United States of America v. James J. Schreckengost

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 04-1921
U NITED S TATES OF A MERICA ,
Plaintiff-Appellant,
v.
J AMES J. S CHRECKENGOST ,
Defendant-Appellee.
____________
Appeal from the United States District Court
for the Southern District of Illinois.
No. 4:03CR40062-001-JPG—J. Phil Gilbert, Judge.
____________
A RGUED S EPTEMBER 23, 2004—D ECIDED O CTOBER 8, 2004
____________
Before E ASTERBROOK , W OOD , and E VANS , Circuit Judges.
E ASTERBROOK , Circuit Judge. James Schreckengost re-
moved the ink from genuine $5 bills with a chemical solution
and used an inkjet printer to produce facsimiles of $100
bills on the blank sheets. These fakes had the feel of cur-
rency and could pass some tests employed to identify genuine
bills. For example, currency paper has colored threads, a
security strip, and a watermark. See the Secret Service’s
description of these and other features at
h t t p : / / w w w . s e c r e t s e r v i c e . g o v /
money_design_features1990.shtml. Some features of real
currency paper depend on the denomination: each security
strip contains the value, and the watermark is a shadow of

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2 No. 04-1921
the bill’s portrait. So someone who looked closely at
Schreckengost’s products would have noticed that the wa-
termark depicted Lincoln rather than Franklin, and that
the security strip said $5 rather than $100. Tiny type is
hard to read, however, and the difference in the faces may
escape notice, so bogus bills on real currency paper are
more likely to evade detection than are bills printed on
sliced-up foolscap. Two cashiers did notice the difference in
Schreckengost’s work, however. He was arrested and
pleaded guilty to counterfeiting. See 18 U.S.C. §§ 471, 472,
492.
His sentence, 8 months’ imprisonment, dissatisfies the
Department of Justice, which has appealed. The district
court calculated the sentence by applying U.S.S.G. §2B1.1,
the generic provision for frauds. According to the prosecutor,
however, the district court should have used §2B5.1, which
bears directly on counterfeiting. This would have increased
Schreckengost’s offense level to 15 (as opposed to 6 from
§2B1.1(a)), for §2B5.1(b)(3) sets 15 as the minimum for
counterfeiting U.S. currency or possessing devices put to that
end. Because Schreckengost is in criminal history category
IV, the range under the prosecutor’s calculation would have
been 24 to 30 months’ imprisonment. But the district judge
concluded that Application Note 3 to §2B5.1 precluded use
of that Guideline. Note 3 reads:
Inapplicability to Genuine but Fraudulently Altered
Instruments.—“Counterfeit,” as used in this sec-
tion, means an instrument that purports to be
genuine but is not, because it has been falsely made
or manufactured in its entirety. Offenses involving
genuine instruments that have been altered are
covered under §2B1.1 (Theft, Property Destruction,
and Fraud).
A fake that includes genuine currency paper has not been
“falsely made or manufactured in its entirety”, the district

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No. 04-1921 3
court held. It is instead an altered version of a genuine
instrument. Accord, United States v. Inclema, 363 F.3d 1177
(11th Cir. 2004).
Although the district court and the parties, like the elev-
enth circuit in Inclema, concentrated on the meaning of
“in its entirety,” this is a distraction. All of the elements
(except hydrogen) in a counterfeit bill were forged in stars;
a counterfeiter plays no role in their creation. Likewise
counterfeiters purchase ink, paper, printing equipment, and
the like in the market rather than fabricating their own.
Thus the phrase “made . . . in its entirety” must refer not to
the bill as a physical artifact (for nothing on this planet has
been created “in its entirety” by a single person) but to the
“instrument”—that is, to the legal or economic significance
of the artifact. A person who alters the numerals on a
genuine bill has tried to change the way an “instrument”
operates in commerce. As such changes usually are easy to
detect there is less need for the incremental deterrence that
§2B5.1 supplies. But a person who grinds up genuine cur-
rency paper and makes a new batch has destroyed any
“instrument” in the process and should receive a punishment
greater than that meted out to someone who prints fakes on
paper bought at Office Depot. So too with a person who
hijacks a truck carrying genuine currency paper to the Bureau
of Engraving and Printing and uses that as the substrate
for his counterfeits. In the diverted-paper situation no “gen-
uine instrument” has come into being, so Application Note
3 does not apply: genuine currency paper does not a
“genuine instrument” make.
Well, is genuine currency paper derived from bills in cir-
culation different from paper diverted before it reaches the
Bureau? The answer is yes in both physical and legal senses.
Bills are printed by an intaglio process under high pressure,
so indentations remain even if the ink disappears. This leads
to the legal difference: the Treasury Department treats bills
from which all ink has been removed as currency, which it

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4 No. 04-1921
will replace with new notes. For a description of the dam-
a g e d - c u r r e n c y e x c h a n g e p r o c e s s s e e h t t p : / /
www.moneyfactory.com/section.cfm/8/39. Had Schreckengost
changed his mind after bleaching the $5 bills, he could have
swapped them for new notes—just as someone who acciden-
tally puts currency through a washing machine may
do—because the printing impressions demonstrate the paper’s
provenance. Maybe if a truck carrying currency paper had
been hijacked recently the Treasury would take care to
ensure that the impressions came from the Bureau of
Printing and Engraving, but once that determination had
been made the blank would be redeemed. The federal gov-
ernment’s willingness to treat even an erased bill as a legal
obligation of the Treasury shows that the paper remains an
“instrument” and vindicates the district court’s decision to
sentence Schreckengost under §2B1.1.
This outcome is unsettling, because it means a lower sen-
tence for someone whose crime, being harder to detect than
that of a counterfeiter who starts with plain bond paper,
instead requires a higher sentence in order to preserve
deterrence. Application Note 3 could not have been written
with this sort of counterfeiting in mind. It is hardly likely
that the Sentencing Commission devised this as a way to
reward counterfeiters who gin up “only” $95 rather than
$100 in extra face value per counterfeit bill; the discount is
too steep, the language inapt. But the Commission did not
adopt goals or objects; it promulgated a text, and like other
rules this text may both overshoot the author’s goals in
some respects and undershoot them in others. Our job is to
implement the adopted text, not the authors’ (imputed)
aspirations. See Rodriguez v. United States, 480 U.S. 522
(1987). The Sentencing Commission may deem it wise to
revisit this subject. As the Application Note stands, how-
ever, counterfeiters such as Schreckengost are beneficiaries,
even if accidental ones.
A FFIRMED

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No. 04-1921 5
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—10-8-04

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