Argued and Submitted, Pasadena, California: January
Appeal from the United States District Court for the Central District of California. D.C. No. 5:11-cr-00090-VAP-1. Virginia A. Phillips, District Judge, Presiding.
Sean K. Kennedy, Federal Public Defender, and Michael Tanaka (argued), Deputy Federal Public Defender, Los Angeles, California, for Defendant-Appellant.
André Birotte Jr., United States Attorney, Antoine F. Raphael and Joseph B. Widman (argued), Assistant United States Attorneys, Riverside, California, for Plaintiff-Appellee.
Before: Alex Kozinski, Chief Judge, and Stephen Reinhardt and Richard R. Clifton, Circuit Judges. Opinion by Judge Reinhardt.
REINHARDT, Circuit Judge:
In 2007, Peter Morris applied for three loans from three financial institutions (Washington Mutual, Lehman Brothers, and Bank of America) to purchase three properties, all located at " Sonic Court" in Riverside, California. In the loan applications, Morris claimed securities and assets that he did not own, employment he did not have, and income he did not earn. He falsely stated that he was unmarried, was in the process of selling a different house, and was not obligated to pay child support. He supplied the three banks with false documents to substantiate these false statements. He also withheld information--for example, he did not tell any of the banks that he was applying for loans from the other two. All three banks approved Morris's loan applications, and Morris purchased the three properties shortly afterward. When Morris made only one mortgage payment, two of the three banks foreclosed on their loans and sold the properties at a loss. Morris sold the remaining property in a short sale, at a loss to the third bank.
In 2011, in connection with these fraudulently obtained loans, Morris pleaded guilty to wire fraud, 18 U.S.C. § 1343, and making a false statement on a loan application, 18 U.S.C. § 1014. The district court sentenced Morris to 63 months imprisonment. In choosing this sentence, the district court began with a Sentencing Guidelines range of 57 to 71 months, which reflected a 16-level increase to Morris's base offense level based on the district court's calculation that the banks had suffered a loss of $1,033,500. A lesser loss would have resulted in a lower Guideline range. Morris appeals his sentence.
Morris contends that the district court erred in calculating the banks' loss under the Sentencing Guidelines. Morris's Guideline sentencing range was calculated using U.S.S.G. § 2B1.1, which applies to offenses involving fraud or deceit. Under § 2B1.1, a defendant's base offense level is increased according to the amount of loss caused by the offense, where the initial measure of " loss" is the greater of actual or intended loss. U.S.S.G. § 2B1.1(b)(1); id. cmt. n.3(A). Because Morris does not make any argument as to what he " intended" the banks to lose, actual loss is the appropriate initial measure here. " Actual loss" is " the reasonably foreseeable pecuniary harm that resulted from the offense." Id. cmt. n.3(A)(i). " Reasonably foreseeable pecuniary harm" means " pecuniary harm that the defendant knew or, under the circumstances, reasonably should have known, was a potential result of the offense." Id. cmt. n.3(A)(iv). Relying on this " reasonably foreseeable" language, Morris argues that the district court should have calculated loss as the value of the loans less the reasonably foreseeable value of the properties at the time the loans were obtained. He contends further that the reasonably foreseeable value at the time the loans were obtained was considerably greater than the actual value of the properties at the time they were sold because the drastic housing market downturn of 2008-2009 was not foreseeable.
The difficulty with Morris's argument is that the Sentencing Guidelines explicitly dictate how to measure loss in mortgage fraud cases that involve collateral. In such cases, the " credits against loss" provision mandates that the initial measure of loss (actual or intended loss) be reduced by " the amount the victim has recovered at the time of sentencing from disposition of the collateral" or, if the collateral
has not been disposed of at that time, the fair market value of the collateral as of the date of conviction. Id. cmt. n.3(E)(ii)--(iii). Morris's proposal for ...