United States v. Marco Luis ( 2014 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA, No. 13-50020
Plaintiff-Appellee,
D.C. No.
v. 3:10-cr-02967-IEG-5
MARCO MANUEL LUIS,
Defendant-Appellant. OPINION
Appeal from the United States District Court
for the Southern District of California
Irma E. Gonzalez, Senior District Judge, Presiding
Argued and Submitted
March 6, 2014—Pasadena, California
Filed August 28, 2014
Before: Richard A. Paez, N. Randy Smith,
and Andrew D. Hurwitz, Circuit Judges.
Opinion by N.R. Smith
2 UNITED STATES V. LUIS
SUMMARY*
Criminal Law
The panel vacated in part and remanded for recalculation
an order of restitution to CitiGroup, and affirmed the district
court as to remaining issues, in an appeal in which the
defendant, who pleaded guilty to conspiracy to engage in
monetary transactions in violation of 18 U.S.C. §§ 1956(h)
and 1957 for his part in the purchase of two parcels of real
property with fraudulently obtained loans, challenged orders
of restitution to CitiGroup, a loan originator, and JP Morgan
Chase, a loan purchaser.
The panel held that because the defendant’s crimes
infringed on Chase’s and Citi’s property interests, they were
offenses “against property” under the Mandatory Victim
Restitution Act. The panel also held that district court did not
abuse its discretion in determining that Chase was a victim
under the Act, because the fraudulent nature of the loans was
concealed at the time Chase purchased them. The panel
rejected the defendant’s contention that “against property”
requires physical damage to property. The panel also rejected
the defendant’s contention that even if actually engaging in
transactions with proceeds from unlawful activity constitutes
an offense against property, conspiracy to engage in such
transactions does not.
Regarding Rancho Santa Fe property loans, the panel (1)
held that the district court erred by calculating Chase’s
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
UNITED STATES V. LUIS 3
restitution based on the unpaid principal loan balance rather
than the value of the loans when Chase purchased them; and
(2) rejected as foreclosed by Robers v. United States, 134 S.
Ct. 1854 (2014), the defendant’s argument that the district
court erred by offsetting the restitution amount owed to Chase
by the foreclosure sale price rather than subtracting the fair
market value assessment submitted by the defendant.
Regarding Citi’s loss in connection with Palomar property
loans, the panel likewise rejected the defendant’s argument
that the district court should have subtracted from the unpaid
principal balance the fair market value of the property at the
time Citi could have foreclosed on it instead of the sale price
of the first mortgage loan. The panel rejected the defendant’s
contention that Citi’s choice to sell the loan rather than
foreclose on the property constituted an intervening cause.
COUNSEL
Todd W. Burns, Burns and Cohan, San Diego, California, for
Defendant-Appellant.
Lawrence E. Spong (argued), Assistant United States
Attorney; Bruce R. Castetter, Assistant United States
Attorney Chief, Appellate Section Criminal Division; Laura
E. Duffy, United States Attorney, United States Attorney’s
Office, San Diego, California, for Plaintiff-Appellee.
4 UNITED STATES V. LUIS
OPINION
N.R. SMITH, Circuit Judge:
The Mandatory Victim Restitution Act (“MVRA”)
requires a district court to order restitution when (1) a
defendant commits an “offense against property,” and
(2) there is a “victim.” See 18 U.S.C. § 3663A(a)(1), (c)(1).
We affirm the district court’s determination that both
requirements were met in this case.
Marco Luis pleaded guilty to two counts of conspiracy to
engage in monetary transactions in property in violation of
18 U.S.C. §§ 1956(h) and 1957 for his part in the purchase of
two parcels of real property with fraudulently obtained loans.
Because Luis’s crimes infringed on JP Morgan Chase’s
(“Chase”) and CitiGroup’s (“Citi”)1 property interests, they
were offenses against property. See United States v. Stephens,
374 F.3d 867, 871 (9th Cir. 2004). Also, the district court did
not abuse its discretion in determining that Chase was a
victim, because the fraudulent nature of the loans was
concealed at the time Chase purchased them. See United
States v. Yeung, 672 F.3d 594, 603 (9th Cir. 2012), overruled
in part on other grounds by Robers v. United States, 134 S.
Ct. 1854 (2014).
We affirm the calculation of restitution owed to Citi,
because the district court deducted from the base restitution
amount the actual amount received in mitigation of the
victim’s loss. See Robers, 134 S. Ct. at 1856. However, we
vacate and remand for the district court to recalculate the
amount owed to Chase, because the district court applied a
1
CitiGroup includes CitiMortgage and CitiBank.
UNITED STATES V. LUIS 5
formula for a loan originator, although Chase had purchased
the loans. See Yeung, 672 F.3d at 602.
FACTS & PROCEDURAL HISTORY
Luis and Joshua Hester, long-time friends, began
investing in real property together. As a real estate agent, Luis
had the know-how. As a career marijuana dealer, Hester had
the cash.
In 2006, Luis and Hester purchased a parcel of real
property in Rancho Santa Fe, California for $2,050,000. Luis
filled out the purchasing paperwork, using Hester’s girlfriend
(Kelsey Wiedenhoefer) as the straw buyer. Luis falsely stated
that Wiedenhoefer was self-employed and earned $420,000
per year. Luis also falsely represented Wiedenhoefer’s
employment history and the source of the down payment and
future monthly payments. Lastly, Luis obtained a pre-
approval letter from Dennis O’Connor, which falsely stated
O’Connor had prepared Wiedenhoefer’s tax returns and could
verify that she was successfully self-employed. Relying on
this paperwork, Washington Mutual approved two mortgages,
in the amounts of $1,640,000 and $204,7500. Thereafter,
Hester made the down payment and monthly mortgage
payments using Wiedenhoefer’s bank account. The payments
were interest only; Hester never paid any principal.
In 2007, Luis and Hester purchased ten acres of real
property in Palomar, California for $560,000. Again, Luis
filled out the purchasing paperwork. This time, he used Jay
Hansen as the straw buyer. Luis knew that Hansen delivered
marijuana to Hester’s customers, but falsely stated that
Hansen made $12,500 a month detailing cars. Citi issued two
mortgages in the amounts of $448,000 and $112,000, making
6 UNITED STATES V. LUIS
the Palomar property 100% financed. Hester provided Hansen
with funds for the closing costs and monthly mortgage
payments.
In December 2008, the Palomar loans went into default.
In September 2009, the Rancho Santa Fe loans went into
default. The fraudulent nature of these loans was discovered
during a larger investigation of Hester’s illegal marijuana
distribution; Hansen, Hester, Wiedenhoefer, and Luis were
then charged criminally in connection with the purchase of
the two properties.
On March 19, 2012, Luis pleaded guilty to two counts of
conspiring to engage in prohibited monetary transactions in
violation of 18 U.S.C. §§ 1956(h) and 1957. On August 27,
2012, the district court sentenced him to 48 months in
custody. The court also ordered restitution in the amount of
$545,029.90. Luis provided this amount of loss to the district
court in his sentencing memorandum.
On September 5, 2012, Luis requested the restitution
order be vacated and reconsidered “based on an appropriate
record, whether, to whom, and how much restitution should
be ordered.” The district court granted this request and held
hearings regarding restitution. Witnesses from Chase and Citi
testified at the hearings.
Patrick M. Carr, vice president and controller for Chase,
testified that Washington Mutual Bank originally authorized
the loans on the Rancho Santa Fe property for $1,640,000
(first mortgage) and $204,750 (second mortgage). On
September 25, 2008, Chase purchased Washington Mutual
Bank’s assets and liabilities. This purchase included a group
of loans totaling about $120 billion of unpaid debt. Chase
UNITED STATES V. LUIS 7
paid about $90 billion for that group of loans, which included
the Rancho Santa Fe property loans. The outstanding unpaid
principal balance on the Rancho Santa Fe property loans
remained $1,844,750. In September 2011, Chase foreclosed
on the Rancho Santa Fe property. (On the foreclosure sale
date, the unpaid principal balance of the loans remained the
same.) At the sale, Chase bid $1,228,815 and purchased the
property.
Cynthia Swan, a business operations analyst with Citi,
testified that Citi originally authorized the Palomar Mountain
property loans for $448,000 (first mortgage) and $112,000
(second mortgage). Around December 2008, these loans went
into default. Citi elected not to foreclose on the property.
Rather, in April 2010, Citi sold the first mortgage for
$230,068. At the time of the sale, the Palomar property first
mortgage’s unpaid principal balance was $447,977. Citi
wrote off the unpaid balance of the second mortgage,
$111,858.
The district court ordered $615,935 in restitution to
Chase. The court subtracted the Rancho Santa Fe property
foreclosure sale price ($1,228,815) from the unpaid principal
balance on the first mortgage ($1,640,000), resulting in a loss
of $411,185 on the first mortgage. The court added this loss
to the unpaid principal balance on the second mortgage
($204,750).
The district court ordered $329,767 in restitution to Citi.
The court subtracted the sale price of the first mortgage
($230,068) from the unpaid principal balance on the first
mortgage ($447,977), a loss of $217,909. The court added
this loss to the unpaid principal balance on the second
8 UNITED STATES V. LUIS
mortgage ($111,858). Luis timely appealed the restitution
order.
STANDARD OF REVIEW
“The legality of an order of restitution is reviewed de
novo, and factual findings supporting the order are reviewed
for clear error.” United States v. Brock-Davis, 504 F.3d 991,
996 (9th Cir. 2007) (citing United States v. Hackett, 311 F.3d
989, 991 (9th Cir. 2002); United States v. Stoddard, 150 F.3d
1140, 1147 (9th Cir. 1998)). “Provided that it is within the
bounds of the statutory framework, a restitution order is
reviewed for abuse of discretion.” Id.
DISCUSSION
I. Restitution was mandatory
The MVRA requires restitution when (1) sentencing a
defendant convicted of “an offense against property under
[Title 18], including any offense committed by fraud or
deceit”; and (2) there is “an identifiable victim or victims
[who] suffered . . . pecuniary loss.” 18 U.S.C. § 3663A(a)(1),
(c)(1). Luis claims the district court erred in finding both
elements satisfied. We disagree.
A.“Offense against property”
Luis pleaded guilty to conspiring to engage in monetary
transactions in property derived from criminal activity under
18 U.S.C. §§ 1956(h) and 1957. The MVRA does not define
“offense against property.” See 18 U.S.C. § 3663A. However,
we have held that “against property” means infringing on a
victim’s property interest. See Stephens, 374 F.3d at 871. In
UNITED STATES V. LUIS 9
Stephens, we determined that failure to pay child support in
violation of 18 U.S.C. § 228 constitutes an offense against
property. Id. at 868, 871. Omission of required support
payments infringed on the other parent’s right to receive the
payments, a property interest. Id. at 871. The failure to pay
child support “involv[ed] pecuniary loss” and therefore
constituted an offense against property. See id. Here, quite
simply, Chase and Citi suffered pecuniary loss when the
Rancho Santa Fe property and Palomar property loans went
unpaid. Luis’s offenses occasioned these losses.
Luis’s argument that “against property” requires physical
damage to property is unavailing. See United States v.
Hunter, 618 F.3d 1062, 1064 (9th Cir. 2010) (holding that a
conviction for mail fraud invoked the MVRA); c.f. United
States v. Rizk, 660 F.3d 1125, 1134–37 (9th Cir. 2011)
(applying the MVRA to offenses arising out of a mortgage
fraud scheme, which included conspiracy, bank fraud, and
loan fraud). Moreover, in United States v. Lazarenko,
624 F.3d 1247 (9th Cir. 2010), we agreed with the parties that
money laundering and conspiracy to launder money
constituted offenses against property. Id. at 1249–50. A
conviction under 18 U.S.C. § 1957 is for money laundering.
United States v. Bush, 626 F.3d 527, 529 (9th Cir. 2010);
United States v. Rogers, 321 F.3d 1226, 1229 (9th Cir. 2003).
We are not alone in this conclusion. Other Courts of
Appeals agree that convictions under § 1957 are subject to the
MVRA. See, e.g., United States v. Diaz, 245 F.3d 294, 296,
312 (3d Cir. 2001); United States v. Polichemi, 219 F.3d 698,
707, 714 (7th Cir. 2000).
Luis also argues that, even if actually engaging in
transactions with proceeds from unlawful activity constitutes
10 UNITED STATES V. LUIS
an offense against property, conspiracy to engage in such
transactions does not. However, that distinction does not
matter. Conspiracy to launder money triggers the “same
penalties” as actual money laundering, 18 U.S.C. § 1956(h),
and MVRA restitution is a “penalty,” see id. § 3663A(a)(1).
B. “Victim”
The district court found Chase and Citi were victims for
MVRA purposes. Luis only challenges this finding as to
Chase.2 He argues that the government failed to meet its
burden to show actual loss suffered by Chase. Luis is
incorrect.
“The government bears the burden of proving that a
person or entity is a victim for purposes of restitution.”
United States v. Waknine, 543 F.3d 546, 556 (9th Cir. 2008).
Under the MVRA, a victim is “a person directly and
proximately harmed as a result of the commission of an
offense for which restitution may be ordered.” 18 U.S.C.
§ 3663A(a)(2). A loan purchaser can be a victim. See Yeung,
672 F.3d at 602. We review a determination that a person or
entity is a victim for abuse of discretion. See id. at 603.
The district court does not abuse its discretion in finding
a loan purchaser is a victim, if the defendant fraudulently
obtained the loan and the fraud was not discovered until after
the purchase. Id. This makes good sense, because the loan
purchaser would not know that the loan’s value was less than
2
Because Luis does not argue that Washington Mutual and Citi were not
“directly harmed” by criminal conduct in the course of the money
laundering conspiracy, § 3663A(a)(2), we consider only whether a loan
purchaser may be a victim of a fraudulent scheme.
UNITED STATES V. LUIS 11
it would otherwise appear to be, due to the unlikelihood of
debtor payment. See id.
Here, Chase purchased the Rancho Santa Fe property
loans on September 25, 2008. The fraudulent nature of the
loans and the fact that they were being paid with illicit gains
did not come to light until July 2010, when the government
filed charges against Luis and his co-defendants.
Consequently, the district court did not abuse its discretion in
concluding Chase was a victim for MVRA purposes.3
II. Restitution calculation
A. Rancho Santa Fe property loans
1. Calculation based on unpaid principal balance
Luis contends that the district court erred by calculating
restitution based on the unpaid principal loan balance rather
than the value of the loans when Chase purchased them. On
this point, we agree with Luis.
Different formulas apply to determine a victim’s actual
losses on loans, depending on whether the victim is a loan
originator or a loan purchaser. Id. at 601–02 (Calculation
rules “require some adjustment . . . where the victim is the
3
Luis also argues that Chase “made out like a bandit” when it purchased
Washington Mutual’s assets and liabilities, which included the Rancho
Santa Fe property mortgages. According to Luis, the profit Chase made on
the overall purchase of the assets and liabilities of another bank means
Chase did not suffer loss as to the Rancho Santa Fe mortgages. He offers
no support for his novel argument, and we therefore deem it waived. See
Howard v. Everex Sys., Inc., 228 F.3d 1057, 1069 n.18 (9th Cir. 2000)
(Failure to cite governing law waives the issue.).
12 UNITED STATES V. LUIS
loan purchaser as opposed to the loan originator.”). The
restitution formula for a loan originator begins with the
amount of the unpaid principal balance due on the fraudulent
loan, see id. at 601, while the restitution formula for a loan
purchaser begins with “how much the victim paid for the
fraudulent loan (or the value of the loan when the victim
acquired it),” id. at 602. The applicable amount is then offset
“by the amount of money the victim received in selling the
collateral.” Robers, 134 S. Ct. at 1856. Applying the loan
originator formula when the victim is a loan purchaser who
paid less than the unpaid principal amount to purchase the
loan “would cause the victim to receive an amount exceeding
its actual losses . . . [and] would constitute plain error.”
Yeung, 672 F.3d at 602.
Here, Chase purchased the loans; it did not originate
them. Yet the district court applied the loan originator
formula: It calculated restitution by subtracting the
foreclosure sale price of the property from the unpaid
principal balance on the loan. Thus, Yeung compels us to
vacate the restitution order with respect to the Rancho Santa
Fe property loan calculation and remand for the district court
to recalculate Chase’s loss, based on “how much [Chase] paid
for the fraudulent loan[s] (or the value of the loan[s] when
[Chase] acquired [them]).” See id.
2. Calculation based on Chase’s floor bid
Luis also argues that the district court erred by offsetting
the restitution amount owed to Chase by $1,228,815 (Chase’s
floor bid/the foreclosure sale price) rather than subtracting
$1,598,847 (the fair market value assessment Luis submitted).
However, Robers v. United States, 134 S. Ct. 1854
(2014)—decided after oral argument took place in the instant
UNITED STATES V. LUIS 13
appeal–dooms this argument, holding that “a sentencing court
must reduce the restitution amount by the amount of money
the victim received in selling the collateral, not the value of
the collateral when the victim received it.” Id. at 1856
(emphasis added).
B. Palomar property loans
Luis makes a similar argument concerning Citi’s loss. He
contends the district court should have subtracted from the
unpaid principal balance the fair market value of the Palomar
property at the time Citi could have foreclosed on it, instead
of the sale price of the first mortgage loan. Again, Robers
substantiates the district court’s calculation method. See id.
The district court must subtract the actual amount received in
mitigation of the loss. See id. Here, the district court did just
that.
Nor does Citi’s choice to sell the loan rather than
foreclose on the property constitute an intervening cause.
“The basic question that a proximate cause requirement
presents is ‘whether the harm alleged has a sufficiently close
connection to the conduct’ at issue.” Id. at 1859 (quoting
Lexmark Int’l, Inc. v. Static Control Components, Inc., 134 S.
Ct. 1377, 1390 (2014)). Foreseeable causes usually do not
break the causal chain. See id. Here, selling defaulted loans,
a very common method of mitigating loss, was foreseeable.
Further, Luis’s criminal conduct directly caused the defaults.
See generally United States v. Gamma Tech Indus., Inc.,
265 F.3d 917, 928 (9th Cir. 2001) (discussing “losses at least
one step removed from the offense conduct”). Thus, the
14 UNITED STATES V. LUIS
district court did not abuse its discretion in calculating
restitution on the Palomar property loans.4
CONCLUSION
We VACATE in part and REMAND the restitution
order for recalculation of restitution as to the Rancho Santa
Fe loans. As to the remaining issues, we AFFIRM.
The parties shall bear their own costs.
4
While Luis also claims Apprendi error, he concedes that United States
v. Green, 722 F.3d 1146 (9th Cir. 2013) forecloses his claim.