JORDAN, Circuit Judge.
Adam Levinson pleaded guilty to one count of wire fraud, in violation of 18 U.S.C. § 1343, and one count of filing a false income tax return, in violation of 26 U.S.C. § 7206(1). During his sentencing hearing, the United States District Court for the District of Delaware granted him a variance from the recommended United States Sentencing Guidelines ("Guidelines") range of 24 to 30 months of imprisonment and sentenced him to two concurrent 24-month terms of probation, in addition to supervised release, restitution, and a special assessment. The government appeals and argues that the District Court failed to adequately explain the chosen sentence. We agree and will vacate Levinson's sentence and remand for resentencing.
Levinson was the manager and twenty-percent owner of CoolerSmart, LLC ("CoolerSmart"), a Delaware company that provided filtered drinking water to residences and businesses. CoolerSmart's majority owner was WaterWorld Ventures, Inc. ("WaterWorld"), a wholly-owned subsidiary of Elkay Manufacturing Company ("Elkay"). Between June 2000 and August 2002, Levinson falsely reported CoolerSmart's financial status and operational performance, representing that the company was successful, when in fact it was not. Elkay relied on those reports when it invested millions of additional dollars into CoolerSmart's business.
In 2001, Elkay reviewed CoolerSmart's operations and finances. In preparation for the review, Levinson implemented a
In 2002, Elkay received an anonymous tip warning of misconduct by CoolerSmart's management. Elkay responded by hiring an accounting firm to conduct a forensic audit of CoolerSmart. The audit not only uncovered Levinson's fraudulent reporting practices, it also revealed that Levinson had used over $177,000 of CoolerSmart's revenue for his own benefit — to make personal loan payments, to pay for repairs on his home, to take vacations, and to make personal credit card bill payments. Levinson failed to report his use of those funds as additional revenue on his 2000, 2001, or 2002 federal income tax returns. As a result, the government's aggregate tax loss for those years was approximately $44,000.
On June 6, 2006, Levinson was indicted on one count of wire fraud and three counts of filing a false income tax return. He entered into a plea agreement that stated he would plead guilty to the wire fraud count and to one count of filing a false income tax return in the year 2002. Prior to his sentencing hearing, Levinson settled a civil fraud suit brought against him by Elkay by paying Elkay $350,000 and relinquishing his twenty-percent ownership interest in CoolerSmart. However, as to the wire fraud count, the government and Levinson agreed that, for purposes of calculating Levinson's offense level under § 2B1.1(b) of the Guidelines and for calculating restitution for the fraud, they would use the amount Levinson took from CoolerSmart for his personal use, which was $177,289. After adjusting Levinson's base offense level of 6 upward by ten points to account for the $177,289 loss to CoolerSmart, his offense level of 16 was further increased by two points pursuant to § 3B1.1 for his role as the organizer, leader, manager, or supervisor of the offense. His adjusted base offense level of 18 was further increased by two points pursuant to § 3B1.3 for his use of special skill in facilitating and concealing his crime, resulting in a final offense level of 20 for the wire fraud count.
Levinson's base offense level for filing the false income tax return was 14, pursuant to § 2T4.1, given that the tax loss was between $30,000 and $80,000. That was adjusted upward by two points under § 2T1.1 for his failure to report more than $10,000 in income derived from criminal activity, resulting in an adjusted offense level of 16.
At sentencing, the District Court used the greater of the two offense levels to compute Levinson's sentence under the Guidelines, as required by § 3D1.3(a). The Court then reduced that offense level of 20 by three levels, in consideration of his acceptance of responsibility, for a total offense level of 17. Because Levinson had no prior criminal record, the Court determined that he fell within Guidelines Criminal History Category I. Therefore, the Court calculated that the recommended sentencing range under the Guidelines was 24 to 30 months imprisonment, two to three years of supervised release, a fine of
Levinson moved for a downward departure based on what he claimed was his diminished mental capacity resulting from bipolar disorder. The District Court declined to grant the motion, concluding that Levinson's actions belied the claim of diminished capacity because his fraud was sophisticated and complex, as were his detailed and extensive efforts to conceal his misrepresentations from Elkay.
After determining the recommended sentence for Levinson under the Guidelines, the District Court heard both parties' arguments regarding the application of the sentencing factors set forth in 18 U.S.C. § 3553(a).
Levinson argued for a sentence of home or community confinement, as opposed to incarceration. He presented the Court with mitigating factors, expressed in a large number of letters written on his behalf by his family, friends, and members of the community, particularly emphasizing his role as a father, his contributions to society and, in particular, his involvement with a Jewish family service organization. Other mitigating factors he pressed included his prompt payment of $350,000 to Elkay to settle the civil suit, his loss of employment if he were imprisoned, and the financial and emotional toll his imprisonment would have on his young family, especially his learning-disabled son.
The Court then considered the § 3553(a) factors. It acknowledged the many letters written on Levinson's behalf, which urged leniency both for the sake of his family and because he was a good person who had made poor decisions. According to the
(App. at 38-39.)
The Court thus declined to impose a sentence of imprisonment and instead sentenced Levinson to 24 months of probation for the wire fraud count, with a concurrent 24-month term of probation for filing a false income tax return, 100 hours of community service, $177,289 in restitution, and a $200 special assessment. Levinson was also sentenced to a six-month period of home confinement with electronic monitoring. The government then filed this appeal.
The government argues that the District Court failed to articulate sufficiently compelling reasons to support its variance from the Guidelines recommendation, and that the Court erred by relying upon clearly erroneous and inconsistent factual findings and on factors unrelated to the sentencing considerations outlined in § 3553(a). According to the government, the District Court committed procedural and substantive errors in imposing Levinson's sentence, and the case should be remanded with instructions to impose a sentence within the advisory Guidelines range. We do not perceive all of the flaws alleged by the government, but we do agree that this case needs to be remanded. Although the District Court may ultimately conclude that the sentence now on appeal should be re-imposed at Levinson's resentencing, the Court must provide us with enough analysis on the record to permit meaningful appellate review, which it so far has not.
A. Roles of District and Appellate Courts
By now, the three-step sentencing procedure set forth in United States v. Gunter, 462 F.3d 237, 247 (3d Cir.2006) ("Gunter I"), has become familiar and has been effectively ratified by the Supreme Court's decision in Gall v. United States, ___ U.S. ___, 128 S.Ct. 586, 169 L.Ed.2d 445 (2007). A district court must begin the process by first calculating the applicable Guidelines range. After that initial calculation,
Our responsibility on appellate review of a criminal sentence is limited yet important: we are to ensure that a substantively reasonable sentence has been imposed in a procedurally fair way. As directed by the Supreme Court, we take up the procedural review first, looking to see that the district court has committed no significant error by, for example, "failing to calculate (or improperly calculating) the Guidelines range, treating the Guidelines as mandatory, failing to consider the § 3553(a) factors, selecting a sentence based on clearly erroneous facts, or failing to adequately explain the chosen sentence — including an explanation for any deviation from the Guidelines range." Gall, 128 S.Ct. at 597. If the sentencing decision passes that first stage of review, we then, at stage two, consider its substantive reasonableness. Id. An estimation of the outer bounds of what is "reasonable" under a given set of circumstances may not always be beyond debate, but the abuse-of-discretion standard by which that estimation must be judged limits the debate and gives district courts broad latitude in sentencing.
Obviously, procedural problems may lead to substantive problems, so there are times when a discussion of procedural error will necessarily raise questions about the substantive reasonableness of a sentence. United States v. Goff, 501 F.3d 250, 256 (3d Cir.2007) ("[T]hese ... substantive problems ... are a product of the District Court's procedurally flawed approach."). After all, if one cannot justify a result by the reasons given, that result is, by definition, not a substantively reasonable conclusion to the logical steps provided. But the guidance we get from Gall is to focus in the first instance on the procedural aspect of a sentencing decision. See 128 S.Ct. at 597 ("[The appellate court] must first ensure that the district court committed no significant procedural error....").
B. Explanation as Key to Appellate Review
One implication of Gall is that we should treat a failure to "adequately explain the chosen sentence — including an explanation for any deviation from the Guidelines range" — as a problem that can typically be addressed by giving the sentencing judge an opportunity to better explain the reasoning behind the decision. It will be a rare case when it is clear that no acceptable reasoning can justify a given sentence. Yet even rightly admired judges may make a decision which we believe is unsupportable, and we are obligated to point that out when it occurs. See Goff, 501 F.3d at 262 (deciding that "a sentence of four months is ... unreasonable in light of the facts and circumstances revealed in the record"); United States v. Pugh, 515 F.3d 1179, 1191 (11th Cir.2008) ("[Gall]
We do not seek to second guess. Given the widely recognized institutional advantages that district courts have in access to and consideration of evidence, we would be foolish to try. See Kimbrough v. United States, ___ U.S. ___, 128 S.Ct. 558, 574, 169 L.Ed.2d 481 (2007) (citing as "discrete institutional strengths" the district court's "superior position to find facts and judge their import under § 3553(a) in each particular case" (internal citation and quotation marks omitted)). In each case, however, we must have an explanation from the district court sufficient for us to see that the particular circumstances of the case have been given meaningful consideration within the parameters of § 3553(a). The Supreme Court has explained that there must be "an individualized assessment based on the facts presented." Gall, 128 S.Ct. at 597. A necessary corollary of that responsibility is the further obligation to provide sufficient justifications on the record to support the sentencing conclusion. See id. at 597 ("After settling on the appropriate sentence, [the sentencing judge] must adequately explain the chosen sentence to allow for meaningful appellate review and to promote the perception of fair sentencing."); Rita v. United States, ___ U.S. ___, 127 S.Ct. 2456, 2468, 168 L.Ed.2d 203 (2007) ("The sentencing judge should set forth enough to satisfy the appellate court that he has considered the parties' arguments and has a reasoned basis for exercising his own legal decisionmaking authority."). While the Guidelines are no longer mandatory, United States v. Booker, 543 U.S. 220, 245, 125 S.Ct. 738, 160 L.Ed.2d 621 (2005), and no "extraordinary circumstances" are needed to justify a sentence that varies from their recommended results, Gall, 128 S.Ct. at 595, and while there is no mathematical formula for determining whether a district court's justifications for a variance are sufficient, id. at 594-95, we nonetheless must be satisfied that, broadly speaking, an adequate justification is provided on the record. In the absence of that, we must remand.
C. The Sentencing at Issue
In this case, as is typical in sentencing hearings, the District Court ruled from the bench, following arguments by counsel and the defendant's allocution. The Court began by correctly calculating the advisory Guidelines range, which, without objection, it determined to be a sentence that included incarceration of 24 to 30 months. It considered, as our precedent requires, Gunter I, 462 F.3d at 247, the defendant's motion for a downward departure, deciding that his claim of diminished capacity was not persuasive. The Court went on to give a thoughtful explanation of the § 3553(a) sentencing factors it had weighed.
In particular, the District Court considered the nature and circumstances of Levinson's crimes, explaining in detail his elaborate fraud and the cover-up scheme he had orchestrated:
(App. at 35-36.)
The Court then turned to Levinson's personal history and characteristics:
(Id. at 36.) In considering Levinson's personal circumstances, the Court specifically acknowledged the many letters of support from Levinson's friends and family and their pleas for leniency. The Court stated that the characterization of Levinson in the letters as a good person who just happened to make some poor decisions did not make him stand out, because most defendants are not bad people and "like Mr. Levinson have made poor choices, motivated by a variety of ills." (Id. at 37.) The Court also acknowledged the accuracy of the letter-writers' concern that Levinson's family would suffer if he were imprisoned. That Levinson's family "would suffer most if he goes to jail," did not distinguish him from other white-collar criminals sentenced to terms of imprisonment, the Court said, because "[t]hat sad outcome is endemic to most criminal cases, as most defendants have families who suffer because their loved one wasn't thinking about them during the criminal activity." (Id.)
However, as previously noted, the District Court did say that Levinson's case could be distinguished on the basis that Levinson's crimes did not inflict financial harm on the public. The Court stated:
(Id. at 37.) The Court asserted that only Elkay, the corporation with which Levinson had co-owned CoolerSmart, had been harmed, and that the corporation's losses had already been addressed by a $350,000 civil settlement paid by Levinson. (Id. at 37-38.)
(Id. at 38-39.) The Court concluded that it would "reject the advisory guideline range of imprisonment" and order probation. (Id. at 39-40.)
The government raises several issues regarding the Court's reasoning and the resulting sentence. We think it sufficient to focus on two.
1. Clearly Erroneous Factual Foundation
First, the government argues that the District Court based its decision on the clearly erroneous premise that Levinson had inflicted no financial harm on the public. There were two counts of conviction, the fraud count, which the Court discussed at some length, and the tax count, which, the government says, the Court entirely ignored. According to the government, since Levinson admitted guilt for filing a false tax return, and since the District Court had concluded that the tax loss associated with that count exceeded $44,000, the Court erred in basing Levinson's sentence on the assertion that "Mr. Levinson did not harm the public from a financial point of view." (Id. at 37.) Levinson endeavors to justify the District Court's comments about private versus public harm by saying that there in fact is no public harm since, "with restitution of the wire fraud proceeds to the victim ..., the Defendant would be entitled to a deduction and thus owe the Government no net taxes by virtue of the `evasion.'" (Appellee's Br. at 3.)
We are compelled to conclude that the government has much the better of those positions. Even if Levinson were correct as to the technical feasibility of the deduction he says he plans to claim on future tax returns, and we make no comment on that at all, his argument is still flawed. It attributes to the District Court a reason that is nowhere stated or even implied in the Court's discussion of the case; there is simply nothing to indicate that the Court had in mind a "defraud now, deduct later" rationale for bypassing comment on the tax count of conviction. More importantly, however, Levinson's argument fails to address the principal problem identified by the government, which is that there is no explanation by the District Court for how this case can be said to entail purely private harm when there is a tax fraud conviction involving a specific dollar loss to the United States Treasury. We thus agree with the government that the District Court rested its sentencing decision on an unsound factual foundation. See Concrete Pipe & Prods. of Cal., Inc. v. Constr. Laborers Pension Trust for S. Cal., 508 U.S. 602, 622, 113 S.Ct. 2264, 124 L.Ed.2d 539 (1993) ("A finding is clearly erroneous when although there is evidence to support it, the reviewing body on the entire evidence is left with the definite and firm conviction that a mistake has been committed.") (internal quotation marks and citation omitted).
2. Inadequate Explanation for Variance
The second issue raised by the government is the adequacy of the District Court's explanation for varying downward from a sentence including 24 to 30 months imprisonment to a sentence with no imprisonment. Again, we agree that the record is problematic, and, even if there were no issue regarding the unmentioned tax conviction, we would need to return this case to the District Court for a more complete explanation of its decision to significantly vary from the recommended sentence of imprisonment. That conclusion rests on two concerns. One is the lack of explanation of how this defendant or his crimes differ in any way that warrants the special leniency shown. The other concern, which is related to the first, is that, if there is no real distinction between Levinson and other white-collar defendants, then the District Court appears to have rested its decision on a policy disagreement with the Guidelines, which it did not articulate or explain.
As to the first concern, the Court's sentencing decision expressly declares that Levinson does not differ from typical defendants, either in regard to his general
Those comments about cost, and the earlier comments about public and private harm, make it appear that the Court left the realm of weighing the particulars of this case and entered into a consideration of general penal policy. Policy considerations are not off-limits in sentencing, see Kimbrough, 128 S.Ct. at 570 (quoting government concession that "as a general matter, `courts may vary [from Guidelines ranges] based solely on policy considerations, including disagreements with the Guidelines'"), but care must be taken in reaching the conclusion that the District Court did here, because the public versus private harm distinction is not without nuance and because considering costs of incarceration will likely contravene very deliberate policy choices embedded in the Guidelines.
The identity of the principal victim as a private corporation should not necessarily lead to the conclusion that there has been no harm to the public. In the broadest sense, all crime involves public harm, since crimes are crimes for the very reason that they involve a violation of public norms and require something more than the correction of a private wrong. In a narrower sense, crimes against private entities can and do inflict public harm, as, for example, when a publicly traded corporation has been defrauded and there is consequent damage to public trust in our nation's capital markets. That does not mean that private versus public harm is a meaningless distinction. The Guidelines themselves take account of that distinction at times. See USSG § 2A6.1(b)(4) (directing offense level be increased by four levels if offense resulted in substantial disruption of public functions or services); USSG § 5K2.14 (providing for upward departure "[i]f national security, public health, or safety was significantly endangered" by the defendant).
The Sentencing Commission recommended terms of imprisonment for economic crimes like Levinson's because of its concern that sentencing for white-collar crime had been ineffectual. See USSG § 1A1.1, Ch. 1, Pt. A.4(d) (2006) ("Under [pre-Guidelines] sentencing practice, courts sentence[d] to probation an inappropriately high percentage of offenders guilty of certain economic crimes, such as theft, tax evasion, antitrust offenses, insider trading, fraud, and embezzlement, that in the Commission's view are `serious.'"). In addition, it has been noted that probationary sentences for white-collar crime raise concerns of sentencing disparities according to socio-economic class. See United States v. Mueffelman, 470 F.3d 33, 40 (1st Cir.2006) ("Restitution is desirable but so is the deterrence of white-collar crime (of central concern to Congress), the minimization of discrepancies between white-and blue-collar offenses, and limits on the ability of those with money or earning potential to buy their way out of jail."). Presumably, the Commission was aware of the costs of incarceration when it made its judgment that white-collar criminals generally should be sent to prison. To use the Commission's characterization, white-collar crimes such as wire fraud and tax fraud are "serious," and typically will warrant serious punishment, including prison time. Thus, if a district court wants to vary from the Guidelines for a reason that is contrary to the Commission's stated position, it must explain why the general policy should not apply in the particular case before it. See United States v. Gunter, 527 F.3d 282, 286 (3d Cir.2008) (district court is "free to disagree with the policy underlying the crack/powder ratio as applied to that particular defendant and make an appropriate downward variance in its sentence.... [But][t]here must be meaningful consideration of the § 3553(a) factors and the particular circumstances of the case before a variance is made." (emphasis omitted)).
That was not done here. Instead, the District Court simply said that it had reviewed its past sentencing decisions and found prison appropriate when some public, as opposed to private, harm had been inflicted. That statement is not enough to tell us why the Guidelines, which, even
It may be that the District Court has reasons we have not understood for varying widely from the recommended Guidelines range of sentences in this case. We do not say that a sentence of probation would be, on this record, plainly outside the boundaries of permissible discretion. We hold only that the justifications given for the sentence are inadequate for us to recognize them as reflecting a proper exercise of discretion.
Accordingly, we will vacate the sentence and remand the case for further proceedings in accordance with this opinion.
127 S.Ct. at 2468-69 (citations omitted).