text: United States of America, Plaintiff-appellee, v. Kenneth L. Baum, D/b/a Regional Investment Corporation,defendant-appellant.united States of America, Plaintiff-appellee, v. Pamela Warfield Larson, Defendant-appellant, 974 F.2d 496 (4th Cir. 1992) :: Justia
  Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Fourth Circuit › 1992 › United States of America, Plaintiff-appellee, v. Kenneth L. Baum, D/b/a Regional Investment Corporat...
  United States of America, Plaintiff-appellee, v. Kenneth L. Baum, D/b/a Regional Investment Corporation,defendant-appellant.united States of America, Plaintiff-appellee, v. Pamela Warfield Larson, Defendant-appellant, 974 F.2d 496 (4th Cir. 1992)
  US Court of Appeals for the Fourth Circuit - 974 F.2d 496 (4th Cir. 1992) Argued April 10, 1992. Decided Sept. 1, 1992. As Amended Sept. 10, 1992
  Pamela Warfield Larson and Kenneth L. Baum, wife and husband, pled guilty respectively to making a false statement in violation of 18 U.S.C. § 1014 and to wire fraud, 18 U.S.C. § 1343, in connection with their application for a loan to purchase residential property. Larson was sentenced under the Sentencing Guidelines to a term of ten months' imprisonment, and Baum was sentenced to twelve months' imprisonment. They challenge on appeal the district court's calculation for sentencing purposes of the amount of loss attributable to their fraudulent conduct. We reverse and remand for resentencing.1 I
  The district court sentenced the defendants under U.S.S.G. § 2F1.1 (1988), which governs crimes involving fraud and deceit. That guideline provides for a base offense level of six points. Section 2F1.1(b) (1) provides for additions to the base offense level according to the magnitude of the loss associated with the offense. The district court determined the amount of loss to be equal to the amount of the loan, $168,700, and added six points to the base offense level.2 The court also added two points for more than minimal planning and deducted two points for acceptance of responsibility.
  "Loss," as the term is used in the guidelines, includes "intended, probable, or otherwise expected loss." See United States v. Schneider, 930 F.2d 555, 558 (7th Cir. 1991). The background note to § 2B1.1 indicates that " [t]he value of property taken plays an important role in determining sentences ... because it is an indicator of both the harm to the victim and the gain to the defendant." In this case, however, there is no evidence that Baum and Larson intended for the lender to lose the full amount of the mortgage, or that they could have profited to that extent. Rather, the evidence indicates that although they intended to fully pay off the loan, Baum and Larson also intended to (and did) induce the lender to unknowingly subject itself to a significant and unappetizing risk--the risk that they would default on the loan.
  In United States v. Rothberg, 954 F.2d 217, 219 (4th Cir. 1992), we held that "the amount recovered or reasonably anticipated to be recovered from collateral that secures a loan should be considered in calculating the amount of actual loss." In support of our holding in Rothberg, we relied upon a comment added to the November 1991 version of the Sentencing Guidelines, which relates specifically to fraudulent loan applications. See id. at 219, n. 3 (quoting U.S.S.G. § 2F1.1 comment (n. 7(b)) (Nov.1991) ("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")).
  The government attempts to distinguish Rothberg, arguing that the instant case involves guidelines which were in effect before the comment cited in Rothberg was added. We note, however, that Rothberg itself was argued on November 1, 1991. Accordingly, the conduct at issue in Rothberg also predated the added comment. For that matter, the added comment merely clarified, rather than changed, existing sentencing law. Cf. United States v. Deigert, 916 F.2d 916 (4th Cir. 1990) (district court properly applied amendment to Sentencing Guidelines added after underlying offense was committed, because amendment was not substantive change, but rather, clarification of existing guideline). Accordingly, the sentences of Baum and Larson are vacated, and the cases are remanded for resentencing consistent with this principle.
  Also included in the calculation of Baum's sentence was a $94,500 loan obtained by Baum from Ben Franklin Savings and Loan in 1987. The district court included this transaction in calculating Baum's offense level, concluding that the transaction was part of the same course of conduct as the First Union loan. See U.S.S.G. § 1B1.3(a) (2). Accordingly, Baum received seven added points for the loss associated with his crime. Baum has not challenged the propriety of this determination, however, on the record in this case, we are of the view that it was error to find that this transaction was part of the same course of conduct as the First Union loan. In light of our holding, during resentencing the district court will have to determine the amount of loss related to the First Union transaction, rather than simply considering the amount of the loan