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127 F.3d 739
(Cite as: 127 F.3d 739)
<KeyCite History>
United
States Court of Appeals,
Eighth Circuit.
UNITED
STATES of America, Appellee/Cross-Appellant,
v.
Jerry E. WELLS and Kenneth R. Steele, Appellant/Cross-Appellee.
Nos.
93-3924, 93-3932 and 94-1031.
Submitted
July 26, 1997.
Decided Oct. 14, 1997.
Defendants were convicted in the United States District Court for the Western District of Missouri, Russell G. Clark, J., of conspiracy and making false statements for purpose of influencing actions of federally insured financial institutions. The Court of Appeals, 63 F.3d 745, vacated and remanded. On petition for certiorari, the Supreme Court, 519 U.S. 482, 117 S.Ct. 921, 137 L.Ed.2d 107, vacated decision of Court of Appeals, holding that materiality was not element of making false statements offense, and remanded for consideration of remaining issues. On remand, the Court of Appeals, Melloy, Chief District Judge, sitting by designation, held that: (1) defendants were not tried for offense not charged in indictment; (2) instruction on "false statements" did not invade province of jury; (3) "intended loss" for sentencing purposes is not necessarily greatest possible loss; (4) neither finding that there was no intended loss nor amount of actual loss attributed to defendants was clearly erroneous; (5) method of calculating actual loss was proper; (6) defendants engaged in more than minimal planning; and (7) defendants were minor participants in conspiracy.
Affirmed
in part and remanded in part.
West Headnotes
[1]
Criminal Law k1179
Defendants
did not waive right to consideration of issues that were not raised in initial
appeal, and such issues thus would be considered on remand from Supreme Court to
Court of Appeals, where defendants could only have raised those issues if they
had anticipated particular position which government adopted for first time in
supplemental brief to Court of Appeals.
[2]
Indictment and Information k120
Trial
of defendants for making false statements for purpose of influencing federally
insured bank, without regard for whether statements were "material," did not
violate defendant's right to be tried only on charges made in indictment,
although indictments charged defendants with making "material" false statements,
where materiality was not element of offense and reference to materiality was
superfluous. 18
U.S.C.A. § 1014.
[3]
Indictment and Information k120
When
indictment includes all of essential elements of offense, but also treats other,
superfluous matters, superfluous allegations may be disregarded and indictment
is proper.
[4]
Indictment and Information k120
Since
superfluous allegations in indictment are not part of charged offense and may be
disregarded, government is not required to prove those allegations in order to
obtain conviction; all government need do is prove that defendant is guilty of
every element of crime charged.
[5] Indictment and Information k120
Striking
superfluous allegations does not result in impermissible constructive amendment
of indictment.
[6]
Criminal Law k822(6)
Jury
instruction on meaning of "false statement," in prosecution for making false
statements to influence actions of federally insured financial institutions, did
not invade province of jury by stating that materiality of statements was not
issue that jury should consider, even though reference to materiality could
confuse jury because materiality was not element of crime, where instructions
read as whole correctly stated government's burden of proof.
[7]
Criminal Law k1139
[7]
Criminal Law k1158(1)
When
government challenges sentences imposed under federal sentencing guidelines,
Court of Appeals reviews district court's factual findings for clear error and
district court's application and construction of guidelines de novo. U.S.S.G.
§ 1B1.1
et seq., 18 U.S.C.A.
[8]
Criminal Law k1158(1)
Factual
finding that underlies determination of sentence is clearly erroneous when
reviewing court, on basis of all evidence, is left with definite and firm
conviction that mistake has been made; where there are two permissible views of
evidence, district court's choice between the two cannot be clearly erroneous.
U.S.S.G.
§ 1B1.1
et seq., 18 U.S.C.A.
[9]
Criminal Law k1139
Where
appellant challenges construction or application of sentencing guidelines in
arriving at its finding of fact, Court of Appeals will review de novo. U.S.S.G.
§ 1B1.1
et seq., 18 U.S.C.A.
[10]
Sentencing and Punishment k736
(Formerly 52k509.25)
Calculation
of loss caused by defendants' offense of making false statements to influence
actions of federally insured financial institutions while obtaining financing
for defendants' company was governed by guidelines' application note governing
fraudulent loan application cases, not application note relating to frauds that
involve misrepresentation of value of item or product. U.S.S.G.
§ 2F1.1, comment. (n. 7),
18 U.S.C.A.
[11]
Sentencing and Punishment k963
(Formerly 184k69(1))
Burden
of proving extent of loss, for purpose of calculating sentence, falls on
government, who must prove extent of loss by preponderance of evidence.
U.S.S.G.
§ 2F1.1,
18 U.S.C.A.
[12]
Sentencing and Punishment k736
(Formerly 184k69(1))
Determination
of "intended loss" under guideline governing calculation of sentence in fraud
cases is not based on possible or potential losses that could occur due to
defendant's fraud, but by amount of loss that defendant intended to cause,
although maximum potential loss is one fact to consider in determining intended
loss. U.S.S.G.
§ 2F1.1, comment. (n. 7),
18 U.S.C.A.
[13]
Sentencing and Punishment k736
(Formerly 184k69(1))
Where
there is no evidence that defendant intended to cause any less than all losses
possible from his fraud, amount of loss for sentencing purposes does not hinge
on actual or net loss, but instead, is found by determining intended loss as
measured by possible loss. U.S.S.G.
§ 2F1.1,
18 U.S.C.A.
[14]
Sentencing and Punishment k736
(Formerly 52k509.25)
District
court's finding that defendants convicted of making false statements for purpose
of influencing actions of federally insured financial institutions, in
connection with defendants' obtaining of financing for their company, did not
intend to cause bank a loss was not clearly erroneous, and calculation of
defendants' sentence based on actual loss, rather than intended loss, was thus
warranted. U.S.S.G.
§ 2F1.1,
18 U.S.C.A.
[15]
Criminal Law k1158(1)
[15]
Sentencing and Punishment k996
(Formerly 110k1320)
Amount
of loss attributed to defendants under fraud sentencing guideline is generally
factual finding, reviewed for clear error; court need not determine value of
loss with any degree of precision, and reasonable estimate of loss based on
available evidence will suffice. U.S.S.G.
§ 2F1.1,
comment. (nn. 7,
8), 18 U.S.C.A.
[16]
Sentencing and Punishment k736
(Formerly 52k509.25)
Calculation
of loss attributable to defendants convicted of making false statements for
purpose of influencing actions of federally insured financial institutions at
$40,000 was not clearly erroneous, in prosecution arising from defendants'
securing of loans from banks and assignment of right to future lease payments;
although banks had charged off approximately $1.2 million in losses on
defendants' accounts, there was evidence that banks could expect future
recovery. U.S.S.G.
§ 2F1.1,
18 U.S.C.A.
[17]
Sentencing and Punishment k736
(Formerly 52k509.25)
In
determining amount of loss attributable to defendants convicted of making false
statements for purpose of influencing actions of federally insured financial
institutions, in connection with defendants' seeking of financing for their
company, court could consider banks' future recovery that would result from
defendants' assignment to banks of right to future lease payments, even if such
recovery was not asset "pledged to secure the loan" within meaning of applicable
guideline. U.S.S.G.
§ 2F1.1, comment. (n. 7),
18 U.S.C.A.
[18]
Sentencing and Punishment k725
(Formerly 110k1251)
Defendants'
sentences for conspiracy and for making false statements for purpose of
influencing actions of federally insured financial institutions should have been
increased for "more than minimal planning," where conspiracy spanned period of
time in excess of three years, involved more than 90 transactions, and featured
personal participation by each defendant in forging of guarantees with their
wives' names. U.S.S.G.
§ 2F1.1(b)(2)(A),
18 U.S.C.A.
[19]
Sentencing and Punishment k725
(Formerly 110k1251)
"More
than minimal planning" which supports increased base offense level under
sentencing guidelines is deemed present in any case involving repeated acts over
period of time, unless it is clear that each instance was purely opportune;
almost any crime that consists of pattern of activity over long period of time
would qualify as offense involving more than minimal planning. U.S.S.G.
§ 2F1.1(b)(2)(A),
18 U.S.C.A.
[20]
Sentencing and Punishment k725
(Formerly 110k1251)
Focus
of "more than minimal planning" sentence enhancement is nature of offense, not
nature of defendant's role in that offense. U.S.S.G.
§ 2F1.1(b)(2),
18 U.S.C.A.
[21]
Sentencing and Punishment k764
(Formerly 110k1251)
Finding
that defendants were minor participants in conspiracy to make false statements
to banks providing financing to defendants' company was not clearly erroneous,
in view of district court's determination that third party was in charge of
company's day-to-day affairs. U.S.S.G.
§ 3B1.2(b),
18 U.S.C.A.
*742 James R. Wyrsch, Kansas City, MO (Jacqueline A. Cook and W. Brian Gaddy, on the brief), for appellant.
Matt
J. Whitworth,
Assistant U.S. Attorney, Kansas City, MO (Marietta
Parker,
on the brief), for appellee.
Before MORRIS S. ARNOLD, Circuit Judge, JOHN R. GIBSON, Senior Circuit Judge, and MELLOY [FN*], Chief District Judge.
FN* The HONORABLE MICHAEL J. MELLOY, Chief United States District Judge for the Northern District of Iowa, sitting by designation.
MELLOY,
Chief District Judge
I.
This
matter is before the court pursuant to remand from the United States Supreme
Court.
In
United
States v. Wells, 519 U.S. 482, 117 S.Ct. 921, 137 L.Ed.2d 107 (1997),
the Supreme Court held that materiality is not an element of 18
U.S.C. § 1014,
which makes it a crime to knowingly make a false statement for the
purpose of influencing the actions of a federally insured bank. The Supreme
Court vacated this Court's decision in United
States v. Wells, 63 F.3d 745 (8th Cir.1995),
which had held that materiality was an element of §
1014,
and remanded the case for consideration of the remaining issues raised by the
defendants. See 519
U.S. at --- - ----, 117 S.Ct. at 931-932.
The
remaining issues presented by the defendants are (1) whether the defendants have
been held to answer for a crime not charged in their indictments and (2) whether
the district court's instructions had the effect of improperly directing a
verdict against the defendants. The court must also resolve the government's
cross appeal, in which it argues the trial court erred in its guideline
computations and the imposition of sentence. We affirm the defendant's
conviction and reverse and remand for resentencing.
Since
the background in this case and the underlying facts have been fully explored in
this court's prior decision and the Supreme Court decision, we will only set
forth those facts necessary to resolve the issues which remain for
consideration.
II.
[1]
As an initial matter, the government argues that we should not consider either
of the defendants' remaining arguments, since, in its view, those arguments
could have been raised in the initial appeal to this Court. The defendants could
only have raised those arguments, however, if they had anticipated
the government's position that materiality is not an element of §
1014,
a position that the government adopted for the first time in a supplemental
brief to this Court. Since nothing in the conduct of this case up to that
*743
point suggested that the government contested the supposed materiality
requirement of §
1014,
we decline to find that the defendants have waived their right to a
consideration of their claims simply because they did not anticipate the
government's change of position and brief all ancillary issues resulting from
that change of position.
III.
[2]
The indictments in this case charged that the defendants made "material" false
statements for the purpose of influencing a federally insured bank. While that
allegation of materiality was in accord with our precedent at the time, see,
e.g., U.S.
v. Ribaste, 905 F.2d 1140 (8th Cir.1990),
it is now clear that materiality is not an element of the crime charged. The
defendants argue that, regardless of whether materiality is an element of
§
1014,
materiality is still an element of the offense "as set forth in the indictment,"
and so the government must prove the materiality of their statements to the
satisfaction of a jury. Anything less, according to the defendants, would amount
to a violation of their right to be tried only on the charges brought by the
grand jury.
[3]
When an indictment includes all of the essential elements of an offense,
but also treats other, superfluous matters, the superfluous allegations may be
disregarded and the indictment is proper. See, e.g., Ford
v. U.S., 273 U.S. 593, 47 S.Ct. 531, 71 L.Ed. 793 (1927);
U.S.
v. Miller, 471 U.S. 130, 105 S.Ct. 1811, 85 L.Ed.2d 99 (1985);
U.S.
v. Norris, 34 F.3d 530, 532 (7th Cir.1994);
U.S.
v. McIntosh, 23 F.3d 1454, 1457 (8th Cir.1994)("Allegations
in the indictment that are not necessary to establish a violation of a statute
are surplusage and may be disregarded if the remaining allegations are
sufficient to charge a crime").
[4]
Since superfluous allegations are not part of the charged offense and may be
disregarded, the government is not required to prove those allegations in order
to obtain a conviction. See U.S.
v. Rosenthal, 9 F.3d 1016, 1023 (2nd Cir.1993)
("[A]llegations in an indictment that go beyond the essential elements which are
required for conviction do not increase the Government's burden"). All the
government need do is prove "that the defendant is guilty of every element of
the crime with which he is charged[.]" See U.S.
v. Gaudin, 515 U.S. 506, 508-10, 115 S.Ct. 2310, 2313, 132 L.Ed.2d 444
(1995).
That was done here, since all the essential elements of §
1014
were submitted to the jury and a conviction resulted.
[5]
Striking superfluous allegations does not result in an impermissible
constructive amendment of an indictment. As we explained in U.S.
v. Begnaud, 783 F.2d 144 (8th Cir.1986),
a constructive amendment occurs when the jury
is "allowed ... to convict the defendant of an offense different from or in
addition to the offenses alleged in the indictment." 783
F.2d at 147;
see generally 24 Moore's Federal Practice, § 607.06[1] (Matthew Bender 3rd
Ed.1997). Paring down an indictment so that it alleges just the essential
elements of an offense does not expose a defendant to the risk of being
convicted of any additional or different offenses. See, e.g., U.S.
v. Helmsley, 941 F.2d 71, 91--92 (2nd Cir.1991)(allegation
in indictment that items of income omitted from tax returns were "substantial"
was surplusage not essential to offense and could be dropped from indictment);
U.S.
v. Bledsoe, 898 F.2d 430 (4th Cir.1990)(holding
that deleting word "public" from an indictment charging defendant with selling
drugs within 1000 feet of a "public" secondary school was not an impermissible
amendment when statute prohibited drug selling within 1000 feet of any secondary
school). The charged offense is the same throughout, and so the court has not
"permit[ted] a defendant to be tried on [a] charge that [is] not made in the
indictment against him." Stirone
v. U.S., 361 U.S. 212, 217, 80 S.Ct. 270, 273, 4 L.Ed.2d 252 (1960);
Helmsley,
941 F.2d at 92.
IV.
[6]
Although the jury in this case did not have to determine materiality, it did
have to determine whether the defendants made false statements for the purpose
of influencing the actions of a federally insured bank.
The district court gave the following instruction on the meaning of "false
statement":
*744 A statement or representation is "false" when it is untrue when made or effectively conceals a material fact. A material fact is a fact that would be important to a reasonable person in deciding whether to engage or not to engage in a particular transaction.
...
The materiality of the statement or representation alleged to be false or concealed is not a matter with which you are concerned and should not be considered by you in determining the guilt or innocence of the defendant.
The
defendants argue that the statement by the court that materiality is not an
issue that should concern the jury had the effect of improperly directing a
verdict for the government on the issue of falsity of the statement. We agree
that in light of the Supreme Court decision in this case, any reference to
materiality in the jury instruction is unnecessary and has the potential to
cause confusion. However, we have repeatedly held that an instruction that may
be less than a model of clarity does not require reversal, provided that the
instruction does accurately set out the elements of the offense which the
government much prove. See Toro
Co. v. R & R Products Co., 787 F.2d 1208, 1215 (8th Cir.1986);
Roth
v. Black & Decker, Inc., 737 F.2d 779, 783 (8th Cir.1984);
Stoetzel
v. Continental Textile Corp. of America, 768 F.2d 217,
224
(8th Cir.1985);
Gander
v. FMC Corp., 892 F.2d 1373 (8th Cir.1990).
In
this case the jury was instructed that, in order to convict, it had to find that
the statements at issue were either untrue when made or effectively concealed a
material fact. The instruction went on to state that "the materiality of the
statement or representation alleged to be false or concealed is not a matter
with which you are concerned ..." (emphasis added). Reading the instructions as
a whole, there can be little doubt that the jury was properly instructed that it
had to find the alleged false statement to be untrue or to have effectively
concealed a fact, and that making the false statement or concealing the fact was
done with the intent to influence the bank's actions. See Wells,
519 U.S. at ----, 117 S.Ct. at 931.
Although there may be superfluous language in the instruction, the government's
burden of proof is correctly stated in the instruction. We cannot agree with the
defendants that the court's statement concerning materiality would have the
effect of directing the jury to find that the statement were also
untrue.
The
district court's instruction did not displace the jury from its proper role of
determining the factual question of whether the defendants made false statements
for the purpose of influencing the bank. Accordingly, the district court's
instructions did not invade the province of the jury.
V.
We
turn last to the government's sentencing appeal. The district court sentenced
the defendants under §
2F1.1 of the federal sentencing guidelines,
which covers "Offenses Involving Fraud or Deceit." The crimes under this section
carry a Base Offense Level of 6. U.S.S.G.
§ 2F1.1(a).
The district court increased the base level by 4, based on its determination
that the defendants did not intend to cause any loss to the banks, and that the
actual loss to the banks was over $20,000 but not more than $40,000. U.S.S.G.
§ 2F1.1(b)(1)(E).
The court declined the government's request to increase the base level another 2
points based on more than minimal planning. U.S.S.G.
§ 2F1.1(b)(2).
The court then decreased the base level from 10 to 8 based on its finding that
the defendants played a minor role in the offense. U.S.S.G.
§ 3B1.2(b).
[7][8][9]
When the government challenges sentences imposed under the federal sentencing
guidelines, we review a district court's factual findings for clear error, and
the district court's application and construction of the guidelines de novo.
United
States v. Ballew, 40 F.3d 936, 943 (8th Cir.1994);
United
States v. Rayner, 2 F.3d 286, 287 (8th Cir.1993).
Because each alleged error by the sentencing court in this case concerns a
finding of fact, we review each for clear error. See United
States v. Earles, 955 F.2d 1175, 1180 (8th Cir.1992)(calculation
of fraud related loss reviewed for clear error); *745United
States v. Lublin, 981 F.2d 367, 370 (8th Cir. 1992)(
"more than minimum planning" determination reviewed for clear
error); United
States v. Hale, 1 F.3d 691, 694 (8th Cir.1993)(status
as minor participant reviewed for clear error). A finding is clearly erroneous
when the reviewing court, on the basis of all the evidence, is left with the
definite and firm conviction that a mistake has been made. United
States v. Cabbell, 35 F.3d 1255, 1260 (8th Cir.1994);
Anderson
v. City of Bessemer City, 470 U.S. 564, 573, 105 S.Ct. 1504, 1511, 84 L.Ed.2d
518 (1985).
Where there are two permissible views of the evidence, the district court's
choice between the two cannot be clearly erroneous. Bessemer
City, 470 U.S. at 574, 105 S.Ct. at 1511-12.
Where the appellant challenges the construction or application of the sentencing
guidelines in arriving at its finding of fact, we will review de
novo.
A.
Loss
[10][11]
The government challenges the district court's calculation of the "loss"
associated with the defendants' fraud and, consequently, its calculation of the
base offense level under the federal sentencing guidelines. "Loss" under the
guidelines is the greater of the intended loss or the actual loss. U.S.S.G.
§ 2F1.1(b)
App. Note 7.
[FN2]
The burden of proving the extent of the loss falls on the Government, who must
prove the extent of loss by a preponderance of the evidence. United
States v. Mills, 987 F.2d 1311, 1315 (8th Cir.1993).
FN2. The method of measuring loss under § 2F1.1 varies depending on the type of fraud involved. Application note 7(a) governs loss in frauds involving misrepresentation of the value of an item or product, and application note 7(b) governs fraudulent loan application cases. § 1B1.2 of the Sentencing Guidelines instructs a sentencing court to determine the offense level based on the section from Chapter Two that is "most applicable to the offense of conviction." Similarly, where the commentary to the applicable section of Chapter Two includes several application notes that describe alternative methods of computing the offense level depending on the particular facts of the case, the sentencing court should choose the "most applicable" application note.
The instant case involved the sale or assignment of the right to future lease payments. Although it is a common business practice for lenders to take an assignment of accounts receivable as security for loans, see e.g. In re B. Hollis Knight Co., 605 F.2d 397, 399 (8th Cir.1979); Rigby Corp. v. Boatmen's Bank & Trust Co., 713 S.W.2d 517, 521 (Mo.Ct.App.1986), such an assignment can be made either as the sale of the accounts receivable under a lease or as the granting of a security interest in conjunction with a loan. When disputes arise over the true nature of the transaction, courts look to the contract to ascertain the parties' true intent. In re CIS Corp., 172 B.R. 748, 756 (S.D.N.Y.1994); People v. The Service Institute, Inc., 101 Misc.2d 549, 421 N.Y.S.2d 325, 326 (Sup. Court Suffolk County 1979). The record appears to indicate that the transactions were an assignment of the leases to the bank based on discounted cash flow. However, the record also reflects the intent of both parties to treat the transactions as loans secured by an assignment of the lease payments, at least for the purpose of determining losses under the contracts. Both parties' evidence of loss at sentencing treated the transaction as a loan and neither party objected to the court's application of note 7(b). Accordingly, note 7(b) is the most appropriate method of calculating loss.
[12] The government claims that the sentencing court erred in its determination that the intended loss was less than the actual loss caused by the defendants' fraud. The court determined that the appellants did not intend to cause any loss, and therefore found the intended loss was zero. Because the court then found that the actual loss was $40,000, the court used the greater actual loss figure to determine the extent of the base offense level increase.
Application
Note 7 to §
2F1.1 of the federal sentencing guidelines
provides that "loss" is "the actual loss to the victim [unless] the intended
loss is greater than the actual loss, [in which case] the intended loss is to be
used."
See U.S.S.G.
§ 2F1.1
App. Note 7; United
States v. Little, 990 F.2d 1090, 1093 (8th Cir.1993).
The
government claims that "intended loss", as used in §
2F1.1,
is measured by the potential loss or possible loss that could arise from the
charged crime, not by the amount of loss that the defendant intended to cause.
Under this view, "intended loss" is shorthand for "the possible loss that could
have resulted regardless of what the defendant intended the loss to be." Because
the banks that were harmed by the defendants' fraud could possibly have lost an
amount equal to the full value of the money transferred, the
government*746
argues that the intended loss was greater than the actual loss, and should have
been used to calculate the increase in the base offense level. We review de
novo, as this relates to the application and construction of the guidelines.
Ballew,
40 F.3d at 943;
Rayner,
2 F.3d at 287.
The
government cites a number of decisions of this court in support of its claim
that the focus for sentencing purposes under §
2F1.1
should be on the amount of possible loss that could have been caused by the
defendants' conduct. United
States v. Morris, 18 F.3d 562, 570 (8th Cir.1994);
Kok
v. United States, 17 F.3d 247, 250 (8th Cir.1994);
United
States v. Prendergast, 979 F.2d 1289, 1292 (8th Cir.1992);
United
States v. Johnson, 908 F.2d 396, 398 (8th Cir.1990).
Although we have never interpreted them that way, see, e.g., U.S.
v. Anderson, 68 F.3d 1050 (8th Cir.1995);
U.S.
v.
Sheets, 65 F.3d 752 (8th Cir.1995);
U.S.
v. Graham, 60 F.3d 463 (8th Cir.1995),
the government argues that these cases stand for the proposition that the
sentencing court should measure intended loss by the possible or potential
losses that could occur due to a defendant's fraud, not by the amount of loss
that the defendant intended to cause. We disagree. Instead, a review of those
cases shows that we have interpreted "intended loss" to mean just that--the loss
the defendant intended to cause to the victim. The amount of possible loss is
just one element of proof to be considered, along with all other evidence, on
the issue of intended loss.
In
Morris,
for example, the plaintiff had been convicted of fraud in relation to a check
kiting scheme involving checks drawn on accounts with insufficient funds.
18
F.3d at 564.
Before the scheme was discovered, the defendant caused some money to be paid
back into one of the accounts, thus decreasing the actual loss suffered by the
wronged bank. The district court reduced the amount of loss for sentencing
purposes by the amount that had been repaid into the account. We reversed
because the evidence at trial showed that the money was repaid only to avoid
detection of the fraud. Id.
at 570.
Implicit in our decision was an understanding that the defendant, at the time he
committed the fraud, had intended to succeed to the full amount of the check and
to cause all the loss that could possibly be caused by the bad check. The fact
that the defendant later paid some of the money back did not alter
the amount of loss intended when the crime was committed. In that situation, the
intended loss was properly measured by the possible loss, and did not hinge on
actual or net loss. Id.
[13]
In Prendergast,
the defendant was convicted of selling fraudulent promissory notes totaling
$280,000. 979
F.2d at 1290.
Prior to sentencing, the defendant made compensatory payments to his victims of
about $110,000. Id
at 1291.
The district court reduced the amount of loss for sentencing purposes by the
amount of reimbursements made, finding that the loss was $170,000. Id.
We reversed. Again, there was no evidence that the defendant intended, at the
time he committed the fraud, to deprive his victims of anything less than the
full value of the fraudulent notes. Id.
Where there is no evidence that a defendant intended to cause any less than all
losses possible from his fraud, the amount of loss for sentencing purposes does
not hinge on the actual or net loss, but instead, is found by determining the
intended loss as measured by the possible loss. The common thread in both
Morris
and Prendergast
is that the repayments were made after the fact only in order to conceal, or
reimburse victims, for crimes that had already been committed. The focus was on
the defendant's intent at the time he committed the fraud.
In
Johnson,
the defendant obtained a number of loan disbursements through fraud, applying
the loan money toward the purchase of two cars. 908
F.2d
396.
At sentencing, the district court measured the amount of loss by the sum total
of the loan disbursements obtained by the defendant, rather than by the actual
loss suffered by the bank after reselling the cars and collecting insurance
proceeds. Id.
at 398.
Under the then-applicable App. Note 7 to §
2F1.1
(prior to revision), "if a probable or intended loss that the defendant
attempted to inflict can be determined, that figure would be used if it was
larger than the actual loss." Id.
We affirmed *747
the court's finding that the probable or intended loss was greater than the
actual loss, and that therefore, the loss did not hinge on the actual loss.
Id.
There was no indication that the defendant had intended to repay, or that it was
probable that the defendant would repay, any portion of the loans. If the court
had found that the defendant had intended to repay the loan in full (and, under
the then-applicable Application Note 7, that it was probable), the court could
properly have found that the intended loss was zero and used the actual loss for
sentencing purposes.
In
each of those opinions, we recognized that the loss for sentencing purposes in
fraud cases does not hinge on actual loss if the court determines either that
the defendant intended to succeed to the full extent of the fraud, or that there
was no evidence that the defendant intended to cause less than the greatest
possible loss. We held, that in those circumstances, the intended loss can
properly be measured by the possible loss, since the defendant
intended to cause that possible loss. Where there is evidence of the extent of
the loss the defendant intended to cause, however, we have held that the crucial
question for determining intended loss for sentencing purposes is the loss that
the defendant actually intended to cause. See, e.g., United
States v. Edgar, 971 F.2d 89, 96 (8th Cir.1992).
In
Edgar,
the defendant was convicted of a fraud committed while acting as bankruptcy
attorney for Duplitech Corporation, a copying and printing business. 971
F.2d at 92.
The fraud consisted of arranging for the sale of certain assets out of an estate
in bankruptcy, thus defrauding creditors of the value of the property
transferred. In making that fraudulent transfer, however, the court found that
the defendant intended that the purchaser of the transferred assets would pay
$100,000 to the creditors. Id.
at 96.
We held that the district court should subtract the amount that the defendant
intended would be repaid from the possible loss, even though it was possible
that the payment would not be made. Id.
United
States v. Anderson, 68 F.3d 1050 (8th Cir.1995),
makes clear that the maximum potential loss is only one fact to consider in
determining intended loss under U.S.S.G.
2F1.1.
In Anderson,
the district court found that the defendant intended to cause less than "the
maximum potential loss" associated with his conduct, 68
F.3d at 1055,
and so used a lower intended loss amount to calculate the defendant's sentence.
68
F.3d at 1055.
The district court
expressly rejected the notion that possible loss was to be used in calculating
the amount of loss when the evidence showed that the defendant intended to
inflict something less than the possible loss. See 68
F.3d at 1054 n. 3.
The Anderson
court held that "the district court did not misinterpret the Guidelines,"
68
F.3d at 1055,
and noted that "[t]he district court did not look to the maximum potential loss
from the situation but [instead] very properly considered the amount of
potential loss that [the defendant] intended to inflict[.]" 68
F.3d at 1055
(emphasis added).
In
summary, the method used by a sentencing court to determine "loss" depends, in
the first instance, on the court's factual finding of the intent of the
defendant to cause loss and on the court's factual finding of the extent of
actual loss. Under Application Note 7 to §
2F1.1
of the guidelines, the loss for sentencing purposes is the greater of the
intended loss or the actual loss. Each of these factual findings will only be
overturned for clear error. Ballew,
40 F.3d at 943;
Rayner,
2 F.3d at 287.
Where
a court determines that a defendant intended to succeed to the full extent of
the fraud or where there is no indication that the defendant intended to cause
less than the greatest possible loss, the intended loss is the possible loss. We
reject the government's position, however, that the intended "loss" is always
measured by the possible or potential loss. Where the evidence is sufficient to
support a sentencing court's determination that a defendant
intended to cause less than the possible or potential loss that could result
from the fraud, "loss" is properly measured by the defendant's intent. Edgar,
971 F.2d at 96.
As in Edgar,
where the evidence shows the amount that a defendant intended to be repaid, the
court can use the possible *748
loss as a baseline measure of loss, and subtract the intended
repayment.
[14]
The district court did not commit clear error in determining that there was no
intention to cause the bank a loss. The court's finding is supported by evidence
on the record and we are not left with the definite and firm conviction, on the
entire evidence, that a mistake has been committed. Cabbell,
35 F.3d at 1260;
Bessemer
City, 470 U.S. at 573, 105 S.Ct. at 1511.
The district court judge who presided over the entire trial and sentencing was
in a much better position than we are to weigh the credibility of the witnesses
and determine the motivations and intent underlying the defendants' actions. The
district court judge determined that the defendants intended that the copier
lessees would make all of the payments due under their CMP lease assignment
agreements. Based on that finding, the sentencing court found that the intended
loss, under §
2F1.1,
was zero. This determination was supported by other evidence in the record,
including evidence that one of the defendants had put over $2 million of his own
money into Copytech to keep it in business and that protective clauses in the
lease and assignment contracts
indicated an intent to shield the banks from loss. The government, for its part,
has not pointed out sufficient evidence to detract from the court's finding. The
sentencing court's determination that the intended loss was zero is not clearly
erroneous.
Because
the sentencing court found that the intended loss was zero, it went on to
calculate the actual loss caused by the defendants' fraud. The government
appeals the court's determination that the two banks harmed by the defendants'
fraud suffered actual losses in the amount of only $40,000, raising both a
factual dispute and a legal dispute. First, the government contends that the
court's calculation of actual loss was clearly erroneous. Second, the government
argues that the method the court used to calculate the loss was legally
insufficient.
[15]
"Loss" under §
2F1.1
is defined to mean:
[T]he actual loss to the victim ... For example, if a defendant fraudulently obtains a loan by misrepresenting the value of his assets, the loss is the amount of the loan not repaid at the time the offense is discovered, reduced by the amount the lending institution has recovered (or can expect to recover) from any assets pledged to secure the loan.
U.S.S.G.
§ 2F1.1
App. Note 7(b). The amount of loss is generally a factual finding, reviewed for
clear error. Ballew,
40 F.3d at 943.
The court need not determine the value of the loss with any degree of precision;
a reasonable
estimate of the loss based on the available evidence will suffice. Anderson,
68 F.3d at 1054;
U.S.S.G.
§ 2F1.1
App. Note 8.
[16]
Although the loss does not have to be determined with precision, the text of the
guidelines provides guidance as to what should be included and excluded from the
loss.
Application
Note 7 of §
2F1.1
provides that the loss includes "the amount of the loan not repaid at the time
the offense is discovered" and should be reduced by the amount that the lender
has "recovered, or can expect to recover, from any assets pledged to secure the
loan." Although the rights to receive future payments under the copier leases
were assigned to the banks, not "pledged to secure" a loan, the court
nevertheless explicitly reduced the amount of loss by the extent of recoveries
made by the bank prior to sentencing, payments that the banks could expect to
receive in the future, and by the amount O'Bannon bank stood to recover based on
a judgment it had received against one of the lessees.
The
government submitted evidence that the banks had charged off approximately $1.2
million in losses on their Copytech accounts. Although the government bore the
burden of proving the extent of loss by a preponderance of the evidence, it did
not offer any evidence on the number of lease accounts that were still active,
on the amount that the banks had recovered since their loss calculation, or on
the amounts that the banks could expect to recover in the
future. Defense evidence showed that O'Bannon Bank had received a judgment
against one of Copytech's *749
customers in the amount of $747,000, that Bank IV had not accounted for the
value of recovered copier equipment, and that Bank IV was still servicing some
active copier leases and receiving monthly payments on them.
In
reaching its finding on the amount of actual loss, the court reduced the loss by
the amount of recovery that the banks had recovered or could expect to recover,
and by the amount of O'Bannon Bank's judgment against one of Copytech's
customers. Given the defense evidence of future recovery, and the absence of
government evidence on the amount that the banks could actually expect to
recover, the court's estimate of a $40,000 loss was not clearly erroneous, and
must therefore be affirmed. Mills,
987 F.2d at 1315.
[17]
The government's primary objection to the court's estimate of a $40,000 loss is
that the court did not apply the guidelines correctly and had no legal basis for
deducting future recovery of lease payments from the actual loss calculation.
Specifically, the government claims that since the money recovered, or expected
to be recovered, from lease payments or from O'Bannon's judgment against
Copytech's customer is not an "asset[ ] pledged to secure the loan", that the
court erred in deducting those amounts from the loss calculation. This dispute
relates to the application of the guidelines, and is reviewed de novo. Ballew,
40 F.3d at 943;
Rayner,
2 F.3d at 287.
Despite
the fact that the copier lease assignments may, technically, have been sales and
assignments of Copytech's interest in the lease accounts, the most appropriate
guideline for the determination of the offense level in this case is §
2F1.1
and Application Note 7(b), relating to fraud in loan application cases. See
supra, note 3. To the extent that the transactions are treated as loans by
analogy for sentencing purposes, the text of Application Note 7(b) must be read
in that light and construed consistently with the actual nature of the
transactions.
If
the banks in this case had lent Copytech money, secured by a security interest
in the stream of lease payments, instead of purchasing an assignment of the
right to receive future payments, the treatment of recovery and expected
recovery against those accounts would be clear. Under Application Note 7(b),
those recoveries would be deducted from the loss calculation as recovery of
assets pledged to secure a loan. In this case, however, Copytech did not pledge
its interest in future lease payments as security in the event of default, but
instead made an outright assignment of its entire interest in those payments to
the bank.
The
right to collect future payments based on an assignment of that right protects
the bank to the same extent as does the right to collect future lease payments
after asserting the rights or a secured creditor to collect the
payments.
[FN3]
In both cases the bank's interests are protected to the extent
of monies recovered from lease payments. Since the transaction itself is being
treated, by analogy, as a "loan", the banks' interests in receiving future lease
payments can properly be treated, by analogy, as assets pledged to secure that
"loan". The district court did not err in deducting future lease payments and
recoveries from the loss calculation.
FN3. In fact, Article 9 of the U.C.C., governing secured transactions, is applicable to the sale of accounts receivable under a lease. See Mo. Rev Stat. §§ 400.9-102, 106.
B. Minimal Planning
[18][19]
The government argues that the sentencing court erred by not increasing the base
level of the defendants' offense by two points for more than minimal planning.
U.S.S.G.
§ 2F1.1(b)(2)(A).
More than minimal planning "is deemed present in any case involving repeated
acts over a period of time, unless it is clear that each instance was purely
opportune." United
States v. Callaway, 943 F.2d 29, 31 (8th Cir.1991)(quoting
U.S.S.G.
§ 1B1.1,
comment. Note 1(f)). "Almost any crime that consists of a pattern of activity
over a long period of time would qualify as an offense involving more than
minimal planning." United
States v. Olson, 22 F.3d 783, 786 (8th Cir.1994)(quoting
West,
942 F.2d at 531).
*750
The defendant in Olson
had been convicted on several counts of wire fraud, securities fraud,
racketeering, misapplication of bank funds and related crimes. Although the
offenses that formed the basis of the conviction occurred over a two-year period
of time, the trial court declined to increase the defendant's level for more
than minimal planning. Id.
This court held that it was clear error by the trial court to deny the increase
in offense level, due primarily to the length of time during which the charged
crimes took place.
The
government argues that the court erred in not applying the two point increase
for more than minimal planning, which in the government's view is called for by
the duration of the conspiracy, from late 1986 or early 1987 until May 1990. In
addition, the government argues that the conspiracy involved repeated acts over
that period of time that were not merely opportune, including consistently
concealing the existence of the CMP addenda from the banks, changing the
language of the lease documents, forging the personal guaranties of their wives,
and selling ninety CMP lease contracts to the banks.
[20]
At sentencing, the district court stated the defendants' objection to the
presentence report and stated, "If there was more than minimal planning, it was
on the part of Mr. Russell, not on the part of these defendants." However, the
focus of the "more than minimal planning" language is the nature of the offense,
not the nature of a defendant's role in that offense. See United
States v. West, 942 F.2d 528, 531 (8th Cir.1991)(citing
U.S.S.G.
§ 2F1.1(b)(2)).
We
conclude that the court clearly erred by not assessing the more than minimal
planning enhancement. The conspiracy spanned a period of time in excess of three
years, involved more than ninety sales of CMP contracts, and featured personal
participation by each defendant in the forging of the guarantees with their
wives' names. Given these factors, we conclude the court clearly erred in not
assessing the two point enhancement for more than minimal planning.
C.
Minor Participant
[21]
The sentencing court decreased the base offense level by two points for being
minor participants. U.S.S.G.
3B1.2(b).
A minor participant is any participant who is less culpable than most other
participants. Id. Although the mere fact that a defendant is less culpable than
a co-defendant does not entitle the defendant to "minor participant" status as a
matter of law, the judicial determination of whether a person is a minor
participant is a factual determination that we review for clear error. Hale,
1 F.3d at 694.
The sentencing court determined that James Russell was in charge of the
day-to-day affairs of the company and that these defendants were minor
participants in the conspiracy. We cannot say that the sentencing court clearly
erred in making that finding.
In
summary, we affirm the defendants' convictions and remand for re- sentencing in
accordance with this opinion.
END
OF DOCUMENT