United States v. Pfaff, No. 09-1702 (2d Cir. 2010)

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09-1702-cr(L), 09-1707-cr(CON), 09-1790-cr(CON) United States v. Pfaff 1 UNITED STATES COURT OF APPEALS 2 FOR THE SECOND CIRCUIT 3 -------- 4 August Term, 2009 5 6 (Argued: May 10, 2010 Decided: August 27, 2010) Docket Nos. 09-1702-cr(L), 09-1707-cr(CON), 09-1790-cr(CON) 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 -----------------------------------------------------------X UNITED STATES OF AMERICA, 24 in the United States District Court for the Southern District of 25 New York (Kaplan, J.) following a ten-week jury trial. 26 separate summary order filed today, we AFFIRM the Appellants 27 convictions as well as Appellant John Larson s term of 28 imprisonment, the only term challenged on appeal. 29 opinion to address one question: whether the district court 30 plainly erred in imposing a fine, pursuant to 18 U.S.C. § 31 3571(d), based on the court s finding that Larson caused a 32 certain pecuniary loss, when that fine exceeded the maximum fine Appellee, - v. ROBERT PFAFF, RAYMOND J. RUBLE, also known as R.J. Ruble, JOHN LARSON, Defendants-Appellants. -----------------------------------------------------------X Before: JACOBS, Chief Judge, WINTER and McLAUGHLIN, Circuit Judges. Appeal from judgments of conviction and a sentence entered In a We write this 1 that would have been permitted absent the finding. 2 the district court s fine violated Apprendi v. New Jersey, 530 3 U.S. 466 (2000), and that it constituted plain error. 4 We hold that Therefore, we VACATE and REMAND for the district court to 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 reconsider Larson s fine. 33 PER CURIAM: 34 ALEXANDRA A.E. SHAPIRO, Marc E. Isserles, Macht, Shapiro, Arato & Isserles LLP, New York, NY, David C. Scheper, Scheper Kim & Overland LLP, Los Angeles, CA, for Defendant-Appellant Robert Pfaff. STUART E. ABRAMS, Frankel & Abrams, New York, NY, Jack S. Hoffinger, Susan Hoffinger, Hoffinger Stern & Ross LLP, New York, NY, for Defendant-Appellant Raymond Ruble. J. SCOTT BALLENGER, Lori Alvino McGill, Latham & Watkins LLP, Washington, DC (Steven M. Bauer, Margaret A. Tough, San Francisco, CA), for Defendant-Appellant John Larson. JOHN M. HILLEBRECHT, Margaret Garnett, Justin Anderson, Katherine Polk Failla, Assistant United States Attorneys, of counsel, for Preet Bharara, United States Attorney for the Southern District of New York, for Appellee. Defendants-Appellants Robert Pfaff, Raymond J. Ruble, and 35 John Larson appeal from judgments of conviction, and Larson from 36 his sentence, entered in the United States District Court for the 37 Southern District of New York (Kaplan, J.). 38 jury trial, Appellants were convicted of tax evasion for 2 Following a ten-week 1 designing, implementing, and marketing fraudulent tax shelters. 2 In a separate summary order filed today, we AFFIRM the 3 Appellants convictions as well as Larson s term of imprisonment, 4 the only term challenged on appeal. 5 question: whether the district court plainly erred by fining 6 Larson $6 million, pursuant to 18 U.S.C. § 3571(d), based on the 7 court s finding that Larson caused a pecuniary loss in excess of 8 $100 million, when the maximum fine absent such a finding would 9 have been $3 million, pursuant to 18 U.S.C. § 3571(b)(3). Here, we address a single We 10 hold that the district court s fine violated Apprendi v. New 11 Jersey, 530 U.S. 466 (2000), and that it constituted plain error. 12 Therefore, we VACATE and REMAND for the district court to 13 reconsider Larson s fine. BACKGROUND 14 15 This case, which has been called the largest criminal tax 16 case in American history, Stein v. KPMG, LLP, 486 F.3d 753, 756 17 (2d Cir. 2007), comes before us after a long and tortuous 18 journey, the details of which are for the most part irrelevant to 19 the issue we now address. 20 see generally United States v. Stein, 541 F.3d 130 (2d Cir. 21 2008), Stein, 486 F.3d 753, United States v. Stein, 495 F. Supp. 22 2d 390 (S.D.N.Y. 2007), United States v. Stein, 452 F. Supp. 2d 23 230 (S.D.N.Y. 2006), and United States v. Stein, 435 F. Supp. 2d For a complete recounting of the saga, 3 1 330 (S.D.N.Y. 2006). 2 to whether the district court plainly erred in fining Larson. 3 Here, we recite only those facts pertinent In December 2008, following trial, Larson was convicted of 4 twelve counts of tax evasion under 26 U.S.C. § 7201, stemming 5 from his involvement in the design, implementation, and marketing 6 of fraudulent tax shelters. 7 regarding the amount of pecuniary loss caused, or gain derived, 8 by Larson through his crimes. 9 court conducted a sentencing hearing at which it found that The jury, however, made no findings On April 1, 2009, the district 10 Larson had caused a gross pecuniary loss [in] exce[ss] [of] $100 11 million and that the maximum fine therefore exceeds . . . $200 12 million. 13 U.S.C. § 3571(d), which authorizes a district court to impose a 14 fine of not more than twice the gross pecuniary loss caused by, 15 or gain derived from, the defendant s offenses. 16 court subsequently fined Larson $6 million and sentenced him to 17 121 months imprisonment. 18 the fine amount as violative of Apprendi. 19 fine on precisely this ground. The court calculated this maximum pursuant to 18 Larson did not object at sentencing to He now appeals the DISCUSSION 20 21 The district Where a defendant fails to object to a fine below, we review 22 the fine for plain error. See United States v. Hernandez, 85 23 F.3d 1023, 1031 (2d Cir. 1996). 24 only if (1) there is an error; (2) the error is clear or We may correct such an error 4 1 obvious, rather than subject to reasonable dispute; (3) the error 2 affected the appellant s substantial rights, which in the 3 ordinary case means it affected the outcome of the district court 4 proceedings; and (4) the error seriously affects the fairness, 5 integrity or public reputation of judicial proceedings. 6 States v. Marcus, 130 S. Ct. 2159, 2164 (2010) (brackets omitted) 7 (internal quotation marks omitted). 8 from this court or the Supreme Court supporting the defendant s 9 claim of error, the error cannot be plain. 10 Weintraub, 273 F.3d 139, 152 (2d Cir. 2001). 11 United Without a prior decision United States v. Section 3571 of Title 18 of the U.S. Code governs the 12 imposition of criminal fines. 13 been found guilty of an offense may be sentenced to pay a fine. 14 18 U.S.C. § 3571(a). 15 individuals based on the severity of their offense: for a 16 felony, an individual may be fined not more than $250,000. 17 Id. § 3571(b)(3). 18 [a]lternative fine based on gain or loss : 19 20 21 22 23 24 25 26 27 28 Generally, [a] defendant who has Section 3571(b) establishes a maximum for Section 3571(d), however, allows an If any person derives pecuniary gain from the offense, or if the offense results in pecuniary loss to a person other than the defendant, the defendant may be fined not more than the greater of twice the gross gain or twice the gross loss, unless imposition of a fine under this subsection would unduly complicate or prolong the sentencing process. Id. § 3571(d). 5 1 In Apprendi, the Supreme Court held that, [o]ther than the 2 fact of a prior conviction, any fact that increases the penalty 3 for a crime beyond the prescribed statutory maximum must be 4 submitted to a jury, and proved beyond a reasonable doubt. 5 U.S. at 490. 6 statutory maximum for Apprendi purposes is the maximum sentence 7 a judge may impose solely on the basis of the facts reflected in 8 the jury verdict or admitted by the defendant. 9 Washington, 542 U.S. 296, 303 (2004). 10 530 The Supreme Court has clarified that the Blakely v. Here, the jury found Larson guilty of twelve felony 11 offenses, but made no findings as to the pecuniary gain or loss 12 caused by his conduct. 13 statutory maximum fine Larson could receive was $3 million, 14 that is, $250,000 for each of his twelve convictions per 18 15 U.S.C. § 3571(b)(3). 16 that could be imposed based on the facts reflected in the jury 17 verdict. 18 U.S.C. § 3571(d), a fine supported only by the district court s 19 own pecuniary loss finding, the court violated Apprendi. 20 United States v. Lagrou Distribution Sys., Inc., 466 F.3d 585, 21 594 (7th Cir. 2006) (holding that a fine in excess of § 3571 s 22 default statutory maximum based on a pecuniary loss finding by 23 the trial judge contravened Apprendi). Id. Absent such gain or loss findings, the This amount represents the maximum fine Therefore, by fining Larson $6 million under 18 6 See 1 The Government argues that our decisions in United States v. 2 Reifler, 446 F.3d 65 (2d Cir. 2006), and United States v. 3 Fruchter, 411 F.3d 377 (2d Cir. 2005), mandate that we affirm 4 Larson s fine. 5 Apprendi is not implicated where district courts order criminal 6 restitution or forfeiture based on court-determined loss or gain 7 amounts. 8 411 F.3d at 382-83 (forfeiture). 9 our findings that criminal restitution and forfeiture are We disagree. In those cases, we held that See Reifler, 446 F.3d at 118 (restitution); Fruchter, Critical to both decisions were 10 indeterminate schemes without statutory maximums. See Reifler, 11 446 F.3d at 118 ( [T]he [Mandatory Victims Restitution Act, 18 12 U.S.C. § 3663A] fixes no range of permissible restitutionary 13 amounts and sets no maximum amount of restitution that the court 14 may order[,] . . . [meaning the] principle that jury findings, or 15 admissions by the defendant, establish the maximum authorized 16 punishment has no application . . . . ); Fruchter, 411 F.3d at 17 383 ( A judge cannot exceed his constitutional authority by 18 imposing a punishment beyond the statutory maximum if there is no 19 statutory maximum [as is the case with criminal forfeiture]. ). 20 This case is distinguishable because the criminal fine 21 scheme, unlike those for restitution and forfeiture, is in fact 22 subject to statutory maximums. 23 the default maximum fines for individuals); id. § 3571(c) 24 (setting the default maximum fines for organizations); id. § See 18 U.S.C. § 3571(b) (setting 7 1 3571(e) (stating that if a criminal offense provision itself 2 fixes a lower maximum fine than § 3571 and expressly exempts the 3 offense from § 3571 s applicability, then the maximum fixed by 4 the offense is controlling). 5 the restitution and forfeiture provisions discussed in our 6 earlier decisions and is fashioned as an alternative fine the 7 fact remains that, absent a pecuniary gain or loss finding, a 8 district court may not impose a fine greater than that provided 9 for in subsections (b), (c), or (e), whichever is applicable. 10 Therefore, it is the clear implication of Apprendi and Blakely 11 that when a jury does not make a pecuniary gain or loss finding, 12 § 3571 s default statutory maximums cap the amount a district 13 court may fine the defendant. 14 Although § 3571(d) is uncapped like Having determined that the district court erred, we consider 15 whether it was plain error. While we easily conclude that the 16 error affected the appellant s substantial rights and 17 seriously affect[ed] the fairness of the proceedings, given 18 that Larson received a fine twice as large as was permitted under 19 the circumstances, Marcus, 130 S. Ct. at 2164, it is a somewhat 20 closer question whether the error was clear or obvious, id. 21 Ultimately, because our conclusions flow ineluctably from 22 Apprendi and Blakely, the error here was sufficiently clear to 23 meet the plain error standard. Cf. Weintraub, 273 F.3d at 152. 24 8 CONCLUSION 1 2 For these reasons, we VACATE Larson s fine and REMAND to the 3 district court for further proceedings not inconsistent with this 4 opinion. 9

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