United States v. Carpenter

• Decision Date: 23 November 2016
• Docket Number: No. 15-3563,15-3563
• Citation: 841 F.3d 1057
• Parties: United States of America, Plaintiff–Appellee v. Coleman Carpenter, Defendant–Appellant
• Court: U.S. Court of Appeals — Eighth Circuit

841 F.3d 1057

United States of America, Plaintiff–Appellee

v.Coleman Carpenter, Defendant–Appellant

No. 15-3563

United States Court of Appeals, Eighth Circuit.

Submitted: September 23, 2016

Filed: November 23, 2016

Thomas Christian Albus, Assistant U.S. Attorney, U.S. Attorney's Office, Saint Louis, MO, for Plaintiff–Appellee.

David Wayne Camp, Law Office of David W. Camp, Jacskson, TN, for Defendant–Appellant.

Coleman Carpenter, Pro Se.

Before WOLLMAN, BRIGHT, and KELLY, Circuit Judges.

BRIGHT

, Circuit Judge.

The government charged Coleman Carpenter with mail and wire fraud arising from a scheme in which he overpaid for commodities to the benefit of certain customers while managing a grain elevator for Bunge of North America (Bunge). After Carpenter pleaded guilty to one count of mail fraud, the district court sentenced him to twelve months and one day in prison. The district court also ordered him to pay $1,561,516.25 in restitution to Bunge, which included $87,536.65 in attorney's fees and expenses Bunge paid to an outside counsel during the investigation of Carpenter's fraudulent scheme and his prosecution.

Carpenter appeals arguing the district court erred in calculating the amount of restitution, and by including the attorney's fees from Bunge's outside counsel in the restitution award. We affirm the portion of the district court's restitution award which does not include attorney's fees ($1,473,980.00), but vacate the portion awarding attorney's fees and expenses ($87,536.65), and remand to the district court for further proceedings.

I

Bunge, a global agriculture commodities business, employed Carpenter as the manager of a grain elevator in Hickman, Kentucky. Bunge authorized Carpenter to purchase agricultural commodities, which included corn, wheat and soybeans, from producers and merchants “on the spot.” In addition, Carpenter could enter into futures contracts for commodities to be delivered at a later date.

Futures contracts had two components: the futures price and the basis. The first component—the futures price—was set by commodities markets. Bunge provided Carpenter access to the current futures prices electronically and through a commercial trading desk (hedge desk) located at its St. Louis, Missouri headquarters. Carpenter was authorized to establish the futures price component of the per bushel price for a particular futures contract based upon the current futures price as determined by the Chicago Board of Trade (CBOT).

The second component—the basis—was set by Bunge and depended on various market conditions, such as location of a point of purchase, operational needs of Bunge, and prices offered by a competitor.¹ Bunge gave Carpenter the authority to “push the basis” in order to respond to changing market conditions or the operational needs of Bunge, but limited this authority to $.08 per bushel at the most. So, for example, if the basis at a given time was $-.15, Carpenter had the authority to push it to $-.07.

Between 2009 and 2013, Carpenter frequently entered into futures contracts in excess of the combination of the CBOT current futures price and Bunge's basis, and his limited authority to “push the basis.” In fact, on some occasions Carpenter increased the price Bunge paid for commodities by $.30, $.40, or $.50 per bushel. For example, on August 1, 2013, Carpenter entered into a futures contract for 60,000 bushels of corn at $5.25 per bushel. Carpenter utilized a futures price of $5.63 per bushel with a basis of $-.38, despite the fact that the hedge desk provided him with a CBOT current futures price of only $4.9075, and the highest price paid on the CBOT that day for corn was $4.9975.

Thus, Carpenter inflated the futures price component of the contract by $.7225 per bushel based on the CBOT current futures prices, or by $.6325 per bushel based on the CBOT high price of the day. After adjusting for the basis, the amount Bunge lost on this single contract was $43,350, as measured by the difference between the $5.63 futures price utilized by Carpenter and the approved CBOT current futures price of $4.9075 (60,000 bushels x $.7225). Carpenter then misrepresented these unauthorized transactions in mailings to Bunge headquarters.

During the scheme, Carpenter received large payments of money from some of the grain elevator customers. For example, in consecutive years in March 2009 and 2010, Carpenter received $10,000 checks from Ronnie Bates Farms, one of the grain elevator's customers. Carpenter's bank account also showed large cash deposits made between 2009 and 2013 totaling over $38,000. Carpenter denies the cash deposits he made to his bank account during that time were related to the fraud scheme.

In 2013, Bunge discovered Carpenter's fraud during an internal audit. Bunge asked the Thompson Coburn law firm in St. Louis to assist in reviewing and assessing Carpenter's unauthorized transactions, while at the same time providing information to the government for potential criminal charges against Carpenter. Thompson Coburn assisted Bunge and the government in reviewing the transactions both before and after a federal grand jury returned an indictment against Carpenter on June 25, 2014. After being charged, Carpenter pleaded guilty to one count of mail fraud in violation of 18 U.S.C. § 1341

.

Prior to sentencing, a probation officer prepared a Presentence Investigation Report (PSR) which, in part, calculated the amount of loss that resulted from Carpenter's fraud pursuant to United States Sentencing Guidelines Manual (U.S.S.G.) § 2B1.1

. The PSR determined loss using a “one-day Chicago Board of Trade high price” as the number to be subtracted from the inflated price paid by Carpenter. For its part, the government recommended loss should be calculated by comparing a “two-day” CBOT high price to the price of Carpenter's unauthorized transactions, which was more conservative than the method recommended by the PSR and resulted in a lower loss amount. Using this two-day method of calculation, the government determined Bunge overpaid its customers approximately $937,000 as the result of Carpenter's unauthorized transactions. In Carpenter's plea agreement, he admitted his fraud scheme resulted in “approximately $937,000” in overpayments by Bunge to various customers.

At sentencing, the district court adopted the parties' agreement as to amount of loss to calculate Carpenter's advisory guidelines range, and then turned to the separate issue of determining the amount of loss for purposes of restitution. The district court agreed the precise amount of restitution was difficult to calculate because the market price at the exact time of day Carpenter entered into each of his fraudulent transactions was unknown. The district court ultimately adopted the PSR's one-day method to determine restitution, however, because Bunge's losses would be underestimated using either the one- or two-day method based on the CBOT high price of the day. Under the one-day method of calculation, the district court set the amount of Bunge's loss for restitution purposes at $1,473,980.00.

Bunge also sought restitution for the attorney's fees it paid to outside counsel prior to and during the government's investigation. Carpenter objected to the attorney's fees arguing, in part, that fees incurred after the government started its investigation were not “necessary.” See 18 U.S.C. § 3663A(b)(4)

(“The order of restitution shall require that such defendant—in any case, reimburse the victim for ... necessary ... expenses incurred during participation in the investigation or prosecution of the offense.”). The district court reviewed the billing statements provided by Bunge's counsel and then awarded 90% of the claimed fees, reflecting a 10% reduction for specific fees associated with a press release, reproduction charges, punitive damages issues, correspondence, and courier services, to which Carpenter had also objected. After the reduction, the fees and associated expenses totaled $87,536.65. Including the attorney's fees, the total restitution the district court awarded to Bunge was $1,561,516.25. Bunge filed this timely appeal challenging the amount of restitution.

II

We review the district court's decision to award restitution for abuse of discretion, but any fact findings as to the amount are reviewed for clear error. United States v. Chalupnik, 514 F.3d 748, 752 (8th Cir. 2008)

. “The government bears the burden of proving the amount of restitution based on a preponderance of the evidence.” United States v. Frazier, 651 F.3d 899, 903 (8th Cir. 2011).

A. The Overpayments

Carpenter contends the district court erred in awarding the initial $1,473,980.00 in restitution (the amount less the attorney's fees) for two reasons. First, Carpenter contends the amount of restitution is difficult, if not impossible, to determine and is not warranted. See 18 U.S.C. § 3663A(c)(3)(B)

(“This section shall not apply ... if the court finds ... that determining complex issues of fact related to the ... amount of the victim's losses would complicate or prolong the sentencing process to a degree that the need to provide restitution to any victim is outweighed by the burden on the sentencing process”). Second, Carpenter argues that Bunge did not sustain a loss because Bunge factored in his overpayments when it ultimately sold the commodities he purchased.

With...