Wednesday, February 17, 2010
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Ninth Circuit: No Prison for Lies About Bank Fraud
By STEVEN M. ELLIS, Staff Writer
The Ninth U.S. Circuit Court of Appeals yesterday upheld a sentence imposing no prison time on a man who lied about his $3 million Arizona bank fraud conviction when he applied for a loan from a Montana bank, and then again when he sought bankruptcy protection.
A panel ruled 2-1 that Duncan W. Edwards’ sentence of five years probation and seven months’ house arrest was not substantively unreasonable, even though it fell below the 27- to 33-month sentence called for in federal sentencing guidelines.
However, the panel agreed that a settlement in Edwards’ bankruptcy determining compensation for victims did not bar U.S. District Court Judge Donald W. Molloy of the District of Montana from ordering over $100,000 in criminal restitution.
Judge Milan D. Smith Jr. joined in the majority opinion by Judge Harry Pregerson, who said the sentence was not an abuse of discretion where Molloy was aware of and weighed the circumstances of the case, including the sentence’s deterrent effect, protection of the public and the need to avoid unwanted sentencing disparities.
Judge Carlos T. Bea dissented, writing that the sentence “was based on the district court’s clearly erroneous finding that general deterrence is not a significant factor in this case and the conclusion that the sentencing factor of general deterrence is somehow restricted only to the effect prison terms would have on [Edwards’] community.”
Bea did not depart from the majority’s conclusion that the bankruptcy settlement did not collaterally estop the district court from ordering restitution under the Mandatory Victims Restitution Act because the issues presented in the two proceedings were not identical.
Edwards pleaded guilty in 2004 to one count of bankruptcy fraud in violation of 18 U.S.C. § 152(9) and one count of making a false statement to a bank in violation of Sec. 1014 for his failure to disclose his 1991 Arizona conviction and a resulting $3 million restitution order in favor of the Federal Deposit Insurance Corporation.
After relocating to Montana, but while still on probation for the Arizona felony, Edwards in early 1998 filled out a loan application failing to disclose the $3 million FDIC obligation. Later that year he sought bankruptcy protection personally and for his company, but failed to disclose assets and liabilities to a Chapter 7 trustee. These included the FDIC obligation, an expected tax return of $28,000 and other assets worth nearly $14,000.
Upon receiving Edwards’ guilty plea, Molloy imposed sentence, which included a $5,000 fine and a special assessment of $100 on each count. The government twice appealed and the Ninth Circuit twice remanded, but Molloy imposed the same sentence, adding the more than-$100,000 restitution award on the second remand.
Pregerson rejected the government’s third appeal, opining that the sentence was not substantively unreasonable because Molloy “was clearly aware of the factors at play in this difficult case” and was entitled to deference.
Bea agreed with the majority that an abuse of discretion standard governed, but said that Molloy’s finding that general deterrence was not a factor in the case was clearly erroneous, explaining:
“Like the taxpayer who decides not to defraud the fisc for fear of wearing an orange jumpsuit for a long time because he knows that the government goes after everyone—even Al Capone—for tax fraud, the contemplating bank fraud thief should be forced to consider a message other than: ‘Oh, if you get caught and you put on a repentant’s suit, you’ll probably get probation and a restitution order of 20 [percent] of what you stole. And about that restitution order, don’t worry too much because, in America, there are no debtor’s prisons. So if you don’t pay, you won’t do time.’”
The case is United States v. Edwards, No. 08-30055.
Copyright 2010, Metropolitan News Company