Court Opinion

ID: 4223316
Source: CourtListenerOpinion
Date Created: 2017-11-23 01:00:27.024307+00
Date Added: 2024-06-11T14:15:36.607812
License: Public Domain

Case: 16-51226          Document: 00514247659              Page: 1      Date Filed: 11/22/2017

           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT
                                                                                        United States Court of Appeals

                                            No. 16-51226
                                                                                                 Fifth Circuit

                                                                                               FILED
                                                                                       November 22, 2017

16-51226                                                                                  Lyle W. Cayce
                                                                                               Clerk
UNITED STATES OF AMERICA,

                 Plaintiff - Appellee

v.

MARIA GUADALUPE HERNANDEZ, also known as Lou Hernandez,

                 Defendant - Appellant

-----------------------------------------------------------------------------------------------

Consolidated with 16-51240

UNITED STATES OF AMERICA,

                   Plaintiff - Appellee

v.

HILDA SIMENTAL MENDOZA,

                    Defendant - Appellant

                      Appeals from the United States District Court
                            for the Western District of Texas
    Case: 16-51226    Document: 00514247659     Page: 2   Date Filed: 11/22/2017

                                No. 16-51226
                             Cons w/ No. 16-51240

Before DENNIS, CLEMENT, and GRAVES, Circuit Judges.
PER CURIAM:
      Maria Hernandez and Hilda Mendoza, two former employees at El Paso
Federal Credit Union, pleaded guilty to wire and bank fraud charges arising
out of their modified “Ponzi scheme,” in the course of which they issued
“unrecorded” share certificates and misappropriated the proceeds. In this
consolidated appeal, both defendants challenge the sentences imposed by the
district court. For the reasons discussed below, we affirm the district court’s
sentences.
                                        I
      Hernandez and Mendoza were employed as a manager and assistant
manager, respectively, by El Paso Federal Credit Union.          In 2015, both
employees were charged with bank fraud, wire fraud, and conspiracy to commit
both after a government investigation uncovered their scheme that involved
fraudulently issuing “unrecorded” share certificates from the credit union.
The credit union funded its operations in part by selling shares of the company
to investors for a fixed principal amount, issuing share certificates as proof of
ownership. The investors were then paid dividends during the term of the
certificate and were owed a return of their principal at the end of the term.
The credit union managed these transactions by maintaining detailed records
of the money coming in and the schedule of payments owed.
      From 2007 until 2012, however, Hernandez and Mendoza sold as many
as 111 share certificates without recording them or conveying the funds to the
credit union, incurring substantial debt for the company without its
knowledge. Because each share certificate required two employee signatures,
Hernandez and Mendoza each signed every certificate. The employees hid the
money paid by the investors in deceased customers’ accounts, dormant
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                                No. 16-51226
                             Cons w/ No. 16-51240

accounts, and other accounts that Hernandez controlled. The defendants then
used some of this money to continue the scheme by paying out dividends to
purchasers of the unrecorded certificates, using the credit union’s software and
printer to print dividend checks with magnetic-ink routing numbers.
Hernandez also used millions for personal expenses: funding vacations,
gambling in Las Vegas, and purchasing real estate.
      This scheme was ultimately revealed after a 2011 audit by the National
Credit Union Administration (NCUA) triggered a government investigation
that uncovered the 111 unrecorded certificates.       The credit union, having
insufficient assets to pay the holders of these certificates, became insolvent,
and the NCUA paid out approximately $18.3 million in claims to these
investors.
      Hernandez and Mendoza were both indicted and pleaded guilty to all
charges. Each defendant’s presentence report (PSR) increased her base offense
level under the United States Sentencing Guidelines by 20 for causing a loss
of over $7 million. Additionally, both PSRs included a two-level enhancement
pursuant to U.S.S.G. § 2B1.1(b)(11) for using an “authentication feature”—the
magnetic-ink routing numbers—on the unrecorded dividend checks.                At
Hernandez’s sentencing, the district court calculated her Guidelines range at
188–235 months and sentenced her to 188 months imprisonment.                   At
Mendoza’s sentencing, the district court reduced her offense level for
acceptance of responsibility and for serving a relatively minor role in the fraud,
calculating a final Guidelines range of 121–151 months and sentencing her to
121 months imprisonment. Both Hernandez and Mendoza timely appealed,
Hernandez     challenging   her   sentencing    enhancements     for   using   an
authentication feature and for causing a loss over $7 million, and Mendoza
challenging her sentence as substantively unreasonable.
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                                 No. 16-51226
                              Cons w/ No. 16-51240

                                       II
      We review the district court’s interpretation and application of the
Guidelines de novo and its factual findings for clear error. United States v.
Trujillo, 502 F.3d 353, 356 (5th Cir. 2007).         Sentences challenged for
substantive reasonableness are reviewed for abuse of discretion. Gall v. United
States, 552 U.S. 38, 51 (2007). If the defendant fails to object at sentencing to
the procedural or substantive reasonableness of her sentence, we review only
for plain error. United States v. Peltier, 505 F.3d 389, 391–92 (5th Cir. 2007).
                                       III
      Section 2B1.1(b)(11) of the United States Sentencing Guidelines provides
for a two-level increase in the offense level if the defendant possessed or used
an authentication feature to further the crime. An authentication feature is
defined in relevant part by 18 U.S.C. § 1028(d)(1) as any “symbol, code, image,
or sequence of numbers . . . used . . . to determine if the document is
counterfeited, altered, or otherwise falsified.” See U.S.S.G. § 2B1.1, comment.
(n.10).
      Hernandez asserts that her conduct—printing checks with magnetic ink
routing numbers using software available in the ordinary course of her
employment—should not trigger this enhancement.           She argues that the
authentication-feature enhancement was intended for defendants who actively
seek out machines capable of creating authentication features. Because the
purpose of the enhancement, she alleges, is to deter those who “rise to the level
of   sophistication   where   they   obtain   machines    capable   of   creating
authentication features,” applying it to her conduct uproots the policy goals of
this provision.
      However, Hernandez provides virtually no support for her allegation
that this is, in fact, the policy goal of this enhancement. The text of the
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                                No. 16-51226
                             Cons w/ No. 16-51240

relevant Guidelines provision offers no indication that the section should be
given the narrower construction that Hernandez suggests; instead it merely
directs the reader to the definition of authentication feature in § 1028(d)(1).
Section 1028 similarly provides no basis to conclude that those who misuse
equipment provided by their employer are outside the scope of this
enhancement.
      Even if Hernandez could demonstrate that this enhancement was
intended for those who “seek out” devices to create authentication features, the
plain language of the Guidelines controls “unless it creates an absurd result.”
United States v. Gordon, 838 F.3d 597, 603 (5th Cir. 2016). Here, the magnetic
routing numbers printed on the fraudulent checks clearly constitute a “string
of numbers” used to “determine if the document is counterfeited, altered, or
otherwise falsified.” 18 U.S.C. § 1028(d)(1). Further, there is nothing “absurd”
about applying the enhancement to Hernandez. We do not accept Hernandez’s
suggestion that she was necessarily less culpable than someone who does not
use their employment to access an authentication machine.                  Though
Hernandez may not have independently accessed such a device, she exploited
the tools entrusted to her by the credit union to perpetuate a fraud that
ultimately rendered the company insolvent. Accordingly, the district court did
not err in applying the authentication-feature enhancement to Hernandez’s
sentence.
                                       IV
      Hernandez additionally contends that the district court erred in holding
her responsible for a loss of $18,376,542, which led to a 20-level increase in her
base offense level under U.S.S.G. § 2B1.1(b)(1).           A district court’s loss
calculation, and its embedded determination that the loss amount was
reasonably foreseeable, are factual findings reviewed for clear error. United
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                                No. 16-51226
                             Cons w/ No. 16-51240

States v. Sanders, 343 F.3d 511, 519 (5th Cir. 2003) (loss calculation reviewed
for clear error); United States v. Hull, 160 F.3d 265, 268–69 (5th Cir. 1998)
(loss foreseeability determination reviewed for clear error). The district court
need only make “a reasonable estimate of the loss,” based on its assessment of
the evidence. United States v. Hebron, 684 F.3d 559, 560 (5th Cir. 2012) (citing
U.S.S.G. § 2B1.1, comment. (n.3(C)). This court will not overturn these factual
findings as long as they are “plausible in light of the record as a whole.”
Sanders, 343 F.3d at 520.
        Hernandez’s argument does not properly account for the record as a
whole and instead focuses on one piece of evidence: an audit report prepared
by Lillie and Company, LLC. Because this particular report only specifically
traced $3.7 million of the over-$18 million loss directly to Hernandez, she
argues that the district court erred by holding her accountable for the entire
loss.
        Notably, however, the Lillie Report did not purport to be an accounting
of the full extent of the loss Hernandez caused. The Lillie Report was instead
prepared for the narrow purpose of substantiating sufficient loss to support an
insurance claim by the credit union. Regardless, this report even stated that
“it appears the Credit Union sustained a loss of at least $19 million resulting
from the actions of their former employee, Lou Hernandez.” Additionally,
other evidence considered by the district court supported its loss calculation.
Prior to sentencing, the court held an evidentiary hearing at which a certified
public accountant who prepared the Lillie Report and a NCUA director who
oversaw the liquidation of the credit union testified that Hernandez and
Mendoza’s criminal conduct caused the loss of over $18 million. Accordingly,
the district court’s determination that Hernandez was responsible for a loss

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                                No. 16-51226
                             Cons w/ No. 16-51240

over the Guidelines threshold of $7 million meriting the 20-level enhancement
was “plausible in light of the record as a whole.” Sanders, 343 F.3d at 520.
                                       V

      We now turn to Mendoza, the assistant manager at the credit union.
Mendoza challenges her sentence as substantively unreasonable, contending
that it is greater than necessary to satisfy the sentencing goals set forth in 18
U.S.C. § 3553(a). Though Mendoza did not object to her sentence after it was
imposed, she argues that she preserved her argument for appeal by requesting
a below-Guidelines variance both in writing and at her sentencing hearing
before the sentence was announced. Accordingly, she argues, her claim should
not be reviewed under the less-favorable plain error standard. Because we
determine that Mendoza could not succeed on the merits of her claim even if
she properly preserved her objection, we need not decide whether our review
is limited to plain error.
      We review an appellant’s claim that her sentence is substantively
unreasonable for abuse of discretion. United States v. Scott, 654 F.3d 552, 555
(5th Cir. 2011). This review is “highly deferential, because the sentencing
court is in a better position to find facts and judge their import under the §
3553(a) factors with respect to a particular defendant.” Id. A sentence within
the Guidelines range is presumptively reasonable, and this presumption is
rebutted only if the appellant demonstrates that the sentence does not account
for a factor that should receive significant weight, gives significant weight to
an irrelevant or improper factor, or represents a clear error of judgment in
balancing sentencing factors. United States v. Cooks, 589 F.3d 173, 186 (5th
Cir. 2009).
      Mendoza does not argue that the district court erred in applying the
Guidelines, considered an irrelevant factor, or failed to consider a factor that
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                                No. 16-51226
                             Cons w/ No. 16-51240

should be given significant weight. Rather, she asserts that the Guidelines
resulted in a sentence that is too harsh considering the facts of the case and
the § 3553(a) factors.   Mendoza argues that her current age, low risk for
recidivism, lack of criminal history, and family ties militate in favor of a
shorter sentence. Additionally, Mendoza asserts that she is less culpable than
her Guidelines range accounted for because her supervisor, Hernandez,
masterminded the scheme and was the only one of them to benefit personally
from the fraudulent activity. As the district court noted, the evidence does not
suggest that Mendoza used the funds from their scheme to finance personal
luxuries.
      At Mendoza’s sentencing, the district court carefully considered her
request for a downward departure and these mitigating factors, discussed the
§ 3553(a) factors, and ultimately determined that a 121-month sentence was
warranted.    Mendoza’s claim amounts to a request that we reweigh the
sentencing factors and substitute our judgment for that of the district court,
which we will not do. See Scott, 654 F.3d at 552. Because Mendoza has not
rebutted the presumption that her within-Guidelines sentence is reasonable,
we find that the district court did not abuse its discretion.
                                       VI
      For these reasons, we affirm the judgment of the district court.

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