NOT RECOMMENDED F OR F ULL-TEXT PUBLICATION File Na me: 11a0546n.06
No. 10-3284
UNITED STAT ES COURT OF AP P EALS F OR THE S IXTH CIRCUIT

UNI TED STATES OF AMERI CA, Plaintiff-Appellee

v. J OHN HREHA , Def endant- Appellant.

______________________ _ _ _ _ _ _ _ _ _ _ _ _ _________ )

) ) ) ) ) ) ) ) ) ON AP P E AL FR OM T HE UNI TED STA TES DI STRI CT COURT FOR THE NORT H E RN DI STRI CT OF OH I O
OP INION

Before: SUTTON and WHITE , Circuit Judges; STAF F ORD, Distric t Judge. *
HELE NE N. WH ITE, Circuit Ju dge. Def endant- Appellant J ohn Hre ha (Hreha ) ap p ea ls his above- Guidelines sentenc e imposed afte r he pleade d g uilty to one count of bank fra ud, in violation of 18 U.S.C. § 1344. We REVERSE and REMAND to the district court for proce eding s consistent with this opi nion.
I.
Hre ha was employ ed as a data supervisor at the Ba nk of Mag nolia (the Ba

nk) in Mag nolia, Ohio from 1990 until 2008. His starting salary was $19,000 per y ear and his ending salary was $37,000 per y ear . I n ear ly 2000, Hre ha noticed a

n internal accounting err or as a result of which it
appea red that there was a shortag e in the Ba nk’s ATM acc ount. Hre ha then cre ated a false elec tronic

The Honor a

b le Wil liam H. Stafford, J r., Senior United States District J udg e for the Norther n * District of F lorida, sitting by desig nation. 1No. 10-3284

United States v. Hre ha
transac tion that showed a deposit into this acc ount, making it appea r that approximately $35,000 was

acc ounted for on a g ener al bank ledg er betwee n the Ba nk’s ATM acc ount with the National City
Ba nk, which the B ank used to re ceive funds.
Be cause the Ba

nk did not notice eit h er the initial acc ounting err or or the larg e false
transac tion conce ali n g t h e er ror, Hre ha decide d to use simil ar false transac tions to obtain smaller
amounts of money from customer bank acc ounts for his persona l use. Fr om approximately Fe bruar y 2000 until J anuar

y 2008, Hre h a cr ea t ed false transac tions in $1,000 incre ments, char g ing the
amounts to v ar i o u s cust omer acc ounts while ultimately transfe rring the funds into his persona l

acc ount. He then reve rsed chec ks he had written on his persona l acc ount, making it appea r that the funds wer e never withdrawn from his a ccount. To aid him in this scheme , Hre ha rec ruited Denise Conley (Conley ) and Carla Woods (Woods), two lower- level employ ees in the Ba nk’s data
proce ssing g roup. Specifica lly , Hre ha instructed Conley and Woods to proce ss duplicate cashie r’s chec ks and deposit these chec ks into their persona l saving s acc ounts. Hre ha would then withdraw the money from these acc ounts “in an eff ort to pay back the money that [Hreha] had taken from [t he
Ba nk.]” Throug h this scheme , Hre ha obtained $245,832.32, Conley obtained $5,326.27, and Woods obtained $22,855.77.
I n J anuar y 2008, Hre ha came forwa rd and told the president of the Ba nk about the scheme

. The Ba nk had not discovere d the fra ud prior to this time

. Hr eh a resigned from his position and signe d over his retire ment acc ount, containing $71,912.48, to the Ba nk as restitution befor e char g es

2No. 10-3284

United States v. Hre ha

wer e filed ag ainst him. Hre ha subsequently had trouble finding employ ment. On Novemb er 10, 2008, Hre ha filed f

or bankr uptcy and his home wa s fore closed on.
On November 18, 2009, Hre ha, Conley , and Woods wer e eac h char g ed with o n e co unt of bank fraud, in violation of 18 U.S.C. § 1344, and aiding and abetting under 18 U .S.C. § 2. Hreha

was arr aig ned on Dec ember 8, 2009. He waived indictment a nd pleade d g uilty to the single count contained in the information. Hre ha also executed a plea ag ree ment, which did not discuss Hre ha’s
sentenc e or Guidelines rang e but did stipulate that the ap p l i ca b le offe nse level, prior to the anticipated thr ee- level downwa rd adjustment for a cce ptance of re sponsibili ty , was ninete en. Conley was sente nced on F ebrua ry 24, 2010. The dist rict court asked Conley whether she knew what Hre ha did with the $245,832.32 that he had obtained from the Ba nk. “Conley stated that she knew Hre ha to have the newe st in elec tronics and nice car s.” She denied knowing any thing else about whether and how Hre ha spent the money
. The district court orally sentenc ed Conley to a term of one da y in prison, to commence immediate ly following her se ntencing hear ing.
Hre ha’s sentenc ing hear ing took place about one hour afte r Conley ’s. The parties ag ree d that there wer e no objections to the PSR

. The district court deter mined that, afte r a three -leve l downwar d adjustment for acc eptanc e of responsibility , Hre ha’s total offe nse level was eig hteen and h is criminal

3No. 10-3284

United States v. Hre ha history cate g ory was I

. As a result, the district court conclude d that Hre ha’s Guidelines rang e was 1 twenty -seve n to thirty -three months. After g iving Hre ha an opportunity t o speak, the district court asked him “whe re did the
money g o? This is approximat ely , if I acc ept the $275,000, over a period of what, eig ht y ear s or there abouts, we’ re talking about an additional $35,000 a y ear , if I aver ag e it out, tax-free

. So wher e did the money g o? ” Hre ha responde d “I just wa s in ove r my head with bills. I had a couple kids in colleg e. I was try ing to keep their slate clea n and just doing too much.” The district court noted that
Hre ha’s financ ial statement ref lected no rea l estate and stated that Hre ha owned a car worth $1,500.
Hre ha explained that he ha d lost all his assets through ba nkruptcy

. The district cour

t then stated
I g uess – sir, I g uess I ' ll be candid with y ou. I jus t d o n ’t fi n d this to be cre dible. And if I don’t fi n d i t to be cre dible, if I for some rea son think y ou’re misleading me about wher e the money went, then that makes it more difficult for me in imposing a s en t en ce h er e because we’ re talking about $275,000. I ’m a li ttle bit familiar with Mag nolia. I t’s a community wh er e t he cost of living is rela tively modest. And I don’t see y ou have any t hing to show for all this money
. I don’t see car s, houses, jewelr

y , any of the kinds of things that one would acc umulate spending – using this kind of money over a period of time.
So I would strong ly

encour ag e y ou that candor is a g ood thing. I f for some rea son I think that – I don’t g et a better answe r then just sort of a vag ue, well, I was in over my head, then I ' m g oing to be led to believe either there is money somewher e

The plea ag ree ment had contemplated a total offe nse level of six teen based on a loss amount 1 of more than $120,000. I n arr iving at this loss amount, the g overnme nt simply subtracte d Hre ha’s restitution to date, $71,912.48, from $245,823.32. Howeve r, the probation office r rec ommended a total offe nse level of eig hteen based on a loss amount of more than $200,000 by taking into acc ount rele vant conduc t – the loss amounts ascribed to Conley and Woods. 4No. 10-3284

United States v. Hre ha else and/or y ou’re wasting it or spending it on things other than y ou’ve disclosed here in open court. And that will not be a g ood thing. That may incre ase the g uidelines. That may mean y ou’re not acc epting responsibility

. Or that may mean I need to vary upwar d beca

use there is something else g oing on here besides, g ee, I ’m j u s t a spendthrift. Not for

this kind of money

. So do y ou want to be fra nk with me, candid with me, or if y ou want to mai n t ai n t h e position that y ou are telling me the truth, then I ’ll be looking at the probation office r, talking to him about the financ ials and what information there may be to truly

establish wher e this money went.
Hre ha responde d “I am telling y ou the truth, sir. I was in over my head. I boug ht car s for my kids. You know, I

paid ca sh for them be cause I took the money from this.”
I n response , the di strict court ag ain questioned Hr eha, a sking him “[w]hat kind of car s did
y ou buy

. How much did y ou spend? How much did y ou spend on colleg e? L et’s be specific here

. What evidence do y ou have to support these various purc hases? ” Hr eha r esponded:

I don’t reme mber what I s p ent on my son’s colleg e or – my daug hter went awa y to school at Stark State for a y ear , and I think it was li ke 11 thous and bucks. And I just – I paid for a ll of that for he r.

. . . . There wer e times when my wife wasn’t working beca use she had over- used her tim e off beca

use she has fib ro m y algia, so she m issed work. So there was only my income coming in. And we would g o on vacation. I mean, vacations would cost us two or three thousand. We’d g o to My rtle Be ach. And I just used it f or that. I mean, over eig ht y ear s, y ou know, we w ent on vac ation ever y single y ear

with my kids. I have none of this money

saved up. I

have nothing

. And I ’m being– and I ’m not ly ing to y ou sir. The district court continued to question Hre ha’s story , stating that it just did “not make sense

. . . that this much money is stolen from the bank and there is not one thing to show for it, and I g et

5No. 10-3284

United States v. Hre ha

. . . vag ue answers ab o u t what was spent and how it was spent.” The court took a short brea k to revie w Hre ha’s bankruptc y filing, and then allowed the parties to examine and respond to the filing. The district c ourt also made the filing a part of the rec ord while noting that it c ast “g rave doubt on [Hreha’ s] cr edibility and the acc urac y of the statements that he ha[d] made to the [court] about his use of ne arly

a quar ter of a milli on dollars in this particular c ase.”
Hre ha’s counsel responde d, “I ’m not sure that this bankruptc y filing g oes back and captur es the [eight] y ear s[’] worth of things. . . . Some of those items [t hat ar e not showing up on this] , it’s
my understanding , [are] car pay ments in excess of $500.” Counsel reque sted that he be allowed to “provide the g overnme nt or the probation depar tment with any rec ords whatsoeve r that would show
to the [di strict court] wher e some of the money went.” The district court stated that it did not “fe el

a need to continue the hear ing beca use [i t thought i t h ad ] al l the information [i t] need[ed].” The
court re asoned
I pick up the bankruptc y and I see student loans here of near ly $80,000. Now, that doesn’t quite square with the fact that y es, I ’m using this money to pay for my students’ colleg e. I look at the inordinate amount of debt here that’s been acc rued. I look at the ty pe of car s. I look at the household g oods. Every thing set forth in this bankruptc y proce eding leads me to be lieve, candidly , that the monies that wer e stolen from the [Bank] went somewher e else. Now, whether it’s g ambling, wh ether it’s adult enter tainment, I ’m not sure, but it has a bear ing on the Court’s sen t ence so I can d et er m i ne an appropr iate sanction and what may be the appropr iate terms o f supervised r elea se. Prior to imposing Hre ha’s sentenc e, the district court briefly descri b ed t h e nature and circ umstances of

the offe nse and the n stated as f ollows:

6No. 10-3284

United States v. Hre ha

The Court would note for the rec ord that this conduct – this defe ndant’s conduct, at least from what I have rea d, led to two other co-w orker s being involved in this unlawful activity , that being Ms. Woods and Ms. Conley , and resulted in their loss of their employ

ment and their obvious culpa bility in this m atter. And I am of the vie w, base d on what I ’ve se en and hear d and rea d, that this defe ndant i s the l eade r. And wit hout his involvement, the ot her t wo may not have been involved, g iven their long -time employ ment at the [Bank]. The abuse of position of trust unde r 3B1.3 is found not to apply . Howeve r, as an aside, there is an arg ument to be made that that cer tainly could have applied in this case a

nd was not ca lculated in the g uidelines.

. . . . The history and char acte ristics of the defe ndant. He’ s 51 y ear s old. He has no prior cr iminal recor d. He’ s marrie d and has thre e children. He indica tes he wa s raised in a lovi ng an d supportive family

. He indicates he does not suffe r from any phy sical, mental, or substanc e abuse issues.
Fr om 1990 to 2008 he was employ ed at the [Bank] w here he committed the instant offe nse. He is curr ently unemploy ed and has h ad t ro uble maintaining employ ment since this instant offense

. The defe ndant repor

ted taking the money t o p ay fo r bills. The Court, candidly , does not believe that to be the ca se. I believe, based on the information I have as outline d i n t h e defe ndant’s b an k ru ptcy , based upon the amounts involved, based upon the probation office r’s investiga tion, etce tera , this money was used for some other purpose. Whether it be leg al or illeg al, the Court ca nnot determine. Whether it be g ambling, whether it be drug s, whether it be alcohol, which the defe ndant denies, or whether it be in s o me sort of adult ente rtainment ac tiviti es, I do not know.
But the defe ndant’s, in my view, lack of candor and unwillingness to disclose to this Court wher e these funds may have g one g ives this C o u rt great difficulty in d eciding an appropr iate sanction or, more importantly , imposing condition s o f supervised rele ase that will a llow the Court to make cer tain this defe ndant does not eng ag e in conduc t of this nature.

7No. 10-3284

United States v. Hre ha

I f these f unds are being used for some form of addictive be havior, e tceter a, then it’s likely until that kind of issue is addre ssed, this conduct will continue ag ain. There will be issues of re cidivism. And the Court – obviously , all of those things fold into the Court’s imposit ion of the need for the sentenc e i m p o s ed , deter renc e, protec t the public, improve the offe nder’ s conduct. I ’ve been deprive d of that by what I believe to be the defe ndant’s intentional[ ly ] vague response s to the Court’s inquiry

. There fore , having addre ssed al l of those things, the kinds of sentenc es available is the statutory period is up to 30 y ear s. The g uidelines is 27 to 33 months. And as I ’ve indicated, I will vary above those g uidelines for the rea sons I ’ve just stated. Sentencing disparities. Def endants with simil ar offe nse levels and criminal history score s would fall within the same sentenc ing rang e as the d e f e n dant, howeve r, I ca ndidly believe – my experience has been that most defe ndants will be able t o more acc urate ly disclose clea rly , g iven the amounts in question here , wher e the funds went, how they wer e expended, who may have rec eived same, etce tera

. None of that applies her e.

. . . . [A] nd just so we note for the r ecor d, the other thing that makes this Court’s sentenc e – why I ’m vary

ing is beca

use [y ou] destroy ed in some respe cts the lives of two other ladies who worke d in that bank with y ou. And but for y ou, and whateve r addiction or whateve r the cause may be of y our misappropriation of this money , y ou took them down with y ou. And that war rants a ha rsh sanc tion as well. The district c ourt then sentenc ed Hre ha to sixty months’ imprisonment. No objections wer e made following the impositi on of the sente nce. 2

After sentenc ing Hre ha and Woods, t he district cour t “bec ame c oncer

ned that Conley

had 2 not been t ru t h fu l d u ri ng her allocution conce rning what she knew about wher e Hre ha may have spent” his share of the money based on Woods’s repr esenta tions at her afte rnoon sentenc ing hear ing that Hre ha spent a lot of money at strip clubs and that Conley was awa re of this fac t. As a result, the district court order ed Conley returne d to the courtroom late in the afte rnoon on Feb ruar y 24. Be cause Conley ’s attorne y could not be present at this time, the di strict court set a hearing for the following day

“to addr ess more f

ully what Conley

had said during her a llocution.”

8No. 10-3284

United States v. Hre ha
On Marc h 4, 2010, Hre ha timely appea led his judgme nt and sentenc e. II.
Hre ha arg ues that his sentenc e was proce durally unrea sonable beca use the district court (1) failed to c onsider all of the 18 U.S.C. § 3553(a) fac tors and focuse d primarily on how Hre ha spent the proce eds of t he bank fra ud; and (2) failed to proper ly calc ulate the Guidelines rang e by miscalculating the loss amount and disreg arding the parties’ stipulations in the plea ag ree ment. He also claims that his sentenc e was substantively unrea sonable beca use it was arbitra

ry and depende d entirely on “one fac tor which was not an element of the offe nse, and was not a nece ssary component
to fashion a proper sentenc e.” The g overnme nt contends that Hre ha’s sentenc e is proce durally and substantively

rea sonable.
We revie w sentenc es for rea sonablene ss. United States v. Holcomb , 625 F.3d 287, 291 (6th Cir. 2010); see also Gall v. United States , 552 U.S. 38, 46 (2007). Reasonableness i s deter mined “using the abuse- of-discr etion standard of revie w.” United States v. W ebb , 616 F.3d 605, 609 (6th

On Fe bruar

y 25, 2010, the district court place d Conley under oath and rea d back its questions and her answe rs from the previous day on the i ssue of where H reha spent the money . The district court then posed t hese questions to C onley ag ain. Conley stated “that she had hear d from W oods that Hre ha had spent a lot of time in adult enter tainment establishments.” When asked by the district court why she di d not mention this fac t the previous day , she said “tha t she did not have firsthand knowledg e of Hre ha frequenting thes e establishments, nor specific knowledge of Hreha using t he monies he embezzled for that purpose, but had only hear d that information from Woods.” Ba sed on this information, the district court announce d that it was considering modify ing Conley ’s sentenc e, as it had not y et been journalized, and asked the parties to brief the issue. Following the submissi on of briefs, the district court issued an o rd er stating that it lacke d the authority to alter Conley ’s sentenc e. 9No. 10-3284

United States v. Hre ha Cir. 2010) (citation omitted). “Review for rea sonab l eness has both proce dural and substantive components.” Id. (citation omitted). When revie wing a sentenc e for proce dural rea sonablene ss, we look at three fac tors: whether the district court “ (1) pr operly calc ulated the applicable advisory Guidelines rang e; (2) c onsidered the ot her § 3553(a) fa ctors as well as t he parties’ arg uments for a sentenc e outs ide t he Guidelines
rang e; and (3) adequate ly arti cu l at ed its rea soning for i mposing the particula r sentence chosen. .

. .” United States v. Bolds , 5 1 1 F.3d 568, 581 (6th Cir. 2007). To deter mine if the district court
proper ly calc ulated the a

pplicable Guide lines rang e, we revie w the district cour t’s finding s of fact under the clea

r-e rror standard and i ts leg al conclusions reg arding application of the Guidelines de

novo
. Id. at 579. “Althoug h the district court need not expli citly ref ere nce eac h of the § 3553(a) fac tors, t h er e must be sufficient evidenc e in the record to aff irmatively demonstrate that the court
g ave e ach of

them considera

tion.” United States v. Battaglia , 624 F.3d 348, 351 ( 6th Cir. 2010).
A sentenc ing explanation is adequate if it allows for meaning ful appellate revie w, Gall , 552
U.S. at 50, wh i ch is acc omplished by setting forth enoug h of a statement of rea sons to satisfy the appellate court that the sentenc ing court had considere d the parties’ arg uments and had a rea soned basis for choosing t h e s en t en ce imposed, Rita v. United States , 551 U.S. 338, 356 (2007). The
“sente ncing [court] is not require d to expli citly addre ss ever y mitigating arg ument that a defe ndant makes, particula

rly when those arg uments are raised only in passing .” United States v. Madden , 515 F.3d 601, 611 (6th Cir. 2008). I ndeed, the Supreme Court has made clea r that “[t] he appropr iateness

10No. 10-3284

United States v. Hre ha of brevity or leng th, concise ness or detail, when to write, what to say , depends upon circ umstances” that are left “to the judg e’s own pr ofessional judg ment.” Rita , 551 U.S. at 356.
Be cause we find that Hre ha’s sentenc e is proce durally unrea sonable, we need not rea ch the issue whether

his sentence is substantively unrea sonable. The district court was clea rly focuse d on what Hre ha did with the proce eds of the bank fra ud

– a considera

tion that is not pertinent in scoring the Guidelines, but potentially rel evant to the
sentenc ing fac tors under § 3553(a)

. Although the district court specula ted as to what Hreha may have done with the money , it did not specific ally state whether it was imposing a sentenc e that was

near ly double the maxi mum rec ommended by the Guidelines beca use it believed that Hre ha had not disgor g ed all of t he procee ds of t he bank fra ud o r t h at h e h ad spent the proceeds in supporting an ad d i cti on. Wit hout further explanation by the district court, our revie w of the rec ord re v ea l s n o

rea dy support for e ither theory

. T h e probation depar

tment did not find that Hre ha had been abusing alcohol or drug s , g ambling, or eng ag ing in any other inappropria te activities. Conley lacke d any persona l knowledg e that Hre ha patronized strip clubs, Woods’s rema rks wer e not made under oath, an d n o n e of the
statements re g arding this iss ue we re ma de at Hr eha’ s sentencing hear ing.
Fur ther, Hre ha confe ssed to the cr i me befor e it was discovere d and promptly turned over

n ea rl y $ 7 2,000 in saving s as partial restitution. The court allowed a three -leve l reduc tion fo r

acc eptanc e of responsibility

. Absent additi onal ex planat i o n and support in the record, the court’s

11No. 10-3284

United States v. Hre ha
trea tment of the “wha t-happe ned-to-the -money ” issue seems inconsiste n t wi th Hre ha’s acc epting responsibility

. The district court also appea rs to have draw n unwar

rante d conclusions about the amount of
money Hre ha had at hi s disposal. Hre ha’s salary during the time of the off ense w as no m ore than $37,000 per y ear , pre- tax, and less for previous y ear s. The proce eds of the bank fra ud added about $31,000 per y ear to Hre ha’s y ear ly income. I t is entirely possible that a person who was supporting

a family of five, three of whom wer e colleg e-a g e children, would spend $68,000 per y ear (assuming no taxes were pa id) and would incur some debt. Additionally , the bankruptcy filing on which the district court relied ref

lected Hre ha’s financ ial state of aff airs after he had lost the bank position and could not find another

. Although the court mi g ht have had good reaso n s fo r q u estioning Hreha ’s inability to provide a more specific acc ount at sentenc ing, such rea sons ar e n o t ev i d ent on this

rec ord.
Moreove r, when it beca

me appar ent that the district court was h ea d i n g down a path not contemplated by Hr eh a or the gover nment, Hre ha’s counsel asked for an opportunity to provide a

more detailed explanatio n o f Hr eh a’s financ es and “whe re the money went.” The district court declined to allow an adjournment to permit Hre ha to supplement the rec ord and attempt to addre ss the court’s conce rns, concluding that it ha d sufficie nt information to deter mine that Hre ha was not telling the court the truth. Be cause it is not evident from the bankruptc y filing alone that Hre ha was being untruthful and beca

use the district court never explained what aspec ts of the bankruptc y rec ord

12No. 10-3284

United States v. Hre ha
cast doubt on Hre ha’s explanations, the court should have permitted co u n s el an opportunity to
prese nt evidence supporting H reha ’s ac count of wha t he did with the money

. He re , Hre ha’s “sente nce in excess of the Guidelines rang e was imposed without

. . . a
statemen t o f rea sons for such a varia nce. Section [18 U.S.C. § 3553(c) (2) require s not only a
statement of rea sons, both stated ‘in open court’ and written in a judgme nt and commitment order , but a lso tha t those statements be made with ‘ specific ity .’” United States v. Blackie , 548 F.3d 395,
403 (6th Cir. 2008). Fur

ther, by ref

using to allow Hre ha to supplement the rec ord, the district court effec t i v el y d ec lined to consider his arg uments reg arding how he spent the proce eds of the fra ud.
Be cause the district court’s sentenc ing explanation does not demonstrate that the district c ourt had considere d Hre ha’s arg uments and had a rea soned basis for choosing the sentenc e imposed, Hre ha’s
sentenc e is proce durally

unrea sonable.
III.
Fo r the aboveme ntioned rea sons, we REVERSE Hre ha’s judgme nt and sentenc e and
REMAND to the district court for proce eding s consistent with this opi nion.

13