Case Information
*1 Before P OSNER , F LAUM , and M ANION , Circuit Judges. M ANION , Circuit Judge
. Guy Stein pleaded guilty to one count of wire fraud stemming from a check-kiting scheme that, along with related conduct, caused a total loss of approxi- mately $1 million to multiple financial institutions. In this appeal, Stein argues that approximately $440,000 of that loss should not have been counted against him because one of the principals of two of the financial institutions was complicit in his scheme. Finding no error with the district court’s resolution of this issue, we affirm.
I. Background Guy Stein ran legitimate companies—Big City Tickets and Advanced Design Consulting—for which he maintained bank accounts at three different banks. In need of “working capital financing assistance for [his] construction projects,” he approached his friend Kevin Wiley. Wiley was a one-third owner of two currency exchanges, and he proposed that Stein write checks from his (underfunded) bank accounts to cash at the exchanges. That way, Stein would have use of the money to run his business for anywhere between a few to several days. At the end of that period, if his business had turned the profit he needed, the checks would clear without any problem. If not, he could write more checks, cash them, deposit enough proceeds to ensure the earlier checks cleared, and have more money to keep running his businesses in the hope of eventu- ally turning a profit. Stein did the latter for about five months, beginning in May 2010. Stein also used a third exchange, not related to Wiley, for this purpose. There was, however, a hitch in this plan. To clear previous checks and obtain the working capital needed for the next period, he would have to write larger (or more) checks each cycle. Further, each time a check was cashed, the exchange charged a fee of approximately 2%. Accordingly, the balance was spiraling upward while the annualized percentage rate for “borrowing” this working capital was anywhere from 100% to over 200% “interest” (depending on whether the period between cashing and clearing checks, over which the roughly 2% fee was spread, was several days or only a few days). All the time, this juggling act (a check-kiting scheme) provided only a small amount of working capital. Needless to say, this was a totally irrational method of financing his construction projects. We do not need to know why Stein did not get a traditional loan or even look ahead to where this scheme would lead. Regardless, things came to a head when Stein was injured in a car accident and was not physically able to orchestrate the next round of checks. At that juncture, the Wiley exchanges suffered a loss of about $440,000 from checks that the banks did not clear because Stein’s bank accounts had insufficient funds. The third exchange, Grand Avenue Currency Exchange, likewise lost about $250,000. Together with some related conduct not at issue in this appeal, the total loss to financial institutions as a result of Stein’s conduct was over a million dollars.
When his fraud came to light, Stein pleaded guilty to one count of wire fraud, in violation of 18 U.S.C. § 1343. At his initial sentencing, the district court calculated his guideline range as 33–41 months based on his crime of conviction and a loss amount of about $1,170,000 (which took into account some money he had paid back). However, the district court noted that Stein’s scheme was not designed to enrich himself. Rather, his fraud was orchestrated to keep his businesses afloat and pay his employees. For these and other relatively sympathetic factors, the district court sentenced him below the guidelines to 24 months’ imprisonment. Stein appealed, arguing that the district court erred in its loss calculation. While on appeal, we granted a limited remand so the district court could consider Stein’s motion for reconsideration of sentence. The district court granted that motion and revised the loss amount, for purposes of calculating the guidelines, down to about $960,000. This resulted in a guideline range of 27–31 months. See U.S.S.G. § 2B1.1(b)(1)(H), (b)(1)(I) (offense level increases by two above a one million dollar threshold). Sticking with its earlier reasoning, the district court again gave a below-guidelines sentence of 21 months’ imprisonment. However, the court still entered a restitution amount of slightly over one million dollars in the amended judgment.
In this appeal, Stein argues that the roughly $440,000 loss he caused to Wiley’s exchanges should not be incorporated into the restitution judgment because of Wiley’s complicity in his scheme. The government disagrees, but adds that the amended judgment should be revised because the approxi- mately one million dollar figure for restitution is a scrivener’s error and the correct figure is about $960,000.
II. Discussion
“We review the district court’s factual findings for clear
error, reversing only when we are ‘left with the definite and
firm conviction that a mistake has been made.’”
United States
5
v. White
, 737 F.3d 1121, 1142 (7th Cir. 2013) (quoting
United
States v. Cruz–Rea
,
Stein does not dispute that approximately $440,000 worth of checks he cashed at Wiley’s exchanges were not honored because of insufficient funds, and this was the evidence the government offered for the district court to calculate the loss. Rather, Stein argues that ordering restitution for this amount was unreasonable because Wiley was complicit in the fraud, and in fact, “earn[ed] significant profits” from the transaction fees. Appellant’s Reply Br. at 1. The record strongly indicates [4]
that Wiley’s exchanges did not profit in the end. But even if the exchanges had profited from the transactions, that alone does not require reducing the restitution due them. The exchanges received the fees for services that they rendered, and so were entitled to those fees in addition to the money from the checks which they had cashed for Stein. Accordingly, if there is any merit to Stein’s argument, it must rest in his assertion that Wiley was complicit in the fraud, such that the exchanges he part-owned are not really victims. This, however, was reasonably dealt with by the district court:
My conclusion with respect to Wiley is this: The victims are the currency exchanges. Wiley himself may have played an improper role. And to the extent that he was recovering, he or the currency exchanges hoped to recover some fee or percentage. He hasn’t been victimized to that extent.
But the victim, that is, the currency exchange, a business that has a separate existence from Mr. Wiley, was victimized by the amount of the dishon- ored checks. So that calculation I am satisfied with. I don’t think I need to make any adjustments to that. (...continued)
Report (“PSR”) at 5, ¶ 14. Not all of these checks were cashed at Wiley’s exchanges and the parties disagree about the transaction fee. But even assuming all $13,000,000 of checks were cashed at Wiley’s exchanges and the fee was the 2.25% Stein asserts, that is only an income of about $300,000 for Wiley’s exchanges—still not a “profit” set against the $440,000 loss. The loss amount is less than the total value of kited checks because earlier- cashed checks cleared from the proceeds of later-cashed checks; only the last cycle failed and exposed the accumulated loss.
October 31, 2013, Sentencing Tr. (“Sent. Tr.”) at 6–7. The
currency exchanges had their own separate existences. It is
irrelevant that Wiley was a contributing cause. He is not the
victim, the exchanges are. Stein was clearly a but-for and
proximate cause of the losses which the exchanges suffered.
See, e.g.
,
United States v. Robertson
,
Further, Wiley’s misconduct while a partial owner does not
change the exchange’s victim status or the propriety of the
calculation. Wiley’s encouraging Stein to undertake the risky
check-kiting scheme may have created multiple transactions
which initially benefitted the exchanges (the victims), and
himself by virtue of his relation to the exchanges. But, again,
the exchanges provided services to Stein to earn their fees and
the exchanges suffered $440,000 in losses when Stein’s checks
were not honored by his banks. Stein may have a civil claim
against Wiley for contribution arising from Wiley’s facilitating
conduct, but that does not relieve Stein of his obligation to
compensate his victims. 18 U.S.C. §§ 3663A (making full
restitution mandatory), 3664(h) (allowing the district court to
apportion liability only among defendants). The district court’s
decision to treat the exchanges as the victims and calculate the
losses based on the dishonored checks was within “the realm
of permissible computations.”
White
,
Finally, the government suggests that we order a limited
remand so the district court can correct what it deems a
“scrivener’s error.” At Stein’s re-sentencing on our earlier
limited remand, the court calculated the loss amount at
approximately $960,000 for the purposes of the guidelines, but
ordered restitution for just over $1,000,000. Normally the loss
amount and restitution award should be the same. However,
after our review of the record, it is clear that this was not a
scrivener’s error, but was rather the result of conflicting factual
findings. At the re-sentencing hearing, the district court agreed
to reduce the loss amount by $209,000 because Stein had repaid
that much to Jay Feldman, the owner of the Grand Avenue
Currency exchange. Subtracting that amount from the previous
total amount of the loss gave the $960,000 figure, which the
district court used to calculate Stein’s guideline range. Sent. Tr.
at 22, 34. However, the district court had previously found that
Feldman was only owed $166,812 in restitution, so the reduc-
tion in the loss amount for money paid to Feldman was more
than what was owed to Feldman. Judgment at 5–6. The
problem is that the total was not arbitrary—it was the sum of
all restitution which the court had found was owed to various
other financial institutions.
Id.
Accordingly, to reduce the total
by more than Feldman was owed would result in reducing
some victims’ restitution below what the court had determined
to be their loss. This would be an abuse of discretion. 18 U.S.C.
§ 3663A (“the court
shall
order … that the defendant make
restitution to the victim of the offense” and “[t]he order of
restitution
shall
require that such defendant … pay an amount
equal to …
the value of the property on the date of the … loss
(emphases added)); 18 U.S.C. § 3664(f)(1)(A) (“In each order of
restitution, the court
shall
order restitution to each victim in the
full amount of each victim's losses as determined by the court
and
without consideration of the economic circumstances of the
defendant” (emphasis added));
see, e.g.
,
United States v. Guy
,
$300,000 in value given to Feldman for a loss of only about $255,000.
the district court to calculate the guidelines based on the
incorrect loss amount derived from crediting Stein’s overpay-
ment of Feldman against other victims. But this worked to
Stein’s advantage and the government has not made this
argument, so we leave things where they lie.
See, e.g.
,
Long-Gang Lin v. Holder
,
III. Conclusion The district court permissibly calculated the loss to the currency exchanges and ordered the appropriate amount of restitution. It was within the district court’s discretion to decide that Wiley’s misconduct did not relieve Stein of his responsibil- ity to make the exchanges whole. Accordingly, we AFFIRM the judgment of the district court.
Notes
[1] We use the term “cash” loosely to include both actually cashing the checks and purchasing money orders with the checks.
[2] The shorter the period, the higher the effective annual “interest.”
[3] Stein does not argue that his guideline range was erroneously calculated because, even if $440,000 was subtracted from the loss amount, he would remain in the same loss range under the guidelines. See U.S.S.G. § 2B1.1(b)(1)(H), (b)(1)(I) (offense level is constant when the loss is above $400,000 and below $1,000,000).
[4] Initially, Stein argued that Wiley’s testimony was not reliable enough to be used to establish the loss amount, but after the government responded that Wiley’s testimony was not needed to arrive at the loss amount, Stein narrowed his argument to Wiley’s complicity in his reply.
[5] During the course of Stein’s check-kiting scheme, he cashed about 1,500 checks for a total value of about $13,000,000. Pre-sentence Investigation (continued...)
[6] To the extent there is an equitable concern that one-third of the restitution order would end up in Wiley’s hands, the district court was informed that he “no longer has an ownership interest.” Sent. Tr. at 6. No contrary evidence was presented.
[7] The value of all checks cashed at the Grand Avenue exchange that were dishonored was about $255,000. Before Stein was indicted, he agreed to repay that exchange. The district court determined that $90,000 in value had been given, resulting in the $166,812 figure in the first Judgment. At re- sentencing, the district court recognized about $209,000 more which had been given to Feldman. In total, the district court recognized almost (continued...)