THOMPSON, Circuit Judge.
For at least eight years Defendant Valentín Valdés-Ayala (Valdés) exploited the desperation of individuals who were behind on their court-ordered child support payments. He did so by illusorily promising professional legal assistance in exchange
A. Setting the Scene
To understand how Valdés exploited the bankruptcy and child support administration systems, it will help to understand the ways in which these systems have been designed to work. We use the testimony the jury heard at trial to paint the backdrop against which Valdés operated his businesses. The jury trial included testimony from a varied cast of 34 witnesses culminating with Valdés, himself, taking the stand.
1. Child Support Collection in Puerto Rico
In Puerto Rico, the Administracion para el Sustento de Menores ("ASUME") governs child support determinations, modifications, collections, and distributions. When the Commonwealth's trial court orders a non-custodial parent to pay child support, ASUME is responsible for collecting the payment and sending it on to the custodial parent. ASUME has several collection tools at its disposal when a non-custodial parent misses a scheduled payment, including retention of income tax refunds, withholding of income, suspension of sport or professional driver's licenses, and referrals to credit agencies. One additional collection mechanism available to ASUME — the filing of a contempt motion in the Commonwealth trial court — can result in up to six months imprisonment for the delinquent parent.
For a parent in arrears wanting to put ASUME's collection efforts on hold (thereby freezing past-due obligations), filing a petition for Chapter 13 bankruptcy in the bankruptcy court does the trick, at least temporarily. The reason: the filing generates an immediate stay. It also kicks out an automatic notification to ASUME, giving it the status of a creditor needing to file a proof of claim. But notwithstanding the stay, the parent has a continuing obligation throughout the bankruptcy proceeding to pay the ongoing support obligations as they are due (i.e., payments that become due
2. Chapter 13 Bankruptcy
A Chapter 13 petition may be filed by individuals who have a regular source of income but need some breathing room to reorganize and repay their debts. The bankruptcy process generates a plan for debt reorganization and repayment. Two major benefits favor filing: (1) the automatic stay, or freeze, on every creditor's
A Chapter 13 petition can be prepared and filed by an attorney, by a petition preparer,
Also required at Chapter 13 filing time is a debtor's certificate of course completion from a credit counseling service. 11 U.S.C. §§ 109(h), 521(b). A nonprofit called Credit Advisors Foundation ("CAF") administers such a course in Puerto Rico, even though it does not have a physical presence there. The course, which can be done online or by phone, mandates the debtor take an initial quiz, learn about budgeting and options for managing one's financial affairs, create a budget using the debtor's own financial situation, and complete a second set of quizzes. At the end of that process, a budget report and analysis as well as a certificate of course completion gets emailed to the debtor and the debtor's attorney (if one is listed in the debtor's account with CAF) for filing with the bankruptcy petition.
Attorneys can file Chapter 13 petitions and the accompanying documents electronically, but non-attorneys in Puerto Rico must file in person at the bankruptcy court located either in San Juan or Ponce. This includes pro se litigants, petition preparers, and friends or family members who file a document on the debtor's behalf. The clerk's office must accept a bankruptcy filing unless a court order is in place barring the individual from doing so.
While there are several documents that make up a complete Chapter 13 package, the automatic stay is nonetheless achieved by submitting a "skeleton filing," consisting of the petition, the certificate of completion for the credit counseling course, and a few other certifications and declarations. Once docketed, the debtor has 14 days to turn in the remaining required documents and schedules. If all of the other paperwork is not filed within that time period, the bankruptcy trustee can move to
As for petition preparers assisting a debtor, there are strict rules about what the helper may and may not do. 11 U.S.C. § 110. The big no-no's: (1) Based only upon information provided by the debtor can the assister fill in the blanks on the petition; (2) no recommendation is to be given about the propriety of filing for bankruptcy or about which code chapter should be utilized, or about what the consequences of a bankruptcy filing might be; and, unsurprisingly, (3) the preparer cannot take the required credit counseling course on the debtor's behalf. The really big yes-yes: the petition preparer must sign several parts of the petition, attesting that he or she has adhered to the various and comprehensive statutory parameters for acting as a bankruptcy petition preparer.
After the petition is filed, the bankruptcy court sends a summons to the debtor with a time and date for a so-called "341 meeting." Mandated by 11 U.S.C. § 341, the debtor is required to attend this meeting to discuss the petition. Also in attendance is the bankruptcy trustee assigned to the case, as well as any creditors who wish to show.
Getting at holistic system concerns, bankruptcy analysts employed by the U.S. Trustee's office supervise all case filings in an effort to ferret out fraud in the system. The job entails combing through bankruptcy filings, homing in on any red flags suggesting a case should not move forward with regular case processing. In petitions prepared and/or filed by Valdés, giant red flags fluttered high.
3. Enter Valdés
Valdés, as we glean from his testimony, is a self-described musician, comedian, script writer, and salesman who has, at one time or another, studied conflict mediation, criminology, and chaplaincy, and, most relevant here, has had personal experience with Puerto Rico's child support collection system, incarceration institutions, and the bankruptcy court system. In 2006, he started the Fundacion Lucha Pro Padres Convictos Por Pension ("the nonprofit") for the purpose "of defending the principles and dignity of every father convicted for failure to pay child support and release, defend, paternal feelings and relations and promote the right to freedom of every convict." In 2009, he was incarcerated for failing to pay his own court-ordered child support but was released after filing a pro se petition for bankruptcy. Three years later he founded a for-profit corporation called Tears in Prison, Inc. for the purpose of preparing bankruptcy petitions.
According to Valdés, around 20 people per month hired him to help them either get out of jail or avoid going to jail at all by preparing bankruptcy petitions in exchange for around $1,575 per petition. He admitted knowing that a bankruptcy petition preparer was not allowed to charge more than $500, so he knew not to list his true fee on the petitions. When he received the $1,575 payment, he says he referred the case to one of seventeen attorneys
According to Valdés, after getting those signatures, he would go to the closest Office Max store and tap into an email account he had set up, which tied his nonprofit, the Fundacion Lucha Pro Padres Convictos Por Pension, with CAF. The purpose of the email hook-up was to pay for credit counseling courses for clients and to receive each client's certificate of completion for each course. After printing out the certificate, Valdés would proceed directly to the courthouse to file the petition.
Twelve of Valdés's clients testified at trial about their experiences with him; eight of whom also had a family member tell of their respective contact with him to coordinate the services he'd advertised on television (yes, he advertised). All of these clients had been behind on their court-ordered child support payments and most were in jail at the time they reached out to Valdés. This evidence revealed a common M.O.; we highlight three of his clients' experiences as representative of all twelve clients who testified.
Ever Colon Figueroa ("Colon"), imprisoned for the first time for failing to meet his child support obligations, became a Valdés client after hearing about the nonprofit from another inmate. Colon passed along the prison chatter to family members and they looked Valdés up. Colon's mother contacted and met with Valdés on behalf of her son and, based upon his promise to spring her son from prison, coughed up $1,775 for his services. After the meeting, Colon says he had a 20-minute visit with a female lawyer who was there, she said, on Valdés's behalf and he signed some papers "related to a bankruptcy," but did not take a credit counseling course. He was released from jail the next day, and went to the bankruptcy court on the day assigned on his summons. The attorney Valdés had promised to send was a no-show, so Colon was reincarcerated. Turning again to Valdés for help, Colon's mother paid Valdés yet more money, $1,200, to spring her son from lock-up. After getting paid, Valdés made a visit to the jailhouse where he huddled with Colon and two other inmates
Another client, Luis Serrano Aponte ("Serrano"), contacted Valdés by phone after he saw a TV commercial for the nonprofit, and the two arranged to meet at a Pizza Hut to discuss how Valdés could help keep him out of jail. He understood from their conversation that Valdés was going to lower his child support payments by starting a Chapter 13 bankruptcy case and that a lawyer would help him with the case, though none ever did. Serrano testified that he did not speak or read English, and while he did sign some papers, he did not take a credit counseling course or any quizzes and he did not actually authorize Valdés to start a bankruptcy case for him. Serrano eventually learned that a bankruptcy case had been filed in his name when he received a letter from the court through the mail, but he testified that the signatures on the bankruptcy petition were not his. Even though Valdés was paid in full he would not answer Serrano's calls, and Serrano never spoke with him again.
A third client, Confesor Rohena Vila ("Rohena"), called Valdés after his girlfriend saw the nonprofit's TV ad (advertising works!). His experience followed the same, well-worn path as Valdés's other clients from the initial meeting to the two-time jailing and release. When Rohena's girlfriend reached Valdés on the phone following Rohena's second arrest, Valdés admitted he could have trouble with the court if he filed a third bankruptcy petition in Rohena's name and so told her there was nothing more he could do for them.
Eventually, the bankruptcy court noticed some common patterns with the petitions which listed Valdés as the non-attorney preparer. The Chapter 13s he filed were of the skeleton variety, with only one of the required schedules attached; the one for listing the debtor's "creditors holding unsecured property claims." Only the "domestic support obligation" category would be checked off on this schedule, and only one creditor, ASUME, would be listed. No assets or other debt would be disclosed in these petitions.
Alejandro Oliveras Rivera, Assistant U.S. Trustee, who testified at Valdés's trial, presided over the 341 meetings for debtors whose petitions listed Valdés as the preparer. Some of these debtors were no-shows at their scheduled 341 meetings, while a few showed up with an attorney. Because none of the petitioners submitted all of the required documents within the allowed time, Oliveras often filed motions to dismiss. Eventually, Oliveras sought an injunction from the bankruptcy court to prohibit Valdés from acting as a petition preparer. Such an order preliminarily entered on September 14, 2012 and a second order entered December 5, 2012 after the bankruptcy court found that Valdés, despite the injunction, had continued to prepare and file bankruptcy petitions.
Prior to the permanent injunction hearing, the bankruptcy court compiled some data which reflected Valdés's filing activity. Between March 6, 2012 and July 16, 2012, Valdés prepared and filed 72 Chapter 13 petitions. By mid-September 2012, 61 of the 72 petitions had been dismissed; 8 more had pending motions to dismiss. 66 of the 72 did not have the required paperwork and debt reorganization plan filed,
On January 18, 2013, Valdés was permanently enjoined from acting as a bankruptcy petition preparer. Thereafter, bankruptcy counter staff refused to accept any petitions Valdés attempted to file. But Valdés wouldn't give up his heavenly mission — at least one staff member saw Valdés escort debtors or their family members to the counter to file a Chapter 13 petition. He also filed petitions through an assistant and he, himself, attempted to make filings at the bankruptcy court located in Ponce rather than San Juan. But as luck would have it, Valdés showed up in Ponce on a day when a San Juan staffer was working there and recognized him.
Also after issuance of the injunction, staff analysts continued to monitor Chapter 13 filings. According to their testimony, what they observed was an increase in the number of monthly pro se filings from 1 to 6-8.
4. Court Proceedings
In November 2013, a grand jury indicted Valdés on a variety of offenses, including bankruptcy fraud; wire fraud; aggravated identity theft; destruction, alteration, or falsification of records in federal investigations and bankruptcy; and contempt of court.
At his November 2015 sentencing hearing, the district court imposed a 134-month term of incarceration, a $402,077.22 money judgment, and a $513,200 restitution order payable to the District of Puerto Rico Clerk of Court. Although the details of the sentencing process and hearing are important, we will hold off on engaging in a substantive discussion of what happened until they become relevant to our analysis.
The scene now set, it's time to dive into the several claims of error Valdés raises on appeal.
We will take each argument in turn.
A. Sufficiency of Evidence
1. Bankruptcy Fraud Convictions
After the government rested and again at the close of trial, Valdés argued — broadly and briefly — that there was insufficient evidence to convict him of bankruptcy fraud because his clients filed their bankruptcy petitions "according to law." Before us, he spins his insufficiency claim in a different direction. According to Valdés, in order to prove he devised a scheme to defraud either child support beneficiaries or ASUME, the government needed to present testimony from beneficiaries affected by the scheme and also needed to submit records to show loss or delay in payments to ASUME. Because his argument here differs from the extremely broad and brief argument he made before the district court, we would ordinarily find his arguments forfeited and proceed on plain error review. The government's brief, however, does not challenge the preservation of this sufficiency claim, and assumes we will proceed on de novo review. Thus, we give Valdés the benefit of the doubt and deploy the legal principles reserved for preserved evidentiary challenges, as his argument fails even on de novo review.
We view "all [the] evidence, credibility determinations, and reasonable inferences therefrom in the light most favorable to the verdict in order to determine whether the jury rationally could have found that the government established each element of the charged offense beyond a reasonable doubt."
As we stated above, Valdés's evidentiary sufficiency challenge to his 18 U.S.C. § 157 bankruptcy fraud convictions is focused on the absence of evidence presented at trial to prove he devised a scheme to defraud either ASUME or child support beneficiaries (as specified in his indictment). Valdés points out that the ASUME administrator's testimony showed that payments pursuant to a court order for child support were still due on a continuing basis despite an active bankruptcy case and that the amount past due to ASUME was nondischargeable. Therefore, he schemed to deprive no one of anything. Continuing on, Valdés says the evidence demonstrated that his actual intent was to get fathers out of jail so that they could find work and pay their child support obligations. Countering this assertion, the government responds that its stated trial objective was to
Our Circuit has yet to interpret § 157 bankruptcy fraud, so we turn to our sister circuits, many of which have addressed sufficiency-of-the-evidence challenges to convictions under this statute. Codified as part of the Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 157 provides up to five years in prison, a fine, or both, for those who:
This type of bankruptcy fraud targets those who use the bankruptcy system as a way of executing or concealing a scheme originally devised outside of the bankruptcy context instead of targeting schemes executed within the bankruptcy system (which are covered by § 152).
Our sister circuits have generally broken out the elements required to prove bankruptcy fraud pursuant to this statute as follows: "(1) devising a scheme to defraud, and (2) filing a document in a bankruptcy proceeding or making [a] false or fraudulent statement in relation to the bankruptcy proceeding for the purpose of executing or concealing the fraudulent scheme."
In a split decision, the
Here's what was brought out at trial. Valdés devised a strategy to charge, on average, $1,575 to individuals in exchange for either getting the individual out of jail or preventing the individual from being incarcerated for failure to pay court-ordered child support. Valdés established both a nonprofit and a for profit corporation as corporate fronts for advertising and executing his scheme. He promised his clients legal representation at the bankruptcy court, but most clients testified that they never met with an attorney and often could not get in touch with Valdés again after he got hold of their money and filed the bankruptcy petitions. The evidence at trial also established that Valdés filed hundreds of skeleton petitions in execution of his scheme. The petitions in evidence show Valdés listed only $300 as his petition-preparing fee when other evidence showed his clients generally paid $1,575 for his services.
Moreover, the indictment (which we'll discuss in more detail in Section B) placed Valdés on notice that there were several categories of victims of his scheme and the government put on evidence demonstrating how he took advantage of them all. Between the government's witnesses and Valdés's own trial testimony admitting to the various components of his scheme, a rational jury could have concluded Valdés intended to defraud a variety of groups: (1) his clients, by taking money and not delivering all of the services promised; (2) ASUME, by filing skeletal bankruptcy petitions which listed ASUME as the only creditor for each debtor, knowing the petitions would trigger an automatic stay on ASUME's efforts to collect; (3) child support beneficiaries, by weakening ASUME's
There is, therefore, ample evidence to support Valdés's convictions for bankruptcy fraud.
2. Wire Fraud Convictions
Valdés's challenge to the sufficiency of evidence to support his wire fraud convictions presents the same issue-preservation situation as with his challenge to his bankruptcy fraud convictions. Before the district court, Valdés argued broadly that the jury couldn't convict him of wire fraud, in part because his use of the internet to complete the credit counseling course was authorized by his individual clients. Before us, Valdés placed all of his chips on his bet that we would find insufficient evidence of bankruptcy fraud, and so only argues that without sufficient evidence to sustain his convictions for bankruptcy fraud, there is insufficient evidence to support his convictions for wire fraud.
We can be brief with this discussion. A conviction for wire fraud pursuant to 18 U.S.C. § 1343 is dependent on three elements: " [A] `scheme to defraud,'  the accused's `knowing and willful participation in the scheme with the intent to defraud,' and  the use of interstate or foreign `wire communications' to further that scheme."
3. Aggravated Identity Theft Convictions
With these convictions, we agree with the parties' assumption that Valdés's sufficiency-of-the-evidence challenge is properly preserved for our de novo review. Valdés's convictions are linked specifically to two of his clients we mentioned before: Serrano and Colon. Aggravated identity theft is committed when, "during and in relation to" the commission of one of several enumerated felonies (including wire fraud), one "knowingly transfers, possesses, or uses, without lawful authority, a means of identification of another person." 18 U.S.C. § 1028A(a)(1), (c)(5). A "means of identification" includes "any name or number that may be used, alone or in conjunction with any other information, to identify a specific individual," including "name, social security number, date of birth," etc. § 1028(d)(7).
Valdés argues there was insufficient evidence to convict him of aggravated identity theft because Serrano and Colon gave him their personal information willingly to use for the agreed-upon purpose of filing a petition with the bankruptcy court. According to him, he didn't attempt to impersonate either Serrano or Colon when he used their personal information, and his use of their information as their agent was for their benefit. Valdés also claims the crime of identity theft is limited to situations in which another person's identity is used for the purpose of deceiving a third party. Because CAF knew Valdés was an intermediary for the individuals who were registered as customers of the credit counseling course, he asserts that he did nothing wrong.
For its part, the government argues that whether Valdés's clients willingly gave their personal information to him to use is irrelevant because his use of their information to obtain credit counseling certificates was unlawful. The government asserts our case law requires a defendant to purport to take action on another's behalf and that this requirement is satisfied here because Valdés used his client's names and addresses in relation to the wire fraud crimes.
A few years later, we examined what it means to
Reading these two cases together then, "regardless of how the means of identification [are] actually obtained, if its subsequent
Valdés took several actions on behalf of Serrano and Colon. Serrano testified the signature on the main bankruptcy petition was his, but he had not understood at the time that Valdés would be starting a bankruptcy case for him.
Viewing the evidence in the light most favorable to the verdict as we must, and drawing reasonable inferences therefrom,
Valdés argues (for the first time in this appeal and echoing themes of his
The government, for its part, argues that the prosecution offered sufficient evidence to prove that Valdés's scheme delayed ASUME's collection efforts (and the child support beneficiaries' ultimate receipt of the support), so there was neither a constructive amendment of the indictment nor a prejudicial variance and Valdés had sufficient notice of the bankruptcy fraud charge against him.
Valdés concedes our review of his arguments related to the indictment is for plain error. Plain error review "entails four showings: (1) that an error occurred (2) which was clear or obvious and which not only (3) affected the defendant's substantial rights, but also (4) seriously impaired the fairness, integrity, or public reputation of judicial proceedings."
One of the principles embodied in the Sixth Amendment is a "guarantee of the right of an accused `to be informed of the nature and cause of the accusation....'"
"[A] constructive amendment occurs when the charging terms of an indictment are altered, either literally or in effect, by prosecution or court after the grand jury has last passed upon them."
The bankruptcy-fraud-specific section of Valdés's indictment alleges Valdés intended to defraud ASUME and child support beneficiaries. The indictment's general allegations, however, which were all incorporated by reference in the bankruptcy-fraud-specific section of the indictment, clearly include an allegation that Valdés defrauded his clients using the bankruptcy court. There can be no doubt then that Valdés's indictment placed him on notice that his charges were related to his bankruptcy court scheme.
Consistent with the indictment allegations, there was a lot of testimony at trial from Valdés's clients. But the government also presented testimony from the ASUME administrator that the bankruptcy petitions effectively froze all of their avenues for enforcing court-ordered child support and collecting the amounts past due. The government's closing argument summarized all the testimony at trial, including the delay ASUME and child support beneficiaries experienced as a result of Valdés's scheme. The evidence at trial did not, therefore, substantively alter the charges against Valdés in the indictment and it did not show a materially different sequence of events than that depicted in the indictment. As a result, there is no hint of either a constructive amendment or prejudicial variance here, never mind plain error.
C. Jury Instructions
Also for the first time on appeal, Valdés accuses the trial judge of improperly instructing the jury about both bankruptcy fraud and aggravated identity theft. The government submitted proposed jury instructions; Valdés submitted none. With respect to bankruptcy fraud, the government adapted its proposed instruction from the Eighth Circuit's and Ninth Circuit's model jury instructions. The two Circuits use almost identical instructions defining three elements, but the Ninth Circuit adds a fourth element which requires the defendant's action to be material, (meaning the action "had a natural tendency to influence, or was capable of influencing the acts of an identifiable person,
Valdés freely admits that trial counsel did not object to any part of the jury instructions at any point during trial, so he has forfeited any level of review before us other than for plain error.
1. Bankruptcy Fraud
During trial, the district judge instructed the jury that, in order to convict Valdés on the bankruptcy fraud charges, they had to find him guilty beyond a reasonable doubt on three elements: he had "intentionally devised or intended to devise the scheme or plan to defraud described in the indictment," he "acted with intent to defraud," and he "filed a petition in a Title 11 bankruptcy proceeding for the purpose of executing or attempting to execute the scheme." The district judge also provided definitions for "scheme," "defraud," and "intent to defraud." Nevertheless, according to Valdés, a few pages of the jury instructions were left out of the printed version that went into the deliberation room with the jurors. Indeed, the version of the jury instructions filed on the docket reflects only one of the elements of bankruptcy fraud the trial judge recited in open court (the intent to devise the scheme or plan to defraud element). The rest seem to be missing. But Valdés doesn't show that the jury was definitely missing a page while they deliberated; all we know for sure is the docketed version of the instructions are missing the page or pages which accurately capture the complete bankruptcy fraud instruction.
Nonetheless, Valdés tries to make much of this clerical snafu and argues the jury
Valdés also argues that the oral instructions were "deficient" because the district court did not provide a definition of "specific intent" as part of the bankruptcy fraud instruction and omitted materiality as an element. As the government points out, however, the district court did define the "intent to defraud" element ("means to act willfully and deliberately with the specific intent to deceive or cheat for the purposes of either causing some financial loss to another or bringing about some financial gain to one self") and this instruction clearly includes an explanation of specific intent as well. Valdés also tries one more time to get us to adopt the
Valdés also finds fault in the district court's omission of materiality as an element in the charge for bankruptcy fraud, but he doesn't tell us why or develop any argument on this point. As a result, he hasn't shown us — as he must — how the omission of this element was a clear error. So this contention goes nowhere fast. In all, Valdés has not exposed any clear or obvious error in the instructions for bankruptcy fraud. As a whole, the jury instructions adequately explained the bankruptcy fraud charge without confusing or misleading the jury.
We move on to the instructions for aggravated identity theft.
2. Aggravated Identity Theft
To find Valdés guilty of aggravated identity theft, the district judge instructed the jury they had to find the government had proven, beyond a reasonable doubt, that: (1) Valdés committed wire fraud; (2) Valdés knowingly possessed and used, without lawful authority, the names and social security numbers for clients Serrano and Colon; (3) these names and social security numbers actually belonged to an individual other than Valdés; and (4) Valdés knew the names and social security numbers belonged to other people. The district judge also provided a definition of "without lawful authority":
Valdés argues the jury was misinstructed on aggravated identity theft because the definition of "without lawful authority" was wrong. He seems to be arguing that because (in his view) he served as a bona fide agent for his clients, both obtaining and using their personal identifying information with their permission, he actually acted with lawful authority, but the district court's definition of "without lawful authority" prevented the jury from seeing things his way. We disagree. Valdés focuses too much on the way in which he obtained the information and ignores how he subsequently used it.
Contrary to Valdés's interpretation of our discussion of the § 1028A elements in
D. Sentencing Issues
As promised, we will now set out the details that are relevant to the sentencing issues Valdés raises for our consideration. The Presentence Report ("PSR") prepared by probation suggested the appropriate guidelines sentencing range ("GSR") pursuant to the November 1, 2014 Guidelines Manual. His sentencing hearing was first scheduled for August 6, 2015. The PSR set out the sentencing guidelines calculations for the bankruptcy fraud convictions (the most serious offense in the counts grouped together) as follows: A base offense level of 6 pursuant to U.S.S.G. § 2B1.1, with a 14-level enhancement pursuant to U.S.S.G. § 2B1.1(b)(1)(H) for the amount of loss greater than $400K, a 2-level enhancement pursuant to U.S.S.G. § 2B1.1(b)(10) for the offense's use of sophisticated means, a 6-level enhancement pursuant to U.S.S.G. § 2B1.1(b)(2)(C) for the number of victims exceeding 250 and/or involving mass marketing, and a 2-level enhancement pursuant to U.S.S.G. § 2B1.1(b)(9) for the offense involving a misrepresentation or other fraudulent action during the course of a bankruptcy proceeding. This resulted in a total offense level of 30.
The PSR also requested restitution in the amount of $513,200 to the bankruptcy court, citing both 18 U.S.C. §§ 3663 and 3663A. This amount reflected the sum of the penalties as of June 30, 2015 imposed by two bankruptcy court judges in Chapter 13 proceedings for Valdés's failure to respond to several orders to show cause why he should not be sanctioned pursuant to 11 U.S.C. § 110 for violating the rules within which petition preparers must operate as well as for violating a bankruptcy court order prohibiting him from preparing petitions for bankruptcy court litigants.
In Valdés's first set of objections to the PSR, he objected to the 6-level enhancement for the number of victims because he contends a lower enhancement was warranted because there was only evidence of 11 victims at trial. His total offense level, he says, should have been 26 instead of 30. He also objected to the proposed restitution by vaguely mentioning the imposition of an additional fine would be excessive. After the first objection to the PSR was filed Valdés changed attorneys, and his new counsel filed additional objections two weeks before his actual sentencing hearing. These objections basically mirror those originally filed by trial counsel. Regarding restitution, he argued:
At the sentencing hearing, held on November 30, 2015, the district court grouped the bankruptcy fraud and wire fraud counts together, tracked the PSR's exact calculations, found the PSR "adequately applied the guideline computations," and concluded the resulting guidelines range was from 97 to 121 months. After adding the 24-month mandatory minimum for the aggravated identity theft convictions and considering the applicable sentences for the destruction, alteration, or falsification of records in bankruptcy counts and the contempt of court count, the district court imposed a 134-month term of imprisonment for all of the counts of conviction. The district court also imposed an order of restitution in the amount of $513,200 to the Clerk of Court for the District of Puerto Rico.
1 Guidelines Sentencing Range
Valdés now asserts the district judge used the wrong version of the United States Sentencing Commission's Guidelines Manual, resulting in a total offense level that was six points higher than it should have been. Because the sentencing hearing occurred after the 2015 Guidelines Manual took effect (on November 1, 2015), he asserts the district judge should have sentenced Valdés under the amended guidelines. While the district judge claimed to use the November 1, 2015 Guidelines Manual to calculate the applicable offense level, it decidedly did not and the government concedes the error. Unquestionably, the number of levels added to the base offense level for the amount of loss pursuant § 2B1.1(b) decreased between the 2014 and 2015 Guidelines Manuals, and the district judge clearly used the loss table in the 2014 Guidelines Manual.
Valdés says two errors occurred as a result of applying the wrong Guidelines Manual to the calculation of the GSR: first, he was assigned two additional levels pursuant to the loss amount under § 2B1.1(b)(1) and second, he was assigned four additional levels pursuant to the number of victims under § 2B1.1(b)(2). He argues that because the 2015 Guidelines Manual introduced a substantial financial hardship consideration under § 2B1.1(b)(2),
While Valdés did object to the initial PSR's suggestion of adding 6 levels to the number of victims pursuant to U.S.S.G. § 2B1.1(b)(2)(A)(i) and argues again to us that only 2 levels should be added for 10+ victims, the discussion in his brief concedes plain error review applies to his sentencing arguments.
The Guidelines Manual instructs district courts to apply the version in effect at the time of sentencing unless doing so would raise ex post facto concerns.
Here, the trial judge's clear error affected Valdés's substantial rights because it affected both the calculation of the applicable GSR and the ultimate imposition of the sentence of incarceration.
In 2015, the Guidelines Manual changed the loss amount ranges in § 2B1.1(b) and incorporated a "substantial financial hardship" consideration to the determination of the number of victims for the specific offense characteristics under § 2B1.1(b)(2). The trial judge added 14 levels pursuant to § 2B1.1(b)(1) for a loss amount greater than $400,000 but less than $1,000,000. Under the amendments to this section effective November 1, 2015, only 12 levels should have been added for a loss amount greater than $250,000 but less than $550,000. In addition, because the substantial financial hardship was a new element in the calculation of the GSR, the trial judge did not consider it and we will not consider it in the first instance. Without a
These two amendments to the Guidelines Manual in 2015 could therefore have resulted in a drop of 6 levels to the total offense level. A total offense level of 24 with a criminal history category of I yields a range of 51-63 months. There was no indication in the sentencing hearing that the trial judge intended to impose an above-guidelines sentence, so even if the trial judge imposed the top of the range, Valdés's total sentence of incarceration would have been 87 months (when the 24-month mandatory minimum for aggravated identity theft is added). This represents a difference of 47 months or almost four years of incarceration. Because "but for the error, there is a reasonable likelihood that the sentence would have been shorter," the sentencing error affected Valdés's substantial rights.
That leaves the fourth prong of plain error review-whether the error "seriously affect[s] the fairness, integrity, or public reputation of judicial proceedings."
Valdés also argues for the first time before us that the bankruptcy court is neither a proper recipient of restitution nor a victim pursuant to either 18 U.S.C. §§ 3663 or 3663A.
The government responds that the bankruptcy court was properly identified
While Valdés filed written objections to the PSR challenging the probation office's restitution recommendation as an impermissible and duplicative collection effort, he did not voice any such objections during the sentencing hearing. The district court imposed restitution at the end of the hearing after the government reminded the court that restitution had been proposed in the PSR. Valdés remained completely silent through this part of the hearing even when the government asserted that Valdés had no objection to the restitution and when the district judge asked if there was anything else from the parties prior to adjourning the hearing.
Valdés arguably withdrew his objection to the use of restitution to enforce his unpaid fines in bankruptcy court by remaining silent during the sentencing hearing instead of pressing the objection he had included in his written response to the PSR.
When the district court ordered restitution, it did not specify whether the order was made pursuant to the Mandatory Victims Restitution Act ("MVRA"), 18 U.S.C. § 3663A, or the discretionary restitution statute authorized by § 3663. The PSR makes reference to both statutes: one section states the MVRA applies to Valdés's fraud offenses before summarizing the Assistant U.S. Trustee's victim impact statement. Another section says that the discretionary statute authorizes restitution in this case.
"Restitution serves as a mechanism for making a victim whole by restoring the monetary equivalent of losses suffered in consequence of the defendant's criminal activity."
Valdés's argument that the bankruptcy court cannot be a recipient of restitution has no merit. We have said that the federal government can be a victim for purposes of restitution.
Valdés's argument that the bankruptcy court is not a victim for restitution as defined in both the MVRA and in the discretionary statute fares no better. For purposes of restitution, "victim" is defined as follows:
18 U.S.C. §§ 3663(a)(2), 3663A(a)(2). The Assistant U.S. Trustee's victim impact statement, as summarized in the PSR, details the ways in which the bankruptcy court was directly and proximately harmed by Valdés's fraudulent use of the bankruptcy system to perpetrate his scheme. The harm stems from the waste of the court's already scarce resources to process the skeletal petitions filed for the sole purpose of taking advantage of the automatic freeze on ASUME's collection efforts that he knew the petitions would generate. The harm also resulted from the time and resources used by the court in its attempts to stop Valdés, including drafting motions, investigating complaints by his clients, and gathering data to show how many fraudulent, skeletal petitions had been filed. Certainly then, on plain error review, it is fair to treat the restitution order, the amount incidentally mirroring the bankruptcy court fine, as having been imposed as a rough estimate of the amount of the losses incurred from the costs imposed on the bankruptcy court while it dealt with the added administrative burden resulting from the fraudulent filings rather than simply as a penalty. It's also fair to conclude on plain error review that these added burdens could be losses subject to restitution given that resources were fraudulently diverted from the regular administration of the bankruptcy court. Therefore, this case is distinguishable from
Finally, Valdés's claim that affirming the order of restitution will allow the court to collect twice on his fines is completely without merit. First, there is no suggestion that the government has attempted to enforce the collection of the fines through the bankruptcy court cases. Second, once Valdés pays his restitution, he may move to reopen any of the bankruptcy cases in which a fine has been imposed and request that the court enter an order stating the fines have been satisfied.
Valdés has therefore not shown that the district court committed any errors, never mind a clear or obvious one, when it ordered restitution to the clerk of court for the district court.
To sum everything up, we affirm Valdés's convictions and the order of restitution but vacate his term of incarceration and remand for resentencing using the proper version of the Guidelines Manual.
The 2014 Guidelines Manual, § 2B1.1(b)(2) provided: