United States v. Brown, 12–3313.

• Decision Date: 11 October 2013
• Docket Number: No. 12–3313.,12–3313.
• Citation: 732 F.3d 781
• Parties: UNITED STATES of America, Plaintiff–Appellee, v. Richard E. BROWN, Defendant–Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

732 F.3d 781

UNITED STATES of America, Plaintiff–Appellee,

v.Richard E. BROWN, Defendant–Appellant.

No. 12–3313.

United States Court of Appeals,Seventh Circuit.

Argued Feb. 25, 2013.

Decided Oct. 11, 2013.

James M. Warden, Attorney, Office of the United States Attorney, Indianapolis, IN, for Plaintiff–Appellee.

Michael C. Keating, Attorney, Keating & Laplante, Evansville, IN, for Defendant–Appellant.

Before BAUER, POSNER, and SYKES, Circuit Judges.

SYKES, Circuit Judge.

For 20 years Richard Brown was the office manager and accountant for a cluster of small businesses in southern Indiana owned by the Walker family. In 2009 the family patriarch discovered that Brown was embezzling money by using company credit cards and writing company checks to pay for personal items and expenses. An audit revealed that during the course of at least a decade, Brown had stolen hundreds of thousands of dollars, gradually putting the businesses in financial straits and destroying their credit.

A federal grand jury indicted Brown on more than 150 counts of wire fraud, mail fraud, and tax fraud. Brown pleaded guilty to a single count of each of these crimes. The advisory guidelines sentencing range was 21 to 27 months' imprisonment, but the district judge thought that was far too low. The judge settled on a sentence of 60 months, a significant variance from the top of the range. Judgment was entered and Brown appealed.

Weeks later, without warning, the judge filed an amended judgment and attached a written “statement of reasons” to “supplement” the reasons he had given in open court for the sentence. Apparently applying “departure” analysis, the judge recalculated the guidelines range, adding upward adjustments based on the amount Brown embezzled, the duration of the scheme, and the vulnerability of one of the victims. On this revised calculation, the guidelines range was 41 to 51 months. Compared to this range, the 60–month sentence seemed like a less significant variance from the guidelines.

On appeal Brown argues that the district judge violated Rule 32(h) of the Federal Rules of Criminal Procedure by failing to give notice of his intent to apply upward “departures.” He also argues that his 60–month sentence is substantively unreasonable.

We affirm. The judge's belated effort to adjust the guidelines range introduced complications but did not violate Rule 32(h). That rule requires “reasonable notice” when the district court is “contemplating” a departure from the sentencing guidelines. Fed.R.Crim.P. 32(h). But “[t]he old regime of ‘departures' is defunct,” United States v. Bartlett, 567 F.3d 901, 909 (7th Cir.2009), and Rule 32(h) does not apply to an upward variance from the advisory guidelines range, see Irizarry v. United States, 553 U.S. 708, 714, 128 S.Ct. 2198, 171 L.Ed.2d 28 (2008). Because departures are obsolete, Rule 32(h) no longer has any work to do.

Moreover, because the judge's written statement of reasons was filed after Brown appealed, the court lacked the power to substantively alter the sentence because jurisdiction had shifted to this court. Brown's sentence did not change, though the rationale for it certainly did. To the extent that the judge's recalculation of the guidelines range amounts to a substantive change, it is a nullity because the court lacked jurisdiction to make the change. If the recalculation simply introduced an inconsistency between the written statement and the oral pronouncement of the sentence, the oral pronouncement controls. Either way, we disregard the written statement of reasons. Considered in light of the court's oral pronouncement of sentence, the 60–month sentence is reasonable.

I. Background

From 1989 until 2009, Brown worked as the office manager, bookkeeper, and accountant for a group of small businesses in Evansville, Indiana, owned by the Walker family. In that capacity he was authorized to write company checks and use company credit cards for business purposes. Unbeknownst to the Walkers, for many years Brown abused the trust they placed in him by paying himself unauthorized bonuses. He also repeatedly wrote company checks and used company credit cards for personal expenses like gas, household items, and home repairs. In addition to making these personal purchases, Brown also used company funds to pay the creditors of his church, the Oak Hill Christian Center, where he served as the bookkeeper.

Not surprisingly, Brown failed to report any of this extra income on his federal tax returns. He also failed to report money he earned doing work for the church. Instead, he had his compensation made payable to the Oak Hill Christian Center and placed in tithing envelopes to conceal the income, and then claimed charitable deductions for the amounts.

Brown's crimes came to light in October 2009 while he was on vacation. Lowell Walker, the family patriarch and the primary owner of the Walker enterprises, intercepted an invoice detailing the use of company checks to pay for expenses relating to Brown's rental properties. This precipitated an internal audit, which revealed the extent of Brown's misuse of company funds. When Brown returned from vacation, the Walkers confronted and fired him. Brown claimed that he was simply reimbursing himself for promised pay raises that he never received.

A federal grand jury indicted Brown for embezzlement dating from 2004 to October 2009, when he was fired. He was charged in a superseding indictment with 135 counts of wire fraud, 15 counts of mail fraud, and 5 counts of tax fraud. He agreed to plead guilty to one count each of wire and mail fraud and one count of tax fraud. The plea agreement called for restitution to the Walker family in the amount of $151,233 and $38,675 to the Internal Revenue Service for tax losses. The district court accepted the guilty pleas.

Based on the contents of the plea agreement and the presentence report, Brown's offense level under the sentencing guidelines was 16, which when combined with a criminal history category I yielded an advisory guidelines range of 21 to 27 months' imprisonment. At the sentencing hearing, the court accepted this guidelines calculation and then heard testimony from three witnesses who spoke on Brown's behalf. All three were friends from the Oak Hill Christian Center; one was the pastor of the church. They extolled Brown's extensive service to the church and said they believed him to be an honest, loyal man.

The court also heard from two members of the Walker family: Barbara Wilson, the co-owner who conducted the internal audit; and Lowell Walker, the head of the family. Wilson testified about Brown's elaborate method of concealing his embezzlement and how his deceit placed the family businesses in a precarious financial situation and destroyed their credit. Wilson, an experienced auditor with a master's degree in business administration, also testified that according to her audit, Brown embezzled company funds on many hundreds of occasions totaling approximately $667,000. That total may understate the loss; Wilson explained that because of missing records, her audit went back only as far as 1996.

When it was his turn to address the court, Brown mostly described what he'd been up to since being fired by the Walkers: He'd taught at a technical college, provided services to the church, obtained a master's degree and minister's license, and served as the legal guardian for a 70–year–old cousin who was mentally handicapped.

Before imposing sentence the district court thoroughly examined the sentencing factors listed in 18 U.S.C. § 3553(a), placing special emphasis on the sophisticated nature of Brown's embezzlement scheme, its long duration, and the deep breach of trust that his conduct entailed. The judge accepted the results of the Walker family's internal audit and explained that the loss—more than $600,000—was significant for a small business. On the other side of the ledger, the judge recognized that Brown had no criminal history and had a great deal of support from members of his church community, including “somewhere between 40 and 50” people who wrote letters to the court on his behalf. These letters, the court said, stressed Brown's “high moral character, ... his fairness, his devotion to his church, his community, [all] the charitable things that he was involved with.”

In the end, however, the judge contrasted the altruistic picture painted by Brown's supporters with the admitted facts of the case. “It's almost like you have two personalities,” the judge said. “One is with your church,” and the other is “a greedy individual who just wants to enrich himself at the expense of others.” After touching on the remaining § 3553(a) factors, the judge imposed a sentence of 60 months concurrent on each count of wire and mail fraud and a concurrent 36 months on the tax-fraud count. The judge explained that this variance from the guidelines range was based on “the [§ ] 3553(a) factors and the extensive nature and duration of the defendant's criminal activity.”

The court entered judgment on October 1, 2012. Brown filed a notice of appeal four days later. On October 24, 2012, the district court issued an amended judgment and attached a written statement of reasons explaining the sentence. The purpose of the amendment was to correct a clerical mistake, but the only difference between the original and amended judgments was that the latter waived interest on the restitution award. In the attached statement of reasons, however, the judge sought to supplement his reasons for the sentence announced in open court. In an apparent effort to apply departure analysis, the judge recalculated Brown's guidelines range.

It's not entirely clear what the judge was trying to accomplish. He began by noting that the original guidelines range was 21 to 27 months and then stated as follows: “After giving respectful consideration to the Sentencing Guidelines, the Court believes the guidelines do not...