United States v. Feldman ( 2003 )

Opinions of the United
2003 Decisions States Court of Appeals
for the Third Circuit
7-30-2003
USA v. Feldman
Precedential or Non-Precedential: Precedential
Docket No. 02-3547
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PRECEDENTIAL
Filed July 30, 2003
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 02-3547
UNITED STATES OF AMERICA
v.
HOWARD ALLEN FELDMAN,
Appellant
On Appeal From the United States District Court
For the Eastern District of Pennsylvania
(D.C. Cr. No. 01-448-01)
Judge: Honorable Bruce W. Kauffman
Argued: May 20, 2003
Before: SCIRICA, Chief Judge, NYGAARD
and BECKER, Circuit Judges
(Filed July 30, 2003)
KIRK T. KARASZKIEWICZ (ARGUED)
100 S. Broad Street
Suite 2230
Philadelphia, PA 19110
Counsel for Appellant
2
PARTRICK L. MEEHAN
United States Attorney
LAURIE MAGID
Deputy United States Attorney
for Policy and Appeals
ROBERT A. ZAUZMER
Assistant United States Attorney
Senior Appellate Counsel
AMY L. KURLAND (ARGUED)
Assistant United States Attorney
615 Chestnut Street
Philadelphia, PA 19106
Counsel for Appellees
OPINION OF THE COURT
BECKER, Circuit Judge.
This appeal by Howard Allen Feldman turns on the
meaning of “loss” under the United States Sentencing
Guidelines and the Victim Witness Protection Act (as
amended by the Mandatory Victims Restitution Act).
Feldman filed a bankruptcy petition in which he vastly
understated the amount of property he owned. Indicted for
concealing assets and making false declarations in
bankruptcy, he pled guilty and was sentenced to fifteen
months imprisonment and ordered to pay restitution to his
creditors. Feldman contests the District Court’s
determination of the amount of loss, which affected both
the prison sentence he received (under the Sentencing
Guidelines a defendant’s base offense level will be increased
incrementally for the loss cause by his crime) and the
amount of restitution he was ordered to pay to his
creditors.
Feldman contends that there was little if any actual loss
that resulted from his crime and that the District Court
erred in its calculation that his creditors lost over
$138,000, and were entitled to restitution in that amount.
He submits that most of the property he failed to report
3
was held by him and his wife as tenants by the entireties
under Pennsylvania law, making the property unavailable
for execution by his creditors to satisfy the debt owed by
Feldman alone. See 18 U.S.C. §§ 3663 and 3664 (stating
that restitution is limited to the amount of loss actually
caused by the defendant’s crime). In other words, Feldman
claims that although he committed a crime (he
acknowledges that he was obligated to report the property),
his crime had no effect on the amount of money his
creditors ultimately received from the bankruptcy
discharge.
The District Court did not determine whether or not the
property owned by Feldman and his wife as tenants by the
entireties would have been exempt from bankruptcy,
reasoning instead that Feldman lost the right to claim the
exemption when he failed to disclose the property. The
Court then concluded that the actual loss to Feldman’s
creditors was the difference between what was owed to
them and what they actually received in the bankruptcy
discharge. The Court based this conclusion on case law
suggesting that bankruptcy courts can refuse to allow an
exemption for property that the debtor initially concealed.
Without getting into the merits of whether property
exempt from bankruptcy because it is held as tenants by
the entireties can ever be distributed to the creditors
unique to one spouse, we conclude that the District Court’s
reasoning was flawed. In our view, the loss of an exemption
during a bankruptcy proceeding does not impact upon the
determination of actual loss (for restitution or sentencing
purposes) since the bankruptcy court, unlike the District
Court here, is not calculating the harm caused by the
defendant’s crime.
The determination of actual loss is relevant to the
sentencing enhancement, since loss under the Sentencing
Guidelines is the greater of the actual loss caused by the
defendant’s illegal actions or the amount of loss the
defendant intended to cause. See U.S.S.G. § 2F1.1
application note 8 (“[I]f an intended loss that the defendant
was attempting to inflict can be determined, this figure will
be used if it is greater than the actual loss.”); United States
v. Yeaman, 194 F.3d 442, 456 (3d Cir. 1999). Under our
4
jurisprudence, even if the District Court erred in
determining actual loss, we must still affirm the sentence if
the District Court did not abuse its discretion in finding
that Feldman intended to cause a loss (greater than the
actual loss), even if it was impossible for that loss to have
actually occurred.
Feldman claims that the government failed to show that
he intended to cause a loss to his creditors; rather, he
maintains that he thought the property he concealed was
exempt from bankruptcy and he did not disclose it because
he thought the large amount of property would “raise a red
flag” and delay the bankruptcy proceeding. Feldman also
submits that he never intended his creditors to receive less
money by failing to disclose all of his property, since by
reason of the exemption they would not be able to reach the
concealed assets. However, we do not believe that the
government was obligated to disprove Feldman’s claim that
he thought the property was exempt. While the government
must prove Feldman’s intent by a preponderance of the
evidence, we conclude that intent can be inferred from the
fact that Feldman concealed a large amount of property. It
is enough that the District Court found unbelievable
Feldman’s claim that he simply wanted to expedite the
bankruptcy process. Thus, while the District Court may
have erred in its discussion of actual loss, that error is
irrelevant for sentencing purposes since the District Court
did not abuse its discretion by determining that Feldman
intended to cause a loss of the entire amount of debt
owned. Accordingly, the increase in Feldman’s base offense
level, while not justified by a finding of actual loss, is
justified by a finding of intended loss; hence we will affirm
the sentence imposed.
In contrast, a restitution award can only be based upon
actual loss. Since the District Court erred in its
determination of actual loss, we will vacate the restitution
award and remand for further proceedings, so that the
District Court can compute actual loss based on the
difference between what Feldman’s creditors would have
received if Feldman had acted lawfully and disclosed all of
his assets and the amount they actually received.
5
I.
On September 22, 1997, Feldman filed a Chapter 7
personal bankruptcy petition, 11 U.S.C. § 101 et seq., in
the United States Bankruptcy Court for the Eastern District
of Pennsylvania, seeking relief from $205,253.30 in credit
card debt he had incurred. Feldman listed his personal
property as valued at $5,845 and his real estate holdings as
valued at $325,000. On December 17, 1997, Feldman
amended the original bankruptcy schedule, listing his
personal property at $7,445. He testified at a meeting of
creditors on January 5, 1998 that he had fully and
accurately disclosed all real and personal property he
owned.
A bankruptcy trustee was appointed who learned that
Feldman had an ownership interest in a number of
valuable pieces of art and other antiques that he had not
listed on the bankruptcy schedule. These assets included
“The Howard and Catherine Feldman Collection,” a
collection of Chinese treaty port paintings, American and
English furniture, decorations, folk art, clocks, rugs and
phrenological material, which eventually sold at a Sotheby’s
auction for $1,207,325 on October 9, 1998 (netting
$910,870.25 after commission). Between September 22,
1996 and June 8, 1999, Feldman and his wife also sold
numerous other items through the Sotheby’s and Christie’s
auction houses for a total of $231,272.46. The proceeds
from these sales were wired to the Feldmans’ joint bank
account.
The bankruptcy trustee also learned that Feldman owned
two Jaguar automobiles in his own name that he had not
declared on the bankruptcy schedules. Feldman produced
a letter of sale, indicating that he had sold the vehicles to
a man named Daniel Krause, yet Feldman retained
possession of and title to the cars (Feldman claimed that he
did so because Krause did not want his wife to find out that
he had purchased them). Krause denied that he had
purchased the vehicles. Feldman entered into an agreement
with the Chapter 7 trustee to buy one of the cars for $5,000
and the other was sold at auction for $16,000 (when a
bankruptcy petition is filed, all the property that belonged
6
to the debtor automatically becomes the property of the
bankruptcy estate pursuant to 11 U.S.C. §§ 541 and 1306).1
On July 28, 1998 the Bankruptcy Court granted
Feldman’s motion to convert the case to Chapter 13. On
August 11, 1998, Feldman amended the bankruptcy
schedule to reflect the findings of the Chapter 7 bankruptcy
trustee, disclosing personal property valued at $741,900,
the bulk of which he claimed was exempt from his creditors
because it was owned as tenants by the entireties with his
wife. However, at a November 24, 1998 creditors’ meeting,
Feldman admitted that he had sold property at a Sotheby’s
auction for approximately $911,000. He also stated that
although he had initially listed his home, which he owned
with his wife, as valued at $325,000, the house had been
listed for sale at $795,000 (but later reduced to $695,000).
The house eventually sold for $550,000 on April 4, 2000
(using this figure, the government contended before the
District Court that Feldman had undervalued his home by
$225,000). Feldman nonetheless claimed that he was
entitled to a discharge in bankruptcy because the personal
property and real estate was also owned by his wife and
was thus totally exempt from bankruptcy. Based on the
undervaluation of his home and the continued concealment
of assets, the bankruptcy trustee objected to the
exemptions and to Feldman being discharged.
Upon motion by the bankruptcy trustee, the case was
reconverted to a Chapter 7 proceeding. The bankruptcy
trustee eventually entered into a settlement agreement with
Feldman, whereby he would pay $50,000 to settle the
objections to the claimed exemptions. It is not clear from
1. Feldman does not claim that the Jaguar vehicles were owned by him
and his wife jointly. As such, his explanation that he did not intend for
his creditors to lose money when he failed to report the rest of the
property does not apply to the Jaguar vehicles. Thus, the only plausible
explanation for Feldman’s concealment of the Jaguar vehicles is that he
intended to keep them out of the reach of his creditors. It appears that
Feldman must have intended to cause his creditors a loss of at least the
value of the cars. We note, however, that there may have been no actual
loss from the concealment of the vehicles, since the creditors were paid
$21,000 for the vehicles (assuming that this amount represents their
value, which is not clear from the record).
7
the record why the bankruptcy trustee decided that it was
in the best interests of the creditors to settle (we can only
speculate that the trustee was concerned that the
Bankruptcy Court would exclude the jointly owned
property, even though it was initially concealed, or that the
cost of continued litigation would reduce the amount of
money available for the creditors). The settlement amount
was added to the $21,000 from the sale of the Jaguar
vehicles. Feldman was ultimately discharged from the rest
of his debt.
In the end, Feldman paid $71,000 to settle his debt. Fees
were subtracted, leaving Feldman’s creditors with
$61,292.38. Although Feldman had filed for bankruptcy
protection in a greater amount, the proofs of claim that
were filed totaled only $175,768.91. Thus, the amount of
unpaid proofs of claim totaled $114,476.53, resulting in a
distribution of approximately 34% of the amount owed to
Feldman’s creditors.
On March 19, 2002, Feldman pled guilty to four counts
of bankruptcy fraud in the District Court of the Eastern
District of Pennsylvania: Count One alleged that Feldman
concealed bankruptcy assets in violation of 18 U.S.C.
§ 152(1); and Counts Two through Four alleged that
Feldman made false declarations in a bankruptcy
proceeding in violation of 18 U.S.C. § 152(3). The
government told the Court that Feldman had concealed
personal property with a total value of $1,459,597.40. At
sentencing, the government urged that Feldman be given
an eight offense level increase in the Sentencing Guidelines
calculation pursuant to U.S.S.G. § 2F1.1(b)(1)(I), for losses
more than $200,000, since, in its submission, he had
intended to cause a loss of $203,784.30 (this included the
amount of debt from which Feldman sought to be
discharged, including fees). Feldman urged that there
should be no offense level increase since the government
could not prove that he intended or actually caused any
loss. Alternatively, Feldman claimed that his offense level
should only be increased by seven levels, pursuant to
U.S.S.G. § 2F1.1(b)(1)(H), for losses more than $120,000,
8
since the amount of loss would not exceed $200,000
without the addition of administrative costs.2
The District Court conducted two sentencing hearings; a
second hearing was scheduled to allow the parties to
submit supplemental material. The District Court made no
finding as to the exact amount of loss, since Feldman’s final
offense level would be fifteen (a guidelines range of eighteen
to twenty-four months) whether his offense level was
increased by seven or eight offense levels. Feldman had a
base offense level of six, U.S.S.G. § 2F1.1, plus seven
offense levels (or eight) for the loss, plus two offense levels
for more than minimal planning, U.S.S.G. § 2F1.1(b)(2),
plus two offense levels for fraud during a bankruptcy
proceeding, U.S.S.G. § 2F1.1(b)(4)(B), minus two offense
levels (or three if the offense level had been increased by
eight) for acceptance of responsibility. U.S.S.G. §§ 3E1.1(a)
and (b). If Feldman’s offense level was increased by eight
offense levels, it would have been decreased by three
offense levels for acceptance of responsibility, pursuant to
U.S.S.G. § 3E1.1(b), and if his offense level was increased
by seven offense levels, it would have been decreased by
two offense levels for acceptance of responsibility, pursuant
to U.S.S.G. § 3E1.1(a).
In its sentence, the District Court ordered that Feldman
be remanded to the custody of the Bureau of Prisons for
fifteen months on Count One, and then receive an
additional three years of supervised release. The District
2. U.S.S.G. § 2F1.1 provides the specific number of offense levels to add
to the defendant’s base offense level once the amount of loss has been
calculated:
(a) Base Offense Level: 6
(b) Specific Offense Characteristics
(1) If the loss exceeded $2,000, increase the offense level as
follows:
Loss (Apply the Greatest) Increase in Level
. . .
(H) More than $120,000 add 7
(I) More than $200,000 add 8
9
Court imposed the same term for Counts Two through
Four, to run concurrently with Count One. It also fined
Feldman $30,000 and imposed a special assessment of
$400. The District Court gave the parties time to reach a
settlement on the restitution amount. After it became clear
that no settlement was forthcoming, the District Court
ordered restitution in the amount of $138,671.69 for the
actual loss to Feldman’s creditors. It is not clear from the
record how this figure was calculated. However, we need
not determine how the District Court decided on this
amount since we will remand on the restitution issue for
other reasons.
Feldman timely appealed and the District Court granted
his motion for release pending appeal. The District Court
had jurisdiction pursuant to 18 U.S.C. § 3231 and we have
jurisdiction pursuant to 18 U.S.C. § 3742 and 28 U.S.C.
§ 1291. We review the factual determinations underlying
the application of the Sentencing Guidelines for clear error,
but we have plenary review over the legal determinations.
See United States v. Napier, 273 F.3d 276, 278 (3d Cir.
2001). Likewise, “we exercise plenary review over whether
an award of restitution is permitted under law, [but] we
review specific awards of restitution for abuse of
discretion.” United States v. Crandon, 173 F.3d 122,125 (3d
Cir. 1999).
II.
We will first discuss the restitution issue, which turns on
the determination of actual loss. This will obviate the need
to discuss actual loss in conjunction with the sentencing
issue.
A. Restitution
Under the Victim Witness Protection Act (as amended by
the Mandatory Victims Restitution Act “MVRA”), the
amount of restitution awarded is limited to the amount of
actual loss caused by the defendant’s crime. 18 U.S.C.
§§ 3663 and 3664. Feldman contends that the District
Court erred by awarding restitution since his creditors
incurred no actual loss because the property that he did
10
not report (the proceeds from the Sotheby’s and Christie’s
sales and the amount by which he undervalued his home)
would not have been reachable by his creditors even if he
had disclosed it because it was held by him and his wife as
tenants by the entireties. In Feldman’s submission, this
result follows from Section 522 of the Bankruptcy Code, 11
U.S.C. § 522, which allows the debtor to utilize state law
bankruptcy exemptions and the fact that in Pennsylvania,
property owned by both husband and wife as tenants by
the entireties is not reachable by the creditors of only the
husband or the wife. See 42 Pa. C.S.A. § 8123.
The credit card debt that triggered the bankruptcy was
incurred in Feldman’s name alone, while the assets he
concealed (excluding the Jaguar vehicles) were owned by
both Feldman and his wife. The government does not
concede that the property would have been exempt from
bankruptcy if Feldman had acted lawfully. Additionally, the
government asserts that in light of the large amount of
property owned by Feldman and his wife (even if exempt),
the bankruptcy trustee may not have recommended
discharge.
Instead of holding a hearing to determine whether or not
the property would have been exempt if Feldman had acted
lawfully, or whether the bankruptcy trustee would have
recommended a discharge, the District Court ordered the
parties to submit briefs discussing the government’s
proposition that in bankruptcy court, “if you fail to disclose
something you then lose the right to exempt it from the
estate.” The Court reasoned that if this proposition was
supported by caselaw, “it makes a very easy disposition” of
the determination of loss.
The District Court was ultimately persuaded by the
government’s assertion that in bankruptcy proceedings, a
debtor is not entitled to claim an exemption in bankruptcy
property that he fraudulently concealed; under this view,
creditors can reach property that would have otherwise
been exempt. See In re Glass, 60 F.3d 565 (9th Cir. 1995)
(affirming a decision of the Bankruptcy Appellate Panel
which did not allow the debtor to voluntarily amend his
bankruptcy schedule and claim a homestead exemption
where the debtor had concealed the property); Redmond v.
11
Tuttle, 698 F.2d 414, 417 (10th Cir. 1983) (“Property
fraudulently transferred out of an estate and later recovered
by the trustee cannot then be exempted by the debtor.”);
Matter of Doan, 672 F.2d 831, 833 (11th Cir. 1982)
(“[C]oncealment of an asset will bar exemption of that
asset.”); In re Yonikus, 966 F.2d 866, 872 (7th Cir. 1993)
(agreeing with Doan). The District Court concluded that this
logic should extend to the determination of actual loss,
reasoning that a debtor who has been dishonest in
concealing assets should not be allowed to use the
exemption provision as a shield. Thus, the Court
determined that the calculation of actual loss would not
exclude the property Feldman claims was exempt.
Feldman argues that the District Court erred by relying
on the caselaw cited above because those cases do not
stand for the proposition “that the debtor is automatically
or by operation of law barred from availing himself of the
exemptions in the disputed property.” However, we do not
believe that it is necessary at this juncture to determine
whether or not the law of this Circuit prevents debtors in
bankruptcy proceedings from claiming exemptions for
assets that they had initially concealed, though we note
that none of the cases cited by the government deals with
property exempt because it is held by two people as tenants
by the entireties, only one of whom has filed a bankruptcy
petition.
What is critical for us is the question whether the loss of
an exemption in a bankruptcy proceeding controls the
determination of actual loss for restitution (or sentencing)
purposes. The Bankruptcy Court may have denied the
exemptions based on Feldman’s concealment, making more
money available to Feldman’s creditors. However, that does
not necessarily mean that the District Court should have
included the concealed but arguably exempt assets in the
calculation of actual loss for the determination of
restitution. Instead, the concept of actual loss attempts to
determine the harm caused by the defendant’s crime. See
Yeaman, 194 F.3d at 457 (“[T]he actual loss determination
must be predicated on the harm caused by [the
defendant’s] offenses.” (quoting United States v. Evans, 155
F.3d 245, 253 (3d Cir. 1998)). This is very different from
12
what occurs in a bankruptcy proceeding where the
bankruptcy court is concerned with the rights of the
creditors as well as the debtor (thus, the bankruptcy court
may “tilt the scales” in favor of the creditors when the
debtor has acted improperly).
Moreover, the logic behind denying exemptions for assets
initially concealed by the debtor is to deter the concealment
of assets. In the restitution context, where the district court
is attempting to “make whole” the creditors by determining
actual loss, deterrence is not a factor. See United States v.
Diaz, 245 F.3d 294, 312 (3d Cir. 2001) (“The purpose of
restitution under the MVRA is to compensate the victim for
its losses and, to the extent possible, to make the victim
whole.”). Thus, we do not think that we can apply the
reasoning behind denying exemptions for assets concealed
in a bankruptcy proceeding to the determination of actual
loss for restitution (or sentencing) purposes.
The government essentially argues that Feldman
committed a crime and his creditors were not paid the full
amount owed to them, so the actual loss must be the
difference between what the creditors were owed and what
they were paid. However, this is not a proper calculation of
the harm caused by Feldman’s crime. See United States v.
Badarocco, 954 F.2d 928, 942 (3d Cir. 1992) (“[A]ny award
of restitution must be based on losses to the victim that
were caused by the counts of which the defendant was
convicted or to which he pled guilty.”) It may be the case
that Feldman caused his creditors to lose money because
he filed for bankruptcy, but this in itself is part of a lawful
regime. Creditors are often not paid in full when a debtor is
discharged in bankruptcy; otherwise a debtor would not
need to file a petition for bankruptcy. Instead, to determine
harm (and thus actual loss), we must compare what
actually happened with what would have happened if
Feldman had acted lawfully.3
3. Indeed, it may be that Feldman’s creditors received a larger payment
than they would have if Feldman had acted lawfully, for if Feldman had
acted honestly and the joint assets were determined to be exempt, his
creditors might not have received the $50,000 that Feldman paid in
settlement.
13
We will therefore vacate the judgment awarding
restitution and remand so that the District Court can
determine actual loss and thus the proper amount of
restitution (if any) that should be awarded to Feldman’s
creditors. The District Court should consider whether
Feldman would have been entitled to an exemption for
property owned by him and his wife as tenants by the
entireties if he had acted lawfully and whether the
bankruptcy trustee would have recommended discharge,
even if the property was exempt from bankruptcy, in light
of the large amount of property owned by Feldman and his
wife.
B. The Sentencing Guidelines Calculation
Since the District Court uses the greater of actual or
intended loss when imposing a sentencing enhancement,
see U.S.S.G. § 2F1.1, application note 8, we must affirm the
District Court’s imposition of a seven (or eight, as discussed
supra) offense level increase if that increase was based on
a finding that Feldman intended a loss (greater than the
amount of actual loss) even though we concluded above
that the District Court erred in determining the actual loss
caused by Feldman’s crime.4 Indeed, a defendant can be
sentenced based on his intended loss even if it was
impossible for any loss to have occurred. See United States
v. Geevers, 226 F.3d 186, 195 (3d Cir. 2000) (“[W]e join the
majority of courts of appeals in holding that impossibility is
not in and of itself a limit on the amount of intended loss
for purposes of calculating sentences under the guidelines.”).5
Thus, even if Feldman could not have caused any loss by
concealing exempt assets, he could still be subject to a
sentencing enhancement if he thought he would cause a
loss by concealing the assets.
4. This case is governed by the 2000 version of the Sentencing
Guidelines.
5. We note that a later version of the Sentencing Guidelines defines
intended loss as “includ[ing] intended pecuniary harm that would have
been impossible or unlikely to occur (e.g. as in a government sting
operation, or an insurance fraud in which the claim exceed the insured
value.)” U.S.S.G. § 2B1.1, application note 2.
14
Feldman claims that the government failed to meet its
burden of proving by a preponderance of the evidence that
he intended to cause a loss to his creditors; he asserts that
once he presented evidence suggesting that he thought his
creditors would be unaffected by the concealment of what
he believed to be exempt assets, the government was
obligated to present evidence to the contrary. See United
States v. Hayes, 242 F.3d 114, 119 (3d Cir. 2001) (holding
that the government has the burden of proving loss);
Napier, 273 F.3d at 279 (“The government bears the burden
to prove by a preponderance of the evidence the facts in
support of a sentence enhancement.” (citing Evans, 155
F.3d at 253)).
The government argues that it met the burden of proof
and urges us to adopt a bright line rule that “[i]ntended
loss includes the value of assets concealed from creditors
and the bankruptcy court.” The government maintains that
by filing a petition for bankruptcy, Feldman demonstrated
his intent to be discharged from the debt he owed to the
credit card companies; Feldman also admittedly concealed
assets to “speed along” the process. Thus, the argument
continues, Feldman committed a crime with the intent that
it would lead to the discharge of the entire amount of debt
owed.
Once again the government cites a string of cases from
other jurisdictions, which, it asserts, stands for the
proposition that intended loss is the amount of debt from
which the defendant sought to be discharged. See United
States v. Holland, 160 F.3d 377, 381 (7th Cir. 1998) (“In
imposing sentence, the district judge found that the acts of
bankruptcy fraud were an attempt to conceal . . . assets in
order to obtain a discharge of $454,000”); United States v.
Graham, 60 F.3d 463, 468 (8th Cir. 1995) (“The fact that
his scheme was flawed does not persuade us that he
intended for the bankruptcy estate to lose any less than the
amount he stood to gain had his deception been better
executed.”); United States v. Shadduck, 889 F. Supp. 8, 10
(D. Mass. 1995) (“[The defendants] intentionally concealed
assets from the Bankruptcy Court and their creditors, and
the value of those assets is properly considered intended
loss.”). See also United States v. Gunderson, 55 F.3d 132815
(7th Cir. 1995); United States v. Edgar, 971 F.2d 89 (8th
Cir. 1992). We do not believe, however, that these cases
stand for the proposition that intended loss is always the
amount of debt from which the defendant sought to be
discharged, and the cited cases do not involve a claim by
the defendant that he thought the assets he concealed were
exempt. We think our decision in United States v. Kopp,
951 F.2d 521 (3d Cir. 1991), is instructive on this point.
Kopp clarified the meaning of intended loss under the
Sentencing Guidelines where the defendant pled guilty to
procuring a bank loan by fraud. We held that the
defendant’s intent to repay a fraudulently obtained loan
should be considered when determining the amount of
intended loss. In Kopp, it appeared that the defendant had
intended to repay (with interest) the fraudulently obtained
loan. The defendant in Kopp lied about the rental income
from his business, and the bank indicated that it would not
have loaned him the money if he had been honest, but he
did give collateral for the loan and made payments on it
before he defaulted. Id. at 536. In that case, we did not
adopt a bright line rule that intended loss is the amount of
the loan the defendant fraudulently obtained. We could
have accepted the argument that the defendant intended to
obtain a loan and accomplished that goal by committing
fraud, so that he intended to cause a loss of the amount of
the loan (this is essentially what the government asks us to
do here), but we did not because we concluded that
“[i]ntended loss refers to the defendant’s subjective
expectation.” See Yeaman, 194 F.3d at 460 (citing Kopp,
951 F.3d at 529-531).
The government asserts that in United States v. Shaffer,
35 F.3d 110, 115 (3d Cir. 1994), we limited the holding in
Kopp to situations “where misrepresentations are
accompanied by an intent to perform lawfully.” However,
Shaffer involved only the calculation of actual loss (in
particular the question whether actual loss is determined at
the time of sentencing or when the crime was detected) and
the panel in Shaffer only discussed Kopp’s language
concerning actual loss. Thus, we do not believe that Shaffer
limits our use of Kopp to determine the meaning of
intended loss. Id. at 113 (“The present case does not involve
an intended loss.”).
16
The essential flaw in the government’s argument is in its
failure to recognize that Feldman must have intended that
a loss be caused by the commission of a crime. It is not
enough that Feldman intended to be discharged from debt
in general; indeed that is the whole point of filing a petition
for bankruptcy. Instead we must look at what Feldman
sought to gain from committing the crime. If Feldman
honestly thought that the only thing he would gain from
the concealment of assets was a more speedy discharge in
bankruptcy, then he arguably did not intend any monetary
loss to his creditors. In the case at bar, as in Kopp, the
District Court had to carefully examine what Feldman
intended to happen when he concealed assets.
That said, we do not believe that to meet its burden of
proof the government must disprove Feldman’s claim that
he thought his creditors would receive the same payment if
he concealed assets. We conclude that Feldman’s intent
can be inferred from the fact that he concealed a large
amount of assets; it is appropriate for the District Court to
consider the reason why most people would conceal assets
and determine that it is simply unbelievable that Feldman
would hide over a million dollars in assets only to achieve
a faster discharge. Most people would not risk committing
a crime to make the bankruptcy process more efficient. See
Geevers, 226 F.3d at 192-93 (“The District Court must
determine [the defendant’s] subjective intention, and it can
draw reasonable inferences from the nature of the crime
that he sought to perpetrate. . . . [T]hen [the defendant] is
free to come forward with evidence to demonstrate that he
actually intended something less.”). Moreover, the fact that
Feldman concealed two Jaguar vehicles that were not even
arguably exempt suggests that he concealed all of the
assets to prevent his creditors from receiving payment.
The District Court expressed disbelief of Feldman’s stated
intent during the initial sentencing hearing:
[W]e have to assume that no one would rob a bank
that they knew had no money in it, right? I mean that’s
what he did here. He undervalued property because he
was trying to defraud his creditors . . . not because he
believed that had he listed it it wouldn’t be part of the
estate. I mean that seems to me — I don’t see how
17
anybody could argue to the contrary. So he intended
that the estate be decreased by the amount that he
was failing to disclose, right? That was his intent. . . .
People don’t do things like that just to simplify the
procedure.
The District Court never made a determination of
whether the assets Feldman claimed were held by him and
his wife as tenants by the entireties would have been
exempt if he had acted lawfully, which would bear upon the
credibility of Feldman’s claim that he did not intend to
cause a loss. However, loss under the Sentencing
Guidelines is determined by calculating the greater of
actual or intended loss, and intended loss includes loss
that was impossible. See Geevers, 226 F.3d at 195. We can
therefore affirm the District Court’s finding that the
government had met its burden of proving by a
preponderance of the evidence that Feldman intended to
cause a loss of the full amount of debt owed, even though
we concluded that the District Court erred in determining
actual loss. The District Court impliedly found that
Feldman intended to inflict a loss in the amount of the
entire debt from which he sought to be discharged and that
finding is supported by assumptions about the nature of
Feldman’s crime and the fact that he concealed other
assets that were not even arguably exempt from
bankruptcy. Therefore the sentence imposed must be
upheld.
III.
For the foregoing reasons, we will affirm the judgment of
the District Court as to the sentence imposed, but we will
vacate the judgment insofar as it contains the restitution
award and remand for further consideration of actual loss.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit