United States v. Louis Vargas

Citations: 41 F.3d 1515; 1994 U.S. App. LEXIS 39026; 1994 WL 622987Docket: 93-50236

Court: Court of Appeals for the Ninth Circuit; November 8, 1994; Federal Appellate Court

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Louis Vargas appeals the upward departure of his sentence for securities fraud, arguing the district court erred in both its authority to depart based on loss amount and the reasonableness of the departure's extent. The Ninth Circuit affirms the court's authority to depart due to the extraordinary loss involved but remands for clarification on the extent of the departure. According to 18 U.S.C. § 3553(b), a sentence must align with the guidelines unless exceptional circumstances exist that were not adequately considered by the Sentencing Commission. The court applies a three-step review process for departures: assessing the legal authority to depart, evaluating factual findings for clear error, and determining if the departure's extent is unreasonable under 18 U.S.C. § 3742(e)(3) and (f)(2). Under U.S.S.G. § 2F1.1, which governs securities fraud, losses exceeding $5 million warrant an 11-level increase, indicating that the guidelines consider loss amount as an aggravating factor. However, the guidelines also allow for departures if losses significantly surpass this threshold, acknowledging that extremely large losses might not be fully addressed. Vargas's reliance on United States v. Martinez is misplaced, as that case dealt with a different guideline (section 2D1.1) where the Commission had already accounted for the quantity of cocaine, unlike in Vargas's case.

Martinez is not applicable to this case due to the absence of enhancement guidelines for quantities over 50 kilograms of cocaine in section 2D1.1, while section 2F1.1 explicitly allows for upward departures in fraud cases where losses exceed $5 million. The district court's departure from the Guidelines meets the first part of the Lira-Barraza test, which permits upward departures for significant losses as noted in the commentary for section 2F1.1. The second prong requires a review of the factual findings supporting the departure, assessed for clear error. Vargas does not contest these factual findings but disputes the reasonableness of the four-level departure. The reasonableness of the departure is linked to the court’s factual determinations regarding loss amounts, which were not specifically made.

While there is consensus that Vargas' victims incurred losses of at least $10 million, there is contention over the total losses, with Vargas and the government stipulating losses between $10 and $20 million, and the government later asserting approximately $28 million. The presentencing report cites actual losses at $26,696,105.52, but the court did not adopt a definitive figure. The court noted the fraud loss as exceeding $5 million, suggesting a range up to $28 million without confirming either the stipulated or the government’s figure. 

Under the third prong of Lira-Barraza, the reviewing court assesses if the extent of the departure is unreasonable, which hinges on the district court's failure to clarify the loss amount. The significant difference between the low-end ($10 million) and high-end ($28 million) figures—$18 million—exceeds mere imprecision, necessitating a remand for a clear loss determination, unless the departure's extent is reasonable based on both figures. The court must exercise discretion respecting the Guidelines' structure while providing detailed reasons for the sentence imposed, as highlighted in United States v. Hicks.

The reviewing court does not search the record for reasons to justify a sentence departure but relies on the reasons provided by the sentencing court. If the district court does not adequately explain the extent of the departure, the appellate panel must vacate and remand the case. In this instance, the district court cited the severity of the crime and the significant financial loss exceeding five million dollars as justification for a four-level upward departure. However, the court failed to explain why this specific degree of departure was appropriate according to the standards of the Guidelines. As a result, the appellate court vacated Vargas' sentence and mandated a remand for resentencing. On remand, the district court must determine the actual loss amount and provide a detailed justification if it chooses to depart upward again. The appellate court acknowledged that a financial loss exceeding five million dollars is a valid basis for an upward departure but emphasized the need for a reasoned explanation aligned with the Guidelines' framework. The court rejected the government's argument to uphold Vargas' sentence based on later versions of the Guidelines, noting that alterations do not influence the preexisting law within this circuit. The case was vacated and remanded for further proceedings, and the disposition is not intended for publication.