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United States v. Furst

argued: August 27, 1990.

UNITED STATES OF AMERICA, APPELLEE
v.
SIDNEY D. FURST, APPELLANT



Appeal from the United States District Court for the Middle District of Pennsylvania; D.C. Criminal Action No. 88-00140.

Hutchinson and Nygaard, Circuit Judges, and Edward D. Re, Judge.*fn*

Author: Hutchinson

Opinion OF THE COURT

HUTCHINSON, Circuit Judge

Sidney D. Furst, III (Furst), appeals from a judgment of sentence imposed in the United States District Court for the Middle District of Pennsylvania following a remand for resentencing on Furst's prior appeal. See United States v. Furst, 886 F.2d 558 (3d Cir. 1989) ( Furst I), cert. denied, 493 U.S. 1062, 107 L. Ed. 2d 961, 110 S. Ct. 878 (1990).

When this matter first came before us in 1989, a jury had convicted Furst on two counts of embezzlement from pension funds, three counts of making false statements in bank records and three counts of making false statements in reports required under the Employee Retirement Income Security Act (ERISA), 29 U.S.C.A. ยงยง 1001-1461 (West 1985 & Supp. 1990). In his first appeal, Furst sought review of the substance of his convictions as well as his sentence.

In the earlier appeal, we reversed three of Furst's convictions and ordered the district court to enter judgments of acquittal on both embezzlement counts and on one count of making false statements in ERISA records. We then remanded the matter for resentencing.*fn1 See id. at 583.

Furst now appeals from the sentence the district court imposed following our remand.*fn2 He maintains that the district court did not comply with the mandate of Federal Rule of Criminal Procedure 32(c)(3)(D) when it failed to resolve or expressly disclaim reliance upon disputed facts contained in his presentence investigation (PSI) report. In a related argument, Furst also maintains that the district court violated his right to due process when it sentenced him in reliance upon erroneous information and assumptions. Finally, Furst argues that the order of restitution the district court imposed must be vacated since the record lacks a factual and legal basis for such an order.

We agree that the district court failed to comply with the mandate of Rule 32(c)(3)(D) and failed adequately to set forth the basis of its restitution order in conformity with the applicable case law. Thus, we will vacate Furst's sentence and remand for further proceedings in conformity with this opinion.

I.

On appeal, Furst focuses solely upon allegations of error arising out of his resentencing. However, a brief summary of the underlying crimes for which he stands convicted is helpful, if not essential.*fn3

Furst committed his crimes while employed as a vice president in the trust division of Northern Central Bank (Bank) in Williamsport, Pennsylvania. Among the accounts Furst controlled were ones belonging to the Williamsport Orthopedic Association Defined Benefit Plan (Plan) and the Williamsport Foundation (Foundation). Furst invested funds totalling $909,100.00 belonging to the Plan, the Foundation and others in a commodities corporation in late 1979. Of the total amount, $481,500.00 belonged to the Plan. One year later, all but $236,015.52 of the total commodities investment had been lost. By mid-1981, less than $1000.00 remained. Furst has not been charged with any wrongdoing in making the commodities investment.

In October of 1981 Furst directed that an entry be made in the Bank's computer closing out the Plan's investment in the commodities corporation for $180,000.00. This entry was carried forward on the Bank's books, where it continued to grow as it earned interest through September of 1985.

By 1984 it was clear to Furst that there would be no money forthcoming from the commodities corporation to cover the entry. In order to generate the cash to cover his entry, Furst engineered a three-step internal stock trade. At step one, Furst took undervalued stock from a non-ERISA account he controlled and moved it into the Plan's escrow account -- an account that he had opened with a $0.00 balance in mid-February of 1985. At step two, he sold the undervalued stock from the Plan's escrow account to an ERISA account for its full market price. At step three, Furst paid the non-ERISA account back from the Plan's escrow account at the original undervalued worth of the stock plus interest at a market rate. This left a $240,000.00 "profit" in the Plan's escrow account to help cover the losses in Furst's commodities investment.*fn4 Furst then transferred the entire $240,000.00 to the Plan to cover the amount of money he said remained following the failed commodities investment on the Plan's behalf.

In late December of 1985, Furst engineered a second internal stock trade, this time to cover up part of the loss the Foundation suffered as a result of the failed commodities investment. This second internal trade was identical to the first, except that it utilized different undervalued stock and generated gain totalling $291,133.70. Furst saw that this gain was distributed into Foundation accounts as if it were proceeds of the commodities investment.

The two embezzlement charges for which Furst was convicted at trial stemmed from these two internal trade transactions. The government charged that the ERISA accounts that purchased the formerly undervalued stock at market price at step two of the internal trade transactions were depleted. The government did not charge Furst with any wrongdoing with respect to the non-ERISA accounts from which undervalued stock was taken at step one of the internal trade transaction.

Deciding Furst's prior appeal, we reversed his two embezzlement convictions because the government failed to prove that the ERISA accounts that purchased the stock at step two of the internal trade transaction paid more than market value. See Furst I, 886 F.2d at 565-67. We also reversed one of Furst's three convictions on charges of making false statements in ERISA records. We held that the government failed to prove that Furst knew his statement in ERISA documents in 1983 that the Plan's commodities investment retained a worth of $180,000.00 was false; such proof is a required element of the crime. Id. at 568-70.

Because we reversed these three convictions and ordered the district court to enter judgments of acquittal in their places, we vacated the district court's sentence of eight concurrent five year terms of imprisonment and restitution in the amount of $358,757.50. We then remanded the matter so that the district court could resentence Furst on the remaining three counts of making false statements in bank records and two counts of making false statements in reports required under ERISA.

Furst then filed a petition for a writ of certiorari with the Supreme Court of the United States. It denied the petition on January 22, 1990. Furst v. United States, 493 U.S. 1062, 107 L. Ed. 2d 961, 110 S. Ct. 878 (1990). Three days later, our Court issued its judgment in lieu of a formal mandate remanding the matter to the district court for resentencing. The maximum sentence of imprisonment Furst faced after our remand was twenty-five years.

In advance of Furst's resentencing, the district court directed the Probation Office to submit an updated PSI report redacting parts of the earlier report so that the remainder would conform to those counts affirmed on appeal. Also in advance of resentencing, Furst suggested to the district court that it order the Probation Office to calculate what his sentence range would be under the sentencing guidelines, even though the guidelines were inapplicable because the offenses for which Furst stood convicted took place before the guidelines' effective date. See supra note 2. The district court adopted Furst's suggestion and ordered the Probation Office to calculate what Furst's sentencing range would be under the guidelines.

The Probation Office issued its revised PSI report to the parties on February 14, 1990. Two days later, Furst sent a letter to the Probation Office listing four objections to the revised PSI report. The district court at sentencing expressly disclaimed reliance upon the portions of the PSI report that were the subject of two of the four objections.

The other two objections constitute the basis of Furst's argument on appeal that the district court failed to follow the dictates of Federal Rule of Criminal Procedure 32(c)(3)(D). These two objections were: (1) that paragraph nine of the PSI report, which relied upon the Bank's factually inaccurate victim impact statement, was itself factually inaccurate and (2) that the Probation Office's estimates of Furst's parole eligibility and guidelines sentence range were factually inaccurate.

The substance of both of Furst's objections was that the Bank, in its victim impact statement, and the Probation Office, in its estimate of parole eligibility and guidelines sentence range, treated Furst as a thief despite this Court's reversal of both of Furst's embezzlement convictions. The Probation Office responded to Furst's objections but refused to alter its PSI report.

As a result, Furst's claim that the PSI report contained factual inaccuracies was before the district court at the time of his resentencing. The district court gave the following response to Furst's objections prior to pronouncing sentence:

Supposing for the moment I just address briefly, if you don't mind, the [objections] which were raised in regard to the pre-sentence report. There were a number of [objections] that were raised in the memorandum and in letters to the Probation Office.

On the victim impact statement, I would have to say that this is simply a disagreement between a view of this matter between the prosecution and between the -- I guess among is the right word, among the prosecution and Probation Office and the defense in this case.

There is complicated testimony in this case about what happened as a result of the defendant's conduct while he was an employee of the bank. There are complicated arguments made as to exactly what impact his conduct had on the bank and other people, if any impact, and I simply have to say that I will have to consider all that each of you is saying in trying to arrive at an appropriate sentence in this case.

I don't see any reason to remove from the pre-sentence report matters that are in there on this issue, because there isn't any question that certain parties feel they were impacted strongly and considerably by the defendant's conduct. And the defense and his counsel have just as strong arguments made as to whether that impact was significant or whether it was a direct result of the defendant's conduct. I will consider all those arguments.

But, again, it's pure argument. There is a difference of opinion as to how those offenses will be graded. And both the grading offense, for purpose of the Parole Board's consideration, and the guidelines calculations that were made and submitted to this court are matters that the court looks at but is not guided by. This is not a guidelines case, and really the court is not governed by what the Parole Board will do. And God knows the Parole Boards does a lot of things we don't agree with, and are a great difference from our opinion as to how matters should be graded.

So, once again, I see those as not very significant matters. And they're just one of many items that a judge should look at in trying to reach a decision on ...


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