Petition for Writ of Certiorari — Jonathan Dean Davis, Petitioner v. United States

Supreme Court briefMar 27, 2023

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APPENDIX TABLE OF CONTENTS

Page

Opinion of the Court of Appeals .......................... App. 1

Amended Judgment in Criminal Case ............. App. 37

Order Denying Petition for Rehearing ............. App. 54

18 U.S.C. § 1343 ................................................. App. 55

18 U.S.C. § 1957 ................................................. App. 55

18 U.S.C. § 3663A............................................... App. 58

United States Sentencing Guideline 2B1.1 ...... App. 63

App. 1

United States Court of Appeals

for the Fifth Circuit

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No. 21-10996

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UNITED STATES OF AMERICA,

Plaintiff—Appellee,

versus

JONATHAN DEAN DAVIS,

Defendant—Appellant.

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Appeal from the United States District Court

for the Northern District of Texas

USDC No. 3:20-CR-575

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(Filed Nov. 15, 2022)

Before CLEMENT, DUNCAN, and WILSON, Circuit Judges.

STUART KYLE DUNCAN, Circuit Judge:

Jonathan Dean Davis was convicted of numerous

wire-fraud and money-laundering charges arising from

a fraudulent scheme to cause the Department of Veterans Affairs to pay over $71 million in GI-Bill funding

to his trade school. Davis raises a menagerie of challenges to his convictions and his sentence. We affirm in

nearly all respects, except that we vacate the forfeiture

order and remand for further proceedings.

App. 2

FACTUAL AND PROCEDURAL BACKGROUND

On March 25, 2021, Davis was named in a thirteen-count superseding indictment filed in the Northern District of Texas.1 Counts 1 through 7 charged

Davis with Wire Fraud, in violation of 18 U.S.C. § 1343;

and Counts 10 through 13 charged Davis with Money

Laundering and Aiding and Abetting, in violation of

18 U.S.C. §§ 1952, 1957.2 Following a trial, a jury convicted Davis on each of these counts on April 15, 2021.

The charges stemmed from a scheme Davis concocted to defraud the Department of Veterans Affairs (“VA”) of vast sums of money. To understand this

scheme, consider first some background information

on the VA and the Post 9/11 Veterans Educational

Assistance Act of 2008 (“GI Bill”). The GI Bill is an educational benefits program that provides financial assistance to eligible student-veterans. The VA agrees to

pay up to a certain amount of a student’s tuition and

fees at VA-approved schools. Notably, this means that

for a school to receive tuition payments through GI-Bill

funding, it must first go through an approval process.

This approval is necessary to ensure that veterans receive sound training and that taxpayer funds are not

wasted. See Cleland v. Nat’l Coll. of Bus., 435 U.S. 213,

The superseding indictment is identical to the initial indictment filed on November 18, 2020, except the superseding indictment reflects corrections to minor date errors.

Counts 8 and 9 charged Davis with Aggravated Identity

Theft, in violation of 18 U.S.C. §§ 1022, 1028A. The jury found

Davis not guilty of those charges, so they are not at issue in this

appeal.

App. 3

219 (1978). Approval requirements include that the

school must have been continuously operational for at

least two years and have demonstrated financial stability. To help in the approval process, the VA relies on

state-approving agencies that determine which educational institutions are eligible. In Texas, that agency

was the Texas Veterans Commission (“TVC”). The TVC

ensures compliance with the two-year requirement

and also independently requires schools to obtain a

Certificate of Approval from the Texas Workforce Commission (“TWC”).

We turn to the defendant and the conduct that culminated in his convictions. Davis had been working in

the heating, ventilation, and air conditioning (“HVAC”)

industry since he was 18 years old. In 2005, he began

training members of the HVAC industry through his

business, Jon Davis Companies, Inc. In 2013, he incorporated a separate business, Retail Ready Career Center Inc. (“Retail Ready”), and opened a company bank

account for it. This new entity became a for-profit trade

school that offered a six-week HVAC training course

for students. The students were primarily military veterans, although some civilian students were also enrolled. The student-veterans would use their GI-Bill

funding to pay Retail Ready’s tuition.

For Retail Ready to obtain GI-Bill funding when

training veterans, Davis first had to obtain VA approval. This is where the fraudulent scheme began.

The Government alleged that, in the course of the VAapproval process, Davis “made a series of misrepresentations to fraudulently obtain VA approval for Retail

App. 4

Ready and to fraudulently induce veterans to enroll as

students at Retail Ready.” The first step began with the

TWC, from which Davis had to receive a Certificate of

Approval. In his application, Davis submitted Retail

Ready’s audited financial statements and certified

they were true and correct. But they were not—a fact

that Davis himself conceded. Further, the application

certified no criminal or civil actions were pending

against the school or its owners and officers. Once

more, this was not true (Davis had a charge pending

against him)—and once more, Davis himself conceded

this fact. As further evidence of the falsehoods submitted to the TWC, the Government invoked an electronic

journal Davis kept on his computer. In this journal, Davis recounted his interaction with the accountant auditing Retail Ready. Davis wrote: “I then finally found

an accountant that will do the audit the way I need it

done for $1,000.00.” He further explained: “I lied to the

accountant that I am using for my audit service, I told

him that I don’t have anything in the company name

other than a lease and I left out having Jay being an

employee and that I’ve had a bank account with expenses out of it because it is a disaster and wouldn’t

project a very good picture.”

The next step in this series of falsehoods, the Government alleged, was that Davis lied to the TVC. In his

application to the TVC for VA approval, Davis certified

that Retail Ready had continuously operated as an

educational institution for the previous two years.

This was false. Retail Ready incorporated in May 2013

and Davis certified the two-year requirement was met

App. 5

when he applied in August 2014. The Government also

alleged that Davis lied about Retail Ready’s being in

sound financial condition by once more providing a

second set of misleading financial statements. As a result of these misrepresentations to the state-approving

agencies, the Government alleged that the VA approved

Retail Ready to begin accepting GI-Bill payments on

behalf of student-veterans on August 7, 2014.

The Government next alleged that Davis advanced

this scheme by lying to the students themselves. Specifically, Davis induced the veterans to enroll at Retail

Ready while concealing the fact that the school had

only been approved as a result of the aforementioned

fraud. Davis also allegedly misrepresented the career

prospects of Retail Ready graduates, and he allegedly

concealed just how much of the students’ GI-Bill funding would be depleted. Several former student-veterans

testified on these points, saying that they were unaware of the fraudulently obtained VA approval; that

they were told they would be prepared to work as technicians making $15-$16 an hour but then struggled to

find work; and that Retail Ready did not disclose how

many months of their GI-Bill benefits would be depleted.

Now consider how all this relates to the wire-fraud

and money-laundering charges at issue. Corresponding to each wire-fraud count, the superseding indictment identified seven Retail Ready students who paid

their tuition and fees—ranging from $18,053.10 to

$20,059.00—through GI-Bill funding. The indictment

also identified four specific purchases, corresponding to

App. 6

each of the four money-laundering counts, that Davis

made with proceeds derived from unlawful activity—

in this case, the foregoing wire fraud scheme. Those

four purchases were: a luxury home for over $2.2 million, a Lamborghini for roughly $430,000, a Ferrari for

roughly $280,000, and a Bentley for roughly $260,000.

In April 2021, the jury convicted Davis of these

counts. He was then sentenced by the district court.

His Presentence Report (“PSR”) recommended a total

offense level of 38. This consisted of 7 base-level points

for wire fraud, a 24-point increase for an intended loss

amount of over $72 million, a 2-point increase for using

mass marketing, a 2-point increase for using sophisticated means, a 1-point increase for money laundering,

and a 2-point increase for obstruction of justice. This

yielded a guideline range of 235 to 293 months of imprisonment. Davis objected, arguing the proper offense

level was 8, which should have yielded a custody range

of 0 to 6 months imprisonment. Disagreeing, the district court sentenced Davis to 235 months of imprisonment. It also ordered $65,200,000 in restitution to the

VA, based on the agency’s actual loss. Finally, it entered a forfeiture order based on the gross amount of

VA funds—over $72 million—that Retail Ready received. Davis now appeals on numerous grounds.

II.

SUFFICIENCY OF THE EVIDENCE

We begin with Davis’s sufficiency challenges.

Where a defendant properly preserves a sufficiency

challenge, as Davis did by moving for acquittal in the

App. 7

district court, we review the challenge de novo. United

States v. Huntsberry, 956 F.3d 270, 279 (5th Cir. 2020).

Our review, however, is “highly deferential to the verdict, and, viewing the evidence in the light most favorable to the prosecution, we consider whether any

rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.” Ibid.

(internal quotation marks and citations omitted); see

generally Jackson v. Virginia, 443 U.S. 307 (1979). “We

accept all credibility choices and reasonable inferences

made by the trier of fact which tend to support the verdict and resolve conflicts in the evidence in favor of the

verdict.” Huntsberry, 956 F.3d at 279 (internal quotation marks and citations omitted).

Wire Fraud

First, we conclude the seven wire-fraud counts are

sufficiently supported by the evidence.

Federal law makes it a crime to use interstate wire

communications to carry out a “scheme or artifice to

defraud, or for obtaining money or property by means

of false or fraudulent pretenses, representations, or

promises.” 18 U.S.C. § 1343. To establish a violation of

this statute, the Government must prove: “(1) a scheme

to defraud exists, (2) the defendant used wire communications in interstate or foreign commerce to further

that scheme, and (3) the defendant had specific intent

to defraud.” United States v. del Carpio Frescas, 932

F.3d 324, 329 (5th Cir. 2019).

App. 8

Davis makes four arguments to support his contention that the evidence was insufficient. Each is unavailing.

First, Davis argues that neither he nor anyone

working for Retail Ready was involved in making the

seven wires; rather, they were made by the U.S. Treasury at the request of a VA employee. This misunderstands the elements of wire fraud. The evidence need

not show that Davis personally transferred the funds

from the VA into Retail Ready’s bank accounts. It need

show only that he “transmit[ted] or cause[d] to be

transmitted” the relevant communications. 18 U.S.C.

§ 1343; see United States v. Johnson, 700 F.2d 163, 177

(5th Cir. 1983) (“It is not necessary to find that Johnson

placed the calls himself in order to find that he ‘caused

them to be placed.’ ” (quoting Pereira v. United States,

347 U.S. 1 (1954)).

Second, Davis argues the Government failed to

prove facts alleged in the indictment because there

was no evidence of Davis’s conduct on the specific dates

of the wires. However, the Government was not required to prove that Davis did something on those precise dates. Its theory was that Davis caused all the

transfers to go through as a result of his initial deceptions in the VA-approval process and the continual enrollment of veterans in the program.

Third, Davis argues there was no evidence of a

“scheme to defraud” because he lied only about “ancillary matters” and not about Retail Ready’s services.

See, e.g., United States v. Takhalov, 827 F.3d 1307, 1313

App. 9

(11th Cir. 2016) (a “scheme to defraud” under § 1343

refers only to “lies about the nature of the bargain itself ”). Davis adds that a “scheme to defraud” encompasses lying to take away someone’s property but not

to obtain a government license. Cf. Cleveland v. United

States, 531 U.S. 12, 19–20 (2000) (a “scheme to defraud”

under § 1341 does not reach fraud in getting a government license because “such a license is not ‘property’

in the government regulator’s hands”). These arguments are mistaken. The evidence showed Davis’s misrepresentations to the VA induced the agency to pay

millions in GI-Bill benefits to a school ineligible to receive them. The falsehoods went to the “nature of the

bargain” (whether the school was eligible for benefits)

and defrauded the government of money, not a license.

Cf. Kelly v. United States, 140 S. Ct. 1565, 1572–74

(2020) (contrasting “a scheme to alter [the government’s] . . . regulatory choice” with a scheme “to take

the government’s property”).

Fourth, Davis argues that the specific intent requirement was not satisfied since the Government presented no evidence of any intent to defraud in 2016 or

2017, which is when the seven wire transfers occurred.

We disagree. The Government presented evidence that

Davis “lied to [his] accountant,” and lied about satisfying the two-year requirement—a requirement he knew

was essential for TVC approval based on his previous

company’s denial on that basis and warnings listed on

the TVC’s application form. Davis’s insistence that this

only establishes a culpable intent at one point in time,

and not years later when the wires occurred, is inapt

App. 10

because his lies led to an ongoing receipt of funds to

which he was not entitled. See United States v. Traxler,

764 F.3d 486, 489 (5th Cir. 2014) (distinguishing “oneshot” operations from “ongoing ventures”).

In sum, Davis fails to show that the evidence was

insufficient to allow a rational jury to convict him on

the wire-fraud counts.

Money Laundering

The evidence similarly supported Davis’s conviction on the money-laundering counts.

Federal law makes it a crime to “knowingly engage[ ] or attempt[ ] to engage in a monetary transaction in criminally derived property of a value greater

than $10,000 and [sic] is derived from specified unlawful activity.” 18 U.S.C. § 1957(a); see also id. § 1957(d).

This requires proving three elements: “(1) property

valued at more than $10,000 that was derived from a

specified unlawful activity, (2) the defendant’s engagement in a financial transaction with the property, and

(3) the defendant’s knowledge that the property was

derived from unlawful activity.” United States v. Moparty, 11 F.4th 280, 298 (5th Cir. 2021).

Davis does not contest that the four transactions

comprising the money-laundering charges occurred—

that is, that he purchased the luxury house and the

three luxury cars. Rather, Davis contests only the first

and third elements, arguing that the evidence was insufficient to establish that at least $10,000 of each of

App. 11

those transactions was derived from unlawful activity,

and also insufficient to establish his knowledge that

the property was criminally derived.

We first consider Davis’s argument that no evidence connected the seven wire-fraud charges to the

four transactions. Davis observes that six of the

seven wires mentioned in the indictment occurred before the four money-laundering transactions and that

those six wires amounted to $113,352.10.3 He relies on

the “clean-funds-out-first rule,” which provides that

“where an account contains clean funds sufficient to

cover a withdrawal, the Government [cannot] prove

beyond a reasonable doubt that the withdrawal contained dirty money.” United States v. Evans, 892 F.3d

692, 708 (5th Cir. 2018) (quoting United States v. Loe,

248 F.3d 449, 467 (5th Cir. 2001)). Because there were

thousands of deposits into Retail Ready’s accounts totaling millions of dollars beyond the seven specifically

alleged fraudulent wires, Davis contends he should

have been acquitted since he could have paid for the

home and the three cars with clean funds.4

The seventh wire occurred after the money-laundering

transactions, and so the funds used in those transactions could

not have derived from that seventh wire.

Davis also argues that, in any event, relying on uncharged

acts of wire fraud constitutes an unconstitutional constructive

amendment of the indictment. We disagree. The statute “does

not require the indictment to specify which unlawful activity

generated the funds in question.” Loe, 248 F.3d at 468. Rather,

“ ‘[n]othing more need be alleged’ than that the laundered money

was the proceeds of wire fraud in violation of § 1343.” United

States v. Caldwell, 302 F.3d 399, 413 (5th Cir. 2002) (quoting

App. 12

We disagree. To begin with, Tracy Clark-Ross, a

forensic auditor at the VA, testified that the deposits

into Davis’s bank accounts amounted to $72.2 million in VA funds and $366,000 in other deposits. The

total of the money-laundering transactions—$3.2

million—far exceeded the $366,000 in clean funds,

and so sufficient evidence showed that Davis necessarily relied on tainted funds to make these purchases.

This is illustrated by our discussion of the “cleanfunds-out-first-rule” in Evans. Addressing a situation

where “a defendant makes several withdrawals, each

individually for less than the clean-fund total in his account,” Evans explained:

Viewed individually, a particular withdrawal

would only use clean money, even though in

aggregate the defendant would have had to

dip into tainted funds. To cope with this

problem, we aggregate the transactions—when

the aggregate amount withdrawn from the

account exceeds the clean funds, individual

withdrawals may be said to be of tainted

money, even if a particular withdrawal was

less than the amount of clean money in the

account.

United States v. Smith, 44 F.3d 1259, 1265 (4th Cir. 1995)). The

Government was thus free to pursue seven specific wire-fraud

charges, while nevertheless insisting on the existence of a broader

fraudulent scheme, involving a plethora of fraudulent wires, from

which funds were derived for the four money-laundering charges.

App. 13

Id. at 708–09 (cleaned up). As Evans shows, because

$3.2 million exceeds $366,000 in clean money, Davis’s

conviction stands.

We next consider Davis’s argument that no evidence suggests he was aware of any crime at the time

of the four transactions. We again disagree. The knowledge element of money laundering “requires that the

defendant know that the property in question is ‘criminally derived,’ although it does not require knowledge

that the property was derived from ‘specified unlawful

activity.’ ” United States v. Pettigrew, 77 F.3d 1500, 1513

(5th Cir. 1996). And “criminally derived property” is defined as “any property constituting, or derived from,

proceeds obtained from a criminal offense.” 18 U.S.C.

§ 1957(f )(2). Once more, given that all of the VA funds

sent to Retail Ready constituted the proceeds of

criminal offenses, sufficient evidence supports Davis’s

knowing those funds were criminally derived. For example, the statements in his journal that “more lying

is in order” and that “[he] lied to the accountant,” support the proposition that Davis knew he was acquiring

his VA approval through fraud.

In sum, Davis fails to show the evidence was insufficient to allow a rational jury to convict him on the

money-laundering counts.

III.

INDICTMENT AND BILL OF PARTICULARS

Davis also argues that the indictment was faulty

and that the district court should have ordered a bill of

particulars.

App. 14

“We review de novo a district court’s denial of a

motion to dismiss the indictment, including any underlying constitutional claims.” United States v. CordovaSoto, 804 F.3d 714, 718 (5th Cir. 2015). We review the

denial of a bill of particulars for abuse of discretion. See

United States v. Lavergne, 805 F.2d 517, 520 (5th Cir.

1986) (“Demonstrating reversible error in the denial

of such a motion is a heavy burden: ‘The denial of a

bill of particulars is within the sound discretion of

the trial judge.’ ” (quoting United States v. Montemayor,

703 F.2d 109, 117 (5th Cir. 1983))).

For an indictment to be sufficient, it must “(1) contain[ ] the elements of the offense charged; (2) fairly inform[ ] the defendant of the charges he must prepare

to meet; and (3) enable[ ] a defendant to plead an acquittal or a conviction in bar to future prosecutions for

the same offense.” United States v. Moody, 923 F.2d

341, 351 (5th Cir. 1991). These requirements “stem[ ]

directly from one of the central purposes of an indictment: to ensure that the grand jury finds probable

cause that the defendant has committed each element of the offense, hence justifying a trial, as required

by the Fifth Amendment.” United States v. CabreraTeran, 168 F.3d 141, 143 (5th Cir. 1999). Accordingly,

an indictment must be “a plain, concise, and definite

written statement of the essential facts constituting

the offense charged.” FED. R. CRIM. P. 7(c)(1).

A bill of particulars is designed “to apprise the

defendant of the charge against him with sufficient

precision to enable him to prepare his defense.” Montemayor, 703 F.2d at 117. But “[i]t is not designed to

App. 15

compel the government to detailed exposition of its evidence or to explain the legal theories upon which it

intends to rely at trial.” United States v. Burgin, 621

F.2d 1352, 1359 (5th Cir. 1980). After all, “[a] defendant

possesses no right to a bill of particulars.” Id. at 1358.

As such, in reviewing the denial of a bill of particulars,

we “can reverse only when it is established that defendant was actually surprised at trial and therefore

was prejudiced in his substantial rights.” Montemayor,

703 F.2d at 117.

The money-laundering counts of the superseding

indictment alleged that four transactions involved

property “derived from a specified unlawful activity,

namely wire fraud.” Davis argues that because the superseding indictment failed to identify the purported

acts constituting wire fraud, it was faulty and rendered Davis unable to prepare an adequate defense.

Specifically, the superseding indictment identified only

seven acts of wire fraud that together amounted to

$131,405.20. But the money-laundering charges involved transactions totaling millions of dollars. So, Davis argues that there must be a slew of unidentified

crimes underlying the money-laundering charges. Because these were unspecified, Davis argues the superseding indictment was constitutionally deficient.

We disagree. The superseding indictment amply

set forth the alleged scheme to defraud the VA and Retail Ready students. It alleged that Davis lied to his

accountant, causing the accountant to prepare false

and misleading financial statements that were then

submitted to the TWC; that Davis lied about the

App. 16

existence of pending criminal or civil charges; that Davis lied about Retail Ready’s continuous operation for

two years; and that Davis lied once more with false financial statements submitted to the TVC. The superseding indictment then went on to allege that these

misrepresentations induced the VA to approve Retail

Ready to begin accepting GI-Bill payments and that

Davis concealed the fraudulently obtained VA approval from Retail Ready’s students. It then alleged

four transactions involving money that derived from

funds obtained from this scheme.

The indictment thus provided Davis adequate notice about the underlying wire fraud that served as the

basis for the money-laundering charges. Although the

indictment only alleged seven specific acts of wire

fraud, it is clear from the indictment, read as a whole,

that the Government was alleging that Retail Ready

was categorically ineligible to receive GI-Bill funding.

As such, all GI-Bill payments to the school would have

represented unlawfully acquired funds. See Loe, 248

F.3d at 468 (explaining that the money-laundering

statute “does not require the indictment to specify

which unlawful activity generated the funds in question”). Davis responds that “the word ‘ineligible’ appears zero times in the Indictment.” That is beside the

point. What matters is whether the nature of the criminal charges was evident. The indictment made that

plain for anyone to see.

Accordingly, we conclude that the indictment was

not faulty and the district court did not err in declining

to order a bill of particulars.

App. 17

IV.

Jury Instructions

Davis next challenges the jury instructions, arguing that (1) the wire-fraud instruction was an impermissible constructive amendment of the indictment,

and (2) the money-laundering instruction was erroneous.

A. Wire-Fraud Instruction

and Constructive Amendment

“This Court reviews a constructive amendment

claim de novo.” United States v. Bennett, 874 F.3d 236,

256 (5th Cir. 2017). “We scrutinize any difference between an indictment and a jury instruction and will

reverse only if that difference allows the defendant to

be convicted of a separate crime from the one for which

he was indicted.” Ibid. (quoting United States v. JaraFavela, 686 F.3d 289, 300 (5th Cir. 2012)).5

The Fifth Amendment guarantees criminal defendants a right to “indictment of a Grand Jury.” U.S.

Const. amend. V; see, e.g., United States v. Griffin, 800

F.3d 198, 202 (5th Cir. 2015) (“[A]fter an indictment

has been returned its charges may not be broadened

through amendment except by the grand jury itself.”

(quoting Stirone v. United States, 361 U.S. 212, 215–16

The Government contends that we should apply plain-error

review because Davis did not preserve this objection to the indictment. See United States v. Daniels, 252 F.3d 411, 414 n.8 (5th Cir.

2001). We disagree and analyze the issue de novo. At trial, Davis’s

counsel argued that “the phrase `at least one of ’ needs to be

struck.” The district court understood the objection, overruled it,

and even acknowledged that the issue could be raised on appeal.

App. 18

(1960))). From this it follows that constructive amendments, which “occur[ ] when the court ‘permits the

defendant to be convicted upon a factual basis that effectively modifies an essential element of the offense

charged’ or upon ‘a materially different theory or set of

facts than that which [the defendant] was charged,’ ”

are impermissible. United States v. Nanda, 867 F.3d

522, 529 (5th Cir. 2017) (citations omitted).

Davis’s argument relies on a slight difference in

wording between the indictment and the jury instructions. He observes that the superseding indictment alleged that he “made a series of misrepresentations to

fraudulently obtain VA approval for Retail Ready and

to fraudulently induce veterans to enroll as students

at Retail Ready.” By contrast, the jury instructions

state that the scheme to defraud must have “employed

at least one of the following false material representations, false material pretenses, or false material promises as part of the scheme.” Davis argues that by

allowing him to be convicted for a scheme involving

only one misrepresentation instead of a “series of

misrepresentations,” the district court impermissibly

broadened the grounds on which he could be convicted.

Davis also contends that a subsequent jury instruction—which stated that the Government must have

proved a scheme that “was substantially the same as

the one alleged in the superseding indictment”—was

insufficient to cure the erroneous instruction.6

Davis also briefly argues that the jury instruction eliminated the unanimity requirement. But “the jury is not required to

App. 19

Davis’s arguments are unavailing. Fundamentally, Davis’s complaint is “not that the indictment

failed to charge the offense for which he was convicted,

but that the indictment charged more than was necessary.” United States v. Miller, 471 U.S. 130, 140 (1985).

Whereas wire fraud only requires a single misrepresentation, the indictment referred to a “series of misrepresentations”—more than what was necessary to

convict. But “the right to a grand jury is not normally

violated by the fact that the indictment alleges more

crimes or other means of committing the same crime.”

Id. at 136. Thus, the Government could have chosen to

prove its case by relying on any of the means described

in the indictment. And, in fact, the jury instructions

still referred to all the same misrepresentations alleged in the indictment.

Money-Laundering Instruction

Davis next challenges the jury instructions on

money laundering. We review this challenge for abuse

of discretion. See United States v. Daniels, 247 F.3d

598, 601 (5th Cir. 2001). A trial judge has “substantial

latitude in tailoring his instructions as long as they

fairly and adequately cover the issues presented in a

case.” United States v. Hunt, 794 F.2d 1095, 1097 (5th

Cir. 1986) (citation omitted).

agree on the means—the specific false statement—[the defendant] used to carry out [his] fraudulent scheme.” Nanda, 867 F.3d

at 529 (quoting United States v. LaPlante, 714 F.3d 641, 647 (1st

Cir. 2013)).

App. 20

Davis argues the district court should have identified the crimes that the jury had to find were the source

of the “criminally derived property.” Instead, the court

instructed the jury “that criminally derived property

was derived from the wire fraud scheme described on

pages 7–12 of these instructions.” This “scheme,” Davis

suggests, refers not to a specific instance of wire fraud

or other criminal act, but merely to an idea. And this

fact, Davis contends, allowed the prosecution to escape

the burden of proving thousands of instances of wire

fraud.

This argument fails for the same reasons as Davis’s previous argument that the money-laundering

counts were limited by the seven specific wires charged

in the indictment. See supra 13–14. The instruction

that the funds used in the money-laundering transactions must be “derived from the wire fraud scheme”

refers to the same premise that Retail Ready was categorically ineligible to receive VA funds and that it

only received them as a result of Davis’s misrepresentations. As before, the money-laundering statute “does

not require the indictment to specify which unlawful

activity generated the funds in question.” Loe, 248 F.3d

at 468. Rather, it “merely requires money to be derived

from a particular set of federal crimes.” Ibid. We therefore reject Davis’s challenge to the money-laundering

instruction.

App. 21

Tracy Clark-Ross’s Testimony

Davis also contends the district court erred by admitting expert testimony from Tracy Clark-Ross, a forensic auditor at the VA. We disagree.

Davis preserved his objection to Clark-Ross’s testimony, so we review for abuse of discretion, subject to

a harmless-error analysis. United States v. Demmitt,

706 F.3d 665, 670 (5th Cir. 2013). Under Federal Rule

of Evidence 701, a lay witness’s testimony is limited to

only those opinions or inferences that are “(a) rationally based on the witness’s perception; (b) helpful to

clearly understanding the witness’s testimony or to determining a fact in issue; and (c) not based on scientific,

technical, or other specialized knowledge within the

scope of Rule 702.” FED. R. EVID. 701. Whereas “expert

testimony results from a process of reasoning which

can be mastered only by specialists in the field,” “lay

testimony results from a process of reasoning familiar

in everyday life.” FED. R. EVID. 701 advisory committee’s note to 2000 amendment.

First, some background on Clark-Ross’s testimony.

Clark-Ross is a forensic auditor with the VA. Her job

includes tracing assets and following the flow of funds.

In this capacity, she reviewed thousands of pages of

Davis’s and Retail Ready’s bank records. Through a

careful review of those records and a process of addition and subtraction, Clark-Ross determined Davis’s

accounts included over $72 million in VA funds and

$366,000 in non-VA funds. A chart summarizing the

flow of funds from the VA to Davis to the four alleged

App. 22

money-laundering purchases came into evidence

during Clark-Ross’s testimony. She also testified that

based on the amount of non-VA money in the bank accounts, those four transactions could not have occurred

without using the VA-derived money.

Davis argues that this was improperly admitted

expert testimony. He challenges the admission of the

chart, arguing the sums it depicts are based on mathematical calculations that are expert in nature. He also

challenges the district court’s allowing Clark-Ross to

describe her process of adding up the funds through a

hypothetical, rather than going through the thousands

of transactions one-by-one at trial. Because this testimony was expert in nature, Davis contends, the jury

should have been able to evaluate Clark-Ross’s qualifications and reliability, as well as the factual basis for

her testimony. And because Clark-Ross was the only

such tracing witness, Davis asserts that improperly

admitting her testimony was not harmless.

We disagree. All of Clark-Ross’s testimony relied

on basic math. She looked at bank records to calculate

$72 million in VA funds and $366,000 in non-VA funds.

She then relied on simple but tedious calculations to

determine that the four purchases (amounting to $3.2

million) exceeded the amount of clean funds in Davis’s

accounts ($366,000). To be sure, the volume of the math

required was large. But nothing about that process—

reviewing the records and engaging in addition and

subtraction—suggests it can be mastered only by specialists in the field with particularized expertise. See

Ryan Dev. Co., L.C. v. Ind. Lumbermens Mut. Ins. Co.,

App. 23

711 F.3d 1165, 1170 (10th Cir. 2013) (upholding admission of accountants’ testimony that relied on “basic

arithmetic, personal experience, and no outside expert

reports in calculating lost income and other claims

for coverage”); United States v. Shaw, 891 F.3d 441, 454

(3d Cir. 2018) (“His testimony was based on subtraction, not ‘scientific, technical, or other specialized knowledge within the scope of Rule 702’ ”). Consequently,

Rule 701(c) was not violated. Moreover, because her review of the records saved the court and jury copious

time, Clark-Ross’s testimony was helpful to the trierof-fact, satisfying Rule 701(b). See United States v.

Georgiou, 777 F.3d 125, 143–44 (3d Cir. 2015) (upholding admission of lay testimony that included summaries of voluminous records). We therefore reject Davis’s

argument that Clark-Ross’s testimony was improperly

admitted.

VI.

SENTENCING

Davis also contests his sentence, which has three

elements: a restitution order, a prison sentence, and a

forfeiture order. We affirm the district court with respect to the first two elements but vacate and remand

the forfeiture order for further consideration.

Restitution

We review restitution orders for abuse of discretion and fact findings for clear error. United States v.

Barnes, 979 F.3d 283, 313 (5th Cir. 2020). “A factual

finding is clearly erroneous only if based on the record

App. 24

as a whole, we are left with the definite and firm conviction that a mistake has been committed.” United

States v. Sharma, 703 F.3d 318, 322 (5th Cir. 2012)

(quotation marks omitted).

The district court adopted the PSR’s proposal that

the VA be paid $65,200,000 in restitution. See generally 18 U.S.C. § 3663A(a)(1), (a)(2), (c)(1) (mandating

restitution for certain crimes). Davis objects to this

amount for three reasons. First, because Retail Ready

actually provided services (HVAC training) to veterans

at the price the VA agreed to pay, the district court’s

awarding as restitution the gross amount the VA paid—

without any consideration of services rendered—was

erroneous. Second, as a result of this restitution award,

the VA receives an impermissible windfall; the VA discharged its obligation to pay for student-veterans’ education but would now be getting that money back.

Third, evidence of Davis’s causing the loss is lacking

because the seven wire fraud convictions involved a total of $131,405.20, not $65,200,000.

Each of these arguments is meritless. First, Davis’s focus on the services he provided to Retail Ready

students is misplaced. “Restitution is remedial in nature; its goal is to make the victim whole.” United

States v. Sanjar, 853 F.3d 190, 215 (5th Cir. 2017); see

also United States v. Williams, 712 F. App’x 376, 383

(5th Cir. 2017). Thus, we consider “the victims’ loss,”

not the gross gain by the defendant. United States v.

Klein, 543 F.3d 206, 215 (5th Cir. 2008). In cases involving “government benefits,” like this one, “loss shall be

considered to be not less than the value of the benefits

App. 25

obtained by unintended recipients or diverted to unintended uses, as the case may be.” U.S.S.G. § 2B1.1, cmt.

(n. 3(F)(ii)). This means that a defendant is entitled to

a credit for the fair market value of services rendered

if he shows the benefits program would have paid for

the services had he not fraudulently billed them. See

United States v. Mahmood, 820 F.3d 177, 193 (5th

Cir. 2016) (citing Klein, 543 F.3d at 213–14); see also

U.S.S.G. § 2B1.1, cmt. (n. 3(E)(i)). But where the benefits program would not have paid for the services absent the fraud, the defendant is entitled to no such

credit. See Mahmood, 820 F.3d at 193–94 (citing United

States v. Jones, 664 F.3d 966, 984 (5th Cir. 2011);

United States v. Echols, 574 F. App’x 350, 360–61 (5th

Cir. 2014) (unpublished)). Davis fraudulently misrepresented Retail Ready’s compliance with statutory requirements and billed the VA for the HVAC training

his school provided. Thus, the VA was the victim of Davis’s scheme. See Mahmood, 820 F.3d at 193 (determining the government program was “the victim of the

[defendant’s] fraud”); Jones, 664 F.3d at 984 (“Here, the

Appellants were convicted of defrauding the government . . . therefore, the government is the relevant victim[.]”). So, regardless of any educational benefit Retail

Ready’s students might have received, the VA itself, as

the victim, would not have paid for anything absent

Davis’s fraudulent misrepresentations. See Jones, 664

F.3d at 984.

Davis’s other arguments are also unavailing. His

windfall argument refers to cases teaching merely that

a court cannot “award a windfall greater than the

App. 26

victim’s actual loss.” United States v. De Leon, 728 F.3d

500, 506 (5th Cir. 2013) (citing United States v. Beydoun, 469 F.3d 102, 107–08 (5th Cir. 2006)). As already

explained, Davis overlooks that the Government was

the victim, and its actual loss was the $65.2 million it

was fraudulently induced to pay. There was no “windfall.” As for Davis’s focus on the seven specifically

charged wire transfers, we have already explained why

this is mistaken: the broader scheme—not just the specific wires—is itself an element of the offense, and sufficient evidence showed Davis is responsible for that

scheme.

Accordingly, the district court did not err in its restitution determinations.

Imprisonment

Davis next contests his 235-month sentence of imprisonment.

“Though we review a sentence for abuse of discretion, we review the district court’s application of the

guidelines de novo and its findings of fact at sentencing

for clear error.” Klein, 543 F.3d at 213 (citation omitted). “The district court’s loss calculation is generally

a factual finding that we review for clear error.”

Mahmood, 820 F.3d at 192. We review the sentence’s

substantive reasonableness for abuse of discretion.

Gall v. United States, 552 U.S. 38, 46–51 (2007).

Davis’s 235-month sentence falls at the bottom of

the 235–293 month range calculated by the district

App. 27

court. Relying on the Sentencing Guidelines, the court

calculated Davis’s total offense level as 38. Davis does

not contest the 7-point increase for wire fraud nor the

1-point increase for money laundering. Rather, he challenges the findings underlying the 24-point increase,

specifically: the court’s “loss” determination; the 1-point

increase for mass marketing; the 2-point increase for

sophisticated means; and the 2-point increase for obstruction of justice. Based on all this, Davis claims his

total offense level should have been 8 and his imprisonment range 0–6 months, rendering his 235-month

sentence substantively unreasonable.

We first consider Davis’s complaints about the

“loss” calculation. The PSR calculated the “intended

loss” at $72,200,000 and the “actual loss” (the intended

loss, minus amounts refunded to the VA) at $65,200,000.

Davis raises four objections. First, the gain to Retail

Ready should not be considered as the loss to the VA.

Second, Davis improperly received no credit for services rendered to offset any loss. Third, Davis did not

intend the loss of $72,200,000, and the 2014 misrepresentations are insufficient to prove otherwise. Fourth,

no evidence of “actual loss” was presented.

Davis is mistaken for the same reason that his

challenges to the restitution calculation were mistaken. Specifically, “the correct loss calculation is ‘the

difference between the amount the defendant actually

received and the amount he would have received absent the fraud.’ ” United States v. Nelson, 732 F.3d 504,

521 (5th Cir. 2013) (quoting United States v. Harms,

442 F.3d 367, 380 (5th Cir. 2006)). Again, because the

App. 28

VA itself—and not the student-veterans—was the

victim of the fraud and would not have paid anything

absent Davis’s misrepresentations, the correct calculation is the amount Davis actually received ($72,200,000

less the amount refunded, or $65,200,000) minus the

amount he would have received ($0). See Sharma, 703

F.3d at 325. The district court’s loss determination was

correct.

We next consider the mass-marketing enhancement. Davis argues that the relevant inquiry is whether

the fraud was committed through mass-marketing,

and not whether mass-marketing occurred at the same

time as the fraud. He observes that this enhancement

applies only “if the offense” “was committed through

mass-marketing.” U.S.S.G. § 2B1.1(b)(2). He also notes

that only criminal conduct can serve as a basis for sentencing and “the ‘mass marketing’ allegation appears

to be based on the contention that RRCC advertised

online.”

These arguments find no support in our caselaw.

To the contrary, we have repeatedly affirmed massmarketing enhancements in cases where, as here, the

victim was a government agency and the agency’s beneficiaries were the targets of a mass-marketing campaign. E.g., United States v. Mauskar, 557 F.3d 219, 233

(5th Cir. 2009). We have rejected the argument “that a

mass marketing enhancement should not apply because [the defendant’s] mass marketing efforts were

not directed at the victims of the crime” where the victim was a benefits program. United States v. Isiwele,

635 F.3d 196, 204 (5th Cir. 2011); see also United States

App. 29

v. Valdez, 726 F.3d 684, 694 (5th Cir. 2013) (noting the

argument that “the enhancement does not apply where

the mass-marketing is not targeted at the specific victims of the fraud” is “foreclosed by circuit precedent”).

We next consider the sophisticated-means enhancement. “Sophisticated means” is defined as “especially complex or especially intricate offense conduct

pertaining to the execution or concealment of an offense.” U.S.S.G. § 2B1.1 Application Note 9(B). Davis

argues that “fail[ing] to follow GAAP when submitting

financial statements, chang[ing] buildings during the

approval process (which was disclosed), and . . . not understand[ing] that moving business operations from

one entity to another is not the same as filing a corporate name change” do not constitute “especially complex” or “especially intricate” means. This argument is

premised on the idea that Davis committed mere unintentional oversights. But the district court found Davis’s actions to be more akin to intentional efforts to

conceal. Davis does not explain why the district court

clearly erred in these findings and so we will not disturb them.

Next, we consider the obstruction-of-justice enhancement. Davis changed the title on his house and

the title on a car after it had been seized. He argues

that in making these changes he did not mean to obstruct justice. Rather, he argues he changed the house

title to obtain a loan and changed the car title so that

the car’s true owner could file a civil forfeiture claim.

The district court found otherwise. The court inferred

that the title changes represented an attempt to evade

App. 30

forfeiture—an inference supported by the timing of the

title transfers, and Davis’s previous contemplation of

similarly deceptive transfers. Once more, Davis has

not shown these findings are clearly erroneous.

Finally, Davis argues his sentence was substantively unreasonable. We disagree. We have already rejected Davis’s arguments concerning his sentencing

enhancements. This means that Davis was sentenced

within the appropriate range—and at the bottom end,

no less. We therefore find no error. See United States v.

Cooks, 589 F.3d 173, 186 (5th Cir. 2009) (“This court

applies a rebuttable presumption of reasonableness to

a properly calculated, within-guidelines sentence.”).

Forfeiture

Finally, Davis argues the district court improperly

ordered him to forfeit $72 million in “proceeds” from

the wire fraud. We agree with Davis that the district

court applied the wrong definition of “proceeds.” See 18

U.S.C. § 981(a)(2). We must therefore vacate the forfeiture order and remand for further proceedings.

Under 18 U.S.C. § 981(a)(1)(C), “[a]ny property . . .

which constitutes or is derived from proceeds traceable” to numerous crimes, including wire fraud, is subject to forfeiture.7 The statute defines “proceeds” in two

The Seventh Circuit has helpfully traced the byzantine

statutory cross-references that link the civil forfeiture statute to

the proceeds of wire fraud. See United States v. Balsiger, 910 F.3d

942, 956–57 (7th Cir. 2018) (citing 18 U.S.C. § 981(a)(1)(C); 18

App. 31

ways. Id. § 981(a)(2). If a case involves “illegal goods,

illegal services, [or] unlawful activities,” then “proceeds” means:

property of any kind obtained directly or indirectly, as the result of the commission of the

offense giving rise to forfeiture, and any property traceable thereto, and is not limited to

the net gain or profit realized from the offense.

§ 981(a)(2)(A).8 But if a case involves “lawful goods or

lawful services that are sold or provided in an illegal

manner,” then “proceeds” means:

the amount of money acquired through the illegal transactions resulting in the forfeiture,

less the direct costs incurred in providing the

goods or services.

§ 981(a)(2)(B). The district court applied the first definition, meaning Davis had to forfeit $72 million in tuition payments from the VA without deducting any of

his costs in running Retail Ready.

On appeal, Davis argues for the second definition

of “proceeds,” because he provided “lawful services”

(HVAC training) in an “illegal manner.” § 981(a)(2)(B).

That would let him subtract the “direct costs” of running Retail Ready. Ibid. In response, the Government

argues for the first definition, emphasizing § 981(a)(2)(A)

applies to “unlawful activities.” Its argument is: (1)

U.S.C. § 1956(c)(7); 18 U.S.C. § 1961(1); 18 U.S.C. § 1343; 28

U.S.C. § 2461(c)).

This definition of “proceeds” also applies to cases involving

“telemarketing and health care fraud schemes.” Ibid.

App. 32

Davis’s relevant conduct was not operating the school,

but committing wire fraud; and (2) because wire fraud

is an “unlawful activity,” the first definition applies.

The district court agreed with the Government, relying

on a First Circuit case, United States v. George, 886

F.3d 31 (1st Cir. 2018), involving embezzlement. The

defendant in George argued for the second definition

on the theory that he provided lawful services (bus services) in an illegal manner (by embezzling funds). Id.

at 40. Rejecting that argument, the First Circuit applied the first definition: “[George’s] crime,” the court

reasoned, “was not the provision of bus services in an

illegal manner but, rather, the misappropriation of

government resources to his own behoof.” Id. at 40.

We see at least two problems with the district

court’s approach. First, George does not support applying the first definition of “proceeds” to wire fraud. Consider a subsequent First Circuit decision, United

States v. Carpenter, 941 F.3d 1 (1st Cir. 2019), which

applied the second definition to wire-fraud proceeds.

Id. at 3. Carpenter helpfully distinguished George:

In [George], we explained that to fall under

§ 981(a)(2)(B), “the crime must involve a good

or service that could, hypothetically, be provided in a lawful manner,” while activities

falling under § 981(a)(2)(A) are “inherently

unlawful.” [George], 886 F.3d at 40. There, we

determined that the defendant’s crime, embezzling funds from a federally funded organization, “[could not] be done lawfully” and so

fell under § 981(a)(2)(A). Id. (quoting United

App. 33

States v. Bodouva, 853 F.3d 76, 80 (2d Cir.

2017)).

By contrast, Carpenter’s conviction arose out

of how he solicited customers for and made

misrepresentations about his [26 U.S.C.] § 1031

intermediary company. Advertising and running such a business are not “inherently unlawful” activities; rather, Benistar provided

what could have been a “legal service,” but

which Carpenter operated in an illegal manner by misrepresenting to exchangors how

their funds would be invested and investing

contrary to those representations.

Id. at 7–8 (emphasis added). This reasoning is sound.

There are some service-based crimes that can never be

performed legally. One cannot lawfully make a living

as a contract killer. See also, e.g., United States v. Bodouva, 853 F.3d 76, 80 (2d Cir. 2017) (“unlawful activities” under § 981(a)(2)(A) means “inherently unlawful

activities, like say the sale of foodstamps, or a robbery”)

(citations omitted) (cleaned up). But there are some

services that, although provided illegally in one case,

could be provided legally in another—like operating an

HVAC school. See also, e.g., United States v. Nacchio,

573 F.3d 1062, 1089 (10th Cir. 2009) (insider trading is

not an “unlawful activity” under § 981(a)(2)(A) because

“securities themselves generally are lawful”); United

States v. Mahaffy, 693 F.3d 113, 138 (2d Cir. 2012)

(same).

Under Carpenter’s reasoning, the second definition applies to Davis. There is a world where Davis

App. 34

legitimately operated Retail Ready while lawfully receiving tuition payments from the VA. His crime therefore involved a “service that could, hypothetically, be

provided in a lawful manner” (HVAC training) but that

was provided in an “illegal manner” (by fraudulently

obtaining GI-Bill funds to pay students’ tuition). Carpenter, 941 F.3d at 7 (quoting George, 886 F.3d at 40).

By contrast, Davis’s crime did not involve property derived from “inherently unlawful” activities, such as embezzlement or contract killing. Ibid. (quoting George,

886 F.3d at 40). The first definition of proceeds therefore does not apply.

Second, the district court’s approach would largely

wipe the second definition of proceeds out of § 981(a)(2).

As the Seventh Circuit has explained, “calling . . . wire

fraud ‘unlawful activity’ ” under § 981(a)(2)(A) “risks

rendering § 981(a)(2)(B) superfluous and thus meaningless.” United States v. Balsiger, 910 F.3d 942, 957

(7th Cir. 2018); see also Nacchio, 573 F.3d at 1088–89

(similar). All forfeitures under § 981 involve crimes.

But “[i]f all unlawful conduct falls within subsection

(A), it is far from clear what is left to fit within subsection (B).” Balsiger, 910 F.3d at 957. We should avoid a

reading that makes a statute eat itself. See, e.g., Gulf

Fishermen’s Ass’n v. Nat’l Marine Fisheries Serv., 968

F.3d 454, 464–65 (5th Cir. 2020) (noting “anti-surplusage canon” under which courts should “give effect to all

of a statute’s provisions, so that no part will be inoperative or superfluous, void or insignificant”) (citation

omitted) (cleaned up). The better reading is the one

App. 35

adopted by several other circuits and the one we adopt

here: illegally provided services that could have “hypothetically” been provided in a “legal manner”—like

Davis’s operation of the school—implicate the second

definition of proceeds under § 981(a)(2)(B), under which

a defendant may deduct “the direct costs incurred in

providing the goods or services.” The focus of any

§ 981(a)(2) analysis is the underlying criminal conduct,

not the crime itself.9

That subsection further provides that Davis “shall

have the burden of proof with respect to the issue of

direct costs” and also that those costs “shall not include

any part of the overhead expenses of the entity providing the goods and services, or any part of the income

taxes paid by the entity.” Ibid. The district court should

have the first opportunity to consider those matters.

We therefore remand for the limited purpose of determining whether Davis can prove any offset under the

terms of § 981(a)(2)(B).

VII.

CONCLUSION

The district court’s forfeiture order is VACATED

and REMANDED for further proceedings consistent

To the extent that any ambiguity remains in applying the

definitions of “proceeds” in § 981(a)(2), under the rule of lenity,

“the tie must go to the defendant.” United States v. Santos, 553

U.S. 507, 514 (2008) (plurality op. of Scalia, J.); see also United

States v. Cooper, 38 F.4th 428, 434 (5th Cir. 2022) (discussing rule

of lenity)

App. 36

with this opinion. In all other respects, Davis’s judgment and sentence are AFFIRMED.

App. 37

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF TEXAS DALLAS DIVISION

UNITED STATES

OF AMERICA

JONATHAN DEAN

DAVIS

§ AMENDED JUDGMENT

§ IN A CRIMINAL CASE

§ Case Number:

§ 3:20-CR-00575-X(1)

§ USM Number: 18747-509

§ Derek Ryan Staub/

§ Jack Ternan/William

§ Chamblee

§ Defendant’s Attorney

THE DEFENDANT:

⬜ pleaded guilty to count(s)

pleaded guilty to count(s)

⬜ before a U.S. Magistrate

Judge, which was accepted by the court.

pleaded nolo contendere

⬜ to count(s) which was

accepted by the court

was found guilty on

☒ count(s) after a plea

of not guilty

Counts 1s thru 7s and

Counts 10s thru 13s of the

Superseding Indictment,

filed on March 25, 2021.

The defendant is adjudicated guilty of these offenses:

Title & Section / Nature of

Offense

Ended

Count

18 U.S.C. § 1343 Wire Fraud

02/19/2016 1s

18 U.S.C. § 1343 Wire Fraud

06/06/2016 2s

18 U.S.C. § 1343 Wire Fraud

08/22/2016 3s

18 U.S.C. § 1343 Wire Fraud

09/15/2016 4s

App. 38

18 U.S.C. § 1343 Wire Fraud

10/27/2016 5s

18 U.S.C. § 1343 Wire Fraud

12/30/2016 6s

18 U.S.C. § 1343 Wire Fraud

08/04/2017 7s

18 U.S.C. § 1957 and 2 Money

04/08/2016 10s

Laundering and aiding and abetting

18 U.S.C. § 1957 and 2 Money

06/17/2016 11s

Laundering and aiding and abetting

18 U.S.C. § 1957 and 2 Money

01/14/2017 12s

Laundering and aiding and abetting

18 U.S.C. § 1957 and 2 Money

04/22/2017 13s

Laundering and aiding and abetting

The defendant is sentenced as provided in pages 2

through 9 of this judgment. The sentence is imposed

pursuant to the Sentencing Reform Act of 1984.

☒

The defendant has been found not guilty on

count(s) Eight and Nine of the Superseding

Indictment.

☒

The original indictment filed on November 18,

2020 is dismissed on the motion of the United

States.

It is ordered that the defendant must notify the

United States attorney for this district within 30 days

of any change of name, residence, or mailing address

until all fines, restitution, costs, and special assessments imposed by this judgment are fully paid. If ordered to pay restitution, the defendant must notify the

court and United States attorney of material changes

in economic circumstances.

September 22, 2021

Date of Imposition of Judgment

App. 39

Brantley Starr

Signature of Judge

BRANTLEY STARR

UNITED STATES DISTRICT JUDGE

Name and Title of Judge

January 12, 2022

Date

IMPRISONMENT

The defendant is hereby committed to the custody of

the United States Bureau of Prisons to be imprisoned

for a total term of:

Two Hundred Thirty-Five (235) months as to counts 1s

thru 7s to run concurrently with each other; and One

Hundred Twenty (120) months as to counts 10s thru

13s to run concurrently with each other and counts 1s

thru 7s, for an aggregrated total of 235 months.

☒

The court makes the following recommendations

to the Bureau of Prisons:

That the defendant be designated to FCI –

Bastrop or in the alternative FCI – Texarkana.

☒

The defendant is remanded to the custody of the

United States Marshal.

The defendant shall surrender to the United

States Marshal for this district:

⬜

⬜ a.m.

⬜ p.m.

⬜

as notified by the United States Marshal.

App. 40

⬜

The defendant shall surrender for service of sentence at the institution designated by the Bureau

of Prisons:

⬜

before 2 p.m. on

⬜

as notified by the United States Marshal.

⬜

as notified by the Probation or Pretrial Services Office.

RETURN

I have executed this judgment as follows:

Defendant delivered on

, with a certified copy of this judgment.

UNITED STATES MARSHAL

DEPUTY UNITED STATES MARSHAL

SUPERVISED RELEASE

Upon release from imprisonment, the defendant shall

be on supervised release for a term of : three (3) years

as to counts 1s thru 7s and 10s thru 13s to run

concurrently with each other, for an aggregated

total of 3 years.

MANDATORY CONDITIONS

You must not commit another federal, state or local crime.

App. 41

You must not unlawfully possess a controlled substance.

You must refrain from any unlawful use of a controlled substance. You must submit to one drug

test within 15 days of release from imprisonment

and at least two periodic drug tests thereafter, as

determined by the court.

⬜

The above drug testing condition is suspended, based on the court’s determination that you pose a low risk of future

substance abuse. (check if applicable)

⬜

You must make restitution in accordance with

18 U.S.C. §§ 3663 and 3663A or any other statute authorizing a sentence of restitution.

(check if applicable)

☒

You must cooperate in the collection of DNA

as directed by the probation officer. (check if

applicable)

⬜

You must comply with the requirements of the

Sex Offender Registration and Notification

Act (34 U.S.C. § 20901, et seq.) as directed by

the probation officer, the Bureau of Prisons, or

any state sex offender registration agency in

which you reside, work, are a student, or were

convicted of a qualifying offense. (check if applicable)

⬜

You must participate in an approved program

for domestic violence. (check if applicable)

You must comply with the standard conditions

that have been adopted by this court as well as with

any additional conditions on the attached page.

App. 42

STANDARD CONDITIONS OF SUPERVISION

As part of your supervised release, you must comply

with the following standard conditions of supervision.

These conditions are imposed because they establish

the basic expectations for your behavior while on supervision and identify the minimum tools needed by

probation officers to keep informed, report to the court

about, and bring about improvements in your conduct

and condition.

1. You must report to the probation office in the federal judicial district where you are authorized to reside

within 72 hours of your release from imprisonment,

unless the probation officer instructs you to report to a

different probation office or within a different time

frame.

2. After initially reporting to the probation office, you

will receive instructions from the court or the probation officer about how and when you must report to the

probation officer, and you must report to the probation

officer as instructed.

3. You must not knowingly leave the federal judicial

district where you are authorized to reside without

first getting permission from the court or the probation

officer.

4. You must answer truthfully the questions asked by

your probation officer.

5. You must live at a place approved by the probation

officer. If you plan to change where you live or anything

about your living arrangements (such as the people

App. 43

you live with), you must notify the probation officer at

least 10 days before the change. If notifying the probation officer in advance is not possible due to unanticipated circumstances, you must notify the probation

officer within 72 hours of becoming aware of a change

or expected change.

6. You must allow the probation officer to visit you at

any time at your home or elsewhere, and you must permit the probation officer to take any items prohibited

by the conditions of your supervision that he or she observes in plain view.

7. You must work full time (at least 30 hours per

week) at a lawful type of employment, unless the probation officer excuses you from doing so. If you do not

have full-time employment you must try to find fulltime employment, unless the probation officer excuses

you from doing so. If you plan to change where you

work or anything about your work (such as your position or your job responsibilities), you must notify the

probation officer at least 10 days before the change. If

notifying the probation officer at least 10 days in advance is not possible due to unanticipated circumstances, you must notify the probation officer within 72

hours of becoming aware of a change or expected

change.

8. You must not communicate or interact with someone you know is engaged in criminal activity. If you

know someone has been convicted of a felony, you must

not knowingly communicate or interact with that

App. 44

person without first getting the permission of the probation officer.

9. If you are arrested or questioned by a law enforcement officer, you must notify the probation officer

within 72 hours.

10. You must not own, possess, or have access to a

firearm, ammunition, destructive device, or dangerous

weapon (i.e., anything that was designed, or was modified for, the specific purpose of causing bodily injury or

death to another person such as nunchakus or tasers).

11. You must not act or make any agreement with a

law enforcement agency to act as a confidential human

source or informant without first getting the permission of the court.

12. If the probation officer determines that you pose

a risk to another person (including an organization),

the probation officer may require you to notify the person about the risk and you must comply with that instruction. The probation officer may contact the person

and confirm that you have notified the person about

the risk.

13. You must follow the instructions of the probation

officer related to the conditions of supervision.

U.S. Probation Office Use Only

A U.S. probation officer has instructed me on the

conditions specified by the court and has provided me

with a written copy of this judgment containing these

App. 45

conditions. I understand additional information regarding these conditions is available at www.txnp.

uscourts.gov.

Defendant’s Signature

Date

SPECIAL CONDITIONS OF SUPERVISION

The defendant shall not enter into any self-employment or business ownership while under supervision

without prior approval of the probation officer.

You must not incur new credit charges, or open additional lines of credit without the approval of the probation officer.

The defendant shall provide to the probation officer

complete access to all business and personal financial

information.

The defendant shall pay any remaining balance of restitution as set out in this Judgment.

The defendant shall participate in outpatient mental

health treatment services as directed by the probation

officer until successfully discharged. These services

may include medications prescribed by a licensed physician. The defendant shall contribute to the costs of

services rendered (copayment) at a rate of at least $25

per month.

The defendant shall participate in an outpatient program approved by the U.S. Probation Office for treatment of narcotic, drug, or alcohol dependency, which

will include testing for the detection of substance use

App. 46

or abuse. The defendant shall abstain from the use of

alcohol and/or all other intoxicants during and after

completion of treatment. The defendant shall contribute to the costs of services rendered (copayment) at a

rate of at least $25 per month.

Pursuant to the Mandatory Victims Restitution Act

of 1996, the defendant is ordered to pay restitution

in the amount of $65,200,000, payable to the U.S. District Clerk, 1100 Commerce Street, Room 1452, Dallas,

Texas 75242. Restitution shall be payable immediately

and any unpaid balance shall be payable during incarceration. Restitution shall be disbursed to:

U.S. Department of Veteran’s Affairs

Debt Management Center

St. Paul, Minnesota

$65,200,000

Account No. 3:20-CR-575

If upon commencement of the term of supervised release any part of the restitution remains unpaid, the

defendant shall make payments on such unpaid balance in monthly installments of not less than 10 percent of the defendant’s gross monthly income, or at a

rate of not less than $200 per month, whichever is

greater. Payment shall begin no later than 60 days after the defendant’s release from confinement and shall

continue each month thereafter until the balance is

paid in full. In addition, at least 50 percent of the receipts received from gifts, tax returns, inheritances, bonuses, lawsuit awards, and any other receipt of money

shall be paid toward the unpaid balance within 15

days of receipt. This payment plan shall not affect the

App. 47

ability of the United States to immediately collect payment in full through garnishment, the Treasury Offset

Program, the Inmate Financial Responsibility Program, the Federal Debt Collection Procedures Act of

1990 or any other means available under federal or

state law. Furthermore, it is ordered that interest on

the unpaid balance is waived pursuant to 18 U.S.C.

§ 3612(f )(3).

CRIMINAL MONETARY PENALTIES

The defendant must pay the total criminal monetary penalties under the schedule of payments page.

Assessment

Restitution

Fine

TOTALS

$1,100.00 $65,200,000.00

$.00

AVAA Assessment* JVTA Assessment**

$.00

☐

The determination of restitution is deferred until

An Amended Judgment in a Criminal

Case (AO245C) will be entered after such determination.

☐

The defendant must make restitution (including

community restitution) to the following payees in

the amount listed below.

If the defendant makes a partial payment,

each payee shall receive an approximately

proportioned payment. However, pursuant to

18 U.S.C. § 3664(i), all nonfederal victims

must be paid before the United States is paid.

App. 48

☐

Restitution amount ordered pursuant to plea

agreement $

☐

The defendant must pay interest on restitution

and a fine of more than $2,500, unless the restitution or fine is paid in full before the fifteenth day

after the date of the judgment, pursuant to 18

U.S.C. § 3612(f ). All of the payment options on the

schedule of payments page may be subject to penalties for delinquency and default, pursuant to 18

U.S.C. § 3612(g).

☒

The court determined that the defendant does not

have the ability to pay interest and it is ordered

that:

☒

the interest requirement is waived for the

☐ fine ☒ restitution

☐

the interest requirement for the ☐ fine

☐ restitution is modified as follows:

* Amy, Vicky, and Andy Child Pornography Victim

Assistance Act of 2018, Pub. L. No. 115-299.

** Justice for Victims of Trafficking Act of 2015, Pub.

L. No. 114-22

*** Findings for the total amount of losses are required under Chapters 109A, 110, 110A, and 113A of

Title 18 for offenses committed on or after September

13, 1994, but before April 23, 1996.

App. 49

SCHEDULE OF PAYMENTS

Having assessed the defendant’s ability to pay, payment of the total criminal monetary penalties are due

as follows:

A ☒ Lump sum payment of $1100.00 due immediately, balance due

☐ not later than

, or

☒ in accordance ☐ C, ☒ D, ☐ E, or ☒ F below; or

B ☐ Payment to begin immediately (may be combined with ☐ C, ☐ D or, ☐ F below); or

C ☐ Payment in equal

(e.g., weekly, monthly,

quarterly) installments of $

over a period of

(e.g., months or years) to commence

(e.g.,

30 or 60 days) days after the date of this judgment; or

D ☐ Payment in equal

(e.g., weekly, monthly,

quarterly) installments of $

over a period of

(e.g., months or years), to commence

(e.g.,

30 or 60 days) days after release from imprisonment to a term of supervision; or

E ☐ Payment during the term of supervised release

will commence within

(e.g., 30 or 60 days)

days after release from imprisonment. The court

will set the payment plan based on an assessment of the defendant’s ability to pay at that

time; or

F ☒ Special instructions regarding the payment of

criminal monetary penalties:

It is ordered that the Defendant shall pay

to the United States a special assessment

App. 50

of $1,100.00 for Counts 1s, 2s, 3s, 4s, 5s, 6s,

7s, 10s, 11s, 12s and 13s , which shall be due

immediately. Said special assessment shall

be paid to the Clerk, U.S. District Court.

Unless the court has expressly ordered otherwise, if

this judgment imposes imprisonment, payment of

criminal monetary penalties is due during imprisonment. All criminal monetary penalties, except those

payments made through the Federal Bureau of Prisons’ Inmate Financial Responsibility Program, are

made to the clerk of the court.

The defendant shall receive credit for all payments

previously made toward any criminal monetary penalties imposed.



Joint and Several

See above for Defendant and Co-Defendant Names

and Case Numbers (including defendant number), Total Amount, Joint and Several Amount,

and corresponding payee, if appropriate.



See Additional Defendants and Co-Defendants

Held Joint and Several.



The defendant shall pay the cost of prosecution.



The defendant shall pay the following court cost(s):

☒

The defendant shall forfeit the defendant’s interest in the following property to the United States:

See Pages 8

Payments shall be applied in the following order: (1)

assessment, (2) restitution principal, (3) restitution interest, (4) AVAA assessment, (5) fine principal, (6) fine

App. 51

interest, (7) community restitution, (8) JVTA assessment, (9) penalties, and (10) costs, including cost of

prosecution and court costs.

ADDITIONAL FORFEITED PROPERTY1

(a) $4,480,466.16 in funds seized from Bank of America account ending in 2653 on or about September 20,

2017, maintained in the name of Retail Ready Career

Center;

(b) $146,370.00 in funds seized from Bank of America

account ending in 0252 on or about September 20,

2017, maintained in the name of Retail Ready Career

Center;

account ending in 8588 on or about September 20,

2017, maintained in the name of Jonathan Davis;

(d) $9,668.28 in funds seized from Bank of Utah account ending in 2251 on or about September 20, 2017,

maintained in the name of Trades United;

(e) One 2014 Lamborghini Aventador (VIN:

ZHWUR1ZD0ELA02916), seized on October 6, 2017;

The Court previously ordered a stay of forfeiture proceedings as to Davis as to item (1) above (the real property at 14888

Lake Forest Drive, Dallas, Texas) pending appeal. See Doc. 216

(staying forfeiture of all property as to Davis); Doc. 303 (vacating

forfeiture stay as to all property but the real property at 14888

Lake Forest Drive, Dallas, Texas). This amended judgment is still

subject to that stay order as to the real property at 14888 Lake

Forest Drive, Dallas, Texas.

App. 52

(f) One

2016

Ferrari

488

(VIN:

ZFF80AMA0G0219421), seized on October 6, 2017;

(g) One 2017 Bentley Continental GT V8 (VIN:

SCBFH7ZA0HC063118), seized on October 11, 2017;

(h) One 2017 Mercedes-Benz AMG S63 (VIN:

WDDUG7JB4HA325753, seized on October 11, 2017;

(i) One

2016

Mercedes-Benz

G63

(VIN:

WDCYC7DF4GX258941), seized on October 11, 2017;

(j) One

2016

Dodge

Ram

2500

(VIN:

3C6UR5DL1GG314858), seized on October 11, 2017;

(k) One

2016

BMW

Alpina

(VIN:

WBA6D6C54GGK18160), seized on October 23, 2017;

(l) Real property located at 14888 Lake Forest Drive,

Dallas, Texas, also known as lot 1, block A, of a replat

of Lake Forest Addition, an addition to the city of Addison, Dallas County, Texas, according to the replat

thereof recorded in volume 94205, page 1934, map records, Dallas County, Texas, as corrected by certificate

of corrections recorded in volume 94226, page 300,

deed records, Dallas County, Texas;

(m) Real property located at 195 North 200 West, Logan, Utah, also known as beginning at the Northeast

corner of Lot 8, Block 21, Plat “A” Logan City Survey,

and running thence West 87.5 feet; thence North 5 rods

to the place of beginning and further described as being situated in the Southeast Quarter of Section 33,

Township 12 North, Range 1 East of the Salt Lake

Base and Meridian; and

App. 53

(n) Real property located at 1408 West 2125 South,

Wellsville, Utah, also known as Lot 108, Spring Creek

Village, Phase 1, as shown by the Official Plat thereof,

filed September 7, 2007, as Filing No. 954131 in the

Office of the Recorder of Cache County, Utah. As said

Plat Map may have heretofore been amended or supplemented and in the Declaration of Covenants, Conditions and Restrictions of Spring Creek Village,

recorded in Cache County, Utah as Entry No. 1005619

in Book 1588 at Page 1751 of the Official Records of the

County Recorder of Cache County, Utah (as said Declaration may have heretofore been supplemented).

App. 54

United States Court of Appeals

for the Fifth Circuit

------------------------------------------------------

No. 21-10996

------------------------------------------------------

UNITED STATES OF AMERICA,

Plaintiff—Appellee,

versus

JONATHAN DEAN DAVIS,

Defendant—Appellant.

-------------------------------------------------------------------------------------------------------------------------------------------------------

Appeal from the United States District Court

for the Northern District of Texas

USDC No. 3:20-CR-575-1

-------------------------------------------------------------------------------------------------------------------------------------------------------

(Filed Dec. 27, 2022)

ON PETITION FOR REHEARING

Before CLEMENT, DUNCAN, and WILSON, Circuit Judges.

PER CURIAM:

IT IS ORDERED that the petition for rehearing is

DENIED.

App. 55

18 U.S.C. § 1343. Fraud by wire, radio, or television

Effective: January 7, 2008

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,

representations, or promises, transmits or causes to be

transmitted by means of wire, radio, or television communication in interstate 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 imprisoned not more than 20 years,

or both. If the violation occurs in relation to, or involving any benefit authorized, transported, transmitted,

transferred, disbursed, or paid in connection with, a

presidentially declared major disaster or emergency

(as those terms are defined in section 102 of the Robert

T. Stafford Disaster Relief and Emergency Assistance

Act (42 U.S.C. 5122)), or affects a financial institution,

such person shall be fined not more than $1,000,000 or

imprisoned not more than 30 years, or both.

18 U.S.C. § 1957. Engaging in monetary transactions

in property derived from specified unlawful activity

Effective: October 5, 2012

(a) Whoever, in any of the circumstances set forth in

subsection (d), knowingly engages or attempts to engage in a monetary transaction in criminally derived

property of a value greater than $10,000 and is derived

App. 56

from specified unlawful activity, shall be punished as

provided in subsection (b).

(b)(1) Except as provided in paragraph (2), the punishment for an offense under this section is a fine under title 18, United States Code, or imprisonment for

not more than ten years or both. If the offense involves

a pre-retail medical product (as defined in section 670)

the punishment for the offense shall be the same as the

punishment for an offense under section 670 unless

the punishment under this subsection is greater.

(2) The court may impose an alternate fine to that

imposable under paragraph (1) of not more than twice

the amount of the criminally derived property involved

in the transaction.

the Government is not required to prove the defendant

knew that the offense from which the criminally derived property was derived was specified unlawful activity.

(d) The circumstances referred to in subsection (a)

are –

(1) that the offense under this section takes

place in the United States or in the special maritime and territorial jurisdiction of the United

States; or

(2) that the offense under this section takes

place outside the United States and such special

jurisdiction, but the defendant is a United States

person (as defined in section 3077 of this title, but

App. 57

excluding the class described in paragraph (2)(D)

of such section).

(e) Violations of this section may be investigated by

such components of the Department of Justice as the

Attorney General may direct, and by such components

of the Department of the Treasury as the Secretary of

the Treasury may direct, as appropriate, and, with respect to offenses over which the Department of Homeland Security has jurisdiction, by such components of

the Department of Homeland Security as the Secretary of Homeland Security may direct, and, with respect to offenses over which the United States Postal

Service has jurisdiction, by the Postal Service. Such

authority of the Secretary of the Treasury, the Secretary of Homeland Security, and the Postal Service shall

be exercised in accordance with an agreement which

shall be entered into by the Secretary of the Treasury,

the Secretary of Homeland Security, the Postal Service,

and the Attorney General.

(f )

As used in this section –

(1) the term “monetary transaction” means the

deposit, withdrawal, transfer, or exchange, in or

affecting interstate or foreign commerce, of funds

or a monetary instrument (as defined in section

1956(c)(5) of this title) by, through, or to a financial

institution (as defined in section 1956 of this title),

including any transaction that would be a financial transaction under section 1956(c)(4)(B) of this

title, but such term does not include any transaction necessary to preserve a person’s right to

App. 58

representation as guaranteed by the sixth amendment to the Constitution;

(2) the term “criminally derived property”

means any property constituting, or derived from,

proceeds obtained from a criminal offense; and

(3) the terms “specified unlawful activity” and

“proceeds” shall have the meaning given those

terms in section 1956 of this title.

18 U.S.C. § 3663A. Mandatory restitution to victims

of certain crimes

Effective: December 4, 2020

(a)(1) Notwithstanding any other provision of law,

when sentencing a defendant convicted of an offense

described in subsection (c), the court shall order, in addition to, or in the case of a misdemeanor, in addition

to or in lieu of, any other penalty authorized by law,

that the defendant make restitution to the victim of

the offense or, if the victim is deceased, to the victim’s

estate.

(2) 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 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. In the case

of a victim who is under 18 years of age, incompetent,

App. 59

incapacitated, or deceased, the legal guardian of the

victim or representative of the victim’s estate, another

family member, or any other person appointed as suitable by the court, may assume the victim’s rights under this section, but in no event shall the defendant be

named as such representative or guardian.

(3) The court shall also order, if agreed to by the parties in a plea agreement, restitution to persons other

than the victim of the offense.

(b) The order of restitution shall require that such

defendant –

(1) in the case of an offense resulting in damage

to or loss or destruction of property of a victim of

the offense –

(A) return the property to the owner of the

property or someone designated by the owner;

(B) if return of the property under subparagraph (A) is impossible, impracticable, or inadequate, pay an amount equal to –

(i)

the greater of –

(I) the value of the property on the

date of the damage, loss, or destruction; or

(II) the value of the property on the

date of sentencing, less

(ii) the value (as of the date the property is returned) of any part of the property that is returned;

App. 60

(2) in the case of an offense resulting in bodily

injury to a victim –

(A) pay an amount equal to the cost of necessary medical and related professional services and devices relating to physical,

psychiatric, and psychological care, including

nonmedical care and treatment rendered in

accordance with a method of healing recognized by the law of the place of treatment;

(B) pay an amount equal to the cost of necessary physical and occupational therapy and

rehabilitation; and

such victim as a result of such offense;

(3) in the case of an offense resulting in bodily

injury that results in the death of the victim, pay

an amount equal to the cost of necessary funeral

and related services; and

(4) in any case, reimburse the victim for lost income and necessary child care, transportation, and

other expenses incurred during participation in

the investigation or prosecution of the offense or

attendance at proceedings related to the offense.

(c)(1) This section shall apply in all sentencing proceedings for convictions of, or plea agreements relating

to charges for, any offense –

(A)

that is –

(i) a crime of violence, as defined in section

16;

App. 61

(ii) an offense against property under this

title, or under section 416(a) of the Controlled

Substances Act (21 U.S.C. 856(a)), including

any offense committed by fraud or deceit;

(iii) an offense described in section 3 of the

Rodchenkov Anti-Doping Act of 2019;

(iv) an offense described in section 1365 (relating to tampering with consumer products);

(v) an offense under section 670 (relating to

theft of medical products); and

(B) in which an identifiable victim or victims has

suffered a physical injury or pecuniary loss.

(2) In the case of a plea agreement that does not result in a conviction for an offense described in paragraph (1), this section shall apply only if the plea

specifically states that an offense listed under such

paragraph gave rise to the plea agreement.

(3) This section shall not apply in the case of an offense described in paragraph (1)(A)(ii) or (iii) if the

court finds, from facts on the record, that –

(A) the number of identifiable victims is so large

as to make restitution impracticable; or

(B) determining complex issues of fact related to

the cause or amount of the victim’s losses would

complicate or prolong the sentencing process to a

degree that the need to provide restitution to any

victim is outweighed by the burden on the sentencing process.

App. 62

(d) An order of restitution under this section shall be

issued and enforced in accordance with section 3664.

App. 63

18 U.S.C. § 2B1.1. Larceny, Embezzlement, and

Other Forms of Theft; Offenses Involving Stolen

Property; Property Damage or Destruction; Fraud

and Deceit; Forgery; Offenses Involving Altered or

Counterfeit Instruments Other than Counterfeit

Bearer Obligations of the United States

(a)

Base Offense Level:

(1) 7, if (A) the defendant was convicted of an

offense referenced to this guideline; and (B) that

offense of conviction has a statutory maximum

term of imprisonment of 20 years or more; or

(2)

(b)

6, otherwise.

Specific Offense Characteristics

(1) If the loss exceeded $6,500, increase the offense level as follows:

Loss (apply the greatest) Increase in Level

( $6,500 or less ............................................ no increase

)

( More than $6,500 .............................................. add 2

)

( More than $15,000 ............................................ add 4

)

( More than $40,000 ............................................ add 6

)

App. 64

( More than $95,000 ............................................ add 8

)

( More than $150,000 ........................................ add 10

)

( More than $250,000 ........................................ add 12

)

( More than $550,000 ........................................ add 14

)

( More than $1,500,000 ..................................... add 16

)

( More than $3,500,000 ..................................... add 18

)

( More than $9,500,000 ..................................... add 20

)

( More than $25,000,000 ................................... add 22

)

( More than $65,000,000 ................................... add 24

)

( More than $150,000,000 ................................. add 26

)

App. 65

( More than $250,000,000 ................................. add 28

)

( More than $550,000,000 ................................ add 30.

)

(2)

(Apply the greatest) If the offense-(A)(i) involved 10 or more victims; (ii) was committed through mass-marketing; or (iii) resulted

in substantial financial hardship to one or more

victims, increase by 2 levels;

(B) resulted in substantial financial hardship to

five or more victims, increase by 4 levels; or

25 or more victims, increase by 6 levels.

(3) If the offense involved a theft from the person of

another, increase by 2 levels.

(4) If the offense involved receiving stolen property,

and the defendant was a person in the business of receiving and selling stolen property, increase by 2 levels.

(5) If the offense involved theft of, damage to, destruction of, or trafficking in, property from a national

cemetery or veterans' memorial, increase by 2 levels.

(6) If (A) the defendant was convicted of an offense

under 18 U.S.C. § 1037; and (B) the offense involved

obtaining electronic mail addresses through improper

means, increase by 2 levels.

App. 66

(7) If (A) the defendant was convicted of a Federal

health care offense involving a Government health

care program; and (B) the loss under subsection (b)(1)

to the Government health care program was (i) more

than $1,000,000, increase by 2 levels; (ii) more than

$7,000,000, increase by 3 levels; or (iii) more than

$20,000,000, increase by 4 levels.

(8)

(Apply the greater) If –

(A) the offense involved conduct described in 18

U.S.C. § 670, increase by 2 levels; or

(B) the offense involved conduct described in 18

U.S.C. § 670, and the defendant was employed by,

or was an agent of, an organization in the supply

chain for the pre-retail medical product, increase

by 4 levels.

(9) If the offense involved (A) a misrepresentation

that the defendant was acting on behalf of a charitable,

educational, religious, or political organization, or a

government agency; (B) a misrepresentation or other

fraudulent action during the course of a bankruptcy

proceeding; (C) a violation of any prior, specific judicial

or administrative order, injunction, decree, or process

not addressed elsewhere in the guidelines; or (D) a misrepresentation to a consumer in connection with obtaining, providing, or furnishing financial assistance

for an institution of higher education, increase by 2 levels. If the resulting offense level is less than level 10,

increase to level 10.

(10) If (A) the defendant relocated, or participated in

relocating, a fraudulent scheme to another jurisdiction

App. 67

to evade law enforcement or regulatory officials; (B) a

substantial part of a fraudulent scheme was committed from outside the United States; or (C) the offense

otherwise involved sophisticated means and the defendant intentionally engaged in or caused the conduct

constituting sophisticated means, increase by 2 levels.

If the resulting offense level is less than level 12, increase to level 12.

(11) If the offense involved (A) the possession or use

of any (i) device-making equipment, or (ii) authentication feature; (B) the production or trafficking of any

(i) unauthorized access device or counterfeit access device, or (ii) authentication feature; or (C)(i) the unauthorized transfer or use of any means of identification

unlawfully to produce or obtain any other means of

identification, or (ii) the possession of 5 or more means

of identification that unlawfully were produced from,

or obtained by the use of, another means of identification, increase by 2 levels. If the resulting offense level

is less than level 12, increase to level 12.

(12) If the offense involved conduct described in 18

U.S.C. § 1040, increase by 2 levels. If the resulting offense level is less than level 12, increase to level 12.

(13) If the defendant was convicted under 42 U.S.C.

408(a), 1011(a), or 1383a(a) and the statutory maximum term of ten years’ imprisonment applies, increase

by 4 levels. If the resulting offense level is less than 12,

increase to level 12.

App. 68

(14) (Apply the greater) If the offense involved misappropriation of a trade secret and the defendant knew

or intended –

(A) that the trade secret would be transported or

transmitted out of the United States, increase by

2 levels; or

(B) that the offense would benefit a foreign government, foreign instrumentality, or foreign agent,

increase by 4 levels.

If subparagraph (B) applies and the resulting

offense level is less than level 14, increase to level

14.

(15) If the offense involved an organized scheme to

steal or to receive stolen (A) vehicles or vehicle parts;

or (B) goods or chattels that are part of a cargo shipment, increase by 2 levels. If the resulting offense level

is less than level 14, increase to level 14.

(16) If the offense involved (A) the conscious or reckless risk of death or serious bodily injury; or (B) possession of a dangerous weapon (including a firearm) in

connection with the offense, increase by 2 levels. If the

resulting offense level is less than level 14, increase to

level 14.

(17)

(Apply the greater) If –

(A) the defendant derived more than $1,000,000

in gross receipts from one or more financial institutions as a result of the offense, increase by 2 levels; or

App. 69

(B) the offense (i) substantially jeopardized the

safety and soundness of a financial institution; or

(ii) substantially endangered the solvency or financial security of an organization that, at any

time during the offense, (I) was a publicly traded

company; or (II) had 1,000 or more employees, increase by 4 levels.

not exceed 8 levels, except as provided in subdivision (D).

(D) If the resulting offense level determined under subdivision (A) or (B) is less than level 24, increase to level 24.

(18) If (A) the defendant was convicted of an offense

under 18 U.S.C. § 1030, and the offense involved an intent to obtain personal information, or (B) the offense

involved the unauthorized public dissemination of personal information, increase by 2 levels.

(19)(A) (Apply the greatest) If the defendant was

convicted of an offense under:

(i) 18 U.S.C. § 1030, and the offense involved a

computer system used to maintain or operate a

critical infrastructure, or used by or for a government entity in furtherance of the administration

of justice, national defense, or national security, increase by 2 levels.

(ii) 18 U.S.C. § 1030(a)(5)(A), increase by 4 levels.

App. 70

(iii) 18 U.S.C. § 1030, and the offense caused a

substantial disruption of a critical infrastructure,

increase by 6 levels.

(B) If subdivision (A)(iii) applies, and the offense

level is less than level 24, increase to level 24.

(20)

If the offense involved –

(A) a violation of securities law and, at the time

of the offense, the defendant was (i) an officer or a

director of a publicly traded company; (ii) a registered broker or dealer, or a person associated with

a broker or dealer; or (iii) an investment adviser,

or a person associated with an investment adviser;

(B) a violation of commodities law and, at the

time of the offense, the defendant was (i) an officer

or a director of a futures commission merchant or

an introducing broker; (ii) a commodities trading

advisor; or (iii) a commodity pool operator,

increase by 4 levels.

(c)

Cross References

(1) If (A) a firearm, destructive device, explosive

material, or controlled substance was taken, or the

taking of any such item was an object of the offense; or (B) the stolen property received, transported, transferred, transmitted, or possessed was

a firearm, destructive device, explosive material,

or controlled substance, apply § 2D1.1 (Unlawful

Manufacturing, Importing, Exporting, or Trafficking (Including Possession with Intent to Commit

These Offenses); Attempt or Conspiracy), § 2D2.1

(Unlawful Possession; Attempt or Conspiracy),

App. 71

§ 2K1.3 (Unlawful Receipt, Possession, or Transportation of Explosive Materials; Prohibited Transactions Involving Explosive Materials), or § 2K2.1

(Unlawful Receipt, Possession, or Transportation

of Firearms or Ammunition; Prohibited Transactions Involving Firearms or Ammunition), as appropriate.

(2) If the offense involved arson, or property

damage by use of explosives, apply § 2K1.4 (Arson;

Property Damage by Use of Explosives), if the resulting offense level is greater than that determined above.

(3) If (A) neither subdivision (1) nor (2) of this

subsection applies; (B) the defendant was convicted under a statute proscribing false, fictitious,

or fraudulent statements or representations generally (e.g., 18 U.S.C. § 1001, § 1341, § 1342, or

§ 1343); and (C) the conduct set forth in the count

of conviction establishes an offense specifically

covered by another guideline in Chapter Two (Offense Conduct), apply that other guideline.

(4) If the offense involved a cultural heritage resource or a paleontological resource, apply § 2B1.5

(Theft of, Damage to, or Destruction of, Cultural

Heritage Resources or Paleontological Resources;

Unlawful Sale, Purchase, Exchange, Transportation, or Receipt of Cultural Heritage Resources or

Paleontological Resources), if the resulting offense

level is greater than that determined above.

App. 72

CREDIT(S)

(Effective November 1, 1987; amended effective June

15, 1988; November 1, 1989; November 1, 1990; November 1, 1991; November 1, 1993; November 1, 1995;

November 1, 1997; November 1, 1998; November 1,

2000; November 1, 2001; November 1, 2002; January

25, 2003; November 1, 2003; November 1, 2004; November 1, 2005; November 1, 2006; November 1, 2007;

February 6, 2008; November 1, 2008; November 1,

2009; November 1, 2010; November 1, 2011; November

1, 2012; November 1, 2013; November 1, 2015; November 1, 2018.)

COMMENTARY

<Statutory Provisions: 7 U.S.C. §§ 6, 6b, 6c,

6h, 6o, 13, 23; 15 U.S.C. §§ 50, 77e, 77q, 77x,

78j, 78ff, 80b-6, 1644, 6821; 18 U.S.C. §§ 38,

225, 285-289, 471-473, 500, 510, 553(a)(1),

641, 656, 657, 659, 662, 664, 1001-1008, 10101014, 1016-1022, 1025, 1026, 1028, 1029,

1030(a)(4)-(5), 1031, 1037, 1040, 1341-1344,

1348, 1350, 1361, 1363, 1369, 1702, 1703 (if

vandalism or malicious mischief, including

destruction of mail, is involved), 1708, 1831,

1832, 1992(a)(1), (a)(5), 2113(b), 2282A, 2282B,

2291, 2312-2317, 2332b(a)(1), 2701; 19 U.S.C.

§ 2401f; 29 U.S.C. § 501(c); 42 U.S.C. § 1011; 49

U.S.C. §§ 14915, 30170, 46317(a), 60123(b).

For additional statutory provision(s) see Appendix A (Statutory Index).>

App. 73

<1. Definitions. – For purposes of this guideline:>

<“Cultural heritage resource” has the meaning given that term in Application Note 1 of

the Commentary to § 2B1.5 (Theft of, Damage

to, or Destruction of, Cultural Heritage Resources or Paleontological Resources; Unlawful Sale, Purchase, Exchange, Transportation,

or Receipt of Cultural Heritage Resources or

Paleontological Resources).>

<“Equity securities” has the meaning given

that term in section 3(a)(11) of the Securities

Exchange Act of 1934 (15 U.S.C. § 78c(a)(11)).>

<“Federal health care offense” has the meaning given that term in 18 U.S.C. § 24.>

<“Financial institution” includes any institution described 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 hospital insurance association;

brokers and dealers registered, or required to

be registered, with the Securities and Exchange

Commission; futures commodity merchants

and commodity pool operators registered, or

required to be registered, with the Commodity

Futures Trading Commission; and any similar entity, whether or not insured by the federal government. “Union or employee pension

App. 74

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 substantial interstate business), and associations that undertake to provide pension,

disability, or other benefits (e.g., medical or

hospitalization insurance) to large numbers of

persons.>

<“Firearm” and “destructive device” have the

meaning given those terms in the Commentary to § 1B1.1 (Application Instructions).>

<“Foreign instrumentality” and “foreign agent”

have the meaning given those terms in 18

U.S.C. § 1839(1) and (2), respectively.>

<“Government health care program” means

any plan or program that provides health benefits, whether directly, through insurance, or

otherwise, which is funded directly, in whole

or in part, by federal or state government. Examples of such programs are the Medicare

program, the Medicaid program, and the

CHIP program.>

<“Means of identification” has the meaning

given that term in 18 U.S.C. § 1028(d)(7), except that such means of identification shall

be of an actual (i.e., not fictitious) individual,

other than the defendant or a person for

whose conduct the defendant is accountable

under § 1B1.3 (Relevant Conduct).>

App. 75

<“National cemetery” means a cemetery (A)

established under section 2400 of title 38,

United States Code; or (B) under the jurisdiction of the Secretary of the Army, the Secretary of the Navy, the Secretary of the Air

Force, or the Secretary of the Interior.>

<“Paleontological resource” has the meaning

given that term in Application Note 1 of the

Commentary to § 2B1.5 (Theft of, Damage to,

or Destruction of, Cultural Heritage Resources or Paleontological Resources; Unlawful Sale, Purchase, Exchange, Transportation,

or Receipt of Cultural Heritage Resources or

Paleontological Resources).>

<“Personal information” means sensitive or

private information involving an identifiable

individual (including such information in the

possession of a third party), including (A)

medical records; (B) wills; (C) diaries; (D) private correspondence, including e-mail; (E) financial records; (F) photographs of a sensitive

or private nature; or (G) similar information.>

<“Pre-retail medical product” has the meaning given that term in 18 U.S.C. § 670(e).>

<“Publicly traded company” means an issuer

(A) with a class of securities registered under

section 12 of the Securities Exchange Act of

1934 (15 U.S.C. § 78l); or (13) that is required

to file reports under section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C.

§ 78o(d)). “Issuer” has the meaning given that

term in section 3 of the Securities Exchange

Act of 1934 (15 U.S.C. § 78c).>

App. 76

<“Supply chain” has the meaning given that

term in 18 U.S.C. § 670(e).>

<“Theft from the person of another” means

theft, without the use of force, of property that

was being held by another person or was

within arms’ reach. Examples include pickpocketing and non-forcible purse-snatching,

such as the theft of a purse from a shopping

cart.>

<“Trade secret” has the meaning given that

term in 18 U.S.C. § 1839(3).>

<“Veterans’ memorial” means any structure,

plaque, statue, or other monument described

in 18 U.S.C. § 1369(a).>

<“Victim” means (A) any person who sustained any part of the actual loss determined

under subsection (b)(1); or (13) any individual

who sustained bodily injury as a result of

the offense. “Person” includes individuals,

corporations, companies, associations, firms,

partnerships, societies, and joint stock companies.>

<2.

Application of Subsection (a)(1). – >

<(A) “Referenced to this Guideline”. –

For purposes of subsection (a)(1), an offense is “referenced to this guideline” if (i)

this guideline is the applicable Chapter

Two guideline specifically referenced in

Appendix A (Statutory Index) for the offense of conviction, as determined under

the provisions of § 1131.2 (Applicable

Guidelines); or (ii) in the case of a

App. 77

conviction for conspiracy, solicitation, or

attempt to which § 2X1.1 (Attempt, Solicitation, or Conspiracy) applies, this guideline is the appropriate guideline for the

offense the defendant was convicted of

conspiring, soliciting, or attempting to

commit.>

<(B) Definition of “Statutory Maximum Term of Imprisonment.” – For

purposes of this guideline, “statutory maximum term of imprisonment” means the

maximum term of imprisonment authorized for the offense of conviction, including any increase in that maximum term

under a statutory enhancement provision.>

<(C) Base Offense Level Determination for Cases Involving Multiple

Counts. – In a case involving multiple

counts sentenced under this guideline,

the applicable base offense level is determined by the count of conviction that provides the highest statutory maximum

term of imprisonment.>

<3. Loss Under Subsection (b)(1). – This

application note applies to the determination

of loss under subsection (b)(1).>

<(A) General Rule. – Subject to the exclusions in subdivision (D), loss is the

greater of actual loss or intended loss.>

<(i) Actual Loss. – “Actual loss”

means the reasonably foreseeable

App. 78

pecuniary harm that resulted from

the offense.>

<(ii) Intended Loss. – “Intended

loss” (I) means the pecuniary harm

that the defendant purposely sought

to inflict; and (II) includes intended

pecuniary harm that would have been

impossible or unlikely to occur (e.g.,

as in a government sting operation,

or an insurance fraud in which the

claim exceeded the insured value).>

<(iii) Pecuniary Harm. – “Pecuniary harm” means harm that is

monetary or that otherwise is readily

measurable in money. Accordingly, pecuniary harm does not include emotional distress, harm to reputation,

or other non-economic harm.>

<(iv) Reasonably Foreseeable

Pecuniary Harm. – For purposes of

this guideline, “reasonably foreseeable pecuniary harm” means pecuniary harm that the defendant knew or,

under the circumstances, reasonably

should have known, was a potential

result of the offense.>

<(v) Rules of Construction in

Certain Cases. – In the cases described in subdivisions (I) through

(III), reasonably foreseeable pecuniary harm shall be considered to include the pecuniary harm specified

for those cases as follows:>

App. 79

<(I) Product Substitution

Cases. – In the case of a product

substitution offense, the reasonably foreseeable pecuniary harm

includes the reasonably foreseeable costs of making substitute

transactions and handling or

disposing of the product delivered, or of retrofitting the product so that it can be used for its

intended purpose, and the reasonably foreseeable costs of rectifying the actual or potential

disruption to the victim’s business operations caused by the

product substitution.>

<(II) Procurement

Fraud

Cases. – In the case of a procurement fraud, such as a fraud affecting a defense contract award,

reasonably foreseeable pecuniary

harm includes the reasonably

foreseeable administrative costs

to the government and other

participants of repeating or correct the procurement action affected, plus any increased costs

to procure the product or service

involved that was reasonably

foreseeable.>

<(III) Offenses Under 18

U.S.C. § 1030. – In the case of

an offense under 18 U.S.C. § 1030,

actual loss includes the following

App. 80

pecuniary harm, regardless of

whether such pecuniary harm

was reasonably foreseeable: Any

reasonable cost to any victim,

including the cost of responding

to an offense, conducting a damage assessment, and restoring

the data, program, system, or information to its condition prior

to the offense, and any revenue

lost, cost incurred, or other damages incurred because of interruption of service.>

<(B) Gain. – The court shall use the

gain that resulted from the offense as an

alternative measure of loss only if there

is a loss but it reasonably cannot be determined.>

<(C) Estimation of Loss. – The court

need only make a reasonable estimate of

the loss. The sentencing judge is in a

unique position to assess the evidence

and estimate the loss based upon that evidence. For this reason, the court’s loss

determination is entitled to appropriate

deference. See 18 U.S.C. § 3742(e) and

(f ).>

<The estimate of the loss shall be based

on available information, taking into account, as appropriate and practicable under the circumstances, factors such as the

following:>

App. 81

<(i) The fair market value of the

property unlawfully taken, copied, or

destroyed; or, if the fair market value

is impracticable to determine or inadequately measures the harm, the

cost to the victim of replacing that

property.>

<(ii) In the case of proprietary information (e.g., trade secrets), the

cost of developing that information or

the reduction in the value of that information that resulted from the offense.>

<(iii) The cost of repairs to damaged property.>

<(iv) The approximate number of

victims multiplied by the average

loss to each victim.>

<(v) The reduction that resulted

from the offense in the value of equity securities or other corporate assets.>

<(vi) More general factors, such as

the scope and duration of the offense

and revenues generated by similar

operations.>

<(D) Exclusions from Loss. – Loss

shall not include the following:>

<(i) Interest of any kind, finance

charges, late fees, penalties, amounts

App. 82

based on an agreed-upon return or

rate of return, or other similar costs.>

<(ii) Costs to the government of,

and costs incurred by victims primarily to aid the government in, the prosecution and criminal investigation of

an offense.>

<(E) Credits Against Loss. – Loss

shall be reduced by the following:>

<(i) The money returned, and the

fair market value of the property returned and the services rendered, by

the defendant or other persons acting

jointly with the defendant, to the victim before the offense was detected.

The time of detection of the offense is

the earlier of (I) the time the offense

was discovered by a victim or government agency; or (II) the time the defendant knew or reasonably should

have known that the offense was detected or about to be detected by a

victim or government agency.>

<(ii) In a case involving collateral

pledged or otherwise provided by the

defendant, the amount the victim

has recovered at the time of sentencing from disposition of the collateral,

or if the collateral has not been disposed of by that time, the fair market

value of the collateral at the time of

sentencing.>

App. 83

<(iii) Notwithstanding clause (ii),

in the case of a fraud involving a

mortgage loan, if the collateral has

not been disposed of by the time of

sentencing, use the fair market value

of the collateral as of the date on

which the guilt of the defendant has

been established, whether by guilty

plea, trial, or plea of nolo contendere.>

<In such a case, there shall be a rebuttable presumption that the most

recent tax assessment value of the

collateral is a reasonable estimate of

the fair market value. In determining

whether the most recent tax assessment value is a reasonable estimate

of the fair market value, the court

may consider, among other factors,

the recency of the tax assessment

and the extent to which the jurisdiction’s tax assessment practices reflect

factors not relevant to fair market

value.>

<(F) Special Rules. – Notwithstanding subdivision (A), the following special

rules shall be used to assist in determining loss in the cases indicated:>

<(i) Stolen or Counterfeit Credit

Cards and Access Devices; Purloined Numbers and Codes. – In a

case involving any counterfeit access

device or unauthorized access device,

App. 84

loss includes any unauthorized charges

made with the counterfeit access device or unauthorized access device

and shall be not less than $500 per

access device. However, if the unauthorized access device is a means of

telecommunications access that identifies a specific telecommunications

instrument or telecommunications

account (including an electronic serial

number/mobile identification number (ESN/MIN) pair), and that means

was only possessed, and not used,

during the commission of the offense,

loss shall be not less than $100 per

unused means. For purposes of this

subdivision, “counterfeit access device” and “unauthorized access device” have the meaning given those

terms in Application Note 10(A).>

<(ii) Government Benefits. – In

a case involving government benefits

(e.g., grants, loans, entitlement program payments), loss shall be considered to be not less than the value of

the benefits obtained by unintended

recipients or diverted to unintended

uses, as the case may be. For example, if the defendant was the intended

recipient of food stamps having a

value of $100 but fraudulently received food stamps having a value of

$150, loss is $50.>

App. 85

<(iii) Davis-Bacon Act Violations.

– In a case involving a Davis-Bacon

Act violation (i.e., a violation of 40

U.S.C. § 3142, criminally prosecuted

under 18 U.S.C. § 1001), the value of

the benefits shall be considered to be

not less than the difference between

the legally required wages and actual

wages paid.>

<(iv) Ponzi and Other Fraudulent Investment Schemes. – In a

case involving a fraudulent investment scheme, such as a Ponzi scheme,

loss shall not be reduced by the

money or the value of the property

transferred to any individual investor in the scheme in access of that

investor’s principal investment (i.e.,

the gain to an individual investor in

the scheme shall not be used to offset

the loss to another individual investor in the scheme).>

<(v) Certain Other Unlawful

Misrepresentation Schemes. – In

a case involving a scheme in which

(I) services were fraudulently rendered to the victim by persons falsely

posing as licensed professionals; (II)

goods were falsely represented as approved by a governmental regulatory

agency; or (III) goods for which regulatory approval by a government

agency was required but not obtained,

or was obtained by fraud, loss shall

App. 86

include the amount paid for the property, services or goods transferred,

rendered, or misrepresented, with no

credit provided for the value of those

items or services.>

<(vi) Value of Controlled Substances. – In a case involving

controlled substances, loss is the estimated street value of the controlled

substances.>

<(vii) Value of Cultural Heritage Resources or Paleontological

Resources. – In a case involving a

cultural heritage resource or paleontological resource, loss attributable

to that resource shall be determined

in accordance with the rules for determining the “value of the resource”

set forth in Application Note 2 of the

Commentary to § 2B 1.5.>

<(viii) Federal Health Care Offenses Involving Government

Health Care Programs. – In a case

in which the defendant is convicted

of a Federal health care offense involving a Government health care program, the aggregate dollar amount

of fraudulent bills submitted to the

Government health care program

shall constitute prima facie evidence

of the amount of the intended loss,

i.e., is evidence sufficient to establish

App. 87

the amount of the intended loss, if

not rebutted.>

<(ix) Fraudulent Inflation or

Deflation in Value of Securities

or Commodities. – In a case involving the fraudulent inflation or deflation in the value of a publicly traded

security or commodity, the court in determining loss may use any method

that is appropriate and practicable

under the circumstances. One such

method the court may consider is a

method under which the actual loss

attributable to the change in value

of the security or commodity is the

amount determined by – >

<(I) calculating the difference

between the average price of the

security or commodity during the

period that the fraud occurred

and the average price of the security or commodity during the

90-day period after the fraud

was disclosed to the market, and>

<(II) multiplying the difference

in average price by the number

of shares outstanding.>

<In determining whether the amount

so determined is a reasonable estimate of the actual loss attributable to

the change in value of the security or

commodity, the court may consider,

among other factors, the extent to

App. 88

which the amount so determined includes significant changes in value

not resulting from the offense (e.g.,

changes caused by external market

forces, such as changed economic circumstances, changed investor expectations, and new industry-specific

or firm-specific facts, conditions, or

events).>

<4.

Application of Subsection (b)(2). – >

<(A) Definition. – For purposes of subsection (b)(2), “mass-marketing” means a

plan, program, promotion, or campaign

that is conducted through solicitation by

telephone, mail, the Internet, or other

means to induce a large number of persons to (i) purchase goods or services; (ii)

participate in a contest or sweepstakes; or

(iii) invest for financial profit. “Mass-marketing” includes, for example, a telemarketing campaign that solicits a large

number of individuals to purchase fraudulent life insurance policies.>

<(B) Applicability to Transmission

of Multiple Commercial Electronic

Mail Messages. – For purposes of subsection (b)(2), an offense under 18 U.S.C.

§ 1037, or any other offense involving conduct described in 18 U.S.C. § 1037, shall

be considered to have been committed

through mass-marketing. Accordingly, the

defendant shall receive at least a twolevel enhancement under subsection (b)(2)

App. 89

and may, depending on the facts of the

case, receive a greater enhancement under such subsection, if the defendant was

convicted under, or the offense involved

conduct described in, 18 U.S.C. § 1037.>

<(C) Undelivered

Mail. – >

United

States

<(i) In General. – In a case in

which undelivered United States mail

was taken, or the taking of such item

was an object of the offense, or in a

case in which the stolen property received, transported, transferred, transmitted, or possessed was undelivered

United States mail, “victim” means

(I) any victim as defined in Application Note 1; or (II) any person who

was the intended recipient, or addressee, of the undelivered United

States mail.>

<(ii) Special Rule. – A case described in subdivision (C)(i) of this

note that involved – >

<(I) a United States Postal

Service relay box, collection box,

delivery vehicle, satchel, or cart,

shall be considered to have involved at least 10 victims.>

<(II) a housing unit cluster

box or any similar receptacle

that contains multiple mailboxes,

whether such receptacle is owned

App. 90

by the United States Postal Service or otherwise owned, shall,

unless proven otherwise, be presumed to have involved the number of victims corresponding to

the number of mailboxes in each

cluster box or similar receptacle.>

<(iii) Definition. – “Undelivered

United States mail” means mail that

has not actually been received by the

addressee or the addressee’s agent

(e.g., mail taken from the addressee’s

mail box).>

<(D) Vulnerable Victims. – If subsection

(b)(2)(B) or (C) applies, an enhancement under § 3A1.1(b)(2) shall not apply.>

<(E) Cases Involving Means of Identification. – For purposes of subsection (b)(2), in

a case involving means of identification “victim” means (i) any victim as defined in Application Note 1; or (ii) any individual whose

means of identification was used unlawfully

or without authority.>

<(F) Substantial Financial Hardship. –

In determining whether the offense resulted

in substantial financial hardship to a victim,

the court shall consider, among other factors,

whether the offense resulted in the victim – >

App. 91

<(i)

becoming insolvent;>

<(ii) filing for bankruptcy under the

Bankruptcy Code (title 11, United States

Code);>

<(iii) suffering substantial loss of a retirement, education, or other savings or

investment fund;>

<(iv) making substantial changes to his

or her employment, such as postponing

his or her retirement plans;>

<(v) making substantial changes to his

or her living arrangements, such as relocating to a less expensive home; and>

<(vi) suffering substantial harm to his

or her ability to obtain credit.>

<5. Enhancement for Business of Receiving and Selling Stolen Property under Subsection (b)(4). – For purposes of

subsection (b)(4), the court shall consider the

following non-exhaustive list of factors in determining whether the defendant was in the

business of receiving and selling stolen property:>

<(A) The regularity and sophistication

of the defendant’s activities.>

<(B) The value and size of the inventory

of stolen property maintained by the defendant.>

App. 92

<(C) The extent to which the defendant’s activities encouraged or facilitated

other crimes.>

<(D) The defendant’s past activities involving stolen property.>

<6. Application of Subsection (b)(6). –

For purposes of subsection (b)(6), “improper

means” includes the unauthorized harvesting

of electronic mail addresses of users of a website, proprietary service, or other online public

forum.>

<7. Application of Subsection (b)(8)(B).

– If subsection (b)(8)(B) applies, do not apply

an adjustment under § 3B1.3 (Abuse of Position of Trust or Use of Special Skill).>

<8.

Application of Subsection (b)(9). – >

<(A) In General. – The adjustments in

subsection (b)(9) are alternative rather

than cumulative. If, in a particular case,

however, more than one of the enumerated factors applied, an upward departure may be warranted.>

<(B) Misrepresentations Regarding

Charitable and Other Institutions. –

Subsection (b)(9)(A) applies in any case in

which the defendant represented that the

defendant was acting to obtain a benefit

on behalf of a charitable educational, religious, or political organization, or a government agency (regardless of whether

the defendant actually was associated with

the organization or government agency)

App. 93

when, in fact, the defendant intended to

divert all or part of that benefit (e.g., for

the defendant’s personal gain). Subsection (b)(9)(A) applies, for example, to the

following:>

<(i) A defendant who solicited contributions for a non-existent famine

relief organization.>

<(ii) A defendant who solicited donations from church members by

falsely claiming to be a fundraiser for

a religiously affiliated school.>

<(iii) A defendant, chief of a local

fire department, who conducted a

public fundraiser representing that

the purpose of the fundraiser was to

procure sufficient funds for a new fire

engine when, in fact, the defendant

intended to divert some of the funds

for the defendant’s personal benefit.>

<(C) Fraud in Contravention of Prior

Judicial Order. – Subsection (b)(9)(C)

provides an enhancement if the defendant commits a fraud in contravention of a

prior, official judicial or administrative

warning, in the form of an order, injunction, decree, or process, to take or not to

take a specified action. A defendant who

does not comply with such a prior, official

judicial or administrative warning demonstrates aggravated criminal intent and

deserves additional punishment. If it is

established that an entity the defendant

App. 94

controlled was a party to the prior proceeding that resulted in the official judicial or administrative action, and the

defendant had knowledge of that prior

decree or order, this enhancement applies

even if the defendant was not a specifically named party in that prior case. For

example, a defendant whose business

previously was enjoined from selling a

dangerous product, but who nonetheless

engaged in fraudulent conduct to sell the

product, is subject to this enhancement.

This enhancement does not apply if the

same conduct resulted in an enhancement

pursuant to a provision found elsewhere

in the guidelines (e.g., a violation of a

condition of release addressed in § 3C1.3

(Commission of Offense While on Release)

or a violation of probation addressed in

§ 4A1.1 (Criminal History Category)).>

<(D) College Scholarship Fraud. –

For purposes of subsection (b)(9)(D):>

<“Financial assistance” means any scholarship, grant, loan, tuition, discount, award,

or other financial assistance for the purpose of financing an education.>

<“Institution of higher education” has the

meaning given that term in section 101 of

the Higher Education Act of 1954 (20

U.S.C. § 1001).>

App. 95

<(E) Non-Applicability of Chapter

Three Adjustments. – >

<(i) Subsection (b)(9)(A). – If the

conduct that forms the basis for an enhancement under subsection (b)(9)(A)

is the only conduct that forms the basis for an adjustment under § 3B1.3

(Abuse of Position of Trust or Use of

Special Skill), do not apply that adjustment under § 3B1.3.>

<(ii) Subsection (b)(9)(B) and

(C). – If the conduct that forms the

basis for an enhancement under subsection (b)(9)(B) or (C) is the only

conduct that forms the basis for an

adjustment under § 3C1.1 (Obstructing or Impeding the Administration

of Justice), do not apply that adjustment under § 3C1.1.>

<9.

Application of Subsection (b)(10). – >

<(A) Definition of United States. –

For purposes of subsection (b)(10)(B),

“United States” means each of the 50

states, the District of Columbia, the Commonwealth of Puerto Rico, the United

States Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa.>

<(B) Sophisticated Means Enhancement under Subsection (b)(10)(C). –

For purposes of subsection (b)(10)(C),

“sophisticated means” means especially

App. 96

complex or especially intricate offense conduct pertaining to the execution or concealment of an offense. For example, in a

telemarketing scheme, locating the main

office of the scheme in one jurisdiction but

locating soliciting operations in another

jurisdiction ordinarily indicates sophisticated means. Conduct such as hiding assets or transactions, or both, through the

use of fictitious entities, corporate shells,

or offshore financial accounts also ordinarily indicates sophisticated means.>

<(C) Non-Applicability of Chapter

Three Adjustment. – If the conduct that

forms the basis for an enhancement under subsection (b)(10) is the only conduct

that forms the basis for an adjustment

under § 3C1.1, do not apply that adjustment under § 3C1.1.>

<10. Application of Subsection (b)(11). – >

<(A) Definitions. – For purposes of

subsection (b)(11):>

<“Authentication feature” has the meaning

given that term in 18 U.S.C. § 1028(d)(1).>

<“Counterfeit access device” (i) has the

meaning given that term in 18 U.S.C.

§ 1029(e)(2); and (ii) includes a telecommunications instrument that has been

modified or altered to obtain unauthorized use of telecommunications service.>

<“Device-making equipment” (i) has the

meaning given that term in 18 U.S.C.

App. 97

§ 1029(e)(6); and (ii) includes (I) any hardware or software that has been configured

as described in 18 U.S.C. § 1029(a)(9); and

(II) a scanning receiver referred to in 18

U.S.C. § 1029(a)(8). “Scanning receiver”

has the meaning given that term in 18

U.S.C. § 1029(e)(8).>

<“Produce” includes manufacture, design,

alter, authenticate, duplicate, or assemble. “Production” includes manufacture,

design, alteration, authentication, duplication, or assembly.>

<“Telecommunications service” has the

meaning given that term in 18 U.S.C.

§ 1029(e)(9).>

<“Unauthorized access device” has the

meaning given that term in 18 U.S.C.

§ 1029(e)(3).>

<(B) Authentication Features and

Identification Documents. – Offenses

involving authentication features, identification documents, false identification

documents, and means of identification,

in violation of 18 U.S.C. § 1028, also are

covered by this guideline. If the primary

purpose of the offense, under 18 U.S.C.

§ 1028, was to violate, or assist another to

violate, the law pertaining to naturalization, citizenship, or legal resident status,

apply § 2L2.1 (Trafficking in a Document

Relating to Naturalization) or § 2L2.2

(Fraudulently Acquiring Documents

App. 98

Relating to Naturalization), as appropriate, rather than this guideline.>

<(C) Application

(b)(11)(C)(i). – >

Subsection

<(i) In General. – Subsection

(b)(11)(C)(i) applies in a case in

which a means of identification of an

individual other than the defendant

(or a person for whose conduct the defendant is accountable under § 1B1.3

(Relevant Conduct)) is used without

that individual’s authorization unlawfully to produce or obtain another

means of identification.>

<(ii) Examples. – Examples of conduct to which subsection (b)(11)(C)(i)

applies are as follows:>

<(I) A defendant obtains an individual’s name and social security number from a source (e.g.,

from a piece of mail taken from

the individual’s mailbox) and obtains a bank loan in that individual’s name. In this example, the

account number of the bank loan

is the other means of identification that has been obtained unlawfully.>

<(II) A defendant obtains an

individual’s name and address

from a source (e.g., from a driver’s

license in a stolen wallet) and

App. 99

applies for, obtains, and subsequently uses a credit card in that

individual’s name. In this example, the credit card is the other

means of identification that has

been obtained unlawfully.>

<(iii) Non-applicability of Subsection (b)(11)(C)(i). – Examples of

conduct to which subsection (b)(11)(C)(i)

does not apply are as follows:>

<(I) A defendant uses a credit

card from a stolen wallet only to

make a purchase. In such a case,

the defendant has not used the

stolen credit card to obtain another means of identification.>

<(II) A defendant forges another individual’s signature to

cash a stolen check. Forging another individual’s signature is

not producing another means of

identification.>

<(D) Application of Subsection

(b)(11)(C)(ii). – Subsection (b)(11)(C)(ii)

applies in any case in which the offense

involved the possession of 5 or more

means of identification that unlawfully

were produced or obtained, regardless of

the number of individuals in whose name

(or other identifying information) the

means of identification were so produced

or so obtained.>

App. 100

<11. Interaction of Subsection (b)(13)

and § 3B1.3 (Abuse of Position of Trust or

Use of Special Skill). – If subsection (b)(13)

applies, do not apply § 3B1.3.>

<12. Application of Subsection (b)(15). –

Subsection (b)(15) provides a minimum offense level in the case of an ongoing, sophisticated operation (e.g., an auto theft ring or

“chop shop”) to steal or to receive stolen (A)

vehicles or vehicle parts; or (B) goods or chattels that are part of a cargo shipment. For purposes of this subsection, “vehicle” means

motor vehicle, vessel, or aircraft. A “cargo

shipment” includes cargo transported on a

railroad car, bus, steamboat, vessel, or airplane.>

<13. Gross Receipts Enhancement under Subsection (b)(17)(A). – >

<(A) In General. – For purposes of subsection (b)(17)(A), the defendant shall be

considered to have derived more than

$1,000,000 in gross receipts if the gross

receipts to the defendant individually, rather than to all participants, exceeded

$1,000,000.>

<(B) Definition. – “Gross receipts from

the offense” includes all property, real or

personal, tangible or intangible, which is

obtained directly or indirectly as a result

of such offense. See 18 U.S.C. § 982(a)(4).>

App. 101

<14.

–>

Application of Subsection (b)(17)(B).

<(A) Application of Subsection

(b)(17)(B)(i). – The following is a nonexhaustive list of factors that the court

shall consider in determining whether, as

a result of the offense, the safety and

soundness of a financial institution was

substantially jeopardized:>

<(i) The financial institution became insolvent.>

<(ii) The financial institution substantially reduced benefits to pensioners or insureds.>

<(iii) The financial institution was

unable on demand to refund fully any

deposit, payment, or investment.>

<(iv) The financial institution was

so depleted of its assets as to be

forced to merge with another institution in order to continue active operations.>

<(v) One or more of the criteria in

clauses (i) through (iv) was likely to

result from the offense but did not result from the offense because of federal government intervention, such

as a “bailout”.>

App. 102

<(B) Application

(b)(17)(B)(ii). – >

Subsection

<(i) Definition. – For purposes of

this subsection, “organization” has

the meaning given that term in Application Note 1 of § 8A1.1 (Applicability of Chapter Eight).>

<(ii) In General. – The following is

a non-exhaustive list of factors that

the court shall consider in determining whether, as a result of the offense,

the solvency or financial security of

an organization that was a publicly

traded company or that had more

than 1,000 employees was substantially endangered:>

<(I) The organization became

insolvent or suffered a substantial reduction in the value of its

assets.>

<(II) The organization filed for

bankruptcy under Chapters 7,

11, or 13 of the Bankruptcy Code

(title 11, United States Code).>

<(III) The organization suffered a substantial reduction in

the value of its equity securities

or the value of its employee retirement accounts.>

<(IV) The organization substantially reduced its workforce.>

App. 103

<(V) The organization substantially reduced its employee pension benefits.>

<(VI) The liquidity of the equity

securities of a publicly traded

company was substantially endangered. For example, the company was delisted from its primary

listing exchange, or trading of the

company’s securities was halted

for more than one full trading

day.>

<(VII) One or more of the criteria in subclauses (I) through

(VI) was likely to result from the

offense but did not result from

the offense because of federal

government intervention, such

as a “bailout”.>

<15. Application of Subsection (b)(19). – >

<(A) Definitions. – For purposes of

subsection (b)(19):>

<“Critical infrastructure” means systems

and assets vital to national defense, national security, economic security, public

health or safety, or any combination of

those matters. A critical infrastructure

may be publicly or privately owned. Examples of critical infrastructures include

gas and oil production, storage, and delivery systems, water supply systems, telecommunications networks, electrical power

App. 104

delivery systems, financing and banking

systems, emergency services (including

medical, police, fire, and rescue services),

transportation systems and services (including highways, mass transit, airlines,

and airports), and government operations

that provide essential services to the public.>

<“Government entity” has the meaning

given that term in 18 U.S.C. § 1030(e)(9).>

<(B) Subsection (b)(19)(A)(iii). – If

the same conduct that forms the basis

for an enhancement under subsection

(b)(19)(A)(iii) is the only conduct that

forms the basis for an enhancement under

subsection (b)(17)(B), do not apply the enhancement under subsection (b)(17)(B).>

<16. Application of Subsection (b)(20). – >

<(A) Definitions. – For purposes of

subsection (b)(20):>

<“Commodities law” means (i) the Commodity Exchange Act (7 U.S.C. § 1 et seq.)

and 18 U.S.C. § 1348; and (ii) includes the

rules, regulations, and orders issued by

the Commodity Futures Trading Commission.>

<“Commodity pool operator” has the

meaning given that term in section 1a(11)

of the Commodity Exchange Act (7 U.S.C.

§ 1a(11)).>

App. 105

<“Commodity trading advisor” has the

meaning given that term in section 1a(12)

of the Commodity Exchange Act (7 U.S.C.

§ 1a(12)).>

<“Futures commission merchant” has the

meaning given that term in section 1a(28)

of the Commodity Exchange Act (7 U.S.C.

§ 1a(28)).>

<“Introducing broker” has the meaning

given that term in section 1a(31) of the

Commodity Exchange Act (7 U.S.C.

§ 1a(31)).>

<“Investment adviser” has the meaning

given that term in section 202(a)(11) of

the Investment Advisers Act of 1940 (15

U.S.C. § 80b-2(a)(11)).>

<“Person associated with a broker or

dealer” has the meaning given that term in

section 3(a)(18) of the Securities Exchange

Act of 1934 (15 U.S.C. § 78c(a)(18)).>

<“Person associated with an investment

adviser” has the meaning given that term

in section 202(a)(17) of the Investment

Advisers Act of 1940 (15 U.S.C. § 80b2(a)(17)).>

<“Registered broker or dealer” has the

meaning given that term in section

3(a)(48) of the Securities Exchange Act

of 1934 (15 U.S.C. § 78c(a)(48)).>

<“Securities law” (i) means 18 U.S.C.

§§ 1348, 1350, and the provisions of law

App. 106

referred to in section 3(a)(47) of the Securities Exchange Act of 1934 (15 U.S.C.

§ 78c(a)(47)); and (ii) includes the rules,

regulations, and orders issued by the Securities and Exchange Commission pursuant to the provisions of law referred to

in such section.>

<(B) In General. – A conviction under

a securities law or commodities law is not

required in order for subsection (b)(20) to

apply. This subsection would apply in the

case of a defendant convicted under a

general fraud statute if the defendant’s

conduct violated a securities law or commodities law. For example, this subsection would apply if an officer of a publicly

traded company violated regulations issued

by the Securities and Exchange Commission by fraudulently influencing an independent audit of the company’s financial

statements for the purposes of rendering

such financial statements materially misleading, even if the officer is convicted

only of wire fraud.>

<(C) Nonapplicability of § 3B1.3

(Abuse of Position of Trust or Use of

Special Skill). – If subsection (b)(20) applies, do not apply § 3B1.3.>

<17. Cross Reference in Subsection (c)(3).

– Subsection (c)(3) provides a cross reference

to another guideline in Chapter Two (Offense

Conduct) in cases in which the defendant is

convicted of a general fraud statute, and the

App. 107

count of conviction establishes an offense involving fraudulent conduct that is more aptly

covered by another guideline. Sometimes, offenses involving fraudulent statements are

prosecuted under 18 U.S.C. § 1001, or similarly general statute, although the offense involves fraudulent conduct that is also covered

by a more specific statute. Examples include

false entries regarding currency transactions,

for which § 2S1.3 (Structuring Transactions

to Evade Reporting Requirements) likely

would be more apt, and false statements to a

customs officer, for which § 2T3.1 (Evading

Import Duties or Restrictions (Smuggling);

Receiving or Trafficking in Smuggled Property) likely would be more apt. In certain

other cases, the mail or wire fraud statutes, or

other relatively broad statutes, are used primarily as jurisdictional bases for the prosecution of other offenses. For example, a state

employee who improperly influenced the award

of a contract and used the mails to commit the

offense may be prosecuted under 18 U.S.C.

§ 1341 for fraud involving the deprivation of

the intangible right of honest services. Such a

case would be more aptly sentenced pursuant

to § 2C1.1 (Offering, Giving, Soliciting, or Receiving a Bribe; Extortion Under Color of Official Right; Fraud involving the Deprivation

of the Intangible Right to Honest Services of

Public Officials; Conspiracy to Defraud by Interference with Governmental Functions).>

<18. Continuing Financial Crimes Enterprise. – If the defendant is convicted under 18 U.S.C. § 225 (relating to a continuing

App. 108

financial crimes enterprise), the offense level

is that applicable to the underlying series of

offenses comprising the “continuing financial

crimes enterprise”.>

<19. Partially Completed Offenses. – In

the case of a partially completed offense (e.g.,

an offense involving a completed theft or

fraud that is part of a larger, attempted theft

or fraud), the offense level is to be determined

in accordance with the provisions of § 2X1.1

(Attempt, Solicitation, or Conspiracy) whether

the conviction is for the substantive offense,

the inchoate offense (attempt, solicitation, or

conspiracy), or both. See Application Note 4 of

the Commentary to § 2X1.1.>

<20. Multiple-Count Indictments. – Some

fraudulent schemes may result in multiplecount indictments, depending on the technical

elements of the offense. The cumulative loss

produced by a common scheme or course of

conduct should be used in determining the offense level, regardless of the number of counts

of conviction. See Chapter Three, Part D (Multiple Counts).>

<21.

Departure Considerations. – >

<(A) Upward Departure Considerations. – There may be cases in which the

offense level determined under this guideline substantially understates the seriousness of the offense. In such cases, an

upward departure may be warranted.

The following is a non-exhaustive list of

factors that the court may consider in

App. 109

determining whether an upward departure is warranted:>

<(i) A primary objective of the offense was an aggravating, nonmonetary objective. For example, a

primary objective of the offense was

to inflict emotional harm.>

<(ii) The offense caused or risked

substantial non-monetary harm. For

example, the offense caused physical

harm, psychological harm, or severe

emotional trauma, or resulted in a

substantial invasion of a privacy interest (through, for example, the

theft of personal information such as

medical, educational, or financial

records).>

<An upward departure would be warranted, for example, in an 18 U.S.C.

§ 1030 offense involving damage to a

protected computer, if, as a result of

that offense, death resulted.>

<An upward departure also would be

warranted, for example, in a case involving animal enterprise terrorism

under 18 U.S.C. § 43, if, in the course

of the offense, serious bodily injury or

death resulted, or substantial scientific research or information were destroyed.>

<Similarly, an upward departure

would be warranted in a case

App. 110

involving conduct described in 18

U.S.C. § 670 if the offense resulted in

serious bodily injury or death, including serious bodily injury or death resulting from the use of the pre-retail

medical product.>

<(iii) The offense involved a substantial amount of interest of any

kind, finance charges, late fees, penalties, amounts based on an agreedupon return or rate of return, or

other similar costs, not included in

the determination of loss for purposes of subsection (b)(1).>

<(iv) The offense created a risk of

substantial loss beyond the loss determined for purposes of subsection

(b)(1), such as a risk of a significant

disruption of a national financial

market.>

<(v) In a case involving stolen information from a “protected computer”,

as defined in 18 U.S.C. § 1030(e)(2),

the defendant sought the stolen information to further a broader criminal purpose.>

<(vi) In a case involving access

devices or unlawfully produced or

unlawfully obtained means of identification:>

<(I) The offense caused substantial harm to the victim’s

App. 111

reputation, or the victim suffered a substantial inconvenience related to repairing the

victim’s reputation.>

<(II) An individual whose means

of identification the defendant

used to obtain unlawful means of

identification is erroneously arrested or denied a job because an

arrest record has been made in

that individual’s name.>

<(III) The defendant produced

or obtained numerous means of

identification with respect to

one individual and essentially

assumed that individual’s identity.>

<(B) Upward Departure for Debilitating Impact on a Critical Infrastructure. – An upward departure would

be warranted in a case in which subsection (b)(19)(A)(iii) applies and the disruption to the critical infrastructure(s) is so

substantial as to have a debilitating impact on national security, national economic security, national public health or

safety, or any combination of those matters.>

<(C) Downward Departure Consideration. – There may be cases in which

the offense level determined under this

guideline substantially overstates the

App. 112

seriousness of the offense. In such cases,

a downward departure may be warranted.>

<For example, a securities fraud involving a fraudulent statement made publicly

to the market may produce an aggregate

loss amount that is substantial but diffuse, with relatively small loss amounts

suffered by a relatively large number of

victims. In such a case, the loss table in

subsection (b)(1) and the victims table

in subsection (b)(2) may combine to produce an offense level that substantially

overstates the seriousness of the offense.

If so, a downward departure may be warranted.>

<(D) Downward Departure for Major

Disaster or Emergency Victims. – If

(i) the minimum offense level of level 12

in subsection (b)(12) applies; (ii) the defendant sustained damage, loss, hardship, or suffering caused by a major

disaster or an emergency as those terms

are defined in 42 U.S.C. § 5122; and (iii)

the benefits received illegally were only

an extension or overpayment of benefits

received legitimately, a downward departure may be warranted.>

<Background: This guideline covers offenses involving theft, stolen property, property damage or destruction, fraud, forgery,

and counterfeiting (other than offenses

App. 113

involving altered or counterfeit bearer obligations of the United States).>

<Because federal fraud statutes often are

broadly written, a single pattern of offense

conduct usually can be prosecuted under several code sections, as a result of which the

offense of conviction may be somewhat arbitrary. Furthermore, most fraud statutes cover

a broad range of conduct with extreme variation in severity. The specific offense characteristics and cross references contained in this

guideline are designed with these considerations in mind.>

<The Commission has determined that, ordinarily, the sentences of defendants convicted

of federal offenses should reflect the nature

and magnitude of the loss caused or intended

by their crimes. Accordingly, along with other

relevant factors under the guidelines, loss

serves as a measure of the seriousness of the

offense and the defendant’s relative culpability and is a principal factor in determining the

offense level under this guideline.>

<Theft from the person of another, such as

pickpocketing or non-forcible purse-snatching,

receives an enhanced sentence because of the

increased risk of physical injury. This guideline does not include an enhancement for

thefts from the person by means of force or

fear; such crimes are robberies and are covered under § 2B3.1 (Robbery).>

<A minimum offense level of level 14 is provided for offenses involving an organized

App. 114

scheme to steal vehicles or vehicle parts. Typically, the scope of such activity is substantial,

but the value of the property may be particularly difficult to ascertain in individual cases

because the stolen property is rapidly resold

or otherwise disposed of in the course of the

offense. Therefore, the specific offense characteristic of “organized scheme” is used as an

alternative to “loss” in setting a minimum offense level.>

<Use of false pretenses involving charitable

causes and government agencies enhances the

sentences of defendants who take advantage

of victims’ trust in government or law enforcement agencies or the generosity and charitable motives of victims. Taking advantage of a

victim’s self-interest does not mitigate the

seriousness of fraudulent conduct; rather,

defendants who exploit victims’ charitable

impulses or trust in government create particular social harm. In a similar vein, a defendant who has been subject to civil or

administrative proceedings for the same or

similar fraudulent conduct demonstrates aggravated criminal intent and is deserving of

additional punishment for not conforming

with the requirements of judicial process or

orders issued by federal, state, or local administrative agencies.>

<Offenses that involve the use of financial

transactions or financial accounts outside the

United States in an effort to conceal illicit

profits and criminal conduct involve a particularly high level of sophistication and

App. 115

complexity. These offenses are difficult to detect and require costly investigations and

prosecutions. Diplomatic processes often must

be used to secure testimony and evidence beyond the jurisdiction of United States courts.

Consequently, a minimum offense level of

level 12 is provided for these offenses.>

<Subsection (b)(5) implements the instruction

to the Commission in section 2 of Public Law

105-101 and the directive to the Commission

in section 3 of Public Law 110-384.>

<Subsection (b)(7) implements the directive to

the Commission in section 10606 of Public

Law 111-148.>

<Subsection (b)(8) implements the directive to

the Commission in section 7 of Public Law

112-186.>

<Subsection (b)(9)(D) implements, in a broader

form, the directive in section 3 of the College

Scholarship Fraud Prevention Act of 2000,

Public Law 106-420.>

<Subsection (b)(10) implements, in a broader

form, the instruction to the Commission in

section 6(c)(2) of Public Law 105-184.>

<Subsections (b)(11)(A)(i) and (B)(i) implement the instruction to the Commission in

section 4 of the Wireless Telephone Protection

Act, Public Law 105-172.>

<Subsection (b)(11)(C) implements the directive to the Commission in section 4 of the

Identity Theft and Assumption Deterrence

App. 116

Act of 1998, Public Law 105-318. This subsection focuses principally on an aggravated form

of identity theft known as “affirmative identity theft” or “breeding”, in which a defendant

uses another individual’s name, social security number, or some other form of identification (the “means of identification”) to “breed”

(i.e., produce or obtain) new or additional

forms of identification. Because 18 U.S.C.

§ 1028(d) broadly defines “means of identification”, the new or additional forms of identification can include items such as a driver’s

license, a credit card, or a bank loan. This subsection provides a minimum offense level of

level 12, in part because of the seriousness of

the offense. The minimum offense level accounts for the fact that the means of identification that were “bred” (i.e., produced or

obtained) often are within the defendant’s

exclusive control, making it difficult for the

individual victim to detect that the victim’s

identity has been “stolen.” Generally, the victim does not become aware of the offense until

certain harms have already occurred (e.g., a

damaged credit rating or an inability to obtain

a loan). The minimum offense level also accounts for the non-monetary harm associated

with these types of offenses, much of which

may be difficult or impossible to quantify (e.g.,

harm to the individual’s reputation or credit

rating, inconvenience, and other difficulties

resulting from the offense). The legislative

history of the Identity Theft and Assumption

Deterrence Act of 1998 indicates that

App. 117

Congress was especially concerned with

providing increased punishment for this type

of harm.>

<Subsection (b)(12) implements the directive

in section 5 of Public Law 110-179.>

<Subsection (b)(14) implements the directive

in section 3 of Public Law 112-269.>

<Subsection (b)(16)(B) implements, in a

broader form, the instruction to the Commission in section 110512 of Public Law 103-322.>

<Subsection (b)(17)(A) implements, in a

broader form, the instruction to the Commission in section 2507 of Public Law 101-647.>

<Subsection (b)(17)(B)(i) implements, in a

broader form, the instruction to the Commission in section 961(m) of Public Law 101-73.>

<Subsection (b)(18) implements the directive

in section 209 of Public Law 110-326.>

<Subsection (b)(19) implements the directive

in section 225(b) of Public Law 107-296. The

minimum offense level of level 24 provided in

subsection (b)(19)(B) for an offense that resulted in a substantial disruption of a critical

infrastructure reflects the serious impact

such an offense could have on national security, national economic security, national public health or safety, or a combination of any of

these matters.>

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.