United States v. Scott M. Posnanski

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v. No. 99-4519
SCOTT MICHAEL POSNANSKI,
Defendant-Appellant.
Appeal from the United States District Court
for the District of Maryland, at Baltimore.
Benson E. Legg, District Judge.
(CR-98-125-L)
Argued: June 9, 2000
Decided: July 17, 2000
Before MURNAGHAN, WILKINS, and WILLIAMS,
Circuit Judges.
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Affirmed by unpublished per curiam opinion.
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COUNSEL
ARGUED: Laurence J. Bolon, Chicago, Illinois, for Appellant.
Andrew Clayton White, Assistant United States Attorney, Baltimore,
Maryland, for Appellee. ON BRIEF: Lynne A. Battaglia, United
States Attorney, Andrew G.W. Norman, Assistant United States
Attorney, Baltimore, Maryland, for Appellee.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
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OPINION
PER CURIAM:
Scott Michael Posnanski appeals an order of the district court
directing him to pay $55,006.07 in restitution to his former employer,
International Auto Auctions ("IAA"), pursuant to the Mandatory Vic-
tim Restitution Act (MVRA) of 1996. See 18 U.S.C.A. § 3663A
(West Supp. 2000). Posnanski argues that the amount of restitution
which was imposed to compensate the victim of his crime for assist-
ing the United States in the investigation and prosecution of his
offense was erroneous because it was based primarily on hearsay evi-
dence and it involved complex issues of fact, making the MVRA
inapplicable. We affirm.
I.
From April to September 1996, Posnanski and a co-conspirator
executed a scheme to defraud IAA. Posnanski, a computer network
analyst and programmer for IAA, manipulated the company's com-
puter system to produce checks drawn on IAA's bank account with
NationsBank.
He and his co-conspirator produced approximately 416 checks,
totaling $16,811,580, made payable to fictitious corporations that they
established using false identities. Posnanski then attempted to conceal
his manipulation of IAA's computer system. The scheme went awry
when NationsBank notified IAA of a suspicious deposit. Federal
authorities arrested Posnanski's co-conspirator, who then implicated
him in the scheme. Posnanski subsequently pled guilty to bank fraud.
See 18 U.S.C.A. §§ 2, 1344 (West 2000).
At sentencing, the Government contended that IAA was entitled to
$58,993.20 in restitution based on an estimate prepared by the com-
pany. In support of the restitution claim, the Government presented
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testimony from Alison Adams, Director of Treasury for IAA, regard-
ing the expenses IAA incurred as a result of assisting in the investiga-
tion and prosecution of the offense. Adams testified that she was the
"point person" for the company, coordinating all requests from the
United States Attorneys. J.A. T024. She provided a detailed account
of the steps taken by IAA in the aftermath of the fraud, most of which
were motivated, at least in part, by requests from the Government.
IAA put a bank fraud watch on its account with NationsBank and all
checks (some 700-800 per day) had to be verified before passing
through the system. IAA also audited its computer system and records
in an attempt to determine exactly what had happened. In addition, it
trained Government investigators in the use of its system. Also, at the
behest of the Government, IAA officials attended numerous meetings
with investigators and court proceedings.
Adams estimated that IAA incurred $58,993.20 in expenses in the
investigation and prosecution of the offense. She stated that no con-
temporaneous time records had been kept because all of the employ-
ees involved were salaried. However, because she was the "point
person" for the company, she had firsthand knowledge of who had
participated in the investigation and prosecution activities. Whenever
possible, she obtained estimates of the time spent on such activities
directly from the employees involved. If an employee was not avail-
able, Adams used her best estimate based on the activities undertaken
and the information elicited, or spoke with the individual's supervisor
or other people involved in the same or similar activities.
Adams testified that there were no notes from these conversations
because when she talked to these people she was usually working
directly on her spreadsheet. She used actual wages from the employ-
ees' IRS documents to determine each employee's hourly wage and
then added 20 percent to account for other employment costs. She
provided documentation for travel expenses and produced receipts for
check stock and stop payment orders from IAA's bank account that
were associated with the fraud.
Adams' estimate of the expenses incurred excluded certain over-
head costs, such as clerical and secretarial work, and various inciden-
tal expenses, including long-distance phone calls, faxes, and shipping
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charges. Finally, Adams stated that in estimating IAA's expenses, she
erred on the conservative side whenever possible.
The sentencing hearing was continued to allow the parties to brief
the issue of which expenses the restitution order should encompass.
Posnanski objected to various calculations regarding wages and travel
expenses. The Government provided more detailed justifications for
those calculations and reduced the claim by approximately $4,000. At
the continuation of the sentencing hearing, the district court heard
brief oral argument and, thereafter, adopted the Government's modi-
fied calculation of expenses incurred by IAA as a result of assisting
in the investigation and prosecution of the offense. The district court
ordered Posnanski to pay $55,006.77 in restitution to IAA.
Posnanski now appeals, arguing (1) that the district court erred in
ordering restitution based primarily on hearsay evidence and (2) that
the MVRA is inapplicable because the determination of restitution
involved complex issues of fact. We disagree.
II.
The MVRA obligates the trial court to order a convicted defendant
to pay restitution to his victim in certain cases, including cases in
which the defendant has committed a crime against property by fraud.
See 18 U.S.C.A. § 3663A(c)(1)(A)(ii). The statute provides that the
court shall order the defendant to reimburse the victim for "necessary
. . . expenses incurred during participation in the investigation or pros-
ecution of the offense or attendance at proceedings related to the
offense."* Id. § 3663A(b)(4). The court is obligated to order restitu-
tion "without consideration of the economic circumstances of the
defendant." 18 U.S.C.A. § 3664(f)(1)(A) (West Supp. 2000). The pro-
bation officer shall include in his presentence report, "to the extent
practicable, a complete accounting of the losses to each victim." 18
U.S.C.A. § 3664(a) (West Supp. 2000). The MVRA does not apply
_________________________________________________________________
*These "expenses" are one type of compensable"loss" envisioned
under the MVRA. See 18 U.S.C.A. 3663A(b). We use the terms "ex-
penses" and "loss" interchangeably here because IAA's "expenses" as a
result of Posnanski's crime were the same as its total "loss" in that none
of the fraudulent checks were cashed.
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if the court finds that "determining complex issues of fact related to
the cause or amount of the victim's losses would complicate or pro-
long the sentencing process to a degree that the need to provide resti-
tution to any victim is outweighed by the burden on the sentencing
process." 18 U.S.C.A. § 3663A(c)(3)(B).
The Government bears the burden of proving the restitution
amount by a preponderance of the evidence. See § 3664(e) (West
Supp. 2000). The preponderance standard should be applied in a
"practical, common-sense way." United States v. Savoie, 985 F.2d
612, 617 (1st Cir. 1993). Further, hearsay testimony may support a
claim for restitution as long as it has a "sufficient indicia of reliabil-
ity." United States v. Newman, 144 F.3d 531, 542 (7th Cir. 1998)
(internal quotation marks omitted). "So long as the basis for reason-
able approximation is at hand, difficulties in achieving exact measure-
ments will not preclude a trial court from ordering restitution."
Savoie, 985 F.2d at 617.
The district judge enjoys discretion as to the restitutionary amount,
with the stipulation that the defendant pay restitution only for losses
traceable to the illegal activity. United States v. Henoud, 81 F.3d 484,
488 (4th Cir. 1996). A restitution order may be relatively broad as
long as the harm is either a direct result of, or closely related to, the
defendant's scheme. See id. at 488.
In general, restitution orders should be affirmed in the absence of
an abuse of discretion. See id. at 487. However, the calculation of loss
is a question of fact and is reviewed only for clear error. See id. at
490.
A.
Posnanski argues that the district court erred in ordering restitution
based primarily on hearsay evidence. He maintains that without docu-
mentation to support the time estimates there can be no reasonable
degree of accuracy. We disagree. Here, the district court found
Adams' testimony to have "sufficient indicia of reliability." The trial
judge stated
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I personally heard the testimony of I.A.A. Director of Trea-
sury, Allison Adams, and found her to be a competent, care-
ful, credible and fair witness who did not overstate the
magnitude of the company's losses. I also found that she
and the company had made a good faith systematic effort to
provide a detailed backup for the amounts that were
claimed. In my view, the testimony put on by Ms. Adams
and the company is much more than a rough estimate, but
is a reliable good faith, sufficiently-detailed estimate of the
amount of expenditures of I.A.A. working with the Govern-
ment, investigating the fraud and assisting the Government.
J.A. T125. Giving due regard to the determination by the district court
of the credibility of witnesses, 18 U.S.C.A. § 3742(e) (West Supp.
2000), we conclude that Adams' testimony satisfied the requirement
of providing a "basis for reasonable approximation," and thus it was
not an abuse of discretion for the court to order restitution based on
her testimony. Savoie, 985 F.2d at 617; see United States v. Futrell,
209 F.3d 1286, 1292 (11th Cir. 2000) (per curiam) (holding that the
district court did not abuse its discretion by accepting the Govern-
ment's reasonable approximation of loss caused by defendant's
fraud); see also United States v. Jackson, 155 F.3d 942, 948 (8th Cir.
1998) (holding that, in calculating intended loss in a check writing
fraud scheme, the district court did not err in accepting estimates of
losses). No doubt it would be preferable for the victim of an offense
to keep contemporaneous records of the expenses incurred as a result
of aiding in the investigation and prosecution of the offense. How-
ever, the plain language of the statute does not impose such a require-
ment and we decline to impose it ourselves.
Posnanski maintains that it is impossible to determine whether the
work done by IAA in the aftermath of the fraud was"necessary." 18
U.S.C.A. § 3663A(b)(4). This argument is without merit. Every indi-
cation is that the actions taken by IAA were indeed necessary. For
example, it had to undergo daily review of checks clearing through
its bank account to ensure that all of the fraudulent checks were
recovered. Additionally, the intensive review of its computer system
was necessary to determine how such a fraudulent scheme could have
been carried out. These were essential components of the Govern-
ment's success in its prosecution of the offense. In fact, the time spent
6
by IAA officials was motivated, at least in part, by requests from the
Government for information and assistance. The United States Attor-
ney indicated that this was a very complicated case, and that without
the help of IAA the Government could not have been successful in
the investigation and prosecution.
Posnanski also maintains that the lack of independent investigation
and verification by the probation department precluded both an inde-
pendent evaluation of IAA's claimed losses and a proper determina-
tion of restitution by the court. We note that the probation officer
appears not to have strictly followed the procedure for issuance and
enforcement of orders of restitution mandated by 18 U.S.C.A. § 3664.
The amount of restitution was not contained in the presentence report
and, in fact, the report states that no monetary loss was incurred by
IAA. However, this statement was based only on the fact that the
defendant was unsuccessful in cashing any of the fraudulent checks.
Moreover, Posnanski does not claim that he did not receive notice of
the amount of loss being claimed. Therefore, despite the technical
deficiency in the presentence report, the error was harmless because
Posnanski had notice of the restitution claim and an opportunity to
contest it.
B.
Posnanski also argues that the MVRA is inapplicable because the
determination of restitution involved complex issues of fact. See 18
U.S.C.A. § 3663A(c)(3)(B). We disagree.
Here, the factual issues were not so cumbersome as to be a burden
on the sentencing process. Hearsay is admissible and the district court
properly exercised its discretion in accepting the credibility and reli-
ability of the witness supporting the Government's loss calculation.
The estimate prepared by Adams and the subsequent revisions by the
Government in response to the defendant's objections facilitated the
calculation of the loss and served to simplify the sentencing process.
There is likewise no evidence that the process was prolonged, as the
issue was resolved in two short hearings. Therefore, the district court
did not err in applying the MVRA.
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III.
We hold that the district court did not err in ordering restitution
based primarily on hearsay evidence because it determined that the
testimony had "sufficient indicia of reliability" and provided the
"basis for reasonable approximation" of the loss suffered by the vic-
tim of the fraudulent scheme. Furthermore, the MVRA is applicable
because the restitution order does not involve complex issues of fact.
Accordingly, we affirm the restitution order of the district court in the
amount of $55,006.07 pursuant to 18 U.S.C.A. § 3663A.
AFFIRMED
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