Opinion ID: 4574496
Heading Depth: 2
Heading Rank: 1

Heading: The Adjustment for Abuse of Trust

Text: Capps first argues that the District Court erred in applying the abuse of trust adjustment to his money laundering conviction. That adjustment, set forth in Chapter 3 of the Sentencing Guidelines, tells a sentencing court that, “[i]f the defendant abused a position of public or private trust, or used a special skill, in a manner that significantly facilitated the commission or concealment of the offense, increase [the offense level] by 2 levels.” U.S.S.G. § 3B1.3. Importantly, 6 however, Note 2(c) of § 2S1.1, the guideline applicable to money laundering convictions, directs that adjustments contained in Chapter 3 are to be applied based on the money laundering behavior alone, not on the underlying offense from which the laundered funds were derived. In other words, the abuse of a position of trust has to be manifested in how the money is laundered, not in how the money was gained. According to Capps, the District Court plainly erred because, in applying the adjustment, it relied on his position at Vanguard and his conduct related to the conspiracy to commit mail fraud, not on any position he had or anything he did in laundering the stolen funds. We agree.
To explain the error, we need to walk through the guidelines calculations for both Capps’s mail fraud and money laundering convictions, 2 as the guidelines require a sentencing court to group those convictions by choosing the highest offense level calculation after calculating the level for each offense separately. See U.S.S.G. § 2S1.1 cmt. n.6 (“In a case in which the defendant is convicted of a count of laundering funds and a count for the underlying offense from which the laundered funds were derived, the counts shall be grouped pursuant to subsection (c) of §3D1.2[.]”); U.S.S.G. § 3D1.3(a) 2 For ease of reference, we speak in terms of Capps’s “mail fraud” conviction, recognizing that the conviction was, more precisely, for conspiracy to commit mail fraud. The distinction has no bearing on our analysis. See U.S.S.G. § 2X1.1(a) (providing that the offense level for conspiracy is the same as the offense level for the substantive offense). 7 (“In the case of counts grouped together pursuant to §3D1.2(a)- (c), the offense level applicable to a Group is the offense level … for the most serious of the counts comprising the Group, i.e., the highest offense level of the counts in the Group.”). Mail fraud has a base offense level of 7. U.S.S.G. § 2B1.1(a)(1). 16 levels must be added for a loss between $1,500,000 and $3,500,000. U.S.S.G. § 2B1.1(b)(1)(I). Assuming for the moment the applicability of the gross receipts adjustment, an additional 2 levels are added. 3 U.S.S.G. § 2B1.1(b)(17)(A). And a further 2-level abuse of trust adjustment applies because Capps’s position of trust at Vanguard significantly facilitated his mail fraud offense. U.S.S.G. § 3B1.3. Capps agrees that, had the PSR calculated the guidelines range for his mail fraud conviction, the adjustment for abuse of a position of trust would have applied to that offense level. The total adjusted offense level, then (before any reduction for acceptance of responsibility), is 27. The base offense level for money laundering is the “offense level for the underlying offense from which the laundered funds were derived[.]” U.S.S.G. § 2S1.1(a)(1). Here, that is mail fraud, so the base offense level is, again, 7. U.S.S.G. § 2B1.1(a)(1). As with the mail fraud calculation, 16 levels must be added for a loss between $1,500,000 and $3,500,000, U.S.S.G. § 2B1.1(b)(1)(I), along with an additional 2 levels under the gross receipts adjustment, U.S.S.G. § 2B1.1(b)(17)(A), assuming it applies. For the 3 Capps challenges the application of the gross receipts adjustment, and we address that challenge infra. 8 money laundering calculation, an additional 2 levels are added because Capps was convicted under 18 U.S.C.§ 1956.4 U.S.S.G. § 2S1.1(b)(2). That adds up to an adjusted offense level of 27, the same as the mail fraud offense level. But the PSR also added the 2-level adjustment for abuse of a position of trust, pursuant to U.S.S.G. § 3B1.3, bringing the total offense level (before any reduction for acceptance of responsibility) to 29. Consequently, the offense level for the grouped counts became that higher number, and his guidelines range was correspondingly increased. That’s the problem. If the abuse of trust adjustment is inapplicable, the range is wrong. In determining whether to apply the abuse of trust adjustment, we use a two-step inquiry. United States v. Douglas, 885 F.3d 124, 130 (3d Cir. 2018) (en banc). “First, we must determine whether the defendant actually occupied a position of public or private trust.” Id. at 130. At that step, we “ask whether the defendant had the power to make decisions substantially free from supervision based on (1) a fiduciary or fiduciary-like relationship, or (2) an authoritative status that 4 Section 1956 of Title 18 is the money laundering statute that Capps pled guilty to violating. Specifically, he pled to violating 18 U.S.C. § 1956(a)(1)(B)(i), which provides, in pertinent part, that whoever launders funds “knowing that the transaction is designed in whole or in part … to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity” shall face various penalties. The guideline for money laundering instructs that 2 levels should be added in calculating the guidelines range for defendants convicted under that statute. U.S.S.G. § 2S1.1(b)(2). 9 would lead his actions or judgment to be presumptively accepted.” Id. at 133. “[I]f we conclude that the defendant did hold such a position,” we reach the second step, where the question is “whether the defendant abused this position in a manner that significantly facilitated his crime.” Id. at 130. (citation and internal quotation marks omitted). In answering that question, “courts should consider, among other things, whether the defendant’s position allowed him to commit a difficult-to-detect wrong, and the defendant’s authority vis-à- vis the object of the wrongful act. Courts may also consider whether the victim relied on the defendant’s integrity, such that the victim became a more susceptible target for the defendant.” Id. at 134. Capps argues that the guidelines calculation contained in the PSR and adopted by the District Court violated Commentary Note 2(c) to the money laundering guideline, § 2S1.1, by incorrectly basing the application of the abuse of trust adjustment on his conduct in the underlying offense, the mail fraud. He insists that he had no position of trust with respect to the money laundering and so could not have abused it. On this record, he is correct. Supporting the abuse of trust adjustment, the PSR said: As a supervisor at Vanguard, the defendant stole the passwords of subordinates and used those passwords to access the Vanguard system used to issue checks and submit requests to have checks issued on certain dormant accounts, all in an effort to conceal his conduct. Capps then deleted and attempted to delete the record transactions in Vanguard’s system related to the 10 falsely submitted requests and improper approvals for checks issued by Vanguard on certain dormant accounts. The defendant abused a position of public or private trust in a manner that significantly facilitated the commission or concealment of the offense; therefore, the offense level is increased by two levels, pursuant to USSG §3B1.3. (Presentence Report at 7.) That justification for the adjustment would make perfect sense, if the count at issue were the mail fraud conviction. But it isn’t. The PSR did not calculate the mail fraud guidelines range, though it should have.5 It only calculated the range for the money laundering. According to the indictment, the factual basis for the money laundering charge is that Capps caused two checks to be issued to him by a co-conspirator, knowing that the property involved in those financial transactions represented the proceeds of the mail fraud. 6 His position at Vanguard was indeed “a position of public or private trust” that he abused to commit the fraud, but it was irrelevant to the 5 The government does not contest that the PSR should have calculated the guidelines for both money laundering and mail fraud. (See Answering Br. at 10 (“Much of the analysis presented in the appellant’s brief is correct: With the fraud and money laundering counts grouped, the court must determine the offense level applicable to each type of offense, and then apply to the group the higher of the two offense levels.”).) 6 The money laundering was charged in two counts, one for each check. 11 commission or concealment of the money laundering as charged in the indictment. The government responds that the money laundering could not have happened but for the fact that Capps was able to direct the disbursement of funds from Vanguard. This is perfectly true, but beside the point. It is always the case with money laundering that the money came from some unlawful activity. By definition, that is a feature of money laundering. There is always an underlying crime. In Capps’s case, the only abuse of a position of trust occurred in the fraud that generated the money to be laundered. The point of Commentary Note 2(c) is to keep the adjustments applicable to the criminal activity that generated the money from being applied to the conceptually distinct money laundering offense. In relying on the flawed PSR, the District Court failed to heed that separation, just as the government’s argument invites us to make the same mistake now. The government believes that United States v. Sokolow, 91 F.3d 396 (3d Cir. 1996), supports its position. The defendant there, the president and CEO of a corporation, collected money in premiums from insurance clients through a fraudulent scheme. Id. at 400. He converted some of those premiums for his personal benefit and laundered them through a number of bank and brokerage accounts, real property, and mortgages. Id. at 400-01. On appeal, we affirmed the application of the 2-level abuse of trust adjustment because “[i]t was within [the defendant’s] authority to withdraw funds from [the corporation] and that authority was necessary for the commission of the money laundering offenses.” Id. at 413. But Sokolow predates the adoption of U.S.S.G. § 2S1.1’s Commentary Note 2(c) in 2001, so we had no occasion to 12 consider the question we do today. The separation between the underlying offense and the money laundering was simply not at issue. It is at issue here, though, and the District Court erred in applying the 2-level abuse of trust adjustment to the money laundering offense calculation. Given the text of Commentary Note 2(c), we think the error is plain. 7 7 The other circuits that have addressed Commentary Note 2(c) have all explained that it dictates that any Chapter 3 adjustment must be based on the defendant’s conduct in relation to the money laundering charge, not the underlying offense. See United States v. Salgado, 745 F.3d 1135, 1138 (11th Cir. 2014) ( “[The] application note’s meaning for this case is straightforward: When the district court calculated [the defendant’s] offense level under § 2S1.1(a)(1), it could base a role adjustment on his conduct in the money laundering conspiracy but not on his conduct in the underlying drug conspiracy.”); United States v. Rushton, 738 F.3d 854, 859 (7th Cir. 2013) (“[T]he 2-level enhancement for abuse of trust … is permissible in a money laundering case—but only when the abuse of trust relates to the money laundering itself rather than to the underling offense (the offense that generated the money that the defendant laundered).”); United States v. Keck, 643 F.3d 789, 800-01 (10th Cir. 2011) (holding that a defendant’s conduct in an underlying drug conspiracy cannot be used to apply Chapter 3 adjustments); United States v. Byors, 586 F.3d 222, 226-28 (2d Cir. 2009) (implicitly adopting the same interpretation); United States v. Anderson, 526 F.3d 319, 328 (6th Cir. 2008) (defendant ineligible for offense level reduction to money laundering guideline calculation based on her minimal role in the underlying drug conspiracy); United States 13 Without application of the abuse of trust adjustment to the offense level for the money laundering count, the offense level (again, before any reduction for acceptance of responsibility) for both the money laundering conduct and the mail fraud conduct is 27, not 29 as the District Court concluded. Thus, the sentencing range is different and, in keeping with the guidance of the Supreme Court and the record here, resentencing is in order. See Molina-Martinez, 136 S. Ct. at 1346 (“In most cases a defendant who has shown that the district court mistakenly deemed applicable an incorrect, higher Guidelines range has demonstrated a reasonable probability of a different outcome.”); Rosales-Mireles, 138 S. Ct. at 1908 (explaining that a “reasonable citizen” would “bear a rightly diminished view of the judicial process and its integrity.”) (quotation marks and citation omitted). 8