FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA, 

No. 06-30550 Plaintiff-Appellee,

D.C. No.

v.  CR 04-0512 JLR

WARREN ERIC ARMSTEAD,

OPINION Defendant-Appellant. 

Appeal from the United States District Court

for the Western District of Washington

James L. Robart, District Judge, Presiding

Argued and Submitted

April 8, 2008—Seattle, Washington

Filed October 15, 2008

Before: Stephen Reinhardt, A. Wallace Tashima, and

M. Margaret McKeown, Circuit Judges.

Opinion by Judge Tashima

14503
COUNSEL

Tessa M. Gorman, Assistant United States Attorney, Seattle,

Washington, for the plaintiff-appellee. 

Carol A. Elewski, Tumwater, Washington, for the defendantappellant. 

OPINION

TASHIMA, Circuit Judge: 

A jury convicted Defendant Warren Armstead of nine

counts of bank fraud in violation of 18 U.S.C. § 1344 and one

count of conspiracy to commit bank fraud in violation of 18

U.S.C. § 1349. On appeal, Armstead contends that the district

court committed numerous procedural errors during sentencing and that his 210-month sentence is substantively unreasonable.1

 Because we agree that the district court miscalculated

the number of victims under United States Sentencing Guidelines (“U.S.S.G.”) § 2B1.1(b)(2) and erred under U.S.S.G.

§ 5G1.3(b)(1), we vacate Armstead’s sentence and remand for

resentencing.

I. FACTUAL AND PROCEDURAL BACKGROUND

From 2001 to 2004, Armstead led a conspiracy to commit

bank fraud. Armstead recruited conspirators and paid them

fifty dollars or gave them drugs in exchange for “packets” of

stolen personal information. Each packet contained an individual’s social security number, a bank account number or

numbers, a credit card number or numbers, and blank checks.

Armstead and his co-conspirators stole these packets from

individuals, their homes, and vehicles. 

1We address Armstead’s challenge to his conviction and affirm his conviction in a memorandum disposition, filed concurrently with this opinion.

UNITED STATES v. ARMSTEAD 14507
Armstead gave the personal identification information to

certain co-conspirators and directed them to create fake

Washington State Driver Licenses (“WSDLs”). Each fake

WSDL contained stolen personal information juxtaposed with

a photograph of one of the conspirators. At Armstead’s direction, his co-conspirators deposited stolen checks into bank

accounts and withdrew funds from those accounts using the

fake WSDLs. Conspirators also used the fake WSDLs to take

out lines of credit with General Electric (“GE”), Home Depot,

and Dania Furniture and to purchase merchandise with that

credit. Armstead received fifty percent of all of the proceeds

from the fraudulent schemes. 

Armstead was charged with nine counts of bank fraud

under 18 U.S.C. § 1344 and one count of conspiracy to commit bank fraud under 18 U.S.C. § 1349. Armstead’s nine coconspirators pled guilty and they, as well as individuals from

whom his co-conspirators stole personal information, testified

against Armstead at his trial. In submitting the case to the

jury, at Armstead’s request, the district court included on the

verdict form the following interrogatory: “Was the defendant

WARREN ERIC ARMSTEAD an organizer or leader of a

conspiracy or a bank fraud scheme that involved five or more

participants or was otherwise extensive?” The jury returned a

guilty verdict on all ten counts and answered the interrogatory

in the affirmative. 

Armstead’s presentence investigation report (“PSR”) recommended a minimum $397,000 loss amount. This amount

included $296,000 from a United States Secret Service loss

calculation (the “Secret Service calculation”); $50,000 in cash

that Armstead gave Rusty Hill, one of Armstead’s coconspirators; $46,000 that an individual testified was taken

from her bank account; and $5,000 in loss to Dania Furniture.

The Secret Service calculation was based on amounts conspirators took from forty-two accounts at thirteen banks and

credit unions (collectively, the “banks”). These forty-two

accounts belonged to forty-six different individuals and busi14508 UNITED STATES v. ARMSTEAD
nesses. The Secret Service calculation also included

$11,576.88 in losses to GE and Home Depot. 

At sentencing the government argued that the loss amount

should also include $107,000 based on deposits made to Armstead’s bank account during the course of the conspiracy.

Armstead argued that the loss calculation should not include

any of the $107,000 or the $50,000 Armstead gave to Hill.

Armstead further contended that the number of victims should

be limited to the number of banks — thirteen2 — and that the

district court should not apply the enhancement for role in the

offense. With regard to the 18 U.S.C. § 3553(a) factors, Armstead argued that his sentence should be comparable to that of

his co-conspirators.3

The district court agreed with the loss calculation in the PSR,4

but also added enough from the $107,000 in deposits to Armstead’s bank account to bring the total loss amount over

$400,000. The court stated that it was “extremely skeptical of

counting 100 percent of the funds,” but concluded that enough

of the funds came from criminal conduct to cross the

$400,000 threshold. The district court also found that there

were more than fifty victims and, having submitted the ques2

In his sentencing memorandum, Armstead argued that the number of

victims should be limited to seven, the number of banks in the indictment.

On the day of sentencing and before this court, however, Armstead argued

that the victims should be limited to the number of banks, but did not dispute the government’s list of thirteen bank victims in the Secret Service

calculation. 

3The co-conspirator with the longest sentence received a 60-month term

of imprisonment. 

4On the day of sentencing, the government presented a slightly revised

Secret Service calculation and a slightly revised amount of loss attributable to Dania Furniture. The district court, however, adopted the Secret

Service calculation and loss attributed to Dania Furniture as listed in the

PSR: $296,000 and $5,000, respectively. Because the parties do not argue

that the district court erred in doing so, we use the amounts listed in the

PSR throughout. 

UNITED STATES v. ARMSTEAD 14509
tion of Armstead’s role in the offense to the jury, adopted its

finding that Armstead was a leader or organizer in the conspiracy. The district court calculated the Guidelines range for

Armstead’s sentence as follows:

Base offense level (U.S.S.G. § 2B1.1(a)(1)): 7

Loss amount over $400,000 (U.S.S.G.

§ 2B1.1(b)(1)(H)): +14

Fifty or more victims (U.S.S.G. § 2B1.1(b)(2)(B)):

+4

Possession of five or more false identifications

(U.S.S.G. § 2B1.1(b)(10)): +2

Adjustment for role in the offense (U.S.S.G.

§ 3B1.1(a)): +4

Total offense level: 31

Criminal history category: V

Guidelines range: 168-210 months

After calculating the Guidelines range, the district court

considered the 18 U.S.C. § 3553(a) factors and sentenced

Armstead to a 210-month term of imprisonment, the top of

the Guidelines range. The district court did not credit Armstead for the five months he had already served on an undischarged state sentence. Armstead timely appeals.

II. ANALYSIS

A. Standards of Review

When reviewing a sentence, “we first consider whether the

district court committed significant procedural error.” United

14510 UNITED STATES v. ARMSTEAD
States v. Carty, 520 F.3d 984, 993 (9th Cir. 2008) (en banc)

(citing Gall v. United States, 128 S. Ct. 586, 597 (2007)). Procedural errors include, but are not limited to, incorrectly calculating the Guidelines range, treating the Guidelines as

mandatory, failing properly to consider the § 3553(a) factors,

using clearly erroneous facts when calculating the Guidelines

range or determining the sentence, and failing to provide an

adequate explanation for the sentence imposed. Id. “We

review the district court’s interpretation of the Sentencing

Guidelines de novo, the district court’s application of the

Guidelines to the facts for abuse of discretion, and the district

court’s factual findings for clear error.” United States v.

Garro, 517 F.3d 1163, 1167 (9th Cir. 2008) (citing United

States v. Cantrell, 433 F.3d 1269, 1279 (9th Cir. 2006)). 

If we discern no significant procedural error, we proceed to

the second step and “consider the substantive reasonableness

of the sentence.” Carty, 520 F.3d at 993 (citing Gall, 128

S. Ct. at 597). We review the substantive reasonableness of a

sentence for abuse of discretion. Gall, 128 S. Ct. at 597;

Carty, 520 F.3d at 993. 

B. Standard of Proof

A district court generally uses a preponderance of the evidence standard of proof when finding facts at sentencing.

United States v. Moreland, 509 F.3d 1201, 1220 (9th Cir.

2007) (citing United States v. Kilby, 443 F.3d 1135, 1140 (9th

Cir. 2006)). Only “ ‘when a sentencing factor has an

extremely disproportionate effect on the sentence relative to

the offense of conviction’ ” must a district court find the facts

by a clear and convincing standard of proof. Id. (quoting

United States v. Dare, 425 F.3d 634, 642 (9th Cir. 2005)). 

Because Armstead did not object to the standard of proof

below, we review for plain error. Fed. R. Crim. P. 52(b); see

also United States v. Rendon-Duarte, 490 F.3d 1142, 1146

(9th Cir. 2007). For an error to be plain, it must be (1) an

UNITED STATES v. ARMSTEAD 14511
“error,” (2) that is “plain,” and (3) that “affects substantial

rights.” Id. (citing United States v. Olano, 507 U.S. 725, 732

(1993)). Moreover, we will not exercise our discretion to correct the error “ ‘unless the error seriously affect[s] the fairness, integrity or public reputation of judicial proceedings.’ ”

Id. (alteration in original) (quoting Olano, 507 U.S. at 732).

Armstead contends that the district court should have

employed the clear and convincing standard of proof because

enhancements5 for the amount of loss under § 2B1.1(b)(1)

(two levels),6 number of victims under § 2B1.1(b)(2) (two

levels),7 and role in the offense under § 3B1.1 (four levels)

had a disproportionate effect on his sentence. Without the disputed enhancements, Armstead’s total offense level would

have been twenty-three instead of thirty-one, and his Guidelines range (using Criminal History Category V) would have

been 84-105 months, instead of 168-210 months. 

[1] Armstead’s argument fails for three reasons. First, the

district court did not err by finding the number of victims by

a preponderance of the evidence because sentencing enhance5

In United States v. Harrison-Philpot, we used the term “enhancement”

to describe an increase in offense level based on uncharged or acquitted

conduct. 978 F.2d 1520, 1524 (9th Cir. 1992) (contrasting “sentencing

enhancement” with “straight sentencing for convicted conduct”). Here, we

use the term “enhancement” to describe any addition to the base offense

level. See United States v. Riley, 335 F.3d 919, 926 (9th Cir. 2003) (using

“enhancements” to describe increases to the base offense level based on

the extent of a conspiracy). 

6

In his sentencing memorandum, Armstead argued that the amount of

loss should be limited to the amount in the indictment: $13,000. At the

sentencing hearing and before this court, however, Armstead disputed

only $173,576.88 of the total loss. Without the disputed amount, the loss

calculation would be over $200,000 instead of over $400,000, resulting in

a 12-level rather than a 14-level increase. See U.S.S.G.

§ 2B1.1(b)(1)(G),(H). 

7The Guidelines direct a two-level increase for over ten victims and a

four-level increase for fifty or more victims. U.S.S.G.

§ 2B1.1(b)(2)(A),(B). 

14512 UNITED STATES v. ARMSTEAD
ments based entirely on the extent of the conspiracy do not

require the heightened standard of proof. See Riley, 335 F.3d

at 926-27 (holding that enhancements for loss amount and

possession of five or more means of false identification were

based on the extent of the conspiracy to produce fictitious

obligations and thus did not have a “disproportionate effect on

the sentence relative to the offense of conviction”); HarrisonPhilpot, 978 F.2d at 1524 (holding that the quantity of drugs

in a conspiracy need only be established by a preponderance

of the evidence). Enhancements based on the extent of a conspiracy are “ ‘on a fundamentally different plane than’ ”

enhancements based on uncharged or acquitted conduct.

Riley, 335 F.3d at 926 (quoting Harrison-Philpot, 978 F.2d at

1523). Due process concerns with regard to the former are

satisfied by a preponderance of the evidence standard because

the enhancements are based on criminal activity for which the

defendant has already been convicted. Harrison-Philpot, 978

F.2d at 1523. 

[2] Second, the jury found that Armstead was a leader or

organizer of the conspiracy beyond a reasonable doubt, a

higher standard of proof than the clear and convincing evidence standard. By adopting the jury’s finding, the district

court agreed that the government proved beyond a reasonable

doubt that Armstead was a leader or organizer of the conspiracy.8

We thus conclude that the standard of proof argument is inapplicable to the four-level enhancement for role in the offense.

8Armstead further contends that the district court should not have

adopted the jury’s finding that Armstead was a leader or organizer in the

conspiracy because the jury was not instructed on how the Guidelines

define those terms. It is the district court’s decision to apply the enhancement, however, that we review on appeal. Given the prodigious evidence

presented at trial detailing Armstead’s role in the conspiracy, and particularly the testimony from co-conspirators that Armstead recruited them,

directed their actions, and collected fifty percent of their proceeds, we cannot say that the district court abused its discretion when applying the fourlevel enhancement for Armstead’s role in the conspiracy. 

UNITED STATES v. ARMSTEAD 14513
[3] Finally, the remaining two-level enhancement due to

the disputed amount of loss did not have an “ ‘extremely disproportionate effect’ ” on the sentence.9 Moreland, 509 F.3d

at 1220 (quoting Dare, 425 F.3d at 642); see also United

States v. Watts, 519 U.S. 148, 150, 156-57 (1997) (noting that

a two-level enhancement is not an “exceptional circumstance[ ]” that could warrant a higher standard of proof).

Accordingly, we hold that the district court did not err by

applying a preponderance of the evidence standard to its

enhancement findings.10

C. Loss Calculation Pursuant to U.S.S.G. § 2B1.1(b)(1)

When calculating the Guidelines range for bank fraud, a

district court must determine the amount of loss caused by the

fraud. U.S.S.G. § 2B1.1(b)(1). The Guidelines further direct

that “[t]he court need only make a reasonable estimate of the

loss.” U.S.S.G. § 2B1.1, cmt. n.3(C). We defer to the district

court’s calculation because “[t]he sentencing judge is in a

unique position to assess the evidence and estimate the loss

based upon that evidence.” Id. 

Armstead contends that the district court erred by including

the following in its loss calculation: $107,000 in deposits to

his bank account; $50,000 that Hill testified Armstead gave to

him; and $16,576.88 in loss attributable to retail fraud. 

[4] Armstead first argues that gain cannot be used as a measure of loss when a court also uses actual loss in its calculations. The $107,000 in deposits to Armstead’s bank account

9While the vast majority of the loss amount is attributable to the extent

of the conspiracy, a fraction of the loss amount — $16,576.88 — relates

to retail fraud, which was uncharged conduct. Assuming that the district

court only found the minimum amount of loss necessary to cross the

$400,000 threshold, a two-level enhancement may be attributed to the

retail fraud loss amount. 

10Finding no error, we need not address the remaining factors in the

plain error analysis. 

14514 UNITED STATES v. ARMSTEAD
and the $50,000 that Armstead gave to Hill are better characterized as gain. The Guidelines direct the court to “use the

gain that resulted from the offense as an alternative measure

of loss only if there is a loss but it reasonably cannot be determined.” U.S.S.G. § 2B1.1, cmt. n.3(B). This note provides

that it is only appropriate to use gain as an exclusive measure

of loss when actual loss cannot be determined. We do not read

the note, however, to prohibit the use of gain as a proxy for

a portion of the total loss where some, but not all, of the loss

can be determined. 

[5] Here, the district court used actual loss to estimate the

vast majority of the total: approximately $347,000. The district court found, however, that this loss calculation did not

properly account for all of the loss caused by the conspiracy

and used a small portion of Armstead’s gain to account for a

small portion of the loss. The nature of Armstead’s crime,

where money was fraudulently withdrawn from bank

accounts, lends itself to this type of approximation because,

as the district court reasonably determined, some of the

money going into Armstead’s account and the money Armstead gave to Hill corresponded dollar-for-dollar with money

lost by the banks. Given that a court need only make a “reasonable estimate of the loss,” the district court’s method of

calculation is not foreclosed by the Guidelines. 

Armstead next argues that the district court erred by including $16,576.88 in loss attributable to retail fraud. Armstead

concedes that this amount can be included if the retail fraud

is relevant conduct under U.S.S.G. § 1B1.3(a)(1)-(2), but he

maintains that it is not. Because Armstead did not object to

the loss calculation on this basis at sentencing, we review for

plain error. See Rendon-Duarte, 490 F.3d at 1146. 

[6] Specific offense characteristics, such as loss, are determined by taking into account:

(1) (A) all acts and omissions committed, aided,

abetted, counseled, commanded, induced, proUNITED STATES v. ARMSTEAD 14515
cured, or willfully caused by the defendant; and

(B) in the case of a jointly undertaken criminal

activity . . . all reasonably foreseeable acts and

omissions of others in furtherance of the jointly

undertaken criminal activity, 

that occurred during the commission of the

offense of conviction . . . ; 

(2) . . . all acts and omissions described in subdivisions (1)(A) and (1)(B) above that were part of the

same course of conduct or common scheme or plan

as the offense of conviction. 

U.S.S.G. § 1B1.3(a)(1)-(2). Acts are part of the same course

of conduct “if they are sufficiently connected or related to

each other as to warrant the conclusion that they are part of

a single episode, spree, or ongoing series of offenses.”

U.S.S.G. § 1B1.3, cmt. n.9(B). Acts are part of the common

scheme or plan if they are “substantially connected to [the

offense] by at least one common factor, such as common victims, common accomplices, common purpose, or similar

modus operandi.” U.S.S.G. § 1B1.3, cmt. n.9(A). 

[7] The fraud perpetrated against GE, Home Depot, and

Dania Furniture involved the same co-conspirators using the

same personal identification information that was used to perpetrate the bank fraud. At sentencing, the government proffered that the Secret Service calculation, which included

losses to GE and Home Depot, accounted for losses associated with the personal identification information recovered

from Armstead’s house, car, and hotel room and identifications used when conspirators deposited or withdrew money

from the banks. Additionally, Armstead orchestrated the

fraudulent purchase at Dania Furniture in the same manner as

he directed the bank fraud: he told co-conspirators to obtain

credit at Dania Furniture using a fake WSDL and purchase

items with that credit. Because the retail fraud involved the

same participants as the bank fraud, the same modus ope14516 UNITED STATES v. ARMSTEAD
randi, and was part of ongoing fraudulent transactions related

to the stolen personal identification information and fake

WSDLs, the district court did not err by including the retail

fraud loss in its calculations.11

Finally, Armstead contends that there was an insufficient

factual basis for including the $107,000 and $50,000 in the

loss amount. Armstead argues that the $107,000 is suspect

because it includes deposits from a family member and

because of possible overlap between the $107,000 and the

Secret Service calculation. He seeks to exclude the $50,000

from Hill because the latter’s testimony was uncorroborated

and not credible. The district court was “extremely skeptical”

of counting all of the $107,000 in the loss amount. Nonetheless, the court determined that it was reasonable to include at

least $3,001 from Armstead’s account (the amount needed to

push the loss total from the $397,000 in the PSR calculation

to over $400,000) because the evidence showed that at least

some of the deposits were the fruit of criminal conduct. The

district court did not separately comment on the $50,000. 

[8] The bank fraud conspiracy ran from 2001 through 2004.

The Secret Service calculation covers a period from September 2003 to September 2004. From February 2003 to August

2003, a period not covered by the Secret Service calculation,

$44,150.94 was deposited into Armstead’s account, not

including deposits from Armstead’s relative. State employment records show that Armstead only earned $3,000 in

wages from 1998 to 2004. Thus, the district court did not

clearly err by including $3,001 from the $107,000 in deposits

in the loss calculation. 

[9] With regard to the $50,000, we note that the sentencing

judge also presided over Armstead’s trial and thus observed

the witness and heard Hill’s testimony. Hill testified that

11Because the district court did not err, we do not proceed to the additional factors in the plain error analysis. 

UNITED STATES v. ARMSTEAD 14517
Armstead gave him $50,000 in 2000 or 2001 for safekeeping

and that he “knew” that the proceeds came from the conspiracy. We reiterate that deference to a district court’s loss calculation is warranted because the district court “is in a unique

position to assess the evidence.” U.S.S.G. § 2B1.1, cmt.

n.3(C). The district court did not clearly err by giving credence to Hill’s testimony and determining by a preponderance

of the evidence that the $50,000 corresponded dollar-fordollar to loss from the bank fraud. 

[10] In sum, the district court did not err by adding fourteen

levels to Armstead’s base offense level pursuant to U.S.S.G.

§ 2B1.1(b)(1)(H) for a loss amount of more than $400,000. 

D. Victim Calculation Pursuant to U.S.S.G. § 2B1.1(b)(2)

When calculating the Guidelines range for bank fraud, a

district court must also determine the number of victims.

U.S.S.G. § 2B1.1(b)(2). The district court found that the bank

fraud conspiracy involved over fifty victims and added four

levels to Armstead’s base offense level pursuant to U.S.S.G.

§ 2B1.1(b)(2)(B). The district court arrived at this number by

adding the number of banks and victims of retail fraud (sixteen) together with an unstated number of individuals and

companies whose personal information was stolen by the conspirators. The Government proffered at sentencing that the

individuals and companies suffered pecuniary losses in the

form of “getting a new driver’s license, or having to figure out

how to put a fraud alert on your account and spending money

to correct credit.” The district court offered little in the way

of an explanation for its finding that there were more than

fifty victims, but concluded “that there were a substantial

number of people involved.” 

Armstead contends that the district court erred by counting

as victims those individuals and companies whose losses were

not included in the loss calculation. We agree. 

14518 UNITED STATES v. ARMSTEAD
[11] The Guidelines define victim as “any person who sustained any part of the actual loss determined under subsection

(b)(1).” U.S.S.G. § 2B1.1, cmt. n.1. “ ‘Actual loss’ means the

reasonably foreseeable pecuniary harm that resulted from the

offense.” U.S.S.G. § 2B1.1, cmt. n.3(A)(i). “ ‘Pecuniary

harm’ means harm that is monetary or that otherwise is readily measurable in money.” U.S.S.G. § 2B1.1, cmt. n.3(A)(iii).

Thus, in order to be counted as a victim, a person12 must have

sustained a loss that is “monetary or that otherwise is readily

measurable in money” and that loss must be included in the

loss calculation. Here, the loss calculated pursuant to U.S.S.G.

§ 2B1.1(b)(1) included only losses to the thirteen banks and

three victims of retail fraud. While other persons conceivably

may have sustained pecuniary harm in the form of time and

money spent procuring new identification and credit cards,

opening new bank accounts, and mending their credit, those

losses were not included in the calculated loss amount. Therefore, the district court erred by including those individuals in

the number-of-victims calculation. 

Our conclusion is in accord with the other circuits that have

considered the issue. The defendants in United States v. Abiodun were convicted of, inter alia, conspiracy to commit

fraud and wire fraud. 536 F.3d 162, 163 (2d Cir. 2008). Their

fraudulent scheme involved stealing credit reports, obtaining

credit cards with the information procured, and purchasing

merchandise with the ill-gotten credit. Id. at 164-65. The district court included in its victim calculation persons “who had

spent an appreciable amount of time securing reimbursement

for their financial losses.” Id. at 166. The Second Circuit held

that this was error “because the losses attributable to these

victims were not included in the loss calculation.” Id. at 168.

The court noted that loss of time is a pecuniary harm because

12

“ ‘Person’ includes individuals, corporations, companies, associations,

firms, partnerships, societies, and joint stock companies.” U.S.S.G.

§ 2B1.1, cmt. n.1. 

UNITED STATES v. ARMSTEAD 14519
it can be measured in monetary terms, but that losses due to

lost time were not included in the loss calculation. Id. at 169.

The Tenth Circuit addressed the victim calculation in the

context of a fraudulent scheme in which the defendant, a

postal employee, stole mail addressed to a non-profit organization. United States v. Leach, 417 F.3d 1099, 1101 (10th Cir.

2005). The district court calculated the loss amount by taking

the total donations the non-profit organization reported missing and subtracting “replacement donations” sent to the nonprofit by the donors. Id. at 1105-06. The district court based

its victim calculation on the over 200 persons who reported

that their donations had not been delivered. Id. at 1106. The

district court found that those persons suffered losses because

they had to write and mail replacement checks. Id. The Tenth

Circuit held that the 200 donors were not victims under

U.S.S.G. § 2B1.1(b)(2). Id. at 1107. While the donors suffered pecuniary harm, their loss “was not included as part of

the actual loss ‘determined under subsection (b)(1).’ ” Id. at

1106 (quoting U.S.S.G. § 2B1.1, cmt. n.1). Cf. United States

v. Icaza, 492 F.3d 967, 969-70 (8th Cir. 2007) (holding that

each individual store was not a separate victim of shoplifting

where all stores were owned by the same corporation). 

Over fifty persons in the present case conceivably may

have suffered pecuniary harm. The loss calculation, however,

only included losses to the thirteen banks and three victims of

retail fraud. As a result, the district court erred in finding

more than sixteen victims. See United States v. Pham, No. 06-

30489, 2008 WL 4307567, at *5 (9th Cir. Sept. 23, 2008)

(holding that individual account holders can be counted as

victims “only if they ‘sustained any part of the actual loss

determined under’ § 2B1.1(b)(1)”) (citing U.S.S.G. § 2B1.1

cmt. n.1). 

The government counters that the loss calculation reflects

more than fifty victims because the losses attributed to the

banks were first held by the account holders prior to the reim14520 UNITED STATES v. ARMSTEAD
bursement of funds. We have not had the occasion to address

whether persons whose losses are so reimbursed may be

included in the victim calculation. 

The Sixth Circuit addressed this issue in United States v.

Yagar, 404 F.3d 967 (6th Cir. 2005). Like Armstead, the

defendant in Yagar stole checks, deposited them into more

than fifty accounts using stolen personal information and then

withdrew the deposited funds from forty-seven accounts. Id.

at 968. The district court counted eleven victims: five banks

and six account holders who had to purchase new checks. Id.

at 969. On appeal, the government argued that the district

court should have found over fifty victims by including all

account holders who temporarily lost funds. Id.

The Sixth Circuit held that the account holders who did not

purchase replacement checks were not victims because the

temporary loss of funds did not amount to a pecuniary harm.

Id. at 971. The court reasoned that such a “short-lived” loss,

which was “immediately covered by a third-party,” had “no

adverse effect as a practical matter.” Id. The court declined to

hold that a fully reimbursed loss is always a bar to including

a person in the victim calculation, noting that there “may be

situations in which a person could be considered a ‘victim’

under the Guidelines even though he or she is ultimately reimbursed.” Id.

Recently, the Fifth Circuit followed Yagar in evaluating the

number of victims in a credit card fraud scheme. United

States v. Conner, 537 F.3d 480, 489-90 (5th Cir. 2008). The

court concluded that credit card account holders could not be

counted as victims because they were “quickly reimbursed”

and there was no evidence “that any account holder had to

spend money or an extended length of time seeking reimbursement.” Id. at 491. The only victims were the five credit

card companies that reimbursed the account holders. Id. at

492. 

UNITED STATES v. ARMSTEAD 14521
We agree with the result in Yagar and Conner, although we

do not adopt the entirety of their reasoning. The Guidelines

direct the court to calculate victims by determining the number of persons who have suffered pecuniary harm. A loss that

is reimbursed immediately does not amount to a pecuniary

harm because the ultimate loss cannot be measured in monetary terms. If, however, the reimbursement takes a longer

period of time and requires a great deal of effort on the part

of the individual, it is conceivable that the individual may suffer additional pecuniary harm that is not fully reimbursed. If

that loss amount is included in the loss calculation, the victim

associated with the loss should be included in the victim calculation. See Pham, 2008 WL 4307567, at *6-*8. 

We thus decline to follow the approach taken by the Eleventh Circuit in United States v. Lee, 427 F.3d 881 (11th Cir.

2005), and hinted at in Yagar and Conner, which would allow

the district court to include as victims persons who were fully

reimbursed if their losses “were neither short-lived nor immediately covered by third parties” without regard to whether

their losses were included in the loss calculation. Lee, 427

F.3d at 895. The defendants in Lee cancelled their checking

accounts but continued to write personal checks, and, in that

manner, purchased miscellaneous goods, cars, motorcycles,

property, and paid off mortgages. Id. at 884-85. When the

checks were not honored, some entities wrote off losses, others received payment from defendants, some repossessed the

merchandise, and a mortgage company foreclosed on one of

the defendant’s homes. Id. at 885-86. The district court calculated the loss at over $400,000 and determined that the number of victims was between ten and fifty. Id. at 893-94. 

The defendants argued that the persons who “offset” their

losses by repossession or other forms of reimbursement could

not be included in the victim calculation. Id. at 894. The Eleventh Circuit disagreed, and held that the district court did not

err by including all of the individuals who received bad

checks in the victim calculation. Id. at 895. The court first rea14522 UNITED STATES v. ARMSTEAD
soned that the credit against loss provision in the Guidelines,

U.S.S.G. § 2B1.1, cmt. n. 3(E), envisions a situation in which

a victim is reimbursed for losses but remains a victim. Lee,

427 F.3d at 895. Second, the court distinguished its case from

Yagar, noting that the losses borne by the victims “were neither short-lived nor immediately covered by third parties.” Id.

[12] While we agree that persons who are reimbursed may

suffer pecuniary harm, we disagree with the approach taken

in Lee. A court should analyze and quantify pecuniary harm

when making the loss calculation, not when determining the

number of victims. If a person suffered pecuniary harm

beyond the amount by which the person was reimbursed, then

that amount should be included in the loss calculation. Once

a loss amount is included in the loss calculation, then the person associated with that loss should also be included in the

victim calculation. If the temporary loss results in no additional pecuniary harm, then there is nothing to include in the

loss calculation and thus no additional victim in the victim calculation.13

[13] Here, the district court erred by applying a four-level

13We agree with the Eleventh Circuit that the credit against loss provision may result in a situation in which a victim’s loss amount is included

in the loss calculation but the loss is subsequently reduced by the amount

the defendant returned to the victim. See U.S.S.G. § 2B1.1, cmt. n.3(E).

In such a case, we see no bar to including that victim in the victim calculation because that person’s loss was included in the loss calculation prior

to the credit. We so conclude because the Guidelines draw a distinction

between “Exclusions from Loss,” U.S.S.G. § 2B1.1, cmt. n.3(D), and

“Credits Against Loss,” U.S.S.G. § 2B1.1, cmt. n.3(E). The former are not

included in the loss calculation whereas the latter simply reduces the

amount of loss. Losses that are subsequently credited are still part of the

initial loss calculation, and thus persons who suffered those losses are victims because they “sustained a[ ] part of the actual loss determined under

subsection (b)(1).” U.S.S.G. § 2B1.1, cmt. n.1. The credit against loss provision is inapposite to Armstead’s case, however, because the individuals

from whose bank accounts conspirators withdrew money were reimbursed

by the banks, not by Armstead. 

UNITED STATES v. ARMSTEAD 14523
enhancement for fifty or more victims when the loss calculation only included losses incurred by sixteen victims. Because

an error in the Guidelines calculation is a significant procedural error, Carty, 520 F.3d at 993, we vacate Armstead’s

sentence and remand for resentencing.14

E. Credit for Time Served Pursuant to U.S.S.G.

§ 5G1.3(b)(1)

Armstead contends that the district court erred by failing to

apply U.S.S.G. § 5G1.3(b)(1), which would have given him

five months’ credit for time served on an undischarged state

sentence. That Guideline provides that if:

a term of imprisonment resulted from another

offense that is relevant conduct to the instant offense

of conviction under the provisions of subsections

(a)(1), (a)(2), or (a)(3) of § 1B1.3 (Relevant Conduct) and that was the basis for an increase in the

offense level for the instant offense under Chapter

Two (Offense Conduct) or Chapter Three (Adjustments), the sentence for the instant offense shall be

imposed as follows: 

(1) the court shall adjust the sentence for

any period of imprisonment already

served on the undischarged term of

imprisonment . . . . 

U.S.S.G. § 5G1.3(b). The PSR recommended, and the government does not dispute, that Armstead was eligible for five

14Because we conclude that the district court erred by including individuals other than the banks and victims of retail fraud in the victim calculation, we do not reach Armstead’s argument that the alleged pecuniary

harms were not supported by the record and had to be excluded from any

loss calculation as losses “similar” to “finance charges, late fees, [and]

penalties.” See U.S.S.G. § 2B1.1, cmt. n.3(D)(i). 

14524 UNITED STATES v. ARMSTEAD
months’ credit for time served on a state conviction because

the conduct that resulted in the state conviction was used to

calculte the Guidelines range for his federal sentence. At the

sentencing hearing, however, the district court did not mention § 5G1.3(b)(1) or adjust Armstead’s sentence for the time

served. Because Armstead did not object at sentencing, we

review for plain error. Rendon-Duarte, 490 F.3d at 1146. 

The Guidelines are now advisory. United States v. Booker,

543 U.S. 220, 245 (2005). Even so, the Guidelines remain

central to the sentencing regime. “As a matter of administration and to secure nationwide consistency, the Guidelines

should be the starting point and the initial benchmark.” Gall,

128 S. Ct. at 596. The district court must begin the sentencing

process by acccurately calculating the Guidelines range.

Carty, 520 F.3d at 991 (“All sentencing proceedings are to

begin by determining the applicable Guidelines range.”). The

court’s consideration of the Guidelines does not, however,

end there. After the Guidelines range is calculated, the court

must “determine from Parts B through G of Chapter Five the

sentencing requirements and options related to probation,

imprisonment, supervision conditions, fines, and restitution.”

U.S.S.G. § 1B1.1(h).15

15After considering Parts B through G of Chapter Five, the Guidelines

direct the court to “[r]efer to Parts H and K of Chapter Five, Specific

Offender Characteristics and Departures, and to any other policy statements or commentary in the guidelines that might warrant consideration

in imposing sentence.” U.S.S.G. § 1B1.1(i). The Supreme Court recently

affirmed the continued validity of departures pursuant to Parts H and K of

Chapter Five. Irizarry v. United States, 128 S. Ct. 2198, 2202-03 (2008)

(explaining that “variances” pursuant to § 3553 are different from “departures” as defined in the Guidelines). Prior to Irizarry, we held that a district court did not err by declining to consider a departure under U.S.S.G.

§ 5K1.1, instead considering the relevant facts under § 3553(a) because

the two analyses were largely duplicative. United States v. Zolp, 479 F.3d

715, 721-22 (9th Cir. 2007). We express no opinion on the continued

vitality of Zolp post-Irizarry. The portion of the Guidelines with which we

are here concerned, Chapter 5, Part G, does not expressly reference

§ 3553(a) or the departure provisions of Chapter 5, Parts H and K. Thus,

Zolp is inapplicable here. 

UNITED STATES v. ARMSTEAD 14525
[14] Here, after calculating the Guidelines range, the district court did not consider § 5G1.3(b)(1), contrary to the

express direction in § 1B1.1(h). Section 5G1.3(b)(1)’s language is mandatory: “the court shall adjust the sentence for

any period of imprisonment already served on the undischarged term of imprisonment.” (Emphasis added.) The district court erred in not including this adjustment in its

Guidelines calculation as “the starting point” of the sentencing proceeding. Gall, 128 S. Ct. at 596. 

[15] This error was compounded by the court’s failure to

give any reason for its decision — if it, indeed, made such a

decision — not to apply the adjustment. Because the provision is mandatory, a court’s declining to make the adjustment

results in a sentence that departs from the Guidelines. See

United States v. Fifield, 432 F.3d 1056, 1061 (9th Cir. 2005)

(explaining that the imposition of consecutive sentences contrary to § 5G1.3(b)(2), when applicable, is a deviation from

the Guidelines). Because the Guidelines are now advisory, a

sentencing court is free to impose a sentence outside of the

Guidelines. If it does so, however, the court must adequately

explain the reason(s) for the deviation. Carty, 520 F.3d at 992

(“[T]he judge must explain why he imposes a sentence outside the Guidelines.”) (citing Rita, 127 S. Ct. at 2468; Gall,

128 S.Ct. at 594). Thus, the court’s failure to provide a justification for its decision not to apply the § 5G1.3(b)(1) credit for

time served was error. See United States v. Lane, 509 F.3d

771, 775-76 (6th Cir. 2007) (finding no error where the district court explained that applying the § 5G1.3(b)(1) credit

would not properly reflect the § 3553(a) factors). 

It remains to determine whether the district court’s error in

failing to give the § 5G1.3(b)(1) credit and in also failing to

explain or justify its action is plain error. “An error is plain

if it is ‘contrary to the law at the time of appeal.’ ” United

States v. Ameline, 409 F.3d 1073, 1078 (9th Cir. 2005) (en

banc) (quoting Johnson v. United States, 520 U.S. 461, 468

(1997)). Because, as explained above, both the Supreme

14526 UNITED STATES v. ARMSTEAD
Court and this court have repeatedly emphasized the centrality

of the Guidelines and the need for the sentencing court to

explain any deviation from the Guidelines, we conclude that

the error is plain. We further conclude that the error affected

Armstead’s substantial rights, given that the starting point for

consideration of the § 3553(a) factors was five months higher

than it should have been. See United States v. RodriguezLara, 421 F.3d 932, 949 (9th Cir. 2005) (holding that the

defendant’s substantial rights were affected where the defendant “was entitled to a lower Guideline range than that under

which he was actually sentenced”). Moreover, it appears from

the sentencing record that the sentence was based on the erroneous belief that it was the highest within-Guidelines sentence. If the Guidelines sentence had been adjusted for the

time-served credit, the highest within-Guidelines sentence

would have been five months shorter. 

[16] Finally, we hold that the error “seriously affect[ed] the

fairness, integrity or public reputation of judicial proceedings.” Rendon-Duarte, 490 F.3d at 1146 (quoting Olano, 507

U.S. at 732). As the Supreme Court has explained, § 5G1.3(b)

protects a defendant “against having the length of his sentence

multiplied by duplicative consideration of the same criminal

conduct.” Witte v. United States, 515 U.S. 389, 405 (1995).

For reasons unexplained on the record, most likely an oversight, Armstead was denied this protection. This error seriously affects the integrity of judicial proceedings because it

may well be that, had the district court considered the credit

under §5G1.3(b)(1), it still would have sentenced him to the

top of the Guidelines sentence, which would have been five

months less. 

[17] We conclude that the district court clearly erred in not

considering the effect of § 5G1.3(b)(1) on its sentence. At

resentencing, the court should either give Armstead five

months’ credit for time served under § 5G1.3(b)(1) or explain

why it declines to apply that sentencing adjustment. 

UNITED STATES v. ARMSTEAD 14527
F. Procedural Challenges Under § 3553(a) 

Armstead further contends that the district court erred by

misstating the parsimony provision in 18 U.S.C. § 3553(a)

and failing to address his parity argument when discussing the

§ 3553(a) factors. Because any imposition of a sentence must

start with a correct Guidelines calculation, Carty, 520 F.3d at

991, on remand, the district court will have to reconsider the

§ 3553(a) factors with the correct Guidelines range in mind.

Thus, we decline to reach Armstead’s procedural arguments

with regard to the application of the § 3553(a) factors. 

III. CONCLUSION

Having concluded that the district court committed significant procedural error, we do not address the substantive reasonableness of Armstead’s sentence. We vacate Armstead’s

sentence and remand for resentencing in accordance with this

opinion. 

VACATED and REMANDED. 

14528 UNITED STATES v. ARMSTEAD