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United States v. Felton

argued: February 16, 1995.

UNITED STATES OF AMERICA
v.
DENNIS FELTON APPELLANT



On Appeal from the United States District Court For the District of New Jersey. (D.C. Crim. Action No. 93-cr-209).

Before: Stapleton and Cowen, Circuit Judges, and Huyett, District Judge*fn*

Author: Huyett

Opinion OF THE COURT

HUYETT, District Judge :

Appellant Dennis Felton was a tax examining assistant with the Automated Collection Service ("ACS") of the Internal Revenue Service ("IRS"). He was responsible for, among other things, contacting taxpayers with regard to collecting delinquent income tax payments. Felton offered delinquent taxpayers the opportunity to settle tax debts with the IRS for personal payments to him. He was convicted of one count of demand and acceptance of a bribe by a public official and five counts of unlawful gratuity demanded and sought by a public official.

Felton appeals his sentence on three grounds. First, Felton argues that the district court erred in adjusting his offense level upward by two levels pursuant to United States Sentencing Guideline section 3B1.1 for being a leader, organizer, manager, or supervisor of a criminal activity. Second, he argues that the district court erred in departing from the Sentencing Guidelines to make a one-level upward adjustment. Third, he argues that the district court made a mathematical error in its computation of his offense level that caused it to find him ineligible for a decrease in his offense level authorized by section 3E1.1 of the Sentencing Guidelines. We agree with Felton's third contention and vacate the district court's judgment of sentence and remand for resentencing.

I. Factual and Procedural Background

In early September 1992, while working for the IRS, Felton received a telephone call from a Colonia, New Jersey taxpayer concerning approximately $22,000 she owed in taxes in connection with her 1990 Form 1040. In response to her inquiry as to whether she could be excused from penalties and interest on the money she owed, Felton telephoned her and told her that if she paid him, he would "take care of business." He arranged a meeting at a mall in New Jersey, where he told her that in exchange for a personal payment of $8,000, he would close the collection action, abate all penalties and interest, and arrange for the return of approximately $13,000 to her. Subsequently, she contacted the IRS Office of the Regional Inspector concerning this incident and participated in a controlled investigation. At an October 6, 1992 meeting, the taxpayer paid Felton $2000 and Felton told her that he wanted to receive the balance of the bribe payment when she received the refund check. The ACS received a return with falsified information, and in June 1993, the taxpayer received a refund check for $24,805.44. Felton was arrested on July 14, 1993 after he demanded and received the remaining $6,000 payment.

On Felton's arrest, he advised the authorities that his co-worker, Walter Clark, actually amended the return for the taxpayer and that Clark was to share equally in the payments. Felton needed Clark or some other person to participate in the schemes because Felton is legally blind and cannot alter tax returns alone. Following Felton's arrest, agents reviewed the files Felton and Clark handled and investigated the five other frauds for which Felton was convicted. With Felton's cooperation, the authorities investigated Clark's involvement in the schemes and prosecuted him for his involvement in one fraud.

In the five incidents for which Felton was convicted of demanding a gratuity, Felton sought payments to prepare tax returns or resolve tax penalties or other tax problems. In some instances, he offered to reduce their individual tax liabilities and generate refunds in exchange for payments to him. In other instances, he solicited taxpayers by offering to amend their income tax returns and cause refunds to issue in exchange for payments to him. In several instances, he demanded and took money from taxpayers without performing services. In two frauds, involving taxpayers from Englewood, New Jersey and Mount Holly, New Jersey, Felton contacted taxpayers after they called the IRS to resolve their tax problems. The Mount Holly taxpayers later referred Felton as a tax adviser to their friends and relatives, which led to frauds against taxpayers in Burlington Township, New Jersey, Williamstown, New Jersey, and Budd Lake, New Jersey. The Mount Holly, Burlington Township, Williamstown, and Budd Lake taxpayers claimed that they did not know Felton was an IRS agent.

On April 22, 1994, Felton entered a guilty plea to an information charging him with one count of "demand and acceptance of bribe by public official," in violation of 18 U.S.C. § 201(b)(2), and five counts of "unlawful gratuity demanded and sought by public official," in violation of 18 U.S.C. § 201(c)(1)(B). A sentencing hearing was held on July 11, 1994. In the judgment, subsequently filed on July 20, 1994, the district court adopted the factual findings and Guideline applications in the Presentence Investigation Report ("presentence report" or "PSR") except for three paragraphs. App. 115 (Judgment, July 20, 1994). Thus, the record reviewed includes the presentence report, the court's oral explanation of its decision at the hearing, and the judgment order.

At the sentencing hearing, the district court calculated a base offense level of ten, pursuant to section 2C1.1, "Offering, Giving, Soliciting, or Receiving a Bribe; Extortion Under Color of Official Right." As recommended in the presentence report, pursuant to subsection 3B1.1(c), the court raised the offense level by two levels because Felton played an aggravating role in the offense. The court also considered the specific offense characteristics provisions of section 2C1.1(b). First, the court adopted the probation office's calculation of a $31,295.44 loss attributable to Felton and increased the offense level by four levels because the aggregate harm exceeded $20,000, pursuant to subsection 2C.1.1(b)(2). Second, the district court rejected the probation officer's calculations and agreed with Felton that although the Guidelines authorized a two-level increase for multiple gratuities or multiple bribes, the Guidelines did not authorize an increase when there was just one bribe, but multiple gratuities. The court, however, used Felton's argument to depart from the Guidelines to increase the offense level by one level. Next, although the presentence report recommended a three-level decrease for acceptance of responsibility pursuant to section 3E1.1, the court granted only a two-level decrease. The court believed that by not imposing the two-level increase for multiple bribes, the offense level prior to the operation of subsection 3E1.1(a) was 15, and not 16 or greater, which would have permitted another decrease in offense level for timely providing information concerning involvement in offense or timely notifying authorities of his intention to enter a plea of guilty. Finally, the district court granted a one-level downward departure, following the government's section 5K1.1 motion.

In summary, the district court's modification of the presentence report yielded an offense level of 14. The following calculation reflects the order in which the offense level should be calculated, pursuant to the application instructions of section 1B1.1:

Base offense level, § 2C1.1(a) 10

Specific offense characteristics, § 2C1.1(b)

More than one gratuity or bribe 0

Aggregate harm more than $20,000 4

Aggravating role in the offense, § 3B1.1(c) 2

Acceptance of responsibility, § 3E1.1(a) - 2

Additional adjustment for acceptance of

responsibility, § 3E1.1(b) 0

Upward Departure from § 2C1.1 1

Downward departure, § 5K1.1 - 1

Total Offense Level = 14

For an offense level of 14, the Guidelines prescribe a sentence within the range of 15 to 21 months. USSG Ch. 5, Pt. A. The district court sentenced Felton to 15 months on the bribery charge and 15 months on each of ...


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