United States v. Hawes

523 F.3d 245, 2008 U.S. App. LEXIS 8668, 2008 WL 1799678
Court of Appeals for the Third Circuit·Decided April 22, 2008·No. 06-3334·Published·Cited by 33 cases

Opinions

OPINION OF THE COURT

RENDELL, Circuit Judge.

Brian Hawes appeals from his sentence imposed after a plea of guilty to two counts of mail fraud in violation of 18 U.S.C. § 1341. He was sentenced to a term of 78 months’ imprisonment. Hawes argues that the District Court improperly calculated the applicable Guideline range. We agree and will vacate the sentence imposed by the District Court and remand for resentencing.

I. Facts and Procedural History

Brian Hawes was a registered investment advisor and owner and president of two investment advisory services, Financial Management Advisory Services (“FMAS”) and Financial Management Services, Inc. (“FMS”). In 1997, he became an authorized representative of Fidelity Investments Investment Advisors Group (“Fidelity”).

[247] From 1988 through 2003, Hawes used his position as an investment advisor to defraud his clients of monies that they had entrusted to him. He would agree to purchase annuities on behalf of his clients, but instead would keep the money for personal use or buy the annuities as instructed but later liquidate them for his own use. To conceal his theft, he created false account statements, indicating higher account balances, and submitted them to his clients.

In 1998, Hawes persuaded a number of his clients to move their assets into investment products offered by Fidelity. For these investment product accounts, Fidelity would mail account statements at regular intervals directly to a client’s residence or address of choice. Until 2002, Hawes would also issue statements to his clients through his investment advisory service, FMAS, that accurately reflected the Fidelity investments. As a financial advisor, he was authorized to use his clients’ social security numbers and other identifying information to access their Fidelity accounts and did so in the regular course of business.

Beginning in 2002, however, Hawes used his access to client accounts without his clients’ permission and changed the addresses to which his clients’ Fidelity account statements were mailed. In some instances, he mailed change of address forms to Fidelity Investments, indicating that future statements should be sent to his office address. In others, he accessed his clients’ online accounts and changed the addresses. Hawes then notified his clients that Fidelity would no longer be issuing paper statements and that FMAS would continue to issue paper account statements reflecting their balances with Fidelity.

Hawes then began to divert and transfer client funds into an account for his personal use. To avoid discovery of his theft, he would transfer funds from one client account to another. Through FMAS, he would then issue and provide statements to his clients that did not report the transfers and falsely overstated the value of the Fidelity accounts. Having ensured that his clients would not receive accurate account statements from Fidelity, Hawes was able to hide the fraud from his clients.

In 2003, after his father’s death, Hawes’ mother discovered that he had been stealing money that his parents had entrusted with him for investment and submitting statements to them that falsely reflected that annuities had been purchased and were earning money. She threatened to report his crime unless the money was repaid, and Hawes agreed to repay a total of $780,000 pursuant to a payment schedule. In order to make the first payment to his mother, Hawes stole $125,000 from other clients’ accounts.

On October 31, 2003, Hawes’ fraud was uncovered and his accounts frozen. On April 9, 2004, a two-count information was filed, alleging two counts of mail fraud in violation of 18 U.S.C. § 1341. On that same date, Hawes pleaded guilty to both counts. On August 4, 2004, he was sentenced to a term of 98 months’ imprisonment, followed by a three-year period of supervised release, and ordered to pay restitution in the amount of $2,601,961.60. In the wake of the Supreme Court’s decision in United States v. Booker, 543 U.S. 220, 125 S.Ct. 738, 160 L.Ed.2d 621 (2005), Hawes filed a motion for summary remand on May 3, 2005, and, on August 9, 2005, this Court affirmed Hawes’ conviction and remanded for resentencing. The trial court held sentencing hearings on January 30, March 29, and June 29, 2006. App. 78-417.

During the course of the hearings, the District Court heard from Angelica Banta, the probation officer who prepared [248] Hawes’ PSR.1 She testified that, in her opinion, an identity theft enhancement under U.S.S.G. § 2Bl.l(b)(9)(C)(i) was proper because Hawes used the social security numbers of his clients to change their addresses so that he would receive the statements indicating the real balances of their investment accounts. Obtaining a change of address was regarded by Ms. Banta as obtaining another form of identification— his clients’ mail — and, therefore, subject to the identity theft enhancement. Counsel for the government argued that the name and address was a means of identification and changing an address was producing another means of identification. Hawes testified that his clients willingly provided him with certain information, including name, address, social security number, date of birth, phone number, and were assigned a unique identification number by the financial institution. He further testified that he had discretionary control over the accounts and prior authorization to engage in any transaction he deemed necessary. Moreover, after Hawes changed a client’s address online, by fax, or by email, Fidelity would send a confirmation of the change of address to the client’s former address.

At the sentencing hearings, the government presented testimony as to the appropriateness of a vulnerable victim sentence enhancement under U.S.S.G. § 3Al.l(b). Clients defrauded by Hawes were elderly, ill, and unsophisticated. App. 399, 403. In particular, testimony showed that Hawes diverted $87,500 from an account belonging to Dorothy McKinney who, as he was aware, was in a nursing home and suffered from Alzheimer’s disease. He did so in order to repay his mother for the funds he had stolen and to prevent her from reporting him to the authorities.

The District Court ruled that by changing the addresses of his clients, Hawes did illegally use a means of identification “to produce or alter duplicate means of identification” and applied a two-level enhancement under U.S.S.G. § 2Bl.l(b)(9)(C)(i). The District Court also applied a vulnerable victim enhancement under U.S.S.G. § 3Al.l(b) upon finding that some of the victims were persons with whom Hawes had a close relationship and others were retired, elderly and suffering from Alzheimer’s. The calculated Guideline Range was 70 to 87 months’ imprisonment.

Hawes was ultimately sentenced to 78 months’ imprisonment, followed by a three-year period of supervised release, and ordered to pay $2,276,565.31 in restitution to his victims. Hawes timely appealed his sentence.

II. Discussion

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United States v. Hawes, 523 F.3d 245, 2008 U.S. App. LEXIS 8668, 2008 WL 1799678 (3d Cir. 2008).

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