Opinion ID: 2816319
Heading Depth: 2
Heading Rank: 2

Heading: The District Court’s Guidelines

Text: Determinations Fountain, Ishmael, and Johnson each challenge the District Court’s calculation of the applicable Guidelines range for their sentence. Where an objection is preserved at sentencing, we exercise plenary review of a district court’s interpretation of the Guidelines but review its factual findings for clear error. United States v. Grier, 475 F.3d 556, 570 (3d Cir. 2007) (en banc). If the facts underlying a Guidelines determination are not in dispute, “but the issue is whether the agreed-upon set of facts fit within the enhancement requirements,” we review the District Court’s application of the enhancement for clear error. United States v. Fish, 731 F.3d 277, 279 (3d Cir. 2013). Finally, where an objection is not preserved at sentencing, we review that challenge for plain error. United States v. Couch, 291 F.3d 251, 252-53 (3d Cir. 2002); United States v. Knight, 266 F.3d 203, 206 (3d Cir. 2001).
5 Because we conclude the evidence supports Fountain’s conviction for the completed offense, we need not consider the Government’s alternative contention that the evidence supported a conviction of attempted extortion. 13
Fountain and Johnson both argue that the District Court erred in applying a two-level enhancement for sophisticated means to their sentences under U.S.S.G. § 2B1.1 because there was nothing particularly sophisticated about the means employed in their schemes. Their arguments are unpersuasive. While the Application Notes to § 2B1.1 suggest that the use of “fictitious entities, corporate shells, or offshore financial accounts” would constitute sophisticated means,6 an offense can easily warrant the sophisticated means enhancement absent the use of those tactics. See United States v. Jennings, 711 F.3d 1144, 1147 (9th Cir. 2013) 6 See U.S.S.G. § 2B1.1 cmt. n.9(B) (“‘[S]ophisticated means’ means especially complex or especially intricate offense conduct pertaining to the execution or concealment of an offense. For example, in a telemarketing scheme, locating the main office of the scheme in one jurisdiction but locating soliciting operations in another jurisdiction ordinarily indicates sophisticated means. Conduct such as hiding assets or transactions, or both, through the use of fictitious entities, corporate shells, or offshore financial accounts also ordinarily indicates sophisticated means.”); id. § 2T1.1 cmt. n.5 (explaining similar factors for applying the sophisticated means enhancement for tax fraud offenses); see also id. § 2T1.1 cmt. background (“Although tax offenses always involve some planning, unusually sophisticated efforts to conceal the offense decrease the likelihood of detection and therefore warrant an additional sanction for deterrence purposes.”). 14 (upholding a sophisticated means enhancement in the absence of corporate shells or offshore accounts, and explaining that “the list contained in the application note is not exhaustive,” and that “the enhancement properly applies to conduct less sophisticated than the list articulated in the application note”); see also Fish, 731 F.3d at 280 (holding that the existence of one of the facts listed in the application note is not necessary to a determination that an offense employed sophisticated means). Determining whether a defendant employed sophisticated means can involve considering factors like the duration of a scheme, the number of participants, the use of multiple accounts, and efforts to avoid detection. See Fish, 731 F.3d at 280. Ultimately, a sophisticated means enhancement is appropriate where a defendant’s conduct “shows a greater level of planning or concealment than a typical fraud of its kind.” United States v. Fumo, 655 F.3d 288, 315 (3d Cir. 2011) (quoting United States v. Landwer, 640 F.3d 769, 771 (7th Cir. 2011)) (internal quotation mark omitted). The enhancement was clearly appropriate here. Fountain identified IRS programs that would pay substantial sums and then designed a scheme to maximize her payout while avoiding detection. In finding that she employed sophisticated means, the District Court pointed specifically to Fountain’s use of inside knowledge of the IRS’s enforcement thresholds, including that TETR claims under $1,500 would not be flagged for review. Fountain took steps to conceal her identity even from others involved in the scheme, employing third parties to recruit claimants and collect their fees so she could avoid any contact with them. Additionally, Fountain developed an enforcement mechanism to ensure her fees were 15 paid: submitting amended returns that tipped off the IRS when claimants were reluctant to pay her. Fountain’s choice to use the IRS as her enforcer further decreased the likelihood that claimants would report her, as they would fear prosecution themselves. In short, Fountain endowed the scheme with a sophisticated knowledge of IRS practices— including some not known to the public—and an elaborate plan for manipulating hundreds of people. For his part, Johnson engaged recruiters to collect additional claimants and instituted additional practices to avoid detection. He routed refunds into accounts that would not raise alarms, like the business bank accounts of various relatives and the estate and personal accounts of his recentlydeceased grandmother, and he used different business and personal addresses for the delivery and cashing of checks. Moreover, he electronically filed claims in such a manner that they could be traced only to a third party’s wireless network, rather than his own. Overall, the sophisticated means employed by Fountain, Johnson, and their co-conspirators (including Ishmael) allowed the scheme to grow to an extraordinary size while remaining undetected for years. Their cunning and willingness to abuse Fountain’s position with the IRS clearly set this scheme apart from a “typical fraud of its kind.” See Fumo, 655 F.3d at 315. Their conduct led the District Judge to remark, at Johnson’s sentencing, that “this was as sophisticated a tax fraud scheme as this Judge has seen in 22 years.” Gov’t’s Supplemental App. 74. In light of these findings, the application of sophisticated means enhancements to Fountain and Ishmael was not clear error.
16 In the District Court, Ishmael challenged the sophisticated means enhancement to his sentence on the same grounds that Fountain and Johnson did: that the scheme, as a whole, did not involve sophisticated means. Ishmael does not raise that argument on appeal. Instead, he argues that the District Court committed procedural error under U.S.S.G. § 1B1.3(a)(1)(B). He points to the District Court’s statement during his sentencing hearing that the fraud scheme “was only possible because of the sophisticated means that, to be sure, were made possible by Ms. Fountain, not Mr. Ishmael.” Ishmael’s App. 151. Ishmael contends that this statement indicates that the District Court attributed Fountain’s sophisticated means to Ishmael and that it erred by doing so without finding that Fountain’s use of those means was reasonably foreseeable to Ishmael. He asks us to remand for resentencing so the District Court can make this finding.7 Ishmael argues that our decision in United States v. Collado, 975 F.2d 985 (3d Cir. 1992), compels us to remand for the District Court to make a finding of reasonable 7 Because Ishmael did not raise this objection in the District Court, the Government argues that we should apply plain error review. Ishmael counters that our decision in United States v. Flores-Mejia, 759 F.3d 253 (3d Cir. 2014) (en banc), does not apply retroactively, and, accordingly, that we should review for an abuse of discretion. We conclude that Ishmael’s challenge fails even if we do review for an abuse of discretion, and we thus need not decide whether his challenge should be subject to plain error review. 17 foreseeability.8 To the contrary, Collado indicates that we may conduct our own review of the record to see if it supports a finding of reasonable foreseeability. See Collado, 975 F.2d at 997. If we are convinced that the attribution of Fountain’s sophisticated means is firmly supported by the record, there is “no reason to remand this case only to have the district court reach the same sentencing decision.” United States v. Duliga, 204 F.3d 97, 101 n.2 (3d Cir. 2000). Here, it is clear that the sophisticated means Fountain employed were reasonably foreseeable to Ishmael. Fountain and Ishmael lived together and had children together. The evidence established that Ishmael knew about the IRS’s $1,500 threshold for flagging TETR claims for review, and that he knew that Fountain would reverse claimants’ refunds if they did not pay her fee. Moreover, the District Court found that Ishmael was “the engine that drove [the] conspiracy from one that might have involved a handful of phony tax refunds to one that involved hundreds at a cost of over $2 million to the United States treasury,” and that Ishmael’s leadership “succeeded in spreading [the] scheme like wild fire.” Ishmael’s App. 163. Thus, we are convinced that a finding of reasonable foreseeability is firmly supported 8 Although Collado dealt with the inclusion of drug quantities dealt by co-conspirators in a defendant’s base offense level calculation, also known as “accomplice attribution,” rather than a sophisticated means enhancement, the same “reasonably foreseeable” standard applies to each inquiry, as both are guided by § 1B1.3. See United States v. Anobah, 734 F.3d 733, 739 (7th Cir. 2013); United States v. Crosgrove, 637 F.3d 646, 666 (6th Cir. 2011). 18 by the record, and we affirm the District Court’s application of the sophisticated means enhancement to Ishmael.
Minor Fountain argues that the District Court erred in applying a two-level enhancement for using a minor to commit her offenses under U.S.S.G. § 3B1.4. The evidence established, however, that Fountain used her minor daughter to collect payments that had been given to Witherspoon on at least one occasion. Fountain counters that her use of her daughter cannot support the enhancement because by the time she had her daughter collect payments, the crime was complete, as Fountain had already filed the false returns.9 But the focus of a court’s inquiry under § 3B1.4 “is on the actions and intent of the defendant. Whether the minor himself engaged in any criminal actions, whether the minor intended to assist in the adult’s criminal activity, or whether the minor even knew that the adult was involved in criminal activity are factors irrelevant to application of the § 3B1.4 enhancement.” United States v. Gaskin, 364 F.3d 438, 46465 (2d Cir. 2004) (collecting cases). Moreover, the crime continued after the filing of returns, as collecting payment, which occurred after filing, was the whole point of the scheme. Further, the evidence indicates that Fountain and her co-conspirators continued filing false returns after Fountain 9 The Government notes that Fountain did not raise this argument in the District Court, and argues that it should be reviewed for plain error as a result. Because we conclude that the District Court committed no error in applying the enhancement, we need not decide which standard applies. 19 had her daughter pick up payments from Witherspoon. Thus, the imposition of this enhancement was not clear error.
Enhancement Johnson argues that the District Court erred in applying a four-level enhancement under U.S.S.G. § 3B1.1(a) because the record lacks evidence that Johnson was a leader or organizer. To support this enhancement, the evidence must show that Johnson exercised some degree of control over at least one other person involved in the offense. United States v. Helbling, 209 F.3d 226, 243-44 (3d Cir. 2000). The evidence indicated that Johnson recruited his father and a friend named Andre Bruce to participate in the AOTC and FTHBC schemes, and that Johnson’s father eventually became a recruiter for Johnson and would withdraw money for him after the IRS issued refunds. Johnson also directed Bruce to destroy evidence while Johnson was on pre-trial release. Thus, the District Court did not clearly err in imposing this enhancement.
Johnson also argues that in calculating the loss attributable to him, the District Court improperly included losses that overstate his criminal conduct and were not reasonably foreseeable to him. It is well-settled that a sentencing court need only make a “reasonable estimate” of loss that is based on the available evidence in the record, United States v. Tupone, 442 F.3d 145, 156 (3d Cir. 2006), and it is clear the District Court did so here. 20 Johnson’s arguments fail upon a review of the Government’s loss methodology, which the District Court approved when it adopted the most conservative of the Government’s proposed loss calculations. Johnson argues that the District Court erred by attributing all fraudulent tax returns to him, but the District Court did not do so. In fact, the Government did not ask the District Judge to do so. Along the same lines, Johnson argues he was improperly held responsible for returns filed from Fountain’s IRS computer and for claims filed before he joined the conspiracy or after he left. The Government, however, excluded those amounts from its calculations. Further, Johnson argues that Bruce, not he, was responsible for returns filed from Bruce’s IP address. But the District Court and the jury already rejected this argument based on Bruce’s trial testimony. Thus, attributing those amounts to Johnson at sentencing was not clear error. Finally, Johnson argues that the District Court improperly attributed to Johnson losses from the TETR and FTHBC conspiracies that were not reasonably foreseeable to him. In light of Johnson’s role in recruiting claimants and allowing the use of his address and bank account in the TETR scheme and his leadership in the FTHBC scheme, the District Judge’s inclusion of those amounts as reasonably foreseeable losses was not clear error. In sum, the District Court arrived at a reasonable estimate of the loss amount attributable to Johnson by adopting the Government’s conservative calculation. As such, we will not disturb the District Court’s findings on appeal.