Opinion ID: 205320
Heading Depth: 2
Heading Rank: 2

Heading: The 10-Victim Enhancement

Text: Skys challenges the 10-victim enhancement on the ground that neither the four financial institutions that avoided being defrauded into accepting his proposed multi-million-dollar transaction nor the individuals who actually were defrauded into giving him money could properly be considered victims within the meaning of § 2B1.1(b)(2). That section instructs the sentencing court, in pertinent part, as follows: (Apply the greatest) If the offense (A)(i) involved 10 or more victims . . ., increase by 2 levels; (B) involved 50 or more victims, increase by 4 levels. . . . Guidelines §§ 2B1.1(b)(2)(A)(i) and (B). The commentary to § 2B1.1 defines [v]ictim, in pertinent part, as any person [including individuals, corporations, and companies] who sustained any part of the actual loss determined under subsection (b)(1). Guidelines § 2B1.1 Application Note 1 (emphasis added). Subsection (b)(1) of § 2B1.1 is the loss table that prescribes offense-level increases depending on the amount of loss. The commentary focusing on subsection (b)(1) provides, with exceptions not relevant here, that loss is the greater of actual loss or intended loss,  Guidelines § 2B1.1 Application Note 3(A) (emphasis added). It defines [i]ntended loss as the pecuniary harm that was intended to result from the offense, id. Application Note 3(A)(ii) (emphasis added), and defines [a]ctual loss to mean[] the reasonably foreseeable pecuniary harm that resulted from the offense, id. Application Note 3(A)(i) (emphasis added). To determine which is the greater, actual loss or intended loss, the court obviously must make some determination as to the amount in each category; but it need only make a reasonable estimate of the loss, id. Application Note 3(C). In sum, while the court's loss determination under subsection (b)(1) of § 2B1.1 is to be based on the amount of intended loss if that is greater than the amount of actual loss, victims, within the meaning of subsection (b)(2), are only those persons or entities who sustained actual loss determined by the court under subsection (b)(1). See, e.g., Abiodun, 536 F.3d at 169 (error as a matter of law to include as victims individuals whose losses . . . were not included in the loss calculation). Skys, noting the above definition of [v]ictim, points out that [a]lthough the testimony adduced at trial could support a claim that the financial institutions bore some incidental, actual loss, that loss was not part of the § 2B1.1(b)(1) calculation. The purported incidental losses therefore cannot form the basis for a finding that the financial institutions were victims. . . . Moreover, if the court took lost time into account when it decided that the financial institutions were victims, it failed to determine the monetary value of this time when making its calculations of loss, as this section also requires. (Skys brief on appeal at 27 (emphases added).) We agree. The court's loss calculation under subsection (b)(1) was based on intended loss: [T]he defendant admitted he attempted to deceive financial institutions by making fraudulent misrepresentations to them that he was in possession of more than 13 million shares of Sprint-Nextel stock. He made these representations in an effort to obtain $83 million from financial institutions in the United States. Now this Court has reviewed the presentence report. I adopt the findings of fact in the report as amended here on the record as my own. Turning first to the guideline calculation, because this crime sounds in fraud, the base offense level is 7, and because the offense involved an anticipated loss exceeding 50 million but less than a hundred million, 24 levels are added. (S.Tr. 20-21 (emphases added).) The district court itself made no determination that any of the four financial institutions mentioned in the PSR suffered any actual loss. And although the court permissibly adopted the findings made in the PSR, that report, while stating that the financial institutions had used their resources for several months in evaluating Skys's proposed transaction, stated that there was no determined loss amount to the institutions. Without any determined amount of actual loss to the financial institutions, the district court inappropriately included the institutions as victims under § 2B1.1(b)(2). We agree with Skys that it is unclear how nonapplication of the two-step 10-victim increase might have affected the district court's ultimate decision on sentencing ( see Skys brief on appeal at 27-28), and we thus agree with his contention that we should remand for the district court to determine (1) whether the record affords enough information for the court to recalculate the loss amount to include incidental losses; and, if so, (2) whether the new loss calculation would support a finding that there were ten or more victims to the offense. See Abiodun, 536 F.3d at 169. (Skys brief on appeal at 28.) Similar determinations are required with respect to the individual investors in Backspace2, who plainly must have been included in the district court's conclusion that there were 10 or more victims, given that the record indicates only four targeted financial institutions. The district court included these individuals because it viewed Skys's frauds against them as relevant conduct. (S.Tr.21.) Skys concedes that [t]he record shows that several individuals gave money to Skys and thereby lost their money. (Skys brief on appeal at 25.) But he contends that their inclusion as victims of his offenses of conviction was error (1) because the individuals were not victims of the instant offense, but rather victims of uncharged conduct, and (2) because the losses they sustained were not included in the court's loss calculation under § 2B1.1(b)(1). (Skys brief on appeal at 26.) Skys's objection to consideration of the frauds perpetrated against the individuals as relevant conduct is meritless. The number-of-victims enhancement is provided for in § 2B1.1(b)'s listing of Specific Offense Characteristics of property crimes such as fraud. Guideline § 181.3, which requires the sentencing court to cake into account a defendant's Relevant Conduct in calculating his Guidelines range, provides, in pertinent part, that  specific offense characteristics . . . shall be determined on the basis of, inter alia, all acts . . . committed . . . by the defendant and  all acts . . . that were part of the same course of conduct or common scheme or plan as the offense of conviction.  Guidelines § 1B1.3(a)(1)(A) and (2) (emphases added). Indicia of a common scheme or plan include the use of the same or a similar modus operandi. Guidelines § 1B1.3 Application Note 9(A). We see no indication that the district court misinterpreted these provisions. Nor do we see any clear error in the district court's finding that Skys's defrauding of the investors was relevant conduct. The record reflects, inter alia, that Skys represented that Backspace2 and Kaiser-Himmel (into which Backspace2 was merged) were computer technology companies; that major aspects of Skys's solicitations of both the Backspace2 investors and the financial institutions included misrepresentations that Skys or his company had developed the Aedan anti-virus computer program and as a result had won lucrative contracts with major corporations; and that Skys presented both targeted groups with forged and fabricated documents. Plainly, Skys's fraudulent conduct against both groups used the same or a similar modus operandi, and his frauds against the Backspace2 investors were properly considered relevant conduct. Skys's objection on the ground that the actual losses suffered by the individuals were not determined as part of a subsection (b)(1) determination of actual loss, however, has merit. The district court implicitly foundand Skys admittedat the sentencing hearing that the individual Backspace2 investors had suffered actual losses: THE COURT: . . . [T]hey were defrauded, right? There's no question MS. HELLER [Skys's attorney]: Well, they lost money. THE COURT: There's no question they were defrauded, is there? MS. HELLER: No, your Honor, there is not. (S.Tr.11.) But, the court made no determination or estimate as to the amounts lost by the defrauded Backspace2 investors, either individually or as a group. Nor did the PSRwhich noted the $300,000 loss of a single individual, the Florida dentistmake any determination as to the amounts lost by the Backspace2 investors. Rather, given the magnitude of the $83 million intended loss, to which Skys allocuted, it appears that the PSR and the district court, for purposes of identifying the proper step on the subsection (b)(1) loss table, simply assumedno doubt correctlythat the defrauded individuals' actual losses totaled less than $83 million. But that assumption did not suffice to permit the court to consider the defrauded individuals to be victims within the meaning of § 2B1.1(b)(2), given the definition of victims as those who sustained any part of the actual loss determined under subsection (b)(1). Further, neither the PSR nor the court made any finding as to the number of Backspace2 investors defrauded by Skys. The absence of any finding as to how many such investors there were, and as to the basis for any quantification, forecloses meaningful review of the application of the 10-victim enhancement. In sum, the court did not determine the amount of actual losses suffered by the four financial institutionsor even whether they suffered actual losses at all; as to the individual Backspace2 investorswho Skys concedes suffered actual lossesthe court did not make any estimate or determination of the amount of those losses; and the court did not make any finding as to how many such actually defrauded investors there were. Accordingly, the district court's findings were insufficient to support the 10-victim enhancement under subsection (b)(2) and insufficient to permit meaningful appellate review. We remand for further proceedings to permit the court to supplement the record with such findings as are appropriate as to (a) whether and to what extent the financial institutions targeted by Skys suffered actual losses, (b) the amounts of loss suffered by individuals defrauded by Skys as part of this common scheme or plan, and (c) the total number of persons who suffered such actual losses. If the court concludes that there were fewer than 10 such victims, the court must recalculate Skys's Guidelines-recommended range of imprisonment without the victim enhancement.