Court Opinion

ID: 3001640
Source: CourtListenerOpinion
Date Created: 2015-09-24 20:19:01.868499+00
Date Added: 2024-06-11T15:02:35.113103
License: Public Domain

In the
 United States Court of Appeals
              For the Seventh Circuit
                        ____________

Nos. 07-2584 & 07-2585
UNITED STATES OF AMERICA,
                                                Plaintiff-Appellee,
                                v.

TERESA ORSBURN and MICHAEL ORSBURN,
                                          Defendants-Appellants.
                        ____________
       Appeals from the United States District Court for the
        Northern District of Indiana, Hammond Division.
             No. 2:06 CR 60—Rudy Lozano, Judge.
                        ____________
       ARGUED APRIL 10, 2008—DECIDED MAY 8, 2008
                        ____________

  Before EASTERBROOK, Chief Judge, and ROVNER and
SYKES, Circuit Judges.
  EASTERBROOK, Chief Judge. In 1998 Michael Orsburn
was elected Trustee of Keener Township in Jasper County,
Indiana. The Trustee administers funds for emergency
services and relief of the poor. Michael appointed his
wife, Teresa Orsburn, to keep records and write checks.
The Orsburns were poor custodians of the public’s funds.
Between 2000 and 2004 they embezzled about $310,000,
roughly 15% of the money that passed through their hands.
Teresa wrote checks to Michael using erasable ink; after
2                                  Nos. 07-2584 & 07-2585

they had been deposited in Michael’s personal checking
account and the cancelled checks mailed back to the
Trustee’s office, Teresa replaced Michael’s name with
that of a more plausible recipient.
  Teresa pleaded guilty to mail fraud and tax evasion (the
Orsburns did not pay income tax on the stolen money).
Michael pleaded not guilty to the same crimes, blaming
everything on Teresa, but was convicted by a jury. Michael
insists that his crime (if any) was theft rather than mail
fraud. But the checks were mailed, and Teresa wrote in
new payees after the mailing in an effort to conceal what
she had done. Given decisions such as Schmuck v. United
States, 489 U.S. 705 (1989), there is no problem applying
18 U.S.C. §1341 to this scheme. The evidence was suf-
ficient. All of the money was deposited into Michael’s
personal checking account, and although Teresa testified
that she forged Michael’s signature so that they could
spend their ill-got gains, the jury did not have to believe
that Michael was in the dark. The embezzled funds were
roughly twice the couple’s legitimate income, and they
spent it all. Michael could hardly avoid noticing this
sudden improvement in the couple’s fortunes even if he
never looked at bank statements.
  Both Orsburns were sentenced to 135 months’ imprison-
ment and ordered to make restitution. Teresa’s sen-
tence would have been lower than Michael’s, given her
guilty plea, but she testified at Michael’s trial and sup-
ported his contention that she alone had carried out the
scheme and that he was ignorant. The jury disbelieved
her, and so did the judge, who added two levels to her
Guidelines calculation for obstruction of justice and
rescinded the discount that usually goes with guilty
pleas. Michael likewise received an enhancement for his
Nos. 07-2584 & 07-2585                                    3

perjury at trial. These decisions are well supported, for
the same reason that the evidence was quite enough to
convict Michael.
  But 135-month sentences are unusually high for embez-
zlers. To see this, suppose the Orsburns had been prose-
cuted under §666(a)(1)(A), which makes it a crime to
steal $5,000 or more from any public agency or jurisdic-
tion that receives $10,000 or more annually from the fed-
eral government. Appendix A to the Sentencing Guidelines
says that U.S.S.G. §2B1.1 applies to a conviction under
§666(a)(1)(A), the subsection covering simple theft by
public officials (i.e., no bribes or kickbacks). The base
offense level is 6, and stealing more than $200,000 but less
than $400,000 adds 12 more levels. Obstruction of justice
contributes 2, and the use of erasable ink to make
changes after the checks had been paid might have been
deemed a “sophisticated means” that would add a fur-
ther 2 levels. Because the Orsburns abused the public
trust they held, §3B1.3 supplies 2 more levels. Adding 1
for the tax offenses under the grouping rules, see U.S.S.G.
§3D1.4, would produce a total offense level of 25, with
a range of 57 to 71 months for these first offenders.
  The district court set the Orsburns’ offense level at 32
rather than 25, which led to a recommended sentence in
the range 121 to 151 months. Section 2B1.1 yields a range
that high only for persons who misappropriate more
than $20 million. The Orsburns’ extra 7 levels come
from using U.S.S.G. §2C1.1 rather than §2B1.1. Guideline
2C1.1 starts with a base offense level of 14 for public
officials (12 for everyone else). That’s 8 offense levels
more than §2B1.1; another 4 came from §2C1.1(b)(3),
which provide that addition if the public official held a
“high-level decision-making or sensitive position”. These
4                                     Nos. 07-2584 & 07-2585

extra 12 levels would be offset by 5: the 2-level enhance-
ment for sophisticated means, the 2 levels from §3B1.3,
and the 1 level from the grouping rules all do not apply
under §2C1.1.
  According to the prosecutor, §2C1.1 is the appropriate
guideline because the Orsburns were convicted of mail
fraud rather than theft by a public employee. Guideline
2C1.1 bears the caption: “Offering, Giving, Soliciting, or
Receiving a Bribe; Extortion Under Color of Official
Right; Fraud Involving the Deprivation of the Intangible
Right to Honest Services of Public Officials; Conspiracy
to Defraud by Interference with Governmental Functions”.
The indictment charging the Orsburns with mail fraud,
in violation of 18 U.S.C. §1341, included a reference to
18 U.S.C. §1346, which says: “For the purposes of this
chapter, the term ‘scheme or artifice to defraud’ includes
a scheme or artifice to deprive another of the intangible
right of honest services.” This brings the Orsburns’ crime
within the caption of §2C1.1, the argument concludes.
  It takes more than citing §1346 to make a scheme an
intangible-rights fraud. Section 1346 is a definitional clause,
not a separate crime, and this definition is not necessary
to the Orsburns’ conviction. They stole money from their
employer. The intangible-rights gloss on §1341 was de-
vised to deal with people who took cash from third
parties (via bribes or kickbacks). United States v. Holzer,
816 F.2d 304 (7th Cir. 1987), supplies a good example.
Judge Holzer accepted bribes from litigants. What he took
from his employer, the state’s judicial system, was the
honest adjudication service that the public thought it
was purchasing in exchange for his salary. This is how
the Supreme Court understood the honest-services
theory in McNally v. United States, 483 U.S. 350 (1987),
Nos. 07-2584 & 07-2585                                      5

which held that §1341 applies only to a person who ob-
tains money or other tangible property from the scheme’s
victim.
  Section 1346 was added to the Criminal Code in 1988 to
equate a deprivation of honest services with deprivation
of money or property. If the Orsburns had been prosecuted
under §1341 after McNally, and before §1346 became
effective, they would have been convicted, because Keener
Township lost most than $300,000. See United States v.
Leahy, 464 F.3d 773 (7th Cir. 2006). If what the Orsburns
did is an honest-services fraud, then every violation of
§1341 by an employee or fiduciary is honest-services fraud.
That’s not how McNally and many opinions before and
since have understood the relation between tangible and
intangible losses. See, e.g., United States v. Bloom, 149 F.3d
649 (7th Cir. 1998).
  Let this pass. The caption of §2C1.1 says that honest-
services frauds come within that section, but not (necessar-
ily) that all honest-services frauds do so. The phrase
“Deprivation of the Intangible Right to Honest Services
of Public Officials” is part of a list and best understood
in light of its companions (bribery, extortion, and inter-
ference with governmental functions). Cf. Begay v. United
States, No. 06-11543 (U.S. Apr. 16, 2008). True enough, the
phrase could be independent of the others in the caption,
but the Sentencing Commission has told us that it should
not be seen that way. The Background section of the
Commentary following §2C1.1 begins:
    This section applies to a person who offers or gives
    a bribe for a corrupt purpose, such as inducing
    a public official to participate in a fraud or to
    influence such individual’s official actions, or to
    a public official who solicits or accepts such a
6                                   Nos. 07-2584 & 07-2585

    bribe. The object and nature of a bribe may vary
    widely from case to case. . . . Consequently, a
    guideline for the offense must be designed to cover
    diverse situations.
In other words, the caption of §2C1.1 (like the section’s
substantive content) is designed to include the many
kinds of bribery, and honest-services fraud can be one
of those variants. But an honest-services fraud that does
not include bribery or any closely related offense is out-
side the scope of §2C1.1.
  What may be said for the prosecutor’s position is that
§2B1.1 does not provide an enhancement when the embez-
zler is a public official; §2C1.1, by contrast, adds 2 to the
base offense level when the offender is a public official,
and this corresponds to the accepted view that misuse
of public office is a good reason to enhance a sentence.
(Extra punishment may be necessary to achieve deter-
rence, as public agencies often employ lax accounting
and so are less likely to catch chiselers.) It does not
follow, however, that the bribery guideline should be
applied to embezzlement. Section 3B1.3 makes up for
what’s omitted from §2B1.1 by adding 2 levels when the
crime entails abuse of trust. What’s more, judges are
free after Booker to sentence above a Guideline range in
order to deal with considerations that a particular Guide-
line omits or that the judge esteems differently from the
Sentencing Commission.
  The best way to treat similar situations alike—and thus
to avoid unwarranted disparities in sentencing, see
18 U.S.C. §3553(a)(6); United States v. Boscarino, 437 F.3d
634 (7th Cir. 2006)—is to start with the right Guideline
and then make adjustments at the margin. Starting with
the right Guideline is essential, see Gall v. United States,
Nos. 07-2584 & 07-2585                                 7

128 S. Ct. 586, 596–97 (2007), independent of any concern
about disparities. Giving the Orsburns sentences apt for
bribe-payers or bribe-takers would produce an unwar-
ranted disparity. They should be classed with other
embezzlers, with a potential for a higher sentence on
account of their public positions if the district judge
deems the adjustment under §3B1.3 inadequate.
  The convictions are affirmed, but the sentences are
vacated, and the cases are remanded for resentencing
consistent with this opinion.

                   USCA-02-C-0072—5-8-08