
USCA1 Opinion

	




                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                 ____________________        No. 93-2236                                    UNITED STATES,                                      Appellee,                                          v.                                  MAE LINH PELKEY,                                 Defendant, Appellant.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF NEW HAMPSHIRE                    [Hon. Paul J. Barbadoro, U.S. District Judge]                                             ___________________                                 ____________________                                        Before                         Torruella and Stahl, Circuit Judges,                                              ______________                             and Carter,* District Judge.                                          ______________                                 ____________________            Marc Chretien, by Appointment of the  Court, with whom Chretien  &            _____________                                          ___________        Schmitt was on brief for appellant.        _______            Jean B. Weld, Assistant United States  Attorney, with whom Paul M.            ____________                                               _______        Gagnon, United States Attorney, was on brief for appellee.        ______                                 ____________________                                    July 14, 1994                                 ____________________        _____________________        *Of the District of Maine, sitting by designation.          CARTER, Chief District Judge.                  ____________________               In  this appeal,  Defendant Mae  Linh Pelkey  challenges the          district court's upward departure from the Sentencing Guidelines.          After considering Defendant's  argument, we  vacate the  sentence          and remand for resentencing.                                       I. FACTS                                       ________               On July 17, 1993,  Appellant Mae Linh Pelkey pled  guilty in          United  States  District Court  in Concord,  New Hampshire,  to a          criminal information  charging three  counts  of mail  fraud,  18          U.S.C.   1341, and one count of wire fraud, 18 U.S.C.   1343.            Pelkey defrauded a  number of her  friends, business  associates,          and former customers out  of more than $500,000.   The fraudulent          transactions involved real estate, investments, and the sale of a          Jaguar automobile.                   The Presentence Report recommended an adjusted total offense          level for  Pelkey of 16.1   The trial  court adopted most  of the          findings and  recommendations of  the  Presentence Report,2  with                                        ____________________          1The  recommended total adjusted offense  level of 16 included: a          base offense level of six for fraud, U.S.S.G.   2F1.1; plus  nine          levels for the  loss involved  in the offense  of conviction  and          relevant   conduct,  totalling  between  $350,000  and  $500,000,          U.S.S.G.    2F1.1(b)(1);  plus a  two-level enhancement  for more          than one  victim, U.S.S.G.     2F1.1(b)(2)(B); plus  a  two-level          enhancement for  vulnerable victim, U.S.S.G.    3A1.1; less three          levels for acceptance of responsibility, U.S.S.G.   3E1.1(a)  and          (b).          2The court disagreed with the report in two respects.  First, the          court  found the total amount of loss was $576,290.40 rather than          $364,264.47.  The effect of this determination on the  adjustment                                         -2-                                         -2-          the resulting sentencing  range of 24 to 30 months.  U.S.S.G. Ch.          5, Pt. A (sentencing table).  In addition, the Presentence Report          noted that the psychological injury of the victims may be grounds          for upward adjustment under U.S.S.G.   5K2.3.  The Government, in          turn,  requested  an  upward  departure  based  on  the  "extreme          psychological injury" suffered by Pelkey's victims.                 The  sentencing  transcript  reveals  the  district  court's          struggle  over whether and how much to depart from the Guidelines          in this case.   In an effort to quantify the  "real value" of the          loss suffered by  the victims, the court relied on  the table set          forth at section 2F1.1 of the Guidelines.  Finding the real value          of  the loss  to  these victims  closer  to $10,000,000  than  to          $500,000,  the approximate  monetary loss  used to  determine the          base  offense level, the court concluded that an upward departure          of five  levels, from level 17  to level 22, was  warranted.  The          court then imposed a sentence of 43 months of imprisonment, to be          served  concurrently with  the unexpired  term of  Pelkey's state          sentence on related fraud charges, and restitution.                                         ____________________          for the specific offense characteristics was that the  adjustment          would be plus ten rather than plus nine, thus raising Pelkey to a          total  adjusted offense level of 17.   Next, the court found that          the sentences  described in the  criminal history section  of the          Presentence Report,  giving rise to the  state court convictions,          were  sentences  for  conduct  that  was  "part  of  the  instant          offense."   As  a  result, the  court  found that  Pelkey  should          receive no criminal history points, changing her criminal history          category  from II  to  I.   The Court  notes,  however, that  the          recalculation  of Pelkey's  offense characteristics  and criminal          history  category did not  change the sentencing  range from that          recommended in the Presentence Report.                                          -3-                                         -3-                                    II. DISCUSSION                                    ______________               Pelkey contends  that the  trial  court's application  of  a          five-level upward  adjustment  in  the  base  offense  level  was          excessive and unreasonable.  Specifically, Pelkey argues that  it          was error  for the  court to  assess the real  value of  the harm          experienced  by the victims at a factor twenty times greater than          their actual  monetary  losses.    Although  Pelkey  admits  that          consideration of the victims' psychological injury is permissible          under U.S.S.G.   5K2.3, she argues that the alleged injury to the          victims  in  this  case is  not  serious  enough  to support  the          application of  that section.   The Government responds  that the          court principally found  support for  the departure  in the  fact          that  the guideline sentence did  not fully account  for the harm          done to the victims because of their loss of retirement funds and          some of the victims'  inability to recapture the loss  because of          their ages.  In  the alternative, the Government argues  that the          court  found sufficient facts to support  a departure pursuant to          section 5K2.3 for extreme psychological injury.                    The district court offered two reasons that section  2F1.1's          loss table  did not fully capture the harmfulness and seriousness          of   the  conduct:  1)  for  some  of  the  victims,  the  losses          represented "all or  partially all of their  life savings. .  . .          and the ability of these victims to  recover from the losses they          suffered is quite limited"; and 2) several victims have  suffered                                         -4-                                         -4-          "extreme psychological  injury as  a  result of  the  defendant's          conduct."3  Supplemental Findings of Fact and  Conclusions of Law                                        ____________________          3The district court explained its reasons for departure both from          the  bench  and  in written  Supplemental  Findings  of Fact  and          Conclusions of Law.   We quote these findings and  conclusions at          length in order to show a complete understanding of the basis for          the district court's decision.                 I  have departed  upwards in  sentencing the  defendant               from a level 17 to a level 22 because I have determined               that aggravating circumstances exist in this case of  a               kind  and   degree  not  taken  into   account  by  the               Sentencing Commission.   As  a  result of  this  upward               departure, I have sentenced the defendant to 43 months.               I have departed upwards for the following reasons:                    (a)  Application Note 10 to Section 2F1.1  of                    the Sentencing Guidelines provides that "[i]n                    cases  in which  the  loss  determined  under                    subsection (b)(1) does  not fully capture the                    harmfulness and seriousness  of the  conduct,                    an  upward departure  may  be warranted."   I                    have  relied  upon  this note  in  making  an                    upward departure.                    (b)  The primary reason  why the loss in this                    case  does not represent  the seriousness and                    harmfulness  of  the  defendant's conduct  is                    that the  losses suffered by  several of  the                    victims  represented all or  partially all of                    their  life savings.    Further,  in  several                    cases,  the victims  were elderly  or nearing                    retirement  and the ability  of these victims                    to  recover from the  losses they suffered is                    quite limited.   Thus,  the losses  here will                    require several  of the victims  to live  out                    their    lives    under   severe    financial                    constraints  that  they  would not  otherwise                    have had  to suffer if the  defendant had not                    engaged in her criminal  conduct.  Given  the                    defendant's close friendship with  several of                    these  elderly victims,  it is  reasonable to                    conclude  that she  was  or should  have been                    aware  that  her   course  of  conduct  would                    deprive these victims of all or most of their                    retirement savings.   This is a factor  which                                         -5-                                         -5-          at  4 and  5.    This  Court  reviews  sentencing  departures  by          examining: (1) whether the reasons  the court gave for  departing          are of the  sort that might permit a  departure in an appropriate          case;  (2)  whether  the record  supports  the  finding of  facts          demonstrating  the existence  of such  reasons; and  (3) whether,          given the reasons, the degree of departure is reasonable.  United                                                                     ______          States  v.  Rivera, 994  F.2d 942,  950  (1st Cir.  1993); United          __________________                                         ______          States  v. Diaz-Villafane,  874  F.2d 43,  49  (1st Cir.),  cert.          _________________________                                   _____          denied, 493  U.S. 862 (1989).  In Rivera, we refined the standard          ______                            ______          of  review for departures under  the first prong, finding plenary          review  appropriate  to determine  whether the  allegedly special                                        ____________________                    the  Guidelines  could   not  possibly   have                    considered  in  measuring  the offense  level                    that  should be  assigned to  the defendant's                    conduct.                    (c)  A secondary reason for the departure  is                    that  there  is  evidence  reflected  in  the                    Presentence Report that several  victims have                    suffered  extreme  psychological injury  as a                    result of the defendant's conduct.  Moreover,                    given  the  defendant's  exploitation of  her                    close friendship with several of the victims,                    it is reasonable  to assume that  she was  or                    should have been aware of the risk of extreme                    psychological injury that  could result  from                    her  conduct.    While  it  could  be debated                    whether  the psychological  injuries suffered                    by the  victims in this case are so severe as                    to qualify for departure under   5K2.3 of the                    Guidelines,  I  find  that the  psychological                    injuries suffered here,  in combination  with                    the  other  reasons  I  have  expressed,  are                    serious   enough   to   warrant   an   upward                    departure.          Supplemental Findings of Fact and Conclusions of Law at 4-5.                                          -6-                                         -6-          circumstances underlying the  departure "are of a 'kind' that the          Sentencing Guidelines, in principle,  permit the sentencing court                                 __ _________          to consider."   Rivera, 994 F.2d at 951.   Plenary review is also                          ______          applied to interpretations of Guideline language.   Id.  However,                                                              ___          we review  the  district court's  determination  that a  case  is          unusual, and therefore worthy of departure, "with full  awareness          of, and respect for,  the trier's superior 'feel' for  the case."          Id. at 952 (quoting  Diaz-Villafane, 874 F.2d at 50).   Similarly          ___                  ______________          deferential  is our review of  the second and  third prongs, that          is, the sentencing court's findings of fact and the direction and          degree of departure, respectively.  Id. at 950.                                                ___               The  sentencing   judge  is  not  required   to  ignore  the          consequences  of a  fraud scheme  outside the  immediate monetary          loss.  If  the evidence  shows that the  defendant's offense  was          more serious than contemplated by the applicable guidelines,  the          judge  can  depart  upward.    See  18  U.S.C.    3553(b)(general                                         ___          principle); U.S.S.G.    2F1.1, comment (n.10).   Application Note          10  provides a nonexclusive list of  circumstances where the loss          determined in  section 2F1.1(b)(1)  does  not fully  capture  the          harmfulness of the conduct and, thus, departure may be warranted.               In this  case, we begin by  noting that the amount  of money          and  the number  of victims  had already  been factored  into the          calculation of Pelkey's base offense level under the  Guidelines.          U.S.S.G.   2F1.1(b)(1)  and (b)(2)(B).  In  addition, the special          vulnerability  resulting from  the age of  the victims  and their                                         -7-                                         -7-          relationship with the Defendant had also been taken into account.          U.S.S.G.      3A1.1.   Accordingly,  if we  are to  avoid double-          counting in this case, the departure  can be valid only if it was          properly based  on the  victims'  resulting financial  strain  or          psychological harm.  We will deal with each issue in turn.                            A. Financial Strain of Victims                            ______________________________               The  principal  reason  given  by  the  district  court  for          departure was the  victims' limited ability  to recover from  the          loss of accumulated  savings and the  resulting financial  stress          associated with the  loss of life savings.  This presents for our          determination the issue of  whether these facts are  unusual and,          therefore, worthy of departure.  Accordingly, we will "accept the          findings  of fact of the  district court unless  they are clearly          erroneous" and  will "give due deference to  the district court's          application  of  the  guidelines to  the  facts."    18 U.S.C.             3742(e).                 Robert  and  Kim  Atma's  financial  loss represented  their          accumulated life savings of more than 20 years.  Already retired,          Katherine Meuse and  Julie Laskey, now  without their  retirement          savings, are forced to live on social security and to borrow from          friends and relatives.  In addition, Ms. Meuse has been forced to          forego  physical  examinations  and   medication  for  her  heart          problem.    Pelkey's  scheme  left  Robert  LeClair  "financially                                         -8-                                         -8-          depleted."   Mr. LeClair was forced to  go back to work full time          at age 60, his automobile has been repossessed, and he was forced          to take out a home equity loan.                   The  nonexclusive  list  of  grounds   for  departure  under          Application Note 10 of section 2F1.1 does not include the reasons          given by the district court for departure.  The failure to have a          secure financial future does not, without more, rise to the level          of seriousness contemplated  by the other  grounds for  departure          suggested  in the  application  note.4   The bases  for departure          provided in Application Note 10 all suggest unusual repercussions          beyond  the loss of financial  capacity and the  general sense of          betrayal   normally  associated   with   fraud  involving   false          pretenses.     We acknowledge that there is a distinction between          defrauding a 40-year-old of her life savings and defrauding a 60-                                        ____________________          4Examples  of  fraud  of a  more  serious  caliber  given in  the          Application Note are:               (a)  the primary objective of the fraud was non-               monetary;               (b)   false  statements were  made for  the  purpose of                    facilitating some other crime;               (c)  the offense caused physical or psychological harm;               (d)  the offense endangered national security or                military readiness;               (e)   the  offense caused  a loss  of confidence  in an                    important institution.          U.S.S.G.   2F1.1, comment (n.10).                                         -9-                                         -9-          year-old of her savings;  that is, the 40-year-old is  capable of          recouping  at least some of  the loss, while  the 60-year-old may          have little or no opportunity to recover from the financial loss.          This  distinction  is,  at  least  partially,  reflected  in  the          enhancement for  vulnerable victims  and, in any  case, does  not          warrant a five-level departure.  Therefore, the upward  departure          in  this case must be vacated.    On remand, if the court were to          make  specific findings that some  of the victims  were unable to          provide for their welfare  or that the facts present  a situation          equal to the  serious caliber  of the other  basis suggested  for          departure in Application Note 10, departure may be appropriate.5                          B. Psychological Injury to Victims                          __________________________________               The district  court  also gave  as  a secondary  reason  for          departure  the victims  psychological injuries.    "[P]hysical or          psychological harm" to the victim is specifically mentioned under          Application Note 10(c)  as a  possible basis for  departure.   An          upward departure grounded on psychological  injury is appropriate          only when the  injury is  "much more serious  than that  normally          resulting from commission of the offense," U.S.S.G.    5K2.3, and                                        ____________________          5The  Court notes that Application Note 10 has since been amended          to  provide  that departure  may be  appropriate if  "the offense          involved  the knowing endangerment of the solvency of one or more          victims."   U.S.S.G   2F1.1, comment (n.10(f))(1993).  This seems          to address the type of harm the court was attempting to quantify.          A departure based on these grounds requires  a court to find that          a defendant  knowingly pushed  a  victim into  extreme  financial                       _________          hardship.                                           -10-                                         -10-          only when there is a "substantial impairment of the intellectual,          psychological, emotional, or behavioral  functioning of a victim,          when the impairment is likely to be of an extended or  continuous          duration, and when the impairment manifests itself by physical or          psychological symptoms or by changes in behavior patterns."  Id.;                                                                       ___          United  States  v.   Astorri,  923  F.2d  1052,   1059  (3d  Cir.          ____________________________          1991)(court  upheld  two-level departure  for  psychological harm          where  evidence showed  that a  victim suffered  from high  blood          pressure and was under a doctor's care as a result of defendant's          actions).             The  evidence, in this  case, of  psychological injury  to the          victims was, at best, meager.   All of the victims expressed  the          feeling  that they  had  lost trust  in  their ability  to  judge          others.   In  addition, the  record reveals  that the  Atmas, who          considered themselves "best friends" of Pelkey for over 22 years,          suffered a sense of severe shock after learning of the fraudulent          real  estate  scheme.6   Ms. Meuse  and  Ms. Laskey,  friends and          former clients  of Pelkey, told  the probation officer  that they          experienced pain, frustration, and depression over  the knowledge          that  they will  not  live their  senior  years without  fear  of          financial burden.  Sean Tracey told the Probation Officer that he                                        ____________________          6Robert Atma's  victim impact  statement also  references "mental          anguish   and   heartache"   resulting   from   the   unexplained          geographical  separation  from  his  wife.    Assuming  that  the          separation  is attributable  to Pelkey's conduct,  these feelings          are not serious enough to establish a psychic injury.                                         -11-                                         -11-          suffered lingering feelings of distrust for others as a result of          the  offense.  The  victim experiencing  the most  severe psychic          harm  appears  to  be  Mr.  LeClair,  Pelkey's  former   business          associate.  Mr. LeClair  disclosed to the probation  officer that          he was in an "emotionally drained state," experiencing moments of          extreme  despair  and  thoughts  of   suicide.    No  medical  or          psychological records were offered and there is no evidence  that          treatment was received by any of the victims.                  This evidence is altogether insufficient to permit departure          for psychological injury.  We do  not think that feelings of lack          of trust, frustration, shock, and depression suffered by Pelkey's          victims are so far beyond the  heartland of fraud offenses as  to          constitute psychological harm  within the meaning  of the  Policy          Statement in   5K2.3 or Application Note 10(c) to   2F1.1; United                                                                     ______          States  v. Lara,  975  F.2d 1120,  1128  (5th Cir.  1992)(finding          _______________          inadequate proof of  harm).  Some  degree of consequential  trust          and reliance by the victim  is to be expected in the  majority of          fraud  cases involving false pretenses, and  the presence of such          reliance  will  not generally  justify  departure.   In  sum, the          injuries  these people suffered were  no worse than  that of many          ________          fraud victims.                      The  sentence  is  vacated  and  the case  is  remanded  for          resentencing consistent with this opinion.                                         -12-                                         -12-
