United States v. Friedberg

Citations: 558 F.3d 131; 103 A.F.T.R.2d (RIA) 999; 2009 U.S. App. LEXIS 4028; 2009 WL 500886Docket: 08-3763-cr

Court: Court of Appeals for the Second Circuit; March 1, 2009; Federal Appellate Court

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Daniel Friedberg pleaded guilty to five counts of tax evasion under 26 U.S.C. § 7201, resulting in a district court sentence of twenty-six months' incarceration. The court applied a two-point offense level increase for abuse of a position of trust, per U.S.S.G. § 3B1.3, during sentencing. Friedberg, who served as Grand Secretary for the Independent Order of Odd Fellows from 1986 to 2004, embezzled $562,000 between 2000 and 2004 and failed to report this income. The Presentence Investigation Report (PSR) set his base offense level at sixteen due to a tax loss exceeding $80,000 and included enhancements for failing to report over $10,000 in income. After accounting for a three-point reduction for acceptance of responsibility, the total offense level was determined to be seventeen, placing his sentencing range at 24 to 30 months.

Friedberg appealed the sentence, disputing the abuse of trust enhancement and claiming the sentence was substantively unreasonable. The appeal was reviewed for reasonableness, assessing both procedural elements—such as reliance on accurate factual findings and appropriate Guidelines calculation—and substantive elements, focusing on the overall appropriateness of the sentence. The appellate court upheld the district court's decision, affirming that the sentencing determination was proper.

Friedberg appeals his sentence, arguing it is both procedurally and substantively unreasonable. He contends that the district court erred by applying an abuse of trust enhancement, stating that while he did abuse a position of trust through embezzlement from Odd Fellows, this does not apply to his interactions with the government, the primary victim of his tax evasion. The court must assess whether the district properly considered the circumstances of his embezzlement in imposing the enhancement. Under the Sentencing Guidelines, a two-point enhancement is applicable if the defendant abused a position of trust that significantly aided the commission or concealment of the offense. The court must evaluate the defendant's role based on 'relevant conduct,' which encompasses all actions taken during the commission of the offense, including those not formally charged. Previous case law supports that uncharged embezzlement can be relevant conduct for an abuse of trust enhancement, as seen in United States v. Cianci, where the Third Circuit affirmed this principle. Several other circuits have similarly upheld abuse of trust enhancements based on analogous reasoning, confirming that a defendant’s misuse of their position can be considered relevant conduct in the context of related offenses.

Two circuit courts have reached differing conclusions regarding abuse of discretion enhancements in sentencing. The Eleventh Circuit in *United States v. Barakat* (130 F.3d 1448, 1997) reversed a sentencing enhancement based on the defendant's involvement in an illegal kickback scheme, asserting that a court may only consider conduct directly related to the offense of conviction. This interpretation has faced criticism for being overly narrow against the Sentencing Guidelines, which permit consideration of conduct beyond the elements of the conviction. Conversely, the Tenth Circuit in *United States v. Guidry* (199 F.3d 1150, 1999) ruled that an abuse of trust enhancement for tax evasion is only applicable if the defendant holds a position of trust regarding the government. In Guidry, the defendant embezzled funds while failing to report the income, but the court found the enhancement improper since she did not have a trust relationship with the victim of her tax evasion. This ruling hinges on the assumption that the government is the sole victim of tax evasion, a premise rejected by other circuits. The Seventh Circuit in *United States v. Bhagavan* (116 F.3d 189) upheld an abuse of trust enhancement, asserting that the defendant exploited his corporate position to defraud both the company and the government, indicating multiple victims in tax evasion cases. The court emphasized that it suffices if identifiable victims were placed in a position of trust that facilitated the offense. Additionally, in *United States v. Cusack* (229 F.3d 344, 2000), a similar reasoning was applied to affirm an abuse of trust enhancement stemming from fraud involving forged documents obtained through the defendant's position as a paralegal.

The Court upheld the application of an enhancement in Friedberg's sentencing due to his abuse of a position of trust, despite the primary victims of his fraud being the purchasers of forgeries. The Court reasoned that the Archdiocese acted as a secondary victim since its documents were misappropriated to facilitate the crime, aligning with precedents established in Cusack and Cianci. Friedberg's tax evasion was part of a broader embezzlement scheme that involved misusing his role as Grand Secretary of Odd Fellows to conceal illicit income. This conduct was relevant to his conviction, which justified the enhancement under U.S.S.G. 3B1.3. The Court distinguished Friedberg's case from prior rulings (Broderson, Jolly, and Nuzzo) where enhancements were reversed based on different circumstances, confirming Friedberg's clear abuse of trust. The Court also rejected Friedberg's argument that affirming this enhancement would lead to an overextension for tax evaders, clarifying that only those who engage in similar relevant conduct could face enhancements.

Friedberg's challenge to the substantive reasonableness of his sentence was denied, as the district court properly calculated the Sentencing Guidelines range and considered relevant factors under 18 U.S.C. 3553(a), imposing a sentence near the lower end of the range. This sentence was deemed reasonable within the context, leading to the affirmation of the district court’s judgment.