United States v. Baretz, Lloyd

In the

United States Court of Appeals

For the Seventh Circuit

____________

No. 03-3332

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

LLOYD J. BARETZ,

Defendant-Appellant.

____________

Appeal from the United States District Court for

the Northern District of Illinois, Eastern Division.

No. 03 CR 206-1—Suzanne B. Conlon, Judge.

____________

ARGUED JUNE 7, 2004—DECIDED JUNE 21, 2005

____________

Before POSNER, RIPPLE and ROVNER, Circuit Judges.

RIPPLE, Circuit Judge. Lloyd J. Baretz was charged in a

twenty-two-count indictment and pleaded guilty, in ac-

cordance with a plea agreement, to three counts of wire

fraud, in violation of 18 U.S.C. § 1343, and to one count of

conspiracy to commit money laundering, in violation of 18

U.S.C. § 1956(h). The district court, applying the 1997

version of the United States Sentencing Guidelines (“1997

Guidelines”), sentenced him to 151 months in prison on the

conspiracy count and to 60 months in prison on each count

of wire fraud; these sentences were to run concurrently. Mr.

2 No. 03-3332

Baretz appeals his sentence. We held this case in abeyance

pending the decision of the Supreme Court of the United

States in United States v. Booker, 125 S. Ct. 738 (2005), and we

then invited the parties to file supplemental memoranda

presenting their views on the application of Booker to this

case. For the reasons set forth in the following opinion, we

now vacate the sentence and remand for further proceed-

ings consistent with this opinion.

I

BACKGROUND

A. Facts

The wire fraud scheme to which Mr. Baretz pleaded guilty

involved the sale of telephone-call accounts receivable to the

Royal Bank Export and Finance Corporation (“REFCO”).

Mr. Baretz was the president and principal shareholder of

Oxford Capital Corporation (“Oxford”) and the president of

Plymouth Capital Corporation (“Plymouth”). Both of these

corporations were engaged in the business of factoring

accounts receivable. Factoring is the purchase of a com-

pany’s invoices at a discount.

The scheme at issue here involved the factoring of tele-

phone-call receivables. A telephone-call receivable is the

debt created when an individual places a telephone call

to receive certain information at a price (such as a call to a

1-900 number) and agrees to pay for the receipt of that

information at a later date. The debt created by this transac-

tion is an account receivable to the Information Provider

(“IP”), the company that provided the information in the

call.

Integretel Inc. (“Integretel”) was a corporation engaged in

the business of servicing and purchasing telephone-call

No. 03-3332 3

receivables. Integretel serviced IPs by sorting their records

and collecting the receivables from each caller’s telephone

company. Integretel then would remit the collected revenue,

minus a service fee, to the IP. Integretel also offered its

customers an “early pay” program. Under this program,

Integretel would purchase, at a discount, the telephone-call

receivables from the IP. This arrangement allowed the IP to

receive revenue immediately rather than wait for the debt

to be collected.

Integretel had a contract with Plymouth, one of

Mr. Baretz’ companies. This arrangement was called a mas-

ter factoring agreement. Under this agreement, Plymouth

would purchase, at a discount, specific telephone-call

receivables from Integretel. Plymouth thus assumed actual

ownership of those receivables. In order to finance its

purchase of receivables from Integretel, Plymouth had a

further agreement with REFCO, under which REFCO would

purchase, at a discount, from Plymouth the receivables that

Plymouth had purchased earlier from Integretel.

Under this agreement, there were limitations with respect

to the receivables purchased by REFCO. REFCO would pur-

chase only certain identified receivables from Plymouth.

The agreement also limited, by dollar amount, the receiv-

ables that REFCO would purchase from any one telephone

company. The contract also capped REFCO’s outstand-

ing balance to Plymouth at any one time at $75 million.

Plymouth warranted to REFCO that it had good title, free of

encumbrances, to all of the receivables that it sold to

REFCO. REFCO had the right to compel Plymouth to

repurchase any telephone-call receivable that remained

unpaid after 90, and later, 120 days.

Oxford, Mr. Baretz’ other company, acted as Plymouth’s

agent in purchasing telephone-call receivables from

Integretel, assigning them to telephone companies for col-

4 No. 03-3332

lection and selling them to REFCO. Periodically, Oxford

would fax to REFCO an “advance request,” which listed the

receivables to be purchased by REFCO, the outstanding

balance on receivables already sold to REFCO, and the

number of months those receivables had been outstanding.

Based on the advance request, REFCO would wire payment

to Oxford’s bank account for the purchase of the agreed

upon receivables. Oxford then would deduct its fee and

wire the balance to Integretel’s bank account.

In December 1995, Mr. Baretz caused Plymouth/Oxford

to begin submitting to REFCO fraudulent or wholly fic-

titious advance requests. In some cases, if Plymouth had

purchased receivables from Integretel that exceeded

REFCO’s agreed limits from a specific telephone company,

Plymouth would substitute a false receivable for another

telephone company. In other cases, Plymouth simply sub-

mitted fictitious receivables. Generally, Mr. Baretz misap-

propriated the excess funds paid by REFCO but not used to

offset Plymouth’s payments to Integretel for personal and

other business uses. From August 1997 until April 1998,

when the fraud scheme was discovered, Plymouth/Oxford

stopped purchasing accounts receivable from Integretel and

sold only fictitious receivables to REFCO.

In order to fund and conceal his fraud, Mr. Baretz en-

gaged in “weekend sweeps.” To run these sweeps, at

the end of each week Oxford would borrow money from

Integretel (which, unknown to REFCO, Mr. Baretz owned as

of January 1996) and forward that money to REFCO.

The funds thus remitted to REFCO were represented to be

payments on genuine receivables. This misrepresentation

concealed that REFCO previously had been sold fictitious

receivables that could not generate receipts. In addition, the

weekend sweeps funds were identified to REFCO as

payments on older receivables that Mr. Baretz wanted to

No. 03-3332 5

retire. This scheme avoided REFCO’s right to compel

Plymouth to repurchase receivables that remained unpaid

for more than 120 days.

At the same time, in order to keep REFCO’s investment at

approximately $75 million, Plymouth/Oxford would send

an advance request to REFCO for further purchases. This

resulting cash infusion allowed Plymouth/Oxford to repay,

early the following week, the loan received from Integretel

and gave Mr. Baretz funds with which to make personal

expenditures and to pay other outstanding debts.

The extent of this deception was grand: Plymouth/

Oxford never owned more than $25 million in early-pay

receivables from Integretel; yet, Plymouth/Oxford had a

receivables balance with REFCO of $75 million. The Govern-

ment submits, and Mr. Baretz has not disputed, that, over

the course of this scheme, he and his co-defendants submit-

ted to REFCO more than $400 million in fictitious receiv-

ables for purchase. The sweep transactions from Integretel

to Plymouth/Oxford involved more than $290 million.

B. District Court Proceedings

Because it is central to the contentions of the parties on

appeal, we shall set forth in some detail the methodology

employed by the district court in sentencing Mr. Baretz.

1.

The presentence investigation report (“PSR”) calculated

Mr. Baretz’ recommended sentence for the wire fraud

counts as follows. The probation officer applied the 1997

Guidelines, the version of the guidelines in effect at the time

of the offense. The probation officer used this version rather

than the version in effect at the time of sentencing to avoid

6 No. 03-3332

what she perceived to be a violation of the Ex Post Facto

Clause. See U.S.S.G. § 1B1.11(b). In her view, the 1997

version of the guidelines was more beneficial to Mr. Baretz.

In applying the guidelines, the officer grouped Counts One,

Four and Seven because the offense level for each largely

was determined by the total amount of loss. The base

offense level was 6 under § 2F1.1.

Section 2F1.1(b) directed that, if the fraud loss amount

exceeded $2,000, the offense level should be increased

according to the loss table in that section. Turning to the loss

table, the probation officer first determined that REFCO had

forwarded $75 million to Plymouth/Oxford for the pur-

chase of telephone-call receivables. The officer then sub-

tracted from this figure $21 million that REFCO had recov-

ered from the sale of collateral pledged by Mr. Baretz.

Mr. Baretz disputed this calculation; he submitted that

REFCO’s loss was collateralized in full; therefore the fraud

loss amount was $0. Specifically, he urged that, at the time

the fraud was discovered, REFCO had a perfected security

interest in the billed and unbilled accounts receivables to be

paid by the telephone companies and that this collateral

adequately covered all of REFCO’s financial exposure. See

U.S.S.G. § 2F1.1, application note 7(b) (instructing that, if the

defendant fraudulently obtained a loan by misrepresenting

the value of his assets, the loss equals the amount of the

loan not repaid at the time the offense is discovered,

reduced by the amount the lending institution has recov-

ered, or can expect to recover, from any asset pledged to

secure the loan). The probation officer, however, recom-

mended that none of this collateral reduce the loss amount,

because REFCO had not been able to liquidate these re-

ceivables and had not received any of the purported assets

to reduce the amount owed.

No. 03-3332 7

The probation officer also identified another factor

relevant to sentencing—relevant conduct. Based on informa-

tion submitted by the Government, the probation officer

noted that Mr. Baretz had committed fraud against other

banks. See U.S.S.G. § 1B1.3. Mr. Baretz contended, however,

that these alleged frauds were not relevant conduct because

they were neither part of a common scheme to defraud nor

part of the same course of conduct as the offense involving

REFCO. The probation officer recommended holding Mr.

Baretz responsible for $23.9 million in loss to the other

banks. Adding this figure to the $54 million in loss to

REFCO, the total recommended fraud loss amount was

$77.9 million, which called for a 17-level upward adjustment

under § 2F1.1(b)(1)(R).

The probation officer also suggested a 2-level enhance-

ment for “more than minimal planning,” in accordance with

§ 2F1.1(b)(2), and another 2-level enhancement because

REFCO was a financial institution within the meaning of

§ 2F1.1(b)(6)(B).

The district court rejected Mr. Baretz’ collateral offset

objection to the amount of fraud loss calculated in the PSR;

it reasoned:

[A]t the time the fraud was discovered, it has certainly

not been shown that the bank had any invested col-

lateral rights in the receivables, particularly unidentified

non-early pay receivables. Sure, they might have had a

far-stretched claim under [In re Telesphere

Communications, Inc., 167 B.R. 495 (Bkrtcy. 1994), rev’d,

205 B.R. 535 (N.D.Ill. 1997)]. That isn’t a vested collat-

eral right. That would have been a dubious right. In any

case, it would have probably taken a lawsuit which

would probably still be going on if that was the course

that the bank had decided or REFCO had decided to

follow.

8 No. 03-3332

I have reviewed a letter that was submitted to the

probation office on behalf of the bank. And it appears to

me that the bank reasonably relied on advice of counsel

in not pursuing an arguable Telesphere remedy. And

that it’s the bank’s recourse to these receivables is, at

best, questionable. And then, as I said, if the bank had

decided to exercise some claim or pursue some claim

against receivables which, arguably, Integretel owned,

although it’s not beyond a doubt, or that Plymouth had

recourse to, that litigation would have certainly gone on

after exposure of the fraud. And what remains unchal-

lenged is, at the time the scheme was exposed, there

were no receivables to support the fraudulent sales to

REFCO. At least it hasn’t appeared to me to be such.

R.106-1 at 49-50. The district court expressly found that the

$54 million in loss to REFCO was established by a prepon-

derance of the evidence. With respect to the $23.9 million in

loss to the other banks, the district court stated that “it is

relevant conduct. And so the presentence report accurately

and sufficiently attributes the loss as resulting in a 17 level

increase.” Id. at 51.

In addition, the district court ruled that REFCO was not a

financial institution and that, consequently, a 2-level

enhancement under § 2F1.1(b)(6)(B) was not appropriate.

The court further enhanced Mr. Baretz’ offense level by 2

levels under § 3B1.1(c), based on its finding that he was an

organizer or leader of the offense. The final adjusted offense

level for the wire fraud offenses was 27.

2.

With respect to the money laundering offense (Count 22),

the probation officer concluded that the base offense level

was 23. See U.S.S.G. § 2S1.1(a). The adjusted offense level

No. 03-3332 9

largely was determined by the value of funds laundered by

Mr. Baretz. See id. § 2S1.1(b)(2) (instructing that if the value

of the funds exceeded $100,000, the offense level should be

increased according to the value table). The probation

officer estimated that Mr. Baretz had laundered more than

$289 million using his system of weekend sweeps.

Neither of the parties believed that the full credit line

ought to be the measure of the loss. The Government

suggested that the amount of loss due to the fraud, $54

million, might be a better indicator of the value of funds

laundered because REFCO’s exposure to loss never had

been more than $75 million and because much of the money

had been cycled through the system several times. Mr.

Baretz argued that it was erroneous to conclude that he had

intended to launder the full amount of the credit line. He

contended that, although REFCO was misled about the

source of the funds it received through the weekend sweeps,

the sweeps had paid down the loan portfolio by the same

amount as the amount of the payments from the local

telephone companies. Despite the position of both parties

that the full credit line was not the appropriate measure of

the loss, the probation officer nevertheless recommended

$75 million as the value of funds laundered because this

amount was REFCO’s maximum exposure at any given

time. Based on the $75 million value of funds calculation,

the probation officer recommended a 12-level enhancement.

See id. § 2S1.1(b)(2)(M).

The district court acknowledged, early into the hearing,

that Mr. Baretz had objected to the PSR’s recommended

value of the funds laundered. Nevertheless, the court never

made a specific ruling as to the accuracy of this finding. The

district court accepted the probation officer’s calculation

that the offense level was 37; implicitly, therefore, the

district court accepted that the value of funds was

10 No. 03-3332

$75 million. We do not know, however, why the court re-

jected the view of the Government and the view of the

defendant.

Under § 3D1.2(c), all of the counts of conviction (the

wire fraud counts and the money laundering count) were

grouped together. The offense level applicable to this group

was the offense level for the most serious of the counts,

which was the money laundering offense. See id. § 3D1.3(a).

Thus, the adjusted offense level was 37. The district court

then reduced this offense level by 3 points based on its

finding that Mr. Baretz had accepted responsibility for

purposes of § 3E1.1. The total offense level was 34, which

resulted in a sentencing range of 151 to 188 months.

3.

Mr. Baretz also requested a downward departure. After

calculating Mr. Baretz’ total offense level, the district court

stated to defense counsel: “Now you had a position for

downward departure. Don’t you know those don’t exist

anymore except in cooperation agreements? But go ahead.”

R.106-1 at 69. Defense counsel then presented his argument;

Mr. Baretz spoke in allocution; and the Government pre-

sented its contrary argument. Without expressly ruling on

the motion, the district court said, “All, right, is there any

reason why sentence cannot be imposed at this time,” and

it proceeded to impose sentence. Id. at 82.

The district court sentenced Mr. Baretz to 151 months in

prison. In imposing this sentence, the court expressed that

the sentence “is more than adequate. I think it’s, frankly,

high, but it’s the lowest sentence mandated by the guide-

lines considering all the factors that apply to this case. So I’ll

impose sentence at the bottom end of the guideline

range . . . .” Id. at 83.

No. 03-3332 11

II

DISCUSSION

A. Version of the Guidelines Applied

Mr. Baretz contends that the district court erred by

applying the wrong version of the guidelines. Although, in

light of the Supreme Court’s decision in Booker, the guide-

lines no longer are mandatory, a sentencing court still “must

consult those Guidelines and take them into account when

sentencing.” Booker, 125 S. Ct. at 767. As this court recently

has articulated, the provision of the Sentencing Reform Act

that mandates resentencing when the challenged sentence

resulted from an “ ‘incorrect application of the sentencing

guidelines,’ ” 18 U.S.C. § 3742(f)(1), remains in effect after

Booker. United States v. Scott, 405 F.3d 615, 617 (7th Cir.

2005). “An incorrect application of the guidelines [therefore]

requires resentencing under the post-Booker sentencing

regime.” Id. (citing United States v. Gleich, 397 F.3d 608, 615

(8th Cir. 2005)); see also United States v. Skoczen, 405 F.3d 537,

549 (7th Cir. 2005) (“Even under an advisory regime, if a

district court makes a mistake in calculations under the

Guidelines, its judgment about a reasonable sentence would

presumably be affected by that error and thus (putting aside

the implications of plain error review) remand would be

required just as before.”); United States v. Davis, 397 F.3d

340, 346 (6th Cir. 2005) (“We read Booker to require that

when district courts consult the Guidelines, they are to

continue to consider the sentence, sentencing range, and

pertinent policy statements contained in those Guidelines,

as required by § 3553(a)(4) and (5).”). Consequently, if the

district court erred in its choice of the applicable guidelines,

its choice is still very important in this post-Booker era.

Sentencing courts must apply the guidelines in effect on

the date the defendant is sentenced, unless the court deter-

12 No. 03-3332

mines that doing so would violate the Ex Post Facto Clause

of the Constitution of the United States. See 28 U.S.C.

1 2

§ 3553(a)(4) & (5); U.S.S.G. § 1B1.11; see also United States

1

Section 3553(a) provides in relevant part:

(a) Factors to be considered in imposing a sentence.—The

court shall impose a sentence sufficient, but not greater than

necessary, to comply with the purposes set forth in para-

graph (2) of this subsection. The court, in determining the

particular sentence to be imposed, shall consider—

....

(4) the kinds of sentence and the sentencing range

established for—

(A) the applicable category of offense committed by

the applicable category of defendant as set forth in

the guidelines—

(i) issued by the Sentencing Commission pursu-

ant to section 994(a)(1) of title 28, United States

Code, subject to any amendments made to such

guidelines by act of Congress (regardless of

whether such amendments have yet to be

incorporated by the Sentencing Commission

into amendments issued under section 994(p) of

title 28); and

(ii) that, except as provided in section 3742(g),

are in effect on the date the defendant is

sentenced;

....

(5) any pertinent policy statement—

(A) issued by the Sentencing Commission pursuant

to section 994(a)(2) of title 28, United States Code,

subject to any amendments made to such policy

(continued...)

No. 03-3332 13

v. Lanas, 324 F.3d 894, 904 (7th Cir. 2003) (noting that court

erred by using an earlier version of the guidelines rather

than the version in effect at time of sentencing). Mr. Baretz

was sentenced on August 19, 2003. The operative version of

the guidelines at that time was the 2002 Guidelines, together

with its supplement issued on April 30, 2003 (the “amended

3

2002 Guidelines”). Instead, the district court applied the

1

(...continued)

statement by act of Congress (regardless of whether

such amendments have yet to be incorporated by

the Sentencing Commission into amendments

issued under section 994(p) of title 28); and

(B) that, except as provided in section 3742(g), is in

effect on the date the defendant is sentenced.

28 U.S.C. § 3553(a).

2

Section 1B1.11 provides in part:

(a) The court shall use the Guidelines Manual in effect on the

date that the defendant is sentenced.

(b)(1) If the court determines that use of the Guidelines

Manual in effect on the date that the defendant is sentenced

would violate the ex post facto clause of the United States

Constitution, the court shall use the Guidelines Manual in

effect on the date that the offense of conviction was commit-

ted.

U.S.S.G. § 1B1.11.

3

Mr. Baretz appears to maintain that the district court should

have applied the 2002 Guidelines without the April 2003 amend-

ments. See Reply Br. at 8. We cannot accept this view in light of

this circuit’s (and many other circuits’) rule that sentencing

calculations must be made using a single guidelines manual in its

entirety, rather than allowing a defendant to pick and choose

(continued...)

14 No. 03-3332

1997 Guidelines (the operative version at the time of the

offense) based on the probation officer’s conclusion that the

earlier version was more beneficial to Mr. Baretz.

1.

At the beginning of our analysis, we must determine

whether Mr. Baretz waived this challenge to his sentence

and therefore cannot raise the matter before us on appeal.

“Waiver occurs when a defendant intentionally relinquishes

a known right.” United States v. Staples, 202 F.3d 992, 995

(7th Cir. 2000). Such a deliberate act on the part of the

defendant “extinguishes the error and precludes appellate

review.” Id. By contrast, a defendant “forfeits his rights by

failing to assert them in a timely manner.” Id. When a

simple forfeiture, as opposed to a waiver, occurs, we may

review for plain error. Id.

The record in this case will not support the conclusion

that Mr. Baretz knew of his right to be sentenced under the

2002 version of the guidelines—the version in effect at the

time of sentencing—or knew that the application of the 2002

Guidelines well might yield a lower sentence than the 1997

Guidelines. Indeed, Mr. Baretz garnered no advantage by

accepting the use of the 1997 version; the only apparent

explanation for its application is that Mr. Baretz and his

counsel did not realize that using the expired version was

incorrect. Because the record does not evidence a knowing

abandonment, we shall review the district court’s use of the

3

(...continued)

from favorable provisions contained in various versions of the

guidelines. See United States v. Anderson, 61 F.3d 1290, 1301 (7th

Cir. 1995).

No. 03-3332 15

1997 Guidelines for plain error. See United States v. Hall, 212

F.3d 1016, 1022 (7th Cir. 2000) (applying plain error review

to defendant’s assertion, raised for the first time on appeal,

that sentence imposed under guidelines in effect at time of

sentencing, not at time of offense, violated the ex post facto

prohibition).

2.

The plain error standard allows us to “correct an error

that the defendant failed to raise below only when there was

(1) error, (2) that is plain, and (3) that affects substantial

rights.” United States v. Henningsen, 402 F.3d 748, 750 (7th

Cir. 2005) (citing United States v. Olano, 507 U.S. 725, 732

(1993)); see also Fed. R. Crim. P. 52(b). “If these conditions

are met, an appellate court may exercise its discretion to

notice a forfeited error if (4) the error seriously affects the

fairness, integrity, or public reputation of the proceedings.”

Id. (citing Olano, 507 U.S. at 732).

The Government concedes that the 1997 Guidelines “was

not more favorable than the version in effect at the time

of sentencing.” Appellee’s Br. at 28. A comparison of

Mr. Baretz’ potential sentence under the amended 2002

Guidelines to the sentence he received under the 1997

Guidelines reveals that the Government is correct.

As we already have noted, due to the multiple-count

adjustment under § 3D1.3(a), Mr. Baretz’ total offense level

was the offense level for his money laundering offense.

After the 1997 Guidelines were published and before

Mr. Baretz’ sentencing, the entire method for calculating the

offense level for money laundering offenses was altered. In

particular, instead of specifying a base offense level of 23 or

20 depending upon the statute of conviction, § 2S1.1(a) now

16 No. 03-3332

ties the base offense level to the offense level for the under-

lying offense from which the laundered funds were ob-

4

tained.

The parties in this case agree that the offense level for

5

Mr. Baretz’ underlying fraud offenses would be 30. This

results from a base offense level of 6, see U.S.S.G. § 2B1.1(a)

(Supp. 2003), and a 24-level enhancement based on the

district court’s finding of loss exceeding $50 million, see id.

§ 2B1.1(b)(1)(M) (Supp. 2003). Accordingly, the base offense

level for the money laundering offense also would be 30. See

id. § 2S1.1(a) (2002).

The parties also agree that 2 offense levels would be

added because Mr. Baretz was convicted under 18 U.S.C.

§ 1956, see id. § 2S1.1(b)(2)(B) (2002), and that 2 more levels

would be added based on the district court’s finding of his

role in the offense, see id. § 3B1.1(c) (2002). The adjusted

offense level at this point would be 34.

The parties dispute the remaining calculations. The

Government submits that another 2 levels would be added

4

Section 2S1.1(a) provides in part:

(a) Base Offense Level:

(1) The offense level for the underlying offense from

which the laundered funds were derived, if (A) the

defendant committed the underlying offense (or would

be accountable for the underlying offense under subsec-

tion (a)(1)(A) of § 1B1.3 (Relevant Conduct); and (B) the

offense level for that offense can be determined . . . .

U.S.S.G. § 2S1.1(a) (2002).

5

Although Mr. Baretz disputes the district court’s findings with

respect to the fraud loss amount and relevant conduct, he ap-

parently accepts those findings for purposes of arguing that the

district court erred by applying the 1997 Guidelines.

No. 03-3332 17

because the record establishes that the offense involved

“sophisticated laundering” within the meaning of

§ 2S1.1(b)(3) (2002). The Government further submits that

Mr. Baretz would be entitled only to a 2-level reduction for

acceptance of responsibility, as opposed to the 3 levels

awarded by the district court under the 1997 Guidelines.

The Government points to a change in the operation of

the acceptance of responsibility guideline, § 3E1.1, imple-

mented by the 2003 supplement. Unlike prior versions of

§ 3E1.1, the amendment permits a district court to award a

defendant a third point for acceptance of responsibility only

upon a formal motion by the Government. See id. § 3E1.1(b)

6

(Supp. 2003). The Government asserts that Mr. Baretz

would receive only a 2-point decrease because it “never

moved or otherwise agreed” that he was entitled to a third

point for acceptance of responsibility. Appellee’s Br. at 30.

The total offense level calculated by the Government would

be 34, which results in a sentencing range of 151 to 188

months—the same range calculated by the district court

under the 1997 Guidelines.

6

Amended § 3E1.1 provides:

(a) If the defendant clearly demonstrates acceptance of

responsibility for his offense, decrease the offense level by 2

levels.

(b) If the defendant qualifies for a decrease under subsection

(a), the offense level determined prior to the operation of

subsection (a) is level 16 or greater, and upon motion of the

government stating that the defendant has assisted authori-

ties in the investigation or prosecution of his own miscon-

duct by timely notifying authorities of his intention to enter

a plea of guilty, thereby permitting the government to avoid

preparing for trial and permitting the government and the

court to allocate their resources efficiently, decrease the

offense level by 1 additional level.

U.S.S.G. § 3E1.1 (Supp. 2003).

18 No. 03-3332

Mr. Baretz takes another view of how the district court

would calculate his sentence. He submits that we cannot

assume that he would receive a sophisticated laundering

enhancement because the applicable guideline requires a

finding of fact by the district court. He also maintains that

the Government cannot fairly claim that he would not be

entitled to a full reduction for acceptance of responsibility

based on the absence of a formal motion, when such a

motion was not required and, thus, was not contemplated

by either party. Mr. Baretz calculates his total offense level

under the amended 2002 Guidelines as 31, which would

yield a sentencing range of 108 to 135 months; a marked

difference from the 151 months’ sentence he received under

the 1997 Guidelines.

We must conclude that the district court erred in its

conclusion that Mr. Baretz would receive a more severe

sentence under the amended 2002 Guidelines and that,

therefore, ex post facto concerns required that the court

employ the 1997 Guidelines. Furthermore, this error is plain.

See Olano, 507 U.S. at 734 (“ ‘Plain’ is synonymous with

‘clear’ or, equivalently, ‘obvious.’ ”).

Under our pre-Booker jurisprudence, the application of the

wrong guidelines constituted plain error and required a

7

remand for resentencing. The same approach is required by

7

See, e.g., United States v. Hall, 212 F.3d 1016, 1022 (7th Cir. 2000)

(“ ‘[A] sentence based on an incorrect guideline range constitutes

an error affecting substantial rights and can thus constitute plain

error.’ ” (quoting United States v. Robinson, 20 F.3d 270, 273 (7th

Cir. 1994)); United States v. Seacott, 15 F.3d 1380, 1386 (7th Cir.

1994) (finding plain error from application of guidelines in effect

at sentencing when sentence imposed potentially was three

months longer than if the court had applied guidelines in effect

at time of the offense); United States v. Kopshever, 6 F.3d 1218, 1223

(continued...)

No. 03-3332 19

our post-Booker cases; in those cases, we have said that

obedience to the Supreme Court’s mandate in Booker re-

quires that the district court first calculate the correct guide-

line sentence so that that calculation can serve as a meaning-

ful guide in the district court’s imposition of a final sen-

8

tence.

We cannot say, at this stage of the proceedings, that the

error was harmless. The district court has not made the

requisite factual findings to permit us to make that determi-

nation.

B. Downward Departure

We must also conclude that, as far as the record now be-

fore us reveals, the district court also erred in articulating

that it did not have discretion to depart downward under

the guidelines in this case.

We do not have appellate jurisdiction to review a court’s

discretionary refusal to depart downward. United States v.

Larkins, 83 F.3d 162, 168 (7th Cir. 1996). We presume,

moreover, that a district court understood its authority to

depart downward and simply decided not to do so; the

defendant has the burden to demonstrate otherwise. Id. If

the record reflects, however, that the district court thought

it had no authority to depart from the guidelines, its refusal

to depart is a legal conclusion that is subject to appellate

review. Id.

7

(...continued)

(7th Cir. 1993) (remanding ex post facto issue involving applica-

tion of amended guidelines “so that it can be decided on a fully

developed factual record”).

8

See, e.g., United States v. Scott, 405 F.3d 615, 617 (7th Cir. 2005);

United States v. Skoczen, 405 F.3d 537, 549 (7th Cir. 2005).

20 No. 03-3332

In response to Mr. Baretz’ motion for a downward

departure, the district court asked “[d]on’t you know those

don’t exist anymore except in cooperation agreements?”

R.106-1 at 69. It is possible, as the Government suggests, that

the district court’s comment that downward departures no

longer were available was simply a critical reference to the

newly enacted Prosecutorial Remedies and Tools Against

the Exploitation of Children Today Act of 2003 (PROTECT

Act), Pub. L. No. 108-21, 117 Stat. 650 (2003), or otherwise

was said in jest. We must confine our review, however, to

the cold record—a medium in which the oftentimes all-

important matters of inflection and tone are absent. We

simply cannot take the chance that such a misapprehension

might have influenced the final adjudication of a sentence.

Our concern is heightened in this respect by the court’s

statement that “I think that a sentence of 151 months is more

than adequate. I think it’s, frankly, high, but it’s the lowest

sentence mandated by the Guidelines considering all the

factors that apply to this case.” R.106-1 at 83.

In sum, on this record, we cannot be certain that the

district court properly considered and rejected Mr. Baretz’

departure arguments with a full recognition of its discretion

to depart downward. Such a misunderstanding constitutes

legal error warranting remand. See United States v. Hegge,

196 F.3d 772, 774 (7th Cir. 1999).

Conclusion

Because we have determined that the district court ap-

plied the incorrect version of the United States Sentencing

Guidelines and because the record reveals that the district

court misapprehended its authority to depart downward

No. 03-3332 21

9

from the applicable guideline range, this case must be

remanded to the district court, and the district court in-

10

structed to conduct a new sentencing. As our cases require,

in order to comply with the direction of the Supreme Court

in Booker, the district court must compute the applicable

guideline sentence and employ that computation as a guide

11

in determining the actual sentence to be imposed.

Accordingly, the sentence imposed by the district court is

vacated and the case is remanded for resentencing.

SENTENCE VACATED; CASE REMANDED

9

Mr. Baretz’ remaining submissions in this appeal deal with the

manner in which the district court applied the 1997 Guidelines.

Because we have determined that those guidelines do not govern

the calculation of the sentence in this case, any adjudication of

those matters at this time would be premature.

10

The errors that we have discussed in the text require, irrespec-

tive of United States v. Booker, 125 S. Ct. 738 (2005), a complete

resentencing. Therefore, the limited remand procedure employed

by this court in dealing with plain error under Booker is not

implicated in this case. See United States v Paladino, 401 F.3d 471

(7th Cir. 2005).

11

We pause respectfully to remind our colleagues in the district

courts of the necessity of their explaining on the record the rea-

sons for their decisions in calculating the guideline sentence and

in determining the final sentence imposed. These findings are of

extreme importance to this court in fulfilling its duty to review

these adjudications. Sufficient detail in these findings always is

important. In cases such as this one, involving relatively com-

plicated financial transactions and relationships, such detailed

findings especially are important—and appreciated by those of

us who have only the cold record to guide us in our work.

22 No. 03-3332

A true Copy:

Teste:

_____________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit

USCA-02-C-0072—6-21-05

No. 03-3332 23