United States v. Eidson

United States Court of Appeals,

Eleventh Circuit.

No. 94-2330.

UNITED STATES of America, Plaintiff-Appellee,

v.

Charles A. EIDSON, Sandra A. Eidson, Defendants-Appellants.

March 31, 1997.

Appeal from the United States District Court for the Middle
District of Florida. (No. 92-00094-CR-T-25(A), Lee P. Gagliardi,
Visiting Judge.

Before ANDERSON, Circuit Judge, and KRAVITCH and HENDERSON, Senior
Circuit Judges.

KRAVITCH, Senior Circuit Judge:

The Clean Water Act ("CWA" or "the Act") prohibits the

addition of any pollutant into navigable waters from any point

source. 33 U.S.C. §§ 1311(a), 1362(12). It defines "navigable

waters" to mean "waters of the United States, including the

territorial seas." 33 U.S.C. § 1362(7). The primary issue before

this court is whether the drainage ditch into which appellants'

company discharged industrial wastewater was a "navigable water"

within the meaning of § 1362(7).

I. Background

Cherokee Trading Partners, Inc. ("Cherokee") was a Delaware

corporation with its principal place of business at 5118 Ingraham

Street in Tampa, Florida.1 Charles Eidson was the president of

Cherokee and his wife, Sandra Eidson, was its secretary and

1
From 1985 until 1989, the Eidsons were corporate officers
of Cherokee Oil Co. Ltd. When this company was dissolved in 1989,
Cherokee Trading Partners took over its operations. Both
companies will be referred to in this opinion as "Cherokee."
registered agent. Cherokee operated a used oil recycling and

wastewater disposal business. The company collected used oil from

businesses for free or for a small fee, brought the oil back to its

facility, reduced the water content if necessary, and then resold

the oil to other businesses. For a slightly higher fee, Cherokee

collected and agreed to dispose properly of industrial wastewater.

On April 25, 1990, a Tampa police officer observed a Cherokee

truck parked at the intersection of Ingraham and O'Brien Streets,

approximately 100 yards from the company's facility. The officer

noticed a "sludge substance" being pumped from the truck into a

storm sewer that drained into a storm drainage ditch connecting

Ingraham and Commerce Streets. At the time of discharge, a light

flow in the storm drainage ditch continued northward into a nearby

drainage canal that ran east-west along Commerce Street and that

eventually emptied into Tampa Bay.

While the officer was observing the scene, Sandra Eidson

approached him. She stated that she was vice-president of Cherokee

and that she had told the driver of the truck to pump the substance

into the storm sewer. She further informed the officer that the

liquid had come from an underground fuel tank in a gasoline station

and had been used to rinse the tank to eliminate any residual

gasses,2 but that Cherokee had permission to pump into the sewer.
When questioned by an environmental inspector later that day,

Charles Eidson stated that he had given Sandra Eidson permission to

have the driver dump the contents of the truck into the sewer.

2
Subsequent laboratory tests revealed that the substance
pumped from the truck into the sewer contained a number of
priority pollutants.
 The unauthorized discharge of pollutants on April 25, 1990 was

hardly an isolated incident at the Cherokee site. Upon the

instruction of Charles and Sandra Eidson, Cherokee employees

routinely discharged industrial wastewater from trucks onto the

ground at the Cherokee site or into the woods and bushes of an

adjacent lot. Cherokee employees also went to great lengths to

conceal these discharges from environmental regulators. In company

documents, they inventoried wastewater that had been discharged

onto the ground in a fictional "Tank 8." In anticipation for one

announced environmental inspection, Cherokee employees imported

truckloads of dirt to hide the site's gross soil contamination. At

the same time that it was discharging industrial wastewater in

violation of its operating permits and governing environmental

laws, Cherokee was routinely assuring its customers that it was

treating and disposing of contaminated wastewater in accordance

with all applicable environmental laws, regulations, and permits.

Charles and Sandra Eidson were indicted and charged with one

count of violating the CWA, 33 U.S.C. §§ 1311(a), 1319(c), by

knowingly discharging or causing the discharge of pollutants into

navigable waters of the United States. They were also charged with

three counts of violating the mail fraud statute, 18 U.S.C. § 1341,

by devising and implementing a scheme to defraud in which they used

false representations to solicit business customers for Cherokee's

wastewater disposal business.3 Following conviction by a jury on

all counts, Charles and Sandra Eidson were sentenced to 70 and 37

3
The three separate counts of mail fraud stem from the
mailing of invoices for the disposal of wastewater to three
different companies in August and September 1990.
months, respectively. This appeal followed.

Concluding that the drainage ditch connecting Ingraham and

Commerce Streets is a "navigable water" under the CWA and rejecting

appellants' other challenges, we AFFIRM their convictions. Finding

an insufficient factual basis for two of the sentence enhancements

imposed by the district court, we VACATE their sentences and REMAND

for resentencing.

II. Discussion

A. Count I: Clean Water Act

With respect to their CWA convictions, appellants claim that

the district court erred in denying their motions for judgment of

acquittal made pursuant to Fed.R.Crim.P. 29(a). Most

significantly, they claim that the government provided insufficient

evidence to prove that the storm drainage ditch connecting Ingraham

and Commerce Streets was a "navigable water" within the meaning of

§ 1362(7) of the CWA.4 We consider appellants' legal claim de novo,

reviewing the evidence in the light most favorable to the

government. United States v. Mejia, 97 F.3d 1391, 1392 (11th

Cir.1996).

Congress enacted the CWA "to restore and maintain the

chemical, physical, and biological integrity of the Nation's

4
Appellants also assert that there was insufficient evidence
to prove that they were responsible for the discharges and that
the discharged substance was a pollutant. These claims are
without merit. Witnesses testified that both defendants admitted
responsibility for the discharge of the substance into the storm
sewer. In addition, the "sludge substance" discharged from the
Cherokee truck, which had been used to remove gasses from an
underground storage tank at a gasoline station, tested positive
for numerous substances classified as pollutants by the
Environmental Protection Agency ("EPA").
waters." 33 U.S.C. § 1251. In order to implement this daunting

mandate, Congress "chose to define the waters covered by the Act

broadly." United States v. Riverside Bayview Homes, Inc., 474 U.S.

121, 133, 106 S. Ct. 455, 462, 88 L.Ed.2d 419 (1985). Courts have

agreed that Congress intended the definition of navigable waters

under the Act "to reach to the full extent permissible under the

Constitution." See United States v. Lambert, 695 F.2d 536, 538

(11th Cir.1983).

The CWA defines "navigable waters" as "waters of the United

States, including the territorial seas." 33 U.S.C. § 1362(7).

This broad definition "makes it clear that the term "navigable' as

used in the Act is of limited import" and that with the CWA

Congress chose to regulate waters that would not be deemed

navigable under the classical understanding of that term.

Riverside Bayview Homes, 474 U.S. at 133, 106 S.Ct. at 462; see

also United States v. Ashland Oil and Transportation Co., 504 F.2d

1317, 1325 (6th Cir.1974) (holding that non-navigable tributary of

navigable river is a "navigable water" under § 1362(7)).

Therefore, we can easily dispose of appellants' contention that the

drainage ditch was not a "navigable water" solely because it was

not navigable-in-fact.5
It is by now well established that Congress intended to

regulate the discharge of pollutants into all waters that may

eventually lead to waters affecting interstate commerce. In

5
Appellants' reliance on Lykes Brothers, Inc. v. United
States Army Corps of Engineers, 821 F.Supp. 1457 (M.D.Fla.1993),
aff'd, 64 F.3d 630 (11th Cir.1995), is misplaced. That case
dealt with a provision of the Rivers and Harbors Act, 33 U.S.C. §
403, which is inapplicable here.
adopting the present definition of "navigable waters," Congress

recognized that "[w]ater moves in hydrologic cycles and it is

essential that discharge of pollutants be controlled at the source.

Therefore, reference to the control requirements must be made to

the navigable waters, portions thereof, and their tributaries."

S.Rep. No. 92-414, at 77 (1972), reprinted in, 1972 U.S.C.C.A.N.

3668, 3742-43. In accordance with this legislative intent, EPA has

defined "waters of the United States" to include tributaries to

waters that "may be susceptible to use in interstate or foreign
commerce," 40 C.F.R. § 230.3(s),6 and courts repeatedly have

6
40 C.F.R. § 230.3(s) provides:

The term "waters of the United States" means:

(1) All waters which are currently used, or were used
in the past, or may be susceptible to use in interstate or
foreign commerce, including all waters which are subject to
the ebb and flow of the tide;

(2) All interstate waters including interstate
wetlands;

(3) All other waters such as intrastate lakes, rivers,
streams (including intermittent streams), mudflats,
sandflats, wetlands, sloughs, prairie potholes, wet meadows,
playa lakes, or natural ponds, the use, degradation or
destruction of which could affect interstate or foreign
commerce including any such waters:

(i) Which are used or could be used by interstate
or foreign travelers for recreational or other
purposes; or

(ii) From which fish or shellfish are or could be
taken and sold in interstate or foreign commerce; or

(iii) Which are or could be used for industrial
purposes by industries in interstate commerce;

(4) All impoundments of waters otherwise defined as
waters of the United States under this definition.

(5) Tributaries of waters identified in paragraphs (1)
recognized that tributaries to bodies of water that affect

interstate commerce are "waters of the United States" protected by

the CWA. See, e.g., United States v. Texas Pipe Line Co., 611 F.2d

345, 347 (10th Cir.1979) (tributary to navigable river); Ashland

Oil, 504 F.2d at 1324 (tributary that eventually flowed into river

that was navigable-in-fact); State of Georgia v. City of East

Ridge, 949 F.Supp. 1571, 1578 (N.D.Ga.1996) (unnamed tributary of

interstate creek); United States v. Saint Bernard Parish, 589

F.Supp. 617, 620 (E.D.La.1984) (canal flowing into wetland).

There is no reason to suspect that Congress intended to

regulate only the natural tributaries of navigable waters.

Pollutants are equally harmful to this country's water quality

whether they travel along man-made or natural routes. The fact

that bodies of water are "man-made makes no difference.... That

the defendants used them to convey the pollutants without a permit

is the matter of importance." United States v. Holland, 373

F.Supp. 665, 673 (M.D.Fla.1974); see also Leslie Salt Co. v.

United States, 896 F.2d 354, 358 (9th Cir.1990) (noting that

protection of the CWA "does not depend on the how the property at

issue became a water of the United States"), cert. denied, 498 U.S.

1126, 111 S.Ct. 1089, 112 L.Ed.2d 1194 (1991). Consequently,

courts have acknowledged that ditches and canals, as well as

streams and creeks, can be "waters of the United States" under §

1362(7). See, e.g., United States v. Velsicol Chemical Corp., 438

F.Supp. 945, 947 (W.D.Tenn.1976) (sewers that lead to Mississippi
River); Holland, 373 F.Supp. at 673 (mosquito canals that empty

through (4) of this section; ...
into bayou arm of Tampa Bay).

Likewise, there is no reason to suspect that Congress

intended to exclude from "waters of the United States" tributaries

that flow only intermittently. Pollutants need not reach

interstate bodies of water immediately or continuously in order to

inflict serious environmental damage.7 As the Tenth Circuit noted

in Texas Pipe Line, "[i]t makes no difference that a stream was or

was not at the time of the spill discharging water continuously

into a river navigable in the traditional sense." 611 F.2d at 347.

Rather, as long as the tributary would flow into the navigable body

of water "during significant rainfall," it is capable of spreading

environmental damage and is thus a "water of the United States"

under the Act. Id.; see also Quivira Mining Co. v. United States

Environmental Protection Agency, 765 F.2d 126, 130 (10th Cir.1985)

(upholding regulation because "during times of intense rainfall,

there can be a surface connection" between tributary and

navigable-in-fact streams), cert. denied, 474 U.S. 1055, 106 S.Ct.

791, 88 L.Ed.2d 769 (1986); United States v. Phelps Dodge Corp.,

391 F.Supp. 1181, 1187 (D.Ariz.1975) ("waters of the United States"

include "normally dry arroyos" from which water could flow to

public waters).

With these principles in mind, we turn to the evidence

presented in this case concerning the drainage ditch between

Ingraham and Commerce Streets. As Cherokee was discharging

pollutants into the storm sewer system on April 25, 1990, a light

7
As the court noted in Ashland Oil, the government need not
prove that the pollutant actually reached the navigable body of
water. 504 F.2d at 1329.
flow was traveling from the sewer drain into the open drainage

ditch that connected Ingraham and Commerce Streets. The flow

continued northward in this ditch until it reached Commerce Street,

where it passed underneath the street and into a drainage canal

that ran parallel to Commerce Street. The sewer, the ditch, and

the canal were all part of a storm drainage system that was

designed to discharge storm water into Tampa Bay. During heavy

rainfall and during high tide,8 water flows from the drainage ditch

connecting Ingraham and Commerce Streets into the Commerce Street

drainage canal, which empties into Picnic Island Creek, a tributary

to Tampa Bay.

We hold that this evidence is sufficient to establish that the

drainage ditch into which Cherokee discharged its pollutants is a

tributary of Tampa Bay and is thus a "water of the United States"

under § 1362(7). To hold otherwise and to allow polluters to

contaminate this drainage system would defeat the intent of

Congress and would jeopardize the health of our nation's waters.

Appellants also contend, without any supporting case law,

that the CWA's definition of pollutant is unconstitutionally vague

because it does not provide someone discharging petroleum-based

products with fair notice that this behavior is prohibited. A

statute is not unconstitutionally vague as long as it "define[s]

the criminal offense with sufficient definiteness that ordinary

people can understand what conduct is prohibited and in a manner

that does not encourage arbitrary and discriminatory enforcement."

8
At high tide, water reached approximately the half-way
point of the ditch between Commerce and Ingraham Streets.
Kolender v. Lawson, 461 U.S. 352, 357, 103 S.Ct. 1855, 1858, 75

L.Ed.2d 903 (1983). We review the CWA's definition of pollutant in

light of the particular facts of this case. See United States v.

Waymer, 55 F.3d 564, 568 (11th Cir.1995), cert. denied, --- U.S. --

--, 116 S.Ct. 1350, 134 L.Ed.2d 519 (1996) (noting that vagueness

challenges that do not involve the First Amendment are examined in

light of facts before the court).

Section 1362(6) defines pollutant as:

dredged spoil, solid waste, incinerator residue, sewage,
garbage, sewage sludge, munitions, chemical wastes, biological
materials, radioactive materials, heat, wrecked or discarded
equipment, rock, sand, cellar dirt and industrial, municipal,
and agricultural waste discharged into water.

Although this definition of pollutant is broad, it is not unduly

vague. The liquid discharged by the Cherokee truck had been used

as a cleaning agent for an underground storage tank at a gas

station and was described as having a strong petroleum odor and a

dirty, oily appearance. Given these facts, we do not hesitate to

conclude that an ordinary person should have been able to

understand that the petroleum-based, sludge-like substance was

industrial waste within the meaning of the Act. Because the statute

provided the Eidsons with adequate notice that their conduct was

prohibited, we reject appellants' constitutional challenge.9

B. Counts II-IV: Mail Fraud

9
Appellants also contend that the Act is unduly vague
because it does not specify what content level of petroleum would
make a discharged liquid a pollutant. The CWA prohibits "the
discharge of any pollutant." 33 U.S.C. § 1311(a) (emphasis
added). Again, we find the Act broad rather than vague.
Considering the sludge-like qualities of the liquid discharged by
Cherokee, appellants cannot reasonably contend that the statute
did not provide them with adequate notice that the discharge was
prohibited.
 Appellants also contend that there was insufficient evidence

to support their convictions for mail fraud. In order to prove a

violation of 18 U.S.C. § 1341, the government must establish that

appellants: (1) intentionally participated in a scheme to defraud

or to obtain money by fraudulent pretenses and representations;

and (2) used the United States mails to further that scheme.

United States v. Wingate, 997 F.2d 1429, 1433 (11th Cir.1993).

Appellants argue that the government failed to establish a

fraudulent scheme because there was no evidence that they made

false representations to their customers. Based on a thorough

review of the record, we find ample evidence to support appellants'

mail fraud convictions.

A scheme to offer services in exchange for a fee, with the

intent not to perform those services, constitutes a fraudulent

scheme under § 1341. United States v. Paccione, 949 F.2d 1183,

1196 (2d Cir.1991), cert. denied, 505 U.S. 1220, 112 S.Ct. 3029,

120 L.Ed.2d 900 (1992). Upon instructions from Charles and Sandra

Eidson, Cherokee representatives regularly informed prospective

customers that Cherokee had proper licenses and permits to dispose

of wastewater. Cherokee documents displayed permit numbers and

Cherokee contracted to dispose of wastewater in accordance with all

applicable laws, codes, and regulations. Despite these

representations, Charles and Sandra Eidson instructed Cherokee

employees to dump the collected industrial wastewater on the ground

at and around the Cherokee facility in direct violation of their

operating permits and applicable environmental laws and

regulations. We hold that this evidence is sufficient to support
appellants' mail fraud convictions.10

C. Sentencing Issues

Appellants also raise a number of claims regarding their

respective sentences. We review the factual findings of a district

court at sentencing for clear error, and review its interpretation

of the Sentencing Guidelines de novo. United States v. Holland,22

F.3d 1040, 1045 (11th Cir.1994), cert. denied, --- U.S. ----, 115

S.Ct. 898, 130 L.Ed.2d 782 (1995).

With respect to their count one convictions, appellants first

challenge the district court's decision to increase their offense

levels pursuant to U.S.S.G. § 2Q1.2(b)(1)(A)(1993). That section

provides for a six-level increase if the "offense resulted in an

ongoing, continuous or repetitive discharge." Appellants contend

that there was only one discharge into waters of the United States.

However, Sandra Eidson admitted that there had been another

discharge into the sewer approximately one week before the April

25, 1990 discharge. We find that this admission is sufficient to

support an offense-level increase under § 2Q1.2(b)(1)(A). See

United States v. Catucci, 55 F.3d 15, 18 (1st Cir.1995) (holding

that two discharges on separate days sufficient to support increase

§ 2Q1.2(b)(1)(A)); United States v. Strandquist, 993 F.2d 395, 401

10
Appellants also contend that the government violated
Fed.R.Crim.P. 16(c) and Brady v. Maryland, 373 U.S. 83, 83 S.Ct.
1194, 10 L.Ed.2d 215 (1963), by not furnishing them with copies
of documents that agents seized from Cherokee's office when they
executed a search warrant in March 1992. Appellants have
presented no evidence to support these claims. In a letter dated
September 17, 1992, the prosecutor informed appellants that they
could pick up the seized documents that the government did not
plan to use at trial. Although informed of their availability,
neither appellant made any attempt to retrieve or review the
seized documents before trial.
(4th Cir.1993) (two separate incidents sufficient to support upward

adjustment under analogous provision of § 2Q1.3(b)(1)(A)).

Appellants also contend that the district court erred in

imposing an offense-level increase pursuant to U.S.S.G. §

2Q1.2(b)(3)(1993). Section 2Q1.2(b)(3) provides for a four-point

increase if "cleanup required a substantial expenditure."

Application Note 7 states that this section governs cases where

"cleanup at substantial expense has been required." U.S.S.G. §

2Q1.2 comment. (n. 7). Appellants argue that because both the

guideline and the application note refer to cleanups in the past

tense, the district court erred in basing the upward adjustment on

an estimate of future cleanup costs.

Section 2Q1.2(b)(3) makes a defendant's sentence dependant on

the nature of contamination caused by the environmental offense.

The costs of cleanup are but one method a court can use to measure

the seriousness of contamination. Section 2Q1.2(b)(3) also

provides for an offense-level increase if the discharge resulted in

"disruption of public utilities or evacuation of a community." We

find it unlikely that Congress intended that a defendant guilty of

serious environmental contamination should receive a lesser

sentence merely because the conviction occurred before the

appropriate environmental agency could undo the harm. Such a

reading would thwart Congress's intent to punish defendants

according to the level of environmental degradation caused by their

criminal offenses.

Moreover, in this case, the Florida Department of

Environmental Regulation already had incurred significant cleanup
costs at the time of sentencing. It had conducted a preliminary

site survey and liquid sample retrieval of Cherokee's site, which

indicated that Cherokee's illegal discharge had caused gross

contamination of the surficial sediments and the surficial aquifer.

The costs incurred for this preliminary examination, which exceeded

thirty thousand dollars, are properly considered cleanup costs.

See United States v. Bogas, 920 F.2d 363, 369 (6th Cir.1990)

(holding that cleanup expenditures under § 2Q1.2(b)(3) include site

testing, studies, and other indirect costs of site remediation).

Based on its preliminary investigation, the department

concluded that complete cleanup of the Cherokee site would cost

several hundred thousand dollars. Because this estimate was based

on a thorough preliminary examination of the site, we are satisfied

that it represents an accurate and reliable measure of the degree

of contamination caused by appellants' discharges. We also

conclude that the contamination in this case was quite serious.

Accordingly, we hold that the preliminary investigation and cleanup

estimate provide an adequate basis for an upward adjustment under

§ 2Q1.2(b)(3). See Bogas, 920 F.2d at 369 (noting that the

government need not provide an exact accounting of cleanup costs in

order to demonstrate "substantial expenditure" under this section);

United States v. Paccione, 751 F.Supp. 368, 376 (S.D.N.Y.1990)

(estimate of future cleanup costs is sufficient to support §

2Q1.2(b)(3) increase), aff'd on other grounds, 949 F.2d 1183 (2d

Cir.1991), cert. denied, 505 U.S. 1220, 112 S.Ct. 3029, 120 L.Ed.2d

900 (1992).

Charles Eidson also contends that the district court erred in
imposing an offense-level increase under U.S.S.G. § 3B1.1(a)(1993)

for his role as an "organizer or leader of a criminal activity that

involved five or more participants or was otherwise extensive."11

The district court increased Eidson's offense level by four points

for his role in the CWA violation and for his role in the mail

fraud scheme because it found that Cherokee employed an average of

five or more persons. Eidson claims that the district court erred

because there was insufficient evidence to conclude that these

employees were participants in the illegal discharge and fraudulent

scheme.

In determining the number of participants in a criminal

activity, courts count all individuals, including the defendants,

who were criminally responsible for the commission of the offense

even though they might not have been convicted. United States v.

Holland, 22 F.3d 1040, 1045 (11th Cir.1994), cert. denied, --- U.S.

----, 115 S.Ct. 898, 130 L.Ed.2d 782 (1995); U.S.S.G. § 3B1.1

comment. (n. 1). With respect to the mail fraud counts, there is

ample evidence to support the district court's finding. Appellants

regularly instructed Cherokee employees to dump the wastewater on

the ground and to refer fraudulently to the ground as "Tank 8".

They also instructed employees to inform prospective customers that

Cherokee had all the necessary permits and licenses. Two Cherokee

employees testified that they knowingly participated in the

fraudulent scheme and also referred to other drivers and a yard

foreman who participated in the scheme to defraud Cherokee

11
Sandra Eidson did not receive an upward adjustment under
this section.
customers. Based on this record, we conclude that the district

court did not clearly err in increasing Eidson's offense level for

his mail fraud convictions.

The district court's upward adjustment for the CWA conviction

presents a more difficult question. As we noted in United States

v. Rodgers, a sentencing court cannot enhance an offense level

merely because a defendant "acted with others for the other charges

against him." 951 F.2d 1220, 1221 (11th Cir.)(citing
United States

v. Tetzlaff, 896 F.2d 1071, 1074 (7th Cir.1990)), modified in part,

972 F.2d 1253 (11th Cir.1992). In other words, a court should only

consider "conduct immediately concerning" the offense of conviction

in determining an adjustment under § 3B1.1(a). See Holland, 22

F.3d at 1046 n. 10.12 For purposes of the offense-level increase for

the CWA conviction, we will not consider the number of participants

involved in the mail fraud scheme because those discharges did not

"immediately concern" the CWA offense.

Both appellants and the driver of the Cherokee truck can be

classified as participants in the April 25 discharge. There is no

12
Rodgers apparently was based on the pre-November 1990
version of § 3B1.1 that did not include the introductory
commentary directing courts to consider relevant conduct pursuant
to § 1B1.3 in determining a defendant's role in the offense.
Nevertheless, its holding appears to continue to govern cases
dealing with the post-amendment version of § 3B1.1. See Holland,
22 F.3d at 1046 n. 10 (applying 1991 version and distinguishing
Rodgers ). In the event that the November 1990 amendment somehow
altered the law of this circuit in such a way that would increase
Eidson's punishment, it would not apply because Eidson committed
this offense before the commentary became effective. See United
States v. Wilson, 993 F.2d 214, 216 (11th Cir.1993) ("We apply
the version of the sentencing guidelines and commentary in effect
on the date of sentencing, unless a more lenient punishment would
result under the guidelines version in effect on the date the
offense was committed.") (citations omitted).
factual basis in the record, however, to identify other

participants in this particular offense. None of the former

Cherokee employees who testified at trial were employed at the time

of this illegal discharge and none of them testified about other

discharges into "waters of the United States." Although a

bookkeeper presumably prepared a manifest and invoice for this

delivery, there is no reason to believe that he or she was aware

that the pollutant was dumped into a "water of the United States"

rather than onto the Cherokee lot with most of the other

pollutants. Therefore, we conclude that there was insufficient

evidence in the record to conclude that the illegal discharge of a

pollutant into "waters of the United States" involved five or more

participants.

Section 3B1.1 allows for an offense-level increase, however,

on the alternative ground that the criminal activity was "otherwise

extensive." Although the presentence report, adopted by the

district court, did not specify that it found the criminal activity

"otherwise extensive," we examine the record to determine if such

a finding would have been justified.

Neither the Guidelines nor the cases interpreting § 3B1.1

provide a precise definition of "otherwise extensive." Such a

finding depends on a number of factors including "the length and

scope of the criminal activity as well as the number of persons

involved." Holland, 22 F.3d at 1046 (noting that criminal activity

that extended over three years and involved the assistance of

several individuals raised a question as to whether it was

"otherwise extensive"); see also United States v. Rodriguez, 981
F.2d 1199, 1200 (11th Cir.) (finding drug operation that extended

from Colombia to New York and involved 100 kilos of cocaine

"otherwise extensive"), cert. denied, 508 U.S. 955, 113 S.Ct. 2455,

124 L.Ed.2d 671 (1993).13

The district court made no such factual findings in this

case. The record indicates only that one other similar discharge

into a "water of the United States" occurred a week before the

April 25 discharge. We conclude that this evidence is insufficient

to establish that the criminal activity involved in the CWA

conviction was "otherwise extensive."

Finally, appellants challenge the district court's factual

finding that the loss caused by their fraudulent scheme exceeded

two hundred thousand dollars. Based on this finding, the district

court increased their offense levels by eight points pursuant to

U.S.S.G. § 2F1.1(b)(1)(I)(1993). Again, the district court merely

adopted the factual findings contained in the presentence report

and made no specific factual findings to support the upward

adjustment.14

The presentence report, without any underlying factual

support, concluded that Cherokee had fraudulently billed Mobil Oil,

Diamond Products Company, and the B & E Equipment Company

13
"In assessing whether an organization is "otherwise
extensive,' all persons involved during the entire course of the
offense are to be considered. Thus, a fraud that involved only
three participants but used the unknowing services of many
outsiders could be considered extensive." U.S.S.G. § 3B1.1
comment. (n. 3).
14
The transcript for Sandra Eidson's sentencing hearing is
not part of this record on appeal. Nevertheless, the order of
judgment indicates that the district court adopted the
presentence report's factual findings.
$215,427.22 for services that were not rendered. Apparently, the

presentence report incorrectly interpreted a government chart,

entitled "Waste Water Transactions of Cherokee Oil, Inc.1985-1991,"

which valued Cherokee's total wastewater revenues at $215,427.22.15

Although losses incurred by other Cherokee customers are includable

in a § 2F1.1 calculation, there must be some factual basis for the

conclusion that these losses were the result of fraud. See

U.S.S.G. § 2F1.1 comment. (n. 7) (1993) ("[L]oss is the value of

money, property, or services unlawfully taken.") (emphasis added).

Former Cherokee employees testified that Cherokee regularly

billed customers for wastewater disposal that it did not conduct

from May 1990 to November 1991. There was no factual basis in the

record, however, to conclude that the wastewater disposal practices

of Cherokee from 1986 to May 1990 were equally fraudulent. The

only witness to testify about Cherokee's practices before 1990,

Albert Martell, worked with the company for only four months in

1986 and specifically disavowed any knowledge as to how wastewater

pickups were disposed.16 Based on this record, we conclude that the

district court committed clear error in concluding that the

fraudulent scheme caused over two hundred thousand dollars in

15
This chart was offered as evidence at trial by the
government, but was rejected by the district court on relevancy
grounds. Its exclusion at trial does not, however, preclude its
use at sentencing. See U.S.S.G. § 6A1.3 (1991) (noting that at
sentencing district court may consider reliable information
without regard to its admissibility at trial).
16
Martell did indicate that in his four months as bookkeeper
he never came across any bills that Cherokee paid for proper
disposal of wastewater. However, this fact standing alone cannot
support the inclusion of all gross wastewater revenues from 1986-
1990.
losses.17

III. Conclusion

We AFFIRM appellants' convictions, VACATE their sentences, and

REMAND the case to the district court for resentencing.

17
The government argues that this deficiency in proof can be
remedied by contemplating the costs that the defrauded companies
may incur if they are required to contribute to cleanup costs
pursuant to Section 107 of the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. § 9607. The
presentence report, however, does not reference the potential
liability of former Cherokee customers. In the event such
liability could be properly considered under this section, we
conclude that at present it is too speculative to support an
enhancement.