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UNITED STATES v. ARNOLD

November 24, 1997

UNITED STATES OF AMERICA
v.
DEAN MARTIN ARNOLD



The opinion of the court was delivered by: VAN ANTWERPEN

 Van Antwerpen, J.

 November 24, 1997

 I. INTRODUCTION

 II. BACKGROUND

 Between November 1992 and June 1995, Defendant was employed by Federal Armored Express ("Federal Armored") as an armored car driver and courier. Defendant has admitted that on December 29, 1993, he stole $ 65,000 from a pouch he was transporting for his employer. Trial Transcript of 11/8/95 ("Tr. 11/8/95") at 127. On May 31, 1994, he took an additional $ 15,000, and on August 23, 1994, he took $ 400,000 in cash from the main vault at Federal Armored. Defendant admitted to these thefts as well. Id. at 129. In all, Defendant stole nearly half-a-million dollars from his employer over a period of approximately eight months.

 Defendant drew on the stolen funds to make a down payment on a trailer home, buy furniture, purchase cameras and accessories, hire a bodyguard, purchase firearms, pay tuition at a private investigator school, and make several other purchases documented by the Government at trial.

 Defendant lived with and was engaged to Jennifer Kloss from March 1994 until November 1994, at which time the engagement was terminated. Kloss moved out and spoke to FBI agents about Defendant's activities. After each of the thefts, Defendant showed Kloss the stolen money. Shortly after telling Kloss of his involvement in the thefts, Defendant began threatening to kill her if she reported him to the FBI. On one occasion, Kloss testified, Defendant choked her and placed a gun to her head, telling her how easy it would be to kill her. Trial Transcript of 11/7/95 ("Tr. 11/7/95") at 37. There was additional testimony that Defendant later set aside over $ 20,000 to hire a hit man to kill Kloss. Id. at 111.

 On August 23, 1994, the FBI visited the trailer home where the Defendant and Kloss were living, in connection with an investigation into the money stolen from Federal Armored. On August 25, 1994, Defendant went with Kloss and her father to visit an attorney, Richard Makoul, Esq. Mr. Makoul consulted with Kloss and Defendant privately, and accepted a $ 1,000 retainer. In December 1994, Kloss voluntarily provided the FBI with information about Defendant's thefts. On March 28, 1995, a federal grand jury returned a sealed five count indictment charging Defendant with bank larceny, money laundering, and witness intimidation. Later that day, Defendant met with an undercover police officer who was posing as a professional hit man. Defendant gave the officer over $ 10,000 as a down payment for having Kloss murdered. As Defendant left this meeting, he was arrested by the FBI. A superseding indictment was issued on April 11, 1995, incorporating the five counts of the original indictment and adding one count of attempted killing of a witness.

 Prior to the commencement of trial, the Government moved to disqualify Mr. Makoul as Defendant's counsel on the basis of his prior representation of Kloss. On May 4, 1995, after hearing arguments on the issue, we granted the Government's motion. United States v. Arnold, 913 F. Supp. 348 (E.D. Pa. 1995). Defendant subsequently petitioned the Court to appoint counsel to represent him. A hearing on Defendant's request was held on July 12, 1995, at which time Defendant testified that he had no property, cash, securities, or other valuables, and could not afford to hire an attorney. Motion Hearing of 7/12/95 ("Tr. 7/12/95") at 4-5. At the conclusion of this hearing, Defendant consented to the appointment of Edson Bostic, of the Federal Defender Association, as his attorney. Id. at 6.

 On appeal, the United States Court of Appeals for the Third Circuit held that the meeting between Defendant and the undercover police officer posing as a hit man violated Defendant's Sixth Amendment right to counsel since Defendant had been indicted earlier that day. Arnold, 106 F.3d at 40. The Court of Appeals reversed the conviction for attempted killing of a witness, vacated the sentence of 210 months, and ordered additional sentencing proceedings on the remaining five counts.

 Resentencing was initially scheduled for August 20, 1997. Memoranda were filed by the Federal Defender Association and the U.S. Attorney's Office, and a revised Presentence Investigation Report ("Presentence Report") was prepared by a United States Probation Officer. Defendant also sent a letter to the court in which he claimed that his attorney had lost the case on purpose and was collaborating with the U.S. Attorney's Office regarding the resentencing hearing.

 At the August resentencing hearing Defendant expressed dissatisfaction with his attorney and requested that a new attorney be appointed--one not affiliated with the Federal Defender Association. Sentencing Transcript of 8/20/97 ("Tr. 8/20/97") at 8. We granted Defendant's request and continued the sentencing hearing so that a new attorney could be appointed. Id. at 15. A new attorney was appointed, however, he was subsequently removed due to a conflict of interest. A new sentencing hearing was scheduled for November 12, 1997, and on September 19, 1997, this court appointed Defendant's current attorney, Jeffrey M. Lindy, Esq.

 On October 17, 1997, Mr. Lindy informed the court that the Defendant now desired to discharge him and proceed pro se during the remainder of the sentencing proceedings. Defendant's decision to represent himself grew out of his wish to call numerous witnesses and take certain strategic positions at the resentencing hearing. Like Defendant's prior counsel, Mr. Lindy advised Defendant that he thought it unwise to conduct resentencing litigation in the manner Defendant desired, and that he was unwilling to do so. Defendant requested that Mr. Lindy be appointed standby counsel, in order to assist Defendant with procedural matters. On October 20, 1997, we held a hearing to consider Defendant's request. At this time, we undertook the task of ensuring that Defendant's waiver of counsel was intelligently and competently made, as required by the Third Circuit. See United States v. Welty, 674 F.2d 185 (3d Cir. 1982). Defendant was made aware of the "many dangers in not having a lawyer" in proceedings as complex as sentencing under the federal guidelines. Motion Hearing Transcript of 10/20/97 ("Tr. 10/20/97") at 12. Once this court was satisfied that Defendant understood the risk of foregoing representation, Defendant requested and was granted a recess to contemplate his decision, whereupon he expressed his desire to keep Mr. Lindy as his lawyer. Id. at 16-18. We granted his request, and Defendant was represented by Mr. Lindy during resentencing proceedings on November 12, 1997. We gave a full opportunity to both the Government and defense to present evidence, call witnesses, and comment on the Presentence Report. Both the Government and defense elected to rely on the existing record, *fn1" which they supplemented with certain stipulations. Both sides presented extensive oral argument.

 III. DISCUSSION

 A. Grouping the Bank Larceny and Money Laundering Counts

 According to the guidelines published by the United States Sentencing Commission ("Sentencing Guidelines"), when a defendant has been found guilty of multiple offenses, the court shall first determine whether any of the offenses should be grouped together as "closely-related counts." Sentencing Guidelines § 3D1.2. The Presentence Report prepared by the Probation Office divides the five counts against the Defendant into two groups. The first group ("Group One") consists of Counts One, Two (both bank larceny) and Five (witness intimidation), and the second group ("Group Two") combines Counts Three and Four (money laundering). *fn2" There is no dispute about whether any of the individual counts within these two groups have been properly placed together. Rather, Defendant contends that the Presentence Report should have gone a step further and lumped all five counts into a single group.

 1. Import of the Grouping Decision

 Several sections of the Sentencing Guidelines come into play when computing the appropriate level of Defendant's offenses for sentencing purposes. Section 3D1.3(a) provides that when counts have been grouped together pursuant to § 3D1.2(a)-(c), the offense level applicable to that group is the highest offense level of any of the counts within the group. Section 3D1.4 provides that when counts of which a defendant has been convicted are divided into more than one group, the combined offense level is to be determined by taking the highest level of any single group, and then increasing that level based on the number of groups above a threshold offense level.

 Applying these provisions, the Presentence Report assigns an offense level of 20 for Group One (Counts One, Two, and Five), and an offense level of 20 for Group Two (Counts Three and Four). Taking the Offense Level of 20, and applying § 3D1.4 yields a final offense level of 22, which carries a sentencing range of 41 to 51 months imprisonment. The Presentence Report also applied a two level enhancement under § 3C1.1, which we will discuss below in Section III (B).

 In contrast to the approach suggested by the Presentence Report, Defendant argues that all five counts should have been combined into a single group. This group would still yield an offense level of 20, but since only one group would exist, there would be no adjustment under § 3D1.4. The final offense level according to Defendant's position would thus remain 20, yielding a recommended sentence of 33 to 41 months. There are three Sentencing Guideline provisions under which the money laundering counts might arguably be grouped with the other counts. We will consider each provision in turn.

 2. Section 3D1.2(b)

 Section 3D1.2(b) provides that counts should be grouped when they "involve the same victim and two or more acts or transactions connected by a common criminal objective or constituting part of a common scheme or plan." Defendant argues that the money laundering represents a continuation of the bank larceny offense--an attempt to hide the proceeds in an overall effort to obtain, use and keep the stolen proceeds. We reject this argument.

 The Defendant's offenses did not involve the same victim as required by § 3D1.2(b). The "victim" of an offense is the "one person who is directly and most seriously affected by the offense." § 3D1.2, Application Note 2. The primary victims of the bank robbery charges were Defendant's former employer, Federal Armored, and it's insurance company, W.H. McGee Insurance, Co. ("McGee Insurance"). In contrast, the primary victim of the money laundering counts was society in general. See United States v. Cruz, 106 F.3d 1134, 1136 (3d Cir. 1997); United States v. Gallo, 927 F.2d 815, 824 (5th Cir. 1991); Sentencing Hearing Transcript of 11/12/97 ("Tr. 11/12/97") at 74. Therefore, Defendant does not satisfy the threshold requirement of § 3D1.2(b), which states that offenses must typically involve the same victim in order to be grouped under the Sentencing Guidelines.

 Defense counsel correctly argued at the November 12, 1997 sentencing hearing that counts need not always involve the same victim in order to be grouped. See United States v. Wilson, 98 F.3d 281, 283 (7th Cir. 1996). We note, however, that the Wilson Court chose to group money laundering and fraud counts because the money laundering took place "in order to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds." Id. There is no indication that the Defendant in the instant case had any such motive, or that the larceny and the money laundering were elements of a common scheme. The two money laundering counts arise out of the conversion of stolen money into separate bank accounts from which checks were drawn to make a down payment on a trailer home. However, most of the money stolen by Defendant was taken after the money laundering conduct had already occurred. In addition, the majority of the stolen money spent by Defendant and his then fiancee went to unrelated purchases. Of the $ 480,000 Defendant admitted taking, only $ 20,000, roughly 4.1% was spent on the trailer home. The timing of the relevant conduct and the fact that such a small percentage of the stolen funds are involved in the money laundering counts convince us that the bank larceny and the money laundering were not part of a common scheme or plan. In the absence of any such unifying element, we will not overlook the requirement of § 3D1.2(b) that counts generally must involve the same victim in order to be grouped together.

 Even the Wilson Court stated that "whether the offenses involve different victims is, as the background commentary notes, a primary consideration in the grouping decision." Id. (internal quotation omitted). The fact that the bank larceny and money laundering offenses involved different victims therefore remains a strong indication that they should not be combined into a single group for the purposes of sentencing.

 Defendant also relies on United States v. Cusumano, 943 F.2d 305 (3d Cir. 1991), cert. denied, 502 U.S. 1036, 116 L. Ed. 2d 785, 112 S. Ct. 881 (1992), in which the Third Circuit upheld the district court's decision to group money laundering with other counts in an indictment under § 3D1.2(b). However, it is important to note the Cusumano Court's finding that "the victim of all offenses in this case was the Fund and its beneficiaries," and that "the evidence demonstrated that the unlawful kickbacks, the embezzlement, the conspiracy, the travel act violations and the money laundering were all part of one overall scheme to obtain money from the Fund and convert it to the use of [the defendants]." Cusumano, 943 F.2d at 313 (emphasis supplied).

 As we have already stated, the bank larceny and money laundering counts in the instant case involved different victims. In addition, the two groups of charges also involved different conduct and were not part of a common scheme or plan. While it is clear that the money involved in the money laundering counts came from the funds involved in the bank larceny charges, Defendant has failed to show that the money laundering was anything but ancillary to the thefts. We are aware that Defendant testified on direct examination as follows:

 Q. Did the fact that Jennifer told you she wanted to be out of the house play any role in your taking the $ 65,000?

 A. Yes, it was the only reason.

 Tr. 11/8/95 at 127. However, Defendant directly contradicted this testimony at his original sentencing hearing: "There's no way I could say that Jennifer is in any way responsible for that." Sentencing Hearing Transcript of 2/22/96 ("Tr. 2/22/96") at 91. Furthermore, as stated above, at no point has Defendant suggested that the money was taken as part of a premeditated, unified scheme to purchase a trailer home. See Cusumano, 943 F.2d at 313. On the contrary, Defendant has indicated that the decision to take money was made on the spur of the moment. "Well, on this day I saw the bag was unsealed and I didn't tell him. I put it on the truck, 'cause I knew exactly what I was gonna do. I was gonna go into that bag and I was gonna steal." Tr. 2/22/96 at 90. Defendant also said,

 There's no way I could say that Jennifer is in any way responsible for that. Dean Arnold decided to drop away from his religion and give up everything he was taught his whole life. I--I'm not gonna say "Dean Arnold," I'm gonna say "I"--decided to steal $ 65,000 that day.

 Id. at 91. There is simply no indication that Defendant stole the money in furtherance of any overarching scheme, an essential element of which was purchasing a trailer home for himself and his fiancee.

 The Cusumano Court found that "money laundering . . . is very much in the thick of this entire scheme." 943 F.2d at 312. In contrast, the evidence in this case suggests that Defendant's offenses were independent instances of criminal behavior involving different motives, different victims, different harms, and different conduct. This being the case, we decline to group them into a single count under § 3D1.2(b).

 3. Section 3D1.2(c)

 At Defendant's November 12, 1997 sentencing hearing, defense counsel suggested that Group One and Group Two be grouped under § 3D1.2(c). This section allows counts to be grouped "when one of the counts embodies conduct that is treated as a specific offense characteristic in, or other adjustment to, the guideline applicable to another of the counts." Defendant cites Frequently Asked Question ("FAQ") 66, which allows counts to be grouped when the conduct forming the basis of one count is a specific offense characteristic or adjustment in the other count, even when the conduct has not risen to a level warranting application of that offense characteristic. Sentencing Guidelines, App. E at 881-882.

 We have reviewed the offense characteristics and relevant adjustments relating to bank larceny ( § 2B1.1), money laundering ( § 2S1.1) and witness intimidation ( § 2J1.2) under the Sentencing Guidelines. Having done so, we are not convinced that the conduct at the foundation of any of these offenses is treated as a specific offense characteristic in, or other adjustment to, any of the other offenses. The nearest we have come to identifying any such commonality stems from the fact that bank larceny and money laundering both involve an adjustment based on the sum of money involved. However, while the offense levels for bank larceny and money laundering are both determined monetarily, the severity of the bank larceny offense is measured by the total loss to the victim, while the severity of the money laundering offense is measured by the value of the funds attempted to be disguised. Thus, there is no inherent connection between the two offenses, and we decline to join Group One and Group Two under § 3D1.2(c).

 Defendant also argues that the bank larceny and money laundering provisions of the Sentencing Guidelines, §§ 2B1.1 and 2S1.1 respectively, are included in a list of offenses which are susceptible to grouping under § 3D1.2(d), and that the plain language of § 3D1.2(d) therefore requires that these offenses be grouped. We disagree. While subsection (d) may provide a list of those offenses which are generally appropriate for grouping, the language of this subsection is precatory, not mandatory. United States v. Ballard, 919 F.2d 255, 257 (5th Cir. 1990), cert. denied, 499 U.S. 954, 113 L. Ed. 2d 481, 111 S. Ct. 1429 (1991); United States v. Egson, 897 F.2d 353, 354 (8th Cir. 1990); United States v. Pope, 871 F.2d 506, 510 n.4 (5th Cir. 1989) (each refusing to group offenses specifically enumerated in § 3D1.2(d)). Any grouping decision requires careful consideration of the facts and circumstances unique to that case.

 Subsection (d) requires more than similar offense level calculations and ongoing or related criminal behavior; there must be some significant factual link between Defendant's offenses before grouping is appropriate. United States v. Manuel, 912 F.2d 204, 206-207 (8th Cir. 1990). Having found, in our discussion of § 3D1.2(b), that Defendant's bank larceny and money laundering convictions do not even satisfy the primary requirements of § 3D1.2 that the violations involve "substantially the same harm," or the requirements of § 3D1.2(b) that the violations involve "the same victim and two or more acts or transactions connected by a common criminal objective or constituting part of a common scheme or plan," we cannot now group these offenses under subsection (d). *fn3"

 For the reasons stated above, we find that the base offense level applicable to Defendant under the Sentencing Guidelines is Level 22. Because Defendant falls into a Criminal History Category of I, Level 22 yields a sentencing range of 51 to 63 months imprisonment. We will premise our consideration of the Government's motions for upward departure on these findings.

 Even if we were to accept the defense's argument that the appropriate Guideline Offense Level should be Level 20, it would be our view that this level would be insufficient and would under represent the seriousness of the amount of money stolen in this matter. For this reason, we would be inclined to depart upward two levels to Level 22. See United States v. Baird, 109 F.3d 856, 870 (3d Cir. 1997) ("However, the Sentencing Commission recognizes that it is difficult to prescribe a single set of guidelines that encompasses the vast range of human conduct potentially relevant to a sentencing decision. Therefore, a court may depart from the range if it finds that there exists an aggravating or mitigating circumstance of a kind not adequately taken into consideration . . . in formulating the guidelines") (internal quotation omitted); United States v. Kikumura, 918 F.2d 1084, 1110 (3d Cir. 1990).

 B. Two Level Enhancement for Obstruction of Justice

 The Government claims that Defendant should be subjected to an additional two level upward departure under Sentencing Guidelines § 3C1.1, based on his wilfully false testimony that he never threatened to harm Jennifer Kloss, and his false allegations accusing the FBI of stealing money from him. *fn4" We will consider the standard of proof applicable to this determination and then apply this standard to the Government's arguments.

 1. Standard of Proof

 Section 3C1.1 of the Sentencing Guidelines provides for a two level enhancement "if the defendant willfully obstructed or impeded, or attempted to obstruct or impede, the administration of justice during the investigation, prosecution, or sentencing of the instant offense." The Supreme Court has held that this obstruction includes testimony which encompasses the elements of perjury. United States v. Dunnigan, 507 U.S. 87, 122 L. Ed. 2d 445, 113 S. Ct. 1111 (1993). Thus, the enhancement applies in cases where a defendant has given willfully false testimony with respect to material matters designed to substantially effect the outcome of the case. Id.

 The language of § 3C1.1 Application Note 1 originally required that sentencing courts evaluate testimony in the light most favorable to the defendant. The Third Circuit elaborated upon this standard when it ordered resentencing in this case.

 We hold that the Application Note's command to evaluate a defendant's alleged false testimony or statements "in a light most favorable to the defendant," requires the sentencing court to refrain from imposing a § 3C1.1 enhancement unless, in weighing the evidence, it is clearly convinced that it is more likely than not that the defendant has been untruthful.

 Arnold, 106 F.3d at 44 (emphasis supplied). We are uncertain as to how we are to interpret this hybrid standard of proof. On the surface, it appears to require application of a preponderance of the evidence standard. However, reading the Third Circuit's opinion in its entirety, suggests that the court intended to require application of the clear and convincing standard. We base this interpretation on the appellate court's summary paragraph at the end of the section on the obstruction enhancement: "On remand, the district court must use the clear and convincing standard, place the burden of proof upon the government, and support its decision with the findings required by the court in Dunnigan." Id.

 Our task of divining which standard of proof to apply is made more complex by Sentencing Guidelines Amendment 566, which became effective November 1, 1997. This clarifying amendment deletes a portion of the final sentence of § 3C1.1 Application Note 1, which read ". . . such testimony or statements should be evaluated in a light most favorable to the defendant" and replaces it with "the court should be cognizant that inaccurate testimony or statements sometimes may result from confusion, mistake, or faulty memory and, thus, not all inaccurate testimony or statements necessarily reflect a willful attempt to obstruct justice." This clarifying amendment applies retroactively to prior Guidelines under § 1B1.11(b)(2), and seems designed to correct the misapprehension that a § 3C1.1 enhancement be justified by clear and convincing evidence.

 This court finds itself in the unenviable position of being caught between conflicting mandates. On the one hand, the Third Circuit seems to require that we apply the clear and convincing standard in determining whether an obstruction of justice enhancement is warranted. Arnold, 106 F.3d at 44. On the other hand, the Sentencing Guidelines imply that such determinations need satisfy only the preponderance of the evidence standard. Sentencing Guidelines § 3C1.1 Application Note 1 (1997). We have undertaken to review the Government's arguments under both the clear and convincing and preponderance of the evidence standards, and conclude, fortunately, that either standard yields the same conclusion: the two level enhancement is appropriate in this case. Therefore, we need not determine exactly which standard applies to this particular case.

 2. Defendant's Testimony that He Never Threatened or Injured Jennifer Kloss

 After the thefts, the Defendant admitted to Jennifer Kloss that he took the money, and she witnessed the stolen funds in Defendant's possession. *fn5" The thefts spurred an investigation and the FBI interviewed the Defendant in February 1994. Tr. 11/7/95 at 96. At Defendant's trial, Jennifer Kloss testified that Defendant injured and threatened to kill her on more than one occasion during the investigation.

 Q. After telling you about his involvement in that first theft and the other thefts, did the defendant ever threaten you?

 A. Yes, he did.

 Q. During these threats, did the defendant ever use a weapon?

 A. Yes, he did.

 Q. Can you tell me the first time that the defendant threatened you with a weapon what happened?

 A. Yes, I can.

 Q. Take your time.

 A. It was at some point in the spring as we had been fighting in the afternoon and arguing. . . . And I asked him what was left of it. And I remember him saying that there was 5 or $ 6,000 left of the money and I asked him where the rest went to. And he wouldn't answer me and he threw me against the wall and he told me that I was to get out of his house and to get out immediately. . . . And the next thing I knew I was walking into the back room and I was getting a box and that's when he started to push me around. And I remember landing into the wall and I remember walking into the bathroom and I remember him turning around and I remember him throwing me into the tub and telling me that I wasn't going anywhere and telling me that I would be in jail and telling me that I should shut up and telling me everything. And the next thing I remember I was getting up and I was screaming back at him about how could you do that. And I had injured my back. How could you throw me, how could you hurt me, why do you keep hurting me. And the next thing I know he's choking me and he told me that I was going to shut up. And he's like don't you know, don't you know, don't you know I could kill you so easily, I could kill you just like that. I could kill you and I don't care, I really don't care. And I didn't know what was going to happen next. And then the next thing I remembered was he stopped choking me and he had his gun. And he checked his gun and he told me it was loaded and he put it to my head. And he told me that he could blow my brains away and he wouldn't give a shit and he didn't care if I would die, he just didn't care. . . .

 [Witness identifies the weapon after a short recess.]

 Q. That's the gun he held to your head?

 A. Yes, it was. . . .

 Q. Did the defendant ever point another gun at you?

 A. Yes, he did.

 Q. Can you tell the members of the jury what happened with that gun?

 A. It was one time in the fall before I left, it would have been last year, I was in our kitchen and I was washing the dishes and I had my back to him. And I turned around and I saw him aiming a rifle at me.

 Q. Would you recognize the rifle?

 A. Yes. . . .

 [Witness identifies the weapon.]

 Tr. 11/7/95 at 35-40.

 Corroborating the testimony offered by Ms. Kloss, Defendant's former bodyguard also testified that Defendant threatened Kloss.

 Q. Did during the time that you were with the defendant, did you ever hear him make any threats against Jennifer Kloss?

 A. Can you rephrase the question to her, or?

 Q. Sure, did you ever hear him make threatening remarks about Jennifer Kloss?

 A. Yes.

 Q. Not to her, but ...


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