Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-13-50020/USCOURTS-ca9-13-50020-0/pdf.json

Parties Involved:
Marco Manuel Luis
Appellant
United States of America
Appellee

Document Text:

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

MARCO MANUEL LUIS,

Defendant-Appellant.

No. 13-50020

D.C. No.

3:10-cr-02967-IEG-5

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

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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.

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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. 

RegardingCiti’s loss in connectionwith 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.

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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”)1property 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.

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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

(KelseyWiedenhoefer) 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 preapproval 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 twomortgages,

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

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6 UNITED STATES V. LUIS

thePalomar property100% 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

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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

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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

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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

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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.

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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.).

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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

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UNITED STATES V. LUIS 13

appeal–dooms this argument, holding that “a sentencingcourt

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

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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.

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