USA v. Skys, No. 09-5204 (2d Cir. 2011)
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09-5204-cr USA v. Skys 09-S204-cr USA v. Skys 1 UNITED STATES COURT OF APPEALS 2 FOR THE SECOND CIRCUIT 3 August Term, 2010 4 5 (Submitted: Decided: November 17, 2010 February 23, 2011) Docket No. 09-5204-cr 6 7 8 UNITED STATES OF AMERICA, 10 - v. 11 12 13 ERIC SKYS, 14 Before: - Defendant-Appellant. ---------------------JACOBS, Chief Judge, KEARSE and STRAUB, Circuit Judges. Appeal from a judgment of the United States District Court 15 16 for 17 Judge, 18 §§ 19 1344, 20 imprisonment 21 activity involving 10 or more victims. 22 23 24 25 26 27 28 29 the Southern District of New York, convicting defendant of securities 78j (b) and 78fC and 2, and as Remanded William H. fraud, and wire and bank frauds, sentencing the for organi zer further him or proceedings of 15 18 U.S.C. principally leader Pauley to 130 extensive in III, U.S.C. §§ 1343, months' criminal connection sentencing. PREET BHARARA, United States Attorney for the Southern District of New York, New York, New York (William J. Stellmach, Daniel A. Braun, Assistant United States Attorneys, New York, New York, of counsel), for Appellee. with IRA D. LONDON, New York, New York (London & Robin, New York, New York, of counsel) I for pefendant-Appellant. 1 2 3 4 KEARSE, 5 Circuit Judge: Defendant Sric Skys appeals from a judgment entered in the Cou~t 6 United States District 7 following his plea of guilty before William H. 8 convicting him on one count of securities fraud, in violation of 9 15 wire U.S.C. §§ 78j (b) and for the Southern District of New York 78ff; three counts Pauley III, of Judge, fraud, in 10 violation of 18 U.S.C. 11 In 12 principally 13 fi ve -year 14 two IS imprisonment 16 ("Guidelines"), 17 finding that chere were 10 or more victims of his offenses within 18 the meaning of Guidel ines § 19 he leader 20 extensive 21 reasons that 22 findings on 23 review 24 appropriate findings or for resentencing. violation J to 18 of the §§ 1344 months' organizer the or the that to I we issues remand conclude are for (2) criminal that he a challenges the range of Guidelines erred (1) in in finding that that was 3Bl.l (a) . For the the supplementation by activity § insufficient - 2 - court and sentenced followed Sentencing district 2Bl. 1 (b) (2) of be calculation of advisory che was On appeal, meaning of Guidelines follow, these court's by contending Skys imprisonment, district recommended we and 2. supervised release. the within and 1343 and 2; and one count of bank fraud U.S.C. 130 term of aspects was of §§ to of district permit the court's meaningful record wi th I. 1 2 The events that BACKGROUND gave 3 no longer in dispute. 4 charges, 5 plead guilty on all counts, 6 the evidence 7 A. to the present prosecution are at J 77) . B rise Skys On the third day of his trial on the above elected to wi thdraw his pI ea of 1S stating, overwhelming" inter not guil ty and to ali~, "I am guilty and (Trial Transcript, August 5, 2009, The Events Underlying the Counts of Conviction 9 In August a Skys, 2007, scheme to obtain whose 12 and chief executive officer of a 13 Corp. 14 business of providing information technology consulting services. 15 He 16 Kaiser-Himmel owned approximately 13.4 mil,lion shares of stock in 17 Sprint 18 for 19 supposedly 20 intelligence. 21 shares of Sprint was approximately $240 million. 22 that 23 legally be 24 realize immediate approached Nextel Ci tigroup Corp. held himself out "K-H OI Inc. ) which I that K-H' s At Sprint and that time, shares transferred cash involved which the were until for was market October 3 in the represented that payment IIAedan," which K-H had the of use value of artificial 13.4 million Skys represented ~, 2008, one .. third - supposedly and restricted, about - to be the president K-H had received as an anti -virus computer program called developed several company he called Kaiser-Himmel (01 Ci tigroup") (" Sprint") from Smith, financial or money Eric 11 ("Kaiser-Himmel" of is launched He sums name 10 institutions. large real they could not he sought to and of the shares by a 1 means such as pledging them to Citigroup in exchange for a loan-- 2 or an advance purchase price--of $83 million that would be repaid 3 either in cash or 4 fact, 5 documents 6 ownership were fabricated. 7 Citigroup by transferring the hypothecated shares. In neither Skys nor K-H owned any Sprint stock, and all of the 8 but 9 learned that declined that 10 forgeries. 11 other 12 documents. Skys submitted seriously in October Skys' s to considered 2007, claims Citigroup the after were it false as proposed contacted and his evidence of transaction Sprint documents and were Skys made similar attempts to obtain funds from three financial institutions, using some of the same forged Those attempts also failed. 13 Skys was arrested in May 2008 and charged with one count 14 of securities fraud and one count of bank fraud in connection with 15 his fraudulent offers to sell the Sprint shares to the financial 16 institutions, in violation of 15 U.S.C. 17 U.S.C. 18 with interstate telephone or fax communications to Citigroup with 19 respect 20 stated balances, in violat ion of 21 indicated above, Skys entered a mid- trial 22 counts. 23 B. 24 25 §§ 78j (b) and 78ff, and 18 1344 and 2, and three counts of wire fraud in connection to, inter alia, securities 18 accounts U. S. C. with §§ 1343 fraudulently and 2. As plea of guil ty on all Uncharged Conduct The presentence report the §§ following additional (" PSR") fraudulent - 4 - prepared on Skys described conduct in which Skys had 1 engaged but 2 January 2006 t.hrough March 2007, Skys solicited investments In a 3 company predecessor 4 representing that he had become a multimillionaire by developing 5 the 6 contractual relationships with several large corporations and the 7 United 8 solicitations, 9 or he which was called "Aedan" not Backspace2 - -a anti -virus States charged program Department of in the and The PSR Defense. stated that of that case. had support that were these From Kaiser -Himmel-- he In Skys distributed documents forgeries. present existing of these fabrications solicitations were 10 successful and that Skys defrauded investors of moneysj but it did 11 not 12 there 13 defrauded. identify any such investor, did not state how many investors were, 14 and did In addi tion, not state the amounts the PSR described Skys' 15 from a 16 to develop 17 included 18 shares of Sprint seock. 19 $2 million investment 20 $5 million in the 21 dental In imaging representations The PSR 2008 fall in exchange which they were receipt of $300 ,000 8 sell the Sprint shares. 22 Florida dentist of software. as to his for a Skys's from the sales ownership Skys also solicited, dentist, false promise of pitch had 13.4 million unsuccessfully, promising to repay a him of 2008 when Skys would be permitted to characterized the dentist and the Backspace2 23 investors as victims in Skys's offenses but noted that his conduct 24 with respect to those persons was uncharged. - s - 1 Sentencing C. The 2 PSR's level calculation began with a of Skys's 3 offense 4 § 5 offense 6 for an intended loss amount of more than $50 million but not more 7 than $100 millioni 8 offense involving 10 or more, but fewer than 50, victims; and two 9 steps 2B1.1 (a) (1) base offense advisory-Guidelines level of 7 pursuant to it recommended increases for the following specific j characteristics: pursuant 24 steps pursuant two steps pursuant to to 2B1. 1 (b) (9) § § to 281,1 (b) § 281.1 (b) for an of fense (C) (2) (A) that 10 sophisticated means. 11 adjustment pursuant 12 organizer 13 more 14 downward adjustment pursuant 15 (1) (M) for an involved of responsibility prior to the imposition of sentence. or The to total or on the ground that Skys was an criminal was otherwise to level of the that was involved extensive, 3El. 1 (a) § offense 37. and five a or two- step for Skys' s acceptance Given Skys' s criminal history 18 imprisonment 19 recommended 20 principally, 21 had actually obtained no money from the financial institutions. Skys was a II, activity 17 22 category 381.1(a) § leader of participants 16 The PSR also recommended a four-step upward 235 prison to term Guidelines-recommended 293 of months. 120 The months as PSR range of nonetheless sufficient, given, that Skys had a history of emotional disturbance and submitted to the district court a presentence 23 memorandum objecting to the PSR-recommended enhancement for 10-49 24 victims and the recommended adjustment 25 criminal activity involving five or more participants. 26 principally that the government for a had not - 6 - leadership role in He argued sufficiently identified 1 such victims 2 enhancement objection, the government argued that the total number 3 of financial institutions that Skys had ateempted to defraud, plus 4 the Florida dentist and the Backspace2 investors he had succeeded 5 in defrauding, was more than 10, and indeed approached 50. 6 the role adjustment, the government argued that there were in face 7 at least five participants in Skys's criminal activity: 8 himself; 9 corporate (2) or participants. his life partner secretary of Skys Careen to Cunningham Kaiser-Himmel, targets; the 10-victim- As to Skys (1) who, made as the material 10 misrepresentations 11 financial officer Joseph Cross; 12 with Cross, 13 co obtain financing from the financial institutions; and (5) Gary 14 Griffiths, supposed 15 development 16 investors for Backspace2. 17 scheme, given its nature and his repeated misrepresentaeions and 18 fabrications, 19 adjustment. 20 to Responding (4) (3) K-H's supposed chief Michael Breshears, who, along had acted as a middleman in assisting Skys's attempts self-described of IiAedan," was as a who collaborator had helped in the recruit individual The government also argued that Skys's sufficiently extensive to warrant the role Skys pursued his objections to the IO-victim enhancement 21 and the leadership-role adjustment at the sentencing hearing. 22 argued, 23 considered victims of his offense because that scheme was not part 24 of the same enterprise as his offense conduct. 25 role adjustment was inappropriate because Cunningham could not be 26 a criminally responsible participant, inter alia, that the Backspace2 - 7 - He investors should not be He argued chat the as "[slhe believed what Mr. 1 Skys told her," 2 anything she did for Kaiser-Himmel 3 other individuals named by the government were "merely doing their 4 jobs" 5 (Sent encing Transcript, 6 claimed 7 branch of 8 fraud "alone through just e-mails." 9 In sentencing Skys, and and could that not the the there was "no that be December 3, not considered meet and that che (" S. Tr. ,,), 2009 the knew" coconspirators. at 9.) "otherwise Skys extensive" leadership role guideline because he conducted the Od. at 10.) the district court stated that l O i n certain respects not pert inent to this appeal) 11 reviewed the presentence report. 12 the 13 la-victim objection, report . as "this Court has adopt the findings of fact in I (Id. my own." (except at 20.) In rejecting Skys's the court stated as follows: [C] onsidering the continui ty wi th relevant conduct and the financial institutions involved, I find that the probation's calculation of the two-level enhancement for more than ten victims is warranted. 14 15 16 17 18 [she] "was fraudulent," legitimately scheme did evidence at 21.) (rd. 19 Wi th respect 3B1.1(a) to role that § 21 five or 22 acti vi ty 23 commented that 24 had 25 of other 26 at 10.) "He 27 number of calculated and orchestrated moves. 28 at Ms. it that "two adj ustment, 20 more has the participants was otherwise Skys and people these he at did was and the branches, other extensive. "really didn't need Cunningham that disjunctive" it then he had various from capable his of - 9.) requiring criminal The court five or more people. the over convincing - 8 one requiring (S. Tr. unwi tting financial home the court had noted participation institutions." a period He of time (Id. in a And he was so good ocher people chat his 1 enterprise 2 (Id. ) 3 a How legitimate one_ is that. not. extensive?" as follows: In formally rul ing on Skys' s challenge, the court stated Now the defendant objects to the four-level enhancement for being an organizer or leader of activity involving five or more participants or that was otherwise extensive, and this Court finds that this was an extensive scheme. Mr. Skys led a l i fe that was entirely a life of fraud, and whenever he needed to offer another artifice, he did it, whether it was a forged stock certi f icate, a bogus account statement, a manipulation of e-mails. Whatever it took, the defendant rose to the occasion. It was not a momentary lapse. It was extensive. And Mr. Skys was constantly moving on to new targets of opportunity. And so a four-level enhancement is warranted in this case. 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 was (ld. at 21-22.) The 19 court concluded that Skys's Guidelines-recommended 20 range of imprisonment was 235 to 293 months. 21 Skys 22 institutions, 23 possessed the ability to become a productive member of 24 the court imposed a below·-Guidelines prison term of 130 months. 25 had not succeeded and finding his that scheme to defraud the financial he was only 26 years of age and society, This appeal followed. DISCUSSION II. 26 27 in However, noting that On appeal, of challenges 28 application 29 increases 30 difficu],ty with both increases. as the Skys part lO-victim of the and 9 - district leadership-role Guidelines - the court's offense-level calculations. We have 1 A. The Standards of Review 2 The district court 3 Guidelines 4 United States 5 court mus t 6 calculating the 7 States, U.S. 8 at 259-60. 9 "reasonableness," which 10 discretion. ~, 11 Brown, 12 sentence v. I' 552 or a u.s. 543 all 49 sentence, ~, either by Gall but i a ~, see, (2005) range," see, i impose proceedings Guidelines (2007) to 243-45 220, sentencing applicable 38, discretion non-Guidelines Booker, begin has the correctly v. Booker, Vniced 543 U.8. We review the district coure's sentencing decision for See, 514 F. 3d 256, 264 is essentially Gall, 552 review at 46 U. S. j for abuse United of States v. (2d eir. 2008). In determining whether there was an abuse of discretion, 13 we review 14 fact, 15 permissible 16 478, 17 ~, or 502 "for an error of law, a decision that decisions. cannot be United II States (2d Cir.), cert. United States v. 18 (IIAbiodun"), 19 are 20 error. 21 99 22 "(M] ixed questions of 23 or 24 the question 25 United States v. Thorn, reviewed See, (2d Cir.) under the novo; ~, denied, Abiodun, cert. denied, de or clearly erroneous findings of 129 8. findings located Ct. of S. 589 fact United States v. ("Rubenstein"), cere. law and fact" clearly erroneous is 397 162, (2008). are (2d i F. 3d see, Cir.) Rulings of law reviewed 546 562 (2009) 166 Rubenstein, denied, U.S. for clear 403 F.3d 93, 876 (2005). are reviewed "either de novo standard [ , 1 depending on whether predominantly legal or 446 F.3d 378, - Ct. range of Josephberq, F. 3d id.; the v. 130 536 wi ehin 10 - 387 [predominantly] (2d eir. 2006) factual." 1 "[T)he interpretation of a sentencing guideline is a 2 question 3 Cir.) 4 169 5 inside or outside 6 ensure that the district court committed no significant procedural 7 error, such a s . 8 9 of law," United States v. Carr, F.3d 557 93, (internal quotation marks omitted), cert. denied, (2009), and "[rl egardless of whether the Guidel ines 103 (2d 130 S. Ct. the sentence imposed is (we 1 range, . improperly calcu':"a ting (J must fi rst the Guidel ines range . or failing to adequately explain the chosen sentence," Gall, 552 U.S. at 51. 10 As to disputed findings of the review. 13 115, 122 14 451-52 15 (2010) 16 (en bane), 17 Carter, 489 F.3d 528, 538 (2d eir. 2007) 18 128 Ct. A defendant's role in criminal activity 19 is a 20 489 21 victims within the meaning of Guidelines § 2Bl.1(b) (2) 22 a 23 considered 24 question of law. S. Cir. 2009) cert. ("Ware"), at 538. a see, The factj victim cert . ~, number but wi thin See,~, 2735 Ware, of the the meaning Abiodun, - 11 - 193 622 F.3d 577 t='.3d 442, 131 (2009); S. Ct. (2d Cir. 432 2008) United States v. (IICarter"), cere. denied, 577 F.3d at 452; persons matter meaningful Ahders, denied, 550 F.3d 180, 129 S. Ct. (2008) question of fact, of Cavera, denied, 1066 question United States v. (2d Cir. 2010); United Scates v. Ware, United States v. F.3d permit must appellace i to court 12 See,~, clarity district make (2d sufficient fact, 11 119, with issues of of or entities who that can Carter, who is likewise properly guidel ine 536 F.3d at 169. are is be a 1 B. The lo-Victim Enhancement Skys 2 challenges neither the four the lo-victim enhancement the ground 3 that 4 defrauded 5 transaction nor the individuals who actually were defrauded into 6 giving him money could properly be considered victims within the 7 meaning of 8 court, in pertinent part, as follows: 9 (Apply the greatest) into 10 § financial on accepting 2B1.1 institutions that avoided being his proposed multi-million-dollar That section instructs the sentencing (b) (2) . If the offense-- (A) (i) involved 10 or more victims increase by 2 levels; 11 12 (8) invol ved by 4 levels . 13 or more vict ims, increase 14 Guidelines 15 § 16 [including individuals, corporations, and companies] who sustained 17 any part of the actual loss determined under subsection 18 Guidelines § 281.1 Application Note 1 (emphasis added) 281.1 §§ 281.1 (b) 50 defines "[v] ictim," Subsection 19 and (2) (A) (i) (b) (1) offense-level in of pertinent § 281.1 increases The (8) . part, is the depending commentary as loss on the to "any person (b) table (1) ." that 20 prescribes amount of 21 loss. 22 exceptions not relevant here, that "loss is the greater of actual 23 loss or intended loss," Guidelines 24 (emphasis added) 25 harm 26 Application Note 3 (A) (ii) 27, loss" The commentary focusing on subsection (b) (1) provides, with that to was "mean [J § 281.1 Application Note 3 (A) It defines" [ilntended loss" as "the pecuniary intended the to result from (emphasis added), the offense," id. and defines "(al ctual reasonably foreseeable pecuniary harm that - 12 - 1 resulted from the offense," id. Application Note 3 (A) (i) 2 added) . 3 intended loss, 4 to 5 reasonable estimate of the loss," id. Application Note 3(C). the To determine which "is the greater," (emphasis actual loss or the court obviously must make some determination as amount in category; but it "need only make a 6 In 7 subsection 8 intended loss if that is greater than the amount of actual loss, 9 "victims," within the meaning of subsection (b) (2), are only those 10 persons or entities who sustained "actual loss determined" by the 11 courc 12 at 169 (error as a matter of law to include as victims individuals 13 whose "losses 14 Skys, 15 sum, each (b) (1) "under while of § the court's 2Bl. 1 subsection (b) lS to loss be See, (1) . " determination based on the Abiodun, ~, under amount 536 . were not included in the loss calculationI') . noting the above def ini tion of "[v] ict im," points [a]lthough the testimony adduced at trial could support a claim that the financial institutions bore some incidental, actual loss, that loss was not part of the § 281.1 (b) (1) calculation. The purported incidental losses therefore cannot form the basis for a finding that the financial institutions were victims. Moreover, if the court took lost time into account when it decided that the financial institutions were victims, it failed to determine the monetary value of this time when making its calculations of loss, as this section also requires. 18 19 20 21 22 23 24 25 26 27 (Skys brief on appeal at 27 28 court's 29 We agree. intended loss: 32 33 F. 3d out that 16 17 30 31 of loss calculat ion (emphases added).) under subsection (b) (1) was based (T]he defendant admitted he attempted to deceive financial institutions by making fraudulent misrepresentations to them that he was in possession of more than 13 million shares of Sprint-Nextel - 13 - The on 3 stock. He made these representations in an effort to obtain $B3 million from financial institutions in the United States. 4 5 6 Now this Court has reviewed the presentence report. I adopt the findings of fact in the report as amended here on the record as my own. 7 Turning first to the guideline calculation, because this crime sounds in fraud, the base offense level is 7, and because the offense involved an anticipated loss exceeding 50 million but less than a hundred million, 24 levels are added. 1 2 8 9 10 11 12 {S.Tr. 20-21 13 (emphases added) .) The district court itself made no determination that financial any 14 of the four 15 any actual 16 findings 17 financial institutions had used their resources for several months 18 In evaluating Skys' s proposed transact.ion, 19 no determined loss amount to the institutions. loss. made in Without 20 institutions mentioned in the PSR suffered And although the court permissibly adopted the the any PSR, that determined that the stated that there was of actual to the included 23 agree with Skys that it 24 step la-victim increase might have affected the district court's 25 ultimate decision on sentencing 26 28), lS as victims court loss 22 institutions district stating financial the the amount while 21 27 28 29 30 31 32 33 institutions, report, under § inappropriately 2Bl.l(b) (2). We unclear how nonapplication of the two- (see Skys brief on appeal at 27- and we thus agree with his contention that we should remand for the district court to determine (1) whether the record affords enough information for the court to recalculate the loss amount to include incidental losses; and, if so, (2) whether the new loss calculation would support a finding that there were ten or more victims to the offense. See Abiodun, 536 F.3d at 169. - 14 - 1 (Skys brief on appeal at 28.) 2 Similar determinations Backspace2, respect 5 more victims, 6 financial 7 individuals 8 "relevant conduct." 9 shows that 10 "lost their 11 contends 12 conviction was error (1) because the individuals "were not victims 13 of the instant offense, 14 and 15 the court's loss calculat ion under 16 appeal at 26.) that Skys's viewed district Skys's (S.Tr.21.) individuals (Skys their because The it money." have been the record indicates only four targeted institutions. several must the included in the district court's conclusion that there were 10 or because plainly to 4 given thac who with individual 17 1n required 3 (2) investors are frauds included against these them as Skys concedes that "(t]he record gave brief inclusion court money on as to Skys" appeal victims at of and 25.) thereby he offenses his But of but rather victims of uncharged conduct," "the losses objection they sustained were not to § 2B1.1 (b) (1) . " consideration included in (Skys brief on the of frauds 18 perpetrated 19 meritless. 20 § 21 property crimes such as fraud. 22 the sentencing court to take into account a defendant's "Relevant 23 Conduct 24 pertinent part, 25 be 26 committed against individuals as in determined listing of calculat ing "Specific his Offense Guideline Guidelines conduct relevant The number-of-victims enhancement 2B1.1(b) 's II the § is provided for 1n Characteristics" by the basis of," the defendant" - 15 - inter and of 181.], which requires range, provides, that "specific offense characteristics on is al ia, "all acts "all in shall acts that were 1 part of the same course of conduct or common scheme or plan as the 2 offense 3 (emphases added). '1 use 'Of the same or a similar "modus operandi." Guidelines 5 Application Note 9 (A) . that 6 court misinterpreted these provisions. of 7 9 we that Skys's finding conduct. IB1.3(a) (1) (A) § and (2) Indicia of a common scheme or plan include the Nor do 8 Guidelines conviction." We see see no any clear error defrauding The record reflects, Backspace2 indication the the district investors inter alia, Kaiser-Himmel the district was court's relevant that Skys represented 10 that 11 merged) were computer technology companies; 12 Skys s 13 financial 14 his company had developed the "Aedan" anti-virus computer program 15 and 16 corporations i 17 forged 18 conduct 19 operandi 20 properly considered relevant conduct. I and of in 1Bl.3 § solicitations as institutions a result and 21 of and his Skys 's by groups frauds investors misrepresentatlons lucrative was and the Skys that contracts Plainly, used the against on 22 suffered 23 subsection 24 merit. 25 the 26 individuals the the were determination same or with not of Skys's or a Backspace2 ground had suffered actual losses: (b) (1) Backspace2 that major aspects of Backspace2 documents. obj ection the won which major Skys presented both targeted groups wi th fabricated both the included had and that against I both (inco that the determined actual loss, fraudulent similar modus investors were actual as losses part however, of a has The district court implicitly found--and Skys admitted--at sentencing hearing that the individual - 16 - Backspace2 investors 1 2 THE COURT: There's no question-- 3 4 MS. money. 5 6 defrauded, HELLER THE COURT: There's is there? But, no quescion No, your Honor, righe? they lost they were there is not . the court made no determination or estimate as 8 (S.Tr. 9 to the amounts lost by the defrauded Backspace2 investors, either 10 11.) Well, [Skys's attorney] MS. HELLER: 7 [T]hey were defrauded, individually or as a group. Nor did the PSR--which noted the $300,000 loss of a single 11 12 individual, the Florida dentist--make any determination as to the 13 amounts 14 magnitude of the 15 allocuted, it appears 16 purposes of identifying the proper step on the subsection 17 loss table, simply assumed--no doubt correccly--that the defrauded 18 individuals' 19 that 20 the 21 § 22 sustained 23 subsection (b) (1) . lost by the Backspace2 $83 million actual that losses assumption did noc defrauded 2B1 . 1 (b) (2) I any intended the PSR and totaled suffice individuals to Rather, investors. loss, to given which the Skys the district court, less than (b) for (1) But $83 million . to permit the court to consider be victims given the def ini tion part of the actual of within victims loss the as meaning of those who "determined" under Further, neither the PSR nor the court made any finding as 24 the number of Backspace2 investors to 26 absence of any finding as to how many such investors there were, 27 and as to the basis for any quantification, 28 review of the application of the 10-victim enhancemenc. - 17 - defrauded by Skys. The 25 forecloses meaningful In sum, 1 the coure did not determine the amount of actual 2 losses suffered 3 whether they suffered actual losses at all; as to the individual 4 Backspace2 5 the court did not make any estimate or determination of the amount 6 of those losses; and the court did not make any finding as to how 7 many such actually defrauded investors there were. four financial institutions--or investors- -who Skys concedes suffered actual Accordingly, 8 9 the by the district court's even losses-- findings were insufficient to support the IO-victim enhancement under subsection 10 (b) (2) and insufficient to permit meaningful appellate review. 11 remand for further proceedings to permit the court to supplement 12 the record with such findings as are appropriate as to (a) whether 13 and 14 suffered 15 individuals defrauded by Skys as part of 16 plan, 17 actual losses. 18 10 19 recommended range of imprisonment without the victim enhancement. 20 C. to what extent actual and (c) the financial losses, the (h) total insti tutions the amounts number of of We targeted by Skys loss suffered by this common scheme or persons who suffered such If the court concludes that there were fewer than such victims, the court must recalculate Skys s I Guidelines- The.Role Adjustment 21 The Guidelines provide for a four-step increase in offense 22 level if the defendant was "an organizer or leader of a criminal 23 activity that" either "involved five or more participants or was 24 otherwise 25 "Organi zers or leaders of extensive." Guidelines § 3Bl.l (a) (emphasis non-extensive criminal - 18 - added). acti vities are only of Guidelines 2 § 3 Cir. 4 United 5 For any part of § 3B1.1 to apply there must have been "more than 6 one 7 Offense, 8 Application 9 section, 1997) the enhancement subject 3Bl.1(c)." to two-level 1 Uni ted States v. ("Carrozzella"), Stqces v. 233 F.3d Guidelines Introductory Note 2 the defendant Chapter qualify must have" " other part ic ipant [J . ") i 11 223 -24 (2d Cir. 12 U.S. 13 (2d 14 1143 15 person 16 offense, 17 Application Note Ii 1154 (2008) Cir. 2000) (discussing (2001) A who 18 is but need not In the present extensive" case, for Ware, Garcia, of in § 3B1.1 under this purposes for F. 3d 552 F.3d 72, 107 denied, 531 3B1.1, § CO\lrt id. at 9-10 § 22 Ms. 23 other 24 contends 25 district 26 responsible people at that § court these 3B1.1 did various is 381.1 (a), the stating (S.Tr. unwitting financ i al find that participant" other than - 19 - 3B1.1 that there Skys "this 21i see also He had participation insti tutions" " ) ). not applicable at all, not the applied only the (Skys "really didn't need five or more people. had of "a 577 F.3d at 453. 21 he U. S. lS commission Guidelines Court finds that this was an extensive scheme" then 201, denied, of the 20 § 413 208 ce~ "otherwise and the cert. (c) ), the district branch 2000). Role adjustment 19 Cunningham (2d id. been convicted." ~, B - Zichettello, responsible have ~, 3B1.1 § V." "participant," criminally an 3B 1. 1 (a) ), § (2d Cir. Part 3, States v. United States i 802 supervised or led at least one (discussing Vni ted 160-61 see, for 10 2005) 157, .CommentarYi ("To 105 F. 3d 796, abrogated in part on other grounds by Kel)nedy, participant." Carrozzella, arguing that was himself any of Skys the "criminally (Skys brief on 1 appeal at 30-31); and he contends that the court gave no adequate 2 explanation for its 3 "extensive" within 4 We 5 inadequate. agree 6 that imposing a 7 must make specific 8 (the] 9 activity (id. was at 31-33). findings and explanation were role adj ustment, findings States v. ~,United (a) the sentencing court as to why a particular subsection of adjustment applies." 3El.l § Skys's subsection the meaning of that the district court's Before II determination Espinoza, 514 Ware, F.3d at 577 F.3d 209,212 see, 451; (2d Cir.) ("Our 10 precedents 11 specific factual 12 [Guidelines] 13 denied, 553 U.S. 1045 (2008); United States v. Patasnik, 14 63, (2d Cir. 1996) (" [Aln implicit finding is 15 Carter, 16 specific 17 of the sentencing hearing, we require specific factual findings to 18 permi t 19 omitted) ) . 20 To 69 are § 489 uniform findings 3Bl.1." F. 3d factual requiring a district ("Although this not make cert. 89 F.3d enough. ") requirement of i making findings may interfere with the smooth operation appellate review." "sufficiently review [, iJ t (internal specific repeat 23 conclusorily chat 24 F.3d 25 satisfy 26 statements in the defendanc's presentence report paraphrase the enough language of for the quotation permit 22 l8 not to appellate at 452. to (internal quotation marks omitted)), 21 or court to support a sentence enhancement under at 538 meaningful be In the meaningful court merely to guideline and say Ware, 577 the defendant meets those criteria." And "al though its obligation a to make sentencing findings - 20 - marks COurt may by adopting sometimes the factual adoption 1 of 2 enough facts to permit meaningful appellate review." ] ~,Carter, 4B9 4 5 6 7 8 9 10 11 the does PSR Wi th not suf f ice if the PSR i tsel f does not rd. state i see, F.3d at 538-39. respect to the extensiveness branch of § 381.1 (a) , the Guidelines commentary states that [iln assessing whether an organization is 'otherwise extensive,' all persons involved during the course of the entire of fense are to be considered. Thus, a fraud that involved only three participants but used the unknowing serVlces of many outsiders could be considered extensive. 12 Guidelines 13 as noted in Carrozzella, 14 15 16 17 18 19 20 21 22 23 24 25 26 § 3Bl.1 Application Note 3 (emphases added). Further, the background commentary states that the adjustments in Guidelines § 381.1 are "based upon the size of a criminal organization (~, the number of participants in the offense) and the degree to which the defendant was responsible for committing the offense." Guidelines § 3B1.1 Background. This commentary and our decision in [United States v. J Liebman, [40 F.3d 544 (2d Cir. 1994)) indicate that an adjustment under Guidelines § 381.1 is based primarily on the number of people involved, criminally and noncriminally, rather than on other possible indices of the extensiveness of the activity. 27 28 29 30 31 At the very least, Section 381.1's 'otherwise extensive' prong demands a showing that an activity is the functional equivalent of an activity involving five or more participants. 32 Carrozzella, 105 F.3d at 33 emphasis in original) 34 Thus, 35 extensi veness 36 organization this In in a 802, 803 (first emphasis ours, second (other internal quotation marks omitted) . branch of § colloquial terms of 3B1. 1 (a) sense persons - 21 - as is n about involved not che that so much about Sl a ze of the defendant 1 2 I organize [dl ' or Carrozzella, 'Ie [dl . '" 105 F.3d at 803. Accordingly, we have stated that 3 4 5 6 7 8 9 10 [tlhree factors determine whether an activity [wal s "otherwi se extensive": " (i) the number of knowing particioantsj (ii) l...he number of unknowing participants whose acti vi ties were organi zed or led by the defendant with specific criminal intent; (and] (i i i) the extent tQ which the services of che unknowing participants were peculiar and necessary to the criminal scheme." 11 Rubenstein, 12 803 - 04 403 F. 3d at 99 (quoting Carrozzella, IDS F. 3d at (emphases ours)) . The role-adjustment findings made In the present case do 13 Fi rst, In order for ei ther branch 14 not meet the above standards. 15 of 16 above, 17 "participant," 18 is criminally responsible for the commission of the offense. 19 district court stated that" [Skys] 20 had the unwitting participation of other people at these various 21 financial 22 Skys" had" 23 provided Skys wi th services, 24 acted with knowledge that her conduct was criminal. Nor did the 25 court make such a finding as to any other individual. The court's 26 reference to the persons at the various financial institutions as 27 "unwitting" 28 those 29 Without a finding identifying at least one person other than Skys ]0 who was criminally responsible, the § 3Bl.1(a) to be applicable, there must have been, as discussed at least one ~, person, Cunningham persons (S.Tr. lS tends could addition to Skys, who was a a person who, although perhaps not convicted, institutions" (id.) in The had Ms. Cunningham and then he 10); but while the statement that suf f icient to indicate that Cunningham it is not a finding that Cunningham to negative any implication that any of properly be deemed criminally - 22 - § responsible. 3Bl.1(a) role adjustment was 1 inappropriate. 2 convicted not only under 18 U.S.C. 3 18 U. S. C. 4 criminally responsible person. 5 by the district court, no meaningful review is possible. § 2 Gi ven that, as to wire and bank fraud, §§ 1343 and 1344 but also under it would be surprising if I there were not another But without an informative finding 6 Second, 7 explanation for 8 as extensive. 9 above, had named four individuals (other than Skys) whom it viewed 10 as criminally responsible participants, the district court made no 11 finding as to any of those individuals, nor any finding that there 12 was 13 al though 14 investors plus the Florida dentist and the financial institutions 15 totaled nearly 16 finding as to that contention ei ther- -even assuming that such a 17 finding not 18 appropriate 19 F.3d at 802-03. 20 by 21 were "involved" during the course of Skys's offense, or a finding 22 that 23 provided Skys with "services." 24 25 26 27 28 29 a § the Skys was court objectively reviewable Although the government, as described in Part I.C. number the government would "many" no its characterization of Skys's criminal activity significant 381.1 gave 50 of persons who were culpable. And contended that the number of Backspace2 viet ims targeted constitut.e number-of -victims an by Skys, the impermissible enhancement, see court overlap made with Carrozzella, no an 105 Nor did the court make a finding, as contemplated Application Note 3, that quantified the persons who people- -or indeed anyone other than Cunningham- -had Instead, the court found that Mr. Skys led .!L life that was encirely a life of fraud, and whenever he needed to offer another artifice, he did it, whether it was a forged stock certificate, a bogus account statement, a manipulation of e-mails. Whatever it took, the defendant rose to the occasion. It was not a - 23 - momentary lapse. It was extensive. And Mr. Skys was constantly movinq on to new targets of opportunity. And so a four-level enhancement is warranted in this case. 1 2 3 4 5 (S.Tr. 6 "entirely 7 victims indicate repeated criminal conduct, 8 findings 9 sense. 21-22 a of (emphases life of added). ) fraud" extensiveness Statements and was except And those statements, that "constantly" In a Skys led seeking new but do not constitute temporal or a colloquial like the sta tements that Skys did 10 "[w]hatever" was required "whenever" a fabrication was needed, are 11 not 12 appellate 13 premises that the court did not articulate. findings of fact reVlew. Accordingly, 14 that They we are are susceptible conclusory remand to permit to any meaningful observations based on the court to district 15 supplement the record with appropriate factual findings as to why 16 the 17 § 18 the court from making factual findings, 19 to the 20 criminally responsible, at least one of whom was organized or led 21 by Skys 22 If 23 met, 24 imprisonment without an adjustment under that subsection, but with 2S an adjustment under subsection (c) of criteria 381.1 (a) for are met. application the In so remanding, extensiveness branch of we do not mean to preclude if the record warrants, as involvement of four persons in addition to Skys who were I and therefore appl ying the other branch of the court concludes that it of must § 3 B1 . 1 (a) . the criteria for neither branch are recalculate Skys I s Guidelines-recommended range of - 24 - § 3B1.1 if appropriate. CONCLUSION 1 2 We 3 support of 4 as 5 remand 6 as 7 the 8 that 9 Skys' s have to all of the parties' arguments their respective positions on this appeal and, indicated (a) considered above, have found them to be without in except merit. We for supplementation of the record with factual findings victim enhancement criteria discussed either set of and abovej cri teria Guidelines-recommended role adj ustment if the court concludes and/or (b) 1-8 met. not range of 1-n accordance with for recalculation imprisonment without 10 offense-level increase for which the criteria are noc met, 11 of the resentencing. 12 and for We noce that Skys also contends that the adjustment on the 13 ground that 14 double counting 15 number of victims, 16 on appeal 17 made 18 contention is premature. by 19 the at scheme in was light excensive of the enhancements Until more district court on specific remand, record both lssues loss amount, (see Skys brief factual findings of are this If the district court 20 supplements 21 foregoing, 22 new notice of appeal--upon notice by either party to this Court by 23 letter wi thin 24 court in accordance with the 25 new 26 referred to this panel. this appeal will be reinstated--without the need for a 14 days resentences Skys, notice on impermissible consideration The mandate shall issue forthwith. che for and use of sophisticated means 34 -35) . the constituted of appeal. of such supplementat ion. any party wishing In either event, If the district to appeal must the matter file shall a be
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