United States v. Bernegger

Case: 09-60932 Document: 00511639722 Page: 1 Date Filed: 10/20/2011

IN THE UNITED STATES COURT OF APPEALS of Appeals
United States Court
FOR THE FIFTH CIRCUIT Fifth Circuit

FILED
October 20, 2011

Lyle W. Cayce
No. 09-60932
Clerk

UNITED STATES OF AMERICA,

Plaintiff-Appellee,
v.

PETER BERNEGGER,

Defendant-Appellant.

Appeal from the United States District Court
for the Northern District of Mississippi

Before WIENER, CLEMENT, and ELROD, Circuit Judges.
PER CURIAM:
Defendant, Peter Bernegger, appeals his conviction for mail and bank
fraud. He also appeals his sentence of seventy months in prison and restitution
of approximately $2 million. We AFFIRM as modified.
I.
Peter Bernegger and Stephen Finch were charged in a six-count
indictment with various counts of mail fraud, wire fraud, bank fraud, and
conspiracy for inducing investors to invest money in their two start-up
companies, We-Gel and Citrus Products International (CPI). We-Gel purported

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to make gelatin out of catfish waste, and CPI sought to make limonin out of
lemon seeds.
Attempting to obtain capital for their new businesses, Bernegger and
Finch held several meetings for potential investors, explaining their knowledge
of the processes used to make gelatin and limonin out of waste products. One
witness testified that Bernegger and Finch claimed there was nothing they did
not know about these processes and that the gelatin was perfected and ready
to be sold. Two witnesses testified that Finch said he and Bernegger had a
contract with Nutri-West that was worth $3.2 million. Following these
meetings, several individuals invested in both We-Gel and CPI.
Bernegger and Finch were never able to manufacture a sellable product,
however, often pouring the results of their attempts in a ditch behind the plant.
In fact, they were only able to make viable batches of the product a couple of
times. As a result, We-Gel had no customers, and never made any sales.
Nonetheless, Bernegger sent e-mails and letters to investors telling them how
well things were going. Among other things, he told the investors that “We-Gel
is producing product, shipping and invoicing customers,” “we have contracted
orders from 2 large customers totaling 3,000 metric tons per year,” and We-Gel
had “completely sold out of gelatin at a good price.” He further told investors
that the United States Navy had expressed interest in the process being used
at We-Gel. David Cooper, an investor who also worked as a chemist with Finch
and Bernegger, testified that he asked Bernegger why he did not tell the
investors the truth in these letters, to which Bernegger replied, “They can’t
handle the truth.”
Later, Bernegger mailed a letter to We-Gel investors asking for additional

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funds “to finance [We-Gel’s] accounts receivable” and asking each investor to
contribute at least $25,000. In that letter, he noted that in order to “sweeten
the pot,” “a letter of intent has been signed with a Texas fish processing
company named GAF.” In a letter sent three days later, he said that GAF “is
paying” We-Gel $1.2 million, which was purportedly “on top of the 50% of pre-
tax profits from the second plant and is expected to be paid in about 4 months
from now.” Bernegger testified that he believed that We-Gel did have a letter
of intent with GAF, pointing to an agreement We-Gel had with L&S Consulting,
a company that hoped to broker a deal between We-Gel and GAF. That letter
stated that “L&S is negotiating a deal with GAF such that GAF and We-Gel will
form a 50-50 partnership for fish waste processing.” The document was signed
by Bernegger and Larry Mobley, a partner at L&S. Bernegger claimed that he
believed Mobley was signing on behalf of GAF.
The jury heard testimony from GAF’s general manager, GAF’s executive
vice president, and Mobley, each of whom testified that GAF never signed a
letter of intent with We-Gel. The only document signed by GAF was a
confidentiality agreement in anticipation of GAF’s visit to We-Gel’s plant.
Although GAF employees did visit the We-Gel plant, they did not think the
process was sufficiently developed to warrant doing business with We-Gel.
As a result of the letters Bernegger mailed, We-Gel obtained additional
funding from some of its investors. One investor gave another $25,000 just days
after receiving the second letter. Other investors did so shortly thereafter. At
the end of February 2005, Donnie Kisner, who had invested $100,000 in CPI,
called his relative, Leo Bieneck, to tell him what he had learned about We-Gel
during the investor meetings. As a result of that conversation, Bieneck wrote

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a check to We-Gel for $25,000. At the time of trial, none of the investors had
received any return on his investment.
In addition to funding from his investors, Bernegger obtained grants of
$250,000 each from both Clay County, Mississippi and the Mississippi Land,
Water and Timber Board. Bernegger signed both a grant agreement and a
security agreement with the state. As collateral for the security agreement, the
state received the first and only lien on any equipment purchased with the
money for five years. We-Gel was expected to meet certain other requirements,
such as employing at least fifty-five employees after two years, turning in
timely reports, and not selling the company. If We-Gel did not meet any of
those obligations, the state could foreclose on the equipment.
A few months after signing the security agreement with the state,
Bernegger sought a loan from BancorpSouth, hoping to pledge the same
equipment as collateral. He sent the loan officer a letter with a list of
equipment, valuing it at $1 million and stating, “We-Gel owns this equipment
and it is paid for in full.” The letter did not mention the state’s security
interest. We-Gel’s office manager testified that, when Bernegger asked her to
put together information about the equipment to give to the bank, she told him
that the equipment was owned by the state. Asked what his response was, she
said, “He kind of shrugged me off and told me not to worry about it. That, no,
that was our equipment.” Later, Bernegger took the loan officer on a tour of
We-Gel and reiterated that it owned all of the equipment free of any liens. As
a result, Bancorp agreed to issue a loan to Bernegger secured by the equipment.
As a condition of closing the loan with Bancorp, Bernegger gave the bank
a lien on his home in Wisconsin, which was already the subject of three liens.

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Before closing the loan with Bancorp, however, he borrowed $100,000 from
another bank, pledging his home as collateral. Nonetheless, he signed an
affidavit at the closing with Bancorp purporting to set forth all of the liens on
the house, but omitting the new lien of $100,000. When Bancorp received the
title opinion revealing the fourth lien, it refused to fund the remainder of the
loan. Bancorp estimated its total loss from We-Gel at $125,000.
The indictment included six counts.1 The jury acquitted Finch of the two
counts against him and acquitted Bernegger of two of the five counts against
him, but convicted Bernegger of mail fraud and bank fraud. Bernegger was
sentenced to seventy months in prison and ordered to pay restitution of
$2,100,000.
II.
Bernegger makes several arguments on appeal, challenging both his
conviction and his sentence.
A.
Bernegger first contends that the district court erred in refusing to sever
the bank fraud count from the mail and wire fraud counts. Under Federal Rule
of Criminal Procedure 12(b), “objections based on defects in the indictment, as
well as [r]equests for severance of charges or defendants . . . must be raised
prior to trial.” United States v. Mann, 161 F.3d 840, 861 (5th Cir. 1998)

1
The indictment charged that: (1) Finch caused Larry Mobley to send a wire transfer of
approximately $200,000; (2) Bernegger caused Craig Trebatowski to send via mail $100,000; (3)
Bernegger caused Leo Bienek to send via mail $25,000; (4) Bernegger sent via mail a letter to all
investors of We-Gel, his company, seeking additional cash investments based on several
misrepresentations; (5) Finch and Bernegger conspired to commit wire and mail fraud, as set forth in the
counts above; and (6) Bernegger committed fraud upon BancorpSouth, whose deposits were insured by
the FDIC, by misrepresenting that certain equipment and property pledged as collateral was owned
lien-free by We-Gel.

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(internal quotation marks omitted). Bernegger never moved to sever Count 6,
however. Instead, he points to a Motion to Sever filed under Federal Rule of
Criminal Procedure 8(b), requesting that the district court “sever[] the case
against him from that of the case of the Co-Defendant, Stephen Finch.”
Bernegger renewed that motion several times during the trial, but at all times
he referred only to severing his case from that of his co-defendant.
Bernegger nonetheless asserts that his motion below preserved the issue
because Rule 8(b) controls all severance motions in cases in which multiple
defendants are tried, regardless of whether the movant is seeking to sever
offenses or defendants. Bernegger, however, never mentioned severing Count
6 in his motion to the trial court. A defendant waives his offense-severance
argument when he argues below only that severance of defendants was
required yet maintains on appeal that severance of offenses is necessary. See
Mann, 161 F.3d at 861 n.58 (distinguishing motions to sever offenses from
motions to sever defendants for preservation purposes). Nor is this result
changed by United States v. Holloway, 1 F.3d 307 (5th Cir. 1993), cited by
Bernegger at oral argument. There, the defendant moved to sever the charge
of being a felon in possession of a weapon from his robbery offenses, citing Rule
14 but not Rule 8(a). Id. at 309-10. We held that the defendant need not cite
the particular rule when his argument is made clear to the district court. Id.
at 310 n.2. Critically, here, Bernegger neither cited the proper rule nor made
his argument that the charges should be severed to the district court. As a
result, he did not preserve the issue, regardless of which rule controls.
Alternatively, Bernegger argues that this court should review the failure
to sever for plain error. When an appellant does not show cause for failing to

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move for severance prior to trial, we need not address the merits of the
severance argument at all, but we retain discretion to review for plain error.
Mann, 161 F.3d at 862; United States v. Tolliver, 61 F.3d 1189, 1198-99 & n.6
(5th Cir. 1995), vacated and remanded on other grounds, 516 U.S. 1105 (1996).
Even if we review for plain error, Bernegger is not entitled to relief. “The
indictment . . . may charge a defendant in separate counts with 2 or more
offenses if the offenses charged . . . are of the same or similar character, or are
based on the same act or transaction, or are connected with or constitute parts
of a common scheme or plan.” Fed. R. Crim. P. 8(a). The district court did not
clearly err in finding that these offenses were of a similar character and
constitute part of a common scheme—“the making of fraudulent
misrepresentations for the purpose of funding his business venture.”
Nor did Bernegger establish that any alleged error affected his
substantial rights. He briefly argues that he was prejudiced because “the mere
existence of the bank fraud invariably led the jury to assume the worst about
Mr. Bernegger,” which he says “explains Mr. Bernegger’s convictions when Mr.
Finch, who admitted lying to Mr. Bernegger and the investors, was acquitted
of every count.” He fails to note, however, that the court instructed the jury:
A separate crime is charged against one or more of the defendants
in each count of the indictment. Each count and the evidence
pertaining to it should be considered separately. The case of each
defendant should be considered separately and individually. The
fact that you may find one or more of the accused guilty or not
guilty of any of the crimes charged should not control your verdict
as to any other crime or any other defendant. You must give
separate considerations to the evidence as to each defendant.

We have held that instructions almost identical to those given here are

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sufficient to cure any prejudice from the joinder of defendants or offenses. See
Mann, 161 F.3d at 862. Indeed, the jury followed those instructions: Bernegger
was acquitted on two counts, as was Finch. As this court has previously said,
“the acquittal of all the defendants on one or more counts ‘supports the
inference that the jury considered separately the evidence as to each defendant
and each count.’” Id. (footnote omitted) (quoting United States v. Faulkner, 17
F.3d 745, 759 (5th Cir. 1994)). In sum, the district court did not commit plain
error by not severing Count 6.
B.
Bernegger next argues that the district court violated the Confrontation
Clause of the Sixth Amendment when it denied him the opportunity to cross-
examine Donnie Kisner, an investor in CPI, about an alleged discrepancy in his
testimony. This claim is reviewed de novo, subject to a harmless error analysis.
United States v. Jimenez, 464 F.3d 555, 558 (5th Cir. 2006). If no Sixth
Amendment violation occurred, we review the limitations on cross-examination
for an abuse of discretion. Id. at 558-59. We will not find an abuse of discretion
“absent a showing that the limitations were clearly prejudicial.” United States
v. Diaz, 637 F.3d 592, 597 (5th Cir. 2011) (internal quotation marks omitted).
While the Sixth Amendment guarantees the right of a defendant to cross-
examine witnesses against him, that right is not unlimited. Jimenez, 464 F.3d
at 558. “[T]rial judges retain wide latitude insofar as the Confrontation Clause
is concerned to impose reasonable limits on such cross-examination [regarding
a witness’s motivation to testify] based on concerns about, among other things,
harassment, prejudice, confusion of the issues, the witness’ safety, or
interrogation that is repetitive or only marginally relevant.” Delaware v. Van

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Arsdall, 475 U.S. 673, 679 (1986). “What is required is that defense counsel be
‘permitted to expose to the jury the facts from which jurors, as the sole triers of
fact and credibility, could appropriately draw inferences relating to the
reliability of the witness.’” Diaz, 637 F.3d at 597 (quoting United States v. Hitt,
473 F.3d 146, 156 (5th Cir. 2006) (citation omitted)). To determine if a Sixth
Amendment violation has occurred, we inquire into “whether the jury had
sufficient information to appraise the bias and motives of the witness.” United
States v. Tansley, 986 F.2d 880, 886 (5th Cir. 1993).
During cross-examination, Kisner revealed that he was involved in an
ongoing project involving processing waste with David Cooper, an investor who
had also worked as a chemist with Finch and Bernegger. Kisner testified that
he had signed a confidentiality agreement and could not discuss it further, but
Bernegger argued that he should be able to cross-examine Kisner on the details
of the project:
I think now that we know that this is a byproduct of food and Mr.
Cooper is involved and Mr. Cooper was involved in CPI and
We-Gel, I have good reason to believe that these gentlemen may
have commandeered—that may be a strong word—or
absconded—that’s a strong word, too—with a project for which Mr.
Bernegger may have had—may use and now may be processing
that, the same set of facts that are before this Court and for which
my client is being criminally prosecuted. I don’t know that because
I haven’t heard what Mr. Kisner is going to say. But if that’s the
case, that is terribly relevant, Your Honor. In fact, that is not only
relevant, it is material.

The district court excused the jury to take testimony under seal. During
Bernegger’s questioning outside the presence of the jury, Kisner testified that
he was involved in a new project to process waste with Putnam Ethanol. He

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further testified that his wife had signed the confidentiality agreement,
contrary to his earlier testimony that he had done so. He testified, however,
that he was bound by it. The district court determined that the new project and
any alleged trade secret violation were not relevant to the fraud issues
presented to the jury. Accordingly, the district court did not allow Bernegger
to cross-examine Kisner on that particular issue in front of the jury.
Bernegger first argues that he should have been able to cross-examine
Kisner about the fact that his wife actually signed the confidentiality
agreement, contrary to Kisner’s prior testimony. However, the record does not
reflect that Bernegger’s attorney ever sought to elicit that testimony before the
jury. The district court did not prevent him from cross-examining Kisner about
the discrepancy in his testimony. Alternatively, Bernegger argues that the
district court’s limitation on his cross-examination of Kisner was improper
because Bernegger might have shown that Kisner stole a trade secret from him
and used it in his new project, meaning that Kisner had an interest in seeing
Bernegger convicted. Bernegger has not shown, however, that such testimony
would have been relevant to whether he fraudulently obtained funding for CPI
and We-Gel, or would have been more than marginally relevant to Kisner’s
credibility. Nor has he presented anything more than mere speculation that
Kisner did in fact use one of Bernegger’s processes improperly. Therefore, the
district court gave Bernegger sufficient latitude during his cross-examination
of Kisner, and there was no Sixth Amendment violation.
Because no Sixth Amendment violation occurred, we next review whether
the district court’s restrictions on cross-examination were so prejudicial as to
result in an abuse of discretion. Jimenez, 464 F.3d at 558-59. Prejudice is

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shown only if “a reasonable jury might have had a significantly different
impression of the witness’s credibility if defense counsel had been allowed to
pursue the questioning.” United States v. Davis, 393 F.3d 540, 548 (5th Cir.
2004). For the reasons discussed above, Bernegger has not shown that the
district court’s limitations on cross-examination were prejudicial. The district
court did not abuse its discretion.
C.
Next, Bernegger contends that the district court erred by not granting a
mistrial based on the format of the superseding indictment. Because he never
asked the district court for a mistrial based on the indictment, we review for
plain error. See United States v. Potts, 644 F.3d 233, 236 (5th Cir. 2011).
Paragraphs 1 through 8 of the indictment, which were listed under the title
“The Scheme” in Count 1, generally described the fraudulent scheme allegedly
devised by Finch and Bernegger. Those eight paragraphs were then
incorporated by reference in Counts 2 through 5. Following the general
description of the scheme, the indictment contained another section, entitled
“Execution of the Scheme,” that laid out the specifics of Count 1—namely, that
Finch had made misrepresentations to Larry Mobley, causing him to wire
approximately $200,000 to We-Gel. Accordingly, while both Bernegger and
Finch were identified in the first part of Count 1 describing the scheme, only
Finch was actually charged with executing the scheme.
In Bernegger’s view, the form of the indictment was confusing to the jury
and justified a sua sponte mistrial. As the district court explained while
discussing Count 1 at the charge conference, the jury charge adequately made
clear that Bernegger was not charged in Count 1. Bernegger’s counsel agreed:

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THE COURT: I think the instructions, as they are, are
adequate. Mr. Daniels, you can’t find him guilty
if there’s not a blank to fill in.
MR. DANIELS: Right.

Bernegger’s attorney then requested an additional curative instruction to clarify
the point further, which the district court granted, instructing the jury:
Now, ladies and gentlemen, I cannot emphasize enough to you that
unless there is a blank here provided for that defendant, you
cannot find that defendant guilty of that count, and the example
that I’m giving you primarily deals with Count 1. Count 1
mentions—goes in great detail, you will have this superseding
indictment back there, and Mr. Bernegger is mentioned, his name
is mentioned in Count 1. But there is no provision for you to find
Mr. Bernegger guilty of Count 1 of that indictment.

Bernegger received everything he requested from the district court to clarify the
Count 1 issue.2 The district court did not plainly err by not declaring a mistrial
sua sponte.
D.
In addition, Bernegger argues that insufficient evidence supports the
jury’s verdict on Count 3 of the indictment: that he caused Leo Bieneck to send
$25,000 by mail. In addressing such an argument, this court views the evidence

2
Relatedly, Bernegger claims that the district court erred “by not redacting [his name] from
Count 1 of the indictment.” This court reviews this claim for an abuse of discretion. United States v.
Graves, 5 F.3d 1546, 1550 (5th Cir. 1993). The Federal Rules of Criminal Procedure provide that “[t]he
Court on motion of the defendant may strike surplusage from indictment or information.” Fed. R. Crim.
P. 7(d). To strike surplusage, the language in the indictment must be “irrelevant, inflammatory, and
prejudicial.” Graves, 5 F.3d at 1550. In response to Bernegger’s request that the district court remove
his name from Count 1, the district court explained that doing so would deprive the jury of the context of
the fraud. Bernegger has not established that the inclusion of his name in the indictment was “irrelevant,
inflammatory, and prejudicial” and has not shown that the district court abused its discretion in refusing
to strike the language.

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and the inferences drawn therefrom in the light most favorable to the verdict.
United States v. Mitchell, 484 F.3d 762, 768 (5th Cir. 2007). “Credibility
determinations and reasonable inferences are resolved in favor of the jury’s
verdict.” United States v. Thompson, 647 F.3d 180, 183 (5th Cir. 2011). The
issue is not whether the jury correctly determined guilt, but whether it made
a rational decision supported by sufficient evidence in the record. United States
v. Jaramillo, 42 F.3d 920, 923 (5th Cir. 1995).
To prove mail fraud, “[t]he Government was required to prove only a
scheme to defraud, the use of the mail or wire communications, and a specific
intent to defraud.” United States v. McMillan, 600 F.3d 434, 450 (5th Cir.
2010); see 18 U.S.C. § 1341. Contrary to Bernegger’s contentions, the
government is not required to prove that any misrepresentations were made
directly to the victim. McMillan, 600 F.3d at 450. Bernegger argues first, that
no fraudulent scheme existed, second, that there was no proof that Bieneck’s
check was mailed, and third, that there was no evidence that he had specific
intent to defraud Bieneck or that he caused Bieneck to send the check.
First, there is sufficient evidence in the record to support a scheme to
defraud. Bernegger argues generally that he intended to establish a legitimate
business, that there was a large demand for gelatin, that Finch lied to him
about being a doctor, and that the investors signed subscription agreements
recognizing the economic risk of investing. As detailed above, the jury was
presented with sufficient evidence that Bernegger made specific
misrepresentations about contracts that We-Gel did not actually have, about a

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letter of intent signed by GAF,3 about how well production was going, and about
the status of collateral he pledged for a business loan,4 all with the goal of
obtaining money to fund We-Gel. The jury was free to credit this evidence and
disbelieve Bernegger, and there is sufficient evidence to support the jury’s
finding of a scheme to defraud.
Second, sufficient evidence supports the jury’s finding that Bieneck’s
check was mailed. “When . . . it would be unusual for the transmittal in
question to be made other than by mail, circumstantial evidence of the mailing
is sufficient to support a mail fraud conviction.” United States v. Sprick, 233
F.3d 845, 854 (5th Cir. 2000). Bieneck lived in Oklahoma; We-Gel received his
check in Mississippi. The government points to the following testimony from
Bernegger as an implicit admission that the check from Bieneck was mailed to
We-Gel:
Q. While we are on the subject of checks, Mr. Bieneck mailed
you a check in February of ’05 as well; is that correct?
A. No.
Q. That is not correct?

3
Bernegger contends that the district court erred by failing to instruct the jury on the definition
of “letter of intent.” The district court denied that request because it was an improper instruction and the
definition was more properly suited for attorney argument. This court reviews “a challenge to jury
instructions for an abuse of discretion, affording the district court substantial latitude in describing the
law to the jurors.” United States v. Ortiz-Mendez, 634 F.3d 837, 839 (5th Cir. 2011) (internal quotation
marks omitted). Bernegger has not established that the district court abused its discretion by denying the
request.
4
Bernegger makes similar arguments regarding the sufficiency of the evidence to support his
convictions under Counts 4 and 6, that the government failed to establish beyond a reasonable doubt that
he sent letters by mail to all investors of We-Gel seeking additional cash investments and that he
committed fraud upon BancorpSouth by misrepresenting that certain equipment and property pledged as
collateral was owned lien-free by We-Gel. For the reasons detailed above, there is sufficient evidence to
support the jury’s verdict on these counts.

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A. No.
Q. You did receive a check from Leo Bieneck, correct?
A. We-Gel did, yes.

Viewing the evidence in the light most favorable to the verdict, there is
sufficient evidence that Bernegger used the mail for a fraudulent scheme.
Third, there is sufficient evidence that Bernegger caused Bieneck to send
the check and that he had a specific intent to defraud. The jury heard
testimony from Kisner that he relayed the information he had heard from
Bernegger to his relative, Bieneck. It cannot be disputed that Bernegger’s
intent in sending the letters and holding the investors’ meeting was to procure
more investors. Kisner himself invested more money after receiving the letters
from Bernegger, and he told Bieneck about We-Gel shortly thereafter. Bieneck
mailed his check less than a month after Bernegger mailed the second letter.
Sufficient evidence supports the jury’s verdict that Bernegger’s
misrepresentations caused Bieneck to invest money in We-Gel.
E.
Bernegger also argues that the district court erred in denying his pro se
habeas corpus petition. After the verdict, but before sentencing, Bernegger filed
a habeas petition under 28 U.S.C. § 2255 raising, among other things, a claim
for ineffective assistance of counsel. His trial counsel then moved to withdraw
based on those claims. The district court denied both the habeas petition and
the motion to withdraw, holding that the petition was not ripe, and we
dismissed the appeal from the denial. A defendant cannot collaterally attack
his conviction until it has been affirmed on direct appeal. Fassler v. United
States, 858 F.2d 1016, 1019 (5th Cir. 1988). As a general rule, therefore, this

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court declines to review ineffective-assistance claims on direct appeal. United
States v. Bishop, 629 F.3d 462, 469 (5th Cir. 2010). The district court correctly
determined that Bernegger’s habeas corpus petition was not ripe for review.
F.
Finally, Bernegger challenges his sentence, arguing that the district court
improperly calculated the total loss caused by his fraudulent scheme as
$2,196,296 and improperly ordered restitution in that amount. See U.S.S.G.
§ 1B1.3(a)(2). A district court’s calculation of the amount of loss attributable to
a defendant is reviewed for clear error. United States v. Peterson, 101 F.3d 375,
384 (5th Cir. 1996). Bernegger asserts that the district court clearly erred by
including in the total loss amount the loans he obtained from Clay County,
Mississippi and the Mississippi Land, Water and Timber Board (the Timber
Board), each for approximately $250,000. The pre-sentence report (PSR), which
the district court adopted, included the amounts of these government loans in
the total loss and listed Clay County and the Timber Board as victims.
Bernegger argues that, because he did not obtain the two loans criminally,
the district court improperly included them in the total loss amount. It is well
established that for “acts to constitute relevant conduct [for purposes of
calculating the total loss attributable to the defendant], the conduct must be
criminal.” United States v. Anderson, 174 F.3d 515, 526 (5th Cir. 1999) (citing
United States v. Powell, 124 F.3d 655, 665 (5th Cir. 1997)). “Before a court may
attribute losses to a defendant’s fraudulent conduct, there must be some factual
basis for the conclusion that those losses were the result of fraud.” See also
United States v. Randall, 157 F.3d 328, 331 (5th Cir. 1998) (internal quotation
marks and alterations omitted).

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No evidence introduced either at trial or at sentencing demonstrated that
Bernegger obtained these loans in a fraudulent or otherwise criminal manner.
In fact, the government never even alleged that Bernegger acted criminally in
obtaining the loans. While the PSR lists Clay County and the Timber Board as
victims, it fails to allege any facts to support this conclusion. Although a PSR
“may be considered as evidence by the court when making sentencing
determinations,” bare assertions made therein are not evidence standing alone.
United States v. Ford, 558 F.3d 371, 376 (5th Cir. 2009). In the absence of
evidence supporting its characterization of the loans, the PSR is inadequate to
support the inclusion of the loan amounts in the loss calculation. See Anderson,
174 F.3d at 528-30; see also Peterson, 101 F.3d at 385. As such, the district court
clearly erred in treating the amounts Bernegger borrowed from Clay County and
the Timber Board as losses attributable to “relevant conduct” within the
meaning of section 1B1.3(a)(2) of the United States Sentencing Guidelines.
Subtracting the amounts of the two government loans from the loss
calculation does not affect Bernegger’s offense level, however, and therefore does
not affect his sentence. The district court calculated the loss attributable to
Bernegger’s fraud as $2,196,296.08. Only $471,296.08 of the total loss amount
was attributable to the government loans. Under the Sentencing Guidelines,
any loss amount between $1,000,000 and $2,500,000 yields the same 16-level
increase. See U.S.S.G. § 2B1.1(b)(1). Thus, subtracting the loan amounts from
the loss calculation, the correct total loss amount is $1,725,000, and Bernegger’s
offense level remains the same.
Because the district court clearly erred in calculating the total loss
amount, however, the restitution amount is incorrect and must be modified. See

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 Case: 09-60932 Document: 00511639722 Page: 18 Date Filed: 10/20/2011

No. 09-60932

United States v. Glinsey, 209 F.3d 386, 395-96 (5th Cir. 2000). We therefore
modify the restitution amount to reflect the correct total loss amount of
$1,725,000.
III.
Accordingly, the judgment of the district court is AFFIRMED as modified.

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