United States v. Olbres

USCA1 Opinion









United States Court of Appeals

For the First Circuit
____________________

Nos. 96-1021 & 1022

UNITED STATES OF AMERICA,
Appellee,

v.

ANTHONY G. OLBRES and SHIRLEY A. OLBRES,
Appellants.

____________________



ERRATA SHEET ERRATA SHEET


The opinion of this Court issued on November 1, 1996 is
corrected as follows:

On page 5, line 20: end the paragraph after "appeal." Begin
new paragraph on line 21, with "Three"

On page 17, line 6: change "appears" to "appeared"

On page 17, line 10: delete apostrophe after "Guidelines"



































United States Court of Appeals
For the First Circuit

____________________


Nos. 96-1021
96-1022

UNITED STATES OF AMERICA,

Appellee,

v.

ANTHONY G. OLBRES and SHIRLEY A. OLBRES,

Appellants.




____________________

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
NEW HAMPSHIRE

[Hon. Steven J. McAuliffe, U.S.District Judge] __________________

____________________

Before

Selya, Cyr and Lynch, Circuit Judges, ______________

____________________

Gregory G. Katsas, with whom John B. Nalbandian, Jones, Day, _________________ __________________ ___________
Reavis & Pogue, Scott P. Lopez, Terry Philip Segal, Segal & ________________ _______________ ___________________ _______
Feinberg, Steven M. Gordon, and Shaheen & Gordon were on brief ________ ________________ ________________
for appellants.
Karen Quesnel, Attorney, Tax Division, Department of _______________
Justice, with whom Loretta C. Argrett, Assistant Attorney ___________________
General, and Robert E. Lindsay and Alan Hechtkopf, Attorneys, __________________ _______________
Tax Division, Department of Justice, were on brief for appellee.

____________________

November 1, 1996
____________________

















LYNCH, Circuit Judge. This tax evasion case raises LYNCH, Circuit Judge _____________

two sentencing issues, one of import to tax cases and one of

larger import. We hold that a sentence in a tax evasion case

must be predicated on findings as to amounts that the

government has proven were willfully evaded and that it is

unlikely the requisite findings were made here. We also hold

that there is no categorical imperative prohibiting the very

consideration of whether a case is so unusual as to warrant a

downward departure based on the loss of jobs to innocent

employees occasioned by the imprisonment of the defendant

owner of a small business. We reject the argument that the

United States Sentencing Commission's comment discouraging

departures based on the "vocational skills" of the defendant

categorically prohibits consideration of such job loss to

third parties. Accordingly, we vacate defendants' sentences

and remand.

I

Anthony and Shirley Olbres, husband and wife, run a

business, Design Consultants ("DC"), which creates exhibit

booths for trade shows. Design Consultants currently employs

twelve people in addition to Anthony Olbres, who is president

of the company, and Shirley Olbres, who serves as DC's part-

time bookkeeper. In 1987, Mr. and Mrs. Olbres had a total

income of $837,480. In June 1987, they purchased a Rolls

Royce Corniche convertible for $158,000. They drove the



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Rolls to a local restaurant in Exeter, New Hampshire. A

passing IRS employee saw the luxury car parked outside of the

restaurant. His curiosity engaged, he wrote down the license

plate number with the intention of identifying the car's

owner and examining his or her tax returns. The IRS

employee's curiosity led to a 1989 audit of the Olbres' 1987

joint tax returns and eventually resulted in a criminal

investigation. The investigation led the government to

conclude that Mr. and Mrs. Olbres had committed criminal tax

evasion.

Mr. and Mrs. Olbres were indicted on three counts of

criminal tax evasion related to the income tax returns they

filed for the years 1986, 1987, and 1988. See 26 U.S.C. ___

7201. The returns understated the couple's taxable income

for those years by approximately $153,000, $749,000, and

$175,000, respectively. For 1987, the year with the bulk of

the unreported income, Mr. and Mrs. Olbres failed to report

income from three sources: 1) payments, totaling $630,000,

from business customers that were deposited directly into a

business savings account and not recorded in the cash

receipts journal provided to the Olbres' accountant; 2)

rental income, totaling $22,000, from various properties the

couple owned; and 3) rebates, totaling $97,000, paid by

shipping companies utilized by DC. Mr. and Mrs. Olbres

conceded all the understatements but defended on the basis



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that none were willful. The couple insisted that they had

relied on their accountant, who had prepared their returns

since 1977. That accountant died before the trial. The

couple attributed other errors, including the failure to

report the shipping rebates, to Mrs. Olbres, who was depicted

as a well-meaning but untrained bookkeeper.

The jury acquitted Mr. and Mrs. Olbres on the charges

relating to the 1986 and 1988 returns and convicted on the

charge related to the 1987 return. The jury verdict was

general; the district judge instructed the jury that it could

convict on a count if it found that Mr. and Mrs. Olbres had

willfully attempted to evade a "substantial" amount of taxes

for the relevant year. There was no specific jury finding as

to the amounts willfully evaded, or as to whether the willful

evasion encompassed some or all of the categories of income

involved.

The district court granted the Olbres' motion for

judgment of acquittal on the conviction relating to the 1987

tax return on the basis that the government had failed to

prove willfulness beyond a reasonable doubt. United States _____________

v. Olbres, 881 F. Supp. 703, 706 (D. N.H. 1994). The ______

government appealed, and this court reversed, holding that

there was evidence of willfulness sufficient to uphold the

conviction. United States v. Olbres, 61 F.3d 967, 970-73 _____________ ______

(1st Cir.), cert. denied, 116 S. Ct. 522 (1995). This court _____ ______



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did not parse the evidence as to the specific amounts

willfully underreported for the year 1987. See id. ___ ___

On remand, the district court determined that the tax

loss caused by Mr. and Mrs. Olbres totalled $632,158, which,

according to the Sentencing Guidelines' Tax Table, places the

Olbres' base offense level at 15. See U.S.S.G. 2T4.1. The ___

$632,158 amount included the $470,236 tax loss from 1987 as

well as the tax losses from 1986 and 1988, despite the

defendants' challenge to the inclusion of certain amounts

from 1987 and of the entire 1986 and 1988 amounts.

The district court judge sentenced Mr. and Mrs.

Olbres to 18 months in prison, the lowest possible sentence

within the level 15 sentencing range for their Criminal

History Category of I. That sentence is predicated upon the

willfulness requirement having been met for the entire sum

underreported for 1987. It is also predicated on the entire

sums underreported for 1986 and 1988, as the court felt it

was required to consider those amounts as relevant conduct,

despite the acquittals. Stating that it was legally required

to do so, the court rejected Mr. and Mrs. Olbres' argument

that there should be a downward departure from the sentence

because sending them to prison would mean the demise of their

small business and loss of employment for a dozen innocent

employees. It is from these determinations that Mr. and Mrs.

Olbres appeal.



-5- 5













Three issues are argued. Mr. and Mrs. Olbres argue

that the district court erred in failing to determine whether

they willfully evaded all of the taxes on which their

sentence was based. They also argue that the consideration

of the acquitted conduct stemming from the 1986 and 1988 tax

years violated the Sentencing Reform Act and the Double

Jeopardy and Due Process Clauses of the Constitution.

Finally, Mr. and Mrs. Olbres argue that the district court

erred as a matter of law in adopting a per se rule that a

trial court may never consider a downward departure to

prevent termination of an ongoing business enterprise and the

loss of employment to innocent persons. We vacate the

sentence and remand for further proceedings on the first and

third grounds and do not reach the Olbres' acquitted conduct

argument.

II

The United States and defendants agree on this appeal

that for sentencing purposes the trial judge was required by

Rule 32(c)(1), Fed. R. Crim. P., to find that Mr. and Mrs.

Olbres willfully attempted to evade all of the taxes used in

determining their base offense level. The dispute is over

whether the court adequately, or ever, made such findings.

The government contends that although the trial court made no

specific findings, the trial judge, by expressly adopting the

findings of the Presentence Investigation Report ("PSR"),



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implicitly found that Mr. and Mrs. Olbres had willfully

evaded taxes on income of approximately $1.1 million,

encompassing the tax years 1986, 1987, and 1988. Mr. and

Mrs. Olbres contend that the trial court improperly declined

to make such findings and instead erroneously assumed that

the general jury verdict and this court's opinion in its

sufficiency review established that the entire sum of $1.1

million was willfully evaded. Because the record is unclear

as to what the district court actually found, and in light of

our disposition of the downward departure issue, we vacate

the Olbres' sentences and remand for further proceedings.

See United States v. Garafano, 36 F.3d 133, 135 (1st Cir. ___ _____________ ________

1994).

In order to determine the base offense level under

the Sentencing Guideline for tax evasion, the sentencing

court must determine the amount of "tax loss" to the

government. U.S.S.G. 2T1.1(a)(1987). In the pertinent

1987 Guidelines Manual, "tax loss" is defined as "the total

amount of tax that the taxpayer evaded or attempted to evade,

including interest to the date of filing of an indictment."

Id. ___

The primary difficulty presented by this case is that

the jury, in order to convict, was not required to find the

total amount of the tax that the taxpayers evaded or

attempted to evade. Indeed, the jury was instructed that



-7- 7













"[t]he government does not have to prove the exact amount the

defendants owed, nor does the government have to prove that

all the tax charged in the indictment was evaded." Thus, the

sentencing judge is required to make a determination which is

not necessarily made by the jury and, in this case, was not

made.

Further enlarging the sentencing judge's task, the

Guidelines also state that "[w]hen more than one year is

involved, the tax losses are to be added." U.S.S.G. 2T1.1.

The Guidelines Commentary explains this instruction as

follows:

While the definition of tax loss corresponds
to "criminal deficiency," its amount is to be
determined by the same rules applicable in
determining any other sentencing factor. In
accordance with the "relevant conduct"
approach adopted by the guidelines, tax
losses resulting from more than one year are
to be added regardless of whether the
defendant is convicted of multiple counts.

U.S.S.G. Pt. T, comment. 1 (1987).

It is against this background that the district court

stated the task it thought it faced in light of the

government's position at that time:

With regard to the amounts evaded, I find
that the proper means of calculating the
amount of tax loss or the amount evaded under
the Sentencing Guidelines requires the Court
to look to the amounts not included as income
on the return that should have been included
as income and then to compute the tax based
upon that income plus interest based on the
statutory rate from the date of return to the
date of indictment.


-8- 8













This is a correct statement of the first step of the

analysis. The next step, as the government now concedes, is

to identify the amount of taxes willfully evaded. We are

left with uncertainty as to whether that step was taken. In

determining what the district court did and did not do at

sentencing, "[w]e are guided . . . by the record -- a record

that flavors the judge's words and concomitantly, offers

insights into his thinking." United States v. Tavano, 12 ______________ ______

F.3d 301, 304 (1st Cir. 1995).

In the court's most express statement of findings,

the judge stated that he adopted the findings and

recommendations set forth in the PSR. The court then held

that Mr. and Mrs. Olbres could be sentenced for all "amounts

not included as income that should have been included as

income." Other than the adoption of the PSR's findings, the

judge made no explicit finding regarding the willfulness of

evasion on specific amounts.

In many instances, a general statement that the judge

has adopted all the factual statements contained in the PSR

satisfies the requirements of Rule 32(c), Fed. R. Crim. P.

United States v. Skrodzki, 9 F.3d 198, 202 n.7 (1st Cir. ______________ ________

1993) (express adoption of PSR defeats Rule 32 challenge);

United States v. Barnett, 989 F.2d 546, 551 n.5 (1st ______________ _______

Cir.)(checking a box on judgment form indicating that court

adopted all findings from PSR constituted specific finding as



-9- 9













to the quantity of drugs for which defendants were held

responsible), cert. denied, 510 U.S. 850 (1993); United _____ ______ ______

States v. Wells Metal Finishing, Inc., 922 F.2d 54, 58 (1st ______ ____________________________

Cir. 1991)(judge briefly explained sentence at hearing and

then completed memorandum indicating that he adopted all

factual statements in PSR, noting that one fact had been

disputed). Here, however, because the PSR did not resolve

all of the disputed factual issues, simple reliance on it is

not enough.1

The original PSR made no reference to willfulness and

did not consider the defendants' acquitted conduct. After a

government objection, the PSR was amended to include the tax

loss amounts attributed to the acquitted conduct. The PSR

addendum noted that, in the district court's Order for

Acquittal on the 1987 charge, the judge conceded that a

different result would obtain under the civil preponderance


____________________

1. This Circuit has also repeatedly held that an implicit
resolution of disputed facts is sufficient "when the court's
statements and the sentence imposed showed that the facts
were decided in a particular way." United States v. Van, 87 _____________ ___
F.3d 1, 3 (1st Cir. 1996)(citing cases). "As a general rule,
a trial court lawfully may make implicit findings with regard
to sentencing matters, incorporating by reference suitably
detailed suggestions limned in the PSI Report or advanced by
a party." Tavano, 12 F.3d at 307; see also United States v. ______ ___ ____ _____________
Ovalle-Marquez, 36 F.3d 212, 227-28 (1st Cir. 1994)(finding ______________
that trial court's statement that offense level was "based .
. . on the amount of cocaine involved in the offense" showed
that the court adopted the PSR's recommendations and
implicitly made the necessary findings as to drug quantity),
cert. denied, 115 S. Ct 1322 (1995). In this case, however, _____ ______
the PSR was not "suitably detailed."

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standard. See Olbres, 881 F. Supp. at 717. The PSR addendum ___ ______

concluded:

Although the Court's remarks only addressed
[1987], there is little difference between
the evidence submitted as to the acquitted
conduct. . . . The question regarding their
intent is the same, regardless of whether one
is focusing on [1987] or the acquitted
conduct.

This reference back to the district court's order is

ineffective; whether defendants willfully evaded all, or

specific portions of, the tax on their 1987 unreported income

is not clearly established in that order or in any other

statement made by the district court. As defense counsel

points out, a willfulness finding for each of the disputed

amounts stemming from factually distinct sources for each

year in question (as to each of which different lack-of-

willfulness arguments are made) is necessary here in order to

determine the correct base offense level.2

Lastly, at sentencing the district court also stated

that "willfulness isn't an issue . . . as to [19]87" because

this court, in its sufficiency opinion, "found a jury could

find beyond a reasonable doubt that intent was present."

That appellate opinion did not, and could not, make any





____________________

2. It is the defendants' position, for example, that the
guilty verdict could have been based on as little as $22,000
of unreported rental income in 1987.

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findings of willful evasion of any specific amount of taxes.3

Rather, the opinion addressed whether there was legally

sufficient evidence to support a verdict that Mr. and Mrs.

Olbres willfully evaded a "substantial" amount of taxes on

their 1987 income. See generally Olbres, 61 F.3d 967. ___ _________ ______

As we are unable to settle the issue of willfulness

findings based on the jury's general verdict, the trial

judge's statements, or the documents he incorporates by

reference, see United States v. Tavares, 93 F.3d 10, 16 (1st ___ _____________ _______

Cir.), cert. denied, No. 96-6067 (Oct. 21, 1996), we leave it _____ ______

to the sentencing court on remand to clarify the specific

amounts on which the sentence is based -- that is, those

amounts as to which payment of taxes was willfully evaded as

proven by the government under the preponderance of the

evidence standard. See Garafano, 36 F.3d at 136. We express ___ ________

no opinion on the appropriateness of the sentence previously

imposed. United States v. Quinones, 26 F.3d 213, 220 (1st _____________ ________

Cir. 1994).

III

The defendants appeal the denial of their downward

departure motion based on their argument that, if they are

imprisoned, their business will fail. Should this occur, the


____________________

3. Such factual determinations are either for the jury at
trial, see, e.g., United States v. Gaudin, 115 S. Ct. 2310, ___ ____ _____________ ______
2313-14 (1995), or for the district court at sentencing, see, ___
e.g., 18 U.S.C. 3742(d). ____

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Olbres allege, twelve innocent employees will lose their jobs

and suffer severe hardship. The government argues that the

Guidelines discuss "vocational skills" as a discouraged

factor, not "ordinarily relevant," U.S.S.G. 5H1.2,4 and so

there is no room for the Olbres' "business failure" argument

-- an argument that, it contends, is not unusual.

The Olbres' argument is based on the premise that

their circumstances take their case out of the "heartland" of

the Tax Guidelines. "U.S.S.G. 5K2.0 allows sentencing

courts to depart from the guideline sentencing range in a

given case if the court finds aggravating or mitigating

circumstances that render the case atypical and take it out

of the 'heartland' for which the applicable guideline was

designed." United States v. Carrion-Cruz, 92 F.3d 5, 6 (1st _____________ ____________

Cir. 1996).

The district court found that if Mr. Olbres was

jailed, DC would become defunct and its employees would lose

their jobs. The district court ruled, nonetheless, that the

Sentencing Commission must have necessarily understood that

small businesses will often fail if their principals are

incarcerated and that job loss to innocent third parties was





____________________

4. Discouraged factors are those "not ordinarily relevant
in determining whether a sentence should be outside the
guidelines . . . ." U.S.S.G. 5H1.2.

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therefore "not an unusual situation" under the Guidelines.5

In so doing, the district court expressly stated it was

following the Third Circuit opinion in United States v. _____________

Sharapan, 13 F.3d 781 (3d Cir. 1995), and declined to follow ________

the Second Circuit opinion in United States v. Milikowsky, 65 _____________ __________

F.3d 4 (2d Cir. 1995). The district court understood

Sharapan to hold that "as a matter of law this is not a basis ________

for departing because the Sentencing Commission has

considered the failure of business in constructing heartland

guidelines."6

Apparently believing that, as a matter of law,

business failure and third party job loss, regardless of the

magnitude or the severity of the consequences, could not

serve as the basis for a downward departure motion, the trial

judge stated at the end of the sentencing hearing:

I also want the record to be clear that if
the fact that your business were to fail
could serve legally as a basis for departing
under the Sentencing Guidelines, then I would
depart, and I would depart in a manner
sufficient to keep the business from failing
and putting those people out of work. But as
I say, I can't as I sit here find a principal
[sic] basis for departing from the guidelines
on those factual assumptions.


____________________

5. The issue is not moot because the district court granted
defendants' motion for bail pending resolution of this
appeal. The government agreed that Mr. and Mrs. Olbres do
not present a danger to the community or a flight risk.

6. It is not necessary to resolve whether this is a correct
reading of Sharapan. ________

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In Sharapan, the Third Circuit reversed the district ________

court's grant of a downward departure. 13 F.3d at 786. The

trial court had found that incarceration of the defendant

would cause his business to fail, resulting in the loss of

approximately thirty jobs. Id. at 782. It therefore ___

departed from the Guidelines' sentence and sentenced the

defendant to probation with conditions. Id. at 783. The ___

Third Circuit reversed, holding that the departure was

inconsistent with U.S.S.G. 5H1.2, p.s., which provides that

departures based on a defendant's "vocational skills" are not

ordinarily appropriate. Id. at 784-85. The Third Circuit ___

viewed the Commission's policy statement on "vocational

skills" as being based on an underlying "principle . . . that

a sentencing judge may grant a departure based on a

defendant's ability to make a work-related contribution to

society only in extraordinary circumstances." Id. at 785; ___

see also United States v. Reilly, 33 F.3d 1396, 1424 (3d Cir. ___ ____ _____________ ______

1994); United States v. Mogel, 956 F.2d 1555, 1564 (11th ______________ _____

Cir.), cert. denied, 506 U.S. 857 (1992); accord United _____ ______ ______ ______

States v. Rutana, 932 F.2d 1155 (6th Cir.) ("[E]ven assuming ______ ______

that [defendant's] imprisonment would lead to the failure of

his business and the loss of his employees' jobs, this fact

does not distinguish [defendant] from other offenders."),

cert. denied, 502 U.S. 907 (1991). _____ ______

In contrast, the Second Circuit in Milikowsky __________



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affirmed a downward departure taken by the district court

because of the effect that Milikowsky's imprisonment would

have on his employees. 65 F.3d at 6. The Second Circuit

noted "that business ownership alone, or even ownership of a

vulnerable small business, does not make downward departure

appropriate," id. at 9, but held that the district court was ___

nonetheless free to, and indeed required to, consider the

possibility of downward or upward departure "when there are

compelling considerations that take the case out of the

heartland factors upon which the Guidelines rest." Id. at 7 ___

(citations omitted).

Milikowsky arose under the antitrust guideline, __________

U.S.S.G. 2R1.1 (1990), and not the tax guideline involved

here. Contrary to the government's argument, this is a

distinction without a difference. The Second Circuit

considered the same argument the government makes here --

that "the Commission could hardly have overlooked the effect

that imprisonment of offenders would have on small businesses

that are likely to be heavily dependent on those very

offenders for their continuing success." Milikowsky, 65 F.3d __________

at 8. That may be so, reasoned the Second Circuit, but "in

considering, and taking into account, the effect of

imprisonment on antitrust offenders' businesses . . . the

Commission did not thereby take into account the effect such

imprisonment would have in 'extraordinary circumstances.'"



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Id. ___

The structure of analysis we follow in considering

sentencing departures is governed by the Supreme Court's

decision in Koon v. United States, 116 S. Ct. 2035 (1996). ____ ______________

The Supreme Court agreed with the analytical structure

adopted by this Circuit in United States v. Rivera, 994 F.2d _____________ ______

942, 949 (1st Cir. 1993):

The Commission's treatment of departure factors led
then-Chief Judge Breyer to explain that a sentencing
court considering a departure should ask the
following questions:

"1) What features of this case,
potentially, take it outside
the Guidelines' 'heartland' and
make of it a special, or
unusual, case?
2) Has the Commission forbidden
departures based on those
features?
3) If not, has the Commission
encouraged departures based on
those features?
4) If not, has the Commission
discouraged departures based on
those features?"

We agree with this summary.

Koon, 116 S. Ct. 2035, 2045 (quoting Rivera, 994 F.2d 942). ____ ______

The Supreme Court continued:

If the special factor is a discouraged
factor, or an encouraged factor already taken
into account by the applicable Guideline, the
court should depart only if the factor is
present to an exceptional degree or in some
other way makes the case different from the
ordinary case where the factor is present.
If a factor is unmentioned in the Guidelines,
the court must, after considering the
"structure and theory of both relevant


-17- 17













guidelines and the Guidelines taken as a
whole," decide whether it is sufficient to
take the case out of the Guideline's
heartland. The court must bear in mind the
Commission's expectation that departures
based on grounds not mentioned in the
Guidelines will be "highly infrequent."

Id. ___

To adopt the categorical approach to job loss from

business failures that the district court appeared to take

would run afoul of one of the important concerns articulated

in Koon. The Supreme Court has held that generally courts ____

should not categorically reject a factor as a basis for

departure from a Guidelines sentence because:

Congress did not grant federal courts
authority to decide what sorts of sentencing
considerations are inappropriate in every
circumstance. Rather, 18 U.S.C. 3553(b)
instructs a court that, in determining
whether there exists an aggravating or
mitigating circumstance of a kind or to a
degree not adequately considered by the
Commission, it should consider "only the
sentencing guidelines, policy statements, and
official commentary of the Sentencing
Commission." . . . . The Commission set
forth factors courts may not consider under
any circumstances but made clear that with
those exceptions, it "does not intend to
limit the kinds of factors, whether or not
mentioned anywhere else in the guidelines,
that could constitute grounds for departure
in an unusual case." 1995 U.S.S.G. ch. I,
pt. A, intro. comment. 4(b). Thus, for the _____________
courts to conclude a factor must not be _____________________________________________
considered under any circumstances would be _____________________________________________
to transgress the policymaking authority _____________________________________________
vested in the Commission. _________________________

Id. (emphasis added). Categorical interpretations "would ___

nullify the Commission's treatment of particular departure


-18- 18













factors and its determination that, with few exceptions,

departure factors should not be ruled out on a categorical

basis." Id. at 2051.7 ___

The district court's categorical approach also

presents a question of law, which, if incorrectly decided,

constitutes an abuse of discretion. As the Supreme Court

noted:

The Government is quite correct that whether
a factor is a permissible basis for departure
under any circumstances is a question of law,
and the court of appeals need not defer to
the district court's resolution of the point.
. . . A district court by definition abuses
its discretion when it makes an error of law.

Id. at 2047. ___

Koon, we believe, reinforces this Circuit's view that ____

"[p]lenary review is appropriate where the question in review

is simply whether the allegedly special circumstances (i.e.,

____________________

7. The Government's argument here relies on a general
distinction between harm to society, which, it says, may be
an extraordinary factor, and business failure, which, it
says, may not. The Supreme Court rejected this type of
argument in Koon: ____

The Government seeks to avoid the factual
nature of the departure inquiry by describing
it at a higher level of generality linked
closely to questions of law. The relevant
question, however, is not, as the Government
says, "whether a particular factor is within
the 'heartland'" as a general proposition,
but whether the particular factor is within
the heartland given all the facts of the
case. . . . These considerations are factual
matters.

Koon, 116 S. Ct. at 2047 (citations omitted). ____

-19- 19













the reasons for the departure) are of the 'kind' that the

Guidelines, in principle, permit the sentencing court to

consider at all." Rivera, 994 F.2d at 951. This is so ______

because this court, "in deciding whether the allegedly

special circumstances are of a 'kind' that permits departure,

will have to perform the 'quintessentially legal' function

of interpreting a set of words, those of an individual

guideline, in light of their intention or purpose." Id. ___

It is clear that the Guidelines do not explicitly

list the factor at issue here among the forbidden or the

discouraged factors. The question is whether the

Commission's "vocational skills" comment8 implicitly

discourages consideration of job loss to innocent employees.

We note first that "vocational skills" themselves are not a

forbidden factor, but a discouraged factor. Compare U.S.S.G. _______

5H1.10 (race, sex, national origin et al. "are not

relevant" in determination of sentence) with U.S.S.G. 5H1.2 ____

("vocational skills are not ordinarily relevant").

Therefore, even if the present case merely concerned

vocational skills, a per se approach would be inappropriate


____________________

8. The Commission statement results from the instructions of
Congress that the Commission's guidelines and policy
statements "reflect the general inappropriateness of
considering the . . . vocational skills, employment record, .
. . and community ties of the defendant." 28 U.S.C.
994(e); see Mogel, 956 F.2d at 1564. ___ _____



-20- 20













and the district court would still have to consider whether

the case was in some way "different from the ordinary case

where the factor is present." Koon, 116 S. Ct. at 2045. ____

"[A] federal court's examination of whether a factor can ever

be an appropriate basis for departure is limited to

determining whether the Commission has proscribed, as a

categorical matter, consideration of the factor. If the

answer to the question is no . . . the sentencing court must

determine whether the factor, as occurring in the particular

circumstances, takes the case outside the heartland of the

applicable Guideline." Id. at 2051. ___

We do not agree with the Government's contention that

the loss of employment to innocent employees necessarily

falls within the term "vocational skills."9 That a defendant

may have vocational skills of great value or rarity does not

necessarily tell one whether incarceration of that defendant

will entail job loss to others totally uninvolved in the

defendant's crimes. Vocational skills may or may not be

related to job loss to others.

Our belief that courts should be careful not to

construe the categories covered by the Guidelines' factors

too broadly finds support in Koon. There, the Supreme Court ____


____________________

9. The dictionary definitions of "vocational skills" do not
import notions of business failures. See Sharapan, 13 F.3d ___ ________
at 784 (describing a dictionary definition of "vocational
skills").

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recognized that while "socio-economic status" of the

defendant is an impermissible ground for departure and "a

defendant's career may relate to his or her socio-economic

status, . . . the link is not so close as to justify

categorical exclusion of the effect of conviction on a

career. Although an impermissible factor need not be invoked

by name to be rejected, socio-economic status and job loss

are not the semantic or practical equivalents of each other."

Koon, 116 S. Ct. at 2051.10 ____

As Koon holds that job loss by the defendant ____

resulting from his incarceration cannot be categorically

excluded from consideration, we think it follows that job

loss to innocent employees resulting from incarceration of a

defendant may not be categorically excluded from

consideration. Further, the rejected link between the socio-

economic status of a defendant and a defendant's personal job

loss is, we think, stronger than the link the Government

posits between "vocational skills" of a defendant and certain

loss of employment to innocent employees. To add a judicial

gloss equating job loss by innocent third parties with

"vocational skills" is to run headlong into the problem of

judicial trespass on legislative prerogative against which

____________________

10. Koon similarly rejected the government's argument that ____
because "physical appearance" is a discouraged factor, the
broader category of physical abuse in prison, including that
resulting from physical appearance, could not be considered.
116 S. Ct. at 2051.

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the Supreme Court warned in Koon. We do not travel this ____

path.

Because we are remanding on the tax loss issue and

the district court will make further findings on that point,

we believe the wisest course is to remand on this issue as

well. In addition, it is unclear to us whether the

government and defendants have had the opportunity to put on

the evidence they would have wished had a non-categorical

approach been taken.11 In rejecting the government's

categorical imperative approach,12 we do not suggest that the

defendants' argument establishes that they fall outside of

the heartland. It is a rare case which does fall outside.

As courts have recognized, incarceration of a defendant

inevitably means that the defendant will no longer be

employed in his previous position and that fact inevitably

will have consequences. See, e.g., Milikowsky, 65 F.3d at 8 ___ ____ __________

("[T]he Commission could hardly have overlooked the effect


____________________

11. Though the defense treated Mr. and Mrs. Olbres
identically for sentencing purposes, evidence was presented
only on Mr. Olbres' importance to DC. Each defendant must be
considered individually. We note that there was no evidence
to suggest that the business would fail were Mrs. Olbres
incarcerated.

12. We note that the opinions from our sister circuits on
which the government has relied, Sharapan, Rutana, and Mogel, ________ ______ _____
were all decided without the benefit of Koon. In ____
distinguishing those cases, we decide only that there is no
categorical barrier to the district court's consideration of
a departure -- not that a departure would be proper on these
facts.

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that imprisonment of offenders would have on small businesses

that are likely to be heavily dependant on those very

offenders for their continuing success."). The mere fact

that innocent others will themselves be disadvantaged by the

defendants' imprisonment is not alone enough to take a case

out of the heartland. These issues are matters of degree,

involving qualitative and quantitative judgments. Bruce M.

Selya & Matthew Kipp, An Examination of Emerging Departure _____________________________________

Jurisprudence Under the Federal Sentencing Guidelines, 67 ________________________________________________________

Notre Dame L. Rev. 1, 7-8 (1991). As this court said in

Rivera: ______

It may not be unusual, for example, to find
that a convicted drug offender is a single
mother with family responsibilities, but, at
some point, the nature and magnitude of
family responsibilities (many children? with
handicaps? no money? no place for children to
go?) may transform the "ordinary case" of
such circumstances into a case that is not at
all ordinary.

United States v. Rivera, 994 F.2d at 948; accord United _____________ ______ ______ ______

States v. Sclamo, 997 F.2d 970 (1st Cir. 1993); see also ________ ______ ___ ____

Koon, 116 S. Ct. at 2051 (it is not unusual for public ____

officials convicted of violating 18 U.S.C. 242 to be

subject to career related consequences, so these consequences

alone do not make a case unusual).

Given our decision to vacate the sentence and remand

for further proceedings, consideration of the defendants'

acquitted conduct arguments would be premature.



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We close with words from Koon on which all of the ____

Justices agreed:

The goal of the Sentencing Guidelines is, of
course, to reduce unjustified disparities and
so reach towards the evenhandedness and
neutrality that are the distinguishing marks
of any principled system of justice. In this
respect, the Guidelines provide uniformity,
predictability, and a degree of detachment
lacking in our earlier system. This too must
be remembered, however. It has been uniform
and constant in the federal judicial
tradition for the sentencing judge to
consider every convicted person as an
individual and every case as a unique study
in the human failings that sometimes
mitigate, sometimes magnify, the crime and
the punishment to ensue. We do not
understand it to have been the congressional
purpose to withdraw all sentencing discretion
from the United States District Judge.
Discretion is reserved within the Sentencing
Guidelines.

Id. at 2053. Even were we not obliged to agree, we would. ___

We vacate the sentence and remand. United States v. ______________

Carvell, 74 F.3d 8 (1st Cir. 1996). _______





















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