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July 29, 2008

Circuit split interpreting the term "victim" under USSG 2B1.1

Katie Gerber, a Summer Associate at Proskauer Rose, posts this summary of an interesting Fifth Circuit case decided recently:          

           The Fifth Circuit has issued an opinion interpreting the term “victim” under section 2B1.1(b)(2) of the Sentencing Guidelines in United States v. Conner (available here).  This opinion appears to reinforce a split in the Circuits on the Guidelines’ requirement that a “victim” suffer “actual loss” resulting from the offense.

            Conner was convicted of conspiracy and mail fraud in connection with a fraud scheme that utilized commercial credit accounts without authorization at various Home Depot, Lowe’s, and Sam’s Club stores.  Conner’s base offense level was increased by 4 levels pursuant to the district court’s finding that his offense involved between 50 and 250 “victims.”  The district court deemed each person whose account information was improperly used by the defendant to purchase goods to be a victim for purposes of § 2B1.1(b)(2)(B). On appeal, Conner argued, and the Fifth Circuit agreed, that the only victims of the scheme were the five credit companies involved, because the underlying account holders were fully reimbursed by those companies for all charges made to their accounts. 

            The majority opinion in the Fifth Circuit followed United States v. Icaza, 492 F.3d 967 (8th Cir. 2007), and United States v. Yagar, 404 F.3d 967 (6th Cir. 2005).  In Icaza, the Eight Circuit case involved a cross-country shoplifting spree at various Walgreen’s stores, and the Circuit determined that the only “victim” for purposes of § 2B1.1(b)(2) was Walgreen’s corporation, because none of the individual Walgreen’s stores “ultimately bore the pecuniary harm.”  Icaza, 404 F.3d at 970.  In the Yagar case, the defendant used stolen checks to deposit funds into accounts of over fifty individuals at five banks using stolen bank information, and then withdrew portions of those funds, receiving over $20,000 in cash.  The Sixth Circuit held that the underlying account holders were not “victims,” because “they were fully reimbursed for their temporary financial losses.”  Yagar, 404 F.3d at 971.

            The majority in Conner declined to follow the Eleventh Circuit’s decision in United States v. Lee, 427 F.3d 881, 884 (11th Cir. 2005).  There, the court determined that businesses that had been able to offset losses caused by the defendants’ wrongdoing, through the recovery of collateral or the return of money or property, nevertheless suffered a loss under the Guidelines and should be deemed victims for purposes of § 2B1(b)(2)(B).  Interestingly, the Lee court noted its disagreement with the Sixth Circuit, arguing that the court in Yagar overlooked the Application Notes in reading the “actual loss” provisions under the Guidelines.  Id. at 895.  The Eleventh Circuit pointed out that the Guidelines take into account an eventual recovery or return of lost money, property, or services to the victim by allowing the defendant to take credit against the total loss for the value of any recovery.  The Court reasoned that the Guidelines, therefore, inherently acknowledge that there was an initial loss to such victims, even when that loss is subsequently remedied.  Id. 

            In contrast with the majority’s view, Circuit Judge Garza sided with the Eleventh Circuit’s approach. He criticized the majority’s analysis, arguing that it “runs counter to the fundamental sentencing goal of tying the severity of a defendant’s sentence to the seriousness of the defendant’s crime.”  Id. He offered the following illustration:

Compare a defendant who defrauds 1,000 individuals that, after the fact, have their losses reimbursed by a single insurer and a defendant who defrauds 10 uninsured individuals.  Assuming an equal amount of loss, there can be no doubt that the first defendant’s crime is more serious and therefore deserving of a more serious sentence.  The majority’s interpretation of victim enhancement leads to the incongruous result of the second defendant receiving the higher Guidelines range. 

            The significance of this debate among the Circuits over the meaning of the term “victim” in § 2B1.1 remains to be seen.  But as the majority in the Fifth Circuit expressly acknowledged, the large number of individual account holders affected by Conner’s crime could be considered in any event under the factors in 18 U.S.C. § 3553(a) if the court decides to issue a non-Guidelines sentence on remand.

Katie Gerber

July 29, 2008 at 10:36 PM | Permalink

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Comments

Judge Garza's point is silly. Criminal defendants receive lower sentences all the time because of the effect of their conduct is not as bad for reasons completely outside of their control. A defendant who shoots someone in the head who unexpectedly survives will receive a lower sentence because the victim happen to have a great doctor. Defendants are typically punished both for what they intend and for the effect of their conduct. And since the defendant in this case hurt less people, his crime simply isn’t as bad, so he probably deserves a slight (ever so slight) sentencing break.

Posted by: Not the same | Jul 30, 2008 10:27:47 AM

"There is no doubt" reveals all. There is always doubt; in fact, the majority not only doubts Judge Garza's reasoning, they expressly repudiated it. I would have repudiated it too; it makes no sense whatsoever.

Posted by: Daniel | Jul 30, 2008 12:35:20 PM

As always, courts and others have a hard time figuring out the difference between "loss" under 2B1.1 (which is simply a proxy for harm) and "restitution" issues.

It doesn't matter that all the victims were made whole *unless* they were made whole by the defendant prior to discovery(i.e. "credits against loss"). In fact, it doesn't matter if there is $0 in "actual loss" if an "intended loss" is clearly provable.

As you say, Mr. Not The Same, we need only to look at the defendant's INTENT when determing the harm under 2B1.1. If his intent was to defraud those 50+ individual account holders then "there is no doubt" what the intended harm (loss) is.

Unless you're on the 5th Circuit.

Posted by: Loss Isn't THAT Complicated | Jul 30, 2008 3:26:09 PM

What if someone defrauds victim and although victim is reimbursed, he or she spends hours on the matter? What if the time expended causes an actual financial loss?

Both sides of this question seem more logical than the use of acquitted conduct at sentencing.

Posted by: Stanley Feldman | Jul 30, 2008 6:29:54 PM

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