In the
United States Court of Appeals
For the Seventh Circuit
No. 10-2426
U NITED S TATES OF A MERICA,
Plaintiff-Appellee,
v.
S COTT S CHLUETER,
Defendant-Appellant.
Appeal from the United States District Court
for the Southern District of Illinois.
No. 3:09-cr-30126—Michael J. Reagan, Judge.
A RGUED JANUARY 25, 2011—D ECIDED M ARCH 10, 2011
Before K ANNE, E VANS, and W ILLIAMS, Circuit Judges.
E VANS, Circuit Judge. For almost three years Scott
Schlueter, a registered broker-dealer, engaged in a fraud-
ulent investment scheme and bilked several people
who trusted him out of more than $300,000. He pleaded
guilty to securities fraud, see 15 U.S.C. § 77q, mail fraud,
see 18 U.S.C. § 1341, and wire fraud, id. § 1343. The
district judge concluded that the agreed guideline range
of 33 to 41 months failed to adequately account for the
2 No. 10-2426
harm Schlueter’s fraud caused his victims (or the egre-
giousness of his conduct) so he sentenced him to serve
a term of 48 months. Schlueter, who asked for a sentence
of 24 months, appeals arguing that his sentence is unrea-
sonable.
The targets of Schlueter’s fraud were people he knew as
friends. He admits that rather than investing money on
their behalf in what he claimed were no-risk invest-
ments, he instead pocketed the proceeds, only oc-
casionally paying out interest. For example, Schlueter
solicited funds from his friends, the Watersons, both of
whom are of retirement age (it’s unclear whether they
were actually retired), and convinced them to invest
close to $280,000 in a nonexistent fund. Mr. Waterson,
who at the time was 75 years old, testified at sentencing
that Schlueter put an additional $300,000 into annuities
that Mr. Waterson can’t reach without penalty until he
is 98, contrary to Mr. Waterson’s direction that the
money be accessible within a year. The Watersons and
Schlueter were friends for ten years, shared meals
together, and spent time with each other’s families, yet,
Mr. Waterson said, when he confronted Schlueter about
the funds, Schlueter treated him “like [he] was a dog.”
Mr. Waterson told the district judge that because of
Schlueter’s grift, Mr. Waterson had to return to work
and couldn’t help his son save his home from foreclo-
sure. Additionally, he and his wife explained in their
victim-impact statement, they could not make improve-
ments to their own house, buy a coveted motor home, or
go shopping.
No. 10-2426 3
Schlueter also admitted scamming a woman named
Staley out of about $40,000. Schlueter, a friend of
Mrs. Staley’s late husband, convinced her to invest the
money she received from her husband’s life insurance
policy in a fictional real estate deal. Schlueter promised
her $750 every two months in interest payments; she
received only three payments after she parted with the
$40,000. As a result of Schlueter’s fraud, she had to take
on a second job. The probation officer, in the presentence
report, noted that Schlueter conned another couple,
also friends, out of $23,000, soliciting them to invest
in nonexistent, no-risk funds.
The probation officer calculated Schlueter’s base
offense level at 7, see U.S.S.G. § 2B1.1(a)(1), added 12 levels
because the total loss was more than $200,000 but less
than $400,000, see id. § 2B1.1(b)(1)(G), added 4 levels
because Schlueter was a registered broker-dealer who
had violated the securities laws, see id. § 2B1.1(b)(17)(A),
and deducted 3 levels for acceptance of responsibility, see
id. § 3E1.1(a)-(b). Schlueter had no criminal history, so
the guideline range was 33 to 41 months’ imprisonment.
Schlueter did not object to any of the information in
the presentence report, and the government didn’t ask
for any additional adjustments.
Schlueter argued for a 24-month sentence because of
his difficult childhood (the judge noted that he had a
“lousy relationship with his parents and family that
continues to this day”) and, among other things, be-
cause he suffered from alcoholism. But the government
advocated a sentence within the guideline range be-
4 No. 10-2426
cause Schlueter defrauded vulnerable victims, including
an elderly couple on the verge of retirement and a
new widow.
As we said, the district judge settled on a sentence of
48 months. The judge determined that the guideline
range did not adequately account for the severe impact
that Schlueter’s fraud had on the victims and the abject
nature of the offense. The judge was also concerned
that Mr. Waterson, at 75 years old, would have to return
to work. And had it not been for Schlueter’s deception,
the judge continued, Mr. Waterson would have been
able to retire, remodel his home, buy a motor home, take
his wife shopping, and help his son prevent foreclosure.
The judge further observed that the guidelines didn’t
account for Schlueter’s treatment of Mr. Waterson when
he approached him about the missing money; Schlueter
“kicked him to the curb.” The judge was also troubled
by the fact that Schlueter swindled a widow out of her
insurance money. Despite Schlueter’s “lousy life,” the
judge thought these facts warranted a sentence above
the guideline range. A lesser sentence, the judge stated,
would not provide just punishment, deter him or others
from committing similar conduct, or promote respect
for the law.
Schlueter argues that the judge committed procedural
error by failing to adequately explain the reason for
imposing the above-range sentence. The procedural
error, he argues, was that the judge incorrectly stated
that the guidelines failed to take into account circum-
stances that are, in fact, provided for in the guidelines.
No. 10-2426 5
Specifically, Schlueter points to the adjustment allowed
for vulnerable victims, see U.S.S.G. § 3A1.1(b), and depar-
tures for extreme psychological injury, see id. § 5K2.3,
property damage or loss, see id. § 5K2.5, and extreme
conduct, see id. § 5K2.8. (Id.)
A judge commits a procedural error at sentencing if
he calculates the guidelines incorrectly, treats the guide-
lines as mandatory, fails to consider the 18 U.S.C. § 3553(a)
factors, or inadequately explains the chosen sentence.
Gall v. United States, 552 U.S. 38, 49-50 (2007); United
States v. Scott, 555 F.3d 605, 608 (7th Cir.), cert. denied, 130
S. Ct. 341 (2009). The guidelines allow for an upward
variance if the offense level substantially understates the
seriousness of the offense. See U.S.S.G. §§ 2B1.1 cmt. 19,
5K2.0(a)(3). While an above-range sentence must be
adequately explained, the judge need not provide an
extraordinary or compelling justification. United States v.
Brown, 610 F.3d 395, 398 (7th Cir. 2010); United States v.
Angle, 598 F.3d 352, 359 (7th Cir. 2010).
Here the judge’s explanation was more than ade-
quate. He found that an above-range sentence was ap-
propriate because Schlueter conned not just vulnerable
victims out of large sums of money, but because he
took advantage of personal relationships to cheat them
out of significant sums they needed at critical stages of
their lives. His victims, an elderly couple preparing for
retirement and a recent widow whom he preyed on
based on his relationship with her dead husband, could
not be more sympathetic. See United States v. Straw, 616
F.3d 737, 744 (8th Cir. 2010) (upholding as reasonable
6 No. 10-2426
district court’s above-range sentence for defendant who
committed fraud and forged a security because guide-
lines did not account for targeting victims close to retire-
ment); United States v. Rajwani, 476 F.3d 243, 250 (5th Cir.
2007) (upholding district court’s above-range sentence
where victims of defendant’s fraud had limited financial
means, amount of loss represented much of victims’ life
savings, and victims suffered physical manifesta-
tions of emotional harm). The court also referenced
Schlueter’s degrading treatment of the elderly Mr.
Waterson as a factor unaccounted for in the guide-
lines. See United States v. Bohanon, 290 F.3d 869, 876 (7th
Cir. 2002) (upholding district court’s above-range sen-
tence for defendant who sent humiliating and threatening
letters to victims’ neighbors).
Additionally, we note that Schlueter’s sentencing
range could have been higher. A two-level adjustment
under U.S.S.G. § 3A1.1(b)(1) for targeting vulnerable
victims would have been appropriate here because
Schlueter scammed a recent widow and an elderly,
retired couple. See United States v. Hawes, 523 F.3d 245,
255 (3d Cir. 2008); United States v. Sims, 329 F.3d 937,
944 (7th Cir. 2003); United States v. Rumsavich, 313 F.3d
407, 412 (7th Cir. 2002); United States v. Parolin, 239 F.3d
922, 926-27 (7th Cir. 2001); United States v. Harris, 38 F.3d
95, 99 (2d Cir. 1994). Had the judge applied a vulnerable
victim adjustment, Schlueter’s sentencing range would
have been 41 to 51 months, and his 48-month sentence,
on appeal, would have been entitled to a presumption of
reasonableness. See Rita v. United States, 551 U.S. 338,
347 (2007); United States v. Mykytiuk, 415 F.3d 606, 608
No. 10-2426 7
(7th Cir. 2005). Although the judge didn’t apply the
adjustment, its availability also supports the reasonable-
ness of the 48-month sentence and the necessity of the
sentence to effectuate the aims of 18 U.S.C. § 3553(a).
For these reasons, the judgment of the district court
is A FFIRMED.
3-10-11