United States v. Thomas A. Demonte

25 F.3d 343, 1994 WL 233963

• Court: Court of Appeals for the Sixth Circuit
• Decided: August 25, 1994
• Docket: 92-3964
• Status: Published

Opinions

NATHANIEL R. JONES, Circuit Judge, delivered the opinion of the court. BATCHELDER, Circuit Judge (pp. 351-353), and CELEBREZZE, Senior Circuit Judge (pp. 353-356), delivered separate opinions concurring in part and dissenting in part.

NATHANIEL R. JONES, Circuit Judge.

Defendant-Appellee Thomas A. DeMonte pled guilty to computer fraud in violation of 18 U.S.C. § 1030(a)(4). This is the government’s second appeal of DeMonte’s sentence. Under the federal sentencing guidelines, the district court calculated DeMonte’s total offense level at 13, meaning he was subject to 12-18 months of imprisonment. The district court, however, departed downward, lowering DeMonte’s base offense level seven levels (to six) and sentencing DeMonte, inter alia, to three years of probation and no term of imprisonment. As a basis for this departure, the district court cited the fact that DeMonte liquidated his assets to make restitution and the fact that he provided the government with information about previously undiscovered crimes he had committed. On appeal, the government portrays this sentence as an example of unwarranted judicial favoritism toward white-collar criminals. We affirm in part and reverse in part.

7. Facts

On March 7,1991, a one-count Information was filed in the United States District Court for the Southern District of Ohio, charging DeMonte with a form of computer fraud, in violation of 18 U.S.C. § 1030.¹ At his arraignment on March 28, 1991, the district court accepted a Plea Agreement entered into by the government and DeMonte.²

DeMonte appeared for sentencing on May 24, 1991. The district court did not sentence DeMonte at that time, but entered the following order:

[T]he court notes that from the presen-tence report that this defendant has unencumbered total assets of approximately $31,769. Before imposing sentence on this defendant the court directs this defendant to liquidate these assets and pay them over totally to the United States government before the court, and the court will give you two weeks to do that.

J.A. at 36. The district court continued the sentencing proceedings.

When DeMonte appeared for sentencing again on June 21,1991, counsel for DeMonte informed the court that DeMonte had liquidated virtually all of his assets except the clothes he was wearing and $20 in his pocket. The government advised the court of De-Monte’s willing and voluntary cooperation, with the government, particularly that he had informed the government of about $30,-000 that he had embezzled about which the government had not known. The government also told the court that, despite De-Monte’s cooperation, it would not move for a downward departure. The district court continued the proceedings in order to consider the matter further.

On July 17,1991, DeMonte again appeared for sentencing. The district court lowered DeMonte’s total offense level from thirteen to six based on DeMonte’s “extraordinary and unusual level of cooperation,” and his making full restitution to the government to the extent possible. Id. at 42-43. Because of this departure, the guideline imprisonment range dropped from 12-18 months to 0-6 months. The district court imposed a sentence which did not include incarceration but which did include three years of probation.

The government appealed this sentence, and in United States v. DeMonte, No. 91-3775, 1992 WL 99454,1992 U.S. App. LEXIS 11392 (6th Cir. May 12, 1992), we reversed the sentence on the ground that the district court did not clearly indicate whether or to what extent it believed DeMonte’s conduct went beyond that contemplated in the plea agreement and that contemplated in Section 3E1.1 of the United States Sentencing Commission’s Sentencing Guidelines [hereinafter U.S.S.G.], which provides a sentencing reduction for defendants who have accepted responsibility for their actions. Thus, on remand, we asked the district court to “clearly articulate the basis for any departure and for the reasonableness of the degree of departure.” DeMonte, No. 91-3775, Slip Op. at 7.

On remand, the district court remained firm in its imposition of three years of probation and no term of imprisonment. In an Opinion and Order dated August 18, 1992, the district court explained that by liquidating virtually all of his assets in order to make restitution, Defendant’s degree of restitution in the instant case, and the manner in which it was made, were so unusual that a downward departure was appropriate. J.A. at 19-20 (citing 18 U.S.C. § 3553(b); U.S.S.G. § 5K2.0). The court also pointed to Defendant’s “extraordinary level of cooperation” as demonstrated by

providing the government with extensive information regarding crimes with which he was not even charged. Such crimes were unknown to both investigators and the United States Attorney’s Office until disclosed by the Defendant. Further, by voluntarily disclosing this information, the Defendant willingly subjected himself to the possibility of more serious punishment. Thus, the Defendant’s level of cooperation is also sufficiently unusual to warrant a downward departure.

Id. at 20.

The government again appeals DeMonte’s sentence.

II. Discussion

Under 18 U.S.C. § 3553(b),

The court shall impose a sentence ... within the range, referred to in subsection (a)(4) unless the court finds that there exists an aggravating or mitigating circumstance of a kind, or to a degree, not adequately taken into consideration by the Sentencing Commission in formulating the guidelines that should result in a sentence different from that described. In determining whether a circumstance was adequately taken into consideration, the court shall consider only the sentencing guidelines, policy statements, and official commentary of the Sentencing Commission.

This statement is echoed and augmented somewhat in U.S.S.G. § 5K2.0:

Where ... the applicable offense guideline and adjustments do take into consideration a factor listed in this subpart, departure from the applicable guideline range is warranted only if the factor is present to a degree substantially in excess of that which ordinarily is involved in the offense.

In United States v. Brewer, 899 F.2d 503 (6th Cir.), cert. denied, 498 U.S. 844, 111 S.Ct. 127, 112 L.Ed.2d 95 (1990), we explained our standard for reviewing departures from the sentencing guidelines:

First, the reviewing court determines whether “the case is sufficiently ‘unusual’ to warrant departure.” This is purely a question of law.

Second, we determine whether the circumstances, if conceptually proper, actually exist in the particular case. That assessment involves factfinding and the trier’s determinations may be set aside only for clear error. See 18 U.S.C. § 3742(d).

Third, once we have assured ourselves that the sentencing court considered circumstances appropriate to the departure equation and that those factors enjoyed adequate record support, the direction and degree of departure must, on appeal, be measured by a standard of reasonableness. 18 U.S.C. § 3742(e)(2); et al.

Id. at 506 (quoting United States v. Diaz-Villafane, 874 F.2d 43, 49 (1st Cir.), cert. denied, 493 U.S. 862, 110 S.Ct. 177, 107 L.Ed.2d 133 (1989)); see also United States v. Joan, 883 F.2d 491, 494 (6th Cir.1989) (adopting three-part test enunciated in Diaz-Villafane).

A Restitution

DeMonte argues that his liquidating virtually all of his assets constitutes “conduct significantly differ[ent] from the norm.” U.S.S.G. Ch.l, Pt.A(4)(b). Thus, in his view, the district court’s departure passes muster under part one of the Brewer test. We disagree, and so we do not need to consider the second and third parts of the test.

We have acknowledged that voluntary res-titutionary payments may constitute “exceptional circumstances” that justify a downward departure greater than that contemplated in Section 3E1.1.³ See Brewer, 899 F.2d at 509 (“[T]he factor of restitution and remorse was considered under the guidelines, and the defendants’ offense level was appropriately reduced by two levels. Unless the defendants have proved that their voluntary repayment of the embezzled funds constitutes an ‘exceptional circumstance,’ a downward departure based on this factor was not warranted.”); see also United States v. Garlich, 951 F.2d 161, 163 (8th Cir.1991) (“A defendant’s voluntary payment of restitution before adjudication of guilt is a factor to be considered in determining whether the defendant qualifies for a two-level reduction for acceptance of responsibility.... Although the district court gave [the defendant] this reduction, we conclude the district court should consider whether the extent and timing of [the defendant’s] restitution are sufficiently unusual to warrant a downward departure.”); United States v. Carey, 895 F.2d 318, 323 (7th Cir.1990). However, De-Monte’s restitutionary payments upon liquidation of his assets were not made voluntarily before adjudication of guilt, but pursuant to a court order⁴ and after adjudication of guilt. Further, what most impressed the court below was that DeMonte .completely liquidated his assets for the purpose of making restitution within a few weeks, yet the court expressly demanded that DeMonte do so. Thus, any “special circumstances” in this ease essentially derive from the district court’s own order; the district court created the special circumstance upon which it relied in departing from the guidelines.⁵

Moreover, as we noted in United States v. Harpst, 949 F.2d 860, 863 (6th Cir.1991), “it seems that the Sentencing Commission considered including the ability to make restitution as a possible mitigating circumstance, yet rejected it as a basis for departure from the guidelines. See U.S.S.G. § 5H1.10, p.s. (socio-economic status not relevant in determination of sentence).” In accordance with U.S.S.G. § 5H1.10, we may not sentence a poor convict more harshly than a rich convict simply because the rich convict is better able to make restitution. Conversely, however, we should not sentence a poor convict less harshly than a rich convict simply because the poor convict is forced to liquidate assets to make restitution. “In promulgating the guidelines, one of the Sentencing Commission’s primary goals was to impose a sentence ‘based upon the crime committed, not the offender.’” Brewer, 899 F.2d at 507 (citation omitted); see also Harpst, 949 F.2d at 863 (noting that sentencing guidelines were, at least in part, “intended to supplant” the “unfortunate practice of disparate sentencing based on socio-economic status”); cf. United States v. Rutana, 932 F.2d 1155, 1159 (6th Cir.) (“The imposition of a ‘harsh’ fine is not a proper basis for departure from the guidelines. The guidelines have already taken fines, even large ones, into consideration .... Economic considerations likewise do not provide a basis for downward departure.”) (footnote omitted; emphasis added), cert. denied, - U.S. -, 112 S.Ct. 300, 116 L.Ed.2d 243 (1991). For example, if the defendant in this case were so poor that he had no assets to liquidate, the district court might not have departed’ downward based on the defendant’s extraordinary restitution measures, and so the defendant would in effect have been denied an equal opportunity to receive a sentence of probation rather than imprisonment. It is precisely this kind of discrimination on the basis of economic status with which U.S.S.G. § 5H1.10 is concerned. Cf. Harpst, 949 F.2d at 863.

Finally, allowing probation in this case seems to defeat the federal sentencing guidelines’ expressed desire to put white-collar crimes on a par with “street crimes” as far as incarceration is concerned:

Under pre-guidelines sentencing practice, courts sentenced to probation an inappropriately high percentage of offenders guilty of certain economic crimes, such as theft, tax evasion, antitrust offenses, insider trading, fraud, and embezzlement, that in the Commission’s view are “serious.” The Commission’s solution to this problem has been to write guidelines that classify as serious many offenses for which probation previously was frequently given and provide for at least a short period of imprisonment in such cases. The Commission concluded that the definite prospect of prison, even though the term may be short, will serve as a significant deterrent, particularly when compared with pre-guidelines practice where probation, not prison, was the norm.

U.S.S.G. Ch.l, Pt.A(4)(d), quoted in Brewer, 899 F.2d at 507 (different version quoted). The Brewer court also quoted an article written by Judge Stephen Breyer, one of the authors of the guidelines:

The Commission found in its data significant discrepancies between pre-Guideline punishment of certain white-collar crimes, such as fraud, and other similar common law crimes, such as theft. The Commission’s statistics indicated that where white-collar fraud was involved, courts granted probation to offenders more frequently than in situations involving analogous common law crimes; furthermore, prison terms were less severe for white-collar criminals who did not receive probation. To mitigate the inequities of these discrepancies, the Commission decided to require short but certain terms of confinement.

The Commission took this course for two reasons. First, the Commission considered present sentencing practices, where white-collar criminals receive probation more often than other offenders who committed crimes of comparable severity, to be unfair. Second, the Commission believed that a short but definite period of confinement might deter future crime more effectively than sentences with no confinement condition.

Brewer, 899 F.2d at 508 (quoting Breyer, The Federal Sentencing Guidelines and the Key Compromises Upon Which They Rest, 17 Hofstra L.Rev. 1, 20, 22). This is not to say that there are no circumstances in which restitution might cause an appropriate downward departure resulting in probation for a white-collar convict. Such circumstances, however, as discussed above, are not present in this case. To the extent, then, that the district court used DeMonte’s restitution to drop the total offense level to the point where probation could be imposed without any confinement, see U.S.S.G. § 5B1.1(a)(1), the sentence manifests the very same unequal treatment of white-collar and “street” criminals that the sentencing guidelines sought to eradicate.

B. Cooperation

The district court also asserted that De-Monte’s “extraordinary level of cooperation” with the authorities supported its decision to depart. Admitting to offenses of which the government had no knowledge and exposing himself to increased criminal liability was, in the view of the district court, an action above and beyond that contemplated by the sentencing guidelines.

The court relied upon United States v. Lieberman, 971 F.2d 989 (3d Cir.1992). In that case, the defendant, when confronted by bank authorities, immediately admitted that he was embezzling funds from the bank. Id. at 991. He explained to managers of the bank how he was able to avoid detection, and resigned his position contemporaneously with these admissions and revelations. He pled guilty. Though he was formally charged with embezzling about $94,000, he agreed to repay the bank approximately $140,000 (which the bank asserted he owed). Id. The district court determined that these facts constituted a special circumstance of acceptance of responsibility above and beyond that contemplated by the guidelines, and granted the defendant a owe-level downward departure. Id. at 992.

The Third Circuit affirmed. It suggested that the defendant’s “admission of the full extent of his wrongdoing when confronted by bank officials, resignation of his position at the bank shortly after being confronted with the improper transactions, and voluntary and truthful admissions to the authorities” fell within the range of conduct the commissions meant the two-level reduction for acceptance of responsibility to address. Id. at 996. Deferring to the district court’s discretion, however, it viewed the defendant’s meetings with bank officials, concerning how to prevent certain types of embezzlement and his repayment of more than he was formally charged with embezzling, as sufficient grounds for the one-level departure. Id.

In the present case, the government readily admits that DeMonte cooperated fully. The government contends, however, that this constituted nothing more than what was required of him. Thus, the government claims, the departure cannot pass muster under the first part of the Brewer test. Further, the government also challenges the district court’s factual determination that DeMonte’s admission of another theft subjected himself to increased criminal liability. Thus, the government contends, the departure cannot pass muster under the second part of the Brewer test. Finally, the government argues that the degree of the district court’s departure is unreasonable, so the departure fails the third part of the Brewer test.

1. Defendant’s conduct was sufficiently unusual

The government argues that De-Monte’s conduct was required by both the Plea Agreement and U.S.S.G. § 3E1.1, comment. (n.l(a)) (voluntary and truthful admission to authorities of involvement in the offense and relevant conduct), and so was not sufficiently unusual to survive the Brewer test. We disagree.

While DeMonte’s admission that he committed a prior theft of which the government was completely unaware was formally required under the terms of the Plea Agreement, it was nevertheless a manifestation of an unusual willingness to cooperate. First, DeMonte could have bargained for a plea agreement that did not require the potentially damning disclosure. From this it follows that DeMonte voluntarily undertook his obligation to disclose the prior theft. Second, and more importantly, as a practical matter, had DeMonte kept the prior theft a secret notwithstanding the existence of the plea agreement, it is highly unlikely that authorities would have found out about it. Thus, there is no sense in which DeMonte was forced or compelled, either by the government or by the plea agreement, to risk disclosing the prior theft. Under these circumstances, it was unusual indeed for DeMonte to have made the disclosures that he did.

We are not holding, of course, that merely abiding by the terms of one’s plea agreement constitutes grounds for a downward departure. We are holding, however, that in the absence of any hint by the government that it suspected anything, DeMonte’s potentially damning admissions are not the sort of admissions that judges expect to hear every day. This is true regardless of whether the admissions were made pursuant to a plea agreement or not.

Further, DeMonte’s conduct does not come under § 3E1.1, comment, n. 1(a) insofar as the prior theft was not “relevant conduct.” The prior fraud was a separate and distinct operation, using a different fictitious company as payee, and a different post office box in a different city as his address. There was apparently a break of about a year and a half between DeMonte’s prior fraudulent activities (of which the government knew nothing) and those to which he pled guilty. See J.A. at 46-47.

Therefore, DeMonte’s level of cooperation was indeed sufficiently unusual to warrant departure.

2. Defendant subjected himself to increased liability

The government correctly points out that under the terms of the Plea Agreement, the government could not further prosecute DeMonte based upon any information he gave concerning other acts of fraud, nor could it use such information to enhance his sentence. Thus, in the government’s view, the district court’s finding that DeMonte subjected himself to increased punishment by “coming clean” is not supported by the record.

However, even though the federal authorities agreed not to use the information which DeMonte provided against him, DeMonte’s revelations exposed him to potentially increased state criminal liability. Cf. United States v. Roberson, 872 F.2d 597, 610-12 (5th Cir.) (state agreement with defendant not to prosecute in return for cooperation had no bearing on whether federal authorities could prosecute because the agreement did not include federal authorities), cert. denied, 493 U.S. 861, 110 S.Ct. 175, 107 L.Ed.2d 131 (1989); United States v. Jordan, 870 F.2d 1310, 1316 (7th Cir.), cert. denied, 493 U.S. 831, 110 S.Ct. 101, 107 L.Ed.2d 65 (1989).

Therefore, we cannot say that the district court’s finding — that DeMonte’s level of cooperation subjected him to the possibility of increased punishment — was clearly erroneous.- The government does not question any of the district court’s other findings of fact, and so we conclude that the court’s downward departure from the guidelines passes muster under the second step of the Brewer test.

8. Reasonableness

The government argues that, even if we find that the district court had the power to depart on the basis of the circumstances of this case, the downward departure of seven levels was patently unreasonable. Because we are remanding for resentencing in light of our reversal of one of the two bases for the district court’s downward departure, we do not reach this issue at this time.

C. Comparison between Restitution and Cooperation as Bases for Making a Downward Departure in the Present Case

Apparently, Judges Batchelder .and Cele-brezze each believe that the two grounds for downward departure presented in the instant case are both on an equal footing. In her concurrence in part and dissent in part, infra, Judge Batchelder suggests that they are both equally invalid. In his separate concurrence in part and dissent in part, infra, Judge Celebrezze suggests that they are both equally valid. I respectfully disagree with each of these views, and in this section, I seek to clarify three of the differences between these bases under the circumstances presented in the instant case.

First, the lower court ordered DeMonte to liquidate his assets within two weeks in order to make restitution, whereas DeMonte voluntarily entered into a plea agreement requiring disclosure of prior thefts. This implies that DeMonte’s cooperation was voluntary in a way that his attempt to make restitution was not.

Second, the court had ample means to determine, before it imposed a sentence upon DeMonte, whether DeMonte complied with the court’s order to liquidate his assets, but had virtually no means to determine whether DeMonte complied with his obligation to disclose prior thefts. Thus, DeMonte had reason to believe that he could keep his prior theft a secret, but he could not have reasonably believed that he could keep a failure to liquidate his assets a secret.

Third, one’s ability to significantly liquidate one’s assets is an economic consideration. As such it should not provide a basis for a downward departure. See, e.g., Rutana, 932 F.2d at 1159. On the other hand, one’s ability to disclose a prior crime is a non-economie consideration. Rewarding such behavior with a downward departure does not present the danger of unfairly discriminating on the basis of economic status. Similarly, to the extent that white collar criminals tend to have more assets to liquidate than street criminals, rewarding the liquidation of assets may result in the sort of unequal treatment favoring white collar criminals that the sentencing guidelines sought to eradicate. On the other hand, because a white collar criminal is no more able to make unanticipated disclosures of prior crimes than a street criminal, rewarding such disclosures is unlikely to result in any corresponding inequity.

III. Conclusion

In light of the foregoing, we reverse the district court’s decision to depart based on DeMonte’s restitutionary payments, we affirm the decision to depart based on De-Monte’s extraordinary cooperation, and we remand for resentencing in accordance with this decision.

1 . For the underlying facts of this crime, see our decision on the prior appeal, United States v. DeMonte, No. 91-3775, 1992 WL 99454, 1992 U.S.App. LEXIS 11392 (6th Cir. May 12, 1992) (per curiam).

2 . In relevant part, the Plea Agreement provides:

4. Defendant THOMAS A. DEMONTE agrees to testify truthfully and completely concerning all matters pertaining to the Information filed herein and to any and all other computer fraud in which he may have been involved or as to which he may have knowledge....

Pursuant to § IB 1.8 of the Federal Sentencing Guidelines, the government agrees that any self-incriminating information so provided will not be used against the defendant in determining the applicable guideline range for sentencing, or as a basis for upward departure from the guideline range.

5. Defendant THOMAS A. DEMONTE agrees to make restitution in the amount of $46,-514.75 to the United States.

6.If such a plea of guilty is entered, and not withdrawn, and defendant THOMAS A. DE-MONTE acts in accordance with all other terms of this agreement, the United States Attorney for the Southern District of Ohio agrees not to file additional charges against Defendant THOMAS A. DEMONTE based on his activities charged in the Information or based on other computer fraud in the Southern District of Ohio occurring prior to the date of the Information and as to which Defendant gives testimony or makes statements pursuant to this agreement.

J.A. at 5-6.

3 . Section 3E1.1, comment. (n.l(c)), provides a remorseful defendant who makes "voluntary payment of restitution prior to adjudication of guilt” with a two-level reduction for demonstrating acceptance of responsibility for his/her criminal conduct. Significantly, DeMonte did receive this two-level reduction.

4 . See 18 U.S.C. §§ 3556, 3663-64 (orders of restitution authorized for violations of provisions of, inter alia, Title 18); U.S.S.G. § 5E1.1(a)(1) ("The court shall enter a restitution order if such order is authorized under 18 U.S.C. § 3663-3664_”). Notably, the district court had the discretion to take DeMonte’s financial resources into account when ordering him to pay restitution. See 18 U.S.C. § 3664(a) ("The court, in determining whether to order restitution under section 3663 of this title and the amount of such restitution, shall consider ... the financial resources of the defendant .... ”); see also U.S.S.G. § 5E1.1, comment, (backg'd) (same).

5 . Before DeMonte was ordered by the court to make restitution, DeMonte had voluntarily agreed to do so in his plea agreement. However, DeMonte's actual conduct in making restitution was not simply an attempt to fulfill the obligation that he had voluntarily undertaken; he did not volunteer to completely liquidate all of his assets within a matter of weeks pursuant to his plea agreement. To the contrary, DeMonte made restitution in the manner he did solely because he was compelled to do so by the court. Had De-Monte liquidated his assets so promptly simply in order to fulfill his obligation pursuant to the plea agreement, then I would agree with Judge Cele-hrezze, infra, concurring in part and dissenting in part, that this would be unusual enough to merit a downward departure under the first prong of the Brewer test.