On Appeal from the United States District Court for the District of New Jersey D.C. Criminal Action No. 95-cr-00661 Argued July 23, 1997
Before: Sloviter, Chief Judge and Roth, Circuit Judges, LUDWIG,*fn1 District Judge
The opinion of the court was delivered by: Roth, Circuit Judge:
Amended Opinion Filed 4/21/98
Stanley Cottman pled guilty to one count of conspiracy to possess, sell, and dispose of stolen property in violation of 18 U.S.C. § 371. He was sentenced to 10 months in prison, a three year term of supervised release, and restitution in the amount of $32,420, payable to the FBI. He has appealed two aspects of the sentence imposed by the district court. First, he claims that the district court incorrectly applied a four point upward adjustment under Sentencing Guideline § 2B1.1(b)(4)(B) on the basis that he was "in the business of" receiving and selling stolen cable equipment. Second, he contends that the district court had no authority to order him to pay restitution to the FBI for funds it spent as part of an undercover sting operation to acquire the stolen cable equipment from him. Wefind no error in the sentence enhancement under § 2B1.1(b)(4)(B) and we will affirm that portion of the sentence. However, because we conclude that the FBI was not a victim of Cottman's offense, we will vacate that portion of the judgment of sentence, imposing restitution, and we will remand this case for resentencing.
I. Factual Background and Procedural History
Pursuant to an ongoing investigation of cable television piracy, the FBI established an undercover warehouse operation in Kenilworth, New Jersey. Agents equipped the premises with video and audio recording devices. An undercover FBI agent (the UCA) was the principal operator of the warehouse. Transcripts and videotapes of conversations, as well as other evidence developed as part of the sting, revealed the following events:*fn2
On February 7, 1995, the UCA in a consensually monitored telephone conversation, spoke to a person known to the UCA as Frank Russo. Russo advised the UCA that an individual known as George "the Animal" Kanter expected to obtain approximately 80 General Instrument Corporation (GI) cable boxes within a week. Russo inquired whether the UCA would act as a "middle man" and receive the boxes on his behalf. The terms of the transaction called for a total cost of $150 per unit, which broke down into $130 for the merchandise, $10 for Kanter's commission, and $10 for the UCA. Russo further explained that, as this was a "green deal," cash up front would be required. Russo asked the UCA to front the cash for him because he would be detained in Florida and unable to bring the money up personally. When the UCA agreed to broker the deal, Russo stated that he would have Kanter contact the UCA immediately.
Within minutes the UCA heard from Kanter. Kanter stated that he had 65 units and that "his guy," was going to get more. Kanter said he would be in touch again when they were ready to do the deal.
The following day, February 8, 1995, Kanter again contacted the UCA. Kanter stated that "his guy" should be back that day, that he would have the total number of units by that night, and that a meeting would be arranged shortly.
On February 10, Kanter and "his guy" Stanley Cottman delivered about 70 boxes containing 65 GI baseband units, many of which appeared to be in brand new unopened shipping cartons. The UCA paid $8,650 in cash to Cottman and $650 to Kanter. During the meeting, Cottman removed all of the serial numbers from the cartons and instructed the UCA to remove all the stickers from the original boxes. Cottman also took the opportunity to elaborate on his involvement in the illegal cable box trade. Cottman boasted that "[A]t one point I get 3 hundred . . . . See, I deal with the same ole people over and over and over, the same ole people, no problems. . . . It's slow now since the people we deal with is so good, they get stuff even if it's slow . . . ."
Later investigation revealed that at least 52 of the 65 GI units were brand new. Approximately 9 of the units had been shipped in late December 1994 to TCI Cablevision in Baltimore, Maryland, while the remaining units had been shipped to Comcast Corporation in Philadelphia just eleven days before the sale.
Cottman, without Kanter, returned to the UCA's warehouse on February 19, 1995, to consummate another deal. Cottman explained that he had left Kanter out of this transaction because he was unsure of his ability to obtain the boxes. Cottman produced 75 GI baseband cable boxes for which the UCA paid him $10,500.
The UCA engaged Cottman in further Discussion about his involvement in illegal cable box trafficking. At one point Cottman said to Kanter: "It started out with one and two to where me and him was moving thousands . . . a week. So I had met a lucky connection up here." Cottman also repeated his assertion that, although he usually got 100 or 200 units per week, at one time he was pulling in about 300 cable boxes a week from his sources. With further inquiries from the UCA, Cottman explained that the people he worked with at the cable companies would pilfer the cable boxes by simply erasing them from the inventory lists on the companies' computers.
Later investigation again revealed that 64 of the 70 baseband units Cottman sold to the UCA were new. All 64 had been shipped to TCI in Baltimore on February 7 and 8, 1995, and received on February 13 and 14. Of these, 62 had been in the possession of Excalibur Cable Communications, Ltd., of Baltimore and had allegedly been stolen in a strong arm robbery of one of its employees, Steven Holder, on the evening of February 17, 1995, just two days before Cottman sold them to the UCA.
Cottman later denied any involvement with the robbery or knowledge of how he came to acquire the Excalibur Cable boxes, insisting that all the cable boxes had been provided by an Englishman named "Roger." However, telephone records indicated that calls were made from Cottman's residence to Holder on February 9, 19, and 26, 1995. Furthermore, Cottman's "800" number telephone records showed that he was called by Holder's supervisor, Dwight Chew, on January 15, 1995.
Finally, on February 21, 1995, Cottman and Kanter together came to the warehouse to deliver about 86 GI baseband cable boxes in exchange for $13,280 paid to Cottman and $1650 paid to Kanter. Cottman again physically removed the serial numbers from the outside packing cartons and instructed the UCA that the serial numbers needed to be stripped from the individual boxes. Later investigation revealed that 40 of these units had been shipped to Comcast of Philadelphia and TCI of Baltimore in February 1995.
In these three transactions, Cottman sold a total of 231 cable boxes for $34,730.*fn3 Cottman was indicted on one count of conspiring to possess and sell stolen cable equipment, valued in excess of $5,000, that had crossed state lines in violation of 18 U.S.C. § 371, and three substantive counts charging him with the receipt and sale of stolen cable equipment, valued in excess of $5,000, that had crossed state lines in violation of 18 U.S.C. §§ 2 and 2315. Federal authorities arrested Cottman on March 7, 1995, at his residence in Perth Amboy, New Jersey.
Cottman made a voluntary statement to the FBI following his arrest in which he stated that he had been employed with RTK Cable Company and had run a sideline business called Incognito Sound Labs, Inc., which he operated out of a public storage facility. According to Cottman, the principal focus of his business was the installation of car radios, for which he would charge $500. Cottman also admitted that he had in the past worked for various cable companies in order to make contacts who would later provide him with cable boxes.
After negotiations, a written plea agreement was reached. Pursuant to the agreement, Cottman entered a guilty plea to the conspiracy count on March 7, 1996. The district court then dismissed the three substantive counts of the indictment.
On July 22, 1996, Cottman was sentenced by the district court to a 10-month prison term to be followed by 3 years of supervised release. As a special condition of supervised release, the court ordered Cottman to pay as restitution the $32,420 expended by the FBI to acquire the stolen cable boxes from him. The district court denied Cottman's request for bail pending appeal.*fn4
Cottman immediately filed his notice of appeal. The notice was dated July 22, 1996, but was not filed by the clerk until July 25, 1996. One day later the district court entered its final judgment and order of commitment.*fn5
As a preliminary matter, we must consider the fact that Cottman has completed his ten month term of incarceration, leaving only his three years of supervised release to be served.*fn6 We must determine whether the completion of his term of imprisonment has mooted Cottman's challenge to the district court's application of the "in the business" enhancement.
Although the Seventh and Eleventh Circuits have determined that challenges of the length of defendants' sentences are no longer viable after the defendant has been released from custody, see, e.g., United States v. Ross, 77 F.3d 1525, 1549 n.6 (7th Cir. 1996); United States v. Farmer, 923 F.2d 1557, 1568 (11th Cir. 1991), we do not agree. We conclude that a finding of mootness is forestalled here because Cottman may still suffer " `collateral legal consequences' from a sentence already served." Pennsylvania v. Mimms, 434 U.S. 106, 108 n.3 (1977) (per curiam).
Two considerations, both of which are products of the Federal Sentencing Guidelines, lead us to this determination. First, the § 2B1.1(b)(4)(B) "in the business" sentencing enhancement increases Cottman's Criminal History Category from I to II for any future convictions. See, e.g., United States v. Kassar, 47 F.3d 562, 565 (2d Cir. 1995); United States v. Chaves-Palacios, 30 F.3d 1290, 1292-93 (10th Cir. 1994); United States v. Dickey, 924 F.2d 836, 838 (9th Cir. 1991). The district court's application of the enhancement increased Cottman's total offense level from ten to twelve, pushing him from Zone B to Zone C on the Sentencing Table which determines his guideline range. See U.S.S.G. § 5A (1995). Because his sentence placed him in Zone C, Cottman no longer qualified for a sentence of probation in lieu of imprisonment. See U.S.S.G. §§ 5B1.1 & 5C1.1 (1995). Cottman, as a result, acquired two, rather than one, criminal history points. The net outcome is that a sentence for any future conviction which may be imposed upon Cottman under the Guidelines will be significantly increased.
Second, if we were to find an error in the application of the "in the business" enhancement, the appropriate sentencing range would be reduced from 10-16 months to 6-12 months. See U.S.S.G. § 5A. This reduction would likely merit a credit against Cottman's period of supervised release for the excess period of imprisonment to which Cottman was subjected. See United States v. Fadayini, 28 F.3d 1236, 1241 (D.C. Cir. 1994).
For these reasons, we do not consider Cottman's appeal to be moot even though he has served the ...