Court Opinion

ID: 185396
Source: CourtListenerOpinion
Date Created: 2011-02-05 02:31:28+00
Date Added: 2024-06-11T17:26:15.522297
License: Public Domain

250 F.3d 774 (D.C. Cir. 2001)
United States of America, Appelleev.Soo Young Bae, Appellant
No. 00-3095
United States Court of Appeals  FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued April 20, 2001Decided May 25, 2001

Appeal from the United States District Court  for the District of Columbia  (No. 99cr00284-01)
Mary Manning Petras argued the cause for appellant.  With her on the briefs was G. Allen Dale.
Catherine A. Szilagyi, Assistant U.S. Attorney, argued the  cause for appellee. With her on the brief were Wilma A.  Lewis, U.S. Attorney at the time the brief was filed, John R.  Fisher and Henry K. Kopel, Assistant U.S. Attorneys.
Before:  Ginsburg, Randolph and Tatel, Circuit Judges.
Opinion for the Court filed by Circuit Judge Ginsburg.
Ginsburg, Circuit Judge:

1
The District of Columbia Lottery  Board licensed Soo Young Bae, then a Washington merchant,  to operate a terminal that prints and dispenses lottery tickets  for sale.  Bae used the terminal to generate tickets with a  face value of $525,586, for which he did not pay.  The winning  tickets among these had a total redemption value of $296,153,  of which Bae successfully obtained all but $72,000.  Bae  pleaded guilty to computer fraud, 18 U.S.C. 1030(a)(4), and  the district court sentenced him to 18 months in prison.  Bae  challenges his sentence, in calculating which the district court  valued the "loss" due to the fraud at $503,650--the market  value of the tickets less the commission Bae would have  received from the Lottery Board had he sold those tickets. We affirm.

2
In sentencing a defendant for fraud the district court must  make a "reasonable estimate" of the victim's "loss."  U.S.S.G.  2F1.1(b) & application n.9.  Although Bae challenges the  method by which the district court arrived at its estimate, he  does not contest any of the data potentially relevant to the  loss calculation, that is, the face value of the tickets, the  commission he would have earned for selling the tickets he  generated, and the value of the winning tickets.  "The appropriate method for calculating loss amounts under the Guidelines is a prototypical question of legal interpretation, and we  review de novo."  United States v. Walker, 234 F.3d 780, 783  (1st Cir. 2000) (emphasis omitted).

3
The general rule in a case involving property obtained by  fraud is that the measure of loss is "the fair market value of  the particular property at issue."  U.S.S.G. 2B1.1 application n.2 (incorporated by reference in U.S.S.G. 2F1.1 application n.8).  Bae argues that "[a]t the instant any lottery  ticket is printed," it is worth whatever value the lottery  drawing later assigns to it;  losing tickets, that is, have no  value.  Bae thus calculates the loss at $296,153, the value of  his winning tickets.  His approach misconceives the probabilistic nature of the lottery ticket, however;  as the Government notes, "the value of the ticket is the value of a chance to win." Tickets are indistinguishable--and each has an equal probability of winning--until the drawing determines the winner(s). Prior to that time, all tickets have the same market value  because they all have the same chance of winning a prize,  which is why they all sell at the same price.  A ticket's  market value, moreover, always exceeds its expected payoff,  because the ticket is priced at a level that also reflects some  of the value consumers derive from playing the odds.

4
A ticket's value changes with the drawing, of course:  once  the lucky numbers are announced, the value of the winning  tickets rises to the value of the prize money while the value of  the losing tickets goes to zero.  Numerous goods, however-from automobiles to common stocks--may change in value  soon after they are purchased.  Nonetheless, for the purpose  of sentencing, the loss associated with their fraudulent procurement is equal to the value of the goods at the time of the  offense.  See, e.g., Walker, 234 F.3d at 783 (partial return of  funds subsequent to embezzlement does not reduce valuation  of loss);  accord United States v. Baker, 200 F.3d 558, 561 (8th  Cir. 2000);  United States v. Burridge, 191 F.3d 1297, 1301  (10th Cir. 1999).

5
Bae also argues that in this case market price is an  inappropriate measure of loss because "[t]he act of printing  those tickets cost the D.C. Lottery nothing."  There is no  basis, however, for Bae's implicit suggestion that market  price is an inadequate measure of loss merely because the  fraudulently obtained good has a low marginal cost of production.  See United States v. Watson, 189 F.3d 496, 501 (7th  Cir. 1999) (value of stolen cigarette tax stamps is "fair market  value of the stamps, not their replacement cost");  United  States v. Jenkins, 901 F.2d 1075, 1083-84 (11th Cir. 1990)  (loss due to theft of nonnegotiable stock certificates is face  value, not cost of reprinting certificates).  The Guidelines  adopt fair market value rather than replacement cost as the  measure of loss for good reason.  See U.S.S.G. 2B1.1  application n.2.  As the Government points out, measuring  loss in terms of replacement costs rather than at fair market  value would result in anomalous and capricious sentences. For example, if loss were measured by reference to replacement cost, then fraudulently obtaining a good from a consumer would be punished more severely than fraudulently obtaining the same good from the manufacturer, which can replace  it at a lower cost.  Similarly, defrauding a more efficient  producer would carry a lower sentence than defrauding a less  efficient producer of the same good.  Nor does Bae offer any  reason to think that the instanced anomalies are somehow  ameliorated in cases where the fraudulently obtained item can  be replaced cheaply;  on the contrary, using replacement cost  as the measure of loss only when replacement cost is low  would increase the arbitrariness of the sentencing regime.

6
Bae offers a variant upon this argument when he contends  that the fair market value of the tickets is an inappropriate  measure of the loss that he caused because generating his  tickets did not reduce the number of tickets that could be and  were sold to others.  This suggests that loss is poorly measured by the fair market value of a good the replacement cost  of which is close to zero.  For the reasons explicated above,  abandoning fair market value as a measure of loss in favor of  replacement cost only when replacement cost is low is a  perverse policy and we reject it.

7
We also reject Bae's alternative argument that the proper  measure of loss in this case is the Lottery Board's lost profit  ($207,496), calculated as the market value of the fraudulently  obtained tickets less both (1) the commission the Board would  have paid Bae for selling those tickets and (2) the amount it  would have had to pay to redeem the winning tickets among  them had they been purchased lawfully.  The Government  suggests that the Guidelines should lead courts to "hesitate[ ]  to engage in net loss calculations," and we agree.  Lost profit  is an undesirable measure of loss for roughly the same  reasons that replacement cost is:  Both measures would penalize frauds differently depending upon whether the victim is  a consumer or a producer;  create disparities in sentencing for  the fraudulent procurement of identical items from different  producers;  and require the courts to inquire into the costs of  production, rather than looking to the generally more accessible market value, in order to calculate a sentence.  Estimating loss based upon lost profits rather than fair market value  is also inconsistent with the principle that the full value of a  stolen item is the measure of loss even if the item is later  returned.  See U.S.S.G. 2B1.1 application n.2;  Walker, 234 F.3d at 783.  (Because it is limited by the plea agreement it  entered into in this case, the Government does not contest the  district court's decision to deduct from its estimate of the loss  the commission that Bae would have received had he legitimately sold the tickets that he printed, although this deduction is in principle indistinguishable from the deduction of  payoffs foregone that Bae proposes here and we reject.)

8
Contrary to Bae's suggestion, our present conclusion is not  inconsistent with our statement in United States v. Gottfried  that estimates of loss under the Sentencing Guidelines seek  "to measure the economic harm ... caused" to the victim.  58 F.3d 648, 651 (1995).  In Gottfried, an attorney in the Department of Veterans Affairs destroyed documents in order to  reduce his workload, and we held that the resulting loss to  the Government could be estimated as the costs of "undoing  the full extent of the damage."  Id. at 652.  There was no  market by which to value the destroyed records, so "market  value ... did not reflect the harm to the government," id.; when fair market value does provide "a reasonable estimate  of the loss," U.S.S.G. 2F1.1 application n.9, however, it is to  be preferred.  See U.S.S.G. 2B1.1 application n.2.

9
Finally, Bae suggests that using market value as the  measure of loss will "produce disparate sentences for similar  crimes" because defendants who generate the same number  of tickets but whose winnings differ will be sentenced similarly.  As the Government properly points out, that is not a  disparity because "the fortuity of 'winning' the lottery" is  irrelevant.  A lottery ticket is a chance to win a prize, and  two defendants, one of whom gets a losing and one a winning  ticket by fraud, commit the same act and therefore merit the  same treatment.  There would be a disparity, however, under  Bae's approach:  The unlucky malefactor who prints out only  losing tickets presumably would get no sentence at all.  Bae  asks whether an offender who fraudulently obtains a single  ticket that proves to be worth millions should be subject only to the minimal sentence associated with the face value of one  ticket.  Should such an offender attempt to redeem his  winnings, as did Bae, the actual or the intended loss associated with that attempt, see U.S.S.G. 2F1.1 application n.8,  would be the full amount of the jackpot.  (We need not decide  how to apply the Guidelines to a winner who, unlike Bae, was  apprehended before trying to claim his prize.)

10
In conclusion, a "reasonable estimate" of the loss caused by  Bae's fraud is the fair market value of the lottery tickets at  the time that Bae printed them.  The sentence imposed by  the district court is therefore

11
Affirmed.*

Notes:

*
 Bae also argues that the district court erred in refusing to grant  a downward sentencing departure due to his "extraordinary physical impairment[s]."  U.S.S.G. 5H1.4.  When a district court is  aware of its discretion to permit such a departure, as the transcripts of the sentencing hearing make clear that it was here, its  refusal to exercise that discretion is unreviewable.  See, e.g., United  States v. Studevent, 116 F.3d 1559, 1564 (D.C. Cir. 1997).