United States v. Smith , 705 F.3d 1268 ( 2013 )

FILED
United States Court of Appeals
Tenth Circuit
PUBLISH January 25, 2013
Elisabeth A. Shumaker
UNITED STATES COURT OF APPEALS Clerk of Court
TENTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff–Appellee,
v. No. 11-6240
DERRICK REUBEN SMITH,
Defendant–Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA
(D.C. No. 5:10–CR–00235–D–1)
Alleen Castellani VanBebber of McDowell, Rice, Smith & Buchanan, P.C., Kansas City,
Missouri, for Defendant–Appellant.
Scott E. Williams, Assistant United States Attorney (Sanford C. Coats, United States
Attorney, and Chris M. Stephens, Assistant United States Attorney, with him on the
brief), Oklahoma City, Oklahoma, for Plaintiff–Appellee.
Before HARTZ, McKAY, and TYMKOVICH, Circuit Judges.
McKAY, Circuit Judge.
Defendant Derrick Reuben Smith was convicted by a jury on one count of
conspiracy to commit wire fraud in relation to real estate mortgages. The district court
declared a mistrial as to four other counts on which the jury could not reach a verdict,
later dismissing these counts without prejudice. At sentencing, the district court
calculated an advisory sentencing range of thirty-seven to forty-six months’
imprisonment. The court then sentenced Defendant to forty months’ imprisonment and
ordered payment of $369,455.54 in restitution. On appeal, Defendant objects to the
district court’s dismissal of the mistried counts without, rather than with, prejudice. He
also raises two challenges to the district court’s calculation of actual loss in its
determination of the applicable sentencing range.
BACKGROUND
Defendant was a real estate investor who conspired to defraud mortgage lenders by
setting up sales to straw buyers at inflated prices, with the excess loan proceeds being
distributed to Defendant and others. When the buyers then defaulted on the loans, the
lenders were unable to recoup the full loan amounts at foreclosure.
The indictment alleged the sales of two houses as overt acts in furtherance of the
conspiracy. Both houses were located in the Raintree Acres Addition in Edmond,
Oklahoma, and had been recently constructed by the same builder. The first house,
13400 Tahoe Drive, was purchased by one of Defendant’s acquaintances in July 2006 for
$425,000, which was $50,000 more than the initial asking price of $375,000. At closing,
the real estate company received an “extraordinarily high” combined commission and
bonus of $51,950 (R. Vol. 3 Part 2 at 147), and both the buyer and Defendant
subsequently received payments out of this commission. Approximately $405,000 of the
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purchase price was funded by a lender, while the home builder agreed to receive a seller-
carry mortgage for the remaining amount. This seller-carry mortgage was subsequently
released without the buyer ever making a payment. The house was sold for a substantial
loss in a subsequent foreclosure sale. The same real estate company was involved in the
sale of the second home, 7409 N.E. 133rd Street, which Defendant’s wife purchased in
January 2007 for $435,000, $60,000 more than the initial asking price of $375,000. At
this closing, the real estate company received a $19,950 commission and a $58,000
bonus, keeping the commission and turning the bonus over to Defendant. A lender
funded more than $410,000 of the inflated purchase price, but the home was sold in
foreclosure for only $300,000. With both houses, the income on the buyer’s loan
application was severely inflated, and other aspects of the transactions also indicated their
fraudulent nature. The real estate broker and real estate agent involved in these sales
were indicted along with Defendant, and both pled guilty before the case went to trial.
Defendant was indicted on five counts of the fourteen-count indictment. The jury
found him guilty of conspiracy to commit wire fraud in regard to real estate mortgages
but could not reach a verdict on the other four counts (two counts of wire fraud and two
counts of money laundering). The district court declared a mistrial as to these counts.
After the seventy days provided for a retrial under the Speedy Trial Act had passed,
Defendant filed a motion for dismissal with prejudice of the mistried charges. While the
district court agreed the Speedy Trial Act had been violated, it decided dismissal without
prejudice was the appropriate remedy under the circumstances. The court accordingly
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dismissed these counts without prejudice.
At sentencing, the district court included in its calculation of actual loss the sale of
a third residence in the Raintree Acres Addition. Like the two houses included in the
indictment, this was a new house constructed by the same builder and sold for
significantly more than its initial asking price. This house, 7300 N.E. 133rd Street, was
purchased by Defendant’s wife in September 2006, in between the sales of the other two
residences. Unlike the other two sales, this sale did not involve Defendant’s indicted co-
conspirators from the real estate agency. Instead of receiving his portion of the inflated
sales price through excessive real estate bonuses, Defendant instead received payment
through $60,800 in purported rent from the builder, who lived in the house for some
months after it was purchased by Defendant’s wife. However, in other ways the sale was
similar to the other two sales—the houses were sold by the same builder, the same
mortgage broker was involved, the buyer’s income was inflated on the loan applications,
and Defendant profited from using artificially inflated sales prices to increase the loan
proceeds. As with the other residence purchased by Defendant’s wife, Defendant sent the
mortgage broker falsified bank records to support the inflated income representations.
Defendant also used the same appraiser who had provided a fraudulent appraisal for the
first property. As with the first house, the buyer did not pay any portion of the inflated
sale price, with the sale here being funded by both an 80% and a 20% mortgage.
Having concluded the sale of 7300 N.E. 133rd Street should be considered as
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relevant conduct, the district court calculated actual loss by subtracting the foreclosure
sales price from the outstanding principal amount for this residence as well as the two
residences mentioned in the indictment. The court sustained Defendant’s objection to a
fourth sale that occurred outside the time frame of the charged conspiracy. Based on the
three relevant sales, the court calculated a total loss amount of $369,455.54, which
resulted in an advisory sentencing range of thirty-seven to forty-six months’
imprisonment. The court sentenced Defendant to a within-Guidelines sentence of forty
months and ordered payment of $369,455.54 in restitution. This appeal followed.
DISCUSSION
Defendant raises three issues on appeal. First, he claims the district court abused
its discretion by dismissing the mistried counts without prejudice. Second, he contends
the court erred in treating the sale of 7300 N.E. 133rd Street as relevant conduct in its
sentencing calculation. Third, he argues the court erred in calculating actual loss based
on the difference between the outstanding principal balance and the foreclosure sale price.
We first consider the district court’s dismissal of the mistried counts. The district
court agreed with Defendant that the mistried counts should be dismissed based on the
government’s violation of the Speedy Trial Act, which provides that a new trial should
commence within seventy days after a trial judge declares a mistrial. 18 U.S.C. §
3161(e). However, the court concluded that dismissal without prejudice was warranted
under the circumstances of the case. We review this decision for abuse of discretion. See
United States v. Williams, 576 F.3d 1149, 1157 (10th Cir. 2009).
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In deciding whether dismissal should be with or without prejudice, a court “shall
consider, among others, each of the following factors: the seriousness of the offense; the
facts and circumstances of the case which led to the dismissal; and the impact of a
reprosecution on the administration of this chapter and on the administration of justice.”
18 U.S.C. § 3162(a)(1). “[W]hen the statutory factors are properly considered, and
supporting factual findings are not clearly in error, the district court’s judgment of how
opposing considerations balance should not lightly be disturbed.” United States v.
Taylor, 487 U.S. 326, 337 (1988).
The district court concluded that the statutory factors weighed in favor of dismissal
without prejudice. First, the charged offenses were serious wire fraud and money
laundering offenses involving large sums of money. The serious nature of the offenses
weighed in favor of dismissal without prejudice. See Williams, 576 F.3d at 1158.
Second, the facts and circumstances leading to the dismissal did not involve any bad faith
on the government’s part—there was no suggestion the government had intentionally
delayed or shown a pattern of neglect in its prosecution of the mistried charges. See
Taylor, 487 U.S. at 338-39 (reversing a dismissal with prejudice where there was no
showing of bad faith or a pattern of neglect). Moreover, Defendant did not assert his
Speedy Trial Act rights until after the violation had occurred, and a district court may
“properly consider[] that fact and other indications that [Defendant] may have contributed
to the delay in his trial when making [the] decision to dismiss the case without prejudice.”
Williams, 576 F.3d at 1159. Finally, the court concluded that the third factor—the impact
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of reprosecution on the administration of the Speedy Trial Act and the administration of
justice—did not warrant a dismissal with prejudice. In deciding whether this factor
warrants dismissal with prejudice, “a court should consider, among other factors, whether
the delay caused by the Government was intentional and the prejudice suffered by the
defendant from the Act’s violation. The defendant has a burden under the Act to show
prejudice other than that occasioned by the original filing.” Id. (citations omitted). The
district court concluded that Defendant had not shown any prejudice caused by the delay,
rather than by the possibility of reprosecution itself, and the court further concluded that
any possible prejudice was insufficient to justify a dismissal with prejudice.
It is this third factor that Defendant focuses on in this appeal. He argues he
suffered prejudice because his Fifth Amendment rights were chilled by the possibility of
reprosecution on the mistried counts. He contends the mistried counts were at issue as
relevant conduct for sentencing purposes, and their dismissal without prejudice forced
him to choose between his Fifth Amendment right to remain silent and his need to defend
himself at the sentencing hearing. Defendant also argues dismissal with prejudice was
warranted based on an additional, non-statutory factor—his sentence on the conspiracy
charge took all of the indicted conduct into account, including the conduct underlying the
mistried counts, and thus reprosecution would be unnecessary to vindicate the public’s
interest in the matter.
We conclude that the district court did not abuse its discretion in dismissing the
mistried counts without prejudice. The district court correctly concluded that the first two
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statutory factors weighed in favor of dismissal without prejudice. As for the third factor,
we agree with the district court that Defendant has not “show[n] specific prejudice other
than that occasioned by the original filing.” United States v. Saltzman, 984 F.2d 1087,
1094 (10th Cir. 1993). This is not a case where a delay caused the loss of a crucial
witness or piece of evidence, causing the third statutory factor to weigh in the defendant’s
favor. See United States v. Abdush-Shakur, 465 F.3d 458, 464 (10th Cir. 2006). Indeed,
Defendant never attempts to tie his prejudice argument to the delay in retrial. It is the
dismissal of the mistried counts without prejudice, rather than the delay in retrying them,
that forms the basis for Defendant’s argument that his Fifth Amendment rights were
prejudiced at sentencing. However, “the prejudice that a defendant must establish to seek
a dismissal with prejudice for a Speedy Trial Act violation must be caused by that
violation.” Williams, 576 F.3d at 1159. Defendant has not shown such prejudice here.
Moreover, while the Fifth Amendment provides defendants with the right not to be
required to testify, it does not give them the right to testify with impunity. See Minnesota
v. Murphy, 465 U.S. 420, 427 (1984). “[T]here is no authority to support [the] claim that
the court must either refuse to consider evidence of acts for which [a defendant] has not
been charged or convicted or grant him immunity from prosecution for any statements
made during allocution.” United States v. Fleming, 849 F.2d 568, 569 (11th Cir. 1988).
Like any other defendant, Defendant had the choice to either exercise his Fifth
Amendment right to remain silent at the sentencing hearing or to risk incriminating
himself with respect to uncharged acts and unresolved criminal charges. See id. at 570.
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The delay may have changed Defendant’s calculation of the risk of self-incrimination,
since the mistried charges remained unresolved. However, Defendant retained in full his
Fifth Amendment right to remain silent. If any right was affected by the delay, it was
Defendant’s separate right of allocution, not his Fifth Amendment right to remain silent.
However, the right of allocution is not a constitutional right, see Scrivner v. Tansy, 68
F.3d 1234, 1240 (10th Cir. 1995), and we are not persuaded that any potential chilling of
this right required dismissal of the mistried charges with prejudice. As for Defendant’s
argument that dismissal with prejudice was warranted because his sentence on the
conspiracy count took the conduct underlying the mistried charges into account,
Defendant did not raise this argument below, and we thus review only for plain error.
United States v. Lewis, 594 F.3d 1270, 1288 (10th Cir. 2010). Under the circumstances
of this case, we are not persuaded the district court erred, much less plainly erred, in
exercising its discretion to dismiss the mistried charges without prejudice.
We turn next to Defendant’s challenges to the district court’s sentencing
calculation, starting with his argument that the district court erred in determining the sale
of 7300 N.E. 133rd Street should be included as relevant conduct for sentencing purposes.
We review the factual findings supporting this determination for clear error, but review
the ultimate determination of relevant conduct de novo. United States v. Tran, 285 F.3d
934, 938 (10th Cir. 2002).
“In calculating loss under the Guidelines, the district court does not limit itself to
conduct underlying the offense of conviction, but rather may consider all of the
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defendant’s relevant conduct.” United States v. Griffith, 584 F.3d 1004, 1011 (10th Cir.
2009) (internal quotation marks omitted). For offenses that are sentenced under U.S.S.G.
§ 2B1.1, like Defendant’s offense, “relevant conduct includes all acts in the same course
of conduct or common scheme or plan.” United States v. Flonnory, 630 F.3d 1280, 1286
(10th Cir. 2011). “For two or more offenses to constitute part of a common scheme or
plan, they must be substantially connected to each other by at least one common factor,
such as common victims, common accomplices, common purpose, or similar modus
operandi.” U.S.S.G. § 1B1.3 cmt. n.9(A). “Offenses that do not qualify as part of a
common scheme or plan may nonetheless qualify as part of the same course of conduct if
they are sufficiently connected or related to each other as to warrant the conclusion that
they are part of a single episode, spree, or ongoing series of offenses.” U.S.S.G. § 1B1.3
cmt. n.9(B). “[I]f the conduct is sufficiently similar and within the same temporal
proximity, it may be considered relevant for purposes of determining the guideline
range.” Griffith, 584 F.3d at 1012.
Defendant argues his relevant conduct was limited to the real estate transactions
mentioned in the indictment and did not include the separate sale of 7300 N.E. 133rd
Street. He contends the sale of this property was not part of a common scheme or course
of conduct because it did not fit within the conspiracy template ascribed to Defendant and
his co-conspirators: the co-conspirators were not involved in the sale; although the same
builder was involved, this was his private residence, not a house he built to sell to third
parties; and Defendant did not receive payments from excessive realtor commission
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amounts, but rather received rental checks from the builder. Defendant also argues there
was nothing illegal about his rental agreement with the builder and thus the transaction
could not be counted as relevant conduct for sentencing. See id. at 1013.
We conclude that the district court did not err in considering the sale of this house
as relevant conduct. First, we hold that the district court did not clearly err in finding the
transaction was fraudulent because, as with the other two sales, Defendant used false loan
applications and artificially inflated sales prices to obtain inflated loan proceeds from a
lender. Second, although there were some dissimilarities between the transactions, this
sale still involved a common purpose, common accomplices, and, at least in some
aspects, a similar modus operandi. With all three transactions, Defendant sought to
defraud lenders into paying excessive loan proceeds based on artificially inflated sales
prices and false loan applications. All three transactions involved the same seller and
mortgage broker, and the sale of 7300 N.E. 133rd Street involved the same buyer as 7409
N.E. 133rd Street and the same appraiser as 13400 Tahoe Drive. As with the purchase of
7409 N.E. 133rd Street, Defendant sent the mortgage broker falsified bank statements to
inflate his wife’s reported income. This transaction also occurred in temporal proximity
to the other two offenses, falling in between the two sales mentioned in the indictment.
The fact that Defendant did not involve his indicted co-conspirators in this sale does not
remove it from the realm of relevant conduct. See United States v. Torres, 182 F.3d
1156, 1161 (10th Cir. 1999) (“In fact, several courts, including this one, have found
relevant conduct under § 1B1.3(a)(1) in situations where the prior offense did not involve
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any conspirator other than the defendant.”). Nor are all of the other common factors
between the transactions mooted simply because Defendant recovered the artificially
inflated loan proceeds via a sham rental scheme rather than sham realtor bonuses. We
hold that the sale of 7300 N.E. 133rd Street was properly counted as relevant conduct.
Finally, we turn to Defendant’s argument that the district court erred in calculating
actual loss, reviewing the court’s loss calculation methodology de novo and its factual
findings for clear error. United States v. Washington, 634 F.3d 1180, 1184 (10th Cir.
2011). For each of the three properties, the district court calculated loss by subtracting
the foreclosure sales price from the outstanding principal balance at the time of
foreclosure. Defendant argues this calculation was incorrect because it did not parse out
the losses sustained by the different lenders, i.e., the original lenders and any successor
lenders for each loan. Defendant also argues the district court was required to determine
whether any loans had been sold and then base its loss calculation on the amount the
downstream lenders paid for the loans, not on the outstanding balance. In essence,
Defendant contends that only the downstream lenders, not the original lenders who
funded the loans, were foreseeable victims of his fraud. We are not persuaded.
“Actual loss” is the “reasonably foreseeable pecuniary harm that resulted from the
offense.” U.S.S.G. § 2B1.1, cmt. n.3(A)(i). As a general matter, “[i]n cases where the
defendant has pledged collateral to secure a fraudulent loan, . . . loss is 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
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the loan.” United States v. James, 592 F.3d 1109, 1114 (10th Cir. 2010). Where a district
court finds that the defendant did not reasonably foresee losses would be sustained by
downstream lenders, the court cannot follow this general formula, but must instead
consider only the original lender’s loss—“the difference between the outstanding balance
on the original loan and what the lender received when it sold the loan.” Id. at 1115.
However, so long as it is foreseeable that loans will be sold or repackaged, both the
original lenders and downstream lenders are foreseeable victims of the fraud, and the
general formula applies. Id. at 1117 (Lucero, J., concurring). That is so because any
gains or losses sustained by the original lender will be offset by a corresponding loss or
gain by the downstream lender, leaving the total loss to equal mortgage balance minus
foreclosure price. Id. “Thus, the number of lenders involved and the amount of profit
made by the original lender or any intermediate lenders is mathematically irrelevant to
the calculation of the total loss caused by the fraud.” Id. And, where losses to both
original and successor lenders is foreseeable, the district court need not apply a more
complicated formula to arrive at the same result. See Washington, 634 F.3d at 1184-85.
Defendant provides no persuasive reason to support his somewhat baffling
argument that only the downstream lenders, not the original lenders, were foreseeable
victims of his fraud. Particularly in light of Defendant’s experience in the industry, the
district court did not err in implicitly concluding that the losses to all lenders were
reasonably foreseeable. See id. at 1185. With all losses being foreseeable, the court did
not err in applying the general formula and simply subtracting the foreclosure sales price
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from the outstanding balance on the loan. See James, 592 F.3d at 1114-15; Washington,
634 F.3d at 1184-85.
In his reply brief, Defendant further argues there was no evidence of the
outstanding mortgage balance for 13400 Tahoe Drive. Because this issue was not raised
in Defendant’s opening brief, we do not address it on appeal. United States v. Kimler,
335 F.3d 1132, 1138 n.6 (10th Cir. 2003).
Defendant also makes the cursory argument that the restitution award should be
reversed because it was based on an incorrect calculation of actual loss. Because we see
no error in the district court’s calculation of actual loss, we likewise reject this argument.
CONCLUSION
For the foregoing reasons, we AFFIRM Defendant’s conviction and sentence.
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