In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 06-3837
U NITED S TATES OF A MERICA,
Plaintiff-Appellee,
v.
N EAL K. A LLEN,
Defendant-Appellant.
____________
Appeal from the United States District Court
for the Western District of Wisconsin.
No. 04 CR 23—Barbara B. Crabb, Chief Judge.
____________
A RGUED N OVEMBER 6, 2007—D ECIDED JUNE 16, 2008
____________
Before F LAUM, K ANNE, and R OVNER, Circuit Judges.
K ANNE, Circuit Judge. Neal Allen pled guilty, pursuant
to a plea agreement, to one count of mail fraud in viola-
tion of 18 U.S.C. § 1341—“Frauds and Swindles”—for
having used the postal service when he provided false
credentials to secure a contract. Allen held himself out as
a mold-testing and remediation expert, which ultimately
led the Lac du Flambeau band of the Chippewa tribe
(“LdF”) to secure his services. At sentencing, the district
court ordered Allen to pay restitution in the amount of
$363,038.47. The court refused to reduce the amount by
the value of the services the LdF received from Allen
2 No. 06-3837
both because the task of calculating that value would be
burdensome, and because Allen misrepresented himself
as a “licensed professional” and thus was not entitled to
such a reduction, see U.S.S.G. § 2B1.1 Application Note
3(F)(v). We find that the application note does not apply
to Allen’s situation, and that the district court should
have calculated the value of the services Allen provided
and modified his sentence accordingly. We therefore
vacate the restitution portion of Allen’s sentence and
remand for a recalculation of restitution that reflects the
actual loss suffered by the victims in this case.
I. H ISTORY
Neal Allen marketed himself as an expert in mold
remediation, and falsified his education and employ-
ment history on a pamphlet that was distributed to pro-
mote a mold seminar. An attorney for the LdF received a
copy of the pamphlet, and the attorney’s contact with Allen
ultimately led the LdF to enter into a contract with Allen,
in September 2002, for mold-testing services. Allen and
his crew performed Allen’s responsibilities under the
contract and tested approximately 400 LdF buildings for
mold. Allen sent the mold samples to Aerotech Laborato-
ries, Inc., after committing to pay the laboratory $71,000
for its analysis of the samples. Allen collected full pay-
ment from the LdF (approximately $286,000) on Decem-
ber 30, 2002, and then promptly left the country—cash
in hand—for the Dominican Republic, where he estab-
lished residence. During that same time period, Allen also
became a naturalized citizen of Costa Rica, under a dif-
ferent name. Allen never paid Aerotech for testing the
samples.
No. 06-3837 3
In October 2004, Allen was indicted by a grand jury in
the Western District of Wisconsin on six counts of mail
fraud, see 18 U.S.C. § 1341. He was ultimately convicted, in
March 2006, of one count of mail fraud, to which he pled
guilty. In the plea agreement, Allen agreed:
to pay restitution for all losses relating to the
offense of conviction and all losses covered by the
same course of conduct or common scheme or
plan as the offense of conviction. The exact restitu-
tion figure will be agreed upon by the parties prior
to sentencing or, if the parties are unable to agree
upon a specific figure, restitution will be deter-
mined by the Court at sentencing.
At the plea hearing, Allen stated to the court:
I falsified credentials to obtain a contract with the
Lac du Flambeau tribe, and I used the federal mails
or I used the FedEx, which is considered federal
mails, to send the lab samples to the lab. That’s
what I did.
In exchange for his plea, the government agreed to rec-
ommend that Allen’s sentence be reduced to the maximum
extent possible for acceptance of responsibility, see U.S.S.G.
§ 3E1.1(a)-(b), and that Allen’s plea would resolve all
possible criminal violations in the Western District of
Wisconsin related to this course of Allen’s criminal con-
duct.
In the presentence report (PSR) and its addendums, the
probation officer calculated Allen’s base offense level as
six and his Criminal History Category as I. The probation
officer recommended a twelve-level enhancement pur-
suant to United States Sentencing Guideline (U.S.S.G.)
§ 2B1.1(b)(1)(G)—because the proposed loss amount
4 No. 06-3837
was more than $200,000 but less than $400,000—a two-
level enhancement for obstruction of justice, a two-level
decrease under § 3E1.1(a) for acceptance of responsibility,
and an additional one-level decrease pursuant to § 3E1.1(b)
for timely providing information to the government
and/or timely notifying authorities of his intention to
plead guilty. Allen’s total offense level was 17. The proba-
tion offer proposed that Allen be ordered to pay
$294,193.47 in restitution to the LdF, and $71,345.00 to
Aerotech Laboratories.
Allen filed a written objection to the PSR, specifically
contesting the amount of loss attributable to him and the
proposed restitution figures. Allen’s position was that
the loss figure could not exceed the amount of loss
actually caused; with respect to the LdF, the figure
should have taken into account the value of Allen’s work
and should have been reduced in its entirety because the
LdF did not suffer any monetary loss. With respect to
Aerotech, Allen argued that the court should not in-
clude the unpaid balance to the laboratory because that
figure merely reflected a breach of contract between Allen
and Aerotech.
In response, the government argued that Application
Note 3(F)(v) of U.S.S.G. § 2B1.1 did not allow for a re-
duction in the amount of loss for the value of services
provided by Allen to the LdF because Allen held himself
out as licensed professional when he deceived the LdF into
contracting with him. At the sentencing hearing, the
government reduced its proposed restitution amount by
$2,500—the value of a microscope that had been seized and
that Allen agreed to turn over for restitution.
At sentencing, the district court adopted the calcula-
tions contained in the PSR and its addendums, finding the
No. 06-3837 5
total amount of loss attributable to Allen to be $363,038.47.
The court decided that the losses sustained by Aerotech
were direct and reasonably foreseeable pecuniary harm
that resulted from Allen’s offense. The district court also
decided that Allen was not entitled to have the loss
amount reduced by the value of the mold-testing services
he provided to the LdF because he had misrepresented
his credentials and made himself appear as “a highly
qualified expert microbiologist in the field of mold
remediation.” The district court explained to Allen during
the sentencing hearing:
Although you’ve suggested that the tribe’s pecuni-
ary loss should be reduced by the actual value of
the services provided, trying to calculate that value
would place an undue burden on the court and it’s
certainly unlikely that the purported value would
exceed the approximately $81,000 that the tribe
expended to house its members who were dis-
placed from their homes during the fraudulent
remediation scheme and for which no restitution
is being ordered because the costs cannot be ade-
quately verified. The fact is the tribe would never
have agreed to pay you had it not been for your
fraudulent misrepresentations.
The court applied the relevant twelve-level enhancement,
see U.S.S.G. § 2B1.1(b)(1)(G), based on the PSR’s proposed
loss amount, and sentenced Allen to 26 months’ imprison-
ment. Allen was ordered to pay as restitution $291,693.47
to the LdF and $71,345 to Aerotech. Allen filed a timely
notice of appeal.
6 No. 06-3837
II. A NALYSIS
Allen appeals the district court’s restitution calculation,
arguing that the amount should have been reduced by the
value of the services he performed.1 The government
argues that Allen cannot challenge the district court’s
calculation of restitution both because he waived such a
challenge by not raising it during the sentencing hearing,
and because he delegated the restitution calculation to
the court—the plea agreement provided that if the
amount of restitution could not be agreed upon by the
parties, the court would determine the figure at sen-
tencing. In any event, the government argues, the district
court’s calculation of the restitution amount was correct
because the tests Allen conducted are useless to the tribe
in light of the truth about Allen—that he is not an expert
in the field of mold remediation.
We will dispose of the government’s “delegation”
argument first. A party that agrees to have the district
court decide a restitution amount implicitly condi-
tions his assent on the court’s calculation of that amount
within the parameters of the law. The government cites
United States v. Peterson, 268 F.3d 533 (7th Cir. 2001), for
the proposition that once a defendant grants the district
court authority to calculate restitution, the defendant is
bound by whatever amount the district court designates,
regardless of how that figure was determined (i.e., in
accordance with the law, or not). Under the govern-
ment’s position, a district court could arbitrarily choose
1
Allen does not appeal the loss calculation insofar as it affected
the non-restitution portions of his sentence, i.e., his term of
imprisonment, so we will only consider the loss calculation as
it relates to Allen’s restitution order.
No. 06-3837 7
a restitution figure out of thin air—say, $50 million—and
order that against a defendant who caused only $1 million
in actual losses, on the grounds that the defendant
“delegated” the calculation authority to the court. Peterson
suggests nothing of the sort. See id. at 533-35.
In Peterson’s plea agreement, he agreed to pay restitu-
tion “for all losses relating to the offense of conviction
and all losses covered by the same course of conduct or
common scheme . . . .” Id. at 533-34. The district court
calculated restitution and included amounts for victims
of Peterson’s course of conduct who were not directly
harmed by the criminal counts to which Peterson
pled—though the victims were harmed by the broader
criminal scheme effectuated by Peterson, which related
to the offense of conviction. Peterson argued that the
district court “lacked authority to order restitution
other than with respect to the two counts of conviction.”
We held that because Peterson had agreed to make resti-
tution to all victims of his course of conduct, and because
he agreed that the district court could decide the restitu-
tion details, if necessary, Peterson was in no position to
challenge the district court’s order of restitution in favor
of the very victims of Peterson’s course of conduct. Id.
at 535.
Allen’s case is different because, unlike Peterson, he
challenges the veracity of the district court’s restitution
calculation, not the authority of the district court to make
that calculation. See id. (“Peterson does not contend that
the judge’s calculation was mistaken; he argues only that
the district judge lacked authority to specify any amount.”).
When reviewing a district court’s calculation of restitu-
tion pursuant to a plea agreement in which the defendant
granted the district court the power to set the precise
8 No. 06-3837
amount, we need not abandon customary restitution-
review practices. The statute by which Allen is being
made to pay restitution—18 U.S.C. § 3663A(a)—applies
regardless of whether he is ordered to pay restitution
against his will, or as a condition of his plea. And, “for
restitution purposes the statute implicitly requires that
the restitution award be based on the amount of loss
actually caused by the defendant’s offense.” United States
v. Rhodes, 330 F.3d 949, 953 (7th Cir. 2003) (citing United
States v. Brierton, 165 F.3d 1133, 1139 (7th Cir. 1999) (em-
phasis removed)); see also 18 U.S.C. § 3663(a)(B)(i)(I). Thus,
we will consider whether the district court correctly
calculated the actual loss caused by Allen’s conduct. If
Allen’s objection to the district court’s restitution-calcula-
tion was preserved, we will review the calculation for
an abuse of discretion. See United States v. Swanson, 394
F.3d 520, 526 (7th Cir. 2005). The government’s waiver
argument, however, suggests that we should review
the calculation for plain error.
It is true that at sentencing Allen did not restate his
objection to the PSR’s calculation of the amount of loss. The
court asked Allen whether he had any objections that
his attorneys had not raised on his behalf. Allen answered,
“No, I don’t.” When the court asked Allen’s attorney
whether there were any things Allen was still objecting
to within the PSR, the attorney responded that there
was not, in light of the fact that the government took off
two levels for abuse of trust. The court then calculated
the total offense level at 17 and the advisory range as 24 to
30 months’ imprisonment. Allen’s attorney finished with,
“we have no objections to those calculations.” On these
statements alone, the government presents a compelling
waiver argument—that Allen intentionally relinquished
No. 06-3837 9
his known right to object to the restitution calculation.
See United States v. Jaimes-Jaimes, 406 F.3d 845, 848 (7th
Cir. 2005) (“The touchstone of waiver is a knowing and
intentional decision.”). The restitution calculation ap-
pears in the PSR, and Allen objected to that calculation
prior to the sentencing hearing. Yet, Allen’s attorney did
not object at sentencing to the restitution calculation.
Instead, the attorney affirmatively stated that he had no
objections to the calculations. “A defendant who does not
object to his sentence when asked whether he has any
objections may communicate an intention to relinquish any
arguments related to his offense calculation . . . .” United
States v. Brodie, 507 F.3d 527, 531 (7th Cir. 2007) (emphasis
added).
However, “a lawyer’s statement at sentencing that the
defendant does not object to anything in the presentence
report does not inevitably constitute a waiver.” Jaimes-
Jaimes, 406 F.3d at 848. If a specific objection was not raised
at sentencing, we will view it as having been waived if
the defendant had a strategic reason to forego the argu-
ment, that is, only if the defendant’s counsel would not
be deficient for failing to raise the objection. Brodie, 507
F.3d at 531-32; Jaimes-Jaimes, 406 F.3d at 848. Allen had
no strategic reason to forego at sentencing his challenges
to the restitution figure. The issue had been at the fore-
front of the district court’s considerations leading up to
sentencing, and the court itself had asked the parties, via
a memo, to respond to questions it had about the amount
of loss attributable to Allen’s conduct. Further, as Allen
points out, the district court did not seemingly consider
the objection waived, and addressed it directly in its
pronouncement of Allen’s sentence and its discussion of
the restitution amount: “Although you’ve suggested that
10 No. 06-3837
the tribe’s pecuniary loss should be reduced by the actual
value of the services provided . . . .” The issue of the
restitution calculation was central to the district court’s
considerations both before sentencing and throughout.
There was no strategic reason for failing to raise the
objection at sentencing, and Allen’s attorneys could be
faulted for their omission. Thus, the objection was not
waived by Allen. See Jaimes-Jaimes, 406 F.3d at 848.
That being said, Allen’s failure to raise the objection
constitutes a forfeiture that was “ ‘accidental rather than
deliberate.’ ” Id. at 848 (quoting United States v. Richardson,
238 F.3d 837, 841 (7th Cir. 2001)). As such, our review is
for plain error. United States v. Thigpen, 456 F.3d 766, 771
(7th Cir. 2006). “To establish plain error, [Allen] has to
demonstrate a clear error that affects a substantial right
and, moreover, impacts ‘the fairness, integrity, or public
reputation of judicial proceedings.’ ” Id. (quoting United
States v. Olano, 507 U.S. 725, 733-34 (1993)). Even if we
spot such an error in the court’s restitution calculation,
we do not have to correct the error, but we may do so if
the error “ ‘seriously affect[s] the fairness, integrity or
public reputation of judicial proceedings.’ ” United States
v. Kibler, 279 F.3d 511, 514 (7th Cir. 2002) (quoting Olano,
507 U.S. at 732).
We now consider whether the district court’s restitu-
tion calculation (or rather, its want of a calculation) re-
flects an error so clear that it must be corrected. The dis-
trict court decided against calculating the actual loss
suffered by the LdF, stating that “trying to calculate that
value would place an undue burden on the court.” The
court guessed that the value the LdF received from Allen’s
services would be less than $81,000—the amount the LdF
allegedly spent housing its members while they were
No. 06-3837 11
displaced from their homes during the mold testing. The
$81,000 was not included in the district court’s calcula-
tion, however, because those costs could not “be ade-
quately verified.” So the district court opted against
calculating the actual loss caused by Allen—the total
pecuniary loss minus the value received by the LdF—and
conjectured that if it had calculated the value received
by the LdF, it would have been less than a non-verifiable
figure that the LdF claims it spent on housing its members.
In addition to the “undue burden” cited by the court, it
also seems to have decided against calculating the actual
loss because Allen represented himself as, in the district
court’s words, “a highly qualified expert microbiologist
in the field of mold remediation.” According to the court,
the tribe would not have hired Allen if it had known the
truth about him, so its entire loss of $291,693.47 was
attributable to Allen.
We must decide whether the district court was required
to calculate the LdF’s actual loss and order restitution
accordingly—as opposed to ordering restitution for the
entire amount the LdF paid to Allen for his services. Under
the Mandatory Victim Restitution Act (MVRA), see 18
U.S.C. § 3663 et seq., restitution is available to victims to
the extent that it would have been available had the vic-
tims pursued a civil suit against the criminal. See United
States v. Martin, 195 F.3d 961, 968 (7th Cir. 1999). When the
victims are seeking to recover their losses from a defen-
dant, they must “prove that the defendant caused the
loss,” and “show that the loss would not have occurred
but for [the defendant’s] misconduct.” Id. “The proper
amount of restitution is the amount wrongfully taken by
the defendant.” United States v. Brierton, 165 F.3d 1133, 1139
(7th Cir. 1999). The government bears the burden of
12 No. 06-3837
demonstrating the losses suffered, and “as part of its
burden to prove a restitution amount, the government
must deduct any value that a defendant’s fraudulent
scheme imparted to the victims.” United States v. Swanson,
483 F.3d 509, 515 (7th Cir. 2007); Swanson, 394 F.3d at
527-28. Allen’s position was, and is, that he performed his
duties under the contract, and that his mold-testing of 400
homes was of significant value to the LdF and the value
should have been calculated and deducted from the
restitution amount.
The government argued that Allen was not entitled to
the customary reduction for the value of services ren-
dered because, in its view, Allen’s conduct fell within the
purview of Application Note 3(F)(v) of U.S.S.G. § 2B1.1,
which provides:
In a case involving a scheme in which (I) services
were fraudulently rendered to the victim by per-
sons falsely posing as licensed professionals . . .
loss shall include the amount paid for the property,
services or goods transferred, rendered, or misrep-
resented, with no credit provided for the value of
those items or services.
Section 2B1.1 of the sentencing guidelines provides a
framework for calculating the amount of loss attributable
to a defendant for sentencing purposes; “loss” is the greater
of the actual loss (“reasonably foreseeable pecuniary harm
that resulted from the offense”) or intended loss. U.S.S.G.
§ 2B1.1, Application Note 3(A)(i)-(ii). However, the deter-
mination of loss for a defendant’s sentencing range is
different than that for his restitution obligations: “[w]hile
for sentencing purposes ‘loss’ is defined as the greater of
either the ‘actual’ or the ‘intended’ amount lost due to the
fraud, for restitution purposes the statute implicitly requires
No. 06-3837 13
that the restitution award be based on the amount of loss
actually caused by the defendant’s offense.” Rhodes, 330 F.3d
at 953 (internal citation omitted). A court could find that a
defendant intended a large amount of loss for sentencing
purposes, but then order a much-reduced amount in
restitution in light of the actual losses suffered by the
victims.
The government’s first problem in relying on the ap-
plication note to avoid calculating the actual loss Allen
inflicted is that it does not apply to restitution calculations.
It may be instructive insofar as a calculation of loss for
sentencing purposes may mirror a calculation of loss for
restitution purposes, but it is not controlling. The sentenc-
ing guidelines address restitution in § 5E1.1, and that
section does not cross-reference § 2B1.1.
The government’s second problem is that, even if Appli-
cation Note 3(F)(v) was relevant to restitution calcula-
tions, Allen’s conduct does not seem to fall under the
provision therein. It is true that Allen was holding himself
out as a highly qualified expert, but the profession in
which he was scheming was not a licensed one. As Allen
pointed out, he never claimed to be a licensed professional,
and the state of Wisconsin does not license microbiolo-
gists—“there was no license that he could have pretended
to possess.” To the extent that the district court relied on
the notion that Allen was not entitled to a reduction in
restitution because of feigning licensure, it was mistaken.
And that error was plain because it subjected Allen to a
condition the law does not contemplate, and thus compro-
mised “ ‘the fairness, integrity, [and] public reputation of
judicial proceedings.’ ” Thigpen, 456 F.3d at 771 (quoting
Olano, 507 U.S. at 733-34).
It was plain error for the district court not to calculate
the actual loss suffered by the LdF. Courts do not have
14 No. 06-3837
inherent authority to order restitution, and “ ‘may do so
only as explicitly empowered by statute.’ ” United States
v. Randle, 324 F.3d 550, 555 (7th Cir. 2003) (quoting United
States v. Hensley, 91 F.3d 274, 276 (1st Cir. 1996)). Under
18 U.S.C. § 3663(B)(i)(I), the court is directed by Con-
gress to consider the “amount of loss sustained by each
victim as a result of the offense.” In the realm of restitution
under 18 U.S.C. § 3663, the “amount of loss” sustained by
victims is synonymous with “actual loss,” and its calcula-
tion must take into account (and deduct) pecuniary
value the victim(s) gained by way of the defendant’s
conduct. See Swanson, 483 F.3d at 515; Swanson, 394 F.3d at
527-28. By failing to calculate the actual losses of the
LdF, the district court may have required Allen to pay in
restitution more than he owed; this error affected Allen’s
substantial rights. See Randle, 324 F.3d at 558 (“In requiring
Randle to pay several thousand dollars in restitution,
without a statutory basis for doing so, the error affects
Randle’s substantial rights.”).
We say “may” because it could be that after inquiring
into whether the LdF received benefits or value from
Allen’s services, the district court decides that Allen’s
work was worthless to the LdF (as is argued by the gov-
ernment). Alternatively, the district court may find that
the testing was of some value to the LdF, and deduct that
value from the amount the LdF paid Allen. We will re-
view for an abuse of discretion whatever determination
the district court makes about the actual loss suffered by
the LdF, assuming the court engages in a proper calcula-
tion of that loss and credits Allen for the value of the
services he provided.
No. 06-3837 15
III. C ONCLUSION
We A FFIRM Allen’s sentence, but we V ACATE the resti-
tution portion of the sentence and R EMAND for the dis-
trict court to redetermine the restitution amount.
USCA-02-C-0072—6-16-08