FI LED U. S . COURT OF AP PE ALS E L E V E N T H C IR C U IT M ar c h 12, 2003 T HOM AS K. KAHN CL E RK [ P UB L I S H] I N THE UN I TE D STATE S C OU RT OF APPE ALS F O R T H E E L E V E N T H C IR C U IT

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N o. 02- 11265

____________________________ D . C. D o c k e tN o . 0 1 - 0 0 0 8 4 - CR- RV U N I T E D S T A T E S O F A M E R I C A , P la in tif f - A p p e lle e , v ersu s D A V I D N E I L Y E A G E R , D e f e n d a n t- A p p e lla n t.

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B efo re B IR C H , D U B IN A an d K R A V IT C H , C i rcu i tJu d g es. B IR C H , C i rc ui tJudg e:2

In th i s case, w e rev i si tth e i ssu e o f w h eth er p ro o f o f reaso n ab l e rel i an ce i s a n e c e s s a ry c o mp o n e n to f a f e d e r a l ma i l f

r a u d c o n v i c t i o n . Be c a u s e th e Su p r e me C our tha s s upe r s e de d ourc i r c ui tpr e c e de ntt o the c ontr a ry , w e hol d tha ts uc h pr oof i s n o tr e q u i r e d . I n a d d i t i o n , we c o n s i d e rth e p r o p e rl o s s c a l c u l a t i o n u n d e rU. S . S . G. § 2 F 1. 1 w hen a defendantw ho po ss es se s are stri ct ed ri gh tt o d i stri bu t e aprod uct f r a udul e nt l y di ve r t s tha tpr oduc tt o non- a uthor i z e d buy e r s . W e f i nd tha tthe approp ri at e f

ocus of the l oss c al cul at i on i s the m ar gi nal val ue of the un re stri ct ed r i ghtt o di s tr i but e ove rthe r e s tr i c t e d r i ght , a nd w e f i nd tha ta r e a s onabl e e s t i m a t e of th is v a lu e is th e p r o f

it o b ta in e d b y th e d e f

e n d a n t f r o m n o n - a u th o r iz e d s a le s . F i na l l y , w e c ons i de rthe a r gum e nttha t , i n a c ons pi r a c y of tw o pe opl e , onl y one p e r s o n ’s s e n te n c e m a y b e e n h a n c e d f o rp la y in g a le a d e r s h ip r o le in th e o f f e n s e . R ej ec t i ng thi s a ss ert i on , w e f i nd thatea ch part i ci pantca n b e s ent ence d as al ea der a s s um i ng tha tboth e xe r c i s e a uthor i ty a nd c ontr ol ove ra di s t i nc tpor t i on of the cr i m i nal ac t i vi ty. O n these and rel at ed i ss ues, w e AF F I RM . I . B AC KG RO UN D D a vi d N e a l Y e a ge rw or ke d a s the vi c e pr e s i de ntof s a l e s a nd m a r ke t i ng f

or R esp i rat o ry D i stri b u t o rs, In c. (“ D i stri b u t o rs”), a sm al l co m p an y l o cat ed i n F o l ey, A l abam a, w ho se bu si ness i tw as t o d i stri bu t e pre sc ri pt i on drug s a tw ho l es al e pri ce s t o p h arm aci es o r o th er o u t l et s. R i ch ard P o w el l , th e o w n er o f D i stri b u t o rs, al so3

o w n e d R e s p ir a to ry D ru g g is t, I n c . ( “D ru g g is t” ) , a m a il- o r d e rp h a r m a c y th a t s o ld p rescri p t i o n d ru g s d i rect l y t o h o m e h eal th p at i en t s. M i sr epre se nt i ng hi m se l f a s avi ce pres i dentfor D rugg i st , Y ea ger c on t ac t ed B oehri ng erIngel hei m P harm ac eut i ca l s, Inc. (“ B IP I” ) i n M ar ch 19 96 t o n egot i at e a c ontr a c tf

orD ruggi s tt o s e l l A tr ove nt ® , a pr e s c r i pt i on drug f orthe tr e a tm e ntof r e s p i r a t o ry c o n d i t i o n s c r e a t e d a n d ma n u f a c tu r e d b y BI PI , t o D ru g g i s t ’ s h o me he a l th pa t i e nt s . Y e a ge rne got i a t e d the c ontr a c tw i thoutthe i m m e di a t e know l e dge of P ow e l l . U nde rthe t e r m s of the c ontr a c t , B I P I w oul d s uppl y A tr ove nta t$28. 78 pe rbox. B I P I of

f e r e d D ruggi s tthi s l ow pr i c e on A tr ove ntba s e d on the unde r s t a ndi ng tha ti tw oul d onl y be r e s ol d t o D ruggi s t ’ s hom e he a l th pa t i e nt s , a nd n o tt o o th er p h arm aci es o r w h o l esal ers. T o ensure thatD rugg i stsol d o nl y t o i t s hom e hea l th p at i ent s, B IP I r equi re d D rugg i stt o sub m i tbo th an i ni t i al ut i l i za t i on re po rtand sup pl em ent al re po rt s e very m onth the r e a f

t e r , w hi c h w oul d l i s tde t a i l e d i nf or m a t i on abouta l l pa t i e nt s r e c e i vi ng A tr o v e n t th r o u g h D ru g g is t. B a s e d o n th e s e u tiliz a tio n r e p o r ts , B I P I w o u ld d e te r m in e th e p r o p e ra m o u n t o f A tr o v e n t to s h ip . U n d e rth e c o n tr a c t, B I P I c o u ld i m m edi at el y t erm i nat e i t s r el at i on shi p w i th D rugg i sti f these re po rt s w er e notfi l ed o rif a n y A tr o v e n t w a s d iv e r te d to n o n - h o m e h e a lth p a tie n ts .4

P o w e ll c o n te n d s h e w a s u n a w a r e u n til S e p te m b e r1 9 9 6 th a t a n y o f h is c om pa ni e s ha d a c ontr a c tw i th B I P I f orthe di s tr i but i on of

A tr ove nt . T hr oughout thi s t i m e pe r i od a nd de s pi t e the r e s tr i c t e d di s tr i but i on c ont e m pl a t e d unde rthe c o n tr a c t w ith B I P I , Y e a g e rr e p e a te d ly d iv e r te d la r g e s h ip m e n ts o f A tr o v e n t to una uthor i z e d buy e r s . T he s e s hi pm e nt s w e r e s e ntt o the una uthor i z e d buy e r s by in te r s ta te c o m m e r c ia l c a rr ie r . D u r in g th e r e le v a n t p e r io d , th e g r o s s p r o f it to P ow el l ’ s c orpo ra t i on s f

rom these sa l es w as $6 87 , 00 0. B IP I i t se l f m arket ed A tr o v e n t to w h o le s a le d is tr ib u tio n c o m p a n ie s , lik e D is tr ib u to r s , a t a p r ic e g e n e r a lly h ig h e rth a n th e D ru g g is t c o n tr a c t p r ic e . T h e c ru x o f th e f r a u d u le n t c o n d u c t in th is case w as th atY eag er o b t ai n ed A tro v en tatth e l o w p ri ce o ffered u n d er th e D ru g g i st c o n tr a c t a n d th e n d iv e r te d th e p r o d u c t to D is tr ib u to r s . D is tr ib u to r s th e n r e - s o ld A tr ove nta ta m a r ke ta dva nt a ge , e f f e c t i ve l y unde r c utt i ng B I P I ’ s ow n di s tr i but i on sc hem e. B oth the i ni t i al ut i l i za t i on re po rtand the m on thl y ut i l i za t i on re po rt s r equi re d un der the cont ra ctw er e notsubm i tt ed. B y J anuary 19 97 , B IP I w as concerned abou tthe re po rt i ng fa i l ures and suspect ed thatdi vers i on of A troventw as o ccu rri n g . In M arch 1 9 9 7 , a rep resen t at i v e o f B IP I co n t act ed P o w el l t o d i scu ss B I P I ’ s c onc e rns a nd t o i ns i s ton the pr om pta nd pr ope rdi s c l os ur e of pa t i e nt i nf or m a t i on. F ol l ow i ng thi s c ont a c t , Y e a ge ra nd P ow e l l a gr e e d t o c ont i nue the5

e xtr e m e l y pr of

i t abl e de c e pt i on of

B I P I by s ubm i tt i ng f

a l s e a nd f

r a udul e nt ut i l i z a t i on r e por t s c ont a i ni ng the ty pe of i nf or m a t i on tha tB I P I ha d r e que s t e d. Y e a g e rp r e p a r e d a n d s u b m itte d th e r e p o r ts to B I P I . B o th Y e a g e ra n d P o w e ll i nstruct ed em pl oyee s of D i stri bu t ors a nd D rugg i sti n con du ctdesi gn ed t o con ce al th e irs c h e m e – f

o re x a m p le , b y a n s w e r in g th e s h a r e d te le p h o n e lin e a s “R D I ” to dr a w a tt e nt i on a w a y f

r om the D i s tr i but or s ope r a t i on. I n J une 1997, uns a t i s f

i e d w i th the r e por t s , B I P I r e que s t e d a n on- s i t e a udi tof the f a c i l i t i e s i n F ol e y , A l aba m a . Y e a ge ra nd P ow e l l w e r e both pr e s e ntf ora nd pa r t i c i pa nt s i n the a udi t . T he doc um e nt s obt a i ne d by B I P I r e pr e s e nt a t i ve s dur i ng the a udi tw e r e c ont i nua t i ons of the D ruggi s t/ D i s tr i but or s s he l l ga m e ; i n the w or ds of a B I P I r e pr e s e nt a t i ve , the doc um e nt s w e r e “ w or thl e s s . ” R 3 a t150. P o w e ll or de r e d e m pl oy e e s t o s e tup r ow s of e m pty boxe s i n the w a r e hous e , w i th boxe s of A tr ove ntonl y on t op, t o gi ve the appe a r a nc e tha tthe i ron- ha nd i nve nt ory of A troventw as m uch l ar ger than i n rea l i ty t o cre at e the i m pres si on thatA troventw as notbe i ng di ve r t e d t o othe rpur c ha s e r s . P ow e l l t e s t i f i e d a ttr i a l tha t , ha d he a nd Y ea ger turned o ver the true i nv ent ory r ec ords, thei r s chem e w ou l d h ave been r e ve a l e d. Y e a ge rpl a nne d the B I P I vi s i ta nd e ns ur e d tha te m pl oy e e s f ol l ow e d the i n stru ct i o n s d esi g n ed t o d ecei v e th e v i si t o rs.6

A f t e rthe audi t , Y e a ge rc ont i nue t o r e m i tut i l i z a t i on r e por t s tha tdi d not cont ai n acc urat e a nd com pl et e i nform at i on for the pat i ent s t o w hi ch D rugg i stw as s u p p o s e d l y d i s tr i b u t i n g A tr o v e n t . BI PI l e a rn e d i n D e c e mb e r1 9 9 7 th a tth e FBI w a s c o n d u c t i n g a c r i mi n a l i n v e s t i g a t i o n r e l a t e d t o th e A tr o v e n ts a l e s , a n d BI PI te r m in a te d its r e la tio n s h ip w ith D ru g g is t/D is tr ib u to r s th e f o llo w in g m o n th . B o th Y e a g e ra n d P o w e ll w e r e in d ic te d f o rth e iru s e o f

th e m a il s y s te m to further thei r f

raud ul entsc hem e. Y ea ger r ef used t o coo pera t e w i th federa l a uthor i t i e s a nd putthe gove rnm e ntt o i t s pr oof . P ow e l l pl e d gui l ty pur s ua ntt o a w r i tt e n pl e a a gr e e m e nt , unde rw hi c h he i s c urr e nt l y s e r vi ng appr oxi m a t e l y one y e a ri n pr i s on. H e c oope r a t e d w i th f e de r a l author i t i e s i n the i nve s t i ga t i on a nd t es t i fi ed agai nstY ea ger duri ng a three -day tri al i n A ug ust20 01 . A un ani m ou s j ury f o u n d Y e a g e rg u ilty o n s e v e n c o u n ts o f m a il f r a u d , in v io la tio n o f

1 8 U .S .C . § 1341, ba s e d on s e ve n s hi pm e nt s of A tr ove ntdi ve r t e d by Y e a ge rf r om A ugus t1996 to A u g u s t 1 9 9 7 to u n a u th o r iz e d c u s to m e r s th r o u g h th e m a il, a n d o f c o n s p ir a c y to com m i tm ai l fr aud, al so i n v i ol at i on of 18 U . S . C . § 1 34 1. T he di stri ctcourt se nt ence d Y ea ger t o 3 3 m on ths i n p ri son, fol l ow ed by three ye ar s of s up ervi se d r e l e a s e , a nd or de r e d tha tY e a ge rbe j oi nt l y a nd s e ve r a l l y l i abl e w i th hi s c oc o n s p ir a to rP o w e ll f

o rth e p a y m e n t o f

$ 6 8 7 ,0 0 0 in r e s titu tio n to B I P I . I I . DI S CUS S I ON7

A . S uf f i c i e nc y of

E vi de nc e f

orM a i l F r a ud C onvi c t i on Y e a ge ra r gue s tha tthe e vi de nc e pr e s e nt e d a ttr i a l c a nnots us t a i n hi s f r a ud c o n v ic tio n b e c a u s e th e g o v e rn m e n t f a ile d to p r o v e th a t th e a lle g e d v ic tim r e a s onabl y r e l i e d on hi s m i s r e pr e s e nt a t i ons . W e r e vi e w de novo the l e ga l que s t i on o f w h e th e rs u f

f ic ie n t e v id e n c e e x is ts in th e r e c o r d to s u p p o r t a g u ilty v e r d ic t. U n ite d S ta te s v . T in o c o , 3 0 4 F .3 d 1 0 8 8 , 1 1 2 2 ( 1 1 th C ir . 2 0 0 2 ) , p e titio n f o rc e r t. f i l e d ( U . S . D e c . 2002) ( N o. 02- 7868) . “ W he n c onduc t i ng the r e vi e w of the r e c or d, w e v ie w th e e v id e n c e in th e lig h t m o s t f a v o r ab le to th e g o v e rn m e n t a n d r e s o lv e a ll r e a s onabl e i nf

e r e nc e s a nd c r e di bi l i ty e va l ua t i ons i n f a vorof the j ury ’ s ve r di c t . ” I d. ( q u o tin g U n ite d S ta te s v . T o , 1 4 4 F .3 d 7 3 7 , 7 4 3 ( 1 1 th C ir . 1 9 9 8 ) ) . T h e v e r d ic t w ill b e u p h e ld u n le s s n o r e a s o n ab le ju ry c o u ld h a v e f o u n d g u ilt b e y o n d a r e a s o n ab le doubt . I d. U nde r18 U . S . C . § 1341, a pe r s on, ha vi ng de vi s e d a s c he m e t o de f r a ud, w ho m a i l s a ny m a tt e rthr ough the P os t a l S e r vi c e ora ny c om m e r c i a l i nt e r s t a t e c a rr i e rf or th e p u rp o se o f fu rth eri n g o r acco m p l i sh i n g th atsch em e, co m m i t s a fed eral o ffen se puni s habl e by f

i ne a nd up t o f

i ve y e a r s of

i m pr i s onm e nt . I n U ni t e d S t a t e s v. B r ow n, 79 F . 3d 1550, 1557 ( 11th C i r . 1996) , w e he l d tha ta de f e nda ntm a y notbe c onvi c t e d of

f e de r a l m a i l f

r a ud unl e s s the r e i s pr oof tha t“ a r e a s onabl e pe r s on w o u ld h a v e a c te d o n th e [ d e f e n d a n t’s f

a ls e ] r e p r e s e n ta tio n s .” A c c o r d in g to8

Y e a g e r , BI PI c o u l d n o th a v e r e a s o n ab l y r e l i e d o n h i s r e p r e s e n t a t i o n s b e c a u s e BI PI kn ew or ea si l y c ou l d h ave di sc ov er ed thatthe conv ey ed ut i l i za t i on i nform at i on w as i n co m p l et e o r fal se. In ad d i t i o n , B IP I i m p l i ci t l y co n sen t ed t o th e i n co m p l et en ess o f th e s e r e p o r ts b y f

a ilin g to p u r s u e a r d e n tly th e irp r o p e rs u b m is s io n . T he fe dera l m ai l fr aud st atut e prohi bi t s the use of the m ai l t o further

“ sch em e[s] . . . t o d efrau d . ” 1 8 U . S . C . § 1 3 4 1 . T h e u se o f th e m ai l t o fu rth er th ese s c h e m e s is a d is tin c t e v il p u n is h ab le w h e th e ro rn o t th e s c h e m e r e s u lts in co m p l et ed co m m o n -l aw frau d . P ro o f o f rel i an ce b y th e v i ct i m o n th e fal se r e pr e s e nt a t i ons of

the de f e nda nt , though ne c e s s a ry t o pr ove c om m on- l a w f r a ud, ha s no pl a c e i n pr os e c ut i ons f orf e de r a l m a i l f

r a ud. N e de rv. U ni t e d S t a t e s , 527 U . S . 1, 24- 25, 119 S . C t . 1827, 1841 ( 1999) . B r ow n, t o the e xt e nttha ti thol ds the c o n tr a ry , is o v e rru le d . A m a i l f r a ud c onvi c t i on doe s r e qui r e tha tthe m i s r e pr e s e nt e d f a c t s be m a t e r i a l – of

a ty pe tha ta r e gul a rpe r s on w oul d r e ga r d a s i m por t a nti n m a ki ng a pa r t i c ul a rde c i s i on. I d. a t22- 23, 119 S . C t . a t1840. H ow e ve r , the r e i s no r e q u ir e m e n t th a t th e m is r e p r e s e n te d m a te r ia l f a c ts b e b e lie v ab le – a d e f e n d a n t is s u b j e c tt o ma i l f

r a u d l i ab i l i ty e v e n th o u g h h e u s e s th e ma i l t o f u r th e ra s c h e me b a s e d o n r id ic u lo u s f

a c ts , a s lo n g a s th e s u b

je c t m a tte ro f

th e m is r e p r e s e n ta tio n is im p o r ta n t. “[ C ]r im in a l liab ility w o u ld e x is t s o lo n g a s th e d e f e n d a n t in te n d e d to9

dece i ve the vi ct i m [abo uta m at er i al t op i c] , even i f the part i cul arm ea ns chosen turn outt o be i m m a t e r i a l , i . e . , i nc apabl e of i nf l ue nc i ng the i nt e nde d vi c t i m . ” I d. a t24, 1 1 9 S . C t. a t 1 8 4 1 . T he r e f or e , i ti s of

no c ons e que nc e tha tB I P I di d nota c tua l l y r e l y on the m i s r e pr e s e nt a t i ons , ortha tB I P I s houl d notha ve r e l i e d on the m i s r e pr e s e nt a t i ons ba s e d on a n abi l i ty t o e a s i l y c onf i r m the i ri na c c ur a c y . T he ty pe of i nf or m a t i on m i sr epre se nt ed by Y ea ger – the cust om er s t o w ho m A troventw as bei ng di stri bu t ed

– w as m ater ial, as in d icated b y th e c o n trac t res tricti n g sa les o n ly to D ru g g ist’ s h o me h e a l th p a t i e n t s . Th e g o v e rn me n tw a s n o ta l s o r e q u i r e d t o p r o v e th a tBI PI r e a s onabl y r e l i e d on thos e m i s r e pr e s e nt a t i ons , a nd, a c c or di ngl y , w e f i nd s uf f i c i e nt e v id e n c e to s u s ta in Y e a g e r ’s c o n v ic tio n s . I ti s obvi ous f

r om the r e c or d tha tB I P I c oul d ha ve pr e s s e d Y e a ge rf or co m p l i an ce w i th th e rep o rt i n g req u i rem en t s o f th ei r co n tract , an d th atd o i n g so w oul d ha ve pr e ve nt e d Y e a ge rf r om pur s ui ng hi s f

r a udul e nts c he m e . B I P I c ont e nds th a t it lo s t tr a c k o f

c o n tr a c t o b lig a tio n s b e c a u s e th e e m p lo y e e p o s itio n r e s p o n s ib le f ortha tt a s k r e m a i ne d va c a ntf ora l ong pe r i od dur i ng the c ons pi r a c y . W e ha ve s o m e tr o u b le c r e d itin g th is a c c o u n t, e s p e c ia lly c o n s id e r in g th e s u b s ta n tia l p r o f it B I P I e n jo y e d f r o m its r e la tio n s h ip w ith Y e a g e ra n d B I P I ’s f a ilu r e to a tte m p t to c o rr e c t th e c o n tr a c tu a l d e f ic ie n c ie s u n til th e in v o lv e m e n t o f f e d e r a l a u th o r itie s .10

O bvi ous l y , B I P I pr ovi de d Y e a ge ra l l the r ope he ne e de d t o ha ng hi m s e l f , a nd Y e a ge rt ook tha toppor tuni ty . I ti s unde r s t a ndabl e i n a pr a c t i c a l s e ns e , but s o m e tim e s r e g r e ttab le in a m o r a l s e n s e , th a t s u p p lie r s o f r o p e a r e n o t p u n is h e d . B . J ury I ns truc t i ons Y ea ger a rgues thatthe di stri ctcourterre d b y r ef usi ng t o g i ve hi s proff

er ed i nstruct i on on re as on abl e r el i ance t o the j ury. “ W e r evi ew a di stri ctcourt ’ s r ef usal t o gi ve a pa r t i c ul a rj ury i ns truc t i on f orabus e of

di s c r e t i on. ” U ni t e d S t a t e s v. C orni l l i e, 92 F . 3d 11 08 , 11 09 (11th C i r. 19 96 ) ( per c uri am ). T he fa i l ure of a di s tr i c tc our tt o gi ve a n appr opr i a t e i ns truc t i on i s r e ve r s i bl e e rr orw he r e the r e que s t e d i ns truc t i on “ ( 1) w a s c orr e c t ; ( 2) w a s nots ubs t a nt i a l l y c ove r e d by the char ge ac tual l y gi ven; and (3) deal tw i th som e poi nti n the tri al so i m po rt antthat f a ilu r e to g iv e th e r e q u e s te d in s tru c tio n s e r io u s ly im p a ir e d th e d e f e n d a n t’s ab ility t o con du cthi s def

ense . ” U ni t ed S t at es v. C hast ai n, 19 8 F . 3d 13 38 , 13 50 (11th C i r. 1999) , c e r t . de ni e d s ub nom . M orr i s v. U ni t e d S t a t e s , 532 U . S . 996, 121 S . C t . 1658 (200 1). Y ea ger r equest ed an i nstruct i on on the re qu i re m entof re as on abl e r el i ance a nd dr e w the pr opos e d l a ngua ge f r om ourde c i s i on i n B r ow n. Y e a ge r ’ s i ns truc t i on prov i ded, i n rel evantpart , that

[ i ] n th i s c i r c u i t , t o p r o v e a ‘ s c h e me o r a r t i f i c e t o d e f

r a u d , ’ t he gove rnm e ntm us tpr ove be y ond a r e aso n ab l e doubttha tthe de f e nda nt11

i nt e nde d t o c r e a t e a s c he m e r e a s onabl y c a l c ul a t e d t o de c e i ve pe r s ons of o rd i na ry prude nc e a nd c om pr e he ns i on. I n othe rw or ds , the go vernm entm ustprov e thata per son o f ordi nary p ru d en ce or a r e aso n abl e pe r s on w oul d ha ve be e n de c e i ve d by t he m i s r e pr e s e nt a t i ons w hi c h w e r e m a de t o i t s de tr i m e nt . T he g o v e r n m e n tm u s t p r o v e b e y o n d a r e a s o n ab le d o u b t th a t a r e a s o n ab le d r u g m an u factu rer, ab o u t t o en t er i n t o an ag reem en t t o s e ll ph arm ac eut i ca l s t o the defendant , w ou l d rea sonabl y have been d e c e iv e d b y th e r e p r e s e n ta tio n s m a d e to its d e tr im e n t. A s c h e m e to d e f

r a u d h a s n o t b e e n p r o v e d w h e r e r e a s o n ab le j ur or s w oul d ha ve t o c onc l ude tha tthe r e pr e s e nt a t i on i s about s om e thi ng w hi c h the a l l e ge d vi c t i m , B oe hr i nge r , s h o u l d , a nd c oul d, ea si l y c on fi rm – i f i tw i shed t o d o so – fr om re adi l y a vai l abl e s ou rc es i nc l udi ng i nf

or m a t i on i ts houl d, a nd c oul d, e a s i l y ha ve obt a i ne d f r om the de f e nda nti n a t i m e l y f

a s hi on a s s pe c i f

i c a l l y s e tf

o r th i n the e x e c u te d a g r e e m e n t. R 1-42 . T he di stri ctcourtre j ec t ed Y ea ger’ s propo se d i nstruct i on , expl ai ni ng that th e t o p i c wa s s u b s t a n t i a l l y a n d c o rr e c t l y c o v e r e d b y i t s p r e f e rr e d c h a r g e , d r a wn f r o m th e E le v e n th C ir c u it’s P a tte rn J u ry I n s tru c tio n s . Ye a g e r ’ s p r o p o s a l f

o c u s e s o n th e c o n c e p to f r e a s o n ab l e r e l i a n c e , a n d , a s we h a v e d is c u s s e d in f

r a , th e c o n c e p t o f

r e a s o n ab le r e lia n c e h a s n o p la c e in pr os e c ut i ons f

orf e de r a l m a i l f

r a ud. Y e a ge r ’ s i ns truc t i on, ba s e d on B r ow n, w a s not a c orr e c ts t a t e m e ntof

the l a w , a nd the di s tr i c tc our tdi d note rrby r e f us i ng t o gi ve th a t in s tru c tio n a t tr ia l. C . L os s E nha nc e m e ntUnder the cur rent version of the Guide lines, § 2F1.1 ha s been inc orporated into § 1 2B1.1. The district cour t used the 2000 edition of the Sentenc ing Guidelines to sentence 2 Yeag er, g iven the ex post facto conc erns inherent in applying more re cent versions. The g eneral rule is that a de fenda

nt is sentenced under the version of the Guide lines in effe ct on the dateof sentenc ing, ba

rringany ex postfac to concerns. United States v. B ailey, 123 F.3d 1381, 1403 (11th Cir. 1997). Yeag er, sentence d on 20 Februar y 2002, would have be en sentenced under the 2001 Guidelines, includingthose amendments made ef fec tive on 1 November

2001. Under

the 20 01 Guide lin e s, thec alcula te d lo ss w ould re sult in a

14 -l e ve l enh anc e ment o f Y e ag e r’ s o ff e ns e le ve l, c omp are d tothe10 -l e ve l enh anc e ment a ri singun der t

he20 00 Guide lin e s, thevers ion in eff ect during thecommission of the criminal conduc t at issue. This increa sed penalty after the commission of the offense raises ex postfac to concerns which were properly addre ssed by

the district court’s use of

the 2000 Guidelines version. There fore , all citations to the Sentencing Guidelines herein are to the 2000 ver sion unless specifically noted. 12 T urni ng t o Y ea ger’ s s ent enci ng fol l ow i ng hi s c on vi ct i on attri al , Y ea ger a r gue s tha tthe di s tr i c tc our ti m pr ope r l y e nha nc e d hi s s e nt e nc e ba s e d on the a m ountof

ga i n f l ow i ng f r om hi s f r a udul e ntc onduc tw i thoutf i r s tm a ki ng the p r e l i m i n a ry d e t e r m i n a t i o n th a ts o m e l o s s a c c ru e d f r o m th e c o n d u c t . Al th o u g h we ge ne r a l l y r e vi e w the di s tr i c tc our t ’ s i nt e rpr e t a t i on of the U ni t e d S t a t e s S e nt e nc i ng G u i d el i n es d e n o v o , th e l o ss cal cu l at i o n atth e h earto f U . S . S . G . § 2 F 1 . 1 i s a 1 f a c tua l de t e r m i na t i on tha tw e r e vi e w f orc l e a re rr or . U ni t e d S t a t e s v. T ous s a i nt , 84 F .3 d 1 4 0 6 , 1 4 0 7 ( 1 1 th C ir . 1 9 9 6 ) . U nde rthe 2000 G ui de l i ne s , the ba s e of f e ns e l e ve l f

orof f e ns e s i nvol vi ng f r a ud i s 6; thi s ba s e of

f e ns e l e ve l i s i nc r e a s e d up t o 18 l e ve l s ba s e d on the a m ount o f lo s s o c c a s io n e d b y th e f r a u d . S e e U .S .S .G . § 2 F 1 .1 ( a ) , ( b ) ( 2 0 0 0 ) . G e n e r a lly 2 spea ki ng , “ [l ] oss i s the val ue of the m on ey , prop erty, or se rvi ce s unl aw ful l y t aken. ”13

U .S .S .G . § 2 F 1 .1 c o m m e n t. ( n .8 ) . L o s s , a s u n d e r s to o d u n d e rth e G u id e lin e s , is o f te n n o t c a lc u lab le w ith p r e c is io n ; th e r e f o r e , w e r e q u ir e th e d is tr ic t c o u r t o n ly

“ m ake are as on abl e e st i m at e of the l oss, gi ven the avai l abl e i nform at i on . ” U . S . S . G . § 2 F 1. 1 com m ent . (n. 9). T he court , ho w ever , ca nn otm er el y s pecul at e a s to th e p r o p e ra m o u n t o f lo s s , U n ite d S ta te s v . S e p u lv e d a , 1 1 5 F .3 d 8 8 2 , 8 9 0 ( 1 1 th C i r . 1997) , a nd, i f

the a m ounts ugge s t e d by the gove rnm e nti s c ont e s t e d, the go vernm entm ustsupp orti t s e st i m at e w i th “ re l i abl e a nd spec i fi c e vi dence. ” U ni t ed S t at es v. R eni ck, 27 3 F . 3d 10 09 , 10 25 (11th C i r. 20 01 ) ( per c uri am ). Y e a g e rc o n t e n d s th a tth e d i s tr i c tc o u r td i d n o ta n d c o u l d n o tf i n d th a tBI PI s u f f e r e d a lo s s f

r o m h is f r a u d u le n t c o n d u c t, b e c a u s e B I P I m a d e a s u b s ta n tia l p r o f it fr om the sa l e of A troventt o D rugg i st . T he go vernm entre spon ds, and the di stri ct c o u r t a c c e p te d , th a t B I P I lo s t p r o f it f r o m Y e a g e r ’s d iv e r s io n : Y e a g e rw r o n g f u lly s o l d A tr o v e n tt o n o n - a u th o r i z e d c u s t o me r s , u s i n g th e l o w c o n tr a c tp r i c e f r o m BI PI t o bol s t e rs a l e s , a nd B I P I w a s de ni e d the oppor tuni ty t o s e l l A tr ove ntthr ough e s tab lis h e d c h a n n e ls to th e s e n o n - a u th o r iz e d c u s to m e r s a t a h ig h e rp r ic e . H o w ev er, th e d i stri ctco u rtfo u n d i t sel f u n ab l e t o reaso n ab l y est i m at e th i s l o ss, b a s e d u p o n c o n f

lic tin g a n d c o n f

u s in g a c c o u n ts a t tr ia l b y e x p e r ts w h o a tte m p te d to q u a n tif y th e p r o f

it s h o r tf a ll.14

I ns t e a d, the c our tf

ound tha tY e a ge r , the de f e nda nt , a nd P ow e l l , the ow ne rof D ru g g is t a n d D is tr ib u to r s , g a in e d $ 6 8 7 ,0 0 0 f o rth o s e c o rp o r a tio n s b y th e irp u r s u it of the s c he m e t o de f

r a ud, a nd the c our tus e d thi s ga i n a s a pr oxy f orl os s f or purpos e s of

s e nt e nc i ng. T he $687, 000 f i gur e r e pr e s e nt s the pr of i tm a de by the c orpor a t i ons by s e l l i ng A tr ove ntt o non- a uthor i z e d c us t om e r s dur i ng the r e l e va nt conspi ra t ori al t i m e per i od – the di ff er ence betw ee n the pri ce atw hi ch A troventw as ob t ai ned u nd erthe l egi t i m at e c on tra ctw i th B IP I, and the pri ce atw hi ch Y ea ger so l d A tro v en tt o n o n -au th o ri zed cu st o m ers. T o a na l y z e w he the rthe di s tr i c tc our tw a s c orr e c ti n i t s s e nt e nc i ng det erm i nat i on s, w e i ni t i al l y m ustdeci de w hether B IP I s uffe re d any “ l oss, ” a s that t e r m i s unde r s t ood unde rthe G ui de l i ne s , f r om Y e a ge r ’ s c onduc t . “ [ L ] os s i s the v a lu e o f th e m o n e y , p r o p e r ty , o rs e r v ic e s u n la w f u lly ta k e n .” U .S .S .G . § 2 F 1 .1 c o m m e n t. ( n .8 ) . Y e a g e ra r g u e s th a t B I P I m a d e a s u b s ta n tia l p r o f it o f f o f its r e l a t i ons hi p w i th D ruggi s t/ D i s tr i but or s , a nd a ny l os s i de nt i f i e d by the gove rnm e nt is o p p o r tu n ity - c o s t lo s s , lo s s b a s e d o n th e v ic tim ’s in ab ility to u s e m o n e y o ra s s e ts i n a m o re p ro fi t ab l e w ay b ecau se o f th e p erp etrat ed frau d . O p p o rtu n i ty-co stl o ss m a y notbe c ons i de r e d a ts e nt e nc i ng: “ [ L os s ] doe s not , f ore xa m pl e , i nc l ude i nt e r e s tthe vi c t i m c oul d ha ve e a rne d . . . ha d the of f e ns e notoc c urr e d. ” I d.15

W h a t “m o n e y , p r o p e r ty , o rs e r v ic e s ” w e r e “u n la w f u lly ta k e n ” b y Y e a g e rin thi s c a s e ? T hough the gove rnm e nti nt i m a t e s tha tw e s houl d f oc us on the va l ue of the di vert ed drug s them se l ves i n est i m at i ng the l oss, w e thi nk thata m ore proper focus w ou l d b e on Y ea ger’ s “ theft ” of di stri bu t i on pri vi l eges . B IP I gra nt ed D ru g g is t th e r e s tr ic te d r ig h t to d is tr ib u te A tr o v e n t a n d c h a r g e d D ru g g is t a c e r ta in pri ce per box for thatpri vi l ege. Y ea ger f raud ul ent l y di vert ed A troventt o o ther p u r c h a s e r s , e f

f e c tiv e ly c o n v e r tin g th e r e s tr ic tiv e d is tr ib u tio n lic e n s e f r o m B I P I in to an un re stri ct ed di stri bu t i on l i ce nse. A bstra ct ed ou t , Y ea ger t oo k the un re stri ct ed ri gh tt o d i stri bu t e A trovent . T hi s r i gh tob vi ou sl y has som e val ue, and w e a gree w i th the di stri ctcourtthatB IP I s uffe re d an actual l oss und erthe G ui del i nes bas ed o n th e “th e f

t” o f th is r ig h t. T h e lo s s c a lc u la tio n , th e r e f o r e , s h o u ld b e a n a tte m p t to de t e r m i ne the va l ue of

the pur l oi ne d por t i on of the di s tr i but i on r i ght– the a d d itio n a l b e n e f

it o f u n r e s tr a in e d d is tr ib u tio n s to le n b y Y e a g e rth r o u g h f r a u d . T he va l ue of

a n unr e s tr i c t e d di s tr i but i on r i ghti s the di f f e r e nc e be tw e e n the c o s t a t w h ic h a d is tr ib u to rc a n o b ta in a p r o d u c t a n d th e p r ic e a t w h ic h h e c a n r e - s e ll th a t p r o d u c t o n th e m a r k e t a s a w h o le . T h e v a lu e o f a r e s tr ic te d d is tr ib u tio n r ig h t is the di f f e r e nc e be tw e e n the c os ta tw hi c h a di s tr i but orc a n obt a i n the pr oduc ta nd the pri ce atw hi ch he can re -s el l thatprod uctt o the re stri ct ed m arket . T here fore , the m ar gi nal val ue of the un re stri ct ed di stri bu t i on ri gh tov erthe re stri ct edAcc eptingthe gross profit from unauthorized sales as a n estimate of the ma

rg inal value 3 of the unre stricted distribution right pre sumes that the value of Atrovent on the restricted ma rket is v e ry low or zero. In this c a se , th ere stric te d ma rke t ( Dr ug g ist ’sle g itimateho mehe alth patients ) c ould a

bs or b o nly a c e rt ain a mou nt o f Atrov e nt. Af

ter t hee xha us tio n o f l e g itimate patients, the valueof Atrovent on the restric ted market is z ero; there are no customer s remaining to whom Drug g ist legitimately could sell Atrovent at any price . There fore , the marg inal value of the unre stricted right to distribute, or, at least, a re asonableestimate of the value base d on the evidenc e pre sented to the district cour t, is the entire prof

it made by

Yeag er/Distributors on the open mar ket, with a set-of

f of zero repre sentingthe value of Atrovent on the e xhausted re stric tiv emarke t. 16 di s tr i but i on r i ghti s the pr i c e di f f e r e nt i a l be tw e e n the ope n m a r ke ta nd the r e s tr ic te d m a r k e t. I tw a s notc l e a re rr orf

orthe di s tr i c tc ourtt o a c c e ptthe pr of i tm a de by D i stri bu t ors throu gh un re stri ct ed sa l e of A troventdu ri ng the t i m e of the conspi ra cy as a reaso n ab l e est i m at e o f th e m arg i n al v al u e o f th e p u rl o i n ed ri g h t . D i stri b u t o rs’ 3 pr of i tw oul d be e xpe c t e d t o c orr e l a t e w i th the pr of i tB I P I c oul d ha ve m a de thr ough its o w n s a le s o f

A tr o v e n t to th e s e n o n - a u th o r iz e d p u r c h a s e r s . T ho ug h w e perhaps approach the i ss ue i n a m anner di ff er entthan the di stri ct c our t , i n tha tw e us e the $687, 000 f i gur e a s a di r e c te s t i m a t e of the va l ue of

the p r o p e r ty ta k e n th r o u g h f r a u d , r a th e rth a n a s a n e s tim a te o f g a in f r o m th e s c h e m e to b e u s e d a s a p r o x y f

o rs u c h v a lu e , w e c a n n o t f a u lt th e r e s u lt a t s e n te n c in g . W e agre e w i th the di stri ctcourtthatthe l oss i nv ol ved i n thi s c as e w as no tm er el y a n oppor tuni ty - c os tl os s butr a the rw a s a de f i ni t e l os s f

orw hi c h s e nt e nc i ng a dj us tm e nt s a r e appr opr i a t e , a nd, f ur the r , w e a gr e e tha t$687, 000, the a m ountof17

pr of i tobt a i ne d thr ough s a l e s of A tr ove nton the unr e s tr i c t e d m a r ke tby D istrib u to rs , i s a re as o n ab le es ti m ate o f th e lo ss in flicted o n B IP I th ro u g h Y ea g er ’s f r a u d u le n t c o n d u c t. A c c o r d in g ly , w e f in d th a t th e d is tr ic t c o u r t d id n o t e rrin i m pos i ng a s e nt e nc i ng e nha nc e m e ntba s e d on al os s c a l c ul a t i on of $687, 000. D . R ol e E nha nc e m e nt Y e a ge ra r gue s tha tthe gove rnm e ntf a i l e d t o pr ove tha the e xe r c i s e d a ny i nfl uence or control ov eranother part i ci panti n the conspi ra cy and that , there fore , hi s s e nt e nc e c a nnotbe i nc r e a s e d f orpl a y i ng a n a ggr a va t i ng r ol e unde rthe G ui de l i ne s . A c c or di ng t o Y e a ge r , be c a us e onl y he a nd P ow e l l w e r e i ndi c t e d f or the c onduc ta ti s s ue , a nd be c a us e P ow e l l ha d a l r e a dy r e c e i ve d a r ol e e nha nc e m e nt f orhi s i nvol ve m e nt , i ti s i nc onc e i vabl e tha tY e a ge ra l s o c oul d be e l i gi bl e f orthe e n h a n c e m e n t. W e r e v ie w th e s e n te n c in g c o u r t’s f a c tu a l f in d in g s f o rc le a re rr o ra n d its appl i c a t i on of

the s e nt e nc i ng gui de l i ne s t o thos e f a c t s de novo. U ni t e d S t a t e s v. H um ber, 25 5 F . 3d 13 08 , 13 11 (11th C i r. 20 01 ). T he go vernm entbear s the bu rden of prov i ng by a pre po nd er ance of the evi dence thatthe defendanthad an a g g r a v a tin g r o le in th e o f f e n s e . U n ite d S ta te s v . A lr e d , 1 4 4 F .3 d 1 4 0 5 , 1 4 2 1 ( 1 1 th C ir . 1 9 9 8 ) .18

U n d e rth e G u id e lin e s , a f o u r - le v e l in c r e a s e in th e ap p lic ab le o f f e n s e le v e l is approp ri at e i f the defendant“ w as an organi ze r or l ea der of acr i m i nal ac t i vi ty that in v o lv e d f

iv e o rm o r e p a r tic ip a n ts o rw a s o th e rw is e e x te n s iv e .” U .S .S .G . § 3B 1. 1( a ) . I f

the de f e nda ntw a s a “ m a na ge rors upe r vi s or( butnota n or ga ni z e ror l ea der) and t he cr i m i nal ac t i vi ty i nv ol ved fi ve or m ore part i ci pant s or w as otherw i se ext ensi ve, ” then the offens e l evel shou l d b e i ncre as ed by three . Id. at ( b) . W he n the de f

e nda nti s “ a n or ga ni z e r , l e a de r , m a na ge r , ors upe r vi s or ” i n a ny other c ri m i nal ac t i vi ty ( thati s, any c ri m i nal ac t i vi ty noti nv ol vi ng fi ve or m ore p a r tic ip a n ts a n d n o t e x te n s iv e ) , th e n h is o f f e n s e le v e l s h o u ld b e in c r e a s e d b y tw o . I d. a t( c ) . T he di s tr i c tc our ti m pos e d the tw o- l e ve l § 3B 1. 1( c ) e nha nc e m e nton Y ea ger. A c c o r d in g to th e c o m m e n ta ry , “[ t]o q u a lif y f o ra n a d ju s tm e n t u n d e rth is s e c t i on, the de f

e nda ntm us tha ve be e n the or ga ni z e r , l e a de r , m a na ge r , ors upe r vi s or of on e or m ore other part i ci pant s. ” U . S . S . G . § 3 B 1. 1 com m ent . (n. 2). Y ea ger l a t c he s ont o thi s c om m e nt a ry a s s uppor tf orhi s a r gum e nttha t , i n a c ons pi r a c y of tw o pe opl e , onl y one c a n be s e nt e nc e d f ora l e a de r s hi p r ol e . H ow e ve r , w e do not th in k th is a r g u m e n t f

lo w s f r o m th e c o m m e n ta ry . W h e n a c o n s p ir a c y in v o lv e s o n ly tw o pa r t i c i pa nt s , e a c h pa r t i c i pa ntc a n be a “ or ga ni z e r , l e a de r , m a na ge r , or supervi sor” i n the cr i m i nal cond uctw hen each part i ci pantt akes pri m ary19

r e s pons i bi l i ty f

ora di s t i nc tc om pone ntof the pl a n a nd e xe r c i s e s c ontr ol or i nf l ue nc e ove rthe othe rpa rt i c i pa ntw i th r e s pe c tt o tha tdi s t i nc tc om pone ntof the pl a n. T he r e c or d i s r e pl e t e w i th i ns t a nc e s f r om w hi c h the di s tr i c tc our tc oul d ha ve c o n c lu d e d th a t Y e a g e rd ir e c te d o ro r g a n iz e d o rle d P o w e ll in th e c o n d u c t o f c e r ta in el em ent s of the cr i m i nal sc hem e. E ven m ore t el l i ng , the re cord i nd i ca t es that Y e a ge rdi r e c t e d othe re m pl oy e e s of D ruggi s ta nd D i s tr i but or s t o unde r t a ke t a s ks desi gn ed t o further the sc hem e. I n a d d itio n , th e f

a c t th a t P o w e ll m a y h a v e r e c e iv e d a n a d ju s tm e n t a t h is s e nt e nc i ng doe s notr e qui r e us t o de pa r tf r om a n i nde pe nde ntc ons i de r a t i on of the p ro p riety o f a n en h an ce m en t fo r Y ea g er . W e a re q u it e s u re th at Y ea g er ’s pa r t i c i pa t i on i n the s c he m e , a s pr ove d a ttr i a l , hi ghl i ght s the l e a de r s hi p r ol e he p la y e d in th e p la n to d e f r a u d B I P I , r e g a r d le s s o f th e r e s u lt o f

P o w e ll’s s e n te n c in g . W e f i nd no e rr ori n the di s tr i c tc our t ’ s i m pos i t i on of a tw o- l e ve l e nha nc e m e nt b a s e d o n th a t le a d e r s h ip r o le . E . R es t i tut i on O rder F i nal l y, Y ea ger c on t ends thatthe di stri ctcourti m po se d a re st i tut i on order w i tho utany e vi dence of an i dent i fi abl e vi ct i m w ho suff er ed l oss or a ny fi nd i ng that Y e a g e rh a d th e ab ility to p a y . A d is tr ic t c o u rt’s r e s titu tio n o r d e ris g e n e r a lly r e v ie w e d f

o rab u s e o f

d is c r e tio n , b u t th e le g a lity o f th a t o r d e ris r e v ie w e d d e n o v o .20

U ni t e d S t a t e s v. D a vi s , 117 F . 3d 459, 462 ( 11th C i r . 1997) . A s w e ha ve di s c us s e d, the r e i s e vi de nc e of

a l os s s uf

f e r e d by B I P I a nd a ttr i but abl e t o Y e a ge r ’ s f r a udul e nt c onduc t . A c c or di ngl y , w e f i nd no m e r i ti n Y e a ge r ’ s a r gum e nttha tthe r e w a s no i dent i fi abl e vi ct i m on w hi ch t o p re di ca t e are st i tut i on order. A s to Y e a g e r ’s a r g u m e n t th a t th e d is tr ic t c o u r t e rr e d b y f a ilin g to ta k e in to a c c ounthi s abi l i ty t o pa y r e s t i tut i on, w e not e tha tr e s t i tut i on i s m a nda t ory , w i thout r e ga r d t o a de f

e nda nt ’ s abi l i ty t o pa y , w he n the c r i m e s of c onvi c t i on a r e f

r a ud- or d e c e it- b a s e d o f

f e n s e s u n d e rT itle 1 8 o f

th e U n ite d S ta te s C o d e . 1 8 U .S .C . § 3 6 6 3 A . Y e a g e rw a s c o n v ic te d o f m a il f r a u d a n d c o n s p ir a c y to c o m m it f r a u d in vi ol a t i on of

18 U . S . C . §§ 1341 a nd 1343, a nd the s e of f e ns e s a r e of

the ty pe f

or w hi ch m andat ory r es t i tut i on i s app ropri at e und er§ 3 66 3A . T here fore , the di stri ct courtdi d n oterr i n fai l i ng t o t ake Y ea ger’ s f i nanci al si tuat i on i nt o acc ou ntbefore or de r i ng r e s t i tut i on. I I I . CONCL US I ON W e co n cl u d e th atY eag er’ s su ffi ci en cy-o f-th e-ev i d en ce cl ai m fai l s b ecau se pr oof of r e a s onabl e r e l i a nc e by the vi c t i m on the m i s r e pr e s e nt a t i ons of the de f e nda nti s notne c e s s a ry t o s us t a i n a f e de r a l m a i l f

r a ud c onvi c t i on. I n a ddi t i on, w e f i nd tha tthe pr of

i t s m a de on the ope n m a r ke ta r e a r e a s onabl e e s t i m a t e of the21

va l ue of a s t ol e n r i ghtt o unr e s tr i c t e d di s tr i but i on; the r e f or e , Y e a ge r ’ s c ha l l e nge of th e l o ss cal cu l at i o n u n d er U . S . S . G . § 2 F 1 . 1 fai l s. B a s e d on the f

or e goi ng di s c us s i on, w e f i nd no e rr ori n Y e a ge r ’ s c onvi c t i on or se nt enci ng . W e AF F I RM .