F I L E D United States Court of Appeals Tenth Circuit UNITED STATES COURT OF APPEALS JAN 10 2000 TENTH CIRCUIT PATRICK FISHER Clerk
UNITED STATES OF AMERICA,
Plaintiff-Appellee, No. 98-3245 v. District of Wyoming JOSEPH RUSSO, (D.C. No. 97-10155-01-MLB)
Defendant-Appellant.
ORDER AND JUDGMENT *
Before BRORBY , HENRY , and LUCERO , Circuit Judges.
On May 27, 1998, Joseph Russo pleaded guilty to knowingly and willfully
making a false statement to the federal government in violation of 18 U.S.C. §
1001. The court sentenced him to twenty-one months imprisonment and ordered
him to pay restitution in the amount of $480,000. Mr. Russo appeals the
judgment and sentence imposed by the district court on the following grounds: 1)
* This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. The court generally disfavors the citation of orders and judgments; nevertheless, an order and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3. his plea was involuntary because the district court failed to inform him that as
part of his sentence the court could order restitution in the amount of $480,000; 2)
there was an insufficient factual basis for his guilty plea and the court failed to
establish that Mr. Russo understood the nature of the charge to which he pleaded
guilty, and 3) the court erred in finding that the amount of loss was greater than
$500,000 for purposes of computing Mr. Russo’s offense level. 1
For the following reasons we conclude that Mr. Russo’s plea was not
involuntary for lack of notice that the court could order restitution as part of his
sentence. We further conclude that the district court established a sufficient
factual basis for Mr. Russo’s guilty plea and that Mr. Russo fully understood the
nature of the crime to which he pleaded guilty. Finally, because Mr. Russo failed
to object to the amount of loss used to compute his offense level at the sentencing
hearing, he has failed to preserve this issue for appeal.
I. BACKGROUND
Appellant, Joseph Russo, and the deceased co-defendant, Edward James
Garner, Jr., entered into an agreement to establish a building materials
manufacturing business known as Panel Building Systems, Inc. (PBS). For the
1 Mr. Russo also filed two motions with the court. The motion to file a pro se supplemental reply brief is granted. The motion for expedited review and reconsideration of motion for bail pending appeal is denied.
2 purpose of obtaining capital to start this business, Mr. Russo applied for a
$630,000 loan from the United States Small Business Administration (SBA)
through the First Neodesha Bank in Neodesha, Kansas. On the application Mr.
Russo stated that he was president and 100% owner of the company. First
Neodesha Bank forwarded the application to the SBA on June 21, 1993. The SBA
approved the loan on September 15, 1993. Between October 1, 1993 and
December 10, 1993, approximately $585,000 of the $630,000 loan had been
disbursed to PBS through First Neodesha Bank. PBS eventually defaulted on the
loan, causing the SBA a loss of approximately $480,000.
As part of its investigation into the defaulted loan the SBA interviewed Mr.
Russo on three separate occasions. During the course of these interviews, the
SBA learned that Mr. Garner, rather than Mr. Russo, was the president and 100%
owner of PBS at the time the loan application was completed. The corporate
books for PBS reflected that on May 5, 1993 Mr. Garner had been appointed as
sole director of PBS. On July 15, 1993, Mr. Garner had voted himself sole
director of PBS, and the following day Mr. Garner voted himself as president,
vice-president, treasurer, secretary. Mr. Garner was also listed as the sole
shareholder of all 500 shares of PBS stock. On March 28, 1994, Mr. Garner
resigned all of his positions but retained 50 shares of stock.
On December 17, 1997, Mr. Russo was charged with two counts of making
3 a false statement on a loan application in violation of 18 U.S.C. § 1014, and with
one count of making a false writing on an SBA loan guarantee in violation of 18
U.S.C. § 1001. On May 26, 1998, Mr. Russo pleaded guilty to making a false
writing on an SBA loan guarantee. The government dismissed the other charges.
In his Petition to Enter a Plea of Guilty (Petition), Mr. Russo stated, “I made
a false writing that I was President of Panel Systems, Inc., when I knew that
Everett James Garner was the President. I did this to obtain an SBA Loan
Guaranty for Panel Systems, Inc.” Rec. vol. I, doc. 19, at ¶ 5. In the Petition
Mr. Russo also acknowledged that he had been informed that the plea of guilty
could subject him to a fine of $250,000 and that the court could order him to pay
restitution. See id. at ¶ 10. The Petition did not, however, specify any amount of
potential restitution.
During the plea colloquy Mr. Russo admitted to the court that he had gone
over the Petition with his attorney, he understood it, he was aware of the fact that
he signed it under oath, and that he had no questions about the Petition. See Rec.
vol. III., doc. 41, at 18. Later on during the plea hearing, the government stated
that it would present the following evidence in support of its prosecution of Mr.
Russo under 18 U.S.C. § 1001:
Your Honor, the evidence of the United States would be that Everett James Garner, Jr. had met the Defendant and Mr. Garner formed a corporation known as Panel Building Systems Incorporated here in Kansas and he was a sole stockholder and officer of the company. That it was determined
4 between the Defendant and Mr. Garner that they would apply for a loan at the First Neodesha State Bank to be determined by the SBA. They completed the paperwork. All the paperwork would indicate in fact instead of Mr. Garner being president, that in fact Mr. Russo was the president of the company. They applied for a loan and one was granted for $650,000 on October 1st, 1993. Mr. Russo indicated on the loan guarantee document that in fact he was the president of the corporation and the loan was granted. The loan was defaulted upon, a loss to SBA of approximately $474,000. The materiality of the statement about being the president, Your Honor, was that SBA required financial information on the president and stockholders of the corporation. Mr. Garner had a substantially poor financial record and if he would have indicated – if they would have indicated the true ownership of the corporation, the loan would not have been approved. And that would – and further, Your Honor, the SBA is part of the executive branch of the United States government. Part of the events that occurred in the District of Kansas. And that would be the evidence of the United States, Your Honor.
Id. at 24-25.
Following the government’s statement, the court asked Mr. Russo to explain
in his own words what he did. Mr. Russo responded, “On the application to the
SBA in regards to their guaranteeing the loan for the bank, First Bank of
Neodesha, I signed as president and CEO when in fact at that time Mr. Garner
was president and CEO.” Rec. vol. III, doc. 41, at 26. Upon further inquiry by
the court as to his motivations for making the false statements, Mr. Russo
explained that “it was always intended from day one that I was to be president and
CEO.” Id. When asked to respond to the government’s assertion that Mr.
Garner’s financial situation was poor and that the loan may not have been granted
if Mr. Garner had been listed on the application as the president of PBS, Mr.
Russo persisted that “there was never any participation whatsoever planned for
5 Mr. Garner.” Id. at 26. Further, he claimed that he was not aware of Mr.
Garner’s poor credit, and “was under the impression he was a wealthy man.” Id.
at 27. However, Mr. Russo admitted that he knew that had Mr. Garner been listed
as president on the loan application, the SBA would have investigated Mr.
Garner’s financial history and not his. See id. at 28.
At the conclusion of the plea hearing, the district court found that Mr.
Russo’s plea “ha[d] been made freely, voluntarily and because he is guilty as
charged and not out of ignorance, fear, inadvertence or coercion and with full
understanding of its consequence.” Id. at 39. Mr. Russo was sentenced to
twenty-one months imprisonment and, as a condition to his supervised release,
was ordered to pay restitution in the amount of approximately $480,000.
II. DISCUSSION
A. Notice of Restitution
First, Mr. Russo argues that his plea was not voluntary because the district
court failed to inform him, prior to or during his plea hearing, of the possibility
that the court would require him to pay $480,000 in restitution. Rule 11 of the
Federal Rules of Criminal Procedure addresses what is required before a plea of
guilty can be accepted. The rule “is designed to assist the district judge in
making the constitutionally required determination that a defendant’s guilty plea
6 is truly voluntary.” United States v. Gigot , 147 F.3d 1193, 1197 (10th Cir. 1998)
(quotation omitted). “Whether a district court has complied with Rule 11 in
accepting a defendant’s plea and, accordingly, whether the defendant’s plea was
knowing, intelligent, and voluntary, is a question of law we review de novo.” Id.
At the time Mr. Russo entered his plea of guilty “he was entitled to an
explanation of the consequences of his conviction, including the court’s authority
to order restitution.” United States v. Pogue , 865 F.2d 226, 228 (10th Cir. 1989)
(citing Fed. R. Crim. P. 11(c)(1)). The record shows that the court did not advise
Mr. Russo of the possibility of restitution or the potential amount during the plea
colloquy. However, Mr. Russo signed the Petition which stated: “My lawyer
informed me that the plea of “GUILTY” could subject me to . . . a fine of
$250,000 . . . . I have also been informed that the Court may order me to make
restitution . . . as a condition of my supervised release.” Rec. vol. I, doc. 19, at ¶
10. At the plea colloquy, Mr Russo admitted that he had read the Petition with
his lawyer, understood it fully, realized that he was signing it under oath, and did
not have any further questions regarding it. See Rec. vol. III., doc. 41, at 18.
Further, at the plea hearing, the government stated that the fraudulently attained
loan resulted in “a loss to SBA of approximately $474,000.” Id. at 25. Thus, the
government argues that Mr. Russo had notice of both the possibility and amount
of restitution at the time of his guilty plea.
7 In the present case, however, we do not need to decide whether Mr. Russo
had sufficient notice of restitution prior to entering his guilty plea. A violation of
Rule 11 for failure to inform a defendant of the possibility that restitution could
be ordered as a consequence of his guilty plea is subject to harmless error
analysis. See id. More importantly, we have held that where a defendant is given
an opportunity to withdraw his plea after being made aware of the restitution
order at sentencing, he “suffer[s] no prejudice from the omission of any reference
to restitution at the time of his plea.” Pogue , 865 F.2d at 229.
Here, Mr. Russo was informed at his sentencing hearing that the court
sought to impose restitution in the amount of $480,000. See Rec. vol. II, doc. 30,
at 10. Later during the hearing, Mr. Russo was given the opportunity to withdraw
his guilty plea. See id. at 16-17. In fact, the district court judge recessed the
sentencing hearing so Mr. Russo could confer in private with his attorney about
withdrawing his plea. See id. at 18-19. When the hearing re-convened, Mr.
Russo informed the court that he did not wish to withdraw his plea. See id. at 20.
Therefore, we conclude that even if the court erred in failing to inform Mr. Russo
of the possibility of restitution at the plea hearing, the fact that Mr. Russo failed
to seize the opportunity to withdraw his plea after being informed at the
sentencing hearing that the court intended to order restitution in the amount of
$480,000 made any such error harmless.
8 B. Factual Basis For the Plea
Next, Mr. Russo alleges that the district court erroneously failed to establish
a sufficient factual basis for his plea in violation of Fed. R. Civ. P. 11(f). 2 In
support of his challenge, Mr. Russo contends that there was no evidence that he
possessed willful intent or that the false statement was material, both necessary
elements for a conviction under 18 U.S.C. § 1001.
As discussed, “[w]hether a district court has complied with Rule 11 in
accepting a defendant’s plea and, accordingly, whether the defendant’s plea was
knowing, intelligent, and voluntary is a question of law we review de novo.”
Gigot , 147 F.3d at 1197. Fed. R. Civ. P. 11(f) specifically requires a court to
satisfy itself that there is a factual basis for the guilty plea before entering
judgment. “The acceptance of a guilty plea is deemed a factual finding that there
is an adequate factual basis for the plea [and] review [is] under the clearly
erroneous standard.” United States v. Blair , 54 F.3d 639, 643 (10th Cir. 1995).
Courts have resolved that “Rule 11 does not require the judge to establish
through colloquy that a factual basis exists for the plea. The court may conclude
2 Mr. Russo also argues that the court violated Rule 11(c)(1) by failing to ensure that he fully understood the nature of the charge to which he was pleading guilty. Based on our review of the record and the foregoing analysis, we conclude that the district court fully complied with Rule 11.
9 that a factual basis exists from anything that appears on the record .” United
States v. DeFusco , 949 F.2d 114, 120 (4th Cir. 1991) (citing United States v.
Lumpkins , 845 F.2d 1444, 1450 (7th Cir. 1988)) (emphasis added); see also
United States v. Tunning , 69 F.3d 107,113-14 (6th Cir. 1995); United States v.
Keiswetter , 860 F.2d 992, 996 (10th Cir. 1988), modified in part on reh’g en
banc, 866 F.2d 1301 (10th Cir. 1989); . Therefore, any statements on the record
made by the government prosecutors, see Keiswetter , 860 F.2d at 996; see also
Tunning , 69 F.3d at 112, or “a signed statement of facts which [the defendant]
admit[s] on the record [is] an accurate representation of what happened,”
DeFusco , 949 F.2d at 120, can support a factual basis for a guilty plea.
Even where a defendant affirmatively denies, or simply never admits,
having possessed the necessary criminal intent for the crime to which he is
pleading guilty, the court may nonetheless find a factual basis for the guilty plea
through other evidence in the record. See United States v. Woolley , 123 F.3d
627, 634 n.10 (7th Cir. 1997) (district court did not err in finding a factual basis
for a guilty plea based on the government’s proffered evidence of intent, even
though the defendant claimed that her statements during the plea colloquy
negated unlawful intent); United States v. Wade , 940 F.2d 1375, 1379 (10th Cir.
1991) (concluding no error in finding factual basis for guilty plea amidst
defendant’s initial protestations during plea colloquy that he did not possess
10 willful intent); DeFusco , 949 F.2d at 120 (signed statement of facts to which
defendant agreed on record was accurate was sufficient evidence to establish
factual basis for guilty plea even though defendant “never admitted to having the
necessary criminal intent for money laundering . . . .”); United States v. Alvarez-
Quiroga , 901 F.2d 1433, 1438 (7th Cir. 1990) (“It is not necessary that the
defendant acknowledge the truth of all the facts essential to guilt.”).
First, Mr. Russo claims that, because his statements during the plea
colloquy express an innocent explanation for making the false statements on his
SBA loan application, he did not admit to possessing “willful intent.”
Specifically, he argues that because he believed that “it was . . . intended from
day one that [he] was to be president,” “there was never any participation
whatsoever planned for Mr. Garner,” and he “was under the impression [Mr.
Garner] was a wealthy man,” there was no factual basis that he willfully intended
to deceive the government. However, for purposes of § 1001, we have held that
“willful” does not require proof of evil intent but rather only that “the act [was]
done deliberately and with knowledge.” Walker v. United States , 192 F.2d 47,
49 (10th Cir. 1951); but see United States v. Ranum , 96 F.3d 1020, 1029 (7th
Cir. 1996) (acknowledging circuit split over whether “willful” within the
meaning of 18 U.S.C. § 1001 requires proof of “intent to deceive”). This
interpretation is consistent with the broad, plain language of the statute, which
11 criminalizes, “mak[ing] any materially false . . . statement or representation; . .
.mak[ing] or us[ing] any false writing or document knowing the same to contain
any materially false . . . statement or entry.” 18 U.S.C. § 1001 (emphasis added).
There is sufficient evidence on the record that Mr. Russo acted deliberately
and with knowledge, and therefore, possessed willful intent. Mr. Russo’s
acknowledgments in the Petition, his statements at the plea colloquy, and the
government’s proffered evidence all establish that Mr. Russo listed himself as
president of PBS on the SBA loan application when he knew that in fact Mr.
Garner was president. See Rec. vol. I, doc. 19, at ¶ 5; vol. III, doc. 41 at 18, 24-
25. We conclude that this is sufficient evidence of willful intent under § 1001
for purposes of establishing a factual basis for a guilty plea.
Mr. Russo also argues that there was an insufficient factual basis to
establish that his false statement was material. Under 18 U.S.C. § 1001, “[a]
falsification is material if it has a natural tendency to influence, or was capable of
influencing, the decision of the tribunal in making a determination required to be
made.” United States v. Harrod , 981 F.2d 1171, 1176 (10th Cir. 1992).
At the plea colloquy, the government proffered evidence of the materiality
of Mr. Russo’s statement, stating “that SBA required financial information on the
president and stockholders of the corporation. Mr. Garner had a substantially
12 poor financial record and if he would have indicated . . . the true ownership of the
corporation, the loan would not have been approved.” Rec. vol. III, at 25. Mr.
Russo admitted that he was aware that had he listed Mr. Garner as president on
the loan application the SBA would have inquired into Mr. Garner’s financial
background and not his. See id. at 28. This was sufficient factual basis for the
court to find that the false statement was material.
To no avail, Mr. Russo relies on the following statement made by the
district court during the colloquy: “The Supreme Court has held in a fairly recent
decision that the jury must determine whether or not a misstatement is material as
opposed to a judge determining it and that’s why I’m raising this because I don’t
know.” Rec. vol. III, doc. 41, at 29. Contrary to Mr. Russo’s interpretation, the
court was not saying that it did not know whether there was sufficient evidence
of materiality for purposes of accepting Mr. Russo’s plea. Rather, when taken in
context, the court was merely fulfilling its duty to insure that Mr. Russo
understood that materiality was a question for the jury, and that by pleading
guilty he was waiving the possibility of a jury finding that the false statement was
not material. See Rec. vol. III, doc. 41, at 29-30. Mr. Russo has misinterpreted
the court’s statement. It does not support the assertion that there was no factual
basis for the plea.
Accordingly, we conclude that the district court established a sufficient
13 factual basis for Mr. Russo’s guilty plea and was in full compliance with Rule 11.
C. Calculation of Amount of Loss
Finally, Mr. Russo alleges that the district court erred in finding, for
purposes of calculating Mr. Russo’s offense level under the Sentencing
Guidelines, that the amount of loss to the victim was greater than $500,000. Mr.
Russo’s pre-sentence report found that the loss was greater than $500,000, which
resulted in an enhancement of ten levels pursuant to U.S.S.G. § 2F1.1(b)(1)(F).
See Rec. vol. IV, at 8, ¶ 26. However, a preceding paragraph in the pre-sentence
report found that the victim impact in the case was $479,739.95. Mr. Russo
argues that he should have received only a nine level enhancement because the
actual loss to the SBA was less than $500,000.
Rule 32(c)(3)(D) of the Federal Rules of Criminal Procedure states:
At the sentencing hearing, the court must afford counsel for the defendant and for the Government an opportunity to comment on the probation officer’s determinations and on other matters relating to the appropriate sentence, and must rule on any unresolved objections to the presentence report.
“[F]ailure to object to any inaccuracies in the presentence report before the
district court constitutes a waiver of the issue on appeal.” United States v. Kay ,
961 F.2d 1505, 1507 (10th Cir. 1992) (internal quotations and citations omitted);
see also United States v. Deninno , 29 F.3d 572, 580 (10th Cir. 1994) (“Failure to
14 object to a fact in a pre-sentence report, or failure to object at the hearing, acts as
an admission of fact.”); United States v. Yates , 22 F.3d 981, 988 (10th Cir. 1994)
(“Only facts that are contested at a sentencing hearing must be established by
preponderance of the evidence.”).
At the sentencing hearing, Mr. Russo asserted tentative disagreement with
the loss figure in the pre-sentence report. See Rec. vol. II, doc. 30, at 5-7. When
asked by the court if he wanted to raise the objection and defer sentencing until a
later date so that the United States Attorney or the probation officer could
respond to it and so that Mr. Russo could look into it as well, Mr. Russo and his
attorney both declined. See id. at 7. We conclude Mr. Russo waived any
objection to the calculation of the loss figure in the pre-sentence report and,
therefore, he has failed to preserve this issue for appeal.
15 III. CONCLUSION
For the foregoing reasons, we AFFIRM the district court judgment and
sentence in all respects.
Entered for the Court,
Robert H. Henry United States Circuit Judge