State v. McMaster

August 4 2008

DA 06-0780

IN THE SUPREME COURT OF THE STATE OF MONTANA

2008 MT 268

STATE OF MONTANA,

Plaintiff and Appellee,

v.

JAYMIE LAWRENCE McMASTER,

Defendant and Appellant.

APPEAL FROM: District Court of the First Judicial District,
In and For the County of Lewis and Clark, Cause No. DC-2006-43(B)
Honorable Jeffrey M. Sherlock, Presiding Judge

COUNSEL OF RECORD:

For Appellant:

Wendy Holton, Attorney at Law, Helena, Montana

James B. Wheelis, Appellate Defender’s Office, Helena, Montana

For Appellee:

Hon. Mike McGrath, Attorney General; John Paulson, Assistant Attorney
General, Helena, Montana

Leo J. Gallagher, Lewis and Clark County Attorney, Helena, Montana

Submitted on Briefs: June 20, 2008

Decided: August 4, 2008

Filed:

__________________________________________
Clerk
Justice Brian Morris delivered the Opinion of the Court.

¶1 Jaymie Lawrence McMaster (McMaster) appeals from an order of the First

Judicial District Court, Lewis and Clark County, requiring him to pay restitution in the

amount of $30,000. We affirm.

¶2 We review the following issue on appeal:

¶3 Did the District Court abuse its discretion when i t determined McMaster’s

restitution obligation based in part upon testimony given at the restitution hearing?

FACTUAL AND PROCEDURAL BACKGROUND

¶4 Dennis Wright (Wright) bought Crossroads Sports and Fitness (Crossroads), a

health club located in Helena, Montana, in 1997. Wright’s accountant described

Crossroads as a “cash cow” and considered the club a good investment for Wright.

Wright hired McMaster as the general manager in 2000 to help run the club’s operations.

Wright hired Teresa Whitney (Whitney) a short time later to serve as the club’s business

manager.

¶5 Crossroads encountered serious financial difficulty late in 2002. The club lost

large amounts of money from 2002 to 2005. Wright invested an additional $250,000

during this period to stave off bankruptcy.

¶6 Valley Bank of Helena contacted Wright late in 2005 concerning Crossroads’

account with the bank. The bank recently had installed fraud detection software. The

software program had flagged the Crossroads account as a possible victim of fraudulent

activity. Wright learned from the bank that a significant amount of unauthorized and

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unusual account activity had occurred. Wright filed a report of potential embezzlement

and internal theft with Helena Police Detective Russ Whitcomb.

¶7 Detectives Whitcomb and Mark Ekola and Agent Wade Cooperider began an

investigation of Wright’s allegations. They accompanied Wright to Crossroads’ offices

to collect evidence and to speak with McMaster. McMaster admitted that he had done

things “which were not right,” but did not admit to having stolen money from Crossroads

at that time. Detective Whitcomb estimated that Wright had suffered a loss of

approximately $66,000 at the conclusion of h i s investigation. The State filed

embezzlement charges against both McMaster and Whitney.

¶8 Whitney pled guilty to the theft of property by embezzlement. She received a

three year deferred imposition of sentence and a restitution obligation of $18,945.88.

McMaster pled guilty to theft of property by embezzlement on May 11, 2006.

¶9 Probation Officer Michael Touchette prepared a Pre-sentence Investigation Report

(PSI) for the court. The PSI documented McMaster’s assets as a moderate income, a

house, two vehicles, and a supplemental income from his wife. The PSI did not include

an affidavit submitted by Wright that described his pecuniary loss, but it did refer to

statements submitted by Wright concerning his estimation of an appropriate amount for

restitution. The PSI outlined the circumstances of McMaster’s embezzlement activities

and the various methods used by McMaster to steal funds. The PSI recommended that

the court set McMaster’s restitution obligation at $12,914.46. The probation officer filed

the PSI and delivered it to the State on August 22, 2006--two days before the restitution

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hearing.

¶10 The District Court held a restitution hearing on August 24, 2006, and continued

the hearing for a second day on September 6, 2006. Wright submitted a written statement

concerning the funds embezzled by McMaster fifteen minutes before the start of the

hearing on August 24, 2006. Wright testified on both days of the hearing. McMaster

cross-examined Wright on the first day of the hearing. McMaster also cross-examined

Wright when the court re-convened the hearing nearly two weeks later on September 6,

2006.

¶11 Wright described the losses that Crossroads had incurred as a result of McMaster’s

activities. Wright “totally disagree[d]” with the restitution figure set forth in the PSI.

Wright submitted a written summary of h i s alleged losses that varied with the

calculations provided in the PSI. McMaster objected to the summary on the grounds that

he had received the summary only minutes before the first day of the hearing. The State

informed the court that it had received the PSI two days before the first day of the

hearing. The State had asked Wright to prepare the summary in the interim to reflect his

disagreement with the PSI’s restitution figure. The District Court provided McMaster

with the opportunity to request a continuation of the hearing or a delay in the imposition

of McMaster’s restitution. McMaster’s counsel stated that she did not want to continue

the hearing.

¶12 McMaster objected to witness testimony and estimates throughout the hearing

based upon his late receipt, or non-receipt in some cases, of various financial documents.

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The court offered on several occasions to continue the hearing if McMaster felt

“disadvantaged” at the lack of timely access to Wright’s financial records or if McMaster

wanted more time to review the records or to obtain additional records.

¶13 Wright’s summary included two different restitution calculations. Wright first

employed a cash-flow analysis that compared the club’s cash-flow and account balance

from the period after McMaster left Crossroads to the club’s finances during the time that

McMaster had embezzled funds. The analysis assumed that no significant improvements

or changes had occurred in Crossroads’ operating procedures. The analysis concluded

that the club should have netted a positive balance of $105,000 for each of the years that

McMaster had embezzled funds. The analysis presented a total restitution

recommendation of $334,425--the projected net balance multiplied by the three years

covered by the embezzlement charge against McMaster, plus accounting charges incurred

in the investigation of the club’s losses.

¶14 The summary presented by Wright included an alternate restitution calculation

based upon Wright’s calculations of lost funds. The summary contained nineteen

categories of embezzlement activity, including improper cash withdrawals, illegitimate

credit card charges, unauthorized “bonus” payments, and unauthorized trade-outs with

other businesses. Wright highlighted in his testimony the areas that he believed the

probation officer had failed to account in calculating the restitution. Wright calculated

these amounts based on his own review of financial records, interviews with other

Crossroads employees, and assumptions that he had made regarding the club’s business.

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Wright’s alleged losses under this method of analysis totaled $231,693.

¶15 Leigh Ann West Simendinger (Simendinger) testified on behalf of the State.

Simendinger is an accountant and an independent consultant who works with struggling

businesses to improve their financial situations. Simendinger regularly employs cash-

flow analyses in her consulting work. She supported the restitution calculation that

Wright had presented using the cash-flow analysis. Simendinger testified that Wright’s

cash-flow analysis constituted a very conservative estimate of Crossroads’ earning

potential during McMaster’s period of embezzlement.

¶16 David Johnson, an accountant hired by McMaster, testified on the second day of

the hearing. The court qualified Johnson as an expert. Johnson testified that he had

received and reviewed a copy of the written statement that Wright had submitted on the

first day of the hearing. Johnson sought to discredit Wright’s restitution figures.

Johnson critiqued specific restitution claims in Wright’s written statement as well as

Wright’s testimony regarding a cash-flow analysis. Johnson also discussed

Simendinger’s testimony concerning the cash-flow analysis. Johnson characterized the

analysis as “irresponsible.” Johnson testified that he would rely only upon “actual

records” and would require the records to demonstrate a “direct benefit” to McMaster for

any restitution calculation. Johnson later admitted that the available records appeared to

reveal that McMaster had documented legitimate transactions, but McMaster had left no

source documents with regard to any illegitimate transactions. He conceded that a cash-

flow analysis would constitute a proper method for determining the restitution amount in

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an embezzlement case when the “actual records” were known to be inaccurate and where

an employee had skimmed cash from the business.

¶17 The probation officer who had prepared the PSI, Touchette, also testified at the

hearing. The State challenged the analysis that Touchette had employed in preparing the

PSI and challenged his final restitution calculations. Touchette testified that he and

Johnson had reviewed Wright’s claimed losses in detail and had “whittled that down to

what we could actually prove the defendant put in his pocket . . . .” Touchette asserted

that he would not provide a restitution figure without having “documentable” evidence

that demonstrated the victim’s losses with “absolute certainty.” Touchette attributed the

majority of Wright’s losses to bad management choices made by McMaster.

¶18 The District Court received several restitution recommendations. The

recommendations ranged from the $12,914 proposed by the probation officer, to

$334,425 as set forth in Wright’s cash-flow analysis. McMaster noted again at the

conclusion of the hearing that he had not received Wright’s written statement regarding

Crossroads’ losses until fifteen minutes before the first day of the hearing. McMaster

argued that he had received no documents that supported Wright’s written statement

between the first day of the hearing on August 24, 2006, and the second day of the

hearing on September 6, 2006. The State informed the court that neither the State, nor

Wright, had received a request for additional records during the two weeks between the

hearing dates. The court adjourned the hearing without imposing a sentence.

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¶19 The court issued an order five days later on September 11, 2006, that found that

the pecuniary loss to Wright consisted of $102,753, “at a minimum.” The court found

further, however, that McMaster could afford to pay only $30,000. The court set

McMaster’s restitution at $30,000 based upon this finding. McMaster appeals.

STANDARD OF REVIEW

¶20 We apply a two-tiered standard of review to a criminal sentence that does not

qualify under statute for review by the Sentence Review Division because the sentence

does not impose at least one year of actual incarceration. State v. Herd, 2004 MT 85,

¶¶ 6-23, 320 Mont. 490, ¶¶ 16-23, 87 P.3d 1017, ¶¶ 16-23. We review de novo whether

the court had statutory authority to impose the sentence, whether the sentence falls within

the applicable sentencing parameters, and whether the court adhered to the mandates of

the applicable sentencing statutes. State v. Breeding, 2008 MT 162, ¶ 10, 343 Mont. 323,

¶ 10, 184 P.3d 313, ¶ 10.

¶21 We next review the district court’s sentence for an abuse of discretion. Herd, ¶ 25.

An abuse of discretion exists if the sentencing court acts arbitrarily without employment

of conscientious judgment or exceeds the bounds of reason and works a substantial

injustice. Breeding, ¶ 10. We review findings of fact made by the district court under the

clearly erroneous standard. Breeding, ¶ 11. Findings of fact are clearly erroneous if they

are unsupported by substantial evidence, if the court misapprehended the effect of the

evidence, or if a review of the record leaves a definite and firm conviction that the

sentencing court made a mistake. Breeding, ¶ 11.

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 DISCUSSION

¶22 Did the District Court abuse its discretion when i t determined McMaster’s

restitution obligation based in part upon testimony given at the restitution hearing?

¶23 Our de novo review of McMaster’s sentence requires that we first address a

potential defect in the sentencing court’s restitution determination for McMaster.

Breeding, ¶ 10. District courts must sentence offenders to make full restitution to victims

who have sustained pecuniary losses. Section 46-18-241, MCA; Breeding, ¶ 13. Section

46-18-242(1), MCA, provides that “[w]henever the court believes that a victim may have

sustained a pecuniary loss . . .” the court shall order the PSI to include a list of the

offender’s assets and a victim-submitted affidavit describing the victim’s pecuniary loss.

¶24 The PSI in this case documented McMaster’s assets as a moderate income, a

house, two vehicles, and a supplemental income from his wife. The PSI did not include

an affidavit submitted by Wright that described Wright’s pecuniary loss. Wright did

describe his pecuniary losses under oath, however, in his testimony before the district

court at the hearing on restitution. McMaster cross-examined Wright at length

concerning his alleged losses.

¶25 The record does not reveal whether the District Court ordered the PSI to include a

victim’s affidavit regarding alleged losses. This Court may disregard any defect in a

proceeding that does not affect substantial rights. Section 46-20-701(2), MCA. We

conclude that any potential failure on the part of the District Court to order the PSI to

include a victim’s affidavit did not affect McMaster’s substantial rights in light of

9
Wright’s extensive and scrutinized testimony at the hearing and our resolution of

McMaster’s appeal.

¶26 McMaster argues that the District Court could not rely on a cash-flow analysis for

determining the victim’s losses in this case. McMaster asserts that the State and Wright

had to provide documents to support Wright’s alleged losses. McMaster argues that due

process and the statutory guidelines require documentation to substantiate a court’s

imposition of restitution. The State responds by noting that McMaster embezzled money

through fraudulent accounting practices. The State contends that McMaster’s actions

rendered the relevant financial documents worthless and necessitated the use of a cash-

flow analysis.

¶27 Section 46-18-242(1), MCA, as noted above, requires the PSI in a case involving a

pecuniary loss to a victim to include a list of the offender’s assets and a victim-submitted

affidavit describing the victim’s loss. The 2001 version of § 46-18-242(1), MCA,

required the PSI to include “documentation” of both the offender’s assets and the

victim’s pecuniary loss. Section 46-18-242(1)(a)-(b), MCA (2001). The legislature

eliminated the word “documentation” in 2003. Laws of Montana, 2003, Ch. 272, § 4.

The amended statute requires only a “list” of the offender’s assets and “an affidavit that

specifically describes” the victim’s pecuniary loss. Section 46-18-242(1), MCA. The

legislature eliminated in 2003 the documentation requirement that McMaster would have

this Court impose upon the State.

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¶28 We have held that a victim may recover losses “even though the actual losses may

be uncertain, if the losses were calculated by use of reasonable methods based on the best

evidence available under the circumstances.” State v. Benoit, 2002 MT 166, ¶ 29, 310

Mont. 449, ¶ 29, 51 P.3d 495, ¶ 29. We upheld in Benoit a district court’s reliance on a

victim’s methodology and underlying assumptions in calculating a restitution amount that

stemmed from Benoit’s falsifying and voiding sales at a restaurant. Benoit, ¶ 30. We

approved of the use of “some guess work” in Benoit and concluded that the sentencing

court adopted reasonably the restitution calculation method employed by the victim under

the circumstances. Benoit, ¶ 30.

¶29 The Dissent chides the District Court for crediting the “off-the-cuff surprise, non-

expert, undocumented testimony” of Wright and his accountant. Dissent, ¶ 51. Nothing

in the controlling restitution statutes, however, requires a court or a victim to substantiate

a restitution calculation with documentation. And nothing in the restitution statutes

circumscribes a court from relying on victim testimony presented at a sentencing hearing.

¶30 Title 46, Chapter 18, MCA, contains the procedural and substantive guidelines that

govern a sentencing court’s imposition of restitution. Section 46-18-242(1), MCA, as

noted above, no longer requires the PSI to include “documentation” in support of a

calculation of a victim’s pecuniary loss. The statute requires only an affidavit submitted

by the victim describing any pecuniary loss. Section 46-18-242(1)(b), MCA. In fact, a

victim may “decline[] to confer . . .” with the probation officer altogether during the

preparation of the PSI regarding the victim’s pecuniary loss. Section 46-18-112(1)(f),

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MCA.

¶31 District courts must permit victims to present a statement concerning the impact of

the crime on the victim and the victim’s opinion regarding an appropriate sentence.

Section 46-18-115(4)(a), MCA. The victim may present this statement, “[a]t the victim’s

option, . . . in writing before the sentencing hearing or orally under oath at the sentencing

hearing, or both.” Section 46-18-115(4)(a), MCA (emphasis added). Section 46-18-

115(4)(b), MCA, requires only that the court provide to the defendant a copy of any

written statement submitted by the victim “prior to imposing sentence.”

¶32 Section 46-18-115(4)(c), MCA, further provides that a court “shall consider the

victim’s statement . . .” and authorizes a court to rely on “new material facts . . .”

presented by the victim at the sentencing hearing. A court must provide the defendant

with an adequate opportunity to respond if the court intends to rely on new material facts

presented by the victim. Section 46-18-115(4)(c), MCA. A court also may continue the

hearing if it intends to rely upon any new material facts. Section 46-18-115(4)(c), MCA.

¶33 Wright submitted a written statement regarding the impact of McMaster’s

embezzlement to the court. McMaster received this document fifteen minutes before the

first day of the hearing on August 24, 2006. The court continued the hearing at the end of

the day on August 24, 2006. Wright resumed testifying thirteen days later at the second

day of the hearing on September 6, 2006. The court concluded the hearing without

imposing sentence. The court ultimately set McMaster’s restitution obligation on

September 11, 2006. McMaster received the written statement submitted by Wright

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eighteen days “prior to [the court] imposing sentence.” Section 46-18-115(4)(b), MCA.

Wright chose to present his statement “both” in writing and orally at the sentencing

hearing. Section 46-18-115(4)(a), MCA. The District Court, in turn, “consider[ed]”

Wright’s statement and relied upon “new material facts . . .” contained in the statement.

Section 46-18-115(4)(c), MCA.

¶34 The court satisfied § 46-18-115(4)(c), MCA, by providing McMaster with an

“adequate opportunity to respond . . .” to Wright’s statement. McMaster’s expert

reviewed Wright’s statement between the first day of the hearing on August 24, 2006,

and the second day of the hearing on September 6, 2006. McMaster’s expert offered a

critical analysis of Wright’s written statement and the testimony concerning the cash-

flow analysis. The court also offered to “continue the sentencing hearing . . .” on at least

three separate occasions. McMaster declined each offer. The District Court complied

fully with the controlling statutes to the extent that it considered Wright’s written

statement and credited the “non-expert, undocumented testimony” presented by Wright

during the sentencing hearing.

¶35 Section 46-18-243(1)(a), MCA, sets forth the substantive information that a

district court may consider when calculating a victim’s pecuniary loss. The statute

defines pecuniary loss for restitution purposes as “all special damages, but not general

damages, substantiated by evidence in the record, that a person could recover against the

offender in a civil action . . . .” Section 46-18-243(1)(a), MCA. We have stated that

testimony at a sentencing hearing comprises part of the record when considering an

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appeal in a criminal case. State v. Korang, 237 Mont. 390, 396, 773 P.2d 326, 329

(1989); see also State v. Thompson, 2004 MT 131, ¶¶ 15-17, 321 Mont. 332, ¶¶ 15-17, 91

P.3d 12, ¶¶ 15-17, overruled in part on other grounds, State v. Herman, 2008 MT 187,

343 Mont. 494, ___ P.3d ___.

¶36 Testimony from McMaster’s accountant and the probation officer reveal that both

failed to understand the burden of proof for restitution. McMaster’s accountant

attempted to discredit Wright’s restitution analysis. The accountant testified that he

would rely only upon “actual records” and would require the records to demonstrate a

“direct benefit” to McMaster for any restitution calculation. The probation officer

likewise asserted that he would not provide a restitution figure without having

“documentable” evidence that demonstrated the victim’s losses with “absolute certainty.”

¶37 The District Court heard testimony from multiple witnesses who confirmed that

McMaster’s fraudulent accounting practices prohibited an accurate determination of a

restitution amount based upon a review of Crossroads’ financial records. McMaster

offers no alternative non-documentary method of analysis to determine the restitution

amount. Indeed, McMaster’s accountant admitted that a cash-flow analysis often could

constitute a proper method for determining the restitution amount in an embezzlement

case given the inaccuracy of the underlying records. The testimony at the hearing

confirmed that the PSI’s exclusive reliance on documented transactions did not provide

the “best evidence available under the circumstances” in light of McMaster’s fraudulent

bookkeeping practices and the various embezzlement methods that he had employed.

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¶38 The District Court heard testimony from numerous witnesses at the sentencing

hearing regarding the extent of McMaster’s embezzlement. Wright described at length

the losses that Crossroads had incurred as a result of McMaster’s activities. The District

Court provided McMaster with the opportunity to request a continuation of the hearing or

a delay of the imposition of McMaster’s restitution on several occasions if McMaster felt

“disadvantaged” at the lack of timely access to the financial records or if McMaster

wanted more time to review the records or to obtain additional records. McMaster

declined.

¶39 McMaster admitted to taking money from Wright. The District Court received

varying restitution recommendations that ranged from $12,914 to $334,425. The court

determined that the pecuniary loss to Wright consisted of at least $102,753. The court

reached this amount based upon the calculations made in the PSI, Wright’s testimony at

the hearing, and the testimony at the hearing concerning the cash-flow analysis.

Substantial evidence in the record supports the District Court’s findings. Korang, 237

Mont. at 396, 773 P.2d at 329.

¶40 The Dissent faults the District Court for discrediting the calculations made by the

defense accountant and the probation officer as set forth in the PSI. Dissent, ¶¶ 51-53.

The Dissent confuses the duties of the probation officer in creating the PSI with the roles

of the court and the victim. The probation officer must make a reasonable effort to

ascertain whether a victim has sustained a pecuniary loss. Section 46-18-112(1)(f),

MCA. The victim need not provide any information to the probation officer. Section 46-

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18-112(1)(f), MCA. The victim can wait until the hearing to present testimony or

documents in support of the amount of the loss. Section 46-18-115(4)(a), MCA.

Moreover, the information included in the PSI does not bind a district court. The court

need only “consider” a PSI before imposing a sentence. Section 46-18-111(1), MCA.

The Dissent concedes that the court considered the information included in the PSI.

Dissent, ¶ 54.

¶41 The Dissent argues that some of Wright’s calculations “were demonstrably wrong-

- which should have cast suspicion on the rest.” Dissent, ¶ 52. The Dissent fails to note

that the State established that some of the calculations and assumptions made by

Touchette and Johnson also “were demonstrably wrong,” which, of course, should have

cast suspicion on the rest of their work. For example, Touchette first described

McMaster’s financial status as a debt of $168,000. Touchette erroneously had failed to

account for the value of the assets for which McMaster owed money. Touchette

recognized this flaw in his accounting only after extensive questioning from the State,

and corrected his assessment of McMaster to a positive financial status of $20,000.

Touchette also had accounted zero dollars in restitution for illegitimate trade-outs

because he had not “seen any documentation . . . .” Touchette conceded at the same time,

however, that the defendant had admitted to illegitimate trade-outs. Similarly, Johnson

testified that he would rely only upon “actual records,” despite conceding that McMaster

had produced no documents for his illegitimate transactions. Nothing prevented the court

from deeming the victim’s information more accurate than the information presented by

16
the probation officer or by the defendant’s expert witness, especially in light of the

testimony presented at the hearing.

¶42 The Dissent argues that the proceedings before the District Court constituted a

“trial by ambush.” Dissent, ¶¶ 47, 60. The record below reveals, however, that the

District Court proceeded in compliance with the controlling statutes. In fact, the District

Court offered to make accommodations beyond those required by the statute with respect

to McMaster’s concerns on at least three separate occasions. McMaster declined all three

offers.

¶43 McMaster made no requests for additional records in the thirteen days that passed

between the first and second day of the hearing. The District Court provided McMaster

with multiple opportunities to request a continuance or to delay the imposition of

sentence if McMaster felt “disadvantaged” by the lack of financial records or if he

wanted more time to obtain additional records. McMaster declined. McMaster’s

repeated refusal of the court’s offers undermines his alleged due process violations and

the Dissent’s assertion of an “ambush.” We will not allow McMaster to decline the

District Court’s offers for additional time during the hearing and then argue on appeal

that he had only “fifteen minutes” to prepare.

¶44 The Dissent claims that the District Court’s management of the restitution

hearings will discourage defendants from cooperating with the pre-sentence investigation.

Dissent, ¶¶ 47, 60. The PSI and testimony from Johnson reveal that McMaster did not

cooperate with the pre-sentence investigation that took place before the hearings. We

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suspect that the disincentive for defendants to cooperate lies not in the sentencing

framework set forth in the statutes; rather, the disincentive likely stems from the fact that,

for every dollar a defendant admits taking, the court “shall . . . require payment of full

restitution to the victim . . . .” Section 46-18-201(5), MCA. As aptly stated in

McMaster’s PSI: “The defendant minimized the extent of his crime when being

investigated and still disputes the amount of restitution owed by him in this case. This is

common among people charged with embezzlement.”

¶45 The District Court, citing State v. Pritchett, 2000 MT 261, 302 Mont. 1, 11 P.3d

539, limited the restitution amount to $30,000 based on the court’s assessment of

McMaster’s ability to pay the restitution. The legislature amended the restitution statute

in 2003 and eliminated the need to include in the PSI the offender’s “future ability to pay

restitution . . . .” Laws of Montana, 2003, Ch. 272, § 4. An offender’s future ability to

pay restitution no longer remains a consideration under § 46-18-242, MCA. State v.

Workman, 2005 MT 22, ¶ 15, 326 Mont. 1, ¶ 15, 107 P.3d 462, ¶ 15. The State correctly

points out that the court’s consideration of this factor simply worked in McMaster’s

favor. We conclude, therefore, that the District Court did not abuse its discretion when it

ordered McMaster to pay restitution in the amount of $30,000.

¶46 Affirmed.

/S/ BRIAN MORRIS

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We Concur:

/S/ KARLA M. GRAY
/S/ JOHN WARNER
/S/ W. WILLIAM LEAPHART
/S/ JIM RICE

Justice James C. Nelson dissents.

¶47 I dissent from the Court’s Opinion. What took place at the restitution hearing

violates fundamental fairness. The Court’s decision sets a precedent that will encourage

“trial by ambush” tactics and will serve as a disincentive for defendants to cooperate in

any presentence investigation (PSI) ordered by the trial court.

¶48 The procedural background of this case deserves to be recounted. To begin with,

probation officer Michael Touchette (Touchette) and forensic accountant David Johnson

(Johnson), who was qualified as an expert by the trial court, carefully reviewed all

available information provided to them by the prosecution and in possession of law

enforcement, including the investigating officer’s report. Touchette and Johnson

interviewed the parties, including the Crossroads Fitness Center’s owner, Dr. Dennis

Wright (Wright), and made a restitution recommendation in the PSI of $12,914.46. Both

Touchette and Johnson believed that this was the amount that was provable as criminal

conduct by McMaster and his accomplice. They believed that other claims, ranging from

$66,000 by the investigating officer to some $300,000 by Wright, were the result of bad

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business judgment and mismanagement—largely because McMaster was not a

businessman—rather than the result of embezzlement or other criminal conduct.

¶49 No additional information was made available to the defense or to the probation

officer until fifteen minutes before the restitution hearing was scheduled to commence.

At this time, the prosecution faxed to defense counsel a document prepared by Wright

with the demand for $334,425 in restitution calculated by “project[ing] . . . back” the

money Crossroads Fitness Center (Crossroads) should have made during 2003, 2004, and

2005. Using a different method—one deemed “less accurate” by Wright—he calculated

that the funds stolen from Crossroads, in addition to an accounting fee, totaled $251,118.

No supporting documentation was produced then, nor has it been produced since, to

substantiate Wright’s claims. Wright’s bare, undocumented demand for $334,425 in

restitution was provided to and considered by the court at the restitution hearing.

¶50 At the hearing, Wright offered all sorts of testimony about his claimed losses and

how they were calculated. Wright conceded that he was not an accountant, that he had no

formal business training, and that he had never conducted a forensic audit. Wright never

produced any documentation substantiating his claims, and his figures and recollections

were, at best, equivocal in a number of particulars. Indeed, some of his contentions were

proven to be flat wrong by Touchette and Johnson.1 Another prosecution witness, Leigh

1
Indeed, compare our decision in a recent civil case involving an inverse condemnation
issue, K & R Partnership v. City of Whitefish, 2008 MT 228, ___ Mont. ___, ___ P.3d
___. There we observed that, to comply with the second prong of the “landowner-
witness” rule, where a property owner (there a landowner) testifies as to the value of his
own property beyond its current use, he must have some peculiar knowledge not
20
Ann West Simendinger (Simendinger) likewise testified completely out of the blue.

Simendinger apparently had an accounting degree and had passed the CPA exam, but had

not activated her license in Montana. She was not qualified as an expert. She produced

no written report; testified without producing any records; and admitted that she had not

audited Crossroads’ books. She admitted that she was not qualified to give an audit

opinion. Indeed, Johnson—who was a forensic accountant and who was qualified as an

expert—found her calculations to be “totally irresponsible” without having produced any

evidence to support her conclusions. Wright’s and Simendinger’s testimony was

admitted over McMaster’s objections.

¶51 As noted in ¶ 19 of the Court’s Opinion, the trial judge settled on a restitution

figure of $30,000—not as the amount which McMaster was criminally responsible for,

but as the amount he could likely pay. Clearly, the trial court discredited the careful

analysis of the defense witness—expert forensic accountant Johnson—and probation

officer Touchette, and, instead, credited the off-the-cuff surprise, non-expert,

undocumented testimony of Wright and Simendinger.

¶52 Here, Johnson and Touchette, working diligently together from all of the

documentary evidence provided to them by the prosecution and from their interviews of

possessed by the average layman and must indicate some basis or foundation for his
claimed expertise. See K & R Partnership, ¶¶ 43, 45. Quite to the contrary, here, Wright
admitted no business or accounting experience at all, much less any expertise in
computing the forensic loss from a claimed business embezzlement. In the restitution
hearing, however, he was allowed to pull figures out of the air without documentation or
foundation using questionable methodologies and procedures—some of which were
demonstrably wrong.
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witnesses, including Wright, came up with a figure of $12,914.46. Minutes before the

restitution hearing was to begin, the prosecution came up with all new numbers and

claims by witnesses which had not been disclosed previously by the State. No

documentation was ever produced to support the new numbers or the methodology by

which these numbers were produced. Some of Wright’s self-serving claims and

calculations were demonstrably wrong—which should have cast suspicion on the rest.

¶53 We have previously stated that methods used to calculate restitution—including

“ ‘some guess work’ ” on the part of a victim—may be acceptable if the methods utilized

were “reasonable based on the best evidence available under the circumstances

presented” in the case. State v. Benoit, 2002 MT 166, ¶ 30, 310 Mont. 449, ¶ 30, 51 P.3d

495, ¶ 30 (emphasis added). Here, the methods utilized by Johnson and Touchette were

based on the “best evidence available under the circumstances.” Indeed, the $12,914.46

restitution figure they compiled was the only figure supported by documentation. Wright

never produced any documentation in support of his self-serving claims for $334,425 or

$251,118. Simendinger’s unsupported calculations and methodologies were labeled as

“irresponsible” by the forensic accountant. And, many of Wright’s claims were shown to

be flat wrong. Accordingly, the trial court’s decision based on the surprise evidence at

the restitution hearing was clearly not the best evidence available under the

circumstances.

¶54 Moreover, the District Court noted that “Wright’s estimate of the total stolen is

probably somewhat overstated.” Despite this concession, the court apparently decided

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that Wright’s estimate of the total amount stolen was “closer to the mark than is the

amount of restitution” suggested in the PSI, in large part because the PSI failed to

account for “trade outs”—whereby McMaster traded club memberships for goods and

services from area businesses. Yet the PSI noted that the problem with calculating the

value of trade-outs was that the “club would not have received full membership dues for

every individual who was given a trade-out.” The court made no attempt to resolve this

issue and instead concluded that McMaster took at least $21,000 from Crossroads in

unauthorized trade-outs.

¶55 While this Court takes great pains to note that § 46-18-242(1), MCA, no longer

requires documentation in support of a calculation of a victim’s pecuniary loss, the Court

conflates consideration of the impact of the crime on a victim with a determination of a

victim’s pecuniary loss or restitution amount.

¶56 A PSI shall contain information on a victim’s pecuniary loss. See

§ 46-18-112(1)(f), MCA (when a PSI is required, the probation officer shall inquire into

and report upon “the victim’s pecuniary loss, if any”); § 46-18-242, MCA (“Whenever

the court believes that a victim may have sustained a pecuniary loss,” the PSI shall

include a list of the offender’s assets and an affidavit that specifically describes the

victim’s pecuniary loss.). If a PSI is not authorized or requested, “the court shall accept

evidence of the victim’s loss at the time of sentencing.” Section 46-18-242(2), MCA.

Here, there was a PSI. Wright had been interviewed by the probation officer in

accordance with § 46-18-112(1)(f), MCA. There were no challenges to the accuracy of

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the information in the PSI. And, the court was under no obligation to allow, much less

credit, Wright’s wild, undocumented, and self-serving claims of pecuniary loss.

¶57 The law also provides that the court “shall permit the victim to present a statement

concerning the effects of the crime on the victim, the circumstances surrounding the

crime, the manner in which the crime was perpetrated, and the victim’s opinion regarding

appropriate sentence.” Section 46-18-115(4)(a), MCA. The substance of a victim’s

statement concerning the effects of the crime on the victim—which presumably may

include a description of how the crime made the victim feel, the loss of sleep suffered by

the victim as a result of the crime, the effect on family relationships, etc.—is entirely

separate and apart from the calculation of pecuniary loss, which must be “substantiated

by evidence in the record.” Section 46-18-243(1)(a), MCA. This calculation must be

based on “the best evidence available under the circumstances presented” in the case.

Benoit, ¶ 30 (emphasis added).

¶58 Furthermore, § 46-18-243(1)(a), MCA, defines the victim’s pecuniary loss in

terms of what could be proven in a civil action under the applicable standard of proof. I

am unaware of any civil case that we have ever decided in which this Court affirmed a

trial court’s decision that resulted from a situation like the one at issue here—i.e., a party

prepares to come to court with his witnesses for a damages hearing; he’s ready to present

evidence based on his and his expert’s own investigations, interviews of opposing

witnesses, audits of information, and documents and discovery provided by the adverse

party; but fifteen minutes before the hearing, the adverse party comes up with entirely

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new numbers, undisclosed witnesses, no experts, questionable methodologies, and no

documents to back any of it up. To make matters worse, the court allows this undisclosed

and untested evidence to be admitted over the adverse party’s objection, and then rules on

the basis of this information. We would never allow this scenario in a civil context.

Wright could not, under any standard of proof that I am aware of, prove his wild, self-

serving claims of loss in a civil case in the manner that the trial court allowed here.

¶59 Unfortunately, this Court, today, says that this sort of practice and procedure is

perfectly acceptable in a criminal case. Our decision now serves as precedent for

prosecutors and trial judges across the State to do exactly the same thing—sandbag2 the

defense on the morning of the hearing. And, presumably, the State will not be heard to

complain when the defendant refuses to cooperate in the presentence investigation, and,

2
Ironically, we recently condemned this sort of conduct in another civil case, Nikolaisen
v. Advance Transformer Co., 2007 MT 352, 340 Mont. 332, 174 P.3d 940, wherein we
stated:

The term “sandbagged,” in the present context derives from the
tactic of a poker player to trap another player by checking a strong hand to
induce a bet, and then raising once that bet is made. Webster’s Third New
International Dictionary, Unabridged 2009 (Philip Babcock Gove, ed.,
Merriam-Webster, Inc. 2002). In law it has come to mean, inter alia, the
practice of unfairly remaining silent concerning an important point in order
to lull another party to inaction. See U.S. v. Pielago, 135 F.3d 703, 709
(11th Cir. 1998); State v. Mendoza-Solario, 33 P.3d 411, 416 (Wash. App.
Div. 3 2001); DeShields v. State, 534 A.2d 630, 645 (Del. 1987); Gilbert v.
K.T.I., Inc., 765 S.W.2d 289, 295 (Mo. App. W. Dist. 1988); Wiard v.
Liberty Northwest Ins. Corp., 2003 MT 295, ¶ 50, 318 Mont. 132, ¶ 50, 79
P.3d 281, ¶ 50 (Nelson, J., concurring).

Nikolaisen, ¶ 27 n. 1 (Warner, J., specially concurring) (emphasis added).

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instead, shows up at the restitution hearing with a whole plethora of undisclosed

witnesses, experts, and expert-wannabes who offer speculative and undocumented, self-

serving testimony and hearsay.

¶60 I cannot condone this “trial by ambush” approach. It is unfair; it is antithetical to

the search for truth; it discourages cooperation between the parties and the investigating

probation officer; it obviates trust and reliance on mutual discovery; it rewards the party

who waits until the last minute to prepare his or her case; it encourages sharp practice; it

demeans the careful work of the investigating probation officer; it destroys the orderly

administration of justice; and, ultimately, it produces an inaccurate and unjust result

which is not based on the best evidence available.

¶61 McMaster is entitled to have his restitution obligation reduced to $12,914.46. I

dissent.

/S/ JAMES C. NELSON

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