United States v. Sanders

United States Court of Appeals
Fifth Circuit
F I L E D
Revised September 5, 2003
August 18, 2003
UNITED STATES COURT OF APPEALS
For the Fifth Circuit Charles R. Fulbruge III
Clerk

No. 02-41514

UNITED STATES OF AMERICA

Plaintiff-Appellee,

VERSUS

CECIL ALLEN SANDERS, JR.

Defendant-Appellant.

Appeal from the United States District Court
for the Eastern District of Texas

Before EMILIO M. GARZA, DeMOSS, Circuit Judges, and DUVAL,1

District Judge.

DeMoss, Circuit Judge:

INTRODUCTION

Defendant was convicted by a jury of bank fraud in violation

of 18 U.S.C. §§ 1344 and 2, and for making a false statement to the

Small Business Administration in violation of 15 U.S.C. §§ 645(a)

and 2. He appeals claiming the evidence was insufficient to

1
District Judge for the United States District Court for
the Eastern District of Louisiana sitting by designation.
support his conviction, the district court erred in admitting

certain evidence, and the district court erred in sentencing him.

We affirm the jury verdict because the evidence is sufficient and

the district court did not err in admitting any of the complained

of evidence. However, because the district court erred in

sentencing Sanders, we vacate the sentence and remand to the

district court for re-sentencing.

BACKGROUND

The facts established at trial are as follows. Cecil Allen

Sanders, Jr. (“Sanders”), and his wife wanted to open a dry

cleaning business. In order to finance the business, which they

called Number One Cleaners, Sanders and his wife applied for a

business loan in the amount of $232,000 from Plano Bank & Trust on

September 5, 1996.

The loan Sanders applied for was 75% guaranteed by the Small

Business Administration (“SBA”). Therefore, in order to obtain the

loan, Sanders had to fill out SBA Form 413 as part of his

application process. SBA Form 413 requires full and complete

disclosure of current assets and liabilities.

In preparing his loan package, Sanders was referred to

Centinal Financial Corporation by Plano Bank. Centinal is a

company hired by Plano Bank to assist SBA loan applicants in

preparing their loan applications for submission to Plano Bank.

Centinal interviews the applicants and pre-qualifies certain loans

2
for approval by the bank. Chris Jones, a Centinal employee,

reviewed Sanders’s credit report, interviewed him, and helped him

prepare SBA Form 413.

Sanders’s credit report showed 28 credit card accounts and a

high level of revolving credit. During the interview, Sanders told

Jones that much of the credit card debt reflected on the report had

been paid. As a result of Sanders’s oral representations, Jones

reported that Sanders’s credit card debt was much lower than as

reflected on the credit report. Jones testified that Centinal

relies on the information provided by the borrower in making its

recommendations to Plano Bank, and stated that he informed Sanders

that Centinal was going to rely on the information he provided.

Jones testified that he told Sanders that the bank would rely on

SBA Form 413 when making its loan decision.

At trial, the government introduced evidence that during his

interview with Jones, Sanders did not disclose that he had a

substantial amount of unsecured obligations outside the

representations he made to Jones. Specifically, Sanders owed

Household Credit over $4,000, American Express Optima $3,500,

Crestar Bank $4,000, AT&T Master Card $1,800, the Grantham Family

$20,000, and Norma Boss $5,000.

The government also introduced evidence that Sanders

misrepresented other information that led Plano Bank to think he

was in better financial condition than he actually was. On page 3

of SBA Form 413, Sanders represented that he paid only $16,500 on

3
charge accounts for the year. He had actually paid significantly

more. He had paid $16,000 to MBNA America and over $21,500 to

Choice Visa. The information Sanders provided on Form 413 was used

to calculate his cash flow. Sanders’s cash flow was listed as

$4,100, while it should have shown a deficit of $62,318.

Ken Lawless, a commercial loan officer working at Plano Bank

who approved the loan, testified that if the bank had been aware

that Sanders had a negative cash flow, it would have denied the

loan.

After the $232,000 loan amount was approved, Sanders’s

purchase of the dry cleaners fell through because there were

environmental problems at the location of the cleaners that was to

be purchased. Sanders and his wife found a different dry cleaners

to purchase for a lower price, which they also called Number One

Cleaners. Sanders resubmitted his loan application but this time

for a new loan of $77,500 from Plano Bank & Trust with an 80% SBA

guarantee.

Prior to the funding of the second loan, on April 7, 1997,

Sanders signed an affidavit stating that his individual and

corporate financial position had not changed substantially since

his application for the first loan, and that his SBA Form 413

information was still accurate. Maria Lagusis, the bank employee

who closed on the loan, testified that in signing the affidavit,

Sanders was certifying that all the information in his SBA Form 413

was accurate and that she reviewed this paragraph with Sanders to

4
make sure he understood what he was doing.

The new loan was disbursed in four installments. With each

installment, Sanders completed an SBA Form 1050 in which he

represented that there had been no substantial adverse change in

his financial condition since he submitted his loan application.

In the meantime, Sanders’s credit card and unsecured personal

debt was mounting. By April 10, 1997, his debt was over $143,000.

His undisclosed debt was $89,517 and his disclosed debt was

$53,610. Special Agent Don Smiddy, of the United States Postal

Inspection Service, showed the jury checks written and signed by

Sanders around the dates of September 30, 1996, and April 10, 1997,

payable to the credit card companies for debt Sanders did not

disclose in his application or SBA Forms. This evidence was used

to establish that Sanders was aware of this debt, but did not

disclose it as an adverse change in his situation.

On October 8, 1997, Number One Cleaners filed for Chapter 7

Bankruptcy in the Northern District of Texas. Sanders had made

three loan payments totaling $3,981, on the Plano Bank SBA

guaranteed loan of $77,500. Four months later, on February 10,

1998, Sanders filed for personal bankruptcy in the Eastern District

of Texas. In his personal bankruptcy, Sanders disclosed the credit

card debt which he had not disclosed during the loan application

process. The loan from Plano Bank was discharged in bankruptcy.

After selling the assets of the cleaners, Plano Bank recovered

$2,164.12, after deducting costs.

5
 On February 13, 2002, a grand jury for the United States

District Court for the Eastern District of Texas returned a two

count indictment charging Sanders with bank fraud in violation of

18 U.S.C. §§ 1344 and 2, and for making a false statement to the

Small Business Administration in violation of 15 U.S.C. §§ 645(a)

and 2.

At Sanders’s jury trial the government presented evidence

demonstrating that Sanders had withdrawn a total of $21,659 from

the Number One Cleaners bank account approximately 4 months before

it went into Chapter 7 bankruptcy and did not disclose these

withdrawals to the bankruptcy court. The district court gave a

limiting instruction to the jury informing them that they could

only consider the evidence to determine if Sanders had the

requisite state of mind or intent to defraud, or whether he

committed the acts by accident or mistake.

Sanders’s defense at trial was that the documents he signed

were vast and complicated. He testified that Jones and the other

loan officers did not explain the documents to him. Additionally

Sanders testified that he understood that the credit report would

include all of his credit history. He also testified that he did

not intentionally misrepresent anything to the bank. He stated

that when he signed the affidavit, no one showed him the documents

he had previously completed in order to determine if anything had

changed.

On May 22, 2002, the jury found Sanders guilty as charged in

6
both counts of the indictment. Sanders was sentenced to a term of

21 months imprisonment on each count of the indictment to be served

concurrently and was ordered to pay restitution in the amount of

$76,767.69, and a special assessment totaling $200. Sanders was

also ordered to serve concurrent terms of supervised release on

each count: 5 years on count 1 of the indictment, and 1 year on

count 2 of the indictment.

Sanders timely filed notice of appeal. On appeal he argues

that the government did not prove that Plano Bank and Trust was

FDIC insured and therefore the evidence is insufficient to support

his bank fraud conviction. Sanders also argues that the district

court erred in admitting some of the evidence that was presented at

trial. Finally, Sanders claims the district court erred in

sentencing him.

DISCUSSION

I. Whether the evidence presented at trial was sufficient to
prove that Plano Bank and Trust was insured by the FDIC,
thereby supporting Sanders’s conviction for bank fraud.

“In reviewing a challenge to the sufficiency of the evidence,

we must determine whether a rational jury could have found that the

evidence established guilt beyond a reasonable doubt on each

element of the offense, drawing all reasonable inferences from the

evidence and viewing all credibility determinations in the light

most favorable to the verdict.” United States v. Solis, 299 F.3d

420, 445 (5th Cir. 2002).

7
 In Count One of the indictment, Sanders was convicted of bank

fraud pursuant to 18 U.S.C. § 1344. We have held that proof of

FDIC insurance is not only an essential element of the bank fraud

crime, but it is also necessary for the establishment of federal

jurisdiction. United States v. Schultz, 17 F.3d 723, 725 (5th Cir.

1994); United States v. Slovacek, 867 F.2d 842, 845 (5th Cir.

1989); United States v. Trice, 823 F.2d 80, 86 (5th Cir. 1987).

Sanders argues that the government offered insufficient

evidence to establish that Plano Bank and Trust was FDIC insured.

The government put on testimony from Ken Lawless, a former Plano

Bank loan officer in charge of SBA loans, who was a loan officer

during the time Sanders applied for a loan. Lawless testified that

the bank was FDIC insured during the time in question. Sanders

argues that this proof was insufficient because the government did

not offer into evidence an insurance certificate, a cancelled check

for the insurance premium, or any testimony as to Ken Lawless’s

basis of knowledge that Plano Bank & Trust was insured by the FDIC.

Sanders contends that he specifically moved for judgment of

acquittal on the grounds that the government failed to prove that

Plano Bank was insured by the FDIC. The government counters that

Sanders did not object to the testimony nor did he cross-examine

Lawless on the issue. The government also argues that although

Sanders made an oral motion for judgment of acquittal, the motion

was based on defense counsel’s erroneous belief that the government

8
had offered no proof of FDIC insurance, not merely insufficient

proof. When the district court informed defense counsel that there

had indeed been proof on this issue, defense counsel withdrew the

motion, saying it was based on an erroneous belief. Defense

counsel did not reurge his motion at the close of the evidence.

The government argues that in light of Mr. Lawless’s testimony,

defense counsel’s failure to cross-examine or object, as well as

the lack of contradictory testimony, there was sufficient evidence

to establish that Plano Bank had the requisite insurance.

We have held that the testimony of a bank officer is

sufficient to establish that a bank is FDIC insured, especially

when the testimony is not challenged on cross-examination. United

States v. Rangel, 728 F.2d 675, 676 (5th Cir. 1984). Sanders

argues that the instant case is distinguishable from Rangel because

in Rangel, defense counsel conceded during argument that the

financial institution was federally insured. Id. In the present

case, however, after the initial objection, Sanders’s counsel

withdrew his motion for acquittal. Further, we have held that a

defense counsel’s “concession” is not necessary to finding that the

testimony of a bank employee is sufficient to establish that a bank

is FDIC insured. Slovacek, 867 F.2d at 845-46. Additionally, we

have held that a showing of personal knowledge of FDIC insurance is

not necessary if the testimony offered was unchallenged by opposing

counsel. Trice, 823 F.2d at 87 n.6. Accordingly, the government

9
presented sufficient evidence to establish that Plano Bank and

Trust was FDIC insured and therefore the jury verdict is affirmed.

II. Whether the district court abused its discretion in admitting
any of the complained of evidence and whether any errors are
reversible.

We review a district court’s evidentiary rulings for abuse of

discretion. United States v. Guerrero, 169 F.3d 933, 943 (5th Cir.

1999). If we find an abuse of discretion, we review the error

under the harmless error doctrine. United States v. Townsend, 31

F.3d 262, 268 (5th Cir. 1994).

In his brief Sanders argues that the district court erred in

admitting three items of evidence: 1) extrinsic evidence showing

that Sanders did not disclose on his bankruptcy petition that

payments were made to insiders within 1 year of the bankruptcy

filing; 2) Sanders’s testimony, which the prosecutor elicited on

cross-examination, concerning his reneging on an agreement with a

real estate agent and pocketing a refund check; and, 3) extrinsic

evidence that Sanders filed a false worker’s compensation claim.

First, the government offered into evidence testimony and

exhibits showing that Sanders and his wife did not disclose, on

their corporate bankruptcy petition, payments and reimbursements

withdrawn from their corporate account within one year of the

filing of their corporate bankruptcy petition. An instruction that

the evidence concerning the bankruptcy petition could be considered

only for the limited purpose of determining whether Sanders had the

10
state of mind or intent to commit the offense in the indictment, or

whether he committed the acts for which he was on trial for by

accident or mistake, was given to the jury.

Sanders argues the evidence had nothing to do with the

allegations in the indictment and was offered solely to portray him

as a liar. The government argues that this evidence was relevant

to show Sanders’s intent and that the bank fraud was committed in

the absence of mistake or accident which is permissible under Fed.

R. Evid. 404(b).2

The Fifth Circuit employs the two-prong Beechum test to

examine the admissibility of extrinsic evidence under Rule 404(b).

Anderson v. United States, 933 F.2d 1261, 1268 (5th Cir. 1991);

United States v. Beechum, 582 F.2d 898, 911 (5th Cir. 1978). The

court must first determine that the extrinsic evidence is relevant

to an issue other than the defendant’s character, i.e., motive,

opportunity, intent, preparation, plan, knowledge, identity, or

2
Rule 404(b) states that:

Evidence of other crimes, wrongs, or acts is not
admissible to prove the character of a person in order to
show action in conformity therewith. It may, however, be
admissible for other purposes, such as proof of motive,
opportunity, intent, preparation, plan, knowledge,
identity, or absence of mistake or accident, provided
that upon request by the accused, the prosecution in a
criminal case shall provide reasonable notice in advance
of trial, or during trial if the court excuses pretrial
notice on good cause shown, of the general nature of any
such evidence it intends to introduce at trial.

Fed. R. Evid. 404(b).

11
absence of mistake or accident. Anderson, 933 F.2d at 1268.

Second “the evidence must possess probative value that is not

substantially outweighed by its undue prejudice and must meet the

other requirements of Rule 403.”3 Id. at 1269 (internal quotation

omitted).

In this case, it has been established that the government

offered the evidence to prove intent and refute Sanders’s claim of

mistake or accident. These purposes are permissible under 404(b).

Next, in order to find extrinsic evidence relevant to an issue

other than character, the proponent must show that the evidence is

of an offense that is similar to the charged offense. Id. The act

of failing to disclose known information on the bankruptcy petition

is similar to the act of failing to disclose known information on

loan application forms and in light of the standard of review,

which is abuse of discretion, the evidence is relevant under the

first prong of the Beechum test.

As to the second prong of Beechum, the district court

specifically stated at sidebar with the attorneys that the

probative value of the evidence outweighed any prejudicial effect.

Likewise, there are no other Rule 403 concerns. Additionally, the

court gave a cautionary instruction to the jury. Under the Rule

3
Rule 403 also requires that the evidence’s probative value
not be substantially outweighed by confusion of the issues,
misleading the jury, consideration of undue delay, waste of time,
or needless presentation of cumulative evidence. Fed. R. Evid.
403.

12
403 standard, when the court issues a limiting instruction, it

minimizes the danger of undue prejudice. United States v. LeBaron,

156 F.3d 621, 625-26 (5th Cir. 1998). Accordingly, the court did

not abuse its discretion in admitting the evidence.

Second, testimonial evidence was introduced by the government

when Sanders took the stand in his own defense. The prosecutor

asked Sanders about reneging on an agreement with the real estate

agent who sold Sanders’s home. The prosecutor suggested that

Sanders reneged on an agreement with the agent after Sanders

received a partial refund of the agent’s commission. Apparently

Sanders accepted the refund but never bought the larger house from

the agent as he allegedly agreed to do.

Sanders argues that this evidence was irrelevant and only

establishes that there was a contract dispute between the real

estate agent and Sanders. The government argues that Sanders took

the stand and put his credibility at issue and the real estate

transaction attacks Sanders’s credibility, which is permissible

under Rule 608.4

4
Rule 608(b) states in pertinent part:

Specific instances of the conduct of a witness, for the
purpose of attacking or supporting the witness’ [sic]
credibility, other than conviction of crime as provided
in rule 609, may not be proved by extrinsic evidence.
They may, however, in the discretion of the court, if
probative of truthfulness or untruthfulness, be inquired
into on cross-examination of the witness (1) concerning
the witness’ [sic] character for truthfulness or
untruthfulness. . . .

13
 When a defendant testifies, he puts his character for

truthfulness in issue. United States v. Waldrip, 981 F.2d 799, 803

(5th Cir. 1993). Under Rule 608(b), the district court may

determine if evidence is probative of truthfulness and under Rule

403 may exclude probative evidence if the prejudicial effect

substantially outweighs the probative value. Id. Although Sanders

argues that the incident is irrelevant because it was a mere

contract dispute, the government alleges that Sanders committed

fraud and cheated the real estate agent into giving him a refund.

Fraud has been held to be probative of a witness’s character for

truthfulness or untruthfulness. See, e.g., United States v.

Mikolajczyk, 137 F.3d 237, 244 (5th Cir. 1998). The evidence may

have been prejudicial, but the district court found the probative

value was not substantially outweighed by unfair prejudice.

Therefore, the district court did not abuse its discretion in

allowing the government to cross-examine Sanders regarding the

transaction.

Third, the prosecutor also questioned Sanders about a worker’s

compensation claim Sanders submitted while he was working for the

United States Postal Service. The government showed that the claim

was fraudulent because Sanders worked for Number One Cleaners while

he maintained a worker’s compensation claim stating he was unable

to work. Sanders testified on cross-examination that although he

Fed. R. Evid. 608(b).

14
worked at the cleaners, he did not haul any bags of dry-cleaning

during the period of time he submitted his claim to the Postal

Service stating he could not do physical labor. To contradict this

testimony, the prosecutor introduced a videotape of Sanders hauling

dry cleaning during the dates he informed the Postal Service that

he was not working.

Sanders argues that evidence, specifically the videotape of

Sanders hauling dry-cleaning, which the prosecutor offered to show

that he committed worker’s compensation fraud was inadmissible.

The government asserts that it was admissible under several of the

Federal Rules of Evidence.5

Again, we analyze the admission of this evidence under 404(b)

utilizing the two-prong Beechum test for admitting evidence of

prior bad acts. In relation to the first prong of the test,

whether the evidence was relevant to any other issue besides

Sanders’s character, the government offered the videotape to prove,

among other things, that the loan fraud like the false worker’s

compensation claim was not committed by accident or mistake. This

is permissible under 404(b). Also, evidence of Sanders’s failure

to disclose something that was known, his working while claiming

worker’s compensation, is related to his failure to disclose his

known debt on his bank loan application, tending to prove he acted

5
The government concedes, in its brief, that the evidence
is inadmissible extrinsic evidence under 608(b) but argues it is
admissible under the other rules.

15
with intent and not by mistake or accident. As to the second prong

of the test, again the court gave a limiting instruction and the

prejudicial impact of this evidence was limited by Sanders,

himself, raising the issue of the worker’s compensation claim by

arguing that the government was “out to get him” for submitting the

claim.

Additionally, for any of the evidentiary rulings to be

reversible error, the admission of the evidence in question must

have substantially prejudiced Sanders’s rights. See Fed. R. Evid.

103(a); Fed. R. Crim. P. 52(a); United States v. Lopez, 979 F.2d

1024, 1034 (5th Cir. 1992). Sanders has not alleged in his brief

that the complained of errors have affected a substantial right.

Accordingly, the district court did not abuse its discretion

in admitting the evidence of bankruptcy fraud, in allowing the

government to question Sanders about the real-estate transaction,

or in admitting evidence concerning the worker’s compensation

claim. Additionally, if there were any errors, they were harmless

and therefore the district court’s evidentiary rulings are

affirmed.

16
III. Whether the district court clearly erred in sentencing
Sanders.

“The calculation of the amount of loss is a factual finding,

reviewed for clear error.” United States v. Tedder, 81 F.3d 549,

550 (5th Cir. 1996) (citation omitted). “In order to satisfy this

clear error test all that is necessary is that the finding be

plausible in light of the record as a whole.” United States v.

Edwards, 303 F.3d 606, 645 (5th Cir. 2002). However, the

interpretation and application of the Guidelines is reviewed de

novo. United States v. Hill, 42 F.3d 914, 916 (5th Cir. 1995).

A. Loss Calculation at Sanders’s Sentencing Hearing.

The 1995 Sentencing Guidelines were used to calculate

Sanders’s sentence because there would have been an ex post facto

problem if the 2002 guidelines, which were in effect on the date

that Sanders was sentenced, were used. See U.S.S.G. § 1B1.11. The

pre-sentencing report (“PSR”) used U.S.S.G. § 2F1.1 to calculate

the sentence for bank fraud under 18 U.S.C. § 1344 and making a

false statement to the Small Business Association under 15 U.S.C.

§ 645(a). The PSR recommended that the two offenses be grouped

together and counted as one offense for sentencing purposes because

the counts involved the same harm. See U.S.S.G. § 3D1.2(d). The

base offense level for “Fraud and Deceit” under 2F1.1 is 6. The

PSR also recommended an increase of 2 offense levels because the

offense involved more than minimal planning or a scheme to defraud

17
more than one victim. See U.S.S.G. § 2 F1.1(b)(2). This put the

offense level at 8.

Section 2F1.1 provides that the offense level should be

increased incrementally for losses that exceed $2,000. The

original PSR, using a loss amount of $77,500, the amount of the

loan Sanders ultimately received, originally recommended increasing

the offense level by 6. The government objected to the PSR’s use

of $77,500 as the loss amount to calculate the offense level,

arguing that the guidelines and case law required using $232,000 as

the amount to calculate the offense level because that was the

amount of loss Sanders intended to cause. Without any hearing, the

PSR was revised based on the government’s objection; and, as

presented to the judge, it recommended adding 8 levels to the

offense, based on an intended loss amount of $232,000, increasing

the total offense level to 16. The PSR stated, the “actual loss in

this case was $76,767.69; however, the intended loss was $232,000;

It appears that Sanders intended to obtain the loan for, $232,000

but due to circumstances beyond his control, he did not.”

Consequently, the revised PSR indicated the guideline range for

imprisonment for Sanders’s offense level was 21-27 months.

Sanders filed objections to the revised PSR, claiming among

other things that the original PSR was correct in using the amount

of $77,500 to calculate the offense level and corresponding

sentencing range. Sanders argued that sentencing based on the

18
$232,000 amount was improper because he intended to pay back the

loan but, in fact never even received a loan for $232,000 and

additionally that using the greater amount ignores the actual

amount of the loss that remained after the payments were made and

the collateral was sold. Sanders also argued that according to the

Sentencing Guidelines the greater amount should not be used because

it overstates the seriousness of his conduct.

At the Sentencing hearing, Sanders again argued that the

offense level should not be based on the $232,000 proposed loan

amount but rather on the $77,500 actual loan amount minus any

payments and cash received from the sale of the collateral. The

government argued for sentencing based on the loan amount of

$232,000 which they argued was the loss Sanders intended to cause.

The court did not state specifically why it found the loss amount

to be $232,000 but it did adopt the findings of fact in the PSR;

although, the PSR made no findings as to Sanders’s intent other

than the general statement that he intended to cause a loss of

$232,000. The court then sentenced Sanders to 21 months

imprisonment, the minimum sentence under the guideline range for

his offense level of 16.

B. Analysis of Indictment

In determining the correct amount of loss in this case, we

must start with the counts of the Indictment which charge Sanders

with the substantive offenses of bank fraud under 18 U.S.C. § 1344

19
and making a false statement to the Small Business Administration

(“SBA”) under 15 U.S.C. § 645. The Indictment does not charge a

conspiracy or an attempt under either count, and there is no

reference to 18 U.S.C. § 371 in the Indictment.

Paragraph 5 of the introduction section of Count 1 of the

Indictment states as follows:

5. The “Number One Cleaners Loan,” as that term is used
in this Indictment, refers to a loan of $77,500, made on
or about April 10, 1997, to defendant CECIL ALLEN
SANDERS, JR. (“SANDERS”) and his spouse by Plano Bank &
Trust, for which loan the SBA guaranteed repayment to
Plano Bank & Trust of up to 80% of the loan amount.

This defined term is first used in paragraph 8 of the

Indictment which expressly charges that Sanders caused false

information to be submitted to Plano Bank & Trust “in order to

obtain the Number One Cleaners Loan.” And similarly in paragraph

9 of the Indictment it charged that Sanders caused additional false

information to be furnished to Plano Bank & Trust “in order to

obtain the Number One Cleaners Loan.” Furthermore, paragraphs 14

and 15 of the Indictment charge that “on or about April 10, 1997,

in order to obtain $54,680.00 of the proceeds of the Number One

Cleaners Loan, SANDERS caused an SBA Form 1050, Settlement

Statement to be submitted to Plano Bank & Trust;” and on that same

day “in order to obtain the proceeds of the Number [One] Cleaners

Loan, SANDERS caused an Affidavit to be submitted to Plano Bank &

Trust.” Finally, in paragraph 2 of Count 2, the Indictment charges

that Sanders made false statements as “described in paragraph 8 (a-

20
b) and 9-12 of Count 1 of [the] Indictment to the SBA for the

purposes of influencing the action of the SBA in guaranteeing the

Number [One] Cleaners Loan, and for the purpose of obtaining money

under the Small Business Act.”

There is no mention whatever in the Indictment of a proposed

loan of $232,000 or of any attempt on Sanders’s part to

fraudulently “obtain” the proceeds of such proposed loan or of any

actions which Plano Bank & Trust took in connection with any such

proposed loan. It is apparent therefore that the offense of

conviction under this Indictment related only to the actions of

Defendant, Sanders, in connection with the “loan of $77,500.00 made

on or about April 10, 1997 to Defendant Cecil Allen Sanders, Jr.”

Likewise the court’s instruction to the jury did not mention in any

way the relevance or significance of any proposed loan transaction

involving $232,000.00.

C. Loss Calculation in Fraudulent Loan Application Cases.

The 1995 Guidelines state the following, concerning loss

calculation in a fraudulent loan case:

[T]he 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.

In some cases, the loss determined above may

21
 significantly understate or overstate the seriousness of
the defendant’s conduct. For example, where the defendant
substantially understated his debts to obtain a loan,
which he nevertheless repaid, the loss determined above
(zero loss) will tend not to reflect adequately the risk
of loss created by the defendant’s conduct. Conversely,
a defendant may understate his debts to a limited degree
to obtain a loan (e.g., to expand a grain export
business), which he genuinely expected to repay and for
which he would have qualified at a higher interest rate
had he made truthful disclosure, but he is unable to
repay the loan because of some unforeseen event (e.g., an
embargo imposed on grain exports) which would have caused
a default in any event. In such a case, the loss
determined above may overstate the seriousness of the
defendant’s conduct. Where the loss determined above
significantly understates or overstates the seriousness
of the defendant’s conduct, and upward or downward
departure may be warranted.

U.S.S.G. § 2F1.1, comment. (n.7(b)).

We note that the term “intended loss” is not expressly

defined anywhere in the Guidelines. The term is used earlier

in the opening paragraph of Note 7 in a sentence which reads

as follows:

Consistent with the provisions of §2X1.1 (Attempt,
Solicitation or Conspiracy), 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.

U.S.S.G. § 2F1.1, comment. (n.7).

The phraseology of this sentence would seem to indicate that

an “intended loss” is one: 1) resulting from convictions for

an “Attempt, Conspiracy or Solicitation” to commit some other

substantive offense which the Defendant was attempting to

commit; 2) which is capable of being determined; and, 3) is

22
greater than “actual loss”.

D. Analysis of Loss Calculations in this case.

The transcript of the sentencing hearing reflects that after

hearing argument of counsel, the district court made the following

rulings:

THE COURT: The court’s understanding of the law in
the 5th Circuit is that it’s the intended loss and not
the actual loss in circumstances such as this that
governs. And based on the evidence that the Court heard
at the trial, the - - and what’s contained in the
presentence report, the Court is persuaded that the
Defendant intended to obtain a loan of $232,000, and that
that was the intended loss.

Also, recalling the evidence that I heard at the
trial of this case, the Defendant’s conduct with regard
to the handling of the proceeds of the loan and his
conduct with respect to the few payments that he made and
the filing of bankruptcy, that the Court can find by a
preponderance of the evidence, as required by the Quay
case, that the Defendant did not intend to repay the
loan.

And the Court finds also from the evidence that the
- - a reasonable effort was made to realize the maximum
out of the collateral by the bank.

I will say that the, as I recall, the program of
making SBA loans by the bank left a little to be desired
from the standpoint of monitoring the loans.

So I will overrule your objection, Counsel, and now
hear anything that you and Mr. Sanders have to say in
mitigation of punishment.

There are no other findings of fact by the trial court in this

record relating to its determination of the amount of loss.

The revised PSR, which the trial court made reference to in

its ruling, contains the following provisions:

23
 16. Specific Offense Characteristics: U.S.S.G. §
2F1.1(b)(1)(I) calls for an 8-level increase if the loss
exceeded $200,000. The actual loss in this case was
$76,767.69; however, the intended loss was $232,000; It
appears that Sanders intended to obtain the loan for
$232,000, but due to circumstances beyond his control, he
did not. According to Application Note 7 to U.S.S.G.
§2F1.1, 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.
Therefore, the intended loss, $232,000, will be used to
calculate the guideline range, and the offense level is
increased by 8.

Likewise the addendum to the PSR contains the following provisions:

DEFENDANT’S OBJECTION NO.3: The defendant maintains a
verbal objection to the revisions of the presentence
report based on the Government’s objections. In the
original report, the guideline calculations were based on
a loss amount of $77,500, the amount the defendant
actually loaned. The Government argued, and the
probation officer now agrees, that the intended loss
should be used to determine the guideline range. the
intended loss was the loan amount the defendant
originally applied for, or $232,000. The defendant
objects to this change.

PROBATION OFFICER’S RESPONSE: As stated in the
Government’s objection, the guidelines and case law
support the use of the intended loss on which to base the
guideline calculations. The probation officer was under
the impression that it was the defendant’s choice to
terminate the sales contract with the seller of the first
business that the defendant intended to purchase.
According to the Government, the seller of that business
would not sign a subordination agreement required by the
bank; therefore Sanders was forced to terminate the sales
contract. It appears that Sanders intended to obtain the
loan for $232,000, but due to circumstances beyond his
control, he did not. According to Application Note 7 to
U.S.S.G. §2F1.1, 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.
Therefore, the intended loss, $232,000, will be used to
calculate the guideline range.

24
 From these provisions in the PSR and Addendum thereto, it is

apparent that the probation department determined the “actual loss”

in this case was $76, 767.69.6 Likewise we note in its original

report “the guideline calculations were based on a loss amount of

$77,500, the amount the defendant was actually loaned.” When the

Government objected to the use of $77,500 as the loss amount in the

original report, the probation officer amended its PSR to use the

$232,000 figure suggested by the Government. In making this

change, the probation officer made no additional findings of fact,

but relied exclusively on the Government’s interpretation 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.” We think the Government erred in proposing this rule

to the probation office, the probation office erred in adopting

this rule in its report, and the district court erred in utilizing

this rule for the following reasons:

A. As we pointed out earlier in this opinion, the
defendant was not charged in the Indictment with
any “attempt” to defraud Plano Bank & Trust and the
substantive offense charged in the Indictment was
the specific loan transaction in the amount of
$77,500 which closed on April 10, 1997.

B. The term “intended loss” as it appears in the last
sentence of the first paragraph of Application Note

6
We note that under Paragraph 57 of the Presentence Report,
it recommended restitution in this same amount (actual loss).
The victims, Plano Bank & Trust and the SBA, have raised no
objection to the accuracy of this amount and did not contend in
any way that they had any “loss” arising out of the proposed loan
of $232,000.

25
 7(b) of U.S.S.G. § 2F1.1 (1995) is an obvious cross
reference to the term “intended loss” as it appears
in the opening paragraph of Application Note 7
which states:

“Consistent with the provisions of
2X1.1(Attempt, Solicitation or
Conspiracy) 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.”

U.S.S.G. § 2F1.1, comment. (n.7).

C. Absent an indictment count which charges an
“attempt” to defraud, the term “intended loss” has
no applicability to the determination of “loss” in
this case.

D. We think the Government, the probation officer and
the trial court erred in considering and finding
the amount of a loan which a defendant received or
intended to receive as a factor in determining
“intended loss.” See United States v. Quaye,
57 F.3d 447, 448 (5th Cir. 1995) (stating that a
finding as to the amount the defendant received or
intended to receive was not sufficient to prove the
amount of the intended loss).

We think the probation officer got it right the first time in

using “actual loss” as the loss amount for purposes of increasing

the offense level under § 2F1.1 (1995). The first sentence of

Application Note 7(b) expressly 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).” U.S.S.G. § 2F1.1, comment. (n.7(b)). The

$77,500 loan on April 10, 1997, was fully funded and the

circumstances which precipitated the need to determine “actual

26
loss” had all occurred. There was therefore no need to try to

estimate “expected loss” within the meaning of this first sentence.

In effect, what the Government persuaded the trial court to do

was to pretend that there was a count in the Indictment which

charged Sanders with an attempt to defraud Plano Bank & Trust of

$232,000. Even if that had been the case, however, we are not

persuaded that the Government would have met its burden of proving

by a preponderance of the evidence, that Sanders did not intend to

repay any portion of the proposed $232,000 loan.

E. Parties’ Contentions of an Intent to Repay

Sanders contends that there is no evidence that he intended to

not repay the loan. He argues that the district court failed to

consider the following facts which support his argument that he

purchased Number One Cleaners with every intention of operating it.

First, he made three payments on the loan which he claims shows his

intention to repay the loan. Second, he actually operated the

cleaners, including putting time and money into fixing some

obsolete equipment. Third, both the proposed loan amount of

$232,000, and the actual loan of $77,500 were secured by

collateral, and he had no involvement in the appraisals of the

collateral for the original loan or the modified loan.

Sanders asserts that because he intended to repay his loan,

the district court should not have used the intended loss in

calculating the sentence, but should have used the actual loss.

27
Sanders maintains that the actual loss was $71,354.88: $77,500

minus the three payments made on the loan, $3,981.00, and minus the

$2,164.12 the bank realized on the sale after liquidating the

collateral on the loan. The actual loss amount of $71,354.88 would

have resulted in an offense level of 14, and his imprisonment

sentence would have fallen within the 15-21 month range instead of

the 21-27 month range. See § 2F1.1 and § 5A. The 15-21 month

range is consistent with the sentencing range and offense level

originally recommended in the PSR.

All the evidence that the government argues as supporting the

district court’s finding of no intent to repay, does not make the

finding plausible but actually supports Sanders’s claim that he

intended to repay the loan or at the very least he never intended

to not repay $232,000, an amount he never received.7

7
We have reviewed the entire record for all evidence that
“plausibly” supports the district court’s finding, even evidence
the Government did not cite in its brief, despite our requirement
that the appellee’s brief must contain citations to “parts of the
record relied on.” Fed. R. App. P. 28(a)(4); Fed. R. App. P.
28(b). Further, the government in its brief argues that “there
is no credible evidence in the record that Sanders intended to
repay the loan.” This argument, however, misstates the burden,
it is the government that had to prove by a preponderance of the
evidence that Sanders intended to not repay the $232,000 loan,
and the absence of evidence indicating Sanders’s intent to repay
is not the same thing as the presence of evidence indicating his
intent not to repay. We note however that under the provisions
of the original loan commitment for the $232,000 loan, Sanders
and his wife were obligated to sign a personal guarantee of their
corporation’s promissory note to Plano Bank & Trust; and in
anticipation of closing such loan, Sanders and his wife had
actually signed such guarantee. Neither the prosecutor, nor the
probation officer, nor the trial court gave any consideration to

28
 First, the government argues Sanders’s failure to disclose the

extent of his debt when applying for the loan is proof that he

intended to not repay the loan. Sanders’s failure to disclose

known debt is the conduct for which he was convicted of bank fraud,

but, this does not in-and-of-itself make plausible the assertion

that he intended to not repay either all or part of the $232,000.

Second, the government argues that Sanders’s financial

situation worsened from the time when he originally applied for the

proposed $232,000 loan to the time when he received the $77,500

loan and this meant his ability to repay the loan lessened and

therefore he intended to not repay the loan. Using the

government’s own logic that ability to repay is relevant to intent,

if this evidence indicates anything it is that Sanders’s ability to

repay was greater when he applied for the $232,000 and therefore he

was less likely to have the intent to not repay the loan at that

time.

Third, the government argues that the timing of the bankruptcy

filing, approximately four months after the final disbursement of

the $77,500 loan, indicates Sanders never intended to repay the

$232,000. The apparent close timing of Sanders’s filing for

bankruptcy and the final disbursement of the $77,500 loan does not

prove, or even tend to prove, that he intended not to repay the

loan of $232,000 which was never funded and which he never

this fact in determining the issue of intent to repay.

29
received.

Fourth, the government argues that the collateral that was to

be used to secure the $232,000 loan was inadequate and that this

indicates Sanders had the intent to not repay the $232,000. Our

case law indicates that if the defendant has no ownership interest

in or control over the collateral used to secure the loan, then the

loss calculation amount does not need to consider the value of the

collateral. United States v. Morrow, 177 F.3d 272, 300 (5th Cir.

1999); Tedder, 81 F.3d at 551; Hill, 42 F.3d at 919. In the

present case, unlike the cited cases, Sanders has always

maintained, and the government conceded in its appellate brief

that, he had nothing to do with the valuation of any collateral.

Further, there is no evidence Sanders attempted to deceive the bank

concerning the collateral. Without more evidence concerning

Sanders’s role in securing the loan with the collateral, the

ultimate inadequacy of the collateral does not prove Sanders had

the intent to not repay the $232,000, an amount he never received.

Fifth, the government argues that because Sanders made only

three loan payments on the $77,500 loan, this is evidence of his

intent to not repay the $232,000 loan. The government’s argument

concerning this evidence makes no sense.

Sixth, the government’s final argument is that Sanders

withdrew over $20,000 from the corporate account prior to the

bankruptcy and did not declare this on the bankruptcy petition and

30
this is evidence of his intent to not repay the $232,000 loan. The

record is unclear as to what the withdrawn funds were used for;

Sanders maintains that he never pocketed any of the loan money but

rather used it in trying to make the dry cleaners work. With

nothing more than the mere withdrawal, it is not plausible that

this evidence along with the government’s other evidence

establishes by a preponderance of the evidence that Sanders

intended to not repay $232,000, an amount he never received; it

could plausibly be evidence of intent concerning the $77,500 loan,

but Sanders was not sentenced based on that loan amount.

Finally, while several cases in this Circuit have sentenced

the defendant based on the intended loss when the actual loss was

less, those cases all include facts not present in this case.

Morrow, 177 F.3d at 300; Tedder, 81 F.3d at 551; Hill, 42 F.3d at

919. In Morrow, Tedder, and Hill, there were facts in the record

that indicated the defendants’ intent not to repay the greater

amount regardless of the fortunate circumstances of the actual loss

being less. Also, unlike the defendants in the other cases,

Sanders never received all or any part of the $232,000, the amount

the government argues is the intended loss here. He never even

attempted to receive this amount after the original property he

wanted to purchase was unavailable; but rather, he found a new

property and received a new loan for $77,500. In fact, we are

unaware of any case in this Circuit with facts similar to this case

31
in which the defendant was sentenced based on a proposed loan of a

greater amount which preceded an actual loan of a lesser amount.

Although it may be theoretically possible to intend a loss that is

greater than the potential actual loss, our case law requires the

government prove by a preponderance of the evidence that the

defendant had the subjective intent to cause the loss that is used

to calculate his offense level. Tedder, 81 F.3d at 551; Henderson,

19 F.3d at 928. In other words, in the absence of facts indicating

an intent not to repay the loan, the actual loss must be used to

calculate the defendant’s offense level. U.S.S.G. § 2F1.1,

comment. (n.7(b)); see also Henderson, 19 F.3d at 928. Unless

there is evidence concerning Sanders’s intent that we are not aware

of, both the Sentencing Guidelines and our case law require that

the actual loss Sanders caused be determined and that he be

sentenced accordingly.

We have concluded that one of the clear errors which the

prosecution made and the probation officer adopted and thereby lead

the district court into error, was the assumption that the $77,500

loan transaction was simply part and parcel of the earlier proposed

loan of $232,000. From our review of the record, however, we are

satisfied that these two transactions were separate and distinct.

The loan commitment for the $232,000 clearly contemplates that such

loan would be “secured by a first lien on all accounts receivable,

supplies, inventory, work in progress, furniture and equipment,

32
vehicle and leasehold improvements located at 8014 Spring Valley,

1505 Commerce, and 14651 Dallas Parkway, Dallas.” This loan was to

enable the defendant’s corporate entity, “Number One Cleaners

Inc.,” to purchase the assets and property on which the first lien

was to be given to the bank. During the process of preparing for

closing of this acquisition and loan, it was discovered that

certain environmental problems existed at one of the plant

locations and the landlord refused to sign a subordination

agreement. As a result the contract which Sanders had to purchase

these properties was “declared null and void.” Obviously, if the

contract to purchase was “null and void,” the loan commitment for

the $232,000 loan was similarly no longer enforceable and the Bank

did not fund any portion of the $232,000 for the purposes stated in

the loan agreement. With the help of a broker, Sanders located

another property which Sanders could use to get into the dry

cleaning and laundry business. In this second transaction the

assets and properties, which defendant would acquire and could then

give a first mortgage to the bank upon, were entirely separate and

different from those contemplated in the $232,000 proposed

transaction. The bank agreed to lend the defendant $77,500 to

effectuate this new acquisition and the previous loan commitment to

lend $232,000 was “modified” to limit the loan amount to $77,500.

In our view once the “loan package” was modified to limit the

loan amount to $77,500, there was no legal basis upon which the

Bank would be at risk to loan any amount of money more than

33
$77,500; and if the Defendant were ever determined to have any

intention not to repay the Bank, such intentions would only exist

as to the sum of $77,500. This new loan was closed and fully

funded in four loan disbursements totaling $77,500, the first of

which was made on April 10, 1997, in the amount of $58,000.

We realize that clear error is a deferential standard of

review; however, it is more than a rubber stamp. Therefore, we

find that the district court clearly erred in finding that the

government proved by a preponderance of the evidence that Sanders

intended to not repay the $232,000 loan. Additionally, because the

record indicates that the district court considered that Sanders

had no criminal history and had served in the military and

therefore sentenced Sanders to the minimum sentence within the

guideline range for a level 16 offense, the error was not harmless.

See United States v. Ahmed, 324 F.3d 368, 374 (5th Cir. 2003)

(citations omitted).

Accordingly, we vacate Sanders’s sentence and remand to the

district court for re-sentencing. When re-sentencing Sanders, the

district should use actual loss and not intended loss to determine

Sanders’s offense level and sentencing range.

CONCLUSION

Having carefully reviewed the record of this case, the

parties’ respective briefing and arguments, for the reasons set

forth above, we affirm the jury verdict and the evidentiary

34
decisions of the district court. However, we vacate Sanders’s

sentence and remand the case for re-sentencing consistent with our

instructions herein.

Affirmed in part, Vacated in part, Remanded in part.

35
EMILIO M. GARZA, Circuit Judge, concurring in part and dissenting

in part:

A man walks into a bank to apply for a $232,000 loan. A bank

loan officer hands the man a form, which requires the man to

disclose his assets and liabilities. The man stares at the form,

pondering his recent debts and cash flow problems: $4,000 owed to

a different bank; $9,300 owed to assorted credit card companies;

approximately $25,000 owed to friends; and a cash flow deficit of

over $60,000. This man has not seen “black” in his credit report

for quite some time. The man presumes that the bank will not look

too kindly on this financial situation, so he “fudges” a bit on the

loan application. He neglects to report many of his debts, states

that he has a positive cash flow, and hands the form back to the

bank loan officer.

Looking at this picture, do we think that this man believes he

can pay back a $232,000 loan? More to the point, is it “plausible”

to conclude that this man does not believe he can repay the loan,

and therefore does not intend to repay it? Of course it is.

The district court in the instant case was presented with a

set of facts almost identical to the above scenario. Based on that

(and other) evidence, the court concluded, plausibly enough, that

Cecil Allen Sanders (“Sanders”) did not intend to repay a $232,000

loan from Plano Bank and Trust (“the Bank”). The majority opinion,

however, asserts that the district court clearly erred in making

36
this determination. For that reason, the majority opinion holds

that the district court erred in using the $232,000 figure to

determine Sanders’s sentence. Although I agree with much of the

majority opinion (the part that affirms Sanders’s conviction), I

cannot concur in the opinion’s decision to reverse Sanders’s

sentence.

The majority opinion rests its conclusion that the district

court erred in sentencing Sanders on two separate grounds. First,

the majority opinion holds that the district court could not

consider the $232,000 loan at all, because the Government did not

include this loan in Sanders’s indictment.8 Second, the majority

opinion concludes that the district court clearly erred in using

the $232,000 figure to calculate Sanders’s sentence because the

evidence shows that Sanders intended to repay the loan. Neither

conclusion, in my view, can be reconciled with our precedent.

I

The present case involves the district court’s application of

Sentencing Guideline § 2F1.1. That provision states that a

district court should increase the sentence of a defendant who has

8
As the majority opinion recites, Sanders never in fact
received the $232,000 loan. Sanders requested the money to
purchase a dry cleaning establishment, and the Bank approved the
loan. At the last minute, however, the seller pulled out of the
deal, because of environmental problems with the facility.
Sanders later found a second (and less expensive) dry cleaning
business, and applied for another loan. The Bank approved a
$77,500 loan, again relying on Sanders’ claims that his finances
were stable. Sanders’s indictment for bank fraud referred
specifically to this second loan.

37
committed certain crimes (including bank fraud) in proportion to

the financial loss caused by the defendant. See U.S. SENTENCING

GUIDELINES MANUAL § 2F1.1(b)(1). For purposes of this guideline, the

relevant “loss” is generally the actual or expected loss to the

victim. Id., cmt. n. 7(b). However, § 2F1.1 provides that “where

the intended loss is greater than the actual loss, the intended

loss is to be used.” Id. In the present case, the district court

found, by a preponderance of the evidence, that Sanders did not

intend to repay the $232,000 loan. Therefore, the court found, as

a matter of fact, that Sanders intended to cause a loss of

$232,000. The court concluded that this figure was greater than

the actual loss caused by Sanders (which, according to the

presentence report was $76,767.69), and therefore calculated

Sanders’s sentence based on this $232,000 intended loss.

The majority opinion concludes that the district court erred

in using the $232,000 figure to determine Sanders’s sentence. The

majority opinion bases this conclusion in part on the fact that

there was no reference in Sanders’s indictment to the $232,000

loan. The opinion thereby appears to assert that, when the

district court calculates a defendant’s sentence pursuant to §

2F1.1, the court can never consider offenses beyond those charged

in the indictment.

The majority opinion’s assertion is surprising. We have

repeatedly reaffirmed that, when a district court sentences a

38
defendant, the court can take into account offenses that were not

specifically included in the indictment. See, e.g., United States

v. Anderson, 174 F.3d 515, 526 (5th Cir. 1999) (“It is not

necessary for the defendant to have been charged with or convicted

of carrying out the other acts before they can be considered

relevant conduct [for sentencing purposes].”); United States v.

Singleton, 946 F.2d 23, 26 (5th Cir. 1991) (“[A] court, when

considering the appropriate sentence under the guidelines, can

consider not only crimes that have not been proven beyond a

reasonable doubt, but crimes that have not even been charged.”);

see also United States v. Powell, 124 F.3d 655, 666 (5th Cir. 1997)

(concluding that, in determining a defendant’s sentence for federal

tax violations, the district court could consider not only the

amount of federal tax losses but also the amount of state tax

losses, because the latter constituted “relevant conduct”); cf.

United States v. Carreon, 11 F.3d 1225, 1241 (5th Cir. 1994) (“A

district court may base a defendant’s sentence on conduct for which

the defendant was acquitted because the government need only

establish sentencing facts (unlike the elements of the crime) by a

preponderance of the evidence.”).

Indeed, we have applied this rule in the § 2F.1.1 context.

See Anderson, 174 F.3d at 526 (rejecting the defendants’ assertion

that “the district court erred in calculating the amount of loss

attributable to them [under § 2F1.1], and thus their base offense

39
levels, because the district court included conduct not charged in

the superseding indictment as relevant conduct pursuant to U.S.S.G.

§ 1B1.3”); see also United States v. Burridge, 191 F.3d 1297, 1304-

05 (10th Cir. 1999) (rejecting the defendant’s assertion that the

district court erred in calculating his sentence under § 2F1.1

because the district court included conduct that was not charged in

the indictment); United States v. Dickler, 64 F.3d 818, 831 (3d

Cir. 1995) (stating, in reviewing the district court’s calculation

of loss under § 2F1.1, that “[t]he relevant criminal conduct need

not be conduct with which the defendant was charged, nor conduct

over which the federal court has jurisdiction”) (citations

omitted).

That is not to say, of course, that the district court can

consider any conduct beyond that charged in the indictment to

determine a defendant’s sentence. The district court can consider

only prior acts that satisfy two conditions. The conduct must (1)

be criminal and (2) qualify as “relevant conduct” under Sentencing

Guideline § 1B1.3. Anderson, 174 F.3d at 526; Powell, 124 F.3d at

665; see also United States v. Sotelo, 97 F.3d 782, 799 (5th Cir.

1996) (“The Sentencing Guidelines allow the sentencing court to

hold a defendant accountable for all relevant conduct.”).

The majority opinion surely would concede that Sanders’s

conduct in applying for the $232,000 loan was criminal. As the

majority opinion recounts, Sanders submitted the same loan

40
application for the initial $232,000 loan and the $77,500 loan that

he ultimately received. Sanders’s failure to report all of his

debts and liabilities on that loan application was the “conduct”

that led to his convictions for bank fraud and for making false

statements to the Small Business Administration (“SBA”). In

affirming those convictions, the majority opinion clearly

recognizes that Sanders’s conduct in filling out the loan

application (for both the $232,000 loan and the $77,500 loan) was

“criminal.”

Therefore, the question of whether the district court could

consider the $232,000 loan at sentencing turns on whether it

qualifies as “relevant conduct” under § 1B1.3. Under that

provision, “relevant conduct” includes “all acts and omissions . .

. that were part of the same course of conduct or common scheme or

plan as the offense of conviction.” U.S. SENTENCING GUIDELINES MANUAL

§ 1B1.3(a)(2). The commentary to § 1B1.3 further explains that, in

order for two offenses to constitute part of a “common scheme or

plan,” they must be “substantially connected to each other by at

least one common factor, such as common victims, common

accomplices, common purpose, or similar modus operandi.” Id., cmt.

n.9(A); Anderson, 174 F.3d at 526; Powell, 124 F.3d at 665.

It is not difficult to recognize that Sanders’s conduct

constitutes the quintessential example of a “common scheme or

plan.” Sanders’ efforts to obtain the $232,000 and $77,500 loans

41
involved most, if not all, of the above criteria: “common victims”

(the Bank and the SBA); “common purpose” (to obtain funds to

purchase a dry cleaning business); and “similar modus operandi”

(submitting the same falsified loan application form). Therefore,

Sanders’s application for the $232,000 loan constitutes “relevant

conduct,” and was properly considered by the district court at

sentencing.9

II

The majority opinion next asserts that the district court

should not have used the $232,000 figure, because the Government

failed to prove by a preponderance of the evidence that Sanders did

not intend to repay the loan. The majority opinion concludes that,

because Sanders intended to repay the loan, the district court

should not have used Sanders’s “intended loss” at all. Instead,

the court should have calculated his sentence based on the “actual

loss” that he caused. See United States v. Tedder, 81 F.3d 549,

551 (5th Cir. 1996) (“Where the defendant intends to repay the

loans, then actual loss, rather than intended loss, is the

appropriate basis for calculating loss under §2F.1.1.”); United

States v. Henderson, 19 F.3d 917, 928 (5th Cir. 1994) (“If [the

defendant] intended to repay the banks on his loans, the district

9
Indeed, it might have been error for the district court
not to consider the $232,000 loan. See United States v. Bennett,
37 F.3d 687, 694 (1st Cir. 1994) (concluding that the district
court erred in calculating the amount of loss under § 2F1.1
because the court failed to include all “relevant conduct”).
42
court should not have used intended loss as the basis for

sentencing.”).

The majority opinion purports to recognize that the

calculation of loss under § 2F1.1 is a factual finding that this

Court reviews for clear error. See United States v. Morrow, 177

F.3d 272, 301 (5th Cir. 1999) (noting that “[t]he district court’s

calculation of loss under § 2F1.1 is a finding of fact reviewable

only for clear error”); Tedder, 81 F.3d at 550; United States v.

Hill, 42 F.3d 914, 919 (5th Cir. 1995). The majority opinion also

appears to acknowledge that the district court’s determination that

Sanders did not intend to repay the $232,000 loan was a finding of

fact, subject to review only for clear error.

Indeed, the majority opinion even recites the very deferential

nature of our review in § 2F1.1 cases. As the majority opinion

states, we affirm the district court’s sentencing determination as

long as the court’s findings of fact are “plausible in light of the

record as a whole.” United States v. Edwards, 303 F.3d 606, 645

(5th Cir. 2002) (“In order to satisfy this clear error test all

that is necessary is that the finding be plausible in light of the

record as a whole.”) (internal quotation marks omitted) (emphasis

added); see also United States v. Lopez, 222 F.3d 428, 437 (7th

Cir. 2000) (“The burden of proof on appealing a district court’s

loss calculation requires the defendant to show that the

determination was not only inaccurate but outside the realm of

permissible computations.”) (internal quotation marks omitted)
43
(emphasis added).

The majority opinion, however, after reciting the proper

standard, then goes on to apply anything but clear error review.

The opinion does not (in accordance with a clear error standard)

examine the evidence as a whole to determine whether that evidence

might support the district court’s factual finding. Cf. Morrow,

177 F.3d at 301 (“Given this [clear error] standard of review, the

only question we must address is whether the record supports the

district court’s determination that the defendants did in fact

intend to inflict a loss in the total amount of the fraudulently

obtained loans.”). Instead, the majority opinion (in accordance

with a de novo standard) examines each piece of evidence

separately, explaining why that evidence—standing alone—cannot

support the district court’s decision.10 The majority opinion

thereby effectively turns a clear error standard of review into a

de novo standard.

A single example illustrates this point. The majority opinion

examines the Government’s contention that Sanders’s failure to

disclose his financial problems on his loan application indicates

a lack of intent to repay the debt. The opinion rejects this

10
Indeed, much of the discussion in the majority opinion
seems more concerned with explaining the fallacies in the
Government’s arguments than with determining whether the evidence
supports the district court’s decision. The fact that some of
the Government’s contentions “make[] no sense” may indicate that
the Government should spend more time refining its arguments, but
does not suggest that there is no evidence to support the
district court’s factual determination.
44
argument, stating that “Sanders failure to disclose known debt . .

. does not in-and-of-itself make plausible the assertion that he

intended to not repay either all or part of the $232,000.” The

majority opinion mischaracterizes the question before this Court.

The issue is not whether a particular piece of evidence “in-and-of-

itself” supports the district court’s decision. Instead, the

question is whether that evidence, in light of the record as a

whole, supports the district court’s factual determination that

Sanders did not intend to repay the debt. See Edwards, 303 F.3d at

645; cf. FED. R. EVID. 401 (noting that “‘[r]elevant evidence’ means

evidence having any tendency to make the existence of any fact that

is of consequence to the determination of the action more probable

or less probable than it would be without the evidence”).

If the majority were to examine the above evidence in light of

the record as a whole, as we must under the clear error standard of

review, the majority would see that the district court’s

determination was indeed “plausible.” The evidence at trial showed

that Sanders was well aware of his precarious financial condition;

for that very reason, he intentionally hid his financial problems

from the Bank when he applied for the loan. That evidence would

support a conclusion that, when Sanders applied for the loan, he

did not believe he would be able to repay the debt (and, thus, did

not intend to repay the debt). The evidence at trial also

suggested that Sanders was not particularly honest or forthcoming

with respect to financial matters. Not only did he make material
45
misrepresentations on his bank loan applications, but he also

failed to disclose information on his bankruptcy petition.11 That

evidence could have led the district court to discount Sanders’s

representations that he did in fact intend to repay the loan. In

sum, the district court could have inferred from Sanders’s pattern

of dishonesty in financial transactions, combined with Sanders’s

clear awareness of his own financial troubles, that when Sanders

applied for the $232,000 loan, he did not believe he could (and did

not intend to) repay the debt.

The evidence produced at trial, when viewed as a whole,

indicates that the district court’s determination (that Sanders did

not intend to repay the $232,000 loan) was at least plausible.

Indeed, in my opinion, the evidence suggests that the district

court’s factual finding was correct. As a result, the district

court properly used the $232,000 figure to determine Sanders’s

sentence.

The majority opinion presents no valid reason for reversing

the district court’s sentencing determination in this case.

Therefore, I respectfully dissent.

11
In addition, the evidence suggested that Sanders may have
filed a fraudulent worker’s compensation lawsuit.
G:\opin\02-41514.US v. Sanders.dissent.wpd 46