Second Circuit: Abuse Of Trust Enhancement Can Be Based On Relevant Conduct

United States v. Friedberg, Docket No. 08-3763-cr (2d Cir. March 2, 2009) (found here)

Friedberg plead guilty to five counts of tax evasion for not having reported $562,000 that he embezzled from the Independent Order of Odd Fellows, for which he served as Grand Secretary.  At sentencing, the court imposed a two level enhancement for "abuse of position of trust."  On appeal, Friedberg conceded that he abused a position of trust with respect to the Odd Fellows by virtue of his embezzlement.  But he argued that that abuse could not support a sentencing enhancement because he did not occupy a position of trust with respect to the government, which was the primary victim of his tax evasion.

Writing for the Second Circuit, Judge Preska (sitting by designation) noted the commentary for the abuse of trust enhancement, which states that a court must consider the defendant's role in the offense based on relevant conduct, and relevant conduct is not limited to the "elements and acts cited in the count."  The Second Circuit then noted a split in the circuits over the question of whether uncharged embezzlement is relevant conduct for purposes of the abuse of trust enhancement.  Ultimately, it sided with those circuits holding that it could be considered.  More specifically, Judge Preska wrote that:

Friedberg's evasion was part of a larger scheme to embezzle funds and hide the income.  He effectuated the scheme by abusing his position as Grand Secretary of Odd Fellows and shielding the illicit income from the government.  The embezzlement accomplished in this manner was part and parcel of the crime of conviction insofar as it provided Friedberg with the funds he failed to report and tended to conceal the criminal activity.  As such, it was undoubtedly relevant conduct. 

. . . .

We hold that where, as here, a defendant's tax evasion was part of a larger scheme constituting relevant conduct, an integral part of which involved abusing a position of trust, the sentencing court may properly apply an enhancement under U.S.S.G §3B1.3.

Retired Justice O'Connor Sits In The Second Circuit

United States v. Sirotina, et al., No. 04-2987-cr(L) (2d Cir. Nov. 21, 2006)

This decision is of interest because the Honorable Sandra Day O'Connor, Asssociate Justice Retired of the Supreme Court of the United States, sat by designation. 

The primary sentencing issue addressed was the question of whether one who manages a fraudulent enterprise but who had no direct contact with the victims of that fraudulent enterprise (in this case a financial fraud) can have abused the victim's trust, exposing the defendant to an enhancement for abuse of a position of trust pursuant to U.S.S.G. 3B1.3.  The Second Circuit found that the district court properly applied the abuse of a position of trust enhancement because the defendant at issue "perpetrated the appearance of legitimacy of a company which was designed [] precisely to induce the trust of its victims."  In light of the commentary to U.S.S.G. 3B1.3 -- which largely indicates that the abuse of a position of trust must arise from actual contact with or an actual relationship between the defendant and the victim -- the Second Circuit's conclusion is somewhat questionable.  Indeed, the Second Circuit itself seemingly recognized this disctinction because Sirotina addressed abuse of position of trust challenges brought not only by a defendant who had no direct victim contact but also by a defendant who "had direct contact with victims at a client lunch used to conceal a broker's identity."

Does Sirotina improperly expand the scope of the abuse of position of trust enhancement?  Let us know your thoughts.

Abuse Of Position Of Trust Enhancement Primer And A Potentially Overly Expansive View Of That Enhancement By The Second Circuit

United States v. Thorn, 446 F.3d 378 (2d Cir. 2006)

Section 3B1.1 of the Guidelines provides for a two-level enhancement for "Abuse of Position of Trust or Use of Special Skill."  Specifically, that section provides that if "the defendant abused a position of public or private trust, or used a special skill, in a manner that significantly facilitated the commission or concealment of the offense, increase [the offense level] by 2 levels."  This enhancement therefore involves a two-prong analysis:

(1) Did the defendant abuse a position of public or private trust OR use a special skill?

(2) Did the defendant abuse that position of public or private trust OR use that special skill in a manner that significantly facilitated the commission OR concealment of the offense? 

The enhancement can only apply when both questions are answered affirmatively.  Thorn is essentially a case in which the Second Circuit found that the district court failed to ask both questions.  As a result, the Second Circuit remanded the case for resentencing with a specific instruction that the district court impose a two-level enhancement pursuant to Section 3B1.3.

More specifically, Thorn was hired one Terry Pandolfi (a homeowner and mother of two young children) to undertake an asbestos abatement project in her basement.  Thorn told Pandolfi the steps he would take to properly remove the asbestos, and assured Pandolfi "that the asbestos was going to be properly removed; it would be removed and all the work performed when [the] children and [Pandolfi] were out of the house; that the work would be completely done and [Pandolfi] would have absolutely no exposure to any asbestos as a result of any of the work performed."  Thorn also specifically assured Pandolfi that his would work would comply with the laws and regulations associated with asbestos abatement.

Surprise, surprise.  Thorn's work was undertaken without proper containment and clean up, in violation of the Clean Air Act.  At his initial sentencing, the district court declined to apply a two-level enhancement pursuant to Section 3B1.3 of the Guidelines.  The district court, however, did not rule out the possibility that Thorn could have occupied a position of trust because his clients (like Pandolfi) deferred to him because of his skill rather than as a result of a special relationship of trust and confidence.  On initial appeal, the Second Circuit remanded with a specific direction that the district court consider the degree of discretion accorded to Thorn by his clients, stating "we remand this issue to the District Court for specific findings consistent with this opinion, including whether any customers entrusted Thorn with discretion to complete the asbestos projects without supervision and without relying on the independent laboratory test results to confirm compliance with state and federal regulations.  If the District Court were to find that one or more clients did grant such discretion and that this discretion put Thorn in a position of trust under 3B1.3, the District Court would then need to make a specific finding whether Thorn used such a position of trust in a manner that significantly facilitated the commission of concealment of the offense."

On remand, the district court found that Pandolfi had provided Thorn with "absolute discretion" in completing the asbestos abatement project at her home and that she paid him without obtaining an independent laboratory test because of his statements to her and the resulting trust that she placed in him.  The district court thus found that Thorn was arguably in a position of trust, but did not apply the Section 3B1.3 enhancement because "it does not necessarily follow that [Thorn] used his position of trust in the manner that significantly facilitated the commission or concealment of the offense.  Defendant did not appear to try to conceal his shoddy work . . . ."

On appeal once again, the Second Circuit criticized the district court for not asking the right questions.  Specifically, the Second Circuit found that the district court had properly considered whether or not Thorn was in a position of trust vis-a-vis Pandolfi and had properly considered the question of whether or not Thorn used that positon of trust to try to conceal his offense.  According to the Second Circuit, however, the district court had not asked whether or not Thorn used his position of trust to commit (as opposed to conceal) his offense.  And, rather than remand for re-sentencing a second time, the Second Circuit just stepped in and made that finding for the district court.  Specifically, the Second Circuit found that the "finding that defendant used his special skills to get hired and secure 'absolute discretion' in doing the job is sufficient as a matter of law to establish that Thorn used his special skill to facilitate the crime."  Thus, the Second Circuit remanded the case to the district court and instructed the district court to impose a two-level enhancement pursuant to Section 3B1.3 of the Guidelines.

Thorn is troubling for (at least) three reasons.  First, it seems that the district court did, in fact, answer the question that the Second Circuit said that it had not.  Specifically, the district court found that "it does not follow" from a finding that Thorn was in a position of trust that he "used his position of trust in the manner that significantly facilitated the commission or concealment of the offense."  That the district expanded further on the "concealment" prong of this analysis does not mean that the district court did not also consider the "commission" prong.  Indeed, the foregoing quotation indicates that the district court had, in fact, considered whether or not Thorn used his position of trust in a manner that significantly facilitated the commission or concealment of the offense.  Second and even if the district court had not answered the question that the Second Circuit says that it did not answer, the district court is the proper place for consideration of that question.  Thus, the Second Circuit properly should have remanded this case for re-sentencing rather than stepping in and answering a question that the district court properly should have answered (and was in a better position to answer).  Finally, the Application Notes to Section 3B1.1 provide examples of persons who abuse a position of public or private trust, such as: (1) an attorney who embezzles client funds for which he/she is acting as guardian; (2) a bank executive's fraudulent loan scheme; and (3) the criminal sexual abuse of a patient by a physician under the guise of examination.  While the Application Notes surely were not intended to restrict application of Section 3B1.3 to legal, financial and medical professionals, all such examples do involve circumstances wherein the actor comes to the situation with certain credentials that objectively result in/create the position of trust that they occupy -- unlike an individual engaged in the business of asbestos abatement.  The Second Circuit may therefore have taken a too expansive view of what type of person can occupy a position of public or private trust.

Is It Double Counting To Enhance A Guidelines Calculation For Abuse Of Public Trust And Acting While A Public Figure?

United States v. Giordano, No. 03-1394, 2006 WL 522236 (2d Cir. March 3, 2006)

No.

Giordano argued that the enhancement under U.S.S.G. 3B1.3 for abuse of public trust and the offense characteristic enhancement under U.S.S.G. 2H1.1(b) for acting while a public official represent impermissible double counting.  The Second Circuit disagreed because double counting "is permissible in calculating a Guidelines sentence where . . . each of the multiple Guidelines sections applicable to a single act serves a distinct purpose or represents a discrete harm."  Here, the Second Circuit found that the enhancement for abuse of public trust "reflects the increased culpability of persons who take undue advantage of a position of trust and discretion (which may be public or private) to commit crimes with a greater chance of impunity."  By contrast, the offense characteristic enhancement under U.S.S.G. 2H1.1(b) for acting while a public official "vindicates a distinct interest, namely the compelling public interest in deterring and adequately punishing those who violate civil rights under color of law, and does not preclude separate enhancements intending to capture a victim's increased vulnerability to [the] defendant's illegal conduct."  Thus, the Second Circuit found no impermissible double counting.

Abuse of Position of Trust

United States v. Adams, No. 03 CR 1368 (ARR), 2006 WL 229904 (E.D.N.Y. Jan. 31, 2006)

In Adams, the Government sought a two-level enhancement for abuse of position of trust under U.S.S.G. 3B1.3 for defendants who were employed by various private companies affiliated with JFK Airport, who had security clearances for restricted areas of the airport, and who had participated in various schemes to import narcotics.  The court rejected that claimed enhancement.

Adams is not all that factually important for its findings concerning airport security guards.  It is, however, important for the court's in-depth analysis of the position being analyzed.  It is also worth studying because it does a nice job of setting forth the standard for determining whether or not a position of trust has been abused:

"[T]he court must undertake a two-prong analysis to find that the 'position of trust' enhancement is warranted.  First, the court must determine that the defendant occupied a position of trust.  Whether the defendant occupied a position of trust must be viewed from the perspective of the victim.  The primary inquiry to determine whether a person is in a position of trust is the extent to which the position provides the freedom to commit a difficult-to-detect wrong.  The Second Circuit has repeatedly emphasized that this standard requires that the defendant's position must involve discretionary authority . . . [and that] this discretion must have been entrusted to the defendant by the victim.  Second, the court must find that the defendant violated that trust in a way that significantly contributed to the crime at issue.  The government must meet its burden of proving satisfaction of both prongs by a preponderence of the evidence."