United States v. Vrdolyak, No. 09-1891 (7th Cir. 01/29/2010)
Edward Vrdolyak pleaded guilty to conspiracy to commit mail and wire fraud and agreed in the plea agreement that the loss intended by his fraud was between $1 million and $2.5 million. He was sentenced to five years of probation, with a community-service obligation but no confinement, and to pay a $50,000 fine (a modest amount, because the defendant has a high income, and a net worth in excess of $1 million if his large loans to members of his family are included).
The government appeals, contending that the judge miscalculated the sentencing-guidelines range applicable to the defendant's crime and committed other errors. Although a judge is no longer required to give a guidelines sentence, he is required to make a correct determination of the guidelines sentencing range as the first step in deciding what sentence to impose. Gall v. United States, 552 U.S. 38, 50 (2007); United States v. Gibbs, 578 F.3d 694, 695 (7th Cir. 2009).
The Chicago Medical School (as it was then known) wanted to sell a property in Chicago that it owned consisting of a lot with a building on it. Stuart Levine was a trustee of the medical school and the chairman of the board's real estate committee, and he agreed with the defendant to use his position as a trustee to steer the sale of the property to a buyer of the defendant's choice. The defendant lined up Smithfield Properties to be the favored buyer in exchange for a $1.5 million fee that Smithfield agreed to pay him, and he in turn agreed to give Levine half the fee. The medical school was not told about this corrupt arrangement.
The district judge concluded that the defendant's fraud had inflicted neither actual nor intended loss on the medical school.
His finding that it had inflicted no actual loss was based on the fact that Smithfield's bid was the highest one considered at the "emergency" meeting. The judge gave no weight to Farley's week-later offer of $16 million and refused to consider the evidence that Farley would have bid $18 million to $20 million if given the chance and that Loyola was also prepared to offer more than $15.5 million.
These rulings were erroneous.
The judge's refusal to consider the evidence of what Loyola or Farley would have done if given the chance to sweeten their bids was based on his belief that uncommunicated intentions are unworthy of consideration by a finder of fact. That is not correct.
No rule of evidence or principle of common sense makes a person's testimony about his own intentions-testimony uniquely based on his personal knowledge-inadmissible in a sentencing proceeding any more than in any other proceeding in which intention is material. United States v. Young, 247 F.3d 1247, 1252–53 (D.C. Cir. 2001).
The judge himself speculated at the sentencing hearing about the defendant's uncommunicated intentions in conspiring with Levine to defraud the medical school- that he had acted out of friendship for Levine. A defendant's testimony about his uncommunicated intentions is no more credible than the testimony of an honest third party about his uncommunicated intentions. To believe the former and refuse even to listen to the latter is error.
The weight to be given a piece of evidence is one thing, and is ordinarily within the discretion of the trier of fact to determine. Admissibility is another matter.
A judge is not permitted to have his own rules of admissibility. The judge's refusal to listen to the evidence of the potential buyers was an egregious error because the evidence was corroborated.
In determining pecuniary loss for purposes of calculating a sentencing-guidelines range, the judge is required to determine the loss that the defendant "reasonably should have known, was a potential result of the offense." U.S.S.G. § 2B1.1, Application Note 3(A)(iv). That potential loss in this case was the amount above $15 million that another bidder might have decided to pay for the property had the bidding been fair and open.
The judge's finding that the defendant had caused no loss blocked the alternative measure of loss in cases in which there is a loss but the precise amount of the loss cannot be determined: in such a case the criminal's gain is treated as the measure of loss. U.S.S.G. § 2B1.1, Application Note 3(B); United States v. Serpico, 320 F.3d 691, 698 (7th Cir. 2003); United States v. Bhutani, 266 F.3d 661, 668 (7th Cir. 2001); United States v. Chatterji, 46 F.3d 1336, 1340 (4th Cir. 1995). That makes good sense in this case.
There was at the very least a probable loss, and that is "loss" within the meaning of the guideline. United States v. Johnson, 16 F.3d 166, 170 (7th Cir. 1994); United States v. Schneider, 930 F.2d 555, 558 (7th Cir. 1991); United States v. Stanley, 12 F.3d 17, 21 (2d Cir. 1993).
The gain (and thus alternative measure of the loss) was the $1.5 million finder's fee. It is true that when originally negotiated, the fee was contingent on certain factors. But by the time of the defendant's sentencing, the contingencies had been dispelled and the defendant would have been entitled, had the scheme not been detected, to the full $1.5 million.
That the fee was to be split with a coconspirator is of no significance. U.S.S.G. § 1B1.3(a); United States v. Thomas, 199 F.3d 950, 952-54 (7th Cir. 1999); United States v. Boatner, 99 F.3d 831, 834-37 (7th Cir. 1996). Dividing the gain by the number of conspirators would mean that the larger the conspiracy, the milder the punishment of each one. Anyway the defendant stood to gain $750,000 from his crime-not a negligible haul.
The zero loss found by the district judge created a guidelines sentencing range of zero to six months in prison; the correct loss figure of $1.5 million (which incidentally was within the range that the defendant agreed in the plea agreement was the intended loss attributable to his crime) ups the sentencing range to 33 to 41 months.
Ordinarily we would stop here and remand for resentencing. But the judge went on to rule that if he was wrong and there was a loss of $500,000, which would create a guidelines range of 27 to 33 months in prison, he would give the defendant a below-guidelines sentence of no prison-in fact the identical sentence that he imposed on the assumption of zero loss.
But $500,000 was also error. And while a judge can give a below-guidelines sentence, the sentence cannot stand if it is based on a legal, factual, or analytic (connecting law and fact) error that is not harmless.
The court of appeals must "ensure that the district court committed no significant procedural error, such as failing to calculate (or improperly calculating) the Guidelines range, treating the Guidelines as mandatory, failing to consider the § 3553(a) factors, selecting a sentence based on clearly erroneous facts, or failing to adequately explain the chosen sentence-including an explanation for any deviation from the Guidelines range." Gall v. United States, supra, 552 U.S. at 51.
The judge committed three errors in his alternative ruling. First, the $500,000 figure was erroneous for the reasons we've given already. Second, repeating an error in his computation of loss, the judge thought that the defendant deserved leniency because he had intended no harm to the medical school, but on the contrary had intended a benefit-that the school should receive the highest bid from Smithfield. The judge's third error was to give, without adequate articulated consideration, enormous weight to letters urging leniency for the defendant, while virtually ignoring the evidence that tugged the other way.
We are not laying down rules of sentencing. The sentencing discretion of federal judges is broad and our concern is not with the judge's having taken account of the defendant's good works but with his failure to consider the full range of evidence pertinent to a just sentence. That was an error, just like the judge's erroneous calculation of the applicable guidelines sentencing range.
Appellate review of errors committed in sentencing is plenary. Gall v. United States, supra, 552 U.S. at 51; United States v. Gibbs, supra, 578 F.3d at 695 ("we review the procedures followed by the district court de novo"). Review turns deferential when the issue is the substantive reasonableness rather than the procedural regularity of the sentencing determination.
The cascade of errors and omissions that we have identified cannot be dismissed as harmless, and so requires that the defendant be resentenced. And in fairness to the government, which is entitled to the same consideration as other litigants, the resentencing should be by a different judge.
The judge's errors in calculating the guidelines range are indicative of an idée fixe that the defendant was not to receive a custodial sentence, even (as the government urged in the alternative) home confinement. In United States v. Peña-Hermosillo, supra, 522 F.3d at 1117, the Tenth Circuit held that "impos[ing] the same sentence under an alternative rationale" had been a "procedural error," explaining that "it is hard for us to imagine a case where it would be procedurally reasonable for a district court to announce that the same sentence would apply even if correct guidelines calculations are so substantially different, without cogent explanation.
In the absence of explanation, we might be inclined to suspect that the district court did not genuinely 'consider' the correct guidelines calculation in reaching the alternative rationale." Id. See also our decision in United States v. Anderson, 517 F.3d 953, 965-66 (7th Cir. 2007), where we expressed concern with "blanket" sentences.
The judgment is reversed and the case remanded for resentencing before a different judge, pursuant to 7th Cir. Rule 36. We intimate no view on what a proper sentence would be.
REVERSED AND REMANDED.
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