In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 04-1053

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

WALTER KEVIN SCOTT,

Defendant-Appellant.

____________

Appeal from the United States District Court for

the Southern District of Indiana, Indianapolis Division.

Nos. IP 02-142-CR-01-B/F—Sarah Evans Barker, Judge.

____________

ARGUED FEBRUARY 17, 2005—DECIDED APRIL 25, 2005

____________

Before POSNER, RIPPLE, and MANION, Circuit Judges.

POSNER, Circuit Judge. Kevin Scott was convicted of bank

fraud, of fraudulently using another person’s Social Security

number, and of transacting in money obtained through

crime (“money laundering” in the broad, which is also the

statutory, sense). He was sentenced to 120 months in prison

and ordered to pay more than $1.3 million in restitution to

the victims of his crimes. He appeals on a number of

grounds, four of which, all relating to the sentence, have
2 No. 04-1053

sufficient substance to warrant discussion. The first is that

he received an illegal sentence because the judge thought

the sentencing guidelines were mandatory, yet United States

v. Booker, 125 S. Ct. 738 (2005), held that they are merely

advisory. He was sentenced before the Booker decision and

failed to challenge the mandatory character of the guidelines in the district court; to obtain relief from us he must

therefore show that the sentence amounted to a plain error.

United States v. Paladino, 401 F.3d 471, 481 (7th Cir. 2005).

Under the procedure adopted in Paladino, if we are uncertain whether the judge would have imposed the same

sentence had he (or in this case she) realized that the

guidelines are merely advisory, we direct a limited remand

for a statement by the judge, id. at 483-85; for that is the only

way we can determine whether the sentencing error actually

harmed the defendant by illegally protracting his term of

imprisonment.

As the government points out, it is unlikely that the judge

in this case would have given the defendant a lower

sentence had she not felt herself bound by the guidelines.

She raised the guidelines range one level, from 87-108

months to 97-121 months, by granting an upward departure,

and then sentenced the defendant near the top of the

elevated range. But as we pointed out in Paladino, a sentencing decision by a judge who thinks herself bound by the

guidelines will be, if the judge is conscientious, a sentence

relative to the guidelines. The judge will compare the

defendant with the average offender in the different guideline ranges, without necessarily agreeing that the ranges are

correct. Also, with the guidelines merely advisory the judge

can take into account mitigating factors that the guidelines

ignored, provided that in doing so she is acting “reasonably.”

United States v. Booker, supra, 125 S. Ct. at 765; United States

v. Paladino, supra, 401 F.3d at 484. We cannot be sure that
No. 04-1053 3

Judge Barker would again sentence Scott to 120 months,

now that the guidelines are merely advisory.

But we must decide the other sentencing issues raised by

Scott. The Sentencing Reform Act requires resentencing

when the challenged sentence was “imposed as a result of

an incorrect application of the sentencing guidelines.”

18 U.S.C. § 3742(f)(1). This provision survived Booker. See

125 S. Ct. at 764. An incorrect application of the guidelines

requires resentencing under the post-Booker sentencing

regime. United States v. Gleich, 397 F.3d 608, 615 (8th Cir.

2005).

Pending the disposition of the criminal charges against

him, Scott (after a failed suicide attempt) was ordered to reside in a community confinement facility. He was authorized

to leave the facility only to consult his lawyer or obtain

medical treatment. He repeatedly abused the terms of the

leave privilege by falsely claiming that he had an appointment with a psychiatrist, instead using his “medical” leaves

not to seek medical treatment but rather to visit his girlfriend

and for other purely personal reasons—even to conduct

business with another resident of the confinement facility.

He also bribed two of the facility’s employees to allow him

to protract his leaves. For this misconduct while a pretrial

detainee Scott was both denied a sentencing discount for

acceptance of responsibility and also given a sentence enhancement for obstruction of justice. He challenges the

obstruction enhancement.

Had his pretrial antics complicated the prosecution of

the fraud charges, he would indeed have been guilty of

obstructing justice; but there is no indication of that. The

judge said that Scott’s antics “got in the way with [she

meant ‘of’] the proper administration of justice in the course

of this case,” but what she seems to have meant is that Scott

was flouting the court’s authority by violating the condi-
4 No. 04-1053

tions under which he was being detained. That he was. But

he was not, by doing so, making it more costly or otherwise

more difficult for the government to prosecute its case

against him successfully, as in United States v. Maccado, 225

F.3d 766, 772 (D.C. Cir. 2000) (refusal to provide a handwriting sample), and countless other cases (such as our own

United States v. Wells, 154 F.3d 412, 414-15 (7th Cir.

1998))—which is what “obstruction of justice” means. It is

not as if he had been trying to escape, compare U.S.S.G.

§ 3C1.1, application note 4(e), that is, to elude justice; he

never missed, or tried to avoid, a scheduled court appearance. So the enhancement for obstruction of justice was a

misapplication of the sentencing guidelines, and Scott is

therefore entitled to be resentenced.

He further objects to the fact that his sentence for money

laundering was increased because he abused a position of

trust. He did abuse a position of trust—he concedes that—

but he committed it in the course of his fraudulent schemes

to obtain the money that he later laundered, rather than in

the course of laundering the money. The relevant guideline

provision kicks up the sentence if the defendant abused a

position of trust “in a manner that significantly facilitated

the commission or concealment of the offense.” U.S.S.G.

§ 3B1.3. Scott did that. To commit the offense of money

laundering, he had to commit a crime that would give him

money to launder; the abuse of trust facilitated his commission of that crime. United States v. Young, 266 F.3d 468, 474-

78 (6th Cir. 2001); see also United States v. Baker, 227 F.3d

955, 966-67 (7th Cir. 2000); United States v. Cefaratti, 221 F.3d

502, 516 (3d Cir. 2000); United States v. Nicolaou, 180 F.3d

565, 573-74 (4th Cir. 1999). Had he not abused a position of

trust, he might not have obtained any money to launder.

United States v. Cruz, 317 F.3d 763 (7th Cir. 2003), is

pertinent. The defendant was charged with bank fraud, but
No. 04-1053 5

the trust she abused to facilitate her commission of that

offense was that of her employer; nevertheless we held that

“courts may apply the abuse of trust enhancement even if

the defendant did not occupy a position of trust in relation

to the victim of the offense of conviction.” Id. at 766. We

have a parallel situation here: Scott abused his employers’

trust, but they were not, in any very direct sense at any rate,

the “victims” of his money laundering.

Scott also contends that he should not have been required

to pay restitution of some $600,000 for audit expenses

incurred by the two employers whom he defrauded. After

his crimes were discovered, the employers, in an effort to

determine how much he had stolen from them, conducted

elaborate but not, so far as appears, extravagant audits of

their books. The applicable statute, the Mandatory Victims

Restitution Act, 18 U.S.C. § 3663A, requires the sentencing

court, “in the case of an offense resulting in damage to or

loss or destruction of property of a victim of the offense,” to

order the defendant to return the property to the owner or,

if that is infeasible, to pay the owner (the victim) an amount

equal to the loss of value of the property. Id., § 3663A(b)(1).

This measure of relief is less generous than common law

damages, since it does not extend to consequences beyond

the diminution of the value of the property stolen or damaged, United States v. Seward, 272 F.3d 831, 839-40 (7th Cir.

2001); United States v. Simmonds, 235 F.3d 826, 830-32 (3d

Cir. 2000); United States v. Richard, 234 F.3d 763, 771 (1st Cir.

2000); United States v. Mikolajczyk, 137 F.3d 237, 245-46 (5th

Cir. 1998)—consequences that could easily exceed that diminution. (Suppose the damage to the property foreseeably

precipitated the owner into bankruptcy.) This distinction is

consistent with the historic distinction between restitution

and damages, the former originally referring to the restoration of something that the defendant had taken from the
6 No. 04-1053

plaintiff, United States v. Daddato, 996 F.2d 903, 905 (7th Cir.

1993); United States v. Fountain, 768 F.2d 790, 800-01 (7th Cir.

1985); Andrew Kull, “Rationalizing Restitution,” 83 Cal. L.

Rev. 1191, 1192 (1995); Douglas Laycock, “The Scope and

Significance of Restitution,” 67 Tex. L. Rev. 1277, 1279-80

(1989), including a profit. Great-West Life & Annuity Ins. Co.

v. Knudson, 534 U.S. 204, 214 n. 2 (2002); Williams Electronics

Games, Inc. v. Garrity, 366 F.3d 569, 576 (7th Cir. 2004);

United States v. Daddato, supra, 996 F.2d at 905; United States

v. Gordon, 393 F.3d 1044, 1051-52 (9th Cir. 2004). The audit

expense, though a loss to Scott’s employers, was not a gain

to him. But it was a form of damage to the employers’

property. Suppose money was stolen from a bank and

eventually returned, but the bank incurred a bookkeeping

cost in determining whether the entire amount stolen had

been returned. That cost would be a diminution in the value

of the bank’s property, caused by the theft, and would

therefore be a proper item for restitution. See United States

v. Donaby, 349 F.3d 1046, 1051-54 (7th Cir. 2003); United

States v. Rhodes, 330 F.3d 949, 953-54 (7th Cir. 2003); United

States v. Hayward, 359 F.3d 631, 642 (3d Cir. 2004). This case

is no different.

Focusing on the difference between the loss to the victim

and the damage to the victim’s property creates a more

precise line between criminal restitution and common law

damages than the more common distinction suggested in

the cases between “direct” and “consequential” damages.

E.g., United States v. George, No. 04-3099, 2005 WL 746552, at

*3-4 (7th Cir. April 4, 2005); United States v. Seward, supra,

272 F.3d at 839; United States v. Barton, 366 F.3d 1160 (10th

Cir. 2004); United States v. Quillen, 335 F.3d 219, 222-24 (3d

Cir. 2003); cf. United States v. Lowell, 256 F.3d 463 (7th Cir.

2001); United States v. Gamma Tech Industries, Inc., 265 F.3d

917, 927-28 (9th Cir. 2001). The line between criminal res-
No. 04-1053 7

titution and common law damages is important to maintain.

Not only is the language of the Mandatory Victims Restitution Act dissimilar to that of the Uniform Commercial Code,

and “restitution” itself no synonym for common

law damages. In addition, to blur the line would create a

potential issue under the Seventh Amendment because the

amount of criminal restitution is determined by the judge,

whereas a suit for damages is a suit at law within the

amendment’s meaning. E.g., Kelly v. Robinson, 479 U.S. 36,

53 n. 14 (1986); Lyndonville Savings Bank & Trust Co. v. Lussier,

211 F.3d 697, 702 (2d Cir. 2000). And it would complicate

criminal sentencing unduly—and unnecessarily; the rare

crime victim who has a real shot at collecting common law

damages (rare because few convicted criminal defendants

are affluent) can bring a tort suit. S. Rep. No. 104-179, 104th

Cong., 1st Sess. 18 (1995), 1996 U.S.C.C.A.N. 924, 931.

Not that the distinction between direct and consequential

damages is wholly unrelated to the distinction between criminal restitution and common law damages. If A tortiously

damages B’s factory, the cost of repairing the factory is direct damages; B’s loss of business while the factory is shut

down awaiting repairs is consequential damages. E.g., Cooper

Power Systems, Inc. v. Union Carbide Chemicals & Plastics Co.,

Inc., 123 F.3d 675, 681 (7th Cir. 1997); Clark’s Pork Farms v.

Sand Livestock Systems, Inc., 563 N.E.2d 1292, 1297-98 (Ind.

App. 1990); 1 Dan B. Dobbs, Law on Remedies §§ 3.3(3), (4),

pp. 298, 302 (2d ed. 1993). The former would be recoverable

in a criminal prosecution, the latter not. In our preferred

terminology, the first type of damage to the factory impairs

the value of B’s property; the second injures B.

The audit fees are on the damage-to-property side of

the line. It is true that most (though not all) cases classify

attorneys’ fees incurred by a crime victim, which might

appear to be the same kind of expense as audit fees, as “con-
8 No. 04-1053

sequential damages” that are therefore ineligible for criminal restitution. United States v. Seward, supra, 272 F.3d at 839;

United States v. Arvanitis, 902 F.2d 489, 497 (7th Cir. 1990);

United States v. Onyiego, 286 F.3d 249, 256 (5th Cir. 2002);

United States v. Patty, 992 F.2d 1045, 1049 (10th Cir. 1993);

United States v. Mullins, 971 F.2d 1138, 1146-48 (4th Cir.

1992); but see United States v. Akbani, 151 F.3d 774 (8th Cir.

1998). (The issue was left open in United States v. Richard,

supra.) But this just illustrates the unhelpfulness of the

“direct-consequential” distinction as a guide to interpreting

the criminal restitution statutes. The real reason for denying

an award of attorneys’ fees under these statutes is that

attorneys’ fees are not classified as damages; the decision to

award or (the traditional Anglo-American rule) not to

award them is a matter of procedural rather than remedial

law. Zapata Hermanos Sucesores, S.A. v. Hearthside Baking Co.,

313 F.3d 385, 388-89 (7th Cir. 2002); Midwest Grain Products

of Illinois, Inc. v. Productization, Inc., 228 F.3d 784, 792 (7th

Cir. 2000). Consistent with this analysis, United States v.

Mikolajczyk, supra, 137 F.3d at 245-46, allowed an award of

attorneys’ fees as restitution because “Kearns’s [the defendant’s co-conspirator] action of bringing a lawsuit against

Ford was part of the scheme to defraud [Ford], the offense

that is the basis of Koehler’s conspiracy conviction” and so

“Ford’s costs of defending the lawsuit were a direct and

mandatory result of Kearns’s act in furtherance of the

conspiracy, not a voluntary action taken by Ford to recover

property or damages from Kearns, Koehler, or a third

party.” The lawsuit was an effort to wrest property from the

victim, and the victim’s legal expenses were a measure of

the diminution in the value of that property brought about

by the fraud.
No. 04-1053 9

To summarize, the conviction and the award of restitution

are affirmed, but the judgment is vacated and the case

remanded for resentencing.

A true Copy:

Teste:

 _____________________________

Clerk of the United States Court of 

Appeals for the Seventh Circuit 

USCA-02-C-0072—4-25-05