Defendant-Appellant, Lloyd Haggert, appeals the sentence imposed by the district court following his conviction for bank fraud. Specifically, Haggert challenges the court's imposition of a five-level increase from his base offense under Sentencing Guideline § 2F1.1, which mandates such an increase when the "loss" attendant to fraud is "more than $40,000." U.S.S.G. § 2F1.1(b)(1)(F) (Nov.1991). The district court looked to the amount of loss that Haggert intended to obtain fraudulently from the bank, in assessing loss at $62,508.50, the sum total of Haggert's fraudulent sight drafts. Haggert asserts that the court ought instead to have used the actual loss resulting from his criminal conduct, which the court had determined was $5,511.30. We affirm the sentence imposed by the district court.

Lloyd Haggert was convicted by a jury in the United States District Court for the District of Maine of violating Title 18 U.S.C. § 1344, by defrauding the federally-insured Skowhegan Savings Bank. The act underlying Haggert's conviction was his attempt to pay delinquent real estate mortgages with valueless sight drafts. On May 30, 1989, Haggert presented two sight drafts, totalling $62,508.50, to the assistant manager of the Skowhegan Savings Bank who, at that time, believed them to be cashier's checks and stamped them as paid. The bank later discovered that these drafts lacked a financial institution identification number. Further investigation revealed that the financial institution upon which they were drawn was not a legitimate, operating institution.

When the Skowhegan Savings Bank refused to discharge Haggert's mortgages, Haggert obtained a judgment to enforce the sight drafts.1 The bank eventually foreclosed on Haggert's mortgages. After accounting for the proceeds from foreclosure, the bank suffered a loss of $20,248.10. In addition, the bank incurred costs of $5,511.30, in fending off Haggert's attempts to force the bank to honor the fraudulent sight drafts.

Prior to his sentencing, Haggert responded to the pre-sentence report prepared by the government. Haggert objected to the determination of the amount of restitution, which had been set at $25,759.40, to reflect the total loss to the bank in its dealings with Haggert. In addition, Haggert challenged two factual assertions that are not pertinent to the issue before us. Haggert made no further objections either at the pre-sentence stage or during the sentencing hearing. In fact, the district judge directly asked Haggert whether he had any additional objections, at the beginning of the sentencing hearing, and whether he had anything to add, near the end of the hearing.

The district court determined that the amount of the defendant's fraud was $62,508.50, and added the mandatory five-level increase for loss of more than $40,000 to Haggert's sentence. For the purpose of calculating restitution, the court determined that the bank's actual damages were limited by statute to the loss directly related to the criminal conduct of the defendant and thus exclusive of the bank's foreclosure costs. See 18 U.S.C. § 3664 (1988). The court established that the actual damage caused by the defendant's fraud was $5,511.30, the cost to the bank of Haggert's attempts to enforce the fraudulent sight drafts. Haggert was sentenced to a term of fifteen months in prison, followed by a two-year term of supervised release, and was ordered to pay $5,511.30 in restitution to the Skowhegan Savings Bank.

We have repeatedly stated in the sentencing context, as well as in other areas, that issues not presented to the district court will not be addressed for the first time on appeal. See, e.g., United States v. Shattuck, 961 F.2d 1012, 1015 (1st Cir.1992) ("[w]e do not review sentencing guideline disputes which were not preserved before the district court.") (citing United States v. Dietz, 950 F.2d 50, 55 (1st Cir.1991)); United States v. Uricoechea-Casallas, 946 F.2d 162, 166 (1st Cir.1991) (failure to raise sentencing guideline issue at district court precludes raising it on appeal); United States v. Curzi, 867 F.2d 36, 44 (1st Cir.1989) ("an issue not presented in the district court will not be addressed for the first time on appeal."). As we observed in the case of Hernandez-Hernandez v. United States, 904 F.2d 758, 763 (1st Cir.1990), "[w]e have applied this proposition in well over a hundred cases since Johnston v. Holiday Inns, 595 F.2d 890 (1st Cir.1979)."

In Johnston, this court explained that while the rule governing issues raised for the first time on appeal is not absolute, it is relaxed only in extreme cases. Arguments not raised below will be entertained on appeal only in " 'horrendous cases where a gross miscarriage of justice would occur' " and, in addition, where the newly asserted ground is " 'so compelling as virtually to insure appellant's success'." Id. at 894. The Johnston standard was recently affirmed in United States v. McMahon, 935 F.2d 397, 400 (1st Cir.1991).

In this case, Haggert had ample opportunity to challenge the sentence imposed. The pre-sentence report assessed the amount of fraud as $62,508.50, and expressly recommended the five-level increase eventually adopted by the district court. In his memorandum responding to the pre-sentence report, Haggert offered three objections, none of which concerned either the calculation of the amount of fraud or the five-level increase. Moreover, during the sentencing hearing, the district court judge took care to inquire whether Haggert had further objections or comments, and Haggert voiced no additional concerns. See generally, United States v. McMahon, 935 F.2d at 399 (failure to object to pre-sentence report); United States v. Fox, 889 F.2d 357, 359 (1st Cir.1989) (failure to challenge facts set forth in pre-sentence report either in responsive memorandum or during sentencing hearing precluded raising challenge as to same issue on appeal).

Because Haggert neglected to raise before the district court the sole basis of his appeal, Haggert's appeal is precluded subject only to the narrow exception articulated in Johnston. Our reading of the Sentencing Guidelines and the supporting case law convinces us that no error of such proportion exists in this case. Far from implicating a miscarriage of justice, or evoking a new ground of almost assured success, the district court's sentence was a proper interpretation and application of the Sentencing Guidelines.2 Indeed, we are convinced that Haggert would not have prevailed on the merits even if the issue had been preserved for appeal.

The issue raised on appeal is the meaning of "loss" in the Sentencing Guideline covering fraud. The district court measured loss by the amount that the defendant intended to obtain fraudulently from the bank. Defendant argues that the actual loss resulting from his criminal conduct should have provided the basis for augmenting his sentence. We begin with an examination of the Sentencing Guidelines.

Guideline § 2F1.1 covers crimes involving fraud and deceit. That Guideline begins with a base offense level of six, which level is adjusted upward in accordance with the dollar value of the loss involved in the crime. Section 2F1.1 mandates an increase of five levels when the "loss" is "more than $40,000." U.S.S.G. § 2F1.1(b)(1)(F) (Nov.1991).

Application Note 7 of the Commentary accompanying the Guideline deals with the valuation of loss. In relevant part, Application Note 7 provides:

Consistent with the provisions of § 2X1.1 (Attempt, Solicitation or Conspiracy), if an intended loss that the defendant was attempting to inflict can be determined, this figure will be used if it is greater than the actual loss.

U.S.S.G. § 2F1.1, comment. (n. 7).3 This explication of the Guideline has been relied upon in the First Circuit and in other circuits. See United States v. Cesar Resurreccion, 978 F.2d 759, 762 (1st Cir.1992) (even where it cannot be stated precisely, the intended loss will be used if it is larger than the actual loss). See also United States v. Schneider, 930 F.2d at 556; United States v. Palinkas, 938 F.2d 456, 465 n. 19 (4th Cir.1991); United States v. Smith, 951 F.2d 1164, 1166 (10th Cir.1991); United States v. Shattuck, 961 F.2d at 1016 (citing United States v. Kopp, 951 F.2d 521 (3rd Cir.1991)).

Application Note 7 contains an example of intended loss that closely approximates the crime committed by Haggert. The example provides that, "if the fraud consisted in ... representing that a forged check for $40,000 was genuine, the loss would be $40,000." U.S.S.G. § 2F1.1, comment. (n. 7). The fraudulent sight drafts that Haggert presented to the bank as genuine totalled $62,508.50. By analogy to this example, the loss would be $62,508.50, the assessment made by the district court.

Notwithstanding the general rule whereby loss for the purpose of sentencing is the greater of the actual or intended losses, Haggert urges us to apply to his case an exception narrowly created for loan application and contract procurement cases. The exception, articulated in subpart (a) of Application Note 7, defines a category of fraudulent actions for which the expected or actual loss to the victim provides the basis for the sentence enhancement. Application Note 7(a), in pertinent part, provides as follows:

In fraudulent loan application cases and contract procurement cases where the defendant's capabilities are fraudulently represented, the loss is the actual loss to the victim (or if the loss has not yet come about, the expected loss). For example, if a defendant fraudulently obtains a loan by misrepresenting the value of his assets, the loss is the amount of the loan not repaid at the time the offense is discovered, reduced by the amount the lending institution has recovered, or can expect to recover, from any assets pledged to secure the loan.

In some cases, the loss determined above may significantly understate or overstate the seriousness of the defendant's conduct....

U.S.S.G. § 2F1.1, comment. (n. 7(a)). We fail to see the relevance of this exception for the factually distinct crime of fraudulent loan payments made well after loans have been secured. Nevertheless, we examine the scope of this exception in order to underscore our conclusion that Haggert's fraud is precisely the sort of criminal conduct that the exception does not cover.

The Seventh Circuit has explained the scope of the exception for fraudulent information in a loan application or in contract procurement by distinguishing between two types of fraud. See United States v. Schneider, 930 F.2d at 558. The first type of fraud implicates the "true con artist," who never intends to perform the undertaking, such as the terms of the contract or loan repayments, but who intends only to pocket the money without rendering any service in return. The second type of fraud involves a person who would not have attained the contract or loan but for the fraud, but who fully intends to perform.4 Id. In the latter case, and only in the latter case, is the intended loss not to be considered for sentencing.

Contrary to Haggert's attempt to place himself in the latter category of offenders, Haggert's conduct is a paradigm of the first type of fraud. Haggert had no intention of paying the loans for which he was in default. He drafted valueless forms of payment which he presented to the bank as valid. When he succeeded momentarily in his ploy, Haggert went so far as to attempt to enforce a judgment against the bank for the amount of his fraudulent sight drafts. When the bank had difficulty locating the financial institution upon which the fraudulent drafts were drawn, Haggert evaded the bank's requests for his assistance, and obstructed the bank's attempts to determine the facts, by continuing to insist upon the veracity of the information he provided the bank. Finally, Haggert knowingly presented the sight drafts that had been falsely stamped as "paid" to another financial institution to support new loan applications. Any of these actions alone would suffice to establish Haggert's intention not to pay the debts he owed to the bank; together, they underscore that Haggert fully intended to defraud the Skowhegan Savings bank in the amount of $62,508.50.

As the Schneider distinction between two types of fraud illustrates, even under the exception for loan application and contract procurement cases, the intent of the defendant is the measure by which the loss is to be assessed. See United States v. Schneider, 930 F.2d at 558. In each of the cases upon which defendant relies where the court held that the loss should be offset to reflect collateral pledged by the defendant, or that the actual loss should constitute the loss for sentencing purposes, the defendants lacked the intent to inflict the full amount of the fraud. See United States v. Smith, 951 F.2d at 1169 (finding no evidence that the defendant intended to inflict the amount of loss established by the district court); United States v. Hughes, 775 F. Supp. 348, 349 (E.D.Cal.1991) (noting that the defendant neither intended nor desired that his loans would go into default). Contrawise, in loan application cases where there was no intent to perform, the intended loss has provided the basis for augmenting the defendant's sentence. See United States v. Johnson, 908 F.2d 396, 398 (8th Cir.1990).

The Guidelines are concerned with assessing the seriousness of the defendant's conduct, given the wide array of conduct covered by fraud. See U.S.S.G. § 2F1.1 comment. (backg'd.).5 See also United States v. Rothberg, 954 F.2d 217, 218 (4th Cir.1992). What the Guidelines do not envision is rewarding a defendant for her or his lack of skill in executing a criminal act. Haggert's failure to reap the full financial benefits of his fraud cannot provide a basis for lowering the sentence imposed by the district court.

Affirmed.