United States v. Harness ( 1999 )

[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
_________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
07/12/99
No. 98-6157
THOMAS K. KAHN
_________________________ CLERK
D. C. Docket No. CR 97-S0203-NE
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
KELLY D. HARNESS,
Defendant-Appellant.
____________________________
Appeal from the United States District Court
for the Northern District of Alabama
____________________________
(July 12, 1999)
Before BARKETT, Circuit Judge, KRAVITCH and MAGILL*, Senior Circuit
Judges.
______________________________________________
*Honorable Frank J. Magill, Senior U.S. Circuit Judge for the Eighth Circuit,
sitting by designation.
MAGILL, Senior Circuit Judge:
Kelly Harness was sentenced to twenty-seven months' imprisonment for his
role in the illegal diversion of federal funds intended to benefit needy individuals
facing eviction from their homes. The district court increased Harness's offense
level two levels for his aggravating role, pursuant to U.S.S.G. § 3B1.1(c), and two
levels for his abuse of a position of trust, pursuant to U.S.S.G. § 3B1.3. The court
also declined to grant the government's motion for a downward departure for
substantial assistance pursuant to U.S.S.G. § 5K1.1. Because the two level
enhancement for an aggravating role was improper, we vacate the sentence and
remand for resentencing.
I. Background
The City of Huntsville, Alabama received funds from the United States
Department of Housing and Urban Development (HUD) via the Emergency Shelter
Grant Program, which was designed to assist individuals in temporary financial
trouble facing eviction from their homes. The City of Huntsville contracted with
the American Red Cross (Red Cross) to provide administrative services related to
the HUD funding. The Red Cross managed this responsibility through a program
called Project Happen.
2
Kelly Harness was an accountant employed by the Red Cross who served as
Director for Project Happen. Harness had check signing authority over Project
Happen accounts and was responsible for maintaining the records related to these
accounts. Harness was also responsible for submitting reimbursement claims to
the City of Huntsville for Project Happen expenditures.
To receive assistance from Project Happen, an individual having trouble
making rental payments would apply for rental assistance through Advocacy for
the Homeless (Advocacy). If the application was approved by James Holland,
Executive Director of Advocacy, it was forwarded to Harness at Project Happen
for his approval. Project Happen would then issue a check directly to the
applicant's landlord to cover his or her rental payment. Project Happen would then
submit the application, an eviction notice, a photocopy of the check, and a
reimbursement request form to the City of Huntsville for reimbursement.
Between December 1995 and June 1997, Harness and his co-defendants,
James and Jill Holland (the Hollands), misapplied over 150 checks from the
Project Happen accounts. Harness made numerous payments to cover his personal
obligations, including mortgage payments and credit card debts. One of the more
egregious diversions by Harness involved a $24,000 payment to Advocacy, which
was diverted by James Holland to purchase a van for Harness's personal use. To
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hide their fraudulent diversion of funds, Harness and the Hollands fabricated
payments to landlords that were supposedly made on behalf of needy applicants
and falsified records in Project Happen's books. The Hollands were also actively
engaged in the conspiracy, and wrote numerous fraudulent checks and created false
documentation to cover their activities. The FBI estimated that the defendants
illegally diverted in excess of $100,000.
Harness and the Hollands were charged in an eight-count indictment that
alleged numerous violations of federal law. Harness pleaded guilty to five of the
counts and testified on behalf of the government against the Hollands. The district
court accepted Harness's guilty plea and sentenced him to twenty-seven months'
imprisonment followed by twenty-four months' supervised release. The court
enhanced Harness's offense level two levels for his aggravating role and two levels
for his abuse of a position of trust. The court also declined to grant the
government's motion for a downward departure for substantial assistance. Harness
did not object to the probation officer's findings of fact and sentencing
recommendations in his presentence investigation report (PSR) and did not object
after the district court imposed the sentence. Harness now appeals his sentence,
arguing that the district court's adjustments and refusal to depart downward were
erroneous.
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II. Standard of Review
We review the district court's application and interpretation of the
Sentencing Guidelines under the de novo standard, but review its findings of fact
only for clear error. See United States v. Barakat, 130 F.3d 1448, 1452 (11th Cir.
1997); United States v. Williams, 51 F.3d 1004, 1011 (11th Cir. 1995). Because
Harness did not object to the probation officer's or the district court's findings of
fact and sentencing calculations, we are limited to reviewing his claims of error for
the first time on appeal under the plain error standard to avoid manifest injustice.
See United States v. Stevenson, 68 F.3d 1292, 1294 (11th Cir. 1995) (per curiam).
"For the Court to correct plain error: (1) there must be error; (2) the error must be
plain; and (3) the error must affect substantial rights." Id.
III. Discussion
A. Aggravating Role
Harness first argues that the district court erred by increasing his offense
level two levels pursuant to U.S.S.G. § 3B1.1(c) for his aggravating role in the
offense. We agree.
Section 3B1.1(c) requires a sentencing court to enhance a defendant's
offense level two levels if he was "an organizer, leader, manager, or supervisor in
any criminal activity . . . ." U.S.S.G. § 3B1.1(c). "To qualify for an adjustment
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under this section, the defendant must have been the organizer, leader, manager, or
supervisor of one or more other participants." Id. comment. (n.2) (emphasis
added).
The probation officer recommended that the court enhance Harness's offense
level two levels because he "exercised management responsibility over the
property and assets of the victim organization as contemplated by U.S.S.G. §
3B1.1(c), Application Note 2." PSR at 6, ¶ 25. This was an incorrect application
of section 3B1.1(c) because the enhancement requires that the defendant organize,
lead, manage, or supervise another participant in the criminal scheme. See
U.S.S.G. § 3B1.1, comment. (n.2). In contrast, the sentencing court has the
discretion to depart upward from the otherwise applicable sentencing range if the
defendant "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." Id. The probation officer's recommendation
that the court enhance Harness's offense level because he had management
responsibility over the assets of the victim was error, because these facts support
only a discretionary decision to depart, not a mandatory enhancement under section
3B1.1(c). See, e.g., United States v. Bapack, 129 F.3d 1320, 1324 & n.6 (D.C. Cir.
1997) (recognizing that enhancement requires control over a participant in the
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scheme, not only control over the scheme itself); United States v. Gort-DiDonato,
109 F.3d 318, 321 (6th Cir. 1997) (recognizing that enhancement required only
when defendant exerts control over another participant, whereas upward departure
may be appropriate if defendant controls only assets or activities of the criminal
enterprise); United States v. Jobe, 101 F.3d 1046, 1068 (5th Cir. 1996) (same);
United States v. Cali, 87 F.3d 571, 576-77 (1st Cir. 1996) (same); United States v.
McFarlane, 64 F.3d 1235, 1239 (8th Cir. 1995) (same); United States v. Fones, 51
F.3d 663, 668 (7th Cir. 1995) (same); United States v. Greenfield, 44 F.3d 1141,
1146 (2d Cir. 1995) (same).
Perhaps recognizing the probation officer's error, the district court amended
the PSR to state that it was imposing a two level adjustment under section 3B1.1(c)
"because [Harness] was an organizer, leader, manager or supervisor of a criminal
activity involving at least three participants."1 Sentencing Tr. at 29. Even this
conclusory statement does not indicate that Harness had the requisite control over
another participant in the criminal activity to support an enhancement under
section 3B1.1(c). Indeed, the findings of fact in the PSR and our review of the
limited record before us reveal no evidence that would support a conclusion that
1
There is no indication that the district court intended to exercise its discretion to depart
from the sentencing range. Rather, every indicator suggests that the court was applying a
mandatory adjustment under section 3B1.1(c).
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Harness had any control over any of the other participants who engaged in the
criminal activities. We conclude that the complete absence of any evidence or
findings of fact that would support a conclusion that Harness was an organizer,
leader, manager, or supervisor of one or more participants renders the district
court's enhancement under section 3B1.1(c) erroneous. Furthermore, we conclude
that this error was plain and that it affected Harness's substantial rights because he
was sentenced at the maximum of the applicable sentencing range. See United
States v. Olano, 507 U.S. 725, 734 (1993) (error is plain when it is clear or
obvious; error affects substantial rights when it affects the outcome of the
proceeding). We, therefore, vacate the sentence and remand for resentencing.2
B. Position of Trust
Harness next contends that the district court erred in enhancing his offense
level two levels pursuant to U.S.S.G. § 3B1.3 for abusing a position of trust. We
disagree.
2
We note that the record in this case is rather limited because it involved a guilty plea.
The district court presided over the trial of Harness's co-defendants and undoubtedly was very
familiar with the facts of this case. We recognize that the government may be able to show that
Harness had the requisite role in the offense to support the enhancement, and the district court
remains free to impose the enhancement if the facts support it. If the court determines that the
enhancement does not apply, it may still consider whether the facts support a discretionary
upward departure.
8
Section 3B1.3 requires a sentencing court to increase a defendant's offense
level two levels if he "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.S.G. § 3B1.3. "For the enhancement to apply, [the] defendant
must have been in a position of trust with respect to the victim of the crime, and the
position of trust must have contributed in some significant way to facilitating the
commission or concealment of the offense." United States v. Garrison, 133 F.3d
831, 837 (11th Cir. 1998) (internal quotation marks and citations omitted).
Furthermore, the position abused by the defendant must be one characterized by
professional or managerial discretion, see U.S.S.G. § 3B1.3, comment. (n.1), and
the relationship between the defendant and the victim must be more significant
than that of an arm's-length business transaction. See Garrison, 133 F.3d at 839.
Harness contends that the district court erred in enhancing his offense level
for abusing a position of trust because the relevant victim in this case was the
United States government, and he did not occupy or abuse a position of trust with
respect to the government.3 While Harness may be correct in arguing that he did
3
Harness also argues that the district court erred in enhancing his offense level under the
"special skill" provision of U.S.S.G. § 3B1.3. There is no indication that the district court relied
on the special skill provision to support the enhancement. Regardless of whether Harness used a
special skill to further his crime, we conclude that the court's decision to enhance was proper
under the abuse of position of trust provision, so we need not consider this alternative basis to
sustain the enhancement.
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not occupy or abuse a position of trust with respect to the government, his
argument ignores the fact that the PSR identified the victim in this case as the Red
Cross. The PSR states that Harness was responsible for diverting approximately
$20,000 from the Red Cross. See PSR at 5, ¶ 16. This fact supports the district
court's conclusion that the Red Cross was a victim in this case. In any event,
Harness did not object to the PSR's conclusion that the Red Cross was the victim of
the offense, see id. at 5, ¶ 17, and the district court was entitled to rely on that
conclusion for purposes of applying the enhancement. See United States v.
Hedges, --- F.3d ---, No. 97-4711, (11th Cir. May 21, 1999) (holding that a district
court may rely on undisputed conclusory statements in the PSR even in the absence
of supporting evidence).
Having concluded that the Red Cross was a victim of the offense, we now
conclude that Harness occupied and abused a position of trust with respect to this
victim. Harness was employed by the Red Cross, which was responsible for the
distribution of HUD funds via the Project Happen program. The Red Cross named
Harness to serve as Director of Project Happen and gave him check signing
authority over Project Happen's accounts. Harness used his position to illegally
divert Project Happen funds and used his position to conceal his and his co-
defendants' fraudulent activity. Based on these facts, we are satisfied that the
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district court did not commit error, let alone plain error, in concluding that Harness
abused a position of trust. The court's two level enhancement under section 3B1.3
was therefore proper.
C. Downward Departure
Harness finally argues that the district court erred in denying the
government's motion for a downward departure pursuant to U.S.S.G. § 5K1.1. We
conclude that we lack jurisdiction to consider this claim of error.
Upon motion by the government, a sentencing court may depart downward
when the defendant has "provided substantial assistance in the investigation or
prosecution of another person . . . ." U.S.S.G. § 5K1.1. The government filed such
a motion in this case. The district court recognized that it had the discretion to
depart, but concluded that a departure was not warranted in this case.
"This Court has held that a district court's discretionary refusal to depart
downward is not appealable, unless the refusal was based on an erroneous belief
that the court did not have the statutory authority to depart from the guideline
range." United States v. Sanchez-Valencia, 148 F.3d 1273, 1274 (11th Cir. 1998)
(per curiam). In this case, the district court explicitly stated that it recognized that
it had the discretion to depart, but specifically declined to do so. See Sentencing
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Tr. at 37-38. Under these circumstances, we lack jurisdiction to review this claim
of error.
IV. Conclusion
Although our review is limited to identifying plain error, we cannot identify
any evidence or findings of fact that would support the district court's adjustment
under U.S.S.G. § 3B1.1(c) for an aggravating role in the offense. We, therefore,
VACATE Harness's sentence and REMAND for resentencing consistent with this
opinion.
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