United States v. Diallo

• Citation: 710 F.3d 147
• Decision Date: 15 January 2013
• Docket Number: No. 10–3771.,10–3771.
• Parties: UNITED STATES of America v. Issa DIALLO, Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

710 F.3d 147

UNITED STATES of America

v.Issa DIALLO, Appellant.

No. 10–3771.

United States Court of Appeals,Third Circuit.

Argued Oct. 3, 2012.

Opinion Filed: Jan. 15, 2013.

Paul J. Walker, Esq., Curt M. Parkins, Esq. [Argued], Walker & Comerford Law LLC, Scranton, PA, Counsel for Appellant Issa Diallo.

Peter J. Smith, United States Attorney, Stephen R. Cerutti II, Assistant United States Attorney [Argued], United States Attorney's Office, Middle District of Pennsylvania, Harrisburg, PA, Counsel for Appellee United States of America.

Before: FUENTES, FISHER, and COWEN, Circuit Judges.

OPINION OF THE COURT

FUENTES, Circuit Judge:

Issa Diallo was arrested and pleaded guilty to knowingly possessing 15 or more counterfeit credit cards with the intent to defraud. At his sentencing hearing, the Government argued that although the actual loss attributed to Diallo's conduct amounted to $160,000, he should be assessed a 16–level enhancement because his intended loss amount was the maximum that he could have charged on the credit cards, which was $1.6 million. We agree with Diallo's contention that for the purpose of Section 2B1.1 of the Sentencing Guidelines, the intended loss of a credit card fraud is not, in every case, the credit card's credit limit. We therefore vacate and remand for resentencing.¹

I.

On December 26, 2008, Diallo used a counterfeit credit card to purchase 26 gift cards, each valued at $100, at a Wegmans Supermarket in Wilkes–Barre, Pennsylvania. The following day, Diallo returned to that supermarket and was arrested. At the time of his arrest, Diallo possessed $920 in cash, a counterfeit North Carolina driver's license, and a counterfeit credit card. After obtaining a search warrant, the Wilkes–Barre Township Police Department searched Diallo's vehicle and recovered 53 counterfeit credit cards, a counterfeit Louisiana driver's license, 24 gift cards, a Global Positioning System (GPS), a laptop computer, a thumb drive, and a skimming device, which is a hand-held device that copies, stores, and encodes credit card information from a credit card's magnetic strip. A subsequent search by Secret Service agents resulted in the discovery of a second thumb drive and another gift card. Searches of the laptop and thumb drives revealed over 200 compromised Discover, Visa, and MasterCard credit card accounts. Through a search of the GPS device, Secret Service agents also discovered the addresses for 12 Wegmans stores, 9 Wawa convenience stores, and 3 7–Eleven convenience stores. Wegmans advised agents that during November and December 2008, Diallo had been recorded on store surveillance tapes using a fraudulent credit card to purchase Visa gift cards at Wegmans stores throughout Virginia, Pennsylvania, New Jersey, and New York.

During an interview with Secret Service agents, Diallo admitted to possessing the compromised credit card numbers on his laptop computer and thumb drives. Diallo stated that he had received the account information from another individual and that he could load the account information onto gift cards using the skimming device.

On January 21, 2010, Diallo pleaded guilty to knowingly possessing 15 or more counterfeit access devices, with intent to defraud, in violation of 18 U.S.C. § 1029(a)(3). The parties did not agree to a specific loss amount or the number of victims and reserved the issue for the sentencing hearing. The parties agreed that the sentence would be calculated under U.S.S.G. § 2B1.1, which is the Guideline covering fraud offenses. Prior to sentencing, a U.S. Probation Officer prepared a presentence report, which calculated a total offense level of 27 and criminal history category of I. The total offense level included a 16–level enhancement for an intended loss amount of over $1 million but not more than $2.5 million, which was based on the Secret Service agents' determination of the aggregate credit limit of all of the compromised credit card numbers, and a 4–level enhancement for over 50 victims, based on the number of financial institutions that had issued the credit cards numbers. Diallo objected to both enhancements.

At Diallo's sentencing hearing, the Secret Service case agent testified that he had determined that there were 52 victims, consisting of the 51 financial institutions that owned the various credit card numbers and Wegmans Corporation. The agent also testified that while an actual loss of $160,000 could be attributed to Diallo, there was “approximately $1.6 million in potential loss.” (App. 15) He calculated this potential loss by contacting the 51 financial institutions associated with each credit card to request each card's credit limit, and the total credit limit for the 327 credit cards was $1.6 million. The agent, however, conceded that an individual in possession of a stolen card could not determine its credit limit without a subpoena.

At Diallo's sentencing hearing, the defense argued that “intended loss requires knowledge that the loss is a virtual certainty,” and that Diallo did not have “that type of guilty knowledge as to the amount that was available on these cards or that he even had access to these cards.” App. 24. In response, the government argued:

[I]ntended loss isn't necessarily something that is certain.

If you can take someone's credit card, and you can charge up to $20,000 on it, that's the intended loss. That is how much you can get if you try long and hard enough to get it.

The card will stop when there is nothing available any longer, when the credit limit has been reached.

App. 25.

The District Court accepted the Government's arguments on Diallo's intended loss and the number of victims, and it overruled Diallo's objections. The Court's analysis on these two issues consisted of the following: “The intended loss for credit cards he personally used and the cards he manufactured and provided to others totaled $1.6 million. Over 50 financial institutions were affected by his actions. So obviously it is a very serious offense.” App. 30–31. The District Court then applied both enhancements, resulting in a total offense level of 27 and a Guidelines range of 70 to 87 months' imprisonment.

After the District Court overruled the objection to the intended loss amount enhancement, Diallo argued that a departure was warranted. He emphasized the fact that the intended loss calculation of $1.6 million is ten times greater than the actual loss, and is “a gross overstatement of the seriousness of this offense.” App. 28. While the District Court declined to depart from the Guidelines range, it ultimately sentenced Diallo to a bottom-of-the-Guidelines-range sentence of 70 months' imprisonment.

II.

On appeal, Diallo challenges the application of the same two enhancements to which he objected at his sentencing hearing. He maintains that (1) his Guidelines range was improperly calculated because of the District Court's determination that intended loss is simply an aggregation of the credit limits of stolen credit card numbers, despite no evidence that Diallo intended to cause that amount of loss; and (2) the District Court incorrectly increased his offense level by four levels based on a finding that there were over fifty victims when only thirty victims had suffered an actual loss.

The Government has conceded that the number-of-victims enhancement is improper because the applicable Sentencing Guidelines require that victims must have suffered an actual loss, as compared to subsequent Guidelines which additionally included individuals “whose means of identification [were] used unlawfully or without authority.” U.S.S.G. § 2B1.1 app. n. 4(E) (effective Nov. 1, 2009); see also United States v. Kennedy, 554 F.3d 415, 419 (3d Cir.2009) (holding that victims must have suffered an actual pecuniary loss); United States v. Corrado, 53 F.3d 620, 622 (3d Cir.1995) (holding that the earlier Guidelines control when retroactive application of the Guidelines in effect at sentencing would result in more severe penalties). As the Government has conceded that remand for resentencing on this enhancement is appropriate, we will only consider the question of Diallo's intended loss amount.

A.

Section 2B1.1 of the Sentencing Guidelines provides that the offense level is to be increased based on the loss amount for offenses involving fraud, as well as other larceny and theft offenses. For offenses resulting in a loss greater than $120,000, there is a 10–level increase, and when there is a loss greater than $1 million, there is a 16–level increase. U.S.S.G. § 2B1.1(b)(1). “Loss” is defined as “the greater of actual loss or intended loss.” Id. app. n.3(A). “Intended loss” is defined as “the pecuniary harm that was intended to result from the offense[ ] and includes intended pecuniary harm that would have been impossible or unlikely to occur (e.g., as in a government sting operation, or an insurance fraud in which the claim exceeded the insured value).” Id. app. n.3(A)(ii). In estimating loss, the application notes advise, “[t]he court need only make a reasonable estimate of the loss. The sentencing judge is in a unique position to assess the evidence and estimate the loss based upon that evidence. For this reason, the court's loss determination is entitled to appropriate deference.” Id. app. n.3(C). This appeal requires us to determine how sentencing courts should calculate what “pecuniary harm was intended to result” from credit card fraud when the fraud's perpetrator did not know the credit limit, which is the potential loss amount from the stolen credit card.

As we have not yet addressed this question, the parties urge us to consider extra-Circuit authority to determine how to calculate intended loss in a credit card fraud. Diallo asks the Court to adopt the reasoning of the Tenth Circuit in United States v. Manatau, 647 F.3d 1048 (10th Cir.2011). In Manatau, the Tenth Circuit stated that “ ‘intended loss' means a loss the defendant purposely sought to...