United States v. Rand, Daniel D.

In the

United States Court of Appeals

For the Seventh Circuit

____________

No. 04-1572

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

DANIEL D. RAND,

Defendant-Appellant.

____________

Appeal from the United States District Court

for the Northern District of Indiana, Hammond Division.

No. 2:02-CR-59—Rudy Lozano, Judge.

____________

ARGUED NOVEMBER 9, 2004—DECIDED APRIL 5, 2005

____________

Before FLAUM, Chief Judge, and CUDAHY and POSNER,

Circuit Judges.

CUDAHY, Circuit Judge. Appellant Daniel Rand pleaded

guilty to a charge of conspiracy relating to an identity-theft

scheme. Pursuant to this scheme, Rand and his co-conspira-

tors stole personal information from (among others) employ-

ees of the Gary, Indiana public school system, used that

information to obtain credit cards and made purchases with

those credit cards. Based upon his guilty plea, Rand was sen-

tenced to 21 months in prison and ordered to pay restitution

in excess of $57,000. Rand now appeals this restitution

2 No. 04-1572

order, claiming that the district court impermissibly in-

cluded in its calculation losses of identity-theft victims not

listed in the indictment or specifically identified in Rand’s

guilty plea.

I. FACTUAL BACKGROUND & DISPOSITION

BELOW

On March 3, 2003, Appellant Daniel Rand pleaded guilty

to a charge of conspiring to steal identification information

from employees of the Gary, Indiana public school system

and to use that information to fraudulently obtain credit

cards, in violation of 18 U.S.C. § 371. This charge repre-

sented Count 1 of a seven-count indictment brought against

Rand, and the other six counts were dismissed after entry

of Rand’s guilty plea. Count 1 stated specifically that four

street addresses had been used in the scheme, and it de-

scribed the general nature of the conspiracy as follows:

It was part of the conspiracy that the defendants: (1)

obtained the names and social security numbers of

employees of the Gary Community School Corporation,

Gary, Indiana, in order to establish credit in the em-

ployees’ names without their knowledge, authority and

permission for the defendants’ own personal purposes

and benefit; (2) obtained credit cards in the employees’

names in order to purchase merchandise for the

defendants’ own personal purposes and benefit; . . . (4)

obtained and redirect[ed] the fraudulent credit cards,

credit card statements, billing statements, and other

mail in order to conceal the deceptive use of the [sic] of

the employees’ identification for the defendants’ own

personal purpose and benefit.

(Grand Jury Charges, 8/22/2002 at 2.) The indictment then

listed 28 separate overt acts of identity theft, specifying the

individual victims whose identities were used and the

approximate time of the theft. Rand initially entered a plea

No. 04-1572 3

of not guilty to the charges, but on February 27, 2003, he

filed a Petition to Enter a Change of Plea, in which he

pleaded guilty to Count 1 of the indictment. In the plea, he

specifically admitted to several acts of fraud involving the

identity information of five individual victims. Rand reiter-

ated his admission at his plea hearing on March 3, 2003.

After entry of Rand’s guilty plea, pre-sentence reports were

drafted, the last of which asserted that the conspiracy

actually implicated fraudulently obtained credit cards sent

to nine different street addresses (not just four addresses as

indicated in Count 1) and that Rand could be held responsi-

ble for 25 additional incidents of identity theft not men-

tioned specifically in the indictment. Based on these figures,

the report concluded that Rand was responsible for

$90,744.30 in actual losses and $8,915.49 in intended losses

under a theory of relevant conduct. Rand challenged this

calculation, alleging that he should be held responsible only

for the specific fraudulent acts he affirmatively admitted in

his guilty plea, which gave rise to losses totaling just

$12,594.90.

At sentencing, the district court adopted neither of these

figures. The court found that the evidence conclusively

linked Rand to only four street addresses: One that he had

already admitted to using in the conspiracy, two that he

referenced in his Change of Plea hearing and one that was

identified by his sister (and co-conspirator), whose testimony

on the matter was never refuted. (R. at 4-236-37.) Based on

these findings, the court settled on a sum of $57,431.67,

which included the damages caused by all the overt fraud-

ulent acts perpetrated using these four addresses. Most of

this total reflected losses resulting from acts of fraud expli-

citly listed in the original indictment, but $7,241.76 was

associated with identity theft victims who were identified

during court proceedings but were neither employees of the

Gary public school system nor mentioned specifically in the

indictment. (See R. at 4-234-44.) The district court ruled

4 No. 04-1572

that Rand was required to pay the entire $57,431.67 in

restitution, and the court sentenced Rand to 21 months in

prison (the highest term allowable under the applicable

sentencing range).

The remaining counts of Rand’s indictment were dismissed

on February 27, 2004. The district court entered its judg-

ment, including the $57,431.67 restitution order, on

March 3, 2004. The judgment was subsequently amended

on March 5, 2004, and Rand timely filed his Notice of Appeal

on the same day. Rand now asserts that the district court’s

restitution calculation was impermissible since it included

damages relating to individual identity theft victims whom

Rand did not affirmatively identify in his guilty plea, who

were not identified specifically in the original indictment or

who were not employees of the Gary, Indiana public school

system.1 For the reasons that follow, we affirm.

II. JURISDICTION

This is a direct appeal from a conviction pursuant to a

guilty plea and a sentence entered on February 26, 2004.

The final judgment in this case was entered by amended

order on March 5, 2004, and Appellant’s timely Notice of

Appeal was filed on that same day. The jurisdiction of the

district court rested on 18 U.S.C. § 3231. Accordingly, we

now have jurisdiction pursuant to 28 U.S.C. § 1291, which

provides for appeals from final orders of the district courts,

and 18 U.S.C. § 3742, which covers appeals from final crim-

inal sentences entered in the district courts.

1

This last point is significant because the charges against Rand

identify the victims of the conspiracy as “employees of the Gary

Community Schools Corporation, Gary, Indiana.” (Grand Jury

Charges, 8/22/2002 at 2.)

No. 04-1572 5

III. DISCUSSION

The district court’s authority to issue a restitution order

is an issue of law that we review de novo. U.S. v. Wells, 177

F.3d 603, 608 (7th Cir. 1999). The government bears the

burden of demonstrating the correct amount of the restitu-

tion award by a preponderance of the evidence, see 18 U.S.C.

§ 3664(e); United States v. Sensmeier, 361 F.3d 982, 988 (7th

Cir. 2004), and “[w]e review the district court’s calculation

of the amount of restitution for an abuse of discretion.”

Sensmeier, 361 F.3d at 988 (citing U.S. v. Newman, 144 F.3d

531, 542 (7th Cir. 1998)). Reversal is warranted under this

standard if the district court relied on “inappropriate fac-

tors” in arriving at the restitution amount. Id.

Rand pleaded guilty to conspiring to commit identity theft

in violation of 18 U.S.C. § 371. He does not dispute that

federal law authorized—indeed required—the district court

to order restitution for such an offense under the Victim and

Witness Protection Act (VWPA), 18 U.S.C. § 3663, and the

Mandatory Victims Restitution Act (MVRA), 18 U.S.C.

§ 3663A(c)(1). The only controversy here concerns the

amount of the restitution order. Specifically, Rand alleges

that the order is invalid because it holds him responsible for

acts of identity theft relating to victims that were not

specifically identified in the original indictment and thus

not covered by his guilty plea. This claim is without merit.

It is well-settled that, as a general matter, “[f]ederal courts

possess no inherent authority to order restitution, and may

do so only as explicitly empowered by statute.” United States

v. Randle, 324 F.3d 550, 555 (7th Cir. 2003) (internal quo-

tations omitted). As such, restitution orders are subject to

certain important strictures. The most basic of these is the

requirement that there be a “direct nexus between the

offense of conviction and the loss being remedied.” Id. at

556. That is, a restitution award is authorized only with

respect to that loss caused by “the specific conduct that is the

6 No. 04-1572

basis of the offense of conviction.” Hughey v. United States,

495 U.S. 411, 413 (1990).2 Thus “both the amount of the

restitution award and the persons to whom such an award

may be directed are limited by the circumstances of the

offense for which the defendant has been convicted.”

Randle, 324 F.3d at 556.

Restitution normally “tracks ‘the recovery to which [the

victim] would have been entitled in a civil suit against the

criminal,’ ” but § 3663A(a)(3) also “permits the defendant to

undertake additional restitution obligations via a plea

agreement.” United States v. Behrman, 235 F.3d 1049, 1052

(7th Cir. 2000) (quoting United States v. Martin, 195 F.3d

961, 968 (7th Cir. 1999)). Thus, in a case such as this one,

where a defendant enters a guilty plea, “[e]xamination of

the conduct constituting the commission of a crime only

involves consideration of the conduct to which the defendant

pled guilty and nothing else.” Randle, 324 F.3d at 556. Sim-

ilarly, consideration of “relevant conduct” for sentencing

purposes may not serve as the basis of a restitution award

unless it is also “charged conduct” or covered in a plea agree-

ment. United States v. Scott, 250 F.3d 550, 553 (7th Cir.

2001); see also Randle, 324 F.3d at 556 (citing Scott for the

same proposition).

However, while federal law carefully circumscribes the

type of conduct upon which restitution orders may be based,

it defines the “victims” of such conduct somewhat more

broadly:

For the purposes of this section, the term ‘victim’ means

a person directly and proximately harmed as a result of

the commission of an offense for which restitution may

be ordered including, in the case of an offense that

2

A portion of Hughey’s holding was superceded by subsequent

amendments to 18 U.S.C. § 3663, though these changes are not

germane to the general rules cited here.

No. 04-1572 7

involves as an element a scheme, conspiracy, or pattern

of criminal activity, any person directly harmed by the

defendant’s criminal conduct in the course of the scheme,

conspiracy, or pattern.

18 U.S.C. §§ 3663(a)(2), 3663A(a)(2) (emphasis added). Our

prior constructions of this language have “distill[ed] three

situations in which restitution is authorized under the

MVRA: first, to a victim directly harmed by the offender’s

‘specific conduct that is the basis of the offense of conviction’;

second, to a victim who is directly harmed by the offender’s

conduct in the course of committing an offense that involves

‘as an element a scheme, conspiracy, or pattern’; and third,

if the parties so agreed in a plea agreement.” Randle, 324

F.3d at 556 (citations omitted).

Absent a specific contrary provision in a plea agreement,

a court ordinarily may not order restitution for individuals

not included within the statutory definition of “victim,”

Behrman, 235 F.3d at 1052-53, nor for individuals who were

not affected by the specific offense conduct to which a

defendant pleaded guilty, Randle, 324 F.3d at 557-58. How-

ever, where a defendant has consented to restitution for

specifically charged conduct, the judge may determine the

exact amount at a later sentencing hearing, United States

v. Peterson, 268 F.3d 533, 534-35 (7th Cir. 2001), and in some

cases restitution may be ordered for certain “direct and

foreseeable consequence[s]” of a crime, even if the conduct

at issue does not constitute an element of the crime itself,

United States v. Donaby, 349 F.3d 1046, 1055 (7th Cir. 2003)

(allowing restitution for damages caused by police pursuit

following a bank robbery).

Thus, while the conduct underlying a restitution order must

be specifically articulated in the charge or a plea agreement,

specific victims need not be, especially in a case involving

“as an element a scheme, conspiracy, or pattern of criminal

activity.” 18 U.S.C. §§ 3663(a)(2), 3663A(a)(2). Rand’s guilty

8 No. 04-1572

plea, concerning an organized identity-theft conspiracy,

clearly qualifies as such a case. Accordingly, any individual

“directly harmed” by Rand’s “criminal conduct in the course

of the [fraud] scheme, conspiracy, or pattern” is presump-

tively included in the restitution calculus. 18 U.S.C.

§ 3663A(a)(2).3

Moreover, Rand may be held responsible for losses caused

by the foreseeable acts of his co-conspirators. Co-conspira-

tors generally are jointly and severally liable for injuries

caused by the conspiracy, and this principle applies to the

restitution context no less than to sentencing. See

United States v. Martin, 195 F.3d 961, 968-69 (7th Cir.

1999). In fact in Martin we stated that even a defendant not

charged with conspiracy could be held responsible for losses

caused by co-defendants where there was evidence of a

common “scheme”or plan. 195 F.3d at 968-69.4

Contrary to Rand’s characterization of things, the district

court’s restitution order fell squarely within these parame-

ters. The authorities in this circuit instruct that the conduct

for which the restitution is ordered must be properly

charged, and here Rand was charged with conspiring to de-

fraud a host of unwitting victims. Under such circumstances,

the trial court must determine, based on the evidence before

it, the scope of the conspiracy and the damages it caused,

3

It is also important to note that, since restitution is essentially

“[a] civil remedy included with a criminal judgment,” the facts

underlying a restitution order need not be established beyond a

reasonable doubt and thus are not governed by Apprendi, Booker

and the other recent jurisprudence addressing sentencing issues.

Behrman, 235 F.3d at 1054; see also United States v. Szarwark,

168 F.3d 993, 998 (7th Cir. 1999).

4

In Martin we also observed that “in determining the scope and

consequence of the scheme the judge was not limited to the

evidence presented at the trial.” 195 F.3d at 969.

No. 04-1572 9

and Rand may be held responsible for any and all such

damages. Here the district court properly looked to the

evidence adduced in proceedings before it to determine the

extent of this conspiracy and the victims it affected.

Rand’s attempts to limit the scope of his liability by listing

in his plea agreement acts relating to only a few individual

victims is thus unavailing. Rand may not evade the clear

import of the MVRA and leave his victims in the proverbial

lurch simply by artful pleading. Having pleaded guilty to

conspiracy, he may not then pick and choose the victims for

which he will be held responsible. Similarly, it is irrelevant

that certain victims identified by the district court were not

employees of the Gary, Indiana public school system; the

district court found that the damages to each victim were

caused by the same common scheme, perpetrated using one

of four addresses identified in proceedings below.

In sum, all of the losses included in the restitution order

stemmed from fraudulent acts taken pursuant to a single

identity theft conspiracy—the specific criminal conduct to

which Rand pleaded guilty—and related to individuals who

were “directly harmed by the defendant’s [or his co-conspira-

tors’] criminal conduct in the course of the scheme, con-

spiracy, or pattern.” 18 U.S.C. § 3663A(a)(2); Randle, 324

F.3d at 556. Moreover, all the included losses related to

street addresses that Rand or his co-conspirators specifi-

cally admitted to using in the course of the conspiracy. The

order thus was supported by the requisite preponderance of

the evidence. See 18 U.S.C. § 3664(e); Sensmeier, 361 F.3d

at 988. In light of these considerations, we cannot say that

the district court abused its discretion in calculating Rand’s

restitution order, nor that its calculation was based on

“inappropriate factors.” Sensmeier, 361 F.3d at 988. There

was no error.

10 No. 04-1572

IV. CONCLUSION

The restitution order issued by the district court is hereby

AFFIRMED.

A true Copy:

Teste:

________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit

USCA-02-C-0072—4-5-05