Opinion ID: 1189282
Heading Depth: 1
Heading Rank: 13

Heading: Hoffecker's Sentence

Text: Finally, Hoffecker challenges his sentence of 210 months of imprisonment. We review sentences for procedural errors and for substantive reasonableness. We first must ensure that a district court did not commit a significant procedural error in arriving at its decision, such as failing to calculate (or improperly calculating) the Guidelines range, treating the Guidelines as mandatory, failing to consider the § 3553(a) factors, selecting a sentence based on clearly erroneous facts, or failing to adequately explain the chosen sentence  including an explanation for any deviation from the Guidelines range. [6] Gall v. United States, ___ U.S. ___, 128 S.Ct. 586, 597, 169 L.Ed.2d 445 (2007). We review a district court's decision under an abuse of discretion standard. Id. [A] district court will be held to have abused its discretion if its decision was based on a clearly erroneous factual conclusion or an erroneous legal conclusion. United States v. Wise, 515 F.3d 207, 217 (3d Cir. 2008). If we determine that a district court did not make any significant procedural errors, we then review the substantive reasonableness of the sentence under an abuse-of-discretion standard. Gall, 128 S.Ct. at 597. We may not reverse a district court's sentence simply because we would have imposed a different sentence. As long as a sentence falls within the broad range of possible sentences that can be considered reasonable in light of the § 3553(a) factors, we must affirm. Wise, 515 F.3d at 218. Hoffecker first contends that the District Court unconstitutionally augmented the sentence because it took into consideration facts the jury did not find. Hoffecker's base offense level was 6 pursuant to U.S.S.G. § 2F1.1(a). The District Court applied several enhancements under the Guidelines and added 31 offense levels to his base offense level, resulting in a total offense level of 37 and an advisory Guidelines range of 210 to 262 months (capped at the 240-month statutory maximum). As we explained in United States v. Grier, [o]nce a jury has found a defendant guilty of each element of an offense beyond a reasonable doubt, he has been constitutionally deprived of his liberty and may be sentenced up to the maximum sentence authorized under the United States Code without additional findings beyond a reasonable doubt. 475 F.3d 556, 561 (3d Cir.2007) (en banc). We went on in Grier to explain: Post- Booker, the punishments chosen by Congress in the United States Code determine the statutory maximum for a crime. The Code identifies the facts necessary to establish an offense and any aggravating circumstances (e.g., significant drug quantity, use of a firearm, injury to a victim) that increase the statutory maximum punishment. These facts must be established beyond a reasonable doubt. But, once these facts are found, triggering the statutory maximum, the judge may impose a sentence anywhere under that maximum without jury determinations and proof beyond a reasonable doubt. ... None of the facts relevant to enhancements or departures under the Guidelines can increase the maximum punishment to which the defendant is exposed. The Due Process Clause thus affords no right to have these facts proved beyond a reasonable doubt. Id. at 565-66 (citations omitted). Accordingly, the District Court did not violate the Constitution when it enhanced Hoffecker's base offense level by taking into account facts the jury did not find. Hoffecker next argues that the District Court erred when it applied six different enhancements that increased his offense level by 27. First, he contends that the District Court erred when it applied a 15-level enhancement to his offense level pursuant to U.S.S.G. § 2F1.1(b)(1)(P) because Hoffecker was responsible for losses totaling $14,151,596. According to the Sentencing Commission's commentary, For the purposes of subsection (b)(1), the loss need not be determined with precision. The court need only make a reasonable estimate of the loss, given the available information. This estimate, for example, may be based on the approximate number of victims and an estimate of the average loss to each victim, or on more general factors, such as the nature and duration of the fraud and the revenues generated by similar operations. The offender's gain from committing the fraud is an alternative estimate that ordinarily will underestimate the loss. U.S.S.G. § 2F1.1 cmt. 8. Hoffecker argues that the District Court's finding was mere speculation. The District Court arrived at the $14,151,596 total by combining Amitex's disbursements of $9,944,655 and Global's realization of $4,206,941 in commissions and fees. Far from being speculative, bank records supported the court's calculation of these amounts and expert testimony at the trial was a further basis for the court's conclusions. Furthermore, if anything, the $14,151,596 total was a conservative estimate as it was based on incomplete Amitex banking records and did not include losses attributed to Amitex's boiler-rooms other than Global. In these circumstances, we conclude that the District Court did not err when it applied the 15-level enhancement to Hoffecker's offense level. Second, Hoffecker argues that the District Court erred when it applied a 2-level enhancement pursuant to U.S.S.G. § 2F1.1(b)(2) because the offense involved more than minimal planning and defrauded more than one victim. The Guidelines define [m]ore than minimal planning as: more planning than is typical for commission of the offense in a simple form. `More than minimal planning' also exists if significant affirmative steps were taken to conceal the offense, other than conduct to which § 3C1.1 (Obstructing or Impeding the Administration of Justice) applies. `More than minimal planning' is deemed present in any case involving repeated acts over a period of time, unless it is clear that each instance was purely opportune. Consequently, this adjustment will apply especially frequently in property offenses. U.S.S.G. § 1B1.1 cmt. n. 1(f). The District Court found that: The testimony is ample in this case. The scheme was complex.... The defendants' efforts to create and operate it were substantial and extensive and documented through the secretly recorded conversations. The victim testimony made it clear that there were provided with statements, brochures and other indices of a legitimate scheme that were, in fact, contrived and carefully so by Mr. Hoffecker and Mr. Myers. The broad geographical scope of the victims and the nationwide boiler-rooms that were set up were demonstrated by the evidence. The location off-shore to avoid oversight was a lynch pin of the intended success and actual success of the operation. App. vol. 55 at 53-54. In these circumstances, the District Court did not err when it applied the 2-level enhancement to Hoffecker's offense level. Indeed, it is rare for us to see a case involving as much planning as there was here. Third, Hoffecker claims that the District Court erred when it applied a 2-level increase pursuant to U.S.S.G. § 2F1.1(b)(3)(B) because he violated a prior lifetime injunction in committing his offenses. As we discussed above, the injunction stated that Hoffecker: should not telemarket, sell, offer for sale, [engage in] brokering a sale, promoting a sale, or promoting the brokering of a sale, arranging for a sale, or arranging the brokering of a sale over the telephone involving precious metals when the purchase of precious metal is to be made in whole or in part with financing. App. vol. 55 at 21. The District Court found that the injunction applies on all fours on the type of investment activity that the jury found he was engaged in. [7] Id. at 54. We conclude that the District Court did not err when it applied this enhancement. Fourth, Hoffecker contends that the District Court erred by applying a 4-level enhancement pursuant to U.S.S.G. § 2F1.1(b)(6) because the offense affected a financial institution and he derived more than one million dollars in gross receipts from the offense. Hoffecker does not dispute that he derived more than one million dollars from the offense, but he claims that Amitex was not a financial institution because it was a sham company with no legitimate business. There is little case precedent addressing the issue of whether an entity which is alleged to be the vehicle of the fraud can constitute a financial institution for purposes of the Sentencing Guidelines. The Guidelines Commentary defines financial institution to include a any state or foreign bank, ... credit union,... investment company, ... and any similar entity, whether or not insured by the federal government. U.S.S.G. § 2F1.1 cmt. n. 14. Two other courts of appeals have concluded that the enhancement will apply when the fraud affected a financial institution that was itself the vehicle for the fraud. The Court of Appeals for the Seventh Circuit in United States v. Collins concluded that when it walks and talks like a financial institution, even if it is a phony one, it is ... covered by § 2F1.1(b)(6). 361 F.3d 343, 348 (7th Cir. 2004) (quoting United States v. Randy, 81 F.3d 65, 69 (7th Cir.1996) (emphasis in original)); see also United States v. Dale, 374 F.3d 321, 328 (5th Cir.2004), vacated on other grounds, 543 U.S. 1113, 125 S.Ct. 1067, 160 L.Ed.2d 1051 (2005) (agreeing with Collins decision that an illegitimate financial institution constitutes a financial institution for purposes of section 2F1.1(b)(6)). In Collins, the defendant had incorporated a sham investment company and fraudulently used it as a conduit to raise millions of dollars from victim investors. 361 F.3d at 344. On appeal, he argued that a financial institution created solely for the purpose of defrauding investors cannot be considered a victim of a scheme to defraud. Id. at 347. The court of appeals pointed out that the defendant's company was fraudulently held out to investors as a financial company that offered the opportunity to invest in high-return, zero-risk investments.... [It] utilized a network of `employees' to draw over 400 unwitting investors into the scheme, accumulating millions of dollars in receipts, all of which would eventually be siphoned out of the company by the company's president and owner. Id. at 348. Thus, the company walked and talked like the financial institution it purported to be. Id. The court found support for its decision in the Sentencing Commission's expansive interpretation of what it means to substantially jeopardize the safety and soundness of a financial institution.... [T]he Commission interprets § 2F1.1(b)(6) broadly, to cover threats to the fiscal security of a corporation as well as the loss of individual investments. Because the Sentencing Commission extends the protections of § 2F1.1(b)(6) beyond institutions to individual investors, it follows that the Commission would intend the guideline to apply to conduct that victimizes both legitimate and fraudulent corporations. In both cases investors lose their investment due to fraudulent conduct. It makes no difference to individual investors in the present case whether [the defendant] stole their money from a legitimate corporation or one created for fraudulent purposes; the important fact to the investors is that their investments will not be repaid. Id. One district court has disagreed with the Court of Appeals for the Seventh Circuit's interpretation of this enhancement. United States v. Sirotina, 318 F.Supp.2d 43, 45-48 (E.D.N.Y.2004). In Sirotina, the court reviewed the legislative history of the enhancement, which proceeded as follows: after the 1980s savings and loan crisis, Congress directed the Sentencing Commission to provide for a substantial period of incarceration for certain offenses that substantially jeopardize[] the safety and soundness of a federally insured financial institution, id. at 45 (quoting Pub.L. No. 101-73, 103 Stat. 183, 501 (1989)); in response, the Commission drafted section 2F1.1(b)(6)  known as (b)(8) in the 2000 version of the Guidelines, which the Sirotina court was using  which implemented the law in a broader form by expanding the definition of financial institutions beyond federally insured financial institutions to uninsured financial institutions. After reviewing this history, the court stated that the guideline was aimed at imposing additional punishment for conduct that results in the destruction of legitimate organizations, such as the savings and loan associations that were pilfered in the 1980s. In expanding the definition of `financial institutions,' all the Sentencing Commission did was to include a broader array of legitimate entities subject to protection. There is no basis to conclude that the Commission chose to ignore the goal of [Congress's] directive and included sham organizations within the umbrella of covered institutions, thereby placing the victim and victimizer on equal footing. Id. at 46. The court then reasoned that [w]hen a legitimate institution is brought to its knees by fraud perpetrated on it, there is a ripple effect greater than the loss to the individual investors. To apply this guideline not to the victim but to the perpetrator makes no sense. Id. The court continued: Nothing in the definition of `financial institution' in Application Note 19 suggests that it was meant to apply to an organization whose raison d'être is to perpetrate fraud. See U.S.S.G. § 2F1.1, cmt. n. 19 (2000). When the Commission intends to apply a guideline to both legitimate and fraudulent activities, it knows how to do so. For example, in U.S.S.G. § 3B1.3, the Commission drafted a guideline that imposes a two-level enhancement for someone who abuses a position of trust. In 1998, long after the definition of `financial institution' was added to the Guidelines, the application note to the abuse of trust provision was amended to clarify that the guideline applied both where a defendant actually holds a position of trust and where he or she pretends to do so. Id. § 3B1.3, cmt. n. 2 (`This adjustment also applies in a case in which the defendant provides sufficient indicia to the victim that the defendant legitimately holds a position of private or public trust when, in fact, the defendant does not.'). No similar change was made to the application notes interpreting `financial institutions' in § 2F1.1(b)(8) to reflect its application to sham entities. Certainly, had the Sentencing Commission intended for the definition of `financial institution' to encompass a fraudulent one, it would have made plain such an unorthodox application of an ordinary term. Id. at 46-47. The court then stated that: the Seventh Circuit's analysis [in Collins ] misconstrues the guideline. It is of course true that investors in both legitimate and illegitimate corporations suffer losses as a result of fraud. One can steal from a legitimate organization and cause losses to investors, or one can create a sham company and effect the same injury. The harm caused by the money lost, however, is covered by a different guideline provision, § 2F1.1(b)(1).... The threat to which § 2F1.1(b)(8) is directed is not the victim losses per se but to the separate harm caused by the destruction of a viable legitimate organization  a harm that is not necessarily congruent with investor losses. Application Note 19 addresses the damage to the entity itself, not the injury to the defrauded individuals. When viewed from the perspective of harm to the institution, the purpose of the guideline would not be served by punishing defendants for the destruction of a vehicle of fraud, which itself served no public good. Id. at 47-48. Accordingly, the court concluded that the Sentencing Commission did not intend for the 4-level enhancement to apply when a fraud affected a sham institution that was itself the vehicle for the fraud. Id. at 48. For several reasons, we disagree with the court's reasoning in Sirotina and we agree with the Courts of Appeals for the Fifth and Seventh Circuits that the 4-level enhancement applies when a fraud affects a financial institution that acted as the vehicle for the fraud. First, it does not make sense that the Congress or the Sentencing Commission would seek to punish more severely a person who controlled an institution that was legitimate than a person who had controlled a sham institution. One would think that the criminal running a completely fraudulent financial institution is more deserving of the harsher sentence. The ripple effect that the Sirotina decision acknowledges happens when an institution is brought to its knees by fraud is the same whether the institution is legitimate or a sham  in either circumstance, the damage is greater than the loss to the individual investors. In addition, the Sentencing Commission's background commentary for section 2F1.1 supports the conclusion that the definition of financial institutions includes sham institutions that hold themselves out as legitimate: This guideline is designed to apply to a wide variety of fraud cases.... Empirical analyses of pre-guidelines practice showed that the most important factors that determined sentence length were the amount of loss and whether the offense was an isolated crime of opportunity or was sophisticated or repeated. Accordingly, although they are imperfect, these are the primary factors upon which the guideline has been based. U.S.S.G. § 2F1.1 cmt. background. This comment suggests that an offender that uses a sham financial institution to commit his fraud is engaging in a sophisticated crime and thus should be subject to the enhancement. Moreover, there is nothing in the guideline to suggest that the Commission intended to limit the enhancement only to apply to legitimate financial institutions; we will not read that limitation into the language of the guideline. Finally, we think it would be difficult for courts to distinguish between a financial institution that solely functioned as a vehicle for the fraud and one that was at least partially legitimate. Accordingly, we conclude that section 2F1.1(b)(6) applies to a fraud that affected a financial institution that was itself the vehicle for the fraud. In this case, the District Court found that: Amitex clearly held itself out in its literature as a financial institution. It sought to engender customer confidence in the loan scheme.... [It] was [held out as] this separate financial institution that would in fact make the initial investment mean oh so much more and the return oh so much greater because of the ability to obtain a loan on and buy much more of the commodities than the investment would otherwise have covered. App. vol. 55 at 56. The use of the apparent financial institution framework was effective and integral to the program this jury has determined was a fraud. Id. at 63. Thus, Amitex walked and talked like a financial institution. Moreover, the evidence demonstrated that Hoffecker derived far more than one million dollars in gross receipts from the offense. In these circumstances, the District Court did not err when it applied the enhancement to increase Hoffecker's offense level by 4 levels. Fifth, Hoffecker argues that the District Court erred when it applied a 2-level enhancement to his offense level pursuant to U.S.S.G. § 3A1.1(b) because he knew or should have known that the victims of the offenses were unusually vulnerable or otherwise particularly susceptible to criminal conduct by virtue of their naiveté. The District Court found that the victims were unsophisticated and without expertise: These were folks whose naiveté was used as a basis for getting them to invest both at the beginning and again and again. And the government has proven through the reloading factor alone that is a link among many of the victims' testimony that the defendants viewed them as susceptible.... And that they lost money as a result of that exploitation of their susceptibility. App. vol. 55 at 65. Though we see no reason why the term could not be used to describe repeated legitimate solicitations, we are dealing here with a fraud case where the repeated targeting of [the] victim, a practice called `reloading,' constitutes evidence that the defendant knew the victim was particularly vulnerable to the fraud scheme. United States v. Day, 405 F.3d 1293, 1296 (11th Cir.2005). Thus, the District Court's use of the term reloading [8] was entirely appropriate. In these circumstances, we conclude that the District Court did not err when it applied the 2-level vulnerable victim enhancement to Hoffecker's offense level. Sixth, Hoffecker contends that the District Court erred by applying a 2-level enhancement because he abused a position of public or private trust ... in a manner that significantly facilitated the commission or concealment of the offense.... U.S.S.G. § 3B1.3. We apply a three-part test to determine whether a defendant occupied a position of trust: (1) whether the position allows the defendant to commit a difficult to detect wrong; (2) the degree of authority which the position vests in defendant vis-a-vis the object of the wrongful act; and (3) whether there has been reliance on the integrity of the person occupying the position. United States v. Hart, 273 F.3d 363, 376 (3d Cir. 2001) (citation and quotation marks omitted). In this case, the District Court found that Hoffecker was a highly intelligent man, highly skilled and experienced in this market, abilities which allowed him to commit a wrong that was difficult to detect. App. vol. 55 at 67. Second, Hoffecker derived a great degree of authority from his position vis-à-vis the victims of his crime. He was vested with authority to coordinate a fraud that employed intentionally misleading sales scripts and boiler-room pressure tactics to defraud investors. He also exercised the authority to hire and train the employees he needed to carry out his scheme. Third, the District Court concluded that Hoffecker had erected a shield by training and using an efficient and highly effective sales force as the vehicle of gaining the reliance of these victims. Id. at 68. The court also pointed to the brochures distributed to victims that falsely promoted Amitex's 25 years of experience and offices in London, Monaco, and Munich. The court reasoned that [a]ll of this effort to promote the viability [of the scheme] and engender victim reliance... cannot be swept aside.... Id. at 69. The court concluded that the abuse of trust is all part and parcel of that deliberate effort that the jury found in convicting the defendants of this fraud, to create a contrived but nonetheless apparently sound investment opportunity that was in fact fraudulent to the core as found by this jury. Id. at 70. In these circumstances, we conclude that the District Court did not err in applying the 2-level enhancement to Hoffecker's offense level for abusing a position of trust. Hoffecker next argues that the District Court did not give meaningful consideration to the section 3553(a) factors when it imposed his 210-month sentence of incarceration. The section 3553(a) factors that a district court must consider are: (1) the nature and circumstances of the offense and the history and characteristics of the defendant; (2) the need for the sentence imposed  (A) to reflect the seriousness of the offense, to promote respect for the law, and to provide just punishment for the offense; (B) to afford adequate deterrence to criminal conduct; (C) to protect the public from further crimes of the defendant; and (D) to provide the defendant with needed educational or vocational training, medical care, or other correctional treatment in the most effective manner; (3) the kinds of sentences available; (4) the kinds of sentence and the sentencing range established for  (A) the applicable category of offense committed by the applicable category of defendant as set forth in the guidelines ...; (5) any pertinent policy statement ... issued by the Sentencing Commission ...; (6) the need to avoid unwarranted sentence disparities among defendants with similar records who have been found guilty of similar conduct; and (7) the need to provide restitution to any victims of the offense. 18 U.S.C. § 3553(a). There is ample evidence that the District Court considered the section 3553(a) factors in imposing sentence. In particular, the court stated: Mr. Hoffecker told me today that everybody knows that commodities are risky. And the fact is, that what was sold this jury found was not risk but utter and complete ruin to anyone who gave one dollar.... The calculated life plan that Mr. Hoffecker engaged in was persistent fraud. Fraud against many, many people who lost much much money.... App. vol. 55 at 120-21. The court continued: [F]rom his own remarks as revealed in the secretly recorded conversations, Mr. Hoffecker does not have respect for the law. There are the comments regarding the fact that the Department of Justice could not pierce the veil, could not provide regulatory oversight. There are the injunctions. There's the history of litigation between Mr. Hoffecker and the regulatory agencies.... And to the extent that a sentence must promote respect for the law and provide just deterrence, I don't believe that the guideline level of 210 months is a punishment more severe than is necessary.... Nothing has deterred Hoffecker. Nothing until now. I can't take seriously the remark that he doesn't know how all of this happened. It happened because he is exceeding[ly] good at what he does or did. He was a lot smarter than a lot of the government regulators and he figured out how to dodge and weave and interstitially get a scheme that this jury found was fraudulent.... [T]he program was a scam.... And therefore, incapacitation for a considerable period of time is truly the only reasonable way for a sentencing judge to approach those issues. App. vol. 55 at 123-26. Beyond these statements, the District Court considered at remarkable length all of the section 3553(a) factors at the sentencing hearing. The transcript of the hearing, stretching over 135 pages, reflects a careful and thorough consideration of section 3553(a) in all its aspects. We find that the District Court gave meaningful consideration to the section 3553(a) factors. Accordingly, we conclude that the District Court's sentencing decisions were procedurally sound. We next consider, under an abuse of discretion standard, whether Hoffecker's sentence of 210 months was substantively reasonable. Gall, 128 S.Ct. at 597. In conducting this analysis, [t]he question is not ... what sentence we ourselves ultimately might have decided to impose on the defendant. We are not sentencing judges. Rather, what we must decide is whether the district judge imposed the sentence he or she did for reasons that are logical and consistent with the factors set forth in section 3553(a). United States v. Cooper, 437 F.3d 324, 330 (3d Cir.2006) (quoting United States v. Williams, 425 F.3d 478, 481 (7th Cir.2005)). Hoffecker contends that the sentence was unreasonable considering that he never before transgressed the boundaries of the law, committed his life in service to others, and was singled out as the person responsible for investors losing money in admittedly high risk ventures.... Appellant's Rep. Br. at 64-65. We disagree with Hoffecker that his sentence was substantively unreasonable. Taken as a whole, and given the deferential standard with which we review sentencing determinations, we find the District Court's sentence was consistent with the factors set forth in section 3553(a) and was substantively reasonable. In light of the seriousness of his offenses, the number of victims, the staggering amount of money taken, his utter disrespect for the law and refusal to acknowledge his transgressions, and the fact that nothing  including a permanent injunction  deterred him from operating the scam, we cannot conclude that the District Court abused its discretion when it imposed a sentence at the bottom of the advisory Guidelines range. Surely it was necessary in the words of section 3553(a) to separate Hoffecker from society for a long period to protect the public from further crimes of the defendant. Hoffecker's attempt to characterize his victims' losses as nothing more than the result of their lack of success in admittedly high risk ventures is really quite extraordinary as their losses were the product of his scam rather than of the operation of the marketplace. Moreover, it is clear that the District Court took Hoffecker's arguments for leniency into account when it fashioned his sentence. Although we do not deem a within-Guidelines sentence presumptively reasonable, it is more likely to be reasonable than one that lies outside the advisory guidelines range. Cooper, 437 F.3d at 331. This sentence was, if anything, on the low side of the range of reasonable sentences.