State v. McMaster

• Decision Date: 04 August 2008
• Docket Number: No. DA 06-0780.,DA 06-0780.
• Parties: STATE of Montana, Plaintiff and Appellee, v. Jaymie Lawrence McMASTER, Defendant and Appellant.
• Court: Montana Supreme Court

190 P.3d 302

2008 MT 268

STATE of Montana, Plaintiff and Appellee, v. Jaymie Lawrence McMASTER, Defendant and Appellant.

No. DA 06-0780.

Supreme Court of Montana.

Submitted on Briefs June 20, 2008.

Decided August 4, 2008.

For Appellant: Wendy Holton, Attorney at Law, James B. Wheelis, Appellate Defender's Office, Helena, Montana.

For Appellee: Hon. Mike McGrath, Attorney General; John Paulson, Assistant Attorney General, Leo J. Gallagher, Lewis and Clark County Attorney, Helena, Montana.

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 it 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 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 his 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 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 his 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. 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. 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 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...