Court Opinion

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Opinions of the United
1994 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

5-25-1994

United States of America v. Pardo
Precedential or Non-Precedential:

Docket 93-5104

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      UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

                          No. 93-5104

                    UNITED STATES OF AMERICA

                                  v.

                          JUAN PARDO,
                                        Appellant

          Appeal from the United States District Court
                 for the District of New Jersey
                   (D.C. Crim. No. 92-00235-1)

                     Argued January 19, 1994

          Before:   SLOVITER, Chief Judge, SCIRICA and
                      LEWIS, Circuit Judges

                     (Filed   May 25, 1994)

Barbara M. Donovan (Argued)
  Assistant Federal Public Defender
Office of Federal Public Defender
Newark, NJ 07102

          Counsel for Appellant

Michael Chertoff
  United States Attorney
Edna B. Axelrod
Eric L. Muller (Argued)
  Assistant United States Attorneys
Office of United States Attorney
Newark, NJ 07102

          Counsel for Appellee

                                  1
                         OPINION OF THE COURT

SLOVITER, Chief Judge.

           Appellant Juan Pardo challenges on four grounds his

sentence imposed after a guilty plea to single counts of bank and

wire fraud and a count of failure to appear.    Two grounds are set

forth in his counselled brief, and two others appear in a

supplemental pro se filing.    Although we reject most of Pardo's

arguments, we agree that the district court misapplied United

States Sentencing Guideline §3B1.3 when it determined that

Pardo's friendship with a bank manager constituted a position of

trust that facilitated his defrauding the bank.    See United

States Sentencing Commission, Guidelines Manual, §3B1.3 (1993)

[hereinafter USSG].   We will therefore vacate the judgment of

sentence and remand for resentencing.

                                  I.

                   FACTS AND PROCEDURAL HISTORY

           There is no dispute about the relevant facts in this

case.   Juan Pardo engaged in a classic check kiting scheme in

which he defrauded First Fidelity Bank out of more than $51,000,

in violation of 18 U.S.C. § 1344 (Supp. IV 1992) (bank fraud) and

18 U.S.C. § 2 (1988), and defrauded numerous clients in excess of

$204,000 by collecting loan application and processing fees for

loans that they never received, in violation of 18 U.S.C. § 1343

(Supp. IV 1992) (wire fraud) and 18 U.S.C. § 2 (1988).   Shortly

after his initial arraignment, Pardo fled to Canada where he

remained for several weeks, and thus failed to appear in

violation of 18 U.S.C. §§ 3146(a) and 2 (1988).

                                  2
A.   The Check Kiting Scheme

           Shortly before the incident which was the subject of

the bank fraud charge in this indictment, Pardo engaged in

another check-kiting scheme at the Guttenberg, New Jersey, branch

of First Fidelity Bank which caused First Fidelity a loss of

$7,324.39.   Although it was never reimbursed for this loss, First

Fidelity declined to prosecute Pardo.     The bank, however, did

report Pardo's illegal conduct to Chex Systems as a security

measure.

           On October 1, 1991, notwithstanding his earlier fraud

on First Fidelity, Pardo opened an account at the Ridgefield Park

branch of First Fidelity under the name of SJF Funding

Corporation, the same corporation he used in the earlier fraud.

The usual bank practice required a background check, which would

have revealed Pardo's prior fraud on First Federal itself, but

that routine was not followed by Brigit Schumann, the branch

manager, who had been a personal friend of Pardo's wife for ten

years and was a bridesmaid at the Pardos' wedding.     The record is

silent as to whether Pardo said anything to induce Schumann's

failure to take precautions, or whether she was just negligent.

           Between October 4 and October 15, 1991, Pardo deposited

five checks into the First Fidelity account totalling $232,000

which had been drawn on accounts Pardo had at other banks, and

which were uncollectible.      Nonetheless, almost immediately after

depositing these checks, Pardo began to write checks against

those deposits on his First Fidelity account, and by October 23,

1991, he had withdrawn a total of $76,771.86.     When Schumann

                                   3
became aware of Pardo's conduct and confronted his wife, she

received assurances that Pardo would reimburse the bank for the

fraudulently obtained funds.   Later, Frank Amato, an associate of

Pardo, wired $25,000 back to the bank.   First Fidelity received

no additional reimbursement and its total loss due to this second

check kiting scheme is $51,771.86.

B.   The Loan Fraud Scheme

          In the Spring of 1991, Pardo became the North American

representative of Siam Commercial Finance S.A., a company based

in Bangkok, Thailand.    His function was to locate customers

seeking loans from several hundred thousand to several million

dollars, and he received in excess of $204,000 as loan

application fees, servicing fees and pre-commitment fees from at

least fourteen individual and corporate clients.   Neither he nor

SJF Funding successfully placed a single loan with Siam through

at least March 1992, the month before he was indicted.    Although

Pardo later claimed he was unaware of Siam's fraudulent

activities, he did not deny that he altered checks that he

received in these transactions nor that he deposited them in his

personal account.

C.   Failure to Appear

          Following his arrest, Pardo was released on bail.

Thereafter, the government sought his detention because it had

learned of other activities by Pardo and was seeking a

superseding indictment concerning additional charges of bank and

wire fraud.   On Friday, May 8, 1992, the district court ordered a

second hearing to be held on the following Monday, May 11, 1992.

                                 4
Pardo fled to Canada over that intervening weekend.   He was

arrested on June 22, 1992, the date that the trial on the

original charges was to begin, when he tried to reenter the

United States near Richford, Vermont.

          On September 30, 1992, Pardo pled guilty to Counts 2

(bank fraud), 16 (wire fraud) and 47 (failure to appear) of the

indictment pursuant to a plea agreement reached with the

government.   On February 8, 1993, the district court sentenced

Pardo.   The court determined that Pardo's total offense level was

18, based in part on its application of a two-level decrease for

acceptance of responsibility (USSG §3E1.1) and a two-level

increase for abuse of a position of trust (USSG §3B1.3).    The

court calculated Pardo's criminal history level as II, based in

part on his conviction on a disorderly persons charge in state

court for which he had not yet been sentenced.   The court then

sentenced Pardo to 37 months imprisonment (31 months on Counts 2

and 16, followed by a consecutive six-month term on Count 47) and

to four years of supervised release, and ordered him to pay

$39,135.93 in restitution and $150 in special assessments.      Pardo

filed a timely appeal on February 16, 1993.   Pardo moved and was

given permission to file a pro se supplemental brief.   We have

jurisdiction pursuant to 18 U.S.C. § 3742(a) (1988) and 28 U.S.C.

§ 1291 (1988).

                               II.

                            DISCUSSION

           We first consider Pardo's claim that the district court

misapplied Sentencing Guideline §3B1.3.   That section, which

                                5
authorizes a two-level enhancement for abuse of a position of

trust, provides:
          If the defendant abused a position of public
          or private trust . . . in a manner that
          significantly facilitated the commission or
          concealment of the offense, increase by 2
          levels.

USSG §3B1.3.   The only commentary relating to the abuse of a

position of trust enhancement appears in Application Note 1.      For

the period relevant here, the Application Note was quite terse.

It provided merely that:
          The position of trust must have contributed in some
          substantial way to facilitating the crime and not
          merely have provided an opportunity that could as
          easily have been afforded to other persons. This
          adjustment, for example, would not apply to an
          embezzlement by an ordinary bank teller.

USSG §3B1.3, comment. (n.1) (1992).

          On November 1, 1993, an amendment to the Application

Note became effective.    To the extent that the new Commentary

sheds any light on the nature of the relationships to which

§3B1.3 applies, we note that it refers exclusively to employment

or professional relationships, such as embezzlement by guardians,

bank executives, bank tellers, and attorneys, and sexual abuse of

patients by physicians.

          The classic cases in this circuit in which we found

abuse of a position of trust fall within these categories.    See

United States v. Craddock, 993 F.2d 338 (3d Cir. 1993)

(enhancement for abuse of position of trust applicable to teller

of financial institution who processed Western Union money orders

knowing they were based on fraudulent credit card transactions);

                                 6
United States v. Brann, 990 F.2d 98 (3d Cir. 1993) (enhancement

applied to narcotics agent who embezzled government-provided

funds by engaging in phony drug transactions and pocketing the

money); United States v. Lieberman, 971 F.2d 989, 992-94 (3d Cir.

1992) (reversing failure to enhance for bank vice president);

United States v. Georgiadis, 933 F.2d 1219, 1225 (3d Cir. 1991),

(affirming district court's application of enhancement to

assistant bank president who diverted funds to own account);

United States v. McMillen, 917 F.2d 773, 775-76 (3d Cir. 1990)

(branch manager operating a position of trust).

          Nonetheless, we are unwilling to draw a bright line

limiting the abuse of trust increase to the employment

relationship.   Neither the Guideline itself nor the Application

Note that follows expressly limits its application to employment

positions.   In fact, other courts of appeals have found positions

of trust outside the traditional employment context.1    In United

States v. Ledesma, 979 F.2d 816, 822 (11th Cir. 1992), the Court

of Appeals affirmed the two level increase imposed on a defendant

who had her young adult daughter bag cocaine and relay drug-

related telephone messages.   The court reasoned that an

enhancement under §3B1.3 was appropriate because Ledesma, as

1
In one case in this court, United States v. Astorri, 923 F.2d
1052, 1061 (3d Cir. 1991), although the district court did not
address an enhancement based on abuse of a position of trust, and
we did not require that it do so, one judge, in a dissent,
suggested that §3B1.3 would apply to a broker who defrauded his
fiancee's parents out of their life savings. The majority found
enhancement on another basis.

                                7
mother, held a position of trust which she abused when she

involved her daughter in the drug conspiracy.

           In United States v. Zamarripa, 905 F.2d 337 (10th Cir.

1990), defendant, a friend of the family of an eight year-old

girl whom he sexually abused while serving as her babysitter, was

given a two-level enhancement.   The Court of Appeals concluded

that Zamarripa's position as babysitter was one of trust, which

he had abused to facilitate his crime, and that therefore

enhancement of his sentence in accordance with §3B1.3 was

appropriate.   See also United States v. Ellis, 935 F.2d 385, 395

n.9 (1st Cir.) (district court found abuse of a position of trust

by defendant's sexual abuse of young daughter of his common law

wife), cert. denied, 112 S. Ct. 201 (1991).     We approvingly cited

Zamarripa in Craddock, 993 F.2d at 343 n.7.

           Accordingly, we are not prepared to hold that the abuse

of a position of trust enhancement under §3B1.3 was not

applicable to Pardo on the ground that he was not employed by the

bank.2   Instead we look to the essence of the meaning of a

position of trust.

           In determining the defining characteristics of a

position of trust, we begin by considering the rationale for the

2
Pardo argues that the enhancement is not applicable to him
because he does not fit into the language used in United States
v. Hickman, 991 F.2d 1110, 1112 (3d Cir. 1993), where we stated
that "[t]o abuse a position of trust, a defendant must, by
definition, have taken criminal advantage of a trust relationship
between himself and his victim." The government argues that the
bank manager was the victim. Although we find this somewhat
tenuous, we need not decide the application of Hickman in light
of our disposition on other grounds.

                                 8
two-level enhancement.   This court has noted that "[t]he

rationale for increased punishment is that an insider who takes

advantage of a position of trust to facilitate a crime is thought

to be more culpable than one who simply commits the offense."

Craddock, 993 F.2d at 340 (emphasis added).   This factor was

subsequently clarified in the 1993 amendment to Application Note

1, which now provides in part:
          "Public or private trust" refers to a position of
          public or private trust characterized by professional
          or managerial discretion (i.e., substantial
          discretionary judgment that is ordinarily given
          considerable deference). Persons holding such
          positions ordinarily are subject to significantly less
          supervision than employees whose responsibilities are
          primarily non-discretionary in nature.

USSG §3B1.3, comment. (n.1) (emphasis added).3

           More concretely, this court repeatedly has recognized

that, "'the primary trait that distinguishes a person in a

position of trust from one who is not is the extent to which the

position provides the freedom to commit a difficult-to-detect

wrong.'"   United States v. Lieberman, 971 F.2d 989 (3d Cir. 1992)

(emphasis added) (quoting United States v Hill, 915 F.2d 502, 506
(9th Cir. 1990)); see also Craddock, 993 F.2d at 341 (quoting

this language); Brann, 990 F.2d at 103 (same).

           Another factor that the case law identifies as relevant

in finding a position of trust is the authority given to

3
  Craddock distinguished the conduct of an insider from an abuse
of "an opportunity that could as easily have been afforded to
other persons." Craddock, 993 F.2d at 340 (quoting USSG §3B1.3,
comment. (n.1)). Although the latter phrase was deleted from
Application Note 1 of §3B1.3 in the 1993 amendment, other
language added in that amendment underlined above makes it clear
that the distinction made in Craddock is still applicable.

                                9
defendant by the position which provides the wherewithal to

commit the wrongful act.     See, e.g., United States v. Lamb, 6
F.3d 415, 421 (7th Cir. 1993) ("a position of trust is

characterized by access or authority over valuable things")

(quotations omitted).   In McMillen, a branch manager of a savings

and loan association approved fraudulent loans to himself,

created a false savings certificate to serve as collateral for

the loans, and opened a checking account in a fictitious name.

See McMillen, 917 F.2d at 774.    We held that because he had the

authority to perform all of those acts without any supervision,

he occupied a position of trust.       See id. at 776.   Later, in

Lieberman, we emphasized the fact that the defendant bank manager

was solely responsible for balancing the account from which he

embezzled.   See Lieberman, 971 F.2d at 993.

           Similarly, in Brann where the defendant Narcotics

Strike Force agent embezzled $18,000, we noted that the

defendant's position enabled him to obtain $9,000 on two separate

occasions, based solely on his assertion that he had set up drug

buys.   See Brann, 990 F.2d at 103.     Although Brann did not hold a

high level managerial post, we were swayed by the fact that his

position entailed sufficient authority to allow him to embezzle

in this respect.   See id.
           Finally, in Craddock, a teller participated in a

conspiracy to defraud his employer by permitting his accomplices

to provide false identification in connection with bogus credit

card transactions via Western Union.       Although Craddock was a low

level employee, he had authority to verify the identity of the

                                  10
persons to whom he was making payouts.    We held that the "key

point . . . is . . . whether Craddock . . . exploited the

authority provided by his position,"     Craddock, 993 F.2d at 343,

and because he did we upheld the enhancement for abuse of a

position of trust.   The characteristics of a position of trust

defined in Craddock are as applicable outside of the employment

context as well as in:
          the standard for tellers, as for clerks, mechanics, and
          all other defendants, is (1) whether the authority
          conferred and the absence of controls indicate that the
          employer relied on the integrity of the defendant to
          protect against the loss occasioned by the crime; and
          (2) whether the trust aspect of the job made the
          commission or concealment of the crime significantly
          easier.

Id. at 343.
          Culling these principles from our cases, it follows

that in considering whether a position constitutes a position of

trust for purposes of §3B1.3, a court must consider: (1) whether

the position allows the defendant to commit a difficult-to-detect

wrong; (2) the degree of authority which the position vests in

defendant vis-a-vis the object of the wrongful act; and (3)

whether there has been reliance on the integrity of the person

occupying the position.   These factors should be considered in

light of the guiding rationale of the section--to punish

"insiders" who abuse their positions rather than those who take

advantage of an available opportunity.

          By applying these factors to the facts of this case, it

is evident that Pardo did not occupy a position of trust.     First,

Pardo's "position" as a friend of the bank manager did not give

                                11
him the ability to commit a difficult-to-detect wrong.   There

would have been nothing difficult to detect had the routine

precautions been taken.   His friendship with the bank manager did

not make her or the bank peculiarly vulnerable, as did the

positions of mother, babysitter or stepfather in Ledesma,

Zamarripa, and Ellis respectively.   At most, Pardo's position as

a friend allowed him the opportunity to commit an easily

detectible wrong.   Our cases and the Application Note counsel

that this is simply not sufficient to warrant enhancement.

          Even more clearly lacking in Pardo's case is the

requisite degree of authority over the object of his wrong.

Unlike the defendants in every other case considered in this

circuit, or those involving non-employment situations cited by

the government, Pardo had no authority over anyone or anything

necessary to the commission of his crimes.

          Thus, although Schumann may have relied on Pardo's

integrity, he was not placed by the bank in any position that

gave him the wherewithal to commit the fraud.   He was in a far

lesser position than the defendant in United States v. Kosth, 943
F.2d 798 (7th Cir. 1991), who submitted fraudulent credit card

slips through the bank at which he obtained a merchant account.

The Court of Appeals overturned the two point enhancement,

stating that there was no special element of private trust

involved, even though there was an element of reliance present.

Id. at 800.

                                12
          Because Pardo's position as Schumann's friend was not a

position of trust within the meaning of §3B1.3,4 we will remand

to the district court for resentencing.

          Next, we turn to Pardo's remaining claims of error.     In

his counselled brief, Pardo argues that he should have been

granted a three level, rather than a two level, reduction for

acceptance of responsibility.    Because the district court is

particularly well situated to evaluate the defendant's acceptance

of responsibility, its determination in this regard may be

reversed only if it is clearly erroneous.    See United States v.

Singh, 923 F.2d 1039, 1042-43 (3d Cir. 1991).

          Section 3E1.1 of the Guidelines provides for a two

level reduction "[i]f the defendant clearly demonstrates

acceptance of responsibility for his offense."   In addition,

subsection (b) authorizes an additional one level reduction where

the offense level is 16   or greater, and:
          the defendant   has assisted authorities in the
          investigation   or prosecution of his own misconduct by
          taking one or   more of the following steps:

          (1)   timely providing complete information to the
                government concerning his own involvement in the
                offense; or

          (2)   timely notifying authorities of his intention to
                enter a plea of guilty, thereby permitting the
                government to avoid preparing for trial and
                permitting the court to allocate its resources
                efficiently.

4
In light of our decision on this issue, we need not consider
whether there was sufficient evidence to support the second prong
of §3B1.3, i.e., whether defendant's abuse of the position of
trust "significantly facilitated the commission or concealment of
the offense." USSG §3B1.3.

                                 13
USSG §3E1.1(b).

             The district court rejected Pardo's arguments that he

was entitled to the three level reduction, finding that the

information he provided regarding the fraudulent activities of

Siam was incomplete.    Moreover, the district court, concluded

that Pardo's plea was not timely, finding that his "plea came

after a long period of flight, during which the government was

put to a continuing investigation of defendant's many criminal

schemes."    App. at 91.   These factual findings find ample support

in the Presentence Report, and we cannot say they are clearly

erroneous.    Thus, we will affirm this portion of Pardo's

sentence.

             Next, Pardo raises two additional claims in his

supplemental pro se filing.     First, he contends that the district

court's method of calculating his total offense level under the

Sentencing Guidelines resulted in "double counting" of his

failure to appear.    Because the appellant did not object to the

enhancement in the Presentence Report, at the Sentencing Hearing

or in any other manner in the district court, we review the

district court's decision for plain error.     See Fed. R. Crim. P.

52(b); United States v. Olano, 113 S. Ct. 1770, 1778-79 (1993).

            Under the Sentencing Guidelines:
            [I]n the case of a conviction on both the underlying
            offense and the failure to appear, the failure to
            appear is treated under §3C1.1 (Obstructing or Impeding
            the Administration of Justice) as an obstruction of the
            underlying offense; and the failure to appear count and
            the count(s) for the underlying offenses are grouped
            together under §3D1.2(c).

                                  14
USSG §2J1.6, comment. (n.3).   Thus, the court arrives at a total

punishment level, based on the underlying charge(s) and the

obstruction charge.   The district court followed the Guidelines

precisely when it added two levels for obstruction of justice to

the total offense level for the two fraud counts (Counts 2 and

16).

          Because 18 U.S.C. § 3146(b)(2)(1988) requires that any

sentence imposed for obstruction be imposed consecutive to any

other sentence, the court must separate out the portion of the

total sentence corresponding to obstruction.   The Application

Notes to §2J1.6 contemplate the very situation posed here:
          For example, where the combined applicable guideline
          range for both counts is 30-37 months and the court
          determines a "total punishment" of 36 months is
          appropriate, a sentence of thirty months for the
          underlying offense plus a consecutive six months
          sentence for the failure to appear count would satisfy
          these requirements.

USSG §2J1.6, comment. (n.3).   Here, the court determined that the

appropriate sentence for the defendant was 37 months, the maximum

sentence in the range (31-37 months) based on its determination

of his criminal history and base offense levels.    The court then

sentenced the defendant to 31 months on Counts 2 and 16, and six

months on Count 47 (failure to appear).   This sentence in no way

involves double counting, and there was no error.

          Pardo's final argument is that his criminal history

level for Count 2 should have been I instead of II.    However,

Pardo's sentence for Count 2 was imposed concurrently with his

sentence on Count 16.   In this case, his sentence under Counts 16

                                15
and 47 would be identical even if his criminal history for Count

2 were I instead of II.5   We decline to consider his challenge to

his sentence under Count 2 under this circumstance.6

                                III.

                             CONCLUSION

            For the foregoing reasons, we will vacate the judgment

of sentence of the district court because of the two point

increase for an abuse of position of trust under USSG §3B1.3, and

will remand to the district court for resentencing consistent

with this opinion.   In all other respects, the judgment will be

affirmed.

5
 Based on the total amount of loss caused by Pardo's wire fraud
(in excess of $200,000), his more than minimal planning activity,
his acceptance of responsibility and his obstruction of justice,
his base offense level for the wire fraud would have been the
same as it was for the bank and wire fraud together. Thus, based
on the offense level for Count 16, and a criminal history of II
for that count (which Pardo does not challenge), his sentence
would not have been different even if count 2 were excluded. In
any event, under the Guideline concept of grouping, the offenses
would be treated together, rather than separately, as Pardo
argues.
6
 In Ray v. United States, 481 U.S. 736, 737 (1987) (per curiam),
the Supreme Court held that where a special assessment was
imposed on three separate counts, they could not be considered
concurrent sentences. Ray is inapplicable here because Pardo
would still be subject to the separate special $50 assessment on
each count. We have, when appropriate, applied the concurrent
sentence doctrine after Ray. See United States v. American
Investors of Pittsburgh, Inc., 879 F.2d 1087, 1100 (3d Cir. 1987)
(opting not to consider claims of individual defendants whose
sentences were concurrent and involved no detrimental effects).

                                 16