United States v. Salim Akbani ( 1998 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
__________
No. 98-1824
__________
United States of America, *
*
Appellee, * Appeal from the United
* States District Court for
v. * the Eastern District of
* Missouri
*
Salim I. Akbani, *
*
Appellant. *
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Submitted: June 9, 1998
Filed: July 27, 1998
___________
Before WOLLMAN and MURPHY, Circuit Judges, and KYLE, District Judge.1
KYLE, District Judge.
Salim I. Akbani pled guilty to one count of bank fraud, in violation of 18
U.S.C. §§ 1344(1) and 1344(2), for a check-kiting scheme he executed using two
separate checking accounts at different financial institutions. He appeals from the
1
The Honorable Richard H. Kyle, United States District Judge for the
District of Minnesota, sitting by designation.
district court’s2 sentence, arguing that the district court improperly calculated the
amount of the loss caused by his conduct, and that the district court erred in
ordering him to pay restitution. For the reasons set forth below, we affirm the
district court in all respects.
Background
Akbani was the sole owner of two businesses, Sportswear, Inc. and Akbani
Industries, Inc., both located in Puxico, Missouri. Sportswear, Inc. had a checking
account, maintained by Akbani and on which he was an authorized signer, at the
First National Bank of the Mid-South (“First National”) in Sikeston, Missouri. He
also maintained a checking account for Akbani Industries, Inc., on which he was an
authorized signer, at the Bank of Advance in Advance, Missouri.
In late 1994, Akbani began to write checks on each account made payable to
the other, knowing that neither account contained sufficient funds to support the
payments. He would then deposit the checks into the accounts, in order to
artificially inflate the balances and cause the respective banks to honor checks for
which there were insufficient funds. Between December 28, 1994 and December
30, 1994, Akbani wrote three checks totaling $213,800, drawn on the Bank of
Advance account for deposit into the account at First National. He also wrote
checks from the account at First National for deposit into the account at the Bank of
Advance. The checks that were drawn on the Akbani Industries, Inc. account at the
Bank of Advance and deposited into Sportswear, Inc.’s account at First National
were returned to First National as unpaid due to insufficient funds. This “charge-
back” resulted in an overdraft to the Sportswear, Inc. account at First National of
approximately $165,000.
2
The Honorable E. Richard Webber, United States District Judge for the
Eastern District of Missouri.
2
After the overdraft on the Sportswear, Inc. account was discovered, First
National received additional funds and applied them against the overdraft, reducing
it to approximately $158,000. Subsequently, the bank began collection action on
collateral that had been posted by Sportswear, Inc. for loans that it had taken out
with the bank. Ultimately, First National sold the overdraft note at a discount to the
Bank of Advance.
On June 12, 1997, Akbani was charged in a four-count indictment with bank
fraud by check-kiting,3 in violation of 18 U.S.C. §§ 1344(1) and 1344(2). On
November 10, 1997, Akbani pled guilty to Count I of the indictment pursuant to a
plea agreement. The parties were unable, in the plea agreement, to agree on the
appropriate amount of loss for purposes of sentencing.
The presentence investigation report (PSI) determined the amount of loss to
be $165,000. Applying section 2F1.1(b)(1)(H) of the United States Sentencing
Guidelines, the PSI recommended a seven-point enhancement to the applicable
offense level. After Akbani objected to the calculation of the amount of loss and the
resulting enhancement, a supplemental addendum to the report was issued,
3
Black’s Law Dictionary defines “kiting” as:
The wrongful practice of taking advantage of the float, the time
that elapses between the deposit of a check in one bank and its
collection at another. Method of drawing checks by which the drawer
uses funds which are not his by drawing checks against deposits which
have not yet cleared through the banks. “Kiting” consists of writing
checks against a bank account where funds are insufficient to cover
them, hoping that before they are presented the necessary funds will be
deposited.
Black’s Law Dictionary 871 (6th ed. 1990) (citation omitted).
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explaining the method that had been used to calculate the amount of loss. The
amount of loss was reached by using the amount of the overdraft in the account at the
time the check-kiting scheme was discovered.
In order to resolve Akbani’s objection, the district court held two evidentiary
sentencing hearings. FBI Special Agent Scott Skinner (“Skinner”), testified that, as of
December 30, 1994, both accounts had positive balances, and there were no floats
outstanding as to either account. He also testified that the total amount of the
overdraft was $165,000. The Government also introduced documentary evidence
showing that First National had an overdraft of approximately $165,000 as of January
6, 1995. Clinton Vestal, the United States Probation Officer who had prepared the
PSI, testified that, during his investigation, he had learned that three checks that
Akbani had written as part of the check-kiting scheme on December 28, 29, and 30,
1994, were subsequently returned as unpaid. This resulted in an overdraft in the
account at First National of approximately $165,000, which the bank discovered on
January 6, 1995.
On March 13, 1998, the district court held another evidentiary sentencing
hearing, at which William Sharp, an executive vice president of First National,
testified that the amount of the overdraft in the account at the bank was approximately
$165,000. Sharp also testified that, on December 30, 1994, both bank accounts in
question had positive balances.
At the March 13, 1998 hearing, Sharp also testified about the expenses incurred
by First National after the discovery of the check-kiting scheme. These expenses
included a discount of approximately $4,800 on the sale of the overdraft note to the
Bank of Advance, $3,018.65 of net expenses, and $7,002.85 in attorneys’ fees. The
total “loss” to which Sharp testified was $14,584.18.
At the conclusion of the March 13, 1998 hearing, the district court determined
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that the amount of loss was $165,000, which resulted in a seven-point enhancement to
the offense level.4 The district court then departed downward5 and sentenced Akbani
to a term of imprisonment of six months, to be followed by six months of home
confinement and three years of supervised release. The district court further ordered
Akbani to pay restitution to First National, in the amount of $11,564.53. The
remaining counts of the indictment against Akbani were dismissed.
Analysis
A. Standard of Review
“We review findings of fact at the sentencing hearing for clear error and give
due deference to the district court’s application of the guidelines to the facts.” United
States v. Brelsford, 982 F.2d 269, 271 (8th Cir. 1992). At sentencing, the
Government bears the burden of proving the amount of loss by a preponderance of the
evidence. United States v. Wells, 127 F.3d 739, 746 (8th Cir. 1997). The
determination of the amount of loss attributable to a defendant is a factual question
which we review for clear error. See United States v. Earles, 955 F.2d 1175, 1180
(8th Cir. 1992). Where a district court has made a legal interpretation of terminology
in the Sentencing Guidelines, however, and applied that interpretation to the facts, we
review both the interpretation and the application de novo. See
4
Section 2F1.1(b)(1)(H) of the United States Sentencing Guidelines provides
that, if the amount of loss is between $120,000 and $200,000, the offense level shall
be increased by seven points.
5
The Sentencing Guidelines called for a term of imprisonment of between 12
and 18 months. The district court granted the downward departure pursuant to §
5K2.0, finding that the Sentencing Guidelines had not adequately taken into account
“the circumstances and . . . all of the factors in this particular case” and that Akbani
had “continued to strive to reduce the harm to the financial institutions involved.”
We are not called upon to review this departure.
5
United States v. Manuel, 912 F.2d 204, 206 (8th Cir. 1990) (quoting United States v.
Toler, 901 F.2d 399, 402 (4th Cir. 1990)); see also Wells, 127 F.3d at 745-46.
B. Amount of Loss
Akbani argues that the amount of loss in a check-kiting scheme should be
determined by the amount of the float at the time that the scheme is discovered. He
contends that, because both accounts in question had positive balances on December
30, 1994, the relevant amount of loss should be zero. The Government responds that
while the amount of loss is to be determined at the “time” of the discovery of the
scheme, this does not mean that it must be determined as of the “day” of discovery,
and that the full amount of loss could not be determined until all of the checks in the
scheme had been presented for payment, thereby revealing the extent of the overdraft.
In United States v. Morris, 18 F.3d 562 (8th Cir. 1994), this Court considered
the appropriate method for calculating the amount of loss in a check-kiting scheme.6
The Morris court applied section 2F1.1 of the Guidelines, and recognized that, under
that section, the offense level is determined by “either the actual loss resulting from
the fraudulent conduct or the amount of loss the defendant intended to inflict,
whichever is greater.” Morris, 18 F.3d at 570 (citing United States v. Edgar, 971 F.2d
89, 93 (8th Cir. 1992)); see also United States v. Prendergast, 979 F.2d 1289, 1292
(8th Cir. 1992) (“The focus for sentencing purposes under § 2F1.1 should be on the
amount of possible loss the defendant attempted to inflict on the victim.”), quoted in
Morris, 18 F.3d at 570. The Morris court reversed the district court’s
6
Although Akbani contends that Morris did not “specifically address[] the
measure of damages for a check-kiting offense,” we find that, while it did not use
the term “check-kiting,” Morris did involve a check-kiting scheme and controls the
instant case with regard to determination of the amount of loss.
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determination of the amount of loss, holding that the district court had erroneously
excluded from that determination the amount of five checks for which there were
insufficient funds, but which the defendants had repaid prior to discovery of the
check-kiting scheme. Recognizing that the amount of loss in a case involving a
check-kiting scheme does not turn on “actual loss” or “net loss,” the Morris court
remanded for resentencing, and instructed the district court to include in its
determination of the amount of loss the amount of the checks written by the
defendants for which there were insufficient funds, but which had been repaid.
Morris, 18 F.3d at 570 (citing Prendergast, 979 F.2d at 1291).
Even more instructive than Morris, however, is our decision in United States v.
Wells, 127 F.3d 739 (8th Cir. 1997), and our discussion of Morris therein. In Wells,
we explained the determination of the amount of loss in Morris and stated:
Implicit in our decision [in Morris] 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 loss intended
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.
Wells, 127 F.3d at 746. Akbani has shown, and we perceive, no reason why this rule
should not govern the instant case.
The nature of a check-kiting scheme is that the balances of the accounts used
are over-represented. At the exact moment of discovery of almost any such scheme,
therefore, there will be no evident overdraft. The amount of loss becomes apparent
only after the scheme begins to unravel, and the fraudulent checks cease to artificially
support each other. It would make little sense, therefore, to fashion a rule
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that requires a sentencing court to look only at the exact date on which the scheme is
discovered. In the instant case, while the scheme may have been discovered on
December 30, there was no way to determine the amount of the overdraft (and
therefore, the amount of the loss) until the fraudulent checks were presented for
payment and revealed to be unsupported by sufficient funds. If the Court were to
adopt Akbani’s proposed rule for determining the amount of loss in such a case,
determinations of the amount of loss in check-kiting cases would become wholly
arbitrary, dependent on when the bank or the Government happens to have discovered
the scheme and whether the perpetrators of the scheme happen to have recently
written fraudulent checks which have had their intended effect of artificially inflating
the account balance but not yet been returned to the bank for insufficient funds. None
of the cases from other jurisdictions cited by Akbani compels -- or even suggests --
such an unlikely result. See United States v. Flowers, 55 F.3d 218 (6th Cir. 1995);
United States v. Shaffer, 35 F.3d 110 (3d Cir. 1994); United States v. Frydenlund,
990 F.2d 822 (5th Cir. 1993); United States v. Carey, 895 F.2d 318 (7th Cir. 1990);
United States v. Bolden, 889 F.2d 1336 (4th Cir. 1989); United States v. Marker, 871
F. Supp. 1404 (D. Kan. 1994). These cases stand for the general proposition -- which
the Government does not dispute -- that the amount of loss in check-kiting cases is to
be determined when the scheme is discovered, rather than at the time of sentencing.
None of them, however, suggests that the amount of loss must be determined as of the
exact moment of discovery, at which point the balances of the bank accounts in
question would still be artificially inflated by the very scheme for which the defendant
is being sentenced.
We find, therefore, that the district court properly interpreted the guidelines and
properly applied them to the facts of the instant case.
We further find that the Government presented sufficient evidence on which the
district court could determine that the amount of loss was more than $120,000.
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C. Restitution
Akbani contends that the district court erred in ordering him to pay $11,564.53
restitution to First National, because the amount of restitution was not pegged to the
actual losses suffered by the bank, and because he and the bank had previously
executed a reciprocal release.
“An order of restitution is reviewed under the clearly erroneous standard.”
United States v. Berndt, 86 F.3d 803, 809 (8th Cir. 1996). District courts have wide
discretion in ordering restitution. Id. at 809 (citing United States v. Bartsh, 985 F.2d
930, 933 (8th Cir. 1993)).
We begin by rejecting Akbani’s argument that restitution is improper because
Akbani and First National had entered into a “Complete Reciprocal Release” on
February 3, 1995, by which the bank released Akbani from any claims or damages
arising out of their relationship. Akbani failed to present any evidence of this
agreement or even make reference to it during either of the evidentiary sentencing
hearings, the second of which was held specifically for determining the appropriate
amount of restitution. In the absence of any such evidence, the district court did not
clearly err in imposing restitution.
Moreover, we find that the district court did not clearly err in determining the
amount of restitution. The district court received evidence on three categories of loss
suffered by First National as a result of Akbani’s check-kiting scheme: (1) a loss of
approximately $4,800 on the bank’s discounted sale of the note; (2) net expenses
of $3,018.65 incurred in securing Akbani’s collateral; and (3) attorneys’ fees of
$7,002.85. On his cross-examination by Akbani’s counsel, Sharp, First National’s
executive vice president, agreed that the expenses incurred in securing the collateral
could be characterized as “a collateral consequence of the failure of [the bank’s]
relationship with Mr. Akbani.”
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The district court awarded restitution in the amount of $11,564.53, an amount
to which Akbani did not object. The district court did not explain how it arrived at
this figure, which was approximately $3,000 less than the amount that Sharp testified
First National lost as a result of Akbani’s conduct. With regard to the $3,018.65 in
“net expenses,” however, Sharp conceded that such expenses were not directly
attributable to the check-kiting scheme but were, instead, “a collateral consequence.”
Had the district court simply added the two categories of loss directly attributable to
the check-kiting scheme -- $4,800 and $7,002.85 -- it could have appropriately
ordered restitution in the amount of $11,802.85, a greater amount than it actually
ordered. While we encourage sentencing courts to make specific findings of fact in
determining an appropriate amount of restitution, we have recognized that such
findings are less important in situations, as here, where the defendant does not object
at the sentencing hearing to the amount of restitution. See Berndt, 86 F.3d at 809
(citing Bartsh, 985 F.2d at 933).
Finally, Akbani argues that restitution cannot include consequential damages
such as attorneys’ fees. Akbani directs this Court to several cases from other
jurisdictions which hold that, in cases that result in damage to or loss or destruction of
property, attorneys’ fees may not be included in calculation of the amount of
restitution. We agree with the Government that the cases cited by Akbani are
inapposite because the instant case does not involve damage to or loss or destruction
of property. The language of the Victim and Witness Protection Act (“VWPA”) that
restricts restitution in such cases to the replacement value of the property, therefore, is
inapplicable in the instant case. See 18 U.S.C. § 3663(b)(1). In cases
involving offenses such as the instant one, the VWPA requires only that the restitution
ordered by the district court be based on losses “caused by the specific conduct that is
the basis for the offense of conviction.” United States v. Marsh, 932 F.2d 710, 712
(8th Cir. 1991) (quoting Hughey v. United States, 495 U.S. 411, 413, 110 S. Ct. 1979,
1981 (1990)). We hold that there is no blanket prohibition in the VWPA against
inclusion of attorneys’ fees in the calculation of a
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restitution amount for offenses that do not result in damage to or loss or destruction of
property. Accordingly, we hold that the district court did not clearly err in
determining that Akbani’s conduct directly caused $11,564.53 in losses to First
National, and we affirm the district court’s order of restitution in that amount.
For the foregoing reasons, the judgment of the district court is affirmed.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS EIGHTH CIRCUIT.
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