UNITED STATES COURT OF APPEALS
Filed 6/6/96 TENTH CIRCUIT
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UNITED STATES OF AMERICA, )
)
Plaintiff-Appellee, )
)
v. ) No. 95-5240
) (D.C. No. 94-CR-174-C)
JOE W. GWARTNEY, ) (N. Dist. of Okla.)
)
Defendant-Appellant. )
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ORDER AND JUDGMENT*
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Before ANDERSON, BARRETT, and MURPHY, Circuit Judges.
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After examining the briefs and appellate record, this panel
has determined unanimously to honor the parties’ request for a
decision on the briefs without oral argument. See Fed. R. App. P.
34(f); Tenth Cir. R. 34.1.9. The case is therefore ordered
submitted without oral argument.
Joe W. Gwartney (Gwartney) appeals from the sentence he
received following his plea of guilty to five counts of making
*
This Order and Judgment is not binding precedent, except
under the doctrines of law of the case, res judicata, and
collateral estoppel. The court generally disfavors the citation
of orders and judgments; nevertheless, an order and judgment may
be cited under the terms and conditions of Tenth Cir. R. 36.3.
false entries in bank records and causing a criminal act in
violation of 18 U.S.C. §§ 1005 and 2(b).
The sole issue on appeal is whether the district court erred
in adopting a Presentence Investigation Report recommending a 7
level increase in Gwartney’s total offense level pursuant to USSG
§ 2F1.1(b)(1)(H)(“If the loss exceeded $2,000, increase the offense
level as follows: . . . (H) More than $120,000, add 7") in
sentencing Gwartney.
Gwartney was a shareholder, officer and director, of the
Exchange Bank of Skiatook, Oklahoma (Bank) from August, 1981, until
July, 1992. He was a member of Bank’s loan committee. His duties
included making loans and signing cashier’s checks issued by Bank.
From February, 1989, to July, 1992, Gwartney made or caused to be
made numerous false entries in the books, reports and statements of
Bank to transfer funds from one account to another and thereby
maintain the pretense that certain nonperforming loans were in fact
performing and to otherwise deceive Bank relative to the true
status of the loans. Gwartney’s transactions “were admittedly
illegal.” (Opening Brief of Appellant at 2).
Gwartney’s activities were uncovered on the evening of July
17, 1992, following an internal audit of accounts which Gwartney
handled. During the audit, Bank employees determined that $125,000
in unauthorized withdrawals were outstanding as a result of
Gwartney’s illegal transactions. Gwartney was placed on leave from
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Bank pending further investigation. On July 22, 1992, one banking
day after his offense had been discovered, Gwartney repaid the
$125,000.
Approximately two and one-half years later, Gwartney was
indicted and charged with 37 counts of making false entries in bank
records and causing a criminal act in violation of 18 U.S.C. §§
1005 and 2(b). He pled guilty to five counts pursuant to a plea
agreement.
Paragraph 29 of Gwartney’s Presentence Investigation Report
(PSR I) stated in part:
The false representations that Gwartney made to the loan
committee, as well as the crucial information that he
deliberately concealed, made it impossible for the
committee to make informed decisions regarding the loans
manipulated by Gwartney in this case. . . . Loan accounts
totaling $303,137.88 have been deemed uncollectible and
charged off since Gwartney’s departure from the bank in
July 1992. Gwartney’s criminal acts clearly contributed
to those bank losses. However, it is impossible to
estimate with reasonable precision the extent to which
loss amounts are attributable to the false entries made
by Gwartney, or --- other acts committed by Gwartney in
violation of bank policy. Therefore, although the false
entries were an integral part of an overall scheme that
harmed the bank, for guideline purposes, no specific loss
value has been determined.
(R., PSR I at 7 (emphasis added)).
PSR I set forth a total offense level of 8, reflecting: a
base offense level of 6; a 2 level increase reflecting repeated
acts over a period of time; a 2 level increase reflecting
Gwartney’s position of trust as an officer and director; and a 2
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level reduction for acceptance of responsibility. Significantly,
PSR I did not include any offense level increases for losses
pursuant to §2F1.1.
PSR I set forth a criminal history category of II. Based on
a total offense level of 8 and criminal history category of II, PSR
I set forth a guideline range for imprisonment of 4 to 10 months.
The district court received a revised Presentence
Investigation Report (PSR II) on October 10, 1995. Paragraph 31
stated:
The total loss attributable to Gwartney’s criminally
false entries in this case is $125,000, which represents
the total amount of unauthorized withdrawals outstanding
at the time the offense was discovered. The $125,000
consists of the $50,000 that was missing from the bank’s
cashiers check account at the time the offense was
discovered, and the $75,000 that was missing from . . .
draw accounts.
(R.,PSR II at 8 (emphasis added)).
PSR II set forth a total offense level of 14, reflecting: a
base offense level of 6; a 7 level increase pursuant to
§2F1.1(b)(1)(H) reflecting a loss of more than $120,000; a 2 level
increase reflecting repeated acts over a period of time; a 2 level
increase reflecting Gwartney’s position of trust as an officer and
director; and a 3 level reduction for acceptance of responsibility.
PSR II set forth a criminal history category of II. Based on
a total offense level of 14 and a criminal history category of II,
PSR II set forth a guideline range for imprisonment of 18 to 24
months.
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Gwartney objected to the finding in PSR II that a loss of
$125,000 was attributable to his criminal acts, contending that
since all affected amounts were reimbursed immediately upon
discovery of the offense, a finding of zero loss was appropriate.
The probation officer preparing PSR II disagreed:
The probation officer would maintain that all available
case law supports a loss valuation applicable at the time
the loss was detected. The . . . discussion of an
offense level reduction for immediate repayment is in the
context of ‘offsets that the bank can immediately apply
against the overdraft,’ which is a circumstance that
clearly does not apply in this case. Gwartney’s ability
to secure a loan five days after discovery of the offense
in order to repay . . . does not constitute ‘immediate
repayment’ in that context. Therefore the probation
officer finds that a loss of $125,000 results in a seven
level increase, pursuant to USSG §2F1.1(b)(H).
(R., Addendum To The Presentence Report at 22).
The district court adopted PSR II. (Appendix to Opening Brief
of Appellant, Tab 6 at 76). The court sentenced Gwartney to 18
months imprisonment on each of the five counts, said sentences to
run concurrently, and to five years supervised release. The
district court also fined Gwartney $10,000.
On appeal, Gwartney contends that the district court “erred in
refusing to setoff his contemporaneous and immediate repayment
against the gross amount of the loss calculated under U.S.S.G. §
2F1.1" and that we should reverse the sentence imposed by the
district court and remand for resentencing. (Opening Brief of
Appellant at 17). The government responds that “[t]he district
court correctly decided that Gwartney should not receive credit for
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amounts he paid back to the victim bank and that the ‘loss’
therefore, was $125,000.” (Brief of Appellee at 12).
“Clearly, the government has the burden to prove the amount of
loss [under § 2F1.1] by a preponderance of the evidence.” United
States v. McAlpine, 32 F.3d 484, 487 (10th Cir. 1994), cert.
denied, ___ U.S.___ (1994). In United States v. Haddock, 12 F.3d
950, 960 (10th Cir. 1993) we reviewed the “loss to victims” under
§ 2F1.1. In that case, defendant Haddock was the chairman of the
board and chief executive officer of the Bank of White City as well
as the president and sole shareholder of First Finance, Inc. which
he formed for the purpose of acquiring loans from the FDIC. He was
convicted of various counts of bank fraud, concealing relevant
information, and filing a false financing statement. In Haddock,
we held:
[T]he enhancement [under § 2F1.1] is only for loss to
victims, not for gain to defendants.
* * *
Actual loss under section 2F1.1 is ‘the amount of money
the victim has actually ended up losing at the time of
sentencing, not what it could have lost. Kopp [United
States v. Kopp, 951 F.2d 521 (3rd Cir. 1991)], 951 F.2d
at 531. A court should measure actual loss by ‘how much
better off the victim would be put but for the
defendant’s fraud.’ Id. This measure properly includes
all types of losses but does not include those losses
that are not attributable to the defendant’s fraud.
Furthermore, only net loss is considered; anything
received from the defendant in return reduces the actual
loss. Smith, 951 F.2d at 1167.
12 F.3d at 960-61 (emphasis added).
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In Haddock, we reviewed the loss caused by each of Haddock’s
crimes and we reduced the actual loss for purposes of § 2F1.1 from
the $143,938.93 set forth in the presentence report to
“approximately $76,000.” Id. at 963. We eliminated entirely for
purposes of § 2F1.1 the $250,000 loss alleged in count III,
holding: “Haddock repaid the $250,000 down payment . . . that is
the subject of count three. White City therefore did not lose
anything because of this offense.” Id. at 962. See also United
States v. Chatterji,46 F.3d 1336, 1340 (4th Cir. 1995)(loss under
§ 2F1.1 is the actual, probable, or intended loss to the victim and
a defendant’s gain may not support an enhancement if there is no
actual or intended loss to the victims); United States v. Moored,
38 F.3d 1419, 1427 (6th Cir. 1994)(loss under § 2F1.1 is not the
potential loss but is the actual loss to the victim, or intended
loss, whichever is greater); United States v. Mummert, 34 F.3d 201,
205 (3rd Cir. 1994)(loss is the actual loss to the bank at the time
of sentencing reduced by the amount the lending institution has
recovered or can be expected to recover from any assets pledged to
secure loan).
Applying Haddock here, we hold that the district court erred
in sentencing by refusing to set off Gwartney’s repayment in
determining the amount of Bank’s loss pursuant to § 2F1.1
REVERSED and REMANDED for resentencing.
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Entered for the Court:
James E. Barrett,
Senior United States
Circuit Judge