Opinion ID: 765751
Heading Depth: 2
Heading Rank: 2

Heading: Sentencing Under Section 2T3.1 (Smuggling Guidelines)

Text: 49 As noted above, after sentencing Nathan and Lander under the fraud guidelines, the District Court held that even if the defendants did not stipulate to fraud, it would have reached the same sentence had it used the smuggling guidelines, which were the guidelines to which the defendants had stipulated. See Electrodyne II , 28 F. Supp. 2d at 272. Because a court may properly sentence in the alternative, we must analyze the propriety of the sentence under section 2T3.1. See United States v. Bermingham, 855 F.2d 925, 934-35 (2d Cir. 1988) (noting that a court may still affirm a sentence despite an alleged error in the application of the Guidelines when it is clear that the sentencing Judge would have imposed the same sentence under the alternative Guidelines scheme proposed); see also United States v. Barnes, 185 F.3d 869 No. 98-50418, (9th Cir. June 30, 1999) (reviewing each of two alternative Guidelines grounds on which District Court sentenced defendant); United States v. Gonzalez-Lopez, 911 F.2d 542 (11th Cir. 1990) (considering both of District Court's alternative grounds for sentencing and reversing on both grounds). 50 Having invoked the smuggling guidelines, the District Court found that an upward departure under section 5K2.0 was appropriate based on the seriousness of the offenses. Electrodyne II, 28 F. Supp. 2d at 266. The Court relied on Application Note 2 to section 2T3.1, which states: 51 Particular attention should be given to those items for which entry is prohibited, limited, or restricted. Especially when such items are harmful or protective quotas are in effect, the duties evaded on such items may not adequately reflect the harm to society or protected industries resulting from their importation. In such instances, an upward departure may be warranted. 52 Id. The Court concluded that the duties evaded by the defendants did not adequately measure the harm they caused. Specifically, the Court found that four aspects of the defendants' conduct rendered this case an atypical smuggling case: the fact that the defendants defrauded the government for their own financial gain; the fact that the actions of the defendants compromised and may in the future compromise the national security of the United States; the fact that they violated the AECA; and the fact that they violated the Buy American Act, which permitted them to gain an unfair financial advantage over those companies that complied with the statute. The Court appears to have used the fraud guidelines as a framework to help it determine how large an upward departure to impose, since it reached a total offense level of 18 under the smuggling guidelines, just as it did under the fraud guidelines. 53 Nathan and Lander object to the upward departure for several reasons. First, the Court earlier had found that this case was not atypical under section 2T3.1, and so should not have departed upwards in light of the Commentary to section 5K2.0, which requires that a case be sufficiently atypical before a court may depart upward. Second, the Court's four bases for an upward departure--that Nathan and Lander defrauded the government for their own financial gain, that they violated the BAA, that they violated the AECA and the regulations promulgated there under, and most importantly that their actions threatened the operational integrity of the United States military--were either not factually supported by the record or could not be said to render their offense atypical. Third, even if one of the four bases was a proper basis on which to upwardly depart, they argue that we must remand for resentencing under Koon v. United States, 518 U.S. 81, 98-99 (1996), since the other bases were improper. 54 The government responds that the Court properly relied on Application Note 2 to section 2T3.1 to conclude that acts like those committed by the defendant warranted an upward departure. The government stresses that the components at issue here were, contrary to the defendants' assertions, prohibited, limited, or restricted under 19 U.S.C. § 1304(d), which says that items that do not bear proper markings may not be brought into United States commerce. It submits that, because of the prohibited nature of the components, Application Note 2 suggests that an upward departure may be warranted. Nevertheless, the government also acknowledges that it never alleged that the defendants' actions posed any threat to national security. Section 5K2.0 states: 55 Under 18 U.S.C. § 3553(b), the sentencing court may impose a sentence outside the range established by the applicable guidelines, if the court finds that there exists an aggravating or mitigating circumstance of a kind, or to a degree, not adequately taken into consideration by the Sentencing Commission in formulating the guidelines that should result in a sentence different from that described. 56 Id. The Commentary to this section requires that the case be sufficiently atypical before a departure is warranted. As a preliminary matter, we note an anomaly in this case. In discussing whether the case was sufficiently atypical to take it out of the smuggling guidelines under the terms of Appendix A, the Court found that, because the smuggling guidelines intended to target offenses involving revenue collection or trade regulation, Nathan's case was not atypical. 4 It stated, Accordingly, the instant matter is not atypical as to the Guideline section ordinarily applicable to the offense of conviction. Electrodyne II, 28 F. Supp. 2d at 245. For the Court to later find that the case is sufficiently atypical to warrant an upward departure is enigmatic. We believe that the Court's later decision can be reconciled on the theory that it thought the case was mechanically similar enough to a typical smuggling case for it to fall within the smuggling guidelines, but was so much more offensive than most smuggling cases that an upward departure was warranted. 57 At all events, the District Court decided that the case was sufficiently atypical that it would depart upward from the base offense level. We must examine the bases for the District Court's departure under section 5K2.0 under an abuse of discretion standard. See Koon, 581 U.S. at 97-98. The dominant basis for the District Court's upward departure was its conviction that the defendants had threatened the national security of the United States. At the sentencing hearing, the District Court stated: 58 I find the position [that there was no threat to national security or the safety of any member of the military] laughable. . . . Maybe [there was no threat to national security] on a strategic basis, but for the ships' crews, the troops in place, for the pilots, it certainly did. I think [the government's] position flies in the face of logic and I can't and will not accept it. 59 Sent. Tr. at 14. In its opinion, the Court wrote, The actions of the Individual Defendant potentially could have compromised, and in the future may compromise, the operational safety of the military and/or the operational readiness and effectiveness of communications, weapons and radar systems. Electrodyne II, 28 F. Supp. 2d at 268. It repeated this theme several more times. See, e.g., id. at 262-63, 269, 270. 60 Despite the Court's oft-expressed concern that the defendants' actions posed a current or future threat to national security, its reference to the fact that the defendants shared information with the Ukraine that was not generally known, and its determination that this harm was not adequately captured by the monetary duties evaded by the defendants, there is no support in the record for the District Court's concerns. In fact, the record is uniformly and explicitly to the contrary. The government stipulated that: (a) there were no defects in the products imported by the defendants; (b) no confidential information was disclosed to Russia or the Ukraine; and (c) the defendants' acts posed no threat to national security or the safety of the military. 61 More importantly, the government consulted each affected government agency before it agreed to accept the defendants' plea agreements, all of which assented. In addition, the government conceded in its sentencing memorandum that the defendants had taken affirmative action to prevent classified material from being disclosed. It also noted that some of the components imported by the defendants represented a flow of technology into, rather than out of, the United States. In sum, the District Court clearly erred to the extent that it found that the defendants' conduct created a threat to national security and it abused its discretion in departing upward on the ground that the defendants' actions threatened national security, since there is no support in the record for that Conclusion. 62 Nor was the District Court correct in using the presence of fraud as a reason to find the instant case atypical. The Court stated, The focus and intent of the conduct underlying the crimes . . . were to criminally and fraudulently deviate from the contract provisions entered into with the United States Government . . . . Electrodyne II, 28 F. Supp. 2d at 268. Conceiving of the smuggling as a way to further that fraud, the Court treated the fraud as something that made the defendants' smuggling case atypical. 63 But this use of fraud is problematic. Smuggling by definition involves some element of fraud, and often occurs to further fraud. The statute to which Lander pled guilty, 18 U.S.C. § 542, states: 64 Whoever enters or introduces . . . into the commerce of the United States any imported merchandise by means of any fraudulent or false invoice, declaration . . . or by means of any false statement . . . or by means of any false or fraudulent practice . . . shall be fined for each offense under this title or imprisoned not more than two years, or both. 65 Id. Likewise, 18 U.S.C. § 545, to which Nathan pled guilty, states: 66 Whoever knowingly and willfully, with intent to defraud the United States . . . passes . . . any false, forged, or fraudulent invoice . . . or [w]hoever fraudulently or knowingly imports or brings into the United States, any merchandise contrary to law . . . [s]hall be fined under this title . . . . 67 Id. A number of courts have noted that the intent to defraud element of that statute should be construed as meaning intent to avoid and defeat the United States customs laws . . . rather than the narrower construction `intent to deprive the United States of revenue.'  See United States v. Robinson, 147 F.3d 851, 853 (9th Cir. 1998), cert. denied, 119 S. Ct. 1249 (1999); see also United States v. Borello, 766 F.2d 46, 51 (2d Cir. 1985). Given that fraud is a critical part of the crime of smuggling, the mere fact that Nathan and Lander engaged in fraud as part of their smuggling violation does not render the smuggling atypical. 68 Third, the District Court's upward departure was in part based on the defendants' violations of the AECA and the ITAR, violations that the Court found had been established by a preponderance of the evidence. See Electrodyne II, 28 F. Supp. 2d at 269-70. However, as with fraud, the fact that the defendants' smuggling scheme also violated the AECA does not render their smuggling atypical. The AECA provides that no defense articles or defense services . . . may be exported or imported without a license for such export or import . . . . 22 U.S.C.§ 2778(b)(2). The smuggling offenses to which Nathan and Lander pled guilty included this self-same conduct: knowingly and willfully bringing certain merchandise into the United States contrary to law or introducing such merchandise into the commerce of the United States by means of a false or fraudulent practice. A violation of the AECA is arguably the archetypal smuggling offense. 69 To the extent that there is anything about a violation of the AECA that makes such act an atypical smuggling offense, it is the fact that the AECA applies only to defense articles and services, to which national security concerns may attach. However, as discussed supra, any violations of national security in this case are chimerical. Therefore, the District Court abused its discretion to the extent that it relied on the presence of an AECA violation to find this case to be an atypical smuggling case. 70 Finally, the District Court stated that the defendants' violations of the Buy American Act created additional harm that was not accounted for under the smuggling guidelines, thereby rendering the case atypical. See Electrodyne II, 28 F. Supp. 2d at 270. The Court reasoned that Congress enacted the BAA to protect American labor and industry, that the defendants received an unfair commercial advantage by using cheaper manufacturers abroad, and that they profited financially from this advantage. The BAA is a civil statute, and the penalty for its violation is simply that a contractor shall not be awarded such contracts for three years after the violation is detected. See 41 U.S.C. § 10b. This facet of the sentencing decision appears to be only a small factor in the upward departure, given the Court's emphasis on the threat to national security, as well as fraud. At all events, to the extent that the BAA, standing alone, would be a ground for upward departure, it could not begin to support one of the magnitude applied here. 71 Because the District Court improperly determined that national security concerns, fraud, and an AECA violation rendered this case an atypical smuggling case, we will vacate Nathan's and Lander's sentences under the smuggling guidelines and remand for further sentencing proceedings. The District Court may consider on remand whether their violations of the BAA caused harm to society or protected industries to an extent not captured by the smuggling guidelines and, if so, whether this factor justifies an upward departure.