United States v. Straus

• Court: Court of Appeals for the Tenth Circuit
• Decided: August 3, 1999
• Docket: 98-2186
• Status: Unpublished

Opinion

F I L E D United States Court of Appeals Tenth Circuit UNITED STATES COURT OF APPEALS AUG 3 1999 TENTH CIRCUIT PATRICK FISHER Clerk

UNITED STATES OF AMERICA,

Plaintiff - Appellee, No. 98-2186 v. (D. New Mexico) JAMES ROBERT STRAUS, (D.C. No. CR-96-660-LH)

Defendant - Appellant.

ORDER AND JUDGMENT *

Before ANDERSON , TACHA , and BALDOCK , Circuit Judges.

On February 3, 1998, James Robert Straus pled guilty to one count of wire

fraud, a violation of 18 U.S.C. §§ 1343 and 2. He was subsequently sentenced to

a term of 21 months’ imprisonment and three years’ supervised release, and

ordered to pay restitution in the amount of $397,050.73. Straus now appeals from

this sentence, arguing that (1) the district court erroneously assessed a two-level

increase in his base offense level for abuse of a position of trust, pursuant to

* This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. The court generally disfavors the citation of orders and judgments; nevertheless, an order and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3. USSG § 3B1.3, and (2) the district court erroneously refused to depart downward

from the applicable guideline range based on Straus’s military and public service

and community involvement. For the reasons discussed below, we affirm the

judgment of the district court in part and dismiss Straus’s appeal in part.

BACKGROUND

In 1988, Straus started a business, based in Albuquerque, New Mexico,

called Straus Downing International, Ltd. (SDI). In the beginning, SDI was

solely an insurance business, but Straus later expanded the scope of SDI’s

operations to include the management of retirement investments. In 1991, Straus

traveled to Bangkok, Thailand, to meet with officials of the International School

of Bangkok (ISB). ISB offered its employees, most of whom were teachers who

taught at the school, the opportunity to invest up to 10% of their incomes in a

retirement fund, and in 1991 the school was looking for a company to manage the

investment fund. Straus made a presentation to ISB officials, and promised them,

both orally and in a written brochure, that if they chose SDI to manage their

retirement fund, the fund would be insured by Aetna Insurance Company. ISB

eventually selected SDI to manage its fund, and in February 1992 began sending

funds to SDI.

-2- Between February 1992 and early 1993, ISB sent approximately $34,000

per month, by wire transfer, to a Swiss bank account in Straus’s name. Straus

“controlled that account and would not allow anyone with [SDI] to contact the

Swiss [bank] regarding the balances of the accounts.” V R. at 3, ¶ 8.

Soon after ISB began sending money to Straus, ISB officials contacted SDI

and requested verification of the Aetna insurance policy which Straus had

promised them covered their funds. On April 19, 1992, Straus sent to ISB, by

facsimile, a document which he represented to be the Aetna policy covering the

retirement funds. The document appeared to bear the signature of an Aetna

official. ISB officials assumed the document to be valid, and continued to send

monthly wire transfers to the Swiss account.

In early 1993, ISB began to become suspicious of Straus and SDI. ISB’s

headmaster met with Straus in Munich, Germany, in May 1993 to confirm that the

funds were still intact. During that meeting, Straus wrote the headmaster a check,

drawn on an account in an Albuquerque bank, for $383,087. When ISB officials

attempted to deposit this check, however, it was returned for insufficient funds.

ISB officials then contacted Straus and asked him where their money was, and

Straus answered that it was “tied up.” Id. at 4, ¶ 11. Subsequently, ISB learned

that SDI had no money in its accounts, and could not produce the investment

funds.

-3- ISB then attempted to pursue a claim against Aetna, the company which

ISB thought had issued a policy insuring their funds. When ISB officials

contacted Aetna, however, they learned that Aetna had issued no such policy, and

that the policy transmitted to them in April 1992 was fraudulent.

A federal investigation ensued, and, on November 7, 1996, a grand jury

returned an indictment charging Straus with four counts of wire fraud. On

February 3, 1998, Straus and prosecutors entered into a plea agreement. Straus

agreed to plead guilty to one count of wire fraud, and the government agreed to

dismiss the remaining counts.

On March 24, 1998, a federal probation officer submitted Straus’s

Presentence Investigation Report (PSR). The report stated that Straus’s base

offense level, pursuant to USSG § 2F1.1(a), was 6. Section 2F1.1(b), however,

mandated a nine-level increase because the amount of money involved was

greater than $350,000. The report recommended that Straus’s offense level be

further increased by two levels, pursuant to USSG § 2F1.1(b)(2), because the

offense involved more than minimal planning, and by another two levels, pursuant

to USSG § 3B1.3, because Straus abused a position of trust. After subtracting

three levels for acceptance of responsibility, pursuant to USSG § 3E1.1, the report

concluded that Straus’s adjusted offense level should be 16. With a criminal

-4- history category of I, the relevant guideline range was 21-27 months’

imprisonment.

Straus filed several objections to the PSR, only one of which is relevant to

this appeal. In this objection, he argued that the two-level increase for abuse of a

position of trust was unwarranted, and in any event constituted double counting

because the reasons for such an increase were already taken into account by the

increase for more than minimal planning. Straus also moved the district court for

a downward departure from the applicable guideline range, based on Straus’s

military and civil service record.

The district court held a sentencing hearing on June 10, 1998. The district

court overruled Straus’s objection to the PSR, finding that the abuse of trust

increase was warranted, and stating that “the application of [the abuse of trust and

the more than minimal planning] enhancements in [this] case . . . are not double

counting” because they “apply to different purposes.” IV R. at 17. The district

court also denied Straus’s motion for a downward departure. The court sentenced

Straus to 21 months’ imprisonment, an amount at the lower end of the guideline

range, and three years’ supervised release. Additionally, the court ordered that

Straus pay restitution in the amount of $397,050.73.

-5- Straus now appeals from the district court’s decisions to impose the two-

level enhancement for abuse of a position of trust, and to deny the requested

downward departure.

DISCUSSION

I. The Abuse of Trust Enhancement

Straus’s first contention is that the district court misapplied the abuse of

trust enhancement. Straus’s argument on this point is twofold. First, Straus

argues that this case is merely a “garden variety” fraud case, Appellant’s Br. at

17, and that therefore the abuse of trust enhancement should not have been

applied. Second, and alternatively, Straus argues that the application of the abuse

of trust enhancement in this case constitutes double counting, because he asserts

that the reasons behind the abuse of trust enhancement in this case are similar to

the reasons behind the enhancement for more than minimal planning.

A. Did the District Court Correctly Apply the Abuse of Trust Enhancement?

“This court reviews the question of whether an individual occupied a

position of trust in a particular transaction for clear error.” United States v.

Trammell , 133 F.3d 1343, 1355 (10th Cir. 1998).

-6- By its terms, USSG § 3B1.3 applies “[i]f the defendant abused a position of

public or private trust . . . in a manner that significantly facilitated the

commission or concealment of the offense.” The Sentencing Commission has

explained that

“[p]ublic 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. For this enhancement to apply, the position of trust must have contributed in some significant way to facilitating the commission or concealment of the offense ( e.g. , by making the detection of the offense or the defendant’s responsibility for the offense more difficult).

USSG § 3B1.3, comment. (n.1).

Straus correctly argues that this enhancement was not intended to be

applied, categorically, to every case of fraud. See United States v. Koehn , 74

F.3d 199, 201 (10th Cir. 1996) (stating that “[i]n every successful fraud the

defendant will have created confidence and trust in the victim, but the sentencing

enhancement is not intended to apply in every case of fraud”). We have,

however, typically upheld application of the guideline in two types of fraud cases:

(1) “where the defendant steals from his employer, using his position in the

company to facilitate the offense”; and (2) “where a ‘fiduciary or personal trust

relationship exists’ with other entities, and the defendant takes advantage of the

-7- relationship to perpetrate or conceal the offense.” Id. (quoting United States v.

Brunson , 54 F.3d 673, 677 (10th Cir. 1995).

This case fits within the second category of cases. Here, Straus was in a

“fiduciary or personal trust relationship” with ISB, because it had entrusted him

with supervision and management of its retirement funds. Straus had personally

represented to ISB officials that the funds were insured, and had even transmitted

to ISB a forged Aetna insurance policy to prove the existence of the insurance. In

addition, Straus was the CEO of SDI, and had undisputed authority over the

financial affairs of the corporation. The record also reflects that Straus had

exclusive control over the Swiss bank account into which the ISB funds were

deposited, and that he refused to allow other SDI employees any contact with the

Swiss bank. In short, ISB trusted Straus with the safekeeping of its funds, and

Straus used this fiduciary position and particularly his exclusive control of the

Swiss account both to perpetrate the fraud and to conceal it.

The conclusion of the district court that Straus occupied a position of trust,

and then abused that trust, comports with our previous case law. See Trammell ,

133 F.3d at 1355-56 (holding that an insurance agent who solicited funds from

investors by representing that he would purchase annuities for them, and then

spent the funds for his own benefit, abused a position of trust); United States v.

Lowder , 5 F.3d 467, 473 (10th Cir. 1993) (holding that a CPA who provided tax

-8- advice to elderly and unsophisticated clients and who encouraged them to invest

in sham corporations of which he was president abused his position of trust);

United States v. Queen , 4 F.3d 925, 929 (10th Cir. 1993) (holding that a person

who falsely purported to be an investment advisor/broker abused a position of

trust); cf. Koehn , 74 F.3d at 202 (holding that a mortgage officer with authority

over escrow accounts abused a position of trust when he misappropriated funds

from those escrow accounts); United States v. Johnson , 4 F.3d 904, 916-17 (10th

Cir. 1993) (holding that a bank vault teller abused a position of trust when she

helped to facilitate a robbery of the vault with which she had been entrusted). We

cannot say that the district court committed clear error when it found that Straus

occupied and violated a position of trust.

B. Did the Application of the Abuse of Trust Enhancement Constitute Double Counting?

Straus next argues that the application of the abuse of trust enhancement

and the application of the enhancement for more than minimal planning

constituted double counting, because the bases for the two enhancements are

similar. The district court’s determination that application of the two

enhancements was not double counting is a “purely legal interpretation of the

Sentencing Guidelines,” which we review de novo. United States v. Duran , 127

F.3d 911, 916 (10th Cir. 1997).

-9- We have stated that impermissible double counting occurs only when (1)

the same conduct is used to support two enhancements, and (2) the two

enhancement provisions “necessarily overlap, are indistinct, and serve identical

purposes.” United States v. Rice , 52 F.3d 843, 850-51 (10th Cir. 1995) (quoting

United States v. Flinn , 18 F.3d 826, 829 (10th Cir. 1994)). We have stressed that

the three requirements of the second prong are phrased in the conjunctive, and

that “[w]hen a defendant’s sentence is enhanced multiple times for a seemingly

single act, impermissible double counting occurs only if the enhancements

necessarily overlap, are indistinct, and serve identical purposes.” United States v.

Rucker , – F.3d. –, –, 1999 WL 373212, at *2 (10th Cir. June 9, 1999) (emphasis

in original). Indeed, “‘[d]ouble counting is permissible if it accounts for more

than one type of harm caused by the defendant’s conduct or where each

enhancement of the defendant’s sentence serves a unique purpose under the

guidelines.’” Id. at –, 1999 WL 373212, at *3 (quoting United States v. Parker ,

136 F.3d 653, 654 (9th Cir.), cert. denied , 119 S. Ct. 363 (1998)).

Even if we assume that Straus is correct that the same conduct was used to

support both enhancements, a proposition that is by no means obvious in this

case, we would still be compelled to conclude that the enhancements were proper.

USSG §§ 2F1.1(b)(2)(A) and 3B1.3 do not necessarily overlap, are not indistinct,

and do not serve identical purposes. The enhancement for more than minimal

-10- planning is “designed to target criminals who engage in complicated criminal

activity because their actions are considered more blameworthy and deserving of

greater punishment than a perpetrator of a simple version of the crime.” Rice , 52

F.3d at 851. The abuse of trust enhancement, by contrast, is “primar[ily]

concern[ed with] penalizing defendants who take advantage of a position that

provides them with the freedom to commit a difficult-to-detect wrong.” Queen , 4

F.3d at 929. Indeed, “one can abuse a position of trust with minimal planning.

Similarly, an individual, such as a[n ordinary] bank teller who embezzles money

with an extensive plan, can engage in more than minimal planning without

abusing a position of trust.” United States v. Berridge , 74 F.3d 113, 118 (6th Cir.

1996). If an offender both abuses a position of trust and engages in more than

minimal planning while doing so, that offender’s sentence can properly be

enhanced under both USSG §§ 2F1.1(b)(2)(A) and 3B1.3, even if the same

conduct is used to justify both enhancements.

Therefore, we conclude that the district court did not err by enhancing

Straus’s sentence for abusing a position of trust, and that the district court did not

engage in impermissible double counting in assessing the enhancement.

II. The Motion for Downward Departure

-11- Straus next challenges the district court’s decision to deny his motion,

based on Straus’s military and civil service record, for a downward departure

from the applicable guideline range. Factors such as a defendant’s military and

civic record are “not ordinarily relevant in determining whether a sentence should

be outside the applicable guideline range.” USSG § 5H1.11. However, a district

court may depart downward on the basis of such “discouraged” factors “only if

the factor is present to an exceptional degree or in some other way makes the case

different from the ordinary case where the factor is present.” United States v.

Collins , 122 F.3d 1297, 1302 (10th Cir. 1997) (quoting Koon v. United States ,

518 U.S. 81, 96 (1996)).

We are, however, without “jurisdiction to review a sentencing court’s

refusal to depart from the sentencing guidelines except in the very rare

circumstance that the district court states that it does not have any authority to

depart from the sentencing guideline range for the entire class of circumstances

proffered by the defendant.” United States v. Castillo , 140 F.3d 874, 887 (10th

Cir. 1998). Therefore, we may review the district court’s decision not to depart

downward in this case only if the district court, ignoring Koon and Collins ,

erroneously determined that it had no authority to depart downward on the basis

of any defendant’s military and civic record.

-12- The record demonstrates that the district court was aware that Koon allows

a court to depart downward on the basis of military and civic accomplishments,

but only in exceptional cases. At the beginning of his argument on the matter,

Straus’s counsel told the court as much, and, at the conclusion of his argument,

Straus’s counsel even cited Koon . IV R. at 18-21.

In denying Straus’s motion for a downward departure, the district court

made the following statement:

Well, I commend Mr. Straus for his bravery while in the service of the United States and the other good deeds he has done [and] has accomplished. And while that may be a basis for adjusting a sentence within a guideline range, I conclude that it is not a valid reason under case law that has been cited to me by the government on downward departures, to be a legitimate basis for a downward departure. And I also believe that this is within my discretion. I would decline to exercise my discretion for downward departure. . . . I will deny the motion for downward departure.

IV R. at 26. Focusing on the part of the statement where the court stated that

“while that may be a basis for adjusting a sentence within a guideline range, I

conclude that it is not a valid reason under case law that has been cited to me by

the government on downward departures, to be a legitimate basis for a downward

departure,” Straus argues that the district court determined that it had no authority

to depart downward. We disagree.

Straus ignores the next part of the statement, where the court stated that “I

also believe that this is within my discretion [and] I would decline to exercise my

-13- discretion for downward departure.” When we consider the court’s statement as a

whole, including the context in which the statement was made—the court was

aware of Koon and counsel had plainly stated, on multiple occasions, that

departure was warranted under these circumstances in exceptional cases—it is

plain that the court understood that it had discretion to depart downward on the

basis of military and civic accomplishments, but that the circumstances of

Straus’s case were not so exceptional as to justify such a departure. Therefore,

we have no jurisdiction to review the district court’s decision not to depart

downward.

CONCLUSION

For the foregoing reasons, we AFFIRM that portion of the district court’s

judgment and sentence pertaining to the abuse of trust enhancement, and we

DISMISS for lack of jurisdiction that portion of Straus’s appeal which challenges

the district court’s decision not to depart downward.

ENTERED FOR THE COURT

Stephen H. Anderson Circuit Judge

-14-