U.S. v. Wallace, 05-3675.

• Decision Date: 14 August 2006
• Docket Number: No. 05-3675.,05-3675.
• Parties: UNITED STATES of America, Plaintiff-Appellant, v. Darryl WALLACE, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

458 F.3d 606

UNITED STATES of America, Plaintiff-Appellant, v. Darryl WALLACE, Defendant-Appellee.

No. 05-3675.

United States Court of Appeals, Seventh Circuit.

Argued May 9, 2006.

Decided August 14, 2006.

Edmond E. Chang, James Barz (argued), Office of the United States Attorney, Chicago, IL, for Plaintiff-Appellant.

Sergio F. Rodriguez (argued), Office of the Federal Defender Program, Chicago, IL, for Defendant-Appellee.

Before CUDAHY, KANNE, and WOOD, Circuit Judges.

WOOD, Circuit Judge.

In this appeal, we again confront the question of the proper approach to appellate review of the reasonableness of a federal sentence. Appellant Darryl Wallace pleaded guilty to wire fraud, 18 U.S.C. § 1343. Despite the fact that the Sentencing Guidelines advise that a term between 24 and 30 months is appropriate for Wallace, the district court judge decided that the reasonable sentence for Wallace was a significantly more lenient one: three years' probation plus a $2,000 fine. In addition, the court imposed several special conditions of probation, including an order that Wallace spend the first six months on home confinement and continue attending psychological counseling and Gamblers Anonymous meetings. We conclude that the district court failed adequately to justify such a significant deviation from the recommended guideline range; we therefore vacate the sentence and remand for further proceedings.

I

Merrill Lynch & Co., Inc., employed Wallace for 23 years. At the time relevant to this case, he was responsible for reconciling accounts in its stock department. Wallace admitted that, between July and October of 2003, he abused that position to record fictitious trades, which yielded gains of more than $600,000 that he credited to his personal trading account. To conceal these actions, he offset the gains with losses that he recorded in a Merrill Lynch account. He later transferred $400,000 of the fraudulent gains into his personal bank account and spent more than $30,000 before he was caught. Merrill Lynch could not determine how much Wallace owed and so waived restitution.

In a written memorandum and at sentencing, Wallace acknowledged that the advisory guidelines range was 24 to 30 months, but he appealed to the judge's discretion under United States v. Booker, 543 U.S. 220, 125 S.Ct. 738, 160 L.Ed.2d 621 (2005), and argued for a sentence below that range. Wallace asked the court to consider his need for psychological counseling to overcome a difficult childhood: his parents divorced when he was eight years old; he was raised in a tough neighborhood; he endured sexual abuse at school; he lost his brother and stepfather in a fire; and he witnessed his sister being struck and killed by a car. Although he nevertheless steered clear of crime and held a single job for over two decades, he learned from a psychologist after his arrest that he was addicted to gambling and suffered "recurrent, mild Major Depressive Disorder." After the arrest, he began attending Gamblers Anonymous and sought to continue mental health counseling. Wallace also argued that the guidelines overstated the seriousness of his crime by basing his offense level on the intended loss rather than the actual loss, resulting in an increase of eight points. See U.S.S.G. § 2B1.1(b)(1)(D), (b)(1)(H), cmt. n. 3(A). Last, Wallace suggested that his request for leniency found support in principle in the guidelines for departing based on aberrant behavior, id. § 5K2.20, and post-offense rehabilitation, id. § 3E1.1, even though he conceded at the hearing that they didn't "fit perfectly." Counsel indicated that he was not requesting a sentence of probation only, but he proposed "a sentence of a year and a day."

The government responded that, in its view, Wallace lacked evidence that his crime was in any way caused by his difficult childhood, psychological problems, or gambling. As to Wallace's contention that the amount he was able to spend before he was arrested better captured the gravity of his offense than the amount he stole, the government pointed out that the guidelines base a defendant's offense level on the greater of actual loss or intended loss, and here the intended loss was greater. And because Wallace committed the fraud over a period of months, the government concluded his behavior was not aberrant under § 5K2.20.

The sentencing court rejected the advisory guidelines range as "a bit much" in light of the factors enumerated in 18 U.S.C. § 3553(a). The judge accepted Wallace's argument that the guidelines overstated the gravity of his crime. She acknowledged the importance of intended loss under the guidelines, noting that "intended loss raises the cap." She did not agree, however, with the government's view that Wallace's gambling was irrelevant. She explained, "But as a practical matter, [the loss] was roughly $30,000, and the gambling obviously was a compelling reason for this taking place." In giving Wallace what she labeled a "World Series break," the court, consistent with § 3553(a)(1), considered his history and personal characteristics and could not "help but be impressed" that in spite of a difficult childhood, psychological problems, and a gambling addiction, he had "really had an exemplary life until he faltered and did this one ridiculous, stupid crime."

The court also considered the need to deter and rehabilitate Wallace. By starting to attend psychological counseling and Gamblers Anonymous, Wallace, in the court's view, had shown that "he's already deterred." And, according to the court, Wallace's "extraordinary remorse" demonstrated that "the rehabilitation process has already begun." The judge concluded that: "[O]ne of the most important aspects of what punishment should achieve in this case has to do with Mr. Wallace's mental health and his gambling addiction. I think that can be achieved without imposing a prison sentence, throwing him into prison with hardened criminals." Although the judge at sentencing thus made clear that she was basing Wallace's sentence on the § 3553(a) factors, the judgment itself refers to the guidelines for departing based on mental and emotional condition, U.S.S.G. § 5H1.3, and aberrant behavior, id. § 5K2.20.

II

On appeal, the government contends that Wallace's sentence is not justified, either as an exercise of discretion based on the § 3553(a) factors, or as a "departure" based on the guidelines cited in the judgment. We can easily dispose of the second point: after Booker the concept of "departures" is outmoded. United States v. Arnaout, 431 F.3d 994, 1003 (7th Cir.2005). It is true, on the one hand, that cases analyzing "departures" pre-Booker remain useful by way of analogy, as we assess the overall reasonableness of a sentence. United States v. Castro-Juarez, 425 F.3d 430, 434-36 (7th Cir.2005). A bad reason for departing pre-Booker remains a reason that, at least as a matter of advice from the guidelines, is still bad; if the district court thought that the reason applied to the case before it, a very good explanation would be necessary. United States v. Boscarino, 437 F.3d 634, 638 (7th Cir.2006). On the other hand, the scope for sentences outside the recommended guidelines range has expanded, as we explained in United States v. Long, 425 F.3d 482 (7th Cir.2005):

Freed from the mandatory nature of [the guidelines'] structure, the court [is] free to consider the factors outlined in 18 U.S.C. § 3553(a), including those that were specifically prohibited by the guidelines and those that are not constitutionally prohibited such as race or sex. See, e.g., § 5H1.11 (discouraging courts to factor "[m]ilitary, civic, charitable, or public service; employment-related contributions; and similar prior good works" in deciding whether to depart); § 5H1.12 (stating that "[l]ack of guidance as a youth and similar circumstances indicating a disadvantaged upbringing" are not relevant grounds in determining whether a departure is warranted).

425 F.3d at 488. See also United States v. Bonner, 440 F.3d 414, 417 (7th Cir.2006) (quoting United States v. Paladino, 401 F.3d 471, 487-88 (7th Cir.2005) (Kanne, J., dissenting)).

Two things are critical now: first, whether the district court's choice of sentence is adequately reasoned in light of the § 3553(a) factors, see Arnaout, 431 F.3d at 1003; and second, whether the sentence can ultimately be deemed a reasonable one. Accord, United States v. Rattoballi, 452 F.3d 127, 131-32 (2d Cir.2006); United States v. Fernandez, 443 F.3d 19, 26 (2d Cir.2006). At each point, the focus is on what the district court did, not on what it might have done. Thus, the procedural inquiry focuses on the actual reasons given, not on whether the sentence could have been supported by a different rationale; the substantive inquiry looks at the sentence imposed, not at all the other hypothetical sentences that might have been chosen. United States v. Cunningham, 429 F.3d 673, 679 (7th Cir.2005); Castro-Juarez, 425 F.3d at 433.

Before addressing the question whether the district court's decision in Wallace's case was procedurally and substantively reasonable, we think it useful to explore both concepts in greater detail. We have already had occasion to discuss what we expect of the district courts from a procedural standpoint. As we held in United States v. Dean, 414 F.3d 725 (7th Cir.2006):

. . . [T]he farther the judge's sentence departs from the guidelines sentence (in either direction — that of greater severity, or that of greater lenity), the more compelling the justification based on factors in section 3553(a) that the judge must offer in order to enable the court of appeals to assess the reasonableness of the sentence imposed. (Cf. United States v. Dalton, 404 F.3d 1029, 1033-34 (8th Cir.2005), reversing a 60-month sentence when the minimum guidelines sentence was four times as long.)

Id. at 729. In other words, the new regime imposes a procedural obligation on the...