Opinion ID: 612373
Heading Depth: 3
Heading Rank: 2

Heading: Citizens Alliance

Text: The Government objects to the District Court‟s calculation of the losses resulting from tools and equipment purchased by Citizens Alliance but actually used by others, including Fumo.7 The Government reviewed hundreds, perhaps thousands, of receipts and credit card statements in order to assemble a list of tools and equipment bought under the aegis of Citizens Alliance. It then compared this list 7 Fumo concedes that there were some “minor” arithmetical errors in calculating the loss to Citizens Alliance, which would pin the loss at $1,077,943, rather than the $958,080 calculated by the District Court. He contends, however, that these errors were insufficient to affect his offense level. They are, however, sufficient to affect Arnao‟s offense level. See Section IV.A., infra. 40 against the inventory of Citizens Alliance and discussed with its employees whether it would ever have made any use of particular items. Finally, it assembled two charts identifying tools and equipment purchased by Citizens Alliance that it believed were used for the benefit of Fumo and his aides, though it conceded that the charts were approximate. Fumo, in testifying, reviewed the charts and denied having received roughly $50,000 worth of the approximately $130,000 in equipment on the charts. The District Court appears to have credited this assertion and reduced the loss by roughly that amount. In light of this credibility determination, we cannot say on this record that the District Court‟s factual finding was clearly erroneous. We therefore affirm the District Court‟s reduction in the loss amount attributable to the tools and equipment.8
The Government sought to assess $574,000 worth of losses for rental income and unnecessary improvements to the property on Tasker Street, which Fumo induced Citizens Alliance to purchase and lavishly furnish, and then used as his Senate office with little payment from the Senate for rent or maintenance. The District Court, however, credited against that figure the fair market value of the property, which ultimately resulted in a significant credit to Fumo. The Government appeals that decision and its reasoning, and argues in the alternative that if Fumo is given credit for the 8 Judge Garth disagrees that the District Court did not err. He would hold that the evidence introduced by the Government, and the exhibits that were put in evidence by the Government, detailing the cost of tools that were purchased and were used by Fumo for personal purposes ($93,409.52) should have been added to the loss calculation in full. The District Court‟s ruling in this regard eliminated the findings made by the jury beyond a reasonable doubt and significantly the court did not issue its own factual findings until after the sentencing hearings were over. In so doing, the Government was not able to argue that the Court‟s findings were clearly erroneous. 41 fair market value of the building, the District Court should set against it the costs of acquiring, maintaining, and improving the building. Application Note 3(E)(i) to Section 2B1.1 of the Guidelines provides that “[l]oss shall be reduced by . . . [t]he money returned, and the fair market value of the property returned and the services rendered, by the defendant or other persons acting jointly with the defendant, to the victim before the offense was detected.” (emphasis added). The use of the word “returned” signifies that for a credit to apply, the defendant must have either returned the very same money or property, or have provided services that were applied to the very same money, value, or property that was lost or taken during the fraud. See also United States v. Radtke, 415 F.3d 826, 842 (8th Cir. 2005) (noting that fringe benefits paid to defrauded employees by the defendant were “not . . . the sort of credit against loss contemplated by the guidelines” because they were “other benefits provided to employee-victims that do not correlate directly with the amounts withheld from the third-party administrator as part of the fraud.” (emphasis in original)). Here, the Government argues that the money or value taken was the maintenance and improvement costs as well as the rent that Fumo was not charged by Citizens Alliance as owner of the property. Fumo did not pay or refund any of the maintenance, improvements, or lost rent himself, which would have been “money returned” under Application Note 3(E). Nor did he render services related to these loses, such as assisting with the maintenance or improvements himself. The Government did not argue that the loss from the fraud included the funds spent by Citizens Alliance on purchasing the property. Thus, because neither that property itself nor its monetary value were ever alleged to have been taken as part of the fraud in the first place, they could not be “returned” to Citizens Alliance under Application Note 3(E) and credited against the losses. To explain the error in the District Court‟s ruling in a 42 less technical way, the maintenance, improvements, and rental income the Government identified as losses were conceptually independent and collateral to any value received because of the purchase of the building. They would have been costs even if Citizens Alliance had owned the building beforehand, or even if it had been a lessee rather than owner, who subleased the space to Fumo. Fumo essentially seeks to set the value of an independent “good” he purportedly secured for Citizens Alliance against the costs his frauds inflicted on it.9 He offers no cases in support of this theory of loss calculation, which is unsurprising, as it would allow, for instance, an officer of a corporation who embezzled from his employer to claim credits against the loss caused by the embezzlement for overall increases in the company‟s assets under his watch. Accordingly, we conclude that the District Court‟s decision to credit the value of the Tasker Street property against the losses resulting from Citizen Alliance‟s lost rent, improvements, and maintenance costs was an abuse of discretion.
Fumo induced Citizens Alliance to commission a painting of the Gazela, a historic ship, from a local painter for $150,000. As the Government‟s investigation and media reports surfaced, Fumo directed Citizens Alliance to donate the painting to the ISM, rather than retain it in his office. The Government argues that this entire amount should count as loss, because the painting was otherwise unwanted and it and its prints are now in storage. The District Court credited the testimony of an appraiser as to the value of the painting and 9 Further, even if it were appropriate to grant a credit for the fair market value of the building, it would be necessary to set off the costs associated with the purchase and maintenance of the building. Obviously, any gain experienced by Citizens Alliance due to the value of the building can only be calculated after subtracting what it paid to acquire the building in the first place. 43 the prints and the Government does not appear to have offered a competing formal appraisal. Accordingly, the District Court‟s factual finding is entitled to significant deference, and we will not disturb it.10