UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 96-50728

UNITED STATES OF AMERICA, Plaintiff-Appellee,

versus

COLLIER M. SUBLETT, Defendant-Appellant.

Appeal from the United States District Court

for the Western District of Texas

September 30, 1997

Before POLITZ, Chief Judge, HIGGINBOTHAM and SMITH, Circuit Judges.

POLITZ, Chief Judge:

Collier M. Sublett appeals his sentence following a guilty plea conviction for

mail fraud and tr ansmitting false writings and bids to defraud the United States.

Concluding that the district court erred in determining Sublett’s offense level, we

vacate and remand for resentencing.

BACKGROUND

Sublett owned Employee Assistance Center of Texas (EACT) which

marketed counseling services. In 1990 Sublett misrepresented his academic and1 U.S.S.G. 2F1.1(b)(1)(J).

2

professional qualification s in his bid to win a five-year contract to provide

counseli ng services to Internal Revenue Service employees in Austin, Texas.

When he applied for a second contract with the IRS in 1994, Sublett again

misrepresented his credentials. He also submitted falsified diplomas and

certifications to the IRS.

Under the first contract the IRS paid EACT $166,323.44. Sublett provided

qualified counselors for most of the sessions; however, Sublett, who was not

qualified, personally provided some counseling and also billed the IRS for sessions

that never occurred. Sublett’s scheme was uncovered before he began to perform

the second contract under which EACT was to receive payments totaling $212,016.

Sublett entered a plea of guilty to two counts of mail fraud, 18 U.S.C. § 1341,

and one count of transmitting false writings and bids to defraud the United States,

18 U.S .C. § 494. In calculating the offense level under U.S.S.G. § 2F1.1, the

district court adopted the presentence report’s computation that the total loss caused

by Sublett was equal to the total amount paid under the first contract plus the total

amount to be paid under th e second contract. Because the loss thus exceeded

$350,000, the district court increased the offense level by nine p o ints 1 and

sentenced Sublett to eighteen months in prison, ordering him to pay a $4000 fine

and $86,395.21 in restitution. Sublett timely appealed.

ANALYSIS2 930 F.2d 555 (7th Cir. 1991).

3

Sublett contends that the district court erred in its application of section

2F1.1(b)(1) by determining the loss to be the total sums paid and to be paid under

the two contracts. Sublett maintains that he should be given credit, in the

sentencing calculation, for the legitimate counseling services provided under the

first contract and for the legitimate and qualified services he intended to provide

the IRS under the second contract. We agree.

Application Note 7(b) to section 2F1.1 states that in a fraudul ent contract

procurement case the loss is the greater of the actual loss to the victim or the

intended los s. On the record before us there is no basis for finding that Sublett

actually caused or intended to cause a loss in the amount of the total value of the

two contracts. In reaching this conclusion we follow the path blazed by our

colleagues in the Seventh Circuit in United States v. Schneider

. 2 In that case, the

court per suasively distinguished between one who perpetrates fraud to win a

contract with no intent to perform and one who uses fraud to procure a contract but

intends to provide the contracted for services. Sublett’s conduct falls into the latter

category and he should not be characterize d as causing as much loss as one who

intends to totally cheat the victim, g iving nothing in return. The district court

therefo re must deduct the value of the legitimate services actually provided by

Sublett’s operation under the first contract and those that he intended to provide

under the second contract in its calculation of the loss under section 2F1.1(b)(1).

We VACATE Sublett’s sentence and REMAND for resentencing consistent4

herewith.