U.S. v. Dick
| Decision Date | 13 February 2003 |
| Docket Number | No. CR.A. 02-10307-GAO.,CR.A. 02-10307-GAO. |
| Citation | 245 F.Supp.2d 322 |
| Parties | UNITED STATES of America, Plaintiff v. Wayne A. DICK, Defendant |
| Court | U.S. District Court — District of Massachusetts |
On July 29, 2002, the defendant, Wayne Dick, pled guilty to five counts of receipt of stolen moneys, 18 U.S.C. § 2315, and two counts of filing a materially false federal income tax return, 26 U.S.C. § 7206(1). A sentencing hearing was held on January 13, 14, and 15, 2003. At the hearing, I heard argument on five issues pertaining to the proper calculation of Dick's sentence under the November 1998 version of the United States Sentencing Commission Guidelines Manual: (1) whether the amount of financial loss that ought to be attributed to Dick under § 2B1.1(b)(1) exceeded $800,000; (2) whether the defendant should receive an adjustment for his role in the offense as a manager or supervisor under § 3B1.1; (3) whether the two tax counts should be grouped with the five theft counts under § 3D1.2(c); (4) whether Dick's offense level should be adjusted downward for acceptance of responsibility under § 3E1.1; and (5) whether the Court should depart from the otherwise applicable Sentencing Guideline range for extraordinary acceptance of responsibility under § 5K2.0.
At the end of the hearing, I stated the reasons for the resolution of all these issues on the record in open court. Most of the issues were resolved on the facts peculiar to this case, but resolution of the question whether the theft and tax counts should be grouped involved interpretation of a guideline provision as to which there is not directly applicable First Circuit precedent and there has been disagreement among other circuit courts. In this memorandum I explain my resolution of that controversy in the context of the facts of this case.
A brief summary of the pertinent facts suffices for purposes of this memorandum. Starting in 1998, Wayne Dick participated with several other persons in an elaborate scheme to defraud Demoulas Supermarkets out of a considerable sum of money. Dick was a food buyer for Demoulas and interacted with brokers and salesmen representing various food manufacturers and vendors. Such vendors often purchased promotional advertisements in Demoulas advertising circulars. It was the practice of Demoulas to invoice the vendor for such advertisements, and the vendor would pay the invoice by check. Typically, the transaction was handled for the vendor by the food broker and for Demoulas by a buyer, such as Dick.
The criminal scheme involved diverting payment checks from vendors intended for Demoulas, causing them to be cashed or converted into other checks by complicit bank tellers, and dividing the proceeds among the various participants. Dick held a trusted position within Demoulas that permitted him to arrange for the promotional advertisements requested by vendors without generating a Demoulas invoice for the service, as should have been done. As a result, Demoulas's records would not indicate any payment due from the vendor. Instead, counterfeit invoices were prepared and sent to the vendor for payment. From the vendor's point of view, everything appeared regular; it was paying for advertising it had actually received. From the point of view of Demoulas's internal accounting, the diverted checks were not missed because they were not expected, there being no record of an invoice. In the course of the scheme approximately $1.8 million was diverted, cashed, and divided among the several participants, including Dick. Not surprisingly, Dick did not report the income generated by the scheme on his federal income tax returns.
In 2000, the scheme came to an end after a bank official noticed a very large Demoulas check being processed through the personal bank account of Daniel Martin, one of the other people involved in the illegal check cashing. A short time later, after discussions with Demoulas representatives, Dick, Martin, and yet another participant, Robert Stella, repaid a significant portion of the stolen money.
When a defendant is convicted on multiple counts, the Sentencing Guidelines generally require that the offense level be separately determined for each count. United States Sentencing Commission, Guidelines Manual ("USSG"), § 1B1.1(d) (Nov.1998). A combined offense level is then determined in accordance with the rules set forth in § 3D1.4. However, "[a]ll counts involving substantially the same harm shall be grouped together into a single Group" before determining the combined offense level. § 3D1.2. The goal of the grouping rules is to limit "the significance of the formal charging decision and to prevent multiple punishment for substantially identical offense conduct" when a defendant is charged with "closely intertwined" offenses. USSG Ch.3, pt. D, intro. comment. "In essence, counts that are grouped together are treated as constituting a single offense for purposes of the guidelines."
The Guidelines set forth four circumstances when multiple counts should be considered to involve "substantially the same harm," so that grouping will be required. § 3D1.2(a)-(d). Dick argues that his offenses fall in the category outlined in § 3D1.2(c), which requires grouping when "one of the counts embodies conduct that is treated as a specific offense characteristic in, or other adjustment to, the guideline applicable to another of the counts." He contends that this rule applies because the conduct punished under the theft counts also as a specific offense characteristic of, or an adjustment to, the guideline governing the tax counts. That guideline calls for a two-level enhancement for tax evasion "[i]f the defendant failed to report or to correctly identify the source of income exceeding $10,000 in any year from criminal activity." § 2T1.1(b)(1). Since the theft conduct was "criminal activity" that generated the unreported income, warranting an upward adjustment of two levels under § 2T1.1(b)(1), Dick argues that § 3D 1.2(c) requires that the theft and tax counts be grouped to determine the applicable offense level.
The circuit courts are divided as to whether tax evasion counts ought to be grouped with counts punishing the criminal conduct that generated the unreported income. The Second and Fifth Circuits have held that grouping may be appropriate in such situations. See United States v. Petrillo, 237 F.3d 119, 124-25 (2d Cir. 2000); United States v. Haltom, 113 F.3d 43, 46^7 (5th Cir.1997). In a case in which the plaintiff was convicted of mail fraud and tax evasion, the Second Circuit held that the crimes should be grouped because Petrillo, 237 F.3d at 125. Similarly, the Fifth Circuit found that mail fraud and tax evasion counts should be grouped because without grouping the defendant would fall victim to "double counting of offense behavior" which the Sentencing Guidelines seek to avoid. Haltom, 113 F.3d at 46-47 (citations and quotations omitted). The Fifth Circuit conceded that by grouping the tax and mail fraud, the "anomalous" result was that the plaintiff would be spared "any incremental punishment for his tax crimes." Id. at 47.
The Third, Sixth, Seventh, Tenth, and District of Columbia Circuits have disagreed with the Second and Fifth Circuits and have held that tax evasion counts should not be grouped with counts charging the criminal activities that gave rise to the unreported income. See United States v. Peterson, 312 F.3d 1300, 1304 (10th Cir. 2002); United States v. Braxtonbrown-Smith, 278 F.3d 1348, 1356 (D.C.Cir.2002); Weinberger v. United States, 268 F.3d 346, 354-55 (6th Cir.2001); United States v. Lindsay, 184 F.3d 1138, 1142-43 (10th Cir. 1999); United States v. Vitale, 159 F.3d 810, 813-14 (3d Cir.1998); United States v. Johnson, 117 F.3d 1010, 1014 (7th Cir. 1997). These circuits have pointed out that the harms of tax evasion and the underlying criminal conduct do not involve "substantially the same harm" since their effects are felt by different victims. See e.g., Johnson, 117 F.3d at 1014; see also Braxtonbrown-Smith, 278 F.3d at 1356; Lindsay, 184 F.3d at 1142. The Third Circuit in Vitale also reasoned that "because the Sentencing Commission listed the failure to report criminally-derived income as a Specific Offense Characteristic for tax evasion in order to deter concealment of such income, it would negate that deterrence were that designation the basis for grouping." 159 F.3d at 813. See also Weinberger, 268 F.3d at 355 ( ).
The First Circuit has not decided the precise question presented in this case, but it has...
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