Philadelphia Criminal Defense Blog

Zak Goldstein 12/22/22 Zak Goldstein 12/22/22

Third Circuit: Loss in Fraud Cases Means Actual Loss, Not Intended Loss

Zak T. Goldstein, Esquire - Criminal Defense Lawyer

The United States Court of Appeals for the Third Circuit, which is the federal appellate court for Pennsylvania and New Jersey, has found that the loss amount in a fraud case must be calculated based on the actual loss inflicted on the victim. Despite suggestions in the commentary to the sentencing guidelines, loss means actual loss - not the intended, hypothetical loss that a defendant may have attempted to cause. This will drastically reduce the guideline range for sentencing purposes for many federal criminal defendants.

In this case, a jury convicted Banks of wire fraud, and the District Court sentenced him to 104 months’ incarceration and three years’ supervised release. On appeal, Banks argued multiple issues, but the issue of significance was whether the District Court erred in applying the loss enhancement, USSG §2B1.1, to the fraud guideline in the United States Sentencing Guidelines because there was no “actual loss.”

The Third Circuit concluded that the loss enhancement in the Guideline’s application notes impermissibly expands the word “loss” to include both intended loss and actual loss. Thus, the District Court erred when it applied the loss enhancement because Banks’s crimes caused no actual loss.

The facts of United States v. Banks

In January 2016, a federal grand jury indicted Frederick Banks for wire fraud, aggravated identity theft, and false statements. The wire fraud charges related to interlocking schemes carried out by Banks to fraudulently gain the money and property of others in relation to the FOREX.COM international exchange system by submitting phony registration information for himself and then using those registrations to execute bogus trades that would drop money into bank accounts that he had set up.

How do you calculate loss in federal fraud cases?

Banks was eventually convicted. He proceeded to sentencing. Before issuing a sentence in a federal case, the district judge must always carefully calculate the applicable sentencing guidelines. In fraud and theft cases, the guidelines are based very heavily on the amount of loss in question. Thus, stealing a small amount can lead to a recommended sentence of federal supervised release or a short jail sentence, while stealing a large amount can lead to a recommendation of an incredibly long amount of prison time. The issue becomes complicated because the definition of loss is not so clear. In this case, the issue was whether loss means the amount that the victims actually lost or instead included the amount that Banks tried to steal.

In computing a sentencing range, Banks’s offense level under the United States Sentencing Guidelines, as calculated by the district judge, included a special offense characteristic for the attempted loss Banks intended to inflict on Gain Capital. The attempted loss, based on fraudulent deposits, was $324,000. Therefore, the base offense level was increased by 12 levels because the attempted loss was greater than $250,000 but less than $550,000. USSG §2B1.1(b)(1)(G) (As a general rule, loss is the greater of actual loss or intended loss, pursuant to Application Note 3 to the sentencing guidelines).

The 12-level increase raised Banks’s adjusted offense level from 7 to 19. During sentencing, the District Court explained that the Sentencing Guidelines defined loss to not only include the actual loss, but to also include the intended loss. And the application notes indicate that the intended loss counts for purposes of calculating the loss amount even if it’s determined to be improbable or impossible that such a loss could have occurred. In this case, the victim suffered $0 in actual losses. The district court, however, used the intended loss amount, which was much higher than $0.

Recently, however, the Courts of Appeals have begun to question whether the application notes, which are essentially comments to the sentencing guidelines, are binding, or whether the court should be limited to using the guideline itself.

The district court used the intended loss figure, and the defendant appealed. On appeal, the Third Circuit reversed and remanded for a new sentencing, finding that loss means actual less. The Court of Appeals relied on Kisor v. Wilkie and Auer v. Robbins in interpreting the Guidelines. Under Kisor, a court must exhaust all the “traditional tools” of construction and consider the “text, structure, history, and purpose of a regulation.” Only then does a court apply Auer, which requires courts to defer to the Sentencing Commission’s commentary for a Guideline unless that interpretation is plainly erroneous or inconsistent with the Guideline.

The Court used a “plain text” analysis to see if there was ambiguity in the way the section was written. The Guideline does not mention “actual” versus “intended” loss; that distinction appears only in the commentary. That absence alone indicates that the Guideline does not include intended loss because there is nothing ambiguous about the term loss. Thus, the ordinary meaning of “loss” in the context of § 2B1.1 is “actual loss.

The Court also reviewed other sources for their definition of loss citing Webster’s New International Dictionary and the 1988 edition of Webster’s Ninth New Collegiate Dictionary. Both of which had matching definitions of “loss.” Next the Court reviewed sister jurisdictions on their conclusions and cited the Sixth Circuit which concluded the definition to be actual loss.

Because the commentary expanded the definition of “loss” by explaining that generally “loss is the greater of actual loss or intended loss,” the Court determined the commentary should have no weight. In other words, the commentary conflicted with the plain language of the guideline itself and so could not be applied.

Ultimately, the Third Circuit Court of Appeals held that “loss” in the context of U.S.S.G. § 2B1.1 is not ambiguous. Therefore, the Court vacated the judgment of sentence and remanded the case. The district court must re-sentence Banks without the additional levels for intended loss.

Facing criminal charges? We can help.

Goldstein Mehta LLC Criminal Defense Lawyer Zak Goldstein

If you are facing criminal charges or under investigation by the police, we can help. We have successfully defended thousands of clients against criminal charges in courts throughout Pennsylvania and New Jersey. We have successfully obtained full acquittals in cases involving charges such as Conspiracy, Aggravated Assault, Rape, and Murder. We have also won criminal appeals and PCRAs in state and federal court. Our award-winning Philadelphia criminal defense lawyers offer a free criminal defense strategy session to any potential client. Call 267-225-2545 to speak with an experienced and understanding defense attorney today.

Zak Goldstein 9/18/22 Zak Goldstein 9/18/22

Attorney Goldstein Argues in Front of Supreme Court of Pennsylvania

Philadelphia criminal defense lawyer Zak T. Goldstein, Esquire, recently argued in front of the Pennsylvania Supreme Court in the case of Commonwealth v. J.W. In that case, the defendant had been convicted in the Montgomery County Court of Common Pleas of aggravated assault and related charges. The Commonwealth alleged that J.W. shot another man in the head and injured him. J.W.’s co-defendant was wearing a probation GPS monitor at the time, and video evidence showed J.W. and the co-defendant together earlier in the day. The GPS evidence placed the co-defendant at the scene of the shooting. Video surveillance also showed that more than one person was involved, so the Montgomery County jury convicted J.W. based on his link to the co-defendant from being seen with him earlier in the day, the GPS evidence, and a number of recanted statements from witnesses.

J.W. was represented by different counsel at trial. He retained Attorney Goldstein for the appeal to the Pennsylvania Superior Court. On appeal, Attorney Goldstein argued that the GPS evidence was hearsay which should not have been introduced into evidence at trial. The Commonwealth had agreed that the GPS evidence was hearsay but argued that it was admissible pursuant to the business records exception, which allows otherwise inadmissible hearsay to be introduced when the hearsay is kept in the normal course of business and appears to be reliable.

The Superior Court rejected the argument, holding in a matter of first impression that computer generated evidence like GPS records is never hearsay because they are the statements of computers rather than humans. Attorney Goldstein filed a petition for allowance of appeal to the Pennsylvania Supreme Court, and the Supreme Court granted the petition to determine whether the rule against hearsay prohibits evidence like GPS records. Attorney Goldstein therefore participated in oral argument before the Court in Philadelphia, and the Court will now decide this important issue of law.

Facing criminal charges? We can help.

Goldstein Mehta LLC Criminal Defense Lawyers

If you are facing criminal charges or under investigation by the police, we can help. We have successfully defended thousands of clients against criminal charges in courts throughout Pennsylvania and New Jersey. We have successfully obtained full acquittals in cases involving charges such as Conspiracy, Aggravated Assault, Rape, and Murder. We have also won criminal appeals in state and federal court. Our award-winning Philadelphia criminal defense lawyers offer a free criminal defense strategy session to any potential client. Call 267-225-2545 to speak with an experienced and understanding defense attorney today.

Zak Goldstein 6/16/21 Zak Goldstein 6/16/21

United States Supreme Court Limits Reach of Computer Fraud and Abuse Act

The United States Supreme Court has decided the case of Van Buren v. United States, holding that a person does not violate the Computer Fraud and Abuse Act (“CFAA”) by accessing information on a computer or network to which the person has lawful access even if they access the information for improper reasons. This is a huge win for everyday individuals because had this case been decided differently, potentially millions of people could have been subjected to criminal liability for violating their employers’ policies. As such, this decision acts as a check on the government from prosecuting behavior that is not inherently criminal.

Van Buren v. United States

The defendant, a former police sergeant, worked for a Georgia police department. The defendant and his fellow officers were warned about a certain individual in town. This individual was known to police as “very volatile” and officers were told to be careful when around him. Despite these warnings, the defendant formed a personal relationship with him. Eventually, the defendant asked the individual for a personal loan. Unbeknownst to the defendant, this individual recorded his conversation with him and then took it to the local sheriff’s office where he complained that the defendant tried to “shake him down for money.” Eventually, the FBI obtained this taped conversation.

The FBI then decided to run a sting operation on the defendant. They concocted a scheme where the defendant would run a license plate for the individual in exchange for $5,000. The defendant then used the state law enforcement computer database to search for this license plate. This would have violated his police department’s policy. After obtaining the FBI-created license-plate entry, the defendant then reached out to the individual. After he made this contact, the defendant was subsequently arrested and charged with a felony violation of the CFAA which subjects an individual to criminal liability to anyone who “intentionally accesses a computer without authorization or exceeds authorized access.” The defendant proceeded by jury trial where he was found guilty of the aforementioned charge and sentenced to 18 months in prison. The defendant then filed a timely appeal with the Eleventh Circuit.

The Eleventh Circuit’s Decision

On appeal, he argued that the CFAA’s clause that states “exceeds authorized access” applies only to those who obtain information to which their computer access does not extend, not to those who misuse access that they already have. The Eleventh Circuit disagreed with the defendant’s argument. The Eleventh Circuit held that the defendant violated the CFAA by accessing the law enforcement database for an “inappropriate reason.” Undeterred, the defendant filed a petition for certiorari with the United States Supreme Court. The Supreme Court agreed to hear his case.

What is the CFAA?

The CFAA subjects individuals to criminal liability to anyone who “intentionally accesses a computer without authorization or exceeds authorized access” and then subsequently obtains information based on this improper access. The statute defines the term “exceeds authorized access” to mean “to access a computer with authorization and to use such access to obtain or alter information in the computer that the accessor is not entitled so to obtain or alter.” The CFAA applies to all information from all computers that connect to the Internet. In addition to criminal penalties, the statute also allows persons who suffered damages to sue the perpetrators for monetary relief.

The U.S. Supreme Court’s Decision

The United States Supreme Court held that the defendant did not violate the CFAA. In making its decision, the Supreme Court first reviewed the plain language of the statute. The Court focused on the clause “exceeds authorized access” because that was the most relevant text in the defendant’s case. The Supreme Court held that an individual “exceeds authorized access” when he accesses a computer with authorization, but then obtains information located in a particular area of a computer that is off-limits to him. In other words, an individual only violates the CFAA when he accesses information that he was not entitled to obtain. An individual does not violate the CFAA if he accesses information, that he is otherwise entitled to access, but does so in violation of a company policy. The Government had argued for a much more expansive view of the statue. However, the Court rejected this interpretation because it would have allowed the government to prosecute individuals when they violated workplace policies. Consequently, the defendant’s conviction is reversed and his sentence is vacated.

Facing Criminal Charges? We Can Help.

Goldstein Mehta LLC Criminal Defense Attorneys

If you are facing criminal charges or under investigation by the police, we can help. We have successfully defended thousands of clients against criminal charges in courts throughout Pennsylvania and New Jersey. We have successfully obtained full acquittals in cases involving charges such as Conspiracy, Aggravated Assault, Rape, and Murder. Our award-winning Philadelphia criminal defense lawyers offer a free criminal defense strategy session to any potential client. Call 267-225-2545 to speak with an experienced and understanding defense attorney today.

Zak Goldstein 2/14/19 Zak Goldstein 2/14/19

PA Superior Court Lowers Bar for Forgery Convictions

Zak T. Goldstein, Esq. - Philadelphia Criminal Defense Attorney

The Pennsylvania Superior Court has decided the case of Commonwealth v. Green, affirming the defendant’s conviction for forgery where the evidence showed that the defendant cashed a check that he knew should not have been made out to him. This decision is problematic for future forgery defendants as it could make it easier for prosecutors to prove that a given defendant had the knowledge necessary to be convicted of forgery.

The Facts of Commonwealth v. Green

In August 2015, St. Moritz Labor Services, a temporary staffing agency, discovered 18 checks drawn on its account that had not been issued in accordance with company procedures. These checks were fraudulent duplicates of lawfully issued checks. The payees were not known to St. Moritz. Further, the amounts on the checks were much higher than St. Moritz standard payroll checks. One of these checks was made payable to the defendant. The defendant never worked for St. Moritz and had no affiliation with that entity. On August 3, 2015, the defendant cashed a St. Moritz check at a local K-Mart.

St. Moritz reported the checks to the police, and the police began an investigation. During the course of their investigation, Officer Green of the Whitehall Police Department contacted the defendant and asked to speak with him regarding a cashed check. According to Officer Green, the defendant stated “[I] only did it once.” After he was given his Miranda rights, the defendant stated that he cashed the check to pay off fines. The defendant stated that he received the check in the mail and he did not know where the check came from or who sent the check. The defendant confirmed that he never worked for St. Moritz and admitted that he did not have any reason to receive a check from that company.

Police arrested the defendant and charged him with forgery, access device fraud, and bad checks. At the preliminary hearing, a magistrate judge dismissed the access device fraud and bad check charges. The defendant proceeded by way of bench trial, and the judge found him guilty and sentenced him to two years’ reporting probation and restitution. The defendant then filed a timely appeal. On appeal, a divided Superior Court panel reversed the judgment of sentence. Thereafter, the Commonwealth sought en banc review, which the Superior Court granted. On appeal, the defendant challenged whether the evidence was sufficient to satisfy the mens rea element of the forgery charge.

What is Forgery?

18 Pa. C.S.A. § 4101 provides for the crime of forgery. A person is guilty of forgery if, with the intent to defraud or injure anyone, the actor either: 1) alters a writing without his authority; 2) makes, completes, executes…issues or transfers a writing so that it purports to be the act of another who did not authorize the act; or 3) utters any writing that he knows to be forged.

As a practical matter, forgery is a difficult crime for the Commonwealth to prove. The Commonwealth typically needs multiple witnesses to prove their case, which often makes it difficult for the Commonwealth to get ready for a preliminary hearing or trial. Because prosecutors may not use hearsay evidence at a trial, they often have significant problems in proving forgery cases. For example, prosecutors generally need to present the testimony of the witness or witnesses who saw a defendant use the allegedly forged instrument, the officer who arrested him or her, the detective or bank investigator who investigated the case, and a custodian of records from the organization that owns the checking account in question. Getting all of these witnesses to appear at the same time can be difficult, and the failure to do so often results in the dismissal of cases.

Additionally, proving the mens rea for forgery is also difficult for the Commonwealth. Forgery is not a strict liability crime. In other words, just because one possesses a forged check does not mean that one is guilty of forgery. As such, trial courts are supposed to heavily scrutinize a defendant’s actions to see if they are guilty of this offense and whether there is any evidence that the defendant actually forged the document or had reason to know that the document was in fact forged. One of the seminal cases on this issue (and one that was analogized in the instant case) was Commonwealth v. Gibson. In Gibson, the Pennsylvania Superior Court held that the defendant in that case did not commit the crime of forgery even though he possessed a forged check. The reason was because, in Gibson, the circumstances did not show that he was trying to commit a fraud or any other type of wrongdoing. After presenting the forged check, the defendant in Gibson presented his identification when asked for it, did not attempt to flee when asked for said identification, and otherwise did not engage in any suspicious behavior when he attempted to cash said check. Because of the lack of suspicious or criminal behavior, the Pennsylvania Superior Court held that the Commonwealth failed to prove that the defendant knew that the check was forged. Without the requisite level of knowledge, a defendant cannot be convicted of forgery.

A Divided Pennsylvania Superior Court Affirms the Defendant’s Conviction

In this case, a divided en banc panel of the Pennsylvania Superior Court affirmed the defendant’s conviction for forgery. In the split decision, the Pennsylvania Superior Court held that, unlike the defendant in Commonwealth v. Gibson, the defendant possessed the requisite mens rea to commit the crime of forgery. Specifically, the majority opinion focused on the defendant’s statement to the police that “he only did it once.” According to the Court, this statement and the defendant’s admission that he had no affiliation with St. Moritz or any reason to receive a check from them established that he had the necessary mens rea to justify a forgery conviction.

Facing criminal charges? We can help.

If you are facing criminal charges or under investigation by the police, we can help. We have successfully defended thousands of clients against criminal charges in courts throughout Pennsylvania and New Jersey. We have obtained full acquittals and dismissals in cases involving charges such as Conspiracy, Aggravated Assault, Forgery, Access Device Fraud, Rape, and Attempted Murder. Our award-winning Philadelphia criminal defense lawyers offer a free criminal defense strategy session to any potential client. Call 267-225-2545 to speak with an experienced and understanding defense attorney today.