United States v. Baretz, Lloyd ( 2005 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 03-3332
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
LLOYD J. BARETZ,
Defendant-Appellant.
____________
Appeal from the United States District Court for
the Northern District of Illinois, Eastern Division.
No. 03 CR 206-1—Suzanne B. Conlon, Judge.
____________
ARGUED JUNE 7, 2004—DECIDED JUNE 21, 2005
____________
Before POSNER, RIPPLE and ROVNER, Circuit Judges.
RIPPLE, Circuit Judge. Lloyd J. Baretz was charged in a
twenty-two-count indictment and pleaded guilty, in ac-
cordance with a plea agreement, to three counts of wire
fraud, in violation of 18 U.S.C. § 1343, and to one count of
conspiracy to commit money laundering, in violation of 18
U.S.C. § 1956(h). The district court, applying the 1997
version of the United States Sentencing Guidelines (“1997
Guidelines”), sentenced him to 151 months in prison on the
conspiracy count and to 60 months in prison on each count
of wire fraud; these sentences were to run concurrently. Mr.
2 No. 03-3332
Baretz appeals his sentence. We held this case in abeyance
pending the decision of the Supreme Court of the United
States in United States v. Booker, 125 S. Ct. 738 (2005), and we
then invited the parties to file supplemental memoranda
presenting their views on the application of Booker to this
case. For the reasons set forth in the following opinion, we
now vacate the sentence and remand for further proceed-
ings consistent with this opinion.
I
BACKGROUND
A. Facts
The wire fraud scheme to which Mr. Baretz pleaded guilty
involved the sale of telephone-call accounts receivable to the
Royal Bank Export and Finance Corporation (“REFCO”).
Mr. Baretz was the president and principal shareholder of
Oxford Capital Corporation (“Oxford”) and the president of
Plymouth Capital Corporation (“Plymouth”). Both of these
corporations were engaged in the business of factoring
accounts receivable. Factoring is the purchase of a com-
pany’s invoices at a discount.
The scheme at issue here involved the factoring of tele-
phone-call receivables. A telephone-call receivable is the
debt created when an individual places a telephone call
to receive certain information at a price (such as a call to a
1-900 number) and agrees to pay for the receipt of that
information at a later date. The debt created by this transac-
tion is an account receivable to the Information Provider
(“IP”), the company that provided the information in the
call.
Integretel Inc. (“Integretel”) was a corporation engaged in
the business of servicing and purchasing telephone-call
No. 03-3332 3
receivables. Integretel serviced IPs by sorting their records
and collecting the receivables from each caller’s telephone
company. Integretel then would remit the collected revenue,
minus a service fee, to the IP. Integretel also offered its
customers an “early pay” program. Under this program,
Integretel would purchase, at a discount, the telephone-call
receivables from the IP. This arrangement allowed the IP to
receive revenue immediately rather than wait for the debt
to be collected.
Integretel had a contract with Plymouth, one of
Mr. Baretz’ companies. This arrangement was called a mas-
ter factoring agreement. Under this agreement, Plymouth
would purchase, at a discount, specific telephone-call
receivables from Integretel. Plymouth thus assumed actual
ownership of those receivables. In order to finance its
purchase of receivables from Integretel, Plymouth had a
further agreement with REFCO, under which REFCO would
purchase, at a discount, from Plymouth the receivables that
Plymouth had purchased earlier from Integretel.
Under this agreement, there were limitations with respect
to the receivables purchased by REFCO. REFCO would pur-
chase only certain identified receivables from Plymouth.
The agreement also limited, by dollar amount, the receiv-
ables that REFCO would purchase from any one telephone
company. The contract also capped REFCO’s outstand-
ing balance to Plymouth at any one time at $75 million.
Plymouth warranted to REFCO that it had good title, free of
encumbrances, to all of the receivables that it sold to
REFCO. REFCO had the right to compel Plymouth to
repurchase any telephone-call receivable that remained
unpaid after 90, and later, 120 days.
Oxford, Mr. Baretz’ other company, acted as Plymouth’s
agent in purchasing telephone-call receivables from
Integretel, assigning them to telephone companies for col-
4 No. 03-3332
lection and selling them to REFCO. Periodically, Oxford
would fax to REFCO an “advance request,” which listed the
receivables to be purchased by REFCO, the outstanding
balance on receivables already sold to REFCO, and the
number of months those receivables had been outstanding.
Based on the advance request, REFCO would wire payment
to Oxford’s bank account for the purchase of the agreed
upon receivables. Oxford then would deduct its fee and
wire the balance to Integretel’s bank account.
In December 1995, Mr. Baretz caused Plymouth/Oxford
to begin submitting to REFCO fraudulent or wholly fic-
titious advance requests. In some cases, if Plymouth had
purchased receivables from Integretel that exceeded
REFCO’s agreed limits from a specific telephone company,
Plymouth would substitute a false receivable for another
telephone company. In other cases, Plymouth simply sub-
mitted fictitious receivables. Generally, Mr. Baretz misap-
propriated the excess funds paid by REFCO but not used to
offset Plymouth’s payments to Integretel for personal and
other business uses. From August 1997 until April 1998,
when the fraud scheme was discovered, Plymouth/Oxford
stopped purchasing accounts receivable from Integretel and
sold only fictitious receivables to REFCO.
In order to fund and conceal his fraud, Mr. Baretz en-
gaged in “weekend sweeps.” To run these sweeps, at
the end of each week Oxford would borrow money from
Integretel (which, unknown to REFCO, Mr. Baretz owned as
of January 1996) and forward that money to REFCO.
The funds thus remitted to REFCO were represented to be
payments on genuine receivables. This misrepresentation
concealed that REFCO previously had been sold fictitious
receivables that could not generate receipts. In addition, the
weekend sweeps funds were identified to REFCO as
payments on older receivables that Mr. Baretz wanted to
No. 03-3332 5
retire. This scheme avoided REFCO’s right to compel
Plymouth to repurchase receivables that remained unpaid
for more than 120 days.
At the same time, in order to keep REFCO’s investment at
approximately $75 million, Plymouth/Oxford would send
an advance request to REFCO for further purchases. This
resulting cash infusion allowed Plymouth/Oxford to repay,
early the following week, the loan received from Integretel
and gave Mr. Baretz funds with which to make personal
expenditures and to pay other outstanding debts.
The extent of this deception was grand: Plymouth/
Oxford never owned more than $25 million in early-pay
receivables from Integretel; yet, Plymouth/Oxford had a
receivables balance with REFCO of $75 million. The Govern-
ment submits, and Mr. Baretz has not disputed, that, over
the course of this scheme, he and his co-defendants submit-
ted to REFCO more than $400 million in fictitious receiv-
ables for purchase. The sweep transactions from Integretel
to Plymouth/Oxford involved more than $290 million.
B. District Court Proceedings
Because it is central to the contentions of the parties on
appeal, we shall set forth in some detail the methodology
employed by the district court in sentencing Mr. Baretz.
1.
The presentence investigation report (“PSR”) calculated
Mr. Baretz’ recommended sentence for the wire fraud
counts as follows. The probation officer applied the 1997
Guidelines, the version of the guidelines in effect at the time
of the offense. The probation officer used this version rather
than the version in effect at the time of sentencing to avoid
6 No. 03-3332
what she perceived to be a violation of the Ex Post Facto
Clause. See U.S.S.G. § 1B1.11(b). In her view, the 1997
version of the guidelines was more beneficial to Mr. Baretz.
In applying the guidelines, the officer grouped Counts One,
Four and Seven because the offense level for each largely
was determined by the total amount of loss. The base
offense level was 6 under § 2F1.1.
Section 2F1.1(b) directed that, if the fraud loss amount
exceeded $2,000, the offense level should be increased
according to the loss table in that section. Turning to the loss
table, the probation officer first determined that REFCO had
forwarded $75 million to Plymouth/Oxford for the pur-
chase of telephone-call receivables. The officer then sub-
tracted from this figure $21 million that REFCO had recov-
ered from the sale of collateral pledged by Mr. Baretz.
Mr. Baretz disputed this calculation; he submitted that
REFCO’s loss was collateralized in full; therefore the fraud
loss amount was $0. Specifically, he urged that, at the time
the fraud was discovered, REFCO had a perfected security
interest in the billed and unbilled accounts receivables to be
paid by the telephone companies and that this collateral
adequately covered all of REFCO’s financial exposure. See
U.S.S.G. § 2F1.1, application note 7(b) (instructing that, if the
defendant fraudulently obtained a loan by misrepresenting
the value of his assets, the loss equals the amount of the
loan not repaid at the time the offense is discovered,
reduced by the amount the lending institution has recov-
ered, or can expect to recover, from any asset pledged to
secure the loan). The probation officer, however, recom-
mended that none of this collateral reduce the loss amount,
because REFCO had not been able to liquidate these re-
ceivables and had not received any of the purported assets
to reduce the amount owed.
No. 03-3332 7
The probation officer also identified another factor
relevant to sentencing—relevant conduct. Based on informa-
tion submitted by the Government, the probation officer
noted that Mr. Baretz had committed fraud against other
banks. See U.S.S.G. § 1B1.3. Mr. Baretz contended, however,
that these alleged frauds were not relevant conduct because
they were neither part of a common scheme to defraud nor
part of the same course of conduct as the offense involving
REFCO. The probation officer recommended holding Mr.
Baretz responsible for $23.9 million in loss to the other
banks. Adding this figure to the $54 million in loss to
REFCO, the total recommended fraud loss amount was
$77.9 million, which called for a 17-level upward adjustment
under § 2F1.1(b)(1)(R).
The probation officer also suggested a 2-level enhance-
ment for “more than minimal planning,” in accordance with
§ 2F1.1(b)(2), and another 2-level enhancement because
REFCO was a financial institution within the meaning of
§ 2F1.1(b)(6)(B).
The district court rejected Mr. Baretz’ collateral offset
objection to the amount of fraud loss calculated in the PSR;
it reasoned:
[A]t the time the fraud was discovered, it has certainly
not been shown that the bank had any invested col-
lateral rights in the receivables, particularly unidentified
non-early pay receivables. Sure, they might have had a
far-stretched claim under [In re Telesphere
Communications, Inc., 167 B.R. 495 (Bkrtcy. 1994), rev’d,
205 B.R. 535 (N.D.Ill. 1997)]. That isn’t a vested collat-
eral right. That would have been a dubious right. In any
case, it would have probably taken a lawsuit which
would probably still be going on if that was the course
that the bank had decided or REFCO had decided to
follow.
8 No. 03-3332
I have reviewed a letter that was submitted to the
probation office on behalf of the bank. And it appears to
me that the bank reasonably relied on advice of counsel
in not pursuing an arguable Telesphere remedy. And
that it’s the bank’s recourse to these receivables is, at
best, questionable. And then, as I said, if the bank had
decided to exercise some claim or pursue some claim
against receivables which, arguably, Integretel owned,
although it’s not beyond a doubt, or that Plymouth had
recourse to, that litigation would have certainly gone on
after exposure of the fraud. And what remains unchal-
lenged is, at the time the scheme was exposed, there
were no receivables to support the fraudulent sales to
REFCO. At least it hasn’t appeared to me to be such.
R.106-1 at 49-50. The district court expressly found that the
$54 million in loss to REFCO was established by a prepon-
derance of the evidence. With respect to the $23.9 million in
loss to the other banks, the district court stated that “it is
relevant conduct. And so the presentence report accurately
and sufficiently attributes the loss as resulting in a 17 level
increase.” Id. at 51.
In addition, the district court ruled that REFCO was not a
financial institution and that, consequently, a 2-level
enhancement under § 2F1.1(b)(6)(B) was not appropriate.
The court further enhanced Mr. Baretz’ offense level by 2
levels under § 3B1.1(c), based on its finding that he was an
organizer or leader of the offense. The final adjusted offense
level for the wire fraud offenses was 27.
2.
With respect to the money laundering offense (Count 22),
the probation officer concluded that the base offense level
was 23. See U.S.S.G. § 2S1.1(a). The adjusted offense level
No. 03-3332 9
largely was determined by the value of funds laundered by
Mr. Baretz. See id. § 2S1.1(b)(2) (instructing that if the value
of the funds exceeded $100,000, the offense level should be
increased according to the value table). The probation
officer estimated that Mr. Baretz had laundered more than
$289 million using his system of weekend sweeps.
Neither of the parties believed that the full credit line
ought to be the measure of the loss. The Government
suggested that the amount of loss due to the fraud, $54
million, might be a better indicator of the value of funds
laundered because REFCO’s exposure to loss never had
been more than $75 million and because much of the money
had been cycled through the system several times. Mr.
Baretz argued that it was erroneous to conclude that he had
intended to launder the full amount of the credit line. He
contended that, although REFCO was misled about the
source of the funds it received through the weekend sweeps,
the sweeps had paid down the loan portfolio by the same
amount as the amount of the payments from the local
telephone companies. Despite the position of both parties
that the full credit line was not the appropriate measure of
the loss, the probation officer nevertheless recommended
$75 million as the value of funds laundered because this
amount was REFCO’s maximum exposure at any given
time. Based on the $75 million value of funds calculation,
the probation officer recommended a 12-level enhancement.
See id. § 2S1.1(b)(2)(M).
The district court acknowledged, early into the hearing,
that Mr. Baretz had objected to the PSR’s recommended
value of the funds laundered. Nevertheless, the court never
made a specific ruling as to the accuracy of this finding. The
district court accepted the probation officer’s calculation
that the offense level was 37; implicitly, therefore, the
district court accepted that the value of funds was
10 No. 03-3332
$75 million. We do not know, however, why the court re-
jected the view of the Government and the view of the
defendant.
Under § 3D1.2(c), all of the counts of conviction (the
wire fraud counts and the money laundering count) were
grouped together. The offense level applicable to this group
was the offense level for the most serious of the counts,
which was the money laundering offense. See id. § 3D1.3(a).
Thus, the adjusted offense level was 37. The district court
then reduced this offense level by 3 points based on its
finding that Mr. Baretz had accepted responsibility for
purposes of § 3E1.1. The total offense level was 34, which
resulted in a sentencing range of 151 to 188 months.
3.
Mr. Baretz also requested a downward departure. After
calculating Mr. Baretz’ total offense level, the district court
stated to defense counsel: “Now you had a position for
downward departure. Don’t you know those don’t exist
anymore except in cooperation agreements? But go ahead.”
R.106-1 at 69. Defense counsel then presented his argument;
Mr. Baretz spoke in allocution; and the Government pre-
sented its contrary argument. Without expressly ruling on
the motion, the district court said, “All, right, is there any
reason why sentence cannot be imposed at this time,” and
it proceeded to impose sentence. Id. at 82.
The district court sentenced Mr. Baretz to 151 months in
prison. In imposing this sentence, the court expressed that
the sentence “is more than adequate. I think it’s, frankly,
high, but it’s the lowest sentence mandated by the guide-
lines considering all the factors that apply to this case. So I’ll
impose sentence at the bottom end of the guideline
range . . . .” Id. at 83.
No. 03-3332 11
II
DISCUSSION
A. Version of the Guidelines Applied
Mr. Baretz contends that the district court erred by
applying the wrong version of the guidelines. Although, in
light of the Supreme Court’s decision in Booker, the guide-
lines no longer are mandatory, a sentencing court still “must
consult those Guidelines and take them into account when
sentencing.” Booker, 125 S. Ct. at 767. As this court recently
has articulated, the provision of the Sentencing Reform Act
that mandates resentencing when the challenged sentence
resulted from an “ ‘incorrect application of the sentencing
guidelines,’ ” 18 U.S.C. § 3742(f)(1), remains in effect after
Booker. United States v. Scott, 405 F.3d 615, 617 (7th Cir.
2005). “An incorrect application of the guidelines [therefore]
requires resentencing under the post-Booker sentencing
regime.” Id. (citing United States v. Gleich, 397 F.3d 608, 615
(8th Cir. 2005)); see also United States v. Skoczen, 405 F.3d 537,
549 (7th Cir. 2005) (“Even under an advisory regime, if a
district court makes a mistake in calculations under the
Guidelines, its judgment about a reasonable sentence would
presumably be affected by that error and thus (putting aside
the implications of plain error review) remand would be
required just as before.”); United States v. Davis, 397 F.3d
340, 346 (6th Cir. 2005) (“We read Booker to require that
when district courts consult the Guidelines, they are to
continue to consider the sentence, sentencing range, and
pertinent policy statements contained in those Guidelines,
as required by § 3553(a)(4) and (5).”). Consequently, if the
district court erred in its choice of the applicable guidelines,
its choice is still very important in this post-Booker era.
Sentencing courts must apply the guidelines in effect on
the date the defendant is sentenced, unless the court deter-
12 No. 03-3332
mines that doing so would violate the Ex Post Facto Clause
of the Constitution of the United States. See 28 U.S.C.
1 2
§ 3553(a)(4) & (5); U.S.S.G. § 1B1.11; see also United States
1
Section 3553(a) provides in relevant part:
(a) Factors to be considered in imposing a sentence.—The
court shall impose a sentence sufficient, but not greater than
necessary, to comply with the purposes set forth in para-
graph (2) of this subsection. The court, in determining the
particular sentence to be imposed, shall consider—
....
(4) the kinds of sentence and the sentencing range
established for—
(A) the applicable category of offense committed by
the applicable category of defendant as set forth in
the guidelines—
(i) issued by the Sentencing Commission pursu-
ant to section 994(a)(1) of title 28, United States
Code, subject to any amendments made to such
guidelines by act of Congress (regardless of
whether such amendments have yet to be
incorporated by the Sentencing Commission
into amendments issued under section 994(p) of
title 28); and
(ii) that, except as provided in section 3742(g),
are in effect on the date the defendant is
sentenced;
....
(5) any pertinent policy statement—
(A) issued by the Sentencing Commission pursuant
to section 994(a)(2) of title 28, United States Code,
subject to any amendments made to such policy
(continued...)
No. 03-3332 13
v. Lanas, 324 F.3d 894, 904 (7th Cir. 2003) (noting that court
erred by using an earlier version of the guidelines rather
than the version in effect at time of sentencing). Mr. Baretz
was sentenced on August 19, 2003. The operative version of
the guidelines at that time was the 2002 Guidelines, together
with its supplement issued on April 30, 2003 (the “amended
3
2002 Guidelines”). Instead, the district court applied the
1
(...continued)
statement by act of Congress (regardless of whether
such amendments have yet to be incorporated by
the Sentencing Commission into amendments
issued under section 994(p) of title 28); and
(B) that, except as provided in section 3742(g), is in
effect on the date the defendant is sentenced.
28 U.S.C. § 3553(a).
2
Section 1B1.11 provides in part:
(a) The court shall use the Guidelines Manual in effect on the
date that the defendant is sentenced.
(b)(1) If the court determines that use of the Guidelines
Manual in effect on the date that the defendant is sentenced
would violate the ex post facto clause of the United States
Constitution, the court shall use the Guidelines Manual in
effect on the date that the offense of conviction was commit-
ted.
U.S.S.G. § 1B1.11.
3
Mr. Baretz appears to maintain that the district court should
have applied the 2002 Guidelines without the April 2003 amend-
ments. See Reply Br. at 8. We cannot accept this view in light of
this circuit’s (and many other circuits’) rule that sentencing
calculations must be made using a single guidelines manual in its
entirety, rather than allowing a defendant to pick and choose
(continued...)
14 No. 03-3332
1997 Guidelines (the operative version at the time of the
offense) based on the probation officer’s conclusion that the
earlier version was more beneficial to Mr. Baretz.
1.
At the beginning of our analysis, we must determine
whether Mr. Baretz waived this challenge to his sentence
and therefore cannot raise the matter before us on appeal.
“Waiver occurs when a defendant intentionally relinquishes
a known right.” United States v. Staples, 202 F.3d 992, 995
(7th Cir. 2000). Such a deliberate act on the part of the
defendant “extinguishes the error and precludes appellate
review.” Id. By contrast, a defendant “forfeits his rights by
failing to assert them in a timely manner.” Id. When a
simple forfeiture, as opposed to a waiver, occurs, we may
review for plain error. Id.The record in this case will not support the conclusion
that Mr. Baretz knew of his right to be sentenced under the
2002 version of the guidelines—the version in effect at the
time of sentencing—or knew that the application of the 2002
Guidelines well might yield a lower sentence than the 1997
Guidelines. Indeed, Mr. Baretz garnered no advantage by
accepting the use of the 1997 version; the only apparent
explanation for its application is that Mr. Baretz and his
counsel did not realize that using the expired version was
incorrect. Because the record does not evidence a knowing
abandonment, we shall review the district court’s use of the
3
(...continued)
from favorable provisions contained in various versions of the
guidelines. See United States v. Anderson, 61 F.3d 1290, 1301 (7th
Cir. 1995).
No. 03-3332 15
1997 Guidelines for plain error. See United States v. Hall, 212
F.3d 1016, 1022 (7th Cir. 2000) (applying plain error review
to defendant’s assertion, raised for the first time on appeal,
that sentence imposed under guidelines in effect at time of
sentencing, not at time of offense, violated the ex post facto
prohibition).
2.
The plain error standard allows us to “correct an error
that the defendant failed to raise below only when there was
(1) error, (2) that is plain, and (3) that affects substantial
rights.” United States v. Henningsen, 402 F.3d 748, 750 (7th
Cir. 2005) (citing United States v. Olano, 507 U.S. 725, 732
(1993)); see also Fed. R. Crim. P. 52(b). “If these conditions
are met, an appellate court may exercise its discretion to
notice a forfeited error if (4) the error seriously affects the
fairness, integrity, or public reputation of the proceedings.”
Id. (citing Olano, 507 U.S. at 732).
The Government concedes that the 1997 Guidelines “was
not more favorable than the version in effect at the time
of sentencing.” Appellee’s Br. at 28. A comparison of
Mr. Baretz’ potential sentence under the amended 2002
Guidelines to the sentence he received under the 1997
Guidelines reveals that the Government is correct.
As we already have noted, due to the multiple-count
adjustment under § 3D1.3(a), Mr. Baretz’ total offense level
was the offense level for his money laundering offense.
After the 1997 Guidelines were published and before
Mr. Baretz’ sentencing, the entire method for calculating the
offense level for money laundering offenses was altered. In
particular, instead of specifying a base offense level of 23 or
20 depending upon the statute of conviction, § 2S1.1(a) now
16 No. 03-3332
ties the base offense level to the offense level for the under-
lying offense from which the laundered funds were ob-
4
tained.
The parties in this case agree that the offense level for
5
Mr. Baretz’ underlying fraud offenses would be 30. This
results from a base offense level of 6, see U.S.S.G. § 2B1.1(a)
(Supp. 2003), and a 24-level enhancement based on the
district court’s finding of loss exceeding $50 million, see id.
§ 2B1.1(b)(1)(M) (Supp. 2003). Accordingly, the base offense
level for the money laundering offense also would be 30. See
id. § 2S1.1(a) (2002).
The parties also agree that 2 offense levels would be
added because Mr. Baretz was convicted under 18 U.S.C.
§ 1956, see id. § 2S1.1(b)(2)(B) (2002), and that 2 more levels
would be added based on the district court’s finding of his
role in the offense, see id. § 3B1.1(c) (2002). The adjusted
offense level at this point would be 34.
The parties dispute the remaining calculations. The
Government submits that another 2 levels would be added
4
Section 2S1.1(a) provides in part:
(a) Base Offense Level:
(1) The offense level for the underlying offense from
which the laundered funds were derived, if (A) the
defendant committed the underlying offense (or would
be accountable for the underlying offense under subsec-
tion (a)(1)(A) of § 1B1.3 (Relevant Conduct); and (B) the
offense level for that offense can be determined . . . .
U.S.S.G. § 2S1.1(a) (2002).
5
Although Mr. Baretz disputes the district court’s findings with
respect to the fraud loss amount and relevant conduct, he ap-
parently accepts those findings for purposes of arguing that the
district court erred by applying the 1997 Guidelines.
No. 03-3332 17
because the record establishes that the offense involved
“sophisticated laundering” within the meaning of
§ 2S1.1(b)(3) (2002). The Government further submits that
Mr. Baretz would be entitled only to a 2-level reduction for
acceptance of responsibility, as opposed to the 3 levels
awarded by the district court under the 1997 Guidelines.
The Government points to a change in the operation of
the acceptance of responsibility guideline, § 3E1.1, imple-
mented by the 2003 supplement. Unlike prior versions of
§ 3E1.1, the amendment permits a district court to award a
defendant a third point for acceptance of responsibility only
upon a formal motion by the Government. See id. § 3E1.1(b)
6
(Supp. 2003). The Government asserts that Mr. Baretz
would receive only a 2-point decrease because it “never
moved or otherwise agreed” that he was entitled to a third
point for acceptance of responsibility. Appellee’s Br. at 30.
The total offense level calculated by the Government would
be 34, which results in a sentencing range of 151 to 188
months—the same range calculated by the district court
under the 1997 Guidelines.
6
Amended § 3E1.1 provides:
(a) If the defendant clearly demonstrates acceptance of
responsibility for his offense, decrease the offense level by 2
levels.
(b) If the defendant qualifies for a decrease under subsection
(a), the offense level determined prior to the operation of
subsection (a) is level 16 or greater, and upon motion of the
government stating that the defendant has assisted authori-
ties in the investigation or prosecution of his own miscon-
duct by timely notifying authorities of his intention to enter
a plea of guilty, thereby permitting the government to avoid
preparing for trial and permitting the government and the
court to allocate their resources efficiently, decrease the
offense level by 1 additional level.
U.S.S.G. § 3E1.1 (Supp. 2003).
18 No. 03-3332
Mr. Baretz takes another view of how the district court
would calculate his sentence. He submits that we cannot
assume that he would receive a sophisticated laundering
enhancement because the applicable guideline requires a
finding of fact by the district court. He also maintains that
the Government cannot fairly claim that he would not be
entitled to a full reduction for acceptance of responsibility
based on the absence of a formal motion, when such a
motion was not required and, thus, was not contemplated
by either party. Mr. Baretz calculates his total offense level
under the amended 2002 Guidelines as 31, which would
yield a sentencing range of 108 to 135 months; a marked
difference from the 151 months’ sentence he received under
the 1997 Guidelines.
We must conclude that the district court erred in its
conclusion that Mr. Baretz would receive a more severe
sentence under the amended 2002 Guidelines and that,
therefore, ex post facto concerns required that the court
employ the 1997 Guidelines. Furthermore, this error is plain.
See Olano, 507 U.S. at 734 (“ ‘Plain’ is synonymous with
‘clear’ or, equivalently, ‘obvious.’ ”).
Under our pre-Booker jurisprudence, the application of the
wrong guidelines constituted plain error and required a
7
remand for resentencing. The same approach is required by
7
See, e.g., United States v. Hall, 212 F.3d 1016, 1022 (7th Cir. 2000)
(“ ‘[A] sentence based on an incorrect guideline range constitutes
an error affecting substantial rights and can thus constitute plain
error.’ ” (quoting United States v. Robinson, 20 F.3d 270, 273 (7th
Cir. 1994)); United States v. Seacott, 15 F.3d 1380, 1386 (7th Cir.
1994) (finding plain error from application of guidelines in effect
at sentencing when sentence imposed potentially was three
months longer than if the court had applied guidelines in effect
at time of the offense); United States v. Kopshever, 6 F.3d 1218, 1223
(continued...)
No. 03-3332 19
our post-Booker cases; in those cases, we have said that
obedience to the Supreme Court’s mandate in Booker re-
quires that the district court first calculate the correct guide-
line sentence so that that calculation can serve as a meaning-
ful guide in the district court’s imposition of a final sen-
8
tence.
We cannot say, at this stage of the proceedings, that the
error was harmless. The district court has not made the
requisite factual findings to permit us to make that determi-
nation.
B. Downward Departure
We must also conclude that, as far as the record now be-
fore us reveals, the district court also erred in articulating
that it did not have discretion to depart downward under
the guidelines in this case.
We do not have appellate jurisdiction to review a court’s
discretionary refusal to depart downward. United States v.
Larkins, 83 F.3d 162, 168 (7th Cir. 1996). We presume,
moreover, that a district court understood its authority to
depart downward and simply decided not to do so; the
defendant has the burden to demonstrate otherwise. Id. If
the record reflects, however, that the district court thought
it had no authority to depart from the guidelines, its refusal
to depart is a legal conclusion that is subject to appellate
review. Id.
7
(...continued)
(7th Cir. 1993) (remanding ex post facto issue involving applica-
tion of amended guidelines “so that it can be decided on a fully
developed factual record”).
8
See, e.g., United States v. Scott, 405 F.3d 615, 617 (7th Cir. 2005);
United States v. Skoczen, 405 F.3d 537, 549 (7th Cir. 2005).
20 No. 03-3332
In response to Mr. Baretz’ motion for a downward
departure, the district court asked “[d]on’t you know those
don’t exist anymore except in cooperation agreements?”
R.106-1 at 69. It is possible, as the Government suggests, that
the district court’s comment that downward departures no
longer were available was simply a critical reference to the
newly enacted Prosecutorial Remedies and Tools Against
the Exploitation of Children Today Act of 2003 (PROTECT
Act), Pub. L. No. 108-21, 117 Stat. 650 (2003), or otherwise
was said in jest. We must confine our review, however, to
the cold record—a medium in which the oftentimes all-
important matters of inflection and tone are absent. We
simply cannot take the chance that such a misapprehension
might have influenced the final adjudication of a sentence.
Our concern is heightened in this respect by the court’s
statement that “I think that a sentence of 151 months is more
than adequate. I think it’s, frankly, high, but it’s the lowest
sentence mandated by the Guidelines considering all the
factors that apply to this case.” R.106-1 at 83.
In sum, on this record, we cannot be certain that the
district court properly considered and rejected Mr. Baretz’
departure arguments with a full recognition of its discretion
to depart downward. Such a misunderstanding constitutes
legal error warranting remand. See United States v. Hegge,
196 F.3d 772, 774 (7th Cir. 1999).
Conclusion
Because we have determined that the district court ap-
plied the incorrect version of the United States Sentencing
Guidelines and because the record reveals that the district
court misapprehended its authority to depart downward
No. 03-3332 21
9
from the applicable guideline range, this case must be
remanded to the district court, and the district court in-
10
structed to conduct a new sentencing. As our cases require,
in order to comply with the direction of the Supreme Court
in Booker, the district court must compute the applicable
guideline sentence and employ that computation as a guide
11
in determining the actual sentence to be imposed.
Accordingly, the sentence imposed by the district court is
vacated and the case is remanded for resentencing.
SENTENCE VACATED; CASE REMANDED
9
Mr. Baretz’ remaining submissions in this appeal deal with the
manner in which the district court applied the 1997 Guidelines.
Because we have determined that those guidelines do not govern
the calculation of the sentence in this case, any adjudication of
those matters at this time would be premature.
10
The errors that we have discussed in the text require, irrespec-
tive of United States v. Booker, 125 S. Ct. 738 (2005), a complete
resentencing. Therefore, the limited remand procedure employed
by this court in dealing with plain error under Booker is not
implicated in this case. See United States v Paladino, 401 F.3d 471(7th Cir. 2005).
11
We pause respectfully to remind our colleagues in the district
courts of the necessity of their explaining on the record the rea-
sons for their decisions in calculating the guideline sentence and
in determining the final sentence imposed. These findings are of
extreme importance to this court in fulfilling its duty to review
these adjudications. Sufficient detail in these findings always is
important. In cases such as this one, involving relatively com-
plicated financial transactions and relationships, such detailed
findings especially are important—and appreciated by those of
us who have only the cold record to guide us in our work.
22 No. 03-3332
A true Copy:
Teste:
_____________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—6-21-05
No. 03-3332 23