1996 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

2-22-1996

United States v. Maurello

Precedential or Non-Precedential:

Docket 95-5109

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Recommended Citation

"United States v. Maurello" (1996). 1996 Decisions. Paper 238.

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1 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

---------- 

No. 95-5109 

---------- 

UNITED STATES OF AMERICA 

v. 

ARTHUR MAURELLO, 

 Appellant 

---------- 

On Appeal from the United States District Court 

for the District of New Jersey 

(D.C. Criminal No. 94-438) 

---------- 

Argued November 20, 1995 

BEFORE: BECKER, SAROKIN 

and WELLFORD,2 Circuit Judges

---------- 

(Opinion filed February 22, l996) 

Brian P. Reilly, Esq. (ARGUED) 

Office of Federal Public Defender 

22 South Clinton Avenue 

Station Plaza #4, 4th Floor 

Trenton, NJ 08609 

 Attorney for Appellant 

Kevin McNulty, Esq. (ARGUED) 

Office of United States Attorney 

970 Broad Street 

 

2Honorable Harry W. Wellford, United States Court of Appeals for 

the Sixth Circuit, sitting by designation. 
2 

Room 502 

Newark, NJ 07102 

 Attorney for Appellee 

---------- 

OPINION OF THE COURT 

---------- 

SAROKIN, Circuit Judge:

Defendant, a disbarred lawyer, was convicted of mail fraud 

by virtue of his unauthorized practice of law. The gross amount 

of fees he received from his clients was used to calculate the 

loss caused by his fraud, and in turn, the sentence to be imposed 

under the guidelines. With some reluctance because of the 

conduct involved, we conclude and agree with defendant's 

contention that fees paid by those who received satisfactory 

services are not to be included in determining the measurement of 

loss from his fraudulent scheme. In addition, we remand to the 

district court for factual findings as to whether defendant's 

self-professed dissatisfied clients suffered actual financial 

loss as a result of his scheme, and if so, in what amount. 

 Because defendant utilized his special skills as an attorney 

in procuring clients, we conclude that imposing a two-point 

upward adjustment for using a special skill in the commission of 

the offense was warranted. 

 Finally, we vacate and remand with respect to the 

restitution imposed for the reasons hereinafter set forth. 

 After pleading guilty to mail fraud and credit card fraud, 

defendant was sentenced pursuant to the Federal Sentencing 
3 

Guidelines to two concurrent prison terms of thirty-six months 

each, to be followed by three years of supervised release. In 

addition, he was ordered to pay $25,000 in restitution on each 

charge. The issues presented for review are threefold: 1) 

whether the district court properly calculated the amount of loss 

caused by defendant's mail fraud for purposes of guideline § 

2F1.1; 2) whether the district court erred in imposing a twopoint upward adjustment to defendant's base offense level on the 

ground that he abused a position of trust and/or used a special 

skill to significantly facilitate the commission or concealment 

of either offense; and 3) whether the district court erred in 

ordering defendant to pay $50,000 restitution ($25,000 on each 

count). We will affirm in part, reverse in part, and remand in 

part to the district court for further findings of fact. 

I.

A. Mail Fraud

 Arthur Maurello was admitted to the New Jersey State Bar in 

1976. From 1976 to 1990, he practiced as a licensed solo 

practitioner. In 1988, however, an ethics complaint was filed 

against him. The Disciplinary Review Board conducted an 

investigation and found that Mr. Maurello had, among other 

things, fraudulently obtained credit cards in the name of his 

former wife and tampered with a witness in the course of the 

ethics investigation. In re Maurello, 121 N.J. 466, 478-79 

(1990). As a result, on October 26, 1990, Mr. Maurello was 

permanently disbarred by the New Jersey Supreme Court. Id.
4 

 In 1989, apparently in anticipation of his possible 

disbarment, defendant took steps to set up a law practice under 

an assumed name. From the New Jersey Lawyer's Diary, defendant 

selected the names of two members of the New Jersey Bar who no 

longer practiced law: Robert Burdette and Alan Jeffrey Miller. 

Although the facts are not clear from the record, it appears that 

defendant acquired personal information about Burdette by "simple 

inquiry to the Bar," and about Miller by calling a toll-free 

information line provided to the public by the California Bar. 

Defendant used this information to obtain driver's licenses, 

credit cards and social security cards under the assumed names. 

 In 1989, defendant briefly established a law practice 

entitled "Bell and Burdette." It is unclear whether or to what 

extent he actually practiced under this name. He then 

reactivated Miller's license to practice law, establishing a law 

firm under the name "Alan Jeffrey Miller Chartered" in 1990. He 

hired staff and associates, and provided legal services to 

hundreds of clients. 

B. Credit Card Fraud

 From 1988 until December 1991, defendant engaged in a scheme 

to commit credit card fraud. Drawing on biographical information 

gleaned from obituaries, he obtained birth certificates, death 

certificates, and other information on at least twelve different 

individuals3 from public records. He then ran credit checks and 

 

3The Presentence Investigation Report alleges that appellant 

obtained credit cards in the names of approximately twenty-eight 

different people. Appellant contends that the correct number is 
5 

obtained driver's licenses under the assumed names. Finally, he 

applied for and received credit cards, on which he charged 

approximately $230,000 worth of merchandise. 

II.

 In 1994, a U.S. Postal Inspector filed a criminal complaint 

in the District of New Jersey which charged that defendant 

committed mail fraud in connection with his unauthorized law 

practice. Defendant waived indictment in open court, and a sixcount Information was filed against him. The Information charged 

defendant with five counts of mail fraud in violation of 18 

U.S.C. §§ 1341 and 1342 and one count of credit card fraud in 

violation of 18 U.S.C. §§ 1029 and 1022. 

 Defendant pled guilty to Count 1 (mail fraud) and Count 6 

(credit card fraud). The district court sentenced him as stated 

above. 

III. Jurisdiction 

 The district court had jurisdiction pursuant to 18 U.S.C. 

§3231. We have appellate jurisdiction pursuant to 28 U.S.C. § 

1291 and 18 U.S.C. 3742.

IV. Standard of Review 

 Our review of the district court's interpretation of "loss" 

for purposes of § 2F1.1 is plenary. United States v. Badaracco, 

954 F.2d 928 (3d Cir. 1992). 

 The appropriate standard of review of a district court's 

decision regarding the applicability of an adjustment under the 

 

twelve. The court accepted the lower number for sentencing 

purposes. 
6 

Guidelines "depends on the mixture of fact and law necessary to 

that court's determination." United States v. Bierley, 922 F.2d 

1061, 1064 (3d Cir. 1990). If the decision is "essentially 

factual," we apply a clearly erroneous standard. Id. If the 

claimed error is legal, however, we review the district court's 

decision de novo. Id. 

 We review a district court's restitution order under a 

bifurcated standard: plenary review as to whether restitution is 

permitted by law, and abuse of discretion as to the 

appropriateness of the particular award. United States v. 

Hunter, 52 F.3d 489, 492 (3d Cir. 1995). 

IV. Discussion

A. Loss Calculation on Mail Fraud Count

 Defendant was sentenced pursuant to § 2F1.1 of the Federal 

Sentencing Guidelines, which governs sentencing for fraud. Under 

that guideline, the offense level for sentencing purposes is 

based in part on the amount of "loss" due to the fraud, with 

higher losses resulting in higher sentences. The issue here is 

whether money paid by clients for apparently satisfactory legal 

services performed by an unlicensed attorney is considered part 

of the "loss" from the attorney's fraudulent acts for purposes of 

§ 2F1.1. 

 The Presentence Investigation Report ("PSR") took the 

position that only fees paid by dissatisfied clients should be 

considered in calculating loss. To compute the monetary loss 

from the mail fraud, the probation office sent letters to all 

known clients of defendant's unauthorized practice, inquiring 
7 

whether they considered themselves victims or believed themselves 

entitled to restitution. From approximately 225 letters, the 

probation office received ninety-seven responses. Seventy of 

those who responded expressed satisfaction with defendant's 

services, while twenty-seven stated that they were dissatisfied 

with the legal services they received and requested their money 

back. The fees paid by those twenty-seven persons totalled 

approximately $62,000. The probation office recommended that 

figure to the court as the total loss from defendant's unlicensed 

practice. 

 At the sentencing hearing, both sides challenged the PSR's 

loss computation. Defendant argued that loss should be zero, 

because his clients received the legal services for which they 

paid. The government, on the other hand, argued that the loss 

should include the gross total of all fees paid to defendant 

during the period of his illegitimate practice, on the theory 

that none of defendant's clients received that for which they had 

paid: the services of a licensed attorney. 

 The district court accepted the government's argument, 

reasoning that "[n]o client would have paid any money had he or 

she known the defendant assumed the identity of another person, 

did not have a license to practice law." App. 598. The court 

concluded that since all of the clients "paid . . . the defendant 

for something the defendant could never provide . . . , every 

dollar that they paid was a loss." Id. Adding together all of 

the fees received by the firm, less those fees paid to 
8 

defendant's partner, the court calculated the total loss from 

defendant's mail fraud scheme to be $428,902. 

1.

 In determining the way in which loss should properly be 

measured in this case, we look first to the Guidelines and 

Commentary thereto. The Commentary to § 2F1.1 defines loss as 

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

Commentary, App. Note 7. The loss calculation need not be 

precise; the guidelines require only a "reasonable estimate" 

based on the information available. Id. at Note 8. 

This estimate, for example, may be based on the 

approximate number of victims and an estimate of the 

average loss to each victim, or on more general 

factors, such as the nature and duration of the fraud 

and the revenues generated by similar operations. The 

offender's gain from committing the fraud is an 

alternative estimate that ordinarily will underestimate 

the loss. 

Id. 

 The Commentary to § 2F1.1 then refers the reader to the 

Commentary to § 2B1.1 for a fuller discussion of loss valuation. 

Section 2B1.1 is the guideline for larceny, embezzlement, and 

theft. The Commentary to § 2B1.1 emphasizes the amount taken

from the victims as the primary measure of loss: "The value of 

the property stolen plays an important role in determining 

sentences for theft and other offenses involving stolen property 

because it is an indicator of both the harm to the victim and the 

gain to the defendant." § 2B1.1, Background, ¶ 1. 

 Although the fraud guideline's cross-reference to the theft 

guideline suggests that the same measurement of loss--amount 
9 

taken--should be used in both cases, this court has "decline[d] 

to impose an identical [loss valuation] analysis for theft and 

fraud crimes in all cases." United States v. Kopp, 951 F.2d 521, 

529 (3d Cir. 1991). Because our analysis in Kopp is crucial to 

an understanding of subsequent Third Circuit case law, we will 

discuss it in some detail. 

 At the outset, we looked to the legislative purpose behind 

the guidelines. We reasoned that 

[m]echanical application of the theft guideline in 

fraud cases would frustrate the legislative purpose of 

the guidelines and contravene the specific language of 

the Commission. The sentencing guideline system was 

designed to sentence similarly situated defendants 

similarly; basing all fraud sentences on a simple 

'amount taken' rule without regard to actual or 

intended harm would contravene that purpose. 

 

Id. (emphasis added). It is important to note that, while 

'amount taken' and 'actual harm' are often the same thing, there 

are circumstances in which the amount taken from the victims 

understates or overstates the actual harm done--for example, when 

the perpetrator returns to the victims all or part of that which 

was actually taken from them, thus reducing their actual loss 

without altering the amount originally taken. Because the 

potential for amount taken to misstate loss is greater in fraud 

cases, which are generally not based on a straightforward taking 

of property, we concluded our legislative purpose analysis by 

stating that "we think it plain that actual harm is generally 

relevant to the proper sentence" for fraud. Id. 

 Next, we stated that "a detailed analysis of the entire

fraud guideline Commentary" supports our conclusion. Id. We 
10 

reasoned that the language of the cross-reference itself "does 

not say that the definitions of 'loss' for theft and fraud crimes 

are identical, just that '[v]aluation of loss is discussed in the 

Commentary to §2B1.1 . . . .'" Id. Whereas the theft guideline 

simply makes amount taken from the victim the preferred measure 

of loss, we noted that the fraud guideline requires a "slightly . 

. . more complicated" analysis: (1) actual loss is the baseline 

measure for fraud, but (2) if either "probable" or "intended" 

loss is reasonably calculable and higher than actual loss, then 

it should be used instead. Id. (citing Commentary to § 2F1.1, 

App. Note 7).4 We therefore concluded that (1) the fraud 

guideline defines loss primarily as "the amount of money the 

victim has actually lost (estimated at the time of sentencing), 

not the potential loss as measured at the time of the crime," 

Kopp, 951 F.2d at 536 (emphasis added); and (2) "the 'loss' 

should be revised upward to the loss that the defendant intended 

to inflict, if that amount is higher than actual loss." Id. 

 We noted that this conclusion was "essentially consistent" 

with the fraud guideline's cross-reference to the theft guideline 

with respect to loss valuation. 951 F.2d at 529. We reasoned 

that "[i]n both theft and fraud cases, the guideline 'loss' turns 

out to be the higher of the actual loss and the intended loss." 

Id. 

 

4The current version of Application Note 7 does not mention 

"probable" loss. It reads as follows: "Consistent with the 

provisions of § 2X1.1 (Attempt, Solicitation or Conspiracy), if 

an intended loss that the defendant was attempting to inflict can 

be determined, this figure will be used if it is greater than the 

actual loss." 
11 

 We acknowledged, however, that "our reconciliation of 

U.S.S.G. §§ 2B1.1 and 2F1.1 might fail" in the case of 

embezzlement. 951 F.2d 530 n.13. 

Conceivably, an embezzler might secret away $10,000 in 

office funds to invest in a reputable stock, truly 

intending and hoping to return the amount taken (plus 

interest) after selling the stock. Under a literal 

reading of U.S.S.G. § 2B1.1, "loss" is the "amount 

taken," $10,000 in our example. In that case intended 

loss would be zero, and actual loss might also be zero. 

But if U.S.S.G. § 2F1.1 applied (it would not), under 

our interpretation "loss" would be zero, and no 

sentence enhancement would apply. 

951 F.2d at 530 n.13. To address this potential inconsistency, 

we suggested that "embezzlement, unlike ordinary theft or fraud, 

involves not only a taking but also an action akin to a breach of 

fiduciary duty, which might justify always using the amount taken 

as 'loss.'" Id. 

 This language formed the basis of our holding the following 

year in United States v. Badaracco, 954 F.2d 928 (3d Cir. 1992). 

In Badaracco, we revisited the issue of loss valuation under the 

fraud guidelines and restricted the scope of Kopp. Badaracco

involved the president and CEO of a bank who had approved loans 

to certain developers on the condition that they award electrical 

subcontracts to companies in which he had an interest. The 

district court, ruling prior to our decision in Kopp, computed 

loss for purposes of § 2F1.1 by adding together the face values 

of the fraudulently induced contracts. 

 During the pendency of the appeal, Kopp was issued. We 

ruled in Badaracco, however, that Kopp did not require us to 
12 

compute loss on the basis of actual loss in that case. 

Badaracco, 954 F.2d at 937. Restricting the scope of the rule 

articulated in Kopp, we stated that "the sentencing judge is 

entitled, probably compelled, to evaluate the size of the loss 

based on the particular offense." Id. Then, relying on the dicta 

in Kopp regarding embezzlement, we held that "[w]hen the officer 

of a financial institution uses his or her position for personal 

benefit, there is a breach of fiduciary duty comparable to that 

implicated by embezzlement, which may justify using the 'gross 

gain' alternative to estimate 'loss.'" Id. at 938. We concluded 

that gross gain was the appropriate measure of loss in Badaracco. 

Id. at 938. 

 Since defendant's fraud in this case involved a breach of 

fiduciary duty, the government contends that Badaracco governs 

and therefore that the appropriate measure of loss is defendant's 

"gross gain." Appellee's Br. at 22. We disagree, for two 

reasons. 

 First, the government's interpretation of Badaracco sweeps 

far too broadly. As discussed above, we did not hold that gross 

gain is the measure to apply in every fraud case involving a 

breach of fiduciary duty; rather, we held that "a breach of 

fiduciary duty comparable to that implicated by embezzlement . . 

. may justify using the 'gross gain' alternative to estimate 

'loss.'" Badaracco, 954 F.2d at 938. Defendant's mail fraud 

scheme is not sufficiently analogous to embezzlement to justify 

using gross gain as the measure of loss. In embezzlement, breach 

of fiduciary duty is an inherent element of the crime. Kopp, 951 
13 

F.2d at 530 n.13. Similarly, in the bank fraud provision 

underlying Badaracco, as written and as applied in that case, 

breach of fiduciary duty is implicitly an element.5 Under both 

crimes, the defendant has rightful possession of or control over 

money, which he fraudulently diverts to his own purposes by 

breaching his fiduciary responsibility to the money's rightful 

owner. 

 In this case, however, defendant was charged with mail fraud 

pursuant to 18 U.S.C. § 1341. The gravamen of his offense is the 

use of the mails to further a fraudulent purpose. Defendant did 

not fraudulently convert money over which he had possession or 

control; rather, he fraudulently induced people to enter into 

contracts pursuant to which they gave him money in exchange for 

services. The mere fact that defendant's scheme involved a 

breach of fiduciary duty does not bring it under the penumbra of 

Badaracco. 

 Second, even if we agreed with the government's analogy, we 

would reject their argument that "gross gain" to the defendant is 

the appropriate measure of loss under Badaracco because the 

portion of the fraud guideline on which that holding was based 

 

518 U.S.C. § 1006, excerpted in Badaracco, provides as follows: 

Whoever, being an officer . . . [of] any lending, 

mortgage, insurance, credit or savings and loan 

corporation or association authorized or acting under 

the laws of the United States . . . with intent to 

defraud any such institution . . . participates or 

shares in or receives directly or indirectly any money, 

profit, property, or benefits through any transaction, 

loan commission, contract, or any other act of any such 

corporation, institution, or association, shall be 

fined not more than $10,000 or imprisoned not more than 

five years, or both. 
14 

has been amended. In Badaracco, we held that the analogy to 

embezzlement justified our "using the 'gross gain' alternative to 

estimate 'loss,' expressly authorized in Application Note 8." 

Badaracco, 954 F.2d at 938. In 1991, however, Application Note 8 

was amended, deleting "offender's gross gain" and substituting 

"offender's gain." See § 2F1.1, Note 8. We noted this change in 

Badaracco, but stated that "[b]ecause we do not remand on this 

issue, we need not consider the effect of this change in 

subsequent sentencings." Badaracco, 954 F.2d at 938 n.11. 

Defendant in this case was sentenced on January 31, 1995--nearly 

four years after this amendment took effect. Although we do not 

need to reach this issue in this case, it seems clear that the 

guidelines no longer endorse "gross gain" to the defendant as an 

alternative measure of loss. 

 As a result, pursuant to the mandate of the guidelines and 

the reasoning of our decision in Kopp, we conclude that actual 

loss is the appropriate basis for loss measurement in this case. 

2.

 We now turn to the task of determining the appropriate 

measurement of actual loss under the facts of this case. The 

government contends, and the district court found, that every 

dollar paid to defendant during his illegitimate practice was a 

dollar lost, because "the true market value of the services 

provided by defendant Maurello was zero." Appellee's Br. at 19. 

The government asserts that "[l]egal representation by a nonlawyer is worth nothing in the marketplace; it is a commodity 

that cannot be sold, as a matter of law." Id. 
15 

 This argument ignores reality. A client who obtains a 

satisfactory contract, settlement, or verdict has received 

something of value, irrespective of whether the lawyer was 

licensed at the time. The services rendered do not become 

worthless if the client later learns that the attorney was not 

licensed to practice when the services were performed. If the 

validity of the services could later be attacked on the ground 

that they were performed by an attorney who had been disbarred, 

then the government's argument might have merit; however, there 

is no such allegation in this case. 

 Furthermore, the government's argument contravenes the 

clearly expressed policy of the guidelines. Congress instructed 

the Sentencing Commission to take the "nature and degree of the 

harm caused by the offense" into account in drafting the 

guidelines. 28 U.S.C. § 994(c)(3). Thus, the policy statement 

at the opening of the guideline manual states that the guidelines 

are designed to serve two sentencing purposes: "just deserts" and 

"crime control." Guidelines Ch. 1, Part A, § 3. Under the theory 

of just deserts, according to the policy statement, "punishment 

should be scaled to the offender's culpability and the resulting 

harms." Id.

 More importantly for our purposes, section 1B1.3, entitled 

"Relevant Conduct," states that "specific offense 

characteristics" shall be determined on the basis of, inter alia, 

"all harm that resulted from the acts and omissions . . . [of the 

defendant], and all harm that was the object of such acts and 

omissions." §1B1.3(a)(3). Section 2F1.1 clearly designates the 
16 

amount of loss from fraud as a specific offense characteristic. 

§ 2F1.1(b)(1); see also § 2B1.1(b)(1)(designating amount of loss 

from theft as a specific offense characteristic). It follows 

that the degree of harm caused by defendant's acts is relevant to 

the determination of loss. See also Commentary to § 2B1.1, 

Background ¶ 1 ("The value of the property stolen plays an 

important role in determining sentences . . . because it is an 

indicator of both the harm to the victim and the gain to the 

defendant."); id. at application note 2 ("Where the market value 

is difficult to ascertain or inadequate to measure harm to the 

victim, the court may measure loss in some other way, such as 

reasonable replacement cost to the victim.")(emphasis added). 

 The district court in this case rejected actual harm to the 

victims as a means of measuring loss on the ground that such an 

approach would put the court 

in the anomalous position of slapping the wrist of the 

competent malefactor and harshly sanctioning the 

incompetent one when both are equally culpable because 

the crime lies in the fact of their misrepresentation, 

not the nature and quality of the representation of 

their clients. 

App. 59. The court concluded that "assessing the quality of the 

services offered by the unlicensed attorney . . . is not the 

purpose of the calculation for determining amount of loss." Id.

at 609. 

 For the reasons just stated, we believe this argument 

misconstrues the theory of the guidelines and the nature and 

purpose of the loss measurement. The quality of services 

rendered is directly relevant to the degree of harm caused by 
17 

defendant's actions. Under the theory advanced by the district 

court, an unlicensed attorney who represents 100 people, earning 

$200,000 in fees and obtaining spectacular results for all of 

them, would receive the same punishment as one who represents the 

same number of clients incompetently and to their detriment but 

receives the same amount in fees. A theory that yields such a 

perverse result is "simple, but irrational." Kopp, 951 F.2d at 

532. We simply cannot agree with the district court's assertion 

that two defendants so situated are "equally culpable." 

 We wish to make clear that we are neither rewarding nor 

condoning the unauthorized practice of law. The issue here is 

not whether or not defendant will be punished for his conduct, 

but rather whether his base offense level will be enhanced on 

account of loss caused by his fraud. To the extent that the 

unauthorized services provided by defendant have not harmed their 

recipients, but to the contrary have benefitted them, we conclude 

that defendant's base offense level should not be enhanced. A 

person who hires a contractor to construct a building according 

to certain specifications, for example, and receives a flawless 

and structurally sound building as a result of the bargain, 

cannot be said to have suffered a loss simply because he later 

learns that the contractor was not licensed at the time of 

construction. In those circumstances, the victim has sustained 

no loss because he has received the services for which he 

bargained, despite the fact that he has received them from a 

person who was not legally authorized to offer them. For 
18 

defendant's conduct in practicing without a license he should be 

and has been punished. 

 The Seventh Circuit's decision in United States v. 

Schneider, 930 F.2d 555 (7th Cir. 1991), supports our conclusion. 

In deciding the appropriate measure of loss from fraudulently 

induced construction contracts that were terminated before the 

intended victim paid any money, Judge Posner reasoned that 

it is necessary to distinguish between two types of 

fraud. One is where the offender--a true con artist . 

. . --does not intend to perform his undertaking, the 

contract or whatever; he means to pocket the entire 

contract price without rendering any service in return. 

In such a case the contract price is a reasonable 

estimate of what we are calling the expected loss, and 

we repeat that no more than a reasonable estimate is 

required. The other type of fraud is committed in 

order to obtain a contract that the defendant might 

otherwise not obtain, but he means to perform the 

contract (and is able to do so) and to pocket, as the 

profit from the fraud, only the difference between the 

contract price and his costs. 

Id. at 558. Stating that the estimate of loss pursuant to § 

2F1.1 must bear some relation to "economic reality," id. at 559, 

the Seventh Circuit ruled that the fraud committed in Schneider

was of the latter type. Because there was no reason to believe 

that the defendants would not have performed the contracts "to 

the perfect satisfaction of the contracting agency," the court 

rejected gross gain to the defendants as the appropriate measure 

of loss. Id. at 558. We endorsed this reasoning in Kopp, and we 

do so again today. 

3. 

 The government argues in the alternative that the loss from 

defendant's fraud should be measured in terms of the total money 
19 

paid to defendant because that money "was diverted from 

defendant's legitimate competitors." We reject this argument for 

the same reason we rejected the district court's measurement of 

actual loss: it eliminates any meaningful correlation between 

severity of punishment and degree of harm caused, and it measures 

the loss to those who are not direct victims of the defendant's 

conduct. For every fraud in the sale of goods or services, there 

is someone who could have sold the same goods or delivered the 

same services as promised or represented, but they are but 

distant and remote victims of such fraudulent conduct. It is not 

their loss which should provide the measure, but rather the 

direct victims of defendant's conduct. Every person who commits 

the type of fraud for which defendant stands convicted can be 

said to have diverted money from legitimate competitors. Thus, 

under this theory, the measure of loss in this type of case would 

always be equal to the total fees paid to defendant, regardless 

of the actual harm to the victims. This would render the degree 

of harm caused by a defendant's acts irrelevant to Guideline 

sentencing--a result that is contrary to the policy of the 

Guidelines as discussed above. 

4. 

 Having rejected the measure of fraud loss employed by the 

district court, we must determine an appropriate substitute. For 

purposes of § 2F1.1, "the loss need not be determined with 

precision. The court need only make a reasonable estimate of the 

loss, given the available information." Commentary to § 2F1.1, 

App. Note 8. 
20 

 We take as our starting place the probation office's 

proposal that actual harm be measured by the total amount of fees 

paid by dissatisfied clients. Because this method seeks to 

identify those clients who were actually harmed by defendant's 

actions, it is a good starting place for measuring loss. It does 

not provide a "reasonable estimate" standing alone, however, 

because unsubstantiated complaints voiced by clients only after 

they have learned of defendant's wrongdoing and their possible 

right to restitution are unreliable at best, and inherently 

suspect. In order to render the probation office's estimate a 

reasonable one for purposes of § 2F1.1, we hold that the 

government must demonstrate and the district court must find that 

the complaints on which it is based are bona fide and can 

reasonably support a loss determination. We therefore remand to 

the district court for the purpose of determining whether the 

twenty-seven complaints underlying the probation office's loss 

estimate bear a reasonable relationship to actual or intended 

loss. The district court is not required to determine whether 

each complainant has a grievance that could support a malpractice 

determination, but merely whether the complainant's claimed loss 

has a reasonable basis in fact so that the court is convinced 

that the complainant did not respond to the government's inquiry 

merely in the hope of procuring a financial windfall. 

 Our conclusion that the district court overvalued fraud loss 

under the circumstances is by no means an indication that the 

district court overestimated the seriousness of the underlying 

conduct. Section 2F1.1 provides that "[i]n cases in which the 
21 

loss determined under subsection (b)(1) does not fully capture 

the harmfulness and seriousness of the conduct, an upward 

departure may be warranted." § 2F1.1. In this case, as in Kopp, 

the district court is free to reconsider on remand "whether the 

properly calculated 'loss' significantly over- or understates the 

gravity of the crime, and therefore whether departure from the 

normal sentencing range is appropriate." Kopp, 951 F.2d at 536. 

B. Abuse of a Position of Trust or Use of Special Skill

 The district court imposed a two-point upward adjustment 

pursuant to § 3B1.3 for abuse of a position of trust or use of a 

special skill. Section 3B1.3 provides: "If the defendant abused 

a position of public or private trust, or used a special skill, 

in a manner that significantly facilitated the commission or 

concealment of the offense, increase by 2 levels." § 3B1.3. The 

district court found that defendant had abused a position of 

trust in connection with the mail fraud, and that he had used a 

special skill in the commission of both the mail fraud and the 

credit card fraud. As either abuse of a position of trust or 

use of a special skill standing alone is a sufficient basis for 

an upward adjustment, we must uphold the district court's 

determination if any one of these three grounds was proper. 

1. Use of a Special Skill 

 We begin by addressing the district court's finding that 

defendant used a special skill in the commission of both 

offenses. The Commentary to § 3B1.3 describes the enhancement for 

use of a special skill in the commission of an offense as 

follows: 
22 

"Special skill" refers to a skill not possessed by 

members of the general public and usually requiring 

substantial education, training or licensing. Examples 

would include pilots, lawyers, doctors, accountants, 

chemists, and demolition experts. 

Application Note 2. Like the enhancement for abuse of a position 

of trust, this adjustment "applies to persons who abuse . . . 

their special skills to facilitate significantly the commission 

or concealment of a crime." Background to § 3B1.3. 

a. Mail Fraud

i.

 To impose an upward adjustment for use of a special skill 

pursuant to § 3B1.3, a court must find two things: (1) that 

defendant possesses a special skill; and (2) that he used it to 

significantly facilitate the commission or concealment of his 

offense. United States v. Hickman, 991 F.2d 1110, 1112 (3d Cir. 

1993). In this case, the district court neither made specific 

findings of fact nor articulated reasons in support of its 

conclusion that defendant used a special skill in perpetrating 

the mail fraud scheme. As a result, we must determine whether 

the record as a whole "demonstrates" the manner in which 

defendant used his special skill to facilitate the commission or 

concealment of the offense. United States v. Rice, 52 F.3d 843, 

850 (10th Cir. 1985); United States v. Gandy, 36 F.3d 912, 916 

(10th Cir. 1994). If the record as a whole supports the district 

court's enhancement of defendant's sentence for use of a special 

skill in the commission of the mail fraud offense, then we need 
23 

not remand for specific factual findings in support of the 

enhancement. Id. 

 We begin with the first prong of the § 3B1.3 inquiry: 

whether defendant possesses a special skill within the meaning of 

the guideline. The court appears to have found that defendant's 

"special skill is [not] the practice of law per se, but rather is 

the knowledge that one obtains through a legal education and 

prior practice." App. 580; see also Govt's Br. at 44 ("[T]he 

special skill adjustment rested on the whole panoply of practical 

skills associated with a legal career."). We note at the outset 

that defendant's legal training clearly constitutes a special 

skill, as lawyering is specifically listed as an example of a 

special skill in the text of the Guideline. Moreover, under the 

circumstances, we believe that including defendant's experiences 

and general knowledge acquired over the course of his legal 

career within the contours of his special skill is warranted. 

See United States v. Culver, 929 F.2d 389 (8th Cir. 1991)(finding 

use of special skill where pilot convicted of conspiracy to 

transport stolen aircraft had used his skills to plan for fuel 

and devise flight plans, despite arrest before take-off); United 

States v. White, 972 F.2d 590, 600-01, cert. denied, 113 S. Ct. 

1651 (1993), cert. denied sub nom Wilson v. United States, id.

(finding use of special skill where defense attorney specializing 

in drug cases used knowledge acquired as a prosecutor and defense 

lawyer to avoid surveillance during drug conspiracy activities). 

 
24 

 The district court's decision with respect to the second 

part of the inquiry--whether defendant used his special skill to 

significantly facilitate the mail fraud--is a question of fact 

that we review for clear error. The factual basis of the 

district court's finding is not clear from the record. The 

government's argument, which presumably the court adopted, is 

that defendant "used his special legal skills" in "ascertaining 

the names of inactive lawyers or obtaining their credit histories 

for the purpose of assuming their identities." Govt. Br. at 38. 

According to the government's Sentencing Memorandum, which was 

part of the record at the time of sentencing, the defendant's 

education and experiences as a licensed attorney 

enabled him to successfully portray himself to his 

clients, adversaries, and the courts as a knowledgeable 

attorney. By using these skills, he was able to conceal 

the truth about his identity and his unlicensed status 

and enabled him [sic] to dupe more people into hiring 

him under the false impression that he was licensed to 

practice law. In short, he used his previous 

experience, education, and training to perpetuate the 

fraud and to conceal it. 

App. 548. 

 We note that this case presents a rather unique situation 

insofar as the very use of the special skill (legal competence) 

mitigated the severity of the offense by avoiding harm to 

victims. Nevertheless, the fact remains that defendant was an 

experienced lawyer with experience in setting up a law practice 

and soliciting clients, that these skills are not possessed by 

the general public, and that he used these skills to facilitate 

his fraudulent scheme and to avoid detection. The district 
25 

court's decision to adjust defendant's sentence upwardly for use 

of a special skill was not clearly erroneous. 

ii.

 Defendant argues that enhancing his sentence for use of a 

special skill pursuant to § 3B1.3 while also imposing an upward 

adjustment under § 2F1.1(b)(3)(B) constitutes impermissible 

double counting. Guideline § 2F1.1(b)(3)(B) provides for a twolevel increase in offense level if the offense involved 

"violation of any judicial or administrative order." Id. Since 

defendant's unlicensed practice was a direct violation of the New 

Jersey Supreme Court order of disbarment, the district court 

enhanced his sentence pursuant to § 2F1.1(b)(3)(B). Defendant 

apparently does not challenge this enhancement, but rather uses 

it as the basis for his challenge to the § 3B1.3 adjustment for 

use of a special skill in connection with his mail fraud scheme. 

The theory behind his argument is that both enhancements punish 

the same behavior: the practice of law. 

 In United States v. Wong, 3 F.3d 667 (3d Cir. 1993), we 

addressed the issue of double counting under the guidelines. 

Defendant in that case challenged the simultaneous imposition of 

upward adjustments for more than minimal planning under 

§2B1.1(b)(5) and for acting as an organizer or leader of a 

criminal enterprise under § 3B1.1(c). We reasoned that "because 

the Guidelines are explicit when two Sentencing Guideline 

sections may not be applied at the same time, the principle of 

statutory construction, 'expressio unius est exclusio alterius,' 

applies." Id. at 670-71. We concluded that "an adjustment that 
26 

clearly applies to the conduct of an offense must be imposed 

unless the Guidelines exclude its applicability." Id. at 671. 

 That reasoning applies with equal force here. Nothing in 

the Guidelines indicates that § 3B1.3 and § 2F1.1(b)(3)(B) may 

not be applied in tandem. We therefore reject defendant's double 

counting argument. 

 We note that even in the absence of governing legal 

precedent, we would reject defendant's argument on purely logical 

grounds. Contrary to his assertions, the enhancements under § 

2F1.1(b)(3)(B) and § 3B1.3 do not "dr[a]w from the same well." 

United States v. Kopshever, 6 F.3d 1218, 1224 (7th Cir. 1993). 

On the contrary, neither one punishes the practice of law per se. 

The former punishes defendant's flagrant violation of a judicial 

order; the latter, his use of the panoply of skills associated 

with legal practice to facilitate passing himself off as a 

licensed attorney. "[E]ven if there is some overlap in the 

factual basis for two or more sentencing adjustments, so long as 

there is sufficient factual basis for each they may both be 

applied." United States v. Haines, 32 F.3d 290, 293-93 (7th Cir. 

1994). Despite the slight overlap between these two provisions 

as applied in this case, they target different behavior. As a 

result, even if the law forbade double counting in the absence of 

explicit instructions in the guidelines, the simultaneous 

application of these two enhancement provisions would not 

constitute double counting. 

iii.
27 

 Because we have concluded that the district court properly 

imposed a two-point upward adjustment for use of a special skill 

in the commission of the mail fraud offense, we need not and do 

not reach the issues of whether defendant used a special skill in 

the commission of the credit card fraud or abused a position of 

trust within the meaning of the guidelines. 

C. Restitution

 Under the Victim and Witness Protection Act, which is 

incorporated into the Guidelines by § 5E1.1, a district court 

sentencing a defendant convicted of an offense under Title 18 

"may order . . . that the defendant make restitution to any 

victim of such offense." 18 U.S.C. § 3663(a)(1). In determining 

whether to order restitution and setting the amount, the court 

shall consider the amount of the loss sustained by any 

victim as a result of the offense, the financial 

resources of the defendant, the financial needs and 

earning ability of the defendant and the defendant's 

dependents, and such other factors as the court deems 

appropriate. 

18 U.S.C. § 3664(a). In this circuit, the sentencing court must 

make specific factual findings as to the amount of loss sustained 

by the victims, the defendant's ability to pay, and the 

relationship between the amount of restitution ordered and the 

loss caused by defendant's offense. United States v. Graham, 

1995 WL 744974, *3 (3d Cir. 1995); United States v. Logar, 975 

F.2d 958, 961 (3d Cir. 1992). 

 In this case, the district court ordered defendant to pay 

$25,000 in restitution on the mail fraud counts and $25,000 on 

the credit card fraud count. Counsel for both sides briefly 
28 

addressed the issue of defendant's resources and his ability to 

pay. Defense counsel argued that defendant has "no resources" 

and owes $170,000 in state and federal taxes, App. 646-48, and 

expressed doubt that "restitution is actually feasible in this 

case." App. 648. The prosecutor then argued, without going into 

greater detail, that "the sum total that we know about the 

defendant's assets are set forth in paragraph 134 of the 

presentence report." App. 649. Although she did not address 

restitution on the mail fraud counts, she concluded by 

acknowledging: "Obviously I don't believe there is going to be 

enough to repay all the credit card companies that suffered an 

injury . . . ." App. 649. 

 The only factual information in the record regarding 

defendant's financial resources and ability to pay is found in 

the PSR. The PSR lists defendant's assets as follows: a 

condominium valued at $110,000; $18,000 in a money market 

account; a few hundred dollars in a checking account; $70 in a 

savings account; and automobiles valued at $2500. PSR ¶ 134. 

The PSR reports that defendant and his wife owe $12,800 on their 

credit cards (not including the fraudulent credit card activity). 

Id. at ¶ 135. Defendant's wife's income of $1741 per month is the 

only income to the household and is insufficient to cover their 

monthly expenses of $1992. Id. at 136. The PSR concludes that 

defendant "is capable of maintaining steady employment . . . 

[and] paying partial restitution." Id. at ¶ 137. 
29 

 None of these factual allegations is undisputed. Defendant 

challenged virtually all of them in his sentencing memorandum. 

Contrary to the PSR's assessment, defendant maintains that he 

has no assets. His wife's assets are separately and 

individually held. All purchases were made by Ms. 

Rzeczyeki and were accumulated through her own 

earnings. All assets listed except the I.R.A. are the 

defendant's wife's, not his. Reference to these 

separate assets should be excised. The I.R.A. was the 

property of the defendant, but was liquidated following 

the defendant's arrest and used to pay living expenses 

for the past ten (10) months. Thus, the defendant has 

no assets. 

App. 54. In addition, defendant challenges the PSR's assessment 

of his future earning potential and ability to pay: 

Mr. Maurello has no assets. Upon release from custody, 

financial resources will remain limited. This is 

especially true since his tax returns have been filed 

pursuant to the plea agreement, and [he] is obligated 

to pay the resulting liabilities. He owes money to the 

Internal Revenue Service which includes tax liability, 

interest and penalties which, all totalled, are more 

than $170,000. 

Id.

 "Where a defendant alleges any factual inaccuracy in the 

presentence report, the Court must make: (1) a finding as to the 

allegation, or (2) a determination that no such finding is 

necessary because the matter controverted will not be taken into 

account in sentencing." United States v. Cherry, 10 F.3d 1003, 

1013 (3d Cir. 1993). Here, in response to this cursory and 

conflicting testimony, the court stated as follows: 

 Well, the defendant's varied and extensive crimes 

set forth in the presentence report have left a 

financial mess and a substantial amount of loss to a 

diverse variety of victims and limited resources to 

repay. 
30 

 I don't want to deprecate the loss of the 

defendant's in any way. On the other hand, I don't 

want to set an amount of restitution which is unlikely 

to ever be repaid. This is a very difficult 

undertaking. 

 We know who is to get the money. What we don't 

know is how much to order that they be given. The 

amount of loss is substantial, as we know. The 

defendant is never going to pay back a good portion of 

it. 

 Without derogating in any way any efforts that the 

victims may take on their own to collect, I will limit 

restitution to $50,000 . . . on each count in lieu of 

any fine. 

App. 650. 

 It is apparent from this excerpt that the district court 

failed to make the findings of fact required by our decisions in 

Cherry and Logar. First, the court made no finding regarding 

defendant's ability to pay. While the Victim and Witness 

Protection Act provides that "[t]he burden of demonstrating the 

financial resources of the defendant and the financial needs of 

the defendant's dependents shall be on the defendant," 18 U.S.C. 

§3664(d), the court cannot impose restitution without making 

specific findings of fact in this regard. Defendant asserts (1) 

that he owes $170,000 in back taxes, (2) that those taxes are 

subject to collection by levy upon his wages, (3) that he has 

never earned more than $25,000 per year in any job, and (4) that 

the most he will take home following deduction of back taxes by 

the IRS is $161.54 per week. Appellant's Br. at 37-38. If these 

assertions are correct, then defendant will not even earn $50,000 

over the course of three years, much less be able to pay that 

amount in restitution. The court's only mention of defendant's 

ability to pay was the pro forma statement that "I don't mean to 
31 

deprecate the defendant's crimes by setting the amount of 

$50,000, but merely to try to, as the Guidelines tell us, try to 

equate the restitution obligation with the defendant's ability to 

pay as he may be able to obtain monies in the future." App. 651. 

 Moreover, the district court failed to make an express 

factual finding in the restitution context regarding the 

relationship between the claimed losses to victims and 

defendant's offense conduct. It may be the case that the 

district court relied on its earlier finding in the fraud loss 

context that all clients were victims and all fees paid were 

losses. Because these losses would not necessarily be subject to 

restitution, however, the district court erred in not making a 

specific finding for purposes of restitution. More importantly, 

even if the court had made a specific finding that all fees paid 

to defendant were losses related to his offense, that finding 

would be clearly erroneous in light of our holding in Part VA of 

this opinion. As discussed above, insofar as defendant's clients 

were satisfied with his services, the fees that they paid in 

exchange for those services cannot be considered losses. 

 While the district court's award of restitution on the 

credit card fraud count is somewhat less problematic, insofar as 

the victims of that fraud and the amount that each is owed is 

clearly established, the district court's failure to make a 

specific finding as to defendant's ability to pay requires remand 

on this issue as well. 

 We therefore remand to the district court for factual 

findings in support of the restitution order. This is especially 
32 

appropriate in light of our ruling today that the appropriate 

measure of loss was not the total of all fees paid to the 

illegitimate practice ($428,902), but rather the fees paid by 

those clients who were justifiably dissatisfied (approximately 

$62,000 if existing complaints are verified). Thus, one of the 

key factors that the district court should have considered in 

setting the amount of restitution was inflated to nearly seven 

times its correct value. 

 Furthermore, we do not require that the district court make 

a separate finding as to the amount of restitution due to each 

victim. The court may establish a formula and authorize the 

Probation Office, not the U.S. Attorney, to apply it. The 

parties might also stipulate to the identity and amounts to be 

paid subject to court approval. However, we specifically express 

our view that the Probation Department rather than the U.S. 

Attorney is the proper agency to carry out such functions. 

VI. Conclusion

 For the foregoing reasons, we will (1) reverse the district 

court's fraud loss valuation and remand to the district court for 

factfinding and resentencing consistent with this opinion; (2) 

affirm the district court's imposition of a two-point upward 

adjustment for use of a special skill in connection with the mail 

fraud; and (3) vacate the district court's order of restitution 

and remand to the district court for appropriate factual 

findings. 
33 

 

 

WELLFORD, Circuit Judge, concurring. 

 I concur in the majority opinion but write separately to 

emphasize several aspects of the case. The amount paid by 

Maurello's fraud victims who indicated dissatisfaction with his 

services represents to this judge a good initial measure of the 

degree of "loss" involved by reason of this deceitful and 

unconscionable conduct by a disbarred lawyer. The "value" of 

legal services is hard to gauge by laymen clients just as the 

"measure of harm" to these "clients" is difficult to assay. It 

is also a serious challenge to ascertain to what extent 

Maurello's services may have benefitted the victims or "clients" 
34 

who did not complain. A qualified and licensed attorney may have 

done a better job for less money, or it may be that Maurello's 

services were actually inadequate, unknown to his "client." Upon 

the remand, I would emphasize that the district court must only 

determine whether the dissatisfied "clients" or victims have "a 

reasonable basis in fact" for their professed feeling of having 

been shortchanged by Maurello. 

 I am disposed to concur, not altogether enthusiastically, 

with my brothers in their interpretation of United States v. 

Kopp, 951 F.2d 521 (3d Cir. 1991), and United States v. 

Badaracco, 954 F.2d 928 (3d Cir. 1992), in assessing fraud loss 

under the guidelines. I find it difficult, however, to find a 

good analogy between the services of an unlicensed contractor in 

building a structure, and the services of a disbarred lawyer in 

handling a domestic relations case. Thus, I do not find United 

States v. Schneider, 930 F.2d 555 (7th Cir. 1991), particularly 

relevant. 

 I would also emphasize that the district court is "free to 

reconsider on remand" whether an upward departure is 

"appropriate" in light of all the circumstances.