there are three issues that we've raised on appeal in this case and i would like to focus my argument this morning and the two most important which have to do with the district courts calculation in standards used with respect to calculate calculating the loss amount at issue in this case and its decisions with respect to restitution as the court is aware the district court in this case decided to ultimately use intended loss as the measure of loss we do not dispute that the district court was free to do that at all the problem here and what i want to clarify from the outset is that all of the factual findings that were contained within the district court's opinion were based on conduct that mr healey engaged in and representations that he made to other businesses to potential clients there's a huge difference under the law between misrepresenting your company's capabilities and  yourself in a sense to obtain money to invest in securities versus lives that are told and puffing that goes on between two businesses and all of the testimony from jason far specifically in referring to page id numbers for thirty thirty eight through four forty five have to do with mr healy's representations to other businesses what what the company could do what it would do for whatever essentially company that mr he was talking to it seems to change all the time i'm also not going to stand up here and defend my client's misrepresentations in this case i find them just as vile as i'm sure the court does but short of the company did he not he started he did it he did and that's another point that i want to bring up is that he founded the company but chris watson was in on this company also from the beginning and he was also an initial target of the investigation now is the court is aware that the district court ultimately found mr healey responsible for one point four million it was the it was all of the part of the calculation of walsh in this case you never know and under no three see roman numeral five i believe it is of the commentary to section to be one point one of the guidelines it specifically says that in a context like this in a business context like this the core is to consider the amount of loss in the value of the securities the equity that was never done at all in this case the trial court was not proceeding under forfeiture of correct no point four the investors came forward and claimed a loss of this nine hundred eighteen thousand dollars yes your claim is that that nineteen that nine hundred eighteen thousand dollars should be offset by a number of different things one of which that you were just five factors that a district court is supposed to consider and they consider the totality the circumstances and all of the information available but the primary one that applies here is the value of the loss in value to the assets to the equity into the securities that was never done here now have the court i'll ask the question i was going to ask anyway then whether it goes to restitution or loss calculation is as i understood the record and please correct me if this is wrong the trial counsel and the sentencing counsel which was not you right correct if i remember right said on the record at the sentencing that the company had or probably had no value at the time of the surrender of the stock i don't believe that are we ever stated that i think your client your clients counsel did but let me pass for just a second ok i'll go back and find out the argue the reason that that concession was made if if it was as i understand it trial counsel was that arguing whether the company did or did not have any value at the time of the surrender trial counsel was arguing that the measurement should be rather than at the time of discord on the route the measurement should be at some future time and the district judge said no we're not going to do that because any value in which the company goes up will be due to the efforts of the current management in mr healey were in this actually do i  may speak to the judge can correct the the counsel for d s s essentially and i realize that i shouldn't use the word misrepresented but instilled in the district court the strong sense of urgency that the company needed to be or excuse me i believe this was the august hearing that the company didn't need to be completely disassociated with healey posthaste the the company did not want to wait for m become available to testify really really pushed the district court on this issue claiming that any association with healey was tainting the company tainting its ability to raise additional capital but a month after mr healey pled guilty in this case the company entered into a consulting agreement with him which is document thirty four i believe it's exhibit c d and e where they agreed to tie themselves to mr healey for another year after he had already p guilty to defrauding them so you know council representations at the hearing make absolutely no sense and that's why as you pointed out in the briefs what happened here is the court held a hearing in july stated on the record in front of other victims that there was a possibility that they could retain their equity and claim restitution and so all of a sudden the company's tone and its arguments to the court completely changed prior to this point they had been strongly arguing that the company had the you it had value that they repeatedly asked the government not to take any action that would devalue the company so how do we deal with that change in your client's counsel's position because there appears to be a change in position as he stated on the record we've already spent a considerable amount of time and hearings on this and the court already difficult from your client's counsel at the time on this october twenty third hearing was quote it probably may never have value and zero zero zero whether there's tended to impede to appease whatever that means a judge or not it is it is what it is so how can there be here if the correct measurement is the value at the time of  as i believe you argue that you should take into account future potential value if the correct timing is the value at the time of discouragement if the lawyer at the hearing tells the judge it probably has no value then where is the year well what are you speaking to as it well as a form of restitution i believe three sixty six a mandatory victim's restitution act allows for that i don't have the station for me having looked at it for a while but i know for certain that as for the return of property if you can we're terming he didn't steal any of my songs his own property correct correct it was his property correct would you agree with me i would and other wives return the value there are in money correct correct doesn't say discord share in a company that you won't absolutely but yet your counsel agreed to that while i don't i don't honor and not only that but what we're simply saying with you is you actually like the dischord you like we don't knows you want because he gets rid of this worthless stock and you want to get credit no absolutely actually what we would prefer here was that he pay the restitution and get his stock the point is that they are still selling these cards all of the technology works all the district court's findings here that the company didn't exist that it had these capabilities that it didn't have it actually did and it's doing just fine and so with respect to the court's findings that but as as opposed to your argument that it was the bird that the burden was upon the government to prove that it had no value that's one of your arguments if if your county if this client's council did concede that it had no value it would have been his burden to refute the position that it had no value to come to commune with evidence of value well we never got you we never got that opportunity though judge because all of the hearings in this case had to do with that they asked for that opportunity and they were deprived of the opportunity know what happened in this case was all of the testimony at the july hearing had to do with calculating the last amount there was never any evidence or testimony of value or promises that were made in the future that the court and household or the government did your counsel your clients counsel seek to either take a position or support the position with evidence and was somehow deprived of that opportunity it looks well based on the record it looked like that was the intention and i'm not sure good morning your honor is may it please the court so in your austin for the united states i'd like to start by pointing the court to the point in the august transcript it's page twenty of that transcript or id to forty four which is the point at which m counsel concedes that the stock has no value it's in discussion of whether mr healey has the ability to pay a fine it is nonetheless a concession and that's i think fair for the district court to rely on as to the calculation of the loss of mt the council now has conceded that the question here is a factual dispute that we're not talking about a legal dispute we're talking about a factual dispute not means the standard of review is clear error unless the district court's factual finding is clearly erroneous this court must affirm now the district court and it's a written opinion considering whether the intended amount of loss was a reasonably calculable goes back and forth between whether this is a pump and dump kind of scheme or whether this is a sham company kind of scheme and the court acknowledges that there is evidence pointing in both directions and ultimately comes down on the side of it being a sham company that mr heal never intended to do anything worthwhile with the company that his intent was to use a bed of lies to raise a lot of money and live a lavish lifestyle he was a bad actor we get t proof walls or a total loss figures in the government sentencing memorandum it concedes that actual las cannot be accurately determined and argues for gain the government makes no address of intended in its written opinion the district court addresses this it agrees that actual os cannot be calculated but it says that the parties neglected to address intended loss which the guidelines say must be used if it can be reasonably calculated instead of ga and then the court goes on to say that in presenting its evidence of mr healy's gain from this scheme the government presented sufficient evidence from which the district court concluded that the intended loss was a reasonably ascertainable which is the standard under the guidelines the court determined that he's intent never changed the fact that he was his scheme was uncovered and he was removed from the company and that exhibit thirty four docket entry thirty four exhibit c which is d s s is sentencing memorandum has a march twenty first two thousand and twelve agreement signed by mr healey withdrawing from the company giving up all of his shares one paragraph of that is consulting agreement but it talks about an ongoing deal in ghana which at that point company didn't know it was a complete fraud that comes out later and so you know it's if if the deal and gone is closed within forty five days he'll receive a certain payout that of course never happens but if he had withdrawn from the company try to close a deal in another country they didn't know was a fraud from the inception that's that's my understanding this whole argument about it about the last allegation in the intended loss deals with this question about how long how large an enhanced when he gets to get a sixteen level enhancement with this one point four million i forgot what is the range of other words one would miss piers and have to succeed in getting this down to in order to change that level sixty in advance they argued for a loss of less than four hundred thousand dollars actually an x given that he had voluntarily signed an agreement giving up those shares six months earlier but the agreement no that's a withdraw all agreement it's the see the documentary thirty four but in any event the the court frames that is as personal restitution in making the company whole that that one of the things that mr healey did in the course of this fried was there's plenty of evidence that he committed fraud but obtained a company you know brought so that's a tricky question and there is a footnote in there just for courts last calculation opinion that says that i don't think you have to take it on exactly those terms though that he the entire company was a fraud is the district court's factual raised just for his personal piggy bank and that therefore you know his ownership in that company essentially his association with the other investors is come by fraud so i think that's what the court means when it says that his ownership was acquired by fraud it's that any value that the company had was acquired by fraud and therefore his ownership to the extent that it was anything more than a piece of paper was acquired by fraud i think you're correct that the his ownership in the piece of paper was not acquired by fraud because he and corporate it before the fraud started but the only arguable asset of this company was the patent which by the way has been denied by the patent and trademark office and that asset wasn't even acquired until may two thousand and ten which is more than fifteen months after he's been raising all this money it's actually near the end of the time when he's raising the money so to the extent the company was anything more than a piece of paper for that first period of time it was just the investors money that was the only thing that was the company and all of that was acquired by fraud so clearly the courthouse to value the company you do on the stands that's when they're presented with it you know  the money but there was so i'd like to separate two things for a moment one is the loss calculation and the other is the restitution for the loss calculation there's no requirement that the court come up with a value for the company because the court was looking at intended loss which has nothing to do with what happens in reality and the second is the restitution and under the statute it's the value with the date that the property is returned which in this case we're assuming was at the sentencing hearing or was ordered returned and so what happens after that point is completely irrelevant the company goes on to make millions he never gets an offset that doesn't matter under the statute  the question about multiple recovery no because at the the point at which the restitution is calculated the statute instructs to determine the loss and they're claiming the loss is the investment that they gave up the money that they paid  and that that amount determined on the date of the sentencing offset by the value of the company which the court said is nothing and that's the restitution award the only thing that could be offset by is if you know under thirty six sixty four if they get a civil recovery for compensatory damages but that's not at issue here so that the answer your question reaffirmed just a couple things with respect to the last month because this is extremely important in this case the specifics are not it's not just creates a chris watson salary we're also talking about almost sixty thousand dollars paid into it to another employees in salary twenty six thousand dollars in employee medical expenses one hundred thirty two thousand dollars in web hosting computer and technological infrastructure investments and in fees that were paid by healey to other companies seventy thousand dollars went to the smiths and the underlying note for the technology for the business twelve thousand dollars and shipping to fraudster is going to be the subject of the day in usa today have to have a an infrastructure to be able to do that so why would a fraudster ever be able in my analogy is imperfect as it may be to then say well gee it was a legitime an expense to go rent the warehouse i get credit for that against my fraud because it's all something that's necessary in order to accomplish the fraud because at the end of the day there is no legitimate company behind that fraud here you have actual employees you have actual technological expenses you had there were there were one hundred thirty six thousand dollars in miscellaneous charges that we don't even know what they went for because the bank lost the documents documenting the underlying transaction you've got nineteen thousand against fraud cases that came out of i think it was a southern a case where there were hundreds of millions of dollars supplement that was in that company had hundreds of employees so because you have to hire people to  facade or to actually accomplish the fraud therefore you get credit for that i don't understand but i doubt very much the company that that company is still in existence and is still thriving in that shareholders essentially begged the court to keep their stock here you have a company that is still in existence and it's he added value he that you can you certainly can argue that he intended for chris watson to lose twenty two hundred sixty eight thousand dollars in salary chris watson would got that money and he i don't understand that argument because watson lose this salary exactly credit he didn't the one that's with the good but the thing here is the court uses in used intended loss as the amount of loss for purposes of calculating the guidelines range it included from the lost as a whole and it took all one point four million all of the money that all the investor has had ever put into this company a huge portion of which went to pay chris watson salary the salaries of other employees employee medical expenses you can it is a matter in terms of the intended loss these of you the investors because it well for one chris what chris watson was a was an employee and an investor he was also another member of of the corporation but when you he whatever was made by mr he would demonstrate credit for off he well he argued it to the district court in a sense in memorandum he also during cross examination he brought out the fact on cross that all of the business expenses that the government initially conceded were legitimate business expenses there  seven hundred thousand dollars there that the government said the majority of the one point four million went to pay seller in benefits therefore we are not going to go after that we concede that you can't include that in your intended loss calculation court we're going to ask you to hold him responsible for five hundred five hundred twenty four thousand yet the district court at sentencing went completely beyond that went to the four one point four million and offered no real explanation for doing that other than all of its findings with respect to he misrepresentations and i see my time is up i just wanted to finish that thought in all of this misrepresentations had to do with those that were made to other companies not to investors thank you all right thank you the court have been appointed under the civil justice act appreciate your assistance to mr huey and the court makes our job easier and provides valuable representation in this case for the defendant so think you or your