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 (Argued: May 10, 2010 Decided: August 27, 2010)
6 Docket Nos. 09-1702-cr(L), 09-1707-cr(CON), 09-1790-cr(CON)
7 -----------------------------------------------------------X
8 UNITED STATES OF AMERICA,
9
10 Appellee,
11
12 - v. -
13
14 ROBERT PFAFF, RAYMOND J. RUBLE, also known as R.J. Ruble, JOHN
15 LARSON,
16
17 Defendants-Appellants.
18 -----------------------------------------------------------X
19
20 Before: JACOBS, Chief Judge, WINTER and McLAUGHLIN, Circuit
21 Judges.
22
23 Appeal from judgments of conviction and a sentence entered
24 in the United States District Court for the Southern District of
25 New York (Kaplan, J.) following a ten-week jury trial. In a
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. We write this
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
1 that would have been permitted absent the finding. We hold that
2 the district court’s fine violated Apprendi v. New Jersey, 530
3 U.S. 466 (2000), and that it constituted plain error.
4 Therefore, we VACATE and REMAND for the district court to
5 reconsider Larson’s fine.
6
7 ALEXANDRA A.E. SHAPIRO, Marc E.
8 Isserles, Macht, Shapiro, Arato &
9 Isserles LLP, New York, NY, David C.
10 Scheper, Scheper Kim & Overland LLP, Los
11 Angeles, CA, for Defendant-Appellant
12 Robert Pfaff.
13
14 STUART E. ABRAMS, Frankel & Abrams, New
15 York, NY, Jack S. Hoffinger, Susan
16 Hoffinger, Hoffinger Stern & Ross LLP,
17 New York, NY, for Defendant-Appellant
18 Raymond Ruble.
19
20 J. SCOTT BALLENGER, Lori Alvino McGill,
21 Latham & Watkins LLP, Washington, DC
22 (Steven M. Bauer, Margaret A. Tough, San
23 Francisco, CA), for Defendant-Appellant
24 John Larson.
25
26 JOHN M. HILLEBRECHT, Margaret Garnett,
27 Justin Anderson, Katherine Polk Failla,
28 Assistant United States Attorneys, of
29 counsel, for Preet Bharara, United
30 States Attorney for the Southern
31 District of New York, for Appellee.
32
33 PER CURIAM:
34 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.). Following a ten-week
38 jury trial, Appellants were convicted of tax evasion for
2
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. Here, we address a single
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). 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.
14 BACKGROUND
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. For a complete recounting of the saga,
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
3
1 330 (S.D.N.Y. 2006). Here, we recite only those facts pertinent
2 to whether the district court plainly erred in fining Larson.
3 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. The jury, however, made no findings
7 regarding the amount of pecuniary loss caused, or gain derived,
8 by Larson through his crimes. On April 1, 2009, the district
9 court conducted a sentencing hearing at which it found that
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.” The court calculated this maximum pursuant to 18
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. The district
16 court subsequently fined Larson $6 million and sentenced him to
17 121 months’ imprisonment. Larson did not object at sentencing to
18 the fine amount as violative of Apprendi. He now appeals the
19 fine on precisely this ground.
20 DISCUSSION
21 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). We may correct such an error
24 only if “(1) there is an error; (2) the error is clear or
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.” United
6 States v. Marcus, 130 S. Ct. 2159, 2164 (2010) (brackets omitted)
7 (internal quotation marks omitted). “Without a prior decision
8 from this court or the Supreme Court” supporting the defendant’s
9 claim of error, the error cannot be “plain.” United States v.
10 Weintraub, 273 F.3d 139, 152 (2d Cir. 2001).
11 Section 3571 of Title 18 of the U.S. Code governs the
12 imposition of criminal fines. Generally, “[a] defendant who has
13 been found guilty of an offense may be sentenced to pay a fine.”
14 18 U.S.C. § 3571(a). Section 3571(b) establishes a maximum for
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). Section 3571(d), however, allows an
18 “[a]lternative fine based on gain or loss”:
19 If any person derives pecuniary gain from the
20 offense, or if the offense results in pecuniary
21 loss to a person other than the defendant, the
22 defendant may be fined not more than the greater
23 of twice the gross gain or twice the gross loss,
24 unless imposition of a fine under this subsection
25 would unduly complicate or prolong the sentencing
26 process.
27
28 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.” 530
5 U.S. at 490. The Supreme Court has clarified that “the
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.” Blakely v.
9 Washington, 542 U.S. 296, 303 (2004).
10 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. Absent such gain or loss findings, the
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). This amount represents the maximum fine
16 that could be imposed based on “the facts reflected in the jury
17 verdict.” Id. Therefore, by fining Larson $6 million under 18
18 U.S.C. § 3571(d), a fine supported only by the district court’s
19 own pecuniary loss finding, the court violated Apprendi. See
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).
6
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. We disagree. In those cases, we held that
5 Apprendi is not implicated where district courts order criminal
6 restitution or forfeiture based on court-determined loss or gain
7 amounts. See Reifler, 446 F.3d at 118 (restitution); Fruchter,
8 411 F.3d at 382-83 (forfeiture). Critical to both decisions were
9 our findings that criminal restitution and forfeiture are
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. See 18 U.S.C. § 3571(b) (setting
23 the default maximum fines for individuals); id. § 3571(c)
24 (setting the default maximum fines for organizations); id. §
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). Although § 3571(d) is uncapped like
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 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
1 CONCLUSION
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