USCA1 Opinion
August 13, 1993
[NOT FOR PUBLICATION]
UNITED STATES COURT OF APPEALS
FOR THE FORST CIRCUIT
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No. 92-1806
UNITED STATES,
Appellee,
v.
ZOLTON PHILLIPS,
Defendant, Appellant.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Douglas P. Woodlock, U.S. District Judge]
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Before
Torruella and Stahl, Circuit Judges,
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and Burns,* Senior District Judge.
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Warren R. Thompson, by Appointment of the Court, for appellant.
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Mark J. Balthazard, Special Assistant United States Attorney,
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with whom A. John Pappalardo, United States Attorney, was on brief for
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appellee.
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*Of the District of Oregon, sitting by designation.
BURNS, Senior District Judge. Phillips
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appeals the district court's order of restitution and the
district court's denial of his request to substitute
counsel. Phillips also asks this court to set aside his
plea of guilty because it was involuntary.
We have jurisdiction under 28 U.S.C. 1291
(1988).
BACKGROUND
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On February 24, 1992, Phillips pleaded guilty to
one count of bank fraud in violation of 18 U.S.C. 1344 for
making materially false statements when obtaining a $5
million loan from First American Bank (FAB) to establish a
mini-storage facility. On
May 22, 1992, the court sentenced Phillips to 24 months
imprisonment1 and ordered Phillips to pay to the Federal
Deposit Insurance Corporation (FDIC) in its capacity as
receiver of FAB the sum of $3,520,100 within three years of
his release from prison.
DISCUSSION
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Phillips contends the district court erred when it
denied his request to substitute counsel prior to trial.
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1Phillips's conduct did not fall under the United States
Sentencing Guidelines; thus, the district court did not
impose a term of supervised release.
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Phillips also states he received ineffective assistance from
his counsel and, therefore, this court should set aside his
plea of guilty because it was involuntary. Phillips further
asserts the district court erred when it ordered him to pay
restitution to FAB for losses that were not caused by his
conduct and when it set an amount of restitution that was
per se unreasonable.
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SUBSTITUTION OF COUNSEL
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Phillips contends the court erred when it refused
to substitute counsel after Phillips asked the court to do
so by letter dated February 10, 1992; however, perusal of
Phillips's letter reflects he merely expressed his desire to
avoid delay of trial and his concern about the timeliness of
various motions filed and to be filed on his behalf. On
February 14, 1992, the parties appeared before the court to
dispose of certain pretrial matters. At that time (ten days
before trial was scheduled to begin), the court asked
Phillips whether he wanted to elaborate on his reasons for
writing the letter; after briefly conferring with his
attorney, Phillips told the court he was "pleased to
proceed." The court asked Phillips a second time whether he
wanted to discuss any matters pertaining to his letter.
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Again, Phillips did not complain about his attorney nor did
he request a change of counsel; in fact, the record does not
reflect Phillips requested a change of counsel at any time
prior to entering his plea.2 We find, therefore,
Phillips's contention that the court denied his request to
substitute counsel has no factual basis.
INVOLUNTARY PLEA
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Phillips asserts his sentence should be set aside
because of his court-appointed counsel's ineffective
assistance. Phillips specifically refers to counsel's
alleged misrepresentations, untimeliness in filing motions,
failure to investigate, and lack of preparation on the day
of trial.
We generally do not consider such claims on direct
appeal because issues regarding ineffective assistance of
counsel "normally require 'the resolution of factual issues
as well as inquiries into other evidentiary matters that
cannot effectively be handled for the first time by a court
of appeals.'" United States v. Hallock, 941 F.2d 36, 43
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(1st Cir. 1991). The matter before us is no exception;
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2When Phillips pleaded guilty on February 24, 1992, he told
the court his attorney had "been very good."
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thus, we decline to consider Phillips's contentions of
ineffective assistance of counsel on direct appeal.
At oral argument, Phillips also contended his plea
of guilty should be set aside because he was not informed by
counsel or the court at the time he pleaded guilty that
restitution could be imposed as part of his sentence. We
will briefly address this issue even though Phillips did not
make the argument in his briefs. Fed. R.
Crim. P. 11(c)(1) provides that the court must inform
defendant of the maximum penalties, which includes the
possibility of restitution, before defendant enters a plea
of guilty. The record shows the district court reviewed the
terms of the plea agreement in open court and asked Phillips
whether he understood the government was recommending
payment of restitution in an amount to be determined later.
Phillips acknowledged the terms of the plea agreement and
indicated he understood the court did not have to follow the
government's recommendations. We find, therefore, Phillips
has no basis for his assertion that he was unaware
restitution could be imposed as part of his sentence.
RESTITUTION
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Phillips contends the loss to FAB was not wholly
caused by his
conduct; therefore, the court erred when it ordered him to
pay restitution. Phillips also asserts that even if
restitution were appropriate, the amount of restitution
ordered by the court was incorrect and per se unreasonable.
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Responsibility for loss.
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Phillips contends FAB's loss was caused by (1)
FAB's reliance on the property valuation of an independent
appraiser as well as Phillips's misrepresentations when the
loan was made, (2) FAB's mishandling of Phillips's business
after it took over, and (3) economic forces beyond the
control of either Phillips or FAB.
Under the Victim and Witness Protection Act of
1982 (VWPA), 18 U.S.C. 3663-64 (1988 & Supp.1990),
restitution is limited to "the loss caused by the specific
conduct that is the basis of the ... conviction." Hughey v.
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United States, 495 U.S. 411, 413 (1990). We review a
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determination of victim loss for clear error. United States
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v. Savoie, 985 F.2d 612, 617 (1st Cir. 1993).
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At the first sentencing hearing, the government
presented evidence (business records and affidavits) showing
the devaluation of the property was a result of Phillips's
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bad faith, mismanagement, and looting of the mini-storage
business. The court granted Phillips a continuance to allow
him to produce further evidence to support his position that
restitution was inappropriate. At the second sentencing
hearing, the court rejected Phillips's denial of
responsibility for FAB's loss.
When he pleaded guilty, Phillips admitted to
providing FAB with materially false statements (e.g.,
omission of his previous filing for bankruptcy) to obtain
the loan to establish a mini-storage facility. Phillips
argues, however, the diminution of the property's value was
due primarily to the bad management of the bankruptcy
trustee and FAB, who, according to Phillips, managed the
property jointly even though the trustee had legal control.
In response, the government points out FAB only
had possession of the property for a few days from
approximately January 6 to
January 17, 1989, and began foreclosure proceedings during
that time.3 On or about January 17, 1989, Phillips filed
for bankruptcy once again, and the trustee in bankruptcy
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3Phillips does not specifically argue the value of the
property diminished between January 6 and January 17, 1989.
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took control of the property shortly thereafter. In August
1989, the property was sold at auction by the trustee in
bankruptcy; Phillips points out the property's value had
decreased considerably by then.4 The sum of $3,520,100
represents the difference between the $5 million FAB
originally loaned Phillips for establishment of the mini-
storage facility and the amount FAB received for the
property.
The court rejected Phillips's contentions and
found the government's arguments persuasive of Phillips's
ultimate responsibility for FAB's loss. After reviewing the
record, we concur with the court's conclusion that FAB would
not have incurred the loss "but for" the loan to Phillips, a
loan Phillips obtained by making material
misrepresentations. We, therefore, do not find the court's
conclusion clearly erroneous.
Amount of loss.
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Phillips further argues that even if restitution
were appropriate, the court incorrectly calculated the loss.
Phillips points out the correct calculation of loss would be
the value of the property "less the value (as of the date
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4The district court noted it was not the proper forum in
which to initiate a claim of mismanagement against the
trustee in bankruptcy.
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the property is returned) of any part of the property that
is returned."
18 U.S.C. 3663(b)(1). The value of the property is its
worth on the date title is transferred. United States v.
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Smith, 944 F.2d 618, 625 (9th Cir. 1991), cert. denied, 112
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S.Ct. 1515 (1992). When the amount of loss is disputed,
"the government bears the burden of establishing it by a
preponderance of the evidence." Id.
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In Smith, the bank took title to certain property
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when Smith defaulted on loans. Before selling the property,
the bank held it for a long period in a declining market.
The Smith court found the property should have been valued
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on the date the bank "had the power to dispose of the
property and receive compensation," id., and the loss
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recognized by the court should have been reduced by that
amount. In the matter before us, FAB took possession of the
property in early January and began foreclosure
proceedings.5 On or about January 17, 1989, Phillips filed
for bankruptcy; the trustee in bankruptcy retained control
over the property until foreclosure proceedings were
completed in August 1989. Unlike the bank in Smith, FAB had
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5Again, we note Phillips does not specifically argue the
value of the property diminished between January 6 and
January 17, 1989.
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little or no time to dispose of the property in early
January since Phillips filed bankruptcy almost immediately
after FAB took physical possession of the property.
After considering the circumstances, the court
concluded Phillips was responsible for FAB's loss totalling
$3,520,100, the
amount still owing after the property at the heart of the
loan was auctioned by the trustee in bankruptcy.6 We do
not find the district court's conclusion clearly erroneous.
Reasonability of restitution order.
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Phillips also contends the court's order for
restitution was per se unreasonable because the court did
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not consider all relevant factors required by statute when
it ordered payment of restitution. Phillips bases his
argument specifically on the court's failure to consider
Phillips's ability to pay the restitution ordered.
The VWPA does not prohibit a sentencing court from
imposing restitution upon a defendant who is indigent at the
time. United States v. Brown, 744 F.2d 905, 911 (2d Cir.),
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cert. denied, 469 U.S. 1089 (1984). A court must, however,
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6Although Phillips argues the worth of the property was
greater when he relinquished control, this appellate court
is not the proper forum in which to challenge the bankruptcy
trustee's competency in controlling or disposing of the
property.
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"consider ... the financial resources of the defendant, the
financial needs and earning ability of the defendant and the
defendant's dependents, and such other factors as the court
deems appropriate." 18 U.S.C. 3664(a). See, e.g., United
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States v. Ramilo, 986 F.2d 333, 336 (9th Cir. 1993). In
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this circuit, a sentencing court is not required to make
"open-court findings on the statutory factors when issuing a
restitution order so long as the record on appeal reveals
that the judge made implicit findings or otherwise
adequately evinced his consideration of those factors."
Savoie, 985 F.2d at 11.
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The record reflects Phillips brought the requisite
factors to the attention of the court in his sentencing
memorandum and at sentencing.7 The court acknowledged
these factors and concluded Phillips was sufficiently
resourceful to be capable of paying all, or at least a
substantial portion, of the restitution within three years
of his release from prison. The court made no specific
findings to support its conclusions; the absence of express
findings, however, is not fatal when the record reflects the
court gave thought to the requisite factors. Id.
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7The probation officer also addressed Phillips's future
money-earning prospects in the PSR.
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When the court ordered payment of restitution, it
noted that Phillips was smart and resourceful. The court
further remarked that Phillips made a great deal of money
once, and, in its opinion, Phillips was capable of making a
great deal of money again. Cf. Smith, 944 F.2d at 623
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(defendant ordered to pay $12.8 million to FSLIC within five
years of his release from prison based on the court's
observation that defendant demonstrated in the past his
ability to accumulate assets in this amount of restitution);
United States v. Rogat, 924 F.2d 983, 986 (10th Cir.), cert.
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denied, 111 S. Ct. 1637 (1991) (indigent defendants were
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ordered to pay restitution of approximately $2.5 million
based on the fact both were "able, intelligent, well-
educated, talented business people, who do have substantial
capacity to earn money now or in the future, and, therefore,
do have ability to make restitution"). The VWPA itself
demands only that the sentencing court "consider" the
factors enumerated therein, Savoie, 985 F.2d at 11; the
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record reflects this sentencing court had before it
information bearing on these factors. Although another
court may have reached a different conclusion,8 we do not
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8According to Phillips, he carries a staggering debt of more
than $36 million after being denied discharge in bankruptcy.
The family's current income is apparently limited to his
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find the sentencing court abused its discretion. To
paraphrase Judge Selya in Savoie, "[w]e have said enough,"
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maybe even too much.
CONCLUSION
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Based on the foregoing, we find the district court
did not err when it ordered Phillips to pay restitution in
the amount of $3,520,100.
Affirmed.
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wife's earnings as a nurse's aide and the pittance Phillips
may be able to earn while imprisoned. To pay the
restitution alone, Phillips will have to make profits
greatly exceeding $3.5 million (legitimately, we presume)
within three years of his release from a two-year stint in
prison. We note Phillips's resourcefulness in the past does
not necessarily promise the same success in the future -- at
least, we hope not; after all, his past "resourcefulness"
led him to this court.
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