Court Opinion

ID: 152184
Source: CourtListenerOpinion
Date Created: 2010-08-03 18:02:54+00
Date Added: 2024-06-11T17:24:27.782707
License: Public Domain

UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT

                             No. 08-5026

UNITED STATES OF AMERICA,

                Plaintiff - Appellee,

           v.

MICHAEL A. LOMAS,

                Defendant - Appellant.

Appeal from the United States District Court for the Eastern
District of North Carolina, at Raleigh. W. Earl Britt, Senior
District Judge. (5:07-cr-00117-BR-1)

Argued:   March 26, 2010                   Decided:   August 3, 2010

Before MICHAEL and DAVIS, Circuit Judges, and Eugene E. SILER,
Jr., Senior Circuit Judge of the United States Court of Appeals
for the Sixth Circuit, sitting by designation.

Affirmed by unpublished per curiam opinion.

ARGUED: Elizabeth Brooks Scherer, SMITH MOORE LEATHERWOOD LLP,
Raleigh, North Carolina, for Appellant.     Anne Margaret Hayes,
OFFICE OF THE UNITED STATES ATTORNEY, Raleigh, North Carolina,
for Appellee.     ON BRIEF: Stephen W. Petersen, SMITH MOORE
LEATHERWOOD LLP, Raleigh, North Carolina, for Appellant. George
E. B. Holding, United States Attorney, Jennifer P. May-Parker,
Assistant United States Attorney, OFFICE OF THE UNITED STATES
ATTORNEY, Raleigh, North Carolina, for Appellee.
Unpublished opinions are not binding precedent in this circuit.

                                2
PER CURIAM:

       Michael A. Lomas was indicted in a multi-count indictment

charging conspiracy in violation of 18 U.S.C. § 371 and mail

fraud in violation of 18 U.S.C. § 1341. Lomas pled guilty to one

count of mail fraud pursuant to a plea agreement in which the

parties left the issue of restitution for the sentencing court’s

determination. The district court sentenced Lomas to serve 240

months in prison and to pay $45,675,365.97 in restitution to 993

victims of his mail fraud scheme.                 On appeal, Lomas contends

that   under      the   Mandatory     Victim    Restitution     Act,   18   U.S.C.

§ 3663A, none of the 993 people in the restitution order qualify

as “victims of the offense” to which he pled guilty and asks

that   we   vacate      the   order   of    restitution.   We   reject      Lomas’s

contention and, accordingly, we affirm.

                                           I.

       On May 10, 2007, Lomas was named in an 18-count indictment

in the United States District Court for the Eastern District of

North Carolina.         Count One of the Indictment charged Lomas and

his    co-defendants      with   conspiracy      to   commit    mail     fraud   in

violation    of    18   U.S.C.   § 1341.        Counts   Two   through    Eighteen

charged Lomas and his co-defendants, as principals and aiders

and abettors, with individual substantive counts of mail fraud

in violation of 18 U.S.C. §§ 1341 and 2.

                                           3
       The     Indictment       began       with    a    lengthy       introduction              that

described the operation and scope of the scheme to defraud and

set out the roles played by Lomas and his six co-defendants.                                       It

clearly       stated        that     the     allegations             set     forth          in    the

introduction          were     incorporated             into    each         count          of     the

Indictment.          J.A. 56, ¶19 (“The allegations set forth in this

Introduction          are     incorporated           into      each         count          in     this

Indictment.”).

       The     introduction          catalogued          the    extensive             overlapping

schemes       that    Lomas        and    his     co-defendants            used       to    defraud

individuals out of approximately $70 million.                                In 1999, Lomas

and    co-defendant         Michael       Young     operated     an        entity      named       The

Agency Alliance Group (TAAG).                     TAAG operated a “lease program”

in    which    individuals         were     promised      a    15%    annual          return      from

revenue       generated       by     pay     telephones,         payable          monthly,         in

exchange for five annual investments of $6,000.

       After    Pennsylvania             authorities      issued       TAAG       a    cease-and-

desist       order,     Lomas       and      his     co-defendants            renamed            their

enterprise the “National Payphone Corporation” and reworked the

terms    of    their    scam,        promising       a    14.35%       annual         return       and

requiring a $7,000 annual investment. Otherwise, they continued

to operate the same scheme.                       After a federal agency sued an

unrelated entity that promised similar terms to investors, Lomas

changed the name and appearance of his enterprise yet again.

                                                4
       In early 2001, Lomas and his co-defendants formed Mobile

Billboards of America, Inc.               This time they promised a 13.49%

annual return, required seven annual investments of $20,000, and

purported to generate revenue by selling ad space on the sides

of trucks.       Between 2001 and 2004, Lomas directed the promotion

and sale of the “investments.” The Indictment charged that Lomas

made    extensive      use   of   false    and    misleading       statements,         both

spoken and written, all of which were aimed at persuading his

“investors” that he was operating a legitimate business that

would generate sufficient money to make the promised investment

returns and would carry little or no risk.

       Lomas     and   his    co-defendants          scammed      approximately        $70

million through various iterations of this investment scheme.

At the peak of his scheme in 2004, Lomas and his co-defendants

took    in     approximately      $4    million      monthly.        The     government

estimates      that    individuals      lost     tens    of     millions    dollars      to

Lomas and his co-defendants.

       On December 17, 2007, Lomas entered into a plea agreement

with the government pursuant to which he agreed to plead guilty

to Count Two of the Indictment.                Count Two charged, in material

part,   that,     on   or    about     March   13,      2003,    Lomas     and   his    co-

defendants “having devised a scheme and artifice to defraud, and

to obtain money and property by means of materially false and

fraudulent pretenses, representations, and promises,” and “for

                                           5
the purpose of executing such scheme and artifice,” “placed in a

post office and authorized depository for mail matter” a letter

(sent by co-defendant Scott B. Hollenbeck) to retiree “GW” in

Roanoke Rapids, North Carolina.                J.A. 59-60.

       In exchange for Lomas’s guilty plea to Count Two of the

Indictment,       the    government       agreed       to     dismiss     the    remaining

counts of the Indictment, including the conspiracy charge.                               Also

as     a   part   of     his     plea    agreement,         Lomas    agreed      to   “make

restitution       to    any     victim    in   whatever       amount      the    Court   may

order, pursuant to 18 U.S.C. 3663 and 3663A.”                             J.A. 64.       The

district court accepted Lomas’s guilty plea on January 7, 2008.

On August 18, 2008, the district court sentenced Lomas to the

statutory maximum of 240 months.

       The sentencing court also ordered Lomas to pay restitution.

In Lomas’s Pre-Sentence Report, the Probation Officer reported

that “[d]uring the course of the instant offense, 1,231 victims

were       defrauded      and     suffered         a   loss     of      $70,967,712.90.”

J.A. 197, ¶18.           Nevertheless, the probation officer initially

stated that restitution could not be ordered in this case.                                The

government objected, and filed a memorandum asking the district

court to order Lomas to pay $45,675,365.97 in restitution to 993

victims.      On October 9, 2008, following a hearing, the district

court      ordered      Lomas    to     pay    $45,675,365.97        to    993    victims,

stating that Lomas was jointly and severally liable with his

                                               6
four co-defendants for this sum.                 In support of its ruling, the

district court cited the very broad definition of “offense” in

18   U.S.C.        § 3663A(a)(2),    and    noted      that    Count   Two    of    the

Indictment, the count to which Lomas pled guilty, explicitly

incorporated the description of the scheme from the Indictment’s

introductory section.

       On October 14, 2008, Lomas filed a timely notice of appeal.

We have jurisdiction pursuant to 28 U.S.C. § 1291 and 18 U.S.C.

§ 3742(a).

                                           II.

       We review criminal restitution orders under an abuse of

discretion standard.            United States v. Henoud, 81 F.3d 484, 487

(4th       Cir.   1996);   United    States      v.   Hoyle,   33   F.3d     415,   420

(4th Cir.         1994).   A   sentencing   court's     discretion     in    ordering

restitution “is circumscribed by the procedural and substantive

protections” of the statute authorizing restitution. Henoud, 81

F.3d at 487.         Here, the applicable statute is 18 U.S.C. § 3663A,

the Mandatory Victim Restitution Act of 1996 (“MVRA”). 1

       1
       Restitution in federal court is governed by one of two
statutes: the Victim Witness Protection Act (“VWPA”), 18
U.S.C. § 3663, or the Mandatory Victim Restitution Act of 1996
(“MVRA”), 18 U.S.C. § 3663A. The structure and language of both
the MVRA and the VWPA are substantially the same, other than in
one respect:     the VWPA permits a district court to order
restitution subject to a defendant’s ability to pay and the MVRA
(Continued)
                                            7
                                  III.

     The   district   court,   after   conducting   a   hearing,   granted

restitution in the amount of $45,675,365.97 to 993 victims.            It

clearly stated its reasoning on the record:

     The Court holds that the amount of restitution is not
     limited to the counts of conviction. The court bases
     its reasoning on 18 U.S.C. Section 3663(a)(2) [sic]
     for the purposes of restitution and victim and offense
     that involves as a scheme or pattern of criminal
     activity means any person directly in harm of the
     defendant’s criminal conduct in the course of the
     scheme, conspiracy or pattern.
          Now, in the case of United States versus Henoud,
     81 F.3d 484, the Fourth Circuit said this amendment is
     widely   viewed   as   partially  overruling   Hughey’s
     restrictive interpretation of the VWPA and expanding
     on the Courts’ authority to grant restitution.
          Federal courts now allow broader restitution
     orders encompassing losses that resulted from a
     criminal scheme or conspiracy regardless of whether
     the defendant is convicted for each criminal act
     within that scheme. The harm must be a direct result
     of the defendant’s criminal conduct though or closely
     related to the scheme.
          The scheme, in my view, and I so hold, is clearly
     described in the indictment in the introduction, which
     as I have pointed out earlier, is by paragraph 19 on
     page 7 incorporated into each count of the Indictment
     and the count to which the defendant pled guilty,
     Count 2, specifically refers to having devised a
     scheme and artifice to defraud.
          And United States versus Karam, 201 F.3d 320, the
     Fourth Circuit said that where one count specifically
     incorporated all of the factual allegations contained
     in another count, that the court could order or should
     order restitution based on that.

mandates restitution for certain crimes without consideration to
the defendant’s ability to pay.      18 U.S.C. §§ 3663 & 3663A.
There is no dispute that this case is controlled by the MVRA.

                                   8
           So this court holds that . . . by pleading
      guilty, the Defendant Lomas pled guilty and he
      admitted the conduct set forth in the introduction and
      incorporated into the count to which he plead guilty.

J.A. 117-18.

                                               A.

      Lomas      contends        that    none          of    the     993    people   in    the

restitution order qualify as “victims of the offense” to which

he   pled   guilty       under    the    MVRA.         See   18     U.S.C.    §   3663A(A)(1)

(“[T]he     court       shall    order     .       .    .    that    the     defendant     make

restitution to the victims of the offense.”).                              He argues, citing

Hughey    v.    United     States,      495    U.S.         411    (1990),    superseded     by

statute, Crime Control Act of 1990, Pub. L. No. 101-647, § 2509,

104 Stat. 4863, as recognized in Henoud, 81 F.3d at 488, that

under the MVRA, the term offense is limited to indicate “the

offense of conviction,” and that his “offense of conviction” was

a very narrow mail fraud offense with a single victim.                                    Thus,

Lomas argues that he should only be required to pay restitution,

if any, to “retiree G.W.,” the only victim who could have been

directly       harmed    by     the     specific,           narrow    scheme      that    Lomas

insists he pled guilty to when he pled guilty to Count Two of

the Indictment. 2

      2
       Lomas relies on United States v. Adams, 363 F.3d 363 (5th
Cir. 2004), but that case is easily distinguished.     In Adams,
the Fifth Circuit held that the parties to a plea agreement may,
if they choose, narrow the scope of the scheme alleged in an
(Continued)
                                               9
      The government argues that Lomas was correctly ordered to

pay   $45,675,365.97        in   restitution      to    993   people   because       the

Indictment plainly manifested that he defrauded all of those

victims.     It argues that the allegations regarding Lomas’s five-

year scheme are detailed in the introduction of the Indictment

and   are   all    explicitly        incorporated      into   each   count     of    the

Indictment,       including      Count   Two.         The   government      adds    that

nothing     in    Lomas’s     plea    agreement       or    guilty   plea    colloquy

narrowed     the    factual      basis   of     his    conviction.          Thus,   the

government continues, Lomas’s conviction was sufficiently broad

to support the district court’s restitution order.

                                          B.

      The government clearly has the better of the argument here.

The 1990 amendments to the VWPA, as interpreted by Henoud, 81

F.3d at 488, fatally undermine Lomas’s argument that the law

indictment for restitution purposes. Adams, 363 F.3d at 366-68.
The court found on the facts in that case that the defendant and
the government (essentially by acquiescence to the defendant’s
insistence) narrowed the scope of the scheme in their plea
agreement from the broader scheme alleged in the indictment.
Id. at 367. Here, the parties did not narrow the scope of the
scheme alleged in the indictment in the plea agreement. To the
contrary, as part of the negotiated plea agreement in this case,
the parties agreed that Lomas would “make restitution to any
victim in whatever amount the Court may order, pursuant to 18
U.S.C. 3663 and 3663A.”   J.A. 64.   Thus, the parties expressly
left for the determination by the sentencing court the contours
of a restitution order.

                                          10
only required him to pay restitution to victims explicitly named

in   the   count     of    his     Indictment    to     which   he    pled       guilty.

Although Henoud interpreted the 1990 amendment as it applied to

the VWPA,    a     later   amendment     added    identical     language         to   the

MVRA. Compare Crime Control Act of 1990, Pub. L. No. 101-647,

§ 2509,    104     Stat.    4863     (codified    as     amended     at     18    U.S.C.

§ 3663(a)(2)(1994))         with     Antiterrorism        and   Effective          Death

Penalty Act of 1996, Pub. L. No. 104-132, § 204(a), 110 Stat.

1227 (codified at 18 U.S.C. § 3663A(a)(2)(2000)). Accordingly,

our interpretation of the language in U.S.C. § 3663(a)(2) from

Henoud controls this case and we hereby adopt it.

     In    Henoud,    81    F.3d    at   488,    we   explained      that    the      1990

amendment to 18 U.S.C. § 3663(a)(2) broadened the ability of

district courts to grant restitution.                 We stated:

     The amendment is widely viewed as partially overruling
     Hughey's restrictive interpretation of the VWPA and
     expanding   district   courts'    authority    to    grant
     restitution. See United States v. Kones, 77 F.3d 66,
     69 (3rd Cir. 1996); United States v. Broughton-Jones,
     71 F.3d 1143, 1147 n.1 (4th Cir. 1995). The majority
     view   is  that   the  1990   amendment   “did    have   a
     substantive impact on the amount of restitution a
     court could order when a defendant is convicted of an
     offense involving a scheme, conspiracy, or pattern.”
     United States v. DeSalvo, 41 F.3d 505, 515 (9th Cir.
     1994). Federal courts therefore now allow broader
     restitution orders encompassing losses that result
     from a criminal scheme or conspiracy, regardless of
     whether the defendant is convicted for each criminal
     act within that scheme. See, e.g., United States v.
     Manzer, 69 F.3d 222, 230 (8th Cir. 1995). The harm
     must be a direct result of the defendant's criminal

                                          11
     conduct, though, or “closely related to the scheme.”
     Kones, 77 F.3d at 70.

Id. (holding that the trial court did not err when it ordered

restitution for losses caused by acts for which the defendant

was not convicted).

     Applying that analysis to the same language in the MVRA, 18

U.S.C. § 3663A(a)(2), it is clear that the district court here

properly ordered Lomas to pay restitution as it did.   The MVRA

states, in pertinent part:

     (a)(1) Notwithstanding any other provision of law,
     when sentencing a defendant convicted of an offense
     described in subsection (c), the court shall order . .
     . that the defendant make restitution to the victim of
     the offense . . .
     (2) For the purposes of this section, the term
     “victim” means a person directly and proximately
     harmed as a result of the commission of an offense for
     which restitution may be ordered 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. . . .
     (3) The court shall also order, if agreed to by the
     parties in a plea agreement, restitution to persons
     other than the victim of the offense.
     . . . .
     (c)(1) This section shall apply in all sentencing
     proceedings for convictions of, or plea agreements
     relating to charges for, any offense—
     (A) that is--
     (i) a crime of violence, as defined in section 16;
     (ii) an offense against property under this title, or
     under section 416(a) of the Controlled Substances Act
     (21 U.S.C. 856(a)), including any offense committed by
     fraud or deceit; . . . .

18 U.S.C. § 3663A.

                               12
      The MVRA requires the court to order a defendant to pay

restitution to victims of certain crimes.                        § 3663A(a)(1) (“the

court shall order”).             Because mail fraud is a crime against

property under Title 18 of the United States Code, it triggers

the   MVRA   and    thus   the    district         court   was     required     to    order

restitution to the victims of Lomas’s crime.

      The statute also clearly defines “victims.”                         Victims are

those who are “directly and proximately harmed as a result of

the commission of an offense.”                    § 3663A(a)(2).      When the crime

involves a scheme or pattern of criminal activity, the universe

of    victims      includes      “any     person       directly      harmed      by    the

defendant’s     criminal      conduct        in     the    course    of   the    scheme,

conspiracy, or pattern.”            Id.       Lomas’s conviction was based on

his   knowing      participation        in    a     scheme    to    defraud     executed

through the use of the mails in violation of 18 U.S.C. § 1341.

Since mail fraud necessarily includes a scheme to defraud, and

in fact includes it as an element of the crime itself, United

States v. Curry, 461 F.3d 452, 457 (4th Cir. 2006), the victims

affected by Lomas’s offense include all persons harmed by Lomas

“in the course of [his participation in] the scheme.” See §

3663A(a)(2).

      Lomas disputes the scope of the scheme.                          We reject his

contention that the plea agreement narrowed the scope of the

charged scheme, and we can discern no other basis on which to

                                             13
adopt      Lomas’s    contentions.           We   most    recently     discussed     this

issue in United States v. Karam, 201 F.3d 320, 325-26 (4th Cir.

2000). 3      There, Thomas E. Karam, a certified public accountant,

was indicted for wire fraud, money laundering, and aiding and

abetting.           Id.    at    323.       The   indictment        charged    him   with

executing       a     multi-year        scheme    to     defraud     private    medical

entities such as Fairfax Anesthesiology Associates, Inc., out of

millions of dollars.             Id. at 325.      Karam pled guilty to a single

count of wire fraud in which he was charged with executing the

scheme by requesting an electronic funds transfer of $150,000.

That count of the indictment specifically incorporated all of

the factual allegations contained in the indictment, allegations

that       detailed       Karam’s     long-term    scheme      to    defraud     private

medical practices.              Id.     The district court sentenced Karam to

24   months     imprisonment          and   ordered      him   to    pay   $774,508   in

restitution, an amount covering losses beyond the losses arising

from the count of conviction.                Id. at 323-24.          On appeal, Karam

challenged the amount of the restitution order, arguing that he

was required to pay only $150,000, the amount explicitly stated

       3
       Again, Karam addresses the application of 18 U.S.C. §
3663(a)(2), rather than 18 U.S.C. § 3663A(a)(2).    As discussed
above, both restitution statutes contain the same definition of
“victim,” including the definition that applies when the offense
of conviction has a scheme as an element of the offense. See 18
U.S.C. §§ 3663(a)(2) & 3663A(a)(2).

                                             14
in the count of conviction.                        Id. at 325.           He argued that the

additional $624,508 in restitution was not directly related to

the conduct underlying his conviction.

      We rejected Karam’s contentions and affirmed, holding that,

“[f]ederal         courts       may    order       restitution         encompassing            losses

resulting      from       a    criminal         scheme     ‘regardless           of   whether     the

defendant is convicted for each criminal act within the scheme,’

so   long    as     the       loss    is    a     direct      result     of    the      defendant's

criminal conduct or is ‘closely related to the scheme.’” Id. at

325-26      (citing       Henoud,      81       F.3d     at    488).        We    evaluated       the

$624,508      in    restitution            that    was     ordered     in     addition      to    the

$150,000      and    found       that       the     additional         money      was    “directly

related to the conduct underlying Karam’s conviction” because it

represented losses that resulted from the same scheme to steal

money from medical professionals by purporting to invest their

money    in        fraudulent          investment             schemes.            Id.     at     326.

Specifically, in addition to stealing money (by failing to meet

payroll tax liabilities) from medical groups, Karam also stole

from individual physicians by inviting them to “defer” their

bonuses and purporting to “invest” their money in a business

that promised a 15% return.

      Thus, under Karam, a sentencing court may order restitution

for losses resulting from a scheme even if the defendant is not

convicted      of    each       individual          criminal      act,        e.g.,     indictment

                                                   15
count,          as    long   as      the      acts    are    the    direct       result       of    the

defendant's           criminal       conduct         or   are     “closely       related      to    the

scheme.” 4           Id.; see also Henoud, 81 F.3d at 488.                                Here, both

condition            precedents         are       fulfilled.             The     financial         harm

inflicted on Lomas’s victims was the direct result of Lomas’s

knowing          participation             in     the     overall        scheme       to      defraud

individuals by inducing them to invest in fraudulent business

enterprises.              And Lomas’s knowing participation in the charged

scheme to defraud satisfies the “closely related” standard.                                         The

district court required Lomas to pay restitution to individuals

whom       he    defrauded        via      mail      fraud   in    the    same       manner    as    he

attempted            to   defraud       the     individual        identified         in   Count     Two

(“retiree            GW”).      In    fact,       Lomas’s       schemes        are   more     tightly

connected than the schemes carried out in Karam because Lomas

actually         used     the     various       derivations        of    the     same     scheme    to

       4
        Our sister circuits agree that when the crime of
conviction includes a scheme as an element of the offense,
restitution may be ordered based on acts for which the
defendants was not convicted.     E.g., United States v. Brock-
Davis, 504 F.3d 991, 999 (9th Cir. 2007) (“when the crime of
conviction includes a scheme, conspiracy, or pattern of criminal
activity as an element of the offense, . . . the restitution
order[may] include acts of related conduct for which the
defendant was not convicted"); United States v. Holthaus, 486
F.3d 451, 458 n.6 (8th Cir. 2007) (explaining that MVRA
superseded Hughey’s holding and that it authorizes restitution
for every victim harmed in the course of the defendant’s scheme,
not just the offense of the conviction); United States v.
Hensley, 91 F.3d 274, 277 (1st Cir. 1996) (same).

                                                     16
defraud his victims, whereas in Karam, the defendant employed

two related but separate schemes. Either way, the restitution

ordered in this case falls safely within the boundaries staked

out in Karam and Henoud.

       Thus, the district court fully acted within its discretion

when   it   awarded   $45,675,365.97    in   restitution   to   Lomas’   993

victims.

                                  IV.

       For all of these reasons, the district court decision is

                                                                 AFFIRMED.

                                   17