Opinion ID: 1457672
Heading Depth: 3
Heading Rank: 2

Heading: analysis

Text: Dedman contends that the district court erred when it calculated the government's loss by including the income taxes that were withheld from the SBP payments in addition to the net-of-tax payments actually received. The resolution of this question is important because if withheld taxes are not included, then the government's total loss would be below $200,000, and Dedman would receive an offense level addition of only ten levels. U.S.S.G. § 2B1.1(b)(1)(F). If, however, withheld taxes are included, then the total loss would exceed $200,000, and Dedman would receive an offense level addition of twelve levels. U.S.S.G. § 2B1.1(b)(1)(G). Whether withheld taxes can be considered part of the government's loss in calculating a sentence enhancement under U.S.S.G. § 2B1.1 is a question that neither this court, nor any other, appears to have addressed. As a matter of first impression, we conclude that the withheld taxes were properly included in the loss determination. In resolving this novel issue, we construe the Guidelines. According to an application note to the 2005 Guidelines, loss is the greater of actual loss or intended loss. U.S.S.G. § 2B1.1 cmt. 3(A). An application note defines actual loss as the reasonably foreseeable pecuniary harm that resulted from the offense. U.S.S.G. § 2B1.1 cmt. 3(A)(i). In contrast, intended loss is the pecuniary harm that was intended to result from the offense and it includes intended pecuniary harm that would have been impossible or unlikely to occur. U.S.S.G. § 2B1.1 cmt. 3(A)(ii). The Guidelines' comments on government benefits provide some further guidance. When addressing government benefits, an application note states that loss shall be considered to be not less than the value of the benefits obtained by unintended recipients or diverted to unintended uses, as the case may be. U.S.S.G. § 2B1.1 cmt. 3(F)(ii) (emphasis added). This provision is helpful in two ways. First, by saying not less than the value of benefits obtained, the Guidelines suggest that the dollar amount that the defendant receives serves as a minimum value for the government's loss, but that the government's loss can exceed that value. In this case, that permits the court to consider the withheld taxes. The government-benefits commentary also suggests that the value of the benefits obtained is inclusive of more than simply the sum added to the defendant's bank account. Because the SBP payments may be subject to income taxation, the only way a defendant could receive in excess of $200,000 is to file a claim for significantly more money. Thus, it can be said that Dedman received $230,000 worth of value even if she received only slightly more than $200,000 in checks; using the amount of the claim, rather than simply the net amount paid to her, reflects a better measure of the value of her true benefit. Cf. Triana, 468 F.3d at 323 ([C]ourts have consistently held that in calculating loss, `substitution of defendants' gain is not the preferred method because it ordinarily underestimates the loss.' (quoting United States v. Snyder, 291 F.3d 1291, 1295 (11th Cir.2002))). That the amount pocketed by Dedman underestimates the government's true loss is further confirmed by considering the SBP's gross payments. The SBP may have only paid to Dedman an amount less than $200,000, but it also paid a considerable sum to state and federal tax agencies on Dedman's behalf. Dedman claims that withheld taxes should not be included in the government's loss calculation as though the withheld funds simply stayed with the SBP, ignoring the fact that the SBP paid the withheld taxes to the appropriate taxing agencies. Thus, the withheld taxes should be considered part of the government's loss. This analysis applies equally to Dedman if the withheld taxes were paid on Holland's behalf for any payments attributed as income to Holland. To exclude the withheld taxes from the calculations of loss would create unfairness under the Guidelines. The Guidelines tie culpability to the length of punishment, and exclusion of withheld taxes would create the possibility that less culpable defendants would be punished more. See United States v. McBride, 362 F.3d 360, 375 (6th Cir.2004) (citing U.S.S.G. § 2B1.1). If withheld taxes were not included in the loss calculation, then someone who filed a false claim for $200,000.01 for some non-taxable benefit would be punished more than someone who filed a false claim for $230,000 that was subject to $30,000 in withheld taxes. Thus, not to include withheld taxes would be to break the Guidelines' intended correlation between intended loss and the amount of punishment. Recently, in United States v. Coker, 514 F.3d 562 (6th Cir.2008), we dealt with a case where government prosecutors allowed the government loss attributed to one defendant to be reduced by the amount that the defendant paid in taxes on the fraudulent payments. That case does not alter our analysis in this case. In Coker, the government volunteered to reduce its loss by the amount of taxes that the defendant paid, so the loss calculation was never at issue in that case. Furthermore, Coker dealt with another defendant in the same scheme, not the defendant who received a favorable loss calculation, so the validity of the loss calculation was not before the court. Most importantly, we acknowledged in that case that [t]he prosecutor's decision to give Walsh a credit for the taxes he paid as `money returned to the victim' under U.S.S.G. § 2B1.1 comment (n.2(E)(i)) was not required by the Guidelines.  Coker, 514 F.3d at 569 (emphasis added). For all of these reasons, we therefore hold that withheld taxes are properly considered part of the government's loss under § 2B1.1. We affirm the district court's calculations of the amount of loss.