U.S. v. Guthrie

• Decision Date: 19 June 1998
• Docket Number: No. 97-2019,97-2019
• Citation: 144 F.3d 1006
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Howard Paul GUTHRIE, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1006

144 F.3d 1006

UNITED STATES of America, Plaintiff-Appellee, v. Howard Paul GUTHRIE, Defendant-Appellant.

No. 97-2019.

United States Court of Appeals, Sixth Circuit.

Argued April 24, 1998.

Decided June 19, 1998.

Thomas J. Gezon (argued and briefed), Office of the U.S. Attorney for the Western District of Michigan, Grand Rapids, Michigan, for Appellee.

F. Randall Karfonta (argued and briefed), Leland, Michigan, for Appellant.

Before: BATCHELDER and COLE, Circuit Judges; McCALLA, District Judge. ^*

OPINION

COLE, Circuit Judge.

Defendant-Appellant Howard Paul Guthrie appeals the sentence imposed by the district court following his plea of guilty to a one-count superseding information charging him with concealment of assets in a bankruptcy proceeding in violation of 18 U.S.C. § 152(1). Specifically, Guthrie contests the district court's two-level enhancement to his sentence for violation of a judicial process under U.S.S.G. § 2F1.1(b)(3)(B); its determination of the amount of loss involved; and its denial of a reduction in sentence for acceptance of responsibility under U.S.S.G. § 3E1.1. Guthrie also argues that he did not receive advance notice of the district court's intent to apply U.S.S.G. § 2F1.1(b)(3)(B), or of the factors that the district court relied upon in determining the amount of loss. Finally, Guthrie alleges that he was denied effective assistance of counsel. The applicability of U.S.S.G. § 2F1.1(b)(3)(B) to the offense of bankruptcy fraud presents a question of first impression in this circuit. For the reasons that follow, we conclude that § 2F1.1(b)(3)(B) applies to the offense of bankruptcy fraud and AFFIRM the sentence imposed by the district court in all respects.

I. BACKGROUND

Since 1960, Guthrie has been involved in land development in Northern Michigan and has owned various real estate properties. In the late 1980s, Guthrie became involved in a gold mining venture in Alaska. In 1989, Guthrie was sued by his partners in the gold mining venture for recovery of a $30,000 bulldozer engine Guthrie allegedly stole from his partners. When Guthrie failed to appear for the court date in Alaska, the court issued a judgment against him in the amount of $330,000. ¹

In an attempt to put his Michigan real estate holdings out of the reach of the judgment entered against him, Guthrie and his wife transferred six real properties by quitclaim deeds to Guthrie's secretary, Robin Ambler Bates. ² Guthrie filed these deeds in Wexford County, Michigan. Thereafter, at Guthrie's instruction, Bates prepared six quitclaim deeds that transferred the properties back to Guthrie. Instead of registering these deeds, Guthrie simply kept them in his possession.

On November 25, 1991, Guthrie filed an individual bankruptcy petition under the provisions of Chapter 7 of the bankruptcy laws in the Bankruptcy Court for the Western District of Michigan. Guthrie provided written statements under oath that he did not own or have any interest in real property. In January 1992, the bankruptcy trustee, James W. Boyd, became aware of real estate owned by Guthrie. Guthrie then converted his Chapter 7 case to a case for reorganization under the provisions of Chapter 11, listing in the newly filed schedules ownership of his home but no other real estate. The bankruptcy court subsequently appointed Boyd as trustee for the Chapter 11 case, and Boyd continued to discover information that led him to believe that Guthrie was concealing assets from the bankruptcy court.

After Boyd notified authorities, the Federal Bureau of Investigation began investigating Guthrie. The FBI learned about the transfer of property from Guthrie and his wife to Bates, and Boyd filed an adversary proceeding against Guthrie and Bates to set aside and avoid as fraudulent the conveyance of the subject real properties. Bates agreed to convey the properties to Boyd in exchange for Boyd's dropping the suit against her. When Boyd attempted to file the deeds in Wexford County, he was informed that deeds had already been registered for those properties. Upon examination of the registered deeds, it was determined that Guthrie had used correction fluid to erase his name as the transferee, and had substituted the names of friends and relatives, unbeknownst to them. Boyd eventually received permission from the bankruptcy court to sell Guthrie's interest in the properties without warranties as to title. At auction, Guthrie's interest in the properties sold for a total of $143,520.70.

On March 4, 1997, an indictment was filed against Guthrie charging him with eight counts of concealment of assets in a bankruptcy proceeding, in violation of 18 U.S.C. § 152(1). Subsequently, pursuant to a written plea agreement, Guthrie entered a plea of guilty to a one-count superseding information ³ charging him with concealment of assets in a bankruptcy proceeding in violation of 18 U.S.C. § 152(1).

On September 10, 1997, the district court held a sentencing hearing. The district court determined that a two-level sentencing enhancement for violation of a judicial process was appropriate in this case pursuant to U.S.S.G. § 2F1.1(b)(3)(B), despite the fact that the probation officer had not recommended such an enhancement in the presentence investigation report. In finding § 2F1.1(b)(3)(B) applicable in this case, the district court noted the conflict in the federal appellate courts regarding whether bankruptcy proceedings were a judicial process within the meaning of § 2F1.1(b)(3)(B), and the fact that this circuit had not yet addressed the issue. The district court concluded that

[g]iven that the base offense level of 2F1.1 applies to such a broad range of crimes and given the structure of the guidelines, it stands to reason that where, as here, the defendant is much more culpable because he uses a judicial process to effectuate the harm, disregards the judicial mandate to truthfully reveal all of his assets, takes advantage of a judicial process that gives him some freedom in terms of his debt situation and lies to the Court, the crime of fraud should be enhanced.

With respect to the amount of loss resulting from Guthrie's fraud, the district court did not rely upon the probation officer's finding that the amount of loss was the value of Guthrie's interest in the property after it had been sold, or $143,520.70. The district court noted that this figure was the best estimate of Guthrie's intended loss to the creditors but concluded that a more accurate estimate was the actual loss to the creditors, or approximately $133,000.00. In arriving at this figure, the court considered as losses $64,518.00 in legal fees, $33,892.00 in back taxes and $35,000.00 in interest.

Finally, the district court accepted the recommendation of the probation officer that Guthrie did not accept responsibility for the offense and, therefore, did not warrant a two-level decrease in sentence under U.S.S.G. § 3E1.1. The district court then sentenced Guthrie to thirty months' incarceration, the low end of his guideline range. Guthrie filed a timely notice of appeal.

II. ANALYSIS

A. U.S.S.G. § 2F1.1(b)(3)(B)

We begin with the application of U.S.S.G. § 2F1.1(b)(3)(B) to the offense of bankruptcy fraud. We review a district court's legal conclusions in applying the Sentencing Guidelines de novo. See United States v. Moored, 38 F.3d 1419, 1423 (6th Cir.1994).

The Sentencing Guidelines' section addressing the offense of fraud, U.S.S.G. § 2F1.1(b)(3)(B), provides that "[i]f the offense involved ... violation of any judicial or administrative order, injunction, decree, or process not addressed elsewhere in the guidelines, increase by 2 levels." The district court determined that the § 2F1.1(b)(3)(B) sentencing enhancement applied in this case because bankruptcy proceedings are a "judicial process." The question presented, then, is whether the term "judicial process" as used in § 2F1.1(b)(3)(B) includes bankruptcy proceedings, an issue of first impression in this circuit.

The appellate courts that have addressed this issue have arrived at different conclusions, with most finding that bankruptcy proceedings are a judicial process as envisioned by § 2F1.1(b)(3)(B) and, thus, the enhancement applies to any scheme to defraud or violate the bankruptcy system. See United States v. Saacks, 131 F.3d 540, 545 (5th Cir.1997) (holding that § 2F1.1(b)(3)(B) enhancement warranted in cases of bankruptcy fraud because bankruptcy proceedings are a judicial order or process); United States v. Messner, 107 F.3d 1448, 1457 (10th Cir.1997) (holding that § 2F1.1(b)(3)(B) enhancement warranted in cases of bankruptcy fraud because bankruptcy proceedings are a judicial process); United States v. Welch, 103 F.3d 906, 908 (9th Cir.1996) (same); United States v. Michalek, 54 F.3d 325, 332-33 (7th Cir.1995) (same); United States v. Lloyd, 947 F.2d 339 (8th Cir.1991) (same). At least one circuit has held that it was unnecessary to decide what the Sentencing Commission meant by "judicial process," because concealment of assets is a violation of a "judicial order." See United States v. Bellew, 35 F.3d 518, 520 (11th Cir.1994). These decisions generally have reasoned that the Sentencing Guidelines' fraud provision is a very broad guideline encompassing a wide variety of offenses; because bankruptcy fraud involves a higher level of culpability due to its deception of the court, the offense warrants a greater punishment.

On the other hand, two circuits have declined to apply the § 2F1.1(b)(3)(B) sentencing enhancement in similar situations. See United States v. Shadduck, 112 F.3d 523, 529-30 (1st Cir.1997) (stating that there was no evidence that the defendant acted with aggravated criminal intent envisioned by the Sentencing Commission in § 2F1.1(b)(3)(B)); United States v. Carrozzella, 105 F.3d 796, 800 (2d Cir.1997) (stating that an enhancement was not warranted in the case of a defendant filing false accounts in probate court,...