United States v. Osborne

F I L E D
United States Court of Appeals
Tenth Circuit

JUN 18 2003
PUBLISH

UNITED STATES COURT OF APPEALS PATRICK FISHER
Clerk
TENTH CIRCUIT

UNITED STATES OF AMERICA,

Plaintiff - Appellee,
v.
No. 02-4119
DALE WALTER OSBORNE,

Defendant - Appellant,

UNITED STATES OF AMERICA,

Plaintiff - Appellee,

v.
No. 02-4167
DARRELL WAYNE REESE,

Defendant - Appellant,

UNITED STATES OF AMERICA,

Plaintiff - Appellee,
No. 02-4171
v.

BRAD LEE GORDON,

Defendant - Appellant.
 Appeals from the United States District Court
for the District of Utah
(D.C. No. 01-CR-742)

Submitted on the briefs: *

G. Fred Metos, Salt Lake City, Utah for Defendant-Appellant Dale W. Osborne.

Julie George, Salt Lake City, Utah for Defendant-Appellant Brad Lee Gordon.

Robert Breeze, Salt Lake City, Utah for Defendant-Appellant Darrell Wayne
Reese.

Paul M. Warner, United States Attorney, and Diana Hagen, Assistant United
States Attorney, Salt Lake City, Utah for the Plaintiff-Appellee United States of
America.

Before KELLY, BRISCOE, and LUCERO, Circuit Judges.

LUCERO, Circuit Judge.

Each defendant, Dale Walter Osborne, Darrell Wayne Reese, and Brad Lee

Gordon, pled guilty to one count of bank fraud in violation of 18 U.S.C. § 1344,

in connection with a check-counterfeiting scheme. All defendants appeal their

sentences, arguing that the district court erred in calculating the amount of loss

for the purpose of determining relevant conduct. Because these appeals arise

*
At the parties’ request, the case is unanimously ordered submitted
without oral argument pursuant to Fed. R. App. P. 34(f) and 10th Cir. R. 34.1(G).

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from common facts and raise similar arguments, we consolidate them for

disposition. Exercising jurisdiction under 28 U.S.C. § 1291, and 18 U.S.C.

§ 3742(a), we affirm.

I

Defendants were involved in a three-tiered check-counterfeiting scheme

that operated from January 2001 until November 2001. Gordon and his girlfriend,

Candice Eppard, were known as the “bosses” of the organization. (2 Osborne R.

at 6.) They employed Osborne, Reese, and others as “front-runners,” who in turn

recruited “cashers.” (2 id. at 7–8.) Testifying as a government witness, Eppard

explained that front-runners acted as buffers between cashers and bosses, to

protect the bosses in the event a casher was apprehended.

The organization worked as follows. Individuals stole checks from the mail

and gave them to the bosses. Using a computer program, the bosses would scan

the stolen checks, alter the payee and amount, and print counterfeit checks.

Although only thirty percent of the stolen checks were usable for counterfeiting,

the bosses would counterfeit a single stolen check several times, and increase the

amount payable in multiples of up to forty times the original amount. Unused

stolen and counterfeit checks were destroyed.

Front-runners provided the bosses with the names of their cashers, to be

printed as the payee on the counterfeit check. Once produced, the bosses handed

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the counterfeit checks to the front-runners, who in turn gave them to cashers to

tender at banks. Upon negotiating a check, the casher gave the proceeds to the

front-runner, who kept a third for himself, gave a third to the casher, and gave a

third to the bosses. Front-runners operated independent cells. They retained

discretion to hire their own cashers and chose the banks where the checks would

be tendered, and they did not pool their proceeds. Nonetheless, they generally

knew the other front-runners in the operation and knew that they were all

involved in the same scheme. Osborne, in his capacity as a front-runner,

employed three cashers, who obtained a total of $45,325 for the organization by

negotiating counterfeit checks. Reese, another front-runner, did not join the

organization until after August 6, 2001. He primarily employed only one casher

although he sometimes worked with two others. Eppard testified that Reese also

assisted in stealing checks from the mail in September 2001.

The scheme ended abruptly when the bosses, Eppard and Gordon, were

arrested on November 29, 2001. During its operation, the organization obtained

proceeds totaling $157,019 from counterfeit checks. After arresting Eppard and

Gordon, the police found in their home stolen and counterfeit checks, with face

values totaling $708,519. Some of these checks were defective and unusable.

Gordon, Eppard, Osborne, Reese, and another front-runner were charged

with one count of conspiracy in violation of 18 U.S.C. § 371, one count of bank

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fraud in violation of 18 U.S.C. § 1344, and one count of mail theft in violation of

18 U.S.C. § 1708. In addition, Gordon and Eppard were charged with one count

of passing counterfeit checks kept in their possession in violation of 18 U.S.C.

§ 472, and one count of possession of counterfeit checks in violation of 18 U.S.C.

§ 513. Gordon, Osborne, and Reese each pled guilty to the bank-fraud count, and

the remainder of the charges were dismissed.

At sentencing, after hearing testimony from Eppard and Postal Inspector

Randy Griffin, the district court concluded that the intended loss for the entire

organization totaled over $825,000, reflecting (1) actual losses of $157,019

obtained from counterfeit checks during the length of the operation, in addition to

(2) potential losses of $708,519, the face value of stolen and counterfeit checks

seized from the Gordon-Eppard residence, minus $40,000, the estimated value of

the unusable checks found discarded outside their former residence.

Based on this calculation of loss, the sentencing court enhanced the

criminal offense level for each defendant. Gordon and Osborne were severally

held accountable for the intended loss of the entire organization—approximately

$825,000. Reese, on the other hand, had not entered the organization until after

August 6, 2001. Thus, the district court attributed to Reese the intended loss of

the organization during the time period when he was found to be an active

participant, from August 6, 2001, until the scheme ended in November 2001.

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This amount included actual losses incurred during this time period in the amount

of $67,648, in addition to potential losses in the amount of the face value of the

checks seized from the Gordon-Eppard residence. For each defendant, the

intended loss was greater than $400,000 but less than $1,000,000, and the

sentencing court accordingly enhanced the offense level for each by fourteen

pursuant to U.S.S.G. § 2B1.1(b)(H). The sentencing court then granted

defendants’ requests for a three-level reduction for attempt pursuant to U.S.S.G.

§ 2X1.1(b)(1), on the basis that considerable steps needed to be performed before

the intended losses could have been realized.

Osborne was sentenced to seventy months of imprisonment to be followed

by sixty months of supervised release, and was required to pay $157,019 in

restitution, jointly and severally with the other defendants. Reese was sentenced

to the same length of imprisonment and supervised release as Osborne, and was

jointly and severally responsible for paying $67,648 in restitution. 1 Gordon was

sentenced to eighty-four months of imprisonment to be followed by sixty months

of supervised release, and was jointly and severally responsible for paying

$157,019 in restitution with the other defendants. On appeal, each defendant

argues that error occurred in calculating the amount of loss.

1
Reese’s late entry into the organization accounts for the reduced
restitution amount.

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 II

At sentencing, the government bears the burden to prove by a

preponderance of the evidence that the conduct of others is to be attributed to the

sentenced defendant. United States v. Melton, 131 F.3d 1400, 1403 (10th Cir.

1997). Osborne, who acted as a front-runner in the organization, argues that the

district court erred in holding him accountable for the intended loss of the entire

organization, rather than limiting loss to the amount obtained by the three cashers

whom he personally employed. We review the district court’s factual findings to

determine whether there was clear error, and we review the ultimate

determination of relevant conduct de novo. United States v. Tran, 285 F.3d 934,

938 (10th Cir. 2002).

U.S.S.G. § 2B1.1 provides a base offense level of six for crimes involving

altered or counterfeit instruments, and includes an enhancement based on the

dollar value of loss. When the amount of loss exceeds $400,000, but is less than

$1,000,000, the offense level increases by fourteen. § 2B1.1(b)(H). Amount of

loss is defined as the greater of “actual loss” or “intended loss,” where actual loss

includes “the reasonably foreseeable pecuniary harm that resulted from the

offense,” and intended loss “(I) means the pecuniary harm that was intended to

result from the offense; and (II) includes intended pecuniary harm that would

have been impossible or unlikely to occur.” Id. cmt. 2(A)(i), (ii).

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 U.S.S.G. § 1B1.3 provides that in the case of a jointly undertaken criminal

activity, the base offense level shall be determined on the basis of “all reasonably

foreseeable acts and omissions of others in furtherance of the jointly undertaken

criminal activity.” Thus, a defendant will be held accountable for the conduct of

others when that conduct is (1) “in furtherance of the jointly undertaken criminal

activity,” and (2) “reasonably foreseeable in connection with that criminal

activity.” § 1B1.3, cmt. n.2.

In determining relevant conduct in Osborne’s case, the sentencing court

held Osborne accountable for the $825,000 of losses intended by the entire

organization, rejecting Osborne’s argument that the amount of loss should be

limited to the $45,325 generated by his individual cell, that is, by the three

cashers he personally employed. This decision was based on the finding that the

aggregate losses of the entire scheme were foreseeable to Osborne because he

knew the other front-runners and the “general outlines and what was done by all

the cells.” (4 Osborne R. at 37.) The sentencing court concluded that the entire

scheme was within the scope of Osborne’s agreement because: (a) Osborne knew

the other front-runners and agreed to protect the bosses by acting as a buffer

between them and the cashers, and (b) because each cell shared a common source

of counterfeit checks, common modus operandi, common purpose, and common

victims. Thus, Osborne was held accountable for the intended loss of the entire

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organization. As this amount exceeds $400,000 but is less then $1,000,000, the

district court enhanced the offense level by fourteen points pursuant to U.S.S.G.

§ 2B1.1(b)(1)(H).

Osborne played a managerial role in the organization by recruiting cashers

and admitted in his statement in advance of his guilty plea that he was “working

together” with the bosses and other front-runners to “execute[] a scheme to

defraud.” (1 Osborne Supp. R. at 5); see United States v. Robbins, 197 F.3d 829,

851 (7th Cir. 1999) (concluding that defendant who was a “trusted lieutenant and

part of the inner circle of the leaders” was responsible for the full amount of

drugs attributable to a conspiracy even though he neither played a leadership role

nor personally participated in every drug transaction (quotation omitted)); cf.

Melton, 131 F.3d at 1406 (holding that defendant may not be accountable for an

act of others where he played a minimal role in the conspiracy and had no direct

dealings with the leaders). He agreed to protect the bosses by acting, along with

his fellow front-runners, as a buffer between them and the cashers, and

understood that each cell would work in an identical manner. See Tran, 285 F.3d

at 938–39. Based on this evidence, we hold that the district court’s factual

conclusion as to the scope of Osborne’s agreement is not clearly erroneous and

affirm its finding that the intended losses of the entire plan were attributable to

Osborne.

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 III

Like Osborne, Reese acted as a front-runner, and also assisted in stealing

checks from the mail. On appeal, Reese raises three distinct arguments. First, he

contends that the sentencing court violated the Ex Post Facto Clause by applying

the 2001 version of the Sentencing Guidelines rather than the prior version.

Second, he claims that the district court miscalculated the amount of intended

losses by basing it on the face value of stolen and counterfeit checks seized from

the Gordon-Eppard residence. Third, he maintains that the district court

improperly ordered restitution against him in the amount of $67,648.

A

Reese’s Ex Post Facto claim is predicated on the fact that his participation

in the scheme ended on August 28, 2001, the date he was arrested with one of his

cashers. 2 Based on this fact, he argues the district court violated the Ex Post

Facto Clause by utilizing the 2001 version of the Sentencing Guidelines, which

did not become effective until November 1, 2001, a point after his offending

conduct had allegedly ended. Whether the district court applied the correct

version of the Sentencing Guidelines presents a question of law we review de

novo, United States v. Easterling, 157 F.3d 1220, 1224 (10th Cir. 1998); however,

2
Because the record does not indicate when Reese was released, we
presume that it occurred shortly after his arrest.

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we review the district court’s underlying factual findings for clear error, United

States v. Archuletta, 231 F.3d 682, 684 (10th Cir. 2000).

On the basis of its finding that Reese remained actively involved in the

conspiracy after the date of his arrest, until the conspiracy as a whole ended on

November 29, 2001, the trial court rejected Reese’s claim that his conduct ended

before the 2001 amendments came into effect. This finding was based on

Eppard’s testimony that Reese stole checks for the organization sometime in

September 2001, and that these checks were used to create counterfeit checks to

be negotiated later. We find no fault in this analysis and conclude that the district

court was not clearly erroneous in concluding that Reese’s participation in the

conspiracy continued past November 1, 2001, the effective date of the 2001

amendments.

B

In addition to challenging the application of the 2001 version of the

guidelines, Reese argues that the district court erred in utilizing the face value of

checks seized from the Gordon-Eppard residence to determine the intended loss of

the entire scheme. “Factual findings supporting a district court’s calculation of

loss . . . are reviewed for clear error.” United States v. Knox, 124 F.3d 1360,

1365 (10th Cir. 1997); see also United States v. Peterson, 312 F.3d 1300, 1302

(10th Cir. 2002) (holding that we review factual determinations as to the amount

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of loss resulting from illegal activity for clear error). Reese contends that “[t]he

face amount of the checks at the Eppard/Gordon residence has nothing to do with

the amount for which said checks would be counterfeited. In other words, the

amount written on a stolen check bore no relation to how much was entered on the

check when the counterfeit check was created.” (Reese Appellant’s Br. at 14.)

According to the testimony of Postal Inspector Randy Griffin, the checks

seized from the Gordon-Eppard residence included stolen checks as well as

counterfeit checks. Although the evidence suggests that not all of these would

actually be negotiated, Griffin testified that “any check with an account number

on it could have been used and all of the checks that amounted to $708,000 had

an account number on them.” (4 Osborne R. at 35–36.) In concluding that the

face value of the seized checks should be used to determine potential loss, the

district court stated:

I am very mindful of the fact that some of those checks, the
counterfeited checks and the stolen checks, might not have been what
the bosses would have used, but I have heard the testimony of the
agent that if it had an account number, it could have been used. And
I’m mindful of the fact that in difficult circumstances such as these,
the government does not have to precisely pinpoint the amount of
loss.

(4 id. at 39.) The court also recognized:

[T]here is no way to know how many times or for what amounts the
checks that were discovered during the raid of the Gordon home, how
many times they would have been used. There was testimony that
some of these checks were used time and time again. And I’m

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 mindful of the fact that under the guidelines I am to use the best
method I can, recognizing that sometimes it cannot be perfect.

(3 Reese R. at 8.) To account for its imprecision in estimating potential loss,

moreover, the sentencing court granted a three-point reduction for attempt under

§ 2X1.1, stating: “I found very persuasive the fact that there were some

considerable steps left to be performed, and steps that very likely would have

resulted in far less loss. For example, . . . they didn’t use all of the checks.” (4

Osborne R. at 39.)

In calculating the amount of loss for purposes of determining relevant

conduct, the district court “need only make a reasonable estimate of loss.”

U.S.S.G. § 2B1.1, cmt. 2(C); see also United States v. Copus, 110 F.3d 1529,

1535 (10th Cir. 1997) (“A reasonable estimate of loss will suffice.”). The

Application Note further explains:

The sentencing judge is in a unique position to assess the evidence
and estimate the loss based upon that evidence. For this reason, the
court’s loss determination is entitled to appropriate deference. See
18 U.S.C. § 3742(e) and (f).

The estimate of loss shall be based on available information, taking
into account, as appropriate and practicable under the circumstances,
factors such as the following:
(i) The fair market value of the property unlawfully taken or
destroyed . . .
(iv) More general factors, such as the scope and duration of the
offense . . .

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U.S.S.G. § 2B1.1, cmt. 2(C). Given Griffin’s testimony that any check with an

account number could potentially be negotiated, that all of the seized checks from

the Gordon-Eppard residence had account numbers on them, and the

uncontroverted fact that a single stolen check would be counterfeited multiple

times for increased amounts, the district court was not clearly erroneous in using

the face value of the seized checks to estimate the intended loss.

C

Finally, Reese challenges the restitution order of $67,648, the amount of

counterfeit checks cashed during the period Reese was found to be active in the

conspiracy, rather than the $28,388 amount that he and Rother, the casher whom

he primarily employed, obtained. We review the legality of a restitution order de

novo, again reviewing the factual findings underlying the order for clear error and

the amount of restitution for abuse of discretion. United States v. Nichols, 169

F.3d 1255, 1278 (10th Cir. 1999).

18 U.S.C. § 3663(a)(1)(A) provides that a court may order restitution by a

defendant to any victim of a bank fraud offense. “[T]he losses caused by the

entire conspiracy, not just the losses caused by those acts committed by the

defendant, can be attributed to the defendant when the district court orders

restitution.” United States v. Brewer, 983 F.2d 181, 185 (10th Cir. 1993). Even

when a defendant is not formally convicted of conspiracy, a district court may

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order a restitution amount for the relevant conduct of others that may be

attributed to him. United States v. Tucker, 286 F.3d 505, 512 (10th Cir. 2002).

Reese does not challenge the district court’s conclusion that his relevant conduct

includes the actual loss from checks negotiated by the organization while he

participated in it (although he does challenge the calculation for potential loss).

Therefore, the court did not abuse its discretion in ordering restitution in the

amount of $67,648, jointly and severally, based on the reasonably foreseeable

actual losses caused by the other members of the conspiracy.

IV

Like Reese, Gordon, one of the bosses, challenges the district court’s

calculation of intended loss based on the face value of stolen and counterfeit

checks found in his home. In response, the government maintains that Gordon

waived this claim by failing to raise it before the sentencing court. When a

defendant fails to raise a factual issue at sentencing, we will “consider the issue

waived and will not find plain error.” United States v. Overholt, 307 F.3d 1231,

1253 (10th Cir. 2002).

Even were we to conclude that Gordon properly preserved this issue for

appeal, our holding above that the district court did not commit clear error in

calculating the amount of loss precludes relief for Gordon on this claim.

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 V

All sentences are AFFIRMED.

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