FILED
United States Court of Appeals
Tenth Circuit
May 27, 2009
Elisabeth A. Shumaker
PUBLISH Clerk of Court
UNITED STATES COURT OF APPEALS
TENTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v. No. 08-7070
DJUAN JAHMAR ORR,
Defendant-Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF OKLAHOMA
(D.C. No. 6:CR-07-0058-RAW)
Robert A. Ridenour, Assistant Federal Public Defender (Julia L. O’Connell,
Federal Public Defender; Barry L. Derryberry, Research & Writing Specialist,
with him on the brief), Office of the Federal Public Defender, Tulsa, Oklahoma,
for Defendant-Appellant.
Christopher J. Wilson, Assistant United States Attorney (Sheldon J. Sperling,
United States Attorney, with him on the brief), Muskogee, Oklahoma, for
Plaintiff-Appellee.
Before KELLY, BRISCOE, and HARTZ, Circuit Judges.
BRISCOE, Circuit Judge.
Defendant Djuan Orr was convicted, following a jury trial, of one count of
knowingly possessing fifteen or more counterfeit or unauthorized access devices,
in violation of 18 U.S.C. § 1029(a)(3), and one count of using a counterfeit access
device, in violation of 18 U.S.C. § 1029(a)(1). Orr was subsequently sentenced to
seventy-seven months’ imprisonment. Orr now appeals his sentence, arguing the
district court lacked an evidentiary basis for calculating the number of victims
and the amount of loss, and in turn applying enhancements based on those
calculations. The government has conceded that the district court erred in its loss
calculations, but argues there was evidentiary support for the court’s findings
regarding the number of victims. Exercising jurisdiction pursuant to 28 U.S.C. §
1291, we agree with Orr that the district court erred in both regards, and thus
remand for resentencing.
I
In August 2007, Secret Service agents began investigating fraudulent credit
card transactions that had been occurring in the Dallas, Texas, metropolitan area.
Defendant Orr was identified as a suspect in the transactions and, on August 24,
2007, Secret Service agents, by way of cell phone tracking, located Orr at a motel
in Ardmore, Oklahoma. The front desk clerk at the motel recognized Orr from a
photograph, and informed the agents that Orr had arrived at the motel on the
morning of August 24th in a vehicle bearing Texas plates, had rented a room for
two people using the name Mike Keys, and had provided a District of Columbia
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driver’s license and an American Express card bearing that same name. The
Secret Service agents obtained the American Express card number from the clerk,
contacted American Express, and were informed that the card number was
actually held by an individual named Bipin Adhikary.
The Secret Service agents subsequently arrested Orr as he was observed
leaving his motel room. A search of Orr’s person incident to arrest produced a
District of Columbia driver’s license and an American Express gift card, both
bearing the name Mike Keys. The original numbers on the gift card appeared to
have been flattened and new numbers re-embossed.
Orr advised the agents that there was another person in the motel room with
him. The agents proceeded to Orr’s motel room, where they made contact with an
individual named Maurice Dixon. Dixon allowed the agents into the room and
gave written consent for them to search the room. The agents seized twenty-two
counterfeit credit, debit and gift cards that bore the names of four different
individuals, none of whom were Orr or Dixon. Most of the cards appeared to
have had their original names and numbers flattened and new numbers and names
re-embossed on the front of the cards.
A search of Orr’s vehicle produced a wallet, located in a map pocket on the
back of the front passenger seat, containing an Ohio driver’s license bearing the
name of Stephen Higgins. Although the license number was subsequently
determined to be valid, the photo on the license appeared to be that of Dixon.
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Also contained in the wallet were two counterfeit credit cards and a Winstar
Casino players card all bearing the name of Stephen Higgins.
Subsequent investigation revealed that, of the twenty-six counterfeit cards
seized in connection with Orr’s arrest, seven had been used fraudulently. With
respect to each of those seven cards, the issuing bank or credit card company
confirmed that the actual owner of the card had made a fraud claim and had not
given permission to anyone else to use the account number.
On September 12, 2007, a federal grand jury indicted Orr on one count of
knowingly possessing fifteen or more counterfeit or unauthorized access devices,
in violation of 18 U.S.C. § 1029(a)(3), and one count of using a counterfeit access
device, in violation of 18 U.S.C. § 1029(a)(1). The case proceeded to trial on
November 19-20, 2007. At the conclusion of the evidence, the jury found Orr
guilty as charged in both counts of the indictment.
The probation officer assigned to Orr’s case submitted a final presentence
report (PSR) on March 14, 2008. In describing “The Offense Conduct,” the PSR
referred not only to the relevant events surrounding Orr’s arrest in Ardmore,
Oklahoma, on August 24, 2007, but also alleged that Orr was in fact the leader of
a Texas-based conspiracy to create and use counterfeit access devices. ROA, Vol.
3, PSR at 2-5. According to the PSR, Orr and his coconspirators “mined” credit
card data “through the use of skimming devices,” “downloaded” the credit card
data “into a computer to create fraudulent credit cards,” and then used the
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fraudulent credit cards “at retail stores to purchase high end items.” Id. at 5.
Consistent with these allegations, the PSR alleged “[t]here [we]re 704 known
credit card numbers that were compromised in this case,” and that these credit
cards had been issued by approximately seventy-five separate banks. Id. at 5-6
(listing each of these banks). In addition, the PSR alleged that “[f]ifteen of these
[seventy-five] banks suffered a[n actual] monetary loss of $154,962.53.” 1 Id. at
6. Of those fifteen banks, the PSR alleged that five, i.e., American Express,
Citibank, Discover, U.S. Bank, and Wells Fargo, suffered actual monetary losses,
totaling slightly more than $10,000, in connection with the counterfeit credit
cards seized by Secret Service agents from Orr on August 24, 2007. Consistent
with these allegations, the PSR imposed a base offense level of six pursuant to
U.S.S.G. § 2B1.1(a)(2), and then applied, in pertinent part, a fourteen-level
enhancement pursuant to U.S.S.G. § 2B1.1(b)(1)(H) based on the total amount of
loss (which the PSR calculated to be $472,032.18 2), and a two-level enhancement
1
The fifteen banks listed in the PSR included “Discover, Citibank, HSBC,
MBNA America Bank, Bank of America, U.S. Bank, Toronto Dominion Bank,
American Airlines Employee Credit Union, Credit Union of Texas, Capital One
Bank, Banco Uno S.A., American National Bank of Texas, Navy Federal Credit
Union, General Technologies Federal Credit Union, and American Express . . . .”
ROA, Vol. 3, PSR at 6. It appears that the PSR may have overlooked one
additional bank, i.e., Wells Fargo, in this calculation. See id. at 4 (listing Wells
Fargo as having suffered an actual loss of $202.00 in connection with one of the
cards seized on August 24, 2007).
2
The PSR arrived at this total loss figure by applying “[a] loss of $500.00
per access device . . . for 648 of the cards” for which either no actual loss had
(continued...)
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pursuant to U.S.S.G. § 2B1.1(b)(2)(A) because the offense involved ten or more
victims.
Orr’s counsel filed written objections to portions of the PSR. In particular,
Orr’s counsel “object[ed] to the factual basis for the findings of relevant
conduct,” noting that “[t]he jury only found that [Orr] and Dixon possessed some
20+ cards or numbers, with no more names or numbers involved,” yet
“[s]omehow” the PSR included “unsubstantiated allegations of criminals [i.e.,
Orr’s alleged coconspirators] to decide that [Orr] [wa]s tied into, or [wa]s the
leader, of a credit card ring in north Texas.” Id., attached letter of Orr’s counsel
at 1. Orr’s counsel also asserted that, “[e]ven were the flawed claims from the
crooks included, we still object to the loss findings.” Id. at 2. More specifically,
Orr’s counsel stated:
Paragraph 20 [of the PSR] claims that fifteen banks claimed losses of
$154,962.53. Where did that number come from? There is no proof
of these losses, how they were incurred, or how they are reasonably
foreseeable to my client’s decisions or actions. Are the losses to real
people or corporations? Have the victims who claim losses been
contacted, or is the PSR relying on calculations drawn directly from
the third or fourth-hand accounts made to credit card representatives
who passed it on to another agent for recording? The Court should
have evidence to support such findings. Where are the witness
statements detailing the loss? Paragraph 21 [of the PSR] states that
Citibank has suffered a total loss of $100,978.18, but the Court has
no proof of why it should use that amount. The PSR cannot contain
2
(...continued)
occurred or the actual loss was less than $500.00 per card, and “actual loss . . .
for the other 56 access devices as their [actual] loss exceeded $500.00 [per card].”
ROA, Vol. 3, PSR at 7.
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unfounded, unproven numbers as the basis for the Court’s decision.
Id. Lastly, Orr’s counsel “object[ed] to the finding of the facts and legal
interpretation of Paragraph 29 of the PSR,” which imposed the two-level
enhancement pursuant to U.S.S.G. § 2B1.1(b)(2)(A) because the offense involved
ten or more victims. Id. In support of this objection, Orr’s counsel stated:
Application Note One of USSG 2B1.1 defines a victim as: (A) any
person who sustained any part of the actual loss determined under
(b)(1); or (B) any individual who sustained bodily injury as a result
of the offense. We adopt the argument and authority asserted by
counsel for Dixon in his objections to the conclusion regarding
number of victims. There is no proof of actual loss to in excess of 10
victims.
Id.
The probation officer, in response to these objections, prepared an
addendum to the PSR stating, in pertinent part:
Defendant’s Objection No. 1: The defendant objects to the factual
basis for the findings of relevant conduct in this case.
Probation Officer’s Response to Defendant’s Objection No. 1: Based
on the conduct that occurred in Oklahoma and Texas, the facts show
that this case involved a conspiracy to make counterfeit credit cards
from data mined through the use of skimming devices. Orr has been
identified by co-defendants of the conspiracy as an integral part of
this conspiracy both in Oklahoma and in Texas. The counterfeited
credit cards produced and used as a result of the conspiracy has
resulted in significant loss to credit card companies. The Probation
Officer maintains that Orr is accountable for all unauthorized access
devices seized in this case to include the relevant conduct which
occurred in Texas.
Defendant’s Objection No. 2: The defendant objects to receiving a
two level enhancement for 10 or more victims.
7
Probation Officer’s Response to Defendant’s Objection No. 2: As
argued by counsel for the defendant, the individuals victimized in
this case had their loss reimbursed by their credit card companies. In
accordance with U.S.S.G. § 2B1.1, Application Note 1, a “victim”
means any person who sustained any part of the actual loss
determined under subsection (b)(1). Further, Application Note
3(A)(E)(k), discusses credits against loss, which considers the impact
of the return of money to the victim. These victims are treated as
having suffered a loss but then allow the defendant to take credit
against the total loss for the value of the returned loss. The provision
of credits against loss recognizes that there was in fact an initial loss,
even though it was subsequently remedied by recovery. Therefore,
the Probation Officer maintains that the five individuals whose credit
card accounts were fraudulently charged suffered an initial loss and
are victims in this case along with their five credit card companies,
resulting in a total of ten victims required for the two level
enhancement, pursuant to U.S.S.G. § 2B1.1(b)(2)(A).
Id., Addendum to PSR at 1-2.
The district court conducted a sentencing hearing on June 3, 2008. During
the hearing, the government presented the testimony of a Secret Service agent
who testified about Orr’s involvement in a Dallas-based conspiracy to create and
use counterfeit credit cards. At the conclusion of the agent’s testimony, the
district court found, “by a preponderance of the evidence,” that “[t]he conduct in
this case . . . involved a conspiracy to make counterfeit credit cards from data that
was mined through the use of wedges or skimming devices,” and that “[t]hese
cards . . . were initially compromised and counterfeited in Texas.” ROA, Vol. 2,
Sentencing Transcript at 76. In turn, the district court found “by a preponderance
of the evidence that the defendant [wa]s accountable for the losses associated
with all the unauthorized access devices seized in Oklahoma and in Texas . . . .”
8
Id. at 79. With respect to Orr’s objection to the fourteen-level enhancement for
amount of loss, the district court overruled that objection, concluding, in
summary fashion, that the amount of loss was “$472,032.18 after application of
the guidelines.” Id. The district court also overruled Orr’s objection to the two-
level enhancement for ten or more victims. In doing so, the district court found
“by a preponderance of the evidence that the numerous individuals whose credit
cards were fraudulently charged sustained an initial loss and [we]re properly
counted, along with the credit card companies, as victims in this case” under
“Section 2B1.1(b)(2)(A).” Id. at 80. Accordingly, the district court stated that
“[t]he [PSR] w[ould] form the factual basis for the court’s sentence,” and it
sentenced Orr to a term of imprisonment of seventy-seven months. Id.
II
On appeal, Orr challenges the two sentencing enhancements that he
objected to below. When a defendant disputes facts from a PSR purporting to
support a sentencing enhancement, the district court’s Rule 32(i)(3)(B) obligation
is invoked. United States v. West, 550 F.3d 952, 976 (10th Cir. 2008). Federal
Rule of Criminal Procedure 32(i)(3)(B) requires that the district court “must—for
any disputed portion of the [PSR] or other controverted matter—rule on the
dispute. . . .” In reviewing a district court’s application of the Sentencing
Guidelines, “we review factual findings for clear error and legal determinations
de novo.” United States v. Kristl, 437 F.3d 1050, 1054 (10th Cir. 2006) (per
9
curiam). The government bears the burden of proving sentencing enhancements
by a preponderance of the evidence. United States v. Conley, 131 F.3d 1387,
1389 (10th Cir. 1997).
The § 2B1.1(b)(2) enhancement for ten or more victims
Orr contends the district court erred in determining that the offense
involved ten or more victims and in turn imposing a two-level enhancement
pursuant to U.S.S.G. § 2B1.1(b)(2)(A). Orr argues that, under § 2B1.1(b)(2)(A),
“one can only be counted as a victim if that person or entity has suffered
monetary harm,” and “[i]n the present case, the persons whose credit cards were
fraudulently used were not victims under this definition because . . . their losses
were reimbursed by the credit card companies.” Aplt. Br. at 11. Thus, Orr
argues, “[t]his leaves only the five credit card companies referred to in the
Addendum [to the PSR] as countable victims.” Id.
Section 2B1.1(b)(2)(A) of the Sentencing Guidelines provides that in cases
involving counterfeit instruments, such as the counterfeit credit cards
manufactured and utilized by Orr in this case, a district court should increase the
defendant’s base offense level “by 2 levels” “[i]f the offense . . . involved 10 or
more victims . . . .” U.S.S.G. § 2B1.1(b)(2)(A) (2007). Application Note 1 to §
2B1.1 defines the term “victim,” in pertinent part, as “any person who sustained
any part of the actual loss determined under subsection (b)(1),” and further
defines the term “person” to “include[] individuals, corporations, companies,
10
associations, firms, partnerships, societies, and joint stock companies.” Id., cmt.
n.1. Application Note 3, which generally applies to the determination of loss
under subsection (b)(1), defines the phrase “actual loss” to “mean[] the
reasonably foreseeable pecuniary harm that resulted from the offense,” and the
phrase “pecuniary harm” to “mean[] harm that is monetary or that otherwise is
readily measurable in money.” Id., cmt. n.3.
Although the PSR alleged that seven of the twenty-six counterfeit access
devices seized on August 24, 2007, had been fraudulently used, the government’s
evidence at trial provided details regarding only four of those devices (two
account numbers issued by Citibank and two account numbers issued by
American Express). Further, even with respect to those four access devices, the
government’s evidence did not indicate whether the legitimate account holders
had been fully reimbursed by the issuing companies or had actually incurred part
of the actual loss. At Orr’s sentencing hearing, the government’s sole witness
testified about Orr’s involvement in the Dallas-based conspiracy to create and use
counterfeit access devices, but did not provide any details regarding specific
losses actually incurred by legitimate account holders or their issuing banks.
Given this dearth of evidence, the district court’s determination that the offense
involved ten or more victims must be deemed clearly erroneous.
The district court, in justifying its determination that ten or more victims
were involved, concluded that “the guidelines recognize the existence of an initial
11
actual loss to the individual victim even when the loss is subsequently recovered.”
ROA, Vol. 2, Sentencing Transcript at 80. In support of this conclusion, the
district court cited to Application Note 3(e)(i) to § 2B1.1 3, which it interpreted as
“treat[ing] people who recover collateral, money, property, or services as victims
. . . .” Id. According to the district court, this “recognize[d] the existence of an
initial actual loss to the individual victim even when the loss is subsequently
recovered.” Id.
The district court’s reliance on Application Note 3(e)(i), however, was
misplaced. Application Note 3, by its own express terms, “applies to the
determination of loss under subsection (b)(1).” As the Fifth Circuit recently
recognized in United States v. Conner, 537 F.3d 480, 491 n.38 (5th Cir. 2008),
the calculation of “loss” for purposes of § 2B1.1 is a “distinct concept” from the
identification of “victims” for purposes of § 2B1.1, and “[w]e should not look to a
separate provision of the Application Notes to create an ambiguity in the
provisions relevant to defining ‘victim,’ when no ambiguity exists when looking
at those provisions alone.” Further, even assuming that Application Note 3 could
be viewed as relevant to the identification of “victims,” it does not support the
district court’s determination that there is a distinct concept of “initial loss” that
3
Application Note 3(e)(i), entitled “Credits Against Loss,” provides, in
pertinent part, that “[l]oss shall be reduced by . . . [t]he money returned, and the
fair market value of the property returned and the services rendered, by the
defendant or other persons acting jointly with the defendant, to the victim before
the offense was detected.” U.S.S.G. § 2B1.1, cmt. n.3(E)(i) (emphasis added).
12
can be taken into account in calculating the number of victims. To the contrary, §
2B1.1 and its Application Notes all focus on “actual loss,” and if an individual
credit card account holder is fully and timely reimbursed by his or her credit card
company or issuing bank for any fraudulent charges made with the account (or is
not required to pay any such charges), then he or she has suffered no “actual
loss.” See United States v. Kennedy, 554 F.3d 415, 419 (3d Cir. 2009) (holding
that individual account holders were not “victims” for purposes of § 2B1.1(b)(2)
because the government “failed to meet its burden to prove that the account
holders even knew that their funds had been stolen before they were completely
reimbursed”); United States v. Pham, 545 F.3d 712, 719 (9th Cir. 2008) (holding
that if individual “account holders victimized by Pham were fully reimbursed as
soon as they notified their banks of the fraudulent activity, then they cannot
reasonably be said to have suffered or ‘sustained’ the losses that were only
temporarily and fleetingly reflected in their accounts”); Conner, 537 F.3d at 489
(holding that individual credit account holders who were fully reimbursed for the
fraudulent charges made on their accounts “did not suffer any ‘actual loss’ and
therefore were not ‘victims’ under § 2B1.1(b)(2)”); United States v. Yagar, 404
F.3d 967, 971 (6th Cir. 2005) (holding that individual bank account holders who
were fully reimbursed by their banks for losses caused by defendant’s fraudulent
conduct did not suffer an “actual loss” and thus were not “victims” for purposes
of § 2B1.1(b)(2)); but see United States v. Abiodun, 536 F.3d 162, 168-69 (2d
13
Cir. 2008) (holding “that individuals who are ultimately reimbursed by their
banks or credit card companies can be considered ‘victims’ of a theft or fraud
offense for purposes of U.S.S.G. § 2B1.1(b)(2) if–as a practical matter–they
suffered (1) an adverse effect (2) as a result of the defendant’s conduct that (3)
can be measured in monetary terms”) 4; United States v. Lee, 427 F.3d 881, 895
(11th Cir. 2005) (suggesting that, “inherent in the credit against loss provision” of
Application Note 3(E), “is an acknowledgment that there was in fact an initial
loss, even though it was subsequently remedied by recovery of collateral or return
of goods,” and that a person who suffers an “initial loss” can be counted as a
“victim” for purposes of § 2B1.1(b)(2)) 5. Finally, and perhaps most importantly
as regards the case at hand, there was no evidence presented by the government at
Orr’s sentencing hearing to establish that ten or more specific individual account
holders had sustained a loss. In light of that fact, Orr did not have the
opportunity to raise what effect, if any, reimbursement to any individual account
holders may have had. In other words, the government failed to carry its burden
4
Abiodun does not support the district court’s decision because the
government presented no evidence that, as a result of Orr’s conduct, any of the
individual account holders suffered adverse effects that could be measured in
monetary terms.
5
The Fifth Circuit in Conner expressly rejected the Eleventh Circuit’s
analysis in Lee. 537 F.3d at 591 n.38. Further, the Eleventh Circuit in Lee
ultimately offered an alternative ground for its decision, noting that the victims in
its case “suffered considerably more than a small out-of-pocket loss and were not
immediately reimbursed by any third party.” 427 F.3d at 895.
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of presenting sufficient evidence to support this enhancement.
In its appellate response brief, the government suggests that the district
court’s “reasoning is immaterial to the victim calculation in that the relevant
conduct included fifteen financial institutions that suffered monetary loss.”
Aplee. Br. at 11. More specifically, the government argues that the “larger
conspiracy” that Orr was found by the district court to have been involved in
“impacted over 70 financial institutions with fifteen suffering monetary pecuniary
loss.” Id. at 19. Although the government effectively concedes that it failed to
present any evidence regarding these institutions or their purported losses, it
asserts that these “facts” were set forth in the PSR and not objected to by Orr. Id.
at 19 n.13.
The government is clearly mistaken, however, in asserting that Orr failed to
object to these allegations in the PSR. In the written objections filed by Orr’s
counsel to the PSR, Orr’s counsel specifically and expressly called into question
the PSR’s allegations “that fifteen banks claimed losses of $154,962.53.” ROA,
Vol. 3, PSR, attached letter of Orr’s counsel at 1. Indeed, Orr’s counsel argued
there was “no proof of these losses, how they were incurred, or how they are
reasonably foreseeable to my client’s decisions or actions,” and he asserted that
the district court “should have evidence to support such findings.” Id. Relatedly,
Orr’s counsel expressly challenged the PSR’s allegation that “Citibank ha[d]
suffered a total loss of $100,978.18,” noting that the district court “ha[d] no proof
15
of why it should use that amount.” Id. Although the government was well aware
of these objections, it made no attempt at the sentencing hearing to flesh out these
factual allegations in the PSR as it was required to do. Conley, 131 F.3d at 1389.
For these reasons, we conclude that the two-level enhancement under §
2B1.1(b)(2) was erroneously applied, and that, as a result, Orr’s case must be
remanded for resentencing.
The § 2B1.1(b)(1) enhancement for amount of loss greater than $400k
Orr also contends that the district court erred in finding that the loss
associated with the offense was more than $400,000, and in turn imposing a
fourteen-level enhancement pursuant to U.S.S.G. § 2B1.1(b)(1). In support of
this contention, Orr asserts that “[a]t the sentencing hearing the government
presented evidence of an extended card fraud conspiracy based in Texas, but did
not present evidence supporting the disputed loss amounts.” Aplt. Br. at 14-15.
“Thus,” he argues, “the district court had no evidence to support the loss
amount.” Id. at 15.
The government concedes in its appellate brief that “no evidence was
presented at the jury trial or the sentencing hearing as to how the specific actual
loss amounts were calculated in the PSR and, therefore, the fourteen-level
enhancement . . . was not properly imposed.” Aplee. Br. at 11.
We agree with Orr and the government on this point. Although the PSR
contained allegations that the Dallas-based conspiracy involved approximately
16
704 counterfeit access devices and approximately $472,032.18 in associated
“losses,” Orr objected to these allegations and the government failed to present
any evidence to substantiate the allegations at the time of sentencing. Thus, the
district court’s “findings” regarding the amount of loss are insupportable.
Accordingly, we REMAND this matter to the district court for
resentencing.
17