LURANA S. SNOW, District Judge.
THIS CAUSE is before the Court on a hearing on the amount of victims' losses for restitution purposes, which was referred to United States Magistrate Judge Lurana S. Snow, for Report and Recommendation, pursuant to 18 U.S.C. § 3664(d)(6). The evidentiary hearing was conducted on May 17, 2016.
The Defendant was charged in a Second Superseding Indictment (SSI) returned on October 1, 2015. Counts 1-7 of the SSI ("Cay Clubs Counts") charge the Defendant with conspiracy to commit bank fraud, three counts of executing a bank fraud scheme and three counts of making a false statement in connection with a federally insured loan, all counts involving various entities utilizing in their names the words "Cay Clubs."
The case was tried to a jury, who returned a verdict of not guilty on Count 1 and guilty on the remaining counts. At sentencing, the Presentence Report (PSR) included as relevant conduct all of the Defendant's activities related to the Cay Clubs projects, which involved the sale "of condominiums in purported luxury resorts in Florida and elsewhere, including the Florida Keys." (ECF No. 351 at 1-2) According to the SSI, the Defendant was the president of Cay Clubs and had authority over its funds.
As alleged in Count 1 of the SSI, the Defendant and his co-conspirators conspired "to knowingly, and with intent to defraud, execute and cause the execution of a scheme and artifice to obtain any of the moneys, funds, credits, assets, securities and other property owned by, and under the custody and control of, one or more financial institutions, including JP Morgan Chase and Fifth Third, by means of false and fraudulent pretenses, representations and promises relating to a material fact."
According to the SSI, the Defendant and his co-conspirators sought to accomplish the object and purpose of the conspiracy in the following manner:
Counts 2-4 of the SSI allege substantive acts of bank fraud in connection with the purchase of three condominium units in Marathon, Florida. Each count charges that the Defendant executed a scheme to defraud financial institutions in order to further the same purpose as alleged in Count 1, to:
At sentencing, the Defendant argued that the loss attributable to him for the offenses for which he was convicted (Counts 2-7) should be limited to the loss of the victims of the three Marathon purchases. (ECF No. 532 at 11-13) Alternatively, the Defendant asserted that the loss should encompass losses attributable to straw purchases of condominium units.
In support of this total loss computation, the Government presented the testimony of Special Agent Joseph Perera of the Criminal Investigation Division of the Internal Revenue Service. Agent Perera identified three boxes labeled Exhibits 1, 2 and 3, which contained folders for each of the victims who had submitted to the Probation Office documents supporting their claimed losses. The agent explained that he reviewed the documents contained in each of the folders, comparing the documents to those in the Government's possession and making sure that there were no duplicate claims. The three exhibits were admitted into evidence without objection from the Defendant.
Agent Perera also stated that he spoke to representatives from each of the financial institutions which had submitted claims to ascertain how the claimed losses had been computed to ensure that revenues from foreclosure or short sales and mortgage payments were offset (subtracted) from the loss amounts.
The District Judge sentenced the Defendant to a total prison term of 480 months, to be followed by five years of supervised release. The Court found, pursuant to 18 U.S.C. § 3664(d), the victims' losses were not yet ascertainable, and set a date of April 6, 2016 for final determination of the victims' losses.
In the instant case, restitution must be ordered pursuant to the Mandatory Victims Restitution Act (MVRA), 18 U.S.C. § 3663-3664. The Act requires the sentencing judge, in formulating the order of restitution, to consider "(I) the amount of the loss sustained by each victim as a result of the offense; and (II) the financial resources of the defendant, the financial needs and earning ability of the defendant and the defendant's dependents, and such other factors as the court deems appropriate." 18 U.S.C. § 3663(a)(1)(B)(I). The procedure for implementing this directive is set forth in § 3664, which requires the probation officer to provide the court with "a complete accounting of the losses to each victim. . . ." 18 U.S.C. § 3664(a). The probation office is required to provide each victim with, inter alia, an affidavit form on which to set forth the amount of the victim's losses subject to restitution. 18 U.S.C. § 3664(d)(2)(B). Any dispute as to the proper amount or type of restitution shall be resolved by the court by the preponderance of the evidence, and it is the Government's burden to demonstrate the amount of loss sustained by each victim. 18 U.S.C. § 3664(e).
"The district court, in determining the amount of restitution, may consider hearsay evidence that bears `minimal indicia of reliability' so long as the defendant is given an opportunity to refute that evidence. "
The MRVA, 18 U.S.C. § 3663(a)(2), defines "victim" as ". . . 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 harmed by the defendant's criminal conduct in the course of the scheme, conspiracy, or pattern. . . ." The Eleventh Circuit ". . . repeatedly has rejected attempts to narrow the scope of `victim under the statute.'"
Finally, although the MVRA prescribes that the restitution hearing should be conducted within 90 days from the date of sentencing, the statute is silent on the question of whether the final determination of the restitution amount must be made within 90 days. In any event, "a sentencing court's failure to impose an order of restitution within the ninety-day limitations period does not deprive the court of the power to order restitution at some later date, at least where the sentencing court made it clear prior to the deadline's expiration that it would order restitution, leaving only the amount."
At the hearing on victims' losses ("Restitution Hearing"), the Government introduced into evidence the same three boxes of documents presented at the sentencing hearing. At the direction of the undersigned, the folders inside the three boxes, each of which contains documents pertaining to a particular victim, were given separate exhibit numbers. Thus, for purposes of the restitution hearing, these folders were received into evidence as Government's Exhibits 2-157.
Agent Perera offered the same testimony as he provided at the sentencing hearing, describing the manner in which he obtained the information contained in the victims' folders, double-checked the amounts claimed with the Government's records, and made certain no claims had been duplicated. He reiterated that with each of the institutional victims, he spoke with a representative to ascertain how they computed losses, including what offsets were used in situations where the loss was reduced by such things as sale of collateral and payments on the mortgages. During cross examination, counsel for the Defendant brought out that the folders for JP Morgan Chase (Government's Exhibit 7) and Iberia Bank (Government's Exhibit 157) did not include the loss declaration form indicating that the information was provided under penalty of perjury generally provided by Probation to victims who are submitting claims for reimbursement.
During Agent Perera's cross-examination, the Defendant introduced Defendant's Exhibits A21 and A22, dealing with loans made by JP Morgan Chase. Defendant's Exhibit A21 lists 48 transactions where the claimed loss amount equals the amount of the original note, and Defendant's Exhibit A22 lists 67 transactions where the loss amount is greater than the note. Agent Perera explained that most of the loans were for interest only, and the bank was required to pay for such items as property taxes and flood insurance, which were included in the loss amounts. The agent further stated that the loss amounts also included attorneys fees and other costs of collection. Agent Perera acknowledged that some of the testimony from representatives of lending institutions occurred only in the Defendant's first trial, which dealt with different charges than those in the SSI.
On redirect, Agent Perera stated that there were 150 accounts in the names of Cay Clubs entities, but none was in the name of the Defendant because of the outstanding judgment against him. Nevertheless, the Defendant maintained control over all of the accounts. Additionally, monies from all Cay Clubs accounts were funneled into the Crystal Clear Management Account, which the Defendant used to pay all bills and personal expenses of himself and members of his family. The Defendant did not draw a salary, again because of the outstanding judgment. Monies from other Cay Clubs accounts were commingled in the Crystal Clear account on a daily basis.
In his defense, the Defendant introduced several documents in addition to Defendant's Exhibits A21 and A22. Defendant's Exhibit A1 is a copy of the JP Morgan Chase spreadsheet, contained within the folder introduced as Government's Exhibit 7, and Defendant's Exhibit A2 is the same spreadsheet, printed from the digital version which had been provided to the Defendant. Defendant's Exhibits A3-A4 also relate to JP Morgan Chase: A3 is a copy of a settlement reached between Chase and the United States Department of Justice and Defendant's Exhibit A-4 is a copy of the Chase Annual Report for 2006. According to the Defendant, these documents suggest that restitution to Chase for some of its claimed losses might constitute a windfall.
Defendant's Exhibits A5-A8 reflect that Chase had assigned two of the mortgages for which losses are claimed to mortgage-backed securities. The Government agreed to investigate that issue and, if true, to deduct those losses from the amount of restitution to be paid to Chase.
The Defendant's primary argument is the same he made at sentencing on the issue of related conduct: that the court should limit restitution to the straw purchases identified in Counts 2-7, or at most, to the total loss resulting from straw purchases. In this context, the Defendant also asserts that the Court should not award restitution for claims made by third party commercial and private lenders (Iberia/Orion, Coast Investment Group, LLC and the GCB investment entities) who made loans to Cay Clubs entities, since the Second Superseding Indictment did not include a description of this conduct.
This issue was resolved by the District Judge at sentencing when he deemed all of the Defendant's fraudulent activities connected to Cay Clubs to be relevant conduct for purposes of computing the amount of loss. At the Restitution Hearing, the Government reiterated its responsive argument that the Defendant had engaged a single scheme, beginning with the first seven straw purchases which inflated the values of Cay Clubs units for promotional purposes. The object of the scheme was to keep the Cay Clubs ventures afloat so that the Defendant could continue to reap personal benefits for himself and members of his family.
The Eleventh Circuit case law discussed earlier in this Report supports the Government's argument. This Circuit consistently has refused to limit the categories of victims entitled to restitution and has approved restitution even to victims of uncharged conduct by a defendant extending beyond the statute of limitations (
The Defendant also argues that the evidence of loss to JP Morgan Chase and Iberia is insufficient to support restitution to those entities because neither filed a victim loss affidavit and neither provided the figures used in their computations of net loss. Agent Perera testified that he met with representatives of each institution to ascertain how the loss amounts were calculated to ensure that all offsets were included in the net loss figures. Under
Finally, the Defendant has expressed concerns about the computation of losses to successor lenders. This issue is moot because the Government has stated on the record that none of the victims who have claimed losses for restitution purposes is a successor lender.
Therefore, the Court should order restitution in the amount of $179,076,941.89 as set forth in the Government's Exhibit 158 (under seal), less the amount of any Chase mortgages assigned for sale as mortgaged backed securities.
This Court having considered carefully the pleadings, arguments of counsel, and the applicable case law, it is hereby
RECOMMENDED that restitution in the amount of $179,076,941.89 as forth in the Government's Exhibit 158 (under seal), less the amount of any Chase mortgages assigned for sale as mortgaged backed securities.
The parties shall have fourteen (14) days from the date of this Report and Recommendation within which to file objections, if any, with United States District Judge Jose E. Martinez. Failure to file timely objections waives a party's right to review before the District Judge, and bars the parties from attacking on appeal any legal rulings and factual findings contained herein. See Fed.R.Crim.P. 59(b)(1), (2); Thomas v. Arn, 474 U.S. 140 (1985); United States v. Lewis, 492 F.3d 1219, 1222 (11th Cir. 2007) (en banc).
