Mortgage Fraud Sentencing Enhacements

My last blog talked about the central issues of scope of criminal activity and actual loss in a mortgage fraud federal sentencing hearing. The recent case of U.S. v. David McCloskey, 2013 U.S. Dist. Lexis 168220 (November 26, 2013), discusses numerous issues guilty pleas or guilty verdicts these cases present. This blog shall discuss the secondary, but equally important, sentencing enhancements based upon the number of victims, type of scheme, leadership roles, and obstruction of justice.

These cases typically involve forged appraisals, engaging in mortgage brokering without a license, submitting fraudulent bank and asset information upon which mortgage qualification documents are based (this is fake W-2 forms, bank account statements, asset information) and complex clients . Please review http://www.phila-criminal- lawyer.com/Publications/201031202-Hark.pdf,  and my other published articles for a simple discussion of the process of a federal sentencing.

The secondary enhancements include: 1) a four-level enhancement for an offense involving more than fifty victims pursuant to U.S.S.G. § 2B1.1(b)(2); 2) a two-level enhancement for the use of sophisticated means pursuant to U.S.S.G. § 2B1.1(b)(10)(C); 3) a four-level enhancement for defendant’s leadership role in the offense pursuant to U.S.S.G. § 3B1.1(a); and 4) a two-level enhancement in defendant’s offense level calculation for obstruction of justice pursuant to U.S.S.G. § 3C1.1.

The judge in McCloskey stated “Application note 8(B) defines “sophisticated means” as especially complex or especially intricate offense conduct pertaining to the execution or concealment of an offense. For example, in a telemarketing scheme, locating the main office of the scheme in one jurisdiction but locating soliciting operations in another jurisdiction ordinarily indicates sophisticated means. Conduct such as hiding assets or transactions, or both, through the use of fictitious entities, corporate shells, or offshore financial accounts also ordinarily indicates sophisticated means. U.S.S.G. § 2B1.1 cmt. n.8(B).

“‘Application of the adjustment is proper when the conduct shows a greater level of planning or concealment than a typical fraud of its kind.'” Other courts of appeals have stated that the enhancement only applies when “‘the offense conduct, viewed as a whole, was notably more intricate than that of the garden-variety offense.'” The courts have therefore interpreted the enhancement at § 2B1.1(b)(10)(C) to refer to offense conduct generally, not the individual defendant’s conduct. As noted above, the guidelines define offense conduct for purposes of determining specific offense characteristics as “all reasonably foreseeable acts and omissions of others in furtherance of the jointly undertaken criminal activity.” U.S.S.G. § 1B1.3(a)(1)(B).

The leadership four level enhancement under section U.S.S.G. § 3B1.1(a) provides that defendant’s offense level should be increased by four levels “[i]f the defendant was an organizer or leader of a criminal activity that involved five or more participants or was otherwise extensive.” Leadership activities include recruiting helpers, coordinating drafting the loan applications, fraudulent appraisals, fraudulent court documents, fraudulent pay stubs, concealing fraudulent documents, and instructing potential co-defendants that they should falsify the necessary documents to justify and applicants particular assets. Not every requirement of the four level enhancement subsection is required. Rather, the Third Circuit has advised that if the defendant’s role in the offense is the central criterion for the application of the enhancement. If the defendant recruited individuals, shared in the flutists fine, may disbursements with the funds, the evidence will reflect the specific defendants exercise of degree of control over the other members of the scheme.

The final issue of obstruction of justice deals with the defendant’s attempt to obstruct justice by testifying under oath falsely, destroying documents, falsely answering questions to FBI officer or a bank investigator, or otherwise engaging in attempts to intimidate witnesses. The obstruction claim stems from U.S.S.G. § 3C1.1 if a defendant files false affidavits with the court asserting his actual innocence in an attempt to withdraw his guilty plea. Section 3C1.1 provides, if (1) the defendant willfully obstructed or impeded, or attempted to obstruct or impede, the administration of justice with respect to the … sentencing of the instant offense of conviction, and (2) the obstructive conduct related to (A) the defendant’s offense of conviction and any relevant conduct; or (B) a closely related offense, increase the offense level by 2 levels. U.S.S.G. § 3C1.1.

The application notes to § 3C1.1 identify “producing or attempting to produce a false …record during an official investigation or judicial proceeding” and “providing materially false information to a judge” as conduct that falls within the scope of the enhancement. U.S.S.G. § 3C1.1 cmt. n.4(C), (F). The notes further define “material” evidence as “evidence, fact, statement, or information that, if believed, would tend to influence or affect the issue under determination.” U.S.S.G. § 3C1.1 cmt. n.6. The government bears the burden of proving the applicability of § 3C1.1 by a preponderance of the evidence. In order to constitute “willful” obstruction of justice, the court must find that defendant had the specific intent to obstruct justice. The application notes explain that “not all inaccurate testimony or statements necessarily reflect a willful attempt to obstruct justice.” U.S.S.G. § 3C1.1 cmt. n.2 (“In applying this provision in respect to alleged false testimony or statements by the defendant, the court should be cognizant that inaccurate testimony or statements sometimes may result from confusion.”) In sum, Producing a false record during a judicial proceeding and providing “materially false” information to a judge is conduct that warrants an enhancement pursuant to § 3C1.1. U.S.S.G. § 3C1.1 cmt. n.4(C), (F).

Once this occurs and the obstruction enhancement is applied, equally important in the revocation of sentencing deductions for acceptance of responsibility. Please call to discuss your case and your sentencing hearing.

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