U.S. v. Innarelli

• Decision Date: 29 April 2008
• Docket Number: No. 06-2400.,06-2400.
• Citation: 524 F.3d 286
• Parties: UNITED STATES of America, Appellee, v. Albert V. INNARELLI, Defendant, Appellant.
• Court: U.S. Court of Appeals — First Circuit

524 F.3d 286

UNITED STATES of America, Appellee, v. Albert V. INNARELLI, Defendant, Appellant.

No. 06-2400.

United States Court of Appeals, First Circuit.

Heard January 7, 2008.

Decided April 29, 2008.

Elizabeth Caddick, for appellant.

Mark T. Quinlivan, Assistant United States Attorney, with whom Michael J. Sullivan, United States Attorney, was on brief for appellee.

Before TORRUELLA, LYNCH, and LIPEZ, Circuit Judges.

TORRUELLA, Circuit Judge.

Albert Innarelli pled guilty to and was convicted of sixty-seven counts of wire fraud and one count of conspiracy to launder money for his role in a "land-flipping" scheme in Springfield, Massachusetts. The district court imposed a within-the-Guidelines sentence of seventy-two months' imprisonment, after determining that Innarelli had intended to defraud his victims out of between $2.5 million and $7 million; the court also ordered Innarelli to pay restitution to some of the banks and individuals he defrauded. On appeal, Innarelli argues that the district court erred in calculating the amount of intended loss for purposes of his sentence, and that it failed to adequately take into account several personal circumstances he claims justified a lower sentence; he also alleges error in the restitution order. The Government concedes that the loss calculation in the restitution order was erroneous. After thorough review of the parties' arguments and the record, we affirm Innarelli's sentence, but vacate the restitution order and remand with instructions that it be recalculated by the district court.

I. Background

As Innarelli was sentenced following a guilty plea, "`[w]e distill the facts from the plea colloquy, the undisputed portions of the presentence investigation report ... and the transcript of the disposition hearing.'" United States v. Martínez-Bermúdez, 387 F.3d 98, 99 (1st Cir.2004) (quoting United States v. Brewster, 127 F.3d 22, 24 (1st Cir.1997)).

Between 1999 and 2001, Innarelli and twelve coconspirators devised and perpetrated an elaborate land-flipping scheme in the Springfield area. The scheme was effected through the coordinated activities of four separate groups of coconspirators. The first group—the "land-flippers"—purchased low-value, distressed properties, usually at auction. Many of these properties needed repairs or had housing-code violations, and some were condemned. This group then sold the properties at greatly inflated prices to unwitting and typically unsophisticated buyers, most of whom had low income, bad credit, or both. In order to obtain financing for the buyers, a second group of coconspirators consisting of mortgage brokers generated documents falsely representing to lending institutions that the buyers had the financial wherewithal to afford mortgage loans. A third group consisting of property appraisers falsely inflated their appraisals of the properties, in order to give the lenders the impression that the properties were worth as much as they were being sold for. Innarelli, the sole lawyer in the scheme, made up the final component of the conspiracy: he prepared and signed off on closing documents which contained false information, and prepared false titles to show that the land-flippers had held title to the properties for longer than they actually had.¹ In fact, the time between the land-flippers' initial purchase of the property and the sale to the victim-buyer was usually remarkably short, sometimes as short as one week. Innarelli also had the lenders wire the proceeds of the fraud to his Interest on Lawyers' Trust account ("IOLTA") and wrote checks to some of the coconspirators from this account to compensate them for their participation.

Many of the buyers were predictably unable to pay their mortgage loans and defaulted. When the lenders foreclosed, some were unable to recoup the full value of their loans because the property turned out to be worth much less than had originally been represented. The scheme was eventually discovered and its participants, including Innarelli, were indicted. Innarelli was charged with sixty-eight counts of wire fraud, in violation of 18 U.S.C. § 1343, relating to the funds wired into his IOLTA account by the lenders. He was also charged with one count of conspiracy to launder the proceeds of the scheme, in violation of 18 U.S.C. §§ 1956(h) and 1957.

On April 24, 2006, Innarelli pled guilty to the conspiracy count and all but one of the wire-fraud counts.² The district court sentenced Innarelli in a hearing on September 20, 2006. The court assigned to Innarelli a criminal history category ("CHC") of I and an offense level of 26. This offense level consisted of several components, one of which is at issue on appeal: an eighteen-level increase resulting from the district court's determination that Innarelli intended to cause the victims to suffer a loss of between $2.5 million and $7 million. See U.S.S.G. § 2B1.1(b)(1)(J) (2006). CHC I and an offense level of twenty-six produced a Guidelines Sentencing Range ("GSR") of sixty-three to seventy-eight months. The district court rejected Innarelli's argument that he deserved a below-Guidelines variance due to several unique personal circumstances—such as past drug addiction and two young children—and sentenced him in the middle of the range to seventy-two months' imprisonment.

The district court also ordered Innarelli to pay restitution to certain of the victims. See 18 U.S.C. § 3663A (2000) (restitution mandatory where defendant has committed an offense against property with fraud or deceit). The court determined that Innarelli owed restitution to lender Equicredit (now Bank of America) in the amount of $1,206,858; to lender National City in the amount of $17,000;³ and to seven victim-buyers in the amount of $10,000 each. We examine the district court's reasoning in support of these figures in the relevant section below.

II. Discussion

Innarelli raises three grounds of appeal. First, he challenges the loss calculation that went into his Guidelines base offense level. Second, he attacks his sentence as unreasonable, because it overstates his culpability by failing to take into account what he regards as unique personal circumstances. Third, he challenges the order of restitution, including the court's calculation of the various amounts owed. We address each of these challenges in turn.

A. The Amount of Loss in the Guidelines Offense Level

We review the district court's interpretation and application of the Guidelines de novo; we review related findings of fact, including the court's calculation of amount of loss, for clear error. See United States v. McCoy, 508 F.3d 74, 78 (1st Cir. 2007); United States v. Flores-Seda, 423 F.3d 17, 20 (1st Cir.2005). In fraud cases such as this one, a defendant's Guidelines offense level begins with a base level of six. U.S.S.G. § 2B1.1 (a)(2). Levels may be added depending on the amount of loss the victim suffered as a result of the defendant's crime; an amount of loss greater than $2.5 million but less than $7 million yields eighteen levels on top of the original six. See id. § 2B1.1(b)(1)(J).

The Guidelines commentary instructs that loss in this instance should be the greater of "actual loss" or "intended loss." Id. § 2B1.1 cmt. n. 3(A). We recently clarified that "intended loss" in these circumstances is a term of art meaning the loss the defendant reasonably expected to occur at the time he perpetrated the fraud. See McCoy, 508 F.3d at 79 (also remarking that "expected loss" would have been a better term in the Guidelines commentary than "intended loss"). In other words, for purposes of determining a defendant's sentence (but, importantly, not the amount of restitution he may be required to pay),⁴ the Guidelines anticipate that the defendant will be punished commensurate with the degree of loss he reasonably expected to occur as long as this amount is greater than the victims' actual loss—including where the victims actually incurred no loss at all. See id.

At sentencing, the district court first determined the total amount of the loan issued for each of the flipped properties, and subtracted from that number the considerably lower amount the land-flippers paid for the piece of property in question. This latter quantity served as a proxy for the true amount of the security the lender held on the property. After performing this calculation for each of the more than 100 flipped properties, the district court added the results together to arrive at a total amount of intended loss in excess of $2.5 million; the court did not pinpoint an exact amount of loss.

We recently sanctioned this methodology in McCoy—another case involving land-flipping in the Springfield area—as consistent with the Guidelines commentary's instruction that "[t]he court need only make a reasonable estimate of the loss." U.S.S.G. § 2B1.1 cmt. n. 3(C) (emphasis added). We explained as follows:

As McCoy was obtaining loans for individuals with low income and poor credit, he could—and should—have expected that the banks would probably recover only the value of the mortgaged properties. Intended loss was therefore the value of the loans less the expected value of the properties.

The district judge determined that the expected value of the properties at the time of the frauds was the price paid for the properties. The land-flipping in this case tended to occur rapidly, with homes being sold to new purchasers just weeks or even days after being purchased for use in the frauds. Thus, the purchase price paid by those engaged in the scheme was a reasonable proxy of the value of the collateral at the time the frauds occurred. . . .

McCoy, 508 F.3d at 79. Given that the underlying facts in this case are virtually identical to those in McCoy,⁵ we see no reason to depart from our conclusion there: the district court's loss estimate was well within the bounds of what is reasonable.

Despite McCoy, Innarelli argues that he should not be...