Opinion ID: 2980431
Heading Depth: 2
Heading Rank: 2

Heading: Fannie Mae as “Victim”

Text: The VWPA provides for “mak[ing] restitution to any victim of such [above-described] offense.” See 18 U.S.C. § 3663(a)(1). This Court defines “victim” under the VWPA “to reach ‘indirect’ victims . . . as well as ‘direct’ victims.” United States v. Durham, 755 F.2d 511, 512-13 (6th Cir. 1985), abrogated on other grounds by United States v. Clark, 957 F.2d 248, 253 (6th Cir. 1992). Subsequent to this decision, Congress amended the VWPA to define “victim” as: a person directly and proximately harmed as a result of the commission of an offense . . . including, in the case of an offense that involves as an element a scheme, conspiracy, or pattern of criminal activity, any person directly harmed by the defendant’s criminal conduct in the course of the scheme, conspiracy, or pattern. Id. § 3663(a)(2). This amendment “expands the definition of ‘victim’ in cases such as mail fraud,” i.e., cases involving schemes to defraud. United States v. Davis, 170 F.3d 617, 627 (6th Cir. 1999) (citing United States v. Jewett, 978 F.2d 248, 253 (6th Cir. 1992)). -4- No. 11-5452 United States v. Wallace The district court interpreted the VWPA to “permit restitution to be ordered in circumstances such as those presented here,” where the direct victim had passed on its loss to a successor in interest. To reach this decision, the district court relied on two Ninth Circuit decisions, United States v. Youpee, 836 F.2d 1191 (9th Cir. 1988), and United States v. Smith, 944 F.2d 618 (6th Cir. 1991). In Youpee, the court upheld a restitution award to the insurance company that indemnified the actual “victim” in the case. In Smith, the court upheld a restitution award to the Federal Savings and Loan Insurance Corporation, which had acquired the claims of the defrauded savings and loan institution. The court determined that these cases, although not binding, demonstrated persuasively that the VWPA permitted a “successor in interest” to the direct victim to receive restitution. The court relied on the LaRoche Email to find that Lehman Brothers “is now known as Aurora Bank FSB.” It reasoned that the name change “is not problematic from a restitution perspective to permit the defendant to avoid a recognized restitution obligation.” It concluded that Fannie Mae constituted “an appropriate victim for purposes of the [VWPA],” and awarded the judgment originally payable to Lehman Brothers to be paid to Fannie Mae. Wallace maintains that the court erred in awarding restitution to Fannie Mae, because Fannie Mae is not a “victim” under the VWPA. He argues the VWPA’s plain language limits “victims” to “any person directly or proximately harmed as a result of the commission of the offense,” (emphasis in original) which excludes any entity even one step removed from the defendant’s conduct. He contends that Hughey v. United States, 495 U.S. 411, 413 (1990), excludes successors in interest, because it permits restitution “only for the loss caused by the specific conduct that is the basis of the offense of conviction.” Because the government made no showing of direct harm to Fannie Mae, -5- No. 11-5452 United States v. Wallace nor of any loss that Fannie Mae sustained from Wallace’s conduct, Wallace maintains that it can not constitute a proper “victim.” He urges the Court to rely on United States v. Campbell, 106 F.3d 64 (5th Cir. 1997), which denied an order of restitution to a bank because it had already recovered its losses in full from the sale of the underlying property. Wallace’s reliance on Hughey and Campbell is misplaced. Both cases address the amount of restitution that a court could order, but not who is entitled to receive such an award. Hughey applies to the scope of any order of restitution, “requir[ing] the court to exclude injuries caused by offenses that are not part of the [conspiracy] of which [the defendant] has been convicted.” United States v. Elson, 577 F.3d 713, 723 (6th Cir. 2009) (quoting United States v. George, 403 F.3d 470, 474 (7th Cir.2005)) (citing Hughey, 495 U.S. at 418, 420) (second and third brackets in original). Campbell stands for the proposition that a victim is “entitled to restitution in the amount of the loss suffered by making a loan to [the defendant],” but not more than that amount. 106 F.3d at 69. The plea agreement that Wallace signed established “the loss caused by the conduct underlying the offense of conviction,” as the $138,000 loss that Lehman Brothers sustained as a result of the default. Furthermore, the VWPA explicitly contemplates restitution awards to parties that fall outside its broad definition of “victim.” In cases involving property loss, the VWPA requires any restitution order to include a directive to “return the property to the owner of the property or someone designated by the owner.” 18 U.S.C. § 3663(b)(1)(A). In plain terms, “someone designated by the owner” need not be the actual victim of the crime. A related subsection also permits courts to award restitution to “the person who provided or is obligated to provide” compensation that a victim “has received . . . from insurance or any other source.” Id. § 3664(j)(1). So long as the court limits the -6- No. 11-5452 United States v. Wallace restitution award to “the loss caused by the specific conduct that is the basis of the offense of conviction,” see Hughey, 495 U.S. at 413, it may issue judgment at its own discretion. The LaRoche Email explicitly states that “[t]he investor who owns this loan . . . is Fannie Mae as Trustee for Fannie Mae REMIC Trust 2007-W2.” With this evidence, the court properly could find that Fannie Mae is the “owner of the property” and require Wallace to return it to them. Alternatively, since a “wholly owned subsidiary” of Lehman Brothers (sub nom Aurora Bank) designated Fannie Mae as the owner of the loan, Fannie Mae is “someone designated by the [original] owner of the property.” Finally, it was proper for the court to view Fannie Mae as “the person who provided or is obligated to provide the compensation” to Lehman Brothers for its loss. Under any of these interpretations, Fannie Mae is a proper recipient of a restitution award. Wallace further contends that the district court lacked sufficient evidence to name Fannie Mae as the restitution recipient, and that the court engaged in an erroneous reading of the evidence at its disposal. Wallace argues that the LaRoche Email alone does not suffice for the court to develop “a full understanding of the relationship between Lehman Brothers, Fannie Mae, and Aurora Bank and how those relationships would and could affect the restitution concept.” Specifically, Wallace maintains that the district court lacked evidence of “when the loan was purchased, was it purchased at a discount, the type of loan servicer Aurora Loan Services, LLC, was, the type of compensation arrangements it makes with its investors or the performance history of the LLC.” Wallace’s argument fails. First, Rule 1101(d) permits courts to accept hearsay in sentencing hearings. United States v. Silverman, 976 F.2d 1502, 1512 (6th Cir. 1992) (en banc). The Court requires only that “the accused must be given an opportunity to refute [hearsay evidence], and the -7- No. 11-5452 United States v. Wallace evidence must bear some minimal indicia of reliability in respect of defendant’s right to due process.” Id. (quoting United States v. Robinson, 898 F.2d 1111, 1115 (6th Cir. 1990)). While the LaRoche Email may lack the degree of reliability that live, in-court testimony contains, this Court has held that statements made by victims’ attorneys at sentencing hearings can bear the requisite “indicia of reliability.” See Elson, 577 F.3d at 732. Therefore, the court properly relied on this evidence. Second, evidence of the specifics of Fannie Mae’s ownership of the loan are immaterial, because Wallace advised the court that he did not challenge the amount of the restitution order. Therefore, he waives any challenge to that amount on appeal.