Opinion ID: 2758566
Heading Depth: 2
Heading Rank: 2

Heading: Potter’s Offense Level Enhancement

Text: By contrast, Potter does not challenge his conviction, but his sentence. Pursuant to Application Note 3(F)(v) of United States Sentencing Guidelines § 2B1.1, the district court determined that the amount of loss was $8.3 million. Based on that loss 8 Nos. 13-3283 & 13-3537 amount, the district court found that a 22 offense level increase1 was warranted, but departed downward and imposed a 16 offense level increase instead. Potter argues that the 16 offense level increase should not have been applied to his sentence because RCN did not actually suffer a loss. Accordingly, he asks the court to remand this matter for a new sentencing hearing. We review the district court’s interpretation and application of the Guidelines de novo. United States v. Natour, 700 F.3d 962, 975 (7th Cir. 2012). We also review de novo whether the facts as found are sufficient to support an enhancement under the Guidelines. Id. at 974. As stated above, the district court applied § 2B1.1 of the Guidelines for Potter’s sentence, which provides the base offense level for defendants convicted of mail fraud and includes various offense level increases depending on the amount of loss at issue. United States Sentencing Commission Guidelines Manual § 2B1.1 (2013). None of the parties dispute that RCN spent $8.3 million on expenditures with ICS. However, Potter challenges whether that $8.3 million can truly be characterized as a loss. In his view, because RCN still received its contracted cable services from ICS, it is of no consequence for a loss calculation that ICS was a false MBE. As the district court noted during Potter’s sentencing hearing, Application Note 3(F)(v) of § 2B1.1 appears to contemplate the scheme here. Application Note 3(F)(v) 1 As a point of clarification, the district court applied a 22 offense level increase, but the proper offense level increase for an $8.3 million loss is actually 20 based on § 2B1.1(b)(1)(K) of the Sentencing Guidelines. Nos. 13-3283 & 13-3537 9 provides that where regulatory approval by a government agency is obtained by fraud, the “loss shall include the amount paid for the property, services, or goods transferred, rendered, or misrepresented, with no credit provided for the value of those items or services.” United States Sentencing Commission Guidelines Manual § 2B1.1 cmt. n.3(F)(v) (2013). It is undisputed that ICS obtained MBE certification from the City of Chicago through fraud, putting Potter’s conduct squarely within the scheme considered by Application Note 3(F)(v). It is also undisputed that RCN paid $8.3 million for ICS’s services. Taken together, RCN’s $8.3 million expenditure is within the ambit of Application Note 3(F)(v). Thus, because Application Note 3(F)(v) applies in this situation, the district court correctly calculated loss consistent with its terms. Applying Application Note 3(F)(v), the district court properly measured RCN’s loss as its total expenditures to ICS without credit for the value of ICS’s services, and was within its discretion to depart downward from the Guidelines and impose a 16 offense level increase instead of the applicable 20 offense level increase. See United States v. Lane, 323 F.3d 568, 588 (7th Cir. 2003) (“Once the amount of loss is calculated under the guidelines, the court has the discretion to modify the amount of loss to more accurately reflect the economic realities of the crime.”). In sum, the facts as found in the record support the district court’s 16 offense level increase. To that end, it is worth noting that the alternative measurement of loss in this case would have resulted in the same 16 offense level increase. If loss cannot be reasonably determined, the court must measure loss by the amount of gain that resulted from the scheme. United States Sentencing 10 Nos. 13-3283 & 13-3537 Commission Guidelines Manual § 2B1.1 cmt. n.3(B) (2013). The ICS scheme generated $2.2 million in net profits, which would indicate a 16 offense level increase under the Guidelines. Id. at § 2B1.1(b)(I). Even under the more lenient measure, Potter still properly bears the 16 offense level increase to his sentence.