NOTE: This is a continuation from Civil Resource Manual
183 Civil Resource Manual at 183.|
2. Published Studies and Analyses Pertinent to
Quantifying Consumer Losses Indicate Losses
Far in Excess of $4,000
a. Department of Transportation/Pennsylvania
Attorney General Bureau of Consumer
In January 1993 the United States Department of Transportation
released a study done for it by the Pennsylvania Attorney General's
Bureau of Consumer Protection (Att. C). The study deals with
odometer fraud. Section D of the study, "Monetary Damage to
Many consumers and dealers have told the Pennsylvania
Bureau of Consumer Protection and NHTSA odometer fraud
investigators that they simply would not knowingly purchase a
rolled back vehicle regardless of price. Therefore, the proper
measure of damages would often be the entire price the consumer
paid for the car.
(See Att. C, p. 13.) Since the consumer purchase price
appropriately be seen as a valid loss figure, the $4,000 figure set
forth in the presentence report is altogether reasonable.
Another approach to viewing loss is through the use of "book
value." The Pennsylvania study cites automotive industry
publications that provide deductions from "book" value that are
associated with mileage. The figures cited are six cents and ten
cents per mile.[FN10] For a 40,000 mile rollback, this deduction
would convert to a $2,400 (at six cents per mile) or a $4,000 (at
ten cents per mile) fraud. See also Att. A, Morse
FN10. The six cents per mile figure was from
Automotive Market Report (AMR), while the ten cents/mile
estimate comes from Galves Auto Price List (Att. C, p. 14).
Both are among the more reliable mileage deduction indicators in
the industry, according to a recent industry publication.
"According to resale dealers, . . . [t]he used-car guides that did
the best job of adding/subtracting for high miles, in order, were
AMR, NADA, Galves, Kelley Blue Book, Black Book, and Gold Book."
Automotive Fleet, April 1993, p. 68 (Att. D). Note that the
graphic on page 1 of this article lists the "Top Factors in
Determining Resale Price," and the first factor is "Mileage."
However, for reasons discussed above, in the Declaration of
Morse, and in the study itself, such "book" value deductions
underestimate the impact of this type of fraud. "Book" values
two vehicles with honest odometers. At most, this reflects only
associated with purchase price as such. The Pennsylvania study
to quantify various losses beyond initial purchase price that
face. The study reaches a figure of $6,653 as the total loss, not
including amounts for various losses that are difficult to quantify
(Att. C, p. 17).
b. National Association of Fleet
Resale Dealers Bulletin
This analysis is corroborated by a study reported in a
February 1993 bulletin published by the National Association of
Fleet Resale Dealers (NAFRD). The bulletin reported a 1992 study
by Associates Leasing which showed that resale value of cars fall
off markedly after 60,000 miles (See Att. E, p. 2). The
NAFRD bulletin reported an 18% drop in value at about 60,000 miles,
and another 10% reduction at about 70,000 miles. In other words,
this report indicates a drop in value of 28% at these two marks
alone.The NAFRD bulletin also included a table (on page 2) 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. Using the average involved in this
case, rolling an odometer from 67,746 miles to 28,923 miles would
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 38,823 miles rolled
off the odometer, the consumer would be paying another $3,823 in
costs attributable to the fraud.[FN11]
FN11. Losses suffered by victims cannot fairly be
measured by gains to criminals. It is for reasons such as those
discussed in the text that the Guidelines provide that "[t]he
offender's gain from committing the fraud . . . ordinarily will
underestimate the loss." Guideline 2F1.1, Application Note 8.
Consider by analogy the burglar who breaks into a home through a
window, steals the stereo, and fences it for $100. The homeowner
loses not only the stereo and suffers the cost of replacement, but
must repair his broken window as well.
c. Other Sentencing Findings
The Fifth Circuit has affirmed a district court's finding of
$4,000 loss per car in an odometer rollback case. United
States v. Whitlow, 979 F.2d 1008, 1012 (5th Cir. 1992)
(per curiam). Three other district courts have adopted the same
$4,000 per car loss figure. See United States v.
Welch, Cr. No. 93-300004-F (D. Mass. Oct. 19, 1993);
United States v. Cooper, Cr. No. HCR 92-0149 (N.D.
Ind. March 3, 1993); United States v. Coker, Cr. No.
H-92-00089 (S.D. Tex. Aug. 7, 1992).
In Whitlow, the district court had noted that the
National Automobile Dealers Association guide for used car values
stated that "High Mileage" deductions should not reduce the value
of a vehicle by more than forty percent. Accordingly, the district
court calculated the loss per vehicle as forty percent of the
average $10,000 retail purchase price of the cars. This resulted
in a loss per car of $4,000, which the Fifth Circuit said was
plausible in light of the record as a whole. Id. In
Whitlow, the Government provided the probation office and
district court information similar to that provided here. The
analysis of the Fifth Circuit in Whitlow is directly
applicable. As in Whitlow, the cars the defendants sold had
an average sale price of approximately $10,000. If the loss per
vehicle is calculated again at forty percent of the average retail
purchase price, the loss per vehicle would again amount to
B. The fraud loss is not diminished because
of the condition of the vehicles
The defendant asserts that the loss is overstated because the
vehicles were in "good condition," and were "driven on the highway"
(Defendant's Sentencing Memorandum at 3). He rationalizes that
because "highway driving does not reduce the engine efficiency to
the same extent as other driving" (id.), the loss could not be as
great as stated in the presentence report. Defendant provides no
support for this assertion. Automobile industry price guides for
used cars, such as the Galves book mentioned above, in no way
distinguish between "highway" miles and other miles when
determining the value of a car based on mileage.
Furthermore, any mechanical or body work performed on the
vehicles before being sold was merely to mask their true condition
as road-weary cars with 65,000, 75,000, or even 100,000 miles on
them. For defendant to now state that the fraud loss calculation
should be diminished because he caused the cars to appear to have
less mileage than they had truly is a circular argument. He is
being sentenced for fraudulently selling cars with altered
odometers, an endeavor in which he succeeded for over six years.
His argument fails to consider that in cosmetically enhancing the
appearance of the vehicles, he enabled the deception and fraud to
The presentence report loss estimate of $4,000 per car is
well-supported. This estimate, if anything, is conservative when
compared to the size of the rollbacks, the prices consumers paid
for these cars, and to published studies or "book" values. This
estimate, moreover, is consistent with findings of other courts
confronted with opposing views regarding loss at sentencing
The substantial loss consumers face results from the reality
that clocked vehicles have but a fraction of the value of a car
with known low mileage, which is what the consumers thought they
purchased. A consumer with a clocked car is in a poor position to
discover the true mileage of the vehicle, and faces the fact that
dealers simply do not want to purchase clocked cars at all.[FN12]
FN12. Dealers holding a clocked vehicle may have the
knowledge and resources to determine the vehicle's approximate
actual mileage. This, along with their business contacts, may
allow them to resell the vehicle at a price resulting in less than
a total loss. Most consumers trying to "unload" a clocked vehicle
will not have the resources and knowledge to research the mileage
and find a buyer willing to pay more than a fraction of what the
consumer had paid for the vehicle.
Moreover, the losses generated by odometer-tampering activities
generally suffered by those persons least able to afford them.
used cars include elderly people on fixed incomes, younger people
have not yet earned enough to afford new cars, and others who, for
reasons, are simply unable to buy new cars.
Additionally, and perhaps more importantly, rolling back a
car's odometer directly affects the safety of the car. Indeed, in
enacting the federal odometer laws, Congress expressly found that
"an accurate indication of the mileage traveled by a motor vehicle
assists the purchaser in determining its safety and reliability."
15 U.S.C. § 1981. See also Att. A, Morse
Declaration, ¶ 8 (odometer tampering prevents purchasers from
using the car's mileage as a reliable guide for proper
FN13. The importance of this fact is illustrated by
the manufacturers' owners' manuals that accompany new cars. Most,
if not all, of these manuals tie the schedule for preventive
maintenance and parts replacement to the car's actual mileage. If
a car's odometer has been rolled back, the individual operating the
vehicle will not be aware that the car's actual mileage is vastly
in excess of the odometer reading. As a result, the individual is
much less likely to have preventive maintenance performed, and
accordingly, is more likely to be involved in accidents due to
mechanical failure. See Att. A, Morse Declaration, ¶ 8.
Here, the typical or average rollback by the defendant was
approximately from 67,746 miles to 28,923 miles. A change of this
magnitude is likely to alter drastically the perceived maintenance
needs of a car. Moreover, the threat to safety represented by a
single rollback is multiplied when a criminal operation like the
defendants' changes the odometers on hundreds of cars.
In short, the harm caused by the defendant's odometer fraud
not only includes the monetary damages incurred by the hundreds of
customer victims, but also higher safety risks.
III. The defendant should not receive a downward
under U.S.S.G. § 5K2.13 for diminished capacity
XXXXX contends that this Court should grant him a downward
departure because he has been diagnosed as suffering from manic
depressive illness. He argues that this illness caused him to
"impair his occupational judgments" (Defendant's Sentencing
Memorandum at 7), and that therefore this illness caused "erratic
and compulsive behavior" which compelled him to commit the instant
offenses. As support, defendant offers a letter from a
psychiatrist who treated him in 1982, and again since 1993.
However, defendant offers no medical records documenting his
illness for the time period involved in this conspiracy:
A. The Law Regarding Downward Departures
A district court must sentence within the applicable Guideline
range, unless the court finds that there exist mitigating
circumstances of a kind, or to a degree, not adequately taken into
consideration by the Sentencing Commission. United States
v. Tsai, 954 F.2d 155, 164 (3d Cir.), cert.
denied, 113 S.Ct. 93 (1992); United States v.
Kikumura, 918 F.2d 1084, 1098 (3d Cir. 1990); 18 U.S.C.
§ 3553(b); U.S.S.G. §§ 1A.4(b), 5K2.0. This injunction
is mandatory. United States v. Uca, 867 F.2d 783,
786 (3d Cir. 1989).The burden of proving such a mitigating factor
is on the defendant and must be by a preponderance of the evidence.
United States v. Sheffer, 896 F.2d 842, 846 (4th
Cir.), cert. denied, 498 U.S. 968 (1990). Cf.
Kikumura, 918 F.2d at 1100-1102 (clear and convincing
standard for large departures).
B. Diminished mental capacity
Criminals and social scientists, for different reasons, often
seek to "explain" criminal behavior by reference to mental illness.
However, mental and emotional conditions ordinarily are not
relevant to the issue of sentencing outside the Guideline range.
United States v. Rosen, 896 F.2d 789, 792 (3d Cir.
1990);[FN14] U.S.S.G. § 5H1.3.
FN14. In Rosen, an extortionate letter writer
diagnosed as a compulsive gambler was denied a downward departure.
United States v. Rosen, supra, 896 F.2d at 791
Section 5K2.13 ("Diminished Capacity") provides a narrow
it requires more than a post hoc rationalization to
justify the radical step of a downward departure. Under §
lower sentence "may be warranted" where the defendant "suffer[ed]
significantly reduced mental capacity not resulting from voluntary
of drugs or other intoxicants . . . which . . . contributed to the
commission of the offense." Thus, the Guideline directly raises the
issues of severity of any reduced mental capacity ("significantly
reduced") and of a causal or contributory link between that reduced
capacity and the criminal acts ("contributed"). United
Piervinanzi, 23 F.3d 670, 675, 684-85 (2d Cir.),
denied, 115 S. Ct. 267 (1994) (departure denied for
post-traumatic stress disorder in money laundering case); United
States v. Munoz-Realpe, 21 F.3d 375, 379 (11th Cir.
Reduced mental capacity means some significant impact on
cognitive function or a significant inability to absorb or process
information or to reason. United States v. Frazier,
979 F.2d 1227, 1229-30 (7th Cir. 1992); United States v.
Johnson, 979 F.2d 396, 401 (6th Cir. 1992); United
States v. Hamilton, 949 F.2d 190, 193 (6th Cir.
A diagnosis of mental illness, even if serious, is not enough.
Frazier, 979 F.2d at 1229-30 (cannot assume that diagnosed
suicidal depression automatically contributes to crime). The
illness must be found to have created a reduced ability to reason
or to absorb and process information, and that deficit must be
significant and have contributed to the crime, or XXXXX's motion
must fail. See United States v. Gentry, 925
F.2d 186, 188 (7th Cir. 1991) (food tampering case, diagnosis of
emotional problems; departure vacated for consideration of severity
and causation factors); accord, United States v.
Chigbo, 38 F.3d 543, 546 (11th Cir. 1994).
1. "Significantly reduced" mental capacity
XXXXX concedes that he intended to commit the offenses and was
aware he was committing crimes when he undertook to roll back
odometers on used motor vehicles. He therefore is admitting that
he carefully and in calculating fashion established and controlled
numerous phony wholesale dealerships with the sole purpose of
rolling back odometers. For each dealership he established, he
recruited someone else to front the dealership, he advised them on
how to set up a wholesale dealership, and controlled the flow of
money in and out of the dealership's bank account. In elaborate
fashion, he moved money amongst various bank accounts in an attempt
to disguise himself as the individual in control of the proceeds of
the scheme. If a "straw" was caught submitting altered titles to
the New Jersey Department of Motor Vehicles, his business was shut
down, and another one started.
XXXXX himself was responsible for most of the "artwork" in
altering the titles for the vehicles, which involved the use of
pens, razors, and typewriters. He also created stationery and
notary public and sales tax stamps that would disguise a vehicle's
true title history. He falsified letters from previous owners of
the cars, and submitted forged lien releases and powers of attorney
in order to retitle the cars in New Jersey.
Once it was clear that he was being investigated, XXXXX also
advised those who had worked for him against retaining counsel
until an indictment was produced. This clearly was self-serving
advice, designed to prevent others from implicating him in the
conspiracy. Yet despite this elaborate, longterm scheme, he
asserts that his behavior was "erratic" because of manic depressive
illness. It is noteworthy that the only documented treatment for
depression XXXXX received after 1982 was after he knew he
was under federal investigation.
XXXXX's arguments must fail. Although he contends that he has
suffered from manic depressive illness for some thirty-five years,
he managed to operate several used car businesses during that same
time period, during which he never was arrested for involvement in
illegal activities. His friends and family portray him as a
reliable, generous man who can be counted on in times of need and
who is genuinely concerned with their welfare. As noted above, he
conceived and directed a complex, comprehensive, long-term scheme
to defraud used car buyers. Even if his behavior could be termed
"erratic," it in no way can be attributed to "significantly reduced
As is evident, XXXXX demonstrated social skills, mental
agility, and the capacity to make rational decisions in his own
interest. His familial, professional, social, and criminal
activities are wholly inconsistent with a person suffering impaired
self-control or an inability to make reasoned decisions.
Piervinanzi, 23 F.3d at 675, 684-85 (defendant's actions
belied one whose mental capacity was significantly reduced).
Nothing in the real world indicates that XXXXX suffered a
significant inability "to process information or to reason."
Johnson, 979 F.2d at 401; Hamilton, 949 F.2d at 193
(downward departure denied where defendant was "able to absorb
information in the usual way and to exercise the power of
In Johnson, a defendant with a "severe adjustment
disorder" and convicted of a two-year fraud scheme was denied a
Section 5K2.13 downward departure. Johnson, 979 F.2d at 401
(defendant demonstrated considerable mental agility in affairs
personal and professional). Similarly, in United States v.
Soliman, 954 F.2d 1012 (5th Cir. 1992), a downward departure
was denied to a pornographer for whom experts testified that
depression contributed to his crime. Id. at 1013-14. The
district court stressed that such a conclusion flew in the face of
the empirical facts that the defendant worked at a good job, wrote
articles and was a good employee. Id. at 1014.
XXXXX is no different than Johnson and Soliman. As such, he
cannot sustain his burden to show he suffered from "significantly
reduced mental capacity."[FN15]
FN15. Nor does the case law cited by XXXXX lend
support for his position. In United States v.
Lewinson, 988 F.2d 1005, 1006 (9th Cir. 1993), a downward
departure for diminished capacity was upheld where the defendant
had unspecified, but "long-standing psychological problems." The
exact nature of those problems is not explained, nor is it clear
from the Ninth Circuit's opinion that Lewinson's crime in any way
matched the breadth, complexity, and planning accomplished by XXXXX
over the six years that his odometer fraud activities lasted, and
which realistically could not have been carried on by one suffering
from "significantly reduced mental capacity." Similarly, in
United States v. Glick, 946 F.2d 335, 339 (4th Cir.
1991), the Fourth Circuit upheld a downward departure under
U.S.S.G. § 5K2.13 where the defendant's disorder "impaired his
ability to cope with stress" such that he became self-destructive.
XXXXX does not claim he cannot cope with stress, and has shown no
signs of being self-destructive. Indeed, each time one of his
co-defendants was caught with altered titles, he shut down the
"straw" company and consciously started up a new business to carry
on the fraud.
Finally, XXXXX's citation to United States v.
Gaskill, 991 F.2d 82 (3d Cir. 1993) is wholly inappropriate.
In Gaskill, the Court remanded the case for sentencing based
on the district court's belief that it was prohibited from granting
a downward departure based on extraordinary family circumstances.
There, Gaskill's wife suffered from serious mental illness and was
not only house-bound, but largely bedridden. The Court found that
a downward departure of but two months would allow Gaskill to
remain home and care for his invalid wife. Unlike XXXXX, Gaskill's
wife was unable to perform simple tasks such as "balanc[ing] a
checkbook or mak[ing] correct change." 991 F.2d at 84. XXXXX's
argument that allowing a downward departure to care for a mentally
ill wife equates with this Court granting a departure to someone
who for six years orchestrated a complex web of deception and fraud
is wholly without merit.
2. XXXXX's use of alcohol and drugs
Another prerequisite to the application of the diminished
capacity downward departure is that the defendant's mental
condition cannot have resulted from "voluntary use of drugs or
other intoxicants." XXXXX admitted he was a drug and alcohol
abuser for many years, coinciding with his claimed treatment for
manic depressive illness. Significantly, the psychiatric
evaluation of XXXXX ordered by this Court included a diagnosis of
XXXXX as having "Mixed Substance Abuse" (Psychological Evaluation
Report of XXXXXX XXXXX, Ph.D., at 6). DX. XXXXX's report also
noted that "MX. XXXXX's years of alcohol abuse may also have taken
their toll on some of his cognitive capabilities" (id.). This was
also referred to in the Psychiatric Evaluation of DX. XXXXXX.
XXXXX's heavy drinking and use of illegal drugs was totally
voluntary. Clearly XXXXX cannot seek a downward departure based on
a condition for which he is responsible.
As to causation, XXXXX's crimes involved many discrete
affirmative acts of planning and deceit spanning over six years.
He has failed to show how his alleged condition specifically
contributed to these criminal acts -- forging names, falsifying
motor vehicle titles, recruiting others to act as "fronts" for him,
to name but a few such acts. He has simply failed to meet his
burden of proving that he suffered a significantly reduced mental
capacity at the time of his crimes and that this reduced
capacity contributed to his many crimes by impairing his ability to
make reasoned decisions. United States v. Cantu, 12
F.3d 1506, 1512 (9th Cir. 1993).
For the reasons discussed above, the United States
respectfully recommends that the Court accept the facts, offense
level computation, and guideline range contained in the presentence
report. The government also urges the Court to deny the
defendant's motion for a downward departure for diminished
MICHAEL R. STILES
United States Attorney
Eastern District of
LINDA I. MARKS
Office of Consumer Litigation
P.O. Box 386
Washington, D.C. 20004
[cited in Civil Resource Manual 170;
Civil Resource Manual 183]