FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA, 

Plaintiff-Appellee, No. 07-50120

v. D.C. No. 

PAUL CR-03-00761- PETERSON, aka Paul Joseph

Peterson, RSWL-1

Defendant-Appellant. 

UNITED STATES OF AMERICA, 

No. 07-50146 Plaintiff-Appellee,

D.C. No.

v.  CR-03-00761-

WILLIAM PETERSON, aka BILL RSWL-02

PETERSON,

OPINION Defendant-Appellant. 

Appeal from the United States District Court

for the Central District of California

Ronald S.W. Lew, District Judge, Presiding

Argued and Submitted

June 12, 2008—Pasadena, California

Filed August 13, 2008

Before: Stephen S. Trott, Kim McLane Wardlaw, and

Raymond C. Fisher, Circuit Judges.

Opinion by Judge Trott

10489
COUNSEL

William J. Genego, Jr., Nasatir, Hirsch, Podberesky, &

Genego, Santa Monica, California, and Paul L. Hoffman, Harris & Hoffman, LLP, Venice, California, for the defendantsappellants.

William A. Crowfoot, Assistant United States Attorney, Los

Angeles, California, for the plaintiff-appellee. 

OPINION

TROTT, Circuit Judge: 

Defendants Paul and William Peterson ran a home building

business in California. In the 1990s, they subsidized down

10492 UNITED STATES v. PETERSON
payments to home buyers and then submitted misleading gift

letters to the Department of Housing and Urban Development

(“HUD”) falsely stating that a family member or friend of the

buyer had provided the money for the down payment. 

Defendants appeal their jury convictions for: 1) causing

false material statements to be made in a matter within the

jurisdiction of an agency of the United States, in violation of

18 U.S.C. § 1001; 2) aiding and abetting in the violation of

§ 1001, in violation of 18 U.S.C. § 2; and 3) conspiring to

make such false statements, in violation of 18 U.S.C. § 371.

They appeal also the district court’s order of restitution in the

amount of $1,258,775, imposed pursuant to 18 U.S.C.

§ 3663A. 

We have jurisdiction pursuant to 28 U.S.C. § 1291, and we

affirm. We hold that although it would be preferable for district courts to use a definition of materiality tracking the language approved by the United States Supreme Court in

United States v. Gaudin, 515 U.S. 506 (1995), in this case, the

district court did not commit plain error by giving the jury

instruction it did. We further hold that the false gift letters and

the source of the down payment for HUD-insured loans were

material to HUD. Finally, we hold that Defendants’ actions

were the actual and proximate cause of HUD’s losses, and we

affirm the restitution order for the full amount of HUD’s loss.

I

BACKGROUND

A. HUD Requirements

By insuring Federal Housing Administration (“FHA”)

mortgages, HUD assists homebuyers who cannot otherwise

afford to purchase homes. FHA mortgage insurance insures

the mortgage for the lenders, and if the buyer cannot make

payments, HUD pays off the loan and takes the property. By

UNITED STATES v. PETERSON 10493
law, the buyer must meet three conditions before HUD will

insure the loan: 1) sufficient income to make the monthly payments; 2) satisfactory credit rating; and 3) the ability to make

a three-percent minimum cash investment in the property.1

See 12 U.S.C. §§ 1709, 1715b. 

Under HUD’s regulations and policies, the buyer is not

required to have the down payment come out of his or her

own pocket—he or she may receive the down payment as a

gift from friends, relatives, or non-profit housing assistance

organizations. However, the sellers of the property are not

permitted to make direct gifts to the buyers. 

Despite this restriction on sellers, the seller was permitted

indirectly to subsidize the down payment by providing money

to a non-profit organization.2 Under the permissible indirect

subsidy scheme, after the non-profit approved a buyer, the

non-profit agreed to gift the down payment at closing. The

gift was paid out of the non-profit’s own funds, and only after

closing did the seller pay the non-profit a “service fee” equal

to the gift from the proceeds of the sale. If the closing did not

go through, the seller was not required to pay the service fee.

The fee was used by the non-profit to provide gifts to future

home purchasers. 

1Although the cash investment is not technically a down payment, we

refer to it as such for simplicity’s sake. 

2

In October 2007, HUD promulgated a new regulation providing that

FHA will no longer insure loans originated with seller-funded down payment assistance, whether that assistance is direct or indirect. See Standards

for Mortgagor’s Investment in Mortgaged Property, 72 Fed. Reg. 56,002,

56,002 (Oct. 1, 2007). Two district courts have concluded that HUD’s promulgation of the October 2007 regulation violated the Administrative Procedure Act. See Nehemiah Corp. of America v. Jackson, 546 F. Supp. 2d

830 (E.D. Cal. 2008); Penobscot Indian Nation v. United States Dep’t of

Housing and Urban Dev., 539 F. Supp. 2d 40 (D.D.C. 2008). We express

no view about the merits of those decisions or HUD’s subsequent attempt

to promulgate similar regulations. See Standards for Mortgagor’s Investment in Mortgaged Property: Additional Public Comment Period, 73 Fed.

Reg. 33,941 (June 16, 2008). 

10494 UNITED STATES v. PETERSON
Buyers who received the down payment money from an

outside source, such as a family member, friend, or nonprofit, were required to submit a gift letter to HUD. The gift

letter confirmed the source of the gift, the relationship of the

donor to the donee, and the nature of the buyer’s down payment. A copy of the cashier’s check delivering the gifted

funds to escrow was attached also to the gift letter. The gift

letter was put into a binder compiling details on the loan. 

At the Petersons’ trial, the government’s expert, Travis

Pham, Chief of the Insuring and Underwriting Division of

HUD, testified that the government relied on the information

in the binder, including the gift letter, to determine whether it

would insure a loan and for auditing purposes. Pham was

offered as an “expert on HUD regulations and policies related

to underwriting” without objection by the Petersons. He said

that HUD would not insure a loan if the binder contained a

false gift letter: the down payment could come from the

buyer’s friends, relatives, or a non-profit, but “money can’t go

directly from the seller to the buyer.” Pham further testified

that requiring buyers to put 3% down gave the buyer some

interest in the property, making it less likely that he or she

would default. He explained that the limitations on who may

give the buyer money existed also to prevent the seller from

increasing the price. 

B. The Petersons’ Scheme 

At the time of the trial, Paul and William Peterson ran a

home building business called Peterson Land and Development (“PLD”). Their father started PLD, and he later brought

Paul into the business. Paul became a FHA and HUD builder

in the late 80s. Sometime in 1992 or 1994, William took over

from their father as the sales manager for PLD. 

At trial, Paul testified that in the early 1990s, he met many

potential buyers who wanted to buy homes, had the employment, income, and credit to do so, “but just didn’t have the

UNITED STATES v. PETERSON 10495
cash to get into the property.” Paul testified that “[u]nder the

FHA program, [he] knew that [he] could not give the buyer

his down payment.” He further testified that he spoke to a

HUD construction analyst, Bob Hudgins, who told him that

although the seller could not directly give the money to the

buyer, he could give it to a relative because FHA did “not

care where the donor gets the money.” Called as a rebuttal

witness by the government, Hudgins testified that he did not

recall the conversation with Paul, but even if it had occurred,

he could not have advised Paul regarding gift letters or mortgage requirements because he had no knowledge of those

areas of HUD. 

Paul testified that after he spoke to Hudgins, he concluded

that he could lawfully assist potential buyers by taking money

from PLD’s profits and subsidizing the down payments. To

facilitate this plan, the Petersons purchased a cashier’s check

in the name of a third party designated by the buyer. The third

party never had possession or control of the gifted funds. The

Petersons then deposited the cashier’s check into escrow and

submitted a gift letter to HUD stating that the third party was

the donor of the gifted down payment. Paul testified that the

buyer took the gift letter and had it filled out and signed by

the bogus donor. As the sales manager, William was responsible for retrieving the gift letters and explaining that the donor

on the gift letter would not actually have to provide any

money. 

Testimony of one of the buyers (“MM”) and the parties

listed on his gift letter (“Fisher Gift Letter”) contradicted

Paul’s testimony about how the gift letters were obtained.

MM testified that he did not have his parents (the purported

donors) sign the gift letter. MM’s parents testified that the signatures of their names on the gift letter were forgeries, and

that they did not provide MM with any financial assistance for

the purchase. 

Defendants put up the down payment money for numerous

transactions between 1993 and 1998. Several buyers for

10496 UNITED STATES v. PETERSON
whom Defendants directly funded the down payment later

defaulted on their mortgage payments, leading to foreclosure.

HUD assumed repayment of the loans. 

C. Procedural History

Count One of the second superceding indictment charged

Defendants with conspiracy to violate 18 U.S.C. § 1001 in

violation of 18 U.S.C. § 371. Count Two charged Defendants

with: 1) violating 18 U.S.C. § 1001(a)(3); and 2) aiding and

abetting the commission of a federal crime under 18 U.S.C.

§ 2. 

Section 1001(a)(3) establishes criminal penalties for anyone who, in a matter within the jurisdiction of a federal

agency, “makes or uses any false writing or document knowing the same to contain any materially false, fictitious, or

fraudulent statement or entry.” 18 U.S.C. § 1001(a)(3). 

On January 17, 2006, the Petersons’ jury trial commenced.

On January 19, Defendants moved for judgment of acquittal

under Federal Rule of Criminal Procedure 29, arguing that the

source of the money was immaterial to HUD. The judge

denied the motion. 

At the government’s request, the district court gave Ninth

Circuit Model Criminal Jury Instruction 8.66 on materiality:

“[a] statement is material if it could have influenced the agency’s decisions or activities.” Paul objected to the instruction,

arguing that the model jury instruction was too broad because

there could be a “situation [where] there is an immaterial or

irrational application or statement that the bureaucracy of the

government requires, that the person could have submitted a

statement to them that was totally immaterial [and] unrelated

to the program, purposes or concerns.” Paul proposed an

alternative jury instruction: “a statement is material if it’s

important or significant to the Government program to which

it was submitted.” The court rejected the proposed instruction.

UNITED STATES v. PETERSON 10497
The jury found both Defendants guilty on both counts of

the indictment. The Pre-Sentence Report recommended restitution in the amount of $1,258,775. The recommendation was

based on a report by Chris Hyun, a forensic auditor with

HUD. Hyun calculated a restitution amount for each property

equal to the difference between the appraised value of the

property at the time of conveyance to HUD and HUD’s

expenses in making good on the lender’s mortgage insurance

claim. The report did not attribute to the Petersons additional

losses resulting from discounts or rebates HUD provided to

the purchasers of foreclosed properties. Defendants objected

to the requested amount of restitution, arguing that the “contribution of the down payments did not proximately cause the

homeowners to fail to make their mortgage payments.” The

district court disagreed with Defendants and determined that

they were the proximate cause of the loss. It ordered restitution in the full amount requested by the government for the

loss incurred by HUD. 

II

DISCUSSION

The Petersons present three arguments for our consideration: 1) the jury instruction was erroneous because it misstated the element of materiality; 2) the evidence was

insufficient to support a determination that the false gift letters were material to HUD; and 3) the restitution order was

erroneous because the government failed to present evidence

that Defendants’ false statements were the direct and proximate cause of the loss. We address each in turn. 

A. Jury Instruction 

1. Standard of Review 

We typically review de novo whether a jury instruction

misstates an element of a crime, and we review for abuse of

10498 UNITED STATES v. PETERSON
discretion a district court’s formulation of an instruction.

United States v. Dearing, 504 F.3d 897, 900 (9th Cir. 2007).

However, “[i]n the absence of a timely objection to the jury

instructions, we review for plain error.” United States v.

Moran, 493 F.3d 1002, 1009 (9th Cir. 2007) (per curiam). See

also United States v. Nash, 115 F.3d 1431, 1437 (9th Cir.

1997) (“Gaudin-type errors not asserted at trial should be

reviewed for plain error pursuant to Fed. R. Crim. P. 52(b)

. . . .”). 

“A party who objects to any portion of the instructions or

to a failure to give a requested instruction must inform the

court of the specific objection and the grounds for the objection before the jury retires to deliberate.” FED. R. CRIM. P.

30(d). “Rule 30 . . . requires that a defendant object with adequate specificity—an objection must state distinctly the matter to which the party objects as well as the grounds of the

objection. A defendant’s mere proposal of an alternate

instruction does not satisfy Rule 30’s standard of specificity.”

United States v. Elias, 269 F.3d 1003, 1017-18 (9th Cir. 2001)

(quoting United States v. Klinger, 128 F.3d 705 (9th Cir.

1997)). 

An examination of the record reveals that Defendants

objected to the jury instruction on different grounds below

than they do on appeal. At trial, Paul offered the following

objection: 

The objection is basically . . . as to line 19 and 20,

and [the government’s] instruction says, a statement

is material if it could have influenced the agency or

activities. The opposite instruction that’s offered by

[Defendants] is a statement is material if it’s important or significant to the Government program to

which it was submitted. . . . The Ninth Circuit

instruction, it sort of could have a situation [where]

there is an immaterial or irrational application or

statement that the bureaucracy of the government

UNITED STATES v. PETERSON 10499
requires, that the person could have submitted a

statement to them that was totally immaterial [and]

unrelated to the program, purposes or concerns . . . .

In other words, Defendants believed that the FHA’s insistence

that down payment funds not come directly from the seller

was irrational in terms of the insurance program’s purposes

(because FHA allowed equally pernicious indirect seller subsidies through non-profits), and consequently that the identity

of the funds’ source was “immaterial.”

3

In contrast, on appeal, Defendants argue that the proper

materiality instruction is: “The statement must have a natural

tendency to influence, or [be] capable of influencing, the decision of the decisionmaking body to which it was addressed.”

See Gaudin, 515 U.S. at 509 (internal quotation marks omitted). The requested instruction on appeal does not focus on

the rationality of the agency’s decisionmaking process, as did

the requested instruction below. Rather it focuses on whether

the statement is capable of influencing the agency’s decision.

Consequently, we review for plain error. 

2. Discussion

We hold that although it would be preferable for district

courts to use the definition of materiality approved by the

Supreme Court in Gaudin, in this case, the use of the Ninth

Circuit Model Jury Instruction was not plain error. 

3This interpretation of Defendants’ objection to the materiality of the

jury instruction is further supported by their Rule 29 motion for a directed

verdict of acquittal. There they argued that the “gift letter demonstrates

that there is no materiality” because Pham’s testimony showed that “not

only does the Government not care [that the funds are] coming from the

seller, but they have consciously blinded themselves to where it’s coming

from.” All of the nonprofit transactions approved by FHA established that

“this type of a transaction where the seller gives it to the buyer . . . is total

immateriality [sic].” The “legal fiction of saying that the money is different that comes than goes out” of a nonprofit’s general funds “prove[s] . . .

[that the gift letters were] never material.” 

10500 UNITED STATES v. PETERSON
Plain error review requires us to find “(1) an error that is

(2) plain and (3) affects substantial rights. Even if these conditions were met, we may only exercise our discretion to correct the error if it ‘seriously affect[s] the fairness, integrity or

public reputation of judicial proceedings.’ ” Nash, 115 F.3d at

1437 (quoting Johnson v. United States, 520 U.S. 461, 467

(1997). A jury instruction is not plainly erroneous if it is “substantially similar” to another permissible instruction. United

States v. Johnson, 297 F.3d 845, 866-67 n.21 (9th Cir. 2002).

[1] The Supreme Court has explained that the customary

common law test for materiality in false statement statutes

such as § 1001 is whether the statement “has a natural tendency to influence, or was capable of influencing, the decision of the decisionmaking body to which it was addressed.”

Kungys v. United States, 485 U.S. 759, 770 (1988) (internal

quotation marks omitted). Subsequently, in Gaudin, the

Supreme Court reaffirmed the definition of materiality that it

applied in Kungys. See Gaudin, 515 U.S. at 509; see also

United States v. Tarallo, 380 F.3d 1174, 1190 (9th Cir. 2004).

Defendants argue that the district court’s instruction was

erroneous, and that the Gaudin instruction should have been

given for two reasons. First, they argue that the “could have”

portion of the jury instruction was erroneous because it broadened the scope of materiality. Under the facts in this case, this

argument fails. 

[2] The difference between “could have influenced” and

“capable of influencing,” is sufficiently nebulous that our sister circuits have sometimes used the “could have” language in

post-Gaudin opinions.4 Furthermore, “capable of influencing”

4

See, e.g., United States ex rel. Wilson v. Kellogg Brown & Root, Inc.,

525 F.3d 370, 378 (4th Cir. 2008) (“[T]he form’s materiality depends on

whether it could have influenced the government’s decision to award Task

Order 43 to KBR.”) (emphasis added); United States v. Rogan, 517 F.3d

449, 452 (7th Cir. 2008) (“Instead [the defendant] argues that the omisUNITED STATES v. PETERSON 10501
is an objective test, which looks at “the intrinsic capabilities

of the false statement itself, rather than the possibility of the

actual attainment of its end.” United States v. Facchini, 832

F.2d 1159, 1162 (9th Cir. 1987); see also Kungys, 485 U.S.

at 771 (equating “predictably capable of affecting” with “ha-

[ving] a natural tendency to affect”). “Could have influenced”

likewise looks at a statement’s intrinsic capacity to influence,

not its probability of causing influence. As the Supreme Court

has said in a different context, “the use of the word ‘could’

focuses the inquiry on the power of the trier of fact,” not on

“likely behavior” or “probabilistic” matters. See Schlup v.

Delo, 513 U.S. 298, 330 (1995) (distinguishing “could have

convicted” from “would have convicted”). 

[3] Thus, because “could have influenced” is “substantially

similar” to the “capable of influencing” language in the

Gaudin instruction, we conclude there is not plain error here.

See Tarallo, 380 F.3d at 1190. 

Defendants’ second argument regarding the given jury

instruction turns on the inclusion of the word “activities.”

Here, they argue that a statement could be deemed material

even if it was completely incapable of influencing a decision

the agency was trying to make. This argument fails because

the plain language of the given instruction does not permit a

finding of materiality based solely on the utterance of a false

statement. Rather, under the given instruction, the jury was

required to find that the false statement could have actually

resulted in a change in position by the agency. Again, this is

“substantially similar” to the Gaudin instruction. Consequently we conclude that the given jury instruction was not

sions were not material . . . . The question is . . . whether the omission

could have influenced the agency’s decision.”) (emphasis added); United

States v. DiRico, 78 F.3d 732, 736 (1st Cir. 1996) (“The government need

only prove to the jury . . . that the alleged false statement at issue could

have influenced or affected the IRS . . . .”) (emphasis added). 

10502 UNITED STATES v. PETERSON
plain error under the specific facts of this case. See Tarallo,

380 F.3d at 1190. 

B. Sufficiency of the Evidence 

Defendants argue that their convictions must be vacated

because there is insufficient evidence as a matter of law to

support a conclusion that the source of the down payment was

material to HUD’s decision to insure the loan. We disagree.

1. Standard of Review

There is sufficient evidence to support a conviction if,

viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential

elements of the crime beyond a reasonable doubt. Jackson v.

Virginia, 443 U.S. 307, 319 (1979). 

2. Discussion

a. Count Two, Violations of §§ 1001 and 2 

[4] “A conviction under § 1001 requires the government to

prove (1) a statement, (2) falsity, (3) materiality, (4) knowledge, and (5) jurisdiction.” United States v. Atalig, 502 F.3d

1063, 1066 (9th Cir. 2007). “The jury is the finder of fact and

is entitled to believe or disbelieve the testimony of the department officials.” United States v. Gaudin, 28 F.3d 943, 950

(9th Cir. 1994) (en banc), aff’d, 515 U.S. 506. 

Defendants contest only the materiality of the false gift letters and the source of the down payment. We hold that

Pham’s testimony could have led a rational trier of fact to

conclude that the false gift letters and the source of the down

payment were material to HUD. 

[5] Pham testified that HUD would not insure a loan if the

case binder contained a false gift letter. Pham further testified

UNITED STATES v. PETERSON 10503
that “we need to know who the donor is and . . . the relationship between the donor and the buyer, and how much the gift

was for, and how the money was transferred and where it was

from.” A reasonable juror could have concluded that the false

statements in the Fisher Gift Letter were material because,

had HUD known that the Petersons directly funded the down

payment, HUD would not have insured the loan. See United

States v. Mayberry, 913 F.2d 719, 723 (9th Cir. 1990) (concluding that the testimony of a HUD administrator that the

information at issue was “highly significant in reviewing

mortgage insurance applications” was sufficient to establish

materiality). 

Defendants make much of the fact that a non-profit could

fund the down payment, and the seller could donate money to

the non-profit, arguing that what mattered to HUD was not

the source of the down payment, but whether or not it was

made. However, this argument ignores Pham’s testimony that

HUD’s policies did not permit the seller to gift the money

directly to the buyer. 

The distinction Pham articulated between direct and indirect gifts did not stem from the idiosyncratic predilections of

any one approving officer. Rather, the requirements were

established rules and regulations of HUD—a clear indication

that the statements in the gift letters as to the source of the

down payment were predictably capable of influencing

HUD’s decisions.5

5Although Pham recognized that there was a “very good possibility”

that the permissible indirect subsidies might implicate many of the same

concerns as the forbidden direct seller subsidies, the materiality requirement in false statement cases does not turn on whether the agency’s regulatory distinctions are wise or consistent as a matter of policy; it contains

no embedded question of substantive reasonableness. Cf. Tarallo, 380

F.3d at 1190 (rejecting the argument that “materiality” depends on

whether a statement is “important to the decision-making process” of a

“reasonable person”). 

10504 UNITED STATES v. PETERSON
Furthermore, it is undisputed that HUD has always prohibited direct gifts from sellers. See Standards for Mortgagor’s

Investment in Mortgaged Property, 72 Fed. Reg. 27,048 (May

11, 2007); Sources of Homeowner Downpayment, 64 Fed.

Reg. 49,956 (Sept. 14, 1999); HUD Mortgagee Letter 91-9

(1991). In fact, Paul himself recognized that “under the FHA

program . . . [he] could not give the buyer his down payment.”

[6] As a result, we hold that there was sufficient evidence

for a reasonable juror to conclude that the gift letters and the

source of the down payment were material to HUD. 

b. Count One, Conspiracy to violate § 1001 

Defendants were convicted also of violating 18 U.S.C.

§ 371, which provides: 

If two or more persons conspire either to commit any

offense against the United States, or to defraud the

United States, or any agency thereof in any manner

or for any purpose, and one or more of such persons

do any act to effect the object of the conspiracy, each

shall be fined under this title or imprisoned not more

than five years, or both. 

18 U.S.C. § 371. 

[7] In support of their argument that the evidence was

insufficient for their conspiracy convictions, Defendants

merely reiterate that the statements made with respect to

Count Two were not material. Because sufficient evidence

supports the convictions for Count Two and because Defendants raise no other argument with respect to the conspiracy

convictions, we hold that sufficient evidence supports the

conspiracy convictions. 

C. Restitution 

Defendants raise two arguments challenging the district

court’s order of restitution in the amount of $1,258,755: 1) the

UNITED STATES v. PETERSON 10505
government presented no evidence that Defendants’ crimes

directly or proximately caused the losses; and 2) the district

court did not make any factual findings to support the restitution order. 

1. Standard of Review

We review de novo the legality of a restitution order and,

if the order is within the statutory bounds, we review the

amount of restitution for abuse of discretion. United States v.

Phillips, 367 F.3d 846, 854 (9th Cir. 2004) (as amended). We

review for clear error factual findings supporting an order of

restitution. United States v. Berger, 473 F.3d 1080, 1104 (9th

Cir. 2007). 

2. Causation 

[8] Restitution in this case is governed by the Mandatory

Victims Restitution Act (“MVRA”), 18 U.S.C. § 3663A. “The

MVRA requires a defendant to pay restitution to a victim who

is ‘directly and proximately harmed as a result of’ the fraud.”

Id. at 1104 (quoting 18 U.S.C. § 3663A(a)(2)). A victim “is

a person who has suffered a loss caused by the specific conduct that is the basis of the offense of conviction.” United

States v. Gamma Tech Indus. Inc., 265 F.3d 917, 927 (9th Cir.

2001) (quotation marks omitted). “The government has the

burden of establishing by a preponderance of the evidence

that the victim’s damages were caused by the conduct of

which the defendant was convicted.” United States v. Rice, 38

F.3d 1536, 1540 (9th Cir. 1994); see also 18 U.S.C. § 3664(e).6

[9] Restitution may compensate victims only “for actual

6Rice considered restitution under the Victim and Witness Protection

Act (“VWPA”). With exceptions inapplicable here, the VWPA and the

MVRA “are identical in all important respects, and courts interpreting the

MVRA may look to and rely on cases interpreting the VWPA as precedent.” United States v. Gordon, 393 F.3d 1044, 1048 (9th Cir. 2004). 

10506 UNITED STATES v. PETERSON
losses caused by the defendant’s criminal conduct.” Gamma

Tech Indus., 265 F.3d at 926. 

Defendant’s conduct need not be the sole cause of

the loss, but any subsequent action that contributes

to the loss, such as an intervening cause, must be

directly related to the defendant’s conduct. The

causal chain may not extend so far, in terms of the

facts or the time span, as to become unreasonable. 

Id. at 928 (citations omitted). The “main inquiry for causation

in restitution cases [is] whether there was an intervening

cause and, if so, whether this intervening cause was directly

related to the offense conduct.” Gordon, 393 F.3d at 1055

(quoting United States v. Meksian, 170 F.3d 1260, 1263 (9th

Cir. 1999). 

We recently addressed the issue of proximate cause in the

context of restitution for misreporting of financial information. Berger, 473 F.3d 1080. In Berger, the defendant falsified

Borrowing Certificates by overstating assets and accounts

receivable. Id. at 1105. As a result of the falsified statements,

several banks loaned “millions of dollars to [the defendant’s

business] based on either nonexistent or substantially overstated collateral.” Id. at 1085. After a jury convicted the

defendant, the district court imposed a sentence of six months

in prison and ordered the defendant “to pay the lending banks

$3.14 million in restitution.” Id. at 1089. 

On appeal, the defendant challenged the restitution order,

arguing that the lending banks’ losses were not traceable to

the fraudulent Borrowing Certificates, but rather to unrelated

financial difficulties. Id. at 1104, 1107. We disagreed, first

observing that “[t]he information in the Borrowing Certificates was vital” because the defendant’s “fraudulent overstatement would, and did, cause the lending banks to advance

more money than” they otherwise would have. Id. at 1107.

We continued: 

UNITED STATES v. PETERSON 10507
[The defendant] is probably correct to note that [his

business’] financial troubles [and a downturn in the

electronics market] ultimately led to the loan default.

He has not demonstrated, however, that external factors were completely to blame for the lending banks’

losses. Even if the default were inevitable, the high

amount of the lending banks’ losses was not. Had

[the defendant] not fraudulently stated [his business’] assets on the Borrowing Certificates, the

amount of outstanding debt would have been smaller. That fact was taken into account by the district

court, which did not attribute the lending banks’

entire loss to the fraud. Instead, the district court

properly focused only on the amount of loss attributable to the falsified Borrowing Certificates. 

Id. Here, if the Petersons had not falsely stated that they were

directly the source of the down payments, then the FHA

would not have insured the defaulted mortgages and would

have suffered no losses whatsoever. 

Similarly, we have upheld restitution orders even where

there are multiple links in the causal chain. United States v.

Hackett, 311 F.3d 989 (9th Cir. 2002). In Hackett, we held

that a defendant who pled guilty to aiding and abetting methamphetamine manufacture could be ordered to pay restitution

to an insurance company for property damage caused when a

co-defendant started a fire by placing a jar of chemicals used

to manufacture methamphetamine on a hot plate. Id. at 992-

93. The defendant obtained supplies that his co-defendants

later used to manufacture methamphetamine, and he had

“knowledge and understanding of the scope and structure of

the enterprise and of the activities of [his co-defendants].” Id.

at 993. We recognized that there were “multiple links in [the]

causal chain,” but still held that the defendant’s conduct was

directly related to the resulting loss. Id.

Under a different statutory scheme, one of our sister circuits addressed the proximate cause issue under similar fac10508 UNITED STATES v. PETERSON
tual circumstances to the scheme used by the Petersons. See

United States v. Spicer, 57 F.3d 1152 (D.C. Cir. 1995). In

Spicer, the defendant was convicted of fraud for submitting

documents that “intentionally overstated the down payment

made by a home buyer in order to help the buyer qualify for

an FHA-insured mortgage.” Id. at 1154 & n.1. “[T]he fraud

conviction was predicated upon a single transaction . . . [but

the defendant] admitted in factual stipulations that he had

made similar misrepresentations on a total of 81 applications

for FHA-insured mortgages.” Id. at 1154. Many of these buyers “subsequently defaulted, resulting in losses of $1.8 million

to HUD.” Id.

The court of appeals agreed with the defendant “that proof

that his misrepresentation proximately caused harm to the

government is required in order to establish the fraudulent

nature of his debt” for the purpose of the Bankruptcy Code.

Id. at 1159. However, the court affirmed the district court’s

conclusion that the defendant’s “misrepresentations proximately caused HUD’s losses.” Id. at 1160. The court of

appeals explained: 

[The defendant’s] misrepresentations were material

to HUD’s determination that the mortgage applicants

met the financial requirements to qualify for FHAinsured mortgages and had a sufficient personal

financial stake in the properties to have the proper

incentives to avoid default. The misrepresentations

were thus more than a “but-for” cause; they proximately caused HUD’s losses when the buyers to

whom HUD improvidently granted FHA-insured

mortgages on the basis of [the defendant’s] misrepresentations of their financial qualifications

defaulted. The defaults were thus a foreseeable consequence of [the defendant’s] conduct. It is undoubtedly true that in each case other factors also

“caused” the buyer’s default, but that is of no

moment, for as long as [the defendant’s] misrepreUNITED STATES v. PETERSON 10509
sentations were a material and proximate cause, they

need not have been the sole factor causing HUD’s

losses. 

Id. at 1159. The court further explained: 

It is undisputed that [the defendant] intentionally

misrepresented buyers’ downpayments in order to

induce HUD to approve FHA-insured mortgages for

parties who otherwise would not qualify; without

evidence of adequate down payments, HUD would

have rejected the applications, calculating the risk of

default too high. HUD went for [the defendant’s]

bait, and suffered massive losses when those buyers

subsequently defaulted. Viewing all the evidence in

the light most favorable to [the defendant], we think

a rational factfinder could only conclude from the

undisputed facts that [the defendant’s] misrepresentations did indeed proximately cause HUD’s losses.

Id. at 1160. 

Here, the district court ordered the full amount of restitution requested by the government for the loss incurred by

HUD for forty-three FHA insured loans. At sentencing, the

district court made the following statements: 

I am going to take the full amount of restitution—

that is the loss—in violation of the two counts. There

may be other contributing factors, as you well

argued, and I accept that. But this is not a tort case

where I am going to divide it. In the first instance,

you are found culpable, and in that first instance you

should remain liable for the restitution amount. 

The district court further stated: “With respect to the argument made by attorneys as to the proximate cause for the 43

foreclosures, I find clearly that the defendants’ actions cer10510 UNITED STATES v. PETERSON
tainly did put the government into that position for the higher

risk, so that is the finding.” 

Defendants argue that the district court erred because the

losses to HUD were caused not by the fraudulent gift letters,

but by intervening events. Specifically, they argue that the

defaults were caused by the home-buyers’ inability to repay

the loans due to increased interest rates, inability to maintain

employment, and decreased paychecks. We disagree with

Defendants that these events preclude a conclusion that

Defendants were the direct and proximate cause of the losses

to HUD. 

[10] Our analysis of our own case law as well as that of our

sister circuits leads us to conclude that despite the multiple

links in the causal chain, the Petersons directly and proximately caused the losses to HUD. As in Berger, Hackett, and

Spicer, the causal chain here is not extended so far as to

become unreasonable. The evidence at trial showed that

Defendants sold forty-three properties and directly provided

down payment assistance along with the false gift letters.

Each of those houses went into foreclosure. Without the down

payment, the buyers would not have been eligible for FHA

insured mortgages and could not have later defaulted on their

payments because they never would have been able to qualify

for HUD financing. The Petersons enabled unqualified buyers

to obtain loans; those unqualified buyers subsequently

defaulted. Thus, the very concern targeted by the prohibition

against direct seller subsidies—that buyers who could not

meet the 3% down payment requirement would have an inadequate incentive to avoid default—was exactly what eventuated. 

3. Factual Findings

Defendants argue that the district court did not make any

factual findings in ordering restitution and that “there was no

basis on which the court could make findings of fact sufficient

UNITED STATES v. PETERSON 10511
to support the order as the government presented no evidence

that the defendants’ crimes directly and proximately caused

the loss.” 

[11] Nothing in the MVRA or our case law requires that the

district court consider certain factors or make findings of fact

on the record. See 18 U.S.C. § 3663A. Furthermore, as we

discussed above, the government did present evidence that

Defendants directly and proximately caused the loss. The

government presented a declaration from Hyun listing fortythree different HUD-insured properties for which Defendants

had subsidized the down payments. Each of those houses

went into foreclosure, resulting in a loss to HUD. Hyun’s declaration and report on the losses documented the specific loss

amount for each property. Although the district court did not

specifically make any findings, it is clear that it relied on

Hyun’s declaration and the testimony at trial in reaching its

conclusion as to the amount of the restitution.

III

CONCLUSION

For the above reasons, we affirm the district court’s sentence and restitution order. 

AFFIRMED.

10512 UNITED STATES v. PETERSON