United States District Court, D. Connecticut
RULING RE SCOPE OF RELEVANT CONDUCT FOR
Jeffrey Alker Meyer United States District Judge.
federal practitioners well know, the U.S. Sentencing
Guidelines follow a “modified real-offense”
system of sentencing. It is a not-so-popular compromise
between the extremes of a “charge offense” system
and a “real offense” system. See
generally Julie R. O'Sullivan, In Defense of the
U.S. Sentencing Guidelines' Modified Real-Offense
System, 91 Nw. U. L. Rev. 1342 (1997).
charge-offense system, a judge bases a sentence solely on the
defendant's charged and proven conduct, while
disregarding any uncharged misconduct no matter how obvious.
By contrast, in a real-offense system, a judge may base a
sentence on all manner of uncharged facts or other crimes
that a judge concludes to be the “real” offense
worthy of punishment.
its adoption of a modified real-offense system, the
Sentencing Guidelines try to strike a balance between the
formalistic limits of a charge-offense system and the
potential for unfair excess of a real-offense system.
It's not easy to do. The Guidelines' solution is a
concept known as “relevant conduct.” See
U.S.S.G. § 1B1.3. If a defendant pleads guilty to one
crime but the prosecution thinks that he should be sentenced
as well for other crimes, then these other crimes may count
toward a defendant's offense level under the Guidelines
if they qualify as “relevant conduct.” It is the
meaning and limits of the Guidelines “relevant
conduct” provision that is the focus of this ruling.
Barton Stuck pleaded guilty to a $50, 000 fraud that occurred
in late 2015. But the Government insists that for several
years before, from 2006 to 2011, he raked in another $8.7
million by defrauding his investors. The Government did not
charge Stuck with this prior fraud, but it argues that the
prior fraud qualifies as “relevant conduct” and
thereby warrants an enormous enhancement of several
years' imprisonment for Stuck under the Sentencing
not agree. I find that Stuck's uncharged fraud does not
meet the definition of “relevant conduct” under
the Sentencing Guidelines. And even if I were to conclude
that the uncharged fraud met the definition of
“relevant conduct, ” I would likely exercise my
discretion to vary downward. In my view, it does not promote
respect for the law for a court to accept a defendant's
guilty plea on one charge and then to impose a sentence that
is driven and dominated by much older conduct that the
Government has not chosen to charge as a crime and to which
the defendant has not admitted as part of his plea agreement.
Barton Stuck controlled a group of related business
entities-known as the “Signal Lake
entities”-through which investors could invest in
various technology companies. He solicited millions of
dollars in investments until his funds failed in 2011, with
large losses for many investors.
Government has filed a memorandum detailing specific losses
to particular Signal Lake investors from 2006 to 2011. Doc.
#50 at 4-19. Stuck does not dispute that his investors from
that era lost money but he does dispute the Government's
contention that these losses were due to his fraud. All told,
the Government alleges that Stuck defrauded investors of
about $8.7 million from 2006 to 2011, with the lion's
share of these losses occurring before 2009. Ibid.
The Government does not identify any specific investor losses
occurring after April 2011.
response to investor complaints, the Federal Bureau of
Investigation (FBI) launched a criminal investigation. In
August and September 2015, an undercover FBI agent posed as a
person who wished to buy out the Signal Lake stake of one of
Stuck's investors. Stuck tried to defraud the undercover
agent. He falsely assured the agent that his investment would
quickly double in value. Stuck also wildly exaggerated Signal
Lake's bank holdings. Stuck further solicited from the
agent a $50, 000 “repayable fee, ” supposedly to
cover the additional accounting and legal fees that Signal
Lake would incur in the transfer of the investment interest.
At Stuck's behest, the agent wired the “fee”
of $50, 000 to a Wells Fargo account in October 2015.
than two years went by before the Government charged Stuck in
February 2018 with wire fraud based on his effort to defraud
the FBI undercover agent. Doc. #1. Stuck has entered a guilty
plea to the wire fraud charge as well as to additional crimes
of related money laundering and false statements to the U.S.
Securities and Exchange Commission (SEC).
now faces sentencing, but the parties do not agree on how the
Sentencing Guidelines should apply in this case. Their
disagreement is about how I should calculate
“loss” for purposes of U.S.S.G. § 2B1.1(b).
Although the parties agree that Stuck's
“loss” calculation should include the $50, 000
that he solicited from the FBI agent in 2015, they disagree
whether it should include any losses of the Signal Lake
investors from 2006 to 2011. As noted above, the Government
maintains that Stuck defrauded his investors of about $8.6
million from 2006 to 2011, and it suggests-consistent with a
stipulation in the plea agreement-that I should adopt a
conservative estimate of a total loss of $3.5 million for
Sentencing Guidelines purposes.
$50, 000 loss, Stuck's offense level would be increased
by 6 levels. See U.S.S.G. § 2B1.1(b)(1)(D)
(loss between $40, 000 to $95, 000). But for a $3.5 million
loss, Stuck's offense level would be increased by 16
levels. See U.S.S.G. § 2B1.1(b)(1)(I) (loss
between $1.5 and $3.5 million). Moreover, because the alleged
fraud from 2006 to 2011 involved many more victims,
Stuck's sentencing offense level would be subject to, as
the presentence report recommends, an additional 2-level
increase for more than 10 victims. See U.S.S.G.
upshot is that, if I include Stuck's alleged investor
fraud from 2006 to 2011 in the Guidelines calculation,
Stuck's offense level will increase by at least 12 more
levels. This increase would result in a Guidelines range for
imprisonment that is about four times as high as it would be
without these enhancements.
parties have filed extensive submissions and requested that I
decide whether Stuck's prior fraud losses from 2006 to
2011 qualify as “relevant conduct” for purposes
of the Sentencing Guidelines. Although Stuck reserves the
right to contest the truth of the Government's
allegations that he previously defrauded investors, his
principal argument at this time is that-even accepting the
Government's factual allegations as true-the prior losses