The opinion
In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 05-4259
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
CHARLES HARRIS,
Defendant-Appellant.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 04 CR 771—Matthew F. Kennelly, Judge.
____________
ARGUED JANUARY 9, 2007—DECIDED JUNE 15, 2007
____________
Before BAUER, RIPPLE and EVANS, Circuit Judges.
RIPPLE, Circuit Judge. Charles Harris was charged in a
one-count information with defrauding investors through
the use of interstate wires. See 18 U.S.C. § 1343. Mr. Harris
entered a plea of guilty on June 23, 2005 and on October 6,
2005, the district court sentenced him to 168 months’
imprisonment and three years of supervised release. The
court further ordered restitution in the amount of
$13,861,849. Mr. Harris filed a motion for reconsideration
of his sentence on October 31, 2005; this motion was denied
on November 1, 2005. Mr. Harris timely appealed. For
the reasons set forth in this opinion, we affirm the judg-
ment of the district court.
2 No. 05-4259
I
BACKGROUND
In September 1996, Mr. Harris formed Tradewinds
International, Limited Partnership (“Tradewinds”), a
hedge fund that engaged in trading various currency, bond
and equity products. Tradewinds was structured as a
limited partnership; Mr. Harris was the general partner,
and the patrons of the fund were limited partners.
Mr. Harris also formed two other hedge fund entities, all
of which are collectively known as “Tradewinds”;
Mr. Harris was the only manager of those entities.
Mr. Harris sent Tradewinds investors quarterly state-
ments via mail or e-mail. The wire fraud charge to which
Mr. Harris pleaded guilty arose out of e-mail communi-
cations in which he made material misstatements and
omissions concerning the profitability of Tradewinds, the
use and/or profitability of funds received from investors
and the status of each investor’s investment. He was
charged in a one-count information with defrauding
investors through the use of interstate wires in violation
of 18 U.S.C. § 1343,1 and entered a plea of guilty to the
1
18 U.S.C. § 1343 provides:
Whoever, having devised or intending to devise any scheme
or artifice to defraud, or for obtaining money or property
by means of false or fraudulent pretenses, representa-
tions, or promises, transmits or causes to be transmitted by
means of wire, radio, or television communication in inter-
state or foreign commerce, any writings, signs, signals,
pictures, or sounds for the purpose of executing such
scheme or artifice, shall be fined under this title or impris-
(continued...)
No. 05-4259 3
information on June 23, 2005.
In the Presentence Investigation Report (“PSR”), the
probation officer calculated a total offense level of 36, for
which the advisory guidelines range is 188-235 months.
Mr. Harris then submitted his objections to the PSR in
which he challenged the inclusion of the “financial institu-
tion enhancement,” see U.S.S.G. § 2B1.1(b)(13)(B)(i).2 He
contended that Tradewinds was not a “financial institu-
tion” as that term is employed in the advisory Guidelines.
He also objected that he should not have received the
sophisticated means enhancement, see § 2B1.1(b)(9)(C).3
Mr. Harris and his wife forfeited most of their real
and personal property in order to compensate the victims
of his misrepresentations. Mr. Harris also submitted
letters to the district court, written by himself, family
members and friends, that described his role as a devoted
husband and father. Furthermore, Mr. Harris fully co-
operated with Government officials at all times during
his proceedings.
1
(...continued)
oned not more than 20 years, or both. If the violation affects
a financial institution, such person shall be fined not more
than $1,000,000 or imprisoned not more than 30 years,
or both.
2
U.S.S.G. § 2B1.1(b)(13)(B)(i) provides a four-level enhancement
where the offense “substantially jeopardized the safety and
soundness of a financial institution.”
3
The district court determined that the offense did not in-
volve “sophisticated means” as that term is defined in the
Guidelines. The Government has not cross-appealed this rul-
ing and therefore the propriety of the sophisticated means
enhancement is not before us.
4 No. 05-4259
Relevant to this appeal, the district court analyzed, at
Mr. Harris’ sentencing, whether Mr. Harris should re-
ceive the “financial institutions” enhancement under
§ 2B1.1(b)(13)(B)(i). This section of the advisory sentenc-
ing guidelines provides for a four-level upward adjust-
ment to a defendant’s offense level when the crime
“substantially jeopardized the safety and soundness of
a financial institution.” U.S.S.G. § 2B1.1(b)(13)(B)(i).
At the sentencing hearing, Mr. Harris contended that
Tradewinds was not a financial institution. In reply, the
Government relied upon our opinion in United States v.
Collins, 361 F.3d 343 (7th Cir. 2004), which held that an
“investment company” was a “financial institution” for
purposes of the enhancement. Id. at 347. The Government
submitted that, because Tradewinds invested people’s
money, it should be considered an investment company
and therefore a financial institution.
Mr. Harris’ attorney countered that Collins was not
controlling because the “institution” at issue in Collins
was a sham corporation. The district court rejected that
argument, noting that the petitioners in Collins had made,
unsuccessfully, the same argument. In Collins, we held
that whether a corporation was a “sham” had no bearing
on whether it could be considered a financial institution.
The Government proceeded to argue that, because
Tradewinds was a “hedge fund,” it was distinguishable
from the “investment company” at issue in Collins. Neither
the Sentencing Guidelines nor the relevant application
note references specifically hedge funds; the statutory
No. 05-4259 5
definition, at 18 U.S.C. § 20,4 also does not refer specif-
ically to hedge funds. Because the statutory definition
refers to “investment companies,” and not hedge funds,
Mr. Harris urges that hedge funds cannot be considered
“financial institutions” under the statute.
The district court inquired about the investments
Tradewinds allegedly had made, and the prosecutor
stated that Tradewinds was supposedly investing in
bonds and securities; Mr. Harris added that the company
4
18 U.S.C. § 20 defines financial institution as:
(1) an insured depository institution (as defined in section
3(c)(2) of the Federal Deposit Insurance Act);
(2) a credit union with accounts insured by the National
Credit Union Share Insurance Fund;
(3) a Federal home loan bank or a member, as defined in
section 2 of the Federal Home Loan Bank Act (12 U.S.C.
1422), of the Federal home loan bank system;
(4) a System institution of the Farm Credit System, as
defined in section 5.35(3) of the Farm Credit Act of 1971;
(5) a small business investment company, as defined in
section 103 of the Small Business Investment Act of 1958 (15
U.S.C. 662);
(6) a depository institution holding company (as defined in
section 3(w)(1) of the Federal Deposit Insurance Act);
(7) a Federal Reserve bank or a member bank of the Federal
Reserve System;
(8) an organization operating under section 25 or section
25(a) of the Federal Reserve Act; or
(9) a branch or agency of a foreign bank (as such terms are
defined in paragraphs (1) and (3) of section 1(b) of the
International Banking Act of 1978).
6 No. 05-4259
traded “commodities,” “going long and short, and also
other types of investments.” R.80-1 at 26.
The district court determined that Collins largely fore-
closes Mr. Harris’ argument that Tradewinds is not a
financial institution. The district court noted that it was
theoretically disputable whether Tradewinds could be
considered an investment company. However, it noted
that, in footnote 2 of Collins, this court had referenced a
definition of “investment company” that defined the term
as “ ‘a company substantially engaged in the business of
investing in securities of other companies.’ ” Collins, 361
F.3d at 346 n.2 (citing United States v. Savin, 349 F.3d 27,
37 (2d Cir. 2003)). The district court then stated that,
because it viewed Tradewinds as essentially an organiza-
tion substantially engaged in the business of investing
in securities of other companies, Tradewinds should be
characterized as a financial institution for purposes of
the sentencing enhancement. Mrs. Harris spoke at the
sentencing about her husband’s remorse. Mr. Harris’
attorney also spoke on his behalf, and Mr. Harris him-
self expressed his contrition to the district court.
The court then discussed the nature and circumstances
of the offense, referring to submissions from victims of the
fraud. The harm to the victims, stated the court, is “really
beyond quantification.” R.80-2 at 72. In discussing
Mr. Harris’ family history and characteristics of the
crime, the court determined that Mr. Harris’ family cir-
cumstances weighed in favor of a shorter sentence; the
court also noted that Mr. Harris had made efforts to
locate the assets. In discussing the countervailing con-
sideration of the seriousness of the offense and the con-
comitant need to promote respect for the law and to
provide just punishment, the court emphasized that the
No. 05-4259 7
criminal acts were repeated and had occurred over a
long period of time. Furthermore, because the crime
was one that required a significant amount of fore-
thought on Mr. Harris’ part, the court determined that a
significant sentence also would contribute to the goal of
deterrence. Considering the issue of remorse, the court
observed that, at the time he “announced” his wrongdo-
ing to the partners in the organization, Mr. Harris did not
appear remorseful, although he certainly was remorseful at
sentencing. The district court further observed that
Mr. Harris did not need training, care or correctional
treatment. The district court also recognized the impor-
tance of restitution in a case involving financial wrongdo-
ing.
The district court then addressed the need to avoid
unwarranted sentencing disparities among people with
similar records. Mr. Harris urged that individuals charged
in large-scale financial fraud cases such as Enron and
WorldCom had received lesser sentences. The district
court determined that these cases should have little effect
on its decision because it knew little about the particular
facts of those cases. Finally, the district court looked to the
advisory sentencing guidelines calculation, which put the
range at 151-188 months, and determined that a sen-
tence within that range was sufficient but not greater
than necessary. The court then imposed a sentence in the
middle of the range, 168 months, to be followed by three
years of supervised release. The court also imposed a
restitution obligation of $13,861,849.
8 No. 05-4259
II
DISCUSSION
A.
When sentencing a defendant, a district court must
consider all sentencing factors enumerated in 18 U.S.C.
§ 3553(a);5 United States v. Dean, 414 F.3d 725, 728 (7th Cir.
5
18 U.S.C. § 3553(a) provides:
(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—
(1) the nature and circumstances of the offense and the
history and characteristics of the defendant;
(2) the need for the sentence imposed—
(A) to reflect the seriousness of the offense, to
promote respect for the law, and to provide just
punishment for the offense;
(B) to afford adequate deterrence to criminal
conduct;
(C) to protect the public from further crimes of the
defendant; and
(D) to provide the defendant with needed educa-
tional or vocational training, medical care, or other
correctional treatment in the most effective manner;
(3) the kinds of sentences available;
(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
(continued...)
No. 05-4259 9
5
(...continued)
the guidelines—
(i) issued by the Sentencing Commission pur-
suant to section 994(a)(1) of title 28, United
States Code, subject to any amendments made
to such guidelines by act of Congress (regard-
less 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 sen-
tenced; or
(B) in the case of a violation of probation or super-
vised release, the applicable guidelines or policy
statements issued by the Sentencing Commission
pursuant to section 994(a)(3) of title 28, United
States Code, taking into account any amendments
made to such guidelines or policy statements by act
of Congress (regardless of whether such amend-
ments have yet to be incorporated by the Sentenc-
ing Commission into amendments issued under
section 994(p) of title 28);
(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
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.
(continued...)
10 No. 05-4259
2005). Here, the district court properly consulted the
advisory guidelines in the course of fulfilling its statutory
obligation. After calculating Mr. Harris’ base offense level,
the court applied the financial institution enhancement
in § 2B1.1(b)(13)(B)(i); this section directs a sentencing
court to impose a four-level upward adjustment to a
defendant’s offense level when the crime “substantially
jeopardized the safety and soundness of a financial
institution.” U.S.S.G. § 2B1.1(b)(13)(B)(i). Mr. Harris
submits that the district court should not have considered
Tradewinds to be a “financial institution” for purposes of
the advisory guidelines calculation. The Government,
however, takes the view that Tradewinds is clearly an
investment company; it then reasons that, because this
court has held that an investment company is a financial
institution,6 Tradewinds is a financial institution for
purposes of the enhancement.
Whether the district court was correct in its determina-
tion that Tradewinds is a financial institution for purposes
of this guidelines section is a question of law that we
review de novo. United States v. Jones, 313 F.3d 1019, 1021
(7th Cir. 2002). Specifically, we review de novo judicial
application of the Guidelines to factual findings. United
States v. Olson, 450 F.3d 655, 684 (7th Cir. 2006).
5
(...continued)
(6) the need to avoid unwarranted sentence disparities
among defendants with similar records who have been
found guilty of similar conduct; and
(7) the need to provide restitution to any victims of the
offense.
6
United States v. Collins, 361 F.3d 343, 347 (7th Cir. 2004).
No. 05-4259 11
The Sentencing Commission amended the Guideline
commentary in 2001 to express its intent to implement,
in a broader form, Congress’ definition of financial institu-
tion in the Crime Control Act of 1990. See Collins, 361 F.3d
at 347. The commentary defines a “financial institution”
in the following manner:
“Financial institution” includes any institution de-
scribed in 18 U.S.C. 20, 656, 657, 1005, 1006, 1007, or
1014; any state or foreign bank, trust company, credit
union, insurance company, investment company, mutual
fund, savings (building and loan) association, union or
employee pension fund; any health, medical, or hospi-
tal insurance association; brokers and dealers regis-
tered, or required to be registered, with the Securities
and Exchange Commission; futures commodity mer-
chants and commodity pool operators registered, or
required to be registered, with the Commodity Fu-
tures Trading Commission; and any similar entity,
whether or not insured by the federal government.
“Union or employee pension fund” and “any health,
medical, or hospital insurance association,” primarily
include large pension funds that serve many persons
(e.g., pension funds or large national and international
organizations, unions, and corporations doing substan-
tial interstate business), and associations that under-
take to provide pension, disability, or other benefits
(e.g., medical or hospitalization insurance) to large
numbers of persons.
U.S.S.G. § 2B1.1, Application Note 1 (emphasis added).
In Collins we held that “investment companies” are
“financial institutions” for purposes of the Guidelines. 361
F.3d at 347. Furthermore, we noted with approval a
decision of our colleagues in the Second Circuit that
12 No. 05-4259
defined an “investment company” as “a company sub-
stantially engaged in the business of investing securities
of other companies.” Id. at 346 n.2 (quoting Savin, 349 F.3d
at 37).
At the sentencing hearing, the parties represented to the
district court that Tradewinds, a hedge fund, invested in
bonds, securities, commodities, going long and short and
other types of investments. Given the definition of an in-
vestment company as “a company substantially engaged in
the business of investing in securities of other companies,”
Collins, 361 F.3d at 346 n.2, we believe that a hedge fund
such as Tradewinds was engaged in investing in bonds,
securities and commodities and was making other types
of investments. We do not think, for purposes of deter-
mining the appropriate advisory guideline, a hedge fund
such as Tradewinds can be distinguished in a principled
way from other types of investment companies. Trade-
winds invested in the securities of other companies, and
this characteristic renders it a financial institution for
purposes of the Guidelines enhancement. Moreover, the
harm caused to the limited partners of Tradewinds was
indisputably financial in nature, the same type of harm
that would be caused by any of the financial institutions
described in the application note to the guidelines provi-
sion. Mr. Harris’ crime caused the same societal damage
as would have been caused by any of the listed entities.
Our case law evinces a broad understanding of the term
“financial institution.” For example, in United States v.
Randy, 81 F.3d 65, 69 (7th Cir. 1996), we stated that, “when
it walks and talks like a financial institution, even if it’s a
No. 05-4259 13
phony one, it is, in our view, covered by [this provision].”7
Further, the list of financial institutions in the Guidelines
note is non-exhaustive and contains a catch-all provision
that requires that “any similar entity” be considered a
financial institution. U.S.S.G. § 2B1.1, Application Note 1.
Furthermore, the Sentencing Commission explicitly
stated that, in amending the guideline commentary, it
intended to broaden the definition of a financial institution.
Collins, 361 F.3d at 347. These considerations lead us to
the conclusion that the district court correctly determined
that Tradewinds qualifies as a financial institution for
purposes of the sentencing enhancement.
Mr. Harris also urges that his Fifth Amendment right
to due process was infringed because the district court
applied the four-level sentencing enhancement for sub-
stantially jeopardizing the safety and soundness of a
financial institution in violation of the Supreme Court’s
holding in United States v. Booker, 543 U.S. 220 (2005). In his
view, the determination that Tradewinds was a financial
institution must be determined by a jury beyond a reason-
able doubt, even for purposes of a sentence enhancement.
Mr. Harris recognizes that Booker addressed this precise
question, but nevertheless contends that, because Booker
considered this question in the context of the Sixth Amend-
ment and he raises a Fifth Amendment Due Process
challenge, Booker does not foreclose his claim. We cannot
7
At the time United States v. Randy, 81 F.3d 65 (7th Cir. 1996),
was decided, this particular enhancement was codified else-
where in the United States Sentencing Guidelines. However,
now the enhancement for “substantially jeopardiz[ing] the
safety and soundness of a financial institution” can be found at
§ 2B1.1(b)(13)(B)(i) of the Guidelines.
14 No. 05-4259
accept this argument. Booker rendered the Guidelines
advisory. Booker, 543 U.S. at 224. Because the Guidelines are
no longer mandatory, Mr. Harris’ sentence was not
impermissibly enhanced. Rather, the district judge simply
took the Guidelines into account, addressed all of the
factors enumerated in 18 U.S.C. § 3553(a), and determined
an appropriate sentence. The district court repeatedly did
refer, as do the parties, to a four-grade sentencing “en-
hancement.” However, this use of residual pre-Booker
terminology does not alter our conclusion that the district
court’s sentencing methodology appropriately con-
sidered the Guidelines as advisory.
B.
Mr. Harris raises several other matters that he believes
rendered his sentence infirm. First, he submits that the
district court failed to take into account any mitigating
circumstances when calculating his sentence. We cannot
accept this argument. In its oral ruling, the court explicitly
mentioned that “there [are] definitely some mitigating
factors here that are significant.” R.80-2 at 73. Indeed, the
court specifically discussed Mr. Harris’ efforts to identify
the location of the assets and carefully examined and gave
considerable weight to Mr. Harris’ family circumstances.
The district court therefore indisputably considered
mitigating factors before determining Mr. Harris’ sentence.
Mr. Harris further contends that the sentence that he
received creates an unwarranted sentencing disparity
because he received a longer sentence than the individu-
als involved in the Enron and WorldCom frauds who, he
submits, committed frauds similar to the one he perpe-
trated, but on a larger scale. The district court sensibly
No. 05-4259 15
replied that it did not “know enough about the particular
details of those cases” to make a proper comparison. Id. at
76-77. The court further noted that “there are all sorts of
factors involved in different cases that explain why dif-
ferent sentences are given.” Id. at 77. Indeed, the district
court considered sentencing disparities when determin-
ing Mr. Harris’ sentence, but decided that, in the overall
balance of factors, there were other elements of Mr. Harris’
crime that weighed in favor of a longer sentence. The
district court recognized the fact that every case is differ-
ent, and employed the § 3553(a) factors to determine an
appropriate sentence in Mr. Harris’ case.
C.
We also believe that the sentence imposed by the dis-
trict court was a reasonable one under all the circum-
stances. In United States v. Mykytiuk, 415 F.3d 606, 608 (7th
Cir. 2005), we held that sentences properly calculated
under the Guidelines would be entitled to a presumption
of reasonableness. It is unnecessary, however, to rely on
that presumption in this case.8 Here, the district court
clearly heeded the congressional direction to consider the
factors set forth in 18 U.S.C. § 3553(a). We have held that
a sentencing judge “can discuss the application of the
statutory factors to the defendant not in checklist fashion
8
We are aware of the case pending before the Supreme Court
of the United States, United States v. Rita, 177 F. App’x 357 (4th
Cir. 2006), cert. granted, 75 U.S.L.W. 3243 (U.S. Nov. 3, 2006) (No.
06-5754). In Rita, the Supreme Court will address the con-
stitutionality of the presumption of reasonableness accorded
to sentences properly calculated under the Guidelines.
16 No. 05-4259
but instead in the form of an adequate statement of the
judge’s reasons, consistent with section 3553(a), for think-
ing the sentence that he has selected is indeed appropriate
for the particular defendant.” Dean, 414 F.3d at 729. “[I]t is
enough to calculate the range accurately and explain
why (if the sentence lies outside it) this defendant deserves
more or less.” Id. (internal citations omitted). In United
States v. Bullion, 466 F.3d 574 (7th Cir. 2006), we again
clarified that the reasonableness standard “confers broad
sentencing discretion. The judge must consider the guide-
lines but is in no sense bound by them. He is bound only
by the statutory sentencing factors, 18 U.S.C. § 3553(a).”
Id. at 575.
Here, the district court carefully considered the § 3553(a)
factors, weighed them against one another, and then
determined a sentence in the middle of the range to be
appropriate. This careful consideration of the needs of
the defendant and the needs of society certainly fulfills the
court’s responsibility.9
Conclusion
For these reasons, the judgment of the district court is
affirmed.
AFFIRMED
9
Because we have determined that the district court did not
commit any error in determining Mr. Harris’ sentence and
because we believe that the sentence imposed was a reason-
able one, we need not consider separately at any length Mr.
Harris’ separate contention that the district court denied him
due process of law in the imposition of the sentence.
No. 05-4259 17
A true Copy:
Teste:
_____________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—6-15-07