This appeal by Thomas Jefferson Kent arises from a wire fraud conspiracy case against Kent, Sanford Gottesman, Brad Robinson, and Beno Matthews,
1
who were each convicted in connection with them participation in an “advance fee” scheme— a scheme in which supposed lending companies operated by the defendants falsely promised loans to small businesses and collected fees for fraudulent expenses, while never issuing any loans. Following their arrests and indictment in February 2014, Kent, Robinson, and Matthews entered ■ guilty pleas.
2
Kent now appeals from a sentence of,
inter alia,
78 months’ imprisonment, which was imposed after he pleaded guilty on February 19, 2014, to conspiring to commit wire fraud in viola
BACKGROUND
I. Factual Background 3
The scheme began in 2007, when Kent formed FDP Capital, LLC, to pose as a private investment banking firm willing to provide funding for small businesses. Through FDP Capital, Kent would contact-small businesses- seeking funding and represent that FDP Capital could provide them with loans. After collecting so-called advance fees from these businesses for various expenses, however, FDP Capital never issued any loans.
Kent recruited Robinson to work for FDP Capital as a broker. Robinson would find and contact prospective customers, solicit and review a “quick' information form” submitted from interested businesses, and in turn send those businesses a' “letter of intent” setting forth FDP Capital’s intent to extend a loan. The letter of intent .explained that, before wiring the funds for the loan, FDP Capital would need to conduct certain due diligence. In order to do so, FDP Capital- asked the businesses to pay an advance fee to cover expenses, often including the cost of a “sité visit” to meet the principals, review the loan proposal, and discuss repayment expectations.' -Kent and Robinson-would conduct those visits themselves.
Through FDP Capital, Kent and Robinson obtained more than $325,000 in advance fees from more than 60 businesses. None of the businesses, however, ever received a loan. After securing the advance fee, FDP Capital would end all contact with the defrauded business, which would find itself unable to reach FDP Capital to inquire about its loan. As a result, many so-called customers filed online complaints about FDP Capital and Kent.
Following the posting of Internet complaints, Kent started a new company, Phoenix Global Holdings, Inc., to perform the same scheme as FDP Capital. -He bégan using aliases — all variations of his name such as Tom Kent, Jeff Kent, and Thomas Jefferson — when communicating with prospective customers. Although Kent still conducted site visits and interacted with customers himself, he no longer did so without using an alias. He also no longer signed any customer documents.
In or around the summer of. 2009, Robinson stopped working for Kent for a time, and Kent met and recruited Gottesman to assist in the fraudulent scheme. They agreed to go into business together in September 2009. • Gottesman took on the role of conducting.the site .visits.. Kent then enlisted Robinson once ■ more and tasked- him with maintaining the mass marketing e-mail server and signing letters of intent. Robinson would also keep Gottesman apprised of the status of client contacts for those businesses Gottesman had visited or was to visit.
In June 2010, Kent and Gottesman had a falling out. The two men nevertheless continued the same scheme, individually, at Wilshire Financial, Inc., Wilshire Capital, Inc., and subsequently at other entities. Kent recruited Matthews, who had previously helped with technology services» and continued . substantially . the same scheme through three new companies: Vouyer Capital LLC, Midwest Global Partners, Inc., and Northeast, Inc. , ■
II. Plea and Sentencing Proceedings
Kent pleaded guilty on February 19, 2014, pursuant to a plea agreement that calculated a Guidelines total offense level of 22. 4 Based on a criminal history category of I, Kent’s stipulated Guidelines range was 41 to: 51 months’ incarceration. The United States Probation Office subsequently prepared a PSR that arrived at the same Guidelines range. On July 15 and 18, 2014, Kent and the Government filed submissions with the district court in anticipation of sentencing, Kent requested a downward deviation from the Guidelines range, asking that the court impose a 36-month prison sentence. The Government requested that the court impose an .incarceration period within the Guidelines range of 41 to 51 months. .
The district court issued an order dated July 23,' 2014, two days before sentencing, giving thé parties notice of its belief that ■two' additional 'sentencing enhancements were applicable: a two-level increase for employing “sophisticated means,” U.S.S.G. § 2Bl.l(b)(10), and a four-level increase for Kent’s leadership role in a “criminal activity that involved five or more participants or was otherwise extensive,” id, § 3Bl.l(a). 5 The same day» Kent filed a letter in response to the district court’s order in which, inter alio, he sought a continuance1 of his. sentencing hearing so that he might.be able to. respond to the proposed enhancements.- The .district court denied Kent’s request for an adjournment, stating that Kent would “have ample opportunity to respond at sentencing.” K.A. 73.
On July 25, 2014, the district court held Kent’s sentencing hearing. As relevant to the § 3Bl.l(a) enhancement, the district court found, by a preponderance of the evidence, that Kent was the “mastermind behind the fraudulent schemes,” that he had established the corporate entities and the
modus opemndi,
that his -scheme had a particularly “high degree of contact with the victims,” that he had “obtained the most money” among the co-conspirators, and that his seheme “spread over the country, and spread over dozens and dozens and dozens of different people.” K.A. 99. On that basis, the district court noted its belief that “there.is far more than a
At that point, the district court invited argument from the parties. As relevant here, the Government "disagreed with the court’s calculations'and questioned whether the court should apply the § 3Bl.l(a) enhancement. The Government stated that “consistent with the plea agreement, [it] respectfully disagree[d] with the court’s guidelines calculation” and “ask[ed] the court to follow the calculations set forth in the presentence report and the plea agreement.” K.A: 101. Concerning the proper interpretation of § 3Bl.l(a), which sets forth an enhancement for leading a criminal activity that involves five or more people or is “otherwise extensive,” the Government explained that the scheme here involved “a small number of people just doing the same thing over and over to-a lot of victims and that [was], .in the lay sense of the word ... pretty extensive.” KA. 106. But given that “there [was] an adjustment for number of victims and there , [was] an adjustment for loss amount,” the Government took the position that those factors did not “necessarily support the otherwise extensive finding.”
Id.
Kent then argued, relying on
United States v. Ware,
The district court then proceeded to give its final Guidelines calculation. The court reiterated that Kent had been “a leader throughout this case” and that Kent, had not objected to the “pieces of the PSR which indicate[d] in the court’s view a leadership role.” K.A. 121. Further, the court-emphasized that Kent was “the biggest taker of money in ■ the aggregate.” Id. With those findings of fact, the district court imposed a leadership enhancement, calculating an offense level of 26 (four levels higher than the level in the PSR) and a Guidelines range of 63 to 78 months of incarceration-.-
Following arguments for mitigation, the district court imposed its sentence on Kent. The district court explained the reasons for imposing the sentence at length, emphasizing the seriousness of Kent’s actions. Ultimately, the district court stated that its sentence related to “the number of victims, the prolonged conduct, the severe impact on.the victims, the need to incapacitate, the devices-and artifices ... used to escape detection, [the] knowledge as to what [Kent was] doing was ‘wrong, [Kent’s] lack of sympathy for- the victims, [and] the harm that [was] done all across .the country.” K.A. 160. The district court sentenced Kent to 78 months’ imprisonment (at the top of the Guidelines range), three years of supervised release, and a mandatory $100 special assessment. It also ordered Kent to pay $953,232.81 in restitution and to forfeit $950,000.
DISCUSSION
I. Standard of Review
We review a sentence for both procedural and substantive reasonableness.
United States v. Cavera,
The district court’s interpretation and application of the Sentencing Guidelines is a question of law, which we review
de novo. United States v. Mulder,
II. The “Otherwise Extensive” Inquiry
This sentencing appeal stems from the district ■ court’s application of the leadership enhancement under the Guidelines. Section 3Bl.l(a) of the Guidelines provides for a four-level increase to a defendant’s offense level if he or she “was an organizer or leader of a criminal activity that involved five or more ■ participants or was otherwise extensive.” U.S.S.G. § 3Bl.l(a) (emphasis added). Because it is uncontested that there were not five or more knowing participants in Kent’s criminal activity, this appeal hinges on the proper legal standard for the “otherwise extensive” prong.
Kent contends that the district court erred in applying, the enhancement because the term “otherwise extensive” in § 3Bl.l(a) refers strictly to organizational size. The task of the district court, he maintains, is “headcountfing],” Kent Br. at 24, the “knowing” participants in the conspiracy along with the “unknowing” or “innocent facilitators” who “perform conduct that is ‘peculiar and necessary’ to.the criminal scheme,”
id.
at 25 (quoting
United States v. Napoli,
For the reasons set forth below, we conclude that the district court erred in applying the § 3Bl.i(a) enhancement. Although we disagree with Kent that under no circumstances may factors other than the number of knowing and unknowing participants in a criminal activity be considered, in determining whether the § 3Bl.l(a) enhancement properly applies, we conclude that the district court’s findings and explanation are inadequate, requiring that Kent’s sentence be vacated and that the application ■ of § 3Bl.l(a) be considered again on remand.
We begin with the Guidelines. Under § 3Bl.l(a), a defendant is eligible for a four-level increase if he or she “was an organizer or leader of a criminal activity that involved five or more participants
or was otherwise ■
extensive.”, U.S.S.G. § 3Bl.l(a) (emphasis added). Section 3B1.1, more broadly, “provides a range of adjustments to increase the offense level based upon the size of a criminal organization (i.e., the number ¡of participants in the
In
United States v. Carrozzella,
As we aiso .explained in
Car-rozzella,
even though § 3B1.1 adjustments are based primarily on the number of ■people involved .in criminal activity, factors other than head counting “may be properly considered in the ‘otherwise extensive’ determination.”
In the present case, the district court failed to consider the factors that we explained in Carrozzella are central to the 3Bl.l(a) inquiry: namely, the number of knowing participants and the number of unknowing participants organized by the defendant to render services peculiar and necessary to the criminal scheme. Here, Rent* was a leader of a scheme involving only four knowing participants:' Gottes-man, Robinson, Matthews, and himself. 8 The district court stated that it was “not relying upon the five or more” portion, but rather oh the “otherwise extensive”’ portion of the Guidelines provision. K.A. 115. Yet the district court did not find any facts regarding the number of tmknowing participants organized or led by Kent. Nor is it clear from the record whether such unknowing participants existed and whether their services were peculiar , and necessary to the scheme. 9
To be sure, we do not require district courts robotically “to regurgitate the facts in the record” ’to satisfy the need for requisite consideration of the “count of the heads and the acknowledgment of the roles played:”
United States v. Chacko,
• Kent established or caused to be established the fake corporate entities.
• Kent developed the business model.
• Kent ,had a high degree of contact with the victims.
• Kent obtained most of the money, spreading it over a variety of entities and throughout the 1'¡country. The •court later explained that the number of victims and-the amount of money was “about the reach, the reach over time, the reach over number- of victims.” K.A. 108. Those figures indicated “how far spread and how deep into the country this conspiracy and its harms went.” Id.
• Kent worked with and led different co-conspirators at different points in time, and those individuals assisted Kent with various tasks. To that’ end, Kent was an organizer and instigator.
• Kent used various aliases.
As the
Cmrozzella
panel suggested, some of these factors, while not directly involving head counting, “may be properly considered in [an] ‘otherwise extensive’ determination” as focused on the, question whether a given criminal activity is “the
functional equivalent
of one involving five or more knowing participants.”
To be clear, we do not opine here as to this analysis,, leaving it in the first instance -to the district court on remand,
Cf. United States v. Skys,
CONCLUSION
For the foregoing reasons, Kent’s sentence is VACATED, and his eaáe is REMANDED to the district court for further proceedings consistent with this opinion.
Notes
. Matthew's name is spelled inconsistently throughout the record as- well as in the case caption of this appeal. This opinion will use "Beno'Matthews” or "Matthews.”
. Gottesman proceeded to a jury trial, On March 7, 2014, after a four-day trial, the jury found Gottesinan guilty of conspiring to commit wire fraud in violation of 18 U.S.C, § 1349, and committing wire fraud 'in violation of 18 U.S.C. §§ '1343 and 2\ The district court (Forrest, J.) sentenced Gottesman on June 9, 2014, to 36 months’ imprisonment, three years of supervised release, and a mandatory $200 special assessment, and ordered him to pay $165,371.26 in restitution and to forfeit the same amount. We consider Gottesman’s appeal in. a summary order filed concurrently with this opinion.
. The factual background presented here is drawn from the district court’s factual findings at Kent’s sentencing, from the United States Probation Department’s Pre-Sentenc-ing Report ("PSR”) as to Kent (which was not objected to and which the court adopted as fáctual findings with minor discrete changes), and, where noted, from undisputed testimony presented at Gottesman’s trial. References in the form "K.A,-" are to Kenf’s appendix, submitted on appeal.
. The parties agreed that the base offense level was 7 pursuant to U.S.S.G. §§ 2X1.1(a) and 2B1,1(a)(1); that this level was increased by 14 pursuant to § 2B1.1(b)(1)(H), based on a loss amount greater than $400,000 but less than $1,000,000;' and that the offense involved 50 or more victims, raising the offense level by 4 additional levels pursuant to § 2B 1,1 (b)(2)(B). The offense level was then decreased by 3 levels pursuant to § 3E’l,l(a), (b), on account of Kent's timely acceptance of responsibility, for a total offense level of 22.
. The district court ultimately declined to impose the § 2Bl.l(b)(10) enhancement of two levels for employing sophisticated means.
. We explained in
Carrozzella
that determining whether the services of an unknowing participant are peculiar arid necessary ’to the scheme requires an examination of “the nature of the services provided.”
. "Impermissible double counting occurs [under the Sentencing Guidelines] when one part of the guidelines is applied to increase a de- ■ fendant’s sentence to- reflect the land of harm that has already been fully accounted for by another part of the guidelines.”
United States v. Sabhnani, 599
F.3d 215, 251 (2d Cir.2010) (alteration in original) (quoting
United States v. Volpe,
. Kent’s argument that there were fewer than four knowing, participants because they, were not all working at the same time is unavailing. Neither the Guidelines, .nor the commentary, nor our precedent imposes a temporal limitation on counting the number of participants. To the contrary, the Guidelines ■ commentary. states that, "[i]n assessing whether an- organization is ‘otherwise extensive,’ all persons involved during the course of the entire offense' are to be considered.” U.S.S.G. § 3131.1(a) cmt. n. 3 (emphasis added). ' -
. The Government argues that "the trial evidence revealed several additional individuals who’ eách provided services that were ‘peculiar and necessary’ to the conspiracy.” Gov’t Br, 43, (describing two individuals who were listed as references, a third who received funding, a fourth who provided input on writings, and a fifth who provided his signature on letters). But the Government concedes that "the District Court did not expressly reference these additional participants,” arguing only that “their clear role in providing peculiar and necessary services to the conspiracy supports the District Court’s conclusion.” Id. at 44. Although the court indicated that it was relying on the PSR, moreover, the PSR does not mention any of the additional individuals that the Government now seeks to count. To the extent that evidence of these individuals was elicited at Gottesman’s trial, the district court may consider on remand whether such evidence is sufficient to support the requisite factual findings necessary to support proper application of the leadership enhancement.