sharp contrast to Appl ication Note 3(b), Application Note 3(g) requires that a materially fa lse statement to a law enforcement officer must significantly obstruct or impede the official investigation before a S 3C1.1 enhancement is appro priate.

11its vitality would not have survived Dunnigan.

B. Application

Application of these governing principles to the re cord in this case involves a close judgment call. The only relevant comments of the district court are cryptic. At the same time, however, the record bears strong evidence tha t would support a finding of perjury in connection with the offenses in group seven. Ultimately, we conclude that this c ase is more like McLaughlin than Boggi, and out of an abun dance of caution, decide to remand to provide an opportun ity for

the district court to make its views clear.

Fiorelli's Presentence Report, in explaining its recommended S 3C1.1 enhancement to the group seven offense level, states that "Fiorelli obstructed jus tice by perjuring himself repeatedly on the stand." PSR at 25. In response to Fiorelli's objection, the presentence o fficer added, "Defense counsel admitted that Fiorelli deni ed extorting money or services and that the jury did n ot accept Fiorelli's denial. This constitutes perjury under U nited States v. Dunnigan." PSR Addendum at 2. These state ments of the probation officer were directed not only to group seven but to each group of offenses that included a n extortion charge. In addition to adopting the prese ntence report, the district court quoted this response to Fiorelli's objection at the sentencing hearing and indicated t hat it was "persuaded by the statement of the Probation Of ficer." It then overruled the objection. There are no other relevant findings in the record.

Two racketeering acts of Fiorelli have been grouped in group seven. The jury found that the government had proved both beyond a reasonable doubt. The first wa s to demand $38,000 from William Sampsel and his firm, A lpha Painting and Restorations, Inc., while serving as a representative of one or more of its employees in v iolation

of 29 U.S.C. S 186. The second of these racketeerin g activities was attempting to obtain $38,000 from Al pha "by wrongful use of . . . threatened force, violence an d fear, including fear of economic harm" in violation of 18 U.S.C. S 1951. As we have earlier noted, Fiorelli took the stand

12and specifically denied ever asking William Sampsel for

money. The fact that he did so ask is necessarily i nherent in the jury's verdict on both of these racketeering acts. Accordingly, if there were some record indication t hat the district court relied on Fiorelli's testimony that he had never asked Sampsel for money, this case would be indistinguishable from Boggi. Since a finding that this testimony was false was implicit in the verdict, th at verdict would establish that falsity had been proven by mor e than clear and convincing evidence. Moreover, as in Bogg i, the conclusion would be inescapable in the context of t he charges being defended against and the unambiguity of

Fiorelli's denial that this falsehood was deliberat e, rather than the result of confusion, mistake, or lapse of memory. Finally, as in Boggi, the jury's verdict and the re cord would permit us to say with confidence that the governmen t carried its heavy burden in proving all of the elem ents of perjury.5

The difficulty from the government's point of view arises from the fact that neither the presentence report n or the district court at the sentencing hearing focused on Fiorelli's denial of a request of money from Sampsel or, indee d, on the particular allegations, testimony, or verdict w ith respect to the group seven offenses. To the extent there wa s any focus on the perjury issue, it was not on Fiorelli' s having denied requesting money from Sampsel, but rather on his having denied obtaining money and services from oth ers by extortionate means. This fact changes our analysis because, as we have noted, Fiorelli freely acknowledged rece iving money and services from contractors and builders ot her than Sampsel. He denied only making threats or prom ises in connection with his receiving those funds and se rvices. Moreover, as we have also noted, the testimony of t he builder/contractors was not that Fiorelli made expl icit threats but rather that they interpreted his conduc t to imply that there was cause for fear if they did not pay.6

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5. Judge Rosenn believes this case is indistinguish able from Boggi. He would therefore affirm the judgment of conviction a nd the sentence as is.

6. While Sampsel testified to an express threat of bodily injury, that threat was in connection with a demand by Siesser t hat Sampsel not go to the FBI, rather than in connection with the dema nd for $38,000.

13The operative portions of the extortion allegations of the

indictment are that the specified payments were mad e "with the consent of the contractors having been induced by the wrongful use of . . . fear, including fear of econo mic harm." See Gov't App. at 14. In a labor racketeering case involving similar allegations and a denial by the defendant t hat any threats were made, the Court of Appeals for the Fou rth Circuit upheld the conviction, ruling as follows:

The fear need not be the consequence of a di rect or implicit threat by the defendant, and the go vernment's burden of proof is satisfied if it shows tha t the victim feared an economic harm, and that the circum stances surrounding the alleged extortionate conduct rendered

that fear reasonable. . . .

[S]o long as the defendant intends to exploi t the reasonable fear of the victim, his actions w ill constitute

extortion under the Hobbs Act.

United States v. Billups, 692 F.2d 320, 330-31 (4th Cir. 1982) (citations omitted).7

Given the concerns reflected in Dunnigan's requirem ent of findings, if a sentencing court is going to rely on the verdict of the jury as laying part of the foundatio n for a S 3C1.1 enhancement, there should be no question bu t that the relevant finding was necessarily made by the ju ry. In this context, we are hesitant to conclude that the falsity of Fiorelli's testimony about the absence of any threa ts by him is necessarily inherent in the jury's verdict on th e extortion charges. Moreover, we find inadequate other assuran ce in the record that the district court, in reaching its decision on the S 3C1.1 enhancement, held the government to its heavy burden of proving falsity and willfulness by clear and convincing evidence as required by Arnold.

IV.

We will reverse the judgment of the district court and remand for resentencing only. On remand, the distri ct court

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7. See also United States v. Williams, 952 F.2d 150 4, 1513 (6th Cir. 1991) (collecting cases).

14should determine whether the government met its bur den

of proving each of the elements of perjury as set f orth above and should make appropriate specific findings to re flect its

decision. We do not foreclose the district court fr om imposing a S 3C1.1 perjury enhancement provided it does so in a manner consistent with this opinion.

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

15