UNITED STATES OF AMERICA, Plaintiff-Appellee, v. SHOU Z. MEI, Defendant-Appellant.
No. 01-2559
United States Court of Appeals For the Seventh Circuit
ARGUED SEPTEMBER 18, 2002—DECIDED JANUARY 9, 2003
Before BAUER, MANION, and ROVNER, Circuit Judges.
Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 00 CR 128-1—Ronald A. Guzman, Judge.
The story begins in early 1999, just after Mei was released from federal custody in Ohio after serving time for attempted credit card fraud (his second credit card fraud-related federal conviction, it turns out). Under pressure to make good on his gambling debts, Mei returned to Chicago to raise cash. His fund-raising scheme involved having accomplices place “skimmers,” portable data storage devices that capture information from the magnetic strip on the back of a credit card, in Chinese restaurants, where corrupt cashiers and servers would swipe the cards of unsuspecting diners. Mei downloaded the information from the skimmers onto a computer that he used to produce counterfeit credit cards and matching identification. On May 17, 1999, Mei gave four cards bearing the name “Xin Chan” to an accomplice, Lau Ming, who tried to use the cards at a Marshall Field’s department store in Calumet City, Illinois. The cards did not work and were confiscated. Mei gave four more “Xin Chan” cards to another accomplice (and a future government informant) known only as “Person A,” who attempted the same fraud at the same store. Again the cards did not work and were confiscated. Mei continued to produce cards, however. Ming, along with another future government informant known as “Person D,” successfully purchased $231 in cigarettes from a Wal-Mart in Bloomingdale, Illinois. Ming and Person D then attempted to buy a $400 camera at a nearby K-Mart, but the cards were rejected and confiscated. Later, Ming and Person D obtained over $800 in cigarettes from a Highland, Indiana, Cigarette Discount Outlet using cards bearing the name “Jin Lang.” Between April and June 1999, Ming eventually charged over $50,000 with cards supplied by Mei.
At the same time, Mei was trafficking counterfeit cards to persons operating in Ohio. One of his Ohio contacts, a government informant known as “Person C,” bought 30 cards and matching identification from Mei in Chicago, returned to Ohio, and made approximately $12,000 in bogus purchases. Mei then delivered 30 more cards to Person C in Ohio, who charged another $12,000. On another occasion, Person C and another informant known as “Person B” met Mei outside of a McDonald’s restaurant in Highland, Indiana, where they gave Mei $16,300 for 20 cards and matching identification. Through the end of 1999, Mei sold Persons B and C approximately 130 cards along with several matching driver’s licenses and at least two skimmers for about $40,000. And by November 1999, Person B had obtained over $33,000 with the cards, in part by taking out cash advances at Indiana riverboat casinos.
The scheme continued into the following year. In early February, Mei arranged to deliver 20 cards and matching identification to Person A. Then, on February 19, 2000, Mei and Chris Huang ordered $30,000 in computer equipment from Urban Computer in Chicago, telling the salesperson that they were starting an internet business. They arranged to pay for and pick up the equipment the next day. Mei, Ming, Huang, Zhou Li, Nom Tin Chan, and Person A met at Mei’s home the next morning. Mei distributed 20 cards
Mei eventually pleaded guilty to the indictment without a plea agreement with the government. Sentences for fraud crimes are based in part on the amount of financial loss, and at Mei’s sentencing the government urged the district court to set the loss at $1,918,172.27, which it argued was a reasonable estimate of the sum of the maximum credit limits of all of the counterfeit credit cards used during the conspiracy. The government had to estimate the total amount of credit placed at risk in this case because most of the cards involved in the conspiracy were never recovered, and also because some of the issuing financial institutions did not cooperate with investigators. To determine the average maximum credit limits of all of the cards, the government first separated the cards with known credit limits into three categories based on when or where the cards were used or seized. The first category
Pointing out that the estimate was based on a sampling of just 16 percent of the cards employed during the conspiracy, Mei argued that the government’s loss estimate was too speculative. Instead, he urged the court to adopt one of what he asserted were two more reasonable methods of calculating his loss. First, Mei suggested multiplying the average actual loss to each victim ($2,722.61) by the number of cards placed at risk (219). This calculation resulted in an estimated loss of $596,251.59. Alternatively, he suggested multiplying the average loss for the cards in each category by the number of cards seized or used in each category, which resulted in a slightly lower loss estimate of $555,191.79. Both alternatives would have increased Mei’s base offense level by ten under
On appeal, Mei argues that the district court’s loss calculation was unreasonable, and that either of his two suggested alternative methodologies provide a more accurate and reasonable estimate of the loss. He contends that neither the sentencing guidelines nor the cases interpreting them sanction the averaging methodology applied by the district court; that even if it were proper to employ an averaging methodology in this case, the methodology was too imprecise to render a reasonable estimate of the loss; and that even if the methodology employed by the district court rendered a reasonable estimate of the loss, the factual underpinning of its application—the court’s finding that Mei intended to use the cards right up to their credit limits—was clearly erroneous. Mei’s contentions, if correct, would limit his time in prison to 57 months. The district court’s determination of the amount of loss is a question of fact we review for clear error, although the application of the sentencing guidelines is a legal question we review de novo. United States v. Higgins, 270 F.3d 1070, 1074 (7th Cir. 2002).
The base offense level for fraud and deceit crimes is subject to graduated increases based on the amount of financial loss attributable to the defendant, if the loss exceeds $2,000.
Intended loss, if it can be determined, is applied in fraud cases because the actual amount of money or property obtained generally understates the true financial loss. See id.; United States v. Snyder, 291 F.3d 1291, 1295 (11th Cir. 2002). This is so because the purpose of fraud statutes such as the statute Mei violated,
Both of Mei’s suggested methodologies estimate the actual losses he inflicted, so either might stand in as an acceptable alternative if his intended loss could not be reasonably estimated. We believe, however, that there was sufficient information for the district court to determine the intended loss, and that the methodology it employed to do so was appropriate. Despite Mei’s contention otherwise, we, as well as other courts and the Sentencing Commission, have approved averaging as a reasonable method of calculating intended loss in fraud cases. See Scott, 250 F.3d at 552; United States v. Egemonye, 62 F.3d 425, 428-29 (1st Cir. 1995); United States v. Wai-Keung, 115 F.3d 874, 877 (11th Cir. 1997); United States v. Koenig, 952 F.2d 267, 271 (9th Cir. 1991);
Mei contends, however, that the representative sampling of cards with known credit limits was far too small to render a reliable estimate of the average maximum credit limits in each category, so that the district court lacked sufficient information to determine an intended loss. The respective averages of the three groups of cards were extrapolated using roughly 12, 8.75, and 82 percent of the cards. Although we have sustained a loss determination based on a much smaller sampling, see Scott, 250 F.3d at 552 (2 of 200 cards), what matters is that the representative sample yield a reasonably reliable figure under the circumstances, and that is the case here. The average for the cards used or seized on February 20, 2000, was $12,864.64, a figure extrapolated from 82% of the cards. Yet the average determined for the cards used or seized in May and June 1999 was just slightly under this number, $12,066.67, despite being based on a sample of only 12% of the cards. And the average extrapolated from the cards seized in Ohio, which was based on only 14 of 160 or 8.75% of the cards, was significantly lower, $6,942.86. Thus, the categories containing the least amount of information rendered averages more favorable to Mei than the category with the best information. Considering also that two cards with unusually
Of course, these numbers hold water only if, as the district court found, Mei “intended to gouge his victims for every penny he could with every card that he had in every way that he knew.” Mei argues that this finding is contrary to the evidence before the court at sentencing. He points out that only one card was used up to its maximum credit limit, and that only two other cards were used close to their maximum credit limits. He further argues that he could not have intended to use each card up to its limit because it was not possible for him to do so. But Mei’s failure to exploit the cards to their fullest potential is not dispositive—it is irrelevant that the full extent of the risk did not materialize. Higgins, 270 F.3d at 1075; Bonanno, 146 F.3d at 509-10; Strozier, 981 F.2d at 284; United States v. Studevent, 116 F.3d 1559, 1561-62 (D.C. Cir. 1997). The amount of money or property Mei was able to obtain from the counterfeit cards was limited not by his own restraint, but by facts beyond his control. Mei did not know the limits of each stolen credit card number when he obtained it—for all he knew, a skimmed card could have a credit limit of $150 or $150,000 (and one did in fact have a limit of more than $150,000, although it was excluded from the calculation). Some cards when stolen may already have been at or near their limit, so that they did not work when Mei attempted to use them. Or, some of the cards did not work because their rightful owners were delinquent in paying a bill or had previously reported the number stolen. Or, Mei was arrested before he could more fully exploit the scheme. That he was thwarted from extracting the full potential of the cards by events beyond his control does not speak to whether he intended to do less or was less culpable. See Coffman, 94 F.3d at 333.
Because we see no error in the calculation of Mei’s intended loss, we AFFIRM the judgment of the district court.
A true Copy:
Teste:
Clerk of the United States Court of Appeals for the Seventh Circuit
USCA-02-C-0072—1-9-03