Tuesday, August 4th, 2020

District court erred in relying on uncharged conduct to select the applicable Guideline provision, and the error is not harmless despite the court’s claim that it would have imposed the same sentence under the correct Guideline.

In United States v. Huberfeld, 2d Cir. No. 19-436 (L), the Court (opinion by Judge Pooler, joined by Judges Lynch and Menashi) vacated both a 30-month sentence and a $19 million order of restitution for basically the same reason – the district court erred in relying on uncharged criminal conduct, beyond and broader than what the defendant actually pleaded guilty to via a negotiated information and plea agreement, in selecting the applicable Guideline provision and awarding restitution. The Court also found that the Guideline-selection error is not harmless, despite the district court’s claim that it would’ve imposed the same 30-month sentence under the correct Guideline, because under the circumstances here, the Court was not “confident” that the incorrect range did not “clearly” affect the court’s selection of the ultimate sentence.

Here’s the factual gist. Huberfeld solicited investments for Platinum Partners, a hedge fund. He spoke to co-conspirator Jona Rechnitz, who suggested that he contact Norman Seabrook, the president of the Corrections Officers Benevolent Association (“COBA”), about having the union make investments with Platinum.

Eventually the three agreed that Seabrook would induce COBA to invest money from its members’ annuity fund with Platinum, in exchange for cash bribes to Seabrook.

Seabrook then convinced COBA to invest $20 million with Platinum. Huberfeld determined that he would pay Seabrook $60,000 for this effort. To “paper over” the bribe, the conspirators came up with the following scheme, which is central to this appeal.

Rechnitz gave $60,000 in cash to Seabrook. Rechnitz then invoiced Platinum for the same amount, purportedly for the purchase of courtside seat to 8 New York Knicks games. Platinum then cut a $60,000 check to Rechnitz.

Platinum eventually went bankrupt. COBA lost $19 million of its $20 million investment.

Seabrook and Huberfeld were indicted for the entire scheme and charged with wire-fraud conspiracy and honest-services fraud based on Seabrook’s role in inducing COBA to invest in Platinum and Huberfeld’s role in bribing him. (Rechnitz cooperated with the Government and pled to a one-count information). The jury hung and a mistrial was declared.

Before the next trial the Government and Huberfeld reached a plea agreement. (Seabrook was tried two weeks later and convicted of the original charges. The Court affirmed his conviction, 58-month sentence, and $19 million restitution order in a summary order issued today.). In essence, Huberfeld would plead guilty to a one-count information charging him with conspiring to commit wire fraud in violation of § 371. Critically, the information charged him only with conspiring to present the false $60,000 invoice to Platinum, instead of the overarching bribery scheme. There was only one reference in the information to the larger offense – a “descriptive” section stating that Huberfeld and Rechnitz “knew that the actual purpose of the payment for [$60,000] was to reimburse Rechnitz for having paid Norman Seabrook . . . for Seabrook’s efforts to get COBA to invest millions of dollars in Platinum.”

The plea agreement focused on the $60,000 scheme. It stipulated that the fraud Guideline, § 2B1.1, applied; that the loss was $60,000; and that the range was 6 to 12 months.

At sentencing the district court refused to apply § 2B1.1 because it believed that the true offense was commercial bribery and thus that § 2B4.1 applied. Under that Guideline the court found the range was 30 to 37 months and then sentenced Huberfeld to 30 months. And it said that it would have imposed the same sentence under the fraud Guideline by varying upwardly from the 6 to 12 months range. The court also imposed $19 million in restitution, to be awarded to COBA as the victim, for the same reason.

The Second Circuit vacated the sentence and the restitution order. As to the sentence, the Court ruled that the district court erred in using the commercial-bribery Guideline, rather than the fraud Guideline, because such “cross-referencing” is permissible only where the conduct set forth in the convicted count of the charging document “actually constitutes an offense covered by another Guideline.” Here, though the charging document briefly referenced the broader bribery scheme, it did “not allege that Huberfeld acted with corrupt intent or that he solicited or made payment in exchange for a benefit, as is generally required for commercial bribery.” Because the superceding information “does not allege the elements of any commercial bribery offense,” the Court concludes, “the district court was not permitted to invoke the cross reference to apply the commercial bribery guideline.”

And the error is not harmless under the totality of circumstances, despite the court’s assurance at sentencing that it would’ve imposed the same sentence under the fraud Guideline. The Court began by generally “not[ing] that the district court cannot insulate its sentence from our review by commenting that the Guideline range made no difference to its determination when the record indicates that it did.” In light of the Guidelines’ “powerful, anchoring effect,” the Court explained, a miscalculated range can affect a judge “even where the court asserted that it was not moved by the Guidelines.”

For several reasons, the Circuit was not “confident” that the error “clear[ly]” made no difference to the outcome. First, the record showed that “the district judge repeatedly acknowledged the importance of the Guidelines” and expended substantial effort trying to calculate the range under § 2B4.1 while refusing the Government’s suggestion that it could account for the larger bribery scheme under the § 3553(a) factors. Second, the 30-month sentence was “conspicuous for its position as the lowest sentence within what the District Court believed to be the applicable range.” Finally, the 30-month sentence was substantially greater than the 6 to 12 range under the fraud Guideline, and the court “did not explain why such a significant variance was appropriate.” The Court thus remanded for resentencing.

The Court vacated the $19 million restitution order to COBA for essentially the same reason it vacated the 30-month sentence. “The restitution statute does not authorize the court to order a defendant to pay restitution to any person who was not a victim of the offense of which the defendant was convicted.” The court thus erred in “imposing a restitution order against Huberfeld as if he were convicted of the uncharged bribery scheme.” Because “none of the conduct within the charged [$60,000] wire fraud conspiracy itself injured COBA,” the union was not a victim — it was not “directly and proximately harmed by the convicted conduct” — and could not be awarded restitution.

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