robbie rossi government sentencing memo

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UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT

UNITED STATES OF AMERICA :

v. : 3:14CR11 (RNC) ROBBIE ROSSI : November 14, 2014

GOVERNMENT’S MEMORANDUM IN AID OF SENTENCING The defendant, Robbie Rossi, stands before the Court having pled guilty to one count of

mail fraud involving a benefit paid in connection with a presidentially declared major disaster or

emergency, in violation of 18 U.S.C. § 1341. For the reasons set forth below, the Government

respectfully urges the Court to impose a sentence of at least 18 months incarceration followed by

two years of supervised release, and order that the defendant pay restitution to the Federal

Emergency Management Agency (FEMA) in the amount of $12,718.60.

Summary of Offense Conduct

In the defendant’s plea agreement, the parties stipulated to the following offense conduct,

which is also set forth in the Presentence Report. On June 1, 2011, severe weather, including a

tornado outbreak, occurred in central Massachusetts. Plea Agreement [doc. no. 32] at 10,

Stipulation of Offense Conduct (“Stip. Off. Cond.”) ¶ 1; Presentence Report (“PSR”) ¶ 6. After

the storm, a Presidential Declaration of a major disaster was made for certain areas of

Massachusetts, including the cities of Springfield and West Springfield. Id. FEMA was

assigned funding for this disaster under Massachusetts Severe Storms and Tornadoes, Disaster

Relief 1994 (FEMA-DR-1994). Id. On August 19, 2011, the defendant applied for FEMA

disaster assistance for damages he claimed he suffered as a result of the June 2011 storm. Id. ¶ 7.

As part of his application, the defendant falsely told FEMA that at the time of the storm, the

Case 3:14-cr-00011-RNC Document 48 Filed 11/14/14 of 11

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defendant was renting a dwelling located at 71 New Bridge Street, West Springfield,

Massachusetts and that he could no longer reside in the dwelling due to the damage inflicted by

the tornado. Id. ¶ 8; Stip. Off. Cond. ¶ 3. In order to support his claim for rental assistance

benefits, the defendant provided FEMA with false documentation of rental payments he

purported to have paid in the months following the June 2011 storm. PSR ¶ 9.

For the purpose of executing his scheme and artifice to defraud FEMA, on March 6,

2012, the defendant caused to be delivered via the United States mail United States Treasury

Check No. 4030007002605, addressed to Robbie Rossi, XX Green Valley Drive, Enfield,

Connecticut. Id. ¶ 10. The defendant knowingly took and received the check from an authorized

depository for mail, and then presented and cashed the check at a check cashing facility located

in Enfield, Connecticut. Id. As a result of the materially false and fraudulent pretenses,

representations, and promises the defendant made to FEMA, FEMA paid the defendant a total of

$12,718.60 in disaster relief benefits to which the defendant was not entitled. Id. ¶ 11; Stip. Off.

Cond. ¶ 5.

Guidelines Calculation

The parties and the Probation Office agree on the defendant’s Sentencing Guidelines

range. PSR ¶¶ 17-26; Plea Agreement at 4-5. The defendant’s base offense level under U.S.S.G.

§ 2B1.1(a) is 7. Based on a loss amount of $12,718.60, under § 2B1.1(b) the offense level is

increased by 4 levels to 11. Because the offense involved conduct described in 18 U.S.C. § 1040

(fraud in connection with major disaster or emergency benefits), two additional levels are added,

for a total of 13. U.S.S.G. § 2B1.1(b)(12). Two levels are subtracted under U.S.S.G. § 3E1.1 for

acceptance of responsibility, resulting in a total offense level of 11. Id. ¶ 26.


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A total offense level 11 in Criminal History Category IV results in a range of 18 to 24

months of imprisonment and a fine range of $2,000 to $20,000, U.S.S.G. § 5E1.2(c)(3). PSR

¶¶ 44, 50; Plea Agreement at 5. The defendant is also subject to a supervised release term of two

to five years. PSR ¶ 46; Plea Agreement at 5; U.S.S.G. § 5D1.2.

Restitution

Restitution is mandatory in this case under 18 U.S.C. § 3663A(c)(1)(A)(ii). PSR ¶¶ 52,

12; Plea Agreement at 2. In the plea agreement, the defendant agreed to make restitution to

FEMA in the amount of $12,718.60. Plea Agreement at 2-3. In its order of restitution, the Court

should direct the Clerk of Court to send restitution payments to the following address:

FEMA P.O. Box 530217 Atlanta, GA 30353-0217

In order to ensure that the defendant properly receives credit for any restitution payments,

the Clerk of Court should include the following information with the payment:

Applicant Name: Robbie J. Rossi Disaster Information: Massachusetts Severe Storms and Tornadoes, DR-1994,

declared on 06/15/2011 FEMA Registration ID#: 41-1061053 Fraud Case # 2012000293

Discussion

In the majority of fraud cases, the amount of intended or actual loss is a primary

consideration for the Court in determining the sentence to be imposed. In this case, however,

there are several other circumstances that, independent of the loss amount, strongly support the

sentence recommended by the Government.1

1As the Court well knows, 18 U.S.C. § 3553(a) sets forth the factors the Court considers in imposing its sentence in this case. In relevant part, § 3553(a) provides as follows: (a) Factors to be considered in imposing a sentence. -- The court shall impose a sentence sufficient, but not greater than necessary, to comply with the purposes set forth in paragraph (2) of this


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First, the nature and circumstances of the defendant’s offense show a greater degree of

fraudulent representation and effort than might first be assumed given the loss amount. The

defendant initially submitted a fraudulent application to FEMA for disaster relief funds on

August 19, 2011.2 Appendix to Government’s Memorandum in Aid of Sentencing (attached

hereto) (“GA”) at GA1. When the defendant spoke to a FEMA inspector at that time, the

defendant was with another individual whom the defendant represented to be “Richard

Letguard,” the defendant’s landlord at 71 New Bridge Street. See GA2. The individual was

subsequently identified as Richard Letendre, a registered sex offender. At no time was Letendre

the defendant’s landlord, nor did Letendre reside at 71 or 75 New Bridge Street. Based on the

information provided by the defendant, within a day, FEMA approved the defendant’s

application and notified him he would receive $2,333.60 for rental assistance and loss of his

personal property. subsection. The court, in determining the particular sentence to be imposed, shall consider --

(1) the nature and circumstances of the offense and the history and characteristics of the defendant;

(2) the need for the sentence imposed -- (A) to reflect the seriousness of the offense, to promote respect for the law, and to provide just punishment for the offense; (B) to afford adequate deterrence to criminal conduct; (C) to protect the public from further crimes of the defendant; and (D) to provide the defendant with needed educational or vocational training, medical care, or other correctional treatment in the most effective manner; (3) the kinds of sentences available; (4) the kinds of sentences and the sentencing range established for -- (A) the applicable category of offense committed by the applicable category of defendant as set forth in the guidelines ... (5) any pertinent policy statement [issued by the Sentencing Commission]..

(6) the need to avoid unwarranted sentence disparities among defendants with similar records who have been found guilty of similar conduct; and

(7) the need to provide restitution to any victims of the offense. 2 The defendant told a FEMA inspector that the defendant leased an apartment at 71 New Bridge Street in West Springfield, Massachusetts, and identified a heavily damaged house on New Bridge Street as his destroyed residence. In fact, the damaged house was located at 75 New Bridge Street, and there is no such address as 71 New Bridge. The defendant never lived at 75 New Bridge Street. Although 75 New Bridge was severely damaged by the tornado, the actual landlord and actual tenant of the building did not seek financial assistance from FEMA for the damage.


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Approximately two weeks later, FEMA notified the defendant that if he required

additional FEMA assistance, he could complete a form called a Declaration of Continuing Need

for Temporary Rental Assistance, which FEMA sent to the defendant. On September 19, 2011,

the defendant submitted his declaration, along with a purported Residential Lease Agreement,

and a receipt for rent paid for the month of September 2011 indicating that the defendant had

paid rent to a landlord named Jennifer Velasquez. GA3, GA5-GA7. The lease and the receipt

were fraudulent. The defendant had induced Ms. Velasquez, an acquaintance of his, to assist

him by telling her that he was applying for state welfare benefits or food stamps, and needed the

documentation. At no time did the defendant pay Velasquez any money for rent, and certainly

not for rent arising or related to any loss caused by the tornado that was the basis for the FEMA

disaster relief program. The defendant then provided additional false documentation to FEMA

on September 22, 2011 and again on September 23, 2011. In the latter submission, the defendant

stated that he had current rent expenses of $700 a month and electricity expenses of $100 month,

and that his money was in a lock box when the house was leveled, and he was not able to retrieve

any documents from the lock box.

On September 27, 2011, the defendant again provided false documentation to FEMA, this

time in the form of a statement from his “sister,” Joann Buchanan, who stated that she had

“given my brother, Robbie Rossi, 400.00 a month” from June 2011 through September 2011

“because of the lease he acquired due to the tornado on June 1, 2011.” GA9. As set forth in the

Presentence Report, the defendant does not have a sister. The individual identified as Joann

Buchanan was apparently a friend of the defendant. That same day, the defendant called

FEMA’s toll-free assistance line and told them that he had been working prior to the tornado,

and had heart surgery and was in rehab, and that his sister was providing him with financial


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assistance. On October 3, 2011, the defendant again provided FEMA with fraudulent rent

receipts from his “landlord,” Jennifer Velasquez.3 Relying on these documents, FEMA provided

the defendant with additional rental assistance funds.

On November 25, 2011 the defendant sent FEMA a request for additional funds,

including a statement from Joann Buchanan that she gives her brother $400 for rental assistance

each month, and additional rent receipts for September to December 2011 purportedly signed by

Jennifer Velasquez. The defendant also stated that all of the records he had “were lost in a lock

box” that was “never found in [his] leveled home.” Based on these documents, FEMA provided

the defendant with additional rental assistance funds.

In February 2012, the defendant again sent fraudulent documentation to FEMA,

including another statement from Joann Buchanan and phony rent receipts. Relying on these

documents, FEMA again provided the defendant with funds for rental assistance.

In April 2012, the defendant sent similar fraudulent documentation purportedly from

Buchanan and Velasquez. FEMA asked for additional documentation, including a copy of the

defendant’s current lease and rent receipts or cancelled checks. In response, the defendant

provided a fraudulent lease and false rent receipts. FEMA again disbursed rental assistance

funds.

In July 2012, the defendant sent FEMA several documents, including a lease agreement,

rent receipts, a letter from Joann Buchanan stating that she gave her brother Robbie Rossi $400

each month for rent, and a letter from Velasquez describing the defendant as her tenant from

September 2011 through December 2012, with a monthly rental payment of $700. All of these

documents were fraudulent. Relying on the defendant’s representations, however, FEMA again

3 According to Ms. Velasquez, she did not create these and other documents submitted in her name, and the documents bear this out. The handwriting is distinctly different from Velasquez’s, and the signature on the documents misspells Velasquez’s first name.


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provided rental assistance funds to the defendant.

After obtaining an arrest warrant for the defendant in October 2013, federal agents

eventually located the defendant in Las Vegas, Nevada. The case agent arranged for the

defendant to be contacted by law enforcement officers posing as FEMA employees, under the

ruse that the defendant had an additional check for disaster relief that he had not claimed. When

the defendant appeared at the offices of a federal agency to claim his check in January 2014, he

was arrested, and eventually transferred to this district.

Thus, the defendant engaged in a continuing pattern of deception designed to defraud

FEMA for approximately one year. He enlisted three other individuals, at least one of whom

was deceived into assisting him, in his scheme. Despite the relatively modest amount of his

financial gain, the defendant’s effort and continuing duplicity indicate a consistent intent to

defraud the Government and wrongfully obtain funds designed to help victims of natural

disasters. Unlike an individual who defrauds another on the basis of a single fraudulent

statement or episode, the defendant’s scheme consisted of repeated false representations over

roughly a year, and he remained willing to continue to fraudulently claim benefits into the

beginning of this year, over two and half years after his initial fraudulent application for disaster

benefits. These circumstances of the defendant’s offense are a significant consideration in

determining the sentence that should be imposed.

Second, the defendant’s scheme victimized FEMA disaster relief funds. In its

administration of these funds, it is often critical for FEMA to provide support to victims of

natural disasters as quickly as possible, so that the victims can obtain food or shelter and begin to

reconstruct their lives. Depending upon the scope of the disaster, FEMA may receive hundreds


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or thousands of claims in the days immediately following a disaster.4 Under these

circumstances, FEMA inspectors essentially rely on the honor system when victims file claims

for relief funds. Unfortunately, this compassion leaves the program vulnerable to exploitation by

unscrupulous individuals who prey upon the generosity of their fellow citizens. This fraud

directly steals tax dollars and deceives emergency responders seeking to help their fellow

citizens get back on their feet.

Third, beyond the direct financial harm caused to taxpayers, the defendant’s scheme

diverted scarce government resources from those who needed them. Every administrative hour

spent on the defendant’s claims for benefits was time not spent on actual victims who needed

assistance, and needlessly increased the administrative cost of disaster relief programs. Any

prophylactic measures that FEMA may take in order to weed out fraudulent claims like the

defendant’s will similarly increase the costs of the program, and run the risk of delaying the

distribution of funds in a critical hour of need, causing additional anxiety to disaster victims.

Fourth, it is a simple fact that natural disasters inevitably result in a proliferation of

fraudulent schemes designed to defraud the government and private charitable groups. “In the

wake of Hurricanes Katrina, Rita, and Wilma, Congress appropriated approximately 62.3 billion

dollars in disaster assistance” and allocations for Katrina and Rita related relief totaled

approximately 29.8 billion dollars. United States Sentencing Commission, Report to the

Congress: Amendments to the Federal Sentencing Guidelines in Response to the Emergency

Disaster Assistance Fraud Penalty Enhancement Act of 2007 (September 2008) (hereinafter

“USSC 2008 Report”) (attached hereto at GA10-GA24) at 3, GA14. In June 2006, the

4 In the first month after Katrina struck, FEMA received more than 2.5 million applications for disaster assistance relating to Hurricanes Katrina and Rita. U.S. Department of Justice, Disaster Fraud Task Force Report to the Attorney General for Fiscal Year 2011, http://www.justice.gov/criminal/disasters/ docs/ReportDFTF2011.pdf, at 1.


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Government Accountability Office released a report in which GAO estimated that one billion

dollars in improper or fraudulent payments, representing approximately 16 percent of the total

claims paid, had been made by FEMA following Katrina, and GAO investigators testified before

Congress that the cost of fraud committed after Katrina and Rita “would amount to billions of

dollars.” Id. at GA14-GA15.

As a result, considerations of general deterrence are particularly salient in this case. The

penalties for defrauding disaster relief programs must be sufficient to deter opportunistic

criminals from taking advantage of a moment when their fellow Americans are at their most

vulnerable and their most compassionate. Although many disaster relief fraud cases involve

relatively small sums of money, the sheer number of such cases requires that the sentences

imposed consider the need to deter such conduct. See USSC Report at GA22 (more than 80

percent of 54 disaster fraud cases reviewed by Sentencing Commission involved less than $5,000

of loss). In response to a specific direction contained in the Emergency and Disaster Assistance

Fraud Penalty Enhancement Act, Pub.L. No. 110-179, 121 Stat. 2556, signed into law by the

President on January 7, 2008, the Sentencing Commission amended the Guidelines to provide for

a minimum offense level of 12 for defendants convicted under the newly created statute

addressing disaster fraud (18 U.S.C. § 1040), and also provided a two-level enhancement for

fraud offenses committed during and in relation to a presidentially declared major disaster or

emergency. See USSC Report at GA12-GA13, GA22-GA24. Whatever one’s view of the

Guidelines as a general matter or in a particular calculation, there is a clearly established need to

impose sentences that will deter fraud on disaster relief funds, even in cases involving relatively

low loss amounts.


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There is surely a public desire for sufficient penalties to be imposed upon those who

defraud disaster relief programs. At a time of increased demands on the federal government to

husband tax dollars with care, the public has a right to expect that those who prey upon

charitable programs will receive a sentence that reflects the uniquely reprehensible nature of the

crime.

These general concerns coalesce with the specific deterrence considerations in this case.

By his own admission and the finding of the Presentence Report, since the age of 19, the

defendant in this case “has spent the majority of his life involved with the criminal justice

system.” PSR ¶ 32. Although most of his crimes were larceny and breaking and entering

offenses, he has also been convicted of armed robbery. See PSR ¶¶ 27-29. When FEMA was

inspecting tornado damage in central Massachusetts in August 2011, however, the defendant

seized the opportunity to exploit the situation for illicit gain, and then continued to do so for over

a year. The defendant is precisely the type of individual who should be deterred from

wrongfully absconding with federal funds. Although the defendant now professes a desire to

change the direction of his life, the sentence imposed in this case should be sufficient to ensure

that inclination will firmly take root.5

5 The character reference provided by the defendant gives rise to concern that the defendant’s professed renunciation of criminal activity and turn to honest employment may not yet be complete. Before he was arrested in Las Vegas, the defendant was driven to the arrest site by a convicted felon named Juan Guzman. Mr. Guzman’s criminal history includes convictions of burglary/theft of property and theft by forged/invalid access card. The Office of the Inspector General of the Department of Homeland Security, the investigative agency on this case, believes the Juan Guzman who is acting as a character reference for the defendant (Deft. Sent. Memo. at 7) is the same Juan Guzman who accompanied the defendant when the defendant was arrested. Allowing that opportunities for felons to find employment and change the direction of their lives may be difficult to find, the defendant’s continued association with Mr. Guzman (as well as the value of Mr. Guzman’s character reference) is a concern. In addition, allowing for the significant caveat concerning information from the Internet, a search for comments related to the defendant’s professed employer, Resort Stay International, yields several criticisms of their business practices.


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In light of these considerations, a term of incarceration of at least 18 months, followed by

a term of supervised release of two years, is necessary to reflect the harm in this case, deter

others from similar conduct, and assist the defendant in changing the direction of his life. Such a

sentence is sufficient, but not greater than necessary, to serve those goals.

Respectfully submitted, DEIRDRE M. DALY UNITED STATES ATTORNEY /s/ DAVID J. SHELDON ASSISTANT UNITED STATES ATTORNEY 157 CHURCH STREET, 25TH FLOOR NEW HAVEN, CT 06510 FEDERAL BAR NO. CT07997 Tel.: (203) 821-3700 Fax: (203) 773-5378 [email protected]

CERTIFICATION I hereby certify that on November 14, 2014, a copy of the foregoing was filed electronically and served by mail on anyone unable to accept electronic filing. Notice of this filing will be sent by e-mail to all parties by operation of the Court’s electronic filing system or by mail to anyone unable to accept electronic filing as indicated on the Notice of Electronic Filing. Parties may access this filing through the Court’s CM/ECF System. /s/ DAVID J. SHELDON ASSISTANT UNITED STATES ATTORNEY


UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT

UNITED STATES OF AMERICA :

v. : 3:14CR11 (RNC) ROBBIE ROSSI : November 14, 2014

APPENDIX TO GOVERNMENT’S MEMORANDUM IN AID OF SENTENCING

Respectfully submitted,

DEIRDRE M. DALY UNITED STATES ATTORNEY /s/ DAVID J. SHELDON ASSISTANT UNITED STATES ATTORNEY 157 CHURCH STREET, 25TH FLOOR NEW HAVEN, CT 06510 FEDERAL BAR NO. CT07997 Tel.: (203) 821-3700 Fax: (203) 773-5378 [email protected]

CERTIFICATION I hereby certify that on November 14, 2014, a copy of the foregoing was filed electronically and served by mail on anyone unable to accept electronic filing. Notice of this filing will be sent by e-mail to all parties by operation of the Court’s electronic filing system or by mail to anyone unable to accept electronic filing as indicated on the Notice of Electronic Filing. Parties may access this filing through the Court’s CM/ECF System. /s/ DAVID J. SHELDON ASSISTANT UNITED STATES ATTORNEY

Case 3:14-cr-00011-RNC Document 48-1 Filed 11/14/14 Page 1 of 26

Defendant’s Initial Application for FEMA Disaster Assistance . . . . . . . . . . . . . . . . . . GA1 Documents Submitted to FEMA on 9/19/2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . GA3 Document Submitted to FEMA on 9/27/2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . GA9 Documents Submitted to FEMA on 9/19/2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . GA3 United States Sentencing Commission, Report to the Congress: Amendments to the Federal Sentencing Guidelines in Response to the Emergency Disaster Assistance Fraud Penalty Enhancement Act of 2007 (September 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . GA10


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This Report responds to the directive in the Emergency and Disaster AssistanceFraud Penalty Enhancement Act of 2007 (the "Disaster Fraud Act"), Pub. L. No.110–179, 121 Stat. 2556, signed by the President on January 7, 2008. The Reportdiscusses the Disaster Fraud Act and its legislative history and explains the actions takenby the U.S. Sentencing Commission ("Commission") pursuant to the congressionaldirective in the Disaster Fraud Act and the Commission’s policy recommendations forcombating disaster fraud offenses.

I. EMERGENCY AND DISASTER ASSISTANCE FRAUD PENALTYENHANCEMENT ACT OF 2007

Relevant to this Report are provisions in the Disaster Fraud Act that directed theCommission to take certain actions, created a new fraud offense, and increased penaltiesfor existing fraud offenses. These issues are described in more detail below.

A. Directive to Commission

The Disaster Fraud Act was signed by the President on January 7, 2008. Section 5(a) of the Disaster Fraud Act contains a 30-day directive to the Commission –with the requisite emergency amendment authority – providing that the Commission"forthwith shall –

(1) promulgate sentencing guidelines or amend existing sentencingguidelines to provide for increased penalties for persons convicted offraud or theft offenses in connection with a major disaster declarationunder section 401 of the Robert T. Stafford Disaster Relief andEmergency Assistance Act (42 U.S.C. 5170) or an emergency declarationunder section 501 of the Robert T. Stafford Disaster Relief andEmergency Assistance Act (42 U.S.C. 5191); and(2) submit to the Committee on the Judiciary of the Senate and theCommittee on the Judiciary of the House of Representatives anexplanation of actions taken by the Commission pursuant to paragraph (1)and any additional policy recommendations the Commission may have forcombating offenses described in that paragraph."

Section 5(b) of the Disaster Fraud Act further requires the Commission to –

(1) ensure that the sentencing guidelines and policy statementsreflect the serious nature of the offenses described in subsection (a)and the need for aggressive and appropriate law enforcementaction to prevent such offenses;(2) assure reasonable consistency with other relevant directivesand with other guidelines;


1 42 U.S.C. § 5170 sets forth the procedures for states to request that the President declare that a majordisaster exists. It requires a request to be made by the Governor, “based on a finding that the disaster is ofsuch severity and magnitude that the effective response is beyond the capabilities of the State and theaffected local governments and that Federal assistance is necessary.” “Based on the request of a Governorunder this section, the President may declare under this chapter a major disaster or emergency exists.”2 42 U.S.C. § 5191 also sets forth the process for requesting an emergency declaration, which results inemergency assistance programs. Section 5191 also gives the President authority to provide emergencyassistance and emergency assistance programs without the specific request of the States.

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(3) account for any aggravating or mitigating circumstances thatmight justify exceptions, including circumstances for which thesentencing guidelines currently provide sentencing enhancements;(4) make any necessary conforming changes to the sentencingguidelines; and(5) assure that the guidelines adequately meet the purposes ofsentencing as set forth in section 3553(a)(2) of title 18, UnitedStates Code.

B. New Offense

Section 2 of the Disaster Fraud Act adds a new offense at 18 U.S.C. § 1040 (Fraud in connection with major disaster or emergency benefits). The newoffense provides that whoever knowingly –

1) falsifies, conceals, covers up by any trick, scheme, or device anymaterial fact; or

2) makes any materially false, fictitious, or fraudulent statement orrepresentation, or makes or uses any false writing or documentknowing the same to contain any materially false, fictitious, orfraudulent statement or representation, in any matter involving anybenefit authorized, transported, transmitted, transferred, disbursed,or paid in connection with a major disaster declaration undersection 401 of the Robert T. Stafford Disaster Relief andEmergency Assistance Act (42 U.S.C. § 5170)1 or an emergencydeclaration under section 501 of the Robert T. Stafford DisasterRelief and Emergency Assistance Act (42 U.S.C. § 5191),2 or inconnection with any procurement of property or services related toany emergency or major disaster declaration as a prime contractorwith the United States or as a subcontractor or supplier under acontract in which there is a prime contract with the United States.

The penalties for violating this statute include fines and imprisonment for a term not toexceed 30 years. The term “benefit” is defined in the statute as “any record, voucher,payment, money or thing of value, good, service, right, or privilege provided by theUnited States, a State or local government, or other entity.”


3 Under 42 U.S.C. § 5122, a “major disaster” means “any natural catastrophe (including any hurricane,tornado, storm, high water, winddriven water, tidal wave, tsunami, earthquake, volcanic eruption, landslide,mudslide, snowstorm, or drought), or, regardless of cause, any fire, flood, or explosion, in any part of theUnited States, which in the determination of the President causes damage of sufficient severity andmagnitude to warrant major disaster assistance under this chapter to supplement the efforts and availableresources of States, local governments, and disaster relief organizations in alleviating the damage, loss,hardship, or suffering caused thereby.”4 Under 42 U.S.C. § 5122, an “emergency” means “any occasion or instance for which, in the determinationof the President, Federal assistance is needed to supplement State and local efforts and capabilities to savelives and to protect property and public health and safety, or to lessen or avert the threat of a catastrophe inany part of the United States.”

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C. Increased Penalties

Sections 3 and 4 of the Disaster Fraud Act expand the category of fraud offensessubject to a 30-year statutory maximum under 18 U.S.C. §§ 1341 (Frauds and swindles)and 1343 (Fraud by wire, radio, or television) to include fraud during and in relation to apresidentially declared major disaster3 or emergency.4

II. LEGISLATIVE HISTORY OF THE DISASTER FRAUD ACT

The Disaster Fraud Act was enacted in response to "concerns that the currentprovisions of title 18, United States Code, do not adequately address or deter fraud inconnection with emergency and disaster assistance." S. Rep. No. 110–69. In the wake ofHurricanes Katrina, Rita, and Wilma, Congress appropriated approximately 62.3 billiondollars in disaster assistance. S. Rep. No. 110–69. As of March 8, 2006, the FederalEmergency Management Agency’s ("FEMA") allocations for Katrina and Rita relatedrelief totaled approximately 29.8 billion dollars, 13.45 billion dollars of which wasallocated to human services, including but not limited to unemployment assistance, crisiscounseling, and housing assistance. S. Rep. No. 110–69.

After FEMA began making disaster assistance available to hurricane victims,reports of fraud and abuse began to surface. "These reports included allegations that therecipients of disaster assistance had misused funds to purchase luxury goods, that non-eligible persons had applied for and received benefits, and that criminals had establishedphony Katrina-related websites to exploit those who wished to contribute to legitimatedisaster assistance efforts." S. Rep. No. 110–69.

In June 2006, the Government Accountability Office ("GAO") released a report toCongress detailing fraud and abuse of disaster recovery funds following HurricaneKatrina. U.S. Gov’t Accountability Office, Expedited Assistance for Victims ofHurricanes Katrina and Rita: FEMA’s Control Weaknesses Exposed the Government toSignificant Fraud and Abuse, GAO-06-655 (June 2006) ("GAO Report"). The GAOestimated that one billion dollars in improper or fraudulent payments, representingapproximately 16 percent of the total claims paid, had been made by FEMA. GAO


5The enhancement did not cover all conduct criminalized in the new statute created by the Disaster FraudAct , 18 U.S.C. §1040, because the Commission’s authority to promulgate the emergency amendment waslimited by the directive to cover only the conduct identified in the directive.

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investigators testified that the cost of the fraud committed after Katrina and Rita wouldamount to billions of dollars. S. Rep. No. 110–69.

In response to the increased instances of fraud following these disasters, thenAttorney General Alberto Gonzalez announced the formation of the Hurricane KatrinaFraud Task Force. "As of August 30 , 2007, the Task Force has prosecuted more than768 individuals in 41 judicial districts around the country, and additional state and localprosecutions for disaster-related fraud have been brought." U.S. Department Of Justice,Hurricane Katrina Fraud Task Force Second Year Report to the Attorney General, 3(Sept. 2007).

The Senate Report explains that the changes brought by the Disaster Fraud Actwere designed to "send a strong message that disaster relief crime is a serious crime." S.Rep. No. 110–69. Congress wants to help "ensure that federal money goes to the rightpeople and does not get stolen by criminals posing as victims." S. Rep. No. 110–69.

III. COMMISSION RESPONSE TO DIRECTIVE

A. Emergency Amendment

Immediately after enactment of the Disaster Fraud Act, being cognizant of the 30-day directive to issue an emergency amendment, the Commission began reviewingrelevant reports, compiling information, and conducting outreach to interested parties inthe criminal justice system and agencies and organizations victimized by disaster fraud.

On January 9, 2008, the Commission voted to promulgate an emergencyamendment in response to the directive. See United States Sentencing CommissionGuidelines Manual, Supplement to Appendix C, Amend. 714 (February 6, 2008)(attached as Appendix A). The amendment, which had an effective date of February 6,2008, added a new two-level enhancement to the fraud guideline, in §2B1.1 (Larceny,Embezzlement, and Other Forms of Theft; Offenses Involving Stolen Property; PropertyDamage or Destruction; Fraud and Deceit; Forgery; Offenses Involving Altered orCounterfeit Instruments Other than Counterfeit Bearer Obligations of the United States)if the offense involved fraud or theft involving any benefit authorized, transported,transmitted, transferred, disbursed, or paid in connection with a declaration of a majordisaster or an emergency.5 The Commission chose a two-level enhancement because itwas consistent with and proportional to other enhancements in the fraud guideline. Mostof the enhancements in this guideline require a two-level increase in the offense level,representing an approximate 25 percent increase in the applicable sentencing range. Moreover, this increase was consistent with enhancements for offenses involving similar


6The offense level forms the vertical axis of the Sentencing Table in the Guidelines Manual. Each categoryof offense has a base offense level, which sets the minimum offense level for the offense. The base offenselevel is then increased (or decreased) by specific offense characteristics triggered by the conduct involvedin the offense. These additions (or subtractions) to the offense level are designed to capture the aggravatingand mitigating circumstances involved in the particular offense. In fraud cases, for example, the amount ofactual or intended loss increases the offense level. Accordingly, an offender who defrauds a victim of$500,000 would receive a higher offense level than an offender who defrauds a victim of $5,000.

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harms, such as a misrepresentation that the defendant was acting on behalf of acharitable, educational, religious, or political organization, or a government agency. SeeUSSG §2B1.1(b)(8).

The emergency amendment further added a new subdivision (IV) to theapplication note defining “loss” in §2B1.1, Application Note 3(A)(v)(Rules ofConstruction in Certain Cases), providing that in disaster fraud cases, "reasonablyforeseeable pecuniary harm includes the administrative costs to any federal, state, orlocal government entity or any commercial or not-for-profit entity of recovering thebenefit from any recipient thereof who obtained the benefit through fraud or wasotherwise ineligible for the benefit that were reasonably foreseeable." This provisionresponded to suggestions by the Department of Justice ("DOJ") that the loss amount indisaster fraud cases should be calculated in a manner similar to procurement fraud cases,and extant Application Note 3(A)(v)(II) applicable to procurement fraud cases includes"reasonably foreseeable administrative costs to the government and other participants . . ." in the calculation of pecuniary harm. Next, the emergency amendmentadded a new application note to the fraud guideline defining the terms used in the newspecific offense characteristic.

Finally, the emergency amendment provided a reference in Appendix A(Statutory Index) of the Guidelines Manual for the new offense at 18 U.S.C. § 1040,referencing the offense to §2B1.1, the fraud guideline.

A review of the fraud guideline suggested that low-level fraud cases involvingexpedited disaster relief would likely fall within offense level 6 or 7, depending on thetype of offense charged.6 Without any aggravating factors, these offenders would all fallwithin Zone A of the Sentencing Table and would be eligible for a probationary sentence. Thus, the Commission determined that a specific offense characteristic designed tocapture fraud resulting from disaster or emergency relief was an appropriate response tothe emergency directive.

B. Solicitation of Public Comment on Proposed Amendment

On January 9, 2008, the Commission also voted to publish a proposed amendmentre-promulgating the temporary, emergency amendment as a permanent amendment to besubmitted to Congress on May 1, 2008, with an effective date of November 1, 2008. See73 Fed. Reg. 4931-4939 (January 28, 2008). The proposed amendment to re-promulgate


7POAG is one of the Commission’s standing advisory groups comprised of federal probation officers. TheCommission routinely seeks POAG’s input on amendments, as it did in this case. 8PAG is also one of the Commission’s standing advisory groups comprised of members of the defense bar. The Commission routinely seeks PAG’s input on amendments, as it did in this case.

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the emergency amendment was published in the Federal Register on January 28, 2008,and included the following issues for public comment, responses to which were due tothe Commission on March 28, 2008:

1. Should the proposed amendment re-promulgating the emergency amendment,effective February 6, 2008, that responded to the directive in section 5 of the"Emergency and Disaster Assistance Fraud Penalty Enhancement Act of 2007,"Pub. L. 110–179 (the "Act"), include a minimum offense level in the specificoffense characteristic? If so, what would be the appropriate level for theminimum offense level?

2. Should the proposed amendment re-promulgating the emergency amendmentexpand the scope of the enhancement to cover fraud or theft involving any benefitauthorized, transported, transmitted, transferred, disbursed, or paid "in connectionwith any procurement of property or services related to any emergency or majordisaster declaration as a prime contractor with the United States or as asubcontractor or supplier on a contract in which there is a prime contract with theUnited States"? Such conduct was criminalized by the new offense at 18 U.S.C. § 1040 created by the Act, but was not specifically included within the scope ofthe directive granting emergency amendment authority to the Commission.

3. Are there any aggravating or mitigating circumstances existing in disaster fraudcases that might justify additional amendments to the guidelines?

The Commission published the proposed amendment to re-promulgate theemergency amendment and issues for comment and received comment from a variety ofsources, most notably the Department of Justice ("DOJ"), the Federal Public andCommunity Defenders ("FPD"), the Probation Officers’ Advisory Group ("POAG")7 andthe Practitioners Advisory Group ("PAG").8 All of the public comment received isattached in Appendix B.

C. Public Briefing and Comments

In addressing the directive, the Commission obtained input from interested partiesin the criminal justice system and agencies and organizations that were victims ofdisaster fraud to obtain information to guide the Commission’s deliberations. Commission staff received briefings from DOJ, the FPD, and the POAG on disasterfraud. Witnesses were invited to speak at a public briefing session on February 13, 2008,to present oral and written statements concerning disaster fraud. The witnesses includeda representative from DOJ, the FPD, the U.S. Department of Housing and Urban


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Development (HUD), and the American Red Cross. The witness list and writtenstatements are appended hereto as Appendix C. The following is a summary of the inputreceived from these outreach efforts.

1. The Department of Justice

DOJ provided the Commission with anecdotal information concerning the scopeof the fraud uncovered in the wake of Hurricanes Katrina, Rita, and Wilma. DOJ advisedthat approximately 1.7 million persons were displaced as a result of these storms, yetFEMA received 2.5 million applications for disaster assistance. The fraud uncoveredincluded instances where temporary workers at disaster aid agencies, hired to processclaims, also filed fraudulent applications for relief.

The Hurricane Katrina Task Force’s investigations revealed that organized groupsin Oregon, California, Florida, Louisiana, and Mississippi participated in makingnumerous fraudulent claims. DOJ has cases pending in 41 judicial districts anduncovered instances of serial fraud, where individuals went to various agenciesfraudulently seeking different types of relief, or filed numerous fraudulent applicationsfor assistance from one agency. DOJ estimated that there are hundreds of thousands offraudulent claims that were made.

DOJ informed the Commission that the Federal Bureau of Investigation’s ("FBI")cyber division monitors the Internet when a natural disaster is imminent. The FBIdiscovered domain names being registered even before Hurricane Katrina, with nameslike Katrinaassistance.com. Following the disaster, the FBI shut down numerouswebsites fraudulently soliciting donations for hurricane relief. One website, namedairkatrina.com, involved an individual pretending to be a pilot transporting medicalsupplies to the disaster area and assisting in the transport of injured victims. He soliciteddonations to assist with the purported costs of the flights. The fraud perpetrator postedfalse stories describing what he claimed to have witnessed during his trips to the area. Before the FBI shut down the website, this individual managed to collect approximately$48,000 in donations.

DOJ described the process involved in providing disaster relief. FEMA and theRed Cross are charged with giving assistance quickly. In order to do so, they operated onan honor system and provided between $1,500- $2,000 per applicant in expedited disasterassistance, without independent verification of the information provided to solicit therelief. Furthermore, the Red Cross operated call-in centers. DOJ advised that the GAOopined that an effective fraud deterrence program should involve (1) adequateverification; (2) good data management; and (3) aggressive, effective prosecutions offraud offenders. See U.S. Gov’t Accountability Office, Individual Disaster AssistancePrograms: Framework for Fraud, Prevention, Detection, and Prosecution, GAO-06-954T (July 2006). There is, however, an inherent tension between providing immediaterelief and requiring adequate verification because the verification process slows deliveryof relief. This tension helped contribute to the abuse that occurred after these disasters.


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DOJ advised that the Attorney General instructed the field that DOJ would have azero tolerance policy for disaster fraud cases. Accordingly, DOJ reported that all casesinvestigated were prosecuted. Many of the fraud cases prosecuted in the wake ofHurricanes Katrina and Rita involved small dollar amounts, insufficient to trigger the lossenhancement in the fraud guideline. Because the cases routinely did not involve otheraggravating factors that would trigger other specific offense characteristics in §2B1.1,many of these defendants fell within Zone A or B of the Sentencing Table (which allowsfor probationary sentences). Thus, the vast majority of offenders received probationarysentences. As a result, in the Middle District of Louisiana, the U.S. Attorney’s office hasinstituted parallel criminal and civil lawsuits in order to obtain restitution orders in thecriminal cases and civil penalties in the civil cases.

DOJ also submitted that disaster fraud is unique because of the national andinternational press coverage that disasters receive. DOJ discovered after Katrina that thecriminal fraud cases resulting from disaster relief fraud were not local, but ratherinvolved national and international connections. As a result, prosecutions for fraud wereinstituted all over the United States after Katrina, and Katrina victims were defrauded byoffenders from different areas of the country, such as by contractors or lottery schemes. Disaster fraud arguably has a more widespread impact because all of the disaster reliefagencies are potentially affected by the fraud.

DOJ suggested that although disaster relief agencies do not qualify as vulnerablevictims under the guidelines, see §3A1.1 (Hate Crime Motivation or Vulnerable Victim),they are nevertheless susceptible to fraud in a way analogous to vulnerable victims. When a disaster strikes, these agencies are often not fully staffed to respond to theemergency. Thus, the agencies are forced to hire staff within a short time period andperhaps without the types of controls that might otherwise be applied to hiring situations. Moreover, because of the extraordinary pressure imposed to deliver relief effectively, theagencies are not necessarily able to exert controls that might prevent fraud, because ofthe inherent tension between fraud controls and expeditious relief discussed earlier.

DOJ asserted that disaster fraud cases are different than other types ofgovernment benefit-related fraud, e.g., unlawfully obtaining security benefits, welfarebenefits, etc. Disaster funds and services must be disbursed immediately in order to beeffective and disbursement is based on the applicant’s representation, unlike the typicaldelivery systems of government benefits which generally have well-establishedverification procedures in place and do not require rapid response and disbursement. Further, in DOJ’s view, disaster frauds receive much greater public scrutiny than do otherfraud offenses. DOJ opined that minimal sentences for these offenses have deleteriouseffects because they discourage contributions from those who see that donations arebeing wasted and also encourage the belief that the potential benefits from such fraud far


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outweigh any possible punishment because those who undeservedly obtained the fundsare receiving little punishment.

2. The Federal Public and Community Defenders

The Commission also received public comment from the FPD suggesting thatdisaster fraud cases involve harms already adequately accounted for by the existingenhancements in the fraud guideline, §2B1.1. In the FPD’s view, §2B1.1 permitsflexibility where appropriate in sentencing first-time minor offenders, while stillreflecting the serious nature of disaster fraud offenses by allowing for sentences at ornear the statutory maximum for larger operations and more culpable offenders. The FPDstated it was not aware of any justification for requiring that such defendants receivelengthier prison sentences or that they be denied alternatives to incarceration. The FPDstated that the most recent information of which it is aware points against incarceratingsuch offenders. According to the FPD, at the most basic level, it costs approximately$10,000 to imprison a defendant for 6 months, and thus makes little financial sense todeny alternatives to incarceration for those defendants convicted of fraudulentlyobtaining $5,000 or less in disaster benefits.

A representative of the FPD at the public briefing session stated that many ofthose prosecuted for disaster fraud were themselves victims of the hurricane, with little orno criminal history, who had perpetuated the fraud to either obtain basic necessities orbecause they were recruited by those who took advantage of their plight. In that respect,the FPD stated that incarceration is a punishment greater than necessary to achieve thegoals of 18 U.S.C. § 3553(a). The FPD suggested that the defendant’s experience as avictim of the disaster should be a mitigating factor that should be included in theamendment. The FPD asserted that §2B1.1 already allows the courts to take intoaccount the wide variety of criminal conduct arising out of disasters, and due to theincreased offense levels for wire and mail fraud and the new offense at 18 U.S.C. § 1040,defendants will be subject to a higher alternative base offense level of 7.

As a result, the FPD recommended that the Commission should refrain fromamending §2B1.1 until such time as information suggests that increasing punishmentsserves the purposes of sentencing set forth in 18 U.S.C. § 3553(a)(2). The FPDrecommended that if the Commission amends the guidelines, it add no more than a two-level increase to §2B1.1(b) if the offense involved conduct described in 18 U.S.C. §1040. Such an increase would be comparable to that assigned to offenses involving othernational interests, such as theft or destruction of or damage to national cemetery orveterans’ memorial property (§2B1.1(b)(6)). The FPD stated such an increase would alsopermit the least culpable offenders in Criminal History Category I with no aggravatingoffense characteristics beyond the offense of conviction to maintain Zone A eligibility. Offenders with no other aggravating offense characteristics in Criminal History


9The PAG generally agreed with the FPD’s comments.

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Categories II through IV would fall within Zone B, while those in Criminal HistoryCategories V and VI would automatically fall within Zone C. Finally, the FPD suggestedthe amendment could either specify that the disaster fraud enhancement should not applyif the defendant was detrimentally affected by the disaster, or the guidelines couldencourage a downward departure.9

3. The U.S. Department of Housing and Urban Development

A representative of HUD appeared at the public briefing session and stated thatthe increased offense level for disaster fraud will improve the likelihood of prosecutionof disaster fraud cases and increase deterrence, therefore reducing the vulnerability ofdisaster assistance to fraud. HUD does not expect increased internal controls and fraudprevention mechanisms will be applied to future disasters because of the immediate needfor assistance. Stronger penalties for disaster fraud should improve the likelihood ofprosecution and deterrence and thus counteract some of the inherent susceptibility ofdisaster assistance to fraud.

Further, HUD stated that one of its offices has obligated $13.25 million foroversight of billions of dollars of community development and disaster recovery funds. The costs associated with the fraud prevention and detection efforts are considerable, andfailing to recognize them undervalues the relative impact of disaster fraud, HUD stated.

4. The American Red Cross

A representative of the American Red Cross testified at the public briefingsession that, in its experience, those who commit disaster fraud come from a variety ofsources. Some of the sources include those who set up phony websites or organizationsthat improperly use the name of the Red Cross. Others were individuals who live in anunaffected area but had previously lived in an affected area who “prove” residence with adriver’s licence with their previous address.

According to the Red Cross, the fraud involving disasters can create a negativeimpression with the public when the funds donated by the public are siphoned off bycriminals instead of reaching the individuals devastated by the disaster. When money isdonated to its organization to alleviate the suffering of people in need and then isimproperly taken by those who commit fraud, it strikes at the core values of the RedCross. As a non-government agency, the Red Cross relies on voluntary donations oftime, money, and blood to accomplish its goals. Any action that erodes the public trusthas a direct impact on the willingness of the public to continue to volunteer and make


10 Staff selected these statutes because a government agency is the victim of the offense. There are a host ofother federal statutes that prosecutors can employ to charge a defendant with fraud or theft from agovernment agency, but many of those statutes cover other types of fraudulent conduct.

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financial contributions and potentially leaves the Red Cross without the necessaryresources to meet the needs of disaster victims. Even if courts award the Red Crossrestitution, it may take defendants months or years to make payments, if payments aremade at all, and therefore the effects of disaster fraud can last for years for the Red Cross.

D. Commission’s Data Analysis

Following the public briefing session in February, the Commission requested thatwitnesses identify disaster fraud cases so that staff could review them. The Commissionreceived a list of approximately 100 cases from the FPD and was able to analyze 54 casesin the Commission’s database. The Commission also reviewed 578 other fraud casesfrom fiscal years 2006 and 2007 sentenced under three statutes: 42 U.S.C. § 1320a-7b(Criminal penalties for acts involving Federal health care programs), 42 U.S.C. § 408(Penalties [for false statements relating to Social Security]); and 7 U.S.C. § 2024 ([FoodStamp Program] Violations and enforcement).10

More than 80 percent of the 54 disaster fraud cases analyzed did not receive asentencing enhancement based on loss because the offense involved less than $5,000 ofloss. See §2B1.1(b)(1). In contrast, almost 60 percent of the other fraud cases analyzedreceived a sentencing enhancement based on loss as the offense involved loss of $5,000or more. The mean and median loss in the disaster fraud cases were $7,893 and $2,000,respectively, compared to $107,930 and $13,910, respectively, for the other fraud casesrelating to government programs. Almost 78 percent of the disaster fraud offendersreceived a sentence of probation. Over 62 percent of the defendants involving otherfrauds relating to government programs received a sentence of imprisonment.

E. Commission Vote To Re-promulgate Permanent Amendment

The emergency amendment that became effective on February 6, 2008 addressedconcerns that disaster fraud involves harms not adequately addressed by §2B1.1 by (1)adding a two-level enhancement if the offense involved fraud or theft involving anybenefit authorized, transported, transmitted, transferred, disbursed, or paid in connectionwith a declaration of a major disaster or an emergency; (2) modifying the commentary tothe guideline as it relates to the calculation of loss; and (3) providing a reference to§2B1.1 in Appendix A (Statutory Index) for the offense at 18 U.S.C. § 1040 (Fraud inconnection with major disaster or emergency benefits) created by the Disaster Fraud Act.


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On April 16, 2008, the Commission voted to promulgate a permanent amendmentre-promulgating the two-level enhancement with several changes, attached hereto inAppendix D. First, the amendment expands the scope of the two-level enhancement toinclude all conduct described in 18 U.S.C. § 1040. Thus, the amendment expands thescope of the enhancement to include frauds or thefts involving procurement of propertyor services as a contractor, subcontractor, or supplier, rather than limiting it to theconduct described in the emergency directive from Congress. The limited emergencyamendment authority in section 5(a) of the Disaster Fraud Act did not permit theCommission to include such conduct in the enhancement promulgated in the emergencyamendment. However, the broader directive in section 5(b) of the Disaster Fraud Act covers all "fraud or theft offenses in connection with a major disaster declaration"prompting expansion of the scope of the enhancement to apply to all conduct described in18 U.S.C. § 1040. Indeed, all public comment submitted supported expansion of theenhancement to cover all conduct criminalized by the new statute, 18 U.S.C. § 1040. Asthe PAG noted in its submission, it is not aware of any "principled basis for treatingemergency or disaster relief fraud by contractors or subcontractors different thanemergency relief fraud by others" and believes the addition of language incorporatingthese individuals "promotes consistency."

Second, the amendment modifies the enhancement to include a minimum offenselevel of 12. This minimum offense level responded to the concerns expressed by DOJand relief agencies that disaster fraud cases involved harms not captured by operation ofthe loss table in the fraud guideline, §2B1.1. The Commission frequently adopts aminimum offense level in circumstances in which loss as calculated by the guidelines isdifficult to compute or does not adequately account for the harm caused by the offense. The Commission studied a sample of disaster fraud cases and compared those cases toother cases of defrauding government programs. This study found that more than 80percent of the disaster fraud cases received no increase in the offense level due to theamount of monetary loss but in almost 60 percent of the other fraud cases, the offenselevel was increased due to the amount of loss involved in the case. This analysissupported claims made in testimony to the Commission that the majority of the disasterfraud cases resulted in probationary sentences because the amount of loss calculatedunder subsection (b)(1) of §2B1.1 had little impact on the sentences.

The Commission also received testimony and public comment identifying variousharms unique to disaster fraud cases. For example, charitable institutions may have amore difficult time soliciting contributions because fraud in connection with disastersmay erode public's trust in these institutions. Moreover, the pool of funds available to aidlegitimate disaster victims is adversely affected when fraud occurs. Further, the inherenttension between the imposition of fraud controls and the need to provide aid to disastervictims quickly makes it difficult for relief agencies and charitable institutions to preventdisaster fraud. All of these factors provide support for a minimum offense level.


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The Commission selected a minimum offense level of 12 after considering avariety of factors, including existing enhancements in the fraud guideline. TheCommission concluded that committing disaster fraud is more serious thanmisrepresenting oneself to be acting for a charitable organization, which receives aminimum offense level of 10 under §2B1.1(b)(8), and less serious than causing aconscious or reckless risk of death, which receives a minimum offense level of 14 under§2B1.1(b)(12).

Third, the amendment adds a downward departure provision that may apply in acase in which the minimum offense level applies, the defendant is a victim of a majordisaster or emergency, and the benefits received illegally were only an extension oroverpayment of benefits received legitimately. The departure provision responded topublic comment from the FPD and POAG suggesting that a defendant’s status as a victimshould be accounted for in the guidelines. This provision recognizes that a defendant’slegitimate status as a disaster victim may be a mitigating factor warranting a downwarddeparture in certain cases involving relatively small amounts of loss.

Fourth, the amendment deletes certain commentary relating to the definition ofloss that was promulgated in the emergency amendment. Specifically, the emergencyamendment added subdivision (IV) to Application Note 3(A)(v) of §2B1.1 providing thatin disaster fraud cases, "reasonably foreseeable pecuniary harm includes theadministrative costs to any federal, state, or local government entity or any commercialor not-for-profit entity of recovering the benefit from any recipient thereof who obtainedthe benefit through fraud or was otherwise ineligible for the benefit that were reasonablyforeseeable." The amendment deletes this provision because of concerns thatadministrative costs might be difficult to determine or in some instances could over-represent the harm caused by the offense, and the loss is adequately addressed by the useof a minimum offense level.

Finally, the amendment redesignates subsection (b)(16) as subsection (b)(11) andmakes conforming changes to the guideline and the commentary.

IV. CONCLUSION

In responding to the directive, the Commission considered the various factorsidentified by Congress, including the serious nature of the disaster fraud offenses and theneed for aggressive and appropriate law enforcement action to prevent such offenses. The Commission will continue to monitor and analyze disaster fraud cases as they aresentenced under the new guideline amendment and will provide policy recommendations,if appropriate, in the future.
