U.S. v. O'Kane

• Decision Date: 09 September 1998
• Docket Number: No. 97-3020,97-3020
• Citation: 155 F.3d 969
• Parties: UNITED STATES of America, Appellant, v. Terry O'KANE, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 969

155 F.3d 969

UNITED STATES of America, Appellant, v. Terry O'KANE, Appellee.

No. 97-3020.

United States Court of Appeals,

Eighth Circuit.

Submitted Feb. 12, 1998.

Decided Sept. 9, 1998.

Janet L. Papenthien, Assistant U.S. Attorney, Sioux City, IA, argued, for Appellant.

Curt Krull, Des Moines, IA, argued, for Appellee.

Before WOLLMAN and HANSEN, Circuit Judges, and DAVIS ¹, District Judge.

HANSEN, Circuit Judge.

The United States appeals the sentence imposed upon Terry O'Kane for his pleas of guilty to one count of a 24-count indictment and to a one-count information drawn against him. For the reasons given below, we reverse and remand for resentencing.

I.

Terry O'Kane collected baseball cards. What began as an innocuous hobby had by 1992 become something more. O'Kane expanded his collection by an elaborate fraud. He worked as an assistant manager of a grocery store, where he could order large volumes of cards on the store account. When they arrived, he intercepted the shipments and took them home or to a storage shed he had rented for keeping the cards. He retained some portion of the shipments but sold the remainder. Using his employer's shipping account, he sent cards to dealers in Minnesota and Texas, who purchased them at a 25 percent discount. O'Kane intercepted the checks from those dealers and deposited them in one of various bank accounts under his control. In all, he managed to defraud his employer of over $300,000 worth of baseball cards before investigators discovered his scheme. In the meantime, he had used a portion of his ill-gotten gains to purchase various items of personal property, including a personal computer and a pickup truck.

When his scheme came to light in January 1996, O'Kane immediately confessed his crime to store investigators and again to police. A federal grand jury returned a 24-count indictment against him on May 22, 1996, charging 18 counts of mail fraud, in violation of 18 U.S.C. § 1341; one count of interstate shipment of stolen goods, in violation of 18 U.S.C. § 2314; three counts of money laundering by engaging in monetary transactions involving criminally derived property of a value in excess of $10,000, in violation of 18 U.S.C. § 1957; one count of money laundering with the intent to carry on a specified unlawful activity, in violation of 18 U.S.C. § 1956(a)(1)(A)(i); and with the forfeiture of personal property pursuant to 18 U.S.C. § 982. On February 28, 1997, O'Kane entered into a plea agreement with the government, in which he agreed to plead guilty to one count of mail fraud and to a one-count information charging money laundering in the purchase of a pickup truck, of a value greater than $10,000, in violation of 18 U.S.C. § 1957, which information the government then filed on April 10, 1997. As part of the plea agreement, he agreed to forfeit all the sports cards still in his possession, money gained from selling the cards, and other personal property (some of which he had acquired with proceeds from the fraud), as well as a large portion of an employee retirement account he had through the grocery. As a result, by the time he entered his plea of guilty, he had made complete restitution to his former employer for his crime.

At sentencing, the district court first determined the base offense levels for O'Kane's two offenses of conviction according to the United States Sentencing Guidelines. Mail fraud, 18 U.S.C. § 1341, has a base offense level of 6, which increases according to the value of the fraud. O'Kane's total fraud, $304,667, added 8 levels, and the court added two more for more than minimal planning, resulting in a level 16 for the mail fraud count. See U.S. Sentencing Guidelines Manual § 2F1.1 (1995). Money laundering under 18 U.S.C. § 1957, has a base offense level of 17, to be increased by two for knowledge that the funds were derived from a specified unlawful activity. See USSG § 2S1.2(b)(1)(B). The Guidelines provide for no dollar adjustment if the laundering is for an amount less than $100,000. Since the government had charged O'Kane with laundering $73,562.50, his money laundering offense level remained 19. See USSG § 2S1.2. The court grouped the fraud and money laundering counts together to arrive at a single group with a base offense level of 19, see USSG § 3D1.2(b), then reduced the base offense level three levels to 16 for O'Kane's acceptance of responsibility. See USSG § 3E1.1. The court then departed downward an additional four levels for unusual acceptance of responsibility, resulting in a final offense level of 12 and a sentencing range of 10 to 16 months. O'Kane had no prior criminal history. The court sentenced O'Kane on each of the two counts to five months' imprisonment with a work release recommendation, followed by five months' home confinement. The sentences were to be served concurrently. The government raised timely objections to both the grouping and departure decisions, and now appeals both.

II.

"We review findings of fact at the sentencing hearing for clear error and give due deference to the district court's application of the guidelines to the facts." United States v. Brelsford, 982 F.2d 269, 271 (8th Cir.1992). But "we review ... the district court's application and construction of the guidelines de novo," United States v. Wells, 127 F.3d 739, 744 (8th Cir.1997), and "[w]e review a district court's decision to depart from the Guidelines for an abuse of discretion." United States v. McNeil, 90 F.3d 298, 300 (8th Cir.1996), cert. denied, --- U.S. ----, 117 S.Ct. 596, 136 L.Ed.2d 524 (1996).

The government argues first that the district court erred at sentencing by grouping the mail fraud count with the money laundering count under Section 3D1.2(b) of the Guidelines. According to the government, the proper application of Part 3D to O'Kane's counts of conviction yields a base offense level of 21 rather than 19, as the district court found. A brief recapitulation of the grouping procedure clarifies the calculation.

After determining the base offense level appropriate for each individual count pursuant to Chapter 2 of the Guidelines, the sentencing court then determines whether to adjust the base levels to reflect the presence of multiple counts. This exercise "seek[s] to provide incremental punishment for significant additional criminal conduct." USSG Ch. 3, Pt. D, intro. comment. First, the court must group closely related counts according to Section 3D1.2; then determine the offense level for each group according to Section 3D1.3; and then find a combined offense level according to Section 3D1.4. A "group" in Part 3D may consist of only one count, if no counts relate so closely to one another as to justify grouping them together under Section 3D1.2. Or, all counts of conviction may fall into a single "group," eliminating the need to "combine" groups under Section 3D1.4. See USSG § 3D1.2, comment. (n.7).

Guided by these rules, the district court grouped O'Kane's two counts together as "involving the same victim and ... connected by a common criminal objective." See USSG § 3D1.2(b). Then, since the court had grouped the two counts under Section 3D1.2(b), Section 3D1.3(a) determined the offense level, setting it at the level of the most serious count in the group. As indicated above, O'Kane's fraud count carried an offense level of 16; his money laundering count an offense level of 19. After grouping the two counts together there was only one group, so the court had no need to "combine" groups pursuant to Section 3D1.4, and thus concluded that, before assessing any adjustment under Section 3E1.1 for acceptance of responsibility, or any departure under Section 5K2.0, O'Kane had an offense level of 19 for the single two-count group.

To group the two counts under Section 3D1.2(b) properly, the court must determine that the same person or entity was the victim of both crimes. Clearly, O'Kane's employer was the victim of his fraud, but it is not as immediately clear who suffered as a result of his money laundering. Several courts have found money laundering to have as its specific victim the same victim as the underlying fraud. See, e.g., United States v. Leonard, 61 F.3d 1181, 1186 (5th Cir.1995) (holding fraud and money laundering constituted "a single, integrated scheme to obtain money from the elderly victims and to use that money to facilitate the continuance of the scam."); United States v. Mullens, 65 F.3d 1560, 1564 (11th Cir.1995) ("the fraud and the money laundering were integral cogs in continuing the scheme."); United States v. Cusumano, 943 F.2d 305, 313 (3d Cir.1991) (grouping proper under (b) because money laundering and fraud "were all part of one overall scheme" against a single victim.).

However, the government has support for its assertion that societal interests, rather than specific victims, are harmed by money laundering; and, therefore, that O'Kane's crimes should not be grouped under Section 3D1.2(b). In a First Circuit case in which a defendant was sentenced under the same guidelines as O'Kane, the court held that "for the purposes of these subsections, the victim of fraud is the insurance company and the victim of money laundering is society." United States v. Lombardi, 5 F.3d 568, 570 (1st Cir.1993). See also United States v. Harper, 972 F.2d 321, 322 (11th Cir.1992) (per curiam) (remarking that money laundering invades societal interests); United States v. Lopez, 104 F.3d 1149, 1150 (9th Cir.1997) (per curiam) (holding that money laundering harms society generally).

The Guidelines also indicate those concerns which should drive our inquiry. The Sentencing Commission intended the grouping rules to "limit the significance of the formal charging decision and to prevent multiple punishment for substantially identical offense conduct." USSG Ch. 3, Pt. D, intro. comment. Defrauding one's employer is not offense conduct substantially identical to laundering part of the proceeds of...