U.S. v. Savin

• Decision Date: 04 November 2003
• Docket Number: Docket No. 02-1718.
• Citation: 349 F.3d 27
• Parties: UNITED STATES, Appellant, v. Patrick SAVIN, Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

349 F.3d 27

UNITED STATES, Appellant, v. Patrick SAVIN, Defendant-Appellee.

Docket No. 02-1718.

United States Court of Appeals, Second Circuit.

Argued: September 18, 2003.

Decided: November 4, 2003.

James G. Cavoli, Assistant United States Attorney for the Southern District of New York (James B. Comey, United States Attorney, and Laura Grossfield Birger, Assistant United States Attorney, of counsel), New York, NY, for Appellant.

Edward J.M. Little, Hughes Hubbard & Reed LLP (Kevin F. Clines and David G. Liston, of counsel), New York, NY, for Defendant-Appellee.

Before: FEINBERG and SACK, Circuit Judges, and WEXLER, District Judge.^*

SACK, Circuit Judge.

The government appeals from the October 25, 2002, judgment of the United States District Court for the Southern District of New York (Robert W. Sweet, Judge) sentencing the defendant-appellee Patrick Savin to thirty-three months' imprisonment followed by three years' supervised release, restitution, and a mandatory $200 assessment. The defendant, pursuant to a plea agreement, pleaded guilty to wire fraud in violation of 18 U.S.C. §§ 1343 and 1346 and perjury in violation of 18 U.S.C. § 1623.

The government argues that the district court erred in failing to apply a four-level Sentencing Guidelines enhancement for an offense that "affected a financial institution" and from which "the defendant derived more than $1,000,000 in gross receipts." United States Sentencing Guidelines ("U.S.S.G." or the "Guidelines") § 2F1.1(b)(6)(B) (1995). An application note to the guideline stated that "any state or foreign ... investment company" is a financial institution for purposes of the guideline, as is "any similar entity." U.S.S.G. § 2F1.1, Application Note 14 (1995). The government contends that the district court should not have defined "foreign investment company" according to the law of Luxembourg, the country in which the affected entity was registered and had its principal place of business, but according to United States federal law. Savin counters that the enhancement cannot be applied to him because the guideline is invalid as applied to investment companies generally, and that the district court's conclusion that the entity at issue was not an "investment company" was correct applying either the law of Luxembourg or United States federal law. The government replies that even if "foreign investment company" were correctly defined by the district court with reference to the law of Luxembourg, Savin's behavior required the enhancement because the affected "entity" was "similar" to "a[] state or foreign ... investment company," id., an issue that the district court did not address. Savin responds that the "similar entity" clause, if otherwise applicable to his case, is unconstitutionally vague as applied to him.

We conclude that the Sentencing Commission was not without authority to treat "any state or foreign ... investment company" as a "financial institution" in the application note to section 2F1.1(b)(6)(B) (1995); the application note is therefore valid as applied to investment companies generally. Because we also conclude that the district court should have looked to United States federal law to determine the meaning of "foreign investment company," we remand for the district court to resentence Savin using the federal-law meaning of the term. Because the "similar entity" clause is not unconstitutionally vague as applied to Savin, if the district court concludes on remand that the affected entity is not a "foreign investment company," the court should consider whether the affected entity is an entity "similar" to any of the kinds of institutions listed in Application Note 14, including a "state or foreign investment company."

BACKGROUND

The facts underlying this appeal are largely undisputed. They are set forth in some detail in the district court's sentencing opinion, United States v. Savin, No. 00-CR-95 (RWS), 2002 WL 31520472 (S.D.N.Y. Oct.22, 2002), 2002 U.S. Dist. LEXIS 20175.

At all relevant times, Mezzonen, S.A., ("Mezzonen") was a tax-exempt "private corporation organized and existing under the laws of the Duchy of Luxembourg, with its principal place of business in Luxembourg." Id., 2002 WL 31520472, at *1, *4, 2002 U.S. Dist. LEXIS 20175, at *1, *12. According to Mezzonen documents introduced in a tangentially related bankruptcy proceeding in the United States Bankruptcy Court for the Southern District of New York, the company was formed in 1989 to engage exclusively in securities investments, particularly in high-yield bonds. Mezzonen raised approximately $50 million in capital by selling shares in itself to European investors.

Mezzonen hired Savin to provide investment advisory and portfolio management services with respect to Mezzonen's investments in high-yield securities. Through most of the 1990s, Savin, acting in part through Savin Carlson Investment Corporation, which he owned, engaged in a complex series of misrepresentations and diversions of funds enabling him to bilk Mezzonen out of several million dollars.

On November 1, 2001, the United States government filed a superseding grand jury indictment in the United States District Court for the Southern District of New York charging Savin with (1) conspiracy to commit wire fraud in violation of 18 U.S.C. §§ 1343 and 1346, (2) wire fraud in violation of 18 U.S.C. §§ 1343 and 1346, and (3) perjury in violation of 18 U.S.C. § 1623 in connection with his allegedly false testimony in the bankruptcy proceeding. On March 13, 2002, pursuant to a plea agreement, Savin entered a guilty plea to one count of wire fraud (for sending a facsimile transmission to an agent of Mezzonen in furtherance of a scheme to receive fees in the nature of kickbacks from a company in which Mezonnen, through Savin, invested money) and one count of perjury (for his false testimony at the bankruptcy proceeding).

The plea agreement stipulated that the 1995 edition of the Guidelines applied to the offenses and that U.S.S.G. § 2F1.1 (1995) governed the wire-fraud offense. According to the plea agreement, Savin's offense level was calculated as follows: Pursuant to section 2F1.1(a), the base offense level was six. The level was increased by thirteen to nineteen pursuant to section 2F1.1(b)(1)(N) because the aggregate amount of the loss involved was more than $2,500,000 but less than $5,000,000. The level was increased by another two levels to twenty-one pursuant to section 2F1.1(b)(2) because the offense involved more than minimal planning. The level was then increased by another two levels to twenty-three pursuant to section 3B1.3 because the offense involved abuse of a position of private trust. Savin and the government also agreed that because the offense level for the perjury offense was nine or more levels less serious than the offense level for the wire-fraud offense, the perjury offense level would be disregarded pursuant to U.S.S.G. § 3D1.4(c). And, for accepting responsibility, it was agreed that Savin would be given the benefit of a three-level reduction pursuant to U.S.S.G. § 3E1.1.

The parties disagreed, however, as to the applicability of U.S.S.G. § 2F1.1(b)(6)(B), under which an offense level is increased by four when the offense for which the defendant was convicted "affected a financial institution [if] the defendant derived more than $1,000,000 in gross receipts from the offense." They agreed to "litigate this issue at sentencing," Letter Agreement between the United States Attorney's Office for the Southern District of New York and Savin, at 3 (Mar. 13, 2002), and each reserved the right to appeal the district court's decision on the matter. If the four-level enhancement provided by section 2F1.1(b)(6)(B) was ultimately determined not to apply, Savin's total offense level would then be twenty, with a sentencing range of thirty-three to forty-one months. If the four-level enhancement did apply, it would be twenty-four, with a sentencing range of fifty-one to sixty-three months.

The district court decided that U.S.S.G. § 2F1.1(b)(6)(B) did not apply to Savin's wire-fraud offense. Savin, 2002 WL 31520472, at *4, 2002 U.S. Dist. LEXIS 20175, at *10. The court first rejected Savin's argument that the guideline was invalid as applied to Savin, reasoning that "the Sentencing Commission was `fully empowered' to adopt [a] definition of `financial institution'" that included investment companies. Id., 2002 WL 31520472, at *4, 2002 U.S. Dist. LEXIS 20175, at *11 (quoting United States v. Ferrarini, 219 F.3d 145, 160 (2d Cir.2000)). The court then agreed with Savin that:

[U]nder Luxembourg law, Mezzonen is not an investment fund. Instead, Mezzonen was structured as a private (non-listed) corporation under the local corporate form of a societe anonyme and benefitted from a tax-exempt status. This structure enabled Mezzonen to avoid corporate, income, capital gains and liquidation taxes under Luxembourg law, as well as heavy regulation. As a matter of equity, Mezzonen should not be considered a financial institution for the purpose of assessing a weightier criminal punishment but not be considered as such — to its own benefit — for the purposes of domestic regulation. Because Mezzonen is not an investment fund under Luxembourg law, it will not be considered as such for the purposes of this sentence. The four-level enhancement does not apply.

Id., 2002 WL 31520472, at *4, 2002 U.S. Dist. LEXIS 20175, at *12-*13. The district court did not consider whether Mezzonen was an entity "similar" to one of the financial institutions listed in a pertinent Guidelines application note, which would have qualified it as a financial institution for these purposes. See U.S.S.G. § 2F1.1, Application Note 14 (1995). The court therefore decided that Savin's total offense level under the Guidelines was twenty. Savin, 2002 WL 31520472, at *5, 2002 U.S. Dist. LEXIS 20175, at *13. Based on that determination and a criminal...