United States of America v. Kevin Gallagher

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 02-2202
UNITED STATES OF AMERICA
v.
KEVIN GALLAGHER,
Appellant
Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. Criminal Action No. 01-cr-00239)
District Judge: Honorable Alan N. Bloch
Submitted Under Third Circuit LAR 34.1(a)
November 21, 2002
Before: BARRY and AMBRO, Circuit Judges
DOWD*, District Judge
(Opinion filed December 4, 2002)
OPINION
*Honorable David D. Dowd, Jr., United States District Judge for the Northern District of Ohio,

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1The District Court applied the November 2000 version of the Sentencing Guidelines by
agreement of the parties.
2
sitting by designation.
AMBRO, Circuit Judge
On October 16, 2001, a grand jury returned a nine-count indictment charging Appellant Kevin
Gallagher with mail fraud in violation of 18 U.S.C. § 1341. On December 27, 2001, Gallagher pled
guilty to count six. The Government agreed to dismiss the other counts. On April 18, 2002, the United
States District Court for the Western District of Pennsylvania sentenced Gallagher to 24 months
imprisonment. As part of the sentencing process, the District Court added a two-point enhancement
for abuse of a position of trust under § 3B1.3 of the U.S. Sentencing Guidelines (“Sentencing
Guidelines”).1 It also denied Gallagher’s motion for downward departure on the ground of reduced
mental capacity. Gallagher asserts on appeal that the District Court erred on both grounds. We
disagree and therefore affirm the District Court.
I.
As the facts of this case are well-known to the parties, we note only a general outline.
Gallagher was an independent diamond salesman who sold diamonds on commission for, among
others, N. Gogolick & Sons (“Gogolick”). As part of his position, Gallagher maintained what is known
as a “road line” of diamonds owned by Gogolick, which Gallagher would place on consignment with his
retail and wholesale customers. To replenish his “road line,” Gallagher from time to time would request
that Gogolick ship him additional diamonds.

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Gallagher also had an expensive gambling habit. To finance his extracurricular activities, he
requested – on nine separate occasions between March 24, 1999 and August 19, 1999 – that
Gogolick ship loose diamonds to various jewelry retailers in western Pennsylvania. On each occasion,
Gallagher retrieved the diamonds. Gogolick never received proceeds from the sale of the diamonds or
their return. An unscheduled audit revealed that diamonds shipped between March 24, 1999 and
August 19, 1999 were part of missing inventory.
II. Abuse of a position of trust
The District Court exercised jurisdiction under 18 U.S.C. § 3231. We exercise appellate
jurisdiction pursuant to 28 U.S.C. § 1291 and 18 U.S.C. § 3742(a), which allows a defendant to
appeal a sentence imposed in violation of law or as a result of an incorrect application of the Sentencing
Guidelines.
Gallagher argues that his position was akin to that of an ordinary bank teller or clerk, whom
application note 1 to § 3B1.3 of the Sentencing Guidelines deems not to occupy a position of trust. He
argues that he was not given substantial discretion, as he was subjected to regular and surprise audits
that made it “absolutely inevitable” that his crime would be discovered.
At the outset, we reject the Government’s argument that, because Gallagher failed to object to
the § 3B1.3 enhancement at his sentencing hearing, he forfeited his objection and therefore it is
reviewable only for plain error. See, e.g., Pa. Envtl. Def. Found. v. Canon-McMillan Sch. Dist., 152
F.3d 228, 234 (3d Cir. 1998). Gallagher’s objection to the pre-sentence report was sufficient to
preserve the issue for appeal. United States v. Warren, 186 F.3d 358, 363 (3d Cir. 1999).
Cases challenging § 3B1.3 enhancements require us to address three questions. United States

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v. McMillen, 917 F.2d 773, 774 (3d Cir. 1990). The first is the scope of Gallagher’s authority, which
is a factual determination reviewable only for clear error. Id. The record amply supports the District
Court’s finding that Gallagher worked independently and possessed significant authority to request
diamonds from Gogolick.
Second, we must consider whether the authority Gallagher possessed “was such that he served
in a ‘position of trust.’” Id. at 775. This interpretation of a guideline term “approaches a purely legal
determination,” reviewable de novo. Id. (citing United States v. Daughtrey, 874 F.2d 213, 217 (4th
Cir. 1989)). We examine three factors when considering whether a defendant occupies a position of
trust: “(1) whether the position allows the defendant to commit a difficult-to-detect wrong; (2) the
degree of authority which the position vests in the defendant vis-a-vis the object of the wrongful act;
and (3) whether there has been reliance on the integrity of the person occupying the position.” United
States v. Pardo, 25 F.3d 1187, 1192 (3d Cir. 1994); see also United States v. Craddock, 993 F.2d
338, 342 (3d Cir. 1993) (an employee occupies a position of trust “when, by virtue of the authority
conferred by the employer and the lack of controls imposed on that authority, he is able to commit an
offense that is not readily discoverable”). That Gallagher possessed substantial discretion to deal with
diamonds on Gogolick’s behalf and that Gogolick relied on Gallagher’s integrity in shipping diamonds at
Gallagher’s request indicate that Gallagher occupied a position of trust. This authority provided
Gallagher with the “wherewithal to commit the wrongful act.” Pardo, 25 F.3d at 1192. Whether
Gogolick regularly audited Gallagher does not alter our conclusion. To hold that § 3B1.3 does not
apply when an employer has established an effective oversight mechanism would effectively preclude
application of § 3B1.3 in many, if not most, cases.

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Third, we review for clear error whether the District Court correctly found that Gallagher
“abused his position in a way that substantially facilitated the commission or concealment of the crime . .
. .” McMillen, 917 F.2d at 775. The District Court correctly found that Gallagher’s substantial
discretion enabled him to request shipments of diamonds to him at his customers’ retail locations on
nine separate occasions.
III. Refusal to depart downward from the Sentencing Guidelines
Gallagher has conceded, as he must, that we lack jurisdiction to review the District Court’s
refusal to depart from the Sentencing Guidelines because the District Court recognized its power to
depart but refused to exercise that power. See United States v. Denardi, 892 F.2d 269, 271-72 (3d
Cir. 1989); see also United States v. Marin-Castaneda, 134 F.3d 551, 554 (3d Cir. 1998). Absent en
banc review (which we are not about to suggest), Denardi stands, and thus we shall not address his
downward departure claim.
* * * * *
For the foregoing reasons, we affirm the District Court’s sentencing enhancement of Gallagher,
and have no jurisdiction to review the District Court’s refusal to depart from the Sentencing Guidelines..
By the Court,
/s/ Thomas L. Ambro

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6
Circuit Judge

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