Opinion ID: 3160112
Heading Depth: 3
Heading Rank: 3

Heading: Keskemety’s Sentencing Appeal

Text: The district court largely adopted the revised presentence report and overruled Keskemety’s objections, including his objections to the fraud loss. The court calculated the Guidelines range based on a 20-level increase in offense level under § 2B1.1(b)(1)(K) for $9,304,929.62 in intended fraud losses and a 6-level increase for over 250 victims. These amounts included both the California and Florida victims and their losses. The court calculated restitution the same way, including the 242 investors solicited by the California and Florida boiler rooms who could be identified by name. With a 2-level increase for the vulnerability of some of the victims and a 3-level reduction for acceptance of responsibility, the result was an offense level of 32, which produced a sentencing range of 121 to 151 months. Citing Keskemety’s military service, age, and poor health, the district court sentenced him to serve 80 months in prison and ordered him to pay $8,628,733.93 in restitution. Keskemety does not dispute that he is accountable for Guideline-calculation purposes for the amount raised from telemarketers’ solicitations in the Florida boiler room during the time he managed it, a fraud loss of $1.5 to $2 million. Nor does he dispute that he must pay restitution to the identifiable investors solicited from the Florida boiler room. He does dispute that his relevant conduct includes the fraud losses generated by the Los Angeles telemarketing office that James Lloyd managed during the same period; that the number of victims of the Florida office exceed 250; and that he owes restitution to the identifiable investors solicited by 18 UNITED STATES V. LLOYD the Los Angeles as well as the Florida operation. Kesketemy agrees that he knew that the California boiler room existed and what it was doing, but he disputes that this knowledge is enough to include the fraud losses from the California boiler room in his own relevant conduct. “[I]n the case of jointly undertaken criminal activity,” a defendant is responsible for “all reasonably foreseeable acts and omissions of others in furtherance of the jointly undertaken criminal activity, that occurred during the commission of the offense of conviction, in preparation for that offense, or in the course of attempting to avoid detection or responsibility for that offense.” U.S.S.G. § 1B1.3(a)(1)(B). The defendant is accountable for the conduct of others that was both: “‘(i) in furtherance of the jointly undertaken criminal activity; and (ii) reasonably foreseeable in connection with that criminal activity.’” United States v. Blitz, 151 F.3d 1002, 1012 (9th Cir. 1998) (quoting U.S.S.G. § 1B1.3, cmt. n.2). “[W]e have held that a district court may not automatically hold an individual defendant responsible for losses attributable to the entire conspiracy, but rather must identify the loss that fell within the scope of the defendant’s agreement with his co-conspirators and was reasonably foreseeable to the defendant.” United States v. Treadwell, 593 F.3d 990, 1002 (9th Cir. 2010). Although a district court need not “proceed item-by-item through a complete list of all losses attributed to a criminal conspiracy and . . . then make an individualized determination whether or not each item was within the scope of the defendant’s ‘joint undertaking’ and was ‘reasonably foreseeable’ to that defendant,” id. at 1002–03, the court must make particularized findings about “‘the scope of the criminal activity the particular defendant agreed to jointly undertake,’” UNITED STATES V. LLOYD 19 Blitz, 151 F.3d at 1012–13 (quoting U.S.S.G. § 1B1.3, cmt. n.2). “In determining the scope of the criminal activity that the particular defendant agreed to jointly undertake (i.e., the scope of the specific conduct and objectives embraced by the defendant’s agreement), the court may consider any explicit agreement or implicit agreement fairly inferred from the conduct of the defendant and others.” U.S.S.G. § 1B1.3, cmt. n.2. The example of jointly undertaken criminal activity in the Application Notes is a street-level drug dealer who pools resources and shares profits with four other street-level drug dealers. The first dealer is engaged in jointly undertaken criminal activity and is accountable for all the drugs he and the four other dealers sell during the time he works with them. Their sales are in furtherance of the first dealer’s jointly undertaken criminal activity and reasonably foreseeable to him. Id., cmt. n.2, Illustration (c)(6). By contrast, a dealer who sells to his own customers, in his own territory, and does not share information, other resources, or profits with other dealers who have their own territories and customers, is not engaged in jointly undertaken drug dealing with the other dealers and is not accountable for the drugs they sell. That is true even if the first dealer knows about the other dealers and who they are and knows that the drugs come from the same supplier. Similarly, even if the first street-level drug dealer knows that the person who recruited him to sell drugs also recruited the other dealers for the same purpose, the first dealer is generally accountable only for the drugs he sells. U.S.S.G. § 1B1.3, cmt. n.2, Illustration (c)(7). The dealers are doing the same kind of criminal activity at the same time, but it is not a jointly undertaken criminal activity. U.S.S.G. § 1B1.3, cmt. n.2, Illustration (c)(6). 20 UNITED STATES V. LLOYD Knowledge of “another participant’s criminal acts is not enough to hold the defendant responsible for those acts,” United States v. Studley, 47 F.3d 569, 575 (2d Cir. 1995), and knowledge of a conspiracy’s overall objectives does not make the defendant accountable for all the coconspirators’ acts furthering those objectives. In the telemarketing context, “the scope of a joint undertaking for sentencing purposes depend[s] on whether the telemarketers ‘worked together,’ ‘relied on one another to make a sale,’ attended the same sales meetings, and ‘depended on the success of . . . the operation as a whole for their financial compensation.’” Treadwell, 593 F.3d at 1005 (quoting Blitz, 151 F.3d at 1013). If two defendants, working together, design and execute a scheme to sell fraudulent stocks in a telephone boiler-room operation, each is accountable for all the fraud losses that result. The conduct of each is in furtherance of their jointly undertaken criminal activity and is reasonably foreseeable in connection with that criminal activity. U.S.S.G. § 1B1.3, cmt. n.2, Illustration (c)(2). To determine a defendant’s fraud-loss amount and resulting offense level, a district court must consider that defendant’s role in the overall scheme. See Treadwell, 593 F.3d at 1005; Studley, 47 F.3d at 576. The district court made the following statements about the scope of the criminal activity Keskemety agreed to jointly undertake: [T]hat the losses of that amount [$9,304,929.62] to those [264] victims were sustained during the period of, the relevant period of [Keskemety’s] participation in the scheme and also that they do include relevant conduct with respect to Mr. Lloyd, and they UNITED STATES V. LLOYD 21 were clearly foreseeable and therefore properly attributable to [Keskemety]. The court appeared to base this conclusion on Keskemety’s knowledge about Lloyd’s operations and Sellers’s overall objectives and goals: Although [Kesketemy] was in Florida, he was fully aware of all the major facets of the scheme, knew others who were raising money from the [Dolphin] movies, [sic] ran his own boiler room operation that employed several closers who worked for him. The district court did not identify additional facts supporting its conclusion that the solicitation and sales activities in Lloyd’s Los Angeles boiler room were within “the scope of the criminal activity [Keskemety] agreed to jointly undertake.” U.S.S.G. § 1B1.3, cmt. n.2. There is evidence that Lloyd and Keskemety were engaged in the same type of activity. Both used similar scripts and materials obtained from Craft’s American Information Strategies. But Lloyd and Keskemety did not pool customers, information, or other resources. In this respect, Keskemety was like the drug dealer who gets the drugs he sells from the same source as other dealers and knows about their work, but does not share drugs, customers, or information with them. Keskemety and Lloyd both got lead lists and scripts from Craft, but they did not share information with each other. At sentencing and on appeal, the government made a number of arguments to show that Keskemety was properly 22 UNITED STATES V. LLOYD held accountable for the fraud losses from the Los Angeles as well as the Florida boiler room. The government cited evidence that Keskemety received a commission check when Lloyd reloaded Keskemety’s investors, even after Keskemety had stopped actively soliciting investments himself. The district court properly rejected this argument because the government could not show that Keskemety “knew that Lloyd . . . [was] reloading his investors other than the fact that he continued to get paid[.]” The district court was “not convinced that there [was] sufficient evidence that [Keskemety] was aware of . . . the [reloading] conference calls.” The district court expressly rejected the statement in the revised PSR that Keskemety profited from the conference calls Lloyd used to reload investors: I don’t see any evidence in this record that would support this defendant profited from the conference calls or that he provided his investor client list to . . . Lloyd for reloading. The record shows that Keskemety did not benefit from the solicitations and sales made in Lloyd’s Los Angeles boiler room and did not share the proceeds of his boiler-room solicitations with Lloyd. The government argues that Keskemety and Lloyd were “acting in concert for the same purported goal: to raise money for Sellers.” The fact that Keskemety and Lloyd independently worked for Sellers does not mean that Keskemety and Lloyd jointly undertook their criminal activity. Similarly, the government urges that because “all [telemarketers] used the same materials to sell the deal,” all were engaged in jointly undertaken criminal activity. As Keskemety points out, using the same marketing materials UNITED STATES V. LLOYD 23 does not tie Keskemety’s compensation to Lloyd’s solicitations and sales such that the California fraud losses should be included in Keskemety’s relevant conduct. The fact that Keskemety dealt with some investors who complained and “lulled” them does not show that he did so for Lloyd’s investors or that Lloyd shared in the benefits of this work. Evidence that Keskemety eventually “went to a salary plus bonus payment plan that was equal to the commissions he would have earned,” does not tie Keskemety’s compensation to Lloyd’s solicitations and sales sufficiently to include the California fraud loses in Keskemety’s relevant conduct. The government cites evidence that Keskemety had an acting role in one of the Dolphin movies, but this does not show that he had an interest in the success of the operation as a whole that would justify including the fraud losses from the Los Angeles boiler room in his own relevant conduct. Keskemety had a very small role in the film, and there is no evidence that it contributed to making the money Lloyd raised through the California boiler room. In sum, the record support for holding Keskemety accountable for Lloyd’s similar criminal activity appears limited to Keskemety’s knowledge of Lloyd’s operations and of Sellers’s overall objectives and goals. That is not enough, given the evidence that Keskemety operated the Florida boiler room independently from Lloyd’s California boiler room and did not share information, resources, or profits. The government contends that United States v. Blitz, 151 F.3d at 1012, supports holding Keskemety accountable for the losses attributable to the Los Angeles–based boiler room. The telemarketing scheme in Blitz was different from 24 UNITED STATES V. LLOYD the scheme the record discloses here. In Blitz, the “[d]ialers and closers strongly relied on one another to make a sale,” “[a]ll employees attended sales meetings,” and the “employees did not work on a pure commission basis” and instead “received a salary,” thus making them “depend[] on the success of the [fraudulent] operation as a whole for their financial compensation.” 151 F.3d at 1013. In holding the individual telemarketers accountable for the money raised by the other telemarketers as reasonably foreseeable jointly undertaken criminal activity, the Blitz court distinguished Studley, in which the court refused to hold one telemarketer accountable for the other telemarketers’ intended fraud losses. In Studley, the defendant “did not design or develop the fraudulent scheme; did not work in any way to further the scheme outside of his own sales efforts; was paid on a pure commission basis, receiving no profits from the overall operation; did not assist other representatives with their sales, but rather competed with them for commissions; did not pool resources with other telemarketers; and had no interest in the success of the operation as a whole.” Blitz, 151 F.3d at 1013. The record shows that Keskemety is much closer to the defendant in Studley than to the telemarketers in Blitz. Keskemety did not design or develop the overall scheme; Sellers did. Lloyd joined the conspiracy to raise money for the Dolphin movies long after Keskemety. Keskemety’s efforts to further the scheme related to the boiler room he managed. He did not pool resources with Lloyd’s boiler room, and he was paid commissions based on the proceeds from the Florida boiler room’s sales. The other cases the government cites do not change the analysis. In United States v. Treadwell, 593 F.3d 990 (9th Cir. 2010), “[b]oth defendants described themselves as UNITED STATES V. LLOYD 25 ‘founders’ of the investment companies they were asking investors to support with funds,” “[b]oth defendants led conference calls with the companies’ nationwide sales force,” “[b]oth defendants traveled around the country selling their companies’ investment strategy,” “[b]oth defendants misrepresented the investments made by their companies,” and “both defendants profited from the mutual efforts of their coconspirators in selling non-existent investments.” Id. at 1005. In this case, by contrast, the district court did not make similar particularized findings of jointly undertaken criminal activity.3 Instead, the district court did not find, and the present record does not show, that the solicitations made and money obtained from Lloyd’s Los Angeles boiler room were within the scope of the criminal activity that Keskemety agreed to undertake for Sellers. We reverse the district court’s judgment on the amount of fraud loss, vacate the restitution order, and remand for resentencing. We need not and do not address Keskemety’s other arguments about substantive reasonableness or restitution.