United States v. Cox , 851 F.3d 113 ( 2017 )

United States Court of Appeals
For the First Circuit
No. 14-1033
UNITED STATES OF AMERICA,
Appellee,
v.
SIREWL COX,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Denise J. Casper, U.S. District Judge]
Before
Howard, Chief Judge,
Selya and Lipez, Circuit Judges.
Leslie Feldman-Rumpler, for appellant.
Ryan M. DiSantis, Assistant United States Attorney, with whom
Carmen M. Ortiz, United States Attorney, was on brief, for
appellee.
March 20, 2017
LIPEZ, Circuit Judge. Between 2006 and 2008, Sirewl
Cox -- a real estate developer, agent, and broker -- orchestrated
a mortgage fraud scheme in Massachusetts. After his scheme was
exposed, Cox was charged with multiple counts of bank and wire
fraud and money laundering. A jury subsequently found Cox guilty
on some of the charged counts, and he was sentenced to a below-
guidelines term of 150 months of imprisonment.
Cox now appeals his sentence on both procedural and
substantive grounds. Specifically, he raises a flurry of
objections related to the district court's use of uncharged and
acquitted conduct to calculate his Guidelines Sentencing Range,
and further contends that the length of his sentence was
substantively unreasonable. Cox also challenges the district
court's statutory authority to order the forfeiture of assets
related to uncharged relevant conduct, an issue of first impression
in this circuit. For the following reasons, we affirm.
I. Factual Background
We provide here only a brief synopsis of the essential
facts of this case, reserving additional detail for the analysis
that follows.1
1Because Cox does not contest the sufficiency of the evidence
supporting his conviction, "we narrate the facts in a 'balanced
way, without favoring either side.'" United States v. Arias, No.
15-1946, 2017 WL 655758, at *1 n.1 (1st Cir. Feb. 17, 2017)
(quoting United States v. Rodríguez–Soler, 773 F.3d 289, 290 (1st
Cir. 2014)).
- 2 -
To carry out his fraudulent scheme, Cox recruited
nominal or "straw" buyers to purchase multi-family "triple-decker"
homes for sale. Once Cox had control of the buildings, he would
perform a "triple-decker flip" -- that is, he would split the
properties into condominium units and then sell those units to
individual buyers, paying off the mortgages on the buildings with
the proceeds. Cox promised the straw buyers a portion of the
profits from the sale of condominium units.
To persuade people to purchase these units, Cox and his
associates told potential buyers that they would help arrange
mortgage financing for the deals. Cox also promised the buyers
that they would not need to put down any of their own money for
the purchase. Instead, Cox generally paid the buyers a cash
"incentive fee" to purchase the condominium units. Once a buyer
agreed to purchase a unit, Cox used his understanding of the
mortgage industry to make the otherwise unqualified buyers appear
eligible for loans. Specifically, Cox submitted false
information -- such as the purchase price of the properties,
borrower income, borrower assets, intent to occupy the unit, down
payments, and cash paid by borrowers at closing -- to mortgage
lenders.
Once these unqualified buyers received preliminary
approval for loans, Cox worked with an associate, Rebecca
- 3 -
Konsevick2 -- who acted as both a real estate agent on building
sales to straw buyers and a closing agent on unit sales -- to close
the deals. During the closing process, Cox had Konsevick submit
additional false information to lenders. Cox further told
Konsevick how to disperse the proceeds from the sale between
himself, the straw buyers, or one of Cox's business entities.
In 2011, a federal grand jury in the District of
Massachusetts returned a sixteen-count indictment charging Cox
with wire and bank fraud, in violation of 18 U.S.C. §§ 1343 and
1344, and unlawful monetary transactions, in violation of 18 U.S.C.
§ 1957.3 Four triple-decker flips formed the basis of the counts
in the indictment: the Roxton, River, Stanwood, and 111 Fuller
properties.4
2 Konsevick pleaded guilty to counts of bank fraud (in
violation of 18 U.S.C. § 1344) and unlawful monetary transactions
(in violation of 18 U.S.C. § 1957). On January 24, 2013, she was
sentenced to 30 months of imprisonment to be followed by two years
of supervised release.
3 Cox's half-brother, Lord Allah, was also charged in the
indictment. He pleaded guilty to two counts of wire fraud, in
violation of 18 U.S.C. § 1343; one count of bank fraud, in
violation of 18 U.S.C. § 1344; and two counts of unlawful monetary
transactions, in violation of 18 U.S.C. § 1957. On December 19,
2012, he was sentenced to 18 months of imprisonment and two years
of supervised release.
4 We refer to the properties at issue in this appeal by the
street name where each property is located, but omit the specific
address, with the exception of the two Fuller properties at issue.
- 4 -
After a twelve-day trial, a jury found Cox guilty on
eight of the sixteen counts in the indictment: Counts One through
Four (wire fraud), Counts Six, Seven, and Nine (bank fraud), and
Count Eleven (unlawful monetary transaction). Cox was found not
guilty on seven counts: Count Five (wire fraud), Counts Eight and
Ten (bank fraud), and Counts Twelve, Thirteen, Fourteen, and
Sixteen (unlawful monetary transactions).
The Probation Office subsequently prepared and issued a
Presentence Investigation Report ("PSR"). The PSR concluded that
Cox's total offense level was 37, his Criminal History Category
("CHC") was III, and his Guidelines Sentence Range ("GSR") was
262-327 months. The PSR's calculation of Cox's total offense level
and GSR was based, among other information, on both the convicted
and acquitted conduct related to the four triple-decker flips
identified in the indictment, as well as on uncharged conduct
related to seven additional triple-decker flips.5 Cox raised
several objections to the PSR's conclusions, including the use of
acquitted and uncharged conduct in the GSR calculation.
At sentencing, the district court adopted the PSR's base
offense level calculation, but found that the GSR of 262-327 months
was longer than necessary to satisfy the goals of sentencing as
5 The uncharged conduct was based on the following seven
properties: Whitfield, Vinson, Warren, Moreland, Bailey, Stellman,
and 15 Fuller.
- 5 -
specified by 18 U.S.C. § 3553(a). The court thus imposed a below-
Guidelines term of 150 months. The court also entered an order of
forfeiture in the amount of $2,966,344.37. Cox now appeals both
his sentence and the forfeiture amount.
II. Standard of Review
"We review sentencing decisions imposed under the
advisory Guidelines, whether outside or inside the applicable GSR,
for reasonableness." United States v. Pantojas-Cruz, 800 F.3d 54,
58 (1st Cir. 2015). This review occurs in two phases. See Gall
v. United States, 552 U.S. 38, 51 (2007). First, we "examine
whether the district court committed any procedural missteps."
United States v. Rossignol, 780 F.3d 475, 477 (1st Cir. 2015).
Such missteps include "failing to calculate (or improperly
calculating) the Guidelines range, treating the Guidelines as
mandatory, failing to consider the § 3553(a) factors, selecting a
sentence based on clearly erroneous facts, or failing to adequately
explain the chosen sentence -- including an explanation for any
deviation from the Guidelines range." Gall, 552 U.S. at 51. "We
have described our abuse of discretion standard in this context as
'multifaceted,' as we apply clear error review to factual findings,
de novo review to interpretations and applications of the
guidelines, and abuse of discretion review to judgment calls."
United States v. Nieves–Mercado, 847 F.3d 37, 42 (1st Cir. 2017).
Where a defendant failed to object in the district court on the
- 6 -
ground asserted on appeal, however, we review only for plain error.
United States v. Ruiz-Huertas, 792 F.3d 223, 226 (1st Cir. 2015).
In the second phase of our review, we appraise the
substantive reasonableness of the sentence, "tak[ing] into account
the totality of the circumstances, including the extent of any
variance from the Guidelines range." United States v. Bermúdez–
Meléndez, 827 F.3d 160, 163 (1st Cir. 2016)(alteration in original)
(quoting Gall, 552 U.S. at 51). "In determining substantive
reasonableness, substantial respect is due to the sentencing
court's discretion." Bermúdez–Meléndez, 827 F.3d at 163. This
deferential approach recognizes that although "[a] sentencing
court is under a mandate to consider a myriad of relevant factors,
. . . the weighting of those factors is largely within the court's
informed discretion." United States v. Clogston, 662 F.3d 588,
593 (1st Cir. 2011). Our review demands only "a plausible
sentencing rationale and a defensible result." United States v.
Martin, 520 F.3d 87, 96 (1st Cir. 2008). Hence, "we limit our
review to the question of whether the sentence, in light of the
totality of the circumstances, resides within the expansive
universe of reasonable sentences." United States v. King, 741
F.3d 305, 308 (1st Cir. 2014).
III. Procedural Reasonableness
Cox makes a multi-pronged attack on the district court's
calculation of the advisory GSR, objecting to the district court's
- 7 -
finding of facts by a preponderance of the evidence, as well as
the imposition of three sentencing enhancements that significantly
increased his GSR. We address each argument in turn.
A. Preponderance of the Evidence Standard
Cox contends that the district court's finding of facts
at sentencing by a preponderance of the evidence -- rather than
under a reasonable doubt standard -- violated his Fifth Amendment
right to due process and his Sixth Amendment right to trial by
jury. Our law, however, is to the contrary: the preponderance-
of-the-evidence baseline for considering sentencing facts has long
been established in this circuit. See United States v. Lombard,
72 F.3d 170, 175-76 (1st Cir. 1995). Indeed, as Cox acknowledges,
we have previously considered, and rejected, arguments that the
Fifth Amendment's Due Process Clause and the Sixth Amendment right
to a jury trial prohibit the finding of sentencing facts by a
preponderance of the evidence. See, e.g., United States v.
Munyenyezi, 781 F.3d 532, 544 (1st Cir. 2015) ("[A] judge can find
facts for sentencing purposes by a preponderance of the evidence,
so long as those facts do not affect either the statutory minimum
or the statutory maximum." (citations omitted)); see also United
States v. Watts, 519 U.S. 148, 156, (1997). In short, the district
court properly applied the preponderance of the evidence standard
to its fact-finding at sentencing.
- 8 -
B. Sentencing Enhancements
Cox's procedural objections are based on the district
court's application of three Guidelines sentencing enhancements
under U.S.S.G. § 2B1.1: a two-level enhancement for deriving gross
receipts of more than $1,000,000 from one or more financial
institutions, see § 2B1.1(b)(16)(A); a two-level enhancement for
an offense involving ten or more victims, see § 2B1.1(b)(2)(A);
and a twenty-level enhancement for engendering losses of more than
$7,000,000, see § 2B1.1(b)(1)(K).6 Cox argues that the district
court's misapplication of these enhancements resulted in either a
six or eight-level increase in his total offense level. At the
core of Cox's objection to each of these enhancements, however, is
a single contention: that the district court relied, in part, on
uncharged or acquitted conduct that lacked adequate evidentiary
support to be considered relevant conduct under the Guidelines.
Under § 2B1.1, a defendant's offense level is increased
both on the basis of the conduct for which he was convicted and on
the basis of the "relevant conduct" for which he is found
responsible by a preponderance of the evidence. See United States
v. Pennue, 770 F.3d 985, 992-93 (1st Cir. 2014). The Guidelines
define "relevant conduct" as:
6The PSR adopted by the district court used the 2012
Guidelines Manual to determine Cox's offense level.
- 9 -
(A) all acts and omissions committed, aided, abetted,
counseled, commanded, induced, procured, or willfully
caused by the defendant[ ] . . .
. . .
that occurred during the commission of the offense of
conviction, in preparation for that offense, or in the
course of attempting to avoid detection or
responsibility for that offense.
U.S.S.G. § 1B1.3(a)(1); see also United States v. St. Hill, 768
F.3d 33, 34 (1st Cir. 2014). Relevant conduct may include both
acquitted and uncharged conduct. See United States v. Watts, 519
U.S. 148, 152-53 (1997); United States v. DeSimone, 699 F.3d 113,
128 (1st Cir. 2012) ("A court 'may consider acquitted conduct in
determining the applicability vel non of a sentencing
enhancement . . . .'" (quoting United States v. Paneto, 661 F.3d
709, 715 (1st Cir. 2011))); see also St. Hill, 768 F.3d at 37
("[T]o be 'relevant conduct,' uncharged conduct must be connected
to the offense of conviction.").
In the context of an extended scheme, uncharged and
acquitted conduct is "relevant conduct" if it is part of the same
"course of conduct or common scheme or plan" as the conduct
underlying the counts of conviction. United States v. Eisom, 585
F.3d 552, 557 (discussing U.S.S.G. §§ 1B1.3 and 3D1.2(d)). A
district court's finding on the scope of a particular scheme
"represents a practical, real-world assessment of probabilities,
based on the totality of proven circumstances." Id. (quoting
- 10 -
United States v. Sklar, 920 F.2d 107, 111 (1st Cir. 1990)). The
court's finding that uncharged or acquitted conduct is part of a
common course of conduct, scheme, or plan, is reviewed for clear
error. Sklar, 920 F.2d at 110-11.
Furthermore, we have repeatedly held that a district
court may rely on a PSR's relevant conduct determinations absent
specific, supported challenges to its recommendations. As we have
explained:
"Generally, a PSR bears sufficient indicia of
reliability to permit the district court to rely on it
at sentencing." The defendant is free to challenge any
assertions in the PSR with countervailing evidence or
proffers, in which case the district court is obliged to
resolve any genuine and material dispute on the merits.
But if the defendant's objections to the PSR are merely
rhetorical and unsupported by countervailing proof, the
district court is entitled to rely on the facts in the
PSR.
United States v. Cyr, 337 F.3d 96, 100 (1st Cir. 2003) (quoting
United States v. Taylor, 277 F.3d 721, 724 (5th Cir. 2001)); see
also United States v. Acevedo, 824 F.3d 179, 184 (1st Cir. 2016);
United States v. Olivero, 552 F.3d 34, 40 (1st Cir. 2009).
Here, Cox contends that the district court erred by
simply adopting the PSR's sentencing recommendations without
specific factual findings regarding each relevant conduct
transaction. Indeed, on appeal, Cox now asserts that neither the
Probation Office nor the district court ever reviewed any of the
- 11 -
voluminous sentencing materials filed by the government. The
record is to the contrary.
The initial PSR, dated January 2, 2013, listed Cox's
total offense level as 37 and his GSR as 262-327 months based on
all relevant conduct attributable to Cox. However, Cox made no
specific objections to the factual basis for the PSR's relevant
conduct determination. Instead, Cox made the following general
objection to the PSR's list of relevant conduct transactions:
The defendant objects to this paragraph in its entirety.
The report provides no factual basis for the [sic]
supporting the statement, "the fraudulent property
transactions in which Cox has been implicated [sic] are
detailed below." The chart lists properties which were
the basis for Counts on which Mr. Cox was acquitted.
Mr. Cox objects to the inclusion of acquitted Counts in
the loss calculation. It lists other properties,
purported "relevant conduct," though not so identified,
for which no evidence is offered to prove Mr. Cox was
even involved in the sale of the properties, much less
that there was fraud involved, and that he participated
in the fraud. It appears the prosecution simply burdened
Probation with an offense conduct narrative, devoid of
factual specifics or substantiating documentation,
vitiating Probation's ability to conduct an independent
review of the offense conduct, as required by
F. R. Crim. P. 32.
(second alteration in original). In addition to filing its own
objections to the PSR, the government subsequently filed a binder
on August 16, 2013, labeled "Supporting Documents for Loss
Calculation," which contained a chart calculating the loss the
government alleged was caused by Cox's scheme, as well as more
- 12 -
than 300 pages of registry of deeds documents supporting the
chart's calculations.
The revised PSR, issued on August 21, 2013, addressed
the parties' objections. In responding to Cox's objection to the
factual basis for the PSR's loss calculation, it stated:
When computing a loss calculation, it is proper to
include all of the loss (charged conduct, acquitted
conduct, and relevant conduct where a preponderance of
the evidence supports the inclusion) as was done in this
instance. It is not practical for the Probation Officer
to provide the details of every transaction in which the
defendant was involved for purposes of the [PSR].
Counsel for the government has provided the Probation
Officer, the Court, and defense counsel, with a large
binder that includes supporting documentation for the
loss calculation. The increase for 10 or more victims
is proper and the loss calculation is accurate. It is
noted that this Court found the increase for 10 or more
victims applicable in related defendant Rebecca
Konsevick's case.
The PSR continued:
The Probation Office maintains that the loss calculation
is an [sic] accurately computed in this instance as is
the offense level calculation. Defense counsel, if he
chooses, can argue that this calculation over-represents
the defendant's culpability/conduct. No change is made
to the report.
On September 12, 2013, three weeks after the revised PSR
was issued, the government filed its sentencing memorandum, along
with a second binder, labeled "Relevant Conduct," containing more
than 500 pages of documents providing evidentiary support for the
relevant conduct determination. In its memorandum, the government
- 13 -
argued that, based on the evidence presented, the PSR had correctly
calculated Cox's GSR.
Cox filed his own sentencing memorandum on December 17,
2013, in which he challenged various aspects of the PSR. In his
memorandum Cox did not, however, raise specific objections to the
PSR's relevant conduct determination. Instead, Cox repeated his
general objections to the PSR's recommendation, specifically
referencing the documentation filed by the government:
In the present case, the government provided Probation
and the defense with a binder of exhibits consisting of
deeds of various properties, and a chart entitled "Loss
of Specific Properties." In most of the deeds, Mr. Cox's
name does not appear. There is no indication in the
exhibit what, if any role he played in the purchase or
sale of the properties. There is no indication whether
fraud was involved in the purchase or sale of the
properties, or the reason the properties were foreclosed
upon. On the basis of the foregoing defendant contends
that "loss" falls between $400,000 and $1,000,000 and a
14 level increase under U.S.S.G. § 2B1.1(b)(1)(H) is
applicable.
The district court convened Cox's sentencing hearing on
December 19, 2013. After hearing lengthy argument from counsel
regarding the Guidelines enhancements -- including a specific
inquiry into the factual support for the uncharged transactions
included as relevant conduct in the PSR7 -- the district court
stated the basis for its factual decisions:
7 Specifically, the court asked counsel for the government to
discuss the basis for the relevant conduct listed in the PSR. The
government, in a lengthy response, detailed how the relevant
- 14 -
Counsel, . . . I did have the benefit, as you know, of
presiding over Mr. Cox's trial, and I have also had the
benefit of reviewing materials, both that were offered
as exhibits at the trial, were the subject of some
pretrial motion practice, and as are before the Court at
sentencing.
The court then rejected Cox's objections to the PSR's relevant
conduct determination:
I respectfully disagree with [Cox's counsel] in terms of
the basis of the numbers that are provided by the
government here based on the trial record and the PSR.
I think it's certainly under the Guidelines appropriate
to include relevant conduct and acquitted conduct. . . .
Based on this record, we discern no error in the district
court's decision to adopt the PSR's sentencing recommendations,
which were fully supported by the evidence presented at trial and
the voluminous supporting materials submitted by the government.
Cox's various objections -- as to the PSR, as well as those made
in his sentencing memorandum and at his sentencing hearing -- are
too general and unsupported to require the district court at
sentencing to engage in a transaction-by-transaction analysis of
the PSR's relevant conduct determination. See Cyr, 337 F.3d at
100 ("[I]f the defendant's objections to the PSR are merely
rhetorical and unsupported by countervailing proof, the district
conduct transactions involved "the same straw buyers [and] the
same false statements," as well as the same "netting of funds
because buyers did not bring cash to closings," and the same false
employers, as well as the fact that Cox received proceeds from the
transactions.
- 15 -
court is entitled to rely on the facts in the PSR."); United States
v. Prochner, 417 F.3d 54, 66 (1st Cir. 2005) (upholding reliance
on a PSR's listing of victims and loss amounts "[i]n the absence
of rebuttal evidence beyond defendant's self-serving words").
Indeed, there is no genuinely disputed evidence at issue
in this case. Cox's objections, at bottom, are merely rhetorical
assertions that the evidence before the court was insufficient to
support the relevant conduct determination. Rule 32(i)(3)(A)
explicitly states that a district court "may accept any undisputed
portion of the PSR as a finding of fact." Olivero, 552 F.3d at 39
(citing Fed. R. Crim. P. 32(i)(3)(A)). Merely asserting, without
more, that the evidence before a sentencing court was insufficient,
does not raise a dispute as to the validity of a PSR's
recommendations. See id. at 39-40 ("If the facts plausibly support
competing inferences, . . . a sentencing court cannot clearly err
in choosing one."). Here, the district court adequately explained
that it was adopting the PSR's relevant conduct determination based
on the evidence in the record. Thus, in the absence of genuinely
controverted evidence, the court's decision to credit the facts
underlying the PSR was not clearly erroneous.
Cox's present challenges to individual relevant conduct
transactions -- each of which is made for the first time on appeal
and is thus subject only to plain error review -- fare no better.
First, Cox argues that three transactions involving one straw buyer
- 16 -
-- Larneshia Bryant-Alexander -- were not supported by sufficient
evidence. The record before the district court at sentencing,
however, indicates that, as to two of the properties, Bryant-
Alexander's stated income on the mortgage application was false.
As for the third property, Bryant-Alexander's application
contained false claims about her employment status, as well as a
representation that she paid more than $17,000 at closing, when
Cox actually made that payment.
Cox also argues that the district court erred in
including five separate transactions as relevant conduct because
they involved straw buyers who were not involved in any of the
transactions listed in the indictment. However, the record shows
that each of these transactions involved the same types of false
statements in mortgage applications that underlay the convicted
and acquitted conduct. Moreover, Cox himself received the majority
of the proceeds from each of these transactions, additionally
supporting the district court's determination that these
transactions were relevant conduct under U.S.S.G. § 1B1.3.
Cox's last specific objection involves one property that
Cox purchased himself. However, his mortgage application for this
property contained the same type of false statements as those made
on behalf of straw buyers. The fact that Cox made these statements
himself, rather than through a straw buyer, does not place them
- 17 -
outside "the same course of conduct or common scheme or plan as
the charged conduct." Eisom, 585 F.3d at 557.
Hence, despite Cox's protestations to the contrary, the
record reveals no error in the district court's relevant conduct
determinations, plain or otherwise. Having determined that these
factual findings were procedurally sound, we can easily dispose of
Cox's objections to each of the § 2B1.1 enhancements. As to the
two-level enhancement for an offense involving ten or more victims,
the loss chart adopted by the district court identified far more
than ten lenders (or their successors-in-interest) who suffered
financial losses as a result of Cox's fraud. Similarly, the
district court's decision to impose a two-level enhancement for
deriving gross receipts of more than $1,000,000 was supported by
ample evidence.
With respect to the court's loss calculation, Cox does
make one additional objection based on the court's methodology.
Although we review the application of the court's loss-calculation
methodology for clear error, determining the correct methodology
is "a prototypical question of legal interpretation" that we review
de novo.8 United States v. Walker, 234 F.3d 780, 783 (1st Cir.
2000).
8 The government contends that our review should be for plain
error because Cox failed to make an objection to the district
court's loss methodology. See United States v. Mitrano, 658 F.3d
- 18 -
In calculating the amount of actual loss caused by Cox's
scheme to defraud, the district court stated that it was applying
the formula set forth in United States v. Appolon, 695 F.3d 44(1st Cir. 2012). There, we held that
[i]n cases where a defendant has pledged collateral to
secure a fraudulent loan, actual loss usually can be
calculated by "subtracting the value of the
collateral -- or, if the lender has foreclosed on and
sold the collateral, the amount of the sales price --
from the amount of the outstanding balance on the loan."
Id. at 67 (emphasis added) (quoting United States v. James, 592
F.3d 1109, 1114 (10th Cir. 2010). Cox points out that the loss
chart adopted by the district court calculated loss by subtracting
the value of the properties from the original loan amount, rather
than from the outstanding loan balance. He reasons that, because
Appolon instructs that "actual loss is always the difference
between the original loan amount and the final foreclosure price
(less any principal repayments)," the failure to ascertain the
outstanding balance for every loan at issue was procedural error.
Id. (emphasis added). Cox misconstrues our instructions in
Appolon.
We did not hold in Appolon that a court may only
determine actual loss if the government has presented evidence of
the outstanding principal balance on every alleged fraudulent
117, 123-24 (1st Cir. 2011). Because Cox's claim fails under
either standard, we do not resolve this disagreement.
- 19 -
loan. Such a requirement would run afoul of the Guidelines's clear
instruction that a district court need not establish loss with
precision, but rather, may make a reasonable estimate of the loss,
based on the available information. See United States v. Adorno-
Molina, 774 F.3d 116, 126 (1st Cir. 2014); U.S.S.G. § 2B1.1,
cmt. n.3(C). See also United States v. Alphas, 785 F.3d 775, 783
(1st Cir. 2015) (noting that the Guidelines use the amount of loss
as a rough proxy for "the seriousness of the crime and the relative
culpability of the offender" in determining a GSR). Indeed, we
discussed this issue in Appolon, noting that, given the "relatively
short lifespan of the loans" in that case, and the fact that the
defendant's "scheme was based on allowing the loans to default,
any difference between the original loan amounts and the
outstanding balances [was] probably not significant." Appolon,
695 F.3d at 68 n.13.
Here, too, the short period of time before Cox's
unqualified straw buyers defaulted on their mortgages means that
any principal payments would be unlikely to impact the district
court's loss calculation.9 In fact, we reached a similar
9Although not addressed by either party, Cox's argument here
requires that we assume the mortgage loans at issue were not
interest-only or negatively amortizing loans, a type of mortgage
loan that was not uncommon before the subprime mortgage crisis.
See generally, Nat'l Comm'n on the Causes of the Fin. & Econ.
Crisis in the U.S., The Financial Crisis Inquiry Report 124 fig.
7.3 (2011). Such loans, if at issue here, could result in actual
losses equal to or greater than the amount of the original loans,
- 20 -
conclusion in United States v. Foley, 783 F.3d 7, 25 (1st Cir.
2015), where we rejected a defendant's claim that the district
court failed to account for certain loan principal payments because
the defendant had "offer[ed] no figure for the borrowers' principal
repayments." Hence, we concluded, the defendant's argument
amounted "to no more than mere speculation, which we need not
credit on appeal." Id. Cox's contention is no less speculative.
His only support for this claim is trial testimony from a few straw
purchasers who recalled having made a small number of mortgage
payments before lenders foreclosed on the properties. Thus, like
the defendant in Foley, the absence of any specific figures
regarding principal repayments dooms this argument.10
C. Variant Sentence
Cox's final claim of procedural error is somewhat
puzzling. He argues that the district court improperly imposed a
sentence based on an "alternative" GSR that was "commensurate with
even if the straw purchasers had timely made some mortgage payments
to the lenders.
10 Furthermore, even if Cox was able to put forth some evidence
of principal repayments by straw buyers, failing to deduct these
amounts from the loss total would likely be harmless error. The
district court found actual loss of more than $7.8 million, and
the threshold for a twenty-level enhancement under
§ 2B1.1(b)(1)(K) was $7 million at the time Cox was sentenced.
Thus, to demonstrate prejudicial error, Cox would have to show
that more than $800,000 in principal was repaid to lenders. Absent
such a showing, he cannot demonstrate he suffered any prejudice.
See Foley, 783 F.3d at 25.
- 21 -
a GSR using only the counts of conviction to assess loss amounts
and gross receipts," but which relied on uncharged and acquitted
conduct to apply the two-level enhancement for crimes involving
ten or more victims. According to Cox, this "alternative
calculation" should have resulted in a base offense level of 31
and a GSR of 108-135 months, instead of a GSR of 135-168 months.
In other words, after vigorously contending that the GSR of 262-
327 months adopted by the court was procedurally unreasonable, Cox
alleges that he was actually sentenced under a lower, but still
procedurally inadequate, GSR.
This purported "alternative" GSR is not supported by the
record. The court did note, in passing, that "even if [the court]
excluded acquitted conduct . . . [it] would still be appropriate"
to impose a twenty-level enhancement under U.S.S.G.
§ 2B1.1(b)(1)(K) for engendering losses greater than $7 million.
That single remark hardly demonstrates that the court adopted,
implicitly or otherwise, a different Guidelines calculation than
the one it did. Indeed, the district court explicitly stated the
GSR and offense level it chose: "I will adopt the base level of
offense of 37" and "I will adopt . . . an advisory guideline[s]
range [of] 262 to 327 months." And, as we have explained in
rejecting Cox's other procedural objections to his sentence, this
advisory GSR was properly calculated. Hence, the district court
committed no procedural error.
- 22 -
IV. Substantive Reasonableness
Cox also contends that his sentence was substantively
unreasonable because it was "significantly and unjustifiably
higher" than sentences imposed on other defendants for similar
crimes. We do not agree.
We have repeatedly emphasized that "[a] challenge to the
substantive reasonableness of a sentence is particularly
unpromising when the sentence imposed comes within the confines of
a properly calculated GSR." United States v. Demers, 842 F.3d 8,
15 (1st Cir. 2016). Less promising still is a defendant's
challenge to a sentencing court's substantial downward variance
from a properly calculated GSR. See United States v. Floyd, 740
F.3d 22, 39-40 (1st Cir. 2014) (noting that, when a district court
provides a substantial downward variance from a properly
calculated GSR, "a defendant's claim of substantive
unreasonableness will generally fail"); King, 741 F.3d at 310.
This case is no exception to the general rule.
After properly calculating Cox's GSR of 262-327 months,
the district court allowed both parties to present arguments,
permitted Cox to address the court himself, thoroughly reviewed
all of the § 3553(a) factors, and, in light of that review,
rejected the government's recommendation of a 180-month sentence
and imposed a 150-month sentence. Cox now argues that the 112-
month downward variance from the low-end of the properly-
- 23 -
calculated GSR -- imposed, in part, to avoid unwarranted sentencing
disparities under 18 U.S.C. § 3553(a)(6)11 -- did not go far enough.
Under 18 U.S.C. § 3553(a)(6), a sentencing court must
consider, inter alia, the need to "avoid unwarranted sentence
disparities among defendants with similar records who have been
found guilty of similar conduct." Cox identifies three fraud cases
in this circuit in which defendants received sentences shorter
than the one imposed here, but makes no serious effort to explain
why he is similarly situated to the defendants in those cases. As
we recently explained in United States v. Nuñez, 840 F.3d 1, 7
(1st Cir. 2016), "[m]erely pointing to a coconspirator's [lower]
sentence, without more, does not prove the existence of an
impermissible sentencing disparity," because "'a defendant is not
entitled to a lighter sentence merely because his co-defendants
11 In discussing the need to avoid unwarranted sentencing
disparities, the district court explained:
I do think a substantial sentence is warranted, and I’ve
given consideration . . . to unwarranted sentencing
disparities. I think the submission by the government
appropriately reflects other serious cases involving
financial fraud in this district, some that are in some
degree different from yours in terms of the scope of the
crime, in terms of the total loss amount, but I think
it’s appropriate for me to consider those in gauging
what an appropriate sentence is here.
For all of these reasons, given all of the goals of
sentencing, all of the factors under 3553(a), I don’t
adopt the government’s recommendation of 180 months, but
I do adopt a significant sentence of 150 months, Mr.
Cox.
- 24 -
received lighter sentences.'" Id. (quoting United States v. Gomez–
Pabon, 911 F.2d 847, 862 (1st Cir. 1990). Merely pointing to the
sentences of unrelated defendants sentenced by different judges is
even less persuasive. See Foley, 783 F.3d at 26. Here, because
Cox fails to develop his conclusory argument, he has failed to
demonstrate that the below-guidelines sentence imposed by the
district court was substantively unreasonable.
V. Forfeiture
Finally, Cox contests the forfeiture award ordered by
the district court. The court granted the government's motion for
forfeiture of property in the amount of $2,966,334.37. This amount
included all proceeds Cox received from the convicted
transactions -- $860,210.52, according to the loss chart adopted
by the district court -- as well as all proceeds Cox received from
uncharged relevant conduct.12 Cox contends that the district court
12 The government's forfeiture motion excluded funds from
transactions based on acquitted conduct. Although the government
provides no explanation for its decision to exclude these funds
from its motion, it asserts that there would have been no legal
obstacle to requesting funds based on acquitted conduct in this
case. For the reasons set forth below, we can find no basis for
drawing a distinction between the uncharged and acquitted conduct
in the context of a broader scheme to defraud. See United States
v. Capoccia, 503 F.3d 103, 117–18 (2d Cir. 2007) (stating that,
"[w]here the conviction itself is for executing a scheme, engaging
in a conspiracy, or conducting a racketeering enterprise," the
proceeds for purposes of forfeiture include the proceeds of "that
scheme, conspiracy, or enterprise"); see also United States v.
Hasson, 333 F.3d 1264, 1279 (11th Cir. 2003) (holding, for purposes
of forfeiture, that "[i]n determining what transactions involved
the proceeds of mail and wire fraud, the jury was not restricted
- 25 -
erred by including proceeds from uncharged relevant conduct in the
forfeiture order because, he claims, "the criminal forfeiture
statute does not authorize the forfeiture of funds based on
unconvicted conduct." Although we have not directly addressed
this argument before, we join the other circuits that have
concluded that a court may order forfeiture of the proceeds from
uncharged conduct that was part of the same fraudulent scheme
alleged in the counts of conviction.
In this case, the government sought forfeiture under 18
U.S.C. §§ 981(a)(1)(C), 982(a)(1), 982(a)(2)(A), and 28 U.S.C.
§ 2461.13 The relevant language from these statutes is broadly
framed to reach property beyond "the amounts alleged in the
count(s) of conviction." United States v. Venturella, 585 F.3d
1013, 1017 (7th Cir. 2009); see also United States v. Lo, 839 F.3d
777, 793 (9th Cir. 2016). Specifically, 18 U.S.C. § 982(a)(2)
to the three substantive counts of wire fraud on which it returned
a guilty verdict" and could consider evidence of fraud offered in
support of an additional money laundering count).
13
More specifically, the government sought forfeiture of
property related to Cox's violations of 18 U.S.C. § 1957 (money
laundering) under 18 U.S.C. § 982(a)(1), violations of 18 U.S.C.
§ 1344 (bank fraud) under 18 U.S.C. § 982(a)(2)(A), and violations
of 18 U.S.C. § 1343 (wire fraud) under 18 U.S.C. 981(a)(1)(C) and
28 U.S.C. § 2461. In his brief, however, Cox refers to "the
criminal forfeiture statute," citing only 18 U.S.C. § 982. He
does not mention 18 U.S.C. § 981 and 28 U.S.C. § 2461, the statutes
under which the government sought forfeiture of property derived
from Cox's violations of 18 U.S.C. § 1343.
- 26 -
subjects to forfeiture "any property constituting, or derived
from, proceeds the person obtained directly or indirectly, as a
result of" certain specified offenses, including bank fraud under
18 U.S.C. § 1344. See also id. § 982(a)(1) (requiring forfeiture
of "any property . . . involved in" a violation of 18 U.S.C. § 1957and of "any property traceable to such property." Similarly, 18
U.S.C. § 981(a)(1)(C) authorizes forfeiture for "[a]ny property,
real or personal, which constitutes or is derived from proceeds
traceable to" the commission of certain crimes, including bank
fraud under 18 U.S.C. § 1344.14 The term "proceeds" is defined as
"property of any kind obtained directly or indirectly, as the
result of the commission of the offense giving rise to forfeiture,
and any property traceable thereto, and is not limited to the net
gain or profit realized from the offense." 18 U.S.C.
§ 981(a)(2)(A).
Both the Seventh and Ninth Circuits relied on this
inclusive statutory language to conclude that, in the case of
14
Although 18 U.S.C. § 981 is titled "Civil forfeiture," it
applies in criminal cases pursuant to 28 U.S.C. § 2461, which
authorizes criminal forfeiture of the proceeds of any offense for
which there is no specific statutory basis for criminal forfeiture
as long as civil forfeiture is permitted for that offense. See
Venturella, 585 F.3d at 1016 (discussing § 2461). The criminal
forfeiture statute, 18 U.S.C. § 982, covers only certain forms of
wire fraud, such as those that affect a financial institution. Id.at § 982(a). Hence, forfeiture in cases of wire fraud not
involving financial institutions falls under 28 U.S.C. 2461 and 18
U.S.C. § 981.
- 27 -
crimes that involve a scheme to defraud, funds "obtained . . . as
a result" of the offense "consist of the funds involved in that
fraudulent scheme, including additional executions of the scheme
that were not specifically charged or on which the defendant was
acquitted." Lo, 839 F.3d at 793; see Venturella, 585 F.3d at 1017(noting that, because defendants "pled guilty to one count of mail
fraud that also alleged a fraudulent scheme," the amount of the
single mailing "does not adequately account for the proceeds
obtained from their crime of conviction"); see also United States
v. Fruchter, 411 F.3d 377, 384 (2d Cir. 2005) (holding, under RICO
forfeiture provisions, that "proceeds derived from conduct forming
the basis of a charge of which the defendant was acquitted can be
counted as 'proceeds' of racketeering activity"). We agree with
this reading of the forfeiture statutes and find that it applies
here.
As we already have held, the district court properly
concluded by a preponderance of the evidence that all of the
uncharged and acquitted conduct was part of the same scheme to
defraud. Although Cox asserts that, for purposes of forfeiture,
the court was required to find beyond a reasonable doubt that the
uncharged conduct was part of the same scheme, we disagree. We
have previously observed that a forfeiture award "is a part of the
sentence rather than the substantive offense." United States v.
Ferrario-Pozzi, 368 F.3d 5, 8 (1st Cir. 2004); see also Libretti
- 28 -
v. United States, 516 U.S. 29, 38-39 (1995). As such, the
preponderance of the evidence standard applies. See Munyenyezi,
781 F.3d at 544; see also Hasson, 333 F.3d at 1277 ("[C]riminal
forfeiture is part of sentencing where the preponderance standard
governs.").
Hence, the district court did not err in including the
proceeds of the uncharged relevant conduct in its forfeiture award.
Affirmed.
- 29 -