Second Circuit: Withdrawal of Funds From ATM Does Not Trigger “Financial Institution” Enhancement under U.S.S.G. §2B.1(b)(16)(A) and A Simple Contractual Relationship Does Not Constitute An Abuse of a Position of Trust under §3B1.3.

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In United States v. Huggins, 844 F. 3d 118  (2d Cir. 2016) the Second Circuit found that merely withdrawing money from a bank’s ATM does not trigger a sentencing enhancement under § 2B.1(b)(16)(A), which generally adds a two-level enhancement for crimes that derive over $1 million in gross receipts from a financial institution. The defendant, Huggins, ran sham oil, diamond, and gold mining companies and used the $8.2 million he received from investors for his personal benefit. The investors sent money to accounts at Bank of America in New York. The defendant then withdrew money from these accounts by ATM withdrawals, wire transfer, or by having an assistant cash his checks. After a two-week trial, the defendant was found guilty of wire fraud and conspiracy to commit wire fraud. At sentencing, the district court calculated a sentencing range of 262 to 327 months, but departed downward to 120 months. The sentence included the two-level enhancement for deriving over $1 million in gross receipts from a financial institution.

The Second Circuit disagreed with the financial institution enhancement, explaining that the enhancement only applied where a financial institution suffered some type of loss or liability in providing funds.   To the contrary, in the instant case the defendant derived funds for his sham companies not from a bank, but from his individual investors. “The bank did not incur a meaningful loss or liability when [the defendant] withdrew money from his companies’ accounts because investors had deposited this money in his companies’ accounts.” The Second Circuit rejected an overly broad reading of the enhancement statute, stating that “applying the enhancement to all cases where a defendant merely withdraws money from his own bank account at a financial institution cuts too broadly and is inconsistent with the primary purpose of the enhancement, i.e., to penalize an individual for placing a financial institution at risk by borrowing or stealing funds to support criminal activity.”

In a very significant holding, the Second Circuit held that a simple salesman who had no discretionary authority and who engaged in “typical commercial transactions” did not occupy a position of trust for purposes of an enhancement under U.S.S.G. §3B1.3.  The Second Circuit held that “a ‘position of trust’ is held by one who was accorded discretion by the victim and abused a position of fiduciary or quasi-fiduciary status.”  The Second Circuit further held that “[a] purely arm's-length contractual relationship between the defendant and the victims does not create a position of trust.”  This is a very important case for the defense as courts routinely impose the abuse of position of trust enhancement upon a mere finding of a contractual relationship between the defendant and the victims.

Categories: Federal Law

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