Argued Nov. 19, 2013.
Joseph H. Hartzler, Attorney, Office of the United States Attorney, Springfield, IL, Darilynn J. Knauss, Attorney, Office of the United States Attorney, Peoria, IL, for Plaintiff-Appellee.
Lee Smith, Attorney, Hinshaw & Culbertson LLP, Peoria, IL, for Defendant-Appellant.
Before POSNER, SYKES, and HAMILTON, Circuit Judges.
POSNER, Circuit Judge.
A commodity pool is an investment fund made up of contributions by a number of different investors. The contributions are commingled and used by the commodity pool operator to buy and sell futures contracts. Because commodity pools are common vehicles for fraud, including Ponzi schemes, the Sentencing Commission has ordained a 4-level guidelines sentencing enhancement for fraud committed by a commodity pool operator. U.S.S.G. § 2B1.1(b)(18)(B)(iii). Brant Rushton, who operated a commodity pool that he used as the vehicle for a Ponzi scheme,
pleaded guilty to one count each of mail fraud and money laundering. 18 U.S.C. §§ 1341, 1956(a)(1)(B)(i). The statutory maximum prison sentence for each of these crimes is 20 years. The probation service calculated Rushton's guidelines sentencing range by adding to the base offense level for the mail fraud the 4-level enhancement for commodity pool operator fraud and a 2-level enhancement for abuse of a position of trust. U.S.S.G. § 3B1.3. Other adjustments brought the total offense level in the presentence report to 28 and the guidelines sentencing range to 78 to 97 months. Neither side objected to the presentence report at the sentencing hearing. Rushton's lawyer did argue that enhancements for operating a commodity pool and for abuse of trust overlap and therefore that including both in calculating a sentencing range overestimated the appropriate sentence for his client. But he was appealing to the sentencing judge's discretion rather than challenging the probation service's calculation of the guidelines range.
The judge sentenced Rushton to 96 months in prison and ordered him to make restitution to his victims of $1.62 million. The appeal challenges just the prison sentence.
The judge was indignant that Rushton's victims had, in the judge's words at the sentencing hearing, " include[d] your parents [defrauded of $116,000], relatives [including an uncle defrauded of $30,000 that he had intended for the care of his mentally disabled son— Rushton's cousin], friends, senior citizens, and disabled children." As is typical of such schemes, much of the money that Rushton stole he spent on luxury items, including $150,000 on horses alone.
The judge dwelled particularly on the plight of Dorris Dunn, who " was 85 years old when she invested [in Rush ton's commodity pool]. If there's one thing we all know, [it's that] the main thing that senior citizens worry about is that they won't have enough money to live on and will have to ask their children or others for help. And they're generally too proud to do that. Your [Rushton's] actions made sure that her concerns came true." Despite the judge's strong language about exploiting an elderly victim, the government did not seek, nor the judge impose or even mention, the 2-level " vulnerable victim" enhancement authorized by U.S.S.G. § 3A1.1(b)(1).
On appeal Rushton argues not that it was merely inappropriate for the judge to add an abuse of trust enhancement on top of the enhancement for his being a commodity pool operator, as he argued in the district court, but that it violated the guidelines. And the government now agrees, noting that the parties had overlooked U.S.S.G. § 2B1.1, Application Note 14(c), which bars the abuse of trust enhancement in a fraud case if the enhancement for being a commodity pool operator applies. The guidelines commentary explains that because commodity pool operators " are subject to heightened fiduciary duties imposed by securities law or commodities law" and therefore the sentencing court " is not required to determine specifically whether the defendant abused a position of trust," Application Note 14(c) " provides that, in cases in which the new, four level enhancement [for commodity pool operator fraud] applies, the existing two level enhancement for abuse of position of trust ... shall not apply." U.S.S.G. App. C, vol. II, p. 367 (Amendment 653, Nov. 1, 2003).
While conceding the error in the calculation of the
guidelines range, the government argues that it is not a plain error, as it
must be for the appellant to prevail, because he didn't ...