United States v. Michael S. Patasnik and James Cecere

Citations: 89 F.3d 63; 1996 U.S. App. LEXIS 16685Docket: 752

Court: Court of Appeals for the Second Circuit; July 11, 1996; Federal Appellate Court

Combined Opinion SummaryCombined Opinion Original

EnglishEspañolSimplified EnglishEspañol Fácil

Michael Patasnik and James Cecere operated an advance fee loan scam for nearly two years, defrauding small businesses of over $800,000 by falsely presenting themselves as lenders who could secure urgent financing. They misrepresented their capabilities, leading victims to submit proposals which they falsely evaluated, requiring upfront fees ranging from $5,000 to over $250,000, with no loans ever being disbursed.

Both defendants faced multiple charges, including interstate transportation of fraudulently obtained funds and conspiracy. Patasnik pled guilty to all counts, while Cecere was convicted after a trial. Patasnik argued ineffective assistance of counsel, which was rejected by the court, affirming his conviction. The defendants contested their sentences, resulting in a remand for resentencing.

Patasnik claimed that two of his three attorneys provided ineffective assistance, specifically citing the actions of Howard Owens and Robert Golger during his plea and sentencing hearings. The court found that the cited instances did not amount to ineffective assistance. Notably, while Patasnik argued that Owens failed to challenge the government's loss claim adequately, the court noted that Owens did address the loss amount during the plea allocution, which was relevant only for sentencing, not for the validity of the guilty plea.

Patasnik was sentenced after a jury trial involving Cecere, during which the court gathered extensive information about the fraudulent scheme they orchestrated. This trial negated the need for a separate hearing on Patasnik's factual claims, as the court had sufficient knowledge of the case. Patasnik's assertion of a conflict with his attorney, Owens, was based on Owens's statement that he would not represent Patasnik at trial without payment, which the court deemed insufficient to establish an actual conflict of interest since Owens’s interests aligned with Patasnik's in seeking payment to advocate for him. 

Patasnik also claimed that Owens failed to investigate his background, listen to his account, and prepare for potential defenses. However, these claims were unsupported, as Patasnik did not provide evidence suggesting that a trial would have been advantageous, given the overwhelming evidence against him. Furthermore, any criticisms of Golger's representation at sentencing were countered by Golger's well-prepared objections and familiarity with Patasnik's case. Overall, the court found Owens's advice to plead guilty to be reasonable, supported by the circumstances and evidence presented.

Patasnik's claim of ineffective assistance by Golger due to the failure to obtain certified copies of his past convictions was rejected. Golger had addressed this at the sentencing hearing, arguing that Patasnik's criminal history score could not be established without those copies, but the court found the presentencing report sufficient for sentencing purposes. Golger's choice to move on to other objections was deemed objectively reasonable.

Both Patasnik and Cecere contested the district court's decision to enhance their offense levels under U.S.S.G. § 3B1.1 for their roles in directing a criminal scheme. Patasnik received a four-level enhancement as an "organizer or leader" of a criminal activity involving five or more participants. The court must make specific factual findings to support such enhancements, including whether the defendant was an organizer or leader and whether the activity was extensive.

Although the district court did not find that the scheme involved five or more participants, it determined that Patasnik and Cecere utilized at least five other individuals, including their lawyer and accountant, which led to a finding of the scheme being "otherwise extensive." Patasnik argued that the evidence was insufficient to support this finding, but the guidelines allow for schemes involving fewer participants if they utilize many outsiders, which the court found applicable.

However, the district court failed to explicitly determine whether Patasnik was an "organizer or leader" of the criminal activity. The government argued that this finding was implicit in the court's imposition of the enhancement, but precedents establish that implicit findings are inadequate. Therefore, the matter was remanded to the district court for a definitive finding on whether Patasnik qualifies as an "organizer or leader" under § 3B1.1(a).

Cecere received a three-level increase in his Guidelines offense level due to his role in the offense, classified as an 'upward departure' at the discretion of the district court, unlike Patasnik's adjustment which was mandated by the Guidelines. Departures are reviewable to determine if they comply with the law and if the resultant sentence is reasonable. In this instance, the focus is on whether the Guidelines were correctly applied. The district court justified its departure based on Application Note 2 to § 3B1.1, which permits an upward departure for defendants who exercise management responsibility over a criminal organization even if they do not lead or supervise other participants. Although Cecere was not a leader, the court determined he had significant decision-making authority within the scheme, warranting the upward departure to align his sentence with those who manage larger criminal activities. A complication arises as the Application Note was added after Cecere's criminal conduct ended, raising an Ex Post Facto Clause issue. Generally, courts apply the Guidelines Manual effective at sentencing unless that would impose greater punishment than the Manual in effect at the crime's commission. If the 1994 Manual is deemed to impose a harsher sentence than the 1992 version, its application would violate the Ex Post Facto Clause; however, if the changes are merely clarifying, the 1994 Manual may be utilized.

The district court's potential application of the 1992 version of § 3B1.1 to increase Cecere's sentence is examined, focusing on the types of departures: guided and unguided. Guided departures rely on Sentencing Commission suggestions, which were not present in the 1992 version due to the absence of Application Note 2, rendering such departures unavailable. Unguided departures, authorized under 18 U.S.C. § 3553(b), require circumstances not adequately considered by the Commission. Cecere's managerial role in a fraudulent scheme is addressed by § 3B1.1, indicating that this factor was considered by the Commission, thus precluding an unguided upward departure.

The inquiry also considers whether the change to § 3B1.1 constituted more than a clarification and imposed a harsher punishment on Cecere than the 1992 version. The analysis reveals a split among circuits: four circuits would have denied any adjustment under the 1992 version, while two circuits would have seen no difference between the 1992 and 1994 Manuals. The district court's discretion in interpreting the guidelines is noted, yet the current Application Note 2 clarifies that 'manager or supervisor' pertains only to individuals, not assets. Consequently, under the 1992 Manual as interpreted by several circuits, an upward adjustment for Cecere's offense level was not permissible. Thus, the application of the 1994 Manual, which allowed for a three-level increase, violated the Ex Post Facto Clause, leading to the conclusion that the district court erred in imposing the upward departure for Cecere's role in the offense.

The district court applied a two-level sentence enhancement to Patasnik and Cecere under Section 3A1.1(b) of the Guidelines, citing the unusually vulnerable nature of the victims. This section allows for enhancement if a defendant knew or should have known that a victim was particularly susceptible due to factors such as age or financial condition. The standard of review for such factual findings is clear error. Patasnik and Cecere contested that their victims were not particularly susceptible, but recent case law, including United States v. Borst, supports that a victim's precarious financial situation can justify such an enhancement, especially if the criminal scheme exploits this desperation. Other circuits have ruled similarly regarding victims of advance fee loan schemes who were unable to secure financing due to poor credit histories. Evidence in this case indicated that the victims were in dire financial straits, with one victim described as "strangling" financially and others facing foreclosure. The court found that Patasnik and Cecere targeted individuals whose financial desperation was evident, thus confirming that they understood the vulnerability of their victims, making the enhancement appropriate. The district court's conclusion that the defendants chose their victims with full knowledge of their circumstances was not clearly erroneous.

The district court reduced Patasnik's offense level by two levels due to his clear acceptance of responsibility. However, Patasnik sought a three-level adjustment for timely notifying authorities of his guilty plea intention, which the government contested. Patasnik's proffer agreement on September 1, 1994, and subsequent plea agreement draft on September 16 did not constitute timely notification, as he only indicated his readiness to plead guilty on October 4 and officially pled guilty on October 7. This delay impaired the government's ability to prepare for trial, justifying the district court's discretion to deny the additional adjustment.

Patasnik also challenged the calculation of his criminal history score, which placed him in category VI with thirteen points, derived from multiple convictions for bad checks and a probation violation. He argued that the three bad check sentences should be considered 'related,' thus warranting only three points instead of nine. The Guidelines define related cases based on factors such as simultaneous offenses, a common scheme, or consolidation for sentencing. Patasnik claimed all sentences were consolidated by the same judge at the same time, which, if accepted, would reduce his criminal history points and potentially lower his sentencing range significantly from 115 months to between 70 and 87 months.

The district court determined that Patasnik's three sentences were not 'related,' rejecting his argument that they were consolidated for sentencing due to their concurrent nature. This finding was reviewed for clear error, referencing United States v. Gelzer, which established that concurrent sentences do not imply consolidation, especially when offenses are factually distinct and not ordered to be consolidated. The offenses in Patasnik's case occurred on different dates, involved different victims, and lacked an order of consolidation, thus affirming the district court's decision.

Patasnik also contested the addition of one criminal history point for his petit larceny conviction, which, if removed, would alter his criminal history category and Guidelines range. As he did not raise this issue in the district court, it was reviewed for plain error. The presentencing report indicated his conviction was for petit larceny, defined under New York law as including the offense of issuing a bad check. The Guidelines state that certain misdemeanors, including bad checks, should not count in the criminal history score. Due to insufficient details in the record regarding the nature of Patasnik's petit larceny conviction, the court remands the case for the district court to clarify this matter.

Additionally, the district court imposed a restitution penalty of $846,203 with monthly payments of $400, which Patasnik argued did not reflect consideration of his ability to pay as required under 18 U.S.C. § 3664(a). The government claimed that the payment plan indicated the court was aware of his financial situation. However, the record lacks evidence that the necessary factors were considered, leading to a remand for the district court to reassess the restitution order based on the statutory factors.

Ultimately, Patasnik's conviction is affirmed, but his and co-defendant Cecere's cases are remanded for resentencing in accordance with the findings discussed.

Patasnik could not have reasonably believed that failing to pay Owens would leave him without legal counsel, as the district court confirmed that Walkley was available to represent him. The court indicated that several individuals may have been knowingly involved in the criminal scheme, suggesting the possibility of identifying five or more "participants." According to Application Note 1 to § 3B1.1, a "participant" is defined as someone criminally responsible for the offense. Application Note 2, which addresses upward departures, has created a new authority that did not previously exist, despite the Sentencing Commission's assertion that the amendment was merely clarifying. Section 3E1.1(b) outlines criteria for a two-level decrease in offense level for defendants who assist authorities, specifically through providing complete information about their involvement or timely notifying authorities of their intent to plead guilty. The court granted Patasnik a two-level decrease based on his earlier willingness to plead guilty, evidenced by a proffer agreement from September 1, 1994. However, this willingness, expressed shortly before trial, did not equate to the "timely notification" needed for a three-level decrease. The offense is categorized under the guidelines as an "insufficient funds check," and under the current payment schedule, Patasnik is projected to complete payments by the year 2171.