United States v. Stepanian

United States Court of Appeals
For the First Circuit

No. 08-1053

UNITED STATES OF AMERICA,

Appellee,

v.

MIKAEL STEPANIAN,

Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF RHODE ISLAND

[Hon. William E. Smith, U.S. District Judge]

Before

Lipez, Hansen,* and Howard,
Circuit Judges.

Barry E. Shulman for appellant.
Donald C. Lockhart, Assistant United States Attorney, with
whom Robert Clark Corrente, United States Attorney, and Lee H.
Vilker, Assistant United States Attorney, were on brief, for
appellee.

June 26, 2009

*
Of the Eighth Circuit, sitting by designation.
 LIPEZ, Circuit Judge. Appellant pled guilty to

conspiracy to commit access device fraud and aggravated identity

theft and now appeals his sentence of 72 months of imprisonment.

Among other things, this appeal requires us to decide whether

individuals who were reimbursed for financial losses are "victims"

within the meaning of the multiple victim enhancement set forth at

section 2B1.1(b)(2) of the United States Sentencing Guidelines.

Concluding that such individuals are "victims" for this purpose, we

reject appellant's challenge to the imposition of a six-level

guideline enhancement for crimes affecting more than 250 victims.

We also reject his claims that the district court erred by giving

the guideline sentence range "substantial weight" and by concluding

that it was bound to impose a two-year consecutive sentence for the

aggravated identify theft conviction.

I.

The facts are not disputed. Beginning in January 2007,

appellant and three co-conspirators -- Arman Ter-Esayan, Arutyun

Shatarevyan, and Gevork Baltadjian -- devised a plan to steal debit

card numbers, personal identification numbers ("PIN codes"), and

credit card numbers from the customers of 24-hour Stop & Shop

grocery stores in Rhode Island. To accomplish this, they

surreptitiously replaced the credit and debit card payment

terminals in Stop & Shop checkout aisles with altered terminals.

The altered terminals were equipped with devices that recorded, or

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"skimmed," debit card numbers, PIN codes, and credit card numbers

whenever customers swiped their cards to make purchases.

After returning to a targeted store to retrieve a

converted payment terminal and replacing it with the store's

original terminal, the co-conspirators possessed the private

account information of every customer who had used the compromised

terminal during the intervening period. The men were able to use

the stolen information to make unauthorized transactions, including

cash withdrawals from automatic teller machines ("ATMs"). Their

unauthorized transactions totaled roughly $132,300.

The scheme was discovered in February 2007, when one

bank's internal investigation of unauthorized ATM withdrawals

revealed that many affected account holders had recently used their

cards at Stop & Shop stores in Coventry and Cranston, Rhode

Island.1 Stop & Shop security personnel soon located surveillance

video showing Ter-Esayan, Baltadjian, and Shatarevyan entering the

Cranston store in the early hours of the morning on February 1,

2007. While Baltadjian engaged the night clerk in conversation,

Ter-Esayan and Shatarevyan approached the credit card terminal in

a deserted checkout aisle. Shatarevyan quickly disconnected the

original terminal from its cables and handed it to Ter-Esayan, who

1
The investigation was also aided when one of the altered
terminals malfunctioned and was sent out of the store for
servicing. When it was opened for repairs on February 13, 2007, it
was discovered that card-skimming equipment had been placed inside
the terminal.

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concealed it in his coat. Shatarevyan then removed a second

terminal from his own coat and connected it to the cables. Stop &

Shop surveillance personnel located similar footage of the three

men switching terminals in the Coventry and Providence, Rhode

Island stores. As revealed by the surveillance video, the process

of substitution only took about twelve seconds.

On February 26, 2007, Stop & Shop employees at one of the

targeted stores recognized appellant's co-conspirators from the

surveillance video and called the police. The responding officers

arrested Ter-Esayan, Baltadjian, and Shatarevyan inside the store.

They also arrested appellant, who was sitting behind the wheel of

a vehicle parked immediately outside the store's exit. Police

later searched a nearby hotel room that had been rented in

appellant's name, where they found materials used to alter the

credit card terminals and a laptop containing the private account

information of customers who had shopped at the Cranston and

Coventry Stop & Shop stores.

On July 13, 2007, after waiving his right to indictment,

appellant pled guilty to a two-count information charging: 1)

conspiracy to violate 18 U.S.C. § 1029(a)(2) by trafficking in and

using one or more unauthorized access devices with intent to

defraud, in violation of 18 U.S.C. § 371 (Count I), and 2) knowing

transfer, possession, or use of other persons' means of

identification in relation to the felony offenses of access device

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fraud, 18 U.S.C. § 1029(a)(2), (a)(3), and conspiracy to commit

access device fraud, 18 U.S.C. §§ 371, 1029(b)(2), constituting

aggravated identity theft in violation of 18 U.S.C. § 1028A(a)(1)

(Count II).

The Office of Probation prepared a pre-sentence report

("PSR") that calculated appellant's total offense level for Count

I (access device fraud) at 23. This calculation included a base

offense level of 6, a ten-level upward adjustment for crimes

causing a financial loss of between $120,000 and $200,000, a six-

level upward adjustment for crimes involving more than 250 victims,

a two-level upward adjustment for use of sophisticated means to

commit the crime, a two-level upward adjustment because the offense

involved the production or trafficking of an unauthorized access

device, and a three-level downward adjustment for acceptance of

responsibility. The PSR placed appellant in Criminal History

Category I, and the resulting guideline range was 46-57 months on

Count I. The report also noted that Count II, aggravated identity

theft, carried a mandatory consecutive sentence of two years. 18

U.S.C. § 1028A(b).

At sentencing, the defendant objected to the PSR's

calculation of the number of victims of the crime, arguing that

individual account holders could not be counted as victims because

they were reimbursed by their financial institutions. The district

court disagreed:

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 [T]here has been loss experienced by all the
victims in the case. The loss experienced by
the individual victims may have been for a
short period of time, might have been for a
week or two weeks or for a day, whatever the
case may be. There was reimbursement, no
doubt, that occurred, but I don't think the
guidelines speak in terms of the length of
time that a victim is deprived of their money
or access to their money any more than in any
other crime of fraud or that involves
stealing, that the question of whether the
person is a victim is determined by whether
they're deprived of their resources for an
hour, a day, a month or a year . . . . It
seems to me these people were victims because
money was stolen from their accounts.

The district court adopted the PSR's recommendation, sentencing

appellant to 48 months of imprisonment on Count I and a mandatory

two year consecutive term on Count II, for a total period of

imprisonment of 72 months. This appeal followed.

II.

Appellant first challenges the district court's

calculation of the number of victims of his crime. United States

Sentencing Guidelines section 2B1.1 ("section 2B1.1") pertains to

economic crimes such as embezzlement, fraud, and some counterfeit

offenses, and instructs that a six-level increase should be applied

if such an offense involved 250 or more victims ("the multiple

victim enhancement"). U.S.S.G. § 2B1.1(b)(2)(C).2 The application

2
Section 2B1.1(b)(2) also instructs sentencing courts to
apply a two-level increase for offenses involving 10 or more but
less than 50 victims, and a four-level increase for those involving
50 or more but less than 250 victims. U.S.S.G. § 2B1.1(b)(2)(A)
and (B).

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notes accompanying section 2B1.1 define "victim" as "(A) any person

who sustained any part of the actual loss determined under

subsection (b)(1);3 or (B) any individual who sustained bodily

injury as a result of the offense . . . ." U.S.S.G. § 2B1.1 cmt.

n.1. The notes define "actual loss" as "the reasonably foreseeable

pecuniary harm that resulted from the offense," U.S.S.G. § 2B1.1

cmt. n.3(A)(i).4 "'Pecuniary harm' means harm that is monetary or

that otherwise is readily measurable in money. Accordingly,

pecuniary harm does not include emotional distress, harm to

reputation, or other non-economic harm." U.S.S.G. § 2B1.1 cmt.

n.3(A)(iii).

Appellant argues that the bank account holders who were

reimbursed for their losses were not "victims" for purposes of the

multiple victim enhancement because, having been reimbursed, they

did not ultimately sustain the "actual loss determined under

subsection (b)(1)" of section 2B1.1. U.S.S.G. § 2B1.1 cmt. n.1.

The government counters that the there is no requirement that

victims bear the final burden of the financial loss, and that it is

3
Subsection (b)(1) prescribes incremental sentence level
increases depending upon the amount of loss attributed to the
crime. U.S.S.G. § 2B1.1(b)(1).
4
This definition excludes "[i]nterest of any kind, finance
charges, late fees, penalties, amounts based on an agreed-upon
return or rate of return, or other similar costs" and "[c]osts to
the government of, and costs incurred by victims primarily to aid
the government in, prosecution and criminal investigation of an
offense." U.S.S.G. § 2B1.1 cmt. n.3(D).

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enough that an individual sustain "any part" of the loss, id.,

before it is shifted to another individual or entity. Further, the

government argues, adopting appellant's argument would contradict

the clear intention of the Sentencing Commission to increase

penalties according to the severity and impact of economic crimes.

We think the government has the better of the argument.

To begin with, we agree with the government that the most natural

reading of the phrase "sustain any part of" in the application

notes' definition of "victim" does not have a temporal limit or

otherwise indicate that losses must be permanent. Although one

understanding of "sustain," meaning "to keep up or keep going," The

Random House Dictionary of the English Language 1917 (2nd. ed.

1987), does have a temporal dimension, we think the better

understanding of the word "sustain" in this context simply means to

"undergo" or "suffer." Black's Law Dictionary 1488 (8th ed. 2004)

("Charles sustained third degree burns."). The card holders bore

the first part of the total losses before the funds were restored.

The direct withdrawal of money from their bank accounts left them

unable to access that money for some period of time.5 This

5
This case does not require us to address the situation where
unauthorized charges made on credit cards are reversed before
targets actually pay for the charges. Although this fraud included
the theft and use of credit card numbers and debit card numbers,
the government took the position in the district court and on
appeal that the vast majority of illicit transactions in this case
were debit card transactions, and the defendant did not object to
that factual characterization. In the absence of such a challenge,
the district court was entitled to rely on the government's

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immediate unavailability of the account holders' money is

"reasonably foreseeable pecuniary harm," U.S.S.G. § 2B1.1 cmt.

n.3(A)(i), and within the intended scope of section 2B1.1.

In drawing this conclusion, we reject the position of

some other circuits that the account holders did not suffer actual

pecuniary harm, "readily measurable in money," because their losses

were reimbursed. See, e.g., United States v. Yagar, 404 F.3d 967,

971 (6th Cir. 2005) (concluding that individuals whose funds are

eventually reimbursed by financial institutions are not "victims"

within the meaning of section 2B1.1 because, having recovered their

losses within a short period of time, they do not suffer any

"adverse effect as a practical matter.").6 The "declaration of

victim losses" statements filed in the district court in this case

confirm the common-sense conclusion that the individual account

holders suffered a real economic loss. The declarations reveal

that one victim who was traveling abroad could not pay her travel

assertion that the debit card theft brought the number of victims
above 250 even if the credit card victims are excluded from that
tally. See, e.g., United States v. Prochner, 417 F.3d 54, 65-66
(1st Cir. 2005) (a sentencing court is entitled to rely on facts
set forth in PSR when defendant has not meaningfully objected to
them). We therefore limit our holding to the situation where money
was removed from the accounts of targets through debit card
withdrawals.
6
See also, United States v. Kennedy, 554 F.3d 415, 419 (3d
Cir. 2009) ("account holders did not 'sustain[] any part of the
actual loss' because they were reimbursed . . . . "); United States
v. Orr, No. 08-7070, 2009 WL 1459570 at *5 (10th Cir. May 27,
2009); United States v. Pham, 545 F.3d 712, 720-21 (9th Cir. 2008);
United States v. Conner, 537 F.3d 480, 489 (5th Cir. 2008).

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expenses during the period of the theft. Another victim described

how he and his family had no money for food and gas for a period of

time because of the theft, and how their card was denied when they

tried to use it to pay for their son's birthday party. That victim

concluded "it put a big financial burden on my family for a few

weeks." Although every victim of the scheme may not have a

similarly dramatic story, these declarations provide tangible

support for our conclusion that even where losses are reimbursed,

unauthorized withdrawals from bank accounts cause real economic

harm.7

Furthermore, the application notes accompanying section

2B1.1 reflect an understanding on the part of the Commission that

the term "victim" includes persons whose losses are reimbursed.

Again, the notes define "victim" as any person who sustains any

part of the actual loss calculated under subsection (b)(1) of

section 2B1.1. In explaining how to calculate the subsection

(b)(1) loss, the notes state that: "Loss shall be reduced by . . .

[t]he money returned . . . by the defendant . . . to the victim

before the offense was detected." U.S.S.G. § 2B.1 cmt. n.3(E)(i).

The notes thus describe a person as a "victim" even though the

person's entire losses might be reimbursed by the defendant before

7
To be clear, our recital of these anecdotes is not meant to
suggest that the government must prove the kind of harm described
in the letters to establish the applicability of the multiple
victim enhancement. We simply offer these accounts in support of
our position that such withdrawals, whatever the particulars of the
impact in an individual case, do represent real economic harm.

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the detection of the crime. The Eleventh Circuit also found this

language persuasive in United States v. Lee, 427 F.3d 881, 895

(11th Cir. 2005), where it found that reimbursed individuals are

"victims" within the meaning of the guideline. The Eleventh

Circuit observed:

When considering the impact of recovered
collateral, or the return of money, property,
or services, to the victim, the Guidelines
treat those so recovering as having suffered
a loss but then allow the defendant to take
credit against the total loss for the value of
the recovered or returned loss. Stated
another way, inherent in the credit against
loss provision 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.

Id. at 895 (citations omitted).8

More recently, albeit in an unpublished opinion, the

Eleventh Circuit has indicated that Lee's reading of the guideline

8
The credit against loss application note reads:

Credits Against Loss.--Loss shall be reduced by the
following: (i) The 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
. . . . (ii) In a case involving collateral pledged or
otherwise provided by the defendant, the amount the
victim has recovered at the time of sentencing from
disposition of the collateral, or if the collateral has
not been disposed of by that time the fair market value
of the collateral at the time of sentencing.

U.S.S.G. § 2B1.1, cmt. n.3(E).

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would apply beyond the narrow facts of that case.9 In United States

v. Cornelius, 202 Fed. App'x. 437, 439 (11th Cir. 2006), the court

concluded that targets of a bank fraud scheme who were reimbursed

shortly after they sustained losses were victims, and remarked that

although the losses in Lee "were not short-term or subject to

indemnity . . . . this did not detract from [the] conclusion that

the Guidelines allow a court to find an actual loss by a reimbursed

party, and therefore treat that party as a victim."10

Finally, although the rule of lenity may counsel in favor

of a defendant's interpretation of an ambiguous guideline,11 see

United States v. Bowen, 127 F.3d 9, 14 (1st Cir. 1997) (applying the

rule of lenity where there was "genuine and insurmountable doubt"

about the meaning of a guideline provision), that rule is reserved

for "those situations in which a reasonable doubt persists about a

statute's intended scope even after resort to the language and

structure, legislative history, and motivating policies of the

statute." United States v. R.L.C., 503 U.S. 291, 305-06 (1992)

9
It generally took longer for the Lee victims to recoup
their losses than is the case here, and some were never totally
reimbursed. Lee, 427 F.3d at 885.
10
The Eleventh Circuit, like our own, views its unpublished
opinions as persuasive authority but not binding precedent. See
11th Cir. R. 36-2; 1st Cir. R. 32.1.0(a); see also Fed. R. App. P.
32.1. We cite Cornelius with the recognition that it is persuasive
authority but not binding within the Eleventh Circuit.
11
Under the rule of lenity, we resolve "grievous ambiguity
in a penal statute" in a defendant's favor. United States v.
Councilman, 418 F.3d 67, 83 (1st Cir. 2005).

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(internal quotations and citations omitted; emphasis in original).

Here, the evident policy behind the guideline resolves any potential

ambiguity in favor of the government, making the rule of lenity

inapplicable. Section 2B1.1 serves Congress's goal of achieving

"proportionality in sentencing through a system that imposes

appropriately different sentences for criminal conduct of different

severity." U.S.S.G. § 1A.1 cmt. Part A, n.3 (emphasis in original).

As the government points out, under Stepanian's view,

[N]one of the people who bore the initial
brunt of the crime -- who had their identities
and assets stolen -- qualify as victims.
Indeed, under his logic, there would only be
one victim if a single insurer stood behind
the 26 banks and absorbed the losses. The
Sentencing Commission could not have intended
such a strange result in the case of an
enhancement whose evident purpose is to gauge
the magnitude of the crime, not to apportion
damages, restitution, or tax liability.

We agree. Section 2B1.1's multiple victim enhancement

serves the goal of proportionality by increasing penalties for

crimes that affect many people. Our reading of the term "victim"

comports with that goal by reflecting the magnitude of a crime which

imposed "reasonably foreseeable pecuniary harm" on many people

within the meaning of the guideline.12 Accordingly, we affirm the

12
In light of the evident circuit split on this question, the
Supreme Court will most likely have to resolve the disagreement, or
the Sentencing Commission will have to provide further guidance.
In fact, the Sentencing Commission is currently considering the
question. See United States Sentencing Commission, Proposed
Amendments to the Sentencing Guidelines, 74 Fed. Reg. 4806 (Jan.
27, 2008) (addressing the circuit split and requesting "comment
regarding whether § 2B1.1 adequately accounts for a case in which

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district court's decision to impose the six-level multiple victim

enhancement for more than 250 victims.13

an individual suffers pecuniary harm, but the pecuniary harm is
immediately reimbursed by a third party."). The fact that the
Sentencing Commission is involved in ongoing deliberations about
the language of the guideline does not, however, relieve us of our
duty to interpret and apply the language of the guideline as it is
presently written. We note that the Department of Justice's Office
of Policy and Legislation, in a letter responding to the
Commission's request for comment, endorsed the position of the
Second and Ninth Circuits, thereby taking a position that would be
at odds with its argument in this case. However, at oral argument,
the United States represented that "to the extent there is any
tension or conflict between [the government's] brief and the letter
from the Department to the Sentencing Commission . . . [the] brief
controls and [the] brief represents the official position of the
Justice Department on this issue in the case of people like the
ones here who have their money stolen from their accounts by debit
and who from our perspective do suffer [a] pecuniary harm, albeit
it a temporary one."
13
Other circuits that have found that temporary losses do not
constitute actual pecuniary harm and do not bring their bearers
within section 2B1.1's definition of "victim" have nonetheless
concluded that secondary financial harms, such as the cost of time
spent seeking reimbursement, can render reimbursed individuals
"victims" within the meaning of the guideline. See United States
v. Abiodun, 536 F.3d 162, 169 (2nd. Cir. 2008) (holding that the
cost of time spent seeking reimbursement can render reimbursed
individuals victims within the meaning of section 2B1.1, so long as
time cost losses are included in the subsection (b)(1) loss
calculation); Pham, 545 F.3d at 721 (same). In addition to its
primary argument, the government asked that, should we decide that
only secondary costs such as time costs would constitute actual
harm to the individual account holders, we remand the case for
factual development of the secondary costs incurred by account
holders as a result of the crime. In light of our acceptance of
the government's primary argument, however, we need not reach the
question whether secondary costs such as time costs can account for
actual loss under subsection (b)(1) and whether they must be
included in the calculation of subsection (b)(1) actual loss if
their bearers are to be counted as victims.

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 III.

Appellant also challenges his sentence on the ground that

the district court misunderstood its discretion to depart from the

sentencing guidelines in light of United States v. Booker, 543 U.S.

220 (2005). "After Booker, the applicable guidelines range is

treated merely as advisory and the sentencing court is free to

exercise its discretion to impose a reasonable sentence outside the

guidelines range that is 'sufficient, but not greater than

necessary' based on the factors articulated in § 3553." United

States v. Vidal-Reyes, 562 F.3d 43, 49 (1st Cir. 2009) (quoting 18

U.S.C. § 3553(a)).

Appellant cites to nothing in the record indicating that

the district court gave undue weight to the sentencing guidelines

or otherwise misunderstood its discretion. The court carefully

addressed the arguments made at sentencing by appellant's counsel,

and stated, "[I will] try to place my decision within the context

of the Section 3553 factors, which I'm obligated to consider in

determining the appropriate sentence." See 18 U.S.C. § 3553(a)

(explaining that "[t]he court shall impose a sentence sufficient,

but not greater than necessary" and setting forth several factors

to be considered in determining sentence length). The court further

stated, "And I think that meting out sentences . . . I do what I

think is right and I don't hesitate to go downward if I think it's

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the appropriate thing to do. But in this case, I think the

guideline sentence is what's called for."

There was no error here. The court understood its

discretion to depart from the sentencing guidelines, and imposed a

sentence with that understanding in mind.

IV.

Lastly, Stepanian challenges the two-year consecutive

sentence he received after pleading guilty to aggravated identity

theft pursuant to 18 U.S.C. § 1028A. He did not raise this claim

in the district court; therefore, our review is for plain error.

United States v. Rodriguez-Lozada, 558 F.3d 29, 38 (1st Cir. 2009).

We find none.

The elements of aggravated identity theft under 18 U.S.C.

§ 1028A are: 1) knowing transfer, possession, or use, without lawful

authority, of a means of identification of another person, 2) in

relation to a felony violation enumerated in subsection (c) of § 18

U.S.C. § 1028A. Appellant frames his argument as a sentencing

challenge, claiming that "the sentencing court committed error when

it believed it was required to impose a two year consecutive

sentence," but his argument seems to take issue with the basis for

his conviction for aggravated identity theft.14 He essentially

claims that his conviction for aggravated identity theft was flawed

14
18 U.S.C. § 1028A prescribes a mandatory consecutive two-
year penalty for violators of that statute. The district court
correctly understood that a two year consecutive sentence is
required for a conviction under § 1028A.

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because he was not independently convicted of an enumerated "in

relation to" offense.

Appellant is correct that his conviction in Count I was

under the general conspiracy statute, 18 U.S.C. § 371, which is not

an enumerated "in relation to" offense under subsection (c) of

section 1028A. His conviction, however, was for conspiracy to

violate 18 U.S.C. § 1029(a)(2), which is an enumerated crime under

subsection (c). For purposes of this appeal we need not determine

whether Count I alone would have formed a sufficient basis for the

"in relation to" element of the § 1028A conviction, because of

appellant's plea of guilty to Count II.

In pleading guilty to Count II, appellant pled guilty to

all of the elements of § 1028A aggravated identity theft, including

the "in relation to" element. Count II alleged that 1) during and

in relation to the felony offenses of access device fraud (18 U.S.C.

§ 1029(a)(2) and (3)) and conspiracy to commit access device fraud

(18 U.S.C. § 1029(b)(2)), appellant 2) "did knowingly transfer,

possess, and use, without lawful authority, means of identification

of other persons . . . ". All three of those listed offenses (18

U.S.C. § 1029(a)(2), (a)(3), and (b)(2)) are felony violations

enumerated in subsection (c)(4) of 18 U.S.C. § 1028A. Appellant

therefore pled guilty to using other persons' means of

identification in relation to violations of several § 1028A-eligible

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offenses.15 There was no error, let alone plain error, in the

imposition of the mandatory two-year consecutive sentence for

aggravated identity theft.

Affirmed.

15
To the extent Stepanian wishes to argue that the government
must separately allege and charge the predicate crime in order to
charge a § 1028A offense (and it is unclear whether this is what he
intends to argue), the statutory language lends no support to that
proposition. Also, the government draws a persuasive analogy to
convictions under 18 U.S.C. § 924 for use of a firearm in relation
to other crimes. In that context, we have held that a defendant
"may be convicted for possession of a weapon in furtherance of a
drug trafficking crime . . . even if he is acquitted of the
underlying . . . crime," because, despite the apparent
inconsistency in the jury's verdict, there was "sufficient evidence
to sustain a rational verdict of guilty on both counts." United
States v. Figueroa-Encarnacion, 343 F.3d 23, 30 & n.4 (1st Cir.
2003). In this case, where the defendant has pled guilty to
committing the "in relation to" offense as an element of the crime
of conviction, and there is not even a claim of inconsistency, the
case for the conviction's legitimacy is even stronger.

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