U.S. v. Devegter

• Decision Date: 16 February 2006
• Docket Number: No. 04-14075.,04-14075.
• Citation: 439 F.3d 1299
• Parties: UNITED STATES of America, Plaintiff-Appellant Cross-Appellee, v. Michael DEVEGTER, Richard Poirier, Jr., Defendants-Appellees Cross-Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

439 F.3d 1299

UNITED STATES of America, Plaintiff-Appellant Cross-Appellee, v. Michael DEVEGTER, Richard Poirier, Jr., Defendants-Appellees Cross-Appellants.

No. 04-14075.

United States Court of Appeals, Eleventh Circuit.

February 16, 2006.

COPYRIGHT MATERIAL OMITTED

Randy S. Chartash, Russell Glenn Vineyard, Amy Levin Weil, U.S. Atty., Atlanta, GA, for U.S David G. Russell, Parker, Hudson, Rainer & Dobbs, LLP, Craig A. Gillen, Gillen, Parker & Withers, LLC, Atlanta, GA, for Defendants.

Appeals from the United States District Court for the Northern District of Georgia.

Before BIRCH, WILSON and COX, Circuit Judges.

WILSON, Circuit Judge:

Richard Poirier, Jr., a former partner of Lazard Freres & Co. ("Lazard"), and Michael DeVegter, a former financial advisor to Fulton County, Georgia, were involved in a bribery scheme (the "Fulton County deal"). DeVegter was paid $41,936 to award a bond refinance contract to Lazard. Both DeVegter and Poirier were convicted of wire fraud and conspiracy to commit wire fraud. Both the government and the defendants agree that there was error necessitating remand under United States v. Booker, 543 U.S. 220, 125 S.Ct. 738, 160 L.Ed.2d 621 (2005). Several of the government's other challenges to the sentences also warrant remand, however.

The sentencing guidelines require the district court, when calculating a sentence under the commercial bribery guideline, U.S. Sentencing Guidelines Manual § 2B4.1 (2000), to use the greater of the bribe amount or the net value of the improper benefit conferred upon, in this case, Lazard. The district court used in its calculations the amount of the bribe because it found that the government did not prove the improper benefit's net value with reliable and specific evidence. The government contends that not using the improper benefit's net value was error, and, in the alternative, contests the calculated bribe amount. Also, the government appeals the district court's downward departure for both defendants.

I. BACKGROUND

Defendants DeVegter and Poirier were indicted for corrupting the process by which Fulton County, Georgia, selected an underwriter for a bond refinancing project. Fulton County hired DeVegter to serve as its independent financial advisor in soliciting and evaluating proposals from competing underwriters. Poirier was a partner with Lazard, the investment banking company that was awarded the underwriting contract. In exchange for DeVegter's assistance in ensuring that Fulton County selected Lazard's proposal, Poirier paid $83,872 to an intermediary, Cole, who in turn paid DeVegter $41,936. The jury found both defendants guilty of conspiracy in violation of 18 U.S.C. § 371 and of 18 U.S.C. § 1343 wire fraud, although it did not reach a verdict on the 18 U.S.C. § 1346 honest services charge.

We have heard this case twice before. On the first occasion, we reinstated the district's court dismissal of a 18 U.S.C. § 1346 charge. United States v. DeVegter, 198 F.3d 1324 (11th Cir.1999). On the second occasion, we affirmed the defendants' convictions and reversed in part the district court's sentence stating that the defendants must be sentenced under § 2B4.1 of the guidelines. United States v. Poirier, 321 F.3d 1024 (11th Cir.2003) ("Poirier II"). We also instructed the district court to assess an obstruction of justice enhancement for both defendants and an aggravating role enhancement for Poirier. Id. at 1036.

On the second remand, the original sentencing judge recused himself. The new sentencing judge held a hearing to determine the value of the bribe and improper benefit conferred upon Lazard as required for sentencing under § 2B4.1. The judge used the bribe amount rather than the benefit conferred upon Lazard because the court found that the government failed to establish with reliable and specific evidence the net value of the improper benefit conferred upon Lazard. The district court found that the bribe paid to DeVegter was $41,936, half of the amount that Poirier paid to Cole. The district court also granted a downward departure for both defendants under § 5K2.0 of the guidelines on the basis of aberrant behavior, physical condition, family circumstances, and a combination of those factors.

II. STANDARDS OF REVIEW

We review the district court's findings of fact in sentencing for clear error. Clear error cannot be found unless:

we are left with a definite and firm conviction that a mistake has been committed. Although the clear error standard is purposefully deferential to the district court, we are not required to rubber stamp the district court's findings simply because they were entered. Review for clear error does not mean no review.

United States v. Crawford, 407 F.3d 1174, 1177 (11th Cir.2005) (internal citations and quotations omitted).

"We review questions of law arising under the Sentencing Guidelines de novo." Id. at 1178 (internal citations and quotations omitted). Booker requires a sentence to be reviewed for reasonableness, but the sentence must still be calculated under the guidelines and the calculation is reviewed de novo. Id.

"Whether a factor is a permissible ground for a downward departure from the Sentencing Guidelines is a question of law," which we review de novo. Id.

We review a properly preserved claim of Booker error de novo and will reverse unless the error was harmless. United States v. Paz, 405 F.3d 946, 948 (11th Cir.2005) (per curiam).

III. DISCUSSION

All of the parties acknowledge, and we agree, that we must remand this case back to the district court to correct the defendants' properly preserved claim of Booker error because the district court treated the sentencing guidelines as mandatory rather than advisory. United States v. Shelton, 400 F.3d 1325, 1330-31 (11th Cir.2005). Although Booker rendered the guidelines advisory, it did not remove the court's obligation to calculate the applicable guideline range correctly so that the court could consider it in sentencing. Crawford, 407 F.3d at 1178. Thus Booker did not alter our review of the application of the guidelines or change the fact that we remand any case in which the guidelines were improperly applied to a sentence. Id.

A. The Appropriate Dollar Amount to be Used in the Sentencing

The dollar amount used in sentencing a defendant under § 2B4.1 should be the greater of the value of the bribe or the net value of the improper benefit conferred. U.S. Sentencing Guidelines Manual § 2B4.1(b)(1) (2000). "The value of the benefit `received or to be received' means the net value of such benefit . . . . A $150,000 contract on which $20,000 profit was made was awarded in return for a bribe; the value of the benefit received is $20,000." Id. at § 2C1.1 cmt. n.2.¹

Assuming the bribe achieves its intended result, the benefit would usually exceed the bribe. The net value of the improper benefit need only be estimated, and the bribe amount should be used only when the net value cannot be estimated. Id. at § 2B4.1 cmt. n.6 (2000). The government bears the burden of establishing the estimated net value with reliable and specific evidence. United States v. Cabrera, 172 F.3d 1287, 1292 (11th Cir.1999).

At sentencing, the government presented evidence that Lazard received a profit of $645,101.15 from the Fulton County Deal.² The district court, however, relied on the bribe amount to determine the appropriate sentencing enhancement under the guidelines because the government did not consider year-end bonuses paid to Lazard employees in calculating the net benefit. Lazard paid its employees a year-end bonus based on their performance on multiple bond deals. The district court concluded that the bonuses paid to Lazard employees for their work on the Fulton County deal were direct costs that were to be deducted in calculating the net value under § 2B4.1. The court held that the government did not establish with reliable and specific evidence the net value of Lazard's improper benefit because the government presented no evidence concerning the amount of the bonuses attributable to the Fulton County deal. As a result, the district court used the bribe's value in calculating the sentences.

The government counters that the bonuses are not deductible direct costs because DeVegter's own witness testified that the bonuses Lazard paid could not be readily apportioned to any particular bond deal. We have not previously decided in this Circuit what costs, if any, should be subtracted from the profit in determining the net improper benefit.

We agree with the Fifth Circuit's approach which subtracts direct costs, but not indirect costs, from profits to determine the net improper benefit. United States v. Landers, 68 F.3d 882 (5th Cir.1995). In Landers, the Fifth Circuit defined direct costs as "all variable costs that can be specifically identified as costs of performing a contract." Id. at 884 n. 2. Unlike the accounting term "direct costs," for sentencing purposes, variable overhead costs not easily identifiable to a specific contract are not direct costs. Id. The court can ignore these variable costs in sentencing because the sentencing courts are not required to make precise calculations. See Id.

Applying the Landers standard, the district court erroneously believed the deficiency in the government's case was that year-end bonuses were not subtracted in calculating the net improper benefit. The court in part reasoned that hypothetically two defendants with different employers would receive different sentences if one employer paid bonuses at the end of the transaction and the other employer paid bonuses at the end of the year. The possibility of a sentencing disparity between two defendants, however, is no reason to ignore the distinction between fixed and variable overhead costs in calculating direct costs. See United States v. Quinn, 123 F.3d 1415, 1425 (11th Cir.1997) ("[A] sentencing judge may not depart in order to avoid an apparently...