Opinion ID: 358
Heading Depth: 2
Heading Rank: 3

Heading: The Salary Theory

Text: Lianidis also argues on appeal that the District Court erred in basing its calculation of benefit received on her and her husband's salaries. According to Lianidis, the proper measurement of benefit received or net value under § 2C1.1(b)(2) is the gross revenue minus legitimate costs to DMS under the SMA contracts, not the salary paid to Lianidis or her husband. The Government disagrees. Asserting that Lianidis's benefit came in two forms company profit as well as her and her husband's salariesthe Government contends that the calculation of benefit received should not change depending on whether a business owner who ultimately will receive all of the company's profit, chooses to designate some of that profit as salary. (Appellee's Br. at 18.) In response, Lianidis argues that this ordinary language approach to benefit is inappropriate under the Guidelines. (Appellant's Br. at 22.) We must agree with Lianidis. The District Court's use of Lianidis's and her husband's salaries as a proxy for benefit received runs contrary to the Guidelines commentary and our own precedent in Cohen, 171 F.3d 796. Example 2 of U.S.S.G. § 2C1.1, application note 3 clarifies the proper measurement of benefit received in cases where bribery is used to procure contracts. The pertinent language is as follows: (2) A $150,000 contract on which $20,000 profit was made was awarded in return for a bribe; the value of the benefit received is $20,000. U.S.S.G. § 2C1.1 cmt. n. 3 (2008). The example clearly directs courts to consider the profit made on the illegally obtained contract. Although the example does not expressly disallow the use of salaries paid under such contracts, we must give controlling weight to the note's suggested use of contract profit. See Stinson, 508 U.S. at 45, 113 S.Ct. 1913. Our opinion in Cohen confirms this reading of § 2C1.1(b)(2). In Cohen, a wholesale meat distribution salesman was found guilty of mail fraud based on his participation in a company bribing scheme: he received $500 a week in cash from the company, in addition to his regular salary paycheck, in exchange for distributing the company's kickbacks. 171 F.3d at 799-800. Like the instant case, the parties disagreed at sentencing over the correct interpretation of improper benefit under U.S.S.G. § 2B4.1. [9] Id. at 802. The Government argued that the phrase refers to the net value gained by the company as a result of the defendant's kickbacks; the defendant argued that the phrase refers to the money pocketed by the defendant himself. Id. at 802-03. The district court agreed with the defendant, but we reversed. Citing example 2 of U.S.S.G. § 2C1.1, application note 3, we held that `improper benefit' refers to the net value accruing to the entity on whose behalf the individual paid the bribe. Id. at 803. Accordingly, we remanded the case to the district court to re-calculate improper benefit with instructions to examine the company's alleged profit on the $10 million worth of meat purchased from the company as a result of the bribes. Id. at 803-04. The instant case presents the same issue. Similar to the salesman who distributed kickbacks to encourage customers to purchase his company's meat, Lianidis gave Woods illegal cash payments to obtain FAA contracts for DMS. Lianidis contends that, under Cohen, the benefit received is the gross revenue minus costs accruing to DMS. The Government, in contrast, argues not only that benefit received refers to the money that accrued to Lianidis as an individual, but also that benefit received includes Lianidis's salary. Bound as we are by Cohen, we cannot accept the Government's argument. The benefit received under § 2C1.1(b)(2) is not the salary paid to Lianidis and her husband, for which she and her husband legally worked and which the Government does not dispute was reasonable, but rather the net value received by DMS itself under the SMA contracts. [10] This interpretation of § 2C1.1(b)(2) makes sense. Basing a calculation of benefit received on a salary paid under an illegally obtain contract is both over- and under-inclusive. The use of salary is over-inclusive because Lianidis and her husband gave their labor, not just a bribe, in exchange for their salaries. The use of salary is under-inclusive because Lianidis and her husband, as owners of DMS, did not depend on their salaries to receive benefits under the SMA contracts. In summary, we hold that the District Court erred in finding that Lianidis had between $1,000,000 and $2,500,000 in benefit received under § 2C1.1(b)(2) based on Lianidis's and her husband's salaries.