
USCA1 Opinion

	




                            United States Court of Appeals                                For the First Circuit                                 ____________________          Nos. 96-1021 & 1022                              UNITED STATES OF AMERICA,                                      Appellee,                                          v.                       ANTHONY G. OLBRES and SHIRLEY A. OLBRES,                                     Appellants.                                 ____________________                                     ERRATA SHEET                                     ERRATA SHEET               The  opinion of  this Court  issued on  November 1,  1996 is          corrected as follows:               On page 5, line 20: end the paragraph after "appeal."  Begin          new paragraph on line 21, with "Three"               On page 17, line 6: change "appears" to "appeared"               On page 17, line 10: delete apostrophe after "Guidelines"                            United States Court of Appeals                                For the First Circuit                                 ____________________          Nos. 96-1021               96-1022                              UNITED STATES OF AMERICA,                                      Appellee,                                          v.                       ANTHONY G. OLBRES and SHIRLEY A. OLBRES,                                     Appellants.                                 ____________________           APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF                                    NEW HAMPSHIRE                    [Hon. Steven J. McAuliffe, U.S.District Judge]                                               __________________                                 ____________________                                        Before                         Selya, Cyr and Lynch, Circuit Judges,                                               ______________                                 ____________________               Gregory G. Katsas, with whom John B. Nalbandian, Jones, Day,               _________________            __________________  ___________          Reavis  &  Pogue, Scott  P. Lopez,  Terry  Philip Segal,  Segal &          ________________  _______________   ___________________   _______          Feinberg,  Steven M. Gordon, and  Shaheen & Gordon  were on brief          ________   ________________       ________________          for appellants.               Karen   Quesnel,  Attorney,  Tax   Division,  Department  of               _______________          Justice,    with  whom  Loretta C.  Argrett,  Assistant  Attorney                                  ___________________          General, and   Robert E.  Lindsay and Alan  Hechtkopf, Attorneys,                         __________________     _______________          Tax Division, Department of Justice, were on brief for appellee.                                 ____________________                                   November 1, 1996                                 ____________________                      LYNCH, Circuit Judge.  This tax evasion case raises                      LYNCH, Circuit Judge                             _____________            two sentencing  issues, one of import to tax cases and one of            larger import.  We hold that a sentence in a tax evasion case            must  be  predicated  on  findings  as  to  amounts  that the            government has  proven were willfully  evaded and that  it is            unlikely the requisite findings were made here.  We also hold            that there is no  categorical imperative prohibiting the very            consideration of whether a case is so unusual as to warrant a            downward departure  based on  the loss  of  jobs to  innocent            employees  occasioned by  the  imprisonment of  the defendant            owner of a  small business.  We reject the  argument that the            United  States  Sentencing Commission's  comment discouraging            departures based on the  "vocational skills" of the defendant            categorically  prohibits consideration  of such  job loss  to            third parties.  Accordingly, we  vacate defendants' sentences            and remand.                                            I                      Anthony and Shirley Olbres, husband and wife, run a            business,  Design Consultants  ("DC"), which  creates exhibit            booths for trade shows.  Design Consultants currently employs            twelve people in addition to Anthony Olbres, who is president            of  the company, and Shirley Olbres, who serves as DC's part-            time bookkeeper.   In 1987,  Mr. and Mrs. Olbres  had a total            income of $837,480.   In  June 1987, they  purchased a  Rolls            Royce  Corniche convertible  for  $158,000.   They drove  the                                         -2-                                          2            Rolls  to a  local restaurant  in Exeter,  New Hampshire.   A            passing IRS employee saw the luxury car parked outside of the            restaurant.  His curiosity engaged, he wrote down the license            plate  number with  the  intention of  identifying the  car's            owner  and examining  his  or  her  tax  returns.    The  IRS            employee's  curiosity led to a 1989 audit of the Olbres' 1987            joint  tax  returns and  eventually  resulted  in a  criminal            investigation.    The  investigation  led the  government  to            conclude that  Mr. and Mrs. Olbres had committed criminal tax            evasion.                     Mr.  and Mrs. Olbres were indicted on three counts of            criminal tax evasion  related to the income  tax returns they            filed for  the years 1986, 1987,  and 1988.  See  26 U.S.C.                                                           ___            7201.   The returns  understated the couple's  taxable income            for  those  years by  approximately  $153,000,  $749,000, and            $175,000,  respectively.  For 1987, the year with the bulk of            the unreported income, Mr. and  Mrs. Olbres failed to  report            income  from three  sources: 1) payments,  totaling $630,000,            from business  customers that were deposited  directly into a            business  savings  account  and  not  recorded  in  the  cash            receipts  journal  provided  to the  Olbres'  accountant;  2)            rental income, totaling $22,000, from  various properties the            couple  owned;  and 3)  rebates,  totaling  $97,000, paid  by            shipping  companies utilized  by  DC.   Mr.  and Mrs.  Olbres            conceded all  the understatements  but defended on  the basis                                         -3-                                          3            that  none were willful.   The couple insisted  that they had            relied on  their accountant,  who had prepared  their returns            since  1977.   That accountant  died before  the trial.   The            couple  attributed  other errors,  including  the failure  to            report the shipping rebates, to Mrs. Olbres, who was depicted            as a well-meaning but untrained bookkeeper.                     The jury acquitted Mr. and Mrs. Olbres on the charges            relating  to the 1986 and  1988 returns and  convicted on the            charge  related to  the 1987  return.   The jury  verdict was            general; the district judge instructed the jury that it could            convict on a count if  it found that Mr. and Mrs.  Olbres had            willfully attempted to evade  a "substantial" amount of taxes            for the relevant year.  There was no specific jury finding as            to the amounts willfully evaded, or as to whether the willful            evasion  encompassed some or all of  the categories of income            involved.                     The  district court  granted  the Olbres'  motion for            judgment of  acquittal on the conviction relating to the 1987            tax return on  the basis  that the government  had failed  to            prove   willfulness beyond a reasonable doubt.  United States                                                            _____________            v. Olbres,  881  F.  Supp. 703,  706  (D. N.H.  1994).    The               ______            government appealed, and  this court  reversed, holding  that            there was  evidence of  willfulness sufficient to  uphold the            conviction.   United States v.  Olbres, 61  F.3d 967,  970-73                          _____________     ______            (1st Cir.), cert. denied, 116 S.  Ct. 522 (1995).  This court                        _____ ______                                         -4-                                          4            did  not  parse  the  evidence  as to  the  specific  amounts            willfully underreported for the year 1987.  See id.                                                        ___ ___                    On remand, the district court determined that the tax            loss caused by Mr. and Mrs. Olbres totalled $632,158,  which,            according to the Sentencing Guidelines' Tax Table, places the            Olbres' base offense level at 15.  See U.S.S.G.   2T4.1.  The                                               ___            $632,158  amount included the $470,236  tax loss from 1987 as            well  as the  tax  losses from  1986  and 1988,  despite  the            defendants' challenge  to  the inclusion  of certain  amounts            from 1987 and of the entire 1986 and 1988 amounts.                     The district  court  judge  sentenced  Mr.  and  Mrs.            Olbres to 18  months in prison, the  lowest possible sentence            within  the  level 15  sentencing  range  for their  Criminal            History  Category of I.  That sentence is predicated upon the            willfulness requirement  having been  met for the  entire sum            underreported  for 1987.  It is also predicated on the entire            sums  underreported for 1986 and  1988, as the  court felt it            was required  to consider those amounts  as relevant conduct,            despite the acquittals.  Stating that it was legally required            to  do so, the court  rejected Mr. and  Mrs. Olbres' argument            that there should  be a downward departure  from the sentence            because sending them to prison would mean the demise of their            small business  and loss of  employment for a  dozen innocent            employees.  It is from these determinations that Mr. and Mrs.            Olbres appeal.                                         -5-                                          5                    Three issues are argued.   Mr. and Mrs.  Olbres argue            that the district court erred in failing to determine whether            they  willfully  evaded  all  of the  taxes  on  which  their            sentence was  based.  They also argue  that the consideration            of  the acquitted conduct stemming from the 1986 and 1988 tax            years  violated  the Sentencing  Reform  Act  and the  Double            Jeopardy  and  Due  Process   Clauses  of  the  Constitution.            Finally,  Mr. and Mrs.  Olbres argue that  the district court            erred  as a matter  of law in  adopting a per  se rule that a            trial  court  may  never  consider a  downward  departure  to            prevent termination of an ongoing business enterprise and the            loss  of  employment to  innocent  persons.   We  vacate  the            sentence and remand for further proceedings on the first  and            third grounds and do not  reach the Olbres' acquitted conduct            argument.                                          II                    The United States and defendants agree on this appeal            that for  sentencing purposes the trial judge was required by            Rule 32(c)(1), Fed. R.  Crim. P., to find  that Mr. and  Mrs.            Olbres  willfully attempted to evade all of the taxes used in            determining their  base offense level.   The dispute  is over            whether the  court adequately,  or ever, made  such findings.            The government contends that although the trial court made no            specific findings, the trial judge, by expressly adopting the            findings  of  the Presentence  Investigation  Report ("PSR"),                                         -6-                                          6            implicitly  found  that Mr.  and  Mrs.  Olbres had  willfully            evaded  taxes  on  income  of  approximately   $1.1  million,            encompassing the tax  years 1986,  1987, and 1988.   Mr.  and            Mrs. Olbres contend that  the trial court improperly declined            to make  such findings  and instead erroneously  assumed that            the  general jury  verdict  and this  court's opinion  in its            sufficiency review  established that  the entire sum  of $1.1            million was willfully evaded.  Because the  record is unclear            as to what the district court actually found, and in light of            our disposition  of the  downward departure issue,  we vacate            the Olbres'  sentences and  remand  for further  proceedings.            See United States  v. Garafano,  36 F.3d 133,  135 (1st  Cir.            ___ _____________     ________            1994).                    In order  to determine  the base offense  level under            the  Sentencing  Guideline for  tax  evasion,  the sentencing            court  must  determine  the  amount  of  "tax  loss"  to  the            government.   U.S.S.G.    2T1.1(a)(1987).   In  the pertinent            1987 Guidelines Manual, "tax  loss" is defined as "the  total            amount of tax that the taxpayer evaded or attempted to evade,            including interest to  the date of filing of  an indictment."            Id.             ___                    The primary difficulty presented by this case is that            the  jury, in order to convict,  was not required to find the            total  amount  of  the  tax  that  the  taxpayers  evaded  or            attempted to  evade.   Indeed, the  jury was instructed  that                                         -7-                                          7            "[t]he government does not have to prove the exact amount the            defendants owed, nor  does the government have to  prove that            all the tax charged in the indictment was evaded."  Thus, the            sentencing judge is required to make a determination which is            not necessarily made by the jury  and, in this case, was  not            made.                      Further  enlarging the  sentencing judge's  task, the            Guidelines also  state  that "[w]hen  more than  one year  is            involved, the tax losses are to be added."  U.S.S.G.   2T1.1.            The   Guidelines  Commentary  explains  this  instruction  as            follows:                    While the definition  of tax loss corresponds                    to "criminal deficiency," its amount is to be                    determined  by the  same rules  applicable in                    determining any other  sentencing factor.  In                    accordance   with   the  "relevant   conduct"                    approach  adopted  by  the   guidelines,  tax                    losses resulting from more than  one year are                    to   be  added  regardless   of  whether  the                    defendant is convicted of multiple counts.              U.S.S.G. Pt. T, comment. 1 (1987).                    It is against this background that the district court            stated  the  task  it  thought  it  faced  in  light  of  the            government's position at that time:                    With  regard to  the amounts  evaded, I  find                    that  the  proper  means  of  calculating the                    amount of tax loss or the amount evaded under                    the Sentencing Guidelines requires  the Court                    to look to the amounts not included as income                    on the return that  should have been included                    as income  and then to compute  the tax based                    upon that  income plus interest based  on the                    statutory rate from the date of return to the                    date of indictment.                                         -8-                                          8            This  is a  correct  statement  of  the  first  step  of  the            analysis.   The next step, as the government now concedes, is            to identify the  amount of  taxes willfully evaded.   We  are            left with uncertainty as to whether that step was taken.   In            determining what the  district court  did and did  not do  at            sentencing, "[w]e are guided . .  . by the record -- a record            that  flavors the  judge's  words  and concomitantly,  offers            insights  into his thinking."   United  States v.  Tavano, 12                                            ______________     ______            F.3d 301, 304 (1st Cir. 1995).                    In the  court's most express  statement of  findings,            the   judge  stated   that  he   adopted  the   findings  and            recommendations  set forth in the  PSR.  The  court then held            that  Mr. and Mrs. Olbres could be sentenced for all "amounts            not  included as  income that  should have  been included  as            income."   Other than the adoption of the PSR's findings, the            judge made  no explicit finding regarding  the willfulness of            evasion on specific amounts.                     In many instances, a general statement that the judge            has adopted all the  factual statements contained in  the PSR            satisfies  the requirements of  Rule 32(c), Fed.  R. Crim. P.            United  States v.  Skrodzki, 9  F.3d 198,  202 n.7  (1st Cir.            ______________     ________            1993) (express  adoption of  PSR defeats Rule  32 challenge);            United  States  v.  Barnett,  989  F.2d  546,  551  n.5  (1st            ______________      _______            Cir.)(checking a  box on judgment form  indicating that court            adopted all findings from PSR constituted specific finding as                                         -9-                                          9            to  the  quantity of  drugs  for which  defendants  were held            responsible),  cert.  denied,  510  U.S.  850 (1993);  United                           _____  ______                           ______            States v. Wells Metal  Finishing, Inc., 922 F.2d 54,  58 (1st            ______    ____________________________            Cir.  1991)(judge briefly  explained sentence at  hearing and            then  completed  memorandum  indicating that  he  adopted all            factual  statements in  PSR,  noting that  one fact  had been            disputed).  Here,  however, because the  PSR did not  resolve            all  of the disputed factual issues, simple reliance on it is            not enough.1                    The original PSR made no reference to willfulness and            did  not consider the defendants' acquitted conduct.  After a            government objection, the PSR was  amended to include the tax            loss amounts attributed  to the acquitted  conduct.  The  PSR            addendum  noted  that,  in  the district  court's  Order  for            Acquittal  on the  1987  charge, the  judge  conceded that  a            different  result would obtain  under the civil preponderance                                            ____________________            1.  This Circuit has also repeatedly held that an implicit            resolution of disputed facts is sufficient "when the court's            statements and the sentence imposed showed that the facts            were decided in a particular way."  United States v. Van, 87                                                _____________    ___            F.3d 1, 3 (1st Cir. 1996)(citing cases).  "As a general rule,            a trial court lawfully may make implicit findings with regard            to sentencing matters, incorporating by reference suitably            detailed suggestions limned in the PSI Report or advanced by            a party."  Tavano, 12 F.3d at 307; see also United States v.                       ______                  ___ ____ _____________            Ovalle-Marquez, 36 F.3d 212, 227-28 (1st Cir. 1994)(finding            ______________            that trial court's statement that offense level was "based .            . . on the amount of cocaine involved in the offense" showed            that the court adopted the PSR's recommendations and            implicitly made the necessary findings as to drug quantity),            cert. denied, 115 S. Ct 1322 (1995).  In this case, however,            _____ ______            the PSR was not "suitably detailed."                                         -10-                                          10            standard.  See Olbres, 881 F. Supp. at 717.  The PSR addendum                       ___ ______            concluded:                      Although the Court's  remarks only  addressed                    [1987],  there  is little  difference between                    the  evidence submitted  as to  the acquitted                    conduct. . . .   The question regarding their                    intent is the same, regardless of whether one                    is   focusing  on  [1987]  or  the  acquitted                    conduct.                                  This reference back to  the district court's order is            ineffective;  whether  defendants  willfully  evaded  all, or            specific portions of, the tax on their 1987 unreported income            is  not clearly  established in  that order  or in  any other            statement made  by the  district court.   As defense  counsel            points out,  a willfulness finding  for each of  the disputed            amounts  stemming from  factually distinct  sources for  each            year  in question  (as to  each of  which different  lack-of-            willfulness arguments are made) is necessary here in order to            determine the correct base offense level.2                    Lastly, at sentencing the district court also  stated            that "willfulness isn't an issue . . . as to [19]87"  because            this court, in its  sufficiency opinion, "found a  jury could            find  beyond a  reasonable  doubt that  intent was  present."            That  appellate opinion  did  not, and  could  not, make  any                                            ____________________            2.  It is the defendants' position, for example, that the            guilty verdict could have been based on as little as $22,000            of unreported rental income in 1987.                                         -11-                                          11            findings of willful evasion of any specific amount of taxes.3            Rather,  the  opinion  addressed  whether  there was  legally            sufficient evidence  to support a  verdict that Mr.  and Mrs.            Olbres willfully  evaded a  "substantial" amount of  taxes on            their 1987 income.  See generally Olbres, 61 F.3d 967.                                 ___ _________ ______                    As  we are unable to settle  the issue of willfulness            findings  based  on the  jury's  general  verdict, the  trial            judge's  statements,  or  the  documents he  incorporates  by            reference,  see United States v. Tavares, 93 F.3d 10, 16 (1st                        ___ _____________    _______            Cir.), cert. denied, No. 96-6067 (Oct. 21, 1996), we leave it                   _____ ______            to the  sentencing court  on remand to  clarify the  specific            amounts  on which  the sentence  is based  -- that  is, those            amounts  as to which payment of taxes was willfully evaded as            proven  by  the government  under  the  preponderance of  the            evidence standard.  See Garafano, 36 F.3d at 136.  We express                                ___ ________            no opinion on the  appropriateness of the sentence previously            imposed.   United States v.  Quinones, 26 F.3d  213, 220 (1st                       _____________     ________            Cir. 1994).                                         III                    The defendants  appeal the  denial of  their downward            departure motion  based on their  argument that, if  they are            imprisoned, their business will fail.  Should this occur, the                                            ____________________            3.  Such factual determinations are either for the jury at            trial, see, e.g., United States v. Gaudin, 115 S. Ct. 2310,                   ___  ____  _____________    ______            2313-14 (1995), or for the district court at sentencing, see,                                                                     ___            e.g., 18 U.S.C.   3742(d).              ____                                         -12-                                          12            Olbres allege, twelve innocent employees will lose their jobs            and suffer severe  hardship.  The government argues  that the            Guidelines  discuss  "vocational  skills"  as  a  discouraged            factor, not "ordinarily relevant,"  U.S.S.G.   5H1.2,4 and so            there is no room for  the Olbres' "business failure" argument            -- an argument that, it contends, is not unusual.                      The  Olbres' argument  is based  on the  premise that            their circumstances take their case out of the "heartland" of            the  Tax Guidelines.    "U.S.S.G.    5K2.0 allows  sentencing            courts to depart  from the  guideline sentencing  range in  a            given  case  if the  court  finds  aggravating or  mitigating            circumstances that render  the case atypical and  take it out            of  the 'heartland'  for which  the applicable  guideline was            designed."   United States v. Carrion-Cruz, 92 F.3d 5, 6 (1st                         _____________    ____________            Cir. 1996).                    The  district  court found  that  if  Mr. Olbres  was            jailed, DC would become defunct and its  employees would lose            their jobs.   The district court ruled, nonetheless, that the            Sentencing Commission must  have necessarily understood  that            small  businesses will  often  fail if  their principals  are            incarcerated and that job loss  to innocent third parties was                                            ____________________            4.   Discouraged factors are those "not ordinarily relevant            in determining whether a sentence should be outside the            guidelines . . . ."  U.S.S.G.   5H1.2.                                         -13-                                          13            therefore "not an  unusual situation" under the  Guidelines.5            In so  doing,  the district  court  expressly stated  it  was            following  the  Third Circuit  opinion  in  United States  v.                                                        _____________            Sharapan,  13 F.3d 781 (3d Cir. 1995), and declined to follow            ________            the Second Circuit opinion in United States v. Milikowsky, 65                                          _____________    __________            F.3d  4  (2d  Cir.  1995).    The  district court  understood            Sharapan to hold that "as a matter of law this is not a basis            ________            for  departing   because   the  Sentencing   Commission   has            considered the failure of business in  constructing heartland            guidelines."6                    Apparently  believing  that,  as  a  matter  of  law,            business failure and third party  job loss, regardless of the            magnitude  or the  severity  of the  consequences, could  not            serve as the basis for a downward departure motion, the trial            judge stated at the end of the sentencing hearing:                     I also want  the record to  be clear that  if                    the  fact that  your  business  were to  fail                    could serve legally as a basis for  departing                    under the Sentencing Guidelines, then I would                    depart,  and  I  would  depart  in  a  manner                    sufficient to keep the business  from failing                    and putting those people out of work.  But as                    I say, I can't as I sit here find a principal                    [sic] basis for departing from the guidelines                    on those factual assumptions.                                             ____________________            5.  The issue is not moot because the district court granted            defendants' motion for bail pending resolution of this            appeal.  The government agreed that Mr. and Mrs. Olbres do            not present a danger to the community or a flight risk.             6.  It is not necessary to resolve whether this is a correct            reading of Sharapan.                       ________                                         -14-                                          14                    In Sharapan, the Third Circuit  reversed the district                       ________            court's grant  of a downward departure.  13 F.3d at 786.  The            trial  court had  found that  incarceration of  the defendant            would  cause his business to  fail, resulting in  the loss of            approximately  thirty  jobs.    Id. at  782.    It  therefore                                            ___            departed  from the  Guidelines'  sentence  and sentenced  the            defendant  to probation  with conditions.   Id.  at  783. The                                                        ___            Third  Circuit  reversed,  holding  that  the  departure  was            inconsistent with U.S.S.G.   5H1.2, p.s., which provides that            departures based on a defendant's "vocational skills" are not            ordinarily  appropriate.  Id.  at 784-85.   The Third Circuit                                      ___            viewed  the  Commission's  policy  statement  on  "vocational            skills" as being based on an underlying "principle . . . that            a  sentencing  judge  may  grant   a  departure  based  on  a            defendant's ability to  make a  work-related contribution  to            society only  in extraordinary  circumstances."  Id.  at 785;                                                             ___            see also United States v. Reilly, 33 F.3d 1396, 1424 (3d Cir.            ___ ____ _____________    ______            1994); United  States v.  Mogel, 956  F.2d  1555, 1564  (11th                   ______________     _____            Cir.),  cert.  denied, 506  U.S.  857  (1992); accord  United                    _____  ______                          ______  ______            States  v. Rutana, 932 F.2d 1155 (6th Cir.) ("[E]ven assuming            ______     ______            that [defendant's] imprisonment would  lead to the failure of            his business and the  loss of his employees' jobs,  this fact            does not  distinguish  [defendant] from  other  offenders."),            cert. denied, 502 U.S. 907 (1991).             _____ ______                    In  contrast,  the   Second  Circuit  in   Milikowsky                                                               __________                                         -15-                                          15            affirmed  a downward  departure taken  by the  district court            because  of the effect  that Milikowsky's  imprisonment would            have on  his employees.   65 F.3d at  6.  The  Second Circuit            noted "that business ownership alone, or even ownership of  a            vulnerable small business, does  not make downward  departure            appropriate,"  id. at 9, but held that the district court was                           ___            nonetheless  free to,  and indeed  required to,  consider the            possibility of  downward or upward departure  "when there are            compelling  considerations  that take  the  case  out of  the            heartland  factors upon which the Guidelines rest."  Id. at 7                                                                 ___            (citations omitted).                    Milikowsky  arose  under  the   antitrust  guideline,                    __________            U.S.S.G.    2R1.1 (1990), and not the  tax guideline involved            here.   Contrary  to  the government's  argument,  this is  a            distinction  without  a  difference.     The  Second  Circuit            considered  the same  argument the  government makes  here --            that "the Commission could  hardly have overlooked the effect            that imprisonment of offenders would have on small businesses            that  are  likely  to  be  heavily dependent  on  those  very            offenders for their continuing success."  Milikowsky, 65 F.3d                                                      __________            at 8.   That may be so, reasoned the  Second Circuit, but "in            considering,  and  taking   into  account,   the  effect   of            imprisonment  on antitrust  offenders' businesses  . .  . the            Commission did not thereby take into account the  effect such            imprisonment  would  have in  'extraordinary circumstances.'"                                         -16-                                          16            Id.            ___                    The  structure of analysis  we follow  in considering            sentencing  departures is  governed  by the  Supreme  Court's            decision  in Koon v. United  States, 116 S.  Ct. 2035 (1996).                         ____    ______________            The  Supreme  Court  agreed  with  the  analytical  structure            adopted  by this Circuit in United States v. Rivera, 994 F.2d                                        _____________    ______            942, 949 (1st Cir. 1993):                    The  Commission's treatment of  departure factors led                    then-Chief Judge  Breyer to explain that a sentencing                    court   considering  a   departure  should   ask  the                    following questions:                           "1) What features of this case,                           potentially,  take  it  outside                           the Guidelines' 'heartland' and                           make  of  it   a  special,   or                           unusual, case?                           2) Has the Commission forbidden                           departures   based   on   those                           features?                           3) If not,  has the  Commission                           encouraged departures  based on                           those features?                           4) If not,  has the  Commission                           discouraged departures based on                           those features?"                      We agree with this summary.            Koon, 116 S. Ct.  2035, 2045 (quoting Rivera, 994  F.2d 942).            ____                                  ______            The Supreme Court continued:                      If  the  special   factor  is  a  discouraged                    factor, or an encouraged factor already taken                    into account by the applicable Guideline, the                    court  should depart  only if  the  factor is                    present  to an exceptional  degree or in some                    other way  makes the case different  from the                    ordinary  case where  the factor  is present.                    If a factor is unmentioned in the Guidelines,                    the   court   must,  after   considering  the                    "structure  and  theory   of  both   relevant                                         -17-                                          17                    guidelines  and the  Guidelines  taken  as  a                    whole,"  decide whether  it is  sufficient to                    take   the  case   out  of   the  Guideline's                    heartland.   The court must bear  in mind the                    Commission's   expectation  that   departures                    based   on  grounds  not   mentioned  in  the                    Guidelines will be "highly infrequent."             Id.            ___                    To adopt  the categorical  approach to job  loss from            business failures  that the  district court appeared  to take            would run afoul of one of the  important concerns articulated            in  Koon.  The Supreme  Court has held  that generally courts                ____            should  not  categorically reject  a  factor as  a  basis for            departure from a Guidelines sentence because:                     Congress   did   not  grant   federal  courts                    authority to decide what sorts  of sentencing                    considerations  are  inappropriate  in  every                    circumstance.   Rather,  18 U.S.C.    3553(b)                    instructs  a  court   that,  in   determining                    whether  there  exists   an  aggravating   or                    mitigating  circumstance  of a  kind or  to a                    degree  not  adequately  considered   by  the                    Commission,  it  should  consider  "only  the                    sentencing guidelines, policy statements, and                    official   commentary   of   the   Sentencing                    Commission."  . .  .  .   The Commission  set                    forth factors  courts may not  consider under                    any  circumstances but  made clear  that with                    those  exceptions, it  "does  not  intend  to                    limit  the kinds of  factors, whether  or not                    mentioned  anywhere  else in  the guidelines,                    that could constitute  grounds for  departure                    in an  unusual case."   1995 U.S.S.G.  ch. I,                    pt. A,  intro. comment. 4(b).   Thus, for the                                                    _____________                    courts  to  conclude  a  factor must  not  be                    _____________________________________________                    considered under any  circumstances would  be                    _____________________________________________                    to  transgress   the  policymaking  authority                    _____________________________________________                    vested in the Commission.                    _________________________                          Id. (emphasis  added).   Categorical  interpretations  "would            ___            nullify  the Commission's  treatment of  particular departure                                         -18-                                          18            factors  and  its determination  that,  with  few exceptions,            departure  factors should not  be ruled out  on a categorical            basis."  Id. at 2051.7                     ___                    The  district  court's   categorical  approach   also            presents a  question of  law, which, if  incorrectly decided,            constitutes an  abuse of discretion.   As  the Supreme  Court            noted:                    The Government is quite correct  that whether                    a factor is a permissible basis for departure                    under any circumstances is a question of law,                    and the  court of  appeals need not  defer to                    the district court's resolution of the point.                    . . .  A district court by  definition abuses                    its discretion when it makes an error of law.            Id. at 2047.             ___                    Koon, we believe, reinforces this Circuit's view that                    ____            "[p]lenary review is appropriate where the question in review            is simply whether the allegedly  special circumstances (i.e.,                                            ____________________            7.  The Government's argument here relies on a general            distinction between harm to society, which, it says, may be            an extraordinary factor, and business failure, which, it            says, may not.  The Supreme Court rejected this type of            argument in Koon:                        ____                    The Government seeks to avoid the factual                    nature of the departure inquiry by describing                    it at a higher level of generality linked                    closely to questions of law.  The relevant                    question, however, is not, as the Government                    says, "whether a particular factor is within                    the 'heartland'" as a general proposition,                    but whether the particular factor is within                    the heartland given all the facts of the                     case. . . .  These considerations are factual                    matters.            Koon, 116 S. Ct. at 2047 (citations omitted).             ____                                         -19-                                          19            the reasons for  the departure)  are of the  'kind' that  the            Guidelines, in  principle,  permit the  sentencing  court  to            consider  at all."   Rivera,  994 F.2d  at 951.   This  is so                                 ______            because  this  court,  "in  deciding  whether  the  allegedly            special circumstances are of a 'kind' that permits departure,            will have  to perform the 'quintessentially   legal' function            of interpreting  a  set  of words,  those  of  an  individual            guideline, in light of their intention or purpose."  Id.                                                                  ___                    It  is clear  that the  Guidelines do  not explicitly            list   the factor at  issue here among  the forbidden or  the            discouraged   factors.     The   question   is  whether   the            Commission's   "vocational    skills"   comment8   implicitly            discourages consideration of job  loss to innocent employees.            We note first  that "vocational skills" themselves  are not a            forbidden factor, but a discouraged factor.  Compare U.S.S.G.                                                         _______               5H1.10  (race,  sex,  national  origin  et  al.  "are  not            relevant" in determination of sentence) with U.S.S.G.   5H1.2                                                    ____            ("vocational   skills   are   not    ordinarily   relevant").            Therefore,  even  if  the   present  case  merely   concerned            vocational skills,  a per se approach  would be inappropriate                                            ____________________            8.  The Commission statement results from the instructions of            Congress that the Commission's guidelines and policy            statements "reflect the general inappropriateness of            considering the . . . vocational skills, employment record, .            . . and community ties of the defendant."  28 U.S.C.              994(e); see Mogel, 956 F.2d at 1564.                    ___ _____                                         -20-                                          20            and the district court  would still have to  consider whether            the  case was in some  way "different from  the ordinary case            where the  factor is  present."   Koon, 116  S. Ct.  at 2045.                                              ____            "[A] federal court's examination of whether a factor can ever            be  an   appropriate  basis  for  departure   is  limited  to            determining  whether  the  Commission has  proscribed,  as  a            categorical  matter, consideration  of  the factor.   If  the            answer to  the question is no . . . the sentencing court must            determine whether the factor,  as occurring in the particular            circumstances, takes  the case  outside the heartland  of the            applicable Guideline."  Id. at 2051.                                     ___                    We do not agree with the Government's contention that            the  loss of  employment  to  innocent employees  necessarily            falls within the term "vocational skills."9  That a defendant            may  have vocational skills of great value or rarity does not            necessarily tell one whether incarceration of  that defendant            will entail  job  loss to  others totally  uninvolved in  the            defendant's crimes.   Vocational  skills may  or  may not  be            related to job loss to others.                    Our  belief  that courts  should  be  careful not  to            construe the  categories covered  by the  Guidelines' factors            too  broadly finds support in Koon.  There, the Supreme Court                                          ____                                            ____________________            9.  The dictionary definitions of "vocational skills" do not            import notions of business failures.  See Sharapan, 13 F.3d                                                  ___ ________            at 784 (describing a dictionary definition of "vocational            skills").                                         -21-                                          21            recognized   that  while   "socio-economic  status"   of  the            defendant  is an  impermissible ground  for departure  and "a            defendant's career  may relate  to his or  her socio-economic            status,  .  . .  the  link  is not  so  close  as to  justify            categorical  exclusion  of  the  effect of  conviction  on  a            career.  Although an impermissible factor need not be invoked            by name to  be rejected, socio-economic  status and job  loss            are not the semantic or practical equivalents of each other."            Koon, 116 S. Ct. at 2051.10              ____                    As  Koon  holds  that   job  loss  by  the  defendant                        ____            resulting  from  his  incarceration  cannot  be categorically            excluded  from consideration,  we think  it follows  that job            loss to innocent employees  resulting from incarceration of a            defendant   may   not   be   categorically    excluded   from            consideration.  Further, the rejected link between the socio-            economic status of a defendant and a defendant's personal job            loss is,  we  think, stronger  than the  link the  Government            posits between "vocational skills" of a defendant and certain            loss  of employment to innocent employees.  To add a judicial            gloss  equating  job  loss  by innocent  third  parties  with            "vocational skills"  is to run  headlong into the  problem of            judicial  trespass on  legislative prerogative  against which                                            ____________________            10.  Koon similarly rejected the government's argument that                 ____            because "physical appearance" is a discouraged factor, the            broader category of physical abuse in prison, including that            resulting from physical appearance, could not be considered.             116 S. Ct. at 2051.                                         -22-                                          22            the Supreme  Court warned in  Koon.   We do  not travel  this                                          ____            path.                    Because we  are remanding on  the tax loss  issue and            the district court will make further findings on that  point,            we believe the  wisest course is to  remand on this  issue as            well.    In  addition,  it  is  unclear  to  us  whether  the            government and defendants  have had the opportunity to put on            the  evidence they  would have  wished had  a non-categorical            approach  been  taken.11    In  rejecting   the  government's            categorical imperative approach,12 we do not suggest that the            defendants'  argument establishes  that they fall  outside of            the heartland.   It is  a rare case which  does fall outside.            As  courts  have  recognized, incarceration  of  a  defendant            inevitably  means  that  the  defendant  will  no  longer  be            employed in  his previous  position and that  fact inevitably            will  have consequences.  See, e.g., Milikowsky, 65 F.3d at 8                                      ___  ____  __________            ("[T]he Commission  could hardly have  overlooked the  effect                                            ____________________            11.  Though the defense treated Mr. and Mrs. Olbres            identically for sentencing purposes, evidence was presented            only on Mr. Olbres' importance to DC.  Each defendant must be            considered individually.  We note that there was no evidence            to suggest that the business would fail were Mrs. Olbres            incarcerated.            12.  We note that the opinions from our sister circuits on            which the government has relied, Sharapan, Rutana, and Mogel,                                             ________  ______      _____            were all decided without the benefit of Koon.  In                                                    ____            distinguishing those cases, we decide only that there is no            categorical barrier to the district court's consideration of            a departure -- not that a departure would be proper on these            facts.                                         -23-                                          23            that imprisonment of offenders would have on small businesses            that are  likely  to  be  heavily  dependant  on  those  very            offenders  for their  continuing success.").   The  mere fact            that innocent others will  themselves be disadvantaged by the            defendants' imprisonment is  not alone enough to  take a case            out  of the heartland.   These issues are  matters of degree,            involving qualitative  and quantitative judgments.   Bruce M.            Selya &  Matthew Kipp,  An Examination of  Emerging Departure                                    _____________________________________            Jurisprudence  Under the  Federal  Sentencing Guidelines,  67            ________________________________________________________            Notre  Dame L.  Rev. 1, 7-8  (1991).   As this  court said in            Rivera:            ______                    It may  not be unusual, for  example, to find                    that  a convicted drug  offender is  a single                    mother with family responsibilities,  but, at                    some  point,  the  nature  and  magnitude  of                    family responsibilities  (many children? with                    handicaps? no money? no place for children to                    go?)  may transform  the  "ordinary case"  of                    such circumstances into a case that is not at                    all ordinary.             United States  v.  Rivera, 994  F.2d  at 948;  accord  United            _____________      ______                      ______  ______            States  v. Sclamo,  997 F.2d  970 (1st  Cir. 1993);  see also            ________   ______                                    ___ ____            Koon,  116  S. Ct.  at 2051  (it  is not  unusual  for public            ____            officials  convicted  of violating  18  U.S.C.     242 to  be            subject to career related consequences, so these consequences            alone do not make a case unusual).                     Given our decision to  vacate the sentence and remand            for  further proceedings,  consideration  of the  defendants'            acquitted conduct arguments would be premature.                                           -24-                                          24                    We close with  words from  Koon on which  all of  the                                               ____            Justices agreed:                     The goal of the Sentencing Guidelines is,  of                    course, to reduce unjustified disparities and                    so  reach  towards  the   evenhandedness  and                    neutrality that are the  distinguishing marks                    of any principled system of justice.  In this                    respect,  the Guidelines  provide uniformity,                    predictability,  and  a degree  of detachment                    lacking in our earlier system.  This too must                    be remembered, however.   It has been uniform                    and   constant   in   the  federal   judicial                    tradition   for   the  sentencing   judge  to                    consider   every   convicted  person   as  an                    individual  and every case  as a unique study                    in   the   human   failings  that   sometimes                    mitigate,  sometimes  magnify, the  crime and                    the  punishment   to  ensue.     We   do  not                    understand it to have been  the congressional                    purpose to withdraw all sentencing discretion                    from  the  United   States  District   Judge.                    Discretion is reserved within  the Sentencing                    Guidelines.            Id. at 2053.  Even were we not obliged to agree, we would.             ___                    We vacate the sentence and remand.  United  States v.                                                        ______________            Carvell, 74 F.3d 8 (1st Cir.  1996).               _______                                         -25-                                          25
