United States v. Bennett

Opinion

USCA1 Opinion

UNITES STATES COURT OF APPEALS

                                FOR THE FIRST CIRCUIT



                                                     
                                 ____________________



        No. 95-1051



                              UNITED STATES OF AMERICA,



                                      Appellant,



                                          v.



                               GEORGE S. BENNETT, JR.,



                                 Defendant, Appellee.



                                                     
                                 ____________________


APPEAL FROM THE UNITED STATES DISTRICT COURT



                          FOR THE DISTRICT OF MASSACHUSETTS



                   [Hon. Edward F. Harrington, U.S. District Judge]
                                               ___________________



                                                     
                                 ____________________


Selya, Cyr and Boudin,



                                   Circuit Judges.
                                   ______________



                                                     
                                 ____________________


William P.  Stimson, Assistant United States  Attorney, with whom
             ___________________

        Donald K. Stern, United States Attorney, was on brief for appellant.
        _______________

             Morris  M. Goldings, with whom  John F. Aylmer,  Jr. and Mahoney,
             ___________________             ____________________     ________

        Hawkes & Goldings were on brief for appellee.
        _________________


____________________



                                    July 31, 1995

                                                     
                                 ____________________



CYR, Circuit  Judge.   Following our remand  for resen-
                    CYR, Circuit  Judge.
                         ______________



          tencing in United States  v. Bennett, 37 F.3d 687 (1st Cir. 1994)
                     _____________     _______



          ("Bennett I"), which vacated a downward adjustment for acceptance
            _________



          of responsibility, the district  court determined that the defen-



          dant's restitutionary effort    an  element in its initial  down-



          ward  adjustment  ruling      nonetheless  warranted  a  downward
                __________



          departure   from  its  recalculated  guideline  sentencing  range
          _________



          ("GSR").   The government again  appealed, and we  now remand for



          resentencing within the recalculated GSR. 


I
                                          I



                                      BACKGROUND
                                      BACKGROUND
                                      __________



                    We relate only the  facts essential to an understanding



          of the instant appeal.  For further detail, the reader is invited



          to see Bennett I, 37 F.3d at 689-92.  
                 _________


A.   Factual Background and Initial Sentencing
          A.   Factual Background and Initial Sentencing
               _________________________________________



                    Appellee Bennett abused positions of  trust with Daniel



          Webster  Mortgage Company, Inc.  ("Daniel Webster"), by obtaining



          more  than ten  fraudulent  real  estate  loans based  on  Daniel



          Webster's  lines of  credit  with Plymouth  Federal Savings  Bank



          ("Plymouth  Federal") and  New Bedford  Institution  for Savings,



          which Bennett  applied toward the development  of real properties



          held  in trust  for the  benefit of  himself and  his wife.   The



          fraudulent borrowing scheme  involved aliases,  false loan  docu-



          ments and concealment.   Following its  discovery by the  Federal



          Deposit Insurance  Corporation during the spring  of 1990, Daniel


2



Webster  and Plymouth Federal sued Bennett.  On February 1, 1991,



          the  parties  entered  into  a  settlement  agreement,  requiring



          Bennett  to turn over cash and  other property, including certain



          improved properties which remained in his possession.  



                    In  late  1991, Bennett  was  indicted  on nine  felony



          counts for  fraudulently  obtaining  $900,000  from  a  financial



          institution,  see  18 U.S.C.     20  (1988) (defining  "financial
                        ___



          institution"),  between August  1988 and  October  1989.   See 18
                                                                     ___



          U.S.C.   1344.  Following his trial and conviction on  all charg-



          es, the district  court calculated the  total loss occasioned  by



          Bennett  at  $900,000, see  U.S.S.G.     2F1.1(b), rejecting  the
                                 ___



          government's contention  that the  total loss should  include, as



          relevant conduct, amounts  fraudulently borrowed but  not charged



          in  the indictment.   The  district court  then deducted  (1) the



          $589,000  Bennett had repaid on the indictment loans prior to the



          discovery of his  crimes, and (2) the value to  Daniel Webster   



          "at least  $660,000"     of the civil  suit settlement  agreement



          entered into after Bennett's crimes had been discovered.



                    Having determined  that no loss had  been occasioned by



          Bennett's fraud, the district court  ruled that Bennett merited a



          two-level downward  adjustment, see U.S.S.G.    3E1.1, for accep-
                              __________  ___



          tance  of responsibility  by  agreeing to  settle the  indictment



          loans in full.  The resulting Total Offense Level ("TOL") of  8,1

                              
          ____________________



               1The  TOL  calculations  at  the first  sentencing  were  as

          follows:



                      2F1.1 (base offense level)                 6

                      2F1.1(b)(1) (zero loss)                    0



                                          3



together with a Criminal History Category of I, produced a GSR of



          from 2 to  8 months'  imprisonment, 24 to  36 months'  supervised



          release,  and a  $5,000  to $50,000  fine.   The  district  court



          sentenced Bennett to  24 months' probation  and six months'  home



          detention, special assessments totaling $450, and no fine. 


B.   Bennett I
          B.   Bennett I
               _________



                    On  appeal in Bennett I we held that the district court
                                  _________



          had  erred in  excluding from  the total  loss  calculation under



          U.S.S.G.   2F1.1(b)(1), as relevant conduct, the losses resulting



          from fraudulent borrowings not charged in the indictment, Bennett
                                                                    _______



          I,  37 F.3d  at  694, and  in  crediting Bennett  with "at  least
          _



          $660,000"  for the civil  suit settlement entered  into after his
                                                                  _____



          crimes had  been discovered.   Id.  at 695  ("'[T]he loss  is the
                                         ___



          amount of the loan not repaid at the time the  offense is discov-



          ered, reduced by the amount the lending institution has recovered



          (or can expect to recover) from any  assets pledged to secure the



          loan.'")  (citing U.S.S.G.   2F1.1,  n. 7(b)).2  Finally, Bennett
                                                                    _______

                              
          ____________________



                      2F1.1(b)(2) (more than minimal planning)   2

                      3B1.3 (abuse of position of trust)         2

                      3E1.1 (acceptance of responsibility)      (2)

                                                            _______

                                        TOL                      8



               2Bennett I established the following formula for calculating
                _________

          "actual loss" under U.S.S.G.   2F1.1 on remand:



               1(a) the   total  dollar  amount  of  the  fraudulent  loans

                    involved in the  nine counts of conviction  ($900,000);

                    and
                    ___



                (b) the total dollar amount of all loans coming  within the

                    "relevant  conduct"  guideline calculation  ($526,000);

                    less
                    ____



                                          4



I held  that the two-level downward adjustment  for acceptance of
          _                                   __________



          responsibility was clear error,  since Bennett had neither demon-



          strated  genuine  contrition nor  made  voluntary  restitution by
                                                  _________



          settling  the civil suit, nor  pled guilty to  the charges in the



          indictment, but instead denied  the essential factual elements of



          the  charges throughout  trial and  at sentencing  by maintaining



          that he had never intended to defraud the banks.  See id. at 696-
                                                            ___ ___



          98.  We  therefore vacated  the first sentence  and remanded  for



          resentencing.  Id. at 700.
                         ___


C.   Resentencing
          C.   Resentencing
               ____________



                    On  remand the  district court  recalculated the  total



          loss  at $837,000, after  including the losses  occasioned by the



          fraudulent borrowings for which Bennett was not indicted, result-



          ing in a TOL of 18.3  Following Bennett's request  for a downward



          departure, see 18 U.S.C.   3553(b), the district court identified
          _________  ___

                              
          ____________________



               2(a) the  total dollar  amount of  all  loans repaid  by the
                                                             ______

                    defendant  prior to  May 3,  1990 ($589,000),  the date

                    Bennett's unlawful activities were discovered; and
                                                                   ___



                (b) the  total recoveries  realized  and reasonably  to  be

                    expected  from all  collateral  pledged  to secure  the

                    fraudulent loans involved  in all counts  of conviction

                    and  encompassed within  the relevant  conduct calcula-

                    tion.



          See Bennett I, 37 F.3d at 695.
          ___ _________



               3The recalculated TOL is comprised as follows: 



                      2F1.1(a) (base offense level)                   6

                      2F1.1(b)(1) (total loss of $837,000)            8

                      2F1.1(b)(2) (more than minimal planning)        2

                      3B1.3 (abuse of position of trust)              2

                                                                 ______

                                             TOL                     18



                                          5



two  factors  ostensibly warranting  a  departure  from the  GSR.



          First,  Bennett had  already  served a  portion  of the  original



          sentence, including  the entire six months'  home detention term.



          Second,  the civil suit  settlement constituted "an extraordinary



          act that seldom occurs in the criminal courts. . . ."  According-



          ly,  the district  court granted  a six-month  downward departure



          from  the  recalculated 27-month  GSR minimum,  based on  the six



          months'  home  detention term  already  served,  combined with  a



          further 15-month  downward departure for the  "extraordinary act"



          of  entering into  the civil suit  settlement agreement  to repay



          $694,000.4   The  district court  then imposed  the minimum  six-



          month prison term now under challenge on appeal. 


II
                                          II



                                      DISCUSSION
                                      DISCUSSION
                                      __________



                    The United  States contends that  Bennett I  foreclosed
                                                      _________



          both a  downward adjustment and  a downward departure  for accep-



          tance of responsibility  based on the  civil settlement and  Ben-



          nett's  belated  expression of  contrition  at  sentencing.   See
                                                                        ___



          Bennett I, 37 F.3d at 696-98; see also  U.S.S.G.   3E1.1 (permit-
          _________                     ___ ____

                              
          ____________________



               4As the  government has not appealed  the six-month downward

          departure,  we do  not  address it.   But  cf.  United States  v.
                                                ___  ___  _____________

          Zackular,  945  F.2d 423,  425  (1st Cir.  1991)  (rejecting home
          ________

          confinement as "official  detention" for purposes of  18 U.S.C.  

          3585 (Credit for Prior Custody):   "While a defendant's  movement

          may be  severely curtailed  by  . .  . home  confinement,  . .  .

          confinement to the comfort of one's own home is not the function-

          al equivalent of incarceration in either a practical or a psycho-

          logical sense."); see also Reno v. Koray, 115  S. Ct. 2021 (1995)
                            ___ ____ ____    _____

          (construing phrase "official detention," see 18 U.S.C.   3585(b),
                                                   ___

          in  light of Bail Reform  Act of 1984,  related sentencing provi-

          sions and Bureau of Prisons guidelines).



                                          6



ting  two-level downward  adjustment for  clear demonstration  of
                                    __________



          acceptance of responsibility).  


A.   Downward Departure
          A.   Downward Departure
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                    A sentencing court may depart from the GSR "only in the
                                           ______



          extraordinary case  -- the case that falls  outside the heartland



          for the offense of conviction . . . ."  United States v. Jackson,
                                                  _____________    _______



          30  F.3d 199,  201 (1st  Cir. 1994);  see also  United  States v.
                                                ___ ____  ______________



          Rivera,  994 F.2d  942, 947-49  (1st Cir.  1993).   The departure
          ______



          decision is subject to bifurcated review.  United States v. Fahm,
                                                     _____________    ____



          13 F.3d 447, 450  (1st Cir. 1994).  First,  all "quintessentially



          legal" rulings  underlying the decision to  depart (viz., whether



          the guideline  language encourages, permits or  forbids departure



          for the kinds of reasons relied upon by the sentencing court) are
                  _____ __ _______



          reviewed de novo.  Id. at 450 (quoting Rivera, 994  F.2d at 951).
                   __ ____   ___                 ______



          Second,  the "heartland"  determination  itself is  reviewed with



          "full awareness of, and respect for, the trier's  superior 'feel'



          for the case."   Rivera, 994 F.2d at  952 (citation omitted); see
                           ______                                       ___



          also Fahm, 13 F.3d at 450.
          ____ ____



               1.   Extraordinary Act
               1.   Extraordinary Act
                    _________________



                    Following Bennett I, the  district court found that the
                              _________



          $660,000  settlement agreement constituted  "an extraordinary act



          that seldom  occurs in  the criminal  courts," for  which Bennett



          "should be  rewarded .  .  . ."    The district  court  carefully



          avoided  explicit  reliance  on  "acceptance  of responsibility,"



          apparently in deference to  Bennett I, 37 F.3d at  698 (stressing
                                      _________



          that  restitution  must  be "'genuinely  voluntary,  rather  than



                                          7



motivated  primarily  by a  collateral  consideration  such as  a



          desire to settle  the civil lawsuit'") (quoting  United States v.
                                                           _____________



          Miller, 991 F.2d 552, 553 (9th Cir. 1993));  cf. United States v.
          ______                                       __  _____________



          Hendrickson, 22 F.3d 170, 176 (7th Cir.) (rejecting civil forfei-
          ___________



          ture, in light of its involuntary nature, as basis for finding of



          "extraordinary acceptance of  responsibility"), cert. denied, 115
                                                          _____ ______



          S. Ct. 209 (1994).  Bennett I also held, however,  that the civil
                              _________



          suit  settlement was not  "genuinely voluntary," 37  F.3d at 698,



          and  that "'restitution is relevant to the extent it shows accep-
                                              __ ___ ______ __ _____ ______



          tance of responsibility.'"  Id. (quoting Miller, 991 F.2d at 553)
          _____ __ ______________     ___          ______



          (emphasis added).   Consequently, whether  or not the  civil suit



          settlement constituted an "extraordinary  act," there has been no



          showing that it  formed a  material basis for  either a  downward



          adjustment or  a downward  departure, let alone  for establishing



          restitutionary conduct outside the  "heartland."  See Rivera, 994
                                                            ___ ______



          F.2d at 947.  



                    As the  only ground for the  challenged downward depar-



          ture  had been foreclosed by  Bennett I, which  plainly held that
                                        _________



          the civil  suit settlement  was not genuinely  "voluntary" within



          the meaning of U.S.S.G.    3E1.1, see Bennett I, 37 F.3d  at 698,
                                            ___ _________



          and  could not  form  the basis  for  a downward  adjustment  for
                                                            __________



          acceptance  of responsibility,  it  could  afford no  permissible



          basis  for the 15-month downward departure.  See Miller, 991 F.2d
                                           _________   ___ ______



          at 553 (sentencing court may depart downward on basis of restitu-



          tionary conduct only if it evinces an acceptance of responsibili-


8



ty  substantially  greater  than  that required  for  a  downward



          adjustment under U.S.S.G.   3E1.1). 
          __________



               2.   Overstated Loss and "Multiple Loss Causation"
               2.   Overstated Loss and "Multiple Loss Causation"
                    ____________________________________________



                    On  appeal, Bennett  broaches  for the  first time  the



          alternative arguments that the 15-month downward departure should



          be upheld  either because  the $837,000 total  loss recalculation



          significantly  overstates  the  seriousness of  his  conduct, see
                                                                        ___



          U.S.S.G.    2F1.1, n. 7(b) (1994),  or on the ground  of multiple



          loss causation.   See, e.g.,  United States v.  Rostoff, 53  F.3d
                            ___  ____   _____________     _______



          398, 405 (1st Cir. 1995) (acknowledging that a downward departure



          may be  warranted in the "few instances" where ". . . a misrepre-



          sentation  . .  . is  not the  sole cause  of the  loss. .  . .")



          (citing U.S.S.G.   2F1.1, n.11 (1987)); see also United States v.
                                                  ___ ____ _____________



          Gregorio, 956 F.2d 341, 345 (1st Cir. 1992).
          ________



                    Although  Bennett  contends  that  the  total  loss  is



          overstated  as  a  consequence of  an  economic  downturn in  the



          regional economy, insofar as the record on appeal permits assess-



          ment it undermines Bennett's claim.  The valuation of the proper-



          ty Bennett agreed to surrender under  the terms of the civil suit



          settlement  was disputed  at  the initial  sentencing; viz.,  the



          government contending for $431,024.16, Bennett $684,000.  At that



          time, Bennett maintained  that a slumping economy had reduced the



          value  of the settlement  after the banks  took title to  the im-
                                    _____



          proved properties  and other  assets tendered  by  Bennett.   The



          district court accordingly rejected the lower valuation propound-



          ed  by the government, and  found the settlement  worth "at least


9



$660,000."  Subsequently, at resentencing, it placed the value of



          Bennett's "extraordinary act" at $694,000.  



                    Thus, not only did  Bennett not proffer record evidence



          of a  sudden, unforeseen  downturn in  the regional economy  that



          significantly lowered  the value of the  properties financed with



          his  illegal  borrowings, but  throughout  both prior  sentencing



          proceedings he  maintained that  market factors had  not affected



          these properties.  We therefore hold both that the "multiple loss



          causation" claim  has not  been preserved,  see United  States v.
                                                      ___ ______________



          Dietz, 950 F.2d  50, 55  (1st Cir. 1991)  ("[I]n connection  with
          _____



          sentencing  as in other contexts  . . .  arguments not seasonably



          addressed to the trial court may not be raised for the first time



          in  an appellate venue."), and  that it is  unsupported    indeed



          contradicted    by the record.  


III
                                         III



                                      CONCLUSION
                                      CONCLUSION
                                      __________



                    As all available avenues  for a downward departure have



          been  foreclosed, we vacate  the second  sentence imposed  by the



          district court  and remand for resentencing  within the guideline



          sentencing range  prescribed by the total  offense level recalcu-



          lated by the district court at the first resentencing.



                    SO ORDERED.
                    SO ORDERED.
                    __ _______


10