United States v. Copple ( 1996 )

Opinions of the United
1996 Decisions States Court of Appeals
for the Third Circuit
2-1-1996
United States v. Copple
Precedential or Non-Precedential:
Docket 95-3119
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UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
_______________
No. 95-3119
_______________
UNITED STATES OF AMERICA
v.
JOHN R. COPPLE, an individual;
MECHEM FINANCIAL INCORPORATED,
a corporation
JOHN R. COPPLE,
Appellant
_______________
On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. Criminal No. 91-cr-00026E)
_______________
Argued September 11, 1995
Before: SLOVITER, Chief Judge, and ALITO,
Circuit Judge, and RENDELL, District Judge*
(Opinion filed February 1, 1996)
_______________
Leonard G. Ambrose, III (Argued)
Ambrose, Friedman & Weichler
Erie, PA 16502-1495
Attorney for Appellant
Bonnie R. Schlueter (Argued)
Office of United States Attorney
Pittsburgh, PA l5219
Attorney for Appellee
_____________
OPINION OF THE COURT
______________
* Hon. Marjorie O. Rendell, United States District Court for the
Eastern District of Pennsylvania, sitting by designation.
1
SLOVITER, Chief Judge.
This case is before us on the appeal of defendant John
R. Copple from that portion of the district court's judgment of
sentence ordering restitution in the amount of $4,257,940.45. In
an earlier appeal in the same case, we vacated the judgment of
sentence and remanded for resentencing. We directed the district
court, inter alia, to make findings about Copple's ability to pay
restitution. Following a hearing, the court reimposed the same
amount of restitution. We conclude that Copple's argument that
the restitution order is unreasonable and clearly excessive in
light of the record developed at the resentencing hearing is
well-taken.
I.
The facts are fully set forth in our prior opinion,
United States v. Copple, 24 F.3d 535 (3d Cir.) (Copple I), cert.
denied, 115 S. Ct. 488 (1994), and we therefore repeat only so
far as is necessary in the context of this appeal. Copple, who
was convicted on multiple counts of mail fraud and income tax
evasion, had defrauded funeral directors of funds which he had
promised to channel into low-risk/high-return investments. Copple
and his investment firm obtained $12 million from the
pre-paid funeral plans of a large number of funeral directors,
but instead of investing the money as promised Copple used it to
increase his personal assets and live extravagantly. Copple's
firm filed for bankruptcy.
2
The bankruptcy trustee, who discovered Copple's
misappropriation, was able to recoup only a limited amount of
these assets, primarily several accounts and deposits totalling
$389,356.51 and coins from Copple's rare coin collection that
were later auctioned off for $209,045. The loss to the victims
of Copple's swindle was $4,257,940.45. See Copple I, 24 F.3d at
538-40.
A jury convicted Copple on 34 counts of mail fraud and
3 counts of income tax evasion. Copple was sentenced to 71
months imprisonment, a $100,000 fine, a special assessment of
$1850 and three years supervised release. The district court
accepted the findings in the presentence report concerning money
due victims, and ordered Copple to pay restitution of
$4,257,940.45.
Copple appealed, challenging both his conviction and
sentence. This court affirmed the conviction, but vacated the
sentence because the district court impermissibly based an upward
departure on the large number of victims and the amount of
monetary loss involved.
More relevant for our purposes here is our discussion
of the restitution portion of the district court's judgment. We
emphasized our cases instructing that restitution orders be
grounded on specific factual findings regarding the defendant's
economic circumstances and other relevant financial information.
We noted that the district court had failed to make any such
findings to support its restitution order of $4,257,940.45, and
"therefore remand[ed] for the district court to make the factual
3
findings necessary to support such order of restitution as it may
make." Id. at 549-50.
On remand, the district court conducted a resentencing
hearing. Mary Copple, Copple's wife and the caretaker for their
two minor children - Jennifer, 18 years old and John, 16 years
old, testified that she could not work or even complete basic
daily tasks because of chronic mental illness, that she required
and had been receiving psychiatric treatment for three years, and
that her husband and her daughter also suffered from mental
illness and were under physicians' care. App. at 53-66. She
stated that her only steady income was $403 in monthly welfare
payments and $292 in monthly food stamps, and that the occasional
commission checks she had received from her husband's insurance
policy renewals totalled $300. She testified that her home was
subject to foreclosure after her failure to pay mortgage payments
for 15 months, that any remaining equity was subject to levy by
the bankruptcy trustee, that the home's electricity and gas
utilities had been discontinued for her inability to pay bills,
and that her only other assets were $400 in a bank account, some
furniture, and a 1987 Cadillac. Id. at 58-70.
Jennifer Copple, Copple's eighteen-year old daughter,
testified that she suffered from manic depression, was on
medication and had been undergoing regular therapy, and as a
result could attend school only part-time. Id. at 73-75. The
government presented no evidence at the hearing. The court
resentenced Copple to a shorter term of 63 months imprisonment,
vacated the $100,000 fine it had imposed earlier, and reimposed
4
the $1,850 special assessment and three-year period of supervised
release.
In addition, the court again ordered that Copple pay
restitution of $4,257,940.45. After establishing that "[t]he
identification of the various victims and the amounts of
individual losses are consistent with the testimony of the
various funeral directors at trial and were not challenged by the
Defendant," App. at 103, the district court renewed its order of
full restitution on the following basis:
With respect to the Defendant's ability to
pay, obviously, according to the testimony of
his wife, the family is in dire financial
straits at this time. But Mr. Copple is a
college graduate. He certainly has been
successful, albeit in an unlawful way in many
instances, but he's certainly been a
successful businessman as far as gaining the
ends which he hoped to gain in the business
world. So I think certainly the potential is
there for him to succeed with respect to his
finances in the future.
App. at 104.
Copple challenges only the restitution order on this
appeal. The district court had jurisdiction under 18 U.S.C.
§3231, and we have jurisdiction pursuant to 28 U.S.C. § 1291.
We conduct plenary review to determine whether a restitution
order is permitted under law, but review the specific order only
for abuse of discretion. United States v. Graham, No. 94-1370,
1995 WL 744974, at *2 (3d Cir. Dec. 18, 1995).
5
II.
The requirements according to which a district court
may permissibly fashion and validly impose a restitution order
are contained in the two provisions of the Victim and Witness
Protection Act of 1982 (VWPA), since recodified at 18 U.S.C.
§§3663 and 3664 and incorporated into United States Sentencing
Guideline § 5E1.1 and its accompanying commentary. 18 U.S.C.
§3663 authorizes a sentencing court to order that a defendant
make restitution to any victims of the offense of conviction. 18
U.S.C. § 3663(a)(1) (1994). Before the court does so, it must
consider the following specific factors: "the amount of the loss
sustained by any victim as a result of the offense, the financial
resources of the defendant, the financial needs and earning
ability of the defendant and the defendant's dependents, and such
other factors as the court deems appropriate." 18 U.S.C.
§3664(a) (1994).
In order to facilitate meaningful appellate review,
this court has exercised its supervisory power to require the
district courts "to make specific findings as to the factual
issues that are relevant to the application of the restitution
provisions of the VWPA." United States v. Palma, 760 F.2d 475,
480 (3d Cir. 1985). In Copple I, we referred to our earlier
opinion in United States v. Logar, 975 F.2d 958, 961 (3d Cir.
1992), where we identified the following factual matters to be
considered by the sentencing court before ordering restitution:
1) the amount of loss, 2) the defendant's ability to
pay and the financial need of the defendant and the
defendant's dependents, and 3) the relationship between
6
the restitution imposed and the loss caused by the
defendant's conduct.
See Copple I, 24 F.3d at 549. We also stated that the court
must point to the evidence . . . supporting the
calculation of loss to the victims.
Id. at 549-50. Copple argues that the district court failed to
follow those explicit directions on remand.
Before it reinstated its restitution order, the
district court noted that the government's "identification of the
various victims and the amounts of individual losses" were
undisputed and had been corroborated by testimony at trial. App.
at 103. Thus, the court satisfied our instruction to make an
explicit finding regarding the amount of the victims' loss, and
Copple does not argue otherwise.
Instead, this appeal centers on the court's conclusion
that Copple would be able to pay the amount of restitution it
set. The court based that conclusion on the "findings" that
"Copple is a college graduate" and that "[h]e certainly has been
successful, albeit in an unlawful way in many instances, . . . in
the business world." App. at 104. It made no findings
concerning Copple's financial resources. Nor did it make
findings about Copple's financial needs, and observed only that
"the family is in dire financial straits at this time," an
assertion hardly supportive of the exceptionally large
restitution amount it ultimately ordered.
The government makes essentially two arguments in its
effort to sustain the district court's restitution order. First
7
it argues that the order can be upheld on the bases given by the
district court, and that the district court properly considered
Copple's college education, skills and intelligence in
determining his future ability to pay. We agree that if there is
a reasonable basis for a projection of the defendant's future
earning ability, a restitution order can be grounded on these
factors. In this case, however, notwithstanding our prior remand
to give the district court the opportunity to furnish the
specific findings that we have held must accompany the
restitution order, no such findings were made. After noting
Copple's college degree and business acumen, the district court
imposed its restitution order based merely on the following
conclusion: "So I think certainly the potential is there for
[Copple] to succeed with respect to his finances in the future."
App. at 104.
Despite the government's valiant efforts to defend
this conclusion, it is most telling that it concedes that
"[a]dmittedly, [the district judge] did not explain how he
arrived at the conclusion that Copple, by virtue of a college
education and business acumen, could earn, by legitimate means,
enough to support his family, to pay his back taxes and current
taxes and to clear $4,257,940.45 for restitution." Brief of
Appellee at 19. The government suggests that based on the
evidence presented at sentencing, "one might well conjecture that
Copple could be expected to clear, at most, $250,000 to be used
toward restitution ($50,000 per year over a five year period)."
Brief of Appellee at 20 (emphasis added). There is nothing in
8
the record to support the government's suggestion that a man with
an ill wife and two children, who apparently also have emotional
problems, could clear $50,000 a year. Persons in far more
favorable circumstances would have difficulty doing so. Moreover,
as the government recognizes, the restitution order in this case
was not $250,000 but more than sixteen times that amount. We
cannot sustain any restitution order, much less one in excess of
$4 million, on conjecture.
The second argument the government makes to support the
restitution order is based on its contention that Copple has not
yet accounted for all the assets he acquired with the
misappropriated funds, which the government claims include
$427,000 from Copple's pre-bankruptcy sale of some of his rare
coins and $196,334 in furniture. It argues that the district
court's liberal restitution order can be viewed as an "implicit"
attempt to capture unidentified holdings that Copple has failed
to produce voluntarily.
It is not improbable that the district court's
restitution order may have been motivated by a reasonable
apprehension that Copple has secreted certain assets, even though
the court did not say so. It does not follow, however, that
factual findings supporting such an apprehension must be as
covert as the hidden assets themselves.
The government contends that the district court could
reasonably have accorded little credibility to Copple's showings
regarding his lack of ability to pay in light of Copple's
suspected retention of certain assets and his generally
9
uncooperative attitude in accounting for and turning over other
assets to the bankruptcy trustee. However, the district court
made no explicit finding of lack of credibility. Even if the
district court's order were premised on its disbelief of Copple's
assertions, we cannot affirm a restitution order where the amount
fixed is based merely on the court's lack of confidence in the
defendant.
We do not suggest that a defendant who has become
expert at secreting the proceeds of the crime can avoid the
obligation to disgorge them. The proceeds from a defendant's
illegal conduct that the defendant still retains or can recoup
are certainly encompassed within the "financial resources of the
defendant," 18 U.S.C. § 3664(a), that the district court should
consider in fashioning a restitution order. Of course, the
continued existence of such proceeds is a factual issue that
should be accompanied by "specific findings."
Although we have not seen it applied elsewhere, we
believe there is a method by which the court can fashion a
restitution order that accounts for the court's reasonable belief
that there are secreted assets and that satisfies the court's
obligation to make the necessary supporting findings. Under 18
U.S.C. § 3664(d), the sentencing court has broad discretion to
assign to either party "[t]he burden of demonstrating such other
10
matters as the court deems appropriate" in the course of its
fact-finding. It would be sufficient for a district court that
believes, based on the record, that such proceeds are still
available to determine the amount properly attributable to the
defendant with reasonable precision.
For example, in this case the court may adopt as a
starting figure the total amount of value (cash, asset values,
etc.) that (1) Copple was found originally to have appropriated
and (2) for which he has not yet accounted. The court should
then permit Copple to prove that he is, in fact, not in
possession of any part of that total amount by specific evidence
showing the amount of disbursements and their destination. Unless
Copple can disprove possession of any remaining amount in this
manner, the court may consider the resulting figure as
constituting "financial resources of the defendant." The court
may then make its determination of Copple's capacity to pay the
ordered amount within five years, taking into account the
resources arrived at by the above method along with other
relevant factors, such as the financial needs and earning ability
of Copple and his dependents. See 18 U.S.C. §§ 3664(a) &
§ 3663(f).
We believe this approach is preferable to the
speculative exercise that the government would have us perform.
For one thing, it enhances the basis for appellate review. More
important, it places the responsibility for accounting for funds
misappropriated squarely on the individual who misappropriated
them. Assigning to Copple the burden of proving disgorgement of
11
the total amount appropriated is consistent with (1) the
statutory mandate, see 18 U.S.C. § 3664(d) ("The burden of
demonstrating the financial resources of the defendant . . .
shall be on the defendant."), (2) the legislative history of the
VWPA, see S. Rep. No. 532, 97th Cong., 2d Sess. 31, reprinted in
1982 U.S.C.C.A.N. 2515, 2537 (quoted in U.S.S.G. § 5E1.1,
comment. (backg'd.)) ("In those unusual cases where the precise
amount owed is difficult to determine, the section authorizes the
court to reach an expeditious, reasonable determination of
appropriate restitution by resolving uncertainties with a view
toward achieving fairness to the victim."), and (3) our policy-
based conviction that defendants ought not be permitted to
profit, quite literally, from uncertainty for which their illegal
conduct is ultimately responsible.
Because we cannot sustain the restitution order on the
basis of the findings that the district court made, we must once
again, albeit reluctantly, remand this case. In doing so, we
recapitulate some relevant principles: First, "[a]ny dispute as
to the proper amount or type of restitution shall be resolved by
the court by the preponderance of the evidence." 18 U.S.C.
§3664(d). Second, although indigency at the time of sentencing
is not a bar to ordering restitution, see United States v.
Hallman, 23 F.3d 821, 827 (3d Cir.) (citing Logar, 975 F.2d at
962), cert. denied, 115 S. Ct. 216 (1994), the sentencing court
should ground the amount of restitution ordered on realistic
prospects that the defendant will be able to pay it, and not on
fantastic or overly speculative possibilities. See Hallman, 23
12
F.3d at 827 (restitution order "may not be based on some future
fortuitous event that may befall the appellant, but must be based
on realistic expectations"); United States v. Seale, 20 F.3d
1279, 1286 (3d Cir. 1994) (in determining future earning
capacity, "some degree of certainty is required"); Logar, 975
F.2d 958, 964 (limiting the district court to consideration of
"realistic" possible additional sources of income); United States
v. Mahoney, 859 F.2d 47, 52 (7th Cir. 1988) (describing
impossible restitution orders as "shams" and as "defeating any
hope of restitution and impeding the rehabilitation process").
Third, the restitution obligation is intended for repayment
within five years. See 18 U.S.C. § 3663(f); United States v.
Sleight, 808 F.2d 1012, 1021 (3d Cir. 1987).
The relevant determination in favor of an order of
restitution, therefore, is not a court's vague appreciation of a
defendant's "potential to succeed" financially at some point in
the undefined future, but, rather, its finding by a preponderance
of the evidence that there exists a realistic prospect that
defendant will be able to pay the required amount within five
years.
Although we stop short of ruling on the substantive
appropriateness of the particular restitution amount ordered by
the district court, we cannot avoid noting that the
extraordinarily ambitious amount ordered, in excess of four
million dollars, appears, at the very least, somewhat
counterintuitive in light of the court's contemporaneous decision
to vacate the $100,000 fine it originally imposed "in view of
13
[Copple's] financial situation." App. at 104. The absence of
explicit findings on the crucial factual issues prevents us from
evaluating confidently the incongruity thereby presented. See
Graham, 1995 WL 744974, at *7 n.2 (while "anomalous that the
district court concluded that [defendant] would be able to pay
approximately $46,000.00 in restitution if he is unable to pay
any fine, . . . the lack of record findings makes these claims
difficult to review").
Of course, the district court may well have considered
the distinct standards governing an order of restitution and the
imposition of a fine. Compare U.S.S.G. § 5E1.1, comment.
(backg'd.) (instructing only that court ordering restitution
"consider" factors indicative of defendant's ability to pay) with
U.S.S.G. § 5E1.2(a) (instructing court not to impose fine where
"the defendant establishes that he is unable to pay and is not
likely to become able to pay"). It may also have considered the
difference in the time-frames for payment. Compare U.S.S.G.
§5E1.1, comment. (backg'd.) (imposing a maximum five-year time
limit on payment of restitution) with U.S.S.G. § 5E1.2(g) (time
before fine paid "generally should not exceed twelve months").
See generally United States v. Ahmad, 2 F.3d 245, 247-49 (7th
Cir. 1993) (attempting reconciliation of district court's
decisions to order restitution and withhold imposition of fine
with possible justifications).
Even if the government is correct that Copple has
retained $623,334 in assets, under the court's order Copple must
come up with over $3.6 million in five years to satisfy the
14
restitution order, plus an additional $665,859 to pay off back
taxes. Copple is currently incarcerated, has a wife and two
children to support after he completes his term, and faces his
employment prospects with fraud and tax evasion convictions in
tow. The value of a college degree notwithstanding, we cannot
say--in the absence of the factual findings discussed--that on
substantive review we could conclude the court's order to be
factually supportable.
III.
In light of the foregoing, we will vacate the district
court's restitution order and remand for the required factual
findings supporting such order of restitution as it may make.
15
United States v. Copple
No. 95-3119
ALITO, Circuit Judge, concurring:
I join the opinion of the court. While restitution for
victims is very important, no good is done by restitution orders
that vastly exceed a defendant's ability to pay and that
therefore will never be satisfied.
The defendant in this case caused great suffering for
the victims of his crimes, while he and his family used the
stolen funds to live lavishly. As we observed in our earlier
opinion, the defendant's personal expenditures during a three-
year period totalled $2.5 million, including more than $500,000
for jewelry and nearly that much for gifts to his family. 24
F.3d at 539.
Defendants convicted of fraud offenses are sometimes
masters at hiding assets. Therefore, if the government bore the
burden of proving that such defendants still possess illegally
obtained assets, the government would be unable to locate hidden
assets, those assets would not be taken into account in framing
the restitution orders, and the defendants would continue to
profit at the expense of the innocent victims. This would be
unconscionable.
The solution is to place the burden of proof on the
defendant to show what has happened to all of the illegally
obtained assets. See 18 U.S.C. § 3664(d). All the assets for
16
which the defendant cannot account may be included in the amount
of restitution ordered. To the extent that records are
unavailable, the risk of inaccuracy should be borne by the
defendant rather than the victims.
17