USA v. Teresa and Michael Orsburn, 07-2584 & 2585. In 1998 Michael Orsburn was elected Trustee of Keener Township in Jasper County, Indiana. The Trustee administers funds for emergency services and relief of the poor. Michael appointed his wife, Teresa Orsburn, to keep records and write checks.
The Orsburns were poor custodians of the public's funds. Between 2000 and 2004 they embezzled about $310,000, roughly 15% of the money that passed through their hands. Teresa wrote checks to Michael using erasable ink; after they had been deposited in Michael's personal checking account and the cancelled checks mailed back to the Trustee's office, Teresa replaced Michael's name with that of a more plausible recipient.
Teresa pleaded guilty to mail fraud and tax evasion (the Orsburns did not pay income tax on the stolen money). Michael pleaded not guilty to the same crimes, blaming everything on Teresa, but was convicted by a jury. Both Orsburns were sentenced to 135 months' imprisonment and ordered to make restitution.
But 135-month sentences are unusually high for embezzlers. To see this, suppose the Orsburns had been prosecuted under §666(a)(1)(A), which makes it a crime to steal $5,000 or more from any public agency or jurisdiction that receives $10,000 or more annually from the federal government. Appendix A to the Sentencing Guidelines says that U.S.S.G. §2B1.1 applies to a conviction under §666(a)(1)(A), the subsection covering simple theft by public officials (i.e., no bribes or kickbacks). The base offense level is 6, and stealing more than $200,000 but less than $400,000 adds 12 more levels. Obstruction of justice contributes 2, and the use of erasable ink to make changes after the checks had been paid might have been deemed a "sophisticated means" that would add a further 2 levels. Because the Orsburns abused the public trust they held, §3B1.3 supplies 2 more levels. Adding 1 for the tax offenses under the grouping rules, see U.S.S.G. §3D1.4, would produce a total offense level of 25, with a range of 57 to 71 months for these first offenders.
The district court set the Orsburns' offense level at 32 rather than 25, which led to a recommended sentence in the range 121 to 151 months. Section 2B1.1 yields a range that high only for persons who misappropriate more than $20 million. The Orsburns' extra 7 levels come from using U.S.S.G. §2C1.1 rather than §2B1.1.
According to the prosecutor, §2C1.1 is the appropriate guideline because the Orsburns were convicted of mail fraud rather than theft by a public employee. It takes more than citing §1346 to make a scheme an intangible-rights fraud. Section 1346 is a definitional clause, not a separate crime, and this definition is not necessary to the Orsburns' conviction. They stole money from their employer.
The intangible-rights gloss on §1341 was devised to deal with people who took cash from third parties (via bribes or kickbacks). United States v. Holzer, 816 F.2d 304 (7th Cir. 1987), supplies a good example. Judge Holzer accepted bribes from litigants. What he took from his employer, the state's judicial system, was the honest adjudication service that the public thought it was purchasing in exchange for his salary.
If what the Orsburns did is an honest-services fraud, then every violation of §1341 by an employee or fiduciary is honest-services fraud. That's not how recent opinions have understood the relation between tangible and intangible losses. See, e.g., United States v. Bloom, 149 F.3d 649 (7th Cir. 1998).
Let this pass. The caption of §2C1.1 says that honest-services frauds come within that section, but not (necessarily) that all honest-services frauds do so. The Background section of the Commentary following §2C1.1 begins: "This section applies to a person who offers or gives a bribe for a corrupt purpose, such as inducing a public official to participate in a fraud or to influence such individual's official actions, or to a public official who solicits or accepts such a bribe. The object and nature of a bribe may vary widely from case to case. . . . Consequently, a guideline for the offense must be designed to cover diverse situations."
In other words, the caption of §2C1.1 is designed to include the many kinds of bribery, and honest-services fraud can be one of those variants. But an honest-services fraud that does not include bribery or any closely related offense is outside the scope of §2C1.1.
The best way to treat similar situations alike-and thus to avoid unwarranted disparities in sentencing, see 18 U.S.C. §3553(a)(6); United States v. Boscarino, 437 F.3d 634 (7th Cir. 2006)-is to start with the right Guideline and then make adjustments at the margin. Starting with the right Guideline is essential, see Gall v. United States, 128 S.Ct. 586, 596–97 (2007), independent of any concern about disparities.
Giving the Orsburns sentences apt for bribe-payers or bribe-takers would produce an unwar-ranted disparity. They should be classed with other embezzlers, with a potential for a higher sentence on account of their public positions if the district judge deems the adjustment under §3B1.3 inadequate.
The convictions are affirmed, but the sentences are vacated, and the cases are remanded for resentencing consistent with this opinion.
For the full opinions visit the 7th Circuit Court of Appeals Web Site.
For more about attorney Michael J. Petro, visit www.mjpetro.com.