GUIDELINES MANUAL §2B1.1

BASIC ECONOMIC OFFENSES

• §2B1.1.

Larceny, Embezzlement, and Other Forms of

Theft; Offenses Involving Stolen Property; Property

Damage or Destruction; Fraud and Deceit; Forgery;

Offenses Involving Altered or Counterfeit

Instruments Other than Counterfeit Bearer

Obligations of the United States

Base Offense Level Calculation

• (1) If the loss exceeded $5,000, increase the offense level as

follows:

• Loss (Apply the Greatest) Increase in Level

• (A) $5,000 or less no increase

• (B) More than $5,000 add 2

• (C) More than $10,000 add 4

• (D) More than $30,000 add 6

• (E) More than $70,000 add 8

• (F) More than $120,000 add 10

• (G) More than $200,000 add 12

• (H) More than $400,000 add 14

• (I) More than $1,000,000 add 16

• (J) More than $2,500,000 add 18

• (K) More than $7,000,000 add 20

• (L) More than $20,000,000 add 22

• (M) More than $50,000,000 add 24

• (N) More than $100,000,000 add 26

• (O) More than $200,000,000 add 28

• (P) More than $400,000,000 add 30.

(1) 7, if (A) the defendant was convicted of an offense referenced to this

guideline; and (B) that offense of conviction has a statutory maximum

term of imprisonment of 20 years or more; or

(2) 6, otherwise.

(Apply the greatest) If the offense— (A) (i) involved 10 or more victims; or (ii) was committed through mass-marketing, increase by 2 levels; (B) involved 50 or more victims, increase by 4 levels; or (C) involved 250 or more victims, increase by 6 levels.

Best and Worst $250,000 Base Level 6, less than 10 victims

6 Base level

12 $250,000.00

0 + < 10 Victims

18

Criminal History Cat.I

27 to 33 Months

“Less than 4 Years”

Base Level 7, Greater than 250 victims.

7 Base level

12 $250,000

6 + > 250 Victims

25

Criminal History Cat.I 57 to 71 Months

“About 6 Years”

Best and Worst $1,000,000

Base Level 6, less than 10 victims

6 Base level

16 >$1,000,000.00

0 + < 10 Victims

22

Criminal History Cat.I

41 to 51 Months

“ About 3 Years”

Base Level 7, Greater than 250 victims.

7 Base level

16 >$1,000,000

6 + > 250 Victims

29

Criminal History Cat.I

87 to 108 Months

“9 Years Max”

Fraud

• Mortgage, Ponzi, Health Care, Etc.

Average Length of Imprisonment for Fraud Convictions

• On average, the defendants convicted of Fraud in the Southern Dist. Of Ind. spent 24 months incarcerated.

Southern Dist. Of Indiana Guideline Departure Rate for Fraud

• 75% of defendants in Fraud offenses were sentenced within the guideline range.

• Of note, there were not any above range departures.

• None of the defendants convicted of Fraud were given adjustments for a §5K1.1 substantial assistance.

Incarceration Rate of Defendants Eligible for Non-Prison Sentences for Fraud

• In the Southern District of Indiana, 100% of defendants eligible for non-prison sentences for fraud were given such non-prison sentences.

• 73.2% of eligible defendants in the 7th Circuit; and 64% nationwide, were given non-prison sentences.

Discovery Mortgage Fraud

1. Create a spreadsheet with each property or item.

2. Determining Values

a) Real Property use the County Assessor’s office. Compare the assessed value of the property with the stated loss by the Government.

b) Vehicles use sources NADA, Kelley’s Blue Book, or online.

Real Estate

• Compare sales of surrounding properties during the time period.

• Investigate to see if the property

– was vandalized while vacant,

– how long it took the financial institution to recover the property, and

– how long did it take them to move it through the foreclosure process.

Assessor’s Office

Parcel Name

5024979 FANNIE MAE 1601 S 9TH AV

1014857 FANNIE MAE 1641 RINGGOLD AV

9056654 FANNIE MAE 6714 LARKWOOD CT

7035508 FANNIE MAE 11330 E BREMERTON CI

7000427 FANNIE MAE 115 N GIBSON AV

1042411 FANNIE MAE 1835 APPLEGATE ST

9042653 FANNIE MAE 415 LINDSAY CT

3002944 FANNIE MAE 8428 LAWRENCE AV

4033315 FANNIE MAE 7319 ANTHONY CI

Spend some time Online

1. Google the Address and scroll through the Neighborhood.

2. Print the pictures from Google as they will have captured the property perhaps before it was damaged.

3. Pull the foreclosure filing to see when it was filed as opposed to the default. (looking for that time gap).

4. Interview the Neighbors to see when the family exited the property and how long before the property was secured by the bank.

5. Send a Production Request to the Bank regarding all its records for property.(again looking for that time gap).

6. Finally if you can locate the former homeowner they may be able to help with the condition of the home before they left so that you can compare when the bank first received the property.

THE DEFINITION OF “LOSS” UNDER §2B1.1

The sentencing guidelines define “loss” as “the greater of actual loss or intended loss,” and provide that the sentencing judge “need only make a reasonable estimate of the loss.” The estimate should be based on available information and the court may consider a variety of different factors. In making the loss calculation, the court may also choose from competing methods of calculating loss. Furthermore, it should be noted that restitution and loss are separate issues and there is no authority supporting the idea that there must be “symmetry” between the two.

Actual Loss

Actual loss, which is often referred to as “but for” loss, is defined in the guideline application notes

as “the reasonably foreseeable pecuniary harm that resulted from the offense.” As further explained by the application notes, pecuniary harm is reasonably foreseeable if it is “harm that the defendant knew or, under the circumstances, reasonably should have known, was a potential result of the offense.” The issue has also arisen recently in the context of mortgage fraud. For example, several circuit courts have recently rejected arguments that defendants in mortgage fraud cases could not have “reasonably foreseen” the downturn in the housing market. In United States v. McKanry, the defendant obtained numerous mortgage loans through applications overstating the named purchaser’s net worth and income, leading to default and subsequent foreclosure. The district court calculated the actual loss as the difference between the unpaid principal balance of the twelve mortgages and the subsequent sales price of the properties. The defendant argued that the government had failed to prove that the loss amount was fully attributable to him, as opposed to normal market conditions. The circuit court disagreed, holding that the appropriate test is not whether market factors impacts the loss amount, but whether “the market factors and the resulting loss were reasonably foreseeable.” The circuit court in United States v. Turk also rejected the argument that it was the housing crash and other “extrinsic factors” that caused individual investors’ losses, because, had the housing market been healthy, the defendant could have sold the properties at profit and covered the investors’ loans. Instead, the appellate court noted that the loss to investors was the principal value of the loans made to the defendant that were never paid back because the defendant had failed to collateralize their interests.

Intended Loss

Intended loss is defined in the guidelines as “pecuniary harm that was intended to result from the offense.” When calculating the intended loss, absolute accuracy is not required as long as the

calculation is not “outside the realm of permissible computations.” An estimate made by the

sentencing judge “need not be determined with precision.” In this regard, courts have held that

a sentencing court does not commit “clear error” when a loss calculation is supported by the

presumptively reasonable facts from the presentence report and the defendant fails to rebut those

facts.

ESTIMATING LOSS

As discussed above, the sentencing court “need only make a reasonable estimate of the loss.” This estimate may be made using available information to determine the value and the sentencing judge is “entitled to appropriate deference” because of the court’s unique position to assess the evidence. judge relied on the hearsay testimony of the victim’s attorney to estimate loss. The evidence the sentencing judges uses to calculate loss can include hearsay if the hearsay has a sufficient indicia of reliability. In United States v. Flores-Seda, the sentencing v. Humphrey, the sentencing judge utilized the defendants’ personal journal which detailed the names of their victims and amounts collected in a loan fraud scheme. On appeal, the court agreed that such material provided a “sufficient indicia of reliability” to be used to calculate an estimated loss. In United States v. Hahn, the sentencing judge relied on the cash deposits made into the defendant’s account to determine the loss from multiple cash thefts. A defendant who challenges a district court’s loss calculation carries a heavy burden and must show that the calculation was not just inaccurate, but “outside the realm of permissible computation.”

Arguments

• Give the Judge a foundation for your points.

– Give them the Spreadsheet showing the proximity of the comparable homes.

– Include a map of the area and any comparable areas.

– Offer a timeline of events.

• Start with default of the homeowner(obtained from bank records).

• Offer the condition of the house at default.

– Use Homeowners statements and affidavits.

– Use neighbors’ statements and affidavits.

– Show the google picture which would have likely been taken before the default.

– Indicate to the Judge that the financial institution had a duty to mitigate losses.

– If the bank wrote off the loss, find out how much, that means they captured money back from the federal government who by then actually would be the entity with the loss. (Be creative with the tax records).