United States v. Lombardi

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT

No. 92-2450
No. 93-1008

UNITED STATES,

Appellee,

v.

DOMENIC LOMBARDI,

Defendant, Appellant.

APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF RHODE ISLAND

[Hon. Raymond J. Pettine, Senior U.S. District Judge]

Before

Boudin, Circuit Judge,

Coffin, Senior Circuit Judge,

and Oakes,* Circuit Judge.

Robert B. Mann with whom Mann & Mitchell was on brief for

appellant.
Margaret E. Curran, Assistant United States Attorney, with whom

Lincoln C. Almond, United States Attorney, and James H. Leavey,

Assistant United States Attorney, were on brief for appellee.

September 24, 1993

*Of the Second Circuit, sitting by designation.

BOUDIN, Circuit Judge. Domenic Lombardi pled guilty on

August 12, 1992, to six counts of a nine-count superseding

indictment, the remaining counts being dismissed at the

government's behest. The nature and interrelationship of the

charges is critical to an understanding of the case.

Three of the counts to which Lombardi pled guilty

charged conspiracy to commit mail fraud (count I) and two

acts of mail fraud (counts III and VI). 18 U.S.C. 371,

1341. All three counts related, at least in part, to

Lombardi's conduct in fraudulently securing insurance

proceeds by having another man set fire to Lombardi's

property. One of the properties was a building owned by

Lombardi; the other was a mobile home that Lombardi was

renting to a tenant.

Two further counts (VIII and IX) were for depositing in

a bank the insurance proceeds received in the respective

episodes. 18 U.S.C. 1957. That statute makes it an

offense to engage knowingly in a monetary transaction

involving criminally derived property of a value greater than

$10,000 where the property resulted from one of a number of

specified offenses, including mail fraud.1 The remaining

count (VII) was for using a fire to commit mail fraud, 18

1As shorthand, we refer to the offense as "money
laundering." In fact, there is a separate federal offense of
"laundering of monetary instruments" under 18 U.S.C. 1956
with more demanding requirements and greater penalties.

-2-
2

U.S.C. 844(h), specifically, the setting of the fires

involved in the mail fraud counts.

On December 3, 1992, the district court sentenced

Lombardi to 63 months, comprising concurrent and consecutive

sentences of varying amounts, on the conspiracy, mail fraud,

and money laundering counts; to an additional, consecutive

60-month sentence, which is mandatory, on the using a fire

count; and to a three-year term of supervised release. The

district court also imposed a $60,000 fine and ordered that

Lombardi pay restitution in the amount of $190,880.08,

representing losses to insurers.2

On this appeal, Lombardi has raised one seemingly novel

issue under the Sentencing Guidelines, and several other

objections more readily answered. The novel issue concerns

the grouping rules and presents an issue of law on which our

review is plenary. United States v. Phillips, 952 F.2d 591,

594 (1st Cir. 1991), cert. denied, 113 S. Ct. 113 (1992). In

this effort we are aided by the careful sentencing memorandum

of the district court explaining why it rejected Lombardi's

position on grouping. We first describe how the district

court calculated Lombardi's sentence.

2The November 1992 version of the Sentencing Guidelines
was in effect at the time of the sentence, and our citations
in this opinion are to that edition. The district court
considered post-sentence memoranda pursuant to Fed. R. Crim.
P. 35. On December 10, 1992, the district court reaffirmed
its sentence, vacating the original sentence and imposing it
again.

-3-
3

The court first separated the conspiracy/mail fraud

counts into one group of offenses and the money laundering

counts into another. U.S.S.G. 3D1.2 (grouping of closely

related counts). The using a fire count was excluded from

the grouping rules because the statute imposes a mandatory

consecutive sentence. See U.S.S.G. 3D1.1(b). Then, the

court calculated the base offense level for each group, that

being in each of the groups here involved the level for the

highest-level count in the group. U.S.S.G. 3D1.3(a).

Based in part on the dollar amounts involved, the base level

for the conspiracy/mail fraud group was 16, U.S.S.G. 2F1.1,

and for money laundering the base offense level was 17.

U.S.S.G. 2S1.2

Then--and this is the point critical to Lombardi's

argument--the district court increased the base offense level

for the money laundering group by 2 levels, to 19, because

the guideline for money laundering provides as a specific

offense characteristic that a two-level increase is required

"[i]f the defendant knew that the funds were the proceeds of

any . . . specified unlawful activity" other than narcotics.

U.S.S.G. 2S1.2(b)(B). "Specified unlawful activity" refers

to a list of crimes, including mail fraud. See id. 2S1.2,

application note 1; 18 U.S.C. 1956(c)(7), 1961(1). Since

Lombardi committed the mail frauds, it is unquestioned that

-4-
4

he knew that the funds laundered were obtained through mail

fraud.3

Under the grouping rules, the offense level where one

group is level 19 and the other level 16 is derived by taking

the higher level and increasing it by 2 levels. U.S.S.G.

3D1.4 (prescribing two-level increase where the offense

levels for the two groups are within four levels of one

another). This combined offense level of 21 was then reduced

by two levels for acceptance of responsibility. U.S.S.G.

3E1.1(a). The resulting final offense level of 19 was used,

in conjunction with Lombardi's substantial criminal history

(category V), to specify the range--57 to 71 months--on which

his 63 month sentence was based. See U.S.S.G. sentencing

table. As earlier noted, the sentence for the using a fire

count was separately determined, and it is not in issue.

Lombardi's central claim on this appeal is that the

money laundering counts should not have been grouped

separately but should have been included in a single group

with the conspiracy/mail fraud counts. If so, the money

laundering counts would have represented the highest level

count in this single group, producing an offense level of 19

3The money laundering offense under section 1957
requires that the launderer know that the proceeds are
derived from criminal activity but it explicitly does not
require that the launderer know that the activity is one of
those "specified unlawful activit[ies]" named in the
statutes. 18 U.S.C. 1957(c).

-5-
5

for the single group. After reducing this figure to level 17

for acceptance of responsibility, the sentencing range fixed

by the sentencing table would have been 46 to 57 months, well

below the 63 months actually imposed.

The rules for grouping of closely related counts, set

forth in U.S.S.G. 3D1.2, largely eliminate cumulative

punishment for multiple counts in the same group (although

one count may comprise a specific offense characteristic or

adjustment for another count in the group). The introductory

commentary says that a single group combines "offenses [that]

are closely interrelated," U.S.S.G., part D, intro.

commentary, and the guideline for grouping closely related

counts says that it covers "counts involving substantially

the same harm," U.S.S.G. 3D1.2. But this is background:

what controls are the four subsections of the guideline that

say precisely when grouping shall occur.

Subsection (a) of section 3D1.2 applies when the counts

involve the same victim and the same act or transaction, and

the latter requirement is clearly not met here since the

fraud and money laundering are distinct acts. Subsection (b)

applies when there is the same victim and multiple acts or

transactions that have a common objective or comprise a

common plan. The guidelines are clear that, for purposes of

these subsections, the victim of fraud is the insurance

company and the victim of money laundering is society. See

-6-
6

U.S.S.G. 3D1.2, application note 2. To the extent that

Lombardi is relying upon subsection (b), the argument is

foreclosed.

Lombardi's best, and main, argument hinges upon U.S.S.G.

3D1.2(c) which provides that counts shall be grouped

together [w]hen one of the counts embodies conduct
that is treated as a specific offense
characteristic in, or other adjustment
to, the guideline applicable to another
of the counts.

Because knowledge that the money laundered funds were derived

from mail fraud was a specific offense characteristic in the

guideline applicable to the money laundering counts, Lombardi

contends that section 3D1.2(c) governs in this case and

requires that all five counts--conspiracy/mail fraud and

money laundering--be grouped together.

Neither Lombardi nor the government has found any

decision that directly addresses this issue. In our view,

the better reading of section 3D1.2(c) is that it does not

apply to this case. The "conduct" embodied in the mail fraud

counts is the various acts constituting the frauds, coupled

with the requisite intent to deceive; the "specific offense

characteristic," in U.S.S.G. 2S1.2(b)(1)(B), is knowledge

that the funds being laundered are the proceeds of a mail

fraud. It happens that Lombardi's knowledge of the funds'

source derives from the fact that he committed the frauds,

-7-
7

but that does not make the fraudulent acts the same thing as

knowledge of them.

Lombardi's reading would also create a disturbing

anomaly in the guideline's application. One who commits a

fraud and launders the money (thereby knowing of its source)

is normally more culpable than one who merely launders the

money knowing of its source. Yet if Lombardi's

interpretation were adopted, a defendant would get exactly

the same total offense level whether the defendant committed

the mail fraud or merely knew that someone else had committed

it: in either case, all five counts would be a single group,

and the money laundering count would generate a level 19 (17

as the base offense level and a 2 level increase for

knowledge of source). The anomaly is not conclusive but it

reinforces our inclination to read the guidelines literally.

If there is any discomfort in the interpretation, it may

come less from the illusion of double counting than from

other sources. Some might think it odd to punish a defrauder

separately for depositing his ill-gotten gains in a bank

rather than spending the money outright. But that is the

consequence of a deliberate policy choice by Congress, and

one that is much easier to understand when one thinks of the

relationship between bank deposits, money laundering and

organized crime. As for the choice to increase the sentence

because the defendant knew the "specific" criminal source of

-8-
8

the funds, one may quarrel with the Sentencing Commission's

policy but the intent is clear.

The logic of the guidelines is easier to understand if

one substitutes a more potent (but hypothetical) "specific

offense characteristic." Thus, suppose a defendant burgled a

house, found it inhabited, and returned a week later to burn

it down (knowing from the burglary that it was inhabited).

No one would cavil at treating knowledge of inhabitation as a

specific offense characteristic to enhance the arson while at

the same time punishing the defendant for burglary. In

Lombardi's case, it is harder to understand why knowledge

that the laundered money came from mail fraud, instead of

merely from some unspecified criminal source, should enhance

the sentence for money laundering. But the principle of

imposing an enhancement, based on knowledge of a crime the

defendant himself committed, is the same.

Accordingly, we conclude that Lombardi's interpretation

of the guidelines fails and that both his mail fraud and his

knowledge that the source of the laundered funds was mail

fraud may play separate roles in enhancing his sentence. The

apparent severity of the result should not be overstated: the

probable effect is a sentence about six months longer than

Lombardi would otherwise have received. It should also not

be forgotten that the same guideline grouping rules manage to

combine a level 19 offense with a level 16 offense to produce

-9-
9

a combined offense level of only 21 (instead of 35) before

the final adjustment, a charity far more significant than the

two point increase that is at issue here.

Lombardi's remaining arguments warrant less discussion.

He asserts that his age (58 at the time of sentencing),

physical ailments, and mental-health problems required a

downward departure. Admitting that discretionary refusals to

depart downward are not appealable, United States v. Lauzon,

938 F.2d 326, 330 (1st Cir.), cert. denied, 112 S. Ct. 450

(1991), Lombardi contends that the district judge must have

believed that it lacked authority to depart downward.

Suffice it to say that there is no evidence that the district

court doubted its authority to depart. Departures on the

grounds asserted are comparatively rare, e.g., U.S.S.G.

5H1.1, 5H1.4, and in the ordinary case no explanation for

declining to do so is required.

Error is also premised on the district court's failure

to give Lombardi a third point for acceptance of

responsibility, as permitted by a newly adopted provision of

the guidelines, where the defendant either:

1. timely provid[es] complete information to the
government concerning his own involvement in the
offense; or

2. timely notify[ies] authorities of his intention
to enter a plea of guilty, thereby permitting the
government to avoid preparing for trial and
permitting the court to allocate its resources
efficiently.

-10-
10

U.S.S.G. 3E1.1(b). Although the district court made no

explicit findings in denying a third point, the court's

sentence followed shortly after the prosecutor argued against

the extra point, and we may fairly assume that the

prosecutor's arguments were accepted.

As to the first branch of section 3E1.1(b), the

prosecutor argued that Lombardi did not provide complete

information as to his involvement because he had withheld

specific information that the prosecutor described. Neither

at the hearing nor in his brief on appeal does Lombardi

answer this charge. The second branch requires "timely"

notification of the guilty plea to permit the government to

avoid the expense of preparing for trial. Since Lombardi did

not plead guilty until after the jury had been empaneled,

well after the government had prepared for trial, he plainly

did not meet the requirement.

Lombardi's next argument is that the district court

erred in imposing a $60,000 fine as part of the sentence.

Although he asserts that the court "did not consider" his

financial resources, the court did in fact take note of

information bearing on these resources, including Lombardi's

transfer to his son of a 13.3 percent interest in the family

business and an $85,853 receivable. According to the

government, Lombardi had obtained about $190,000 from

insurance fraud (reflected in the restitution order) during

-11-
11

the prior three years. The district court also noted that

the probation officer had encountered difficulty in securing

complete financial information from Lombardi.

Under the guidelines, the presumption is that a fine

will be imposed, and the burden is upon the defendant to show

that a fine is not warranted. United States v. Savoie, 985

F.2d 612 (1st Cir. 1993). On this record, we think that the

district court could fairly conclude that Lombardi had not

long before been in possession of sums ample to pay the

$60,000 fine and that their absence had not been adequately

explained. A defendant has little incentive to help in an

inventory of his assets, and a busy federal judge is not

required to conduct an audit before imposing a fine.4

Lastly, Lombardi argues that the court should not have

imposed a restitution order, under the Victim and Witness

Protection Act, 18 U.S.C. 3663-64, requiring Lombardi to

repay the $190,000 obtained from insurers. Apart from the

lack of explicit findings of financial condition, which

4Citing United States v. Spirolpoulos, 976 F.2d 155 (3d

Cir. 1992), Lombardi also says that the fine was unlawful
because its purpose was to pay the cost of his incarceration
and supervision. Whether or not this court would follow the
Third Circuit need not be decided here. Compare United

States v. Turner, 998 F.2d 534 (7th Cir. 1993) (disagreeing

with the Third Circuit). In Spirolpoulos, the sentencing

court imposed a flat fine and then a per diam amount for
incarceration costs. Here, the court imposed only the flat
fine, the judgment labels it a "fine," and it is irrelevant
that the judgment form has a boilerplate statement that
"[t]he fine includes any costs of incarceration and/or
supervision."

-12-
12

Savoie holds are not required, 985 F.2d at 620, see also

United States v. Ahmad, 1993 U.S. App. LEXIS 21587 (7th Cir.

1993), Lombardi's brief argues that such a liability is

unrealistic when there is little evidence of actual assets or

future earning power. We agree that on this record there

might be no basis for an affirmative finding that Lombardi

does or necessarily will have $190,000 available to pay such

restitution.

But we fail to see why such a record basis should be

required. Lombardi does not deny that the money was secured

from the insurers by fraud, and the whereabouts of the entire

$190,000 is at least uncertain, as are his future prospects

of income. While the judgment requiring restitution may

prove fruitless, it may also be of some use if Lombardi ever

secures new assets or the insurance companies wish to prove

that assets held nominally by family members are really

Lombardi's. In all events, the statute merely requires the

court to "consider" financial condition, among other factors,

18 U.S.C. 3664(a); there is no requirement that the

defendant be found able to pay now. See Ahmad, 1993 U.S.

App. LEXIS 21587, at *4-5. In framing this restitution

order, the district court did not abuse its considerable

discretion.

Affirmed.

-13-
13