United States v. Haggert

• Court: Court of Appeals for the First Circuit
• Decided: November 20, 1992
• Docket: 91-2293
• Status: Published

Opinion

USCA1 Opinion

November 20, 1992
                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT

                                 ____________________

          No. 91-2293

                                    UNITED STATES,

                                      Appellee,

                                          v.

                                  LLOYD R. HAGGERT,

                                Defendant, Appellant.

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                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                              FOR THE DISTRICT OF MAINE

                     [Hon. D. Brock Hornby, U.S. District Judge]
                                            ___________________

                                 ____________________

                                        Before

                              Torruella, Circuit Judge,
                                         ______________
                            Brown,* Senior Circuit Judge, 
                                    ____________________
                          and Bownes, Senior Circuit Judge.
                                      ____________________

                                 ____________________

               Charles  F. Dalton,  Jr., with  whom Dalton, Baron  & London
               __________________                   _______________________
          were on brief for appellant.
               F. Mark Terison, Assistant United States Attorney, with whom
               _______________
          James L. McCarthy, Assistant  United States Attorney, and Richard
          _________________                                         _______
          S. Cohen, United States Attorney, were on brief for appellee.
          ________

____________________

____________________

          ____________________

          *of the Fifth Circuit, sitting by designation.

                                          1

BOWNES, Senior Circuit  Judge.   Defendant-Appellant,
                            _____________________

            Lloyd Haggert,  appeals the sentence imposed  by the district

            court   following   his   conviction   for   bank   fraud.   

            Specifically,  Haggert challenges the court's imposition of a

            five-level increase  from his  base offense under  Sentencing

            Guideline    2F1.1, which mandates such  an increase when the

            "loss" attendant to fraud is "more than $40,000."  U.S.S.G.  

            2F1.1(b)(1)(F) (Nov. 1991).  The district court looked to the

            amount of  loss that Haggert intended  to obtain fraudulently

            from the bank, in assessing loss at $62,508.50, the sum total

            of Haggert's  fraudulent sight drafts.   Haggert asserts that

            the  court  ought  instead  to  have  used  the  actual  loss

            resulting  from his  criminal  conduct, which  the court  had

            determined was $5,511.30.  We  affirm the sentence imposed by

            the district court.

                                         I.  
                                         I.

                                     Background  
                                     Background
                                     __________

                    Lloyd Haggert was convicted  by a jury in the  United

            States District Court for the District  of Maine of violating

            Title 18  U.S.C.   1344, by  defrauding the federally-insured

            Skowhegan  Savings  Bank.     The  act  underlying  Haggert's

            conviction  was his  attempt  to pay  delinquent real  estate

            mortgages  with valueless  sight drafts.   On  May 30,  1989,

            Haggert presented two sight drafts, totalling $62,508.50,  to

            the  assistant manager of the  Skowhegan Savings Bank who, at

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that time, believed them  to be cashier's checks  and stamped

            them  as paid.  The  bank later discovered  that these drafts

            lacked   a   financial  institution   identification  number.

            Further investigation revealed that the financial institution

            upon which  they were drawn  was not a  legitimate, operating

            institution.

                    When the Skowhegan Savings  Bank refused to discharge

            Haggert's mortgages, Haggert  obtained a judgment to  enforce

            the  sight  drafts.1    The  bank  eventually  foreclosed  on

            Haggert's mortgages.  After  accounting for the proceeds from

            foreclosure,  the bank  suffered a  loss  of $20,248.10.   In

            addition, the  bank incurred  costs of $5,511.30,  in fending

            off  Haggert's  attempts  to  force  the  bank  to  honor the

            fraudulent sight drafts.    

                    Prior  to  his sentencing,  Haggert responded  to the

            pre-sentence report  prepared  by the  government.    Haggert

            objected to  the determination of the  amount of restitution,

            which had been set  at $25,759.40, to reflect the  total loss

            to  the  bank in  its dealings  with  Haggert.   In addition,

            Haggert  challenged  two  factual  assertions  that  are  not

            pertinent  to the issue before  us.  Haggert  made no further

            objections  either at  the pre-sentence  stage or  during the

            sentencing  hearing.   In fact,  the district  judge directly

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            1  It would appear  that the defendant  obtained the judgment
            himself, without going through any judicial procedures.

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                                          3

asked Haggert  whether he  had any additional  objections, at

            the beginning of  the sentencing hearing, and whether  he had

            anything to add, near the end of the hearing.  

                    The district court determined  that the amount of the

            defendant's  fraud was  $62,508.50, and  added  the mandatory

            five-level  increase  for  loss   of  more  than  $40,000  to

            Haggert's   sentence.  For   the   purpose   of   calculating

            restitution,  the  court determined  that  the  bank's actual

            damages were  limited by statute to the loss directly related

            to the criminal conduct  of the defendant and  thus exclusive

            of  the bank's  foreclosure  costs.   See  18 U.S.C.     3664
                                                  ___

            (1988).  The court established  that the actual damage caused

            by  the defendant's fraud was $5,511.30, the cost to the bank

            of Haggert's attempts to enforce the fraudulent sight drafts.

            Haggert  was sentenced to a term of fifteen months in prison,

            followed by a  two-year term of  supervised release, and  was

            ordered  to pay  $5,511.30  in restitution  to the  Skowhegan

            Savings Bank. 

                                         II. 
                                         II.

                                      Discussion
                                      Discussion
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            A.  Standard of Review 
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                    We have repeatedly stated in  the sentencing context,

            as  well as in other areas,  that issues not presented to the

            district  court will not be  addressed for the  first time on

            appeal. See, e.g.,  United States v. Shattuck, 961 F.2d 1012,
                    ___  ____   _____________    ________

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1015 (1st Cir. 1992)("[w]e do not review sentencing guideline

            disputes  which  were  not  preserved  before   the  district

            court.")(citing United States v. Dietz,  950 F.2d 50, 55 (1st
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            Cir. 1991)); United  States v. Uricoechea-Casallas,  946 F.2d
                         ______________    ___________________

            162,  166  (1st  Cir.   1991)(failure  to  raise   sentencing

            guideline  issue at  district court  precludes raising  it on

            appeal);  United States v. Curzi,  867 F.2d 36,  44 (1st Cir.
                      _____________    _____

            1989)("an issue not presented in the district  court will not

            be addressed for the first time on appeal.").  As we observed

            in the case of Hernandez-Hernandez v. United States, 904 F.2d
                           ___________________    _____________

            758, 763 (1st Cir. 1990), "[w]e have applied this proposition

            in  well over a hundred cases since Johnston v. Holiday Inns,
                                                ________    ____________

            595 F.2d 890 (1st Cir. 1979)."

                    In Johnston, this court explained that while the rule
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            governing issues raised for  the first time on appeal  is not

            absolute, it is relaxed only in extreme cases.  Arguments not

            raised  below   will  be   entertained  on  appeal   only  in

            "`horrendous cases where a gross miscarriage of justice would

            occur'" and, in addition, where the  newly asserted ground is

            "`so compelling as virtually to insure appellant's success'."

            Id. at 894.   The Johnston standard was recently  affirmed in
            ___               ________

            United States v. McMahon, 935 F.2d 397, 400 (1st Cir. 1991).
            _____________    _______

                    In  this  case,  Haggert  had  ample  opportunity  to

            challenge  the sentence  imposed.   The  pre-sentence  report

            assessed  the amount  of fraud  as $62,508.50,  and expressly

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recommended the five-level increase eventually adopted by the

            district court.   In  his memorandum responding  to the  pre-

            sentence report,  Haggert offered three  objections, none  of

            which concerned either the calculation of the amount of fraud

            or the five-level increase.   Moreover, during the sentencing

            hearing,  the  district  court  judge took  care  to  inquire

            whether  Haggert  had  further objections  or  comments,  and

            Haggert voiced no additional concerns.  See generally, United
                                                    ___ _________  ______

            States v. McMahon, 935 F.2d at 399 (failure to object to pre-
            ______    _______

            sentence report); United  States v.  Fox, 889  F.2d 357,  359
                              ______________     ___

            (1st  Cir. 1989)(failure to challenge facts set forth in pre-

            sentence  report either  in responsive  memorandum  or during

            sentencing  hearing precluded  raising challenge  as to  same

            issue on appeal).  

                    Because  Haggert   neglected  to  raise   before  the

            district court the sole basis of his appeal, Haggert's appeal

            is precluded subject only to the narrow exception articulated

            in Johnston.   Our reading  of the Sentencing  Guidelines and
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            the  supporting case law convinces  us that no  error of such

            proportion exists  in  this case.    Far from  implicating  a

            miscarriage of  justice, or  evoking a  new ground  of almost

            assured success,  the district court's sentence  was a proper

            interpretion  and application of  the Sentencing Guidelines.2

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            2 Had  Haggart preserved his  claim below, our  inquiry would
            have  been two-fold.  In Sentencing Guideline cases, we first
            determine de novo  the scope  of the Guideline  at issue  and
                      __ ____

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                                          6

Indeed,  we  are  convinced   that  Haggert  would  not  have

            prevailed  on the merits even if the issue had been preserved

            for appeal.

            B.  The Sentencing Guidelines
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                    The issue raised  on appeal is the  meaning of "loss"

            in  the Sentencing  Guideline covering  fraud.   The district

            court measured loss by the amount that the defendant intended
                                                                 ________

            to obtain fraudulently from the bank.   Defendant argues that

            the actual  loss resulting  from his criminal  conduct should
                ______

            have  provided  the basis  for augmenting  his sentence.   We

            begin with an examination of the Sentencing Guidelines.

                    Guideline   2F1.1 covers  crimes involving fraud  and

            deceit.  That Guideline  begins with a base offense  level of

            six, which  level is adjusted  upward in accordance  with the

            dollar  value of  the loss  involved in  the crime.   Section

            2F1.1  mandates an increase of five levels when the "loss" is

            "more than $40,000."   U.S.S.G.   2F1.1(b)(1)(F) (Nov. 1991).

Application Note 7 of the Commentary accompanying the

            Guideline  deals with  the valuation  of  loss.   In relevant

            part, Application Note 7 provides: 

                    Consistent  with  the provisions  of    2X1.1
                    (Attempt, Solicitation or Conspiracy),  if an
                    intended   loss   that   the  defendant   was

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            then  assess  the  district court's  fact-finding  for  clear
            error.  See United  States v. St. Cyr, No.  92-1639, slip op.
                    ___ ______________    _______
            at 6  (1st Cir. October 15, 1992).

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                                          7

attempting to inflict can be determined, this
                    figure will be used if it is greater than the
                    actual loss. 

            U.S.S.G.   2F1.1,  comment. (n.7).2  This  explication of the

            Guideline  has been relied upon  in the First  Circuit and in

            other circuits.  See United States v. Cesar Resurreccion, No.
                             ___ _____________    __________________

            91-2015,  slip op.  at 7  (1st Cir.  October 30,  1992) (even

            where  it cannot be stated  precisely, the intended loss will

            be used  if it is  larger than  the actual loss).   See  also
                                                                ___  ____

            United States v. Schneider, 930 F.2d at 556; United States v.
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            Palinkas,  938  F.2d 456,  465 n.19  (4th Cir.  1991); United
            ________                                               ______

            States v. Smith, 951 F.2d 1164, 1166 (10th Cir. 1991); United
            ______    _____                                        ______

            States v. Shattuck, 961 F.2d at 1016 (citing United States v.
            ______    ________                           _____________

            Kopp, 951 F.2d 521 (3rd Cir. 1991)).
            ____

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            2 The first sentence in Application Note 7 refers the reader,
            for a discussion of valuation of loss, to the Commentary in  
            2B1.1 (Larceny, Embezzlement, and Other Forms of Theft).  The
            Commentary  in    2B1.1, in  turn, refers  for  discussion of
            partially   completed   offenses   to       2X1.1   (Attempt,
            Solicitation,  or Conspiracy).    The example  provided in   
            2B1.1 of  a partially completed offense is  a completed theft
            that is part of a  larger, attempted theft.  This example  is
            closely analogous to the case at hand where the defendant was
            not  successful in  reaping  the anticipated  profits of  his
            fraud.   See generally, United States  v. Schneider, 930 F.2d
                     ___ _________  _____________     _________
            555,  556  (7th  Cir.  1991)("Many  fraudulent   schemes  are
            interrupted  before they  reach fruition.   From  a practical
            standpoint they  are attempts,  and their gravity  depends in
            significant  degree on the size  of the loss  that would have
            been inflicted had the scheme not been interrupted."). 
                    The  second  sentence in  Application  Note  7, which
            begins  the  quote  cited  above, also  refers  to     2X1.1.
            Whichever  road  is  taken,  the  result  is  the  same.    A
            sentencing  judge must look to the  amount that the defendant
            intended  to  defraud or  to steal,  or  to the  actual loss,
            whichever is greater.

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                                          8

Application Note 7  contains an  example of  intended

            loss  that  closely  approximates  the  crime   committed  by

            Haggert.  The example provides  that, "if the fraud consisted

            in . .  . representing that  a forged check  for $40,000  was

            genuine,  the loss  would  be $40,000."    U.S.S.G.    2F1.1,

            comment.  (n.7).   The fraudulent  sight drafts  that Haggert

            presented to  the bank  as genuine  totalled $62,508.50.   By

            analogy  to this example,  the loss would  be $62,508.50, the

            assessment made by the district court.

                    Notwithstanding the general rule whereby loss for the

            purpose of  sentencing  is  the  greater  of  the  actual  or

            intended losses, Haggert  urges us  to apply to  his case  an

            exception narrowly created for  loan application and contract

            procurement cases.  The exception, articulated in subpart (a)

            of  Application  Note 7,  defines  a  category of  fraudulent

            actions for which the  expected or actual loss to  the victim

            provides the basis for the sentence enhancement.  Application

            Note 7(a), in pertinent part, provides as follows: 

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                                          9

In fraudulent loan application cases and
                    contract   procurement    cases   where   the
                    defendant's  capabilities   are  fraudulently
                    represented, the  loss is the actual  loss to
                    the victim (or  if the loss has  not yet come
                    about, the expected loss).  For 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.
                         In some cases, the loss determined above
                    may significantly understate or overstate the
                    seriousness of  the defendant's conduct . . .
                    .

            U.S.S.G.    2F1.1,  comment. (n.7(a)).   We  fail to  see the

            relevance of this exception  for the factually distinct crime

            of fraudulent loan  payments made well after  loans have been

            secured.    Nevertheless,  we   examine  the  scope  of  this

            exception  in   order  to  underscore  our   conclusion  that

            Haggert's  fraud is  precisely the  sort of  criminal conduct

            that the exception does not cover.    

                    The Seventh  Circuit has  explained the scope  of the

            exception for fraudulent information in a loan application or

            in contract procurement by  distinguishing between two  types

            of  fraud. See United States  v. Schneider, 930  F.2d at 558.
                       ___ _____________     _________

            The first type of fraud implicates the "true con artist," who

            never intends  to perform the undertaking, such  as the terms

            of the contract or  loan repayments, but who intends  only to

            pocket  the money  without rendering  any service  in return.

            The second type of fraud involves a person who would not have

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                                          10

attained  the contract  or loan  but for  the fraud,  but who

            fully intends  to perform.3 Id.  In the latter case, and only
                                        __

            in the latter case, is the intended loss not to be considered

            for sentencing.

                    Contrary to Haggert's attempt to place himself in the

            latter category of offenders, Haggert's conduct is a paradigm

            of the  first type  of fraud.   Haggert had  no intention  of

            paying the loans  for which  he was in  default.  He  drafted

            valueless  forms of payment which he presented to the bank as

            valid.  When  he succeeded momentarily  in his ploy,  Haggert

            went so far  as to attempt to enforce a  judgment against the

            bank for the amount of his fraudulent sight drafts.  When the

            bank had  difficulty locating the financial  institution upon

            which the  fraudulent drafts  were drawn, Haggert  evaded the

            bank's requests for his assistance, and obstructed the bank's

            attempts to determine the facts, by continuing to insist upon

            the  veracity  of  the  information  he  provided  the  bank.

            Finally,  Haggert knowingly  presented the sight  drafts that

            had  been  falsely stamped  as "paid"   to  another financial

            institution to support  new loan applications.  Any  of these

            actions alone would suffice  to establish Haggert's intention

            not to  pay the  debts he  owed to  the bank;  together, they

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            3 See generally, United States v. Smith, 951 F.2d at 1167 ("A
              ___ _________  _____________    _____
            thief who  steals $100,000 is  more culpable than  a salesman
            who  obtains $100,000 by selling a victim an $80,000 house he
            fraudulently represents as being worth $100,000.").

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                                          11

underscore  that  Haggert  fully  intended   to  defraud  the

            Skowhegan Savings bank in the amount of $62,508.50. 

                    As  the Schneider  distinction  between two  types of
                            _________

            fraud  illustrates,  even   under  the  exception   for  loan

            application and contract procurement cases, the intent of the

            defendant is the measure by which the loss is to be assessed.

            See United States v. Schneider, 930 F.2d at 558.   In each of
            ___ _____________    _________

            the  cases upon which  defendant relies where  the court held

            that the  loss should be offset to reflect collateral pledged

            by the defendant, or  that the actual loss  should constitute

            the loss  for sentencing purposes, the  defendants lacked the

            intent  to inflict the full amount  of the fraud.  See United
                                                               ___ ______

            States v. Smith, 951  F.2d at 1169 (finding no  evidence that
            ______    _____

            the  defendant  intended  to   inflict  the  amount  of  loss

            established by the district  court); United States v. Hughes,
                                                 _____________    ______

            775  F.  Supp. 348,  349 (E.D.  Cal.  1991) (noting  that the

            defendant neither  intended nor desired that  his loans would

            go  into default).    Contrawise, in  loan application  cases

            where there was no  intent to perform, the intended  loss has

            provided the  basis for augmenting the  defendant's sentence.

            See United States  v. Johnson,  908 F.2d 396,  398 (8th  Cir.
            ___ _____________     _______

            1990). 

                    The  Guidelines  are  concerned  with  assessing  the

            seriousness of the defendant's  conduct, given the wide array

            of conduct covered by  fraud.  See U.S.S.G.    2F1.1 comment.
                                           ___

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(backg'd.).4  See  also United States  v. Rothberg, 954  F.2d
                          ___  ____ _____________     ________

            217,  218  (4th  Cir. 1992).    What  the  Guidelines do  not

            envision  is rewarding  a defendant  for her  or his  lack of

            skill in executing a criminal act.  Haggert's failure to reap

            the full  financial benefits  of his  fraud cannot  provide a

            basis  for  lowering the  sentence  imposed  by the  district

            court.  

                    Affirmed. 
                    ________

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            4  Note  7(a),  which  articulates  the  exception  for  loan
            applications and contract procurement, contains language that
            underscores the  importance of  assessing the  seriousness of
            the  defendant's  conduct as  well.   We  refer to  the first
            sentence of the second paragraph quoted supra at p. 9. 
                                                    _____

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