Court Opinion

ID: 169614
Source: CourtListenerOpinion
Date Created: 2010-08-14 17:33:18+00
Date Added: 2024-06-11T17:25:02.988619
License: Public Domain

F I L E D
                                                                United States Court of Appeals
                                                                        Tenth Circuit
                     UNITED STATES CO URT O F APPEALS
                                                                      August 10, 2007
                            FO R TH E TENTH CIRCUIT                Elisabeth A. Shumaker
                                                                       Clerk of Court

    U N ITED STA TES O F A M ER ICA,

                Plaintiff-Appellee,

    v.                                                  No. 06-1412
                                                 (D.C. No. 04-CR-103-REB)
    JAN NICE M CLA IN SCH M IDT,                         (D . Colo.)

                Defendant-Appellant.

                             OR D ER AND JUDGM ENT *

Before H E N RY and A ND ER SO N, Circuit Judges, and BROR BY, Senior Circuit
Judge.

         Jannice M cLain Schmidt pleaded guilty to two counts of Securities Fraud

and Aiding and Abetting in violation of 15 U.S.C. §§ 77q(a)(1) and 77x and

18 U.S.C. § 2. 1 The district court sentenced her to 60 months imprisonment on

the first count and 48 months on the second count, to be served consecutively, for

*
       After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and
collateral estoppel. It may be cited, however, for its persuasive value consistent
with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
1
      She also admitted to one count of Criminal Forfeiture under 18 U.S.C.
§§ 981, 1956, and 1961, and 28 U.S.C. § 2461.
a total sentence of 108 months. She appeals from the district court’s judgment

and sentence. W e vacate her sentence and remand.

                                      FACTS

      This case arises from a Ponzi scheme in which Schmidt participated. The

government estimates the aggregate intended loss to victims from the scheme at

over $50 million. Investors w ere told that they were investing in a high-yield

investment program and that their investments would be insured against loss. In

reality, investor funds were used for other purposes, including payments to earlier

investors and to those who ran the scheme.

      Schmidt’s plea agreement described her participation in the scheme:

             In the first part of 2001, [Schmidt] was solicited by defendant
      Charles Lewis to invest money in the Smitty’s, LLC high-yield
      investment program. [Schmidt] initially understood that the program
      used investor funds to trade medium term notes (M TNs) with little or
      no risk because funds invested were maintained in a non-depleting
      bank account and insured against loss. In the fall of 2001, [Schmidt]
      became the bookkeeper for Smitty’s, which entailed performing the
      accounting necessary for the preparation of monthly statements,
      preparing checks for signature, and sending checks to investors
      seeking to withdraw money, all at the direction of defendant Norman
      Schmidt. At or about the same time, [Schmidt] began to solicit
      investors in the Smitty’s high-yield investment program and to
      receive commissions for persons whom she brought into the program.
      [Schmidt] later became aware that similar investment programs were
      being marketed through [other] entities.

            During the time that [Schmidt] was involved w ith these
      programs, Norman Schmidt was the principal and operator of
      Smitty’s and the other entities named above, Charles Lewis solicited
      investors, and George Alan W eed purportedly arranged for the
      insurance on the investment. [Schmidt] learned at some point that

                                        -2-
      M ichael Smith was involved with Charles Lewis and Capital
      Holdings. George Beros was known to [Schmidt] as a partner of
      Norman Schmidt in M onarch Capital Holdings and the trader of the
      medium term notes.

             [Schmidt] continued to assist in the operation of Smitty’s,
      including soliciting investors, maintaining investor accounts, and
      preparing and sending monthly statements to investors w hich falsely
      represented the status of the investment, up to and until the execution
      of various search and seizure warrants stemming from the
      investigation of this case on M arch 7, 2003. She also participated in
      soliciting investments through and sending monthly statements to
      investors in other entities[.] During this period, [Schmidt] became
      aware that investors’ funds were not being deposited into non-
      depleting accounts, were not being used for the purposes represented
      to investors . . . and that no trading of M TNs had taken place.

R., doc. 750, at 4-5.

      The two counts to which Schmidt pled guilty involved a comparatively

small sum of money, $30,000. 2   The plea agreement listed several sentencing

2
      Count I involved her helping Charles Lewis to persuade a previous
acquaintance of Schmidt’s to invest $5,000 in the Smitty’s high-yield investment
program. Schmidt failed to disclose a material fact to the victim in connection
with the solicitation: that Lewis had a prior Colorado felony conviction.

       Count II involved an incident that occurred after the United States
government seized the Smitty’s, LLC bank accounts. An investor provided a
cashier’s check in the amount of $25,000 to Smitty’s. Because of the seizure of
Smitty’s bank accounts, this check could no longer be negotiated. Schmidt and
Norman Schmidt drove to the victim’s home to persuade him to provide a
cashier’s check to replace the original check. Schmidt did not disclose to the
victim Lewis’s felony conviction, that the funds would not be used to trade
M TNs, and that the Smitty’s bank accounts had been seized by federal law
enforcement agents. Schmidt and Norman Schmidt accompanied the victim to a
bank, where a check was drawn payable to a different entity. Schmidt later
assisted in opening a new account in the name of that entity, from which the
                                                                      (continued...)

                                        -3-
factors on which Schmidt and the government disagreed, including the amount of

loss to be attributed to Schmidt for advisory sentencing guideline purposes. The

government contended that the entire intended loss of more than $50 million

should be attributed to Schmidt, raising her offense level by 24 levels. Schmidt

noted her disagreement, but did not initially provide an alternate figure.

      The probation department prepared a Presentence Investigation Report

(PSIR). The PSIR stated that after additional analysis, the government now

believed that the total intended loss attributable to Schmidt’s participation in the

scheme was between $20 million and $50 million. This adjustment was

appropriate, the PSIR opined, because Schmidt had not been involved in the

initial part of the scheme to defraud. PSIR, at 4. The PSIR further stated that

“[d]efense counsel advised the probation officer that he believes . . . the loss to be

significantly less, but has not yet provided the probation officer a written

statement explaining his final loss calculation.” Id.

      Based on additional information supplied by the government, the probation

department later calculated the intended loss attributable to Schmidt at

$27,276,442.93. Id. at 16. This figure was based on the investor deposits into the

“non-depleting accounts.” Id. The PSIR further noted that defense counsel and

2
 (...continued)
victim’s funds were later withdrawn with Schmidt’s assistance and used for
purposes inconsistent with the representations made to the victim.

                                          -4-
the government agreed that this amount should be reduced by the principal

returned to investors. The government did not believe, however, that the repaid

principal would reduce the loss amount below $20 million. For an intended loss

between $20 million to $50 million, the Guidelines provided for an increase of 22

levels. The PSIR adopted this loss range in its calculations.

      The PSIR thus calculated Schmidt’s advisory guideline sentence as follow s:

      Base Offense Level:                                           6

      Enhancement based on intended loss of $20,000,000         +22
      but less than $50,000,000

      Enhancement for 50 or more victims                        +4

      Enhancement for use of “sophisticated means”              +2

      Adjusted Offense Level:                                      34

Id. at 21-23. The Adjusted Offense Level was then reduced by three levels

because Schmidt accepted responsibility for her crimes, resulting in an aggregate

level of 31.

      Schmidt had no prior criminal history points. Accordingly, her criminal

history category was I, which, when combined with the Adjusted Offense Level of

31, yielded an advisory guideline range of imprisonment of 108 to 135 months.

But because the statutory maximum penalty for the two offenses was only five

years each, the PSIR reduced the high end of the range to 120 months, yielding an

advisory guideline sentence of 108 to 120 months. See id. at 31.

                                         -5-
      Schmidt filed objections to the PSIR, in which she stated “the Defendant

does not yet know what amount of deduction to the gross loss number should be

applied. . . . If the deduction takes the loss below[] $20,000,000, the calculation

changes[.]” Defendant’s Objections, at 2. She also requested a departure from

the advisory guideline sentencing calculation, arguing that the government’s

figure “vastly exceeds the Defendant’s participation in this investment scheme,”

which in her view should have been limited to investment funds deposited in the

Smitty’s investment accounts and not those monies raised by other entities

“known as Capital Holdings, M onarch Capital Holdings, [and the] N orthwestern

Group.” Id. at 5. Schmidt calculated the loss resulting from this more limited

participation at $11,384,617. Id.

      The probation department prepared an addendum to the PSIR. It noted that

the government had supplied a revised loss figure, adjusted for return to investors,

of $25,656,958.96. Addendum, at A-1. This revised figure would have no effect

on the advisory guideline computation, since the amount of loss still exceeded

$20 million. The probation department further rejected Schmidt’s argument that

her participation should be limited to the Smitty’s accounts, noting that she w as a

registered agent of M onarch Capital Holdings, LLC, and that money was

transferred into FastTrack, LLC, an entity she controlled.

      During the sentencing hearing, Schmidt did not specifically renew her

objection that the loss calculation should be limited to the Smitty’s accounts.

                                          -6-
Sentencing Tr. at 25-29. The district court briefly addressed her previous

objections to the loss calculation, however, stating that they were “overruled . . .

generally for the reasons stated, arguments advanced, and authorities cited by the

probation officer and the government.” Id. at 41. The court then accepted “the

presentence report and its concomitant addenda, including the advisory sentencing

guideline applications and calculations therein, as an integral part of [its] findings

of fact.” Id. It further declined to depart downward from the advisory guideline

range, again referring to “the reasons stated, arguments advanced, and authorities

cited by the probation officer and the government.” Id. at 42. After considering

the factors contained in 18 U.S.C. § 3553, the district court sentenced Schmidt as

described above.

                                     ANALYSIS

      Schmidt contends that the district court erred by relying solely on the PSIR

to determine the amount of loss. She further argues that there was an insufficient

factual basis to hold her accountable for a loss in excess of $20 million.

      1. Standard of Review

      The parties disagree concerning the standard of review , but it is now well

established. After United States v. Booker, 543 U.S. 220 (2005), we review

sentences for reasonableness. United States v. Kristl, 437 F.3d 1050, 1053

(10th Cir. 2006) (per curiam). “[A] sentence that is properly calculated under the

Guidelines is entitled to a rebuttable presumption of reasonableness.” Id. at 1054;

                                          -7-
see also Rita v. United States, 127 S. Ct. 2456, 2462-63 (2007) (concluding that a

court of appeals may apply a presumption fo reasonableness to a

within-Guidelines sentence). In considering the district court’s application of the

Guidelines, we review its factual findings for clear error and its legal

determinations de novo. Kristl, 437 F.3d at 1054. W e review compliance with

the Rules of Criminal Procedure de novo. United States v. Rodriguez-Delma,

456 F.3d 1246, 1253 (10th Cir. 2006), cert. denied, 127 S. Ct. 1338 (2007).

      2. Reliance on PSIR

      Federal Rule of Criminal Procedure 32(i)(3)(B) requires a sentencing court

to make a ruling on any disputed portion of the presentence report, unless it

determines that a ruling is unnecessary because the controverted matter will not

affect sentencing. See also U.S. Sentencing Guidelines M anual § 6A1.3(b) (2002)

(requiring resolution of disputed sentencing factors at sentencing). Schmidt

contends that the district court did not satisfy the Rule because it failed to make a

“clear and independent ruling” on the disputed amount of loss and instead

“merely adopt[ed] the factual findings and guideline applications of the PSIR.”

U nited States v. William s, 374 F.3d 941, 947 (10th Cir. 2004).

      The district court “may accept any undisputed portion of the presentence

report as a finding of fact.” Fed. R. Crim. P. 32(i)(3)(A). W hen a defendant

alleges a factual inaccuracy in the PSIR, however, the district court must resolve

                                          -8-
the factual dispute and may not simply refer back to the PSIR itself to defeat the

objection. Rodriguez-D elm a, 456 F.3d at 1253.

      In her objections to the PSIR, Schmidt disputed her involvement with the

entities known as Capital Holdings, M onarch Capital Holdings, and the

Northwestern Group. The district court did not make a finding concerning

whether Schmidt was involved with these entities. Instead, it simply adopted the

PSIR’s findings and the government’s arguments on this point. Under W illiam s

and other pertinent authority, this was not a sufficient finding. A remand for an

appropriate finding is therefore required.

      The government raises several arguments in opposition to remand. First, it

argues that Schmidt waived or conceded her challenge to her participation in the

entities other than Smitty’s by failing to raise the objection in her initial

submission prior to issuance of the PSIR and by failing to renew the argument at

the sentencing hearing. W e do not find her argument waived, however. The

PSIR specifically acknowledged and addressed the argument in question, which

was raised in Schmidt’s objections. See Fed. R. Crim. P. 32(f)(1) (establishing

procedure for objections). The PSIR’s factual finding remained in contention at

sentencing, where the district court ruled upon it without the necessary factual

finding.

      Second, the government argues that Schmidt did not raise an authentic

factual dispute, but merely disputed the district court’s application of the

                                           -9-
Guidelines. Challenges to the district court’s application of the Guidelines alone

do not implicate Rule 32’s requirement of a specific finding as to the accuracy of

disputed facts. Rodriguez-D elm a, 456 F.3d at 1253; United States v. Windle,

74 F.3d 997, 1002 (10th Cir. 1996). But while Schmidt’s challenge addressed the

application of the Guidelines, requesting a downward departure, it also raised a

disputed factual issue for resolution: whether Schmidt participated in the fraud

perpetrated through entities other than Smitty’s. The district court was therefore

required to make a finding to resolve this factual dispute.

      Third, the government argues that Schmidt was required to offer evidence

beyond her own personal denials to trigger the district court’s further inquiry into

the loss issue. It was the government’s burden to prove the enhancement in

Schmidt’s base offense level resulting from her participation in the scheme.

W illiam s, 374 F.3d at 947 (stating government bears burden of establishing

sentence enhancements under Guidelines). 3 Using the government’s own data,

Schmidt arrived at a specific but substantially smaller loss figure than that

contained in the PSIR. This provided a sufficient evidentiary basis to establish a

disputed issue of fact, requiring a specific finding by the district court.

3
       W e acknowledge that Schmidt presented her factual dispute in the context
of a request for a downw ard departure rather than as a direct attack on her offense
level. Nevertheless, the factual dispute goes to the nature of relevant conduct to
be attributed to her, a factor relevant also to determining the enhancement
requested by the government.

                                         -10-
      The evidence showed that Schmidt was originally recruited as a victim into

the scheme, and only later became a participant. The plea agreement lacks detail

concerning her participation in specific aspects of the scheme. Given her

objection to the PSIR, the nature and extent of her participation were key factors

to be resolved in determining the appropriate advisory Guideline range and her

appropriate sentence. See U .S. Sentencing Guidelines M anual §§ 1B1.3(a)(1)(A )

and (B) (2002) (addressing relevant conduct), 2B1.1 cmt. 2 (addressing loss

calculation).

      3. Sufficiency of Evidence

      Schmidt also argues that the evidence was insufficient to justify the

enhancement. She contends that the district court could only rely on conduct to

which she pleaded guilty or which was proved to a jury beyond a reasonable

doubt. This is not the law, however. “[S]o long as the district court applies the

Guidelines in an advisory, rather than a mandatory, fashion, it may rely on facts

found by a judge to be true based on a preponderance of the evidence.” United

States v. Bustamante, 454 F.3d 1200, 1202 (10th Cir. 2006). The district court

treated the Guidelines as advisory and could therefore find facts by a

preponderance in sentencing Schmidt. While its finding here was insufficient in

light of the factual dispute, Schmidt’s admission to the relevant conduct was not

required.

                                        -11-
      Schmidt also complains that the district court impermissibly relied on

hearsay evidence, in the form of bank deposit information submitted by the

government. For hearsay to serve as a basis for a sentencing enhancement, the

Sentencing Guidelines require that the statement possess “sufficient indicia of

reliability to support its probable accuracy.” U.S Sentencing Guidelines M anual

§ 6A1.3(a) (2002); see also United States v. Dazey, 403 F.3d 1147, 1177 n.7

(10th Cir. 2005) (citation omitted). This is not a high standard, for it requires only

“minimal indicia of reliability.” United States v. Fennell, 65 F.3d 812, 813

(10th Cir. 1995) (citing United States v. Beaulieu, 893 F.2d 1177, 1181 (10th Cir.

1990)). The evidence before the district court concerning the amount of loss

appears to possess sufficient indicia of reliability to support its probable accuracy

concerning the actual losses incurred by the victims. W e decline to address at

this time, however, whether this evidence would have been sufficiently reliable to

support a proper finding on the disputed participation issue, had one been made.

On remand for the additional findings w e have ordered, the district court should

determine whether further proceedings or the reception of additional evidence on

this question are required.

                                         -12-
      W e VACATE the district court’s sentence, and REM AND for further

proceedings in accordance with this order and judgment.

                                                  Entered for the Court

                                                  Stephen H. Anderson
                                                  Circuit Judge

                                      -13-