1994 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

9-8-1994

United States of America v. Mummert

Precedential or Non-Precedential:

Docket 94-7119

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Recommended Citation

"United States of America v. Mummert" (1994). 1994 Decisions. Paper 127.

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UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

____________ 

No. 94-7119 

____________ 

UNITED STATES OF AMERICA, 

Appellee 

v. 

H. JAY MUMMERT, 

Appellant 

____________________ 

ON APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE MIDDLE DISTRICT OF PENNSYLVANIA 

(D.C. Crim. No. 93-00189) 

____________________ 

Argued: July 26, 1994 

Before: BECKER and ALITO, Circuit Judges and 

BRODY, District Judge* 

(Opinion Filed: September 8, 1994) 

____________________ 

 JOSHUA D. LOCK, ESQ. (Argued) 

 106 Walnut Street 

 Harrisburg, PA 17101 

 Attorney for Appellant

 DAVID M. BARASCH 

 United States Attorney 

 MARTIN C. CARLSON (Argued) 

 Assistant United States Attorney 

_________________________ 
* The Honorable Anita B. Brody, United States District Judge for 

the Eastern District of Pennsylvania, sitting by designation. 

 
 Federal Building 

 228 Walnut Street 

 Harrisburg, PA 17108 

 Attorneys for Appellee

 ____________________ 

 OPINION OF THE COURT 

 ____________________ 

ALITO, Circuit Judge: 

 H. Jay Mummert, who pled guilty to a fraud offense, 

took this appeal to challenge the district court's calculation of 

his sentence under the Sentencing Guidelines and the district 

court's denial of his request for a downward departure. We hold 

that the district court did not err in calculating Mummert's 

sentence under the Guidelines, but we remand for further 

proceedings concerning Mummert's downward departure request. 

I. 

 Mummert, the former chief executive officer of the 

People's State Bank of East Berlin, Pennsylvania, became 

acquainted with a contractor, Richard Myford, and a realtor, 

Sherry Seidenstricker, who had formed a partnership to build and 

market residential properties. In the fall of 1992, Mummert 

caused the bank to make a $95,000 loan to finance construction of 

a house for the partnership. According to Mummert's presentence 

investigation report, Mummert "handled [this loan] in an 

irregular fashion. Indeed, the bank's records ha[d] no complete 

loan application file documenting this . . . loan." 
 After the loan was made, Mummert states, he learned 

that independent auditors were conducting an examination of the 

bank's records, and he advised Myford and Seidenstricker of his 

concern that the examiners might discover the irregular loan. 

Myford and Seidenstricker, who were attempting to sell the 

property, then helped to prepare loan applications on behalf of 

the buyers, Paul and Melissa Belzner. Myford and Seidenstricker 

intended for the bank to make a new $95,000 bridge loan to the 

Belzners and for this money to be used to pay off the original 

loan. 

 The new loan application contained false financial 

information. It also falsely stated that the Belzners had active 

accounts at the People's State Bank and that they had been 

approved for a mortgage by another lender. The application was 

accompanied by a forged mortgage commitment letter, and the 

Belzners' signatures were forged. 

 According to his presentence investigation report, 

Mummert inserted some of the false information on the loan 

application, and he was present when the Belzners' signatures 

were forged. Over a period of time, Mummert then issued $95,000 

in cashier's checks to Myford, who forged the Belzners' 

endorsements and used the checks to pay off the initial 

construction loan. After the Belzners subsequently informed the 

bank that they had not signed the loan application, the fraud was 

discovered. 

 In August 1993, Mummert was charged in a one-count 

information with causing false statements to be made in the 
records of a federally insured credit institution, in violation 

of 18 U.S.C. § 1006. This information alleged that Mummert had 

submitted the false and forged bank loan applications. 

 In September 1993, Mummert pled guilty to this offense, 

and a presentence investigation report was prepared. The report 

determined that the amount of loss was $95,000 and that Mummert's 

offense level should therefore be increased by six levels under 

U.S.S.G. § 2F1.1(b)(1)(G). The report also concluded that a twolevel increase for more than minimal planning should be made 

under U.S.S.G. § 2F1.1(b)(2)(A). In addition, the report 

concluded that there were no factors that warranted a sentencing 

departure. 

 Mummert's attorney disputed all of these 

determinations. With respect to the amount of loss, he argued: 

 All proceeds of the $95,000.00 loan 

which constitutes the basis of this 

prosecution went to the construction of 

a home. That home is presently for 

sale. The owner of that property has 

advised the bank that they will be 

repaid completely immediately upon the 

sale of the property. . . . 

Furthermore, the bank has long had civil 

redress available to it to secure the 

return of its money if they thought that 

they could do so more promptly that 

awaiting the sale of the home. The bank 

did not avail themselves of this relief, 

however, because there has never been 

any question regarding the value of the 

home, the willingness to sell it, the 

intention to pay the bank fully upon its 

sale and, thus, the inevitability of the 

return of the full $95,000.00 plus 

interest. 
 Mummert's attorney also argued that his client's part 

in the completion of a forged loan application did not show more 

than minimal planning, and he contended that a downward departure 

was warranted on several grounds. First, he argued that such a 

departure was justified under U.S.S.G. § 5K2.13 based on 

diminished capacity. Second, he argued that a departure was 

justified under 18 U.S.C. § 3553(b), based on a combination of 

mitigating circumstances, including Mummert's benign motive, his 

lack of profit from the crime, his history of childhood abuse, 

and the length of time during which he did not commit any crimes. 

See app. 77-78. 

 The district court adopted "the factual finding and 

guideline application in the presentence report" without comment. 

Id. at 95. With respect to the defendant's requests for a 

downward departure, the court said the following: 

 This is a very hard problematic case. I will 

not accept the diminished capacity as reason 

to depart. If anything, I have given some 

real consideration to a departure based on 

aberration of this man's character in 

performing this. But the cases I have been 

able to find on aberrant behavior usually are 

combined with an immediate acceptance of 

responsibility and restitution where 

applicable. So I don't think there can be a 

departure for that reason. 

Id. at 86. This appeal followed. 

 

II. 

 On appeal, Mummert contends that the district court 

erred in finding that the amount of loss under U.S.S.G. § 2F1.1 
was $95,000. Instead, Mummert argues, the bank suffered no loss 

because, after the disclosure of the false statements and forged 

signatures on the loan application, Seidenstricker wrote a letter 

to the bank stating: 

 The [property in question] is currently under 

contract with a new buyer. Application for a 

mortgage is presently being made. 

 Upon receiving a commitment from the 

mortgage lender a settlement date will be set 

and the proceeds shall be paid to The Peoples 

State Bank. 

 If for some unforeseen reason the home 

is not sold I will gladly sign the above 

mentioned property over to The Peoples State 

Bank to ensure that your loan is covered. 

Relying on United States v. Kopp, 951 F.2d 521 (3d Cir. 1991), 

Mummert argues that the bank's loss should have been calculated 

to be zero since it could have obtained the property pursuant to 

Seidenstricker's offer. We disagree. 

 In Kopp, the defendant had been convicted for 

fraudulently obtaining a $13.75 million bank loan. This loan was 

secured by a mortgage. "[T]he bank demanded and received a deed 

in lieu of foreclosure and eventually sold the property for $14.5 

million, $750,000 more than the face value of the loan." Kopp, 

951 F.2d at 524. "The bank nonetheless calculated that it 

actually lost approximately $3.4 million overall, due to lost 

interest . . . , the bank's operating expenses when taking over 

the property . . . , and the cost of a low-interest loan to the 

new purchaser." Id. The sentencing judge held that the full 
face value of the loan -- $13.75 million -- constituted the loss 

for guidelines purposes, but our court reversed, stating: 

 We . . . hold that fraud "loss" is, in 

the first instance, the amount of money 

the victim has actually lost (estimated 

at the time of sentencing) not the 

potential loss as measured at the time 

of the crime. However, the "loss" 

should be revised upward to the loss 

that the defendant intended to inflict, 

if that amount is higher than actual 

loss. 

Id. at 536; cf. United States v. Daddona, No. 93-7338 (3d Cir. 

Aug. ___, 1994) slip op. at ____ (amount of loss under § 2F1.1 is 

amount taken from bank in fraud scheme, not consequential damages 

incurred by bank in completing project); United States v. 

Badaracco, 954 F.2d 928, 937-38 (3d Cir. 1992) (in three-party 

fraud case, amount of loss under § 2F1.1 is "gross gain" to 

defendant in amount of face value of fraudulent loans). Our 

court also noted that Application Note 7, which had been 

promulgated after Kopp's sentencing, "confirm[ed]" and 

"buttress[ed]" our interpretation of U.S.S.G. § 2F1.1. Kopp, 951 

F.2d at 527 n.9, 534. 

 This new Application Note was in effect at the time of 

Mummert's sentencing, and therefore we apply it directly here. 

This Application Note states in pertinent part: 

 In fraudulent loan application cases . . . 

the loss is the actual loss to the victim (or 

if the loss has not yet come about, the 

expected loss). For example, if a defendant 

fraudulently obtains a loan by 

misrepresenting the value of his assets, the 

loss is the amount of the loan not repaid at 

the time the offense is discovered, reduced 

by the amount the lending institution has 
recovered (or can expect to recover) from any 

assets pledged to secure the loan. However, 

where the intended loss is greater than the 

actual loss, the intended loss is to be used. 

U.S.S.G. § 2F1.1, Application Note 7(b). 

 Applying this interpretation here, the loss is the 

actual loss to the bank at the time of sentencing ($95,000) 

"reduced by the amount the lending institution has recovered (or 

can expect to recover) from any assets pledged to secure the 

loan" ($0). The fact that Seidenstricker offered, after 

Mummert's crime was detected, to make a gratuitous transfer of 

the property in question does not alter this calculation. A 

defendant in a fraud case should not be able to reduce the amount 

of loss for sentencing purposes by offering to make restitution 

after being caught. See United States v. Shaffer, Nos. 93-

7508/7549 (3d Cir. Aug. , 1994); United States v. Frydenlund, 

990 F.2d 822, 826 (5th Cir.), cert. denied, 114 S. Ct. 337 

(1993); United States v. Rothberg, 954 F.2d 217, 219 (4th Cir. 

1992); United States v. Carey, 895 F.2d 318, 323 (7th Cir. 1990). 

The same rule applies when the offer of restitution is made by a 

third party who was involved in the offense in the way that 

Seidenstricker was here. Consequently, we hold that the district 

court did not err in determining that the amount of loss for 

sentencing purposes in this case was $95,000. 

 Mummert also maintains that the district court erred in 

finding that he had engaged in "more than minimal planning" 

within the meaning of U.S.S.G. § 2F1.1(b)(2)(A) and that he had 

not clearly demonstrated "acceptance of responsibility for his 
offense" within the meaning of U.S.S.G. § 3E1.1(a). These 

findings are reviewed for clear error. See United States v. 

Singh, 923 F.2d 1039, 1043 (3d Cir.) (acceptance of 

responsibility), cert. denied, 500 U.S. 937 (1991); United States 

v. Cianscewski, 894 F.2d 74, 82 (3d Cir. 1990) (more than minimal 

planning). We find no clear error in this case. 

 

III. 

 Mummert also argues that the district court erred in 

denying his request for a downward departure. Under United 

States v. Denardi, 892 F.2d 269, 271-72 (3d Cir. 1989), our 

jurisdiction to entertain this argument depends on the basis for 

the district court's ruling. If the ruling was based on the 

district court's belief that a departure was legally 

impermissible, we have jurisdiction to determine whether the 

district court's understanding of the law was correct. By 

contrast, if the district court's ruling was based on an exercise 

of discretion, we lack jurisdiction. Id.; see also, e.g., United 

States v. Love, 985 F.2d 732, 734 n.3 (3d Cir. 1993); United 

States v. Bierley, 922 F.2d 1061, 1066 (3d Cir. 1990). 

 Here, unfortunately, the district court did not state 

expressly whether its denial of the defendant's departure request 

was based on legal or discretionary grounds. Since U.S.S.G. § 

5K2.13 makes clear,1 and the government apparently acknowledged 

 

1. U.S.S.G. § 5K2.13 states: 

 If the defendant committed a non-violent 

offense while suffering from significantly 
at the time of sentencing, that a downward departure for 

"diminished capacity" is permissible under some circumstances, it 

seems quite likely that the district court's refusal to depart on 

this ground was discretionary. The basis for the district 

court's rejection of the defendants remaining departure 

arguments, however, is impossible to discern from the record, and 

therefore we are unable to determine whether we have jurisdiction 

to review the district court's rejection of these remaining 

arguments. Faced with the ambiguous record before us, we might 

conceivably assume for the sake of argument that the district 

court's rulings were based on the belief that a downward 

departure was not legally permissible on the grounds cited. We 

could then proceed to analyze whether each of the many factors 

cited by the defendant, either singly or in combination, could 

justify a downward departure. 

 There are, however, at least two reasons, one formal 

and one practical, for not taking this approach. First, this 

approach would require us to address one aspect of the merits of 

the defendant's departure request before determining that we have 

jurisdiction. Second, this approach might well result in a 

significant waste of time. If we determined, after analysis, 

(..continued) 

reduced mental capacity not resulting from 

voluntary use of drugs or other intoxicants, 

a lower sentence may be warranted to reflect 

the extent to which reduced mental capacity 

contributed to the commission of the offense, 

provided that the defendant's criminal 

history does not indicate a need for 

incarceration to protect the public. 
that a departure was legally permissible on one or more of the 

grounds cited by Mummert and remanded the case to the district 

court, we might well learn that the district court had always 

intended to reject Mummert's departure request as a matter of 

discretion. 

 Accordingly, in cases such as this, where the record 

does not make clear whether the district court's denial of 

departure was based on legal or discretionary grounds, we believe 

that the appropriate course of action is to vacate the sentence 

and remand for the district court to clarify the basis for its 

ruling.2

 This holding is consistent with our decision in United 

States v. Georgiadis, 933 F.2d 1219, 1222-24 (3d Cir. 1991). In 

that case, we were able to determine, based on the record, that 

the district court's refusal of a downward departure was based on 

discretionary grounds. See Id. at 1224. The defendant in that 

case contended, however, that a district court must do more than 

just make clear whether a refusal to depart is based on legal or 

discretionary grounds. Instead, the defendant contended that the 

 

2. The Tenth Circuit recently held that "unless [a district] 

judge's language unambiguously states that the judge does not 

believe he has authority to downward depart, we will not review 

his decision." United States v. Rodriguez, 1994 U.S. App. LEXIS 

18697, 1994 WL 383186 (10th Cir. 1994). This rule appears to be 

designed to promote essentially the same objective as the rule we 

adopt in this case, i.e., to encourage district courts to make 

clear whether their departure rulings rest on legal or 

discretionary grounds. Under the Tenth Circuit's approach, 

however, a defendant whose departure request is rejected with an 

ambiguous ruling based on legal grounds would apparently be 

deprived of the appellate review to which he is statutorily 

entitled. Our approach would not allow this to occur. 
"sentencing court must always indicate on the record that it 

knows it has authority to depart, considered the defendant's 

request to do so, and decided not to depart."3 Id. at 1222. We 

held that such recitals are not mandatory. Id. at 1222-23. 

Thus, Georgiadis did not concern the question whether a 

sentencing court must provide a record that is sufficient to 

enable us to determine whether we have appellate jurisdiction; 

rather, Georgiadis concerned the question whether a sentencing 

court that refuses to make a departure on discretionary grounds 

is required to provide additional statements. Consequently, 

Georgiadis is consistent with our holding here. 

IV. 

 For these reasons, we vacate the sentence imposed by 

the district court and remand for further proceedings consistent 

with this opinion. In taking this approach, we emphasize that we 

have not reached any conclusion with respect to the question 

whether a downward departure on any of the grounds cited by 

Mummert would be legally permissible. 

 

3. In Georgiadis, the defendant suggested that the record did 

not make clear whether the district court had denied his 

departure request on legal or discretionary grounds. United 

States v. Georgiadis, No. 90-3224, Appellant's Br. at 21-26. The 

government disagreed, stating that the record showed that the 

trial judge had made "a discretionary nonappealable refusal to 

depart." No. 90-3224, Appellee's Br. at 25 (emphasis in 

original). Our court agreed with the government's interpretation 

of the record. See 933 F.2d at 1224.