Court Opinion

ID: 1039538
Source: CourtListenerOpinion
Date Created: 2013-08-31 05:05:30.109081+00
Date Added: 2024-06-11T10:27:13.316326
License: Public Domain

Case: 12-30890   Document: 00512358658      Page: 1   Date Filed: 08/30/2013

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

                                                                   FILED
                                                                 August 30, 2013

                                 No. 12-30890                    Lyle W. Cayce
                                                                      Clerk

UNITED STATES OF AMERICA,

                                            Plaintiff-Appellee
v.

CRAIG MICHAEL NASH,

                                            Defendant-Appellant

                 Appeal from the United States District Court
                    for the Western District of Louisiana

Before SMITH, GARZA, and SOUTHWICK, Circuit Judges.
LESLIE H. SOUTHWICK, Circuit Judge:
      Craig Nash appeals the district court’s imposition of a two-level sentencing
enhancement pursuant to U.S.S.G. § 2B1.1(b)(9)(C) for violating a prior, specific
administrative order. For the following reasons, we AFFIRM the sentence.
              FACTUAL AND PROCEDURAL BACKGROUND
      In March 2003, Craig Nash opened the “Goodfellas Tobacco” convenience
store (“Goodfellas”). He subsequently applied to the Food and Nutrition Service
of the United States Department of Agriculture (“USDA”) to become an
authorized retailer of the Supplemental Nutrition Assistance Program (“SNAP”),
commonly known as the “food stamp” program. SNAP is a food assistance
program that enables low-income households to buy food using monthly benefits
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in the form of electronic benefit transfer cards redeemable for food at authorized
retail stores. As part of the application process, Nash agreed to abide by SNAP
regulations, which prohibited the unlawful purchasing and redeeming of SNAP
benefits, including for ineligible items like alcohol. Nash’s application was
granted on January 28, 2004, and Goodfellas began accepting SNAP benefits.
      Based on suspicious transactions, the USDA opened an investigation into
possible food stamp trafficking by Goodfellas on February 2, 2007. The USDA
determined that between January 17 and April 3, 2007, Goodfellas violated
SNAP regulations on four occasions by accepting SNAP benefits in exchange for
ineligible merchandise. The USDA sent Nash a letter dated July 1, 2008,
charging Nash with misuse of food stamp benefits, and notifying him that the
violations called for a six-month disqualification period from SNAP or, under
certain circumstances, a civil money penalty. The letter provided Nash with the
opportunity to reply to the charges; it stated that he could have legal counsel
present at any meeting. Finally, the letter stated that if Nash did not reply
within ten days of receipt of the letter, the USDA would reach a decision based
on the available information and advise him in writing.
      Nash replied on July 8. The USDA sent him a second letter dated July 9,
confirming receipt and consideration of the reply. The letter also stated that the
USDA had concluded that the violations cited in the July 1 letter had occurred.
Because the USDA found that Goodfellas’ disqualification from SNAP would
cause hardship for food stamp households, the agency imposed a civil money
penalty of $14,742.00. The letter warned that failure to pay the fine would
result in a six-month disqualification from SNAP. Further, “[i]f it is determined
that you accepted food stamp benefits after the effective date of disqualification,
you will be subject to a severe monetary fine . . . and possible prosecution under
applicable laws.”    The July 9 letter also stated that the USDA’s decision
constituted a final determination unless Nash submitted a written request for

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review. The letter concluded by alerting Nash that this decision did not preclude
the USDA or any other agency “from taking further action to collect any claim
determined under [the food stamp program regulations], or under any other
pertinent statutes or regulations,” or “prosecution under applicable laws.” Nash
acknowledged the violation and agreed to pay the fine.
      Because of continuing suspicious activity at Goodfellas, the USDA’s Office
of Inspector General began a criminal investigation on September 23, 2009, to
determine if the store was still violating SNAP regulations. Federal agents with
the assistance of cooperating witnesses made ten undercover visits to Goodfellas,
during which store employees exchanged $2,862.34 in SNAP benefits for
$1,395.00 in cash and ineligible items such as beer, liquor, and cigarettes. The
illegal transactions resulted in multiple fraudulent wire transfers of funds from
the United States Treasury into Goodfellas’ bank account.
      In December 2009, while the government’s investigation continued, Nash
applied for authorization to accept SNAP benefits at a second location,
“Goodfellas Grocery II.”1 Nash proceeded to commit food stamp fraud through
this second store as well, redeeming a total of $91,006.41 in SNAP benefits, of
which at least $62,515.86 was obtained fraudulently. It later was determined
that from January 2007 through January 2011, Goodfellas completed a total of
2,066 SNAP redemption transactions resulting in $2,917,587.84 being deposited
into Goodfellas’ bank account. Combined, Nash’s stores fraudulently obtained at
least $1,784,135.51 through food stamp trafficking.
      On May 12, 2011, Nash was indicted with one count of conspiracy to
defraud SNAP in violation of 18 U.S.C. § 371, fifteen counts of food stamp fraud
in violation of 7 U.S.C. § 2024(b) or (c), and ten counts of wire fraud in violation
of 18 U.S.C. § 1342. Nash pled guilty to the conspiracy count and one count of

      1
          By this point, Goodfellas had renamed itself “Goodfellas Grocery.”

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wire fraud. A presentence investigation report (“PSR”) issued on April 12, 2012.
Using the November 1, 2011 Guidelines, the PSR calculated that Nash had a
total offense level of 22 and a criminal history category of I, resulting in a
recommended sentence of 41-51 months.
       As relevant to this appeal, the government objected to the PSR’s failure to
apply a two-level enhancement under Section 2B1.1(b)(9)(C) of the United States
Sentencing Guidelines for an offense involving “a violation of a prior, specific
judicial or administrative order, injunction, decree or process.” The probation
office responded to the government’s objection in a May 9 addendum, stating
that it could not address the applicability of Section 2B1.1(b)(9)(C) because it did
not have documents relating to the 2007 investigation into Nash’s SNAP
violation. The addendum added, however, that “should the Government be able
to provide further evidence concerning the 2007 sanctions, the probation office
would agree that the two (2) level enhancement would apply.”
       The government submitted the July 1 and 9 letters to the district court,
which issued a memorandum ruling on August 21, 2012.2 After reviewing the
letters, the court agreed that Section 2B1.1(b)(9)(C)’s two-level enhancement was
appropriate. On August 16, the district court sentenced Nash to 60 months’
imprisonment on the conspiracy count and 78 months’ imprisonment on the wire
fraud count, to be served concurrently. The court also imposed a three-year term
of supervised release. Nash timely appealed the district court’s imposition of a
two-level enhancement under Section 2B1.1(b)(9)(C).
                                      DISCUSSION
       We review a district court’s interpretation or application of the Guidelines
de novo and its factual findings for clear error. United States v. Cisneros-
Gutierrez, 517 F.3d 751, 764 (5th Cir. 2008). A determination that a particular

       2
        Although not part of the original appellate record, we later granted the government’s
motion to supplement the record with the July 1 and 9 letters.

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judicial or administrative action qualifies under Section 2B1.1(b)(9)(C) is an
interpretation and application of the guidelines that we review de novo. Id.
      Section 2B1.1(b)(9)(C) provides that the offense level for a fraud offense
must be increased by two levels if the offense involves “a violation of any prior,
specific judicial or administrative order, injunction, decree, or process not
addressed elsewhere in the guidelines.” An Application Note elaborates:
      Subsection (b)(9)(C) provides an enhancement if the defendant
      commits a fraud in contravention of a prior, official judicial or
      administrative warning, in the form of an order, injunction, decree,
      or process, to take or not to take a specified action. A defendant who
      does not comply with such a prior, official judicial or administrative
      warning demonstrates aggravated criminal intent and deserves
      additional punishment. If it is established that an entity the
      defendant controlled was a party to the prior proceeding that
      resulted in the official judicial or administrative action, and the
      defendant had knowledge of the prior decree or order, this
      enhancement applies even if the defendant was not a specifically
      named party in that prior case.
U.S.S.G. § 2B1.1(b)(9)(C) cmt. n.7(C).3
      On appeal, Nash argues that the district court erred in imposing a two-
level enhancement under Section 2B1.1(b)(9)(C) based on his prior SNAP
violations because “[c]ontrary to the district court’s conclusion, the defendant’s
‘negotiation’ with an agency that included the ‘definite result’ of the payment of
a fine [was] insufficient to support [the conclusion] that he failed to comply with
a ‘definitive directive’ of the agency as a result of the subsequent SNAP
violations to which he pled guilty.” Nash appears to focus on the need for the
agency “to issue a directive that the defendant subsequently violated.” We
understand him to argue that because the July 9 letter did not expressly enjoin

      3
          Guidelines commentary is binding and is equivalent in force to the Guidelines
language itself as long as the language and the commentary are not inconsistent. United
States v. Rayo-Valdez, 302 F.3d 314, 318 n.5 (5th Cir. 2002).

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him from committing food stamp fraud in the future, he cannot now be found to
have violated the USDA’s order. We find Nash’s argument to be without merit.
      We previously have interpreted an argument like Nash’s only once, in an
unpublished opinion. United States v. Garcia, 432 F. Appx. 318, 321 (5th Cir.
2011). The court’s reasoning was valid and we adopt it here. The defendant
Garcia owned and operated, with the assistance of her husband and co-
conspirator, a facility providing orthotic and prosthetic goods and services. Id.
at 321. Subsequently, Texas enacted a statute requiring such facilities to
become accredited orthotic facilities under the clinical direction of an orthotist
licensed by the Texas Board of Orthotics and Prosthetics. Id. Although the
defendant arranged to have a licensed orthotist serve as the facility’s
practitioner-in-charge, she continued to do business even when the orthotist was
not present in violation of the Texas statute. Id. The defendant later was
convicted of committing health care fraud. Id. at 322. The district court applied
Section 2B1.1(b)(9)(C)’s two-level enhancement on the basis of a cease and desist
order issued by the Texas Board of Orthotics and Prosthetics. Id. at 329. The
Board issued its order after denying the husband’s licensing request because he
had repeatedly failed the licensing exam. Id. at 330. The order also warned of
monetary penalties if the order was violated. Id.
      After reviewing decisions from other circuits, we found application of the
enhancement inappropriate because the cease and desist order “did not stem
from a hearing, negotiations, or an interaction between [the defendant’s co-
conspirator] and the Texas Board of Orthotics & Prosthetics that allowed [the
co-conspirator] ‘to participate in some meaningful way’ and that led to ‘a definite
result.’” Id. (quoting United States v. Goldberg, 538 F.3d 280, 291 (3d Cir. 2008)).
We further observed that “there is no evidence in the record that the Board fined
[the co-conspirator] for violating the order prior to his federal indictment” and

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that “[i]t appears that the cease and desist order was not akin to the formal
orders” that other courts found warranted the enhancement. Id.
      Applying Garcia’s reasoning, the district court correctly found that Nash’s
prior violation of SNAP and his acknowledgment of the violation satisfied the
requirement that there be “interaction” between the agency and the defendant.
See Goldberg, 538 F.3d at 291-92 & n.7. The July 1 letter notified Nash that the
USDA had documented regulatory food stamp violations at Goodfellas. The
letter explained Nash’s right to reply to the charges, and Nash apparently
availed himself of that right. The USDA then issued its decision. There thus
was “an interaction” between Nash and the USDA, in which Nash had the ability
“to participate in some meaningful way.” Id. at 291; see United States v.
Spencer, 129 F.3d 246, 252 (2d Cir. 1997) (affirming application of enhancement
where there was evidence of informal administrative process of negotiation,
culminating in an agreement, and an informal decree). Because there was a civil
money penalty, and Nash agreed to pay the fine, the interaction also “led to a
definite result.” Goldberg, 538 F.3d at 291; see United States v. Malol, 476 F.3d
1283, 1294 (11th Cir. 2007) (“The key issue is whether the order or process has
been finalized.”); cf. Garcia, 432 F. App’x at 330 (observing that state board did
not fine the defendant for violating order prior to federal indictment).
      What might be perceived as still missing is that Section 2B1.1(b)(9)(C)
only applies if a defendant’s offense involved “a violation of [a] prior, specific
judicial or administrative order. . . . ” We consider that requirement to be met,
if somewhat short of its literal terms, by accepting the interpretation of the
Guideline application note: the enhancement should be applied “if the defendant
commits a fraud in contravention of a prior, official judicial or administrative
warning, in the form of an order, injunction, decree, or process, to take or not to
take a specified action.” § 2B1.1(b)(9)(C) cmt. n.7(C) (emphasis added). The
application note goes on to state that any “defendant who does not comply with

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such a prior, official judicial or administrative warning demonstrates aggravated
criminal intent and deserves additional punishment.” Id. The background note
similarly states that “[a] defendant who has been subject to civil or
administrative proceedings for the same or similar fraudulent conduct
demonstrates aggravated criminal intent and is deserving of additional
punishment for not conforming with the requirements of judicial process or
orders issued by federal, state, or local administrative agencies.” Id. cmt.
background. Although application of the enhancement “requires some specific
directive that the defendant can defy,” such a directive need not be only in the
form of an injunction or a cease and desist order. See Goldberg, 538 F.3d at 292.
      The July 9 letter found that Nash, through Goodfellas, was responsible for
violating food stamp regulations on four occasions by accepting benefits in
exchange for ineligible merchandise. The USDA fined him $14,742.00 and
warned that failure to pay the fine would result in a six-month disqualification
from SNAP. Cf. United States v. Linville, 10 F.3d 630, 632 (9th Cir. 1993) (not
applying the enhancement where defendant was not “issued a formal order
compelling statutory compliance”). The letter added that “[i]f it is determined
that you accepted food stamp benefits after the effective date of disqualification,
you will be subject to a severe monetary fine . . . and possible prosecution under
applicable laws.”    (emphasis added).      Finally, the letter made clear that
imposition of the fine did not preclude further action in response to Nash’s
violations. The dissent contends that the letter was insufficient to warn Nash
that future violations would result in enhanced penalties. While it is true that
“no court of appeals has held that a mere warning letter, without more, can
justify the enhancement,” the fine (itself the result of a proceeding in which
Nash participated) clearly “ordered [Nash] to stop” committing food stamp fraud.
Goldberg, 538 F.3d at 291-92. Nash’s understanding that continuation of his
fraudulent conduct was illegal makes him exactly the type of defendant the

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enhancement was intended to apply to, namely, one “who has been subject to
civil or administrative proceedings for the same or similar fraudulent conduct”
and thus has “demonstrate[d] aggravated criminal intent.” § 2B1.1(b)(9)(C) cmt.
background; see § 2B1.1(b)(9)(C) cmt. n. 7(C) (defendant’s failure to comply with
prior official administrative warning “demonstrates aggravated criminal intent
and deserves additional punishment,” and “defendant whose business previously
was enjoined from selling a dangerous product, but who nonetheless engaged in
fraudulent conduct to sell the product, is subject to this enhancement.”).
       Accordingly, the district court did not err in applying § 2B1.1(b)(9)(C) to
enhance Nash’s sentence.4 AFFIRMED.

       4
         The Goldberg court arguably took a more demanding view of the language an order
must contain. There, an agency issued a notice stating that the defendant had engaged in
prohibited conduct. The notice provided him with the opportunity to attend a meeting with
agency officials to present his views, and warned him that the next step would be to refer the
matter to the Department of Justice for possible criminal prosecution. 538 F.3d at 291. The
Third Circuit considered whether the fact that the notice said “you are dispensing illegal
drugs” was sufficient or whether the notice had “to say the word ‘desist’ on the same line to
tell him to stop.” Applying what it admitted was “a highly formalistic interpretation,” the
court decided the order must say “stop.” Id. at 292 n.7. “[I]f we are going to enhance a
sentence based on a failure to comply with a directive, we do not think that it is too much to
ask the directive be definitive in nature.” Id.
        Our decision is not contrary to Goldberg. While in Goldberg the agency notice merely
stated the agency’s belief that the defendant was engaging in illegal conduct, Nash actually
was fined for his conduct after having the opportunity to contest the agency’s determination.
See id. at 291 (enhancement could not be imposed “for no other reason than that the defendant
continued to engage in certain conduct after the agency questioned its legality”). The July 9
letter amounted to a directive that Nash could comply with or defy. Because Nash chose to
defy the USDA’s directive, the enhancement applies.

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EMILIO M. GARZA, Circuit Judge, dissenting:
      The district court erred at sentencing by imposing a two-level increase
pursuant to § 2B1.1(b)(9)(C). Section 2B1.1(b)(9)(C) only applies if a defendant’s
offense involved “a violation of [a] prior, specific judicial or administrative order,
injunction, decree, or process . . . .”
      The USDA’s July 9th letter stated, “We find that the violations cited in our
[July 1st] charge letter occurred at your firm.” In lieu of a six-month period of
disqualification, the letter assessed a fine for Nash’s SNAP violations and
required Nash to pay his fine within fifteen days of receipt of the letter. The
letter warned failure to pay the fine within fifteen days would result in a six-
month disqualification from the SNAP program. The letter further stated that
if “you are disqualified” and “it is determined you accepted food stamps benefits
after the effective date of disqualification, you will be subject to a severe
monetary fine . . . and possible prosecution under applicable laws.” The letter
informed Nash the USDA’s determination that Nash committed the SNAP
violations did not prevent other agencies or departments from taking action in
response to his violations.
      The government does not point to any order, injunction, decree or process
the USDA imposed in its July 9th letter that Nash violated. The letter required
Nash to pay a fine, and Nash paid that fine.
      The majority makes much of a Guideline note that states the enhancement
applies “if the defendant commits a fraud in contravention of a prior, official
judicial or administrative warning, in the form of an order, injunction, decree,
or process, to take or not to take a specified action.” Ante, at 8 (quoting
§ 2B1.1(b)(9)(C) cmt. n.7(C)). The majority concludes that “the fine . . . clearly
‘ordered [Nash] to stop’ committing food stamp fraud.” Ante, at 9. This is
unconvincing. The letter warned only that failure to pay the fine would result

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in disqualification from the SNAP program, and if disqualified, accepting food
stamp benefits during that period of disqualification would result in enhanced
penalties. The letter did not warn Nash to stop committing food stamp fraud.
Additionally, even if the letter made such a warning, the Guideline note requires
that the warning be “in the form of an order, injunction, decree, or process, to
take or not to take a specified action.” § 2B1.1(b)(9)(C) cmt. n.7(C). Here, in its
July 9th letter, the USDA only required Nash to pay the fine within fifteen days
of receipt of the letter. Nash paid the fine in a timely manner.1
       Respectfully, I dissent.

       1
          Moreover, it is unclear the USDA’s letters to Nash constituted the type of official
agency order or decree contemplated by the statute. See United States v. Linville, 10 F.3d 630,
632–33 (9th Cir. 1993) (“It is pellucid that there is a vast difference between ignoring prior
decrees, orders and injunctions after being subjected to formal proceedings, and ignoring
letters and the like, no matter how official they might look.”)

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