U.S. v. Franz

Decision Date04 October 1989
Docket NumberNo. 88-2739,88-2739
Citation886 F.2d 973
PartiesUNITED STATES of America, Plaintiff-Appellee, v. Scott FRANZ, Defendant-Appellant.
CourtU.S. Court of Appeals — Seventh Circuit

Caryn Jacobs and David J. Stetler, Asst. U.S. Attys., Crim. Receiving, Appellate Div., Chicago, Ill., for U.S.

James R. Epstein, Francine Kaplan, Epstein, Zaideman & Esrig, Chicago, Ill., for Scott Franz.

Before COFFEY, RIPPLE, and MANION, Circuit Judges.

RIPPLE, Circuit Judge.

Scott Franz engaged in a checkkiting scheme and pleaded guilty to a charge of bank fraud under 18 U.S.C. Sec. 1344. At his sentencing hearing, Mr. Franz requested that, due to the presence of mitigating circumstances in his case, the district court depart from the sentencing range mandated by the Sentencing Guidelines promulgated by the United States Sentencing Commission under 28 U.S.C. Sec. 994. The district court denied his request for a departure and imposed on Mr. Franz the lowest sentence provided for his offense under the guidelines: eight months' imprisonment (four months of which are to be served in a work-release program), followed by a two-year period of supervised release. Mr. Franz was also ordered to make restitution to the victim of his fraud in the amount of $62,382. Mr. Franz filed a notice of appeal from the district court's denial of his request for a departure. The government maintains that, pursuant to 18 U.S.C. Sec. 3742(a), we lack jurisdiction to consider a defendant's appeal of a legal sentence that is within the applicable sentencing guideline range. For the reasons set forth in this opinion, we conclude that section 3742(a) does not provide for appellate review of Mr. Franz' sentence. Therefore, we dismiss his appeal for want of jurisdiction.

I. Background
A. Facts

Scott Franz was employed as an account executive at Merrill Lynch, Pierce, Fenner & Smith, Inc. (Merrill Lynch) in Northbrook, Illinois from May 1987 through April 1, 1988. Mr. Franz maintained a Cash Management Account at Merrill Lynch that allowed him to write checks on the account and to trade stocks and stock options. He also maintained a checking account at the First Illinois Bank of Arlington Heights (First Illinois). At the time of his conviction, he had worked in the securities field for ten years and had never before been charged with any violation of the criminal law.

In December 1987, Mr. Franz underwent back surgery in an attempt to correct a chronic back injury. This procedure was his fourth back operation and the third time that he had undergone back surgery in three years. After his operation, he was placed in a body cast and ordered to remain at home for at least six weeks. He was also ordered to remain in the body cast for four months. In addition, Mr. Franz was required to take prescription drugs to help him tolerate the severe pain that he was experiencing. Mr. Franz maintains that these drugs adversely affected his mood and his ability to think and work.

During the first week of his recuperation, Mr. Franz was informed by Merrill Lynch that he would be receiving only the disability benefits of a one-year employee--one week of disability pay. This news apparently came as a surprise to Mr. Franz, who had previously worked for Merrill Lynch for several years, left the firm, and then returned in May 1987. Moreover, Mr. Franz maintains that he was required to fill the production quotas of a six-year employee. At the same time that Merrill Lynch informed Mr. Franz of his limited disability benefits, it demanded repayment of a loan that had previously been made to him.

Mr. Franz provides the sole financial support for his wife and two children, and the combined pressures of no work income, limited disability benefits, and Merrill Lynch's demand for repayment of the loan placed a strain on Mr. Franz' family finances. Therefore, in mid-January 1988, while still in a full body cast, Mr. Franz attempted to return to work. Mr. Franz explained that he only returned to work so that he could earn enough money to cover his family expenses and to allow him to return home and recuperate properly. See Appellant's Br. at 3. His post-operative pain and the restrictions imposed by his body cast made it difficult for Mr. Franz to perform his duties. Therefore, he continued to take his pain medication while working and cut himself out of his body cast. Even after taking these steps, his physical condition prevented him from attending properly to his clients' accounts. He therefore began trading exclusively for his own account.

When some of his investments fell through, Mr. Franz began kiting checks in an attempt to cover his losses. Mr. Franz purchased stock options through his Merrill Lynch account. In order to pay for the options, he wrote checks on his First Illinois account. He did not, however, have sufficient funds in that account to cover the checks. Thus, he deposited checks written on his Merrill Lynch account, for which there were also insufficient funds, into his First Illinois account. In this way, Mr. Franz created the false impression that there was a positive balance in the First Illinois account.

In late February 1988, Merrill Lynch noticed a large balance in Mr. Franz' Cash Management Account and again demanded repayment of his outstanding loan. At that time, Mr. Franz confessed his check-kiting scheme to Merrill Lynch, and, shortly thereafter, he voluntarily contacted the office of the United States Attorney. He then pleaded guilty to a one-count information charging him with bank fraud in violation of 18 U.S.C. Sec. 1344.

B. Sentencing Hearing

In his plea agreement, Mr. Franz agreed that, for the purpose of applying the sentencing guidelines, the adjusted offense level for his crime was level thirteen. He also acknowledged that he was entitled to a two-level reduction under Guideline section 3E1.1 for accepting responsibility for his conduct. See Sentencing Guidelines Manual Sec. 3E1.1. Acceptance of Responsibility. The plea agreement also stated that Mr. Franz' criminal history category was a level I. See R.11. The guidelines prescribe a sentencing range of eight to fourteen months' imprisonment for a defendant with a level eleven offense and a level I criminal history. However, at his sentencing hearing on August 26, 1988, Mr. Franz requested that the district court depart from the prescribed guideline levels. He argued that many mitigating factors present in his case either were not taken into account by the sentencing guidelines or were considered inadequately by the guidelines. Thus, in his view, departure was warranted.

Mr. Franz specifically argued that he had acted under duress and that his "overwhelming acceptance of responsibility for his actions" made the two-level reduction allowed by the guidelines inadequate. With respect to duress, Mr. Franz maintained that his severe physical disability, the mental and emotional impact of his medication and the severe pain that he was experiencing, and the financial pressures on his family combined to constitute a cognizable duress claim that required a downward departure. Mr. Franz also emphasized that he had engaged in the check-kiting scheme without any intent to inflict a monetary loss on First Illinois; rather, he intended only to make enough money to allow him to return home and rehabilitate properly.

Mr. Franz' second argument focused on the fact that he voluntarily confessed to both his employer and the federal authorities without having been contacted by them. The government also conceded that Mr. Franz had cooperated fully. Moreover, Mr. Franz entered into an agreement obligating him to repay the entire amount lost by First Illinois on or before August 1991. Under these circumstances, Mr. Franz maintained that the two-point reduction authorized under the guidelines inadequately recognized his acceptance of responsibility.

The district court rejected Mr. Franz' request for departure. The court explained that a number of factors made departure inappropriate in this case. For example, it noted that Mr. Franz was an experienced member of the financial community who should have known that his offense was a "gross kind of fraud." R.17 at 30. In addition, the court explained that most people who commit monetary crimes are under financial pressures and need to support their families. Id. Many people have a need for more money, and many people have medical emergencies. Such stresses, however, do not justify taking $60,000 of someone else's money. Thus, while the court recognized that Mr. Franz was undergoing significant and legitimate financial stress and intended to give the money back if he could, it concluded that "all of those things are considered in the guideline range." Id. at 31. The court also noted that the two-point credit for acceptance of responsibility was "reasonable" in this case and did not justify departure. Id. at 30. Although it refused to depart from the guidelines, the court concluded that the circumstances of this case made a sentence at the low end of the guideline range appropriate. The court thus imposed on Mr. Franz the lowest sentence possible under the guidelines.

II. Analysis

This case presents an important issue of appellate jurisdiction: do the courts of appeals have jurisdiction to review a district court's refusal to depart from the sentencing guidelines?

The question before us is essentially one of statutory interpretation. We must therefore begin with the words of the statute. See United States v. Sager, 881 F.2d 364, 365 (7th Cir.1989); United States v. Rosado, 866 F.2d 967, 969 (7th Cir.1989). Section 3553 of the Comprehensive Crime Control Act of 1984 sets forth the framework to be followed by a district court when imposing sentence on a defendant. Section 3553(b) provides that

[t]he court shall impose a sentence of the kind, and within the range, referred to in [Sec. 3553(a)(4) ] unless the court...

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