United States v. McArthur

• Court: Court of Appeals for the Tenth Circuit
• Decided: May 21, 2007
• Docket: 05-4068
• Status: Unpublished

Opinion

F I L E D United States Court of Appeals Tenth Circuit UNITED STATES CO URT O F APPEALS May 21, 2007 TENTH CIRCUIT Elisabeth A. Shumaker Clerk of Court

U N ITED STA TES O F A M ER ICA,

Plaintiff-Appellee, No. 05-4068 v. District of Utah RANDY KAY M cARTHUR, (D.C. No. 2:04-CR-334-TC)

Defendant-Appellant.

OR D ER AND JUDGM ENT *

Before HA RTZ, SE YM OU R, and M cCO NNELL, Circuit Judges.

Beginning in the late 1980s and continuing until 2004, Randy M cArthur

embezzled millions of dollars from the Bank of Ephraim in Ephraim, Utah. W hen

he was finally caught, the unreconciled balance in the account over which he had

responsibility was nearly $5 million. M r. M cArthur pleaded guilty to bank fraud

but disputed what portion of that $5 million imbalance was traceable to his crime.

Based on the evidence the government presented at M r. M cArthur’s sentencing

* After examining the briefs and appellate record, this panel has determined unanimously that oral argument would not materially assist in the determination of this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). This case is therefore submitted without oral argument. This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. It may be cited, however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1. hearing, the district court found that he stole between $3 million and $4 million of

that $5 million imbalance and sentenced him accordingly. And because the

government was forced to expend resources to prove the total amount of money

M r. M cArthur stole, it refused to move for an acceptance of responsibility

reduction under § 3E1.1(b) of the United States Sentencing Guidelines.

M r. M cArthur now appeals from the district court’s loss finding and the

government’s failure to move for a § 3E1.1(b) reduction. W e find no error in the

proceedings below and therefore affirm. 1

I. FACTS

Beginning in the 1980s, M r. M cArthur began a series of fraudulent

transactions that enabled him to steal, for the better part of two decades, millions

of dollars from the Bank of Ephraim (“Bank”), a community bank in the central

Utah town from which it took its name. As the Bank’s cashier, M r. M cArthur

was responsible for reconciling the Bank’s accounts with Zions Bank and Far

W est Bank. He perpetrated the fraud by writing cashier’s checks payable from

the Bank to the Far W est Bank; cashing the check at Far W est, informing the Far

W est teller that the Bank needed cash on hand; and then keeping the cash for

himself instead of returning it to the Bank. He concealed those fraudulent

transactions by altering statements to make it appear as if the cashier’s check

1 W e apologize to the parties for our delay in acting on this appeal, which somehow disappeared from the Court’s case-tracking system, and thank counsel for calling the matter to our attention.

-2- proceeds were deposited in the Bank’s account at Zions. M r. M cArthur reported

that “it was easy to hide the embezzlement” during the 1980s and early 1990s

because “there were no internal controls” at the Bank “and outside audits were

‘lax.’” R. Vol. VI, at 5.

The ruse became more difficult in the mid-1990s because of the advent of

computer-generated bank statements and greater internal controls at the Bank.

Around this time, M r. M cArthur’s long-time friend and subsequent codefendant

Dean Johnson began helping M r. M cArthur perpetrate the fraud by falsifying

various computer statements. Their joint venture continued until 2004, when an

anonymous tip led to the discovery of the embezzlement scheme and the fact that

the Bank’s accounts were out of balance by nearly $5 million. This, in turn,

caused the Bank to collapse and be placed in receivership with the Federal

Deposit Insurance Corporation.

M r. M cArthur pleaded guilty to bank fraud and aiding and abetting in

violation of 18 U.S.C. §§ 1344 and 2. Following a lengthy evidentiary hearing,

the district court found that M r. M cArthur caused a loss of between $3 million

and $4 million to the Bank. After applying several enhancements and an

acceptance of responsibility reduction, the district court found that M r.

M cArthur’s Guidelines offense level was 29 and his criminal history category was

I, resulting in an advisory Guidelines range of 87 to 108 months. It then heard

argument relating to the 18 U.S.C. § 3553(a) sentencing factors before sentencing

-3- M r. M cArthur to 87 months imprisonment. He now appeals, challenging the

district court’s loss calculation and its failure to deduct one additional level from

his Guidelines offense level for timely notifying the government of his intention

to accept responsibility. He also alleges that the government breached his plea

agreement by refusing to recommend a § 3E1.1(b) reduction. W e have

jurisdiction under 28 U.S.C. § 1291 and 18 U.S.C. § 3742(a).

II. D ISC USSIO N

A. Burden of Proof for Sentencing Facts

M r. M cArthur first argues that the district court should have required the

governm ent to prove sentencing facts beyond a reasonable doubt. He

acknowledges, however, that our precedent forecloses this argument, see United

States v. M agallanez, 408 F.3d 672, 684–85 (10th Cir. 2005), and that he raises it

merely to preserve it, see Appellant’s Br. 7–8. W e therefore affirm.

B. The G overnment Proved by a Preponderance of the Evidence that M r. M cArthur Caused a Loss of at Least $2.5 M illion.

In calculating M r. M cA rthur’s Guidelines offense level, the district court

applied an 18-level enhancement under § 2B1.1(b)(1) after finding that M cArthur

caused a loss to the Bank of “between 4 million and 3 million,” but “certainly . . .

more than $2,500,000.” R. Vol. IV, at 160. M r. M cArthur challenges this

finding, arguing that there is no factual basis in the record for valuing the actual

-4- loss, and that the district court’s range of $3 million to $4 million is an

unreasonable estimate. W e disagree.

“W hen evaluating sentence enhancements under the Sentencing Guidelines,

we review the district court’s factual findings for clear error and questions of law

de-novo. W e will not disturb a factual finding unless it has no basis in the

record.” United States v. M ozee, 405 F.3d 1082, 1088 (10th Cir. 2005) (citations

omitted) (emphasis added). And when, as here, we review a district court’s

“decision to apply an enhancement, we view the evidence and inferences

therefrom in the light most favorable to the district court’s determination.” Id.

The record is replete with evidence that, together with inferences from it,

prove by a preponderance of the evidence, see United States v. Swanson, 360 F.3d

1155, 1168 (10th Cir. 2004), that the loss amount was at least $2.5 million. For

example, during M r. M cArthur’s sentencing hearing, the government presented

testimony from, among others, Keith Church, the former Bank president; Gary

M yers, the accountant the B ank hired to audit its books after M r. M cA rthur’s

scheme collapsed; and Todd A rgyle, the FBI special agent who investigated the

crime. All three witnesses testified that M r. M cArthur admitted to stealing at

least $4 million from the Bank. See R. Vol. IV, at 35, 91–92, 127. M r. M cArthur

attempts to discredit his admission by calling it “mathematically impossible” and

“not credible,” ultimately arguing that he “was simply wrong about how much

money he stole.” Appellant’s Br. 11. “[T]he credibility of the witnesses and the

-5- weight to be given the evidence,” however, “together with the inferences,

deductions and conclusions to be drawn from the evidence, are all matters most

appropriate for resolution by the district court.” United States v. Guerrero, 472

F.3d 784, 789 (10th Cir. 2007) (internal quotation marks omitted). W e see no

reason to reverse the district court’s finding on credibility.

And even if M r. M cArthur is correct that it is mathematically impossible

for him to have stolen $4 million, the relevant numbers for purposes of appeal are

$2.5 million— the amount at which, under § 2B1.1(b)(1)(J), his 18-level

Guidelines enhancement applies— and $3 million, the amount of his restitution

order. M r. M cA rthur’s brief does not argue that the latter two numbers are

mathematically impossible. To the contrary, he states in his brief “that the

amount of loss was at least $1.6 million but no greater than $3.8 million.”

Appellant’s Br. 14. Because both the relevant loss amounts are within that range,

M r. M cArthur’s mathematical impossibility argument is without merit, and any

error the district court made by including $4 million in the range of possible loss

was harmless.

The district court also heard testimony that the amounts M r. M cArthur stole

were “pretty consistent” from the 1980s until 2004. Id. at 93. At the time of the

sentencing hearing, data from the earlier years of the scheme was either

unavailable or as-yet undiscovered, but the existing evidence from the later years

showed that M r. M cA rthur stole $1,154,500 between 1999 and 2004. Appellant’s

-6- Br., A ttach. B, at 1. That period of time was, by M cArthur’s own admission, a

more difficult operating environment due to the increased internal controls and

change in bank statement format. Given this admission, it was not unreasonable

for the district court to assume that the amounts of the earlier thefts w ere roughly

equivalent to the amounts of later ones.

This same evidence also shows why the court’s estimate of damages

conforms to the Guidelines standard. The commentary to Section 2B1.1 instructs

that district courts “need only make a reasonable estimate of the loss” and that

“the court’s loss determination is entitled to appropriate deference” because “[t]he

sentencing judge is in a unique position to assess the evidence and estimate the

loss based upon that evidence.” U.S.S.G. § 2B1.1 cmt. 3(C) (emphasis added).

Courts are to consider “factors such as . . . the scope and duration of the offense”

when estimating the loss amount. Id. cmt. 3(C)(v). The district court properly

considered this factor, as shown by the statement it made w hen rejecting M r.

M cArthur’s argument that the amount of loss traceable to him was limited to $1.6

million:

To believe the 1.6 [million loss] story would require me to find, which I cannot do, there is no evidence, that during the perhaps nine or 10 years where you . . . can’t see what happened that M r. M cArthur took a much, much smaller amount tha[n] he took in the later years, and those later years are the years where controls were tighter, and it simply is not credible.

R. Vol. IV, at 161–62.

-7- This reasoning, together with the evidence recounted above, convinces us

that the district court’s estimate— particularly the lower end of its range— was not

unreasonable under the Guidelines. To be sure, M r. M cArthur introduced

evidence that shows some of the $5 million total missing from the Bank’s account

was due to bad checks, bank fees, other mathematical computations, and theft by

another employee, see id. at 111–12, but these facts of themselves do not render

the district court’s estimate unreasonable.

In sum, M r. M cArthur concedes that range of loss attributable to him is

between $1.6 million and $3.8 million. After a lengthy evidentiary hearing

during which M r. M cArthur was represented by able defense counsel, the district

court found he was responsible for at least $2.5 million in loss— an amount

squarely within this conceded range— and enhanced his sentence accordingly.

The record contains sufficient evidence to support this finding. W e therefore

affirm the district court’s decision to apply the enhancement.

C. The $3 M illion Restitution O rder W as Not Clearly Erroneous.

M r. M cArthur next argues that the district court erred by imposing a $3

million restitution order. He acknowledges that the M andatory Victims

Restitution Act, 18 U.S.C. § 3663A(c)(1)(A)(ii), requires restitution in this case,

but argues that the amount of the award was too high because “the government

did not establish by a preponderance that M r. M cArthur had caused a $3 million

loss.” Appellant’s Br. 19.

-8- As discussed above, however, $3 million was the low end of the district

court’s estimated loss range, which we have held was not unreasonable. This

amount is also within the loss range M r. M cArthur conceded was attributable to

him. These facts, combined with the testimony and other evidence discussed

above, persuade us the record supports a finding that M r. M cArthur caused a $3

million loss. The district court’s restitution order was therefore proper.

D. Acceptance of Responsibility

The district court decreased M r. M cArthur’s offense level by two levels

under § 3E1.1(a) of the Sentencing Guidelines for acceptance of responsibility.

He claims that he w as entitled to the additional one-level decrease under §

3E1.1(b). W e disagree.

After M r. M cArthur filed his brief, this Court published United States v.

M oreno-Trevino, 432 F.3d 1181 (10th Cir. 2005), which held “that prosecutors

have considerable discretion to file a motion” under § 3E1.1(b). Id. at 1186. It

also held that a court’s power to “review the government’s refusal to file a

Section 3E1.1(b) motion and grant a remedy” extends only to refusals that are

“(1) animated by an unconstitutional motive, or (2) not rationally related to a

legitimate government end.” Id. (internal quotation marks and citation omitted).

These holdings answer most of M r. M cArthur’s objections. He argues that

the government failed to move for the § 3E1.1(b) reduction based on a

misperception that his acceptance was untimely, which he alleges w as not a

-9- rational basis for doing so. This argument mischaracterizes § 3E1.1(b). That

section makes an additional one-level reduction available to defendants whose

timely acceptance of responsibility “permit[s] the government to avoid preparing

for trial and permitting the government and the court to allocate their resources

efficiently.” U .S.S.G. § 3E1.1(b). As the government notes, M r. M cA rthur’s

acceptance of responsibility “did not save the government anything in proving

substantial loss and destruction of a financial institution” because he “converted

the sentencing hearing into a small trial” about the amount of loss he caused.

Appellee’s Br. 46–47. The prosecutor made this argument below when he

referred to testimony from defense witnesses at the sentencing hearing disputing

M r. M cArthur’s involvement beyond the $1.6 million documented by M r. M yers,

the accountant. See R. Vol. IV, at 167.

It is not irrational for the government to decline to move for a one-level

acceptance of responsibility reduction when the defendant pleads guilty to fraud

but contests the loss amount traceable to him in the hopes of obtaining a low er §

2B1.1 enhancement. See United States v. Blanco, 466 F.3d 916, 918 (10th Cir.

2006) (“Ensuring efficient resource allocation is a legitimate government end and

a stated purpose of § 3E1.1(b). And a prosecutor’s decision not to make a §

3E1.1(b) motion on behalf of a defendant who requests independent [drug]

reweighing, with its concomitant resource expenditure, is rationally related to that

-10- end.”). We therefore affirm the district court’s decision not to aw ard M r.

M cA rthur an additional one-level reduction under § 3E1.1(b).

E. Breach of the Plea Agreement

Finally, M r. M cArthur argues that the government’s failure to move for a §

3E1.1(b) reduction w as a breach of his plea agreement. W e review de novo a

claim that the government has breached a plea agreement. United States v.

Werner, 317 F.3d 1168, 1169 (10th Cir. 2003).

Our review of the record persuades us that no breach of the plea agreement

has occurred. One page of the statement in advance of plea is missing from the

record, the result an apparent docketing error in the district court. See R. Vol. I,

Doc. 35, at 5–7 (containing pages five and seven of the statement in advance of

plea but omitting page six). As such, we rely on the recitation in M r. M cA rthur’s

brief of the plea agreement’s contents, which he quotes as stating:

Here, the plea agreement stated that the government would recommend that the defendant’s offense level under the Sentencing Guidelines be decreased by two or three levels for acceptance of responsibility, as appropriate, if, in the opinion of the United States, the defendant clearly demonstrates acceptance of responsibility for his offenses, as set forth in Section 3E1.1 of the Sentencing Guidelines.

Appellant’s Br. 31–32 (quoting R. Vol. I, Doc. 35, at 6–7). 2

2 W e are puzzled by M r. M cA rthur’s ability to quote a non-existent record page. W e assume he is able to quote the missing page because he has a copy of the entire agreement, notwithstanding the government’s failure to docket the entire agreement at the district court.

-11- M r. M cArthur received a two-level reduction under § 3E1.1(a) for

acceptance of responsibility. The plain terms of the plea agreement— which set

forth the government’s obligation as a disjunctive proposition, i.e., to recommend

a reduction of two or three levels as appropriate— have thus been met. And the

agreement vests the government with discretion to determine w hether M r.

M cArthur demonstrated acceptance of responsibility “as set forth in Section

3E1.1 of the Sentencing Guidelines,” which, as previously discussed, includes the

requirement of “permitting the government and the court to allocate their

resources efficiently.” U.S.S.G. § 3E1.1(b). Simply because the government

exercised its contractual discretion to reach a result unwanted by M r. M cArthur

does not mean that a breach occurred. Indeed, the government’s conduct was w ell

within the bounds of permissible action under the plea agreement. W e thus find

no breach of the agreement that would entitle M r. M cArthur to relief.

III. C ON CLU SIO N

The judgment of the United States D istrict Court for the District of Utah is

AFFIRM ED.

Entered for the Court,

M ichael W . M cConnell Circuit Judge

-12-