United States v. Ethan Day
In United States v. Day, —- F.4th —-, No. 23-50636 (5th Cir. Sept. 16, 2024), the Fifth Circuit vacated the defendant’s 101-month prison sentence and remanded his case for resentencing.
At trial, a jury convicted Day of wire fraud, money laundering, and related crimes based on his role in a “scam that purported to sell shipping containers converted into housing units.” The conspirators would take customers’ money but never deliver them a product.
Before sentencing, Day received a PSR that identified 41 victims and calculated a loss of $2,563,123.72. It did not address “the individual financial circumstances of the 41 victims,” yet it recommended a 6-level enhancement under USSG § 2B1.1(b)(2)(C) for causing substantial financial hardship to 25 or more victims. Day objected, but the court overruled his objection.
Holding 1: The substantial-hardship enhancement did not apply because the district court failed to “assess whether the loss ‘significantly impact[ed] the victim’s resources’” (quoting United States v. Aderinoye, 33 F.4th 751, 757 (5th Cir. 2022)).
The typical white-collar Guideline, USSG § 2B1.1, already enhances defendants’ sentences based on the amount of loss, so the substantial-hardship enhancement focuses on something different. That enhancement could be based on “bankruptcy, loss of a large portion of a retirement or other investment account, needing to change employment or living arrangements, and difficulty obtaining credit.” Aderinoye, 33 F.4th at 757. It could also be supported by other evidence that the loss “significantly impact[ed] the victim’s resources,” but none of that analysis was performed here.
Of note, the Fifth Circuit allows district courts to apply the enhancement based on “reasonable inferences about the victims’ financial circumstances and about their level of financial harm,” but those inferences must “find some support in the record.” Aderinoye, 33 F.4th at 757. Here, some of the victims were corporations, and many of them “received the bulk” of the orders they placed. Those facts undermine any inference that “only poor people bought Day’s container houses,” and it fails to prove that more than 25 victims had their resources “significantly impacted” by this crime.
Holding 2: On the other hand, the district court was correct that Day deserved a two-level enhancement for his role as an “organizer, leader, manager, or supervisor” of his crimes. See USSG § 3B1.1(c). He exercised control over lower-level participants in the crimes, and he “managed a significant portion of the fraud’s assets.” It did not matter that another conspirator might have been more culpable, because even “lower-tier managers and supervisors can still qualify for the enhancement.”