Filed: Apr. 22, 2004
Latest Update: Mar. 02, 2020
Summary: United States Court of Appeals FOR THE EIGHTH CIRCUIT _ No. 03-1897 _ United States of America, * * Appellant, * * Appeal from the United States v. * District Court for the * Western District of Missouri Phillip O'Malley, * * Appellee. * _ Submitted: December 18, 2003 Filed: April 22, 2004 _ Before MELLOY, McMILLIAN, and BOWMAN, Circuit Judges. _ McMILLIAN, Circuit Judge. The United States of America (hereinafter the government) appeals from a final judgment entered in the United States District
Summary: United States Court of Appeals FOR THE EIGHTH CIRCUIT _ No. 03-1897 _ United States of America, * * Appellant, * * Appeal from the United States v. * District Court for the * Western District of Missouri Phillip O'Malley, * * Appellee. * _ Submitted: December 18, 2003 Filed: April 22, 2004 _ Before MELLOY, McMILLIAN, and BOWMAN, Circuit Judges. _ McMILLIAN, Circuit Judge. The United States of America (hereinafter the government) appeals from a final judgment entered in the United States District ..
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United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 03-1897
___________
United States of America, *
*
Appellant, *
* Appeal from the United States
v. * District Court for the
* Western District of Missouri
Phillip O'Malley, *
*
Appellee. *
___________
Submitted: December 18, 2003
Filed: April 22, 2004
___________
Before MELLOY, McMILLIAN, and BOWMAN, Circuit Judges.
___________
McMILLIAN, Circuit Judge.
The United States of America (hereinafter the government) appeals from a final
judgment entered in the United States District Court for the Western District of
Missouri following its criminal prosecution of Phillip O’Malley, who was found
guilty by a jury of conspiring to commit bank, wire, and mail fraud, in violation of 18
U.S.C. §§ 371, 1341, 1343, and 1344. After determining O’Malley’s applicable range
of imprisonment under the sentencing guidelines to be 24 to 30 months, the district
court sentenced O’Malley to three years of probation with no term of imprisonment
and ordered O’Malley to pay $459,047.02 in restitution, a $10,000.00 fine, and a
$100.00 special assessment. United States v. O’Malley, No. 01-5022-03-CR (W.D.
Mo. Mar. 4, 2003) (Judgment). For reversal, the government argues that the district
court erred at sentencing in (1) determining the relevant amount of financial loss to
the victim and (2) departing from the sentencing guidelines. For the reasons stated
below, we vacate O’Malley’s sentence and remand the case to the district court for
further proceedings consistent with this opinion.
Jurisdiction
Jurisdiction was proper in the district court based upon 18 U.S.C. § 3231.
Jurisdiction is proper in this court based upon 18 U.S.C. § 3742(b) and 28 U.S.C.
§ 1291. The notice of appeal was timely filed pursuant to Fed. R. App. P. 4(b).
Background
On July 27, 2001, O’Malley, the owner and operator of several businesses in
Pittsburg, Kansas, along with Paul Doyon and Marc Lininger, business development
managers for Sam’s Club Membership Warehouses (hereinafter Sam’s Club), were
charged in the district court in a three-count indictment. Count I of the indictment
alleged that, in 1996, O’Malley, Doyon, and Lininger jointly participated in a
conspiracy to commit fraud in the sales and distribution of chlorofluorocarbon gases,
commonly known as freon. Counts II and III of the indictment were subsequently
dismissed and are not at issue in the present appeal.
Doyon pled guilty and was sentenced to two years imprisonment. Lininger also
pled guilty and agreed to testify for the government against O’Malley. Lininger’s
sentencing was postponed until after O’Malley’s trial.
At O’Malley’s trial, the government’s evidence showed the following. During
the relevant time period, Sam’s Club was a large volume purchaser and distributor of
freon. Business development managers for Sam’s Club were responsible for
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marketing Sam’s Club products to large volume purchasers. Ordinarily, large volume
purchases and sales by Sam’s Club were controlled by its purchasing and sales
department. However, because of the volatility of the freon market, Sam’s Club
allowed some large volume purchases and sales of freon to be controlled by its
business development managers at the local level. Lininger and Doyon were among
the business development managers who were permitted to have such control.
Lininger and Doyon arranged with O’Malley for Sam’s Club to purchase freon from
one or more of O’Malley’s companies at inflated prices. Lininger, Doyon, and
O’Malley also arranged transactions in which one of O’Malley’s companies would
purchase freon from Sam’s Club and then sell it to a third party at a higher price.
O’Malley would give Lininger and Doyon each a share of his profits (i.e., kickbacks),
which they referred to as “commissions.” Sam’s Club had no knowledge of this
scheme involving O’Malley, Lininger, and Doyon.
The jury found O’Malley guilty of conspiracy to commit bank, wire, and mail
fraud, as alleged in Count I of the indictment.
Pursuant to the district court’s instructions, a probation officer prepared a
presentence investigation report (PSR) for O’Malley.1 According to the PSR, the
1
In preparing O’Malley’s presentence investigation report, the probation officer
used the 1995 version of the sentencing guidelines. The district court and the parties
have similarly assumed that the 1995 version of the guidelines applies in the present
case. Section 1B1.11 of the 2002 version of the sentencing guidelines provides in
pertinent part: “The court shall use the Guidelines Manual in effect on the date that
the defendant is sentenced,” except that, “[i]f the court determines that use of the
Guidelines Manual in effect on the date that the defendant is sentenced would violate
the ex poste facto clause of the United States Constitution, the court shall use the
Guidelines Manual in effect on the date that the offense of conviction was
committed.” In the present case, application of the 2002 Guidelines Manual, which
was in effect at the time of O’Malley’s sentencing hearing, would result in a higher
sentence than application of the 1995 version, which was in effect at the time of the
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difference between the amount O’Malley paid for the relevant quantities of freon and
the amount for which he sold the same quantities of freon equaled $756,460.00. Of
that sum, O’Malley retained $277,412.98, Doyon and Lininger each received
$229,523.51, and three unindicted co-conspirators received $20,000 altogether. The
PSR concluded that the amount of the loss to the victim was $459,047.02, which
represented the sum of Doyon’s and Lininger’s gains from the conspiracy.2 The PSR
further concluded that O’Malley’s total offense level was 17, his criminal history
category was I, and his resulting sentencing range was 24 to 30 months. The PSR
recommended restitution in the amount of $459,047.02.
The parties filed objections to the PSR, which were addressed at O’Malley’s
sentencing hearing.3 On the question of the amount of the victim’s loss, the
government argued that the loss to Sam’s Club should include, not just the kickbacks
received by Doyon and Lininger, but all of the co-conspirators’ ill-gotten gains – for
a total loss of $756,460.00.4 The government maintained, and the district court
acknowledged, that the findings made at Doyon’s sentencing hearing were not
offense. Under the 2002 Guidelines Manual, USSG § 2B1.1, a crime of fraud with
an amount of loss between $400,000 and $1,000,000 results in an adjusted base
offense level of 20. Without any additional offense level adjustments, O’Malley’s
sentencing range under the 2002 guidelines would be 33 to 41 months.
2
The PSR noted that the district court had already ruled at Doyon’s sentencing
hearing that the amount of the loss to the victim was $459,047.02.
3
O’Malley and Lininger were sentenced at the same hearing on March 4, 2003.
Because Lininger had cooperated with the government and agreed to testify against
O’Malley, he received a sentence of probation under USSG § 5K1.1.
4
In its written objections, the government argued that the amount of loss should
be $736,460.00. However, the government corrected its position at the sentencing
hearing and argued for a $756,460.00 loss figure, which included the $20,000.00 in
kickbacks paid to the three unindicted co-conspirators. See Sentencing Transcript at
3.
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binding for purposes of sentencing O’Malley. The government also asserted that, if
the loss figure were to be increased, O’Malley’s restitution, offense level, sentencing
range, and fine range should also be increased accordingly.
In his written objections to the PSR, O’Malley expressly noted that he did not
dispute the PSR’s factual account of the relevant transactions; however, he did
dispute the characterization of any financial gain to him, Doyon, or Lininger as a
“loss” to Sam’s Club. At the sentencing hearing, O’Malley argued that the loss figure
should be no more than $459,047.02, but also again suggested that “even the payment
of $459,047.02 overstates the seriousness of the offense because there is no indication
that that was a loss to Sam’s Club, particularly in a dollar-for-dollar amount.”
Sentencing Transcript at 5.
Upon consideration, the district court held that, for all relevant sentencing
purposes including restitution, the amount of the loss to Sam’s Club was
$459,047.02. See id. at 6-7.
After ruling on the issue of the loss to the victim, the district court next
considered whether a downward departure was warranted, as requested by O’Malley.
At that time, O’Malley’s attorney called the district court’s attention to character
letters that the defense had previously submitted to the district court. In addition,
defense counsel presented for the first time a letter dated February 25, 2003, from
T.A. Dunham, the President of Gold Bank, to James R. Hobbs, O’Malley’s attorney
(hereinafter the “Gold Bank letter”), which stated in relevant parts:
Dear Mr. Hobbs,
This letter is to inquire as to the terms of remitting restitution to the
Clerk of the Court in Springfield, Mo. on behalf of our customer Philip
O’Malley. We recognize that this matter is under the jurisdiction of a
Federal Court and the Presiding Judge will ultimately make the decision
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as to the disposition of Mr. O’Malley’s case. However, as Mr.
O’Malley’s counsel we would like to point out to you certain concerns
the bank feels very strongly about with respect to funding our
customer’s request.
1. It is imperative in our judgment that Mr. O’Malley
receive a probated sentence if he borrows these
funds in order to manage his businesses and
liquidate certain properties necessary to reduce his
outstanding loans from the bank to a manageable
level. . . .
2. As certain real estate properties will need to be
liquidated to repay this additional debt, . . . the bank
is concerned that if Phil is incarcerated, potential
buyers of these properties in our small community
will believe there is a sense of urgency in selling
these properties and tender below market offers.
3. We feel it is necessary to require that Mr. O’Malley
receive a probated sentence to fund this credit
facility under the terms and conditions of our
commitment.
Sincerely,
T.A. Dunham, Community Bank President - Pittsburg
The Gold Bank letter and the character letters were then collectively marked
as Defendant’s Exhibit 1.5
5
As stated above, the Gold Bank letter had not previously been submitted to the
district court, although the character letters had been. Defense counsel explained:
“And I have with me, Judge, the original of the letter from Gold Bank. At the time
we submitted letters to the Court, we had not yet received that original.” Sentencing
Transcript at 8.
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Thereafter, defense counsel argued that a downward departure was warranted
based upon extraordinary restitution, as well as the adverse economic impact that
O’Malley’s incarceration would have on the community. The government responded
by arguing that neither of these two factors identified by O’Malley, whether
considered alone or in combination, warranted a downward departure. The
government argued that the payment of restitution at that point was not extraordinary
and should, at most, be considered under the sentencing guidelines as a possible
ground for finding acceptance of responsibility. As a policy matter, the government
emphasized, a white collar defendant’s payment of restitution should not influence
the sentencing court to depart downward.
At the close of both parties’ arguments on the issue of downward departure,
defense counsel stated:
[A]t this time I would like to tender to the Court Exhibit 1 that has
the original letter from Mr. Dunham of Gold Bank along with the other
letters as well as attached to it with a paper clip is a cashier’s check paid
to the Clerk of the Court, remittor Phil O’Malley, on Gold Bank in the
amount of $459,047.02.
Sentencing Transcript at 21.
As indicated above, the district court determined that O’Malley’s applicable
sentencing range under the guidelines was 24 to 30 months, but departed from the
guidelines and sentenced O’Malley to three years of probation, with no prison term.
The district court explained:
[P]ursuant to USSG 5K2.0 [this case is] outside the heartland based
upon[:] 1) the extraordinary restitution effort of the defendant to take out
a loan to pay restitution immediately; 2) the seriousness of defendant’s
role is overstated; 3) Pittsburg, Kansas, being a small farming
community, the Court recognizes the economic impact and importance
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of keeping defendant’s business operating and the provision of
employment for over 60 people in the community.
United States v. O’Malley, No. 01-5022-03-CR (W.D. Mo. Mar. 4, 2003) (Statement
of Reasons). This appeal followed.
Discussion
Amount of loss
The government argues that the district court clearly erred in determining that
the amount of financial loss to Sam’s Club resulting from O’Malley’s offense was the
total amount of Doyon’s and Lininger’s kickbacks, $459,047.02, instead of the full
amount of money retained by all of the co-conspirators, $756,460.00. The
government acknowledges that it bore the burden of proof on this issue. However,
the government contends that it met its burden by introducing evidence, based upon
records kept by O’Malley himself, showing the amount of money received by each
of the co-conspirators in each of their unlawful transactions. As a consequence of the
district court’s improper valuation of the loss, the government argues, O’Malley was
permitted to retain the $277,412.98 he obtained through his criminal conduct. That
result, the government argues, is contrary to the well-established principle that a
criminal offender should not be permitted to profit from his or her crime. See, e.g.,
United States v. Whatley, 133 F.3d 601, 606 (8th Cir.) (“We are not inclined to allow
the defendants a profit for defrauding people or a credit for money spent perpetrating
a fraud.”), cert. denied,
524 U.S. 940 (1998). Addressing the district court’s apparent
effort to be consistent with its prior sentencing of co-defendant Doyon, the
government contends that Doyon’s restitution order was erroneous, and now the
district court has simply repeated the error. The government also argues that it is not
a defense to say that the victim nevertheless retained an objectively fair profit. The
government explains that, under such circumstances, the victim is harmed by the
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denial of full and honest disclosure, which would have permitted it to benefit even
more. Thus, the government concludes, the measure of harm must be the benefit that
all of the co-conspirators reaped as a result of their unlawful scheme.
In support of the district court’s finding regarding the amount of the loss,
O’Malley notes that, under the guidelines (currently USSG § 2B1.1 and formerly
USSG § 2F1.1), the loss determination need not be exact, but may be a reasonable
estimate of the victim’s loss based upon the available evidence. O’Malley argues
that, because the prosecution’s theory was an “intangible rights theory of mail and
wire fraud,” the payments made to Doyon and Lininger accurately reflected the value
of Sam’s Club’s loss of honest services from its employees. O’Malley further argues
that, because it was not unlawful for him simply to make a business profit, the profit
he made was not part of the relevant loss. He also argues that, under the guidelines
and interpretive case law, the actual gain incurred by a defendant ordinarily is not the
proper measure of the loss to the victim and should only be used as an alternative
estimate of the loss where it cannot otherwise be calculated. Turning to the cases
cited by the government, O’Malley distinguishes them on grounds that they involved
more egregious wrongdoing and did not involve an “intangible rights theory,” as in
the present case. For example, he argues, in United States v. Whatley, 133 F.3d at
606, this court rejected the defendant’s argument that the amount of loss should
exclude the cost of running the business in question because the entire business was
based upon a fraud. By contrast, he argues, his businesses were themselves not
illegal or fraudulent, only certain transactions were. Therefore, he concludes, the
profits incurred by his businesses were legitimate and should not be treated as part
of Sam’s Club’s loss under the guidelines.
We review the district court’s determination of the amount of loss to the victim
for clear error. United States v. Oligmueller, 198 F.3d 669, 671 (8th Cir. 1999). We
argree with the government that allowing O’Malley or his companies to retain the
profits incurred from his unlawful conspiracy with Doyon and Lininger would
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improperly permit him to benefit from his illegal conduct. His profits were part of
Sam’s Club’s losses. For example, where Lininger and Doyon arranged for Sam’s
Club to sell freon through one of O’Malley’s companies to a third party and O’Malley
received a middleman’s profit (which he shared with his co-conspirators), the amount
of loss to Sam’s Club was the entire profit retained by all the co-conspirators,
including O’Malley; absent the fraud, Doyon and Lininger arguably could have
arranged a direct sale from Sam’s Club to the third party buyer at the same price, and
Sam’s Club would have retained the entire profit for itself. Similarly, where Doyon
and Lininger conspired with O’Malley for O’Malley to purchase freon from a third
party and then sell the same freon to Sam’s Club at a profit (a profit which the co-
conspirators secretly kept for themselves), Sam’s Club arguably was denied the
benefit of buying the freon at O’Malley’s purchase price and thus was improperly
deprived of the net profit shared by the co-conspirators, including O’Malley.
Therefore, the amount of loss suffered by Sam’s Club as a result of the conspiracy
should have included all the funds retained by all of the co-conspirators as a result of
their fraudulent scheme, and the district court’s finding to the contrary was clearly
erroneous. The total amount of Sam’s Club’s loss was $756,460.00.
Downward departure
“Under the PROTECT Act of 2003, Pub. L. No. 108-21 § 401, 117 Stat. 650,
657 (2003), amending 18 U.S.C. § 3742(e) effective April 30, 2003, we review
de novo the issue of whether a departure is justified given the particular facts of a
case.” United States v. Hutman, 339 F.3d 773, 775 (8th Cir.), cert. denied,
124 S. Ct.
842 (2003). The de novo standard of review applies to pending appeals, even where
the defendant was sentenced before the effective date of the PRTOECT Act, because
a change in the review standard is procedural in nature. United States v. Gonzales-
Ortega,
346 F.3d 800, 802 (8th Cir. 2003) (“Although [the defendant] was sentenced
before the PROTECT Act became law, the Act, because it is procedural in nature,
does apply to his pending appeal.”); United States v.
Hutman, 339 F.3d at 775
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(quoting United States v. Mejia, 844 F.2d 209, 211 (5th Cir. 1988)) (“A change in the
standard of review is properly characterized as procedural rather than substantive
[and therefore can be applied to a pending appeal without violating the Ex Post Facto
clause] because it neither increases the punishment nor changes the elements of the
offense or the facts that the government must prove at trial.”).
As stated above, the district court set forth three reasons for its decision to
depart from the guidelines: (1) O’Malley’s extraordinary restitution effort in taking
out a bank loan to pay full restitution immediately; (2) the view that the seriousness
of O’Malley’s role in the offense had been overstated under the guidelines; and (3)
the economic impact on the community if O’Malley were to be absent from his
businesses, which employed over 60 residents of Pittsburg, Kansas, a small farming
community.
In support of the determination that his restitution effort was extraordinary,
O’Malley maintains that the cashier’s check, which was tendered to the district court
before its decision to depart, was fully and immediately negotiable regardless of what
the district court’s sentencing decision would be.6 O’Malley also emphasizes that his
payment of restitution relieved Doyon and Lininger of their joint and several liability.
O’Malley cites United States v. Oligmueller, 198 F.3d at 672, for the proposition that
his restitution effort justified the downward departure in the present case. O’Malley
further argues that departure for extraordinary restitution is appropriate in the present
case because “[o]therwise, there is no incentive for a defendant to make such
substantial and extraordinary effort.” He concludes that even a sentence at the low
6
O’Malley maintains: “The Gold Bank letter simply asks the district court to
consider probation. This letter indicates in part that ‘[w]e recognize that this matter
is under the jurisdiction of the Federal Court and the Presiding Judge will ultimately
make the decision as to the disposition of Mr. O’Malley’s case.’ The Bank is simply
asking the Court to impose probation.” Brief for Appellee at 26-27.
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end of his guideline sentencing range would not “adequately distinguish or award
[sic] such extraordinary efforts.” Brief for Appellee at 29.
The district court, in its statement of reasons, suggested that O’Malley’s actions
were extraordinary because of the extensive borrowing efforts and financial
commitment he was required to make in order to obtain such a sizable bank loan prior
to the sentencing hearing. The district court expressly noted “the extraordinary
restitution effort of the defendant to take out a loan to pay restitution immediately.”
We, too, recognize that O’Malley must have gone to great lengths to have a cashier’s
check for $459,047.02 readily available for tender at the sentencing hearing.
However, to treat such efforts as warranting a downward departure from the
guidelines would differentiate criminal defendants on the basis of their economic
resources, which is clearly contrary to the intent of the sentencing guidelines.
Moreover, voluntary payment of restitution is a mitigating circumstance that
has been taken into consideration by the Sentencing Commission in formulating the
guidelines. Application note 1(c) to USSG § 3E1.1 expressly recognizes that a
downward adjustment for acceptance of responsibility may be applicable if the
defendant voluntarily paid restitution prior to the adjudication of his or her guilt.
Therefore, the district court was authorized to depart from the guidelines based upon
O’Malley’s restitution efforts only if, “in light of unusual circumstances, the guideline
level attached to that factor is inadequate.” USSG § 5K2.0; see also United States v.
Garlich, 951 F.2d 161, 163 (8th Cir. 1991) (district court erroneously concluded that
it lacked authority to consider the defendant’s voluntary payment of restitution before
his adjudication of guilt; “[i]f the district court determines the two-level reduction for
acceptance of responsibility inadequately addresses [the defendant’s] restitution, the
district court may impose a reasonable sentence outside the guideline range”).
While litigating in the district court, O’Malley argued that any restitution
amount was inappropriate because Sam’s Club suffered no real financial loss, a
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position he maintained right up to the point of the district court’s ruling on the
amount of the loss. See Sentencing Transcript at 5. Only after that decision was
made did O’Malley tender the cashier’s check to pay restitution. Under these
circumstances, while O’Malley certainly had a right to dispute the amount of the loss
to Sam’s Club, his payment of restitution after his guilt was adjudicated and after the
amount of the loss was determined did not qualify as acceptance of responsibility
under the guidelines, much less a basis for downward departure.
Furthermore, contrary to O’Malley’s argument, the downward departure in the
present case is not justified under United States v. Oligmueller. In that case, we held
that the amount of the loss resulting from the defendant’s fraudulent attainment of a
bank loan should reflect the full amount fraudulently borrowed, without consideration
of the defendant’s efforts to repay the bank after the fraud was discovered (except for
payments from the sale of pledged assets); however, we further held that the district
court did not abuse its discretion in departing downward because the amount of the
loss significantly overstated the risk to the bank and because the defendant – having
voluntarily begun making restitution almost a year before he was indicted – had
engaged in extraordinary restitution efforts. See 198 F.3d at 671-72.
Thus, the only remaining question with respect to “extraordinary restitution”
is whether the downward departure is justified on that basis because O’Malley’s full
payment of restitution relieved his co-defendants of their joint and several liability
for the same loss. We hold that it is not. Joint and several liability is no less
liability. The downward departure cannot be justified by the fact that O’Malley’s
immediate fulfillment of his own legal obligation bestowed a benefit upon his co-
conspirators.
We next turn to the district court’s second reason for departing downward –
that “the seriousness of defendant’s role is overstated.” As a procedural matter, we
note that O’Malley did not identify this factor as a ground for departure nor did the
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district court notify the parties that it was contemplating departure on this basis, as
required under Fed. R. Crim. P. 32(h) (“Before the court may depart from the
applicable sentencing range on a ground not identified for departure either in the
presentence report or in a party’s rehearing submission, the court must give the
parties reasonable notice that it is contemplating such a departure.”); see also Burns
v. United States, 501 U.S. 129, 138-39 (1991) (“[B]efore a district court can depart
upward on a ground not identified as a ground for upward departure either in the
presentence report or in a prehearing submission by the Government, Rule 32 requires
that the district court give the parties reasonable notice that it is contemplating such
a ruling. This notice must specifically identify the ground on which the district court
is contemplating an upward departure.”);
id. at 135 n.4 (“It is equally appropriate to
frame the issue as whether the parties are entitled to notice before the district court
departs upward or downward from the Guidelines range. Under Rule 32, it is clear
that the defendant and the Government enjoy equal procedural entitlements.”).
Therefore, under the procedural circumstances of the present case, the district court
lacked authority to depart from the guidelines on the ground that the seriousness of
O’Malley’s role in the offense had been overstated.
Because of the possibility that the procedural defect discussed above could be
corrected on remand, we will now address this second factor on its merits. A
defendant’s minimal or minor role in the offense is a factor considered in the
guidelines. See USSG § 3B1.2 (downward adjustments of 2 to 4 levels for minor to
minimal participation in the criminal activity). Thus, the question once again is
whether, “in light of unusual circumstances, the guideline level attached to that factor
is inadequate.” USSG § 5K2.0. In the present case, the probation officer did not
recommend a downward adjustment based upon O’Malley’s mitigating role in the
offense, nor did O’Malley object to the PSR for its lack of such a recommendation.
Nevertheless, because O’Malley was “not the one that hatched the idea,” the district
court concluded that O’Malley was a relatively less culpable participant in the
conspiracy and credited that finding by using it as a ground for departing downward.
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Sentencing Transcript at 23. Upon review, we cannot say that O’Malley may not
receive a downward adjustment under USSG § 3B1.2 for his mitigating role;
however, there is nothing so unusual in the circumstances of the present case to
warrant a downward departure on that basis.
Finally, as to the district court’s third reason for the downward departure – the
adverse economic impact O’Malley’s incarceration would have on the community –
we note that this factor is expressly discouraged as a ground for departure under the
guidelines. See USSG 5H1.6 (“Family ties and responsibilities and community ties
are not ordinarily relevant in determining whether a sentence should be outside the
applicable guideline range.”). Consequently, a downward departure on this basis is
permitted only if O’Malley’s community ties are truly exceptional. We have carefully
reviewed the character letters submitted by O’Malley, as well as the district court’s
explanation for its decision, and we conclude that the circumstances in the present
case are not so exceptional. As we have previously explained, “[a]lthough downward
departure on this ground is not ruled out as a matter of law, the mere fact a business
faces likely failure and innocent others will be disadvantaged when its key person
goes to jail is not by itself unusual enough to warrant a departure.” United States v.
Morken, 133 F.3d 628, 630 (8th Cir. 1998) (internal citations, quotation marks, and
ellipsis omitted). In sum, the downward departure was not justified by O’Malley’s
community ties, and the district court erred in sentencing O’Malley outside the
applicable guideline range.
Conclusion
O’Malley’s sentence is vacated. The case is remanded to the district court for
further sentencing proceedings consistent with this opinion.
______________________________
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