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Date: 02-04-2019

Case Style:

United States of America v. Donald Iley

Case Number: 17-1269

Judge: Holmes

Court: United States Court of Appeals for the Tenth Circuit on appeal from the District of Colorado (Denver County)

Plaintiff's Attorney: Karl L. Schock and Robert C. Troyer

Defendant's Attorney: Josh Lee and Virginia L. Grady - FPD

Description:





For crimes of fraud and deceit, § 2B1.1(b)(9)(C) of the U.S. Sentencing
Guidelines Manual (“U.S.S.G.” or “Guidelines”) provides for a two-level
sentencing enhancement if the defendant’s offense conduct violated “any prior,
specific judicial or administrative order.” After investigating complaints
regarding the tax-preparation services of the defendant, Donald Iley, the Colorado
Board of Accountancy (the “Board”) issued an administrative order—called an
“Agreement and Final Agency Order” (the “Order”), R., Vol. I, at 78 (Agreement
and Final Agency Order, dated Jan. 29, 2010)—in which Mr. Iley admitted to
engaging in professionally negligent conduct and agreed to accept certain
disciplinary sanctions, including a $10,000 fine and a five-year probationary
period. Among the acts for which the Board disciplined Mr. Iley was taking a
client’s money ostensibly to pay the client’s payroll taxes but then failing to
promptly and properly pay those funds to the Internal Revenue Service (“IRS”).
During his probationary period, Mr. Iley was required to open his practice to
monitoring by a third-party accountant, to complete eighty hours of continuing
professional education within two years of the Order’s effective date, and to
submit quarterly reports to the Board in which Mr. Iley was obliged to attest to
his continued compliance with the Order’s terms.
However, while serving the Order’s probationary term, Mr. Iley executed a
fraudulent scheme in which he fleeced his clients of more than $11 million. As
part of this scheme, Mr. Iley fraudulently misrepresented to his clients that he was
2
taking their funds to pay outstanding payroll taxes to the IRS but, instead, Mr.
Iley used those funds for personal purposes. After this fraud was discovered, Mr.
Iley pleaded guilty to wire fraud and aiding in the preparation of a false tax
return. At sentencing, the district court enhanced Mr. Iley’s sentence under
§ 2B1.1(b)(9)(C). The question before us is whether the court erred in doing so.
We hold that, under the particular circumstances of this case, the court did not
err. Accordingly, exercising jurisdiction under 28 U.S.C. § 1291 and 18 U.S.C.
§ 3742(a), we affirm.
I
Donald Iley was an accountant. Until 2015, he was licensed by the Board
and owned and operated an accounting firm, Iley & Associates, Inc. Among other
services, Mr. Iley calculated clients’ payroll taxes, prepared the necessary tax
forms, collected money from clients to pay these taxes, and then sent the money
and the accompanying forms to the IRS.
Not all of Mr. Iley’s clients were satisfied with his services. After
receiving multiple complaints about his tax-preparation practices, the Board
launched an investigation. Mr. Iley had notice of the investigation, and he
responded to the allegations made against him. After conducting meetings on the
matter, the Board “found reasonable grounds to refer [Mr. Iley and his business]
to [a] hearing for license law violations.” R., Vol. I, at 79. However, in 2010,
3
Mr. Iley and the Board ultimately reached an agreement to resolve the matter.
Their agreement was memorialized in the aforementioned Order.
In that Order, Mr. Iley admitted to certain acts of professional negligence,
gave up his right to a hearing regarding the complaints, and agreed to the Board’s
imposition of certain discipline. Among other things, Mr. Iley admitted in the
Order that he took a client’s money ostensibly to pay that client’s payroll taxes to
the IRS but “failed to properly and promptly remit payment in full to the IRS.”
Id. at 88. As for the discipline, the Board sanctioned Mr. Iley by requiring him to
pay a fine of $10,000 and to submit to a five-year period of probation. During
this probationary period, Mr. Iley was obliged to open his practice to monitoring
by a third-party accountant to “improve the quality and accuracy of [his] tax
services and to determine whether [Mr. Iley] meets the generally accepted
professional standards for tax services,” including adherence to the Board’s
ethical rules. Id. at 93. Mr. Iley also was required to complete eighty hours of
continuing professional education within two years of the Order’s effective date.
And, lastly, Mr. Iley was required to submit quarterly reports to the Board
attesting to his “compliance with this Order.” Id. at 95. The Order expressly
warned Mr. Iley that “[a]ny violation of this Order may result in grounds for
discipline.” Id. at 98.
However, for a year before the Board issued the Order and for
approximately five years afterwards, Mr. Iley was engaged in a fraudulent scheme
4
to steal money from his clients. As part of this scheme, Mr. Iley would prepare
an accurate form reflecting the payroll taxes a client owed, submit the form for
the client’s approval, and then withdraw money from the client’s accounts under
the guise of paying the tax. But Mr. Iley would not send the money to the IRS;
instead, he would keep the money for his own personal purposes—including
making “payments on his mortgage and his wife’s credit card bill.” Id. at 7
(Indictment, filed Aug. 24, 2016). To complete the scheme, Mr. Iley would send
the IRS a phony form, wrongly showing that the client owed no payroll taxes.
There is no indication in the record that the Board was aware of the fraudulent
nature of Mr. Iley’s misdeeds when it issued the Order in 2010.
As authorized by the Order, Mr. Iley requested early termination of the
practice monitoring in 2013. As support for his request, Mr. Iley represented to
the Board that he had “learned a great deal from this process, including” the need
for “absolute candor with clients.” Id. at 25 n.3 (Plea Agreement, filed Apr. 18,
2017). But his actions revealed that Mr. Iley was not being truthful with the
Board. Yet, oblivious to Mr. Iley’s ongoing fraud, the Board granted Mr. Iley’s
request. However, the Board later became aware that Mr. Iley (among other
things) was still “failing to remit taxes on behalf of clients to the United States
Treasury,” and it suspended his license in December 2015 and “permanently
revoked” it in August 2016. Id., Vol. II, ¶ 36 (Presentence Investigation Report
(“PSR”), filed July 7, 2017).
5
In late 2015, with some of Mr. Iley’s clients now wise to his fraudulent
conduct and law enforcement directing their investigative resources at him, Mr.
Iley ended his fraudulent scheme. All told, Mr. Iley defrauded his clients of more
than $11 million. More than 140 of his clients were identified as victims of the
scheme. Many of them ended up owing the IRS interest and penalties because
Mr. Iley failed to honor his promises to forward their funds to the IRS to pay their
payroll-tax liabilities. And some of his clients were small businesses that were
“ruin[ed]” “financially” by his fraudulent scheme. Id., Vol. V, at 75 (Tr. of
Sentencing Hr’g, dated July 13, 2017).
In August 2016, a federal grand jury returned an indictment against Mr.
Iley charging him with twelve counts of wire fraud, 18 U.S.C. § 1343, two counts
of mail fraud, 18 U.S.C. § 1341, and eighteen counts of aiding in the preparation
of false tax returns, 26 U.S.C. § 7206(2). Some months later, Mr. Iley pleaded
guilty to one count of wire fraud and one count of aiding in the preparation of a
false tax return, in exchange for the government agreeing, inter alia, to dismiss
the remaining charges.
The U.S. Probation Office prepared a PSR and computed Mr. Iley’s
advisory Guidelines sentencing range as ninety-seven to 121 months’
imprisonment.1 The PSR arrived at that range by using a total adjusted offense
1 The Probation Office used the 2016 edition of the Guidelines in
(continued...)
6
level of thirty, which included a two-level enhancement under § 2B1.1(b)(9)(C)
for Mr. Iley’s alleged violation of the Order. Without this “Prior Order”
enhancement,2 Mr. Iley would have faced an advisory Guidelines sentencing
range of seventy-eight to ninety-seven months’ imprisonment.
Mr. Iley objected to the PSR’s application of the § 2B1.1(b)(9)(C)
enhancement. As he saw it, his fraud conviction was unrelated to the conduct for
which the Order had punished him—namely, professional negligence. Thus, as
Mr. Iley reasoned, his later fraud did not violate the Order, meaning that
§ 2B1.1(b)(9)(C) did not apply.
1(...continued)
calculating Mr. Iley’s sentence. This decision is not challenged on appeal.
Therefore, in resolving this appeal, we also rely on the 2016 edition.
2 From 2004 to 2010, the language currently found in § 2B1.1(b)(9)(C)
appeared in § 2B1.1(b)(8)(C). From 2001 to 2003, this language was housed in
§ 2B1.1(b)(7)(C). Before that, the enhancement was governed by somewhat
different language (although, as we discuss infra, the differences are immaterial
in this case) and appeared elsewhere in the Guidelines. See United States v.
Pentrack, 428 F.3d 986, 989 (10th Cir. 2005) (citing U.S.S.G. § 2F1.1(b)(4)(B)
(Nov. 1999)). Because the language has not changed in respects material to this
case with these re-codifications, we consider judicial decisions interpreting prior
versions of the enhancement as directly applicable to our resolution of Mr. Iley’s
challenge under § 2B1.1(b)(9)(C). Moreover, to minimize any possible confusion
related to these immaterial changes, this opinion generally elides in its analysis
the prior section numbers and (except where necessary) changes in the
enhancement’s text. Not infrequently, it simply refers to the enhancement as the
“Prior Order” enhancement, without reference to which version of the
enhancement was effective at the time of a particular judicial decision.
7
The Probation Office saw things differently. It noted that the Order put Mr.
Iley on probation and part of that probation entailed “not engaging in more
fraudulent activity.” R., Vol. II, at 226 (Addendum to the PSR, dated July 7,
2017). Yet, as the Probation Office explained, Mr. Iley “continued his fraudulent
activity.” Id. And so the Probation Office reasoned that Mr. Iley had violated the
Order and was thus eligible for the § 2B1.1(b)(9)(C) enhancement.
At sentencing, the district court agreed with the Probation Office. It read
the Order as telling “Mr. Iley that he needed to stop engaging in . . . . further
fraudulent activity.” Id., Vol. V, at 49–50. The court stated that, despite that
warning, Mr. Iley was “actively defrauding” his clients while on probation and
thereby violating the Order. Id. at 49. For that reason, the court found that the
§ 2B1.1(b)(9)(C) enhancement applied to Mr. Iley.
Mr. Iley now appeals, challenging the district court’s imposition of the twolevel
enhancement under § 2B1.1(b)(9)(C).
II
The overarching question of whether a district court correctly computed a
defendant’s Guidelines sentencing range—and, more specifically, whether it
correctly imposed a particular Guidelines enhancement—is a question of
procedural reasonableness. See, e.g., United States v. Huckins, 529 F.3d 1312,
1317 (10th Cir. 2008) (noting that “[p]rocedural reasonableness addresses [inter
alia] whether the district court incorrectly calculated . . . the Guidelines
8
sentence”); accord United States v. Martinez-Barragan, 545 F.3d 894, 898 (10th
Cir. 2008). However, in assessing whether the district court’s computation is
correct “we review legal questions regarding the application of the Sentencing
Guidelines de novo,” and “a district court’s factual findings are reviewed only for
clear error, giving due deference to the district court’s application of the
Guidelines to the facts.” United States v. Pentrack, 428 F.3d 986, 989 (10th Cir.
2005); see also United States v. Kristl, 437 F.3d 1050, 1054 (10th Cir. 2006) (per
curiam) (“We note that this new standard of review—that of
‘reasonableness’—does not displace the oft-cited principle that in considering the
district court’s application of the Guidelines, we review factual findings for clear
error and legal determinations de novo.”).
We do not appear to have addressed in direct and express terms whether we
should assess de novo whether a particular “prior, specific judicial or
administrative order, injunction, decree, or process” provides a sufficient basis for
the imposition of the Prior Order enhancement.3 U.S.S.G. § 2B1.1(b)(9)(C).
3 In two precedential decisions, we appear to have tacitly conducted
such an assessment de novo. We seemingly did so in Pentrack when “[t]urning to
the factual background” of that case—that is, when focusing on whether the
message conveyed by the “consent judgment and stipulation” at issue was
adequately specific regarding “the type of conduct prohibited.” 428 F.3d at 988,
990. In this connection, it is notable that in Pentrack we did not purport to defer
in any way to the district court’s interpretation of the judgment and stipulation;
we simply concluded based on an independent analysis that it “was designed to
prohibit prior misconduct of the very same nature as his federal crimes” and
(continued...)
9
And, as it turns out, we need not definitively resolve this standard-of-review
question here. That is because the parties present no genuine controversy
regarding it. See, e.g., People for the Ethical Treatment of Property Owners v.
U.S. Fish and Wildlife Serv., 852 F.3d 990, 1008 (10th Cir. 2017) (“[I]f it is not
necessary to decide more, it is necessary not to decide more.” (alteration in
original) (quoting PDK Labs. Inc. v. DEA, 362 F.3d 786, 799 (D.C. Cir. 2004)
(Roberts, J., concurring in part and concurring in the judgment))), cert. denied,
138 S. Ct. 649 (2018); Valley Forge Ins. Co. v. Health Care Mgmt. Partners, Ltd.,
3(...continued)
offered “specific notice as to prohibited conduct.” Id. at 990–91. With less
exposition, we appear to have followed a similar path in United States v.
Flanders, 491 F.3d 1197 (10th Cir. 2007). There, we arguably reviewed a prior
administrative order de novo in addressing “[t]he extent to which the [order]
restricted Defendant’s [subsequent] conduct” regarding certain matters discussed
in the order. Id. at 1219. So interpreted, our prior precedent would be congruent
with at least some of our sister circuits that have directly and expressly addressed
this question. See United States v. Nash, 729 F.3d 400, 403 (5th Cir. 2013) (“A
determination that a particular judicial or administrative action qualifies under
Section 2B1.1(b)(9)(C) is an interpretation and application of the guidelines that
we review de novo.”); United States v. Mantas, 274 F.3d 1127, 1132 (7th Cir.
2001) (“We review de novo the district court’s imposition of a 2–offense–level
sentence enhancement for violation of official process under [the Prior Order
enhancement].”). And application of a de novo standard of review also would
seemingly be consistent with the approach generally taken in reviewing similar
written instruments in other contexts. See Joseph A. ex rel. Wolfe v. Ingram, 275
F.3d 1253, 1266 (10th Cir. 2002) (“We construe the terms of a consent decree de
novo using traditional principles of contract interpretation.”); see also Schering
Corp. v. Ill. Antibiotics Co., 62 F.3d 903, 908 (7th Cir. 1995) (“The interpretation
of documents, including judicial decrees, is . . . traditionally an issue of law and
one on which, moreover, appellate review is plenary.”). However, as noted infra,
we ultimately exercise restraint and leave the definitive resolution of this
standard-of-review issue to another day.
10
616 F.3d 1086, 1094 (10th Cir. 2010) (“Judicial restraint, after all, usually means
answering only the questions we must, not those we can.”). Specifically, the
parties agree that de novo review governs this question. Compare Aplt.’s
Opening Br. at 8 (asserting, without citation to controlling Tenth Circuit
authority, that “[d]e novo review also governs the district court’s interpretation of
the administrative order that Mr. Iley allegedly violated”), with Aplee.’s Resp. Br.
at 7 (adopting the de novo approach of the Fifth Circuit). Thus, we are content to
apply de novo review in assessing whether the Order provides a sufficient basis
for the imposition of the Prior Order enhancement.
III
This case turns on whether Mr. Iley’s fraudulent conduct violated the
Order.4 Mr. Iley claims that it did not for two reasons. First, in his view,
§ 2B1.1(b)(9)(C) applies only when a defendant does something that an “agency
had expressly forbidden him from [doing].” Aplt.’s Opening Br. at 7. And
because the Order did not expressly enjoin Mr. Iley from committing the same or
similar fraudulent conduct for which he ultimately was convicted, Mr. Iley
contends that he did not violate the Order. See id. at 6 (“[T]he administrative
order clearly delineates the conditions of Mr. Iley’s probation, and none of those
conditions includes an order not to commit fraud.”). Second, Mr. Iley argues that
4 The parties do not contest that the Order qualifies as a prior
“administrative order” under § 2B1.1(b)(9)(C).
11
the Order punished him for negligence, not fraud. Hence, Mr. Iley reasons that
his fraudulent conduct did not violate the Order because negligence and fraud are
different. For either or both reasons, he contends that the district court erred in
applying the § 2B1.1(b)(9)(C) enhancement.5
5 Some of our sister circuits have held in the context of administrative
orders that “imposing the two-level [Prior Order] enhancement requires an
interaction between the agency and defendant that allowed the defendant to
participate in some meaningful way (if he elected to do so).” United States v.
Goldberg, 538 F.3d 280, 291 (3d Cir. 2008); see Nash, 729 F.3d at 405 (“[T]he
district court correctly found that Nash’s prior violation of [the government
program at issue] and his acknowledgment of the violation satisfied the
requirement that there be ‘interaction’ between the agency and the defendant.”
(quoting Goldberg, 538 F.3d at 291–92 & n.7)); see also United States v. Linville,
10 F.3d 630, 632 (9th Cir. 1993) (“The Commentary and Background to [the Prior
Order enhancement] indicate that it was meant to apply where a defendant
violated a previously-issued judicial or administrative order which resulted from a
formal adversary proceeding; Linville neither had the benefit of an adversary
proceeding to establish the statutory violations she is accused of in the
[government agency’s] warnings, nor was she issued a formal order compelling
statutory compliance.”); Thomas W. Hutchison, et al., FEDERAL SENTENCING LAW
& PRACTICE § 2B1.1, Westlaw (database updated Jan. 2019) (“Because
administrative agency procedures are less formal than judicial procedures, the
circuits consider the process of the issuance of what is said to constitute an
administrative order when determining the applicability of the enhancement.”).
We do not appear to have addressed in a precedential decision whether the
application of the Prior Order enhancement hinges to any degree on a so-called
“interaction” requirement. And we have no occasion to opine on the matter here
because Mr. Iley does not attack the district court’s imposition of the
enhancement on the ground that the Board’s Order was not the product of
sufficient “interaction.” Perhaps this is not surprising because the Order—by its
plain terms—evinces that Mr. Iley was “notified” of the complaints against him;
was “given the opportunity to provide the Board with written data, views, and
arguments concerning the complaints”; and negotiated an agreement with the
Board, memorialized in the Order, “[i]n order to avoid the uncertainty of
(continued...)
12
The government disagrees. It says that Mr. Iley’s first argument “elevates
form over substance.” Aplee.’s Resp. Br. at 11. In the government’s view,
“[a]lthough the Order did not explicitly enjoin [Mr.] Iley from” committing the
fraudulent conduct underlying his conviction, “that was the unmistakable
implication of the Order.” Id. at 10. Thus, the government reasons that, by
engaging in fraudulent conduct while the Order was in effect, Mr. Iley violated
the Order. As for Mr. Iley’s second argument, the government asserts that it is
irrelevant that the Order disciplined Mr. Iley for negligent conduct, whereas he
was subsequently convicted of fraudulent acts, because “by punishing even
negligent conduct, the Order necessarily prohibited [Mr.] Iley from engaging in
the same conduct fraudulently as well.” Id. at 14. Thus, the government argues
that the district court properly applied the § 2B1.1(b)(9)(C) enhancement.
In sum, the parties disagree on two points. First, whether § 2B1.1(b)(9)(C)
applies even though the Order did not expressly enjoin Mr. Iley from committing
the same or similar fraudulent conduct for which he ultimately was convicted.
And, second, whether the fact that the Order imposed discipline on Mr. Iley for
negligent conduct meant that Mr. Iley’s subsequent commission of the same or
similar conduct fraudulently was not in contravention of the Order.
5(...continued)
litigation and to bring this matter to a conclusion.” R., Vol. I, at 79. Indeed, Mr.
Iley asserts that the Order “was effectively a consent decree.” Aplt.’s Opening
Br. at 8.
13
A
As to the first question, having carefully considered our caselaw, the plain
terms of § 2B1.1(b)(9)(C) and its commentary, and relevant authorities of our
sister circuits, we conclude that, at least under the specific circumstances of this
case, § 2B1.1(b)(9)(C) applies even though the Order did not expressly enjoin Mr.
Iley from defrauding his clients. In particular, we conclude that § 2B1.1(b)(9)(C)
may apply without an explicit injunction when, as here, the prior order (1)
imposed a concrete punishment, such as a fine, on the defendant for the same or
similar conduct at issue in the defendant’s subsequent offense; (2) imposed
prospective, remedial conditions or obligations, like practice monitoring and the
filing of quarterly reports—through a probationary term or otherwise—that were
reasonably calculated to curtail future instances of the conduct at issue; and (3)
nevertheless the defendant perpetrated that prohibited conduct while the order
was still in effect.
Importantly, we find persuasive support for our holding in our own
precedent, specifically Pentrack. There, Mr. Pentrack and a state agency entered
into a consent order. The order punished Mr. Pentrack for deceiving customers
and enjoined him from, inter alia, making future “false, deceptive, or misleading
statements.” 428 F.3d at 988. Some years later, Mr. Pentrack was convicted of
defrauding customers. After the district court enhanced his sentence under the
14
Prior Order enhancement, Mr. Pentrack argued on appeal that the earlier order
was not “specific” enough because “it merely obligated him to do what he had
always been required to do, namely obey the law.” Id. at 989.
In rejecting that argument, we undertook an informative examination of the
history of the enhancement and its commentary.6 We did so because, though the
enhancement requires the violation to be of a “specific” injunction—and in legal
parlance that would mean the order “must be explicit”—the Prior Order
enhancement’s plain terms offered “little insight into exactly how the injunction
must satisfy” the explicitness standard. Id. We noted that the Sentencing
Commission inserted in 2000 the “prior, specific” language into what is in
material respects the current text of the Guideline,7 but notably we did not
conclude that the Commission did so to create a heightened standard of specificity
for injunctions falling within the ambit of the enhancement. In other words, we
6 Pentrack expressly recognized that “[w]e interpret the Sentencing
Guidelines by following ordinary rules of statutory construction.” 428 F.3d at
989. Further, it is well settled that the commentary of the Guidelines is “binding
and authoritative” unless it “violates the Constitution or a federal statute” or
adopts “a plainly erroneous reading of[] [a] guideline.” United States v. Miller,
868 F.3d 1182, 1188 (10th Cir. 2017) (quoting United States v. Morris, 562 F.3d
1131, 1135 (10th Cir. 2009)), cert. denied, 138 S. Ct. 2622 (2018). We adhere to
these principles throughout our analysis here.
7 As we stated, “Before 2000, a defendant’s offense level was
enhanced if [the offense] involved a ‘violation of any judicial or administrative
order, injunction, decree, or process not addressed elsewhere in the guidelines.’”
Pentrack, 428 F.3d at 989 (quoting U.S.S.G. § 2F1.1(b)(4)(B) (Nov. 1999)).
15
did not conclude that the Commission sought to ensure, by its word changes, that
defendants would be subject to the enhancement only for violating express
commands not to engage in certain conduct. See id. at 990.
Instead, examining the Commission’s explanation for the insertion of the
language, we noted the following: “The additional phrasing, then, merely clarifies
the distinction between enhancements for bankruptcy and non-bankruptcy fraud,
effectively leaving unaltered the application of the enhancement in
non-bankruptcy proceedings.” Id. (emphasis added). Under this unaltered
application, the prior injunction need not have explicitly proscribed a defendant’s
subsequent offense conduct; rather, for purposes of the enhancement’s
application, we concluded that the injunction was sufficient, so long as it was
“specific enough to provide the defendant with adequate notice of the prohibited
conduct.” Id.
We concluded that the order in Pentrack did just that. More specifically,
“the order was designed to prohibit prior misconduct of the very same nature as
[the defendant’s] federal crimes (deception of consumers) and gives specific
notice as to prohibited conduct”; therefore, we concluded that the order
“satisfie[d] the requirements” of the Prior Order enhancement. Id. at 990–91.
Given the adequate notice provided by the order, we thought Mr. Pentrack could
“hardly complain that he did not know what past conduct was being enjoined or
16
what future conduct would violate [the order’s] terms.” Id. at 991 n.3. For those
reasons, we held that the district court did not err in enhancing Mr. Pentrack’s
sentence.
Pentrack suggests that an express injunction is not always necessary under
§ 2B1.1(b)(9)(C). Pentrack’s analysis of the enhancement’s history and the
Sentencing Commission’s insertion of the phrase “prior, specific” indicates that
those words were not aimed at creating a heightened standard of specificity for
injunctions properly falling within the ambit of the enhancement. That is, the
Commission was not seeking to ensure that defendants would be subject to the
enhancement only if they violated express commands not to engage in certain
conduct. Rather, we concluded that it is sufficient “if the injunction is specific
enough to provide the defendant with adequate notice of the prohibited conduct.”
Id. at 990.
It is noteworthy, moreover, that in determining that the order was indeed
specific enough in Pentrack, we did not parse its terms but rather focused on
whether, overall, “the order was designed to prohibit prior misconduct of the very
same nature as [Mr. Pentrack’s] federal crimes,” and whether the order
“provide[d] [him] with adequate notice of the prohibited conduct”—that is, of
“what future conduct would violate [the order’s] terms.” Id. at 990–991 & n.3.
Viewed in totality, Pentrack’s reasoning thus strongly suggests that a prior order
17
that was reasonably calculated to prohibit certain conduct need not include terms
that expressly enjoin the future occurrence of that conduct. Rather, it is sufficient
if that order gave the defendant adequate notice of the prohibited conduct and, in
the words of the Guidelines commentary, the defendant’s subsequent offense
conduct is “the same or similar” as the conduct that the order prohibited.
U.S.S.G. § 2B1.1(b)(9)(C) cmt. background; see Pentrack, 428 F.3d at 990–991.
Viewed in this light, Pentrack points toward our ultimate conclusion that
the district court did not err in applying § 2B1.1(b)(9)(C) to Mr. Iley, even though
the Order lacked an explicit injunction against the commission of the fraudulent
acts that were the subject of Mr. Iley’s subsequent offense. As in Pentrack, the
Order was reasonably calculated to prohibit conduct that was the same as or
similar to Mr. Iley’s subsequent offense conduct. Recall that the Order
specifically identified the conduct: “Despite taking possession of sufficient funds
to pay the taxes due, Respondent Iley failed to properly and promptly remit
payment in full to the IRS . . . .” R., Vol. I, at 88. Subsequently, Mr. Iley was
indicted, inter alia, for similar conduct, i.e., taking client funds that were made
available to pay taxes, failing to remit those funds to the IRS, and instead “us[ing]
these monies for other purposes, including paying personal expenses such as
payments on his mortgage and his wife’s credit card bill.” Id. at 7. To prohibit
18
this conduct, the Order imposed on Mr. Iley a substantial fine of $10,000 and a
probationary term during which he was required to abide by certain conditions.
Notably, to “improve the quality and accuracy of [his] tax services” and “to
determine whether [he] meets the generally accepted professional standards for
tax services,” including adhering to the Board’s ethical rules, the Order required
Mr. Iley to submit to monitoring of his practice by a third-party accountant. Id. at
93. Furthermore, under the Order, Mr. Iley was obliged to submit quarterly
reports to the Board in which, among other things, he was required to attest that
he was “in compliance with” the Order—that is, the same Order that condemned
his conduct of taking and not remitting client money. Id. at 95. At a minimum,
then, the Order’s monetary fine and forward-looking remedial obligations evince
that the parties to the Order contemplated that, while on probation, Mr. Iley
would cease the conduct that had given rise to the Order—even without an
explicit injunction mandating that he do so. In other words, the Order was
reasonably calculated to prohibit conduct that was the same as or similar to Mr.
Iley’s subsequent offense conduct. But Mr. Iley did not stop the conduct.
Furthermore, as in Pentrack, the Order clearly provided Mr. Iley “with
adequate notice” that this conduct was “prohibited.” 428 F.3d at 990. Like Mr.
Pentrack, Mr. Iley could “hardly complain that he did not know” that his later
19
fraud contravened the substance of the Order. Id. at 991 n.3. Simply put, Mr.
Iley knew the Order prohibited the same or similar conduct comprising his
fraudulent scheme but he kept engaging in that conduct anyway, and, as a
consequence, his clients were defrauded. Thus, given the Order’s notice and Mr.
Iley’s subsequent conduct evidencing defiance of the Order, Pentrack is
persuasive support for the conclusion that the district court properly
determined—even without an express injunction—that Mr. Iley’s conduct
“satisfies the requirements of § 2B1.1(b)([9])(C).” Id. at 991.
To be sure, as Mr. Iley is quick to point out, the order in Pentrack differs
from the Order here because it “specifically enjoined fraud.” Aplt.’s Opening Br.
at 12. As such, though Pentrack’s reasoning is quite persuasive and illuminating,
we freely acknowledge that, standing alone, Pentrack does not directly control
our holding here. In short, standing alone, Pentrack is not dispositive. However,
Pentrack does not stand alone. Our holding—which is grounded in the specific
circumstances of Mr. Iley’s case—finds further support in the decisions of our
sister circuits.
In the Fifth Circuit’s decision in United States v. Nash, 729 F.3d 400 (5th
Cir. 2013), for example, an agency determined that Mr. Nash improperly accepted
food stamps for unapproved items. The agency then imposed a fine and sent Mr.
Nash a warning letter—a letter that the court consistently referred to as the “July
20
9 letter.” See, e.g., id. at 405. That letter “warned that failure to pay the fine
would result in a six-month disqualification from” the food-stamp program and
“made clear that imposition of the fine did not preclude further action in response
to [Mr.] Nash’s violations.” Id. at 405, 406. Mr. “Nash acknowledged the
violation and agreed to pay the fine.” Id. at 402. But he nevertheless continued
to accept food stamps for unauthorized items. Mr. Nash was ultimately indicted
and convicted of a criminal offense stemming from his food-stamp fraud. The
district court applied the § 2B1.1(b)(9)(C) enhancement in sentencing Mr. Nash,
and he challenged this ruling on appeal.
At the outset, the Fifth Circuit defined Mr. Nash’s challenge and its
disposition: “We understand [Mr. Nash] to argue that because the July 9 letter did
not expressly enjoin him from committing food stamp fraud in the future, he
cannot now be found to have violated the [agency’s] order. We find [Mr.] Nash’s
argument to be without merit.” Id. at 404. Focusing on the substance of
§ 2B1.1(b)(9)(C),8 the Fifth Circuit concluded that the “application of the
enhancement ‘requires some specific directive that the defendant can defy.’” Id.
8 Though Nash conceded that the warning letter was “somewhat short
of [§ 2B1.1(b)(9)(C)’s] literal terms” because it was not a “prior, specific judicial
administrative order, injunction, decree or process,” Nash ruled that the letter
satisfied the substance of the enhancement. See 729 F.3d at 405 (emphasis added)
(quoting U.S.S.G. § 2B1.1(b)(9)(C)). No such concession is necessary here, of
course; it is undisputed that the Order qualifies as a prior “administrative order”
under § 2B1.1(b)(9)(C). See supra note 4.
21
at 405 (quoting United States v. Goldberg, 538 F.3d 280, 292 (3d Cir. 2008)).
And the July 9 letter was such a directive because it effectively warned Mr. Nash
“that continuation of his fraudulent conduct was illegal.” Id. at 406. The court
opined that, while “‘no court of appeals has held that a mere warning letter,
without more, can justify the enhancement,’ the fine (itself the result of a
proceeding in which [Mr.] Nash participated) clearly ‘ordered [Mr. Nash] to stop’
committing food stamp fraud.” Id. (quoting Goldberg, 538 F.3d at 291–92). And,
because Mr. Nash defied this order to stop, the Fifth Circuit concluded that Mr.
Nash was “exactly the type of defendant the enhancement was intended to apply
to”—that is, “one ‘who has . . . demonstrate[d] aggravated criminal intent.’” Id.
(second alteration in original) (quoting § 2B1.1(b)(9)(C) cmt. background).
Thus, the Nash court held that § 2B1.1(b)(9)(C) applied even though the July 9
letter did not expressly enjoin Mr. Nash from committing the specific fraudulent
conduct for which he later was criminally prosecuted.
It is patent that Nash bolsters the ultimate conclusion that we reach here.
Like in Nash, Mr. Iley’s contention that the enhancement does not apply because
the Order did not explicitly enjoin him from engaging in the fraudulent conduct
underlying his offense is “without merit.” Id. at 404. Analogous to Nash, Mr.
Iley was warned, in substance, through the Order “that continuation of his
fraudulent conduct” was prohibited. Id. at 406. Specifically, the Order identified
22
the acts of Mr. Iley that it sought to prohibit, including “taking possession of
sufficient [client] funds to pay the taxes due” and then not “properly and
promptly” paying those funds to the IRS. R., Vol. I, at 88. These were the same
basic acts underlying Mr. Iley’s fraudulent scheme. And, partly because of these
acts, the Order fined Mr. Iley and placed him on probation, during which Mr. Iley
was required to abide by certain conditions. Those conditions included practice
monitoring and the requirement that he attest quarterly that he was “in compliance
with” the Order—that is, an Order that condemned his conduct of taking and not
remitting client money. Id. at 95. We are able quite naturally to read the Order’s
sanctions, including its monetary fine and forward-looking remedial obligations,
as a firm and concrete warning to Mr. Iley to stop the conduct that had given rise
to the Order. Further, as in Nash, the Order’s sanctions here—viewed in
totality—constituted a “specific directive that the defendant can defy.” Nash, 729
F.3d at 405 (quoting Goldberg, 538 F.3d at 292). And, by continuing to engage
in the kind of acts that the Order identified as worthy of sanction, Mr. Iley
certainly did defy the Order’s directive. Thus, as in Nash, Mr. Iley’s subsequent
fraudulent conduct made “him exactly the type of defendant the enhancement was
intended to apply to.” Id. at 406.
Nash distinguished circuit cases holding that a mere warning letter, without
more, was insufficient to justify application of the enhancement. Id. It noted that
23
more was present in Nash; “the fine (itself the result of a proceeding in which
[Mr.] Nash participated) clearly ‘ordered [Mr. Nash] to stop’ committing food
stamp fraud.” Id. (quoting Goldberg, 538 F.3d at 291–92).9 Like Nash, we also
9 As the Third Circuit recognized in Goldberg, one of those merewarning
cases is the Seventh Circuit’s decision in United States v. Wallace, 355
F.3d 1095 (7th Cir. 2004). See Goldberg, 538 F.3d at 291. In Wallace, the
Seventh Circuit reversed the district court’s imposition of the Prior Order
enhancement “where [the defendant] was told that his behavior was unlawful” and
“[a]t this time he signed a ‘Statement of Voluntary Discontinuance’ prepared by
the [agency], which was basically a promise by [the defendant] that he would not
engage in similar fraudulent behavior in the future.” 355 F.3d at 1096. The
Wallace court concluded that the Statement and surrounding circumstances were
insufficiently specific and concrete to justify application of the Prior Order
enhancement. See id. at 1098 (unfavorably comparing this warning scenario to a
situation where a defendant is under, inter alia, a consent decree); see Goldberg,
538 F.3d at 291 (deeming agency action insufficient to warrant application of the
Prior Order enhancement where it does not lead “to a definite result, like a
consent decree or seizure”); Linville, 10 F.3d at 633 (noting that “the Sentencing
Commission did not intend to subject every recipient of relatively informal
missives and official notifications and warnings of violations from administrative
agencies to the extra penalties” of the enhancement, which were “designed for
people” with more culpable intent). Wallace offered a helpful illustration:
To paint a clearer picture, we see [the defendant’s] situation more
resembling that of a driver receiving a warning from a police
officer after being caught speeding. In this situation, like [the
defendant], the driver knows she has violated a traffic law, she
knows that if she speeds in the future she will be violating the
law, and our driver will most likely have agreed to the officer’s
request that she “slow it down” and not violate the posted speed
limits in the future. In cases of these informal warnings, the
driver cannot be doubly fined the next time she is stopped and
issued a ticket. The same is true of the [agency’s] actions
concerning [the defendant]. Without having engaged in
something more substantial than preparing a “Statement of
Voluntary Discontinuance”, [sic] we cannot hold that [the
(continued...)
24
can distinguish such cases because there is more here—indeed, there is more here
than in Nash.
We need not, and thus do not, rely solely on a monetary fine (as in Nash) to
distinguish such mere-warning cases. To be sure, the Order clearly imposed a
substantial fine on Mr. Iley (i.e., $10,000), and it is a significant part of the
calculus. But we also may rely here on the Order’s imposition of a probationary
term on Mr. Iley that had prospective, mandatory conditions. Coupled with the
fine, these conditions were reasonably calculated to send the definite and concrete
message to Mr. Iley that he should cease the conduct that had given rise to the
Order—or, as Nash put it, that Mr. Iley should “stop” this conduct. Id. (quoting
9(...continued)
defendant] is subject to the [Prior Order] sentence enhancement
. . . .
355 F.3d at 1098 (emphasis added). As explicated further infra, contrary to
Wallace’s hypothetical, the Board’s negotiations with Mr. Iley led to a “definite
result, like a consent decree,” Goldberg, 538 F.3d at 291. Instead of the Board
simply informing Mr. Iley of the acts it sought to prohibit and, in effect, giving
him a warning in the form of a sanctionless order (like the hypothetical warning
for speeding in Wallace), the Board reached a negotiated agreement with Mr.
Iley—memorialized in the Order—that resulted in the imposition of a substantial
monetary fine and a probationary term. Together, these sanctions were
reasonably calculated to send a firm and concrete message to Mr. Iley that he
should cease the conduct that had given rise to the Order—viz., Mr. Iley should
“stop” this conduct. See Nash, 729 F.3d at 406 (quoting Goldberg, 538 F.3d at
291–92). Cf. Flanders, 491 F.3d at 1219 (holding that where the prior
memorandum of understanding governing the defendant’s conduct “only
recommended board approval [for a certain asset sale]” and “did not mandate it”
the memorandum did not sufficiently “restrict[] Defendant’s conduct” to make his
subsequent attempted asset sale a violation of the memorandum).
25
Goldberg, 538 F.3d at 291–92). Thus, Nash stands with our decision in Pentrack
in supporting the conclusion that we reach here.10
10 Although Mr. Iley’s briefing never mentions the case, we recognize
that the Third Circuit professed in Goldberg to embrace “a highly formalistic
interpretation” of the Prior Order enhancement, 538 F.3d at 292 n.7, which at
least at first blush would appear to be at odds with our Pentrack decision and our
general approach here toward application of the enhancement. Under that
formalistic approach, a prior warning would need to include not only a warning
that the defendant’s conduct is illegal, but also “the word ‘desist’ on that same
line to tell him to stop[.]” Id. However, Goldberg’s actual legal analysis seems
to significantly belie this first impression; that analysis appears to be centered on
whether the agency’s action resulted in a “definite result, like a consent decree or
seizure”—that is, “some specific directive that the defendant can defy.” Id. at
291–92 (citing United States v. Spencer, 129 F.3d 246, 252 (2d Cir. 1997)
(holding the enhancement to be warranted in the consent-decree context), and
Mantas, 274 F.3d at 1129–30 (upholding application of the enhancement where
agency officially seized the defendant’s contaminated and tainted meat by placing
at tag on a cooler containing it)). The government’s problem in Goldberg was
that the agency’s response to the defendant’s wrongful conduct led to no such
definite result. Specifically, the agency simply “twice warned” Mr. Goldberg that
he “was violating” the law by distributing certain veterinary pharmaceuticals. Id.
at 284. Mr. Goldberg, however, kept on distributing them, and he was later
convicted of fraud. The district court thought the enhancement applied, but the
Third Circuit disagreed.
So understood—as Nash also appeared to read it—Goldberg “is not
contrary” to our approach here. Nash, 729 F.3d at 406 n.4. Here, the Board’s
negotiations with Mr. Iley produced a definite result—that is, an Order that was
effectively a consent decree, as Mr. Iley admits. See Aplt.’s Opening Br. at 8
(noting that the Order was “effectively a consent decree”). This Order imposed a
substantial fine on Mr. Iley and placed him on probation. And, under that
probation, Mr. Iley was obliged to fulfill certain conditions that were designed to
ensure that he did not repeat the conduct that led the Board to issue the Order in
the first place—conduct such as taking his clients’ money for the ostensible
purpose of paying the IRS to satisfy their tax bills, but then failing to do so. Yet,
after the Order issued, Mr. Iley defied it, continuing to take his clients’ money
without—as his clients expected—paying the IRS. In sum, the Order constituted
(continued...)
26
We can say the same thing with respect to the Eighth Circuit’s decision in
United States v. Jokhoo, 806 F.3d 1137 (8th Cir. 2015). There, a state agency
issued administrative orders that revoked Mr. Jokhoo’s business license and
imposed “civil penalties after a hearing” on him for various fraudulent practices.
Id. at 1139. Mr. Jokhoo nevertheless continued the same or similar practices and
was subsequently indicted and convicted for doing so. At sentencing, the district
court enhanced Mr. Jokhoo’s sentence under § 2B1.1(b)(9)(C)—a decision that he
challenged on appeal. The Eighth Circuit discerned no error in the enhancement,
however. Citing Nash, it stated, “[t]he administrative order need not expressly
enjoin proscribed conduct, but must direct a defendant to refrain from such
conduct.” Id. at 1141. The Eighth Circuit reasoned that, like the fine in Nash, the
agency’s “sanctions ‘clearly ordered’ [Mr.] Jokhoo to stop committing fraud, but
the record shows that [he] continued to do so.” Id. (quoting Nash, 729 F.3d at
406). And so the Eighth Circuit in Jokhoo held that “[t]he district court . . . did
not err in applying the enhancement.” Id.
10(...continued)
the “definite result, like a consent decree,” that the Third Circuit found to be
missing in Goldberg. 538 F.3d at 291. And, consistent with Goldberg’s
reasoning, the Order’s fine and probationary conditions were tantamount to a
“specific directive” that Mr. Iley could—and did—“defy.” Id. at 292. Thus, our
careful consideration of its actual legal analysis leads us to conclude—like the
Fifth Circuit did before us in Nash—that Goldberg truly “is not contrary” to our
approach here. Lastly, at the risk of stating the obvious: even if Goldberg’s
approach were contrary to our own, as an out-of-circuit authority, Goldberg
would not be controlling here.
27
Jokhoo’s application here is clear: it further undermines Mr. Iley’s claim
that § 2B1.1(b)(9)(C) cannot apply because the Order did not expressly enjoin
him from defrauding his clients. Indeed, the Eighth Circuit directly rejected such
a notion, stating that a prior “order need not expressly enjoin proscribed conduct.”
Id. Like Nash, the Jokhoo court found that the sanctions imposed on Mr.
Jokhoo—including civil penalties—were sufficient to order him to stop his
fraudulent conduct. The same is true here. Coupled with its $10,000 fine, the
Order’s forward-looking remedial obligations were reasonably calculated to send
a definite and concrete message to Mr. Iley that he should cease (i.e., stop) the
conduct that had given rise to the Order. But Mr. Iley did not stop.
Consequently, as the court did in Jokhoo, we conclude that the district court
rightly imposed the enhancement on Mr. Iley.
Mr. Iley musters little caselaw in favor of a contrary result. As noted, he
has pointed out that the order in Pentrack differs from the Order here because it
“specifically enjoined fraud.” Aplt.’s Opening Br. at 12. But, as discussed supra,
that fact ultimately does little for Mr. Iley. We have acknowledged that the
different facts in Pentrack mean that, standing alone, that case is not dispositive.
As demonstrated, however, Pentrack does not stand alone; persuasive circuit
precedent like Nash and Jokhoo supports the conclusion that we reach here. The
only other case involving application of the enhancement that Mr. Iley
28
affirmatively relies on to support his first argument is our decision in United
States v. Lewis, 594 F.3d 1270 (10th Cir. 2010). Mr. Iley says that in Lewis
“[t]his Court sustained the enhancement ‘because some transactions in the Ponzi
scheme violated’ the ‘order issued by the Nebraska Department of Banking and
Finance.’” Aplt.’s Opening Br. at 13 (quoting Lewis, 594 F.3d at 1287). Mr.
Iley’s reliance on Lewis, however, is misguided. In the language from Lewis that
Mr. Iley quotes as ostensibly stating the court’s holding, the Lewis panel is
actually describing the district court’s rationale for imposing the
enhancement—not the rationale of the Lewis panel. See Lewis, 594 F.3d at 1287
(“The district court imposed this enhancement because some transactions in the
Ponzi scheme violated a cease-and-desist order issued by the Nebraska
Department of Banking and Finance.”). And neither the argument that the Lewis
defendant presented to the district court nor the one he raised on appeal is even
remotely relevant to the matters at issue here: “In the district court Lewis opposed
the two-level enhancement on the ground that the violation of the order was not
foreseeable. His argument on appeal is different. He now argues that the
enhancement should not apply because he did not have knowledge of the order.”
Id. at 1288. In short, Lewis is inapposite. Thus, Mr. Iley’s reliance on it is
unavailing.
29
Mr. Iley does not fare much better by asserting that “the guideline’s
commentary . . . indicate[s] that circumstances like Mr. Iley’s are outside the
scope of § 2B1.1(b)(9)(C)” because it “confirm[s] that the guideline applies only
where the defendant violated the express terms of a prior order.” Aplt.’s Opening
Br. at 11 (emphasis added). Mr. Iley notes that the one illustrative hypothetical in
the commentary provides that “a defendant whose business previously was
enjoined from selling a dangerous product, but who nonetheless engaged in
fraudulent conduct to sell the product, is subject to this enhancement.” U.S.S.G.
§ 2B1.1(b)(9)(C) cmt. n.8(C). However, Mr. Iley offers no argument to explain
why we should view this hypothetical as helpful to him. Indeed, the hypothetical
tells us nothing about the nature of the prior order that enjoined the sale of the
dangerous product. Notably, notwithstanding Mr. Iley’s conclusory suggestion to
the contrary, see, e.g., Aplt.’s Reply Br. at 9, the hypothetical does not tell us
whether the prior order that enjoined the sale did so by it express terms or, as
here, by its substance—viz., by being “designed to prohibit prior misconduct of”
the same or similar sort as the defendant’s subsequent criminal conduct and by
being “specific enough to provide the defendant with adequate notice of the
prohibited conduct.” Pentrack, 428 F.3d at 990–91. Therefore, the hypothetical
does not advance Mr. Iley’s cause.
30
Mr. Iley also posits that “[t]he commentary further states that the guideline
applies when the defendant’s fraud contravened a directive ‘to take or not to take
a specified action.’” Aplt.’s Opening Br. at 12 (quoting U.S.S.G. § 2B1.1(b)(9)(C)
cmt. n.8(C)). But, again, Mr. Iley does not explain why the quoted commentary
language helps him. More specifically, he does not tell us why any such directive
to take or not take such action must itself be set out in explicit terms, if the
directive’s substance—like the Order’s substance here—is “specific enough to
provide the defendant with adequate notice of the prohibited conduct,” Pentrack,
428 F.3d at 990, and reasonably calculated to send the definite and concrete
message to the defendant that he should cease (i.e., stop) the conduct that gave
rise to the order. Moreover, in its analysis of the enhancement’s history, the
Pentrack court concluded that the “specified action” language was part of the
“additional phrasing” that “merely clarifies the distinction between enhancements
for bankruptcy and non-bankruptcy fraud.” Id. Therefore, it does not seem that
this language was ever intended to shed any particular light on whether a
defendant’s subsequent criminal conduct must violate the express terms of a prior
injunction to qualify for the § 2B1.1(b)(9)(C) enhancement. Indeed, importantly,
this language did not stop the Pentrack panel from concluding that central to the
specificity inquiry is simply whether “the injunction is specific enough to provide
the defendant with adequate notice of the prohibited conduct.” Id. And, as noted,
31
the Order here was specific enough for this purpose. In sum, the Guidelines
commentary also lends Mr. Iley no succor.
In summary, we hold that, at least under the specific circumstances of this
case, § 2B1.1(b)(9)(C) applies even though the Order did not expressly enjoin Mr.
Iley from defrauding his clients. In particular, we conclude that § 2B1.1(b)(9)(C)
may apply without an explicit injunction when, as here, the prior order (1)
imposed a concrete punishment, such as a fine, on the defendant for the same or
similar conduct at issue in the defendant’s subsequent offense; (2) imposed
prospective remedial conditions or obligations, like practice monitoring and the
filing of quarterly reports—through a probationary term or otherwise—that were
reasonably calculated to curtail future instances of the conduct at issue; and (3)
nevertheless the defendant perpetrated that prohibited conduct while the order
was still in effect.11
B
We now take up the second question: Whether Mr. Iley’s fraudulent
conduct violated the Order where it expressly only punished him for negligent
11 Our holding with regard to the scope of § 2B1.1(b)(9)(C) is limited
to the issues necessary to decide this appeal. We leave for another day the
question of whether § 2B1.1(b)(9)(C) applies when, as in Nash, the defendant
received a fine and a warning, but was not expressly subject to any prospective
remedial conditions or obligations. We similarly decline to decide whether the
enhancement would apply when the crime was committed after any prospective
features of the prior order had expired.
32
conduct. Mr. Iley claims that his offense conduct did not violate the Order
“[b]ecause negligence is not similar conduct to fraud.” Aplt.’s Reply Br. at 14
n.4. He maintains that, just as “a dog distinguishes between being stumbled over
and being kicked,” we should distinguish between negligence and fraud. Id. at 13
(quoting Oliver Wendell Holmes Jr., THE COMMON LAW at 3 (1881)). In more
prosaic language, he contends that “a warning against being sloppy” does “not
amount to a warning not to steal clients’ money.” Id. at 14 n.4. Thus, Mr. Iley
argues that by defrauding his clients, he did not violate the Order’s “warning
against being sloppy.” Id.
But, importantly, Mr. Iley offers us no reason to read a symmetry-ofmental-
state requirement into § 2B1.1(b)(9)(C), or any on-point legal authority
that would support such a step. And there is reason to question whether the
Sentencing Commission contemplated such a significant limitation on the
universe of defendants qualifying for the enhancement. Cf. U.S.S.G. § 2B1.1 cmt.
n.8(C) (setting forth a hypothetical illustrating the enhancement’s application that
ascribes no particular mental state to the prior conduct that gave rise to an
injunction—involving the sale of a dangerous product—but that nevertheless
deems the enhancement appropriate where the defendant is expressly described as
engaging in “fraudulent conduct to sell the [same or similar dangerous] product”).
33
Indeed, in this regard, a defendant who commits certain conduct with a high
level of culpable intent after being formally warned against committing the same
underlying conduct, while possessing a lower level of culpable intent, would seem
to be even more worthy of the enhancement than a defendant who simply engages
in the same prohibited conduct again, while possessing the same, lower level of
culpable intent. That is because such a defendant seemingly would have
displayed even more of the “aggravated criminal intent” that § 2B1.1(b)(9)(C)
aims to punish. U.S.S.G. § 2B1.1 cmt. background. Put another way, that
defendant would seemingly be more worthy of the enhancement because, not only
would his subsequent criminal conduct indicate that the prior order did not deter
him from engaging in the same prohibited conduct with the same level of culpable
intent, but it also did not deter him from brazenly upping his game—viz., from
engaging in the same or similar prohibited conduct with a higher level of
“aggravated criminal intent.” Id.
In this case, Mr. Iley evinced such brazen, and thus more sanction-worthy,
conduct. The Order warned him that negligently harming his clients by taking
their money ostensibly to pay their taxes to the IRS and then not doing so was
prohibited and merited punishment and intrusive probationary conditions, like
practice monitoring. Then, while still on probation for this negligent conduct,
Mr. Iley fraudulently misrepresented to his clients that he was taking their money
34
to pay their taxes to the IRS and then knowingly diverted the money for other
personal uses. That is, Mr. Iley engaged in essentially the same or similar
conduct when perpetrating his fraudulent scheme—the only critical difference
being that, after being formally warned against doing so, he acted anyway with an
even more culpable state of mind (i.e., fraudulently). As such, the district court
certainly did not err in ruling that Mr. Iley acted with the kind of “aggravated
criminal intent” that § 2B1.1(b)(9)(C) penalizes. Id. In other words, we hold that
Mr. Iley’s fraudulent conduct in not paying his clients’ funds (as promised) to the
IRS could and did violate the Order, even though by its explicit terms the Order
only sanctioned Mr. Iley for his negligent commission of the same or similar acts.
IV
In conclusion, for the foregoing reasons, the district court did not err in
applying the two-level enhancement under § 2B1.1(b)(9)(C) in Mr. Iley’s case.
Accordingly, we AFFIRM the court’s sentencing order.
35
17-1269, United States v. Iley
HARTZ, J., Circuit Judge, concurring.
I concur in the judgment and all of Judge Holmes’s fine opinion except the
discussion of United States v. Nash, 729 F.3d 400 (5th Cir. 2013), and United States v.
Jokhoo, 806 F.3d 1137 (8th Cir. 2015). In particular, I agree with the opinion’s
determination that the context of the Order of the Colorado Board of Accountancy made
clear that the fraudulent conduct of which Defendant was later convicted would be a
violation of the terms of his probation under the Order.
In my view, Judge Holmes’s opinion is fully convincing without any need for
support from Nash and Jokhoo. And I think those two decisions are misguided because
they in essence transform USSG § 2B1.1(b)(9)(C) into a recidivist provision, increasing a
defendant’s offense level simply because the defendant had previously been penalized by
a court or administrative agency for similar misconduct. See Nash, 729 F.3d at 406–07
(Garza, J., dissenting). I am therefore reluctant to embrace the reasoning that brought
those courts to their holdings (even though Judge Holmes’s opinion is careful not to
endorse the holdings in the two cases).

Outcome: Affirmed

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