Definitions dispute could shift federal fraud sentencing

SAN FRANCISCO (CN) — A prosecutor on Friday assured a Ninth Circuit appeals panel that federal sentencing guidelines don’t include thoughtcrime.

The argument arose in the case of a French national who pleaded guilty and was sentenced in the Eastern District of California on mail fraud and aggravated identity theft charges. Sentenced in June 2024 to 10 years in prison, Gabriel Diop now argues that a key distinction between “loss” and “intended loss” should be taken into account in his sentence.

“It’s ambiguous how you calculate loss,” said attorney Doug Beevers, representing Diop. “Loss does have some ambiguity as to how you calculate the levels and the exact dollar value.”

The three-judge appeals panel made no decision on Friday.

Prosecutors said Diop stole the identities of people with money held by the State Controller’s Office of Unclaimed Property, filing false applications and concealing the fraud with P.O. boxes, mail forwarding, fake IDs and counterfeit notary stamps.

He stole $1.9 million and attempted to take another $9 million, prosecutors said. A lower court ordered him to pay about $1.8 million in restitution.

During arguments, U.S. Circuit Judge Daniel Bress, a Trump appointee, inquired about ensuring fairness across defendants with similar levels of culpability.

“Is a house where you just talk about drug distribution a drug house?” Beevers asked in reply.

A judge may consider monetary loss in the sentencing guidelines, along with factors like age and criminal history, meaning larger thefts can result in longer prison terms.

Assistant U.S. Attorney Samuel Stefanki urged the three-judge panel to affirm the lower court’s sentence, arguing it should be based on the full $11 million Diop attempted to steal, not just the $1.9 million he obtained.

Stefanki said Diop’s attorney was interpreting the guidelines a certain way, stressing that judges must consider all acts and omissions that are part of a fraud scheme.

The appeals panel had asked attorneys to focus on United States v. Yafa in their briefing. That case held that the word “loss” was ambiguous about whether someone’s actual loss included actual gains a defendant received through fraud. That means the law strongly suggests loss isn’t limited to only amounts that are identifiable and calculable.

Stefanki argued that ambiguity is large and includes the greater harms stemming from a defendant’s conduct.

“Mr. Diop’s attempted loss was appropriately accounted for,” he added.

The prosecutor added later that an attempt to commit a crime differs from merely thinking about it. He said his office doesn’t charge people for thinking about, for example, stealing $1 million.

“The defendants must take an action,” he said. “The guidelines are not punishing thoughts.”

Law enforcement descended on Diop’s Agoura Hills home in 2021, finding 12 fake driver’s licenses, bank cards and checkbooks. They also found counterfeit stamps used to notarize applications for unclaimed property, prosecutors have said.

When businesses that hold someone’s money, stocks or similar assets can’t contact the proper owners, they turn them over to the State Controller’s Office. The rightful owners can then file claims for their property.

The appeals panel was rounded out by U.S. Circuit Judges Morgan Christen, a Barack Obama appointee, and Kenneth Lee, a Trump appointee.