US v. Baum, 91-60-N.

• Decision Date: 05 March 1992
• Docket Number: No. 91-60-N.,91-60-N.
• Citation: 785 F. Supp. 570
• Parties: UNITED STATES of America v. Kenneth L. BAUM, Defendant.
• Court: U.S. District Court — Eastern District of Virginia

785 F. Supp. 570

UNITED STATES of America v. Kenneth L. BAUM, Defendant.

No. 91-60-N.

United States District Court, E.D. Virginia, Norfolk Division.

March 5, 1992.

Paul G. Cassell, Asst. U.S. Atty., Norfolk, Va., for U.S.

Charles R. Burke, Virginia Beach, Va., for defendant.

OPINION AND ORDER

REBECCA BEACH SMITH, District Judge.

Defendant pled guilty to procuring $263,200 in home loans by fraudulent misrepresentations, in violation of 18 U.S.C. §§ 1343 and 2. On September 23, 1991, the court sentenced defendant to twelve months imprisonment and $4,050 in fines. Defendant filed notice to appeal his sentence on October 2, 1991, and on October 4, 1991, defendant moved to stay execution of his sentence of imprisonment and fines pending appeal. By order of October 23, 1991, the court denied defendant's motion.¹ See United States v. Baum, 777 F.Supp. 6 (E.D.Va.1991). This matter comes before the court on defendant's Motion for Reconsideration of Release Pending Appeal, filed February 21, 1992. For the reasons stated below, the court GRANTS defendant's renewed motion.

I. Standards of Review

Rule 9(b) of the Federal Rules of Appellate Procedure requires a defendant to apply to the district court for an initial determination of any motion for release after conviction and pending appeal. The rule provides further: "Thereafter, if an appeal is pending, a motion for release ... pending review may be made to the court of appeals or to a judge thereof." Fed. R.App.P. 9(b) (emphasis added). Defendant first moved for release on October 4, 1991, and this court denied that motion. Although Rule 9(b) permits defendant to seek review of his motion before the United States Court of Appeals for the Fourth Circuit, it does not require that he do so. In light of new and subsequent authority in support of his position on appeal, defendant chose instead to renew his motion before this court. Because this court now grants defendant's renewed motion for release, a ruling by this court on defendant's motion in no way prejudices him. Furthermore, an immediate decision better serves the interests of justice.

Title 18 U.S.C. § 3143(b) sets out the criteria for defendant's release pending appeal. With exceptions not relevant here,

the judicial officer shall order that a person who has been found guilty of an offense and sentenced to a term of imprisonment, and who has filed an appeal ..., be detained, unless the judicial officer finds —

(A) by clear and convincing evidence that the person is not likely to flee or pose a danger to the safety of any other person or the community if released under section 3142(b) or (c) of this title; and

(B) that the appeal is not for the purpose of delay and raises a substantial question of law or fact likely to result in —

(i) reversal,

(ii) an order for a new trial,

(iii) a sentence that does not include a term of imprisonment, or

(iv) a reduced sentence to a term of imprisonment less than the total of the time already served plus the expected duration of the appeal process.

18 U.S.C. § 3143(b) (Supp.1991). The burden to establish these criteria rests with defendant. Fed.R.App.P. 9(c).

II. Discussion

A. No Risk of Flight or Danger

The court continues to find that defendant has satisfied his burden under 18 U.S.C. § 3143(b)(1)(A). Defendant has promptly and properly appeared at all scheduled meetings of the court, at all appointments with Pretrial Services, Probation and Parole, and with his defense counsel. Defendant also surrendered himself for service of his sentence after remaining at liberty for a period of thirty days. See supra note 1. Defendant, therefore, has established by clear and convincing evidence that he will not flee or pose a danger to any other person or to the community.² Defendant also has now satisfied the court that this appeal is not for purpose of delay, and, for the reasons stated below, that this appeal raises a substantial question of law likely to result in a prison sentence reduced to a term that is less than the total of the time already served plus the expected duration of the appeal process.³

B. Appeal Raises Substantial Question of Law

Defendant has appealed this court's application of United States Sentencing Guideline § 2F1.1(b)(1), which contains a table that increases the offense level based on the amount of the "loss" resulting from offenses involving fraud or deceit. At the sentencing hearing, the court found as a fact that the amount of the loss was $263,- 200, the amount defendant fraudulently induced the banks to lend him. Thus, the court measured the loss by the value of the loans deceptively obtained. See Baum, 777 F.Supp. at 7. This decision was based on the weight of authority and on the relevant commentary to the sentencing guidelines at that time. See id. at 7-8.

Defendant continues to contend, however, that the banks' security interest in the houses should offset or reduce the loss to the banks, thus making the amount of loss $0⁴ and reducing his guideline range from 12-18 months to 0-6 months.⁵ Since October 23, 1991, the date on which the court denied defendant's first motion for release, the commentary for the sentencing guideline calculation of loss in cases of fraudulently obtained loans has completely changed, and the Fourth Circuit has adopted the changed definition of loss suggested by the amended commentary. These developments raise a substantial question of law that would have the potential of reducing defendant's sentence.

1. Amendments to Sentencing Guideline Commentary

The Sentencing Commission has made significant amendments to the commentary to U.S.S.G. § 2F1.1, effective November 1, 1991, since this court rendered its decision on defendant's first motion for release and well after defendant's sentencing date. Most importantly, the commentary now directly addresses fraudulent loan application cases. See U.S.S.G. § 2F1.1, Commentary, note 7(b) (Nov.1991). The Commission has revised note 7 to define specifically the loss in fraudulent loan application cases: "The loss is the actual loss to the victim (or if the loss has not yet come about, the expected loss)." The Commission elaborated this definition of loss with an example:

If a defendant fraudulently obtains a loan by misrepresenting the value of his assets, the loss is the amount of the loan not repaid at the time the offense is discovered, reduced by the amount the lending institution has recovered, or can expect to recover from any assets pledged to secure the loan.

Other amended notes in the commentary similarly reflect the Commission's intent with respect to the calculation of loss. For instance, note 8 of the 1990 commentary suggested that "the offender's gross gain from committing the fraud" was an acceptable estimate of the loss. U.S.S.G. § 2F1.1, Commentary, note 8 (Nov.1990) (emphasis added). Note 8 of the 1991 commentary now refers merely to the "offender's gain." In addition, note 10 previously left within the court's discretion the decision whether to depart downwardly in cases in which the total dollar loss overstated the seriousness of the offense. The 1990 version of note 10 cited as an example "understating debts to a limited degree in order to obtain a substantial loan which the defendant genuinely expected to repay." U.S.S.G. § 2F1.1, Commentary, note 10 (Nov.1990). In contrast, note 10 of the 1991 revised commentary makes no mention of such a situation warranting a downward departure.⁶

The court leaves unanswered the question whether the amendments to the commentary apply retroactively to defendant's sentence, insofar as the amendments reveal the Commission's intent in the earlier version.⁷ Regardless of the retroactive application of these changes, the results recently reached in this circuit and others, see infra at 7-8, now potentially undermine this court's calculation at defendant's sentencing and raise a substantial question of law that justifies release of defendant pending appeal.

2. Conflict Among the Circuits

When this court sentenced defendant and made its initial decision on defendant's motion for release pending appeal, the majority of the circuits that had considered the definition of loss in cases of fraudulently obtained loans had measured loss by the value of the loans deceptively obtained. See, e.g., United States v. Brach, 942 F.2d 141, 143 (2d Cir.1991) ("For sentencing purposes, it is enough to recognize that Brach put the victim at risk for the full amount of $250,000."); United States v. Johnson, 941 F.2d 1102, 1114 (10th Cir.1991) (victim's reacquisition of property through foreclosure does not diminish defendant's culpability and responsibility for the fraudulent scheme he masterminded); United States v. Cockerham, 919 F.2d 286, 289 (5th Cir.1990) ("loss includes the value of all property taken, even that recovered or returned"). But see United States v. Schneider, 930 F.2d 555, 559 (7th Cir.1991) (only case at time of defendant Baum's sentencing that suggested calculation of loss based on actual loss to victim, if defendant intended and was able to repay loan). However, since the time of defendant's sentencing and initial release motion, other circuits, including the Fourth Circuit, have adopted the same method of computing loss from fraud offenses as suggested in the changed commentary to U.S.S.G. § 2F1.1 discussed above. See United States v. Rothberg, 954 F.2d 217, 218 (4th Cir.1992) ("the amount recovered or reasonably anticipated to be recovered from collateral that secures a loan should be considered in calculating the amount of the actual loss."); United States v. Kopp, 951 F.2d 521, 536 (3d Cir.1991) ("fraud `loss' is ... the amount of money the victim has actually lost (estimated at the time of sentencing), not the potential loss as measured at the time of the crime"); United States v. Smith, 951 F.2d 1164, 1167 (10th Cir.1991) ("loss must reflect the value of the property securing the loans"). Thus, the...