Court Opinion

ID: 8418925
Source: CourtListenerOpinion
Date Created: 2022-11-03 19:10:20.595693+00
Date Added: 2024-06-11T16:48:21.086327
License: Public Domain

AMBRO, Circuit Judge,
dissenting.
I believe that the District Court did not touch the bases in holding that the Government established by a preponderance of the evidence that Cherry caused at least a $500,000 loss. Thus, I respectfully dissent from the majority’s judgment in favor of the Government.
A. It Is Unclear That Cherry’s Expenditures Were Illegitimate.
There is conflicting evidence in the record concerning the amount of AMP’s loss. The District Court appeared to credit the Government’s side of the story, without explaining why it disbelieved Cherry.
As the majority notes, the Government’s loss calculation was based primarily on the Pre-Sentence Report (“PSR”), which refers to an IRS audit. The PSR states:
In December 1995, the IRS executed a search warrant on the Cherry’s residence and recovered records of the fraudulent invoices and other financial records. Analysis of the financial records showed that the AMP receipts were deposited into AET accounts at Fulton Bank by the Cherrys, and into the III accounts at the First National Bank of Maryland.... These AMP payments were the only income of AET and III. Checks were then written from the First National Bank of Maryland account ... and deposited into the Fulton Bank account of AET. Hema Cherry subsequently wrote checks from the Fulton Bank account to pay her American Express bills and to herself, which she then deposited into her own account at Harris Savings (now Waypoint Bank). The Harris Savings funds, along with Hitesh Cherry’s AMP salary from an account at Corestates Bank, were commingled to pay for personal expenses. These included vacations to Hawaii, Jamaica, Acapulco, the Grand Canyon, California, and India, as well as extensive renovations and additions to the Cherrys’ home. The couple also dined out extensively. A review by the case agent of the Cherrys’ income and expenses suggests that of the approximate[ly] $800,000 received by AET and III, between $500,000 and $600,000 was used by them for personal expenses.
However, in the appendix to his brief, Cherry provides a detailed schedule of ex*429penses indicating that $718,107 of the more than $800,000 AMP paid to AET and III represents legitimate business expenses. Moreover, he noted that the Government specifically identified only approximately $180,000 worth of personal expenses, despite the contrary statement in the PSR.
Thus, there appears to be a discrepancy between the PSR — which claims that most of the AMP-derived funds were used for the Cherrys’ personal expenses — and the appendix Cherry submitted — which indicates that most of the funds were legitimately expended. The District Court did not address, much less resolve, this discrepancy. The Government offered to show the District Court the Cherrys’ financial records, but the Court never looked at the records and therefore never confirmed the soundness of the Government’s loss-calculation analysis. We have no basis to conclude whether the Government or Cherry is correct as to how the funds at issue were expended.
B. It Is Unclear That AET’s Work Was Virtually Worthless.
The Government also justifies the loss figure by arguing the design and testing work AET performed was virtually worthless, even if Cherry did not divert the funds to his personal use. It asserts that testing is only valuable if performed by a trustworthy source and, because of Cherry’s fraud, AET was not trustworthy. In any event, the Government argues that AET never performed the final qualification testing on the two products AET contracted to design — Suregrip and Camflex.
Cherry disagrees, contending that AET provided valuable design and testing services that benefitted AMP, even though AMP ultimately decided not to produce Suregrip and Camflex. He also argues that AET never contracted to perform qualification testing and that AMP’s decision ultimately not to produce Sureflex or Camflex was not due to his fraud. He points to the testimony of an employee of both AMP and AET, Daniel Nardone, who stated that “[qualification testing could have been conducted on Camflex within one or two months. Suregrip would have been ready within six months.” Cherry also introduced into evidence a report from Richard D. Brugger, a consulting engineer, who opined that “[t]he AET test equipment is capable of reliably performing the tests which were required in the accumulation of data for Research & Development needs” and that “[t]he test procedures used at AET are appropriate for the production of data as intended for R & D design guidelines.”
Because neither party introduced any tangible evidence concerning the value of the work AET performed, the District Court’s valuation of AET’s services reflected what was in essence its resolution of a credibility contest between the Government’s witnesses and Cherry’s witnesses. The Court did not explain why it resolved the dispute in favor of the Government. It instead provided a conclusory, one-sentence explanation for the § 2F1.1 sentence enhancement — “The government has a preponderance standard. I think if we consider everything, I cannot go under the $500,000.00 figure and justify it at this point.” This explanation for enhancing Cherry’s sentence under § 2F1.1, given the parties’ sharp disagreement over both the amount Cherry diverted to personal use and the value of AET’s services, is self-evidently inadequate. See United States v. Evans, 155 F.3d 245, 253 (3d Cir.1988). (“The district court made only a conclusory one sentence statement regarding its loss determination. Although the district court’s determination need not be exact[,] ... we should not be asked to rummage through the entire record with*430out guidance from the district court as to the legal and factual basis for its determination.”).
I would therefore remand for resentencing and thus respectfully dissent.