United States v. Lombardi

Opinion

USCA1 Opinion

UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT

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        No. 92-2450
        No. 93-1008

                                    UNITED STATES,

                                      Appellee,

                                          v.

                                  DOMENIC LOMBARDI,

                                Defendant, Appellant.

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                    APPEALS FROM THE UNITED STATES DISTRICT COURT

                           FOR THE DISTRICT OF RHODE ISLAND

                [Hon. Raymond J. Pettine, Senior U.S. District Judge]
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                                 ____________________

                                        Before

                                Boudin, Circuit Judge,
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                            Coffin, Senior Circuit Judge,
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                              and Oakes,* Circuit Judge.
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                                 ____________________

            Robert  B.  Mann  with  whom  Mann  & Mitchell  was  on  brief for
            ________________              ________________
        appellant.
            Margaret E.  Curran, Assistant United  States Attorney, with  whom
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        Lincoln  C.  Almond, United  States  Attorney,  and  James H.  Leavey,
        ___________________                                  ________________
        Assistant United States Attorney, were on brief for appellee.

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                                  September 24, 1993
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        ___________________________

        *Of the Second Circuit, sitting by designation.

BOUDIN, Circuit Judge.   Domenic Lombardi pled guilty on
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            August  12, 1992, to  six counts of  a nine-count superseding

            indictment,  the  remaining  counts  being  dismissed  at the

            government's behest.  The nature and interrelationship of the

            charges is critical to an understanding of the case.

                 Three  of  the  counts  to which  Lombardi  pled  guilty

            charged conspiracy  to commit  mail fraud  (count I) and  two

            acts of  mail fraud (counts III  and VI).  18  U.S.C.    371,

            1341.    All  three counts  related,  at  least  in part,  to

            Lombardi's   conduct   in  fraudulently   securing  insurance

            proceeds  by  having  another  man  set  fire  to  Lombardi's

            property.   One  of the  properties was  a building  owned by

            Lombardi;  the  other was  a  mobile home  that  Lombardi was

            renting to a tenant.  

                 Two further counts (VIII and IX) were for  depositing in

            a  bank the  insurance  proceeds received  in the  respective

            episodes.    18 U.S.C.     1957.   That statute  makes  it an

            offense   to  engage  knowingly  in  a  monetary  transaction

            involving criminally derived property of a value greater than

            $10,000 where the property  resulted from one of a  number of

            specified  offenses, including  mail fraud.1   The  remaining

            count (VII)  was for using  a fire  to commit mail  fraud, 18

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                 1As  shorthand,  we  refer  to  the  offense  as  "money
            laundering."  In fact, there is a separate federal offense of
            "laundering of  monetary instruments" under 18  U.S.C.   1956
            with more demanding requirements and greater penalties.

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                                          2

U.S.C.     844(h), specifically,  the  setting  of the  fires

            involved in the mail fraud counts.

                 On  December  3,  1992,  the  district  court  sentenced

            Lombardi  to 63 months, comprising concurrent and consecutive

            sentences of varying amounts,  on the conspiracy, mail fraud,

            and money  laundering counts;  to an  additional, consecutive

            60-month sentence, which  is mandatory, on  the using a  fire

            count; and to a  three-year term of supervised release.   The

            district court also imposed  a $60,000 fine and ordered  that

            Lombardi  pay  restitution  in  the  amount  of  $190,880.08,

            representing losses to insurers.2

                 On this appeal, Lombardi  has raised one seemingly novel

            issue  under the  Sentencing  Guidelines,  and several  other

            objections more  readily answered.  The  novel issue concerns

            the grouping rules and presents an issue of law on  which our

            review  is plenary.  United States v. Phillips, 952 F.2d 591,
                                 _____________    ________

            594 (1st Cir. 1991), cert. denied, 113 S. Ct. 113 (1992).  In
                                 ____________

            this effort we are aided by the careful sentencing memorandum

            of the  district court explaining why  it rejected Lombardi's

            position on  grouping.   We first describe  how the  district

            court calculated Lombardi's sentence.

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                 2The  November 1992 version of the Sentencing Guidelines
            was in effect at  the time of the sentence, and our citations
            in  this opinion  are to  that edition.   The  district court
            considered post-sentence memoranda pursuant to Fed.  R. Crim.
            P. 35.  On  December 10, 1992, the district  court reaffirmed
            its sentence, vacating the  original sentence and imposing it
            again.

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                                          3

The  court first  separated  the  conspiracy/mail  fraud

            counts  into one group  of offenses and  the money laundering

            counts into another.   U.S.S.G.   3D1.2  (grouping of closely

            related  counts).  The using  a fire count  was excluded from

            the grouping  rules because  the statute imposes  a mandatory

            consecutive sentence.   See U.S.S.G.    3D1.1(b).   Then, the

            court calculated the  base offense level for each group, that

            being  in each of the groups here  involved the level for the

            highest-level  count  in the  group.    U.S.S.G.    3D1.3(a).

            Based  in part on the dollar amounts involved, the base level

            for the conspiracy/mail fraud group was 16, U.S.S.G.   2F1.1,

            and  for money  laundering  the base  offense  level was  17.

            U.S.S.G.   2S1.2

                 Then--and  this  is  the point  critical  to  Lombardi's

            argument--the district court increased the base offense level

            for  the money laundering group  by 2 levels,  to 19, because

            the  guideline for  money laundering  provides as  a specific

            offense  characteristic that a two-level increase is required

            "[i]f  the defendant knew that the funds were the proceeds of

            any  . . . specified unlawful activity" other than narcotics.

            U.S.S.G.   2S1.2(b)(B).  "Specified unlawful activity" refers

            to a list of crimes, including mail fraud.  See  id.   2S1.2,
                                                        ___  ___

            application note 1; 18 U.S.C.     1956(c)(7), 1961(1).  Since

            Lombardi committed  the mail frauds, it  is unquestioned that

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he knew that the  funds laundered were obtained  through mail

            fraud.3

                 Under the  grouping rules,  the offense level  where one

            group is level 19 and the other level 16 is derived by taking

            the higher level and increasing it  by 2 levels.  U.S.S.G.   

            3D1.4  (prescribing  two-level  increase  where  the  offense

            levels  for  the two  groups are  within  four levels  of one

            another).  This combined offense level of 21 was then reduced

            by two levels for  acceptance of responsibility.  U.S.S.G.   

            3E1.1(a).   The resulting final offense level of 19 was used,

            in  conjunction with Lombardi's  substantial criminal history

            (category V), to specify the range--57 to 71 months--on which

            his  63 month  sentence was based.   See  U.S.S.G. sentencing
                                                 ___

            table.  As  earlier noted, the sentence for the  using a fire

            count was separately determined, and it is not in issue.

                 Lombardi's  central claim  on  this appeal  is that  the

            money  laundering   counts  should  not   have  been  grouped

            separately but  should have been  included in a  single group

            with  the  conspiracy/mail fraud  counts.   If so,  the money

            laundering counts  would have  represented the  highest level

            count  in this single group, producing an offense level of 19

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                 3The  money   laundering  offense  under   section  1957
            requires  that  the  launderer  know that  the  proceeds  are
            derived  from criminal  activity but  it explicitly  does not
            require that the launderer  know that the activity is  one of
            those   "specified  unlawful   activit[ies]"  named   in  the
            statutes.  18 U.S.C.   1957(c).

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                                          5

for the single group.  After reducing this figure to level 17

            for acceptance of responsibility, the sentencing  range fixed

            by the sentencing table would have been 46 to 57 months, well

            below the 63 months actually imposed.

                 The rules  for grouping  of closely related  counts, set

            forth  in  U.S.S.G.    3D1.2,  largely  eliminate  cumulative

            punishment for  multiple counts  in the same  group (although

            one count  may comprise a specific  offense characteristic or

            adjustment for another count in the group).  The introductory

            commentary says that a single group combines "offenses [that]

            are  closely   interrelated,"   U.S.S.G.,  part   D,   intro.

            commentary, and  the guideline  for grouping closely  related

            counts says  that it  covers "counts  involving substantially

            the  same harm," U.S.S.G.    3D1.2.  But  this is background:

            what controls are the four subsections of the  guideline that

            say precisely when grouping shall occur.

                 Subsection (a) of section  3D1.2 applies when the counts

            involve  the same victim and the same act or transaction, and

            the  latter  requirement is  clearly not  met here  since the

            fraud and money laundering are distinct acts.  Subsection (b)

            applies  when there is the  same victim and  multiple acts or

            transactions  that  have a  common  objective  or comprise  a

            common  plan.  The guidelines are clear that, for purposes of

            these  subsections,  the victim  of  fraud  is the  insurance

            company and the victim  of money laundering is society.   See
                                                                      ___

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                                          6

U.S.S.G.   3D1.2,  application note  2.  To  the extent  that

            Lombardi  is relying  upon  subsection (b),  the argument  is

            foreclosed.

                 Lombardi's best, and main, argument hinges upon U.S.S.G.

               3D1.2(c)  which  provides  that counts  shall  be  grouped

            together  [w]hen one of the counts embodies conduct
                      that is  treated  as a  specific  offense
                      characteristic  in,  or other  adjustment
                      to, the guideline  applicable to  another
                      of the counts.

            Because knowledge that the money laundered funds were derived

            from mail fraud was a specific  offense characteristic in the

            guideline applicable to the money laundering counts, Lombardi

            contends  that  section 3D1.2(c)  governs  in  this case  and

            requires  that all  five  counts--conspiracy/mail  fraud  and

            money laundering--be grouped together.  

                 Neither  Lombardi  nor  the  government  has  found  any

            decision that directly  addresses this issue.   In our  view,

            the  better reading of section  3D1.2(c) is that  it does not

            apply to this case.  The "conduct" embodied in the mail fraud

            counts is  the various acts constituting  the frauds, coupled

            with the  requisite intent to deceive;  the "specific offense

            characteristic," in  U.S.S.G.   2S1.2(b)(1)(B),  is knowledge

            that the funds  being laundered  are the proceeds  of a  mail

            fraud.   It happens that  Lombardi's knowledge of  the funds'

            source derives  from the fact  that he committed  the frauds,

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but that does not make the fraudulent acts the  same thing as

            knowledge of them.

                 Lombardi's  reading  would   also  create  a  disturbing

            anomaly in the  guideline's application.   One who commits  a

            fraud and launders the money  (thereby knowing of its source)
                  ___

            is normally  more culpable than  one who merely  launders the

            money   knowing   of  its   source.      Yet  if   Lombardi's

            interpretation were adopted,  a defendant  would get  exactly

            the same total offense  level whether the defendant committed

            the mail fraud or merely knew that someone else had committed

            it: in either case, all five  counts would be a single group,

            and  the money laundering count would generate a level 19 (17

            as  the base  offense  level  and  a  2  level  increase  for

            knowledge of source).   The anomaly is not conclusive  but it

            reinforces our inclination to read the guidelines literally.

                 If there is any discomfort in the interpretation, it may

            come less  from  the illusion  of double  counting than  from

            other sources.  Some might think it odd to punish a defrauder

            separately  for depositing  his  ill-gotten gains  in a  bank

            rather than spending  the money  outright.  But  that is  the

            consequence of  a deliberate  policy choice by  Congress, and

            one that is much easier to  understand when one thinks of the

            relationship  between  bank  deposits,  money  laundering and

            organized  crime.  As for the choice to increase the sentence

            because the defendant knew  the "specific" criminal source of

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the funds,  one may quarrel with  the Sentencing Commission's

            policy but the intent is clear.

                 The logic of  the guidelines is easier  to understand if

            one  substitutes a  more potent (but  hypothetical) "specific

            offense characteristic."  Thus, suppose a defendant burgled a

            house,  found it inhabited, and returned a week later to burn

            it down (knowing  from the burglary  that it was  inhabited).

            No one would cavil at treating knowledge of inhabitation as a

            specific offense characteristic to enhance the arson while at

            the  same  time punishing  the  defendant for  burglary.   In

            Lombardi's  case, it  is harder  to understand  why knowledge

            that the  laundered money  came from  mail fraud,  instead of

            merely from some unspecified  criminal source, should enhance

            the  sentence for  money laundering.   But  the principle  of

            imposing an  enhancement, based on  knowledge of a  crime the

            defendant himself committed, is the same.

                 Accordingly, we conclude that  Lombardi's interpretation

            of the guidelines fails and that both his mail fraud and  his

            knowledge that the  source of  the laundered  funds was  mail

            fraud may play separate roles in enhancing his sentence.  The

            apparent severity of the result should not be overstated: the

            probable effect is  a sentence about  six months longer  than

            Lombardi would otherwise  have received.  It  should also not

            be forgotten that the same guideline grouping rules manage to

            combine a level 19 offense with a level 16 offense to produce

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a  combined offense level of  only 21 (instead  of 35) before

            the final adjustment, a charity far more significant than the

            two point increase that is at issue here.

                 Lombardi's remaining arguments warrant  less discussion.

            He  asserts  that his  age (58  at  the time  of sentencing),

            physical  ailments,  and  mental-health problems  required  a

            downward departure.  Admitting that discretionary refusals to

            depart downward are not  appealable, United States v. Lauzon,
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            938  F.2d 326, 330  (1st Cir.), cert. denied,  112 S. Ct. 450
                                            ____________

            (1991), Lombardi  contends that the district  judge must have

            believed   that  it  lacked  authority  to  depart  downward.

            Suffice it to say that there is no evidence that the district

            court  doubted its  authority to depart.   Departures  on the

            grounds asserted  are comparatively  rare, e.g.,  U.S.S.G.   
                                                       ____

            5H1.1, 5H1.4,  and in the  ordinary case  no explanation  for

            declining to do so is required.

                 Error is  also premised on the  district court's failure

            to   give  Lombardi   a   third  point   for  acceptance   of

            responsibility, as permitted by  a newly adopted provision of

            the guidelines, where the defendant either:

                 1.  timely provid[es]  complete information  to the
                 government  concerning his  own involvement  in the
                 offense; or

                 2. timely notify[ies] 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.

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U.S.S.G.   3E1.1(b).   Although  the district  court made  no

            explicit  findings  in denying  a  third  point, the  court's

            sentence followed shortly after the prosecutor argued against

            the  extra   point,  and  we  may  fairly   assume  that  the

            prosecutor's arguments were accepted.

                 As  to  the  first   branch  of  section  3E1.1(b),  the

            prosecutor  argued that  Lombardi  did  not provide  complete

            information  as to  his involvement  because he  had withheld

            specific information that the prosecutor described.   Neither

            at  the  hearing nor  in his  brief  on appeal  does Lombardi

            answer  this charge.    The second  branch requires  "timely"

            notification of the  guilty plea to permit  the government to

            avoid the expense of preparing for trial.  Since Lombardi did

            not plead  guilty until  after the  jury had  been empaneled,

            well after the government had prepared for trial,  he plainly

            did not meet the requirement.

                 Lombardi's  next argument  is  that the  district  court

            erred in imposing  a $60,000  fine as part  of the  sentence.

            Although he asserts  that the  court "did  not consider"  his

            financial resources,  the  court did  in  fact take  note  of

            information bearing on  these resources, including Lombardi's

            transfer to his son of a  13.3 percent interest in the family

            business  and  an  $85,853  receivable.    According  to  the

            government,  Lombardi   had  obtained  about   $190,000  from

            insurance fraud (reflected  in the restitution  order) during

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the  prior three years.   The district court  also noted that

            the probation officer had encountered difficulty  in securing

            complete financial information from Lombardi.    

                 Under  the guidelines,  the presumption  is that  a fine

            will be imposed, and the burden is upon the defendant to show

            that a fine is  not warranted.  United States v.  Savoie, 985
                                            _____________     ______

            F.2d 612 (1st Cir. 1993).  On this record, we  think that the

            district court  could fairly  conclude that Lombardi  had not

            long  before  been in  possession of  sums  ample to  pay the

            $60,000 fine and that  their absence had not  been adequately

            explained.   A defendant has  little incentive to  help in an

            inventory  of his  assets, and  a busy  federal judge  is not

            required to conduct an audit before imposing a fine.4

                 Lastly, Lombardi  argues that the court  should not have

            imposed  a restitution  order, under  the Victim  and Witness

            Protection Act,  18 U.S.C.    3663-64,  requiring Lombardi to

            repay  the $190,000 obtained  from insurers.   Apart from the

            lack of  explicit  findings  of  financial  condition,  which

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                 4Citing United States v.  Spirolpoulos, 976 F.2d 155 (3d
                         _____________     ____________
            Cir. 1992),  Lombardi also says  that the  fine was  unlawful
            because  its purpose was to pay the cost of his incarceration
            and  supervision.  Whether or not this court would follow the
            Third  Circuit need  not  be decided  here.   Compare  United
                                                          _______  ______
            States v. Turner, 998 F.2d  534 (7th Cir. 1993)  (disagreeing
            ______    ______
            with  the Third  Circuit).   In Spirolpoulos,  the sentencing
                                            ____________
            court imposed  a flat  fine and  then a  per diam amount  for
            incarceration costs.   Here, the court imposed  only the flat
            fine, the judgment labels  it a "fine," and it  is irrelevant
            that  the  judgment form  has  a  boilerplate statement  that
            "[t]he  fine  includes  any  costs  of  incarceration  and/or
            supervision."

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                                          12

Savoie  holds are  not required,  985 F.2d  at 620,  see also
            ______                                               ________

            United  States v. Ahmad, 1993 U.S. App. LEXIS 21587 (7th Cir.
            ______________    _____

            1993),  Lombardi's  brief argues  that  such  a liability  is

            unrealistic when there is little evidence of actual assets or

            future earning power.   We  agree that on  this record  there

            might be  no basis for  an affirmative finding  that Lombardi

            does or necessarily  will have $190,000 available to pay such

            restitution.

                 But  we fail to  see why such  a record  basis should be

            required.   Lombardi does not deny that the money was secured

            from the insurers by fraud, and the whereabouts of the entire

            $190,000 is at  least uncertain, as are  his future prospects

            of  income.   While  the judgment  requiring restitution  may

            prove fruitless, it may also be  of some use if Lombardi ever

            secures  new assets or the insurance  companies wish to prove

            that  assets  held nominally  by  family  members are  really

            Lombardi's.  In all events,  the statute merely requires  the

            court to "consider" financial condition, among other factors,

            18  U.S.C.     3664(a);  there  is no  requirement  that  the

            defendant  be found able  to pay now.   See  Ahmad, 1993 U.S.
                                                    ___  _____

            App.  LEXIS 21587,  at  *4-5.   In  framing this  restitution

            order,  the district  court  did not  abuse its  considerable

            discretion.

                 Affirmed.
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