In the Courts

In United States v. Lee, Nos. 04-12485, 04-13673, 2005 WL 2446229 (11th Cir. Oct. 05, 2005) the Eleventh Circuit held, in a case of first impression in the circuit, that a victim who has reduced or eliminated his loss by recovering collateral remains a victim for the purpose of determining the appropriate sentence enhancement under ' 2B1.1(b)(2)(A) of the Sentencing Guidelines. In doing so, the Eleventh Circuit both distinguished and criticized the only other circuit opinion to address the issue of reimbursed victims, United States v. Yagar, 404 F.3d 967 (6th Cir. 2005).

The defendants in this case were convicted of mail fraud for a scheme that involved writing checks on closed accounts. When confronted by creditors, defendants employed an elaborate scheme to attempt to delay or discourage collection by directing their creditors to present the instruments as “offset checks” to the government to be paid from a fund supposedly established for that purpose. On appeal defendants argued, relying on Yager, that when counting victims for sentencing purposes the trial court had inappropriately included individuals able to offset their losses through collateral and repossession. In Yager, the Sixth Circuit found that individuals fully reimbursed by a third party should not be counted as victims for sentencing purposes. In Lee, the court questioned the Yager court's reading of the Guidelines, and suggested that even a short and fully reimbursed loss is sufficient to create a fraud victim for sentencing purposes. The court went on to note that even under the Sixth Circuit's Yager standard, foreclosing or repossessing collateral is sufficient to create a victim, as the burden and cost of carrying out foreclosure created a real pecuniary loss.