Opinion ID: 666583
Heading Depth: 2
Heading Rank: 1

Heading: The Value of the Stolen Property

Text: 40 A sentence for federal property crimes is determined according to the value of the property involved because [t]he value of property taken ... is an indicator of both the harm to the victim and the gain to the defendant. U.S.S.G. Sec. 2B1.1, comment. (backg'd). Under ordinary circumstances, fair market value is the proper measure of the value of the stolen property. U.S.S.G. Sec. 2B1.1, comment. (n. 2). The commentary to section 2B1.1 expresses a clear preference for the use of fair market value in sentencing for property crimes, but this general rule is by no means absolute. Where the market value is difficult to ascertain or inadequate to measure harm to the victim, the court may measure loss in some [non-market] way, such as reasonable replacement cost to the victim. Id. 41 Although the Warshawskys participated exclusively in the wholesale auto parts market, the district court valued the stolen parts at $519,391 using GM's suggested retail price list. In using retail market value, the court offered the following justification: 42 Fundamentally, Counsel, this--we have to focus on the fact, I think, that this is a conspiracy and the conspiracy--a conspiracy valuation is highly dependent, in my estimation, on the state of mind, the intent of the conspirator. I think that the phrase intended loss has a very great weight in these circumstances.... 43 [W]e have to figure out what the market is, certainly not the used part market I'm satisfied of that. I think the government's argument that the new part market is the place to focus for valuation of loss here or intended loss is appropriate, is substantiated by the record and by the law.... 44 The intended loss I think here is clearly far beyond half a million dollars.... And that is the Court's intended determination on that issue. 45 The defendants claim that the district court misapplied the market value rule by choosing the wrong market--the retail market--to value the stolen parts. Thus, the critical inquiry for the defendants is determining the proper market in which to value the parts. To the contrary, the government argues that the use of retail prices represents a non-market valuation justified by the exception to the market value rule for cases where the market value is difficult to ascertain or inadequate to measure harm to the victim. The critical inquiry from the government's perspective is whether the circumstances in this case justify deviation from the market value rule. Our analysis leads us to conclude that the district court's sentencing calculation cannot be affirmed under either of these approaches. 46 If we assume that the district court's sentencing calculation represents an effort to determine the actual market value of the parts, we cannot agree that the proper market for valuation purposes was the retail market, because the retail market has literally no connection to this case. We understand that some cases require a sentencing judge to choose between a variety of markets affected by the defendant's criminal activity. In such cases, the sentencing court should apply the standard test for determining market value of stolen property, by looking to the price a willing buyer would pay a willing seller at the time and place the property was stolen or at any time during the receipt or concealment of stolen property. United States v. Reid, 586 F.2d 393, 394 (5th Cir.1978), cert. denied, 440 U.S. 927, 99 S.Ct. 1262, 59 L.Ed.2d 483 (1979) (citations omitted); United States v. Bakken, 734 F.2d 1273, 1278 (7th Cir.1984); United States v. Perry, 638 F.2d 862, 865 (5th Cir.1981). All of the participants in this case--GM, M & A Automotive, R.W. Expediters, Steven LaFay--interacted in the wholesale market. Indeed, none of the participants in this case ever handle parts outside of the wholesale market. We agree with the court in Perry: 47 [T]he market value of goods stolen in wholesale lots from a wholesaler should be valued at the actual market value (i.e., the wholesale price) at which that victim offered the goods for sale rather than a fictitious retail price that might have been fixed by a retailer who had purchased the goods (at the wholesale price) for resale to an ultimate consumer at sufficient profit as suited the hypothetical retailer's purposes. 48 638 F.2d at 867-68. Certainly the wholesale market is the market in which the Warshawskys were competing, albeit unfairly and fraudulently. 49 Given the dubious connection between the Warshawskys' criminal activity and the retail market for auto parts, we are inclined to read the district court's sentencing calculation as a determination that the market value of the parts was difficult to ascertain or inadequate to measure harm to the victim, rather than merely a selection of the wrong market for valuation. Within this framework, the question is whether the circumstances here justify the district court's deviation from the market value rule expressed in section 2B1.1. The plain language of Note 2 to section 2B1.1 applies the market value rule to all cases unless it is established at sentencing that market value is: (1) difficult to ascertain, or (2) inadequate to measure harm to the victim. This commentary establishes a two-step test for deviation from the market value rule. First, the sentencing court must attempt to determine the market value of the stolen property. If it is impossible or impractical to estimate the market value, then the sentencing court clearly has no choice but to deviate from the market value rule. See United States v. Pemberton, 904 F.2d 515, 515-17 (9th Cir.1990) (upholding deviation from market value rule in the absence of ... a market ... suppl[ying] a readily ascertainable price); United States v. Thomas, 973 F.2d 1152, 1159 (5th Cir.1992) (Only where ascertaining market value is impractical, may a court measure loss in some other way.); United States v. Hernandez, 952 F.2d 1110, 1118-19 (9th Cir.1991), cert. denied, --- U.S. ----, 113 S.Ct. 334, 121 L.Ed.2d 252 (1992) (upholding non-market valuation where estimate of market value would require expensive and complex calculations). 50 If some market value for the stolen property is readily-ascertainable, the sentencing court must proceed to the second part of the test by assessing the extent to which the market value adequately measures the harm to the victim or the gain to the defendant. If the sentencing court concludes that the market value inadequately measures the harm or the gain, then the court must select some appropriate alternative valuation technique. See United States v. King, 915 F.2d 269, 272 (6th Cir.1990) (upholding non-market valuation where victim's loss exceeded the market value of the stolen property); United States v. Johnson, 941 F.2d 1102, 1115 (10th Cir.1991) (If the district court decides that the final figure is 'inadequate to measure [the] harm to the victim,' then the court is free to 'measure the loss in some other way, such as reasonable replacement cost to the victim.' ); United States v. Berkowitz, 27 F.2d 1376, 1390 (7th Cir.), cert. denied, --- U.S. ----, 112 S.Ct. 141, 116 L.Ed.2d 108 (1991). To facilitate appellate review, a sentencing court choosing to deviate from the market value rule should compile an appropriate record with sufficient detail. Johnson, 941 F.2d at 1115. 51 Applying the test to the facts here, we look first to see if a market valuation of the stolen property can be readily ascertained. The presentence investigation report reveals three figures, precisely calculated and easily obtained, which could be used to gauge the market value of the stolen parts. The report establishes the price paid by the Warshawskys for the stolen parts, $46,075; the wholesale price of the parts, $173,376; and the retail price, $519,391. Nonetheless, the district court decided that market valuation was not possible because many of the stolen parts were destined to be scrapped by GM, which rendered their market value uncertain. Yet this analysis betrays the fundamental rationale for sentencing according to property values--the desire to estimate the harm to the victim and the gain to the defendant. A central theme of the prosecution was the demand for stolen parts which could be fraudulently returned to GM for wholesale price refunds. Judging from the evidence at trial, it is fair to conclude that the Warshawskys' entire fencing operation depended upon its potential to defraud GM's wholesale return policy. When stolen parts are traded expressly to obtain fraudulent wholesale refunds from the manufacturer, the gain to the thief is clearly the wholesale price, and the harm to the victim can at least be approximated by that same figure. We cannot avoid the conclusion that the market value of the parts was their wholesale price of $173,376, a reliable value readily available to the district court for use at sentencing. 4 52 Given the properly determined market value of the stolen property, the second part of the 2B1.1 test is to assess the adequacy of market valuation as a measure of the victim's loss and the defendant's gain. Although the Sentencing Commission has clearly instructed courts to use market value in calculating sentences, it has also recognized that in some cases market value will inadequately gauge the severity of a defendant's conduct. In this case, we have no clearly-articulated indications from the sentencing court that the wholesale market value of the parts was an inadequate measure of the harm to GM or the gain to the Warshawskys. We have even less explanation why retail prices somehow more accurately gauge the severity of the Warshawskys' wrongdoing. We see no way to agree with the sentencing court's deviation from the market value in this case--a case with a readily available market for valuing the parts--in the absence of some sufficiently detailed justification for doing so. 53