United States v. Swanson, David H. ( 2007 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 05-4432
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
DAVID H. SWANSON,
Defendant-Appellant.
____________
Appeal from the United States District Court
for the Southern District of Indiana, Indianapolis Division.
No. 1:01CR00083—Sarah Evans Barker, Judge.
____________
ARGUED MAY 8, 2006Œ—DECIDED APRIL 20, 2007
____________
Before BAUER, RIPPLE, and ROVNER, Circuit Judges.
ROVNER, Circuit Judge. For the second time David
Swanson, who worked as an independent consultant
and briefly as the chief executive officer of Countrymark
Cooperative, Inc., appeals his prison sentence and the
restitution and forfeiture orders entered on his convic-
tions arising from a fraudulent scheme to siphon funds
for his personal use from his consulting clients and
Countrymark. We remanded previously, instructing the
Œ
Pursuant to Operating Procedure 6(b), this successive appeal
has been submitted to the same panel that decided Case No.
03-1863.
2 No. 05-4432
district court to reconsider the amounts it ordered as
restitution and forfeiture, and for recalcuation of the
guidelines imprisonment range using the 1998 version of
the guidelines, which the parties agreed should apply. We
also recognized that aspects of Swanson’s sentence under
the guidelines might be affected by the then-forthcoming
decision in United States v. Booker, 543 U.S. 220 (2005).
Now in this second appeal, Swanson renews his disagree-
ments with the district court’s calculation of the fraud
loss and the amount of restitution, and he also presses a
new contention that in formulating his guidelines sen-
tence the court erroneously applied an upward adjust-
ment for his role as an organizer or leader of extensive
criminal activity. We are not persuaded by these argu-
ments—or by others that rest on views about Booker that
we have rejected in other cases—and accordingly affirm
the judgment of the district court.
I.
We presume familiarity with our prior opinion, United
States v. Swanson, 394 F.3d 520 (7th Cir. 2005) (“Swanson
I”). Briefly, as an independent consultant and as the CEO
of Countrymark, Swanson managed the acquisitions of
related agricultural enterprises. He used his positions for
personal gain, however, by obtaining “reimbursement” for
phony expenses and by inflating the reported purchase
price of one acquisition and keeping the extra money for
himself. After a three-week trial, a jury found Swanson
guilty of wire fraud, money laundering, interstate trans-
portation of stolen funds, and income tax evasion. At the
first sentencing, the district court found that Swanson’s
fraud led to $6.7 million in losses; that conclusion was
based in part on what the court characterized as “the
government’s proof at trial that the jury accepted.” The
court also entered orders of restitution and forfeiture
No. 05-4432 3
but failed to consider whether the restitution figure
should have been offset by money repaid to the victim
corporations and by the value, if any, they received from
Swanson’s work on the acquisitions. The court also
neglected to ensure that the forfeiture figure encom-
passed only proceeds from Swanson’s illegal activities.
Because of these errors, we remanded for resentencing.
We noted that the jury returned general verdicts and thus
did not make any findings relevant to the fraud loss;
accordingly, we instructed the district court to revisit the
loss determination and, if necessary depending on the
outcome in Booker, other guidelines findings as well. See
Swanson I, 394 F.3d at 526 n.1. We also directed the
district court to reconsider the amounts of restitution and
forfeiture after making additional factual findings, and
to recalculate the imprisonment range using the 1998
guidelines rather than the 2001 version that the court
employed. Id. at 530.
At resentencing the parties and the district court all
agreed that Swanson should be sentenced using the 1998
version of the guidelines. The government, however,
argued that our remand in Swanson’s first appeal did not
require the district court to recalculate the fraud loss for
purposes of the guidelines. In a memorandum supported
by an extensive compilation of trial exhibits, the gov-
ernment offered revised calculations for the amounts of
restitution and forfeiture. For his part, Swanson argued
that our remand did require a recalculation of the
fraud loss, and that the government failed to support its
revised calculation with adequate evidence. He also
objected that he had acted alone and thus a four-level
upward adjustment under U.S.S.G. § 3B1.1 for organiz-
ing and leading the criminal activity should not be reim-
posed. This was not an argument he made at the first
sentencing hearing or that he raised in his prior appeal.
Swanson further objected to the government’s proposed
4 No. 05-4432
restitution figure. He argued that the requested amount
still failed to account for the value that his work, even if
fraudulent in part, may have conferred on the victims, but
he refused to suggest an alternative figure for restitu-
tion or produce any evidence that part of what he did for
his victims was legitimate.
The district court recalculated the fraud loss using the
government’s new itemization but still arrived at $6.7
million, just as before. The court used this figure in
applying U.S.S.G. § 2F1.1, the applicable offense guideline
from the 1998 version of the guidelines, and once again
added four levels under § 3B1.1(a). The court then sen-
tenced Swanson to 151 months of imprisonment, the high
end of the resulting range of 121 to 151 months. In addi-
tion, with no proposed restitution figure from Swanson,
the court adopted the government’s calculations, which
credited Swanson for repayments made to Countrymark,
and ordered Swanson to pay $2.2 million in restitution.
II.
A. Fraud Loss Amount
Swanson first argues that the district court erred in
calculating a $6.7 million fraud loss. The court’s calcula-
tion subjected Swanson to a 14-level upward adjustment
under the 1998 version of the guidelines. See U.S.S.G.
§ 2F1.1(b)(1)(O), (P) (1998) (increasing offense level by 14
if loss caused by fraud totals more than $5 million but
less than $10 million). The two largest components of
the loss stem from Swanson’s conduct during Country-
mark’s acquisition of Malta Clayton, an agriculture feed
company, and his role in promoting a start-up company
called GreenHeat, LLC. He says the loss figure is over-
stated since it includes (1) amounts that even now he
characterizes as “closing costs” for the Malta Clayton
No. 05-4432 5
acquisition, (2) investments in GreenHeat that Swanson
says were lost because the company failed and not be-
cause of his fraud, and (3) losses stemming from conduct
not charged in his indictment.
As to the acquisition, Swanson told Countrymark’s
board of directors that acquiring Malta Clayton would cost
$33 million. In fact, as Swanson knew, the actual cost
was only $31 million, but he collected a total of $35 million
for the deal from Countrymark and another investor.
Swanson left the $4 million surplus in a bank account
that he alone controlled, and from that account he di-
verted half to his personal use before he was discovered. At
trial the chairman of Countrymark’s board confirmed
that Swanson misrepresented the acquisition cost to be
$33 million. The government also introduced phony
invoices that Swanson created to convince Countrymark
that nearly all of the $2 million he used for personal
expenses and funneled to his private accounts had gone to
Vickers and Allen, Inc., a consulting firm, for “closing
costs” associated with the acquisition. Swanson did not
disclose to the board that he controlled this firm, and its
two named principals testified that they were unaware
of any work performed in connection with the Malta
Clayton acquisition.
After Countrymark discovered it had been bilked and
forced Swanson to resign, he began promoting a start-up
company called GreenHeat, LLC, which purportedly was
developing an environmentally friendly fuel derived from
soybeans. Swanson amassed a sizable amount of capital for
the venture, including a $1.13 million investment by
Archer Daniels Midland Company (“ADM”). But instead of
using this money to develop GreenHeat, Swanson used
it to pay for personal expenditures and to make several
installment payments to Countrymark under the terms of
a settlement agreement the company reached with
Swanson. Ultimately, ADM and the other investors lost
6 No. 05-4432
all of the money they contributed to GreenHeat. At trial an
ADM representative testified that he reviewed some of
GreenHeat’s financial information provided by Swanson
shortly before writing off the investment and could detect
no misstatements. But at Swanson’s first sentencing
hearing, an agent from the Internal Revenue Service
(“IRS”) testified that she had reviewed GreenHeat’s
bank and tax records and concluded that the start-up
was never viable and that Swanson converted the com-
pany’s funds to his personal use.
All of this was adequately established, and at
resentencing the district court found that the “amount put
at risk” by Swanson included the entire $4 million he
diverted during the Malta Clayton acquisition. The court
likewise included ADM’s investment in GreenHeat.
Although the GreenHeat swindle was not alleged in the
indictment, the court noted that loss for guidelines pur-
poses encompasses other acts that are part of a “common
scheme or course of conduct.” And, the court reasoned,
Swanson’s theft of ADM’s $1.13 million investment in
GreenHeat was just another step in his scheme of “obtain-
ing funds through mergers, acquisitions and joint ven-
tures.”
Swanson first challenges the district court’s loss find-
ing because, he asserts, some of the extra $4 million he
took for the Malta Clayton acquisition might really have
been used for legitimate closing costs. To support this
position, Swanson points to trial testimony by an Ernst &
Young accountant (and government witness) who stated
during cross-examination that the fees charged by Vickers
and Allen for the Malta Clayton acquisition fell within
the range calculated under a standard formula used to
determine broker’s fees.
A district court need only make a reasonable estimate of
the loss flowing from a fraudulent scheme, see U.S.S.G.
No. 05-4432 7
§ 2B1.1 cmt. n.3(C); United States v. Vivit, 214 F.3d 908,
915 (7th Cir. 2000), and we will not disturb the court’s loss
calculation—a factual finding—unless it is clearly errone-
ous, United States v. Berheide, 421 F.3d 538, 540 (7th Cir.
2005). Loss cannot include the value of services a defen-
dant legitimately performed for the victims of his fraud,
Vivit, 214 F.3d at 915, but it does include the “amount
that the defendant placed at risk by misappropriating
money or other property,” United States v. Lauer, 148 F.3d
766, 768 (7th Cir. 1998) (counting all money placed in
Ponzi scheme as intended loss, even though portion was
recovered, because entire amount was placed at risk); see
also Swanson I, 394 F.3d at 527.
The district court did not commit clear error. The court
properly concluded that Swanson put the surplus funds
for the Malta Clayton acquisition at risk. He obtained
control over the $4 million by intentionally overstating the
acquisition cost of Malta Clayton, and once he had the
money he placed it in a bank account over which he
maintained sole control. Swanson then created false
invoices to cover the diversion of $2 million from that
account, and the remaining $2 million was at risk of a
similar fate. Moreover, defense counsel’s unsupported
assertion that Swanson might have legitimately spent
some of the $4 million on closing costs is frivolous. See
Swanson I, 394 F.3d at 527 (“[A] defendant’s wholly
unsubstantiated statements are not enough to counter or
even question the court’s acceptance of the government’s
proof of loss as outlined in the presentence investigation
report.”); Campania Mgmt. Co., Inc. v. Rooks, Pitts &
Poust, 290 F.3d 843, 853 (7th Cir. 2002) (stating that
counsel’s representations are not evidence); United States
v. Krankel, 164 F.3d 1046, 1054-55 (7th Cir. 1998) (holding
that “bald, unsupported assertions” by defendant cannot
refute presentence investigation report). The Ernst &
Young accountant’s testimony is irrelevant. The purported
8 No. 05-4432
closing costs might have been reasonable had Vickers
and Allen actually performed work on the acquisition, but
the principals of that firm denied doing any such work,
and they would know. There is no mystery about what
Swanson did with the funds he diverted; he sent a sizable
amount to a lawyer in Switzerland and moved the rest to
his personal bank account.
Swanson also contests the inclusion in the fraud loss of
ADM’s $1.13 million investment in GreenHeat. Swanson
still insists that GreenHeat was a legitimate venture that
simply failed; he points to the testimony of the ADM
representative who reviewed the financial information
Swanson provided and found nothing suspect. But that
is the point: Swanson was the source of the information,
and it was false. That is why the IRS agent, after studying
tax and bank records, concluded that Swanson once again
siphoned company funds for personal use, and that
GreenHeat was never viable.
Swanson also argues that the district court should have
excluded the GreenHeat swindle from the fraud loss
because it was not charged in the indictment. But relevant
conduct not charged in the indictment is always fair
game at sentencing. The court was required to include
the GreenHeat losses if they were “part of the same
course of conduct or common scheme or plan as the offense
of conviction.” U.S.S.G. § 1B1.3(a)(2); see United States v.
Firth, 461 F.3d 914, 917-18 (7th Cir. 2006). An offense
is part of a “common scheme or plan” if it is “substantially
connected” to the offense of conviction “by at least one
common factor, such as common victims, common accom-
plices, common purpose, or similar modus operandi.”
U.S.S.G. § 1B1.3 cmt. n.9(A); see United States v.
Delatorre, 406 F.3d 863, 867 (7th Cir. 2005). Here, the
court found that the common scheme was defined by a
similar modus operandi: “obtaining funds through merg-
ers, acquisitions and joint ventures.” Swanson specialized
No. 05-4432 9
in misusing his positions to convert to his own use funds
invested in the agricultural businesses he was promoting.
He followed this scheme in procuring ADM’s investment
in GreenHeat, just as he did in promoting Countrymark’s
acquisition of Malta Clayton. The district court’s inclu-
sion of this fraud as relevant conduct is not clearly errone-
ous.
Under the 1998 guidelines used by the district court at
resentencing, Swanson’s imprisonment range is sustain-
able with a fraud loss of between $5 and $10 million, see
U.S.S.G. § 2F1.1(b)(1)(O), (P) (1998), and the losses to
Countrymark ($4 million) and ADM ($1.13 million) are
enough to put Swanson within this range.
B. Aggravating Role Adjustment
Swanson also argues that, because he allegedly acted
alone, the district court clearly erred when it increased his
guidelines offense level by four based on his role as an
“organizer or leader of criminal activity that . . . was
otherwise extensive.” U.S.S.G. § 3B1.1(a). But as we have
previously held, “any issue that could have been but was
not raised on appeal is waived and thus not remanded.”
United States v. Husband, 312 F.3d 247, 250-51 (7th Cir.
2002); see also United States v. Morris, 259 F.3d 894, 898
(7th Cir. 2001).
In sentencing Swanson the first time, the district court
applied this upward adjustment, but Swanson did not
challenge its application during his first appeal. In
Swanson I we mentioned this adjustment in a footnote,
explaining that at resentencing the district court might
need to reconsider its application depending on the
outcome of Booker. 394 F.3d at 526 n.1. We were con-
cerned that the Supreme Court might decide that ad-
justments such as this must be determined by a jury
10 No. 05-4432
rather than the sentencing court, see id., but that contin-
gency did not come to pass. See Booker, 543 U.S. at
245-46; United States v. White, 472 F.3d 458, 464 (7th Cir.
2006); United States v. Owens, 441 F.3d 486, 490 (7th Cir.
2006). Consequently, the district court did not have
to revisit its decision to impose the aggravating role
adjustment in Swanson’s case—any factual dispute as to
its application was beyond the scope of our remand. In
an abundance of caution the district court entertained
and rejected defense counsel’s contention that this ad-
justment is inapplicable because Swanson purportedly
acted alone, but we will not similarly indulge Swanson’s
argument on appeal. Swanson “cannot use the accident of
a remand to raise in a second appeal an issue that he could
just as well have raised in the first appeal.” United States
v. Parker, 101 F.3d 527, 528 (7th Cir. 1996). Swanson
waived this issue by failing to raise it during his first
appeal.
C. Restitution
In this appeal, Swanson again argues that in calculating
restitution the government failed to meet its burden of
sorting out the financial benefit his victims purportedly
received from his fraudulent activities. In Swanson I, we
explained that, as part of its burden to prove a restitution
amount, the government must deduct any value that a
defendant’s fraudulent scheme imparted to the victims.
394 F.3d at 527-28. Accordingly, at resentencing the
government recalculated the restitution amount and
submitted a supporting memorandum that cites exten-
sively to trial testimony and to a compilation of trial
exhibits. This time around the government’s restitution
figure excluded Swanson’s repayments to Countrymark
and losses arising from any uncharged relevant conduct.
The government largely based its restitution figure on
No. 05-4432 11
Swanson’s conduct in Countrymark’s acquisition of Malta
Clayton and its earlier acquisition of another company,
Buckeye Feed Mills.
The government’s memorandum directed the district
court to evidence that Swanson took $2 million of
$4 million he diverted during the acquisition of Malta
Clayton. The memorandum also pointed to the following
evidence about Countrymark’s acquisition of Buckeye.
Selig Ziess, a venture capitalist, testified at trial that he
loaned Swanson $284,000 during Swanson’s failed effort
to buy Buckeye before he was hired by Countrymark as
its CEO. Swanson promised that he would return the
money at the closing of Buckeye’s sale and, in fact, did so.
At trial the government introduced an invoice submitted
on behalf of Swanson to Buckeye for $284,000 payable to
Associated Capital, a firm run by Ziess. The itemized
invoice represents that payment was required for various
services, including an industry review performed by
Vickers and Allen. Both Ziess and representatives of
Vickers and Allen testified that they knew nothing
about the Buckeye closing or the fees listed in the Associ-
ated Capital invoice. Swanson requested an additional
$247,392 in reimbursements from Buckeye related to the
closing, and this itemized request was also introduced at
trial. The CFO of Buckeye testified that many of the
listed expenses were duplicative or for work that was not
performed. Many of the people Swanson claimed to have
paid for services related to the closing testified that they
had performed no work on the acquisition.
Swanson did not propose an alternative restitution
figure, but argued that the government failed to meet its
burden of sorting out the benefit received from his fraudu-
lent activities from the losses. Given the evidentiary
support provided by the government, the district court
found that these amounts were “sufficiently authoritative”
and adopted the government’s recommendation, ordering
12 No. 05-4432
Swanson to pay Countrymark $1.662 million and Buckeye
$531,392 in restitution.
Here, Swanson essentially refashions his argument
regarding the fraud loss figure and contends that some of
the restitution awarded to Countrymark for losses associ-
ated with the Malta Clayton and Buckeye acquisitions
were actually legitimate closing costs. And like his argu-
ment regarding the court’s fraud-loss calculation, this
argument is doomed. Restitution is subject to a preponder-
ance standard, and we review the court’s calculation for
abuse of discretion. See United States v. Danford, 435 F.3d
682, 689 (7th Cir. 2005). The evidence shows that the
requested reimbursements were not for actual services
related to the closing of the business transactions, but
that they were false requests for work that was never
performed.
D. Constitutional Issues
The remaining issues, raised by Swanson only to pre-
serve Supreme Court review, are without merit. First,
Swanson argues that the application of the remedial
holding of Booker, which renders the guidelines advisory,
violates the limitations on ex post facto judicial
decisionmaking inherent in the idea of due process. We
have previously rejected this argument, noting that Booker
affected neither what conduct was considered criminal
nor the statutory maximum penalties, and we do so again
here. See United States v. Jamison, 416 F.3d 538, 539 (7th
Cir. 2005). Lastly, Swanson argues that he was entitled to
a jury finding beyond a reasonable doubt regarding his
forfeiture and restitution amounts. But because restitution
is a civil remedy, rather than a criminal punishment, it
may be determined by a judge using a preponderance of
the evidence standard and remains unaffected by Booker.
See United States v. LaGrou, 466 F.3d 585, 593 (7th Cir.
No. 05-4432 13
2006); Danford, 435 F.3d at 689; United States v. George,
403 F.3d 470, 473 (7th Cir. 2005). Similarly, the Sixth
Amendment and Booker do not apply to forfeiture orders
because there is no statutorily prescribed maximum
amount of forfeiture. Swanson I, 394 F.3d at 526; United
States v. Tedder, 403 F.3d 836, 841 (7th Cir. 2005).
III.
Accordingly, the judgment of the district court is
AFFIRMED.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—4-20-07