UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v. No. 95-5866

ROBERT J. MERRITT,

Defendant-Appellant.

Appeal from the United States District Court

for the District of Maryland, at Baltimore.

Frederic N. Smalkin, District Judge.

(CR-95-167-S)

Argued: March 7, 1997

Decided: June 4, 1997

Before WILKINSON, Chief Judge, and RUSSELL and

HALL, Circuit Judges.

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Affirmed by unpublished per curiam opinion.

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COUNSEL

ARGUED: Michael Scott Evans, Manhattan Beach, California, for

Appellant. Kathleen O'Connell Gavin, Assistant United States Attorney, Baltimore, Maryland, for Appellee. ON BRIEF: Lynne A. Battaglia, United States Attorney, Baltimore, Maryland, for Appellee.

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Unpublished opinions are not binding precedent in this circuit. See

Local Rule 36(c).

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OPINION

PER CURIAM:

Robert J. Merritt appeals his convictions of bank fraud and of twice

making false statements to a financial institution. He also contends

that the district court incorrectly calculated his sentence. We affirm.

I.

During the autumn of 1994, Merritt, doing business as Mortgage

Partners Group, Ltd. (MPG) of Pasadena, California, negotiated with

Dr. Lazslo Tauber of Bethesda, Maryland, for the purchase of eight

commercial office buildings in Washington, D.C., and New York

City, priced at $736 million. Merritt was unable, however, to meet

Tauber's demand for $5 million in earnest money, so Tauber found

another buyer. During the early stages of their negotiations, Tauber

supplied Merritt with a substantial amount of personal financial information, including the names of the banks with which he did business.

On February 17, 1995, Merritt telephoned one of those banks, the

First National Bank of Maryland (FNB), seeking to obtain a letter of

credit for $300 million. Robert McLewee, a senior vice-president in

FNB's mortgage banking department, returned Merritt's call. When

McLewee dialed the number in California that Merritt had left, he was

greeted by an automated answering system that permitted the caller

to connect to any of several businesses, one of which offered psychic

readings. McLewee reached Merritt at his office and arranged to have

Adele Ammons, a vice-president in the bank's real estate department,

contact him by telephone.

McLewee's encounter with Merritt raised the former's suspicions.

FNB alerted the Secret Service, which obtained Ammons's consent to

record her conversations with Merritt. During the next ten days, by

phone calls, mailings, and facsimiles, Merritt filled in the details of

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his proposal. He represented to Ammons that MPG was negotiating

with a pension fund, Provider's Plus, to borrow $500 million to

acquire office buildings in Washington, D.C.

Merritt proposed depositing $200 million of the loan proceeds with

FNB, which would issue a certificate for that amount bearing six percent interest. In return, FNB was to provide Merritt with a $300 million letter of credit, to be used as security for the loan with Provider's

Plus; the bank would draw down the certificate of deposit to make

MPG's annual $30 million interest payments to Provider's Plus for

the ten-year term of the loan. At the end of the ten years, having paid

out $300 million, FNB would retain the balance of the certificate,

which Merritt said would amount to approximately $13 million.

Merritt mailed FNB a "business profile" of MPG. Dr. Tauber was

listed as one of Merritt's partners, to whom the profile attributed

approximately 94% of the partnership's assets. Stanley Smith, said to

be a retired Air Force colonel who had served as a director on the

boards of two major corporations, was also named as a partner, and

Owen Haynes, a contractor, was, according to the profile, MPG's

"Clerk of the Works."

In actuality, neither Tauber nor Haynes was associated in any way

with Merritt or MPG. Smith was, at least nominally, Merritt's partner,

and he had served in the Air Force, but he had never risen beyond the

rank of First Lieutenant and he had never served on any corporate

board.

Smith, apparently believing Merritt to be a legitimate businessman,

had given him more than $450,000 in cashier's checks over a 3-4 year

period, but had never realized any return on those"investments."

Indeed, on October 12, 1993, following an investigation by the Attorney General of California, Merritt consented to the entry of a judgment in that state's Superior Court. The accompanying order enjoined

Merritt from selling unregistered securities, and it directed that he pay

$70,000 restitution to Smith and to Smith's two sons. Smith never

collected on the judgment, however, because he agreed to allow Merritt to roll the debt over into a new investment scheme.

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Provider's Plus, as it turned out, was not a pension fund with $500

million to lend. It was instead a telemarketing company with assets

of $15,000.

Merritt was charged with bank fraud and with three counts of making false statements to a financial institution, in violation of, respectively, 18 U.S.C. §§ 1344 and 1014. As to the latter three charges, it

was alleged that Merritt had falsely represented to FNB that (1) MPG

was in the process of acquiring office buildings in the Washington,

D.C., area; (2) Provider's Plus would supply the $200 million necessary to obtain the letter of credit; and (3) Dr. Tauber was associated

with MPG. The jury acquitted Merritt of the first of the three falsestatement charges, but it found him guilty of the others and of the

fraud. The district court entered a judgment of conviction on the verdicts, and it sentenced Merritt to 70 months in prison. Merritt appeals

his convictions and his sentence.

II.

Though his trial counsel lodged no objection, Merritt now contends

that the government should not have been permitted to introduce evidence of Smith's payments and the California judgment order. He

maintains that this evidence was of "other crimes, wrongs, or acts,"

generally proscribed by Fed. R. Evid. 404(b). The government counters that the evidence revealed the true nature of Smith's relationship

with Merritt, and, thus, that Merritt lied to FNB about that relationship. According to the government, the link between Merritt's representations concerning Smith and the scheme to defraud FNB resulted

in Merritt's dealings with Smith being direct evidence of the scheme,

and not 404(b) evidence.

Plainly, Merritt was not charged with making false statements to

FNB regarding Smith. Nevertheless, even were we to accept Merritt's

characterization of the evidence as relevant only to demonstrate his

seeming propensity to devise fraudulent real estate schemes, we do

not believe that he was sufficiently prejudiced by its admission to

warrant vacation of his convictions for plain error. See Fed. R. Crim.

P. 52(b); United States v. Loayza, 107 F.3d 257, 262-63 (4th Cir.

1997) (absent timely objection at trial, only those errors or defects

affecting the defendant's substantial rights may be noticed). Merritt

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was accused of very well-defined crimes, i.e. , making specific false

statements to FNB which, in turn, amply evidenced an intentional

scheme to defraud. This was hardly the type of case in which the

jurors' collective judgment was likely to be colored by mention of

extraneous matters; indeed, Merritt's acquittal on the first falsestatement count strongly indicates that this jury paid attention to the

evidence and understood its charge.1

III.

Having satisfied ourselves that Merritt's convictions were validly

obtained, we move on to consider his sundry attacks on his sentence.

Some background is in order.

A.

1.

The base offense level for fraud is 6, but an upward adjustment of

1-18 levels may be called for, depending on the loss attributable to the

fraud. United States Sentencing Commission, Guidelines Manual,

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1 To the extent that evidence of Merritt's dealings with Smith might

have been erroneously admitted, the error was not compounded by the

admission of evidence concerning the California judgment order. On

cross-examination by defense counsel, Smith testified that Merritt had

never promised him that his investment would be risk-free. Smith's testimony appears to have been at odds with the terms of the judgment order,

which enjoined Merritt from continuing to represent that the risks attendant to his investment programs were "either minimal or essentially nonexistent." In light of Smith's testimony on cross-examination, the district

court allowed the government to inquire about the terms of the injunction

on redirect. This impeachment of Smith was necessary to avoid leaving

the jury with a false impression, and, therefore, was entirely appropriate.

Merritt's final challenge to his convictions -- that the Secret Service

was required to obtain a court order before recording his telephone conversations with Ammons -- is entirely without substance. The plain language of the wiretap statute permits the government to record any

communication with the prior consent of one of the parties. See 18

U.S.C. § 2511(2)(c).

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§ 2F1.1(a)-(b) (Nov. 1994).2 At the extremes, the base offense level

is not adjusted for losses to the victim(s) of $2,000 or less, but losses

exceeding $80 million merit the maximum 18-level increase. In fraudulent loan application and contract procurement cases, if the intended

loss exceeds the actual loss, Application Note 7(b) specifies that the

former is to be used to calculate the applicable increase. The Note

also provides, however, that where the loss calculation significantly

understates or overstates the seriousness of the defendant's conduct,

the district court may depart from the indicated level.

2.

With the above principles in mind, the district court upwardly

adjusted Merritt's base offense level by 18; the court found that,

although FNB had suffered no actual loss as the result of Merritt's

crimes, the intended loss amounted to $100 million. The district

court's calculation was premised upon the hypothetical loss that

would have occurred had FNB actually issued the $300 million letter

of credit, and had then been forced to honor it prior to any significant

interest having accrued on the $200 million certificate of deposit.

The court then downwardly departed 4 levels, on the ground that

a loss adjustment increase totaling 14 levels more accurately reflected

the seriousness of Merritt's conduct. To the loss-adjusted offense

level of 20, the district court added 6 additional levels: 2 for more

than minimal planning, see USSG § 2F1.1(b)(2)(A); 2 because the

acts constituting Merritt's offenses violated the California judgment

order, see USSG § 2F1.1(b)(3)(B); and 2 for obstruction of justice,

pursuant to USSG § 3C1.1. The resultant adjusted offense level of 26,

in conjunction with Merritt's criminal history (Category I), produced

a sentencing range of 63-78 months' imprisonment. Except for the

planning-based increase, Merritt contests all of the offense level

adjustments contributing to the 70-month sentence ultimately

imposed.

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2 Merritt was sentenced on October 25, 1995, within the effective dates

of the 1994 Guidelines Manual.

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B.

The district court colorfully described Merritt's scheme as "cockamamie," and it opined that the letter of credit"would probably not

have been issued by any sane institution." Merritt seizes upon this

characterization and the court's observation that Provider's Plus

lacked "two nickels to rub together" (much less the wherewithal to

lend Merritt the seed money that was the agreed-upon prerequisite to

obtaining the letter of credit), arguing forcefully that, inasmuch as it

was "impossible" for FNB to have actually sustained a loss, no loss

enhancement should apply.

Merritt's argument fails at the outset; though it was, perhaps,

highly improbable that his scheme would be successful, it was not

"impossible." To begin with, we know of no authority that would

entitle a person convicted of a crime to a lesser sentence based on the

happenstance that the intended victim was resistant to being victimized.3

That being the case, we must examine the scheme in the abstract and

recognize the possibility that some bank (perhaps an "insane" one)

might have swallowed Merritt's story, and, if it had, that it could have

lost $100 million. Merritt could have found an alternative source for

the seed money or, more likely, he could have finagled the issuance

of the letter of credit on his word that deposit of the $200 million was

imminent.4

Admittedly, determining a "loss" where none has actually occurred

involves more uncertainty than we might ordinarily be comfortable

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3 There is authority, certainly, for increasing a defendant's punishment

for having selected a victim who is especially prone to the offense. See,

e.g., United States Sentencing Commission, Guidelines Manual,

§ 3A1.1(b) (Nov. 1995) (providing for a 2-level upward adjustment

where the victim was "unusually vulnerable due to age, physical or mental condition" or was "otherwise particularly susceptible to the criminal

conduct"). The discrepancy is one of the risks assumed by those who

decline to behave within the confines of the law.

4 The district court put it more bluntly, but no less accurately: "All you

have to do is sit down and read the cases of bankers who have been

defrauded and you would understand that a lot of them have an IQ about

the . . . size [of] their shoe."

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with in deciding how much time a person must spend in prison. The

evidence in this case raises a fair inference that Merritt fudged his credentials in the hope of becoming a legitimate real estate investor, but

that he lacked the sophistication to realize the transparency of his proposal; it may well be that he did not intend FNB to suffer any loss.5

Nevertheless, cheats and swindlers who go down swinging for the

bleachers ought to be punished more severely than those who bunt

foul on the third strike.

C.

The two-level increase for obstruction of justice stems from Merritt's actions upon his release from custody following arrest, which he

secured by posting a $15,000 cash bond. On May 23, 1995, Merritt

moved to substitute for the cash a house in California that his landlord

had conveyed to him by quitclaim deed two weeks earlier. The

motion was denied. It was subsequently revealed that Merritt had

failed to disclose to the court that he had simultaneously devised a

second quitclaim deed re-conveying the property to the landlord that,

by written agreement, he would be bound to execute in the event that

he was unable to obtain refinancing of the loan note within forty-five

days.

Inasmuch as the agreement to execute the second quitclaim deed

could have interfered with the district court's interest in the property

(had it actually been substituted for the cash), the court found that

Merritt's failure to disclose its existence resulted in his "providing

materially false information to a judge or magistrate." USSG § 3C1.1,

comment. (n.3(f)). The district court's finding is not clearly erroneous; the two-level increase was, therefore, appropriate.6

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5 Though Merritt may not have intended any loss, it does not follow

that the "intended loss," for sentencing purposes, must be zero. It is sufficient that Merritt intended to induce FNB to "unknowingly subject itself

to a significant and unappetizing risk[.]" United States v. Baum, 974 F.2d

496, 499 (4th Cir. 1992). In such a case, the potential consequences of

that risk provide the best measure of the loss that was "intended." Id.

6 We are likewise unpersuaded by Merritt's remaining argument

respecting the validity of his sentence. Merritt's scheme clearly consti-

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IV.

Merritt's convictions and his sentence are affirmed.

AFFIRMED

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tuted a violation of the California judgment order, the terms of which

enjoined him from "[m]aking . . . any untrue or misleading statements in

connection with the sale [or] offer for sale[of], or inducement to purchase . . . interests in real estate." The order plainly applies to statements

made concerning "the sale" of real estate; it is of no moment that, with

regard to the transaction actually proposed by Merritt, he was to be the

purchaser -- and not the seller -- of the Washington, D.C., office buildings. Thus, the district court properly applied the two-level increase provided by USSG § 2F1.1(b)(3)(B) for offenses involving the "violation of

any judicial . . . order, injunction, decree, or process[.]"

We note finally that we may not review the district court's decision to

refuse Merritt's request for a downward departure in order to care for his

mother, absent an indication (not present here) that the court mistakenly

believed that it lacked the legal authority to depart. See, e.g., United

States v. Fletcher, 74 F.3d 49, 56 (4th Cir.), cert. denied, 117 S. Ct. 157

(1996).

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