32 F.

3d 484

UNITED STATES of America, Plaintiff-Appellee,

v.
Johnnie Louis McALPINE, aka Louie McAlpine, DefendantAppellant.
No. 93-3279.

United States Court of Appeals,

Tenth Circuit.
Aug. 17, 1994.

Submitted on the briefs: *

Randall K. Rathbun, U.S. Atty., Lanny D. Welch, Asst. U.S. Atty.,
Wichita, KS, for plaintiff-appellee.
Edward W. Dosh, Parsons, KS, for defendant-appellant.
Before BALDOCK, McWILLIAMS, and BRORBY, Circuit Judges.
BALDOCK, Circuit Judge.

Defendant Johnnie Louis McAlpine pleaded guilty to eight counts of mail

fraud, 18 U.S.C. Sec. 1341, and was sentenced to forty-six (46) months
imprisonment, to be followed by three years of supervised release, and ordered
to pay $1,403,451 in restitution. Defendant appeals asserting error in his
sentencing. We have jurisdiction pursuant to 18 U.S.C. Sec. 3742.

On January 23, 1992, Defendant was indicted on twenty-six counts of mail

fraud, 18 U.S.C. Sec. 1341. In the indictment, Defendant was charged with
scheming to defraud investors by inducing them to buy interests in oil and gas
leases and properties. Through a series of misrepresentations, Defendant had
lured sixty-five investors into the scheme and had obtained from them
approximately $7 million in investment monies. Although Defendant actually
used an undetermined amount of the funds for legitimate investment purposes,
he also diverted a portion of the funds to his own personal use. In addition,
Defendant misled investors as to their ownership interests in the various

properties and as to the production capability of the properties. As a result of

Defendant's fraud and misrepresentations, the investors ended up losing
substantial amounts of money on their investments. Ultimately, Defendant
pleaded guilty to eight of the charged counts.
3

As part of the plea bargain agreement, the government agreed to recommend

Defendant receive a sentence at the low end of the guideline range, as well as a
two-level reduction for acceptance of responsibility. However, the government
and Defendant could not agree either as to a specific amount of loss or a
specific amount of restitution which Defendant should be ordered to pay to the
investors. The United States Probation Office prepared a presentence report
("PSR") and in the report estimated the actual loss to be in excess of $5 million.
Defendant objected to the Probation Office's loss findings, and the district court
set a hearing to resolve Defendant's objections and to compute a loss and
restitution amount.

At the hearing, the government called three witnesses. The first witness was an
investor, Mr. Ralph Holt, who testified that he and his children invested a total
of $1,218,921.53 in Defendant's schemes and that the minimal returns they
received did not exceed the expenses associated with the wells. As a result,
Holt explained, the investments yielded little or no overall return. The second
witness, Kelly Schmidt, was a petroleum engineer who surveyed the oil and gas
properties to determine if any of the properties had remaining value. Schmidt's
conclusion was that most of the properties had either minimal or no value;
however, Schmidt found that two properties--the Oklahoma City property and
Jewell # 1--had a combined remaining value of $624,000. Finally, the
government called Robert Schick, a United States Postal Inspector. Schick
testified that, beginning in late 1988, he attempted to contact the sixty-five
investors to gather information concerning their individual losses. Thirty-seven
of the investors responded, and Schick calculated that these thirty-seven
sustained a combined loss of $5.3 million.

In response, Defendant called two witnesses at the hearing--Mr. John Vietz and
Defendant's father John McAlpine. Only McAlpine's testimony is relevant for
purposes of this appeal. McAlpine testified, inter alia, that one of the oil and gas
properties--the Casey field--had a remaining value of $124,000, and that
$270,000 in equipment had been removed by the investors from some of the
Oklahoma oil wells.

Subsequent to the hearing, the court prepared a memorandum in which it

detailed its findings. In the memorandum, the court adopted Postal Inspector
Schick's $5.3 million actual loss figure as to the thirty-seven investors, 832

F.Supp. 1426. After subtracting the combined estimated value of the various
remaining properties--$624,000 from Schmidt's evaluations and $394,000 from
Defendant's father's evaluation--the court arrived at a net loss figure of
$4,282,000 for the thirty-seven investors. The court declined to reduce the loss
figure further despite additional arguments by the Defendant. The court then
concluded:
7

The [thirty-seven] investors who responded to the postal inspector do not

represent all of the investors. While the actual losses sustained by the other
investors cannot be precisely determined, there is no reason to ignore them or
to assume that they did not suffer losses, too. On the contrary, in view of the
scope of the scheme and the fact that it is shot through and through with fraud,
the only reasonable conclusion is that the other investors likewise suffered
losses. The court has no trouble concluding that when the entire scheme is
considered, as it must be, the actual loss exceeds $5 million.

Defendant's base offense level for violation of 18 U.S.C. Sec. 1341 was level 6.
From there, the court adjusted 11 levels because the loss caused by Defendant
exceeded $5 million, see U.S.S.G. Sec. 2F1.1 (1987 version), which resulted in
an offense level of 17. Combined with a two-level increase for more than
minimal planning, Defendant's final offense level was 19. The court rejected
the government's recommendation that Defendant receive a two-level reduction
for acceptance of responsibility and also rejected the government's
recommendation that Defendant receive a sentence at the low end of the
guideline range. Using criminal history category III, the court determined the
applicable sentencing range was thirty-seven to forty-six months and sentenced
Defendant to forty-six months imprisonment. The court also ordered Defendant
to pay restitution in the amount of $1,403,451.

On appeal, Defendant raises four challenges to his sentence. Defendant argues

that the district court erred by: (1) shifting the burden of proving loss to him;
(2) calculating actual loss improperly; (3) failing to credit Defendant for
acceptance of responsibility; and (4) using gross loss figures in computing the
restitution amount.

I.
10

Defendant first contends the district court erred in shifting the burden to prove
loss to him when it relied on disputed facts in the PSR to compute actual loss.
Defendant argues he is entitled to resentencing because the court "may have
relied upon the disputed facts in the PSI without making a finding regarding
those facts." United States v. Gattas, 862 F.2d 1432, 1435 (10th Cir.1988).

11

Clearly, the government has the burden to prove the amount of loss by a
preponderance of the evidence. See United States v. Reddeck, 22 F.3d 1504,
1512 (10th Cir.1994). Defendant's contention that the district court wrongfully
shifted the burden of proof to him is a legal issue which we review de novo.
See United States v. Kirk, 894 F.2d 1162, 1163 (10th Cir.1990).

12

Our review of the record convinces us the district court did not erroneously
shift the burden of proving the amount of loss to Defendant by relying on
disputed facts in the PSR. Instead, the court relied on the evidence presented by
the government at the sentencing hearing to support its loss calculation. At the
sentencing hearing, the government met its burden to prove loss through the
testimony of Postal Inspector Schick. Schick testified that thirty-seven investors
had losses of $5.3 million. The court found Schick's testimony to be reliable,
and Defendant did not dispute the $5.3 million actual loss figure. From this
figure, the court subtracted the value of the various remaining oil properties, as
determined by Schmidt and Defendant's father John McAlpine, to reach a net
actual loss figure of $4.2 million. All of these amounts were adduced from
testimony at the hearing, rather than from the PSR. Although the court stated in
its memorandum that it would not "totally disregard the loss figures used by the
probation officer," the court clearly set forth its findings on actual loss based on
the evidence and testimony adduced at the hearing. Therefore, we conclude the
court held the government to its burden of proving loss and did not erroneously
shift the burden to Defendant.

13

Furthermore, it would appear that Defendant asserts error by the district court
in violation of Fed.R.Crim.P. 32(c)(3)(D). Contrary to Defendant's assertions
however, we conclude the court considered the evidence adduced at the
hearing, and did not take into account disputed matters in computing the
amount of loss. Therefore, we find no violation of Rule 32, and Defendant is
not entitled to resentencing on the question of loss. See Gattas, 862 F.2d at
1435 ("[r]esentencing is an appropriate remedy ... only when the sentencing
judge may in fact have relied on disputed facts in the PSI without conducting a
hearing on the truth of such facts").1

II.
14

Defendant next argues the district court erred in its calculation of actual loss.
Specifically, Defendant argues the court erred in: (1) estimating actual loss as
opposed to arriving at an exact loss figure, and (2) making findings of fact
contrary to the evidence on actual loss. We review the district court's
interpretation and application of the sentencing guidelines de novo, United
States v. Brownlee, 970 F.2d 764, 764 (10th Cir.1992), and review the court's

factual findings for clear error. United States v. Lyons, 992 F.2d 1029, 1032
(10th Cir.1993). We will not disturb the court's factual findings unless they are
without support in the record, or unless "after reviewing all the evidence we are
left with the definite and firm conviction that a mistake has been made." United
States v. Easterling, 921 F.2d 1073, 1077 (10th Cir.1990), cert. denied, 500
U.S. 937, 111 S.Ct. 2066, 114 L.Ed.2d 470 (1991).
A.
15

Under the sentencing guidelines, the district court is empowered to make a

reasonable estimate of loss attributable to fraud, based on all available
information. See U.S.S.G. Sec. 2F1.1, Application n. 8; see also U.S.S.G. Sec.
2B1.1, Application n. 3 (court empowered to make a reasonable estimate of the
loss for theft-related offenses). At the time of Defendant's sentencing, the
applicable guideline provided in part:

16

The amount of loss need not be precise. The court is not expected to identify
each victim and the loss suffered to arrive at an exact figure. The court need
only make a reasonable estimate of the loss, given the available information.
The estimate may be based on an approximate number of victims and an
estimate of the average loss to each victim, or on more general factors, such as
the nature and duration of the fraud....

17

U.S.S.G. Sec. 2F1.1, Application n. 8 (1987 version). The guidelines also

expressly authorized the court to consider the nature and scope of the entire
scheme in determining the amount of loss. See U.S.S.G. Sec. 2F1.1,
Application n. 8. (1987 version). As a result, the court was clearly within its
authority in estimating the loss attributable to Defendant's fraud.

18

Furthermore, we conclude the court's estimation of actual loss was not

erroneous in the instant case. The court was presented with undisputed
testimony of $4.2 million in net actual losses for the thirty-seven responding
victims. The court also heard Schick's testimony that the twenty-eight other
investors, who did not respond to his inquiries during the investigation, also
incurred losses. Tr.Vol. III, p. 135-36. Moreover, although Schick did not
provide loss figures for these remaining twenty-eight investors, Holt provided
the following testimony at the hearing:

19(by the court): How do you know [the other investors] had other expenses
Q
[associated with their investments in the oil and gas properties]?
A (by Holt): I have received copies of billings from Oakland as to what they billed
20

20
the participants and I know that they were billed on the same basis that I was billed.
I know that I have submitted bills to them for legal expenses we incurred because I
handled the bookkeeping on that. So I know that their proportionate share was equal
and handled on a pro rata basis, as was mine, for anything that happened after that
point.
21

Tr.Vol. III, p. 60.

22

Based on the testimony of Schick and Holt, the court could reasonably infer
that the other twenty-eight investors sustained losses on their investments.
Having concluded this inference was reasonable, and given the undisputed
testimony that thirty-seven investors lost $4.2 million, we hold the court could
also reasonably conclude the other twenty-eight investors' losses were at least
in excess of $800,000. In doing so, the court properly cited the nature of the
scheme--the fact that Defendant's far-reaching misrepresentations and fraud
permeated the scheme from beginning to end--and the scope of the scheme--the
fact that Defendant's fraud extended over a period of two years. See U.S.S.G.
Sec. 2F1.1, Application n. 8. We conclude the court's reference to the nature
and scope of the scheme, together with the evidence of the amount of loss
suffered by the thirty-seven investors, supports the court's estimation that the
amount of loss sustained by all sixty-five investors exceeded $5 million.2 B.

23

Defendant also argues the court's factual findings concerning actual loss are
contrary to the evidence. Defendant claims the court improperly failed to
reduce the amount of loss by: (1) $1.1 million for amounts pledged by investors
but not paid, and (2) $2 million for tax benefits obtained by the victims through
their investments.

24

We conclude the district court did not erroneously refuse to reduce the actual
loss amount by $1.1 million for amounts pledged but not paid. The record
reflects that the investors sustained a minimum of $4.2 million in losses without
any reference to the $1.1 million they ultimately decided not to invest. Because
the court never added the $1.1 million figure into its calculation of the loss, we
conclude the court correctly refused to reduce the total amount of loss by $1.1
million.

25

The court also correctly refused to give Defendant a $2 million credit because
the victims were able to obtain tax benefits on their investments. Defendant
cites no authority in support of his novel proposition, and we have found none.
In previous cases where we have deducted the value of something the victim
has received in computing actual loss, Defendant himself has been responsible

for the victim's receipt of something of value. See United States v. Smith, 951
F.2d 1164, 1167 (10th Cir.1991) (victims losses decreased because they
received from Defendant value in form of security interests and promises of
individual borrowers to repay fraudulently secured loans); United States v.
Gennuso, 967 F.2d 1460, 1461-62 (10th Cir.1992) (victims losses decreased
because they received from defendant value of wholesale cost of water
purification system and of a vacation package).
26

We note that had the Sentencing Commission desired to allow for tax savings
to a victim as an element to be considered in reducing loss, it could have
provided for such in the Guidelines. See, e.g., U.S.S.G. Sec. 2B1.1, Application
n. 2 (specifically providing that interest that could have been earned is not
considered in calculating loss of stolen funds). Because the Sentencing
Commission did not do so, and because no Tenth Circuit or other precedent
supports Defendant's argument to reduce the amount of loss by a victim's tax
savings, we reject Defendant's argument and conclude the district court did not
err in refusing to reduce the amount of loss by the amount of the victims' tax
savings.

III.
27

Defendant next contends the district court erred in denying him a sentence
reduction for acceptance of responsibility. Specifically, Defendant claims the
court erred in: (1) relying on an unsworn statement submitted to the probation
officer by Defendant to find he had not accepted responsibility after earlier
finding a portion of the same statement unpersuasive on another issue, and (2)
making findings of fact contrary to the evidence, including a finding that
Defendant's failure to testify at his sentencing hearing was to avoid crossexamination.

28

Defendant has the burden of proving he is entitled to a sentence reduction for

acceptance of responsibility and must show "recognition and affirmative
acceptance of personal responsibility for his criminal conduct." U.S.S.G. Sec.
3E1.1(a). We review the court's determination not to allow a reduction for
acceptance of responsibility for clear error. United States v. Spedalieri, 910
F.2d 707, 712 (10th Cir.1990). "[T]he sentencing judge is in a unique position
to evaluate a defendant's acceptance of responsibility. For this reason, the
determination of the sentencing judge is entitled to great deference on review."
U.S.S.G. Sec. 3E1.1, application n. 5.

A.

29

First, contrary to Defendant's assertions, the court was clearly entitled to

examine Defendant's statement to the probation officer, whether sworn or not,
in determining whether reduction for acceptance of responsibility was
appropriate. See United States v. Beserra, 967 F.2d 254, 255 (7th Cir.), cert.
denied, --- U.S. ----, 113 S.Ct. 419, 121 L.Ed.2d 341 (1992) (upholding district
court's refusal to grant reduction for acceptance of responsibility based on the
district court's conclusion that the defendant's letter to the probation officer
showed he had not accepted responsibility for his actions); see also United
States v. Beaulieu, 893 F.2d 1177, 1179 (10th Cir.1990) (district court entitled
to use any reliable information to support its factual determinations); U.S.S.G.
Sec. 6A1.3(a) ("[i]n resolving any reasonable dispute concerning a factor
important to the sentencing determination, the court may consider relevant
information without regard to its admissibility under the rules of evidence ...
provided that the information has sufficient indicia of reliability"). Moreover,
the court's reliance on Defendant's unsworn statement after earlier finding a
portion of the same statement unpersuasive was entirely consistent. Just as the
court found Defendant's statements regarding commingling lacked credibility, it
also found Defendant's statements concerning his role in the offense lacked
credibility. We conclude the court's use of Defendant's statement was entirely
proper.

B.
30

IV.

We also reject Defendant's argument that the district court's factual findings
were clearly erroneous. The district court recited at length its reasons for
concluding Defendant failed to prove he was entitled to a reduction for
acceptance of responsibility. The court cited several examples in Defendant's
statement to support its conclusion, including Defendant's assertions that the
investors were "sophisticated," and that the investments were "risky," and that "
[t]he fraud primarily involved the inefficient operation of the fields and shoddy
accounting techniques used by [Defendant]." The court concluded these
examples, instead of admissions of guilt, were merely excuses by Defendant,
and attempts by Defendant to shift blame away from himself. In addition, the
court cited "the overall tenor of [Defendant's] objections to the presentence
report," and "the evidence he sought to elicit at the hearing and in a posthearing memoranda" in support of its conclusion that Defendant had failed to
accept responsibility for the fraud. The district court was in the best position to
observe all of this evidence, and did not clearly err in holding the Defendant
had not met his burden to prove he was entitled to a reduction for acceptance of
responsibility.

31

Finally, Defendant challenges the district court's calculation of the amount of

restitution. Defendant argues that the court erred in using gross figures instead
of actual loss figures in computing restitution. Defendant claims the court's
reliance on the gross figures resulted in a restitution amount restoring the
victims' investments, instead of compensating them for their losses. We review
the court's calculation of restitution for clear error. United States v. Mitchell, 15
F.3d 953 (10th Cir.1994).

32

Under 18 U.S.C. Sec. 3663, the sentencing court is authorized to order a

defendant to make restitution to any victim of his offense. In deciding whether
to order restitution, the court shall consider, among other things, "the amount of
loss sustained by any victim as a result of the offense." 18 U.S.C. Sec. 3664(a).

33

In calculating the amount of loss, the district court considered both Postal
Inspector Schick's testimony on actual loss and the probation officer's figures
on total investment, which were contained in the presentence report. The court
prepared a chart identifying some of the victims and set forth its best estimate
of the "loss amounts" for those victims. The court then added all of the amounts
together to reach a total restitution figure.

34

However, the court's calculation of the restitution amount is problematic

because it is unclear whether the individual figures underlying the total amount
of restitution actually represent loss suffered by the victims or merely the
amount they invested in the schemes. For some of the victims, the court's
computed restitution amounts correspond exactly to the total investment figures
in the PSR. For other victims, the figures are different. However, even where
the figures are different, the record does not indicate how the court arrived at
the specific figures. As a result, we are unable to effectively review the court's
findings, and are unable to determine if the findings represent the victims'
losses. Thus, we vacate the order of restitution and remand for the court to
make specific factual findings consistent with this opinion in recomputing the
restitution amount. See United States v. Gilbreath, 9 F.3d 85, 87 (10th
Cir.1993) (where record was unclear as to whether defendant had present assets
or the capacity to generate income through future legal undertakings to satisfy
restitution award, court vacated restitution order and remanded for further
proceedings).

35

In sum, we AFFIRM the district court's calculation of actual loss, and its denial
of a reduction for acceptance of responsibility. We VACATE the restitution
order and REMAND for further proceedings consistent with this opinion.

Both parties waived oral argument. The case is therefore submitted on the
briefs

Defendant also argues he is entitled to resentencing as to actual loss because

the court relied on disputed facts in determining the amount of investors' funds
commingled by Defendant. Defendant's contention lacks merit, however,
because our review of the record convinces us the disputed matter--i.e., the
extent of commingling--was clearly not considered by the court in computing
the amount of actual loss

Contrary to Defendant's assertions, once the court found the total amount of
loss exceeded $5 million, the court was not required to further fix an exact,
precise amount of the loss. See, e.g., United States v. Chichy, 1 F.3d 1501,
1510-11 (6th Cir.), cert. denied, --- U.S. ----, 114 S.Ct. 620, 126 L.Ed.2d 584
(1993) (court estimates actual loss as between $70,000 and $120,000, without
specifying an exact figure)