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Parties Involved:
Kenneth E. Haddock
Appellant
United States of America
Appellee

Document Text:

PUBLISH 

IN THE UNITED STATES COURT 

FILED eals 

OF APP~ States court of APP 

Tenth Clrcult 

FOR THE TENTH CIRCUIT MAR 0 91995 

UNITED STATES OF AMERICA, ) 

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PATRICK FISHER _ Clerk 

Plaintiff-Appellee, 

v. No. 94-3239 

KENNETH E. HADDOCK, 

Defendant-Appellant. 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF KANSAS 

(D.C. No. 90-20074-01) 

Samuel Rosenthal of Curtis, Mallet-Prevost, Colt 

Washington, D.C., for Defendant-Appellant. 

& Mosle, 

Kurt J. Shernuk, Assistant United States Attorney (Randall K. 

Rathbun, United States Attorney, with him on the brief), Kansas 

City, Kansas, for Plaintiff-Appellee. 

Before ANDERSON and HOLLOWAY, Circuit Judges, and DOWNES,** 

District Judge. 

HOLLOWAY, Circuit Judge. 

**Honorable William F. Downes, United States District Judge for 

the District of Wyoming, sitting by designation. 

Appellate Case: 94-3239 Document: 01019282421 Date Filed: 03/09/1995 Page: 1 
Defendant-Appellant Kenneth E. Haddock appeals from the 

district court's judgment and sentencing order which required him 

to pay $76,732 in restitution to the Central National Bank, 

Herington Branch. 

u.s.c. § 1291. 

Appellate jurisdiction is proper under 28 

I 

This is Haddock's third appeal in this case. In United 

States v. Haddock, 956 F.2d 1534·, modified on reh'g, 961 F.2d 933 

(lOth Cir.), cert. denied, 113 S. Ct. 88 (1992) (Haddock I), we 

affirmed Haddock's conviction on eight of the ten counts of the 

indictment. The underlying facts are set out in that opinion and 

need not be repeated. 

In United States v. Haddock, 12 F.3d 950 (lOth Cir. 1993) 

(Haddock II), we affirmed the district court's denial of Haddock's 

post-conviction claim of ineffective assistance of counsel, but 

remanded for resentencing because the district court had 

miscalculated the amount of actual loss and had therefore 

miscalculated the total offense level under the Sentencing 

Guidelines. After thoroughly analyzing the transactions involved, 

we calculated the amount of actual loss to be approximately 

$76,000, justifying a five level increase rather than a seven 

level increase in the offense level under the applicable 1987 

Sentencing Guidelines. This made the proper sentencing range 24 

to 30 months, rather than 30 to 37 months. Id. at 964. 

On remand the district court sentenced Haddock to a prison 

term of 27 months and a period of supervised release of three 

years. The court also ordered Haddock to pay $76,732.00 in 

2 

Appellate Case: 94-3239 Document: 01019282421 Date Filed: 03/09/1995 Page: 2 
.restitution to the Central National Bank, Herington Branch. The 

court ordered that the restitution be paid in installments through 

the Inmate Financial Responsibility Program of the Federal Bureau 

of Prisons, with any balance remaining to be paid during the 

period of supervised release in installments and the amount of the 

monthly payments to be determined by the Probation Office.l In 

this third appeal Haddock challenges only the order for 

restitution. 

II 

A. Issues raised. 

Haddock raises three issues regarding the order of 

restitution. First, he argues that the order of restitution must 

be reversed because the district court failed to take into account 

whether Haddock had the ability to pay the restitution. He also 

asserts that there was no factual basis to support a conclusion 

that Haddock had the ability to pay, had such a finding been made. 

Second, Haddock argues that the judge's order for restitution in 

the third sentencing was vindictive because the court had not 

ordered restitution in the previous two sentencings before his 

challenges to those rulings. Third, Haddock asserts that the 

payee designated in the restitution order, Central National Bank, 

Herington Branch (CNB}, was not a victim of the crime; that he was 

entitled to corrections on the amount of loss; therefore the 

district court erred in ordering the restitution required to CNB. 

1 

We discussed the Inmate Financial Responsibility Program in 

United States v. Williams, 996 F.2d 231, 234 (lOth Cir. 1993}. 

3 

Appellate Case: 94-3239 Document: 01019282421 Date Filed: 03/09/1995 Page: 3 
B. Ability to pay restitution. 

Under 18 U.S.C. §§ 3663 and 3664, a sentencing court may 

order that a convicted defendant make restitution to the victims. 

In deciding whether to order restitution, the sentencing court 

must "consider the amount of the loss sustained by any victim as a 

result of the offense, the fina~cial resources of the defendant, 

the financial needs and earning ability of the defendant and the 

defendant's dependents, and such ·other factors as the court deems 

appropriate." 18 U.S.C. § 3664(a). 

"Absent an abuse of or failure to exercise discretion, we 

will not disturb an order of restitution." United States v. 

Clark, 901 F.2d 855, 856 (lOth Cir. 1990). We review the district 

court's factual findings underlying a restitution order under the 

clearly erroneous standard. United States v. Rogat, 924 F.2d 983, 

984-85 (lOth Cir.), cert. denied, 499 U.S. 982 (1991). 

In Rogat, we said that "[t]he statute requires only that a 

sentencing judge consider the defendant's financial condition; the 

judge need not specifically recite his findings regarding that 

condition." 924 F.2d at 986. However, we have also held that "a 

restitution order 'must be consistent with a defendant's ability 

to pay.'" United States v. Gilbreath, 9 F.3d 85, 86 (lOth Cir. 

1993) (quoting United States v. Mcilvain, 967 F.2d 1479, 1481 

(lOth Cir. 1992)). An order of restitution "must be supported by 

at least some indication that a defendant has assets or earning 

potential." Gilbreath, 

substantial ambiguity as 

9 F. 3d at 86. And " [w] hen there is 

to whether the judge considered the 

4 

Appellate Case: 94-3239 Document: 01019282421 Date Filed: 03/09/1995 Page: 4 
_statutory factors, specific factual findings in the record may be 

required for effective appellate review." Rogat, 924 F.2d at 986. 

Here, the district court ordered restitution of $76,732 to 

CNB. Haddock argues that the district judge refused to consider 

Haddock's ability to pay and held that proving that he could not 

pay "can come at a different time." Appellant's Brief at 16 

(citing Joint Appendix [J.A.] at 149). Alternatively, he urges 

that even if the judge had not refused to make findings on his 

ability to pay, the restitution order would have to be reversed 

because there was no basis for concluding that Haddock could make 

such restitution. Appellant's Brief at 17. 

The presentence report contains conflicting statements 

regarding Haddock's financial condition. The report was 

originally prepared in January 1991, and had been revised 

following each of Haddock's two prior appeals. However, the 

revised report indicates that no additional financial information 

had been requested since December 1990. It is unclear why the 

probation office did not seek to update this information in light 

of the fact that the financial information was considered 

inadequate when the original report was prepared. The report 

notes a substantial discrepancy between Haddock's financial 

condition as reported to the probation office in a December 1990 

interview and as represented by Haddock to a bank in connection 

with a loan application made about July 6, 1990. In view of that 

discrepancy, the report in paragraph 86 states: "Based upon the 

preceding information, an accurate assessment of the defendant's 

financial condition is not possible, however, the information 

5 

Appellate Case: 94-3239 Document: 01019282421 Date Filed: 03/09/1995 Page: 5 
_provided by Mr. Haddock to financial institutions reflects the 

ability to pay a fine." 

As revised for the 1994 sentencing, the presentence report 

acknowledged the staleness of the information obtained more than 

three years before and the fact that significant changes had 

occurred in Haddock's circumstances in the interim. Most 

significantly, Haddock had been convicted of murder in state court 

in 1993 in connection with the death of his wife in 1992, is 

presently serving his state prison sentence, and has been in 

custody since November 27, 1992. Thus, the latest revised 

presentence report states in paragraph 87: 

A substantial amount of time has passed since the 

preparation of the financial profile contained in th~s 

report. The specific financial condition of Mr. Haddock 

is unknown at this time and he may not now possess the 

ability to pay a fine. This opinion is based on the 

lack of adequate information to determine specific 

assets and liabilities incurred by the defendant for 

representation in a recent criminal prosecution and the 

appeals of the federal conviction. 

J.A. at 267 (emphasis added). 

Thus the record indicates that there was no reliable basis 

for the sentencing court to conclude that Haddock had assets from 

which to pay the restitution. Neither was there evidence 

concerning Haddock's future earning ability. It would have been 

unreasonable to conclude that Haddock could return to his area of 

previous employment, banking, following this conviction. His only 

other prior work experience was in teaching, a vocation from which 

we likewise must expect that he will be excluded in light of this 

conviction and the murder conviction. 

6 

Appellate Case: 94-3239 Document: 01019282421 Date Filed: 03/09/1995 Page: 6 
In addition, during the sentencing hearing the district judge 

stated: 

All the Court is finding--that the Court at this time is 

finding that the loss has been determined by the lOth 

Circuit Court of Appeals, and I'm ordering restitution 

based on that finding. The matter of proving that you 

cannot pay it or that you should not pay it, that, 

perhaps. can come at a different time. 

J.A. at 149 (emphasis added). This statement strongly suggests 

that Haddock's ability to pay was not taken into account before 

imposing the order of restitution.2 

During Haddock's first sentencing the judge had stated, "I'm 

also concerned that funds be available to support the defendant's 

children and to help the defendant's wife with her support of the 

family, so I'm not going to assess a fine in this case." Id. at 

75-76. At the latest sentencing on July 1, 1994, Haddock's 

2 

We think it unlikely that the district judge completely 

overlooked his duty to determine Haddock's .ability to pay, 

notwithstanding his comment that "proving you cannot pay it . . . 

can come at a different time." As the district judge no doubt 

realized, pursuant to section 3663(g), failure to complete 

payments within the specified time could lead to revocation of the 

period of supervised release or to a finding of contempt. 

However, that subsection also provides that in the event of such 

failure, in considering the appropriate action to be taken the 

court "shall consider the defendant's employment status, earning 

ability, financial resources, the willfulness of the defendant's 

failure to pay, and any other special circumstances that may have 

a bearing on the defendant's ability to pay." 

Probably this procedure was what the district court 

envisioned, and other courts have affirmed restitution orders made 

in contemplation of the possibility that the defendant might 

ultimately be relieved of some of the financial responsibility if 

the defendant was unable to pay the full amount despite good faith 

efforts. United States v. Blanchard, 9 F.3d 22, 23-25 (6th Cir. 

1993); United States v. Ruffen, 780 F.2d 1493, 1495-96 

(9th Cir.), cert. denied, 479 U.S. 963 (1986). Nevertheless, this 

possibility for "remittitur" if Haddock ultimately proves to be 

unable to pay the full amount of restitution ordered cannot 

substitute for the statutorily required initial consideration of 

his ability to pay. 

7 

Appellate Case: 94-3239 Document: 01019282421 Date Filed: 03/09/1995 Page: 7 
-·children were 19, 17, and 14 years old. Notwithstanding the 

reasonable inference from the evidence that Haddock's financial 

condition could only have worsened in the more than three years 

since the sentencing report had originally been prepared, and in 

spite of his previously expressed concern about Haddock's 

children, the sentencing judge made only general statements 

indicating that these important factors had been assessed. At the 

July 1994 sentencing the court said: 

[A]fter consideration of the amount of loss sustained, 

the questionable financial resources of the defendant, 

the future earnings ability of the defendant, and the 

financial needs of the defendant and his dependents, he 

should be required to make restitution as hereinafter 

ordered, so . . . the defendant is ordered to pay 

restitution to Central National Bank, Herington Branch, 

in the amount of [$]76,732. Restitution is to be paid 

through the Federal Bureau of Prisons Inmate Financial 

Responsibility Program while [defendant is] 

incarcerated, and following incarceration, any balance 

shall be paid as set out in the special conditions of 

supervised release. 

. . . [I]n view of the lOth Circuit remand and the 

financial uncertainty of the defendant, no fine will be 

imposed. 

Id. at 120-21. 

In its brief, the government notes that the presentence 

report found that Haddock had a college education and continuous 

work history, but concedes that his current financial condition is 

unclear given his recent state conviction in Kansas and resulting 

life sentence. Haddock's financial situation has not been 

reassessed since his state conviction. Consequently, no 

meaningful analysis on this record of his ability to pay is 

possible. 

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Appellate Case: 94-3239 Document: 01019282421 Date Filed: 03/09/1995 Page: 8 
The government also notes that the district court stated that 

it had considered "the questionable financial resources of the 

defendant and his future earning capacity as well as the financial 

needs of his dependents." Appellee's Brief at 5. However, as to 

Haddock's ability to pay restitution, this seems to be belied by 

the court's own statement at sentencing that "[t]he matter of 

proving that you cannot pay it or that you should not pay it, 

that, perhaps, can come at a· different time." J.A. at 149. 

Further, although the court indicated it had considered the needs 

of Haddock's dependent children, the record is devoid of 

information on which such consideration could be given. 

In sum, there is simply too little in the record before us to 

demonstrate that the sentencing court adequately considered 

Haddock's ability to pay. We cannot discern the basis for any 

conclusion which may have been implied that Haddock had the 

ability to make the restitution ordered. This lack of support for 

the court's implicit conclusion that Haddock could pay the 

restitution requires remand for further consideration. United 

States v. Mitchell, 15 F.3d 953, 958 (lOth Cir. 1994) (finding of 

ability to pay could not be implied where no underlying facts 

would support such a finding); see also Rogat, 924 F.2d at 985 

(possibility that restitution can be paid cannot be based solely 

on chance) .3 

3 

On several other occasions we have vacated orders for 

restitution where there was insufficient evidence that the 

prospects for payment were realistic. See. e.g., United States v. 

Patty, 992 F.2d 1045, 1052-53 (lOth Cir. 1993); United States v. 

Mcilvain, 967 F.2d 1479, 1481-82 (lOth Cir. 1992); United States 

(Footnote continued on next page) 

9 

Appellate Case: 94-3239 Document: 01019282421 Date Filed: 03/09/1995 Page: 9 
For these reasons, we will vacate the order for restitution 

and remand for a determination on the defendant's ability to pay 

and for consideration of the relevant factors, including the needs 

of his dependent children. 

C. Was the order of restitution vindictive? 

Defendant Haddock argues that there is a presumption of 

vindictiveness where, as here, the sentencing judge fails to set 

forth the basis for his departure from the earlier sentence. 

Defense counsel says he explicitly called the judge's attention to 

the fact that he had twice earlier ruled that no fine or order of 

restitution would be imposed; that nothing had changed other than 

the fact that defendant had successfully appealed his sentence 

twice, without the government contesting the failure to order 

restitution. Brief of Appellant at 20-21; J.A. at 122-23. 

Defendant relies on North Carolina v. Pearce, 395 U.S. 711, 725-26 

(1969), and United States v. Sullivan, 967 F.2d 370, 374 

(lOth Cir.), cert. denied, 113 S. Ct. 285 (1992), 

cert. denied, 113 S. Ct. 1013 (1993), contending that when a judge 

imposes a more severe sentence on a defendant after a new trial, 

the reasons for doing so must affirmatively appear to overcome a 

presumption of vindictiveness; that here the presumption was not 

addressed by the judge and the statements by him only heighten·the 

(Footnote continued) : 

v. Grimes, 967 F.2d 1468, 1473 (lOth Cir.), cert. denied sub nom. 

McGlynn v. United States, 113 S. Ct. 355 (1992); United States v. 

Kelley, 929 F.2d 582, 587 (lOth Cir.), cert. denied, 502 U.S. 926 

(1991); United States v. Dunning, 929 F.2d 579, 581 (lOth Cir.), 

cert. denied, 502 U.S. 879 (1991); United States v. Clark, 901 

F.2d 855 (lOth Cir. 1990). 

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Appellate Case: 94-3239 Document: 01019282421 Date Filed: 03/09/1995 Page: 10 
_view that he intended to punish the defendant for exercising his 

constitutional rights by his appeals. Brief of Appellant at 23. 

The government responds that the vindictiveness argument is 

frivolous and finds no support in the record; that the judge had 

said the reason for not having ordered restitution was based on 

the difficulty of calculation of the loss at the time of the 

original sentencing; that here the sentence of imprisonment was 

reduced although an order for restitution was imposed; and that 

in any event the restitution order was not challenged below for 

vindictiveness so that we could only review for plain error. 

Brief of Appellee at 6. 

While the vindictiveness contention was not developed with 

legal citations, defendant's counsel did point out that at the 

first two sentencings, no restitution was ordered; that defendant 

then appealed twice on grounds felt to be meritorious and obtained 

some relief; that nothing had changed on defendant's ability to 

pay or on issues that bear on restitution; and there was no 

reason for departing from the orders entered twice so that no 

restitution should be ordered as before. J.A. at 122-23, 126. 

We feel the issue was sufficiently raised so that defendant 

may argue its merit here. However, since we are vacating the 

order for restitution on other grounds and are remanding for a 

determination on ability to pay and for consideration of the 

factors bearing on restitution, we do not know whether such an 

order for restitution will ultimately be imposed. We thus think 

it premature and improper to pass on the vindictiveness claim now 

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Appellate Case: 94-3239 Document: 01019282421 Date Filed: 03/09/1995 Page: 11 
_and express no view on its merits. 

D. was Central National Bank a proper recipient of restitution? 

In the sentence imposed, the trial judge ordered that 

defendant Haddock make restitution to the CNB as payee in the 

amount of $76,732. The order specified that the payment be made 

in installments paid through the Federal Bureau of Prisons' Inmate 

Financial Responsibility Program and with any balance to be paid 

as set out in the special conditions of supervised release. J.A. 

at 20. 

Defendant Haddock's brief, pp. 23-24, argues that if CNB is a 

recipient of restitution, it would have a windfall, there being no 

evidence it was a victim; that Haddock was denied any opportunity 

to offer evidence regarding the amount of any "loss" to any 

victim. We will address the question whether CNB could properly 

be designated as recipient of restitution. However, the objection 

that Haddock was denied any chance to offer evidence on the amount 

of the loss is foreclosed. In Haddock II, we determined the 

actual loss to be approximately $76,000, 12 F.3d at 963-64, and 

this amount we hold is the law of the case under the general rule. 

See United States v. Martinez, 987 F.2d 920, 923 (2d Cir. 1993). 

The government brief makes no response to the contention that 

CNB was not shown to be a "victim" and the issue is troublesome. 

Haddock's brief, p. 24, recognizes that CNB purchased assets which 

may have come from the banks involved in the loan transactions on 

which Haddock was convicted. The Presentence Report, ,r 32, notes 

that due to its having virtually no capital to protect its 

depositors, the Bank of White City was forced to merge with the 

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.Bank of Herington. The White City Bank was merged and White City 

lost its independently chartered bank and was left with a branch 

office of the Bank of Herington. J.A. at 253. Haddock testified 

that CNB is a Junction City bank "that purchased the Bank of 

Herington and White City as it was through the Topeka bank [which] 

actually took control of the bank after I left the bank." J.A. at 

139. 

Mr. Schweer, Probation Officer for the District of Kansas, 

testified that he gathered information for the Presentence Report. 

He referred to the Bank of White City or the Bank of Herington as 

the "victim bank." J.A. at 133. In Haddock II we determined the 

actual loss on Count Six to the White City Bank was $51,732. 12 

F.3d at 962. On Count Nine, we determined that the actual loss to 

the White City Bank resulting from Haddock's fraud should include 

$25,000 due to misrepresentations. Id. at 962-63. Thus the 

actual loss we determined of approximately $76,000 was related to 

losses of the White City Bank. 

The Bank of White City's assets were apparently acquired by 

CNB. This is a reasonable inference from Haddock's testimony that 

CNB purchased the Bank of Herington and the Bank of White City. 

J.A. at 139. We feel this makes proper the position taken by 

Mr. Farris of CNB that CNB should be the payee of any restitution 

imposed by the court in sentencing Mr. Haddock. J.A. at 147. We 

are persuaded that CNB can properly receive the restitution 

payments since it acquired the claims of the defunct Bank of 

White City. See United States v. Smith, 944 F.2d 618, 621-22 

(9th Cir. 1991), cert. denied, 112 S. Ct. 1515 (1992) (FSLIC 

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.treated as proper recipient of restitution due to assignment of 

assets including claims); United States v. Rochester, 898 F.2d 

971, 980 n.7 (5th Cir. 1990) (same); United States v. Ryan, 874 

F.2d 1052, 1053 (5th Cir. 1989) (same). 

In sum, we hold that designating CNB as payee of restitution 

by Haddock was not in error. 

III 

Accordingly, the restitution· order entered on July 1, 1994, 

is VACATED. The case is REMANDED to the district court for a 

determination on the defendant Haddock's ability to pay 

restitution, including 

determination.4 

4 

the relevant factors governing that 

Entered for the Court 

William J. Holloway, Jr. 

Circuit Judge 

On October 21, 1994, Haddock, filed a motion to supplement 

the record pursuant to Fed. R. App. P. 10(e). Haddock seeks to 

submit two letters from an accountant, T. Teal Dakan, related to 

the amount of loss suffered by CNB. In the July 28, 1994 letter 

to AUSA Shernuk, Dakan discussed the acquisition of failed banks 

from the FDIC. However, he admits that he is "not familiar with 

the details of the CNB acquisition." July 28, 1994 letter at 2. 

Therefore, the only purposes for supplementing the record would be 

to put in Dakan's general knowledge of how failed banks are 

acquired, and his view on the actual losses, which have been 

determined. In effect, Haddock is attempting to introduce expert 

testimony through the back door and to reopen the loss issue. The 

letters are neither necessary nor helpful to the resolution of 

this appeal, and the motion to supplement is denied. 

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