U.S. v. Paslay

• Decision Date: 03 September 1992
• Docket Number: No. 90-8832,90-8832
• Citation: 971 F.2d 667
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Harold Hall PASLAY, a/k/a Pat Paslay, Defendant-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 667

971 F.2d 667

UNITED STATES of America, Plaintiff-Appellee, v. Harold Hall PASLAY, a/k/a Pat Paslay, Defendant-Appellant.

No. 90-8832.

United States Court of Appeals Eleventh Circuit.

Sept. 3, 1992.

David W. Wallace, Marietta, Ga., for defendant-appellant.

Kent Alexander, Leo E. Reichert, Asst. U.S. Attys., Atlanta, Ga., for plaintiff-appellee.

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

Before BIRCH, Circuit Judge, JOHNSON ^*, and BOWNES ^**, Senior Circuit Judges.

JOHNSON, Senior Circuit Judge:

I. STATEMENT OF THE CASE

Harold Hall Paslay appeals his sentence for two of five counts of conviction. For the reasons that follow, we vacate his sentence on these counts and remand.

A. Background Facts

In 1986, appellant Paslay embarked on a bold scheme to defraud hundreds of people by selling them franchises in a "legal expense" insurance company. In the scheme, Paslay sold distributorships in American Legal Distributors, Inc. (ALD). The distributorships, which cost purchasers between $2,500 and $25,000, allowed the purchasers to direct market legal insurance policies to the public. In order to help secure investors, Paslay paid "singers" to provide potential investors with untrue testimonials regarding the profitability of ALD distributorships.

Through brochures placed in local stores, the distributors were to sell legal insurance policies directly to the public. ALD promised to pay the distributors a commission on the policies that they sold. The policies ostensibly provided policyholders with free or reduced-rate legal assistance through the Lawyer Access Network (LAN). Policyholders were told that the LAN consisted of attorneys throughout the nation who would provide legal assistance either free of charge or at a substantial discount.

Paslay's scheme soon collapsed. When distributors and policyholders attempted to access the LAN, they discovered that it was non-existent. Before the scheme came to an end, however, Paslay had sold at least 375 distributorships in over 30 states. Investors were defrauded of around $3.3 million.

B. Procedural History

On November 8, 1989, a federal grand jury indicted Paslay on thirty-four criminal counts relating to the ALD/LAN scheme. On December 12, 1989, Paslay pled not guilty to all counts. However, on April 25, 1990, pursuant to a plea bargain, Paslay changed his plea to guilty on the following five counts: count I, which alleged mail fraud in violation of 18 U.S.C.A. § 1341 (1984); count IV, which alleged transportation of stolen goods, securities, or money in violation of 18 U.S.C.A. § 2314 (West Supp.1992); counts XXVII and XXXII, which each alleged wire fraud in violation of 18 U.S.C.A. § 1343 (1984); and count XXXIV, which alleged a criminal conspiracy to commit mail fraud and wire fraud in violation of 18 U.S.C.A. § 371 (1966).

On July 25, 1990, the government mailed Paslay a copy of its presentencing memorandum, which recommended an upward departure from the sentencing guidelines in light of Paslay's past and continuing involvement in fraudulent schemes. On August 16, 1990, the district court sentenced Paslay. The lower court divided its sentencing between the three counts that arose prior to the guidelines and the two counts that ostensibly arose after the applicability of the guidelines. ¹

The lower court imposed five year sentences for counts IV, XXVII, and XXXII all of which related to activities occurring prior to the effective date of the sentencing guidelines. The sentences were to run consecutively with each other, for a total of fifteen years imprisonment, and concurrently with the sentences for counts I and XXXIV.

Regarding the counts ostensibly arising after the applicability of the sentencing guidelines, the lower court sentenced Paslay to thirty months imprisonment for count I, and to sixty months imprisonment for count XXXIV. The sixty and thirty month sentences were to run consecutively with each other but concurrently with the sentences for the pre-guidelines counts. In order to reach the ninety month total, the lower court departed from the guidelines by adding four points to Paslay's base offense level. The lower court justified its departure based on both the harm Paslay caused to his accomplices and Paslay's use of a weapon or dangerous instrumentality during the pendency of his scheme. See U.S.S.G. § 5K2.0 (general rule); id. at § 5K2.6 (weapon or dangerous instrumentality). Finally, the lower court sentenced Paslay to three years supervised release to follow his sentences, ordered him to pay $3.3 million in restitution, ² and imposed a $50 special assessment per count, for a total of $250 in special assessments.

II. ISSUES

In his direct appeal, Paslay argues that the lower court's upward departure from the sentencing guidelines was improper for two primary reasons. First, Paslay asserts that the lower court improperly relied on the "victimization" of his accomplices in making its four-level departure. Second, Paslay claims that he was not accorded proper notice of the lower court's grounds for departing from the guidelines under Burns v. United States, --- U.S. ----, ---- - ----, 111 S.Ct. 2182, 2186-87, 115 L.Ed.2d 123 (1991). In addition, Paslay argues that the lower court abused its discretion by denying him a two-level reduction in offense level for acceptance of responsibility.

III. ANALYSIS

A. The Upward Departure

Paslay contends that the lower court's decision to add four points to his offense level was at least partly unauthorized by the guidelines. This Court employs a three-step test when evaluating a lower court's decision to depart from the guidelines. The first question is "whether the guidelines adequately consider a particular factor so as to preclude a district court from relying upon it as a basis for departure. We exercise de novo review of this question of law." United States v. Weaver, 920 F.2d 1570, 1573 (11th Cir.1991). The second step is for the reviewing Court to examine the factual basis for the lower court's departure. Id. This review is limited to a search for "clear error." Id. Finally, if the first and second tests have been satisfied, this Court must make a de novo review of the "reasonableness" of the departure. Id.

A proper analysis of whether the lower court's upward departure was justified necessarily begins with an examination of the reasons proffered by the lower court for its departure. See id. In the case at bar, the lower court departed for two reasons: (1) "in effecting the scheme, violent behavior was utilized in that Mr. Paslay used an aluminum instrument, a baseball bat or hammer, to bash in Mrs. Mednick's [his corporate counsel] car ... and, on Mr. Paslay's instructions, one of his employees used a pistol to shoot and flatten one of Mrs. Mednick's automobile tires," and (2) some of the accomplices (the "singers") would not have become felons had Paslay not organized the scheme. Transcript, at 70-72. See also U.S.S.G. § 5K2.6 (use of weapon or dangerous instrumentality incident to crime); id. at § 5K2.0 (general statement regarding unguided departures--applicable to court's "victimization" of the accomplices rationale).

The sentencing court's reliance on the "victimization" of the singers was misplaced on the facts of this case. The guidelines provide for a four-level upward departure if a person is a "leader" or "organizer" of a criminal enterprise. U.S.S.G. § 3B1.1(a). The application notes to this provision provide that "[f]actors the court should consider include ... the recruitment of accomplices...." Id. at application note 3 (emphasis added). See U.S.S.G. § 3B1.1(a); Weaver, 920 F.2d at 1573. See generally United States v. Robinson, 898 F.2d 1111, 1118 (6th Cir.1990) (§ 3B1.1(a) takes into account the use of an "intermediary" to commit a crime; consequently, sentencing court could not rely on defendant's use of an intermediary to justify an upward departure). Section 3B1.1(a)'s consideration of the "recruitment of accomplices" anticipates some degree of participation in the criminal activity by the accomplices. Moreover, a crime involving accomplices routinely will involve some level of "victimization," if by "victimization" one means that those recruited would not have become involved in a criminal enterprise and would have remained law-abiding citizens but for their recruitment. ³ If a district court wishes to make an upward departure for the "victimization" of accomplices based on their recruitment, the victimization resulting from the recruitment must be of a kind or degree not inherent in their recruitment. See U.S.S.G. § 3B1.1(a); United States v. Sasnett, 925 F.2d 392, 398 (11th Cir.1991); Weaver, 920 F.2d at 1573. In addition, the guidelines specifically take into account the exploitation of vulnerable victims. See U.S.S.G. § 3A1.1. Although the alleged "victims" in this case were also accomplices, we see no reason why fraud perpetrated on vulnerable accomplices could not be subsumed under this section. See generally United States v. Smith, 930 F.2d 1450, 1454-56 (10th Cir.) (applying section 3A1.1 to a person other than the direct victim of the crime of conviction), cert. denied, --- U.S. ----, 112 S.Ct. 225, 116 L.Ed.2d 182 (1991). At the outset then, the district court's reliance on section 5K2.0 to support its "victimization" rationale must relate to "victimization" of a kind or degree not already subsumed within sections 3B1.1(a) or 3A1.1. Weaver, 920 F.2d at 1573. ⁴

The government argues that section 3B1.1(a) does not take into account a scenario wherein the organizer "tricks" his accomplices into participating in a crime. Neither the government nor the district court considered the potential applicability of section 3A1.1. Assuming arguendo that an upward departure pursuant to section 5K2.0 for "victimization" of a kind or degree not comprehended by sections 3B1.1(a) or 3A1.1 would be proper, we find that the...