U.S. v. Schneider

• Decision Date: 16 April 1991
• Docket Number: Nos. 90-2230,90-2256,s. 90-2230
• Citation: 930 F.2d 555
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Marlene Cox SCHNEIDER and Paul S. Schneider, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 555

930 F.2d 555

59 USLW 2693

UNITED STATES of America, Plaintiff-Appellee, v. Marlene Cox SCHNEIDER and Paul S. Schneider, Defendants-Appellants.

Nos. 90-2230, 90-2256.

United States Court of Appeals Seventh Circuit.

Argued March 1, 1991.

Decided April 16, 1991.

Gerald M. Burke, Office of U.S. Atty., East St. Louis, Ill., for plaintiff-appellee.

Renee E. Schooley, Federal Public Defender, Office of Federal Public Defender, St. Louis, Mo., for defendant-appellant Marlene Cox Schneider.

Bruce H. Bornstein, Freedman & Bornstein, Chicago, Ill., for defendant-appellant Paul S. Schneider.

Before POSNER, FLAUM, and MANION, Circuit Judges.

POSNER, Circuit Judge.

This pair of criminal appeals presents an important question concerning the meaning of "loss" in the Sentencing Guidelines. The Guidelines for property crimes such as larceny and fraud make the punishment vary with the loss to the victim of the crime. Secs. 2B1.1(b)(1) (larceny and closely related crimes such as embezzlement), 2F1.1(b)(1) (fraud). In the case of fraud, the loss need not be actual; it is enough if it is probable or intended. Application Note 7 to Sec. 2F1.1; United States v. Haddon, 927 F.2d 942, 951 (7th Cir.1991). In the case of attempted larceny, the Guidelines reach the same result by analogy to other attempts. Application Note 2 to Sec. 2B1.1. The dangerousness of an attempt--and hence the fitness and apt degree of punishment--is a function not only of the likelihood that it would have been completed but for interruption or mischance, but also of the gravity of the completed crime; so attempted murder is a more serious crime than attempted theft. Many fraudulent schemes are interrupted before they reach fruition. From a practical standpoint they are attempts, and their gravity depends in significant degree on the size of the loss that would have been inflicted had the scheme not been interrupted.

The defendants, a husband and wife, were sentenced to 30 and 15 months in prison, respectively, for conspiring to defraud, and defrauding, two federal agencies, in violation of various federal statutes. Mr. Schneider, an experienced building contractor, submitted a bid for $65,900 on a contract let by the General Services Administration for alterations in a federal building. In the papers accompanying the bid, he certified falsely that he had not been charged with a criminal offense within the past three years; in fact a charge of forgery was pending against him in an Illinois state court. He also submitted a fraudulent payment and performance bond. He was the low bidder and won the contract. But before performance began or any payment was made under the contract, the GSA canceled it on the ground of misrepresentation and awarded the job to another--and considerably higher--bidder.

Mrs. Schneider, who was associated with her husband in the building business, submitted to the Defense Department a bid for $76,500 (we are rounding off all dollar figures to the nearest $100), also for building alterations. The bid was accompanied by the same type of fraudulent payment and performance bond. The Department rejected the bid, being unsatisfied with the bond (though it didn't know at first that it was fraudulent), and later accepted a higher bid from another contractor.

Although the two different bids were submitted by two different Schneiders, they were acting in concert and each was convicted of both frauds. But they were treated differently in sentencing with respect to increase in offense level by reason of loss to the victim, that is, the government. In the case of Mr. Schneider, the district judge added together the amounts by which the prices at which the two contracts were ultimately let to other contractors exceeded the prices that the Schneiders had bid--a total of $82,700. In the case of Mrs. Schneider, the judge simply added together the Schneiders' two bids, producing a sum in excess of $100,000. As a result, Mrs. Schneider's offense level rose by six points because of victim loss, whereas her husband's rose by only five points because the method of computing victim loss in his case placed him in a lower bracket. The Guidelines' brackets for translating dollars of such loss into punishment "bonus" points have since been changed, so that the Schneiders might receive a greater or lesser punishment if they committed their crimes today, but the changes have no significance for our analysis.

The judge gave no reason for treating husband and wife differently and the government does not defend the difference in treatment. It could not do so. The difference is irrational. Not only is the loss that the Schneiders caused the government (or rather would have caused it, if his bid had not been cancelled and hers had been accepted) a joint one that cannot be apportioned; not only, if it could be apportioned, would there still be no basis for apportioning a larger share to Mrs. Schneider; but in addition the two methods of calculating loss make opposite assumptions about the significance of the size of the bid. For Mrs. Schneider, the higher the bid, the heavier the punishment, because for her the loss to the victim was equated to the amount of the bid. For Mr. Schneider, the higher the bid, the lighter the punishment, because the higher the Schneiders' bid the smaller the difference between their bid and that at which the contract was ultimately let; and it is this difference, the "excess procurement cost" as the government calls it, that is the measure of victim loss that the judge applied to Mr. Schneider.

Forced, as it believes itself to be, to choose between the two methods used by the district judge, the government says--naturally, for it is the position that yields the heavier punishment--that the proper method for calculating loss to the victim in a case such as this is the one that the judge used on Mrs. Schneider. And so the government proposes that "the calculation of appellant Paul Schneider's total offense level should be raised one level to account for the error committed by the district court." But since the government neglected to appeal, we cannot raise Schneider's sentence.

The government's failure to appeal is academic, since the method of calculating Mrs. Schneider's offense level was incorrect. The amount bid for a contract procured by fraud is not a reasonable estimate of the loss to the other party to the contract in a case such as this where the contract is terminated before that other party--the intended victim of the fraud--has paid a dime. There may be a loss. The victim may have incurred expenses in terminating the contract or in obtaining a substitute contract. One of the latter expenses might be a higher contract price, if the delay occasioned by the first termination forced the victim to recontract in a market that had moved against him. No evidence was presented of either type of expense with respect to either contract involved in this case; and the face amount of the contract would not be a reasonable estimate of either type of expense.

That is not the end of the analysis, however, because "loss" within the meaning of the Guidelines includes intended, probable, or otherwise expected loss, a qualification of vital importance in a case such as this where the fraud is discovered or otherwise interrupted before the victim has been...