Court Opinion

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Date Created: 2015-10-13 21:05:00.705965+00
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Opinions of the United
2002 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

9-19-2002

USA v. Weir
Precedential or Non-Precedential: Non-Precedential

Docket No. 01-4407

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Recommended Citation
"USA v. Weir" (2002). 2002 Decisions. Paper 586.
http://digitalcommons.law.villanova.edu/thirdcircuit_2002/586

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                                                    NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

                          NO. 01-4407

                UNITED STATES OF AMERICA

                                v.

                        GERALD WEIR,
                                Appellant

          On Appeal from the United States District Court
                    for the District of New Jersey
                    (D.C. Crim. 99-cr-00705-1)
          District Judge: Hon. Joseph A. Greenaway, Jr.

            Submitted Under Third Circuit LAR 34.1(a)
                       September 9, 2002

   Before: SLOVITER, RENDELL, and FUENTES, Circuit Judges

                  (Filed : September 19, 2002 )

                  OPINION OF THE COURT
SLOVITER, Circuit Judge.

                                                   I.

                                    Facts and Procedural History

        Appellant Gerald Weir, an attorney, was the president and 50% owner of Capital

Resources Corporation (CRC), a mortgage broker and sales financing corporation licensed

in New Jersey to sell first and second mortgages. CRC was affiliated with Capital Financial

Corporation (later changed to Capital Homeowners Corporation (CHC)) and Ready Capital

Corporation (RCC), two companies engaged in originating residential first and second

mortgage loans in New York and Rhode Island respectively. CRC would often purchase

first mortgages from CHC and RCC which it then sold to banks pursuant to Loan

Agreements under which, for a fee, it collected the principal and interest payments from

the borrowers on behalf of the bank. CRC agreed to repurchase from the bank any loans

that became more than ninety days delinquent. CRC was obliged to track the borrowers’

payment history and issue monthly delinquency reports to the banks to show the status of

each loan.

        On or about May 1984, a number of loans became more than ninety days delinquent

but CRC did not have enough money in its operating account to repurchase all of the

delinquent loans. Weir directed CRC to make monthly payments to the banks on the

delinquent borrowers’ behalf (called “perfect pays”) and to generate false monthly

delinquency reports to the banks to conceal the borrowers’ delinquencies. This continued

until December 1989 when, due in part to CRC’s practice of making monthly payments on

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behalf of its delinquent borrowers, CRC filed for Chapter 11 bankruptcy. Knowing that

CRC’s financial records could be subject to examination by the bankruptcy trustee, CRC

prepared accurate delinquency statements for the month of December which showed that

CRC owed nine banks over $15 million for the repurchase of delinquent loans.

        The bankruptcy relieved CRC of its obligation to buy back the hundreds of

delinquent mortgage loans it was obligated to repurchase. As a result, the banks had to

service the loans themselves or recover those losses by filing bankruptcy claims or by

selling or foreclosing on the real property securing the loans.

        In November 1999, Weir pled guilty, pursuant to a plea agreement, to an information

charging him with one count of bank fraud, 18 U.S.C. §§ 2, 1344, and nine counts of issuing

false statements to financial institutions, 18 U.S.C. §§ 2, 1014.1 The parties also agreed to

the following: (1) that section 2F1.1 of the 2000 Sentencing Guidelines applied to Weir’s

fraud offense, which provided a base offense level of six; (2) that Weir’s fraud did not

cause a loss of more than $1,500,000, which under U.S.S.G. § 2F1.1(b)(1)(M) limited the

increase in Weir’s offense to no more than eleven additional levels; (3) that a two-level

enhancement for more than minimal planning applied, see U.S.S.G. § 2F1.1(b)(2)(A); (4)

that a three-level downward adjustment was appropriate under U.S.S.G. §§ 3E1.1 (a) and (b)

(2); and (5) that Weir did not abuse a position of trust or use a special skill in committing

   1
         The record does not indicate why it took the government ten years to charge Weir
with these crimes. The crimes of bank fraud and issuing false statements to banks do not
contain statute of limitations provisions, and Weir did not raise a statute of limitations
issue as an affirmative defense. See Fed. R. Civ. P. 8(c).

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the crimes, see U.S.S.G. § 3B1.3. The sentencing judge was not bound by the plea

agreement and was able to exercise his discretion with respect to Weir’s sentence. Weir

retained the right to argue the issue of sentencing in the plea agreement because “the

government had not provided the documentary basis for its loss calculation.” Br. of

Appellant at 4.

        The District Court held extensive sentencing hearings on the issue of loss

calculation under U.S.S.G. § 2F1.1(b) (2000) (deleted 2001). Citing letters it received

from seven banks who were defrauded by Weir, the Government initially asserted that Weir

was responsible for a loss of $929,494.94. However, after Weir claimed that the

Government’s loss analysis failed to credit the banks with payments they received from the

bankruptcy court, from sales of defaulted mortgages, and from foreclosure sales of

delinquent properties, the Government reduced its loss calculation to $629,228.00.

        At the sentencing hearings, FBI Special Agent Nicholas Zubulake and FBI Financial

Analyst Peter Wong testified for the Government. Donald T. Faber, who was appointed by

the bankruptcy court in 1990 as a certified public accountant for CRC, testified for the

defense on the issue of loss as an expert in the field of accounting.

        During the sentencing hearings, the District Court further reduced the Government’s

claim of loss, finding that two of the banks had been fully compensated through bankruptcy

distributions and three other banks were fully compensated by the resale of real property

securing various loans. Only two banks remained in the loss calculation: Guttenberg

Savings and Loan (Guttenberg) and Fitchburg Savings and Loan (Fitchburg). The

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Government argued that sentencing Weir based on only two banks’ losses would

underestimate the seriousness of Weir’s conduct, see U.S.S.G. § 5K2.0, and moved for a

three-level upward departure to Weir’s sentence.

        The Government initially had claimed that Guttenberg sustained a loss of

$207,237.06 and that Fitchburg sustained a loss of $75,862.22, but the District Court, after

considering the bankruptcy distributions and foreclosure sales of delinquent loans, reduced

Guttenberg’s loss to $80,400 and Fitchburg’s loss to $52,054.94, a total loss figure of

$132,454.94. Although Weir sought further reduction based on the “interest differential,”

CRC’s overpayments, and the banks’ failure to send representatives to various foreclosure

sales to minimize their losses, the District Court rejected this request. In light of its

determination that the total loss was $132,454.94, the District Court placed Weir’s total

offense level at 13. See U.S.S.G. § 2F1.1(b)(1)(H) (2000) (deleted 2001) (providing a

seven-level increase to the base offense level of six for a loss between $120,000 and

$200,000).

        The District Court also granted the Government’s upward departure motion pursuant

to U.S.S.G. § 2F1.1. The court found that because Weir’s fraud involved twenty-two banks

and hundreds of false reports, a loss of $132,454.94 underestimated the seriousness of

Weir’s conduct. The District Court thus applied a three-level upward departure, raising

Weir’s offense level to sixteen, and sentenced Weir to twenty-one months in prison on

each of the ten counts to be served concurrently and a five-year supervisory release. The

court also ordered Weir to pay $2000 restitution to each of five banks, including

                                                       5
Guttenberg and Fitchburg.

        Weir requested the District Court to amend its sentence pursuant to Fed. R. Crim. P.

35(c), arguing that the court’s refusal to deduct the “uncollected interest” from the loss

amount was in error. App. at 46. Weir argued that his offense level would be reduced from

sixteen to fifteen and his requisite prison sentence would be reduced from 21 to 27 months

to 18 to 24 months. The District Court denied Weir’s motion to amend the sentence, but

released Weir on bail pending appeal to this court.

                                                      II.

                                                Discussion

        This court has jurisdiction, pursuant to 18 U.S.C. § 3742, to review a sentence

imposed under the sentencing guidelines.

        We exercise plenary review of the district court’s interpretation of “loss” under the

sentencing guidelines. United States v. Maurello, 76 F.3d 1304, 1308 (3d Cir. 1996).

However, the district court’s decision regarding the applicability of an adjustment under the

sentencing guidelines “depends on the mixture of fact and law necessary to that court’s

determination.” United States v. Bierley, 922 F.2d 1061, 1064 (3d Cir. 1990). If the

district court’s decision is based on “essentially factual” grounds, we will reverse only for

clear error. Id. If the claimed error is a matter of law, this court must review the district

court’s decision de novo. Id.

        Weir raises three issues with respect to calculation of loss in the fraud context. If

we were to accept all of Weir’s asserted reductions, the total loss would be zero and his

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offense level would be reduced to six (0-6 months in prison). Taking them seriatim, we

first consider Weir’s claim that both Guttenberg and Fitchburg negligently failed to send a

representative to various foreclosure sales, which would have allowed the banks to

minimize their claimed losses due to Weir’s fraud. We reject the claim and agree with the

Government that the issue is the amount of the victim’s actual loss, “not the quality of the

victim’s efforts to mitigate the loss.” Br. of Appellee at 25. See United States v. Kopp,

951 F.2d 521, 531 (3d Cir. 1991). Second, Weir claims that both Guttenberg and

Fitchburg kept “interest overpayments” – extra interest paid to the banks in February 1989

due to a computer glitch in issuing perfect pays – and that this overpayment should be used

to reduce the banks’ loss claim. There is no reason to do so as the issue is actual loss

rather than loss from other causes. Weir further contends that both banks received

“uncollected interest,” which was interest that accrued on the defaulted loans and, as such,

should be credited to him. Under the loan agreements, the banks had no obligation to try to

collect any such interest, particularly because it was due from borrowers who had already

defaulted.

        Our cases have fully discussed the issue of fraud loss, and we see no need to repeat

the relevant law here. The District Court showed care and diligence over the course of an

entire year in attempting to resolve this particularly complex issue of loss. Over the course

of the seven sentencing hearings, Weir successfully narrowed the number of banks

claiming loss from nine to two and decreased the loss figure from $929,494.94 to

$132,454.94.

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       The court’s calculations were conservative. Some relevant documents were

unavailable because one of the nine victim banks failed and another was unable to provide

necessary documents. However, the Government provided a representative sampling of

defaulted loans. Weir was entitled to no more.

                                                    III.

                                              Conclusion

       We have considered all of the other issues raised by Weir and are not persuaded.

Accordingly, we will affirm the judgment of sentence.

_____________________

TO THE CLERK:

               Please file the foregoing opinion.

                               ______________________________
                                                    /s/ Dolores K. Sloviter
                                                      Circuit Judge

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