In the
United States Court of Appeals
For the Seventh Circuit
No. 95-2496
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
GREGORY D. WILSON,
Defendant-Appellant.
Appeal from the United States District Court
for the Central District of Illinois.
No. 95 CR 30013--Richard Mills, Judge.
ARGUED APRIL 1, 1996--DECIDED OCTOBER 17, 1996
Before CUMMINGS, EASTERBROOK and ROVNER,
Circuit Judges.
ROVNER, Circuit Judge. Illinois security broker Gregory
Wilson conducted a Ponzi scheme that defrauded forty-eight
victims of more than three million dollars. Representing to
investors that their funds were being placed into certifi-
cates of deposit, annuities, and mutual funds, Wilson ac-
tually deposited the funds into a personal checking account
and used them both for personal expenses and to cover
interest and dividend payments owed to previous investors.
After federal agents uncovered the scheme, Wilson pled
guilty to charges of mail fraud and money laundering.
Wilson was then sentenced under the 1994 United States
Sentencing Guidelines. The charges of mail fraud and of
money laundering each produced an offense level of 23
under Guidelines sections 2F1.1 and 2S1.1 respectively.
Because the district court did not group the counts to-
gether (U.S.S.G. sec. 3D1.2), Wilson received a two-level
multiple count adjustment under section 3D1.4, so that
his adjusted offense level was 25. That level was reduced
by three levels for Wilson's timely acceptance of responsi-
bility. With a criminal history category of I, Wilson's
sentencing range was 41 to 51 months. The district court
sentenced Wilson at the top of that range to 51 months
of incarceration. The court also ordered Wilson to pay
restitution in the amount of $3,114,334. On appeal, Wilson
argues that the court erred in refusing to group the mail
fraud and money laundering charges together; he also
challenges the order of restitution./1
I.
Guidelines section 3D1.2 deals with the grouping of "close-
ly related counts." It provides that "[a]ll counts involving
substantially the same harm shall be grouped together
into a single Group" and then sets out in four subsec-
tions the circumstances under which that condition is met:
(a) When counts involve the same victim and the
same act or transaction.
(b) When counts involve the same victim and two
or more acts or transactions connected by a com-
mon criminal objective or constituting part of a
common scheme or plan.
(c) When one of the counts embodies conduct that
is treated as a specific offense characteristic in,
or other adjustment to, the guideline applicable
to another of the counts.
(d) When the offense level is determined largely on
the basis of the total amount of harm or loss,
the quantity of a substance involved, or some
other measure of aggregate harm, or if the of-
fense behavior is ongoing or continuous in nature
and the offense guideline is written to cover such
behavior.
U.S.S.G. sec. 3D1.2. As the underlying facts are not disputed
and our task primarily is to interpret the guideline, we
review the district court's decision not to group the mail
fraud and money laundering counts de novo. United States
v. McDuffy, 90 F.3d 233, 235 (7th Cir. 1996).
The central purpose of this section, as the Eleventh Cir-
cuit has pointed out, "is 'to combine offenses involving
closely related counts' " (United States v. Mullens, 65
F.3d 1560, 1564 (11th Cir. 1995) (quoting United States
v. Harper, 972 F.2d 321, 322 (11th Cir. 1992) (per curiam))
(emphasis in Harper), cert. denied, 116 S. Ct. 1337 (1996)),
and Wilson's convictions for mail fraud and money launder-
ing without question meet that criterion. All of the money
that Wilson laundered was money defrauded from his in-
vestors, so "[w]ithout the fraud there would have been
no funds to launder." Mullens, 65 F.3d at 1564. Moreover,
the money laundering took place in an effort to conceal
the fraud and keep the entire scheme afloat. For example,
Wilson would take money that he received from his in-
vestors and purchase cashier's checks to make payments
to earlier investors, in classic Ponzi fashion. See Informa-
tion Count II; Plea Agreement at 3-4; Plea Hearing Tr.
39-40; Presentence Report para. 15. The use of a cashier's
check concealed the source of the money (his personal
bank account) and helped keep the fraudulent scheme
afloat by lulling investors into a false sense of security./2
(Indeed, the authorities were alerted to the scheme when
Wilson made the mistake of paying one of his investors
with a personal check. Presentence Report para. 15.) Wilson's
commission of mail fraud arose from similar efforts to con-
ceal the scheme: each month he would mail fictitious finan-
cial statements to investors purporting to reflect the
status of their funds. Plea Agreement at 3-4. In this way,
"both the fraud and the money laundering were integral
cogs in continuing the scheme." Mullens, 65 F.3d at 1564.
Accord United States v. Leonard, 61 F.3d 1181, 1186 (5th
Cir. 1995).
The mail fraud and money laundering counts therefore
should have been grouped. It is noteworthy that subsec-
tion (d) of the guideline identifies a number of offenses
that either are or are not to be grouped under that par-
ticular subsection, and offenses governed by Guidelines
sections 2F1.1 and 2S1.1 are among those identified as
appropriate for grouping. Grouping may not be automatic
for these offenses simply because they are listed (see
Harper, 972 F.2d at 322), but the two offenses with which
we are concerned here also satisfy the standard outlined
in application note 6: "Counts involving offenses to which
different offense guidelines apply are grouped together
under subsection (d) if the offenses are of the same gen-
eral type and otherwise meet the criteria for grouping
under this subsection." Broadly speaking, they are "of the
same general type,"/3 and the offense level for each "is
determined largely on the basis of the total amount of
harm or loss" as subsection (d) envisions. See United
States v. Adams, 74 F.3d 1093, 1102 n.12 (11th Cir. 1996)
("Fraud and money laundering convictions . . . can be
grouped under U.S.S.G. sec. 3D1.2(d).").
We reject the government's contention that these of-
fenses are inappropriate for grouping because they involve
different victims and thus different harms. Whether the
offenses involve different victims is, as the background
commentary notes, "[a] primary consideration" in the group-
ing decision. There is also a line of authority, on which
the district court relied, observing that the victim of mail
fraud is the person defrauded, while the victim of money
laundering is society at large. See, e.g., United States v.
Kunzman, 54 F.3d 1522, 1531 (10th Cir. 1995) (following
United States v. Johnson, 971 F.2d 562, 576 (10th Cir.
1992)); United States v. Lombardi, 5 F.3d 568, 570 (1st
Cir. 1993). In the abstract, that may be true. Yet, when
the defendant is convicted of laundering the proceeds of
his fraud in order "to conceal or disguise the nature, the
location, the source, the ownership, or the control of the
proceeds," as Wilson was here (see sec. 1956(a)(1)(B)(i)), there
is intuitive force to the argument that the victim of the
fraud is also a victim of the transaction designed to hide
or "cleanse" the funds of which she was defrauded./4 More
to the point, the money laundering in this case served
to perpetuate the very scheme that produced the laun-
dered funds, as we have already explained. The Fifth Cir-
cuit found this point dispositive in a similar case:
[T]he money laundering offense was not "ancillary"
here. There was a single, integrated scheme to ob-
tain money from the elderly victims and to use that
money to facilitate the continuance of the scam. The
activities can not be neatly separated . . . . By con-
ducting financial transactions--paying callers, pur-
chasing leads, paying phone bills--with the victim's
money for the purpose of bilking more people out of
$395.50 each, the group of targeted victims became
the victim of the money laundering activity as well
as the fraud scheme. In this case, the district court
properly found that the money laundering and fraud
constituted part of the same continuing common crim-
inal endeavor.
Leonard, 61 F.3d at 1186 (following United States v. Cusu-
mano, 943 F.2d 305, 312-13 (3d Cir. 1991) (affirming group-
ing under subsection (b)), cert. denied, 502 U.S. 1036, 112
S. Ct. 881 (1992))./5
The fraud and money laundering counts therefore should
have been grouped as indicated by subsection (d). The
two-level increase in Wilson's offense level pursuant to
section 3D1.4 was erroneous. We will, accordingly, vacate
Wilson's sentence and remand for re-sentencing.
II.
Wilson also challenges the order of restitution. Although
we have vacated Wilson's sentence, we are given no rea-
son to believe that the district court will not order restitu-
tion in the same amount when it resentences him, and
so we will take up his challenge. Of course, our review
of the restitution order is deferential. E.g., United States
v. Lampien, 89 F.3d 1316, 1323 (7th Cir. 1996)./6
Although the district court enjoys broad discretion in
requiring the defendant to compensate his victims (United
States v. Viemont, 91 F.3d 946, 951 (7th Cir. 1996)) and
full restitution is the norm, (United States v. Ahmad, 2
F.3d 245, 247 (7th Cir. 1993)), the defendant must have
"at least a hope" of complying with the court's restitu-
tion order (United States v. Mahoney, 859 F.2d 47, 52 (7th
Cir. 1988)), and we will vacate an order with which the
defendant cannot possibly comply (Lampien, 89 F.3d at
1323). Wilson contends that this is such an order. In his
words:
To order restitution of more than $3 million for an
indigent defendant who has no assets, no income or
prospect of income is unrealistic and excessive. There
is absolutely no showing that this Defendant has any
capability of repaying $3 million of restitution.
Wilson Br. 22.
The principal and fatal flaw in Wilson's argument is a fail-
ure in proof. It is his burden to show that there is not
even some hope of complying with the restitution order;
it is not the government's burden or the court's to prove
the contrary. See Viemont, 91 F.3d at 951; United States
v. Murphy, 28 F.3d 38, 40 (7th Cir. 1994). Wilson's cur-
rent indigence alone does not preclude the order (Viemont,
91 F.3d at 951), and he points to nothing in the record
demonstrating that his earning capacity makes restitution
impossible (cf. Lampien, 89 F.3d at 1323-24). If future cir-
cumstances bear out Wilson's argument, he of course re-
tains the right to seek modification of the restitution order
in the district court. Viemont, 91 F.3d at 952. At this
juncture, however steep the restitution obligation, and
however unlikely it may strike us that he will be able
to honor it, Wilson has not presented the type of con-
crete evidence that would demonstrate he has no hope
of being able to comply. Under these circumstances, we
have no basis to disturb the court's order.
III.
Because the fraud and money laundering convictions
should have been grouped, and the two-level adjustment
in Wilson's offense level pursuant to Guidelines section
3D1.4 was therefore in error, we vacate Wilson's sentence
and remand for resentencing. Finding no abuse of discre-
tion in the district court's order that Wilson make restitu-
tion in the amount $3,114,334, we affirm that order.
AFFIRMED IN PART,
VACATED IN PART, and REMANDED.
FOOTNOTES
/1
Wilson additionally argues that the court lacked
jurisdiction over him because he is a "free white male,"
subject to the laws of the State of Illinois, but not those
of the federal government. As we have previously ruled,
this argument is without merit. United States v. Sloan,
939 F.2d 499, 500-01 (7th Cir. 1991), cert. denied, 502 U.S.
1060, 112 S. Ct. 940 (1992).
/2
Although the information to which Wilson pled guilty
charged him only with financial transactions designed "to
conceal or disguise the nature, the location, the source,
the ownership, or the control of the proceeds" of the fraud
(18 U.S.C. sec. 1956(a)(1)(B)(i)), the indictment that was
dismissed upon entry of his plea also charged him with
engaging in similar transactions "with the intent to pro-
mote the carrying on of" the fraud (sec. 1956(a)(1)(A)(i)). See
Presentence Report para. 3.
/3
Note 6 explains that "[t]he 'same general type' of of-
fense is to be construed broadly, and would include, for
example, larceny, embezzlement, forgery, and fraud."
/4
See the third example identified in application note 4
as appropriate for grouping under subsection (b) of the
guideline: "The defendant is convicted of one count of auto
theft and one count of altering the vehicle identification
number of the car he stole. The counts are to be grouped
together."
/5
Our research located several other cases in which the
district court grouped money laundering and fraud of-
fenses, although in none of these cases did the court of
appeals consider the propriety of the grouping. See United
States v. Sokolow, 91 F.3d 396, 410 (3d Cir. 1996); United
States v. Haun, 90 F.3d 1096, 1102 (6th Cir. 1996); United
States v. Leahy, 82 F.3d 624, 638 n.20 (5th Cir. 1996);
United States v. Massey, 48 F.3d 1560, 1568 (10th Cir.),
cert. denied, 115 S. Ct. 2628 (1995). Conversely, in United
States v. Cole, 988 F.2d 681, 684-85 (7th Cir. 1993), the
district court did not group the securities fraud and mail
fraud offenses together with the money laundering of-
fenses, and because the issue was not raised, we affirm-
ed the sentence without discussing whether the decision
not to group these offenses was correct.
/6
After we heard oral arguments in this appeal, the
President signed into law what is known as the Antiter-
rorism and Effective Death Penalty Act of 1996, Pub. L.
104-132, 110 Stat. 1214. Title II of that act adds a new
provision to the criminal code mandating restitution for all
property offenses, "including any offense committed by fraud or
deceit." 18 U.S.C.A. sec. 3663A(c)(1)(A)(ii) (West Supp. July
1996). However, the new provision affects sentencing proceedings
only in cases in which the defendant was convicted on
or after April 24, 1996, when the act became law. See 18
U.S.C.A. sec. 2248 note (West Supp. July 1996) Wilson, of
course, was convicted and sentenced well in advance of
this date, so the provision has no effect on his case.