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.
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