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United States v. Smith

July 20, 2004


Appeal from the United States District Court for the District of Columbia (No. 99cr00370-01)

Before: Rogers, Garland, and Roberts, Circuit Judges.

The opinion of the court was delivered by: Roberts, Circuit Judge

Argued April 20, 2004

In this case, which is before this court for a second time, appellant Arnett C. Smith raises several challenges to the district court's recalculation of his sentence for conspiracy and conflict of interest. The district court enhanced Smith's offense level by six levels under the Sentencing Guidelines, finding that Smith committed perjury during the trial, that his offense involved vulnerable victims, and that he had played a leadership role in the offense. The court also departed upward an additional two levels, relying on the fact that Smith's conduct included loan fraud for which he was not charged. Smith challenges all the enhancements and the upward departure. We affirm the sentence.


The facts are set forth in detail in United States v. Smith, 267 F.3d 1154 (D.C. Cir. 2001) ( Smith I ); we recount only those pertinent to this appeal. Smith was the chief of the Day Programs Branch of the District of Columbia's Mental Retardation and Developmentally Disabled Administration (MRDDA). His job included referring patients to treatment centers; one of the centers that regularly received such referrals was known as Better Treatment Centers (BTC). BTC's parent company, Psychological Development Associates, Inc. (PDA), was owned by Denise Braxtonbrown-Smith (no relation to appellant). The conflicts of interest for which Smith was convicted arise from several financial transactions among Smith, Braxtonbrown-Smith, and PDA.

First, in the fall of 1994, Smith set about purchasing a house on Columbia Road in the District of Columbia. Braxtonbrown-Smith rented the house from its elderly owner, Earnestine Keaton, and had an option to buy it. Braxtonbrown-Smith told Keaton that she could not afford to buy the house, but that her friend Smith could buy it at the current price of $85,000. Smith and Keaton signed a contract in October 1994 under which Smith was obligated to pay a total of $65,000; Braxtonbrown-Smith told Keaton (who was not represented by a lawyer; Braxtonbrown-Smith had assured her that no lawyer was necessary because they were friends) that she would pay the remaining $20,000.

Smith, however, had no intention of being the record owner of the property. Even prior to his contract with Keaton, he arranged for his childhood friend Terry Reid to purchase the house. Reid submitted a mortgage application in September 1994; to facilitate the approval of the loan, he stated on the application that he would be occupying the house on Columbia Road as his principal residence. To make that statement more plausible, Smith drew up a fake lease that provided for Smith's mother, Florence Ricks, to move into Reid's current home in Upper Marlboro, Maryland. The mortgage was approved and Reid bought the house on Columbia Road from Smith in December 1994 for $102,000 -- providing substantial profit to Smith, who at that time had paid only $10,000 toward the $65,000 that he owed to Keaton. The following month, Smith paid Keaton another $10,000; he paid the remaining $45,000 in April 1995, but only after Keaton contacted him when she learned from a newspaper about the sale of the property to Reid.

Braxtonbrown-Smith was now nominally Reid's tenant, but Smith retained a significant role in the affairs relating to the house. He oversaw the preparation of a lease that Braxtonbrown-Smith and Reid signed, under which Braxtonbrown- Smith agreed to pay roughly $1,300 per month in rent. He and Reid also entered into their own agreement -- again prepared at Smith's direction -- which provided that Reid would record the deed to the property solely in his name. The same agreement, however, established that Smith and Reid would in fact own the property as tenants in common, each with a fifty percent share. Reid and Smith thus executed a new deed reflecting their tenancy in common; by the express terms of the agreement, this new deed was to remain unrecorded. Smith and Reid took equal shares of the profit -- roughly $200 per month -- that was earned from renting the home to Braxtonbrown-Smith.

The second series of transactions involved in this case were short-term loans from Smith to PDA. In January 1995, Smith lent $14,900 to PDA and received, just one week later, a repayment of $18,500. Two additional loans from Smith to PDA, in late January and March 1995, totaled $28,000, for which Smith received a repayment of $39,000 from PDA in early April 1995.

Smith was charged with three counts of receiving illegal gratuities under 18 U.S.C. § 201(c)(1)(B), two counts of conflict of interest under 18 U.S.C. § 208(a), and one count of conspiracy under 18 U.S.C. § 371. The conspiracy charge identified three possible predicate offenses: payment of illegal gratuities (a violation of 18 U.S.C. § 201(c)(1)(A)), receipt of illegal gratuities, and conflict of interest. The jury deadlocked on the first three counts -- the charges of receipt of illegal gratuities -- but convicted Smith on the conflict of interest and conspiracy counts. The verdict left one issue, which would be relevant at Smith's sentencing, unresolved: it failed to identify which of the three possible predicate offenses identified in the indictment was the offense underlying the conspiracy conviction. At sentencing, the district court resolved the issue, determining that "the evidence proven by a preponderance at trial amply demonstrate[d] that [Smith] conspired to commit the offense of Receipt of Illegal Gratuities and/or Payment of Illegal Gratuities." United States v. Smith, No. 99-CR-370, mem. op. at 4 (D.D.C. Nov. 6, 2000) (Initial Sentencing Op.). The court added several enhancements to the base sentencing level for that assumed predicate offense, relying on the number and value of the gratuities and the fact that the conspiracy involved a vulnerable victim. See 2002 U.S.S.G. §§ 2C1.2(b)(1) (multiple gratuities), 2C1.2(b)(2)(A) (value of gratuities), 3A1.1(b)(1) (vulnerable victim). Further enhancements were warranted, the court found, because Smith was the organizer of the conspiracy and had committed perjury at his trial. See id. §§ 3B1.1(c) (aggravating role), 3C1.1 (obstruction of justice).

After adding these enhancements, the court turned its attention to a government motion for an upward departure under Section 5K2.0 of the Guidelines. The government emphasized that certain conduct related to Smith's conspiracy offense -- "efforts to evade income taxes, commit bank fraud and defraud Mrs. Keaton" -- were not accounted for in the sentencing guidelines applicable to the conspiracy charge. Initial Sentencing Op. at 20-21. The court adopted the government's reasoning and departed upward. Id. at 24. In exercising its discretion as to the extent of this departure, the court examined how many levels would be added to Smith's sentence -- under the grouping rules of Section 3D of the Guidelines -- if he had actually been convicted of all three additional offenses (tax evasion, bank fraud, and fraud on Mrs. Keaton). Concluding that a hypothetical conviction on these offenses, with certain enhancements -- including an enhancement for perjury relating to the bank fraud -- would warrant a three-level increase in Smith's offense level, the court chose to depart upward to that extent. Id. at 24-25. The foregoing calculations yielded a guideline range of 41 to 51 months' imprisonment, and the court sentenced Smith to a 46-month prison term.

Smith appealed, and we affirmed his conviction but vacated his sentence and remanded for resentencing. Smith I, 267 F.3d at 1163. As an initial matter, we concluded that the court had erred by using a preponderance-of-the-evidence standard, instead of requiring proof beyond a reasonable doubt, in determining that payment/receipt of illegal gratuities was the predicate offense implicit in the conspiracy conviction. Id. at 1161-63. With respect to the upward departure, we approved of the district court's methodology for determining the extent of the departure, but found that two of the three uncharged offenses on which the court had relied -- tax evasion and fraud on Mrs. Keaton -- should not have been used in the calculation. Id. at 1165-66. As for the third uncharged offense -- the loan fraud -- we held that "the court's conclusions ... [were] well supported by the record," but found that the court's decision to add an enhancement for perjury in its calculation of the adjusted offense level for that hypothetical offense may have been improper because the court "may have confused lying to the bank ... with lying to the court." Id. at 1166.

On remand, the district court concluded that a conflict of interest offense, rather than a gratuities offense, was the predicate offense for the conspiracy of which Smith was convicted. United States v. Smith, No. 99-CR-370, mem. op. at 2-3 (D.D.C. June 23, 2003) (Resentencing Op.). The court noted that the base offense level for that offense was six, see 2002 U.S.S.G. ยง 2C1.3, and reached a total offense level of twelve by adding most of the same enhancements it had applied in the initial sentencing: two levels for Smith's perjury at trial, two levels under the vulnerable victim provision, and two levels for Smith's role as an organizer. Resentencing Op. at 3-4. In adopting the last two enhancements, the court stated that "the Court of Appeals failed to find that these adjustments were unwarranted or unsupported by the record, and ...

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