Opinion ID: 777545
Heading Depth: 2
Heading Rank: 3

Heading: Grouping of the Fraud and Money Laundering Counts

Text: 59 All four appellants contend that the district court should have grouped their fraud and money laundering counts for sentencing purposes, pursuant to Section 3D1.2(b) 8 of the Guidelines. Section 3D1.1(a) of the Guidelines establishes a three-step procedure for determining the proper offense level in a case, like this one, that involves multiple counts of conviction. First, counts that are closely related must be grouped in accordance with the provisions of § 3D1.2. Each group is then assigned an offense level, based on the count with the highest offense level within that group. See U.S.S.G. § 3D1.3. Finally, if there is more than one group, § 3D1.4 provides that the combined offense level is derived by determining units for each group and adding offense level increases for each group to the offense level for the group with the highest specified offense level. 60 At sentencing, the district court declined to group appellants' wire fraud and money laundering counts under § 3D1.2(b), concluding that the fraud and money laundering counts involved different victims. Based on this determination, the district court added two offense-level points for the money laundering group to the offense-level calculation for the grouped fraud counts for each appellant under § 3D1.4. We review the district court's interpretation and application of the Guidelines de novo and its factual determinations underlying the application of the Guidelines for clear error. United States v. Ahmad, 202 F.3d 588, 590 (2d Cir.2000). 61 Appellants argue that the wire fraud and money laundering offenses in this case were so tightly interwoven that the victims of the two offenses were the same. As a general rule, [t]he `victims' of fraud counts are those persons who have lost money or property as a direct result of the fraud, while [t]he `victim' of money laundering is ... ordinarily society at large. United States v. Napoli, 179 F.3d 1, 7 (2d Cir.1999). Indeed, we have held that most cases involving fraud and money laundering do not warrant grouping as they generally involve different harms to different victims. United States v. Sabbeth, 262 F.3d 207, 221 (2d Cir.2001), reconsideration denied, 277 F.3d 94 (2d Cir. 2002); see also United States v. Kalust, 249 F.3d 106, 109-10 (2d Cir.) (finding no distinction between concealment money laundering and promotion money laundering under 18 U.S.C. § 1956(a)(1)(A)(i) for purposes of grouping), cert. denied sub nom. Percan v. United States, ___ U.S. ___, 122 S.Ct. 213, 151 L.Ed.2d 152 (2001). 62 In Napoli however, we left open the possibility of grouping fraud and money laundering if they are `so highly interwoven... that the [] victim' of each is the same. Sabbeth, 262 F.3d at 221 (quoting Napoli, 179 F.3d at 8 n. 3) (first alteration in original). Appellants argue that their case falls into the exception posited in Napoli on the basis that their money laundering and fraud offenses involved the same victims because the proceeds of the fraud were used to compensate the fraud's perpetrators and to pay for expenses related to the scheme. The use of criminally derived proceeds to perpetuate a fraud does not, however, lead inexorably to the conclusion that the victims of the fraud are the same as the victims of the money laundering. See Kalust, 249 F.3d at 109; see also United States v. Green, 225 F.3d 955, 960 (8th Cir.2000) (Reinvestment [of proceeds] itself does not make the victim of money laundering the same as the victim of fraud.), cert. denied, 531 U.S. 1127, 121 S.Ct. 884, 148 L.Ed.2d 793 (2001). 63 In declining to group the counts at sentencing, the district court made the following findings: [I]t cannot be said that the money laundering and fraud were so highly interwoven that the counts should be grouped. This was not a case where, for example, the money laundering was part of a Ponzi scheme to keep the scheme afloat. There were no individual investors who were the direct victims of the money laundering, while it was the individual investors who were the victims of the fraud counts. The victim of the money laundering was society because the crime was disguised. Thus, as in Napoli, there were different harms to different victims and grouping is not appropriate. 64 We agree with the district court's conclusion that the victims of the fraud and money laundering offenses in this case were distinct — the individual investors suffered from appellants' fraud, while the public as a whole was the victim of appellants' attempts to conceal their relationship to one another and the source of their illegally obtained funds. See U.S.S.G. § 3D1.2, cmt. n. 2 (1998) (explaining that victim, as used in § 3D1.2(a) and (b) is not intended to include indirect or secondary victims). For example, when asked about the source of the funds obtained from NuFocus, Szur lied to the NASD, claiming that the funds were compensation for consulting services. This impeded the discovery of the true source of the funds and delayed the revelation of the fraudulent scheme to the public's detriment. Accordingly, we affirm the district court's ruling with respect to the grouping issue. 9