United States v. Copple

Opinions of the United
1996 Decisions States Court of Appeals
for the Third Circuit

2-1-1996

United States v. Copple
Precedential or Non-Precedential:

Docket 95-3119

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 UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

_______________

No. 95-3119
_______________

UNITED STATES OF AMERICA

v.

JOHN R. COPPLE, an individual;
MECHEM FINANCIAL INCORPORATED,
a corporation

JOHN R. COPPLE,
Appellant
_______________

On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. Criminal No. 91-cr-00026E)

_______________

Argued September 11, 1995

Before: SLOVITER, Chief Judge, and ALITO,
Circuit Judge, and RENDELL, District Judge*

(Opinion filed February 1, 1996)
_______________

Leonard G. Ambrose, III (Argued)
Ambrose, Friedman & Weichler
Erie, PA 16502-1495

Attorney for Appellant

Bonnie R. Schlueter (Argued)
Office of United States Attorney
Pittsburgh, PA l5219

Attorney for Appellee
_____________

OPINION OF THE COURT
______________

* Hon. Marjorie O. Rendell, United States District Court for the
Eastern District of Pennsylvania, sitting by designation.

1
SLOVITER, Chief Judge.

This case is before us on the appeal of defendant John

R. Copple from that portion of the district court's judgment of

sentence ordering restitution in the amount of $4,257,940.45. In

an earlier appeal in the same case, we vacated the judgment of

sentence and remanded for resentencing. We directed the district

court, inter alia, to make findings about Copple's ability to pay
restitution. Following a hearing, the court reimposed the same

amount of restitution. We conclude that Copple's argument that

the restitution order is unreasonable and clearly excessive in

light of the record developed at the resentencing hearing is

well-taken.

I.

The facts are fully set forth in our prior opinion,

United States v. Copple, 24 F.3d 535 (3d Cir.) (Copple I), cert.
denied, 115 S. Ct. 488 (1994), and we therefore repeat only so

far as is necessary in the context of this appeal. Copple, who
was convicted on multiple counts of mail fraud and income tax

evasion, had defrauded funeral directors of funds which he had

promised to channel into low-risk/high-return investments. Copple

and his investment firm obtained $12 million from the

pre-paid funeral plans of a large number of funeral directors,

but instead of investing the money as promised Copple used it to

increase his personal assets and live extravagantly. Copple's

firm filed for bankruptcy.

2
 The bankruptcy trustee, who discovered Copple's

misappropriation, was able to recoup only a limited amount of

these assets, primarily several accounts and deposits totalling

$389,356.51 and coins from Copple's rare coin collection that

were later auctioned off for $209,045. The loss to the victims

of Copple's swindle was $4,257,940.45. See Copple I, 24 F.3d at

538-40.

A jury convicted Copple on 34 counts of mail fraud and

3 counts of income tax evasion. Copple was sentenced to 71

months imprisonment, a $100,000 fine, a special assessment of

$1850 and three years supervised release. The district court

accepted the findings in the presentence report concerning money

due victims, and ordered Copple to pay restitution of

$4,257,940.45.

Copple appealed, challenging both his conviction and

sentence. This court affirmed the conviction, but vacated the

sentence because the district court impermissibly based an upward

departure on the large number of victims and the amount of

monetary loss involved.

More relevant for our purposes here is our discussion

of the restitution portion of the district court's judgment. We

emphasized our cases instructing that restitution orders be

grounded on specific factual findings regarding the defendant's

economic circumstances and other relevant financial information.

We noted that the district court had failed to make any such

findings to support its restitution order of $4,257,940.45, and

"therefore remand[ed] for the district court to make the factual

3
findings necessary to support such order of restitution as it may

make." Id. at 549-50.

On remand, the district court conducted a resentencing

hearing. Mary Copple, Copple's wife and the caretaker for their

two minor children - Jennifer, 18 years old and John, 16 years

old, testified that she could not work or even complete basic

daily tasks because of chronic mental illness, that she required

and had been receiving psychiatric treatment for three years, and

that her husband and her daughter also suffered from mental

illness and were under physicians' care. App. at 53-66. She

stated that her only steady income was $403 in monthly welfare

payments and $292 in monthly food stamps, and that the occasional

commission checks she had received from her husband's insurance

policy renewals totalled $300. She testified that her home was

subject to foreclosure after her failure to pay mortgage payments

for 15 months, that any remaining equity was subject to levy by

the bankruptcy trustee, that the home's electricity and gas

utilities had been discontinued for her inability to pay bills,

and that her only other assets were $400 in a bank account, some

furniture, and a 1987 Cadillac. Id. at 58-70.

Jennifer Copple, Copple's eighteen-year old daughter,

testified that she suffered from manic depression, was on

medication and had been undergoing regular therapy, and as a

result could attend school only part-time. Id. at 73-75. The

government presented no evidence at the hearing. The court

resentenced Copple to a shorter term of 63 months imprisonment,

vacated the $100,000 fine it had imposed earlier, and reimposed

4
the $1,850 special assessment and three-year period of supervised

release.

In addition, the court again ordered that Copple pay

restitution of $4,257,940.45. After establishing that "[t]he

identification of the various victims and the amounts of

individual losses are consistent with the testimony of the

various funeral directors at trial and were not challenged by the

Defendant," App. at 103, the district court renewed its order of

full restitution on the following basis:
With respect to the Defendant's ability to
pay, obviously, according to the testimony of
his wife, the family is in dire financial
straits at this time. But Mr. Copple is a
college graduate. He certainly has been
successful, albeit in an unlawful way in many
instances, but he's certainly been a
successful businessman as far as gaining the
ends which he hoped to gain in the business
world. So I think certainly the potential is
there for him to succeed with respect to his
finances in the future.

App. at 104.

Copple challenges only the restitution order on this

appeal. The district court had jurisdiction under 18 U.S.C.

§3231, and we have jurisdiction pursuant to 28 U.S.C. § 1291.

We conduct plenary review to determine whether a restitution

order is permitted under law, but review the specific order only

for abuse of discretion. United States v. Graham, No. 94-1370,
1995 WL 744974, at *2 (3d Cir. Dec. 18, 1995).

5
 II.

The requirements according to which a district court

may permissibly fashion and validly impose a restitution order

are contained in the two provisions of the Victim and Witness

Protection Act of 1982 (VWPA), since recodified at 18 U.S.C.

§§3663 and 3664 and incorporated into United States Sentencing

Guideline § 5E1.1 and its accompanying commentary. 18 U.S.C.

§3663 authorizes a sentencing court to order that a defendant

make restitution to any victims of the offense of conviction. 18

U.S.C. § 3663(a)(1) (1994). Before the court does so, it must

consider the following specific factors: "the amount of the loss

sustained by any victim as a result of the offense, the financial

resources of the defendant, the financial needs and earning

ability of the defendant and the defendant's dependents, and such

other factors as the court deems appropriate." 18 U.S.C.

§3664(a) (1994).

In order to facilitate meaningful appellate review,

this court has exercised its supervisory power to require the

district courts "to make specific findings as to the factual

issues that are relevant to the application of the restitution

provisions of the VWPA." United States v. Palma, 760 F.2d 475,

480 (3d Cir. 1985). In Copple I, we referred to our earlier

opinion in United States v. Logar, 975 F.2d 958, 961 (3d Cir.

1992), where we identified the following factual matters to be

considered by the sentencing court before ordering restitution:
1) the amount of loss, 2) the defendant's ability to
pay and the financial need of the defendant and the
defendant's dependents, and 3) the relationship between

6
 the restitution imposed and the loss caused by the
defendant's conduct.

See Copple I, 24 F.3d at 549. We also stated that the court

must point to the evidence . . . supporting the
calculation of loss to the victims.

Id. at 549-50. Copple argues that the district court failed to

follow those explicit directions on remand.

Before it reinstated its restitution order, the

district court noted that the government's "identification of the

various victims and the amounts of individual losses" were

undisputed and had been corroborated by testimony at trial. App.

at 103. Thus, the court satisfied our instruction to make an

explicit finding regarding the amount of the victims' loss, and

Copple does not argue otherwise.

Instead, this appeal centers on the court's conclusion

that Copple would be able to pay the amount of restitution it

set. The court based that conclusion on the "findings" that

"Copple is a college graduate" and that "[h]e certainly has been

successful, albeit in an unlawful way in many instances, . . . in

the business world." App. at 104. It made no findings

concerning Copple's financial resources. Nor did it make

findings about Copple's financial needs, and observed only that

"the family is in dire financial straits at this time," an

assertion hardly supportive of the exceptionally large

restitution amount it ultimately ordered.

The government makes essentially two arguments in its

effort to sustain the district court's restitution order. First

7
it argues that the order can be upheld on the bases given by the

district court, and that the district court properly considered

Copple's college education, skills and intelligence in

determining his future ability to pay. We agree that if there is

a reasonable basis for a projection of the defendant's future

earning ability, a restitution order can be grounded on these

factors. In this case, however, notwithstanding our prior remand

to give the district court the opportunity to furnish the

specific findings that we have held must accompany the

restitution order, no such findings were made. After noting

Copple's college degree and business acumen, the district court

imposed its restitution order based merely on the following

conclusion: "So I think certainly the potential is there for

[Copple] to succeed with respect to his finances in the future."

App. at 104.

Despite the government's valiant efforts to defend

this conclusion, it is most telling that it concedes that

"[a]dmittedly, [the district judge] did not explain how he

arrived at the conclusion that Copple, by virtue of a college

education and business acumen, could earn, by legitimate means,

enough to support his family, to pay his back taxes and current

taxes and to clear $4,257,940.45 for restitution." Brief of

Appellee at 19. The government suggests that based on the

evidence presented at sentencing, "one might well conjecture that

Copple could be expected to clear, at most, $250,000 to be used

toward restitution ($50,000 per year over a five year period)."

Brief of Appellee at 20 (emphasis added). There is nothing in

8
the record to support the government's suggestion that a man with

an ill wife and two children, who apparently also have emotional

problems, could clear $50,000 a year. Persons in far more

favorable circumstances would have difficulty doing so. Moreover,

as the government recognizes, the restitution order in this case

was not $250,000 but more than sixteen times that amount. We

cannot sustain any restitution order, much less one in excess of

$4 million, on conjecture.

The second argument the government makes to support the

restitution order is based on its contention that Copple has not

yet accounted for all the assets he acquired with the

misappropriated funds, which the government claims include

$427,000 from Copple's pre-bankruptcy sale of some of his rare

coins and $196,334 in furniture. It argues that the district

court's liberal restitution order can be viewed as an "implicit"

attempt to capture unidentified holdings that Copple has failed

to produce voluntarily.

It is not improbable that the district court's

restitution order may have been motivated by a reasonable

apprehension that Copple has secreted certain assets, even though

the court did not say so. It does not follow, however, that

factual findings supporting such an apprehension must be as

covert as the hidden assets themselves.

The government contends that the district court could

reasonably have accorded little credibility to Copple's showings

regarding his lack of ability to pay in light of Copple's

suspected retention of certain assets and his generally

9
uncooperative attitude in accounting for and turning over other

assets to the bankruptcy trustee. However, the district court

made no explicit finding of lack of credibility. Even if the

district court's order were premised on its disbelief of Copple's

assertions, we cannot affirm a restitution order where the amount

fixed is based merely on the court's lack of confidence in the

defendant.

We do not suggest that a defendant who has become

expert at secreting the proceeds of the crime can avoid the

obligation to disgorge them. The proceeds from a defendant's

illegal conduct that the defendant still retains or can recoup

are certainly encompassed within the "financial resources of the

defendant," 18 U.S.C. § 3664(a), that the district court should

consider in fashioning a restitution order. Of course, the

continued existence of such proceeds is a factual issue that

should be accompanied by "specific findings."

Although we have not seen it applied elsewhere, we

believe there is a method by which the court can fashion a

restitution order that accounts for the court's reasonable belief

that there are secreted assets and that satisfies the court's

obligation to make the necessary supporting findings. Under 18

U.S.C. § 3664(d), the sentencing court has broad discretion to

assign to either party "[t]he burden of demonstrating such other

10
matters as the court deems appropriate" in the course of its

fact-finding. It would be sufficient for a district court that

believes, based on the record, that such proceeds are still

available to determine the amount properly attributable to the

defendant with reasonable precision.

For example, in this case the court may adopt as a

starting figure the total amount of value (cash, asset values,

etc.) that (1) Copple was found originally to have appropriated

and (2) for which he has not yet accounted. The court should

then permit Copple to prove that he is, in fact, not in

possession of any part of that total amount by specific evidence

showing the amount of disbursements and their destination. Unless

Copple can disprove possession of any remaining amount in this

manner, the court may consider the resulting figure as

constituting "financial resources of the defendant." The court

may then make its determination of Copple's capacity to pay the

ordered amount within five years, taking into account the

resources arrived at by the above method along with other

relevant factors, such as the financial needs and earning ability

of Copple and his dependents. See 18 U.S.C. §§ 3664(a) &

§ 3663(f).

We believe this approach is preferable to the

speculative exercise that the government would have us perform.

For one thing, it enhances the basis for appellate review. More

important, it places the responsibility for accounting for funds

misappropriated squarely on the individual who misappropriated

them. Assigning to Copple the burden of proving disgorgement of

11
the total amount appropriated is consistent with (1) the

statutory mandate, see 18 U.S.C. § 3664(d) ("The burden of

demonstrating the financial resources of the defendant . . .

shall be on the defendant."), (2) the legislative history of the

VWPA, see S. Rep. No. 532, 97th Cong., 2d Sess. 31, reprinted in

1982 U.S.C.C.A.N. 2515, 2537 (quoted in U.S.S.G. § 5E1.1,

comment. (backg'd.)) ("In those unusual cases where the precise

amount owed is difficult to determine, the section authorizes the

court to reach an expeditious, reasonable determination of

appropriate restitution by resolving uncertainties with a view

toward achieving fairness to the victim."), and (3) our policy-

based conviction that defendants ought not be permitted to

profit, quite literally, from uncertainty for which their illegal

conduct is ultimately responsible.

Because we cannot sustain the restitution order on the

basis of the findings that the district court made, we must once

again, albeit reluctantly, remand this case. In doing so, we

recapitulate some relevant principles: First, "[a]ny dispute as

to the proper amount or type of restitution shall be resolved by

the court by the preponderance of the evidence." 18 U.S.C.

§3664(d). Second, although indigency at the time of sentencing

is not a bar to ordering restitution, see United States v.

Hallman, 23 F.3d 821, 827 (3d Cir.) (citing Logar, 975 F.2d at

962), cert. denied, 115 S. Ct. 216 (1994), the sentencing court

should ground the amount of restitution ordered on realistic

prospects that the defendant will be able to pay it, and not on

fantastic or overly speculative possibilities. See Hallman, 23

12
F.3d at 827 (restitution order "may not be based on some future

fortuitous event that may befall the appellant, but must be based

on realistic expectations"); United States v. Seale, 20 F.3d

1279, 1286 (3d Cir. 1994) (in determining future earning

capacity, "some degree of certainty is required"); Logar, 975

F.2d 958, 964 (limiting the district court to consideration of

"realistic" possible additional sources of income); United States

v. Mahoney, 859 F.2d 47, 52 (7th Cir. 1988) (describing

impossible restitution orders as "shams" and as "defeating any

hope of restitution and impeding the rehabilitation process").

Third, the restitution obligation is intended for repayment

within five years. See 18 U.S.C. § 3663(f); United States v.

Sleight, 808 F.2d 1012, 1021 (3d Cir. 1987).

The relevant determination in favor of an order of

restitution, therefore, is not a court's vague appreciation of a

defendant's "potential to succeed" financially at some point in

the undefined future, but, rather, its finding by a preponderance

of the evidence that there exists a realistic prospect that

defendant will be able to pay the required amount within five

years.

Although we stop short of ruling on the substantive

appropriateness of the particular restitution amount ordered by

the district court, we cannot avoid noting that the

extraordinarily ambitious amount ordered, in excess of four

million dollars, appears, at the very least, somewhat

counterintuitive in light of the court's contemporaneous decision

to vacate the $100,000 fine it originally imposed "in view of

13
[Copple's] financial situation." App. at 104. The absence of

explicit findings on the crucial factual issues prevents us from

evaluating confidently the incongruity thereby presented. See

Graham, 1995 WL 744974, at *7 n.2 (while "anomalous that the

district court concluded that [defendant] would be able to pay

approximately $46,000.00 in restitution if he is unable to pay

any fine, . . . the lack of record findings makes these claims

difficult to review").

Of course, the district court may well have considered

the distinct standards governing an order of restitution and the

imposition of a fine. Compare U.S.S.G. § 5E1.1, comment.

(backg'd.) (instructing only that court ordering restitution

"consider" factors indicative of defendant's ability to pay) with

U.S.S.G. § 5E1.2(a) (instructing court not to impose fine where

"the defendant establishes that he is unable to pay and is not

likely to become able to pay"). It may also have considered the

difference in the time-frames for payment. Compare U.S.S.G.

§5E1.1, comment. (backg'd.) (imposing a maximum five-year time

limit on payment of restitution) with U.S.S.G. § 5E1.2(g) (time

before fine paid "generally should not exceed twelve months").

See generally United States v. Ahmad, 2 F.3d 245, 247-49 (7th

Cir. 1993) (attempting reconciliation of district court's

decisions to order restitution and withhold imposition of fine

with possible justifications).

Even if the government is correct that Copple has

retained $623,334 in assets, under the court's order Copple must

come up with over $3.6 million in five years to satisfy the

14
restitution order, plus an additional $665,859 to pay off back

taxes. Copple is currently incarcerated, has a wife and two

children to support after he completes his term, and faces his

employment prospects with fraud and tax evasion convictions in

tow. The value of a college degree notwithstanding, we cannot

say--in the absence of the factual findings discussed--that on

substantive review we could conclude the court's order to be

factually supportable.

III.
In light of the foregoing, we will vacate the district
court's restitution order and remand for the required factual
findings supporting such order of restitution as it may make.

15
United States v. Copple
No. 95-3119

ALITO, Circuit Judge, concurring:

I join the opinion of the court. While restitution for

victims is very important, no good is done by restitution orders

that vastly exceed a defendant's ability to pay and that

therefore will never be satisfied.

The defendant in this case caused great suffering for

the victims of his crimes, while he and his family used the

stolen funds to live lavishly. As we observed in our earlier

opinion, the defendant's personal expenditures during a three-

year period totalled $2.5 million, including more than $500,000

for jewelry and nearly that much for gifts to his family. 24

F.3d at 539.

Defendants convicted of fraud offenses are sometimes

masters at hiding assets. Therefore, if the government bore the

burden of proving that such defendants still possess illegally

obtained assets, the government would be unable to locate hidden

assets, those assets would not be taken into account in framing

the restitution orders, and the defendants would continue to

profit at the expense of the innocent victims. This would be

unconscionable.

The solution is to place the burden of proof on the

defendant to show what has happened to all of the illegally
obtained assets. See 18 U.S.C. § 3664(d). All the assets for

16
which the defendant cannot account may be included in the amount

of restitution ordered. To the extent that records are

unavailable, the risk of inaccuracy should be borne by the

defendant rather than the victims.

17