On Appeal From the United States District Court For the Western District of Pennsylvania. (D.C. Crim. Action Nos. 94-cr-00030-1 and 94-cr-00030-2).
Before: Stapleton, Hutchinson and Seitz, Circuit Judges.
STAPLETON, Circuit Judge:
These are appeals from the judgments of sentence imposed on Sidney Dickler and Richard Petrucci after each entered a plea of guilty to impeding the functions of the Resolution Trust Corporation ("RTC") in violation of 18 U.S.C. § 1032(2). The defendants attack their sentences on two grounds: that the court prohibited them from submitting evidence at their sentencing hearings relevant to the calculation of the "loss" caused by their criminal conduct for purposes of U.S.S.G. § 2F1.1 and that the district court erred in calculating that loss. We will reverse the judgments and remand for resentencing.
Sidney Dickler and Richard Petrucci were charged in a three-count indictment with offenses relating to their operation of two companies: Action Repossession Services, Inc. ("Action Repossession") and Action Motors, Inc. ("Action Motors"). Action Repossession was in the business of repossessing cars on behalf of financial institutions. Action Motors was a used car dealer. Dickler and Petrucci were principals in both companies. Counts One and Two of the indictment charged Dickler and Petrucci with participating in a scheme to defraud two federally insured financial institutions, Horizon Financial Savings ("Horizon") and Atlantic Financial ("Atlantic"), in violation of 18 U.S.C. § 1344. According to the indictment, the criminal activity began in 1985. The RTC became the conservator of Horizon on June 8, 1989, and of Atlantic on January 11, 1990. Count Three charged defendants with participating in a scheme to impede the functions of the RTC in violation of 18 U.S.C. § 1032(2).
Action Repossession was under contract with the victim banks to repossess cars when a car owner defaulted on his or her car loan, or when a lease terminated and the car was not voluntarily returned. Under its agreement with the banks, Action Repossession was to repossess and store the vehicle, prepare a condition report on the repossessed vehicle, and solicit three bona fide bids for the vehicle from prospective buyers.*fn1 The condition report and bids were then to be sent to the banks, who would either accept one of the bids or reject them all. If the bids were rejected, the banks might sell the car at auction. If one of the bids was accepted, the bank would send the vehicle title and bill of sale to Action Repossession, who was then expected to transfer title to the vehicle to the successful bidder on the bank's behalf.
The defendants' fraudulent scheme involved submitting false bids to the banks. Instead of soliciting bona fide bids from used car dealers or individuals, Dickler and Petrucci submitted bids with the names of fictitious bidders with the intent that Action Motors would purchase the car for resale whenever a false bid was accepted. Thus, under the scheme, when the bank accepted one of the bids and sent the title and bill of sale to Action Repossession, Action Motors would acquire the vehicle instead of the fictitious bidder and, after repairing and "detailing" it,*fn2 would then resell the vehicle for a profit.
Prior to trial, Dickler and Petrucci each entered a plea of guilty to Count Three of the indictment pursuant to a plea agreement. The respective plea agreements, which were the same in all aspects relevant to this appeal, provided that: (1) that conduct charged in Counts One and Two could be considered "relevant conduct" for purposes of the presentence investigative report ("PSR"), (2) the relevant loss for purposes of applying U.S.S.G. § 2F1.1 was more than $120,000 and less than $500,000, (3) each defendant would assist the government in the investigation of other bank fraud violations, (4) a special assessment of $50 would be paid, (5) the defendants' offense levels under the Sentencing Guidelines should be reduced for acceptance of responsibility, (6) the offense levels should be increased two levels for aggravating roles, and (7) at sentencing, the government would move to dismiss the remaining counts and recommend that the defendants be given sentences in the middle range of the applicable guideline range.
In compliance with Federal Rule Criminal Procedure 11(f), the court, before accepting the pleas of Dickler and Petrucci, asked the government to summarize its evidence as to Count Three.*fn3 The government summarized the defendants' false bid scheme. It submitted documentation to explain how the scheme worked, including a bid sheet, a condition report, a bill of sale, odometer disclosure statement, and an internal record of Action Possession indicating the purchase, repair, and retail sale of the vehicle. In the course of explaining the illustrative documentation to the court, the government indicated that the scheme included not only the preparation and submission of bids from fictitious bidders but also the preparation and submission of false condition reports. Specifically, the government represented that it had spoken with the former lessee of the vehicle described in the sample condition report, who had explained that the vehicle had been in better condition when it was repossessed than represented on the condition report (e.g., he refuted that the tires were poor, that the car had no hubcaps, and that the tail light was broken), and that the signature purporting to be his on the condition report was not. Each defendant, upon questioning by the court, agreed with the government's factual summary and entered his plea.
A PSR was subsequently prepared for each defendant. In relevant part, the PSRs contained the following factual allegations and legal Conclusions: the defendants would order employees to falsify the condition reports being sent to the financial institutions, the defendants' fraud caused the banks to lose monies on the vehicles because the submitted bids were "low balled," the defendants had obtained approximately $386,223 from the banks and the RTC through the submission of false bids (calculated by deducting the bid price and cost for detailing and repairing the vehicles from the price at which Action Motors sold the repossessed vehicles), and the amount they obtained represented the amount of loss for purposes of calculating the offense level under U.S.S.G.
Sentencing hearings were held on September 2, 1994. A separate hearing was held for each defendant although the court held that any relevant information in the first hearing (Dickler's) could be incorporated into the second. The focus of the hearings was the calculation of loss under U.S.S.G. § 2F1.1(b). Although they had stipulated to a loss of at least $120,000 in their respective plea agreements, the defendants objected to the PSR's loss calculation because it focused on the gain they realized from reselling the repossessed vehicles rather than the actual loss to the victims. They maintained that the figure did not accurately represent the victims' loss because it did not account for the effect market forces and other external factors had on their resale price. Although the defendants conceded that the court was entitled to set the loss at $120,000 based on their stipulation, they contended that no higher loss figure was permissible because the fraudulent bids they had submitted, although falsified as to identity of the purchaser, represented the fair market value of the vehicles and, accordingly, there was no loss to the victims.
According to Petrucci's testimony, the defendants submitted bids in the name of fictitious purchasers because it was difficult to obtain bona fide bids from outside bidders, a contention supported by the testimony of another used car dealer who testified that most dealers were reluctant to become involved in the repossession bid market. The defendants were concerned, according to Petrucci, that the failure to submit three bids in accordance with the standard practice of the banks would jeopardize their repossession business, which generated approximately three times the income produced by their used car dealership.
Testimony as to the banks' method for evaluating bids on repossessed vehicles was presented by James Sweeney, a former collection manager for Atlantic Financial. Sweeney explained that at the time an automobile was repossessed, the bank would determine a high and low bid for the vehicle. The high bid would be eighty-five percent of the National Automobile Dealers Association ("NADA") book's average value for that car. To obtain the low bid figure, the bank would reduce that figure based on the vehicle's condition and mileage, as represented in the vehicle condition reports and accompanying photographs. Sweeney testified that it was generally known in the repossession bid industry that banks valued their repossessed vehicles in this manner and thus that banks did not generally receive bids for more than eighty-five percent of "book" value. Sweeney further explained that once the statutory no-bid period passed, it was important to obtain and accept a reasonable bid as quickly as possible in order to avoid mounting storage charges and further erosion of the bid price.*fn4
The parties stipulated to testimony that Atlantic's bid evaluation methods were standard industry practice. Sweeney also testified that, at Dickler's suggestion, defendants would occasionally fix up the repossessed vehicle before selling it on the bank's behalf but, although this generated a higher return value for the bank, they elected not to sell most of the vehicles in this manner because they were more interested in simply disposing of the vehicles quickly. According to Petrucci, Horizon had likewise declined defendants' suggestion to improve the condition of their vehicles before soliciting buyers.
The defendant also presented evidence to explain why their resale price was generally significantly higher than their purchase bid price. Petrucci testified that all of the repossessed vehicles purchased from the banks and the RTC were detailed, and that many were also repaired before they were resold. Various witnesses testified that cosmetic and repair work increases the price of a used vehicle disproportionately to the cost of the work. Moreover, cars sold by used car dealers sell at higher prices than repossessed vehicles because repossessed vehicles are purchased on an "as is" basis and cannot be test-driven.*fn5
The defendants also attempted to present evidence that the vehicle condition reports had not been falsified, but the court would not permit this testimony, stating that defendants could not now present evidence that contradicted the facts to which they had agreed during the change of plea hearings.
The district court did not find the defendants' arguments and evidence persuasive. The court rejected all of the defendants' substantive objections to the PSR's loss calculation and adopted the PSR's focus on the defendants' resale prices less the amount they paid for the vehicles and their costs for detailing work and repairs. The court allowed only a deduction for computational errors of $34,765.50, resulting in a final loss calculation of $351,457.50. Thus, under U.S.S.G. § 2F1.1, the court added nine levels to the base offense level of six because the loss involved in the offense was greater than $350,000 and less than $500,000. That figure was increased another two levels for more than minimal planning, and increased an additional two levels for aggravating role, resulting in a total offense level of nineteen. That figure was then reduced three levels for acceptance of responsibility, for a total adjusted offense level of sixteen. This offense level, with a criminal history category of I, corresponded to a sentencing range for each defendant of twenty-one to twenty-seven months. Within that range, the court sentenced Dickler to twenty-four months of imprisonment and Petrucci to twenty-one months. These timely appeals followed.*fn6
The threshold issue is whether the district court erred in refusing to admit evidence at the sentencing hearing tending to show that the condition reports submitted to the banks were not falsified. The district court so ruled based on its view that when a defendant under oath expressly admits facts at a plea hearing in the course of persuading the court to accept his plea, he may not thereafter deny those ...