United States v. Skys, No. 09-5204-cr (2d Cir. February 23, 2011) (Jacobs, Kearse, Straub, CJJ)
In August of 2007, Eric Skys approached Citigroup and claimed that his company, Kaiser-Himmel Corp., owned 13.4 million shares of Sprint Nextel Corp. stock, with a market value of approximately $240 million. He told Citigroup that transfer of the shares was restricted for another fourteen months, but that he wanted to raise immediate cash by pledging the shares to Citigroup in exchange for an $83 million dollar loan. Citigroup’s due diligence revealed that Skys’ claims were false and that the documents he had presented were forgeries. Skys approached three other financial institutions with the same scheme, again without success. He ultimately pled guilty to securities, wire and bank fraud.
At sentencing, his presentence report described additional, albeit uncharged, fraudulent conduct. Skys solicited investments in a fake software company and also cheated a Florida dentist out of $300,000, then tried to take him for another $2 million, again claiming he owned 13.4 million shares of Sprint stock.
At sentencing, over objection, the district court included a two-level enhancement for ten or more victims and a four-level enhancement for aggravating role. These contributed to a final range of 235 to 293 months. The district court varied downward, and imposed a below-Guideline prison term of 130 months.
On appeal, Skys raised the same sentencing issues, and the circuit agreed with him to some extent. While it did not hold that the court should not have applied the enhancements, it concluded that the district court’s findings were insufficient. It accordingly vacated the sentence and remanded the case so that the district court could supplement the record and, if necessary, resentence Skys.
For the ten-victim enhancement, only victims that suffer an actual loss qualify. Here, the district court did little more than adopt the fact findings in the presentence report, which indicated only that Skys tried to defraud four financial institutions, none of which suffered an actual financial loss. And, while some of the individuals victimized by the uncharged conduct suffered an actual loss, there was no evidence that there were ten or more of them. Thus, the court of appeals concluded that there was no way it could engage in “meaningful review” of the enhancement.
It reached a similar conclusion for the role enhancement. The aggravating role enhancement applies where the defendant was an organizer or leader of a criminal activity that involved five or more participants or was “otherwise extensive.” Here, the district court applied only the “otherwise extensive” theory, concluding that “this was an extensive scheme.” Here, again, the circuit found the findings to be insufficient.
The circuit has interpreted the “otherwise extensive” language to refer primarily to the number of persons involved, either knowing or unknowing, and the extent to which the the unknowing participants were necessary to the success of the scheme. Here, the district court did not identify a single other “participant” – a person with criminal responsibility for the commission of the offense – and gave no “objectively reviewable explanation” for its conclusion that Skys’ criminal activity was “extensive.”