UNITED STATES OF AMERICA, Plaintiff-Appellee, v. LAURA WASZ and BRUCE WASZ, Defendants-Appellants.
Nos. 05-1463 & 05-1464
United States Court of Appeals For the Seventh Circuit
ARGUED FEBRUARY 6, 2006—DECIDED JUNE 14, 2006
Before FLAUM, Chief Judge, and ROVNER and SYKES, Circuit Judges.
Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. No. 03 CR 1103—Elaine E. Bucklo, Judge.
Laura Wasz and her son Bruce Wasz owned three pawn shops in the Chicago area. Beginning in September 2001 and continuing until June 2003, the Waszes used those shops as a front for selling stolen goods on eBay, the popular Internet auction site. The Waszes obtained the stolen merchandise from co-defendants Peter Giannopoulos, Daniel Bonaguidi, Robert Savino, Spyros Arvanitakis, Jason Wolber, George Lukaszewski, and Kim Marx—whom the parties aptly label the “thieving co-defendants.” Before they hooked up with the Waszes, the thieving co-defendants were stealing merchandise from Home Depot and similar retailers and then returning the items to the stores for cash refunds, as if they had been legitimately purchased. Over time, changes in store policies made it increasingly difficult for the thieves to return the stolen goods in exchange for cash. A timely introduction to the Waszes by a mutual acquaintance, however, provided the thieves with another outlet for the merchandise they were stealing.
The Waszes and their thieving co-defendants struck up a mutually profitable arrangement: the thieves would obtain the merchandise, and the Waszes would fence it. The thieves would steal items from home improvement and building supply stores including Home Depot, The Great Indoors, and Expo Design Center, at locations not just in the Chicago metropolitan area but also in Colorado, Kansas, Maryland, Michigan, Minnesota, Missouri, New Jersey, Ohio, Tennessee, Virginia, and Wisconsin. The Waszes often identified specific items that they wanted the thieves to steal, including kitchen appliances, garage door openers, tankless water heaters, sump pumps, snow blowers, chainsaws, pressure washers, mosquito exterminators, faucets, and household tools. On occasion, when the thieves embarked on road trips to victimize out-of-state retailers, the Waszes would advance them funds to cover
On receipt of the contraband, Laura and Bruce Wasz divided the items between themselves, stored the merchandise at their pawn shops and other locations, and then sold the items over the Internet. Under a number of different user names, the Waszes offered the stolen goods for sale on eBay. Both described themselves as “honest” sellers and concealed from prospective buyers the fact that the merchandise was stolen. Goods were frequently described as “new,” “brand new,” and “new in box“. The items typically were offered for sale at prices substantially below their usual retail value: the Federal Bureau of Investigation (“FBI“) would later prepare an analysis indicating that the Waszes sold their most popular lines of stolen goods at prices averaging 62 percent of the goods’ retail value. Needless to say, buyers snapped up the goods, unaware that they were purchasing stolen items. Over the time span of this scheme, the Waszes completed auctions of more than 13,000 items at sale prices totaling more than $2.3 million.
The government was tipped off to the scheme when a manufacturer of sump pumps complained to the FBI that its products were being offered for sale on eBay in “new in box” condition at less than their wholesale value and without the manufacturer‘s permission. Investigation led the government to some of the thieving co-defendants, who
The Waszes ultimately were charged in a multi-count indictment with engaging in both mail and wire fraud in violation of
Pursuant to the United States Sentencing Guidelines, the advisory sentencing ranges for both Bruce and Laura Wasz
The defendants contended that the probation officer‘s loss calculation was too high. With the support of a loss analysis prepared by a forensic accounting firm that they had engaged, the Waszes argued that the actual loss fell between $400,000 and $1 million, an amount that would have called for a more modest increase of 14 levels to the base offense level. See
Looking at the loss in terms of what the Waszes gained from their criminal conduct, the defendants proposed that the loss was equal to the net revenue that the Waszes realized on the sales of the stolen merchandise. The Waszes’ calculation of this amount began with an effort to cull from their total eBay sales during the relevant time period the revenue realized on items that were not available for sale at the stores targeted by the Waszes’ thieving co-defendants and thus (presumably) had not been stolen. These include items such as cars, used goods, jewelry, clothing, computers, office supplies, health and beauty items, and eyeglasses. Removing those items yielded corrected sales figures of $1,273,237 for Laura Wasz and $991,067 for Bruce Wasz. R. 205, Hopewell Report at 5-6. In the view of the defendants’ consultants, those figures then
[T]otal transactions—or using the accounting term—gross revenue, is not “gain“, as the concept of gain includes not only revenue but the offset of revenue by expenses. The Wasz‘s are actually business owners. They operate legitimate pawn and second hand dealer businesses. As such, in determination of gain one must subtract from gross revenue the cost of generating that revenue. From the business records of the Wasz‘s, the consultants have determined that the cost for Laura to generate the $1,351,893 in total [eBay] transactions was $894,676 or 66%. The cost for Bruce to generate the $1,307,987 i[n] total transactions was $892,724 or 68%. Applying those percentages to the $1,273,237 and $991,067 in [corrected] sales subject to the indictment, the cost of generating those sales was $842,622 for Laura and $676,420 for Bruce.
R. 205, Hopewell Report at 7. Subtracting those costs from the corrected sales figures for each defendant yielded net revenue figures of $430,615 for Laura Wasz and $314,647 for Bruce Wasz. Id. Combining the two produced a collective net gain of $745,262 for both defendants. Id.
Looking at the loss from the perspective of the retailer victims, the defendants proposed that the loss should be measured not by the total retail value of the items stolen, but rather the profit the retailers lost as a result of their inability to sell the stolen items. That would be the gross profit the retailers would have realized on the sale of the goods, an amount equal to the retail price of the items less the retailers’ cost of acquiring the goods for sale. (Overhead and other fixed administrative costs would not be deducted, as the retailers would have incurred these costs regardless of the lost sales.) Id. at 6. Looking to data on the gross profits of home improvement and building supply retailers,
As it turns out, the error does not make a dramatic difference in the relevant loss figure in this case. As we have mentioned, the government in an effort to quantify the loss prepared a summary identifying certain product lines that the Waszes sold on eBay with some regularity and that their thieving co-defendants admitted having stolen. According to an updated summary submitted at sentencing, the retail value of these items alone totaled just over $2.2 million. See R. 203, Gov. Ex. 5; see n.3, supra. The government cited that total as a reasonable albeit conservative estimate of the loss. Applying the 31-percent figure to that amount, rather than to the Waszes’ corrected total eBay sales would yield a total of over $682,000. That amount still falls within the loss range of $400,000 to $1 million that the Waszes contended was appropriate.
The court also found that Bruce and Laura Wasz both qualified as organizers or leaders of the offense and increased their offense levels by four levels based on their aggravating role.
These and other adjustments resulted in total adjusted offense levels of 27 for each defendant. Coupled with a criminal history category of I, that offense level produced an advisory sentencing range of 70 to 87 months for Laura Wasz. Bruce Wasz‘s more extensive record of prior offenses placed him in a criminal history category of IV, which yielded a sentencing range of 100 to 125 months. The district court ordered Laura Wasz imprisoned for 70 months—a term at the bottom of the advisory range. The court ordered Bruce Wasz to serve 83 months in prison—a term that was below the advisory range but, in the court‘s view, more in line with the term it had imposed on his mother. R. 251-2 at 66.
II.
Pursuant to the Supreme Court‘s decision in United States v. Booker, 543 U.S. 220, 125 S. Ct. 738 (2005), the district court was not obligated to impose a sentence within the range called for by the Sentencing Guidelines and, indeed, did not do so in Bruce Wasz‘s case. Nonetheless, the court was required to and did consult the advisory Guidelines range in selecting an appropriate sentence. E.g., United States v. Laufle, 433 F.3d 981, 984-85 (7th Cir. 2006). For that purpose it was of course necessary for the court to accurately calculate the sentencing range called for by the Guidelines, “so that that calculation c[ould] serve as a meaningful guide in the district court‘s imposition of a
A.
We begin our review with the loss calculation, which had the most pronounced impact on the defendants‘s sentencing level. To the extent that calculation turns on factual determinations, we review it for clear error. E.g., United States v. Schaefer, 384 F.3d 326, 331 (7th Cir. 2004). However, threshold questions concerning the meaning of “loss” and the methodology to be used in measuring that loss present questions of law that call for de novo review. United States v. Sensmeier, 361 F.3d 982, 986 (7th Cir. 2004); United States v. Walker, 234 F.3d 780, 783 (1st Cir. 2000).
We should make one point clear at the outset: the Waszes each may be held to account for the total value of the merchandise stolen by their thieving co-defendants and sold by either Bruce or Laura Wasz on eBay. There is no dispute that the steal-to-sell venture among the Waszes and their thieving co-defendants qualifies as a jointly undertaken criminal activity for purposes of the loss calculation. See
We may quickly dispose of the Waszes’ threshold suggestion that the district court did not make adequate findings to support its determination that the loss resulting from their offense was within the range of $1 million to $2.5 million. The district court was presented with a fully developed record as to the parties’ competing calculations of the loss amount. The district court‘s remarks at sentencing make patently clear not only that the court rejected the defendants’ proposed loss calculation (see R. 251-2 at 4, 8, 16, 18-20), but that the court expressly adopted the findings of the PSR, which in relevant part tracked the government‘s loss calculation (see id. at 3, 21). The court‘s findings are more than adequate. See, e.g., United States v. Sykes, 357 F.3d 672, 674 (7th Cir. 2004).
Echoing a point they made below, the defendants also suggest that the district court‘s loss calculation may have been based on inaccurate data. As noted, the Waszes auctioned more than 13,000 items on eBay during the time frame covered by the indictment. It is common ground among the parties that not all of these sales are within the scope of the indictment. Not all of the items the Waszes sold were stolen, for example, and that fact no doubt helps to explain why a number of the items that the Waszes auctioned off on eBay (e.g., cars, jewelry, clothing, and computers) were not the types of goods offered for sale by the home
But any uncertainty as to the exact number and identity of the items that the Waszes sold pursuant to the charged scheme turns out to be immaterial to the dispute over the loss calculation. As noted above, in an effort to make a reasonable estimate of the loss attributable to the scheme, the government in its version of the offense had identified ten of the most frequently sold product lines from the list of the defendants’ eBay sales that both Laura and Bruce admitted fencing during the time frame of the charged scheme and that corresponded with the types of items that the thieving co-defendants acknowledged having stolen and sold to the Waszes. R. 232, Government‘s Official Version of the Offense Ex. 2. Prior to sentencing, the government updated and expanded this list to include a total of fourteen product lines. These lines included Aquastar tankless water heaters; Genie garage door openers; Kohler, Mico, and Moen faucets; Basement Watchdog sump pumps; and Insinkerator garbage disposals. Sales of these product lines alone totaled over 6,500 items (roughly one-half of the defendants’ total eBay auctions) and generated some $1.4 million in revenue to the Waszes. Using the typical prices at which the victimized retailers normally sold these items, the government put the total retail value of these goods at just over $2.2 million, and it cited this figure as a reasonable albeit conservative estimate of the loss. R. 203 at 14-15 & Gov. Ex. 5. The district judge explicitly agreed that this was a conservative estimate of the loss. R. 251-2 at 20. Notably, the defendants offered no reason why confining the loss estimate to these fourteen categories of stolen goods was not a reasonable approach to estimating the loss. For their part, as we discussed above, the defendants and their consultants parsed the list of total eBay auctions by the Waszes and eliminated the types of items that they believed were not
The material question insofar as the loss calculation in this case is concerned is whether the items admittedly sold by the Waszes should be valued at their retail or a lesser value. “Loss” is defined as either the actual or intended loss, whichever is greater.
The district court was on firm ground in using the retail value of the stolen merchandise fenced by the Waszes as the benchmark in estimating the loss. Other courts have recognized that when the stolen merchandise at issue has been taken from retailers, the price at which the retailers would have sold that merchandise serves as a reasonable estimate of the loss. E.g., United States v. Carrington, 96 F.3d 1, 6 (1st Cir. 1996); United States v. Lopez, 64 F.3d 1425, 1427 (9th Cir. 1995);
We reject the defendants’ suggestion that the loss instead be measured in terms of the gain that the Waszes realized on the sales of the stolen goods. See R. 205, Hopewell Report at 7. This approach would begin with the prices at which the Waszes actually sold the goods on eBay (prices which, as we have noted, were substantially below the usual retail prices of the goods) and deduct the costs of generating those sales (costs that presumably would
The defendants alternatively have proposed that the loss be measured by the gross profit that the retailer-victims would have realized on the sale of the stolen items, but we reject this approach as well. The premise behind this theory is that the retailers would have incurred certain costs in selling the stolen items that they did not incur when the items were stolen. Given the facts, we have some doubt as to the accuracy of this premise. The goods in question were stolen off the store shelves, so to speak. Consequently, it seems likely that the retailers would have already incurred many if not most of the costs that the
For all of these reasons, we find no clear error in the district court‘s decision to value the loss associated with the Waszes’ crime at between $1 million and $2.5 million. As that figure corresponds to a conservative estimate of the retail value of the stolen merchandise that the Waszes sold on eBay, it serves as a reasonable measure of the loss.
B.
The Waszes also challenge the district court‘s finding that they played an aggravating role in the offense for purposes of Guidelines section 3B1.1. As relevant here, the guideline specifies a four-level enhancement “[i]f the defendant was an organizer or leader of a criminal activity that involved five or more participants or was otherwise extensive.”
Whether the defendant qualifies as an organizer or leader for purposes of this guideline is a factual determination. There is no dispute here that the underlying criminal activity involved five or more individuals or was otherwise extensive. The Waszes instead contend that they are not properly characterized as organizers or leaders of the criminal activity. Factors that bear on that assessment include: the exercise of decisionmaking authority, the nature of the defendant‘s participation in the offense, the recruitment of accomplices, a claimed right to a larger share of the fruits of the crime, the degree of participation in the planning or organization of the offense, the nature and scope of the illegal activity, and the degree of control or authority exercised over other participants.
A finding that the defendant functioned as an organizer or leader does not necessarily mean that he directly controlled other individuals. Rather, the defendant must have exercised some degree of control over others involved in the commission of the offense or he must have been responsible for organizing others for the
purpose of carrying out the crime. Efforts to marshall other individuals for the purpose of executing the crime thus satisfy 3B1.1(a).
United States v. Carson, 9 F.3d 576, 585 (7th Cir. 1993) (internal quotation marks and citations omitted) (emphasis added); see also United States v. Blaylock, 413 F.3d 616, 621 (7th Cir. 2005); United States v. Hanhardt, 361 F.3d 382, 393-94 (7th Cir. 2004), cert. granted & j. vacated on other grounds, 543 U.S. 1097, 125 S. Ct. 994 (2005); United States v. Fones, 51 F.3d 663, 670 n.5 (7th Cir. 1995); United States v. Mustread, 42 F.3d 1097, 1104 (7th Cir. 1994); United States v. Guyton, 36 F.3d 655, 662 (7th Cir. 1994). Because the district court‘s assessment of the defendant‘s role in the offense constitutes a factual determination, we review it for clear error. E.g., Blaylock, 413 F.3d at 618.
The Waszes characterize their relationship with their thieving co-defendants as a symbiotic joint venture for which they bear equal but no greater responsibility. The Waszes emphasize that long before they were introduced to their thieving co-defendants, those co-defendants were in the business of stealing goods from home improvement retailers, that they (the Waszes) simply functioned as an outlet for the stolen merchandise, and that to the extent their co-defendants took any direction from them (e.g., as to the types of goods they wanted stolen), they did so as any supplier eager to please his buyer would. The government, on the other hand, sees the Waszes as being more culpable than their co-defendants because (a) they owned and managed the pawn shops, which served as a front for the fencing operation; and (b) they organized their co-defendants in the sense that they told the thieves what to steal, occasionally fronted money to cover the costs of their out-of-state trips, and instructed the thieves to remove price tags and complete false invoices to help conceal the stolen nature of the goods. On review of the record, we conclude
There is, we should clarify at the outset, no issue as to whether one of the Waszes but not the other qualifies for the enhancement. Their roles in the offense were similar if not identical: both were involved in the procurement of stolen merchandise from their co-defendants, both received merchandise from their co-defendants (which they divided between themselves), both took steps to maintain a fictitious paper trail to conceal the stolen nature of the merchandise, and both auctioned off the stolen merchandise on eBay. The only material distinction between the two was that Laura Wasz had an employee, co-defendant Hockins, who worked at a pawn shop that she owned and who, at her behest, regularly engaged in a number of activities in furtherance of the charged scheme. Her control of Hockins’ activities certainly lends additional support to the notion
First, the offense to which the Waszes pleaded guilty was wire fraud, and the underlying fraud was the passing off of stolen goods as legitimate to unsuspecting eBay customers. As the purveyors of the merchandise, the Waszes were, of course, at the forefront of that fraud. Their co-defendants had nothing to do with the eBay sales: by standing arrangements with their co-defendants, the Waszes typically paid cash for the stolen goods delivered to them in amounts corresponding to a set percentage (33 to 40 percent) of the retail value of the goods; how and at what prices the Waszes sold the goods was entirely up to them.
Second, vis-à-vis their thieving co-defendants, the Waszes provided an outlet for the stolen merchandise that the thieves sorely needed. Due to changes in the merchandise return policies of their retailer victims, the thieving co-defendants were finding it increasingly difficult to steal goods and then return the items to the stores for cash refunds. As the owners of pawn shops, the Waszes had a ready-made cover for the handling of stolen merchandise.
Third, one may reasonably infer from the evidence that the Waszes to a material degree did direct the efforts of their co-defendants. The Waszes frequently specified what items they wanted their co-defendants to steal, on occasion naming the brands, model numbers, and quantities of the items they wanted. When their co-defendants embarked on interstate road trips to steal merchandise, the Waszes occasionally gave them cash to help defray the expenses of the expeditions. While on such trips, the co-defendants would check in with the Waszes by telephone to apprise them of their progress. Finally, the Waszes instructed their co-defendants to remove the price tags and other identifying marks from the stolen merchandise and to complete fictitious invoices for the merchandise, two steps that aided the Waszes’ effort to disguise the illicit source of the goods they were selling on eBay.
Collectively, these facts permit the inference that the Waszes bear a greater degree of responsibility for the overall effort to steal merchandise from retailers and sell it to unsuspecting buyers on eBay than do their thieving co-defendants. Not only were the Waszes solely responsible for the planning and execution of the sales end of the scheme, but they gave material direction to their co-defendants with respect to the thieving end of the scheme; the stolen merchandise did not simply arrive at their doorstep on a take-it-or-leave-it basis. We appreciate the Waszes’ point that it may not be at all unusual for a thief to try to accommodate his fence by stealing the types of goods that
III.
Finding no clear error in either the loss calculation or the finding that Bruce and Laura Wasz were organizers or leaders of the criminal offense to which they pleaded guilty, we AFFIRM their sentences.
Teste:
Clerk of the United States Court of Appeals for the Seventh Circuit