7th Circuit Weighs In On Split Re: Grouping Offenses Under § 3D1.2(c) or (d) of Sentencing Guidelines

Per United States v. Vucko, 473 F.3d 773 (7th Cir. Jan. 12, 2007):

In the mid-1990s Vucko began to help herself to Northwest's money, eventually pilfering more than $700,000. Meanwhile, Vucko also defrauded the United States by falsely reporting her income on her tax returns for five years. After she was caught, she pleaded guilty without a plea agreement to wire fraud in violation of 18 U.S.C. § 1343 and to making a false statement in a tax return in violation of 26 U.S.C. § 7206(1). . . . At sentencing, the primary issue that Vucko raised was whether her wire fraud and tax fraud counts had to be grouped under the provisions of § 3D1.2(c) or (d). . . . On appeal, Vucko continues to urge that the district court should have grouped her two offenses for sentencing purposes. . . . Vucko is not the first person who initially committed fraud and then failed to report her income from that fraud. We are therefore not the first court to face the question whether these offenses should be grouped under § 3D1.2(c). The issue is difficult enough that it has caused a split among our sister circuits.

The Fifth Circuit encountered this problem in United States v. Haltom, 113 F.3d 43 (5th Cir.1997). Haltom pleaded guilty to one count of mail fraud and four counts of tax evasion. The district court found that grouping was inappropriate, but the court of appeals reversed. Noting that the Introductory Commentary explained that grouping provides for “incremental punishment for significant additional criminal conduct,” the court thought that the key word there was “significant.” “Sometimes,” it commented, “an additional count does not represent significant additional criminal conduct, and does not lead to an increased sentence.” Id. at 45. Turning specifically to § 3D1.2(c), the court reasoned, “Convictions on multiple counts do not result in a sentence enhancement unless they represent additional conduct that is not otherwise accounted for by the guidelines.” Id. at 45-46 (emphasis in original). The defendant's offense level under the tax guideline was increased by two, because the source of the unreported income was criminal activity. The court described as “indisputable” the fact that the mail fraud count covered conduct that was being treated as a specific offense characteristic for the tax count. Id. at 46. Immediately after so concluding, however, the court went on to concede:

As a matter of common parlance, Haltom's mail fraud and tax evasion convictions cannot readily be said to have caused “substantially the same harm.” See U.S.S.G. § 3D1.2. The mail fraud damaged the private financial interests of Haltom's corporate clients; the tax offenses harmed the government. Absent a contrary directive in the guidelines themselves, we might have considered these harms quite distinct and concluded that Haltom's offenses were not groupable. 113 F.3d at 46. It nonetheless thought that grouping was compelled by the guidelines.

The First Circuit took a different approach in United States v. Martin, 363 F.3d 25 (1st Cir.2004). There the defendant also pleaded guilty to fraud and tax evasion, and the district court decided that grouping was required. It computed an offense level of 20 for the fraud counts and 18 for the tax evasion counts, the latter including the two extra points for income derived from criminal activity that exceeds $10,000. Following an analysis similar to that in Haltom, it grouped based on § 3D1.2(c). Reversing, the First Circuit noted that the Guidelines “do not require that all of the conduct be ‘fully accounted for’; rather, it is enough that conduct ‘embodied’ in the second offense is ‘treated as an adjustment’ to the other offense.” Id. at 41 (quoting United States v. Sedoma, 332 F.3d 20, 27 (1st Cir.2003) (internal quotation marks omitted) (quoting U.S.S.G. § 3D1.2(c))). As a practical matter, the decision to group the tax and fraud offenses meant that the final offense level was two notches lower than it would have been without grouping, just as in Vucko's case. The First Circuit acknowledged that “[t]he text of § 3D1.2(c), taken alone, appears to support grouping in this case.” Martin, 363 F.3d at 42. Nevertheless, the court pointed out, the Guidelines must be interpreted in light of the Commentary, which is “authoritative unless it violates the Constitution or a federal statute, or is inconsistent with, or a plainly erroneous reading of, that guideline.” Id. (quoting Stinson v. United States, 508 U.S. 36, 38 (1993)). Thus, “even when one count embodies conduct treated as an adjustment to a second count, the counts cannot be properly grouped under § 3D1.2(c) unless they are ‘closely related.’ ” Martin, 363 F.3d at 42. The First Circuit held that the fraud and tax evasion counts are not “closely related” because they involve “different victims,” cause “different harms,” and required “different conduct.” Id. at 42-43. . . .

The Third and Tenth Circuits take the same approach as the First. . . . Several reasons persuade us to reject grouping in these circumstances.


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