Source: http://nj.findacase.com/research/wfrmDocViewer.aspx/xq/fac.19950821_0040023.C03.htm/qx
Timestamp: 2017-01-18 10:06:55
Document Index: 239852002

Matched Legal Cases: ['§ 2', '§ 2', '§ 1032', '§ 2', '§ 2', '§ 2', '§ 2', '§ 2', '§ 1', '§ 1', '§ 2', '§ 2']

| U.S. v. Dickler
U.S. v. Dickler
UNITED STATES OF AMERICAv.SIDNEY J. DICKLER RICHARD R. PETRUCCI SIDNEY J. DICKLER APPELLANT IN NO. 94-3517 RICHARD R. PETRUCCI APPELLANT IN NO. 94-3518
On Appeal From the United States District Court For the Western District of Pennsylvania. (D.C. Crim. Action Nos. 94-cr-00030-1 and 94-cr-00030-2).
Action Repossession was under contract with the victim banks to repossess cars when a car owner defaulted on his or her car loan, or when a lease terminated and the car was not voluntarily returned. Under its agreement with the banks, Action Repossession was to repossess and store the vehicle, prepare a condition report on the repossessed vehicle, and solicit three bona fide bids for the vehicle from prospective buyers.*fn1 The condition report and bids were then to be sent to the banks, who would either accept one of the bids or reject them all. If the bids were rejected, the banks might sell the car at auction. If one of the bids was accepted, the bank would send the vehicle title and bill of sale to Action Repossession, who was then expected to transfer title to the vehicle to the successful bidder on the bank's behalf.
The defendants' fraudulent scheme involved submitting false bids to the banks. Instead of soliciting bona fide bids from used car dealers or individuals, Dickler and Petrucci submitted bids with the names of fictitious bidders with the intent that Action Motors would purchase the car for resale whenever a false bid was accepted. Thus, under the scheme, when the bank accepted one of the bids and sent the title and bill of sale to Action Repossession, Action Motors would acquire the vehicle instead of the fictitious bidder and, after repairing and "detailing" it,*fn2 would then resell the vehicle for a profit.
In compliance with Federal Rule Criminal Procedure 11(f), the court, before accepting the pleas of Dickler and Petrucci, asked the government to summarize its evidence as to Count Three.*fn3 The government summarized the defendants' false bid scheme. It submitted documentation to explain how the scheme worked, including a bid sheet, a condition report, a bill of sale, odometer disclosure statement, and an internal record of Action Possession indicating the purchase, repair, and retail sale of the vehicle. In the course of explaining the illustrative documentation to the court, the government indicated that the scheme included not only the preparation and submission of bids from fictitious bidders but also the preparation and submission of false condition reports. Specifically, the government represented that it had spoken with the former lessee of the vehicle described in the sample condition report, who had explained that the vehicle had been in better condition when it was repossessed than represented on the condition report (e.g., he refuted that the tires were poor, that the car had no hubcaps, and that the tail light was broken), and that the signature purporting to be his on the condition report was not. Each defendant, upon questioning by the court, agreed with the government's factual summary and entered his plea.
A PSR was subsequently prepared for each defendant. In relevant part, the PSRs contained the following factual allegations and legal Conclusions: the defendants would order employees to falsify the condition reports being sent to the financial institutions, the defendants' fraud caused the banks to lose monies on the vehicles because the submitted bids were "low balled," the defendants had obtained approximately $386,223 from the banks and the RTC through the submission of false bids (calculated by deducting the bid price and cost for detailing and repairing the vehicles from the price at which Action Motors sold the repossessed vehicles), and the amount they obtained represented the amount of loss for purposes of calculating the offense level under U.S.S.G.
§ 2F1.1(b).
Testimony as to the banks' method for evaluating bids on repossessed vehicles was presented by James Sweeney, a former collection manager for Atlantic Financial. Sweeney explained that at the time an automobile was repossessed, the bank would determine a high and low bid for the vehicle. The high bid would be eighty-five percent of the National Automobile Dealers Association ("NADA") book's average value for that car. To obtain the low bid figure, the bank would reduce that figure based on the vehicle's condition and mileage, as represented in the vehicle condition reports and accompanying photographs. Sweeney testified that it was generally known in the repossession bid industry that banks valued their repossessed vehicles in this manner and thus that banks did not generally receive bids for more than eighty-five percent of "book" value. Sweeney further explained that once the statutory no-bid period passed, it was important to obtain and accept a reasonable bid as quickly as possible in order to avoid mounting storage charges and further erosion of the bid price.*fn4
The defendant also presented evidence to explain why their resale price was generally significantly higher than their purchase bid price. Petrucci testified that all of the repossessed vehicles purchased from the banks and the RTC were detailed, and that many were also repaired before they were resold. Various witnesses testified that cosmetic and repair work increases the price of a used vehicle disproportionately to the cost of the work. Moreover, cars sold by used car dealers sell at higher prices than repossessed vehicles because repossessed vehicles are purchased on an "as is" basis and cannot be test-driven.*fn5
The district court did not find the defendants' arguments and evidence persuasive. The court rejected all of the defendants' substantive objections to the PSR's loss calculation and adopted the PSR's focus on the defendants' resale prices less the amount they paid for the vehicles and their costs for detailing work and repairs. The court allowed only a deduction for computational errors of $34,765.50, resulting in a final loss calculation of $351,457.50. Thus, under U.S.S.G. § 2F1.1, the court added nine levels to the base offense level of six because the loss involved in the offense was greater than $350,000 and less than $500,000. That figure was increased another two levels for more than minimal planning, and increased an additional two levels for aggravating role, resulting in a total offense level of nineteen. That figure was then reduced three levels for acceptance of responsibility, for a total adjusted offense level of sixteen. This offense level, with a criminal history category of I, corresponded to a sentencing range for each defendant of twenty-one to twenty-seven months. Within that range, the court sentenced Dickler to twenty-four months of imprisonment and Petrucci to twenty-one months. These timely appeals followed.*fn6
The defendants do not challenge this legal Conclusion as a general proposition.*fn7 Rather, they insist that there were special circumstances here that should relieve them of the consequences that would ordinarily flow from an admission at a plea hearing. First, according to the defendants, they did not unambiguously admit that their scheme involved falsified condition reports. Second, they claim surprise, pointing out that the indictment alleged only the submission of bids from fictitious bidders and insisting that they were "blindsided" by the government at the plea hearings. We cannot accept either contention.
The defendants pleaded guilty to a violation of 18 U.S.C. § 1032(2).*fn8 Because their conduct involved a fraudulent bidding scheme, the court sentenced defendants under U.S.S.G. § 2F1.1, the guideline provision applicable to crimes of fraud and deceit. This guideline section provides for a base offense level of six with graduated enhancements of the offense level according to the size of "the loss" to the victim attributable to the fraudulent conduct. The court determined their loss to be $351,457.50 which added nine levels.
While the general definition section of the Sentencing Guidelines does not define "the loss," the commentary to § 2F1.1 discusses this concept.*fn9 Application note 7 states in relevant part:
Valuation of loss is discussed in the Commentary to § 2B1.1 (Larceny, Embezzlement, and Other Forms of Theft).*fn10 As in theft cases, loss is the value of the money, property, or services unlawfully taken; it does not, for example, include interest the victim could have earned on such funds had the offense not occurred. 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. Frequently, loss in a fraud case will be the same as in a theft case. For example, if the fraud consisted of selling or attempting to sell $40,000 in worthless securities, or representing that a forged check for $40,000 was genuine, the loss would be $40,000.
[The defendant] did not "take" $13.75 million for nothing, as a thief would. Furthermore, all thefts involve an intent to deprive the victim of the value of the property taken. . . .The same is not always true for fraud: some fraud involves an intent to walk away with the full amount fraudulently obtained, while other fraud is committed to obtain a contract the fraud perpetrator intends to perform.
In applying this flexible, fact-driven concept of loss, we have thus held that in situations where value passes in only one direction -- from the victim to the perpetrator -- the perpetrator's gain will normally reflect the victim's loss. On the other hand, where value passes in both directions, we have held that the victim's loss will normally be the difference between the value he or she gave up and the value he or she received (or, if greater, the difference between what the perpetrator intended the victim to give up and to receive).
Even where value flows in both directions, if it is not feasible to estimate with reasonable accuracy the victim's loss or intended loss, we have indicated that a sentencing court may look to the perpetrator's gain as a surrogate for the victim's loss. United States v. Badaracco, 954 F.2d 928, 937-38 and n.10 (3d Cir. 1992) (citing Kopp, 951 F.2d at 531). Where property is received by the perpetrator of a fraud and promptly resold without alteration, for example, the proceeds from the resale will normally approximate the market value of the property when the victim parted with it; in such a situation, the defendant's gain can rationally serve as a surrogate for the victim's loss. The guideline provision governing fraud offenses refers to the victim's loss, however, and the defendant's gain may be used only when it is not feasible to estimate the victim's loss and where there is some logical relationship between the victim's loss and the defendant's gain so that the latter can reasonably serve as a surrogate for the former. Without this logical connection, the defendant's gain cannot be said to be an "estimation" of actual loss, and as our precedent and the Sentencing Guidelines make clear, it is a reasonable estimation of loss, not an alternative, unrelated value, that the sentencing court must ascertain. U.S.S.G. § 2F1.1 cmt. (n.8) ("For the purposes of subsection (b)(1), the loss need not be estimated with precision. The court need only make a reasonable estimate of the loss, given the available information. . . . The offender's gain from committing the fraud is an alternative estimate that ordinarily will underestimate the loss.") (emphasis added); cf. United States v. Holloman, 981 F.2d 690 (3d Cir. 1992) (upholding use of defendant's gain as surrogate for victim's loss where value to defendant of stolen cancelled checks in counterfeiting scheme reflected bank's potential loss), cert. denied, 125 L. Ed. 2d 695, 113 S. Ct. 3002 (1993).
In Kopp, we specifically rejected the use of the defendant's gain as "an alternative estimate, when . . . the true loss is measurable." 951 F.2d at 530 (emphasis removed). Although we have subsequently refined the circumstances in which Kopp 's specific actual loss calculation is applicable, we have not strayed from the concept that the loss calculation should represent the fraud victim's actual loss. E.g., United States v. Shaffer, 35 F.3d 110, 114 (3d Cir. 1994) (distinguishing Kopp 's focus on calculating victim's actual loss at the time of sentencing and holding that in check kiting scheme, loss should be calculated at time crime is detected because this more accurately reflects the bank's actual loss from the unsecured fraudulent "loans"); United States v. Mummert, 34 F.3d 201 (3d Cir. 1994) (upholding face value of loan as reasonable calculation of bank's actual loss where no assets had been pledged against the loan and no payments had been made thereon); see also United States v. Daddona, 34 F.3d 163, 170-71 (3d Cir.) (holding that actual loss may not include developer's costs to complete construction project absent evidence linking those costs directly to defendant's conduct in fraudulently securing construction bonds), cert. denied, 115 S. Ct. 515 (1994).
It is true, as the district court found, that the defendants' conduct with respect to the submission of false condition reports makes it difficult to now determine one factor in the evaluation formula -- the condition of each particular vehicle at the time of repossession. Because the condition reports cannot be relied upon as evidence of the vehicles' actual condition, we acknowledge that the defendants' conduct has impaired the district court's ability to estimate the banks' losses in particular transactions.
Defendant was the agent of the institutions and had an obligation to solicit bids to obtain the highest possible price for the cars. Defendant did not fulfill this obligation and solicited no independent bids. (Defendant's position at P9). Rather, defendant's company purchased the cars, hiding its true identity. Thus, the fair market value of the cars is unascertainable because of defendant's own conduct. The fact that the institutions may have received a higher percentage of the cars' appraisal value from defendant than they received, on average, from other purchasers is of little relevance. The cars that defendant purchased may have been in better condition than other cars that the financial institutions sold.
We confess that our study has left us without confidence that we understand exactly what the "appraised value" refers to and how it was derived. At the same time, the record appears to indicate that the "appraised value" on Horizon's books came from a source not dependent on Action's condition reports, was regularly recorded on Horizon's books, and was presumably relied upon by it for some business purpose.*fn11 While it is not a necessary inference, we believe a trier of fact could infer from this information that the "appraised value" of the various vehicles was determined in some reasonably consistent manner. If one draws this inference, this data concerning a substantial sample of the relevant universe of transactions appears to indicate that Horizon received more from the vehicles it sold to Action Motors than it received from its other sales in the "as is" market. Unless one is willing to assume that the sales to others were also tainted with fraud, this would suggest that the sales to defendants, on average, were not at prices below market value in the "as is" market.
The district court found the argument regarding the defendants' additional expenses "without merit" because the "focus of the Court should be on the loss to the victim, not the costs of committing the crime to the defendant." App. at 165. "Even if the defendants incurred these costs," the court reasoned, "they are not clearly connected to the actual losses sustained in this case, which is the lost value on the cars that the financial institutions sold to the defendants." Id.
Having determined to look to the defendants' gain as a surrogate for the victim's loss, we believe the district court was not entitled to give credit for certain expenses that reduced the defendants' gain and ignore others that would have the same effect on the ground that the latter were not clearly connected to the bank's loss.*fn12 In short, we find it impossible to logically distinguish between the defendants' repair costs and the commissions and auction costs they paid in order to realize their gain.*fn13
The conduct underlying the indictment involved two periods: the period during which defendants submitted false bids to Horizon (1985 to June 1989) and Atlantic (1985 to January 1990), and the period during which they submitted false bids to the RTC who had been appointed custodians of the failed banks (June 1989 or January 1990 to December 1992). Counts One and Two of the indictment, which were dismissed at sentencing, were based on the conduct during the earlier period and Count Three, to which the defendants pleaded guilty, was based on the conduct during the latter period. There is no question that the defendants' actions in defrauding the banks during the early period is "relevant conduct" within the meaning of the Sentencing Guidelines and thus that any loss attributable to that conduct may be used to calculate the defendants' offense level under U.S.S.G. § 2F1.1.*fn14 The defendants argue, however, that because the statute underlying their guilty pleas, 18 U.S.C. 1032(2), was not enacted until November 29, 1990, their acts vis-a-vis the RTC prior to that date cannot be considered relevant conduct for purposes of determining loss. The district court regarded all sales as relevant conduct without finding that the bids during the challenged period were criminal conduct. If the defendants are right, this would require a $101,562.23 reduction in the district court's loss calculation.
Although this court has not yet addressed the question, other courts of appeals have concluded that "relevant conduct" within the meaning of § 1B1.3 must be criminal conduct. See United States v. Sheahan, 31 F.3d 595, 600 (8th Cir. 1994) ("We agree that the relevant conduct the sentencing court should consider in the section 2F1.1 loss calculation is that which is attributable to the defendant's 'criminal conduct.'"); United States v. Wilson, 980 F.2d 259, 261 (4th Cir. 1992) (same).*fn15 The government does not contend otherwise, and we agree.*fn16
The relevant criminal conduct need not be conduct with which the defendant was charged, United States v. Santiago, 906 F.2d 867 (2d Cir. 1990), nor conduct over which the federal court has jurisdiction, United States v. Pollard, 986 F.2d 44 (3d Cir.), cert. denied, 124 L. Ed. 2d 671, 113 S. Ct. 2457 (1993). Thus, the district court's use of the loss attributable to the challenged period could be upheld if the defendants' conduct during that period was shown to constitute any state or federal crime, since it is clear that the conduct was part of the same on-going scheme as the offense conduct. See U.S.S.G. § 1B1.3(a)(2). For some inexplicable reason, however, the government did not present evidence at the sentencing hearing or argue in its brief on appeal that the conduct during that period was otherwise criminal. Nevertheless, at oral argument before this court the government suggested a number of criminal offenses which the defendants were said to have committed by submitting fictitious bids to the RTC*fn17 and asked that we affirm the district court's inclusion of the loss that occurred during the challenged period on this basis.
While we think it highly likely that the defendants' conduct during the challenged period did violate some criminal statute, we decline to accept the government's invitation. Due process requires that the defendants have fair notice of exactly why the government believes their conduct during this period was criminal and a fair opportunity to counter the government's case on that score. In order to be fair, such an opportunity may have to include an opportunity to offer additional evidence. Accordingly, on remand, the district court should require the government to identify the statute or statutes it relies upon and to identify the record evidence that satisfies each element of the offense proscribed. The defendants should then be afforded the opportunity to develop an appropriate record and argue to the contrary.*fn18
We agree with the Fourth and the D.C. Circuit Courts of Appeal that, where the government has the burden of production and persuasion as it does on issues like enhancement of the offense level under § 2F1.1 based on the victim's loss, its case should ordinarily have to stand or fall on the record it makes the first time around. It should not normally be afforded "a second bite at the apple." United States v. Leonzo , 50 F.3d 1086, 1088 (D.C. Cir. 1995) (remanding for resentencing on the existing record where government failed to sustain its burden of proving loss under § 2F1.1); United States v. Parker, 30 F.3d 542, 553-54 (4th Cir.) (no new evidence permitted on resentencing where prosecution had failed to introduce sufficient evidence that offense took place within 1000 feet of a "playground" within meaning of statute), cert. denied, 130 L. Ed. 2d 515, 115 S. Ct. 605 (1994). At the same time, we perceive no constitutional or statutory impediment to the district court's providing the government with an additional opportunity to present evidence on remand if it has tendered a persuasive reason why fairness so requires. See United States v. Ortiz, 25 F.3d 934, 935 (10th Cir. 1994) (holding that an order vacating sentence and remanding for resentencing contemplates a de novo hearing at which court can receive any evidence it could have considered during first sentencing hearing); United States v. Cornelius, 968 F.2d 703, 705 (8th Cir. 1992) (holding that district court erred in refusing to consider defendants' evidence upon resentencing); United States v. Jacobs, 955 F.2d 7, 10 (2d Cir. 1992) (per curiam) (where original sentence had been vacated because there was insufficient evidence connecting conspiracy's income to drug sales, district court could on remand consider "reliable new evidence" on this issue; United States v. Stern, 13 F.3d 489, 498 (1st Cir. 1994) ("where a sentence is vacated and remanded for redetermination under correct principles, the government is not automatically foreclosed from offering evidence pertinent to the newly established rule.")