Court Opinion

ID: 992891
Source: CourtListenerOpinion
Date Created: 2013-07-03 23:59:21.354471+00
Date Added: 2024-06-11T15:37:40.069030
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

UNITED STATES OF AMERICA,
Plaintiff-Appellant,

v.                                                                 No. 95-5964

JOHN THOMAS GILLESPIE,
Defendant-Appellee.

UNITED STATES OF AMERICA,
Plaintiff-Appellant,

v.                                                                 No. 95-5965

WILLIAM HEALY HINES,
Defendant-Appellee.

Appeals from the United States District Court
for the Eastern District of Virginia, at Alexandria.
T. S. Ellis, III, District Judge.
(CR-95-178-A)

Argued: July 11, 1997

Decided: August 25, 1997

Before NIEMEYER, MICHAEL, and MOTZ, Circuit Judges.

_________________________________________________________________

Vacated and remanded by unpublished per curiam opinion.

_________________________________________________________________

COUNSEL

ARGUED: Thomas Higgins McQuillan, Assistant United States
Attorney, Alexandria, Virginia, for Appellant. Cheryl Ann Maier,
KING, PAGANO & HARRISON, Washington, D.C., for Appellee
Gillespie; Seymour Glanzer, DICKSTEIN, SHAPIRO, MORIN &
OSHINSKY, L.L.P., Washington, D.C., for Appellee Hines. ON
BRIEF: Helen F. Fahey, United States Attorney, Alexandria, Vir-
ginia, for Appellant. Steven Schaars, KING, PAGANO & HARRI-
SON, Washington, D.C., for Appellee Gillespie. David B. Killalea,
DICKSTEIN, SHAPIRO, MORIN & OSHINSKY, L.L.P., Washing-
ton, D.C., for Appellee Hines.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

PER CURIAM:

John Gillespie and William Hines worked as supervisors in a
freight forwarding company, Daniel F. Young, Inc. (DFY), that
engaged in a fraudulent billing scheme involving a Department of
Defense foreign aid program, the Foreign Military Sales Financing
Program. See 22 U.S.C.A. §§ 2763-2764 (West 1990 & Supp. 1997).
DFY transferred Department of Defense payments to Multi-Modal
Freight Systems, Inc., a company operated by a third co-conspirator,
Sylvan Friedman, who would distribute to Gillespie and Hines their
shares of the fraudulent gains. At first, Friedman directly forwarded
the defendants' shares to them in cash or paid personal bills on their
behalf. When this arrangement grew burdensome, the parties decided
to route their illegal profits through a German bank instead. Within
ten months, $715,000 of fraudulently-obtained funds flowed through
this German account. Gillespie and Hines became unhappy with the
delays involved with this method, so Friedman then began cycling the
payments through a domestic shell corporation he controlled. The
total government loss from the fraud scheme exceeded $2.5 million.

After an investigation, the Government charged Gillespie and
Hines with twenty-eight counts of money laundering in violation of

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18 U.S.C.A. § 1956(a)(2)(A) (West Supp. 1997), ten counts of sub-
mitting false claims in violation of 18 U.S.C.A.§ 287 (West Supp.
1997), and one count of conspiracy to defraud the Government, to
engage in wire fraud and money laundering (based on the transactions
with the German bank), and to submit false claims in violation of 18
U.S.C.A. § 371 (West 1966 & Supp. 1997). The jury convicted both
Gillespie and Hines of the conspiracy count; however, it acquitted
Hines of all substantive counts and Gillespie of all but six false claims
counts.

At sentencing, the district court properly looked to the multiple
count rules and determined to "go from" U.S.S.G. § 2X1.1 (conspir-
acy) to U.S.S.G. § 2S1.1 (money laundering-- the most heavily pun-
ished object of the conspiracy). See U.S. Sentencing Guidelines
Manual § 3D1.1-.3 (1994). Section 2S1.1 provides for a base level of
"23, if convicted under 18 U.S.C. § 1956(a)(1)(A), (a)(2)(A), or
(a)(3)(A)" and a base level of "20, otherwise." See 18 U.S.C.A.
§ 1956 (West Supp. 1997). Gillespie and Hines argued (and the pro-
bation officer concluded) that because they were convicted under the
conspiracy statute, 18 U.S.C.A. § 371, not"under 18 U.S.C.A.
§ 1956(a)(1)(A), (a)(2)(A), or (a)(3)(A)," the base level should be 20.
The district court rejected that argument because the object of the
defendants' conspiracy had been to launder money in violation of
§ 1956(a)(2)(A); thus, he considered the proper base level to be 23,
pursuant to § 2S1.1(a)(1).

Then, over the defendants' objections, the district court: (1)
increased each defendant's base level by four levels pursuant to
§ 2S1.1(b)(2)(E), accepting the Government's contention that the total
value of the laundered funds, $750,000, should be attributed to each
man; and (2) refused to decrease the defendants' base levels by three
levels pursuant to § 2X1.1(b)(2), rejecting their argument that they
did not perform all acts they believed necessary for completion of the
substantive offenses. Thus, the district court calculated the total
offense level for each defendant to be 27. Because neither Gillespie
nor Hines had any criminal record, their presumptive sentencing
range was 70 to 87 months imprisonment. See U.S.S.G. Ch.5, Pt.A
(Sentencing Table).

                     3
Over the Government's objection, the district court granted both
Gillespie and Hines a six-level downward departure from this pre-
sumptive sentencing range, reasoning:

         The Court understands the heartland argument to be that the
         guidelines ranges are established on the basis of a range of
         cases under a particular statute that give you an average
         range for sentence. The idea under the guidelines is to avoid
         disparities.

          The typical 1956 cases this Court has seen and sentenced
         people under, both before, when I sentenced people without
         guidelines, and subsequent to the guidelines, were all of a
         very different nature from this. They were very different
         cases from this, the vast majority of them covering narcot-
         ics, supported narcotics and the like.

          The sentences that I would have imposed and that I have
         seen imposed for those types of crimes are significantly
         more severe than those that might be imposed in connection
         with this case. Indeed, it's a factor of two or more. And the
         Court simply believes that this is not a heartland type of
         case for money laundering.

This six-level departure resulted in a guideline range of 37 to 46
months, which was the same sentencing range that would have
resulted if the court had sentenced the defendants using the fraud
guideline, U.S.S.G. § 2F1.1, rather than the money laundering guide-
line, § 2S1.1.1

Only the Government appeals. It offers a number of arguments as
to why the sentences were improper. At the crux of most of these
arguments is the claim that, notwithstanding the district court's state-
ments that it was "go[ing] from" the money laundering guideline and
"departing" downward six levels from that guideline, what the court
actually did was sentence Gillespie and Hines using the fraud guide-
_________________________________________________________________
1 The court sentenced each man to 40 months in prison and two years
of supervised release, and ordered each to pay restitution in the amount
of $75,000.

                   4
line, as if money laundering had not been an object of the conspiracy
at all.

The record provides some support for this claim. After adjusting
the total offense level to 27, the district court turned to the "issue of
the departure." The following colloquy then occurred:

          [COUNSEL FOR HINES]: Your Honor, we respectfully
          urge the Court to look at a number of mitigating circum-
          stances here in regard to a downward departure.

           Your Honor correctly summarized the heartland, quote,
          unquote, violation argument. It is clear that the object of this
          conspiracy, the 1956, is not a heartland violation, and it is
          clear from the indictment that it isn't, and it is clear from the
          trial of the case it wasn't. It was simply a classic, forward
          [sic] case.

           THE COURT: It is strictly a what?

           [COUNSEL FOR HINES]: A fraud case , an overbil-
          ling, overcharging case; fraudulent overbilling is what the
          prosecution said it was. They said in their opening statement
          and they said during the trial, and it is such.

           Now, the fact that they would, in effect, couch this in the
          language of 1956 and dress it up that way, should not, there-
          fore, result in an unnecessarily harsh sentence flowing there-
          from, simply because they took that step to utilize the statute
          that really was designed for an entirely different purpose.

           THE COURT: And you point out that purpose was
          really drug trafficking --

           [COUNSEL FOR HINES]: Yes, sir.

           THE COURT: -- and assisting drug trafficking.

          [COUNSEL FOR HINES]: Drug trafficking and orga-
          nized crime.

                     5
 And this was not, this is not -- this is a normal fraud
case. It is not an abnormal fraud case, or it's--

THE COURT: Garden variety.

[COUNSEL FOR HINES]: Pardon me?

THE COURT: Garden variety.

 [COUNSEL FOR HINES]: I wouldn't say garden vari-
ety, but it's a normal fraud case, having --

 THE COURT: Well, what would the guidelines be if
they had just been charged with conspiracy to defraud and
they had be [sic] convicted?

[COUNSEL FOR HINES]: I have --

 THE COURT: I'm sure you've done that calculation. I
recall some weeks ago doing it myself.

[COUNSEL FOR HINES]: I think it came out to about
21.

 THE COURT: I think -- yes, I thought it was-- is the
probation officer present in the courtroom?

[COUNSEL FOR HINES]: Yes.

THE PROBATION OFFICER: That's correct, your
Honor.

THE COURT: Twenty-one?

THE PROBATION OFFICER: Yes, sir.

THE COURT: In fact, I think I inquired of that of you.

THE PROBATION OFFICER: Yes, sir.

          6
       THE COURT: All right, 21.

       [COUNSEL FOR HINES]: And so --

       THE COURT: Instead of what, Mr. Glanzer ?

        [COUNSEL FOR HINES]: Well, we are up now to, we
       are up to 27 now.

        THE COURT: All right. So it would be 21, and crimi-
       nal history today Category 1. All right, go ahead.

        [COUNSEL FOR HINES]: And with regard to that
       issue, I don't have anything more to say, because it is clear
       from the evidence in the case what the case was about, and
       that's what it was.

....

        [COUNSEL FOR GILLESPIE]: Your Honor heard the
       evidence. Your Honor well knows the law. You have heard
       the heartland argument at least four times in this case. The
       guidelines recognize that for non-heartland cases, a depar-
       ture downward may be appropriate. That's what we seek
       today.

        Without that departure, just glancing at the chart, Mr.
       Gillespie's sentence could be as much as two times what
       would be appropriate for a fraud driven charge, two times
       what he had offered in, I believe it was August or September
       of 1994, to plead guilty to.

        The charging decision here should not solely drive this
       Court's sentence. We urge you to take a look at what really
       occurred, whether the Court characterizes it as garden vari-
       ety fraud or straightforward fraud, this case has all the hall-
       marks of a fraud case. That is all it ever could have been or
       should have been, and it is what Mr. Gillespie was willing
       to face up to months and months ago.

                 7
           The loss figures, which the Court is also well aware of,
          simply grossly overstate Mr. Gillespie's involvement in this
          matter, and we ask the Court, in the exercise of its discre-
          tion, to depart downward for Mr. Gillespie, to bring this
          case to a point recognizing the conduct actually involved
          and recognizing what he has been convicted of.

(emphasis added).

Thus, the defense supported the departure principally by arguing
that the crimes at issue here involved "straightforward," "normal"
fraud as opposed to money laundering.2 Combined with the fact that
the district court went to some pains to elicit from the defense coun-
sel, and confirm with the probation officer, what the sentencing range
would have been if the defendants "had just been charged with" and
convicted of "conspiracy to defraud rather than money laundering,"
the record provides some basis for concluding that perhaps the district
court did ultimately use the fraud guideline to sentence.

Such a procedure would clearly be in error. A defendant convicted
of money laundering, in violation of § 1956, must be sentenced pursu-
ant to the money laundering guideline, U.S.S.G.§ 2S1.1, even if the
conviction is based on economic rather than narcotics-related crimes.
Section 1956 broadly criminalizes financial transactions with funds
arising from a multitude of specified unlawful activities. See 18
U.S.C.A. § 1956(c)(7) (listing more than sixty federal crimes as trig-
gering money laundering provisions). Thus, as the Eleventh Circuit
recently explained:

          Congress intended to criminalize a broad array of money
          laundering activity, and included within this broad array is
          [transferring fraud profits between bank accounts]. Simply
_________________________________________________________________
2 Gillespie's counsel offered no other argument. The only other com-
ments that Hines' counsel made in support of the departure were that the
amount of laundered money attributed to Hines was overstated and that
Hines had refused to plead guilty to money laundering as a matter of
"principle." The district court did not appear to rely on either of these
arguments, even telling the prosecutor it did not need to hear about the
plea agreement.

                    8
          stated, [fraud-based] money laundering . . . is of the type
          considered by Congress and the Sentencing Commission.

United States v. Adams, 74 F.3d 1093, 1102 (11th Cir. 1996); see also
United States v. Pierro, 32 F.3d 611, 619 (1st Cir. 1994) (rejecting
defendant's argument that case fell outside money laundering heart-
land because it was "in essence . . . a garden-variety theft-of-property
case"); United States v. Rose, 20 F.3d 367, 374-75 (9th Cir. 1994)
(affirming refusal to depart because of disparity between fraud and
money laundering guidelines); United States v. Morris, 18 F.3d 562,
569 (8th Cir. 1994) (reversing departure that lowered sentence for
money laundering conviction to bank fraud range).

When sentencing for conspiracy, the Guidelines instruct the district
court to look to the guideline "for the substantive offense." U.S.S.G.
§ 2X1.1(a). If defendants are convicted of conspiring to commit
money laundering, that guideline must be U.S.S.G.§ 2S1.1.

Gillespie and Hines do not contend otherwise. Moreover, either
implicitly (Gillespie) or explicitly (Hines at oral argument), they con-
cede that a departure based solely on the fact that the laundered
money was not linked to narcotics crimes would be erroneous. They
instead assert that the district court did use the money laundering
guideline and did properly depart from it for reasons other than the
fact that their crimes were not drug related. This may be so.

The experienced district judge certainly gave careful consideration
to the sentences at issue here. Apparently, this case impressed the
court as fundamentally different from other money laundering cases
it had previously seen. This general impression seemed to underlie its
decision to depart. Unfortunately, the court did not articulate the basis
for this general impression or enumerate what factors justified the
departure -- other than the lack of a narcotics connection.

At the time of sentencing, the district court, of course, knew that
a court must impose a sentence within the guideline range "unless 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." 18 U.S.C.A.

                     9
§ 3553(b) (West Supp. 1997). The district court did not, however,
have the benefit of Koon v. United States, 116 S. Ct. 2035 (1996).
There, the Supreme Court provided much needed guidance as to how
courts are to determine whether a potential basis for departure has
been "adequately taken into consideration by the Sentencing Commis-
sion."

The Koon Court "explained that when analyzing whether a poten-
tial basis for departure was adequately considered by the Commission
in formulating the guidelines, a sentencing court must focus on
whether the factor is taken into account by the guidelines, policy
statements, or commentary and whether it is encompassed within the
heartland of situations to which the applicable guideline was intended
to apply." United States v. Barber, 1997 WL 386103, at *3 (4th Cir.
July 14, 1997) (Nos. 95-5238, 95-5250) (citing Koon, 116 S. Ct. at
2044). "The Commission intend[ed] the sentencing courts to treat
each guideline as carving out a `heartland,' a set of typical cases
embodying the conduct that each guideline describes." Koon, 116 S.
Ct. at 2044 (quoting U.S.S.G. Ch.1, Pt.A, intro. comment. 4(b)
(1995)). Only factors that take a case outside the heartland for the
applicable guideline can be considered as potential bases for depar-
ture. See Barber, 1997 WL 386103, at *3.

Guided by these principles, a court must first identify "[w]hat fea-
tures of this case, potentially, take it outside the Guidelines' `heart-
land' and make of it a special or unusual case." Koon, 116 S. Ct. at
2045 (citing United States v. Rivera, 944 F.2d 942, 949 (1st Cir.
1993)). Then a court must determine if the special feature is forbid-
den, encouraged, discouraged, or unmentioned by the Guidelines. Id.
If a factor is forbidden, e.g., race, sex, religion, socio-economic status,
or drug dependency, see U.S.S.G. §§ 5H1.4, 5H1.10, a court may
never rely on it as a basis for a departure. Id. at 2044, 2050. "All other
factors, however, potentially may provide a basis for departure under
appropriate circumstances." Barber, 1997 WL 386103, at *3.

If the Commission has indicated that a departure on the basis of a
certain factor is encouraged, a district court is free to consider depar-
ture on that basis provided the applicable guideline has not already
taken that factor into account. Koon, 116 S. Ct. at 2045. If the applica-
ble guideline has already taken an encouraged factor into account, or

                     10
if departure for that factor is discouraged, or unmentioned, a district
court can use it as a basis for a departure from the Guidelines range
"only if the factor is present to an exceptional degree or in some other
way makes the case different from the ordinary case where the factor
is present." Id. (emphasis added); see also United States v. Brock, 108
F.3d 31, 34-35 (4th Cir. 1997); United States v. Hairston, 96 F.3d
102, 105-06 (4th Cir. 1996), cert. denied, 117 S. Ct. 956 (1997).
Moreover, "`in determining which sentence to choose,' a sentencing
court must consider the statutory goals of sentencing set forth in 18
U.S.C.A. § 3553(a)(2) (West 1985)." Barber, 1997 WL 386103, at *4
(citing Koon, 116 U.S. at 2051).

Because the district court did not have the benefit of Koon or our
cases interpreting it when it imposed the sentences at issue here, we
vacate the sentences and remand for resentencing. On remand, the
district court should apply the principles articulated in Koon and sum-
marized above and make express factual findings as to all bases for
any departure decision. See Brock, 108 F.3d at 35 n.2. Of course, the
district court does not have authority to depart in such fashion as to
completely nullify the jury finding that Gillespie and Hines were
guilty of conspiracy to commit money laundering. See Adams, 74
F.3d at 1103.

VACATED AND REMANDED

                    11