United States v. Banks

55 F.4th 246

UNITED STATES of America

v.Frederick H. BANKS, Appellant

No. 19-3812 & 20-2235

United States Court of Appeals, Third Circuit.

Argued on March 29, 2022

Opinion filed: November 30, 2022

Abigail E. Horn (ARGUED), Federal Community Defender Office for The Eastern District of Pennsylvania, 601 Walnut Street, The Curtis Center, Suite 540 West, Philadelphia, PA 19106, Counsel for Appellant

Laura S. Irwin (ARGUED), Office of the United States Attorney, 700 Grant Street, Suite 4000, Pittsburgh, PA 15219, Counsel for Appellee

Before: RESTREPO, ROTH, and FUENTES, Circuit Judges

OPINION OF THE COURT

ROTH, Circuit Judge:

A jury convicted Frederick Banks of wire fraud, and the District Court sentenced him to 104 months' imprisonment and three years' supervised release. On appeal, Banks argues that the District Court erred in three ways, by (1) denying his constitutionally protected right to self-representation, (2) applying the loss enhancement to the fraud guideline in the United States Sentencing Guidelines because there was no "actual loss," and (3) imposing certain special conditions of supervised release.¹ We conclude that the loss enhancement in the Guideline's application notes impermissibly expands the word "loss" to include both intended loss and actual loss. Thus, the District Court erred when it applied the loss enhancement because Banks's crimes caused no actual loss. We will, therefore, affirm the judgment of the District Court except on the issue of loss enhancement; we will remand this case to the District Court for it to determine loss and to resentence Banks.

I.

In January 2016, a federal grand jury indicted Frederick Banks for stalking, wire fraud, aggravated identity theft, and making false statements. The wire fraud charges "related to interlocking schemes ... carried out by [Banks] to fraudulently gain the money and property of others in relation to the FOREX.COM international exchange system by submitting phony registration information for himself and then using those registrations to execute bogus trades that would drop money into bank accounts that he had set up."²

A. The Scheme

Banks's scheme targeted Gain Capital Group, which did business as Forex.com. Gain Capital's clients opened accounts, deposited funds, and then used those funds to invest in the foreign currency exchange market. Banks's plot was to open Gain Capital accounts and make electronic deposits into those accounts, but his deposits were drawn on bank accounts with insufficient funds. He then tried to withdraw funds from these accounts, "with the goal being to complete the withdrawals/transfers before the lack of supporting funds could be detected." To support his scheme, Banks made fraudulent representations through text message, telephone conversations, and emails. He misrepresented his identity, his income, his occupation, his net worth, and the balances in his bank accounts.

Importantly, Gain Capital suffered no actual loss. Banks made fraudulent deposits of $324,000 and unsuccessfully executed 70 withdrawals/transfers totaling $264,000. Gain Capital, however, did not transfer a single dollar to Banks.

B. Banks's Competence to Stand Trial and Competence to Represent Himself

Early in Banks's prosecution, his court-appointed lawyer suggested to the District Court that Banks was not competent to stand trial and to assist in his own defense. The District Court concurred, relating that Banks

appeared to be materially detached from reality, wholly inappropriate in his conduct, communications and general affect, and consumed, for reasons which to this day remain inexplicable, with the notion that the then-pending (and subsequently superseded) federal criminal charges should all be dismissed because in [Banks's] estimation, [a] former FBI Agent had set him up in an earlier federal prosecution which long ago became final.³

Banks was also "fixat[ed] with the same CIA-induced ‘voice to skull’ telepathic communication" he referred to in an "allegedly fraudulent habeas petition."⁴ The District Court also noted that Banks had previously told this Court that he was not competent to stand trial or represent himself, even when he told the trial court in those proceedings that he was competent.

Accordingly, the District Court ordered an evaluation of Banks. Dr. Robert Wettstein evaluated Banks and concluded he "was psychotic and delusional, and was subject to various forms of delusional and psychotic episodes."⁵ Dr. Wettstein believed, however, that Banks could understand the nature and consequences of the criminal charges against him and could assist his lawyer in his defense.

The District Court then concluded "a second professional opinion was necessary to protect both the rights of [Banks] and the integrity of the judicial process."⁶ Dr. Heather Ross, a forensic psychologist, concluded Banks "was so continuously delusional that he was not competent to stand trial, nor to waive his right to counsel and represent himself."⁷ After the statutory period of restorative treatment, yet another forensic psychologist, Dr. Allisa Marquez, concluded not only that Banks was restored to competency, but that he had never been incompetent (as defined in 18 U.S.C. § 4241 ) because he did not then suffer from, and had never suffered from, "any mental disease or defect but was instead afflicted with a chronic narcissistic and paranoid personality disorder, which would cause him to act out of a disproportionate sense of self grandeur but would not make him incompetent."⁸

After these evaluations, the District Court "repeatedly solicited the position of both the United States and [Banks's] appointed counsel as to the issue of competency. They ... each uniformly and consistently expressed their observation that [Banks] [was] neither competent to stand trial, nor to waive counsel and represent himself at any such trial."⁹ Combined with the District Court's own observations of Banks, the District Court accepted the conclusions of Drs. Wettstein and Ross that Banks suffered from "a mental disease or defect of psychosis and delusional paranoia," but the District Court also accepted the doctors' conclusions that Banks was "competent to be tried."¹⁰

Then the District Court considered Banks's "repeatedly asserted desire to waive representation by counsel and represent himself."¹¹ Although the District Court acknowledged that "ordinarily, if a defendant is competent to be tried, that means as a matter of course that such a defendant is competent to represent himself," it explained that trial court judges are in a "particularly apt position ... to assess such matters, and that there can be a narrow class of cases in which that parallel conclusion does not hold."¹²

The District Court concluded that the "content and volume" of Banks's filings demonstrated that he "is so detached from the reality as to what can and cannot be accomplished by legal processes that he has sought to assert in the context of a federal criminal trial that he has not knowingly and voluntarily waived his right to be represented by counsel in the defense of these serious criminal charges, and is not capable of doing so."¹³ Although Banks "can understand the charges against him, and what can happen to him if he is convicted of them, and that he can assist his lawyer as that lawyer pulls the levers of justice on his behalf in the course of a criminal trial ... he has no competence to make the decision to give up his right to be represented by a lawyer in that trial and related proceedings in any knowing way."¹⁴

At trial, the jury convicted Banks of four counts of wire fraud and one count of aggravated identity theft.¹⁵

C. Sentencing

Banks's offense level computation under the United States Sentencing Guidelines included a special offense characteristic for the attempted loss Banks intended to inflict on Gain Capital. According to the presentence investigation report:

The attempted loss, based on [Banks's] fraudulent deposits, is $324,000. Therefore, the base offense level is increased by 12 because the attempted loss was greater than $250,000 but less than $550,000. USSG § 2B1.1(b)(1)(G) (As a general rule, loss is the greater of actual loss or intended loss, pursuant to Application Note 3).¹⁶

The 12-point increase raised Banks's adjusted offense level from 7 to 19. During sentencing, the District Court explained that the Sentencing Guidelines define "loss to not only be actual loss, but to be intended loss. And the application notes indicate that the intended loss counts into the calculation of the loss amount, even if it's determined to be improbable or impossible of occurrence."¹⁷ The District Court found that the loss amount exceeded $250,000, triggering the 12-point loss-amount enhancement. The District Court explained that Banks "intended to cause a loss in a pecuniary amount in excess of $250,000" and that Banks "by his conduct, intended to cause such a loss; and, therefore, it is appropriately added into the guidelines calculation under 2B1.1."¹⁸

The District Court sentenced Banks to 104 months' imprisonment and three years of supervised release.

II.¹⁹

Banks makes three arguments on appeal. First, he contends that the District Court erred in denying his constitutionally protected right to self-representation. Second, he asserts that the loss enhancement to the fraud guideline, found at U.S.S.G. § 2B1.1, should not apply because there was no actual loss. Third, he argues that District Court erred in imposing certain special conditions of supervised release. Because the term "loss" is unambiguous in the context of § 2B1.1 and because the loss-enhancement commentary improperly expands the Guideline, we will vacate Banks's judgment of sentence and remand this case to the District Court for resentencing. We will affirm the District Court's orders denying Banks's request to represent himself and imposing the special conditions of supervised release.

A. Banks's Right to Self-Representation²⁰

Generally,...