United States Court of Appeals,

Eleventh Circuit.

Nos. 94-2231, 94-2232.

UNITED STATES of America, Plaintiff-Appellee,

v.

APEX ROOFING OF TALLAHASSEE, INC., Defendant-Appellant.

UNITED STATES of America, Plaintiff-Appellee,

v.

Lisa Jean DOXSEE, Defendant-Appellant.

April 17, 1995.

Appeals from the United States District Court for the Northern

District of Florida. (No. 93-03109/LAC), Lacy A. Collier, Judge.

Before BIRCH and DUBINA, Circuit Judges, and JOHNSON, Senior

Circuit Judge.

PER CURIAM:

This appeal presents the issue of whether restitution is

appropriate when the victim of the crime charged has sustained no

financial loss. The district court awarded restitution to the Navy

from the contracting individual and corporate defendants resulting

from a terminated work contract, although the Navy incurred no

financial loss. We VACATE and REMAND.

I. BACKGROUND

Defendant-appellant Lisa Jean Doxsee was president, treasurer

and secretary of corporate defendant-appellant Apex Roofing of

Tallahassee, Inc. ("Apex"), a Florida corporation. Approximately,

September, 1991, the United States Department of the Navy awarded

Apex the contract to replace or repair the roofs on two buildings

at Naval Air Station, Whiting Field in Milton, Florida. The
 1

Although during the course of performing the contract, Apex

received some materials and/or services on credit from other

companies, the greatest amount was owed to Huls. 

 2The Navy made the following payments to Apex based on the

percentage of the work completed: (1) $43,005.00 on March 12,

1992, based on 42% completion, (2) $8,660.00 on March 31, 1992,

based on 50% completion, (3) $20,199.00 on May 26, 1992, based on

67% completion, and (4) $11,000.00 on June 5, 1992, based on 75%

completion. 

 3On the first two payments, this certificate was signed by

Apex's vice-president; on the last two payments, the certificate

original contract price was $103,000.00.

Apex commenced work approximately the end of January, 1992.

It ordered on credit most of the materials for the project from

Huls America, Inc. ("Huls") in New Jersey.1 The total amount was

approximately $35,000.00.

The Navy paid Apex as the work progressed. To receive a

progress payment, the Navy required Apex to submit an invoice

documenting the costs of materials and labor for the project to

date. The Navy also required Apex to certify that "[p]ayments to

subcontractors and suppliers have been made from previous payments

received under the contract, and timely payments will be made from

the proceeds of the payment covered by this certification." When

this documentation was submitted, the Navy's job site inspectors

would verify the proper percentage of the contract work that had

been completed, and the Navy issued a progress payment based on

that percentage.

During Apex's performance on the contract, the Navy made four

progress payments to Apex.2

 Before receiving each of these

payments, Apex submitted a certificate stating that the

subcontractors or suppliers had been paid. 3

 The Navy paid Apex
was signed by Doxsee. 

 4We are cognizant that $82,864.00 is more than 75% of the

original contract price of $103,000.00, a difference of

$5,614.00. Nevertheless, the Navy determined the progress

payments to Apex based on its evaluation of the percentage of the

contract work completed. The Navy also did not file a claim for

having paid for more than 75% of the contract price and receiving

less than that percentage of work completed by Apex. 

Accordingly, we will use the Navy's determination of 75% as being

the amount of work completed on the project by Apex. 

 5The Navy was aware of this assignment. 

$82,864.00 based on completion of seventy-five percent of the

project.4

Approximately at the time of the last payment, Apex stopped

work on the contract. The immediate cause of the work stoppage was

the discovery of asbestos in the area where Apex had been working.

This would have required a modification of the contract to account

for the removal of the asbestos.

Additionally, Apex was experiencing serious financial

difficulties. Payments from the Navy were assigned to Apex's bank

to satisfy loans that had been made to Apex.5

 Because of cash flow

problems, Doxsee was using available cash to pay her employees and

for necessary expenses. Finally, Apex could not pay its employees

and, consequently, could not continue to work on the Navy project

or any other project. No subcontractors, however, were unpaid.

Doxsee filed for personal bankruptcy.

Apex did not stop work on the Navy contract because of any

action taken by any supplier of materials; essentially Apex had

the necessary materials to finish the project at the work site.

When Apex could not finish the project, the Navy terminated the

contract and completed the work with its own personnel. The Navy
 6

It was determined that Apex still owed $32,932.59 to Huls,

$2,296.07 to Lowes, $1,060.00 to Burleson Van Lines, and

$1,414.96 to Clark Sand Company. Apex's bonding company,

International Fidelity Insurance Company, subsequently paid Huls

and Lowes a total of $35,229.63 pursuant to the payment bond that

Apex had purchased before being awarded the contract. The

bonding company did not pay Burleson Van Lines and Clark Sand

Company a total of $2,474.96. 

 7

The PSR recommended that $35,229.63 should go to Apex's

bonding company, $1,060.00 to Burleson Van Lines, and $1,414.96

to Clark Sand Company. This was total restitution in the amount

of $37,704.59. The Navy did not file a claim for the cost to

complete the project. 

 8Doxsee and Apex argued that determining the amounts owed to

the bonding company and to suppliers was a civil matter between

Apex and these companies. Doxsee and Apex contended that they

had not been charged with misappropriating funds that should have

gone to suppliers, but with not telling the Navy that suppliers

had not been paid. 

even used materials that had been left at the work site by Apex.

After Apex stopped work on the contract, the Navy learned that Apex

had not paid all of its suppliers as it had certified before

receiving each progress payment.6 Doxsee and Apex were indicted

for this offense in violation of 18 U.S.C. § 1001 and pled guilty.

The presentence report ("PSR") recommends that, if Doxsee and

Apex were ordered to make restitution, then that restitution should

go to Apex's bonding company and suppliers.7 Because they had pled

guilty to submitting a false certification to the Navy, Doxsee and

Apex objected to their PSRs and contended that the Navy was the

only victim.8

 Further, they argued that no restitution was owed to

the Navy because it had suffered no loss as a result of the

offense. They maintained that they had earned all the funds

received from the Navy because work had been performed on the

contract of equal value.

Doxsee also raised the issue of her inability to pay
restitution. Responding to the initial PSR recommending a fine and

restitution, Doxsee stated that she was financially unable to pay

a fine or restitution. While the amended PSR recognizes that

"Doxsee may not have the financial ability to pay the bonding

company," it nevertheless states that "she definitely has the

ability to pay the individual victims in the instant offense."

Doxsee PSR at 25, ¶ 99. Concerning Apex's ability to make

restitution, the PSR notes that the corporation had been dissolved

and did "not have the financial ability to make restitution in this

case." Apex PSR at 13, ¶ 51.

At sentencing, the district court specifically found that

"there was not more than one victim," R3-45, and that, when "the

crime was committed the United States Government was the victim,"

R3-64. Nevertheless, the district court ordered Doxsee and Apex to

pay restitution of $37,704.59 each, the total amount owed to the

bonding company and suppliers, not to the Navy. While the district

judge appeared to recognize that the Navy had not suffered actual

loss in this amount, R3-63-65, he seemed to reason that the Navy

potentially could lose this amount if the unpaid suppliers

repossessed the roofing work completed or materials because they

had not been paid. At sentencing, the district judge expressed his

concern for potential loss to the Navy in response to Doxsee's

attorney's explanation that the Navy had received the work for

which it had paid:

MR. KEITH: My point is at the time, the money she received

for this contract of 80 something thousand dollars, the Navy

received the same amount of work from Apex or Ms. Doxsee.

THE COURT: That's where we're talking about the facts, again.

They did not, because in the Court's opinion they don't own
 9

The court further suggested that the Navy may have a

responsibility to use the restitution to reimburse the bonding

company and the suppliers. R3-60. 

the roof that's put up there and the suppliers could come in

and unshingle the roof and take it away and that is the loss.

So the Government was in fact out, and unless somebody paid

the supplier, then they still own the roof, they can come get

it and take it back.... They have the right to do that, so

that's the loss.

R3-65 (emphasis added).9

Although the district judge recognized that neither Doxsee nor

Apex had the ability to pay a fine, R3-2,6, he nevertheless ordered

restitution of $37,704.59 from each:

[A]s to Apex Roofing.... I do find there is no need to place

the corporation on probation because it has been dissolved.

I do find there's limited, if any, financial ability, and

therefore a fine will be waived. However, I am going to order

restitution, for what it's worth, in the amount of

[$]37,704.59....

[A]s to defendant Lisa Doxsee.... it's the judgment of

the Court that you be committed to the custody of the Bureau

of Prisons to be imprisoned for a term of six months.... And

upon release be placed on a period of supervised release for

a period of three years.... In addition, [Doxsee] shall make

restitution in the amount of $37,704.59. That will be due and

payable to the United States Government and their

responsibility to determine the ultimate receiver of that

amount.

R3-59-60 (emphasis added). In ordering restitution of both Doxsee

and Apex, the district judge gave no reviewable findings of how

Doxsee or Apex could actually pay the restitution designated.

Instead, the district judge represents that "I'm trying to send a

message to all of those that deal with the United States

Government. The Government is not an entity that you take

advantage of." R3-66. Doxsee and Apex timely appealed their

respective sentences regarding restitution to the Navy.

II. DISCUSSION
 We review a district court's order of restitution for abuse

of discretion. United States v. Husky, 924 F.2d 223, 225 (11th

Cir.), cert. denied, 502 U.S. 833, 112 S.Ct. 111, 116 L.Ed.2d 81

(1991). Using restitution as part of a sentence is governed by the

Victim and Witness Protection Act ("VWPA"), 18 U.S.C. §§ 3663-3664.

Under 18 U.S.C. § 3663(a)(1), a district court is authorized to

order a defendant to make restitution to any victim of the criminal

offense for which the defendant is convicted. In determining

whether to order restitution under section 3663 of this title and

the amount, the district 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) (emphasis added). We have determined that the statute

directs the sentencing court to consider not only the victim's

injury, but also the financial condition and earning ability of the

defendant to pay restitution. United States v. Barnette, 10 F.3d

1553, 1556 (11th Cir.), cert. denied, --- U.S. ----, 115 S.Ct. 74,

130 L.Ed.2d 28 (1994). Consequently, we have required that the

district court evaluate a defendant's financial situation and

ability to pay before determining the restitution amount. United

States v. Cobbs, 967 F.2d 1555, 1558 (11th Cir.1992) (per curiam);

United States v. Stevens, 909 F.2d 431, 435 (11th Cir.1990).

Significantly, under Hughey v. United States, 495 U.S. 411,

413, 110 S.Ct. 1979, 1981, 109 L.Ed.2d 408 (1990), we have held

that the "district court is authorized to order restitution only
 10Before Apex was awarded the contract to repair or replace

two roofs for the Navy at Whiting Field for $103,000.00, it had

to purchase a performance bond and a payment bond. "

"[P]erformance bonds' guarantee that the contractor will complete

the project in accordance with the specifications; and "payment

bonds' ensure that those who furnish labor and materials for the

project will be paid." See United States v. Stern, 13 F.3d 489,

for the loss caused by the specific conduct underlying the offense

of conviction." Cobbs, 967 F.2d at 1559 (emphasis added); see

United States v. Young, 953 F.2d 1288, 1289 (11th Cir.1992) ("A

court therefore exceeds the scope of its authority under the VWPA

when it orders restitution for uncharged offenses." (emphasis

added)); United States v. Stone, 948 F.2d 700, 704 (11th Cir.1991)

("[W]e hold that a restitution order under the VWPA may not exceed

the loss attributable to the specific conduct that is the basis of

the offense of conviction." (emphasis added)). "When the offense

involves making a false statement, the inquiry to determine loss

must focus on the amount of loss related to the false statement....

The task of the district court is to determine the amount of loss

that is attributable to [the defendant's] criminal conduct."

United States v. Wilson, 980 F.2d 259, 262 (4th Cir.1992). The

sentencing court "may not authorize restitution even for like acts

significantly related to the crime of conviction." Young, 953 F.2d

at 1289.

 In this case, Doxsee and Apex pled guilty to making false

statements to the Navy in violation of 18 U.S.C. § 1001. The

district court found that the Navy was the only victim of this

crime. The $37,704.59 restitution amount, however, for both Doxsee

and Apex represents the losses to Apex's bonding company and

suppliers and not to the Navy.10 This is not the federal crime to
491 n. 1 (1st Cir.1994). 

 11Since Apex could not have continued work on the contract

at the time that stoppage occurred because of the discovery of

asbestos, the Navy essentially terminated the contract for

convenience and not for default. Thus, the reason Apex stopped

work on the contract was not because it had not paid its

suppliers or had certified falsely that it had paid its

suppliers, but because of the asbestos problem. The Navy

apparently terminated the contract because it wanted to complete

the project without the delays that would have been occasioned by

modifying the contract because of finding asbestos. 

which Doxsee and Apex pled guilty.

Indeed, the Navy appears to have sustained no loss whatsoever,

financial or otherwise. The Navy paid Apex on the performance

contract only for the percentage of the work that had been

completed or $82,864.00 for seventy-five percent of the work

instead of $103,000.00 for a hundred percent of the work. When

Apex had to stop work on the contract because of the asbestos

problem and its financial difficulties, the Navy terminated the

contract11 and completed the project using its own personnel and

materials left at the job site by Apex. The Navy clearly received

a benefit of value that it considered equal to the amount of money

that it paid to Apex. To uphold the district court's restitution

orders of $37,704.59 for Doxsee and Apex, we would have to find

that the Navy suffered an actual loss in these amounts as a result

of the offense. If the Navy were to receive $37,704.59 from either

Doxsee or Apex, then it would have a windfall.

The district judge's speculation as to potential loss to the

Navy from repossession of materials by suppliers is problematic for

two reasons. First, the $37,704.59 restitution amount is the

alleged loss to the bonding company and suppliers; the actual loss
 12The suppliers' recourse would be to seek payment from the

bonding company pursuant to the payment bond. See United States

ex rel. Pertun Const. Co. v. Harvesters Group, Inc., 918 F.2d 915

(11th Cir.1990) (discussing the right of suppliers of a

government contractor to seek payment from the bonding company

under the Miller Act because federal buildings are exempt from

liens). In this case, Apex's bonding company paid two suppliers

a total of $35,229.63. The other two unpaid suppliers never

filed a claim with the bonding company. Consequently, the

bonding company and the two suppliers suffered a loss because of

Apex's financial problems and not because of conduct violating 18

U.S.C. § 1001. The criminal offense is not that Apex failed to

pay its suppliers. That is a civil matter between Apex, the

suppliers, and the bonding company. The criminal offense is that

Apex told the Navy that it had paid its suppliers when it had

not. Any loss to the suppliers or the bonding company was not

caused by this offense and cannot be considered a loss to the

Navy for Sentencing Guidelines purposes. 

 13Ironically, at sentencing a discussion occurred concerning

negotiations by representatives of Apex with the Navy regarding

the possibility that the Navy still owed Apex money for work

performed on the contract. R3-48. Any money owed by the Navy to

Apex would be paid to the bonding company and not to Apex. 

to the Navy would have to be determined when and if such

repossession were ever found to be authorized under applicable law,

which we doubt would occur. Second, we are unconvinced that

suppliers would or could gain access to a secure naval base for the

purpose of exercising self-help, even if available. By recognizing

that the Navy was the only victim with no apparent financial loss,

the district judge could not award restitution to the Navy based on

amounts owed by Apex to its bonding company and suppliers.12 Thus,

the restitution award in any amount to the Navy for Doxsee and Apex

was an abuse of discretion.13

 Even if restitution were appropriate, the district court

further erred by not evaluating the financial condition and ability

to pay of Doxsee and Apex. Although the judge observed that

neither Doxsee nor Apex had the ability to pay a fine, he
 14Under the Sentencing Guidelines, a court can order an

organization to pay restitution only if it is authorized under 18

U.S.C. §§ 3663-3664. U.S.S.G. § 8B1.1(a)(1). 

inconsistently required each to pay a sizeable restitution amount.

While an indigent defendant can be ordered to pay restitution if it

appears that there is a future ability to earn or acquire money,

Stevens, 909 F.2d at 435, a dissolved corporation does not have

such ability.14 The district judge "apparently focused only on the

amount of loss to the victim[s]" other than the Navy, the only

victim covered by the offense of conviction, and did not consider

Doxsee and Apex's future ability to pay the ordered restitution as

required by section 3664(a). United States v. Newman, 6 F.3d 623,

631 (9th Cir.1993).

III. CONCLUSION

Appellants Doxsee and Apex contend that they erroneously were

ordered to make restitution to the Navy for false certification

that suppliers had been paid on a roofing contract. Because the

Navy suffered no financial loss and paid Apex on its roofing

contract only for the benefit that it determined that it received,

we VACATE and REMAND with instructions to eliminate the respective

restitution orders for the reasons discussed herein.