UNITED STATES CO URT OF APPEALS FOR THE TENTH CIRCUIT

__________________ _______________ UNITED STATES OF AMERICA, Pl aintiff - Appellee,

v. THOMAS B. EVANS, De fendant - Appellant. No. 15-1461 (D.C. No. 1:11- CR-00481-CMA-1) (D. Colo.)

__________________ _______________ ORDER AND JUDGMENT *

__________________ _______________ Before BACHARACH and O’BRIEN , Circuit Judges.  

__________________ _______________ This is the second appeal of a sentence imposed after Mr. Evans pleaded guilty to conspiracy to commit mail and wire fraud. See 18 U.S.C. §§ 1341, 1343, 1349. In the first appeal, we requir ed the distri ct court to recalculate the losses caused by th e fraud and reconsid er how the amount

* This order and judgme nt does not constitute bi nding precedent except under the doctrines of law of the case, res judicata, and collateral estoppel. But the order and judgment may be ci ted for its persuasive value under Fed. R. App. P. 32.1(a) and Tenth Cir. R. 32.1(A).

  The Honorable Neil Gorsuch he ard oral argume nt but did not participate in this orde r and judgment. The practice of this court permits the remaining two panel judges if in agreement to act as a quorum in resolving the appeal. See 28 U.S.C. § 46(d); see also United States v. Wiles , 106 F.3d 1516, 1516, at n* (10th Cir. 1997) (not ing that this court allows remaining panel judges to act as a quorum to reso lve an appeal). FILED United States Court of Appeals Tenth Circuit 

### February 3, 2017 Elisabeth A. Shumaker Clerk of Court2 of the losses would affect the sent ence. On remand, the district court recalculated the losses at slightly over $4 million a nd resentenced Mr. Evans to prison for 10 years and 1 month. We must ask if the district court properly

 recalculated the losses caused by Mr. Evans’s fraud and applied a sentence enhancement for the amount of loss,

 applied a sentence enhancement fo r the number of victims, and

 recalculated the amount of restitution. We conclude that the court erred in re calculating the loss es and restitution and in applying the sentence enhancements. 1. Mr. Evans committed fraud through his real estate development firm. Mr. Evans was the owner and president of a real estate development firm. Through the firm, Mr. Evans purchas ed, renovated, and operated apartment complexes, wi th the ultimate goal to sell them at a profit. To finance this project , Mr. Evans sold interests in three limited partnerships. At the outset, these three investment ventures were legitimate, but risky. The investors were promised immediate, high interest payments, but were also warned of the investment risks. By April 2005, the vent ures were experienci ng cash-flow problems. To keep the ventur es afloat, Mr. Evans contribu ted roughly $4.5 million of his own money, commingled funds, and provided false reports to investors and lenders.3 When the fraud was di scovered in April 2007, the court appointed a receiver. Upon the recei ver’s recommendation, th e investors contributed more money in an attempt to salvag e the business. This attempt proved unsuccessful, howev er, and the apartm ent complexes were lost through foreclosure. 2. Mr. Evans’s original senten ce was overturned on appeal. Mr. Evans was originally sentenced to 14 years’ imprisonment and ordered to pay over $12.3 million in restitution. In sentencing Mr. Evans, the district court applied 2 sent ence enhancements under the U.S. Sentencing Guidelines. The first was a 20-level increase under U.S.S.G. § 2B1.1(b)(1)(K) for the amount of loss caused by the fraud. The court calculated the loss by starting with the total invested and subtracting the amount returned to the investors. Using this calculation , the court found that the investors had sustained approximately $12 .3 million in losses. Second, the district cour t found that there had be en 77 to 92 victims, which resulted in a 4-level increase under U.S.S.G. § 2B1.1(b)(2)(B) because the offense invol ved 50-249 victims. Mr. Evans appealed the sentence an d we remanded for resentencing, holding that the district court had er red in calculating the loss. On remand, the district court recalculated the loss at slightly over $4 million. Based on this loss, the court appl ied an 18-level increase under the sentencing4 guidelines. U.S.S.G. § 2B 1.1(b)(1)(J) (2012). In ad dition, the court again applied the 4-level increase for an offense involving 50 to 249 victims. U.S.S.G. § 2B1. 1(b)(2)(B) (2012). Ultimately, Mr. Evans was resentenced to prison for 10 years and 1 month an d ordered to pay slightly more than $4 million in restitution. Mr. Evans appeals the new sentence. 3. Our opinion in Evans I established the law of the case. In reviewing the district court’s method of calculating loss, we are guided by our opinion in Mr. Evans’s prior appeal: United States v. Evans (Evans I) , 744 F.3d 1192 (10th Ci r. 2014). This opinion establ ished the law of the case. When a case is appealed and re manded, our opin ion ordinarily establishes the law of the case. United States v. West , 646 F.3d 745, 746 (10th Cir. 2011). As the law of the case, our opin ion must ge nerally be followed in subsequent proceedings. United States v. Alvarez , 142 F.3d 1243, 1247 (10th Cir. 1998). The government argues that Evans I did not establish the law of the case, theorizing that th e resentencing proceedings included new evidence that cast doubt on Evans I ’s instructions on ca lculating the loss. We address this argument de novo. Stewart v. Beach , 701 F.3d 1322, 1329 (10th Cir. 2012).5 In applying de novo re view, we deviate from the law of the case doctrine only in “exceptionally narr ow circumstances;” one is when the evidence in a later proceedi ng is substantially different from the evidence in the first proceeding. United States v. Alvarez , 142 F.3d 1243, 1247 (10th Cir. 1998). According to the government, this exception applies because the new evidence showed th e impossibility of doing wh at we had required in Evans I because of the

 general difficulty in a ppraising the real estate securities and the nature of the investments,

 large magnitude of the fraud, and

 lack of data on the securities’ value when th e fraud began. For these matters, however , the government has no t identified any new evidence significan tly different from the evidence in Evans I

. If the evidence on re mand showed difficulty in appraising the securities, this difficulty would also have been appare nt from the evidence in Evans I , for the nature of the securities and the investment was apparent from the outset. See Evans I , 744 F.3d at 1194 (deta iling the ventures); see also Transcript of Sentencing Hearing at 8-18, United States v. Evans , No. 11-cr-00481-CMA (D. Colo. Jan. 15, 2013), EC F No. 96 (testimony at original sentencing hearing describing the investment scheme). The6 government does not point to any new evidence relate d to the nature of the securities or the investment scheme. On the magnitude of the fraud, the governmen t points to testimony that the fraud impeded ap praisal of the investment properties in late 2006 and in 2007. But this testimony resembles the evidence in Evans I

. See Evans I , 744 F.3d at 1194. The government also argu es that because of th e fraud’s magnitude, it was impossible to determine the property values when the fraud began (April 2005). The cited te stimony does no t support this argument; this testimony addresses only the property values in late 2006 and in 2007, after the fraud ha d already begun. Finally, the government argues that Evans I does not control because the resentencing proceedings establishe d a lack of data on the property values in April 2005 . This is a failur e in the governmen t’s proof, not a reason to deviate from Evans I . The government bears the burden of proof for all sentence increases, and the government’s inabilit y to prove the April 2005 property values does not v itiate the remand instructions in Evans I

. See United States v. Kirk , 894 F.2d 1162, 1164 (10th Cir. 1990). In our view, Evans I established the law of the case.7 4. The district court’s loss-calculation method did not comply with Evans I and was unsupported. The resulting question is whether the district co urt’s loss-calculation method complied with Evans I . We decide this qu estion under de novo review. Vehicle Mkt. Research, Inc. v. Mitchell Int’l, Inc. , 839 F.3d 1251, 1256 (10th Cir. 2016). In our view, the loss-calcula tion method deviated from Evans I and was unsupported. In Evans I , we ordered vacatur of the or iginal sentence based on the district court’s miscal culation of the loss. Evans I , 744 F.3d at 1194. In light of this miscalculati on, we instructed the district court to determine “the reasonably foreseea ble amount of loss to the value of the securities caused by Mr. Evans’ fraud.” Id. at 1198. To make that determinat ion, the court was to “disregard[] any loss that occurred before the fraud began [] and account[] for the forces that acted on the secu rities after the fraud ended.” Id. To exclude harm preceding the fraud, the district court had to determine “the value of the securities at the time the fraud began.” Id. at 1196. The district court initial ly acknowledged that to recalculate the loss, it was necessary to determ ine the value of the s ecurities when the fraud began. But during the resentencing proc eedings, the court stated that this value could not be determined. R. vol. 6, at 32; see also id. at 99 (district court stating that “it is not possible to calculate the market value of the8 properties at the beginn ing of the fraud”). Th e government similarly admitted that it co uld not prove the value of th e securities wh en the fraud had begun. R. vol. 2, at 1577 (noting that Mr. Evans “beg an his criminal activity at a point when the investment properties had an indeterminate value”); id. at 1585-86 (“[T]he specific data points to which the Tenth Circuit instructed this Co urt to look in arriving at a loss calcula tion are not currently part of the evidentiary record . . . and do not ap pear . . . to be available to the United States.”). In light of these evidentiary di fficulties, the district court recalculated the loss through a “loss of equity” theory. None of the parties had endorsed this theory, and it di ffered from the form ula adopted in Evans I

. Under this new th eory, the court f ound that Mr. Ev ans’s fraudulent scheme had caused creditors to asse rt approximately $4 million in liens. The court reasoned that the liens had “increased the total debt burden on the property,” reducing the investors’ equity. R. vol. 6, at 108. “This [$4 million] loss to the victims,” the court concluded, “would not have occurred but for [Mr. Ev ans’s] fraudulent conduct ” and was reasonably foreseeable to Mr. Evans. Id. Mr. Evans argues that th is recalculation of loss did not comply with Evans I . We agree. Under Evans I , recalculation of the loss re quired a determination of the va lue of the securities wh en the fraud began. See9 Evans I , 744 F.3d at 1196-97 (“This [(determining loss)] requires a determination of the valu e of the securities at th e time the fraud began, which is the correct starting point for the loss calculation in this case.”). The government bore th e burden of meeting Evans I ’s losscalculation requirements. See Kirk , 894 F.2d at 1164. Both the government and the district court acknowledged th at the government co uld not meet its burden under Evans I . As a result, the district court erred in applying a loss enhancement to Mr. Evans’s sentence. The government argues that Evans I did not require a determination of the value of the investment proper ties at the beginn ing of the fraud. According to the government, Evans I required only a reasonable estimate of the loss caused by Mr. Evans’s fraud. The government contends that a reasonable estimate was feasible base d on “the encumb rances placed on [the properties] during the fraud period .” Appellee’s Resp. Br. at 32. This contention ignores Evans I ’s instruction to determine the value of the securities when th e fraud began. Evans I , 744 F.3d at 1196. The government attempts to square the “loss of equity” th eory with the language of Evans I , pointing to Evans I ’s statement that “the investors’ interests we re akin to equity.” Id . at 1197. But the Evans I court used this statement only to explain wh y the district court needed to account for non-fraud factors when calculating the loss. Id. That statement did not alter our instructions to the district court on remand.10 But even if the government’s interpretation we re correct, the district court’s “loss of equity” theory did not reasonably measure loss caused by the fraud. The government acknowledged that at least some of the liens “appear to have resulted from activities outside th e scope of [Mr.] Evans’ fraud.” R. vol. 2 at 1724-25. And the governm ent has not identified evidence demonstrating that the liens resulted from fraud, as opposed to a defective business model. See Evans I , 744 F.3d at 1197 (sta ting that a loss in value “due to a poo r or unsustainable busin ess model would not be chargeable to Mr. Evans”). When the fraud began in April 2005, the ventures were already experiencing cash-flow problems; indeed, those cash-flow problems are what prompted Mr. Evans to engage in the fraud . The government has not presented any reason to be lieve that the liens would have been avoided if Mr. Evans had disclosed the cash-flow problems. In sum, the district court’s loss calculation did not follow Evans I or reasonably measure the lo ss caused by the fraud. Thus, the district court erred in applying the loss enhancement.11 5. The district court erred in applying a number-of-victims enhancement. The district court also increased Mr. Evans’s offense level by 4 levels based on the existence of 50-249 victims. U.S.S.G. § 2B1.1(b)(2)(B) (2012). A victim is “any person who sustained an y part of the actual loss determined under su bsection (b)(1).” Id. cmt. n.1. Pointing to the erroneous calculation of loss, Mr. Evans argues that the error tainted the court’s calculation of the numbe r of victims. We agree. We review the legal co nclusions de novo and th e factual findings for clear error. United States v. Leach , 417 F.3d 1099, 1106 (10th Cir. 2005). Applying these standards, we conclude that the district court erred in applying the number-of-victims enhancement. As discussed above, the government failed to prove an actual loss under U.S.S.G. § 2B1.1(b)(1). Without an actual loss, th ere could be no victims. See id. at 1107 (holding that the district court erred by applying the num ber-of-victims enhancement without an actual loss). Thus, the court could not apply the enhancement for the number of victims. The government states that Mr. Evans “arguably has waived” an appeal of the number-of- victims enhancement by failing to challenge the enhancement in the first sentencing appeal. Appellee’ s Resp. Br. at 37. We disagree.12 On remand, the district court expr essly reconsidered its decision to apply an enhancement for th e number of victims. R. vol. 6, at 84-85. In light of the district court’s reexamin ation of the issue, it would not have mattered if Mr. Evans had appealed the issue at th e initial sentencing. The court made a new finding when applying the enhancement again after the remand. Accordingly, Mr. Evans di d not waive his ch allenge to the number-of-victims enhancement. 6. The sentencing erro rs were not harmless. The government argues th at even if the distri ct court had erred in applying enhancements, the errors would have been harmless. We disagree. Errors are harmless if they did not affect the sentence imposed. United States v. Lente , 647 F.3d 1021, 1037-38 (10th Cir. 2011). As the beneficiary of the errors, the govern ment must prove harmlessness by a preponderance of the evidence. Id. at 1037. In urging harmlessness, the government relies on the court’s statement that the sentence would have been the same even without the disputed enhancements. 1 The court explained that even if the guideline range had been lower, a sentence below ten years and one month would have been insufficient. We rej ect the government’ s harmless-error

1 Without enhancements for the amount of loss and number of victims, the guideline range would have been 4 to 10 months. Thus, the district court’s statement reflects a decision to imprison Mr. Evans for over 9 years longer than the top of his guideline range.13 argument because the district court’s alternative rational e for the sentence was based on a clearl y erroneous finding. We review the alternative rationa le for an abuse of discretion. Gall v. United States , 552 U.S. 38, 51 (2007). An abuse of discretion occurs when a sentence is based on a clearly erroneous finding. Id

. For its alternative sentencing ration ale, the district court repeatedly found that Mr. Ev ans had stolen in vestors’ funds. R. vol. 6, at 124 (“You lied to your victims, you st ole their funds, and you failed to manage the investment properties in th e manner you promised.”); id. at 128 (district court expressing regret that it coul d not find Mr. Evan s responsible for “the full $12 million he stole from [i nvestors]”). This finding was clearly erroneous, for there is no evidence that Mr. Evans stole money from investors. To the contrary, Mr. Ev ans contributed approximately $4.5 million of his own money to keep the busi ness afloat. Mr. Evans’s misrepresentations could conceivably represent a form of “stealing” if the misrepresentat ions had caused investors to lose money. But as already discussed, the government has been unable to prove loss to investors caused by the fraud. See Part 4, above. The court’s clearly erroneous finding could have tainted the alternative rational e for the sentence. See Koon v. United States , 518 U.S. 81, 113 (1996) (“When a reviewing court conclude s that a district court based a departure on both valid and invalid factor s, a remand is required14 unless it determines the district court would have imposed the same sentence absent reliance on the invalid factors.”). Thus, we do not regard the erroneous enhancem ents as harmless. See United Stat es v. PeñaHermosillo , 522 F.3d 1108, 1117-18 (10th Ci r. 2008) (holding that an alternative sentencing rationale could not render a procedural error harmless because the a lternative rationale wa s also erroneous). 7. We vacate the restitution order. In light of the calculation of lo ss, the district court ordered restitution for slightly over $4 mil lion. The restitution order was also

erroneous. “We review the restituti on order for an abuse of discretion, which requires us to review fact ual findings for clear erro r and application of the [governing la w] de novo.” United States v. Howard , 784 F.3d 745, 750 (10th Cir. 2015). We apply this standard agains t the backdrop of the Mandatory Victims Recovery Act. The Act re quires payment of restitution by defendants convicted of “any offense [against property] committed by fraud or deceit.” 18 U.S.C. §§ 3663A(a)(1), (c)(1)(A)(ii), 3664(f)(1)(A). The amount must be pr oven by a pre ponderance of the evidence. United States v. Gallant , 537 F.3d 1202, 1247 (10th Cir. 2008); see 18 U.S.C. § 3664(e).15 The government has not pr oven how much loss, if any, resulted from Mr. Evans’s fraud. Even if the government had lim ited information, the court had to base the re stitution order on the am ount of the actual loss. United States v. Hudson , 483 F.3d 707, 710 (10th Cir. 2007). Here, the restitution order was not based on “a reasonable estimate of . . . loss.” Gallant , 537 F.3d at 1252. As a result, the court erred in calculating restitution. 8. We remand for assign ment to a di fferent judge. Finally, Mr. Evans asks for reassi gnment to a differ ent judge. We grant this request. We have an inherent power to remand cases for reassignment to different judges. O’Rourke v. City of Norman , 875 F.2d 1465, 1475 (10th Cir. 1989). We rarely exer cise this power “absent pr oof of personal bias.” Id. But “it is not solely th e reality of actual bias or prejudice but also the appearance of impropriety that we must guard against.” Mitchell v. Maynard , 80 F.3d 1433, 1450 (10th Cir. 1996). There is no reason to believe that the district judge harbored a personal bias. In the absenc e of a bias, we use a thr ee-part test to analyze the necessity of reassignment: (1) whether the original judge would reasonably be expected on remand to incur substantia l difficulty in putting out of his or her mind previously expressed views or findings determined to be erroneous or based on evidence that must be rejected,16 (2) whether reassignment is a dvisable to preserve the appearance of justice, and (3) whether reassignme nt would entail wa ste and duplication out of proportion to any gain in preserving the appearance of fairness. Id. (quotation reformatted). Under this test, reassi gnment is warranted. First, the district j udge repeatedly stated th at Mr. Evans deserved a sentence enhancement, sa ying that it was unfo rtunate that the loss computation was not higher. R. vol. 5, at 209-10 (district judge stating, before hearing the evid ence on the amoun t of loss, that she would not sentence Mr. Evans within a guidelin e range resulting fr om no loss or victim enhancements); R. vol. 6, at 28, 29, 33, 36, 103, 105, 109, 125, 128 (statements that the inability to find a higher loss was unfortunate). The judge added that she be lieved Americans “do not take white collar crime seriously enough.” R. vol. 5, at 174. Even after we rejected the original loss calculation, the district judge reiterated her belief that Mr. Evans had “stole[n]” approximately $12 million and expressed regret concerning the inability to orde r restitution in that amount. R. vol. 6, at 128. Thus, we could reasonably expect our disposition to cause difficulty on remand. Second, reassignment w ould preserve the appear ance of justice. The district judge has already sentenced Mr . Evans twice, and our remand will result in Mr. Evans’s thir d sentencing proceeding for the same offense.17 Assignment to a differen t judge would “prevent any . . . appearance of impropriety” in sentencing Mr. Evans a third time. Mitchell , 80 F.3d at 1450. Finally, the government argues th at reassignment would waste judicial resources. We appreciate the time that the distri ct judge has spent studying this case, but we are remanding with instru ctions not to apply an enhancement for loss or th e number of victims. Ou r remand instructions will lessen the resources required to resentence Mr. Evans, and the inevitable duplication of ef fort from reassignment is necessary to preserve the appearance of fairness. In light of the history of the case, reassignment is warranted. We are not suggesting that the di strict judge is person ally biased or acted improperly. We merely conclude that reassignment would best serve the interest of justice. 9. Disposition We remand for the district court to (1) vacate Mr. Evans’s sentence, (2) resentence Mr. Evans without applyi ng enhancements for loss (U.S.S.G. § 2B1.1(a)) or the number of victims (U.S.S.G. § 2B 1.1(b)), and (3) vacate18 the restitution order. On remand, this case must be reassigned to a different judge.

Entered for the Court

Robert E. Bacharach Circuit JudgeCase No. 15-1461, United States v. Evans O’BRIEN , J., specially concurring. Dating back to 1993 Ev ans enjoyed success in the real estate business. Seeking to capitalize on past success, in 2003 he decided to pursue an ambitious project—buying and refurbishing tired properties and then turnin g them at a profit. To do so he needed investors. He adequately disclo sed the risky nature of the proj ects to the investors and, to sweeten the deal, offered 12% pe r annum interest on invested funds. That debt burden, along with other factors, pr oduced disastrous results. By April 2005, several things became clear: The rehabilitation costs were considerably more than anticipated, the proj ects were undercapitalized and the interest obligations to investors were disastrously large and unrelen ting. As a consequence, the project took on a gloomy countenance, rev ealing the business model to have been, at best, overly ambitious or, more likely, inheren tly flawed. None of that, as all agree, amounted to fraud. Evans was loath to admit the failure of hi s projects. He confidently thought he could turn things around and, to that end, poured about $4,500,000 of his own funds into them, and manipulated available cash to put out increasingly violent economic fires. But he did not tell the investors. Instead he put a wholesome spin on seriously bad circumstances. While he did so, in part, w ith the hope of recovery, he intended to mislead them. The true state of affairs came to light in April 2007 . As a result, Evans was removed from management of the projects and efforts were made to salvage them. Those efforts were unsuccessful. (Interestingly, the district judge found the value of the2 properties to have actually increased during the fraud. But, in fairness, the projects’ debt did as well.) Evan’s disinformation campai gn was wrong, and fraudulent, as he has candidly admitted. But that still leaves much to be decided. His guilty plea begs a question, the answer to which has resu lted in a sentencing dilemma—how does one measure the damages reasonably resulting from the fraud (not being candid with investors), rather than merely estimating the economic losses flowing from a flawed business plan, poor timing and market dynam ics? The business loss calculation is relatively easy; arriving at a reasonable estimate of damages is quite difficult, as we have

seen. What are the damages caused by the fraud? Simply stated they are the money investors lost as a result of not having full and timely knowled ge of the depth and breadth of the projects’ shortcomings. In other word s, what investors additionally lost by being deprived of an opport unity to mitigate foregon e losses. But we know one thing: much of the loss had been incu rred or was inextricably destin ed to be incurred before any fraudulent conduct commenced. The first panel opinion charted the path to resolving the damages dilemma, but it was not followed on remand. It was necessa ry for the government to produce sufficient evidence from which a reasonable estimate of damages resulting from the fraud could be computed. See USSG §2B1.1, comment. (n.3(c)). It failed to produce such evidence, saying it was beyond its ken. Faced with a problematic record the district judge undertook an equally problematic differentia l analysis which neith er of the parties3 adopted (but the government dutifully, albeit re luctantly and ineffectively, pursued). At the end of the day proof of damage was left wanting. That leaves us no choice. The result here may not be heralded as a model of perfect justice, but it will stand as a conscientious application of the la w. I concur in the Order & Judgment.