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United States of America v. Sara Marie Smith

IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA


April 19, 2012

UNITED STATES OF AMERICA
v.
SARA MARIE SMITH,

The opinion of the court was delivered by: Hon. John E. Jones III

MEMORANDUM

THE BACKGROUND OF THIS MEMORANDUM IS AS FOLLOWS:

Pending before the Court is the Motion to Vacate, Set Aside, or Correct Sentence by a Person in Federal Custody pursuant to 28 U.S.C. § 2255 (the "Motion") filed by Defendant Sara Marie Smith ("Defendant" or "Smith") on July 7, 2011. (Doc. 86). On July 21, 2011, Smith filed a Notice of Election (Doc. 90) indicating that she desired the Court to rule on the Motion as filed. Thereafter, we issued a briefing schedule, with which the parties have complied. Accordingly, the Motion is fully briefed and is therefore ripe for our review. For the reasons that follow, the Motion shall be denied.

I. BACKGROUND

On February 28, 2008, a grand jury sitting in the Middle District of Pennsylvania returned an indictment against Smith, charging the Defendant with Bank Fraud in violation of 18 U.S.C. § 1344 and False Statements in relation to a Loan Account in violation of 18 U.S.C. § 1014. The indictment alleged that in her position as bookkeeper and office manager for Clark Motor Company ("Clark Motor"), Smith defrauded M&T Bank, the financial institution which funded Clark Motor's floor plan line of credit. The indictment charged that Smith used her access to an on-line computer banking network operated by M&T Bank to fraudulently inflate the value of the vehicle inventory securing the credit line and thereby caused the bank to advance over $9 million on vehicles which never existed in the Clark Motor inventory.

On April 22, 2009, Smith pled guilty, pursuant to a plea agreement, to Count One of the indictment. The non-binding plea agreement contained stipulations concerning the loss amount and the Sentencing Guidelines calculation. Specifically, Smith and the Government agreed that the loss caused by her conduct was $1,639,625.80. The agreement also provided that Smith's base offense level was 23, based upon a loss caused by her conduct of $1,000,000 to $2,500,000. The parties also agreed that if Smith's criminal history category was calculated to be level III, the applicable imprisonment range was 41 to 51 months. However, if the criminal history level was higher than III, the agreement required the Government to recommend the bottom of the applicable guideline range.

The United States Probation Office prepared a Presentence Investigation Report ("PSR"), which calculated Smith's criminal history category at IV. With a total offense level of 22, Smith's advisory guideline range was 63 to 78 months of imprisonment. On August 26, 2009 a presentence conference was held with the participation of counsel for the parties to discuss the Defendants objections to the PSR. Smith objected to, inter alia, the two-level enhancement for abuse of position of trust pursuant to U.S.S.G. § 3B1.3. After receiving full briefing on the objections, on November 12, 2009, we issued a Memorandum and Order overruling all of Smith's objections and denying her motion for downward departure based on an overstatement of her criminal history. (Doc. 62).

Thereafter, on November 24, 2009, we sentenced Smith to 63 months imprisonment, restitution in the amount of $1,639,625.80 (which was the stipulated amount in the plea agreement), a special assessment of $100 and a five year term of supervised release. Smith took a direct appeal to the Third Circuit on November 25, 2009, arguing that we erred in applying the abuse of trust enhancement. In an unpublished opinion, the Third Circuit affirmed the judgment of conviction and sentence and concluded that Smith did, indeed, occupy a position of trust under U.S.S.G. § 3B1.3. See United States v. Smith, 416 Fed. Appx. 170 (3d Cir. 2010). The Third Circuit rejected Smith's argument that her fraud was "not difficult detect" because she was not closely supervised; the Court of Appeals determined that it was clear her employer delegated to her the authority to obtain loans for vehicle purchases and issue checks without any external controls on that authority. Id. at 172.

This timely 28 U.S.C. § 2255 Motion followed, raising four possible grounds for relief. First, Smith claims that counsel was ineffective for failure to argue that Clark Motor was not a victim. Second, she claims that counsel ineffectively challenged the abuse of trust enhancement. Third, Smith claims that counsel improperly agreed to the loss calculation in the plea agreement. Finally, she claims that counsel was ineffective because he allowed her to enter into a "misleading" plea agreement and then failed to object to the Government's alleged breach thereof. We shall discuss each claim in seriatim.

II. STANDARD OF REVIEW

In order to successfully demonstrate ineffective assistance of counsel, Smith must establish that (1) the performance of counsel fell below an objective standard of reasonableness; and (2) the errors of counsel prejudiced the defense. Strickland v. Washington, 466 U.S. 668, 687-92, 104 S. Ct. 2052, 80 L. Ed. 2d 674 (1984). The first prong of the Strickland test requires the defendant show that counsel's performance was actually deficient. Jermyn v. Horn, 266 F.3d 257, 282 (3d Cir. 2001). A court "deciding an actual ineffectiveness claim must judge the reasonableness of the counsel's challenged conduct on the facts of the particular case, viewed as of the time of counsel's conduct." Strickland, 466 U.S. at 690. Counsel's conduct presumptively "falls within the wide range of reasonable professional assistance," and the defendant "must overcome the presumption that, under the circumstances, the challenged action 'might be considered sound trial strategy.'" Id. at 689-90 (quoting Michel v. Louisiana, 350 U.S. 91, 93, 76 S. Ct. 158, 100 L. Ed. 83 (1955)).

The second prong of the Strickland test requires the defendant show that the deficient performance so prejudiced the defense as to raise doubt as to the accuracy of the outcome of the trial or sentence. Strickland, 466 U.S. at 693-94. The defendant must demonstrate that "there is a reasonable probability that, but for counsel's unprofessional errors, the result of the proceeding would have been different." Jermyn, 266 F.3d at 282 (quoting Strickland, 466 U.S. at 693). A "reasonable probability," for the purposes of establishing prejudice, is "a probability sufficient to undermine confidence in the outcome." Id.

III. DISCUSSION

A. Clark Motor as a Victim

Smith contends that counsel was ineffective because he failed to argue that Clark Motor was not a victim in this case based on Smith's contention that Clark Motor suffered no economic loss as a result of her fraud.This argument, which is based on Smith's misapprehension of both the facts and federal law, is unavailing.

It is evident that M&T Bank was the primary economic victim of Smith's fraud. That fact, conceded by the Government, cannot be disputed.Smith fraudulently diverted approximately $9 million in loan proceeds, and when the scheme was ultimately discovered, Clark Motor's floor plan loan account had a balance of $1,580,173.50 for vehicles that had never been on the dealer inventory. Clark Motor was, however, also a victim of Smith's scheme. Smith diverted monies from Clark Motor accounts to pay off loans on her personal vehicles, to pay herself additional, unauthorized commissions, and for deposits into her bank account for her own use and benefit.We cannot find that counsel's performance fell below an objective standard of reasonableness for failing to argue that Clark Motor was not a victim because Clark Motor was most surely a victim. Accordingly, this ground for relief is denied.

B. Abuse of Trust Enhancement

As noted above, at the pre-sentence phase of the case, defense counsel objected to the two-level enhancement for abuse of position of trust pursuant to U.S.S.G. § 3B1.3. The issue was briefed by the parties, and this Court ultimately overruled the objection, concluding:

It is evident that Smith was able to perpetrate the criminal activity at Clark Motor by virtue of her access to the M&T Dealer Access System -- access which accompanied her job duties as a bookkeeper at Clark Motor. Additionally, by virtue of her position as bookkeeper, Smith was able to evade detection by keeping Clark Motor "in the black," thus keeping questions by her superiors at bay. While Clark Motor may have placed misguided trust in Smith in light of her previous convictions based on criminal conduct of a similar ilk, the arguably poor business decision by Clark Motor to hire Smith as a bookkeeper does not vitiate the criminal conduct she accomplished in that role. We conclude that the 2 level enhancement for abuse of a position of trust is warranted and shall overrule the Defendant's objection to Paragraph 23. (Doc. 62, pp. 6-7). In an opinion dated November 23, 2010, the Third Circuit denied Smith's appeal, and determined that it was clear her employer delegated to her the authority to obtain loans for vehicle purchases and issue check without any external controls on her authority. Smith, 416 Fed. Appx. at 172.

Smith now claims that counsel was ineffective in asserting his challenge to the abuse of trust enhancement. She argues that counsel did not appropriately argue that Clark Motor could have easily detected the fraud scheme that she perpetrated against the car dealer and its lender. We disagree.

First, we reiterate that Smith's counsel did in fact present this argument to both this Court and the Third Circuit, thus any assertion that counsel did not address this argument is patently meritless. Moreover, as noted by the Third Circuit, "it does not help Smith that her fraud was rendered 'difficult to detect' because she was not closely supervised. To the contrary, the relevant inquiry is neither whether the wrong was difficult to detect in any objective sense, nor whether a different employer would have found it easy to detect. Instead it is whether the 'real scope' of Smith's job -- including the de facto level of supervision she received -- made it easy for her to conceal her fraudulent conduct." Id. Both this Court, and the Third Circuit, had little difficulty concluding that it was. That her counsel appropriately objected but lost the argument does not render him deficient. Thus, we do not find that Smith's contention of ineffectiveness with respect to counsel's arguments on the abuse of trust enhancement to be availing.

C. Loss Calculation Agreement

Astoundingly, despite unequivocally agreeing to a loss amount of $1,639,625.80 in the plea agreement, and then not objecting to this figure as contained in the PSR, Smith now contends that neither M&T Bank nor Clark Motor suffered any loss as a result of her conduct. Based on this position, Smith contends that counsel was ineffective for allowing her to stipulate to the loss figure in the plea agreement.

This argument warrants little analysis for two reasons. First, it is beyond peradventure that Smith perpetrated a fraud upon M&T Bank and Clark Motor that resulted in M&T Bank providing loans to Clark Motor for vehicles that Clark Motor never had in its inventory, and then Smith diverted those loan proceeds for her own benefit. Second, despite being given numerous opportunities to do so, Smith never expressed any disagreement with the loss calculation amount stipulated to by her. In fact, the negotiated stipulated loss amount of nearly $1.6 million is far less than the approximately $9 million in loans Smith was responsible for diverting, establishing that Smith's counsel worked arduously in her favor to achieve a lower base offense level for calculating her sentencing guidelines. Finally, it is appropriate to observe that Smith possesses a degree of financial sophistication that makes it impossible to conceive that she had this stipulated loss figure foisted upon her due to a lack of awareness. Accordingly, for these reasons, we reject this ground of Smith's Motion.

D. Breach of Plea Agreement

Finally, Smith argues that counsel was ineffective for permitting her to enter into a "misleading" plea agreement and then failing to object when the Government allegedly breached the same. As discussed previously, the stipulations contained in Smith's plea agreement provided that if her criminal history was a level III, her guideline imprisonment range would have been 41 to 51 months. However, if the criminal history score was higher than III, the Government was bound to recommend the bottom of the advisory guideline range. On its face, there is nothing misleading about the plea agreement. To the contrary, neither Smith's counsel nor the Government could state with certainty what Smith's criminal history category would be at the point the plea agreement was offered. As such, her counsel clearly negotiated the most favorable provision he could that bound the Government to recommend the bottom of the guideline range if Smith was exposed to a higher range due to a criminal history category above III. Further, these alternatives were discussed with Smith on the record, and she unequivocally stated that she understood the terms of the non-binding stipulation. Once again we observe that Smith is a person of evident intelligence, and having presided over the underlying case we harbor no doubt whatsoever that she knew precisely what she was doing at all times in these proceedings. Thus, we do not conclude that the plea agreement was misleading, nor was it breached, inasmuch as the Government recommended exactly what it agreed to -- the bottom of the guideline range that Smith was exposed to in light of her criminal history category of IV. Accordingly, we do not find counsel's performance in this regard to be ineffective in any sense.

IV. CONCLUSION

Accordingly, based on the foregoing analysis, we do not find that counsel's performance was ineffective in any respect, and as such, the instant Motion shall be denied. An appropriate Order shall issue.

20120419

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