U.S. v. Keller

• Decision Date: 08 August 2007
• Docket Number: No. 05-6725.,No. 05-6562.,05-6562.,05-6725.
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Stephen L. KELLER, Defendant-Appellant. United States of America, Plaintiff-Appellant, v. Robert Grant Sutherlin, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

498 F.3d 316

UNITED STATES of America, Plaintiff-Appellee, v. Stephen L. KELLER, Defendant-Appellant.

United States of America, Plaintiff-Appellant, v. Robert Grant Sutherlin, Defendant-Appellee.

No. 05-6562.

No. 05-6725.

United States Court of Appeals, Sixth Circuit.

Argued: April 24, 2007.

Decided and Filed: August 8, 2007.

ARGUED: Susan G. James, Susan G. James & Associates, Montgomery, Alabama, John D. Cline, Jones Day, San Francisco, California, for Defendants. John Patrick Grant, Assistant United States Attorney, Lexington, Kentucky, for Plaintiff. ON BRIEF: Susan G. James, Susan G. James & Associates, Montgomery, Alabama, John D. Cline, Jones Day, San Francisco, California, for Defendants. John Patrick Grant, Assistant United States Attorney, Lexington, Kentucky, for Plaintiff.

Before: GUY, COLE, and McKEAGUE, Circuit Judges.

OPINION

R. GUY COLE, JR., Circuit Judge.

Stephen Keller and Grant Sutherlin were convicted of multiple counts of fraud and money laundering in connection with their operation of a viatical company. At their initial sentencing hearings, the district court imposed the lowest possible sentence on both defendants, pursuant to the then-mandatory Sentencing Guidelines. Sutherlin was sentenced to 151 months of imprisonment and Keller received 168 months. Following the Supreme Court's decision in United States v. Booker, 543 U.S. 220, 125 S.Ct. 738, 160 L.Ed.2d 621 (2005), both defendants' sentences were vacated and their cases remanded for resentencing. On remand, the district court imposed sentences on each defendant that varied downward substantially from their respective Guidelines' minimums. The court sentenced Sutherlin to 36 months in prison, representing a variance of 115 months; Keller was sentenced to 120 months in prison, which constitutes a variance of 48 months.

The Government now appeals Sutherlin's sentence as substantively unreasonable. In addition, Keller appeals his sentence as both procedurally and substantively unreasonable. For the reasons described below, we VACATE Sutherlin's sentence and REMAND for re-sentencing, and AFFIRM Keller's sentence.

I. BACKGROUND

A. Facts

In 2003, a jury convicted co-defendants Sutherlin and Keller of fraud and money laundering in connection with a scheme to purchase fraudulently obtained life-insurance policies and then resell them to private investors.

Keller was the owner of Kelco, Inc., a Lexington, Kentucky-based viatical company. Sutherlin began working for Kelco in 1994, when he was 17 years old, and he dropped out of college to work full-time for the company, eventually becoming its Vice President.

As a viatical company, Kelco purchased life-insurance policies from terminally ill people, particularly HIV patients, for less than the face value of the policies and then re-sold them to investors. Keller was Kelco's chief executive officer and Sutherlin had responsibility for negotiating the purchase and sale of the insurance policies.

Life-insurance companies typically will not write policies for persons with terminal illnesses such as HIV and AIDS. Keller and Sutherlin purchased policies from persons who they knew had obtained them by fraud, i.e., Keller and Sutherlin knew that the policyholders had lied to the insurance companies about the true state of their health. What's more, Keller and Sutherlin encouraged HIV and AIDS patients to apply for as many policies as they could and then sell them to Kelco, so that Kelco would have more policies to re-sell to investors. In some instances, Keller and Sutherlin asked HIV patients to obtain higher-value policies that would require a blood sample. In those cases, Keller and Sutherlin instructed the HIV patients to arrange for someone else to give the blood.

Many of the policies that Kelco purchased were "contestable," meaning that they were within the two-year period from the policy's effective date in which the insurance company could cancel the policy if it discovered that the policy had been procured through fraud. Keller and Sutherlin knew that if a contestable policy were cancelled by an insurance company, the third-party to whom they had sold the policy would sustain a complete loss on his or her investment. Kelco worked to conceal its purchase of these contestable policies from the insurance companies, first by making it appear as though the beneficiaries were using their policies as collateral for loans, and later by setting up trusts.

Keller and Sutherlin profited handsomely from their scheme. Keller's income exceeded $1 million during the late 1990s and Sutherlin's income rose from $213,417 in 1997 to $376,281 in 1999. All-in-all, federal agents determined that Kelco had purchased at least 445 fraudulently obtained life-insurance policies with a face value of more than $37 million.

B. Procedural History

Sutherlin and Keller appealed their convictions to this Court, which we affirmed in 2004. United States v. Sutherlin, 118 Fed. Appx. 911 (6th Cir. 2004). Sutherlin and Keller subsequently appealed their sentences, which were vacated and remanded in light of the Supreme Court's opinion in Booker. The district court having re-sentenced both defendants, the Government now appeals Sutherlin's sentence and Keller appeals his sentence.

1. Sutherlin's First and Second Sentencing Hearings

At Sutherlin's initial sentencing on August 12, 2003, the district court calculated a base offense level of 34 and a Criminal History Category of I, which yielded a Sentencing Guidelines range of 151-188 months. Under the then-mandatory Guidelines, the court sentenced Sutherlin to 151 months of imprisonment on counts 24 through 46 of the indictment and 60 months on each of counts 1 through 23, to be served concurrently. In addition, Sutherlin was sentenced to three years of supervised release upon the termination of his imprisonment, and ordered to pay a special assessment of $4,600 and restitution of $661,292.

Following the Supreme Court's decision in Booker, which rendered the Sentencing Guidelines advisory, Sutherlin's case was remanded for re-sentencing. The second sentencing hearing took place on September 16, 2005. Sutherlin took his opportunity to allocute by apologizing to the court, his family, and the victims of his fraudulent activity, in what the record suggests was an emotional statement. Sutherlin stated that he "wish[ed] that back then I had the judgment not to listen to what Steve [Keller] told me and I wish that I had listened to my parents and stayed in college at UK, but I can't turn back the clock." (Joint Appendix ("JA") 1309.) Sutherlin pleaded with the court to "[p]lease give me the chance to provide for my wife and daughter and please give me a chance to pay my restitution. I promise you, Your Honor, that you will be proud of me." (JA 1309.) The Government acknowledged that Sutherlin's contrition was "genuine" and "heartfelt." (JA 1310.)

After hearing from Sutherlin and counsel on both sides, the district court proceeded to thoroughly discuss the issues that it was bound to consider in imposing sentence. As an initial matter, the district court properly recognized that the Guidelines are now advisory and that the duty of the sentencing judge is to "impose a sentence sufficient, but not greater than necessary to comply with the purposes set forth" in § 3553(a)(2). The court specifically recited each of the § 3553(a) factors and also acknowledged that it was required to consider the policy statements embodied in that section. The district court noted that the advisory Guidelines range in Sutherlin's case remained 151 to 188 months and that although the Guidelines are advisory, they are "still a matter which must seriously be considered." (JA 1312.)

The district court then applied each of the § 3553(a) factors in light of Sutherlin's individual characteristics. With respect to the "nature and circumstances of the offense and the history and characteristics of the Defendant," the court found that Sutherlin's youth was a significant consideration in determining his sentence. The court noted that Sutherlin was "just a kid" when, at age 17, he went to work for Keller. (JA 1313-14.) Given Sutherlin's youth and impressionability, the court found that Keller was able to exercise substantial influence over Sutherlin. Keller persuaded Sutherlin to drop out of college to work full-time at Kelco and Keller lavished Sutherlin with a prestigious title and a generous salary. According to the court, Keller "exploited Mr. Sutherlin's youth and lack of education and lack of experience with a substantial salary and an elevated position in the company. A position that he could never have hoped to have obtained outside of Kelco." (JA 1313.) The court noted that Sutherlin was only 21 in 1998, when most of the fraudulent policies were sold, and just 23 in 2000 when Kelco's illegal operations came to an end. The court stated that although Sutherlin's youth was not a basis for departing from the Guidelines under the pre-Booker regime, it was an important factor to be considered in the post-Booker world.

Next, the court noted that Sutherlin was "deeply, deeply remorseful for his actions and seems to have now underst[ood] the wrongfulness of his past conduct." (JA 1314.) The court further stated that the letters it had received on Sutherlin's behalf further showed the depth of Sutherlin's contrition.

The court also was impressed by Sutherlin's activities since his original sentencing, explaining that Sutherlin had been a "productive and []hard working citizen working to resurrect his father's aviation sales business prior to reporting to prison." (JA 1314.) While incarcerated, Sutherlin had not been a disciplinary problem, had organized a bible-study group, and had worked hard to keep in regular touch with his wife and daughter. The court further noted that Sutherlin had paid his $4,600 special assessment and had made regular restitution payments, including while in jail, that...