Opinion ID: 741804
Heading Depth: 3
Heading Rank: 1

Heading: Enhancement for Loss

Text: 49 Van Brocklin, Atterberry, and Pyatt were sentenced under the sentencing guideline applicable to bank fraud. U.S. Sentencing Guidelines Manual § 2F1.1. The district court found that defendants' conduct caused a loss to First Federal of $3.892 million, resulting in a thirteen-level specific offense characteristic enhancement under § 2F1.1(b)(1)(N). In determining the total loss, the district court considered the following sums: (1) the $980,000 that Van Brocklin received in bribe money from Atterberry and Pyatt; (2) FNF's profits from the FWMC loan sales; (3) the $97,000 released by the HDA property receiver; and (4) the settlement from the HDA litigation. Defendants claim that the district court erroneously equated the bank's loss with the profit made by the defendants. We review the district court's interpretation of the Guidelines de novo, and the factual findings supporting its conclusions for clear error. United States v. Willis, 997 F.2d 407, 417 (8th Cir.1993). 50 A number of courts have held that, in some cases, it is inappropriate to determine loss under § 2F1.1 in accordance with the gain to the defendants. See United States v. Kopp, 951 F.2d 521, 526-36 (3d Cir.1991) (summarizing cases). The guideline's application notes are ambiguous as to whether or when such a method is appropriate, stating that loss need not be determined 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 overestimate the loss. U.S.S.G. § 2F1.1, comment. (n. 8). 51 Given the wide latitude the guideline gives sentencing courts in determining loss, we are not prepared to say that determining loss according to a defendant's profit is necessarily erroneous, so long as the evidence indicates that such a method provides a reasonable estimate of the actual loss. 8 We find that in this case, however, the district court clearly erred in equating loss solely with the defendants' profit. The district court apparently found that the entire profit that FNF made from its resale of the FWMC loans was money that should have gone to First Federal, and was therefore loss to the bank. The court also concluded that the $980,000 that Van Brocklin received from the FWMC sales, which was paid out of FNF's profit margin from those sales, also should have gone to the bank and was thus loss. 52 The problem with this is that the government never established by a preponderance of the evidence what FNF would have or should have paid for those loans had the sales been legitimate. In this case, both the bank directors and OTS wanted those loans sold. Any loss to the bank from defendants' scheme did not occur simply because the loans were sold, but only if the loans were sold at an artificially low price. This was the very nature of the government's cherry-picking theory: that FNF selectively purchased high-value loans from the FWMC portfolio, yet paid a 70 cent price that was based on the quality of the portfolio as a whole. 53 The government has the burden of proof in showing loss under § 2F1.1, and the evidence at trial and at sentencing simply did not establish with any certainty what that loss was. Even if we were to assume that FNF, acting without fraud and bribery, would have paid a higher price to First Federal for the loans it cherry-picked, FNF presumably would still have resold those loans at a yet higher price in order to turn a profit. Similarly, using the bribes paid to Van Brocklin as a proxy for loss is inappropriate, since those funds also came out of FNF's profit margin from the sales. The evidence did not establish what First Federal should have received on those sales in a completely legitimate transaction. Equating defendants' entire profit with loss to First Federal in all likelihood overestimates the actual loss to the bank. 9 We therefore hold that the district court clearly erred in its determination of the bank's loss under § 2F1.1. We remand to the district court for a new determination of loss to the bank under § 2F1.1 or for recalculation of the sentences under another appropriate guideline. 54