United States v. Alexander Martinez
2012 U.S. App. LEXIS 18529
| 8th Cir. | 2012Background
- Martinez was CFO of Affiliated Foods Southwest and was charged with conspiracy to commit bank fraud, bank fraud, and making false statements; he was sentenced to 12 months and 1 day with no restitution.
- Affiliated had a multi-million dollar U.S. Bank line of credit secured by accounts receivable and inventory; loan amount depended on eligible collateral.
- To obtain additional funds, Martinez allegedly inflated Affiliated’s apparent financial status, including directing subsidiaries to issue payments to Affiliated funded by Affiliated, a method described as check-kiting.
- When fraud was discovered in February 2009, Affiliated owed Bank over $55 million; the line of credit was frozen and later forborne with a turnaround consultant; Affiliated filed bankruptcy in May 2009 with about $28 million owed.
- Before sentencing, roughly $2.8 million of principal remained unrecovered; Government argued $11.6 million in extra loans were the intended loss, while Martinez argued the loss was not caused by his fraud and collateral remained; the district court used Martinez’s $48,000 gain as an alternative loss for guideline purposes.
- At sentencing, the district court declined restitution due to the complexity of determining losses attributable to Martinez; Government contends restitution should be awarded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper loss measure for guidelines | Government: use actual or intended loss, not gain. | Martinez: loss cannot be reasonably determined; collateral may offset loss; gain may be used as alternative. | District court may use gain as alternative loss when actual/intended loss cannot be determined. |
| Collateral as part of loss calculation | Government: collateral value should not reduce loss in this context. | Martinez: collateral can reduce or offset loss under applicable guidance. | Collateral value prior to discovery properly considered; district court could not determine fair market value of outstanding collateral, so use of gain approved. |
| Restitution under MVRA when loss is complex | Government: MVRA requires restitution for victim losses proven by preponderance. | Martinez: district court may decline restitution due to complexity of proving loss attributable to fraud. | District court did not abuse discretion in declining restitution given complex loss attribution. |
Key Cases Cited
- United States v. Mancini, 624 F.3d 879 (8th Cir. 2010) (loss determination is reviewed de novo and factual inaccuracy reviewed for clear error; loss must be reasonably estimated)
- United States v. Hodge, 588 F.3d 970 (8th Cir. 2009) (district court findings on loss are factual and reviewed for clear error)
- United States v. Alexander, 679 F.3d 721 (8th Cir. 2012) (loss estimation permitted under a preponderance standard; collateral considerations discussed)
- United States v. Parish, 565 F.3d 528 (8th Cir. 2009) (loss calculation for collateralized loans involves subtracting recoveries and collateral value)
- United States v. Staples, 410 F.3d 484 (8th Cir. 2005) (subtract collateral value from intended loss when appropriate)
- United States v. Oligmueller, 198 F.3d 669 (8th Cir. 1999) (loss determination in collateralized fraud cases; post-discovery payments may be considered if tied to pledged assets)