U.S. v. Kosth, 90-3233

• Decision Date: 09 December 1991
• Docket Number: No. 90-3233,90-3233
• Citation: 943 F.2d 798
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Daniel KOSTH, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 798

943 F.2d 798

UNITED STATES of America, Plaintiff-Appellee, v. Daniel KOSTH, Defendant-Appellant.

No. 90-3233.

United States Court of Appeals, Seventh Circuit.

Argued April 1, 1991.

Decided Sept. 25, 1991.

Order on Petition for Rehearing

Dec. 9, 1991.

James M. Kuhn, Asst. U.S. Atty. (argued), Office of the U.S. Atty., Peoria, Ill., for plaintiff-appellee.

Donovan S. Robertson (argued), Braud/Warner, Ltd., Rock Island, Ill., for defendant-appellant.

Before POSNER, FLAUM and KANNE, Circuit Judges.

KANNE, Circuit Judge.

Defendant Daniel Kosth sold credit reporting equipment through his business, The Quad Cities Credit Bureau, Inc. Kosth obtained a merchant account with First Midwest Bank of Moline which entitled him to process his company's credit card transactions through the bank. When one of his customers purchased reporting equipment with a credit card, Kosth forwarded the credit card invoice to First Midwest Bank of Moline. The bank then processed the invoice through the merchant account, remitted money to Kosth, and sought payment from the credit card company for the purchase. For eight months defendant's brother supplied him with fraudulent and altered credit cards. Using these cards, Kosth received payment from the bank for phantom purchases of merchandise.

Ultimately a three count indictment was returned charging Kosth with conspiracy to commit fraud by access device and fraud by access device in violation of 18 U.S.C. §§ 1029(a)(1), (a)(2), and 371. Kosth pled guilty to the one conspiracy count and the other two counts were dismissed. The district court sentenced Kosth to fifteen months imprisonment to be followed by three years of supervised release. One condition of the release requires defendant to inform the Probation Office of any financial obligations incurred by his wife which exceed $250.00. Kosth was also ordered to pay over $29,422.93 in restitution for monies received through this scheme. In imposing the sentence the court found Kosth had abused a position of private trust and thus increased his offense level by two under § 3B1.3 of the Sentencing Guidelines. Defendant appeals the two level enhancement, and the propriety of the condition to report his wife's financial obligations.

We will uphold the sentence imposed by the district court if the court correctly applied the guidelines to factual findings which are not clearly erroneous. United States v. Hubbard, 929 F.2d 307, 310 (7th Cir.1991). We review the legal meaning of such language as "position of trust" under the de novo standard. ^* See United States v. Mettler, 938 F.2d 764, 767 (7th Cir.1991) (citing Hubbard, 929 F.2d at 310) (court reviews de novo the legal meaning of "special skill" in Guideline § 3B1.3). "The position of trust must have contributed in some substantial way to facilitating the crime and not merely have provided an opportunity that could as easily have been afforded to other persons. This adjustment, for example, would not apply to an embezzlement by an ordinary bank teller." United States Sentencing Commission, Guidelines Manual, § 3B1.3, comment. (n. 1).

Kosth argues that he did not occupy a position of trust as contemplated by the Sentencing Guidelines. We agree. It is true that Kosth operated a credit bureau and was in the business of selling credit reporting equipment. But his arrangement with the bank was the same as that of any other merchant--be that a restaurant, shoe store or hotel. There was no special element of private trust involved. Kosth entered into a contract with a bank which enabled him to collect money from the bank upon presentation of a slip of paper indicating that a customer had purchased merchandise with a credit card. As with all credit transactions, there was an element of reliance present. However, the relationship described by the facts in this case was a standard commercial relationship. The fraud described here does not differ from any other commercial credit transaction fraud. The defendant was not an "insider" of the credit card payment system as the government argues. He was an ordinary merchant customer of the bank who committed fraud by abusing his contractual and commercial relationship with it. The district court erred in determining that Kosth abused a position of private trust; the private trust envisioned by the Guidelines does not include one in Kosth's position. The two level enhancement for abuse of a position of private trust was inappropriate and should not be applied upon resentencing.

We defer to the judgment of the district court when it chooses to impose special conditions of supervised release; and we review those conditions only for an abuse of discretion. United States v. Showalter, 933 F.2d 573, 574 (7th Cir.1991). A district judge may order any condition of supervised release "it considers to be appropriate." 18 U.S.C. § 3583(d). Discretionary conditions imposed by the district judge must be reasonably related to the nature and circumstances of the offense. 18 U.S.C. § 3563(b). The Sentencing Guidelines suggest monitoring a defendant's credit purchases where restitution is required,

If an installment...