United States v. Michael Free
714 F. App'x 144
| 3rd Cir. | 2017Background
- Michael Free filed Chapter 13 then converted to Chapter 7; he disclosed assets exceeding liabilities but was later found to have concealed assets (notably firearms) and sold some during the bankruptcy.
- A trustee and investigators uncovered concealment; Free was convicted at trial of bankruptcy fraud (false statements and concealment of assets).
- At initial sentencing the District Court calculated a loss (based on concealed assets) exceeding $1,000,000 and applied a 14-level enhancement; Free appealed.
- This Court remanded for the District Court to determine what loss Free intended or the gain he sought, because the original record lacked essential findings on intended loss.
- On remand the District Court found no actual loss to creditors but concluded Free intended to cause pecuniary harm of more than $400,000 by concealing multiple assets, and reimposed a sentence (24 months, 3 years supervised release) with a 14-level loss enhancement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether loss amount for sentencing should be zero | Free: no actual or intended loss because assets exceeded liabilities and creditors were paid in full; motive was personal, not to harm creditors | Government: loss should be based on value of concealed assets; intended loss may be inferred from concealment | The District Court’s finding of intended loss (> $400,000) upheld; zero loss rejected |
| Standard for reviewing loss findings | Free: N/A (challenges factual finding) | Government: district court’s factual finding should stand unless clearly erroneous | Appellate standard: factual findings reviewed for clear error; applied and affirmed |
| Whether intended loss can be used when actual loss impossible | Free: intended loss cannot exist because no creditor loss occurred | Government: Guidelines permit intended loss even if actual loss impossible or unlikely | Court: Guidelines allow intended loss that would have been impossible or unlikely; permitted here |
| Basis for quantifying intended loss | Free: no evidence he sought creditor harm; valuations unreliable | Government: valuations in PSR, testimony, and memo support > $400k | Court: accepted PSR and other valuations, concluding intended loss > $400k |
Key Cases Cited
- United States v. Free, 839 F.3d 308 (3d Cir. 2016) (remand requiring district court to determine intended loss or gain sought)
- United States v. Feldman, 338 F.3d 212 (3d Cir. 2003) (court may infer intended loss from concealment and conduct)
- United States v. Himler, 355 F.3d 735 (3d Cir. 2004) (finding of intended loss is factual and not reversed unless clearly erroneous)
- United States v. Greeves, 226 F.3d 186 (3d Cir. 2000) (nature of the crime can inform inference of intended loss)