Opinion ID: 765751
Heading Depth: 3
Heading Rank: 1

Heading: The Air Force Contract

Text: 96 The first contested item is the District Court's inclusion of $139,200 in the loss calculation, which represented Electrodyne's claim against the Air Force for a canceled contract. Electrodyne represents that this claim arose from a contract pursuant to which Electrodyne had to provide the Air Force with pin diode switches. During the pendency of the criminal investigation, the Air Force canceled the contract, which was one of Electrodyne's two contracts with the Air Force, on the grounds of delay. Electrodyne filed an administrative appeal, arguing that the contract had been canceled for the convenience of the Air Force. The parties reached a tentative settlement that Electrodyne would fulfill the contract and be paid $139,200 if Electrodyne was not convicted. When Electrodyne pled guilty, that settlement became void and the contract was canceled. 97 The District Court found that the full amount of the $139,200 settlement was part of the loss to the Air Force. Therefore, the District Court calculated a total loss to the Air Force of $309,860, which also included $170,660 relating to investigation and reprocurement costs for two contracts: the pin diode contract that was the subject of the settlement agreement and a separate contract for phase shifters. Electrodyne submits that, as a legal matter, the District Court's finding was in error. Our review of what constitutes loss is plenary and requires us to look for actual or intended harm to the victim. See Evans, 155 F.3d at 252. 98 The government argues that the $139,200 would have been Electrodyne's but for the plea agreement, and that the money would have been fraudulently acquired. However, the issue is not Electrodyne's potential total gain but the Air Force's actual or intended loss, if any, stemming from the criminal conduct. We have repeatedly emphasized that the amount of loss in a fraud case, unlike that in a theft case, often depends on the actual value received by the defrauded victim. See United States v. Dickler, 64 F.3d 818, 825 (3d Cir. 1995). Thus, when a defendant obtains a secured loan by means of fraudulent representations, the amount of loss is the difference between what the victim paid and the value of the security, because only that amount was actually lost. See United States v. Kopp, 951 F.2d 521, 528-31 (3d Cir. 1991). In a fraudulent procurement case, the principles enunciated in Dickler and Kopp require us to offset the contract price by the actual value of the components provided in order to determine the amount of loss. See United States v. Schneider, 930 F.2d 555, 558 (7th Cir. 1991) (following this procedure in a fraudulent procurement case). 99 In short, the face value of the contract does not reflect a reliable loss figure because Electrodyne was prepared to provide the components to the Air Force, and the value of those components must be offset against the amount the Air Force agreed to pay. This is true whether we speak of actual or intended loss. The government's argument ignores the value that the Air Force would have received for its money if the settlement had proceeded. That is, if the parties had carried out the agreement, the Air Force would have received pin diode switches that, for all this record shows, were worth $139,200. Because the loss to the government would not have been the full settlement amount, we cannot charge Electrodyne with the full amount as intended loss. 100 More importantly, the government does not address the argument that the harm suffered by the Air Force was reflected in the $170,660 already attributed to Electrodyne's conduct. The crucial consideration here is that the District Court included the loss attributable to investigation and reprocurement relating to the pin diode switches in its calculation of $170,660 due to the Air Force, independent of the $139,200 in dispute here. See Electrodyne II, 28 F. Supp. 2d at 255 & n.67. Thus, the difference between the value that would have been received by the Air Force and the materials Electrodyne was supposed to have provided has already been taken into account in the $170,660 loss calculation, which included the costs to the Air Force of getting the components from another source. 101 We find that the settlement amount of $139,200 duplicates the $170,660 for reprocurement and investigation, regardless of whether actual or intended loss is considered. The Air Force only suffered one loss relating to the pin diode switches, and the District Court double-counted that loss when it included both the canceled settlement and the reprocurement. We conclude that the Court erred when it treated this element of the restitution agreement as having value over and above the $170,660 for reprocurement of the items covered by the canceled settlement agreement.