F OR P UBLICATION



### UNIT E D ST AT E S CO URT O F APPE AL S FO R T H E NINT H CIRCUIT

U N I T E D S T A T E S O F A M E R I C A , Plaintiff-Appellee

,

v

.

G R E G O R Y P E T E R T O R

L A I , J R

. , D efendant-Appellant

. No. 11-10359

D.C. No. 2:08-cr-00329- J AM-1

OPI NI ON

A ppeal from the United States District Court for the Eastern District of California J ohn A. Mendez , District J udg e , Presiding

Arg ued and Submitted J anuary 18, 2013—San F rancisco, California

F iled Aug ust 26, 2013

B efore: J

. Clifford W a llace, J erome F arris, and J ay S. B y bee, Circuit J udg es.

Opinion by

J udg e B y beeU N I T E D S T A T E S V

. T O R L A I 2

SUMMARY *

Crim inal Law

The panel a ffirmed the sentence imposed following a jury conviction of six teen counts of making a false claim for farm benefits in connection with the F ederal Crop I nsurance Act.

The panel held that by virtue of the defendant’s fraud, he

was not e lig ible for any g overnment b enefit under the c rop insurance prog ram, and th e r e f o re he was n o t an “intended beneficiary

” under U.S.S.G. § 2 B 1.1 cmt

. n.3(F )(ii). The panel thus rejected the d efendant’s arg ument that the district
court erred, i n i t s l oss calculation, by failing to separate leg itimate from illeg itimate claims.

T h e p a n e l held that the district court did not err b y including in the loss amount the producer p remiums the defendant paid – i.e.
, the non-subsidiz ed portion of t h e c rop insurance premium fo r which an insured farmer is responsible.

The p anel concluded that there was s u fficient evidence that administrative and operating ex p enses paid by the
g overnment to the i n s u rance company for selling a nd servicing the policy

, and premium s u b sidies paid by the
g overnment to und e r w rite the crop insurance, were reasonably foreseeable to the d efendant, and that the district court did not err by

including them in its loss calculation.

* T h is su m m ary co n stitu

tes n o part o f th e o p in io n o f th e co u rt. It h as b een p rep ared b y

co u rt staf

f f o r th e co n v en i en ce o f

th e read er.U N I T E D S T A T E S V

. T O R L A I 3

COUNSEL

T. L ouis Palaz z o ( a r gu ed), Palaz z o L aw F irm, L as Veg as, Nevada; Alle n L ichtenstein, L a s Veg as, Nevada, for Defendant-Appellant.

Mic h a e l D. Anderson (arg ued) a nd Ky le Reardon, Assistant United States Attorney s, United States Attorney ’s Office for the Eastern District of California, Sacramento, California, for Plaintiff-Appellee.

OP INION

B YB EE, Circuit J udg e:

Thomas J efferson once wrote to J ohn J ay : “Cultivators o f
t he earth are the most valuable c itiz ens. They are the mos t vig orous, the most independent, the most virtuous

, a n d they

are tied to their country and wedded to its liberty and interests by th e most lasting bands.” 8 The Papers of T h omas J efferson 426 (J ulian P. B oy d et a l. eds., Princeton University Press) (1950) (spelling moderniz e d )

. A l t h o u g h an industrious cultivator of the earth, G reg ory Peter Torlai did not p rove the
most virtuous. Torlai was convicted o f six teen cou n t s o f making a false claim for farm benefits in connection with the F ederal Crop I nsurance Act. At sentencing

, the district court determined that Torlai had c a used a l o ss of $410,372, resulting in a 14-level sentencing g uideline increase. I n this appeal, we c onsider whether the district court erred in its loss calculation. These are ma t t e rs of first impression. W e affirm.U N I T E D S T A T E S V

. T O R L A I 4

I . B ACKGROUND AND PROCEDURAL H I STORY

A. Federal Crop Insurance Program

“F arming has literally b een a feast or famine proposition

s i n c e the b eg inning of time.” David F

. Rendahl, Federal Crop Insurance: Friend or Foe?
, 4 San J oaquin Ag ric. L

. Rev. 185, 185 (1994). “Most ag r icultural p r o d uction is subject to the va ga r i e s of weather, and the nature o f
ag ricultural supply and demand often results in volatile market prices.” Dennis A. Shi el d s , Cong

. Research Serv., R40532, F ederal Crop I nsurance: B ackg r ound 1 ( 2012). One

o f t h e m ost vivid illustrations o f ag ricultural risk is the American Dust B owl. I n the 1930s, the my opic ag ricultural practices o f h omes t eaders coupled with severe droug ht

re s u l ted in widespread crop failure that left wide swaths o f the Great Plains reg ion of the United States hig hly susceptible
t o wind erosion. See Richard H ornbeck, The Enduring I m p act of the American Dust Bowl: Short- and Long-Run Adjustments to Environmental Catastrophe

, 102 Am

. Econ. R e v. 1477, 1479 ( 2012). “Dust storms in the 1930s b l e w

enormous quantities o f topsoil off Plains farmland; o n ‘B lack Sunday ’ in 1935, one such storm blanketed East Coast cities in a haz e.” Id. The destruction left in the Dust B owl’s wake

was so severe that it tr ig g ered a massive ex odus of farmers and t heir families w ho lost their livelihoods long before the dust settled.

The D ust B owl’s aw f

u l destruction not only motivated The Grapes of W

rath

, but a lso spurred Cong ress to “authoriz e [ ] federal crop insurance as an ex per i m e n t to address the effects of the G reat Depression and crop losses

seen in the Dust B owl.” Shields, supra a t 1. I t was o nly with the F ederal Crop I nsurance Act of 1980 (“F CI A”), 7 U

. S.C.U N I T E D S T A T E S V

. T O R L A I 5

§ 1501 et seq. , h o w e v e r , that Cong ress p ermanently authoriz ed the federal c rop insurance prog ram. Id. The FC I A ’ s ex press purpose is “to promote the national welf a r e by improving the economic stability of ag riculture throug h a sound sy stem of crop insurance.” Id. § 1502(a).

“The f ederal crop insurance prog ram provides producers with r isk manag ement tools to address crop y ield and/or

r evenue losses on their farms.” Shields, supra a t 2

. T h e prog r am is administered by the federal g overnmen t , but the insurance policies are sold throug h arrang ements with private insurance companies. Id. “I ndependent insurance ag ents a re paid sales c o m m i s s ions by the companies. The insurance companies’ losses are re i nsured by [ the] USDA, and their administrative and operating [ (“A& O”)] costs are reimbursed by the federal g overnment.” I d.

“I n p urchasing a policy

, a producer g rowing an insurable
crop [ in a c overed county ] selects a level of coverag e a nd
pay s a portion of the premium, which increases as the level o f
coverag e rises. The remainder o f the premium is covered b y the federal g o v e r n ment (about 62% of total premium, on averag e , is p aid by the g o v ern m e n t )

. ” Id. at 3. Thus, the federal crop insurance program subsidiz es the cost borne b y

a f armer in obtaining crop insurance, increasing farmer participation. See id.

Generally speaking

, there are two ty pes o f crop insurance policies: y i e l d

- b a s ed and revenue-based. Id. at 5. Yieldbased crop insurance policie s p r ovide insured farmers with “an i n d emnity if there is a y ield loss relative to the farmer’s ‘normal’ (historical) y ield.” Id. I n contrast, revenue-based

c r o p i n s u r a n c e p o l i c i e s a r e m o r e c o m p r e h e n s i v e, “protect[ ing ] ag ainst crop revenue loss resu l t ing fromU N I T E D S T A T E S V

. T O R L A I 6

declines in y ield, price, or both.” Id

. L ike other insurance products, th e differing crop insurance policies only provide

an indemnity ag ainst certain risks of loss, usually related to unpredictable, weather- r e l ated events that are bey ond the power of a farmer to control.

A farmer desiring to o btain crop insu r a n c e approaches a private insurer and is required to fil l o u t an application for
crop insurance containing detailed information: e.g. , the ty pe of insurable c rop; d ate of planting ; a pplicable i rr ig ation practice, if any ; and acrea ge u nder cultivation. The farmer also provides an actual production history (“A P H ”) for the
parce l t o b e insured. The APH establishes a record o f productivity for the subject parcel, a ssisting in the calculation of the policy premium and any benefits that mig ht b e r equired
to be paid. This informati o n must be received prior to planting the crop a f

ar m e r desires to insure. After planting

, however, the farmer must submit an acreag e report certify ing the veracity of all final information submitted reg ard ing the insured crop, including the amount of the farmer’s insurable interest in the crop. This cumulative i n formation is used to calculate the premium that a p p l i es to the issued crop insurance policy

.

I f, during the co u r s e of the g r owing season, a farmer’s insured crop suffers a covered cause of loss, the farmer must comply with a claims procedure, including filing a notice o f lo s s , t o o b tain an indemnity pay ment. A s part of the c laims
process, an a d

j u ster must inspect the crop to v erify the farmer’s asserte d c au s e of loss a n d f ile a corresponding report—certified by the farmer—detailing information about the crop a nd the cause o f loss. I f the loss is determined to be covered by the crop insurance p olicy

, the required indemnity will be paid to the farmer.U N I T E D S T A T E S V

. T O R L A I 7

Althoug h the crop insurance premium is due w h en the insurance policy is issued, in p r a c t ice, the farmer is allowed
to d elay pay

ment until e ither the insured crop is harvested a nd marketed, or a v alid claim is submitted and an ind emnity paid. N ormally

, when a valid claim is submitted, the farmer

never p ay s the p remium out-of-pocket; rather, the farmer receives an indemnity pay ment that is net the c rop insurance premium the farmer remains owing

.

B

. Facts

T o rl a i is an ex p erienced farmer. I n fact, f o r approx imately thirty y ears, Torlai h as been actively involved in the cultivation of nu m e r ous different crops o n varied parcels o f l and throug hout northern California, including in Contra Costa, L assen, a

nd San J oaquin counties. As part o f his substantial farming operations, T orlai has long taken advantag e of federal crop insurance prog rams t o h edg e ag ainst the risks he faces in his farming operations.

I n 2008, an indic t m ent was r eturned ag ainst Torlai charg ing him with seventeen counts of making a false claim for farm benefits. S

e e 1 8 U .S.C. § 1014. The charg e s stemmed from misrepresentations that Torlai made in order
to obtain crop in s u rance policies a nd collect indemnity
pay ments on those policies for Stoney Creek Ranch ( L assen County ) in 2001, 2002, and 2005; Union I sland (San J oaquin County ) in 2001; and Quimby I sland (Contra Costa County ) in 2001. T o r lai’s alleg ed misrepresentations included

ex a g g erated acreag e reports, misidentify ing the crop planted, incorr ect planting dates, claiming non-irrig ated c rops were irrig ated, misrepresenting f o r a g e crops as crops for g rain production, and inventing causes of loss.U N I T E D S T A T E S V

. T O R L A I 8

C. Procedural History

At trial, the jury convicted Torlai o f all six teen c ounts placed before them—the g overnmen t having previously dismissed o ne of the seventeen counts in the indictment. The Pre-Sentence Report recommended that Torlai be g iven a 12- level sentencing g uideline i n c r e ase based on an e stimated $350,000 loss. At the sentencing hearing

, h o w e v e r, the
g overnment arg ued that the a p propriate loss amount should be $410,372, requiring a 14-level sent encing g u ideline increase. 1 The g overnment’s proposed loss amount r equired the district court to d etermine that Torlai was not leg itimately entitled to any p ortion of the indemnity pay ments he received, including (1) the g ross amount o f the indemnity without

s ubtracting Torlai’s portion o f the crop insurance pre m i u m , and (2) the premium subsidies a n d A& O ex penses paid b y the
g overnment. The d istrict court acce p t e d the g overnment’s calculated loss amount, b ut varied from t h e sentencing
g uideline rang e and imposed a below-Guidelines sentence o f
concurrent terms of 30 months imprisonment and 36 months supervised r elease. T orlai timely appea l e d

, arg uing that the district court e r red in imposing a 14-level sentencing
g uidelines increase f

o r loss based on the g overnment’s calculation. W e have jurisdiction pursuant to 28 U.S. C

. § 1291.

I I

. STANDARD OF REVI EW

O u r a ppellate review of a sentence “is to determine whether the sentence is r easonable; only a procedurally

1 Un i t e d States Sen ten cin g Gu id elin es § § 2 B 1 .1 (b )(1 )(G) an d (H)
p ro v id e th at a lo s s g reater th an $ 20 0,0 0 0 resu lts i n a 1 2

- lev el in crease, an d a lo ss g reater th an

$ 4 0 0 ,0 0 0 resu lts in

a 1 4

- lev el in crease.U N I T E D S T A T E S V

. T O R L A I 9

erroneous or substantively unreasonable sentence will be set aside.” U

ni t e d States v. Carty
, 520 F .3d 984, 993 (9th Cir. 2008) ( en banc); see also Gall v. United States
, 552 U.S. 38, 46 (2007) (“Our ex planation of ‘reaso n a b leness’ review in the Booker o pinion made it p e l l u cidly clear that the familiar abuse-of-discretion standard of review n ow a p plies to appellate review of sentencing decisions.”). Thus, we must first consider “whether the district court com m i t t ed sig nificant procedural error” w hen d e termining T orlai’s
sentence. Carty
, 520 F .3d at 9 93. “Procedural e rrors include, but a re not l i m i t e d to, incorrectly calculating the Guidelines
rang e , treating the Guidelines a s mandatory

, failing properly
to consider the § 3553(a) factors, u sing clea rly erroneous facts when calculating the Guidelines rang e o r d etermining the sentence, and failing to p rovide a n adequate ex planation for the sentence imposed.” Un i t ed States v. Armstead

, 552 F .3d 769, 776 (9th Cir. 2008). “I f we discern no sig nificant p rocedural error, we proceed to t h e second step and ‘ consider the substantive reasonableness of the sentence.’” I

d . (quoting Carty
, 520 F .3d at 993). 2

W e review “the district court’s construction a nd interpretation of the Sentencing G uidelines de novo,” United States v. Nielsen

, 694 F .3d 1 0 3 2
, 1034 (9th Cir. 2012), a nd “the district cou rt’s application[ ] of the Guidelines to the facts” for abuse of discretion, U nited States v. Holt

, 510 F .3d 1007, 1 0 1 0 ( 9th Cir. 2007). W e w ill only reverse a district court’s decision as an abuse o f d i s c r etion where we either “determine de n o v o [ that] the trial c ourt identified the [ in] corr e c t leg al rule to apply ,” o r “determine [ that] the trial court’s a pplication o f the correct leg al standard w a s (1) illog ical, (2) implausible, or (3) without support in inferences

2 T o rlai do es n o t co n test th e su b s tan tiv e reaso n ab len ess o f h is sen t en ce.U N I T E D S T A T E S V

. T O R L A I 10

that may be drawn f

rom the facts in the record.” United States

v. Hinkson

, 585 F .3d 1 247, 1261–62 (9th Cir. 2009) (en banc) (internal quotation marks omitted).

W e r e v iew the district court’s f actual determinations,

“ including the calculation of the v ictim’s loss,

. . . for clear error.” United States v. Tulaner

, 512 F .3d 5 76, 578 (9th Cir. 2008). “The clear error standard is s i gn i f icantly deferential and is not met unless [we are] left w i t h a d efinite and f irm conviction that a mistake has been c ommitted.” Fisher v

. Tucson Unified S

c h

. Dist.
, 652 F .3d 1131, 1136 (9th Cir. 2011) (internal quotation marks omitted). “ [ I ] f the district court’s finding s are plausible in lig ht of the record viewed in its entirety

, [ w e ] cannot reverse even if [ we a re] convinced [ we] would have fo u n d d ifferently

. ” United States v

. McCarty
, 648 F .3d 820, 824 (9th Cir. 2011) (internal quotation marks omitted). Thus, “ [ w] here there are two permissible views of the evidence, the f actfinder’s choice between them cannot be clearly erroneous.” United States v

. Elliott

, 322 F .3d 710, 715 ( 9th Cir. 2003) (internal quotation marks omitted).

I I I . DI SCUSSI O N

W h en imposing a sentence u p on an individual convicted of making a false claim f or farm benefits pursuant to 18 U.S.C. § 1014, a district co u r t is g uided by the United States Sentencing G uidelines (“USSGs”) § 2B 1.1. W hile the USSGs are only advisory

, see U nited St a t e s v

. Booker

, 543 U.S. 220, 245 ( 2005), a d istrict court must c o r r e ctly calculate the g uideline ran ge b e fore imposing a reasonable sentence, see G all

, 552 U.S. a t 51. At is s ue in the instant appeal is the district court’s loss calculation used to derive the sentencing g uidelines rang e a pplicable to Torlai’s conviction.U N I T E D S T A T E S V

. T O R L A I 11

Th e “ c ommentary in the G uidelines Manual that interprets or ex plains a g uideline is authoritative u n less it violates the Constitution or a federal statute, or is inconsistent with, or a plainly erro n e o u s reading of, that g uideline.” S t i n son v. United States
, 5 08 U.S. 36, 38 (1993); see a l s o United States v. Jackson

, 697 F .3d 1141, 1146 (9th Cir. 2 012) (per curiam). The comment a r y t o § 2B 1.1 indicates that a portion o f the sentencing g uideline rang e i s d i c t ated by the loss table, and the relevant instructions for properly using the loss table are contained in application note 3.

Specifically

, “loss is the g reater of actual loss or intended loss,” subject to certain ex ceptions that are not relevant in this

case. U.S.S.G. § 2B 1.1 cmt. n.3(A). The ap p l ication n ote continues by defini ng “actual loss” as “the reasonably foreseeable pecuniary h arm 3 that resulted from the offense.” Id. § 2B 1 .1 cmt. n.3(A)(I ). “I ntended loss” is defined as: (1) “[ T] he pecuniary harm 4 that was intended to result from the offense,” and (2) “includes intended pe c u n iary harm that

w o u l d have been impossible or unlikely to occur.” Id. § 2B 1.1 cmt. n.3(A)(ii).

A special rule, however, applies to cases involving
g overnment benefits:

3 “ Reaso n ab ly f

o reseeab l e p ecu n ia r y h a r m ” is d ef in ed as “ p ecu

n iary h arm th at th e d ef

en d an t k n ew o r, u n d er th e circu m stan ces, r e aso n ab ly sh o u ld h av e k

n o w n , w as a p o ten tial resu l t o f th e o f f en se.” U.S.S.G. § 2 B 1 .1 cm

t. n .3 (A )(iv ).

4 “ P ecu n iary h arm ” i s d ef in ed as “ h arm th a t i s m o n etary o r th at

o t h erw ise is read ily m easu rab le in m o n ey .” P ecu n iary h arm “ d o es n o t in clu d e em o tio n al d istress, h arm to rep u tatio n , o r o th er n o n

- eco n o m ic h arm .” U.S.S.G. § 2 B 1 .1 cm t. n .3 (A )(iii).U N I T E D S T A T E S V

. T O R L A I 12

I n a case involving g overnment benefits ( e.g. , g rants, loans, e n titlement prog ram pay ments), loss shall be considered to be n o t less than the value o f the b e n e fits obtained by unintended recipients or diverted to unintended uses , a s the c ase may be. F o r e x ample, if the defenda n t was the intended recipient of food stamps havin g a value of $100 but f r audulently received food stamps having a value of $150, loss is $50.

Id. § 2B 1.1 cmt. n.3(F )(ii) ( emphasis added). 5 Nevertheless,
t h e d i s trict court “need only make a r easonable estimate o f the loss. T he sentencing judg e is in a uniq u e position to

assess the e vidence and estimate t h e l o ss based upon that evidence. F or t h i s reason, the court’s loss determination is entitle d to appropriate deference.” I d. § 2B 1.1 cmt. n.3(C);

5 Cro p in s u ran ce o b tain ed th ro u g h th e f ed eral cr o p in su

ran ce p ro g ram is a g ov ern m en t b en ef

it f o r p u rp oses o f § 2 B 1 .1 cm t. n .3 (F)(ii). T h e f ed eral cro p in s u ran ce p ro g ram is a su b sid y p ro g ram in ten d ed to b en ef

i t f arm ers sp ecif

i cally

, an d so ciety m o re g en erally

, th ro u g h a m o re stab le
ag ricu ltu ral sy stem

. A lth o u g h f

ed eral cro p in su

ran ce is n o t id en tical to th e f ed eral f oo d stam p p ro g ram in clu d ed a s a n e x a m p le in § 2 B 1 .1 cm

t.

n .3 (F)(ii), th e f

ed eral cro p in su

ran ce p ro g ram is sim ilar in th at it p ro v i des

a su b sid y to a p articu lar su

b set o f th e Un i ted States p o pu latio n

. T h u s, th e b e n e fit a f

arm er receiv es th ro u g h p articip atio n in th e f ed eral cro p in su ran ce p ro g ram

—p rem iu m su

b si d y —is a g o v ern m en t ben ef

i t sim i lar
t o “ en titlem en t p ro g ram p ay m en t s.” S

ee § 2 B 1 .1 cm

t

. n .3 (F)(ii ) ; c

f

. Un ited S t a tes v. Ma xwell

, 5 7 9 F.3 d 12 8 2
, 1 3 0 6

– 0 7 (1 1 t h Cir. 20 0 9) (ch aracterizin g a co n tract receiv ed u n d er a fe d e r ally f u n ded Disa d v an tag ed B u sin ess En terp rises pro g ram —f o r th e p u rp ose of

“ h elp [in g ] s m all m in ority

- o w n ed b u sin esses d ev elo p an d g ro w ”—as a g o v ern m en t ben ef

it); Un i ted Sta tes v. Tu

p o n e , 44 2 F.3 d 1 4 5
, 1 5 3– 5 4 (3 d Cir. 2 00 6 ) (ch aracterizin g f ed eral w o rk ers’ co m

p en satio n b e n e fi t p ay m en ts as a g o v ern m en t b en ef it).U N I T E D S T A T E S V

. T O R L A I 13

see also United Stat e s v. W

. Coast Aluminum Heat Treating Co.
, 265 F

. 3d 986, 991 ( 9th Cir. 2001) (“[ T] he district court’s oblig ation is to adopt a r easonable ‘realistic, e conomic’ projection of loss based on the evidence presented.”). 6

Torlai’s e n tire appeal is centered on an alleg ed error committed b y the d istrict court in determining the loss
amount. I n this reg a

rd, Torlai a d v ances three main
arg uments: (1 ) T he district court improperly based its loss calculation on the “premise t h a t Torlai’s statements were

6 T o rlai h as a r g u e d th at certain f acts relied o n b y th e d istrict co u rt in

sen ten cin g eith er w ere n o t d eterm i n ed by th e j u ry , o r th e j u ry d id n o t f in d certain f acts b ey o n d a reaso n ab le d ou b t th at th e d istrict co u rt su b seq u en tly relied o n at sen ten cin g . A s w e h av e p rev i o u sly stated :

T h is arg u m en t f

u n d am en tally m isu

n d erstan d s th e

cu rren t state o f c o n s t i tu t io n al law o n sen ten cin g

. T h e relev an t Six th

A m en dm en t q u estio n is n o t

. . . w h eth er [th e d i s t r i c t co u rt] f

o u n d f acts th at w ere n o t p ro v en b ey o n d a reaso n ab le d o u

b t b y th e j u ry i n th e p ro cess of calcu latin g th e g u id elin es ran ge

. Rath er, th e Six th A m en d m en t q u estio n

. . . i s w h eth er th e law fo rb i d

s [th e d istrict co u rt] to in crease a d ef en d an t’ s sen ten ce

u n less t h e [d istrict co u rt] f

in d s f acts th at th e j u ry d id n o t fi n d (an d t

h e o f f en d er d id n o t co n ced e). B ecau se t h e

sen ten cin g g u id e lin es are ad v iso ry af ter Bo o ker

, th e Six th A m en d m en t do e s n o t req u ire t h at th e lo ss b e p ro v ed to a j u

ry b ey o n d a reaso n ab le d o u b t

.

Un ited S ta tes v. Hickey

, 5 8 0 F .3 d 9 22
, 9 32 (9 th Cir. 2 0 0 9) (in t ern al citatio n s an d q u o t atio n m ark s o m i tted ); see a lso Dillo n v. Un ited Sta tes , 1 3 0 S

. Ct. 2 6 8 3
, 26 9 2 (2 0 1 0 ) (“ T ak in g th e orig in al sen ten ce as g iv en , an y f acts f ou n d b y a j u d g e at a § 3 5 8 2 (c)(2 ) p ro ceed in g do n ot serv e to in crease t h e p rescrib ed ran g e o f p u n ish m en t; i n stead

, t h ey af f ect o n ly th e j u d g e’ s ex ercise o f

d iscretio n w ith in th at ran g e[,]

. . . an d th e ex ercise o f

su ch d iscretio n d o e s n o t co n trav en e th e Six th A m en d m en t ev en if it is in f o rm ed b y j u d g e- f o u n d f acts.”).U N I T E D S T A T E S V

. T O R L A I 14

false in their en t i r e ty

. ” T orlai arg ues that this was error because he w as leg itimately e ntitled to some insurance, even if not every

thing he claimed. (2) The court er r o n eously included his entire indemnity claim as loss, even thoug h any indemnity pay

ment made by the g overnment woul d h a v e been r educed by the amount that h e o w e d as an insurance premium. (3) The co u rt impermissibly included amounts spent by the g overnment o n A & O ex p e nses and premium subsidies as “reasonably foreseeable intended pecuniary losses.” 7 W e consider each of Torlai’s arg uments in turn.

A. Indemnity Payment as the Basis for Loss Calculation

F irst, T orlai arg ues that he actually planted and lost some leg itimately insured crops. Torlai a sserts that he “[ c] learly

. . . did, in fact, plant crops that w ere insured u n der the policies issued,” but “[ n] either the jury at trial nor the Court

7 T o r l a i a l so arg u es th at th e Ru le o f L en ity sh o u ld ap p ly b ecau s e th e d istrict co u rt “ read ily ad m itted t h at th ere w as n o c a se l aw to g u id e [th e

co u rt] in [its] sen ten cin g d ecisio n s” an d

, th eref o r e , t h e d i strict co u rt

“ i n v o k ed its in terp retatio n o f th e F e d e r a l S en ten cin g Gu id elin es.” W e h av e p rev io u sly h eld t

h at th e Ru le o f

L en ity ap p lies to o u r in terp retatio n

o f th e USSGs, as w ell as p en al statu tes. Un ited S t a t e s v. Fu en t esBa ra h o na , 1 11 F.3 d 6 5 1
, 6 5 3 (9 th Cir. 1 9 9 7 ) (p er cu riam ). Fu rth er, w e h av e h eld th at “ [t]h e ru l e o f len ity is ap p licab le o n ly w h ere th ere is a g riev ou s am

b ig u ity o r u n certain ty i n t h e lan g u ag e an d stru ctu re o f [an ] A ct, su ch th at ev en af

t er a co u rt h as s eize[d ] ev ery th in g f ro m w h ich aid

can b e d eriv ed

, i t is s till lef t w ith an am

b ig u o u s statu te.” Un i t ed S ta tes v. Ben d tzen , 5 4 2 F.3 d 72 2
, 72 7

– 2 8 (9 th Cir. 2 0 0 8 ) (in tern al q u o tatio n m ark s

o m itted an d alteratio n s in o rig in al). Ou r an aly sis sh o w s t h at th e relev an t

sen ten cin g g u id elin e i s n o t “ g riev o u s[ly ] am b ig u [o u s].” T h e m ere f

act th at t h ere i s a dearth o f p re- ex istin g caselaw d o es n o t in elu ctab ly f o rce u s to co n clu d e th at th e d istrict co u rt co u ld m ak e n o m o re th an a g u ess as to

w h at th e relev an t s e n t e n cin g g u id elin e m ean t. T o rlai’ s Ru le o f L en ity
arg u m en t is w ith o u t m erit.U N I T E D S T A T E S V

. T O R L A I 15

a t sentencing ever attempted to ascertain what portions o f those indemnities paid were leg itimate and w h at portions

were not.” I n Torlai’s estimation, the dist r i c t court merely assumed “that Defendant was n ot entitled to any o f the money h e received in the form of indemnity pay ments,” with “ [ n ] o

a ttempt [being ] made to separate the leg itimate from the illeg itimate claims for the purpose of determining how much of the insurance c l a i m was fraudulent

. . . and how much o f the claim was not erroneous.” T hus, Torlai arg ues that the district court shoul d have conducted a n analy sis “to determine ho w m u ch of [ his] claims or intended claims, [ sic ] were leg itimate under the policies i n e f f ect,” and that amount should be subtracted from loss calculation u nder t he
g overnment benefits provision of § 2B 1.1 cmt. n.3(F )(ii).

I n a g overnment benefits case, “ l o s s shall be considered
to be not less than the value of the b e n efits obtained b y unintended recipients or diverted to uni n t e n ded uses

. ” U.S.S.G. § 2B 1.1 cmt. n.3(F )(ii) (emphasis added). Only the illeg itimate portion o f the v alue of the go v e r n ment benefits should b e included in the loss calculation. Id. Torlai arg ues that if he truly planted some el i g i b l e crop that was covered under a valid crop insurance policy but, f o r ex ample, h ad overstated the acreag e under c ultivation, a nd the crop insurance policy was v a lid notwithstanding the false statement, then the district court would have been required to determine the amount of the resulting indemnity p ay ment to which Torlai w ould have been leg itimately entitled u nder the valid crop insurance policy

. W e need not address Torlai’s
arg ument because it assumes a premise he cannot sustain: that Torlai r etained a v alid crop insurance policy desp ite his misrepresentations. I mportant ly

, however, each of the applications for crop insurance submitted by Torlai contained “Conditions of Acceptance,” providing that Torlai’sU N I T E D S T A T E S V

. T O R L A I 16

“Applic a t ion [wa] s accepted and insurance attache[ d] in accordance with the policy unless

. . . any material fact [wa] s omitted, concealed or misrepresented in th[e] Application or in the submission of th[e] A p p lication .” (emphasis added). This is consistent with the basic policy provisions that were in effect when Torlai received crop insurance on the parcels charg ed in the indictment. I n e ach relevant y e a r , t h e basic Crop Revenue Coverag e I n surance Policy provided: “[ I ] f y ou

or any one a ssisting y ou has int e n t ionally concealed o r misrepresented any material fact r elating to this p olicy

. . . [the] policy will be voided .” 8 See, e.g. , Risk Mg mt. Ag ency ,

8 T h e co m

p lete p o licy

p ro v isio n

states:

2 7 . Co ncea lm ent, M i srepresenta tio n o r Fra ud

(a) If y o u h av e f

alse l y o r f

rau d u l en tly co n cealed th e f act th at y ou are in elig ib le to receiv e b en e fi t s u n d er th e A ct o r if y o u o r an y on e assi s t in g y ou h as in ten tio n ally co n cealed or

m isrep resen t ed an y m aterial f act relatin g to th is p o licy :

(1 ) T h is p o licy

w ill b e v o id ed ; an d

(2 ) Yo u m ay b e su

b j ect t o rem ed ial san ctio n s in acco rd an ce w ith 7 C F R p art 4 0 0
, su b part R.

(b ) E ve n th o u g h th e p o licy is v o id

, y o u m ay stil l b e req u ired to p ay

2 0 p ercen t o f th e p rem iu m d u e u n der th e p o licy to o ffs e t co sts in cu rred b y u s i n t h e serv ice of th is p o licy

. If
p rev io u sly p a id

, th e b alan ce o f th e p rem iu m

w ill b e retu rn ed

. (c) Vo id an ce o f th is p o licy w ill re su lt in y ou h av in g t o reim

b u rse all in dem

n ities paid f

orU N I T E D S T A T E S V

. T O R L A I 17

USDA, 2001 Crop R e v enue Coverag e (CRC) I nsurance Policy , 01-CRC-B ASI C 14 (2000) (emphasis a dded). Thus, if Torlai misrepresented any material fact in his p olicy application, then his crop i n surance policies would be void and the district court could determine that Torlai was not an intended r ecipient of the g overnment benefit at issu e

— c rop insurance indemnity

pay ments.

Our review of the record reveals sufficient evidence that T o r l a i w as not entitled to any portion of the indemn i t y pay ments.

1. Stoney

Creek Ranch 2001

The Pre-Sentence Report fou n d that Torlai actually planted substantially less than the 499 ac r es o f wheat for Stoney Creek Ranch in 2001 he reported, and that the wheat that was planted was not irrig a ted. Torlai also misstated his interest in the crops g r own on Stoney C r e e k Ranch. M o r e over, Torlai only purchased enoug h beardless wheat seed to p lant approx imately 120 acres of n on-irrig ated

th e cro p y ear in w

h ich th e v o id an c e w as ef f ectiv e.

(d ) Vo id an ce w ill be ef

f ectiv e o n th e fi r s t d ay of th e i n su ran ce perio d f

o r th e cro p y ear in w

h ich th e act o ccu rred an d w ill n o t af f ect th e p o licy f o r su b seq u en t cro p y ears u n less a v io latio n of th is sectio n

also o ccu rred in su ch cro p y ears.

Risk Mg m

t. A g en cy , USDA
, 2 0 0 1 C r o p Rev en u e Co v erag e (CRC) In su ran ce Po licy

, 0 1

- CRC- B A SIC 1 4 (2 0 0 0 ); Risk Mg m t. A g e n c y , USDA
, 20 0 2 C ro p Rev en u e Co v erag e (CRC) In su

ran ce P o licy

, 0 2- CRCB A SIC 15

– 1 6 (2 00 1 ); Risk Mg m t. A g en cy , USDA
, 2 0 0 5 Cro p Rev en u e Co v erag e (CRC) In su

ran ce P olicy , 0 5

- CRC- B A SIC 2 4 (2 0 0 4 ).U N I T E D S T A T E S V

. T O R L A I 18

land—thoug h he had altered an invoice to make it appear a s i f he had p urchased a g reater quantity of seed. T hus, t h e record reveals that Torlai m a d e multiple material misstatements that rend e red his crop insurance policy for Stoney Creek Ranch in 2001 void. This evidence was clearly sufficient f

or the district court to determine that Torl a i w a s not an intended beneficiary of any indemnity pay ment r elated to Stoney Creek Ranch in 2001.

F urthermore, r eg ardless of the v alidity o f Torlai’s crop insurance policy for Stoney C r e e k Ranch in 2001, the
g overnment will not pay an indemnity unless the farmer has filed a valid claim. T hat is, a f ar mer covered by a crop insurance policy must sh o w that the loss he suffered was caused by a covered event. Reg arding the 2001 Stoney Creek Ranch crop, Torlai based his claim for an indemnity pay ment

on losses supposedly r esulting from h ail, wind, and e x cessive precipitation. T he evidence showed, however, that there was “no crop to be impacted by the causes of loss.” The satellite imag es introduced into evidence d id n ot s how any evidence of a wheat crop that had d eveloped t o a sufficient stag e o f

ma turation that could have been harmed by the purported

causes of loss. Even assuming that the weather e vents Torlai reported did occur and that T o r l a i g rew some portion of the insured crop and h ad a v alid crop insurance policy

, the evidence clearly showed that the w eather events asserted in the filed claim coul d n ot h ave caused any damag e and, th e r e f o r e, Torlai was entitled to no indemnity

. T he absence of a leg itimate cause of loss m eans that Torlai was n ot an intended benefic i a r y o f a ny indemnity for Stoney Creek Ranch in 2001, reg ardless of any other factors.U N I T E D S T A T E S V

. T O R L A I 19

2. Stoney

Creek Ranch 2002

The Pre-Sentence Report found that Torlai actua l l y planted substantially less t h a n the reported 836.1 acres o f wheat f or Stoney Creek Ranch in 2002, and that the wh eat that was planted was n ot irrig ated. The Pr e

- Sentence Report’s conclusion is supported by the record. L i k e wise, Torlai ag a in misstated his i n t erest in the crops g rown on Stoney Creek Ranch. I n fact, satelli t e imag es revealed that there was insufficient land cleared on Stoney Creek Ranch to

even plant 499 acres of wheat. “[ A] pprox imately 536 of the 836.1 a cres reported a s planted to wheat by [ T orlai] ha[ d] not been converted from native veg etation g rass” during the relevant tim e period. F u r thermore, crop insurance adjusters did not find any wh e a t p lanted in fields that Torlai represented as having been planted to wheat. W hat crop i n s urance adjusters did find were larg e pits full of g arb a ge and debris, a far-cry from a wheat stand. Thus, the record reveals that Torlai made material misstatements that render his crop insurance policy for Stoney Creek Ranch in 2002 void. On that basis, the evidence was s u f f icient for the district court to determine that Torlai w as not an intended beneficiary of any in d em n i ty pay ment related to Stoney Creek Ranch in 2002.

Reg ardless o f the validity of Torlai’s crop insurance policy for Stoney Creek Ranch i n 2 0 0 2
, Torlai did not have

a v a l i d claim f

or loss. During an unscheduled visit by crop insurance adjusters, they

discovered that the wheat had been
g raz ed off by c attle. I n response, Torlai withdrew his c laim. Even assuming that Torlai had a valid crop insurance p olicy and that the asserted cause o f loss was leg itimate, the fact that horses or cattle had g raz ed off the p u r p ortedly insured crop

v o ided the insurance contract and nullified Torlai’s cla i m ,U N I T E D S T A T E S V

. T O R L A I 20

entitling him to no i n d e mnity pay ment. As a consequence, Torlai was not an intended benefic i a r y o f any indemnity for Stoney Creek Ranch in 2002.

3. Stoney

Creek Ranch 2005

As with the previous claims, the Pr e -Sentence Report concluded t hat Torlai had actually planted substantially less than the reported 650 acres of w heat for Stoney Creek Ranch in 2005, a nd that the w heat that was p lanted was n ot irrig ated. The Pre-Sentenc e Report’s conclusion is supported by the record. Torlai also misstated his interest in the crops g rown

on Stoney Creek Ranch. Thus, the record reveals that Torlai made material misstatements that render his crop insurance policy for Stoney

Creek Ranch in 2005 void.

F urthermore, the evidence showed that Torlai had no intention of harvesting any of the w h e a t that was p lanted because the w heat w as of a variety used as a fo rag e crop for beeves and thus was not elig ible for crop insurance. Even if the fields represented by Torlai as h a v i n g been planted h ad actually been planted to a variety of wheat intended for being harvested as g rain, Stoney Creek Ra n c h ’s rocky

, sag ebrushcovered terr ai n w a s such that a combine would h ave been unable to harvest a wheat crop. The absence of an insurable
crop means that Torlai was not an intended b eneficiary of any indemnity

for Stoney

Creek Ranch in 2005.

W e note that the Stoney Creek Ranch claims submitted b y Torlai in 2002 and 2005 were not actually paid. The evidence is sufficient, however, to support a finding by t h e district
court that Torlai intended in both 2002 and 2005 to follow the pattern of his successful Stoney Creek Ranch c rop insurance fraud perpetrated in 2001. T h us, the amounts that would haveU N I T E D S T A T E S V

. T O R L A I 21

been paid as an indemnity for both the 2002 and 2 005 c laims

w e r e properly considered by the district court as intend e d losses. S ee U.S.S.G. § 2B 1.1 cmt. n.3(A)(ii); United States v. McCormac , 309 F .3d 623, 627–29 (9th Cir. 2002).

4. Union I sland 2001

Torlai claimed that safflower was planted on Union I sland in 2001 and that the crop failed due to inclement w ea t her. Contemporaneous records show, however, that the fields that

were supposedly planted in safflower were actua l ly p lanted in corn and alfalfa. This evidence was supported by satellite i m a ge s

. The satellite imag es d id, however, show that
approx imately 34.7 acres were planted in safflower, thoug h the record is ambig uou s as to w hether the 34.7 a cres o f safflower documented by satell i te imag es was on Torlai’s property

. Reg ardless, T orlai had reported that he h a d p lanted 199.3 acres in safflower on U nion I sland in 2 0 0 1

. Torlai’s material misstatements render his crop ins u r ance policy for Union I sland in 2001 void.

F urthermore, the evidence showed that the a lleg ed date o f loss—April 10, 2 001—was o nly five day s aft e r t h e date the safflower was re portedly planted—April 5, 2 0 01. The
t estimony a t trial established that “safflower emerg e nce usually takes between one and three w e e k s .” So, the evidence showed that any safflower that mig ht have actually been planted on Union I sland would not have emerg ed from the soil before the date of t h e a l l e g ed cause of loss. Even if Torlai had a valid crop insurance policy

, there was sufficient evidence for the district court to find that Torlai could not have suffered a cog niz able cause o f loss w i t h i n five day s o f sowing

.U N I T E D S T A T E S V

. T O R L A I 22

5. Quimby

I sland 2001

Quimby I sland was mostly inundated with wat e r a t the

a lleg ed time of planting

, and wheat cannot be planted wh e n the soil is submerg ed. Moreover, evidence was presented that at the alleg ed time of loss, the crop had not g r own to a point whe r e it could have been adversely impacted by the hail,

ex c e ss precipita t i o n , inclement w eather, and w ind that were the causes o f loss T o rlai alleg ed. Even assuming t h a t t h e weather events d id occur, the evidence clearly s h owed that the w eather cou l d n ot have caused any damag e, a nd Torlai

was n o t entitled to indemnity

. The absence of a leg itimate

cause of loss means that Torlai was not an inte n d ed beneficiary

of any indemnity

for Quimby

I sland in 2001.

* * * * *

B y virtue of his fraud, T o rlai was no t e l i g ible f or any g overnment benefit u nder the crop insur a nce prog ram, a nd therefore, h e was not an “intended beneficiary .” The district
court d id not err in including the full indemnity amount f or all claims from Stoney Creek Ranch in 2001, 2002, 2005; Union I sland in 2001; and Quimby I sland in 2001.

B

. Accounting for Premiums W ithheld by the Insurer

Torlai arg ues that the district c ourt erred by “not taking into account the producer premiums [ he] paid,” i.e.
, the nonsubsidiz ed portion of the crop insurance premium for which

an insured f

arme r i s r e sponsible. As we have discussed, althoug h producer “ p r emiums a re owed at the start of the
g rowing season,” they d o n o t h ave to be paid until a fter harvesting the insured crop. So, when an event o ccurs that is covered by crop insurance and a f a rmer has n ot y et satisfiedU N I T E D S T A T E S V

. T O R L A I 23

the p remium, the a m ount of the producer premium is deducted from the actual amount paid to the insured. Torlai
arg ues that since “the indemnity pay ment actually recei v ed would be the indemnity under the policy minus the producer premium, that premium is n o t an o ffset,” and some $28,874 of producer premiums should not be included as a loss to the
g overnment. T orlai asserts that he “would [ n] ever be able to obtain [ these funds] for himself throug h fraud or o therwise.” Essentially

, T orlai c o ntends that because he never ex pected
to g et the full amount of the indemnity

— i.e.
, he o n l y ever intended to obtai n the indemnity less the producer premium—the producer premiums should not be calculat e d as part of the total loss.

The district court addressed this issue, stating :

To offset the los s e s i n this case by any money paid by [ Torlai] to purchase his crop insurance would be akin to g iving an arsonist credit for the cost of insurance premiums paid by him on a house that he burned down.

That [ Torlai’s] fraud occurred in the
contex t o f crop insurance, where premiums

are o wed a t t h e start of the g r owing season, but pay able after harvest, as opposed to more t r a d i t i o n a l f

o rm s of insurance

, w h e r e premiums are due upon the commencement o f
coverag e, does nothing to chang e the a naly sis. F raud is fr a u d

, and [ T o rlai] is not e ntitled to credit f o r monies he invested in order to insure the success of his fraudulent scheme.U N I T E D S T A T E S V

. T O R L A I 24

W e h a ve not previously considered this issue, but we ag re e with the district court.

Althoug h th e s entencing g u idelines p rovide some g uidance as to what f

actors sh o u l d o ffset a loss calculation, U

. S.S.G. § 2B 1.1 cmt. n.3(E) 9

, in the end we think the “Credits Ag ainst L oss” commentary is inapplicable. Rather,

as Torlai arg u es, the issue is not whether t h e p roducer premiums are offsets, but whether the withheld p r o d ucer premiums sho u l d b e included in the intended loss amount. Viewed in this lig ht, the district c ourt properly a p p l ied the Guidelines.

9 A p p licatio n

n ote 3 states, in

p art:

L o ss sh all b e red u ced b y

th e f o llo w in g :

(I) T h e m o n ey retu rn ed

, an d t h e f air m ark et v alu e of th e p ro p erty retu rn ed an d th e serv ices ren d ered

, b y th e d ef en d a n t o r o th er p erso n s actin g j o in tly w i th th e d ef en dan t, to th e v ictim b ef

o re th e o f f en se w as d e t e c t e d

. T h e tim e o f d etectio n o f th e o f f en se is th e earlier o f (I) th e ti m e th e o f f en se w as d isco v ered b y a v ictim o r g o v ern m en t ag en cy ; or (II) th e tim e th e d e fen d an t k n ew o r reaso n ab ly sh ou ld h av e k

n ow n th at t h e of f en s e w as d etected

o r ab o u t to b e d etected b y a v ictim o r g o v ern m en t ag en cy

. (ii) In a case i n v o lv in g co llateral p led g ed o r o th erw ise
p ro v id ed b y th e d ef

en d an t, th e am o u n t th e v ictim h as reco v ered at th e tim e of sen ten cin g f ro m d isp o sitio n of th e co llateral, o r if th e co llateral h as

n o t b een d isp o s ed o f b y t h at tim e, th e f

air m a rk et

v alu e o f th e co llateral at th e tim e o f sen ten cin g

.
U.S.S.G. § 2 B 1 .1 cm

t. n .3 (E).U N I T E D S T A T E S V

. T O R L A I 25

Torlai points to a case from the Seventh C i r cuit, United States v. S impson
, 9 95 F

. 2d 109 (7th Cir. 1993), that sug g ests

a farmer’s portio n o f c r op insurance p remiums should be deducted from the calculated loss a mount. Simpson i s a n interesting c ase w ith a few more twists than presented he r e; however, t h e core fact pattern is similar: Simpson was convicted of filing false insurance forms under the USDA’s
crop insurance subsidy prog rams. Id. at 110. Reg arding this issue, the Seventh Circuit stated:

The district court erred when it fi gu r ed the
amount o f loss, however, in that it fa i l e d to deduct a $74,000 premium from the $838,900 false claims. I f Simpson had seen his scheme throug h to pay

ment, [the insurance company ]

wo u l d have d educted the premium from the
amount of Simpson’s claims. As the
g overnment conceded at oral a r g ument, the
proper amount of l o s s was the amount o f the clai m s m i n us the p remium

. . . . This clear

error requires a remand so that t h e district judg e may recalculate Simpson’s sentence.

Id. at 113 (internal citation omit t ed). Thus, the Seventh Circuit has at l e a s t implicitly held that it is clear e rror for a district court to fail to deduct the producer premium from the total indemnity

.

W e do not l i gh t l y cast aside r easoned d ecisions of our sister circuits. See In re Taffi

, 68 F .3d 306, 308 (9th Cir. 1995). W e disag r ee , h owever, with the Seventh Circuit’s brief analy sis in Simpson

. The lack of de t ailed analy sis on this issue may be the product of the fact that the g overnment

c o n ceded at o ral arg u ment b efore the Seventh Circuit t h atU N I T E D S T A T E S V

. T O R L A I 26

“the pr o per amount of loss was the amount of the c laims minus the pr e m i u m

. ” Simpson
, 9 95 F .2d at 113. Thus, a critical concession by the g overnment on this i ssue made further analy sis of thi s i s sue unnecessary by the Seventh Cir c uit, rendering Simpson minimally persuasive and o f questionable precedent.

Considering the merits o f the issue itself, quite simply

, the rule that Simpson stands for—lo s s calculations in crop insurance f

raud cases must o n l y i nclude indemnities minus the producer premium—overlooks b a s i c e c o n omic r eality a nd

common sense. A farmer must pay t h e c rop insurance producer premium rega r d less of w hether an indemnity will be paid. T he p roducer p remium is due when the crop insurance policy is issued, and the fact that a farmer c an delay
pay ment until harvest or a v alid claim is submitted for
p a y ment does not neg ate the farmer’s responsibility for t h at amount. I n effect, the g overnment has fronted the farmer his
crop insurance premium, w hich he took and then u sed to defraud the g o vernment. 1 0 Even thoug h Torlai did not have
to with d r a w m o n e y from his own b ank account to pay the producer premium, he, in effect, benefitted by the full amount of the indemnity

. F rom an economic perspective, T o rlai was in the same financial condition as he would have been had he

1 0 W h ere a f

arm er is f

o u n d to h av e i n ten tio n ally co n cealed o r

m isrep resen ted a m aterial f act in o btain in g cro p i n su

ran ce, “ [e]v en th o u g h th e p o licy is v o id , [th e f

arm er] m ay

still b e req u ired to p ay 2 0 p ercen t o f th e p rem iu m d u e u n d er th e p o licy .” Risk Mg m t. A g en cy , USDA
, 2 0 0 1 Cro p Rev en u e Co v erag e (CRC) In su ran ce P o licy

, 0 1

- CRC- BA SIC 1 4 (2 0 0 0).U N I T E D S T A T E S V

. T O R L A I 27

paid the p roducer premium up front and wa s p a id the full amount of the indemnity on the back end. 1 1

11 T o illu strate th is p oin t, w e lay ou t tw o sim p lif ied scen ario s f

or p ed ag o g ical p u rp o ses: (1 ) Farm er 1 p u rch ases cro p in s u r a n c e a n d is
req u ired to p ay th e f

u ll am o u n t o f th e p ro d u cer p rem iu m ($ 1 0 ) o n th e d ate th e p o licy i s i s s ue d ; an d (2 ) F arm er 2 p u rch ases cro p in su ran ce, b u t can d elay p rem iu m p ay

m en t u n til th e d ate th e in su red cro p is h arv ested so th at, if a v alid c l a i m i s su b m itted

, F arm er 2 w ill receiv e an in d em n ity
p ay m en t n et t h e p ro d u cer p rem iu m ($ 1 0 ). If a v alid cau se o f lo ss o ccu rs, th e in d em n i ty p ay m en t is $ 30

. Fo r th e s ak e o f sim p licity

, w e assu

m e th at b o th Farm er 1 an d 2 b e g i n w ith an id en tical b alan ce in th eir resp ectiv e b an k acco u n ts ($ 10 0 ).

In a situ atio n w

h ere n o co v ered cau se o f lo s s is su f f ered

, Farm er 1 ’ s b an k acco u n t w ill sh o w th e f o llo w i n g b alan ce: $ 1 0 0

- $ 1 0 = $9 0

. Farm er 2 ’s b an k acco u n t w i ll h av e an i d en tical b alan ce: $ 1 0 0

- $ 1 0 = $9 0

. T h e

o n ly d if f eren ce is th e tim e w

h en th e $ 1 0 p rem iu m is w i th draw n

. N o w

co n sid er a situ atio n w

h ere a v alid claim is su

b m i t t e d

. Farm er 1 ’ s b an k

acco u n t w ill sh o w th e f

o llo w in g b alan ce: $ 1 0 0

- $1 0 = $ 9 0 + $ 3 0 = $ 1 2 0

. Farm er 1 pay s th e $ 1 0 p ro d u cer p rem iu m w h en p u rch a s i n g i n su

ran ce, d ecreasin g h is ban k acco u n t to $9 0 ; af

ter Farm er 1 su

bm its a v alid claim

, h e is en titled to th e f

u ll in d em n ity am o u n t, resu ltin g in a term in al b alan ce

o f $ 1 2 0

. Farm er 2’ s b an k acco u n t w ill sh o w th e f o llo w in g b alan ce: $ 1 0 0
+ ($ 3 0

- $ 10 ) = $ 1 2 0

. So
, Farm er 2 w o u l d n ev er p ay th e p ro d u cer p rem i u m o u t o f h is o w

n b an k acco un t , b u t th e en d resu l t is th e sam e. A g ain

, th e on ly d i ffe r e nc e is th at F arm er 2 is ab le to h av e t h e b en ef it of

an ex t ra $ 1 0 in h is b a n k a c co u n t o v er th e co u rse o f th e cro p seaso n

. Essen tiall y , th e g o v ern m en t h as p ro v id ed Farm er 2 w ith an in t erest- f ree lo an in t h e am o u n t o f th e cro p in su ran ce prem iu m

. Ultim ately

, h o w ev er, b o th Farm ers 1 an d 2 ex p ect to rece i v e an id en tical ben ef i t f ro m th e in d em n ity p ay m en t. B o th

w o u ld b e in th e sam e eco n o m ic p o sitio n

.

In a m o re co m

p licated eco n o m ic w o rld in w h ich th ere is a tim e v alu e to m o n ey , Farm er 2 w o u l d b e b etter o f f

, sin ce Farm er 2 h ad t

h e b en ef it of retain i n g th e ex t

ra $ 1 0 in h is b an k acco u n t f o r a p erio d o f tim e—m o n ey t h at h e co u ld h av e in v ested o r p u t to o th er u s es—an d co n clu d ed a t t h e

sam e tim e w ith an a m o u n t id en tical to Farm er 1

. S o , if an y th i n g , th e sim p le calcu latio n ap p lied b y th e d istrict co u r t u n d erstates th e tru eU N I T E D S T A T E S V

. T O R L A I 28

I mportantly , the only reason Torlai d id not ex pect to pay the producer premium, and ex pected to receive the indemnity
pay ments net the producer premium, was because Torlai obtained crop insurance throug h fraud

. As the district court put it, “F raud is fraud, and [Torlai] is not entitled to credit for

m o nies he invested in o rder to insure the success of his fraudulent scheme

. ” A n honest f armer, purchasing crop insurance to hedg e ag ainst ag ricultural risks would f ully

ex p ect to pay the producer prem i um. As an e x p erienced farmer w ith k

n owledg e of the c r op insurance sy st em , Torlai understood that if he successfully perpetrated hi s fraudulent scheme, he would n ever h ave to pay the producer premium. 1 2 Reg ardless, the actual loss to the g overnment w a s the full
amount of the indemnity

. I n the c o n tex t of crop insuranc e, whether the producer premium is paid when the policy is purchased or whether the g overnment subtracts the producer premium from the indemnity paid, the g o v e rnment is in the

same economic p osition. See United States v. Blitz

, 151 F .3d 1002, 1010 (9th Cir. 1998) ( “ I n other w o r d s , when we have required a realistic economic approach we have indicated that

we should not ascribe a larg er loss to the defendants than they intended to or actually did inflict. W e have not, however, hesitated to hold defendants responsible for the full reach of their intent, even when that intent was thwarted.”).

eco n o m ic b en ef

it t h a t T o rlai receiv ed b y w aitin g to p ay th e p ro d u cer p rem i u m

.

12 In th is s en se, t

h e d istrict co u rt’ s statem en t th at su b tractin g th e am o u n t

o f th e p ro du cer prem i u m f ro m th e lo ss calcu latio n w as lik e “ g i vi n g a n

arso n ist cred i t f

o r th e co st o f in su

ran ce p rem iu m s p aid b y h im o n a h o u s e th at h e b u rn ed d o w

n ” is q u i te ap t.U N I T E D S T A T E S V

. T O R L A I 29

W e conclude that t he district c o u rt did not err b y including the total a m o u n t o f the indemnities in the loss calculation.

C. Accounting

for Premium Subsidies a n d A& O Expenses in Loss Calculation

I n addition to calculating the total indemnities claimed, whether the g overnment actually paid them or not, the district
court also included in the l o s s calculation two other categ ories o f ex p enses: A& O ex penses and premium subsidies. The A& O ex penses are fees the g overnment pay s to the insurance company for selling a n d servicing the policy

. Premium subsidies a

re th e a mounts the g overnment pay s to the insurance company t o underwrite the crop insurance, which the insurance c ompany w ould not otherwise be willing
to do. I n other words, a premium subsidy is the g overnment’s share of the p remium; it is a measure of the a ctual cost o f having a crop insurance prog ram above that paid b y the farmer.

The district court included the totals for both categ ories of ex penses in its loss calcul at i o n. I t found that the A& O

ex p enses and premium subsidies were “reasonably foreseeable pecuniary losses for w hich [ Torl a i ] should be held accountable. Even thoug h he didn’t have a check cut to him, it wa s m o n e y that was, in e f fect,

. . . taken away from
ot h e r farmers. I t was, in particular the premium subsidies,
not availabl e [ to other farmers] .” The district court also found that there was a non-s p e c u l a tive method to calculate the “premium s u b sidy and A& O b a sed on documents.” Torlai arg ues that it was error for the district court to include these ex penses, and that “the inclusi o n o f all premium

s u b s idy and A& O ex penses as part of the loss calculation i sU N I T E D S T A T E S V

. T O R L A I 30

based o n an assumption that [ he] was inelig ible f or any crop insurance p o l i c y at all.” Torlai contends that no “evidence [ was] ever presented that [ he] either knew abou t p r e mium subsidies or A& O ex p enses, or that circumstances e x isted under which he reasonably should have known about them.” 1 3

Contrary to Torla i ’ s c ontention, there was evidence to support the district court’s conclusion that the premium subsidies and A& O ex penses were “reasonably for e seeable
pe cu n i a ry losses for which [Torlai] should b e h eld accountable.” Reg arding the premium subsidies, the evidence showed that the premium subsi d ies were specifically disclosed to Torlai throug h his summaries of crop insurance coverage

. Moreover, the g o vernment presented evidence showing that each crop insurance policy

, including Torlai’s, indicat e s “ at the top of them,

. . . that the policy is reinsured by the f

ederal g overnment.” And, a witness testified that “[ t] he standard reinsu ra n c e ag reements a re available online at the public website

, ” and the policies specifically state that the crop insurance prog ram is adminis t r ated by the private insurer. The reinsurance
ag reements provide detailed information about the details o f both the premium subsidies and A& O ex penses. Considering all this evidence, coupled with Torlai’s statu s a s an

ex p erienced farmer w ho has ex tensively used crop insurance

as a part of his operations, we conclude that this evidence is sufficient to show that Torlai, at least, r e a sonably should have

1 3 T orlai also asserts th at an y i n crease in th e lo ss calcu latio n ascrib ab le
to A & O ex pen ses an d p rem iu m su b sid i es “ is a f

actu al m atter th at sh ou ld
p ro p erly h av e been d eterm in ed b y th e j u ry ” in lig h t o f Bo o ker

, 5 4 3 U .S.
at 2 3 1

. T h e j u ry w as n o t req u ired t o d eterm in e th e am ou n t o f th e A & O

ex p en ses an d p rem iu m su b sid ies. S

ee su p ra n o te 6

. A t sen ten c i n g , a l l th at is req u i red i s th at th e g o v ern m en t p ro v e th e lo ss b y a p rep o n d eran ce

o f th e ev id en ce. Armstea d , 5 5 2 F.3 d at 7 7 6

.U N I T E D S T A T E S V

. T O R L A I 31

known of the premium subsidies and A& O ex penses und e r the circumstances. See U.S.S.G. § 2B 1.1 cmt. n.3(A)(iv). 1 4

I V. CONCL USI O N

F or the foreg oing reasons, we AF F IRM Torlai’s
sentence.

14 A lth ou g h § 2 B 1 .1 cm

t. n .3 (A ) o f t

h e Gu id elin es states th at “ lo ss is th e g reater of actu al lo ss o r in ten d ed lo ss,” T o rlai h as n o t claim ed th at it w as

err o r fo r th e d i strict co u rt to calcu late th e to tal lo ss by ad din g to g eth er

so m e elem en ts rep resen tin g i n ten d ed lo sses an d o th ers, i n clu d in g A & O

ex p en ses, rep resen tin g actu al lo sses. A n y arg u m en t to th is ef f ect h as b een

w aiv ed

, see S

m ith v. Ma rsh

, 1 9 4 F.3 d 1 0 4 5
, 10 5 2 (9 th Cir. 1 9 9 9 ) (“ [O]n
ap p eal, arg u m en t s n o t raised by a p ar t y i n i t s o p en in g b rief are d eem ed

w aiv ed .”). W e d eclin e to reach th e q u estio n w h eth e r it w as p ro p er to

co n sid er b o th i n t e n d ed an d actu al lo sses to g eth er. S ee U.S. Sen ten cin g Gu i d elin es Man u al § 2 B 1 .1 cm t. n .3 (A ) ( “[ L] o s s is th e g reater o f actu al lo ss o r in ten d ed lo ss

. . . .”); see a lso Un ited S ta tes v. Ma n a ta u , 6 4 7 F.3 d 1 0 4 8
, 1 0 50 (1 0 t

h C i r

. 2 0 1 1 ) (d iscu ssin g th at in ten d ed lo s s m ay in clu d e actu al lo sses “ th e d ef

en d an t p u rp osely so u g h t to in f lict.”).