UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

UNITED STATES OF AMERICA, 

Plaintiff-Appellee,

v.  No. 01-4638

WILLIAM MURRAY,

Defendant-Appellant. 

Appeal from the United States District Court

for the District of Maryland, at Greenbelt.

Peter J. Messitte, District Judge.

(CR-00-317-PJM)

Argued: June 4, 2002

Decided: July 12, 2002

Before NIEMEYER, MICHAEL, and TRAXLER, Circuit Judges.

Vacated and remanded by unpublished opinion. Judge Traxler wrote

the majority opinion, in which Judge Michael joined. Judge Niemeyer

wrote a dissenting opinion. 

COUNSEL

ARGUED: Ronald Barry Rubin, RUBIN & RUBIN, CHARTERED,

Rockville, Maryland, for Appellant. Sandra Wilkinson, Assistant

United States Attorney, UNITED STATES ATTORNEY’S OFFICE,

Greenbelt, Maryland, for Appellee. ON BRIEF: Michael A.

Stodghill, RUBIN & RUBIN, CHARTERED, Rockville, Maryland,

for Appellant. Thomas M. DiBiagio, United States Attorney,
UNITED STATES ATTORNEY’S OFFICE, Greenbelt, Maryland,

for Appellee.

Unpublished opinions are not binding precedent in this circuit. See

Local Rule 36(c). 

OPINION

TRAXLER, Circuit Judge: 

William Murray defrauded Brethren Mutual Insurance Company

("BMI") out of a substantial sum of money by misrepresenting both

the original costs involved in constructing a facility for one of BMI’s

insureds and the costs of rebuilding the facility after it was partially

destroyed by fire. Pursuant to a plea agreement, Murray pled guilty

to two counts of mail fraud, see 18 U.S.C.A. § 1341 (West 2000), and

the remaining counts of the multi-count indictment against him were

dismissed. The parties left the question of the proper amount of restitution to be determined at sentencing. Prior to sentencing, the parties

agreed on the actual replacement cost of the building and agreed that

the restitution award should include the amount by which the costs of

the project had been fraudulently inflated. They disagreed, however,

about whether the restitution amount should include profits and overhead to which Murray would have been entitled based on the actual

replacement cost. Stated differently, the question at sentencing was

whether Murray was entitled to keep the profits and overhead from

the job that were legitimate under the contractual formula for calculating those figures, or whether he should be required to refund those to

BMI, the victim of the fraud. The district court held that Murray must

refund those amounts, and Murray appeals. We vacate and remand.

I.

On appeal, Murray continues to press his argument that the profits

and overhead from the project, once properly adjusted to account for

the fraud, should not be counted as loss to BMI.1 Because this issue

1Murray may raise this issue on appeal notwithstanding the provision

in his plea agreement waiving his right to appeal. See United States v.

2 UNITED STATES v. MURRAY
involves the district court’s application of the guidelines to undisputed facts, we review the court’s determination de novo. See United

States v. Parsons, 109 F.3d 1002, 1004 (4th Cir. 1997) (observing that

the issue of what amounts are properly counted as "loss" is "a purely

legal question"); United States v. Daughtrey, 874 F.2d 213, 217 (4th

Cir. 1989) (stating that legal issues involving the interpretation and

application of the sentencing guidelines are reviewed de novo). 

Murray argues that the disposition of this appeal is squarely controlled by our prior decisions in United States v. Parsons, 109 F.3d

1002 (4th Cir. 1997), and United States v. Dawkins, 202 F.3d 711 (4th

Cir. 2000). In Parsons, the defendant had been a postal service

employee and had received a job transfer that required her to change

geographic locations. The government agreed to pay the expenses of

the move upon the filing of travel vouchers. Parsons listed false

expenses on her vouchers and was convicted on multiple counts

related to this misconduct. For purposes of determining Parsons’

offense level, the district court concluded that the entire amount of

expenses claimed should be counted as loss. This court reversed,

holding that "[w]hen an item’s value is fraudulently inflated, loss is

the amount the item was overvalued, not the entire amount paid."

Parsons, 109 F.3d at 1004. 

In Dawkins, the defendant, another postal service employee, was

convicted of two counts of making a false statement to obtain federal

employees’ disability benefits. The district court concluded that the

loss for purposes of determining Dawkins’ offense level was the full

amount of benefits Dawkins had received during the two periods covered by the two forms he was convicted of falsifying, and the court

ordered restitution in the full amount of the loss. Citing Parsons, we

reversed, instructing the district court on remand to "consider loss as

the difference between the amount of benefits Dawkins actually

received and the amount he would have received had he truthfully and

accurately completed the [disability] forms." Dawkins, 202 F.3d at

715. 

Broughton-Jones, 71 F.3d 1143, 1147 (4th Cir. 1995) ("[A]ppeals challenging the legality of restitution orders are . . . outside the scope of a

defendant’s otherwise valid appeal waiver."). 

UNITED STATES v. MURRAY 3
We agree with Murray that Dawkins and Parsons require a recalculation of the restitution award in this case. It is undisputed that the

insurance policy provided for the replacement costs of the building.

It is also undisputed that as a matter of industry custom, replacement

costs include the profits and overhead of the contractor that rebuilds

the facility. Edward Kopper, a property claims manager for BMI and

its representative at the sentencing hearing, testified that the company

usually allows some amount for overhead and profit and that those

figures are set by industry standard. Furthermore, the government

conceded below that there was a contractual provision providing for

overhead and profit. Thus, under Dawkins and Parsons, the amount

of loss is the difference between the amount BMI actually paid and

the amount it would have paid had Murray submitted truthful and

accurate invoices. The latter amount would have undeniably included

Murray’s overhead and profits. 

The government argues, however, that BMI was not obligated to

pay anything under the policy, and thus it was appropriate for the district court to order Murray to relinquish his overhead and profits. To

understand this argument, it is necessary for us to introduce a few

new facts and a new player, Larry Miller. Shortly after the fire partially destroyed the original building, Murray contacted Miller, who

had been a friend of Murray’s for some time and who had also been

a high-level executive in the insurance industry. Murray asked Miller

to be a liaison between S&K (the insured) and BMI. Miller agreed to

act on S&K’s behalf. He also agreed to help Murray effect his fraudulent scheme. Thus, Miller, while acting as S&K’s representative, was

aware of and participated in the fraud. A provision in the insurance

contract declared that the policy was "void in any case of fraud . . .

as it relates to this Coverage Part at any time." J.A. 70. The government argues that because Miller was the insured’s agent, Miller’s

fraud was chargeable to the insured and the policy was therefore

voided. Because the policy was allegedly void, the government contends BMI was not obligated to pay anything, and, accordingly, the

district court could properly order restitution in any amount up to and

including the full amount BMI paid out. 

We cannot accept this argument. Whether and to what extent insurance contracts are void or voidable is often a complex issue. It is

enough for present purposes for us to observe that BMI has never

4 UNITED STATES v. MURRAY
taken the position that its loss was the full amount it paid on the

insured’s claim. In fact, prior to the sentencing hearing, the company

filed an Amended Declaration of Victim Losses declaring that "the

company is entitled to restitution in the total amount of $660,937.87."

J.A. 47. Critically, in explaining how it arrived at this amount, BMI

explained that it "paid $1,774,392.05 . . . for reconstruction of the

building, when the actual cost of reconstruction was $1,113,454.18.

No more than the actual cost was recoverable under the [BMI] policy." J.A. 47 (emphasis added). Thus, not only has the company itself

never sought to avoid the policy, but in determining its losses it

explicitly indicated that its calculations were premised on an effective

policy. Indeed, BMI has not sought to recover the other roughly $1.1

million that it paid pursuant to the claim, and the government’s argument that BMI has chosen not to pursue that amount as a gratuitous

gesture to S&K is not at all persuasive. Nor is that argument supported by the record. As already noted, BMI paid the claim because

it thought itself obligated to do so "under the [BMI] policy." J.A. 47.

II.

In sum, this case is controlled by Parsons and Dawkins. Under the

sound reasoning of those cases, the amount of loss for restitution purposes in a fraud case is the amount the victim would not have paid

but for the fraud. Once we eliminate the fraud from this case, we are

left with a contract that requires BMI to pay actual replacement costs,

which includes some measure of profit and overhead. Accordingly,

we vacate the restitution award and remand to the district court for

further proceedings consistent with this opinion.2

2Murray also contends that the district court failed to make adequate

factual findings to support the restitution award. To the extent that this

challenge is meant to address Murray’s ability to pay restitution, we

believe counsel’s statements at sentencing by which he expressly indicated that Murray was able to pay restitution provided a sufficient basis

upon which to order restitution. To the extent that the challenge is to the

district court’s failure to key the monthly payment schedule to Murray’s

ability to pay, we need not address it. Because we vacate and remand for

imposition of a lower amount of restitution, the district court may reconsider the monthly payment schedule. We have no reason to doubt that the

district court is aware of its duty to make factual findings and will comply with its obligations. 

UNITED STATES v. MURRAY 5
VACATED AND REMANDED

NIEMEYER, Circuit Judge, dissenting: 

Because the profit and overhead would benefit the defendant and

reward him for the fraudulent scheme, of which he was the architect,

I agree with the district court and would affirm.

6 UNITED STATES v. MURRAY