PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

 

No. 09-1165

 

UNITED STATES OF AMERICA

v.

MARIA LIANIDIS,

Appellant

 

On Appeal from the United States District Court

for the District of New Jersey

(D.C. No. 07-cr-00665-001)

District Judge: Honorable Garrett E. Brown, Jr.

 

Argued December 2, 2009

Before: FISHER, HARDIMAN

and STAPLETON, Circuit Judges.

(Filed: March 19, 2010 )
2

Anna M. Durbin

Peter Goldberger (Argued)

50 Rittenhouse Place

Ardmore, PA 19003-2276

Counsel for Appellant

George S. Leone

Office of United States Attorney

970 Broad Street, Room 700

Newark, NJ 07102

Glenn J. Moramarco (Argued)

Office of United States Attorney

Camden Federal Building & Courthouse

401 Market Street, 4th Floor

P.O. Box 2098

Camden, NJ 08101

Counsel for Appellee

 

OPINION OF THE COURT

 

FISHER, Circuit Judge.

Maria Lianidis pled guilty to three counts of bribery of a

federal employee in violation of 18 U.S.C. § 201. On appeal,

Lianidis contends that the District Court erred at sentencing by

imposing a 16-level increase based on its determination that the

“benefit received” under U.S.S.G. § 2C1.1(b)(2) was between

$1,000,000 and $2,500,000. To resolve this issue, we must
3

define the proper calculation of “benefit received” in cases

where illegal bribes are used to obtain what would otherwise be

legal contracts. Following the Fifth Circuit’s approach in

United States v. Landers, 68 F.3d 882 (5th Cir. 1995), we hold

that “benefit received” under § 2C1.1(b)(2) is the net value,

minus direct costs, accruing to the entity on whose behalf the

defendant paid the bribe. Because the District Court did not

properly articulate and apply this standard, we will vacate and

remand for re-sentencing.

I.

A.

From 1992 through 2001, Lianidis worked as a computer

specialist for the Federal Aviation Administration (“FAA”) at

the Atlantic City International Airport. During this period,

Steven Lianidis, Maria Lianidis’s husband, founded Digital

Management Systems, Inc. (“DMS”), a family-owned computer

services engineering company located in Absecon, New Jersey.

DMS designed and supported computer applications for aviation

systems through contracts with the FAA. In 2001, Lianidis left

the FAA to serve as DMS’s president, a position she held

through 2007.

Darrell Woods, an FAA employee at the Atlantic County

Technical Center from 1996 through 2005 and a long time

friend of Lianidis, was in charge of overseeing the DMS

contracts. From July 9, 2001, through December 26, 2004,

Lianidis made a series of about 19 cash payments, totaling
Although the Presentence Investigation Report states 1

that the total was $159,000, the parties agreed at the Sentencing

Hearing that the total was closer to $155,000. (App. at 12.)

4

approximately $155,000, to Woods. In return, Woods 1

improperly steered contracts supporting the FAA’s “Service

Movement Advisor” computer system (“SMA contracts”) to

DMS and, once the contracts were awarded, improperly

authorized increases on those contracts.

The SMA Statement of Work (“SOW”) specified certain

award conditions, including the following:

“As a condition of award the Contractor shall

perform the work activities described in this SOW

primarily at the [FAA Technical Center] and shall

maintain an office within 5 miles of that site.”

(App. at SA59 & SA142, § 1.2.) To comply with this office

requirement, DMS initially rented a small facility, presumably

from a third party. Then, in June 2003, Lianidis’s husband

formed a real estate company named DESFO, LLC and used it

to purchase a larger facility within five miles of the Technical

Center, which DESFO then rented to DMS. In addition to its

rent, DMS incurred a litany of costs at the DESFO office,

including, inter alia, salaries, payroll taxes, and costs associated

with computer equipment, supplies, cleaning, insurance, legal

and professional assistance, and meals and entertainment. (Id.

at 72-79.)
Any minor discrepancies as to the exact figures do not 2

affect this appeal.

5

The SMA contracts were in effect for a total of six years.

Although the contracts were procured with bribes, DMS’s actual

work on the contracts was legitimate. (PSR ¶ 37.) Overall, the

FAA paid DMS a total of $6,783,877.33 under the SMA

contracts. During the six-year period, Lianidis received a total

salary of $445,298, and her husband received a total salary of

$601,525.2

From September 2004, through March 11, 2005, the FAA

prepared a competitive solicitation for work related to a separate

computer system, Surface Management Systems (“SMS”). On

November 23, 2004, after asking for Lianidis’s suggestions,

Woods inserted a provision in the SMS solicitation that

excluded larger qualified bidders and restricted competition to

smaller businesses closer to DMS in size. However, the

solicitation was canceled – apparently due to the bribery

investigation – prior to any contract award.

B.

On August 9, 2007, a grand jury charged Lianidis with

one count of conspiracy to defraud the United States, in

violation of 18 U.S.C. § 371; seventeen counts of bribery of a

federal employee, in violation of 18 U.S.C. § 201; and eight

counts of money laundering, in violation of 18 U.S.C. § 1957.

On February 6, 2008, Lianidis pled guilty to three counts of

bribery of a federal employee in the United States District Court
6

for the District of New Jersey. The Plea Agreement expressly

stated that the parties were unable to agree on the calculation of

value, benefit, and loss pursuant to U.S.S.G. § 2C1.1(b)(2).

(App. at 88.)

The Presentence Investigation Report (“PSR”)

recommended that the District Court impose a 16-level increase

based on its conclusion that the “benefit received” under

§ 2C1.1(b)(2) and the reference table in § 2B1.1 was between

$1,000,000 and $2,500,000. (PSR ¶¶ 37-38.) At the December

23, 2008 Sentencing Hearing, the District Court agreed, based

on what appears to be two, alternate theories.

First, citing the Fifth Circuit’s decision in United States

v. Landers, 68 F.3d 882 (5th Cir. 1995), the District Court held

that the proper calculation of “benefit received” under

§ 2C1.1(b)(2) deducts direct costs, but not indirect costs, from

the gross proceeds of the illegally obtained contracts. (App. at

14.) In applying the Landers rule, the District Court refused to

include Lianidis’s proposed additional costs as direct costs:

“Now, the defendant also asserts that she had

costs of purchasing a building within five miles of

the FAA site with a security system, a lab,

computer equipment, backup equipment,

additional landscaping, trash removal, pest

control, dues and subscriptions, cleaning services,

and rent which was paid by DMS, the defendant’s

corporation, to the defendant who purchased the

building and [that] this should be considered a

direct cost and deducted. [The] Government
7

disputes that. I do not find that that is direct

cost.”

(Id. at 15.) The District Court reiterated shortly thereafter,

“As far as the deduction for the overhead of the

building as a direct cost to the contract, building

that they purchased and they received rent from

the corporation, I don’t think that is a direct cost

and I will not consider it as such under the

guidelines.”

(Id. at 16.) In so holding, the District Court evidenced its

agreement with the Government, which estimated the “benefit

received” to be $3,287,192 by subtracting as direct costs only

“direct labor costs and other salary and wages paid, payroll

taxes, [and] employee benefits.” (Id. at 13.)

As an alternative theory, the District Court used

Lianidis’s and her husband’s salaries as a proxy for “benefit

received”:

“As far as the alternative theory, . . . [Lianidis]

was able to enjoy the lifestyle provided by [her

and her husband’s] salaries which totaled over a

million dollars. And although she says that she

worked for it, that’s not the point. The point is

that we have these bribes paid in connection with

this work.

. . . 
Counsel for Lianidis contended at oral argument that the 3

salary theory was the sole basis for the District Court’s decision

because it was the only theory set forth in the PSR. (PSR ¶ 37-

38.) The record is unclear. On one hand, the Court began with

a discussion of Landers and classified the salary theory “as the

alternative theory.” (App. at 15.) On the other hand, the Court

stated, in conclusion, that it was adopting the PSR:

“So having evaluated the presentence report, I

adopt it and find it to be correct. So what we do

have here is an offense level of 25, a criminal

history category one, which gives us a range of 57

to 71 months under the advisory guidelines.”

(Id. at 17.) Furthermore, the Court imposed a 16-level increase

even though the Court could have imposed an 18-level increase

under the Landers direct cost approach. See U.S.S.G. § 2B1.1.

We will address both theories. The District Court’s use

of a new legal theory is not problematic because neither Federal

8

The defendant and her husband were not the only

employees, but this was their company and they

obtained over a million dollars in cash salaries.

What would have happened had they competed

fairly for the contract is not before me. There’s

no good work exception to the bribery laws.”

(Id. at 15-16.) Finding that the salaries also warranted a 16-level

increase, the Court adopted the PSR’s recommendation.3
Rule of Criminal Procedure 32 nor our case law require a district

court to abide by a probation officer’s interpretation of the

Sentencing Guidelines. Cf. United States v. Hudson, 491 F.3d

590, 596 (6th Cir. 2007) (“While case law requires notice before

a district court departs or varies from the recommended

guideline sentence, . . . [it does] not require notice when a

district court interprets the guidelines differently from the

probation officers-when it applies the Guidelines in a manner

different from what is recommended in the presentence report.”

(quotations and citations omitted)). Moreover, Lianidis has not

asserted that she was unduly surprised by the Government’s

$3,287,192 figure, which was calculated using the PSR’s

proceeds figure of $6,783,877.33 and the salary, tax, and benefit

figures provided by Lianidis herself.

The judgment did not become final, and thus the appeal 4

did not ripen, until the filing of an agreed order for the criminal

forfeiture of $150,000 on June 10, 2009.

9

The 16-level increase resulted in a total offense level of

25, which, when combined with Lianidis’s criminal history

category of I, produced an advisory Sentencing Guidelines range

of 57 to 71 months of imprisonment. After granting a two-level

downward variance of nine months on account of the

defendant’s compelling personal circumstances, the Court

imposed a sentence of 48 months of imprisonment, followed by

three years of supervised release. The Court also ordered a fine

of $75,000 – $25,000 for each count – and a special assessment

of $300. The Court entered judgment on December 30, 2008,4
10

and Lianidis filed a timely notice of appeal of the 16-level

increase on January 13, 2009.

II.

The District Court had jurisdiction under 18 U.S.C.

§ 3231, and this Court has jurisdiction pursuant to 28 U.S.C.

§ 1291 and 18 U.S.C. § 3742(a). “We review the District

Court’s interpretation of the Sentencing Guidelines de novo,”

but we review the District Court’s application of law to fact with

due deference. United States v. Aquino, 555 F.3d 124, 127 (3d

Cir. 2009). “We review the District Court’s factual findings for

clear error.” United States v. Cohen, 171 F.3d 796, 802 (3d Cir.

1999).

III.

Lianidis argues on appeal that the District Court erred in

imposing a 16-level increase pursuant to § 2C1.1(b)(2) under

both its Landers approach and its salary theory. We will address

the problems with each approach in turn, after a brief overview

of § 2C1.1(b)(2).

A. Background

Under U.S.S.G. § 2C1.1(b)(2), the offense level of a

defendant convicted of bribing a federal employee increases

based on the “benefit received or to be received” in exchange

for the bribe:
11

“If the value of the payment, the benefit received

or to be received in return for the payment, the

value of anything obtained or to be obtained by a

public official or others acting with a public

official, or the loss to the government from the

offense, whichever is greatest, exceeded $5,000,

increase by the number of levels from the table in

§ 2B1.1 . . . corresponding to that amount.”

U.S. Sentencing Guidelines Manual § 2C1.1(b)(2). We have

held that the Government bears the burden of showing “benefit

received.” United States v. Pena, 268 F.3d 215, 220 (3d Cir.

2001) (citing United States v. McDowell, 888 F.2d 285, 291 (3d

Cir. 1989)). Here, the Government alleges that the “benefit

received” is between $1,000,000 and $2,500,000, which

warrants a 16-level increase. U.S.S.G. § 2B1.1(b)(1).

To determine whether the Government has met its

burden, we must define the scope of “benefit received.” We are

aided by the § 2C1.1 application notes, which discuss “benefit

received” in terms of “net value” and “profit”:

“The value of ‘the benefit received or to be

received’ means the net value of such benefit.

Examples: (1) A government employee, in return

for a $500 bribe, reduces the price of a piece of

surplus property offered for sale by the

government from $10,000 to $2,000; the value of

the benefit received is $8,000. (2) A $150,000

contract on which $20,000 profit was made was

awarded in return for a bribe; the value of the
12

benefit received is $20,000. Do not deduct the

value of the bribe itself in computing the value of

the benefit received or to be received. In the

preceding examples, therefore, the value of the

benefit received would be the same regardless of

the value of the bribe.”

U.S.S.G. § 2C1.1 cmt. n.3. Because the Sentencing Guidelines

commentary “is akin to an agency’s interpretation of its own

legislative rules[,]” we will give the application notes

“controlling weight” unless the commentary “violate[s] the

Constitution or a federal statute[]” or “is plainly erroneous or

inconsistent with the regulation.” Stinson v. United States, 508

U.S. 36, 45 (1993) (quotations and citations omitted).

B. The Landers Approach

Lianidis takes issue with two aspects of the District

Court’s application of Landers in calculating “benefit received.”

First, Lianidis asserts that, under our decision in Pena, 268 F.3d

215, the proper measurement of “benefit received” is the gross

revenue less legitimate costs of the SMA contracts, which

Lianidis suggests is slightly distinct from the Landers approach.

Second, Lianidis argues that, even following Landers, the

District Court erred in refusing to include her and her husband’s

salaries and DMS overhead as direct costs of the SMA

contracts. The Government maintains that the District Court’s

analysis is sound.
13

1.

Although this Court has addressed the scope of “benefit

received,” or “net value,” in some instances, we have yet to

define the calculation of “benefit received” in a case where, as

here, the contract underlying the bribery is legal. We first

examined “net value” in United States v. Schweitzer, where a

defendant bribed a public official to obtain confidential

information held by the Social Security Administration. 5 F.3d

44, 45 (3d Cir. 1993). There, we held that the “benefit received”

is “the market value of the information secured for [the

defendant’s] client.” Id. at 47. We declined to subtract the

value of the bribe in calculating “benefit received” because the

“concept of ‘net value received’ has nothing to do with the

expense incurred by the wrongdoer in obtaining the net value

received.” Id. This, we continued, “is clear from the Note’s

instruction that the value of the bribe is not to be deducted in

calculating the ‘net value.’” Id. (referencing U.S.S.G. § 2C1.1

cmt. n.3 (“Do not deduct the value of the bribe itself in

computing the value of the benefit received or to be received.”)).

We extended Schweitzer in Pena, which, like Schweitzer

and unlike the instant case, concerned an illegal underlying

transaction: the defendant police officer accepted bribes in

return for permitting illegal gambling machines to operate

without interference. Pena, 268 F.3d at 216. In calculating the

“benefit received,” we refused to subtract operation costs when

the transaction was illegal: “the concept of netting out costs to

arrive at profit is inappropriate under the Guidelines section

when the transactions are entirely illegitimate.” Id. at 219. We

expressly declined to follow United States v. Sapoznik, where
14

the Seventh Circuit, in another case involving illegal gambling,

remanded for re-sentencing because the government had not set

forth evidence regarding the costs of the illegal enterprise,

which, according to the Seventh Circuit, prevented the

calculation of net value. Id. (citing Sapoznik, 161 F.3d 1117,

1119-20 (7th Cir. 1998)). We explained in conclusion that the

“‘net value’ of the ‘benefit’ received does not mean ‘net

proceeds.’ Rather, it means benefit received after netting out the

value of what-if anything-of legitimate value, was provided.”

Id. at 221. We found that there was “no such value” in that case.

Id.

Lianidis hones in on the Pena phrase “legitimate value.”

However, contrary to Lianidis’s characterization, Pena does not

stand for the proposition that “net value” is necessarily

calculated by subtracting all “legitimate” costs from gross

revenue. Rather, Pena held that it is inappropriate to subtract

the costs of illegal transactions in calculating “net value.” Since

the Pena court did not give meaningful discussion to the costs

of legal transactions, nor to whether any differentiation between

direct and indirect costs should exist, the precise calculation of

“net value” under § 2C1.1(b)(2) when the underlying transaction

is legal is still, at the very least, an open issue for this Court.

We can look to our sister circuits for guidance. The

seminal case is Landers, the Fifth Circuit decision applied here

by the District Court. Similar to the instant case, the defendant

in Landers made cash bribes to obtain favorable contracts for

the company he represented. 68 F.3d at 883. The district court

calculated “net value” by subtracting the costs of the goods sold

from the gross value of the contracts. Id. at 884-85. On appeal,
The Fifth Circuit rejected the defendant’s contention that 5

“net value” is synonymous with “net profits”: “If the

Sentencing Commission wanted courts to use a ‘net profit’

figure, presumably it would have employed that term.” Landers,

68 F.3d at 885. The court also held that the Sentencing

Commission had implicitly rejected the concept of “net profits”

“by noting that one type of direct costs, bribes, is not deductible

from gross profits.” Id.

15

the defendant argued that the district court should have

subtracted both the cost of the goods sold and a share of his

company’s overhead from the contract price. Id. at 884. In a

well-reasoned opinion, the Fifth Circuit agreed with regards to

the cost of the goods sold, but not with regards to the overhead.

Id. at 886.

To start, the Fifth Circuit determined that the use of the

adjective “net” before “value,” as well as the examples in the

§ 2C1.1 application notes, “implies that some costs should be

deducted” in the calculation of “benefit received.” Id. at 884.

The court then drew a line between “direct” costs, which it held

were deductible, and “indirect” costs, which it held were not.5

Id. at 884-86. The court’s rationale was two-fold. First, the

court analogized “indirect costs” to the bribe itself, which

application note 3 of § 2C1.1 states is not subtracted in the

calculation of “net value”:

“The rationale for refusing to deduct the amount

of a bribe from gross value applies equally to

indirect costs. Like a bribe, indirect costs have no
16

impact on the harm caused by the illegal conduct.

This is true whether one considers the pecuniary

benefit to the bribing party or the pecuniary loss

to a competitor. For both parties, the benefit of an

additional contract is measured by gross revenue

minus direct costs. By definition, indirect costs

do not affect that value.”

Id. at 885. Second, the court held that excluding “indirect costs”

is consistent with the Guidelines’ general goal of achieving

reasonable uniformity in sentencing because “[a]llowing a

wrongdoer to deduct indirect costs would result in differing

culpability not only for similar acts, but also for the very same

act.” Id. The court provided a hypothetical as an example:

“Take for example a case in which two

defendants bribe the same government official for

the same contract. If indirect costs were

deductible, the defendants could receive different

sentences if one of them worked for a company

with higher indirect costs.”

Id. at 886. In conclusion, the court calculated “net value” by

subtracting the costs of the goods sold, but not the company’s

overhead. Id.

Landers has not fallen on deaf ears. The Courts of

Appeals that have addressed this issue – the Second, Seventh,

and Eleventh Circuits – have cited Landers with approval. See

United States v. Glick, 142 F.3d 520, 525 (2d Cir. 1998) (“In

calculating the amount of ‘improper benefit[]’ [under
Application note 4 of U.S.S.G. § 2E5.1, which concerns 6

bribery affecting an employee benefit plan, directs courts to the

commentary of § 2C1.1 in determining “value of the improper

benefit to the payer.”

Application note 2 of U.S.S.G. § 2B4.1, which applies 7

in cases of commercial bribery, directs courts to the commentary

of § 2C1.1 in determining “value of the improper benefit to be

conferred.”

17

§ 2E5.1(b)(2)] only direct costs, not indirect costs, should be 6

subtracted from the gross value received.”); Sapoznik, 161 F.3d

at 1119 (agreeing that fixed costs should be included in net

value but finding it unclear whether the costs at issue were

indeed fixed); United States v. DeVegter, 439 F.3d 1299, 1304

(11th Cir. 2006) (“We agree with the Fifth Circuit’s approach

which subtracts direct costs, but not indirect costs, from profits

to determine the net improper benefit [under § 2B4.1(b)(1)].”).7

See also Cohen, 171 F.3d at 803 (citing Landers generally);

United States v. Leon, 2 F. Supp. 2d 592, 596 (D.N.J. 1998) (“I

hold that only ‘direct costs’ are deductible in calculating the

amount of the benefit conferred [under § 2B4.1(b)(1)]. . . .

Indirect costs are not deductible.”). We agree that the Fifth

Circuit’s reasoning is sound: indirect costs, like bribes, do not

impact the harm caused by the bribery, and allowing the

deduction of indirect costs would foster inconsistency in

sentencing. Accordingly, we will adopt the Landers approach

and subtract only direct costs, and not indirect costs, when

calculating “net value” under § 2C1.1(b)(2).
We address this latter incorrect statement of law more 8

fully in Section C, infra.

18

2.

Lianidis also challenges the District Court’s application

of Landers. Lianidis asserts that both the overhead of the DMS

office, which Lianidis alleges only serviced the SMA contracts,

and her and her husband’s reasonable salaries under the SMA

contracts are direct costs of the SMA contracts. In response, the

Government argues that it would be misleading to claim that one

hundred percent of the DMS overhead can be attributed to the

SMA contracts and that Lianidis’s and her husband’s salaries

must be included in “benefit received” as a matter of law.8

We hold at the outset that, although it is the

Government’s burden to show “net value,” Pena, 268 F.3d at

220, the defendant bears the burden of producing the necessary

documents. To hold otherwise would, in practice, prevent the

Government from meeting its burden of proof.

In applying the Landers rule, we will look to the Fifth

Circuit’s sound definitions of “direct” and “indirect” costs. We

hold that “direct” costs are

“all variable costs that can be specifically

identified as costs of performing a contract. This

might include, for example, transportation costs

for the goods in question. Thus, variable

overhead costs that cannot easily be identified to
19

a specific contract are not direct costs. This

definition differs from the accounting term ‘direct

costs’ in that it excludes those variable costs that

cannot readily be apportioned to the contract.”

Landers, 68 F.3d at 884 n.2. “Indirect” or “fixed” costs are, on

the other hand,

“the costs incurred independently of output. For

example, rent and debt obligations are costs a

business incurs no matter how many contracts it

receives. For the most part, overhead costs are

fixed costs. The marginal increase in variable

overhead costs from a wrongfully obtained

contract is normally so de minimis that accounting

for them during sentencing would be impractical.”

Id. at 885 n.3. Put succinctly, whether a cost is direct or indirect

depends on whether it can be easily attributed to the specific

contract at issue.

Here, the District Court, after summarizing Lianidis’s

proposed additional direct costs, merely concluded without

explanation, “I do not find that that is direct cost.” (App. at 15.)

Because the Court did not engage in the foregoing analysis, we

will remand for the District Court to consider whether any

portion of the DMS overhead or Lianidis’s and her husband’s

salaries can be easily attributed to solely the SMA contracts.
20

C. The Salary Theory

Lianidis also argues on appeal that the District Court

erred in basing its calculation of “benefit received” on her and

her husband’s salaries. According to Lianidis, the proper

measurement of “benefit received” or “net value” under

§ 2C1.1(b)(2) is the gross revenue minus legitimate costs to

DMS under the SMA contracts, not the salary paid to Lianidis

or her husband. The Government disagrees. Asserting that

Lianidis’s benefit came in two forms – company profit as well

as her and her husband’s salaries – the Government contends

that the calculation of “benefit received” “should not change

depending on whether a business owner who ultimately will

receive all of the company’s profit, chooses to designate some

of that profit as salary.” (Appellee’s Br. at 18.) In response,

Lianidis argues that this “ordinary language approach” to

“benefit” is inappropriate under the Guidelines. (Appellant’s

Br. at 22.)

We must agree with Lianidis. The District Court’s use of

Lianidis’s and her husband’s salaries as a proxy for “benefit

received” runs contrary to the Guidelines commentary and our

own precedent in Cohen, 171 F.3d 796.

Example 2 of U.S.S.G. § 2C1.1, application note 3

clarifies the proper measurement of “benefit received” in cases

where bribery is used to procure contracts. The pertinent

language is as follows:
See note 7, supra.

9

21

“(2) A $150,000 contract on which $20,000 profit

was made was awarded in return for a bribe; the

value of the benefit received is $20,000.”

U.S.S.G. § 2C1.1 cmt. n.3 (2008). The example clearly directs

courts to consider the profit made on the illegally obtained

contract. Although the example does not expressly disallow the

use of salaries paid under such contracts, we must give

“controlling weight” to the note’s suggested use of contract

profit. See Stinson, 508 U.S. at 45.

Our opinion in Cohen confirms this reading of

§ 2C1.1(b)(2). In Cohen, a wholesale meat distribution

salesman was found guilty of mail fraud based on his

participation in a company bribing scheme: he received $500 a

week in cash from the company, in addition to his regular salary

paycheck, in exchange for distributing the company’s kickbacks.

171 F.3d at 799-800. Like the instant case, the parties disagreed

at sentencing over the correct interpretation of “improper

benefit” under U.S.S.G. § 2B4.1. Id. at 802. The Government 9

argued that the phrase refers to the net value gained by the

company as a result of the defendant’s kickbacks; the defendant

argued that the phrase refers to the money pocketed by the

defendant himself. Id. at 802-03. The district court agreed with

the defendant, but we reversed. Citing example 2 of U.S.S.G.

§ 2C1.1, application note 3, we held that “‘improper benefit’

refers to the net value accruing to the entity on whose behalf the

individual paid the bribe.” Id. at 803. Accordingly, we
The dissent would hold that “net benefit” includes the 10

salaries paid to Lianidis and her husband in part because a

sentencing judge would be unable to discern whether a company

owner like Lianidis was hiding company profit through the

payment of excessive salaries. We do not share this concern.

Regardless, we are not free to disregard the § 2C1.1 application

notes, which direct us to determine profit and which have

“controlling weight,” simply because we conclude that

compliance with the notes will be onerous. See Stinson, 508

22

remanded the case to the district court to re-calculate “improper

benefit” with instructions to examine the company’s alleged

profit on the $10 million worth of meat purchased from the

company as a result of the bribes. Id. at 803-04.

The instant case presents the same issue. Similar to the

salesman who distributed kickbacks to encourage customers to

purchase his company’s meat, Lianidis gave Woods illegal cash

payments to obtain FAA contracts for DMS. Lianidis contends

that, under Cohen, the “benefit received” is the gross revenue

minus costs accruing to DMS. The Government, in contrast,

argues not only that “benefit received” refers to the money that

accrued to Lianidis as an individual, but also that “benefit

received” includes Lianidis’s salary. Bound as we are by

Cohen, we cannot accept the Government’s argument. The

“benefit received” under § 2C1.1(b)(2) is not the salary paid to

Lianidis and her husband, for which she and her husband legally

worked and which the Government does not dispute was

reasonable, but rather the “net value” received by DMS itself

under the SMA contracts.10
U.S. at 45.

The Government asks that we affirm on alternate 11

grounds based on its argument that the “benefit . . . to be

received” by Lianidis under the SMS contract was between

$1,000,000 and $2,500,000. Because the District Court did not

engage in the necessary factfinding, we decline to reach this

23

This interpretation of § 2C1.1(b)(2) makessense. Basing

a calculation of “benefit received” on a salary paid under an

illegally obtain contract is both over- and under-inclusive. The

use of salary is over-inclusive because Lianidis and her husband

gave their labor, not just a bribe, in exchange for their salaries.

The use of salary is under-inclusive because Lianidis and her

husband, as owners of DMS, did not depend on their salaries to

receive benefits under the SMA contracts.

In summary, we hold that the District Court erred in

finding that Lianidis had between $1,000,000 and $2,500,000 in

“benefit received” under § 2C1.1(b)(2) based on Lianidis’s and

her husband’s salaries.

IV.

To reiterate, we hold that the proper calculation of

“benefit received” under U.S.S.G. § 2C1.1(b)(2) is the net value,

minus direct costs, accruing to the entity on whose behalf the

defendant paid the bribe. We will vacate Lianidis’s sentence

and remand to the District Court for re-sentencing in accordance

with this standard.11
issue. It is not our role as an appellate court to investigate

Lianidis’s intent, the extent to which Lianidis’s bribes were

connected to the SMS contract, or the SMS contract’s value.

See Ingersoll-Rand Financial Corp. v. Anderson, 921 F.2d 497,

504 (3d Cir. 1990) (“This court is not a factfinding tribunal.”).

24
HARDIMAN, J., dissenting.

I agree with the Majority’s adoption of the Landers test

to interpret USSG § 2C1.1(b)(2). I likewise agree that Lianidis

bore the burden of producing the evidence necessary to

determine the nature and amount of her costs that were directly

attributable to performing work procured by the bribe. Unlike

my colleagues, however, I would affirm Lianidis’s judgment of

sentence for two independent reasons. First, the District Court

did not clearly err in determining which costs incurred by DMS

were directly attributable to its ill-gotten contracts. Second,

because DMS was a closely-held business and Lianidis was its

President, the District Court did not clearly err when it held that

the portions of the salaries Lianidis and her husband paid

themselves that were attributable to their work on the ill-gotten

contracts constituted the “benefit received” from her bribes.

The District Court expressly adopted the Landers test in

calculating the net value of the benefit received, and held

Lianidis’s proposed deductions were not direct costs. The

Majority concludes that the District Court reached this

conclusion “without explanation” and “did not engage” in a

more elaborate analysis of the Landers test. But the Majority

does not endeavor to explain how the District Court’s finding of

fact, curt though it was, constituted “clear error.” See United

States v. Cohen, 171 F.3d 796, 802 (3d Cir. 1999). Lianidis

bore the burden of producing evidence to support her claim that

some costs were deductible because they were directly

attributable to the ill-gotten contracts. The record indicates that

she presented the District Court with a laundry list of business

expenses and requested a deduction for each. Several of these

expenses were classic “fixed costs,” such as rent and upkeep of
 Lianidis proffered evidence through her accountant that 1

DMS paid $2,128,207 in wages to subcontractors for work

performed on the FAA contracts at issue here. This does not

change the Guidelines range found by the District Court,

however, because the net benefit received by the company still

would have exceeded $1 million.

-2-

DMS’s office space, and Lianidis offered little or no evidence

connecting them to the FAA contracts she procured through

bribery. Absent such proof, I find no “clear error” in the District

Court’s conclusion that those costs were not deductible in

determining the “benefit received” under § 2C1.1(b)(2).1

Even if Lianidis had carried her burden of showing which

costs were directly attributable to her ill-gotten FAA contracts,

I would affirm the judgment of the District Court because it

correctly found that the $1,046,823.80 in wages Lianidis and her

husband paid themselves for work they performed on the

contracts procured through bribery were part of the “net benefit”

received as a result of her bribe. In this regard, I disagree with

the Majority’s treatment of DMS as “the entity on whose behalf

the defendant paid the bribe.” Because DMS was a closely-held

corporation and Lianidis, as its President, controlled her salary

and her husband’s salary, I would hold that Lianidis was the

beneficiary of the bribes.

In holding otherwise, the Majority relies on United States

v. Cohen, 171 F.3d 796 (3d Cir. 1999). In Cohen, an employee

obtained contracts for his employer through bribery, and we

concluded that the employer was “the entity on whose behalf”
 The Majority’s analysis of Application Note 2(2) works 2

fine in the typical case where the person who commits the

bribery does so on behalf of a corporation that employs him. I

find Application Note 2(2) factually inapposite to closely-held

companies like DMS for the reasons stated herein.

-3-

the bribe was paid. Id. at 803. This conclusion made perfect

sense because Cohen was not an owner or officer of the

company. That is decidedly not the case here. Lianidis owned

and controlled DMS, she was the beneficiary of the company’s

profits, and she determined her own and her husband’s salaries.

This control enabled Lianidis to pay herself as an employee

(salary) or as a shareholder (distribution of profits). Under the

rule established by the Majority, the owner of a closely-held

business who pays herself a handsome salary, as did Lianidis, is

subject to a lower Guidelines range than an owner who pays

herself a modest salary during the year and pays out the profits

of the company at year end, even though both owners end up

with the same amount of money. Even worse, an employee such

as Cohen—who through bribery procures a contract that results

in great financial benefit to his employer but little or no benefit

to himself—would be subject to a higher Guidelines range than

Lianidis, who chose to pay herself and her husband over

$1,000,000 generated by her own bribery.2

For the foregoing reasons, I would hold that when an

employee pays bribes to win contracts for a corporation that she

owns and controls, the employee herself is the beneficiary of the

bribe, and the amount of the benefit is equal to the sum of (1)

the portion of her salary attributable to the bribe-induced
 I recognize that salaries are not pure profit to an 3

employee because working imposes a labor cost on the

employee. As a matter of theory, the net benefit accruing to an

employee would be the amount by which her salary exceeds this

cost. In practice, however, I can discern no way for a sentencing

court to determine this cost. Moreover, I am loathe to permit a

deduction for the value of labor that one had the opportunity to

perform only through bribery. Even if such a determination

were feasible, the employee would still be required to submit

evidence demonstrating that her labor costs were directly

attributable to the ill-gotten contract. Because Lianidis has

made no effort to do so here, I view the entire portion of the

salaries she paid to herself and her husband as part of the net

benefit she received from her bribes.

 The District Court did not add these amounts together 4

in calculating the benefit received, instead treating them as

alternative measures of the benefit. This was the approach

advocated by the government, which was bound by its plea

agreement with Lianidis not to argue for an offense level higher

than 17, and as a result could not argue that the value of the

benefit received was greater than $1 million to $2.5 million.

-4-

contract and (2) the profits the corporation earned from that 3

contract (after paying her salary). Because the District Court did

not clearly err in calculating either of these amounts, I 4

respectfully dissent.