United States v. Jerry E. Wells

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
_______________
No.93-3924/3932/94-1031WM
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United States of America, *
*
Appellee/ *
Cross-Appellant, *
*
v. * Appeal from the United States
* District Court for the
Jerry E. Wells and * Western District of Missouri.
Kenneth R. Steele, *
*
Appellant/ *
Cross Appellee. *
_______________
Submitted: July 26, 1997
Filed: October 14,
1997
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Before MORRIS S. ARNOLD, Circuit Judge, JOHN R. GIBSON, Senior Circuit
Judge, and MELLOY*, Chief District Judge.
_____________
MELLOY, Chief District Judge
*The HONORABLE MICHAEL J. MELLOY, Chief United States
District Judge for the Northern District of Iowa, sitting by designation.
I.
This matter is before the court pursuant to remand from the United States
Supreme Court.
In United States v. Wells, — U.S. --, 117 S. Ct. 921 (1997), the Supreme Court
held that materiality is not an element of 18 U.S.C. § 1014, which makes it a crime to
knowingly make a false statement for the purpose of influencing the actions of a
federally insured bank. The Supreme Court vacated this Court’s decision in United
States v. Wells, 63 F.3d 745 (8th Cir. 1995), which had held that materiality was an
element of § 1014, and remanded the case for consideration of the remaining issues
raised by the defendants. See 117 S. Ct. at 931 - 932.
The remaining issues presented by the defendants are (1) whether the defendants
have been held to answer for a crime not charged in their indictments and (2) whether
the district court’s instructions had the effect of improperly directing a verdict against
the defendants. The court must also resolve the government’s cross appeal, in which
it argues the trial court erred in its guideline computations and the imposition of
sentence. We affirm the defendant’s conviction and reverse and remand for re-
sentencing.
Since the background in this case and the underlying facts have been fully
explored in this court’s prior decision and the Supreme Court decision, we will only set
forth those facts necessary to resolve the issues which remain for consideration.
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II.
As an initial matter, the government argues that we should not consider either of
the defendants’ remaining arguments, since, in its view, those arguments could have
been raised in the initial appeal to this Court. The defendants could only have raised
those arguments, however, if they had anticipated the government’s position that
materiality is not an element of § 1014, a position that the government adopted for the
first time in a supplemental brief to this Court. Since nothing in the conduct of this case
up to that point suggested that the government contested the supposed materiality
requirement of § 1014, we decline to find that the defendants have waived their right
to a consideration of their claims simply because they did not anticipate the
government’s change of position and brief all ancillary issues resulting from that change
of position.
III.
The indictments in this case charged that the defendants made “material” false
statements for the purpose of influencing a federally insured bank. While that
allegation of materiality was in accord with our precedent at the time, see, e.g., U.S.
v. Ribaste, 905 F.2d 1140 (8th Cir. 1990), it is now clear that materiality is not an
element of the crime charged. The defendants argue that, regardless of whether
materiality is an element of § 1014, materiality is still an element of the offense “as set
forth in the indictment,” and so the government must prove the materiality of their
statements to the satisfaction of a jury. Anything less, according to the defendants,
would amount to a violation of their right to be tried only on the charges brought by the
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grand jury.
When an indictment includes all of the essential elements of an offense, but also
treats other, superfluous matters, the superfluous allegations may be disregarded and
the indictment is proper. See, e.g., Ford v. U.S., 273 U.S. 593 (1927); U.S. v. Miller,
471 U.S. 130 (1985); U.S. v. Norris, 34 F.3d 530, 532 (7th Cir. 1994); U.S. v.
McIntosh, 23 F.3d 1454, 1457 (8th Cir. 1994)(“Allegations in the indictment that are
not necessary to establish a violation of a statute are surplusage and may be disregarded
if the remaining allegations are sufficient to charge a crime”).
Since superfluous allegations are not part of the charged offense and may be
disregarded, the government is not required to prove those allegations in order to obtain
a conviction. See U.S. v. Rosenthal, 9 F.3d 1016, 1023 (2nd Cir. 1993) (“[A]llegations
in an indictment that go beyond the essential elements which are required for conviction
do not increase the Government’s burden”). All the government need do is prove “that
the defendant is guilty of every element of the crime with which he is charged[.]” See
U.S. v. Gaudin, 115 S. Ct. 2310, 2313 (1995). That was done here, since all the
essential elements of § 1014 were submitted to the jury and a conviction resulted.
Striking superfluous allegations does not result in an impermissible constructive
amendment of an indictment. As we explained in U.S. v. Begnaud, 783 F.2d 144 (8th
Cir. 1986), a constructive amendment occurs when the jury is “allowed ... to convict
the defendant of an offense different from or in addition to the offenses alleged in the
indictment.” 783 F.2d at 147; see generally 24 Moore’s Federal Practice, § 607.06[1]
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(Matthew Bender 3rd Ed. 1997). Paring down an indictment so that it alleges just the
essential elements of an offense does not expose a defendant to the risk of being
convicted of any additional or different offenses. See, e.g., U.S. v. Helmsley, 941 F.2d
71, 91 - 92 (2nd Cir. 1991)(allegation in indictment that items of income omitted from
tax returns were “substantial” was surplusage not essential to offense and could be
dropped from indictment); U.S. v. Bledsoe, 898 F.2d 430 (4th Cir. 1990)(holding that
deleting word “public” from an indictment charging defendant with selling drugs within
1000 feet of a “public” secondary school was not an impermissible amendment when
statute prohibited drug selling within 1000 feet of any secondary school). The charged
offense is the same throughout, and so the court has not “permit[ted] a defendant to be
tried on [a] charge that [is] not made in the indictment against him.” Stirone v. U.S.,
361 U.S. 212, 217 (1960); Helmsley, 941 F.2d at 92.
IV.
Although the jury in this case did not have to determine materiality, it did have
to determine whether the defendants made false statements for the purpose of
influencing the actions of a federally insured bank. The district court gave the following
instruction on the meaning of “false statement”:
A statement or representation is “false” when it is untrue
when made or effectively conceals a material fact. A material fact
is a fact that would be important to a reasonable person in deciding
whether to engage or not to engage in a particular transaction.
...
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The materiality of the statement or representation alleged to
be false or concealed is not a matter with which you are concerned
and should not be considered by you in determining the guilt or
innocence of the defendant.
The defendants argue that the statement by the court that materiality is not an
issue that should concern the jury had the effect of improperly directing a verdict for
the government on the issue of falsity of the statement. We agree that in light of the
Supreme Court decision in this case, any reference to materiality in the jury instruction
is unnecessary and has the potential to cause confusion. However, we have repeatedly
held that an instruction that may be less than a model of clarity does not require
reversal, provided that the instruction does accurately set out the elements of the
offense which the government much prove. See Toro Co. v. R & R Products Co., 787
F.2d 1208, 1215 (8th Cir. 1986); Roth v. Black & Decker, Inc., 737 F.2d 779, 783 (8th
Cir. 1984); Stoetzel v. Continental Textile Corp. of America, 768 F.2d 217, 224 (8th
Cir. 1985); Gander v. FMC Corp., 892 F.2d 1373 (8th Cir. 1990).
In this case the jury was instructed that, in order to convict, it had to find that the
statements at issue were either untrue when made or effectively concealed a material
fact. The instruction went on to state that “the materiality of the statement or
representation alleged to be false or concealed is not a matter with which you are
concerned . . .” (emphasis added). Reading the instructions as a whole, there can be
little doubt that the jury was properly instructed that it had to find the alleged false
statement to be untrue or to have effectively concealed a fact, and that making the false
statement or concealing the fact was done with the intent to influence the bank’s
actions. See Wells, 117 S. Ct. at 931. Although there may be superfluous language in
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the instruction, the government’s burden of proof is correctly stated in the instruction.
We cannot agree with the defendants that the court’s statement concerning materiality
would have the effect of directing the jury to find that the statement were also untrue.
The district court’s instruction did not displace the jury from its proper role of
determining the factual question of whether the defendants made false statements for
the purpose of influencing the bank. Accordingly, the district court’s instructions did
not invade the province of the jury.
V.
We turn last to the government’s sentencing appeal. The district court sentenced
the defendants under § 2F1.1 of the federal sentencing guidelines, which covers
“Offenses Involving Fraud or Deceit.” The crimes under this section carry a Base
Offense Level of 6. U.S.S.G. § 2F1.1(a). The district court increased the base level by
4, based on its determination that the defendants did not intend to cause any loss to the
banks, and that the actual loss to the banks was over $20,000 but not more than
$40,000. U.S.S.G. § 2F1.1(b)(1)(E). The court declined the government’s request to
increase the base level another 2 points based on more than minimal planning. U.S.S.G.
§ 2F1.1(b)(2). The court then decreased the base level from 10 to 8 based on its
finding that the defendants played a minor role in the offense. U.S.S.G. § 3B1.2(b).
When the government challenges sentences imposed under the federal sentencing
guidelines, we review a district court's factual findings for clear error, and the district
court's application and construction of the guidelines de novo. United States v. Ballew,
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40 F.3d 936, 943 (8th Cir. 1994); United States v. Rayner, 2 F.3d 286, 287 (8th Cir.
1993). Because each alleged error by the sentencing court in this case concerns a
finding of fact, we review each for clear error. See United States v. Earles, 955 F.2d
1175, 1180 (8th Cir. 1992)(calculation of fraud related loss reviewed for clear error);
United States v. Lublin, 981 F.2d 367, 370 (8th Cir. 1992)("more than minimum
planning" determination reviewed for clear error); United States v. Hale, 1 F.3d 691,
694 (8th Cir. 1993)(status as minor participant reviewed for clear error). A finding is
clearly erroneous when the reviewing court, on the basis of all the evidence, is left with
the definite and firm conviction that a mistake has been made. United States v. Cabbell,
35 F.3d 1255, 1260 (8th Cir. 1994); Anderson v. City of Bessemer City, 470 U.S. 564,
573, 105 S. Ct. 1504, 1511 (1985). Where there are two permissible views of the
evidence, the district court’s choice between the two cannot be clearly erroneous.
Bessemer City, 470 U.S. at 574, 105 S.Ct. at 1511-12. Where the appellant challenges
the construction or application of the sentencing guidelines in arriving at its finding of
fact, we will review de novo.
A. Loss
The government challenges the district court's calculation of the "loss" associated
with the defendants' fraud and, consequently, its calculation of the base offense level
under the federal sentencing guidelines. "Loss" under the guidelines is the greater of the
intended loss or the actual loss. U.S.S.G. § 2F1.1(b) App. Note 7.2
2
The method of measuring loss under § 2F1.1 varies depending on the
type of fraud involved. Application note 7(a) governs loss in frauds involving
misrepresentation of the value of an item or product, and application note 7(b)
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The burden of proving the extent of the loss falls on the Government, who must prove
the extent of loss by a preponderance of the evidence. United States v. Mills, 987 F.2d
1311, 1315 (8th Cir. 1993).
The government claims that the sentencing court erred in its determination that
the intended loss was less than the actual loss caused by the defendants' fraud. The
court determined that the appellants did not intend to cause any loss, and therefore
governs fraudulent loan application cases. § 1B1.2 of the Sentencing Guidelines
instructs a sentencing court to determine the offense level based on the section from
Chapter Two that is "most applicable to the offense of conviction." Similarly, where
the commentary to the applicable section of Chapter Two includes several
application notes that describe alternative methods of computing the offense level
depending on the particular facts of the case, the sentencing court should choose the
"most applicable" application note.
The instant case involved the sale or assignment of the right to future lease
payments. Although it is a common business practice for lenders to take an
assignment of accounts receivable as security for loans, see e.g. In re B. Hollis
Knight Co., 605 F.2d 397, 399 (8th Cir. 1979); Rigby Corp. v. Boatmen's Bank &
Trust Co., 713 S.W.2d 517, 521 (Mo. Ct. App. 1986), such an assignment can be
made either as the sale of the accounts receivable under a lease or as the granting of
a security interest in conjunction with a loan. When disputes arise over the true
nature of the transaction, courts look to the contract to ascertain the parties' true
intent. In re CIS Corp., 172 B.R. 748, 756 (S.D.N.Y. 1994); People v. The Service
Institute, Inc., 101 Misc. 2d 549, 421 N.Y.S.2d 325, 326 (Sup. Court Suffolk
County 1979).
The record appears to indicate that the transactions were an assignment of the
leases to the bank based on discounted cash flow. However, the record also reflects
the intent of both parties to treat the transactions as loans secured by an assignment
of the lease payments, at least for the purpose of determining losses under the
contracts. Both parties' evidence of loss at sentencing treated the transaction as a
loan and neither party objected to the court's application of note 7(b). Accordingly,
note 7(b) is the most appropriate method of calculating loss.
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found the intended loss was zero. Because the court then found that the actual loss was
$40,000, the court used the greater actual loss figure to determine the extent of the base
offense level increase.
Application Note 7 to § 2F1.1 of the federal sentencing guidelines provides that
"loss" is “the actual loss to the victim [unless] the intended loss is greater than the
actual loss, [in which case] the intended loss is to be used.” See U.S.S.G. § 2F1.1 App.
Note 7; United States v. Little, 990 F.2d 1090, 1093 (8th Cir. 1993).
The government claims that "intended loss", as used in § 2F1.1, is measured by
the potential loss or possible loss that could arise from the charged crime, not by the
amount of loss that the defendant intended to cause. Under this view, “intended loss”
is shorthand for “the possible loss that could have resulted regardless of what the
defendant intended the loss to be.” Because the banks that were harmed by the
defendants' fraud could possibly have lost an amount equal to the full value of the
money transferred, the government argues that the intended loss was greater than the
actual loss, and should have been used to calculate the increase in the base offense
level. We review de novo, as this relates to the application and construction of the
guidelines. Ballew, 40 F.3d at 943; Rayner, 2 F.3d at 287.
The government cites a number of decisions of this court in support of its claim
that the focus for sentencing purposes under § 2F1.1 should be on the amount of
possible loss that could have been caused by the defendants’ conduct. United States
v. Morris, 18 F.3d 562, 570 (8th Cir. 1994); United States v. Kok, 17 F.3d 247, 250
(8th Cir. 1994); United States v. Prendergast, 979 F.2d 1289, 1292 (8th Cir. 1992);
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United States v. Johnson, 908 F.2d 396, 398 (8th Cir. 1990). Although we have never
interpreted them that way, see, e.g., U.S. v. Anderson, 68 F.3d 1050 (8th Cir. 1995);
U.S. v. Sheets, 65 F.3d 752 (8th Cir. 1995); U.S. v. Graham, 60 F.3d 463 (8th Cir.
1995), the government argues that these cases stand for the proposition that the
sentencing court should measure intended loss by the possible or potential losses that
could occur due to a defendant's fraud, not by the amount of loss that the defendant
intended to cause. We disagree. Instead, a review of those cases shows that we have
interpreted “intended loss” to mean just that — the loss the defendant intended to cause
to the victim. The amount of possible loss is just one element of proof to be
considered, along with all other evidence, on the issue of intended loss.
In Morris, for example, the plaintiff had been convicted of fraud in relation to a
check kiting scheme involving checks drawn on accounts with insufficient funds. 18
F.3d at 564. Before the scheme was discovered, the defendant caused some money to
be paid back into one of the accounts, thus decreasing the actual loss suffered by the
wronged bank. The district court reduced the amount of loss for sentencing purposes
by the amount that had been repaid into the account. We reversed because the
evidence at trial showed that the money was repaid only to avoid detection of the
fraud. Id. at 570. Implicit in our decision was an understanding that the defendant, at
the time he committed the fraud, had intended to succeed to the full amount of the
check and to cause all the loss that could possibly be caused by the bad check. The
fact that the defendant later paid some of the money back did not alter the amount of
lossintended when the crime was committed. In that situation, the intended loss was
properly measured by the possible loss, and did not hinge on actual or net loss. Id.
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In Prendergast, the defendant was convicted of selling fraudulent promissory
notes totaling $280,000. 979 F.2d at 1290. Prior to sentencing, the defendant made
compensatory payments to his victims of about $110,000. Id at 1291. The district court
reduced the amount of loss for sentencing purposes by the amount of reimbursements
made, finding that the loss was $170,000. Id. We reversed. Again, there was no
evidence that the defendant intended, at the time he committed the fraud, to deprive his
victims of anything less than the full value of the fraudulent notes. Id. Where there is
no evidence that a defendant intended to cause any less than all losses possible from
his fraud, the amount of loss for sentencing purposes does not hinge on the actual or
net loss, but instead, is found by determining the intended loss as measured by the
possible loss. The common thread in both Morris and Prendergast is that the
repayments were made after the fact only in order to conceal, or reimburse victims, for
crimes that had already been committed. The focus was on the defendant's intent at the
time he committed the fraud.
In Johnson, the defendant obtained a number of loan disbursements through
fraud, applying the loan money toward the purchase of two cars. 908 F.2d 396. At
sentencing, the district court measured the amount of loss by the sum total of the loan
disbursements obtained by the defendant, rather than by the actual loss suffered by the
bank after reselling the cars and collecting insurance proceeds. Id. at 398. Under the
then-applicable App. Note 7 to § 2F1.1 (prior to revision), "if a probable or intended
loss that the defendant attempted to inflict can be determined, that figure would be used
if it was larger than the actual loss." Id. We affirmed the court's finding that the
probable or intended loss was greater than the actual loss, and that therefore, the loss
did not hinge on the actual loss. Id. There was no indication that the defendant had
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intended to repay, or that it was probable that the defendant would repay, any portion
of the loans. If the court had found that the defendant had intended to repay the loan
in full (and, under the then-applicable Application Note 7, that it was probable), the
court could properly have found that the intended loss was zero and used the actual loss
for sentencing purposes.
In each of those opinions, we recognized that the loss for sentencing purposes
in fraud cases does not hinge on actual loss if the 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. We
held, that in those circumstances, the intended loss can properly be measured by the
possible loss, since the defendant intended to cause that possible loss. Where there is
evidence of the extent of the loss the defendant intended to cause, however, we have
held that the crucial question for determining intended loss for sentencing purposes is
the loss that the defendant actually intended to cause. See, e.g., United States v. Edgar,
971 F.2d 89, 96 (8th Cir. 1992).
In Edgar, the defendant was convicted of a fraud committed while acting as
bankruptcy attorney for Duplitech Corporation, a copying and printing business. 971
F.2d at 92. The fraud consisted of arranging for the sale of certain assets out of an
estate in bankruptcy, thus defrauding creditors of the value of the property transferred.
In making that fraudulent transfer, however, the court found that the defendant intended
that the purchaser of the transferred assets would pay $100,000 to the creditors. Id. at
96. We held that the district court should subtract the amount that the defendant
intended would be repaid from the possible loss, even though it was possible that the
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payment would not be made. Id.
United States v. Anderson, 68 F.3d 1050 (8th Cir. 1995), makes clear that the
maximum potential loss is only one fact to consider in determining intended loss under
U.S.S.G. 2F1.1. In Anderson, the district court found that the defendant intended to
cause less than “the maximum potential loss” associated with his conduct, 68 F.3d at
1055, and so used a lower intended loss amount to calculate the defendant’s sentence.
68 F.3d at 1055. The district court expressly rejected the notion that possible loss was
to be used in calculating the amount of loss when the evidence showed that the
defendant intended to inflict something less than the possible loss. See 68 F.3d at 1054
n. 3. The Anderson court held that “the district court did not misinterpret the
Guidelines,” 68 F.3d at 1055, and noted that “[t]he district court did not look to the
maximum potential loss from the situation but [instead] very properly considered the
amount of potential loss that [the defendant] intended to inflict[.]” 68 F.3d at 1055
(emphasis added).
In summary, the method used by a sentencing court to determine "loss" depends,
in the first instance, on the court's factual finding of the intent of the defendant to cause
loss and on the court's factual finding of the extent of actual loss. Under Application
Note 7 to § 2F1.1 of the guidelines, the loss for sentencing purposes is the greater of
the intended loss or the actual loss. Each of these factual findings will only be
overturned for clear error. Ballew, 40 F.3d at 943; Rayner, 2 F.3d at 287.
Where a court determines that a defendant intended to succeed to the full extent
of the fraud or where there is no indication that the defendant intended to cause less
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than the greatest possible loss, the intended loss is the possible loss. We reject the
government's position, however, that the intended "loss" is always measured by the
possible or potential loss. Where the evidence is sufficient to support a sentencing
court's determination that a defendant intended to cause less than the possible or
potential loss that could result from the fraud, “loss” is properly measured by the
defendant’s intent. Edgar, 971 F.2d at 96. As in Edgar, where the evidence shows the
amount that a defendant intended to be repaid, the court can use the possible loss as a
baseline measure of loss, and subtract the intended repayment.
The district court did not commit clear error in determining that there was no
intention to cause the bank a loss. The court's finding is supported by evidence on the
record and we are not left with the definite and firm conviction, on the entire evidence,
that a mistake has been committed. Cabbell, 35 F.3d at 1260; Bessemer City, 470 U.S.
at 573, 105 S.Ct. at 1511. The district court judge who presided over the entire trial
and sentencing was in a much better position than we are to weigh the credibility of the
witnesses and determine the motivations and intent underlying the defendants' actions.
The district court judge determined that the defendants intended that the copier lessees
would make all of the payments due under their CMP lease assignment agreements.
Based on that finding, the sentencing court found that the intended loss, under § 2F1.1,
was zero. This determination was supported by other evidence in the record, including
evidence that one of the defendants had put over $2 million of his own money into
Copytech to keep it in business and that protective clauses in the lease and assignment
contracts indicated an intent to shield the banks from loss. The government, for its
part, has not pointed out sufficient evidence to detract from the court's finding. The
sentencing court's determination that the intended loss was zero is not clearly
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erroneous.
Because the sentencing court found that the intended loss was zero, it went on
to calculate the actual loss caused by the defendants' fraud. The government appeals
the court's determination that the two banks harmed by the defendants' fraud suffered
actual losses in the amount of only $40,000, raising both a factual dispute and a legal
dispute. First, the government contends that the court's calculation of actual loss was
clearly erroneous. Second, the government argues that the method the court used to
calculate the loss was legally insufficient.
"Loss" under § 2F1.1 is defined to mean:
[T]he actual loss to the victim . . .For example,
if a defendant fraudulently obtains a loan by
misrepresenting the value of his assets, the loss is the
amount of the loan not repaid at the time the offense
is discovered, reduced by the amount the lending institution
has recovered (or can expect to recover)
from any assets pledged to secure the loan.
U.S.S.G. § 2F1.1 App. Note 7(b). The amount of loss is generally a factual finding,
reviewed for clear error. Ballew, 40 F.3d at 943. The court need not determine the
value of the loss with any degree of precision; a reasonable estimate of the loss based
on the available evidence will suffice. Anderson, 68 F.3d at 1054; U.S.S.G. § 2F1.1
App. Note 8.
Although the loss does not have to be determined with precision, the text of the
guidelines provides guidance as to what should be included and excluded from the loss.
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Application Note 7 of § 2F1.1 provides that the loss includes "the amount of the loan
not repaid at the time the offense is discovered" and should be reduced by the amount
that the lender has "recovered, or can expect to recover, from any assets pledged to
secure the loan." Although the rights to receive future payments under the copier leases
were assigned to the banks, not "pledged to secure" a loan, the court nevertheless
explicitly reduced the amount of loss by the extent of recoveries made by the bank prior
to sentencing, payments that the banks could expect to receive in the future, and by the
amount O'Bannon bank stood to recover based on a judgment it had received against
one of the lessees.
The government submitted evidence that the banks had charged off
approximately $1.2 million in losses on their Copytech accounts. Although the
government bore the burden of proving the extent of loss by a preponderance of the
evidence, it did not offer any evidence on the number of lease accounts that were still
active, on the amount that the banks had recovered since their loss calculation, or on
the amounts that the banks could expect to recover in the future. Defense evidence
showed that O'Bannon Bank had received a judgment against one of Copytech's
customers in the amount of $747,000, that Bank IV had not accounted for the value of
recovered copier equipment, and that Bank IV was still servicing some active copier
leases and receiving monthly payments on them.
In reaching its finding on the amount of actual loss, the court reduced the loss by
the amount of recovery that the banks had recovered or could expect to recover, and
by the amount of O'Bannon Bank's judgment against one of Copytech's customers.
Given the defense evidence of future recovery, and the absence of government evidence
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on the amount that the banks could actually expect to recover, the court's estimate of
a $40,000 loss was not clearly erroneous, and must therefore be affirmed. Mills, 987
F.2d at 1315.
The government's primary objection to the court's estimate of a $40,000 loss is
that the court did not apply the guidelines correctly and had no legal basis for deducting
future recovery of lease payments from the actual loss calculation. Specifically, the
government claims that since the money recovered, or expected to be recovered, from
lease payments or from O'Bannon's judgment against Copytech's customer is not an
"asset[] pledged to secure the loan", that the court erred in deducting those amounts
from the loss calculation. This dispute relates to the application of the guidelines, and
is reviewed de novo. Ballew, 40 F.3d at 943; Rayner, 2 F.3d at 287.
Despite the fact that the copier lease assignments may, technically, have been
sales and assignments of Copytech's interest in the lease accounts, the most appropriate
guideline for the determination of the offense level in this case is § 2F1.1 and
Application Note 7(b), relating to fraud in loan application cases. See supra, note 3.
To the extent that the transactions are treated as loans by analogy for sentencing
purposes, the text of Application Note 7(b) must be read in that light and construed
consistently with the actual nature of the transactions.
If the banks in this case had lent Copytech money, secured by a security interest
in the stream of lease payments, instead of purchasing an assignment of the right to
receive future payments, the treatment of recovery and expected recovery against those
accounts would be clear. Under Application Note 7(b), those recoveries would be
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deducted from the loss calculation as recovery of assets pledged to secure a loan. In
this case, however, Copytech did not pledge its interest in future lease payments as
security in the event of default, but instead made an outright assignment of its entire
interest in those payments to the bank.
The right to collect future payments based on an assignment of that right protects
the bank to the same extent as does the right to collect future lease payments after
asserting the rights or a secured creditor to collect the payments.3 In both cases the
bank's interests are protected to the extent of monies recovered from lease payments.
Since the transaction itself is being treated, by analogy, as a "loan", the banks' interests
in receiving future lease payments can properly be treated, by analogy, as assets
pledged to secure that "loan". The district court did not err in deducting future lease
payments and recoveries from the loss calculation.
B. Minimal Planning
The government argues that the sentencing court erred by not increasing the base
level of the defendants’ offense by two points for more than minimal planning.
U.S.S.G. § 2F1.1(b)(2)(A). More than minimal planning “is deemed present in any
case involving repeated acts over a period of time, unless it is clear that each instance
was purely opportune.” United States v. Callaway, 943 F.2d 29, 31 (8th Cir.
1991)(quoting U.S.S.G. § 1B1.1, comment. Note 1(f)). “Almost any crime that
3
In fact, Article 9 of the U.C.C., governing secured transactions, is
applicable to the sale of accounts receivable under a lease. See Mo. Rev Stat.
§§ 400.9-102, 106.
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consists of a pattern of activity over a long period of time would qualify as an offense
involving more than minimal planning." United States v. Olson, 22 F.3d 783, 786 (8th
Cir. 1994)(quoting West, 942 F.2d at 531).
The defendant in Olson had been convicted on several counts of wire fraud,
securities fraud, racketeering, misapplication of bank funds and related crimes.
Although the offenses that formed the basis of the conviction occurred over a two-year
period of time, the trial court declined to increase the defendant's level for more than
minimal planning. Id. This court held that it was clear error by the trial court to deny
the increase in offense level, due primarily to the length of time during which the
charged crimes took place.
The government argues that the court erred in not applying the two point increase
for more than minimal planning, which in the government’s view is called for by the
duration of the conspiracy, from late 1986 or early 1987 until May 1990. In addition,
the government argues that the conspiracy involved repeated acts over that period of
time that were not merely opportune, including consistently concealing the existence
of the CMP addenda from the banks, changing the language of the lease documents,
forging the personal guaranties of their wives, and selling ninety CMP lease contracts
to the banks.
At sentencing, the district court stated the defendants' objection to the
presentence report and stated, "If there was more than minimal planning, it was on the
part of Mr. Russell, not on the part of these defendants." However, the focus of the
"more than minimal planning" language is the nature of the offense, not the nature of
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a defendant's role in that offense. See United States v. West, 942 F.2d 528, 531 (8th
Cir. 1991)(citing U.S.S.G. § 2F1.1(b)(2)).
We conclude that the court clearly erred by not assessing the more than minimal
planning enhancement. The conspiracy spanned a period of time in excess of three
years, involved more than ninety sales of CMP contracts, and featured personal
participation by each defendant in the forging of the guarantees with their wives’
names. Given these factors, we conclude the court clearly erred in not assessing the
two point enhancement for more than minimal planning.
C. Minor Participant
The sentencing court decreased the base offense level by two points for being
minor participants. U.S.S.G. 3B1.2(b). A minor participant is any participant who is
less culpable than most other participants. Id. Although the mere fact that a defendant
is less culpable than a co-defendant does not entitle the defendant to "minor participant"
status as a matter of law, the judicial determination of whether a person is a minor
participant is a factual determination that we review for clear error. Hale, 1 F.3d at 694.
The sentencing court determined that James Russell was in charge of the day-to-day
affairs of the company and that these defendants were minor participants in the
conspiracy. We cannot say that the sentencing court clearly erred in making that
finding.
VI.
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In summary, we affirm the defendants’ convictions and remand for re-sentencing
in accordance with this opinion.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT
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