In the
United States Court of Appeals
For the Seventh Circuit

No. 99-3136

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

LARRY A. HOLLIS,

Defendant-Appellant.



Appeal from the United States District Court
for the Northern District of Indiana, Hammond Division.
No. 98 CR 185--James T. Moody, Judge.


Argued September 26, 2000--Decided October 19, 2000



  Before COFFEY, RIPPLE and ROVNER, Circuit Judges.

  ROVNER, Circuit Judge. Larry Hollis pled guilty
to two counts of affecting interstate commerce by
extortion. Hollis challenges the district court’s
refusal to grant him a two-point reduction under
the Sentencing Guidelines for acceptance of
responsibility. Because the district court
applied an outdated provision of the Guidelines,
and because we cannot be certain this error was
harmless, we vacate and remand for resentencing.

I.

  Hollis was the Chief Plumbing and Mechanical
Inspector for the City of Gary, Indiana when he
devised a scheme to supplement his income. A
confidential informant reported to the FBI that
Hollis called him and offered to sell him a
general contractor’s license for the City of Gary
for $1500. The City of Gary normally charged $65
for the licenses, but apparently the licenses
were difficult to obtain because the applicant
was also required to pass a test. In exchange for
the highly inflated fee, Hollis told the
informant he would not be required to pass the
test. The FBI wired the informant for sound and
taped the exchange of cash for a license that
subsequently took place at a local gas station.
A few days later, Hollis met with a second
informant (also wired for sound by the FBI) at
the same gas station and conducted an identical
transaction of cash for a license. Upon
investigation, the FBI determined that Hollis had
engaged in a number of these transactions,
selling general contractors’ licenses for
approximately $1500 and not requiring the
applicants to pass the test. The government
charged him only with the two counts relating to
the confidential informants, but informed the
court for the purposes of sentencing that Hollis
had engaged in other relevant conduct.

  Hollis pled guilty to the charges, and was
interviewed by a probation officer as part of the
pre-sentence procedure. The probation officer
reported that Hollis made the following
statement:

I sold two general contractors’ licenses. I let
two guys get their licenses w/o taking the test.
I was the Chief Plumbing Maintenance Inspector.
Some people in the controller’s office were
involved. This guy approached me in need of a
contractor’s license. I told him I would see what
I could do. I went to someone in the Building
Department, who in turn contacted someone in the
Controller’s office to get the license. They
returned the license to the Building department
who gave them to me. I sold them for $1500 for
each license.

On the basis of this statement, the government
asked the district court to deny Hollis an
adjustment to his sentence for acceptance of
responsibility.

  The district court held an evidentiary hearing
to determine, among other things, whether Hollis
had misled the probation officer. A number of
government witnesses described nearly identical
transactions with Hollis, beginning with a cold
call from Hollis offering to sell a general
contractor’s license and ending with an exchange
of cash for the license at a local gas station.
None of these witnesses testified regarding the
conduct with which Hollis was charged in the
indictment; rather, they described relevant
conduct that the court could consider in setting
Hollis’ sentence. The only witness testifying to
the conduct charged in the indictment was the FBI
case agent in charge of the investigation. She
testified that Hollis contacted the first
confidential informant with a cold call, and that
the informant then contacted the FBI. The second
informant was introduced to Hollis by the first
informant, and the second charged transaction
took place in the same manner, according to the
agent. On the basis of this testimony, the court
agreed that Hollis provided the probation officer
with "less than truthful information" when he
stated, "I sold two general contractor’s
licenses. I let two guys get their licenses
without taking the test." Tr. at 107-08. The
court stated, "I just think that is less than
truthful given the evidence that I’ve seen and
heard today. And providing false information to
a probation officer, even if it’s not material,
may warrant the denial of this reduction for
acceptance of responsibility." Tr. at 108.

  Further explaining his rationale for denying the
acceptance of responsibility reduction, the trial
judge stated,

And you couple that with the fact that the
Defendant, even though he admitted to the conduct
charged in the indictment in this case, the
majority rule from other circuits as well as the
Seventh Circuit is that Section 3 E 1.1 requires
acceptance of responsibility for all related
criminal conduct, not just the count of
conviction.

Tr. at 108. The court concluded that for all of
those reasons, it would not award Hollis the
benefit of acceptance of responsibility. In his
statement to the Court, Hollis explained that he
did not purposely lie to the probation officer.
He thought he was only being asked about the
charges in the indictment. He told the court he
would have admitted the relevant conduct if the
probation officer had asked him about it. The
court denied the two-point reduction for
acceptance of responsibility, and sentenced
Hollis to twenty-four months of incarceration,
and three years of supervised release. Hollis
appeals.

II.

  On appeal, Hollis contends the district court
erred in refusing to grant the two-point
acceptance of responsibility reduction for two
reasons. First, Hollis contends there is no
evidence in the record supporting the contention
that Hollis lied to the probation officer about
either the charged or the uncharged conduct.
Second, Hollis argues that the district court
relied on an outdated provision of the Sentencing
Guidelines, and outdated case law interpreting
it. In 1998, Hollis maintains, the Sentencing
Guidelines were amended to provide that a
defendant is not required to volunteer or
affirmatively admit relevant conduct beyond the
offense of conviction in order to obtain an
acceptance of responsibility reduction. The
government concedes that the court appeared to be
relying on an outdated provision of the
Guidelines but contends that the court provided
two alternative grounds for the denial of the
reduction: first, that Hollis had not admitted to
the relevant conduct, and second that Hollis has
misled the court about his level of involvement
in the charged conduct by stating that the
informant contacted him when the FBI’s interview
of the informant indicated that Hollis called the
informant out of the blue to offer him the
license. Although the first reason for the denial
is admittedly improper under the new Guideline
provision, the government maintains that the
second rationale stands alone as an independent
basis to deny the reduction. Thus, the government
posits that any error by the district court was
harmless because the sentence would have been the
same even if the court had not applied the wrong
Guideline provision.

  We review de novo a district court’s
application of the Sentencing Guidelines, but we
defer to its findings of fact unless they are
clearly erroneous. United States v. Bragg, 207
F.3d 394, 399 (7th Cir. 2000). The government
concedes that the district court applied an
outdated version of Guideline 3E1.1 when it held
that a defendant must admit guilt for all
relevant conduct as well as the conduct
comprising the offense of conviction in order to
be eligible for the acceptance of responsibility
reduction. The district court also erroneously
relied on a case that interpreted the earlier
version of the Guideline in reaching its holding.
See United States v. White, 993 F.2d 147, 150
(7th Cir. 1993). The Guideline currently states,
in relevant part:

If the defendant clearly demonstrates acceptance
of responsibility for his offense, decrease the
offense level by 2 levels.

U.S.S.G. sec. 3E1.1(a). The application notes to
the Guideline further provide:

Note that a defendant is not required to
volunteer, or affirmatively admit, relevant
conduct beyond the offense of conviction in order
to obtain a reduction under subsection (a). A
defendant may remain silent in respect to
relevant conduct beyond the offense of conviction
without affecting his ability to obtain a
reduction under this subsection. However, 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. sec. 3E1.1, application note 1(a). As we
noted above, the district court believed that the
rule in this Circuit was to require acceptance of
responsibility for all related conduct, not just
the offense of conviction. Because the new
application notes of the Guideline expressly
disavow this position, the district court erred
in applying the old version of the Guideline to
Hollis.

  Once we determine that a district court has
misapplied a Guideline, we are obliged to remand
for resentencing unless, reviewing the record as
a whole, we can conclude that the error was
harmless, i.e., that the error did not affect the
district court’s selection of the sentence
imposed. Williams v. United States, 503 U.S. 193,
201-204 (1992). We cannot conclude under these
circumstances that the error was harmless. The
district court found that Hollis’ statement that
he "sold two general contractor’s licenses. I let
two guys get their licenses without taking the
test." was less than truthful. But that is
exactly what Hollis was charged with doing. The
district court concluded the statement was less
than truthful because the government produced a
number of witnesses who testified that Hollis
sold many more than two general contractors’
licenses. Hollis was not charged with that
conduct and there was no evidence produced that
the probation officer even asked him about that
related conduct, much less any evidence that
Hollis falsely denied this uncharged conduct. The
government claims that the district court found
the conduct less than truthful because Hollis
minimized his role by stating that the first
confidential informant contacted him, rather than
admitting that he placed a cold call to the
informant. There is no indication in the record
that the district court based its ruling on this
theory. Therefore, we cannot conclude that the
district court’s reliance on the outdated
provision of the Guidelines constituted harmless
error, and we vacate and remand for resentencing.

VACATED AND REMANDED.
