Opinion ID: 2789095
Heading Depth: 2
Heading Rank: 2

Heading: Aaron’s Sentence

Text: As described above, the district court applied the preponderance of the evidence standard to calculate the total loss amount resulting from Aaron’s relevant conduct. Aaron contests the district court’s use of that standard, arguing that the clear and convincing standard should have been applied because the loss enhancements had a disproportionate impact on the length of his sentence. District courts generally use the “preponderance of the evidence standard of proof when finding facts at sentencing, such as the amount of loss caused by a fraud.” United States v. Treadwell, 593 F.3d 990, 1000 (9th Cir. 2010). The higher clear and convincing standard may apply, however, “when a sentencing factor has an extremely disproportionate effect on 8 UNITED STATES V. HYMAS the sentence relative to the offense of conviction.” United States v. Mezas de Jesus, 217 F.3d 638, 642 (9th Cir. 2000) (citing United States v. Restrepo, 946 F.2d 654, 659 (9th Cir. 1991) (en banc)); see also Treadwell, 593 F.3d at 1000. Particularly “where a severe sentencing enhancement is imposed on the basis of uncharged or acquitted conduct, due process may require clear and convincing evidence of that conduct.” Treadwell, 593 F.3d at 1000. Our precedents “have not been a model of clarity in deciding what analytical framework to employ when determining whether a disproportionate effect on sentencing may require the application of a heightened standard of proof.” United States v. Berger, 587 F.3d 1038, 1048 (9th Cir. 2009). We have indicated that, “where the sentencing enhancements are based on . . . the offense of conviction,” the preponderance of the evidence standard is sufficient. Id. (citing United States v. Harrison-Philpot, 978 F.2d 1520, 1524 (9th Cir. 1992)) (internal quotation marks omitted). We have also held that “there is no bright-line rule for the disproportionate impact test;” instead, the court examines the “totality of the circumstances” using six factors first articulated in United States v. Valensia, 222 F.3d 1173 (9th Cir. 2000) (“Valensia factors”).2 Berger, 587 F.3d at 1048 (citing United States v. Jordan, 256 F.3d 922, 928 (9th Cir. 2001)) (internal quotation marks omitted). Under the Valensia totality of the circumstances test, six factors, none of which is dispositive, guide the determination 2 Our opinion in Valensia was vacated and remanded by the Supreme Court, see United States v. Valensia, 532 U.S. 901 (2001), but we have continued to use the factors articulated in the decision. UNITED STATES V. HYMAS 9 of whether a sentencing factor has a disproportionate impact on the sentence: (1) whether the enhanced sentence falls within the maximum sentence for the crime alleged in the indictment; (2) whether the enhanced sentence negates the presumption of innocence or the prosecution's burden of proof for the crime alleged in the indictment; (3) whether the facts offered in support of the enhancement create new offenses requiring separate punishment; (4) whether the increase in sentence is based on the extent of a conspiracy; (5) whether an increase in the number of offense levels is less than or equal to four; and (6) whether the length of the enhanced sentence more than doubles the length of the sentence authorized by the initial sentencing guideline range in a case where the defendant would otherwise have received a relatively short sentence. Treadwell, 593 F.3d at 1000. We separate our consideration of the loss enhancement here into two parts: (1) losses attributed to the loan that was the subject of Count Four of the indictment, to which Aaron pled guilty, and (2) losses attributed to the other loans.
Aaron pled guilty to Count Four of the indictment, which involved a loan in the amount of $295,600. Applying the preponderance of the evidence standard, the district court 10 UNITED STATES V. HYMAS determined the loss to the lender on that loan to be $162,758.79. That loss, by itself, enhanced Aaron’s total offense calculation under the Sentencing Guidelines by 10 levels. See U.S.S.G. § 2B1.1 (providing for a 10-level increase for losses over $120,000 but no more than $200,000). Notwithstanding the increase in the sentence, the loss from Count Four stemmed from conduct for which Aaron was convicted, alleviating the due process concerns discussed above. The preponderance of the evidence standard was sufficient for determining the actual extent of that loss. See Harrison-Philpot, 978 F.2d at 1524. We would reach the same conclusion applying the Valensia factors. The maximum sentence authorized for wire fraud was 20 years, and the sentence imposed was well below that. The loss enhancement did not negate the presumption of innocence or alter the burden of proof for wire fraud. See Treadwell, 593 F.3d at 1001. The facts offered in support of the loss enhancement did not create a new offense that would require separate punishment. See id. The fourth factor did not apply because Aaron was not convicted for conspiracy. The fifth and sixth factors arguably favor use of the clear and convincing standard. The number of offense levels added under U.S.S.G. § 2B1.1 for a loss of more than $120,000 but not more than $200,000 was 10. In pleading guilty, Aaron did not acknowledge any particular loss amount, and that loss enhancement was over 4 levels. Similarly, the length of the Guidelines sentencing range based on that loss amount more than doubled the length of sentence authorized by the initial Guidelines range if no loss had been attributed to the UNITED STATES V. HYMAS 11 transaction. Aaron argues that these two factors alone were sufficient to require the use of the heightened standard. But the size of a loss enhancement, standing alone, does not compel the use of the clear and convincing standard. Treadwell, 593 F.3d at 1001–02. In this instance, we conclude that there were no serious due process concerns that required application of a heightened standard, even considering the Valensia factors, to the extent that the sentence was based on the loan that was the subject of the conviction. Aaron admitted the facts of the fraud that caused the loan to be made. He also knew the size of the loan, and that defined the potential extent of the loss. In that situation it was not necessary to apply a heightened standard to protect against a violation of due process.
The sentence imposed by the district court was not entirely based on the loan that was the subject of the conviction, however. The district court also used losses from other loans to calculate Aaron’s total offense level, increasing the total offense figure by an additional 8 levels. Based on the principles articulated above, the clear and convincing standard of proof should have been applied to determine the amount of the losses from the other loans. Aaron did not plead guilty to fraud for the other loans. He was not charged with a conspiracy, nor did he admit in his plea agreement that he had participated in a scheme to defraud involving multiple transactions. Losses from these loans were based on conduct for which he was not convicted. Aaron did not have a guilt-phase trial where the government 12 UNITED STATES V. HYMAS was required to prove beyond a reasonable doubt that he committed fraud on the other loan applications. Similar to the analysis of Count Four, the fifth and sixth Valensia factors support the use of the heightened standard for the other loans, even though the first four factors may not require that result. Inclusion of the losses from the other loans ultimately resulted in an increase of 8 offense levels, from 10 (based on the loss from the Count Four loan by itself) to 18. This additional 8-level increase more than doubled the Guidelines imprisonment range. Under our precedents, we conclude that the district court should have employed a heightened clear and convincing standard of proof with regard to the losses from those other loans. In United States v. Munoz, for example, we held that the district court was required to use the clear and convincing evidence standard when calculating losses from uncharged conduct. 233 F.3d 1117, 1127 (9th Cir. 2000), superseded on other grounds by statute as stated in United States v. Van Alstyne, 584 F.3d 803, 817–18 (9th Cir. 2009). Two defendants were indicted on ten counts but convicted of only two counts of fraud in connection with specific sales of bus shelters as part of a Ponzi scheme. Id. at 1123. The district court, applying a preponderance of evidence standard, included within the loss calculation the losses from hundreds of sales made to other investors not included in the two counts of conviction. Id. at 1124. We vacated the sentence and remanded for resentencing, holding that, while the sales to the other investors were relevant conduct, the heightened standard of proof should have been used because the enhancement had a “disproportionate effect on the sentence.” Id. at 1127. The same is true here. UNITED STATES V. HYMAS 13 The district court in this case concluded that the appropriate standard of proof was preponderance of evidence based upon a line of cases that applied that lower standard when determining the extent of losses from a conspiracy. The decisions cited by the district court – Treadwell, 593 F.3d at 1001; Berger, 587 F.3d at 1048–49; and United States v. Armstead, 552 F.3d 769, 777 (9th Cir. 2008) – hold that where losses are based on the extent of a criminal conspiracy, those losses need not be proven by clear and convincing evidence because the defendants had the opportunity at trial to challenge evidence of the extent of the fraud conspiracy. In this case, however, the government did not charge Aaron with a conspiracy to defraud that included the other acts of fraud alleged in the indictment. He only pled guilty to one count of fraud regarding a specific loan transaction. He had neither need nor opportunity to contest the alleged conspiracy, and he cannot be sentenced using the lower standard as if he had challenged a conspiracy charge. To be sure, the allegations against the Hymases bore similarities to a conspiracy, and the multiple counts resembled each other by alleging similar misrepresentations in similar loan applications. But the representations were not identical in all applications. Most of the losses included in the district court’s calculation were based on loans that did not contain the specific false representations in Count Four acknowledged in the Plea Agreement. Even as to the loan applications that included the same statements, Aaron argues with justification that his admission that the statements were false in 2007 did not mean he admitted that those same statements were false in earlier years, before the family’s financial circumstances deteriorated. 14 UNITED STATES V. HYMAS The government argues that, even if the district court applied the wrong standard, its decision to impose a 24-month sentence was harmless beyond a reasonable doubt because the sentence varied significantly below the guidelines range. We decline to engage in such guesswork. It is true that the district court might have made the same loss calculation applying the clear and convincing standard, but it might not have, either. The court made a point of stating that it was applying the preponderance standard, and the court’s emphasis on the standard could imply that a higher standard would have resulted in a different loss calculation. Sometimes a district court says in finding a loss amount that it would reach the same result under either standard, but the court in this instance did not. Similarly, the district court might have imposed the same sentence even if it had calculated a lower loss figure under the clear and convincing standard and, as a result, a lower sentencing Guidelines range, but that possible outcome is too uncertain for us to rely upon it. It is also inconsistent with our normal approach to sentencing. “[T]he district court must correctly calculate the recommended Guidelines sentence and use that recommendation as the ‘starting point and initial benchmark.’” United States v. Munoz-Camarena, 631 F.3d 1028, 1030 (9th Cir. 2011) (per curiam) (quoting Kimbrough v. United States, 552 U.S. 85, 108 (2007)) (internal quotation marks omitted). We cannot say on this record that the failure to calculate the correct recommended Guidelines sentence was harmless error because the district court’s analysis for the extent of the variance was not based on the correct range. Id. at 1030–31. Accordingly, we vacate Aaron Hymas’s sentence and remand the matter to the district court. On remand, the court should apply the clear and convincing standard in calculating losses attributable to the other loans. UNITED STATES V. HYMAS 15
Aaron also argues that the district court erred by using the amount realized from deficiency sales to calculate the losses from the loans. We conclude that the district court correctly calculated the losses by taking the principal amount of the loan and subtracting any credits from the subsequent sale of the property. See United States v. Morris, 744 F.3d 1373 (9th Cir. 2014). Similarly, the district court did not err by considering the losses submitted by successor lenders who had purchased the loans. The losses to those lenders are considered reasonably foreseeable pecuniary harm because the lenders purchased the loans “without an awareness of [their] true value due to . . . fraud.” United States v. Yeung, 672 F.3d 594, 603 (9th Cir. 2012), overruled on other grounds by Robers v. United States, 572 U.S. –, 134 S. Ct. 1854 (2014)). Although Yeung examined proximate cause in the context of the Mandatory Victims Restitution Act, 18 U.S.C. § 3663A, we see no reason why its reasoning would not apply to determine losses in the sentencing context.