Opinion ID: 1033239
Heading Depth: 3
Heading Rank: 2

Heading: Hearing, Objections and Discovery

Text: When reviewing a district court‟s interpretation of the sentencing guidelines we exercise plenary review, but when reviewing a district court‟s application of the guidelines to the facts, we utilize an abuse of discretion deferential standard of review. See Aquino, 555 F.3d at 127 n.5. Kluger argues that the District Court denied him a presentence evidentiary hearing at which he could have addressed the foreseeability issue with respect to the scope of the agreement among the conspirators through direct testimony and cross-examination.21 At sentencing, Kluger explained that he did not stipulate to the total amount of “gain” because he expected to address that issue at the hearing that he contemplated the Court would conduct prior to his sentencing. Kluger also argues that the Court failed to resolve his objections to the presentence report and also erred in not ordering discovery regarding information the government provided to the probation officer. In particular, Kluger objected to the presentence report‟s characterization of the agreement among the conspirators and the portrayal of Kluger as the initiator of the conspiracy. Under U.S.S.G. § 6A1.3(a) (emphasis added): 21 We review a refusal to grant such an evidentiary hearing for abuse of discretion. See United States v. Cantero, 995 F.2d 1407, 1412 (7th Cir. 1993) (citations omitted). The government put Robinson, the “middleman,” on notice that he might need to testify at Kluger‟s sentencing hearing, but the District Court determined that this testimony was not necessary because the Court did not conduct an evidentiary hearing. 25 When any factor important to the sentencing determination is reasonably in dispute, the parties shall be given an adequate opportunity to present information to the court regarding that factor. In resolving any dispute concerning a factor important to the sentencing determination, the court may consider relevant information without regard to its admissibility under the rules of evidence applicable at trial, provided that the information has sufficient indicia of reliability to support its probable accuracy. U.S.S.G. § 6A1.3(b) provides that, “[t]he court shall resolve disputed sentencing factors at a sentencing hearing in accordance with Rule 32(i), Fed. R. Crim. P.” Rule 32(i) (emphasis added) provides that at sentencing, the court: (A) must verify that the defendant and the defendant‟s attorney have read and discussed the presentence report and any addendum to the report; ... (C) must allow the parties‟ attorneys to comment on the probation officer‟s determinations and other matters relating to an appropriate sentence; and ... (2) The court may permit the parties to introduce evidence on the objections. . . . (3) At sentencing, the court: 26 ... (B) must--for any disputed portion of the presentence report or other controverted matter--rule on the dispute or determine that a ruling is unnecessary either because the matter will not affect sentencing, or because the court will not consider the matter in sentencing . . . .
The District Court held an extensive sentencing hearing for Kluger in which the parties addressed the Court. The sentencing guidelines and Federal Rules of Criminal Procedure do not require that a district court conduct an evidentiary hearing in addition to a sentencing hearing at which the parties can be heard. Thus, “[a]n evidentiary hearing need not be afforded on demand because there is no „right‟ to a hearing.” United States v. Cantero, 995 F.2d 1407, 1413 (7th Cir. 1993) (citations omitted); see also United States v. Real-Hernandez, 90 F.3d 356, 362 (9th Cir. 1996) (“There is no general right to an evidentiary hearing at sentencing, and a district court has discretion to determine whether to hold such a hearing.”) (internal citations omitted). In Cantero the Court of Appeals for the Seventh Circuit held that the district court did not abuse its discretion in denying the defendant in a drug conspiracy case an evidentiary hearing to contest the sentencing enhancement for his supervisory role in the conspiracy, even though the defendant argued that the determination of his role in the conspiracy raised a question of fact and that he needed to cross-examine his coconspirators so that the court could determine how to characterize his role. In this regard, the defendant was given a 27 copy of the presentence report in advance of sentencing and the government and he submitted written memoranda on the issue. See Cantero, 995 F.2d at 1413. The district court, after considering the materials submitted on the issue, held that the defendant was not a leader or organizer of the criminal activity but rather was a manager or supervisor of the activity. In United States v. Collado, a case involving two brothers serving as heroin suppliers in a broader drug conspiracy, we remanded the case for resentencing because the district court failed to make any factual findings beyond those in the presentence report concerning the scope of their involvement. 975 F.2d 985 (3d Cir. 1992). We emphasized that when a district court is applying § 1B1.3 “a searching and individualized inquiry into the circumstances surrounding each defendant‟s involvement in the conspiracy is critical to ensure that the defendant‟s sentence accurately reflects his or her role.” Id. at 995. But in Collado the record was unclear as to when the brothers initially became involved in the conspiracy, and therefore the record did not clearly establish the date after which the brothers could be held accountable for the proceeds of the conspiracy. See id. at 996. There is, however, no uncertainty as to the time during which Kluger participated in the conspiracy in this case because the conspiracy could not have been carried out prior to his involvement inasmuch as he served as the source of the information that made the execution of the scheme possible. In United States v. Rennert, building on Collado, we clarified that “[a]lthough we required individualized inquiry [in Collado], we did not impose an immutable requirement that the district court hold extensive hearings to make explicit, 28 particularized findings as to the exact date on which each defendant committed to the conspiracy or the precise contours of each conspirator‟s agreement.” 374 F.3d 206, 214 (3d Cir. 2004), vacated in part on other grounds, Miller v. United States, 544 U.S. 958, 125 S.Ct. 1744 (2005). Consequently, we agree with the Court of Appeals for the Seventh Circuit “that § 6A1.3 of the Guidelines requires the district court to provide a procedure — but not necessarily an evidentiary hearing — in which the parties may argue contested sentencing issues.” Cantero, 995 F.2d at 1413 (citation omitted); see also Fed. R. Crim. P. 32(i)(2) (“The court may permit the parties to introduce evidence on the objections.”) (emphasis added). Here, the extensive sentencing hearing before the District Court gave Kluger a sufficient opportunity to present his case. In holding Kluger responsible for the profits from the insider trading under the plain language of § 2B1.4 in which foreseeability as Kluger raises the issue in this case is not an issue, we agree with the District Court that there was no need for an evidentiary hearing. Kluger does not dispute the total amount gained by Bauer on which the District Court made its calculations and he does not deny that his tips to Bauer via Robinson made the gains possible. No matter what the terms of the agreement among the conspirators, those terms would not have altered the fact that Kluger provided the information that reached Bauer via Robinson and made it possible for Bauer to make substantial gains by trading on that information. Furthermore, even if the foreseeability to Kluger of the extent of Bauer‟s trades had been an issue in Kluger‟s sentencing, as he claims it should have been, as the District Court explained, Kluger could not have “made one of his regular trips north to 29 pick up his cash proceeds, [and then] return[ed] back resting comfortably in the idea that nobody else had a dollar more than he did of gain.” App. at 63.
In a May 25, 2012 letter to the District Court, Kluger complained that the presentence report did not adequately address his objections. As noted above, Kluger objected to the characterization of the scheme, which he alleged was based on an underlying agreement regarding the division and targeted range of profits, thereby altering the calculation of the gains attributable to him and explaining the absence of a loss stipulation in the plea agreement. Kluger also objected to the presentence report‟s description of him as the initiator of the scheme, a characterization that he would have attempted to rebut in testimony at a presentence evidentiary hearing. The presentence report read: In the summer of 1994, Kluger, who was then in law school at NYU and working as a summer associate at Cravath [,Swaine & Moore], contacted Robinson and told him „I‟ve got something,‟ meaning that he had access to inside information through his employment at the law firm. Kluger explained that he could learn of merger activity before the information was public through his work at the firm. At Kluger‟s request, Robinson agreed to help find individuals willing to buy and sell stocks based on the inside information Kluger provided. Robinson 30 approached Bauer, a professional stock trader and Robinson‟s friend, who agreed to trade based on the inside information provided by Kluger. PSR ¶ 34. Kluger, however, proposed the following paragraph: Kluger and Robinson remained friends after their brief stint working together at the Manhattan real estate company, REQuest, and would speak on the phone from time to time. In the summer of 1994, Kluger was in law school at NYU and working as a summer associate at Cravath, Swaine & Moore. In several telephone conversations in which Kluger and Robinson discussed each other‟s work and current lives, Robinson became aware that Kluger was working on potentially high profile [merger and acquisition] deals and that he was learning of merger activity before the information became public through his work at the firm. Robinson then told Kluger about his friend Garrett Bauer, a professional stock trader and Robinson‟s friend. Robinson approached Bauer who agreed to trade based on the inside information provided by Kluger. Kluger, Bauer and Robinson agreed that profits from any inside information provided by Kluger would be split equally among the three of them. From the beginning of the scheme, Bauer did not honor his agreement to split profits equally among the three participants and, instead, kept the majority of the profits for himself. 31 Kluger was unaware that Bauer was trading over and above the amounts discussed between Kluger and Robinson. PSR ¶ 57. The Probation Department, however, is not required to resolve all objections. Following Fed. R. Crim. P. 32(g), the probation officer “submit[ted] to the court and to the parties the presentence report and an addendum containing any unresolved objections, the grounds for those objections, and the probation officer‟s comments on them.” Fed. R. Crim. P. 32(g). In considering the presentence report the District Court complied with the applicable federal rules of criminal procedure. Fed. R. Crim. P. 32(i)(3)(B) provides that the sentencing court “must--for any disputed portion of the presentence report or other controverted matter--rule on the dispute or determine that a ruling is unnecessary either because the matter will not affect sentencing, or because the court will not consider the matter in sentencing . . . .” The District Court made its disposition with respect to the dispute concerning the existence of a limiting agreement among the conspirators by refusing to grant a hearing on the grounds that Kluger could not prove anything at the hearing that would impact on the Court‟s determination of his sentence. The Court reached its conclusion as to how to proceed by relying on the plain language of § 2B1.4 and by taking into account its concern over the potential for unreliable testimony regarding the agreement. At the sentencing hearing, the Court explained that it was “fully satisfied that the background note to the insider trading . . . guideline[] fully covers Mr. Bauer‟s 32 activities and Mr. Kluger‟s activities. And that the gain attributable to Bauer‟s activities is attributable to Kluger in terms of the exposure to the guideline,” regardless of the existence of an agreement. App. at 63. Clearly, in Kluger‟s proposed changes to the presentence report quoted above he attempts to describe his role in the scheme in more benign terms than the report described his role. Thus, Kluger suggests that the presentence report should have recited that “Robinson became aware,” of Kluger‟s access to inside information whereas the report states that Kluger directly contacted Robinson and informed him that he had access to inside information. The presentence report also states that Kluger asked Robinson to locate an individual capable of executing the trades on their behalf whereas Kluger claims that Robinson told him about Bauer and approached Bauer on his own. Kluger concedes that he did not object to the presentence report at sentencing but attributes his failure to object to his expectation that the Court would resolve factual disputes at the evidentiary hearing that he contemplated that the Court would hold before imposing sentence. Kluger argues that even though the District Court did not directly address his alleged initiating role in the scheme, the Court could not have failed to consider it. Kluger, however, is in no position to make assumptions as to what the District Court did or did not take into consideration in rendering its sentence. Ultimately, Kluger was the source of the information that Bauer used to make his trades; the identification of the originator of the underlying scheme was of minimal significance in view of the circumstance that Kluger 33 was a full participant in the conspiracy, and therefore an inquiry into the originator of the scheme did not merit an individualized sentencing hearing.
Kluger claims that there are materials, including recorded conversations and emails, that would prove that there was an agreement among the three conspirators regarding the limits of the insider-trading scheme.22 He maintains that the government violated his due process rights by not supplying to him all of the materials that it provided to the probation office which he argues functions as “an independent arm of the court,” not as “an arm of the government.” Appellant‟s br. at 57. But Fed. R. Crim. P. 32, which deals with presentence reports does not provide for such broad discovery with respect to presentence materials. Rather, Rule 32(e)(2), requires that the probation officer give the report itself to the defendant, the defendant‟s counsel, and a government attorney at least 35 days prior to sentencing unless the defendant waives the time requirement. Rule 32(f) provides that the parties have 14 days to object in writing and to provide 22 In particular, Kluger maintains that he should have received tapes/transcripts of Robinson‟s post-arrest conversations with Bauer. We believe he is referring to the conversations between Robinson and Bauer following Robinson‟s decision to cooperate with the government. The presentence report provides a detailed overview of those conversations. We are not aware of any communications between Bauer and Robinson after their arrests on the charges involved in this case. 34 those objections to the probation officer and to the opposing party. The probation officer then may meet with the parties to review their objections. See Rule 32(f)(3). At least seven days before sentencing, the probation officer must provide the report and related objections to the court and parties.23 See Rule 32(g). Thus, Rule 32 did not require that Kluger be given the discovery that he sought. In any event, even if the rules provided that such discovery materials should have been supplied, Kluger does nothing more than speculate with respect to the existence of such materials, especially in the absence of any indication that the government failed to comply with the rule‟s disclosure requirements that should be made. The government counters that it already disclosed all of the information, such as the transcripts and copies of the calls that Robinson covertly recorded, and, at sentencing, the District Court accepted the 23 The only additional disclosure occurs at sentencing when the court “must give to the defendant and an attorney for the government a written summary of--or summarize in camera--any information excluded from the presentence report under Rule 32(d)(3) on which the court will rely in sentencing, and give them a reasonable opportunity to comment on that information.” Fed. R. Crim. P. 32(i). Rule 32(d)(3) requires the presentence report to exclude: “(A) any diagnoses that, if disclosed, might seriously disrupt a rehabilitation program; (B) any sources of information obtained upon a promise of confidentiality; and (C) any other information that, if disclosed, might result in physical or other harm to the defendant or others.” 35 government‟s assertion.24