i'm with the law firm of gibson dunn and crutcher and i represent the appellate charles banks i'd like to reserve five minutes for rebuttal charles banks pleaded guilty in the western district of texas to a single count of wire fraud involving a transaction with former san antonio spurs superstar tim duncan at the sentencing in this case in san antonio the government did more than simply leverage the optics of a case involving a hometown hero they overreached seeking a sentence of thirteen based on the last amount of thirteen and a half million dollars which vastly overstated the loss actually caused by the offense in this case and that last figure was based on a variety of allegations  the offense in this case which were not charged were not proven and certainly were not admitted by the defendant the district court failed to scrutinise the government's case the government's theory of the loss to the new district court made no findings on key issues it did not explain its reasoning or state why it selected the sentence that it did in doing so the district court committed fundamental errors in the application of sentencing guideline to be one point one it raised these errors had the result of raising the offense level by twenty two levels from a zero to six sentencing guideline range up to seventy eight to ninety seven months in prison under golfer says the united states these errors in the interpretation and application of the guidelines which are reviewed to novo affected the sentence and require remained the district court also erred in calculating the loss amount and implying that in applying the two level adjustment for deriving funds from a financial institution in admitting his guilt to the defendant surrendered to serve a sentence he's already served eight months of his forty eight month sentence he liquidated all of his assets to satisfy his civil creditors and the victim in this case he's not contesting the base offense level or the adjustment for abuse of a position of trust the restitution issue is moot all the seeks in this appeal is a fair shot at a fair sentence based on the rule of law and the actual off ends of conviction downward departure doesn't necessarily render the errors harmless in this case he didn't state why he selected the sentence that he did the only thing that he said was that the seventy eight to ninety seven months seemed too high to him so certainly the that resulted from the offense that's the definition from a no it's really a one of the sentencing guidelines so starting with that six million dollars that was a alone by comerica to game day that was guaranteed by tim duncan that transaction resulted in no peculiarity loss to the defendant p g every harm under the guidelines means quote harm that is monetary with zero zero zero as you said that no i'm sorry i used to work for the government your honor paid a dime on that guarantee never paid a dime and it is extremely unlikely that he will ever have to pay anything on that in the future ok let me ask you the us what happened to the loan the loan your honor was a loan by comerica back it was comerica bank's money tim duncan had no money out of pocket on that loan he guaranteed the loan the loan has now one point nine million dollars has been repaid by the coal guarantor kevin garnett he was a  that one point comerica bank had completely offered to completely release mr duncan from the loan that apparently did not happen they then signed an agreement with kevin garnett that which supersedes that agreement in which he is completely  well i'm ira i think that the problem that i'm looking at under actual loss are you agree that reasonable foreseeability is an important is an important part of that but there has to be ph in every harm and in this case he hasn't paid anything and because of these arrangements with kevin garnett to cover the loan he's already paid one point nine million of it by the way so he'll never be liable for the whole six million dollars no matter what happens and mr duncan himself has denied liability for the loan has told the america bank he's not going to pay it so it's extremely unlikely that he'll ever be able to that he'll ever be called upon in the years that have passed since the default the bank has never called upon him to make good on that loan and is as this court said in the resell case in an honor judge graves it's error to count as last speculative was in the future this is speculation that some day the bank may change its mind before the statute of limitations runs a matter control when that is but at some point that they may pursue and they haven't pursued him all these years one point nine million dollars has already been paid and he's never paid anything so far so our view is no peculiar a last second thing about the six million dollars as i mention there's no dispute that one point nine million at least has already been paid on that amount so to him so same with the seven a half million dollar loan which is the other part of this thirteen and a half million dollar figure that figure was a loan that was made back in two thousand and twelve and there was no fraud in the origination of that loan nobody has a or proven that the issue there is that there was a peculiar loss on that loan so when gameday failed that loan was taken out by mr duncan he took out seven and a half million dollars from comerica bank and lent it to game day as part of  first in line that's not right and i think that part is not correct your government mistake that i believe it has your honor there's not only want to yeah there's no evidence that he was first in line here there's nothing that was there was no finding by the district court there was no evidence that was presented in the sentencing but the issue with the subrogation is that there was no the last did not flow from that event nobody recovered any money at the time the game day failed the issue is what is the offense in this case the offense in this case is what he pleaded guilty to certainly the subrogation but the loan itself was made back in two thousand and twelve had nothing to do with the crime in this case the fact that if this transaction in two thousand and thirteen involving the  tax that you wanted just described had never happened mr duncan still would have lost that seven a half million dollars he lost it not because he was suffocated not because anybody else got assets ahead of him he lost it simply because he was an investor in game day and all the investigat he was living in california for quite some time he's not from texas loss actually caused by the offense and that raises an important dispute that we have for the government about what is the nature of the offense in this case the defendant pleaded guilty in this case pursuant to a without a plea there's a guilty plea you look at what is the mutual understanding of the parties that's what defines the scope of the offense that you're looking at that the factual basis is actually not that far off from the superseding indictment count two but the factual basis  what defines the offense to which the defendant pleaded guilty and here it's all about that transaction two thousand and thirteen has nothing to do with the failure of game day with other issues that the government spent a lot of time on at the sentencing hearing it really had to focus on that transaction he's pleaded guilty to that he's acknowledged the frog but the losses the government really agrees with us that the losses were caused by the failure of game day and that is something which was not part of the offense and therefore there was not a lot that flowed from that if i could just comment very briefly on the the financial adjustment if you received a two level adjustment for financial for driving more than a million dollars from a financial institution as a result of the facts just two things about that one as a matter of law as this court said in sandlin in two thousand and nine the language of the adjustment requires that the money be derived as a result of the violation of the statute again the the funds that the offense here the violation had to do with that transaction back in two thousand and thirteen the money that the government in there was really no proof of this no findings by the district court but the money that the government now points to one point five million dollars in the bank or all transactions funds after the six million dollars funding money that went from game date then to various entities associated with mr banks not to mr banks directly much of it went to something called hammer holdings or to something called pewter holdings there was very little testimony about what those are their partnerships in which mr banks owns a portion and other people on a portion so it wasn't money that went to mr banks also the funds that would get every penny for which he was i'm sorry everyplace the money went with the banks with he was involved he was involved but it's more than that the colton case which the government cited in their brief it's a fourth circuit case from two thousand that case in a applying a similar judgment from two f one point one said it wasn't enough that money goes to an entity which is a fifty fifty ownership by the defendant it's not enough for application of this amendment of this adjustment and finally the money that that they described was going to him the first payment is three months after the transaction with the bank and they are counting payments that went to mr banks two and a half years later out of game day this is in a two year period when gameday was earning eighty million dollars in revenues there was lots of financial activity going on they made no effort to track these funds coming from the bank going to mr banks it just went into a large company that was doing a lot at the time and over two year period there were various payments and it used much people that testified from game day one was that a junior controller his first job out of college who testified for the government and then there was the receiver of game day who testified for mr banks and their testimony that the this is the c the controller who been the c f o of the company testified in mr banks favor really that much of the speech he was entitled to but there was no allegation of criminality in that it may have been bad business activity it may have been sleazy business activity there was no proof that any of this kind act was criminal and most importantly the issue that we are are most insistent upon in that we insisted upon in the hearing before the district court is that the failure of gameday is not what this case was about it's not what he pleaded  to it's not what he was charged with it was just driv the government conceded intil game day failed in two thousand and seventeen that this was a no last case after the company failed they tried to make this a lost case about the failure of game day and that was just not what the offense was about are from the western district of texas on behalf of united states i'm going to first address this sort of six million dollar piece and i think that's more the obvious guideline loss in this case the defrauding of duncan allowed the defendant to get a loan from comerica that loan failed there was a specific court finding that duncan and the bank anger net were the victims of the s offense and that comes from paragraph twenty seven of the pre sentence report which the district court adopted those factual findings so we have a finding that comerica was a victim and suffered the actual loss in this case i mean the loan came from america it didn't come from duncan duncan was really the fraud happened on duncan to get the loan from america so once that loan was defaulted mr banks certainly knew that this was struggling it wasn't able to qualify for the loan on its own it was over leveraged under capitalized and at that point it was certainly foreseeable absent his fraud on the back end that loan could fail and that's what made it to be one point one loss but in this case of course we have even more after that six million dollar america loan demanded t continue to loot game day as we had since i'm two thousand and twelve so this money may be even more foreseeable that that last would occur and i'm going to now address the seven and a half million component of it now at the time the defendant deceived tim duncan into subordinated his interest he was also alluding gameday so it was reasonably foreseeable that dun them lose that seven and a half million dollars and we talked a lot the defendant's counsel talked a lot about how the offense that was proven its sentencing was untethered to the offense charging this is simply untrue this scheming to defraud here was very clearly set core from the very beginning of the case and that was the defendant's plan to get money from comerica define game day so that he could take money out of game day for his own personal use this is what was charged by the grand jury i direct the court's attention to records eighty where it said that the point of the scheme was to receive commissions and payments for his own personal use this was the scheme that was presented by the government at the change of plea it is the government's position that this is the scheme to which the defendant pleaded guilty and there was no mutual understanding of the parties here he pleaded guilty unconditionally to count two the indictment there was no plea agreement and this was and even if even if we differ even if the defendant has a different view of what he pled to than the government the govern wasn't was intitled to prove the scope of the last resulting from the scheme at sentencing and it did and i just want to and direct the court's attention to very some several findings that the district did made because there's apparently some dispute about the district court's findings most importantly the only disputed aspect of this case was lost and the district court that was its factual finding that was the finding of the district court went to and it found that defendant controlled game day that it wasn't me and that it was the defendant that was pulling the strings and control and told me what to do and i direct the court's attention to and page one zero nine eight of the record but most importantly it adopted the factual findings in the pre sentence report where the scheme was fully set forth directing the court's attention to paragraphs twenty and twenty one and twenty two it tells the scope of the scheme that none of the loans or fees the defendant the controller testified that this is not the way they did business with any of their other people who took loans from the company it was an industry standard so he was clearly looting the company here and that was within the scope of the scheme and it made that seven and a half million dollar loss for forseeable we know we have to have actual and proximate cause well we know and before the looting of the company and that caused that seven and half million dollar loss like we know that his looting resulted in that and then proximate cause it was certainly reasonably forseeable when he made him subordinate that seven and a half million dollar interest so both of those components are present in this case as far as forsee ability to move what you mean when you say the board subordinate has one of wrote this down which page of the record it was in but it was attached to one of the defendants and pleadings objections to the pre sentence report and ten duncan was interviewed twice and he testified that he was the first position and first in line and that if anything would happen to game day he interest was was based on that interview tim duncan and the testimony when the cowlick his accountant so both of those are vitamins in the record the actual lien itself was not admitted into evidence i don't think that's necessary given the standard of what that interest was was the first position and interest to me not is the only other as in the record i agree it could have been proven up differently but it is for purposes of a sentence seen it was certainly sufficient to have tim duncan statement as well as as far as whether he had a priority interest in this the seven half million dollars this is undisputed and how do we know that america would not give that six million dollar loan and left him duncan subordinated out interest so obviously there is evidence in the record and again a specific finding from the district court in one moment please about his first priority interest of and deceiving tim duncan into subordinating the interests it was reasonably forseeable that duncan would lose that seven and a half million dollars and once again they inevitably defaulted on the loan and i do want to clarify something it keeps reappearing in this case about the two hundred to two hundred fifty million dollar company so yes there was testimony that from two thousand and ten to two thousand and fifteen game day may two hundred two hundred fifty million dollars in gross revenue but there was awful testimony that eighty percent of that went to the overheads expert expenses of the team contracts and the cost of goods sold like to ninety year under armor or whatever those places whatever their contracts were so eighty percent of that is just off the top not even part of their net earnings so now they're down to twenty percent and not about forty million dollars this is in their redirect tony mag now that's the net revenue and that doesn't even  include employee salaries that doesn't even include taking out for taxes so forty million dollars when you're taking six and a half million dollars from forty million dollars net that's certainly a lot different than taking it from a two hundred to two hundred fifty million dollars company to talk a little bit about defendant's ability to narrow the sentencing liability end of the scheme he said that he's allowed to just at sentencing admit to certain facts and that's all the court can hold him accountable for and certainly to the extent that a pri due process would apply that would be true but this is an analogy we have some sort of title twenty one defendant who pleads guilty to fifty kilograms more of a certain controlled substance and he insists at sentencing and there's no plea agreement that he's only accountable for fifty one that doesn't mean at sentencing that we're limited to his admissions that we're untethered to a plea agreement between the parties about what the point to be was this is a sentencing determination i also would like to know the act with respect to deriving the gross receipts from the financial institution and we're talking about whether him or holdings with fifty percent or more aware that when we're talking about game day here the money went from comerica to game day which the district court found the defendant control he was the controlling person the chairman of the board the majority shareholder the district court made a specific finding of fact based on the e mail trail between him and neil that he was the one controlling the company and pulling the strings like the wizard robots so in that case when he's directing how that money is being paid when he goes from comerica to game day that is where he indirectly drives that money it's not money at all to melt the derives it from him or holdings now i do want to say that this issue was fully litigated below this was and both parties had a different theory of what the loss was in this case since the change of plea the government insisted it was a thirteen and a half million and the defendant insisted it was zero they both fully litigated their position they both called witness it is it was fully litigated in the pleadings and the government its theory prevailed in the district court the district court adopted the government's findings and that's not clear air when it's supported by the record this court may have a different view of what the law says but that doesn't mean that judge perry's finding was clearly erroneous and if there are no further questions i yield the rest of my therefore that the offense is however very they charged it in the charging document well that's just not the law the law is when plead guilty pursuant to a plea agreement or in this case not a plea agreement but you plead guilty the issue is you look at the guilty plea the facts that were accepted by the district court as the basis for that plea the defendant submitted a detailed factual basis the district court accepted that factual basis and accepted the plea on that factual basis the government in fact urged the court to accept the plea on that basis and to make a finding that that was a violation of wire fraud statute so under the zano which quoted adams that's what you look to and there's nothing in there and in fact there's nothing in the superseding indictment if you want to look at that about the looting of gameday the looting of game day so called looting of game day had nothing to do with this case and i'm not saying that there was no wrongdoing there but there were it was never charged it was never proven and it wasn't even relevant in this case intil after came they failed the government realize they have a high profile defendant with no loss so then they have to talk about the looting of game day and that's that's where this team developed and when we showed up for the sensing hearing it wasn't about the off hand or what flowed from the offense it was all about you know what happened in game day years later and so our view is the losses here america bad by the way never claimed it was a victim here kevin garnett never claimed it was a victim here america bank never showed up at the sensing hearing and it may be because tim duncan accountant who testified at the hearing suspected comerica bank of being involved in fraud against him dr she said sell it page nine twenty four of the record on appeal so they were not victims in this case  secondly on this issue of banks controlling game day there was testimony he'd never been to the offices of gameday he'd never been seen in the offices of game day mr mangan all of the former controller who testified for the government said he'd never met mr maddox he never even talked on the phone so certainly i'm not saying he wasn't a heavy heavily involved in game day but this was not a personal corporation this is a legitimate sports merchandising company that made well over two hundred million dollars in revenues and during the period that was active over several years i'm not saying it was well managed but this was not some sham company that mr banks was just using to move money around these were real employees real contract with the warriors soon be the n b a champs sorry about the spurs but this was a this was a real company that was doing real work and so to turn this into a case about game day if they wanted to do that they should have charged it and should have proven it and should have convicted