[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
No. 04-14075 FEBRUARY 16, 2006
________________________ THOMAS K. KAHN
CLERK
D. C. Docket No. 97-00508-CR-1-1
UNITED STATES OF AMERICA,
Plaintiff-Appellant
Cross-Appellee,
versus
MICHAEL DEVEGTER,
RICHARD POIRIER, JR.,
Defendants-Appellees
Cross-Appellants.
________________________
Appeals from the United States District Court
for the Northern District of Georgia
_________________________
(February 16, 2006)
Before BIRCH, WILSON and COX, Circuit Judges.
WILSON, Circuit Judge:
Richard Poirier, Jr., a former partner of Lazard Freres & Co. (“Lazard”), and
Michael DeVegter, a former financial advisor to Fulton County, Georgia, were
involved in a bribery scheme (the “Fulton County deal”). DeVegter was paid
$41,936 to award a bond refinance contract to Lazard. Both deVegter and Poirier
were convicted of wire fraud and conspiracy to commit wire fraud. Both the
government and the defendants agree that there was error necessitating remand
under United States v. Booker, 543 U.S. 220, 125 S. Ct. 738, 160 L. Ed. 2d 621
(2005). Several of the government’s other challenges to the sentences also warrant
remand, however.
The sentencing guidelines require the district court, when calculating a
sentence under the commercial bribery guideline, U.S. Sentencing Guidelines
Manual § 2B4.1 (2000), to use the greater of the bribe amount or the net value of
the improper benefit conferred upon, in this case, Lazard. The district court used
in its calculations the amount of the bribe because it found that the government did
not prove the improper benefit’s net value with reliable and specific evidence. The
government contends that not using the improper benefit’s net value was error,
and, in the alternative, contests the calculated bribe amount. Also, the government
appeals the district court’s downward departure for both defendants.
2
I. B ACKGROUND
Defendants deVegter and Poirier were indicted for corrupting the process by
which Fulton County, Georgia, selected an underwriter for a bond refinancing
project. Fulton County hired DeVegter to serve as its independent financial
advisor in soliciting and evaluating proposals from competing underwriters.
Poirier was a partner with Lazard, the investment banking company that was
awarded the underwriting contract. In exchange for DeVegter’s assistance in
ensuring that Fulton County selected Lazard’s proposal, Poirier paid $83,872 to an
intermediary, Cole, who in turn paid DeVegter $41,936. The jury found both
defendants guilty of conspiracy in violation of 18 U.S.C. § 371 and of 18 U.S.C. §
1343 wire fraud, although it did not reach a verdict on the 18 U.S.C. §1346 honest
services charge.
We have heard this case twice before. On the first occasion, we reinstated
the district’s court dismissal of a 18 U.S.C. § 1346 charge. United States v.
DeVegter, 198 F.3d 1324 (11th Cir. 1999). On the second occasion, we affirmed
the defendants’ convictions and reversed in part the district court’s sentence stating
that the defendants must be sentenced under § 2B4.1 of the guidelines. United
States v. Poirier, 321 F.3d 1024 (11th Cir. 2003) (“Poirier II”). We also instructed
the district court to assess an obstruction of justice enhancement for both
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defendants and an aggravating role enhancement for Poirier. Id. at 1036.
On the second remand, the original sentencing judge recused himself. The
new sentencing judge held a hearing to determine the value of the bribe and
improper benefit conferred upon Lazard as required for sentencing under § 2B4.1.
The judge used the bribe amount rather than the benefit conferred upon Lazard
because the court found that the government failed to establish with reliable and
specific evidence the net value of the improper benefit conferred upon Lazard. The
district court found that the bribe paid to DeVegter was $41,936, half of the
amount that Poirier paid to Cole. The district court also granted a downward
departure for both defendants under § 5K2.0 of the guidelines on the basis of
aberrant behavior, physical condition, family circumstances, and a combination of
those factors.
II. S TANDARDS OF R EVIEW
We review the district court’s findings of fact in sentencing for clear error.
Clear error cannot be found unless:
we are left with a definite and firm conviction that a mistake has been
committed. Although the clear error standard is purposefully
deferential to the district court, we are not required to rubber stamp
the district court’s findings simply because they were entered.
Review for clear error does not mean no review.
United States v. Crawford, 407 F.3d 1174, 1177 (11th Cir. 2005) (internal citations
4
and quotations omitted).
“We review questions of law arising under the Sentencing Guidelines de
novo.” Id. at 1178 (internal citations and quotations omitted). Booker requires a
sentence to be reviewed for reasonableness, but the sentence must still be
calculated under the guidelines and the calculation is reviewed de novo. Id.
“Whether a factor is a permissible ground for a downward departure from
the Sentencing Guidelines is a question of law,” which we review de novo. Id.
We review a properly preserved claim of Booker error de novo and will
reverse unless the error was harmless. United States v. Paz, 405 F.3d 946, 948
(11th Cir. 2005) (per curiam).
III. D ISCUSSION
All of the parties acknowledge, and we agree, that we must remand this case
back to the district court to correct the defendants’ properly preserved claim of
Booker error because the district court treated the sentencing guidelines as
mandatory rather than advisory. United States v. Shelton, 400 F.3d 1325, 1330-31
(11th Cir. 2005). Although Booker rendered the guidelines advisory, it did not
remove the court’s obligation to calculate the applicable guideline range correctly
so that the court could consider it in sentencing. Crawford, 407 F.3d at 1178.
Thus Booker did not alter our review of the application of the guidelines or change
5
the fact that we remand any case in which the guidelines were improperly applied
to a sentence. Id.
A. The Appropriate Dollar Amount to be Used in the Sentencing
The dollar amount used in sentencing a defendant under § 2B4.1 should be
the greater of the value of the bribe or the net value of the improper benefit
conferred. U.S. Sentencing Guidelines Manual § 2B4.1(b)(1) (2000). “The value
of the benefit ‘received or to be received’ means the net value of such benefit. . . .
A $150,000 contract on which $20,000 profit was made was awarded in return for
a bribe; the value of the benefit received is $20,000.” Id. at § 2C1.1 cmt. n.2.1
Assuming the bribe achieves its intended result, the benefit would usually
exceed the bribe. The net value of the improper benefit need only be estimated,
and the bribe amount should be used only when the net value cannot be estimated.
Id. at § 2B4.1 cmt. n.6 (2000). The government bears the burden of establishing
the estimated net value with reliable and specific evidence. United States v.
Cabrera, 172 F.3d 1287, 1292 (11th Cir. 1999).
At sentencing, the government presented evidence that Lazard received a
profit of $645,101.15 from the Fulton County Deal.2 The district court, however,
1
The commentary to § 2B4.1 cross-references § 2C1.1.
2
The appropriate measure of the improper benefit should be the benefit to Lazard as
opposed to merely any benefit directly attributable to Poirier. See, e.g., United States v. Cohen,
171 F.3d 796, 803 (3d Cir. 1999) (improper benefit was net value of the contracts that
6
relied on the bribe amount to determine the appropriate sentencing enhancement
under the guidelines because the government did not consider year-end bonuses
paid to Lazard employees in calculating the net benefit. Lazard paid its employees
a year-end bonus based on their performance on multiple bond deals. The district
court concluded that the bonuses paid to Lazard employees for their work on the
Fulton County deal were direct costs that were to be deducted in calculating the net
value under § 2B4.1. The court held that the government did not establish with
reliable and specific evidence the net value of Lazard’s improper benefit because
the government presented no evidence concerning the amount of the bonuses
attributable to the Fulton County deal. As a result, the district court used the
bribe’s value in calculating the sentences.
The government counters that the bonuses are not deductible direct costs
because DeVegter’s own witness testified that the bonuses Lazard paid could not
be readily apportioned to any particular bond deal. We have not previously
decided in this Circuit what costs, if any, should be subtracted from the profit in
determining the net improper benefit.
defendant’s employer gained as a result of kickback scheme); United States v. Landers, 68 F.3d
882, 884 (5th Cir. 1995) (improper benefit was the net value defendant’s employer derived from
contracts that resulted from the bribes); United States v. Ziglin, 964 F.2d 756, 758 (8th Cir.
1992) (defendant subject to enhancement for the total improper benefit resulting from bribery
scheme, not just for his individual share); United States. V. Kant, 946 F.2d 267, 269 (4th Cir.
1991) (improper benefit was amount accruing to defendant as well as his two co-conspirators).
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We agree with the Fifth Circuit’s approach which subtracts direct costs, but
not indirect costs, from profits to determine the net improper benefit. United States
v. Landers, 68 F.3d 882 (5th Cir. 1995). In Landers, the Fifth Circuit defined
direct costs as “all variable costs that can be specifically identified as costs of
performing a contract.” Id. at 884 n.2. Unlike the accounting term “direct costs,”
for sentencing purposes, variable overhead costs not easily identifiable to a specific
contract are not direct costs. Id. The court can ignore these variable costs in
sentencing because the sentencing courts are not required to make precise
calculations. See Id.
Applying the Landers standard, the district court erroneously believed the
deficiency in the government’s case was that year-end bonuses were not subtracted
in calculating the net improper benefit. The court in part reasoned that
hypothetically two defendants with different employers would receive different
sentences if one employer paid bonuses at the end of the transaction and the other
employer paid bonuses at the end of the year. The possibility of a sentencing
disparity between two defendants, however, is no reason to ignore the distinction
between fixed and variable overhead costs in calculating direct costs. See United
States v. Quinn, 123 F.3d 1415, 1425 (11th Cir. 1997) (“[A] sentencing judge may
not depart in order to avoid an apparently unjustified disparity between
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codefendants.”); cf. United States v. Regueiro, 240 F.3d 1321, 1325-26 (11th Cir.
2001) (per curiam) (“Disparity between the sentences imposed on codefendants is
generally not an appropriate basis for relief on appeal). Moreover, because
absolute precision is not required in calculating direct costs for sentencing
purposes, the potential for different results based on different accounting practices
should not prevent the courts from estimating the net improper benefit, which is
often, as in this case, considerably higher than the bribe amount. See U.S.
Sentencing Guidelines Manual § 2F1.1 cmt. n.9 (2000); Landers, 68 F.3d at 884
n.2.
The district court’s order ignores the distinction between variable and fixed
overhead costs by equating year-end bonuses with commissions. Commissions are
specifically identified and readily apportioned to a given transaction, but year-end
bonuses usually depend on employee performance on multiple deals throughout
the year and cannot be readily apportioned to a particular bond deal. The inherent
difficulty of apportioning a year-end bonus to a specific transaction takes it outside
the realm of direct costs that should be subtracted from profits in determining the
net improper benefit. The government’s failure to include these costs therefore did
not preclude the district court from relying on the net improper benefit as opposed
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to the bribe amount for sentencing purposes.3 Moreover, the defendants’ have the
burden of proving what direct costs should be subtracted in determining the net
improper benefit, and they have not satisfied this burden in regards to the bonuses.
See, United States v. Glick, 142 F.3d 520, 525 (2d Cir. 1998); Landers, 68 F.3d at
885.
B. The Downward Departure
The district court also erred by entering a downward departure for both
Poirier and DeVegter’s sentences. The grounds for Poirier’s downward departure
were a combination of aberrant behavior, physical condition, and family
circumstances. The grounds for DeVegter’s downward departure were aberrant
behavior, physical condition, no loss to the victim, and full satisfaction of the
3
Even if the court were forced to rely on the bribe amount as opposed to the net
improper benefit, it did not calculate the amount correctly. The district court found that the
amount of the bribe to be used in sentence calculation was $41,936 (the amount that Cole paid to
DeVegter). This was half of the $83,872 that Lazard paid Cole.
In this Court’s second decision in this case, we stated, “The evidence at trial established
that Poirier supervised Jim Eaton at the Lazard firm, and that he authorized Eaton to make the
corrupt payoff to a person who passed half the money on to DeVegter.” Poirier II, 321 F.3d at
1036. This finding of fact equated the full $83,872 amount as the bribe amount, and the district
court was precluded from deciding otherwise under the law-of-the-case doctrine. Wheeler v.
City of Pleasant Grove, 746 F.2d 1437, 1440 (11th Cir. 1984).
Furthermore, the district court concluded that the unfairness of the Government’s
allowing Cole to keep half of the payment while arguing for the court’s use of the full amount in
sentencing of Poirier and deVegther necessitates using the $41,936 figure. This is an
impermissible conclusion because sentencing disparities between defendants is no justification
for departing from the established law of the case. See United States v. Quinn, 123 F.3d 1415,
1425 (11th Cir. 1997); cf., United States v. Regueiro, 240 F.3d 1321, 1325-26 (11th Cir. 2001)
(per curiam).
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previous sentence. Taking each separately, none other than DeVegter’s full
satisfaction of the previous sentence justify the departure, and thus the district
court erred as a matter of law in departing.4
(1) Aberrant Behavior
“[T]o qualify for an ‘aberrant behavior’ departure, (1) the case must be
‘extraordinary,’ [and] (2) the defendant’s conduct must constitute ‘aberrant
behavior.’” United States v. Orrega, 363 F.3d 1093, 1096 (11th Cir. 2004). “A
defendant’s conduct is aberrant behavior if that conduct constitutes a single
criminal occurrence or single criminal transaction that (A) was committed without
significant planning; (B) was of limited duration; and (C) represents a marked
deviation by the defendant from an otherwise law-abiding life.” Id. (internal
citations and quotations omitted).
Neither defendant’s criminal behavior was aberrant. DeVegter engaged in
repeated acts of wrongdoing spanning months: he allowed Lazard to help design
questions for the Request For Proposal (“RFP”) that would be favorable to its
candidacy; he gave Lazard a copy of the final RFP before it was released to other
4
Although the district court had the authority to grant a downward departure based on
DeVegter’s satisfaction of his previous sentence by performing community service, we would be
surprised on resentencing if such a downward departure was used to reduce any actual prison
time to which the court sentences DeVegter. See, e.g., United States v. Carpenter, 320 F.3d 334,
346 (2d Cir. 2003) (holding that it would be surprising to reduce a prison term by more than half
of the time spent in home detention).
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competitors; he disclosed a competitor’s submission and solicited comments from
Lazard attacking the proposal; he altered the rankings to elevate Lazard to first
place; and he lied to the SEC to conceal the conduct.
Poirier also engaged in repeated acts of wrongdoing: he authorized Cole to
approach DeVegter; directed Eaton to keep Cole’s role secret from the other
Lazard bankers; discussed with DeVegter the spread range to include in Lazard’s
response; provided DeVegter the one-page critique advocating the advantages of
Lazard’s proposal over Bear Stearns’; sent the payoff to Cole under the cover of a
false invoice; testified falsely to the SEC; and participated in other improprieties
with Cole in connection with political fund-raising activities for the purpose of
obtaining bond underwriting business. In short, this crime involved significant
planning from both defendants. See, e.g., Orrega, 363 F.3d at 1098 (“Orrega (1)
initiated two conversations with [a minor]; (2) [requested sexual acts from the
minor]; (3) sent a naked picture of himself . . .; (4) setup a meeting place; (5)
discussed how [they would recognize each other]; and (6) drove to the meeting
place. Such facts certainly do not indicate that the crime was ‘committed without
significant planning.’”). In light of the defendants’ significant planning, the
district court erroneously found that the crimes at issue constituted aberrant
behavior.
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(2) Physical Condition
The district court also departed downward because of the defendants’
physical conditions. “[A]n extraordinary physical impairment may be a reason to
impose a sentence below the applicable guideline range.” U.S. Sentencing
Guidelines Manual § 5H1.4 (2000). Physical impairment, however, is a
discouraged basis for departure. United States v. Simmons, 368 F.3d 1335, 1339
(11th Cir. 2004). “The Commission does not view discouraged factors as
necessarily inappropriate bases for departure but says they should be relied upon
only in exceptional cases.” Koon v. United States, 518 U.S. 81, 95, 116 S. Ct.
2035, 2045, 135 L. Ed. 2d 392 (1996) (internal quotations omitted). Neither
defendants’ conditions present an exceptional case.
Poirier suffers from Restless Leg Syndrome (“RLS”). RLS requires Poirier
to have space to exercise, especially at night when the condition is most acute. A
Board of Prison’s (“BOP”) physician, who reviewed Poirier’s medical records,
provided a declaration indicating that the BOP could provide Poirier with the
medical regimen (drugs, diet, and exercise) that Poirier’s physicians believed to be
appropriate.
DeVegter had a severe shoulder injury, and submitted an affidavit from his
surgeon stating that he needed to undergo additional surgery followed by nine
13
more months of physical therapy. The government proposed that the reporting
date for DeVegter’s sentence be delayed by nine months to accommodate the
recovery in lieu of a downward departure. The district court decided to delay the
reporting date by nine months and to depart downward. The delay in beginning
the sentence was reasonable. This delay, however, made a further downward
departure unnecessary because by the time the sentence was to begin, surgery
would have corrected the physical condition. Neither of the defendants’
conditions are so “extraordinary” or “exceptional” as to justify a downward
departure.
(3) Family Circumstances
As with Poirier’s physical conditions, his family circumstances are not so
extreme as to justify a downward departure. “Family . . . responsibilities . . . are
not ordinarily relevant in determining whether a sentence should be outside the
applicable guideline range.” U.S. Sentencing Guidelines Manual § 5H1.6 (2000).
The district court partly based the downward departure for Poirier on his
dyslexic son’s need for tutoring as well as the fact that his mother-in-law is in
failing health. The court recognizes that these circumstances are indeed
unfortunate. Nevertheless, the collateral effects that Poirier’s sentence has on his
family do not distinguish his case from the many cases in which we have reversed
14
downward departures. See United States v. Mogel, 956 F.2d 1555, 1565 (11th Cir.
1992) (finding a woman with “two minor children to support, and a mother that
lives with [her]” is not extraordinary); United States v. Cacho, 951 F.2d 308, 311
(11th Cir. 1992) (having minor children to take care of is not extraordinary);
United States v. Allen, 87 F.3d 1224, 1225 (11th Cir. 1996) (finding that a
defendant with the role of primary caretaker for his 70 year-old father with
Alzheimer’s and Parkinson’s diseases is not extraordinary). There is nothing
inherently extraordinary about caring for a child or a sick parent. Innocent young
family members, including children, commonly suffer as a result of a parent's
incarceration. Mogel, 956 F.2d at 1565. Although we can understand Poirier’s
desire to minimize his sentence’s adverse effects on his family, the court should
not have considered these circumstances in departing downward.
(4) No loss to the victim
DeVegter argues that the fact that Fulton County did not experience a loss as
a result of the bribe further justified the downward departure. The guidelines do
not specifically mention this factor as one that justifies departure.
If a factor is unmentioned in the Guidelines, the court must, after
considering the structure and theory of both relevant individual
guidelines and the Guidelines taken as a whole, decide whether it is
sufficient to take the case out of the Guideline's heartland. The court
must bear in mind the Commission's expectation that departures based
on grounds not mentioned in the Guidelines will be highly infrequent.
15
Koon, 518 U.S. at 96, 116 S. Ct. at 2045 (internal citations and quotations omitted).
A bribery case such as this one is not outside the guidelines’ heartland.
Even assuming that the county would have accepted Lazard’s proposal in the
bribe’s absence (and this is a big assumption), its lack of a financial loss would not
warrant a departure. If such downward departures were common, there would be
less of an incentive against county financial advisors misrepresenting to investment
banks the likelihood of the county accepting their proposals in the hopes of
receiving a bribe that would otherwise be unnecessary. To allow such a calculating
financial advisor to receive a lesser sentence than an otherwise law abiding advisor
who, in a moment of weakness, accepts a bribe from an investment bank would be
patently unjust. Nothing indicates that courts should employ a “highly infrequent”
remedy to provide more lenient sentences to a class of criminals (i.e., individuals
who give bribes but who do not actually cause a financial loss) that are not so rare
as to warrant treatment outside the guidelines’ heartland.
(5) Combination of Factors
The district judge also referenced the combination of conditions as a basis
for the downward departure. The sentencing guidelines envision situations in
which a combination of departure factors could result in a departure, even if none
of the factors taken individually would warrant a departure. U.S. v. Smith, 289
16
F.3d 696, 714-15 (11th Cir. 2002); U.S. Sentencing Guidelines Manual § 5K2.0
(2000). However, when “none of the stated bases for departure . . . are permissible
grounds for a . . . departure at all [an a particular case]. . . , it would be incongruous
to say that the combination of these impermissible departure grounds nevertheless
warrants a departure.” Id.
IV. C ONCLUSION
We hold that this case must be remanded for re-sentencing under Booker.
We further hold that the district court should rely on the net improper benefit to
Lazard in applying the sentencing guidelines because bonuses were not direct costs
that needed to be subtracted in estimating this amount. Finally, the district court
should not grant a downward departure under the justification it has previously
given for the downward departure, except for DeVegter’s satisfaction of his
previous sentence.
VACATED AND REMANDED.
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