good morning your honour's good morning may it please the court elizabeth richardson royer on behalf of the appellant kelly gearhart i plan to reserve a few minutes for a bottle try to watch the clock the briefing in this case raises a number of errors and i'm happy to discuss any of them that your honour's wish to discuss but i thought i would this morning focus on the procedural errors that occurred at sentencing and in the restitution proceedings first i want to give just sort of an overview and we have one can see to their right we have one agreement so the district court was tasked with an order to determine the sentence and the restitution finding out what the relevant conduct was how many additional victims there were what the additional losses were and i think the problem that happened in this case that led to a number of anyone else that this is not a model of clarity in terms of addressing all the points that were raised a lot but i suppose i'm having a little bit of a hard time with everything that i look at in the entire record scene why he couldn't do exactly what he did well the first error that i think is that i don't see how it's not an error is where the court you know look first at the initial p s twenty nine offense level which had been abandoned by the probation office by then and then you know looked at the government's argument for you know additional victims which would take it to to an offense level thirty three listen to the government's argument on that point said you know i know there are more victims that hasn't been shown and then found it an offense level of thirty three increased it by four levels for you know no discernible reason there is no enhanced meant that should have applied the court found it wasn't shown by clear and convincing others ask you about the letters all right the court read a lot of letters sent and i think made a comment about well i find them quite moving because there were elderly people involved in all of that and then those people weren't ultimately identified as victims is that because those people weren't victims or is what is were they for did they get full restitution at that was unclear to me it sounded like they still were out money there were  there was a dispute which my contention is the court needed to resolve and didn't about who was a victim in this case and who wasn't so mr gifford didn't dispute that the people that he spoke to directly and the people that he approached to buy property in two thousand and seven were victims  the government's position was that all of the investors who invested through hearst financial in the vista on by project that every single one of those investors was a victim and and that hasn't been shown by a preponderance of the evidence or clear and convincing evidence in this case for a number of reasons and that you don't dispute that they could have brought that they could have done more to establish that at the sentencing hearing because i think the  that there were certain things that factual determinations needed to be made and you're saying they weren't made but they could be made part of what a probation officer found that even with respect to the seventeen victims that had been you know identified in the first p s r that even with those victims there were evidentiary disputes that had to be resolved through a hearing and then the the probation officer found that with respect to all these other victims we called them the h s t investors that there just wasn't sufficient proof at all of a connection between mr bure heart and those victims and that's because most of those victims invested in two thousand and five and at that point that's when mr hart bought the property he did a ton of work after that to develop the property and it's not at all clear from the record that he was involved in any fraud at that point that he made any money misrepresentations that he knew about j miller's representations in two thousand and five so those people according to the probation officer and the defense were not victims and you know they were deemed victims for purposes of the and handsome and but then the court you know increased the offense level five four levels anyway just as if they had been victims although he found that they weren't and there's so that increased the guideline range this for level enhanced meant departure or whatever you really want to call it and there's some lack of clarity about what exactly the court did increase the guideline range from eighty seven two hundred eight months two hundred  thirty five two hundred sixty eight months for basically no supportable reason and that error in and of itself is reversible error that really can't be ignored i think the court also made a number of violations of rule thirty two there were things in the p s r that the defendant objected to below the provision of actually actually backed off of a number of those factual statements and said you know what you're right there are credibility issues with respect to  these potential victims there are credit issues about whether the banks were aware of you know what the trustee they were getting was and we have to have these issues resolved and the court the court didn't resolve those issues despite the fact that mr  heart raised objections to what had been in the initial p s r and those were factual determinations that had to be made and they were never made well let me ask you this if let's say let's say we agree with some of your contentions and we send it back to do certain things what is it possible your client could get more time without it being retaliatory if the hearings actually went forward and it looked worse i don't think it could look worse i think he got well you know and a but never knows i mean that a court could always impose more time it would certainly look retaliatory you know given that the probation officer on the defendant thought the appropriate guideline range with fifty seven to seventy one the government was arguing for a low end sentence  it would not look great right but but the agreement what was the agreement to the agreement was not to a specific sentence ok you know that the parties agreed on a number of the factors they disagreed about the last amount and the number of victims as well and the number of victims so but what i'm saying is he already got the enhancement that would have corresponded to the government's argument for the number of victims well on the facts of this case and if you look you know into the evidence i think that the government can't show that all of these people were victims they weren't all recorded on the two thousand and seven trust deed the only evidence that mr knew anything about j miller's initial fraud comes from j miller himself and even he doesn't go so far as to say you know we were in on this together the scope of the undertaking simply didn't involve you know the two thousand and five procurement of investments so in terms of mr gearhart to ability to repay it does not appear that he will have the means to repay most of the restitution in this case as it is ordered that assuming for a moment that the just court erred in calculating the amount of restitution how exactly is he prejudiced well the the defendant's ability to pay is not an appropriate consideration under the r a the case law probably says that will and the statute itself says that that the court should not consider the defendant's ability to pay and so if his inability to pay means that the court can order whatever restitution it wants i think the statute you know has to be thrown out if i could ask about your client's background in preparing for this case i was struck by the fact that he's had a lot of bad things happen to him wholly aside from this case i was curious when did the district  that he gets that classification for this whole offense or his you know throughout his life his his reputation and everyone who dealt with him until two thousand and seven thought that he was really a straight shooter so i think it's fair to say that we're talking about his background  t his his his you know his childhood and and you know having sort of worked his way up and giving back and all these things you know the death of his son all these things where a car hit the car wreck the car racket his brother drowned you know his his his mother left you know he was sort of stuck with this alcoholic father who he had to support as a teenager all of this was brought before the district judge who totally ignored it and the district the district judge you know when looking at the the thirty five fifty three a factors you know lip service to them and i you know don't want to steal my colleague's argument from earlier but you know said i consider these factors but then you know clearly didn't never mentioned them never gave them any attention whatsoever  and only consider the fact is that the court cared about which was you know the harm and the nature of the offense and things like that and so you know aside from all of the procedural errors in this case in the court's refusal to make the factual findings that were required the court's refusal to to look at proximate the bottom line is the sentence is substantively unreasonable for for you know the reasons that your honor points out about mr gearhart background this is not a typical ponzi scheme this is not a typical fraud defense and even the government conceded that that mr gearhart you know for many years had a legitimate business and once we find procedural error we don't have to get to the substantive there your honor although i would before i reserve the remainder of my time if if there's a procedural error that your honour's find that so basis for  vacating the sentence and reminding i would ask that the case be reassigned to a different judge because of all the errors in the judge's adamancy in refusing to make the factual findings necessary in this case that's a fairly unusual remedy did you ask for that your brief i can't of things i'd like to start with first off in terms of what the court actually did if you look at the record as a whole i believe the record actually demonstrates what the court did it made a finding under clear and convincing evidence standard that the number of victims was more than ten but was not as the government was searching more than two hundred fifty and as a result it found the guideline basis the guideline offense level to be twenty nine and that's clear indeed at a later point in time the government which is making it recommendation based on the offense level that the court found and indeed the defense counsel at sentencing at a number of times asked the court so is the court finding only seventeen victims not over two hundred fifty and the court responded yes me on some level that first of all the letters that you have and so it's what are we to make of that just a court's comment that he was greatly touched by the story is of elderly investors and and none of them were found to be victims so what we do about that that's not necessarily true the court had a range of victim letters that both parties agreed the court could have presented to it subject to its subsequent determination camps there were two sets there were it depends on how you view victims in terms of the victims that the court considered for purposes of applying the victim enhanced meant under the fraud guidelines it found by clear and convincing only the seventeen however later it restitution it found under preponderance that the number of victims was far broader and for restitution purposes encompassed all of the more than two hundred fifty investors in v h and i can explain to the court why that's a finding supported by the evidence looks like it went in the banks to yeah so but if you look gary hart objected to the pre sentence report contention that the two banks in the case were victims yes on the ground that they were aware of partial conveyances of the property at issue so it would seem according to rule thirty two of the federal rules of criminal procedure a sentencing court is to rule on all disputed facts and say and say and or say that such a ruling isn't necessary i can't find where the district court did any of that of the court did not do that but again you have to look at the specifics and you have to look at this court's decision and petrie that when we look at the purpose and language of the legislative amendment to rule thirty two what we conclude is that the purpose of that was to narrow it and what petrie held is that after that amendment the court's obligation to make explicit findings under rule thirty two is limited to one where there are factual objections to the pre sentence report and where they get a similar yes as to certain things but i'll get to that in a second and those specific factual objections have to make a the p s r regarding that the p s r does not say heritage bank was aware or wasn't aware there simply isn't the statement and so that is not a specific factual objection to a facts stated in the pre sentence report the second thing is it didn't matter the government's theory was not that heritage bank was not aware of the rican vance's the government's theory was those we convey and says were what mr miller did to clear title so that the title report looked like those interests that had been granted to the investors had been reconfigured back to mr gearhart but as mr miller admitted in his plea agreement under oath in his factual basis which was submitted to the court mr miller stated i did again even though mr gearhart plea was limited what he admitted doing in his plea basis in his own plea basis was promising to sell certain wants in particular a lot seven hundred sixteen seventeen and eighteen as well as fifteen twenty one and twenty two to two individuals seattle and you are and then as he admitted in his plea agreement after promising to sell those to those individuals he then went ahead and pledged those lots to the banks now the defense argues that if i promised the lots and those weren't recorded so there was nothing to show that those existed those promises and those were never disclosed to the bank now he argues in his reply brief that if i promise a lot to a but i don't deliver it and then i pledge it to the bank that's not a fraud on the bank because you know it's a fraud on the person i promise to but because i didn't deliver i can then pledge it to the bank that makes no sense what what the banks problem was that he got these lots thinking they were free and clear when in fact mr gearhart as he admitted in his plea agreement had already promised those lots and collected money for those lots from these other individuals so for both those reasons the evidence supported the banks being a victim without regard to whether they were aware of the partial reconvince as which is why the p s r doesn't rely on any knowledge regarding the partial rican fan since it doesn't say anything about it and the same thing is true if you go through in their brief they objected to nine specific failures of the court to make finding for many of those the p s r doesn't contain a factual statement and so there's no obligation on the rule thirty two and for the remainder of them it didn't make a difference it wasn't a fact that made a difference in the formulation of an appropriate sentence let me ask you about the restitution what evidence in the record shows that two thousand and five investors listed on the f b i spreadsheet invested their money after care heart fraud was in place invested before the fraud arose why are they entitled to restitution there was some limited information and primarily from miller and berard and statements by them in their testimony that  your heart was involved in the fraud but put that aside for a second because accorded make findings as to that and i agree that has to that prop if the court was going to rely on it it needed to do something but again we come back to the fact that the fraud on which the government focused was the multiple pledging of the lots and mr gere hearts two thousand and seven pledging of those lots in two thousand and eight pledging of lots that had already been pledged to individual victims both in two thousand five and in two thousand and seven went into when then in two thousand and eight he goes and he read pledges those lots and or resell certain of those lots even though they had already been pledged to security and so as an example of that the court wants an example that one of the seventeen victims that the court found was a woman named j g and she made her investments in two thousand and five and she got security interests under the two thousand and five feet of trusts and in connection with that two thousand five deed of trust the defendant himself signed certain documents pledging to her acknowledging that she had been granted interests in two particular lots twenty six and twenty seven now maybe that wasn't fraudulent at the time ok but then in two thousand and eight after having pledged these locks to her in two thousand and five mr gearhart goes ahead and pledges those exact same lots to support additional loans to heritage oaks bank and that is a fr mr gearhart subsequent fraudulent conduct deprived of that victim of her security interests and deprived a whole host of other victims all of the two thousand and five victims who had received pledges of interests in this parcel of property that was divided up into subsequent lots many of whom received specific pledges as to specific law to deprive them of those interest and that's why they were victims for purposes of restitution the defendants fraudulent conduct in two thousand and seven with the multiple pledging of those lots caused them the losses and that was the proximate cause and that's why they didn't quote them clearly articulate that are you doing a better job than the court and i will take credit for doing a better job than the court did but i think if you read the record as a whole that was the thrust of the government's arguments and that was the thrust of the findings now in connection with restitution but i also need to point out is this the real issue for purposes of restitution the only issue that the parties pushed the court to make a finding on and with some exceptions was how many victims were there was he going to say that there were more than the two hundred that that was all the festers or not once the court made the determination that was all the b t h investors the defendant while preserving all the arguments they had made previously and in connection restitution the defendant and the government got together and put together a joint status report that was submitted to the court and dueling restitution orders and so the parties put forward their own points of view as to how various credits and other things should be applied and ultimately the court adopted the defense's position in connection with that restitution so once the court made a finding that there were more than two hundred fifty victims for restitution purposes which i believe  supported by the record for all the reasons i've said after that the parties essentially arrived at their agreement as to credits and other things so again i think the record supports what the court did in terms of restitution i may ask you  counsel well probably most likely be sane in more detail but let's say we don't agree with you on every point that you've argued and we feel that there's a need for there are certain procedural errors that either need to be further developed or clarified carefully in context at the comments that the court made and while i don't disagree you know again if i were the judge i would probably refrain from making some of those comments but if you look at them in context i don't think they demonstrate either a personal bias against either the defendant or his counsel or that basically the court would have difficulty putting aside anything that this court required him to do that it hadn't done and there certainly are hard to get more on a remount in theory he could if there were additional evidence presented now the government would abide by its plea agreement and recommend in accordance with that you know depending on the offense level found but you know if there is a possibility that the court looking at the evidence could conclude that clear and convincing evidence provided a basis for finding more than two hundred fifty victims but you clearly since there is additional evidence the government could introduce to support that how do you around the proposition corrected the sentence itself where it's clear that it was just an error it's clear that the court meant to impose one hundred sixty eight months the simple problem is that one hundred sixty eight months on count fifteen exceeds one hundred twenty months statutory maximum to be and around them concurrently he could have  hundred sixty eight months so i think with that intent it would be fair in this case as the court has done in some other cases where it simply corrected itself or it's clear it was just an error could say simply we're going to correct the judgment to read one hundred twenty months on count fifteen alternatively if  believes it wants the district court to do that in the first instance the court could remain and only on that count with instructions to reduce the step to reduce to the statutory maximum or pin vacate with instructions for the court to simply reduce sentence on that one count  court wants to leave open to the court the option of doing something other than one hundred twenty months so i think those are all options but i don't think you need to really manage for an entire new resign and sing and i think that type of limited remand would make much more sense given in particular the volume of the record the volume of the arguments the volume of the briefing i don't think there's any reason to force the district court to go through that all again simply to correct what was clearly a technical  additional question she have twenty seconds to wrap up what i'd like to do just briefly is address the victim letters which the court started with because if you look at the victim letters that was the basis for the court departing upward four levels and the court explained that that was a based on the egregious harm that these victims had suffered and i just want the court to recognize the guidelines recognized that itself is an appropriate basis for a departure it was harm outside the economic harm and that provided a rebuttal thank you first i want to address counsel's argument that when the court went up for a levels it was a variance not a departure and then and it just wasn't a variance is where a court you know picks a sentence that's outside the guideline range and here the court increased the offense level to thirty three increased the guideline range and so this is not a variance and you know to the extent counsel saying well it could have been a variance and that would have been ok then why have the guidelines at all i mean if a court can just you know say well this enhanced man is not more into it and i'm going to increase the guideline range to whatever i want anyway then you know we might as well just throw it out and only review for substantive reasonable this but we do still care about how court calculates the guidelines in this case there is no basis for that for level increase just quickly with respect to the you your honor asked about you know were all the people who submitted these letters and who spoke in court deemed victims and at sentencing the answer is clearly no many and most of them were deemed  not to be vic and it was almost a sort of bait and switch because when they were called to testify and when the letters were submitted mr gearhart said you know i have no problem with this so long as the court won't consider these if these people are victims and the court was like yes yes i understand how are you defining victim for purposes of sentencing a victim is you know one that the court deems to be a victim and of course that mean economic or does that mean that it didn't emotionally affect them or well there's a there's a definition which i can find but it is someone who has suffered some part of the loss i think some part of the actual loss and the court said these people you know the the government didn't show that these people suffered part of the actual loss by clear and convincing evidence they're not victims for sentencing and despite the fact that the defendant only allowed these people to testify with the understanding the court wouldn't consider them if they were victims then the court clearly did consider them which is sort of you know if the court hadn't agreed to the condition then than mr garrett would have objected more strenuously to them speaking i want to speak quickly about the rule thirty two error and the heritage  of bank because the government argues that there wasn't anything in the p s r that said heritage oaks banks didn't know about the reconvene and says i don't think it has to be quite that specific  paragraph fifty three and fifty four of the p s are the the probation officer said that mr hart misrepresented that he owned the property that he represented it was an income bird and it was in response to those statements that mr hurd came back and said he didn't misrepresent that it was an income because the banks knew when they had the documents in front of them that there was a prior trust deed the trustee was listed the trust deed was known and that's the factual dispute that the court was was required to address it because it did matter it did matter whether they knew because if you look at the contract between mr pure heart and h o b you know it says that title is clear to the extent except you know revealed on the title report and there are remedies in there for if a title is not clear but you know the heritage oaks bank was aware that this prior trustees existed and