                                                        [DO NOT PUBLISH]


            IN THE UNITED STATES COURT OF APPEALS

                    FOR THE ELEVENTH CIRCUIT           FILED
                     ________________________ U.S. COURT OF APPEALS
                                                        ELEVENTH CIRCUIT
                                                         JANUARY 4, 2011
                            No. 09-15151
                                                            JOHN LEY
                        Non-Argument Calendar                CLERK
                      ________________________

               D. C. Docket No. 08-00049-CR-4-RH-WCS

UNITED STATES OF AMERICA,


                                                          Plaintiff-Appellee,

                                 versus

DON WARNER REINHARD,

                                                       Defendant-Appellant.


                      ________________________

               Appeal from the United States District Court
                   for the Northern District of Florida
                     _________________________

                            (January 4, 2011)

Before EDMONDSON, MARTIN and KRAVITCH, Circuit Judges.

PER CURIAM:
       Don Reinhard was an apparently successful businessman who made

millions of dollars investing other people’s money. But Reinhard’s investment

business fell on hard times in the early 2000s, and amid allegations of

mismanagement, he filed for bankruptcy in 2006. Two years later, after a lengthy

investigation by the Internal Revenue Service, a federal grand jury returned a 23-

count indictment charging Reinhard with bank fraud under 18 U.S.C. § 1014 and

failing to disclose assets to the bankruptcy trustee, in violation of 18 U.S.C.

§ 152(3).1 Reinhard pleaded guilty to both charges.2

       The district court, after considering the U.S. Sentencing Guideline

concerning victim losses, U.S.S.G. § 2B1.1(b)(1), increased Reinhard’s offense

level by 12, sentenced him at the top of the applicable guidelines range to 51

months in prison, and issued a restitution order.3 In this appeal, Reinhard

challenges the district court’s application of § 2B1.1(b)(1) and presents two

questions for our consideration.




       1
        The indictment also charged violations of 18 U.S.C. §§ 2, 152(7), 1001(a), 1344,
1956(a)(1)(B)(i), and 2314, along with tax-related crimes under 26 U.S.C. § 7206(1)–(2).
       2
        In exchange for the guilty plea on these counts and several others, the Government had
the remaining charges in the indictment dismissed.
       3
        The court also imposed a five-year term of supervised release, which Reinhard has not
challenged on appeal.

                                               2
      First, after filing for bankruptcy in 2006, Reinhard failed to disclose that he

owned three valuable glass sculptures. The works were appraised at $40,000 each

in 2004, but one of them sold at auction for only $24,000 in 2007. Did the district

court err by using the works’ 2004 appraisal value to measure the bankruptcy

estate’s loss?

      Second, Reinhard defaulted on a loan that his bank had modified in reliance

on false documentation he submitted. Reinhard contends that the bank was going

to lose money anyway before the loan was modified. Did the district court err by

attributing the bank’s loss to Reinhard’s fraud? If so, was the corresponding order

of restitution improper?

                                                I

      We begin our analysis with the loss attributable to Reinhard’s bankruptcy

fraud. The district court determined that the bankruptcy estate’s loss on the

undisclosed sculptures was $120,000: three times the $40,000 appraisal figure for

each work.4 The court’s determination is a factual finding that we review for clear

error. United States v. Cabrera, 172 F.3d 1287, 1292 (11th Cir. 1999).




      4
          The specific appraisal figures were $38,000, $39,000, and $43,000.

                                                3
       Reinhard concedes that the estate’s loss should be measured by the value of

the undisclosed artworks,5 but he argues that the district court clearly erred by

relying on outdated appraisals in a sinking economy. He contends that the

$24,000 auction price was a more appropriate measure of each work’s value.

       There is something to be said for Reinhard’s argument, but we see no clear

error in the district court’s finding that the appraisals were a better measure of

value. For one thing, just as the 2004 appraisals may have overstated the

sculptures’ 2006 value, the 2007 sale price may have understated the works’ 2006

value. And although auction prices are often good indicators of market value,

Reinhard sold the work at issue here online, through eBay. Unlike a gallery sale

or live auction—in which buyers would have been able to see the sculpture in

person—the online auction reduced the work to a flat, digital representation. The

Government presented a reasonable estimate of the bankruptcy estate’s loss,6 and




       5
         Reinhard halfheartedly argues that he should only be held responsible for loss associated
with the one work he sold, but “loss” under U.S.S.G. § 2B1.1(b)(1) means “the greater of actual
or intended loss.” U.S.S.G. § 2B1.1, comment. (n.3(A)). On these facts, the district court
reasonably found that by refusing to disclose his ownership of the works, Reinhard intended to
deprive the bankruptcy estate of the value of all three.
       6
         Cf. Cabrera, 172 F.3d at 1292 (“The guidelines do not require the government to make
a fraud loss determination with precision; the figure need only be a reasonable estimate given the
information available to the government.”).

                                                4
the court did not err by finding that formal appraisals were a better indication of

value here than an online auction price.

                                             II

      With respect to Reinhard’s bank fraud, the following facts were established

before sentencing. Reinhard financed the purchase of a 2000 Sea Ray pleasure

boat with a loan from SouthTrust Bank.7 In 2003, Reinhard decided to reduce his

debt-servicing burden by selling the Sea Ray and using the proceeds to buy a

smaller 2004 Contender boat. To secure financing for the deal, Reinhard provided

SouthTrust with what purported to be a copy of his 2001 federal tax return.

Relying on that document, SouthTrust agreed to modify the terms of the original

loan by accepting a $95,000 payment on the outstanding principal and substituting

the Contender for the Sea Ray as collateral.

      But the document Reinhard gave to the bank had never been filed with the

IRS. Moreover, where the return he gave the bank showed $944,000 in adjusted

gross income, the return he had actually filed reported only $389,000. According

to an IRS investigator’s conversation with the bank’s president, had the bank been

given Reinhard’s real tax return, it never would have approved the loan




      7
          When Reinhard was sentenced, SouthTrust had become part of Wachovia.

                                             5
modification. And when Reinhard defaulted on the modified loan, SouthTrust was

left with a deficiency of over $147,000.8

       A. Sentencing

       Reinhard contends that the bank was going to lose money regardless of

whether it modified the loan, and he argues that the district court erred by

attributing a loss that the bank would have incurred anyway (when he defaulted on

the original loan) to his fraud. The Government, on the other hand, insists that

Reinhard should be held responsible for any loss that the bank incurred on the loan

as modified. In other words, the Government prefers a simpler loss calculation:

“While it may be true that the bank was ultimately in a better position in relation

to its loan to the defendant after the Contender transaction, the evidence

established that the bank ultimately lost $147,240.76.” Appellee’s Br. 21.

       We are skeptical of the Government’s argument,9 but we need not decide the

issue here. In calculating the advisory range of sentences under the Guidelines,

the district court increased Reinhard’s offense level by 12 points because the total



       8
          The outstanding balance on the loan was $213,158.84, and the Contender sold for
$82,739.54, creating a true deficiency of $130,419.30. But SouthTrust had to spend another
$16,821.46 to retrieve the boat for sale, and for the sake of simplicity, we have combined these
figures in our discussion of the $147,240.76 “deficiency.”
       9
        The only loss relevant to Reinhard’s offense level under the Guidelines is “pecuniary
harm that resulted from the offense.” U.S.S.G. § 2B1.1, comment. (n.3(A)(i)) (emphasis added).

                                                6
loss attributable to his bank and bankruptcy frauds was $357,817, or between

$200,000 and $400,000. See U.S.S.G. § 2B1.1(b)(1). In addition to the bank’s

$147,000 deficiency, that figure included the $120,000 bankruptcy loss associated

with the undisclosed artworks and other, undisputed losses of over $90,000. Even

if we concluded that the district court had erred by holding Reinhard responsible

for the deficiency, the total loss would still exceed $210,000—which would

warrant the same 12-point offense-level adjustment that the district court applied.

Because a mistake on this point would not have affected Reinhard’s sentence, any

error was harmless. See, e.g., United States v. Raad, 406 F.3d 1322, 1323 n.1

(11th Cir. 2005).

      B. Restitution

      The district court also ordered Reinhard to pay the bank over $171,000 in

restitution, which included the $147,000 deficiency along with interest and

attorney’s fees. The Mandatory Victims Restitution Act requires a sentencing

court to order the defendant to compensate his victims for any financial losses

“resulting” from his crimes. 18 U.S.C. § 3663A. The question here is whether the

district court clearly erred in its finding that the bank’s exposure to the deficiency

resulted from Reinhard’s fraud. See United States v. Hasson, 333 F.3d 1264, 1270




                                           7
(11th Cir. 2003) (“We review factual findings underlying a restitution order for

clear error.”).10

       In defense of the award, the Government adopts the same argument it made

concerning loss under U.S.S.G. § 2B1.1(b)(1): Reinhard should pay for the bank’s

losses regardless of whether it “was ultimately in a better position in relation to its

loan” after the modification. Appellee’s Br. 21. But that simplistic approach

would run afoul of express language in the Mandatory Victims Restitution Act,

which authorizes restitution only for losses “resulting” from the “offense.” 18

U.S.C. § 3663A(b)(1); cf. United States v. Dickerson, 370 F.3d 1330, 1335 (11th

Cir. 2004) (“A federal district court has ‘no inherent authority to order restitution,

and may do so only as explicitly empowered by statute.’” (quoting United States v.

Hensley, 91 F.3d 274, 276 (1st Cir. 1996))). Defaulting on a loan is not a crime,

and holding Reinhard responsible for what the bank “ultimately” lost—even if the

modification may have saved it money—would be to hold him responsible for loss

resulting not from the offense itself, but from a preexisting and lawful business

relationship.


       10
          The Government argues that we should review the restitution award only for plain error
because Reinhard did not specifically object to the award when it was imposed. We disagree.
The district court derived the loss figure for the restitution award from the loss calculation under
U.S.S.G. § 2B1.1(b)(1). Having failed to persuade the court on the latter issue, Reinhard was not
required to raise the same objection again when the court ordered restitution.

                                                 8
       Reinhard’s offense was making false statements during his application for a

loan modification.11 And the only loss that could fairly be said to have resulted

from that offense is loss proximately caused by the modification itself, as opposed

to the original loan. As the district court said, “if there was a loss that was already

going to be incurred anyway, then that’s not attributable to the later fraud.”

Sentencing Tr. 6; see also United States v. Liss, 265 F.3d 1220, 1231 (11th Cir.

2001) (“An award of restitution must be based on the amount of loss actually

caused by the defendant’s conduct.”).

       When the defendant challenges the amount of a victim’s loss for the

purposes of a restitution award, the Government bears the burden of proving that

loss by a preponderance of the evidence. 18 U.S.C. § 3664(e). Here, therefore,

the Government had to prove that the bank’s losses on the modified loan exceeded

those the bank would have incurred when Reinhard defaulted on the original loan.

The only evidence the Government produced on this point was testimony that the




       11
            Specifically, Reinhard pleaded guilty to

       knowingly mak[ing] any false statement or report . . . for the purpose of
       influencing in any way the action of . . . any institution the accounts of which are
       insured by the Federal Deposit Insurance Corporation . . . upon any . . . loan, or
       any change or extension of the same, by . . . substitution of security therefor.

18 U.S.C. § 1014.

                                                  9
bank never would have modified the loan if it had known that Reinhard submitted

a false tax return with his application.

      On the other side of the scale was conflicting testimony from the same

witness that the bank agreed to the modification “because it was actually reducing

the bank’s risk with respect to the [original] loan.” Sentencing Tr. 49. And

although the financial particulars of the modification are hazy, rough figures in the

record support Reinhard’s contention that the bank benefitted from the transaction.

We know from the modification agreement, for instance, that the outstanding

balance on the original loan was around $327,000. And testimony at the

sentencing hearing revealed that Reinhard gave the bank $95,000 to facilitate the

modification, under the terms of which the bank financed the purchase of a

$265,000 boat with a $233,000 loan. This development not only reduced the

bank’s overall exposure; it also left the bank with a fully secured loan.

      Although the deficiency when Reinhard defaulted means that the modified

loan eventually became undersecured, the record does not support a finding that

the modification left the bank undersecured at the outset. Accordingly, unless the

loan was at least as oversecured before the modification as it was afterward, none

of the bank’s loss on the deficiency can be attributed to Reinhard’s fraud. And by




                                           10
failing to show that the modified loan was any riskier than the original,12 the

Government failed to present enough evidence to support the district court’s

finding that the bank’s loss was properly charged to Reinhard’s crime.

       Notwithstanding the Government’s failure to discharge its burden of proof

on this issue, the district court concluded that all of the bank’s loss on the

deficiency resulted from the fraud. This finding not only discounted the

possibility “that the bank was going to take a loss anyway,” Sentencing Tr. 63, it

also assumed, without any evidence, that the bank would have taken no loss if

Reinhard had defaulted on the loan under its original terms. The record, at least in

its current state, thus leaves us “with the definite and firm conviction that a

mistake has been committed.” Anderson v. Bessemer City, 470 U.S. 564, 573

(1985), quoted in United States v. Robertson, 493 F.3d 1322, 1330 (11th Cir.

2007). This was clear error.

                                               III

       Because the district court committed, at most, only harmless error with

respect to the victim-loss calculations under the Guidelines, we affirm Reinhard’s

sentence. But in light of our conclusion that the court clearly erred in its finding


       12
          In response to questioning by the district court, the Government’s primary witness
admitted that she “[didn’t] know anything about the transaction of the big boat” that secured the
original loan. Sentencing Tr. 58.

                                                11
that Reinhard’s bank fraud “result[ed] in damage or loss” to SouthTrust, 18 U.S.C.

§ 3663A(b)(1), we vacate the restitution award in favor of the bank and remand

for further proceedings consistent with this opinion.13

       AFFIRMED in part, VACATED in part, and REMANDED.




       13
          The restitution award in favor of the IRS has not been challenged on appeal, and we
leave it undisturbed.

                                               12
