Opinion ID: 170060
Heading Depth: 2
Heading Rank: 1

Heading: Loss Calculation and Sentence

Text: In reviewing Mr. Galloway's sentence, we first examine whether the district court correctly determined the advisory guideline sentence range, and if so, we review the sentence for reasonableness. See United States v. Kristl, 437 F.3d 1050, 1053 (10th Cir.2006). We review the district court's legal conclusions de novo and its factual findings for clear error. See id. at 1054. The district court's factual findings constitute clear error when our review of the entire record leaves us with the definite and firm conviction that a mistake has been made. United States v. Burridge, 191 F.3d 1297, 1301 (10th Cir. 1999) (internal quotation marks omitted). We apply a rebuttable presumption of reasonableness for sentences imposed within the correctly calculated advisory guideline range. See Rita v. United States, ___ U.S. ___, 127 S.Ct. 2456, 2462-63, 168 L.Ed.2d 203 (2007); Kristl, 437 F.3d at 1055. If we conclude that the district court misapplied the guidelines, we must remand the case to the district court for re-sentencing unless we determine, based upon our review of the entire record, that the district court's error was harmless. See 18 U.S.C. § 3742(f)(1); Williams v. United States, 503 U.S. 193, 203, 112 S.Ct. 1112, 117 L.Ed.2d 341 (1992). At the outset, we note that the amount of loss, if any, that resulted from Mr. Galloway's fraudulent conduct affects whether the 1998 or 2005 version of the Guidelines applies to this case. The district court initially applied the 1998 version but amended its findings and conclusions using the 2005 version after the parole officer raised ex post facto concerns. [6] In light of this issue, we review the district court's sentence determination under both the 1998 and 2005 versions of the Guidelines. Under either the 1998 or 2005 Guidelines, the district court may increase the offense level for a defendant convicted of fraud based upon the actual financial loss caused by the defendant's fraudulent conduct or by the loss intended by the defendant, whichever is greater. See U.S.S.G. § 2B1.1(b)(1), cmt. n. 3(A) (2005); U.S.S.G. § 2F1.1(b)(1), cmt. n. 8(b) (1998). Because Mr. Galloway was convicted of aiding and abetting the fraud of the borrowers, Mr. Galloway is sentenced as a principal and we treat him as the recipient of the fraudulently obtained loan proceeds. See United States v. Smith, 951 F.2d 1164, 1167 n. 4 (10th Cir.1991). The district court need not calculate actual or intended loss with exact precision, it need only make reasonable estimates. See U.S.S.G. § 2B1.1(b)(1), cmt. n. 3(C) (2005); U.S.S.G. § 2F1.1(b)(1), cmt. n. 9 (1998). The government has the burden of proving actual and intended loss by a preponderance of the evidence. United States v. Schild, 269 F.3d 1198, 1200 (10th Cir.2001). If there is an actual or intended loss, the gain that resulted from the offense may serve as an alternate measure of loss if the actual or intended loss cannot be reasonably determined. See U.S.S.G. § 2B1.1(b)(1), cmt. n. 3(B) (2005); U.S.S.G. § 2F1.1(b)(1), cmt. n. 9 (1998). Faced with ever-changing and conflicting data on the loss sustained by HUD as well as arguments by Mr. Galloway that HUD sustained no loss, the district court concluded without explanation that a loss occurred, and then determined it could not reasonably quantify the actual or intended loss. Instead, it chose to estimate the loss using Mr. Galloway's gain, the only figure not in dispute. The district court stated: My own personal conclusions are that the defendant's conduct did cause a loss. . . . I do determine that there has been a loss from the Government's exhibits for the conduct as a whole. . . . I do, however, find and conclude that the correct measurement in this case should be the gain. I am satisfied that there has been a loss and a loss that is traceable to the original wrongful conduct that qualified three individuals for loans. I am concerned, however, in terms of proximate causation or other language to indicate that there have definitely been refinancing, including increased principal, at least partially based upon subsequent representations concerning ability to pay, as well as a real concern of the extent of the loss because of all the various expenses involved. I am confident, however, that I can conclude that the wrongful conduct caused the loss, but feel I should fall back on the offender's gain from the fraud as the alternative estimate that is likely underestimating the loss. That may well be, but I do conclude that that affords me with an alternative basis that's linked to the motivation for the defendant's wrongful conduct as found by the jury. VIII Aplt.App. at 108-09. We recognize that the government never requested an enhancement based upon intended loss, however, the district court is required to correctly apply the Guidelines. In United States v. Haddock, we explained that the loss enhancement is only for loss to victims, not for gain to defendants. The defendant's gain may be used only as an `alternate estimate' of that loss; it may not support an enhancement on its own if there is no actual or intended loss to the victims. 12 F.3d 950, 960 (10th Cir. 1993); see also United States v. Galbraith, 20 F.3d 1054, 1060 (10th Cir.1994) (finding gain to the defendant could not be used as an alternative estimate of loss when there was no actual or intended loss). Although Haddock applied § 2F1.1 of the Guidelines, § 2B1.1 adopts the same requirements. See U.S.S.G. § 2B1.1(b)(1), cmt. n. 3(B) (2005) (The court shall use the gain that resulted from the offense as an alternative measure of loss only if there is a loss but it reasonably cannot be determined.) (emphasis added). Accordingly, before using gain as an alternate estimate of loss, the district court must first estimate the actual and intended loss due to a defendant's fraudulent conduct, and then consider whether the defendant's gain is a reasonable estimate of the actual or intended loss. See Haddock, 12 F.3d at 961. In reiterating this rule, we are not suggesting that the district court must find the precise amount of the loss, it must only make a reasonable estimate of the loss. However, in doing so, the district court must make a finding that addresses the various amounts of loss proposed, especially in the case of a moving target like this one. In this case, the proposed amounts of loss ranged from as low as $0 to as high as $122,992.29, and the district court cannot not simply choose to substitute a gain of $29,359.20 as a measure of the loss without a basis for why that substitution is reasonable. The district court simply did not resolve the specific factual disputes concerning whether Mr. Galloway's fraudulent conduct indeed caused a loss and we must therefore remand. Moreover, even if the district court was correct to estimate HUD's loss using Mr. Galloway's gain, its inclusion of all of Mr. Galloway's commissions, including those on transactions for which the government claimed no loss occurred, was in error. Our precedent makes clear that the use of gain as an estimate of loss must be limited to transactions in which there was indeed a loss. See id. (If gain to the defendant does not correspond to any actual, intended, or probable loss, the defendant's gain is not a reasonable estimate of loss.). Accordingly, we remand the case for the district court to vacate Mr. Galloway's sentence and re-sentence. As re-sentencing will proceed de novo, United States v. Ortiz, 25 F.3d 934, 935 (10th Cir.1994), we find it premature to engage in any analysis of our own concerning the actual or intended loss, if any, caused by Mr. Galloway. Given the ex post facto concerns discussed earlier, on remand the district court must determine Mr. Galloway's sentence under both the 1998 and 2005 version of the Guidelines to determine whether applying the 2005 Guidelines would place Mr. Galloway at a disadvantage. If so, the district court must apply the 1998 version of the Guidelines.