United States v. August L. Holthaus ( 2007 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 06-2843
___________
United States of America, *
*
Appellee, *
* Appeal from the United States
v. * District Court for the
* Northern District of Iowa.
August L. Holthaus, Jr., *
*
Appellant. *
*
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Submitted: February 13, 2007
Filed: May 25, 2007
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Before RILEY, MELLOY, and SHEPHERD, Circuit Judges.
___________
RILEY, Circuit Judge.
August Holthaus, Jr. (Holthaus) pled guilty to knowingly and fraudulently
making a false declaration or statement in connection with his bankruptcy petition, in
violation of 18 U.S.C. § 152(3). The district court1 sentenced Holthaus to 5 months’
imprisonment followed by 5 months’ home detention during 3 years’ supervised
release. The court also ordered mandatory restitution of $8,093.02, pursuant to the
Mandatory Victims Restitution Act (MVRA), 18 U.S.C. § 3663A, for uncompensated
1
The Honorable Linda R. Reade, Chief Judge, United States District Court for
the Northern District of Iowa.
legal services and out-of-pocket expenses. Holthaus appeals his sentence and the
restitution order. We affirm.
I. BACKGROUND
Holthaus filed a bankruptcy petition under Chapter 7 of the United States
Bankruptcy Code in October 2002 and failed to report various assets and liabilities.
The bankruptcy court denied the discharge of Holthaus’s debts because Holthaus
failed to disclose his assets truthfully. On July 27, 2005, Holthaus was indicted for
knowingly and fraudulently making a false declaration or statement under penalty of
perjury in his voluntary bankruptcy petition. He pled guilty on September 15, 2005.
At sentencing, the parties agreed Holthaus concealed the following assets
valued at $54,478.57: an inheritance ($36,023.35), gambling winnings ($1,400), a
tractor ($5,000), a cabin ($4,000 in equity), accounts receivable ($7,855.22), and a
shotgun ($200). Holthaus admitted he intended to defraud creditors when he failed
to list the accounts receivable and the shotgun, but denied such intent when concealing
the tractor, cabin, inheritance, and gambling winnings. In response, the government
argued the circumstances surrounding the concealment evidenced Holthaus’s intent
to inflict a loss upon his creditors of the full $54,478.57 in income and assets.
The district court determined the intended loss to be $54,478.57 based on the
total value of the assets and income Holthaus fraudulently concealed. The district
court calculated a base offense level of 6 under U.S.S.G. § 2B1.1(a). The court then
added a six-level increase pursuant to § 2B1.1(b)(1)(D) for intending a loss of more
than $30,000, and a two-level increase under § 2B1.1(b)(7)(B) for misrepresentation
or fraud during a bankruptcy proceeding. The court also departed downward two
levels for acceptance of responsibility. Holthaus’s adjusted offense level of 12,
together with a criminal history category of I, resulted in an advisory Sentencing
Guidelines range of 10 to 16 months.
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On appeal, Holthaus challenges the district court’s finding that Holthaus
intended to defraud his creditors of more than $30,000, which resulted in a six-level
increase under § 2B1.1(b)(1)(D). Holthaus argues he did not intend to defraud his
creditors of more than $8,055.22, which would have resulted in an advisory
Sentencing Guidelines range of only zero to 6 months. Holthaus also appeals the
district court’s restitution order.2
II. DISCUSSION
A. Intended Loss for Sentencing Purposes
We review de novo the district court’s interpretation and application of the
advisory Sentencing Guidelines. United States v. Rouillard, 474 F.3d 551, 555 (8th
Cir. 2007). We review for clear error the district court’s factual determinations of
loss. United States v. Levine, 477 F.3d 596, 603 (8th Cir. 2007).
“Loss” means the greater of either “actual loss” or “intended loss.” U.S.S.G.
§ 2B1.1, cmt. n.2(A). Because the bankruptcy court refused to discharge Holthaus’s
debt, no actual loss resulted from Holthaus’s fraud. See United States v. Wheeldon,
313 F.3d 1070, 1072 (8th Cir. 2002). Thus, we look to the probable intended loss for
purposes of Holthaus’s sentence increase under § 2B1.1(b)(1). See id. “The
government must prove the intended loss by a preponderance of the evidence.”
United States v. Staples, 410 F.3d 484, 490 (8th Cir. 2005). The intended loss is the
pecuniary harm Holthaus “intended to result from [his] offense,” and it includes “harm
that would have been impossible or unlikely to occur.” U.S.S.G. § 2B1.1 cmt.
2
Holthaus further raises and preserves the issue that disputed sentencing fact
issues increasing the Sentencing Guidelines range must be determined beyond a
reasonable doubt. This issue is decided to the contrary by precedent. See United
States v. Garcia-Gonon, 433 F.3d 587, 593 (8th Cir. 2006) (“Under an advisory
Guidelines regime, sentencing judges are only required to find sentence-enhancing
facts by a preponderance of the evidence.”).
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n.2(A)(ii). The district “court need only make a reasonable estimate of the loss . . .
based on available information.” U.S.S.G. § 2B1.1 cmt. n.2(C).
Holthaus argues this intended loss for sentencing purposes was $8,055.22 – the
combined value of the accounts receivable and the shotgun, excluding the inheritance,
gambling winnings, cabin, and tractor.
In discussing our decisions in Wheeldon and United States v. Dolan, 120 F.3d
856 (8th Cir. 1997), the parties each mischaracterize precedent when explaining the
calculation of intended loss. In Dolan, the defendant committed bankruptcy fraud,
concealing $1,985,000 in assets. Dolan, 120 F.3d at 862. The bankruptcy petition set
forth $1,376,558.91 in total liabilities, $446,500 in property, and $590,000 in arranged
settlements with creditors. Id. at 870-71. This left a discharge amount of
approximately $340,000. By virtue of concealing nearly $2 million, the debtor
appeared eligible for the requested discharge of approximately $340,000 in reported
debt, thereby intending a loss to creditors of $340,000.
Indeed, Dolan also represented the rare situation in which the value of the
concealed assets alone equaled more than the amount to be discharged. Id. Under
those circumstances, we concluded intended loss should be calculated “by using either
the value of the assets concealed or the value of the debtor’s liabilities, whichever is
less.” Id. at 870. This conclusion follows the general rule that intended loss usually
does not exceed the value of the debts sought to be discharged or otherwise avoided.
See id.; see also United States v. Edgar, 971 F.2d 89, 95 (8th Cir. 1992) (capping
intended loss at the amount of debt when “the value of the concealed property exceeds
the amount of debt owed to the creditors”). Because the defendant’s fraudulent
concealment in Dolan potentially could have effectuated a discharge of the debtor’s
reported remaining liabilities of $340,000, the total discharge amount established
“intended loss.” See Dolan, 120 F.3d at 870-71.
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Standing in contrast to the facts of Dolan, in Wheeldon, the debtor filed for
bankruptcy, reporting no assets while concealing approximately $64,600 in assets.
Wheeldon, 313 F.3d at 1072. The concealed assets were worth much less than the
debtor’s discharge amount of approximately $139,500. Id. Because the total value
of the debtor’s concealed assets plus disclosed assets was less than the total liabilities
the debtor petitioned to discharge or avoid, the debtor’s concealment did not affect his
actual insolvency status. The debtor’s illegal concealment of assets could not have
effectuated discharge of his entire debt, so the intended loss did not encompass the
entire discharge amount. See id. at 1073. Instead, the debtor’s intended loss extended
only to the value of the assets he hid from his creditors. Id. (limiting intended loss “to
the assets [creditors] would have known about if the petition had been truthful”).3
When determining intended loss, we look to the amount of loss a defendant
actually intended to cause his creditors. See United States v. Wells, 127 F.3d 739, 747
(8th Cir. 1997) (acknowledging actual intent controls, and when “a court determines
either that the defendant intended to succeed to the full extent of the fraud, or that
there was no evidence that the defendant intended to cause less than the greatest
possible loss . . . in those circumstances, the intended loss can properly be measured
by the possible loss”); see also Staples, 410 F.3d at 490. There is no blanket rule
defining intended loss as the lesser of the value of assets concealed or the value of the
debtor’s liabilities. Indeed, some factual scenarios may require an intended loss
calculation based on the greater of the value of the assets concealed or debt sought to
be discharged. See United States v. Shevi, 345 F.3d 675, 679 (8th Cir. 2003) (noting
“if the debtor’s concealed assets plus his disclosed assets totaled more than his debts,
3
The intended loss in Wheeldon also happened to be the lesser of the value of
assets concealed or total discharge amount. Despite this parallel, we merely
acknowledged the calculation used in Dolan and qualified the calculation by
explaining the factual context of Dolan. See Wheeldon, 313 F.3d at 1072-73, 1073
n.3. We did not apply the statement made in Dolan as a categorical rule, although we
believed “the rule stated is sound.” Id. at 1073 n.3
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then asset concealment was essential to establishing insolvency, and the debtor was
not entitled to bankruptcy protection at all”). Even if the value of the assets concealed
is less than the discharge amount, when a defendant’s fraudulent concealment creates
an illusory eligibility for bankruptcy, intended loss extends to the entire discharge
amount because he intends his crime to effectuate the improper discharge of all the
reported debt.
1. Concealed Assets
Holthaus argues the district court erred by including his $36,023.35 inheritance
in the loss calculation4 because the government failed to prove Holthaus retained any
of the income when he filed for bankruptcy or spent it in contemplation of bankruptcy.
Holthaus claims he spent this income before filing for bankruptcy and therefore could
not have intended to deprive his creditors of income he knew was unavailable to them.
The district court properly rejected this argument as self-serving. See Dolan,
120 F.3d at 871. The record indicates Holthaus forestalled the bankruptcy trustee in
locating his income, and it remained unclear throughout the sentencing hearing where
the income went. Holthaus asserts he made certain purchases after receiving the
inheritance income but before filing for bankruptcy and argues these purchases
constitute circumstantial evidence he spent the income. The trustee testified, after
spending an extra fifty hours of investigation, Holthaus’s dishonesty coupled with his
lack of cooperation left the trustee unable to agree with Holthaus’s assertion the
money had all been spent before Holthaus filed for bankruptcy. The district court
credited the trustee’s testimony, stating the trustee may have been able to recoup some
of the creditors’ losses had Holthaus been forthcoming about the location of his
inheritance, explaining “this is the very reason why the bankruptcy statutes require
4
Although Holthaus also argues the district court improperly included in the
loss calculation his gambling winnings, tractor, and interest in the cabin, the
classification of Holthaus’s inheritance is the critical issue in this case, as that amount
alone was greater than $30,000.
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persons to not only disclose their assets, but also recent income.” The court found that
in concealing his inheritance income, Holthaus “hindered the trustee and bought
himself time to spend the inheritance.” The district court’s credibility determinations
are virtually unreviewable by this court. United States v. Agboola, 417 F.3d 860, 869
(8th Cir. 2005).
Holthaus argues the government failed to meet its burden because the trustee
could not find his income. Under the circumstances here, the government need not
prove a negative. See Rogers v. United States, 367 F.2d 998, 1000 (8th Cir. 1966).
We decline Holthaus’s invitation to reward defendants who are particularly skilled at
hiding their income. See United States v. Piggie, 303 F.3d 923, 927 (8th Cir. 2002)
(rejecting the defendant’s “invitation to calculate intended losses based upon [the
defendant’s] succeeding with his fraud and deception”). To do so would be to
encourage the very conduct outlawed by the statute of conviction here.
The value of assets concealed serves as relevant evidence in determining
intended loss. See Wheeldon, 313 F.3d at 1073 (instructing the district court to
determine intended loss based on the value of assets concealed). Holthaus does not
dispute the dollar amounts associated with the concealed inheritance, so the value of
concealed income constitutes the upper limit “a reasonable person in [Holthaus’s]
position could have intended” to keep from his creditors at the time of the fraud.
Staples, 410 F.3d at 490; see also Wheeldon, 313 F.3d at 1073, 1073 n.2 (holding
where the defendant knows as well as anyone the value of the assets he concealed, the
intended loss calculation may properly be based upon the value of the assets
concealed). Holthaus failed to offer at sentencing more than his bare assertions he
intended no loss. Thus, we conclude the district court did not clearly err in
determining intended loss. See U.S.S.G. § 2B1.1 cmt. n.2(C) (requiring the district
court to “only make a reasonable estimate of the loss”).
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Because we conclude the district court properly included Holthaus’s $36,023.35
inheritance in the loss calculation, which alone triggers the six-level increase under
§ 2B1.1(b)(1)(D), we find it unnecessary to address Holthaus’s arguments against the
inclusion of the other assets.
Holthaus also argues a loss calculation based on the face value of his concealed
inheritance results in an unfair presumption that improperly shifts the burden of proof
to Holthaus. We disagree. The district court did not mechanically equate the value
of concealed income with intended loss. Rather, as discussed above, the district court
determined Holthaus’s subjective intent based on the available evidence. Holthaus
pled guilty to knowingly and fraudulently concealing assets and liabilities in
connection with his voluntary bankruptcy petition. 18 U.S.C. § 152(c). Holthaus
admitted a knowing intent to deceive when filing for bankruptcy, presumably
expecting asset concealment to benefit him by either (1) making discharge of his debt
more likely (intending a loss of his entire discharge amount), or (2) allowing him to
retain the assets while keeping them hidden from creditors (intending a loss of the
value of assets concealed). See, e.g., Piggie, 303 F.3d at 927 (explaining intended loss
properly encompassed losses intended to be “the natural and probable consequences
of the defendant’s actions”). While the full value of the assets concealed should not
automatically determine intended loss, sometimes the value of the assets concealed
remains the best evidence of intended loss. Thus, Holthaus’s mere assertion he did
not fraudulently conceal assets fails because the government need not prove an
element already established by Holthaus’s adjudication of guilt. See Staples, 410 F.3d
at 490 (“Absent other evidence of the defendant’s intent, the size of the maximum loss
that a fraud could have caused is circumstantial evidence of the intended loss which
satisfies the preponderance of the evidence standard.”); see also United States v.
Geevers, 226 F.3d 186, 193 (3d Cir. 2000) (concluding a district court may “draw
inferences from the face value . . . in arriving at the factual conclusion that the
defendant intended” that amount of harm, which satisfies the government’s prima
facie case and shifts the burden of production to the defendant “to demonstrate that
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he actually intended something less”). Here, Holthaus offered no persuasive evidence
he intended to defraud his creditors of a lesser amount than the total value of the
inheritance income he concealed.5
The government carried its burden of proving Holthaus intended a loss of more
than $30,000. The district court did not clearly err in determining the full value of the
concealed assets constituted intended loss.
B. Restitution
Holthaus claims the district court erred in concluding the bankruptcy trustee
was a victim under the MVRA, 18 U.S.C. § 3663A, and in ordering restitution for the
trustee’s uncompensated work as a result of Holthaus’s offense. Holthaus asserts his
crime only indirectly affected the trustee because the trustee is not one of Holthaus’s
creditors, and therefore the trustee fails to meet the “directly and proximately harmed”
statutory requirement. We disagree.
Determining who is a “victim” under the MVRA is a question of law we review
de novo. United States v. Senty-Haugen, 449 F.3d 862, 865 (8th Cir. 2006). The
MVRA defines a “victim” as “a person directly and proximately harmed as a result
of the commission of an offense.” 18 U.S.C. § 3663A(a)(2). Holthaus first argues the
trustee is not a “person” within the meaning of the statute. The plain language of
§ 3663A(a)(2) does not bar a bankruptcy trustee from potentially being “directly and
proximately harmed as a result of the commission of an offense.” 18 U.S.C.
§ 3663A(a)(2). See also United States v. Mickle, 464 F.3d 804, 810 (8th Cir. 2006)
(explaining “the MVRA authorizes an order of restitution to any person ‘directly and
5
Although the record does not clearly indicate whether Holthaus intended his
fraudulent concealment to effect discharge of his entire debt, thereby intending an
even greater loss, we need not resolve that issue. The government has not challenged
Holthaus’s sentence as insufficient, and the district court did not clearly err in finding
Holthaus intended to deprive his creditors of at least $30,000.
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proximately harmed’ as a result of the conspiracy, even if the offense of conviction
did not require proof [the defendant] defraud[ed] those particular victims”), cert.
denied, 127 S. Ct. 1308 (2007). The Seventh Circuit has held bankruptcy trustees
qualify as victims under the statute if their compensation is negatively impacted by
a debtor’s misrepresentation, concluding the defendant directly and proximately
harmed the bankruptcy trustee by misstating assets, which “reduced [the trustee’s]
compensation and increased [the trustee’s] costs.” United States v. Lowell, 256 F.3d
463, 465-66 (7th Cir. 2001). We agree and adopt the reasoning and holding in
Lowell.
The district court correctly determined Holthaus’s violation of 18 U.S.C.
§ 152(3) directly and proximately harmed the bankruptcy trustee because the trustee
worked more than fifty uncompensated hours as a result of Holthaus’s fraud.6 Thus,
restitution was appropriate.
III. CONCLUSION
For the foregoing reasons, we affirm Holthaus’s sentence and the district court’s
order of restitution.
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6
To the extent Holthaus argues Hughey v. United States, 495 U.S. 411, 420
(1990) (concluding restitution should be awarded only for harm resulting from a
charged offense) requires a victim be specifically named in the statute of conviction,
his argument mischaracterizes the holding of Hughey. Additionally, the MVRA
superseded Hughey’s holding. See United States v. Scat, Inc., 40 F. App’x 310, 311
(8th Cir. 2002) (per curiam) (unpublished) (noting the MVRA superseded Hughey and
“authorizes restitution for every victim harmed in the course of the defendant’s
scheme, conspiracy, or pattern of criminal activity, not just the offense of
conviction”).
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