180. Sample Government Alborz Memorandum -- Fifth Circuit
From a Fifth Circuit brief, October 1994.
3. The information considered by the district court formed a proper basis for the loss estimate.
In determining the sentence, the district court noted that a variety of sources of information and factors supported the loss estimate. (Tr. 47, l. 1-6). The defendant contends on appeal that this information was not adequate. Defendant cites United States v. Alborz, 818 F. Supp. 1306 (N.D. Cal. 1993), for the proposition that the value of "legitimate activities" must be credited to him in computing the amount of loss. (Br. at 13-14). Relying on Alborz, XXXXXX also contends that only information about retail value could properly be used to determine the loss estimate. However, Alborz is distinguishable on its facts. Furthermore, Alborz disregards an important principle of loss evaluation, leading to erroneous conclusions. It has no application to the instant case.
In Alborz, the court stated:
In the instant case, on the other hand, the PSR does discuss "detailing" work. As stated above, the PSR notes that the vehicles were "cosmetically improved" and that there was no evidence of significant mechanical repairs. (PSR ¶ 28). The purpose of these alterations was to disguise the vehicles so they would look like the low mileage cars they were represented to be. (PSR ¶ 36). This type of cosmetic "detailing" to conceal a vehicle's true condition is typical of deceptive practices in the used car industry. See Trade Regulation Rule Concerning the Sale of Used Motor Vehicles, 49 Fed. Reg. 45692, 45701 (1984). The PSR correctly rejects the notion that this part of the fraudulent scheme somehow inures to the defendant's benefit in calculating losses.[FN1]
In sum, this case is not like Alborz because the PSR here did consider and properly rejected the proposition that the defendant should get credit for the costs of disguising the true mileage of the vehicles. Moreover, Alborz is, simply put, wrongly decided.
The Guidelines specifically support estimations of loss beyond consideration of retail values in appropriate cases. "Where the market value is difficult to ascertain or inadequate to measure harm to the victim, the court may measure loss in some other way, such as reasonable replacement cost to the victim." U.S.S.G. § 2B1.1, Application Note 2.[FN3] Thus, the district court was not obligated to calculate a fair market value for the clocked cars. Instead, the court could have used replacement cost to determine consumer loss. This would have resulted in a finding of consumer harm far more than $4,002 per vehicle.
Under the same principle the court could properly consider evidence from the PSR and the government's submissions that detailed losses imposed on the owners of high mileage vehicles. These include inflated purchase prices, finance charges, insurance costs, taxes, and repair costs, as well as lost time dealing with maintenance problems. (PSR ¶ 42; GSR, Ex. 1, pp. 14-17, & Ex. 3, p. 2). The dollar figures attributed to these costs are not arbitrary, as XXXXXXX asserts. (Br. 13).
To the extent the calculation of these types of losses are imprecise, they have been construed to the defendant's benefit. For example, the Pennsylvania Attorney General's Office study on odometer tampering reaches a figure of $6,653 as the total loss, not including amounts for various losses that are difficult to quantify. (GSR, Ex. 1, p. 17.) Similarly, the National Association of Fleet Retail Dealers' bulletin provides a basis for a loss evaluation in excess of $4,000. The bulletin included a table showing that variable costs per mile for a car increase slowly to about ten cents per mile at about 45,000 miles, but reach twenty cents per mile after about 80,000 miles. (GSR, Ex. 3, p. 2). Using the average rollback involved in this case of 45,000 miles (PSR ¶ 29), rolling odometers with mileages between 70,000 and 110,000, such as those purchased by the conspirators (PSR ¶ 28), would thereby push a car from being a high cost per mile vehicle to falsely appearing to be a low cost per mile vehicle. The costs of operating such a vehicle will thus be considerably higher than expected as a result of the fraud. If these excessive operating expenses are ten cents per mile to repeat the 45,000 miles rolled off the odometer, the consumer would be paying another $4,500 in costs attributable to the fraud.