UNITED STATES COURT OF APPEALS
for the Fifth Circuit
_____________________________________
No. 93-9121
_____________________________________
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
VERSUS
JOHN M. RONNING,
Defendant-Appellant.
______________________________________________________
Appeal from the United States District Court
for the Northern District of Texas
______________________________________________________
(March 3, 1995)
Before JONES, DUHÉ, and STEWART, Circuit Judges.
DUHÉ, Circuit Judge:
John M. Ronning appeals the district court's four-level
enhancement of his sentence under U.S.S.G. § 3B1.1(a). Ronning
pled guilty to mail fraud after two days of a bench trial. The
court found that Ronning was the leader or organizer of an
otherwise extensive scheme to defraud his clients. The only other
participant in the scheme, however, was Ronning's partner J.D.
Wimple. Because the record does not show that Ronning exerted some
control over Wimple, we vacate the sentence and remand for
resentencing.
BACKGROUND
Ronning and Wimple operated a loan brokering business named
WESTPAC Financial Group, Inc. (WESTPAC). Wimple served as
President, and Ronning served as Executive Vice-President or Chief
Executive Officer. Ronning controlled all corporate assets.
WESTPAC packaged loan proposals and located interested lenders for
its clients and charged them advance fees for its services.
Ronning and Wimple misrepresented to their clients WESTPAC's
contacts with worldwide financial institutions and WESTPAC's past
performance in securing loans. Instead of placing collected
advance fees in trust accounts until loan commitments were made,
Ronning and Wimple pocketed the advance fees without refunding them
or closing the loans. The scheme involved $1,134,852 in advance
fees collected from over 100 victims.
After two days of a joint trial, Ronning pled guilty to one
count of mail fraud, and Wimple pled guilty to one count of tax
evasion. Applying the 1987 Sentencing Guidelines, Ronning's PSR
recommended that the court apply the four-level § 3B1.1(a)
enhancement because Ronning was Vice President of WESTPAC and he
had five or more participants working under him. Ronning objected
to the application of § 3B1.1.1 The court disagreed with him and
applied § 3B1.1 because it found him to be a leader and organizer
and the scheme to be otherwise extensive.2
DISCUSSION
A district court's determination that a defendant is a § 3B1.1
leader or organizer is a factual finding, which we review for clear
1
U.S.S.G. § 3B1.1(a) mandates a four-level enhancement if "the
defendant was an organizer or leader of a criminal activity that
involved five or more participants or was otherwise extensive."
2
Because we agree with Ronning that he was not a leader or
organizer under § 3B1.1, we do not address the court's finding that
the scheme was otherwise extensive.
2
error. United States v. Valencia, No. 94-40063, 1995 U.S. App.
LEXIS 1593, at *4 (5th Cir. Jan. 26, 1995). "A factual finding is
not clearly erroneous if it is plausible in light of the record
read as a whole." Id. at *5.
Section § 3B1.1(a) has two requirements: (1) the defendant
must have been a leader or organizer in the criminal activity, and
(2) the scheme must have either included five or more participants
or been otherwise extensive. U.S.S.G. § 3B1.1(a). The commentary
defines "participant" as a person who is criminally responsible for
the commission of the offense, but need not have been convicted.
Id. commentary n.1. The record contains no evidence of criminal
responsibility of WESTPAC employees other than Ronning and Wimple.
They were the only two participants in this scheme.
Ronning contends that he and Wimple were equals, and thus,
neither was an organizer or leader. Offenses committed by
"individuals of roughly equal culpability" do not "receive an
adjustment under this Part." U.S.S.G. § 3B1.4 commentary. The
Government responds that, although Wimple had the position of
President, Ronning was the de facto leader of the operation.
Ronning traveled abroad to visit clients, and they looked to him as
the head of the operation. Ronning also controlled the purse
strings.
The Sentencing Commission added commentary note 2 to § 3B1.1
in 1993. Although the district court applied the 1987 Sentencing
Guidelines, we may consider this new note because it clarifies §
3
3B1.1 and is not intended to change it substantively. United
States v. Gross, 26 F.3d 552, 555 (5th Cir. 1994). The note reads:
To qualify for an adjustment under this section, the
defendant must have been the organizer, leader,
manager, or supervisor of one or more other
participants. An upward departure may be warranted,
however, in the case of a defendant who did not
organize, lead, manage, or supervise another
participant, but who nevertheless exercised
management responsibility over the property, assets,
or activities of a criminal organization.
U.S.S.G. § 3B1.1 commentary n.2, added by id. app. C, amend. 500
(effective Nov. 1, 1993). The note resolves a circuit split over
whether control of another participant is required for § 3B1.1 to
apply. Id. app. C, amend. 500.
To qualify for the four-level § 3B1.1(a) enhancement, a person
must have been the organizer or leader of at least one other
participant. Valencia, 1995 U.S. App. LEXIS 1593, at *6; Gross, 26
F.3d at 555. The note recognizes an exception to the control
requirement if a defendant exercises management responsibility over
a criminal organization's property, assets, or activities. The
courts that have employed this exception, however, have applied it
only to the three-level § 3B1.1(b) enhancement for a manager. See
United States v. Carson, 9 F.3d 576, 592 (7th Cir. 1993), cert.
denied, 115 S. Ct. 135 (1994); United States v. Chambers, 985 F.2d
1263, 1268-69 (4th Cir.), cert. denied, 114 S. Ct. 107 (1993); see
also United States v. Greenfield, Nos. 94-1001, 94-1033, and 94-
1086, 1995 U.S. App. LEXIS 824, at *11 (2d Cir. Jan. 13, 1995)
(noting that the exception would not apply to § 3B1.1(c) because
that subsection does not contemplate a criminal organization).
4
In Carson, the Seventh Circuit vacated a § 3B1.1(a)
enhancement because the record failed to support a finding that the
defendant exercised direct or indirect control over any
participant. 9 F.3d at 591. For another defendant who was given
an enhancement under § 3B1.1(b), however, the court determined that
proof of control was not necessary if the defendant exercised
management responsibilities over a criminal organization's
property, assets, or activities. Id. at 592 (citing Chambers, 985
F.2d at 1268). Therefore, Carson distinguishes between subsections
(a) and (b) by making proof of control necessary under (a) but not
necessary under (b).
The Sentencing Commission created the exception to the control
requirement because of Chambers. U.S.S.G. app. C, amend. 500. In
that case, the Fourth Circuit held that a defendant who manages
property without supervising people could satisfy § 3B1.1(b).
Chambers, 985 F.2d at 1268. Because the Sentencing Guidelines do
not define "manager," the Fourth Circuit applied a plain meaning
approach to the term. Id. The court determined that none of the
dictionary definitions of manager require supervision of people; a
manager can either supervise people or manage the property.3 Id.;
see also United States v. Mares-Molina, 913 F.2d 770, 774 (9th Cir.
1990) (Rymer, J., dissenting) ("I respectfully dissent, because one
3
Because management of property may not be as sound a basis for
determining a defendant's role in the offense, the Fourth Circuit
also requires a showing that the defendant is more culpable than
other participants. Id. at 1268-69.
5
many 'manage' a thing, such as a business or money or a warehouse,
as well as a person.").
Applying a plain meaning approach to "leader" and "organizer,"
we note that their definitions relate to supervision of people
only. Leader is defined as a person who leads as a commander.
Webster's Third New International Dictionary 1283 (1981).
Organizer is defined as a person who travels for the purpose of
establishing new organizations. Id. at 1590. A commander commands
people, and organizations are composed of people. Unlike a
manager, a leader's or organizer's actions must directly affect
other people. Consequently, a leader or organizer must control or
influence other people.
Our opinions in Valencia and Gross, both § 3B1.1(a) cases,
support this conclusion. Because they require a defendant to lead
or organize another participant but do not mention the commentary
note's exception to the control requirement, they recognize
implicitly that the exception does not apply to § 3B1.1(a).
Management responsibility does not make a leader or organizer.
Ronning's control of WESTPAC's assets does not allow application of
the four-level § 3B1.1(a) enhancement.4
Thus, for § 3B1.1(a) to apply in this case, the record must
support a finding that Ronning organized or led Wimple in some way.
4
The district court thought that Ronning was more culpable than
Wimple and, thus, more deserving of the less favorable plea
agreement. Although relative culpability essentially distinguishes
a leader or organizer from a manager or supervisor, see § 3B1.1
commentary n.4, it does not satisfy the requirement of control over
another participant. United States v. Harper, 33 F.3d 1143, 1150-
51 (9th Cir. 1994), cert. denied, 63 U.S.L.W. 3539 (Jan. 17, 1995).
6
The evidence does not support such a finding. Fred Delin, who knew
Ronning socially, testified that Wimple ran the show. He was the
President, occupied the corner office, and often gave Ronning
directions. Truman Heddins, a WESTPAC client, preferred to talk to
Wimple because Ronning simply spoke rhetoric. Heddins did not
believe that Ronning could help him retrieve his advance fees.
Thomas Rex Franklin, the only employee of WESTPAC who testified,
told the court that Wimple was aware of most of the projects in the
office but that Ronning had not seen ninety percent of them.
The Government attempts to show that Ronning was the
controlling personality at WESTPAC because he had most of the
contact with the clients. Ronning was the "front" man. The
Government asserts that Wimple was nothing more than a bookkeeper.
Nevertheless, a review of the record reveals constant references to
Wimple and Ronning as partners. The mere fact that Ronning had
more contact with clients than Wimple does not show that he had
control or influence over Wimple. Contrary to the Government's
argument, Wimple was not a puppet President. Rather, the reason
Wimple stayed in the background appears to have been because he was
not as smooth and likeable as Ronning. Wimple also had a temper.
Franklin testified that he left WESTPAC after Wimple yelled at him
for forty-five minutes. Heddins described Wimple as an "almost out
of control type person," who became very irate during a meeting.
Thus, it appears that Wimple did not have much contact with clients
by his design; he let Ronning do most of the talking. Although
Ronning had more client contact, he did not directly or indirectly
7
control Wimple. Even under our clearly erroneous standard of
review, we conclude that the record read as a whole does not render
plausible a finding that Ronning organized or led Wimple.
CONCLUSION
For the foregoing reasons, we vacate Appellant's sentence for
resentencing.
VACATED and REMANDED.
8