                    United States Court of Appeals
                            FOR THE EIGHTH CIRCUIT
                                   ___________

                                   No. 06-1364
                                   ___________

United States of America,               *
                                        *
             Appellant,                 *
                                        * Appeal from the United States
      v.                                * District Court for the
                                        * Northern District of Iowa.
Bradley Gregg,                          *
                                        *
             Appellee.                  *
                                   ___________

                             Submitted: September 26, 2006
                                Filed: November 13, 2006
                                 ___________

Before MURPHY, HANSEN, and RILEY, Circuit Judges.
                           ___________

RILEY, Circuit Judge.

       Bradley Gregg (Gregg) pled guilty to possessing a firearm while subject to a
restraining order, in violation of 18 U.S.C. §§ 922(g)(8) and 924(a)(2). The district
court sentenced Gregg to 15 months’ imprisonment. The government appeals
Gregg’s sentence, arguing the district court erred by refusing to apply an
enhancement for using a firearm in connection with another felony offense and by
granting a 3-level reduction for acceptance of responsibility. For the reasons stated
below, we vacate and remand for resentencing.
I.    BACKGROUND
      Tony Sole, also known by the alias Chad Massen (Massen), owed Gregg
several hundred dollars. To enable Massen to earn money to repay his debt, Gregg
loaned Massen several hundred dollars more. Massen intended to use the money to
purchase and then resell methamphetamine. As collateral for the loan, Massen gave
Gregg a stolen shotgun.

       On December 6, 2003, while subject to a restraining order, Gregg was hunting
and accidentally shot himself in the foot with the shotgun. On December 9, 2003,
ATF Special Agent Zane Dodds (Agent Dodds) interviewed Gregg about the hunting
accident. Gregg initially stated he purchased the shotgun from a gun dealer in Des
Moines, Iowa, but later claimed he purchased the shotgun from Massen. On January
27, 2004, Agent Dodds and ATF Special Agent Todd Monney (Agent Monney) again
interviewed Gregg. At this interview, Gregg admitted he received the shotgun as
collateral for a loan he made to Massen so Massen could purchase and resell
methamphetamine.

       On September 26, 2005, Gregg pled guilty to possessing a firearm while
subject to a restraining order, in violation of 18 U.S.C. §§ 922(g)(8) and 924(a)(2).
In the plea agreement, Gregg stipulated he obtained the shotgun as collateral for a
loan he made to a third party so the third party could purchase methamphetamine.

       At the sentencing hearing, the disputed issue was whether Gregg used or
possessed the shotgun in connection with another felony offense, specifically, a
conspiracy to distribute methamphetamine. Agents Dodds and Monney both testified
Gregg told them Massen tendered the shotgun as collateral and Massen intended to
use the loaned money to purchase methamphetamine and resell it. Gregg testified he
told Agents Dodds and Monney he had loaned money to Massen; however, Gregg
denied knowing Massen intended to purchase and resell methamphetamine. Gregg



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testified he learned Massen purchased methamphetamine only after Gregg made the
loan.

      The district court concluded Gregg had not used or possessed the shotgun in
connection with a conspiracy to distribute methamphetamine. Accordingly, the court
refused to apply a 4-level enhancement pursuant to U.S.S.G. § 2K2.1(b)(5) even
though the court, when deciding whether or not to grant a variance, concluded the
testimonies and reports of Agents Dodds and Monney were “accurate.”

       After the district court refused to apply an enhancement pursuant to section
2K2.1(b)(5), the court concluded Gregg was entitled to a 2-level reduction for
acceptance of responsibility. The government then made a motion for an additional
1-level reduction for acceptance of responsibility. The government made the motion,
even though the government believed Gregg was not entitled to acceptance of
responsibility, because the district court had resolved the relevant enhancement fact
issues in Gregg’s favor.

       Starting with a base offense level of 14 pursuant to section 2K2.1(a)(6), the
district court applied a 2-level enhancement because the shotgun was stolen, see
U.S.S.G. § 2K2.1(b)(4), and a 3-level reduction for acceptance of responsibility, see
U.S.S.G. § 3E1.1. Gregg’s total offense level of 13 and criminal history category II
produced an advisory Guideline range of 15 to 21 months’ imprisonment. The
district court sentenced Gregg to 15 months’ imprisonment.

       The government appeals Gregg’s sentence, arguing the district court erred by
refusing to apply an enhancement pursuant to section 2K2.1(b)(5) and by granting a
reduction for acceptance of responsibility pursuant to section 3E1.1.




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II.    DISCUSSION
       Although application of the Guidelines is no longer mandatory, the district
courts nevertheless must consult the Guidelines to calculate a defendant’s sentence
because the Guidelines are “the critical starting point for fashioning a reasonable
sentence under [18 U.S.C.] § 3553(a).” United States v. Jeremiah, 446 F.3d 805, 807
(8th Cir. 2006) (internal quotation omitted). “We review de novo the district court’s
interpretation and application of the Guidelines.” United States v. Peterson, 455 F.3d
834, 837 (8th Cir. 2006) (citation omitted). We review for clear error the district
court’s factual findings, id., and its decision to grant a reduction for acceptance of
responsibility, United States v. Perez, 270 F.3d 737, 739 (8th Cir. 2001).

      A.     Possessing a Firearm in Connection With Another Felony Offense
      Section 2K2.1(b)(5) calls for a 4-level enhancement for using or possessing
“any firearm or ammunition in connection with another felony offense.” The
government contends Gregg used and possessed a firearm in connection with a drug
conspiracy by accepting the shotgun as collateral for a loan. Gregg asserts the
government proved neither the existence of a drug conspiracy nor that Gregg used or
possessed a firearm in connection with a drug conspiracy.

      To prove Gregg conspired to distribute methamphetamine, the government had
to show (1) the existence of a conspiracy, that is, an agreement to distribute
methamphetamine; (2) Gregg knew of the conspiracy; and (3) Gregg intentionally
joined the conspiracy. See United States v. Savatdy, 452 F.3d 974, 977 (8th Cir.
2006). At the sentencing hearing, the government offered Gregg’s plea agreement
as well as the testimonies and reports of Agents Dodds and Monney to show Gregg
conspired to distribute methamphetamine. The plea agreement, testimonies, and
reports showed Gregg loaned money to Massen knowing Massen intended to
purchase and then resell methamphetamine so Massen could repay his debts to Gregg.
Despite this evidence, the district court chose not to apply a 4-level enhancement
pursuant to section 2K2.1(b)(5).

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       The district court expressly found the testimonies and reports of Agents Dodds
and Monney were credible when fashioning a sentence under 18 U.S.C. § 3553(a).1
However, the court necessarily must have treated the agents’ testimonies and reports
as incredible when calculating the appropriate Guideline range. If the district court
found the testimonies and reports of Agents Dodds and Monney credible, the court
should have applied an enhancement pursuant to section 2K2.1(b)(5). A court’s
credibility findings for purposes of calculating the appropriate Guideline range and
fashioning a sentence under § 3553(a) must be internally consistent. See Anderson
v. City of Bessemer, 470 U.S. 564, 575 (1985) (stating a district court’s findings
regarding the credibility of testimony, “if not internally inconsistent, can virtually
never be clear error”). We previously have held a district court clearly errs when it
finds testimony to be credible for purposes of calculating an advisory Guideline
range, yet it finds the same testimony to be incredible for purposes of fashioning a
sentence under § 3553(a). United States v. Portillo, 458 F.3d 828, 830 (8th Cir.
2006); United States v. Brown, 453 F.3d 1024, 1026 (8th Cir. 2006). Similarly, a
district court also clearly errs when it finds testimony to be credible for purposes of
fashioning a sentence under section 3553(a), yet it finds the same testimony to be
incredible for purposes of calculating an advisory Guideline range. See Brown, 453


      1
       At the sentencing hearing, the district court stated:

      And I’m persuaded for whatever reason that [Agents Dodds’s and
      Monney’s] reports are accurate that [Gregg] said in effect what he said
      and that [Gregg] decided to tell [Agents Dodds and Monney] all these
      things. . . . But [Gregg] even after he had told [Agents Dodds and
      Monney] everything they wanted to know and they were ready to drive
      off and work some other case said, [a]nd, by the way, when I gave
      [Massen] that money, I told [Massen] he had to—or he wanted to buy
      drugs with it and so forth, and I said okay and gave him the money. . . .
      I’m not sure why, but I am sure that [Gregg’s] own words have hurt him
      here today and, in fact, helped to make the Court decide what it has to
      decide.

                                         -5-
F.3d at 1026 (vacating and remanding a sentence based on internally inconsistent
findings regarding the credibility of testimony). Therefore, because the district
court’s findings were internally inconsistent, the district court clearly erred.

      Additionally, Gregg contends the government never proved he used or
possessed a firearm in connection with a conspiracy to distribute methamphetamine.
To be used or possessed in connection with another felony, the firearm must have
“‘some purpose or effect with respect to’ that felony and facilitates or has the
potential to facilitate it.” United States v. Massey, 462 F.3d 843, 847 (8th Cir. 2006)
(quoting United States v. Fredrickson, 195 F.3d 438, 439 (8th Cir. 1999) (per
curiam)). Firearms merely present by accident or coincidence are not possessed or
used in connection with another felony. Smith v. United States, 508 U.S. 223, 238
(1993), abrogated on other grounds by Bailey v. United States, 516 U.S. 137, 146
(1995); Fredrickson, 195 F.3d at 439-40.2

       Here, Gregg joined the conspiracy by loaning money to Massen so Massen
could purchase and resell methamphetamine. Gregg conditioned making the loan on
Massen tendering some form of collateral. The shotgun facilitated the drug
conspiracy by acting as collateral for the loan. Cf. United States v. Cox, 324 F.3d 77,
84 (2d Cir. 2003) (holding a drug dealer uses a firearm for purposes of 18 U.S.C.
§ 924(c) by accepting it as collateral for a debt); United States v. Byrne, 163 F.3d 603
(8th Cir. 1998) (unpublished table decision) (same). The shotgun facilitated the drug
conspiracy even though Gregg never intended to use the firearm as a weapon; merely
using the firearm’s economic value to secure the loan facilitated the drug conspiracy.
Cf. United States v. Cannon, 88 F.3d 1495, 1509 (8th Cir. 1996) (holding a drug

      2
       In Smith, the Supreme Court interpreted 18 U.S.C. § 924(c). See Smith, 508
U.S. at 227. Smith is relevant because the “in relation to” language set forth at
§ 924(c) has the same purview as the “in connection with” language set forth at
section 2K2.1(b)(5). See United States v. Wunder, 414 F.3d 1019, 1021 (8th Cir.
2005) (citing United States v. Regans, 125 F.3d 685, 686 (8th Cir. 1997)).

                                          -6-
dealer uses a firearm for purposes of 18 U.S.C. § 924(c) by trading drugs for guns).
Gregg used and possessed the shotgun in connection with a drug conspiracy.

      The district court clearly erred by not applying an enhancement pursuant to
section 2K2.1(b)(5).

       B.      Acceptance of Responsibility
       After refusing to apply an enhancement pursuant to section 2K2.1(b)(5), the
district court granted Gregg a 3-level reduction for acceptance of responsibility. “[A]
defendant who falsely denies, or frivolously contests, relevant conduct that the court
determines to be true has acted in a manner inconsistent with acceptance of
responsibility.” U.S.S.G. § 3E1.1 cmt. n.1. In the plea agreement, Gregg stipulated
he loaned Massen money so Massen could purchase methamphetamine. At
sentencing, the court decided not to grant a variance because the testimonies and
reports of Agents Dodds and Monney showed Gregg loaned Massen money knowing
Massen intended to purchase methamphetamine with the money and resell the
methamphetamine for a profit, permitting Massen to repay his debts to Gregg.
Therefore, Gregg is not entitled to a 3-level acceptance of responsibility reduction
because Gregg falsely denied relevant conduct when he testified at the sentencing
hearing in a manner inconsistent with acceptance of responsibility.

III.  CONCLUSION
      For the reasons stated, we vacate Gregg’s sentence and remand for
resentencing not inconsistent with this opinion.
                      ______________________________




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