U.S. v. McClellan

• Decision Date: 22 March 1989
• Docket Number: No. 88-1838,88-1838
• Citation: 868 F.2d 210
• Parties: 27 Fed. R. Evid. Serv. 623 UNITED STATES of America, Plaintiff-Appellee, v. Monty Phillip McCLELLAN, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 210

868 F.2d 210

27 Fed. R. Evid. Serv. 623

UNITED STATES of America, Plaintiff-Appellee, v. Monty Phillip McCLELLAN, Defendant-Appellant.

No. 88-1838.

United States Court of Appeals, Seventh Circuit.

Argued Oct. 31, 1988.

Decided Jan. 27, 1989.

Rehearing Denied March 22, 1989.

Richard H. Parsons, Peoria, Ill., for defendant-appellant.

L. Lee Smith, Asst. U.S. Atty., Peoria, Ill., for plaintiff-appellee.

Before CUMMINGS and CUDAHY, Circuit Judges, and PELL, Senior Circuit Judge.

PELL, Senior Circuit Judge.

Monty P. McClellan appeals his convictions of two counts of bankruptcy fraud, one count of mail fraud, and two counts of making false statements to a federally insured bank, in violation of 18 U.S.C. Secs. 152, 1341, and 1014, respectively. ¹ He is currently incarcerated, serving a total sentence of eight years.

I.

McClellan is a physician who formerly practiced in Aledo, Illinois. In 1982, he owed about $200,000 to the National Bank of Aledo, debt he had accumulated through a series of bad investments during the 1970's. In 1983, in order to continue his credit and secure additional loans, McClellan submitted financial statements to the Bank of Aledo and to the National Bank of Monmouth, valuing his assets at over $6.5 million and asserting a net worth of nearly $6 million. The listing of assets included close to $2 million in "gold monitor certificates" that were actually worthless. ²

The next year, the owners of an Iowa motel sued McClellan for breaching a contract to buy the motel. While the jury was deliberating in that case, McClellan and his wife arranged a ski vacation in Europe for January 1984, billing the airfare to their American Express account. On December 13, 1983, the last day of deliberations, McClellan executed an agreement with his father. In exchange for various household goods and two cars, a 1980 Porsche and a 1981 DeLorean, McClellan's father would pay him $30,000. His father transferred the money to McClellan by wire on December 13. Both signatures on the sale document were dated that same day, although the two men lived in different states. The next day, the Iowa jury returned a verdict against McClellan in the amount of $1 million. Soon after, the McClellans departed on their European vacation, charging their expenses to American Express.

A few days after returning from Europe, McClellan filed a Chapter 11 petition. Ten months later, no plan of reorganization had been filed, and the petition was converted to Chapter 7. McClellan's creditors filed an adversary suit against him and succeeded in having his debts declared nondischargeable on the basis of fraud. McClellan then moved to Utah, where he purchased a home in his mother-in-law's name (pursuant to a power of attorney) and began practicing medicine in a newly established clinic owned by his father.

McClellan was indicted on May 6, 1987. Counts I and II charged him with fraudulently transferring the Porsche and the DeLorean, respectively, in contemplation of bankruptcy. He was also charged with use of the mails to defraud American Express and two counts of submitting false statements to federally insured banks.

Among other evidence at McClellan's trial, the prosecution introduced prior testimony of the defendant's first wife, from whom he had been divorced since 1977. It also offered documents and transcripts from McClellan's adversary proceeding in bankruptcy.

McClellan was sentenced to five years on one count of bankruptcy fraud, three years on the other, and five years probation to begin upon his release from prison. Sentence was suspended on the other convictions. He was also ordered to pay $658,775.93 in restitution as a condition of his probation, pursuant to 18 U.S.C. Sec. 3579.

II.

McClellan first argues that the district court ordered an unreasonable amount of restitution and in so doing failed to consider the mandatory factors set forth at 18 U.S.C. Sec. 3580(a), in particular his capacity to pay. The sentencing judge specifically stated that he had considered all of the factors under 18 U.S.C. Sec. 3580(a), listing "the amount of the loss sustained by the victims, the financial resources of the defendant, the financial needs and earning ability of the defendant, the defendant's dependents, such other factors as the court deems appropriate." Despite this statement, McClellan asserts that the court merely gave "lip service," not serious consideration, to the mandatory factors.

A court generally need not state explicitly that it is relying upon a mandatory sentencing consideration. United States v. Gomer, 764 F.2d 1221, 1223 (7th Cir.1985). ³ An order of restitution will be reversed on appeal if it is "not improbable" that the court failed to consider a mandatory factor. Id. at 1123; see, e.g., United States v. Mahoney, 859 F.2d 47 (7th Cir.1988). The sentencing court commits no error if: 1) the issue is not properly before the court (i.e., the defendant has not adequately raised it); 2) the judge implicitly considers the mandatory factor; or 3) the restitution represents the actual proceeds of the crime. Gomer, 764 F.2d at 1122. McClellan claims that, despite the court's specific statement to the contrary, it failed to take into account his limited income of $200 per week. In fact, the district court specifically mentioned this factor in determining that McClellan had deliberately structured his finances to avoid creditors. The judge found that McClellan had consistently attempted to avoid his financial obligations, including those to his own family. The court also noted that McClellan stood to collect, in six or seven years, a share of a substantial trust. Noting that despite his current low income, McClellan retained "tremendous earning potential," the court ordered restitution in the amount of the victims' loss. We have approved an order of restitution that exceeded the defendants' current ability to pay and took into account potential increases in income. United States v. Fountain, 768 F.2d 790, 802-03 (7th Cir.1985), cert. denied, 475 U.S. 1124, 106 S.Ct. 1647, 90 L.Ed.2d 191 (1986) (approving order of restitution despite likelihood that defendants would remain imprisoned as long as they lived; possibility that they would profit from a book about their crime justified restitution order).

McClellan cites Mahoney, in which this court reversed an order of restitution that clearly exceeded the defendant's foreseeable ability to pay. The circumstances in Mahoney, we held, left "little doubt" that the judge "simply forgot or disregarded" the defendant's limited income and the special needs of his dependents, particularly his disabled wife. In McClellan's case, the sentencing judge clearly articulated reasons for the order of full restitution, specifically that McClellan chose to maintain a low income while his father's corporation paid all of his living expenses, that the arrangement was intended to shield him from creditors, and that he likely would continue his repeated manipulations to that end. The court ordered that McClellan begin paying restitution at $100 a month, with the payments to be increased should his income increase. There is no indication that the court overlooked any mandatory consideration; rather, the court discussed his ability to pay in some detail. McClellan's argument addresses the weight given various evidentiary factors in determining his ability to pay, not the court's supposed failure to consider this matter. McClellan has demonstrated no abuse of discretion. See Fountain, 768 F.2d at 802 ("[T]he statute does not say that indigency is a defense, only that it is a factor the judge is required to take into account ...").

McClellan next challenges the imposition of concurrent sentences on the two counts of bankruptcy fraud arising from the transfer of the Porsche and the DeLorean. Because he transferred both cars in a single transaction, McClellan argues that he should have been subject to punishment for only one count of bankruptcy fraud. See Price v. Georgia, 398 U.S. 323, 326, 90 S.Ct. 1757, 1759, 26 L.Ed.2d 300 (1970) (double jeopardy clause prohibits multiple punishments for same offense).

Multiple violations of Sec. 152 occur, and multiple indictments lie, when each fraudulent transfer is a "separate act, taken at a discrete time, with the requisite intent." United States v. Melton, 763 F.2d 401, 402 (11th Cir.1985) (quoting United States v. Moss, 562 F.2d 155, 160 (2nd Cir.1977), cert. denied, 435 U.S. 914, 98 S.Ct. 1467, 55 L.Ed.2d 505 (1978)); see also United States v. Harris, 388 F.2d 373 (7th Cir.1967). In contrast,

when the impulse is single, but one indictment lies, no matter how long the action may continue. If successive impulses are separately given, even though all unite in swelling a common stream of action, separate indictments lie.

Blockburger v. United States, 284 U.S. 299, 302, 52 S.Ct. 180, 181, 76 L.Ed. 306 (1932). McClellan executed a single transaction. Although two items were involved, he did not make two separate sales or form the requisite intent on two occasions. The question is not how many items McClellan sold, but how many discrete actions he took. See Moss, 562 F.2d at 160.

The Government, defending the separate punishments, relies upon the fact that the titles to the two cars were transferred a month apart, one in April and one in June of 1984. The date that title was formally transferred, however, is not the operative time with respect to McClellan's intent. The record indicates that the reason for the discrepancy was a delay in processing the two title applications, which the senior McClellan submitted on the same date. More importantly, his father's actions in applying for title to the vehicles have no bearing on the fact that McClellan made only one sale. McClellan acted only once and should have been punished for a single count of bankruptcy fraud. ⁴ In essence, then, our conclusion is that the automobiles transaction should...