U.S. v. Feldman, 02-3547.

• Decision Date: 30 July 2003
• Docket Number: No. 02-3547.,02-3547.
• Parties: UNITED STATES of America v. Howard Allen FELDMAN, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

338 F.3d 212

UNITED STATES of America v. Howard Allen FELDMAN, Appellant.

No. 02-3547.

United States Court of Appeals, Third Circuit.

Argued: May 20, 2003.

Filed July 30, 2003.

COPYRIGHT MATERIAL OMITTED

Kirk T. Karaszkiewicz (Argued), Philadelphia, for Appellant.

Partrick L. Meehan, United States Attorney, Laurie Magid, Deputy United States Attorney for Policy and Appeals, Robert A. Zauzmer, Assistant United States Attorney Senior Appellate Counsel, Amy L. Kurland (Argued), Assistant United States Attorney, Philadelphia, for Appellees.

Before: SCIRICA, Chief Judge, NYGAARD and BECKER, Circuit Judges.

OPINION OF THE COURT

BECKER, Circuit Judge.

This appeal by Howard Allen Feldman turns on the meaning of "loss" under the United States Sentencing Guidelines and the Victim Witness Protection Act (as amended by the Mandatory Victims Restitution Act). Feldman filed a bankruptcy petition in which he vastly understated the amount of property he owned. Indicted for concealing assets and making false declarations in bankruptcy, he pled guilty and was sentenced to fifteen months imprisonment and ordered to pay restitution to his creditors. Feldman contests the District Court's determination of the amount of loss, which affected both the prison sentence he received (under the Sentencing Guidelines a defendant's base offense level will be increased incrementally for the loss cause by his crime) and the amount of restitution he was ordered to pay to his creditors.

Feldman contends that there was little if any actual loss that resulted from his crime and that the District Court erred in its calculation that his creditors lost over $138,000, and were entitled to restitution in that amount. He submits that most of the property he failed to report was held by him and his wife as tenants by the entireties under Pennsylvania law, making the property unavailable for execution by his creditors to satisfy the debt owed by Feldman alone. See 18 U.S.C. §§ 3663 and 3664 (stating that restitution is limited to the amount of loss actually caused by the defendant's crime). In other words, Feldman claims that although he committed a crime (he acknowledges that he was obligated to report the property), his crime had no effect on the amount of money his creditors ultimately received from the bankruptcy discharge.

The District Court did not determine whether or not the property owned by Feldman and his wife as tenants by the entireties would have been exempt from bankruptcy, reasoning instead that Feldman lost the right to claim the exemption when he failed to disclose the property. The Court then concluded that the actual loss to Feldman's creditors was the difference between what was owed to them and what they actually received in the bankruptcy discharge. The Court based this conclusion on case law suggesting that bankruptcy courts can refuse to allow an exemption for property that the debtor initially concealed.

Without getting into the merits of whether property exempt from bankruptcy because it is held as tenants by the entireties can ever be distributed to the creditors unique to one spouse, we conclude that the District Court's reasoning was flawed. In our view, the loss of an exemption during a bankruptcy proceeding does not impact upon the determination of actual loss (for restitution or sentencing purposes) since the bankruptcy court, unlike the District Court here, is not calculating the harm caused by the defendant's crime.

The determination of actual loss is relevant to the sentencing enhancement, since loss under the Sentencing Guidelines is the greater of the actual loss caused by the defendant's illegal actions or the amount of loss the defendant intended to cause. See U.S.S.G. § 2F1.1 application note 8 ("[I]f 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."); United States v. Yeaman, 194 F.3d 442, 456 (3d Cir.1999). Under our jurisprudence, even if the District Court erred in determining actual loss, we must still affirm the sentence if the District Court did not abuse its discretion in finding that Feldman intended to cause a loss (greater than the actual loss), even if it was impossible for that loss to have actually occurred.

Feldman claims that the government failed to show that he intended to cause a loss to his creditors; rather, he maintains that he thought the property he concealed was exempt from bankruptcy and he did not disclose it because he thought the large amount of property would "raise a red flag" and delay the bankruptcy proceeding. Feldman also submits that he never intended his creditors to receive less money by failing to disclose all of his property since by reason of the exemption they would not be able to reach the concealed assets. However, we do not believe that the government was obligated to disprove Feldman's claim that he thought the property was exempt. While the government must prove Feldman's intent by a preponderance of the evidence, we conclude that intent can be inferred from the fact that Feldman concealed a large amount of property. It is enough that the District Court found unbelievable Feldman's claim that he simply wanted to expedite the bankruptcy process. Thus, while the District Court may have erred in its discussion of actual loss, that error is irrelevant for sentencing purposes since the District Court did not abuse its discretion by determining that Feldman intended to cause a loss of the entire amount of debt owned. Accordingly, the increase in Feldman's base offense level, while not justified by a finding of actual loss, is justified by a finding of intended loss; hence we will affirm the sentence imposed.

In contrast, a restitution award can only be based upon actual loss. Since the District Court erred in its determination of actual loss, we will vacate the restitution award and remand for further proceedings, so that the District Court can compute actual loss based on the difference between what Feldman's creditors would have received if Feldman had acted lawfully and disclosed all of his assets and the amount they actually received.

I.

On September 22, 1997, Feldman filed a Chapter 7 personal bankruptcy petition, 11 U.S.C. § 101 et seq., in the United States Bankruptcy Court for the Eastern District of Pennsylvania, seeking relief from $205,253.30 in credit card debt he had incurred. Feldman listed his personal property as valued at $5,845 and his real estate holdings as valued at $325,000. On December 17, 1997, Feldman amended the original bankruptcy schedule, listing his personal property at $7,445. He testified at a meeting of creditors on January 5, 1998 that he had fully and accurately disclosed all real and personal property he owned.

A bankruptcy trustee was appointed who learned that Feldman had an ownership interest in a number of valuable pieces of art and other antiques that he had not listed on the bankruptcy schedule. These assets included "The Howard and Catherine Feldman Collection," a collection of Chinese treaty port paintings, American and English furniture, decorations, folk art, clocks, rugs and phrenological material, which eventually sold at a Sotheby's auction for $1,207,325 on October 9, 1998 (netting $910,870.25 after commission). Between September 22, 1996 and June 8, 1999, Feldman and his wife also sold numerous other items through the Sotheby's and Christie's auction houses for a total of $231,272.46. The proceeds from these sales were wired to the Feldmans' joint bank account.

The bankruptcy trustee also learned that Feldman owned two Jaguar automobiles in his own name that he had not declared on the bankruptcy schedules. Feldman produced a letter of sale, indicating that he had sold the vehicles to a man named Daniel Krause, yet Feldman retained possession of and title to the cars (Feldman claimed that he did so because Krause did not want his wife to find out that he had purchased them). Krause denied that he had purchased the vehicles. Feldman entered into an agreement with the Chapter 7 trustee to buy one of the cars for $5,000 and the other was sold at auction for $16,000 (when a bankruptcy petition is filed, all the property that belonged to the debtor automatically becomes the property of the bankruptcy estate pursuant to 11 U.S.C. §§ 541 and 1306).¹

On July 28, 1998 the Bankruptcy Court granted Feldman's motion to convert the case to Chapter 13. On August 11, 1998, Feldman amended the bankruptcy schedule to reflect the findings of the Chapter 7 bankruptcy trustee, disclosing personal property valued at $741,900, the bulk of which he claimed was exempt from his creditors because it was owned as tenants by the entireties with his wife. However, at a November 24, 1998 creditors' meeting, Feldman admitted that he had sold property at a Sotheby's auction for approximately $911,000. He also stated that although he had initially listed his home, which he owned with his wife, as valued at $325,000, the house had been listed for sale at $795,000 (but later reduced to $695,000). The house eventually sold for $550,000 on April 4, 2000 (using this figure, the government contended before the District Court that Feldman had undervalued his home by $225,000). Feldman nonetheless claimed that he was entitled to a discharge in bankruptcy because the personal property and real estate was also owned by his wife and was thus totally exempt from bankruptcy. Based on the undervaluation of his home and the continued concealment of assets, the bankruptcy trustee objected to the exemptions and to Feldman being discharged.

Upon motion by the bankruptcy trustee, the case was reconverted to a Chapter 7 proceeding. The bankruptcy trustee eventually entered into a settlement agreement with Feldman, whereby he would pay $50,000 to settle the objections to the claimed exemptions. It is not clear from the record why the bankruptcy trustee...