The Third Circuit vacated a downward variance to a probationary sentence for a white collar defendant which the district court had justified on the grounds that the victim of his crimes was not the public at large but a private business entity which had settled its lawsuit against the defendant. Finding the district court’s explanation for the sentence insufficient, the Court of Appeals remanded the case for resentencing. Several months later, the district court resentenced the defendant to a year and a day in federal prison.
Adam Levinson was the manager and 20% owner of a company that provided filtered drinking water to residences and businesses. Over a two-year period, Levinson falsely reported his company’s financial status and operational performance to its majority owner and to the latter’s parent company, Elkay Manufacturing Company (“Elkay”). Levinson created a fake second set of financial and operational books; altered his company’s general ledger and customer lists; hired an outside contractor to enter false customer information into the company’s databases; directed company employees to shred documents, delete e-mails and create false sales reports; and punished employees who refused to participate in his cover-up. Based on an anonymous tip, Elkay arranged for a forensic audit of the company which revealed Levinson’s fraud, including over $177,000 of the company’s revenue used for his own personal benefit. Levinson was indicted on one count of wire fraud and three counts of filing false tax returns based on his failure to report the funds he had converted to his own use, resulting in a $44,000 tax loss.
Levinson pleaded guilty to the wire fraud count and to a single tax count. Prior to sentencing, Levinson also settled Elkay’s civil fraud suit against him by paying Elkay $350,000 and relinquishing his ownership interest in his company. Levinson faced an advisory Guidelines sentencing range of 24-30 months’ incarceration. At sentencing, the district court rejected arguments for a lower sentence based on Levinson being a good person who had made some bad decisions and on the harm his incarceration would cause his family, noting that these did not distinguish Levinson from other white-collar defendants. However, the district court distinguished Levinson’s offense conduct from that of other similarly situated defendants on the grounds that his crimes “had little impact beyond his business partners and his family” and the harm he had caused had been “resolved amicably with his business.” For those reasons, the district court sentenced Levinson to two years’ probation, including six months of home confinement with electronic monitoring. The government appealed the sentence.
On appeal, the Third Circuit stressed “[w]e do not seek to second guess” a district court sentence and “we would be foolish to try” in light of the broad sentencing discretion accorded district courts by a string of Supreme Court decisions since 2005. In fact, the Court found it “difficult to give direction [to sentencing courts] when we are ourselves endeavoring to understand our role in reviewing sentences” in the wake of those Supreme Court decisions. Nevertheless, the Third Circuit concluded that the district court had committed clear error in finding purely private harm where Levinson had been convicted of tax fraud involving a specific dollar loss to the U.S. Treasury. Additionally, and even if there had been no tax conviction, the district court had not adequately explained how the identity of Levinson’s primary victim as a private business entity necessarily meant that there had been no harm to the public or distinguished him from other similarly situated white-collar defendants. Accordingly, the Third Circuit vacated and remanded the sentence. On January 6, 2009, the district court resentenced Levinson to concurrent prison sentences for one year and a day on both counts of conviction. Levinson has filed a notice of appeal. The Third Circuit’s full decision can be found at United States v. Levinson, 543 F.3d 190 (3rd Cir. 2008).