# United States v. William E. Miller, William L. Phillips, and Sherry J. Mitchell

> Court of Appeals for the Seventh Circuit · May 11, 1992 · 962 F.2d 739

URL: https://www.frixlaw.com/law-library/cases/9482873

## Case

- **Full name:** UNITED STATES of America, Plaintiff-Appellee, v. William E. MILLER, William L. Phillips, and Sherry J. Mitchell, Defendants-Appellants
- **Court:** Court of Appeals for the Seventh Circuit
- **Decided:** May 11, 1992
- **Citations:** 962 F.2d 739; 1992 U.S. App. LEXIS 10101
- **Precedential status:** Published
- **Opinion:** Concurrence by Flaum
- **Judges:** Flaum, Ripple, Will
- **Cited by:** 31 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/9482873

## How later opinions describe it (automated extraction)

- noting that “there is no prescribed minimum number of persons needed to permit an enhancement under § 3B1.1. All that is required to find that a scheme is ‘otherwise extensive’ is that the defendant directed at least one criminal participant.”

## Opinion text

FLAUM, Circuit Judge,
concurring.
I concur in all of Judge Will’s fine opinion, and write separately only to present some additional thoughts on our discussion in section II.A, where we upheld the district court’s six-level increase in Miller’s sentence under § 2F1.1(b)(1) for causing a loss of between $100,001-$200,000.
As an initial matter, it is worth noting that in this case we need not choose sides between United States v. Smith, 951 F.2d 1164 (10th Cir.1991), and United States v. Kopp, 951 F.2d 521 (3d Cir.1991), on the one hand, and United States v. Brach, 942 F.2d 141 (2d Cir.1991), on the other. Brack held that the loan proceeds fraudulently obtained by a defendant accurately measures the amount of loss under § 2F1.1(b)(1). Brach, 942 F.2d at 143 . Smith and Kopp rejected that approach, holding that the amount of loss must reflect the actual economic loss to the de *748 frauded party, and therefore must take into account the value of the collateral recovered by that party. Smith, 951 F.2d at 1167 ; Kopp, 951 F.2d at 536 . Here, Miller obtained loan proceeds of approximately $663,000, while the actual economic loss to the government (loan proceeds minus costs recovered at liquidation, plus interest) was approximately $658,000. The district court relied upon both figures in setting the government’s net loss at between $500,000 and $1,000,000. See III Tr. at 49. Accordingly, even if we accepted the approach established in Smith and Kopp and held that the district court should not have relied upon the $663,000 figure, the error would have been harmless and remand unnecessary; there is no difference in sentencing for a $658,000 loss and a $663,000 loss. Williams v. United States, — U.S. —, 112 S.Ct. 1112, 1120 (1992) (remand unnecessary if “the district court would have imposed the same sentence had it not relied upon the invalid factor or factors”).
All the same, were we forced to confront the issue, I would side with Smith and Kopp and against Brack. Brach’s holding that the loan proceeds reflect the “probable loss resulting from the fraud,” 942 F.2d at 143 , I respectfully suggest, cannot be right. When the government puts its cash at risk in exchange for the right to a borrower's collateral — which it does, in effect, by guaranteeing a loan — it suffers no net loss, assuming, of course, that the collateral is sufficient to cover any default. This assumption will, in most instances, hold so long as the borrower does not misrepresent the value of his collateral. Accordingly, Brack’s ruling that the total loan proceeds accurately measure loss under § 2F1.1(b) bears little, if any, “relation to economic reality,” United States v. Schneider, 930 F.2d 555, 559 (7th Cir.1991), and hence suffers in comparison to Smith and Kopp . Application Note 7(b), adopted after this case was briefed and far after the district court rendered its decision, demonstrates that Smith and Kopp better reflect the view of the Guidelines drafters:
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.
As such, I would suggest that, in future cases, we treat the net loss to the victim, not the face value of the loan, as the starting point for determining loss under § 2Fl.l(b). In this case, the government’s net loss was $658,000.
The Guidelines also recognize that the actual net loss may either overstate or understate the seriousness of an offense, and that in those circumstances a district court may depart upward or downward. See, e.g., § 2F1.1(b), Application Note 7(b) (upward departure permitted where collateral fully covered loan — meaning that net loss was zero — if defendant’s conduct created a risk of loss); id. (downward departure permitted if unforseen event would have caused a default even absent defendant’s minor fraud); id., Application Note 10 (listing other grounds for departure); Kopp, 951 F.2d at 536 (upward departure permitted if defendant intended to inflict greater net loss than that which occurred). Here, the district court departed downward, having determined that Miller was not responsible for HUD’s total loss, but only for between $100,001-$200,000 of it.
Against this backdrop, one can see why we must reject Miller’s appeal of his sentence. Miller maintains that the amount of loss under § 2F1.1(b)(1) should be measured as of the time he sold the properties to Einar Steffanson. At that point, Miller argues, the properties were worth more than the outstanding indebtedness of the loan; they lost their value due to intervening circumstances — namely Steffanson’s neglect, and HUD’s alleged negligence in managing the properties (once it took title from Steffanson) and failure to get top dollar upon liquidation. Consequently, Miller claims that the amount of loss due to his fraud was zero. As noted, however, § 2F1.1(b)(1) loss is measured by the net loss to the injured party, which, in this case, is $658,000. What Miller seeks (and received), then, is properly characterized as *749 a downward departure based upon the fact that Steffanson and HUD, rather than he, were responsible for some of the loss. See Kopp, 951 F.2d at 531 (distinguishing “calculation of ‘loss’ in the first instance” from discretionary downward departures when net loss not attributable entirely to defendant’s fraud). The district court believed that Miller was responsible for only part of HUD’s losses, and hence deserved a departure, a ruling upon which Judge Will’s lead opinion does not pass owing to the government’s decision not to appeal.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/9482873. Public record. Not legal advice.