                              In the
 United States Court of Appeals
               For the Seventh Circuit
                          ____________

No. 03-2987
UNITED STATES OF AMERICA,
                                                    Plaintiff-Appellee,
                                  v.

RICHARD J. COLLINS,
                                                Defendant-Appellant.
                          ____________
             Appeal from the United States District Court
        for the Northern District of Illinois, Eastern Division.
              No. 02 CR 831—Suzanne B. Conlon, Judge.
                          ____________
     ARGUED JANUARY 28, 2004—DECIDED MARCH 15, 2004
                          ____________



  Before MANION, DIANE P. WOOD, and EVANS, Circuit
Judges.
  MANION, Circuit Judge. Richard Collins and others incor-
porated Gateway Association, Inc., and used it as a conduit
to fraudulently raise millions of dollars from unsuspecting
investors. Much of the money he kept for his own use or
transferred to benefit friends. Once caught and charged, he
pleaded guilty to two counts of mail fraud and was sen-
tenced to ten years in prison. On appeal, Collins challenges
a four-level increase in his sentence, claiming that Gateway
was improperly labeled a financial institution under
U.S.S.G. § 2F1.1(b)(6). We affirm.
2                                               No. 03-2987

  In November 1997, Richard Collins and his confederates
incorporated Gateway Association, Inc., in Illinois. Collins
used numerous “finders” who were paid to locate prospec-
tive investors and bring them to Gateway’s meetings. At
these meetings, Collins and others promoted Gateway as an
investment company primarily involved in the international
trading of bank instruments. Investors were told that, once
they paid a $2,500 fee to become Gateway members, they
were eligible for various benefits, including discounts on
shopping, hotels, and health care. Members would also be
able to invest in the bank debenture trading program, which
Collins promised would result in a risk-free return of as
much as 1,250%. Promises that seemed too good to be true
in fact turned out to be totally false. Gateway had no
investment program or discount program; the company was
part of Collins’s scheme to defraud investors for his own
personal gain.
  For a while the scheme worked. From November 1997 to
April 1999, Gateway received almost $11 million from at
least 400 investors. In the process of collecting these large
sums, Collins had to scramble to conceal the fraud. When an
investor would question the progress of an investment,
Collins would assure the individual that “a specialist re-
covery team” had been assembled to recover his funds and
that the money would be returned in the very near future.
On at least one occasion, Collins also returned a portion of
an investor’s principal as a show of good faith. Of course
Collins had no intention of returning most of the money,
as he had already spent approximately $634,000 of Gateway
funds on personal items and had withdrawn over $1,120,000
in cash from various Gateway accounts. Collins and others
also moved investor funds to the accounts of friends and to
overseas locations to conceal the misappropriation. Little of
this money would ever be recovered.
No. 03-2987                                                       3

  In March 2003 Collins was charged with three counts of
mail fraud and one count of wire fraud. He eventually
pleaded guilty to two of the mail fraud counts. The plea
agreement stipulated that the 1997 edition of the sentencing
guidelines applied to the offense and that former U.S.S.G.
§ 2F1.1 was the applicable sentencing provision. However,
the parties disputed whether Collins’s offense level should
be increased by four levels for “substantially jeopardiz[ing]
the safety and soundness of a financial institution,” or “af-
fect[ing] a financial institution and . . . deriv[ing] more than
$1,000,000 in gross receipts from the offense.” See U.S.S.G.
§ 2F1.1(b)(6) (1997)1. The government argued in favor of
the four-level adjustment on the premise that Gateway was
a financial institution within the meaning of the guideline
and that Collins’s fraudulent conduct caused Gateway to
become insolvent.
  In preparing the presentence investigation report,
Collins’s probation officer initially disagreed with the gov-
ernment’s position because he believed that § 2F1.1(b)(6)
applied only to legitimate financial institutions, not shell
corporations. But after reading our decision in United States
v. Randy, 81 F.3d 65 (7th Cir. 1996), he agreed with the
government that the guideline covers corporations founded
for fraudulent purposes and thus recommended the four-
level increase. Collins made three related objections to the
presentence report: (1) Gateway was not a “financial insti-
tution” within the meaning of the guideline because it was
never officially licensed or registered as an investment


1
  This guideline upward adjustment has changed locations
several times. At the time of Collins’s offense, it was found at
§ 2F1.1(b)(6). It was later renumbered to § 2F1.1(b)(7),
§ 2F1.1(b)(8), and finally § 2B1.1(b)(12), its current location. For
simplicity, we refer to the adjustment as § 2F1.1(b)(6).
4                                                No. 03-2987

company, and Gateway acted more as a discount club than
an investment company; (2) investment companies cannot
be considered “financial institutions” within the meaning of
the guideline because Congress did not define them as such
when it authorized the guideline in the Crime Control Act
of 1990; (3) Collins’s actions did not “affect” Gateway or
“substantially jeopardize” Gateway because Gateway was
the vehicle for the fraud, not a victim of it.
  At sentencing in July 2003 the district court overruled
Collins’s objections. The court agreed with the government
that Gateway was a financial institution that had been sub-
stantially jeopardized by Collins’s actions:
      . . . . The guideline provides for a four-level increase
    when a defendant’s conduct jeopardizes a financial
    institution, as that term is used in the guidelines and as
    that provision is interpreted by the Seventh Circuit, a
    company that holds itself out as an investment company
    does constitute a financial institution under the guide-
    lines.
      As for Gateway, Gateway didn’t perpetrate this fraud.
    The defendant and his cohorts did. Gateway, at one
    point, was a solvent entity because of the millions of
    dollars that a lot of victims invested based on these
    misrepresentations. And certainly the solvency of
    Gateway was not only affected, it was destroyed by the
    fraud. So the four-level enhancement does apply and
    the objection is overruled.
  The court’s decision to apply the adjustment had a
significant effect on Collins’s sentence. The additional four
levels gave Collins a total offense level of 30, and with a
Criminal History Category of III the resulting prison range
was 121 to 151 months rather than 78 to 97 months. How-
No. 03-2987                                                5

ever, because the two counts to which Collins pleaded guil-
ty had a combined maximum penalty of ten years’ incar-
ceration, see 18 U.S.C. § 1341 (1997), the court sentenced
Collins to 120 months. The court also denied the govern-
ment’s motion under U.S.S.G. § 5K1.1 for a 25% departure
from the low end of the sentence because the court thought
that Collins had lied about the location of the stolen funds
that were still missing.


                             I.
  On appeal Collins challenges only the application of
§ 2F1.1(b)(6), arguing first that “investment companies”
are not “financial institutions” under the 1997 sentencing
guidelines because Congress did not specifically include
them in its definition of “financial institutions” when it
passed the Crime Control Act of 1990, the authorizing stat-
ute for § 2F1.1(b)(6)(B). To support this argument, Collins
relies entirely on our decision in United States v. Tomasino,
206 F.3d 739 (7th Cir. 2000), modified by 230 F.3d 1034 (7th
Cir. 2000) (per curiam). In Tomasino, we evaluated whether
the Sentencing Commission had misinterpreted the defini-
tion of “financial institutions” in the authorizing statute
by expanding Congress’s definition to include pension
funds in the application note to § 2F1.1(b)(6). We opted to
err on the side of underpunishment, explaining that the
Commission might actually have relied on its legislative
power to expand the definition, but that we could not
say without additional explanation from the Commission.
Tomasino, 206 F.3d at 742. Accordingly, we gave the Com-
mission a “reasonable opportunity to clarify” whether it had
acted in a legislative capacity in promulgating the expanded
definition, id. at 743, but the Commission declined the
invitation, id, 230 F.3d at 1035.
6                                                    No. 03-2987

  Collins believes that his case is analogous to Tomasino
because “investment companies,”2 although expressly de-
fined as “financial institutions” in Application Note 14 to
the 1997 version of § 2F1.1(b)(6), are not included in Con-
gress’s definition of “financial institutions” in the enabling
statute. Accordingly, Collins argues that it is impossible to
determine whether the Commission was exercising its
legislative power in expanding the definition of financial
institutions to include investment companies, and his
sentence should therefore be vacated. However, in 2001 the
Sentencing Commission effectively answered our earlier
request for clarification by amending the guideline com-
mentary to state explicitly that it intended to implement, “in
a broader form,” Congress’s definition of “financial institu-
tions.” U.S.S.G. § 2B1.1, comment. (backg’d) (2002).
Tomasino recognized that if the Commission were to add
this language to the background commentary it would be
“clear” evidence “that the Commission . . . was exercising its
legislative power” in promulgating the broader definition
of financial institutions. Tomasino, 206 F.3d at 741.
   When the Sentencing Commission amended the back-
ground commentary to show that it was exercising its leg-
islative power to expand the congressional definition of
“financial institutions,” it merely clarified its authority to
enact the preexisting definition in Application Note 14
to § 2F1.1(b)(6), and so there is no issue in applying the


2
   Collins does not challenge the district court’s characterization
of Gateway as an “investment company.” For a definition of
“investment company,” see United States v. Savin, 349 F.3d 27, 37
(2d Cir. 2003) (defining “investment company” in Application
Note 14 to § 2F1.1(b)(6) of the guidelines as “a company substan-
tially engaged in the business of investing in securities of other
companies”).
No. 03-2987                                                      7

clarification retroactively. See Tomasino, 206 F.3d at 742-43
(“A clarifying guideline can lawfully be applied retro-
actively . . . . The background note does not prescribe
punishment and the question of its meaning is unrelated
to retroactivity.”); see also United States v. Hartz, 296 F.3d 595,
598 (7th Cir. 2002) (court may apply clarifying amendments
retroactively). Consequently, we may look to the Sentencing
Commission’s expanded definition of “financial institu-
tions” in the 1997 guidelines—a definition that expressly
includes “investment companies.” See U.S.S.G. § 2F1.1,
comment. (n.14) (1997).
   Collins next argues that his fraudulent acts did not
victimize Gateway within the meaning of § 2F1.1(b)(6)
because Gateway was merely a sham used to facilitate a
fraudulent scheme. The essence of Collins’s argument is that
a financial institution created solely for the purpose of
defrauding investors cannot be considered a victim of a
scheme to defraud. However, we came to the opposite con-
clusion in United States v. Randy, 81 F.3d 65 (7th Cir. 1996),
the only case we have found that deals with the application
of § 2F1.1(b)(6) to fraudulent corporations. Randy paid
$30,000 for a “bank,” which he named the Canadian Trade
Bank, from the WFI Corporation, “a company apparently in
the business of selling ‘paper’ banks which have no employ-
ees and no assets beyond the name and the banking li-
cense.” Randy, 81 F.3d at 66-67. The “bank” was initially
licensed by the government of Montserrat but soon lost the
license when Montserrat tightened its banking regulations.
Id. at 67. Randy then paid an additional $10,000 for the
purchase of another entity in Grenada, which he again
named the Canadian Trade Bank. Id. Because Grenada had
no licensing laws, the Canadian Trade Bank “became a
corporation which simply acted like a bank,” until Grenada
struck the company from the rolls of registered corporations
in 1991. Id. Using the Canadian Trade Bank name, Randy
8                                                No. 03-2987

developed a nationwide network of “brokers” who were
paid commissions to sell the “bank’s” certificates. Id. From
1990 to 1992, the “brokers” sold more than $16 million
worth of the certificates to more than 400 investors. Id.
However, aside from some money paid to investors as
“interest” in an attempt to prevent them from uncovering
the scheme, Randy spent the majority of the money on
private purchases and moved the rest into the accounts of
friends. Id.
  In challenging the application of § 2F1.1(b)(6) on appeal,
Randy argued that “the Canadian Trade Bank was not the
sort of financial institution the Sentencing Commission in-
tended the guideline to cover.” Id. at 69. We rejected this
argument and held that Randy’s “bank” fell within the
guideline definition of “financial institution” and upheld
the district court’s sentence:
       The Canadian Trade Bank was licensed as a bank by
    Montserrat and licensed by Grenada as a company with
    broad banking powers. There is no reason to exclude it
    from the definition in the application note. Furthermore,
    when it walks and talks like a financial institution, even
    if it’s a phony one, it is, in our view, covered by
    § 2F1.1(b)(6).
Id. (emphasis added). There appears to be no meaningful
difference between the facts of Randy and the facts of the
present case that would remove Gateway from the reach of
§ 2F1.1(b)(6). Like the Canadian Trade Bank, Gateway, a
company incorporated in Illinois, was fraudulently held out
to investors as a financial company that offered the opportu-
nity to invest in high-return, zero-risk investments. Like the
Canadian Trade Bank, Gateway utilized a network of
“employees” to draw over 400 unwitting investors into the
scheme, accumulating millions of dollars in receipts, all of
which would eventually be siphoned out of the company by
No. 03-2987                                                  9

the company’s president and owner. Both companies
therefore “walked and talked” like the financial institutions
they purported to be.
  Collins argues that his case is distinguishable from Randy
because the Canadian Trade Bank was licensed whereas
Gateway was only incorporated; the licensing of the Cana-
dian Trade Bank was a factor that this court seemed to rely
on in Randy in holding that the company “walked and
talked” like a bank. Even if licensing is qualitatively differ-
ent than incorporation for purposes of § 2F1.1(b)(6), a close
reading of Randy reveals that the Canadian Trade Bank had
no license when Randy began the scheme to defraud.
Instead, the Canadian Trade Bank was simply a corporation,
registered in Grenada, that represented itself as a bank that
offered investment certificates. This corporate status is
identical to the one held by Gateway during the course of
Collins’s scheme to defraud.
  Our decision in Randy to apply § 2F1.1(b)(6) to fraudulent
corporations is supported by the Sentencing Commission’s
expansive interpretation of what it means to substantially
jeopardize the safety and soundness of a financial institu-
tion. The guidelines explain that an offense “shall be
deemed to have ‘substantially jeopardized the safety and
soundness of a financial institution’ if, as a consequence of
the offense, the institution became insolvent; substantially
reduced benefits to pensioners or insureds; was unable on
demand to refund fully any deposit, payment, or invest-
ment; was so depleted of its assets as to be forced to merge
with another institution in order to continue active opera-
tions; or was placed in substantial jeopardy of any of the
above.” U.S.S.G. § 2F1.1, comment. (n.15) (1997). Thus, the
Commission interprets § 2F1.1(b)(6) broadly, to cover
threats to the fiscal security of a corporation as well as the
loss of individual investments. Because the Sentencing
10                                                 No. 03-2987

Commission extends the protections of § 2F1.1(b)(6) beyond
institutions to individual investors, it follows that the
Commission would intend the guideline to apply to conduct
that victimizes both legitimate and fraudulent corporations.
In both cases investors lose their investments due to fraudu-
lent conduct. It makes no difference to the individual
investors in the present case whether Collins stole their
money from a legitimate corporation or one created for
fraudulent purposes; the important fact to the investors is
that their investments will not be repaid.
  Finally, Collins argues that even assuming fraudulent
corporations may be considered “victims” under
§ 2F1.1(b)(6), the guideline should still not apply because he
did not intend to cause harm to Gateway—the company
was merely a conduit for the harm that he intended to inflict
on individuals. This argument is meritless. The case that
Collins cites as support, Hartz, 296 F.3d at 600, actually
concludes that a fraudulent act need not be directly targeted
at a financial institution in order for the guideline to apply
so long as the institution is harmed as a collateral effect of
the fraudulent conduct. Thus, even if Collins’s scheme to
defraud had only an indirect effect on Gateway, his use of
Gateway to facilitate his scheme would fall within the scope
of § 2F1.1(b)(6) under the logic of Hartz. But it is difficult to
see how the insolvency of Gateway could be considered a
collateral effect. Collins admitted in the plea agreement to
having intended to steal every dollar sent by investors to the
Gateway corporation, and, as a result of the scheme, few
investors, if any, were able to recoup their investments.
  Before concluding, we note that Collins has raised another
argument in his reply brief. He argues, without citation to
any legal authority, that the case should be remanded
because the district court did not clarify which subsection,
(A) or (B), of § 2F1.1(b)(6) it was using in sentencing him.
No. 03-2987                                                  11

Subsection (A) requires the court to apply the adjustment if
the defendant’s fraudulent offense “substantially jeopar-
dized the safety and soundness of a financial institution”
while subsection (B) applies when the offense “affected a
financial institution and the defendant derived more than
$1,000,000 in gross receipts from the offense.” But Collins
does not explain how the court’s alleged error prejudiced
him, and in any case he has waived the argument by failing
to raise it in his opening brief, see Nelson v. La Crosse County
Dist. Attorney, 301 F.3d 820, 836 (7th Cir. 2002). Accordingly,
this final argument is also meritless.
                                                    AFFIRMED.

A true Copy:
        Teste:

                           _____________________________
                            Clerk of the United States Court of
                              Appeals for the Seventh Circuit




                     USCA-02-C-0072—3-15-04
