Court Opinion

ID: 613501
Source: CourtListenerOpinion
Date Created: 2011-09-12 23:19:20+00
Date Added: 2024-06-11T17:50:25.320894
License: Public Domain

Case: 10-30095     Document: 00511599471         Page: 1     Date Filed: 09/12/2011

             IN THE UNITED STATES COURT OF APPEALS
                      FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                      Fifth Circuit

                                                                            FILED
                                                                        September 12, 2011

                                       No. 10-30095                        Lyle W. Cayce
                                                                                Clerk

UNITED STATES OF AMERICA,

                                                  Plaintiff - Appellee
v.

DAVID LESTER MCFADDEN,

                                                  Defendant - Appellant

                Appeal from the United States District Court for the
                           Eastern District of Louisiana
                             USDC No. 2:09-cr-00118

Before GARZA and DENNIS, Circuit Judges.1
PER CURIAM:**
        Defendant, David Lester McFadden, pled guilty to conspiracy to commit
securities fraud in violation of 18 U.S.C. § 371. The district court sentenced
McFadden to 60 months imprisonment and three years of supervised release,
and imposed a fine of $250,000. He appeals his sentence and fine. The sentence

        1
        Circuit Judge Will Garwood was originally assigned to this panel and participated in
oral argument and the deliberations on this case. Judge Garwood has since passed away.
Therefore, this case is being decided by a quorum. 28 U.S.C. § 46(d).
        **
         Pursuant to 5th Cir. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
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and fine imposed were not procedurally or substantively unreasonable. We AFFIRM.
                                        I.
      Between 1999 and 2006, McFadden misrepresented himself as a certified
public accountant and advised longtime Exxon Mobil Corporation employees
between the ages of fifty and sixty to liquidate their employer-sponsored
retirement plans and make investments with him. McFadden misrepresented
the potential rate of return on these investments and the extent to which they
were diversified.   Eventually, 137 victims invested over $68 million with
McFadden. After years of civil arbitrations and mediation proceedings, the
victims recovered approximately $54 million in awards and settlements. For
some, but not all, of the victims, these amounts included lost interest on their
investments, attorney fees, and punitive damages.
      McFadden entered into a plea agreement with the government providing
for a recommended sentence range of 18 to 24 months imprisonment. As part
of the agreement, McFadden agreed to pay restitution of no more than
approximately $1.2 million. The district court reserved acceptance of the plea
agreement. Because the agreement was entered into under Federal Rule of
Criminal Procedure 11(c)(1)(C), McFadden had the right to withdraw his plea if
the court rejected it. See Fed. R. Crim. P. 11(c)(1)(C).
      The probation officer’s presentence report (PSR) recommended a total
offense level of 33 based, in part, on a 20-level enhancement for the victims’
losses of $14.5 million. With McFadden’s criminal history category of I, the
sentence range under the Sentencing Guidelines (U.S.S.G. or guidelines) was
135 to 168 months imprisonment. However, because the maximum sentence of
imprisonment under the statute of conviction is 60 months, see 18 U.S.C. § 371,
which was less than the minimum of the applicable guidelines range, 60 months
became the guidelines sentence. See U.S.S.G. § 5G1.1(a). The guidelines fine
range was $17,500 to $175,000, and although the statutory maximum fine was

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$250,000, the PSR did not recommend any departures under the guidelines for
the fine. However, the PSR noted several factors that counseled for an above-
guidelines fine: (1) that McFadden’s victims had lost a reliable source of
retirement income from their Exxon Mobil annuities; (2) that the guidelines do
not include attorney fees in calculating the amount of loss for the purpose of
determine the guidelines offense level; and (3) that the guidelines do not take
into account the emotional and mental injury and stress resulting from the
financial harm McFadden caused.
      The PSR also recommended that no restitution should be ordered because
McFadden’s victims had already recovered in civil proceedings more than they
had lost in their investment principal. The government objected to this point in
the PSR and argued that many of the victims had not fully recovered because
they had not received compounded interest or legal costs. McFadden did not
object to the PSR, but defended its conclusion that the victims had fully
recovered their losses and were not entitled to restitution.
      The district court rejected the plea agreement after reviewing the PSR.
However, McFadden continued in his guilty plea. The district court adopted the
findings of the PSR, except for those pertaining to restitution. At the sentencing
hearing, the government called the attorney who represented McFadden’s
victims in the civil proceedings. The attorney testified that he believed that
some of the victims had not been made whole because they had not been
compensated for the amount of lost interest that they would have otherwise
received on their investments. He testified that the net loss for sixteen of these
victims totaled $2.4 million. In cross examination of the witness and in his
arguments to the court, McFadden argued that federal sentencing laws did not
provide for interest and attorney fees as part of restitution and that, in many
instances, the amount that the victims received through civil proceedings was
more than the principal amount they had lost in their investments.

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      McFadden argued for a sentence that reflected the fact that he provided
financial support to his family; and, while he asked for a downward variance
because of the money that had been paid back to the victims, he also noted
specifically that, “I know we can’t get actual credit for [the money that was paid
back] . . . because it wasn’t discovered and paid by [McFadden] before it was
discovered by the plaintiffs,” and therefore, the PSR’s 20-level enhancement in
the offense level for the $14.5 million in loss “was the correct calculation.” The
government contended that the sentencing guidelines did not “take into
consideration the stress of the financial ruin” inflicted on the victims and that
the court should “take that into specific consideration” as a justification for “a
variance.” The government argued further that the court should take into
account the amount of potential interest that the victims lost on their
investments.
      At the conclusion of the sentencing hearing, the court said that it was
“unable at this time today to make precise calculations as to what further
restitution might be owed.” It stated that it was “not convinced that all of these
victims have been made whole by the various recoveries that have been made by
virtue of any arbitration and litigations, settlements, and so forth” and that it
“agree[d] with the government’s basic premise that, as a matter of fact, that not
all of these victims have been made whole.” Noting that 18 U.S.C. § 3664
allowed it to postpone its determination regarding restitution, the district court
said, “what I’m going to do with respect to restitution is sustain the
government’s objection [to the PSR] at this point. I guess I’m saying I’m doing
this conditionally, and I’m going to allow 90 days . . . for the government to . . .
submit any additional evidence or calculations as to what the government deems
is evidence of the actual losses incurred by the victims.” The court then said:
      [U]nder the restitution statute . . . I can’t award damages for pain
      and suffering and mental anguish and things like that that the

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       victims have gone through in this case. If I was able to do that, I
       would certainly do that, because I think that would be called for in
       this case. It would be warranted, because I think as a large part of
       the injury, the damage that Mr. McFadden has inflicted on all of his
       victims, regardless of whether they recovered their money or most
       of their money or all of their money even. Eventually you put them
       through years of hell and litigation and arbitration, and I’ve read
       letters where people barely had money to scrape together to pay gas
       to attend all of these hearings, and, of course, we’ve heard, not only
       today, but in the letters, about all the stress related issues that
       people have suffered, not that necessarily all of that was due to Mr.
       McFadden’s conduct, but I’m convinced that a good measure of it
       was.
The court went on to state the 18 U.S.C. § 3553(a) factors; noted that it had read
the PSR and “all of the letters,” which included letters in support of mitigation;
and explained the seriousness of McFadden’s fraudulent scheme. The court
concluded: “Having said all of that, and considering that there’s a real question
as to whether you ever actually, in fact, will make full restitution to all of these
folks, I think the appropriate sentence is the statutory maximum.” Accordingly,
the court sentenced McFadden to 60 months of imprisonment, a $250,000 fine,
and three years of supervised release.
       McFadden objected to the court’s imposition of the maximum fine, which,
he argued, was “an upward departure from what’s in the guidelines and we had
no notice of an upward departure.” McFadden also objected to “the excessive
nature of the fine as well as the sentence,” and “to the Court sustaining the
government’s objections to . . . restitution,” although he acknowledged that he
“realize[d] it’s just . . . conditional.”
       The district court later held a restitution hearing, after which it
determined that the government had not shown that damages for lost interest
or attorney fees could be included in a restitution judgment. Accordingly, the
court held that the money already recovered by the victims exceeded the amount
of loss and no further restitution could be ordered.

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      McFadden timely appealed.
                                         II.
      McFadden argues that the sentence and fine imposed by the district court
were procedurally defective and substantively unreasonable. We begin by
considering McFadden’s arguments that his sentence was procedurally defective.
See Gall v. United States, 552 U.S. 38, 51 (2007).
                                          A.
      McFadden first argues that the district court committed procedural error
by failing to appropriately consider all of the sentencing factors set forth in 18
U.S.C. § 3553(a). Specifically, McFadden contends that the court focused on the
seriousness of his offense and failed to consider the other § 3553(a) factors.
McFadden did not make this objection in the district court. Therefore, we review
this first claim for plain error. See United States v. Mondragon-Santiago, 564
F.3d 357, 361 (5th Cir.), cert. denied, 130 S. Ct. 192 (2009). To establish plain
error, a defendant must first show a forfeited error that is clear or obvious and
that affects his substantial rights. Puckett v. United States, 129 S. Ct. 1423,
1429 (2009). If a defendant makes such a showing, we have the discretion to
correct the error if it seriously affects the fairness, integrity, or public reputation
of judicial proceedings. Id.
      A sentencing court commits procedural error when it “fail[s] to consider
the § 3553(a) factors . . . .” Gall, 552 U.S. at 51. While “a checklist recitation of
the section 3553(a) factors is . . . [in]sufficient,” United States v. Smith, 440 F.3d
704, 707 (5th Cir. 2006), “a district court need not recite each of the § 3553(a)
factors and explain its applicability,” United States v. Herrera-Garduno, 519
F.3d 526, 531 (5th Cir. 2008) (citing Smith, 440 F.3d at 707). In this case, the
district court read out each of the § 3553(a) factors and indicated that it had
considered them in imposing its sentence. The district court then engaged in a
fact-specific explanation of the reasons for imposing its chosen sentence, focusing

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its discussion on the nature of McFadden’s fraud and the vulnerability of his
victims. That the district court’s reasoning was based on those § 3553(a) factors
that the court found most relevant to the case before it does not constitute a
failure to consider the necessary sentencing factors. See Herrera-Garduno, 519
F.3d at 531 (“Here, because the district court relied primarily on the facts of
Herrera’s prior conviction, and because the court addressed these facts and their
relation to the § 3553(a) factors in some detail, we are satisfied that the district
court’s statement of reasons provides an adequate basis for our review.” (citing
Gall, 552 U.S. at 50)). Accordingly, we conclude that the district court did not
plainly err by failing to consider the § 3553(a) factors.
                                        B.
      In a related argument, McFadden contends that the district court failed
to adequately explain its within-guidelines sentence of imprisonment and above-
guidelines fine. McFadden contends that there were mitigating factors favoring
a downward variance from the sentencing range, and that the district court
failed to explain why it chose not to apply a downward variance with respect to
its sentence of imprisonment and, instead, applied an upward variance in
imposing the fine. As McFadden did not raise this objection in district court, we
review for plain error. See Mondragon-Santiago, 564 F.3d at 361.
      A sentencing court must “adequately explain the chosen sentence —
including an explanation for any deviation from the Guidelines range.” Gall, 552
U.S. at 51. “Where the defendant or prosecutor presents nonfrivolous reasons
for imposing a . . . sentence[ outside the guidelines range], . . . the judge will
normally . . . explain why he has rejected those arguments.” Rita v. United
States, 551 U.S. 338, 357 (2007). A statement of reasons is legally sufficient so
long as “[t]he sentencing judge . . . set[s] forth enough to satisfy the appellate
court that he has considered the parties’ arguments and has a reasoned basis for
exercising his own legal decisionmaking authority.” Id. at 356.

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      Here, the district court listened to the statements of McFadden and his
counsel, as well as those of the victims present at the sentencing hearing; it
noted that it had read “all the letters” submitted, including those supporting
McFadden’s argument for a downward variance; and it stated that it had read
the PSR. The PSR pointed out that the otherwise applicable guidelines range
for imprisonment was more than twice the statutory maximum and that the
guidelines range did not account for the mental and emotional impact on the
victims. The court recited the § 3553(a) factors and gave a thorough exposition
of McFadden’s crime. The court stated that the loss to the victims of McFadden’s
investment fraud scheme was substantial, and indicated that it did not believe
that some of them would ever be made whole. We are satisfied that the district
court’s explanation for the sentence imposed was legally sufficient. See id.
Thus, we conclude that the district court did not plainly err in explaining its
reasons for the sentence imposed.
                                         C.
      Third, McFadden claims that the district court committed procedural error
by basing its sentence on an erroneous fact, viz., that the victims were still owed
restitution. Although McFadden consistently objected at the sentencing hearing
to the notion that he owed restitution, he did not specifically object that the
district court had erroneously based its sentence on its mistaken belief that he
owed restitution. See United States v. Neal, 578 F.3d 270, 272 (5th Cir. 2009)
(“To preserve error, an objection must be sufficiently specific to alert the district
court to the nature of the alleged error and to provide an opportunity for
correction.”). However, because McFadden did not know at sentencing that the
court would subsequently determine that he did not in fact owe restitution, he
was not in a position to raise this particular argument at that time. Cf. United
States v. Bigelow, 462 F.3d 378, 381 (5th Cir. 2006) (“Th[e] issue [of whether the
written judgment or the sentence pronounced at sentencing controls when the

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two conflict] is being raised for the first time on appeal, for the simple reason
that [the defendant] had no opportunity to consider, comment on, or object to the
special conditions later included in the written judgment. Accordingly, instead
of reviewing for plain error, we review the court’s imposition of [those] conditions
for an abuse of discretion.”). Thus, we find the issue adequately preserved under
the circumstances and review McFadden’s claim for abuse of discretion. See id.
      A “district court commit[s] . . . significant procedural error . . . [if it]
select[s] a sentence based on clearly erroneous facts.” Gall, 552 U.S. at 51. It
is clear that the district court here had made no finding of fact that McFadden
owed restitution at the time of sentencing. The court specifically stated that it
was “unable at this time . . . to make precise calculations as to what further
restitution might be owed” and postponed its determinations on the issue of
restitution pursuant to 18 U.S.C. § 3664(d)(5), which provides that the court
may, upon timely request by the government, “set a date for the final
determination of the victim’s losses, not to exceed 90 days after sentencing.” 18
U.S.C. § 3664(d)(5). Moreover, our review of the transcript of the sentencing
hearing makes clear that the district court did not select its sentence based on
any belief about whether McFadden owed restitution. Rather, the transcript
shows that the court selected its sentence based on its finding that McFadden’s
fraud had caused his victims irreparable injury for which they could never be
made whole, regardless of restitution. This finding is supported by the record
and, therefore, is not clearly erroneous. See United States v. Villanueva, 408
F.3d 193, 203 (5th Cir. 2005).      The government’s witness testified at the
sentencing hearing that many of the victims would never recover for the lost
interest on their investments nor for the attorney fees they paid. The PSR noted
as a basis for an above-guidelines fine the fact that the guidelines calculation of
the victims’ losses did not account for attorney fees or for the mental and
emotional harm caused by McFadden’s fraud. McFadden did not object to the

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PSR, and the district court was therefore entitled to accept “any undisputed
portion of the [PSR] as a finding of fact.” Fed. R. Crim. P. 32(i)(3)(A). The
district court then expressly acknowledged the unaccounted-for harm noted in
the PSR in explaining its decision to impose the statutory maximum sentence.
Accordingly, we conclude that the court did not select its sentence based on a
clearly erroneous fact regarding restitution.
                                        D.
      McFadden next argues that the district court committed procedural error
by imposing a fine above the guidelines range without giving McFadden advance
notice of its intent to do so, as required for upward departures from guidelines
sentences under Federal Rule of Criminal Procedure 32(h). As the Supreme
Court noted in Irizarry v. United States, “‘[d]eparture’ is a term of art under the
Guidelines and refers only to non-Guidelines sentences imposed under the
framework set out in the Guidelines.” 553 U.S. 708, 714 (2008). The Court held
in Irizarry that a variance — i.e., a non-guidelines sentence imposed other than
under the guidelines framework for departures — is not subject to the advance
notice requirement of Rule 32(h). Id. at 716. This court recognizes an above-
guidelines sentence to be a variance, and not an upward departure, where the
district court “d[oes] not make reference to upwardly departing . . . .” United
States v. Smith, 440 F.3d 704, 708 n.3 (5th Cir. 2006); see also Irizarry, 553 U.S.
at 712 (analyzing sentence as a variance, rather than a departure, where the
district court made no reference to any departure provision, stated that “the
guidelines range is not appropriate in this case,” and concluded that “the
statutory maximum is what’s appropriate”). In imposing the fine challenged
here, the district court did not refer to the guidelines departure provisions.
Rather, the court explained that it found the guidelines-range fine inappropriate
and had chosen to impose the statutory maximum. Because the fine imposed

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was a variance from the guidelines range rather than an upward departure,
McFadden was not entitled to advance notice.
                                        III.
         Having determined that the district court did not commit procedural error
in selecting the sentence imposed, we turn to McFadden’s contention that the
sentence was substantively unreasonable. Gall, 552 U.S. at 51. We review the
substantive reasonableness of McFadden’s sentence for abuse of discretion. Id.
at 46.
         Because McFadden’s sentence of imprisonment and supervised release
were “within a properly calculated guideline range,” they are “presumptively
reasonable.” United States v. Ruiz, 621 F.3d 390, 398 (5th Cir. 2010) (citing
Campos-Maldonado, 531 F.3d 337, 338 (5th Cir. 2008)). McFadden argues that
his personal characteristics — that he had no prior criminal record and provided
financial support for his family — and several aspects of his offense — that he
had not stolen his clients’ money and that his clients had been paid back for
their lost investments — required a below-guidelines sentence.                These
arguments, however, amount to merely “a disagreement with the propriety of
the sentence imposed [which] does not suffice to rebut the presumption of
reasonableness that attaches to a within-guidelines sentence.” Id. (citing United
States v. Gomez-Herrera, 523 F.3d 554, 565-66 (5th Cir. 2008); United States v.
Rodriguez, 523 F.3d 519, 526 (5th Cir. 2008)). Accordingly, McFadden has
shown no substantive error in his sentence of imprisonment or supervised
release.
         Although we do not apply a presumption of reasonableness to the above-
guidelines fine, still we “must give due deference to the district court’s decision
that the § 3553(a) factors, on the whole, justify the extent of the deviation.” Gall,
552 U.S. at 51. McFadden argues that the victims had been repaid for their lost
investments, and that this fact entitled him to a downward variance. We

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disagree. Taking into account the totality of the circumstances presented in this
case, including the extent of the variance from the guidelines range, we find that
the fine imposed by the district court was justified by the § 3553(a) factors.
Accordingly, we conclude that McFadden has failed to demonstrate an abuse of
discretion in the district court’s imposition of the above-guidelines fine.
                                      IV.
      For the foregoing reasons, we AFFIRM McFadden’s sentence and fine.

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