U.S. v. Broderson

Citation67 F.3d 452
Decision Date23 October 1995
Docket NumberD,1903,Nos. 1522,s. 1522
PartiesUNITED STATES of America, Appellee/Cross-Appellant, v. Howard BRODERSON, Defendant-Appellant/Cross-Appellee. ockets 94-1586(L), 94-1638.
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Candace Reid, New York City (Lawrence S. Goldman, Goldman & Hafetz, of counsel), for Defendant-Appellant/Cross-Appellee.

Scott W. Mackay, Washington, DC (Deborah A. Kent, United States Department of Justice, Defense Procurement Fraud Unit, of counsel), for Appellee/Cross-Appellant.

Before: OAKES, WINTER and MAHONEY, Circuit Judges.

WINTER, Circuit Judge:

Howard Broderson appeals from the sentence imposed by Judge Mishler after a jury convicted Broderson of twenty-two counts involving fraudulent conduct directed at the United States government. Broderson challenges: (i) the enhancement of his offense level by two levels based on a determination that he had abused a "position of trust" with the victim of the fraud, see U.S.S.G. Sec. 3B1.3; (ii) the use of the 1993 Guidelines Manual instead of the 1988 Manual in determining his sentence; and (iii) the enhancement of his offense level by twelve levels based on a finding that the "intended loss" to the victim was $2.1 million, see U.S.S.G. Sec. 2F1.1(b)(1)(M). The government cross-appeals, contending that the district court erred when it departed downward by seven levels under U.S.S.G. Secs. 2F1.1, comment. (n. 7(b)), 5K2.0. We hold that Broderson's conduct was not an abuse of a position of public trust under U.S.S.G. Sec. 3B1.3. We disagree with the district court's calculation of the intended loss. We agree that the grounds relied upon by the district court as a basis for a downward departure were proper. We therefore remand for resentencing.

BACKGROUND

In the summer of 1989, Grumman Data Systems Corporation and the National Aeronautics and Space Administration ("NASA") negotiated a contract under which Grumman agreed to provide supercomputer hardware, software, and related integration and maintenance services to the Lyndon B. Johnson Space Center in Houston, Texas. Broderson, a vice president of the Business Operations Division of Grumman, negotiated the contract on behalf of Grumman and was responsible for preparing and submitting Grumman's proposals to NASA. The contract negotiations were governed by the Truth in Negotiations Act ("TINA"), 10 U.S.C. Sec. 2306a, and TINA's implementing regulations in the Federal Acquisition Regulations ("FAR"), 48 C.F.R. Secs. 15.801-15.804. TINA and FAR required Broderson to disclose to NASA (and to update) all "cost or pricing data" until an agreement was reached by NASA and Grumman. 10 U.S.C. Sec. 2306a; 48 C.F.R. Sec. 15.801.

Under the contract, Grumman was to purchase supercomputer hardware and lease it to NASA under a "lease-to-ownership-plan" ("LTOP"). Under the LTOP, NASA was to make 57 or 58 monthly payments to Grumman, the total cost not to exceed $48 million. Broderson arranged to finance Grumman's A jury convicted Broderson of eleven counts of executing a major fraud scheme in connection with the defective pricing of a government contract valued at more than $1 million, in violation of 18 U.S.C. Secs. 1031, 2; nine counts of wire fraud, in violation of 18 U.S.C. Secs. 1343, 2; and two counts of making false statements to the United States, in violation of 18 U.S.C. Secs. 1001, 2. Broderson does not appeal from the conviction.

purchase of the supercomputer hardware through a third-party financing company, Old Stone Leasing Corporation. Old Stone initially offered Broderson an interest rate of 13.77 percent, which he disclosed to NASA. Approximately three weeks later, Old Stone reduced the requested interest rate to 10.5 percent. Broderson failed to inform NASA of the lower interest rate. Broderson signed and caused to be submitted to NASA two Certificates of Current Cost or Pricing Data, which falsely stated that to the best of Broderson's knowledge and belief, Grumman's cost or pricing data were accurate, complete, and current. The final contract between Grumman and NASA provided for a 57-month stream of lease payments at the 13.77 percent interest rate. However, Grumman thereafter sold the lease stream to Old Stone, valuing it at the 10.5 percent interest rate.

At sentencing, the district court assigned Broderson a base offense level of six under U.S.S.G. Sec. 2F1.1(a). Judge Mishler then enhanced the offense level by twelve levels based on an intended loss of $2.1 million under U.S.S.G. Sec. 2F1.1(b)(1)(M); two levels for abuse of a position of public trust under U.S.S.G. Sec. 3B1.3; and two levels for more than minimal planning under U.S.S.G. Sec. 2F1.1(b)(2)(A). Judge Mishler then departed downward by seven levels based on his findings that the determination under Section 2F1.1 significantly overstated the seriousness of Broderson's conduct, and that there were mitigating circumstances of a kind or degree not adequately taken into consideration in the Guidelines, see U.S.S.G. Sec. 5K2.0. In support of these findings, Judge Mishler noted that: (i) Broderson had sought only to benefit his employer, Grumman, and had received no personal benefit from the fraud; (ii) under existing market conditions, the contract was favorable to the government; and (iii) the government received restitution from Grumman.

Based on a criminal history category of I and offense level of 15, the district court set Broderson's sentencing range at 18 to 24 months. Absent the downward departure, Broderson's guideline range would have been 41 to 51 months. Judge Mishler sentenced Broderson to 18 months imprisonment to be followed by three years of supervised release, and imposed a $1,100 mandatory special assessment.

This appeal and cross-appeal followed.

DISCUSSION
A. Abuse of a Position of Trust

The district court's determination that Broderson occupied and abused a position of trust is a legal question that we review de novo. United States v. Castagnet, 936 F.2d 57, 58-59 (2d Cir.1991). U.S.S.G. Sec. 3B1.3 provides, in relevant part:

If the defendant abused a position of public or private trust, or used a special skill, in a manner that significantly facilitated the commission or concealment of the offense, increase by 2 levels. This adjustment may not be employed if an abuse of trust or skill is included in the base offense level or specific offense characteristic.

We agree with Broderson that he did not occupy a position of trust vis-a-vis the government. TINA and FAR imposed specific legal obligations on Broderson that he failed to fulfill. But for those provisions, Broderson would not have been under any duty to inform the government of Grumman's anticipated costs or to certify that such information had been accurately provided.

The government's theory seems so far reaching that it might cause virtually anyone who is commanded by statute to make an accurate report to the government to be subject to a Section 3B1.3 enhancement. All taxpayers who file false tax returns, for example, might be included. We believe that it is fairly obvious that the Sentencing Commission harbored no intent that the enhancement be so sweeping.

Quoting from the Commentary to Section 3B1.3, the government argues that anyone with "professional or managerial discretion" --which Broderson had as a high executive at Grumman--occupies a position of public or private trust. See U.S.S.G. Sec. 3B1.3, comment. (n. 1). However, the cases relied upon by the government indicate that the discretion must be entrusted to the defendant by the victim. See United States v. Viola, 35 F.3d 37, 45 (2d Cir.1994) (declining to apply Section 3B1.3 to a forklift operator who abused his position as an employee by viewing documents and disclosing their contents), cert. denied, --- U.S. ----, 115 S.Ct. 1270, 131 L.Ed.2d 148 (1995); Castagnet, 936 F.2d at 51 (applying Section 3B1.3 to a Piedmont airline employee who traded Piedmont tickets for cash or other airline tickets). Moreover, every example of an abuse of trust in the Commentary accompanying Section 3B1.3 also involves a victim entrusting an agent or employee with discretion. U.S.S.G. Sec. 3B1.3 comment. (n.1) (examples of abuse of a position of trust are an attorney embezzling a client's money, a bank executive executing a fraudulent loan scheme, and a physician sexually abusing a patient during an examination).

Broderson was a high-ranking executive at Grumman and therefore had managerial discretion to negotiate for that company. Had he accepted a bribe from another party to give that party better terms than were necessary, that would have abused his position of trust. In contrast, NASA entrusted Broderson with no discretion whatsoever and whatever "trust" NASA placed in Broderson was based strictly on the explicit commands of TINA and FAR.

The government's position is wrong for a second reason. Section 3B1.3 does not apply if the abuse of trust is already "included in the base offense level or specific offense characteristic." U.S.S.G. Sec. 3B1.3. The conduct that is the basis of the conviction must be independently criminal, as in the Commentary's examples noted above, and not itself the abuse of trust. Broderson's fraudulent conduct was signing the certificate stating that Grumman had complied with TINA and FAR. Any abuse of trust was therefore "included in the base offense level" of six for fraud and deceit. See U.S.S.G. Sec. 2F1.1(a).

B. Use of the 1993 Guidelines Manual

Broderson contends that the district court erred in using the 1993 Guidelines Manual to compute his sentence. He argues that the district court should have used the 1988 Guidelines Manual instead because that manual was in effect at the time of all the acts committed personally by Broderson. The version of the Guidelines' fraud loss table that was in effect prior to November 1, 1989 provided for only a ten-level enhancement for an...

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