Court Opinion

ID: 1007997
Source: CourtListenerOpinion
Date Created: 2013-07-04 19:33:46.992118+00
Date Added: 2024-06-11T12:39:37.891062
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS
                FOR THE FOURTH CIRCUIT

UNITED STATES OF AMERICA,              
                 Plaintiff-Appellee,
                 v.                           No. 01-4638
WILLIAM MURRAY,
             Defendant-Appellant.
                                       
           Appeal from the United States District Court
            for the District of Maryland, at Greenbelt.
                 Peter J. Messitte, District Judge.
                         (CR-00-317-PJM)

                      Argued: June 4, 2002

                      Decided: July 12, 2002

 Before NIEMEYER, MICHAEL, and TRAXLER, Circuit Judges.

Vacated and remanded by unpublished opinion. Judge Traxler wrote
the majority opinion, in which Judge Michael joined. Judge Niemeyer
wrote a dissenting opinion.

                           COUNSEL

ARGUED: Ronald Barry Rubin, RUBIN & RUBIN, CHARTERED,
Rockville, Maryland, for Appellant. Sandra Wilkinson, Assistant
United States Attorney, UNITED STATES ATTORNEY’S OFFICE,
Greenbelt, Maryland, for Appellee. ON BRIEF: Michael A.
Stodghill, RUBIN & RUBIN, CHARTERED, Rockville, Maryland,
for Appellant. Thomas M. DiBiagio, United States Attorney,
2                     UNITED STATES v. MURRAY
UNITED STATES ATTORNEY’S OFFICE, Greenbelt, Maryland,
for Appellee.

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

                              OPINION

TRAXLER, Circuit Judge:

   William Murray defrauded Brethren Mutual Insurance Company
("BMI") out of a substantial sum of money by misrepresenting both
the original costs involved in constructing a facility for one of BMI’s
insureds and the costs of rebuilding the facility after it was partially
destroyed by fire. Pursuant to a plea agreement, Murray pled guilty
to two counts of mail fraud, see 18 U.S.C.A. § 1341 (West 2000), and
the remaining counts of the multi-count indictment against him were
dismissed. The parties left the question of the proper amount of resti-
tution to be determined at sentencing. Prior to sentencing, the parties
agreed on the actual replacement cost of the building and agreed that
the restitution award should include the amount by which the costs of
the project had been fraudulently inflated. They disagreed, however,
about whether the restitution amount should include profits and over-
head to which Murray would have been entitled based on the actual
replacement cost. Stated differently, the question at sentencing was
whether Murray was entitled to keep the profits and overhead from
the job that were legitimate under the contractual formula for calculat-
ing those figures, or whether he should be required to refund those to
BMI, the victim of the fraud. The district court held that Murray must
refund those amounts, and Murray appeals. We vacate and remand.

                                   I.

   On appeal, Murray continues to press his argument that the profits
and overhead from the project, once properly adjusted to account for
the fraud, should not be counted as loss to BMI.1 Because this issue
    1
   Murray may raise this issue on appeal notwithstanding the provision
in his plea agreement waiving his right to appeal. See United States v.
                       UNITED STATES v. MURRAY                           3
involves the district court’s application of the guidelines to undis-
puted facts, we review the court’s determination de novo. See United
States v. Parsons, 109 F.3d 1002, 1004 (4th Cir. 1997) (observing that
the issue of what amounts are properly counted as "loss" is "a purely
legal question"); United States v. Daughtrey, 874 F.2d 213, 217 (4th
Cir. 1989) (stating that legal issues involving the interpretation and
application of the sentencing guidelines are reviewed de novo).

   Murray argues that the disposition of this appeal is squarely con-
trolled by our prior decisions in United States v. Parsons, 109 F.3d
1002 (4th Cir. 1997), and United States v. Dawkins, 202 F.3d 711 (4th
Cir. 2000). In Parsons, the defendant had been a postal service
employee and had received a job transfer that required her to change
geographic locations. The government agreed to pay the expenses of
the move upon the filing of travel vouchers. Parsons listed false
expenses on her vouchers and was convicted on multiple counts
related to this misconduct. For purposes of determining Parsons’
offense level, the district court concluded that the entire amount of
expenses claimed should be counted as loss. This court reversed,
holding that "[w]hen an item’s value is fraudulently inflated, loss is
the amount the item was overvalued, not the entire amount paid."
Parsons, 109 F.3d at 1004.

   In Dawkins, the defendant, another postal service employee, was
convicted of two counts of making a false statement to obtain federal
employees’ disability benefits. The district court concluded that the
loss for purposes of determining Dawkins’ offense level was the full
amount of benefits Dawkins had received during the two periods cov-
ered by the two forms he was convicted of falsifying, and the court
ordered restitution in the full amount of the loss. Citing Parsons, we
reversed, instructing the district court on remand to "consider loss as
the difference between the amount of benefits Dawkins actually
received and the amount he would have received had he truthfully and
accurately completed the [disability] forms." Dawkins, 202 F.3d at
715.

Broughton-Jones, 71 F.3d 1143, 1147 (4th Cir. 1995) ("[A]ppeals chal-
lenging the legality of restitution orders are . . . outside the scope of a
defendant’s otherwise valid appeal waiver.").
4                     UNITED STATES v. MURRAY
   We agree with Murray that Dawkins and Parsons require a recalcu-
lation of the restitution award in this case. It is undisputed that the
insurance policy provided for the replacement costs of the building.
It is also undisputed that as a matter of industry custom, replacement
costs include the profits and overhead of the contractor that rebuilds
the facility. Edward Kopper, a property claims manager for BMI and
its representative at the sentencing hearing, testified that the company
usually allows some amount for overhead and profit and that those
figures are set by industry standard. Furthermore, the government
conceded below that there was a contractual provision providing for
overhead and profit. Thus, under Dawkins and Parsons, the amount
of loss is the difference between the amount BMI actually paid and
the amount it would have paid had Murray submitted truthful and
accurate invoices. The latter amount would have undeniably included
Murray’s overhead and profits.

   The government argues, however, that BMI was not obligated to
pay anything under the policy, and thus it was appropriate for the dis-
trict court to order Murray to relinquish his overhead and profits. To
understand this argument, it is necessary for us to introduce a few
new facts and a new player, Larry Miller. Shortly after the fire par-
tially destroyed the original building, Murray contacted Miller, who
had been a friend of Murray’s for some time and who had also been
a high-level executive in the insurance industry. Murray asked Miller
to be a liaison between S&K (the insured) and BMI. Miller agreed to
act on S&K’s behalf. He also agreed to help Murray effect his fraudu-
lent scheme. Thus, Miller, while acting as S&K’s representative, was
aware of and participated in the fraud. A provision in the insurance
contract declared that the policy was "void in any case of fraud . . .
as it relates to this Coverage Part at any time." J.A. 70. The govern-
ment argues that because Miller was the insured’s agent, Miller’s
fraud was chargeable to the insured and the policy was therefore
voided. Because the policy was allegedly void, the government con-
tends BMI was not obligated to pay anything, and, accordingly, the
district court could properly order restitution in any amount up to and
including the full amount BMI paid out.

  We cannot accept this argument. Whether and to what extent insur-
ance contracts are void or voidable is often a complex issue. It is
enough for present purposes for us to observe that BMI has never
                       UNITED STATES v. MURRAY                           5
taken the position that its loss was the full amount it paid on the
insured’s claim. In fact, prior to the sentencing hearing, the company
filed an Amended Declaration of Victim Losses declaring that "the
company is entitled to restitution in the total amount of $660,937.87."
J.A. 47. Critically, in explaining how it arrived at this amount, BMI
explained that it "paid $1,774,392.05 . . . for reconstruction of the
building, when the actual cost of reconstruction was $1,113,454.18.
No more than the actual cost was recoverable under the [BMI] pol-
icy." J.A. 47 (emphasis added). Thus, not only has the company itself
never sought to avoid the policy, but in determining its losses it
explicitly indicated that its calculations were premised on an effective
policy. Indeed, BMI has not sought to recover the other roughly $1.1
million that it paid pursuant to the claim, and the government’s argu-
ment that BMI has chosen not to pursue that amount as a gratuitous
gesture to S&K is not at all persuasive. Nor is that argument sup-
ported by the record. As already noted, BMI paid the claim because
it thought itself obligated to do so "under the [BMI] policy." J.A. 47.

                                    II.

   In sum, this case is controlled by Parsons and Dawkins. Under the
sound reasoning of those cases, the amount of loss for restitution pur-
poses in a fraud case is the amount the victim would not have paid
but for the fraud. Once we eliminate the fraud from this case, we are
left with a contract that requires BMI to pay actual replacement costs,
which includes some measure of profit and overhead. Accordingly,
we vacate the restitution award and remand to the district court for
further proceedings consistent with this opinion.2
  2
   Murray also contends that the district court failed to make adequate
factual findings to support the restitution award. To the extent that this
challenge is meant to address Murray’s ability to pay restitution, we
believe counsel’s statements at sentencing by which he expressly indi-
cated that Murray was able to pay restitution provided a sufficient basis
upon which to order restitution. To the extent that the challenge is to the
district court’s failure to key the monthly payment schedule to Murray’s
ability to pay, we need not address it. Because we vacate and remand for
imposition of a lower amount of restitution, the district court may recon-
sider the monthly payment schedule. We have no reason to doubt that the
district court is aware of its duty to make factual findings and will com-
ply with its obligations.
6                    UNITED STATES v. MURRAY
                                     VACATED AND REMANDED

NIEMEYER, Circuit Judge, dissenting:

   Because the profit and overhead would benefit the defendant and
reward him for the fraudulent scheme, of which he was the architect,
I agree with the district court and would affirm.