Case: 10-30729 Document: 00511598136 Page: 1 Date Filed: 09/09/2011
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
September 9, 2011
No. 10-30729 Lyle W. Cayce
Clerk
UNITED STATES OF AMERICA
Plaintiff-Appellee
v.
MATTHEW B. PIZZOLATO
Defendant-Appellant
Appeal from the United States District Court
for the Eastern District of Louisiana
Before KING, DAVIS, and GARZA, Circuit Judges.
W. EUGENE DAVIS, Circuit Judge:
Defendant-Appellant Matthew B. Pizzolato pleaded guilty to multiple
crimes related to his conduct in running a fraudulent “Ponzi” scheme. The plea
agreement recommended an applicable sentencing range of 151 to 188 months
under the Federal Sentencing Guidelines (the “Guidelines”). The district court
disregarded the plea agreement’s recommendation and imposed the statutory
maximum sentence of 360 months. Appellant argues that the Government
breached the plea agreement by providing the district court with facts and
arguments supporting a longer sentence than the parties agreed upon.
We find no merit to defendant’s arguments and affirm.
Case: 10-30729 Document: 00511598136 Page: 2 Date Filed: 09/09/2011
No. 10-30729
I.
A federal grand jury indicted Matthew B. Pizzolato on 64 counts related
to a Ponzi scheme he ran between 2005 and 2009 through which he defrauded
over 180 investors of $19,500,000. The indictment included 52 counts of mail
fraud, two counts of wire fraud, seven counts of money laundering, one count of
securities fraud, one count of witness tampering, and one count of obstruction
of justice.
Pizzolato entered into a Federal Rule of Criminal Procedure, rule
11(c)(1)(B) plea agreement with the Government under which he pleaded guilty
to 21 counts of mail fraud, one count of wire fraud, three counts of money
laundering, the one count of securities fraud, and the one count of witness
tampering. The Government stipulated that “the agreed upon Guideline range
for this defendant is 151-188 months . . . .” The Government also agreed that
“this sentence should run concurrent as to all counts.” The Government further
agreed to a three-level downward adjustment for acceptance of responsibility.
The Government agreed to request the dismissal of the remaining fraud and
obstruction-of-justice counts.
The plea agreement stated that Pizzolato could receive a maximum
statutory sentence of 240 months of imprisonment for each count of mail fraud,
wire fraud, witness tampering, and securities fraud, and that he could receive
a consecutive maximum statutory sentence of 120 months of imprisonment for
money laundering. The agreement provided that “any discussions with
defendant’s attorney or anyone else regarding sentencing guidelines are merely
rough estimates and the Court is not bound by those discussions.” It further
provided that the Guidelines are advisory and not mandatory, and that the
district court could impose the maximum term of imprisonment allowed by law.
Pizzolato also waived his right to appeal his conviction or sentence on any
ground, and waived his right to pursue postconviction relief except to the extent
2
Case: 10-30729 Document: 00511598136 Page: 3 Date Filed: 09/09/2011
No. 10-30729
that ineffective assistance of counsel affected the validity of the appeal waiver
or of his guilty plea.
At rearraignment, the district court asked Pizzolato if he understood that
the court could impose the maximum sentences and that these sentences could
be made to run consecutively if the court accepted his guilty plea. Pizzolato
answered affirmatively.1 The district court further asked Pizzolato if he
understood that the Guideline recommendations in the plea agreement were not
binding and that Pizzolato had no right to withdraw his plea if the court did not
follow the Government’s recommendation. Pizzolato again answered
affirmatively.2
1
The following exchange occurred at rearraignment:
The Court: Now do you fully understand that if I accept your guilty plea I could
impose the maximum possible sentence I just related to you?
The Defendant: Yes, Your Honor.
The Court: Do you understand that I could sentence you consecutively rather
than concurrently?
The Defendant: Yes, Your Honor.
2
Again the court asked:
The Court: You understand that although the government has agreed to
recommend the appropriateness of certain sentencing guidelines, such
recommendation or request does not bind this Court once the Court accepts the
guilty plea? Do you understand that?
The Defendant: Yes, sir.
The Court: Further, do you understand that once I accept the plea agreement,
you will have no right to withdraw your plea if I do not follow the government’s
recommendation?
The Defendant: Yes, sir.
Separately, the court again confirmed that the Defendant understood.
The Court: But everybody understand that [the plea agreement] is not binding
3
Case: 10-30729 Document: 00511598136 Page: 4 Date Filed: 09/09/2011
No. 10-30729
The prosecutor summarized the terms of the plea agreement and the
parties’ Guideline calculations, concluding his remarks with reference to a “term
of imprisonment of 151 to 188 months. Again, that’s pursuant to 11(c)(1)(B).
This is not binding on the Court. It’s just a recommendation of the parties in
this case. And the defendant and government agree that this sentence should
run concurrently as to all counts.” The district court again made sure Pizzolato
understood that the agreed-upon Guideline recommendations were not binding
on the court and that the court could impose the statutory maximum penalties.3
The court also reviewed the waiver provision and ascertained that Pizzolato
understood it and knowingly and voluntarily agreed to it.
After rearraignment, the probation officer calculated Pizzolato’s offense
level, criminal history category, and applicable Guideline range consistent with
the plea agreement’s recommendation of 151-188 months. Nevertheless, the pre-
sentence report (the “PSR”) suggested that an upward departure from the
Guideline range might be appropriate because Pizzolato’s offenses caused
substantial non-monetary and emotional harm that the financial loss tables in
the Guidelines did not take into account. According to the PSR, “in addition to
the financial hardships caused by the offense, the countless number of victim
on the Court? I will make my own independent determination in determining
what the guideline range is. Although the guideline range, of course, as you
know and, Mr. Pizzolato, you should know it’s only advisory. Everybody
understand that?
Defense counsel: Yes, sir.
The Defendant: Yes, sir.
3
The Court: Does [the Defendant] also understand that I am no bound by the
plea, by the sentencing guidelines, or the plea agreement, and that he can
receive the maximum sentence with respect to each count to run consecutively
if I chose to do so?
Defense counsel: Yes, Your Honor.
4
Case: 10-30729 Document: 00511598136 Page: 5 Date Filed: 09/09/2011
No. 10-30729
impact letters received in this case clearly reflects the severe emotional effect
that the offense has had on the victims, the overwhelming majority of whom
were elderly.”
The PSR also suggested that a sentencing variance might be appropriate
because Pizzolato continued to minimize the seriousness of the offense by
maintaining that he never intended to steal from his investors but wanted to
make enough profit to repay them, something that was not supported by the
evidence. The PSR “submit[ted] that the reality of the defendant’s culpability,
considered with his statements to undermine the seriousness of the offense, may
be a factor to provide grounds for a variance from the guideline range under 18
U.S.C. § 3553(a).”
After receiving the PSR, the district court notified the parties that it was
contemplating an upward departure from the recommended Guideline range
pursuant to § 2B1.1, comment. n.19(A)(ii) of the Guidelines, which suggests that
a departure might be appropriate when a financial crime results in non-
monetary harm. Alternatively, the district court indicated that it was
contemplating an upward variance for the reasons set forth in 18 U.S.C. §
3553(a), which provides the general factors for the court to consider when
imposing a sentence.
Pizzolato thereafter filed a sentencing memorandum in which he disagreed
with the PSR’s suggestion of an upward variance. The memorandum attempted
to distinguish his offense from other Ponzi schemes for which defendants had
received higher sentences. He mentioned the well-known cases of Bernard
Madoff and Marc Dreier. He referred to these individuals as typical Ponzi
scheme defendants who were older, educated, and sophisticated. In comparison
he characterized himself as “a 26 year-old young man with very little education
or life experience.” Pizzolato also favorably compared himself to other defendants
in Ponzi schemes who had received lower sentences than provided for by the
5
Case: 10-30729 Document: 00511598136 Page: 6 Date Filed: 09/09/2011
No. 10-30729
Guideline sentencing range. Specifically, he referred to Bobby Shamburger and
Judith Zabalaoui, both of whom were sentenced in the Eastern District of
Louisiana.4
The district court ordered the Government to respond to Pizzolato’s
sentencing memorandum. In its response, the Government stated that it stood
by the plea agreement. However, the Government also argued that Pizzolato’s
objections to the PSR should be overruled. The Government distinguished
Pizzolato’s case from those mentioned in Pizzolato’s memorandum where the
defendants had received lighter sentences. The Government argued that
Pizzolato’s characterization of himself as a sheltered, unsophisticated young man
was belied by his ability to obtain his victims’ money and the methods he
admitted using to do so. The Government characterized Pizzolato as a “smooth-
talking salesman” and “a confident man” who was able “to pull off one of the
largest Ponzi schemes ever in this district.”
Pizzolato replied to the Government’s response, questioning the
Government’s adherence to the plea agreement. Pizzolato asserted that the
Government had only briefly indicated that it stood by its within-range
sentencing recommendation, then argued at length against Pizzolato’s request
for a within-range sentence. Pizzolato also complained that the Government
relied on conduct underlying his obstruction of justice charge even though the
Government had agreed to dismiss that charge. Pizzolato denied that he was
attempting to minimize the seriousness of his conduct; rather, he was
attempting to raise his youth, inexperience, and lack of education as factors
relevant to a sentencing determination.
4
Shamburger was sentenced in 2003 to 126 months of imprisonment for a scheme
resulting in losses in the tens of millions of dollars. See United States v. Shamburger, No.
2:94-CR-00377 (E.D. La. Aug. 25, 2003). Zabalaoui was sentenced in 2009 to 97 months of
imprisonment for a scheme defrauding investors of approximately $3,000,000. United States
v. Zabalaoui, No. 2:09-CR-0044 (E.D. La. Aug. 6, 2009).
6
Case: 10-30729 Document: 00511598136 Page: 7 Date Filed: 09/09/2011
No. 10-30729
Pizzolato articulated his objections to the PSR at the sentencing hearing.
The district court stated that it would not consider the probation officer’s
conclusion that Pizzolato continued to minimize the seriousness of his offense,
but rather would make its own independent determination on the issue.
Pizzolato further argued at the sentencing hearing that the Government
breached the plea agreement by implicitly arguing for an upward departure in
its response to his sentencing memorandum. The Government countered by
arguing that it was required to respond with candor to Pizzolato’s sentencing
memorandum and, further, that it continued to stand by the plea agreement.
The prosecutor again stated that the Guideline range set out in the plea
agreement was the appropriate range.
The district court rejected Pizzolato’s objections, noting that the plea
agreement in Pizzolato’s case fell under Rule 11(c)(1)(B) and, therefore, was not
binding on the district court, as made clear at Pizzolato’s rearraignment. The
court determined that the Government had not agreed that a particular sentence
would be appropriate: “So, pursuant to Rule 11(c)(1)(B), the government has
agreed that a sentencing Guideline range is the appropriate Guideline, not that
a particular sentence is appropriate. The only part of the plea agreement where
the government has agreed that a particular sentence is appropriate is a
sentence where it says that the government and the defendant agreed that the
sentence should run concurrent as to all counts.” The court concluded, therefore,
that the Government did not breach the plea agreement. The court further
noted that the Government had properly responded to Pizzolato’s sentencing
memorandum and that the Government never requested an upward departure
or a non-Guideline sentence. The court made clear that the ultimate decision on
sentencing rested with the court despite the parties’ recommendations.5
5
The Court:
7
Case: 10-30729 Document: 00511598136 Page: 8 Date Filed: 09/09/2011
No. 10-30729
The prosecutor then summarized the letters of several of Pizzolato’s
victims. The prosecutor also called several victims as witnesses pursuant to 18
U.S.C. § 3771(a)(4) and Federal Rule of Criminal Procedure 32(i)(4)(B). These
victims testified in open court as to the devastating effect of Pizzolato’s crimes
on them and their families. The victims who testified were elderly and had lost
most or all of their life savings to Pizzolato’s crimes.
The prosecutor also called another witness, Kathy Almon, to testify with
regard to Pizzolato’s conduct underlying the obstruction of justice charge. Almon
testified that Pizzolato visited her home and took documents when she was not
watching, then later replaced them with forged documents. In response to
Pizzolato’s objections to Almon’s testimony, the district court stated that it would
not consider evidence relevant to the dismissed obstruction of justice count when
determining whether to adjust Pizzolato’s offense level, but that it would
consider such evidence when determining whether to depart or vary from the
applicable Guideline range.
Taking all the evidence into account, the court accepted the parties’
agreed-upon Guideline range of 151-188 months as being the applicable range
under the Guidelines. Nevertheless, the court found that an upward departure
or non-Guideline sentence was appropriate. The court expressed its view that
it had “never seen a fraud-based crime more horrendous than the one you have
committed.” The court considered the ages of many of Pizzolato’s victims and
their dim prospects for recovery; the amount of interest the victims could have
[T]he Government hasn’t asked for an upward departure in this case. The
government hasn’t asked for a non-Guideline sentence. I think it responded, I
think it responded appropriately, but its’ the Court’s decision. . . . Now I can tell
you it doesn’t make a difference to me what . . . the Government’s position is on
that, I independently determined that I was considering it and quite frankly
after reading everything, including the PSR, I am of the opinion independently
and what the Government thinks is irrelevant to me, that an upward departure
and/or non-Guideline sentence is appropriate in this case. That’s how I resolved
that.
8
Case: 10-30729 Document: 00511598136 Page: 9 Date Filed: 09/09/2011
No. 10-30729
made in relatively safe investments, which many of them stated was their goal
when they invested with Pizzolato; the duration of the scheme, which lasted
about three years; the psychological damage to the victims; the number of
victims; and the expansive reach and complexity of the scheme. The court
explained that Pizzolato had taken the life savings of many of his vulnerable,
elderly victims, distinguishing his case from other cases. The court’s reasoning
can be summarized by the following excerpt from the court’s remarks to the
Defendant:
You stole from hardworking Americans who toiled their whole lives
to provide for their families, insure stability in their later years, and
provide some comfort for their children and grandchildren. This is
not a case in which a great number of sophisticated and well-off
individuals lost large sums of money representing only a small
portion of their overall wealth. No, this is a case where a lot of
people of modest means lost everything. You stole many victims’
live savings. In particularly despicable fashion, many of your
victims were the most susceptible members of our society; all looked
forward to some modest degree of comfort during their golden years.
Weaving a web of deception and practicing predatory acts, you
ruthlessly pounced on some of our most vulnerable citizens. You
falsely represented yourself to be an attorney. These people trusted
you with their life savings and you, in turn, devastated them. You
stole savings desperately needed by these fine people to achieve the
most basic needs of their life. Worrying that these needs will go
unmet, many of our victims fear they will never recover from their
loss. I feel the same.
The district court imposed consecutive sentences of 240 and 120 months
of imprisonment, the statutory maximum. Pizzolato now appeals, arguing
primarily that the Government breached the plea agreement when it provided
the district court with facts and arguments supporting a sentence above the
agreed-upon Guideline range of 151-188 months. Pizzolato also argues that the
district court abused its discretion by departing substantially from the
Guidelines.
9
Case: 10-30729 Document: 00511598136 Page: 10 Date Filed: 09/09/2011
No. 10-30729
II.
“This court reviews a claim of a breach of plea agreement de novo,
accepting the district court’s factual findings unless clearly erroneous.” United
States v. Elashyi, 554 F.3d 480, 501 (5th Cir. 2008). “The defendant bears the
burden of demonstrating the underlying facts that establish breach by a
preponderance of the evidence.” United States v. Roberts, 624 F.3d 241, 246 (5th
Cir. 2010).
We review a sentence to “ensure that the district court committed no
procedural error . . .” and to “consider the substantive reasonableness of the
sentence under an abuse-of-discretion standard.” United States v. Gall, 552 U.S.
38, 51 (2007). The validity of an appeal waiver is reviewed de novo. United
States v. Burns, 433 F.3d 442, 445 (5th Cir. 2005).
III.
Pizzolato primarily argues that the Government breached the plea
agreement. The Government argues that it did not breach the agreement and
that, in any event, Pizzolato waived his appeal rights. “[A]n alleged breach of
a plea agreement may be raised despite a waiver provision.” Roberts, 624 F.3d
at 244. Thus, the dispositive question on this appeal is whether the Government
breached the agreement.
A.
In determining whether the terms of a plea agreement have been violated,
we must consider “whether the government’s conduct is consistent with the
defendant’s reasonable understanding of the agreement.” Elashyi, 554 F.3d 480
at 501 (5th Cir. 2008) (internal quotation marks and citations omitted). We
apply general principles of contract law in order to interpret the terms of the
plea agreement.” Id. “The Government is required to strictly adhere to plea
agreements.” Roberts, 624 F.3d at 244.
10
Case: 10-30729 Document: 00511598136 Page: 11 Date Filed: 09/09/2011
No. 10-30729
Applying these principles, we conclude that the Government did not
breach the plea agreement. The parties entered into the agreement pursuant
to Federal Rule of Criminal Procedure 11(c)(1)(B), which provides:
[T]he plea agreement may specify that an attorney for the
government will . . . recommend, or agree not to oppose the
defendant’s request, that a particular sentence or sentencing range
is appropriate or that a particular provision of the Sentencing
Guidelines, or policy statement, or sentencing factor does or does not
apply (such a recommendation or request does not bind the court).
Consistent with the plain text of this Rule, the Government agreed only to make
a non-binding recommendation to the district court that 151-188 months was the
appropriate and applicable sentencing range under the Guidelines. The district
court was correct, therefore, when it determined that the Government agreed
only that a particular sentencing range was appropriate, not that a particular
sentence was appropriate.
The Defendant could not have reasonably understood the plea agreement
as providing otherwise. The agreement plainly did not bind the Government to
recommend a particular sentence, as opposed to a particular Guideline
sentencing range. Moreover, it is not uncommon for the Government to agree
to the applicability of a particular Guideline range without binding itself to
recommend a particular sentence under Rule 11(c)(1)(B). See, e.g., United States
v. Sotelo, No. 10-40351, 2010 WL 4683699, *1 (5th Cir. Nov. 18, 2010) (“[T]he
Government did not breach the plea agreement. The Government was obligated
to request full credit for acceptance of responsibility and dismissal of the
outstanding charges in the indictment, which it did. The agreement did not bind
the parties to a particular sentencing range or recommendation.”). And contrary
to Appellant’s assertions, the Government’s agreement to a particular sentencing
range was not worthless or illusory in the absence of an agreement to
recommend a particular sentence. Calculation of the appropriate Guideline
11
Case: 10-30729 Document: 00511598136 Page: 12 Date Filed: 09/09/2011
No. 10-30729
range is often a complex and contested issue. The Government’s agreement to
an applicable Guideline range is significant because, although not mandatory,
a sentencing court “must begin [its] analysis with the Guidelines and remain
cognizant of them throughout the sentencing process.” Gall, 543 U.S. at 50 n.6.
Pursuant to Pizzolato’s plea agreement, the Government approved certain
specific Guideline calculations, such as a three-level reduction for Pizzolato’s
acknowledgment of responsibility for his crimes.
The Government repeatedly stood by the plea agreement’s calculation of
a Guideline sentencing range of 151-188 months. The district court noted that
prosecutors never requested an upward variance or a non-Guideline sentence.
The district court accepted the parties’ agreed-upon Guideline recommendations
in full. Further, the Government consistently advocated for concurrent
sentences, which, as the district court recognized, is the only affirmative
recommendation the Government agreed to give with respect to the
appropriateness of a particular sentence.
The Government’s response to Pizzolato’s sentencing memorandum
opposing Pizzolato’s objections to the PSR did not represent a breach of the plea
agreement. Not only did the Government respond under a direct court order, but
“[a] prosecutor has the duty as an officer of the court to inform the court of all
factual information relevant to the defendant’s sentence so that a sentence may
be imposed upon a complete and accurate record.” United States v. Saling, 205
F.3d 764, 768 (5th Cir. 2000) (internal quotation marks and citation omitted).
“[P]arties cannot agree to withhold relevant information from the court.” United
States v. Guerrero, 299 F. App’x 331, 335 (5th Cir. Nov. 10, 2008) (citing United
States v. Avery, 621 F.2d 214, 216 (5th Cir. 1980)). Moreover, the Government
may not “stand mute in the face of factual inaccuracies or withhold relevant
information from the court.” United States v. Block, 660 F.2d 1086, 1091-92 (5th
Cir. Unit B. Nov. 1981).
12
Case: 10-30729 Document: 00511598136 Page: 13 Date Filed: 09/09/2011
No. 10-30729
Thus, although the Government’s response included negative and
pejorative descriptions of Pizzolato as a “smooth-talking salesman” and
“confidence man,” the Government was entitled to counter Pizzolato’s benign
characterization of himself as uneducated and unsophisticated. The
Government had a duty to correct what it believed to be Pizzolato’s attempt to
mislead the court. Moreover, the Government clarified both in its written
response and orally before the district court that it continued to stand by the
recommended Guideline sentencing range in the plea agreement of 151-188
months.
Similarly, the Government had the right to provide the court with Almon’s
testimony regarding Pizzolato’s conduct in connection with the dismissed
obstruction-of-justice charge because such conduct was relevant to Pizzolato’s
sentence. The prosecutor did not attempt to increase the agreed-upon Guideline
calculations based on this testimony. Furthermore, the district court stated for
the record that it considered Almon’s testimony only when determining whether
to depart from the Guidelines and not when calculating the appropriate
Guideline range. The district court repeatedly noted that the Government
never advocated for a Guideline range inconsistent with the plea agreement or
a non-Guideline sentence.
The Government’s consistent affirmation of the agreed-upon Guideline
range contrasts with the situation in United States v. Munoz,408 F.3d 222 (5th
Cir. 2005) where the prosecutor affirmatively advocated for application of an
abuse-of-trust sentence enhancement suggested by the PSR that had not been
included in the Guideline calculations the parties reached in the plea agreement.
Id. at 225-26. This court held that had the prosecutor “simply provided the court
with accurate relevant facts, the Government would not have breached the
agreement; but the Government crossed the line to breach by affirmatively
advocating the application of the enhancement.” Id. at 227-28. The prosecutor
13
Case: 10-30729 Document: 00511598136 Page: 14 Date Filed: 09/09/2011
No. 10-30729
in the present case never crossed the line into affirmatively advocating for a
Guideline range or sentence conflicting with the plea agreement.
In any event, the district court independently decided to depart upwardly
from the Guidelines. The record unequivocally demonstrates that the district
court made the decision to upwardly depart in its sole discretion and based upon
its independent assessment of the seriousness of Pizzolato’s crime. The district
court initially provided the parties with sua sponte notice that it was considering
an upward departure or non-Guideline sentence. At the subsequent sentencing
hearing, the court stated in plain language that the Government’s
recommendations were immaterial and that the court had independently
determined a higher sentence was appropriate.6 The record is replete with
statements from the district court expressing its independent concern with the
severity of Pizzolato’s fraud, including the devastating effect his crimes had on
a large number of vulnerable, elderly citizens.7 The district court explained in
detail how, in its opinion, such concerns were not accurately reflected in the
applicable Guideline range.
The district court had the authority to disregard the parties’ recommended
Guideline range under Rule 11(b)(1)(B). Pizzolato knew that the district court
had such authority. At rearraignment, Pizzolato clearly expressed his
understanding that the plea agreement was not binding on the court and that
the court could impose the statutory maximum sentence if it so chose.
In sum, the Government did not breach the plea agreement. In the
exercise of its discretion, the district court disregarded the plea agreement’s
recommendations and independently decided to impose the statutory maximum
sentence on Pizzolato.
6
See supra n.5.
7
“[T]his cold record, I state for the Court of Appeals, will never reflect the depth of pain
that I witnessed today by these persons.”
14
Case: 10-30729 Document: 00511598136 Page: 15 Date Filed: 09/09/2011
No. 10-30729
B.
Pizzolato further challenges the district court’s substantial departure from
the applicable Guideline range as an abuse of discretion. However, the record
clearly demonstrates that (1) Pizzolato knowingly and voluntarily waived his
appeal rights regarding any sentence not exceeding the statutory maximum; and
(2) such a waiver applies to his challenge under the plea agreement’s plain
language because the district court’s sentence does not exceed the statutory
maximum. Therefore, Pizzolato waived his right to appeal the sentence on
grounds that the district court abused its discretion in imposing the statutory
maximum. See United States v. Bond, 414, F.3d 542, 544 (5th Cir. 2005).
IV.
For the foregoing reasons, the sentence is AFFIRMED.
15