Opinion ID: 19365
Heading Depth: 3
Heading Rank: 2

Heading: Third-party misconduct

Text: 15 Hammond also argues that the district court erred by attributing to him losses due to embezzlement by third parties and that the inclusion of these losses in his total loss increased his base offense level at sentencing by one level. We review the district court's application of the Sentencing Guidelines de novo. See United States v. Dean, 59 F.3d 1479, 1494 (5th Cir. 1995). 16 Under section 2B1.1(b) of the Sentencing Guidelines, the base offense level for embezzlement is calculated based on the dollar amount of the loss caused by the embezzlement. In calculating this base offense level, the sentencing judge holds the defendant accountable for losses due to the defendant's own conduct as well as for those due to the defendant's relevant conduct. U.S.S.G. 1B1.3. A defendant's relevant conduct includes all reasonably foreseeable acts and omissions of others in furtherance of jointly undertaken criminal activity. Id. 1B1.3(a)(1)(B). Application Note Two to section 1B1.3 explains that a defendant is accountable for the conduct...of others that was both: (1) in furtherance of the jointly undertaken criminal activity; and (2) reasonably foreseeable in connection with that criminal activity. Id. 1B1.3, comment. (n.2). The Note explains further that, in applying this test, a court must first determine the scope of the criminal activity the particular defendant agreed to jointly undertake. Id. Thus, in order for Hammond to be accountable under section 1B1.3 for the losses incurred by third parties, the district court must have made findings establishing that: (1) Hammond agreed to undertake criminal activities jointly with third parties, (2) the losses caused by the third parties were within the scope of that agreement, and (3) the third parties' misconduct was reasonably foreseeable to Hammond. See United States v. Evbuomwan, 992 F.2d 70, 74 (5th Cir. 1993). These findings need not be expressly made, but the meaning of the court's findings must be clear. See United States v. Lghodaro, 967 F.2d 1028, 1030 (5th Cir. 1992). 17 The PSR attributed to Hammond the personal expenses of two employees that were charged to union American Express cards. The PSR stated starkly that [t]he total loss from the American Express credit card account, including personal expenses by two employees, is $231,502.49. The PSR did not identify the employees, nor did it specify the exact amount of loss they caused. The original PSR, however, had not included these third-party charges in its loss calculations. It was revised after consideration of the government's objection that Hammond should be held accountable for such losses. Relying on the Teamsters' findings in the Article 19 hearing, the government argued that the loss attributable to Hammond should include $41,712.49 in personal charges made by Louis Stewart, the Local's former board member, and Gerald Doerr, the Local's former business agent. The revised PSR reflected these charges but contained no finding that Hammond had agreed to a joint undertaking of criminal activity. 18 Hammond filed an objection to the revised PSR, arguing that his employees' charges should not be included in his loss calculations [a]bsent proof of an agreement between Hammond and other Union members to defraud the Union. The district court overruled Hammond's objectionand adopted the PSR's calculations, stating: 19 One of the arguments is you shouldn't be charged for some of these expenditures by others because the argument goes you couldn't have reasonably known what they were doing. You were paid a huge salary to know what they were doing and to double check it. Unlike the nice man in the bank fraud conspiracy I pointed to, you were their leader, you ran things, you knew what they were doing and you knew why they were being allowed to get along. It is perfectly reasonable to charge you with the $41,000 defalcation of the others. 20 The district court's statement clarifies that Hammond should have reasonably foreseen the misconduct of Local employees. The statement does not, however, constitute a particularized finding that Hammond agreed to participate in an embezzling scheme with Stewart and Doerr. Nor does it explain how Stewart's and Doerr's American Express charges furthered any joint undertaking of criminal activity with Hammond or were within the scope of any such agreement with him. We made it clear in United States v. Evbuomwan that such findings were absolute prerequisites to a sentence adjustment based on third-party misconduct. 992 F.2d at 74 (holding that foreseeability of third-party misconduct was irrelevant absent concurrent findings that defendant agreed to undertake criminal activity jointly with third parties and that third-party misconduct was within scope of that agreement). 21 The district court's reference to the $41,000 defalcation of the others appears to rely on the Teamsters' findings that Stewart and Doerr embezzled over $41,000 of Local funds. Although the court made references to the Teamsters' Article 19 decision during sentencing, it never stated that it was relying on any of the Teamsters' findings. Furthermore, the court never specifically identified Stewart and Doerr when discussing the $41,000 loss, much less an agreement to undertake criminal activity with Hammond. The district court's observation that Hammond was the leader who ran things, [] knew what they were doing, and [] knew why they were being allowed to get along suggests that there may have been an atmosphere of complicity among officials at the Local. While an atmosphere of complicity may be some evidence of jointly undertaken criminal activity, we ask for a specific finding of jointly undertaken activity because the mere knowledge that criminal activity is taking place is not enough for sentence enhancement under 1B1.3. Evbuomwan, 992 F.2d at 74. Therefore, we must vacate the sentence and remand the case so that the district court can comply with the requirements of the Sentencing Guidelines when resentencing Hammond.