Opinion ID: 3010740
Heading Depth: 2
Heading Rank: 1

Heading: Necessity of Findings on Ability to Pay a Fine

Text: Electrodyne asserts that on remand, our order that the district court make a finding on Electrodyne's ability to pay should be accompanied by a directive that any fine imposed should not exceed $140,000. In support of this assertion, Electrodyne correctly states that the stipulation between it and the government provided the fine should not exceed $140,000, see DA 58-59, and that the government affirmed its agreement at the sentencing hearing. See DA 143. In further support of its position, Electrodyne argues the presentence report confirmed Electrodyne's inability to pay more than the stipulated fine, Appellant's Reply Brief, p. 2, and that by adopting the factual findings of the presentence report the district court so found. While we agree the district court adopted the factual findings of the presentence report, see DA 153, by signing the Judgment in a criminal case,2 DA 149-153, we cannot accept that the _________________________________________________________________ 2. The Judgment in a criminal case is the formal judgment entered against a criminal defendant. On that form, there is a box that can be checked stating: The court adopts the factualfindings and guideline application in the presentence report. DA 153. This box was checked in the instant case. See id. We are not unaware that the mark may have been clerical error; nonetheless, we must assume it is an accurate reflection of the district court's position. 7 probation officer adopted any factual position with respect to the financial condition of Electrodyne. A constant problem faced by a district court in establishing fines is that the defendant controls what information flows to the probation office. The problem is exacerbated both by the fact that probation officers rarely have training in accounting and by defendant's status as a corporation, which enables defendant to choose to be less than forthcoming because, by definition, a corporation cannot be incarcerated. That is exactly what happened in this case: At the request of the probation office, the corporate defendant has provided corporate income tax returns for the last three fiscal years. Electrodyne does not have audited financial statements for the past three years; however, provided [sic] a financial statement with the accountant's compilation for the year end December 31, 1994. A compilation is limited to presenting in the form of financial statements information that is the representation of management. The accountant did not audit or review the accompanying financial statements and, accordingly, does not express an opinion or any other form of assurance on them. Management elected to omit substantially all of the disclosures and the statement of cash flows required by generally accepted accounting principles. If the omitted disclosures and statement of cash flows were included in the financial statements, they might influence the user's conclusion about the Company's financial position, results of operations, and cash flows. Accordingly, these financial statements are not designed for those who are not informed about such matters. Presentence report at 27, P 138 (emphasis added). The accountant expressly declined to render an opinion or to find any assurance of the accuracy of Electrodyne's financial statements and noted the defendant declined to supply other documentation. In effect, the accountant was saying the financial information supplied by Electrodyne 8 was insufficient to make a determination. Given the facts contained in the presentence report, we hold the probation officer made no factual finding on ability to pay a fine. Given that state of affairs, we decline to direct the district judge to impose a fine not exceeding $140,000. We do not believe the district judge must be a puppet dancing to whatever financial disclosure strings a defendant corporation wishes to pull. We can think of no reason why the district judge does not have the power to require production of necessary financial documents so as to have a basis in fact for any fine which is to be imposed. Should the defendant corporation fail to producefinancial documentation requested by the probation office and/or the court, the necessity for the district judge to have a basis in fact for establishing the amount of fine is reduced. Similarly, the sentencing judge is not controlled by, but may accept, a fine amount negotiated by the corporate defendant and the government. If the judge accepts the negotiated fine, no detailed finding of ability to pay is necessary because the defendant has implicitly acknowledged its ability by virtue of the agreement. Section 3572(a)(1) of Title 18 of the United States Code mandates that when a court imposes a fine and determines the amount, time for payment and method of payment, the court must consider, inter alia, the defendant's income, ensuring capacity and financial resources. Further, it is well settled in this circuit that[t]he district court must make findings regarding a defendant's ability to pay a fine. United States v. Seale, 20 F.3d 1279, 1284 (3d Cir. 1994). Where the court has created enough of a factual record that it is clear that it considered a defendant's ability to pay, its findings may be deemed adequate. Id. at 1284. Here the district judge failed to make any findings pertaining to imposition of afine. Without factual findings there can be no meaningful appellate review. Ordinarily, we would only vacate the fine portion of the sentence and remand for resentencing. However, as discussed in Section B below, the entire sentence must be vacated. Therefore, we will vacate and remand with instructions to make factual findings on both the ability to pay a fine and the time within which the fine can be paid. 9 B. The District Court's Reliance Upon Disputed Matters Rule 32(c)(1) requires that with respect to each disputed matter the court must make either a finding on the allegation or a determination that no finding is necessary because the controverted matter will not be taken into account in, or will not affect, sentencing. Fed. R. Crim. P. 32(c)(1). A finding on a disputed fact or a disclaimer of reliance upon a disputed fact must be expressly made. See United States v. Murello, 76 F.3d 1304, 1317 (3d Cir. 1996); Furst, 918 F.2d at 408. Further, the Rule requires that the findings and determinations be appended to a copy of the presentence report. See Fed. R. Crim. P. 32(c)(1). This Rule is strictly enforced and failure to comply with it is grounds for vacating the sentence. See Furst, 918 F.2d at 408; U.S. v. Blanco, 884 F.2d 1577, 1580-1582 (3d Cir. 1989). Electrodyne asserts it made numerous objections to the presentence report and the district court neither made findings regarding the disputed issues nor expressly disclaimed reliance on the disputed matters. The government concedes the record supports this allegation. After Electrodyne's objections, see DA 131-134, were articulated to the district court, see DA 136-141, the court rejected some of the objections and then stated,Now, the other objections do not affect the guideline.  They don't affect my determination as to sentencing. DA 141. However, the judgment order noted that the court adopt[ed] the factual findings and guideline application in the presentence report. DA 153. At best, the record is ambiguous as to the district court's reliance upon the disputed matters; at worst, the record reflects a direct conflict with Rule 32(c)(1)'s mandate. Electrodyne's sentence will be vacated and the case will be remanded for resentencing consistent with Rule 32(c)(1). C. The District Court's Calculation of the Applicable Guideline Fine Range for Count 10 Electrodyne argues the district court incorrectly assessed the total loss figure used to determine the base fine pursuant to U.S.S.G. S 8C2.3 and S 8C2.4. More specifically, the court allegedly equated the stipulated restitution with a stipulated loss when, in fact, the 10 restitution was not an accurate reflection of the loss. In addition, Electrodyne asserts the court erroneously found the corporation had 50 or more employees, which increased the fine range under U.S.S.G. S 8C2.5(b)(4). The government agrees that the district court did not make sufficient findings to afford meaningful appellate review. Although the parties do not characterize this ground for appeal as a failure to comply with Rule 32(c)(1), it is apparent that such a problem has been presented. Electrodyne challenged the presentence report's calculation of the loss as the same figure to which the parties stipulated for restitution. See Presentence report at 19, P 108; DA 137-141. Electrodyne explained to the district court that the restitution amount inflated the amount of loss because some of the loss figures were double counted and some of the restitution was being paid in kind rather than in money. See DA 137-141. The court responded, I'm not buying into the argument. The fact of the matter is if this figure is good enough for restitution, and Ifind it is, it's good enough to make a loss, an analogy as [sic] appropriate loss figure. DA 141. Not only is this finding on the disputed issue of loss not appended to a copy of the presentence report but the nature of the finding also precludes meaningful appellate review of the issue. The conclusory statement that restitution and loss are equatable does not sufficiently address the points raised by defendant so as to constitute a finding or determination as required by Rule 32. The issue of whether Electrodyne satisfied the 50 or more employees basis for increasing the culpability score underlying the fine range presents a similar problem. U.S.S.G. S 8C2.5(b)(4). The presentence report stated that Electrodyne had approximately 50 people, presentence report at 26, P 134, but Electrodyne argued to the district court that its workforce consisted of fewer than 50 employees on average and only at times reached 50. See DA 136-137. Electrodyne asserted that the guideline provision should be based on the average number of employees and, therefore, should not be applied to Electrodyne. See id. The government did not take a position on the issue and the court stated, I'll rule against you on that. DA 137. This 11 summary dismissal of Electrodyne's argument is insufficient to offer this Court a basis for review. At a minimum, the district court must offer a factual basis for rejecting Electrodyne's assertion that its workforce did not satisfy the criterion, including a factual finding as to the number of days Electrodyne had 50 or more employees in whatever the district court determines is the relevant time period. The presentence report's statement that approximately 50 people were employed by Electrodyne cannot serve as a basis for finding that the 50 or more criterion was actually met. Accordingly, upon remand, the court shall make findings pursuant to Rule 32(c)(1) on the amount of loss and the number of employees for the purpose of determining Electrodyne's fine. A True Copy: Teste: Clerk of the United States Court of Appeals for the Third Circuit 12