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U.S. SENTENCING MEMORANDUM AND 

MOTION PURSUANT TO USSG § 5K1.1 - 1

(Kebede, CR05-381Z) UNITED STATES ATTORNEY

700 Stewart Street, Suite 5220

Seattle, Washington 98101-1271

(206) 553-7970

Judge Zilly

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF WASHINGTON

AT SEATTLE 

UNITED STATES OF AMERICA, ) NO. CR05-381TSZ

)

Plaintiff, )

) GOVERNMENT’S SENTENCING

 v. ) MEMORANDUM AND MOTION

) FOR DOWNWARD DEPARTURE

JOSHUA KEBEDE, ) PURSUANT TO USSG § 5K1.1

)

Defendant. )

_________________________________)

I. INTRODUCTION AND RELIEF REQUESTED

The government respectfully submits this sentencing memorandum. Defendant

Joshua Kebede was a participant in two separate mortgage fraud schemes. He was first

involved, as a relatively minor participant, in a large-scale mortgage fraud ring involving

other individuals identified in the plea agreement by their initials. He later recruited his

co-defendant in this case, Almussa, to help him perpetrate a similar scheme. Mr. Kebede

recruited straw buyers to obtain loans under false pretenses to acquire real property, all

for the purpose of speculating in real estate using other people’s money. Compounding

the problem, when he first learned of the investigation he asked at least one witness to lie

to the investigating agent about his role in the scheme. 

Case 2:05-cr-00381-TSZ Document 190 Filed 08/21/07 Page 1 of 9
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 The government further asks the Court’s indulgence for the late filing of this 1

Sentencing Memorandum and Motion for departure. Mr. Almussa’s sentencing hearing 

was recently continued to October, and both the government and the defense anticipated -

incorrectly - that Mr. Kebede’s sentencing would likewise be continued accordingly, as 

it had on prior occasions. 

U.S. SENTENCING MEMORANDUM AND 

MOTION PURSUANT TO USSG § 5K1.1 - 2

(Kebede, CR05-381Z) UNITED STATES ATTORNEY

700 Stewart Street, Suite 5220

Seattle, Washington 98101-1271

(206) 553-7970

On the other hand, Mr. Kebede ultimately agreed to cooperate in the investigation

of both mortgage fraud rings. He testified truthfully in this case to the best of his ability.

His cooperation in both cases materially advanced the investigation, and likely

contributed to the guilty verdict obtained under this cause number. 

For those reasons, the Government respectfully moves the Court to depart

downward and sentence Mr. Kebede to 15 months incarceration, which is slightly more

than one-third of the bottom of the applicable Guideline range, to be followed by three

years of supervised release on the terms outlined in the Presentence Report.1

II. BACKGROUND

This case was tried before this Court in late November and early December of

2006. The Court doubtless recalls the general outline of the facts, as well as Mr.

Kebede’s testimony, and they are only briefly summarized here in the interests of brevity. 

A. THE NATURE OF THE SCHEME.

Sometime in 2003, Mr. Kebede became a member of a large-scale mortgage fraud

ring using the so-called “credit investor” mortgage fraud scheme. This other ring is the

subject of an ongoing joint state and federal investigation. To date, no charges have been

filed in that case, but indictments are anticipated before the end of this year. This original

mortgage fraud scheme has dozens of participants, and the total estimated loss exceeds

$12 million dollars. Some of the participants in this other case are identified by their

initials in Kebede’s Plea Agreement in this matter. See, Docket # 78, at page 4, line 3. 

Case 2:05-cr-00381-TSZ Document 190 Filed 08/21/07 Page 2 of 9
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Almussa and Kebede also, ultimately, had something of a falling out, and Almussa then 2

proceeded to do additional transactions on his own, with no involvement from Kebede. Some of

those transactions were the subject of Counts Two - Seven

U.S. SENTENCING MEMORANDUM AND 

MOTION PURSUANT TO USSG § 5K1.1 - 3

(Kebede, CR05-381Z) UNITED STATES ATTORNEY

700 Stewart Street, Suite 5220

Seattle, Washington 98101-1271

(206) 553-7970

Mr. Kebede’s role in the original conspiracy was somewhat limited. Kebede

recruited some straw buyers, identified properties to be flipped, and participated in some

of the flips himself. He was personally involved with only a handful of the dozens of

properties identified in the larger investigation. 

Kebede ultimately felt that he was not receiving all he was promised from the

leaders of the other conspiracy. It was in approximately this same time frame that he met

Almussa, who was working at the time as a loan officer with a mortgage broker. Kebede

described how the scheme worked, and Almussa agreed to assist Kebede. 

The essence of both fraud schemes was to defraud mortgage companies by

obtaining mortgage loans under false pretenses. Almussa and/or Kebede would enter into

contracts to purchase residential real estate in arms-length transactions. While those deals

were still pending, the conspirators would recruit “straw buyers” to purchase the same

property for an inflated purchase price. The conspirators would then cause the straw

buyers to apply for loans to finance the higher purchase price through Almussa. The loan

application contained numerous material misrepresentations, including: (a) inflated

income levels; (b) fake employment information; and (c) false promises to occupy the

residence. 

The legitimate sale and the “flip” sale to the straw buyer would close on the same

day, through the same escrow. A portion of the fraudulently obtained loan proceeds

would be used to pay the original, legitimate seller, with the balance used to pay the

expenses of the conspiracy (including payouts to the straw buyers and other participants),

with Almussa and/or Kebede pocketing the difference. Almussa and Kebede did at least

four such transactions together, which were charged as part of Counts One (the

conspiracy charge) and Eight (a stand-alone substantive wire-fraud charge). 

2

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U.S. SENTENCING MEMORANDUM AND 

MOTION PURSUANT TO USSG § 5K1.1 - 4

(Kebede, CR05-381Z) UNITED STATES ATTORNEY

700 Stewart Street, Suite 5220

Seattle, Washington 98101-1271

(206) 553-7970

Based on interviews with Mr. Kebede and other participants, it appears that Mr.

Kebede’s goal in the scheme was to speculate in the then-hot real estate market. Mr.

Kebede had poor credit, and could not obtain loans legitimately for that purpose. 

Accordingly, he resorted to using straw buyers with better credit to acquire control of real

property, remodel it, and then sell it for a higher price, enabling the participants to pay off

the original fraudulently-obtained loans, and make additional profits. A portion of the

cash proceeds that flowed from the “flip” were to be used to pay construction costs and

other expenses that went along with the remodeling process. 

B. LOSSES TO THE LENDERS.

Based on the ten transactions charged in this case, the conspirators pocketed a total

of $990,570.25 on the flip transactions. Kebede himself netted approximately $156,000

of this amount, with the remainder going to Almussa. Almussa also received an

additional $112,121.99 in commissions on the fraudulent loans. 

Under the Guidelines a defendant’s gain is not automatically the same as the

victim’s loss. Instead, where collateral exists, the Court is obligated to reduce the gross

loss amount by the amount recovered on disposition off the collateral - or, if that has not

occurred, by an estimate of the fair market value of the collateral as of the date of

sentencing.. See, USSG 2B1.1, Application Note 3.E.ii. In an appreciating market (like

the Seattle housing market), this can sometimes result in the loss figure being smaller than

the defendants’ gain. 

By the government’s calculation, Kebede was involved in at least nine separate flip

transactions: four in the prior uncharged conspiracy, and five with Almussa. On six of

the properties, the lender, in the end, does not appear to have sustained a loss. For

example, the home on 4398 Somerset Blvd. SE in Bellevue (the Ken King house, charged

as part of Count 1) was successfully remodeled by Mr. Kebede, including putting in a

new kitchen. King later resold the house for over $200,000 more than the “flip” price. 

The 520 176th Lane NE property in Bellevue (the Kubra Safi house, also part of Count 1)

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U.S. SENTENCING MEMORANDUM AND 

MOTION PURSUANT TO USSG § 5K1.1 - 5

(Kebede, CR05-381Z) UNITED STATES ATTORNEY

700 Stewart Street, Suite 5220

Seattle, Washington 98101-1271

(206) 553-7970

was ultimately resold after some remodeling work for a more modest $45,000 gain. The

other properties similarly seem to have sold for more than the loan amount. 

However, on the remaining three properties the lender did sustain a loss. Two

were in the larger mortgage fraud case, and one in this matter. 

The first was at 21422 NE 79th Street in Redmond, and was flipped using straw

buyer C.K., Ken King’s wife, for $595,000. The flip price was approximately $200,000

more than fair market value paid for the property shortly before the flip. The defrauded

lender was Long Beach Mortgage, a subsidiary of Washington Mutual. This property was

later sold to avoid foreclosure for approximately $550,000, or $45,000 less than the loan

amount. 

The second was at 1635 Pine View Drive in Issaquah,, and was flipped using a

straw buyer named P.L. for $695,000, which was approximately than $180,000 more than

the fair market value of the property. That property was foreclosed on later for a loss of

approximately $155,000. The original lender on that property was apparently Lime

Financial, a lender based in Oregon. 

In this case, the court heard testimony from Caryl Estes that her house at 15800

71st Ave. NE in Kenmore was foreclosed on after she and her husband filed for

bankruptcy. The foreclosure price was $394,251, or approximately $88,749 less than the

flip price and fraudulent loan amount. The original lender was New Century Mortgage

Corporation. 

Adding these losses together, Mr. Kebede is directly responsible for approximately

$288,749 worth of loss, which was sustained by three separate lenders. More detailed

loss information is still being compiled for purposes of calculating restitution. The

government therefore respectfully submits that the imposition of restitution be deferred

until the sentencing of co-defendant Almussa. 

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U.S. SENTENCING MEMORANDUM AND 

MOTION PURSUANT TO USSG § 5K1.1 - 6

(Kebede, CR05-381Z) UNITED STATES ATTORNEY

700 Stewart Street, Suite 5220

Seattle, Washington 98101-1271

(206) 553-7970

III. GUIDELINE CALCULATION

The government agrees with the Probation Office’s Guideline calculation,

although it reaches the result by a slightly different means. As set forth in the PSR,

Probation used the gross difference between the original legitimate purchase price and

the subsequent inflated flip price for three properties involved in this case. PSR ¶ 22. 

As outlined above, the government has determined that some of the houses at issue

in this matter was foreclosed upon, or sold to avoid foreclosure, and the loss amount is

therefore fixed at the difference between the loan amount and the subsequent sale. The

government is also including losses from houses that were not formally mentioned in the

indictment, but that are within the scope of the conspiracy or otherwise related conduct.

As set forth above, the government calculates that the total loss amount as approximately 

$288,749. 

Pursuant to USSG § 2B1.1(a)(1) the base offense level is 7. It is increased by 12

levels, because the loss amount is greater than $200,000 but less than $400,000. 

Mr. Kebede has also stipulated to a leadership adjustment pursuant to USSG §

3B1.1, although the exact amount of the adjustment is left to the Court. Plea Agreement,

¶ 10.c, at page 11, lines 10-12. The government agrees with probation that three points is

appropriate. Mr. Kebede recruited more than five separate straw buyers into the scheme. 

He was also responsible for introducing Almussa to this scheme (although Almussa later

went on to perpetrate additional frauds without Kebede), and for initially recruiting codefendant John Gonzalez into the scheme. 

As the Court recalls, Mr. Kebede did attempt - initially with some success - to

tamper with a witness in this matter. He admitted to that conduct at a prior bond review

hearing, and stipulated in his Plea Agreement to a two point increase for obstruction of

justice pursuant to USSG § 3C1.1. 

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U.S. SENTENCING MEMORANDUM AND 

MOTION PURSUANT TO USSG § 5K1.1 - 7

(Kebede, CR05-381Z) UNITED STATES ATTORNEY

700 Stewart Street, Suite 5220

Seattle, Washington 98101-1271

(206) 553-7970

The government agrees that Mr. Kebede has accepted responsibility, which results

in a 3 level decrease, which results in a total offense level of 22. Mr. Kebede is Criminal

History Category I, which results in an advisory Guideline range of 37-46 months. 

III. RECOMMENDATION

The government recommends a sentence of 15 months incarceration, to be

followed by three years of supervision. This is slightly more than Probation’s

recommendation of a year and a day. 

A sentence of 15 months reflects the seriousness of the offense and the defendant’s

role in that offense. Since the trial of this case, it has become increasingly clear that the

mortgage industry is infected with fraud at virtually every level. New Century Mortgage

Corp., the primary victim in this matter, has since declared bankruptcy and is in the midst

of liquidation. More generally, the dislocations in the subprime mortgage market have

adversely impacted many other aspects of the economy. While it is certainly true that

many of these problems are attributable to lax underwriting standards, poor lending

decisions, and simple greed by lenders, fraud of this type is also a significant factor. 

Accordingly, the need to impose just punishment, and to deter others from committing

similar crimes, call for the imposition of some significant period of confinement. 

A sentence imprisonment is also necessary to reflect the fact that this defendant

attempted to obstruct justice by tampering with a possible witness while on pretrial

release. While Mr. Kebede’s efforts to shape the witness’ testimony were ultimately

unsuccessful, any attempt to interfere with a pending investigation is obviously a serious

matter. This is particularly true where, as here, the attempt was also a violation of the

defendant’s terms of pretrial release. 

On the other hand, Mr. Kebede did ultimately agree to cooperate, in both this case

and in the other pending mortgage fraud case referred to above. Mr. Kebede provided

truthful and useful information about both cases, and he testified truthfully and to the best 

Case 2:05-cr-00381-TSZ Document 190 Filed 08/21/07 Page 7 of 9
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U.S. SENTENCING MEMORANDUM AND 

MOTION PURSUANT TO USSG § 5K1.1 - 8

(Kebede, CR05-381Z) UNITED STATES ATTORNEY

700 Stewart Street, Suite 5220

Seattle, Washington 98101-1271

(206) 553-7970

of his ability in this case. On that basis, the government submits that some reduction

below the guideline range is appropriate, and respectfully asks this Court to grant its

motion for a downward departure. 

CONCLUSION

For the reasons set forth above, the government respectfully recommends the

Court impose a term of fifteen months incarceration, to be followed by three years of

supervision on the terms outlined in the PSR. The government further submits that the

imposition of a restitution amount be deferred no more than sixty days. 

DATED this 21st day of August, 2007.

Respectfully submitted,

JEFFREY C. SULLIVAN

United States Attorney

/s/ Vincent T. Lombardi 

VINCENT T. LOMBARDI

WSBA # 21967

Assistant United States Attorney

700 Stewart Street, Ste. 5220

Seattle, Washington 98101

Facsimile: 206-553-4440

Phone: 206-553-5178

E-mail: vince.lombardi@usdoj.gov

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U.S. SENTENCING MEMORANDUM AND 

MOTION PURSUANT TO USSG § 5K1.1 - 9

(Kebede, CR05-381Z) UNITED STATES ATTORNEY

700 Stewart Street, Suite 5220

Seattle, Washington 98101-1271

(206) 553-7970

CERTIFICATE OF SERVICE

I hereby certify that on August 21 , 2007, I electronically filed the foregoing

with the Clerk of Court using the CM/ECF system which will send notification of such

filing to the attorney of record for the defendant.

s/ Cheryl E. Walkden 

CHERYL E. WALKDEN

Paralegal Specialist

United States Attorney’s Office

700 Stewart Street, Suite 5220

Seattle, Washington 98101-1271

Phone: (206) 553-1511

Fax: (206) 553-0755

E-mail: Cheryl.Walkden@usdoj.gov

Case 2:05-cr-00381-TSZ Document 190 Filed 08/21/07 Page 9 of 9