United States v. Levinson

Opinions of the United
2008 Decisions States Court of Appeals
for the Third Circuit

9-18-2008

USA v. Levinson
Precedential or Non-Precedential: Precedential

Docket No. 07-1544

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 PRECEDENTIAL
IN THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________

No. 07-1544
_____________

UNITED STATES OF AMERICA,

Appellant,

v.

ADAM LEVINSON

Appellee.
_____________

On Appeal from the United States District Court
for the District of Delaware
(D.C. No. 06-cr-00062)
District Judge: Honorable Sue L. Robinson
_______________

Argued June 4, 2008

Before: FISHER, JORDAN, and VAN ANTWERPEN,
Circuit Judges

(Filed September 18, 2008)
_______________
Colm F. Connolly
Ilana H. Eisenstein [ARGUED]
Office of United States Attorney
1007 N. Orange Street - #700
Wilmington, DE 19801
Counsel for Appellant

Edmund D. Lyons, Jr. [ARGUED]
The Lyons Law Group
1526 Gilpin Avenue
Wilmington, DE 19801
Counsel for Appellee
_____________

OPINION
_____________

JORDAN, Circuit Judge.

Adam Levinson pleaded guilty to one count of wire
fraud, in violation of 18 U.S.C. § 1343, and one count of
filing a false income tax return, in violation of 26 U.S.C. §
7206(1). During his sentencing hearing, the United States
District Court for the District of Delaware granted him a
variance from the recommended United States Sentencing
Guidelines (“Guidelines”) range of 24 to 30 months of
imprisonment and sentenced him to two concurrent 24-month
terms of probation, in addition to supervised release,
restitution, and a special assessment. The government appeals
and argues that the District Court failed to adequately explain

2
the chosen sentence. We agree and will vacate Levinson’s
sentence and remand for resentencing.

I. Background

Levinson was the manager and twenty-percent owner
of CoolerSmart, LLC (“CoolerSmart”), a Delaware company
that provided filtered drinking water to residences and
businesses. CoolerSmart’s majority owner was WaterWorld
Ventures, Inc. (“WaterWorld”), a wholly-owned subsidiary of
Elkay Manufacturing Company (“Elkay”). Between June
2000 and August 2002, Levinson falsely reported
CoolerSmart’s financial status and operational performance,
representing that the company was successful, when in fact it
was not. Elkay relied on those reports when it invested
millions of additional dollars into CoolerSmart’s business.

In 2001, Elkay reviewed CoolerSmart’s operations and
finances. In preparation for the review, Levinson
implemented a scheme to cover up the falsehoods he had
already told about CoolerSmart’s performance. He created a
second set of financial and operational books and altered
CoolerSmart’s general ledger and customer lists. He also
hired an outside company to enter false customer information
into CoolerSmart’s databases. At his direction, CoolerSmart
employees shredded documents, deleted e-mail and other
electronic records, created false sales reports, recorded
unauthorized expenditures, and falsely reported financial
information. Levinson punished employees who refused to
participate in his cover-up scheme, and, in at least one

3
instance, he cut an employee’s salary in half and eliminated
her benefits.

In 2002, Elkay received an anonymous tip warning of
misconduct by CoolerSmart’s management. Elkay responded
by hiring an accounting firm to conduct a forensic audit of
CoolerSmart. The audit not only uncovered Levinson’s
fraudulent reporting practices, it also revealed that Levinson
had used over $177,000 of CoolerSmart’s revenue for his own
benefit – to make personal loan payments, to pay for repairs
on his home, to take vacations, and to make personal credit
card bill payments. Levinson failed to report his use of those
funds as additional revenue on his 2000, 2001, or 2002 federal
income tax returns. As a result, the government’s aggregate
tax loss for those years was approximately $44,000.

On June 6, 2006, Levinson was indicted on one count
of wire fraud and three counts of filing a false income tax
return. He entered into a plea agreement that stated he would
plead guilty to the wire fraud count and to one count of filing
a false income tax return in the year 2002. Prior to his
sentencing hearing, Levinson settled a civil fraud suit brought
against him by Elkay by paying Elkay $350,000 and
relinquishing his twenty-percent ownership interest in
CoolerSmart. However, as to the wire fraud count, the
government and Levinson agreed that, for purposes of
calculating Levinson’s offense level under § 2B1.1(b) of the
Guidelines and for calculating restitution for the fraud, they
would use the amount Levinson took from CoolerSmart for
his personal use, which was $177,289. After adjusting
Levinson’s base offense level of 6 upward by ten points to

4
account for the $177,289 loss to CoolerSmart, his offense
level of 16 was further increased by two points pursuant to §
3B1.1 for his role as the organizer, leader, manager, or
supervisor of the offense. His adjusted base offense level of
18 was further increased by two points pursuant to § 3B1.3
for his use of special skill in facilitating and concealing his
crime, resulting in a final offense level of 20 for the wire
fraud count.

Levinson’s base offense level for filing the false
income tax return was 14, pursuant to § 2T4.1, given that the
tax loss was between $30,000 and $80,000. That was
adjusted upward by two points under § 2T1.1 for his failure to
report more than $10,000 in income derived from criminal
activity, resulting in an adjusted offense level of 16.

At sentencing, the District Court used the greater of the
two offense levels to compute Levinson’s sentence under the
Guidelines, as required by § 3D1.3(a). The Court then
reduced that offense level of 20 by three levels, in
consideration of his acceptance of responsibility, for a total
offense level of 17. Because Levinson had no prior criminal
record, the Court determined that he fell within Guidelines
Criminal History Category I. Therefore, the Court calculated
that the recommended sentencing range under the Guidelines
was 24 to 30 months imprisonment, two to three years of

5
supervised release, a fine of $5,000 to $354,578,1 restitution
in the amount of $177,289, and a $200 special assessment.

Levinson moved for a downward departure based on
what he claimed was his diminished mental capacity resulting
from bipolar disorder. The District Court declined to grant
the motion, concluding that Levinson’s actions belied the
claim of diminished capacity because his fraud was
sophisticated and complex, as were his detailed and extensive
efforts to conceal his misrepresentations from Elkay.

After determining the recommended sentence for
Levinson under the Guidelines, the District Court heard both
parties’ arguments regarding the application of the sentencing
factors set forth in 18 U.S.C. § 3553(a).2 The government

1
The upper end of the fine range was defined as twice the
gross gain or loss from the crimes, 18 U.S.C. § 3571(d), and
the Court used the $177,289 loss as the basis for its fine
calculation.
2
Section 3553(a) provides that a court is to consider the
following factors when imposing a sentence:
(1) the nature and circumstances of the offense
and the history and characteristics of the
defendant;
(2) the need for the sentence imposed (A) to
reflect the seriousness of the offense, to promote
respect for the law, and to provide just
punishment for the offense; (B) to afford
adequate deterrence to criminal conduct; (C) to
6
maintained that a sentence within the Guidelines was
appropriate because of the seriousness of the offense,
Levinson having engaged in an elaborate, ongoing scheme
that violated Elkay’s trust in him as CoolerSmart’s manager
and minority shareholder. The government also pointed out
that, as part of his scheme to defraud Elkay, Levinson
extorted and manipulated CoolerSmart employees by
threatening to demote or fire them and to terminate their
benefits if they refused to participate. Finally, the
government emphasized that, once Levinson realized that
Elkay was about to uncover the fraud, he tried to conceal it

protect the public from further crimes of the
defendant; and (D) to provide the defendant
with needed educational or vocational training,
medical care, or other correctional treatment in
the most effective manner;
(3) the kinds of sentences available;
(4) the kinds of sentence and the sentencing
range established for ... the applicable category
of offense committed by the applicable category
of defendant as set forth in the guidelines ...;
(5) any pertinent policy statement ... issued by the
sentencing commission ...;
(6) the need to avoid unwarranted sentence
disparities among defendants with similar
records who have been found guilty of similar
conduct; and
(7) the need to provide restitution to any victims of the
offense.
7
while simultaneously negotiating the sale of his CoolerSmart
shares to a third party without Elkay’s consent.

Levinson argued for a sentence of home or community
confinement, as opposed to incarceration. He presented the
Court with mitigating factors, expressed in a large number of
letters written on his behalf by his family, friends, and
members of the community, particularly emphasizing his role
as a father, his contributions to society and, in particular, his
involvement with a Jewish family service organization. Other
mitigating factors he pressed included his prompt payment of
$350,000 to Elkay to settle the civil suit, his loss of
employment if he were imprisoned, and the financial and
emotional toll his imprisonment would have on his young
family, especially his learning-disabled son.

The Court then considered the § 3553(a) factors. It
acknowledged the many letters written on Levinson’s behalf,
which urged leniency both for the sake of his family and
because he was a good person who had made poor decisions.
According to the District Court, those considerations did not
distinguish Levinson from other criminals. The District Court
did, however, determine that Levinson’s case could be
distinguished from other cases involving white-collar crime
because his victim was not the public at large but was instead
a private business entity that had already settled its civil
lawsuit against Levinson. Coming to its conclusion on
sentencing, the District Court stated:

[Levinson] was a businessman who stole from
his business partners for his own benefit. He

8
 was and remains, however, a person who
contributes to the community, his family and
friends.

In the end, it seems to me that we have an
individual who put the appearance of prosperity
above his respect for the law. Balanced against
this is the propriety of putting into jail at a
substantial cost to the public a nonviolent
offender who poses little or no threat to the
public and whose crimes had little impact
beyond his business partners and his family.

... [W]hen I look at the costs associated with
putting someone like Mr. Levinson [in] jail in
this day and age compared to the harm he has
caused, which has been resolved amicably with
his business and which certainly will impose
even more harm on his family, I just can’t see
that it makes much sense. I just do not.

(App. at 38-39.)

The Court thus declined to impose a sentence of
imprisonment and instead sentenced Levinson to 24 months
of probation for the wire fraud count, with a concurrent 24-
month term of probation for filing a false income tax return,
100 hours of community service, $177,289 in restitution, and
a $200 special assessment. Levinson was also sentenced to a
six- month period of home confinement with electronic
monitoring. The government then filed this appeal.

9
II. Discussion3

The government argues that the District Court failed to
articulate sufficiently compelling reasons to support its
variance from the Guidelines recommendation, and that the
Court erred by relying upon clearly erroneous and
inconsistent factual findings and on factors unrelated to the
sentencing considerations outlined in § 3553(a). According to
the government, the District Court committed procedural and
substantive errors in imposing Levinson’s sentence, and the
case should be remanded with instructions to impose a
sentence within the advisory Guidelines range. We do not
perceive all of the flaws alleged by the government, but we do
agree that this case needs to be remanded. Although the
District Court may ultimately conclude that the sentence now
on appeal should be re-imposed at Levinson’s resentencing,
the Court must provide us with enough analysis on the record
to permit meaningful appellate review, which it so far has not.

A. Roles of District and Appellate Courts

By now, the three-step sentencing procedure set forth
in United States v. Gunter, 462 F.3d 237, 247 (3d Cir. 2006)
(“Gunter I”), has become familiar and has been effectively
ratified by the Supreme Court’s decision in Gall v. United

3
The District Court had subject matter jurisdiction over this
case pursuant to 18 U.S.C. § 3231. We have jurisdiction over
the government’s appeal pursuant to 18 U.S.C. § 3742 and 28
U.S.C. § 1291.
10
States, 128 S. Ct. 586 (2007). A district court must begin the
process by first calculating the applicable Guidelines range.
After that initial calculation, the court must then rule on any
motions for departure and, if a motion is granted, state how
the departure affects the Guidelines calculation. Finally, after
allowing the parties an opportunity for argument, the court
must consider all of the § 3553(a) factors and determine the
appropriate sentence to impose, which may vary from the
sentencing range called for by the Guidelines. United States
v. Wise, 515 F.3d 207, 216-17 (3d Cir. 2008) (citing Gall, 128
S. Ct. at 596-97; Gunter I, 462 F.3d at 247).

Our responsibility on appellate review of a criminal
sentence is limited yet important: we are to ensure that a
substantively reasonable sentence has been imposed in a
procedurally fair way. As directed by the Supreme Court, we
take up the procedural review first, looking to see that the
district court has committed no significant error by, for
example, “failing to calculate (or improperly calculating) the
Guidelines range, treating the Guidelines as mandatory,
failing to consider the § 3553(a) factors, selecting a sentence
based on clearly erroneous facts, or failing to adequately
explain the chosen sentence – including an explanation for
any deviation from the Guidelines range.” Gall, 128 S. Ct. at
597. If the sentencing decision passes that first stage of
review, we then, at stage two, consider its substantive
reasonableness. Id. An estimation of the outer bounds of
what is “reasonable” under a given set of circumstances may
not always be beyond debate, but the abuse-of-discretion

11
standard by which that estimation must be judged limits the
debate and gives district courts broad latitude in sentencing.4

Obviously, procedural problems may lead to
substantive problems, so there are times when a discussion of
procedural error will necessarily raise questions about the
substantive reasonableness of a sentence. United States v.
Goff, 501 F.3d 250, 256 (3d Cir. 2007) (“[T]hese ...
substantive problems ... are a product of the District Court's
procedurally flawed approach.”). After all, if one cannot
justify a result by the reasons given, that result is, by
definition, not a substantively reasonable conclusion to the
logical steps provided. But the guidance we get from Gall is
to focus in the first instance on the procedural aspect of a
sentencing decision. See 128 S. Ct. at 597 (“[The appellate
court] must first ensure that the district court committed no
significant procedural error ... .”).
B. Explanation as Key to Appellate Review

One implication of Gall is that we should treat a failure
to “adequately explain the chosen sentence – including an
explanation for any deviation from the Guidelines range” – as

4
Although we use an abuse-of-discretion standard when
reviewing a district court’s decision, “the amount of deference
we give will depend on the type of procedural error asserted
on appeal.” Wise, 515 F.3d at 217. Thus, we will conclude
that the district court abused its discretion regarding factual
findings only if those findings are clearly erroneous. Id. In
contrast, if the procedural error is purely legal, we do not
defer to the district court. Id.
12
a problem that can typically be addressed by giving the
sentencing judge an opportunity to better explain the
reasoning behind the decision. It will be a rare case when it is
clear that no acceptable reasoning can justify a given
sentence. Yet even rightly admired judges may make a
decision which we believe is unsupportable, and we are
obligated to point that out when it occurs. See Goff, 501 F.3d
at 262 (deciding that “a sentence of four months is ...
unreasonable in light of the facts and circumstances revealed
in the record”); United States v. Pugh, 515 F.3d 1179, 1191 (11th
Cir. 2008) (“[Gall] leave[s] no doubt that an appellate court
may still overturn a substantively unreasonable sentence,
albeit only after examining it through the prism of abuse of
discretion, and that appellate review has not been
extinguished.”). In general, however, when we are reviewing
a sentence and find ourselves unable to see how the reasons
articulated lead to the punishment imposed, we will be
focused on trying to obtain a better understanding of the
district court’s reasoning.

We do not seek to second guess. Given the widely
recognized institutional advantages that district courts have in
access to and consideration of evidence, we would be foolish
to try. See Kimbrough v. United States, 128 S. Ct. 558, 574
(2007) (citing as “discrete institutional strengths” the district
court’s “superior position to find facts and judge their import
under § 3553(a) in each particular case” (internal citation and
quotation marks omitted)). In each case, however, we must
have an explanation from the district court sufficient for us to
see that the particular circumstances of the case have been
given meaningful consideration within the parameters of §

13
3553(a). The Supreme Court has explained that there must be
“an individualized assessment based on the facts presented.”
Gall, 128 S. Ct. at 597. A necessary corollary of that
responsibility is the further obligation to provide sufficient
justifications on the record to support the sentencing
conclusion. See id. at 597 (“After settling on the appropriate
sentence, [the sentencing judge] must adequately explain the
chosen sentence to allow for meaningful appellate review and
to promote the perception of fair sentencing.”); Rita v. United
States, 127 S. Ct. 2456, 2468 (2007) (“The sentencing judge
should set forth enough to satisfy the appellate court that he
has considered the parties’ arguments and has a reasoned
basis for exercising his own legal decisionmaking
authority.”). While the Guidelines are no longer mandatory,
United States v. Booker, 543 U.S. 220, 245 (2005), and no
“extraordinary circumstances” are needed to justify a sentence
that varies from their recommended results, Gall, 128 S. Ct. at
595, and while there is no mathematical formula for
determining whether a district court’s justifications for a
variance are sufficient, id. at 594-95, we nonetheless must be
satisfied that, broadly speaking, an adequate justification is
provided on the record. In the absence of that, we must
remand.5

5
In Rita, the Supreme Court emphasized the importance of
district courts providing sufficient explanations of their
sentencing decisions, and the latitude those courts have in
deciding what is sufficient in a given case:
The sentencing judge should set forth enough to
satisfy the appellate court that he has considered
the parties’ arguments and has a reasoned basis
14
for exercising his own legal decisionmaking
authority. Nonetheless, when a judge decides
simply to apply the Guidelines to a particular
case, doing so will not necessarily require
lengthy explanation. Circumstances may well
make clear that the judge rests his decision upon
the Commission’s own reasoning that the
Guidelines sentence is a proper sentence (in
terms of § 3553(a) and other congressional
mandates) in the typical case, and that the judge
has found that the case before him is typical.
Unless a party contests the Guidelines sentence
generally under § 3553(a) – that is argues that
the Guidelines reflect an unsound judgment, or,
for example, that they do not generally treat
certain defendant characteristics in the proper
way – or argues for departure, the judge
normally need say no more. ...
Where the defendant or prosecutor
presents nonfrivolous reasons for imposing a
different sentence, however, the judge will
normally go further and explain why he has
rejected those arguments. Sometimes the
circumstances will call for a brief explanation;
sometimes they will call for a lengthier
explanation. Where the judge imposes a
sentence outside the Guidelines, the judge will
explain why he has done so. ...
By articulating reasons, even if brief, the
sentencing judge not only assures reviewing
15
 We do not pretend that the foregoing observations
provide much, if any, guidance. Indeed, we find it difficult to
give direction when we are ourselves endeavoring to
understand our role in reviewing sentences after Booker, Rita,
Gall, and Kimbrough.6 In the end, though, we think this much
is clear about sentencing in the post-Booker era: appellate
review, limited though it is by the abuse-of-discretion
standard, remains and requires district courts to plainly state
the reasoning behind each sentence. Moreover, in deciding
on appeal whether the reasons provided by a district court are
adequate, the degree that a sentence varies from the
recommendation given in the Guidelines matters. See Gall at
594-95 (“In reviewing the reasonableness of a sentence
outside the Guidelines range, appellate courts may ... take the

courts (and the public) that the sentencing
process is a reasoned process but also helps that
process evolve.
127 S. Ct. at 2468-69 (citations omitted).
6
As an example of the challenge, there are somewhat mixed
messages that can be drawn from Gall. On the one hand, we
are told that proportionality between the extent of a variance
and the extent of the justification for the variance is not
required, 128 S. Ct. at 595 (rejecting an approach “that uses
the percentage of a departure as the standard for determining
the strength of the justifications required for a specific
sentence”), while, on the other hand, we are advised that a
major variance “should be supported by a more significant
justification than a minor one,” id. at 597.
16
degree of variance into account and consider the extent of a
deviation from the Guidelines.”). Hence, while we eschew
any requirement of direct proportionality, we may look for a
more complete explanation to support a sentence that varies
from the Guidelines than we will look for when reviewing a
sentence that falls within a properly calculated Guidelines
range. Cf. United States v. Smalley, 517 F.3d 208, 215 n.9
(3d Cir. 2008) (“Because of the appellate court’s duty to
review the sentence for reasonableness, Gall made it clear that
‘failing to adequately explain the chosen sentence - including
an explanation for any deviation from the Guidelines’ was
procedural error.”).

C. The Sentencing at Issue

In this case, as is typical in sentencing hearings, the
District Court ruled from the bench, following arguments by
counsel and the defendant’s allocution. The Court began by
correctly calculating the advisory Guidelines range, which,
without objection, it determined to be a sentence that included
incarceration of 24 to 30 months. It considered, as our
precedent requires, Gunter I, 462 F.3d at 247, the defendant’s
motion for a downward departure, deciding that his claim of
diminished capacity was not persuasive. The Court went on
to give a thoughtful explanation of the § 3553(a) sentencing
factors it had weighed.

In particular, the District Court considered the nature
and circumstances of Levinson’s crimes, explaining in detail
his elaborate fraud and the cover-up scheme he had
orchestrated:

17
 Mr. Levinson did engage in a detailed,
extensive and thorough effort to conceal from
Elkay ... numerous fraudulent
misrepresentations regarding CoolerSmart’s
performance for more than two years. In order
to convince Elkay that CoolerSmart was
operating successfully, Mr. Levinson
manipulated sales reports and falsified financial
information. He hired temporary employees to
create a false set of books and sanctioned
CoolerSmart employees who would not help
him in his fraudulent scheme. He shredded
documents and deleted electronic data. He did
such a good job, in fact, of covering up his
fraudulent activities that Elkay did not discover
them through its routine audits. Only through
an anonymous tip was defendant’s conduct
finally disclosed.

It’s also apparent from the record that Mr.
Levinson engaged in this complex course of
conduct not just to keep his job and his
company going[;] he used over $175,000 of the
ill-gotten proceeds to lease a luxury car for his
personal use, to travel to the beach, to Florida,
... for personal expenses with unauthorized
company money.

(App. at 35-36.)

18
 The Court then turned to Levinson’s personal history
and characteristics:

With respect to Mr. Levinson’s history and his
characteristics, by all accounts, he is engaging,
energetic and productive, as a member of the
community and as a family member and friend.
Likewise, the criminal activity which brings us
to court today necessarily demanded these same
characteristics.

(Id. at 36.) In considering Levinson’s personal circumstances,
the Court specifically acknowledged the many letters of
support from Levinson’s friends and family and their pleas for
leniency. The Court stated that the characterization of
Levinson in the letters as a good person who just happened to
make some poor decisions did not make him stand out,
because most defendants are not bad people and “like Mr.
Levinson have made poor choices, motivated by a variety of
ills.” (Id. at 37.) The Court also acknowledged the accuracy
of the letter-writers’ concern that Levinson’s family would
suffer if he were imprisoned. That Levinson’s family “would
suffer most if he goes to jail,” did not distinguish him from
other white-collar criminals sentenced to terms of
imprisonment, the Court said, because “[t]hat sad outcome is
endemic to most criminal cases, as most defendants have
families who suffer because their loved one wasn’t thinking
about them during the criminal activity.” (Id.)

However, as previously noted, the District Court did
say that Levinson’s case could be distinguished on the basis

19
that Levinson’s crimes did not inflict financial harm on the
public. The Court stated:

It is important to note, however, that Mr.
Levinson’s victim was a private business
entity,[whose] principals have resolved their
dispute for a sum of money. In other words,
Mr. Levinson did not harm the public from a
financial point of view.

(Id. at 37.) The Court asserted that only Elkay, the
corporation with which Levinson had co-owned CoolerSmart,
had been harmed, and that the corporation’s losses had
already been addressed by a $350,000 civil settlement paid by
Levinson. (Id. at 37-38.)

The Court’s peroration bears repeating:

[W]hen I look at the costs associated with
putting someone like Mr. Levinson [in] jail in
this day and age compared to the harm he has
caused, which has been resolved amicably with
his business and which certainly will impose
even more harm on his family, I just can’t see
that it makes any sense. I just do not.

(Id. at 38-39.) The Court concluded that it would “reject the
advisory guideline range of imprisonment” and order
probation. (Id. at 39-40.)

20
 The government raises several issues regarding the
Court’s reasoning and the resulting sentence. We think it
sufficient to focus on two.

1. Clearly Erroneous Factual Foundation

First, the government argues that the District Court
based its decision on the clearly erroneous premise that
Levinson had inflicted no financial harm on the public. There
were two counts of conviction, the fraud count, which the
Court discussed at some length, and the tax count, which, the
government says, the Court entirely ignored. According to
the government, since Levinson admitted guilt for filing a
false tax return, and since the District Court had concluded
that the tax loss associated with that count exceeded $44,000,
the Court erred in basing Levinson’s sentence on the assertion
that “Mr. Levinson did not harm the public from a financial
point of view.” (Id. at 37.) Levinson endeavors to justify the
District Court’s comments about private versus public harm
by saying that there in fact is no public harm since, “with
restitution of the wire fraud proceeds to the victim ... , the
Defendant would be entitled to a deduction and thus owe the
Government no net taxes by virtue of the ‘evasion.’”
(Appellee’s Br. at 3.)

We are compelled to conclude that the government has
much the better of those positions. Even if Levinson were
correct as to the technical feasibility of the deduction he says
he plans to claim on future tax returns, and we make no
comment on that at all, his argument is still flawed. It
attributes to the District Court a reason that is nowhere stated

21
or even implied in the Court’s discussion of the case; there is
simply nothing to indicate that the Court had in mind a
“defraud now, deduct later” rationale for bypassing comment
on the tax count of conviction. More importantly, however,
Levinson’s argument fails to address the principal problem
identified by the government, which is that there is no
explanation by the District Court for how this case can be said
to entail purely private harm when there is a tax fraud
conviction involving a specific dollar loss to the United States
Treasury. We thus agree with the government that the
District Court rested its sentencing decision on an unsound
factual foundation. See Concrete Pipe & Prods. of Cal., Inc.
v. Constr. Laborers Pension Trust for S. Cal., 508 U.S. 602,
622, 113 S.Ct. 2264, 124 L.Ed.2d 539 (1993) (“A finding is
clearly erroneous when although there is evidence to support
it, the reviewing body on the entire evidence is left with the
definite and firm conviction that a mistake has been
committed.”) (internal quotation marks and citation omitted).

2. Inadequate Explanation for Variance

The second issue raised by the government is the
adequacy of the District Court’s explanation for varying
downward from a sentence including 24 to 30 months
imprisonment to a sentence with no imprisonment. Again, we
agree that the record is problematic, and, even if there were
no issue regarding the unmentioned tax conviction, we would
need to return this case to the District Court for a more
complete explanation of its decision to significantly vary from
the recommended sentence of imprisonment. That conclusion
rests on two concerns. One is the lack of explanation of how

22
this defendant or his crimes differ in any way that warrants
the special leniency shown. The other concern, which is
related to the first, is that, if there is no real distinction
between Levinson and other white-collar defendants, then the
District Court appears to have rested its decision on a policy
disagreement with the Guidelines, which it did not articulate
or explain.

As to the first concern, the Court’s sentencing decision
expressly declares that Levinson does not differ from typical
defendants, either in regard to his general character or the
effect that his incarceration would have on his family. We
can imagine some surprise in the courtroom, then, as the
direction shifted from what appeared to be a conclusion that
Levinson’s case would naturally fall within the Guidelines to
the very different conclusion that a probationary sentence was
warranted. While the Court did make the already noted
comments about public versus private harm, we do not
understand it to have been saying that that distinction made
Levinson personally different from other defendants. Rather,
those comments appear to bear on the policy disagreement
that we will turn to shortly. To the extent the Court
commented on the personal characteristics of Levinson and
the particulars of his crimes, all it said was that Levinson was
not atypical, so there was, in that regard, no adequate
explanation for the relatively wide variance between the
applicable Guidelines range and the sentence the Court
pronounced. See Gall, 128 S. Ct. at 597 (“We find it
uncontroversial that a major departure should be supported by
a more significant justification than a minor one.”); cf. United
States v. Howe, --- F.3d ----, ----, [citation forthcoming] (3d

23
Cir. 2008) (upholding downward variance after reviewing
reasons advanced by district court to justify the variance).
Nor did the Court identify any other basis for varying, except
for its observation that the costs of incarcerating a non-violent
offender who had already paid some restitution to the victim
left the Court believing that a prison sentence “makes no
sense.” (App. at 39.)

Those comments about cost, and the earlier comments
about public and private harm, make it appear that the Court
left the realm of weighing the particulars of this case and
entered into a consideration of general penal policy. Policy
considerations are not off-limits in sentencing, see
Kimbrough, 128 S. Ct. at 570 (quoting government
concession that “as a general matter, ‘courts may vary [from
Guidelines ranges] based solely on policy considerations,
including disagreements with the Guidelines’”), but care must
be taken in reaching the conclusion that the District Court did
here, because the public versus private harm distinction is not
without nuance and because considering costs of incarceration
will likely contravene very deliberate policy choices
embedded in the Guidelines.

The identity of the principal victim as a private
corporation should not necessarily lead to the conclusion that
there has been no harm to the public. In the broadest sense,
all crime involves public harm, since crimes are crimes for the
very reason that they involve a violation of public norms and
require something more than the correction of a private
wrong. In a narrower sense, crimes against private entities
can and do inflict public harm, as, for example, when a

24
publicly traded corporation has been defrauded and there is
consequent damage to public trust in our nation’s capital
markets. That does not mean that private versus public harm
is a meaningless distinction. The Guidelines themselves take
account of that distinction at times. See USSG § 2A6.1(b)(4)
(directing offense level be increased by four levels if offense
resulted in substantial disruption of public functions or
services); USSG § 5K2.14 (providing for upward departure
“[i]f national security, public health, or safety was
significantly endangered” by the defendant).7 But to say that
the Guidelines’ policies on incarceration are inapplicable to
white-collar crime directed at private entities would be an
extraordinary assertion of judicial power, impermissible in the

7
Note, however, that at other points the Guidelines equate
public and private harm, as in § 3B1.3, which directs that an
offense level be increased by two points if a defendant has
abused a position of either public or private trust.
Significantly, the District Court in this case applied the
increase called for in § 3B1.3, although the reason it gave was
that “the defendant abused a special skill to facilitate the
commission or concealment of the instant offense.” (App. at
10.) We tend to agree with the conclusion in the Presentence
Report that the increase is also applicable because Levinson
abused a position of private trust. See Presentence Report at
12 (“[T]his enhancement is applicable to the offense, because
Mr. Levinson occupied a fiduciary position in CoolerSmart,
and used that position to commit and conceal the offense.”).
25
abstract,8 and, even when confined to a specific case, certainly
requiring a thorough explanation.
The Sentencing Commission recommended terms of
imprisonment for economic crimes like Levinson’s because of
its concern that sentencing for white-collar crime had been
ineffectual. See USSG § 1A1.1, Ch. 1, Pt. A.4(d) (2006)
(“Under [pre-Guidelines] sentencing practice, courts
sentence[d] to probation an inappropriately high percentage of
offenders guilty of certain economic crimes, such as theft, tax
evasion, antitrust offenses, insider trading, fraud, and
embezzlement, that in the Commission’s view are ‘serious.’”).
In addition, it has been noted that probationary sentences for
white-collar crime raise concerns of sentencing disparities
according to socio-economic class. See United States v.

8
Kimbrough made it clear that district courts may weigh the
applicability of general Guidelines policies as part of the
individualized sentencing determination made to satisfy §
3553(a)’s requirement that the sentence for a specific
defendant be “sufficient, but not greater than necessary,” to
comply with the statute’s aims. 128 S. Ct. at 570. However,
nothing in Kimbrough or in our own jurisprudence leaves a
district court free to state its own general sentencing policies
in contravention of the Guidelines. Cf. United States v. Ricks,
494 F.3d 394, 403 (3d Cir. 2007) (“[A] district court may ...
view the sentencing disparity [imposed by the crack vs.
powder cocaine Guidelines] as too vast. However, it must do
so as applied to the particular defendant that appears before
the court. In terms of sentencing process, a court must give its
reasons for why it views the ratio as too harsh when applied to
the defendant.”).
26
Mueffelman, 470 F.3d 33, 40 (1st Cir. 2006) (“Restitution is
desirable but so is the deterrence of white-collar crime (of
central concern to Congress), the minimization of
discrepancies between white- and blue-collar offenses, and
limits on the ability of those with money or earning potential
to buy their way out of jail.”). Presumably, the Commission
was aware of the costs of incarceration when it made its
judgment that white-collar criminals generally should be sent
to prison. To use the Commission’s characterization, white-
collar crimes such as wire fraud and tax fraud are “serious,”
and typically will warrant serious punishment, including
prison time. Thus, if a district court wants to vary from the
Guidelines for a reason that is contrary to the Commission’s
stated position, it must explain why the general policy should
not apply in the particular case before it. See United States v.
Gunter, 527 F.3d 282, 286 (3d Cir. 2008) (district court is
“free to disagree with the policy underlying the crack/powder
ratio as applied to that particular defendant and make an
appropriate downward variance in its sentence. ... [But]
[t]here must be meaningful consideration of the § 3553(a)
factors and the particular circumstances of the case before a
variance is made.” (emphasis omitted)).

That was not done here. Instead, the District Court
simply said that it had reviewed its past sentencing decisions
and found prison appropriate when some public, as opposed
to private, harm had been inflicted. That statement is not
enough to tell us why the Guidelines, which, even after
Booker, remain “the starting point and initial benchmark” for
sentencing, Gall, 128 S. Ct. at 596, should not apply to
Levinson.

27
 It may be that the District Court has reasons we have
not understood for varying widely from the recommended
Guidelines range of sentences in this case. We do not say that
a sentence of probation would be, on this record, plainly
outside the boundaries of permissible discretion. We hold
only that the justifications given for the sentence are
inadequate for us to recognize them as reflecting a proper
exercise of discretion.

III. Conclusion

Accordingly, we will vacate the sentence and remand
the case for further proceedings in accordance with this
opinion.

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