Court Opinion

ID: 815372
Source: CourtListenerOpinion
Date Created: 2013-01-15 17:41:47+00
Date Added: 2024-06-11T12:39:12.162481
License: Public Domain

PRECEDENTIAL

  UNITED STATES COURT OF APPEALS
       FOR THE THIRD CIRCUIT
            _____________

                No. 10-3771
               _____________

      UNITED STATES OF AMERICA

                      v.

               ISSA DIALLO,

                          Appellant
                ___________

On Appeal from the United States District Court
    for the Middle District of Pennsylvania
            (D.C. No. 3:09-CR-007)
 District Judge: Honorable James M. Munley
                ____________

           Argued October 3, 2012

  Before: FUENTES, FISHER, and COWEN,
              Circuit Judges

      (Opinion Filed: January 15, 2013)
Paul J. Walker, Esq.
Curt M. Parkins, Esq. [ARGUED]
Walker & Comerford Law LLC
Suite C
205-207 N. Washington Avenue
Scranton, PA 18503

      Counsel for Appellant Issa Diallo

Peter J. Smith, United States Attorney
Stephen R. Cerutti II, Assistant United States Attorney
                                                   [ARGUED]
United States Attorney’s Office
Middle District of Pennsylvania
Ronald Reagan Federal Building
Suite 220
228 Walnut Street
Harrisburg, PA 17108

             Counsel for Appellee United States of America
                          ____________

                   OPINION OF THE COURT
                        ____________

FUENTES, Circuit Judge:

       Issa Diallo was arrested and pleaded guilty to
knowingly possessing 15 or more counterfeit credit cards
with the intent to defraud. At his sentencing hearing, the
Government argued that although the actual loss attributed to
Diallo’s conduct amounted to $160,000, he should be
assessed a 16-level enhancement because his intended loss

                                 2
amount was the maximum that he could have charged on the
credit cards, which was $1.6 million. We agree with Diallo’s
contention that for the purpose of Section 2B1.1 of the
Sentencing Guidelines, the intended loss of a credit card fraud
is not, in every case, the credit card’s credit limit. We
therefore vacate and remand for resentencing. 1

                               I.

        On December 26, 2008, Diallo used a counterfeit
credit card to purchase 26 gift cards, each valued at $100, at a
Wegmans Supermarket in Wilkes-Barre, Pennsylvania. The
following day, Diallo returned to that supermarket and was
arrested. At the time of his arrest, Diallo possessed $920 in
cash, a counterfeit North Carolina driver’s license, and a
counterfeit credit card. After obtaining a search warrant, the
Wilkes-Barre Township Police Department searched Diallo’s
vehicle and recovered 53 counterfeit credit cards, a
counterfeit Louisiana driver’s license, 24 gift cards, a Global
Positioning System (GPS), a laptop computer, a thumb drive,
and a skimming device, which is a hand-held device that
copies, stores, and encodes credit card information from a
credit card’s magnetic strip. A subsequent search by Secret
Service agents resulted in the discovery of a second thumb
drive and another gift card. Searches of the laptop and thumb
drives revealed over 200 compromised Discover, Visa, and
MasterCard credit card accounts. Through a search of the
GPS device, Secret Service agents also discovered the
addresses for 12 Wegmans stores, 9 Wawa convenience

1
 The District Court had jurisdiction pursuant to 18 U.S.C. §
3231. This Court has appellate jurisdiction pursuant to 28
U.S.C. § 1291 and 18 U.S.C. § 3742.

                                    3
stores, and 3 7-Eleven convenience stores. Wegmans advised
agents that during November and December 2008, Diallo had
been recorded on store surveillance tapes using a fraudulent
credit card to purchase Visa gift cards at Wegmans stores
throughout Virginia, Pennsylvania, New Jersey, and New
York.

       During an interview with Secret Service agents, Diallo
admitted to possessing the compromised credit card numbers
on his laptop computer and thumb drives. Diallo stated that he
had received the account information from another individual
and that he could load the account information onto gift cards
using the skimming device.

        On January 21, 2010, Diallo pleaded guilty to
knowingly possessing 15 or more counterfeit access devices,
with intent to defraud, in violation of 18 U.S.C. § 1029(a)(3).
The parties did not agree to a specific loss amount or the
number of victims and reserved the issue for the sentencing
hearing. The parties agreed that the sentence would be
calculated under U.S.S.G. § 2B1.1, which is the Guideline
covering fraud offenses. Prior to sentencing, a U.S. Probation
Officer prepared a presentence report, which calculated a total
offense level of 27 and criminal history category of I. The
total offense level included a 16-level enhancement for an
intended loss amount of over $1 million but not more than
$2.5 million, which was based on the Secret Service agents’
determination of the aggregate credit limit of all of the
compromised credit card numbers, and a 4-level enhancement
for over 50 victims, based on the number of financial
institutions that had issued the credit cards numbers. Diallo
objected to both enhancements.

                                  4
        At Diallo’s sentencing hearing, the Secret Service case
agent testified that he had determined that there were 52
victims, consisting of the 51 financial institutions that owned
the various credit card numbers and Wegmans Corporation.
The agent also testified that while an actual loss of $160,000
could be attributed to Diallo, there was “approximately $1.6
million in potential loss.” App. 15) He calculated this
potential loss by contacting the 51 financial institutions
associated with each credit card to request each card’s credit
limit, and the total credit limit for the 327 credit cards was
$1.6 million. The agent, however, conceded that an individual
in possession of a stolen card could not determine its credit
limit without a subpoena.

       At Diallo’s sentencing hearing, the defense argued that
“intended loss requires knowledge that the loss is a virtual
certainty,” and that Diallo did not have “that type of guilty
knowledge as to the amount that was available on these cards
or that he even had access to these cards.” App. 24. In
response, the government argued:

      [I]ntended loss isn’t necessarily something that
      is certain.

      If you can take someone’s credit card, and you
      can charge up to $20,000 on it, that’s the
      intended loss. That is how much you can get if
      you try long and hard enough to get it.

      The card will stop when there is nothing
      available any longer, when the credit limit has
      been reached.

                                  5
Ohio App. 25.

       The District Court accepted the Government’s
arguments on Diallo’s intended loss and the number of
victims, and it overruled Diallo’s objections. The Court’s
analysis on these two issues consisted of the following: “The
intended loss for credit cards he personally used and the cards
he manufactured and provided to others totaled $1.6 million.
Over 50 financial institutions were affected by his actions. So
obviously it is a very serious offense.” App. 30-31. The
District Court then applied both enhancements, resulting in a
total offense level of 27 and a Guidelines range of 70 to 87
months’ imprisonment.

       After the District Court overruled the objection to the
intended loss amount enhancement, Diallo argued that a
departure was warranted. He emphasized the fact that the
intended loss calculation of $1.6 million is ten times greater
than the actual loss, and is “a gross overstatement of the
seriousness of this offense.” App. 28. While the District Court
declined to depart from the Guidelines range, it ultimately
sentenced Diallo to a bottom-of-the-Guidelines-range
sentence of 70 months’ imprisonment.

                              II.

       On appeal, Diallo challenges the application of the
same two enhancements to which he objected at his
sentencing hearing. He maintains that (1) his Guidelines
range was improperly calculated because of the District
Court’s determination that intended loss is simply an
aggregation of the credit limits of stolen credit card numbers,
despite no evidence that Diallo intended to cause that amount

                                    6
of loss; and (2) the District Court incorrectly increased his
offense level by four levels based on a finding that there were
over fifty victims when only thirty victims had suffered an
actual loss.

        The Government has conceded that the number-of-
victims enhancement is improper because the applicable
Sentencing Guidelines require that victims must have suffered
an actual loss, as compared to subsequent Guidelines which
additionally included individuals “whose means of
identification [were] used unlawfully or without authority.”
U.S.S.G. § 2B1.1 app. n.4(E) (effective Nov. 1, 2009); see
also United States v. Kennedy, 554 F.3d 415, 419 (3d Cir.
2009) (holding that victims must have suffered an actual
pecuniary loss); United States v. Corrado, 53 F.3d 620, 622
(3d Cir. 1995) (holding that the earlier Guidelines control
when retroactive application of the Guidelines in effect at
sentencing would result in more severe penalties). As the
Government has conceded that remand for resentencing on
this enhancement is appropriate, we will only consider the
question of Diallo’s intended loss amount.

                               A.

       Section 2B1.1 of the Sentencing Guidelines provides
that the offense level is to be increased based on the loss
amount for offenses involving fraud, as well as other larceny
and theft offenses. For offenses resulting in a loss greater than
$120,000, there is a 10-level increase, and when there is a
loss greater than $1 million, there is a 16-level increase.
U.S.S.G. § 2B1.1(b)(1). “Loss” is defined as “the greater of
actual loss or intended loss.” Id. app. n.3(A). “Intended loss”
is defined as “the pecuniary harm that was intended to result

                                    7
from the offense[] and includes intended pecuniary harm that
would have been impossible or unlikely to occur (e.g., as in a
government sting operation, or an insurance fraud in which
the claim exceeded the insured value).” Id. app. n.3(A)(ii). In
estimating loss, the application notes advise, “[t]he court need
only make a reasonable estimate of the loss. The sentencing
judge is in a unique position to assess the evidence and
estimate the loss based upon that evidence. For this reason,
the court’s loss determination is entitled to appropriate
deference.” Id. app. n.3(C). This appeal requires us to
determine how sentencing courts should calculate what
“pecuniary harm was intended to result” from credit card
fraud when the fraud’s perpetrator did not know the credit
limit, which is the potential loss amount from the stolen credit
card.

        As we have not yet addressed this question, the parties
urge us to consider extra-Circuit authority to determine how
to calculate intended loss in a credit card fraud. Diallo asks
the Court to adopt the reasoning of the Tenth Circuit in
United States v. Manatau, 647 F.3d 1048 (10th Cir. 2011). In
Manatau, the Tenth Circuit stated that “‘intended loss’ means
a loss the defendant purposely sought to inflict. ‘Intended
loss’ does not mean a loss that the defendant merely knew
would result from his scheme or a loss he might have possibly
and potentially contemplated.” Id. at 1050 (emphasis in
original). The Court looked at the plain language and context
of the Guideline and background legal norms, and it held that
“a court cannot simply calculate ‘intended loss’ by toting up
credit limits without any finding that the defendant intended
to inflict a loss reasonably approaching those limits.” Id. at
1056-57. The Government, however, cites cases from the
Fifth, Seventh, and Eighth Circuits, that it contends support

                                  8
its view that aggregating the total credit limit is the proper
method to calculate intended loss. See United States v.
Harris, 597 F.3d 242 (5th Cir. 2010); United States v.
Bonanno, 146 F.3d 502 (7th Cir. 1998); United States v.
Staples, 410 F.3d 484 (8th Cir. 2005). However, all of these
cases are distinguishable from the facts before us as the cases
involved either defendants who recklessly transferred the
credit information to a third party, thereby placing the full
potential loss at risk, or defendants who had knowledge of
and actually intended the maximum potential loss.
       While we have not specifically considered how to
estimate the intended loss of a credit card fraud, we have
addressed how intended loss should be calculated under
analogous circumstances where the defendant had not
necessarily expected to capture the full potential loss. As with
other sentencing enhancements, we employ a burden-shifting
framework to establish that an enhancement applies.
“[T]hough the government bears the burden of proof in
guidelines cases, the burden of production may shift to the
defendant once the government presents prima facie evidence
of a given loss figure.” United States v. Geevers, 226 F.3d
186, 188 (3d Cir. 2000). However, the government always
bears the burden of proving by a preponderance of the
evidence that the facts support a sentencing enhancement, and
“the defendant does not have to prove the negative to avoid
the enhanced sentence.” United States v. Evans, 155 F.3d
245, 253 (3d Cir. 1998) (internal quotation marks and citation
omitted).

       We looked at how sentencing courts should calculate
intended loss in United States v. Kopp, 951 F.2d 521 (3d Cir.
1991). In Kopp, the district court sentenced the defendant
based on the full value of the bank loan that his fraudulent

                                  9
misrepresentation had secured, rather than determining the
victim-bank’s actual loss or evaluating the defendant’s claim
that he intended to repay the loan. Id. at 525-26. We rejected
a “[m]echanical application of the theft guidelines in fraud
cases” and remanded the case after finding that the district
court made no findings on actual or intended loss. Id. at 529,
536. We cautioned that the fraud Guideline “has never
endorsed sentencing based on the worst-case scenario
potential loss” and admonished sentencing courts to consider
actual or intended harm. Id. at 529 (emphasis in original). To
make this determination, we look to the “defendant’s
subjective expectation, not to the risk of loss to which he may
have exposed his victims.” United States v. Yeaman, 194 F.3d
442, 460 (3d Cir. 1999). Nevertheless, “[w]hile intended loss
may not be automatically determinable based on what the
potential loss is, intended loss may still equal potential loss.”
Geevers, 226 F.3d at 192. However, the Geevers Court
cautioned, “[i]t is clear that a district court errs when it simply
equates potential loss with intended loss without deeper
analysis.” Id.

        Geevers involved a check kiting scheme, whereby
Geevers had opened numerous bank accounts by depositing
checks from closed accounts or accounts with insufficient
funds and then attempted to withdraw some of the funds
before the victim bank realized the checks were not backed.
Id. at 188-89. Geevers had deposited checks with face values
of $2 million, had attempted to withdraw or transfer about
$400,000, and had managed to withdraw or transfer over
$160,000. Id. at 189. The government argued that the
intended loss amount was the total face value of the deposited
checks. Id. Geevers, however, argued that it was not his
intention to steal the total face value of the checks and that he

                                   10
could not have possibly successfully withdrawn that amount.
Id. at 189-90. We found Geevers’s contention of impossibility
irrelevant, noting “impossibility does not require a sentencing
court to lower its calculation of intended loss.” Id. at 195.
Instead, the Court found that even though it was likely that
Geevers did “not expect to obtain the full amount of his
fraudulent checks[,] . . . expectation is not synonymous with
intent when a criminal does not know what he may expect to
obtain, but intends to take what he can.” Id. at 193.

        To the contrary, focusing on Geevers’s argument
regarding intent, the Court held that “a reasonable inference
may be drawn that a defendant in Geevers’s position intends
to cause the full loss of the face value of his false checks.” Id.
at 192. Based on that reasonable inference, “the government
has made its prima facie case,” and under our burden-shifting
framework, the defendant “is free to come forward with
evidence to demonstrate that he actually intended something
less.” Id. at 193. Still the Geevers Court cautioned sentencing
courts that “the face value of the deposited checks is not to be
mechanically assumed to be the intended loss.” Id. at 194.
Furthermore, even after determining the intended loss
amount, district courts must consider whether the loss amount
properly accounts for the seriousness of the offense and if not,
whether to depart downward or upward. “[I]f any such
augmentation caused the properly calculated ‘loss’ to
overstate the seriousness of the offense,” then the district
court may depart downward. Kopp, 951 F.2d at 523.
“Correspondingly, if the court finds that the ‘loss’ understates
the seriousness of the offense (which might be the case if
actual and intended loss were zero and the risk of loss were
significant), it may depart upward . . . .” Id.

                                   11
        In United States v. Titchell, 261 F.3d 348, 353-54 (3d
Cir. 2001), we reinforced the Geevers requirement that
district courts must conduct a “deeper analysis” before
drawing the inference that a defendant intended to cause the
full potential loss. In Titchell, the defendant had been
convicted of mail fraud after mailing out fictitious invoices
totaling $17,577,525 for the renewal of Yellow Pages
advertising. Id. at 352. The defendant made at least $647,000
from this scheme. Id. At sentencing, the entirety of the district
court’s analysis was: “In this case the bulk mailing did (sic)
defendant was found guilty of contained 119,575 bogus
renewal invoices at a quote of $147 a piece. Thus, intended
loss was $17,577,525. Therefore, the increase is warranted
and the base offense level is increased to 21.” Id. at 353
(internal quotation marks omitted) (alterations in original).
On appeal, we found that the district court’s mere reference to
the potential loss calculation, without any “attempt to explain
or justify why the potential loss . . . should be considered to
be the same as the intended loss,” constituted error. Id. at
353-54. We reproached the government for its argument that
district courts can implicitly draw reasonable inferences that a
defendant intended to cause the full potential loss, noting, “if
district courts could silently draw such inferences, there
would be little left of Geevers’ admonition that district courts
must perform a ‘deeper analysis’ than simply calculating
potential loss.” Id. at 354. Here, we must determine whether
the District Court performed the requisite “deeper analysis” in
calculating Diallo’s loss amount.

                               B.

      At Diallo’s sentencing, a Secret Service agent testified
that he and his colleagues had contacted each financial

                                    12
institution to determine the credit limit for each account
number that Diallo had possessed and that the aggregate
credit limit totaled $1.6 million. Only $160,000 in fraudulent
activity could be attributed to Diallo. The agent also testified
that an individual in possession of a stolen card would not be
able to determine the credit limit without a subpoena to the
financial institution. Finally, the agent testified that Diallo
possessed a skimming device, which copies, stores, and
encodes credit card information, and that Diallo was
perpetrating his scheme at Wegmans stores from Virginia to
New York.

        The United States probation officer who prepared
Diallo’s presentence investigation report relied on the Secret
Service’s determination that “[b]ased on the credit limit of
each card, the intended loss amount was more than
$1,600,000 but less than $2,500,000” and added 16 levels
pursuant to U.S.S.G. § 2B1.1(b)(1)(I). Confidential
Presentence Report (“PSR”) ¶¶ 13, 20. The defense objected
to the 16-level enhancement at sentencing, arguing that Diallo
did not have “that type of guilty knowledge as to the amount
that was available on these cards.” App. 24. The defense cited
case law from outside of this Circuit in support of its view
that “intended loss requires knowledge that the loss is virtual
certainty,” which is not present in this case. Id. The
Government responded that “If you can take someone’s credit
card, and you can charge up to $20,000 on it, that’s the
intended loss. That is how much you can get if you try long
and hard enough to get it.” App. 25. The District Court, with
no analysis, overruled Diallo’s objection to the intended loss
enhancement. Diallo then argued for a downward departure,
stating that as the intended loss calculation is ten times the
actual loss, “the intended loss is really a gross overstatement

                                  13
of the seriousness of this offense.” App. 28. In sentencing
Diallo, the entirety of the District Court’s analysis on the
intended loss amount was as follows: “The intended loss for
credit cards he personally used and the cards he manufactured
and provided to others totaled $1.6 million.” App. 30-31.

       In this case, as in Titchell, the District Court did not
heed our warning that “it is error for a district court simply to
equate [potential loss and intended loss] without ‘deeper
analysis.’” Titchell, 261 F.3d at 354 (citing Geevers, 226 F.3d
at 192). Here, there was no “deeper analysis” by the District
Court as to whether Diallo intended the maximum potential
loss by “maxing out” each and every credit card number that
he fraudulently possessed. It is possible that the District Court
relied on the Secret Service agent’s testimony that the search
of his car uncovered a skimming device; the evidence that
Diallo has traveled from Virginia to New York in order to use
the fraudulent credit cards; that Diallo had already spent
$160,000 and was continuing to make additional purchases;
or that at the time of his arrest, Diallo had returned to a store
where he had made $2,600 in purchases just one day prior. It
is also conceivable that the District Court agreed with the
Government’s argument that Diallo intended to charge up to
the credit limit on every credit card number found in his
possession. On the other hand, the District Court might
simply have incorrectly presumed that the aggregate credit
limit alone can make out a prima facie case for intended loss
amount in a credit card fraud. Given that the District Court
sentenced Diallo to 70 months, the bottom of his 70-to-87-
months Guidelines range, perhaps the District Court accepted
the defense’s argument that the intended loss amount grossly
overstated the seriousness of Diallo’s conduct. But from the
District Court’s statement at sentencing—“The intended loss

                                  14
for credit cards he personally used and the cards he
manufactured and provided to others totaled $1.6 million”
App. 30-31—we would be speculating as to what evidence or
argument was the basis for the District Court’s finding that
$1.6 million was Diallo’s intended loss amount. This type of
“speculation ‘is inappropriate’ in light of the inherently
discretionary nature of the sentencing court’s decision.”
United States v. Knight, 266 F.3d 203, 208 (3d Cir. 2001)
(citing United States v. Pollen, 978 F.2d 78, 89-90 (3d Cir.
1992)).

                               C.

       We cannot say as a matter of law that the District
Court’s error was harmless. The possibility exists that the
District Court, on remand, may find that the Government fails
to prove by preponderance of the evidence that Diallo
intended to use each and every fraudulent credit card until the
entire $1.6 million aggregate credit limit was depleted. If so,
it may find that the actual loss of $160,000 is a more
reasonable estimate of loss. Based on that loss amount, the
District Court would increase the offense level by ten, rather
than sixteen, resulting in a total offense level of 21 instead of
27, leading to a Guidelines range of 37 to 46 months’
imprisonment. U.S.S.G. ch. 5, pt. A. 2 Of course, on remand,
the District Court may also better justify its conclusion that
Diallo intended to commit the maximum potential loss.

2
  This Guidelines range does not incorporate the additional
reduction that would occur on remand based on the number-
of-victims enhancement.

                                    15
       Thus, we must remand to the District Court to
determine the intended loss amount and whether a departure
is warranted based on the intended loss amount overstating or
understating the seriousness of the offense. See United States
v. Langford, 516 F.3d 205, 217 (3d Cir. 2008) (“[W]e cannot
presume that a district court would have imposed the same
sentence, given the opportunity to consider the correctly
calculated Guideline.”).

                             III.

      Accordingly, the Judgment of Sentence of the District
Court entered on September 7, 2010 will be vacated and the
case remanded for resentencing in conformity with this
opinion.

                                    16