Opinion ID: 71480
Heading Depth: 3
Heading Rank: 2

Heading: The Method of Calculating Intended Loss

Text: The method used by the district courts in this case was not to determine the defendants' intended loss based on direct inferences from the facts, but rather to apply Sowels as a sort of bright-line rule that allowed them to factually estimate the defendants' intended loss as being equal to the aggregate credit limits of the stolen cards. We have affirmed methods of determining intended loss similar to the one used by the district courts numerous times in the past. United States v. Oates, 122 F.3d 222, 225 (5th Cir.1997) (This Court has long adhered to the view, supported by the relevant application note, that the amount of loss for the purpose of determining a base offense level in U.S.S.G. § 2F1.1(b)(1) is the dollar amount placed at risk by a defendant's fraudulent scheme or artifice. [10] ) (citing United States v. Brown, 7 F.3d 1155, 1159 (5th Cir.1993); Sowels, 998 F.2d at 251; United States v. Wimbish, 980 F.2d 312, 315-16 (5th Cir. 1992), abrogated in part by Stinson v. United States, 508 U.S. 36, 113 S.Ct. 1913, 1918-19, 123 L.Ed.2d 598 (1993); [11] United States v. Hooten, 933 F.2d 293, 298 (5th Cir.1991)). However, an examination of our opinions reveals that it is only proper for sentencing courts to use these methods under certain factual circumstances.
In United States v. Wimbish , the defendant forged a series of stolen checks and deposited them, requesting cash back from each deposit. Wimbish, 980 F.2d at 313. At his sentencing, the district court calculated the amount of intended loss by adding together the face values of the checks he had forged. Id. The defendant objected to this method and appealed his sentence on the ground that he had known the deposits would be detected as forgeries and voided. Id. Thus, he argued, his intent was only to steal the amount of money that he had requested as cash back when he made the deposits. Id. He concluded that this meant the district court should have found that his intended loss was the same as the actual loss he had inflicted: the amount of money that he had requested as cash back from the fraudulent deposits. Id. We rejected this argument. Id. at 312. We found that it was proper to use the sum of the full face values of the forged checks, because the banks could have failed to detect his fraud in a timely manner. Id. at 315-16. The possibility of such a failure meant that the defendant's scheme placed the entire face value of each stolen check at risk. Id. We held that the defendant's conscious, callous indifference to this risk placed the face values of the stolen checks within the ambit of his intended loss. Id. at 316. Our subsequent cases have interpreted Wimbish as establishing that the full value of property recklessly jeopardized by a defendant's crime may be considered part of his intended loss. E.g., Oates, 122 F.3d at 225.
In United States v. Morrow, we examined one way in which property can be recklessly jeopardized by a defendant's crime. 177 F.3d 272, 300-01 (5th Cir.1999) (per curiam). The defendants in Morrow were mobile home salesmen who committed fraud in helping their customers obtain financing. Id. at 285. At sentencing, the district court calculated their intended loss by adding together the face values of the loans they had procured fraudulently. Id. at 300. On appeal, the defendants challenged this calculation. Id. We began by noting that the repayment of the fraudulent loans was controlled entirely by the defendants' customers, not by the defendants themselves. Id. We found that this lack of control meant that the district court had accurately characterized the defendants as consciously indifferent or reckless about the repayment of the loans. Id. at 301 (internal quotation marks omitted). Accordingly, we held that the district court had not erred in calculating the defendants' intended loss by adding the face values of the fraudulent loans. Id. Morrow stands for the proposition that one way a defendant can recklessly jeopardize the full value of property during the commission of a crime is to place that property in the hands of a third party whom he does not control. See id. at 300-01. If transferring the property to a third party creates a significant risk that the property will be completely destroyed, then its face value may be used to determine the defendant's intended loss under the rule of Wimbish. See Morrow, 177 F.3d at 300-01; Wimbish, 980 F.2d at 316.
In United States v. Sowels , the defendant was a postal employee who stole between fifty and seventy-five letters containing credit cards in November 1991 and 110 letters with cards in January 1992. 998 F.2d at 250. He was arrested before he was able to use the 110 cards he stole in January, but after he had already made $28,540.89 in unauthorized charges on the cards he had stolen in November. Id. At sentencing, the district court calculated his inflicted loss by adding the $28,540.89 in actual charges made in November to the $351,600.00 aggregate limit of the 110 cards that were stolen, but never used, in January. See id. at 252. On appeal, the defendant challenged the propriety of using the aggregate credit limit of the unused cards stolen in January. Id. at 250-51. We affirmed his sentence. See id. at 251-52. The district court had made an explicit finding of fact that the defendant had intended to use all of the credit available under the cards. Id. at 251. We reviewed this finding for clear error. Id. Even though there was no direct support for the finding in the record, we found that it was not clearly erroneous for two reasons. See id. The first reason was that the finding was supported by the rule of Wimbish, because the defendant had planned to transfer the stolen cards to third parties whom he did not control, meaning his crime would recklessly jeopardize the full value of the cards' credit limits. Id. The second reason was that the offense was incomplete at the time the authorities intervened. Id. We stated that, [h]ad Sowels completed or withdrawn from his offense before being apprehended, he might have been able to rebut the evidence that he intended to charge the cards to their limit. Given that authorities cut short his plans, however, the district court did not clearly err. Id. See also id. at 252 ([T]his case is unique because it involves an uncompleted offense. For this reason, the district court faced the difficult task of projecting into the future Sowels's intent as to the extent to which he would use the cards.). Thus, Sowels established first, that the rule of Wimbish can be applied to credit cards, and second, that a defendant cannot easily rebut a factual finding that his intended loss was equal to the full value of property jeopardized by his crime if his fraud was never completed due to the intervention of law enforcement. See id. at 251-52.
Both Harris and Williams argue that it is improper for a sentencing court to find that a defendant intended to inflict the total loss of property that he recklessly jeopardized, citing language from some of our opinions that provides that intended loss must be calculated by looking to the defendant's actual, not constructive, intent. E.g., United States v. Sanders, 343 F.3d 511, 527 (5th Cir.2003) ([O]ur case law requires the government prove by a preponderance of the evidence that the defendant had the subjective intent to cause the loss that is used to calculate his offense level.); United States v. Hill, 42 F.3d 914, 919 (5th Cir.1995) (When reviewing the calculation of an intended loss, we look to actual, not constructive, intent ....). We recognize that this language is confusing when contrasted with the rule of Wimbish, which allows intent to be inferred from recklessness for the purpose of calculating intended loss. See Wimbish, 980 F.2d at 315-16. However, this apparent conflict can be resolved by examining the origin of the language requiring actual, not constructive, intent. We first mentioned this requirement in United States v. Henderson, 19 F.3d 917, 928 (5th Cir.1994). In Henderson, the defendant was convicted of bank fraud for making loans from one bank, of which he was the president and largest shareholder, to a second bank he had started with a friend, without disclosing to the first bank that he was a co-owner of the second bank. Id. at 919-22. The sentencing court, apparently having confused its actual and intended loss inquiries, refused to consider the possibility that the defendant had intended to inflict no loss. Id. at 927-28. Instead, it found that his intended loss was the face value of the fraudulent loans he had procured, reasoning that we intend the result of the acts that we take. Id. On appeal, we found that the district court had misapplied the rule of Wimbish, because it had found intent to inflict a loss of the loan's face value based not upon recklessness, but on the fact that an actual loss ultimately had occurred. Id. at 928. We noted that, unlike Wimbish and Sowels, which had involved stolen property, Henderson involved a fraudulent loan. Id. Obtaining a loan fraudulently is different from stealing property outright, because defendants who fraudulently obtain loans often intend to repay them in full. See id. It follows that, where the defendant intends to repay the loan or replace the property, the intended loss is zero. Id. Accordingly, we vacated the defendant's sentence and ordered the district court to consider his argument that he had intended no loss. Id. at 928-29. Thus, Henderson only established that courts could not use the fact that a defendant's crime ultimately resulted in a loss of property to find that he constructively intended to inflict any loss. See id. Such a method of calculating intended loss confuses what actually occurred with what the defendant intended to occur. See id. It was in this context that we said, [t]he Sentencing Guidelines refer to actual intent, not constructive intent. Id. at 928. It is clear from this context and from the way we have discussed Henderson in later opinions that we did not use the phrase constructive intent in the sense that it is often used in discussing the mental states of substantive criminal offenses. Compare Henderson, 19 F.3d at 928 ([T]he intended loss for stolen or fraudulently obtained property is the face value of that property.) and United States v. Hill, 42 F.3d 914, 919 (5th Cir.1995) (stating that we look to actual, not constructive, intent, but also holding the defendant responsible for the face value of fraudulently-lent securities based on the risk imposed on the victims who borrowed the securities), with Wayne R. LaFave, 1 Substantive Criminal Law § 5.2(e), at 352 (2d ed. 2003) ([T]he notion of `constructive intent' has been used by some courts; it is first asserted that intent is required for all crimes, and then it is added that such intent may be inferred from recklessness or negligence.). We did not prohibit sentencing courts from inferring intent from a defendant's recklessness, for to do so would have been in direct conflict with Wimbish and its progeny. See, e.g., Tedder, 81 F.3d at 551 (inferring intent to cause a loss from the fact that the defendant had helped third party clients whom he did not control to obtain loans, while recklessly disregarding the fact that their poor credit histories and fake social security numbers meant that they were highly unlikely to pay). [12] Instead, we held that a sentencing court cannot reject a defendant's claim that no loss was intended based purely on the fact that a loss was eventually inflicted. [13] Henderson, 19 F.3d at 928-29. An interpretation of Henderson 's constructive intent language that used the term as it is often used in discussing the intent requirements of criminal statutes would produce absurd results. In Tedder, the defendant, who had helped people with poor credit histories obtain a series of fraudulent loans with fake social security numbers, attempted to argue that it always had been his intent that the loans be repaid. Tedder, 81 F.3d at 551. He even presented credible evidence that he always instructed his clients to pay their bills on time. Id. The sentencing court calculated his intended loss as being the face value of the loans he had recklessly obtained for third parties, and he appealed, arguing the record clearly showed that his actual intent had been for his clients repay their loans. Id. We were able to reject this strained argument, because the district court could reasonably infer intended loss from defendant's reckless acts, regardless of his evidence of actual intent. See id. A rule that prohibited sentencing courts from inferring intent from a defendant's recklessness would approach effectively creating a defense capable of eviscerating the intended loss provisions of the Sentencing Guidelines for any criminal who managed to insulate his crime from the ultimate infliction of loss. It takes no great feat of the imagination to picture pickpockets selling stolen credit cards to third parties, only to claim at sentencing, Sure, I sold them the cards, but it was none of my business what they planned to do with them, or computer hackers gaining access to bank account numbers on behalf of clients, only later to claim, I don't know, and I didn't ask, what they planned to do with those numbers. We did not write Henderson to prevent the intended loss provisions of the Sentencing Guidelines from being applied to criminal middlemen who act recklessly or in willful blindness, and we decline to read it in a manner that accomplishes that result now. [14]
Under the rule of Wimbish, a sentencing court may find that a defendant intended to inflict a loss of the face value of property that was recklessly jeopardized by his crime. Wimbish, 980 F.2d at 315-16. We have consistently held that one way a defendant may jeopardize property is by transferring it to a third party whom he does not control. Morrow, 177 F.3d at 300-01. We have also held that credit cards constitute a form of property that can be recklessly jeopardized in this way. Sowels, 998 F.2d at 251; United States v. Mordi, No. 92-1675, 1993 WL 152261, at -4 (5th Cir. Apr. 21, 1993) (per curiam). Therefore, in cases where a defendant recklessly jeopardizes the full credit limit of a card by transferring it to a third party whom he does not control, the sentencing court may reasonably find that his intended loss was equal to the limit of that card. See Sowels, 998 F.2d at 251; Mordi, 1993 WL 152261, at . Although it is possible for a defendant to rebut the inference that he intended to charge a card to its limit by introducing evidence of a contrary modus operandi, this will be difficult to accomplish, so as to render clearly erroneous a contrary district court finding, if there is no evidence that his offense was complete at the time the defendant was stopped by the authorities. See Sowels, 998 F.2d at 251-52.