NOT RECOMMENDED FOR PUBLICATION File Name: 17a0535n.06 No. 16-3825 UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

UNITED STATES OF AMERICA, Plaintiff-Appellee,

v. MARTHA E. EDNIE, Defendant-Appellant. ) ) ) ) ) ) ) ) ) ) ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF OHIO

BEFORE: BOGGS, GRIFFIN, and WHITE, Circuit Judges. GRIFFIN, Circuit Judge. Defendant Martha Ednie, a mortgage broker who assisted others in obtaining bank loans using false purchase prices, appe als her convictions for bank fra ud and conspiracy to commit the same. She argues that the government failed to present sufficient evidence to establish that she knew the purchase prices were fraudulent at the time she submitted them to lenders. She also raises two challenges to her concurrent 30-month sentences, arguing that the district court erred in denying her a mitigating-role reduction and in calculating the loss amount attributable to her conduct. We hold that the government presente d sufficient evidence to sustain defendant’s convictions, but the district court erred in de nying defendant’s request for a mitigating-role reduction. We therefore affi rm her convictions, vacate her sentences, and remand for resentencing.No. 16-3825 United States v. Ednie

-2- I. Herman “Wayne” Bradley and his son, Nick Bradley, owned dozens of rental properties in the Toledo, Ohio area. In late 2005, the two decided to sell some of them. They enlisted Tim Bradley, Wayne’s other son, who was a real-estate agent, and came up with an idea to attract buyers. As an additional incentive for interested buyers, the Bradleys offered to provide cash back after closing, which the buyer s could use to make repairs or spend as they pleased. To accomplish this, the buyer and seller would take the initially agreed -upon purchase price and increase it to reflect the amount of money coming back to the buyer—anywhere from $5,000 to $10,000 per property. The parties would then ente r into a separate agreement (called an addendum) that memorialized the initial, lower purcha se price, as well as the seller’s promise to provide the buyer cash b ack after closing. In many cases, the buyers needed financing, which is where defendant Martha Ednie, a local mortgage broker, came in. The Bradleys recommended that the buyer s use Ednie to obtain financing. Ednie compiled pertinent information about the buyers and tr ansactions—information such as the buyer’s income, assets, and debt, as we ll as the terms of the sale memorialized in the purchase agreement. She submitted that information to the lenders, which then made lending decisions based on that information. The problem with the cash-back arrange ment is that everyone knew about it except the lenders. After the parties agreed to the cash-back proposal, the Bradleys prepared a new purchase agreement reflecting only the inflated purc hase price. This was the purchase price that Ednie submitted to lenders. The parties also failed to disclose the addendums to the lenders. Ednie knew about these side agr eements during the loan-applicat ion process and notarized many of them after the fact.No. 16-3825 United States v. Ednie

-3- The Bradleys executed this sc heme with at least eight di fferent buyers and thirty-five properties over the course of nearly two years. In every case, lenders believed they were issuing loans that represented 80 to 90% of the purchase price, with the borrower providing personal funds to pay for the remaining 10 to 20%. In reality, lenders were issuing loans that often exceeded 100% of the value of the home, and a portion of the loan proceeds were being paid back to the borrower, effectivel y cashing out any equity stake th e borrower had in the property. The federal government eventually caught wind of the scheme and, after a lengthy investigation by the IRS, indicted Wayne, Nick, Ti m, Ednie, and several others on conspiracy and various financial-crimes charges. Ednie was charged with one count of conspiracy to commit bank fraud and thirty-four counts of ba nk fraud, two of which were dismissed before trial. The jury found defendant guilty of cons piracy to commit bank fraud. It also found her guilty on twenty of the thirty-two counts of ba nk fraud and not guilty on the remaining twelve. Before sentencing, a probation officer prepar ed defendant’s Presentence Investigation Report (PSIR). Starting from a base offense level of 7, the probation officer increased defendant’s offense level by 14 after calcula ting defendant’s intended loss at $625,344.50. See U.S.S.G. § 2B1.1(b)(1)(H) (loss amount betwee n $550,000 and $1.5 million). She arrived at this figure by compiling information for sixteen of th e transactions for which defendant was found guilty and in which the lender subsequently for eclosed on the buyer. For each transaction, she subtracted the amount the lender recouped on the foreclosure sale from the initial mortgage amount. She then totaled those figures to ar rive at the final loss amount of $625,344.50. That
14-level increase resu lted in a total offense le vel of 21, which, in conjunction with a criminalhistory category of I, yielded a Guid elines range of 37 to 46 months.No. 16-3825 United States v. Ednie

-4- Defendant filed objections to the PSIR but di d not challenge the lo ss-amount calculation. Instead, she argued that she was entitled to a fou r- or two-level reduction in her offense level for having a “minimal” or “minor” role under U.S. S.G. § 3B1.2. The pr obation officer responded that a reduction was not justified because defendant played a “vital” role in the conspiracy. The district court adopted the pr obation officer’s response and overruled defendant’s objection. Working from the 37-to-46-month Guidelines ra nge, the district court varied downward and imposed 30-month sentences running concurrently to each other. Ednie appealed, challenging her convictions and sentences.
II. Defendant first argues the government failed to present sufficient ev idence to convict her of bank fraud and conspiracy to commit bank fraud. We review this claim de novo, asking “whether any rational trier of f act could have found the essential elements of the crime beyond a reasonable doubt.” United States v. McAuliffe , 490 F.3d 526, 537 (6th Cir. 2007). We must view the evidence in th e light most favorable to the prosecution and refrain from reweighing the ev idence or reconsidering the credibility of witnesses. United States v. Jackson , 470 F.3d 299, 309 (6th Cir. 2006). To convict defendant of bank fraud, the govern ment had to establish that she “knowingly execute[d] . . . a scheme or artifice” “to defraud a financial institution” or “to obtain any of the moneys . . . owned by . . . a fi nancial institutio n, by means of false or fraudulent pretenses, representations, or promises.” 18 U.S.C. § 1344(1), (2). To convict defendant of conspiracy to commit bank fraud, the government had to establish “that ‘two or more persons conspired, or agreed, to commit the cr ime of [bank] fraud’ and ‘that the defendant knowingly and vol untarily joined the conspiracy.’” United States v.No. 16-3825 United States v. Ednie

-5- Rogers , 769 F.3d 372, 377 (6th Cir. 2014) (quoting Sixth Circuit Pattern Criminal Jury Instruction 3.01A); 18 U.S.C. § 1349. Defendant argues that the government failed to show that she knew about the fraudulent purchase agreements before the loans closed, and thereby failed to establish the mens rea element for both offenses. According to defe ndant, the only pieces of evidence tending to establish that she “knowingly” participated in the bank-fraud conspiracy were the addendums that she notarized after each sale was finalized. This evidence was insufficient, she contends, because she had no duty to verify informa tion provided by the buyer and the seller. Defendant’s argument fails for two reasons. First, it misconstrues the theory upon which she was prosecuted and convicted. Defendant claims that the basis for her guilt was her notarization of the addendums memo rializing the cash-back transactions. But, as the government explains, the crime of bank fraud was complete when Ednie induced banks to make lending decisions based on false purchase-price information. See 18 U.S.C. § 1344. The fact that she later notarized addendums simply provided additional support for the government’s contention that defendant was aware of the cash-back sche me throughout the nearly two-year conspiracy. Indeed, even defense counsel acknowledged the supporting role the notarized addendums played during his closing argument: “[M]er ely notarizing an addendum[,] in the Government’s eyes[,] is not enough for Martha to be charged with a crime.” Second, and perhaps more importantly, defend ant’s argument overlooks other evidence establishing her actual knowledge of the false purchase prices during each loan-application process. For starters, the government presente d the jury with defendant’s own grand-jury testimony, in which she admitted to be ing aware of the addendums:No. 16-3825 United States v. Ednie

-6- Q. . . . Were you aware of these addendum s yourself before the loans closed? A. I was not. Q. Herman Bradley never told you about that situation? A. No. Q. Are you sure about that, ma’am. A ll honesty, ma’am. This is an important point before us, and you’re under oath, and th is is a grand jury. This grand jury expects the truth. Were you aware of these side deals pr ior to these loans being closed with Herman Wayne Bradley or anyone associated with . . . him? A. The fact that repairs were to be d one and rolled into the loan amount, yes. Q. So you did know? A. That repairs were going to be done. Q. All right. A. It was a possibility. (Emphasis added.) And shortly before this exchange, Ednie testified that she understood the significance of failing to disclose the true purchase price and ex istence of the side agreements, acknowledging that “a borrowe r cannot roll improvements in to the loan and finance improvements.” Furthermore, two of Ednie’s co-conspira tors testified that she knew about the addendums. Wayne Bradley told the jury that “Martha knew about the addendums, and she knew about the money going back.” Asked why he thought that, he said, “Because of the conversation that me and Martha had.” Nick Brad ley also testified that “[s]he was aware of the addendums and aware of the money going back, a nd she was providing the financing for all of the buyers.”No. 16-3825 United States v. Ednie

-7- Ednie objects that Wayne’s and Nick’s testimony was “conclu sory” and failed to establish that she knew about the scheme before the closings. But even accepting that their testimony was ambiguous on this point, defendant he rself testified that she was aware of “[t]he fact that repairs were to be done and rolled in to the loan amount” “prior to these loans being closed.” The jury was free to accept this testimony, and it is not our role to second-guess the jury’s credibility assessments. Jackson , 470 F.3d at 309. Taken together, and viewed in the light most favorable to the prosecution, this evidence was sufficient to enable any rational juror to conclude beyond a reasonable doubt that defendant had actual knowledge of the cash-back agreements before the closings. We ther efore affirm defendant’s convictions.
III. Defendant also challenges the procedural reasonableness of her sentences. This court reviews a district court’s se ntence under the deferential abus e-of-discretion standard. Gall v. United States , 552 U.S. 38, 51 (2007). “A district court commits procedural e rror and abuses its sentencing discretion by,” among other things, “improperly cal culating the Guidelines range
. . . .” United States v. Brinley , 684 F.3d 629, 633 (6th Cir. 2012) (citing Gall , 552 U.S. at 51). Ednie argues that the district co urt miscalculated her Guidelines range in two ways. First, she contends that the district court erred in failing to grant her an adjustment for a mitigating role in the conspiracy under U.S.S.G. § 3B1.2, and, in a rela ted vein, she argues th at the district court violated Rule 32(i)(3)(B) by faili ng to properly rule on her object ion. Second, she argues that the district court’s calculation of loss amount under U.S.S.G. § 2B1.1 is not supported by a preponderance of the evidence.No. 16-3825 United States v. Ednie

-8- A. Section 3B1.2 of the Sentencing Guidelines authorizes a sentenci ng court to adjust a defendant’s offense level if she had a mitigating ro le in the offense. Specifically, it permits a four-level reduction if the defenda nt was a “minimal participant, ” which is defined as someone who is “plainly among the least culpable of thos e involved in the cond uct of a group”; a twolevel reduction if the defendant was a “minor part icipant,” which is defined as someone who is “less culpable than most other pa rticipants in the criminal activ ity, but whose role could not be described as minimal”; and a three-level reduction if the defendant falls somewhere in between. U.S.S.G. § 3B1.2 and cmt. n.4, n.5. In her objection to the PSIR, defendant argued that a two- or four-level adjustment was warranted because she did not receive any of th e financial proceeds of the conspiracy, she did not own any of the properties at issue, she did not induce buyers to join the conspiracy, and her involvement was limited to presenting loan appli cations to lenders. This, she argued, made her “substantially less culpable” than the average participant. The probation officer responded that, although de fendant was not the real-estate agent or owner of the propertie s, “her role as a mortgage broker wa s vital for this ba nk fraud conspiracy to occur.” Without her, the probation officer concluded, “the other codefendants in this case would have been without a mortgage loan, or it would have been necessary for them to locate another mortgage broker to complete the transact ions.” The district co urt adopted the probation officer’s response and overrule d defendant’s objection. The district court erred. To be sure, this court has previously upheld similar denials on the basis that the defendant was vital or “indispensable” or “critical.” See, e.g. , United States v. Salgado , 250 F.3d 438, 458 (6th Cir. 2001) (“A defendant who plays a lesser role in a criminalNo. 16-3825 United States v. Ednie

-9- scheme may nonetheless fail to qualify as a minor participant if his role was indispensable or critical to the success of the scheme, or if his importance in the overall scheme was such as to justify his sentence.”). However, in November 2015 (six months before defendant’s PSIR was prepared), the Commission amended the Application Notes to clarify the a pplication of § 3B1.2.
See U.S. Sentencing Guidelines Manual A pp. C, amend. 794, at 116–18 (Nov. 2015). With Amendment 794, the Commission made clear that c ourts—including some in our circuit—were incorrectly denying requests for a mitigating-role adjustment on the basis that the defendant played an indispensable role in the offens e. The Commission wrote: “Public comment suggested, and a review of case la w confirmed, that in some cases a defendant may be denied a mitigating role adjustment solely because he or she was ‘integral’ or ‘indispensable’ to the commission of the offense.” Id . at 118 (citing, among others, United States v. Skinner , 690 F.3d 772, 783–84 (6th Cir. 2012)). “How ever,” the Commission said, “a finding that the defendant was essential to the offense does not alter the requirement, expressed in Note 3(A), that the court must assess the defendant’s culpability relative to the average participant in the offense.” Id. The Commission therefore amended the application note s to state that “[t]he fact that a defendant performs an essential or indispensable role in th e criminal activity is not determinative. Such a defendant may receive an adjustment under this guideline if he or she is substantially less culpable than the average participant in the crim inal activity.” U.S.S.G. § 3B1.2 cmt. n.3(C). Notwithstanding the Commission’s admonition in Application Note 3(C), the probation officer concluded that Ednie was not entitled to a mitigating-role reduction because “her role as a mortgage broker was vital for this bank fraud cons piracy to occur.” The district court adopted this rationale verbatim. This is precisely the analysis the Commi ssion sought to end with Amendment 794. There is no evid ence that the probation officer applied the fact ors provided byNo. 16-3825 United States v. Ednie

-10- the Commission for evaluating mitigating-role ad justment requests, despite the fact that defendant argued that several factors supported a reduction. See U.S.S.G. § 3B1.2 cmt. n.3(C). “This court gives ‘Application Notes to th e Sentencing Guidelines . . . controlling weight.’” United States v. Hernandez-Fierros , 453 F.3d 309, 313 (6th Ci r. 2006) (omission in original) (quoting United States v. Jarman , 144 F.3d 912, 914 (6th Cir. 19 98)). The district court denied defendant’s request for the very reason th at the Application Note instructs should not be dispositive in evaluating such a request. This constitutes legal error that requires resentencing. See United States v. Kaminski , 501 F.3d 655, 672–73 (6th Cir. 2007) (vacating sentence and remanding for resentencing because district c ourt enhanced defendant’s offense level in contravention of application note). The government makes two arguments for why the district court did not commit reversible error. First, it rejects defendant’s de scription of the district court’s ruling, insisting that “the district court did not determine that Ednie’s essential role rendered her categorically ineligible for the reduction.” But the PSIR speaks for itself , and so does the sentencing transcript. The probation officer did not referen ce the five factors intended to guide a district court’s decision; instead, she simply stated that “[Ednie’s] role as a mortgage broker was vital for this bank fraud conspiracy.” There is no other fair reading of the PSIR. And the district court merely summarized the probation officer’s re sponse before adopting it verbatim. The government’s contrary arguments— that the district court relied on Ednie’s repeated conduct and special role relative to other pa rticipants—are either unaccompanie d by record citation or rely on an unrelated portion of th e sentencing hearing. Second, the government shifts to the merits, arguing that defendant is not entitled to a reduction because, even under the proper legal sta ndard, she is not substantially less culpableNo. 16-3825 United States v. Ednie

-11- than other participants. This argument is mi splaced. Whether a defendant is entitled to a reduction under the five-factor stan dard provided in Application No te 3(C) is a fact-intensive question that district court j udges are best equipped to resolve in the first instance. See U.S.S.G. § 3B1.2 cmt. n.3(C) (“The determination whether to apply [§ 3B1.2] is based on the totality of the circumstances and involves a determination th at is heavily dependen t upon the facts of the particular case.”). Because de fendant preserved this claim belo w, she need not demonstrate to this court that the error affected her substantial rights ( i.e. , that she is, in fact, entitled to the reduction, resulting in a lower Guid elines range); on th ese facts, she is en titled to have the district court rule on the issu e in the first instance. In sum, the district court committed a legal error in overruling defendant’s objection for a reason explicitly disavowed by the Guidelines Appli cation Notes. An error of law is necessarily an abuse of discretion, see Koon v. United States , 518 U.S. 81, 100 (1996), a nd the district court is better positioned to decide whether defendant is substantially less culpable than the average participant using the five factor s in Application Note 3(C). We therefore vacate defendant’s sentences and remand for resentencing. 1
B. Defendant also argues that the district court erred in calculating the loss amount attributable to her under U.S.S.G. § 2B1.1. “We review a district court’s calculation of the ‘amount of loss’ for clear error, but consider the methodology behind it de novo .” United States v. White , 846 F.3d 170, 174 (6th Cir. 2017) (quoting United States v. Meda , 812 F.3d 502, 519 (6th Cir. 2015)). “In order to

1 In light of our decision, it is unnecessary to address defendant’s argument that the district court violated Rule 32 by failing to make factual findings relating to the five factors listed in Application Note 3(C).No. 16-3825 United States v. Ednie

-12- challenge this calculat ion, [the defendant] must carry the burden of demonstrating that the court’s evaluation of the loss was not only inexact but outside the universe of acceptable computations.” Id. (alteration in original) (quoting United States v. Martinez , 588 F.3d 301, 326 (6th Cir. 2009)). Because she failed to object to the loss calculation below, defendant bears the additional burden of satisfying the plain-error sta ndard, which requires that she show: (1) error, (2) that was clear or obvious, (3 ) that affected her substantial rights, and (4) that seriously affected the fairness, integrity, or pub lic reputation of judi cial proceedings. United States v. Olano , 507 U.S. 725, 732–36 (1993). Section 2B1.1 of the Sentencing Guidelines requires a district court to increase a defendant’s offense level based on the amount of monetary loss attributable to his or her offenses. See U.S.S.G. § 2B1.1. This court takes a two-step approach to determining loss amount in mortgage-fraud cases. United States v. Wendlandt , 714 F.3d 388, 393–94 (6th Cir. 2013). In step one, the court must calculate the to tal loss, using the greate r of “actual loss” or “intended loss.” Id. at 393 (citing U.S.S.G. § 2B1.1 cmt. n.3(A)). “Intended loss” means “the pecuniary harm that the defendant purposely sought to inflict.” U.S.S.G. § 2B1.1 cmt. n.3(A)(ii). “Actual loss” means “the reasonably foreseeable pecuniary harm that resulted from the offense,” U.S.S.G. § 2B1.1 cmt. n.3(A)(i), with “reasonab ly foreseeable pecuniary harm” defined as “pecuniary harm that the defendant knew or, un der the circumstances, reasonably should have known, was a potential result of the offense,’” U.S. S.G. § 2B1.1 cmt. n.3(A)(iv). To attribute an actual loss to a defendant, his or her conduct must be both a “but for” cause and a proximate cause of the loss. United States v. Rothwell , 387 F.3d 579, 583 (6th Cir. 2 004). In step two, “the district court must reduce the loss by the amount of money the victim recovered by selling theNo. 16-3825 United States v. Ednie

-13- collateral, or the fair market value of the property at the time of sentencing if the victim has not disposed of the collateral.” Wendlandt , 714 F.3d at 394 (citing U.S.S.G. § 2B1.1 cmt. n.3(E)(ii)). Defendant first argues that, insofar as the $625,344.50 figure represents “intended loss,” there is no evidence to suggest that she “purposel y” intended for lenders to lose a substantial portion of the loans th rough foreclosure. See U.S.S.G. § 2B1.1 cmt. n.3(A)(ii). The government does not contest this assertion, but argues in stead that $625,344.50 represents the “actual loss” from defendant’s conduct. However, the PSI R (which the district court adopted without comment or alteration) explicitly states that “the intended loss is $625,344.50.” (Emphasis added.) Because the record establishes that th e 14-level increase in defendant’s offense level was based on “intended” loss, and because the go vernment makes no argument to support the 14- level increase under that standar d, the government has effectively conceded error on this point. Normally, we would next turn to the questio n whether the error was obvious and affected defendant’s substantial rights. However, becau se we are vacating defendant’s sentences and remanding for resentencing, there is no need to do so. The parties can argue the loss-amount issue before the district court on remand.
IV. For these reasons, we affirm defendant’s c onvictions, vacate her sentences, and remand for resentencing.