[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
FILED
________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
March 22, 2006
No. 05-13789
THOMAS K. KAHN
Non-Argument Calendar CLERK
________________________
D. C. Docket No. 04-60265-CR-DTKH
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
RICHARD ALLEN HILL,
Defendant-Appellant.
________________________
Appeal from the United States District Court
for the Southern District of Florida
_________________________
(March 22, 2006)
Before CARNES, PRYOR and FAY, Circuit Judges.
PER CURIAM:
Richard Allen Hill is appealing his 21-month sentence for conspiracy to
evade the reporting requirements in 31 U.S.C. §§ 5313(a) and 5324, and
defrauding the United States for the purpose of impeding, impairing, and
defrauding the United States for the purpose of impeding, impairing, and
obstructing the lawful functions of the Internal Revenue Service (“IRS”), in
violation of 26 U.S.C. § 7201, all in violation of 18 U.S.C. § 371. Hill argues on
appeal that the district court erred in determining his base offense level under the
United States Federal Guidelines (“federal guidelines”).1 For the reasons set forth
more fully below, we affirm.
A federal grand jury returned an indictment charging Hill, along with two
co-conspirators, Joseph Steinberg and Anthony Fusco, with committing the above-
referenced conspiracy between August 1999 and May 2000. Hill entered into a
plea agreement with the government, whereby he agreed to plead guilty to this
conspiracy offense, and he acknowledged that the amount of funds that were
structured for purposes of relevant conduct, and pursuant to the fraud table in
U.S.S.G. § 2F1.1(b)(1), was $902,732.
1
Hill’s presentence investigation report (“PSI”) reflects that the 2000 edition of the
federal guidelines were used to avoid an ex post facto violation because (1) the offense conduct
ceased in October 2001, and (2) the 2000 edition was more favorable to Hill.
2
During Hill’s plea colloquy, the government proffered that, as part of the
conspiracy, Hill received $902,732 in checks, which were broken up into amounts
less than $10,000, with the checks either made out to Hill, or cashed by his
employees for him. On further questioning from the court, the government agreed
that an “ultimate goal” of the conspiracy was “so [that] someone’s tax liability was
not fully recognized.” The government explained that the IRS would not be able to
compute Hill’s income from the scheme. However, Hill also acknowledged that
another goal of the conspiracy was to avoid reporting requirements.
Hill’s PSI included that Tap Pharmaceuticals (“Tap”) manufactured drugs
and sold them to licensed doctors for Medicaid and Medicare patients at a much
lower cost than wholesale prices, so that these physicians could sell the drugs at a
lower cost to their patients. Supreme Distributors (“Supreme”), a licensed
wholesale-distributor company, bought wholesale-prescription drugs from other
licensed wholesale distributors and then sold these drugs to other wholesalers or
pharmacies. In April 2000, Supreme contacted the Federal Drug Administration
(“FDA”) about a shipment Supreme had received from Ideal Marketing Concepts
(“Ideal”), another licensed wholesale-distribution company that purchased and sold
prescription drugs and that had Steinberg, Hill’s co-conspirator, as its President
3
and Chief Financial Officer.2 The FDA investigation revealed that this shipment
from Ideal contained a tampered box of an oncological drug, Neupogen, which had
a pharmacy label and a patient name on it,3 was valued at $80,000, and was
regulated by the Food, Drug, and Cosmetic Act.4
The PSI further included that Hill, who was a licensed osteopathic physician
in the State of Florida, would receive prescription drugs from Tap and other
sources and then sell them to Ideal in exchange for either checks or cash. If Ideal
paid Hill by check, each check was structured to be less than $10,000. Hill was
responsible for using nominee bank accounts, a check-cashing store, and his
employees to cash checks in the total stipulated amount of $902,732, with all of
these transactions structured to avoid currency-transaction reports. Hill then would
use these sale proceeds to purchase assets and place them in the names of various
2
Hill agreed during his plea colloquy that, when Steinberg was incarcerated on state
charges from October 1999 through May 2000, Steinberg hired co-conspirator Fusco to assume
his duties as Ideal’s Chief Financial Officer.
3
The patient whose name was on the pharmacy label revealed that he was a Medicare
patient who had sold the Neupogen to his social worker, who then had resold the drug to one of
Steinberg’s associates.
4
The PSI explained that, in accordance with statutes and regulations that cover how
wholesale-prescription drugs are sold and purchased, a paper trail, which is referred to as a
“pedigree,” must follow a drug from the point of origin to the point of dispensing, and the
shipment of prescription drugs from the manufacturer to various wholesalers, up and to the point
of resale at a pharmacy. This pedigree, which includes the name of the previous owner, the drug
itself, and a National Drug Code Number, is necessary so that, in the event of a manufacture
recall, the product can be traced and recalled.
4
nominees, who were mainly members of Hill’s family. During 1999, Hill failed to
report at least $532,364 of taxable income, which amount was derived from checks
drawn on Ideal’s bank account, and which resulted in a tax liability of $202,390.
In addition to summarizing this offense conduct, the PSI calculated Hill’s
offense level pursuant to U.S.S.G. § 2S1.3 (2000)—the guideline applicable to
offenses involving “Structuring to Evade Reporting Requirements.” Under
§ 2S1.3(a), the PSI began with an offense level of 6, and then added the number of
offense levels from the fraud and deceit table in § 2F1.1 that corresponded to the
value of the funds relevant to the conspiracy. Because the stipulated amount of
funds was $902,732, the PSI added 11 levels, resulting in Hill having a total base
offense level of 17. Moreover, because Hill knew or believed that the funds were
proceeds of unlawful activity, or were intended to promote unlawful activity, this
level was increased two levels, pursuant to U.S.S.G. § 2S1.3(b)(1).
Hill objected that his PSI incorrectly calculated his base offense level and
also increased it two levels, pursuant to § 2S1.3(a) and (b)(1), because the offense
conduct did not involve money laundering or any illegal activity. The probation
officer responded that, because Hill pled guilty to both objects of the conspiracy,
including evading the reporting requirements in §§ 5313 and 5324, § 2S1.3 was the
proper guideline to use in calculating his offense level. The probation officer also
5
explained that, although Hill bought and sold some drugs legitimately, he illegally
(1) routinely bought drugs from Medicare and Medicaid patients through
“runners,” and (2) resold drugs that had been re-labeled or re-packaged.
At sentencing, the district court discussed that, although the federal
guidelines now were advisory, both the Supreme Court and this Court had
explained that district courts still must consult these guidelines, which includes
properly calculating them. Hill then renewed his objection to the PSI’s calculation
of his offense level under § 2S1.3(a) & (b)(1). The government, in turn, offered
the testimony of Eric Larson, a Special Agent with the FDA assigned to investigate
the case, who testified as follows about information he learned from interviewing
employees and business associates of Hill. As part of the instant conspiracy, Hill
was engaged in the unlicensed wholesale distribution of prescription drugs, such as
Serostim, Neupogen, and Lupron, which were used primarily for treating cancer
and AIDS. Hill obtained some of his prescription drugs from Michael Deagan, an
unlicensed “street dealer,” who delivered these drugs to Hill’s office in a black
bag, and who reported profits of $50,000 to $75,000 from his Serostim sales to
Hill. Hill, in turn, was Ideal’s main supplier of Serostim, selling them through
Steinberg’s associates, Wall and Jay Vegotsky. After receiving drugs from Hill
and other physicians, as well as from other unlicensed wholesalers, via “runners”
6
who went to these sources, Ideal sold these drugs to Supreme and other licensed
wholesalers, without disclosing the true illegal sources and chain of pedigree of the
drugs, in violation of 21 U.S.C. §§ 331 and 333.5
The government argued that the offense level provided by § 2S1.3(b)(1) was
applicable because (1) one object of the conspiracy involved structuring financial
transactions to avoid reporting requirements, and (2) Hill knew or believed that the
relevant funds were from purchases and sales of prescription drugs from an
unlicensed wholesaler and, thus, the proceeds of unlawful activity. Hill responded
that, because the government failed to charge, and Hill did not admit during his
plea colloquy, that the relevant funds were the proceeds of unlawful activity, it
could not be a factor in determining his sentence. Hill also contended that
evidence showing that he purchased quantities of pharmaceuticals on the “gray
market” did not establish that the underlying conduct was illegal.
Based on its determination that the government had established by the
preponderance of the evidence that Hill knew or believed that the funds involved
either were the proceeds of unlawful activity, or were intended to promote
5
The PSI further discussed that, at Ideal, the patient labels on the drugs would be
removed and repackaged, using a heat gun and shrink wrap, such that the invoices and pedigrees
contained false information regarding the drug’s origin, age, and National Drug Code Number.
7
unlawful activity, the court overruled Hill’s objection to setting his offense level
pursuant to § 2S1.3. The court explained as follows:
Dr. Hill being a licensed medical doctor. Drugs that are issued in the
name of other people, and we are not talking, by the way, about, for
instance, say, a stronger Aspirin or something else you need a doctor’s
prescription for, but we are talking about highly regulated drugs that
are very, very expensive. I think the Neopogen was valued at
somewhere [between] $1[,]500 or $1[,]700 for a small vial of it.
These are anti-cancer drugs, and some of these drugs were, obviously,
labeled for other patients.
We know, ultimately, when they were received at Ideal, the patients
names were removed, [the PSI] talks about the process for removing
labels and repackaging them, so on, so forth. No effort at maintaining
the pedigree which is so important in this area so if there is a need to
recall the drugs, that could be done, and the transactions are just huge.
It is remarkable that we are talking about transactions, [$]50 to
$75,000 in terms of quantity. We are looking at a doctor purchasing
these drugs from someone who is unlicenced.
Furthermore, the court rejected Hill’s argument that the court, nevertheless,
should apply the cross reference in § 2S1.3(c) and, thus, the tax table in U.S.S.G.
§ 2T4.1, because the conspiracy did not involve a tax offense as its only object.
After concluding that Hill had a resulting guideline range of 27 to 33 months’
imprisonment, and after granting the government’s motion for a downward
departure based on substantial assistance, pursuant to U.S.S.G. § 5K1.1, the court
sentenced Hill to 21 months’ imprisonment, constituting a sentence below Hill’s
advisory guideline range, 2 years’ supervised release, and $202,390 in restitution.
8
Hill argues on appeal that the district court erred in calculating and
considering his advisory guideline range because, in adopting the PSI’s
recommended offense level of 17, pursuant to § 2S1.3(a) & (b)(1), the court
wrongly concluded that Hill knew or believed that the funds either were proceeds
of unlawful activity, or were intended to promote unlawful activity. Hill also
contends that the court erred in refusing to apply the cross reference in § 2S1.3(c)
to the tax guideline in U.S.S.G. § 2T4.1, when Hill’s indictment, plea agreement,
and plea colloquy reflected that he was charged with, and pleading guilty to, tax
evasion. Additionally, Hill asserts that, although this guideline range only was
advisory, this Court should vacate and remand his sentence because, if the advisory
range had been lower, a reasonable probability exists that the court would have
departed downward below the 21-month sentence that it ultimately imposed.6
Post-Booker, we continue to review a district court’s factual determinations
for clear error. See United States v. Crawford, 407 F.3d 1174, 1178-79 (11th Cir.
2005) (explaining that Booker did not alter either our review of the application of
6
To the extent Hill’s brief can be construed as also arguing that his sentence was
imposed in violation of Blakely v. Washington, 542 U.S. 296, 124 S.Ct. 2531, 159 L.Ed.2d 403
(2004), or United States v. Booker, 543 U.S. 220, 125 S.Ct. 738, 160 L.Ed.2d 621 (2005), he was
sentenced post-Booker, with the court treating the guidelines as advisory. Thus, no Sixth
Amendment violation occurred. See United States v. Chau, 426 F.3d 1318, 1323-24 (11th Cir.
2005) (rejecting the argument that, even when the federal guidelines are applied in an advisory
fashion, “the Sixth Amendment right to a jury trial prohibits the sentencing court from making
factual determinations that go beyond a defendant’s admissions”).
9
the guidelines, or our standards of review). We cannot find clear error unless we
are “left with a definite and firm conviction that a mistake has been committed.”
Id. at 1177 (quotation omitted). On the other hand, we review questions of law
arising under the federal guidelines de novo. Id. at 1178. Under Booker, we
review a defendant’s ultimate sentence for reasonableness. See Booker, 543 U.S.
at ___, 125 S.Ct. at 765-66. “[T]he district court remains obliged to ‘consult’ and
‘take into account’ the [g]uidelines in sentencing.” Crawford, 407 F.3d at 1178.
“This consultation requirement, at a minimum, obliges the district court to
calculate correctly the sentencing range prescribed by the [g]uidelines[.]” Id.
(emphasis in original). “After it has made this calculation, the district court may
impose a more severe or more lenient sentence as long as the sentence is
reasonable.” Id. at 1179.
The Currency and Foreign Transactions Reporting Act and its accompanying
regulations require banks and other financial institutions to file a report with the
government for any cash transactions involving more than $10,000. See 31 U.S.C.
§ 5313(a); 31 C.F.R. § 103.22(b)(1). A financial institution also must file this
report, known as a Currency Transaction Report (“CTR”), if it knows that a person
is making multiple transactions in a single day that result in either deposits or
withdrawals totaling over $10,000. See 31 C.F.R. § 103.22(c)(2). It is illegal
10
under § 5324 either to cause or attempt to cause a financial institution to fail to file
a report, or to structure cash transactions “for the purpose of evading” the filing of
a CTR. 31 U.S.C. § 5324(a)(1) & (3). This anti-structuring law “aims to prevent
people from either causing a bank to fail to file a required report or defeating the
government’s efforts to identify large cash transactions by splitting up a cash hoard
in a manner that avoids triggering a bank’s reporting requirements.” United States
v. Vazquez, 53 F.3d 1216, 1218 (11th Cir. 1995) (quotation omitted).
In examining whether the district court correctly calculated Hill’s advisory
guideline range based on his conviction for conspiring to, among other things,
evade the reporting requirements in § 5313(a) and § 5324, the relevant version of
§ 2S1.3—the guideline applicable for “Structuring Transactions to Evade
Reporting Requirements”—provided for a base offense level of six, “plus the
number of offense levels from the table in § 2F1.1 (Fraud and Deceit)
corresponding to the value of the funds.” U.S.S.G. § 2S1.3(a) (2000). This
guideline also provided that, “[i]f the defendant knew or believed that the funds
were proceeds of unlawful activity, or were intended to promote unlawful activity,
increase by 2 levels.” U.S.S.G. § 2S1.3(b)(1) (2000).
On the other hand, this guideline also provides that:
If (A) subsection (b)(1) does not apply; (B) the defendant did not act
with reckless disregard of the source of the funds; (C) the funds were
11
the proceeds of lawful activity; and (D) the funds were to be used for
a lawful purpose, decrease the offense level to level 6.
U.S.S.G. § 2S1.3(b)(2) (2000). Moreover, under the cross reference in § 2S1.3(c),
courts are to apply the “most appropriate guideline from Chapter Two, Part T
(Offenses Involving Taxation)” if (1) the offense was committed for the purpose of
violating tax laws, and (2) the resulting offense level is greater than that
determined above. U.S.S.G. § 2S1.3(c).
Hill contended at sentencing that § 2S1.3(b)(1) was not applicable, and that
he, instead, should have been sentenced under § 2S1.3(b)(2), because the
government failed to establish that he “knew or believed that then funds were
proceeds of unlawful activity, or were intended to promote unlawful activity.”
When a defendant objects to a factual finding, such as in the instant case, the
government bears the burden of establishing the disputed fact by a preponderance
of the evidence. See United States v. Rodriguez, 398 F.3d 1291, 1296 (11th Cir.),
cert. denied, 125 S.Ct. 2935 (2005).
In Vazquez, the defendant argued that the district court improperly enhanced
his base offense level under § 2S1.3(b)(1), based on the court’s finding that the
defendant “knew or believed that the funds were criminally derived property.” See
Vazquez, 53 F.3d at 1226. The defendant’s PSI reflected that, although the
defendant only was charged with structuring transactions amounting to $1.5
12
million, a total of approximately $7.5 million had been processed through the four
accounts controlled by the defendant and his co-conspirator, and that this amount
far exceeded the defendant’s legitimate annual income of $15,000. See id. at 1226-
27. The district court found that, although it could not be certain of the source of
the money, it did not believe the defendant’s alternative story. See id. On appeal,
we determined that this factual finding was not clearly erroneous, explaining that
the district court was entitled to infer that the defendant’s false explanation was a
cover for some type of criminal endeavor. See id. at 1227.
In the instant case, Special Agent Larson testified at sentencing that, as part
of the instant conspiracy, Hill obtained some of his prescription drugs from
Michael Deagan, an unlicensed “street dealer,” who delivered these drugs to Hill’s
office in a black bag, and who reported profits of $50,000 to $75,000 from his
Serostim sales to Hill. Special Agent Larson also explained that, after receiving
drugs from Hill and other physicians, as well as from other unlicensed wholesalers,
via “runners” who went to these sources, Ideal sold these drugs to Supreme and
other licensed wholesalers, without disclosing the true illegal sources and chain of
pedigree of the drugs, in violation of 21 U.S.C. §§ 331 and 333. The PSI discussed
that, at Ideal, the patient labels on the drugs would be removed and repackaged,
using a heat gun and shrink wrap, such that the invoices and pedigrees then false
13
information regarding the drug’s origin, age, and National Drug Code Number.
Thus, similar to the facts in Vazquez, the court did not clearly err in concluding
that the government had established by the preponderance of the evidence that Hill
knew or believed that the fund involved either were the proceeds of unlawful
activity, or were intended to promote unlawful activity. See U.S.S.G.
§ 2S1.3(b)(1) (2000).
To the extent Hill also is contending that the court erred in failing to apply
the cross section referenced in § 2S1.3(c)(1), based on his argument that the
conspiracy to which he plead guilty was for the purpose of violating tax laws, he
cites in support to the government’s comment during his plea colloquy that the
“ultimate goal” of the conspiracy was “so someone’s tax liability [would] not [be]
fully recognized.” Hill’s two-pronged conspiracy, however, also had as an object
for the co-conspirators to evade the reporting requirements in §§ 5313(a) and 5324.
Indeed, the government proffered, and Hill agreed during his plea colloquy, that a
separate goal of the conspiracy was to avoid reporting requirements. The PSI also
included, and Hill failed to refute, that he was responsible for using nominee bank
accounts, a check-cashing store, and his employees to cash checks in the total
agreed sum of $902,732, with all of these transactions structured to avoid currency
transaction reports. Additionally, § 2S1.3(c)(1) was not applicable because the
14
offense level of 16 that would have resulted from the court’s application of
U.S.S.G. § 2T1.1(a)(1),7 would have been less than 17—the offense level that
resulted from the court’s application of § 2S1.3(a) & (b)(1). See U.S.S.G.
§ 2S1.3(c) (requiring as a condition that the resulting offense level from the tax
table be greater than the offense level in § 2S1.3).
Accordingly, we conclude that the district court did not clearly err in finding
that Hill “knew or believed that then funds were proceeds of unlawful activity, or
were intended to promote unlawful activity,” for purposes of applying § 2S1.3(a)
& (b). Furthermore, the court did not err in finding inapplicable the cross section
referenced in § 2S1.3(c), for violating tax laws. We, therefore, affirm.
AFFIRMED.
7
A base offense level of 16, pursuant to U.S.S.G. § 2T4.1(K), would have been
applicable under the tax table in U.S.S.G. § 2T4.1, because the tax loss at issue was $202,390.
See U.S.S.G. § 2T4.1(K) (2000) (setting offense level at 16 for offenses involving more than
$200,000 in tax losses).
15