United States v. Sethi

• Decision Date: 08 January 2013
• Docket Number: No. 12–1774.,12–1774.
• Citation: 702 F.3d 1076
• Parties: UNITED STATES of America, Plaintiff–Appellee, v. Dinesh SETHI, also known as Dan Sethi, Defendant–Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

702 F.3d 1076

UNITED STATES of America, Plaintiff–Appellee,

v.Dinesh SETHI, also known as Dan Sethi, Defendant–Appellant.

No. 12–1774.

United States Court of Appeals,

Eighth Circuit.

Submitted: Sept. 21, 2012.

Filed: Jan. 8, 2013.

Leon F. Spies, Iowa City, IA, for appellant.

Mary Clare Luxa, AUSA, Des Moines, IA, for appellee.

Before MELLOY, BEAM, and BENTON, Circuit Judges.

BEAM, Circuit Judge.

Dinesh Sethi appeals his sentence following a guilty plea to one count of wire fraud in a six-count indictment, charging him with wire fraud and conspiracy to commit wire fraud. He challenges the district court's ¹ sentencing enhancements, the court's failure to vary downward, and the court's award of restitution. We affirm.

I. BACKGROUND

At the time of his indictment, Sethi was president and owner of DES Staffing Services, a temporary staffing services agency based in Des Moines, Iowa. DES provided human resource and accounting functions for its client employers, such as staffing fulfillment, compensation management, and furnishing workers' compensation insurance for the employees of the DES client employers.

Relevant here, DES obtained workers' compensation coverage on the secondary market through the National Council on Compensation Insurance (NCCI). Because DES fell in a high risk category, it was required to pay higher premiums for its coverage. Between February 2006 and February 2009, in order to reduce the premiums paid by DES for its coverage, Sethi devised and carried out a scheme to defraud the two insurance companies administering the workers' compensation policies DES obtained through NCCI.

Stated generally, because workers' compensation premiums are calculated based upon factors such as total wages to be covered, job classifications, and an employer's past history of work-related injuries, Sethi's scheme involved manipulating these various factors in order to reduce the amount of premiums paid by DES. For example, Sethi had his director of finance shift payroll from high premium job classifications to lower premium job classifications, and, additionally, created shell corporations in order to deflect DES's high “modification factor” (“mod factor”)—a rating that reflects an employer's history of work-related injuries, including those involving serious injury or death. The shell corporations, with no claim history whatsoever, would necessarily have a lower mod factor and thus greatly reduced the amount of premiums due on the employees from its payroll.

At sentencing, the district court applied a sophisticated-means enhancement as well as a role-in-the-offense adjustment. Additionally, the court imposed restitution and declined Sethi's request for a downward variance. Sethi challenges each on appeal.

II. DISCUSSIONA. Enhancements

We review the application of the Guidelines to the facts de novo and factual findingsunderlying the calculation of the Guidelines for clear error. United States v. Morse, 613 F.3d 787, 796 (8th Cir.2010). The ultimate sentence is reviewed for abuse of discretion. Id. The district court committed no error here.

Section 2B1.1(b)(10)(C) of the advisory Guidelines authorizes a two-level sentencing enhancement for the use of “sophisticated means.” Application note 8(B) to § 2B1.1(b)(10)(C) defines “sophisticated means” as

especially complex or especially intricate offense conduct pertaining to the execution or concealment of an offense. For example, in a telemarketing scheme, locating the main office of the scheme in one jurisdiction but locating soliciting operations in another jurisdiction ordinarily indicates sophisticated means. Conduct such as hiding assets or transactions, or both, through the use of fictitious entities, corporate shells, or offshore financial accounts also ordinarily indicates sophisticated means.

The sophisticated-means enhancement is appropriate when the offense conduct, viewed as a whole, “was notably more intricate than that of the garden-variety [offense].” United States v. Hance, 501 F.3d 900, 909 (8th Cir.2007). “Even if any single step is not complicated, repetitive and coordinated conduct can amount to a sophisticated scheme.” United States v. Fiorito, 640 F.3d 338, 351 (8th Cir.2011) (quotation omitted), cert. denied,––– U.S. ––––, 132 S.Ct. 1713, 182 L.Ed.2d 254 (2012).

The government established that Sethi utilized sophisticated means to accomplish the fraudulent activities in this case. United States v. Scott, 448 F.3d 1040, 1043 (8th Cir.2006) (“[U]nder the advisory guidelines scheme, sentencing judges are required to find sentence-enhancing facts only by a preponderance of the evidence.”). With little, if any, citation to supporting authority on appeal, Sethi contends that “under the unique circumstances of this case, and based on the characteristics of the staffing industry, his fraud was not sophisticated.” He additionally claims that his act of working with the director of finance “to shift payroll was neither complex nor especially intricate.” The facts of the case advise otherwise, however. We need not delve too deep to uphold the district court's conclusions here. Sethi not only directed the shifting of payroll to less expensive job classifications in multiple reports over several years, but also created two shell corporations, utilizing names and addresses of unwitting, or at the very least uninvolved, individuals as ostensible “owners.” Sethi even assumed the identities of these other individuals by signing documents and answering phone inquiries in their stead. He also recruited an existing franchise owner to take over alleged franchises of DES so as to capitalize on her low mod factor, or injury history factor. Sethi went to great lengths to manipulate the workers' compensation premium calculation factors. The district court did not err in applying the enhancement here.

The district court further did not err in applying the role-in-the-offense adjustment as well. The four-level leadership-role enhancement under § 3B1.1(a) for Sethi's leadership role provides:

Based on the defendant's role in the offense, increase the offense level as follows: (a) If the defendant was an organizer or leader of a criminal activity that involved five or more participants or was otherwise extensive, increase by 4 levels.

In advocating for the imposition of this enhancement, the government relied on the “otherwise extensive” trigger. “A defendant must have at least directed or procured the aid of others for the enhancement to apply.”

United States v. Bistrup, 449 F.3d 873, 883 (8th Cir.2006). A scheme may be “otherwise extensive” if it involves a large loss amount and covers a period of years. United States v. Washington, 255 F.3d 483, 486 (8th Cir.2001).

Sethi argues the court erred in relying upon the same factual findings to support both the sophisticated-means and leadership-role enhancements. He claims the court thus impermissibly “double counted” the conduct, highlighting that “sentencing courts err when precisely the same aspect of a defendant's conduct factors into his sentence in two separate ways.” United States v. Smith, 516 F.3d 473, 476 (6th Cir.2008) (internal quotation omitted). “We review de novo whether a district court impermissibly double counted in applying the sentencing guidelines.” United States v. Hill, 583 F.3d 1075, 1080 (8th Cir.2009).

“Double counting occurs when one part of the Guidelines is applied to increase a defendant's punishment on account of a kind of harm that has already been fully accounted for by application of another part of the Guidelines.” United States v. Hedger, 354 F.3d 792, 793 (8th Cir.2004) (quotation and internal quotation omitted). “Double counting may be allowed, however, where ‘(1) the Sentencing Commission intended the result and (2) each statutory section concerns conceptually separate notions relating to sentencing.’ ” Hill, 583 F.3d at 1080 (quoting Hedger, 354 F.3d at 794).

Applying the sophisticated-means enhancement on this fraud charge, along with an enhancement based upon Sethi's role in the offense that was “otherwise extensive,” concern conceptually separate notions relating to sentencing. Noted earlier, the sophisticated-means enhancement concerns the execution or concealment of an offense—the “how.” And, as explained by the Guidelines' application notes, “[i]n accessing whether an organization is ...