Opinion ID: 2613
Heading Depth: 2
Heading Rank: 3

Heading: Whether the District Court Erred in its Loss Calculations

Text: We review Guidelines sentences and non-Guidelines sentences under the same standard: reasonableness. United States v. Fernandez, 443 F.3d 19, 26 (2d Cir.2006). [A] sentence may (but need not necessarily) be vacated as `unreasonable' because some steps taken by the sentencing court in determining or imposing the sentence did not comport with the requirements of law, either substantive or procedural. United States v. Pereira, 465 F.3d 515, 519 (2d Cir.2006). An error in determining the applicable Guideline range... would be the type of procedural error that could render a sentence unreasonable.... United States v. Selioutsky, 409 F.3d 114, 118 (2d Cir.2005). Under the version of the Sentencing Guidelines applicable to the instant convictions, § 2F1.1 governed offenses involving fraud or deceit, and the total offense level was determined, in part, as a function of the loss amount. See U.S.S.G. § 2F1.1 (2000). [8] An application note to § 2F1.1 provided guidance on calculating the loss amount: As in theft cases, loss is the value of the money, property, or services unlawfully taken. ... Frequently, loss in a fraud case will be the same as in a theft case. For example, if the fraud consisted of selling or attempting to sell $40,000 in worthless securities, or representing that a forged check for $40,000 was genuine, the loss would be $40,000. There are, however, instances where additional factors are to be considered in determining the loss or intended loss: (a) Fraud Involving Misrepresentation of the Value of an Item or Product Substitution A fraud may involve the misrepresentation of the value of an item that does have some value (in contrast to an item that is worthless). Where, for example, a defendant fraudulently represents that stock is worth $40,000 and the stock is worth only $10,000, the loss is the amount by which the stock was overvalued ( i.e., $30,000). In a case involving a misrepresentation concerning the quality of a consumer product, the loss is the difference between the amount paid by the victim for the product and the amount for which the victim could resell the product received. U.S.S.G. § 2F1.1 cmt. n. 8(a) (2000); see also United States v. Stanley, 54 F.3d 103, 106-07 (2d Cir.1995). The Guidelines stated that [t]he court need only make a reasonable estimate of the loss, given the available information. U.S.S.G. § 2F1.1 cmt. n. 9 (2000). Nevertheless, a court of appeals must `determine[] whether the trial court's method of calculating the amount of loss was legally acceptable.' United States v. Rutkoske, 506 F.3d 170, 178 (2d Cir.2007) (quoting United States v. Olis, 429 F.3d 540, 545 (5th Cir.2005)) (alteration in original). The district court computed the loss amount as equal to the entire cost of the securities sold by the appellants, on the ground that the members would not have invested had they realized the true size of the sales commissions. In Dickau's case, the district court also ordered restitution for the same amount. [9] Although we defer to the district court's determination that the members would not have purchased the investment had they known that 45% of the sales price went toward commissions, this does not, in and of itself, mean that the securities the investors received in exchange for their contributions were entirely without value. After all, the investors did obtain an interest in a company engaged in producing and distributing a motion picture. Accordingly, the district court erred in not deducting from the purchase price the actual value of the instruments. [10] See United States v. Sash, 396 F.3d 515, 522-23 (2d Cir.2005) (Guidelines commentary is authoritative as to the meaning of the Guidelines if it interprets a Guidelines term and is in not inconsistent with the Guidelines text, the Constitution, or federal law); cf. Chasins v. Smith, Barney & Co., 438 F.2d 1167, 1173 (2d Cir. 1970) (employing a recission al measure of damages, rather than equating damages to purchase price, where the evil is not the price at which Chasins bought but the fact of being induced to buy and invest). [11] We are mindful that illiquid securities for which there is no public market can be extremely difficult to value. Determination of the extent to which the misrepresentations here resulted in an overvaluation of the securities cannot be an exact science, Rutkoske, 506 F.3d at 179, and we can only call on the district court to make a reasonable estimate of the loss amount, U.S.S.G. § 2F1.1 cmt. n. 9 (2000). The reasonable valuation of such illiquid assets is an exercise best committed to the sound discretion of the district court.