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United States v. Allen

June 16, 2008


Appeal from the United States District Court for the Western District of Wisconsin. No. 04 CR 23-Barbara B. Crabb, Chief Judge.

The opinion of the court was delivered by: Kanne, Circuit Judge.


Before FLAUM, KANNE, and ROVNER, Circuit Judges.

Neal Allen pled guilty, pursuant to a plea agreement, to one count of mail fraud in violation of 18 U.S.C. § 1341-"Frauds and Swindles"-for having used the postal service when he provided false credentials to secure a contract. Allen held himself out as a mold-testing and remediation expert, which ultimately led the Lac du Flambeau band of the Chippewa tribe ("LdF") to secure his services. At sentencing, the district court ordered Allen to pay restitution in the amount of $363,038.47. The court refused to reduce the amount by the value of the services the LdF received from Allen both because the task of calculating that value would be burdensome, and because Allen misrepresented himself as a "licensed professional" and thus was not entitled to such a reduction, see U.S.S.G. § 2B1.1 Application Note 3(F)(v). We find that the application note does not apply to Allen's situation, and that the district court should have calculated the value of the services Allen provided and modified his sentence accordingly. We therefore vacate the restitution portion of Allen's sentence and remand for a recalculation of restitution that reflects the actual loss suffered by the victims in this case.


Neal Allen marketed himself as an expert in mold remediation, and falsified his education and employment history on a pamphlet that was distributed to promote a mold seminar. An attorney for the LdF received a copy of the pamphlet, and the attorney's contact with Allen ultimately led the LdF to enter into a contract with Allen, in September 2002, for mold-testing services. Allen and his crew performed Allen's responsibilities under the contract and tested approximately 400 LdF buildings for mold. Allen sent the mold samples to Aerotech Laboratories, Inc., after committing to pay the laboratory $71,000 for its analysis of the samples. Allen collected full payment from the LdF (approximately $286,000) on December 30, 2002, and then promptly left the country-cash in hand-for the Dominican Republic, where he established residence. During that same time period, Allen also became a naturalized citizen of Costa Rica, under a different name. Allen never paid Aerotech for testing the samples.

In October 2004, Allen was indicted by a grand jury in the Western District of Wisconsin on six counts of mail fraud, see 18 U.S.C. § 1341. He was ultimately convicted, in March 2006, of one count of mail fraud, to which he pled guilty. In the plea agreement, Allen agreed:

to pay restitution for all losses relating to the offense of conviction and all losses covered by the same course of conduct or common scheme or plan as the offense of conviction. The exact restitution figure will be agreed upon by the parties prior to sentencing or, if the parties are unable to agree upon a specific figure, restitution will be determined by the Court at sentencing.

At the plea hearing, Allen stated to the court:

I falsified credentials to obtain a contract with the Lac du Flambeau tribe, and I used the federal mails or I used the FedEx, which is considered federal mails, to send the lab samples to the lab. That's what I did.

In exchange for his plea, the government agreed to recommend that Allen's sentence be reduced to the maximum extent possible for acceptance of responsibility, see U.S.S.G. § 3E1.1(a)-(b), and that Allen's plea would resolve all possible criminal violations in the Western District of Wisconsin related to this course of Allen's criminal con-duct.

In the presentence report (PSR) and its addendums, the probation officer calculated Allen's base offense level as six and his Criminal History Category as I. The probation officer recommended a twelve-level enhancement pursuant to United States Sentencing Guideline (U.S.S.G.) § 2B1.1(b)(1)(G)-because the proposed loss amount was more than $200,000 but less than $400,000-a two-level enhancement for obstruction of justice, a two-level decrease under § 3E1.1(a) for acceptance of responsibility, and an additional one-level decrease pursuant to § 3E1.1(b) for timely providing information to the government and/or timely notifying authorities of his intention to plead guilty. Allen's total offense level was 17. The probation offer proposed that Allen be ordered to pay $294,193.47 in restitution to the LdF, and $71,345.00 to Aerotech Laboratories.

Allen filed a written objection to the PSR, specifically contesting the amount of loss attributable to him and the proposed restitution figures. Allen's position was that the loss figure could not exceed the amount of loss actually caused; with respect to the LdF, the figure should have taken into account the value of Allen's work and should have been reduced in its entirety because the LdF did not suffer any monetary loss. With respect to Aerotech, Allen argued that the court should not include the unpaid balance to the laboratory because that figure merely reflected a breach of contract between Allen and Aerotech.

In response, the government argued that Application Note 3(F)(v) of U.S.S.G. ยง 2B1.1 did not allow for a reduction in the amount of loss for the value of services provided by Allen to the LdF because Allen held himself out as licensed professional when he deceived the LdF into contracting with him. At the sentencing hearing, the government reduced its proposed restitution amount by ...

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