Tuesday, September 10, 2013

Enhancement for Violating Administrative Order/Process Applied to Future Fraud Unaddressed by Prior Agency Intervention

According to the majority, an agency letter finding fraud in certain instances and requiring payment of a fine for those violations constitutes an administrative order, injunction, decree, or process that is violated by future instances of fraud since the agency warned the individual of the violations, allowed him to participate in the process in a meaningful way, and assessed a fine for the violations.  The individual’s subsequent violations despite the previous agency interaction resulted in a two-level enhancement pursuant to U.S. Sentencing Guideline § 2B1.1(b)(9)(C).

Nash became an authorized retailer for the food stamp program known as the Supplemental Nutrition Assistance Program (SNAP) through his convenience stores.  In 2008, the U.S. Department of Agriculture (USDA) sent Nash a letter notifying him of suspected food stamp violations and offering Nash an opportunity to respond.  Nash did so, but the USDA concluded that the violations had occurred and fined him nearly $15,000.  The USDA’s letter warned that failure to pay the fine would result in a six-month disqualification from SNAP and that the USDA’s decision did not preclude prosecution under applicable laws. 

Nash paid the fine but continued to commit food stamp fraud.  He later pled guilty to committing a conspiracy to defraud SNAP.  At sentencing, the district court applied the § 2B1.1(b)(9)(C) enhancement for “a violation of any prior specific . . . administrative order, injunction, decree, or process not addressed elsewhere in the guidelines.”  Nash argues that the USDA letters that resulted in him paying a fine for previous fraud do not constitute a definite agency directive with which he failed to comply.  The panel disagreed, finding that Nash had sufficient interaction with USDA and was able to participate in that administrative process in some meaningful way.  Further, the panel accepted the interpretation of the Guideline application note, which applies the enhancement if the defendant commits fraud “in contravention of a prior, official judicial or administrative warning,” and concluded that the USDA process here—administrative warning and fine—triggered the § 2B1.1(b)(9)(C) enhancement.

Judge Garza dissented, finding that the USDA’s letter did not constitute a warning or order against future food stamp fraud since the letter only threatened consequences if Nash did not pay the fine linked to those prior violations, and Nash paid that fine.

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