Case o' The Week: A Grand is "Substantial" (in the Ninth) - George and "Substantial financial hardship" guideline enhancement

The Hon. Judge Eric D. Miller

“‘I stole only from those who were already poor’ is not often advanced as an argument in mitigation, and we find it unpersuasive.”

   (Guess how the remaining sentencing issues panned out).

United States v. George, 2020 WL 547383, *4 (9th Cir. Feb. 4, 2020), decision available here.

Players: Decision by Judge Miller, joined by Judges Owens and Ryan Nelson. Hard-fought appeal by former AFD Ben Coleman.  

Facts: Christopher George was found guilty of fraud offenses after trial. His companies “defrauded nearly 5,000 homeowners out of millions of dollars.” Id. at *1. George’s original twenty-year sentence was reversed by Judges Reinhardt, W. Fletcher and Owens. 713 Fed.Appx. 704 (9th Cir. 2018). 

  On remand the district court and government agreed that newer (2015) guidelines should be used. Id. The court then reduced George’s sentence “by just five months, to 235 months.” Id. George appealed again: the case went to the new panel of Judges Miller, Owens and Ryan Nelson. Id.

Issue(s): “[George] focuses on the district court’s application of section 2B1.1(b) (2)(C) of the Guidelines, which provides for a six-level enhancement if the offense ‘resulted in substantial financial hardship to 25 or more victims.” U.S.S.G. § 2B1.1(b)(2)(C)(2016).’” Id. “George argues that the district court erred in finding that 25 or more victims suffered substantial financial hardship. Addressing that argument requires us to examine the meaning of ‘substantial financial hardship,’ a term we have not previously interpreted.” Id. at *2.

Held: “We conclude that section 2B1.1(b)(2) requires the sentencing court to determine whether the victims suffered a loss that was significant in light of their individual financial circumstances.” Id. at *2.

  “The notes reinforce the conclusion that our inquiry must consider how the loss affects the victim. For some victims, a loss of, say, $10,000 might not have any of the listed effects. For others, a much smaller loss might have such effects. The provision thus requires a focus on the victims’ individual circumstances, a focus that is consistent with the Sentencing Commission’s goal in amending section 2B1.1 in 2015 to ‘place greater emphasis on the extent of harm that particular victims suffer.’” Id. (internal quotations and citation omitted).

Of Note: Relying on the Ninth’s 1999 Merino decision (where a $32,000 cleanup was not substantial), George argued on appeal that the $1,000 to $3,000 fees lost by most victims was not “substantial” here. Judge Miller is unpersuaded. The district court found that these victims were on the brink of losing their homes because of mortgage non-payments. For these specific victims, a couple of thousand in fees paid to George’s (fraudulent) loan-modification company was “substantial” -- the district court did not clearly err. Id. at *3.

   Note that this is a whopping +6 offense level bump – a worrisome and expansive reading of “substantial” for fraud cases.    

How to Use: One has to squint hard to see the silver lining in this dark guideline cloud, but there’s a brief tort-ish analysis of interest towards the end of the opinion. The government argued that this enhancement did not require foreseeability – that is, the government argued that there was no requirement that the defendant could foresee that his actions would cause the victim’s “substantial” loss. 

  Judge Miller rejects the government's “but-for causation” argument, and presumes that the Commission meant to include the (higher) proximate cause requirement. Id. at *4. This is a useful interpretation for when the government stretches that causal link to the breaking point.

  (Unfortunately for Mr. George, the Ninth finds that both "but-for" causation and proximate cause were met here: his 19 ½-year sentence stands).

                                               

For Further Reading: Last week Mr. Roger Stone was sentenced to forty months in custody. His sentencing sparked two stories. First, DOJ’s dueling mitigation-memo revealed how much political meddling has undermined the independence of federal prosecutors. 

  The Stone sentencing also, however, illustrated just how unfairly punitive the sentencing guidelines are for all federal defendants. DOJ was right, to recommend a lower sentence than the whopping 7-9 years urged by the line AUSAs. Notably, Judge Amy Berman Jackson agreed with DOJ that the guidelines were too high -- even for this colorful defendant -- in a thoughtful and underreported sentencing decision. The Stone sentencing was a victory for judicial independence in sentencing, and yet another black eye for the increasingly irrelevant sentencing guidelines. 

   Who better to give us insights on both "Stone stories" than a former criminal-division AUSA, who is now a proud, hard-fighting member of a CJA panel?

N.D. Cal. CJA Panel Member Jeffrey Bornstein

 For a very thoughtful op-ed on both stories that weave through the Stone brouhaha, see “Trump’s Meddling is Wrong, but so are Overlong Sentences,” by stalwart NorCal CJA member Jeffrey Bornstein, available here. 

Image of the Honorable Judge Eric D. Miller from https://www.youtube.com/watch?v=nHQYcZ9Kr98

Image of Mr. Jeffrey Borstein from https://rbgg.com/attorneys/partners/jeffrey-l-bornstein/

Steven Kalar, Federal Public Defender N.D. Cal. Website at www.ndcalfpd.org

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