Opposition Brief — Krilich v. United States

No. 03-16

me EE i

Jn the Supreme Court of the Anited States

ROBERT R. KRILICH, SR., PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

THEODORE B. OLSON

Solicitor General

Counsel of Record

CHRISTOPHER A. WRAY

Acting Assistant Attorney

General

RICHARD A. FRIEDMAN

Attorney

Department of Justice

Washington, D.C. 20530-0001

(202) 514-2217

QUESTIONS PRESENTED

1. Whether 18 U.S.C. 1014—which prohibits, among

other things, any false statement “for the purpose of

influencing in any way” the action of a federally insured

bank on “any application, advance, discount, purchase,

purchase agreement, repurchase agreement, commit-

ment, or loan”—prohibits a false statement in an appli-

cation for the disbursement of funds held in trust by a

covered bank that could be liable for disbursing the

funds in violation of the trust agreement.

2. Whether, after the court of appeals remanded for

resentencing under a mandate directing that petitioner

be sentenced within a specific Sentencing Guidelines

range, the district court properly declined to impose a

sentence outside that range based on asserted changed

circumstances.

(I)

TABLE OF CONTENTS

Page

Opinions below - 1

ERENT IE ARTERIES CEO aOR 1

Statement skeen 2

cnc scnkcans cinsssdvcoseanirevenns 9

Conclusion suisipadiaenastissliindnsnanindeiciiateieenninaniniiacdas 19

IEE deiaeiiatentusstrerbinatenchecientosecnsencovestsssesectsannsesossescoseconcanis la

TABLE OF AUTHORITIES

Cases:

Barrow v. Falck, 11 F.3d 729 (7th Cir. 1998) ....cccccccsscessses 17

Brogan v. United States, 522 U.S. 398 (1998) ...c.ccccccccssse. 13

Puente v. United States, 676 F.2d 141 (5th Cir.

SEITE Matsvesndbituibapusnghencodbshssaishbisssadoineinacscedicbadasiesesnosinisesscadanen 15

United States v. Akrawi, 982 F.2d 970 (6th Cir.

Sar tasiasonislasihiisetntasadisbieediebtitnsateetnssuiplisisnansvsassarontensesnnenaes 15

United States v. Bell, 5 F.3d 64 (4th Cir. 1998) .....cccscc..0.. 15

United States v. Boren, 278 F.3d 911 (9th Cir.

SINT iheatisiiielstihdinhcccataelssedtbainceenasdidetsabssicosaciadbicsnebictussckeanhesseinsduce. 13-14

United States v. Bradstreet, 207 F.3d 76 (1st Cir.

Sena Mesenbesnnissiesishiibunsabicanseistissuesrstnirenssniinsestsnidentesiubinsecesscececs 16

United States v. Bryce, 287 F.3d 249 (2d Cir.),

cert. denied, 587 U.S. 884 (2002) ..........cccccccccsccscscscesesosseceses 16

United States v. Bryson, 229 F.3d 425 (2d Cir.

SnD Sibsietsaebuiehinctalinendiicipnhsbebtcsisticiasencisiedsheinischoesnbsibicaitembninsasouien 16

United States v. Buckley, 251 F.3d 668 (7th Cir.

SnD iiihnshehsesesciniantiinscchant sndaielilinbbabitataxeinsocidbostastiuncasisonsacestoree 17-18

United States v. Carpenter, 320 F.3d 334 (2d Cir.

TT seliiasiectnhinchatitelishaddedcoiinicsiicsctshictinniniabladdasnislaicidainseswunieone 16,17

United States v. Chavez-Chavez, 213 F. 3d 420 (7th

ESD Nt “SR te a aoe OO Sa 18-19

United Shcten. v. Core, 125 F.3d 74 (2d Cir. 1997),

cert. denied, 522 U.S. 1067 (1998) ........ccccccccccoscsscsoscecsesseoee 15

United States v. Devoll, 39 F.3d 575 (5th Cir. 1994),

cert. denied, 514 U.S. 1067 (1995) - 11,12,14

(IIT)

IV

Cases—Continued: Page

United States v. Egwaoje, 335 F.3d 579 (7th Cir.

2003) 18-19

United States v. Erskine, 588 F.2d 721 (9th Cir.

1978) = 10

United States v. Moore, 131 F.3d 595 (6th Cir.

SED evn ssiniesacicninesiicitiinectieetanbtataeaaiannidsiadimeashaneniaittenionhtiaianivisie 14-15

United States v. Pimentel, 34 F.3d 799 (9th Cir.

1994), cert. denied, 513 U.S. 1102 (1995) 15

United States v. Pinto, 646 F.2d 833 (8d Cir.),

cert. denied, 454 U.S. 816 (1981) - 10

United States v. Polland, 56 F.3d 776 (7th Cir.

1995) 15

United States v. Quintieri, 306 F.3d 1217 (2d Cir.

2002), cert. denied, 123 S. Ct. 2246 (2003) 16

United States v. Rhodes, 145 F.3d 1375 (D.C. Cir.

1998) 16

United States v. Rudolph, 190 F.3d 720 (6th Cir.

1999) 15

United States v. Sally, 116 F.3d 76 (3d Cir. 1997) ........... 15

United States v. Santonelli, 128 F.3d 1233 (8th

Ze IGS cveiiarniisannnscnnnsiniensiinncihilaiiteiaaiintininiabitintennnenieee 15

United States v. Tamayo, 80 F.3d 1514 (11th Cir.

TED seincieeisiniaaaiad ne mm 15

United States v. Wade, 266 F.3d 574 (6th Cir.

2001), cert. denied, 535 U.S. 964 (2002) .........cccccssessesescesees 14

United States v. Webb, 98 F.3d 585 (10th Cir.

1996), cert. denied, 519 U.S. 1156 (1997) ain 15

United States v. Wells, 519 U.S. 482 (1997) ..........cceeees 11

Werber v. United States, 149 F.3d 172 (2d Cir.

1998) ‘i 15

West Va. Univ. Hosps., Inc. v. Casey, 499 U.S. 83

(1991) 13

Williams v. United States, 458 U.S. 279 (1982) ...........4. 12-13

~

Statutes, regulations and rule: Page

Prosecutorial Remedies and Other Tools to End the

Exploitation of Children Today Act of 2003,

Pub. L. No. 108-21, § 401(e), 117 Stat. 650, 671 .............. 18

18 U.S.C. 1014 a passim

A site esi ionciceibdsinaiesdininteemeniiaieiaiaiada 2,5

18 U.S.C. 3742 vecoaniieitineniinsinlileciei 14, 18

18 U.S.C. 3742(f)(1) 14

18 U.S.C. 3742(f)(2)(A) 14

Se a IEE iusiciiceiscnictereinitiigmveisnnssainhablanidanisnaniniin 14

18 U.S.C. 3742(g)(2) 18

28 U.S.C. 2106 14°

United States Sentencing Guidelines:

§ 2C1.1(b)(2)(A) (1996)...... 5

§ 2D1.1(b)(1) 16

§ 2F'1.1(b)(1) (1996) ~ §

§5Hi.1. 8

ji 8

7th Cir. R. 53 17

Jn the Supreme Court of the Gnited States

No. 03-16

ROBERT R. KRILICH, SR., PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINIONS BELOW -

The order of the court of appeals affirming peti-

tioner’s sentence (Pet. App. la-2a) is not published in

the Federal Reporter but is reprinted in 53 Fed. Appx.

788. The opinion of the court of appeals vacating

petitioner’s sentence and remanding for resentencing

(App., infra, 1a-8a) is reported at 257 F.3d 689. The

opinion of the court of appeals affirming petitioner’s

convictions, vacating the judgment, and remanding for

resentencing (Pet. App. 11a-30a) is reported at 159 F.3d

1020. The order and opinion of the district court

imposing sentence after the second remand (Pet. App.

3a, 4a-10a) are unreported.

JURISDICTION

The judgment of the court of appeals was entered on

December 31, 2002. A petition for rehearing was “~~

2 -

denied on January 27, 2003 (Pet. App. 3la-32a). On

April 18, 2003, Justice Stevens extended the time

within which to file a petition for a writ of certiorari to

and including June 26, 2003, and the petition was filed

on that date. The jurisdiction of this Court is invoked

under 28 U.S.C. 1254(1).

STATEMENT

Following a jury trial, petitioner was convicted in the

United States District Court for the Northern District

of Illinois on 14 counts of making false statements to a

federally insured bank, in violation of 18 U.S.C. 1014,

and on one count of conspiring to violate the Racketeer

Influenced and Corrupt Organizations (RICO) Act, in

violation of 18 U.S.C. 1962(d). The jury also returned a

forfeiture verdict. Petitioner was sentenced to 64

months of imprisonment and ordered to pay a $1 million

fine. He forfeited assets totaling $8,670,097.62. The

court of appeals affirmed the convictions, vacated the

judgment, and remanded for resentencing. This Court

denied certiorari.

On remand, the district court sentenced petitioner to

87 months of imprisonment. The court of appeals again

vacated the sentence, with instructions to the district

court to impose a sentence in the range of 135 to 168

months. This Court again denied certiorari.

On remand, the district court sentenced petitioner to

135 months of imprisonment. The court of appeals

affirmed.

1. a. In 1985, petitioner, a real estate developer,

financed several construction projects with funds de-

rived from municipally sponsored debt instruments

known as Industrial Revenue Bonds (IRBs). The inter-

est on IRBs was exempt from federal taxation. For

that reason, investors accepted a lower return than on

3 -

taxable investments, and the developer was able to

borrow funds at a below-market rate. Once a local unit

of government approved the issuance of IRBs, they

were sold to investors and the proceeds were placed

with a trustee, who held the money and invested it in

an interest-bearing account until the developer needed

it to build the project for which the bonds were issued.

From the interest earned on the proceeds, the investors

were paid a set rate of return, and any excess amounts,

referred to as “arbitrage,” could be used by the

developer for costs directly related to the project. In

this case, the trustee banks for the bond proceeds and

arbitrage funds were the First Tennessee Bank Na-

tional Association and the LaSalle National Bank,

which are both federally insured financial institutions.

97-2721 Gov’t C.A. Br. 1-2, 9-10.

Tax and legal requirements, as well as the bond

agreements, specifically limited the uses to which the

bond proceeds and the arbitrage funds could be put.

The restrictions served to protect the investors and to

ensure the bonds’ tax-free status. To obtain disburse-

ments of arbitrage funds, petitioner had to submit

written requisitions to the trustee banks identifying

who and how much was to be paid. Petitioner also had

to certify to the trustee and bond counsel that the costs

were properly incurred for thé project for which the

bonds were issued, that the costs had not been the

subject of a prior disbursement, and that 90% of the

funds used thus far had been used for “good costs,” as

defined in the bond indenture. Based on the statements

in the requisitions and certifications, the bank would

disburse the funds either to petitioner or to the listed

vendor. The banks relied on the statements made in

the requisitions and certifications in disbursing the

arbitrage funds. The banks could be liable if money

4

were paid for costs not covered under the bond inden-

ture or if funds were expended in excess of the tax

code’s limits. 97-2721 Gov’t C.A. Br. 10-11.

Petitioner caused false invoices and certifications to

be submitted to the trustee banks to obtain arbitrage

funds for impermissible purposes, such as a payment on

his yacht, the purchase of a Corvette, and the payment

of other expenses unrelated to the development pro-

jects for which the bonds were issued. Petitioner’s role

in the falsification of those invoices and certifications

formed the basis of his convictions under 18 U.S.C.

1014. 97-2721 Gov’t C.A. Br. 3, 9-12.

b. Petitioner’s conviction for RICO conspiracy was

based on several acts of bribery and mail fraud. In

1983, petitioner paid the mayor of Oakbrook Terrace,

Illinois, $5000 to obtain a zoning change for petitioner’s

land without the involvement of the zoning board of

appeals or the city council. The zoning change, which

was made by substituting a new plat for petitioner’s

original plat, required the signatures of the mayor and

the city clerk. Although the city clerk repeatedly

refused to sign the papers legitimizing the new plat

because the required procedures had not been followed,

the mayor completed the deal by obtaining the signa-

ture of the deputy city clerk while the city clerk was on

vacation. 97-2721 Gov’t C.A. Br. 3-9.

In 1984, petitioner agreed to pay the same mayor

$40,000 to arrange for his municipality to sponsor the

issuance of IRBs to finance one of petitioner’s develop-

ment projects. Petitioner concealed the bribe by ar-

ranging for the mayor’s son, Andy Sarallo, to win a

$40,000 prize in a staged (and insured) hole-in-one golf

contest. Petitioner met with the mayor and his sons

before the contest and assured them that Sarallo would

win the prize on the ninth hole. In keeping with

5

applicable insurance requirements, there were two

spotters at that hole: John Hilgenberg, an employee of

the golf course, who was at the tee; and Kim Plencner,

one of petitioner’s employees, who was on the green.

Before Sarallo’s foursome reached the ninth hole,

petitioner instructed Hilgenberg to leave for lunch. As

the foursome approached the hole, petitioner obtained

one of Sarallo’s golf balls and instructed him and his

companions to start screaming after Sarallo teed off, as

if he had made a hole-in-one. Petitioner then went to

the ninth green and dropped the ball in the hole. The

members of Sarallo’s foursome and the “spotters”

(Plencner and petitioner) falsely acted as if a hole-in-

one had been made, even though Sarallo’s ball had

never reached the green. Sarallo was then awarded the

$40,000 prize, an amount that petitioner fraudulently

recovered under a special contest-related insurance

policy. 97-2721 Gov’t C.A. Br. 4-7.

2. a. A jury found petitioner guilty of making false

statements to a federally insured bank, in violation of 18

U.S.C. 1014, and RICO conspiracy, in violation of 18

U.S.C. 1962(d). In imposing sentence, the district court

applied the Guideline for bribery. A provision of that

Guideline, Sentencing Guidelines § 2C1.1(b)(2)(A), re-

quired an increase in the offense level under the then-

applicable Guideline for fraud and deceit, Sentencing

Guidelines § 2F1.1(b)(1), based on the value of the

bribes, the benefit received in return for the bribes, or

the loss to the victim from the bribes, whichever was

greatest. The court found that the benefit to petitioner

was between $5 million and $10 million, that this

amount was greater than the value of the bribes or the

loss to the victim, and that his offense level should

therefore be increased by 14 levels. The court then

departed downward by seven levels, based on its con-

6

clusion that the bribes had caused no one a loss and its

belief that imposing sentence within the Guidelines

range would create a disparity between petitioner’s

sentence and the sentences of other public-corruption

defendants, including the mayor bribed by petitioner.

The court sentenced petitioner to 64 months of

imprisonment. Pet. App. 12-13a, 24a- 29a.

b. Petitioner and the government both appealed.

The court of appeals affirmed petitioner’s convictions,

but vacated his sentence and remanded for resentenc-

ing. Pet. App. 11la-30a.

In his appeal, petitioner claimed that the convictions

~ under Section 1014 were invalid, because the with-

drawals of the trust funds were not lending trans-

actions and Section 1014 applies only to false state-

ments made to obtain loans or other extensions of

credit. The court of appeals disagreed. Pet. App. 19a-

24a. “The text of the statute,” the court explained, “is

straightforward and broad: it applies to ‘any’ statement

made for the purpose of influencing in ‘any’ way the

action of ‘any’ of the covered institutions in ‘any’ appli-

cation.” Jd. at 2la. The court also observed that

Section 1014 specifically covers misstatements to a

variety of institutions that do not make loans, and

concluded that, “{i]f their inclusion in the statute is to

have meaning, then § 1014 must cover statements that

are not designed to influence an extension of credit.”

Id. at 22a. In an opinion concurring in part and dis-

senting in part (id. at 29a-30a), Judge Ripple agreed

with petitioner’s view that Section 1014 “applies only to

lending activities by the financial institutions protected

by the statute” (id. at 29a).”

* In addition to rejecting petitioner’s interpretation of Section

1014, the court of appeals held that statements made by petitioner

7

In its cross-appeal, the government claimed that the

district court had misapplied the Sentencing Guidelines.

The court of appeals agreed. It held that the district

court had relied on impermissible grounds in departing

downward and directed the court to recalculate the

benefit to petitioner from his bribes and then decide

whether a departure was warranted on the ground that

the resulting offense level overstated the seriousness of

petitioner’s conduct. Pet. App. 24a-29a.

c. Petitioner filed a petition for a writ of certiorari,

raising two questions: whether the court of appeals had

correctly interpreted Section 1014, and whether the

district court had permissibly admitted petitioner’s

proffer statements at trial. See 98-1715 Pet. i, 9-20.

This Court denied review. Krilich v. United States, 528

U.S. 810 (1999).

3. a. On remand, the district court found that the

gain from petitioner’s offenses was approximately $14

million, which added 15 levels to his offense level and

yielded a Guidelines range of 135 to 168 months’ im-

prisonment. The court concluded that the offense level

did not significantly overstate the seriousness of peti-

tioner’s crimes and declined to depart on that ground.

The court did grant a five-level downward departure,

however, based on petitioner’s age-related medical

problems. As a result of the departure, petitioner’s

Guidelines range was 78 to 97 months’ imprisonment.

The court sentenced petitioner to a prison term of 87

months. App., infra, 2a-5a.

as part of a proffer during plea negotiations had been properly ad-

mitted at trial (Pet. App. 13a-17a); rejected petitioner’s contention

that the evidence of one of his bribes was insufficient as a matter of

law (id. at 17a-18a); and held that a variance between a date

charged in the indictment and the date proved at trial was harm-

less error (id. at 18a-19a).

8

b. Both petitioner and the government appealed

again. The court of appeals rejected petitioner’s chal-

lenges to the district court’s calculation of his gain and

the court’s conclusion_that it did not significantly over-

state the seriousness of his crimes. App., infra, 3a-4a.

The court of appeals also rejected the government’s

argument that a downward departure based on peti-

tioner’s medical condition was barred by the terms of

its remand, observing that “changed circumstances are

a standard reason for consideration of additional issues

on aremand.” /d. at 5a. The court agreed with the gov-

ernment, however, that the district court had abused its

discretion in departing downward, because Sections

5H1.1 and 5H1.4 of the Guidelines permit a departure

based on a defendant’s medical condition only if it is

“debilitating” or “extraordinary,” and petitioner’s con-

dition was neither. Jd. at 5a-8a. The court of appeals

thus vacated petitioner’s sentence again, and remanded

the case “with instructions to impose a sentence in the

range of 135 to 168 months.” Jd. at 8a.

c. Petitioner again filed a petition for a writ of

certiorari, this time raising two different questions:

whether the district court had erred in calculating the

benefits to petitioner from his bribes, and whether the

court of appeals had erred in reversing the district

court’s downward departure. See 01-1108 Pet. i, 9-26.

This Court again denied review. Krilich v. United

States, 534 U.S. 1163 (2002).

4. a. On remand, petitioner filed a new motion for a

downward departure, arguing that his medical condi-

tion had deteriorated since the previous resentencing.

The district court found that petitioner did not satisfy

the requirements for a departure on this ground,

because he was not bedridden, he did not need constant

care, the care he did need was available in prison, and

9

he could not establish that imprisonment would shorten

his life. The court therefore denied the motion and

sentenced petitioner to 135 months’ imprisonment. Pet.

App. 4a-10a.

b. Petitioner appealed again. In an unpublished two-

paragraph order, the court of appeals affirmed. Pet.

App. la-2a. Noting that it had remanded the case after

petitioner’s most recent appeal with instructions to im-

pose a sentence between 135 and 168 months, the court

held that its remand “did not permit the presentation of

evidence or legal theories supporting a different

[Guidelines] range,” and that the district court there-

fore had no authority to “impose a sentence lower than

the one [petitioner] received.” Id. at 2a.

ARGUMENT

1. Petitioner renews a claim (Pet. 16-21) he raised in

his first certiorari petition (98-1715 Pet. 9-15): that 18

U.S.C. 1014 applies only to false statements made to

influence lending or other credit transactions, and that

the court of appeals’ contrary conclusion on petitioner’s

first appeal was erroneous. This Court determined that

this issue did not warrant further review when it

denied petitioner’s first petition, and there is no reason

for a different result now.

a. Section 1014 prohibits, among other things, the

making of “any false statement” for the purpose of

“influencing in any way” the action of “any institution

the accounts of which are insured by the Federal De-

posit Insurance Corporation” on “any application, ad-

vance, discount, purchase, purchase agreement, repur-

chase agreement, commitment, or loan.” 18 U.S.C.

1014. Petitioner’s conduct falls squarely within that

prohibition. He caused false statements to be made for

the purpose of influencing the banks’ actions on

in ree aac cal arama emcees

10

applications and commitments relating to the dis-

bursement of IRB funds. As a result of those misrep-

resentations, funds were disbursed for purposes incon-

sistent with the tax-exempt status of the IRBs. Had

petitioner told the banks the truth about the uses to

which those funds would be put, the banks would have

been obligated to deny the disbursements. As a bank

officer testified at trial, the banks “would certainly be

open to liability if [they] paid out money for costs that

weren’t qualified under the indenture,” because the

tax-exempt status of the bonds would have been

subject to termination. Tr. 570.

Petitioner would limit the unqualified language of

Section 1014 to false statements made in an application

for a loan or credit. There is no merit to that position.

The statute enumerates a long list of the types of

transactions covered, and a loan is only one item on that

list. Adopting petitioner’s reading would render the

other enumerated terms superfluous. See United

States v. Pinto, 646 F.2d 833, 838 (3d Cir.) (“If ‘advance’

was only to refer to a loan, the term ‘advance’ would be

rendered meaningless.”), cert. denied, 454 U.S. 816

(1981); see also United States v. Erskine, 588 F.2d 721,

722 (9th Cir. 1978) (Kennedy, J.) (Section 1014 applies

to “a loan or one of the other transactions listed in the

statute”). If petitioner’s construction were correct,

there would also be no rational explanation for Con-

gress’s decision to include within Section 1014’s scope

false statements made to institutions such as the Fed-

eral Reserve banks, the Office of Thrift Supervision,

the Federal Housing Finance Board, the Federal De-

posit Insurance Corporation, the Resolution Trust Cor-

poration, the Farm Credit System Insurance Corpora-

tion, and the National Credit Union Administration

Board. As the court of appeals observed, “[nJone of

11

these institutions makes loans,” and “(i]f their inclusion

in the statute is to have meaning, then § 1014 must

cover statements that are not designed to influence an

extension of credit—indeed, must cover statements that

have nothing to do with the payment of money.” Pet.

App. 22a. This Court has rejected efforts to limit the

scope of Section 1014 with qualifications that do not

appear in the text of the statute. See United States v.

Wells, 519 U.S. 482, 490 (1997) (false statement need

not be material, since text does not contain materiality

requirement).

b. Petitioner contends (Pet. 16-19) that this Court

should grant certiorari to resolve what he characterizes

as a “square conflict” (Pet. 16) between the court of

appeals’ decision and the Fifth Circuit’s decision in

United States v. Devoll, 39 F.3d 575, 578 (1994), cert.

denied, 514 U.S. 1067 (1995). Petitioner is mistaken.

Although some of the language in Devoll is inconsistent

with the court of appeals’ reasoning in this case, no true

conflict has yet developed. And even if there were a

conflict, the unusual factual setting would make this

case a poor vehicle for attempting to resolve it. .

The defendant in Devoll appears to have argued, not

that his misrepresentations lacked a connection to a

_ lending transaction, but that the district court com-

mitted plain error in failing to instruct the jury that

such a connection was an element of the offense. With

little analysis, the court of appeals held that the district

court had committed error, because “section 1014 ap-

plies only to actions involving lending transactions.” 39

F.3d at 580. The court nonetheless affirmed the

defendant’s conviction, finding that the error was not

“plain” and that, in any event, it did not affect his

substantial rights, because there was “ample evidence”

that his false statements did in fact arise in the context

Fe nT ne a a ene ee

12

of lending activities. Jd. at 581. Petitioner cites no

case, and the government is aware of none, in which a

court of appeals has reversed a conviction or affirmed

the dismissal of an indictment on the ground that

Section 1014 is limited to lending activities.

Nor is it clear that the Fifth Circuit would find

Section 1014 inapplicable on the peculiar facts of this

case. The opinion in Devoll suggests that the court was

principally concerned with avoiding Section 1014’s

application to “fraud or false representations having

nothing to do with financial transactions, such as fraud

in an employment contract or, for example, in a contract

to provide goods or services for custodial care, premises

repair, or renovation.” 39 F.3d at 580. This is not such

a case. Petitioner made false statements in applications ©

for the disbursement of trust funds administered by

banks, which could be held liable if they disbursed the

funds in violation of the terms of the trust. Petitioner’s

conduct thus directly involved “financial transactions”

(ibid.), and allowing the government to prosecute him

for that conduct serves Section 1014’s purpose of

insulating such transactions from false statements

intended to influence the institution’s conduct. Even if

the statute were construed (as petitioner proposes) to

exclude false statements “unrelated to lending

transactions” (Pet. i), this case would still fall within the

statute, because it does involve borrowed funds (i.e.,

funds that were borrowed from the issuers of the

IRBs). Although the bank was not itself the lender, it

played a central role in implementing the lending

arrangement and took on financial exposure for

improper release of the funds.

c. There is no merit to petitioner’s contention (Pet.

19-21) that the court of appeals’ decision is inconsistent

with this Court’s decision in Williams v. United States,

EO: eee ae, re Pee smear a re ee ee aR

13

458 U.S. 279 (1982). In Williams, the Court held that

depositing bad checks does not involve the making of a

i “false statement” under Section 1014, because “a check

is not a factual assertion,” and therefore “cannot be

| characterized as ‘true’ or ‘false.’” Id. at 284. Examin-

ing the legislative history to determine whether it

would permit a broader reading of Section 1014 than

the statute’s text, the Court found that it would net,

because the only applicable legislative history focused

on “representations made in connection with conven-

tional loan or related transactions.” Jd. at 288-289.

Despite petitioner’s suggestion to the contrary (Pet. 20-

21), that observation does not support a deviation from

the unambiguous statutory language addressing the

. very different issue presented here. See West Va.

Univ. Hosps., Inc. v. Casey, 499 U.S. 83, 100 (1991)

(ambiguity of one aspect of statute does not render rest

of statute ambiguous). Although the legislative history

did focus on “conventional loan or related transactions”

(458 U.S. at 289), this Court has made clear that “it is

not, and cannot be, our practice to restrict the unquali-

fied language of a statute to the particular evil that

Congress was trying to remedy—even assuming that it

is possible to identify that evil from something other

than the text of the statute.” Brogan v. United States,

522 U.S. 398, 403 (1998).

d. Petitioner contends that, while there may have

been reason to deny review when he filed his first

certiorari petition, review is warranted now, because,

he says, the circuit conflict has “grown more substan-

tial” in “the intervening four years,” as “other circuits

have embraced the Seventh Circuit’s reading of Section

| 1014.” Pet. 19. While two other courts of appeals have

followed the Seventh Circuit’s decision in this case, see

United States v. Boren, 278 F.3d 911, 914-916 (9th Cir.

a ee

14

2002); United States v. Wade, 266 F.3d 574, 579-581 (6th

Cir. 2001), cert. denied, 585 U.S. 964 (2002), no court of

appeals has ever followed the Fifth Circuit’s decision -in

Devoll, either before or after petitioner’s first certiorari

petition was denied. Thus, just as there was no true

circuit conflict concerning the meaning of Section 1014

at the time of petitioner’s first petition, there is no such

conflict today.

2. Petitioner also contends (Pet. 9-16) that the court

of appeals erred in holding, in his most recent appeal,

that the district court was not permitted to impose a

sentence outside the Sentencing Guidelines range

specified in the mandate from the previous appeal. He

asks this Court to resolve an asserted circuit conflict on

whether, in resentencing a defendant after a remand, a

district court may consider circumstances that have

changed since the time of the initial sentencing. As

explained below, this is not an appropriate case to ad-

dress that question. Review by this Court is therefore

unwarranted.

Under 28 U.S.C. 2106, a court of appeals may “affirm,

modify, vacate, set aside or reverse any judgment,

decree, or order” of the court whose decision it is

reviewing, and may “remand the cause and direct the

entry of such appropriate judgment, decree, or order,

or require such further proceedings to be had as may be

just under the circumstances.” In addition, the statute

governing sentencing appeals, 18 U.S.C. 3742, provides

that, when a court of appeals finds a sentencing error, it

must “remand the case for further sentencing proceed-

ings with such instructions as the court considers

appropriate.” 18 U.S.C. 3742(f)\1), (2A), and (B). It is

thus well settled that, when a court of appeals reverses

the judgment in a criminal case, it may limit the scope

of the proceedings on remand. See, ¢.g., United States

Mn, a ee

15

v. Moore, 131 F.3d 595, 597-598 (6th Cir. 1997); United

States v. Santonelli, 128 F.3d 1233, 1238 (8th Cir. 1997);

United States v. Webb, 98 F.3d 585, 587 (10th Cir. 1996),

cert. denied, 519 U.S. 1156 (1997); United States v.

Polland, 56 F.3d 776, 777 (7th Cir. 1995); United States

v. Pimentel, 34 F.3d 799, 800 (9th Cir. 1994), cert.

denied, 513 U.S. 1102 (1995). It is also well settled that,

except perhaps in extraordinary circumstances, a dis-

trict court conducting a resentencing must act in con-

formity with the mandate of the court of appeals. See,

€.g., Moore, 131 F.3d at 598; Webb, 98 F.3d at 587;

United States v. Tamayo, 80 F.3d 1514, 1519-1520 (llth

Cir. 1996); Polland, 56 F.3d at 777-779; Pimentel, 34

F.3d at 800; United States v. Bell, 5 F.3d 64, 66 (4th Cir

1993). The court of appeals applied that “mandate

rule,” finding that its narrow remand to the district

court “with instructions to impose a sentence in the

range of 135 to 168 months” did not permit “the pres-

entation of evidence or legal theories supporting a dif-

ferent range.” Pet. App. 2a.

The vast majority of the court of appeals decisions on

which petitioner relies (see Pet. 11-14) are not incon-

sistent with that ruling. Many did not even involve a

resentencing after a remand. See United States v.

Rudolph, 190 F.3d 720 (6th Cir. 1999); Werber v. United

States, 149 F.3d 172 (2d Cir. 1998); United States v.

Core, 125 F.3d 74 (2d Cir. 1997), cert. denied, 522 U.S.

1067 (1998); United States v. Sally, 116 F.3d 76 (3d Cir.

1997); Puente v. United States, 676 F.2d 141 (5th Cir.

1982). One did involve such a resentencing but did not

address the question whether the district court was

permitted to consider changed circumstances. See

United States v. Akrawi, 982 F.2d 970 (6th Cir. 1993).

Still others did address that question but were cases

where the defendant was resentenced after a remand

16

that either was not limited or was not as limited as the

one here, which required the imposition of a sentence

within a particular Guidelines range. See United States

v. Quintieri, 306 F.3d 1217, 1226 (2d Cir. 2002) (because

there “may have been improper double counting,” court

“remand[ed] to the district court for resentencing in

light of this order, without prejudice to the government

submitting an argument to the district court explaining

why th{ere] was not double-counting”), cert. denied, 123

S. Ct. 2246 (2003); United States v. Bryce, 287 F.3d 249,

252 (2d Cir.) (“the case was remanded for ‘resentene-

ing’”), cert. denied, 537 U.S. 884 (2002); United States v.

Bradstreet, 207 F.3d 76, 78 (1st Cir. 2000) (court “ruled

that the district court had erred in granting the depar-

ture, vacated the sentence, and remanded for resen-

tencing”); United States v. Rhodes, 145 F.3d 1375, 1377

(D.C. Cir. 1998) (court “remanded * * * to the district

court ‘for possible resentencing taking into account the

provisions of [Sentencing Guidelines] § 2D1.1(b)(1)””).

Petitioner cites only two decisions, both from the

Second Circuit, that are arguab!’ inconsistent with the

court of appeals’ decision. J] one, United States v.

Bryson, 229 F.3d 425 (2000), the Second Circuit held

that a “remand [directing] that [the defendant] be

resentenced ‘according to his original offense level of

31’ * * * did not preclude a departure based on

intervening circumstances.” Jd. at 426. In the other,

United States v. Carpenter, 320 F.3d 334 (2d Cir. 2003),

the court permitted a departure based on changed

circumstances despite a mandate directing the district

court to resentence the defendant “at a base offense

level of 15 and a criminal history category of I, which

carries a sentencing range of 18-24 months,” or, if the

defendant was granted an additional one-level reduc-

tion for acceptance of responsibility, “at a base offense

17

level of 14 and a criminal history category of I, which

carries a sentencing range of 15-21 months.” Id. at 337.

Even if the court of appeals’ decision ean be said to be

inconsistent with these two decisions, however, there

are at least four independent reasons why further

review is not warranted.

First, the question on which the Seventh Circuit and

the Second Circuit arguably disagree is whether, when

a court of appeals remands for imposition of a sentence

within a particular Guidelines range, a district court

may depart from that range on the basis of circum-

stances that have changed since the time of the pre-

vious sentencing. That question is quite narrow and is

unlikely to arise with much frequency.

Second, any conflict created by the court of appeals’

decision is insufficiently developed to justify this

Court’s intervention. Only one circuit has issued deci-

sions with which the court of appeals’ decision arguably

conflicts; both of those decisions are less than three

years old; the court of appeals’ decision was issued by

unpublished order, and thus does not bind future panels

of the Seventh Circuit, see 7th Cir. R. 53; and the

published decision on which the court of appeals relied

(see Pet. App. 2a) was a civil case, Barrow v. Falck, 11

F.3d 729 (7th Cir. 1993), which held that a remand with

instructions to award attorneys’ fees within a certain

range did not permit an award outside that range.

Indeed, in an earlier appeal in this very case, the

Seventh Circuit permitted petitioner to rely on the

asserted deterioration in his medical condition as a

basis for urging a downward departure, notwithstand-

ing a remand for resentencing that made no mention of

that factor. See App., infra, 5a (“changed circum-

stances are a standard reason for consideration of addi-

tional issues on a remand”) (citing United States v.

18

Buckley, 251 F.3d 668 (7th Cir. 2001)). The result in

this case may therefore reflect only the court’s reaction

to petitioner’s continued effort to relitigate a medical-

departure ground that had already been rejected on

appeal.

Third, in the context of downward departures, the

“changed circumstances” rule that petitioner espouses

must now be considered in light of the language of the

Prosecutorial Remedies and Other Tools to End the

Exploitation of Children Today Act of 2003, Pub. L. No.

108-21, 117 Stat. 650. As petitioner notes (Pet. 14 n.7),

that Act (§ 401(e), 117 Stat. 671) amends 18 U.S.C. 3742

to forbid departure on a remand for resentencing ex-

cept on a ground that was both “specifically and af-

firmatively included in the written statement of reasons

* * * in connection with the previous sentencing” and

“held by the court of appeals, in remanding the case, to

be a permissible ground of departure.” 18 U.S.C.

3742(g)(2). The courts of appeals have not yet had the

opportunity to consider whether this language super-

sedes any “changed circumstances” rule with respect to

new departure grounds.

Fourth, petitioner would not be entitled to relief even

under the rule he asks this Court to adopt. The district

court denied petitioner’s motion for a downward

departure, not on procedural grounds (i.e., because it

believed it was not permitted to imnose a sentence

outside the Guidelines range identified in the mandate),

but on the merits (7.e., because it found that petitioner’s

evidence did not satisfy the legal requirements for the

departure he sought). Pet. App. 4a-10a. That decision

would likely have been upheld on appeal even if the

court had not applied the rule to which petitioner

objects, because “discretionary decisions not to depart

are not reviewable.” United States v. Egwaoje, 335

19

F.3d 579, 588 (7th Cir. 2003) (quoting United States v.

Chavez-Chavez, 213 F.8d 420, 421 (7th Cir. 1998)).

(Contrary to petitioner’s assertion (Pet. 6-7, 16), the

district court did not apply an incorrect legal standard

in denying his departure motion; it applied the standard

set forth by the Seventh Circuit on the previous appeal,

compare Pet. App. 7a with App., infra, 6a-8a.) Thus,

even if a defendant is entitled to consideration of

changed circumstances at his resentencing, that is

precisely what petitioner received.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

THEODORE B. OLSON

Solicitor General

CHRISTOPHER A. WRAY

Acting Assistant Attorney

General

RICHARD-A. FRIEDMAN

Attorney

SEPTEMBER 2003

APPENDIX

UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Nos. 00-3971, 00-4066, 00-4221

UNITED STATES OF AMERICA,

PLAINTIFF-APPELLEE, CROSS-APPELLANT

Vv.

ROBERT R. KRILICH, SR. _

DEFENDANT-APPELLANT, CROSS-APPELLEE

Submitted: Mar. 10, 2001"

Decided: July 16, 2001

Rehearing and Rehearing En Banc

Denied: Aug. 13, 2001**

Before EASTERBROOK, RIPPLE, and EVANS, Circuit

Judges.

EASTERBROOK, Circuit Judge.

Robert Krilich’s criminal case is on appeal for a third

time. He has been convicted of racketeering and other

offenses related to a scheme that included bribery of

public officials in order to obtain assistance in the

approval and financing of construction projects. In 1998

* These cross-appeals have been submitted under Operating

Procedure 6(b) to the panel that decided prior appeals in the case.

The panel has concluded that additional oral argument is unnec-

essary.

** Judge WILLIAMS did not take part in the consideration of the

petition for rehearing en banc.

(la)

e 2a

we affirmed Krilich’s convictions but on the United

States’ cross-appeal remanded for resentencing. See

United States v. Krilich, 159 F.3d 1020 (7th Cir. 1998).

See also United States v. Krilich, 178 F.3d 859 (7th Cir.

1999) (reversing an order releasing Krilich on bail).

Krilich’s original sentence was 64 months’ imprison-

ment. On remand the district court imposed a sentence

of 87 months. Once again, both sides complain.

What occasioned the remand is a dispute about the

application of the table in U.S.S.G. § 2F1.1(b)(1) to add

levels to the calculation of Krilich’s offense severity.

One aspect of Krilich’s offense was co-opting a local

government to sponsor tax-free industrial revenue

bonds, some proceeds of which were used to finance a

project (and other proceeds of which were diverted to

Krilich’s personal benefit). The prosecutor argued that

the gain to Krilich from this offense should be measured

by the difference between what he paid in interest on

the bonds, and the higher payments that would have

been necessary had the interest been taxable to the

investors (as it should have been). The district judge

did not resolve the parties’ dispute about valuation,

ruling instead that no matter how the matter came out

he would allow only seven levels from this table,

departing on the authority of Application Note 7(b) to

§ 2F1.1. (This has become Note 8(b) in the latest

version of the Guidelines, but we use the former num-

bering for consistency with our prior opinions.) We

held that this procedure was unauthorized and re-

manded for the imposition of a sentence based on the

table in § 2F1.1(b)(1). 159 F.3d at 1029-31. Although

downward departure could not be excluded as a possi-

bility, we held, the procedure must start with an

accurate calculation.

3a

A different district judge imposed sentence on

remand. After a hearing that lasted almost three

weeks, the court concluded that the gain Krilich had

reaped by offering tax-free bonds (and correspondingly

the loss to the Treasury) was approximately $14

million, which added 15 offense levels under the table in

§ 2F 1.1. This produced a total offense level of 32 and a

presumptive sentencing range of 135 to 168 months’

imprisonment. The judge concluded that the offense

level of 32 did not “significantly overstate” the serious-

ness of Krilich’s crime, and the court therefore held that

departure under Application Note 7(b) is unwarranted.

Nonetheless, the court granted Krilich a significant

downward departure of five offense levels for health

reasons. The level 27 sentencing range is 78-97 months,

and the district judge chose a sentence in the middle of

that range. Krilich contends that his sentence is too

high, the United States that it is too low.

Krilich contests every aspect of the district court’s

findings. His principal contention is that the $14 million

figure for his gain (and the Treasury’s loss) is flawed

because it supposes that he would have raised the same

amount of money with taxable bonds had he lacked

access to tax-free instruments. Higher interest rates

could have led to a change of plans, for demand curves

slope downward and an increase in the price of one

project leads an entrepreneur like Krilich to shift to

another. That much cannot be denied, but the Guide-

lines do not determine a wrongdoer’s gain based on

what-if scenarios. Imagine a bank robber who argues

that, had he known about the presence of a guard, he

would have robbed a grocery store instead and thus

caused a lower loss. It is hard enough to tote up the

gains and losses from crimes actually committed

4a

without—pursuing second-best solutions, which are

usually indeterminate. The gain and loss rules in the

Guidelines call for approximations, not exact figures.

See § 2F1.1 Application Note 8 (now Note 9). Krilich

did get access to tax-free bonds, raising $135 million

that he held for 12 years. Some of this money he used

for construction or consumption, and the rest he

reinvested at higher interest. A similar kitty lent by

investors who had to pay taxes on interest would have

cost Krilich much more than what he actually paid in

interest. Under the Guidelines the buck stops there.

The district court’s finding that the gain was $14 million

is supported by the record (which includes the calcula-

tions of an expert in finance) and cannot be called a

clear error. None of Krilich’s other objections to the

conclusion that his gain exceeds $10 million is persua-

sive; we see no need to add to the district court’s

analysis. And Krilich’s contention that the district

court should have departed under Application Note 7(b)

goes nowhere; the judge understood the existence of

(and limits on) that authority, and the decision that this

is not an appropriate occasion for departure cannot be

reviewed by this court. United States v. Franz, 886

F.2d 973 (7th Cir. 1989).

At the time of the resentencing hearing early in 2000,

Krilich was 69 years old and had age-related medical

problems. The district court concluded, on the basis of

a psychiatrist’s testimony (yes, a psychiatrist; no car-

diologist testified), that Krilich has four physical infir-

mities: chronic cardiovascular disease, chronic periph-

eral vascular disease with hypertension, obstructive

pulmonary disease, and lower back pain of lumbar and

lumbosacral origin. The court gave Krilich a one-level

5a

departure for each of these four, and a fifth level for the

four in combination.

The United States’ argument that consideration of

this subject was barred by the terms of our remand.is

not correct. The district court found that Krilich’s

medical condition had deteriorated since his original

sentencing, and changed circumstances are a standard

reason for consideration of additional issues on a

remand. See United States v. Buckley, 251 F.3d 668

(7th Cir. 2001). It remains necessary, however, to de-

termine whether the district judge abused his dis-

cretion.

The judge acknowledged that none of the four physi-

cal problems would justify a departure standing alone

but believed that the combination does so:

I specifically do not find that . . . the Bureau of

Prisons is unable to adequately treat the defen-

dant’s ailments. Nevertheless, contrary to the gov-

ernment’s position, the defendant presented a medi-

cal profile outside the heartland of people remanded

to the custody of the Bureau of Prisons.

‘ Krilich’s health issues present an unusual

profile. The conditions of confinement will un-

doubtedly aggravate his conditions and make treat-

ment more difficult. Therefore, a departure is war-

ranted. . . . [These conditions create] treatment

and quality of life difficulties that fall outside the

heartland.

The judge reached this conclusion despite finding that

“there is no structural reason why Krilich cannot

receive adequate care within the [Bureau of Prisons]”.

Ten months after announcing the 87-month sentence,

the district court held another hearing at which Krilich

-

6a

argued, with the support of two cardiclogists (neither of

whom had examined him or was familiar with the

medical care available in federal prisons), that an even

greater departure was warranted. This hearing was

unauthorized, because the district judge no longer had

the authority to alter Krilich’s sentence, see 18 U.S.C.

§ 3582(c) and Fed. R. Crim. P. 35, but was harmless, for

the judge ultimately concluded that the cardiologists

had added nothing to what was already in the record.

Relying on U.S.S.G. § 5H1.4, the United States con-

tends that an “unusual [medical] profile” is not a valid

ground for departure. Section 5H1.1 says that age may

not be the basis of departure unless the defendant is

“elderly and infirm”, referring for further guidance to

§ 5H1.4, which provides:

Physical condition or appearance, including phy-

sique, is not ordinarily relevant in determining

whether a sentence should be outside the applicable

guideline range. However, an extraordinary physi-

cal impairment may be a reason to impose a sen-

tence below the applicable guideline range; e.g., in

the case of a seriously infirm defendant, home

detention may be as efficient as, and less costly

than, imprisonment.

Does Krilich have an “extraordinary physical impair-

ment”? Is he “elderly and infirm” or “seriously infirm”?

The district court did not find so; instead the judge

apparently believed that any “unusual” medical condi-

tion or combination of conditions justifies a departure.

That can’t be reconciled with the first sentence of

§ 5H1.4. “Extraordinary” is a subset of “unusual.” We

have held that the limit to “extraordinary” conditions

Ta

must be taken seriously. See United States v. Woody,

59 F.3d 1257, 1275-76 & n.15 (7th Cir. 1995).

Almost everyone is “unusual” in some respect, and

many septuagenarians have conditions similar to

Krilich’s. Yet § 5H1.1 and § 5H1.4 put normal age-

related features off limits as grounds for reduced

sentences. Older criminals do not receive sentencing

discounts. Many persons in poor health are confined in

federal prisons. If the medical problem is extraordinary

in the sense that prison medical facilities cannot cope

with it, then a departure may be appropriate. See

United States v. Sherman, 53 F.3d 782, 787 (7th Cir.

1995). To justify such a conclusion, however, the court

“must ascertain, through competent medical testimony,

that the defendant needs constant medical care, or that

the care he does need will not be available to him should

he be incarcerated.” United States v. Albarron, 233

F.3d 972, 978 (7th Cir. 2000). Or a bedridden person

would be as effectively imprisoned at home as in a jail;

the physical condition itself does the imprisoning. But

the district court found that the Bureau of Prisons

could treat Krilich’s conditions, and he is not bedridden,

so these rationales for departure are missing.

An ailment also might usefully be called “extra-

ordinary” if it is substantially more dangerous for pris-

oners than nonprisoners. Then imprisonment would

shorten the defendant’s life span, making a given term

a more harsh punishment than the same term for a

healthy person. A district court properly may reduce

the sentence’s length when necessary to equalize sever-

ity. See United States v. Gee, 226 F.3d 885, 902 (7th Cir.

2000). Cf. United States v. Guzman, 236 F.3d 830 (7th

Cir. 2001). The district judge not only did not make

such a finding for Krilich but also believed that this

8a

finding could not be sustained. Approximately 4,000

persons in federal custody receive care for cardiovascu-

lar conditions, and no evidence of record demonstrates

that they exhibit greater mortality than free persons

with these conditions.

The Bureau of Prisons can provide Krilich with the

medical regimen (which is to say, the drugs and diet)

that his physicians believe to be appropriate. That the

Bureau has not provided (and does not propose to

provide) the quality of care that top private specialists

provide is neither here nor there; wealthy defendants

can afford exceptional care, but this does not curtail the

punishment for their crimes. Krilich did not establish

that his condition is either “debilitating” or “extra-

ordinary,” and a departure therefore conflicts with

norms established by § 5H1.1 and § 5H1.4. A generic

statement that a defendant’s circumstances are out of

the “heartland” may not be used to override limitations

written into the Guidelines. See Koon v. United States,

518 U.S. 81, 92-96, 116 S. Ct. 2035, 185 L. Ed. 2d 392

(1996); Krilich, 159 F.3d at 1080. Krilich’s sentence

therefore is again vacated, and the case is remanded

with instructions to impose a sentence in the range of

135 to 168 months.