United States v. Behrman, Donald ( 2000 )

  • In the
    United States Court of Appeals
    For the Seventh Circuit
    No. 00-2563
    United States of America,
    Donald Behrman,
    Appeal from the United States District Court
    for the Southern District of Illinois.
    No. 3:99CR30042-002--William L. Beatty, Judge.
    Argued November 9, 2000--Decided December 22, 2000
      Before Fairchild, Easterbrook, and Manion, Circuit
      Easterbrook, Circuit Judge. After pleading guilty
    to four counts of bank fraud, see 18 U.S.C.
    sec.1344, Donald Behrman was sentenced to 15
    months’ imprisonment plus $611,438.41 in
    restitution to the banks he hoodwinked. By
    pleading guilty Behrman waived any potential
    challenge to all pre-plea events, and the plea
    agreement adds a waiver of both appeal and
    collateral attack concerning the sentence,
    provided that the punishment is within the
    statutory maximum. Nonetheless Behrman has
    appealed, contending that the restitution is
      Paragraph 8 of the plea agreement reads:
    The Defendant is aware that Title 18, United
    States Code, Section 3742 affords a defendant the
    right to appeal the sentence imposed.
    Acknowledging all this, the Defendant knowingly
    waives the right to appeal any sentence within
    the maximum provided in the statute(s) of
    conviction (or the manner in which that sentence
    was determined) on the grounds set forth in Title
    18, United States Code, Section 3742 or on any
    ground whatever, in exchange for the concessions
    made by the United States in this plea agreement.
    The Defendant also waives his right to challenge
    his sentence or the manner in which it was
    determined in any collateral attack, including
    but not limited to a motion brought under Title
    28, United States Code, Section 2255.
    The "concessions made by the United States" in
    exchange for Behrman’s plea and waiver were
    substantial. A stipulation of facts accompanying
    the plea agreement reveals that Behrman and his
    father Theodore defrauded five banks, over
    extended periods, by selling assets in which the
    banks had security agreements. The banks financed
    the family’s used-car business, lending against
    the security of titles to the cars. Behrman sold
    many of the cars without repaying the borrowed
    money. Banks were not the only losers. Behrman’s
    Garage and Sales, Inc., did not file corporate
    tax returns, or pay federal taxes, for the
    calendar years 1995, 1996, 1997, and 1998.
    Behrman himself did not file tax returns, and
    evaded his personal tax obligations, for 1994,
    1995, 1996, 1997, and 1998. By pleading guilty
    Behrman avoided criminal prosecution for these
    tax offenses, which if pursued would have
    produced a sentence substantially exceeding the
    15-month term he received.
      Although the prosecutor has fulfilled the United
    States’ part of the bargain, Behrman says that he
    need not keep his promise to refrain from
    appealing because he seeks to present a
    constitutional argument in support of reversal.
    The restitution order, Behrman contends, violates
    the due process clause of the fifth amendment
    because it is inadequately supported by the facts
    and because the basis of the restitution order
    was not established to a jury’s satisfaction
    beyond a reasonable doubt. See Apprendi v. New
    120 S. Ct. 2348
     (2000). Behrman points to
    cases saying that particular plea agreements do
    not waive constitutional arguments. E.g., Jones
    v. United States, 
    167 F.3d 1142
    , 1144 (7th Cir.
    1999); United States v. Woolley, 
    123 F.3d 627
    632 (7th Cir. 1997); United States v. Schmidt, 
    47 F.3d 188
    , 190 (7th Cir. 1995). Some
    constitutional theories--particularly claims that
    the plea agreement was involuntary or the result
    of ineffective assistance of counsel--concern the
    validity of the plea agreement and thus would
    knock out the waiver of appeal along with the
    rest of the promises; all terms stand or fall
    together. United States v. Wenger, 
    58 F.3d 280
    (7th Cir. 1995). But Behrman does not contend
    that his plea is invalid and does not want a
    trial; he seeks to retain the prosecutor’s
    concessions while having an appeal too. Yet each
    side’s concessions are linked to the other’s;
    while the agreement is in force, a defendant must
    keep all of the promises he made. To create a
    general "constitutional-argument exception" to
    waivers in plea agreements would be to reduce the
    concessions defendants could obtain for their
    promises, because it would reduce the number of
    (enforceable) promises defendants could make.
    Because almost every argument in a criminal case
    may be restated in generic constitutional form
    (as Behrman has done), a "constitutional-argument
    exception" would vitiate most waivers of appeal
    and all waivers of collateral attack. Yet we held
    in Wenger, and have reiterated many times since,
    that voluntary waivers of appeal are valid and
      Behrman’s contention that all constitutional
    arguments always may be presented despite
    promises made in plea agreements (and no matter
    what the agreement says) is impossible to
    reconcile with cases such as Bousley v. United
    523 U.S. 614
     (1998), United States v.
    488 U.S. 563
     (1989), and Mabry v. Johnson,
    467 U.S. 504
    , 508 (1984), which hold that by
    pleading guilty defendants waive all objections--
    including constitutional objections-- to their
    convictions. Only arguments that would nullify
    the plea itself survive. If a voluntary guilty
    plea may waive a basket full of potential
    constitutional objections to searches and
    seizures, confessions, and the validity of the
    indictment and prosecution (including claims
    under the double jeopardy clause that logically
    would preclude any sentence), it is impossible to
    see why a voluntary plea agreement may not waive
    constitutional objections to the particular
    sentence imposed. Plea agreements may preserve
    some (or all) constitutional arguments,
    concerning the conviction as well as the
    sentence, see Fed. R. Crim. P. 11(a)(2), but
    Behrman’s does not reserve any identified theory
    for appeal. To the contrary, this agreement
    surrenders the right to present "any ground
    whatever" in support of an appeal challenging
    "any sentence within the maximum provided in the
    statute(s) of conviction".
      Constitutional grounds are included in "any
    ground whatever". Still, the agreement waives the
    right to appeal only if $611,000 in restitution
    is a "sentence within the maximum provided in the
    statute(s) of conviction". There is a difference
    between the "statute of conviction"--which is to
    say 18 U.S.C. sec.1344--and the entire Criminal
    Code. Section 1344 provides that a person
    convicted of bank fraud "shall be fined not more
    than $1,000,000 or imprisoned not more than 30
    years, or both." It does not mention restitution.
    What does authorize restitution is 18 U.S.C.
    sec.3663(a), and because Behrman’s crime entailed
    fraudulent deprivation of property the judge was
    required by sec.3663A to provide for complete
    restitution. See sec.3663A(c)(1)(A)(2). Because
    the agreement waives appeal only with respect to
    fines and imprisonment, and not with respect to
    restitution, Behrman is entitled to present any
    kind of argument--procedural, statutory, or
    constitutional. An agreement waiving appeal from
    "any sentence within the maximum provided in
    Title 18" or similar language would foreclose the
    arguments Behrman now presents, but, just as we
    are willing to enforce waivers of appeal, we
    enforce them only to the extent of the agreement.
      One final argument based on waiver remains.
    Restitution is due to the "victim" of the
    offense, defined by sec.3663A(a)(2) as "a person
    directly and proximately harmed as a result of
    the commission of an offense for which
    restitution may be ordered". See also 18 U.S.C.
    sec.3664(e). We understand this language to refer
    to harm directly caused by the offense of
    conviction; more diffuse estimates of loss may be
    appropriate for purposes of relevant conduct
    under the Sentencing Guidelines, but restitution
    tracks "the recovery to which [the victim] would
    have been entitled in a civil suit against the
    criminal". United States v. Martin, 
    195 F.3d 961
    968 (7th Cir. 1999). But sec.3663A(a)(3) permits
    the defendant to undertake additional restitution
    obligations via a plea agreement, and the United
    States contends (in effect though not explicitly)
    that Behrman did this, waiving the benefits of
    sec.3663A(a)(2) and the holding of Martin.
      Concurrently with the plea agreement, the
    parties entered into a stipulation of facts.
    Paragraph 8 of this stipulation, which also
    appears as para.3 n.1 of the plea agreement,
    contains this language (boldface in original):
    The loss to the victim banks was caused by a
    number of factors in this case, not all of which
    can be proven to be attributable to the
    fraudulent conduct of the defendants [Behrman and
    his father]. Therefore the actual loss for
    restitution purposes is greater than the
    guideline "valuation of loss" for sentencing
    purposes. The F.B.I. investigation has revealed
    to date that $243,894 of the total loss to the
    victim banks can be substantiated as attributable
    to the fraud or misrepresentations of the
    defendants. For restitution purposes the victims
    report the following losses [bank-by-bank details
    omitted]; which totals to a total loss for
    restitution purposes of $602,997.85.
    This appears to get things backward, implying
    that difficulty of proving loss means that
    restitution will exceed "loss" for purposes of
    the loss table under the Guidelines. Oddly, the
    parties make nothing of this glitch. The
    prosecutor reads para.8 as an undertaking to pay
    $603,000 in restitution, even though that amount
    may exceed the direct and proximate harm from the
    offense of conviction. But it would be unsound to
    read this stipulation as a promise to pay
    $603,000 in restitution. Paragraph 8 does not
    consent to the imposition of any particular
    penalty. Instead it stipulates that "the victims
    report the following losses. . ." (emphasis
    added). Whether those losses are amounts that
    should be included as restitution under the
    sentence is a question reserved (at least, not
    resolved) by the stipulation of facts and plea
    agreement. Paragraph 7 of the plea agreement
    adds, apparently referring to all elements of the
    sentence: "Defendant expressly recognizes that
    the final calculation will be determined by the
    Court after considering the Presentence Report,
    the views of the parties and any evidence
    submitted prior to sentencing" (underlining in
    original). Nothing here or elsewhere in the plea
    agreement undertakes to make restitution in
    excess of the amount required by sec.3663A.
      Misunderstanding the effect of para.8, and
    without carrying out the inquiry required by
    sec.3663A(a)(2) and Martin, the district judge
    directed Behrman to pay as restitution whatever
    sums the victim banks claimed as their losses
    from all dealings with Behrman’s Garage and
    Sales. Something more than $244,000 may be
    appropriate as restitution, for the FBI’s
    preliminary conclusions do not necessarily
    reflect the full consequences of the fraud, but
    before directing Behrman to pay more than that
    figure the district court must carry out the
    inquiry and make the findings required by the
    statute and our opinions interpreting sec.3663A.
    One important question, so far unaddressed in
    this case, is whether the banks’ losses on credit
    that they extended to the Behrmans’ customers is
    the sort of harm for which restitution is
    available under sec.3663A. Compare United States
    v. Menza, 
    137 F.3d 533
    , 537 (7th Cir. 1998), with
    United States v. Hensley, 
    91 F.3d 274
    , 277 (1st
    Cir. 1996) (broaching the question whether Hughey
    v. United States, 
    495 U.S. 411
     (1990), applies to
    restitution orders in light of post-Hughey
      Neither side gave the topic much thought in the
    district court, perhaps because no one
    anticipates that Behrman will be able to pay even
    $244,000. He is represented by a public defender,
    and his economic prospects are not bright. But
    the difference between $244,000 and $603,000 (or
    $611,000) could matter if Behrman acquires
    substantial legitimate income. This restitution
    obligation, which like a civil fraud judgment
    cannot be discharged in bankruptcy, see 11 U.S.C.
    sec.523(a)(2)(A), (a)(13), will dog Behrman for
    life unless it is paid, so the case is not moot.
      According to Behrman, even $243,000 is too high
    unless a jury finds the essential facts beyond a
    reasonable doubt. But like most recent arguments
    invoking Apprendi, this contention depends on a
    misunderstanding of that case. Behrman treats it
    as fundamentally changing the law of criminal
    sentencing, so that every fact affecting
    punishment must be treated as an "element of the
    offense," with all that implies in criminal law.
    Yet that is not how the Supreme Court described
    its decision. What Apprendi holds is: "Other than
    the fact of a criminal conviction, any fact that
    increases the penalty for a crime beyond the
    prescribed statutory maximum must be submitted to
    a jury, and proved beyond a reasonable doubt."
    120 S. Ct. at 2362-63. Thus the first question is
    whether restitution is a "penalty for a crime,"
    a question that has already been answered "no" in
    this circuit because restitution for harm done is
    a classic civil remedy. See United States v.
    168 F.3d 993
    , 998 (7th Cir. 1999).
    Congress required judges to include this remedy
    in a criminal judgment to avoid the need for the
    victims of crime to file separate civil suits--
    litigation that, given the preclusive effect of
    the criminal judgment, would have an inevitable
    outcome. A civil remedy included with a criminal
    judgment does not make it a "penalty for a crime"
    that must be established beyond a reasonable
    doubt; otherwise it would not be possible to
    apply the law of preclusion (or grant summary
    judgment) in an ordinary civil suit seeking
    restitution. It follows that Apprendi does not
    affect the calculation of restitution.
      What is more, sec.3663A does not include a
    "statutory maximum" that could be "increased" by
    a given finding. Section 3663A is in this respect
    like a statute that permits the judge to impose
    any term of years up to life in prison. When
    sentencing under such a statute, we held in
    United States v. Smith, 
    223 F.3d 554
    , 564-66 (7th
    Cir. 2000), the judge may make any appropriate
    findings by a preponderance of the evidence. Put
    otherwise, Apprendi does not affect the operation
    of the Sentencing Guidelines; it is limited to
    situations in which findings affect statutory
    maximum punishment. See Talbott v. Indiana, 
    226 F.3d 866
    , 869-70 (7th Cir. 2000). Even if matters
    were otherwise, however, Behrman could not
    benefit. Section 1344 authorizes a financial
    penalty up to $1 million, and Behrman has no
    interest in whether this is called a "fine" or
    "restitution." (This is not to say that
    restitution is capped at $1 million, but only
    that, if restitution does not exceed the
    authorized fine, then a defendant cannot complain
    even if the Supreme Court should eventually
    disagree with our understanding of Apprendi and
    the holding in Szarwark.) Finally, a defendant
    who has pleaded guilty, and thus surrendered his
    entitlement to a jury trial, is in no position to
    contend that any particular issue should have
    been submitted to a jury. Thus all the genuine
    issues in this case are statutory, and on remand
    the district court may apply sec.3663A without
    modification in light of Apprendi.
      The portion of the sentence specifying
    restitution is vacated, and the case is remanded
    for proceedings consistent with this opinion.