United States v. Peppe

United States Court of Appeals
United States Court of Appeals
For the First Circuit
For the First Circuit

No. 95-2121

UNITED STATES,

Appellee,

v.

HENRY J. PEPPE,

Defendant - Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Douglas P. Woodlock, U.S. District Judge]

Before

Selya, Stahl and Lynch,
Circuit Judges.

Richard H. Gens with whom Martin K. Leppo was on brief for

appellant.
Gary S. Katzmann, Assistant United States Attorney, with whom

Donald K. Stern, United States Attorney, was on brief for appellee.

March 29, 1996

STAHL, Circuit Judge. Pursuant to a plea agreement
STAHL, Circuit Judge.

with the government, defendant-appellant Henry J. Peppe

pleaded guilty to a three-count indictment charging him and

his codefendant, Joseph S. Mongiello, with making

extortionate extensions of credit and using, and conspiring

to use, extortionate means to collect and attempt to collect

an extension of credit. The district court sentenced Peppe

to twenty-seven months' incarceration followed by three

years' supervised release, a special assessment fee, and a

$10,000 fine. Peppe now appeals the imposition of the fine

and a condition of his supervised release requiring

probation-office approval prior to any incurring of new

credit charges or opening of new credit lines.1

I.
I.

Factual Background and Prior Proceedings
Factual Background and Prior Proceedings

A. Offense Conduct

We accept the facts of the offense as set forth in

the unchallenged portions of the Presentence Report ("PSR").

See United States v. Grandmaison, No. 95-1674, slip op. at 2-

3 (1st Cir. Mar. 1, 1996).

In the summer of 1993, Peppe and Mongiello loaned

to John Wiltshire, a self-employed contractor, $3,000 upon

1. At oral argument before this court, Peppe withdrew his
challenge to the court's imposition of an additional
condition of supervised release: that Peppe grant access to
any and all financial information requested by the probation
office. Accordingly, we do not address this argument.

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which Wiltshire was required to pay 5% interest per week.

When Wiltshire was late in making his loan payments, Peppe

and Mongiello would intimidate him and his wife through

repeated, threatening telephone calls. In June 1994,

Wiltshire temporarily stopped making the weekly interest

payments because he could no longer afford them. In July

1994, Wiltshire agreed to do some construction work at

Peppe's home in return for forgiveness of part of the debt.

On August 1, 1994, Wiltshire contacted the Federal

Bureau of Investigation ("FBI") about his situation. By that

date, he had paid about $6,000 in interest on the $3,000

loan. As part of the FBI's subsequent investigation,

Wiltshire tape-recorded telephone conversations and meetings

with Peppe and Mongiello, including conversations

accompanying five additional payments on the loan. On one

such occasion, Peppe referred to his "cuff list" of

delinquent loan-shark debtors to see how far behind Wiltshire

was. In October 1994, Wiltshire told Peppe that he would not

make further payments on the loan and indicated that he had

relocated himself and his wife. Upon hearing this, Peppe

became very angry and warned Wiltshire, "I will catch up to

you" and "I will find you." At the time of his arrest, Peppe

had in his possession a "cuff list" listing ten debtors

overdue in their payments.

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B. The Plea Agreement

The parties agreed that Peppe's plea would be

tendered pursuant to Fed. R. Crim. P. 11(e)(1)(B), and that,

"[w]ithin the maximum sentence" possible under applicable

law, "the sentence to be imposed is within the sole

discretion of the sentencing judge." Peppe acknowledged in

the plea agreement that he faced a maximum penalty of 20

years' incarceration and a $250,000 fine on each count. The

agreement stated that, under the United States Sentencing

Guidelines, Peppe's Base Offense Level was 20 and the parties

would recommend to the court a three-level reduction for

Peppe's acceptance of responsibility, resulting in a Total

Offense Level of 17.

C. The Presentence Report

In the PSR, Peppe's Total Offense Level was

computed at 17, his Criminal History Category at I, and the

applicable Guideline imprisonment range was found to be

twenty-four to thirty months followed by two to three years

of supervised release. The fine range was determined at

$5,000 to $50,000, pursuant to U.S.S.G. 5E1.2(c)(1) and

(2). While the government contended that the victim,

Wiltshire, was entitled to restitution of the interest paid,

$6,000, the PSR stated that the issue of granting restitution

in loan-sharking cases had never been addressed in the

District of Massachusetts, and relayed the matter to the

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court. Peppe complained that the government's restitution

figure came only from Wiltshire and was exaggerated, but he

did not offer his own calculation and did not otherwise

object to that portion of the PSR.

The PSR also included the following additional

facts to which neither party objected. Peppe is a forty-

year-old high school graduate with previous work experience

as a bartender, temporary postal employee, greyhound-dog

owner and racer, and employee at his father's smoke shop.

Peppe and his wife, Jayne Zannino Peppe, have three children,

the youngest of whom may have a serious medical condition.

Peppe's wife manages the care of the family and home, working

part-time as a real estate agent. Peppe's assets total

$24,056.50, comprised of, inter alia, bank accounts,

securities, life insurance, real estate, and an automobile.2

His liabilities total $50,000, made up of loans from his

brothers for attorney fees incurred in his defense. The PSR

reports that Peppe has a negative net worth of $25,943.50 and

a monthly negative cash flow of $193.

D. The Sentencing Hearing

The district court adopted the factual findings and

Sentencing Guideline applications set forth in the PSR. At

the sentencing hearing, the district court confirmed the

2. As of the time of the balance sheet set forth in the PSR,
Peppe no longer owned greyhounds.

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PSR's calculation of Total Offense Level and Guideline ranges

for the fine and imprisonment term. The government

recommended thirty months' incarceration, a fine of $5,000

and an order of restitution of $6,000. Peppe responded that

restitution should not be an issue in sentencing, and

requested a hearing should it become a factor. With respect

to restitution, the court stated:

[T]he record, frankly, is not clear
enough for me to do anything but
speculate concerning the proper level of
restitution. I decline to take any
further time before reaching a sentence
in this case to attempt to fashion a
restitutionary remedy, particularly in
light of the fact that there is a
potential for a fine. And I will impose
a fine in this case.

The district court sentenced Peppe to twenty-seven

months' imprisonment on each count, to be served

concurrently, followed by three years of supervised release.

The court further imposed a $10,000 fine, with interest

waived, to be paid in installments. In addition to the

standard conditions of supervised release, the court ordered

that Peppe could not "incur new credit charges or open

additional lines of credit without prior approval of the

probation officer" who, in turn, would take into

consideration Peppe's compliance with the fine payment

schedule. At the conclusion of the sentencing hearing, the

court opined:

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I think I needn't say very much about the
reasons for the sentence. I think Mr.
Pep[p]e understands that this is one of
the costs of doing this kind of business
and that there is imposed in connection
with those costs a fine component, and a
component [of] being taken away from
loved ones at critical times.

II.
II.

Discussion
Discussion

Peppe now argues that the court erred by imposing

the $10,000 fine and by prohibiting him from incurring new

credit charges or opening additional lines of credit without

prior approval of the probation office. Neither challenge

was raised before the sentencing judge, however, and, as

Peppe concedes, our review is for plain error only. United

States v. Carrozza, 4 F.3d 70, 86-87 (1st Cir. 1993), cert.

denied, 114 S. Ct. 1644 (1994).

A. Imposition of $10,000 Fine

Peppe contends that the court did not consider his

financial resources and earning ability in assessing the

$10,000 fine. He points out that his financial information

in the record is undisputed, and argues that it establishes

both his current inability to pay the fine and the

unlikelihood that he will be able to pay it in the future.

Peppe also suggests that the fine contained a "restitutional

component," noting that its amount reflects an approximate

combination of the government's recommendation for a fine

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($5,000) and restitution ($6,000), and that the court did not

consider the requisite factors to support a restitution

remedy. He maintains that, in addition to waiving the

interest on the fine, the court should also have waived the

fine itself and imposed alternative sanctions such as

community service.

When imposing a fine and its conditions, a district

court must consider, inter alia, "any evidence presented as

to the defendant's ability to pay the fine (including the

ability to pay over a period of time) in light of his earning

capacity and financial resources" and "the burden that the

fine places on the defendant and his dependents relative to

alternative punishments." U.S.S.G. 5E1.2(d); see also 18

U.S.C. 3572(a). The defendant bears the burden of

demonstrating that his case warrants an exception to the rule

that a fine be imposed. United States v. Savoie, 985 F.2d

612, 620 (1st Cir. 1993); U.S.S.G. 5E1.2(a) ("The court

shall impose a fine in all cases, except where the defendant

establishes that he is unable to pay and is not likely to

become able to pay any fine"). Moreover, a district court

need not make express findings regarding a defendant's

financial condition so long as the record is sufficient for

adequate appellate review. Savoie, 985 F.2d at 620 (citing

United States v. Wilfred Am. Educ. Corp., 953 F.2d 717, 719-

20 (1st Cir. 1992)). When a challenge to the imposition of a

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fine is fully preserved for appellate review, we review for

abuse of discretion. Savoie, 985 F.2d at 620. But here,

because Peppe did not object below, we review for plain

error. Carrozza, 4 F.3d at 86-87.

First, we do not agree with Peppe that the court

failed to consider his financial condition when imposing the

fine. The PSR, adopted by the district court, detailed

Peppe's assets, liabilities, and monthly cash flow. Wilfred

Am. Educ. Corp., 953 F.2d at 719-20 (reviewing court will not

presume that the court below ignored relevant evidence in the

record). The court's consideration of Peppe's financial

condition is evident in its waiver of interest on the fine

and written order stating that it "has determined that the

defendant does not have the ability to pay interest."

Indeed, in choosing $10,000, the court chose a fine at the

lower end of the applicable $5,000 to $50,000 range.

Second, although it is undisputed that Peppe's net

worth and monthly cash flow are negative, these facts alone

do not compel the conclusion that a fine should not be

imposed. Rather, it was Peppe's burden to establish that he

was not able to pay the fine, with or without a reasonable

installment schedule. At no time did Peppe offer evidence to

establish his inability to pay, and his inability to pay does

not follow inexorably from the facts in the record. See

United States v. Olivier-Diaz, 13 F.3d 1, 5 (1st Cir. 1993)

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(noting that plain error will not be found where defendant

asserts a fact that he failed to ask the sentencing court to

find, "unless the desired factual finding is the only one

rationally supported by the record below."). Interestingly,

all of Peppe's debt is owed to family members who funded his

defense costs. Further, Peppe does not address his future

ability to pay the fine, and given his age, good health, and

past employment experience, he cannot complain in this

regard.

Finally, Peppe contends that the court fashioned

the fine to include an impermissible "restitutionary

component." This argument lacks merit. The court explicitly

stated that a restitutionary remedy would be purely

speculative, and simply declined to take that route. The

court did not express the desire to compensate the victim,

Wiltshire; rather, it expressed the goal to punish Peppe.

Accordingly, the court imposed the fine in an amount higher

than recommended by the government, but still at the lower

end of the Guideline range. The record shows that Peppe had

ample notice of both the potential for a fine and the

applicable fine range, and never claimed the inability to pay

any amount.

We find no error -- certainly no plain, or obvious,

error -- in imposing the $10,000 fine. We decline,

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therefore, to order any relief sought by Peppe regarding the

fine.

B. Probation Office Approval Prior to Obtaining New Credit

Peppe argues that requiring probation office

approval prior to his incurring new credit charges or

obtaining additional lines of credit is not reasonably

related to his offense and constitutes an impermissible

occupational restriction that inhibits his pursuit of lawful

business activity. He also contends that, under the

Guidelines, the only purpose for this condition is to ensure

compliance with a fine payment schedule; accordingly, he asks

this court to modify the condition to resemble U.S.S.G.

5E1.2(g).

A district court may impose a condition of

supervised release that is "reasonably related" to: the

defendant's offense, history, and characteristics; the need

for deterrence from further criminal conduct; public

protection; and effective correctional treatment of the

defendant. U.S.S.G. 5D1.3(b); see also United States v.

Thurlow, 44 F.3d 46, 47 (1st Cir.), cert. denied, 115 S. Ct.

1987 (1995). Peppe's offense conduct involved the

extortionate extension of credit. His "cuff lists" of

delinquent loan-shark debtors, evidenced in the record,

suggest that his extortionate lending activity was not

limited to the identified victim, Wiltshire. The condition

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of prescreening new credit charges and credit lines is a

reasonable information-gathering device for the probation

office to monitor Peppe's use of money; when Peppe desires

new credit, the probation office may inquire as to its

purpose and planned disbursement. Moreover, as the district

court indicated at sentencing, the probation office could

also use that opportunity to monitor Peppe's compliance with

the fine payment schedule. Therefore, the condition meets

the requirements of 5D1.3(b) because it is reasonably

related to Peppe's offense, preventing his participation in

further extortionate lending, and ensuring his payment of the

fine.

Peppe suggests that the credit condition inhibits

his ability to work or engage in lawful business activities,

in derogation of the requirements of U.S.S.G. 5F1.5(a).3

We disagree. First, 5F1.5(a) is inapplicable because Peppe

fails to explain how the court's condition affects his

participation in a "specified occupation, business, or

profession." Id. (emphasis added). Even assuming it is an

"occupational restriction" within the meaning of 5F1.5, it

3. U.S.S.G. 5F1.5(a) provides that a court may bar or
limit a defendant's participation in a "specified occupation,
business, or profession" if it determines that such
participation bears a "reasonably direct relationship" to the
relevant offense conduct, and the restriction "is reasonably
necessary to protect the public because there is reason to
believe that, absent such restriction, the defendant will
continue to engage in [similar unlawful conduct]."

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is appropriate for many of the same reasons that it is a

proper condition of supervised release under 5D1.3(b). See

supra note 3 (noting criteria considered in occupational-

restriction condition). Second, the condition requires only

prior approval of the probation office; it is not an absolute

bar to incurring credit charges or obtaining new credit, and

it applies only for the duration of the supervised release.

Thus, we do not see, and Peppe has not explained, how this

condition impermissibly restricts his lawful business

activities.

Finally, we find Peppe's argument that U.S.S.G.

5E1.2(g) prohibits the condition in his case to be

disingenuous. See U.S.S.G. 5E1.2(g) (providing that a

district court "may impose a condition prohibiting the

defendant from incurring new credit charges or opening

additional lines of credit unless he is in compliance with

the payment schedule") (emphasis added). Here, the district

court did not "prohibit" Peppe from obtaining credit, it only

required prior approval. Further, simply because the

Guidelines permit the condition in the circumstance reflected

in 5E1.2(g) does not mean that a court cannot employ it in

other cases under 5D1.3(b), the provision generally guiding

conditions of supervised release. Finally, we decline to

modify the credit conditions imposed on Peppe to "comport"

(as Peppe puts it) with section 5E1.2(g), which would allow

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Peppe to forego credit prescreening as long as he complied

with the payment schedule. That condition is not what the

district court deemed appropriate in its carefully fashioned

sentence, and we discern no reason or basis to disturb the

court's decision.

The district court did not err in imposing the

condition that Peppe obtain prior approval from the probation

office for new credit charges or lines of credit.

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III.
III.

Conclusion
Conclusion

Nothing more need be said. For the foregoing

reasons, all of Peppe's challenges on appeal are without

merit. Affirmed.
Affirmed

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