United States v. Anne Stover , 93 F.3d 1379 ( 1996 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
No. 94-3148/3150/3301MNST
United States of America, *
*
Appellee/Cross-Appellant, *
* Appeal from the United States
vs. * District Court for the
* District of Minnesota.
Anne Stover and Rita Chandi, *
*
Appellants/Cross-Appellees.*
On the Court's own motion, the opinion and judgment filed
August 15, 1996, are rescinded. The attached revised opinion will
replace the opinion filed August 15, 1996.
August 22, 1996
Order Entered at the Direction of the Court:
Clerk, U.S. Court of Appeals, Eighth Circuit.
____________
No. 95-3148
____________
United States of America, *
*
Appellee, *
*
v. *
*
Anne Stover, now known as *
Anne Elise Cohen, *
*
Appellant. *
____________
No. 95-3150
____________
United States of America, *
*
Appellee, *
* Appeals from the United States
v. * District Court for the
* District of Minnesota
Rita Chandi, *
*
Appellant. *
____________
No. 95-3301
____________
United States of America, *
*
Appellant, *
*
v. *
*
Anne Stover, now known as *
Anne Elise Cohen, *
*
Appellee. *
--------------
United States of America, *
*
Appellant, *
*
v. *
*
Rita Chandi, *
*
Appellee. *
____________
Submitted: February 14, 1996
Filed: August 22, 1996
____________
Before McMILLIAN, LAY and HANSEN, Circuit Judges.
____________
McMILLIAN, Circuit Judge.
Before this court are two consolidated appeals and a cross-
appeal. Anne Stover and Rita Chandi (together defendants) appeal
from separate and final judgments entered in the United States
District Court for the District of Minnesota after each pled guilty
to one count of mail fraud, in violation 18 U.S.C. § 1341. Stover
was sentenced to twenty-four months imprisonment, three years
supervised release, a special assessment of fifty dollars, and
restitution in the amount of $40,000 to be paid jointly and
severally with Chandi. United States v. Stover, No. CR 3-94-98(1)
(D. Minn. Aug. 21, 1995) (judgment). Chandi was sentenced to
eighteen months imprisonment, three years supervised release, a
special assessment of fifty dollars, and restitution in the amount
of $40,000 to be paid jointly and severally with Stover. United
States v. Chandi, No. CR 3-94-98(2) (D. Minn. Aug. 21, 1995)
(judgment). For reversal, defendants argue that the district court
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clearly erred in finding that they knowingly targeted unusually
vulnerable victims for purposes of imposing a two-level sentencing
-3-
enhancement pursuant to U.S.S.G. § 3A1.1 (Nov. 1994).1 Chandi
separately argues that the district court clearly erred in finding
that she was accountable for losses in excess of $500,000 as part
of her offense conduct under U.S.S.G. § 2F1.1(b)(1)(K). The
government, on cross-appeal, argues that the district court abused
its discretion in failing to identify the victims to whom
restitution is owed and in ordering Stover to pay only $40,000 in
restitution when the undisputed evidence at sentencing showed a
loss to victims in the amount of $643,617. For the reasons
discussed below, we affirm in part and reverse in part, and remand
the case to the district court for resentencing.
Background
In December 1988, Stover founded Families for Children (FFC),
an adoption agency based in St. Paul, Minnesota.2 FFC was licensed
by the Minnesota Department of Human Services as a nonprofit
corporation in 1990 and registered with the Minnesota Attorney
General as a charity in 1992. According to Stover, FFC initially
concentrated on placing for adoption children born in foreign
countries. In 1991, however, FFC shifted its focus to the
placement of American-born infants. During the relevant period of
time, Stover had the title Executive Director of FFC and Chandi had
the title Associate Director of FFC.
1
Pursuant to guideline amendments effective November 1, 1995,
this guideline provision now appears in U.S.S.G. § 3A1.1(b).
2
There is some disagreement over whether Chandi participated
in founding FFC. She claims that she did not become involved in
FFC until 1992. The indictment alleges that Stover and Chandi
founded FFC together in 1988, and Stover refers to herself and
Chandi as "co-founders" of FFC.
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FFC operated by entering into contracts with prospective
adoptive individuals, couples, or families (hereinafter referred to
as "clients"), requiring them to pay an up-front fee ranging up to
-5-
$11,500. Meanwhile, FFC would seek out pregnant women who were
willing to give up their babies for adoption (referred to as "birth
mothers"), by offering them financial and other forms of support.
FFC held itself out as specializing in open adoptions, in which the
birth mother would take part in the selection of the adoptive
parent or parents and would be permitted periodic contact with the
child.
By mid-1992, the demand for children from FFC clients exceeded
FFC's available and anticipated supply. Stover and Chandi began
lying to their clients. According to the facts admitted in their
plea agreements, defendants
knowingly made intentional misrepresentations to
prospective and existing clients about the ratio of
birth mothers to adoptive parents that were clients
at FFC. These intentional misrepresentations
included, but were not limited to, statements at
various times that FFC was working with
approximately 30 birth mothers, and had only
approximately 30 waiting clients. In reality, at
the time these statements were made, the true
number of birth mothers was much lower than stated,
and the true number of waiting clients was much
higher than stated.
Designated Record at 24-25 (Stover's Plea Agreement ¶ 1); id. at
31-32 (Chandi's Plea Agreement ¶ 1).
On October 4, 1993, the Minnesota Attorney General's Office
filed a complaint against FFC and also applied for and obtained a
temporary injunction closing down FFC and appointing a receiver to
wind up FFC's affairs. According to the government, upon examining
FFC's records, authorities discovered that FFC had approximately
seventy-five clients on its waiting list and was working with only
one or two birth mothers as of October 1993. Id. at 9 (Indictment
¶ 18).
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-7-
The government states that Stover's salary was $88,000 per
year as of June 1992 and, after further raises (which she gave
herself), was up to $95,150 per year as of October 1993. The
government further alleges that Stover paid herself $2,500 per
month in "rent" for FFC's use of the basement of her house, even
though her monthly mortgage payment for the whole house was only
approximately $1,500; she also used FFC funds to pay for a car for
herself, day care for her children, and domestic services.
Chandi's salary during the same time period increased from
approximately $21,000 to $42,500 per year.
On August 24, 1994, defendants were charged in an eighteen-
count indictment. They each pled guilty to count eight of the
indictment, alleging mail fraud in violation of 18 U.S.C. § 1341.
The plea agreement included a provision acknowledging the district
court's authority, pursuant to 18 U.S.C. § 3663(a)(3), to order
restitution in any amount up to and including the amount of loss
deemed to be relevant conduct under U.S.S.G § 3F1.1(b)(1).
The presentence investigation report (PSR) recommended that
each defendant receive a two-level upward adjustment for targeting
unusually vulnerable victims. U.S.S.G. § 3A1.1 (Nov. 1994)
(vulnerable victim enhancement). Defendants objected to the
recommendation. The government supported it and submitted
extensive documentation, including victim impact statements, to
illustrate the manner in which defendants allegedly preyed upon
people who were particularly desperate to adopt. At sentencing,
the district court applied the two-level victim-related enhancement
to each defendant's guidelines calculation.
The PSR also set forth the precise amount of loss suffered by
each of seventy-two FFC clients, which totalled $643,617.
Consequently, defendants' base offense level of 6 was increased by
10 pursuant to U.S.S.G. § 2F1.1(b)(1)(K) (offense conduct provision
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requiring a 10-level increase if loss is more than $500,000). The
PSR also recommended exact restitution to each victim.
The district court calculated Stover's and Chandi's total
offense levels as 17 and 15, respectively. Each was assigned a
criminal history category I. Stover was sentenced to twenty-four
months imprisonment and Chandi was sentenced to eighteen months,
each receiving the lowest sentence within their respective ranges.
As to restitution, the district court initially ordered defendants
to pay restitution as ordered by the probation office, without
specifying the amount of restitution owed or the names of the
victims. The government moved for modification of the restitution
order on grounds that the order lacked sufficient specificity. In
its written judgments and commitment orders, the district court
ordered defendants each jointly and severally accountable to pay
$40,000 in restitution, but still did not specify the names of the
victims or the amounts owed to them individually. These appeals
and cross-appeal followed.
Discussion
Application of vulnerable victim enhancement
Defendants argue that the district court erred in giving them
each a two-level upward adjustment under the vulnerable victim
provision, U.S.S.G. § 3A1.1 (Nov. 1994), which provides: "[i]f the
defendant knew or should have known that a victim of the offense
was unusually vulnerable due to age, physical or mental condition,
or that a victim was otherwise particularly susceptible to the
criminal conduct, increase by 2 levels." The district court
explained its reasons for imposing the two-level adjustment under
§ 3A1.1 as follows.
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This crime involved fraud that preyed upon
the victims' willingness to spend large amounts of
money in order to adopt children. This situation
is similar to
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the scenarios described in Application Note 1 to
§ 3A1.1, which indicates that the enhancement
should apply "where the defendant marketed an
ineffective cancer cure or in a robbery where the
defendant selected a handicapped victim."[3] The
victims' strong desire to adopt made them
financially more vulnerable than other individuals
and particularly susceptible to [defendants']
criminal conduct.
Designated Record at 180-81 (statement of reasons for imposing
sentence (Stover) at 1-2); id. at 185-86 (statement of reasons for
imposing sentence (Chandi) at 1-2). Defendants argue that the
district court based its decision upon the financial vulnerability
of their victims. Therefore, they argue, the district court erred
because, according to this court's holding in United States v.
Ravoy, 994 F.2d 1334 (8th Cir. 1993), financial vulnerability is
generally not a ground for finding the existence of a vulnerable
victim.
Defendants further argue that, under applicable case law, the
vulnerable victim enhancement applies only where there is evidence
of both an unusual vulnerability or particular susceptibility of
the victim and targeted exploitation of that weakness. Defendants
maintain that the mere fact that their clients had the desire to
adopt children made the fraud possible, but did not make their
clients unusually vulnerable or particularly susceptible to the
crime. See United States v. Paige, 923 F.2d 112, 113-14 (8th Cir.
1991) (reversing application of enhancement even though defendant
targeted young store clerks because he considered them
inexperienced and naive; such clerks were not unusually
vulnerable). Even if their clients' desire to adopt was powerful,
3
In the current version of the Guidelines Manual, reflecting
amendments that became effective November 1, 1995, these examples
are contained in application note 2. U.S.S.G. § 3A1.1, comment.
(n.2) (Nov. 1995).
-11-
defendants argue, there is no evidence that the clients' judgment
was particularly impaired. Second, defendants argue that there was
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no evidence that they targeted their victims' vulnerabilities, as
the law requires. See, e.g., United States v. Callaway, 943 F.2d
29, 31 (8th Cir. 1991) (although victim was young and handicapped,
record does not support a finding that the defendant chose her
victim because of those factors); United States v. Cree, 915 F.2d
352, 354 (8th Cir. 1990) (enhancement justified only when
defendant's actions in some way exploited or took advantage of the
victim's vulnerability). On this point, defendants maintain that
they had every intention of successfully placing a child with each
of their clients and, therefore, this case is materially different
from those in which the fraud is based upon deliberately false
promises. Defendants conclude that, because neither of the two
requirements exists in the present case, the district court erred
in imposing the vulnerable victim enhancement under U.S.S.G.
§ 3A1.1.
In response, the government argues that the district court did
not clearly err in making its vulnerable victim finding. The
government argues that this case is analogous to the example in the
commentary, to which the district court referred, concerning the
defendant who markets an ineffective cure for cancer. U.S.S.G.
§ 3A1.1, comment. (n.2) (Nov. 1995); id. comment. (n.1) (Nov.
1994). The government maintains that many of defendants' victims
had problems with infertility and suffered the attendant emotional
effects of that condition. Moreover, the government argues,
defendants knew about these problems from the written forms filled
out by some of their prospective clients. The government claims
that defendants targeted those clients' emotional vulnerability by
promising a "quick fix." The government maintains that,
notwithstanding the district court's failure to cite the
infertility of some of the victims as a ground for finding unusual
vulnerability, this court should uphold the sentencing enhancement
on that basis.
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The government further suggests that the district court's
application of § 3A1.1 is supported by cases in which the
defendants were given the enhancement because they victimized a
specific group or class of people. The government cites, for
example, United States v. McDermott, 29 F.3d 404, 411 (8th Cir.
1994), in which this court upheld the application of § 3A1.1 to the
sentences of two defendants convicted of racially-motivated hate
crimes where the victims included geographically-isolated, African-
American youth and a physically-disabled fourteen-year-old
Caucasian girl. The government notes that, in McDermott, this
court rejected the argument that the victims' race could not be the
basis for applying a § 3A1.1 enhancement even though the victims of
such civil rights violations typically are racial minorities. Id.
at 411.4 Similarly, the government argues, the victims in the
present case shared a desire to adopt children and that desire may
have made the fraud possible, but it certainly did not diminish the
victims' particularized emotional vulnerability. The government
also argues that defendants' claim of innocent intentions goes to
the question of whether there was intentional fraud and is
irrelevant to this sentencing issue. Moreover, the government
emphasizes the wording of § 3A1.1 which broadly states that the
two-level adjustment applies if the defendant "knew or should have
known" that the victim was unusually vulnerable or particularly
susceptible to the criminal conduct. The government maintains that
the requirement in Eighth Circuit case law, that the defendant must
"target" an unusually vulnerable victim, should not eclipse the
plain meaning of the guideline provision. See, e.g., United States
v. O'Brien, 50 F.3d 751, 757 (9th Cir. 1995) (emphasizing "knew or
4
Under the current version of the guidelines, reflecting the
amendments effective November 1, 1995, a defendant who
intentionally selects a victim because of actual or perceived race,
color, religion, national origin, ethnicity, gender, disability, or
sexual orientation is now subject to a 3-level enhancement under a
separate subsection of § 3A1.1, entitled "Hate Crime Motivation."
U.S.S.G. § 3A1.1(a) (Nov. 1995).
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should have known" language as basis for affirming application of
§ 3A1.1 enhancement).
We begin by noting that our analysis is complicated by the
fact that after defendants' sentencing, but before defendants'
appeals were submitted to this court, the sentencing guidelines
were amended, effective November 1, 1995. As a consequence, what
was formerly U.S.S.G. § 3A1.1 became § 3A1.1(b). The exact wording
of the guideline provision has not changed, nor have the
hypothetical examples in the accompanying commentary. However, the
commentary has been changed in one important respect. The pre-
November 1995 commentary included the sentence: "This adjustment
applies to offenses where an unusually vulnerable victim is made a
target of criminal activity by the defendant." U.S.S.G. § 3A1.1
comment. (n.1) (Nov. 1994). That commentary language was the
foundation for the targeting requirement relied upon in decisions
such as Cree, 915 F.2d at 353-54 (quoting commentary). However, in
the current version of the Sentencing Commission's commentary, that
key sentence has been replaced by the statement: "Subsection (b)
applies to offenses involving an unusually vulnerable victim in
which the defendant knows or should have known of the victim's
unusual vulnerability." U.S.S.G. § 3A1.1(b) comment. (n.2) (Nov.
1995). In making this change, the Sentencing Commission
specifically stated "[t]his amendment revises the Commentary of
§ 3A1.1 to clarify application with respect to [the targeted
victim] issue." U.S.S.G. App. C, Amend. 521, at 430 (Nov. 1995)
(emphasis added).
In the aftermath of this "clarification" by the Sentencing
Commission, we will be required to consider carefully the
continuing vitality of our previously well-established holding that
"enhancing a defendant's sentence based on victim vulnerability is
justified only when a defendant's actions in some way exploited or
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took advantage of that vulnerability." Cree, 915 F.2d at 354. We
note, for example, that in United States v. Feldman, 83 F.3d 9, 16
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(1st Cir. 1996), the First Circuit observed that under the pre-
November 1995 guidelines
the "target" language split the circuits on the
issue of whether the government had to prove that
the defendant was motivated by the victim's special
vulnerability in order to lay a foundation for the
upward adjustment, see, e.g., United States v.
Smith, 39 F.3d 119, 124 (6th Cir. 1994); United
States v. Cree, [915 F.2d at 354], or whether the
government merely had to show that the defendant
targeted his [or her] victim with the knowledge
(actual or constructive) that the victim was
unusually vulnerable, see, e.g., United States v.
O'Brien, [50 F.3d at 754-55].
The First Circuit then concluded:
[a]s for future cases, the Sentencing Commission
has removed all reasonable doubt by amending the
commentary to § 3A1.1. In an effort to resolve
"some inconsistency in the application of § 3A1.1
regarding whether this adjustment required proof
that the defendant had 'targeted the victim on
account of the victim's vulnerability,'" U.S.S.G.
App. C, Amend. 521, at 430 (Nov. 1995), the
Commission deleted the "target" language.
Feldman, 83 F.3d at 16. Thus, the First Circuit held that cases
such as Cree no longer represented the prevailing rule.
Id.
In the present case, after defendants' appeals were submitted
to the court, the parties supplemented their briefs with letters to
the court concerning the applicability of the guideline amendments
to defendants' sentences. Defendants argue that we should apply
the guidelines in effect at the time of sentencing, notwithstanding
the November 1995 amendments. The government argues that Amendment
521 governs the present case because it is expressly a
"clarification" of the guidelines.
-17-
The government's position appears to be supported by United
States v. Stinson, 30 F.3d 121, 122 (11th Cir. 1994) (per curiam),
-18-
in which the Eleventh Circuit, on remand from the Supreme Court,
instructed the district court to resentence the defendant in
accordance with an amendment to the commentary of the guidelines,
even though that amendment had become effective after the
defendant's original sentencing. The Eleventh Circuit's decision
to apply the guidelines amendment retroactively was based upon the
fact that the amendment was purportedly a "clarification" and not
a substantive change in the law. Id. ("[a]lthough we have doubts
that this amendment just clarifies the pertinent guidelines (as
opposed to making a substantive change in the law), we cannot
conclude that the Commission's viewing of the amendment as a
clarification is plainly wrong").
However, a determination that an amendment is a
"clarification" does not necessarily end the inquiry. In Stinson
v. United States, 508 U.S. 36, 42-43 (1993) (remanding the case to
the Eleventh Circuit), the Supreme Court held that, even though the
commentary to the guidelines is generally authoritative and binding
on the courts, "[i]t does not follow that commentary is binding in
all instances." The Supreme Court went on to explain that "the
guidelines are the equivalent of legislative rules adopted by
federal agencies. The functional purpose of commentary (of the
kind at issue here) is to assist in the interpretation and
application of those rules." Id. at 45. "[T]his type of
commentary is akin to an agency's interpretation of its own
legislative rules." Id. "[P]rovided an agency's interpretation of
its own regulations does not violate the Constitution or a federal
statute, it must be given `controlling weight unless it is plainly
erroneous or inconsistent with the regulation.'" Id. (emphasis
added) (citations omitted).
In United States v. Stinson, it was clearly understood that
the defendant's sentence would be decreased if the amendment were
applied. 30 F.3d at 122 (defendant's felon-in-possession offense
was basis for establishing his career offender status and amendment
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specifically excluded that offense from the category of predicate
crimes of violence). Consequently, no issue existed as to whether
-20-
resentencing under the amended commentary would violate the ex post
facto clause of the Constitution. In the present case, by
contrast, Amendment 521, affecting the commentary to § 3A1.1, would
have the effect, if any, of increasing defendants' sentences.
"Article I of the United States Constitution provides that neither
Congress nor any State shall pass any 'ex post facto Law.'" Miller
v. Florida, 482 U.S. 423, 429 (1987). As a general rule of
constitutional law, a violation of the ex post facto prohibition
occurs where (1) the law applied is retrospective, that is, it
applies to events occurring before its enactment, and (2) it is
disadvantageous to the defendant to whom it is applied, provided,
however, that it does not involve merely a procedural change and
its onerous effects are not offset by other ameliorative
provisions. Id. at 430-32. In the present case, the commentary to
U.S.S.G. § 3A1.1 is a "law" for purposes of engaging in ex post
facto analysis. See, e.g., United States v. Levi, 2 F.3d 842, 844-
45 (8th Cir. 1993) (holding that, while the sentencing guidelines
and commentary are "laws" for purposes of ex post facto analysis,
some policy statements are not). Therefore, notwithstanding the
Sentencing Commission's description of Amendent 521 as a
"clarification," we hold that applying the new language set forth
in U.S.S.G. § 3A1.1 comment. (n.2) (Nov. 1995), as opposed to the
language set forth in U.S.S.G. § 3A1.1 comment. (n.1) (Nov. 1994),
would in this case violate the Constitution's prohibition against
ex post facto laws because: the application would be retrospective;
it would, if anything, increase defendants' sentences; it would not
merely involve a procedural change; and it would not be offset by
other ameliorative provisions. We therefore decline to apply the
new commentary. We analyze this particular case according to the
law as it existed at the time of defendants' criminal conduct,
which, for all intents and purposes, is the same as the law which
existed at the time of sentencing and at the time the parties
initially briefed this case. We now turn to the merits of the
vulnerable victim issue.
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We review for clear error the district court's finding that
there was a vulnerable victim in the present case. United States
v. Cron, 71 F.3d 312, 314 (8th Cir. 1995); United States v. Boult,
905 F.2d 1137, 1138-39 (8th Cir. 1990) (existence of a vulnerable
victim is a factual determination reviewable under the clearly
erroneous standard). In the present case, we are not dealing with
one of the types of victim vulnerability expressly enumerated in
§ 3A1.1 (i.e., age, physical or mental condition). Rather, we are
faced with the difficult question of whether defendants' victims
were "otherwise particularly susceptible to the criminal conduct,"
within the meaning of § 3A1.1. In United States v. Castellanos, 81
F.3d 108, 110-11 (9th Cir. 1996) (emphasis added), the Ninth
Circuit provided the following interpretation of that elusive
language, based upon a survey of numerous decisions of the federal
courts of appeals.
[I]t is not enough to support a finding of
particular susceptibility under § 3A1.1 that the
victims are more likely than other members of the
general population to become a victim to the
particular crime at issue. The reason for this is
that criminals will always tend to target their
victims with an eye toward success in the criminal
endeavor. Thus, the chosen victims are usually
more susceptible than the general population to the
criminal conduct.
The appellate courts have consistently
refused to find a class of victims to be
particularly susceptible to criminal conduct simply
because they were statistically more likely to fall
prey to the defendant's crime. . . .
. . . .
Especially in cases involving some kind of
scheme to defraud, the criminal will typically
direct his [or her] activities toward those persons
most likely to fall victim to the scheme. But all
defendants targeting such victims do not
necessarily merit a sentence enhancement under
§ 3A1.1. Otherwise, all but the most unthinking of
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criminal defendants would be candidates for upward
adjustment under § 3A1.1. Instead, the victims to
whom § 3A1.1 applies are those who are in need of
greater societal protection. . . . They are the
persons who,
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when targeted by a defendant, render the
defendant's conduct more criminally depraved.
Paige, 923 F.2d at 113.
We agree with the above-quoted interpretation of the phrase
"otherwise particularly susceptible to the criminal conduct," as
used in § 3A1.1. With that in mind, we now turn to the arguments
presented in these appeals. To begin, we agree with defendants'
argument that persons who desire to adopt, when victimized by a
scheme to defraud in the adoption business, are "[a]s a general
class, . . . not the type of class as a whole for which § 3A1.1 was
designed." Brief for Appellant Stover at 12. Cf. United States v.
Morrill, 984 F.2d 1136, 1137 (11th Cir. 1993) (en banc) (per
curiam) (on remand from the Supreme Court, holding that bank
tellers, as a group, are not "otherwise particularly susceptible"
to bank robbery within the meaning of the guidelines); accord
U.S.S.G. § 3A1.1(b), comment. (n.2) (Nov. 1995); id. comment. (n.1)
(Nov. 1994) ("a bank teller is not an unusually vulnerable victim
solely by virtue of the teller's position in a bank").
However, the district court determined that the enhancement
was appropriate in the present case because defendants preyed upon
their victims' "strong desire to adopt" and their seemingly blind
willingness to spend large amounts of money toward that end. The
district court compared the victims in the present case to the
hypothetical cancer patient looking for a cure, used as an example
in the commentary to § 3A1.1. In light of that comparison, we
understand the district court's reasoning to be that defendants
preyed on victims whose particular susceptibility derived from
their "strong desire to adopt," not their financial circumstances.
Therefore, defendants' reliance on Ravoy is misplaced. See Brief
for Appellant Stover at 9 (citing Ravoy, 994 F.2d at 1335-36
(vulnerable victim finding based upon "distressed financial
circumstances" was clearly erroneous because the victims, although
-25-
mostly low-income people who had fallen on hard economic times,
lacked a sufficiently particularized vulnerability)).
The case before us is similar in many respects to the example
in the commentary referring to the defendant who markets an
ineffective cure for cancer. In both cases, it appears that the
victims' vulnerability results from a sense of desire or
desperation, presumably created by circumstances beyond their
control. However, in the commentary example, we can also presume
that the hypothetical victim of the fraud is a person afflicted
with a potentially fatal medical condition. Recognizing that there
are no bright lines in this analysis, we think the need for
societal protection, and the inference of heightened criminal
depravity, is greater in the cancer patient context than in the
adoption setting. In our opinion, the cancer patient's inherent
desperation for a life-saving cure is sufficiently different from
the "strong desire to adopt" felt by the victims in the present
case that a distinction should be drawn for purposes of applying
§ 3A1.1. Moreover, the mere fact that many of defendants' victims
were readily disposed to spend thousands of dollars in order to
pursue their heartfelt dreams of having a child still does not, in
our opinion, create the type of particular susceptibility
contemplated by § 3A1.1. The clients' willingness to spend such
large sums of money made them more likely to fall victim to
defendants' fraud, but did not create the extra need for societal
protection which § 3A1.1 is designed to address. Therefore,
without intending to discount the pain and disappointment suffered
by defendants' victims, we hold that the district court's
vulnerable victim finding was clearly erroneous.
We next turn to the government's main argument on this
issue -- that it was, more specifically, the infertility of some of
defendants' victims that made those victims particularly
-26-
susceptible to the fraud. As a threshold matter, we recognize that
we may consider this proposed basis to affirm, which was presented
-27-
by the government to the district court but not expressly mentioned
by the district court in its statement of reasons for making its
vulnerable victim finding. See United States v. Garrido, 995 F.2d
808, 813 (8th Cir.) (the court of appeals may affirm on any ground
supported by the record), cert. denied, 510 U.S. 926 (1993). We
further recognize that, given the proper set of facts, a person's
infertility, if known to the defendant, might support a finding of
particular susceptibility to adoption-related fraud. Cf. United
States v. Malone, 78 F.3d 518, 522-23 (11th Cir. 1996) (affirming
application of § 3A1.1 adjustment to carjacking offenders who
targeted cabdrivers whom the defendants knew were required to take
certain unusual risks, as opposed to other less easily victimized
drivers). However, upon careful review of the record in the
present case, we find no evidence that defendants offered their
services selectively rather than to the general public at-large.
Moreover, the evidence indicates that defendants vigorously pursued
the business of anyone who was willing to pay their fees, without
any genuine regard for how unfortunate the clients' particular
circumstances were. In the present case, the fact that defendants
were able to bait and hook clients who had difficulties with
infertility, and were possibly emotionally distraught as a result,
was inherent in the nature of their ruthless crime, but does not
suggest that those victims were "targets" within the pre-November
1995 meaning of U.S.S.G. § 3A1.1. In other words, the government
did not demonstrate that defendants' actions in some way exploited
or took advantage of the victims' infertility, or that any of the
victims were chosen for that reason. Therefore, we hold that,
under the law applicable to the present case, the vulnerable victim
enhancement was not justified. See, e.g., Callaway, 943 F.2d at
31; Cree, 915 F.2d at 354 (enhancement justified only when
defendant's actions in some way exploited or took advantage of the
victim's vulnerability); U.S.S.G. § 3A1.1, comment. (n.1) (Nov.
1994) ("[t]his adjustment applies to offenses where an unusually
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vulnerable victim is made a target of criminal activity by the
defendant").
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Amount of loss attributable to Chandi under U.S.S.G. § 2F1.1
Chandi additionally argues that the district court imposed a
ten-level increase based upon a clearly erroneous finding that the
amount of loss for which she was responsible exceeded $500,000.
See U.S.S.G. § 2F1.1(b)(1)(K) (offense conduct provision requiring
a 10-level increase if loss is more than $500,000). Chandi argues
that the $643,617 loss figure should have been reduced in her case
because (1) thirteen couples, whose fees accounted for $107,705 of
the $643,617 total figure, were FFC clients before she joined the
agency and (2) eight additional couples from New York, whose fees
accounted for $37,275, had no contact with her and only paid fees
pursuant to a New York law which limits fees to services rendered.
Chandi argues that, subtracting these amounts, the total loss
attributable to her is less than $500,000, thereby reducing her
total offense level by one.
Upon review, we hold that, as to the New York clients, the
evidence supports an inference that Chandi did in fact have contact
with those clients. In any case, under § 2F1.1, Chandi is
responsible for those clients' losses because they were a
foreseeable consequence of defendants' fraudulent scheme. See
U.S.S.G. § 1B1.3 (specific offense characteristics such as amount
of loss shall be based upon all reasonably foreseeable acts and
omissions of others in furtherance of jointly undertaken criminal
activity). Chandi's contention that New York law prohibits
agencies from charging for services not yet rendered is irrelevant
because the payments made by the New York clients were all based
upon FFC's misrepresentations, and none of those clients
successfully adopted a child through FFC. Thus, the amount of loss
attributable to Chandi exceeds $500,000, regardless of whether she
may be held accountable for losses suffered by clients whom FCC
acquired prior to June 1992. Accordingly, we hold that the
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district court's finding as to the total amount of loss
attributable to Chandi was not clearly erroneous.
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Identification of victims in the restitution order
The government argues, on cross-appeal, that the district
court abused its discretion in fashioning its restitution order.
First, the government argues that, despite its repeated and
specific requests, the district court failed to identify by name
the victims of the ordered restitution (i.e., the payees). The
government maintains that it is implicit throughout the language of
18 U.S.C. § 3663 and U.S.S.G. § 5E1.1 (restitution), that, when
restitution is ordered, the victim must be specifically named. For
example, the government points out that, under 18 U.S.C.
§ 3663(h)(2), a victim named in a restitution order may enforce
that order as a civil judgment; however, when no victim is
specifically named in a restitution order, it is "problematic," if
not impossible, for victims to enforce the restitution order in the
event that the defendant fails to pay. Moreover, the government
points out, U.S.S.G. § 5E1.1 (emphasis added) provides that the
restitution order "should specify the manner in which, and the
persons to whom, payment is to be made."
In the present case, the restitution section of each
defendant's written judgment contains the following statement
directly beneath the heading "Name of Payee": "Information to be
submitted by the probation office." Designated Record at 169
(Stover's judgment); id. at 174 (Chandi's judgment). Upon careful
review of the law governing the district court's authority to order
restitution, we hold that the district court lacked authority to
leave the designation of the payee or payees entirely to the
discretion of the probation office, as indicated in the written
judgments. As a general rule, the district courts should designate
the recipient or recipients when ordering restitution pursuant to
18 U.S.C. § 3663. See United States v. Miller, 900 F.2d 919, 922-
24 (6th Cir. 1990) (vacating sentences and remanding to the
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district court for, among other things, clarification of "whom it
has found to be a victim entitled to restitution payments and the
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amount of restitution each victim is to be paid"); accord United
States v. Seligsohn, 981 F.2d 1418, 1423 (3d Cir. 1992) ("the court
should designate recipients of the restitution"). The Sixth
Circuit's decision in Miller also raises the important point that
a lack of clarity with respect to victim identity and the amount of
restitution owed to each victim may complicate other matters -- for
example, determinations of whether restitution has been offset by
payment of a civil judgment, or vice versa. 900 F.2d at 922. In
Seligsohn, 981 F.2d at 1424, the Third Circuit held that
the unguided discretion to determine who are
"victims" should not be entrusted to either the
United States Attorney or the Probation Office. . .
.
. . . [T]he designation of those eligible
should be made by name where that is possible.
Where names are unknown, designations can be made
by a description specific enough to provide
appropriate guidance for the United States Attorney
[or the Probation Office] in determining those
entitled to share in the proceeds. . . . When the
total available funds will be insufficient to pay
all victims, a court should also devise a system of
equitable priority or pro ration.
In the present case, we direct the district court, on remand,
to identify the payees in the restitution order and to specify
either the amounts to be paid each victim or an appropriate method
of equitable distribution.
Amount of restitution as to Stover
The government separately argues that the amount of
restitution ordered by the district court, $40,000, is inadequate
as to Stover, particularly in light of the parties' acknowledgement
in the plea agreement of the district court's authority to order
restitution up to and including the full amount of the loss, in
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accordance with 18 U.S.C. § 3663(a)(3) (the court may order
restitution in any criminal case to the extent agreed to by the
parties in a plea agreement). The government notes that it twice
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asked the district court to order restitution in the full amount of
the loss (which was undisputed), or, in the alternative, to order
restitution in the amount of defendants' ill-gotten gains. As to
Stover, the government maintains, this latter amount was nearly
$250,000, based upon the salary and expense money she received
during the relevant time period. The government concludes that the
amount of restitution which Stover was ordered to pay, $40,000, was
so inadequate as to constitute an abuse of discretion.
We agree with the government that the amount of restitution
Stover was ordered to pay is low. However, in light of the wide
discretion ordinarily afforded the district courts in determining
the amount of restitution, United States v. Berndt, 86 F.3d 803,
809 (8th Cir. 1996), we hold that the district court did not abuse
its discretion in ordering Stover to pay $40,000, jointly and
severally with Chandi.
Conclusion
For the foregoing reasons, we reverse the district court's
imposition of a two-level upward adjustment under U.S.S.G. § 3A1.1
for each defendant; affirm the ten-level increase to Chandi's base
offense level under U.S.S.G. § 2F1.1; and affirm the amount of
restitution ordered to be paid by Stover. We vacate each
defendant's sentence with directions to the district court to
resentence defendants without the vulnerable victim enhancement and
to amend the restitution orders in accordance with this opinion.
LAY, Circuit Judge, concurring and dissenting.
I agree that the law applicable at the time of sentencing must
be applied for ex post facto reasons, that a "strong desire to
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adopt" a child does not make a person "unusually vulnerable," and
furthermore that the government failed to demonstrate that Stover
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and Chandi "targeted" people on a selective basis of infertility
under U.S.S.G. § 3A1.1 & comment.(n.1) (Nov. 1994).
Although the amount of restitution lies within the discretion
of the trial judge, this is a case, in light of the facts and
circumstances, in which the amount of restitution required of
Stover was an abuse of discretion. The victims' total loss
exceeded $500,000, Stover's personal take was $250,000, and the
court made no finding that she personally was unable to pay a
larger amount of restitution. The case should be remanded to
require Stover to pay restitution either in the full amount of the
loss or the amount of Stover's ill-gotten gains.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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