United States v. Grasso

• Decision Date: 26 July 2013
• Docket Number: No. 10–50116.,10–50116.
• Citation: 724 F.3d 1077
• Parties: UNITED STATES of America, Plaintiff–Appellee, v. Kyle John GRASSO, Defendant–Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

724 F.3d 1077

UNITED STATES of America, Plaintiff–Appellee,

v.Kyle John GRASSO, Defendant–Appellant.

No. 10–50116.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Dec. 6, 2012.

Filed July 26, 2013.

Karen H. Bucur (argued), Laguna Hills, CA, for Defendant–Appellant.

André Birotte Jr., United States Attorney; Robert E. Dugdale, Assistant United States Attorney; Jeremy D. Matz (argued), Assistant United States Attorney, Los Angeles, CA, for Plaintiff–Appellee.

Appeal from the United States District Court for the Central District of California, Dean D. Pregerson, District Judge, Presiding. D.C. No. 2:07–cr–00755–DDP–2.

Before: MARSHA S. BERZON, SANDRA S. IKUTA, and JACQUELINE H. NGUYEN, Circuit Judges.

OPINION

IKUTA, Circuit Judge:

Kyle Grasso appeals his convictions for money laundering, bank fraud, loan fraud, and conspiracy to commit loan and bank fraud, stemming from a Los Angeles-based scheme to defraud mortgage lenders. We conclude that the evidence adduced at trial, taken in the light most favorable to the government, was adequate to enable a rational trier of fact to find the essential elements of each conviction. See United States v. Nevils, 598 F.3d 1158, 1163–64 (9th Cir.2010) (en banc). Accordingly, we affirm on all counts.

I

We have already explained how this scheme operated in United States v. Rizk, 660 F.3d 1125 (9th Cir.2011) (affirming conviction of Lila Rizk, a real estate appraiser in the scheme and one of Grasso's co-defendants). Therefore, we provide only a brief overview of the scheme before detailing the particular aspects relevant to Grasso's appeal.

A

The scheme, as crafted by Mark Abrams, a mortgage broker, and Charles Elliott Fitzgerald, a real estate developer, took advantage of the real estate frenzy of the early 2000s. The conspirators would enter into a purchase agreement for a home in an exclusive Westside Los Angeles community, and then obtain a loan for significantly more than the sale price, pocketing the extra money. For this scheme to work, the conspirators had to exert control over multiple aspects of each real estate transaction. Among other things, the sellers and agents had to keep the true purchase price of the home confidential; the appraisal reports had to show the falsely inflated values of the homes; the title and escrow companies had to prepare two sets of documents, one showing the actual purchase price (for the seller) and one showing the inflated purchase price (for the lender); and finally the Multiple Listing Service (MLS) had to show the falsely inflated sales price of the homes. Abrams and Fitzgerald coordinated the efforts of a range of colleagues to make this conspiracy work. Abrams relied on Jamieson Matykowski, one of his employees, and Richard Maize, who controlled Americorp Funding, among others. Americorp, a mortgage broker, would send loan packages to lending agents for review and approval. The conspirators generally targeted banks that did not require their lending agents to use rigorous documentation and approval standards. Over the course of the scheme, the conspirators conducted roughly 80 fraudulent transactions. The banks that ultimately financed the loans that their lending agents approved, including Lehman Brothers (through its lending agent, Aurora Loan Services), GreenPoint Bank (through its lending agent, GreenPoint Mortgage), and RBC Mortgage Company, together lost at least $46 million in the Abrams–Fitzgerald conspiracy.

Grasso was one of Abrams and Fitzgerald's recruits for this scheme. Grasso and his partner Joseph Babajian were successful real estate agents in the same affluent area that Abrams and Fitzgerald targeted, Westside Los Angeles. From 2000 to January 2001, Grasso and Babajian were the top-producing real estate agents at Fred Sands Realtors in Beverly Hills. Grasso and Babajian subsequently left Fred Sands and became affiliated with Prudential California Realty. Prudential compensated Grasso and Babajian for their move by conveying an ownership interest in several of Prudential's subsidiaries to Grasso and Babajian's wholly owned company, FSC Ventures. One of these subsidiaries was Cal Title, a title insurance company whose lax approval process would become instrumental to the co-conspirators' operation.

At trial, the government presented evidence to prove that Grasso became involved in the Abrams–Fitzgerald scheme some time in 2000 and worked with them through at least late 2002. According to the government, Grasso participated primarily by identifying houses to be included in the scheme, ensuring that the seller would keep the sales price confidential, managing the information reported in the MLS listings, and obtaining the title insurance and escrow documents needed for the conspiracy through his access to Cal Title. The government's case against Grasso rested heavily on evidence relating to six real estate transactions, which we describe in the order they occurred.

We begin with Grasso's purchase of a property on Claridge Drive, Beverly Hills for his personal use. In July 2000, after Grasso separated from his wife, he was in the market for his own home, and focused on the Claridge Drive property. According to the evidence adduced at trial, Abrams thought that Grasso's skills and contacts were useful in furthering the scheme and wanted to “ingratiate” himself with Grasso to induce him to continue helping with the fraud. Therefore, Abrams offered to help Grasso purchase the Claridge Drive property by following the same basic blueprint used for other transactions in the scheme. Under the plan, Abrams would front Grasso the money for a down payment, Grasso would obtain an inflated loan, and then use the extra funds to pay Abrams back. According to Abrams, Grasso knew how the scheme worked and was a willing participant. Matykowski confirmed that Grasso acknowledged he was “going to do one of our deals” by inflating the purchase price of the Claridge Drive property “to forego putting a large down payment down.”

The plan moved forward over the summer. Grasso entered into a purchase agreement with Jose Menendez, the owner of the Claridge Drive property, to purchase the house for $890,000.¹ In early September 2000, Grasso submitted two fraudulent loan applications to Americorp Funding, one seeking a first mortgage of $746,250, and the second seeking a home equity credit line of $149,200. Both applications stated that the purchase price of the home was $995,000, and the first application stated that Grasso was making a down payment of some $120,000. Americorp submitted Grasso's application to GreenPoint Mortgage. In reviewing the applications, GreenPoint Mortgage identified a red flag: Grasso already owned a home that had a higher value than the Claridge Drive property, which raised the inference that Grasso planned to use the Claridge Drive property as a rental. In response to GreenPoint Mortgage's inquiry on this point, Grasso falsely stated that he and his wife intended to move into the home. Satisfied with that explanation, GreenPoint Mortgage approved Grasso's loans. As was the standard procedure for all loans that GreenPoint Mortgage originated at that time, GreenPoint Bank funded the loan.

At closing, Abrams's in-house escrow company prepared fraudulent documents reflecting a purchase price of $995,000, but sent a settlement statement to Menendez stating the correct $890,000 sales price.

At the same time he was purchasing the Claridge Drive property, from August to September 2000, Grasso sought Abrams and Fitzgerald's help with a client's property on Alta Drive in Beverly Hills. The property had been on the market for nearly a year, and the seller, Vigen Shaghzo, was putting pressure on Grasso to sell it. Abrams and Fitzgerald agreed to buy the Alta Drive property if they could work one of their fraudulent deals.

The Alta Drive transaction unfolded as follows. In early August 2000, Abrams offered $2,000,000 to Shaghzo in the name of Abrams's father, a straw purchaser. According to Abrams, Grasso knew that Abrams's father was not actually purchasing the home. After Shaghzo accepted the $2,000,000 offer, Grasso withdrew the $2,050,000 MLS listing for the house and relisted it for $4,495,000. This false relisting caused a problem, however: when Shaghzo found out about it, he ordered Grasso to correct the misinformation, and Grasso agreed to do so. Abrams and Fitzgerald then submitted a fraudulent loan application for an inflated purchase price of $4,395,000 to Aurora Loan Services for approval. A loan for the full amount was funded by Lehman Brothers. After the sale closed in September 2000, and the escrow company disbursed the loan proceeds from Lehman Brothers, Abrams paid Grasso's firm $46,436 in commissions. Several months later, MLS reported the property sold at its true price of $2,000,000. To prevent Aurora Loan Services and Lehman Brothers from seeing this accurate listing, Grasso again arranged to change the MLS listing to show a sales price of $4,495,000.

In January 2001, after Grasso became affiliated with Prudential and obtained an indirect interest in Cal Title, Abrams and Fitzgerald began using Cal Title to provide title insurance for their purchases. Cal Title was willing to prepare two title insurance policies, one with the inflated purchase price (which would be provided to the lender) and the second with the actual purchase price (that the seller could review). Although Abrams and Fitzgerald attempted to use other title companies for their transactions, these companies soon declined to work with them, and Abrams and Fitzgerald began using Cal Title exclusively, whether or not Grasso or Babajian was acting as the agent for the transaction.

Sometime in 2001, Grasso called Matykowski to complain that Abrams and Fitzgerald had been using Cal Title for transactions where he was not the agent. Grasso was agitated about this development, and forbade the Abrams–Fitzgerald team from...