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The Meaning of the Guidelines’ “Otherwise Extensive” Criminal Activity

In United States v. Kent, 14-2082, 14-2874, the Court (Livingston, J., Hall, J., and Hellerstein, J. sitting by designation), the Court vacated the sentence imposed by the United States District Court for the Southern District of New York (Forrest, J.) and held that the record was insufficient to impose Guidelines Section 3B1.1(a)’s leadership enhancement.  Section 3B1.1 provides for a four-level increase in offense level if the defendant “was an organizer or leader of a criminal activity that involved five or more participants or was otherwise extensive.”  In Kent, the Court restated that the “otherwise extensive” prong of this enhancement is not meant to be a qualitative assessment of whether the crime was serious, but rather involves a quantitative question about the number of criminally responsible and unknowing participants in the offense.  Because the district court did not conduct the required analysis, the Court of Appeals reversed and remanded the case.

Background

In February 2014, Defendant Thomas Jefferson Kent entered into a plea agreement for conspiracy to commit wire fraud in violation of 18 U.S.C. § 1349.  The conspiracy charge arose from an advance fee scheme that Kent began in 2007, when he created an entity that posed as a private investment firm that would provide loans to small businesses.  Over a period of several years, Kent recruited three other individuals to his scheme and created various entities to collect over $400,000 in advance fees from small business while never actually issuing any loans to those small business clients.  

In his plea agreement, Kent and the Government stipulated to a Guidelines range of 41 to 51 months of incarceration.  Prior to sentencing, Kent requested a downward departure from the stipulated range to 36 months and the Government requested a sentence within the Guidelines range.  Two days before Kent’s sentencing, the District Court sua sponte notified the parties that two additional Guidelines enhancements were potentially applicable, including a Section 3B1.1(a) enhancement for leadership of an “otherwise extensive” criminal activity (it is undisputed that Kent’s scheme involved fewer than 5 knowing participants).  At sentencing, both Kent and the Government agreed that the Section 3B1.1(a) leadership enhancement was inapplicable to the offense conduct.  The Government took the position that the scheme was “in the lay sense of the word . . . pretty extensive” but that the record did not contain the factors that would legally support imposition of the “otherwise extensive” enhancement.  Kent similarly argued that the District Court had misconstrued the meaning of “otherwise extensive” and cited to the Circuit’s prior decision in United States v. Ware, 577 F.3d  442 (2d Cir. 2009), which held that a sentencing court’s broad reference to “unknowing participants” was an insufficient factual basis to support imposition of the enhancement. 

The District Court disagreed, concluding that Kent’s role as the mastermind behind the fraudulent scheme, his high degree of contact with the victims, and the high number of victims throughout the country supported imposition of the four-level enhancement.  The District Court then calculated a new Guidelines range of 63 to 78 months of incarceration and imposed a sentence of 78 months, the top of the new Guidelines range and nearly twice as long as the 41-month sentence at the low end of the stipulated sentencing range.

The Court Reverses Due To Insufficient Findings

The Court vacated the 78-month sentence for procedural error, rendering the sentence procedurally unreasonable.  In doing so, the Court reaffirmed the factors to consider in the “otherwise extensive” inquiry, first set forth in United States v. Carrozzella, 105 F.3d 796 (2d Cir. 1997):  (1) the number of knowing participants in the criminal activity; (2) the number of unknowing participants in the criminal activity; and (3) the extent to which the services of the unknowing participants were “peculiar and necessary” to the criminal scheme.  The purpose of the Carrozzella inquiry is to determine whether the scheme was the “functional equivalent” of a scheme with five or more knowing participants.  While the Court disagreed with Kent that only the number of knowing and unknowing participants are relevant to imposition of the otherwise extensive enhancement, it nonetheless held that the District Court failed to consider the Carrozzella factors, had found no facts related to the number of unknowing participants organized or led by Kent, and had found no facts related to whether those unknowing participants’ services were peculiar and necessary to Kent’s scheme.

The Court concluded that some the factors identified by the District Court had an “unclear nexus to the ‘otherwise extensive’ prong of § 3B1.1(a) or appear to be duplicative of factors already taken into account in calculating Kent’s offense level.”  Though the Court cautioned that it offered no opinion as to whether the enhancement might apply to Kent, it instructed the District Court, on remand, to “consider whether these factors are sufficiently related to the ‘extensive’ nature of the scheme.” 

With this decision, the Court reaffirmed its commitment to the factors set forth nearly twenty years ago in Carrozzella and emphasized that a scheme that is extensive in the colloquial sense may not be “otherwise extensive” under Section 3B1.1(a).  Defense counsel should be alert—as Kent’s counsel was here—to possible Guidelines errors and to preserve these issues for appeal.  Even in this era of non-mandatory Guidelines, a Guidelines error will almost always lead to a sentence being reversed.  See Molina-Martinez v. United States, __ S. Ct. __ (2016).

-By Susan Millenky and Harry Sandick