724 F.3d 1077 (9th Cir. 2013), 10-50116, United States v. Grasso

Docket Nº:10-50116
Citation:724 F.3d 1077
Opinion Judge:IKUTA, Circuit Judge.
Party Name:UNITED STATES OF AMERICA, Plaintiff-Appellee, v. KYLE JOHN GRASSO, Defendant-Appellant
Attorney:Karen H. Bucur (argued), Laguna Hills, California, for Defendant-Appellant. Andr
Judge Panel:Before: Marsha S. Berzon, Sandra S. Ikuta, and Jacqueline H. Nguyen, Circuit Judges. Opinion by Judge Ikuta; Partial Concurrence and Partial Dissent by Judge Berzon. BERZON, Circuit Judge, concurring in part and dissenting in part. Marsha S. Berzon, Circuit Judge
Case Date:July 26, 2013
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

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724 F.3d 1077 (9th Cir. 2013)

UNITED STATES OF AMERICA, Plaintiff-Appellee,

v.

KYLE JOHN GRASSO, Defendant-Appellant

No. 10-50116

United States Court of Appeals, Ninth Circuit

July 26, 2013

Argued and Submitted December 6, 2012, Pasadena, California

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

Karen H. Bucur (argued), Laguna Hills, California, 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, California, for Plaintiff-Appellee.

Before: Marsha S. Berzon, Sandra S. Ikuta, and Jacqueline H. Nguyen, Circuit Judges. Opinion by Judge Ikuta; Partial Concurrence and Partial Dissent by Judge Berzon. BERZON, Circuit Judge, concurring in part and dissenting in part.

SUMMARY[*]

Criminal Law

The panel affirmed 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.

Affirming the conspiracy conviction, the panel held that the government presented more than sufficient evidence that the defendant knew the objectives of the fraudulent scheme.

Affirming the loan fraud convictions, the panel held that a jury could reasonably (1) conclude that the defendant knew that his false statements made to obtain a loan would ultimately influence a federally insured bank, and (2) find all the necessary elements to impose Pinkerton liability.

Affirming the bank fraud conviction, the panel held that there was ample evidence that the defendant was well aware of the scheme's fraudulent objective and that he intentionally furthered the fraud.

Because the money laundering convictions do not raise a merger problem with respect to either the loan fraud or bank fraud convictions, the panel defined " proceeds" to mean " gross receipts," and concluded that the " referral fees" the defendant received from Yoakum Drive and Benedict Canyon Drive transactions may be viewed as " proceeds" of the loan and bank fraud. The panel on that basis rejected the defendant's argument that the government presented insufficient evidence that his money laundering charges were based on " separate and distinct" activity from the Yoakum and Benedict transactions. The panel therefore affirmed the money laundering convictions under 18 U.S.C. § 1956(a)(1)(A)(i).

Concurring in the affirmance of the conspiracy, loan fraud, and bank fraud convictions, Judge Berzon wrote separately to express concern that some of the majority's quotations could be read to suggest that a defendant may be convicted without participating in a conspiracy, if he simply has knowledge of the conspiracy and a " connection" to its participants. She dissented from the affirmance of the money laundering convictions because the government introduced no evidence that the Benedict- and Yoakum-related commission payments were made with profits, as opposed to gross revenues, of the overall bank fraud scheme.

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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

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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.

1

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...

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