United States v. Valente

• Decision Date: 15 February 2019
• Docket Number: August Term, 2018,No. 17-2311-cr,17-2311-cr
• Parties: UNITED STATES of America, Appellee, v. Scott VALENTE, Defendant-Appellant.
• Court: U.S. Court of Appeals — Second Circuit

915 F.3d 916

UNITED STATES of America, Appellee,

v.Scott VALENTE, Defendant-Appellant.

No. 17-2311-cr

August Term, 2018

United States Court of Appeals, Second Circuit.

Argued: November 1, 2018

Decided: February 15, 2019

Steven D. Clymer (Richard D. Belliss, Assistant United States Attorneys, on the brief ), for Grant C. Jaquith, United States Attorney for the Northern District of New York, Syracuse, NY, for Appellee.

Molly Corbett (James P. Egan, on the brief ), for Lisa A. Peebles, Federal Public Defender for the Northern District of New York, Albany, NY, for Appellant.

Before: Raggi, Lynch and Droney, Circuit Judges.

Judge Lynch, Circuit Judge, concurs in a separate opinion.

Droney, Circuit Judge:

Scott Valente ("Valente") appeals from the district court’s amended judgment of conviction entered on July 21, 2017. He contends that his sentence was procedurally and substantively unreasonable and that the district court lacked authority to impose the amended restitution order on resentencing. We vacate a portion of the district court’s sentence of incarceration as procedurally unreasonable because of an incorrect criminal history finding, but we affirm the amended restitution order.

VALENTE’S GUILTY PLEA AND SENTENCE

On May 11, 2015, Valente pleaded guilty to a three-count information charging Securities Fraud in violation of 15 U.S.C. § 78j (Count 1), Mail Fraud in violation of 18 U.S.C. § 1341 (Count 2), and Obstructing and Impeding the Internal Revenue Laws in violation of 26 U.S.C. § 7212(a) (Count 3). On November 20, 2015, the United States District Court for the Northern District of New York (Sharpe, J. ) sentenced Valente to 240 months on each of the first two counts, and 36 months on Count 3, all to run concurrently, and to three years of supervised release. The district court also ordered Valente to pay restitution in the amount of $8,200,579.69. Judgment was entered the same day. Valente appealed, and this Court remanded to the district court to reconsider the assessment of certain criminal history points to Valente’s criminal history score. United States v. Valente , 688 F. App'x 76, 79–80 (2d Cir. 2017) (summary order). On July 20, 2017, the district court reconsidered its application of those points, applied them again, and resentenced Valente to the same terms of imprisonment and of supervised release as it had previously imposed. The district court also, over defense counsel’s objection, increased the prior restitution amount to $8,616,113.39. The amended judgment was entered on July 21, 2017, and a second amended judgment was entered on August 8, 2017.¹

THE UNDERLYING FRAUDS

This case arises out of frauds that Valente, a former registered investment broker, perpetrated on the clients of The ELIV Group, LLC ("ELIV"), an unregistered investment and consulting group that Valente owned and operated in Albany, New York. Valente established ELIV in 2010 after he was barred in 2009 from associating with Financial Industry Regulatory Authority ("FINRA") members, based on findings that he had made unauthorized trades for customers and provided false written account information to customers. To establish ELIV and open brokerage accounts on its behalf, Valente arranged for his wife to be the nominal owner of ELIV, even though she had never been registered as a broker or held any type of brokerage license. Valente was ELIV’s de facto owner, as well as its manager and sole employee.

Valente recruited investors for ELIV through hotel conferences, seminars, and references from existing clients, and he used investors’ funds to purchase various securities. Valente represented that, in exchange for managing these investments, he would be charging an annual 1% fee. When soliciting investors, Valente fraudulently stated that ELIV was an accredited investment and consulting firm. Valente also falsely stated on ELIV’s website that ELIV had achieved a five year average annual return of 34.5%, even though it had not been in business for five years and consistently lost money through speculative investments. After Valente obtained investments in ELIV, he continued to deceive investors by, inter alia , creating and mailing monthly performance statements that falsely reported gains in various accounts.

Valente further deceived potential investors by falsely representing that ELIV was an approved custodian for tax-deferred individual retirement accounts ("IRAs") and that ELIV could open new IRAs and create rollover IRA accounts. In reliance on these misrepresentations, approximately forty-eight of ELIV’s clients rolled over IRA or other retirement accounts to the purported ELIV IRAs. As a result, these clients lost their tax-deferred investments and exposed themselves to early withdrawal penalties. In addition, Valente issued to ELIV investors false financial account statements to make it appear as if ELIV was holding the investors’ retirement accounts as legitimate IRA accounts. Some of these altered statements were then sent to the Internal Revenue Service by accountants who believed that they were valid, creating potentially adverse tax implications for investors.

Valente also submitted fraudulent information to the Securities and Exchange Commission ("SEC") after it commenced an investigation of ELIV.

The SEC moved for a preliminary injunction against Valente and ELIV, which the United States District Court for the Southern District of New York granted in June 2014, ordering Valente and ELIV to cease operations and freezing their assets. The SEC’s analysis of ELIV’s financial records revealed that, between November 2010 and June 2014, Valente, through ELIV, had obtained approximately $10.5 million from more than 100 investors. The SEC investigation revealed that, as of the date of the asset freeze, ELIV had suffered significant losses, as ELIV’s investments were worth approximately $4.7 million less than what investors had provided in principal. It also revealed that these losses were not attributable solely to poor investment strategy, as Valente had appropriated approximately $2.2 million of the funds invested for personal expenses, which was well in excess of the 1% management fee that he had promised investors.

On May 11, 2015, Valente waived indictment and pleaded guilty in the Northern District of New York. He was sentenced on November 20, 2015, and resentenced on July 20, 2017, as mentioned above. This appeal revisits certain criminal history issues discussed in the initial appeal and addresses the amended restitution order.

APPLICATION OF THE SENTENCING GUIDELINES

At resentencing, the district court found that Valente’s adjusted offense level under the Sentencing Guidelines was 34, that he fell within Criminal History Category IV, based on eight criminal history points, and that the Guidelines imprisonment range was 210–262 months.

Valente’s criminal history includes multiple state convictions related to driving while intoxicated, including two Driving While Ability Impaired ("DWAI") infractions, a recidivist DWAI misdemeanor, a driving while intoxicated misdemeanor, and a misdemeanor for operating a motor vehicle without an ignition interlock device.²

On appeal, Valente first challenges the procedural reasonableness of the district court’s assignment of two particular criminal history points: one for his prior state misdemeanor conviction of failing to use a vehicle with an interlock device, and a second for being a recidivist DWAI offender. Valente had been given a sixty-day sentence of imprisonment in state court for the latter conviction. We consider the district court’s assignment of each point in turn.

Section 4A1.2(c) of the Sentencing Guidelines provides guidance for determining whether "prior sentences" are counted in an offender’s criminal history score. All felonies are counted. U.S.S.G. § 4A1.2(c). Certain prior misdemeanor convictions are not counted if they are listed under § 4A1.2(c)(1) or are similar to the listed offenses. But, an unlisted misdemeanor offense is counted if it is categorically more serious than a listed offense. United States v. Morales , 239 F.3d 113, 118 (2d Cir. 2000). In this context, "categorically more serious" does not mean that the unlisted offense is "within a category that is more serious than the [l]isted [o]ffenses" based solely on its underlying elements. Id. at 118 n.5. Rather, we "use[ ] the adverb [‘categorically’] in its ordinary sense to mean ‘without qualification or reservation.’ " Id. (quoting Webster’s Third New International Dictionary (1993) ("categorically") ). In determining whether an offense is categorically more serious than a listed offense,

the court should use a common sense approach that includes consideration of relevant factors such as (i) a comparison of punishments imposed for the listed and unlisted offenses, (ii) the perceived seriousness of the offense as indicated by the level of punishment; (iii) the elements of the offense, (iv) the level of culpability involved; and (v) the degree to which the commission of the offense indicates a likelihood of recurring criminal conduct.

U.S.S.G. § 4A1.2 cmt. n.12(A).³ The district court may also consider "any other factor the court reasonably finds relevant in comparing prior offenses and [l]isted [o]ffenses." United States v. Martinez-Santos , 184 F.3d 196, 206 (2d Cir. 1999). The misdemeanor interlock device offense is not listed in U.S.S.G. § 4A1.2(c)(1).

We review a district court’s interpretation of the Sentencing Guidelines de novo , but we examine its factual findings only for clear error. United States v. Potes-Castillo , 638 F.3d 106, 108–09 (2d Cir. 2011). When reviewing challenged U.S.S.G. § 4A1.2(c) rulings, this Court examines de novo the district court’s determinations based on an offender’s prior offense that "punishes only one basic form of conduct," Morales , 239 F.3d at 117–18, but, where "the inquiry will necessarily focus on the particular conduct of the defendant, we give due deference to a court...