author: BRORBY, Circuit Judge. BARRETT, Senior Circuit Judge,

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Paul SILVERS, Defendant-Appellant.
    No. 95-3089.
    United States Court of Appeals, Tenth Circuit.
    May 29, 1996.
    Rehearing Denied July 5, 1996.

      Robert S. Streepy (Randall K. Rathbun, United States Attorney, and Gregory G. Hough, Assistant United States Attorney, Topeka, Kansas, with him on the brief), Assistant United States Attorney, Kansas City, Kansas, for Plaintiff-Appellee.
    Thomas M. Dawson, Leavenworth, Kansas, for Defendant-Appellant.
    Before BRORBY, BARRETT and MURPHY, Circuit Judges.
   BRORBY, Circuit Judge.

Defendant Paul Silvers pled guilty to one count of possession with intent to distribute marijuana in violation of 21 U.S.C. § 841(a). He now appeals his sentence. We exercise jurisdiction pursuant to 18 U.S.C. § 3742(a) and affirm.

I

A grand jury returned a two-count indictment against Mr. Silvers and four other individuals in September 1991. The district court later dismissed Count 1 of the indictment, alleging Mr. Stivers and his codefend-ants conspired to possess marijuana with intent to distribute (21 U.S.C. §§ 841(a) & 846), on double jeopardy grounds, United States v. Mintz, 804 F.Supp. 229 (D.Kan.1992), and we affirmed the dismissal. United States v. Mintz, 16 F.3d 1101 (10th Cir.), cert. denied, — U.S.-&-, 114 S.Ct. 2723 & 2760, 129 L.Ed.2d 847 & 875 (1994). After we issued our mandate, Mr. Silvers pled guilty to Count 2 of the indictment, which alleged he and his codefendants “knowingly and intentionally possessed] with the intent to distribute or dispense more than 1000 marijuana plants ... in violation of Title 21, United States Code, Section 841(a)(1); with reference to Title 21, United States Code, Sections 812 and 841(b)(1)(A).” In the plea agreement, the government agreed to allow Mr. Silvers “to present evidence at his sentencing regarding the number of marijuana plants that he possessed with intent to distribute,” and Mr. Silvers “acknowledge^] and understood] that the Government takes the position that defendant possessed, with the intent to distribute, over 1000 marijuana plants, and will advocate this position at his sentencing.” In the section of the preprinted petition to enter a plea of guilty in which the defendant is to indicate whether the government has made any promises or concessions, Mr. Silvers wrote, “possessed amount of marijuana is left open until sentencing.” Similarly, in the section in which the defendant is to state the terms of his plea agreement, Mr. Silvers wrote, “plea to possession & will be allowed to argue about amount of marijuana in defendant’s possession.” Finally, defense counsel averred that he had informed Mr. Silvers that the guilty plea “left open marijuana amount for trial.”

At the change of plea hearing, defense counsel stated he

just want[ed] to make sure the Court knew and that my client also knows, the issue of the amount of the marijuana in his possession is left open specifically for sentencing, and the government contends he had a thousand plants and he contends he had substantially less than that, and that issue is reserved, to my understanding, to the sentencing.

The government conceded defense counsel was correct, and that the matter was “spelled out in the written plea agreement.” Later during the change of plea hearing, the government outlined the penalties for the offense to which Mr. Silvers was pleading guilty and explained the penalties would differ depending on the amount of marijuana attributable to him. The district court also stated the sentence would depend on “the finding of the court as to the quantity of marijuana.” The government then summarized the evidence against Mr. Silvers, which, according to the government, included evidence sufficient to prove beyond a reasonable doubt that Mr. Silvers possessed with intent to distribute “a thousand or more marijuana plants.” The district court asked defense counsel whether he believed the evidence was sufficient to prove Mr. Silvers’ guilt beyond a reasonable doubt, “keeping in mind the difference of opinion on the quantity of marijuana.” Defense counsel responded, “[y]es, reserving the fact of the amount of possession of Mr. Silvers.” After an interruption, defense counsel continued:

Reserving the amount of pounds, which we believe to be somewhere between 150 and potentially 400 pounds, we would agree with the government’s assertions that there was possession of marijuana here, and the other issue is the amount of marijuana that was destroyed while in the possession of the government.

At the close of the hearing, the district court accepted Mr. Silvers’ guilty plea.

Mr. Silvers’ presentence report attributed 1,000 marijuana plants to him for sentencing purposes, thereby triggering the mandatory minimum sentence prescribed in 21 U.S.C. § 841(b)(l)(A)(vii), which includes imprisonment for not less that ten years nor more than life. Using the version of the guidelines in effect at the time of sentencing, see U.S.S.G. § lBl.ll(a); United States v. Owens, 70 F.3d 1118, 1130 (10th Cir.1995), the presentence report assigned Mr. Silvers a base offense level of 32, the level for offenses involving “[a]t least 1,000 KG but less than 3,000 KG of Marihuana.” U.S.S.G. § 2Dl.l(c)(4). In converting the 1,000 marijuana plants into 1,000 kilograms of marijuana, the presentenee report relied on a footnote to the Drug Quantity Table, U.S.S.G. § 2Dl.l(e), which provides:

In the case of an offense involving marihuana plants, if the offense involved (A) 50 or more marihuana plants, treat each plant as equivalent to 1 KG of marihuana; (B) fewer than 50 marihuana plants, treat each plant as equivalent to 100 G of marihuana. Provided, however, that if the actual weight of the marijuana is greater, use the actual weight of the marihuana.

(Emphasis in the original). With a three-point downward adjustment for acceptance of responsibility, U.S.S.G. § 3El.l(a, b), Mr. Silvers’ total offense level was 29, yielding a sentencing range of 97-121 months in criminal history category II. U.S.S.G. Chapter 5, Part A. However, because of the ten-year statutory mandatory minimum sentence, 21 U.S.C. § 841(b)(l)(A)(vii), Mr. Silvers’ effective guideline sentencing range was 120-121 months. U.S.S.G. § 5Gl.l(c)(2).

Now represented by a different attorney, Mr. Silvers objected to the presentenee report on the ground that “use of any quantity of plants in this case to establish the Guideline would be legally incorrect, [because] the equivalency provisions of the United States Sentencing Guidelines with respect to marijuana can only apply to live marijuana plants actually found.” Mr. Silvers also contended “there is no evidence to support 1,000 plants.” At the sentencing hearing, the district court rejected Mr. Silvers’ first contention, stating “you’ve made an amenable argument ... to convert this sentencing into a proceeding on pounds rather than on number of plants of marijuana. However, the Court is of the opinion that ... [Mr. Silvers] should be sentenced on the basis of plants.” As for the second objection, the district court found that “the presentence investigation report correctly uses 1,000 or more marijuana plants to calculate the defendant’s guideline range.” At the close of the hearing, the district court sentenced Mr. Silvers to 120 months imprisonment, the statutory mandatory minimum in light of the finding at least 1,000 marijuana plants were attributable to him for sentencing purposes. 21 U.S.C. § 841(b)(l)(A)(vii). This appeal followed.

II

Before we address Mr. Silvers’ challenge to his sentence, we will attempt to eliminate the apparent confusion surrounding the nature of his guilty plea. As noted above, Mr. Silvers pled guilty to Count 2 of the indictment, which alleged he and his co-defendants “knowingly and intentionally possessed] with the intent to distribute or dispense more than 1000 marijuana plants ... in violation of Title 21, United States Code, Section 841(a)(1); with reference to Title 21, United States Code, Sections 812 and 841(b)(1)(A).” The only substantive charge in Count 2 was that Mr. Silvers possessed marijuana with the intent to distribute in violation of 21 U.S.C. § 841(a). The other statutes cited are not substantive offenses: 21 U.S.C. § 812 is the schedule of controlled substances, and 21 U.S.C. § 841(b)(1)(A) prescribes certain mandatory minimum penalties for violations of 21 U.S.C. § 841(a). Our cases make clear not only that the mandatory minima prescribed in 21 U.S.C. § 841(b)(1)(A) are not substantive offenses in themselves, but further that “[t]he quantity of the marijuana possessed by [the] defendant is not an element of the substantive offense as defined in 21 U.S.C. § 841(a).” United States v. Cox, 934 F.2d 1114, 1121 (10th Cir.1991); see also United States v. Underwood, 982 F.2d 426, 429-30 (10th Cir.1992) (because drug quantity is not an element of 21 U.S.C. § 841(a), defendant is not entitled to have the issue decided by a jury), cert. denied, 509 U.S. 925, 113 S.Ct. 3043, 125 L.Ed.2d 729 (1993). We have also held it is unnecessary for the government to allege drug quantity in the indictment, and that even when the government does so, the quantity alleged “does not dictate the mandatory minimum that the court is required to impose” under 21 U.S.C. § 841(b). United States v. Reyes, 40 F.3d 1148, 1151 (10th Cir.1994); see also Underwood, 982 F.2d at 429 (district court may rely on drug quantities not alleged in the indictment in calculating base offense level under U.S.S.G. § 2D1.1(c)). Because drug quantity is not an element of the offense, “the government [is] not bound to prove the quantity [of drugs] seized beyond a reasonable doubt,” Cox, 934 F.2d at 1121, in order to obtain a conviction under 21 U.S.C. § 841(a); rather, the government is required only to prove the quantity of drugs attributable to the defendant by a preponderance of the evidence at sentencing in order to trigger the mandatory minimum sentences prescribed in 21 U.S.C. § 841(b), Underwood, 982 F.2d at 429, just as the government is required to prove such quantities by a preponderance of the evidence to establish the defendant’s base offense level under the Drug Quantity Table, U.S.S.G. § 201.1(c), United States v. Williamson, 53 F.3d 1500, 1529 (10th Cir.), cert. denied, — U.S. -, 116 S.Ct. 218, 133 L.Ed.2d 149 (1995), and the evidence need only possess “sufficient indicia of reliability to support its probable accuracy,” U.S.S.G. § 6A1.3, comment.; see United States v. Edwards, 69 F.3d 419, 438 (10th Cir.1995), petitions for cert. filed, (U.S. Feb. 23, Feb. 29 & Mar. 4, 1996) (Nos. 95-1355, 95-8147 & 95-8134); United States v. Cody, 7 F.3d 1523, 1527 (10th Cir.1993). Placed in this context, Mr. Silvers’ guilty plea amounted to an unconditional plea to the charge he possessed marijuana with the intent to distribute in violation of 21 U.S.C. § 841(a), with an express caveat that he did not wish to stipulate to the amount of marijuana attributable to him for sentencing purposes. With that said, we turn to Mr. Silvers’ contentions on appeal.

III. Mandatory Minimum Penalties under 21 U.S.C. § 8il (b)(1) (A)

A. Supposed Requirement that the Government Prove Mr. Silvers Grew Marijuana

Mr. Silvers contends the district court erred when it calculated his mandatory minimum sentence under 21 U.S.C. § 841(b)(l)(A)(vii) on the basis of the number of marijuana plants attributable to him, rather than the actual weight of that marijuana. According to Mr. Silvers, the one planVone kilogram equivalency does not apply in his case because he did not actually “grow” the marijuana in question, but instead discovered it growing wild in Kansas. In effect, Mr. Silvers would have us hold that, in order to obtain a sentence based on the number of plants, the government must prove by a preponderance of the evidence that the defendant was a “grower” of marijuana. Mr. Silvers’ contention stands or falls on how we construe the relevant statute, 21 U.S.C. § 841(b)(l)(A)(vn).

“In determining the scope of a statute, we look first to its language.” United States v. Turkette, 452 U.S. 576, 580, 101 S.Ct. 2524, 2527, 69 L.Ed.2d 246 (1981). The statute itself says nothing about a requirement that the government prove by a preponderance that the defendant was a grower of marijuana. Instead, the statute provides as follows:

(b) Penalties
Except as otherwise provided .., any person who violates [21 U.S.C. § 841(a) ] shall be sentenced as follows:
(1)(A) In the case of a violation of [21 U.S.C. § 841(a) ] involving—
(vii) 1000 kilograms or more of a mixture or substance containing a detectable amount of marijuana, or 1,000 or more marijuana plants regardless of weight; ...
such person shall be sentenced to a term of imprisonment which may not be less than 10 years or more than life....

21 U.S.C. § 841(b). By its plain and unambiguous language, the statute requires the government to prove only that either 1,000 marijuana plants or 1,000 kilograms of marijuana are attributable to the defendant for sentencing purposes in order to trigger the mandatory minimum. To accept Mr. Silvers’ construction, we would in effect be required to rewrite the statute to read “1,000 kilograms or more of a mixture or substance containing a detectable amount of marijuana, or, if and only if the defendant is a grower of marijuana, 1,000 or more plants regardless of weight.” For the reasons stated below, we cannot and will not do so.

When, as in this case, “the statutory language is unambiguous, in the absence of a clearly expressed legislative intent to the contrary, that language must ordinarily be regarded as conclusive.” United States v. Floyd, 81 F.3d 1517, 1523 (10th Cir.1996), (quoting Turkette, 452 U.S. at 580, 101 S.Ct. at 2527 (citations and internal quotation marks omitted)). There is no “clearly expressed legislative intention to the contrary” in this ease. Before 1986, possession with the intent to distribute marijuana in violation of 21 U.S.C. § 841(a) was not punished based on the number of plants attributable to the defendant. Congress did so for the first time with the enactment of the Anti-Drug Abuse Act of 1986, Pub.L. 99-570, § 1003(a)(1)(C), 100 Stat. 3207-5. No House or Senate Report was submitted with this legislation, see 1986 U.S.C.C.A.N. 5393, and the discussion of the statute reported in the Congressional Record sheds no light on Congress’ intent. Congress enacted the amendments changing the relevant sections of 21 U.S.C. § 841(b) into their present form as part of the Anti-Drug Abuse Act of 1988, Pub.L. 100-690, §§ 6470(g)(2), 6470(h)(2), & 6479, 102 Stat. 4181, 4378, 4381-82. Again, no House or Senate Report was submitted with this legislation. See 1988 U.S.C.C.A.N. 5937. The only discussion of the relevant parts of the statute on the either the House or Senate floor was a section-by-section analysis read into the Congressional Record by Senator Biden, then chairman of the Senate Judiciary Committee. Regarding § 6479, Senator Biden stated:

Section 841(b)(1)(A) provides for a mandatory minimum 10 year penalty for distribution, or possession with intent to distribute, of “1,000 kilograms or more of a mixture or substance containing a detectable amount of marijuana.” Defendants charged with possessing large quantities of marijuana plants have argued that the statutory definition of marijuana specifically excludes the seeds and stems of the plant, and that therefore these items may not be counted toward the 1,000 kilogram requirement.
The government has argued in response that the term “mixture or substance” encompasses all parts of the plants as harvested, notwithstanding the statutory definition of “marijuana,” but defendants contend that the “mixture or substance” language applies only to marijuana after it has been prepared for illegal distribution. The defendants’ position has been adopted by at least one court. United States v. Miller, 680 F.Supp. 1189 (E.D.Tenn.1988).
The amendment is intended to curtail this unnecessary debate by providing that the minimum penalty is triggered either by the weight of the “mixture or substance” or by the number of plants regardless of weight. The bill uses 1,000 plants as the equivalent of 1,000 kilograms.

134 Cong. Rec. 32,700 (1988). Nothing in Senator Biden’s discussion of § 6479 can be interpreted as expressing an intent that the one plant/one kilogram equivalency applies only if the government first proves the defendant was a grower of marijuana.

We are aware of a line of cases holding, despite the dearth of legislative history, that courts can infer that one of the purposes of the one plant/one kilogram equivalency is to punish marijuana growers more severely than other defendants. This line of cases began with United States v. Fitol, 733 F.Supp. 1312 (D.Minn.1990), in which the district court stated:

It seems clear ... that by changing the determining factor from weight to number of “plants regardless of weight,” Congress intended to punish growers of marihuana by the scale or potential of their operation and not just by the weight of the plants seized at a given moment. Congress must have found a defendant who is growing 100 newly planted marihuana plants to be as culpable as one who has successfully grown 100 kilograms of marijuana.

Id. at 1315 (emphasis in the original). The Fitol court’s interpretation of Congress’s intent has gained a wide following, both in this Circuit and in others. See United States v. Jackson, 11 F.3d 953, 956 (10th Cir.1993) (“Congress intended to punish growers of marijuana by the scale or potential of their operation and not just by the weight of the plants seized at a given moment.” (Citation and internal quotation marks omitted)); Cody, 7 F.3d at 1528 (“This sentencing elevation is ... a reflection of Congress’s belief that growing a large number of plants (capable of large scale distribution) is an exponentially more severe offense than growing a small number.” (Citation and internal quotation marks omitted.)); United States v. Occhipinti 998 F.2d 791, 802 (10th Cir.1993) (“[W]e rejected a challenge to the constitutionality of the minimum sentencing provisions found at 21 U.S.C. § 841(b)(l)(B)(vii), holding that Congress rationally intended to punish growers of marijuana by the scale or potential of their operation and not just the weight of the plants seized at a given moment.” (Citations and internal quotation marks omitted.)); United States v. Lee, 957 F.2d 778, 784 (10th Cir.) (“Congress intended to punish growers of marijuana by the scale or potential of their operation and not just the weight of the plants seized at a given moment. In our view, the cultivation of marijuana plants creates a greater potential for abuse than possession of harvested marijuana.”), cert. denied, 506 U.S. 978, 113 S.Ct. 475, 121 L.Ed.2d 381 (1992); United States v. Eves, 932 F.2d 856, 859 (10th Cir.) (same), cert denied, 502 U.S. 884, 112 S.Ct. 236, 116 L.Ed.2d 192 (1991); see also United States v. Carvell, 74 F.3d 8, 9 n. 1 (1st Cir.1996) (“‘Congress intended to punish growers of marihuana by the scale or potential of their operation and not just by the weight [or size] of the plants seized at a given moment.’” (Quoting United States v. McMahon, 935 F.2d 397, 401 (1st Cir.), cert. denied, 502 U.S. 897, 112 S.Ct. 272, 116 L.Ed.2d 224 (1991))); United States v. Proyect, 989 F.2d 84, 88 (2d Cir.) (“[I]n enacting a mandatory minimum sentence based solely on the number of plants a grower possesses, Congress intended to punish growers of marijuana by the scale or potential of their operation and not just by the weight of the plants seized at a given moment.”) (citations and internal quotation marks omitted), cert. denied, — U.S. -, 114 S.Ct. 80, 126 L.Ed.2d 49 (1993); United States v. Murphy, 979 F.2d 287, 290 (2d Cir.1992) (“Congress wanted to penalize large scale growers more harshly than small time offenders.... After all, if there were no large scale growers of marijuana it is unlikely that there could be large scale sellers of marijuana.”); United States v. Fletcher, 74 F.3d 49, 55 (4th Cir.1996) (“By providing that processed marijuana be measured by weight but live plants be counted by number and then treated as the equivalent of an amount of dry marijuana as set by statute, Congress has established a system of stepped-up punishment for growers.”) (footnotes omitted); United States v. Holmes, 961 F.2d 599, 601 (6th Cir.) (“Congress and the Sentencing Commission [have] adopted a view that a person who grows over 1,000 marijuana plants is equally culpable as a person who harvests over 1000 kilograms of marijuana”), cert. denied, 506 U.S. 881, 113 S.Ct. 232, 121 L.Ed.2d 168 (1992); United States v. Young, 34 F.3d 500, 506 (7th Cir.1994) (equivalency provision “‘reflects Congress’ judgment that an individual who grows 150 plants is just as culpable as one who has distributed 150 kilograms of marijuana.’” (Quoting United States v. Haynes, 969 F.2d 569, 571 (7th Cir.1992))); United States v. Smith, 961 F.2d 1389, 1390 (8th Cir.1992) (“The cases suggest Congress intended to account for the heightened culpability of growers because of their primacy in the distribution chain, rather than to punish them based on predictable yield of their plants.”); United States v. Wegner, 46 F.3d 924, 926 (9th Cir.1995) (“Our precedent unambiguously endorses the view that the one kilogram conversion ratio represents congressional intent to punish growers of 50 or more marijuana plants to a greater extent than smaller producers or mere possessors.”); United States v. Foree, 43 F.3d 1572, 1581 (11th Cir.1995) (21 U.S.C. § 841(b) “punishes marijuana growers by relying in sentencing on the number of live plants recovered rather than marijuana weight”).

We are in substantial agreement with the conclusion in the Fitol line of eases that at least one of the reasons, and perhaps the main reason, Congress enacted the one plant/ one kilogram equivalency was to punish growers more severely that others. We do not believe, however, that this line of cases supports Mr. Silvers’ position. First, none of the above eases holds the government must prove the defendant was a grower in order to obtain a sentence under the one plant/one kilogram equivalency. Second, the mere fact one of the legislative purposes of the one plant/one kilogram equivalency was to punish growers more severely does not mandate the conclusion that the government must prove the defendant was a grower before that equivalency can be applied. Had Congress intended to focus the impact of this statute so narrowly and limit its application in this •way, Congress would have demonstrated its intent in the text of the statute or in some other clear and unambiguous fashion.

Third, we believe it is equally plausible that Congress’ purpose was broader than Mr. Silvers suggests. The marijuana industry is very much like any other agricultural business, and the people involved in it have the same basic roles as their counterparts in the legitimate agricultural trade: some plant the seeds, some tend and water the plants, some harvest the plants when they are mature, some dry the plants, some cut and package them, some ship them, and some distribute them to the wholesale and retail markets. One could easily conclude that when Congress enacted 21 U.S.C. § 841(b)(l)(A)(vii), it intended only to distinguish between individuals involved in production and individuals involved only in shipping, distribution, and sales, and to impose a harsher penalty on those involved in production, regardless of whether those individuals are growers, harvesters, driers, etc. One could also conclude Congress sought to achieve this goal merely by punishing those who possess plants more harshly than those who possess processed marijuana, reasoning that those who possess plants are involved in the early stages of the production process, whereas those who possess processed marijuana are involved only in shipping, distribution, or sales. To effectuate this broader legislative purpose, we conclude it is necessary for the government to prove only that the defendant possessed plants, and it is not be necessary for the government to prove the defendant’s individual role in the production of marijuana, i.e., that he was a grower.

Furthermore, contrary to Mr. Silvers’ contention, there is nothing in the United States Sentencing Guidelines that conflicts with our conclusion. The footnote to the Drug Quantity Table, on which the probation department and the district court relied in this case, states merely:

In the case of an offense involving marihuana plants, if the offense involved (A) 50 or more marihuana plants, treat each plant as equivalent to 1 KG of marihuana; (B) fewer than 50 marihuana plants, treat each plant as equivalent to 100 G of marihuana. Provided, however, that if the actual weight of the marihuana is greater, use the actual weight of the marihuana.

U.S.S.G. § 2Dl.l(e)(n.*) (emphasis in the original). In the commentary to this guideline, the Commission explains:

In cases involving fifty or more marihuana plants, an equivalency of one plant to one kilogram of marihuana is derived from the statutory penalty provisions of 21 U.S.C. § 841(b)(1)(A), (B), and (D). In cases involving fewer than fifty plants, the statute is silent as to the equivalency. For cases involving fewer than fifty plants, the Commission has adopted an equivalency of 100 grams per plant, or the actual weight of the usable marihuana, whichever is greater. The decision to treat each plant as equal to 100 grams is premised on the fact that the average yield from a mature marihuana plant equals 100 grams of marihuana.

U.S.S.G. § 2D1.1, comment, (backg’d). Neither provision suggests the government must prove the defendant was a grower in order to obtain a sentence using the one plani/one kilogram equivalency.

Mr. Silvers makes much of the fact that the Sentencing Commission amended the above provisions effective November 1, 1995. U.S.S.G.App. C, amend. 516. The amendment rewrote the footnote to the Drug Quantity Table, quoted above, to read as follows:

In the case of an offense involving marihuana plants, treat each plant, regardless of sex, as equivalent to 100 G of marihuana. Provided, however, that if the actual weight of the marihuana is greater, use the actual weight of the marihuana.

(Emphasis in the original.) The amendment also rewrote the above-quoted portion of U.S.S.G. § 2D1.1, comment, (backg’d):

For marihuana plants, the Commission has adopted an equivalency of 100 grams per plant, or the actual weight of the usable marihuana, whichever is greater. The decision to treat each plant as equal to 100 grams is premised on the fact that the average yield from a mature marihuana plant equals 100 grams of marihuana.

The Commission gave the following justification for the amendment:

For offenses involving 50 or more marihuana plants, the existing § 2D1.1 (Unlawful Manufacturing, Importing, Exporting, or Trafficking; Attempt or Conspiracy) uses an equivalency of one plant = one kilogram of marihuana, reflecting the quantities associated with the five- and ten-year mandatory minimum penalties in 21 U.S.C. § 841. For offenses involving fewer than 50 marihuana plants, the guidelines use an equivalency of one plant = 100 grams of marihuana, unless the weight of the actual marihuana is greater. In actuality, a marihuana plant does not produce a yield of one kilogram of marihuana. The one plant = 100 grams of marihuana equivalency used by the Commission for offenses involving fewer than 50 marihuana plants was selected as a reasonable approximation of the actual average yield of marihuana plants taking into account (1) studies reporting the actual yield of marihuana plants (37.5 to 412 grams depending on growing conditions); (2) that all plants regardless of size are counted for guideline purposes while, in actuality, not all plants will produce useable marihuana (e.g., some plants may die of disease before maturity, and when plants are grown outdoors some plants may be consumed by animals); and (3) that male plants, which are counted for guideline purposes, are frequently culled because they do not produce the same quality of marihuana as do female plants. To enhance fairness and consistency, this amendment adopts the equivalency of 100 grams per marihuana plant for all guideline determinations.

U.S.S.G.App. C, amend. 516.

We see nothing in U.S.S.G.App. C, amend. 516, that impacts our conclusion in this case. First, U.S.S.G.App. C, amend. 516, neither states nor implies that the government must prove the defendant was a grower in order to obtain a sentence under the revised one plant/100 gram equivalency. Second, although our resolution of the issue must await another day, it should be noted that it is far from clear whether U.S.S.G.App. C, amend. 516, is a valid exercise of the Commission’s rulemaking authority, see United States v. Novey, 78 F.3d 1483, 1486 (10th Cir.1996) (Sentencing Commission does not have authority to override or amend statute), given that it conflicts with Congress’ intent to treat one plant as equivalent to one kilogram of marijuana, as reflected in 21 U.S.C. § 841(b)(l)(A)(vii). Third, it is true that the Commission has issued a policy statement stating this amendment may be applied retroactively, U.S.S.G. § lB1.10(a, c), and therefore the district courts have discretion to reduce existing sentences in light of this amendment under appropriate circumstances, assuming of course that the amendment is valid, See United States v. Telman, 28 F.3d 94, 96 (10th Cir.1994). Mr. Silvers is not entitled to such a reduction, however, because he received the statutory mandatory minimum sentence, and U.S.S.G.App. C, amend. 516, cannot be retroactively applied to bring his sentence below that statutory mandatory minimum. U.S.S.G. § 5Gl.l(c)(2).

In light of the above, we reject Mr. Silvers’ contention the one plant/one kilogram equivalency prescribed in 21 U.S.C. § 841(b)(l)(A)(vii) applies only if the government proves the defendant actually grew the marijuana in question.

B. The Meaning of the Word “Plants” in 21 U.S.C. § 8U(b)(l)(A)(vii)

Mr. Silvers contends that in order for the government to obtain a sentence on the basis of the one plant/one kilogram equivalency in 21 U.S.C. § 841(b)(l)(A)(vii), the government must prove it actually seized “plants” from the defendant’s possession, and that plants are not “plants” for sentencing purposes unless they are alive. We reject Mr. Silvers’ contention. Again, first and foremost, there is nothing in the language or legislative history of 21 U.S.C. § 841(b)(l)(A)(vii) to support Mr. Silvers’ position. See Fletcher, 74 F.3d at 55 (“Congress has not further subdivided live marijuana plants into growing plants and cut plants.”). The statute states merely the one plant/one kilogram equivalency applies if the government proves 1,000 “plants” are attributable to the defendant. There is nothing in the statute requiring the government to prove the additional elements Mr. Silvers urges us to embrace. Were we to so hold, our decision would be based on nothing more than judicial fiat.

Second, in Eves, 932 F.2d at 860, we concluded there was not “any aspect of legislative history that supports [the] theory that Congress intended ‘plant’ to be construed other than by its plain and ordinary dictionary meaning.” See Chapman v. United States, 500 U.S. 453, 461-62, 111 S.Ct. 1919, 1925, 114 L.Ed.2d 524 (1991) (if a word in a statute or the Sentencing Guidelines is not defined therein, and does not have an “established common law meaning,” the word “must be given [its] ordinary meaning”); Floyd, 81 F.3d at 1523. We did note, however, that “the congressional intent was to simplify, not to complicate, the method of determining the high end or low end mandatory sentences,” and that if we were to require the government to prove the plants were alive at the time of seizure, our conclusion would, in effect, “require police officers to possess infrared gas analyzers to determine whether gas exchange is occurring in marijuana growth [and] to undergo botanical training in order to observe marijuana ... over a period of time to see whether increments of new tissue appear.” Eves, 932 F.2d at 860. To create such a requirement, we held, “would be to turn our face on the legislative purpose.” Id. With these concerns in mind, we concluded

the definition intended by Congress is the one accepted by the district court here: a marijuana “plant” includes those cuttings accompanied by root balls. Whether the plant could survive on its own would not be an issue; if it looks like a “plant” — that is, if it has a reasonable root system — it will be considered a “plant.” No expert need testify, no experiments with instrumentation to monitor whether gaseous exchange is occurring need be conducted, no elaborate trimester or viability system need be established. If a cutting has a root ball attached it will be considered a plant.

Id. Although the marijuana in Eves was in “plant” form at the time of seizure, there is nothing in our opinion to suggest the government must prove that the marijuana was in plant form at the time of seizure in every ease to obtain a sentence under the one plani/one kilogram equivalency prescribed in either 21 U.S.C. § 841(b)(1)(A) or U.S.S.G. § 2Dl.l(c). Furthermore, Eves makes it clear a marijuana plant can be considered a “plant” for sentencing purposes even if the government cannot prove it was alive.

Third, effective November 1, 1995, the Sentencing Commission embraced our definition of the word “plant” as used in U.S.S.G. § 2D1.1 by adding application note 18, which provides:

For purposes of the guidelines, a “plant” is an organism having leaves and a readily observable root formation (e.g., a marihuana cutting having roots, a rootball, or root hairs is a marihuana plant).

U.S.S.G. § 2Dl.l(c), comment, (n.18). The Commission explained the amendment as follows:

[T]his amendment addresses the issue of what constitutes a marihuana plant. Several circuits have confronted the issue of when a cutting from a marihuana plant becomes a “plant.” The appellate courts generally have held that the term “plant” should be defined by its plain and ordinary dictionary meaning.... [A] marihuana ‘plant’ includes those cuttings accompanied by root balls.... Because this issue arises frequently, this amendment adds an application note to the Commentary of § 2D1.1 setting forth the definition of a plant for guidelines purposes.

U.S.S.G.App. C, amend. 518 (citations and internal quotation marks omitted). Of course, U.S.S.G. § 2D1.1, comment, (n.18), has no direct application to this case. This is so because it did not become effective until November 1, 1995, some eight months after Mr. Silvers was sentenced, and it is not retroactive. U.S.S.G. § lB1.10(a, c). Furthermore, Mr. Silvers’ sentence stands or falls depending on the applicability of the statutory mandatory minimum in 21 U.S.C. § 841(b)(l)(A)(vii), and it is irrelevant what his base offense level is under U.S.S.G. § 2Dl.l(c), given that the district court sentenced Mr. Silvers to the statutory mandatory minimum term of 120 months. Nevertheless, we believe the Commission’s decision to embrace our definition of the word “plants” is noteworthy because it underscores the correctness of our definition in Eves. More importantly, it should be noted the definition of the word “plant” in U.S.S.G. § 2D1.1, comment. (n.18), like our definition in Eves, does not require the government to prove the plants were in plant form at the time of seizure or that they were alive.

Finally, we find none of the cases from our sister circuits holding the marijuana must be in “plant” form at the time of seizure, see United States v. Blume, 967 F.2d 45, 49 (2d Cir.1992), or that a plant is not a “plant” unless it is alive, see United States v. Stevens, 25 F.3d 318, 320-23 (6th Cir.1994), and United States v. Osburn, 955 F.2d 1500, 1509 (11th Cir.), cert. denied, 506 U.S. 878, 113 S.Ct. 223, 121 L.Ed.2d 160 (1992), to be persuasive. First, as noted above, neither the statute, the guidelines, nor our case law impose such requirements. Second, were we to embrace the holdings in Blume, Osbum, and Stevens, we would be adopting a special, heightened standard of proof in cases involv ing marijuana plants, which would conflict strikingly with the standard of proof in cases involving all other drugs. We have held countless times that if no drugs are actually seized, the government can nevertheless prove the type and quantity of drugs attributable to the defendant through other evidence, and may also rely on estimates to approximate quantity provided there are sufficient indicia of reliability to support the estimate’s probable accuracy. See, e.g., Owens, 70 F.3d at 1130; United States v. Hooks, 65 F.3d 850, 854 (10th Cir.1995), cert. denied, — U.S. -, 116 S.Ct. 797, 133 L.Ed.2d 745 (1996); United States v. Ortiz, 993 F.2d 204, 207 (10th Cir.1993); U.S.S.G. § 6A1.3(a). We see no basis for such a special rule in either the statute, the guidelines, or our ease law. We therefore embrace the holdings of the Fourth, Seventh, and Ninth Circuits. See Fletcher, 74 F.3d at 55 (marijuana plant can be a plant even if it is not “alive”); Haynes, 969 F.2d at 572-73 (marijuana need not be in plant form at the time óf seizure); Wegner, 46 F.3d at 926-27 (same). In light of our conclusion, the government is required to prove by a preponderance of either direct or circumstantial evidence only that the defendant possessed with the intent to distribute or distributed marijuana plants as defined in Eves, 932 F.2d at 860, at some point in time in order to obtain a sentence under the one plant/one kilogram equivalency in 21 U.S.C. § 841(b)(1)(A)(vii).

C. Sufficiency of the Evidence to Support the District Court’s Finding 1,000 Marijuana Plants Were Attributable to Mr. Silvers

Mr. Silvers’ presentence report states “an excess of 1,000 plants” were attributable to him. The probation department based its conclusion primarily on information provided by one of Mr. Silvers’ codefendants, Sandra Wolfe. Specifically, the presentence report states, “Wolfe ... advised the plants numbered more than 1,000” and ‘Wolfe indicated over 1,000 plants were harvested by Mintz and his associates.” Mr. Silvers objected to the probation department’s reliance on Ms. Wolfe’s statements because the district court had stated in its earlier order denying the government’s second motion for reconsideration of the order dismissing Count 1 of the superseding indictment that “there are serious credibility problems with defendant Wolfe.” In that order, however, the district court did not expressly find Ms. Wolfe had lied. Instead, the district court stated it could not “find solely by virtue of the affidavit of Sandra Wolfe, who is seeking leniency in treatment by the government, that she was not in fact truthful in her testimony before this court and in a previous meeting with counsel for several of the defendants.”

In response to Mr. Silvers’ objections, the government stated:

The trial Court relied on affidavits from Mintz and Silvers in making its determination that the conspiracies alleged separately in Florida and Kansas were one and the same. The Court chose not to believe Ms. Wolfe in that regard. In hindsight, had the Court known then what is readily apparent now, that Mintz was a pathological liar and manipulator, the results likely would have been different. Also, bear in mind Ms. Wolfe’s emotional state and her conflict with counsel at the time of that hearing....
Ms. Wolfe is adamant in her assertions that this matter involved over 1,000 marijuana plants. She took Special Agent Myers to an area where several acres of marijuana plants were growing, and later harvested by Mintz, Silvers, et al. This is just one of many areas harvested by Silvers, et al. Recall that they harvested everything they could.

The government also relied on a statement by Louis Charles Sheptin, one of codefendant Michael Mintz’s fellow inmates, that Mr. Mintz told him he, Mr. Silvers, and others had cultivated and processed over 2,500 marijuana plants.

At the sentencing hearing, the district court apparently changed its opinion regarding Ms. Wolfe’s credibility, at least with respect to her statements regarding the number of marijuana plants attributable to Mr. Silvers. In overruling Mr. Silvers’ objection, the district court stated:

[TJhe Court finds that the presentenee investigation report correctly uses 1,000 or more marijuana plants to calculate the defendant’s guideline range....
The Court finds there is credible and sufficient evidence to find the defendant was accountable for this quantity of drugs. It was within the scope of this jointly undertaken criminal activity and was reasonable foreseeable....

Mr. Silvers now contends the district court erred in relying on Ms. Wolfe’s statements given that the district court had previously found her credibility doubtful, and on Mr. Mintz out-of-court statements to Mr. Sheptin, given the government’s admission Mr. Mintz is a pathological liar. Mr. Silvers further notes Ms. Wolfe’s and Mr. Mintz’s statements are inconsistent with other statements they made in the past. We agree that both Ms. Wolfe’s and Mr. Mintz’s credibility is, to say the least, uncertain. However, it is well established that “credibility determinations are for the district court ... and we will therefore not reexamine the credibility of a witness’ testimony on appeal.” Hooks, 65 F.3d at 854 (citations and internal quotation marks omitted). The district court has made a finding regarding credibility, and we will not now second-guess that finding. Because Ms. Wolfe’s and Mr. Mintz’s statements support the district court’s factual determination 1,000 marijuana plants are attributable to Mr. Silvers, we conclude its determination was not clear error.

IV

For the reasons stated, we find no fault with the district court’s conclusion Mr. Silvers is subject to the mandatory minimum penalties prescribed in 21 U.S.C. § 841(b)(l)(A)(vii). Because the district court imposed the minimum term of imprisonment allowed under that statute, Mr. Silvers’ contentions regarding the district court’s application of the Sentencing Guidelines are unavailing, because any errors the district court might have committed were harmless. Mr. Silvers’ sentence is therefore AFFIRMED.

BARRETT, Senior Circuit Judge,

dissenting:

I respectfully dissent. My review of the case law leads me to conclude that in order to be sentenced based on the number of plants rather than the weight of marijuana, the defendant must be a grower of marijuana.

The circuits which have considered this issue, including this circuit, are unanimous that in amending 21 U.S.C. § 841(b)(l)(A)(ii) and U.S.S.G. § 2D1.1 to specifically include plants separately from the weight of the marijuana, Congress intended to punish growers of marijuana differently than those defendants who merely possess marijuana.

In United States v. Eves, 932 F.2d 856 (10th Cir.), cert. denied, 502 U.S. 884, 112 S.Ct. 236, 116 L.Ed.2d 192 (1991), we observed that in United States v. Fitol, 733 F.Supp. 1312 (D.Minn.1990), Judge Devitt “thoroughly reviewed the legislative history of the Sentencing Guidelines and concluded that:

by changing the determining factor from weight to number of “plants regardless of weight” Congress intended to punish growers of marijuana by the scale or potential of their operation and not just by the weight of the plants seized at a given moment. Congress must have found a defendant who is growing 100 newly planted marijuana plants to be just as culpable as one who has successfully grown 100 kilograms of marijuana.”

Eves, 932 F.2d at 859 (quoting Fitol, 733 F.Supp. at 1315).

In United States v. Lee, 957 F.2d 778, 784 (10th Cir.), cert. denied, 506 U.S. 978, 113 S.Ct. 475, 121 L.Ed.2d 381 (1992), we stated that:

We must hold that the district court erred in finding/concluding that because a single marijuana plant could not produce a kilogram of marijuana substance, the statute punished defendants who grow marijuana plants more severely than those who possess harvested marijuana and is, accordingly, violative of equal protection guarantees.... We agree with Judge Devitt’s observation in Fitol, supra, that Congress intended to punish growers of marijuana by the scale or potential of their operation and not just the weight of the plants seized at a given moment. In our view, the cultivation of marijuana plants creates a greater potential for abuse than possession of harvested marijuana.

See also United States v. Jackson, 11 F.3d 953, 956 (10th Cir.1993) (“Rather, as we recognized in [Lee ], ‘Congress intended to punish growers of marijuana by the scale or potential of their operation and not just by the weight of the plants seized at a given moment.’ ”); United States v. Cody, 7 F.3d 1523, 1528 (10th Cir.1993) (The equivalency provision “is a reflection of Congress’ belief that growing a large number of plants (capable of large scale distribution) is an exponentially more severe offense than growing a small number.”) (quoting United States v. Osburn, 955 F.2d 1500, 1508 (11th Cir.), cert. denied, 506 U.S. 878 & 901, 113 S.Ct. 223 & 290, 121 L.Ed.2d 160 & 215 (1992)); United States v. Occhipinti 998 F.2d 791, 802 (10th Cir.1993) (“[W]e rejected a challenge to the constitutionality of the minimum sentencing provisions found at 21 U.S.C. § 841(b)(l)(B)(vii), holding that Congress rationally ‘intended to punish growers of marijuana by the scale or potential of their operation and not just the weight of the plants seized at a given moment.’ ”) (quoting Lee, 957 F.2d at 784).

Based on Eves, Occhipinti from this circuit and the decisions of the eight other circuits cited by the majority ,1 would hold that a defendant cannot be sentenced based on the number of marijuana plants as opposed to the actual weight of the marijuana under the equivalency provision of U.S.S.G. § 2D1.1 unless he or she is grower of marijuana.

Unlike the majority, I do not view these cases as simply stating one reason for Congress’ enactment of the one planVone kilogram equivalency. In holding that Congress intended to punish growers with this “stepped-up punishment,” the courts have recognized the anomaly created where individuals at different stages in production are treated much differently, evidencing that the harsher sentencing provision was not intended to extend further down the chain of production. See United States v. Osburn, 955 F.2d 1500, 1509 (11th Cir.) (the market-oriented approach “mandates different treatment for individuals involved in different aspects of the distribution of a drug.”), cert. denied, 506 U.S. 878 & 901, 113 S.Ct. 223 & 290, 121 L.Ed.2d 160 & 215 (1992). See also United States v. Rogers, 1993 WL 12672 (10th Cir.1993) (“It is true that a marijuana grower, arrested prior to harvesting, is sentenced on a one kilogram-per-plant basis. On the other hand, a marijuana grower, arrested immediately after harvesting, is sentenced according to the actual weight of the marijuana,_”).

Significantly, there is no evidence that Silvers engaged in the process of “growing” marijuana in Kansas. To the contrary, the evidence relating to the marijuana in question was limited to Wolfe’s testimony summarizing the manner in which she located the fields of wild marijuana, (Appendix of Appellant at 120-22, 123-25, 126-27), and Mintz’s testimony summarizing his travels to Kansas to set up a base operation for harvesting and processing the wild marijuana. Id. at 128-32, 133-35. The government s case against Silvers was predicated upon his participation in harvesting wild marijuana and his possession of harvested wild marijuana with the intent to distribute it. The government did not present any evidence that Silvers had engaged in growing marijuana in Kansas nor that Silvers had ever possessed any marijuana plants.

Therefore, I would vacate the sentence imposed on Silvers and remand for resen-tencing on the basis of the weight of the marijuana involved.

      . See United States v. Carvell, 74 F.3d 8, 9 n. 1 (1st Cir.1996); United States v. Proyect, 989 F.2d 84, 88 (2d Cir.); United States v. Murphy, 979 F.2d 287, 290 (2nd Cir.1992); United States v. Fletcher, 74 F.3d 49, 55 (4th Cir.1996); United States v. Heater, 63 F.3d 311, 322 (4th Cir.1995); United States v. Stevens, 25 F.3d 318, 320-23 (6th Cir.1994); United States v. Holmes, 961 F.2d 599, 601 (6th Cir.); United States v. Young, 34 F.3d 500, 506 (7th Cir.1994); United States v. Smith, 961 F.2d 1389, 1390 (8th Cir.1992); United States v. Wegner, 46 F.3d 924, 926 (9th Cir.1995); United States v. Foree, 43 F.3d 1572, 1581 (11th Cir.1995).


source: Caselaw Access Project

author: HENRY, Circuit Judge.

license: Public Domain

text:
    In re M & L BUSINESS MACHINE COMPANY, INC., Debtor. Christine J. JOBIN, Trustee of the Estate of M & L Business Machine Company, Inc., Plaintiff-Appellee/Cross-Appellant, v. Perry S. McKAY, Defendant-Appellant/Cross-Appellee.
    Nos. 94-1087, 94-1097.
    United States Court of Appeals, Tenth Circuit.
    May 29, 1996.
    Rehearing Denied in No. 94-1087 July 16, 1996.

      Craig A. Weinberg (Andrew C. Littman, with him on the briefs), Stevens, Littman & Biddinson, Boulder, Colorado, for Defendant-Appellant.
    Christine J. Jobin (Dana M. Arvin and Charles F. McVay with her on the briefs), The Jobin Law Firm, Denver, Colorado, for Plaintiff-Appellee.
    Before KELLY, SETH , and HENRY, Circuit Judges.

      The late Honorable Oliver Seth, Senior Judge, United States Court of Appeals for the Tenth Circuit, heard oral argument in this case but did not participate in the final decision.

   HENRY, Circuit Judge.

This appeal concerns the investments made by the appellant Perry S. McKay in a pyramid or “Ponzi” scheme run by the debt- or in bankruptcy, M & L Business Machine Company, Inc. (“M & L”). The appellee Christine J. Jobin, the bankruptcy trustee for M & L, brought an adversary proceeding against Mr. McKay seeking to recover a total of $43,500 in payments made to him in the ninety day period preceding the filing of the bankruptcy petition. Ms. Jobin argued that, under the Bankruptcy Code, the $43,500 paid to Mr. McKay was avoidable for several reasons and that the money should be returned to the bankruptcy estate for distribution to all creditors. In response, Mr. McKay argued that the payments constituted returns of a good faith investment for which M & L obtained reasonably equivalent value, that the payments were made in the ordinary course of business', and that, as a result, the trustee was not entitled to recover them.

After the resolution of cross-motions for summary judgment and a trial, the bankruptcy court concluded that the trustee was entitled to recover $22,000.00 from Mr.' McKay under 11 U.S.C. § 547(b), which authorizes the avoidance of transfers through which a transferee obtains more than he or she would have received in a chapter 7 liquidation proceeding. The court also held that the trustee was entitled to recover the entire $43,500 from Mr. McKay under 11 U.S.C. § 548(a)(1) as transfers made with the intent to hinder or defraud creditors. However, the court rejected the trustee’s claim under 11 U.S.C. § 548(a)(2), which concerns transfers for which the debtor receives less than reasonably equivalent value. The effect of the bankruptcy court’s rulings was a $22,000 judgment in favor of the trustee on the § 547(b) claim, and a judgment of $43,500 in favor of the trustee on the § 548(a)(1) claim. The district court affirmed the bankruptcy court’s decision in all respects. See Jobin v. McKay (In re M & L Business Mach. Co., 164 B.R. 657 (D.Colo.1994)).

Mr. McKay now challenges the district court’s affirmance of the bankruptcy court’s entry of judgment in favor of the trustee on her § 547(b) and § 548(a)(1) claims. In her cross-appeal, the trustee contends that the bankruptcy and district courts erred in rejecting her claim under § 548(a)(2). For the reasons set forth below, we affirm the decision of the district court.

I. BACKGROUND

In the mid-1980s, officers of the debtor M & L began running a Ponzi scheme. Using the company’s legitimate operations as a computer sales and leasing company as a front, the M & L officers solicited investments by promising extremely high rates of return. Upon receiving money from investors, M & L issued promissory notes and paid the promised sums with postdated checks drawn on company accounts.

From June through September 1990, Mr. McKay invested a total of $207,500 in M & L on varying terms. He made an initial investment of $100,000 on June 19, 1990, receiving an unsecured promissory note offering a return of ten percent per month ($10,000) over a two year period. A week later, he invested an additional $7,500 on the same terms. Finally, on September 7, 1990, and again on September 10, 1990, Mr. McKay invested $50,000 in M & L. On the latter two investments, M & L promised Mr. McKay a return of nine percent per week ($4,000). At the time of each of his investments, Mr. McKay received postdated checks. He deposited nine of them, totaling $43,500.

On October 1, 1990, M & L filed a petition under chapter 7 of the Bankruptcy Code. The bankruptcy court converted the case to chapter 11 and appointed Ms. Jobin as trustee. After the Ponzi scheme was discovered, the trustee converted the case back to chapter 7 and filed adversary proceedings against M & L investors in which she sought to recover payments made by M & L prior to the bankruptcy petition. She filed the instant adversary proceeding against Mr. McKay in September 1992 and asserted claims to recover the $43,500 under the preference, fraudulent transfer, and post-petition transaction provisions of the Bankruptcy Code. See 11 U.S.C. §§ 547, 548, and 549.

Mr. McKay and the trustee filed motions for summary judgment, which the bankruptcy court granted in part and denied in part. The court ruled that the trustee was entitled to recover $22,000 from Mr. McKay as an avoidable preference under 11 U.S.C. 547(b). The court rejected Mr. McKay’s argument that the transfers from M & L had been made “in the ordinary course of business” and therefore were not subject to avoidance in light of § 547(c)(2). Additionally, the court found that although the trustee had established the elements of an avoidable transfer “to hinder, delay, or defraud” creditors under § 548(a)(1), there were controverted issues of material fact as to whether Mr. McKay had received the payments from M & L “in good faith,” as that term is used in § 548(c), such that he could defeat the § 548(a)(1) claim. Finally, the court concluded that there were unresolved factual issues as to whether M & L had received “reasonably equivalent value” for the transfers to Mr. McKay and that, as a result, summary judgment was also not warranted on the trustee’s claim to avoid the transfers under § 548(a)(2).

After denying summary judgment on the § 548(a)(1) and 548(a)(2) claims, the bankruptcy court heard evidence concerning the circumstances surrounding Mr. McKay’s investments in M & L. The evidence established that Mr. McKay had substantial experience in financial matters. In particular, he studied business administration in college and operated a profitable construction business in California. At the time of the bankruptcy proceedings, Mr. McKay was the co-trustee of a family trust holding over $8,000,-000 in assets. He operated an industrial park in Golden, Colorado, a commercial real estate business, and a farming and ranching business. When he began investing in M & L, Mr. McKay’s portfolio included stocks and bonds — which he traded through several brokers — mutual funds, land, and promissory notes. He subscribed to several investment publications.

Mr. McKay testified that he learned of M & L though Dr. Alec Tsoucatos, an economics professor and former college president who informed him of the extremely high rates of return that M & L was offering and reported that he had profitably invested in M & L over the last five years. Mr. McKay acknowledged that shortly after his first payment to M & L, he learned that Dr. Tsouca-tos, although not representing himself to be a broker, had received a commission for convincing him to invest.

After speaking with Dr. Tsoucatos, Mr. McKay visited M & L’s corporate offices and spoke with two of its officers. In response to his inquiries about M & L’s offering such high rates of return, the M & L officers stated that investors’ cash payments allowed the company to obtain computer equipment at very low prices and then negotiate extremely profitable contracts with its customers. The officers reported that M & L had obtained contracts to provide equipment to a California school district and to several Fortune 500 companies. However, they said, concerns about confidentiality precluded them from disclosing the terms of specific contracts. The M & L officers also informed Mr. McKay that the company’s use of private investors to provide financing allowed them to negotiate contracts more quickly, without the constraints imposed by conventional lenders. However, the officers also stated that the majority of their financing was obtained through conventional lenders.

Mr. McKay also testified to the bankruptcy court that, before investing in M & L, he reviewed audited financial statements (for 1988, 1989, and part of 1990) that M & L officers provided. He also reviewed sales projections for 1990 and biographical sketches of two of M & L’s officers. The sketches indicated that neither officer had significant financial experience. Additionally, Mr. McKay did not attempt to verify any of the information in the financial statements. He neither examined any of the purported contracts with M & L customers nor attempted to contact any of the conventional lenders that the M & L officers had reported to be the source of most of the company’s financing.

In his testimony before the bankruptcy court, Mr. McKay acknowledged that the first check that he received from M & L was returned for uncollected funds. After receiving notice of the returned cheek, Mr. McKay contacted a bank officer, who informed him that the matter would be discussed with M & L’s president. Subsequently, Mr. McKay spoke to M & L’s president, who assured him that the problem had been corrected. The cheek cleared after it was deposited a second time. Dr. Tsoueatos then advised Mr. McKay not to deposit M & L’s cheeks until five days after the date on each cheek. Mr. McKay followed this advice and had no further difficulty in depositing M & L’s checks.

During the bankruptcy proceedings, the trustee also introduced testimony from Mr. Ken Wester, a goldsmith and gemologist who had been solicited to invest in M & L but had declined. Mr. Wester had considerably less financial experience than Mr. McKay, but he explained that he refused to invest because he was suspicious of the extremely high rates of return.

After hearing the evidence, the bankruptcy court issued findings of fact and conclusions of law. The court ruled that Mr. McKay had failed to demonstrate that the transfers from M & L were taken in good faith under § 548(c). As a result, it found that the trustee was entitled to avoid all of the challenged transfers under § 548(a)(1), but not under § 548(a)(2). With regard to the § 548(a)(2) claim, the court reasoned that because M & L had received reasonably equivalent value for its payments to Mr. McKay, judgment should be entered in favor of Mr. McKay.

The district court affirmed the bankruptcy court’s summary judgment rulings, findings of fact, and conclusions of law in all respects. See Jobin, 164 B.R. at 661-668. On appeal to this court, Mr. McKay advances the following arguments: (1) that the bankruptcy and district courts erred in applying an objective standard of good faith under § 548(c); (2) that even under an objective standard, the evidence presented to the bankruptcy court established that he received the payments from M & L in good faith; and (3) that the courts erred in concluding that the transfers from M & L were not made in the ordinary course of business under § 547(e)(2). In her cross appeal, the trustee argues that the courts erred in rejecting her claim to avoid the transfers under § 548(a)(2).

II. DISCUSSION

A The objective standard for determining good faith is proper under 11 U.S.C. § 548(c).

Mr. McKay first argues that the bankruptcy and district courts erred in concluding that he did not receive the transfers from M & L in good faith and in thereby rejecting his defense to the trustee’s § 548 claims. He maintains that both courts erroneously applied an objective standard of good faith, under which “if the circumstances would place a reasonable person on inquiry of a debtor’s fraudulent purpose, and a diligent inquiry would have discovered the fraudulent purpose, then the transfer is fraudulent.” Jobin, 164 B.R. at 661 (quoting Hayes v. Palm Seedlings Partners-A (In re Agric. Research & Technology Group, Inc.), 916 F.2d 528, 536 (9th Cir.1990)). According to Mr. McKay, the proper measure of good faith under § 548(c) is subjective—“a transferee does not lack ‘good faith’ unless he has some actual knowledge of the fraud.” Aplt. Brief at 26. This argument raises a legal question regarding the proper interpretation of the Bankruptcy Code and is therefore subject to de novo review. See Dalton Dev. Project v. Unsecured Creditors Comm. (In re Unioil), 948 F.2d 678, 681 (10th Cir.1991) (Although “[a] bankruptcy court’s factual determinations will not be disturbed on appeal absent the most cogent reasons appearing in the record,” conclusions of law may be reviewed de novo, (internal quotation and citation omitted)).

We begin our analysis with the language of the Bankruptcy Code. Section 548(a)(1) provides that the trustee may avoid transfers of the debtor’s property made within one year before the filing of the bankruptcy petition if the debtor “made such transfer or incurred such obligation with actual intent to hinder, delay, or defraud any entity to which the debtor was or became ... indebted.” Section 548(a)(2) authorizes the trustee to avoid transfers on somewhat different grounds. If the debtor “received less than reasonably equivalent value” in exchange for a transfer of the debtor’s property, the trustee may avoid the transfer if several additional elements are established. 11 U.S.C. § 548(a)(2).

Section 548(c) provides a defense for individuals to whom the debtor’s property is transferred:

Except to the extent that a transfer or obligation voidable under this section is voidable under section 544, 545, or 547 of this title, a transferee or obligee of such a transfer or obligation that takes for value and in good faith has a lien on or may retain any interest transferred or may enforce any obligation incurred, as the case may be, to the extent that such transferee or obligee gave value to the debtor in exchange for such transfer or obligation.

11 U.S.C. § 548(c) (emphasis supplied).

As the parties note, the Bankruptcy Code does not define “good faith.” “Likewise, the legislative history related to section 548(c) never defines, and scarcely addresses, good faith.” In re Telesphere Communications, Inc., 179 B.R. 544, 557 n. 20. (Bankr.N.D.Ill.1994) (citing S.Rep. No. 989, 95th Cong., 2d Sess. 89-90 (1978), H.R.Rep. No. 595, 95th Cong., 1st Sess. 375 (1977)). As a result, courts applying § 548(c) have generally refused to formulate precise definitions. See, e.g., In re Agric. Research & Technology Group, 916 F.2d at 536 (“Courts have been candid in acknowledging that good faith ‘is not susceptible of precise definition.’ ”) (quoting Consove v. Cohen (In re Roco Corp.), 701 F.2d 978, 984 (1st Cir.1983)); In re Telesphere, 179 B.R. at 557 (noting that “there is no clear source of interpretive guidance” in construing the term). In analyzing § 548(c), one leading commentator has concluded that “[t]he unpredictable circumstances in which the courts may find its presence or absence render any definition of ‘good faith’ inadequate, if not unwise.” 4 Collier on Bankruptcy ¶ 548.07[2] at 548-72 (Lawrence P. King ed., 15th ed.1996).

Nevertheless, contrary to Mr. McKay’s contention, “good faith” has frequently been construed to include an objective component. After noting that “[gjood faith is an intangible and abstract quantity with no technical meaning,” Black’s Law Dictionary states that the term includes not only “honest belief, the absence of malice and the absence of design to defraud or to seek an unconscionable advantage” but also “freedom from knowledge of circumstances which ought to put the holder on inquiry.” Black’s Law Dictionary at 693 (6th ed.1990) (emphasis supplied). Prominent bankruptcy scholars agree: “[T]he presence of any circumstance placing the transferee on inquiry as to the financial condition of the transferor may be a contributing factor in depriving the former of any claim to good faith unless investigation actually disclosed no reason to suspect financial embarrassment.” 4 Collier on Bankruptcy, supra, ¶ 548.07 at 548-73.

The Eighth Circuit has recently followed this objective approach in determining good faith under § 548(c), holding that “a transferee does not act in good faith when he has sufficient knowledge to place him on inquiry notice of the debtor’s possible insolvency.” See Brown v. Third Nat. Bank (In re Sherman), 67 F.3d 1348, 1355 (8th Cir.1995) (citing Armstrong v. Ketterling (In re Anchorage Marina, Inc.), 93 B.R. 686, 693 (Bankr.D.N.D.1988); 4 Collier on Bankruptcy, supra, ¶ 548.07 at 548-72 to 73). The Sherman court concluded that the transferee’s knowledge of the debtors’ substantial debts, of their delinquent mortgage payments, of a bank’s plan to file foreclosure proceedings against them, and of a pending lawsuit placed the transferee on inquiry notice that the transfer of the debtors’ property was not made in good faith under § 548(c). 67 F.3d at 1355-56. Similarly, in In re Agric. Research & Technology Group, the Ninth Circuit relied on several Supreme Court decisions construing “good faith” in other contexts to conclude that “courts look to what the transferee objectively ‘knew or should have known’ in questions of good faith, rather than examining what the transferee actually knew from a subjective standpoint.” Significantly, the majority of bankruptcy courts construing “good faith,” as it is used in § 548(c), have followed the Eighth and Ninth Circuits, holding that a transferee who reasonably should have known of a debtor’s insolvency or of the fraudulent intent underlying the transfer is not entitled to the § 548(c) good faith defense. See, e.g., In re Anchorage Marina, 93 B.R. at 693; Walker v. Littleton (In re Littleton), 82 B.R. 640, 644 (Bankr.S.D.Ga.1988), rev’d on other grounds, 888 F.2d 90 (11th Cir.1989); Williams v. Kidder Skis Int’l (In re Fitzpatrick), 73 B.R. 655, 658 (Bankr.W.D.Mo.), aff'd in part and rev’d in part, 60 B.R. 808 (W.D.Mo.1985); In re Polar Chips Int’l, 18 B.R. at 484.

In arguing that these decisions should not be followed and that good faith should be measured subjectively, Mr. McKay invokes this circuit’s decision in Richards v. Platte Valley Bank, 866 F.2d 1576 (10th Cir.1989), two Fourth Circuit decisions, the analysis of several bankruptcy courts, and the definitions of good faith under the Uniform Commercial Code and various state laws concerning fraudulent conveyances. However, none of these authorities establishes that the objective measure of good faith applied by the bankruptcy and district courts is improper.

In Richards, we construed a provision of Colorado’s version of the Uniform Fiduciaries Act, Colo.Rev.Stat. § 15-1-109, that imposed liability on banks paying cheeks written by fiduciaries when “paying the check amounts to bad faith.” Richards, 866 F.2d at 1579 n. 2 (quoting Colo.Rev.Stat. § 15-1-109). We observed that although the statute did not define “bad faith,” it defined good faith as “a thing done ‘honestly, whether it be done negligently or not.’ ” Id. at 1582 (quoting Uniform Fiduciaries Act, § 1(2), 7A U.L.A. 396 (1985)). We considered that definition in concluding that, under the Colorado statute, the mere failure to make inquiry, even though there are suspicious circumstances, does not constitute bad faith — -“unless the facts and circumstances are so cogent and obvious that to remain passive would amount to deliberate desire to evade knowledge because of a belief or fear that inquiry would disclose a defect in the transaction." Id. at 1583 (citations omitted).

Richards clearly does not address the circumstances now before us in this adversary proceeding under the Bankruptcy Code. As noted above, unlike the Uniform Fiduciaries Act, § 548(c) of the Bankruptcy Code does not define good faith in terms of knowledge and does not expressly exclude consideration of negligence. Moreover, the Richards decision is based in part on consideration of the purpose of the Uniform Fiduciary Act — the need for uniform rules “to take the place of diverse and conflicting rules that had grown up concerning constructive notice of breach of fiduciary obligations in order that commerce might proceed with as little hindrance as possible.” Id. (quoting Union Bank & Trust Co. v. Girard Trust Co., 307 Pa. 488, 161 A. 865, 870 (1932)). In the instant case— in which a bankruptcy trustee seeks to recover assets for the benefit of all creditors of a Ponzi scheme — the need for a good faith standard that removes hindrances to commerce is not the paramount concern that it was in Richards. See Gill v. Winn (In re Perma Pac. Properties, Inc.), 983 F.2d 964, 968 (10th Cir.1992) (“It is the ultimate aim of the preference law in the Bankruptcy Code to insure that all creditors receive an equal distribution from the available assets of the debtor.”).

As to the other authorities on which Mr. McKay relies, we agree with the district court that none of them expressly addresses the issue of whether the determination of good faith under § 548(c) has an objective component. See Jobin, 164 B.R. at 661-62. Smith v. Mixon, 788 F.2d 229 (4th Cir.1986), the more recent of the Fourth Circuit cases that Mr. McKay cites, interprets a provision of the Bankruptcy Code, 11 U.S.C. § 550(b)(1), which establishes a defense to a trustee’s avoidance actions under 11 U.S.C. § 550(a)(2) for “any immediate or mediate transferee of such initial transferee.” Section 550(b)(1) provides that the trustee may not recover from these transferees if they “take for value ... in good faith, and without knowledge of the voidability of the transfer avoided.” 11 U.S.C. § 550(b)(1) (emphasis supplied). In construing this section, the Smith court focused on the use of the term “knowledge” and concluded that that term referred to actual notice and not constructive notice. Smith, 788 F.2d at 232. In this case, because Mr. McKay received the disputed funds directly from the debtor, M & L, he was not an “immediate or mediate transferee of [an] initial transferee,” 11 U.S.C. § 550(b)(1). The reasoning of Smith is therefore inapplicable.

The earlier Fourth Circuit decision on which Mr. McKay relies, Gilmer v. Woodson, 332 F.2d 541 (4th Cir.), cert. denied, 379 U.S. 834, 85 S.Ct. 67, 13 L.Ed.2d 42 (1964), is also based on a statute not at issue here — section 67(d)(2) of the Bankruptcy Act. Construing that section, the Gilmer court stated that “good faith cannot be said to be lacking unless the transferee knowingly participated in the debtor-transferor’s purpose to defeat other creditors or lacked good faith in valuing the property exchanged.” Gilmer, 332 F.2d at 547. However, the court did not expressly hold that good faith must always be subjectively measured under section 67(d) of the Bankruptcy Act. Moreover, in reversing the district court’s finding of a lack of good faith, the Gilmer court considered several objective factors — the value of the antecedent debt and the value of the security received. See id. Therefore, Gilmer also does not establish that good faith under § 548(c) must be measured subjectively.

As to the decisions of bankruptcy courts, Mr. McKay relies primarily on Merrill v. Abbott (In re Indep. Clearing House Co.), 77 B.R. 843 (D.Utah 1987), and Practical Inv. Corp. v. Relien (In re Practical Inv. Corp.), 95 B.R. 935 (Bankr.E.D.Va.1989). However, as the district court noted, neither case held that good faith under § 548(c) must always be measured subjectively. In particular, although at one point the Independent Clearing House court referred to good faith as “a subjective question,” 77 B.R. at 862, the court also noted that the presence of circumstances placing the transferee on inquiry as to the debtor’s insolvency may deprive him of the good faith defense, id. (citing 4 Collier on Bankruptcy, supra, ¶ 548.07[2] at 548-[72]). Moreover, the Independent Clearing House court explained (albeit in a mixed anatomical metaphor) the determination of good faith in a manner that emphasized objective factors: “The test is whether the transaction in question bears the earmarks of an arm’s length bargain.” Id. Similarly, in In re Practical Investment, the court focused on the particular facts before it in concluding that a transferee was entitled to the good faith defense and did not expressly hold that a subjective test was required. 95 B.R. at 942-45.

Finally, we are not persuaded by Mr. McKay’s argument that the definitions of good faith under the Uniform Commercial Code and state fraudulent conveyance laws should be adopted in interpreting § 548(c). Many of these provisions contain language different than the language used in § 548(e) and, like the Uniform Fiduciaries Act, which we considered in Richards, 866 F.2d at 1583, involve policy concerns not applicable here. See, e.g., Territorial Sav. & Loan Ass’n v. Baird, 781 P.2d 452, 461 (Utah App.1989) (referring to the definition of “good faith” set forth in Utah Code Ann. § 70A-1-201(19) (1989) — “honesty in fact in the conduct or transaction concerned”); Money Mart Check Cashing Ctr., Inc. v. Epicycle Corp. 667 P.2d 1372, 1373 (Colo.1983) (noting that “[t]he drafters of the Uniform Commercial Code intended that this standard [of good faith] be a subjective one”). Significantly, none of the decisions cited by Mr. McKay concern an investor in a Ponzi scheme who had notice of the kind of suspicious circumstances that surrounded M & L. In construing the term “good faith,” as it is used in § 548(e), we find the decisions of the Eighth and Ninth Circuits and the majority of bankruptcy courts more persuasive than the authorities on which Mr. McKay relies.

Accordingly, we conclude that the bankruptcy court and the district court properly held that good faith under § 548(c) should be measured objectively and that “if the circumstances would place a reasonable person on inquiry of a debtor’s fraudulent purpose, and a diligent inquiry would have discovered the fraudulent purpose, then the transfer is fraudulent.” Jobin, 164 B.R. at 661 (quoting Agric. Research & Technology Group, 916 F.2d at 536).

B. Evidence of a Lack of Good Faith

Mr. McKay also argues that, even under an objective standard, the bankruptcy and district courts erred in concluding that his receipt of the $43,500 was not “in good faith” under § 548(c). Resolution of this issue requires a determination of whether the facts satisfy the proper legal standard, a mixed question of law and fact. See Clark v. Security Pac. Business Credit, Inc. (In re Wes Dor, Inc.), 996 F.2d 237, 241 (10th Cir.1993). In these circumstances, because the question of good faith is primarily factual, we will review the findings of the bankruptcy court for clear error. See id. at 242 (applying the clearly erroneous standard to the district court’s determination of value under § 548(c)); see also Acequia, Inc. v. Clinton (In re Acequia, Inc.), 34 F.3d 800, 805 (9th Cir.1994); In re Roco, 701 F.2d at 981-82.

In arguing that he received the $43,500 from M & L in good faith, Mr. McKay notes that he invested in M & L on the recommendation of Dr. Tsoucatos, a former economics professor, and that he received assurances about the financial soundness of the company from M & L’s president after the first check was returned. As further indicators of good faith, Mr. McKay also points to his visit to M & L’s offices, the explanations of the high rates of return provided by M & L officials, and his review of company financial statements.

Under § 548(c), Mr. McKay has the burden of establishing good faith. See Agric. Research & Technology Group, 916 F.2d at 535; In re Candor Diamond Corp., 76 B.R. at 351, 4 Collier on Bankruptcy, supra, ¶ 548.10 at 548-129. Upon review of the record, we agree with the district court that the bankruptcy court’s finding that Mr. McKay failed to establish good faith under the objective standard of § 548(c) was not clearly erroneous. The factors supporting this conclusion have been persuasively outlined by the district court: Mr. McKay’s experience as an investor; promised rates of return greatly exceeding the market rate (120% per year on two investments and 468% on the two other investments); an implausible explanation by M & L officials as to how the company could pay these extremely high rates; M & L’s use of postdated checks to pay investors; Dr. Tsoucatos’s disclosure that he received a commission for finding investors for M & L; and the fact that the company’s first check to Mr. McKay was returned. See Jobin, 164 B.R. at 662-63. In light of all of these circumstances, it was not clearly erroneous for the bankruptcy court to conclude that a reasonably prudent investor in Mr. McKay’s position should have known of M & L’s fraudulent intent and impending insolvency and that he was therefore not entitled to the good faith defense established by § 548(c).

C. The “Ordinary Course of Business” Defense under § 5^7 (c)(2)

Mr. McKay also challenges the conclusion of the bankruptcy and district courts that the transfers from M & L were not made “in the ordinary course of ... business or financial affairs,” 11 U.S.C. § 547(c)(2), and that, as a result, the trustee was entitled to avoid the transfers under § 547(b). On this factual question, we must accept the conclusions of the bankruptcy court unless they are clearly erroneous. Clark v. Balcor Real Estate Fin., Inc. (In re Meridith Hoffman Partners), 12 F.3d 1549, 1553 (10th Cir.1993), cert. denied, — U.S. -, 114 S.Ct. 2677, 129 L.Ed.2d 812 (1994).

Under § 547(b), the trustee may avoid transfers of property of the debtor made within ninety days of the filing of the bankruptcy petition if she proves that the transfer was made: (1) for the benefit of a creditor; (2) in satisfaction of an antecedent debt; (3) while the debtor was insolvent; and (4) such that it enabled the creditor to receive more than he would have received in a chapter 7 liquidation proceeding. 11 U.S.C. § 547(b)(l)-(5). Section 547(c)(2) establishes a defense as to transfers made in the ordinary course of business:

(c) The trustee may not avoid under this section a transfer—
(2) to the extent that such transfer was—
(A)in payment of a debt incurred by the debtor in the ordinary course of business or financial affairs of the debtor and the transferee;
(B) made in the ordinary course of business or financial affairs of the debtor and the transferee; and
(C) made according to ordinary business terms[.]

11 U.S.C. § 547(c)(2). The transferee has the burden of proving this defense. In re Meridith Hoffman Partners, 12 F.3d at 1553. Additionally, the defense should be narrowly construed. J.P. Fyfe, Inc. v. Bradco Supply Corp., 96 B.R. 474, 476 (D.N.J.1988), aff'd, 891 F.2d 66 (3d Cir.1989); First Software Corp. v. Curtis Mfg. Co. (In re First Software Corp.), 81 B.R. 211, 213 (Bankr.D.Mass.1988); Waldschmidt v. Ranier (In re Fulghum Constr. Corp.), 78 B.R. 146, 150 (M.D.Tenn.1987), rev’d on other grounds, 872 F.2d 739 (6th Cir.1989).

In affirming the conclusion of the bankruptcy court that Mr. McKay had failed to establish the ordinary course of business defense, the district court focused on § 547(c)(2)(C)’s requirement that the transfer be made according to ordinary business terms. See Jobin, 164 B.R. at 664-65. In applying § 547(c)(2), we have taken the same approach. See In re Meridith Hoffman Partners, 12 F.3d at 1553 (“Because we conclude that the payments were not made according to ordinary business terms, we do not discuss whether they meet the other two requirements.”). Accordingly, we will address the “ordinary business terms” element of the § 547(e)(2) defense.

In In re Meridith Hoffman Partners, we concluded that “ordinary business terms” under § 547(c)(2) “are those used in ‘normal financing relations,’: the kinds of terms that creditors and debtors use in ordinary circumstances, when debtors are healthy.” 12 F.3d at 1553. We arrived at this definition by considering the general purpose of the § 547(c)(2) defense — “to leave undisturbed normal financial relations, because it does not detract from the general policy of the preference section to discourage unusual action by either the debtor or his creditors during the debtor’s slide into bankruptcy.” Id. (quoting, S.Rep. No. 989, 95th Cong., 2d Sess. 88 (1978), 1978 U.S.C.C.A.N. 5787, 5874).

Although several courts have concluded that transfers by a debtor engaged in a Ponzi scheme do not, as a matter of law, involve ordinary business terms, see, e.g., Henderson v. Buchanan, 985 F.2d 1021, 1025 (9th Cir.1993); In re Taubman, 160 B.R. 964, 971 (Bankr.S.D.Ohio 1993), we have chosen a middle ground. In Sender v. Heggland Family Trust (In re Hedged-Invs. Assocs., Inc.), 48 F.3d 470, 476 (10th Cir.1995), we rejected “the sweeping rule that § 547(c)(2) has absolutely no application in the context of a Ponzi scheme.” Instead, we stated that because investment companies do not ordinarily pay fraudulent profits to early investors, the § 547(c)(2) defense is inapplicable to payments to investors in a Ponzi scheme. Id. However, we also noted that payments to non-investment creditors could be made according to ordinary business terms and in the ordinary course of business such that these investors are entitled to the § 547(c)(2) defense. Id. (“If, for instance, a Ponzi scheme uses telephone services, is billed for that service, and pays the phone company, disallowing the avoidance of that payment following a bankruptcy petition is consistent with the purposes of § 547.”).

In the instant case, it is undisputed that Mr. McKay is an investment creditor of a Ponzi scheme. The rule we formulated in In re Hedgedr-Investments is directly applicable, and the bankruptcy court did not clearly err in concluding that payments from M & L to Mr. McKay were not made according to ordinary business terms under § 547(c)(2)(C). The bankruptcy court and the district court properly rejected Mr. McKay’s ordinary course of business defense to the trustee’s § 547 claim.

D. Reasonably Equivalent Value Under § 5J(8(a)(2)

In her cross-appeal, the trustee argues that the bankruptcy court and the district court erred in'concluding that she was not entitled to avoid the transfers from M & L to Mr. McKay under § 548(a)(2). We find no error in the analysis of the bankruptcy and district courts.

Section 548(a)(2) provides that the trustee may avoid transfers of the debtor’s property made within one year of the bankruptcy petition if the debtor:

(A) received less than a reasonably equivalent value in exchange for such transfer or obligation; and
(B)(i) was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation;
(ii) was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with the debtor was an unreasonably small capital; or
(iii) intended to incur, or believed that the debtor would incur, debts that would be beyond the debtor’s ability to pay as such debts matured.

11 U.S.C. § 548(a)(2). Section 548(d)(2)(A) defines “value” as “property, or satisfaction or securing of a present or antecedent debt of the debtor.” As the district court noted, the Bankruptcy Code does not define the term “antecedent debt,” but it does define “debt” as “liability on a claim.” See Jobin, 164 B.R. at 666 (citing 11 U.S.C. § 101(12)). “Claim” is defined broadly as the “right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured,” and as the “right to an equitable remedy for a breach of performance.” 11 U.S.C. § 101(5).

Both the bankruptcy court and the district court rejected the trustee’s § 548(a)(2) claim on the grounds that Mr. McKay had given “reasonably equivalent value” to M & L. According to both courts, the value given to M & L was the reduction of Mr. McKay’s claim for restitution against M & L. As the bankruptcy court explained, “[I]t is not disputed that [Mr. McKay] invested the total sum of $207,500 into M & L and was only able to cash checks totaling $43,500.00. That is[J [Mr. McKay] lost, on an out-of-pocket basis, the sum of $164,000.00 and still has a restitution right to same.” ApltApp. vol. II at 542. Thus, according to the bankruptcy and district courts, in paying $43,500 to Mr. McKay, M & L received “reasonably equivalent value” in that Mr. McKay’s claim for restitution as a defrauded investor was reduced by this amount.

The courts based their reasoning on two decisions: Wyle v. Rider (In re United Energy Corp.), 944 F.2d 589, 596 (9th Cir.1991) and In re Independent Clearing House, 77 B.R. at 857. Both decisions concluded that investors in fraudulent schemes had claims for restitution and rescission against the debtor and that, by reducing the amount of these claims, the debtors’ payments provided reasonably equivalent value. See In re United Energy 944 F.2d at 596 (noting that investors in a fraudulent scheme clearly had claims for rescission and restitution ... regardless of whether there existed a contractual right to the return of principal); In re Independent Clearing House, 77 B.R. at 857 (“From the time a defendant entrusted his money to the debtors, he had a claim against the debtors for the return of his money. We believe that the Code’s definition of ‘debt’ and its related terms is broad enough to cover the debtors’ obligation to return a defendant’s principal undertaking, whether that obligation was based on the contract between the debtors and the defendant or was based on the defendant’s right to restitution.”).

In challenging the rejection of her § 548(a)(2) claim, the trustee relies on the bankruptcy court’s finding that Mr. McKay lacked good faith under § 548(c). She argues that, because Mr. McKay lacked good faith, he did not have a colorable restitution claim against M & L, and, as a result, M & L’s payments to him did not provide M & L with “reasonably equivalent value” by reducing such a claim. She also argues that the bankruptcy and district courts improperly applied two standards of good faith — an objective one under § 548(c) and a subjective one under § 548(a)(2). She maintains that the objective standard should be applied under both subsections and that, under this objective standard, she is entitled to avoid the transfers under § 548(a)(2).

Contrary to the trustee’s argument, the language of § 548(a)(2) and § 548(c) does not require application of the same standard. Although § 548(c) uses the term “good faith,” § 548(a)(2) does not. Instead, § 548(a)(2) refers to “value.” Because the Bankruptcy Code’s definition of “value” includes “satisfaction of an antecedent debt” and because the Code’s definition of “debt” includes “liability on a claim,” analysis of the trustees § 548(a)(2) claim requires us to determine whether Mr. McKay has a claim against M & L and, if so, whether M & L’s payments to him reduced that claim — thereby providing “reasonably equivalent value.”

In making these determinations, we apply Colorado law. See Landsing Diversified Properties-II v. First Nat’l Bank & Trust Co. (In re W. Real Estate, Inc.), 922 F.2d 592, 595 (10th Cir.1990), modified sub nom., Abel v. West, 932 F.2d 898 (1991); Flavor Dry, Inc. v. Lines (In re James E. O’Connell Co.), 799 F.2d 1258, 1260 (9th Cir.1986). Additionally, we must consider the following factual findings of the bankruptcy court regarding Mr. McKay’s state of mind— which the trustee has not challenged in her cross-appeal:

This conclusion regarding objective “bad faith,” (more accurately lack of good faith) should not be construed as a determination by this Court of malicious intent, malevolence, or nefarious scheming by McKay— or of a lack of credibility. The Court does not find that he was malicious; malevolent, nefarious, or not credible. He simply did not invest in M & L and receive payments from M & L in a good faith manner as measured by an objective — not subjective standard.

Aplt.App. vol. II at 547. Accordingly, the question before us is whether an individual investor who should have known of a fraudulent scheme but did not have actual knowledge has a colorable restitution claim to recover his investment.

Upon review of the applicable law, we conclude that Mr. McKay has such a claim. One who has been fraudulently induced to enter into a contract may rescind the contract and recover the benefits that he has conferred on the party who has defrauded him. See Western Cities Broadcasting v. Schueller, 849 P.2d 44, 48 (Colo.1993) (en banc); Trimble v. City & County of Denver, 697 P.2d 716, 723-24 (Colo.1985). Importantly:

A suit in equity for rescission of a contract ... does not necessarily fail because the party seeking rescission was unreasonable in relying upon the misrepresentation made by the other party. Even negligence on the part of the party seeking rescission will not bar equitable relief when the misrepresentation was made intentionally by the other party.

Pacific Maxon, Inc. v. Wilson, 96 Nev. 867, 619 P.2d 816, 817 (1980).

Colorado courts have applied this principle to allow a party fraudulently induced to enter into a contract to recover the full amounts paid even when the defrauded party acted negligently and had inquiry notice of the fraud. For example, in Enerwest, Inc. v. Dyco Petroleum Corp., 716 P.2d 1130, 1132 (Colo.App.1986), the court concluded that a company that had entered into a contract to acquire an easement was entitled to “restitution of the full amount paid under the contract” because the parties purporting to convey the easement had fraudulently concealed the fact that they had previously conveyed the easement to a third party. The court observed that the defrauded parties’ right to recover restitution was unaffected by the fact that they had inquiry notice of the prior conveyance. Id.; see also Loden v. Drake, 881 P.2d 467, 469 (Colo.App.1994) (noting that a party’s failure to read certain provisions of a contract does not preclude restitution if the other party fraudulently concealed other contractual terms).

In this case, the evidence in the record indicates that Mr. McKay was fraudulently induced to invest in M & L. As a result, in light of the bankruptcy court’s factual finding that he did not have actual knowledge of the fraud, Mr. McKay has a colorable claim to recover the amounts that he invested in M & L. The bankruptcy and district courts thus properly concluded that M & L’s payments to Mr. McKay reduced the amount of this restitution claim, that M & L thereby received reasonably equivalent value for its payments to him, and that the trustee was not entitled to avoid the transfers under § 548(a)(2).

III. CONCLUSION

For the reasons set forth above, we therefore AFFIRM the decision of the district court in all respects.

      . We have defined a Ponzi scheme as
      an investment scheme in which returns to investors are not financed through the success of the underlying business venture, but are taken from principal sums of newly attracted investments. Typically, investors are promised large returns for their investments. Initial investors are actually paid the promised returns, which attract additional investors.

        Sender v. Heggland Family Trust (In re Hedged-Invs. Assocs., Inc.), 48 F.3d 470, 471 n. 2 (10th Cir.1995) (citing Merrill v. Abbott (In re Ind. Clearing House Co.), 41 B.R. 985, 994 n. 12 (Bankr.D.Utah 1984), aff'd in part and rev'd in part, 62 B.R. 118 (D.Utah 1986)).

      . As to the other $21,500 in payments from M & L, the court observed that, after he received them, Mr. McKay invested an additional $100,-000 (i.e. the two $50,000 investments that he made in September 1990). Noting that, under 11 U.S.C. § 547(c)(4), the “new value” exception, the trustee may not avoid an otherwise preferential transfer if the transferee gives "new value” to the debtor after the transfer, the court ruled that the trustee could not recover the first four payments from M & L (totaling $ 21,500) under § 547. The trustee did not challenge this conclusion regarding the § 547(c)(4) exception in the appeal to the district court, and she has not done so in this appeal. However, because of our ultimate conclusion that the trustee may recover the entire $43,500 (including the $21,500 covered by the "new value” exception) under § 548(a)(1), the applicability of the exception is of little practical benefit to Mr. McKay.

      . 11 U.S.C. § 548(a)(2) states that the trustee may avoid transfers made within a year of the filing of the bankruptcy petition if she establishes that the debtor:
      (A) received less than a reasonably equivalent value in exchange for such transfer or obligation; and
      (B)(1) was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation;
      (ii) was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with the debtor was an unreasonably small capital; or
      (iii) intended to incur, or believed that the debtor would incur, debts that would be beyond the debtor’s ability to pay as such debts matured.

      . Although the question before the Ninth Circuit was the proper interpretation of "good faith” under a section of Hawaii's Fraudulent Conveyance Act, Haw.Rev.Stat. § 651C-8(d), the court referred to 11 U.S.C. § 548(c) as "the equivalent" of the Hawaii statute. See In re Agric. Research & Technology Group, 916 F.2d at 535. Moreover, in adopting the objective standard for determining good faith, the Ninth Circuit relied on bankruptcy court decisions construing § 548(c). See id. at 535-36 (citing McColley v. Rosenberg (In re Candor Diamond Corp.), 76 B.R. 342, 351 (Bankr.S.D.N.Y.1987); Consumers Credit Union v. Widett (In re Health Gourmet, Inc.), 29 B.R. 673, 677 (Bankr.D.Mass.1983); Sanitary Ice Vending Co., Inc. v. Harris (In re Polar Chips Int’l, Inc.), 18 B.R. 480, 484 (Bankr.S.D.Fla.1982)).

      . Under § 547(b), the trustee may also avoid transfers made within a year of the filing of the bankruptcy petition if she also establishes that the transferee was an “insider.” See 11 U.S.C. § 547(b)(4)(B).

      . In her cross-appeal, the trustee has also argued that the fact that Mr. McKay filed a proof of claim in the bankruptcy court for the entire amount that he invested in M & L ($212,500.00) and the fact that he did not state that this claim was for restitution establish that he does not have a restitution claim against M & L. We agree with the district court that this argument is not persuasive. “[Tlhe issue is not what McKay stated that M & L owed him but, whether, at the time he made his investments, he had a right to restitution.” Jobin, 164 B.R. at 668. Moreover, Mr. McKay has filed an amended proof of claim for $164,000 — the sum of his investments in M & L minus the payments that he received. See id. at 668 n. 6.