F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
OCT 30 2001
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v. No. 01-3002
STEVEN A. SCHILD,
Defendant-Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
(D.C. No. 00-CR-40021-RDR)
Submitted on the briefs:
James E. Flory, United States Attorney, and T.G. Luedke, Assistant United States
Attorney, Topeka, Kansas, for Plaintiff-Appellee.
David J. Phillips, Federal Public Defender, and Marilyn M. Trubey, Assistant
Federal Public Defender, Topeka, Kansas, for Defendant-Appellant.
Before HENRY , PORFILIO , and MURPHY , Circuit Judges.
PORFILIO , Circuit Judge.
Defendant-appellant Steven Schild pleaded guilty to one count of bank
fraud in violation of 18 U.S.C. § 1344. He appeals his sentence, arguing that his
offense level should not have been increased based on loss to the bank.
We affirm. 1
Defendant was a customer of Bennington State Bank in Bennington,
Kansas (BSB). During 1994 and early 1995, he borrowed money from BSB
to finance his cattle operation. When his line of credit with the bank ran out,
defendant sold cattle out of trust and then filed false cattle count reports with the
bank to conceal his fraud. In August of 1995, defendant filed for bankruptcy
protection.
The base offense level for bank fraud under United States Sentencing
Guidelines Manual (USSG) § 2F1.1 is six. Defendant’s sentence was enhanced
eight levels to reflect an intended loss of more than $200,000 but less than
$350,000, and defendant was sentenced to a term of imprisonment of one year
and one day. On appeal, defendant contends that the bank he defrauded did not
lose any money in the end, and that, therefore, it was error to increase his offense
level based on loss to the bank.
1
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument.
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After hearing testimony from the vice president of BSB that defendant had
converted approximately five hundred head of cattle at a fair market value of
approximately $270,000, the district court relied on that figure to arrive at an
intended loss of between $200,000 and $350,000. “We must accept these factual
findings unless clearly erroneous, but we review de novo what may be included
in computing loss.” United States v. Haddock , 12 F.3d 950, 961 (10th Cir.
1993). The government bears the burden of proving loss by a preponderance of
the evidence. United States v. Nichols , 229 F.3d 975, 979 (10th Cir. 2000). To
prove intended loss, the government must show “that the defendant realistically
intended a particular loss, or that a loss in that amount was probable.” Id.
(quotation omitted).
Application note 8 to the commentary following § 2F1.1 states that “if
an intended loss that the defendant was attempting to inflict can be determined,
this figure will be used if it is greater than the actual loss.” Note 8(b) states:
In fraudulent loan application cases and contract procurement
cases, the loss is the actual loss to the victim (or if the loss has not
yet come about, the expected loss). For example, if a defendant
fraudulently obtains a loan by misrepresenting the value of his
assets, the loss is the amount of the loan not repaid at the time the
offense is discovered, reduced by the amount the lending institution
has recovered (or can expect to recover) from any assets pledged to
secure the loan. However, where the intended loss is greater than
the actual loss, the intended loss is to be used.
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USSG § 2F1.1, cmt. 8(b) (emphasis added). An intended loss amount should be
used for sentencing purposes if it can be determined and if it exceeds the actual
loss. Nichols , 229 F.3d at 978-79.
The fact of actual loss in this case is problematic and was so for the district
court. In trying to arrive at an amount of actual loss for purposes of a restitution
order, the district court addressed defendant’s argument that his offense level
should reflect no loss to the bank. In fact, according to the bankruptcy court, it
appeared BSB had been paid in full. Appellant’s Br., tab C (Bankruptcy Ct.
Mem. Op. and Order at 13-14).
At the sentencing hearing, however, BSB’s vice-president testified that
BSB did not include the claim for the lost cattle in its proof of claim filed in the
bankruptcy proceedings because it had already entered into a separate agreement
with defendant for repayment of those amounts. According to BSB’s vice
president, apart from the recovery in bankruptcy, the bank was still owed
$206,000 as a result of defendant’s fraud. Because the evidence was conflicting,
the district court refused to award any restitution due to its inability to determine
actual loss.
Seizing on this fact, defendant argues that, because the government could
not prove actual loss to BSB, his offense level should not have been increased.
This argument ignores the fact that, when actual loss cannot be determined but
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intended loss can be ascertained, the latter is to be used for sentencing purposes.
See, e.g., United States v. Moore , 55 F.3d 1500, 1503 (10th Cir. 1995)
(remanding for evidentiary development of defendant’s intent to deprive rental
car companies of the full value of fraudulently rented vehicles, where the
government presented no evidence of actual loss to owners); Haddock , 12 F.3d at
963 (“Intended or probable loss may be used instead of actual loss where there is
no actual loss, or where actual loss is less than the loss the defendant intended to
inflict.” (internal quotation omitted)); United States v. Smith , 951 F.2d 1164,
1168 (10th Cir. 1991) (noting that a district court need not find actual loss in
order to increase an offense level under § 2F1.1).
In a related argument and relying on the second sentence of the
commentary quoted above, defendant essentially argues that the amount of
intended loss should be determined by netting out the amounts eventually
recovered by the bank against the fair market value of the cattle sold out of trust.
Defendant is correct that “[a]ctual loss under § 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.” Haddock , 12 F.3d at 961 (quotation omitted). Defendant’s sentence,
however, was properly based on intended loss, not on actual loss.
In the intended loss calculation, the amount of money repaid to a fraud
victim is not included in the loss amount unless the defendant voluntarily
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returned value to the victim as part of the ongoing fraud. United States v.
Janusz , 135 F.3d 1319, 1324 (10th Cir. 1998). “[T]he purpose of the loss
calculation under the Sentencing Guidelines is to measure the magnitude of the
crime at the time it was committed. The fact that the victims have been able to
recover part of their loss after the discovery of the fraud does not diminish
[defendant’s] culpability and responsibility for purposes of sentencing.” Id.
Thus, the fact that BSB may have recovered some of the money it lost due to
defendant’s fraud is not taken into account at sentencing. See also United States
v. Burridge , 191 F.3d 1297, 1300 (10th Cir. 1999) (holding that district court is
not required “as a matter of law, to exclude from the intended loss calculation all
funds returned to a fraud victim”); Nichols , 229 F.3d at 982 (refusing to credit
bad check writer with amounts he had restored to bank or with amounts bank
recovered in setoff).
Defendant blends into his setoff argument, the point that, because the loans
to purchase the cattle were fully secured, that fact should be taken into account in
reducing the amount of loss to BSB. That is true when sentencing is based on
actual loss. See Smith , 951 F.2d at 1166. This court has also required that the
value of security given for a loan be taken into account in determining intended
loss. Nichols , 229 F.3d at 980 (finding it “error to ignore the contemporaneous
exchange of security for the note in considering the economic reality of the
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transaction and any intended loss in excess of actual loss. The security of the
loan is a valid consideration in evaluating a defendant’s realistic intent and the
probability of inflicting the loss.”). Defendant’s situation, however, differs from
that of the defendants in Smith and Nichols .
The record indicates that defendant’s numerous loans with BSB were
cross-collateralized. However, it is undisputed that by April 1995, the value
of defendant’s collateral equaled the amount of his debt to the bank. When
defendant began converting the cattle, there was apparently no extra collateral
available to secure the bank in the absence of the cattle themselves. The point
defendant ignores is that the loan to him for his cattle operation was a line of
credit, part of the security for which was the cattle themselves. When defendant
sold the cattle, he sold the bank’s collateral. See Nichols , 229 F.3d at 979
(“[T]he mere presence of collateral securing an item that was fraudulently
obtained does not automatically reduce the loss calculation under § 2F1.1 where
it can be shown that the defendant intended to permanently deprive the creditor
of the collateral through concealment.”).
Intent is a question of fact for the sentencing court to be determined on
a case-by-case basis. Burridge , 191 F.3d at 1300, 1304. At the sentencing
hearing, defendant testified that he did not intend to cause loss to BSB.
While the district court might have believed this assertion, it was not clearly
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erroneous for the court to discount it based on defendant’s concealment of
the fraud. See id. at 1303.
This case is controlled by United States v. Banta , 127 F.3d 982 (10th Cir.
1997), which involved the purchase of two vehicles by the defendant based on a
fraudulent loan application. The fair market value of the vehicles involved in the
defendant’s fraud was approximately $50,000. After the bank repossessed the
vehicles and sold them, the net loss to the bank was approximately $18,000. This
court rejected the defendant’s argument that $18,000 more closely represented
economic reality, or that the defendant could not have intended to inflict a loss
equal to the full amount of the loans because the loans were collateralized by the
vehicles themselves. The court noted the false information the defendant
provided to the bank and the fact that the defendant could have inflicted a loss
equal to the face value of the loans if he intended to permanently deprive the
bank of its collateral by simply concealing the vehicles. The defendant was thus
properly held accountable for the full value of the loans.
Based on Banta , it is clear that this defendant was properly sentenced.
BSB loaned defendant money to purchase cattle, with the cattle themselves as
collateral. Defendant filed false cattle count reports on more than one occasion
in an effort to mislead the bank about the number of cattle remaining in his
operation. Contrary to the facts in Banta , BSB has never recovered any of the
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cattle converted by defendant and has never learned exactly what happened to
them. The speculation of the court in Banta that the defendant there could have
concealed the vehicles from the bank is a reality in this case: defendant actually
did permanently conceal and/or deprive BSB of its collateral. This case is unlike
Smith , 951 F.2d 1164, or Nichols , 229 F.3d 975, where the defendants
fraudulently procured loans, albeit with some type of collateral given. Here,
defendant simply sold the bank’s collateral. Because the factual findings of the
district court are not clearly erroneous and because there is no error in the
amounts included in the computation of the loss, defendant was properly
sentenced.
The judgment of the United States District Court for the District of Kansas
is AFFIRMED.
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