Ellen Brotman wins a reversal in Third Circuit on Loss Calculation

If you don’t know Ellen Brotman in Philadelphia, it’s time that you do. She is a relentless fighter and recently won an appeal in the Third Circuit on a significant white collar sentencing issue. The case is U.S. v. Nagle  and involves a minority government contract fraud where the trial court calculated loss based on the face value of the government contract. The Third Circuit reversed and held that the fair market value of the contract had to be reduced by the amount of goods and services provided, creating a true net, or actual, loss.

The argument was an uphill battle as Brotman had to convince the Third Circuit to reject the approach taken by the Fourth, Seventh, and Eleventh circuits. The Third Circuit adopted Brotman’s arguments that these cases were either inapplicable, due to changes in the application notes, or were poorly reasoned. The Third Circuit agreed that using the entire face value of the contract, no matter what portion of the contract had been performed, violated the language of the guidelines and bedrock principles underlying loss analysis. The opinion corrects a significant injustice which wrongly punished contractors as if they had actually stolen the entire amount of the contract, even in cases, such as this one, in which the contract had been completely and competently executed.

Brotman also argued that the victims of the offense were the hypothetical minority business owners who should have gotten the work that the sham minority businesses received. The loss these victims would have suffered was the profit they lost in performing these contracts. Brotman argued that the minority business inclusion program was intended to drive this profit to diverse businesses and that thwarting this goal was the actual harm.

The Legal Intelligence reported on the significance of the ruling here as did the Third Circuit Blog here.

Brotman was quoted in the Legal Intelligencer: “It's an important decision because it re-emphasizes that the guidelines are about the actual harm” and “the loss is always what is actually lost,” she said. “It's the higher of intended or actual loss and what is actually lost is the amount of money you paid minus what you got back for it ... that also happens to be the profit.”

A great victory for future arguments relating to loss calculations and yet another example of standout lawyering from Ellen Brotman, one of our criminal defense sisters. Congratulations, Ellen!