Court Opinion

ID: 994459
Source: CourtListenerOpinion
Date Created: 2013-07-04 00:23:16.850907+00
Date Added: 2024-06-11T10:54:32.380993
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

UNITED STATES OF AMERICA,
Plaintiff-Appellee,

v.                                                                      No. 97-4106

WILLIAM MARSHALL REECE,
Defendant-Appellant.

Appeal from the United States District Court
for the Eastern District of North Carolina, at Raleigh.
James C. Fox, District Judge.
(96-CR-122-F)

Argued: January 30, 1998

Decided: March 17, 1998

Before HAMILTON and LUTTIG, Circuit Judges, and
VOORHEES, Chief United States District Judge
for the Western District of North Carolina,
sitting by designation.

_________________________________________________________________

Affirmed by unpublished per curiam opinion.

_________________________________________________________________

COUNSEL

ARGUED: Tracy Chappell Curtner, HAFER, MCNAMARA,
CALDWELL, CUTLER & CURTNER, Raleigh, North Carolina, for
Appellant. Daniel Pearce Butler, Senior Trial Attorney, Public Integ-
rity Section, UNITED STATES DEPARTMENT OF JUSTICE,
Washington, D.C., for Appellee. ON BRIEF: Richard T. Gammon,
DEMENT, ASKEW, GAMMON, DEMENT & OVERBY, Raleigh,
North Carolina, for Appellant. Janice McKenzie Cole, United States
Attorney, Public Integrity Section, UNITED STATES DEPART-
MENT OF JUSTICE, Washington, D.C., for Appellee.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

PER CURIAM:

Defendant-appellant William Reece was an official at the Bureau
of Alcohol, Tobacco and Firearms (ATF) who abused his position in
order to embezzle money from the agency. Reece eventually pled
guilty to one count of mail fraud and one count of tax evasion, and
at his sentencing hearing, the district court departed upward four
levels from the sentencing guideline range. Reece appeals his sen-
tence, and we affirm.

Over a period of several years, Reece orchestrated and imple-
mented a fraudulent scheme that employed several persons and corpo-
rate entities to embezzle money from the government. Reece was
employed by the ATF as the Program Manager for the Air Operation
Section, a position which vested him with the responsibility for leas-
ing certain aircraft to be used by the Section. Reece submitted requisi-
tion forms to ATF Headquarters in order to obtain approval of
particular leases. Each form usually listed three companies and their
respective bids for the particular aircraft lease. Reece, however, also
rigged the bidding; the low bidder on each form was always a busi-
ness secretly controlled by Reece. Reece then approved and caused
invoices to be submitted for payment for the airplanes leased through
this arrangement, even though Reece and the companies that he con-
trolled did not actually provide any aircraft for use by the ATF. In
payment for the services it never received, ATF Headquarters issued
United States Treasury Checks to the company listed on each respec-

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tive invoice. Those checks were mailed to post office boxes that were
set up by associates of Reece who were acting under his direction.
The funds were eventually deposited into bank accounts of companies
controlled by Reece. In total, Reece received approximately $550,672
through this fraud. Furthermore, in 1990, Reece received $183,873 in
income from this scheme that he did not report on his personal or cor-
porate tax returns.

For his role in this fraud perpetrated against the taxpayers, Reece
was eventually named in a two count criminal information filed in the
Eastern District of North Carolina. Count I charged him with mail
fraud in violation of 18 U.S.C. §§ 1341 and 1346, and Count II
charged him with tax evasion in violation of 26 U.S.C. § 7201. Reece
subsequently pled guilty to both counts pursuant to a written plea
agreement.

During Reece's sentencing hearing, the district court notified the
defendant that it was considering an upward departure from the sen-
tencing guideline range, and the court continued the hearing in order
to provide the parties with an opportunity to present additional evi-
dence regarding factors that might make departure appropriate. Even-
tually, the court departed upward two levels under U.S.S.G. § 2C1.7
Application Note 5, and two levels under § 3B1.1 Application Note
2. The addition of these four offense levels established a total criminal
offense level of 27 which, when combined with Reece's criminal his-
tory Category I, yielded a sentencing range of 70 to 87 months. The
court then imposed a sentence of 87 months in addition to three years
of supervised release and $195,723 of restitution to the ATF. In this
appeal, Reece challenges both sets of upward departures. We con-
clude that the district court did not abuse its discretion by departing
upward four levels from the guidelines range.

Section 2C1.7 is entitled "Fraud Involving Deprivation of the
Intangible Right to the Honest Services of Public Officials; Conspir-
acy to Defraud by Interference with Governmental Functions." Appli-
cation Note 5, which is the provision relied upon for the § 2C1.7
departure here, provides that,

          [w]here the court finds that the defendant's conduct was part
          of a systematic or pervasive corruption of a governmental

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          function, process, or office that may cause loss of public
          confidence in government, an upward departure may be
          warranted. See Chapter Five, Part K (Departures).

Appellant argues that the district court abused its discretion by depart-
ing upward two levels based upon § 2C1.7 Application Note 5
because his only crime was simple theft from the government which
falls within the "heartland" of § 2C1.7, thus rendering any departure
unwarranted. Reece further argues that departure under the Applica-
tion Note was unwarranted because the sentencing court made insuffi-
cient findings to support its conclusion that Reece's criminal conduct
was part of a "systematic or pervasive corruption" that "may cause
loss of public confidence in government."

We find neither of these two arguments persuasive. First, although
Reece's conduct of embezzling money from the government may fall
within the ordinary meaning of § 2C1.7, departure here was entirely
justified because appellant's conduct also fits easily within the lan-
guage of Application Note 5 since Reece did not simply steal once,
but rather, embezzled large sums of money over a period of years and
took elaborate steps to avoid detection.

Second, there were clearly sufficient facts before the district court
to justify departure under Application Note 5. For instance, the evi-
dence that justified the district court's conclusion that Reece's scheme
amounted to "systematic or pervasive corruption," included the fol-
lowing: the scheme resulted in a reported loss to the government of
$1.45 million which the sentencing judge termed the"largest internal
theft in ATF history," J.A. at 116; the scheme apparently spanned 5
years, and involved 22 different submissions to the ATF to set up
rigged and fraudulent contracts; J.A. at 147; the scheme involved the
use of phony invoices and fraudulent VISA charges, J.A. at 147; and
the investigation and prosecution of the theft diverted funds from
legitimate law enforcement functions of the ATF. J.A. at 147. There
was also substantial evidence supporting the district court's conclu-
sion that Reece's scheme "may cause loss of public confidence in
government," in particular, the fact that there were multiple news
reports of Reece's fraud, J.A. at 121, as well as the fact that Reece's
fraud diverted a substantial amount of resources from other purposes
because of the time and money necessary to investigate and prosecute

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Reece. J.A. at 116-17. On the basis of this and other evidence, the dis-
trict court quite reasonably concluded that,

           [w]hen you have people who are high ranking and people
          in government, the head of a division, it makes one wonder
          about the quality or makes one wonder whether the citizens'
          faith in the government is undermined, such high level peo-
          ple engage in criminal activity. It seems to me it is almost
          a given that when you have people in positions of trust, they
          bring shame upon the leadership roles that they occupy. It
          is a very difficult thing. I think it does incalculable harm to
          the government in the sense that it breeds a lack of respect
          for those who are engaged in it, not to mention the cost of
          investigation in sorting it out. It takes tremendous assets
          away from the bureau to make investigations that would be
          available for other useful purposes. I would guess several
          hundred thousand dollars at least the government spent in
          investigating this man could have been put to good use
          investigating alcohol, tobacco and firearm crimes.

J.A. at 129-30. Viewing these findings of fact by the district court, we
are convinced that the district court did not abuse its discretion by
departing upward under Application Note 5 by two levels. Although
Reece contends that these factual conclusions do not support the
departure because the judge's language was speculative and equivocal
("it makes one wonder," "it seems to me," etc.), the language of
Application Note 5 renders departure appropriate where the defen-
dant's conduct "may" destroy public confidence in government, and
we conclude that the facts here certainly establish that it was not an
abuse of discretion for the district court to conclude that such a large
and highly publicized scheme of public corruption"may cause loss of
public confidence in government."

The district court also departed upward two levels under § 3B1.1
Application Note 2. Section 3B1.1, which is entitled"Aggravating
Role," provides:

          (a) If the defendant was an organizer or leader of a crimi-
          nal activity that involved five or more participants or
          was otherwise extensive, increase by 4 levels.

                    5
          (b) If the defendant was a manager or supervisor (but not
          an organizer or leader) and the criminal activity
          involved five or more participants or was otherwise
          extensive, increase by 3 levels.

          (c) If the defendant was an organizer, leader, manager, or
          supervisor in any criminal activity other than described
          in (a) or (b), increase by 2 levels.

U.S.S.G. § 3B1.1. The district court did not employ an adjustment
under any of these subsections, but rather, performed an upward
departure based upon Application Note 2 of this section which pro-
vides that,

          [t]o qualify for an adjustment under this section, the defen-
          dant must have been the organizer, leader, manager, or
          supervisor of one or more other participants. An upward
          departure may be warranted, however, in the case of a
          defendant who did not organize, lead, manage, or supervise
          another participant, but who nevertheless exercised manage-
          ment responsibility over the property, assets, or activities of
          a criminal organization.

U.S.S.G. § 3B1.1 Application Note 2 (emphasis added).

Reece insists that there are no findings to support this departure
upward under Application Note 2. We disagree. In the course of per-
petrating his fraud, Reece committed the following acts: (1) he estab-
lished four bogus corporate entities, J.A. 63-74, J.A. 84-85, J.A. 93-
94; (2) he used several individuals as fronts for the companies, J.A.
63, J.A. 85, J.A. 147; (3) he used individuals to open post office
boxes and to use those boxes to receive fraudulently obtained govern-
ment checks, J.A. 78, J.A. at 84, J.A. 147; (4) he used individuals as
signatories on bank accounts for the corporate entities, J.A. 147; and
(5) he used other companies to perpetrate VISA card fraud against the
government, J.A. 63-66, J.A. 115. Given these facts, the district court
did not abuse its discretion by concluding that Reece "exercised man-
agement responsibility over the property, assets, or activities of a
criminal organization"; Reece exercised management responsibility
over the property, assets, and activities of an organization, and that

                    6
organization engaged in criminal activity, namely, Reece's aircraft
lease fraud. Although Reece insists that this organization is not a
"criminal organization" within the meaning of Application Note 2
because it did not further any other criminal enterprises beyond the
ATF fraud, we see nothing in the term "criminal organization" that
limits its application to organizations that further multiple criminal
purposes.

Accordingly, we affirm appellant Reece's sentence.

AFFIRMED

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