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Third Circuit Reverses Occupational Restriction in Excess of Statutory Maximum for Supervised Release

by Matt Clarke

On September 14, 2017, the U.S. Court of Appeals for the Third Circuit reversed the portion of the sentence that restricted a former Realtor who had pleaded guilty to one count of mail fraud from working in real estate for five years following his release from prison. It held the maximum restriction possible for that offense was three years. The Court upheld his 70-month prison term followed by three years of supervised release.

Randy Poulson operated fraudulent real estate and investment schemes in New Jersey from 2006 through 2011, costing over 75 victims a total of $2,721,240.91. Using his company, Equity Capital Investments, LLC, he tricked people facing foreclosure on their properties to sign over their deeds to him in exchange for a false promise to pay off the outstanding mortgages. He then used Poulson Russo LLC, a real estate investment education company, to organize for-fee speeches, seminars, monthly dinners, and private tutorials during which he solicited attendees to invest in Equity Capital, falsely claiming their money would be used to purchase, maintain, and improve those residential properties.

He convinced over 25 people to deed him their properties and over 50 people to invest using wire transfer or the U.S. Mail. Typically, the investors executed promissory notes with Equity Capital that guaranteed a 10% to 20% return on their investments, monthly interest payments, and a fixed maturity date.

Poulson used the same properties multiple times to secure multiple investments. He used the funds for his personal expenses. When the scheme began to fall apart, he created a Ponzi scheme to pay earlier investors with funds obtained from subsequent investors.

Poulson pleaded guilty to one count of mail fraud, a violation of 18 U.S.C. § 1341, which is a Class C felony. The district court found that there were over 25 victims who had suffered “substantial financial hardship,” raising the offense level by six. He was sentenced to 70 months imprisonment followed by three years of supervised release with an occupational restriction barring him from working in real estate for five years after release. Poulson appealed.

The Third Circuit rejected Poulson’s claim that determining whether a financial burden is “substantial” requires it be compared to the victim’s overall finances. The district court has a substantial degree of discretion in the matter and is not required to seek full financial disclosure from victims. In this case, it based its determination on victim impact statements. Thus, the Court affirmed the district court’s determination that 25 victims suffered “substantial hardship” under § 2B1.1 of the U.S. Sentencing Guidelines.

However, according to the Court, the district court erred when it imposed a five-year occupational restriction. Supervised release and conditions thereof are limited to three years for Class C felonies under 18 U.S.C. § 3583(b). By statute, the district court was only authorized to impose a maximum term of three years’ supervised release, including any occupational restriction. Therefore, the portion of Poulson’s sentence that included an occupational restriction lasting more than three years amounted to plain error. United States v. Lewis, 660 F.3d 189 (3d Cir. 2007) (“A sentence that exceeds the statutory maximum constitutes plain error.”).

Accordingly, the Third Circuit affirmed the imprisonment and supervised release portions of the sentence, reversed the five-year occupational restriction, and remanded the case to the district court for correction to an occupational restriction of no more than three years. See: United States v. Poulson, 871 F.3d 261 (3d Cir. 2017). 

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United States v. Poulson




 

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