Revised March 2, 1999

UNITED STATES COURT OF APPEALS

For the Fifth Circuit

No. 97-50537

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

VERSUS

MARK IZYDORE; HARRY SCHREIBER,

Defendants-Appellants.

Appeals from the United States District Court

for the Western District of Texas

February 8, 1999

Before WIENER, BARKSDALE, and DeMOSS, Circuit Judges.

DeMOSS, Circuit Judge:

Appellants Harry Schreiber (“Schreiber”) and Mark Izydore

(Izydore”) were convicted on one count of conspiracy to commit wire

fraud and bankruptcy fraud, and numerous counts of the substantive

offenses of wire fraud and bankruptcy fraud. On appeal they

challenge the propriety of their convictions and sentences. We

vacate two of the appellants’ convictions for wire fraud, affirm

all the appellants’ other convictions, and vacate their sentences2

for resentencing on remand.

I. FACTS

Marhil Manufacturing (“Marhil”) was a family-run business in

Smithville, Texas, that manufactured doors, hatches, and other

closures for the marine industry. The company was owned by JoAnn

Copeland, Joe Cop eland, and Mrs. Copeland’s son, Craig Wallace

(“Wallace”). In the late 1980s Marhil encountered financial

difficulties and was forced to file for bankruptcy under Chapter 11

of the United States Bankruptcy Code. 11 U.S.C. § 1101, e t seq.

In an effort to turn the company around, Marhil began an active

search for outside investors who could provide operating capital

for the business. Wallace, who was Marhil’s president at the time,

subsequently was introduced to the appellants. Negotiations ensued

and the parties eventually agr eed that the appellants’ company,

Westminster Financial (“Westminster”), would provide Marhil with

the capital it needed pursuant to a stock subscription agreement.

Under the terms of the agreement Westminster was to purchase

185 shares of Marhil stock for the sum of $185,000. The proceeds

from the sale were to be used to pay Marhil’s credi tors and

otherwise fund its plan of reorganization. The sale was scheduled

to occur on Sept ember 10, 1990. Thereafter, it was agreed that

Westminister would establish a $250,000 line of credit for Marhil,1 Progress payments allow a company to pay for remaining

materials and labor needed to complete a project under contract.

3 which would be used to fund business operations.

Shortly after the stock subscription agreement was

incorporated into the bankruptcy court’s order confirming Marhil’s

plan of reorganization, the appellants formed Marhil Acquisit ion

Corp. (“M AC”), a Colorado corporation, and opened several bank

accounts in Florida for MAC, and a second company, M.C.M.

Acquisitions Corp., Inc. Izydore then arranged to have Marhil’s

receivables factored through Goodman Fa c tors, Inc. by falsely

representing himself as the president of Marhil. The proceeds from

the factoring were subsequently transferred to MAC’s bank account

in Florida. In all, the appellants factored $378,487 worth of

Marhil’s receivables.

In addition to factoring Marhil’s receivables, the appellants

instructed Wallace to apply for a progress payment from National

Steel and Shipbuilding Co. (“NASSCO”), a company for which Marhil

was manufacturing marine closures under a substantial contract. 1

NASSCO complied with the request and sent Marhil a progress payment

of $197,490. On the appellants’ instructions Wallace forwarded the

payment to appellants, who deposited it in the MAC bank account in

Florida. It was later determined that no portion of the progress

payment was ever used to complete the NASSCO project. Instead,

some of the money went to the personal expenses of the appellants;

credit card balances; homes in Aspen, Colorado and West Palm Beach,4

Florida; and Schreiber’s BMW, to name a few. When asked to account

for the funds, the appellants claimed, amongst other things, that

$25,000 had been paid to a company called Michellette Corp., and

that $35,000 had gone to a law firm named Jacobson & Lambert, P.A.

Those statements were later shown to be false.

By December 1990, the appellants had still not purchased

Marhil’s stock as required by the subscription agreement an d the

reorganization plan. Consequently, a creditor filed suit seeking

to rescind the bankruptcy court’s order confirming the plan of

reorganization. At a subsequent hearing before the bankruptcy

court, the appellants claimed that $225,000 had been deposited in

Marhil’s account, that checks had been issued to all creditors, and

that the new Marhil stock had been issued in accordance with the

reorganization plan. After taking that testimony, the bankruptcy

court continued its consideration of the matter until January 17,

1991.

On January 15, 1991, Wallace received a fax from Schreiber

stating that Schreiber had stopped payment on a check that had been

issued to one of its creditors. Wallace then learned that

Schreib er had used a blank check that Wallace had given him for

incidental exp enses to withdraw the $225,000 deposit. At the

January 17 hearing, the bankruptc y court was presented with

compelling evidence that the appellants’ representations at the

previ ous hearing were false. Accordingly, the court revoked the

pla n of reorganization and appointed a Chapter 11 trustee to5

oversee M arhil’s operations. On a subsequent audit of Marhil’s

books, the trustee discov ered that the appellants had stolen

$108,000 from Marhil. The trustee’s attempts to save the business

were unavailing; she was forced to close Marhil based on its

inability to meet its business obligations.

On September 19, 1995, a grand jury indicted the appellants on

nine counts. Count one charged the appellants with conspiracy to

commit wire fraud and bankruptcy fraud, in violation of 18 U.S.C.

§ 371. Counts two through six charged the appellants with

committing wire fraud in violation of 18 U.S.C. § 1343, and aiding

and abetting wire fraud i n violation of 18 U.S.C. § 2. Counts

seven through nine charged the appellants with bankruptcy fraud in

violation of 18 U.S.C. § 152, and aiding and abetting bankruptcy

fraud in violation of 18 U.S.C. § 2. The case went to trial and a

jury convicted the appellants on all counts. The district court

subsequen tly sentenced Izydore to 60 months imprisonment and

Schreiber to 120 months. The appellants now appeal their

convictions and sentences.

II. CHALLENGES TO EVIDENTIARY RULINGS

The a ppellants argue that the district court committed

reversible erro r by allowing Bettina Whyte (“Whyte”), the

bankruptcy trustee, t o give opinion testimony regarding the

legality of the appellants’ conduct. At trial, when asked to

characterize the $108,500 that the appellants o wed Marhil, Whyte6

stated “[the money] was taken, and it was not legally taken in my

opinion, which was what I said in my report to the court.” Whyte

was not testifying as an expert witness when she made this

statement. The appellants timely objected to Whyte’s statement,

and asked the court to strike it from the record. The district

court overruled the objection.

We review a district court's decision to admit evidence under

the abuse of discretion standard. U nited States v. Wallace

, 32

F.3d 92 1, 927 (5th Cir. 1994). However, we will not reverse a

district court's evidentiary rulings unless substantial prejudice

results to the complaining party. Fed. R. Evid. 103(a); M unn v.

Algee , 924 F.2d 568, 573 (5th Cir.), c ert. denied

, 502 U.S. 900

(1991). The burden of proving substantial prejudice lies with the

party asserting error. F DIC v. Mijalis

, 15 F.3d 1314, 1318 (5th

Cir. 1994).

In this appeal the appellants assert that Whyte’s statement is

i nadmissible because it constitutes a legal conclusion regardin g

the ultimate issue of their guilt. They argue that her testimony

was particularly prejudicial given he r role as court-appointed

trustee. In the government’s view, Whyte’s statement merely

explains the circumstances surrounding her attempt to recover the

missing funds, and does not reflect a judgment on the criminal

guilt or innocence of the appellants.

Under Rule 704(a), "[t]estimony in the form of an opinion or7

inference otherwise admissible is not objectionable because it

embraces an ultimate issue to be decided by the trie r of fact."

Fed. R. Evid. 704(a); see United States v. Moore

, 997 F.2d 55, 57-

58 (5th Cir. 1993) (discussing Rule 704(a)). That rule, however,

does not allow a witness to give legal conclusions. Owen v. Kerr

McGee Corp.

, 698 F.2d 236, 240 (5th Cir. 1983). For that reason we

have long recognized that determinations of guilt or innocence are

solely within the province of the trier of fact. U nited States v.

Buchanan

, 70 F.3d 818, 833 n.20 (5th Cir. 1995), c ert. denied

, 517

U.S. 1114 (1996); United States v. M asson , 582 F.2d 961, 964 n.5

(5th Cir. 1978).

Here, there are two visible flaws in the appellants’ argument.

First, we are not at all convinced th at the phrase “it was not

legally taken” is a legal conclusion regarding the very specific

issue of whether the appellants are guilty of conspiracy, wire

fraud, and bankruptc y fraud. Whyte made this statement while

testifying at length about her efforts as trustee to account for

monies belonging to Marhil. When viewed in this context Whyte’s

statement is more accurately described as an opinion about whether

the $108,000 properly belonged to Marhil, or the appellants. It is

not a legal conclusion regarding the ultimate issue of whether the

appellants were guilty of the crimes charged in the indictment.

Second, even if it is a legal conclusion that was mistakenly

admitted, we have reviewed the record as a whole and cannot8

conclude that Whyte ’s statement, which consists of that single

remark, affected the substantial rights of the appel lants. Any

mistake by the dist rict court in admitting Whyte’s statement was

harmless error.

The appellants also contend that the district court erred in

excluding as hearsay four transcripts from various proceedings in

the bankruptcy court. They assert that the transcripts did not

constitute hearsay because they were offered not to prove the truth

of the matter asserted, but to show that false and misleading

statements were made to the bankruptcy court. The appellants did

not adequately raise this issue below, and we detect no plain error

that would require us to consider it on appeal. United States v.

Calverley

, 37 F.3d 160, 162 (5th Cir. 1994) (en banc), cert.

denied , 513 U.S. 1196 (1995).

III. SCHREIBER’S SUFFICIENCY CLAIMS

Schreiber brings sufficiency of the evidence challenges to all

of his convictions. He preserved this claim for appellate review

by moving for judgment of acquittal at close of government’s case,

and at the close of evidence. U nited States v. Pankhurst

, 118 F.3d

34 5, 351 (5th Cir.), c ert. denied

, 118 S. Ct. 630 (1997). The

district court denied those motions. We review d e novo a district

court’s denial of a motion for judgment of acquittal. U nited

States v. Myers , 104 F.3d 76, 78 (5th Cir.), cert. denied , 117 S.9

Ct. 1709 (1997). In evaluating the sufficiency of the evidence we

must affirm the verdict “if a reasonable trier of fact could

conclude from the evidence that the elements of the offense were

established beyond a reasonable doubt, viewing the evidence in the

light most favorable to the verdict and drawing all reasonable

inferences from the evidence to support the verdict.” Id.

We have rev iewed the record in this case, Schreiber’s

arguments on appeal, and the applicable law, and conclude that

there is sufficient evidence supporting Schreiber’s convictions for

conspiracy under count one; wire fraud under counts two, five, and

six; and bankruptcy fraud under counts seven through nine. We do

not find, however, sufficient evidence to su p port Schreiber’s

convictions for wire fraud under counts three and four.

A wire fraud conviction requires proof of (1) a scheme to

defraud, and (2) the use of interstate wire communication s in

furthera nce of the scheme. 18 U.S.C. § 1343; U nited States v.

Gray

, 96 F.3d 769, 773 (5th Cir. 1996), cert. deni ed , 117 S. Ct.

1275 (1997); United States v. Loney

, 959 F.2d 1332, 1337 (5th Cir.

1992). Under the wire fraud statute, 18 U.S.C. § 1343, "once

membership in a scheme to defraud is established, a knowing

participant is liable for any wire communication which subsequently

takes place or which previously took place in connection with the

scheme." United States v. Faulkner , 17 F.3d 745, 771-72 (5th Cir.)

(quotations and cita tions omitted), c ert. denied

, 513 U.S. 87010

(1994). But the communication at issue must satisfy the interstate

nexus set forth in § 1343; it is an immutable requirement. S ee

United States v. Darby

, 37 F.3d 1059, 1067 (4th Cir. 1994) (noting

that the interstate nexus requirement of wire fraud is not a

substantive element, but arises from constitutional limitations on

congressional power over intrastate activities), cert. denied

, 514

U.S. 1097 (1995).

In this case, there is sufficient evidence supporting

Schreiber’s conviction for conspiracy under count one. Thus, there

is sufficient evidence of a scheme to defraud, the first element of

the wire fraud offense. G ray

, 96 F.3d at 773. Schreiber, however,

assails his wire fraud conviction under counts three and four by

attacking the second element of the offense. He alleges that there

is no evidence in the record that the telephone calls at issue in

those counts crossed state lines. We agree.

Count three was based on a telephone conver sation that

occurred between Schreiber and JoAnn Copeland on October 10, 1990.

Copeland testified at trial that during that conversation she and

Schreiber dis c ussed payment problems that were occurring with

several of Marhil’s customers. In her testimony, however, Copeland

could not remember where Schreiber was located when this telephone

c all took place. Moreover, there is no evidence in the record,

documentary or otherwise, showing that the October 10 telephone

call crossed state lines.11

Count four was based on a telephone call between Schreiber and

Wallace on January 7, 1991. Wallace testified at trial that on

that day he placed a call to Schreiber in Aspen, Colorado, and left

a message because he was unable to reach him in person. Schreiber

subsequently returned Wallace’s call, and p roceeded to allay

Wallace’s concerns about the blank check he had provided Schreiber.

On cross-examination, Wallace conceded that he did not know where

S chreiber was when he returned the call. Again, as with the

telephone call in count three, there is no evidence in the record

which would indicate that Schreiber was outside the State of Texas

when the conversation took place.

Viewing the record in a light most favorable to the

government, we conclude that there is insufficient evidence of an

interstate nexus with respect to the telephone calls that form the

basis of counts three and four. We thus reverse Schreiber’s wire

fraud convictions under those counts. For the same reasons, we

reverse Izydore’s convictions for wire fraud under counts three and

four, which were based upon the same telephone calls.

In a related argument Schreiber argues that, because his wire

fraud convictions in counts three and four are invalid, his

conspir acy conviction in count one is likewise deficient because

one of its two objects was the substantive offense of wire fraud.

He asserts that because the general verdict on the conspiracy

charge does not indicate which object the jury relied on in

reaching that verdict, it is impossible to dete rmine whether the12

conspiracy conviction rests on the wire fraud object. We reject

this argument.

Schreiber was convicted on five separate counts of wire fraud

and three separate counts of bankruptcy fraud. We have reversed

only two of the wire fraud convictions. Accordingly, Schreiber’s

argument is flawed in two respects. First, there are three

remaining wire fraud convictions that support the wire fraud object

in the conspiracy count. Second, the Supreme Court has held that

the failure of proof on one of several alternative conspiratorial

objects does not void the conspiracy conviction if there is

sufficient proof as to any one of t he objects of the conspiracy.

Griffin v. United States

, 502 U.S. 46, 56-57 (1991). We thus

affirm Schreiber’s conspiracy conviction in count one.

IV. IZYDORE’S CLAIM OF DENIAL OF COUNSEL

Izydore contends that he was denied his right to counsel of

choice when the district court refused to allow David L. Botsford

(“Botsford”) to represent him at trial. Izydore maintains that the

district court then repeated that mistake by refusing to allow

Bots ford to represent him on appeal. We do not find Izydore’s

arguments persuasive.

Under the Sixth Amendment a defendant is guaranteed assistance

of counsel in all criminal pr osecutions. U nited States v.

Morrison

, 449 U.S. 361, 364 (1981); United States v. Hughey

, 147

F.3d 423, 428 (5th Cir. 1998). Concomitant with that guarantee is13

a defendant’s right to hire the attorney of his choice. Morris v.

Slappy , 461 U.S. 1 (1983). But the right to counsel of choice is

not an unfettered privilege. S ee Wheat v. United States

, 486 U.S.

153, 159 (1988) (“The Sixth Amendment right to choose one’s own

counsel is circumscribed in several important respects.”). It is

well recognized that there is a presumption in favor of a

defendant's counsel of choice, but that presumption may be overcome

by, inter alia , an actual conflict of interest on the part of the

chosen attorney, or by a showing of a serious potential for such a

conflict. I d

. at 164. As observed by the Supreme Court in W heat

,

“while the right to select and be represented by one’s preferred

attorney is comprehended by the Sixth Amendment, the essential aim

of the Amendment is to guarantee an effective advocate for each

criminal defendant rather to ensure that a defendant will

inexorably be represented by the lawyer whom he prefers.” Id. at

159. To that end, a district court is afforded broad latitude in

deciding whether countervailing considerations require the

rejection of a defendant’s preferred counsel. I d. at 163-64 ("The

evaluation of the facts and circumstances of each case . . . must

be left primarily to the informed judgment of the trial court.").

In this case, Schrei ber was originally represented by two

attorneys, Botsford and Richard Lubin (“Lubin”). Izydore was

initially repres ented by only one attorney, Steven Brittain

(“Brittain” ). Roughly three weeks before the start of trial14

Izydore moved the court to allow Botsford to appear as co-counsel

with Brittain. At a hearing on the motion Izydore informed the

court that Botsford was needed to assist in preparing the case for

t rial. He also maintained that Botsford would undertake various

responsibilities at trial, including cross-examination. The court

was advised that if Izydore’s motion was granted, Botsford would

withdraw from his representation of Schreiber with Schreiber’s

express permission.

In complianc e with the dictates of the Sixth Amendment, the

district court proceeded to explo re the nature of Botsford’s

representation of Schreiber. The trial court also questioned

counsel for all parties about whether there was a potential

conflict of interest that might unexpectedly ripen into an actual

c onflict at trial. After conducting that inquiry, the district

court concluded that Botsford’s subsequent representation of

Izydore would create a potential conflict of interest. The court

then denied Izydore’s motion, and later denied Izydore’s motion to

have Botsford represent him on appeal.

Izydore n ow challenges those rulings. He asserts that

Botsford play ed only a limited role in the representation of

Schreiber. Izydore also emphasizes that he and Schreiber proceeded

to trial under a joint defense agreement, and that Schreiber

explicitly waived any conflict of interest. In Izydore’s opinion,

the district court’s ruling violated Wheat because mere speculation15

about a conflict of interest is not enough to deny a defendant’s

counsel of choice; there must be a serious potential for conflict

of interest. We are not persuaded by Izydore’s arguments.

Izydore forge ts that at the hearing the government

contradicted his claim that Botsford had played a minor role in

Schreiber’s representation. The government, for example, informed

the court that Botsford was involved in lengthy plea negotiations

with the government on Schreiber’s behalf. Additionally, the

government warned the court that, based on statements Izydore made

in those plea negotiations, and in interviews with government

agents, there were two potential conflicts of interest which could

result in antagonistic defenses at trial.

On these facts we cannot conclude that the district court

abused its discretion by refusing to allow Botsford to act as cocounsel for Izydore. That Izydore may have waived any potential

conflict of interest does not change our view. Under Wheat it is

clear that a defen dant’s waiver does not necessarily preclude a

district court from rejecting a defendant’s counsel of choice when

the overall circumstances of a case suggest a conflict of interest

may develop. I d. at 163. In this case, Schreiber’s purported

waiver was significantly outw eighed by other facts that strongly

counsel ed against allowing Botsford to act as co-counsel for

Izydore.

We could not accept Izydore’s argument without turning a blind16

eye to the original design of the Sixth Amendment. The basic

purpose of the right to counsel “is simply to ensure that criminal

defendants receive a f air trial.” S trickland v. Washington

, 466

U.S. 668, 689 (1984). When considering Sixth Amendment claims “the

appropriate inquiry focuses on the adversarial process, not on the

accused’s relationship with his lawyer as such.” U nited States v.

Cronic

, 466 U.S. 648, 657 n.21 (1984). In the present action,

Izydore was represented by Brittain before, during, and after

trial. There is no indication in the record that Brittain’s

representation was inadequate or in any way unsatisfactory to

Izydore. Given the fact that Izydore was represented by one

attorney of his own choosing, we are hard pressed to find a denial

of his right to counsel based solely on the fact that he was denied

a second attorney of his choice. We find no error in the district

court’s decision.

V. SENTENCING CLAIMS

T h e appellants allege that the district court improperly

calculate d their sentences under the United States Sentencing

Guidelines by (1) calculating the amount of loss to be $976,158,

under U.S.S.G. § 2F1.1(b)(1); (2) finding that the appellants were

organizers or leaders of a criminal activity involving five or more

participants, or was otherwise extensive, under U.S.S.G.

§ 3B1.1(a); and (3) finding that the appellants violated a judicial2 Schre iber, but not Izydore, argues that the district

court erred by increasing his offense level by two levels for

obstruction of justice under U.S.S.G. § 3C1.1. We have reviewed

the record and find no merit to this argument.

3 We note, however, that in the subsequent judgment of

convicti on the district court assessed a joint and several

obligation against each defendant for restitution in the amount of

$564,412.09. We would ordinarily expect that the restitution

obligation and the amount of loss would be nearly the same.

17 order, under U.S.S.G. § 2F1.1(b)(3). We review each challenge in

turn. 2

The appellants first contend that the district court erred in

calculating the amount of loss to be attributed to them under

U.S.S.G. § 2F1.1(b)(1). The district court’s findings in this

regard are reviewed for clear error. U nited States v. Wimbish

, 980

F.2 d 312, 313 (5th Cir. 1992). At sentencing the district court

determined that the appellants were responsible for a total loss of

$976,158. 3 The district court based its determination on the

findings in the appellants’ presentence reports, although the court

did hear testimony from an expert witness who testified on the

appellants’ behalf. The presentence reports arrived at a total of

$976,158 by adding the following three figures: (1) $656,000,

which was described in the presentence reports as the value of

Marhil at the time of the bankruptcy court’s order of confirmation;

(2) $110,000, which was listed in the presentence reports as the

total loss to post-petition creditors for supplies received but not

paid for; and (3) $210,158, which was characterized in presentence

reports as the expenses associated with the appointment of the18

b ankruptcy trustee, attorney, and auditor, needed to investigat e

Marhil’s reorganization plan (collectively “trustee’s fees”). On

appeal, the appellants challenge the accuracy of these three

determinations.

The applicable Sentencing Guidelines provision for offenses

involving fraud is U.S.S.G. § 2F1.1. Section 2F1.1 assigns a base

offense level of six, and then adds incremental levels according to

the amount of loss resulting from the fraud. U.S.S.G. § 2F1.1. A

"loss" under § 2F1.1 me ans the actual or intended loss to the

victim, whichever is greater. U.S.S.G. § 2F1.1 commentary n.7.

Further, the amount of loss need not be determined with precision.

The district court need only make a reasonable estimate given the

available information. U.S.S.G. § 2F1.1 commentary n.8.

Here, the appellants first contend that the d istrict court

erred by including in its calculations the $656,000 that

represented the value of Marhil at the time the bankruptcy court

entered its order of confirmati on. The appellants maintain that

this figure is flawed because it is based only on Marhil’s assets

at the time of the confirma tion order, and does not reflect the

company’s liabilities.

The defendants’ presentence reports state tha t the value of

Marhil was $656,000 when the p lan of reorganization was finally

confirmed. The presentence reports do not calculate that figure

indep endently, but claim that this amount is “established in the

August 29, 1990, Order Confirming Marhil Manufacturing, Inc.’s Plan4 We also note that, although the actual presentence reports

do not contain this breakdown, it is clearly set forth in an

addendum to Izydore’s presentence rep ort that summarizes and

considers Izydore’s sentencing ob jections. S ee United States v.

Sanders

, 942 F.2d 894, 898 (5th Cir. 1991) ("[A] presentence

report generally bears sufficient indicia of rel iability to be

considered as evidence by the trial judge in making the factual

determinations required by the sentencing guidelines").

19 of Reorganization.” That statement is incorrect. We have reviewed

the bankruptcy court’s August 29 Order and find no reference at all

to the value of Marhil. Nevertheless, given the record as a whole

we cannot con clude that this single misstatement brings the

district court’s ruling into the realm of clear error.

The evide nce at trial established that the defendants were

willing to expend $656,000 in total capital in order to gain

control of Marhil. That figure consisted of $225,000 in cash, a

$250,000 line of credit for Marhil’s use, a $145,000 purchase of

equipment, and $36,000 in leasing costs for commercial real estate.

Although $656,000 may not be a precise valuation of Marhil’s worth

under the appellants’ proposed accounting, we find that it was a

reasonable estimate of its value given the available information. 4

See U.S.S.G. § 2F1.1 commentary n.8

. (amount of loss need not be

determined with precision, but must only be a reasonable estimate

given the available information). Accordingly, we conclude that

the district court’s decision to include that figure in its loss

calculations was not clear error.

Next, the appellants contend that the district court committed20

clear error by deciding to include in its loss calculations the

$110,000 debt owed to post-petition credi tors. They insist that

this debt cannot be considered a loss because it generated $510,170

in receivables for Marhil. We find no clear error on this point.

Finally, the appellants assail the district court’s decision

to include in its loss calculations the $210,158 in trustee’s fees.

The appellants maintain that those expenses are consequ e ntial

losses that cannot be co nsidered in loss calculations under

U.S.S.G. § 2F1.1. We note as a threshold matter that there is no

dispute as to the amount of the trustee’s fees. The only question

is whether those fees are to be considered a “loss” under U.S.S.G.

§ 2F1.1. That is a legal question involving the correct

interpretation of the Sentencing Guidelines that we review de novo

.

See United

States v. Randall , 157 F.3d 328, 330 (5th Cir. 1998)

(district court's interpretat ion and application of U.S.S.G. §

2F1.1 is reviewed de novo ); see also United States v. Vitek Supply

Corp.

, 144 F.3d 476, 488 (7th Cir. 1998) (observing that meaning of

“loss” under U.S. S.G. § 2F1.1. is a question of law reviewed d e

novo ).

The commentary to U.S.S.G. § 2F1.1 descr ibes “loss” as “the

value of the money, property, or services unlawfully taken.”

U.S.S.G. § 2F1.1 (also incorporating by reference the discussion of

loss val uation contained in commentary of U.S.S.G. § 2B1.1); s ee

also § 2B1.1 (“‘Loss’ means the value of the property taken,21

damaged, or destroyed”). Thus, on its face the definition of loss

is centered on the value of the thing taken, without reference to

consequential or incidental losses.

Other provisions in the Sentencing Guidelines plainly indicate

that consequential losses are ordinarily not taken into account

under U.S.S.G. § 2F1.1. The Sentencing Guidelines provide, for

instance, that loss “does not include interest the victim could

have earned

. . . had the offense not occurred.” U.S.S.G. § 2F1.1

commentary n.7. Similarly, the Sentencing Guidelines explain that

“when property is taken or destroyed, the loss is the fair market

value of the particular property at issue.” U.S.S.G. § 2F1.1

comment ary n.2. Thus, it stands to reason that if a defendant

steals an automobile the applicable loss would be the fair market

value of the car. It would not include the victim’s consequential

losses, like paying for public transportation or missing work, even

though su ch losses were the direct result of the defendant’s

unlawful conduct, and would not have occurred but for the

defendant’s actions.

This is not to say that consequential losses are never

considered under U.S.S.G. § 2F1.1, for there are specific instances

when consequential losses may pro perly be considered. The

commentary to U.S.S.G. § 2F1.1 provides that “[i]n contrast to

other types of cases, loss in a procurement fraud or product

substitution case includes not only direct damages, but also

consequential damages that were reasonably foreseeable.” U.S.S.G.22

§ 2F1.1 commentary n.7(c). But the fact that the Sentencing

Commission prescribed consequential losses in only these specific

fraud cases, and not others, is strong evidence that consequential

damages were omitted from the general loss definition by design

rather than mistake. Accordingly, we have found, as other courts

have, that consequential losses typically are not cou nted when

computing loss under U.S.S.G. § 2F1.1. U nited States v. Thomas

,

973 F.2d 1152, 1159 (5th Cir . 1992); see also United States v.

Daddona

, 34 F.3d 163, 171-72 (3d Cir.), cert. denied

, 513 U.S. 1002

(1994); United States v. Marlatt , 24 F.3d 1005, 1007-08 (7th Cir.

1994); United States v. Newman

, 6 F.3d 623, 630 (9th Cir. 1993)

(applying U.S.S.G. § 2B1.1).

Here, the government contends that the trustee’s fees are not

consequential losses because the fees were the direct result of the

appellants’ conduct. The government’s analysis misses the mark.

The touchstone for determining loss under U.S.S.G. § 2F1.1 is the

“value of the thing taken.” That concept is the key measure

b ecause the Sentencing Commission believed that punishment for

fraud should reflect a balance between the loss to the victim and

the gain to the defendant. S ee U.S.S.G. § 2B1.1 commentary

background (“The value of property stolen plays an important role

in determinin g sentences for theft and other offenses involving

stolen property because it is an indicator of both the harm to the

victim and t he gain to the defendant”). It was a “compromise23

between the retributive goals of punishment, which might have been

advanced best by basing sentence solely on the injury to the

victim, and its deterrent function, which might have been advanced

best by determining sentenc e solely from the offender’s gain.”

United States v. Wilson , 993 F.2d 214, 217 (11th Cir. 1993).

In this case, over the course of the appellants’ unlawful

conduct Marhil was robbed of its capital, an d post-petition

creditors were defrauded. There can be no doubt that this money

was “taken” by the appellants, as that word is commonly understood.

The trustee’s fees, on the other hand, were incurred after the

appellants’ unlawful conduct had ended. And while it is true that

the trustee’s fees were a consequence of the appellants’ unlawful

conduct, mere “but for” causation is not the litmus test for loss

determinations under U.S.S.G. 2F1.1. S ee Marlatt

, 24 F.3d at 1007

(expressly recognizing this point). The appropriate measure is the

value of the thing taken, and under that standard we cannot

reasonably conclude that trustee’s fees were the “thing taken” from

Marhil. Accordingly, we find that the district court erred in

including the trustee’s fees in its loss calculations.

We turn next to the appellants’ challenge to the district

court’s finding that the appellants were organizers or leaders of

a criminal activity involving five or more participants, or that

was otherwise extensive, under U.S.S.G. § 3B1.1 (a). Section

3B1.1(a) has two requirements: (1) the defendant must have been a24

leader or organizer in the criminal activity, and (2) the scheme

must have either included five or more participants or been

otherwise extensive. U.S.S.G. § 3B1.1(a). The commentary defines

"participant " as a person who is criminally responsible for the

commission of the offense, but need not hav e been convicted.

U.S.S.G. § 3B1.1(a) commentary n.1. “In assessing whether an

organization is ‘otherwise extensive,’ all persons involved during

the course of the entire offense are to be considered.” U.S.S.G.

§ 3B1.1(a) commentary n.3. Moreover, the use of “unknowing

services” of outsiders may make the criminal activity "ot herwise

extensive." U.S.S.G. § 3B1.1(a) commentary n.3. We review the

district court's findings in this regard for clear error. United

States v. Narvaez

, 38 F.3d 162, 166 (5th Cir. 1994), cert. denied

,

514 U.S. 1087 (1995).

On appeal the appellants focus their challenge on the adequacy

of proof supporting the requisite number of participants, and the

alternative requirement that the scheme be otherwise extensive. At

sentencing the district court made an express finding that the

scheme invo lved five or more participants, and that it was

otherwise extensive. Those findings are not clearly erroneous.

Finally, the appellants contend that the district court erred

by enhancing their offense levels under U.S.S. G. § 2F1.1(b)(3),

which provides for a two-level increase if the underlying offense

involves a “violation of any judicial or administrative order,g:\opin\97-50537.opn

25

injunction, decree, or proces s.” U.S.S.G. § 2F1.1(b)(3). We

review de novo the district court’s ruling on this issue. United

States v. Saacks

, 1 31 F.3d 540, 543 (5th Cir. 1997). The

appellants contend that error attended this decision because their

actions did not violate any specific order of the district court.

The appellants’ contention is foreclosed by our decision in Saacks

.

In that case we expressly held that bankruptcy fraud is in itself

a violation of a judicial or administrative order or process within

the meaning of U.S.S.G. § 2F1.1(b)(3). Id. at 546. Accordingly,

the district court did not err in this regard.

VI. CONCLUSION

Based on the foregoing, we VACATE the appellants’ convictions

for wire fraud under counts three and four, but AFFIRM the

appellants’ remaining convictions. We also VACATE the appellants’

sentences and REMAN D to the district court for resentencing

consistent with this opinion.