In the
United States Court of Appeals For the Seventh Circuit ____________________
No. 21-3014 UNITED STATES OF AMERICA, Plaintiff-Appellee,
v.
STUART NITZKIN, Defendant-Appellant. ____________________
Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 1:21-CR-00292(1) — Sara L. Ellis, Judge. ____________________
ARGUED JUNE 2, 2022 — DECIDED JUNE 22, 2022 ____________________
Before EASTERBROOK, ST. EVE, and JACKSON-AKIWUMI, Cir- cuit Judges. EASTERBROOK, Circuit Judge. From April 2011 through Sep- tember 2016, Stuart NiFkin was executive director of a charity in Illinois. Through NiFkin’s efforts the charity raised about $1.1 million a year. He took home more than $300,000 annu- ally—about half as salary and the rest embezzled. NiFkin pleaded guilty to wire fraud, 18 U.S.C. §1343, and was sen- tenced to 42 months’ imprisonment plus a fine, restitution, 2 No. 21-3014
and a year’s supervised release. His appellate brief presents a single issue: whether, when calculating the recommended length of imprisonment, the district judge properly added two levels under U.S.S.G. 2B1.1(b)(9)(A). Guideline 2B1.1(b)(9)(A) adds two levels (which for NiFkin implied eight to ten extra months in prison) when the offense involves “a misrepresentation that the defendant was acting on behalf of a charitable, educational, religious, or po- litical organization, or a government agency”. NiFkin’s posi- tion is simple: he did not “misrepresent” his status as a person “acting on behalf of” the charity, given that he was its duly appointed executive director. NiFkin contends that §2B1.1(b)(9)(A) does not deal with diversion of funds raised by a legitimate officer of a legitimate charity. The district judge found an increase under §2B1.1(b)(9)(A) proper because NiFkin “was aware that some of the money coming in, based on his past decisions and behavior, was not going to the charity but would instead be diverted to him.” In other words, the judge thought the increase appropriate be- cause of NiFkin’s intent about the disposition of the money rather than because NiFkin misled donors about his position with the charity. The judge’s approach has the support of Ap- plication Note 8(B), which tells us that the increase applies in any case in which the defendant represented that the defendant was acting to obtain a benefit on behalf of a charitable, educational, religious, or political organization, or a government agency (regardless of whether the defendant actually was associ- ated with the organization or government agency) when, in fact, the defendant intended to divert all or part of that benefit (e.g., for the defendant’s personal gain).
The question that we must decide is whether this note is a rea- sonable understanding of the Guideline—for, although the No. 21-3014 3
Sentencing Commission’s commentary may be used to re- solve ambiguities, it may not be used to contradict or extend a Guideline’s text. See, e.g., United States v. Rollins, 836 F.3d 737 (7th Cir. 2016); D’Antoni v. United States, 916 F.3d 658 (7th Cir. 2019); United States v. Smith, 989 F.3d 575, 584 (7th Cir. 2021). Application Note 8(B) was promulgated in 2001 as part of Amendment 617. A predecessor application note had given a few examples, all of which entailed misrepresentation of the defendant’s position or misrepresentation of the charity’s very existence. Not until the 2001 change did any commen- tary suggest that intention to divert part of the proceeds could support an enhancement under §2B1.1(b)(9)(A). The Commis- sion said this about the change: [T]his amendment resolves a circuit conflict regarding the scope of the enhancement in the consolidated guideline for a misrepre- sentation that the defendant was acting on behalf of a charitable, educational, religious, or political organization, or a government agency. (Prior to this amendment, the enhancement was at sub- section (b)(4)(A) of §2F1.1). The conflict concerns whether the mis- representation enhancement applies only in cases in which the de- fendant does not have any authority to act on behalf of the cov- ered organization or government agency or if it applies more broadly to cases in which the defendant has a legitimate connec- tion to the covered organization or government agency, but mis- represents that the defendant is acting solely on behalf of that or- ganization or agency. Compare, e.g., United States v. Marcum, 16 F.3d 599 (4th Cir. 1994) (enhancement appropriate even though defendant did not misrepresent his authority to act on behalf of the organization but rather only misrepresented that he was con- ducting an activity wholly on behalf of the organization), with United States v. Frazier, 53 F.3d 1105 (10th Cir. 1995) (application of the enhancement is limited to cases in which the defendant ex- ploits the victim by claiming to have authority which in fact does not exist). 4 No. 21-3014
The amendment follows the broader view of the Fourth Circuit. It provides for application of the enhancement, now, by this amend- ment, at §2B1.1(b)(7)(A), if the defendant falsely represented that the defendant was acting to obtain a benefit for a covered organi- zation or agency when, in fact, the defendant intended to divert all or part of that benefit (for example, for the defendant’s per- sonal gain), regardless of whether the defendant actually was as- sociated with the organization or government agency. The Com- mission determined that the enhancement was appropriate in such cases because the representation that the defendant was act- ing to obtain a benefit for the organization enables the defendant to commit the offense. In the case of an employee who also holds a position of trust, the amendment provides an application note instructing the court not to apply §3B1.3 (Abuse of Position of Trust or Use of Special Skill) if the same conduct forms the basis both for the enhancement and the adjustment in §3B1.3.
The proviso mentioned at the end is in Application Note 8(E)(i): “If the conduct that forms the basis for an enhance- ment under subsection (b)(9)(A) is the only conduct that forms the basis for an adjustment under §3B1.3 (Abuse of Po- sition of Trust or Use of Special Skill), do not apply that ad- justment under §3B1.3.” We will return to this proviso. The statement in Amendment 617 that the Commission is resolving a conflict among the circuits by rewriting an applica- tion note is hard to fathom, at least on an initial reading. The Fourth and Tenth Circuits disagreed about how to read a Guideline. The normal way to resolve a conflict is to change the Guideline, which the Commission did not do. Rewriting the application note is like reenacting a statute with the text unchanged but a different legislative history, and Pierce v. Un- derwood, 487 U.S. 552 (1988), holds that this maneuver does not change the statute’s meaning. So how could a new appli- cation note change a Guideline’s meaning? No. 21-3014 5
We said that the “normal” way to resolve a conflict is to change the Guideline, but it turns out that the conflict be- tween the Fourth and Tenth Circuits was about the Applica- tion Note rather than the Guideline.
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In the
United States Court of Appeals For the Seventh Circuit ____________________
No. 21-3014 UNITED STATES OF AMERICA, Plaintiff-Appellee,
v.
STUART NITZKIN, Defendant-Appellant. ____________________
Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 1:21-CR-00292(1) — Sara L. Ellis, Judge. ____________________
ARGUED JUNE 2, 2022 — DECIDED JUNE 22, 2022 ____________________
Before EASTERBROOK, ST. EVE, and JACKSON-AKIWUMI, Cir- cuit Judges. EASTERBROOK, Circuit Judge. From April 2011 through Sep- tember 2016, Stuart NiFkin was executive director of a charity in Illinois. Through NiFkin’s efforts the charity raised about $1.1 million a year. He took home more than $300,000 annu- ally—about half as salary and the rest embezzled. NiFkin pleaded guilty to wire fraud, 18 U.S.C. §1343, and was sen- tenced to 42 months’ imprisonment plus a fine, restitution, 2 No. 21-3014
and a year’s supervised release. His appellate brief presents a single issue: whether, when calculating the recommended length of imprisonment, the district judge properly added two levels under U.S.S.G. 2B1.1(b)(9)(A). Guideline 2B1.1(b)(9)(A) adds two levels (which for NiFkin implied eight to ten extra months in prison) when the offense involves “a misrepresentation that the defendant was acting on behalf of a charitable, educational, religious, or po- litical organization, or a government agency”. NiFkin’s posi- tion is simple: he did not “misrepresent” his status as a person “acting on behalf of” the charity, given that he was its duly appointed executive director. NiFkin contends that §2B1.1(b)(9)(A) does not deal with diversion of funds raised by a legitimate officer of a legitimate charity. The district judge found an increase under §2B1.1(b)(9)(A) proper because NiFkin “was aware that some of the money coming in, based on his past decisions and behavior, was not going to the charity but would instead be diverted to him.” In other words, the judge thought the increase appropriate be- cause of NiFkin’s intent about the disposition of the money rather than because NiFkin misled donors about his position with the charity. The judge’s approach has the support of Ap- plication Note 8(B), which tells us that the increase applies in any case in which the defendant represented that the defendant was acting to obtain a benefit on behalf of a charitable, educational, religious, or political organization, or a government agency (regardless of whether the defendant actually was associ- ated with the organization or government agency) when, in fact, the defendant intended to divert all or part of that benefit (e.g., for the defendant’s personal gain).
The question that we must decide is whether this note is a rea- sonable understanding of the Guideline—for, although the No. 21-3014 3
Sentencing Commission’s commentary may be used to re- solve ambiguities, it may not be used to contradict or extend a Guideline’s text. See, e.g., United States v. Rollins, 836 F.3d 737 (7th Cir. 2016); D’Antoni v. United States, 916 F.3d 658 (7th Cir. 2019); United States v. Smith, 989 F.3d 575, 584 (7th Cir. 2021). Application Note 8(B) was promulgated in 2001 as part of Amendment 617. A predecessor application note had given a few examples, all of which entailed misrepresentation of the defendant’s position or misrepresentation of the charity’s very existence. Not until the 2001 change did any commen- tary suggest that intention to divert part of the proceeds could support an enhancement under §2B1.1(b)(9)(A). The Commis- sion said this about the change: [T]his amendment resolves a circuit conflict regarding the scope of the enhancement in the consolidated guideline for a misrepre- sentation that the defendant was acting on behalf of a charitable, educational, religious, or political organization, or a government agency. (Prior to this amendment, the enhancement was at sub- section (b)(4)(A) of §2F1.1). The conflict concerns whether the mis- representation enhancement applies only in cases in which the de- fendant does not have any authority to act on behalf of the cov- ered organization or government agency or if it applies more broadly to cases in which the defendant has a legitimate connec- tion to the covered organization or government agency, but mis- represents that the defendant is acting solely on behalf of that or- ganization or agency. Compare, e.g., United States v. Marcum, 16 F.3d 599 (4th Cir. 1994) (enhancement appropriate even though defendant did not misrepresent his authority to act on behalf of the organization but rather only misrepresented that he was con- ducting an activity wholly on behalf of the organization), with United States v. Frazier, 53 F.3d 1105 (10th Cir. 1995) (application of the enhancement is limited to cases in which the defendant ex- ploits the victim by claiming to have authority which in fact does not exist). 4 No. 21-3014
The amendment follows the broader view of the Fourth Circuit. It provides for application of the enhancement, now, by this amend- ment, at §2B1.1(b)(7)(A), if the defendant falsely represented that the defendant was acting to obtain a benefit for a covered organi- zation or agency when, in fact, the defendant intended to divert all or part of that benefit (for example, for the defendant’s per- sonal gain), regardless of whether the defendant actually was as- sociated with the organization or government agency. The Com- mission determined that the enhancement was appropriate in such cases because the representation that the defendant was act- ing to obtain a benefit for the organization enables the defendant to commit the offense. In the case of an employee who also holds a position of trust, the amendment provides an application note instructing the court not to apply §3B1.3 (Abuse of Position of Trust or Use of Special Skill) if the same conduct forms the basis both for the enhancement and the adjustment in §3B1.3.
The proviso mentioned at the end is in Application Note 8(E)(i): “If the conduct that forms the basis for an enhance- ment under subsection (b)(9)(A) is the only conduct that forms the basis for an adjustment under §3B1.3 (Abuse of Po- sition of Trust or Use of Special Skill), do not apply that ad- justment under §3B1.3.” We will return to this proviso. The statement in Amendment 617 that the Commission is resolving a conflict among the circuits by rewriting an applica- tion note is hard to fathom, at least on an initial reading. The Fourth and Tenth Circuits disagreed about how to read a Guideline. The normal way to resolve a conflict is to change the Guideline, which the Commission did not do. Rewriting the application note is like reenacting a statute with the text unchanged but a different legislative history, and Pierce v. Un- derwood, 487 U.S. 552 (1988), holds that this maneuver does not change the statute’s meaning. So how could a new appli- cation note change a Guideline’s meaning? No. 21-3014 5
We said that the “normal” way to resolve a conflict is to change the Guideline, but it turns out that the conflict be- tween the Fourth and Tenth Circuits was about the Applica- tion Note rather than the Guideline. The Fourth Circuit held in Marcum that a defendant who misrepresented how charita- ble proceeds would be used should receive an enhancement under §2B1.1(b)(9)(A). (The Guideline was then §2F1.1(b)(4)(A). It was moved by Amendment 617 to §2B1.1(b)(7)(A) and moved later to §2B1.1(b)(9)(A). Its text has remained constant. We use the current numbering through- out this opinion to promote clarity.) Marcum did not quote or analyze the Guideline’s lan- guage. Frazier, by contrast, analyzed the language in detail and focused on the phrase “on behalf of” in the longer phrase “a misrepresentation that the defendant was acting on behalf of a charitable … organization”. Referring to dictionaries, Fra- zier observed that “on behalf of” could mean “as a representa- tive of” or “in the interest of”. If the phrase has the former meaning, then a person who was authorized to represent a charity cannot receive an enhancement under §2B1.1(b)(9)(A), but if it has the laler meaning then a person who secretly planned to take some of the money under the table is eligible for the enhancement. The Tenth Circuit thought that the Guideline bears both meanings, but that, because all of the Application Note’s examples dealt with misrepresentation of status rather than misrepresentation of intent, only misrepre- sentation of status could support an enhancement. Amendment 617, and the revised Application Note 8(B), remove the basis for the restrictive reading in Frazier and sup- port a conclusion that both kinds of misrepresentation qual- ify. If the only reason for the conflict between Marcum and 6 No. 21-3014
Frazier was judicial disagreement about how to read an appli- cation note, that sort of conflict can indeed be resolved by re- writing the note and leaving the Guideline’s text unchanged. Since 2001, courts of appeals have uniformly accepted the new Application Note as an authoritative construction of §2B1.1(b)(9)(A). See United States v. Wiant, 314 F.3d 826, 829 (6th Cir. 2003); United States v. Lambert, 498 F.3d 963 (9th Cir. 2007); United States v. Smith, 516 F.3d 473 (6th Cir. 2008); United States v. Fumo, 655 F.3d 288 (3d Cir. 2011). Some of these decisions mention only the text of §2B1.1(b)(9)(A) and others do not analyze with care either the text or the note. One even alributes Amendment 617 to Congress! Lambert, 498 F.3d at 970. (The brief for the United States quotes that alrib- ution with approval. Do the Ninth Circuit and the Depart- ment of Justice really not know who writes the Guidelines and their commentary?) But these decisions all come out the same way, and we could not hold otherwise without creating a new conflict among the circuits. We do not find the prospect of a new conflict necessary, for two reasons. First, Frazier is right to observe that “on behalf of” can mean “for the benefit of”. It is appropriate to use the Sentenc- ing Commission’s commentary to resolve ambiguities in the Guidelines. True, any compensated employee of a charity is raising money in part for his own benefit (how else will the organization pay his salary?), but limiting the enhancement to people who plan to receive secret benefits produces a sensi- ble outcome. Second, the proviso now expressed in Application Note 8(E)(i) eliminates the prospect that reading “on behalf of” to No. 21-3014 7
mean “for the benefit of” will duplicate the enhancement un- der §3B1.3 for abuse of a position of trust, an enhancement that NiFkin received in addition to the one under §2B1.1(b)(9)(A). There’s nothing wrong with double counting when the Commission calls for it. See United States v. Vizcarra, 668 F.3d 516 (7th Cir. 2012). But when the Commission itself says that two enhancements so overlap that only one should be applied, we need not strain to avoid overlaps. The appro- priate thing to do is allow each Guideline a natural meaning, then enforce the anti-cumulation rule. The problem in NiFkin’s sentencing turns out to be, not a misconstruction of §2B1.1(b)(9)(A), but the fact that everyone overlooked Application Note 8(E)(i). The district judge did not mention it, let alone conclude that the enhancements un- der §2B1.1(b)(9)(A) and §3B1.3 rest on different conduct. A court of appeals may notice plain error, see Fed. R. Crim. P. 52(b), and this oversight is plain enough. A difference of eight to ten months in the recommended length of a sentence is well worth geling correct. Rosales-Mireles v. United States, 138 S. Ct. 1897 (2018), holds that errors in calculating the appropriate sentencing range usually should be corrected under Rule 52(b). So we remand with instructions to apply Application Note 8(E)(i). If the judge finds that the two enhancements re- flect different conduct, then both may be applied. Even if only one applies, the judge may conclude that a 42-month sentence retains the support of the criteria in 18 U.S.C. §3553. But that determination must start with a correct appreciation of the range recommended by the Sentencing Commission. See United States v. Asbury, 27 F.4th 576, 582 (7th Cir. 2022). The sentence is vacated, and the case is remanded for further proceedings consistent with this opinion.