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United States v. Blount

United States Court of Appeals, Fifth Circuit

October 18, 2018

UNITED STATES OF AMERICA, Plaintiff - Appellee
v.
JOHN STEVEN BLOUNT, Defendant-Appellant

          Appeal from the United States District Court for the Western District of Louisiana

          Before JOLLY, ELROD, and WILLETT, Circuit Judges.

          E. GRADY JOLLY, CIRCUIT JUDGE

         John Steven Blount, who pled guilty to securities fraud crimes, on appeal challenges only his two-level sentencing enhancement based on his violation of a prior administrative order. He argues first that the order, handed down by the Financial Industry Regulatory Authority (FINRA), is not an administrative order within the meaning of § 2B1.1(b)(9)(C) of the Sentencing Guidelines. Second, he argues that even assuming § 2B1.1(b)(9)(C) is applicable to the FINRA order, he did not violate its terms. We hold that, under the plain error standard of review, the district court did not err in applying the § 2B1.1(b)(9)(C) sentencing enhancement to the FINRA order and that Blount clearly violated the order's terms.

         I.

         Blount practiced as a FINRA-licensed securities broker and dealer from June 1992 through August 2003. During this period, he was the subject of over one hundred customer complaints, provoking FINRA to open a regulatory investigation. The investigation concluded that Blount misrepresented material information to investors, causing them to purchase unsuitable financial products. Based on this finding, FINRA issued an order banning Blount from associating with any FINRA member "in any capacity." Because of FINRA's jurisdiction over the brokerage industry, this order effectively barred Blount from dealing in the securities business.

         Blount disregarded FINRA's order (and numerous other state and federal securities laws and regulations along the way) and resumed work as an investment advisor and securities broker by at least the summer of 2007. Holding himself out as a licensed securities broker, Blount orchestrated a Ponzi scheme primarily targeting retirees. He promised his victims high rates of return for investments in what turned out to be fictitious securities. Instead of investing his victims' capital, he placed it in various shell companies for his own benefit.

         In February 2014, FINRA forwarded a complaint to the Louisiana Office of Financial Institutions alleging that Blount was selling securities to the public in violation of its 2003 order. This complaint provoked a law enforcement investigation which exposed Blount's Ponzi scheme. Ultimately, Blount defrauded at least 72 investors out of approximately $5.8 million.

         II.

         The federal government charged Blount with violating 18 U.S.C. § 1343 by committing wire fraud. Blount pled guilty. In accordance with the plea agreement, he signed a stipulated factual agreement admitting that the 2003 FINRA order barred him from working as a securities broker. He also admitted that "[d]espite his prohibition by FINRA, on a date not later than June 1, 2007, Blount resumed operations as an investment advisor and securities broker in violation of state and federal securities laws and regulations." To eliminate all doubt of the admission, Blount reaffirmed these admissions during his plea colloquy:

District Court: In spite of your prohibition by FINRA . . . you resumed operations as an investment advisor and securities broker . . . . [I]s that what happened in this case?
Blount: Yes, ma'am.

         The Presentence Report (PSR) recommended several offense-level adjustments, including a two-level increase under U.S.S.G. § 2B1.1(b)(9)(C) for violating a prior judicial or administrative order.[1] The district court overruled Blount's objections to the PSR and sentenced him to 235 months of imprisonment followed by three years of supervised release and ordered him to pay $4, 313, 173.22 in restitution. He did not directly appeal this sentence.

         Soon thereafter, however, Blount filed a motion in the district court under 28 U.S.C. § 2255 to vacate, set aside, or correct his sentence, arguing that his defense counsel was constitutionally ineffective. The district court granted the motion, vacated his sentence, and ordered a revised PSR and new sentencing hearing. The revised PSR eliminated its recommendation for an enhancement for abuse of trust but left untouched the remainder of Blount's sentence, including the two-level enhancement for violating an administrative order. Blount objected to the revised PSR including its prior order enhancement but failed to object on the grounds that the FINRA order was not an administrative order within the terms of § 2B1.1(b)(9)(C). The district court rejected Blount's objection, holding ...


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