United States v. Alphas, 2015 U.S. App. LEXIS 7581

John S. Alphas, owner of a produce-distribution business, submitted at least ten insurance claims from 2007–2011 that were partly or wholly fraudulent; total face value exceeded $490,000, but insurer payments totaled $178,568.41.
Alphas pleaded guilty to one count of wire fraud; parties stipulated to base offense level 7 but disputed the amount-of-loss for sentencing and restitution.
Probation recommended intended loss equal to the aggregate face value of claims (≈ $480,000) for a +14 level enhancement; Alphas argued loss should exclude legitimately incurred amounts and submitted calculations supporting ≈ $178,000 (a +10 level).
The district court held that void-for-fraud policy clauses meant intended loss equaled the full face amount of submitted claims, applied a +14 enhancement, but imposed a substantial downward variance and sentenced Alphas to 12 months + 1 day and ordered restitution of $178,568.41.
The First Circuit granted a stay of the sentence and addressed two questions of first impression in the circuit: (1) how to calculate intended loss for guideline enhancement in the insurance-fraud context with void-for-fraud clauses, and (2) how to calculate restitution under the MVRA.

Issue	Plaintiff's Argument (United States)	Defendant's Argument (Alphas)	Held
Proper measure of "intended loss" for guideline enhancement in insurance-fraud cases when policies contain void-for-fraud clauses	Void-for-fraud clauses mean the defendant intended to deprive insurer of the full claim amount; use aggregate face value of submitted claims as intended loss	Loss should exclude amounts the insurer would have paid absent the fraud; intended loss is the amount the defendant sought to swindle (the fraudulent inflation), not amounts legitimately owed	Court rejected government view; intended loss should exclude amounts the victim would have paid but for the fraud; remanded for recalculation, though face value may be a starting point with burden-shifting to defendant to prove legitimate portions
Proper measure of restitution under the MVRA when insurer paid claims but policies contain void-for-fraud clauses	Restitution may equal amounts paid because void-for-fraud clauses can render insurer's civil recovery complete	Restitution limited to the victim’s actual loss — only amounts the insurer would not have paid but for the fraud; legitimate portions must be excluded	Court held restitution must be limited to but-for losses; remanded for district court to determine actual loss (insurer payments less amounts that would have been paid absent fraud)

Gall v. United States, 552 U.S. 38 (standards for sentencing procedure and error)
United States v. Innarelli, 524 F.3d 286 (1st Cir.) (definition and focus of "intended loss")
United States v. Prange, 771 F.3d 17 (1st Cir.) (pragmatic, fact-specific approach to loss computation)
United States v. Torlai, 728 F.3d 932 (9th Cir.) ( Ninth Circuit decision treating void-for-fraud/government-benefits context differently)
United States v. Parsons, 109 F.3d 1002 (4th Cir.) (loss limited to tangible economic loss; distinguishing forfeiture)
Burrage v. United States, 134 S. Ct. 881 (but-for causation principle relevant to causation of loss)