United States v. Susana P. Longo ( 2006 )

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                          FOR THE ELEVENTH CIRCUIT                     FILED
                            ________________________          U.S. COURT OF APPEALS
                                                                ELEVENTH CIRCUIT
                                                                    June 19, 2006
                                     No. 05-16201                THOMAS K. KAHN
                                 Non-Argument Calendar               CLERK
                        D. C. Docket No. 05-00026-CV-JEC-1
    a.k.a. Susana McDermott,
    a.k.a. Susana Perales,
    a.k.a. Hilda Perales,
                      Appeal from the United States District Court
                         for the Northern District of Georgia
                                    (June 19, 2006)
    Before BLACK, CARNES and BARKETT, Circuit Judges.
          Susan P. Longo appeals her 168–month, 60–month, and 120–month
    concurrent sentences for wire fraud, embezzlement from employee benefit plans,
    and money laundering in violation of 18 U.S.C. §§ 2, 664, 1343, 1349, and 1957.
    Longo contends that the district court erroneously applied the following three
    enhancements in calculating her advisory guidelines sentence: (1) a four level
    enhancement under § 2B1.1(b)(2)(B) because the offense involved fifty or more
    victims; (2) a two level enhancement under § 2B1.1(b)(9)(C) because the offense
    involved sophisticated means; and (3) a four level enhancement under
    § 2B1.1(b)(15)(A)(iii) because the offense involved a violation of securities law.
            According to the presentence investigation report (PSI), Longo was
    employed as a compliance officer with the investment advisor Applied Financial
    Group (AFG) when she diverted approximately $6.1 million from four employee
    benefit plans. In her scheme to defraud, Longo drafted checks on the plans’
    accounts and either forged the signature of a plan trustee or represented herself as
    the plan trustee and liquidated the securities held by the plan. She also forged
    checks and faxed trading orders to Charles Schwab & Co. (Schwab), the plans’
    custodian. These checks and trading orders liquidated the plans’ assets and
    transferred them to conduit accounts, also maintained by Schwab, where the
    account holder had either died or lacked the mental capacity to monitor Longo’s
    actions. Longo then drafted checks on these accounts, depositing the funds into
    her personal account.
          Two of the four plans that Longo stole from had a combined total plan
    membership of over 110 members and each member held a pro rata interest in the
    plans’ assets. One of those plans (with about 50 members) incurred approximately
    $500,000 in legal fees and expenses as a result of Longo’s fraud that, like Longo’s
    theft, diminished the total plan assets. The liquidation and eventual freezing of the
    plans’ assets also resulted in more direct problems for the individual plan
    participants, especially retired individuals who used the money to pay living
    expenses. For instance, one man was forced to return to the workforce after his
    retirement, another had to get two jobs to make ends meet, and a third had to
    borrow $10,000 to avoid losing his retirement home.
          We review a district court’s findings of fact for clear error and the
    application of the guidelines to those facts de novo. United States v. Ndiaye, 
    434 F.3d 1270
    , 1280 (11th Cir. 2006). A finding that a defendant used sophisticated
    means is a finding of fact reviewed for clear error. See United States v. Barakat,
    130 F.3d 1448
    , 1457 (11th Cir. 1997). Having reviewed the record and considered
    the parties’ briefs, we discern no reversible error.
          Longo contends that the district court improperly enhanced her sentence by
    providing a four level enhancement under section 2B1.1 of the guidelines for an
    offense involving fifty or more victims. See U.S.S.G. § 2B1.1(b)(2) (2004).
    Under that section, a victim is defined in part as “any person who sustained any
    part of the actual loss determined under subsection (b)(1) . . . ‘Person’ includes
    individuals, corporations, companies, associations, firms, partnerships, societies,
    and joint stock companies.” Id., comment. (n.1). Actual loss is defined as “the
    reasonably foreseeable pecuniary harm that resulted from the offense.” Id.,
    comment. (n.3).
          Longo’s contention concerns two separate questions. The first is whether
    reimbursement precludes a person from being considered a victim. The second is
    how victims should be counted—in this case whether each plan counts as a single
    victim or whether each individual participant in the plan counts as a victim. Our
    decision in United States v. Lee, 
    427 F.3d 881
    , 894–95 (11th Cir. 2005), cert.
    denied sub nom. Wyman v. United States, 
    126 S. Ct. 1447
     (2006), is controlling as
    to the first question. In that case we held that a victim who is reimbursed for his
    losses qualifies as a victim for the purposes of § 2B1.1(b)(2)(A). We concluded
    that the Sixth Circuit misread the guidelines commentary in United States v. Yagar,
    404 F.3d 967
     (6th Cir. 2005), when it held that bank account holders who were
    reimbursed by the banks for the cost of buying new checks were not victims
    because they were fully reimbursed for their temporary loss. Id. Even if the
    payments by the insurance companies and other third parties as well as the monies
    recovered from Longo during the state receivership proceedings fully reimbursed
    the employee benefit plans for their loss (and it is not clear that they did), this
    reimbursement does not preclude any of the persons who suffered an actual loss
    from being considered victims under § 2B1.1(b)(2).
          As to the second question, we conclude that the district court did not err in
    finding that the plan participants should be counted as victims under § 2B1.1(b)(2).
    Longo stole money from four employee benefit plans, two of which had a
    combined membership of 110 participants. As the statements of some of the plan
    participants show, they each individually suffered pecuniary harm because they
    each owned a pro rata share of the plan assets and held them jointly and severally.
    The harm to the participants was reasonably foreseeable as Longo was embezzling
    massive amounts of money directly from the plans. Each of the plan participants
    suffered an actual loss and so each was a victim. Because there were over fifty
    participants, the district court did not clearly err in applying the four level
    enhancement under § 2B1.1(b)(2).
          Longo’s second contention is that the district court clearly erred in applying
    the sophisticated means enhancement. We disagree. Section 2B1.1 provides for a
    two level enhancement if the offense involved sophisticated means. U.S.S.G.
    § 2B1.1(b)(9)(C) (2004). The commentary states that sophisticated means are
          especially complex or especially intricate offense conduct pertaining
          to the execution or concealment of an offense. For example, in a
          telemarketing scheme, locating the main office of the scheme in one
          jurisdiction but locating soliciting operations in another jurisdiction
          ordinarily indicates sophisticated means. Conduct such as hiding
          assets or transactions, or both, through the use of fictitious entities,
          corporate shells, or offshore financial accounts also ordinarily
          indicates sophisticated means.
    § 2B1.1, comment. (n.8(B)). Not all actions need to be sophisticated in order to
    support a sophisticated means enhancement; it is sufficient if the totality of the
    scheme was sophisticated. United States v. Halloran, 
    415 F.3d 940
    , 945 (8th Cir.
    2005); United States v. Finck, 
    407 F.3d 908
    , 915 (8th Cir. 2005), cert. denied, 
    126 S. Ct. 282
     (2005) (“Repetitive and coordinated conduct, though no one step is
    particularly complicated, can be a sophisticated scheme.”).
          Longo engaged in repetitive and coordinated conduct requiring multiple
    financial transactions before she received money. Her scheme involved forgery,
    misrepresentation, falsification and destruction of documents, re-routing of mail,
    and selection of conduit account holders who were unlikely to discover her use of
    those accounts. Even though certain aspects of Longo’s scheme were not
    sophisticated, the district court did not clearly err in finding that the offense
    considered as a whole involved sophisticated means.
          Finally, we disagree with Longo’s third contention that the district court
    erred in imposing a securities law violation enhancement. Her contention is
    two–fold: (1) that the district court failed to make findings as to the enhancement
    and (2) that the record does not support that every element of the underlying
    offense conduct is satisfied. Both arguments fail.
          The district court made adequate findings as to this enhancement. The court
    adopted the PSI in its entirety only excluding any exceptions it specifically stated.
    Although the court did not make explicit findings of fact as to this enhancement, its
    adoption of the PSI’s facts and recommendation on this issue is sufficient to permit
    meaningful appellate review.
          With respect to Longo’s second argument, the record shows that the district
    court did not err in applying the securities law enhancement. Section 2B1.1(b)(15)
    provides for a four level enhancement if the offense involved “a violation of
    securities law and, at the time of the offense, the defendant was . . . an investment
    adviser, or a person associated with an investment adviser.” U.S.S.G.
    § 2B1.1(b)(15). Under the plain language of that enhancement it requires a
    showing that (1) the defendant violated a securities law and (2) that the defendant
    was a qualifying individual at the time of the violation. Securities law is defined as
    “18 U.S.C. §§ 1348, 1350, and the provisions of law referred to in section 3(a)(47)
    of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(47)); and . . . includes
    the rules, regulations, and orders issued by the Securities and Exchange
    Commission pursuant to the provisions of law referred to in such section.” Id.,
    comment. (n.14(A)). A person associated with an investment advisor1 includes
    partners, officers, or directors of an investment advisor and employees of an
    investment advisor, except (in some instances) those whose functions are clerical
    or ministerial. Id., 15 U.S.C. § 80b-2(a)(17).
           The PSI indicated that Longo’s actions constituted a violation of several
    securities laws, including 15 U.S.C. § 77q(a) which states:
           It shall be unlawful for any person in the offer or sale of any securities
           or any security-based swap agreement (as defined in section 206B of
           the Gramm-Leach-Bliley Act) by the use of any means or instruments
           of transportation or communication in interstate commerce or by use of
           the mails, directly or indirectly
               Defined as a person or company “who, for compensation, engages in the business of
    advising others, either directly or through publications or writings, as to the value of securities or
    as to the advisability of investing in, purchasing, or selling securities, or who, for compensation and
    as part of a regular business, issues or promulgates analyses or reports concerning securities.”
    U.S.S.G. § 2B1.1, comment. (n.14(A)) (2004); 15 U.S.C. § 80b-2(a)(11).
                 (1) to employ any device, scheme, or artifice to defraud . . . .
    15 U.S.C. § 77q(a).
          Longo makes a cursory argument that § 77q(a) does not apply because “the
    record does not clearly establish a statutory violation—that is, that in the offer or
    sale of securities Ms. Longo committed one of the listed § 77q(a) prongs by the use
    of means or instruments of communication in interstate commerce.”
          The Supreme Court has noted that the term offer and sale in § 77q(a)(1) are
    “expansive” terms that Congress “expressly intended to define broadly.” United
    States v. Naftalin, 
    441 U.S. 768
    , 772–73, 
    99 S. Ct. 2077
    , 2081–82 (1979) (holding
    that placing orders with brokers for the sale of stock a defendant did not actually
    own constituted fraud in the offer and sale of securities in violation of § 77q(a)(1)
    because the statute’s terms encompassed the entire selling process and applied
    regardless of any injury to a purchaser).
          Longo misrepresented herself as a plan trustee and directed the liquidation of
    securities. She forged checks and, using interstate telephone lines, faxed forged
    trading orders to Schwab, which had the effect of liquidating plan assets. She
    directed the withdrawal of cash from the proceeds of the securities to be deposited
    into accounts unrelated to the securities. By doing so she defrauded Schwab, the
    plans’ custodian, who believed the transactions were legitimately authorized. She
    directed the sale of securities using channels of interstate commerce in a scheme to
    defraud. These actions satisfy the elements of § 77q(a). See Naftalin, 441 U.S. at
    772–73, 99 S. Ct. at 2081–82. Thus the record clearly shows that Longo violated a
    securities law that meets the first requirement for the § 2B1.1(b)(15) enhancement.
          The only remaining question is whether Longo was a qualifying individual
    under the enhancement provision, and we conclude that she was because she was a
    person associated with an investment advisor. Longo’s employer AFG was a
    registered investment advisor. At the time of the violation, Longo was a
    compliance officer who managed portfolios and (ironically) had responsibility for
    ensuring that activities and transactions affecting AFG’s clients were authorized
    and conducted in compliance with state and federal law. She was an employee
    with more than clerical or ministerial duties. Because the undisputed facts
    establish that Longo violated a securities law and was a person associated with an
    investment advisor, the district court did not err in applying the enhancement.