United States v. Hawes
Full Opinion (html_with_citations)
OPINION OF THE COURT
Brian Hawes appeals from his sentence imposed after a plea of guilty to two counts of mail fraud in violation of 18 U.S.C. § 1341. He was sentenced to a term of 78 monthsâ imprisonment. Hawes argues that the District Court improperly calculated the applicable Guideline range. We agree and will vacate the sentence imposed by the District Court and remand for resentencing.
I. Facts and Procedural History
Brian Hawes was a registered investment advisor and owner and president of two investment advisory services, Financial Management Advisory Services (âFMASâ) and Financial Management Services, Inc. (âFMSâ). In 1997, he became an authorized representative of Fidelity Investments Investment Advisors Group (âFidelityâ).
In 1998, Hawes persuaded a number of his clients to move their assets into investment products offered by Fidelity. For these investment product accounts, Fidelity would mail account statements at regular intervals directly to a clientâs residence or address of choice. Until 2002, Hawes would also issue statements to his clients through his investment advisory service, FMAS, that accurately reflected the Fidelity investments. As a financial advisor, he was authorized to use his clientsâ social security numbers and other identifying information to access their Fidelity accounts and did so in the regular course of business.
Beginning in 2002, however, Hawes used his access to client accounts without his clientsâ permission and changed the addresses to which his clientsâ Fidelity account statements were mailed. In some instances, he mailed change of address forms to Fidelity Investments, indicating that future statements should be sent to his office address. In others, he accessed his clientsâ online accounts and changed the addresses. Hawes then notified his clients that Fidelity would no longer be issuing paper statements and that FMAS would continue to issue paper account statements reflecting their balances with Fidelity.
Hawes then began to divert and transfer client funds into an account for his personal use. To avoid discovery of his theft, he would transfer funds from one client account to another. Through FMAS, he would then issue and provide statements to his clients that did not report the transfers and falsely overstated the value of the Fidelity accounts. Having ensured that his clients would not receive accurate account statements from Fidelity, Hawes was able to hide the fraud from his clients.
In 2003, after his fatherâs death, Hawesâ mother discovered that he had been stealing money that his parents had entrusted with him for investment and submitting statements to them that falsely reflected that annuities had been purchased and were earning money. She threatened to report his crime unless the money was repaid, and Hawes agreed to repay a total of $780,000 pursuant to a payment schedule. In order to make the first payment to his mother, Hawes stole $125,000 from other clientsâ accounts.
On October 31, 2003, Hawesâ fraud was uncovered and his accounts frozen. On April 9, 2004, a two-count information was filed, alleging two counts of mail fraud in violation of 18 U.S.C. § 1341. On that same date, Hawes pleaded guilty to both counts. On August 4, 2004, he was sentenced to a term of 98 monthsâ imprisonment, followed by a three-year period of supervised release, and ordered to pay restitution in the amount of $2,601,961.60. In the wake of the Supreme Courtâs decision in United States v. Booker, 543 U.S. 220, 125 S.Ct. 738, 160 L.Ed.2d 621 (2005), Hawes filed a motion for summary remand on May 3, 2005, and, on August 9, 2005, this Court affirmed Hawesâ conviction and remanded for resentencing. The trial court held sentencing hearings on January 30, March 29, and June 29, 2006. App. 78-417.
During the course of the hearings, the District Court heard from Angelica Banta, the probation officer who prepared
At the sentencing hearings, the government presented testimony as to the appropriateness of a vulnerable victim sentence enhancement under U.S.S.G. § 3Al.l(b). Clients defrauded by Hawes were elderly, ill, and unsophisticated. App. 399, 403. In particular, testimony showed that Hawes diverted $87,500 from an account belonging to Dorothy McKinney who, as he was aware, was in a nursing home and suffered from Alzheimerâs disease. He did so in order to repay his mother for the funds he had stolen and to prevent her from reporting him to the authorities.
The District Court ruled that by changing the addresses of his clients, Hawes did illegally use a means of identification âto produce or alter duplicate means of identificationâ and applied a two-level enhancement under U.S.S.G. § 2Bl.l(b)(9)(C)(i). The District Court also applied a vulnerable victim enhancement under U.S.S.G. § 3Al.l(b) upon finding that some of the victims were persons with whom Hawes had a close relationship and others were retired, elderly and suffering from Alzheimerâs. The calculated Guideline Range was 70 to 87 monthsâ imprisonment.
Hawes was ultimately sentenced to 78 monthsâ imprisonment, followed by a three-year period of supervised release, and ordered to pay $2,276,565.31 in restitution to his victims. Hawes timely appealed his sentence.
II. Discussion
Hawes raises a number of objections to his sentence: (1) that the District Court erroneously applied a two-level âidentity theftâ enhancement to his Base Offense Level under U.S.S.G. § 2Bl.l(b)(9)(C)(i); (2) that the District Court erroneously applied a two-level âvulnerable victimâ enhancement to his Base Offense Level under U.S.S.G. § 3A1.1(b)(1); (3) that his sentence is unreasonable; and (4) that the District Court did not consider the factors set forth in 18 U.S.C. § 3663 in determining the amount of restitution.
We will consider each of these arguments in turn. We review the District Courtâs application of the Guidelines to the facts for abuse of discretion. Unit
A. The Identity Theft Enhancement
Hawes contends that his conduct in concealing his fraud does not qualify for a two-level enhancement under U.S.S.G. § 2Bl.l(b)(9)(C)(i). To determine whether the District Court erred in interpreting the identity theft enhancement to include Hawesâ changing of his clientsâ addresses, we begin by looking to the language of the Guideline and the statutory language referenced therein.
Under the Guidelines, a two-level enhancement to a defendantâs Base Offense Level is appropriate where the offense involved âthe unauthorized transfer or use of any means of identification unlawfully to produce or obtain any other means of identification.â U.S.S.G. § 2Bl.l(b)(9)(C)(i).
the term âmeans of identificationâ means any name or number that may be used, alone or in conjunction with any other information, to identify a specific individual, including any-
(A) name, social security number, date of birth, official State or government issued driverâs license or identification number, alien registration number, government passport number, employer or taxpayer identification number;
(B) unique biometric data, such as fingerprint, voice print, retina or iris image, or other unique physical representation;
(C)unique electronic identification number, address, or routing code; or
(D)telecommunication identifying information or access device (as defined in section 1029(e))3
Hawes contends that âthe act of changing a personâs address is not engaging in the âunauthorized transfer or use of any means of identification unlawfully to alter or duplicate or assemble [an] alternate hybrid means of identificationâ or using a means of identification to âproduce an altered duplicate means of identification.ââ Appellantâs Br. 21 (quoting United States v. Newsome, 439 F.3d 181, 185-86 (3d Cir.2006)).
We begin by asking whether the statuteâs plain terms address the precise question of whether changing an address constitutes producing or obtaining âany other means of identification.â As the Court of Appeals for the Ninth Circuit has observed, âthe enhancement is rather awkwardly written.â United States v. Melendrez, 389 F.3d 829, 832 (9th Cir.2004).
There is a paucity of helpful case law, largely because this sentencing enhancement was only enacted in 2000. Neither we nor any other court has had occasion to address the issue of whether changing an address constitutes obtaining or producing a new means of identification. In United States v. Auguste, however, where the defendant had added herself to another personâs credit card account as a secondary cardholder and had changed the accountâs address in order to receive the secondary card, the enhancement applied not because she had changed the address but because she had taken an account number and added her own name to it, thereby creating a new means of identification. 392 F.3d 1266, 1267-68 (11th Cir.2004).
We have issued only one decision interpreting this Guideline, United States v. Newsome, 439 F.3d 181 (3d Cir.2006), which both parties cite and upon which the District Court relied to conclude that the enhancement applied. In Newsome, defendants obtained personal contact and account information of Fleet Bank customers and used it to produce driversâ licenses with photographs of defendants and the victimsâ information, which they then used to withdraw funds from the accounts. Id. at 183. The district court held that âNew-some had illegally used one means of identification to produce another,â and we agreed that the enhancement was properly allowed. Id. at 184. The fraud victimâs information â name, birth date, driverâs license number, and employee identification number â was a means of identification under 18 U.S.C. § 1028(d)(7). Id. The question was whether the information on the new driversâ licenses constituted âany other means of identification.â Newsome argued that what he did was use an existing means of identification to obtain cash, not to obtain a new means of identification, like a social security number or a loan account number. We disagreed, reasoning that U.S.S.G. § 2B1.1 (b)(9)(C)(i) can be read as requiring the enhancement for âthe unauthorized transfer or use of any means of identification unlawfully to alter or duplicate or assemble any alternate hybrid means of identification.â Id. at 185.
However, in Newsome, the means of identification produced, a driverâs license, is specifically mentioned in the commentary to the Guideline. Furthermore, it involved the sort of âbreedingâ of means of identification that is targeted by the enhancement. Id. at 186; see Commentary to U.S.S.G. § 2B1.1, Background (noting that the enhancement âfocuses principally on an aggravated form of identity theft known as âaffirmative identity theftâ or âbreedingâ â). Neither of the aspects here, a personâs mail and address, are specifically mentioned in the Guidelines, nor is Hawesâ conduct easily categorized as the breeding of means of identification.
Faced with ambiguities in the identity theft enhancement, courts have looked to the application notes, which set forth examples of the types of conduct to which the identification enhancement applies or
(i) In General. â Subsection (b)(10)(C)(i) applies in a case in which a means of identification of an individual other than the defendant (or a person for whose conduct the defendant is accountable under 1.3 (Relevant Conduct)) is used without that individualâs authorization unlawfully to produce or obtain another means of identification.
(ii) Examples. â Examples of conduct to which subsection (b)(10)(C)(i) applies are as follows:
(I) A defendant obtains an individualâs name and social security number from a source (e.g., from a piece of mail taken from the individualâs mailbox) and obtains a bank loan in that individualâs name. In this example, the account number of the bank loan is the other means of identification that has been obtained unlawfully.
(II) A defendant obtains an individualâs name and address from a source (e.g., from a driverâs license in a stolen wallet) and applies for, obtains, and subsequently uses a credit card in that individualâs name. In this example, the credit card is the other means of identification that has been obtained unlawfully.
(iii) Nonapplicability of Subsection (b)(10)(C)(i). â Examples of conduct to which subsection (b)(10)(C)(i) does not apply are as follows:
(I) A defendant uses a credit card from a stolen wallet only to make a purchase. In such a case, the defendant has not used the stolen credit card to obtain another means of identification.
(II) A defendant forges another individualâs signature to cash a stolen check. Forging another individualâs signature is not producing another means of identification.
Application Note 9(C) to U.S.S.G. § 2B1.1.
The Application Note examples are confined to a common sense meaning of identity theft through breeding a new means of identification. The examples of when the enhancement applies involve the production of a specific form of identifying information, which is then used for improper purposes, i.e., taking anotherâs identity to use as oneâs own. In the first example, the defendant uses the victimâs name and social security number to obtain a bank loan, the âmeans of identificationâ bred. In the second example, the defendant uses the victimâs name and address to apply for and obtain a credit card, another unique âmeans of identification.â Where courts have held that the guideline applies to conduct not contained in these examples, the facts have been closely analogous to the examples. See, e.g., Melendrez, 389 F.3d at 829. By contrast, in the examples of when the enhancement does not apply, the defendant has not generated any additional identifying information or engaged in the âbreedingâ targeted by the enhancement.
Changing an address is not easily analogous to the examples in the application notes. In comparison to the facts in other cases, Hawesâ conduct seems closer to the Application Noteâs examples of conduct that does not constitute identity theft, such as stealing an existing credit card or cash
We conclude that Hawesâ conduct does not qualify for the identity theft enhancement. An address or piece of mail does not seem to fit the Guidelineâs definition of âmeans of identification.â The government suggests that the general definition of âmeans of identificationâ includes a name plus any other piece of information and thus includes a name plus an address. To take the governmentâs argument to its logical conclusion, a name plus shoe size or hair color could constitute a means of identification. We believe that the statute, as the language suggests, requires that the means of identification be just that, a means of identification, not merely an attribute of oneâs identity.
The examples enumerated in 18 U.S.C. § 1028(d)(7) are unique means of identification, primarily numbers. A social security number, account number, and the other examples provided within the statute specifically and uniquely identify one particular individual. Accordingly, when addressing the argument that bank accounts are not means of identification, the Court of Appeals for the Eighth Circuit found it determinative that âa bank account number is a unique identification number.â United States v. Scott, 448 F.3d 1040 (8th Cir.2006).
At sentencing, the government argued that the name and address was a means of identification because it was âthe way that Fidelity identified clients in this case.â App. 381. From a common sense standpoint, we find this argument difficult to accept. Financial institutions identify their clients, not by name or address (which can be non-unique identifiers), but rather by account number. As Hawes testified, Fidelity was given certain information about clients to set up an account and â[t]he way Fidelity identified a client after that was by the account number.â App. 384.
Our conclusion is bolstered by the legislative history of the Identity Theft and Assumption Deterrence Act of 1998, Pub.L. No. 105-318, 112 Stat. 3007 (1998) (âITADAâ).
In enacting the ITADA, the Sentencing Commission explained that subsection (b)(10)(C):
focuses principally on an aggravated form of identity theft known as âaffirmative identity theftâ or âbreedingâ, in which a defendant uses another individualâs name, social security number, or some other form of identification (the âmeans of identificationâ) to âbreedâ (i.e., produce or obtain) new or additional forms of identification.
Commentary to U.S.S.G. § 2B1.1, Background. As we said in Newsome, âCongress wanted to provide increased punishment for identity theft that involved creation of means of counterfeit identification rather than the plain vanilla type of identity theft that occurs when person A steals and uses person Bâs credit card.... This multiplication of means of identification is the type of identity theft that Congress believed deserved greater punishment.â Newsome, 439 F.3d at 186. As other courts of appeals have observed, â[t]he ânature of the harmâ meant to be targeted by this enhancement is, in part, âthat which results from using someoneâs identifying information to establish new credit.â â United States v. Oates, 427 F.3d 1086, 1090 (8th Cir.2005) (quoting United States v. Williams, 355 F.3d 893, 900 (6th Cir.2003)).
Given the purpose of the enhancement, we will not read the Guideline to apply to Hawesâ conduct in changing the addresses on his clientsâ account statements lest we produce absurd or unintended results âdemonstrably at odds with the intentions of [the statuteâs] drafters.â Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 571, 102 S.Ct. 3245, 73 L.Ed.2d 973 (1982). Here, Hawes misused his clientsâ accounts and abused their trust. He did not, however, establish new credit or âbreedâ new forms of identification, as contemplated by Congress and the Sentencing Commission in enacting this enhancement. Hawesâ conduct does not qualify for the two-level enhancement under U.S.S.G. § 2B1.1 (b)(9)(C)(i). We therefore find that the District Court erred in imposing the enhancement.
B. Harmless Error Analysis and Guideline Calculation
The government urges us to hold that the erroneous application of the identity theft enhancement to the calculation of Hawesâ Guidelines Range was harmless. Our recent decision in United States v. Langford, 516 F.3d 205 (3d Cir.2008), controls our analysis of this issue.
In the present case, based on the identity theft enhancement, the District Court calculated the total offense level to be 27, instead of 25, which resulted in a
The government has not met its burden of showing that the error was harmless. It is by no means âunambiguousâ that Hawesâ sentence would be the same regardless of whether the identity theft enhancement applied. See Langford, 516 F.3d at 217. It is clear from the record that the sentencing court intended to and did in fact select Hawesâ sentence from the calculated range. Hawesâ sentence was in the mid- to lowpoint of the calculated range. Because the enhancement was erroneously applied, the Court imposed a sentence outside the proper Guideline range of 57 to 71 months. In order to impose a 76-month sentence, the Court would have had to depart upward from the Guidelines, reasoning through the § 3553(a) factors and explaining why the defendant merited a greater term of imprisonment than that contemplated by the Guidelines. Here, by contrast, the Court made clear that a within-Guidelines range was appropriate for Hawes based on its § 3553(a) analysis.
The miscalculation of the Guideline range by the District Court also affected the arguments that the parties made at sentencing. After the Court decided that the enhancement would apply and the range would be 70 to 87 months, defense counsel argued for a sentence at the bottom of the Guidelines, that is, a 70-month sentence. Under the correct range, counsel would have urged the Court to impose a 57-month sentence instead.
Because the error was not harmless, we will remand to the District Court for re-sentencing in light of the foregoing.
C. Hawesâ remaining objections to his sentence
Because we will remand for resentenc-ing, we must address the other errors that Hawes alleges were committed by the District Court in calculating his Guideline range.
1. Vulnerable victim enhancement
Hawes challenges the District Courtâs decision to impose a two-level enhancement under U.S.S.G. § 3Al.1(b)(1), which provides for such enhancement â[i]f the defendant knew or should have known that a victim of the offense was a vulnerable victim.... â A vulnerable victim âmeans a person (A) who is a victim of the offense of conviction and any conduct for which the defendant is accountable under § 1B1.3 (Relevant Conduct); and (B) who is unusually vulnerable due to age, physical or mental condition, or who is otherwise particularly susceptible to the criminal conduct.â U.S.S.G. § 3A1.1(b)(1), Application Note 2.
(1) the victim was particularly susceptible or vulnerable to the criminal conduct; (2) the defendant knew or should have known of this susceptibility or vulnerability; and (3) this vulnerability or susceptibility facilitated the defendantâs crime in some manner; that is, there was âa nexus between the victimâs vulnerability and the crimeâs ultimate success.â
184 F.3d at 220 (quoting United States v. Monostra, 125 F.3d 183, 190 (3d Cir.1997)). In particular, Hawes argues that the District Court failed to find that there was âa nexus between the victimâs vulnerabilityâ and the success of his fraudulent scheme.
The District Court did not cite Iannone in finding that the vulnerable victim enhancement applied. Its failure to use the case name during sentencing in open court does not, however, indicate that the application of the enhancement was error.
Indeed, the record supports the District Courtâs finding that Hawesâ offense qualified for this enhancement. First, the victims of Hawesâ fraud met the standard for vulnerability. The District Court referred to the victimsâ impact statements and âthe close personal relationship the Defendant has had with some of his clients, not only his parents, who could not be more susceptible, but also to other clients who he personally knew or who were referred to him by friends and relatives.â App. 402. It also found that âmany of these individuals were retired, elderly, some suffering from diseases.â App. 403. Second, Hawes knew of his victimsâ vulnerability. Many of his clients were known to him personally or referred to him by friends or relatives. As regards one of his victims, Dorothy McKinney, Hawes knew that she was in a nursing home suffering from Alzheimerâs and was legally blind. Third, there was a nexus between the vulnerability of the victims and the continued success of his fraud. The vulnerable status of Ms. McKinney in particular made it easier to continue the fraud. Specifically, when Hawesâ mother discovered that Hawes had stolen hundreds of thousands of dollars and demanded that he repay $125,000 immediately, Hawes procured the bulk of this sum from Ms. McKinneyâs account, knowing that her particular vulnerabilities made it more likely the theft would go undetected. Taking this money to pay his mother was meant to prevent his family from reporting the theft and allow it to continue.
We, therefore, find that the District Court did not err in enhancing Hawesâ offense level under § 3Al.l(b) and affirm its application of the vulnerable victim enhancement.
2. Failure to consider 18 U.S.C. § 3663 in entering the restitution order
Hawes contends that the District Court failed to consider âthe financial resources of the defendant, the financial needs and earning ability of the defendant, and the defendantâs dependents, and such other factors as the court deems appropriateâ as required by 18 U.S.C. § 3663(a)(1)(B)(i)(II). The parties agree that Hawes failed to raise this objection at sentencing. We, therefore, review the order of restitution for plain error. Fed. R.Crim.P. 52(b); United States v. Lloyd, 469 F.3d 319, 320 (3d Cir.2006).
We find no plain error on the record here. Hawes entered into a plea agreement with the government pursuant to which the parties agreed to the amount of loss and restitution. The Second Adden
3. Reasonableness of Hawesâ sentence
Hawes also argues that his sentence was unreasonable because the District Court gave presumptive weight to the guidelines and imposed a sentence greater than necessary to meet the purposes of sentencing. Because we find that the miscalculation of the Guideline range was not harmless error, we cannot review the sentence for reasonableness. See Langford, 516 F.3d at 214-15, 220. We are confident that the District Court will not give presumptive weight to the Guidelines on remand as the Supreme Court has recently made clear that this is error. Gall v. United States, â U.S.-,-, 128 S.Ct. 586, 597, 169 L.Ed.2d 445 (2007).
III. Conclusion
For the foregoing reasons, we will vacate Hawesâ sentence and remand to the District Court for resentencing.
. The relevant part of the sentencing hearing transcript refers to her as âAngelica Can-vann.â However, it appears that this was a transcription error, Appellant's Br. 13 n. 6, and both the PSR and other portions of the sentencing hearing transcripts identify the probation officer as Angelica Banta.
. This citation is to the 2002 edition of the Federal Sentencing Guidelines Manual, which was used by the District Court and probation office in sentencing Hawes; this section is now at U.S.S.G. § 2Bl.l(b)(10)(C)(i).
. The Commentary to U.S.S.G. § 2B1.1 provides that: " 'Means of identificationâ has the meaning given that term in 18 U.S.C. 1028(d)(4), except that such means of identification shall be of an actual (i.e., not fictitious) individual, other than the defendant or person for whose conduct the defendant is accountableâ under U.S.S.G. § 1B1.3. This is not at issue in this case as the means of identification used were of actual individuals, Hawes' clients.
. See, e.g., United States v. Auguste, 392 F.3d 1266, 1268 (11th Cir.2004) (looking first to application notes and then to the plain language of the guideline); United States v. Melendrez, 389 F.3d 829, 835 (9th Cir.2004) (looking to application notes and reasoning that ''[njeither set of examples perfectly matches Melendrezâs crime, but we conclude that his actions are more like those in the first set of examples.â).
. Because the statutory meaning is unclear, the legislative history can aid us in discerning the Guidelineâs purpose and interpreting it appropriately. See Patterson v. Shumate, 504 U.S. 753, 761, 112 S.Ct. 2242, 119 L.Ed.2d 519 (1992) (stating that resort to statutory history is appropriate where language of statute is ambiguous or confusing); United States v. Pollen, 978 F.2d 78, 85 (3d Cir.1992).
. Although the error at issue in Langford concerned a miscalculation of the criminal history level rather than the offense level, there is no reason to treat one type of miscalculation of the Guidelines differently from another. Regardless of the nature of the error, it may affect the Guideline range chosen and the sentence ultimately imposed.
. In Langford, we noted the possibility that, based on a miscalculation, a District Court might compare a defendant to others who actually have higher offense levels. That possibility became a reality here, as the District Court indicated that the sentence she imposed avoided "imposing] a sentence that would result in disparities among other people who have engaged in like conduct.â However, given the proper range, the sentence she imposed resulted in the disparity she was seeking to avoid.