United States of America, Appellee, v. Marco G. Fiore, Jr.; Benjamin v. Salmonese, Jr.; Frank Piscitelli; Thomas Deceglie; Peter C. Restivo; David C. Lavender; Michael J. Eisemann; Michael Ricottone; Howard Zelin; Glen Benussi, Defendants,thomas J. Desimone, Defendant-appellant, 381 F.3d 89 (2d Cir. 2004)

Thomas J. DeSimone appeals from the sentence imposed following a guilty plea before Judge Kaplan. On December 17, 2001, DeSimone pleaded guilty to three counts of a superseding indictment charging him with conspiring to commit securities fraud, wire fraud, and commercial bribery, in violation of 18 U.S.C. § 371 (1994) (Count One); securities fraud, in violation of 15 U.S.C. §§ 77q(a) and 77x and 18 U.S.C. § 2 (Count Two); and perjury, in violation of 18 U.S.C. § 1621 (Count Four). He argues on appeal that the district court erred: (i) in enhancing his sentence for obstruction of justice; (ii) in making remarks reflecting ethnic stereotyping; and (iii) in improperly ordering restitution. We affirm.¹ 

BACKGROUND

DeSimone was charged with involvement in a stock manipulation scheme in which the trading price of certain securities was inflated by fraud. Nationwide Securities, Inc. underwrote initial public offerings by two corporations, Gaylord Companies, Inc. and Thermo-Mizer Environmental Corp. After their offerings in 1995 and 1996 respectively, both Gaylord and Thermo-Mizer began trading publicly on the NASDAQ Small-Capitalization Market System. Nationwide acted as an aftermarket "market maker" for the securities, and used its licensed brokers, including DeSimone, to fraudulently manipulate the demand for, and price of, the common stock and warrants in aftermarket trading.

The scheme involved a cornucopia of securities laws violations. Nationwide's principals and brokers retained undisclosed control over substantial positions in the warrants by placing them in the names of nominees and offshore corporations prior to the dates of the offerings. The nominees held the warrants subject to undisclosed arrangements in which DeSimone and the other codefendants controlled the timing and disposition of the warrants and retained all or a portion of the proceeds from their sale. The scheme operated from a "boiler room," the brokers typically making hundreds of telephone calls each day involving the use of fraudulent sales pitches to solicit purchases of the securities through Nationwide. The calls created a demand for the securities, enabling DeSimone and the other codefendants to sell them through the nominees at the fraudulently inflated prices. As a result, DeSimone and his cohorts obtained illegal profits of approximately $2.0 million.

The scheme also included making undisclosed payments to DeSimone and other brokers to sell the particular securities to retail clients, conditioning purchases in the offerings on aftermarket purchases, making unauthorized trades in customer accounts, failing to execute sell orders in a timely fashion or only when sales could be paired with purchases, and fraudulently using DeSimone's registered representative number in selling securities in order to conceal the identity of certain brokers. In exchange for the use of his number, DeSimone received securities from the offerings, which he placed in nominee accounts at Nationwide held in the names of his mother, grandmother, and sister-in-law.

The SEC conducted a civil investigation into Nationwide in connection with the Gaylord and Thermo-Mizer offerings. In the course of that investigation, DeSimone denied under oath any knowledge of his mother's account at Nationwide or of her trading in Thermo-Mizer warrants. He also denied having allowed others to use his broker's license. These statements were known by DeSimone to be false.

On December 17, 2001, pursuant to a plea agreement, DeSimone entered a guilty plea to three counts charging him with conspiracy to commit securities fraud, wire fraud and commercial bribery (Count One), securities fraud (Count Two), and perjury (Count Four). The probation office's presentence report suggested a two-level enhancement not in the plea agreement for obstruction of justice based on his perjury before the SEC. The presentence report also detailed DeSimone's financial condition, recommended no fine, but did recommend restitution. DeSimone's sentencing took place during two proceedings. At the first proceeding the district court deferred its restitution determination and found that the obstruction enhancement applied to DeSimone. At the second proceeding the district court sentenced DeSimone to a 21-month term of imprisonment to be followed by three years of supervised release. The district court also ordered restitution to the victims of the fraud in the amount of $742,060.63 and imposed a $250 special assessment.

DISCUSSION

a) The Obstruction of Justice Enhancement

DeSimone first challenges the district court's inclusion of a two-level obstruction of justice enhancement pursuant to Section 3C1.1 of the Sentencing Guidelines.²  "The imposition of an obstruction-of-justice enhancement is subject to a mixed standard of review." United States v. Brown, 321 F.3d 347, 351 (2d Cir. 2003). We review de novo the sentencing court's interpretation of the Sentencing Guidelines but review its related findings of fact only for clear error. United States v. Crisci, 273 F.3d 235, 240 (2d Cir. 2001).

The district court grouped DeSimone's perjury offense with his underlying fraud offense, using the fraud as the base offense level, and then enhanced that by two levels for the perjury.³ 

DeSimone does not challenge the district court's grouping of the obstruction offense, in this case perjury, with the underlying offense, in this case fraud, under Section 3D1.2(c).⁴  Application Note 5 to Section 3D1.2 explains that:

[s]ubsection (c) provides that when conduct that represents a separate count, e.g. .... obstruction of justice, is also a specific offense characteristic in or other adjustment to another count, the count represented by that conduct is to be grouped with the count to which it constitutes an aggravating factor. This provision prevents "double counting" of offense behavior .... [A] count such as obstruction of justice, which represents a Chapter Three adjustment and involves a different harm or societal interest than the underlying offense, is covered by subsection (c) ....

U.S.S.G. § 3D1.2 cmt. n. 5. The Application Note gives the following example: "If... [a] bribe was given for the purpose of hampering a criminal investigation into the offense, it would constitute obstruction and under § 3C1.1 would result in a 2-level enhancement to the offense level for the fraud. Under [these] circumstances, the counts would be grouped together." Id. The district court found that, like the bribery in the example, DeSimone's perjury constituted obstruction under Section 3C1.1.

Application Note 8 to Section 3C1.1 then directs that the offense level calculated pursuant to the underlying offense, here fraud, be enhanced by two levels for obstruction of justice, and that the resulting offense level applies unless the offense level for the obstruction offense, here perjury, is greater. See supra note 2.

The offense level for DeSimone's fraud offense before application of the obstruction of justice enhancement was sixteen, and the offense level for his perjury under Section 2J1.3 was less than the fraud offense level plus the two-level obstruction enhancement. See U.S.S.G. § 2J1.3. Accordingly, the district court used the fraud offense level of sixteen and added two levels for DeSimone's obstruction of justice, leading to an offense level of eighteen. It then reduced the offense level by three points for acceptance of responsibility resulting in a final offense level of fifteen.

DeSimone advances two arguments in challenging the obstruction of justice enhancement. First, he argues that because his perjury was committed in an SEC civil investigation and before the initiation of the criminal investigation, the perjury did not constitute an obstruction of the investigation into the underlying fraud offense, and, therefore, the enhancement is inapplicable. Second, he argues that the enhancement results in double-counting, improperly punishing him for conduct already taken into consideration by his perjury conviction. We disagree.⁵ 

DeSimone's first argument — that perjury in the civil investigation did not constitute an obstruction of the investigation into his fraud offense — relies on the following language of Section 3C1.1:

If (A) the defendant willfully obstructed or impeded, or attempted to obstruct or impede, the administration of justice during the course of the investigation, prosecution, or sentencing of the instant offense of conviction, and (B) the obstructive conduct related to (i) the defendant's offense of conviction and any relevant conduct; or (ii) a closely related offense, increase the offense level by 2 levels.

U.S.S.G. § 3C1.1 (emphasis removed).

DeSimone contends that the perjury did not occur "during the course of the investigation, prosecution, or sentencing of the instant offense of conviction" within the meaning of Section 3C1.1. Id. According to the Commentary, the quoted language "instructs that the obstruction must relate either to the defendant's offense of conviction (including any relevant conduct) or to a closely related case" and "also clarifies the temporal element of the obstruction guideline (i.e., that the obstructive conduct must occur during the investigation, prosecution, or sentencing of the defendant's offense of conviction)." U.S.S.G. app. C., amend. 581 (2001).

We see nothing in the Guidelines language or in the Commentary that undermines the district court's conclusion. It is undisputed that DeSimone perjured himself in an SEC investigation involving the precise conduct for which he was criminally convicted: conspiracy to commit securities fraud and securities fraud. His false denial of any knowledge of his mother's account at Nationwide, her purchase of Thermo-Mizer warrants, or Nationwide's use of his trading license went to the heart of his role in the underlying fraudulent scheme.

Where federal administrative and prosecutorial jurisdiction overlap, subsequent criminal investigations are often inseparable from prior civil investigations, and perjury in the prior proceeding necessarily obstructs—if successful, by preventing—the subsequent investigation. Securities fraud is a proper subject of both administrative and criminal investigations, and whether the administrative enforcement officials proceed before, after, or simultaneously with criminal prosecutors is often determined by fortuitous circumstances regarding possession of particular evidence, available resources, and legal issues, such as statutes of limitation. Moreover, there is no general rule preventing the SEC's sharing of evidence acquired through civil discovery with criminal prosecutors. SEC v. Dresser Indus., 628 F.2d 1368, 1385 (D.C. Cir. 1980) (en banc) ("Both the '33 Act and the '34 Act—and other statutes related to securities law enforcement as well—expressly authorize the SEC to transmit such evidence as may be available * * * to the Attorney General, who may, in his discretion, institute the necessary criminal proceedings ....") (internal quotation marks and citations omitted; alteration in original). SEC enforcement officials and prosecutors all expect coordination at some investigative level and perceive the various proceedings as integral to each other. A subject of the investigations will also view each as a different facet of one problem. For example, a subject who decides upon perjury in an SEC proceeding will do so principally because the goal is to avoid all liability or criminal liability in particular.

Moreover, DeSimone's argument is contrary to the caselaw of this and other circuits. In United States v. Zagari, 111 F.3d 307, 328 (2d Cir. 1997), we addressed a Section 3C1.1 enhancement based on a sentencing court's finding that the defendant had perjured himself in a separate, civil action. Though we remanded for findings on the materiality of the perjury to the federal offense, we stated that where "the connection between the two cases is quite close ... perjury in the civil action could constitute obstruction of justice in the instant federal offense." Id.⁶  See also United States v. McGovern, 329 F.3d 247, 252 (1st Cir. 2003); United States v. Barry, 938 F.2d 1327, 1335 (D.C. Cir. 1991).

DeSimone's argument that the two-level enhancement results in double counting for the perjury offense is also without merit. DeSimone's sentence was calculated using the underlying fraud count as the base. Absent the two-level obstruction enhancement, the sentence would not have reflected DeSimone's perjury. As noted, the district court properly grouped the underlying (fraud) and obstruction (perjury) offenses under Section 3D1.2(c), applied the appropriate offense level for fraud, and adjusted upward by two levels for the perjury. As the Seventh Circuit observed in United States v. Maggi, 44 F.3d 478, 482 (7th Cir. 1995), "this formula ensures the two-point enhancement does not constitute `double-counting.' ... [because] when closely related counts are grouped under section 3D1.2(c), the offense level used is that for the most serious counts." The court explained that:

Here, the money laundering count was the most serious, and therefore, the court applied its offense level. The court's subsequent two-point upward adjustment for obstruction of justice did not constitute double counting because it was used to enhance only this money laundering offense level. Had the obstruction of justice count(s) called for an offense level higher than the money laundering count (plus the two-point enhancement), [the Application Note] provides that the obstruction base level would have applied, without the enhancement. This section of the Guidelines, as clarified by [the Application Note], was therefore crafted to avoid double counting for obstruction of justice.

Id. (emphasis removed); see also U.S.S.G. § 3D1.2 cmt. n. 5.

b) Ethnic Considerations in Sentencing

DeSimone's second challenge on appeal concerns remarks of the district court during sentencing that, in his view, "cast aspersions on DeSimone's ethnic heritage and require resentencing." Appellant's Br. at 10. The remarks were references by the court to a television series, The Sopranos. DeSimone argues that because the principal subject matter of The Sopranos is a modern-day, Italian-American, organized-crime family, the references infected, or appeared to have infected, the sentence imposed on DeSimone, an Italian-American. We disagree.

The first reference to The Sopranos occurred during an oral argument on DeSimone's pretrial motion for severance; DeSimone's counsel stated that "the statements alleged to be perjurious are fairly narrow in that they refer to [DeSimone's] relationship with his mother, which I believe opens up a whole other issue at trial." In response, the prosecution argued:

In this case defendant Fiore was charged with making false statements to the U.S. Attorney's office in a proffer session concerning his ownership interest in Nationwide Securities as well as his earning of excessive compensation in connection with the IPO transactions that are the crux of the case here. In the case of Mr. DeSimone, he is charged with making false statements concerning not his relationship with his mother, not some abstract—

The district court interrupted:

So this isn't The Sopranos?

To which the prosecution replied:

This is not The Sopranos, no. These were not false statements made concerning some aspect of his relationship that was wanting.

The second reference to The Sopranos occurred during the July 29, 2002 sentencing proceeding. The district court stated:

The defendant will please rise for the imposition of sentence. Mr. DeSimone, this was an outrageous fraud. I've said that to the other defendants, I say it to you. It was a classic boiler room operation as you well know. It looks like a bad episode out of The Sopranos, albeit without anybody getting hurt physically. It was despicable, and I don't know what else to say about it. Not only that, but you lied about it when the time came. I understand from what I've been told that previous to this episode you were not a bad guy, and I've been here long enough to know that you're probably not in all respects a bad guy now. Human nature is that way. Even people who do terrible things have other aspects to their personalities, to their lives, that are perfectly okay and often commendable. But somehow, you lost your moral compass here in a very serious way and I can't condemn that enough.

It is not seriously disputed that the court's first reference to The Sopranos was to a theme of the series concerning the difficult relationship between the principal character and his mother or that the second reference was to a particular episode that portrayed a boiler-room operation similar, save for acts of violence, to the one in which DeSimone was involved.

However, DeSimone argues that, because the television series does focus on criminals of Italian descent, the court's remarks indicate that his ethnicity was, or appears to have been, a basis for his sentence, thus violating a clear rule of law. See United States v. Leung, 40 F.3d 577, 586 (2d Cir. 1994) (We have "reject [ed] the view that a defendant's ethnicity or nationality may legitimately be taken into account in selecting a particular sentence" and have held that "even the appearance that the sentence reflects a defendant's race or nationality will ordinarily require a remand for resentencing.").

However, we see nothing in the court's remarks that went beyond a reference to two plotlines in The Sopranos that are ethnicity-neutral. Difficult relationships between children and parents and the operation of boiler rooms for purposes of securities fraud are not commonly associated with a single ethnic group, and no reasonable person—even one who might be highly critical of the television series on ethnic-stereotyping grounds—would believe that the court was making an ethnicity-based remark.⁷ 

Moreover, where a defendant's "sentence [i]s within the Guidelines range [it] can be vacated only upon a showing that his [ethnic origin], rather than individual, distinctive aspects of his character or the offense, dictated" the sentence. United States v. Jacobson, 15 F.3d 19, 23 (2d Cir. 1994).

The district court in the present case made very plain the individual and distinctive aspects of DeSimone's character and his crimes that were the basis for the sentence imposed. It explained in detail the impropriety of the acts and admonished DeSimone for participating in "an outrageous fraud" involving "a classic boiler room operation as you well know" in which "you lost your moral compass ... in a very serious way and I can't condemn that enough." Furthermore, the district court highlighted DeSimone's dishonest and obstructive conduct in perjuring himself as compounding the wrongfulness of his actions: "It was despicable, and I don't know what else to say about it. Not only that but you lied about it when the time came." The district court's discussion with respect to sentencing in the instant case thus focused exclusively on individual, distinctive, and ethnically neutral aspects of DeSimone's character and his crimes.

c) Imposition of Restitution

DeSimone's final claim is that the district court failed to consider required factors under the Mandatory Victim Restitution Act ("MVRA"), see 18 U.S.C. § 3664(f) (2), before imposing the order of restitution.⁸  "We review a restitution order for abuse of discretion." United States v. Lino, 327 F.3d 208, 210 (2d Cir. 2003). DeSimone's failure to object to the restitution order at sentencing does not create a bar to appellate review "because improperly ordered restitution constitutes an illegal sentence amounting to plain error." United States v. Thompson, 113 F.3d 13, 15 (2d Cir. 1997).

The relevant section of the MVRA requires district courts imposing restitution to consider three factors: "(A) the financial resources and other assets of the defendant, including whether any of these assets are jointly controlled; (B) projected earnings and other income of the defendant; and (C) any financial obligations of the defendant; including obligations to dependents." 18 U.S.C. § 3664(f) (2). DeSimone's claim rests solely on his argument that the district court did not make express statements on the record indicating that it considered the MVRA factors. See Appellant's Br. at 14-17. Even if we believed that the district court failed in this regard—and we do not—DeSimone's argument is barred by a recent decision of this court.

In United States v. Walker, 353 F.3d 130, 134-35 (2d Cir. 2003), we stated that " [t]he only question we address is whether the sentencing judges must state on the record that they have considered the factors, on pain of remand. We now abandon that requirement." Therefore, "in considering restitution sentences imposed under MVRA, we will not vacate and remand ... solely by reason of the sentencing judge's failure to indicate consideration of the mandatory factors." Id. at 134. There is nothing in the present record to indicate that the district court failed to consider the factors contained in the MVRA in ordering DeSimone's restitution. Indeed, the district court's order is thoughtful and carefully calibrated to meet DeSimone's circumstances.⁹ 

The judgment of the district court is affirmed.