*1 III. CONCLUSION consistently held that lines), have courts breaking plea been no there has Trujillo’s that Mr. we Because hold omitted)). gov (footnotes bargain.” enforce- rights is appellate waiver of his Accord promises. its performed ernment able, and do not appeal we DISMISS it did not breach conclude ingly, we claims. reach his substantive plea agreement. that even if argues Trujillo Mr. also the plea breach did not government appeal enforce his cannot
agreement, seek enforcement it did not because
waiver brief, filing than rather merits
until its reject the We timely prebriefing motion. America, of UNITED STATES argument. Plaintiff-Appellee/Cross- mo dispositive permit certain We Appellant, briefing merits filed before tions to be v. movant is If the to a movant. convenience GALLANT, Defendant- M. Glenn having to brief the successful, it will avoid Appellant/Cross-Appellee. be otherwise merits issues would party. prevent To opposing raised America, Plaintiff- United States interfering with from motions such Appellee/Cross-Appellant, appeals, disposition orderly prompt requirements time impose strict we v. timely to file a But motions. failure such Baetz, Douglas R. Defendant- raising the issue not foreclose
motion does Appellant/Cross-Appellee. in the merits brief. America, Plaintiff- United States Rule Circuit particular, Tenth Appellant/Cross-Appellee, 27.2(A)(1)(d) permits waiver, appeal file a motion to enforce v. timely, is see the motion provided Boyd, Defendant- Thomas Alan 27.2(A)(3)(b) (2007), and attached to Rule Appellee/Cross-Appellant. and the agreement plea are the the motion hearing and sen plea transcripts of America, Plaintiff- United States 27.2(A)(2)(b). Rule hearing, see id. tencing Appellant/Cross-Appellee, states, however, that explicitly rule “[fjailure not foreclose file a does motion in a merits raising issue from party Jr., Grace, Defendant- Jack O. 27.2(A)(3). Trujillo’s Mr. Rule brief.” Id. Appellee/Cross-Appellant. unpublished court’s on two of this reliance 07-1356, 07-1344, 07-1391, 07-1392, Nos. precludes misplaced. cases is Neither 07-1408, 07-1407, 07-1422, 07-1423. waiver raising appellate government from published law brief. Our in its merits Appeals, States United Court See United clearly practice. permits Tenth Circuit. Ibarra-Coronel, States v. Aug. Cir.2008) (government 1221 n. 3 raising waiver its from precluded brief). response
BRISCOE, Circuit Judge. Gallant, Defendants Glenn Douglas Baetz, Grace, Jack and Thomas Alan Boyd have filed appeals these direct being after convicted of a variety of fraud-related arising crimes from and related to the operation of a credit portfolio card fi- by BestBank, nanced a Colorado bank in- sured Deposit Federal Insurance (“FDIC”). Corporation Defendants Gal- lant and jury Baetz were tried before a fraud, and convicted of conspiracy, bank fraud, reports, false bank wire and a con- tinuing financial enterprise crimes (“CFCE”). They now appeal those convic- tions, arguing that the evidence legally insufficient support their convictions and that the district court erred in failing give requested jury instruction. De- Boyd fendants Grace and were convicted John M. Haried and Murphy, James C. separate trial, similar counts in a bench Attorneys, (Troy Assistant United States do appeal but their convictions. Eid, A. Attorney; United States Michael legal Due to the common and factual Carey, P. Assistant United States Attor- cases, presented by issues these the dis- ney, briefs), Denver, CO, with them on the trict court sentenced all four defendants for the Plaintiff-Appellee/Cross-Appellant, using essentially procedures the same United States of America. enhancements. All four appeal defendants Connelly, Reilly, Sean Pozner & Connel- sentences, their arguing that the district (Jason LLP, Denver, ly, Lynch, CO M. procedural court committed error in calcu- LLP, Reilly, Connelly, Denver, Pozner & lating applicable range. Guidelines CO; Burke, Burke, Patrick J. Patrick J. cross-appealed has P.C., Denver, CO; Fishman, Robert T. cases, sentences in all raising four a num- *8 Denver, CO, briefs), him with on the challenges of ber to the district court’s Defendants-Appellants/Cross-Appellees, calculation of the range, Guidelines Douglas Glenn M. Gallant and R. Baetz. procedures used the district court in Carlson, John T. Assistant Federal conducting sentencing, Pub- and the district Defender, Moore, (Raymond lic P. Federal court’s failure to order restitution. Defender, briefs), Public with him on the Although all not of the issues raised are for Defendanb-Appellee/Cross-Appellant, defendants, common to all four we are Boyd. Thomas Alan addressing appeals single opinion all significant overlap because there is be- Sears, Sears, P.C., Daniel J. Daniel J. legal tween both the facts and the issues. Denver, CO, for Defendant-Appel- jurisdiction pursuant We have to 28 U.S.C. Grace, lee/Cross-Appellant, Jack O. Jr. 3742(a)-(b). §§ 1291 and 18 U.S.C. We TACHA, BRISCOE, Before and reverse the convictions of Gallant and LUCERO, Judges. Circuit Baetz on Counts 55 and 56 and affirm operate sub-prime its counts, To market and re- on all other their convictions defendants, program, card BestBank entered credit all four the sentences verse Century Marketing Agreement into a court with di- remand to district and Services, (“Century”) on Inc. Financial and re- sentences vacate their rection to Century February was owned sentence. and by Douglas Baetz Glenn operated and I. BACKGROUND FACTUAL Gallant, prior who were associates Marketing Agreement, Boyd.1 Under purchased a Mattar In Edward underwriting established BestBank Thornton, Colora- bank state-chartered capital for the provided criteria and Mattar do, renamed BestBank. which he In ex- credit cardholders. extension of bank, it to a changing reorganized investment, BestBank re- change for its deposits in- bank with commercial state above the cost per ceived six cent interest Because Mattar had by the FDIC. sured por- also received of funds. BestBank regulatory ap- banking experience, no the accounts. charged the fees tion of ownership of the bank proval for his turn, Century, performed most expe- employment his contingent upon management and of the credit marketing the bank. Ac- to operate rienced bankers soliciting appli- credit card portfolio: card Thomas Alan cordingly, Mattar hired cations, issuing applicants, cards to and President of BestBank Boyd to serve as from cardhold- collecting fees and interest Fi- as its Chief Grace to Jack serve Century arrange- from the profited ers. Boyd and Grace Both nancial Officer. charges and other by collecting ment fees experience. Mattar prior banking had from cardholders. Officer served as Chief Executive shareholder, BestBank, as the sole Century upon relied BestBank and of Directors. appointed he the Board Data Resources “processor,” First Grace, Mattar, sev- Boyd, Along with (“FDR”), certain tasks for perform on the Board of persons eral other served portfolio. processor, card As the credit Directors. accounts, updated FDR monitored account information, payments from card- of Best- collected key components One of holders, plastic mailed credit cards to the issuance of plan was Bank’s business cardholders, monetary all transac- handled sub-prime cardhold- VISA credit cards accounts, pro- qualify postings tions and do Sub-prime ers. cardholders statements Many duced and sent account from most lenders. for credit cards pay- cardholder reports regarding history, or have no credit other have a bad credit 1997, Century changed all, that ments. October high is a risk history at and there Independent Com- they processor accumu- its to First debt they pay will not off the (“FICI”), Inc. which Baetz and puters, credit card accounts. Given late on their operated. pro- These owned and sub-prime Gallant probability the increased *9 debt, daily monthly reports, created off their cessors pay will not cardholders primary source of the is not al- which were data on the debt assessing interest prosecution experts that the and its relied charging front-end ways profitable as as at trial. issuing upon credit. applicants to before fees Center, Capi- Group, Columbia other re- cial Bankcard Gallant various 1. Baetz and owned Holdings. Corporation, Burwin We marketing and tal in the lated entities involved collectively entities portfol- card will refer to these servicing BestBank credit of the "Century.” Century Finan- entities ios. These included (later potential In to shield itself from cation fee and an annual fee order of $129 losses, required Century pur- to $95), BestBank reduced to and the applicant was any from it accounts that were over chase required to make minimum monthly pay- days delinquent, including accounts $20, with eighteen per ments cent inter- (or off’). “charged uncollectible were charged any est outstanding balance. Later, September BestBank and Initially, the program secured appeared Century an addendum to the negotiated Century opened large successful. num- Marketing Agreement, requiring Century accounts, ber of new credit card using all to accounts were over purchase telemarketing potential to contact card- days sixty delinquent. To finance Centu- However, holders. all was not Al- well. ry’s purchase delinquent or uncollectible though reported some of the accounts accounts, required Century to BestBank valid, were Century, under the direction keep a bad debt reserve on hand Gallant, Baetz and opened number of account at BestBank. This bad debt re- accounts without receipt mandatory originally per serve totaled four cent of the security minimum deposit. many In $250 portfolio, and was later increased to five cases, Century such did not issue cards or per portfolio. cent of the BestBank also account purported statements to the card- kept Century’s operat- some control over account, holders, ing Century occasionally thereby concealing the existence approval needed BestBank’s to withdraw of the purported accounts from the card- money operating from the account. In Sometimes, Century holders themselves. 1996, Century and BestBank further reduced the credit limit on the accounts to agreed Century “partic- would have a zero, charged security deposit to the Century which ipation,” purchase would Century charged card. annual $129 non-performing additional accounts in the fee, as well as other and charges, fees to portfolio. credit card Despite pro- these accounts, causing these BestBank to trans- tections, any BestBank had to absorb addi- Century’s fer funds for these amounts to tional out of losses BestBank’s own bad operating account and to record the delinquent debt reserve if or uncollectible amounts as receivables on BestBank’s Century’s ability pay. accounts exceeded books. the number of With accounts losses, turn, If these exceeded Best- steadily exceeding the number cardhold- ability pay, Bank’s then state and feder- er payments, BestBank’s receivables con- bank, regulators al would shut down the grow. tinued to and the FDIC would insure BestBank’s As fraudulent accounts—as aswell some $100,000 which, depositors up for each— delinquent, valid accounts—became Baetz ultimately, happened. is what began disguising and Gallant the delin- joint BestBank/Century The first credit quencies Century’s in order to avoid obli- card Marketing Agree- venture under the gation purchase those accounts from began ment 1994 with the issuance of Frequently, Century simply BestBank. secured credit cards. the secured Under accounts, “re-aged” removing their delin- program, applicant credit card each quency making appear them status and required open non-interest-bearing ac- any payments by the card- current without a minimum count BestBank with se- re-aging holders. This violated the Mar- curity deposit exchange $250. keting Agreement seriously increased security deposit, applicant re- by disguising exposure BestBank’s to risk ceived a credit card with a credit limit *10 delinquent a host of otherwise loans equal security to the amount of depos- it. applicant charged appli- repayment. was had little chance of cardholder $20 portfolio was per two cent of cases, Century charged the $129
In other account, delinquency, higher a much while simulta- first month of annual fee to account for than normal. crediting percentage the same neously simultaneous debits Although these $129. May Boyd In and Grace communi- out, their each other canceled and credits problems Century about the cated with they re- re-aging: as the same effect was Baetz, writing to portfolio. Boyd, with made status and delinquency moved the accounts Century stop opening directed current. appear the accounts and secu- completed application without Wiedmaier, employee a BestBank Jon charge off all accounts rity deposit, and to program, became the secured who oversaw In another let- days delinquent. over delinquen- early 1995 about concerned ter, Boyd reminded Baetz that Mar- He noticed that portfolio. cies in the Century prohibited keting Agreement re- accounts had been many delinquent without BestBank’s re-aging from accounts subjected to simulta- aged, or had been Boyd Baetz that un- permission. informed the annual fee. credits for neous debits and itself, Best- less the situation reversed many ac- noticed that Wiedmaier also might ade- debt reserve not be Bank’s bad than 151 % of greater counts had balances quate to cover losses. Many of these accounts limit. the credit re-aging Despite Boyd’s correspondence, fees, fees, late charged annual had been In a memorandum to continued unabated. interest, never received a they but had and copied 1995—and Grace dated June limit credit was security deposit and their attempted Boyd and Mattar —Wiedmaier cases, cardholders were many zero. In quantify problem. explained He or mak- monthly statements receiving accounts, 4,900 totaling with balances prevented had ing payments, re-aging and $700,000, limits but no had credit $150 being reported delin- from the accounts and had balances consist- security deposit, 18,000 out accounts quent. point, At one fees, fees, ing solely of annual late 40,000 re-aged. This been of a total of had accounts, 9,900 An interest. additional re-aging prac- cry a far from normal million, had totaling with balances $1.3 Typically, portfolio. tices for a credit card zero, security deposits, no credit limits of per cent of in less than one re-aging occurs cards issued. and no credit Wiedmaier card- only in situations where accounts and accounts where the card- also discovered good-faith arrange- holders have made security nothing post but holders had done issuing pay bank to back ments with the as accounts where there deposits, well credit card debt. an otherwise unaffordable security deposits but where annu- were no that someone had Wiedmaier concluded from the card- al fees had been debited accounts. He concealing delinquent been total, In he checking holders’ accounts. investigating problem, continued accounts, 16,000 with balances discovered Boyd he raised his concerns million, thought which he totaling $2.2 January dated Grace in a memorandum In a letter dated June were uncollectible. forty-five per explained that 1995. He 1, 1995, prob- Boyd warned Baetz consisted of portfolio balance cent of Nevertheless, accounts. lems with these greater charges to accounts with balances spite protests, of Wiedmaier’s limit. On the vast than 151% of the credit books. accounts remained on BestBank’s accounts, majority the balances of these attempted develop also fees, fees, Wiedmaier entirely annual late consisted re-aging limit re-aging policy would interest, accounts and none of these addition, in which it was forty- the handful of situations security deposits. had *11 fee, membership AATC received his rec- reported $100 $498 Wiedmaier appropriate. Mattar, Grace, Century kept the balance. Boyd, and ommendations Baetz and Gallant Boyd informed fee, membership In addition to the $498 re-aging accounts. they not be should of the unsecured cards were recipients however, continued, at some re-aging charged an annual fee of $45. $498 not write or point, Boyd told Wiedmaier membership fee and annual fee were $45 might cause memoranda distribute day charged to each new account within a August In with the FDIC. problems being Each opened. or two of the account expla- with no was terminated Wiedmaier an automat- new account therefore carried nation. $543, only ic and had balance $57 available credit. of this was Century and Best- Some $543 the end of At deposited by Century’s BestBank into foray to their into brought an end Bank reserve, bad debt or into Cen- by selling approxi- cards BestBank’s credit secured 20,000 tury’s participation account. Most of the performing accounts mately $543, by Through though, quickly deposited Dakota. BankFirst of South Century’s operating into ac- Century BestBank program, secured sale of the count, dollars, was recorded as million of and all of million $543 earned $1 $1.9 books, $500,000 thereby BestBank’s receivable on to BestBank and paid which inflating the value of BestBank’s assets. up a bad debt setting it devoted to which opened ac- valid accounts were under any non-performing Some to cover reserve Century opened program, the AATC but that it had sold. The evidence counts many of the accounts and received the BestBank sus- trial did not show whether receiving signed card in fees without first from the secured credit $543 tained a loss applications application fees. program. $20 Sometimes, Century posted even addition- 1996, Century May In and BestBank never re- charges al to accounts had credit card venture. embarked on a new payments. As with the secured ceived for a program, applicants Under new the existence Century concealed program, charged a credit card were still BestBank issuing plastic of some accounts fee, previous unlike the application but $20 account statements to the sending cards or were unsecured. program, the accounts instance, cardholders. For purported the unsecured program, Like the secured September Century had failed telemarketing, primarily on program relied 179,000 card for plastic credit issue underwrit- established the and BestBank 224,000 Many of the account accounts. applicant. Each ing criteria for each new than were shredded rather statements $600, in order had a credit limit of but card sent to cardholders. card, applicant an automatical- to receive a addition, Gallant did not Baetz and ly charge incurred a one-time of $498. nearly enough travel vouchers purchase a mem- charge gave This cardholder cruises to all provide for AATC to free bership in the All Around Travel Club (“AATC”) cardholders, many of the new new venture which Gallant —a trav- members never received their owned a 52% interest —and entitled AATC Baetz agreement packages. various travel discounts el Under the cardholder to vouchers, the travel AATC Of the the vendor of and a voucher for a free cruise.2 Tours, pro- replaced the AATC during early but it was late 1995 and 2. For brief time 1996, Century gram only marketed a similar unsecured a few months. after involving program Universal credit card *12 1,000 Century vouchers week while wire transfers. would first wire purchased per simultaneously be- Century opening money operating was account at from its 8,000 10,000 per tween new accounts Century to another account at BestBank 340,- disparity, week. Because of this over Farmers and Merchants Bank in South ultimately not receive 000 customers did Carolina, which it would wire the after despite travel member- packages, $498 money to a BestBank account State ship charged fee that had been to each of Abilene, There, Security Bank in Texas. their accounts. Some of these customers money co-mingled legitimate was complain receiving called to about not their payments cardholder and sent to Best- Century packages. travel AATC con- Bank, the end result of which was to hide selling memberships open- tinued new being the fact that the were credits $20 accounts, ing backlog new even as the by Century than actual paid rather card- packages grew rapidly. undelivered travel holders. delinquencies in the The number of Although the effect of these credits $20 portfolio unsecured credit card rose swift- money Century to was to transfer from 1997, ly. September In BestBank re- BestBank, payments these were far below 25,000 only payments ceived cardholder Century what if it paid should have had 225,000 31, of March open, accounts. As refunded the entire member- AATC $498 1998, 307,000 343,000 out of accounts were ship fee and annual fee to BestBank $45 limit, delinquent, over their credit or had application for each account. The preventing block codes cardholders disguised credits the true risk $20 using from the accounts. very any- portfolio, making difficult for rose, delinquencies Century As dis- one to determine whether cardholders on guised obligation them order avoid its pay- these accounts would ever submit purchase delinquent and uncollectible employees ment. Several BestBank even- 1996, Beginning August accounts. Cen- credits, tually became aware of the includ- tury began posting credits to delin- $20 Grace, Mattar, ing Boyd, and John quent accounts at the direction of Baetz (the manager Schmalzer risk at Best- and Gallant. This caused the accounts to Bank). appear incoming current. All transactions Century applied up credits until $20 system FDR a particular on the had trans- 23,1998, July day the FDIC shut down identifying type action code of transac- time, the number of BestBank. Over $20 initially applied tion. The credits were $20 increased, eventually reaching credits al- using FDR which transaction code 10,000 day. In per most credits normally only reserved for the return alone, in the seven months before Best- merchandise to merchant. When the closure, $23,723,603 portfolio processor changed Century posted to FICI— Bank’s which had different software than FDR— in credits. Several witnesses asserted at posted using the credits were transaction applied trial that the credits were $20 codes both of which were nor- only accounts because the cardholders had mally payments. reserved cardholder yet packages received their travel from testified, however, AATC. Witnesses also
Century initially paid BestBank for the designated that accounts were to receive through directly credits withdrawals $20 ac- depending upon credits whether the Century’s from In operating account. delinquent. however, counts were about to become Century began March addition, the credit limit on each ac- money transferring the for these credits to through system BestBank an elaborate count was reduced the amount of the cent) mostly opened the three months credit, made a if a cardholder $20 *13 — credit, the credit before BestBank closed—received neither receiving a after payment payments. account was re-billed credits nor cardholder Be- and the was reversed credits, accounts, Century’s purchases asked about tween When $20. reserve, that one witness falsely participation, informed and bad debt Centu- Baetz payments sent elec- ry ability approximately were cardholder had the to cover they 409,- 161,545 accounts, tronically. cry a far from the that received credits to dis- 207 accounts disguised delinquencies Century also end, delinquency. their In the guise on ac- “paid ahead” notations posting accounts, 2,231,938 posted credits were ahead” mechanism “paid counts. $49,587,580.5 totaling every For month in which a reserved for situations usually 1996, after October the number of credits vacation, in and going cardholder is pay- exceeded the number of cardholder instances, cardholder requires those 235,195 example, ments. In June exceeding the payment have made a accounts, only posted credits were while however, Century, post- previous balance. 96,184 pay- accounts received cardholder notations on accounts “paid ahead” ed in By ments. the time BestBank closed any payments received that had never all July delinquent the dollar value of The result was that the cardholders. from accounts, that had re- including accounts the accounts became due on payments no delinquen- their disguise ceived credits to period, time and during “paid ahead” $129,607,428 cy, one-half totaled delinquent.3 did not become the accounts —almost $261,495,049 bal- portfolio’s of the AATC 583,727 ac- Ultimately, a total of AATC ance. in resulting opened, were counts Bour, January Joseph a Best- $316,963,005 charges alone.4 Of $543 employee Bank and former Colorado bank accounts, 583,727 Century either these examiner, Century was discovered that 75,910 off accounts purchased charged or posting the credits to accounts.6 $20 to be uncollectible. determining after them accounts, Fearing might exposed that BestBank be 583,727 of the significantly, More million, totaling report- Bour to losses 243,110 (forty-two per cent of the $50 accounts total) credits; 166,097 Boyd, responded concerns to who ed his only AATC received cent) very was Century relationship that (twenty-eight per received accounts and that Bour important to BestBank payments of cardholder combination ap- how he needed to be careful about credits; 103,846 (eighteen accounts AATC cent) Boyd also told Bour proached things. only pay- cardholder per received (twelve actually made ments; 70,674 payments the credits were per accounts fee testimony e.g., $45 annual conflicting sometimes 3. There was some accounts — charged twice. "paid regarding ahead” no- trial whether added to new accounts because the tation was the credits is not 5. The total dollar value of grace promised sixty-day cardholders were 2,231,938, multiplied by $20 because some period. agreement The cardholder did not posted multiples $20— credits were grace period "paid ahead” for new include a e.g., $40 $60. however, cardholders, and at least one wit- grace that there was no such ness testified beyond a reason- 6. The district court found period. discovery, following able doubt (Mattar, Boyd, and BestBank defendants charges Grace) knowledge ongoing $543 fraud 4. The total dollar value of these had 583,727, Century multiplied by actively conspired with the de- $543 because is not Gallant). (Baetz charges to the fendants there were sometimes errors Boyd owning continuing cardholders via Ulti- the rest and Western Union. mately, operate his concerns the bank. Bour communicated (in Mattar, Schmalzer, and addi- Grace performed Farrar extensive due dili- Boyd), tion to and when he became con- evaluating purchase. gence He re- they stop remedy would not vinced BestBank, spreadsheet ceived a from problem, promptly resigned he delinquencies which listed total mil- $12 Bank- contacted the Colorado Division of *14 September reality, lion as of 1997. In ing. delinquencies totaled over million. $53 time, By regulatory Century’s this offi- Farrar Colorado later received financial begun question Boyd. cials and the FDIC had statements from financial One set of practices. BestBank’s business Fearful statements omitted million of delin- $35 regulators quent Century that the would learn that Best- accounts that was responsi- overstated, grossly purchasing. Bank’s assets were for ble These statements also Mattar, Boyd, and Grace undertook to omitted million in credits that Cen- $6 $20 tury by paid save the bank from closure further had to BestBank over a six- concealing Century’s They period. did month time Another set of finan- fraud. in cial statements claimed that shareholder part accepting the continued $20 million, regu- equity Century in was question. credits without When almost $20 yet questions lators raised about the value of failed mention that over million $19 Mattar, program, Boyd, delinquent card of this amount consisted of credit actively regulators, only and misled the AATC accounts worth a fraction of Grace 1997, lying program’s performance, about their book value. In December Far- put place the controls that had been in to rar traveled to Florida and met with Baetz accuracy, Century’s ability ensure and and Gallant. Baetz and gen- Gallant were indemnify non-performing erally cooperative answering BestBank for in Farrar’s Mattar, Boyd, questions, accounts. Enabled and but never disclosed the prob- Grace, Century open they having continued to fraudu- lems were with the travel packages they lent accounts. As a of the artificial or the credits that were result $20 moreover, growth portfolio, applying delinquent in BestBank’s accounts. Ulti- Boyd quarterly mately, purchase Mattar and each received Farrar chose not to Best- payments totaling bonus million. Bank. $6.9 totaling
Grace payments received bonus 1998, Boyd April attempt- In Mattar and $100,000.7 over sixty per controlling ed to sell cent inter- steadily declin- Partners for capital With BestBank’s est BestBank Cerberus ing, Boyd Mattar and made several at- million. Cerberus also conducted due $23 so, tempts diligence doing to sell BestBank. In the fall of on BestBank. 1997, they attempted attempted to sell Mattar’s own- to focus on the of delin- number ership quencies payments, interest the bank to South Dako- and cardholder as well asking Century’s perform- ta banker Frank Farrar. Their as on indemnification million, $8,333,000 price was of which ance. did not receive all of the Cerberus $10.1 exchange requested regarding Farrar would contribute in information it these stock, fifty subjects. did per cent of BestBank’s When Cerberus receive 23, pay- payments 7. Included are Grace received bonus in this calculation bonus 1998. $2,427,828 $25,000 1998, $92,643 Boyd ments of that Mattar and January on 22, 1998, January 30, each received on April $2,316,081 they April each received current, only and that moreover, portfolio was information, of the Grace some Taffet asked delinquencies, delinquent. When number of 2.7% was misstated million of delin- delinquencies were could claiming there Baetz and Gallant how $9.8 31,1997, and $8.5 as of December quencies sub-prime credit card so low for be as of March delinquencies million this was due to Baetz claimed portfolio, mil- fact there were $62.5 1998—when efforts. Century’s superior collection December $86.8 as of lion told Taffet that the FDIC eval- Baetz also 31,1998. as of March million well, gone had uations of BestBank smoothly, running program the AATC Ronald Gold- representative Cerberus receiving to meet with that AATC were to Florida cardholders traveled stein Baetz nor Neither Based on this infor- packages. and Gallant. their travel Baetz any with card- problems mation, disclosed Gallant Taffet concluded credit credits that payments risk, holder delinquency $20 portfolio had no card *15 Although accounts. to they applying were at a attempted portfolio to sell the he Goldstein the showed and Gallant Baetz million book val- premium above the $200 dis- they did not packages, travel AATC ue. sending travel problems with the close ultimately in closed When BestBank 1998, July to cardholders.
packages 1998, purchasers im- July potential most investi- the FDIC was learning that after portfolio. in the mediately lost interest BestBank, in lost interest Cerberus gating Baetz and Taffet concluded that Gallant the bank’s stock. purchasing informa- him with inaccurate provided had at- was same time BestBank theAt August in and confronted them 1998. tion Cerberus, stock to to sell its own tempting delin- them that he believed Taffet told to David Taffet and Gallant hired Baetz actually higher much than quencies were portfolio— card the BestBank credit sell they and that were they reported, had in that Century’s participation including disguise the re-aging to using credits to market attempted Taffet portfolio. portfolio. Baetz performance true card receivables pool million credit $200 credits, and he making the admitted to identify po- and to portfolio in AATC for dissatisfied they that were claimed large institu- such purchasers, tential contradicted his customers —which AATC agreed Baetz and Gallant investors. tional pro- the AATC assertions previous cent of pay per two Century would Baetz smoothly. then running gram They agreed also Taffet. price to the sale was, portfolio to Taffet that admitted all information he him with to provide thirty per cent reality, only worth about portfolio. market the needed million value. of its book $200 put began to portfolio, Taffet To sell of BestBank Following an inspection potential present a “book” together July 1998, concluded regulators June the details of explaining purchasers, was insolvent. On that BestBank infor- attempted gather He portfolio. 1998, Division of Colorado July Boyd, asking them Baetz and from mation infusion of immediate Banking ordered and loan delinquency rates for details on $151,515,000. in the capital new amount the “master requested also He losses. capital meet this failed to BestBank When transactions, as well as detailing all tape” closed Best- call, the State of Colorado the credit underwriting criteria for The FDIC was 1998. July Bank with the reports call filed any cards time, Century At the appointed receiver. “master He never received FDIC. million in its bad approximately $8 him had that 97.3% informed tape.” BestBank reserve, turn, partic- million in provided debt its BestBank with more net $46 account, oper- and million in its ipation expenses income than if its bad debt had $4 account, ating approx- while BestBank had higher. been imately million in its bad debt reserve— $3 Wolfschlag, Charles the cashier and a for a million. The total FDIC $61 BestBank, director of testified that money any refused to from release provided information to BestBank’s Board these accounts. of Directors indicated that the credit card trial, against At several counts the de- portfolio had delinquencies Sep- no after reports fendants call involved submitted explained tember 1996.10 He by BestBank to the FDIC. As an FDIC- approved Board BestBank’s bad debt re- bank, required insured BestBank was based, in large part, serve on this informa- quarterly FDIC, call reports file with the Wolfschlag tion. testified that he had listing delinquencies loan reporting never seen memorandum Wiedmaier’s de- money the amount of set aside as bad tailing problems portfo- secured debt reserve.8 filing The instructions for lio, it, and if he had seen he never would reports the call publicly are available on signed report have the call that BestBank usually the FDIC’s website. Bank officials submitted on Wolfschlag June prepare call reports from the rec- bank’s ap- also testified that the Board never ords, and an officer and two directors must proved crediting simultaneous and debit- *16 sign certify report. and each call ing of the annual fees on accounts in the 30, report 1995, In a call filed on June portfolio, secured nor did ap- the Board 412,000 BestBank stated that accounts prove “paid credits or ahead” nota- $20 116,000 days delinquent, were 30-89 and tions on in portfo- accounts the unsecured days delinquent. accounts were 90 or more lio. He stated that he never would have loans, potential To cover losses from these signed call if reports he had known BestBank stated in the call that it report about the credits. had set aside a bad debt approx- reserve of Baetz and Gallant knew of BestBank’s $340,000. imately However, starting with obligation reports to file call and to submit 1996, report September the call filed in occasion, inspections, FDIC and on one and continuing reports for all call filed Grace sent them a memorandum asking 1998, through July reported BestBank for their in making assistance BestBank portfolio its credit card had zero delin- occasion, appear solvent. On another in quencies. The lack of reported delinquen- spring Baetz corresponded cies with a told Robert much smaller bad Kane, debt reserve than who marketing pack- BestBank would other- vacation This, required AATC, wise have been to report.9 ages payments for to Kane required reports 8. The FDIC very also call to in- program, little to do with the credit card clude, alia, sheet, inter a balance an income supervised primarily by Boyd which was statement, distinguishing turd a schedule non- Grace. His involvement with the credit card performing performing loans from loans. portfolio position resulted from his as a di- rector, making capac- and in decisions in that permitted 9. BestBank was to consider Centu- ity, upon presented he relied information ry’s participation indemnification and obli- Grace, by Boyd, Wolfschlag him and Mattar. gations calculating reported the numbers caught .off-guard by was himself BestBank's reports, only Century on the call but if had $60,000 insolvency July losing capacity actually the financial to—and did— $100,000 deposits that exceeded the insured obligations. honor those by the FDIC. cashier, Wolfschlag mostly As dealt BestBank, operations side of and he had reports, filing false bank verdicts for guilty BestBank delayed being because were in a fraud, participating during conspiracy, position wire its cash to bolster needed CFCE, bank fraud counts. and most of the examination. an FDIC judg- moved for a each Baetz and Gallant Best- preceding months During of con- on several counts acquittal ment of a total closure, Century deposited Bank’s ultimately viction, district personal into Gallant’s million of $11.7 convic- of the bank fraud dismissed several million, $6.4 Of this $11.7 account. bank tions. payroll, from deposited million was payments. of other million consisted
$5.3 Century proceeded then defendants Century de- period, time During the same filed government first sentencing. The personal into Baetz’s million posited $11.6 sentencing, which regarding a statement million, $6.5 Of $11.6 account. bank applicable en- its view as to outlined payroll, from deposited million was It also for Baetz and Gallant. hancements payments. million other consisted $5.1 A and forfeiture. called for restitution prepared Presentence officer parole then BACKGROUND PROCEDURAL II. (“PSRs”) for Reports Investigation jury returned grand a federal defendants, a to- which calculated Century Baetz, naming indictment ninety-five count and a criminal histo- level of 34 tal offense Grace, as defen- Gallant, and Mattar Boyd, resulted in a I men. This ry of for both conspiracy, charges It included dants. range of 151-188 recommended Guidelines fraud, gift a commission accepting bank also The PSRs imprisonment. months’ loans, filing false procuring exchange $309,476,381in restitu- called for a total in a fraud, participating reports, bank wire 3- tion, additional and recommended fraud, CFCE, money laundering, securities upon based departure upward level tax return. evasion, to file a failing tax by the defendants. created extent of loss *17 trials separate requested The defendants result enhancement would This additional Pro- Rule of to Criminal pursuant Federal months. range of 210-262 in a Guidelines 14(a). ap- allegations tax As the cedure motion for filed a government also The Mattar, government the only plied to Baetz for against of forfeiture orders sever those request to to his agreed $11,747,091. for $11,604,179 and Gallant ultimately counts, district and the motion, but denied The district court gov- The request. granted severance fur- of a possibility the foreclose did “not severance, but opposed otherwise ernment appropriate hearing determine ther to separate court ordered two the district sentencing process.” the part as amount Gallant trials, Century defendants one for II Vol. at App’x Baetz, defen- one for BestBank and Grace, based on Mattar, Boyd, and and the defendants government dants The antagonistic de- mutually the the While possibility objections to PSRs. filed defen- groups objections, those fenses between reviewed those officer parole regarding dants. concern court, expressing Booker, 543 States effect of United Century trial of the defendants L.Ed.2d 621 125 S.Ct. U.S. govern- of the the close held first. At under loss (2005), ability to calculate on its several of case, the court dismissed ment’s Guidelines, asked Sentencing the Federal counts, money all of the the wire fraud addressing submit briefs parties counts, of receiv- and the count laundering briefing of reviewing the that issue. After procur- for exchange ing a commission court elected district parties, ultimately returned jury a loan. A ing delay until sentencing completion after the point The most contentious in the brief- of the BestBank defendants’ trial. The ing was related to the calculation of the presented court determined that evidence amount of loss caused the defendants’ might impact the BestBank trial conduct under section 2F1.1 of the Guide- calculation of the amount of loss associated The government presented lines. Century with the defendants. It also ex- court with possible approaches three pressed delay belief would be more calculating counts, loss for the bank fraud significant efficient because of the overlap $206,775,813 which varied between between the sentencing involving issues $141,402,151 for Gallant and Baetz and the two sets of defendants. $65,156,797 $42,599,862 Boyd for counts, Grace. For
The court then held the trial the wire fraud BestBank government defendants. The began argued case the measure of trial, a jury agreed but the defendants intended, actual, loss should be rather than proceed with a bench trial after one loss. It calculated the intended loss ill, attorneys defendants’ fell interrupting $140,000,000 more than for attempt trial, the trial. At the close of the court sell the portfolio, AATC credit card which findings issued pursuant its to Federal only applied Century to the defendants. 23(c). Rule of Criminal Procedure It ac- It also calculated for both sets of defen- quitted the BestBank defendants of securi- $23,000,000 dants in intended loss for the fraud, money ties laundering, receiving a scheme to sell BestBank stock to Cerberus gift loan, in exchange procuring and Partners, $8,300,000 for the attempt to CFCE, participating but found them sell BestBank stock to Farrar. guilty conspiracy and several of the government sought also restitution fraud, counts of filing bank false bank pursuant to Mandatory Victims Resti- reports, and wire fraud. tution Act. See 18 U.S.C. 3663A. It day On the same the district court is- called for restitution divided between the 23(c) sued findings, its Rule it ordered a five defendants to each victim in the full hearing procedures to resolve the for sen- loss, amount of each victim’s which includ- tencing the five At defendants. that hear- $206,775,813 ed to the FDIC and ing, expressed the court the view that the $1,360,239 to Cerberus. The nature of the underlying offenses made the argued also that Gallant sepa- and Baetz *18 usual procedure having parole of officer rately owed restitution to David Taffet in calculate part the offense level as of a PSR $12,500. the amount of government The inefficient. This led the court depart to requested forfeiture from each defendant from procedures in outlined Federal equal money to the paid salary, as bonus Rule of Criminal Procedure 32. It asked payments, and advances from the time the government to submit a brief defining when each defendant became aware of the position its on how each defendant should scheme and calculated this amount at be in sentenced order to have govern- $11,604,179 Baetz, $11,747,091 for for Gal- positions respect ment’s with to all five lant, $4,743,909 Boyd, $92,643 for and for defendants in a single document. The Grace. court stated that it would then allow each of the respond any objec- government sought defendants to The additional base aspects tionable of that brief.11 level enhancements for each of the defen- Although 11. day Mattar was tried and convicted he was to be sentenced. There are there- Grace, Boyd the same trial as and he was regarding fore no issues Mattar before this sentenced, ultimately never died he on the court. addressing the hearing held a The court enhance- a two-level requested dants. It and determined objection government’s involvement four defendants’ for all ment Guide- preliminary issue a that it would mini- than more that involved fraud in a 2Fl.l(b)(2). that would address calculation lines U.S.S.G. See planning. mal restitution, loss, and forfeiture issues of leader/organiz- four-level sought a It also in the trial rec- Baetz, solely evidence Gallant, based against enhancement er allow the it would It that ord. determined criminal roles their Boyd for that calcula- objections to parties submit manager/su- three-level enterprise, provide an offer they could tion which Grace. against enhancement pervisor hearing. evidentiary an request proof a four-level sought also government The all four defendants against enhancement calcu- issued its subsequently The court jeopardized that committing a fraud for range. agreed It of the Guidelines lation in- a financial or soundness safety section regarding defendants with the 2Fl.l(b)(6). Fi- See U.S.S.G. stitution. losses 2F1.1, amount finding “[t]he that a two- requested government nally, the calcu- cannot defendants be caused de- the BestBank for level enhancement fairly considers by any lated formula that of trust. positions abusing fendants roles in the offenses individual their § 3B1.3. U.S.S.G. See regulators bank the intervention at 979. App’x as receiver.” and the FDIC issues, the on these briefing Following under to measure loss The court elected confirming an order issued court district 2Fl.l(b) what each defen- based on section procedures depart from it would that of the criminal result gained as a dant calculate instead Rule 32 and outlined Baetz court found that enterprise. The The range itself. Guidelines applicable scheme, $11,604,179 from received make its it would stated that court also $11,747,091. These gained while Gallant re- only the “considering determination increase triggered fifteen-level amounts at 952. App’x records.” trial spective their enhanced that for both defendants tri- that the objected, arguing government also 21. The from 6 offense levels provide the “not alone would records al $4,743,909,which received Boyd found harm measure an accurate with Court from 6 level his offense increased of- from commission resulting $117,643, increas- received Grace to the calculation respect fenses” with 12. 6 to level his from ing offense in deter- § 2F1.1 or U.S.S.G. loss under en- a two-level proposed then The court by 18 U.S.C. mandated mining restitution of the defendants against all hancement App’x § 3663A. in a enter- criminal for their involvement re- evidentiary hearing requested minimal than more “[wjhile involved prise that loss, arguing spect *19 four-level enhance- well as as planning, pur- guideline for of the loss quantification sub- a crime that committing for ments inextrica- issues are restitution poses and safety and the stantially jeopardized pre- that was the evidence linked to bly The institution. a financial of soundness guilt to is trial, the evidence sented at a four-level proposed court also leader/or- of the proof the with not coextensive Baetz, Gal- against ganizer enhancement to harm amount of loss and the amount of manag- three-level lant, and Boyd a and restitu- order in an for compensated be against Grace. enhancement er/supervisor ar- The defendants at 953-54. Id. tion.” an enhance- not recommend The court did new not receive the court could gued for defendants the BestBank against ment Amendment. on the Sixth based evidence 1222 trust, however, government of be- the Sixth Amendment. The
abusing position a “adjustment objected cause be em- the to district court’s calculation is ployed if an abuse of trust included in of loss and the decision not order resti- specific of other offense determination tution. The also made an of- and that the case characteristics is here proof regarding fer of the basis of its 3Bl.l(a) employed where has been be- proposed by calculation of loss caused positions cause of the held these bank BestBank’s failure. IV, App’x officers.” Doc. Grace Vol. 1153 Century At sentencing defendants’
at 9. rejected hearing, district court all ob- ultimately The court district calculated jections, imposed and within-Guidelines adjusted an offense level of 31 for both 120 for sentences of months Baetz and Gallant, which, coupled Baetz and when Gallant, represented mandatory which I, history with a criminal carried a minimum for sentence the CFCE convic- range Guidelines of 108-135 months. The tion. court imposed also fines of adjusted district also court calculated $18,600 defendant, each against and or- history offense level of and a criminal of dered against forfeiture Baetz for Boyd, I for which called for Guidelines $11,604,179 $11,747,091. and Gallant for range Finally, of 87-108 months. it calcu- The rejected objec- district also all Grace, lated an level for offense of 27 during sentencing tions made the Best- history which given his criminal of I result- Bank imposed defendants. It within- ed in a range Guidelines of 70-87 months. Guidelines sentences of 90 months for The district that it court determined would Boyd Grace, and 72 months imposed for any not provide restitution to of the four $16,500 against defendant, fines of each government. victims identified It $4,743,909 and ordered forfeiture did, however, impose against forfeiture $92,643 against Boyd against Grace. each of “in the the defendants form of money judgments the same amounts as III. CHALLENGES TO GALLANT’S computation of the amount loss at- & BAETZ’S CONVICTIONS tributed to each defendant calcula- Sufficiency A. of the Evidence tion specific applicable offense levels App’x each.” Grace Vol. IV 986. The evidence was sufficient to support the Baetz convictions of and Gal parties then objec- submitted their lant, except regard Counts 55 tions to district court’s calculations. “ to support ‘Evidence sufficient Baetz objected the imposi- Gallant conviction if jury reasonable could find tion leader/organizer of a enhancement guilty beyond the defendant a reasonable imposition Boyd of forfeiture. doubt, given the direct and circumstantial objected imposition Grace both to the evidence, along with reasonable inferences jeopardizing for enhancements the sound- therefrom, taken in a most light favorable institution, ness of a financial as well as ” government.’ States United v. Nel their enhancements for roles in their son, (10th Cir.2004) offense. Grace also claimed the en- Wilson, (quoting United States hancement committing an offense in- Cir.1997)). “We will not volving than planning more minimal *20 weigh conflicting evidence second-guess Both or erroneous. BestBank defendants fact-finding jury.” also arguing permit- submitted briefs decisions Summers, ting 1287, United v. 414 government to offer additional States F.3d (10th Cir.2005). proof of the amount of loss would violate 1293 than “Rather exam
1223 negate in the fraud Baetz pieces,’ in ‘bits and we does ining the evidence sufficiency of evidence culpability Gallant’s under 18 evaluate U.S.C. to 1344(1). be ‘considering the collective inferences § provides: The statute a from the evidence as whole.’” drawn executes, knowingly Whoever or at- Wilson, Nelson, (quoting F.3d at 1229 388 execute, a tempts to scheme or artifice— 778). 107 F.3d at (1) institution; to defraud a financial the “waiver Our court follows
rule,” “a who requires which defendant $1,000,000 shall be fined not more than of at the judgment acquittal for a moved years, imprisoned or not more than 30 government’s [to] close case move of or both. at judgment acquittal a again for 1344(1). § 18 “Under 18 U.S.C. U.S.C. if close the entire case he thereafter 1344(1), prove § must government in his defense.” Unit
introduces evidence (1) that: knowingly defendant execut 1197, Flanders, 491 ed States v. F.3d attempted ed or a execute scheme or (10th Cir.2007) (citations and internal 1207-OS institution; a artifice defraud financial omitted). Under quotation marks (2) had the to defraud the defendant intent rule, plain where a we review for error (3) institution; a financial bank sufficiency of the appeals the defendant federally involved was insured.” Flan that he upon argument evidence based ders, phrase at 1212. “The F.3d failed make or reaffirm before dis simply ‘scheme or artifice to defraud’ re plain trict Id. at 1208. error court. Our quires design, plan, ingenious contri context, however, is analysis in this “essen (quoting vance or device to defraud.” Id. tially sufficiency-of- usual the same” as our Hill, 436, 444 United States v. Id. analysis. the-evidence (10th Cir.1999)) (alteration quo and some omitted). (Counts tation marks Under 1. Bank Fraud S2-W- necessary “the for a bank fraud alleged “knowl- intent Whether BestBank’s rever- edge” mandates is an intent to the bank conviction deceive fraud sal12 money to obtain from other order Kenrick, 221 property.” United States v. argue and Gallant first Baetz we (en (1st Cir.2000) banc). F.3d 26-27 should reverse their convictions bank to reach a wide “Section 1344was intended fraud because the introduced activity that under range of fraudulent concealed, they or at- no evidence that banking of the federal integrity mines the conceal, from tempted to the fraud Best- liberally system,” and “courts con have They Bank. contend BestBank was Flanders, practices re-aging the credits and the statute.” aware of strued and, result, they guilty (citation cannot be internal marks quotation 1344(1) defrauding under omitted). 18 U.S.C. range broad of schemes “The BestBank. only by is limited covered statute creativity.” United States criminal’s sufficient to evidence was Cir.1997). Norton, 108 F.3d support the convictions Baetz Gal argue that appear and Gallant fraud, Baetz participation lant and the for bank not concealed their conduct was BestBank directors and officers because of several argue, entirely bank fraud appear ment deals with the 12. Baetz and Gallant however, counts, they address its negates never passing, “knowledge” also that this reports, conspiracy, call conspiracy, application to false false call re- their convictions for ports, argu- or CFCE. of their and CFCE. substance *21 1224 BestBank, conviction,
from
the evidence was insuffi-
even if
owner
the
and di-
either “a
or
cient to show
scheme
artifice
rectors of the banks
aware of the
were
“intent to defraud” under
defraud” or
fraud.
Id.
Rackley,
v.
1344. In
States
986
United
Likewise,
Waldroop,
in United
States
(10th
1357,
Cir.1993),
reject-
F.2d
we
1361
(10th
736,
Cir.2005),
431 F.3d
742
the de-
argument,
ed a
explaining:
similar
fendant contended that there was insuffi-
notion
Defendant confuses the
of de-
cient
support
evidence to
his conviction for
frauding
federally
bank with
insured
bank
Mayfield
fraud because “he informed
owner
defrauding
the idea of
its
or di-
(an Executive Vice
at
[
President
the
rectors.
It
is the financial institution
bank)
Mayfield’s secretary
and
in-
]
his
agents—that
itself—not its directors or
Again,
volvement
the
loans.”
we re-
is the victim of the fraud the statute
jected
argument, explaining
it
proscribes....
charge
is not a
defense
the
that he
Thus,
[the
even if
owner
banks]
Mayfield
colluded with
to commit bank
knew the true nature of the loan trans-
is
fraud.
It
the financial institution it-
actions, the institutions could neverthe-
agents—that
self—not its officers or
is
less be defrauded.
the
victim the fraud U.S.C.
18
1344
(citations omitted).
Id.
In Rackley,
the
proscribes.
It follows that bank custom-
government
produced
had
evidence that
ers who collude with bank
officers
particular
“defendant’s interest
in the
defraud banks
be held
also
crimi-
files,
loans was not included in the loan
nally accountable
as principals
either
members,
mentioned to the board
or dis-
as aiders and abettors.
cussed at board or loan committee meet-
(citation, alterations,
Id.
quo-
and internal
ings,” and the banks “would not have
omitted).13
tation marks
approved
loans
or authorized the
government
The
produced suffi
payments
closing
had the loan docu-
cient
evidence
Baetz and
accurately
Gallant’s
ments
reflected
in-
defendant’s
scheme
intent
and
to defraud BestBank.
terest
the loans.” Id. at 1362. We
concluded, therefore,
evidence
evidence showed that Baetz and Gal
to support
was sufficient
lant opened
bogus
defendant’s
a host of
accounts under
1992)
weight
authority supports
13. (holding
our con
that the evidence was suffi
Rackley Waldroop.
clusions in
and
support
See United
cient to
the defendants' convictions
Aubin,
141,
(5th
fraud,
States v.
87
despite
F.3d
146
participation
Cir.
bank
1996) ("In essence,
argues
directors).
that Woods’
Aubin
fraud
bank
officers
Ventura,
knowledge,
Savings
as owner of Western
But
F.Supp.2d
see United States v.
Loan,
Western,
1204,
(D.Kan.1998)
imputed
should be
and that
(holding
1207-13
given the full disclosure to Woods there could
there was insufficient
of a
evidence
scheme or
defraud,
intent,
finding
be no
anof
intent to defraud Western.
artifice to
fraudulent
merit.”);
argument
This
is
employees
without
United
where two bank
testified that the
Molinaro,
853,
(9th
States v.
11 F.3d
openly
defendant’s conduct had been
commu
Cir.1993) ("Mangano
them),
argues
98-3249,
aff'd,
that because he
nicated to
No.
Case
(10th
fully
participation
1999);
disclosed his
in the transac
3. Call
statute,
necessary
knew
under the
“it suf-
and Gallant
intent
Baetz
Whether
were
reports
management
the call
that he set into motion
entries on
fices
necessarily
caused [someone
actions
false
Wolf,
false entries.”
make
else]
*24
challenge
and
next
Baetz
Gallant
1504;
Flanders,
F.2d at
see also
491 F.3d
§§ 1005
18 U.S.C.
convictions under
their
moreover,
1005,
“an
at 1215. Under
of
2,
abetting
filing
the
aiding
and
and
qualifies
of material information
omission
They argue that
the
reports.
call
false
Flanders,
entry.”
a false
491 F.3d
as
gov
the
was insufficient because
evidence
(citation
quotation
and internal
1214-15
they
that
had
failed to show
ernment
omitted).
purpose
“The
of
stat-
marks
instruc
the FDIC’s “arcane
knowledge of
‘upon
inspection
ensure that
of
ute is to
alleg
rules that
“accounting
tions” or
bank, public officers and others would
a
Br. at
false.” Baetz
edly
reports
made the
picture
books of account a
discover
its
” Flanders, 491 F.3d at
its true condition.’
to
was sufficient
The evidence
Darby,
1214
v.
289
(quoting United States
and Gal
convictions of Baetz
support the
224, 226,
573,
(1)
manages,
supervises
or
organizes,
BestBank,
which affected
a financial in-
continuing
financial crimes enter-
stitution.
prise; and
(2)
$5,000,000
in App’x
speci-
receives
or more
at 127. The indictment also
enterprise
requisite
from such
fied the
gross receipts
period
24-month
as “be-
period,
1, 1996,
during any
ginning
August
ending
24-month
on
23,1998.”
July
Id.
$10,000,000
than
shall be fined not more
individual,
$20,000,000
if an
if an or-
court,
govern-
Before the district
ganization,
imprisoned
for a term of
attempted
argue
ment
that the “enter-
years
than
not less
10
which
be
in
prise” specified
225 “is not
U.S.C.
life.
limited to the substantive counts of the
(b)
(a),
indictment,”
For purposes of subsection
id. at
and that “the en-
terprise
term
financial crimes enter-
“continuing
consisted of both an overall
prise”
specified
means a series of violations under
scheme as well as a
‘series of
657, 1005, 1006, 1007,
section
completed
part
violations’
were
1014, 1032,
title,
scheme,”
the execution of the
id. at
or 1344 of this
sec-
concluded, therefore,
tion
affecting
1341 or
a financial The
institution,
in
per-
gross
committed
at least
the source of the
million
re-
$5
sons acting
ceipts
in
was not limited to the constituent
concert.
Rather,
separate
in
to trace and
the tainted funds
gross
the million
violations.
$5
a broader crimi-
result from
receipts
prove
continuing
could
the elements of the
extending
enterprise, with boundaries
nal
enterprise charge.
financial
specified
violations
beyond the constituent
During
peri-
Id.
590-91.
the 24-month
in the statute.
indictment, moreover,
in
od defined
rejected
govern-
court
The district
payroll pay-
“the evidence showed direct
that the criminal enter-
argument
ment’s
$6,000,000
ments of more than
to each of
beyond the constituent
extend
prise could
them....”
Id. at 589.
in the statute.
its
specified
violations
order,
court also
the district
written
agree
We
with the district court that the
Baetz and Gallant
agreed with
evidence was sufficient to convict Baetz
produce
counts did not
bank fraud
in a
participating
and Gallant of
CFCE. As
receipts per
requisite
gross
million
$5
matter,
preliminary
the district court
that,
The district court reasoned
person.
reject
government’s
was correct to
ar
scheme,
money
under the bank fraud
gument
enterprise
that the criminal
could
ac-
Century’s operating
was transferred
beyond
extend
the “series of violations”
count,
Baetz and Gallant
rather
than to
specified
the CFCE statute.
personally.
statute is clear that Baetz and Gal
CFCE
Nevertheless,
conclud-
the district court
$5,000,000 or
lant must have “receive[d]
was sufficient to con-
ed that the evidence
gross receipts
continuing
more in
from [a
in a
participating
Baetz and Gallant of
vict
that a
enterprise],”
financial crimes
that,
explained
The district
CFCE.
“ ‘continuing
enterprise’
financial crimes
statute, “each of
convicted under the
to be
means a series of violations” listed
have re-
separately
the defendants must
scope
§ 225. The
statute.
18 U.S.C.
$5,000,000
gross
re-
ceived more than
“continuing
financial crimes enter
App’x 588-89.
ceipts
enterprise.”
from the
prise” is coextensive with the “series
relied on Baetz and
The district court then
Harris,
violations.”
ment not “double-count” when attrib improperly receipts” sis includes “indirect uting gross receipts to each of the defen gross receipts, its calculation of individually.18 dants reporting indisputably “[t]he false counts Third, correctly directly generate the district court con- any did not revenue.” omitted). reports cluded that the series of false call Baetz Br. at 40 (emphasis Their First, produced gross argument at least million in re- fails for two reasons. $5 ceipts “gross 24- during receipts,” each defendant term while not defined § period. purposes month The CFCE statute lists for the of 18 U.S.C. reports very broadly false call as violations defined similar situations 225(b) § receipts constitute a CFCE. See 18 to include both direct and indirect U.S.C. 1005). 982(a)(4) See, (listing money. § govern- e.g., 18 U.S.C. 18 U.S.C. trial, (defining “gross receipts ment introduced evidence at more- of such an of- over, showing “any that Baetz and Gallant each fense” to include property, real or payroll deposits personal, received over million of tangible intangible, which is $6 obtained, payments directly and over million of other indirectly, as a result $5 Century offense”); during period. from the 24-month of such 2B1.1 U.S.S.G. cmt. n. reports, (defining Without the false call “gross receipts BestBank from the of- required would have been to close or fense” to include “all property, sub- real or reasoned, It is less clear that the district court U.S.C. 225. As the district court below, concluding payments though, explain that the and as we correct false reports personally call Century’s operating account the amounts re- could not count —and Colton, ceived Baetz and Gallant as a result of the gross receipts. In United States v. reports (4th Cir.2000), support false call sufficient to 911-12 —were Thus, that, the CFCE convictions. we need not purposes Fourth Circuit held for the of a whether, case, *29 money decide in the enhancement, de- money sentencing deposited posited Century’s operating qual- into account corporate into a account could not constitute "gross receipts" ifies as under 18 U.S.C. "gross receipts” indirectly by received the § 225. defendant, corporation sep- because the was a entity arate and the defendant did not control 19. This "series of violations” includes the court, however, corporation. the was reports preceded false call the 24-month distinguish those the careful facts from (Counts 48). period CFCE 47 and The CFCE where a situation defendant "had a control- only requires "gross receipts” statute that the ling complete ownership stake in—if not of— during period be received the 24-month —not companies receiving illegally obtained that the "series of violations” be confined to cases). (citing funds.” Id. at 911 period. § the 24-month See 18 U.S.C. Here, reports Baetz and Gallant controlled Centu- The false call submitted before the 24- ry, arguably, Century's in period and amounts month enabled BestBank to remain open, operating ultimately could be attributed to them and account enabled Baetz Gal- "gross receipts” purposes payments. $5 as for the of 18 lant to receive over million in
1233 ” [particular] tangible intangible, which is defense personal, instructions.... Al-Rekabi, a directly indirectly result United States v. 454 obtained offense”). Second, Cir.2006); the CFCE stat- 1121 of such see also United Williams, § in includes its list of violations. ute States v. 403 F.3d 1195 n. 225(b). (10th Cir.2005). § If indirect re- See 18 U.S.C. “Criminal defendants ceipts “gross receipts” are not included as are jury upon entitled to instructions their statute, under the it is difficult to CFCE theory provided of defense there is eviden- imagine any reports how false call could tiary legal support. Upon the failure “gross receipts” ever result instruct, to so we will find reversible er —and § part of 1005 would be read out of least Visinaiz, ror.” United States v. 225(b). decline to restrict (10th Cir.2005) (citations We 1300, 1308 omit fashion, and we conclude that ted). such court, however, The district is not evidence was sufficient to convict Baetz required give theory a of the defense and Gallant under the CFCE statute. instruction “which legal lacks reasonable Al-Rekabi, and factual basis.” 454 F.3d at Jury B. Instructions: Whether dis- (citation quotation and internal marks denying Baetz trict court erred omitted). request for an instruc- Gallant’s The district court was correct that the suretyship tion on law proposed jury instruction did not fit the proposed Baetz and Gallant Contrary facts of the case. to Baetz and jury at trial: following instruction argument appeal, Gallant’s govern A guarantor or indemnitor of debt has ment did not contend each individual legal right to intervene into the con- was, somehow, inherently credit illegal. tract between debtor and creditor to Rather, government’s against case pay monies to the creditor to avert both aggre Baetz and Gallant centered on the a default on the debt and the conse- gate delinquencies number of cardholder quences guarantor to the of such a de- and the increase in that number over time. guarantor’s payment fault. The on a they important credits were because debt to avert the debtor’s default is concealed the increase in the number of a crime. delinquencies cardholder increase that —an App’x at 367. This instruction tracked resulted, large part, from Baetz and i.e., theory their it was defense — making improperly opening, Gallant legal commercially reasonable for to, charges new accounts. Such conceal Century post credits because $20 Di prevented ment BestBank’s Board of Century obligated indemnify Best- rectors, FDIC, purchasers and the any Bank for accounts that became uncol- learning BestBank’s stock from the true lectible. The district court refused the This, in delinquency portfolio. risk of the (and jury proposed instruction a related turn, disguised steadily increasing risk instruction), stating, “They are statements solvency, by preventing any to BestBank’s law, this, they I but don’t think fit ascertaining one from whether the bad *30 into this Id. at case.” 4177. debt reserves could cover all uncollectible result, accounts. As a Baetz and Gallant
The district court did not issuing credit cards were able to continue abuse in refusing its discretion to instruct long after BestBank had become insolvent. jury requested. as Baetz and Gallant jury inappli proposed in The instruction was jury “We review de novo whether the cable, nothing it have added but given adequate, structions were but review and would an confusion to the trial. See United States abuse of discretion the denial 1234 (10th the case for further 1237, reverse and remand Kaatz, 1246 Cir. F.2d 70S
v. only 1983) (“The regards restitution not proceedings instructions must be reviewed Cerberus, instruction but also to the requested The to Taffet as whole. and confusion nothing but have added would FDIC. (citation omit properly refused.” and remand, court “be- the district must On “
ted)). ‘fully de novo gin anew” and conduct ” Smith, v. resentencing.’ United States IV. SENTENCING (10th Cir.1991); see 1456 930 and all four defendants government The result, Todd, we F.3d at 1139. As district court’s sen- aspects of the appeal depth govern- in need not address The tencing procedures conclusions. challenging arguments ment’s various argument is government’s primary employed by the discretionary procedures calculating in court erred the district Nevertheless, because the district court. the defen- amount of loss attributable to that the district court record indicates imposing purposes conduct for dants’ misapprehend- law or misapplied have § 2F1.1 of the Sen- under enhancement discretion, sentencing of its ed the limits defendants and tencing Guidelines.20 to the provide guidance we some district argue the dis- government also they reoccur on court on those issues lest various other imposing trict court erred remand. In under the Guidelines. enhancements addition, government challenges the A. Guidelines Calculations procedures employed sentencing Loss Under Amount U.S.S.G. argues that the district district court 2Fl.l(b)(l) § failing restitution. court erred order primary argument re- government’s is well- Our standard review sentencing is that the district garding court’s we review the district established: procedural error calcu- committed de novo its factual legal conclusions § of loss under 2F1.1 of lating the amount for clear error. United States conclusions the 1997 the Guidelines. Under Guide- Todd, Cir. 2Fl.l(a) lines, § level sets base offense 2008). below, the district As set forth involving fraud or de- of six for offenses legal calculating court committed error in undisputed It ceit. is is range applicable to each the Guidelines level for the proper base offense defen- ‘starting point Because “the defendant. 2Fl.l(b)(l) pro- dants’ offenses. Section any initial benchmark’ for sentenc and the $2,000,” the loss exceeded “[i]f vides that correctly ing must be a calculated decision level should be de- the offense increased sentencing range,” we remand Guidelines No pending the amount loss. upon with direction to vacate the sentences if applied is the loss is less enhancement defendant. at 1134-35 resentence each Id. — $2,000; a one-level enhancement than States, (quoting v. United U.S. Gall $2,000 greater if loss is than applied 586, 594-98, -, L.Ed.2d 128 S.Ct. $5,000; on, and so with (2007)). addition, but less than dis because in rela- growing size of the enhancement resti declining trict court erred in to order Cerberus, amount of loss. we also tion to the U.S.S.G. tution to Taffet and court with the consent 20. The Guidelines were amended combining eliminating former 2F1.1 and appeal, parties contin- all On all defendants. are to the 1997 2B1.1. All citations apply. agree ue to that the 1997 Guidelines *31 Guidelines, applied by were the district which 2Fl.l(b)(l). (the greatest possible en- loss for the The bank-fraud-related counts eighteen, is for losses exceed- hancement unnecessary details of which are to resolv- $80,000,000. Id. ing ing presented). the issues comput- These figures ed loss at varying between calculating the amount of loss attrib- $65,156,797 $42,599,862 for the Best- defendant, the district court utable to each $206,775,813 Bank defendants and figure pegged to the used individualized $141,402,151 for Gallant and Baetz. The money gained that defendant amount of government argued that Finding that measure of from his criminal conduct. $11,604,179 and that loss for the wire fraud gained Baetz Gallant counts was the $11,747,091, loss, district gained court as- amount of intended which it calculat- a fifteen-level for both. $23,000,000 sessed increase ed at for all defendants from $4,743,909, Boyd Because received the attempt to sell BestBank stock to Cer- court assessed a thirteen-level increase for Partners; $8,300,000 berus for the Best- Finally, him. the court found that Grace Bank defendants from the attempt to sell $117,643, gained resulting a six-level Farrar; BestBank stock to Frank increase. $140,000,000 for Gallant and Baetz from attempt portfo- sell the credit card government
The contends that this cal- lio. culation of loss was erroneous two re- that, first, spects: argues the district The argued defendants that each of court should not have used the defendants’ these measures overinflated amount of the amount of without first gain as loss them, loss attributable to as at least some estimating the actual or intended loss from portion of these estimates was upon based conduct; second, their the district either non-criminal conduct or events oc- aggregated court should have the amount BestBank, curring after the FDIC seized resulting joint of loss from the defendants’ They argued arriving both. at an below, conduct.21 As set forth each of upon accurate measure of loss based points these warrants reversal and remand respective trial prove impos- records would resentencing.
for sible, proposed and instead that the court gains use their from the as the scheme to the Gain Defendant measure loss under Guidelines. the Amount Loss arguments, govern- Faced with these government The contends that the dis- pointed ment to evidence in the trial also improperly trict court used the defendants’ suggesting roughly record a loss of gains as the amount of loss. Prior to $134,000,000 resulting from the defen- sentencing, government presented dants’ bank fraud. the district court a number of estimates of subsequently The district court issued the amount of loss attributable to the de- range. its calculation of the Guidelines fendants’ conduct. It offered the court court, possibilities calculating According three actual to the amount “[t]he government 21. that the court will not consider the matter in sentenc- also contends dis- comply trict court did not with Rule ing.” government argues that loss was 32(i)(3)(B) of the Federal Rules of Criminal which district "controverted matter” on Procedure, provides sentencing which that a did, court failed to rule. The district court any disputed portion court "must —for however, a method- rule on loss—albeit with presentence report or other controverted mat- ology takes issue with— dispute ter—rule on the or determine that a gain using the as the measure of defendants' ruling unnecessary either the mat- because argument therefore has no merit. loss. This sentencing, will ter not affect or because *32 mismanagement of cannot be as the FDIC’s the by the defendants such losses caused fairly portfolio, con- and so on. any formula credit card calculated in the offenses roles their individual siders court, however, relying solely upon regu- by the bank intervention and the records, to the trial believed itself unable FDIC as receiver.” Grace the lators and exactly of the total portion determine what Thus, IV, at 6. rather Doc. App’xVol. to the defendants’ losses was attributable measure the actual loss attempting than actions.22 Faced with this dilem- criminal bank fraud or by the defendants’ caused ma, opted to use the defendants’ the court fraud, the of their wire loss the intended during period partic- the of their gains to measure loss un- elected district court in the criminal conduct as the ipation 2Fl.l(b)(l) upon what each based § der By court’s measure of loss. the district individually received as result defendant admission, approach imper- was own remarked that The court of his conduct. gains some of those were fect because legitimate aspects there were “[although “legitimate aspects [of] attributable to the BestBank,” with Century’s business Century’s business with BestBank” and “appropriate were meas- gains defendants’ figures the total therefore overestimated estimates.” Id. loss as reasonable ures of actually gained from what the defendants objections, parties’ hearing at After aspects criminal of their conduct. ultimately calculated each defen- the court IV, 1153, at 7. How- App’x Grace Vol. Doc. in accordance with dant’s sentence ever, defendants caused accepting out above. gain figures set beyond what or intended additional losses district court’s various upon Based conduct, from criminal they gained their statements, forth including those set upon the total the court seized amounts above, court reached its loss appears earnings their as “reasonable estimates” of following manner. The in the estimates it ran our doing, loss. Id. so afoul of that the at trial showed presented evidence when a district court precedent regarding from the defen- or intended losses actual gain a measure may use the defendant’s far in excess of their conduct were dants’ § of loss under 2F1.1. from that conduct. The dis- gains actual commentary As set forth defendants, agreed trict court 2F1.1, money, § “loss is the value of the government’s estimates of though, that unlawfully property, or services taken.”23 for all counts were actual or intended loss “[wjhere Thus, § 2F1.1 cmt. 7. U.S.S.G. they took into account high too because loss, in actual that value will fraud results have been were or would losses that 2F1.1; § for enhancement” under be used it- by the defendants’ conduct caused not proba- was no actual loss or if a there self, “[i]f other factors: default but various cardholders, greater loss was than the post-closure events ble or intended by actual likely previously referred to the definition in Note 2 very because evidence to this 22. This is effect, § guilt interpreting § when 2F1.1. See being irrelevant to the defendants’ 2B1.1 innocence, presented Santiago, at trial. 524- was not United States Moreover, (10th Cir.1992). govern- as the notes, the used this ment district court also challenge a meritless 23. The defendants raise definition, "[njeither rulings the court's government's on the alterna- reliance government’s arguments nor the are based put Application Note 2 tive definition forth 'damaged 2B1.1, upon property whether the § which states to U.S.S.G. " " Reply destroyed’ ‘taken.’ Gov't Br. [versus] property tak- means the value of ‘[l]oss’ result, (Gallant/Baetz) en, at 3. As a which defini- destroyed.” Application damaged, or apply we makes no in the specifically read- tion difference 2F1.1 refers the Note present commentary, have case. and we er to 2Bl.l's
1237 loss, figure will be used.” victims’ larger actual loss.” The district court had used 517, Santiago, gain v. 977 F.2d the defendant’s United States as a measure of loss omitted). (10th Cir.1992) (citations As 524 without considering whether the victims properly recognized, loss, so, the district court this any had suffered if what the consequential damages definition excludes rejected amount of that loss was. We that resulting from the defendant’s criminal approach. Taking note Application conduct, given the court’s stated find- requirement Note 8’s that the district ing government’s that loss estimates court “make a reasonable estimate damages, it upon consequential were based loss, information,” given the available for the district court to appropriate 8, § U.S.S.G. 2F1.1 cmt. we remarked that reject figures.24 those See United States “whatever the court uses to estimate the ” (5th Cir.1999) 213, Izydore, v. 167 F.3d 223 loss, ‘reasonable,’ the estimate must be (noting “consequential typically that losses Haddock, 12 “If gain F.3d 961. to the computing are not counted when loss un- defendant not correspond any does ac- citing 2F1.1” and cases to der U.S.S.G. tual, intended, loss, probable or the defen- effect). gov- The fact that all of the that gain dant’s not a reasonable estimate of may proffered figures ernment’s have been Calculating loss.” Id. in- the actual and flawed, however, give did not the district tended loss that resulted from each of the gain court license to use the defendants’ as conviction, counts of we then reversed and an alternative measure loss—at least resentencing remanded for after conclud- way in the it did. ing gain the defendant’s overstated resulting the amount of loss from crim- his Application Note 8 to 2F1.1 states: inal conduct. Id. at 961-64. gain committing “The offender’s from fraud is an alternative estimate [of loss] recently holding We reaffirmed this ordinarily will underestimate 1246, Galloway, United States v. 509 F.3d language appears loss.” At first blush this (10th Cir.2007), interpreted 1250-53 which permit gain the use of as a measure of both the 2005 Guidelines and the 1998 However, reading loss without limitation. Guidelines. As the latter are not material- conjunction this sentence in with the rest ly different from the 1997 appli- Guidelines 8, Application previously Note we have case, present cable in the in- Galloway is gain concluded that an offender’s be structive here. the district We described only used an “alternative estimate” decision-making process: court’s certain circumstances. ever-changing Faced with and conflict- Haddock, ing [the data on loss sustained
In United States v. 12 F.3d (10th Cir.1993), arguments by as well as Mr. specifi- victim] 960 we were Galloway that no cally presented question [the victim] with the of “when sustained loss, the district court has discretion to measure the district concluded without occurred, gain explanation loss instead of the that a defendant’s loss rate, Although any ultimately At we takes issue with because remand appeal, develops this factual conclusion on resentencing, to the district court for it is argument against only this conclusion unnecessary to address this issue in detail. $134,000,000 regard figure to the loss set government may argu renew its factual "Quanstrom Report.” forth in the so-called involving ments the correct loss calculation at upon problems Based the various with that resentencing. Galloway, United States figure, painstakingly detailed in the defen- (10th Cir.2007); United briefs, finding dants' the district court’s Keifer, States v. Cir. figure was an inaccurate measure of loss 1999). clearly was not erroneous. four, two, than numbers reasonably reasonable it could not then determined amounts. great ten times as as those intended loss. In- even actual quantify *34 court, court in using like the district the loss The district stead, to estimate it chose the only figure simply upon not seized defen Galloway, the Galloway’s gain, Mr. of it as a measure gain dants’ and used in dispute. Galloway make loss. As Haddock and virtually approach, This Id. at 1251-52. clear, though, satisfy this the dis cannot in approach court’s the district identical to the responsibilities trict court’s unless case, soundly rejected: present the attempted to determine court has first as an alternate esti- gain using [BJefore degree certainty general the with some of must loss, court the district mate first of intended, loss, that is amount of actual intended loss and the actual estimate criminal attributable to the defendants’ conduct, due to a fraudulent defendant’s that the defendants’ conduct and concluded the whether consider and then defen- amount. “correspond^] to” that gain estimate a reasonable gain dant’s is of 2 Haddock, 1 961. Because the F.3d at .... [W]e loss or intended the actual any make sort of district court failed to that the district suggesting not are loss, actual or intended findings regarding loss, it amount of precise find the must is not sufficient to the record before us estimate of only make a reasonable must was a gain conclude that the defendants’ However, so, doing in the dis- the loss. reasonable measure of loss. See Gallo finding a that make must trict court (concluding at way, 509 F.3d amounts of loss the various addresses inade findings where district court’s were a in the case of especially proposed, in “premature engage it be quate, would like this one. this moving target analysis concerning our own any of of loss case, amounts proposed loss”). actual or intended high to as as from as low ranged $0 cannot $122,922.29, the district court argue The defendants that Haddock gain a simply choose substitute Galloway proposition stand for the a $29,359.20 loss without as a measure itself, may gain, by defendant’s “[t]he reason- why that is basis for substitution if no an there is support enhancement able. loss, there is actual or intended but where Haddock, 12 F.3d at (citing loss, Id. at 1252 may it be used as an ‘alternative ” added). 961) (emphasis (quoting at 27 Had estimate.’ Grace Br. 960) dock, (emphasis origi at in F.3d Galloway control out Haddock and nal). have misread these The defendants Assuming for the sake case. come Galloway, In both cases. Haddock court correct argument that the district an actual district court find that did government’s ly concluded that even occurred. defendants’ read loss had the ac modest estimates overstated most Galloway is further ing of Haddock loss, the court tual or intended amount rationale of by underlying contradicted the actual or attempt made no to calculate cases, gain a defendant’s both which is that loss, by or the which intended amount of loss may only be used as a measure It could have been loss was overstated. estimate” of loss. where it is “reasonable $1,000,000; it $100; it could have been Haddock, 1252; Galloway, 509 See F.3d $100,000,000. no There is have been could defendant’s at 961. Whether supports evidence in the record (as loss it overestimates gain significantly court’s loss es conclusion that district cases) significantly $11,747,091; may have those $11,604,179; timates (as here), it it have $117,643 underestimates $4,743,909; any were more not a estimate” and cannot and remand for a “reasonable recalculation of the loss be used to calculate enhancement. occasioned the defendants’ conduct. suggestion There is the some of the Joint v. Individual Measures of arguments thing that the “tak- defendants’ Loss Each Defendant necessarily thing en” must mean the “tak- defendant,” en definition which also contends that the equate would loss with the defendant’s district court aggregated should have gain every case. To the extent *35 amounts of loss attributable to each defen- argument, defendants make this it has no points dant. It to the district court’s stat- merit. That loss is not intended to be ed rationale for approach: its individualized gain commensurate with the victim’s is co-conspirators While may be liable for evident Application from Note 8 to the criminal acts of all those with whom 2F1.1, above, § quoted which that states they in conspire, fairness sentencing re- gain “ordinarily the defendant’s will under- quires that some consideration given be estimate the loss.” culpability. their individual Under relatedly, Boyd Somewhat and Grace ar- matrix, the Guidelines that can be done gue they the bonuses received as a by measuring the amount of the loss conduct, result of their which were the according to what each of them received. figures by used the district to calcu- court IV, Grace App’x Vol. Doc. at 7. them, late the loss attributable to consti- statement, Based on legal they tuted the limit of the loss inflict- argues that the district court calculated only ed because those bonuses were the in loss a manner that is not contemplated (rath- thing directly “taken” their fraud by the Guidelines and therefore committed it). consequence er than as Both were procedural error. however, conspiracy, also convicted of All four defendants were convicted of in following as set forth in detail sub- conspiring with one another to commit the section, they are also liable for the loss they substantive offenses for which were reasonably inflicted foreseeable acts also convicted. Like other offense charac- co-conspirators. they of their Because lB1.3(a)(l)(B) teristics, § under Guidelines therefore be liable for inflicted losses the amount of loss attributable to mem- Gallant, by the conduct of Baetz and their a conspiracy bers of shall be determined only bonuses are not the basis for calculat- “all reasonably the basis of foreseeable ing the losses attributable to their conduct. acts and omissions of others furtherance in Galloway, As we cautioned 509 F.3d jointly of the criminal undertaken activi- requirement there no that the ty! that occurred during ] the commission district court calculate an in- amount of of the offense of conviction....” United tended or actual with precision. loss How- Brown, States v. ever, Galloway and Haddock counsel that Cir.1998) (quoting U.S.S.G. the district court should the first in- lB1.3(a)(l)(B) (1995)) § (quotation marks stance evaluate perspective loss from the omitted). lB1.3(a)(l)(B) Thus, § contem- victim, rather than the defendant. court, in plates calculating that a district If the district court believed that the infor- the amount of loss attributable to a mem- mation before it was insufficient make a conspiracy, of a ber will consider whether victims, reasonable estimate loss to the the amount of to that loss attributable requested the court should have additional evidence, expert testimony, co-conspirators such as from member’s resulted from parties. Accordingly, “reasonably we must reverse foreseeable acts and omis- so, pre-dated their for those losses If ble co-conspirators. of those
sions” will much is range conspiracy. This entry Guidelines into the properly-calculated 1B1.3, for those responsible § commentary member hold that clear from losses. rele- defendant’s provides “[a] which the conduct does not include vant conduct case, present in the
The district conspiracy prior to the of members of a member of the holding each rather than if conspiracy, even joining defendant resulting for losses responsible conspiracy acts of that conduct....” reasonably foreseeable defendant knows of from the gain used instead co-conspirators, § his cmt. 2. To the extent that 1B1.3 U.S.S.G. culpability. each defendant’s proxy reasonably foreseeable conduct however, 2F1.1, cal- figures The loss follow- Boyd’s co-conspirators and Grace’s lB1.3(a)(l)(B), do according to culated entry conspiracy into the caused ing their calculation of loss for the provide however, losses, attributable to the loss Cutler, States v. this manner. United Cf. *36 accordingly. calculated them should be Cir.2008) (hold- (2d 136, 168-69 520 F.3d addition, arguably while Baetz Gallant rejecting, court erred ing that district for the responsible not have been perceived of the defendant’s on the basis are, bonuses, they very at the bankers’ figure that included culpability, a loss least, resulting for losses from responsible reasonably fore- resulting from the loss reasonably foreseeable con- one another’s “dis- co-conspirators; seeable acts of duct. set forth Guide- regarded principle lB1.3(a)(l)(B)”). A defendant’s did not in- § lines Because the district court § 2F1.1 holds him under enhancement those losses clude in its loss calculations caused the rea- for losses responsible reasonably foreseeable attributable to the co-conspir- acts of his sonably foreseeable co-conspirators, acts of the defendants’ we given to the ators, no consideration with this issue for also reverse and remand culpability. of his degree resentencing. sure, court found if the district
To be culpable were less that certain defendants U.S.S.G. 2. Role in the Under Offense others, taken this con- it could have than SBl.l(a) § a sen- imposing when clusion into account defendants, all four sentencing and 3B1.2 of the 3B1.1 tence. Sections pur- enhancements imposed district court adjustments in of- for provide Guidelines §to 3B1.1 of the Guidelines. Gal- suant mitigating or aggravating fense level for Baetz, lant, Boyd four-level received roles, the factors district respectively; and 3Bl.l(a), § allows increases under which to consider under 18 are directed courts 3553(a) was such increases the defendant § “[i]f make room for differ- U.S.C. activi- sentencing co-conspirators organizer or leader of a criminal ences in Nothing in culpability. varying degrees ty participants five or more involved ” lB1.3(a)(l)(B), commentary 2F1.1, or the re- extensive.... Grace or was otherwise sections, accounts for such though, to those under three-level increase ceived considerations. 3Bl.l(b), an in- § which allows for such manager was crease defendant “[i]f directly address the district Rather than (but organizer or supervisor not an into account losses failure to take court’s leader) activity criminal involved and the reasonably foreseeable by the occasioned otherwise participants more or was five or Boyd and co-conspirators, conduct of their ” lia- extensive.... cannot be held argue they Grace The defendants contend that the district argued that employee “the must be proven by assessing court erred these enhance to be criminally responsible” before a ments making specific without finding § 3B1.1 enhancement is assessed and that they organizers were or leaders of at there was no evidence that employees person least one other who criminally referred to the court were criminally responsible. Although apparent from responsible. Id. at 989-90 (citing United Guideline, language of the any en Aptt, (10th States v. 354 F.3d 3B1.1, § hancement under including an Cir.2004)).25 Responding to objec- these enhancement for organizing, leading, man tions at one of the sentencing two hear- aging, or supervising an “otherwise exten ings, the district court noted that “the sive” criminal activity, requires the in guideline course, says, of not only the volvement of at least one “participant” number of participants, but also for other- other than the defendant. United States wise—or was otherwise extensive....” Id. Bauer, 183-84 Cir. at 1093:10-12. It then applied the en- 1993); see also 3B1.1 cmt. 2 U.S.S.G. hancements to all four defendants. (“To qualify adjustment for an under this us, On the record before agree we section, the defendant must have been the that the district court erred in applica its leader, organizer, manager, supervisor 3Bl.l(a) tion enhancement. “A of one or participants.”). more other A district court specific must make findings “participant” person is “a criminally who is and advance a factual basis to support an *37 responsible for the commission of the of enhancement § under U.S.S.G. 3B1.1.” fense.” Id. cmt. 1. Chisum, United States 502 F.3d In preparing preliminary its calculation (10th Cir.2007) (quotation marks and of defendants, the Guidelines range for the omitted). Thus, citation once the defen the court wrote: dants had objection raised their to imposi upon Based the defendant’s role in the enhancement, tion of the the district court offense, the offense level is by increased required they to find that orga had if levels organiz- defendant was an nized or led “at person least one who was er or leader of a criminal activity that criminally responsible.” Id. This is not a involved 5 or participants more or was particularly onerous showing: “The Guide otherwise The partici- extensive.... requires only line a conclusion that [the pants need guilty not all of be the crime. supervised defendant] at least one such Many employees Century of and Best- participant; it does require not the court Bank were required to accomplish the identify specific examples.” Aptt, 354 deception in this case. F.3d at 1287. (citations omitted). App’x at 981-82 Nonetheless, the district court did not objected defendants pro- to the court’s make such finding. a From its statements assessment posed of a four-level increase appears that the court have their been offense, for role in the arguing that laboring misapprehension under the the court that if had not any identified other the defendants’ criminally responsible activity persons was otherwise ex- they had organized tensive, managed. or then Admitting that there was no requirement “it is true that an employee that need not have there be at criminally one least re- ” convicted been to be ‘participant,’ they sponsible subordinate involved in their ac- Although language this is the objections. used Gal- Baetz, Boyd lant and Grace made similar fact-finding cannot hancement, appellate cor- However, the defendants as
tivity.
duty to
court’s
activity
the district
a criminal
substitute
if
even
rectly argue,
extensive,”
en-
for the
clearly the reasons
as “otherwise
articulate
might qualify
Chisum,
re-
at 1243
threshold
F.3d
not eliminate
hancement.”
this “does
omitted).
supervise
a defendant
that
and citation
marks
quirement
(quotation
Gal-
participant.”
other criminal
one
matter to
result,
least
this
remand
we
As
§
cmt.
3B1.1
(citing U.S.S.G.
Br. at 49
spe-
lant
entry of more
court for
district
Camacho,
v. Cruz
2);
States
United
see
presence
regarding
findings
cific
Cir.1998) (hold-
1220, 1224
in the offenses.
participants
subordinate
an enhance-
to receive
order
ing that
have
3B1.1,
must
defendant
under
ment
Trust Under
a Position
3. Abuse
lead-
with his
consistent
control
“exercised
§ SB1.S
U.S.S.G.
partici-
other
at least one
role over
ership
that
sentenc-
argues
addition, the
statements
court’s
pant”).
Grace,
district court
Boyd and
ing
that
may have believed
that it
indicate
an enhance-
refusing
impose
erred
BestBank”
Century and
“employees
Guidelines,
of the
under
3B1.3
ment
de-
accomplish the
required
“were
who
“[i]f
increase
a two-level
provides
which
partici-
qualified
case”
in this
ception
position
public
abused
the defendant
court made
981-82. The
App’x at
pants.
skill, in a
trust,
special
used a
private
em-
any of these
that
though,
finding,
no
facilitated
significantly
manner
responsible,
criminally
were
ployees
” Boyd con-
offense....
of the
commission
opera-
unaware
are
who
“employees
error, while
court’s
cedes
district
criminally
not
nature are
fraudulent
tion’s
does
enhancement
argues
Grace
Aptt, 354
participants.”
responsible
agree with
to him. We
apply
reason,
govern-
For
at 1285.
that the district
conclude
government,
or-
the defendants’
argument
ment’s
*38
impose a
by refusing
erred
Century
over
control
and/or
ganizational
§ 3B1.3 enhancement.
for
them
qualified
employees
BestBank
(Gal-
Br.
enhancement,
see Gov’t
the
joba
“char-
trust is
private
of
position
A
lant/Baetz)
69, unpersuasive.26
is
at
managerial
or
by professional
acterized
discretionary
(i.e., substantial
discretion
the
in
ample
is
evidence
There
given consider-
ordinarily
that is
judgment
the
of
the assessment
support
record
deference).”
1.
§
cmt.
3B1.3
U.S.S.G.
able
enhancement,
in its sen
four-level
if
employed
may not be
adjustment
“This
spe
government
tencing statements
included in
or skill is
of trust
an abuse
may
who
persons
other
cifically identified
char-
offense
specific
offense level
base
App’x
See
participants.
qualified
have
this
§
When
3B1.3.
U.S.S.G.
acteristic.”
if the rec
However,
“even
at
607.
of
upon
abuse
“is based
the en~ enhancement
overwhelmingly supports
ord
"underlings or
are
ly
participants
noted that
does not make
government
Although
26.
Bauer, 995
that there
of the defendant.
could
argument,
contend
subordinates”
one
Reid,
findings
specific
be-
911
(citing
more
United States
need
at 184
no
for
F.2d
was
Cir.1990)).
both
(10th
degree
Baetz were
found
Gallant
cause
F.2d
1464
activity
this
responsible for
in
criminally
over
exercised
the defendants
of control that
Grace,
were
case,
Mattar
Boyd,
uncertain,
it
conduct is
another's
one
separate
ain
related conduct
guilty of
found
logically
conclude
be
inconsistent
would
run,
five,
were
argument would
All
case.
"underlings
subordinates”
were
all
that
be-
in
offenses
"participants”
therefore
other.
each
However,
previous-
have
we
yond any doubt.
trust,
position
it
employed
be
in
“stay
would
with the calculation made as
adjustment
§
addition to an
under
3B1.1 to the
in
guidelines
July
5th order.”
role);
if
(Aggravating
adjustment
is Grace App’x
XLVI,
Vol.
Doc. 1208 at 44.
solely
skill,
based
special
on the use of a
it
noted,
As
Boyd
that
concedes
the dis-
may not
employed
be
addition to an
trict court erred in failing to apply this
adjustment
§
under
3B1.1 (Aggravating
Grace, however,
enhancement.
argues
Role).” Id.
the enhancement
not apply
does
preliminary
calculation,
its
Guidelines
him.27
disagree.
We
The district court
§
the district
“may
court -wrote that
3B1.3
§
correct
noting that
“may
3B1.3
not be
if an
employed
abuse of trust
is
not be employed if an
abuse
trust
included
the determination
spe-
of other
included in the determination of
spe-
other
cific offense characteristics and that is the
cific offense characteristics.”
App’x
Grace
3Bl.l(a)
§
case here where
IV,
has been em-
9;
Vol.
Doc. 1153 at
see U.S.S.G.
ployed
(“This
positions
§
because of the
held
adjustment
3B1.3
may not be em-
these
IV,
bank officers.” Grace App’x
ployed
Vol.
if an abuse of trust or skill is
Doc.
government
9. The
filed a
included in the base
specif-
offense level or
objection,
written
arguing
characteristic.”).
that a role in ic offense
But it is well-
3Bl.l(a)
§
the offense enhancement under
established that an abuse of trust
is not
aspects
“concern[s] different
of a defen-
incorporated in the base offense level for
participation
dant’s
in the offense” than an
§
fraud under
2F1.1. See United States v.
abuse
Queen,
trust
enhancement
under
Cir.1993)
§ 3B1.3. Id.
1169 at
It
Doc.
claimed that
(holding that
guideline
“the
for fraud is
imposition
2F1.1,
of a role in the
§
offense
and it does not
any
include
factor-
3Bl.l(a)
§
enhancement pursuant
only
ing
trust”).
position
abuse of a
§
precludes a
3B1.3 enhancement when text of § 3B1.3 also makes clear that an
the basis for the
3B1.3 enhancement is
position
abuse of a
of trust is not factored
special
the use of a
government
skill. The
into a role in the offense enhancement
objection
renewed its
at the sentencing
under
3B1.1. As
argued
hearing, but the court
court,
it
concluded
the district
agree
27. We
gov
do not
with Grace
to the attention of the court and make clear
ernment forfeited
appellate
this issue for
re
take;
action wants the court to
it need
*39
by failing
view
to
raise
before the district
repeat
objection
not
that
once it has met that
party may preserve
court.
“A
a claim of
requirement.
Alabama,
Douglas
See
v.
380
by informing
error
the court —when the court
415, 421,
U.S.
85 S.Ct.
to the district on ba- authority” the sentencing ercise its the not have it that would concluding in the already record. sis of information PSR, dis- the a prepare office probation the contends that also The di- procedure that “the wrote trict coúrt sepa to hold a decision not district court’s con- for the 32 Fed.R.Crim.P. rected sentencing was evidentiary hearing rate of preparation investigation and an duct of erroneous the court’s upon district based officers report probation presentence a it was understanding of what evidence de- confusion and result ... would under to consider permitted not 1123, at 1. Doc. Boyd App’x, lay....” United States decision in Supreme Court’s 32(c)(1)(A) the Federal of However, Rule 738, 220, 160 Booker, 125 S.Ct. 543 v. U.S. that: provides Procedure Rules Criminal of (2005). court district 621 L.Ed.2d a conduct must officer probation hearings various at the made statements a and submit investigation presentence of the effect about indicating its concern imposes it court before to the report evidence ability to consider its Booker on unless: sentence has this court As trial record. beyond the 3593(c) or another § (i) U.S.C. 18 merely pro Booker explained, previously otherwise; or requires statute applying from courts hibits district the informa- (ii) finds that the court mandatory fashion. Unit in a Guidelines it to mean- record enables in the tion 888, Lawrence, 907 F.3d 405 v. ed States au- sentencing its exercise ingfully Cir.2005). not (10th “prohib does Booker § 18 U.S.C. thority under making the court from the district it[] finding on explains its court applying findings and same factual record. sen to a defendant’s enhancements” same Id.; pre-Booker. have (same). Thus, it would tence that § 6A1.1 U.S.S.G. See also Magallanez, 408 see also United States probation by the a PSR preparation Cir.2005) (“[W]hen 672, 685 the two one of mandatory unless office is determination court makes district It is evident applies. exceptions listed test by a preponderance facts sentencing applicable which is exception, first that the Guidelines, it is now-advisory under proceedings, penalty in death primarily reached by jury determinations not bound case. While present in the apply not does more onerous through application conceivably be exception the second standard.”), cert. doubt reasonable den. court’s case, district in this applicable L.Ed.2d 163 S.Ct. 546 U.S. not why would explanation stated (2005). PSR— perform a office probation have the Therefore, is free in confusion district court result “would remand, hearing on require- evidentiary to the conform order an delay”—does hearing remand, warrant such 32(c)(l)(A)(ii). facts On should the Rule ments of 3661,28 Federal Rule elects under U.S.C. again court once if the district 32(i)(2),29 Procedure and/or by the Criminal a PSR preparation forego Procedure Rule of Criminal 29. Federal limi- provides that "[n]o U.S.C. 28. 18 "may 32(i)(2) provides that the district con- information placed on the be tation shall character, con- evidence” background, parties to introduce cerning permit offense of an person convicted of a the PSR. any objections duct may re- States of the United a court which impos- purpose of for the consider ceive and ing appropriate sentence.”
1247
6A1.3(a)
§
Sentencing
of the
Guidelines.30 the Sentencing Guidelines does not neces-
commentary
indicates,
§
theAs
6A1.3
sarily establish loss under the MVRA. Id.
evidentiary hearing may
“[a]n
sometimes Unlike
Guidelines,
loss under
only way
be the
disputed
resolve
is MVRA requires proof of actual loss and
sues,”
if
the calculation of loss for does not allow
metrics,
alternative
such as
purposes of the Guidelines or restitution
gain. See
Hudson,
United States v.
483
presents
complex
factual issues that
Cir.2007).
F.3d
711
to,
may
district court understood it
this
The district
court
be such a case. See United
refused to
States Rob
erts,
(10th Cir.1993)
restitution,
award
holding
14 F.3d
521
that
(sug
Taffet and
that,
gesting
given
Cerberus
difficulty
calculating
were not “victims” under the
drug quantity
MVRA,
for
purposes,
Guidelines
dis
and that the complexity in calcu
trict court should hold evidentiary hear
lating the FDIC’s
triggered
losses
provi
Booker,
ing);
254-55,
see also
543 U.S. at
sion of the
denying
MVRA
restitution in
(rejecting
30. The 1997 version of any which dispute concerning is important a factor version, provides same as the current determination, sentencing to the court that: relevant consider information without any important When factor to the sentenc- regard admissibility to its under the rules of ing reasonably dispute, determination trial, applicable provided evidence given the parties adequate shall be op- the information has sufficient of re- indicia portunity present to the information liability support probable accuracy. its regarding resolving factor. *43 124 district court’s denial of restitu- verse the
David Taffet Taffet. tion to restitution seeks government The expenses he in on the for Taffet based interpretation, first the dis- Under the to market the during his effort curred sepa- reasoning trict conflates the court’s portfolio. argues It card AATC credit and culpability rate of causation. questions of six wire fraud that he a victim was is A under the someone “victim” MVRA to his communications with relating counts “directly by the who is harmed defendant’s Century fi regarding the BestBank and in the criminal conduct course the See nancial of account. Grace health 3663A(a)(2). To 18 U.S.C. scheme.” I, (describing Doc. 124 at App’x Vol. fraud, Baetz and of wire convict Gallant 72-73). 68-70, and counts government proved beyond reason- the a Baetz and Gallant of jury The convicted (1) (2) defraud; a an able scheme to doubt counts, the six fraud but court the wire (3) communication, a wire and interstate acquitted Boyd and Grace of those later to use the communication to purpose wire 23(c) findings. Rule The counts in its the United execute scheme. States order Baetz and Gallant court refused to (10th Cir.2007). Lake, to based on the pay Taffet restitution fraud, therefore, A guilty verdict for wire outcomes, saying contrasting necessarily of a establishes existence jury persuaded that [although defraud, and there can be no scheme sufficiently developed and there awas “uncertainty” regarding whether Baetz [Taffet] scheme to defraud identified engaged sufficiently in “a de- Gallant through misrepresentations omis- veloped and defraud identified scheme to concerning the value of sions IV, Grace Doc. 1153 App’x Vol. [Taffet].” amounts, disagreed this Court in its jury’s guilty at 10. The verdict estab- findings in the trial of the bank officer beyond a lished the existence of a scheme uncertainty That is the ba- defendants. doubt, by prepon- reasonable let alone a to him in denying compensation sis for evidence, derance of the district component a the form restitution as court denying erred restitution based a criminal sentence. government’s prove exis- failure IV, 1153 at 10. Vol. Doc. App’x Grace tence a the extent the dis- scheme. To deny- for explanation The court’s district opinion implies trict a court’s cryptic. It is ing restitution to Taffet “scheme” under fraud statute dif- the wire “uncertainty” the specific unclear what MVRA, fers from a “scheme” under denying as “the basis references authority view, cites no for such which Id. most compensation.” natural any contrary event would seem to the reading suggests of the court’s decision usage identical the word in the two inconsistency the verdicts in between provisions. two on the wire fraud counts trials noted, As we read could also the district Taffet outside the MVRA’s defini- places opinion providing court’s alternative tion of “victim” because denying basis for restitution Taffet. sufficiently failed establish existence following sentence its discussion of scheme to “developed identified verdicts, the court that the conflicting said Id. “uncertainty” defraud Taffet.” person MVRA “defines ‘victim’as a direct- court, however, the district by identified ly harmed the offense proximately may also to whether the acts of refer wire ‘directly and limits restitution to those directly caused Taffet’s damages. fraud interpretation, we re- harmed’ the defendant’s criminal con- Under either must *44 duct in the of a conspira- course scheme or Bank stock to Cerberus. See Grace App’x cy.... Taffet within that [is not] defini- I, Vol. 124 Doc. at 42 (describing counts possible tion.” Id. It is to construe this 58-60, 62-64).33 and government language as indicative of the court’s belief made argument this response its to the directly that Taffet was not by the harmed district court’s calculation the advisory of acts of wire fraud.31 Even interpreting the guidelines range, but the court never di- district court’s statement such a man- rectly addressed it during sentencing. ner, we that finding clearly conclude this is Before we erroneous. consider When Baetz and whether Gallant hired Cerberus Taffet to market and was a sell the BestBank of victim the wire fraud counts portfolio credit card per for two of cent under MVRA, we must Boyd’s address sale price, their acts of directly wire fraud argument that a settlement agreement be- led him to conclude that the credit card tween of all the defendants and Cerberus portfolio had delinquency no risk. The bars a restitution award to Cerberus. expenses he incurred in drafting the Boyd notes that the bankers settled with describing “book” the details of portfo- $60,000 for Cerberus and in exchange lio for potential buyers marketing and “Cerberus released [the BestBank defen- portfolio were incurred because these from further liability.” dants] Boyd Br. at misrepresentations. Had Taffet known 79. Relying Coleman, United States v. that the portfolio only was worth about Cir.1993), where the thirty per cent its million face $200 Fifth Circuit held that a settlement be- value, he would have known that it was tween a criminal defendant and the FDIC unlikely he would be able to buyer, find a in a civil proceeding foreclosed gov- and likely would have incurred the ernment from obtaining restitution in a expenses to market the account. criminal prosecution, Boyd argues that the settlement with Cerberus precludes resti-
Cerberus Partners tution in favor of govern- Cerberus. The The district court also did not contends, however, ment that the manda- award restitution to Cerberus because tory language of the requires MVRA Cerberus only be “could considered a vic restitution, to order regardless of tim of the offense of fraud securities private settlement between the Best- charged in Count 90” and “[n]one of the Bank defendants and Cerberus. *45 First, may suggest which is erroneous. requires sentencing the tion. MVRA that the district court believed that Cerbe to victims. See provide court to restitution rus not be a victim of fraud could wire 3668A(a)(l) § (noting for crimes U.S.C. 18 dis under the MVRA. To the extent the deceit, court involving fraud or “the shall case, trict this to be we court believed ... to restitution the victim of order may as a disagree. qualify An individual ”). private ... A cannot offense settlement underlying if victim under MVRA the See language. S.Rep. No. abrogate that wire fraud. United v. States offense is 104-179, (1995), in 1996 reprinted at 18 (11th (“It 627, Foley, 924, F.3d 635-36 Cir. that 508 930 is essential U.S.C.C.A.N. Matsumaru, States v. system recognize 2007); 244 United justice criminal victim, and, Cir.2001). (9th that crime has on the impact 1092, 1109 F.3d that possible, the extent ensure [the] to in interpret language can also We to repay be held accountable offender way: court have another the district costs.”). However, determin these when recognized that could be a victim Cerberus the amount of a restitution award un ing counts, of the wire fraud but concluded MVRA, the must court “reduce der of fraud cause the acts wire did not by any amount the victim re restitution direct harm to Cerberus. This conclusion settlement.” Unit part of a civil ceived Baetz, Gallant, Boyd clearly is erroneous. Harmon, 674, v. Fed.Appx. ed States 156 and of fraud for were convicted wire Grace (5th Cir.2005). This principle 676 achieves (1) the faxing operating agreement of apparent congressional purpose of Century and Financial between BestBank maximizing a against the award criminal (Count 58); 27, to on 1998 April Cerberus fraud, guilty avoiding while defendant (2) in New Loper a memo from Robert the undesirable result of restitution effec 28, Keys May York Mike on Colorado United tuating recovery. double Cf. (Count 59); (3) 1998 a memorandum Dawson, (7th 1048, v. States 1050 Ron data from Jack Grace to summaries Cir.2001) 3664(f)(1)(A) 18 (citing U.S.C. May at Cerberus on 28 and Goldstein of a proposition a victim crimi for (Count (4) 60); 1998 finan- BestBank’s nal act not more restitu should receive Kha- cial Colorado to statements from Joe whole); than make it required tion also na in New York. The district court Stanley, United States Boyd for convicted and Grace wire fraud Cir.2002) (“The purpose (1) faxing Grace’s memorandum 3664(j)(2) recovery prevent is to double pro with a BestBank forma schedule by prevent a victim ... To double recov July Ron Goldstein at Cerberus on ery, payments such as those made [the] (Count (2) 62); Capi- Columbia from the co-defendants are subtracted loss.”). tal state- Corp. balance sheet income amount the victim’s Boyd Ron at Cer- ment from Goldstein Because the settlement does not 22,1998. July berus on case, in this we bar award of restitution some, was harmed at least Cerberus whether the district court must consider not all of these acts. It would perhaps finding was not a erred Cerberus have with expenses incurred associated The district court under the MVRA. victim if only be its of BestBank’s finances held that Cerberus “could consid review the acts of wire fraud. The not to decision those hearings would conflict with Federal sixty purchase per controlling cent inter- Rule of 32(b)(l)’s Criminal Procedure re- only est BestBank came after Cerberus quirement that “[t]he court must impose that the investigating learned FDIC was sentence without unnecessary delay.” The BestBank. Had provided BestBank Cer- court also noted that the FDIC re- could information, berus accurate financial damages cover through a pending civil ac- expense of performing Cerberus’s due dili- tion. considerations, Based these gence could have been avoided. elected invoke the com- MVRA’s plexity provision and deny restitution to 2. Complexity Provision in the MVRA the FDIC. district court also refused to order *46 The government objected to the district restitution to the pro- FDIC. The MVRA court’s restitution, refusal to award argu- sentencing vides that a court need not ing that existing evidence on the record provide a restitution award to a victim if provided a sufficiently precise estimate of calculating the size of requires that award BestBank’s loss for the court to fashion a complex “determin[ation] of fact [of] issues restitution award. It also contended that related to the cause or amount of the the existence of litigation alternative does victim’s losses” and would therefore “com- impact not a district duty court’s to award plicate prolong the sentencing process restitution under the MVRA. At Baetz and degree to a that the provide need to resti- Gallant’s sentencing hearing, the court re- any tution to victim is the outweighed jected arguments, saying these on the sentencing process.” burden 18 the complexity in attempting to arrive at 3663A(c)(3)(B). U.S.C. The district a true measure of loss in this case is court concluded that while BestBank awas such ... that this case has been for here MVRA, under the victim and the FDIC as a long ... process [and] time the receiver assumed right BestBank’s to res- adjudication has taken a long time —I’m titution, difficulty the calculating Best- not going go beyond that beyond triggered losses Bank’s the “com- MVRA’s today. put It’s time to final to in this exception. plexity” this court and as to these defendants. explaining its rationale for invoking So, I’m adhering to the view that I took the complexity MVRA’s exception, the dis- in July order, the 5th respect both with trict began by noting court that gov- the to the calculation the amount of loss ernment that the “concede[s] FDIC claim gain, and also the determination that suggested is excessive” and the court cal- there should be no order of restitution culate BestBank’s by “estimatfing] losses to the FDIC because it com- would—the the true value of the portfolio.” AATC loan plexity of the factual issues is such that IV, Grace App’x Vol. Doc. at 11. It 1153 it would prolong And, the proceedings. that concluded restitution “must be awards also, the says what statute is that the based on ... actual loss” that “[t]he delay in the criminal proceeding such approximations may which the cal- support for, that it would offset the reason or the of the amount culation for deter- loss And, need for making the victim whole. specific the mining offense characteristic case, already out, as I’ve pointed Sentencing the may Guidelines not be the FDIC has civil action pending. used support restitution Id. order.” App’x at 11-12. The Vol. at court then IV 1102-03. The did determined that court hearings provide any additional necessary would be further elaboration re- losses, calculate BestBank’s actual garding sentencing restitution found that required the time Boyd to conduct and Grace. Vaknin, v. 112 F.3d that al loss. United States government argues omitted). (1st Cir.1997) (quotation its discretion con abused
district court
theft,
Accordingly, “in the case of fraud or
BestBank’s actual
cluding
calculating
that
pre
with
loss need not be determined
on the
prove too burdensome
loss would
only
need
make a rea
cision.
court
two ratio
It offers
sentencing process.34
loss, given
sonable estimate
First,
gov
argument.
nales for this
information available.” United States
argues that
district
ernment
Jackson,
n.
Cir.
re
burden on
imposed an excessive
omitted).
1998) (quotation
of Best-
quiring
prove
it to
the amount
Second,
court,
it ar
are
precision.
Bank’s
On the record before this
we
loss
say
ap-
unable to
district court
application
district court’s
gues that
plied
precision”
an erroneous “absolute
complexity exception
con
of MVRA’s
proof
of loss.
government’s
standard
judgment
clear error
be
stitutes a
The court did note that a restitution order
availability
cause
court considered the
loss,
must be based on actual
damages remedy
determining
of a civil
approximations
which
support
“[t]he
to this case.
provision applies
*47
the
the
of
for
calculation of
amount
loss
Inc.,
Sybase,
F.3d
See Allen v.
468
determining
specific
the
offense character-
(10th Cir.2006).
659
Sentencing
may
istic
the
not
for
Guidelines
be
to
a
support
used
restitution order.”
calculating loss under
When
required.
IV,
But
App’x
Grace
Vol.
Doc. 1153
MVRA,
not
precision is
the
absolute
evidence, beyond
in-
there is no clear
the
Ahidley,
486
ted
States
Uni
may
that
ference
be drawn from the
(10th Cir.2007);
1184, 1189
United
F.3d
in
“approximations”
court’s refusal to use
Teehee,
States v.
MVRA,
calculating
under
the
loss
the
that
Cir.1990) (noting that
determination
“[t]he
recognize
court failed to
it could fashion an
by
is
of an
restitution amount
appropriate
a
award based on
reasonable estimate of
science.”).
sentencing
nature
inexact
A
loss.
are
BestBank’s actual
We
therefore
may resolve restitution uncertainties
court
not
that this
persuaded
is a sufficient basis
achieving
a
“with view towards
fairness
assigning
for
error
the district court.
it
victim,”
as
a
long
the
so
still makes
appropriate
in
government,
argu-
determination of
its
“reasonable
second
ment,
explaining
of
out that
ra-
points
restitution” rooted in calculation
actu
its
agree
government
the
of
34. We
with
that
estimate
the amount of actual loss. Gallo
do
used,
way,
("[A]lthough gain may
the
have
We it erroneously applies prohibi- because In this respect, we also note the contrast 3664(f)(1)(B) tion in 3664(f)(1)(B) determinations between the language §of regarding complexity exception. and the language of the preceding subsec- 3663A(c)(3)(B)’s full, § tion, complexity provi- which provides that “the court shall provides finds, sion that “if the court from order restitution to each victim in the full *48 facts on the determining record that com- amount of each victim’s losses as deter- plex issues of fact related to the by cause or mined the court and without consider- of amount the victim’s losses would compli- ation of the economic circumstances of the cate or prolong sentencing 3664(f)(1)(A). the process § to a defendant.” Id. Section degree 3664(f)(l)(A)’s that provide the need to restitution language unambiguously any to victim is outweighed by the burden bars a sentencing court from considering a sentencing on the process,” then the court certain factor in determining whether to obliged is not provide to restitution under award restitution in place. the first See 3663A(c)(3)(B). § the MVRA. Barton, 18 U.S.C. United States v. 366 F.3d 3664(f)(1)(B), however, Section Cir.2004). declares 1166-67 Congress Had that “[i]n no case shall the fact that a also intended to bar courts from consider- victim has received or is entitled to ing availability receive the of alternative relief compensation respect to a loss from when making determination, this threshold any insurance or other likely source be consid- it would have language. used similar in determining ered the amount of contrasting restitu- This language our affirms con- tion.” together 3664(f)(1)(B) When viewed § becomes clusion that does not limit clear that while the complexity exception the may factors that courts consider under § in 3663A addresses whether a complexity court the exception.36 35. Grace was not named as a defendant acknowledge in 36. We may that our conclusion Boyd the lawsuit. reached a settlement conflict with the that of Ninth Circuit in Unit agreement requiring pay him to the Cienfuegos, FDIC ed States $1,000,000 days, (9th Cir.2006), within 30 but he failed to which found that “the district comply initially subsequently paid only by relying court abused its discretion on the $457,000. IV, App’x perceived Grace Vol. complexity Doc. 1153 at of the restitution deter availability mination and the of a more suit 32(b)(1), other without un- availability “impose of re sentence the
While TV, process necessary delay.” App’x to the of Grace Vol. irrelevant lief deemed Against a restitution 1153 at 12-13. this burden the amount Doc. calculating necessarily award, irrelevant sentencing process, not on the the district it is an availability weighed necessity such award under of providing the the of pending civil particular § The existence restitution to the victim in this 3663A. cases be relevant to may ongo- some FDIC’s litigation proceeding, noting that the suit, test established balancing ing pending the since October civil 3663A(c)(3)(B)’s exception. complexity legal this need. We find no error lessened 3663A(c)(3)(B) sentencing directs factor, Section in the inherent consideration of for the victim’s need resti weigh courts to reject argument that government’s on burden the sentenc tution against the district court abused its discretion Where, here, a civil suit ing process. noting availability of an alternative commenced but has only been 3663A(c)(3)(B)’s has not applying forum in bal- parties point to the where proceeded ancing test. pretrial extensive motions
have conducted not Although has identi- negotiations, dis settlement practice, legal fied any error the district court’s rely upon need to covery, victim’s FDIC, regarding restitution to the rulings compensation may sentencing process we further consid- nonetheless remand for degree. to some be lessened provide question eration whether place light not to the FDIC court should restitution award A district mere resentencing ques- this factor. The fact our remand for on great weight on suit, above, filed civil tion of loss. discussed the dis- victim has As the victim could possibility trict court wish reconsider its deci- suit, little—and, is of evidentiary hearing future file such a sion conduct loss, no—relevance. section typically, question on the and to instead primary that the consideration Sentencing makes clear calculate loss under the Guide- calculating restitution is the burden trial lines based record. Should the *49 sentencing process. would on the place district court that an determine evidentia- however, that unpersuaded, dis We are ry necessary hearing is to determine loss categorically prohibited are trict Guidelines, courts difficulty the the added under pending civil into account suits taking from calculating in a award to the restitution (and such suits extent to which have the reduced, likely will be and the FDIC determining the to progressed) when need application balancing court’s test to a victim. provide restitution “complexity” provision under the would change. Accordingly, therefore on remand Here, district court noted the com- the the district court should consider anew a plexity calculating restitution award complexity exception whether the should court, the before the based on evidence apply. just fair noting “a order providing be “difficult time restitution” would y. CONCLUSION consuming” expressed concern that its We AFFIRM Baetz and Gallant’s con- responsibility, conflict with would victions, except regard to Counts 55
under Federal Rule of Procedure Criminal ability longer be able to order restitu of civil suit can no consid forum decline Cienfuegos tion. in deciding ...” The decision court's ered district court in however, specifi ambiguous, added). somewhat (emphasis restitution." Id. amount of cally the avail notes that "under MVRA and 56. We REVERSE all four defen- subsection, economic-circumstances dants’ sentences and REMAND to the dis- 3664(f)(1)(A), § at issue in Barton immedi- trict court with direction vacate their ately precedes the subsection prohibiting sentences and resentence. consideration compensation, 3664(f)(1)(B). § Barton, Citing major-
TACHA, J., concurring. ity notes that the economic-circumstances I fully concur judgment. I write subsection applies when a court invokes separately I respectfully disagree because the complexity exception, but limits the majority’s with the conclusion that a dis- application of the compensation subsection trict may consider a civil pending to a court’s calculation of the “amount” of in determining suit whether the MVRA’s an actual subsections, award. Both how- complexity exception applies. ever, language contain concerning the concludes majority that the subsec- “amount” of a Thus, restitution award. I tion prohibiting “compen- consideration of do not think plain language of the ... sation from insurance any other statute supports the distinction that one source,” § 3664(f)(1)(B), 18 U.S.C. does not subsection only to applies the calculation of apply to the court’s determination of an award, actual while the other applies whether deny restitution based both to the calculation of an award and to complexity id. exception, the availability of an short, award. In (cid:127) 3663A(c)(3)(B). To reach this conclu- because Barton that a court we held sion, majority emphasizes that the'sub- may not consider defendant’s economic prohibits section the consideration of com- circumstances invoking the complexity pensation “in determining the amount exception, I would hold similarly that a restitution,” 3664(f)(1)(B) (emphasis add- court may consider other sources of ed), but prohibit does not consideration of compensation in invoking exception. compensation in whether to determining I would therefore hold deny court may restitution under complexity ex- not consider ception. words, compensation In from a majority other in- civil suit terprets this whether apply only determining deny subsection to restitution the court’s under calculation of the MVRA’s complexity actual award. exception. addition, because the district court in
I disagree with this interpretation be- the present clearly case considered the cause I think it is inconsistent with our FDIC’s pending civil in deciding suit Barton, In United States v. precedent. we whether to apply I exception, would held that a district court not consider *50 hold that the court legal committed a er- a defendant’s economic circumstances ror. determining whether to apply complex-
ity exception.
Cir.2004). We reached conclusion statutory
based language prohibit-
ing consideration of defendant’s econom-
ic “In each circumstances: order of resti-
tution, the shall order restitution to
each victim in the amount of each full
victim’s losses as determined the court
and without consideration of the economic
circumstances defendant.” 3664(f)(1)(A) added). (emphasis It notes defendants convicted [were] on that that' was not charge.” Coleman decided under the IV, App’x Grace Vol. Doc. 1153 MVRA, at government 10.32 under argues but the Victim Witness Pro- that Cer Act, berus was also a victim of six tection wire fraud reached that conclusion relating counts to the scheme to sell Best- based primarily on the parsing of statuto- 31. reading admittedly This Given managed strained. credil card accounts were in a the lack analysis question manner, on the prudent causation sound delinquency preceding and the regarding discussion subprime rate for account was less than "scheme,” existence of a unlikely percent, it seems five profitable, that BestBank was served as the Century rationale the court’s refusal Group per- Financial to award I, restitution. forming required[.]” App'x Grace Vol. Doc. 124 47-48. 32. Count 90 was a securities count fraud brought pursuant 33.Baetz, Gallant, § 77q(a) to 15 U.S.C. Boyd, & 77x and Grace were all Mattar, Grace, Baetz, alleging Boyd, convicted of counts 58-60 and count 62. "fraudulently represented Gallant Only Boyd ... to Cer- guilty and Grace were found berus subprime Partners that BestBank’s counts offense in the ered a victim the of securities appear does not ry language that App’x 90.” charged Grace MVRA. fraud Count IV, Again, at 10. this lan Vol. Doc. 1153 agree We ways, in two either of guage be read not bar restitu that the settlement does