United States Court of Appeals
For the First Circuit
No. 05-1705
UNITED STATES OF AMERICA,
Appellee,
v.
PHILLIP SCOTT SCHERRER,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
[Hon. Steven J. McAuliffe, U.S. District Judge]
Before
Boudin, Chief Judge,
Torruella, Selya, Lynch, Lipez and Howard*
Circuit Judges.
Bjorn Lange, Assistant Federal Public Defender, Federal
Defender Office, for appellant.
Mark E. Howard, Assistant United States Attorney, for
appellee. Thomas P. Colantuono, United States Attorney, and Peter
E. Papps, Assistant United States Attorney, on brief for appellee.
____________________
OPINION EN BANC
April 12, 2006
*
Judge Howard is recused and took no part in the consideration
or decision of this case.
BOUDIN, Chief Judge. After pleading guilty to wire
fraud, in violation of 18 U.S.C. § 1341 (2000), Phillip Scott
Scherrer was sentenced to 96 months' imprisonment, 33 months above
the top of the guideline sentencing range. He now appeals, arguing
primarily that his sentence was unreasonably high. To provide
general guidance on this type of recurring issue, we heard this
case en banc in the first instance. Scherrer also contests two
conditions on his supervised release term, a matter with which we
deal at the end of this opinion.
Scherrer was indicted in September 2004 and, on December
2, 2004, pled guilty to a superseding information charging two
counts of wire fraud. Count I addressed a fraud that Scherrer
worked against two friends, George and Brenda LaPoint. In
substance, he induced them to give him $150,000, promising to
purchase an annuity that would generate specific income. Instead,
Scherrer used the money for his personal benefit and then with
further deceptions fended off requests from the LaPoints for
income.
Count II covered a wider scheme in which Scherrer induced
or attempted to induce over 40 individuals or couples–-some of them
his friends--to "invest" over $3 million, primarily through sales
of stock in a software company. The sales and attempted sales were
facilitated by false statements concerning the value of the stock
and other particulars. Scherrer did not buy the stock but used the
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money to maintain a luxurious lifestyle, including membership in a
country club, expensive cars, gambling, frequent vacations, and
lavish entertaining.
Given a combined loss (achieved and attempted) of just
over $3,216,000 and more than 10 victims, in conjunction with a
criminal history category I, the guideline range for Scherrer was
51 to 63 months. U.S.S.G. § 2B1.1(a), (b)(1) & (2); ch. 5, pt. A
(Sentencing Table). At the start of the sentencing hearing on
April 26, 2005, the district court warned Scherrer that the court
was not disposed to stay within the guidelines and the court
offered to let Scherrer withdraw his plea. Scherrer declined to do
so.
Scherrer's counsel then sought a sentence at the bottom
of the range, pointing to Scherrer's full acceptance of
responsibility, his cooperation, his history of bipolar disorder,
other medical problems and the harshness of his initial
confinement. He argued also that Scherrer would not commit future
frauds because his divorce deprived him of resources to do so.
Scherrer himself promised to write a book about the events and
devote the royalties to restitution.
George LaPoint testified, describing the fraud against
him and his wife, Scherrer's exploitation of his trust, and the
consequences. Letters from other victims described Scherrer's
abuse of their trust. Government counsel, recommending a 63-month
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sentence at the top of the range, emphasized the number of victims,
the age and vulnerability of many of them, the extent of Scherrer's
deceit, and the devastating economic harm inflicted on various
victims.
The district judge then sentenced Scherrer to 8 years,
33 months more than the top of the 63-month guideline maximum. In
brief (we will return to the details), the court stressed
Scherrer's exploitation of personal relationships, the harm caused,
his misuse of his skills, his extravagant use of the funds stolen,
and his history of dishonest conduct. The court said that the
sentence was needed to deter such conduct and protect the public,
reflected the particular circumstances of the crime, and was no
greater than necessary to achieve the goals of the statute. 18
U.S.C. § 3553(a).
On this appeal, Scherrer's main attack is that the
sentence was unreasonably high, double counting factors already
considered in the guideline calculation. Scherrer also says that
the district court failed to give due weight to or adequately
discuss mitigating factors such as Scherrer's bipolar disorder or
chronic medical conditions or the low likelihood of recidivism,
that it disregarded shorter sentences imposed on other defrauders,
and that it ignored the so-called parsimony principle of 18 U.S.C.
§ 3553(a).
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United States v. Booker, 543 U.S. 220, 260 (2005),
contemplates such appeals from allegedly unreasonable sentences and
our recent decision in United States v. Jiménez-Beltre, 440 F.3d
514, 2006 WL 562154, at *3-*4 (1st Cir. 2006) (en banc), outlines
our approach to such cases. Unless the district court has
misconstrued the statute or the guidelines or has misstated the
facts, our main concern is whether the court has adequately
explained its reasons for varying or declining to vary from the
guidelines and whether the result is within reasonable limits.
Jiménez-Beltre, 2006 WL 562154, at *3-4.
We start with the reasons given by the district court for
sentencing above the guideline range. Scherrer does not directly
attack aggravating circumstances relied on by the court, focusing
instead on supposed mitigating factors. But the reasonableness of
the substantial increase over the guideline maximum can scarcely be
judged without a better understanding of what lies behind the
judge's decision. This understanding is also pertinent to the
charge of double counting made by Scherrer.
First, the present offenses were not Scherrer's first
involvement in fraudulent activities. In 1980, he was convicted
for the fraudulent sale of sham hospital bonds in Michigan and was
disbarred as a result. He also settled a civil case against him in
North Carolina, which accused him of fraudulently obtaining a
construction loan and using the funds for other purposes. In
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actions brought to enforce the settlement agreement, on which
Scherrer had defaulted, he was twice held in contempt and briefly
incarcerated for filing false or unsupported financial affidavits.
Nor does the fact that there were only two counts in the
present case fully reflect Scherrer's career of fraud. Although
count II focused on the stock of a single company, effectively the
count embraced a whole series of frauds against different persons.
Although the loss calculation aggregates these frauds, it does not
fully reflect the extent to which Scherrer--taking into account his
earlier misbehavior--had become a serial criminal specializing in
fraud. It was happenstance that he used the same company stock for
successive swindles.
The district court was especially disturbed by Scherrer's
exploitation of trust. Scherrer presented himself as a successful
professional and a personally sympathetic figure (for example, he
spoke at the memorial service for the LaPoints' deceased son) and
then exploited his personal connections with various of the victims
to defraud them. The district court also stressed the age of some
of the victims, their personal need, and the economic consequences
inflicted by the frauds, contrasted with Scherrer's purchase of
luxuries for himself.
These assessments were not conjecture but were supported
by individual stories revealed by the LaPoint testimony and letters
written by victims describing what had happened and, in some cases,
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urging the most severe possible sentence. Among the victims were
a man who worked at a dry cleaning store, the locker room attendant
at Scherrer's golf club, former students of Scherrer and others who
had little to spare. Among the funds taken were those saved by
older people for retirement, money for children's education and the
proceeds of a divorce settlement. One particularly affecting
letter read in part:
I am 78 years old and a widower . . . .
I retired in 1987 with a pension. . . . Over
the years it has been difficult to save with
yearly inflation when my income remains the
same. I was approached by Phillip Scherrer
who claimed to be an agent for Delaware Corp.,
to invest in a stock called "Bloodhound" which
he said would return 6 to 8 times my
investment within a year. In a period of a
few months, I gave him $10,000 which was about
half my life savings. This doesn't leave very
much for emergency expenses and certainly at
my age I do not have any potential earning
power. I now exist on necessary expenses and
hope for the best.
It was not unreasonable for the judge to regard
Scherrer's history and methods as pertinent to the "nature and
characteristics of the offense and the history and characteristics
of the defendant," 18 U.S.C. § 3553(a)(1), nor to regard the
aggravating circumstances as pertinent to the "seriousness of the
offense," "just punishment" and the need for "adequate deterrence,"
id. § 3553(a)(2)(A), (B). The affirmative basis for the district
court's decision to vary upwards from the guidelines is adequately
supported.
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Scherrer's counter-attack on the sentence begins with his
claim that mitigating factors were ignored. Taken at face value,
these factors do at first seem to have weight; but the government
gave some effective answers in the district court and it is fair to
infer that the district court found them persuasive. That the
district court did not elaborate on them--it said only that it took
them into account--does not preclude the inference where the record
explains it. Jiménez-Beltre, 2006 WL 562154, at *3.
Admittedly, Scherrer was diagnosed with bipolar disorder
in 1978 and suffered a breakdown the next year requiring a hospital
stay. However, lithium is often an effective treatment and it so
proved for Scherrer, who earned both an M.B.A. and a Ph.D while
taking medication, until (against medical advice) he ceased using
it in 1998. The district court was entitled to discount the claim
of medical condition where, as here, the condition was reactivated
by Scherrer's own refusal to continue on medication. Cf. U.S.S.G.
§ 5H1.4 (Policy Statement) (prohibiting consideration of drug
dependence as a mitigating factor under the guidelines).
In a related argument, Scherrer says he currently suffers
from various medical conditions that will be exacerbated by prison
including high blood pressure, high cholesterol, hypothyroidism and
Raynaud's disease (a circulatory disorder). Yet it also appears
that these conditions are controlled by medication and that the
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Bureau of Prisons can furnish the necessary medical care for the
conditions.
In a second such objection, Scherrer says that the
district court ignored his showing that in other cases other
defrauders whose behavior was similar or worse had received more
lenient sentences. Thus, according to Scherrer, the district judge
was disregarding "the need to avoid unwarranted sentence
disparities among defendants with similar records who have been
found guilty of similar conduct." 18 U.S.C. § 3553(a)(6).
Scherrer points to two kinds of evidence to support his thesis:
!two cited cases in the same district court in
which defendants were convicted of fraud but
received 60-month sentences (United States v.
Blastos, 258 F.3d 25 (1st Cir. 2001), and
United States v. Trainor, U.S.D.C., D.N.H.,
No. 04-CR-118-JD);
!newspaper reports of several recent federal
fraud cases in other courts in which
defendants got shorter sentences (e.g., a
former WorldCom director sentenced to a year
and a day).
Trying to compare an individual sentence with a few
counsel-selected cases involving other defendants sentenced by
other judges is almost always useless. The cases selected in this
manner are not likely to be representative, may not be comparable
(e.g., convictions after trial versus pleas), and the information
readily available about the other defendants and their
circumstances is usually going to be inadequate to assure
comparability. Scherrer's conduct, involving a loss of $3.2
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million inflicted upon dozens of individual, unsophisticated
victims, is not "similar" to that of Blastos, who defrauded the
Greek government of $2.1 million, or of Trainor, who defrauded
institutional lenders of less than $1 million.
Scherrer also accuses the district court of ignoring the
"parsimony" principle, that is, the statutory guidance that a
sentence should be no higher than needed to meet statutory goals.
18 U.S.C. § 3553(a). But the district court acknowledged the
principle and, from the judge's point of view, eight years was the
minimum sentence needed to provide adequate deterrence through a
just sentence for a specially reprehensible series of frauds. So,
in this case, the issue remains whether the variance and resulting
sentence were reasonable.
It would be a different matter if the district court
relied upon a factor not acknowledged by the statute to enhance a
sentence--for example, if the court said the extra 33 months was
necessary to appease angry victims. Assuming a guideline sentence
that satisfied the goals set forth by the statute, adding more
months for some other, unapproved purpose might well defy the
parsimony principle. In this case the district judge relied upon
nothing outside the ambit of the statute to increase the sentence.
In sum, the district judge had a reasonable basis for
exceeding the guideline maximum. The only close call is whether
the amount by which he exceeded the maximum is also reasonable: the
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guideline maximum was five and a quarter years; the sentence
imposed was eight years. Numerically, the jump is not vast; as a
percentage it is considerable. Deciding just how far a judge
should vary from the range, where a basis for variance is made out,
is quite hard to measure. In this case the sentence is not out of
line with other upward variances in egregious cases.1
Scherrer was also sentenced to three years of supervised
release and challenges two conditions of that release--requiring
him to undergo treatment for narcotic addiction or drug or alcohol
dependency and abstain from alcoholic beverages during and after
such treatment--as an abuse of discretion. The government has
conceded that the need for those conditions is not supported by the
record and has requested a limited remand for purposes of striking
those conditions.
We agree that the need for those conditions is
unsupported by the record. Compare United States v. Thurlow, 44
F.3d 46, 47 (1st Cir. 1995) (per curiam) (upholding condition of
abstaining from alcohol where record indicated that substance abuse
was a serious problem for the defendant and that he used the
proceeds of his crimes to purchase alcohol on several occasions).
1
United States v. Smith, 440 F.3d 704 (5th Cir. 2006); United
States v. Porter, 439 F.3d 845 (8th Cir. 2006); United States v.
Jordan, 435 F.3d 693 (7th Cir. 2006); United States v. Rogers, 423
F.3d 823 (8th Cir. 2005).
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On remand, the district court can simply strike the conditions or
develop a record on the matter.
The sentence is affirmed save for the two conditions just
cited and the matter is remanded to the district court to strike
the conditions or to hold further proceedings with respect to them
as it sees fit.
It is so ordered.
Concurrence follows.
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LIPEZ, Circuit Judge, concurring. I concur in Judge
Boudin's thoughtful opinion for the en banc court, which is
consistent with the en banc decision in United States v. Jimenez-
Beltre, – F.3d –, No. 05-1258, 2006 WL 562154 (March 9, 2006). I
write separately because of my concern about the district court's
explanation of the reasons for its decision.
In Jimenez-Beltre, the defendant objected to the district
court's treatment of some factors the defendant cited at sentencing
as reasons for a sentence below the guidelines range. The en banc
court stated that "our emphasis in reviewing such claims will be on
the provision of a reasoned explanation, a plausible outcome and --
where these criteria are met -- some deference to different
judgments by the district judges on the scene." Id. at *3. We
stated further that "[w]hether the sentence falls inside or outside
the applicable guidelines range, it is important for us to have the
district court's reasons for its sentence . . . and this is even
more important in the more open ended post-Booker world." Id. The
en banc court then added this important caveat: "Yet a court's
reasoning can often be inferred by comparing what was argued by the
parties or contained in the pre-sentence report with what the judge
did." Id.
Now, in one of our first decisions post-Jimenez-Beltre,
we rely on this caveat to affirm the decision of the district
court. The defendant offered a number of mitigating arguments in
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support of his position that he should receive a sentence at the
bottom of the guidelines range. He cited his thirty year diagnosis
of bipolar disorder, his chronic medical problems, his acceptance
of responsibility and cooperation with authorities, and the
sentences imposed on two other defendants convicted in the New
Hampshire federal district court of extensive fraud. After
listening to these arguments and the counter-arguments of the
government, the district court explained in detail the aggravating
factors that, in its judgment, required a sentence considerably
above the guidelines range. It said summarily that the mitigating
factors advanced by the defendant had been "taken into account,"
along with the sentencing factors set forth in 18 U.S.C. § 3553(a).
Noting the "effective" arguments advanced by the government for
rejecting the mitigating factors cited by the defendant, we say in
our en banc decision that "it is fair to infer that the district
court found them persuasive." We add, citing Jimenez-Beltre: "That
the district court did not elaborate on them –- it said only that
it took them into account -– does not preclude the inference where
the record explains it."
Although this is an efficient approach to appellate
review of sentencing, it has costs that we should acknowledge. If
a sentencing court listens to the specific arguments of a defendant
for leniency, and then rejects them with the summary statement that
they have been taken into account in the final decision, a
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defendant naturally will be skeptical that this is so. That
skepticism will be particularly acute if the court explains in
detail, as happened here, its reasons for imposing a sentence
considerably above the guidelines range while dismissing summarily
the arguments for a lower sentence.
This is not a one-sided phenomenon. If the government
advanced specific arguments for a particular sentence, and the
court summarily rejected those arguments while explaining in detail
its reasons for imposing a lesser sentence, the government would
feel as the defendant feels here –- that its arguments were not in
fact heard and fully considered, and it would rightly complain on
appeal. In either case -- summary dismissal of a defendant's
arguments or summary dismissal of the government's arguments -- we
can save the decision on appeal by inferring the court's reasoning.
But we will never convince the party whose arguments were summarily
dismissed that these arguments were fully and fairly considered by
the sentencing court.
There are also costs on appeal. There are two components
of a reasonable sentence -- the explanation for the choice of the
sentence imposed and the sentence itself. If we have to infer a
critical portion of the explanation, as we have done here, we are
inescapably dealing with conjecture about it -- reasonable
conjecture to be sure, but conjecture nonetheless. Instead of
focusing on our primary appellate responsibility, to subject the
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actual sentencing explanation of the district court to critical
scrutiny, we must first articulate the explanation that the
district court did not. That articulation will always be an
approximation. We will never know what the district court actually
thought. Moreover, to an extent difficult to quantify, we will mix
our inferences about the district court's reasoning with our own
responses to the record of the sentencing proceeding. To that
extent, we will, in effect, be doing the sentencing in the first
instance -- a confusion of roles.
Our willingness to infer the reasoning of the district
court at sentencing also creates odd incentives for the district
court. The judge who explains in detail the reasons for accepting
or rejecting particular arguments advanced by the parties may make
it easier for the appellate court to question the reasonableness of
these explanations. An inferred explanation may be less vulnerable
to that scrutiny. Hence, wittingly or unwittingly, district courts
may be content to let the record speak for itself. That practice
would be incompatible with the district court's responsibility to
sentence in the first instance.
I wish to be clear about the scope of my concern. I do
not minimize the burdensome sentencing responsibilities of the
district court. I am not suggesting that there is legal error if
a district court does not explicitly address every sentencing
factor and purpose set forth in 18 U.S.C. § 3553(a). There is no
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checklist that must be followed. But when the defendant or the
government advances specific arguments for leniency or severity,
grounded in the defendant's history or the circumstances of the
offense, it is reasonable to expect a district court to explain why
those specific arguments are or are not persuasive. This
responsiveness by the district court is not a matter of legal
correctness. It is a matter of good practice. A sentencing
decision that withstands appellate review is not necessarily the
measure of good practice.
Here, a very able and thoughtful district court judge
explained in detail the aggravating circumstances that required, in
his view, a sentence considerably above the advisory guidelines
range. It was a compelling explanation. The fraudulent conduct
here was egregious. But it would have been better for us as an
appellate court, and better for perceptions about the fairness of
the process in the district court, if the judge had explained
specifically why he rejected the defendant's arguments in
mitigation.2 Of all the important work done by the district
courts, nothing is more important than their sentencing work. With
so much at stake -- for defendants, victims, prosecutors, and the
public -- the district courts should take the extra time, which
2
Subsequently, in a sealed statement of reasons attached to
the judgment, the judge elaborated on the aggravating factors that
required a sentence above the advisory guidelines range. He again
said summarily that he took into account the arguments in
mitigation presented by defense counsel.
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will be minimal, to respond in some detail to the specific
arguments of the government and the defendant. That will be time
well spent.
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