Court Opinion

ID: 2962058
Source: CourtListenerOpinion
Date Created: 2015-09-21 20:52:04.083287+00
Date Added: 2024-06-11T13:14:14.632751
License: Public Domain

USCA1 Opinion

	

          August 13, 1993                                [NOT FOR PUBLICATION]                            UNITED STATES COURT OF APPEALS                                FOR THE FORST CIRCUIT                                 ____________________        No. 92-1806                                    UNITED STATES,                                      Appellee,                                          v.                                   ZOLTON PHILLIPS,                                Defendant, Appellant.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                   [Hon. Douglas P. Woodlock, U.S. District Judge]                                              ___________________                                 ____________________                                        Before                         Torruella and Stahl, Circuit Judges,                                               ______________                          and Burns,* Senior District Judge.                                      _____________________                                 ____________________            Warren R. Thompson, by Appointment of the Court, for appellant.            __________________            Mark  J. Balthazard,  Special  Assistant  United States  Attorney,            ___________________        with whom A. John Pappalardo, United States Attorney, was on brief for                  __________________        appellee.                                 ____________________                                 ____________________        _____________________        *Of the District of Oregon, sitting by designation.                            BURNS,  Senior  District  Judge.     Phillips                                    _______________________             appeals the  district court's  order of restitution  and the             district  court's  denial  of   his  request  to  substitute             counsel.  Phillips  also asks  this court to  set aside  his             plea of guilty because it was involuntary.                        We  have  jurisdiction  under  28  U.S.C.     1291             (1988).                                      BACKGROUND                                      __________                       On February 24, 1992,  Phillips pleaded guilty  to             one count of bank fraud in violation of 18 U.S.C.   1344 for             making  materially  false  statements when  obtaining  a  $5             million loan from  First American Bank (FAB)  to establish a             mini-storage facility.  On              May  22, 1992,  the court  sentenced Phillips  to 24  months             imprisonment1  and ordered  Phillips to  pay to  the Federal             Deposit  Insurance  Corporation  (FDIC) in  its  capacity as             receiver  of FAB the sum of $3,520,100 within three years of             his release from prison.                                      DISCUSSION                                      __________                       Phillips contends the district court erred when it             denied  his request  to substitute  counsel prior  to trial.                                              ____________________             1Phillips's  conduct did  not fall  under the  United States             Sentencing  Guidelines;  thus,  the district  court  did not             impose a term of supervised release.                                         -2-             Phillips also states he received ineffective assistance from             his  counsel and, therefore, this court should set aside his             plea of guilty because it was involuntary.  Phillips further             asserts  the district court erred when it ordered him to pay             restitution  to FAB for losses  that were not  caused by his             conduct  and when it set  an amount of  restitution that was             per se unreasonable.             ___ __             SUBSTITUTION OF COUNSEL             _______________________                       Phillips contends the court  erred when it refused             to substitute counsel  after Phillips asked the court  to do             so by  letter dated February  10, 1992; however,  perusal of             Phillips's letter reflects he merely expressed his desire to             avoid delay of trial and his concern about the timeliness of             various motions filed  and to be  filed on  his behalf.   On             February 14, 1992,  the parties appeared before the court to             dispose of certain pretrial matters.  At that time (ten days             before  trial  was  scheduled  to begin),  the  court  asked             Phillips whether he wanted  to elaborate on his  reasons for             writing  the  letter;  after  briefly  conferring  with  his             attorney,  Phillips  told  the  court  he  was  "pleased  to             proceed."  The court asked Phillips a second time whether he             wanted  to discuss  any  matters pertaining  to his  letter.                                         -3-                                          3             Again, Phillips did not complain about  his attorney nor did             he request a change of counsel; in fact, the record does not             reflect Phillips requested  a change of counsel  at any time             prior  to   entering  his   plea.2    We   find,  therefore,             Phillips's contention  that the court denied  his request to             substitute counsel has no factual basis.             INVOLUNTARY PLEA             ________________                       Phillips  asserts his sentence should be set aside             because   of   his  court-appointed   counsel's  ineffective             assistance.    Phillips  specifically  refers  to  counsel's             alleged misrepresentations, untimeliness in  filing motions,             failure to investigate,  and lack of preparation  on the day             of trial.                       We generally do not consider such claims on direct             appeal  because issues  regarding ineffective  assistance of             counsel "normally  require 'the resolution of factual issues             as  well as  inquiries into  other evidentiary  matters that             cannot  effectively be handled for the first time by a court             of appeals.'"   United States  v. Hallock, 941  F.2d 36,  43                             _______________   _______             (1st  Cir. 1991).   The  matter before  us is  no exception;                                              ____________________             2When Phillips pleaded guilty on  February 24, 1992, he told             the court his attorney had "been very good."                                          -4-                                          4             thus, we  decline  to  consider  Phillips's  contentions  of             ineffective assistance of counsel on direct appeal.                       At oral argument, Phillips also contended his plea             of guilty should be set aside because he was not informed by             counsel  or the  court at  the time  he pleaded  guilty that             restitution  could be imposed as  part of his  sentence.  We             will briefly address this issue even though Phillips did not             make the argument in his briefs.                Fed.      R.             Crim.  P.  11(c)(1)  provides  that the  court  must  inform             defendant  of  the  maximum penalties,  which  includes  the             possibility of  restitution, before defendant enters  a plea             of guilty.  The record shows the district court reviewed the             terms of the plea agreement in open court and asked Phillips             whether  he  understood  the  government   was  recommending             payment of restitution in an amount to be  determined later.             Phillips acknowledged  the terms  of the plea  agreement and             indicated he understood the court did not have to follow the             government's recommendations.   We find, therefore, Phillips             has  no  basis  for  his  assertion   that  he  was  unaware             restitution could be imposed as part of his sentence.             RESTITUTION             ___________                                         -5-                                          5                       Phillips contends  the loss to FAB  was not wholly             caused by his             conduct; therefore, the  court erred when it  ordered him to             pay  restitution.    Phillips  also  asserts  that  even  if             restitution  were  appropriate,  the  amount  of restitution             ordered by the court was incorrect and per se unreasonable.                                                    ___ __             Responsibility for loss.              _______________________                       Phillips contends  FAB's loss  was  caused by  (1)             FAB's reliance  on the property valuation  of an independent             appraiser as well as  Phillips's misrepresentations when the             loan was made, (2)  FAB's mishandling of Phillips's business             after  it took  over,  and (3)  economic  forces beyond  the             control of either Phillips or FAB.                       Under  the Victim  and  Witness Protection  Act of             1982  (VWPA),  18  U.S.C.     3663-64  (1988  &  Supp.1990),             restitution  is limited to "the  loss caused by the specific             conduct that is the basis of the ... conviction."  Hughey v.                                                                ______             United  States, 495  U.S.  411, 413  (1990).   We  review  a             ______________             determination of victim loss for clear error.  United States                                                            _____________             v. Savoie, 985 F.2d 612, 617 (1st Cir. 1993).                   ______                       At  the first  sentencing hearing,  the government             presented evidence (business records and affidavits) showing             the devaluation of  the property was a  result of Phillips's                                         -6-                                          6             bad  faith, mismanagement,  and looting of  the mini-storage             business.  The court granted Phillips a continuance to allow             him to produce further evidence to support his position that             restitution  was inappropriate.   At  the second  sentencing             hearing,   the   court   rejected   Phillips's   denial   of             responsibility for FAB's loss.                         When  he  pleaded  guilty,  Phillips  admitted  to             providing  FAB  with  materially  false   statements  (e.g.,             omission of  his previous  filing for bankruptcy)  to obtain             the  loan to  establish a  mini-storage facility.   Phillips             argues, however, the diminution  of the property's value was             due  primarily  to  the  bad management  of  the  bankruptcy             trustee  and FAB,  who, according  to Phillips,  managed the             property jointly even though  the trustee had legal control.                       In response,  the government  points out FAB  only             had  possession  of  the  property  for  a   few  days  from             approximately January 6 to              January 17, 1989,  and began foreclosure proceedings  during             that  time.3  On or  about January 17,  1989, Phillips filed             for  bankruptcy once  again, and  the trustee  in bankruptcy                                              ____________________             3Phillips  does  not specifically  argue  the  value of  the             property diminished between January 6 and January 17, 1989.                                         -7-                                          7             took control of the property shortly  thereafter.  In August             1989, the property  was sold  at auction by  the trustee  in             bankruptcy;  Phillips points  out the  property's value  had             decreased  considerably by  then.4   The  sum of  $3,520,100             represents  the  difference  between  the   $5  million  FAB             originally  loaned Phillips for  establishment of  the mini-             storage  facility  and  the  amount  FAB  received  for  the             property.                         The  court  rejected  Phillips's  contentions  and             found  the government's  arguments persuasive  of Phillips's             ultimate responsibility for FAB's loss.  After reviewing the             record, we concur with the court's conclusion that FAB would             not have incurred the loss "but for" the loan to Phillips, a             loan     Phillips     obtained     by    making     material             misrepresentations.  We, therefore,  do not find the court's             conclusion clearly erroneous.               Amount of loss.             ______________                       Phillips further  argues that even  if restitution             were appropriate, the court incorrectly calculated the loss.             Phillips points out the correct calculation of loss would be             the value  of the property  "less the value (as  of the date                                              ____________________             4The district court  noted it  was not the  proper forum  in             which  to  initiate a  claim  of  mismanagement against  the             trustee in bankruptcy.                                         -8-                                          8             the property is returned)  of any part of the  property that             is returned."               18 U.S.C.    3663(b)(1).  The value  of the property  is its             worth  on the date title  is transferred.   United States v.                                                         _____________             Smith,  944 F.2d 618, 625 (9th Cir. 1991), cert. denied, 112             _____                                      _____ ______             S.Ct. 1515 (1992).   When  the amount of  loss is  disputed,             "the government  bears the  burden of  establishing it by  a             preponderance of the evidence."  Id.                                              __                       In Smith, the bank  took title to certain property                          _____             when Smith defaulted on loans.  Before selling the property,             the bank  held it for a  long period in  a declining market.             The Smith court  found the property should  have been valued                 _____             on  the  date the  bank  "had the  power  to dispose  of the             property  and  receive  compensation,"  id.,  and  the  loss                                                     __             recognized by  the court should  have been  reduced by  that             amount.  In the matter before us, FAB took possession of the             property   in   early   January   and    began   foreclosure             proceedings.5   On or about January 17, 1989, Phillips filed             for bankruptcy; the  trustee in bankruptcy retained  control             over   the  property  until   foreclosure  proceedings  were             completed in August 1989.  Unlike the bank in Smith, FAB had                                                           _____                                              ____________________             5Again,  we note  Phillips does  not specifically  argue the             value of the property diminished between January 6 and              January 17, 1989.                                         -9-                                          9             little  or no  time  to dispose  of  the property  in  early             January  since Phillips filed  bankruptcy almost immediately             after FAB took physical possession of the property.                       After  considering  the  circumstances, the  court             concluded Phillips was responsible for  FAB's loss totalling             $3,520,100, the              amount  still owing after the  property at the  heart of the             loan was auctioned  by the  trustee in bankruptcy.6   We  do             not find the district court's conclusion clearly erroneous.             Reasonability of restitution order.             __________________________________                       Phillips  also  contends  the  court's  order  for             restitution was  per se  unreasonable because the  court did                              ___ __             not consider  all relevant factors required  by statute when             it  ordered  payment of  restitution.    Phillips bases  his             argument specifically  on the  court's  failure to  consider             Phillips's ability to pay the restitution ordered.                         The VWPA does not prohibit a sentencing court from             imposing restitution upon a defendant who is indigent at the             time.   United States v. Brown, 744 F.2d 905, 911 (2d Cir.),                     _____________    _____             cert.  denied, 469 U.S. 1089 (1984).  A court must, however,             _____  ______                                              ____________________             6Although  Phillips argues  the  worth of  the property  was             greater when he  relinquished control, this  appellate court             is not the proper forum in which to challenge the bankruptcy             trustee's  competency  in  controlling or  disposing  of the             property.                                         -10-                                          10             "consider ... the financial  resources of the defendant, the             financial needs and earning ability of the defendant and the             defendant's dependents, and such  other factors as the court             deems appropriate."  18 U.S.C.   3664(a).  See, e.g., United                                                        ___  ____  ______             States  v. Ramilo, 986  F.2d 333, 336  (9th Cir. 1993).   In             ______     ______             this circuit,  a sentencing court  is not  required to  make             "open-court findings on the statutory factors when issuing a             restitution  order so long  as the record  on appeal reveals             that  the   judge  made   implicit  findings  or   otherwise             adequately  evinced his  consideration  of  those  factors."             Savoie, 985 F.2d at 11.               ______                       The record reflects Phillips brought the requisite             factors to  the attention  of  the court  in his  sentencing             memorandum  and  at  sentencing.7    The  court acknowledged             these  factors  and   concluded  Phillips  was  sufficiently             resourceful  to  be capable  of paying  all,  or at  least a             substantial portion,  of the restitution within  three years             of  his release  from prison.   The  court made  no specific             findings to support its  conclusions; the absence of express             findings, however, is not fatal when the record reflects the             court gave thought to the requisite factors.  Id.                                                            __                                              ____________________             7The  probation  officer  also  addressed  Phillips's future             money-earning prospects in the PSR.                                         -11-                                          11                       When  the court ordered payment of restitution, it                                    noted  that Phillips was  smart and resourceful.   The court             further remarked  that Phillips made  a great deal  of money             once,  and, in its opinion, Phillips was capable of making a             great  deal of  money again.    Cf. Smith,  944 F.2d  at 623                                             ___ _____             (defendant ordered to pay $12.8 million to FSLIC within five             years of  his  release  from prison  based  on  the  court's             observation  that  defendant demonstrated  in  the past  his             ability to accumulate assets in this amount of restitution);             United States v. Rogat, 924 F.2d 983, 986 (10th Cir.), cert.             _____________    _____                                 _____             denied,  111 S.Ct.  1637  (1991)  (indigent defendants  were             ______             ordered  to  pay restitution  of approximately  $2.5 million             based  on  the  fact  both were  "able,  intelligent,  well-             educated, talented business people, who do have  substantial             capacity to earn money now or in the future, and, therefore,             do  have ability  to make  restitution").   The  VWPA itself             demands  only  that  the  sentencing  court  "consider"  the             factors  enumerated therein,  Savoie,  985 F.2d  at 11;  the                                           ______             record  reflects  this   sentencing  court  had  before   it             information bearing  on  these factors.    Although  another             court may  have reached a  different conclusion,8 we  do not                                              ____________________             8According to Phillips, he carries a staggering debt of more             than $36 million after being denied discharge in bankruptcy.             The  family's current  income is  apparently limited  to his                                         -12-                                          12             find  the  sentencing  court  abused  its  discretion.    To             paraphrase Judge  Selya in Savoie, "[w]e  have said enough,"                                        ______             maybe even too much.                                      CONCLUSION                                      __________                       Based on the foregoing, we find the district court             did not err when  it ordered Phillips to pay  restitution in             the amount of $3,520,100.                       Affirmed.                       ________                                              ____________________             wife's earnings as a nurse's  aide and the pittance Phillips             may   be  able  to  earn  while  imprisoned.    To  pay  the             restitution  alone,  Phillips  will  have  to  make  profits             greatly  exceeding $3.5  million (legitimately,  we presume)             within three years of  his release from a two-year  stint in             prison.  We note Phillips's resourcefulness in the past does             not necessarily promise the same success in the future -- at             least, we  hope not;  after all, his  past "resourcefulness"             led him to this court.                                                                 -13-                                          13