United States v. Lipsey , 509 F. App'x 714 ( 2013 )


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  •                                                                        FILED
    United States Court of Appeals
    Tenth Circuit
    February 1, 2013
    UNITED STATES COURT OF APPEALS
    Elisabeth A. Shumaker
    Clerk of Court
    TENTH CIRCUIT
    UNITED STATES OF AMERICA,
    Plaintiff - Appellee,                    No. 11-1536
    v.                                           (D. Colorado)
    CEDRIC LIPSEY,                              (D.C. No. 1:09-CR-00387-PAB-1)
    Defendant - Appellant.
    ORDER AND JUDGMENT *
    Before HARTZ, ANDERSON, and GORSUCH, Circuit Judges.
    Defendant and appellant, Cedric Lipsey, appeals his sentence following his
    plea of guilty to three counts of wire fraud, in violation of 
    18 U.S.C. §§ 1343
     and
    2. 1 Arguing that his sixty-three month sentence is procedurally and substantively
    unreasonable, he seeks a new sentencing hearing. For the following reasons, we
    affirm his sentence.
    *
    This order and judgment is not binding precedent, except under the
    doctrines of law of the case, res judicata, and collateral estoppel. The court
    generally disfavors the citation of orders and judgments; nevertheless, an order
    and judgment may be cited under the terms and conditions of 10th Cir. R. 32.1.
    1
    Mr. Lipsey also pled guilty to one count of forfeiture, pursuant to 
    18 U.S.C. § 981
    (a)(1)(C) and 
    28 U.S.C. § 2461
    (c), of property constituting or
    derived from the proceeds of wire fraud. The government subsequently
    abandoned this forfeiture claim.
    BACKGROUND
    The parties stipulated in Mr. Lipsey’s plea agreement that the government’s
    evidence would demonstrate the details of the wire fraud scheme to which Mr.
    Lipsey pled guilty. We summarize the pertinent facts from that agreement.
    Between April 2004 and February 2006, primarily in the general area of
    Denver, Colorado, Mr. Lipsey, a licensed real estate broker, along with Philip A.
    Martinez, a loan officer and mortgage broker, implemented a scheme to defraud
    lending institutions that funded residential mortgages. Mr. Lipsey held himself
    out as a successful real estate agent and investor. He would induce “buyers” or
    “investors” (hereafter “first investors” or “first buyers”), individuals with good
    credit whom he met through his church, through friends and relatives and through
    self-help seminars, to participate in a program where he claimed they could
    legitimately acquire properties and profit by reselling them without investing any
    money of their own.
    Accordingly, Mr. Lipsey and Mr. Martinez would arrange for these “first
    investors” to submit loan applications to obtain mortgages on residences. He and
    Mr. Martinez would include false representations in the loan applications where
    necessary to influence lenders to approve loans. Shortly after these first
    investors/buyers had purchased their properties, Mr. Lipsey would arrange for
    them to sell the properties to other comparable “investors” (hereafter “second
    investors” or “second buyers”) at substantially higher prices. Mr. Lipsey and
    -2-
    Mr. Martinez received money in the form of commissions, fees and proceeds from
    the sales transactions.
    While that is the essence of the fraudulent scheme, there are a few other
    details which explain why the scheme lasted as long as it did. Mr. Lipsey would
    tell the first buyers that they were buying the residences at less than their market
    value, and that the resale price was at or above their market value, thereby
    enabling a quick profit. In fact, the first investors purchased the properties at or
    near their market value, contrary to Mr. Lipsey’s representations. These first
    investors further stated that Mr. Lipsey told them he would take care of all
    paperwork and pay for any associated costs. The buyers’ only role would be to
    hold the properties in their names for a short period of time. For their
    participation, Mr. Lipsey paid them amounts of money ranging from $3,000 to
    $15,000 after the property was sold.
    When Mr. Lipsey arranged to sell the recently purchased properties to the
    second buyers/investors, he made these buyers the same assurances as the first
    buyers (he would handle all paperwork and expenses). Because of their limited
    involvement as investors/buyers who did not intend to live in the homes, these
    second buyers did not critically evaluate the price of the homes, which Mr. Lipsey
    inflated to more than market value. To satisfy lenders for the sales to these
    second buyers, Mr. Lipsey and Mr. Martinez arranged to have inflated appraisals
    prepared.
    -3-
    In exchange for the second buyers’ participation, Mr. Lipsey represented to
    them that he would pay them money (ranging from $5,000 to $10,000) just after
    their purchases and then manage the properties as rentals and make mortgage
    payments until he resold them. Or, he offered to pay them a larger sum ($90,000
    to $140,000) with which the buyers could themselves manage the properties as
    rentals and make mortgage payments until Mr. Lipsey sold the properties.
    With respect to the lending institutions, Mr. Martinez played a large role in
    insuring that the loans were made, typically with nearly 100% financing, which
    required no, or only minimal, down payments. Mr. Martinez also found loans
    which required little proof of the borrowers’ employment, assets or income.
    Accordingly, as indicated above, Mr. Martinez provided false information about
    the buyers’ qualifications. Both Mr. Lipsey and Mr. Martinez employed a number
    of other tactics to lull the lending institutions to issue the loans they sought.
    The scheme eventually was discovered. As the plea agreement states, “As a
    result of this fraudulent scheme, the individuals who ended up as the second (and
    in one instance the third) buyers learned that the properties they had purchased
    were worth substantially less than amounts for which they had been mortgaged.
    All but one of the properties have gone into foreclosure. The actual loss to the
    lenders is $4,430,240.29, [2] because the unpaid principal balances on their loans
    2
    While this was the loss amount stated in the plea agreement, it ultimately
    was adjusted.
    -4-
    exceeded the amounts they recovered by reselling the properties.” Plea
    Agreement at 21, R. Vol. 1 at 74.
    The only disputed issues in this case are the amount of loss attributed to
    Mr. Lipsey’s fraud, the amount of restitution which he is required to make, and
    the impact of those two calculations on Mr. Lipsey’s prison sentence. After
    multiple sentencing hearings addressing the issues of loss calculation and
    restitution, the district court determined that the government had proven, by a
    preponderance of the evidence, that the total loss from Mr. Lipsey’s fraudulent
    scheme, for purposes of sentencing under the advisory United States Sentencing
    Commission, Guidelines Manual (“USSG”), was $4,208,860.11. The court further
    concluded that, pursuant to the Mandatory Victims Restitution Act (“MVRA”), 18
    U.S.C. § 3663A(b)(1)(A), Mr. Lipsey was required to make restitution in the
    amount of $2,922,759.89. Mr. Lipsey disputes these amounts and, in particular,
    the methodology used to calculate them.
    In preparation for sentencing under the advisory Guidelines, the United
    States Probation Office prepared a presentence report (“PSR”). The PSR arrived
    at a total offense level of 26, which included an 18-level upward adjustment
    because, pursuant to USSG §2B1.1(b)(1)(J), the loss exceeded $2,500,000 but was
    less than $7,000,000. With a criminal history category of 1, the advisory
    Guidelines sentencing range was 63 to 78 months. Mr. Lipsey filed objections to
    the PSR, challenging the loss and restitution calculations. The government filed
    -5-
    objections and corrections to the restitution amount. The court ultimately
    sentenced Mr. Lipsey to 63 months’ imprisonment, after finding that the loss and
    restitution amounts were as stated above.
    Mr. Lipsey appeals his sentence, arguing: (1) the district court erred in
    calculating the loss amount, thereby rendering his sentence procedurally
    unreasonable; (2) the district court erred in calculating the amount of restitution
    required, thereby also rendering his sentence procedurally unreasonable; and (3)
    his sentence is substantively unreasonable.
    DISCUSSION
    We review sentences for reasonableness under a deferential abuse-of-
    discretion standard. See United States v. Alapizco-Valenzuela, 
    546 F.3d 1208
    ,
    1214 (10th Cir. 2008). “‘Reasonableness review is a two-step process comprising
    a procedural and a substantive component.’” 
    Id.
     (quoting United States v. Verdin-
    Garcia, 
    516 F.3d 884
    , 895 (10th Cir. 2008)). See Gall v. United States, 
    552 U.S. 38
    , 51 (2007). “Procedural review asks whether the sentencing court committed
    any error in calculating or explaining the sentence.” Alapizco-Valenzuela, 
    546 F.3d at 1214
    . Substantive review, on the other hand, “involves whether the length
    of the sentence is reasonable given all the circumstances of the case in light of the
    factors set forth in 
    18 U.S.C. § 3553
    (a).” United States v. Conlan, 
    500 F.3d 1167
    ,
    1169 (10th Cir. 2007). A within-Guidelines sentence is entitled to a presumption
    -6-
    of substantive reasonableness on appeal, and a defendant must rebut this
    presumption by demonstrating that the sentence is unreasonable in light of the
    other sentencing factors laid out in § 3553(a). Rita v. United States, 
    551 U.S. 338
    , 347 (2007); United States v. Kristl, 
    437 F.3d 1050
    , 1054 (10th Cir. 2006).
    I. Loss Calculation
    Under the Guidelines, the base offense level applicable to a crime involving
    fraud is increased according to the amount of loss. USSG §2B1.1(b). “The court
    should use the greater of actual or intended loss.” United States v. James, 
    592 F.3d 1109
    , 1114 (10th Cir. 2010) (citing USSG §2B1.1 cmt. n.3(A)). The
    Guidelines define “actual loss” as “the reasonably foreseeable pecuniary harm that
    resulted from the offense.” USSG §2B1.1 cmt. n.3(A)(i).
    “A district court’s loss calculation at sentencing is a factual question we
    review for clear error.” United States v. Griffith, 
    584 F.3d 1004
    , 1011 (10th Cir.
    2009) (quoting United States v. Ary, 
    518 F.3d 775
    , 787 (10th Cir. 2008)).
    “Reversing for clear error ‘requires that, based on the entire evidence, we have a
    definite and firm conviction that a mistake has been committed.’” 
    Id.
     (quoting
    United States v. Hahn, 
    551 F.3d 977
    , 979 (10th Cir. 2008) (further quotation
    omitted)). The issue of the methodology used by the court to calculate loss,
    however, is a legal question which we review de novo. See James, 
    592 F.3d at 1114
    . Furthermore, “the government bears the burden of proving loss by a
    preponderance of the evidence.” 
    Id.
     Finally, “the comments to the Guideline
    -7-
    instruct that we are to give ‘appropriate deference’ to the district court’s
    determination, because the ‘sentencing judge is in a unique position to assess the
    evidence and estimate the loss based upon that evidence.’” Griffith, 
    584 F.3d at 1011
     (quoting USSG §2B1.1, cmt. n.3(C)).
    The district court made the following findings with respect to the loss
    calculation:
    At the time of the crimes to which the defendant has pled
    guilty, he was a licensed real estate broker. As a result of his
    familiarity with real estate transactions, the Court finds that, between
    April 2004 and March 2006, it was reasonably foreseeable to the
    defendant that mortgage loans on the properties involved in his
    fraudulent activities would be sold or repackaged to lenders other
    than the ones who made the [second] sale loans. . . . [I]t was also
    reasonably foreseeable to the defendant between April 2004 and
    March 2006 that the market value of the properties could fluctuate
    either up or down in the future.
    Sentencing Mem. at 2-3, R. Vol. 1 at 269-70 (record citations omitted). The court
    then agreed with the government’s theory of loss, “that the unpaid principal on the
    mortgage loan used to secure the [second] sale is reduced by the amount for which
    the collateral securing the loan was sold. Thus, for those properties that were
    subject to foreclosure, this means that the unpaid principal on the [second] sale
    note is reduced by [the] amount for which the property securing the note was sold
    after the lender reacquired the property at foreclosure.” Id. at 3.
    In reaching this conclusion, the court relied upon our decision in United
    States v. Washington, 
    634 F.3d 1180
     (10th Cir.), cert. denied, 
    132 S. Ct. 300
    -8-
    (2011), in which we stated, “[w]here a lender has foreclosed and sold the
    collateral, the net loss should be determined by subtracting the sales price from
    the outstanding balance on the loan.” 
    Id. at 1184
    . Using that formula provided in
    Washington, the district court found that the government had proven, by a
    preponderance of the evidence, that the total amount of actual loss was
    $4,208,860.11.
    We perceive no error in the court’s methodology or calculations. Mr.
    Lipsey makes two primary arguments to us on appeal: (1) that the district court
    erred in ignoring the conclusion of his expert, Dr. Mark Levine, that the relevant
    “value” of the properties subject to foreclosure, for the purposes of calculating
    loss, was their appraised value at the time of foreclosure, rather than the amount
    for which such properties were actually sold following foreclosure; and (2) the
    court erroneously shifted the burden to establish loss on to Mr. Lipsey. 3
    The problem with Mr. Lipsey’s first argument is it finds no support in our
    case law. Rather, the district court correctly followed the reasoning of
    Washington and explained why Mr. Lipsey’s reliance on James was misplaced.
    Additionally, as the government and the district court point out, his argument
    3
    With respect to his first argument, Mr. Lipsey alleges that when the
    “[victim/] note holder re-acquired the property following the foreclosure sale[,]
    . . . the value of the property at that point in time was the best and most
    reasonable calculation of the true value of the re-acquired property.” Appellant’s
    Op. Br. at 15.
    -9-
    ignores the fact that Mr. Lipsey and Mr. Martinez admitted to generating false
    appraisals in connection with the sales of the properties at issue.
    Mr. Lipsey’s second argument, to which he devotes merely a page of his
    brief, is equally unavailing. While it is true that the government bears the burden
    of establishing loss, the district court did not shift that burden to Mr. Lipsey by
    rejecting his argument about the value of appraisals and by not requiring the
    government to introduce such appraisals. As indicated above, appraisals of the
    kind sought by Mr. Lipsey were simply irrelevant to the calculation of loss in this
    case. The government properly carried its burden of proof.
    II. Restitution
    Mr. Lipsey also argues that his sentence is procedurally unreasonable
    because the district court erred in calculating the amount of restitution he is
    obligated to pay under the MVRA. “We review the legality of a restitution order
    de novo, the district court’s factual findings for clear error, and the amount of
    restitution for abuse of discretion.” United States v. Parker, 
    553 F.3d 1309
    , 1323
    (10th Cir. 2009). “The determination of an appropriate restitution amount is by
    nature an inexact science.” 
    Id.
     (further quotation omitted). Thus, the MVRA
    directs courts to “reach an expeditious, reasonable, determination of appropriate
    restitution by resolving uncertainties with a view toward achieving fairness to the
    victim.” 
    Id.
    -10-
    The district court found that the “government has proven by a
    preponderance of the evidence [that] restitution in the amounts and to the victims
    listed in the Probation Department’s revised restitution list . . . is $2,922,759.89.”
    Sentencing Mem. at 11-12, R. Vol. 1 at 278-79. As it did with the calculation of
    loss, the court agreed with the government’s theory of restitution calculation that
    it “should . . . use the difference between the unpaid principal balance [on the
    notes from the lenders to the second buyers] and the amount that the lender
    received from selling the property after foreclosure.” Id. at 9. The court rejected
    Mr. Lipsey’s argument (which he continues to make on appeal) that the restitution
    amount should be calculated based on the amount that the lender successfully bid
    on the properties at the foreclosure sale. In short, the district court’s methodology
    for calculating restitution was correct, leading to a reasonable and fair result. 4
    III. Substantive Reasonableness
    Finally, Mr. Lipsey challenges his sentence, arguing it is substantively
    unreasonable primarily because, at sixty-three months, his sentence is
    disproportionately longer than the fifty-month sentence of his equally culpable co-
    defendant, Mr. Martinez. As the government points out, however, Mr. Lipsey
    discounts or ignores the fact that Mr. Martinez entered into a plea agreement with
    4
    We note that the total amount of restitution ordered by the district court
    was less than the total amount of loss calculated. This was because the identities
    of some of the actual owners of the defaulted notes were not specifically
    documented.
    -11-
    the government more than a year earlier than did Mr. Lipsey and he (Mr.
    Martinez) provided substantial information to the government. The government
    accordingly recommended that Mr. Martinez receive a downward departure in his
    sentence, based upon his substantial assistance, under USSG §5K1.1. As the
    district court specifically noted, “[t]he two [men] do not stand in similar positions
    given the aspect of cooperation.” Tr. of Sentencing (Vol. 5), 11/23/2011, R. Vol.2
    at 683.
    Furthermore, we have stated that “[w]hile similar offenders engaged in
    similar conduct should be sentenced equivalently, disparate sentences are allowed
    where the disparity is explicable by the facts on the record.” United States v.
    Davis, 
    437 F.3d 989
    , 997 (10th Cir. 2006) (further quotations and citations
    omitted). The record in this case clearly reveals the reason for the disparity
    between the sentences of Mr. Lipsey and Mr. Martinez. Mr. Lipsey has failed to
    rebut the presumptively reasonable sentence he received.
    CONCLUSION
    For the foregoing reasons, we AFFIRM the sentence imposed on Mr. Lipsey.
    ENTERED FOR THE COURT
    Stephen H. Anderson
    Circuit Judge
    -12-