Opinion ID: 771493
Heading Depth: 2
Heading Rank: 1

Heading: Grouping Under U.S.S.G. 3D1.2

Text: 4 Syrax contends that the district court erred by failing to group his fraud and money laundering counts as a single group under U.S.S.G. 3D1.2(b) or (d). The district court's refusal to group offenses under the guidelines is subject to de novo review. See United States v. Hanley, 190 F.3d 1017, 1033 (9th Cir. 1999). Section 3D1.2 provides in part that: 5 All counts involving substantially the same harm shall be grouped together into a single Group. Counts involve substantially the same harm within the meaning of this rule: 6 . . . 7 (b) When counts involve the same victim and two or more acts or transactions connected by a common criminal objective or constituting part of a common scheme or plan. 8 . . . 9 (d) When the offense level is determined largely on the basis of the total amount of harm or loss, the quantity of a substance involved, or some other mea sure of aggregate harm, or if the offense behavior is ongoing or continuous in nature and the offense guideline is written to cover such behavior. 10 U.S.S.G. 3D1.2. 11 Syrax's 97-month sentence consisted of 60 months each on counts 3 (mail fraud) and 4 (wire fraud), and 97 months each on count 25 (interstate transportation of property obtained by fraud) and the information (money laundering), all to be served concurrently. The district court declined to group Syrax's fraud and money laundering counts for sentencing, relying on United States v. Taylor, 984 F.2d 298 (9th Cir. 1993). 12 Syrax's contention that his fraud and money laundering counts should have been grouped together under 3D1.2(d) is foreclosed by Taylor, which held that grouping under section 3D1.2(d) is not appropriate when the guidelines measure harm differently. Id. at 303. In Taylor, we noted that the offense level under the fraud guideline, 2F1.1, was determined based on the loss attributable to the scheme, while the money laundering guideline, 2S1.2, looked at the value of the funds attributable to the scheme. See id. Because the guidelines for wire fraud and money laundering measure harm differently, we held that the district court erred in grouping a dismissed wire fraud count with a monetary transaction count under 3D1.2(d). Id.; see also Hanley, 190 F.3d at 1033-34 (reaffirming the holding in Taylor and rejecting the defendants' argument that their wire fraud and money laundering counts should have been grouped under 3D1.2(d)). 13 Syrax points out that the defendant in Taylor was charged with a violation of 18 U.S.C. 1957, for laundering money for personal use, rather than the so-called promotion prong of the money laundering statute, 18 U.S.C. 1956, under which Syrax was convicted. 2 While this is true, the holding in Taylor was based on the fact that the guidelines for wire fraud and money laundering measure harm differently. See Taylor, 984 F.2d at 303. The guideline for 1956, U.S.S.G. 2S1.1, measures harm in the same manner as the guideline for 1957, 2S1.2 -that is, the offense level is increased based on the value of the funds. The rationale underlying Taylor thus applies whether the defendant is charged underS 1956 or 1957. 14 In United States v. Rose, 20 F.3d 367 (9th Cir. 1994), in which the defendants were charged under 1956(a)(1)(A)(i), we distinguished Taylor in concluding that the district court did not err in grouping the defendant's fraud and money laundering counts. Rose drew no distinction between the promotion and the personal use money laundering statutes; instead, we distinguished Taylor based on the fact that, unlike Rose, there was complete identity between the laundered and the fraudulently obtained funds. See id. at 371-72. Thus, Rose does not control here. 15 Syrax further argues that the fraud and money laundering counts should have been grouped under 3D1.2(b), rather than (d), a question that was not addressed in Taylor, Rose, or Hanley. Subsection (d) looks to, inter alia , whether the offense level is determined on the basis of the total amount of harm or loss. By contrast, subsection (b) requires grouping when the counts involve the same victim and two or more acts or transactions connected by a common criminal objective or constituting part of a common scheme or plan. U.S.S.G. 3D1.2(b). Syrax relies on the fact that he reinvested $1,779,980.95 of the fraudulently-obtained money into the scheme, in arguing that the fraud and the money laundering activities were so closely connected that the victims of the fraud were also the victims of the money laundering. 16 In order to group under 3D1.2(b), however, Syrax's offenses must both (1) involve the same victim and (2) be closely connected. See U.S.S.G. 3D1.2(b); United States v. Lopez, 104 F.3d 1149, 1150-51 (9th Cir. 1997) (discussing the two requirements of 3D1.2(b)). In Lopez , we concluded that the defendant's conspiracy and money laundering convictions satisfied the first requirement because both crimes were victimless and the  `societal interests that are harmed are closely related.'  See Lopez, 104 F.3d at 1150 (quoting U.S.S.G. 3D1.2, cmt. n.2). 17 By contrast, Syrax's offenses are not both victimless crimes. While society is the victim of his money laundering activity, see id. at 1150-51, his conviction for fraud involved specific victims. Syrax's offenses therefore do not involve the same victim and so were properly not grouped under 3D1.2(b). The finding that his fraud and money laundering offenses should not be grouped under 3D1.2(b) is also in accord with decisions of the Second, Eighth, and Tenth Circuits. In United States v. Napoli, 179 F.3d 1 (2d Cir. 1999), cert. denied, 120 S. Ct. 1176 (2000), for example, the Second Circuit addressed whether a defendant's convictions for fraud and for money laundering under 1956(a)(1)(B) should be grouped together under 3D1.2(b). Reasoning that [t]he `victims' of fraud counts are those persons who have lost money or property as a direct result of the fraud,  but that [t]he `victim' of money laundering is, by contrast, ordinarily society at large, the court concluded that the defendant's fraud and money laundering counts involved different harms to different victims and so could not be grouped under 3D1.2(b). Id. at 7-8; see also United States v. O'Kane, 155 F.3d 969, 972 (8th Cir. 1998) (concluding that the district court erred in grouping the defendant's fraud and money laundering offenses under 3D1.2(b) because [f]raud clearly harms the defrauded . . . [b]ut money laundering harms society's interest in discovering and deterring criminal conduct); United States v. Kunzman, 54 F.3d 1522, 1531 (10th Cir. 1995) (affirming the district court's decision not to group fraud and money laundering counts under 3D1.2(b) because the victim of fraud is the defrauded individual,  while the victim of money laundering is society in general (citing United States v. Johnson, 971 F.2d 562 (10th Cir. 1992))). 18 Syrax's reliance on out-of-circuit cases that permit grouping of fraud and money laundering offenses is unavailing. These cases are inapposite because they involved grouping under 3D1.2(d), not (b), and we have already held in Taylor that money laundering and fraud are not to be grouped under 3D1.2(d). See United States v. Wilson , 98 F.3d 281, 282-84(7th Cir. 1996) (concluding that for a conviction under 1956(a)(1)(B)(i), it was error not to group fraud and money laundering counts under 3D1.2(d) because the money laundering in this case served to perpetuate the very scheme that produced the laundered funds); United States v. Mullens, 65 F.3d 1560, 1564 (11th Cir. 1995) (affirming the district court's decision to group fraud and money laundering counts under 3D1.2(d) for a defendant convicted of a ponzi scheme, reasoning that the offenses were integral cogs in continuing the scheme. Without the fraud there would have been no funds to launder.); United States v. Leonard, 61 F.3d 1181, 1185-86 (5th Cir. 1995) (affirming the district court's decision to group offenses because the money laundering and fraud constituted part of the same continuing common criminal endeavor). 3 19 Syrax further argues that, because the laundering of funds was an integral part of his fraud scheme, the fraud victims were also victims of the money laundering. We reject this argument. Although the presentence report did state that Syrax reinvested $1,779,980.95 of the fraudulently obtained money into the scheme, it also stated that he actually bilked victims out of over $4.5 million. 20 Thus, unlike Rose, there is not a complete identity between Syrax's laundered funds and his fraudulently obtained funds. See Rose, 20 F.3d at 372. 21 Under Taylor, the district court properly refused to group Syrax's offenses under 3D1.2(d). Further, we reject his argument that the offenses should have been grouped under 3D1.2(b) because his fraud and money laundering offenses did not involve the same victims. The district court did not err in refusing to group Syrax's fraud and money laundering offenses in a single group.