Friday, June 13, 2008

Case o' The Week: Ninth Checks Attempts to Limit Loss Amounts, Santos

Looking for cheap witticisms at the Ninth's expense, gleaned from last week's headlines? Ain't nothin' here. Y'all best be movin' on, compadre.

We instead focus on the interesting, though disappointing, decision on loss calculations from Judge Reinhardt (right).
United States v. Santos, __ F.3d __, 2008 WL 2312391 (9th Cir. June 6, 2008), decision available here.

Players: Hard-fought appeal by (then) ED Cal AFPD, (now) ND Cal AFPD Ned Smock.

Facts: Santos and a co-conspirator used checks stolen from the mail as templates to produce counterfeit checks. (WL star cites not yet available). The counterfeit checks were then cashed by others. Santos pleaded guilty to various charges.

The PSR hit him with almost $300k in loss, adding both the value of the stolen checks and the value of the counterfeit checks. The district court rejected Santos’s complaint that only the value of the counterfeit checks should count and sentenced the defendant to seventy-seven months.

Issue(s): “Whether a district court may use the face value of stolen checks in estimating the intended loss of a counterfeit scheme is a matter of first impression in this circuit.” . . . “Santos argues that the district court erred in using the total face value of the stolen checks, rather than the counterfeit checks, to determine intended loss for the purposes of a sentencing enhancement under § 2B1.1(b)(1) of the United States Sentencing Guidelines (“U.S.S.G.”).”

Held: “We agree with the approach of the Third and Eleventh Circuits. Absent evidence to the contrary, the district court may reasonably infer that the participants in a counterfeiting scheme intend to take as much as they know they can. Thus, where the scheme involves using stolen checks as templates for counterfeiting, the face value of the stolen checks is ‘probative’ of the defendants’ intended loss, as it is the amount that the participants know is in the accounts from which they are drawing.” . . . .“Adopting the approach of the Eleventh Circuit in United States v. Grant, 431 F.3d 760 (11th Cir.2005), we hold that, in cases such as this, a district court may reasonably infer, absent a showing to the contrary, that the defendant intended to cause loss up to the full face value of the stolen checks. Because the district court did not clearly err in finding that Santos intended to cash counterfeit checks up to the face amount of the stolen checks, we affirm its application of a 12-level enhancement under § 2B1.1(b)(1)(G).”

Of Note: This is a new rule for the Ninth, imported from the Eleventh. Here’s the Grant rule on calculating loss, quoted favorably in Santos:

“[W]e hold when an individual possesses a stolen check, or a photocopy of a stolen check, for the purpose of counterfeiting, the district court does not clearly err when it uses the full face value of that stolen check in making a reasonable calculation of the intended loss. Although a district court cannot equate the full face value of stolen checks with intended loss as a matter of law in every case, it can still find a defendant intended to utilize the full face value of stolen checks. Where the Government presents evidence indicating the defendant intended to utilize the full face value of the checks, and the defendant fails to present countervailing evidence, a district court is especially justified in including the checks’ full face value in its intended loss calculation.”

How to Use: Santos isn’t a blank check on loss calculation (pardon the pun). Judge Reinhardt cautions that a “court may not mechanically assume that the face value of the stolen checks is the intended loss . . . . Rather, it must consider the evidence, if any, presented by the defendant tending to show that he did not intend to produce counterfeit checks up to the full face value of the stolen checks.”

Read footnote seven of Santos carefully – Judge Reinhardt gives us a number of other examples of how a defendant may not have intended to steal through counterfeiting the entire amount of stolen checks.

For Further Reading: Seems like the dust had settled on loss-calculation law, but new fraud schemes drive new rules. The Ninth recently gave us the great loss-calculation decision of United States v. Crandall, 525 F.3d 907(9th Cir. 2008), discussing loss in the real estate context.

For the party line on loss calculations (but useful nonetheless), see the Commission’s training outline here.

Steven Kalar, Senior Litigator, N.D. Cal. FPD. Website at


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Blogger Greg May said...

One of the cleverest blog post introductions I've ever run across!

Wednesday, June 18, 2008 2:38:00 AM  

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