United States v. Jerry E. Lucas, Jr.

DAVID A. NELSON, Circuit Judge,

concurring in part and dissenting in part.

I agree with the decision to remand this case, and I concur in much of the court’s opinion. Insofar as the opinion invites the district court to depart from what I take to be the ratio decidendi of United States v. Sparks, 88 F.3d 408 (6th Cir.1996), however, I respectfully dissent.

*1301 As a preliminary matter, I might note that it is less obvious to me than it is to the majority that the starting point to be used in calculating the guideline sentence range should be U.S.S.G. § 2B1.1 rather than § 2F1.1. The former section, which deals with larceny, embezzlement and other forms of theft, was pretty clearly the correct guideline for the court to start with in United States v. Dion, 32 F.3d 1147 (7th Cir.1994). There the “loans” fabricated by the defendant loan officer were nothing more than a cover for the defendant’s embezzlement of funds. The purported makers of the notes either did not exist at all or, in the words of the Seventh Circuit, “were not customers of the bank.” Id. at 1148 . (I assume this means that the individuals whose names appeared on the notes were not in fact signa-tors and were not liable to the bank.) The maker of the note given to the bank in the case before us, by contrast, was a real person — Steven Mitchell — who really signed the note and who had real assets (including a $45,000 note from defendant Lucas) and a real income. Mitchell was an accommodation maker, to be sure, but he was a borrower in fact as well as in name; he was personally liable on the note to the bank. I think it is arguable, under these circumstances, that the heart of the offense committed by defendant Lucas lay in his deceitful concealment of his private deal with Steven Mitchell — and, accordingly, the applicable guideline may arguably be § 2F1.1, which covers offenses involving fraud or deceit. Little or nothing actually turns on this, however, if the amount of the loss is to be determined under the principles set forth in the Commentary to § 2F1.1 — and I fully agree with my colleagues on the panel that the principles of the § 2F1.1 Commentary, including Application Note 7(b), must be applied here in any event.

The most recent of the several published Sixth Circuit opinions dealing with Application Note 7(b) is United States v. Sparks, 88 F.3d 408 (6th Cir.1996). Like the instant case, Sparks arose from the activities of a bank officer who lent the bank’s money to third persons for the purpose of benefiting himself. One of the nominal recipients of the Sparks loans, a man named Gupton, paid his outstanding balances more than a year after the discovery of the fraud. The Sparks panel held that in computing the amount of the bank’s loss for sentencing purposes it was proper to deduct payments made before the fraud was detected, but not payments made long afterward. Quoting from United States v. Wright, 60 F.3d 240, 242 (6th Cir.1995), the Sparks panel (one member of which was the author of Wright), gave the following rationale for not allowing the belated payments to be deducted in the calculation of the loss:

“In the present case the debt was not repaid immediately by simple demand or through foreclosure, but by a third party more than a year after the discovery of the fraud. That Gupton’s payments reduced the amount of the bank’s ultimate loss does not alter the amount of ‘actual loss’ determinable at the time the crime was detected, because, at that time, the bank had no realistic expectation of ‘immediate recovery [either] from the actual debtor,’ or through ‘legal remedies. ’ ” 88 F.3d at 409 (emphasis supplied).

As far as the case at bar is concerned, the lessons of Sparks appear to be these:

1. If defendant Lucas repaid the Steven Mitchell loan before discovery of the fraud, the bank suffered no actual loss and the defendant’s offense level should be calculated accordingly. (On this point the majority and I are in accord.)

2. If defendant Lucas did not repay the loan until after discovery of the fraud, the actual loss was the balance that remained unpaid as of the time the crime was detected unless it can be said that as of that time the bank had a realistic expectation of immediate recovery by simple demand or otherwise. (It is the words set forth in italics on which the majority and I part company.)

Given the circumstance that the loan at issue here was repaid in full prior to maturity, it seems to me that if the bank truly had a realistic expectation of immediate recovery as of the time the fraud was discovered, Sparks would compel the conclusion that there was no actual loss. I think the same conclusion would be inescapable, on this hypothesis, under the Wright panel’s holding with respect to the third of the three loans in question there.

*1302 The third Wright loan was made to a business associate of the defendant on the strength of the defendant’s fraudulent representations that the loan would be secured by assignment of a certain deed of trust. The bank raised the misrepresentation issue with the defendant when the fraud was discovered, whereupon the business associate provided security satisfactory to the bank. We held that there was no loss — a holding premised, Sparks suggests, on the understanding that the bank had a realistic expectation that the situation would be put right immediately.

Assuming, in the case at bar, that the fraud committed by defendant Lucas was discovered before the loan was repaid, we simply do not know whether the bank, on discovering the fraud, had a realistic expectation of being made whole immediately. I. would therefore instruct the district court to resolve this factual question — and if the court should find that such an expectation did exist as of the time of the discovery of the fraud, I believe that the loss used in calculating the guideline range ought to be zero.