U.S. v. Peterson, 07-50120.

Citation538 F.3d 1064
Decision Date13 August 2008
Docket NumberNo. 07-50120.,No. 07-50146.,07-50120.,07-50146.
PartiesUNITED STATES of America, Plaintiff-Appellee, v. Paul PETERSON, aka Paul Joseph Peterson, Defendant-Appellant. United States of America, Plaintiff-Appellee, v. William Peterson, aka Bill Peterson, Defendant-Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)

William J. Genego, Jr., Nasatir, Hirsch, Podberesky, & Genego, Santa Monica, CA, and Paul L. Hoffman, Harris & Hoffman, LLP, Venice, CA, for the defendants-appellants.

William A. Crowfoot, Assistant United States Attorney, Los Angeles, CA, for the plaintiff-appellee.

Appeal from the United States District Court for the Central District of California; Ronald S.W. Lew, District Judge, Presiding. D.C. Nos. CR-03-00761-RSWL-1, CR-03-00761-RSWL-02.

Before: STEPHEN S. TROTT, KIM McLANE WARDLAW, and RAYMOND C. FISHER, Circuit Judges.

TROTT, Circuit Judge:

Defendants Paul and William Peterson ran a home building business in California. In the 1990s, they subsidized down payments to home buyers and then submitted misleading gift letters to the Department of Housing and Urban Development ("HUD") falsely stating that a family member or friend of the buyer had provided the money for the down payment.

Defendants appeal their jury convictions for: 1) causing false material statements to be made in a matter within the jurisdiction of an agency of the United States, in violation of 18 U.S.C. § 1001; 2) aiding and abetting in the violation of § 1001, in violation of 18 U.S.C. § 2; and 3) conspiring to make such false statements, in violation of 18 U.S.C. § 371. They appeal also the district court's order of restitution in the amount of $1,258,775, imposed pursuant to 18 U.S.C. § 3663A.

We have jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm. We hold that although it would be preferable for district courts to use a definition of materiality tracking the language approved by the United States Supreme Court in United States v. Gaudin, 515 U.S. 506, 115 S.Ct. 2310, 132 L.Ed.2d 444 (1995), in this case, the district court did not commit plain error by giving the jury instruction it did. We further hold that the false gift letters and the source of the down payment for HUD-insured loans were material to HUD. Finally, we hold that Defendants' actions were the actual and proximate cause of HUD's losses, and we affirm the restitution order for the full amount of HUD's loss.

I BACKGROUND
A. HUD Requirements

By insuring Federal Housing Administration ("FHA") mortgages, HUD assists homebuyers who cannot otherwise afford to purchase homes. FHA mortgage insurance insures the mortgage for the lenders, and if the buyer cannot make payments, HUD pays off the loan and takes the property. By law, the buyer must meet three conditions before HUD will insure the loan: 1) sufficient income to make the monthly payments; 2) satisfactory credit rating; and 3) the ability to make a three-percent minimum cash investment in the property.1 See 12 U.S.C. §§ 1709, 1715b.

Under HUD's regulations and policies, the buyer is not required to have the down payment come out of his or her own pocket—he or she may receive the down payment as a gift from friends, relatives, or non-profit housing assistance organizations. However, the sellers of the property are not permitted to make direct gifts to the buyers.

Despite this restriction on sellers, the seller was permitted indirectly to subsidize the down payment by providing money to a non-profit organization.2 Under the permissible indirect subsidy scheme, after the non-profit approved a buyer, the non-profit agreed to gift the down payment at closing. The gift was paid out of the non-profit's own funds, and only after closing did the seller pay the non-profit a "service fee" equal to the gift from the proceeds of the sale. If the closing did not go through, the seller was not required to pay the service fee. The fee was used by the non-profit to provide gifts to future home purchasers.

Buyers who received the down payment money from an outside source, such as a family member, friend, or nonprofit, were required to submit a gift letter to HUD. The gift letter confirmed the source of the gift, the relationship of the donor to the donee, and the nature of the buyer's down payment. A copy of the cashier's check delivering the gifted funds to escrow was attached also to the gift letter. The gift letter was put into a binder compiling details on the loan.

At the Petersons' trial, the government's expert, Travis Pham, Chief of the Insuring and Underwriting Division of HUD, testified that the government relied on the information in the binder, including the gift letter, to determine whether it would insure a loan and for auditing purposes. Pham was offered as an "expert on HUD regulations and policies related to underwriting" without objection by the Petersons. He said that HUD would not insure a loan if the binder contained a false gift letter: the down payment could come from the buyer's friends, relatives, or a non-profit, but "money can't go directly from the seller to the buyer." Pham further testified that requiring buyers to put 3% down gave the buyer some interest in the property, making it less likely that he or she would default. He explained that the limitations on who may give the buyer money existed also to prevent the seller from increasing the price.

B. The Petersons' Scheme

At the time of the trial, Paul and William Peterson ran a home building business called Peterson Land and Development ("PLD"). Their father started PLD, and he later brought Paul into the business. Paul became a FHA and HUD builder in the late 80s. Sometime in 1992 or 1994, William took over from their father as the sales manager for PLD.

At trial, Paul testified that in the early 1990s, he met many potential buyers who wanted to buy homes, had the employment, income, and credit to do so, "but just didn't have the cash to get into the property." Paul testified that "[u]nder the FHA program, [he] knew that [he] could not give the buyer his down payment." He further testified that he spoke to a HUD construction analyst, Bob Hudgins, who told him that although the seller could not directly give the money to the buyer, he could give it to a relative because FHA did "not care where the donor gets the money." Called as a rebuttal witness by the government, Hudgins testified that he did not recall the conversation with Paul, but even if it had occurred, he could not have advised Paul regarding gift letters or mortgage requirements because he had no knowledge of those areas of HUD.

Paul testified that after he spoke to Hudgins, he concluded that he could lawfully assist potential buyers by taking money from PLD's profits and subsidizing the down payments. To facilitate this plan, the Petersons purchased a cashier's check in the name of a third party designated by the buyer. The third party never had possession or control of the gifted funds. The Petersons then deposited the cashier's check into escrow and submitted a gift letter to HUD stating that the third party was the donor of the gifted down payment. Paul testified that the buyer took the gift letter and had it filled out and signed by the bogus donor. As the sales manager, William was responsible for retrieving the gift letters and explaining that the donor on the gift letter would not actually have to provide any money.

Testimony of one of the buyers ("MM") and the parties listed on his gift letter ("Fisher Gift Letter") contradicted Paul's testimony about how the gift letters were obtained. MM testified that he did not have his parents (the purported donors) sign the gift letter. MM's parents testified that the signatures of their names on the gift letter were forgeries, and that they did not provide MM with any financial assistance for the purchase.

Defendants put up the down payment money for numerous transactions between 1993 and 1998. Several buyers for whom Defendants directly funded the down payment later defaulted on their mortgage payments, leading to foreclosure. HUD assumed repayment of the loans.

C. Procedural History

Count One of the second superceding indictment charged Defendants with conspiracy to violate 18 U.S.C. § 1001 in violation of 18 U.S.C. § 371. Count Two charged Defendants with: 1) violating 18 U.S.C. § 1001(a)(3); and 2) aiding and abetting the commission of a federal crime under 18 U.S.C. § 2.

Section 1001(a)(3) establishes criminal penalties for anyone who, in a matter within the jurisdiction of a federal agency, "makes or uses any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry." 18 U.S.C. § 1001(a)(3).

On January 17, 2006, the Petersons' jury trial commenced. On January 19, Defendants moved for judgment of acquittal under Federal Rule of Criminal Procedure 29, arguing that the source of the money was immaterial to HUD. The judge denied the motion.

At the government's request, the district court gave Ninth Circuit Model Criminal Jury Instruction 8.66 on materiality: "[a] statement is material if it could have influenced the agency's decisions or activities." Paul objected to the instruction, arguing that the model jury instruction was too broad because there could be a "situation [where] there is an immaterial or irrational application or statement that the bureaucracy of the government requires, that the person could have submitted a statement to them that was totally immaterial [and] unrelated to the program, purposes or concerns." Paul proposed an alternative jury instruction: "a statement is material if it's important or significant to the Government program to which it was submitted." The court rejected the proposed instruction.

The jury found both Defendants guilty on both counts of the indictment. The Pre-Sentence Report recommended restitution in the amount of $1,258,775. The...

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