Opinion ID: 203270
Heading Depth: 2
Heading Rank: 1

Heading: The Amount of Loss in the Guidelines Offense Level

Text: We review the district court's interpretation and application of the Guidelines de novo; we review related findings of fact, including the court's calculation of amount of loss, for clear error. See United States v. McCoy, 508 F.3d 74, 78 (1st Cir. 2007); United States v. Flores-Seda, 423 F.3d 17, 20 (1st Cir.2005). In fraud cases such as this one, a defendant's Guidelines offense level begins with a base level of six. U.S.S.G. § 2B1.1 (a)(2). Levels may be added depending on the amount of loss the victim suffered as a result of the defendant's crime; an amount of loss greater than $2.5 million but less than $7 million yields eighteen levels on top of the original six. See id. § 2B1.1(b)(1)(J). The Guidelines commentary instructs that loss in this instance should be the greater of actual loss or intended loss. Id. § 2B1.1 cmt. n. 3(A). We recently clarified that intended loss in these circumstances is a term of art meaning the loss the defendant reasonably expected to occur at the time he perpetrated the fraud. See McCoy, 508 F.3d at 79 (also remarking that expected loss would have been a better term in the Guidelines commentary than intended loss). In other words, for purposes of determining a defendant's sentence (but, importantly, not the amount of restitution he may be required to pay), [4] the Guidelines anticipate that the defendant will be punished commensurate with the degree of loss he reasonably expected to occur as long as this amount is greater than the victims' actual lossincluding where the victims actually incurred no loss at all. See id. At sentencing, the district court first determined the total amount of the loan issued for each of the flipped properties, and subtracted from that number the considerably lower amount the land-flippers paid for the piece of property in question. This latter quantity served as a proxy for the true amount of the security the lender held on the property. After performing this calculation for each of the more than 100 flipped properties, the district court added the results together to arrive at a total amount of intended loss in excess of $2.5 million; the court did not pinpoint an exact amount of loss. We recently sanctioned this methodology in McCoy another case involving land-flipping in the Springfield areaas consistent with the Guidelines commentary's instruction that [t]he court need only make a reasonable estimate of the loss. U.S.S.G. § 2B1.1 cmt. n. 3(C) (emphasis added). We explained as follows: As McCoy was obtaining loans for individuals with low income and poor credit, he couldand shouldhave expected that the banks would probably recover only the value of the mortgaged properties. Intended loss was therefore the value of the loans less the expected value of the properties. The district judge determined that the expected value of the properties at the time of the frauds was the price paid for the properties. The land-flipping in this case tended to occur rapidly, with homes being sold to new purchasers just weeks or even days after being purchased for use in the frauds. Thus, the purchase price paid by those engaged in the scheme was a reasonable proxy of the value of the collateral at the time the frauds occurred. . . . McCoy, 508 F.3d at 79. Given that the underlying facts in this case are virtually identical to those in McCoy, [5] we see no reason to depart from our conclusion there: the district court's loss estimate was well within the bounds of what is reasonable. Despite McCoy, Innarelli argues that he should not be held responsible for the entire difference between the land-flippers' purchase price and the sale price with respect to each and every piece of property, for two reasons. First, he claims he never intended the buyers to default on their mortgages and he never intended the lenders to foreclose; as a real-estate lawyer, his reputation and continued good business depended on the success of the property transactions he helped to effect. Second, some of the buyers were able to continue making payments and did not default on their loans. Even when buyers defaulted, moreover, many of the properties in fact appreciated in value after the frauds and before the lender resold them after foreclosure, and so many of the lenders suffered no actual loss as a result of the scheme. In fact, some even turned considerable profits. Both these arguments must fail in light of what we have said above. Notwithstanding the Guidelines commentary's use of the word intended, we focus our loss inquiry for purposes of determining a defendant's offense level on the objectively reasonable expectation of a person in his position at the time he perpetrated the fraud, not on his subjective intentions or hopes. See id. [6] Moreover, as already noted, it is immaterial that many of the victims actually incurred no loss. See id. As the district court aptly stated, [l]oss in a fraud case is a yardstick for moral culpability. Accord id. (intended loss is a measure for the defendant's culpability). Where, as here, the defendant reasonably should have expected that loss would result, he can and generally should be punished more severely to account for his greater level of moral culpability, even where the victim has managed to make money in spite of the fraud. Finding no error in the district court's calculation of Innarelli's Guidelines offense level, we move on to Innarelli's next sentencing-related challenge.