United States v. Howard

• Decision Date: 28 April 2015
• Docket Number: No. 14–1075.,14–1075.
• Citation: 784 F.3d 745
• Parties: UNITED STATES of America, Plaintiff–Appellee, v. Roger Keith HOWARD, Defendant–Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

784 F.3d 745

UNITED STATES of America, Plaintiff–Appellee

v.Roger Keith HOWARD, Defendant–Appellant.

No. 14–1075.

United States Court of Appeals, Tenth Circuit.

April 28, 2015.

Elizabeth L. Harris, Law Office of Elizabeth L. Harris, LLC, Denver, CO, for Defendant–Appellant.

Paul Farley, Assistant United States Attorney (John F. Walsh, United States Attorney, with him on the brief), Denver, CO, for Plaintiff–Appellee.

Before KELLY, LUCERO, and HARTZ, Circuit Judges.

Opinion

HARTZ, Circuit Judge.

Defendant Roger Howard pleaded guilty to three counts of wire fraud, see 18 U.S.C. § 1343, and one count of money laundering, see id. § 1957, arising from his participation in three mortgage-fraud schemes. His participation included identifying property buyers, arranging for their applications for mortgage loans to overstate assets and incomes, and obtaining inflated property appraisals and kickbacks to himself and some buyers. All buyers defaulted on their mortgage notes. Some notes had been sold by the original lenders to downstream lenders, who may themselves have resold the notes.

The United States District Court for the District of Colorado sentenced Defendant to 108 months' imprisonment and ordered him to pay $8,862,191.18 in restitution. He argues that the district court made two errors in imposing the sentence: (1) it improperly increased his offense level by miscomputing the loss to the mortgage lenders, see USSG § 2B1.1 ; and (2) it awarded restitution to alleged victims without evidence of their actual losses.

Exercising jurisdiction under 28 U.S.C. § 1291 and 18 U.S.C. § 3742, we affirm the determination of loss under USSG § 2B1.1, which was calculated in accordance with our precedents, but we largely agree with Defendant's restitution argument and therefore reverse the restitution order and remand for further proceedings.

I. LOSS UNDER USSG § 2B1.1(B)(1)

Under the sentencing guideline for fraud, the offense level is based on the amount of loss. See USSG § 2B1.1(b)(1). The district court calculated the loss caused by Defendant to be $8,961,191.18. For losses exceeding $7 million but less than $20 million, the offense level is 20. See id. § 2B1.1(b)(1)(K).

In mortgage-fraud cases like this, “[a]ctual loss” under USSG § 2B1.1 cmt. n.3(A)(i) “is the unpaid portion of the loan as offset by the value of the collateral.” United States v. Crowe, 735 F.3d 1229, 1241 (10th Cir.2013) (internal quotation marks omitted), cert. denied, ––– U.S. ––––, 134 S.Ct. 1565, 188 L.Ed.2d 575 (2014). “[S]o long as it is foreseeable that loans will be sold or repackaged, both the original lenders and downstream lenders are foreseeable victims of the fraud, and the general formula applies.” United States v. Smith, 705 F.3d 1268, 1276 (10th Cir.2013). “That is so because any gains or losses sustained by the original lender will be offset by a corresponding loss or gain by the downstream lender, leaving the total loss to equal mortgage balance minus foreclosure price.” Id. As a result, “the number of lenders involved and the amount of profit made [or loss suffered] by the original lender or any intermediate lenders is mathematically irrelevant to the calculation of the total loss caused by the fraud.” Id. (emphasis and internal quotation marks omitted).

Defendant does not dispute that the district court's method of calculating loss was the method dictated by our precedents. Instead, he challenges the loss amount based on three arguments not raised below: (1) the government's evidence was insufficient to prove $709,588 in losses on eight loans included in the loss amount; (2) the court should have reduced the loss amount by $973,935 to account for interest payments made on the loans; and (3) the court should not have included $313,261 in losses to a downstream noteholder that purchased three loans after the buyers had defaulted. Based on these arguments, he concludes that the correct total loss amount is $6,964,407 (instead of $8,961,191). See Aplt. Br. at 27. Because his offense level and guidelines range remain the same unless the net actual loss is $7 million or less, see USSG § 2B1.1(b)(1)(K), Defendant cannot prevail if we reject any argument challenging more than $35,593.

When the defendant objects to the loss calculation below, we review the district court's factual findings for clear error and calculation methodology de novo. See Crowe, 735 F.3d at 1235–36. But because Defendant failed to object below on the grounds argued here, we review only for plain error. See id. at 1242. Relief is available under the plain-error standard only if Defendant establishes four elements: “(1) the district court committed error; (2) the error was plain—that is, it was obvious under current well-settled law; (3) the error affected the Defendant's substantial rights; and (4) the error seriously affected the fairness, integrity, or public reputation of judicial proceedings.” United States v. Gantt, 679 F.3d 1240, 1246 (10th Cir.2012) (brackets and internal quotation marks omitted). Defendant must establish all four elements. See id. “[T]he failure of any one will foreclose relief and the others need not be addressed.” Id.

Defendant argues that the district court committed plain error by counting losses on certain loans totaling $709,588. Among those losses are the amounts of five second-mortgage loans totaling $422,588. The court calculated the losses from printouts from UTLS Default Services. The printouts showed the amounts of the loans and named the noteholders. Defendant asserts that the amounts cannot be believed because each printout is indisputably wrong in naming the holder of the first-mortgage note on the property. This challenge to the loss calculation raises solely a question of fact—was there a second mortgage in the amount stated on the printout? But “factual disputes regarding sentencing not brought to the attention of the district court do not rise to the level of plain error.” United States v. Lewis, 594 F.3d 1270, 1288 (10th Cir.2010) (brackets and internal quotation marks omitted).

Defendant relies on United States v. Goode, 483 F.3d 676, 681 (10th Cir.2007), for the proposition that sufficiency of the evidence can be reviewed for plain error. Goode, however, involved a challenge to the sufficiency of the evidence of guilt at a criminal trial, where different considerations are in play than with sentencing.¹ More importantly, the issue raised by Defendant is one of admissibility of evidence—was the printout sufficiently reliable to be used to establish the amount of the second mortgage notes?—not sufficiency. Because Defendant failed to object to the evidence below, there was no need for the government to explain why the printout was likely to be accurate. Defendant has given us no reason to believe that the government could not present reliable evidence on remand of the amount of the second-mortgage loans. See Lewis, 594 F.3d at 1288. We are not disposed to ignore our binding precedents regarding the scope of plain-error review of sentencing determinations.

II. RESTITUTION

The award of restitution in this case is governed by the Mandatory Victims Restitution Act of 1996 (MVRA), which “requires certain offenders to restore property lost by their victims as a result of the crime.” Robers v. United States, ––– U.S. ––––, 134 S.Ct. 1854, 1856, 188 L.Ed.2d 885 (2014). Defendant's principal challenge is to the method of calculating the loss to downstream lenders—that is, lenders who did not originate the mortgage loan but purchased it from the original lender or an earlier downstream lender. Because we agree with this challenge and remand for further proceedings, we need not address his other challenges, which had not been raised below and can be considered on remand.

The MVRA requires that a defendant convicted of an offense against property, including any offense committed by fraud or deceit, be ordered to pay restitution to victims of the offense. See 18 U.S.C. § 3663A(a)(1), (c)(1)(A)(ii). Payment is to be made to “an identifiable victim or victims [who] suffered ... pecuniary loss.” Id. § 3663A(c)(1)(A)(ii), (B). A victim is “a person directly and proximately harmed as a result of the commission of an offense for which restitution may be ordered.” Id. § 3663A(a)(2). “Restitution must not unjustly enrich crime victims or provide them a windfall.” United States v. Ferdman, 779 F.3d 1129, 1132 (10th Cir.2015). District courts thus “may not order restitution in an amount that exceeds the actual loss caused by the defendant's conduct, which would amount to an illegal sentence.” Id. (internal quotation marks omitted); see also United States v. Griffith, 584 F.3d 1004, 1019 (10th Cir.2009) (“a district court that orders restitution in an amount greater than the total loss caused by the offense thereby exceeds its statutory jurisdiction and imposes an illegal sentence”) (internal quotation marks omitted).

In disputes over the amount of a victim's loss, the government bears the burden of persuasion by a preponderance of the evidence. See 18 U.S.C. § 3664(e). The district court “may consider hearsay evidence that bears minimal indicia of reliability so long as the defendant is given the opportunity to refute the evidence.” United States v. Rodriguez, 751 F.3d 1244, 1261 (11th Cir.2014) (internal quotation marks omitted), cert. denied, ––– U.S. ––––, 135 S.Ct. 310, 190 L.Ed.2d 225 (2014) ; cf. United States v. Sunrhodes, 831 F.2d 1537, 1544 (10th Cir.1987) (admission of hearsay testimony with substantial indicia of reliability in restitution proceeding did not violate hearsay rule or Confrontation Clause). We review the restitution order for an abuse of discretion, which requires us to review factual findings for clear error and application of the MVRA de novo. See Ferdman, 779 F.3d at 1131 ; United States v. Battles, 745 F.3d 436, 460 (10th Cir.2014), cert. denied, ––– U.S. ––––, 135 S.Ct. 355, 190 L.Ed.2d 249 (2014) ; cf. Cooter & Gell v. Hartmarx...