United States v. James Charles Morris

                                                                [PUBLISH]

              IN THE UNITED STATES COURT OF APPEALS

                      FOR THE ELEVENTH CIRCUIT                   FILED
                        _______________________         U.S. COURT OF APPEALS
                                                          ELEVENTH CIRCUIT
                                                             MARCH 28, 2002
                              No. 01-10955                 THOMAS K. KAHN
                        _______________________                 CLERK

                    D. C. Docket No. 99-00055-CR-1-004

UNITED STATES OF AMERICA,

                                                      Plaintiff-Appellee,

     versus

JAMES CHARLES MORRIS,

                                                      Defendant-Appellant.


                       _________________________

                 Appeal from the United States District Court
                     for the Northern District of Florida
                       _________________________

                              (March 28, 2002)



Before BARKETT, HULL and KRAVITCH, Circuit Judges.

KRAVITCH, Circuit Judge:

     Defendant-appellant James Charles Morris appeals from the sentence
imposed by the district court after he pleaded guilty to conspiracy to defraud and

conspiracy to launder money. In addition to concurrent 97 month terms of

imprisonment, Morris faces a three year term of supervised release and was

ordered to pay $419,125 in restitution. On appeal, Morris alleges that the district

court erred in ordering restitution when it failed to advise Morris of the possibility

of an order of restitution before accepting his guilty plea. Morris also contends

that the district court erred in imposing a sentence enhancement for abuse of a

position of trust.

                                 I. BACKGROUND

       Morris and four others were indicted and charged with various counts

stemming from investment fraud. In the scheme, Morris’s co-conspirators

obtained investors’ funds by falsely representing the investments as legitimate

high-yield opportunities. The co-conspirators then would use bank wire transfers

to send funds to other persons and entities, including Morris, thus concealing the

money trail and promoting the investment fraud.

       Pursuant to a written plea agreement, Morris pleaded guilty to conspiracy to

defraud and conspiracy to launder money, in violation of 18 U.S.C. §§ 371 and

1956(h). The agreement and the plea colloquy informed Morris that he could face

the following fines: (1) for conspiracy to defraud, a maximum fine of $250,000 and


                                           2
(2) for conspiracy to launder money, a maximum fine of the greater of $500,000 or

twice the value of the transaction. Neither the plea colloquy nor the plea

agreement alerted Morris to the fact that he could be sentenced to pay restitution.

      The presentence report recommended that Morris receive a two-level

enhancement for abuse of a position of trust under U.S.S.G. § 3B1.3. Morris

objected to the enhancement, arguing that he did not hold a special position of trust

as envisioned by the Guidelines. The government responded that the enhancement

was appropriate because Morris had used his attorney trust account to funnel the

money in promotion of the fraudulent scheme and the other conspirators had

informed the victims that Morris was a trader and an attorney. The court overruled

Morris’s objection, but did grant a three-level reduction for acceptance of

responsibility, which resulted in a base offense level of 28. This adjusted offense

level and a criminal history category I led to a Guidelines range of 78 to 97

months. The court sentenced Morris to 97 months imprisonment to be followed by

a three-year term of supervised release, and ordered Morris to pay $419,125 in

restitution to sixteen victims, jointly and severally with his four co-defendants.

Morris did not object at sentencing to the court order to pay restitution. This

appeal follows.

                                 II. DISCUSSION


                                          3
A. Rule 11 and Restitution

       Morris asserts that the district court violated Federal Rule of Criminal

Procedure 11 by ordering restitution where it failed to advise him, before he

pleaded guilty, of the possibility that such an order might be issued. This court

reviews the issue of a Rule 11 violation for plain error when it was not raised

before the district court. See United States v. James, 210 F.3d 1342, 1343 (11th

Cir. 2000). Morris must show that there is (1) “error,” (2) that is “plain,” and (3)

that “affect[s] substantial rights.” See United States v. Olano, 507 U.S. 725, 732-

34 (1993). “If all three conditions are met, an appellate court may then exercise its

discretion to notice a forfeited error, but only if (4) the error ‘seriously affect[s] the

fairness, integrity, or public reputation of judicial proceedings.’” Johnson v.

United States, 520 U.S. 461, 467 (quoting Olano, 507 U.S. at 732) (other internal

quotation marks omitted).

       The government concedes that Morris was not made aware of the possibility

of an order of restitution at either the plea hearing or in the plea agreement.1 Rule


       1
         Although Morris was not made aware of the possibility of a restitution order in the plea
agreement or at the plea hearing, the government contends that certain actions and inactions by
Morris signify that he understood the consequences of his plea. The government points to a
letter that Morris wrote to the probation officer, where Morris expressed “I am very sorry for
what I have done and can only hope to some how make restitution,” and notes that Morris did
not object to the presentence report statement that he owed restitution to twenty-four victims.
These facts are irrelevant and provide no support for the government’s position, for these events
occurred after Morris pleaded guilty. Failure to object to the presentence report means the

                                                4
11(c) provides:

       Advice to the defendant. Before accepting a plea of guilty or nolo
       contendere, the court must address the defendant personally in open
       court and inform the defendant of, and determine that the defendant
       understands, the following:

       (1) the nature of the charge to which the plea is offered, the mandatory
       minimum penalty provided by law, if any, and the maximum possible
       penalty provided by law, including the effect of any special parole or
       supervised release term, the fact that the court is required to consider
       any applicable sentencing guidelines but may depart from those
       guidelines under some circumstances, and, when applicable, that the
       court may also order the defendant to make restitution to any victim of
       the offense.

Fed. R. Crim. P. 11(c). Because the court erred by failing to inform Morris of the

possibility of restitution, the next issue is whether or not this error affected his

substantial rights. See Fed. R. Crim. P. 11(h) (“Any variance from the procedures

required by this rule which does not affect substantial rights shall be

disregarded.”). “We have identified three core objectives of Rule 11: (1) ensuring

that the guilty plea is free of coercion; (2) ensuring that the defendant understands

the nature of the charges against him; and (3) ensuring that the defendant is aware

of the direct consequences of the guilty plea.” United States v. Quinones, 97 F.3d

473, 475 (11th Cir. 1996). “Failure to satisfy any of the core objectives violates




sentence is reviewed under the plain error standard, but it does not affect the analysis of what
Rule 11 requires.

                                                 5
the defendant’s substantial rights.” Id.

      Morris argues that by omitting the possibility of an order of restitution, the

court failed to satisfy the concerns of Rule 11 and violated his substantial rights.

Both the plea agreement and the plea colloquy, however, informed Morris that he

faced a maximum fine of $250,000 on the conspiracy to defraud count and a fine

on the conspiracy to launder money count of the greater of $500,000 or twice the

value of the transaction. Because Morris faces a restitution order that is below the

amount he was informed he could face in fines, the government contends that the

his substantial rights were not impaired.

      This is a question of first impression for this court. In United States v.

McCarty, 99 F.3d 383 (11th Cir. 1996), we concluded that a defendant’s

substantial rights were not affected when a district court failed to mention

specifically the possibility of restitution but the defendant had been fully advised

of his obligation to make restitution in the plea agreement. See id. at 386-87.

Morris, however, was not made aware of the possibility of restitution in either the

plea agreement or the plea hearing.

      Although Federal Rule of Criminal Procedure 11(c) requires the district

court to explain a defendant’s liability for both fines and restitution, we hold that

failure to do so does not impact a defendant’s substantial rights where he was


                                            6
warned of a potential fine larger than the actual amount of restitution ordered.

Here, the restitution order was considerably less than the fine Morris was warned

of at the time of his guilty plea. In a case that involved an earlier version of Rule

11, the Supreme Court stated that “matters of reality, and not mere ritual, should be

controlling.” McCarthy v. United States, 394 U.S. 459, 467-68 n.20 (1969)

(citation omitted). We agree with the holding of seven of the eight circuits to have

ruled on this question that a defendant “is not prejudiced so long as his liability

does not exceed the maximum amount that the court informed him could be

imposed as a fine. It is the amount of liability, rather than the label ‘restitution,’

that affects [a defendant’s] substantial rights.” United States v. Glinsey, 209 F.3d

386, 395 (5th Cir. 2000).2 Accordingly, we conclude that the district court’s

       2
         See also United States v. Raineri, 42 F.3d 36, 42 (1st Cir. 1994) (holding that error is
harmless where defendant is required to pay restitution in an amount less than the potential fine
of which he was warned); United States v. Gabriele, 24 F.3d 68, 71 (10th Cir. 1994) (holding
that defendant’s substantial rights not impaired when ordered to pay $100,000 in restitution
when he knew he could be fined up to $750,000); United States v. Fox, 941 F.2d 480, 484-85
(7th Cir. 1991) (holding that decision to plead guilty not prejudiced by court’s failure to advise
of possibility of restitution when defendant had notice of a possibly greater fine); United States
v. Miller, 900 F.2d 919, 921 (6th Cir. 1990) (holding that error was harmless where defendant
was required to pay restitution in an amount less than the maximum possible fine amount of
which he had knowledge); United States v. Pomazi, 851 F.2d 244, 248 (9th Cir. 1988), overruled
in part on other grounds, Hughey v. United States, 495 U.S. 411 (1990) (holding that there is no
surprise or prejudice in failure to mention restitution in Rule 11 hearing when defendant was told
of potential liability of $500,000 and $64,229 restitution order imposed); United States v.
Fentress, 792 F.2d 461, 466 (4th Cir. 1986) (holding that there is no surprise or prejudice by the
imposition of $38,000 restitution order when defendant might have been ordered to pay a
maximum fine of $40,000). But see United States v. Showerman, 68 F.3d 1524, 1528 (2d Cir.
1995) (holding that the failure to mention the possibility of restitution at the Rule 11 hearing is
not harmless error even when the restitution imposed is less than the maximum fine the

                                                7
failure to mention the possibility of restitution was not plain error.

B. Enhancement for Abuse of a Position of Trust

       Morris also contends that the district court erred in enhancing his sentence

pursuant to U.S.S.G. § 3B1.3 for abuse of a position of trust. The Sentencing

Guidelines require a two-level increase of a defendant’s base offense level “[i]f the

defendant abused a position of public or private trust, or used a special skill, in a

manner that significantly facilitated the commission or concealment of the

offense.” U.S. Sentencing Guidelines Manual § 3B1.3 (2001). “For the

adjustment to apply, the government must establish both elements: (1) that the

defendant held a place of public or private trust; and (2) that the defendant abused

that position in a way that significantly facilitated the commission or concealment

of the offense.” United States v. Ward, 222 F.3d 909, 911 (11th Cir. 2000). “We

review the district court’s fact findings for clear error, but its determination

whether the facts justify an abuse-of-trust enhancement we review de novo.” Id.

(quoting United States v. Mills, 138 F.3d 928, 941 (11th Cir. 1998)).

       Morris claims that, because he did not occupy a position of public or private

trust, the enhancement was erroneous. Morris was represented to the victims by

his co-conspirators as a professional trader and a licensed attorney, both of which


defendant understood he might receive).

                                           8
the government claims are positions of public trust. The government further

contends that Morris “abused those positions when he convinced the victims of the

fraud to invest or continue in their investments and by using his attorney trust

account to receive, launder and transfer monies,” thereby significantly facilitating

the commission of the crime.

      This argument is insufficient to merit the enhancement. The government

states that the enhancement was appropriate because Morris was “represented” and

“described” as an attorney and trader, and points to our statement that the

“determination of whether a defendant occupied a position of trust that would

warrant this enhancement is assessed from the perspective of the victim of the

crime.” United States v. Garrison, 133 F.3d 831, 837 (11th Cir. 1998). Because

the co-conspirators represented Morris as an attorney and trader, the government

asserts that he occupied a position of trust from the victims’ perspective.

      The government’s argument misreads the Sentencing Guidelines. Under the

government’s view of § 3B1.3, Morris would face a two-level enhancement to his

sentence because of the representations of others. However, “the structure of the

sentencing guidelines compels the conclusion that the abuse of trust enhancement

must be based on an individualized determination of each defendant’s culpability.”

United States v. Moore, 29 F.3d 175, 179 (4th Cir. 1994). The provisions of Part B


                                          9
of Chapter Three of the Sentencing Guidelines, “Role in the Offense,” provide for

“adjustments to the offense level based upon the role the defendant played in

committing the offense.” U.S.S.G. ch. 3, pt.B, introductory cmt. (2001). “By their

very nature, the role in the offense adjustments cannot be based upon the actions of

co-conspirators.” Moore, 29 F.3d at 179. Here, the government contends that the

co-conspirators represented Morris to be a trader and attorney. The language and

structure of the Guidelines prevents application of the § 3B1.3 enhancement to

Morris based upon the representation of others.3

       Both the Government’s statement of facts presented at the plea colloquy4 and

the probation officer’s presentence report reveal evidence that the government

could have presented to bolster its argument for the § 3B1.3 enhancement.5 This is

especially true given that this case involved a guilty plea and therefore the record is

quite limited. According to the statement of facts, Morris portrayed himself as a


       3
         The dissent lists statements from the presentence report that, although adding
information related to the underlying fraud, do not relate to the question of whether Morris
occupied a position of trust relative to the victims. The dissent notes that Tolley, a co-
conspirator, “even drafted an agreement to convince the victims to forego legal action against
him and Morris in return for fixed dates of repayment.” Dissent at 28. Again, this is relevant to
the underlying fraud, but is not relevant to the determination of whether Morris occupied a
position of trust.
       4
         At the plea colloquy Morris accepted the statement of facts, with minor modifications
offered by his attorney that are not relevant here.
       5
         The government did discuss some of this evidence at oral argument, but did not utilize
this evidence in the argument presented in its brief.

                                               10
trader who had conducted successful multi-million dollar international bank trades

in the past.6 The statement further relates that, after the initial investments,

investors “contacted and maintained contact” with Morris directly. Furthermore,

Morris and two other co-conspirators allegedly called a victim numerous times and

advised, “The money is on the way.” The probation office conducted follow-up

telephone calls to victims and reported the results in an addendum to the

presentence report.7 One victim stated that after her initial investment, she “later

spoke directly with the defendant who confirmed he was a practicing attorney.” A

second victim interviewed related that he was “introduced to the defendant through

co-defendant Brown, who identified the defendant as being an attorney and the

investor or ‘trader.’” Morris identified himself to a third victim as the trader and

“indicated he was going to get him a big return on his investment.”

       “Determining what constitutes a position of trust for the purposes of § 3B1.3

is not a simple task.” United States v. Iannone, 184 F.3d 214, 222 (3d Cir. 1999).

In addition to the Guidelines’ lack of a clear definition of what constitutes a

       6
        The context of this sentence indicates that this statement relates to his dealings with co-
conspirators, not that Morris portrayed himself as a trader to the victims. This assessment is
bolstered by the probation officer’s presentence report, which states: “Morris was falsely
portrayed to investors, by co-conspirators Calvin F. Brown and Robert Charles Stewart, as a
sophisticated ‘trader’ of currency and bank instruments in the international financial
community.”
       7
          Although the district court did not make findings of fact, it did adopt the presentence
report at Morris’s sentencing hearing.

                                                 11
position of trust, see id.; United States v. Mullens, 65 F.3d 1560, 1566 (11th Cir.

1995), the determination of whether to apply the enhancement is highly dependent

on the specific facts in each situation. See United States v. Hart, 273 F.3d 363, 375

(3d Cir. 2001). Although the facts here make the question of the applicability of §

3B1.3 difficult, we conclude that, based upon Eleventh Circuit precedent, the

evidence is not enough to justify the enhancement in this case. There is no doubt

that the statements attributed to Morris were integral to the fraud itself, but that is

insufficient to justify the enhancement. See Mullens, 65 F.3d at 1567 (“Often there

is a component of misplaced trust inherent in the concept of fraud.”); United States

v. Koehn, 74 F.3d 199, 201 (10th Cir. 1996) (“In every successful fraud the

defendant will have created confidence and trust in the victim, but the sentencing

enhancement is not intended to apply in every case of fraud.”). Morris may have

abused the trust of the victims, but that is not the inquiry here. The initial question

is whether or not Morris occupied a position of trust. See Mullens, 65 F.3d at 1567

(“One must hold a position of trust before it can be abused, however.”).

      Morris’s status as an attorney (in actuality, a non-practicing attorney) does

not necessarily mean he abused a position of trust. Although attorneys are

expected to abide by ethical standards, it simply is not the case that an attorney

holds a position of trust with respect to all people with whom he comes into


                                           12
contact solely by virtue of his status as an attorney. Morris did not have an

attorney-client relationship with any of the victims. Although Morris’s status as an

attorney may have been used to develop the trust of the victims, there are no facts

to support the conclusion that as an attorney Morris occupied a position of trust in

relation to these victims.8

       The fact that Morris used an attorney trust account also does not merit

application of the § 3B1.3 enhancement. There was no commingling of these

funds with non-related funds and the account was not otherwise used. None of the

victims had any connection to the attorney trust account, and there is no allegation

that any knew of its existence.9 Instead, the victims wired or sent their funds not to

Morris, but to his co-conspirators. The co-conspirators in turn would transfer these

funds to Morris’s attorney trust account. Morris then would immediately transfer


       8
          This does not provide a great deal of shelter from the § 3B1.3 enhancement for
attorneys who commit fraud. This analysis would be different if the situation involved an
attorney who abuses the trust of a client. See U.S.S.G. § 3B1.3, cmt. 1 (“This adjustment, for
example, applies in the case of an embezzlement of a client’s funds by an attorney serving as a
guardian.”); see also United States v. Walker, 191 F.3d 326, 338 (2d Cir. 1999) (“As a general
matter, an attorney occupies a position of trust with regard to his clients.”). Furthermore, fraud
committed by attorneys outside the context of a client relationship can merit an enhancement
under the “special skill” provision of § 3B1.3, which specifically mentions lawyers in the list of
examples. U.S.S.G. § 3B1.3, cmt. 3. As the government did not raise the special skill provision
in the district court or in its brief, it is not discussed here.
       9
         If there was any evidence that the use of this attorney trust account acted to “engender
the victims’ trust,” dissent at 27, or “foster that trust,” dissent at 28, the analysis would be
different. However, there is no evidence that the victims were aware of the attorney trust
account.

                                                13
various amounts of these commingled funds to other bank accounts in his name or

the names of other persons or businesses. Therefore, the use of this account does

not place Morris in a position of trust with respect to the victims of the fraud. We

need not discuss whether the use of the attorney trust account “significantly

enhanced the commission or concealment of the offense” because the first element

required, that the defendant held a position of trust, has not been established.10

        Some evidence supports a claim that Morris represented himself as a trader

to the victims. A § 3B1.3 enhancement has been applied in situations involving

brokers or financial advisors. See, e.g., Hart, 273 F.3d at 377-78; United States v.

Bollin, 264 F.3d 391, 415-16 (4th Cir. 2001); United States v. Davuluri, 239 F.3d

902, 909 (7th Cir. 2001); United States v. Hirsch, 239 F.3d 221, 227-28 (2d Cir.

2001). The Guidelines provide, “‘Public or private trust’ refers to a position of

public or private trust characterized by professional or managerial discretion.”

U.S.S.G. § 3B1.3, cmt. 1.11 The role of a financial advisor or broker is impossible

        10
           Although agreeing that the government must establish (1) that Morris held a position of
public or private trust, and (2) that Morris abused that position in a manner significantly
facilitating the commission or concealment of the offense, see dissent at 19 n.1, the dissent uses
evidence that speaks to the second prong to address the first prong. Whether or not the use of
Morris’s attorney trust account facilitated or concealed the scheme is not relevant to the first
prong, unless there is evidence that the victims knew of the use of the attorney trust account and
derived some measure of trust from the use of such an account. The record provides no such
evidence.
        11
          The Supreme Court has held that “commentary in the Guidelines Manual that interprets
or explains a guideline is authoritative unless it violates the Constitution or a federal statute, or is

                                                  14
to classify in general. The Third Circuit has stated:

       [I]t seems apparent that the responsibilities and discretion exercised
       by stockbrokers spans the spectrum. At the one end are brokers who
       exercise authority and discretion over an account and have the power
       to make sales or take actions on behalf of a customer without specific
       direction. . . . At the other end are brokers who mechanically execute
       trades requested by customers.

Hart, 273 F.3d at 377. Each situation involving a financial advisor must therefore

be analyzed individually.

       Even assuming arguendo that Morris portrayed himself as a trader and had

complete discretion over the victims’ funds, Eleventh Circuit case law requires

more before the enhancement will apply. The guiding precedent is Mullens, which

also involved the applicability of the § 3B1.3 enhancement in a situation involving

investment fraud. 65 F.3d 1560 (11th Cir. 1995). In Mullens, the defendant was

“the head and sole stockholder in Omni,” “his representations of being a financial

advisor . . . encouraged investors to put their life savings into Omni,” and he had

“total control” over all funds. Id. at 1566. He “sold investment opportunities in

the form of shares, contract rights, and participation rights in limited partnerships.

Mullens told investors the limited partnerships were formed to purchase and sell

small, privately held companies for a profit. In reality, Omni was a ponzi scheme.”


inconsistent with, or a plainly erroneous reading of, the guideline.” Stinson v. United States, 508
U.S. 36, 37-38 (1993).

                                                15
Id. at 1562.

       Although “Mullens may have touted himself as a ‘gifted advisor who the

Omni investors could trust’ and an ‘investment and financial advisor,’” we held

that “[w]e see nothing in these circumstances to support the conclusion that a

position of private trust between Mullens and his victims was created.” Id. at

1567. Mullens thus requires more than control or discretion to justify the § 3B1.3

enhancement. As explained there, “Fraudulently inducing trust in an investor is

not the same as abusing a bona fide relationship of trust with that investor.” Id.

       The facts here are very similar to those in Mullens. The scheme involving

Morris consisted of representations by the conspirators that the investors would

receive very large returns on currency, bank-note, and bank debenture trading

programs. Mullens enticed victims to invest in limited partnerships, which he

claimed were formed to purchase and sell small, privately held companies for

profit. Both Mullens and Morris had complete control of the victims’ money, and

each promised a large return based on their abilities.12

       What constitutes a bona fide relationship of trust is not amenable to precise

       12
          As the dissent notes, we stated in Mullens: “To our knowledge, however, there was no
evidence Mullens held himself out as an investment broker, or advertised Omni as an investment
brokerage firm.” 65 F.3d 1560, 1566 (11th Cir. 1995). However, the next sentence in Mullens
states, “If he had run a legitimate but unprofitable enterprise, Mullens would have been
considered nothing more than a business owner who offered investment opportunities to the
public that soured.” Id. at 1566-67. That is also true in the case at hand.

                                              16
definition. We explained in Mullens that the defendant did not occupy a position

of trust with respect to investors he cultivated at a country club where there was no

evidence “suggesting that Mullens had a special, close, or personal attachment, or

fiduciary relationship with any member of the country club.” Id. at 1566.

Although we do not require the relationship to satisfy the legal definition of a

fiduciary, United States v. Kummer, 89 F.3d 1536, 1547 (11th Cir. 1996), we have

stated that the “guideline enhancement requires more than a mere showing that the

victim had confidence in the defendant. Something more akin to a fiduciary

function is required.” United States v. Garrison, 133 F.3d 831, 838 (11th Cir.

1998) (quoting United States v. Brunson, 54 F.3d 673, 678 (10th Cir. 1995)).

Garrison also quotes a similar statement from the Sixth Circuit: “[A]s used in the

guideline, ‘position of public or private trust’ is a term of art, appropriating some

of the aspects of the legal concept of a trustee or fiduciary.” 133 F.3d at 839

(quoting United States v. Ragland, 72 F.3d 500, 503 (6th Cir. 1996)). We need

not elaborate on what constitutes a bona fide relationship of trust because the facts

in this case do not prove that Morris had more of a relationship of trust with his

victims than did the defendant in Mullens. We acknowledge that other circuits that

have considered the abuse of trust enhancement under similar facts have not




                                          17
followed Mullens.13 However, this panel is bound by Mullens as Eleventh Circuit

precedent unless reversed by the Supreme Court or this court en banc. Therefore,

the enhancement for abuse of trust was improper.

                                       III. CONCLUSION

       The restitution order is AFFIRMED. We REVERSE and REMAND for

resentencing without enhancement for abuse of a position of trust.




       13
          The Seventh Circuit has explicitly criticized Mullens. In United States v. Davuluri, that
court stated: “To the extent that Mullens . . . holds that a financial advisor with total control over
investors’ funds does not occupy a position of trust, we respectfully decline to follow that
decision as inconsistent with our own case law.” 239 F.3d 902, 909 (7th Cir. 2001); see also
United States v. Bollin, 264 F.3d 391, 416 (4th Cir. 2001) (finding position of trust existed
where victims provided defendant with discretion to invest and expected defendant “to make
trades in their best interest, which he did not do”); United States v. Reeves, 255 F.3d 208, 212
(5th Cir. 2001) (finding position of trust where defendants presented themselves as financial
planners and defrauded victims by persuading them to turn over money to be invested in sham
companies); United States v. Iannone, 184 F.3d 214, 224 (3d Cir. 1999) (holding that position of
trust existed where defendant’s “position as head of a company in which the victims invested
made his fraud difficult to detect, vested him with significant authority over the victim’s
investment monies, and encouraged his victims to rely on his perceived integrity”); United
States v. Lowder, 5 F.3d 467, 473 (10th Cir. 1993) (finding that the president of a bogus
financial company who was entrusted with the ability to spend the investors’ money without any
oversight held a position of trust); United States v. Tardiff, 969 F.2d 1283, 1289 (1st Cir. 1992)
(“Virtually by definition, a money manager or financial advisor who is entrusted with, and who
proceeds fully to exercise, broad discretionary powers in respect to other peoples’ money
occupies a position of private trust.”).

                                                 18
HULL, Circuit Judge, concurring in part and dissenting in part:

       I concur in the majority opinion as to Rule 11 and Restitution, but disagree

with its reversal of the two-level enhancement for abuse of a position of trust under

U.S.S.G. § 3B1.3. In my view, Morris held a position of private trust in this

broker-trader scheme and abused that position to facilitate both the commission

and concealment of the offense.1 Our precedent has not answered whether persons

who are engaged in a brokerage-trading business and who utilize trust bank

accounts as an integral part of that business occupy a position of private trust. I

would hold they do.

       I first review the undisputed facts which show that Morris and his co-

conspirators not only purported to operate a brokerage-trading business,

characterized by professional and managerial expertise and discretion, but also

used various trust bank accounts for their clients’ funds in order to facilitate and

conceal the scheme. The undisputed facts are in three places in the record: (a) the

statement of facts filed with the plea agreement and then recited during the plea

colloquy; (b) the pre-sentence report; and (c) admissions during the sentencing

hearing. The facts filed with the plea agreement (and recited almost verbatim

       1
         I agree with the majority opinion that the government must establish both: (1) that the
defendant held a position of public or private trust; and (2) that the defendant abused that
position in a way that significantly facilitated the commission or concealment of the offense.
U.S.S.G. § 3B1.3.

                                               19
during the plea colloquy) are as follows:2

               During the conspiracy charged in the indictment, [defendants]
       George Melvin Bevre, Calvin Fredrick Brown, Robert Charles
       Stewart, James C. Morris and Royce Edward Tolley conducted
       fraudulent investment programs to obtain money from unsuspecting
       investors by using the telephone, facsimiles, wire transfers of funds,
       and the United States Mail.
       The five defendants induced potential investors to invest in a variety
       of programs and made false and fraudulent representations by wire
       and mail to defraud investors throughout the United States and to
       launder money through a fund rotation scheme, and used bank
       accounts in Minnesota, Nevada, California, Colorado, Maryland,
       Alachua County, Florida, and in foreign countries to move and
       conceal the investors’ funds.
       They also engaged in a technique common in fraudulent schemes
       called “layering,” whereby individuals fraudulently obtain funds from
       investors and pass a portion on to other companies and individuals,
       who claim not to be “the person investing the funds,” and can then
       ostensibly cast blame on others to whom investors’ money was sent.
       In such frauds, layering and the “blame game” continue endlessly to
       stall, frustrate and eventually defeat investors who seek just
       compensation.
               The scheme in this case consisted of fraudulent promises and
       representations by the defendants that investors would receive
       exorbitant returns on their investments in purported currency, bank-
       note and bank debenture trading programs.

       2
         Morris did not contest these facts as outlined in the government’s proffer during his plea
colloquy. Instead, during that plea colloquy Morris expressly agreed that the facts as to his
involvement were true and correct. (Plea T. p.22). As to his co-defendants’ conduct, there was
also no objection, and his counsel stated: “Mr. Morris naturally doesn’t know all of the details
of what other individuals were doing. But, we believe Mr. Morris, and I would definitely take
the government’s word that the activities of the other individuals are true and accurate.” (Sent.
T. p.6). At the second sentencing hearing, the court asked again: “Mr. Morris, do you still admit
that you violated the law as set forth in the facts presented by the government when we were
here at your plea elocution as to both Counts 1 and 18?” (Sent. T. p.6). Morris replied, “Yes, I
do, Your Honor.” The parties do not dispute the facts but argue about whether the facts were
sufficient to warrant the enhancement.

                                                20
In truth, the “investment programs” either did not exist or were of
such dubious existence that the defendants’ failure to perform due
diligence and their promises of investment returns constituted, at a
minimum, willful blindness.
The defendants obtained investors’ funds by making false
representations and using other persons to falsely represent to
investors that the “programs” were legitimate high-yield opportunities
in the world of international finance.
Once the investors’ funds went into the defendants’ bank accounts,
the defendants would use bank wire transfers to send funds to other
persons and entities throughout the world to conceal the money trail
and to promote the investment fraud.
...
From June 1996 through June 1997, . . . Bevre made false
representations to entice funds from persons to invest in fictitious
currency and bank debenture trading programs, and caused those
funds to be deposited into his Global Funding account at various
financial institutions.
...
       From late 1996 through April 1997, Brown and Stewart, using
the names TKO Maintenance and Ventura Enterprises, made false and
misleading representations to obtain funds from investors through the
United States mail and bank wire transfers.
Between May 9, 1997 and May 15, 1997, George Melvin Bevre wire
transferred 1.5 million dollars from his Global Funding trust account
at Calvert Shareholder Services, a division of the Calvert Group
mutual fund management firm in Baltimore, Maryland. Bevre sent
five hundred thousand dollars to Brown’s Roman Carlos Trust bank
account at the Levy County State Bank in Chiefland, Florida, and one
million dollars to Stewart’s Jonathan Mencken Trust bank account at
the Barnett Bank in Gainesville, Florida.
Brown and Stewart each took approximately three hundred thousand
dollars from those accounts and wire transferred to it to accounts they
controlled in Antigua, British West Indies, from which they wire
transferred funds back into the United States and used for their own
benefit.
       After receiving the $1.5 million from Bevre and skimming 600
thousand dollars from that and other investors’ funds in the Roman

                                  21
Carlos Trust and Jonathan Mencken Trust accounts, Brown and
Stewart wired 1.2 million dollars to James C. Morris, a non-practicing
attorney in Gardnerville, Nevada.
Morris portrayed himself as a “trader” who conducted successful
multimillion dollar international bank trades in the past. Morris has
been involved as an alleged “trader” with Stewart in February 1997,
when Brown and Stewart each took $50,000 from a purported
investment of four hundred thousand dollars wire transferred to them.
After receiving the funds from Brown and Stewart in May 1997,
Morris commingled them in three of his bank accounts with other
moneys he had fraudulently obtained, and wire transferred hundreds
of thousands of dollars to Royce E. Tolley, then an attorney in Castle
Rock, Colorado.
Tolley has since been disbarred by the Colorado Bar for fraudulent
activities with clients. Both Morris and Tolley used attorney-client
trust accounts to receive and transfer funds obtained by fraudulent
representations.
Tolley also received wire transfers from Morris in Tolley’s Echo Hills
Swim and Tennis Club account.
       When Brown’s investors pressured him about their investments
during the summer of 1997, he advised them that their money had
been sent to Morris and that Morris had transferred some of their
money to Tolley. The investors then contacted and maintained
contact with Morris, Tolley, and Brown.
       Tolley contacted investors of Brown and Stewart and told them
that he, Tolley, and James C. Morris were attempting to find and
return the investors’ money. In November 1997, Tolley sent investors
a nine-page document titled: “Assignment of Interest in Joint Venture
Non-Circumvention and Fee Agreement.”
Paragraph 3.G of that document reads:
       By its signature(s) hereto, Brown (all members of the Brown
       group) agrees to forego any and all legal, civil or criminal, that
       it or any person or entity has against James C. Morris, Royce E.
       Tolley, Allen Clark, Pacific Bank AIU, or any other person
       with regard to the 1.2 million dollars transferred by Brown’s
       group to Morris for investment purposes on the condition that
       Brown’s group receives the 1.2 million on or before December
       15th, 1997, and the remaining 3.6 million on or before February

                                   22
       1, 1998.
       In a letter to Calvin Brown dated December 7, 1997, Tolley
stated that he had “in place” financial transactions totalling more than
three billion dollars, and that “I have a lot on the table and I believe
we will work our way through these very soon.”
Tolley’s November agreement and his December letter were simply
stalling tactics to keep Brown’s investors from going to law
enforcement authorities because neither he, Morris, Brown nor
Stewart had the means or intention to pay any investor.
       From November 1997 through February 1998, an investor who
gave Brown twenty-five thousand dollars in April 1997, received
numerous telephone calls from Brown, Morris and Tolley in which
they continually stated: “The money is on the way,” and that it would
be deposited into Stewart’s offshore accounts for payment of principal
and interest to the investors.
Morris also told the investor that he had cancer and was on dialysis.
This investor and numerous other investors never received an interest
payment or return of their principal.
       Morris was interviewed by the FBI and admitted that Brown
and Stewart had wire transferred 1.2 million dollars to him, but gave
an excuse that the investment that he had planned was not workable.
He also said Brown and Stewart had given him authorization to invest
the money in whatever venture Morris felt would return a high yield.
Morris said the money was to go towards the purchase or lease of 25
million dollars in Treasury bonds.
       Tolley was also interviewed and stated that he had dealt with
Morris in investment ventures in 1997. He said Brown called him in
October or November 1997 about the 1.2 million dollars given to
Morris. Tolley admitted Morris gave him at least six hundred
thousand dollars of that money in June 1997. He also admitted that he
talked to two of Brown’s investors and prepared an agreement in
which he agreed to pay the two investors twenty-five thousand dollars
each.
       The loss to investors during the charged mail fraud, wire fraud,
and money laundering conspiracies was approximately 1.6 million
dollars. The individual defendants received from approximately two
hundred thousand dollars to six hundred thousand dollars from their
fraudulent activities; the precise figure for each defendant will be

                                   23
       determined prior to sentencing.

(Plea T. pp.15-21).

       The pre-sentence report also outlined the offense conduct in similar detail.

These undisputed facts are taken from that report:3

       31.    James C. Morris is an attorney licensed by the State Bar
              of California, whose residence was in Gardnerville,
              Nevada. During the instant offense, Morris was falsely
              portrayed to investors, by co-conspirators Calvin F.
              Brown and Robert Charles Stewart, as a sophisticated
              “trader” of currency and bank instruments in the
              international financial community. When Morris
              received wire transferred funds from Brown and Stewart,
              he would commingle those funds with other funds in his
              bank account and would immediately transfer various
              amounts of those funds to other bank accounts in his
              name and in the names of other persons and alleged
              business entities, thus rotating the funds to conceal them
              and prevent the funds from being traced. Morris would
              then transfer the remaining funds to co-conspirator Royce
              Edward Tolley, an attorney in Castle Rock, Colorado.
              Tolley would continue the rotation of the funds, while
              retaining a portion of the funds for his personal use.

       36.    Bevre, also known as George Hart, was the owner and
              controller of Global Funding Limited Trust. This trust
              was created on or about June 13, 1996, and had bank
              accounts at the First American Bank of Breckenridge, in

       3
         Because Morris was seeking a reduction for acceptance of responsibility, his attorney
emphasized that the objections to the pre-sentence report “are totally legal objections. Mr.
Morris is not disputing facts or his conduct. He takes full responsibility for his actions.” (T.
p.14). See United States v. Hedges, 175 F.3d 1312, 1315 (11th Cir. 1999) (noting defendant “did
not object to the statements in the PSI” and thus “these statements were undisputed, and the
court was permitted to rely on them despite the absence of supporting evidence”).

                                              24
      Breckenridge, Minnesota and at Calvert Shareholder
      Services, in Baltimore, Maryland. These accounts were
      used by Bevre/Hart to deposit and withdraw funds
      obtained from the fraudulent scheme.

38.   Brown was a resident of Levy County, Florida and was a
      signatory and controller of the Roman Carlos Trust and
      Barco Resources Limited accounts. The Roman Carlos
      Trust account was obtained through the Passport Society,
      which provided for the creation of a “colato”, allegedly
      under the law of Antigua, BWI. The Passport Society is
      an offshore investment company that sets up trust
      accounts, international corporations, etc.

39.   Brown and co-conspirator Robert C. Stewart operated as
      promoters/brokers. They induced potential investors to
      invest in a variety of programs and made false and
      fraudulent representations to investors in order to
      facilitate the fraud scheme. The funds obtained by the
      fraud scheme were then laundered through a fund
      rotation or “shell game.”

41.   Stewart was a resident of Gainesville, Florida, and a
      signatory and controller of the Jonathon Mencken Trust
      and Bittner Group, Limited. The Jonathon Mencken
      Trust was obtained through the Passport Society, which
      provided for the creation of a “colato”, allegedly under
      the laws of Antigua, BWI. Stewart and co-conspirator
      Calvin F. Brown operated as promoters/brokers. They
      induced potential investors to invest in a variety of
      programs and made false and fraudulent representations
      to investors in order to facilitate the fraud scheme.

43.   Tolley was a practicing attorney who resided in Denver
      and Castle Rock, Colorado. Tolley received wire
      transfers from co-conspirator James C. Morris.

At the sentencing hearing, Morris’ counsel also acknowledged that “Mr

                                 25
Morris was a licensed attorney. He had an attorney trust fund that was established.

All of the money that was received by Mr. Morris mainly from co-defendants, not

directly from quote victims, went into that account” and that “there was no other

funds in that account.” (Sent. T. p.12). Morris admitted to receiving $3.2 million

in his attorney-client trust fund account.4

       Considered together, these undisputed facts reveal that Morris and his co-

conspirators operated as a brokerage-trading business that was characterized by

professional and managerial expertise and discretion and that utilized various trust

accounts to engender trust and to facilitate the scheme and delay discovery of the

fraud. Stewart, Brown, and Bevre represented themselves as professional brokers.

During his plea colloquy, Morris admitted that “Morris portrayed himself as a

trader who conducted successful multimillion dollar international bank trades in

the past.” Morris also did not object to the pre-sentence report’s statement

acknowledging that his co-conspirators also portrayed him that way to the

investors. Specifically, the pre-sentence report stated that “[d]uring the instant



       4
         While the pre-sentence report indicated that Brown and Stewart wired $5,315,500 to
Morris’ account, Morris’ counsel filed objections to the pre-sentence report stating that
“[a]ccording to FBI ‘flow charts’ . . . [the] total money received during the time period of the
indictment is 3.2 million dollars.” (Defendant’s Objections to Pre-Sentence Report, p.2).
Counsel’s objections also stated “the defendant’s position was “that 3.2 million dollars is the
total amount involved.” (Defendant’s Objections to Pre-Sentence Report, p.2). The $3.2 million
was ultimately the amount the parties agreed went into Morris’ attorney-client trust account.

                                              26
offense, Morris was falsely portrayed to investors, by co-conspirators Calvin F.

Brown and Robert Charles Stewart, as a sophisticated ‘trader’ of currency and

bank instruments in the international financial community.”

      Morris also admitted he and the co-conspirators utilized various trust bank

accounts as part of the scheme and rotated the funds through many bank accounts,

including those trust accounts. The investor clients wired their money usually to

one of these three trust accounts: (a) Global Funding Trust; (b) Roman Carlos

Trust; and (c) Jonathan Mencken Trust. Bevre’s Global Funding trust account was

at Calvert Shareholder Services, a division of the Calvert Group mutual fund

management firm in Baltimore, Maryland. From these trust accounts, at least $3.2

million in funds were wired to Morris’ attorney-client trust account. Some of the

money was then wired by Morris to Tolley’s attorney-client trust account. These

various trust accounts not only helped legitimize the transactions and engender the

victims’ trust but also helped conceal, prevent, and delay the tracing of the funds

and discovery of the fraud.

      When the investor clients pressured Morris, the “investors then contacted

and maintained contact with Morris, Tolley and Brown.” The blame game and

stalling were also part of the overall brokerage-trading scheme to provide time to

conceal the funds and defeat any recovery of the funds. When the investor clients


                                         27
pressured Tolley and Morris, Tolley (a practicing attorney) even drafted an

agreement to convince them to forego legal action against him and Morris in return

for fixed dates of repayment.

       Based on these undisputed facts, I would affirm the two-level enhancement

under U.S.S.G. § 3B1.3 for several reasons.5 First, the fact that no legitimate

brokerage-trading firm or business existed does not preclude the enhancement.

Instead, we must consider the case as if this was a legitimate investment brokerage

firm or business with professional brokers and traders, who traded currency and

bank notes in the international financial markets and who were entrusted with the

discretion to invest clients’ funds and used various trust accounts to foster that

trust. Even though Morris may not have had a traditional attorney-client

relationship, the fact that he and his co-conspirators used numerous trust accounts

as part of the overall scheme may still be considered.6


       5
         The district court did not make individualized findings as to the basis for imposing the
abuse of trust enhancement, but the sentence may be upheld as long as the record supports the
enhancement. See United States v. Ismond, 993 F.2d 1498, 1499 (11th Cir. 1993) (“If the court
does not make individualized findings, the sentence may nevertheless be upheld if the record
supports the amount of drugs attributed to a defendant”).
       6
          The majority opinion circumscribes Morris’ position relative to the victims by
emphasizing that his co-conspirators, not Morris, portrayed him as a trader to the victims, that
Tolley, not Morris, drafted the forbearance agreement, and that there is no evidence the victims
knew about Morris’ attorney-client trust account. I disagree with this reading of the record. In
my view, the record shows that Morris has admitted that he knew his co-conspirators were
falsely representing him as a trader and themselves as brokers, that he was fully aware of his co-
conspirators’ use of trust accounts to receive the victims’ funds and indeed the victims’ money

                                                28
       Second, the position of trust issue has been decided and developed on a

case-by-case basis, and we have not answered the position of trust issue

specifically as to investment brokerage business with professional brokers and

traders using trust accounts.

       Third, our precedent supports the enhancement where the defendant

occupies a position characterized by professional and managerial discretion. For

example, in United States v. Kummer, 89 F.3d 1536 (11th Cir. 1996), we explained

that “the abuse of trust enhancement only requires a finding that defendant

possessed a position ‘characterized by professional or managerial discretion’ which

‘contributed in some significant way to facilitating the commission of the

offense.’” Id. at 1547 (quoting U.S.S.G. § 3B1.3, comment. (n. 1)). In Kummer,

the defendant Oglesby “attack[ed] the factual finding that he was in a position of

trust, noting that he was not a ‘fiduciary of the benefit plan or labor organization’

as specified in § 2E5.1(b)(1).” Id. In affirming the two-level increase under §

3B1.3, we concluded that “[i]n his position as a union official” Oglesby had

professional or managerial discretion, and that “his position significantly

contributed to facilitating the commission of the offense in this case.” Id.


was wired from those trust accounts to Morris’ trust accounts, and that Morris, along with
Tolley, participated in conversations with the investors leading to the forbearance agreement and
“maintained contact” with the victims. Morris is not shielded by the acts of his co-conspirators
but implicated in all of their conduct both directly and indirectly.

                                               29
      In United States v. Ward, 222 F.3d 909 (11th Cir. 2000), this Court also

observed that “[t]he commentary to § 3B1.3 tells us that the phrase ‘[p]ublic or

private trust refers to a position of public or private trust characterized by

professional or managerial discretion (i.e., substantial discretionary judgment that

is ordinarily given considerable deference).’” Id. at 911 (citing U.S.S.G. § 3B1.3,

comment. (n. 1)). In Ward, we further noted that the commentary also advises

“that people in such positions ‘ordinarily are subject to significantly less

supervision than employees whose responsibilities are primarily non-discretionary

in nature.’” Id. The defendant in Ward was an armored car guard who was

convicted of stealing money from the armored cars he guarded during the pick-up

and delivery of bank deposits. Id. at 910. We concluded the abuse of trust

enhancement did not apply because the guard was given no discretion and his

position was comparable to an ordinary bank teller or hotel clerk position. Id. at

912-13. In contrast, investment brokerage firms or businesses are entrusted with

broad discretionary authority to manage the funds of their clients through the

application of specialized, professional knowledge.

      I recognize that in United States v. Mullens, 65 F.3d 1560 (11th Cir. 1995),

we concluded that the defendant Mullens was not in a position of trust by touting

himself as a “‘gifted investor who the Omni investors could trust’ and an


                                           30
‘investment and financial advisor.’” Id. at 1566-67. We noted that if he had run

legitimate businesses, then “Mullens would have been considered nothing more

than a business owner who offered investment opportunities to the public that

soured.” Id. We concluded that “[w]e see nothing in these circumstances to

support the conclusion that a position of private trust between Mullens and his

victims was created.” Id. at 1567. But in doing so, we pointed out that “there was

no evidence Mullens held himself out as an investment broker, or advertised Omni

as an investment brokerage firm.” Id. at 1566 (emphasis supplied). Thus, even the

Mullens decision distinguished the investment broker from the general investment

and financial advisor. Mullens also did not involve trust bank accounts being

utilized as an integral part of the business relationship. This is not a case of an

arm’s length commercial relationship but one where the defendant Morris abused

the discretionary authority which he knew had been entrusted to him and his co-

conspirators by the victims. See United States v. Garrison, 133 F.3d 831, 839

(11th Cir. 1998). I, too, would follow Mullens, as the majority does, were it not

for the fact that Mullens involved a business owner who offered investment

opportunities and Mullens itself expressly distinguished that from investment

brokerage firms, which is what this scheme involved.

      For all of these reasons, I would affirm the § 3B1.3 enhancement.


                                          31
32