U.S. v. Zaragoza, ZARAGOZA-BARAJA

• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)
• Writing for the Court: Before CUMMINGS, FLAUM, and RIPPLE; CUMMINGS; Kocoras'
• Citation: 123 F.3d 472
• Parties: Unempl.Ins.Rep. (CCH) P 22,190 UNITED STATES of America, Plaintiff-Appellee/Cross-Appellant, v. Sergio ZARAGOZA, a/k/a Louis A. Valera, Defendant-Appellant/Cross-Appellee. and UNITED STATES of America, Plaintiff-Appellee, v. Aliciaefendant-Appellant.
• Docket Number: ZARAGOZA-BARAJA,Nos. 96-3353,96-3629 and 96-3371,D
• Decision Date: 28 July 1997

Page 472

123 F.3d 472 Unempl.Ins.Rep. (CCH) P 22,190 UNITED STATES of America, Plaintiff-Appellee/Cross-Appellant,
v.
Sergio ZARAGOZA, a/k/a Louis A. Valera,
Defendant-Appellant/Cross-Appellee.
and
UNITED STATES of America, Plaintiff-Appellee,
v.
Alicia ZARAGOZA-BARAJAS, Defendant-Appellant. Nos. 96-3353, 96-3629 and 96-3371. United States Court of Appeals,
Seventh Circuit. Argued May 16, 1997.
Decided July 28, 1997.

Page 474

Barry Rand Elden, Chief of Appeals, Office of the United States Attorney, Criminal Appellate Division, Daniel Howard Parish (argued), Office of the United States Attorney, Chicago, IL, for Plaintiff-Appellee.

Howard B. Levy (argued), Chicago, IL, for Louis A. Valera.

Robert L. Rascia, Michael Monaco (argued), Serpico, Novelle & Navigato, Chicago, IL, for Alicia Zaragoza-Barajas.

Before CUMMINGS, FLAUM, and RIPPLE, Circuit Judges.

CUMMINGS, Circuit Judge.

Defendants were charged with mail fraud (18 U.S.C. §§ 1341, 1342) in a multicount superseding indictment. Defendant Zaragoza, without a written plea agreement, pleaded guilty to seventeen counts of mail fraud and one count of use of a fictitious name in the commission of mail fraud, and was sentenced under the federal Sentencing Guidelines to forty-one months' imprisonment, followed by three years of supervised release, restitution in the amount of $569,741, and a $900 special assessment. Pursuant to a written agreement with the government, defendant Zaragoza-Barajas ("Barajas") pleaded guilty to one count of use of a fictitious name in the commission of mail fraud and was sentenced under the Guidelines to thirty-three months' imprisonment, followed by

Page 475

three years' supervised release, restitution in the amount of $569,741, and a $50 special assessment. Both defendants appeal their sentences. The government cross-appeals the district court's failure to impose an obstruction of justice enhancement to Zaragoza's offense level. For the following reasons, we affirm as to all sentencing issues raised by defendants; further, because an obstruction enhancement is warranted in Zaragoza's case, we vacate his sentence and remand his case for resentencing. BACKGROUND

For approximately six years, the defendants engaged in an extensive scheme by which they defrauded the Illinois Department of Employment Security ("IDES") by fraudulently procuring unemployment compensation checks for fictitious employees. Zaragoza and his brother Jose owned, respectively, El Saloon Bar and La Palapa Restaurant, both of which are located in Chicago. ¹ Each quarter, Zaragoza and his brother submitted to IDES fraudulent forms (known as UC3/40 forms) in which they listed fictitious employees of these two establishments. Sometime thereafter, Zaragoza, Jose Zaragoza, and other participants in the scheme including Barajas (Sergio and Jose's sister), Mayra Zaragoza (Jose's wife), and Cesar Zaragoza (Jose's nephew) filed applications for unemployment benefits under the names of these fictitious employees--using as addresses for the fictitious persons various addresses under their control such as El Saloon's address, Barajas' home address, and Zaragoza's address. In turn, IDES would send a form (BIS-032) to El Saloon and La Palapa to verify the purported employees' unemployment status and to give the employer an opportunity to contest or otherwise respond to the claim for benefits. Zaragoza and his brother Jose would respond (on behalf of El Saloon and La Palapa, respectively) by confirming and supporting the fraudulent claims. IDES then approved the claims and issued benefit checks. The scheme participants forged endorsements on the checks and then cashed or deposited the checks into bank accounts they controlled. At the time of the sentencing hearing, several of the participants were fugitives and the proceeds from the scheme were virtually unaccounted for.

The government's investigation revealed that of the 138 names under which claims (established to be fraudulent) were submitted, 55 were the names of persons who had applied for loans through Nationwide Acceptance Corp., where Barajas was employed as a branch manager. ² The use of information obtained through Nationwide caused at least seven people who subsequently filed valid unemployment claims to suffer delays and other difficulties in securing benefits. No other scheme participant was ever employed at Nationwide.

In determining Zaragoza's sentence, the district court found that the amount of loss attributable to him was $569,741. Accordingly, pursuant to U.S.S.G. § 2F1.1(b)(1), the district court increased his base offense level ten levels. The district court also determined that his offense level should be increased four levels for his role as an organizer or leader of criminal activity involving five or more participants. U.S.S.G. § 3B1.1(a). The district court concluded that Zaragoza did not qualify for a two-level reduction in his offense level for acceptance of responsibility. U.S.S.G. § 3E1.1(a). Finally, ruling against the government, the district court refused to impose a two-level obstruction of justice enhancement for his attempts to disguise his writing. See U.S.S.G. § 3C1.1. On appeal, Zaragoza maintains that the district court erred in finding that the amount of loss

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attributable to him was $569,741, in ordering restitution in that amount, in denying him an acceptance of responsibility reduction, and in imposing an aggravating role enhancement without supporting its finding with specific evidence. The government's cross-appeal contends that the district court erred by failing to impose an obstruction of justice enhancement.

As with Zaragoza, the district court also attributed $569,741 in losses from the scheme to Barajas and ordered her to pay restitution in that amount. Adopting Zaragoza's arguments, Barajas challenges both the calculation of loss attributable to her and the restitution order. The district court imposed a two-level increase in Barajas' offense level for abusing a position of trust in the commission of her offense, U.S.S.G. § 3B1.3, and denied her a two-level reduction for acceptance of responsibility. She challenges both of these determinations.

ANALYSIS

We begin by addressing the issues common to both defendants' appeals: calculation of the amount of loss, propriety of the restitution orders, and the district court's denial of offense-level reductions for acceptance of responsibility. Thereafter, the defendants' individual contentions and the government's cross-appeal will be taken up.

COMMON ISSUES

Amount of Loss

Zaragoza and Barajas both contend that the district court erred in determining that the amount of loss attributable to each was $569,741. Our review of the district court's factual finding regarding the amount of loss attributable to a defendant is for clear error only. United States v. Jackson, 95 F.3d 500, 505 (7th Cir.1996), certiorari denied, --- U.S. ----, 117 S.Ct. 532, 136 L.Ed.2d 417; United States v. Morris, 80 F.3d 1151, 1171 (7th Cir.1996), certiorari denied, --- U.S. ----, 117 S.Ct. 181, 136 L.Ed.2d 120.

In its efforts toward establishing the amount of loss resulting from defendants' scheme, the government investigated all IDES claims in which El Saloon, La Palapa, or Landscape Maintenance ³ had been identified as the claimant's employer. The government verified the falsity of each such individual claim by one or more of three methods: (1) interviewing the actual persons in whose names the claims had been submitted; (2) reviewing the records of the claimants' actual employers; or (3) confirming through Social Security Administration records that the IDES claims contained erroneous biographical information such as date of birth or social security number. Only where one or more of these methods revealed a false claim, and where records indicated that IDES had sent a benefits check to an address controlled by the defendants or their co-schemers and the check had been deposited into bank accounts controlled by them, were the amounts disbursed to the putative claimant included in the government's loss calculation. Having reviewed the government's submissions relating to the amount of loss, the district court concluded:

I am persuaded not only by a preponderance of the evidence but beyond a reasonable doubt that the loss figures are as the government says. I think the loss is $569,741 here. And I think there was a deliberate and conservative calculation in reaching that amount.... It is true that not all of the losses could be proved to have been fraudulent in the same analytical way. There are a variety of methods used to determine where the loss is. And some were lacking, as I think has been pointed out here. But there is not any question that every loss figure that finds its way into this total of 569,000 was proved in at least one compelling way or another, and most in more than one way.

Sentencing Transcript at 30-31.

In challenging the district court's loss finding, defendants simply and conclusorily assert that "verification of the amount of loss other than by verification with the actual

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person or actual employer lacks the sufficient degree of reliability to support its probable accuracy" and "verification of the amount of loss through the Social Security Administration does not support the preponderance of the evidence standard due to its lack of reliability." Conspicuously absent from defendants' argument is any explanation of why verification via the Social Security Administration's records should be deemed unreliable. And even if verification through Social Security Administration records might, as a general matter, be unreliable for some unexplained reason, defendants utterly fail to address why that verification should be considered unreliable in the instant case where it was corroborated by the facts that the putative claimants identified El Saloon and La Palapa as their employers, used addresses...