U.S. v. Brown, 93-4061

• Decision Date: 07 February 1995
• Docket Number: No. 93-4061,93-4061
• Citation: 47 F.3d 198
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Steven E. BROWN and Gary L. Knox, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 198

47 F.3d 198

UNITED STATES of America, Plaintiff-Appellee, v. Steven E. BROWN and Gary L. Knox, Defendants-Appellants.

No. 93-4061.

United States Court of Appeals Seventh Circuit.

Argued Sept. 8, 1994.

Decided Feb. 7, 1995.

Lawrence Beaumont (argued), Office of the U.S. Atty., Urbana Div., Urbana, IL, for plaintiff-appellee.

John H. Long, and W. Scott Hanken (argued), Long, Morris, Myers & Rabin, Springfield, IL, for defendants-appellants.

Before COFFEY, ROVNER and FOREMAN, ^* Circuit Judges.

COFFEY, Circuit Judge.

Steven E. Brown and Gary L. Knox pleaded guilty to one count of bank fraud, in violation of 18 U.S.C. Sec. 1344, and one count of mail fraud, in violation of 18 U.S.C. Sec. 1341. The defendants challenge their adjusted offense level calculated by the district court. The defendants also challenge the district court's enhancements of their sentences pursuant to the Sentencing Guidelines. We affirm in part and vacate and remand in part.

I. FACTS

Steven E. Brown and Gary L. Knox engaged in two fraudulent schemes. Between the months of August and October of 1990, the defendants committed bank fraud in the course of obtaining a Small Business Administration (SBA) guaranteed loan. With the intent of purchasing the Normandy Club in Pekin, Illinois, the defendants applied for a $390,000 SBA guaranteed loan at the First State Bank of Pekin. They falsely represented to the bank that they possessed the necessary $100,000 capital injection. In reality, the defendants had made a fraudulent and illegal arrangement with the seller of the Normandy Club whereby the seller agreed to kick back $130,000 of the sale proceeds and the defendants, in turn, would use the kickback funds to cover the $90,000 NSF check they had written as evidence of their capital injection.

Some years earlier, between November 1, 1986 and September 1, 1988, the defendants solicited investors in real estate properties located in Decatur, Illinois. The defendants sold shares in three properties in which, unbeknownst to the investors, they had no interest. The defendants would pay previous investors with new investor capital. This "Ponzi" ¹ scheme resulted in a loss of approximately $1.9 million to investors. In the course of this scheme, the defendants mailed and caused to be delivered by the U.S. Postal Service checks to Larry Jackson, one of the investors.

Pursuant to the plea agreement entered into between the defendants and the government, the defendants agreed to plead guilty to count one, charging them with bank fraud, and count eight, charging them with mail fraud for the mailing to Larry Jackson, in exchange for the dismissal of the remaining counts. See 18 U.S.C. Sec. 1341; 18 U.S.C. Sec. 1344. The dismissed counts related to both fraudulent schemes. ² After a sentencing hearing, the district court determined that the base offense level for both defendants was six. Based on the amount of loss involved in the mail fraud, the offense level was increased by 12. The court then enhanced the defendants' sentences by two points for each of the following: more than minimal planning; violation of a private trust; and obstruction of justice. The court declined to reduce the offense level for acceptance of responsibility. With an offense level of 24, the court sentenced each of the defendants to 63 months of imprisonment on count one and a concurrent term of 60 months on count eight. The defendants were also ordered to pay $1.9 million in restitution.

II. DISCUSSION

The defendants' claims on appeal relate to the plea agreement entered into with the government and the district court's enhancements of their sentences. We review the district court's interpretation of plea agreements for clear error. United States v. Yanez, 985 F.2d 371, 376 (7th Cir.1993); United States v. Fields, 766 F.2d 1161 (7th Cir.1985). Similarly, in reviewing a district court's application of the Guidelines, we review for clear error. 18 U.S.C. Sec. 3742(e); see, e.g., United States v. Osmani, 20 F.3d 266, 269 (7th Cir.1994); United States v. Robinson, 14 F.3d 1200, 1203 (7th Cir.1994); United States v. Ojo, 916 F.2d 388, 391 (7th Cir.1990). We will affirm the decision of the district court unless we are left with the definite and firm conviction that a mistake has been committed. See Ojo, 916 F.2d at 391. As for the defendants' objections to the district court's restitution order, we review for an abuse of discretion. United States v. White, 993 F.2d 147, 151 (7th Cir.1993).

A. Plea Agreement

The defendants claim that pursuant to the plea agreement they were guaranteed an adjusted offense level of no more than 22. They argue that this agreement was breached when the district court calculated an adjusted offense level of 24. We disagree. First, the plea agreement itself does not specify that the government would recommend any particular offense level. In relevant part, the agreement states:

2. The defendant understands and agrees that the plea in this matter is a completely open plea, and that at the time of sentencing the government will be free to present any relevant evidence in aggravation and to make any recommendation that it deems appropriate.

. . . . .

4. The defendant understands and agrees that no recommendation made by the government or by the defendant will be binding upon the court. The court will be free to impose any sentence, from the statutory minimum to the statutory maximum inclusive, which it deems appropriate.

5. The sentence in this case is subject to the Sentencing Guidelines promulgated by the Sentencing Commission.

Plea Agreement at 1 (emphasis added). Further, at their plea hearing, the district court asked the defendants: "you understand this is an open plea ... there is no recommendation by the government about a sentence?" Both defendants answered yes. While the government advised the court that it believed the worst case scenario for each defendant would be level 22, the court ultimately advised the defendants that "I have no idea what the sentence will be but I want to be sure that your eyes are open and that you appreciate what may come to pass." ³ See United States v. Garcia, 35 F.3d 1125, 1133 (7th Cir.1994) (as required by Fed.R.Crim.P. 11(c), the district court clearly instructed the defendants that the final decision as to their sentences would rest with the court); cf. United States v. Knorr, 942 F.2d 1217, 1220 (7th Cir.1991) (erroneous estimates of how calculations under the Sentencing Guidelines will turn out do not justify withdrawal of plea). Based on the plea agreement and the court's thorough colloquy with the defendants pursuant to Federal Rule of Criminal Procedure 11, along with the fact that no recommendation had been made as to their sentences, we conclude the government did not breach the agreement; thus the district court was not required to sentence defendants at offense level 22. ⁴

B. Amount of Loss

The defendants argue that the district court erred in grouping counts one and eight for sentencing purposes as well as including the acts (dismissed counts) that were not relevant to the offenses of conviction when calculating the total amount of loss attributable to their bank and mail frauds. The defendants assert that because the criminal activity charged in the two counts took place on different dates, the district court erred in grouping them for sentencing purposes. We disagree.

Section 3D1.2 of the Sentencing Guidelines provides that "[a]ll counts involving substantially the same harm shall be grouped together into a single Group." U.S.S.G. Sec. 3D1.2. The court must group all counts that "involve the same victim and two or more acts or transactions connected by a common criminal objective or constituting part of a common scheme or plan." U.S.S.G. Sec. 3D1.2(b). Further, multiple fraud convictions are grouped together under Sec. 3D1.2(d). United States v. Sykes, 7 F.3d 1331, 1336 (7th Cir.1993). Count one and count eight constitute multiple fraud convictions. Thus the district court did not clearly commit error in grouping the counts. See United States v. White, 888 F.2d 490 (7th Cir.1989).

Defendants also claim that they should not be responsible for losses connected to the dismissed counts of the indictment. The government asserts that the district court did not calculate the amount of loss based on the dismissed counts but rather on the fraudulent scheme charged in count eight of the indictment. We agree. The defendants are certainly liable for losses incurred in the entire fraudulent scheme, not just the losses of Larry Jackson. The indictment alleges that the mailing to Larry Jackson was for the purposes of executing the scheme, a scheme that was charged in the indictment and admitted to in the plea agreement. The district court's finding that the losses resulting from the entire scheme should be used for calculating the amount of loss was not erroneous. ⁵

Finally, the defendants suggest that there was no evidence to support the court's findings as to the amount of loss. As the evidence before the court reflected, the presentence report gave detailed accounts of the losses suffered by the victims, as did the indictment. The defendants do not challenge the accounts factually, but merely assert their inadequacy. We hold that the losses were sufficiently detailed and agree with the district court that the defendants' objections to the loss calculations are without merit.

C. Acceptance of Responsibility

The district court concluded that the defendants did not qualify for a two-level reduction in offense level for acceptance of responsibility under Sec. 3E1.1. As the Commentary to Sec. 3E1.1 explains, the district judge should consider whether the defendant has "truthfully admitt[ed] the conduct comprising the offense(s) of conviction, and truthfully admitt[ed] or not falsely den[ied] any additional relevant conduct for which the defendant is accountable under Sec. 1B1.3 (Relevant...