U.S.A. v. Free

Case No. 15-2939 (3d Cir. Oct. 6, 2016)
Reversed and remanded. Under the federal Sentencing Guidelines, "loss" must reflect the actual pecuniary loss incurred, or which a defendant intended to incur, through bankruptcy fraud. Only pecuniary loss incurred or intended to be incurred should be reflected in the offense level. Non-pecuniary harm (e.g., to the judicial process) may be addressed by an upward departure.
Procedural context:
On appeal from the U.S. District Court for the Western District of Pennsylvania
A wealthy individual filed Chapter 13 bankruptcy, and his case was converted to Chapter 7. The Chapter 7 trustee discovered that the debtor hid assets worth hundreds of thousands of dollars from the Bankruptcy Court. Despite concealing assets, creditors were paid in full. Debtor was convicted of multiple counts of bankruptcy fraud. The federal Sentencing Guidelines increase a fraudster's recommended sentence based on the amount of the "loss" he causes, or intends to cause, to his victims. Defendant argued there was no pecuniary loss since his creditors were paid in full and that he did not intend to cause loss because the bankruptcy case was filed to stay collection activity, not to discharge any debt. The District Court treated the estimated value of the concealed assets and the amount of the debt he sought to discharge as the relevant "loss" under the Sentencing Guidelines.
Fuentes (author), Shwartz, and Restrepo, C.J.

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