United States v. Cherry

76 F. App'x 426

• Court: Court of Appeals for the Federal Circuit
• Decided: September 25, 2003
• Docket: No. 02-2509
• Status: Published

Opinions

OPINION OF THE COURT

NYGAARD, Circuit Judge.

The Appellant, Hitesh Cherry, pleaded guilty to conspiracy and mail fraud and was sentenced to thirty months in prison. The District Court determined the amount of loss to be between $500,000 and $800,000 and upwardly adjusted the sentence by ten levels pursuant to U.S.S.G. § 2F1.1. Cherry appeals the District Court’s determination of the amount of loss. Because the District Court did not clearly err in its determination of the amount of loss, we will affirm.

The parties to this case, counsel, and the District Court are all familiar with the facts and procedure of this case. Therefore, as we are writing a non-precedential opinion and only for the parties herein, we recite only such facts necessary to our holding. Cherry was a development engineer and manager with AMP, Inc. In 1990, Cherry proposed that AMP develop a new electrical current transmission and distribution connection system for electrical utilities. Over the next five years, Cherry outsourced much of the work on these new products to two companies, American Equipment Testing (AET) and Innovators International Inc. (III). Unbeknownst to AMP, and in violation of AMP’s Global Code of Conduct, Cherry indirectly owned both AET and III. AET was a fictitious-name company registered to Cherry’s wife, created solely for the scheme. It did not own any facilities, and did not have employees other than Cherry and his wife. Ill was incorporated in Maryland and consisted of only a post office box, contrary to Cherry’s assertions that it was qualified contractor. Between 1991 and 1995 AET conducted some work related to the development of the new products, but did so using AMP employees under the direction of Cherry. AMP paid AET $677,260 and III $132,075 before the fraud was discovered.

At the sentencing hearing, Cherry contended that because AET did expend funds to rent space and for equipment, and did conduct testing of the products, which resulted in data for AMP, it suffered no loss. Cherry argues that the data from the testing has value for AMP and it simply needs to complete the testing process to reap the benefit of his work. In contrast, the government points to AMP’s judgment that the work done by AET and III resulted only in intangible assets that have no value to the company.

At the sentencing hearing the District Court heard testimony concerning the amount of loss. Cherry’s supervisor at AMP testified that AET’s work did not result in a marketable product. App. at 71-73; PSR at 4. Cherry contends that AET purchased or made testing equipment at a cost of over $200,000. App. at 109. This equipment was apparently all eventually given to AMP, App. at 54-55, and the government concedes that there may be some value to AMP for the equipment. App. at 99. Cherry provided a list of the AET’s expenses, which allege to account for almost all of the money paid by AMP. App. at 108. However, the government argued that Cherry’s proffered expenses for AET are not credible and are belied by the LR.S.’s analysis of the Cherrys’ finances. App. at 95. An I.R.S. review of the Cherrys’ financial records suggests that they used over $500,000 of AET and III funds for personal expenses. PSR at 4.

The District Court’s conclusion of what constitutes loss under the Sentencing Guidelines is subject to plenary review, while factual findings as to the amount of loss are reviewed for clear error. See United States v. Brennan, 326 F.3d 176, 194 (3d Cir.2003) (citation omitted). Because this case concerns only the District Court’s calculation of the amount of loss, we will only reverse if the calculation is clearly erroneous. The amount of loss need not be exact, it “need only be a reasonable estimate, based on available information.” United States v. Hayes, 242 F.3d 114, 117 (3d Cir.2001).

Although the District Court recognized that the amount of loss was difficult to determine, in light of the testimony presented at the hearing, its determination that the loss was in excess of $500,000 was not clearly erroneous. AMP paid Cherry’s shell companies over $800,000 to develop and test products that it never received. In its business judgment, the data produced by AET was worthless to AMP. Just as the loss to AMP cannot be calculated based solely on its expenditures, see U.S.S.G. § 2F1.1 n. 8 (noting that where the fraud involves misrepresentation of the value of an item, the actual value may offset part of the loss), neither can Cherry assert that his alleged expenses directly translate into value for AMP. Unlike United States v. Maurello, 76 F.3d 1304 (3d Cir.1996), and Hayes, the District Court did credit Cherry in the loss calculation by finding that the loss was below $800,000, it simply did not grant Cherry the full credit he was seeking. The District Court’s estimate of loss was reasonable and not clearly erroneous, therefore we will affirm.