UNITED STATES OF AMERICA, Plаintiff-Appellee, v. DANIEL SEXTON, Defendant-Appellant.
No. 17-5743
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
July 5, 2018
RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit I.O.P. 32.1(b). File Name: 18a0132p.06. Argued: May 1, 2018. Appeal from the United States District Court for the Eastern District of Kentucky at Lexington. No. 5:16-cr-00040-1—Danny C. Reeves, District Judge.
Before: MOORE, CLAY, and KETHLEDGE, Circuit Judges.
ARGUED: Michael M. Losavio, Louisville, Kentucky, for Appellant. Dmitriy Slavin, UNITED STATES ATTORNEY‘S OFFICE, Lexington, Kentucky, for Appellee. ON BRIEF: Michael M. Losavio, Louisville, Kentucky, for Appellant. Dmitriy Slavin, Charles P. Wisdom Jr., UNITED STATES ATTORNEY‘S OFFICE, Lexington, Kentucky, for Appellee.
CLAY, J., delivered the opinion of the court in which KETHLEDGE, J., joined, and MOORE, J., joined in part. MOORE, J. (pg. 17), delivered a separate opinion concurring in part and dissenting in part.
CLAY, Circuit Judge. Defendant Daniel Sexton (“Sexton“) appeals from the judgmеnt entered by the district court sentencing him to 109 months’ imprisonment, and ordering him to pay $2,637,058.32 in restitution and to forfeit property to the government, including a money judgment of $2,534,912. For the reasons set forth below, we AFFIRM the decision of the district court.
BACKGROUND
I. Factual History
Sexton operated a number of businesses in Kentucky. Jonathan Williams (“Williams“) was a certified public accountant (“CPA“) who acted as manager or co-owner of Sexton‘s companies. Sheila Flynn (“Flynn“) was the office manager. Between May 2006 and September 2010, Sexton and his co-conspirators secured loans for the businesses from banks by making misrepresentations about the businesses’ assets and the identity of the true borrowers. For example, Sexton owned three mobile home parks, and Sexton and Williams submitted financial records to banks and other lenders valuing the parks significantly higher than their actual value. Sexton and Williams also submitted to banks financial records falsely valuing a jet, and false and unfiled tax returns containing inflated adjusted gross income amounts. In addition, they arranged for straw purchases of condominiums that Sexton owned that were in foreclosure proceedings.
The banks who issued the loans included PBI Bank, Community Trust Bank, Farmers National Bank, Forcht Bank, and Central Bank. The total amount of funds disbursed from thеse banks was $8,160,400. Sexton and Williams also submitted applications for higher loan amounts ($13,600,000 and $13,800,000) toward the end of the time period involved, but those loan funds were never disbursed.
On May 5, 2016, Sexton, along with Williams, Flynn, and Joseph Tobin (“Tobin“), a bank loan officer at PBI Bank, was charged in a twenty-four count indictment. Count 1 alleged conspiracy to commit bank fraud in violation of
On February 3, 2017, Sexton pleaded guilty to Count 1 pursuant to a plea agreement. At sentencing, the government moved to dismiss Counts 2-24. On March 28, 2017, a Presentence Investigation Report (“PSR“) was prepared for Sexton. Relevant to this appeal, the PSR gave Sexton a four-level increase for being an organizer or leader under USSG § 3B1.1(a). The PSR also gave Sexton one criminal history point pursuant to USSG §§ 4A1.1(c), 4A1.2(m), and 4A1.2(f) for a 2005 California sentence for willful infliction of corporal injury to which Sexton pleaded nolo contendere. Finally, the PSR gave Sexton another two criminal history points pursuant to USSG § 4A1.1(d) for committing the instant offense while on probation for the California sentence. Sexton‘s guideline imprisonment range was 97-121 months. Sexton objected to both the organizer/leader adjustment and his criminal history calculation.
Sexton was sentenced on June 19, 2017. At sentencing, the district court overruled Sexton‘s objections to the organizer/leader enhancement and to the criminal history score. The district court applied the leader enhancement, finding that there were more than five participants, that Sexton exercised responsibility, leadership, or organizational responsibility over Flynn, that the conspiracy was otherwise extensive, and that Sexton was entitled to a large share of the fruits of the crime. The court also assessed three criminal-history points finding that the California case representеd a prior sentence and that Sexton committed the instant offense while still serving that sentence. The court sentenced Sexton to 109 months in prison.
On June 27, 2017, Sexton timely filed his notice of appeal. He argues on appeal that the district court incorrectly increased his criminal history score three points based on the California sentence, that the district court incorrectly applied the organizer/leader enhancement, that
DISCUSSION
I. Criminal History Score
Standard of Review
“In reviewing a district court‘s application of the Sentencing Guidelines, this Court will ‘accept the findings of fact of the district court unless they are clearly erroneous and [will] give due deference to the district court‘s application of the Guidelines to the facts.‘” United States v. Moon, 513 F.3d 527, 539-40 (6th Cir. 2008) (quoting United States v. Williams, 355 F.3d 893, 897-98 (6th Cir. 2003)). “We review a district court‘s legal conclusions regarding the Sentencing Guidelines de novo.” Id. at 540 (citing United States v. Latouf, 132 F.3d 320, 331 (6th Cir. 1997)). “We review de novo a district court‘s criminal history calculation.” United States v. Paseur, 148 F. App‘x 404, 408 (6th Cir. 2005) (citing United States v. Wheeler, 330 F.3d 407, 411 (6th Cir. 2003)).
Analysis
A defendant‘s criminal history category is determined by looking at USSG §§ 4A1.1 and 4A1.2. A district court assigns zero to three criminal history points for each of a defendant‘s prior sentences. USSG § 4A1.1. A prior sentence is “any sentence previously imposed upon adjudication of guilt, whether by guilty plea, trial, or plea of nolo contendere, for conduct not part of the instant offense.” USSG § 4A1.2(a)(1). If the prior sentence was not a “sentence of imprisonment,” the district court adds one point. USSG § 4A1.1(c). After assigning points for each of the prior sentences, the district court must determine whether the present offense was committed “while under any criminal justice sentence, including probation, parole, supervised release, imprisonment, work release, or escape status.” USSG § 4A1.1(d). If so, the court must add two points. Id.
On September 19, 2005, Sexton pleadеd nolo contendere to willful infliction of corporal injury in the Los Angeles Superior Court of California. The court found Defendant guilty. The
The district correctly assessed one criminal history point for this prior California sentence under USSG § 4A1.1(c). Though Sexton was not sentenced to prison, he was placed on probation by the California court, which is treated as a sentence under §4A1.1(c). USSG § 4A1.2 cmt. n.2. That Sexton was eventually permitted to withdraw his plea makes no difference. A “diversionary disposition resulting from a finding or admission of guilt, or a plea of nolo contendere, in a judicial proceeding is counted as a sentence under § 4A1.1(c) even if a conviction is not formally entered.” USSG § 4A1.2(f). This rule “reflects a policy that defendants who receive the benefit of a rehabilitative sentence and continue to commit crimes should not be treated with further leniency.” USSG § 4A1.2 cmt. n.9. The arrаngement provided by the California court fits within the definition of a diversionary disposition under § 4A1.2(f). Sexton‘s sentence was not otherwise reversed, vacated, invalidated, or expunged. See id. § 4A1.2 cmt. n.6, 10.
The district also correctly assessed two criminal history points under USSG § 4A1.1(d). Sexton became involved in the instant conspiracy beginning in 2006, which was while he was still on probation for this prior California sentence.
Because the district court did not err in its criminal history analysis, we affirm the district court‘s criminal history calculation.
II. Leadership Adjustment
Standard of Review
“We review the district court‘s ‘legal conclusion that a person is an organizer or leader under [§] 3B1.1’ deferentially, and its factual findings for clear error.” United States v. House, 872 F.3d 748, 751 (6th Cir. 2017) (quoting United States v. Olive, 804 F.3d 747, 759 (6th Cir. 2015)). “Under the clear-error standard, we abide by the court‘s findings of fact unless the
Analysis
Section 3B1.1(a) of the Sentencing Guidelines mandates a four-point offense-level increase “[i]f the defendant was an organizer or leader of a criminal activity that involved five or more participants or was otherwise extensive.” To decide whether a defendant was an “organizer or leader,” the Guidelines direct courts to consider a number of factors, including “the exercise of decision making authority, thе nature of participation in the commission of the offense, the recruitment of accomplices, the claimed right to a larger share of the fruits of the crime, the degree of participation in planning or organizing the offense, the nature and scope of the illegal activity, and the degree of control and authority exercised over others.” USSG § 3B1.1 cmt. n 4. “A district court need not find each factor in order to warrant an enhancement.” United States v. Castilla-Lugo, 699 F.3d 454, 460 (6th Cir. 2012) (citing United States v. Gates, 461 F.3d 703, 709 (6th Cir. 2006)). “There can . be more than one person who qualifies as a leader or organizer of a criminal association or conspiracy.” USSG § 3B1.1 cmt. n.4.
However, “[t]o qualify for an adjustment under this section, the defendant must have been the organizer, leader, manager, or supervisor of one or more other participants.” USSG § 3B1.1 cmt. n.2. If a defendant did not organize, lead, manage, or supervise another participant, an upward departure may be warranted if the defendant “nevertheless exercised management responsibility over the property, assets, or activities of a criminal organization.” Id. This means the enhancement can be applied “where a defendant has ‘exerted control over at least one individual within a criminal organization,’ but not where the defendant has ‘merely exercised control over the property, assets or activities of the enterprise.‘” United States v. Swanberg, 370 F.3d 622, 629 (6th Cir. 2004) (quoting United States v. Gort-DiDonato, 109 F.3d 318, 321 (6th Cir. 1997)).
Sexton does not argue that the district court erred in finding the five participant requirement to have been satisfied and does not address the district court‘s finding that the criminal activity was otherwise extensive. Accordingly, we do not consider those issues, and instead address only whether the district court erred in concluding that Sexton was an organizer or leader of the conspiracy. See McPherson v. Kelsey, 125 F.3d 989, 995-96 (6th Cir. 1997).
The district court reasonably found that Sexton exerted control over a single individual within the criminal organization, Sheila Flynn. At sentencing, Flynn testified that she worked for one of Sexton‘s companies and that Sexton was her boss. Flynn testified that she prepared false documents while working at Sexton‘s company and under Sexton‘s direction, including false bank statements, false rent rolls, and a false airline appraisal. She testified that after preparing those documents, she gave them to either Williams or Sexton. She testified that the documents were then submitted to banks or loan comрanies. Flynn also testified that Sexton fired her in October 2005. At that time, Sexton received a foreclosure notice on his properties, decided to go to California, and took $25,000 in cash with him. In response, and while Sexton was gone, Williams and Flynn tried to seize control of the company. When Sexton returned from California, he fired Williams and Flynn and retook control of the company. He later rehired both Williams and Flynn. In light of this evidence, the district court reasonably found that that Sexton “exerted control over at least one individual within [the] criminal organization.” Swanberg, 370 F.3d at 629.
Sexton did not merely exercise authority over one pаrticipant. Turning to the other factors, the district court also reasonably found that Sexton had a right to a larger share of the fruits of the crime. For instance, Flynn testified that some of the money from the loans “went back into the property, but a majority of it was diverted to a house in the Bahamas and a house in Indiana.” (R. 262, Sentencing Tr., PageID # 1077.) She testified that the house in the Bahamas belonged to Sexton, and the house in Indiana belonged to Sexton‘s girlfriend. Flynn also testified that the money for Sexton‘s trips to California came from the rents that the company
A third factor, the nature of participation in the commission of the offense, also supports the district court‘s conclusion. Sexton owned and operated a number of businesses involved in the scheme. His companies’ assets were used to secure the loans, and his employees were used to carry out the fraudulent activities. The companies were the vehicle through which the bank fraud was accomplished. And Sexton was not a mere owner or operator of the businesses. Sexton knew of the role his businesses and employees played in thе scheme, allowed the scheme to continue, participated in the scheme,1 and benefitted from the scheme both personally and as owner and operator of those businesses. See United States v. Lewis, 21 F. App‘x 320, 322 (6th Cir. 2001).
In all, three of the factors laid out by the Guidelines cut in favor of finding Sexton was a leader of the criminal activity. That Williams may have qualified as a leader during the same period of time does not preclude Sexton from also occupying a leadership or organizational role. USSG § 3B1.1 cmt. n.4; United States v. Sadler, 750 F.3d 585, 594 (6th Cir. 2014). That Williams may have been the actual brains behind the operation also does not preclude Sexton from bеing a leader when there is sufficient other evidence of Sexton‘s leadership role. United States v. Burley, 241 F. App‘x 290, 296-97 (6th Cir. 2007).
Sexton was the owner and operator of companies that were used to perpetrate bank fraud. He opened up his businesses to carry out the fraudulent enterprise. He bankrolled the operation and provided the infrastructure for the conspiracy by allowing his assets and employees to be used to accomplish the fraud. He knew of the fraud, took actions to assist in the fraud, personally and professionally benefitted from the fraud, and at the very least implicitly approved of the fraud. Sеxton also exerted control over at least one member of the conspiracy. Because
Accordingly, we affirm the district court‘s application of the enhancement.
III. Substantive Reasonableness
Standard of Review
This Court reviews sentencing decisions deferentially for abuse of discretion. Gall v. United States, 552 U.S. 38, 41 (2007).
Analysis
This Court reviews a sentence for reasonableness. United States v. Payton, 754 F.3d 375, 377 (6th Cir. 2014). “This review has two components: procedural reasonаbleness and substantive reasonableness.” United States v. Solano-Rosales, 781 F.3d 345, 351 (6th Cir. 2015).
A district court commits a procedural error by “failing to calculate (or improperly calculating) the Guidelines range, treating the Guidelines as mandatory, failing to consider the
To be substantively reasonable, the sentence “must be proportionate to the seriousness of the circumstances of the offense and offender, and sufficient but not greater than necessary, to comply with the purposes of
The district court sentenced Sexton to the middle of the Guidelines range after explicitly mentioning and reviewing a number of
Sexton‘s main challenge is to the district court‘s weighing of those factors, specifically failing to give enough weight to his “minor and overstated criminal history, a family, personal remorse and acceptance of responsibility.”2 (Sexton Br. at 48.) However, “the manner in which a district court chooses to balance the applicable sentencing factors is beyond the scope of the Cоurt‘s review.” United States v. Adkins, 729 F.3d 559, 571 (6th Cir. 2013) (citing United States v. Sexton, 512 F.3d 326, 332 (6th Cir. 2008); United States v. Ely, 468 F.3d 399, 404 (6th Cir. 2006)). And “[w]here a district court explicitly or implicitly considers and weighs all pertinent factors, a defendant clearly bears a much greater burden in arguing that the court has given an unreasonable amount of weight to any particular one.” Id. (quoting United States v. Thomas, 437 F. App‘x. 456, 458 (6th Cir. 2011)). The district court did consider all of the factors mentioned by Sexton and found that many of them weighed against giving him a lower sentence. For instance, the court considered Sexton‘s criminal history and decided that it, as well as his multiple pre-sentence bond violations relating to cocaine use, weighed in favor of the Guidelines sentence provided. Further, the district court сonsidered recalculating the Guidelines range to remove the acceptance of responsibility credit because Sexton was “pointing the finger at everybody else.” (R. 262, Sentencing Tr., PageID # 1133-34.)
IV. Forfeiture
Standard of Review
“We review the interpretation of federal forfeiture laws de novo.” United States v. Hampton, 732 F.3d 687, 690 (6th Cir. 2013). “However, as [Sexton] concedes, because [he] failed to object to entry of the forfeiture money judgment on any grounds, our review is for plain error.” Id. “Plain error requires that the defendant show error that is plain and that ‘affects substantial rights’ and, if shown, also that the ‘error seriously affects the fairness, integrity, or public reputation of the judicial proceedings.‘” Id. (citing Johnson v. United States, 520 U.S. 461, 461-62 (1997)).
Analysis
The civil forfeiture statute,
Sexton pleaded guilty to conspiracy to commit bank fraud in violation of
In Honeycutt, the Supreme Court examined
Since Honeycutt was decided, two other circuits have determined that its reasoning also applies to forfeiture under
Standard of Review
“We review the propriety of a restitution order de novo.” United States v. Church, 731 F.3d 530, 535 (6th Cir. 2013) (citing Johnson, 440 F.3d at 849). “Because federal courts have no inherent power to award restitution, ‘restitution orders are proper “only when and to the extent authorized by statute.“‘” Id. (quoting United States v. Evers, 669 F.3d 645, 655-656 (6th Cir. 2012)). Because Sexton did not object to the amount of restitution, this Court reviews for plain error. United States v. Koeberlein, 161 F.3d 946, 951 (6th Cir. 1998).
Analysis
Under the Mandatory Victim Restitution Act (“MVRA“), “a district court must order restitution from a defendant convicted ‘of an offense against property . . . including any offense committed by fraud or deceit’ if an identifiable victim has suffered a loss.” United States v. Gale, 468 F.3d 929, 941 (6th Cir. 2006) (citing
In the plea agreement, the parties agreed to recommend a restitution amount of $2,534,912. The parties reserved the right to “object or argue in favor of other calculations.” (R. 154, Plea Agreement, PageID # 441.) The PSR, which was prepared after the plea agreement was entered into, calculated a restitution amount of $2,637,058.32. The district court ordered restitution in the amount of $2,637,058.32. The court explained that the number contained in the рlea agreement was lower than the number contained in the PSR because one of the financial institutions was not able to sell some of the collateral for as much as it had originally agreed upon. The court noted that it was a joint and several obligation with Williams for the same amount, and with Flynn up to $1,467,674.
Sexton‘s remaining argument disputes a specific portion of the PSR‘s loss calculation—about $50,000 in losses claimed by Forcht Bank. More specifically, Forcht Bank provided a supplemental declaration of victim losses, which included amounts for accrued interest, late fees, legal fees, property taxes, force place insurance, and appraisal fees.
Sexton argues that “[t]he restitution statute does not provide” for these items to be included in a restitution order. (Sexton Br. at 38-39.) Where an “offense does not involve damage to or loss or destruction of property . . . the MVRA ‘requires only that the restitution ordered by the district court be based on losses caused by the specific conduct that is the basis for the offense of conviction.‘” United States v. Elson, 577 F.3d 713, 726 (6th Cir. 2009) (quoting United States v. Akbani, 151 F.3d 774, 780 (8th Cir. 1998)). Under
Forcht Bank‘s declaration included $12,554.14 in legal fees that it accrued, but it is not clear that Forcht Bank accrued those fees within the limits that the Supreme Court set in Lagos. The record does not contain any information as to whether Forcht Bank paid those fees as part of the government‘s investigation and criminal proceedings. Because it is not clear to us how these fees were accrued, it is hard to say that the district court committed any error. To the extent Sexton‘s argument challenges the district court‘s findings as to the amount of loss, this Court has previously held that “a district court is required to make adequate factual findings in calculating the loss amount when there is a ‘disputed portion of the presentence report or other controverted matter.‘” United States v. McGlown, 380 F. App‘x 487, 491 (6th Cir. 2010) (quoting United States v. Darwich, 337 F.3d 645, 666 (6th Cir. 2003)). However, because Sexton did not dispute the restitution amount, the district court was not required to make more specific factual findings, and because the district court was not required to make more sрecific factual findings, it did not plainly err as a result of failing to make such findings.
As to the remaining figures in Forcht Bank‘s declaration, Sexton provides no evidence that the losses were unrelated to the conspiracy. And Sexton cites a number of cases from both inside and outside this Circuit where courts have properly included similar fees in a restitution order. See, e.g., United States v. Robers, 698 F.3d 937, 955 (7th Cir. 2012) (permitting the inclusion in the restitution award of line-item expenses like property taxes, insurance, and accrued interest). We do not think that Sexton has shown an error that is “obvious or clear.” Koeberlein, 161 F.3d at 949.
CONCLUSION
For the reasons set forth above, we AFFIRM the decision of the district court.
KAREN NELSON MOORE, Circuit Judge, concurring in part and dissenting in part. I join the majority opinion except for the portion concluding that the Supreme Court‘s recent decision in Lagos v. United States, 138 S. Ct. 1684, 1687 (2018), does not require us to vacate the portion of the restitution award for Forcht Bank‘s legal fees. According to the majority, the district court did not plainly err because the parties, while at the district court, did not dispute Forcht Bank‘s $12,554.14 in legal fees.
“The general rule, however, is that an appellate court must apply the law in effect at the time it renders its decision.” Thorpe v. Hous. Auth. of City of Durham, 393 U.S. 268, 281 (1969). A related concept is that a district court‘s initially correct determination can become wrong because of a change in law, and this scenario mandates that an appellate court conclude that the district court plainly erred. Henderson v. United States, 568 U.S. 266, 279 (2013); see also Johnson v. United States, 520 U.S. 461, 468 (1997).
In Sexton‘s case, although the district court‘s award of restitution for Forcht Bank‘s legal fees might have been correct before Lagos, nonetheless after the Supreme Court‘s decision, restitution must be tied to a government investigation or to a criminal proceeding. Lagos, 138 S. Ct. at 1687. Because the government has “[t]he burden of demonstrating the amount of the loss sustained by a victim as a result of the offense” under
In light of the new import of Lagos, I would remand to permit the government to attempt to meet its burden of proof regarding the restitution to Forcht Bank of its $12,554.14. Otherwise, I conсur in full in the majority opinion.