Court Opinion

ID: 3043038
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:10:33.018427+00
Date Added: 2024-06-11T11:49:02.264880
License: Public Domain

United States Court of Appeals
                         FOR THE EIGHTH CIRCUIT
                               ___________

                                   No. 06-3281
                                   ___________

United States of America,             *
                                      *
            Plaintiff-Appellee,       *
                                      * Appeal from the United States
     v.                               * District Court for the Southern
                                      * District of Iowa.
Ryland Craig Utlaut,                  *
                                      *
            Defendant-Appellant.      *
                                 ___________

                             Submitted: April 12, 2007
                                Filed: August 15, 2007
                                 ___________

Before MURPHY, BENTON, and SHEPHERD, Circuit Judges.
                           ___________

SHEPHERD, Circuit Judge.

      Ryland Craig Utlaut pled guilty to one count of mail fraud. See 18 U.S.C.
§ 1341. The district court1 sentenced Utlaut to 63 months imprisonment and two years
of supervised release. On appeal, Utlaut contends that the district court’s failure to
grant a downward departure based on diminished capacity was an incorrect and
harmful application of section 5K2.13 of the Sentencing Guidelines. We affirm the
sentence.

      1
       The Honorable Robert W. Pratt, Chief Judge, United States District Court for
the Southern District of Iowa.
                                           I.

       Utlaut was employed by Garst Seed (“Garst”), a national seller of corn, bean,
and alfalfa seed, from 1991 to 2004. Garst initially hired Utlaut as a district manager,
and later promoted him to regional sales manager.

       Beginning in 2001, Utlaut utilized his position at Garst and his knowledge of
the seed business to conduct a “Ponzi” scheme.2 Typically, Garst customers order
their seed at the end of the calendar year for planting the following spring. Garst does
not bill the customer until August, after harvest is completed. Garst offers a discount
program for customers who pre-pay for seed prior to the planting season.

       Under Utlaut’s “Ponzi” scheme, he offered customers a greater “early-pay”
discount through Agri-Management, an entity he created. Utlaut deposited checks
made payable to Agri-Management into an account he controlled, and instead of using
the money to pay for seed, Utlaut used the funds to support his gambling addiction.
Utlaut would give the seed orders to Garst, but concealed his “early-pay” program
from the company. Garst delivered the seed to the customers, and, unaware that the
customers had “pre-paid,” would bill the customers in August. Upon receiving the
invoices from Garst, the customers would forward them to Utlaut, who paid with a
check from Agri-Management. Utlaut obtained funds to pay the invoices from new
seed orders and by soliciting direct investment in Agri-Management in exchange for
the promise of a guaranteed return exceeding investment.

      Utlaut’s scheme collapsed in July 2004, when a customer contacted Garst
regarding a large payment for seed that was not reflected on his invoice. After an

      2
        A “Ponzi” scheme is “[a] fraudulent investment scheme in which money . . .
from the new investors is used directly to repay or pay interest to earlier investors,
[usually] without any operation or revenue-producing activity other than the continual
raising of new funds.” Black’s Law Dictionary 1198 (8th ed. 2004).
                                          -2-
investigation, Garst discovered that Utlaut had deposited the money into his bank
account, and Garst terminated Utlaut’s employment. As a result of Utlaut’s fraud,
Garst’s customers lost a total of $3,895,962.90, which was ultimately reimbursed by
Garst.

       On July 22, 2005, Utlaut entered a guilty plea to a one-count information
charging him with mail fraud in violation of 18 U.S.C. § 1341. At sentencing, Utlaut
presented evidence regarding his gambling addiction and argued for a downward
departure pursuant to section 5K2.13,3 which the district court denied. The district
court sentenced Utlaut to 63 months imprisonment, a sentence at the low end of the
63 to 78 month advisory guideline range. Utlaut appeals.

                                         II.

      In a single issue, Utlaut contends that the district court misinterpreted the

      3
       § 5K2.13 Diminished Capacity (Policy Statement)
      A downward departure may be warranted if (1) the defendant committed
      the offense while suffering from a significantly reduced mental capacity;
      and (2) the significantly reduced mental capacity contributed
      substantially to the commission of the offense. . . .

                               Commentary
      Application Note:
      1. For purposes of this policy statement—
      “Significantly reduced mental capacity” means the defendant, although
      convicted, has a significantly impaired ability to (A) understand the
      wrongfulness of the behavior comprising the offense or to exercise the
      power of reason; or (B) control behavior that the defendant knows is
      wrongful.

See United States Sentencing Commission, Guidelines Manual § 5K2.13 (Nov.
2005).
                                         -3-
Sentencing Guidelines by requiring Utlaut to provide testimony from a medical doctor
to establish a section 5K2.13 departure. Utlaut contends that the district court’s
failure to depart because of the lack of evidence from a medical doctor, despite
Utlaut’s uncontroverted evidence demonstrating that he suffered from a compulsive
disorder, was an incorrect and harmful application of section 5K2.13.

       We review the district court’s interpretation and application of the Sentencing
Guidelines de novo and its factual findings for clear error. United States v. Vasquez-
Garcia, 449 F.3d 870, 872 (8th Cir. 2006). Where a sentence is imposed as a result
of an incorrect application of the Sentencing Guidelines and such error is not
harmless, the case must be remanded. United States v. Fleck, 413 F.3d 883, 893-94
(8th Cir. 2005). However, “[a] district court’s refusal to grant a downward departure
is generally unreviewable on appeal, unless the district court had an unconstitutional
motive or erroneously believed that it was without authority to grant the departure.”
See United States v. Goldsmith, 486 F.3d 404, 407 (8th Cir. 2007) (quoting United
States v. Dabney, 367 F.3d 1040, 1044 (8th Cir. 2004)).

       At the sentencing hearing, the district court considered the diminished capacity
departure but denied it, finding Utlaut had not satisfied the requirements of section
5K2.13. Although the district court stated at one point, “there’s no dispute in this
record that he’s a pathological gambler. Everybody in the courtroom agrees with
that,” the district court could not find, based on the record before it, that Utlaut’s
gambling addiction impaired his ability to understand the wrongfulness of the offense,
exercise reason, or control his destructive behavior, and that his impairment
contributed substantially to his embezzlement of company funds. See United States
Sentencing Commission, Guidelines Manual § 5K2.13 (Nov. 2005).

      The district court found that Utlaut’s two pieces of evidence did not sufficiently
show or explain the required link between Utlaut’s addiction and his embezzlement.
Utlaut’s treatment records from The Meadows, an inpatient gambling treatment

                                          -4-
facility, did not sufficiently analyze or discuss the link, and an affidavit from Ms.
Culle Vandergarde, a licensed clinical social worker and addictions counselor who
provided treatment to Utlaut following his discharge from The Meadows, lacked the
required analysis and was conclusory.

      The district court unsuccessfully sought from Utlaut an explanation of, and
supporting evidence for, the required link between Utlaut’s addiction and his
embezzlement. On appeal, Utlaut misconstrues the district court’s efforts as a
requirement that he provide testimony from a medical doctor to establish a section
5K2.13 departure. Contrary to Utlaut’s contention that the district court erroneously
limited the evidence it would consider, the district court gave Utlaut ample
opportunity to supply relevant evidence to prove the required link.

       In sum, the district court considered the downward departure and denied it
because Utlaut failed to substantiate his claim of diminished capacity. Accordingly,
we will not review the district court’s refusal to grant the departure on appeal. See
Goldsmith, 486 F.3d at 407; United States v. Gonzalez-Ramirez, 350 F.3d 731, 734
(8th Cir. 2003) (“[T]he district court specifically acknowledged its authority to depart,
but denied the motion based on Gonzalez-Ramirez’s failure to substantiate his claim
of diminished capacity. . . . Thus, we affirm the district court’s discretionary denial
of the § 5K2.13 motion.”).
                                           III.

      Accordingly, we affirm the sentence.

                        ______________________________

                                           -5-