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United States v. Schmidgall

United States District Court, Eighth Circuit

May 23, 2013

UNITED STATES OF AMERICA, Plaintiff,
v.
ROYANN L. SCHMIDGALL, Defendant.

FINDINGS ON LOSS CALCULATION

JOHN M. GERRARD, District Judge.

This case is before the Court with respect to the loss calculation for purposes of sentencing. As directed by the Court in its Amended Order on Sentencing Schedule (filing 31), the parties submitted a statement of uncontroverted facts (filing 36), and briefed the matters on which they disagree (filings 37 and 38). The government submitted an index of evidence in support of its position (filing 39), and a hearing was held at which additional evidence was adduced and submitted (filings 41, 42, and 45). The parties have also filed post-hearing briefs (filings 46 and 47).

While the parties agree on most of the facts, they disagree about whether some of the defendant's alleged conduct between 2004 and 2008 should be included in the loss calculation. The Court has considered the parties' arguments, along with the evidence filed with the Court and adduced at the evidentiary hearing. Based on the evidence before the Court, the Court agrees with the government that the losses between 2004 and 2008 should be included in the loss calculation for purposes of determining the defendant's offense level and ordering restitution.

BACKGROUND

The defendant was the office manager for Nebraska Pulmonary Specialties (NPS) and was solely responsible for processing the payroll. As part of that duty, the defendant administered employees' "paid time off" (PTO). Employees accrued vacation and short-term sick leave as PTO, on a per-paycheck basis, and could receive payment for unused PTO hours. The defendant paid out those hours to employees at their normal hourly rate of pay. Filing 36 at 1.

Between 2004 and 2011, the defendant paid herself for PTO hours that she did not have available, and she paid herself at a rate exceeding her hourly rate of pay. Filing 36 at 4. The parties agree that by January 1, 2009, the defendant knew that she had no PTO hours available, so all payments made after that date should be included in the loss calculation. Filing 36 at 4. That total is $419, 500. Filing 36 at 4. The parties disagree about payments made between 2004 and 2008. The government argues that for those payments, the calculated loss should include the difference between the defendant's rate of pay and the hourly rate at which her PTO was paid, resulting in an additional loss of $122, 395.25. Filing 37 at 5. The defendant contends that the pre-2009 loss is not "relevant conduct" to the offense of conviction. Filing 38 at 5-7. And the defendant questions the evidence that the government relies upon to establish that the defendant was overpaid. Filing 38 at 6-7.

The defendant was a salaried employee. The government's calculations are based on the difference between the defendant's hourly "salary rate" (i.e., her biweekly pay period salary divided by 80 hours) and the rate at which she was compensated for the unused PTO that she claimed.[1] See filing 45-1.[2] The evidence establishes that the defendant compensated herself for unused PTO at a rate of $50 or $100 per hour (although a $60 rate was used on one occasion). Filing 45-1; see also filings 39-2, 39-6, and 39-7. The rate was $50 per PTO hour through late 2006, excluding the one instance of $60 per hour; the rate increased to $100 per hour in October 2006 and remained there for the remainder of the relevant timeframe. Filing 45-1. The defendant's annual salary, however, was $70, 434 between 2004 and 2006 (not including bonuses). Filing 39-5 at 2. It was increased to $92, 333 in 2007. Filing 39-5 at 4. But using either figure, her prorated hourly salary rate (assuming a 40-hour work week) would not have exceeded $44.44 per hour. Filing 45-1.

Three of the physician members of NPS-Drs. William Johnson, John Trapp, and Anup Chakraborty-testified at the evidentiary hearing that neither they nor any of the other doctors at NPS authorized a different rate of compensation for the defendant's PTO hours. Johnson testified that employees were expected to take PTO payouts at a rate consistent with their hourly wage, as calculated from their salary. And Abbie Edwards, who took over as operations manager for NPS after the defendant was fired, said she reviewed NPS's available financial records and that for at least part of the relevant timeframe, employees other than the defendant who took PTO payouts (including salaried employees) were paid for PTO at the same rate as their calculated hourly wage. Edwards said that the defendant had instructed her on how a salaried employee's hourly wage was to be calculated: dividing their salary per biweekly pay period by 80 hours. Employees other than the defendant were compensated for PTO based on that formula, but an override rate was used for the defendant's compensation, and Edwards explained that the payroll systems did not create an override rate by default: the override rates were created by manual entries in the payroll system, for which the defendant was responsible.

ANALYSIS

The loss calculation at issue here is useful primarily for two purposes. First, in determining the offense conduct, the offense level is increased based on the amount of the loss. U.S.S.G. § 2B1.1(b)(1). Second, in the case of an identifiable victim, the Court shall enter a restitution order for the full amount of the victim's loss. U.S.S.G. § 5E1.1; see also 18 U.S.C. § 3663A(a)(1) and (c)(1)(B). The Court recognizes that although the gross amounts of theft loss for sentencing purposes and victim loss for restitution purposes are often calculated in the same manner, the two determinations serve different purposes and thus may differ depending on the relevant facts. United States v. Lange, 592 F.3d 902, 907 (8th Cir. 2010). Restitution may only be awarded for the loss caused by the specific conduct that is the basis of the offense of the conviction. United States v. DeRosier, 501 F.3d 888, 896 (8th Cir. 2007). But restitution may be ordered for criminal conduct that is part of a broad scheme to defraud, even if the defendant is not convicted for each fraudulent act in the scheme. Lange, 592 F.3d at 907; DeRosier, 501 F.3d at 897. The Court sees no basis, at this point, to distinguish between the loss calculation for purposes of determining the specific offense characteristics and the victim's loss.

RELEVANT CONDUCT

The primary dispute between the parties at this point is the scope of the defendant's "relevant conduct" within the meaning of U.S.S.G. § 1B1.3(a)(2). Most of the facts have been agreed to by the parties. Pursuant to § 1B1.3(a)(2), the defendant's specific offense characteristics shall be calculated on the basis of all acts and omissions committed, aided, abetted, counseled, commanded, induced, procured, or willfully caused by the defendant, and all such acts and omissions "that were part of the same course of conduct or common scheme or plan as the offense of conviction." The offense of conviction here is Count 15 of the indictment, which concerned a PTO payment made in March 2011. See, filing 1 at 3; filing 29 at 4-5. But a "course of conduct" or "common scheme or plan" may include conduct occurring before or after the timeframe of the indictment, although the time interval between the offenses may be considered in determining whether other conduct is "relevant conduct" within the meaning of the Guidelines. See § 1B1.3 cmt. n.9.

Factors to be applied in determining whether conduct is "relevant conduct" include temporal and geographical proximity, common victims, common scheme, charge in the indictment, and whether the allegedly relevant conduct is used to prove the instant offense. See United States v. Hernandez, 712 F.3d 407, 409 (8th Cir. 2013); see also § 1B1.3 cmt. n.9.

For two or more offenses to constitute part of a common scheme or plan, they must be substantially connected to each other by at least one common factor, such as common victims, common accomplices, common purpose, or similar modus operandi. For example, the conduct of five defendants who together defrauded a group of investors by computer manipulations that unlawfully transferred funds over an eighteen-month period would qualify as a common scheme or plan on the basis of any of the above listed factors; i.e., the commonality of victims (the same investors were defrauded on an ongoing basis), commonality of offenders (the conduct constituted an ongoing conspiracy), ...

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