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UNITED STATES v. SCHECK

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION


November 26, 1991

UNITED STATES OF AMERICA
v.
DANNY SCHECK

Williams

The opinion of the court was delivered by: ANN CLAIRE WILLIAMS

MEMORANDUM OPINION AND ORDER

Defendant Danny Scheck was indicted and charged with mail and wire fraud and with violating certain provisions of the Commodity Exchange Act. After a seven week trial, defendant Scheck was found guilty on Count 10, which charged that defendant Scheck aided and abetted defendant Robert Mosky in cheating and defrauding Mosky's customer in violation of 7 U.S.C. §§ 6(b)(1)(A) and 13(c)(a). The jury was unable to reach a verdict on the other 19 counts in which defendant Scheck was named, and the court declared a mistrial on those 19 counts. In April, 1991, defendant Scheck entered into a plea agreement with the government. Pursuant to the agreement, Scheck pled guilty to two misdemeanor counts of accommodation trading in violation of 7 U.S.C. § 6(c)(3)(A). The agreement further provided, in accordance with Fed. R. Crim. P. 11(e) (1)(c), "that as a part of the sentence the court shall order restitution in an amount not to exceed the amount of loss calculated pursuant to Guideline § 2F1.1(b)(1)(C)." Plea Agreement at P16. The parties also agreed that the government would recommend that the court impose a fine and term of probation within the applicable guideline ranges.

 After defendant Scheck pled guilty to the aforementioned charges, the court referred the case to the probation department for the preparation of a presentence investigation report. In their report, the probation department found that "the Guideline range for a fine is between $ 4,250 and $ 129,637.50." Presentence Report at 10. The report also stated that "according to the government, the defendant should be ordered to pay $ 4,250 in restitution." Id. Defendant Scheck filed objections to these aspects of the presentence report. Defendant Scheck maintains that he should only have to pay $ 50 in restitution and that the Guideline range for his fine is between $ 2,000 and $ 20,000. The court will address each of these arguments in turn.

 Restitution

 Defendant Scheck maintains that he should not be ordered to pay restitution in the amount of $ 4,250, which represents one half of the government's estimate of the amount of loss caused by all of Scheck's illegal trading. *fn1" Defendant Scheck contends that he should only be ordered to pay restitution in the amount of $ 50 because the loss involved in his counts of conviction is only $ 50. *fn2" In support of this contention, defendant Scheck cites Hughey v. United States, 495 U.S. 411, 110 S. Ct. 1979, 109 L. Ed. 2d 408 (1990). In Hughey, the Supreme Court held that under the restitution provisions of the Victim and Witness Protection Act ("VWPA") of 1982, 18 U.S.C. § 3579(a)(1), *fn3" restitution can only be ordered for losses caused by the specific conduct that is the basis of the offense of conviction and cannot include losses caused by related conduct. While defendant Scheck does not argue that restitution in the case at bar is being ordered pursuant to the 18 U.S.C. § 3579(a)(1), *fn4" the provision at issue in Hughey, he argues that the principles enunciated in Hughey should guide this court's determination of the amount of restitution defendant Scheck must pay.

 The court finds that because restitution is not being ordered under the statutory provision at issue in Hughey, the holding of Hughey, which limits restitution ordered under § 3579 (a) (1) to the amount of loss associated with the count of conviction, should not determine the amount of restitution the court orders defendant Scheck to pay. This is because there is no language in Hughey that indicates that the Court intended its holding to apply to restitution ordered under statutes other than § 3579(a) (1). The Hughey Court examined the language of § 3579(a)(1) very closely and determined that the terms "an offense" and "such offense" in § 3579(a)(1) refer to the offense of conviction. Nowhere in the Hughey opinion is there any statement that the Court intended to limit all restitution orders to the amount of loss caused by the offense of conviction.

 In fact, as the defense acknowledges, there are several Seventh Circuit cases which hold that restitution for losses beyond the losses alleged in the count to which the defendant pleads guilty can be ordered as a special condition of probation under 18 U.S.C. § 3563. See United States v. Peredo, 884 F.2d 1029 (7th Cir. 1989); United States v. Mischler, 787 F.2d 240 (7th Cir. 1986); United States v. Paul, 783 F.2d 84 (7th Cir. 1986); United States v. Davies, 683 F.2d 1052 (7th Cir. 1982). The government argues that the court should order defendant Scheck to pay $ 4250 as a special condition of probation under section 3563(b) (3). *fn5" To order restitution in an amount larger than the loss related to the offense of conviction under section 3563(b)(3), the court must determine that "the unlawful proceeds were obtained as part of an ongoing scheme to defraud, and the defendant consented to the damages figure in the plea agreement and at the subsequent hearing on the plea before the district court." Peredo, 884 F.2d at 1031. See also, Davies, 683 F.2d at 1054 ("court can order restitution that exceeds the amount of loss related to the counts pled to when "(a) the defendant has obtained the proceeds as part of an ongoing scheme to defraud which extends over time, and (b) the amount of the damages to the victim has been established with specificity and admitted to by the defendant in the indictment, the plea agreement, and plea and presentence proceedings.").

 In his reply brief, defendant Scheck argues that the court cannot order restitution in an amount greater than $ 50 as a condition of probation because the two requirements mentioned above, that the proceeds be obtained from an ongoing scheme and that the defendant admit to the amount of loss, have not been met. Specifically, defendant Scheck contends that he has "not been convicted nor pled guilty to any mail or wire fraud counts or scheme to defraud related thereto. Furthermore, . . . Scheck has not agreed in his plea agreement to make restitution in an amount beyond the $ 50 directly involved in Count 10 of the superseding indictment." Scheck's Reply Brief at 5 (emphasis in original). While it is true that Scheck has not been convicted or pled guilty to any mail or wire fraud scheme, he stated in his version of the offense and in the plea agreement that he "accepts the government's calculation that the loss from the same course of conduct falls within the range of Guideline § 2F1.1(b) (1)(C)." *fn6" See Defendants Version of the Offense attached to Presentence Investigation Report and Plea Agreement at para. 6(b)(iii). The court finds this statement, which is basically an admission that loss from defendant Scheck's "same course of conduct" was more than $ 5,000 but not more than $ 10,000, is sufficient to show that defendant Scheck caused more than $ 50 of customer loss as part of an ongoing scheme to defraud.

 The court also finds that defendant Scheck's failure to explicitly admit to causing $ 8500 worth of loss with co-defendants does not preclude the court from imposing restitution in an amount in excess of $ 50. The reason why the aforementioned cases require the defendant to "admit" or "consent" to the damage figure is to insure that the defendant is sentenced "'on the basis of accurate information.'" Mischler, 787 F.2d at 240, quoting, United States v. Rone, 743 F.2d 1169, 1171 (7th Cir. 1984). In Mischler, the Seventh Circuit vacated a restitution order holding that the district court did not rely on accurate information in imposing restitution. See also, Peredo, 884 F.2d at 1033 (reversed restitution order because defendant disputed its accuracy and district court did not make findings as to why it thought the figure was accurate). In the case at bar, although the defendant has not admitted the accuracy of the government's specific restitution calculation, he has admitted to being responsible for losses which fall within the range of the government's calculations. Moreover, the court finds that the government used very careful and conservative methods to arrive at its amount of loss and restitution figures. *fn7" Defendant has not questioned the government's calculation methods, and has only refused to admit to their accuracy because he believes that under Hughey he should only be liable for the amount of loss involved in the count upon which he was convicted. Under the facts of this case, there is not a danger that defendant will be sentenced on the basis of inaccurate information. Therefore, the court has the option of ordering up to $ 4,250 in restitution as a condition of probation, under 18 U.S.C. § 3563(b)(3).

 Fine

 As noted above, defendant Scheck maintains that pursuant to § 5E1.2(c) of the Guidelines, the fine range within which the court should impose a fine is between $ 2,000 and $ 20,000. The probation department contends that the appropriate fine range is between $ 4,250 and $ 129,637.50. The government asserts that the correct fine range is between $ 4,250 and $ 77,287.50. *fn8" In order to understand how defendant Scheck, the government and the probation officer arrived at these numbers, it is necessary to examine the text of § 5E1.2(c) of the Guidelines.

 Section 5E1.2(c)(1) provides that "the minimum of the fine range is the greater of: (A) the amount shown in column A of the table below *fn9" ; or (B) the pecuniary gain to the defendant, less restitution made or ordered." Section 5E1.2(c) (2) provides that "the maximum of the fine range is the greater of: (A) the amount shown in column B of the table below; *fn10" (B) twice the gross pecuniary loss caused by the offense; or (C) three times the gross pecuniary gain to all participants in the offense." Defendant Scheck contends that in order to calculate which is greater, the amounts provided in the fine table or the alternative amounts which are based on the amount of pecuniary gain or loss caused by the offense, the court can only consider the pecuniary gain or loss caused by the offense of conviction. The government and the probation department argue that when calculating the alternative amounts, the court can look to the gain or loss caused by all relevant conduct and not just the offense of conviction. *fn11"

 In support of his contention that the alternative fine ranges can only be calculated by referring to the loss or gain associated with the offense of conviction, defendant Scheck once again relies on United States v. Hughey, supra. As the court noted above, the Hughey Court narrowly interpreted the words "an offense" and "such offense" in the VWPA, which is a statute authorizing courts to order defendants to pay restitution to victims of certain offenses. Defendant provides no reason why the court should use an interpretation of a restitution statute to interpret the Sentencing Guidelines dealing with fines, other than the fact that the VWPA and § 5E1.2(c) (2) of the Guidelines both contain the word "offense." The court finds that the use of the word "offense" in both provisions, standing alone, is not an adequate reason to use the Hughey Court's narrow interpretation of the word "offense" in applying Guideline § 5E1.2(c) (2).

 Moreover, the text of the rest of Guideline § 5E1.2 counsels against a narrow reading of the term "offense." As the government points out, § 5E1.2(d)(1) states that when determining a fine, the court should consider "the need for the combined sentence to reflect the seriousness of the offense . . ., to promote respect for the law, to provide just punishment and to afford adequate deterrence." Similarly, § 5E1.2(e) provides that "the amount of the fine should always be sufficient to ensure that the fine, taken together with other sanctions imposed, is punitive."

 In short, the emphasis in § 5E1.2 on punishment and deterrence indicate that the court should interpret the term "offense" in § 5E1.2(c)(2)(B) and (C) more broadly to include relevant conduct, rather than interpreting the term narrowly to include only the offense of conviction.

 This broader interpretation of the term offense is also supported by the structure of § 5E1.2(c) itself. Section 5E1.2(c)(1), which is used to determine the minimum fine, does not even mention the term "offense." This section merely states that the court should look at "the pecuniary gain to the defendant, less restitution made or ordered. " Presumably, because the word "offense" is not mentioned, the court can look at the pecuniary gain from all of defendant's relevant conduct to determine the minimum amount of the fine. Therefore, it would be illogical to confine the calculation of the maximum amount of the fine to the amount gained or lost due to the offense of conviction, when the minimum amount is calculated based on all of defendant's relevant conduct.

 Finally, the court finds a broader interpretation of the word "offense" in this section to include relevant conduct is appropriate, given the overall structure of the Guidelines. As the government notes, "relevant conduct is properly included in calculating the outer limit of a defendant's possible period of incarceration, supervised release, or probation. It is anomalous to suggest that relevant conduct may properly be considered in setting the parameters for these aspects of a defendant's sentence, but not in determining the applicable maximum fine range pursuant to Guideline 5E1.2(c) (2)(C)." Government's Response to Defendant's Objections to Presentence Report at 7 (emphasis in original).

 For these reasons, the court finds the appropriate fine range for defendant Scheck is between $ 4,250 and $ 71,662.50. *fn12"

 ENTER: Ann Claire Williams, Judge United States District Court

 Dated : November 26, 1991


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