Opinion ID: 665997
Heading Depth: 2
Heading Rank: 3

Heading: The Amount of Loss Calculation

Text: 55 Henderson requested a hearing on the amount of loss. He hoped to show that the amount calculated in the pre-sentencing report (PSR) was incorrect. The district court denied this request, and instead considered Henderson's written objections to the PSR and the evidence proffered at sentencing. The district court then adopted the calculations made in the PSR, but modified the amount of loss to include interest on the two fraudulent loans. Henderson renews his objections on appeal. In examining a challenge to a sentence based on the Guidelines, we must accept the factual findings of the district court unless they are clearly erroneous, but we fully review its application of the Guidelines for errors of law. United States v. Rodriguez, 925 F.2d 107, 109-10 (5th Cir.1991). We review the district court's denial of Henderson's hearing request for an abuse of discretion. 56 We first consider the district court's denial of Henderson's hearing request. At the outset we note that a sentencing hearing was conducted, and that the amount of loss issue was discussed at that hearing. Henderson's objection, therefore, goes to the form of the hearing, and more specifically, to the district judge's refusal to allow testimony at the sentencing hearing. Essentially, Henderson requested a mini-trial, complete with exhibits, expert witnesses, character witnesses, and an opportunity to cross examine the government's witnesses. Refusing to conduct such a hearing does not constitute an abuse of discretion in this case. 57 Henderson had an opportunity to review the PSR and file formal objections to that report. He could have filed affidavits and other exhibits in support of his position. At the sentencing hearing, Henderson presented several exhibits and objected to some of the exhibits proffered by the government. Henderson's due process rights were protected adequately by these procedures. 58 We recognize the due process concerns behind this issue. However, we believe that a sentencing court must be given deference to determine whether a hearing is needed on particular sentencing issues. When a hearing is necessary to protect a convicted defendant's due process rights, then a failure to hold a hearing would be an abuse of discretion. We do not believe Henderson's due process rights were violated. Henderson could have presented the sentencing judge with all the information necessary to calculate the amount of loss without cross examining the government's sources. 59 The district court calculated a $2,344,646.38 loss due to Henderson's actions, which included the face value of both the 1985 FB & T loan and the 1986 Cy-Fair loan, plus interest on both loans. Henderson argues that the district court should have reduced this amount to account for value recovered, or likely to be recovered, by the banks or the FDIC on these loans. Henderson further objects to the inclusion of interest in the amount of loss. 60 We must first determine what procedure the district court used to determine the amount of loss. If the district court's calculation was an estimate of the actual loss caused by the two loans in question, 61 the loss is the amount of the loan not repaid at the time the offense is discovered, reduced by the amount the lending institution has recovered (or can expect to recover ) from any assets pledged to secure the loan. However, where the intended loss is greater than the actual loss, the intended loss is to be used. 62 United States Sentencing Commission, Guidelines Manual, Sec. 2F1.1, comment. (n. 7) (emphasis added). 63 The district court based Henderson's sentence on an intended loss. 11 This decision was based on the district judge's understanding of the meaning of intended loss under the Sentencing Guidelines. The following excerpts from Henderson's sentencing are illustrative: 64 The question is did I remove something that I shouldn't have removed, did I do something that I shouldn't have done, are the circumstances surrounding the loss such that any reasonable person would conclude that there is fraud and deceit and cheating going on. Are those the circumstances? If they are--and that's what the jury found. If they are, then, it was a loss that was intended because we intend the result of the acts that we take. 65 That's what the law is. We intend the result of the acts we take except in some circumstances. 66 We find this interpretation erroneous. 67 The Sentencing Guidelines refer to actual intent, not constructive intent. [I]f an intended loss that the defendant was attempting to inflict can be determined, this figure will be used if it is greater than the actual loss. U.S.S.G. Sec. 2F1.1, comment. (n. 7). If Henderson intended to repay the banks on his loans, the district court should not have used intended loss as the basis for sentencing. 68 In United States v. Wimbish, 980 F.2d 312 (5th Cir.1992), we held that the face value of stolen and forged checks was properly used as an intended loss because the victims were put at risk for the full face value of their checks. See also, United States v. Brown, 7 F.3d 1155, 1159 (5th Cir.1993) (holding that full value of stolen money orders constitute intended loss because, the defendant clearly intended Lomoriello to suffer a loss exceeding $5,000.) (emphasis added); United States v. Sowels, 998 F.2d 249, 251 (5th Cir.1993) (holding that stolen credit cards indicate an intent to cause a loss equal to the credit limits of the cards). These cases show that the intended loss for stolen or fraudulently obtained property is the face value of that property. 69 Unlike the cases cited supra, where the defendant intends to repay the loan or replace the property, the intended loss is zero. The face value of the property bears no relation to the loss the defendant was attempting to inflict. U.S.S.G. Sec. 2F1.1, comment. (n. 7). Because the district court misinterpreted the meaning of intended loss under the Sentencing Guidelines, we must vacate the sentence on count one. The district court must determine if Henderson actually intended to cause a loss to either bank, and if so, the amount of the intended loss. Only if this value is greater than the actual loss to the banks should it be used to determine Henderson's sentence. 12 70 Some comment is necessary concerning the district court's inclusion of interest in the amount of loss. The current commentary to the Sentencing Guidelines 13 provides that the amount of loss does not, for example, include interest the victim could have earned on the funds had the offense not occurred. U.S.S.G. Sec. 2F1.1, comment. (n. 7). We find that this commentary sweeps too broadly and, if applied in this case would be inconsistent with the purpose of Sec. 2F1.1. Stinson v. United States, --- U.S. ----, ----, 113 S.Ct. 1913, 1919, 123 L.Ed.2d 598 (1993). 71 Interest should be included if, as here, the victim had a reasonable expectation of receiving interest from the transaction. See, e.g., United States v. Lowder, 5 F.3d 467, 471 (10th Cir.1993) (holding that interest should be included in the amount of loss where the defendant promised victims a specific interest rate on their investments); United States v. Jones, 933 F.2d 353, 354-55 (6th Cir.1991) (interest should be included where the defendant defrauded credit card companies which had a reasonable expectation of a specific return on the credit extended). In the words of the district judge, interest is a loss, a loss of earnings on money--representing a loss of earnings on money that was--that rightfully belonged to the bank and therefore should be also included. 11 R. 42-43. We find no error in the district court's decision to include interest in the amount of loss in this case. 72 Henderson's sentence under count one was calculated in accordance with the Sentencing Guidelines, and therefore, is based, in part, on the amount of loss. The other four sentences were not based on the Guidelines, but may include consideration of the loss attributable to Mr. Henderson. We therefore VACATE Henderson's sentences and REMAND for resentencing. Because we find the method used to calculate the amount of loss flawed, we do not reach the question of whether or not the result of that calculation was clearly erroneous.