United States v. Jerry E. Wells ( 1997 )


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  •                          United States Court of Appeals
    FOR THE EIGHTH CIRCUIT
    _______________
    No.93-3924/3932/94-1031WM
    _______________
    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
    _____________
    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.
    -2-
    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
    -3-
    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]
    -4-
    (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.
    ...
    -5-
    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
    -6-
    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,
    -7-
    
    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)
    -8-
    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.
    -9-
    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);
    -10-
    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. -11- 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
    -12-
    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
    -13-
    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
    -14-
    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
    -15-
    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.
    -16-
    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
    -17-
    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
    -18-
    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.
    -19-
    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
    -20-
    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.
    -21-
    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
    -22-
    

Document Info

Docket Number: 93-3924

Filed Date: 10/14/1997

Precedential Status: Precedential

Modified Date: 10/13/2015

Authorities (37)

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United States v. Alan E. Rosenthal , 9 F.3d 1016 ( 1993 )

united-states-of-america-appellantcross-appellee-v-virginia-t-morris , 18 F.3d 562 ( 1994 )

United States v. Brenda Callaway , 943 F.2d 29 ( 1991 )

United States v. Jerome T. Bledsoe , 898 F.2d 430 ( 1990 )

United States v. William C. Norris , 34 F.3d 530 ( 1994 )

United States v. Thomas Roger Little , 990 F.2d 1090 ( 1993 )

united-states-v-susan-greenwood-olson-united-states-of-america-v-robert , 22 F.3d 783 ( 1994 )

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united-states-v-jerry-e-wells-united-states-of-america-v-kenneth-r , 63 F.3d 745 ( 1995 )

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