Loss Enhancement Under Sentencing Guidelines Does not Include Intended Loss: Banks

In a recent decision, the Third Circuit held that the loss enhancement under the federal sentencing guidelines does not include the intended loss. The court's ruling could have significant implications for defendants convicted of fraud crimes. In particular, it could lead to significantly lower sentences. The decision is sure to be welcomed by defendants, who have long argued that including the intended loss in sentencing calculations was unfair and unjustified. Criminal defense lawyers will undoubtedly closely examine the ruling as they consider potential defenses for their clients accused of fraud.

United States v. Banks, No. 19-3812 & 20-2235, 2022 WL 17333797 (3d Cir. 2022)

Banks is Convicted of Fraud Crimes and Sentenced According to his Intended Loss Amount

Banks was convicted of wire fraud and sentenced to 104 months imprisonment. On appeal, Banks argued, among other things, that the district court erred in applying the loss enhancement to the fraud guidelines in the Sentencing Guidelines because there was no actual loss.

Banks’ offense level computed under the Sentencing Guidelines included a special offense characteristic for attempted loss Banks intended to inflict. The PSR found, and the district court adopted:

The attempted loss, based on [Banks’s] fraudulent deposits, is $324,000. Therefore, the base offense level is increased by 12 because the attempted loss was greater than $250,000 but less than $550,000. U.S.S.G. 2B1.1(b)(1)(G)

(As a general rule, loss is the greater of actual loss or intended loss, pursuant to Application Note 3).

Banks Appeals, Arguing that Intended Loss Does not Meet the Definition of "Loss"

On appeal before the Third Circuit, Banks argued that the district court erroneously applied the intended-loss enhancement to his sentence when the victim suffered no actual losses. Banks further argued that because the U.S. Sentencing Commission interprets “loss” in its commentary, and the weight afforded to that commentary may affect the meaning of “loss.”

Third Circuit:  Intended Loss Expands the Definition of Loss and Should not be Considered.

The Third Circuit recently held in United States v. Nasir, 17 F.4th 459 (3d Cir. 2021) that the definition of “controlled substance offense” under U.S.S.G. 4B1.2(b) did not include inchoate crimes despite the Guidelines’ commentary. Building off of Nasir and its reasoning, the court reiterated that “If the Sentencing Commission’s commentary sweeps more broadly than the plain language of the guideline it interprets, we must not reflectively defer. The judge’s lodestar must remain the law’s text, not what the [Sentencing] Commission says about that text.” The court held the same framework applies to Banks’ challenge to 2B1.1’s intended-loss enhancement.

Utilizing this method, the court began with the plain text of 2B1.1. The Guideline is titled “Larceny, Embezzlement, and Other Forms of Theft; Offenses Involving Stolen Property; Property Damage or Destruction; Fraud and Deceit; Forgery; Offenses Involving Altered or Counterfeit Instruments; Offenses Involving Altered or Counterfeit Instruments Other than Counterfeit Bearer Obligations of the United States.” The Guidelines then provide a graduated scale based on the monetary loss. As the victim’s monetary loss grows, so does the enhancement to the defendant’s base offense level.

The plain language of the guidelines do not mention “actual” versus “intended” loss. The only reference is in the Guidelines’ commentary. Applying the ordinary meaning of “loss” in the context of 2B1.1, the court concluded includes only actual loss.

After a dive into common dictionary definitions of “loss,” the court found that no definition could be read to suggest “intended loss.” Because the commentary to 2B1.1 expands the definition of loss by explaining that generally “loss is the greater of actual loss or intended loss,” the Court accorded the commentary no weight. Accordingly, the Third Circuit found Banks is entitled to be resentenced without the 12-point intended-loss enhancement because there was no evidence of actual loss.

Judgment vacated and remanded for re-sentencing without the intended-loss enhancement.

Our Take:  Start looking for these arguments in other courts

This isn’t the first time we have seen a court of appeals giving the Guidelines’ commentary no weight and only considering the plain text of the language of the actual guideline. Most recently, several circuits have held the Guidelines’ commentary to U.S.S.G. 4B1.2 cannot be used to include inchoate crimes in determining whether a prior offense qualifies for career offender purposes.

The Third Circuit’s reasoning here invalidating the intended-loss commentary to 2B1.1 follows the same logic other circuits followed in analyzing 4B1.2. But the Third Circuit’s decision here is the first that I am aware of where the enhancement under 2B1.1(b) does not include intended loss. This is big news. It is typically far easier for the government to prove intended loss versus actual loss, and intended loss is typically always higher. In Banks’ case, there was no actual loss at all, meaning no enhancement applies.

I would expect the Third Circuit’s decision may be followed by similar circuit courts, such as the Sixth Circuit which made previous Guidelines-commentary decisions.  See United States v. Riccardi, 989 F.3d 476 (6th Cir. 2021), US v. Phillips, No. 21-5762 (6th Cir. Nov. 28, 2022) Moreover, this may give defendants in certain circuits a potential avenue for challenging their sentence