## Facts

- Eureka Laboratories, Inc. (ELI) operated an analytical testing laboratory analyzing soil, air, and water samples for governmental and private clients.
- From February 1991 to August 1993, ELI received contracts from the EPA, Army, and Air Force to analyze environmental samples related to hazardous waste site evaluation and remediation.
- During contract performance, ELI fraudulently manipulated analytical tests.
- The United States charged ELI and two managers in an eight-count superseding information alleging conspiracy to defraud the United States and related offenses under 18 U.S.C. §§ 287, 371, and 1001.
- After trial began, ELI pleaded guilty to all counts.
- At sentencing, the district court estimated governmental loss at about $4.6 million using paid invoices and reasonably foreseeable reprocurement costs, yielding a Guidelines fine range of approximately $6.43–$9.18 million.
- A presentence report recommended a reduced fine based on financial condition and estimated ELI’s assets at about $2.5 million; an independent audit estimated net assets near $1.516 million with uncertain future profitability.
- The district court imposed a $1.5 million fine (payable over a five-year probation period), $322,442 in restitution, and a $1,600 special assessment.

## Issues

1. Whether the district court clearly erred in finding ELI could pay the $1.5 million fine (plus restitution and assessment).
2. Whether U.S.S.G. § 8C3.3, as a matter of law, barred imposing a fine that would substantially jeopardize the continued viability of the organization.

## Decision

- The Ninth Circuit affirmed the sentence.
- The court held the district court did not clearly err in finding ELI could pay the fine over the probationary period.
- The court held § 8C3.3 did not categorically prohibit a fine that could jeopardize organizational viability; the guideline functions as a downward-departure provision governing how inability-to-pay considerations may reduce, not eliminate, fines.
- The court treated installment payment of the fine as consistent with the organizational Guidelines’ installment framework.

## Legal Principles

- Interpretation of the Sentencing Guidelines is reviewed de novo; factual findings on ability to pay are reviewed for clear error.
- In organizational sentencing, a court may depart downward from the guideline fine range based on inability to pay, but § 8C3.3 does not impose an absolute bar on fines that may threaten continued viability.
- A reduced fine must be set with attention to the organization’s financial resources and obligations, including restitution and other monetary sanctions.
- Courts may structure corporate fines to be paid over time, including through installment schedules during probation, to account for cash-flow limitations.

## Conclusion

The Ninth Circuit upheld a substantially reduced corporate fine and related monetary penalties, ruling that the district court’s ability-to-pay finding was not clearly erroneous and that § 8C3.3 permits fines that may endanger an organization’s continued operation when the court properly considers financial condition, restitution, and payment structure.


United States v. Eureka Labs., Inc., 103 F.3d 908 (9th Cir. 1996)