Opinion ID: 592297
Heading Depth: 2
Heading Rank: 1

Heading: enhancement under guidelines section 2f1.1

Text: 29 Guidelines § 2F1.1(b)(1) allows sentence enhancement based on the dollar value of a loss exceeding $2,000. Where fraud results in actual loss, that value will be used for enhancement under Guidelines § 2F1.1. United States v. Smith, 951 F.2d 1164, 1166 (10th Cir.1991). If there was no actual loss or if a probable or intended loss was greater than the actual loss, the larger figure will be used. Application Note 7, Guidelines § 2F1.1; Smith, 951 F.2d at 1166; United States v. Palinkas, 938 F.2d 456, 465 n. 19 (4th Cir.1991); United States v. Schneider, 930 F.2d 555, 556 (7th Cir.1991). 30 In the instant case, there was no actual loss because Santiago's attempt to defraud his insurance company was prevented by police intervention. The district court therefore turned to Application Note 7, Guidelines § 2F1.1, concluding, in pertinent part, that: 31 The illustration [Application Note 7] says you take the amount which was intended or probable. Well, that really doesn't cover this, because the defendant was intending to defraud the insurance company of $11,000. That was the claim he put in. Now, as a practical matter, it wouldn't work for that, because the blue book was about $4,800, and that's all the insurance company would have paid out under any circumstances. So the probable and intended are not the same in this instance. Under those circumstances, I think that the guidelines would contemplate the use of the intended amount. Tr. Vol. II, p. 8 (emphasis added). 32 Accordingly, the district court enhanced Santiago's sentence three levels under Guidelines § 2F1.1(b)(1)(D) for an intended (rather than probable or actual) loss exceeding $10,000. 33 As a preliminary matter, we agree with the district court's approach in disparately treating probable and intended losses as those terms are disjunctively provided in Application Note 7, Guidelines § 2F1.1. The Note's language mandates that treatment, and obviously was included to encompass the myriad factual circumstances in which, although they often may be equal, the loss that probably would have occurred had the crime been completed differs from the loss intended. 34 In the instant case, however, we conclude as a matter of law that the intended loss was equal to the probable loss of $4,800. This case presents the question, apparently of first impression, whether the loss a defendant subjectively believes he or she can, and intends to, impose on a fraud victim governs for sentencing under Guidelines § 2F1.1 when the economic reality is that the probable or actual loss could not in any circumstances have exceeded a discernible lesser amount. We answer that question in the negative, and hold that, whatever a defendant's subjective belief, an intended loss under Guidelines § 2F1.1 cannot exceed the loss a defendant in fact could have occasioned if his or her fraud had been entirely successful. 35 Our conclusion results from the Guidelines' definitions of loss and our cases addressing loss valuation. Guidelines § 2F1.1 itself does not define the meaning of loss, but its Application Note 7 refers to the commentaries under § 2B1.1 for evaluating losses. Section 2B1.1's Application Note 2 states that: 36  'Loss' means the value of the property taken, damaged, or destroyed. Ordinarily, when property is taken or destroyed the Loss is the fair market value of the particular property at issue.... In cases of partially completed conduct, the loss is to be determined in accordance with the provisions of § 2X1.1.... (emphasis added). 37 While not directly applicable, Guideline § 2X1.1's Application Note 2, regarding attempted thefts, similarly indicates that the value of the items the defendant intended to steal should be considered for sentencing under that section. 38 The Guidelines thus imply that the value of the property taken--by fraud, deceit or otherwise--is the upper limit of any loss valuation upon which a sentencing enhancement may be based. In making that observation, we do not imply that the defendant's actual gain or victim's actual loss defines a loss limit for sentencing purposes. To the contrary, we have applied section 2B1.1's definition of loss literally to affirm sentencing adjustments based on the value of the property taken when it exceeded the actual harm suffered by the victim. See United States v. Johnson, 941 F.2d 1102, 1114 (10th Cir.1991) (affirming sentence enhancement based on value of fraudulently acquired real estate that exceeded actual loss); United States v. Westmoreland, 911 F.2d 398, 399 (10th Cir.1990) (fair market value of items taken that exceeded victim's ultimate loss constituted loss for purpose of sentence enhancement). 8 Nor has timely police intervention to prevent or diminish an actual loss affected our determination of the defendant's culpability for sentencing purposes. Id. (both cites). 39 We have not hesitated, however, to reverse sentencing adjustments based on estimates or valuations of loss that bore no relation to economic reality. Thus in Smith, a case involving fraudulent acquisition of federally insured real estate loans, we determined that the net, rather than gross, loss measured by the difference between the value given and received controlled when imposing sentencing enhancement points. Noting that any approach other than net loss valuation ignores reality, we concluded that the record did not indicate: (1) that the defendant had realistically intended the loss for which he was sentenced under Guidelines § 2F1.1, or (2) that a loss in that amount was probable. Smith, 951 F.2d at 1168; See also Schneider, 930 F.2d at 559 (sentence adjustment under Guidelines § 2F1.1 reversed because estimate of loss bore no relation to economic reality). 40 We reached a similar result in Whitehead, where the defendant had fraudulently obtained a lease and option to buy a home. His sentence had been enhanced under Guidelines § 2F1.1 based on a loss valuation that included the home's value. We reversed, declining to accept the government's contention that the mere purchase of an option equated with an attempt to purchase the home itself and therefore the home's full value should have been considered part of the loss. Whitehead, 912 F.2d at 452. On the facts there presented, it was far from certain that the defendant would have been successful in exercising his option to purchase or that the full value of the home would have been lost. Id. 41 The principle that emerges when the Guidelines are considered in light of the above cited cases is that the fair market value of what a defendant has taken or attempted to take defines the upper limit for loss valuation under Guidelines § 2F1.1. Although the language of that Guidelines section leaves room for a contrary interpretation, we conclude that a valuation or estimate of loss that exceeds that limit impermissibly ignores economic reality. See, e.g., Smith, 951 F.2d at 1167; Schneider, 930 F.2d at 559; Whitehead, 912 F.2d at 452. 42 In the instant case, Santiago filed a fraudulent claim seeking $11,000 from his insurance company. Nothing suggests that he would not have taken that sum if he could have. The record establishes, however, that Santiago's subjective belief in his car's value was at odds with the economic reality that his insurance company would not have paid more than the car's $4,800 blue book value in any circumstances. See Tr. Vol. II, p. 8. 43 Obviously, factual impossibility is not a defense to the crime for which Santiago was convicted. By imposing a base offense level of 6 irrespective of the amount of loss, however, Guidelines § 2F1.1 allows punishing a culpable defendant who is responsible for a fraudulent or deceitful taking of even de minimis value. That Guidelines section then allows awarding additional punishment points for different levels of proven loss over $2,000. 44 As we have concluded, however, such sentencing enhancements may be based only on an economically realistic valuation of property a defendant has taken or attempted to take. 9 We hold as a matter of law that, for purposes of sentencing enhancement under Guidelines § 2F1.1 and its Application Note 7, a defendant cannot be punished for an intended loss greater than the economic worth of the property to which the fraud is directed. Thus the probable and intended loss are identical in this case. Although it is clear that Santiago's sentence must be enhanced, the government did not prove a basis for the full enhancement adopted by the district court. We therefore reverse the district court's determination of loss and remand for resentencing using the correct loss valuation. 45