United States v. Dison , 330 F. App'x 56 ( 2009 )


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  •       IN THE UNITED STATES COURT OF APPEALS
    FOR THE FIFTH CIRCUIT  United States Court of Appeals
    Fifth Circuit
    FILED
    May 14, 2009
    No. 08-30045
    Charles R. Fulbruge III
    Clerk
    UNITED STATES OF AMERICA
    Plaintiff-Appellee
    v.
    ALICIA A DISON
    Defendant-Appellant
    Consolidated with
    No. 08-30108
    UNITED STATES OF AMERICA
    Plaintiff-Appellee
    v.
    RYAN D WALTERS
    Defendant-Appellant
    No. 08-30045 c/w No. 08-30108 c/w
    No. 08-30109 c/w No. 08-30196
    Consolidated with
    No. 08-30109
    UNITED STATES OF AMERICA
    Plaintiff-Appellee
    v.
    ADAM A HARRIS
    Defendant-Appellant
    Consolidated with
    No. 08-30196
    UNITED STATES OF AMERICA
    Plaintiff-Appellee
    v.
    GEOFFREY G VICE
    Defendant-Appellant
    2
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    No. 08-30109 c/w No. 08-30196
    Appeals from the United States District Court
    for the Western District of Louisiana
    USDC No. 5:07-CR-50072-4
    USDC No. 5:07-CR-50072-2
    USDC No. 5:07-CR-50072-3
    USDC No. 5:07-CR-50072-1
    Before SMITH and SOUTHWICK, Circuit Judges, and RODRIGUEZ, District
    Judge.*
    PER CURIAM:**
    This consolidated criminal appeal concerns the proper application of the
    United States Sentencing Guidelines when a defendant is convicted of bleaching
    the ink off of legitimate United States Federal Reserve notes and reprinting the
    notes in different denominations. Defendants argue that the district court erred
    in applying Section 2B5.1 rather than Section 2B1.1 to determine their base
    offense levels because they altered genuine instruments and did not falsely
    manufacture such instruments in their entirety. Defendants further maintain
    that the district court improperly enhanced their sentences under Sections
    2B5.1(b)(2)(A) and (b)(3) of the Sentencing Guidelines because the notes at issue
    were obviously counterfeit.            For the reasons that follow, we VACATE the
    defendants’ sentences, and REMAND for resentencing.
    I. BACKGROUND
    In March 2007, Louisiana State Probation and Parole agents performed
    a routine home inspection at a residence occupied by Geoffrey Vice and Ryan
    Walters. Upon searching the house, agents discovered an altered $100 bill in a
    chest of drawers in Walters’s bedroom. Walters said that the bill belonged to his
    *
    District Judge of the Western District of Texas, sitting by designation.
    **
    Pursuant to 5TH CIR . R. 47.5, we determine that this opinion should not be published
    and is not precedent except under the limited circumstances set forth in 5TH CIR . R. 47.5.4.
    3
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    brother, Adam Harris. He later confessed that he knew Vice and Harris were
    making counterfeit bills. In Vice’s bedroom, agents also found an altered $100
    bill in a purse, an HP printer, two legitimate $5 bills, and three legitimate $1
    bills floating inside a peanut butter jar containing ammonia. Vice and Alicia
    Dison arrived during the search. Dison consented to a search of her person, and
    agents found an altered $100 bill in her pocket.
    Agents also learned that prior to the home inspection, Harris had
    attempted to pass an altered note at a local McDonald’s. The cashier showed the
    bill to the manager, who identified it as counterfeit and confiscated it. The
    manager knew and recognized Harris. When he told Harris that the bill was
    counterfeit, Harris drove away. In March 2007, police stopped Harris and found
    another altered $100 bill in his car. Harris admitted that he had unsuccessfully
    attempted to pass this bill at a Wal-Mart store. In addition to the currency
    found during the searches, two other counterfeit notes bearing the same serial
    number as the notes seized were sent to the United States Secret Service.
    In August 2007, a federal grand jury returned a six-count indictment
    against Vice, Dison, Walters, and Harris.       Along with other, substantive
    counterfeiting charges, each defendant was charged with one count of conspiracy
    to make, pass, utter, possess, and conceal counterfeit Federal Reserve notes. All
    defendants pled guilty to the conspiracy charge. The remaining counts in the
    indictment were dismissed.
    At sentencing, Darron Kraft, a special agent for the United States Secret
    Service, testified that the defendants created the counterfeit $100 bills by
    soaking legitimate $1 and $5 bills in a glass jar filled with ammonia. The bills
    would be taken out periodically to scrub off ink. They would then be hung to dry
    in front of a window air conditioning unit. After the defendants removed all of
    the ink from the bills, they would use a printer to transfer the image of a $100
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    bill onto the bleached lower denomination notes.        The new, altered notes
    retained their original watermark and security thread.
    Agent Kraft also testified regarding the United States Department of
    Treasury’s policy with respect to bleached currency. Kraft explained that there
    are two designations for such bills: mutilated or unfit. Damaged or worn out
    bills can be taken to a bank and exchanged for good currency. However, once a
    bill has been damaged or altered to the point that its denomination cannot be
    discerned, it is to be turned over to the Department of Treasury’s Bureau of
    Engraving and Printing. The Treasury Department then determines whether
    the bill should be refunded at face value to the person who surrendered it. If the
    currency is deemed altered or questionable, it is turned over to the Secret
    Service for investigation. No refund is given. Finally, Kraft testified that he
    would consider bleached and reprinted bills to be counterfeit.
    The presentence report for each defendant calculated the defendant’s base
    offense level using Section 2B5.1(a) of the Sentencing Guidelines, enhanced by
    Sections 2B5.1(b)(2)(A) and (b)(3). All defendants objected to the use of Section
    2B5.1 (the section generally applicable to counterfeiting offenses) rather than
    Section 2B1.1 (the section generally applicable to theft and fraud offenses) in
    calculating their base offense levels. Defendants argued that Section 2B1.1
    should apply because they only altered Federal Reserve notes and did not
    manufacture them in their entirety. Defendants also objected to the Section
    2B5.1(b)(2)(A) and (b)(3) enhancements because the bills at issue were so
    obviously counterfeit that they were unlikely to be accepted, even if subjected to
    only minimal scrutiny. The district court overruled the defendants’ objections,
    finding the use of Section 2B5.1 appropriate.       All four defendants timely
    appealed. Their appeals have been consolidated for our review.
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    II. DISCUSSION
    Defendants contend that the district court erred in applying Section 2B5.1
    to determine their base offense levels under the Sentencing Guidelines.
    Initially, we determine whether the district court committed any significant
    procedural error. Gall v. United States, 
    128 S. Ct. 586
    , 597 (2007). If proedural
    errors were avoided, we consider the substantive reasonableness of the sentence.
    
    Id. The district
    court’s interpretation and application of the Sentencing
    Guidelines are reviewed de novo. United States v. Klein, 
    543 F.3d 206
    , 213 (5th
    Cir. 2008). Factual findings are reviewed for clear error. 
    Id. A sentencing
    court’s findings of fact are not clearly erroneous if they are “plausible in light of
    the record read as a whole.” United States v. Williams, 
    520 F.3d 414
    , 422 (5th
    Cir. 2008) (internal quotation marks and citation omitted).
    Section 2B1.1 of the Sentencing Guidelines is entitled “Larceny,
    Embezzlement, and Other Forms of Theft; Offenses Involving Stolen Property;
    Property Damage or Destruction; Fraud and Deceit; Forgery; Offenses Involving
    Altered or Counterfeit Instruments Other than Counterfeit Bearer Obligations
    of the United States.” A base offense level of six applies. The introductory
    comments for this section provide that it addresses “basic forms of property
    offenses: theft, embezzlement, fraud, forgery, counterfeiting (other than offenses
    involving altered or counterfeit bearer obligations of the United States) . . . .”
    (emphasis added). The italicized phrase creates one part of the ambiguity with
    which we must contend. The words “altered” and “counterfeit” are somewhat
    competing concepts. This heading to Section 2B1.1 excludes them both from that
    section when the offense concerns bearer obligations of the United States. The
    parties agree that the pieces of currency at issue are bearer obligations of the
    United States. On the other hand, the title to this section, which we also quoted
    above, excludes only “counterfeit bearer obligations of the United States,” not
    “altered or counterfeit” as the introductory commentary states.
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    The other possible source for the sentence argued by the parties is Section
    2B5.1. It assigns a base offense level of nine for “Offenses Involving Counterfeit
    Bearer Obligations of the United States.” That section’s Application Note 2
    states that the “guideline applies to counterfeiting of United States currency and
    coins . . . and other items that generally could be described as bearer obligations
    of the United States, i.e., that are not made out to a specific payee.” Application
    Note 3 explains that “counterfeit” means “an instrument that purports to be
    genuine but is not, because it has been falsely made or manufactured in its
    entirety. Offenses involving genuine instruments that have been altered are
    covered under [Section] 2B1.1 (Theft, Property Destruction, and Fraud).”
    (emphasis added). The italicized phrase in a Note to Section 2B5.1, which
    references Section 2B1.1 for “altered” instruments but not counterfeit ones,
    contends uncertainly with the phrase we italicized from the introductory
    commentary to Section 2B1.1, which says it applies neither to altered nor to
    counterfeit instruments. If the false currency involved in this case is altered as
    opposed to counterfeit, neither Guideline section unambiguously welcomes the
    offense for sentencing.
    The district court held that the bleached and reprinted notes were covered
    by Section 2B5.1. The court classified the notes as counterfeit bearer obligations
    within the title of Section 2B5.1 and the language of Application Note 2 to that
    section.   The court found Section 2B1.1 to be inapplicable because of its
    introductory comments that it does not apply to “altered or counterfeit bearer
    obligations of the United States.”
    As we seek the proper Guideline, we must determine whether the search
    is for a Guideline that applies to instruments that are falsely manufactured in
    their entirety, i.e., are “counterfeit,” or instead for the Guideline applicable to
    the alteration of currency. This false, high-denomination currency began as
    small-denomination bills issued by the Treasury.         Through the bleaching
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    process, a relatively clean base was created on which to photocopy a bill with a
    much larger dollar value. Using as a base the official currency paper that
    continues to contain watermarks is a critical part of the similitude that the
    counterfeiters seek.   In that physical sense, these bills were not “entirely”
    manufactured by the defendants.      The government argues, though, that in a
    legal sense, these bills were entirely manufactured.
    The government refers us to testimony from Secret Service Agent Kraft
    regarding the Department of Treasury’s policy with respect to bleached currency.
    The testimony was that the Treasury classifies bleached bills as either mutilated
    or unfit. Damaged or worn out bills can be taken to a bank and exchanged for
    good currency. However, once a bill has been damaged or altered to the point
    that its denomination cannot be discerned, it is to be turned over to the Treasury
    Department’s Bureau of Engraving and Printing. The determination is made
    whether the bill should be refunded at face value to the person who surrendered
    it. If the currency is deemed altered or questionable, it is turned over to the
    Secret Service for investigation; no refund is given. Agent Kraft testified that,
    to his knowledge, the Treasury Department does not have any reason to
    distinguish between bills that have been altered as opposed to manufactured in
    their entirety, i.e., “counterfeit” under the Guidelines.
    Although we have not considered whether bleached and reprinted notes
    are falsely made or manufactured in their entirety or merely altered, two other
    circuits provide useful guidance on this issue. See United States v. Inclema, 
    363 F.3d 1177
    (11th Cir. 2004); United States v. Schreckengost, 
    384 F.3d 922
    (7th
    Cir. 2004). In Inclema, the defendant was convicted of a counterfeiting offense
    involving bleaching genuine lower-denomination bills and using a computer
    printer to reprint the bills in a higher 
    denomination. 363 F.3d at 1179
    . The
    district court sentenced the defendant under Section 2B5.1. 
    Id. The Eleventh
    Circuit vacated the defendant’s sentence and remanded for sentencing under
    8
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    Section 2B1.1. 
    Id. The court
    held that “defendants who start with genuine
    paper currency and modify it by whatever means for the purpose of creating non-
    genuine currency should be sentenced under [Section] 2B1.1.” 
    Id. at 1182.
          Relying in part on dictionary definitions, the court’s essential point was
    that the defendant started with Federal Reserve notes and ended with Federal
    Reserve notes. 
    Id. at 1181.
    The court rejected the government’s argument that
    once the defendant bleached the notes, they became merely high-quality pieces
    of currency paper. 
    Id. The court
    explained that the bleached paper was the
    distinct paper used by the United States Treasury to print Federal Reserve
    notes, the “possession of which alone without the authority of the Secretary of
    the Treasury is a felony.” 
    Id. (citation omitted).
          Similarly, the Seventh Circuit held that bills that have been bleached and
    reprinted are altered and not counterfeit. 
    Schreckengost, 384 F.3d at 924-25
    .
    That defendant had removed the ink from genuine $5 bills and “used an inkjet
    printer to produce facsimiles of $100 bills on the blank sheets. These fakes had
    the feel of currency and could pass some tests employed to identify genuine
    bills.” 
    Id. at 923.
    The defendant pled guilty to counterfeiting and was sentenced
    in accordance with Section 2B1.1. 
    Id. The government
    appealed the defendant’s
    sentence. 
    Id. The court
    did not fully agree with the Eleventh Circuit’s analysis,
    but it reached the same conclusion. 
    Id. at 924.
    It held that the bleached and
    reprinted bills were altered instruments, and Section 2B1.1 applied. 
    Id. The government
    argues that the Seventh Circuit erred when it concluded
    that bleached bills retain their legal status as genuine instruments. Agent Kraft
    testified that the Treasury Department will not replace bills from which all of
    the ink has been removed.       However, what the Treasury will do in the
    performance of its obligations is largely beside the point. Our obligation is to
    interpret sections of the Sentencing Guidelines that are not written in terms of
    whether the United States Department of the Treasury would find the changes
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    to actual currency so substantial as to deny its holder the right to have it
    replaced.   Instead, we are to determine whether false currency has been
    manufactured by the defendant in its entirety, or whether actual currency has
    been altered.
    We agree with these other circuits that bleached and reprinted notes are
    altered, not falsely made in their entirety. The reprinted bills possess many of
    the unique security features of genuine currency, including the embedded
    security thread and watermark.       The notes are composed of the authentic
    Treasury Department paper used to print genuine Federal Reserve notes. The
    bleached and reprinted notes retain many of the physical and legal
    characteristics of their previous state and cannot be said to have been falsely
    made or manufactured in their entirety.
    Now that we have found these bills were not manufactured in their
    entirety by the defendants, we need to resolve, as a matter of first impression for
    this circuit, which Guideline section applies to that offense. Our review of the
    provisions offered by the parties has not revealed a simple answer to this
    question.   The difficulty stems primarily from an inconsistency between
    Application Note 3 to Section 2B5.1 and portions of the introductory and
    background comments to Section 2B1.1, as well as its title.
    We start our effort to resolve the sentencing questions by using ordinary
    rules of statutory construction. Those rules apply to the interpretation of the
    Sentencing Guidelines. United States v. Rabanal, 
    508 F.3d 741
    , 743 (5th Cir.
    2007). Accordingly, if the language of the Guidelines is unambiguous, the plain
    meaning of the language controls, and the court’s inquiry ends there.           
    Id. Ambiguity, though,
    will cause the court to look for evidence of meaning in other
    relevant sources. United Sates v. Palazzo, 
    558 F.3d 400
    , 405 (5th Cir. 2009).
    The commentary to a Guideline section is authoritative unless it is a plainly
    erroneous reading. Stinson v. United States, 
    508 U.S. 36
    , 38 (1993); see also
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    U.S.S.G. § 1B1.7 (“Significance of Commentary”). We have elaborated on this
    exception by stating that if the Guideline text and the commentary are
    inconsistent, the Guidelines language controls. United States v. Cervantes-
    Blanco, 
    504 F.3d 576
    , 579 n.1 (5th Cir. 2007).          We have also held, quite
    naturally, that in case of an inconsistency between an Application Note and
    Guideline language, we will apply the Guideline and ignore the Note. United
    States v. Ashburn, 
    20 F.3d 1336
    , 1340 (5th Cir. 1994).
    Another location for relevant language in this case is the heading or title
    to Section 2B1.1. To understand the importance of titles, we search the section
    of the Guidelines that sets out “General Application Principles.” See U.S.S.G.
    § 1B1.1. An Application Note to that section gives the formal label of “title” to
    a heading of a Guideline. 
    Id. at cmt.
    n.6. This Application Note implies that the
    titles have significance, in that the Note makes clear that when a short-form
    title of a Guideline is used to identify it in a cross-reference, that shortening has
    no substantive effect. 
    Id. Recognizing that
    the titles have some significance is
    unavoidable, as the section titles are simultaneously adopted with each
    Guideline section, often are key to understanding what Guideline sections cover,
    and are not mere compiler’s additions as is the case for titles in some statutes.
    See 2A NORMAN J. SINGER & J.D. SHAMBIE SINGER , STATUTES            AND   STATUTORY
    CONSTRUCTION § 47:14 (7th ed. 2007). Where titles rank in the hierarchy of
    Guideline text, commentary, or notes is not critical for us today. We only are
    finding that a section title has relevance.
    We now examine the different pieces of our interpretive puzzle.
    Application Note 3 of Section 2B5.1 defines “counterfeit” as “an instrument that
    purports to be genuine but is not, because it has been falsely made or
    manufactured in its entirety.” That Note refers to Section 2B1.1 for sentencing
    of offenses involving genuine but fraudulently altered instruments. Following
    our instructions to turn to Section 2B1.1, we there find the introductory and
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    background comments state that the Guideline does not apply to offenses
    involving “altered or counterfeit bearer obligations of the United States.” The
    title, though, only excludes counterfeit bearer obligations.
    The problem, then, is that Section 2B5.1 does not apply to “altered” bearer
    obligations of the United States, and we have found these bills to fit that
    description.   Turning to Section 2B1.1, we discover that its title excludes
    counterfeit bearer obligations of the United States; presumably, altered bills
    such as the ones in this case would be covered. However, two other parts of the
    same Guideline state that both counterfeit and altered bearer obligations of the
    United States are excluded. Neither section unambiguously wants this offense.
    The United States Sentencing Commission has recently recognized the
    difficulty courts face in reconciling these conflicting provisions. On January 27,
    2009, the Sentencing Commission published a notice of a proposed amendment.
    Notice of Proposed Amendments, Sentencing Guidelines for United States
    Courts, 74 Fed. Reg. 4802, 4821-22 (proposed Jan. 27, 2009). Included were
    amendments to the Guideline provisions at issue in this case. The proposed
    changes will take effect (though perhaps with some changes) on November 1,
    2009, unless Congress enacts a law to the contrary.
    The synopsis for the relevant proposal, entitled “Counterfeiting and
    ‘Bleached Notes,’” explains that the amendment is intended to clarify “guideline
    application issues regarding the sentencing of counterfeiting offenses involving
    ‘bleached notes.’” 
    Id. at 4821.
    It defines “bleached notes” as genuine United
    States currency that has been chemically stripped of its original image and
    reprinted to look like currency of a higher denomination. The synopsis states
    that circuit courts have reached different conclusions regarding whether Section
    2B5.1 or Section 2B1.1 should apply to bleached notes. It cites Schreckengost
    and Inclema for the view that Section 2B1.1 should apply; it cites the district
    court decision that we are reviewing for the proposition that Section 2B5.1
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    should apply.   “The proposed amendment resolves this circuit conflict and
    responds to concerns expressed by federal judges and members of Congress
    concerning the guidelines pertaining to offenses involving bleached notes.” 
    Id. The Commission
    suggests that the source for the difficulty regarding
    bleached notes is Application Note 3 to Section 2B5.1. The Commission explains
    that under the definition of counterfeit in Application Note 3, “courts have had
    to consider whether a bleached note should be considered falsely made or
    manufactured in its entirety (and therefore sentenced under §2B5.1) or an
    altered note (and therefore sentenced under §2B1.1).” 
    Id. at 4821-22.
    The
    corrective for the future is to make Section 2B5.1 apply.
    The proposed amendment resolves this issue to provide that
    offenses involving bleached notes are to be sentenced under §2B5.1.
    Specifically, the proposed amendment deletes Application Note 3
    and revises the definition of “counterfeit” to more closely parallel
    relevant counterfeiting statutes, for example 18 U.S.C. §§ 471
    (Obligations or securities of the United States) and 472 (Uttering
    counterfeit obligations or securities).
    
    Id. at 4822.
          The impact of the proposed amendment on us is limited. The amendment
    was not in effect at the time the defendants were sentenced. It remains
    ineffective. Thus, retroactive application of the changes is not an issue. More
    importantly, the proposed amendment and its synopsis do not take a position on
    the meaning of the current version of the Guidelines. The Commission merely
    seeks to clarify the sentencing for future cases and does not resolve the
    uncertainty with which we are concerned.
    Faced with such ambiguity, recognized though not yet resolved by the
    proposed amendments to the Guidelines, “we are constrained to apply the rule
    of lenity in this case.” United States v. Orellana, 
    405 F.3d 360
    , 370 (5th Cir.
    2005). The rule of lenity provides that “‘ambiguity concerning the ambit of
    criminal statutes should be resolved in favor of lenity.’” Jones v. United States,
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    529 U.S. 848
    , 858 (2000) (quoting Rewis v. United States, 
    401 U.S. 808
    , 812
    (1971)). Thus, “‘when [a] choice has to be made between two readings of what
    conduct Congress has made a crime, it is appropriate, before we choose the
    harsher alternative, to require that Congress should have spoken in language
    that is clear and definite.’” 
    Id. (quoting United
    States v. Universal C.I.T. Credit
    Corp., 
    344 U.S. 218
    , 221-22 (1952)). Although the proposed amendments to the
    Guidelines would allow Section 2B5.1 to be used in the future, the rule of lenity
    applies until that time. We find Section 2B1.1 to be the Guideline provision for
    determining the defendants’ base offense levels in this case.
    Because we hold that Section 2B1.1 is the appropriate starting point for
    calculating the defendants’ Guidelines sentencing range, we need not reach the
    defendants’ second issue on appeal, whether the Section 2B5.1(b)(2)(A) and (b)(3)
    enhancements were properly applied. On remand, the district court should
    calculate the defendants’ sentences in accordance with Section 2B1.1.
    III. CONCLUSION
    For the foregoing reasons, we VACATE the defendants’ sentences, and
    REMAND for resentencing under Section 2B1.1.
    14