UNITED STATES OF AMERICA v. JONATHAN KIRSCHNER, a/k/a Jonathan Kratcher, Appellant
No. 20-1304
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
Argued January 26, 2021; Filed April 22, 2021
PRECEDENTIAL; On Appeal from the United States District Court for the District of New Jersey (District Court No. 1:18-cr-00360-001); District Judge: Honorable Robert B. Kugler
Mark E. Coyne
Office of United States Attorney
970 Broad Street, Room 700
Newark, NJ 07102
Molly S. Lorber [ARGUED]
Office of United States Attorney
Camden Federal Building & Courthouse
401 Market Street
Camden, NJ 08101
Counsel for Appellee
Justin T. Loughry [ARGUED]
Loughry & Lindsay
330 Market Street
Camden, NJ 08102
Counsel for Appellant
RESTREPO, Circuit Judge.
In 2018, Jonathan Kirschner pleaded guilty to one count of impersonating an officer acting under the authority of the United States and one count of importing counterfeit coins and bars with intent to defraud. At sentencing, the District Court applied to Kirschner‘s sentence three enhancements pursuant to the U.S. Sentencing Guidelines—a 2-level enhancement because Kirschner‘s fraud used sophisticated means; another 2-level enhancement because Kirschner abused a position of public trust to facilitate his crimes; and a 22-level enhancement because the “loss” attributable to his scheme was greater than $25 million but less than $65 million, even though it grossed only about one one-thousandth of that.
Kirschner appeals the District Court‘s judgment of sentence and challenges the three enhancements it applied. For the reasons that follow, we will vacate Kirschner‘s sentence and remand for resentencing. While the District Court was well within its discretion to apply the abuse-of-trust and use-of-sophisticated-means enhancements, we conclude it clearly erred in applying the 22-level enhancement for loss, and we cannot say that the error was harmless.
I. BACKGROUND
In 2017, Jonathan Kirschner earned $30,105 by importing counterfeit coins and bullion and then, posing as a federal law enforcement agent, selling them as genuine articles to unsuspecting customers. Eventually, several customers discovered the coins or bullion they bought were fakes and alerted federal authorities—the real federal authorities. Pretending to be prospective buyers, federal agents set up a sting and snared Kirschner. Searching his home and interdicting packages destined for him, agents discovered and seized thousands of counterfeit coins and bullion that, according to the government‘s expert, would have been worth approximately
Kirschner subsequently pleaded guilty to one count of impersonating a federal agent, in violation of
Prior to sentencing, a Presentence Investigation Report (“PSR“) was prepared, employing the Guidelines. The PSR calculated Kirschner‘s base offense level to be 6, and included a 22-level enhancement for loss and two 2-level enhancements for use of sophisticated means and abuse of trust. It also included a separate 2-level enhancement because Kirschner‘s crime involved ten or more victims. According to the PSR, then, Kirschner‘s total offense level was 34. Because of prior offenses, Kirschner had a criminal history category of III. Thus, the PSR calculated a Guidelines range of 188 to 235 months.
In their sentencing memoranda, the parties tracked the contours of their plea agreement. Both agreed that Kirschner‘s base offense level was 6 and that he should receive a 3-level reduction for acceptance of responsibility. They further agreed that Kirschner was due no further enhancement for the number of victims, the use of sophisticated means, or the abuse of a position of trust.
And they continued to disagree over the amount of loss attributable to Kirschner‘s scheme. Kirschner argued that he intended to cause losses of only about $1.2 million, warranting a 14-level enhancement and a total offense level of 17 (base offense level of 6 plus 14 for loss less 3 for acceptance of responsibility). The government, by contrast, argued that he intended to cause losses of approximately $36 million, equaling a 22-level enhancement and a total offense level of 25 (base offense level of 6 plus 22 for loss less 3 for acceptance of responsibility).
At sentencing, the District Court adopted the PSR‘s recommendations in part. It adopted the base level offense, and the enhancements for loss, use of sophisticated means, and abuse of trust. The District Court also granted Kirschner a 3-level decrease for acceptance of responsibility, resulting in a total offense level of 29. With his criminal history category of III, Kirschner‘s Guidelines range was 108 to 135 months. The District Court sentenced Kirschner to 126 months’ imprisonment, and this appeal followed.
II. DISCUSSION
The District Court had jurisdiction under
A. The District Court‘s increase of Kirschner‘s offense level for intended loss was clear error
Kirschner first argues that the District Court clearly erred in applying a 22-level enhancement for intended loss. We agree. The applicable advisory Guidelines provision is
There is no question that the actual losses Kirschner inflicted on his victims were far less than the losses he intended to cause. Compare App. 259-62 (invoices revealing actual losses of approximately $30,000), and Dist. Ct. Dkt. 72 (district court ordering $14,600 in restitution to identified victims), with App. 236-37 (government estimating intended losses of approximately $36 million), and App. 190, 271-72 (Kirschner estimating intended losses of $1.2 million). But the parties vociferously dispute what unrealized losses he intended.
Before the District Court, the government argued that Kirschner intended to cause losses of approximately $36 million and so merited a 22-level offense level increase. The government‘s $36 million calculation involved these steps. To begin, relying on a numismatic expert, the government estimated and summed the fair market value of the genuine version of each counterfeit seized from Kirschner, and concluded that the total fair market value of all seized counterfeits was approximately $46.5 million. Next, the government analyzed invoices documenting Kirschner‘s successful sales and determined that Kirschner historically had been able to sell his counterfeits at about 77 percent of the estimated fair market value of the counterfeits’ genuine counterparts. Finally, the government multiplied the total market value of the genuine versions of wares seized from Kirschner ($46.5 million) by Kirschner‘s historic yield (77 percent) to arrive at an intended loss of approximately $36 million. Id. Roughly algebraically, the government‘s intended-loss methodology was as follows:
Estimating the fair market value of the genuine versions of these counterfeits appears to have been straightforward. The market for common collector coins is robust, so to estimate the price their genuine counterparts could fetch on an open market, the government‘s expert reviewed auction sales and sales reported in a popular trade publication. And valuing the bullion was simpler still. Like any fungible commodity, the government‘s expert approximated the counterfeit bullion‘s grade, measured its weight, and valued it accordingly. The expert testified that valuing wares in this way was commonly accepted in the numismatic community. App. 110. After discounting the total estimated fair market value by Kirschner‘s historic yield, the government estimated the intended losses attributable to these counterfeits to be approximately $1.2 million ($1.5 million genuine fair market value discounted at 77 percent).
The remaining minority of wares seized from Kirschner, however, were counterfeits of six exceptionally rare coins. Agents seized three counterfeits of the 1933 Saint-Gaudens Double Eagle; nine counterfeits of the 1804 Bowed Liberty; four counterfeits of the 1794 Flowing Hair; six counterfeits of the 1866-S coin, fifty-three Morgan Dollars (without the motto, making them rarer); and one-hundred-twenty-seven Morgan Dollars (with the motto, and thus more common). To illustrate the exceptional rarity of these coins (counterfeits though they were), the government‘s expert identified the 1933 Saint-Gaudens Double Eagle as “one of the most valuable coins in United States history.” App. 128. Indeed, only one 1933 Saint-Gaudens Double Eagle has been sold publicly, and that one was sold at auction in 2002 for $8 million. See Langbord v. U.S. Dep‘t of Treasury, 832 F.3d 170, 177 (3d Cir. 2016) (en banc). And it had been owned by King Farouk of Egypt.
Despite their extreme rarity, the government attempted to estimate the fair market value of these coins just as it estimated the fair market value of the others. It purportedly referenced auction records and recent trades or sales among dealers and collectors. But the uniqueness of the Saint-Gaudens Double Eagle suggests that the market for these wares was significantly less robust and more specialized than the market for common collector coins. Nevertheless, employing the same
| Coin | Num. Seized | FMV of Each Coin | Total FMV of All Coins | Discounted at 77 Percent |
|---|---|---|---|---|
| 1933 Saint-Gaudens | 3 | $8,000,000 | $24,000,000 | $18,480,000 |
| 1804 Bowed Liberty | 9 | $2,000,000 | $18,000,000 | $13,860,000 |
| 1794 Flowing Hair | 4 | $95,000 | $380,000 | $292,600 |
| 1866-S Twenty Dollar | 6 | $82,000 | $492,000 | $378,840 |
| Morgan Dollar (no motto) | 53 | $37,587 | $1,992,111 | $1,533,925 |
| Morgan Dollar (motto) | 127 | $993 | $126,111 | $97,105 |
| TOTAL | $44,990,222 | $34,642,471 | ||
The District Court adopted the government‘s intended loss methodology and resulting loss figure.
On appeal, Kirschner challenges the inclusion of the intended losses associated with the six high-value counterfeits.1 Kirschner contends that the District Court never found by a preponderance of the evidence that he “purposely sought to inflict” the losses the government claims he intended to inflict. He says that he never had access to the markets presupposed by the government‘s “fair market value” methodology, nor did he attempt to access such markets. He further says that he had no knowledge of the prices for which genuine versions of his counterfeits had sold. Finally, he says that even if he knew the prices the genuine versions had sold for, the government
introduced no evidence that he would have attempted to sell them at those prices discounted at 77 percent.
We agree. While the District Court “focus[ed] [] on what [Kirschner] intended to do” with the high-value counterfeits, App. 156, it never found that Kirschner intended to sell the coins as counterfeits for the prices the government claimed. At the sentencing hearing, the District Court‘s findings on intended loss were dedicated to rebuffing Kirschner‘s ill-fated argument that he intended to sell the high-value counterfeits as replicas, not as the real thing. But the first-order inquiry is not whether Kirschner intended to sell the high-value counterfeits as replicas or the real thing. The first-order inquiry is whether the government proved, by a preponderance of the evidence, that Kirschner intended to sell these coins at the prices the government claims.
The District Court reasonably rejected Kirschner‘s sell-them-as-replicas argument. As the Court found, “[h]is entire behavior was that he was importing these things in order to sell them and get over on people and defraud people,” and none of the counterfeit coins seized “were marked
On this record, we cannot say that the government carried its burden to show that Kirschner had the requisite purpose to sell the high-value counterfeits for the prices it suggested. The past coin sales detailed in the government‘s complaint were of a particular type—advertised on the website Facebook; consummated in grocery-store parking lots and local bank lobbies; and priced on the order of $100 per coin. It is not clear whether Kirschner intended to evolve his operation to attempt the type of rarefied sales contemplated by the government‘s loss figures. Nor can we say the District Court‘s error adopting the government‘s methodology and resulting loss figure was harmless. The possibility exists that the District Court, on remand, may find that the government fails to prove by preponderance of the evidence that Kirschner intended to sell the high-value counterfeits at those prices. And again, the principal question is not whether Kirschner could have sold the high-value counterfeits at the prices claimed by the government. The question is whether he intended to.
While we have not considered how to estimate intended loss in this context, we have addressed how to do so in similar circumstances. In United States v. Diallo, 710 F.3d 147, 148 (3d Cir. 2013). Through the scheme, the defendant caused actual losses of $160,000. Id. at 149. But a Secret Service case agent testified that the total intended loss was approximately $1.6 million. Id. To arrive at that figure, the agent had contacted the financial institutions associated with each stolen credit card to request the card‘s credit limit, and was told the total credit limit for the 327 stolen credit cards was $1.6 million. Id. Over the defendant‘s objections, the government argued that this figure should be the “intended loss” for the purposes of sentencing. Id. The district court accepted the government‘s arguments, and increased the defendant‘s sentence accordingly.
On appeal, we considered “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.” Id. at 150 (internal quotation marks omitted). Looking to United States v. Geevers, 226 F.3d 186 (3d Cir. 2000), we held that “‘[w]hile intended loss may not be automatically determined based on what the potential loss is, intended loss may still equal potential loss.‘” Diallo, 710 F.3d at 151 (quoting Geevers, 226 F.3d at 192). We noted, however, that “‘[i]t is clear that a district court errs when it simply equates potential loss with intended loss without deeper analysis.‘” Id. (quoting Geevers, 226 F.3d at 192). Instead, a burden-shifting framework is appropriate in such cases. “[T]hough the government bears the burden of proof in guidelines cases, the burden of production may shift to the defendant once the government presents prima facie evidence of a given loss figure.” Id. (quoting Geevers, 226 F.3d at 188). But we reiterated that “the government always bears the burden of proving by a preponderance of the evidence that the facts support a sentencing enhancement, and the defendant does not
With respect to the defendant‘s sentencing in Diallo, we found that the district court had not engaged in the requisite “deeper analysis.” We noted that:
It is possible that the District Court relied on the Secret Service agent‘s testimony that the search of his car uncovered a skimming device; the evidence that Diallo has traveled from Virginia to New York in order to use the fraudulent credit cards; that Diallo had already spent $160,000 and was continuing to make additional purchases; or that at the time of his arrest, Diallo had returned to a store where he had made $2,600 in purchases just one day prior. It is also conceivable that the District Court agreed with the Government‘s argument that Diallo intended to charge up to the credit limit on every credit card number found in his possession. On the other hand, the District Court might simply have incorrectly presumed that the aggregate credit limit alone can make out a prima facie case for intended loss amount in credit card fraud. . . . [W]e would be speculating as to what evidence or argument was the basis for the District Court‘s finding that $1.6 million was Diallo‘s intended loss amount.
Id. at 153. Accordingly, we vacated the sentence and remanded for reconsideration of intended loss and whether a departure was warranted based on the intended loss amount overstating or understating the seriousness of the offense. Id. at 154.
It is true that our decision to vacate and remand in Diallo primarily was caused by the district court‘s failure to justify its conclusion that the defendant intended to commit the maximum potential loss. Here, the District Court did not commit that error. Following the government, the Court discounted the estimated fair market value of the counterfeits’ genuine counterparts by Kirschner‘s historic yield of 77 percent.
But our admonition in Diallo that district courts must conduct a “deeper analysis” before inferring that a defendant intended to cause a particular loss applies to any loss methodology the government elects to adopt. So, in Diallo, the district court‘s decision to equate intended loss with maximum potential loss without justification was an example of a sentencing court failing to conduct the requisitely deep analysis. A district court similarly runs afoul of Diallo if, as here, it adopts an intended-loss methodology without demonstrating that the defendant‘s “purpose” was to inflict the losses the government claims he intended to inflict. See
In sum, to estimate the losses a defendant intended to cause his victims under
Here, on remand, the District Court should examine whether Kirschner purposely sought to inflict the losses associated with the six high-value counterfeits. Among other inquiries, the District Court may examine whether Kirschner had knowledge of the fair market values claimed by the government; whether Kirschner intended to sell the high-value counterfeits at the claimed market price with only a minor discount, or whether he took any steps to sell counterfeits of those types at all; whether Kirschner had sold any of the high-value counterfeits in the past and, if so, whether that sale price is not the most sensible intended loss for future sales of that coin, see Kirschner Br. at 27 (government claiming $37,000 per coin losses for coin previously sold for $20); and whether Kirschner was aware of various idiosyncrasies that would cause the value of a counterfeit to go up or down, as with the motto on the Morgan Dollars. The court may also consider whether the comment is right that intended loss matters, and whether Kirschner has preserved this issue. Cf. Nasir, 982 F.3d at 157-59. But if intended loss does matter and Kirschner has preserved the issue, the District Court cannot simply estimate “intended loss” by accepting the government‘s slightly discounted fair market values without any finding that the defendant intended to inflict losses reasonably approaching those figures.2
pecuniary harm that would have been impossible or unlikely to occur.” App. 156. It “underst[oo]d the argument that it would have been almost impossible to sell these $8 million coins or the 1804 silver dollars,” but “[impossibility] doesn‘t matter under the Sentencing Guidelines.” Id. It is true that under the Guidelines comment, intended loss “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).”
Second, and related, Kirschner suggests that had the government‘s sting operation involved the attempted sale of a Saint-Gaudens Double Eagle for $4 or $5 million or more, “if Kirschner has accepted the proposition and made arrangements to make the sale, of course the sentence must reflect the four or five or even eight million dollar loss[.]” Kirschner Reply
B. The District Court‘s increase of Kirschner‘s offense level for abuse of a position of trust was not clear error
Kirschner next argues that the District Court erred in applying the abuse-of-trust enhancement. We disagree. That enhancement, set forth in Chapter 3 of the Sentencing Guidelines, tells a sentencing court that, “[i]f the defendant abused a position of public or private trust . . . in a manner that significantly facilitated the commission or concealment of the offense, increase [the offense level] by 2 levels.”
In United States v. Douglas, 885 F.3d 124 (3d Cir. 2018) (en banc), we adopted a two-step inquiry to determine whether to apply the abuse-of-trust enhancement. Under Douglas, we ask, first, “whether the defendant actually occupied a position of public or private trust.” Id. at 130. To aid that inquiry, we ask whether the defendant‘s position included “the power to make decisions substantially free from supervision based on (1) a fiduciary or fiduciary-like relationship, or (2) an authoritative status that would lead his actions or judgment to be presumptively accepted.” Id. at 133.
If we conclude that the defendant did hold such a position, we reach the second step. There, the question is whether the defendant abused his position of trust “in a manner that significantly facilitated his crime.” Id. at 130 (citation and internal quotation marks omitted). In answering that question, courts should consider, among other relevant and case-specific factors, “whether the defendant‘s position allowed him to commit a difficult-to-detect wrong“; whether the defendant‘s position granted him “authority vis-à-vis the object of the wrongful act“; or “whether the victim relied on the defendant‘s integrity, such that the victim became a more susceptible target for the defendant.” Id. at 134.
Here, the District Court heard sufficient evidence to support the abuse-of-trust enhancement. Kirschner admitted at his plea hearing and does not contest on appeal that he occupied a position of trust relative to his victims.3 The record also
Kirschner contends he only impersonated a law enforcement agent so that his buyers would not try to rob him. Kirschner Br. 30; App. 174. But that contention is belied by the record. During his plea colloquy, Kirschner admitted that he falsely claimed to be a federal agent so that his victims would “feel more at ease.” App. 92. Kirschner‘s fear-of-getting-robbed contention also is belied by logic. If impersonating a federal law enforcement officer protected his counterfeits or the money earned from them from robbery, then by definition the impersonation played a significant role in the execution of his scheme.
As this Court has held previously, we do not today hold that every fraud committed by law enforcement or those masquerading as them will justify an upward adjustment under § 3B1.3. Cf. United States v. Brann, 990 F.2d 98, 103 (3d Cir. 1993). Further, at the second step of Douglas, a defendant‘s intention to assume and then abuse a position of trust to significantly facilitate a crime may not always warrant a Guidelines enhancement. A defendant could pretend to be a police officer to facilitate some fraud, but the record could reveal that the defendant‘s apparent position played no role in the fraud‘s success or failure. Sentencing courts, acting pursuant to the Guidelines, must always determine whether the defendant‘s apparent position significantly facilitated the commission of the crime or concealment
Kirschner finally argues that the District Court‘s abuse-of-trust enhancement double-counts his impersonation charge under § 912. But as the District Court found, there was no double counting because of the Guidelines’ grouping rules. App. 160; see also App. 61, ¶ 9 (agreeing in plea agreement to group offenses). Under those rules, Kirschner‘s fraud and impersonation counts were grouped for sentencing purposes because
“the offense behavior was ongoing and continuous in nature.” App. 61, ¶ 9 (citing the grouping rules in
C. The District Court‘s increase of Kirschner‘s offense level for use of sophisticated means was not clear error
Kirschner finally argues that the District Court erred in applying the use-of-sophisticated-means enhancement. We disagree. That enhancement, set forth in Chapter 2 of the Sentencing Guidelines, tells a sentencing court that, if “the offense otherwise involved sophisticated means and the defendant intentionally engaged in or caused the conduct constituting sophisticated means, increase [the offense level] by 2 levels.”
Like with the abuse-of-trust enhancement, the District Court heard sufficient evidence to find that Kirschner‘s fraud employed sophisticated means. While Kirschner did not himself create the counterfeits he sold or the intricate packaging in which he sold them, he deployed various other strategies to conceal his fraud. He used a pseudonym to conceal his identity, and he created fake businesses, social media accounts, and sale invoices to give his scheme the veneer of legitimacy. App. 158-60.
20. App. 61, ¶ 8 (plea agreement). Section 2B1.1 therefore governed both the impersonation and fraud counts.
Kirschner appears to oppose the enhancement on two grounds. Neither is decisive. First, Kirschner claims that his “criminal conduct was in fact highly unsophisticated”
Second, Kirschner observes that he did not create any of the packaging material used to sell his counterfeits himself; he just bought them on the internet. That argument again is inapt. For one, like with the locations he used for his sales, that Kirschner could have delivered his wares in more sophisticated packaging is not enough to upset the District Court‘s finding. For another, that argument does not address the District Court‘s finding that Kirschner‘s fake business entities and the like played major roles in the commission and concealment of his crimes.
III. CONCLUSION
For the foregoing reasons, we will vacate the District Court‘s judgment of sentence and remand for reconsideration of the loss amount. The District Court need not reconsider the two 2-level sentence increases for use of sophisticated means and abuse of trust.