United States v. Bennett

UNITES STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT

No. 95-1051

UNITED STATES OF AMERICA,

Appellant,

v.

GEORGE S. BENNETT, JR.,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Edward F. Harrington, U.S. District Judge]

Selya, Cyr and Boudin,

Circuit Judges.

William P. Stimson, Assistant United States Attorney, with whom

Donald K. Stern, United States Attorney, was on brief for appellant.

Morris M. Goldings, with whom John F. Aylmer, Jr. and Mahoney,

Hawkes & Goldings were on brief for appellee.

July 31, 1995

CYR, Circuit Judge. Following our remand for resen-
CYR, Circuit Judge.

tencing in United States v. Bennett, 37 F.3d 687 (1st Cir. 1994)

("Bennett I"), which vacated a downward adjustment for acceptance

of responsibility, the district court determined that the defen-

dant's restitutionary effort an element in its initial down-

ward adjustment ruling nonetheless warranted a downward

departure from its recalculated guideline sentencing range

("GSR"). The government again appealed, and we now remand for

resentencing within the recalculated GSR.

I
I

BACKGROUND
BACKGROUND

We relate only the facts essential to an understanding

of the instant appeal. For further detail, the reader is invited

to see Bennett I, 37 F.3d at 689-92.

A. Factual Background and Initial Sentencing
A. Factual Background and Initial Sentencing

Appellee Bennett abused positions of trust with Daniel

Webster Mortgage Company, Inc. ("Daniel Webster"), by obtaining

more than ten fraudulent real estate loans based on Daniel

Webster's lines of credit with Plymouth Federal Savings Bank

("Plymouth Federal") and New Bedford Institution for Savings,

which Bennett applied toward the development of real properties

held in trust for the benefit of himself and his wife. The

fraudulent borrowing scheme involved aliases, false loan docu-

ments and concealment. Following its discovery by the Federal

Deposit Insurance Corporation during the spring of 1990, Daniel

2

Webster and Plymouth Federal sued Bennett. On February 1, 1991,

the parties entered into a settlement agreement, requiring

Bennett to turn over cash and other property, including certain

improved properties which remained in his possession.

In late 1991, Bennett was indicted on nine felony

counts for fraudulently obtaining $900,000 from a financial

institution, see 18 U.S.C. 20 (1988) (defining "financial

institution"), between August 1988 and October 1989. See 18

U.S.C. 1344. Following his trial and conviction on all charg-

es, the district court calculated the total loss occasioned by

Bennett at $900,000, see U.S.S.G. 2F1.1(b), rejecting the

government's contention that the total loss should include, as

relevant conduct, amounts fraudulently borrowed but not charged

in the indictment. The district court then deducted (1) the

$589,000 Bennett had repaid on the indictment loans prior to the

discovery of his crimes, and (2) the value to Daniel Webster

"at least $660,000" of the civil suit settlement agreement

entered into after Bennett's crimes had been discovered.

Having determined that no loss had been occasioned by

Bennett's fraud, the district court ruled that Bennett merited a

two-level downward adjustment, see U.S.S.G. 3E1.1, for accep-

tance of responsibility by agreeing to settle the indictment

loans in full. The resulting Total Offense Level ("TOL") of 8,1

1The TOL calculations at the first sentencing were as
follows:

2F1.1 (base offense level) 6
2F1.1(b)(1) (zero loss) 0

3

together with a Criminal History Category of I, produced a GSR of

from 2 to 8 months' imprisonment, 24 to 36 months' supervised

release, and a $5,000 to $50,000 fine. The district court

sentenced Bennett to 24 months' probation and six months' home

detention, special assessments totaling $450, and no fine.

B. Bennett I
B. Bennett I

On appeal in Bennett I we held that the district court

had erred in excluding from the total loss calculation under

U.S.S.G. 2F1.1(b)(1), as relevant conduct, the losses resulting

from fraudulent borrowings not charged in the indictment, Bennett

I, 37 F.3d at 694, and in crediting Bennett with "at least

$660,000" for the civil suit settlement entered into after his

crimes had been discovered. Id. at 695 ("'[T]he loss is the

amount of the loan not repaid at the time the offense is discov-

ered, reduced by the amount the lending institution has recovered

(or can expect to recover) from any assets pledged to secure the

loan.'") (citing U.S.S.G. 2F1.1, n. 7(b)).2 Finally, Bennett

2F1.1(b)(2) (more than minimal planning) 2
3B1.3 (abuse of position of trust) 2
3E1.1 (acceptance of responsibility) (2)

TOL 8

2Bennett I established the following formula for calculating

"actual loss" under U.S.S.G. 2F1.1 on remand:

1(a) the total dollar amount of the fraudulent loans
involved in the nine counts of conviction ($900,000);
and

(b) the total dollar amount of all loans coming within the
"relevant conduct" guideline calculation ($526,000);
less

4

I held that the two-level downward adjustment for acceptance of

responsibility was clear error, since Bennett had neither demon-

strated genuine contrition nor made voluntary restitution by

settling the civil suit, nor pled guilty to the charges in the

indictment, but instead denied the essential factual elements of

the charges throughout trial and at sentencing by maintaining

that he had never intended to defraud the banks. See id. at 696-

98. We therefore vacated the first sentence and remanded for

resentencing. Id. at 700.

C. Resentencing
C. Resentencing

On remand the district court recalculated the total

loss at $837,000, after including the losses occasioned by the

fraudulent borrowings for which Bennett was not indicted, result-

ing in a TOL of 18.3 Following Bennett's request for a downward

departure, see 18 U.S.C. 3553(b), the district court identified

2(a) the total dollar amount of all loans repaid by the

defendant prior to May 3, 1990 ($589,000), the date
Bennett's unlawful activities were discovered; and

(b) the total recoveries realized and reasonably to be
expected from all collateral pledged to secure the
fraudulent loans involved in all counts of conviction
and encompassed within the relevant conduct calcula-
tion.

See Bennett I, 37 F.3d at 695.

3The recalculated TOL is comprised as follows:

2F1.1(a) (base offense level) 6
2F1.1(b)(1) (total loss of $837,000) 8
2F1.1(b)(2) (more than minimal planning) 2
3B1.3 (abuse of position of trust) 2

TOL 18

5

two factors ostensibly warranting a departure from the GSR.

First, Bennett had already served a portion of the original

sentence, including the entire six months' home detention term.

Second, the civil suit settlement constituted "an extraordinary

act that seldom occurs in the criminal courts. . . ." According-

ly, the district court granted a six-month downward departure

from the recalculated 27-month GSR minimum, based on the six

months' home detention term already served, combined with a

further 15-month downward departure for the "extraordinary act"

of entering into the civil suit settlement agreement to repay

$694,000.4 The district court then imposed the minimum six-

month prison term now under challenge on appeal.

II
II

DISCUSSION
DISCUSSION

The United States contends that Bennett I foreclosed

both a downward adjustment and a downward departure for accep-

tance of responsibility based on the civil settlement and Ben-

nett's belated expression of contrition at sentencing. See

Bennett I, 37 F.3d at 696-98; see also U.S.S.G. 3E1.1 (permit-

4As the government has not appealed the six-month downward
departure, we do not address it. But cf. United States v.

Zackular, 945 F.2d 423, 425 (1st Cir. 1991) (rejecting home

confinement as "official detention" for purposes of 18 U.S.C.
3585 (Credit for Prior Custody): "While a defendant's movement
may be severely curtailed by . . . home confinement, . . .
confinement to the comfort of one's own home is not the function-
al equivalent of incarceration in either a practical or a psycho-
logical sense."); see also Reno v. Koray, 115 S. Ct. 2021 (1995)

(construing phrase "official detention," see 18 U.S.C. 3585(b),

in light of Bail Reform Act of 1984, related sentencing provi-
sions and Bureau of Prisons guidelines).

6

ting two-level downward adjustment for clear demonstration of

acceptance of responsibility).

A. Downward Departure
A. Downward Departure

A sentencing court may depart from the GSR "only in the

extraordinary case -- the case that falls outside the heartland

for the offense of conviction . . . ." United States v. Jackson,

30 F.3d 199, 201 (1st Cir. 1994); see also United States v.

Rivera, 994 F.2d 942, 947-49 (1st Cir. 1993). The departure

decision is subject to bifurcated review. United States v. Fahm,

13 F.3d 447, 450 (1st Cir. 1994). First, all "quintessentially

legal" rulings underlying the decision to depart (viz., whether

the guideline language encourages, permits or forbids departure

for the kinds of reasons relied upon by the sentencing court) are

reviewed de novo. Id. at 450 (quoting Rivera, 994 F.2d at 951).

Second, the "heartland" determination itself is reviewed with

"full awareness of, and respect for, the trier's superior 'feel'

for the case." Rivera, 994 F.2d at 952 (citation omitted); see

also Fahm, 13 F.3d at 450.

1. Extraordinary Act
1. Extraordinary Act

Following Bennett I, the district court found that the

$660,000 settlement agreement constituted "an extraordinary act

that seldom occurs in the criminal courts," for which Bennett

"should be rewarded . . . ." The district court carefully

avoided explicit reliance on "acceptance of responsibility,"

apparently in deference to Bennett I, 37 F.3d at 698 (stressing

that restitution must be "'genuinely voluntary, rather than

7

motivated primarily by a collateral consideration such as a

desire to settle the civil lawsuit'") (quoting United States v.

Miller, 991 F.2d 552, 553 (9th Cir. 1993)); cf. United States v.

Hendrickson, 22 F.3d 170, 176 (7th Cir.) (rejecting civil forfei-

ture, in light of its involuntary nature, as basis for finding of

"extraordinary acceptance of responsibility"), cert. denied, 115

S. Ct. 209 (1994). Bennett I also held, however, that the civil

suit settlement was not "genuinely voluntary," 37 F.3d at 698,

and that "'restitution is relevant to the extent it shows accep-

tance of responsibility.'" Id. (quoting Miller, 991 F.2d at 553)

(emphasis added). Consequently, whether or not the civil suit

settlement constituted an "extraordinary act," there has been no

showing that it formed a material basis for either a downward

adjustment or a downward departure, let alone for establishing

restitutionary conduct outside the "heartland." See Rivera, 994

F.2d at 947.

As the only ground for the challenged downward depar-

ture had been foreclosed by Bennett I, which plainly held that

the civil suit settlement was not genuinely "voluntary" within

the meaning of U.S.S.G. 3E1.1, see Bennett I, 37 F.3d at 698,

and could not form the basis for a downward adjustment for

acceptance of responsibility, it could afford no permissible

basis for the 15-month downward departure. See Miller, 991 F.2d

at 553 (sentencing court may depart downward on basis of restitu-

tionary conduct only if it evinces an acceptance of responsibili-

8

ty substantially greater than that required for a downward

adjustment under U.S.S.G. 3E1.1).

2. Overstated Loss and "Multiple Loss Causation"
2. Overstated Loss and "Multiple Loss Causation"

On appeal, Bennett broaches for the first time the

alternative arguments that the 15-month downward departure should

be upheld either because the $837,000 total loss recalculation

significantly overstates the seriousness of his conduct, see

U.S.S.G. 2F1.1, n. 7(b) (1994), or on the ground of multiple

loss causation. See, e.g., United States v. Rostoff, 53 F.3d

398, 405 (1st Cir. 1995) (acknowledging that a downward departure

may be warranted in the "few instances" where ". . . a misrepre-

sentation . . . is not the sole cause of the loss. . . .")

(citing U.S.S.G. 2F1.1, n.11 (1987)); see also United States v.

Gregorio, 956 F.2d 341, 345 (1st Cir. 1992).

Although Bennett contends that the total loss is

overstated as a consequence of an economic downturn in the

regional economy, insofar as the record on appeal permits assess-

ment it undermines Bennett's claim. The valuation of the proper-

ty Bennett agreed to surrender under the terms of the civil suit

settlement was disputed at the initial sentencing; viz., the

government contending for $431,024.16, Bennett $684,000. At that

time, Bennett maintained that a slumping economy had reduced the

value of the settlement after the banks took title to the im-

proved properties and other assets tendered by Bennett. The

district court accordingly rejected the lower valuation propound-

ed by the government, and found the settlement worth "at least

9

$660,000." Subsequently, at resentencing, it placed the value of

Bennett's "extraordinary act" at $694,000.

Thus, not only did Bennett not proffer record evidence

of a sudden, unforeseen downturn in the regional economy that

significantly lowered the value of the properties financed with

his illegal borrowings, but throughout both prior sentencing

proceedings he maintained that market factors had not affected

these properties. We therefore hold both that the "multiple loss

causation" claim has not been preserved, see United States v.

Dietz, 950 F.2d 50, 55 (1st Cir. 1991) ("[I]n connection with

sentencing as in other contexts . . . arguments not seasonably

addressed to the trial court may not be raised for the first time

in an appellate venue."), and that it is unsupported indeed

contradicted by the record.

III
III

CONCLUSION
CONCLUSION

As all available avenues for a downward departure have

been foreclosed, we vacate the second sentence imposed by the

district court and remand for resentencing within the guideline

sentencing range prescribed by the total offense level recalcu-

lated by the district court at the first resentencing.

SO ORDERED.
SO ORDERED.

10