United States v. Griffin
| Docket Number | 21-3326,21-3352,21-3361,22-1012,22-1075 |
| Decision Date | 07 August 2023 |
| Citation | 76 F.4th 724 |
| Parties | UNITED STATES of America, Plaintiff-Appellee, v. Chad GRIFFIN, Matthew Smith, Kelly Isley, Kerri Agee, and Nicole Smith, also known as Nicole Smith-Kelso, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Appeals from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. 1:19-cr-00103—Tanya Walton Pratt, Chief Judge.
Andrew Laing, Attorney, Department of Justice, Criminal Division, Asset Forfeiture & Money Laundering Section, Washington, DC, Jeremy Raymond Sanders, Attorney, Department of Justice, Criminal Division, Fraud Section, Washington, DC, Samantha Bateman, Attorney, Department of Justice, Criminal Division, Capital Case Section, Washington, DC, for Plaintiff-Appellee.
Ruth F. Masters, Attorney, Masters Law, Oak Park, IL, for Defendant-Appellant in No. 21-3326.
Sara J. Varner, Attorney, Indiana Federal Community Defenders, Inc., Indianapolis, IN, for Defendant-Appellant in No. 21-3352.
J. Richard Kiefer, Attorney, Dentons Bingham Greenebaum LLP, Indianapolis, IN, for Defendant-Appellant in No. 21-3361.
Jonathan A. Bont, Attorney, Frost Brown Todd LLP, Indianapolis, IN, Hannah V. Garst, Attorney, Law Offices of Hannah Garst, P.C., Arlington Heights, IL, for Defendant-Appellant in No. 22-1012.
Keri A. Ambrosio, Attorney, Law Offices of Keri A. Ambrosio, P.C., Chicago, IL, for Defendant-Appellant in No. 22-1075.
Before Ripple, Scudder, and St. Eve, Circuit Judges.
A jury convicted Chad Griffin, Matthew Smith, Kelly Isley, Kerri Agee, and Nicole Smith1 (together, the "defendants") for their roles in a scheme to defraud the Small Business Administration ("SBA"). The defendants now challenge their convictions and sentences on multiple grounds, some of which they raise jointly and some of which individual defendants raise independently.
We affirm the convictions of all five defendants. We also affirm the sentences of all defendants in all respects except one; we conclude that a clerical error in a supervised release condition in Mr. Griffin's amended judgment should be corrected. We make this correction by modifying the judgment.
To help small businesses access credit, the SBA provides guarantees on certain loans made to small businesses. Each guarantee represents a conditional but concrete commitment of government funds. To obtain an SBA guarantee, a borrower must comply with the SBA's guidelines and requirements. The SBA, for example, has certain requirements for borrower eligibility and prohibits the loan proceeds from being used for various purposes.
At the center of this case are two relevant guarantee programs administered by the SBA. The first, and most common, guarantee program is the SBA's standard 7(a) program. To apply for a 7(a) guarantee, the lender and the borrower must provide details about the borrower's financial condition and the proposed uses of the loan proceeds. SBA loan specialists then review the applications for compliance with SBA rules.
The second program involved in this case is the SBA's Express Program, which is designed for smaller loans. Under this program, the SBA authorizes participating banks to issue SBA guarantees for new loans on behalf of the SBA as long as relevant SBA guidelines are followed. Under this program, the SBA conducts little to no review of the loan or the accompanying paperwork before the loan authorization is issued. Notably, borrowers screened out for a 7(a) loan are not allowed to resubmit for an Express loan.
If a borrower defaults on a loan guaranteed by the SBA, the lender submits a purchase request to the SBA, asking the SBA to purchase the outstanding balance of the defaulted loan. The SBA then decides whether to honor the guarantee. In making its decision, the SBA reviews the purchase request paperwork to ensure that the loan complied with SBA requirements. The SBA can decline to pay a portion of the guaranteed amount (a "repair") or the entire guaranteed amount (a "denial") if it determines that the loan was partly or wholly ineligible for an SBA guarantee.
A lender can retain a lending service provider ("LSP") to package, originate, disburse, service, or liquidate SBA-guaranteed loans on the lender's behalf. In carrying out any of these tasks, the LSP acts as the lender's agent and represents the lender before the SBA. The five defendants in this case worked at, or with, Banc-Serv Partners, LLP ("Banc-Serv"), an LSP. Ms. Agee was the founder, president, and chief executive officer. Ms. Isley was the chief operating officer. Ms. Smith was a relationship manager. Mr. Griffin was an administrative assistant, then a relationship manager, and then the chief marketing officer. Mr. Smith was a co-founder and co-owner of Banc-Serv with Ms. Agee before leaving to be a managing director of Bridge Business Bancorp ("BBB"), a lender that worked with Banc-Serv to obtain SBA-guaranteed loans.
According to the Government's case, through their work with Banc-Serv, the defendants engaged in a scheme to obtain SBA guarantees for loans that did not meet the SBA's guidelines and requirements. They made false statements on loan-guarantee applications and purchase requests sent to the SBA about matters such as borrowers' eligibility to receive a loan and how loan proceeds would be disbursed. For example, they worked to obtain SBA-guaranteed financing for uses the SBA deemed ineligible, such as paying off past-due payroll taxes and personal debt, by falsely designating the loan proceeds going to those ineligible uses as "working capital," or capital to cover a business's normal operating expenses. The defendants also submitted applications through the Express Program for loans and borrowers that the SBA previously had deemed ineligible. The defendants then renewed their misrepresentations in the paperwork they submitted as part of the purchase requests they sent to the SBA.
A grand jury indicted the five defendants in connection with their roles in the scheme to defraud the SBA. The original indictment contained thirteen counts.2 The second amended indictment, the operative indictment in this case, contained five counts. Count 1 charged all five defendants with conspiracy to commit wire fraud affecting a financial institution, in violation of 18 U.S.C. § 1349. Counts 2 through 5 charged wire fraud affecting a financial institution, in violation of 18 U.S.C. §§ 1343 and 2. Counts 2 and 4 charged Ms. Agee, Ms. Isley, and Ms. Smith, while Counts 3 and 5 charged Ms. Agee only.
The district court conducted an eight-day jury trial. The court denied the defendants' motions for acquittal made both after the close of the Government's case and after the defendants rested. The jury convicted the defendants on all counts, except that Mr. Smith was found guilty of only the lesser-included offense of conspiracy to commit wire fraud.
After the jury verdict, the defendants renewed their motions for judgment of acquittal. The district court denied the defendants' motions. The court first concluded that acquittal was not warranted for Ms. Agee, Ms. Isley, Ms. Smith, or Mr. Griffin because, given the "lengthy trial testimony and the numerous exhibits," there was "relevant evidence from which the jury could reasonably find each of the Defendants guilty beyond a reasonable doubt."3 The court explained that "the evidence of a scheme to defraud the SBA (the object of the conspiracy) was overwhelming" because the misrepresentations in the presented loan documents "were aimed at acquiring the money and property of the SBA both in the form of the valuable guarantees as well as payment on those guarantees on the back end."4 As part of the scheme, the defendants routinely sent interstate wire communications from Banc-Serv in Indiana to SBA offices in Virginia and California. The court also explained that, "[f]or most of the loans discussed at trial, a financial institution was put at a risk of loss," as "[t]he parties stipulated that the banks at issue . . . were all qualifying financial institutions" and "[t]he banks' risk was clear from the testimony of the SBA witnesses and a lender who all said that the bank that made the loan would be the one that could be charged a repair or a complete denial of the guarantee."5 The defendants' communications "showed their understanding of the SBA's rules and regulations and how they would circumvent those rules and regulations by changing information on documents to get the SBA's approval."6 The district court also concluded that an acquittal for Mr. Smith was not warranted. The court explained that the record was "not devoid of any evidence from which the jury could find" him guilty beyond a reasonable doubt of conspiracy to commit wire fraud, noting that neither it nor the jury was required to "examine each shred of evidence in isolation."7
The Probation Office prepared a Presentence Investigation Report ("PSR") for each defendant. The defendants objected to the increase in offense level under U.S.S.G. § 2B1.1(b)(1) based on loss amount. The PSRs concluded that the proper measure of actual loss was the amount that the SBA spent purchasing the outstanding balances of the fraudulent SBA-guaranteed loans on which the borrowers had defaulted. The defendants contended that their conduct was not the legal cause of the SBA's purported loss because their actions did not affect the borrower's creditworthiness or the SBA's willingness to guarantee a loan. They also argued that the loss amount attributed to the defendants was incorrect under the government benefits rule. The defendants objected to the restitution amount on the same grounds as the loss amount. The defendants also objected to the application of the sophisticated means enhancement under U.S.S.G. § 2B1.1(b)(10)(C).
At each defendant's sentencing hearing, the district court adopted the Probation...
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