U.S. v. Bussell

• Decision Date: 27 September 2007
• Docket Number: No. 06-50088.,No. 06-50140.,06-50088.,06-50140.
• Citation: 504 F.3d 956
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Letantia BUSSELL, Defendant-Appellant. United States of America, Plaintiff-Appellee, v. Letantia Bussell, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

504 F.3d 956

UNITED STATES of America, Plaintiff-Appellee, v. Letantia BUSSELL, Defendant-Appellant.

United States of America, Plaintiff-Appellee, v. Letantia Bussell, Defendant-Appellant.

No. 06-50088.

No. 06-50140.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted February 6, 2007.

Filed September 27, 2007.

Dan Marmalesfsky, Morrison & Foerster LLP, Los Angeles, CA, argued the cause, for the defendant-appellant, and filed briefs; Heather Pearson, Morrison & Foerster LLP, Los Angeles, CA, was on the briefs.

Paul Stern, Assistant U.S. Attorney, Major Frauds Section, Los Angeles, CA, argued the cause, for the plaintiff-appellant, and filed a brief; Debra Wong Yang, U.S. Attorney, Thomas P. O'Brien, Assistant U.S. Attorney, Chief, Criminal Division, and Ranee A. Katzenstein, Assistant U.S. Attorney, Major Frauds Section, were on the brief.

Appeal from the United States District Court for the Central District of California; Alicemarie H. Stotler, District Judge, Presiding. D.C. Nos. CR-01-00056-AHS-02, CR-01-00056-AHS-01.

Before: DIARMUID F. O'SCANNLAIN, EDWARD LEAVY, and CONSUELO M. CALLAHAN, Circuit Judges.

O'SCANNLAIN, Circuit Judge:

We are asked to decide whether the district court properly determined the amount of intended loss for purposes of sentencing, and the amount of actual loss for purposes of restitution, resulting from convictions for bankruptcy fraud.

I

Letantia Bussell ("Letantia") is a practicing dermatologist.¹ Her late husband, John Bussell, was a practicing cardiac anaesthesiologist until 1992. In 1992, the Bussells were experiencing significant financial difficulties. They owed the Internal Revenue Service ("IRS") and the California State Franchise Tax Board approximately $1.2 million in taxes, interests, and penalties assessed for tax years 1983, 1984, 1986, and 1987. They also owed the Bank of Beverly Hills $787,500.00.

Upon the advice of their former lawyers, the Bussells organized the dermatology practice into a three-tiered structure in 1992. The new arrangement separated the business and medical aspects of Bussells's practice: BBL Medical Management, Inc. ("BBL") received the practice's gross receipts, paid the expenses and overhead, and retained the profits; Beverly Hills Dermatology Medical Corp. ("Beverly Hills Medical") received 10% to 20% of BBL's profits and employed Letantia through her professional corporation, L.B. Bussell, MD, Inc. ("L.B. Bussell, Inc."), for an artificially reduced salary. BBL and Beverly Hills Medical were held in the names of nominee owners; Letantia was the sole shareholder and officer of public record of L.B. Bussell, Inc. The Bussells further enlisted the help of their former lawyers in 1993 to set up various corporations to conceal ownership of a four-unit condominium in the Stein-Ericksen Lodge in Park City, Utah (the "Utah condominium"), a San Diego farm, and receipt of disability insurance income. The Bussells also opened an off-shore bank account to receive funds from John Bussell's pension plan.

On March 7, 1995, the Bussells, together with their former lawyers, filed a joint bankruptcy petition. The Bussells reported total assets of $1,783,026.30 and total debts of $4,677,194.22 on that petition. The amount of debt scheduled for discharge totaled $3,057,927.09, but the bankruptcy court only discharged debt of $2,293,527.09 because a liability of $764,000.00 to Provident was at issue in pending litigation.

Following the bankruptcy discharge, Letantia was charged in a 17-count indictment, along with two co-defendants, with conspiracy, concealment of assets in contemplation of bankruptcy, making false declarations, perjury, and attempted tax evasion. At trial, the Bussells argued that they had acted in good faith and relied on the advice of their lawyers. Bussell I, 414 F.3d at 1052. After jury deliberations had begun, John Bussell fell to his death from his hotel room. Id.

The jury ultimately convicted Letantia of the following counts charged in the indictment: conspiracy to conceal assets in contemplation of bankruptcy and to make false statements in the bankruptcy (count 1); concealing ownership in BBL, including BBL's bank account with a balance of $949,048.00 (count 2); concealing ownership in Beverly Hills Medical, including Beverly Hills Medical's bank account with a balance of $5,787.00 (count 3); making false statements in the bankruptcy petition (counts 5 and 6); and willfully attempting to evade a substantial portion of income tax owed for tax years 1983, 1984, 1986, and 1987 (count 12). The jury, however, acquitted Letantia of concealing ownership of the Utah condominium (count 4); making a false oath and account that she was not actively involved with any corporations other than L.B. Bussell, Inc. except on a passive investment basis (count 11); and willfully attempting to evade a substantial portion of income tax owed for 1996 (count 17).

Their former lawyers, Sherman and Beaudry, entered into plea agreements with the government, under which Sherman pleaded guilty to conspiracy and to attempted tax evasion, and Beaudry pleaded guilty to aiding and abetting attempted tax evasion and the filing of false tax returns. Id.

Applying the then-mandatory Sentencing Guidelines, the district court sentenced Letantia to a mid-range sentence of 36 months imprisonment. In determining her offense level for purposes of calculating an appropriate Guidelines range, the district court increased the base offense level by 13 levels, finding that the intended loss equaled $3,057,927.09, the amount of debt scheduled for discharge in bankruptcy. The district court also ordered Letantia to pay, in addition to a special assessment and a fine, restitution totaling $2,393,527.00, for which she was jointly and severally liable with attorneys Sherman and Beaudry, and prosecution costs totaling $62,614.37.

Letantia timely appealed her conviction, her sentence, and the district court's orders of restitution and costs. The government timely cross-appealed Letantia's sentence. In Bussell I, we affirmed Letantia's conviction, but ordered a limited remand pursuant to Ameline. Bussell I, 414 F.3d at 1060. We also vacated the district court's orders of restitution and prosecution costs, and remanded for reconsideration. Id.

On remand, the district court declined to reopen sentencing proceedings, concluding that Letantia's sentence would not have materially differed had the Guidelines been advisory at the time of the original sentencing. The district court also ordered restitution of $2,284,172.87, costs of prosecution of $55,626.09, and a criminal fine of $50,000.00.

Letantia timely appealed.

II

We first consider Letantia's various challenges to her sentence.²

A

The Sentencing Guidelines assign a base offense level of six, see U.S.S.G. § 2F1.1(a) (1994),³ and then increase levels according to the amount of loss resulting from the fraud, see U.S.S.G. § 2F1.1(b)(1).⁴ The accompanying application notes define "loss" as "the value of the money, property, or services unlawfully taken." U.S.S.G. § 2F1.1 cmt. n. 7. The application notes further provide 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." U.S.S.G. § 2F1.1 cmt. n. 7. In some cases, "additional factors are to be considered in determining the loss or intended loss." U.S.S.G. § 2F1.1 cmt. n. 7 The commentary also explains that "the loss need not be determined with precision. The court need only make a reasonable estimate of the loss, given the available information." U.S.S.G. § 2F1.1 cmt. n. 8 (emphasis added).

The thrust of Letantia's argument is that intended loss should be categorically limited to the value of the concealed assets or the value of her liabilities, whichever is less. She contends that the district court erred by determining her intended loss based on the amount of debt discharged in bankruptcy, $3,057,927.09, rather than by the allegedly much lower net value of the concealed assets, $85,000.00.⁵

This argument appears at first glance to find support in Eighth Circuit precedents. In United States v. Dolan, 120 F.3d 856 (8th Cir.1997), the defendant committed bankruptcy fraud by concealing assets well in excess of the debt to be discharged. Id. at 862, 870-71. Under those circumstances, the Eighth Circuit concluded that the intended loss should be calculated "by using either the value of the assets concealed or the value of the debtor's liabilities, whichever is less." Id. at 870. In contrast to the facts in Dolan, in United States v. Wheeldon, 313 F.3d 1070 (8th Cir.2002), the defendant filed for bankruptcy, concealing assets worth much less than the debt scheduled to be discharged. Id. at 1072. The Eighth Circuit stated in Wheeldon that "[i]t belies reality to argue that [the defendant], or a debtor similarly situated, intended to defraud his creditors of everything he owed them solely because he failed to disclose all of his (rather modest) assets." Id. at 1073. Accordingly, the Eighth Circuit held that intended loss must be limited to the value of the concealed assets that the defendant's creditors would have known about if the bankruptcy petition had been truthful. Id.

Letantia relies on these Eighth Circuit decisions to argue that we should fashion a categorical rule for purposes of sentencing in bankruptcy fraud cases. We decline such invitation. First, in United States v. Holthaus, 486 F.3d 451 (8th Cir.2007), an opinion filed after oral argument in this case, the Eighth Circuit rejected a similar mischaracterization of Dolan and Wheeldon. Id. at 455. There, the Eighth Circuit expressly held: "There is no blanket rule defining intended loss as the lesser of the value of assets concealed or the value of the debtor's liabilities. Indeed, some factual scenarios may require an intended loss calculation based on the greater of the value of the assets...