United States v. Mummert ( 1994 )

Opinions of the United
1994 Decisions States Court of Appeals
for the Third Circuit
9-8-1994
United States of America v. Mummert
Precedential or Non-Precedential:
Docket 94-7119
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"United States of America v. Mummert" (1994). 1994 Decisions. Paper 127.
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________
No. 94-7119
____________
UNITED STATES OF AMERICA,
Appellee
v.
H. JAY MUMMERT,
Appellant
____________________
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
(D.C. Crim. No. 93-00189)
____________________
Argued: July 26, 1994
Before: BECKER and ALITO, Circuit Judges and
BRODY, District Judge*
(Opinion Filed: September 8, 1994)
____________________
JOSHUA D. LOCK, ESQ. (Argued)
106 Walnut Street
Harrisburg, PA 17101
Attorney for Appellant
DAVID M. BARASCH
United States Attorney
MARTIN C. CARLSON (Argued)
Assistant United States Attorney
_________________________
* The Honorable Anita B. Brody, United States District Judge for
the Eastern District of Pennsylvania, sitting by designation.
Federal Building
228 Walnut Street
Harrisburg, PA 17108
Attorneys for Appellee
____________________
OPINION OF THE COURT
____________________
ALITO, Circuit Judge:
H. Jay Mummert, who pled guilty to a fraud offense,
took this appeal to challenge the district court's calculation of
his sentence under the Sentencing Guidelines and the district
court's denial of his request for a downward departure. We hold
that the district court did not err in calculating Mummert's
sentence under the Guidelines, but we remand for further
proceedings concerning Mummert's downward departure request.
I.
Mummert, the former chief executive officer of the
People's State Bank of East Berlin, Pennsylvania, became
acquainted with a contractor, Richard Myford, and a realtor,
Sherry Seidenstricker, who had formed a partnership to build and
market residential properties. In the fall of 1992, Mummert
caused the bank to make a $95,000 loan to finance construction of
a house for the partnership. According to Mummert's presentence
investigation report, Mummert "handled [this loan] in an
irregular fashion. Indeed, the bank's records ha[d] no complete
loan application file documenting this . . . loan."
After the loan was made, Mummert states, he learned
that independent auditors were conducting an examination of the
bank's records, and he advised Myford and Seidenstricker of his
concern that the examiners might discover the irregular loan.
Myford and Seidenstricker, who were attempting to sell the
property, then helped to prepare loan applications on behalf of
the buyers, Paul and Melissa Belzner. Myford and Seidenstricker
intended for the bank to make a new $95,000 bridge loan to the
Belzners and for this money to be used to pay off the original
loan.
The new loan application contained false financial
information. It also falsely stated that the Belzners had active
accounts at the People's State Bank and that they had been
approved for a mortgage by another lender. The application was
accompanied by a forged mortgage commitment letter, and the
Belzners' signatures were forged.
According to his presentence investigation report,
Mummert inserted some of the false information on the loan
application, and he was present when the Belzners' signatures
were forged. Over a period of time, Mummert then issued $95,000
in cashier's checks to Myford, who forged the Belzners'
endorsements and used the checks to pay off the initial
construction loan. After the Belzners subsequently informed the
bank that they had not signed the loan application, the fraud was
discovered.
In August 1993, Mummert was charged in a one-count
information with causing false statements to be made in the
records of a federally insured credit institution, in violation
of 18 U.S.C. § 1006. This information alleged that Mummert had
submitted the false and forged bank loan applications.
In September 1993, Mummert pled guilty to this offense,
and a presentence investigation report was prepared. The report
determined that the amount of loss was $95,000 and that Mummert's
offense level should therefore be increased by six levels under
U.S.S.G. § 2F1.1(b)(1)(G). The report also concluded that a two-
level increase for more than minimal planning should be made
under U.S.S.G. § 2F1.1(b)(2)(A). In addition, the report
concluded that there were no factors that warranted a sentencing
departure.
Mummert's attorney disputed all of these
determinations. With respect to the amount of loss, he argued:
All proceeds of the $95,000.00 loan
which constitutes the basis of this
prosecution went to the construction of
a home. That home is presently for
sale. The owner of that property has
advised the bank that they will be
repaid completely immediately upon the
sale of the property. . . .
Furthermore, the bank has long had civil
redress available to it to secure the
return of its money if they thought that
they could do so more promptly that
awaiting the sale of the home. The bank
did not avail themselves of this relief,
however, because there has never been
any question regarding the value of the
home, the willingness to sell it, the
intention to pay the bank fully upon its
sale and, thus, the inevitability of the
return of the full $95,000.00 plus
interest.
Mummert's attorney also argued that his client's part
in the completion of a forged loan application did not show more
than minimal planning, and he contended that a downward departure
was warranted on several grounds. First, he argued that such a
departure was justified under U.S.S.G. § 5K2.13 based on
diminished capacity. Second, he argued that a departure was
justified under 18 U.S.C. § 3553(b), based on a combination of
mitigating circumstances, including Mummert's benign motive, his
lack of profit from the crime, his history of childhood abuse,
and the length of time during which he did not commit any crimes.
See app. 77-78.
The district court adopted "the factual finding and
guideline application in the presentence report" without comment.
Id. at 95. With respect to the defendant's requests for a
downward departure, the court said the following:
This is a very hard problematic case. I will
not accept the diminished capacity as reason
to depart. If anything, I have given some
real consideration to a departure based on
aberration of this man's character in
performing this. But the cases I have been
able to find on aberrant behavior usually are
combined with an immediate acceptance of
responsibility and restitution where
applicable. So I don't think there can be a
departure for that reason.
Id. at 86. This appeal followed.
II.
On appeal, Mummert contends that the district court
erred in finding that the amount of loss under U.S.S.G. § 2F1.1
was $95,000. Instead, Mummert argues, the bank suffered no loss
because, after the disclosure of the false statements and forged
signatures on the loan application, Seidenstricker wrote a letter
to the bank stating:
The [property in question] is currently under
contract with a new buyer. Application for a
mortgage is presently being made.
Upon receiving a commitment from the
mortgage lender a settlement date will be set
and the proceeds shall be paid to The Peoples
State Bank.
If for some unforeseen reason the home
is not sold I will gladly sign the above
mentioned property over to The Peoples State
Bank to ensure that your loan is covered.
Relying on United States v. Kopp, 951 F.2d 521 (3d Cir. 1991),
Mummert argues that the bank's loss should have been calculated
to be zero since it could have obtained the property pursuant to
Seidenstricker's offer. We disagree.
In Kopp, the defendant had been convicted for
fraudulently obtaining a $13.75 million bank loan. This loan was
secured by a mortgage. "[T]he bank demanded and received a deed
in lieu of foreclosure and eventually sold the property for $14.5
million, $750,000 more than the face value of the loan." Kopp,
951 F.2d at 524. "The bank nonetheless calculated that it
actually lost approximately $3.4 million overall, due to lost
interest . . . , the bank's operating expenses when taking over
the property . . . , and the cost of a low-interest loan to the
new purchaser." Id. The sentencing judge held that the full
face value of the loan -- $13.75 million -- constituted the loss
for guidelines purposes, but our court reversed, stating:
We . . . hold that fraud "loss" is, in
the first instance, the amount of money
the victim has actually lost (estimated
at the time of sentencing) not the
potential loss as measured at the time
of the crime. However, the "loss"
should be revised upward to the loss
that the defendant intended to inflict,
if that amount is higher than actual
loss.
Id. at 536; cf. United States v. Daddona, No. 93-7338 (3d Cir.
Aug. ___, 1994) slip op. at ____ (amount of loss under § 2F1.1 is
amount taken from bank in fraud scheme, not consequential damages
incurred by bank in completing project); United States v.
Badaracco, 954 F.2d 928, 937-38 (3d Cir. 1992) (in three-party
fraud case, amount of loss under § 2F1.1 is "gross gain" to
defendant in amount of face value of fraudulent loans). Our
court also noted that Application Note 7, which had been
promulgated after Kopp's sentencing, "confirm[ed]" and
"buttress[ed]" our interpretation of U.S.S.G. § 2F1.1. Kopp, 951
F.2d at 527 n.9, 534.
This new Application Note was in effect at the time of
Mummert's sentencing, and therefore we apply it directly here.
This Application Note states in pertinent part:
In fraudulent loan application cases . . .
the loss is the actual loss to the victim (or
if the loss has not yet come about, the
expected loss). 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. However,
where the intended loss is greater than the
actual loss, the intended loss is to be used.
U.S.S.G. § 2F1.1, Application Note 7(b).
Applying this interpretation here, the loss is the
actual loss to the bank at the time of sentencing ($95,000)
"reduced by the amount the lending institution has recovered (or
can expect to recover) from any assets pledged to secure the
loan" ($0). The fact that Seidenstricker offered, after
Mummert's crime was detected, to make a gratuitous transfer of
the property in question does not alter this calculation. A
defendant in a fraud case should not be able to reduce the amount
of loss for sentencing purposes by offering to make restitution
after being caught. See United States v. Shaffer, Nos. 93-
7508/7549 (3d Cir. Aug. , 1994); United States v. Frydenlund,
990 F.2d 822, 826 (5th Cir.), cert. denied, 114 S. Ct. 337
(1993); United States v. Rothberg, 954 F.2d 217, 219 (4th Cir.
1992); United States v. Carey, 895 F.2d 318, 323 (7th Cir. 1990).
The same rule applies when the offer of restitution is made by a
third party who was involved in the offense in the way that
Seidenstricker was here. Consequently, we hold that the district
court did not err in determining that the amount of loss for
sentencing purposes in this case was $95,000.
Mummert also maintains that the district court erred in
finding that he had engaged in "more than minimal planning"
within the meaning of U.S.S.G. § 2F1.1(b)(2)(A) and that he had
not clearly demonstrated "acceptance of responsibility for his
offense" within the meaning of U.S.S.G. § 3E1.1(a). These
findings are reviewed for clear error. See United States v.
Singh, 923 F.2d 1039, 1043 (3d Cir.) (acceptance of
responsibility), cert. denied, 500 U.S. 937 (1991); United States
v. Cianscewski, 894 F.2d 74, 82 (3d Cir. 1990) (more than minimal
planning). We find no clear error in this case.
III.
Mummert also argues that the district court erred in
denying his request for a downward departure. Under United
States v. Denardi, 892 F.2d 269, 271-72 (3d Cir. 1989), our
jurisdiction to entertain this argument depends on the basis for
the district court's ruling. If the ruling was based on the
district court's belief that a departure was legally
impermissible, we have jurisdiction to determine whether the
district court's understanding of the law was correct. By
contrast, if the district court's ruling was based on an exercise
of discretion, we lack jurisdiction. Id.; see also, e.g., United
States v. Love, 985 F.2d 732, 734 n.3 (3d Cir. 1993); United
States v. Bierley, 922 F.2d 1061, 1066 (3d Cir. 1990).
Here, unfortunately, the district court did not state
expressly whether its denial of the defendant's departure request
was based on legal or discretionary grounds. Since U.S.S.G. §
5K2.13 makes clear,1 and the government apparently acknowledged
1
. U.S.S.G. § 5K2.13 states:
If the defendant committed a non-violent
offense while suffering from significantly
at the time of sentencing, that a downward departure for
"diminished capacity" is permissible under some circumstances, it
seems quite likely that the district court's refusal to depart on
this ground was discretionary. The basis for the district
court's rejection of the defendants remaining departure
arguments, however, is impossible to discern from the record, and
therefore we are unable to determine whether we have jurisdiction
to review the district court's rejection of these remaining
arguments. Faced with the ambiguous record before us, we might
conceivably assume for the sake of argument that the district
court's rulings were based on the belief that a downward
departure was not legally permissible on the grounds cited. We
could then proceed to analyze whether each of the many factors
cited by the defendant, either singly or in combination, could
justify a downward departure.
There are, however, at least two reasons, one formal
and one practical, for not taking this approach. First, this
approach would require us to address one aspect of the merits of
the defendant's departure request before determining that we have
jurisdiction. Second, this approach might well result in a
significant waste of time. If we determined, after analysis,
(..continued)
reduced mental capacity not resulting from
voluntary use of drugs or other intoxicants,
a lower sentence may be warranted to reflect
the extent to which reduced mental capacity
contributed to the commission of the offense,
provided that the defendant's criminal
history does not indicate a need for
incarceration to protect the public.
that a departure was legally permissible on one or more of the
grounds cited by Mummert and remanded the case to the district
court, we might well learn that the district court had always
intended to reject Mummert's departure request as a matter of
discretion.
Accordingly, in cases such as this, where the record
does not make clear whether the district court's denial of
departure was based on legal or discretionary grounds, we believe
that the appropriate course of action is to vacate the sentence
and remand for the district court to clarify the basis for its
ruling.2
This holding is consistent with our decision in United
States v. Georgiadis, 933 F.2d 1219, 1222-24 (3d Cir. 1991). In
that case, we were able to determine, based on the record, that
the district court's refusal of a downward departure was based on
discretionary grounds. See Id. at 1224. The defendant in that
case contended, however, that a district court must do more than
just make clear whether a refusal to depart is based on legal or
discretionary grounds. Instead, the defendant contended that the
2
. The Tenth Circuit recently held that "unless [a district]
judge's language unambiguously states that the judge does not
believe he has authority to downward depart, we will not review
his decision." United States v. Rodriguez, 1994 U.S. App. LEXIS
18697, 1994 WL 383186 (10th Cir. 1994). This rule appears to be
designed to promote essentially the same objective as the rule we
adopt in this case, i.e., to encourage district courts to make
clear whether their departure rulings rest on legal or
discretionary grounds. Under the Tenth Circuit's approach,
however, a defendant whose departure request is rejected with an
ambiguous ruling based on legal grounds would apparently be
deprived of the appellate review to which he is statutorily
entitled. Our approach would not allow this to occur.
"sentencing court must always indicate on the record that it
knows it has authority to depart, considered the defendant's
request to do so, and decided not to depart."3 Id. at 1222. We
held that such recitals are not mandatory. Id. at 1222-23.
Thus, Georgiadis did not concern the question whether a
sentencing court must provide a record that is sufficient to
enable us to determine whether we have appellate jurisdiction;
rather, Georgiadis concerned the question whether a sentencing
court that refuses to make a departure on discretionary grounds
is required to provide additional statements. Consequently,
Georgiadis is consistent with our holding here.
IV.
For these reasons, we vacate the sentence imposed by
the district court and remand for further proceedings consistent
with this opinion. In taking this approach, we emphasize that we
have not reached any conclusion with respect to the question
whether a downward departure on any of the grounds cited by
Mummert would be legally permissible.
3
. In Georgiadis, the defendant suggested that the record did
not make clear whether the district court had denied his
departure request on legal or discretionary grounds. United
States v. Georgiadis, No. 90-3224, Appellant's Br. at 21-26. The
government disagreed, stating that the record showed that the
trial judge had made "a discretionary nonappealable refusal to
depart." No. 90-3224, Appellee's Br. at 25 (emphasis in
original). Our court agreed with the government's interpretation
of the record. See 933 F.2d at 1224.