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RECOMMENDED FOR FULL-TEXT PUBLICATION 

Pursuant to Sixth Circuit I.O.P. 32.1(b) 

File Name: 14a0244p.06 

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT 

_________________ 

UNITED STATES OF AMERICA, 

Plaintiff-Appellee, 

v. 

JASEN SNELLING, 

Defendant-Appellant. 

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No. 12-4288 

Appeal from the United States District Court 

for the Southern District of Ohio at Cincinnati. 

No. 1:12-cr-00058—Herman J. Weber, District Judge. 

Decided and Filed: September 22, 2014 

Before: BOGGS and ROGERS, Circuit Judges; and STEEH, District Judge.*

_________________ 

COUNSEL 

ON BRIEF: Kevin M. Schad, OFFICE OF THE FEDERAL PUBLIC DEFENDER, Cincinnati, 

Ohio, for Appellant. Christopher K. Barnes, UNITED STATES ATTORNEY’S OFFICE, 

Cincinnati, Ohio, for Appellee. 

_________________ 

OPINION

_________________ 

BOGGS, Circuit Judge. Defendant-Appellant Jasen Snelling appeals a 131-month prison 

sentence imposed pursuant to a plea agreement. In the agreement, Snelling admitted to charges 

of conspiracy to commit mail and wire fraud, obstruction of justice, and tax evasion for his part 

 *

 The Honorable George C. Steeh, United States District Court for the Eastern District of Michigan, sitting 

by designation. 

>
No. 12-4288 United States v. Snelling Page 2

in an investment scheme that defrauded investors of nearly $9 million. Snelling challenges the 

sentence based on an allegedly faulty Guidelines-range calculation that employed a loss figure 

that did not take into account the sums paid back to his Ponzi scheme’s investors in the course of 

the fraud. 

 For the reasons below, we vacate the sentence of the district court and remand the case 

for resentencing. 

I 

 In June 2012, Snelling was named in an information for his part in a Ponzi scheme that 

defrauded investors by soliciting funds for two fictitious financial companies, CityFund and 

Dunhill. These companies supposedly invested their clients’ money in overseas mutual funds 

and overnight depository accounts, activities that promised investors an annual return of 10–

15%. In reality, Snelling and his partner operated a Ponzi scheme in which the “returns” on 

earlier investors’ capital were simply a portion of new investors’ deposits. The remainder of the 

new deposits were diverted to Snelling and his partner. The two of them used the money to buy 

vacation houses and boats, pay private-school tuition, and otherwise live extravagantly. Among 

the various tactics employed by the scheme were the intentional targeting of victims’ IRA and 

401(k) accounts, the issuance of false quarterly statements by mail and, when confronting their 

investors’ suspicions, the production of false trading-account records. They also provided false 

documents, including the falsified trading-account statements, to a federal grand jury. Those 

documents reflected a balance of $8.5 million in CityFund / Dunhill’s account when, in fact, it 

held just $995.88. Neither Snelling nor his partner paid taxes on the diverted funds. 

 The information contained three counts: conspiracy to commit mail and wire fraud, in 

violation of 18 U.S.C. § 1349; obstruction of justice, in violation of 18 U.S.C. §§ 1519 and 2; 

and tax evasion, in violation of 18 U.S.C. § 7201. Snelling signed a plea agreement, admitting 

all three of the charges in the information. The plea agreement contained reference to the very 

dispute that is at issue in this case: the parties’ divergent offense-level calculations for the charge 

of mail and wire fraud. Depending upon the loss figure established at sentencing, different subsections of U.S.S.G § 2B1.1(b)(1), corresponding to different offense-level enhancements, would 
No. 12-4288 United States v. Snelling Page 3

apply. The plea agreement indicated that it was Snelling’s position that he should receive credit 

for money returned to the victims during the scheme. 

 The probation office prepared a Presentence Investigation Report (PSR), which 

calculated the sentencing-guidelines range for the charge of mail and wire fraud according to the 

method proposed by the government in Snelling’s plea agreement. That calculation reflected a 

total loss figure of over $7,000,000, which, in turn, yielded an offense-level enhancement of 

20 levels under U.S.S.G. § 2B1.1(b)(1)(K). The PSR, like the plea agreement, duly recorded 

Snelling’s objection to the government’s calculations as well as his different reading of the 

Guidelines, which would have yielded a loss figure of less than $7,000,000, based on the 

Guidelines’ requiring the deduction of sums returned to investors in the course of a fraud. 

Snelling also objected to the PSR’s Guidelines calculation in a sentencing memorandum. The 

government filed a memorandum in response in which it held firm to the offense-level 

calculation set forth in the plea agreement and in the PSR, arguing that Snelling “should not get 

credit for payments to perpetuate the scheme made with other victims’ money.” 

 At sentencing, Snelling again stated his reading of the U.S.S.G. The district court 

rejected Snelling’s argument. Echoing the government’s memorandum, the court stated that “the 

loss should not be reduced, particularly because the monies did not represent profits . . . any 

return of money was to induce further investment . . . .” 

 In the end, the court settled on a loss figure that was based on the intended loss of 

$8,924,451.46, a figure that resulted in the application of U.S.S.G. § 2B1.1(b)(1)(K) and its 

attendant offense-level increase of 20. This led to a total offense level of 35 for the charge of 

mail and wire fraud. The court also calculated an offense level of 19 for the charge of 

obstruction of justice and an offense level of 22 for the charge of tax evasion. With a three-level 

reduction applied for Snelling’s acceptance of responsibility, the court settled on a final offense 

level of 32 and a criminal history category of I. This calculation resulted in a sentencing range 

of 121–151 months, significantly higher than the range of 97–121 months claimed by the 

defense. The court ultimately sentenced Snelling to 131 months’ of imprisonment, to be served 

concurrently with the Indiana prison sentence already imposed, and to be followed by three years 

of supervised release. Snelling timely appealed the sentence. 
No. 12-4288 United States v. Snelling Page 4

II 

 “Criminal sentences are reviewed for both substantive and procedural reasonableness.” 

United States v. Stewart, 628 F.3d 246, 257 (6th Cir. 2010). Substantive reasonableness is 

concerned with the length of a sentence in context, “tak[ing] into account the totality of the 

circumstances, including the extent of any variance from the Guidelines range.” United States v. 

Novales, 589 F.3d 310, 314 (6th Cir. 2009). Procedural reasonableness, on the other hand, is 

concerned with the method by which the court arrives at the sentence. For a sentence to be 

procedurally reasonable, the court “must properly calculate the Guidelines range, treat the 

guidelines as advisory, consider the § 3553(a) factors and adequately explain the chosen 

sentence . . . .” United States v. Presley, 547 F.3d 625, 629 (6th Cir. 2008). Snelling does not 

challenge the substantive reasonableness of his sentence; his appeal focuses on procedural 

reasonableness—whether the district court calculated the Guidelines range correctly. 

 As for the loss figure applied in calculating the Guidelines range, we review the district 

court’s determination for clear error. See United States v. Ware, 282 F.3d 902, 907 (6th Cir. 

2002). However, “[w]hether those facts as determined by the district court warrant the 

application of a particular guideline provision is purely a legal question and is reviewed de 

novo.” United States v. Rothwell, 387 F.3d 579, 582 (6th Cir. 2004). 

III 

 Snelling’s appeal calls into question the district court’s calculation of his Guidelines 

range. He objects that the loss figure should have been reduced from $8,924,451.46, the total 

amount of money taken in by the Ponzi scheme from its investor victims, to $5,336,187.78, to 

account for the total amount returned to investors over the life of the fraud. The difference 

between the two figures leads to the application of different sub-sections of U.S.S.G. 

§ 2B1.1(b)(1). Losses over $7,000,000 require the application of § 2B1.1(b)(1)(K), which calls 

for an offense-level increase of 20 levels. Losses under $7,000,000, on the other hand, require at 

most the application of § 2B1.1(b)(1)(J) and an attendant increase of 18 levels. At sentencing, 

the application of these two provisions to a criminal history category of I yields two disparate 

ranges: 121–151 months and 97–121 months, respectively. 
No. 12-4288 United States v. Snelling Page 5

 Basing his argument squarely on the text of the guidelines, Snelling’s reasoning runs as 

follows: First, the loss figure attributable to any fraud is the greater of either the actual loss (the 

“reasonably foreseeable pecuniary harm that resulted from the offense”), or the intended loss 

(“the pecuniary harm that was intended to result from the offense”). U.S.S.G. § 2B1.1 

Application Note 3(A). This rule produces a loss figure of $8,924,451.46, the total amount of 

money received from the victim-investors over the life of the fraud. This was the sum identified 

by the government in its information and was the sum set forth in its sentencing memorandum. 

 Second, Application Note 3(E), “Credits Against Loss,” requires that the “[l]oss shall be 

reduced by . . . [t]he money returned, and the fair market value of the property returned, and the 

services rendered, by the defendant . . . to the victim before the offense was detected.” U.S.S.G. 

§ 2B1.1 Application Note 3(E)(i). Snelling reads this to require that the $8,924,451.46 figure be 

reduced by the total amount of money returned to the investor victims through the course of the 

Ponzi scheme—approximately $3.6 million. This figure is identified in the PSR as the amount 

of restitution owed: $5,336,187.78. 

 Third, because Snelling’s figure of $5,336,187.78 is under $7,000,000, the court should 

have applied § 2B1.1(b)(1)(J), which calls for an offense-level increase of 18 levels instead of 

the government calculation’s increase of 20 levels. 

 Snelling’s argument, based on the text of the Guidelines alone, is persuasive. His reading 

of the Guidelines is further bolstered by U.S.S.G. § 2B1.1 Application Note 3(F)(iv), which 

specifically addresses Ponzi-scheme loss calculations. Application Note 3(F)(iv) states that, 

when calculating the loss figure in a Ponzi scheme, the “loss shall not be reduced by the money 

or the value of the property transferred to any individual investor in the scheme in excess of that 

investor’s principal investment.” U.S.S.G. § 2B1.1 Application Note 3(F)(iv). Snelling argues 

that the language of this note implies that courts are expected to reduce loss figures by the sums 

returned to investor victims, and that the note seeks to limit such reduction to no more than the 

principal invested. Thus, the Sentencing Commission, while contemplating that loss figures 

should be reduced according to the amount of money returned, does not want a single investor’s 

returns to be deducted beyond the amount originally invested: “[T]he gain to an individual 

investor in the scheme shall not be used to offset the loss to another.” U.S.S.G. § 2B1.1 
No. 12-4288 United States v. Snelling Page 6

Application Note 3(F)(iv). Again, Snelling’s argument is persuasive. The fact that the 

Application Notes limit deductions from loss figures to no more than the sums originally 

invested implies, quite strongly, that the loss figures are to be reduced in the first place. 

 Further evidence supporting Snelling’s position comes from the history of the Guidelines. 

The 2001 edition of the Guidelines contained entirely re-written provisions covering sentencing 

enhancements based on the magnitude of the losses caused by fraud. The pre-2001 provision, 

§ 2F1.1, contained language similar to the current provision, in that it called for an offense-level 

enhancement that increased with the size of the loss suffered by the fraud’s victims. U.S.S.G. 

§ 2F1.1(b)(1) (2000). The loss figure that courts were to apply was based on the “value of the 

money, property, or services unlawfully taken.” U.S.S.G. § 2F1.1 Application Note 8 (2000). 

Other than minor additions to the rule, the text of § 2F1.1 remained largely unchanged between 

1987, the year that the first Guidelines Manual was published, and 2000, the year before the 

provision’s repeal. Unlike the current provision, § 2F1.1 made no reference to a reduction of the 

loss value based on sums returned to victims. 

 The 2001 edition of the Guidelines Manual completely overhauled the provisions relating 

to fraud by restyling the pre-2001 version of § 2B1.1 “Larceny, Embezzlement, and Other Forms 

of Theft; Receiving, Transporting, Transferring, Transmitting, or Possessing Stolen Property” as 

a new, comprehensive provision “Larceny, Embezzlement, and Other Forms of Theft; Offenses 

Involving Stolen Property; Property Damage or Destruction; Fraud and Deceit; Forgery; 

Offenses Involving Altered or Counterfeit Instruments Other than Counterfeit Bearer Obligations 

of the United States.” United States Sentencing Commission, AMENDMENTS TO THE SENTENCING 

GUIDELINES, POLICY STATEMENTS, AND OFFICIAL COMMENTARY 15–16 (May 1, 2001) (emphasis 

added). The new rule included two provisions that persist in the U.S.S.G. in fundamentally the 

same form to this day: Application Note 2(E), “Credits Against Loss,” and Application Note 

2(F)(iv), “Ponzi and Other Fraudulent Investment Schemes.” U.S.S.G. § 2B1.1. The Sentencing 

Commission’s wholesale replacement of the pre-existing provision with a new, comprehensive 

provision covering theft of all types demonstrates the Commission’s intention to implement a 

new sentencing policy for crimes of fraud. 
No. 12-4288 United States v. Snelling Page 7

 In light of the history of the U.S.S.G., the government’s appeal to Nichols and its 

underlying rationale is unavailing. In Nichols, the Eighth Circuit determined that, in spite of 

§ 2B1.1’s clearly-worded Application Notes, the funds returned to investors in the course of a 

Ponzi scheme should not be credited to the defendant because they were used to “perpetuate the 

fraud and ensnare new investors.” United States v. Nichols, 416 F.3d 811, 820 n.6 (8th Cir. 

2005) (quoting United States v. Munoz, 233 F.3d 1117, 1125 (9th Cir. 2000)). This 

determination was, however, fundamentally irrelevant to the holding of Nichols. As the Eighth 

Circuit stated, “[t]he fraud perpetuated in this case was not a typical Ponzi scheme. Nichols and 

Gomez did not claim to have generated ‘returns’ for investors. Instead, they refunded money to 

victims who requested refunds.” Nichols, 416 F.3d at 820 n.6. The Eighth Circuit chose to apply 

the logic of several cases that dealt with loss calculations in the context of Ponzi schemes 

because it believed that “Nichols and Gomez returned funds to victims in order ‘to perpetuate the 

fraud.’” Id. (quoting Munoz, 233 F.3d at 1125). 

Critically, all of the cases upon which the Eighth Circuit based its reasoning pre-dated the 

2001 amendments. In fact, many of the cases cited trace their source back to a decision of the 

Seventh Circuit, United States v. Lauer, which was decided in 1998, three years before the 2001 

amendments to the Guidelines took effect. See Nichols, 416 F.3d at 820 n.6 (quoting United 

States v. Lauer, 148 F.3d 766 (7th Cir. 1998)). Thus, not only is Nichols not directly on point, it 

is predicated on logic from cases based on a different sentencing regime. It does not matter that 

those earlier courts convincingly applied equitable principles to Ponzi-scheme loss calculations. 

Once the Sentencing Commission promulgated new Guidelines provisions, those provisions 

became the controlling terms under which district courts were required to calculate a defendant’s 

sentence. 

 The other precedent cited by the government is not logically applicable to this case. The 

government attempts to analogize Snelling’s new investors (whose deposits were used in part to 

pay the earlier investors’ “returns”) to insurance companies and banks that make payments to 

fraud victims. See United States v. Newsome, 281 F. App’x 464 (6th Cir. 2008) (refusing to 

deduct from the defendant’s loss figure the amounts paid by the auto-theft victim’s insurance 

companies); United States v. Erpenbeck, 532 F.3d 423 (6th Cir. 2008) (declining to deduct the 
No. 12-4288 United States v. Snelling Page 8

value of civil settlements from defendant’s loss figure, reasoning that defendant should not 

benefit from the fortuity of third-party payments to victims). Snelling’s new investors were not 

third-party payers, but were instead fellow victims. The new investors did not pay the earlier 

investors. New investors paid Snelling in order to participate in his investment scheme and then 

Snelling, who had control of the funds at that point, paid some of it to the earlier investors in 

order to perpetuate the Ponzi scheme. The third-party-payment cases cited by the government 

are simply inapposite. 

Admittedly, there is intuitive appeal to the government’s argument that Snelling should 

not be allowed to benefit from the payments he made “not to mitigate the losses suffered . . . but 

to create the means to convince new victim-investors to pay him even more money.” We need 

not reflect, however, on whether it is unseemly for Snelling to benefit from the money he paid 

out to investors in an effort to perpetuate his Ponzi scheme. Undoubtedly, it is. The only 

question we must consider is whether the district court correctly applied the Guidelines and 

whether it used a correct Guidelines range. 

An accurately calculated Guidelines range is necessary for a procedurally reasonable 

sentence—any error in calculating the Guidelines range cannot survive review. See Gall v. 

United States, 552 U.S. 38, 49 (2007); see also United States v. Bolds, 511 F.3d 568, 579 (6th 

Cir. 2007) (“[W]e must ensure that the district court correctly calculated the applicable 

Guidelines range which are the starting point and initial benchmark of its sentencing analysis.”) 

(internal alterations and quotation marks omitted). As appealing as the government’s argument 

may be, it does not comport with the text of the Guidelines. Accordingly, the district court was 

in error when it declined to reduce the loss figure by the value of the payments made by Snelling 

to his investor victims in perpetuating his Ponzi scheme.

IV 

 For the reasons set forth above, we VACATE Snelling’s sentence and REMAND the case 

to the district court for resentencing.