United States Court of Appeals

FOR THE EIGHTH CIRCUIT

____________

No. 02-1577SI

____________

United States of America, *

*

Appellee, *

* On Appeal from the United

v. * States District Court

* for the Southern District

* of Iowa.

Albert A. Wheeldon, *

*

Appellant. *

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Submitted: October 8, 2002

Filed: December 27, 2002 

___________

Before BOWMAN, RICHARD S. ARNOLD, and LOKEN, Circuit Judges.

___________

RICHARD S. ARNOLD, Circuit Judge.

This appeal involves a 30 month sentence imposed on Albert Wheeldon for

committing bankruptcy fraud. One of the principal factors determining the sentence

under the Guidelines is the amount of loss inflicted by the fraud. See U.S.S.G.

§ 2B1.1(b). Sometimes the computation of loss is complicated. What happens, for

example, if the actual loss differs from the intended loss? In general, under

Application Note 2 to the Guideline just cited, loss means the greater of actual loss

or intended loss. In the present case, there was no actual loss: the discharge that Mr.

Wheeldon was attempting to obtain in bankruptcy by fraud was never granted. So the
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issue is the amount of the intended loss. Here, the defendant concealed the value of

certain assets. The total amount of debt for which he sought discharge was a larger

figure. Which of these two numbers is the intended loss for Guidelines purposes?

The District Court held, in accordance with the position taken by the government, that

the larger figure, the total amount of debt for which discharge was sought, was the

relevant one. With respect, we disagree. The sentence will be vacated, and the cause

remanded for further proceedings in accordance with this opinion.

I.

Albert Wheeldon applied for and received social security disability benefits in

late 1990. The benefits were to be terminated if he regained the ability to work. Mr.

Wheeldon began to operate a small lawn-care service around that time. His services

included mowing lawns, removing snow, and so forth. It is not clear exactly how

much revenue his business generated. For each of the years 1997 through 2000, the

defendant deposited between $10,000 and $20,000 into his checking account. He

received disability benefits while running his small business for a decade. Eventually

a neighbor reported Mr. Wheeldon’s fraud to the Inspector General, who began an

investigation. 

In November of 2000, Mr. Wheeldon filed a Chapter 7 bankruptcy petition.

He represented that he had no assets or income. Two months later he sold his lawncare equipment and customer list for $8,500. He was indicted for theft of government

property (wrongfully received disability benefits), making false statements to the

Social Security Administration, concealing assets from his creditors, and making false

statements in his bankruptcy filings. A jury found him guilty on all counts. He was

sentenced to 30 months in jail to be followed by three years of supervised release.

The Sentencing Guidelines require the trial court to determine the extent of the

loss the defendant intended to inflict. See U.S.S.G. § 2B1.1 & App. Note 2 (2000).
1

We apply the Sentencing Guidelines in effect on November 1, 2000, in this

case.

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Mr. Wheeldon sought to have $139,528.71 in debts discharged in his bankruptcy.

The District Court said:

I think, at least under my reading of the law, and as a finding of fact, I’m

going to find that the intention of the defendant was to deprive the

government and [his] creditors . . . of . . . the amount of $139,528.71.

That, I’m going to find that’s the loss of this case that’s attributable to

the defendant, and I think the Seventh Circuit case in Parsons, the

circuit’s two opinions in Edgar and Dolan make it so that I have to make

that finding. 

Sentencing Tr. 33. Under Sentencing Guideline § 2F1.1(b)(1)(H) (2000), this finding

of fact resulted in a seven-level increase in Mr. Wheeldon’s base offense level.1

 His

final offense level was nineteen. He argues that the most he could have intended his

creditors to lose was $64,600.70, the assets of his lawn-care business and the amount

he received in disability benefits. 

II.

The interpretation of the Sentencing Guidelines is a question of law. United

States v. Willis, 997 F.2d 407, 417 (8th Cir. 1993). In this case, where the property

concealed from creditors was worth a great deal less than the total amount of debt

sought to be discharged, what is the measure of intended loss?

We have already referred to Application Note 2. Under this provision and our

opinion in United States v. Dolan, 120 F.3d 856, 870 (8th Cir. 1997), the probable

intended loss should be used if that amount is larger than the actual loss. Here,

however, Mr. Wheeldon’s fraud was discovered, a discharge in bankruptcy was
2

Under U.S.S.G. § 2B1.1, Application Note 2(A)(ii)(II) (2002), intended loss

is said to include “intended pecuniary harm that would have been impossible or

unlikely to occur (e.g., as in a government sting operation, or an insurance fraud in

which the claim exceeded the insured value).” We think that these instances are

distinguishable from the present situation. When the government is conducting a

sting operation, for example, the defendant presumably does not know about it. His

subjective intention is to produce a certain loss, despite the fact that, because he is

dealing with the government, that loss will never actually occur. Here, however,

defendant knew, as well as anybody did, the value of his lawn-care equipment and

customer list. He could not have intended to deprive his creditors of more than that

value.

3

The government points out that the case cited in Dolan for this proposition,

United States v. Edgar, 971 F.2d 89, 95 (8th Cir. 1992), does not explicitly support

it. This is true, but the fact of the Dolan holding remains, and we are bound by it. In

any event, we believe the rule stated is sound.

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refused, and his bankruptcy petition was dismissed. His creditors therefore never

suffered an actual loss on account of the fraud. The relevant figure for sentencing

purposes is therefore the intended loss.

In Dolan, the value of the concealed asset was greater than the amount of the

debt sought to be discharged. We held that the relevant figure for sentencing

purposes was the amount of the debt. This was an upper limit on what the creditors

could possibly have lost, and therefore an upper limit on both intended loss and actual

loss.2

 In Dolan, in a bankruptcy-fraud situation, the intended loss was the lesser of

the value of the assets concealed and the value of the debtor’s liabilities. 120 F.3d

at 870.3

It belies reality to argue that Mr. Wheeldon, or a debtor similarly situated,

intended to defraud his creditors of everything he owed them solely because he failed

to disclose all of his (rather modest) assets. Suppose Mr. Wheeldon owed creditors

a million dollars. He filed a petition in bankruptcy seeking a discharge, which would
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of course have covered the entire million. He represented that he had nothing. In

fact, he did have a few hundred dollars worth of assets, which he concealed from the

court. We cannot agree that the debtor’s intention, in these circumstances, was to

inflict a loss of a million dollars. The government rightly emphasizes that

concealment of the lawn-care business as an asset was not the only count of

bankruptcy fraud on which Mr. Wheeldon was convicted. He was also misleading

about whether he was engaged in any business. But the material misrepresentation

to creditors must be limited to the assets they would have known about if the petition

had been truthful. Only that amount can be the intended loss for Guidelines purposes.

We have noted that, about two months after the filing of the bankruptcy

petition, Mr. Wheeldon sold his lawn-care business for $8,500.00. That is certainly

some evidence of what the business was worth. It is not necessarily conclusive. The

District Court will be free, on remand, to conduct additional proceedings to determine

the value of Mr. Wheeldon’s entire estate, and, in doing so, to consider such further

evidence, if any, as either side wishes to offer.

The judgment is reversed, and the cause remanded to the District Court for

further proceedings consistent with this opinion.

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.