[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
Nos. 09-13892 & 09-13993 AUGUST 15, 2011
________________________ JOHN LEY
CLERK
D. C. Docket No. 05-00009-CR-J-25HTS
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
ROBERT D. SINGLETARY,
PATRICK M. SINGLETARY,
Defendants-Appellants.
________________________
Appeals from the United States District Court
for the Middle District of Florida
_________________________
(August 15, 2011)
Before TJOFLAT, ANDERSON and ALARCON,* Circuit Judges.
*
Honorable Arthur L. Alarcon, United States Circuit Judge for the Ninth Circuit, sitting
by designation.
TJOFLAT, Circuit Judge.
Count One of the multi-count indictment in this case—which was returned
on December 21, 2005—charged Robert and Patrick Singletary (“the Singletarys”),
Peter J. Russo, Clifford R. Shaw, and others (not indicted) with conspiring between
1997 and September 16, 2004, in violation of
18 U.S.C. § 371, to commit three
offenses: (1) to defraud a federally insured bank, in violation of
18 U.S.C. § 1344;
(2) to make false representations with respect to material facts to the United States
Department of Housing and Urban Development (“HUD”), in violation of
18
U.S.C. § 1001; and (3) to defraud purchasers of residential property and mortgage
lenders, in violation of
18 U.S.C. § 1343. On October 17, 2006, the Singletarys
pled guilty to Count One to the extent that it alleged a conspiracy to commit the §
1001 offense.1 The evidence underpinning the guilty pleas indicated that the
Singletarys, through others, had induced home buyers to make false statements in
1
18 U.S.C. § 1001(a) provides for criminal penalties for anyone who
in any matter within the jurisdiction of the executive, legislative, or judicial
branch of the Government of the United States, knowingly and willfully—
(1) falsifies, conceals, or covers up by any trick, scheme, or device a material
fact;
(2) makes any materially false, fictitious, or fraudulent statement or
representation; or
(3) makes or uses any false writing or document knowing the same to contain any
materially false, fictitious, or fraudulent statement or entry . . . .
2
applying for, and obtaining, mortgage loans insured by the Federal Housing
Authority (the “FHA”) (which is a part of HUD), thus executing the § 1001 aspect
of the Count One conspiracy. A sentencing hearing was held on July 9 and 10, and
November 30, 2007. At the November 30 hearing, the Singletarys announced their
intention to withdraw their guilty pleas, and on June 16, 2008, after considering the
parties’ memoranda on the issue, the district court reinstated their not-guilty pleas
and set the case down for trial on October 6, 2008.
On October 7, 2008, following jury selection, the Singletarys pled guilty to
Count One to the extent that it alleged a conspiracy to commit the § 1343 offense2
in addition to the § 1001 offense. The district court convened sentencing hearings
on April 22 and 23 and on July 21, 2009.3 At the April 23 hearing, the court
sentenced the Singletarys to prison terms4 and, as part of the sentence for
2
18. U.S.C. § 1343 provides, in relevant part:
Whoever, having devised or intending to devise any scheme or artifice to defraud,
or for obtaining money or property by means of false or fraudulent pretenses,
representations, or promises, transmits or causes to be transmitted by means of
wire, radio, or television communication in interstate or foreign commerce, any
writings, signs, signals, pictures, or sounds for the purpose of executing such
scheme or artifice, shall be fined under this title or imprisoned not more than 20
years, or both. If the violation . . . affects a financial institution, such person shall
be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.
3
By stipulation of the parties, the transcripts of the sentencing hearings held on July 9
and 10 and November 30, 2007, were made part of the April 22 hearing.
4
Pursuant to
18 U.S.C. § 3581(b)(4), the court sentenced Patrick Singletary to a term of
18 months and Robert Singletary to a term of 12 months and one day. Both sentences included a
3
conspiracy to violate § 1343, entered a preliminary order of forfeiture in the
amount of $1 million.5 At the July 21 hearing, the court, as an additional part of
the sentencing packages, ordered the Singletarys to make restitution to “HUD
Collections”6 in the amount of $1 million.7 On July 28, 2009, the court entered
final judgments against the Singletarys, thus concluding their prosecutions.8
The Singletarys now appeal their sentences. We dispose in the margin of
their challenges to the district court’s forfeiture orders and Robert Singletary’s
claim that the district court erred in calculating his offense level under the United
States Sentencing Guidelines.9 Remaining for decision is the question of whether
three-years term of supervised release pursuant to
18 U.S.C. § 3583.
5
See Fed. R. Crim. P. 32.2(b). In sentencing a person convicted of conspiring to violate
18 U.S.C. § 1343, i.e., engaging in wire fraud “affecting a financial institution,” the district court
“shall order that the person forfeit to the United States any property constituting, or derived
from, proceeds the person obtained . . . as the result of such violation.”
18 U.S.C. § 982(a)(2).
6
HUD Collections, like the FHA, is part of HUD.
7
The court signed and filed the restitution order on July 22, 2009.
8
The final judgments included the Singletarys’ prison terms and terms of supervised
release; the forfeiture orders were entered pursuant to
21 U.S.C. § 853(a) and
18 U.S.C. § 3554,
and the restitution noted in the text was imposed pursuant to
18 U.S.C. § 3556.
9
The Government concedes that the forfeiture orders were entered in error; hence, on
receipt of our mandate, the district court shall delete the forfeiture provision from the
Singletarys’ judgments. Robert Singletary challenges his prison sentence on the ground that the
district court committed clear error in applying U.S.S.G. § 1B1.3(a), because it treated him as
having been a member of the conspiracy to the extent that it involved all of the mortgage
applications the court found to have been part of the conspiracy. The challenge is meritless, and
we therefore affirm his prison sentence without further discussion.
4
the district court abused its discretion in ordering restitution in the sum of $1
million.
In addressing this question, we begin with a description of the relevant
objects of the Count One conspiracy—a scheme to defraud mortgage lenders and
the FHA, which insured their mortgages, in violation of
18 U.S.C. §§ 1001 and
1343.10 We then proceed to the sentencing hearings before the district court on
July 9 and 10, 2007, and April 22 and 23 and July 21, 2009, and examine the proof
the Government submitted in support of its demand that the court order the
Singletarys to make restitution for the losses the FHA sustained after some of the
mortgages it insured went into default and the foreclosure sales failed to bring
prices sufficient to satisfy the balances due under the mortgages. Finally, we
determine whether the district court applied the appropriate legal standard in
ordering the Singletarys to make restitution in the sum of $1 million. We conclude
that the court did not; therefore, its entry of the restitution orders constituted an
abuse of discretion.
I.
The scheme here worked as follows. CAL Investments of North Florida,
10
As noted in the text supra, Count One alleged that in addition to defrauding mortgage
lenders, the conspirators defrauded purchasers of residential property. There is no evidence in
the record indicating that the home buyers who obtained the FHA insured mortgages were
actually defrauded. If anything, they participated in the fraud.
5
Inc. (“CAL”), a corporation the Singletarys owned and operated, would purchase
residential property in need of substantial repair work to be marketable,11 and then
sell the property to Eagle Investments of North Florida, Inc. (“Eagle”), a
corporation Robert Singletary owned.12 Eagle, in turn, would make the necessary
repairs. Eagle obtained the funds needed for the restoration from a commercial
bank. The bank would loan Eagle up to 70 percent of the appraised value of the
property as restored.13
After restoring the property, Eagle would place it on the market. Eagle
would refer a potential buyer to one of three mortgage brokerage companies
Patrick Singletary owned or controlled: Harbour Mortgage, Sunshine Mortgage,
and Tropical Mortgage (collectively the “Mortgage Brokers”). The Mortgage
Brokers’ loan officers—namely Scott Starratt, T.C. Mullis, Christopher Snell and
Robert Hill—would help the potential buyer obtain a mortgage that would be
insured by the FHA.14 The FHA would insure a mortgage for up to approximately
11
Dack Properties of Jax, Inc., which was owned and operated by Patrick Singletary and
Clifford R. Shaw, performed the same function as CAL. We refer to them together as CAL.
12
Other entities, owned by both indicted and unindicted co-conspirators, participated in
a manner similar to Eagle. The existence of these entities is immaterial to this appeal.
13
The appraisal was known as a “subject-to” appraisal. The bank apparently loaned
Eagle the funds based on Eagle’s creditworthiness and a security interest in the property.
14
According to the Government, other loan officers were involved. The four named in
the text are the only ones identified in the record; they testified for the Government at the
sentencing proceedings held on July 9 and 10, 2007.
6
97 percent of the sale price of residential property, provided that the buyer met
certain criteria. The criterion pertinent here concerns the buyer’s down
payment—a minimum of 3 percent of the price the buyer agreed to pay Eagle for
the property.
HUD regulations required the buyer, as borrower, to “invest the difference
between the total acquisition cost (sales price, cost of any required repairs paid for
by the borrower, and total closing costs to be paid by the borrower), and the
amount of the mortgage to be insured.” This “investment”—the down payment—
had to be “not less than 3% of the sales price” for a principal residence.15 If the
buyer received a “gift” for use as the down payment, the gift had to come from, for
example, the buyer’s “relative” or “employer,” and, among other things, “the
lender [had to] document the gift funds by obtaining a gift letter, signed by the
donor and borrower, that specifie[d] the dollar amount of the gift, state[d] that no
repayment [was] required . . . and state[d] the nature of the donor’s relationship to
the borrower.”16 Finally, “[r]egardless of when the gift funds [were] made
available to the homebuyer, the lender [had] to determine that the gift funds
ultimately were not provided from an unacceptable source and were indeed the
15
HUD Handbook 4000.2 § 6-2,
2004 WL 5863716 (May 2004).
16
HUD Handbook 4155.1 § 2-10,
2003 WL 25947965 (Oct. 20, 2003).
7
donor’s own funds.”17
The Mortgage Brokers used various fraudulent practices to obtain FHA
insurance. For example, in preparing buyer applications for mortgages (that the
FHA would insure), the loan officers at the Mortgage Brokers frequently drafted
and signed a gift letter to verify the buyer’s source of the down payment. Many of
these letters were false in that Eagle, rather than the buyer, provided the down
payment. At times, the loan officers would buttress the buyer’s creditworthiness
with a false “credit explanation” letter or create a false employment verification
form.
II.
A.
The presentence investigation reports (the “PSRs”) prepared by the
probation office for the April 2009 sentencing proceeding stated that the FHA
sustained losses totaling $1,732,585 as the result of 89 mortgage foreclosures.
These PSRs, like the PSRs prepared for the July 2007 sentencing proceeding, also
stated that the FHA had incurred expenses of $1,309,620 in disposing of the 89
foreclosed properties, for a total loss of $3,042,205.18 The probation office arrived
17
Id.
18
HUD apparently informed the probation office, as the probation office was preparing
the PSRs for the 2007 sentencing proceeding, that 89 foreclosures resulted in FHA losses of
$3,042,205. The probation office’s $1,732,585 figure purportedly represented the difference
8
at the $1,732,585 figure in determining, under U.S.S.G. § 2B1.1, the offense level
for a conspiracy to violate
18 U.S.C. §§ 1001 and 1343. See United States
Sentencing Commission Guidelines Manual, § 2B1.1 (Nov. 1, 2008). The specific
offense characteristic of the § 2B1.1(b)(1) guideline, § 2B1.1(b)(1)(I), called for a
16-level enhancement of the base offense level of 6 for a loss of “more than
$1,000,000” but less than $2,500,001.19 Since $1,732,585 fell between these two
amounts, the PSRs enhanced the Singletarys’ base offense levels to level 22.20
The Singletarys objected to the PSRs’ § 2B1.1(b)(1)(I) loss determination of
$1,732,585 for the 89 foreclosures and the PSRs’ recommended restitution of
$3,042,205. Accordingly, when the Singletarys’ sentencing proceeding
commenced on April 22, 2009, the Government had the burden of establishing by a
preponderance of the evidence the amount of the FHA’s § 2B1.(b)(1) losses, United
States v. Sepulveda,
115 F.3d 882, 890 (11th Cir. 1997) (“When a defendant
between the balances due on the 89 mortgages and the amount realized in the foreclosure sales,
i.e., the FHA’s “actual loss.” U.S.S.G. § 2B1.1, comment. (n.3(A)(i)).
19
If the loss is “more than $2,500,000,” U.S.S.G. § 2B1.1(b)(1)(J) provides for a 18-
level increase of the base offense level.
20
The PSR for Patrick further increased his offense level by 4 under U.S.S.G. § 3B1.1(a)
(because he was an organizer and leader of the criminal activity), and then reduced it by 2 levels
for acceptance of responsibility under U.S.S.G. § 3E1.1(a). This yielded a total offense level of
24 and, with a category I criminal history, a sentencing range of 51 to 63 months. The PSR for
Robert reduced his offense level of 22 by 2 levels for acceptance of responsibility under
§ 3E1.1(a). This yielded a total offense level of 20 and, with a criminal history category of I, a
sentencing range of 33 to 41 months. The district court granted downward variances in imposing
sentence in both cases.
9
challenges one of the factual bases of his sentence . . . the Government has the
burden of establishing the disputed fact by a preponderance of the evidence.”)
(citation and internal quotation marks omitted), and the amount of restitution the
court should order the Singletarys to pay,
18 U.S.C. § 3664(e).21 See also United
States v. McNair,
605 F.3d 1152, 1221 (11th Cir.2010). And whether the court is
determining the amount of the § 2B1.1(b)(1) losses or restitution, it “must explain
its findings with sufficient clarity to enable this court to adequately perform its
function on appellate review.” United States v. Huff,
609 F.3d 1240, 1248 (11th
Cir. 2010) (citations omitted).
B.
During the sentencing proceeding held on April 22 and 23, 2009, the
Government undertook to establish the losses the FHA incurred in the foreclosure
of 56 of the 89 mortgages listed in the PSRs.22 The Government did so through the
21
18 U.S.C. § 3664(e) states, in pertinent part:
Any dispute as to the proper amount or type of restitution shall be resolved by the
court by the preponderance of the evidence. The burden of demonstrating the
amount of the loss sustained by a victim as a result of the offense shall be on the
attorney for the Government.
The Government must demonstrate the amount of such loss with evidence bearing “sufficient
indicia of reliability to support its probable accuracy.” United States v. Bernardine,
73 F.3d
1078, 1080–81 (11th Cir.1996).
22
The record does not indicate why the Government chose only 56 of the mortgages to
establish the FHA’s losses under § 2B1.1(b)(1).
10
transcripts of the testimony of four of the loan officers employed by one or more of
the Mortgage Brokers—Starratt, Mullis, Snell and Hill23 —given during the
sentencing proceeding held on July 9 and 10, 2007. These transcripts disclosed that
each of these loan officers was shown the “files” for mortgages he handled to
closure. Most of the files contained a gift letter. Each loan officer testified on
direct examination that the gift letters in the files he handled were false, in that the
signature of the author had been forged or, if not, that the buyer had not received
the gift. On cross-examination, the officers wavered. They could not recall some
of the closings nor could they say with certainty that the gift letters they identified
were false or that the buyer had not received the gift. This led the district court, at
the proceeding on April 23, 2009, to question the loan officers’ credibility, saying:
[T]he four employees of this company or these companies . . . had
serious credibility problems as far as I am concerned. And I do have
serious problems with their testimony regarding their credibility . . .
they are unindicted co-conspirators . . . [a]nd I think that affects their
credibility. . . . [S]ome of their testimony has to be considered and I did
consider some of it.
23
Starratt, Mullis, Snell and Hill were unindicted members of the Count One conspiracy.
11
Record, vol. 2, no. 775, at 4–5. “I am not specifically finding that the
[§ 2B1.1(b)(1)] loss is $1,732,585.52 because basically . . . my calculation of the
loss is based on an estimate taking into account the credibility problems that . . . I
spoke of earlier.”24 Id. at 21. “I am unable to go to 1,732,585.” Id. at 31.
The district court then pegged the loss at $1 million. The court gave no
explanation, however, as to what made up its estimate of $1 million. The
Government’s proof related to 56 of the 89 mortgage foreclosures listed in the
PSRs, but the court, in estimating the loss at $1 million, did not indicate which of
the 56 foreclosures created such loss. It thus appears that the court merely intuited
losses of $1 million for purposes of its § 2B1.1(b)(1) determination 25 and then used
that figure in awarding the United States forfeiture.
C.
The district court deferred its ruling on restitution until July 21, 2009; that
day, the court held a hearing to enable the Government to prove its case for
24
The record does not indicate when, “earlier,” the court “spoke of” the officers’
questionable credibility, i.e., whether during the July 2007 sentencing proceeding or the April
2009 sentencing proceeding.
25
Assuming that the Government’s proof established a loss of $1 million, the court, in
enhancing the base offense level, should have applied § 2B1.1(b)(1)(H), which provides a 14
level enhancement, instead of § 2B1.1(b)(1)(I), which it did apply, because the loss was not
“more” than $1 million. The Singletarys did not object to the court’s § 2B1.1(b)(1)(I)
application, however, and although the application could be considered under the plain error
doctrine, we would not notice plain error because the Singletarys’ substantial rights were not
affected. This is because the court granted a substantial downward variance from the Guidelines
sentencing range in fashioning their prison sentences.
12
restitution pursuant to
18 U.S.C. § 3664(e). Assistant U.S. Attorney Mark
Devereaux (who had been representing the Government from the beginning) put on
the Government’s case. He called two witnesses. The first, a HUD official,
explained in a general way how HUD could incur losses over and above differences
between the balance due on defaulted mortgage notes and the price the FHA
obtained through foreclosure sales (which, in the instant case, the PSRs fixed at
$1,732,585 for 89 properties). But she was not asked, and thus did not state,
whether the losses the FHA incurred in the instant case amounted to the $3,042,205,
the figure HUD had given the probation office prior to the July 2007 sentencing
proceeding and the figure the PSRs recommended the court use in determining the
amount of restitution. The second witness, an employee of a company that
managed foreclosed properties for HUD, testified about the sort of expenses HUD
generally incurred post-foreclosure and prior to the ultimate disposition of a
foreclosed property. Like the HUD official, the employee of this company did not
provide the district court with evidence the court could rely on in ordering
restitution.
After presenting the testimony of these witnesses, Devereaux addressed the
district court regarding the amount of restitution the Government thought would be
appropriate. He stated that the PSRs had “calculated accurately” the loss amount
13
for U.S.S.G. § 2B1.1(b)(1)(I) purposes at $1,732,585, and reminded the court of its
previous observation that “there was more than a million dollars for guideline
losses” and that it “couldn’t figure out for forfeiture exactly what, and the point
was just as today it’s very difficult.” Record, vol. 3, no. 776, at 196–97.26 Then,
treating the testimony of the Government’s two witnesses as non-probative,
Devereaux effectively abandoned the PSRs’ recommendation that the court order
$3,042,205 in restitution. Instead, he asked the court to order restitution in the
approximate amount of the PSRs’ § 2B1.1(b)(1)(I) loss calculation, $1,732,585,
stating:
And this, until you really start looking into it, it looks like it might be
fairly easy, but it’s very difficult to do. And so I’m asking the Court
not to give even the 3 million, give them the benefit. But I'm asking
that you give no less than at least the guideline loss that the Court
found—I mean, that [the probation office] found, the 3.7—excuse me,
1.7 million, no less than that.
Id. at 197.27 At this point, the following exchange occurred between the court and
Devereaux over the question of whether the court could order restitution using the
loss figure determined under § 2B1.1(b)(1) of the Guidelines.
26
As noted in the text supra, the PSRs calculated the losses generated by 89 foreclosures.
The Government’s case, however, as presented by Devereaux, involved only 56 of the 89
foreclosures. Accordingly, the § 2B1.1(b)(1) losses had to have been considerably less than
$1,732,585.
27
Devereaux was asking the court to grant restitution for the losses the FHA sustained
with respect to the 89 foreclosures listed in the PSRs, even though the case he presented for the
Government involved only 56 of those foreclosures. See supra note 26.
14
THE COURT: Let me ask you a question about this. Now, under the
guidelines there is a way to make a reasonably intelligent guess as to
the guideline loss.
MR. DEVEREAUX: Yes.
THE COURT: But under this statute relating to restitution, it seems to
be all or nothing. It seems to be—there doesn’t seem to be a
provision that allows the Court to do that. It seems to say if you can’t
do it, then you don’t order restitution. How do you see that statute?
MR. DEVEREAUX: The bottom line . . . is that my client, HUD, is
out $3 million.
....
They intentionally victimized HUD. They knew that that was the
program they wanted to go in. And, therefore, since they went after
HUD, then they have to take [the] victim as they find them.
....
THE COURT: What I’m saying is does the statute give me room to—
to do otherwise?
MR. DEVEREAUX: I believe so because it’s up to the Court on
determining what the restitution is. And the Court can say, well, I
believe under considering all of the factors that the—that the
restitution should be modified, it shouldn’t be everything . . . .
....
And so no question if you look at that $1.7 million guideline loss, and
then you look at that that—here’s the profit. I’m showing the profit is
at 2 and a half million. . . . .[T]wo and a half million is what I should
be asking here. But I’m not. I’m trying to be reasonable as well.
Id. at 199–200.28 This ended the discussion about whether the district court could
28
In stating that the Singletarys’ fraudulent scheme yielded profits of $2.5 million,
Devereaux may have had in mind an alternative method of determining losses under the specific
offense characteristic, U.S.S.G. § 2B1.1(b)(1). The notes to § 2B1.1(b)(1) state: “The court shall
use the gain that resulted from the offense as an alternative measure of loss only if there is a loss
but it reasonably cannot be determined.” U.S.S.G. § 2B1.1, comment. (n.3(B)). In stating that
he “should be asking” for restitution of $2.5 million, Devereaux was effectively telling the court
15
use a “reasonably intelligent guess” to fix the amount of restitution.
On July 22, 2009, the district court entered its order on restitution. The
order stated that:
Upon consideration of the evidence, including the original
sentencing hearing held July 9–10, 2007, the sentencing hearing held
April 22–23, 2009, the Presentence Investigation Report, and the
restitution hearing held July 21, 2009, the Court finds that the
Government has failed to establish, by a preponderance of the
evidence, restitution in the amount of $3,031,045.00. From the
evidence, the Court is unable to determine the exact amount that is
recoverable as restitution or is reasonable. As previously indicated,
the Court finds that the credibility of the witnesses presented at the
original sentencing hearing is questionable. However, the Court does
find that restitution of at least $1,000,000.00 has been established by
the Government. Accordingly, the amount of restitution is set at
$1,000,000.00 jointly and severally.
III.
A.
Under the Mandatory Victim Restitution Act (the “MVRA”), restitution is
required in any case involving a criminal “offense against property under [Title 18]
. . . including any offense committed by fraud or deceit.” 18 U.S.C.
§ 3663A(c)(1)(A)(ii). Wire fraud and fraudulent representations, the objects of the
conspiracy in this case, are “offense[s] against property” within the meaning of the
MVRA. See Huff, 609 F.3d at 1247. The amount of restitution is not necessarily
that if the FHA’s losses cannot “reasonably . . . be determined,” it should order restitution in the
amount of the Singletarys’ gain.
16
identical to the amount of loss calculated under the Guidelines. Huff, 609 F.3d at
1247; see also United States v. Gallant,
537 F.3d 1202, 1247 (10th Cir. 2008);
United States v. Simpson,
538 F.3d 459, 465–66 (6th Cir. 2008). Restitution under
the MVRA is based on the loss the victim actually suffered; whereas the amount of
loss under § 2B1.1(b)(1) of the Guidelines is determined using “the greater of
actual loss or intended loss.”29 U.S.S.G. § 2B1.1, comment. (n.3(A)). See Huff,
609 F.3d at 1247–48.
B.
The Singletarys’ challenges to the Government’s demand for restitution
were presented initially in their objections to the PSRs prepared for the July 9–10,
2007 sentencing proceeding and then again in response to the district court’s
directive to the parties, made at the close of the sentencing proceeding, to file post-
hearing memoranda. In his memorandum, Patrick Singletary reminded the court
that, with respect to the 89 mortgage foreclosures listed in the PSR, he had
“objected to the factual basis and calculation of losses set out in the [PSR] both for
sentencing guidelines calculations and restitution,” Patrick M. Singletary’s Mem.
Regarding Sentencing at 1, and that “[b]ecause of these objections, the government
must prove as to each FHA mortgage falling within the conspiracy the specific
29
It is not clear from the record whether, in determining loss for U.S.S.G. § 2B1.1
purposes, the district court believed that $1 million represented intended loss or actual loss.
17
false statements and that they are material,” id. at 8. Robert Singletary’s
memorandum likewise put the Government to the proof with respect to the alleged
false statements and the losses those mortgages generated.
C.
During the July 9–10 proceeding, the Government did not attempt to prove
that the buyer’s applications for the 89 mortgages listed in the PSRs contained
materially false statements; 30 rather, as recounted in part II, supra, the Government
limited its proof to the applications of 56 of those mortgages. To this end, it
presented the testimony of four of the Mortgage Brokers’ loan officers, Starratt,
Mullis, Snell and Hill. As the loan officers took the stand, Devereaux handed them
the FHA files, one by one, that they handled and asked them whether the files
contained anything fraudulent. For example, Devereaux asked the first witness,
Starratt, “is that file clean and legit?” Starratt answered, “No, it has another fake
gift letter in it.” Record, vol. 1, no. 553, at 114. Robert Singletary’s attorney,
Curtis Fallgatter, objected on the ground that the statement amounted to nothing
more than a conclusion. Starratt interjecting, stated, “[w]ell, it’s filled out in my
handwriting,” implying that because he filled it out it was fake. The district court
overruled the objection with this comment: “I’m not so sure I disagree with you
30
Most of the allegedly false statements were made in gift letters. Some were made in
“credit explanation” letters or employment verification forms. See supra part I.
18
that there may be a problem with these generalizations that something is fake. And
I also have a problem with the fact that he filled it out making it fake. That doesn’t
make it fake.” Id. at 114–115. Devereaux, referring to the same file, then asked
Starratt, “no question in your mind there’s fraud in that file?” Fallgatter objected
to the question as leading. The court, without ruling, said this: “Like I told you,
these general answers that there’s a fraud in the file ain’t going to get it with me.”
Id. at 119.
Devereaux questioned Mullis, Snell and Hill in much the same manner, with
Fallgatter and Charles Lembke, Partrick Singletary’s attorney, objecting
intermittently to what they considered “generic” testimony about the documents
they identified as fraudulent. Such generic and conclusory direct-examination
testimony about fraud delivered by four unindicted co-conspirators who executed
the fraud presented “serious credibility problems” for the district court, as it stated
during the April 23, 2009 hearing.
On July 21, 2009, the Government had further opportunity to buttress its
case—that the applications for the 56 foreclosed mortgages were fraudulent,
resulting in FHA losses of $1,732,585 and additional HUD losses of $1,309,620,
for a total of $3,042,205.31 The Government’s effort failed, however, which
31
Apparently, Devereaux was attempting to hold the Singletarys responsible for the
$1,732,585 in losses incurred with respect to the 89 mortgages listed in the PSRs, not the 56
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accounts for this statement in the district court’s July 22, 2009 restitution order:
“The Government has failed to establish, by a preponderance of the evidence,
restitution in the amount of $3,0[42,20]5.” That is, not only did the Government
fail to establish the additional HUD losses of $1,309,620, but the FHA losses of
$1,732.585 as well. Assuming that the FHA losses incurred by the foreclosure of
the 89 mortgages listed in the PSRs were caused by fraud and were precisely in the
amounts the PSRs indicated, the FHA losses for the 56 mortgages included within
the 89 mortgages totaled $1,164,377. Devereaux never argued that the court
should order forfeiture for that amount, though, and the court apparently eschewed
adding up the numbers on its own initiative, as the following statement in its July
22 restitution order indicates: “From the evidence, the Court is unable to determine
the exact amount that is recoverable as restitution or is reasonable.”
We assume that, in saying this, the district court meant that it could not say
that the Government had made out a case for restitution under
18 U.S.C. § 3664(e).
To order restitution, then, the court would have to accept Devereaux’s “I believe
so” answer to the question it put to Devereaux the day before, on July 21: whether
it could adopt—for the restitution figure—the “reasonably intelligent guess” it had
made in determining the FHA’s loss under the Guidelines, specifically,
mortgages he presented to the four loan officers, Starratt, Mullis, Snell and Hill.
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§ 2B1.1(b)(1). The court accepted Devereaux’s answer and accordingly adopted
its § 2B1.1(b)(1) guess and ordered restitution in the sum of $1 million.
IV.
The Government had the burden of proving, with respect to each of the
mortgages for which it sought restitution, that the mortgage was the product of a
fraudulent misrepresentation. The district court’s statement in the July 22
restitution order that “restitution of at least $1,000,000 has been established by the
Government” did not identify the mortgages that had been fraudulently obtained
and caused losses totaling that sum.
To enable meaningful appellate review, a district court's calculation of
restitution must be supported by specific factual findings. Huff, 609 F.3d at 1248.
In the context of the case here, the district court’s task was, first, to determine by a
preponderance of the evidence which of the 56 mortgages the loan officers handled
was obtained through a false “gift” letter, a false “credit explanation” letter or a
false employment verification form, and, second, where fraud is found, to
determine the extent of the actual loss HUD may have incurred due to the
mortgage’s foreclosure.
The district court failed to carry out this task. We therefore VACATE the
restitution provisions of the Singletarys’ judgements and REMAND the case so
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that the court may perform this task. We do so with this caveat: the Government is
not receiving another bite of the apple. The district court shall render the necessary
findings of fact and conclusions of law with respect to each of the 56 mortgages at
issue on the basis of the evidentiary record as it now exists.
SO ORDERED.
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