Opinion ID: 44571
Heading Depth: 2
Heading Rank: 2

Heading: Government’s Cross Appeal of Grant’s Sentence

Text: The government cross-appeals Grant’s sentence, arguing that the district court judge committed errors in sentencing Grant. The government’s argument on appeal is two-fold. First, the government asserts that the district court’s calculation of the amount of loss for sentencing purposes was clearly erroneous. Second, the government contends that the sentence that the court imposed on Grant was improper because it was below the range recommended by the Sentencing Guidelines, and the court failed to state adequate reasons supporting that sentence. Because we agree with the government’s first contention, we need not reach the second issue.
The district court’s calculation of the amount of loss for sentencing purposes is a factual determination reviewable for clear error. United States v. Delgado, 321 F.3d 1338, 1348 (11th Cir. 2003); United States v. Maung, 267 F.3d 1113, 1118 (11th Cir. 2001). We have indicated that clear error will be present when “we are 13 left with a definite and firm conviction that a mistake has been committed” by the district court. United States v. Crawford, 407 F.3d 1174, 1177 (11th Cir. 2005) (citation omitted). Under U.S.S.G. § 2B1.1, the base offense level for a theft offense involving fraud or deceit is six. In addition, the Guidelines state that a defendant’s offense level is subject to enhancement if the monetary loss in the case exceeded $5,000. U.S.S.G. § 2B1.1(b)(1). The extent of the sentence enhancement is determined by the total amount of the loss. Id. A loss of more than $400,000, for example, leads to a fourteen-level enhancement. See U.S.S.G. § 2B1.1(b)(1)(H). In Grant’s case, the probation officer prepared a Presentence Investigation Report (“PSI”) prior to the Sentencing Hearing. The PSI calculated Grant’s base offense level as six, pursuant to U.S.S.G. § 2B1.1(a). The PSI calculated the total loss to the bank as $481,945.38. Thus the PSI recommended a fourteen-level enhancement to Grant’s sentence, since the offense involved a loss of more than $400,000 but less than $1,000,000. See U.S.S.G. § 2B1.1(b)(1)(H). The PSI also recommended another two-level enhancement for obstruction of justice, pursuant to U.S.S.G. § 3C1.1. This resulted in a total offense level of 22. With an offense level of 22 and a criminal history category of I, Grant was subject to a Guidelines 14 range of 41 to 51 months of imprisonment.10 At the sentencing hearing, the district court judge expressed concern over the proper calculation of the loss amount for purposes of U.S.S.G. §2B1.1. The court made clear that it was unconvinced that the total loss was $481,945.38, the figure indicated in the PSI. Specifically, the court observed that Southern Pride’s line of credit was close to fully exhausted–with a balance of around $496,000–even before the company started falsifying its accounts receivable in September 2002. In light of that fact, the court expressed skepticism that Grant’s conduct caused a loss of over $400,000, as the PSI alleged. The court asked the government to establish with more certainty the sum of money that Grant obtained and failed to pay back as a result of his false statements to the bank. R9 at 4. As the court indicated, if Grant “already owed the money [] before he ever gave that [false] information, [then] giving that information didn’t cause the loss.” Id. In response, the government offered the testimony of Hayes Parnell, the president of Covenant Bank. Parnell testified that the total outstanding balance on the account at the time Southern Pride ceased its operations in 2003 was approximately $496,000, and that, after recovering a single backhoe worth $12,000, the total loss that the bank wound up suffering was approximately 10 The 2003 edition of the Sentencing Guidelines was used in calculating Grant’s sentence. 15 $484,000. When pressed by the court as to whether that loss was caused by Grant’s false statements in 2002 (as opposed to being simply a prior outstanding balance), Parnell testified that if the bank not been deceived by Grant throughout 2002-2003, it could have taken steps, prior to Southern Pride’s closing, to protect its security interest. Parnell pointed out that the bank had a contractual right, in the event of a default, to offset the outstanding balance on line of credit with Southern Pride’s deposits, and that it would have sought to do so had it known of Southern Pride’s repeated false submissions. Parnell also testified that the bank “could have done what we could to get the note paid down to where it was within the amount of the collateral; or we would have called the whole loan, if we had been suspicious enough to think that something really bad was happening.” R9 at 10-11. The government maintained that, since the bank might have collected some of the lost funds from Southern Pride’s accounts receivables had it known of Grant’s false statements sooner–and, at least in that sense, Grant’s fraudulent conduct “caused” the bank’s loss–the loss amount should be the sum that the bank had failed to recover, i.e. $484,000. The district court, however, remained unpersuaded by this argument. The court informed the government that it could not find, by a preponderance of the evidence, that the total loss was $484,000. When the court asked Grant’s counsel 16 for his suggested loss amount for purposes of § 2B1.1, he indicated that the loss should be approximately $20,000.11 The court rejected both figures, stating: “I’m going to find, and I know this may sound arbitrary . . . . I’m going to find that the loss is $50,000.” R9 at 18. This determination resulted in a six-level enhancement in Grant’s sentence, see U.S.S.G. § 2B1.1(b)(1)(D), rather than the fourteen-level enhancement that the government had sought. Consequently, Grant’s sentencing range went from a recommended 41 to 51 months of prison (Offense Level 22) to a 15 to 21 month sentencing range (Offense Level 14). In cases involving financial fraud, such as Grant’s, the district court is required to calculate properly the amount of loss pursuant to U.S.S.G. § 2B1.1. See United States v. Hamaker, 455 F.3d 1316, 1336 (11th Cir. 2006). Indeed, the commentary to U.S.S.G. § 2B1.1 states that “loss serves as a measure of the seriousness of the offense and the defendant’s relative culpability and is a principal factor in determining the offense level under this guideline.” U.S.S.G. § 2B1.1 cmt. backg’d (emphasis added). While the district court retains broad discretion in determining the loss amount, Hamaker at 1338, the court nevertheless is obligated 11 Grant’s attorney arrived at this figure by arguing that the balance in October 2002 had been drawn down to $464,000, and that the line increased between that period and Southern Pride’s demise in 2003 to $484,000–a difference of $20,000. Although Grant’s counsel stated at the hearing that the difference between $464,000 and $484,000 was “$10,000,” R9 at 17, we assume that he intended to state $20,000 as the loss proposed figure. 17 to “make independent findings establishing the factual basis for its guidelines calculation.” Id. “The district court’s factual findings for purposes of sentencing may be based on, among other things, evidence heard during trial, undisputed statements in the PSI, or evidence presented during the sentencing hearing.” United States v. Polar, 369 F.3d 1248, 1255 (11th Cir. 2004). In this case, the district court first concluded that government had failed to show a loss of $484,000 by the preponderance of the evidence. In the wake of that determination, the court proceeded to reject both the government’s recommended loss amount ($484,000) and the defendant’s recommended loss amount ($20,000), as well as the loss that had been found, beyond a reasonable doubt, by the jury at trial ($350,000). Rather than adopting any of these figures, the court settled, somewhat inexplicably, on a total loss amount of $50,000. Not only was the record devoid of any such basis for arriving at that figure as the loss, but the court failed to state any “findings establishing the factual basis for its Guidelines calculation.” Hamaker at 1338. Moreover, in a burst of candor, the court stated its recognition that the $50,000 figure “may sound arbitrary.” R9 at 18. In similar cases involving unexplained loss calculations by the sentencing judge, we have seen fit to vacate the sentence and remand the case for re-sentencing. See, e.g., United States v. Liss, 265 F.3d 1220, 1231 (11th Cir. 2001) (vacating a district 18 court’s sentence and remanding for re-sentencing, since the court “fail[ed] to make sufficient factual findings regarding the amount of loss” under the Guidelines). We do so here. The case of United States v. Renick, 273 F.3d 1009 (11th Cir. 2001) (per curiam), is strikingly on point with the facts of Grant’s case. In Renick, which involved Medicare fraud, the sentencing judge noted difficulties in calculating the total amount of loss, due to factual gaps in the record. After rejecting the government’s recommended loss amount, the court stated: “in the absence of anything more concrete, I’m just gonna arbitrarily pick a number and say it’s between 70,000 and a hundred twenty thousand and we will proceed.” 273 F.3d at 1024. On appeal, we held that this estimate of the loss was arbitrary, “an abuse of discretion and contrary to law.” Id. at 1027. We stated that there was “no basis for making a reasonable estimate as to [the] loss,” and that, apparently, “the district court felt some duty to find some loss, arbitrary or otherwise, but . . . stated no findings upon which its ‘estimate’ was made.” Id. Accordingly, we vacated the sentence imposed and remanded the case for re-sentencing. Id. at 1028. Here, as in Renick, the district court failed to provide any factual basis whatsoever for its ultimate loss calculation of $50,000. Thus, the district court clearly erred in calculating the amount of loss attributable to Grant’s false 19 statements. And because the amount of loss is an essential component in the calculation of a defendant’s sentence under U.S.S.G. § 2B1.1, the court erred in calculating Grant’s sentence under the Guidelines. We conclude that Grant’s sentence should be vacated, and that his case should be remanded to the district court for re-sentencing.
The government also argues that the district court erred in sentencing Grant below the recommended Guidelines range without stating its reasons in support of that decision. The court sentenced Grant to ten months–five months of imprisonment followed by five months of home custody–when the recommended range (for an Offense Level 14) was 15 to 21 months.12 Because we have already concluded that the district court’s calculation of the sentencing range was based on an improper calculation of the total loss amount, however, we need not address the 12 As an aside, we note that the district court judge imposed Grant’s sentence under the apparent misapprehension that he was sentencing Grant within the recommended Guidelines range. The judge stated “I see no grounds for departure” and then proceeded to sentence outside of the Guidelines range. R9 at 37. Over and above the court’s erroneous calculation of Grant’s sentence as discussed in the previous section, this fact alone would be sufficient grounds to vacate Grant’s sentence and remand his case, since we have made clear that the court’s duty to properly “consult” the guidelines cannot be based on an erroneous understanding of them. See Crawford, 407 F.3d at 1183 (“[B]ecause true consultation cannot be based on an erroneous understanding of the Guidelines, the district court erred in failing to consult properly the Guidelines.”); id. at 1179 (“A misinterpretation of the Guidelines by a district court effectively means that the district court has not properly consulted the Guidelines.”(citation and alteration omitted)). 20 government’s separate argument concerning the district court’s failure to state its reasons for a downward departure. The recommended range itself was based on a faulty calculation of the loss amount; that fact, standing alone, militates in favor of a remand, irrespective of the court’s decision to sentence outside of that range.