Court Opinion

ID: 2995023
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:17:59.730788+00
Date Added: 2024-06-11T11:45:23.580780
License: Public Domain

In the
United States Court of Appeals
For the Seventh Circuit

No. 00-4191

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

SCOTT P. LOWELL,

Defendant-Appellant.

Appeal from the United States District Court
for the Southern District of Illinois.
No. 99-CR-40018-GPM--G. Patrick Murphy, Chief Judge.

Submitted December 11, 2000/1--Decided June 20, 2001

  Before MANION, DIANE P. WOOD, and EVANS,
Circuit Judges.

  EVANS, Circuit Judge. A little over a
year ago, while resolving the first
appeal in this case, we summarized the
situation in the first paragraph of an
unpublished order that said:

After founding CD Masters, a computer
company that began to do very well, very
soon, 19-year-old Scott Lowell looked
like he might well be following in Bill
Gates’ footsteps. A mere 6 years later,
however, Lowell strayed far off the how-
to-be-a-billionaire path--CD Masters went
belly-up, Lowell falsified the company’s
bankruptcy petition, got caught, got
charged with a federal crime, pled
guilty, and was sentenced to serve 18
months in jail and pay a $2,500 fine. He
was also ordered to pay $130,000 in
restitution. Now the only thing Lowell
and Gates share is a fervent belief that
they have been wronged by federal
district court judges.

  Our order, issued on April 28, 2000,
went on to reject all, save one, of
Lowell’s arguments. Although we found no
abuse of discretion by the district court
in ordering Lowell to pay $90,000 in
restitution (a direct loss to the
bankruptcy estate), we thought the
additional restitution ordered--$40,000
intended to compensate the trustee for
her additional, unnecessary labor--needed
a few more turns on the lathe. We
remanded the case to the district court
to "decide what, if any, restitution
beyond $90,000 should be ordered." So our
remand was, to use an appropriate
adjective, limited.

  When the case returned to the district
court, additional testimony from the
trustee was offered and the court found
the trustee to be one of Lowell’s
victims, and so Lowell was ordered to pay
$25,906.25 in restitution to her. Now
Lowell appeals again, raising a number of
issues that are far beyond our limited
remand and deserve little comment. For
instance, Lowell argues that restitution
is precluded because it violates the rule
announced in Apprendi v. New Jersey, 530
U.S. 466 (2000), as the information to
which he pled guilty did not contain
allegations regarding the applicability
or amount of restitution sought by the
government. We will not consider this and
similar arguments because they are
outside the scope of our remand, but that
causes no particular harm to Lowell as
the contention is without merit in the
first place. See United States v.
Behrman, 235 F.3d 1049, 1054 (7th Cir.
2000). Similarly, Lowell’s argument that
a violation of 18 U.S.C. sec. 152(3)--his
offense of conviction--is not one to
which the Mandatory Victim’s Restitution
Act applies is waived both because he did
not raise the issue in the district court
during his original sentencing or before
us during his first appeal and because it
is an issue that is beyond the scope of
our limited remand. And again, were we
inclined to consider this argument on its
merits, it would fail, as the MVRA, we
think, clearly applies.

  So we turn to Lowell’s last-ditch
argument that a trustee is not a proper
"victim" under the MVRA. It is true that
at the original sentencing hearing,
neither the government nor the trustee
requested restitution for the trustee. It
was ordered, sua sponte, by the district
judge after he heard evidence of the
tremendous amount of unnecessary effort
expended by the trustee as a result of
Lowell’s attempt to cover up his crime.
That this was an appropriate concern,
ironically, was acknowledged by Lowell’s
counsel at sentencing, when he said:
As to the amount of loss, I think the
only thing that is directly attributable
would be the additional time of the
trustee that she had to devote to this.
And I will say that the time of the
trustee is a loss that should be
considered. The time of the trustee--and
the extra time, not the time that she
would have devoted otherwise . . . .

  The issues presented now are whether the
trustee in this case is a proper "victim"
within the meaning of the MVRA and, if
so, what is the proper measure of her
damages. The trustee is a victim if she
is a "person directly and proximately
harmed as the result of the commission of
an offense for which restitution may be
ordered . . . ." 18 U.S.C. sec.
3663A(a)(2). The plain language of this
statute suggests to us that the trustee
was indeed a victim of Lowell’s
fraudulent statements on CDM’s bankruptcy
petition which, again, he admitted were
made to conceal assets. The bankruptcy
code provides for the employment of
private attorneys as bankruptcy trustees
in all districts and empowers them to
administer bankruptcy cases filed in
those districts. See 11 U.S.C. sec. 321
et seq. The trustee in our case, a
private attorney, was a chapter 7 "panel
bankruptcy trustee" called into service
by the United States Trustee’s Office. In
addition to her duties as a panel
trustee, she retains her private
bankruptcy practice. For this reason, a
panel trustee is in a far different
position than are direct, full-time,
government employees. Lowell’s argument,
which attempts to analogize the trustee
here to governmental employees (like an
IRS auditor or a governmental
investigator) who are not entitled to
restitution for performing their duties,
misses the mark. Moreover, Lowell’s
analogy also fails for the reason
identified by Judge Murphy in the
district court at the resentencing
hearing:

that [the government has] investigating
agents and prosecuting attorneys implies
that there is wrongdoing criminal conduct
in the first place and that’s the reason
they’re there. The bankruptcy scheme, on
the other hand, doesn’t suggest that
there is wrongdoing or criminal conduct.
Rather, it is expected that everyone will
conduct themselves straightforwardly and
honestly and testify truthfully and debts
will be discharged and creditors will be
paid and security interest will be
recognized and commerce will go on. . . .
So, I see, I mean, I don’t think your
analogy holds.

  Bankruptcy panel trustees are, of
course, compensated for their services.
In addition to a $60 fee paid to the
trustee by the government for every
bankruptcy case she closes, a panel
trustee’s compensation in a given case is
based upon a percentage of the value of
the assets liquidated and disbursed to
the estate’s creditors. It is obvious,
therefore, that when Lowell fraudulently
misstated the extent of CDM’s assets in
the admitted effort to conceal them from
the trustee, he "directly and proximately
harmed" the trustee herself, as the fraud
prevented her from easily identifying,
seizing, liquidating, and dispersing the
concealed assets. This, of course,
reduced her compensation and increased
her costs.

  The Court of Appeals for the First
Circuit has specifically recognized that
the payment structure we just described,
and the effect concealment of estate
assets has on her compensation, renders a
chapter 7 trustee a "victim" of
violations of sec. 152(1) and (3) for
purposes of applying the "multiple
victim" enhancement of sec. 2F1.1 of the
sentencing guidelines. In United States
v. Shadduck, 112 F.3d 523, 531 (1st Cir.
1997), the court observed:

[A]s the representative of the debtor
estate, see Bankruptcy Code sec. 323(a),
11 U.S.C. sec. 323(a), it is incumbent
upon the trustee to collect and reduce to
money all nonexempt assets of the estate,
id. sec. 704(1). Accordingly, although
the trustee has no pre-petition claim to
property of the debtor and therefore does
not qualify as a "creditor," a prescribed
portion of the net recoveries from any
"property of the estate" administered by
the trustee comprises a priority cost of
administration as provided in [the
chapter 7 trustee compensation provisions
of the] Bankruptcy Code sec.sec. 326(a),
330(a)(1), 503(b)(1)(A) & 507(a)(1).
Consequently, not only creditors but the
chapter 7 trustee as well may be
victimized directly by a bankruptcy fraud
to the extent it deprives the estate of
assets otherwise subject to
administration.

Id. at 531. Recognizing that the case is
relevant only by analogy, we nevertheless
conclude that the direct and proximate
harm described by the First Circuit,
which renders the chapter 7 trustee a
victim, applies with equal vigor to this
trustee.

  Finally, upon reviewing the record, we
determine that Judge Murphy did not abuse
his discretion when, on remand, he
settled on $25,906.25 as the amount of
restitution due to the trustee. The
evidence disclosed that the trustee was
required to spend approximately 207
unnecessary hours in this case as a
direct result of Lowell’s fraudulent
statements on the bankruptcy petition and
schedules. Also, the fact that the
trustee receives $125 per hour for out-
of-court work and $150 per hour for in-
court work in her private practice is
uncontradicted. Thus, the sum settled on
as restitution, $25,906.25 (207.252 hours
X $125 per hour), must stand.

AFFIRMED.

FOOTNOTES

/1 After an examination of the briefs and the
record, we have concluded that oral argument is
unnecessary, and the appeal is submitted on the
briefs and the record. See Fed. R. App. P. 34(a);
Cir. R. 34(f).