Court Opinion

ID: 9482526
Source: CourtListenerOpinion
Date Created: 2023-08-05 08:52:52.47545+00
Date Added: 2024-06-11T17:49:02.915305
License: Public Domain

WEIS, Circuit Judge,
concurring and dissenting.
I join in the majority opinion except with respect to Part II. B.
In determining the amount of “loss” for purposes of Sentencing Guideline computations, the majority and I are in agreement that in the circumstances presented here the offender’s “gross gain” is an appropriate standard for increasing the base offense level. In the district court the parties concurred on the use of gain and that should govern the disposition of this appeal. I, however, would employ a different method than the district court and the majority in arriving at the defendant’s gain.
The gross value of the contracts at issue was $293,000. No evidence exists whatsoever that defendant did not intend to have the Badaracco companies perform the contracts and indeed he asserted that they were “at most 80% completed.” There also can be no dispute that performance of the contracts required that the Badaracco companies expend money for labor and materials. In business practices, such expenditures must be deducted to arrive at the gain to the contractors — they are costs of performance.
If all had gone well, the Badaracco companies would have made a profit measured by the difference between the contract price and the expense incurred — that sum would be the defendant’s “gain.” (Actually, defendant’s personal benefit would have been less, but he does not challenge being treated as if he and the family companies were one entity for purposes here.)
The gain, therefore, should be measured initially by the profit on the projects. To this amount should be added such “gains” as the amount of overhead included in the costs of the project that would otherwise have been borne by the Badaracco companies, an estimate of the benefit attributable to providing work for their employees, and the value of keeping otherwise idle tools or equipment in operation. Combining these estimates would lead to a realistic appraisal of the “gross gain” to the defendant.
Merely relying on the contract price as defendant’s gain distorts the severity of the defendant’s offense. The situation, in fact, would have been quite different if defendant received $293,000 for electrical contracts he never intended to perform. In that event, defendant would clearly gain the entire $293,000 and the guidelines would have required an addition of eight points to the base offense level. However, that is the same increase the district court used here. Thus, no distinction would exist between that aggravated situation of clear fraud and the one here where the actual, realistic benefit to the defendant was substantially less. A sentence such as the one imposed ignores reality and is contrary to the intent of the guidelines that an increased benefit to the defendant should lead to an increased sentence.
An analogous situation was described in United States ¶. Schneider, 930 F.2d 555 (7th Cir.1991), where the issue was the loss to the victim caused by fraudulent procurement of a contract. The Court rejected the government’s contention that the loss was the full amount of the contract in circumstances where the defendant had intended to perform the construction. The Court found the proposition “irrational” in that it would result in the same penalty as one *945assessed against a “con artist” who had intended to take the full amount set out in the contract, but never perform it. Id. at 558.
Although Schneider discussed loss to the victim and the issue here is benefit to the wrongdoer, the two situations are but different sides of the same coin. I would adopt the rationale of Schneider which we recently approved in United States v. Kopp, 951 F.2d 521 (3d Cir.1991); see also United States v. Smith, 951 F.2d 1164, 1167 (10th Cir.1991) (“[I]t is a net value that must be used to measure loss. Any other approach ignores reality.”).
As the majority observes, the bank did not receive a benefit and that fact makes it appropriate to look to the defendant’s gain. It does not follow, however, that the face amount of the contracts should be used to enhance the sentence. The “gain” the majority uses is purely fictional, but the increased period of incarceration is starkly real.
I would remand to the district court for a determination on the gain defendant received and a reevaluation of the sentence.
On this record recalculation could not include any potential loss to the bank in foreclosures because there has been no showing that the electrical work in any of the projects led to default on mortgages. I find no basis on which it may reasonably be concluded that the developers’ use of the defendant’s companies caused the failure of any project. The presentence report notes that the government conceded, “it is fair to state that any losses to the Bank on these loans will be more the result of a faltering real estate market than as a result of the defendant’s fraud.”
I agree with the majority that the matter of restitution must be reconsidered by the district court. This is in the nature of a civil remedy to make the victim whole for the loss actually incurred or expected to be incurred as a result of the wrongful conduct. Consequently, there must be a nexus established between the criminal act and the loss. The victim is entitled to reimbursement, but not a windfall. To compensate the bank here for losses caused by the deteriorated real estate market on the fortuity that the defendant’s illegal acts occurred at approximately the same time could not be justified as restitution. See, e.g., United States v. Tyler, 767 F.2d 1350, 1351 (9th Cir.1985) (“[Rjestitution is proper only for losses directly resulting from the defendant’s offense.”) (emphasis in original).
The government acknowledged that the bank was aware that the Badaracco companies were the beneficiaries of work related to the construction loans. The defendant’s crime was that he had assured the bank that he did not have an interest in any of these companies. Nothing in the record indicates that the loans would not have been approved had the defendant disclosed his ties to the family business. See generally Hughey v. United States, 495 U.S. 411, 110 S.Ct. 1979, 109 L.Ed.2d 408 (1990).
I join in the order for remand, but would include a reassessment of “gain” as a factor in determining the sentence.