Opinion ID: 2999663
Heading Depth: 2
Heading Rank: 1

Heading: Calculation of the Guidelines Range

Text: Frith argues on appeal that the district court miscalculated the amount of loss in determining his offense level under § 2F1.1. Loss amount for purposes of the guidelines must be calculated on the basis of the conduct of conviction and relevant conduct; relevant conduct must be criminal or unlawful conduct, though it need not have been charged. See United States v. Schaefer, 291 F.3d 932, 937-40 (7th Cir. 2002). Conduct underlying an acquitted charge may be included as long as that conduct is proved by a preponderance of the evidence. United States v. Watts, 519 U.S. 148, 157 (1997). Frith argues the district court’s loss calculation was based entirely on noncriminal conduct. He asserts that his alteration of CPB’s books and the payouts he took for himself were “not criminal in and of themselves.” Filing false reports with regulatory authorities and operating in violation of the net capital and Special Reserve requirements is criminal conduct, but according to Frith, did not cause any loss. He applies the same logic to attack the offense-level enhancement for substantially jeopardizing the safety and soundness of a financial institution, § 2F1.1(b)(6)(A), claiming he did nothing of a criminal nature to jeopardize the safety and soundness of CPB. We review calculations of loss under the guidelines for clear error, United States v. Berheide, 421 F.3d 538, 540 (7th Cir. 2005), and application of the guidelines de novo, United States v. Ellis, 440 F.3d 434, 436 (7th Cir. 2006). The guidelines define loss as “the value of the money, property, or services unlawfully taken.” U.S.S.G. § 2F1.1 cmt. n.7. Loss is not always a precise calculation; reasonable estimates will suffice for purposes of the guidelines. U.S.S.G. § 2F1.1 cmt. n.8. And, as we have noted, where losses are attributable to relevant conduct, the relevant 6 No. 04-2364 conduct must be criminal or unlawful conduct. Schaefer, 291 F.3d at 937-40; see also United States v. Solis, 299 F.3d 420, 461-62 (5th Cir. 2002); United States v. Dove, 247 F.3d 152, 155 (4th Cir. 2001); United States v. Shafer, 199 F.3d 826, 831 (6th Cir. 1999); United States v. Jain, 93 F.3d 436, 443 (8th Cir. 1996); United States v. Dickler, 64 F.3d 818, 830 (3d Cir. 1995). Also, to calculate loss for purposes of § 2F1.1, the guidelines call for consideration of losses attributable to all acts and omissions that were part of the same course of conduct or general scheme of wrongdoing. U.S.S.G. § 1B1.3(a)(2). Most of the $1.2 million in losses found by the district court are attributable to relevant conduct that was part of Frith’s scheme to operate CPB without enough money on hand to comply with the applicable net capital and Special Reserve requirements of the securities laws. Frith was charged with, though ultimately not convicted of, filing eighteen false reports with regulatory authorities during 1996 and 1997 misstating the true financial status of CPB. Besides being illegal themselves, the false reports covered up the fact that Frith was operating his broker-dealership in violation of laws designed to protect his clients. For seventeen months in 1996 and 1997 Frith operated his business by criminally deceiving regulatory authorities and the public. When authorities finally shut CPB down, there was not enough money to pay clients what they were owed. The SIPC’s and fidelity insurer’s payments were made to cover these client losses; the district court did not clearly err by including them in the loss amount calculation. The $190,000 payment by CPB’s auditor’s malpractice carrier is another matter, however. It should not have been included in the calculation of loss amount. The money paid by the malpractice insurer for CPB’s auditor was attributable to losses sustained by CPB’s clients as a result of the auditor’s acts or omissions, not Frith’s. The point is academic, however; excluding the $190,000 from the No. 04-2364 7 calculation, Frith’s offense level remains the same. See U.S.S.G. § 2F1.1(b)(1). Accordingly, with this (harmless) exception, the district court did not clearly err in calculating loss amount for purposes of Frith’s guidelines range. Nor did the court err by applying the enhancement for substantially jeopardizing the safety and soundness of a financial institution. See § 2F1.1(b)(6)(A). The application notes to § 2F1.1 provide that a financial institution has been substantially jeopardized when “as a consequence of the offense, the institution became insolvent . . . or was unable on demand to refund fully any deposit, payment, or investment . . . or was placed in substantial jeopardy of any of the above.” U.S.S.G. § 2F1.1 cmt. n.15. The district court need not have considered Frith’s relevant conduct to impose this enhancement; operating CPB in violation of the net capital and Special Reserve requirements even for a single day meant that CPB could not pay its debts on demand. The district court correctly increased Frith’s guidelines range under § 2F1.1(b)(6)(A). That is not the end of the matter, however. The district court sentenced Frith to 97 months in prison—the low end of the properly calculated guidelines range of 97-120 months—applying the guidelines as mandatory. Frith did not object, so we review only for plain error. United States v. Bonner, 440 F.3d 414, 415-16 (7th Cir. 2006). The government concedes that a Paladino limited remand is appropriate so the district judge can advise us whether she would have sentenced Frith differently had she known the guidelines are advisory. Paladino, 401 F.3d at 484.