United States v. Powers ( 2014 )

FILED
United States Court of Appeals
Tenth Circuit
September 29, 2014
UNITED STATES COURT OF APPEALS
Elisabeth A. Shumaker
Clerk of Court
TENTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
Nos. 11-2190 & 11-2241
v. (D.C. No. 1:09-CR-03065-MCA-1)
(D.N.M.)
KEVIN POWERS,
Defendant - Appellant.
ORDER AND JUDGMENT *
Before HOLMES, HOLLOWAY, ** and MURPHY, Circuit Judges.
Defendant-Appellant Kevin Powers was convicted of seventeen counts of
wire fraud for his role in fraudulently obtaining mortgage loans for nine houses
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. It may be cited,
however, for its persuasive value consistent with Federal Rule of Appellate
Procedure 32.1 and Tenth Circuit Rule 32.1.
**
The late Honorable William J. Holloway, Jr., United States Senior
Circuit Judge, participated as a panel member when oral argument was heard on
this case but passed away before having an opportunity to vote on or otherwise
participate in the consideration of this order and judgment. “The practice of this
court permits the remaining two panel judges if in agreement to act as a quorum
in resolving the appeal.” United States v. Wiles, 106 F.3d 1516, 1516 n.* (10th
Cir. 1997); see also 28 U.S.C. § 46(d) (noting circuit court may adopt procedure
permitting disposition of an appeal where remaining quorum of panel agrees on
the disposition). The remaining panel members have acted as a quorum with
respect to this order and judgment.
and making undisclosed cash payments to the buyers of those homes. See 18
U.S.C. § 1343. On appeal, Mr. Powers challenges his conviction based on the
district court’s admission of certain testimony and evidence at trial. He also
challenges his sentence based on the district court’s application of the gross-
receipts enhancement under § 2B1.1(b)(14)(A) of the U.S. Sentencing Guidelines
(“U.S.S.G” or “the Guidelines”). 1 Exercising jurisdiction under 28 U.S.C.
§ 1291, we affirm Mr. Powers’s conviction but remand to the district court for re-
sentencing in accordance with this order and judgment’s clarification of the
proper scope of the sentencing enhancement.
I
Mr. Powers was a realtor and mortgage broker in Albuquerque, New
Mexico. In 2010, he was charged in a seventeen-count indictment in the United
States District Court for the District of New Mexico. These charges arose from
Mr. Powers’s role in fraudulently obtaining mortgage loans for nine houses
acquired by six buyers in 2006 and 2007. By providing false and incomplete
information to lenders, Mr. Powers was able to obtain loans for the buyers greater
than the actual sale prices of the houses. Mr. Powers funneled these excess funds
1
Although the 2013 edition of the Guidelines renumbered this
provision as § 2B1.1(b)(16)(A), the U.S. Probation Office used the 2010 edition
of the Guidelines in preparing the Presentence Investigation Report (“PSR”) in
this case. Because neither party disputes that decision, we also rely on the 2010
edition.
2
back to the buyers in what is commonly described as a mortgage “cash back”
scheme.
Mr. Powers was the central figure in this scheme. With one exception, he
was the individual who located the properties involved, and he was the one that
brought them to the attention of the buyers. Mr. Powers, acting for the buyers,
would make offers on the properties that were considerably higher than the
sellers’ asking prices. He would explain the high offers to the sellers by saying
that the added money was for renovations or landscaping, and that it would be
paid out at closing to a firm called K&E Construction. This, however, was not
the whole story. Mr. Powers did not inform the sellers that he owned K&E
Construction, or that the firm was in fact merely a shell entity through which the
additional money would pass before ultimately being kicked back to the buyers.
After a seller agreed to the proposed inflated purchase price, Mr. Powers
would assist the buyer in applying for financing. He, rather than the buyers,
prepared the loan applications; in doing so, he knowingly misrepresented both his
clients’ intended use of the properties and their financial qualifications for the
loans. For example, he indicated that properties were being purchased as primary
residences instead of as investment properties and he listed incomes far higher
than the buyers’ true incomes.
In the deals underlying his prosecution, Mr. Powers helped secure loans
from four different lenders: SunTrust Mortgage Company, National City
3
Mortgage, Accredited Home Lenders, and RFC Cameron Financial Group, Inc.
(collectively, the “lenders”). At the time the loans were obtained, each of the
lenders offered one-hundred-percent loan-to-value stated-income financing 2 for
homes bought as primary residences.
At trial, the government offered testimony from witnesses who worked at
the four lenders and were familiar with their firms’ lending practices in 2006 and
2007. Over multiple objections, they explained the requirements for the lenders’
loan programs at issue and, based on their review of the actual loan documents in
this case, they testified that the incomes listed in the loan documents qualified the
buyers for the loans that they had received. The witnesses also answered
hypothetical questions regarding whether these loans would have been approved if
certain information on the applications had been different—that is, if the incomes
had been substantially lower than stated, if the buyers had expressed an intent to
use the houses as investment properties rather than primary residences, and if the
lending companies had known that the money paid out at closing was actually
going to the buyers to make the mortgage payments.
2
A “stated-income” or “no-income-verification” loan is so called
because “the lender accepts the borrower’s statement of his income without trying
to verify it.” United States v. Phillips, 731 F.3d 649, 651 (7th Cir. 2013) (en
banc). For this reason, these loans are sometimes referred to as “liars’ loans.” Id.
One-hundred-percent loan-to-value financing simply refers to financing that
covers the full purchase price of a piece of property, rather than requiring a down
payment on some portion of the price.
4
After a nine-day trial, a jury found Mr. Powers guilty of all seventeen
counts. The Probation Office prepared a PSR, in which it recommended, inter
alia, a two-level enhancement under § 2B1.1(b)(14)(A) of the Guidelines.
Section 2B1.1(b)(14)(A) provides that a two-level enhancement to a defendant’s
offense level is warranted where “the defendant derived more than $1,000,000 in
gross receipts from one or more financial institutions as a result of the offense.”
In stating that the enhancement was applicable to Mr. Powers, the PSR relied on
the full mortgage amounts of five of the loans, implicitly applying the entire loan
amounts to Mr. Powers. Over Mr. Powers’s objections, the district court applied
the sentencing enhancement after finding that “as a technical matter, Mr. Powers
did directly and through his shell, K&E Construction Company, derive more than
1 million dollars.” R., Vol. III, at 3104 (Sentencing Hr’g, dated Sept. 13, 2011).
The district court ultimately sentenced Mr. Powers to fifty-six months’
imprisonment and $1,155,317.50 in restitution. 3
Mr. Powers now asserts three errors on appeal. First, he claims that some
of the lender witnesses’ testimony was admitted in error because it constituted
expert testimony from lay witnesses. Second, he argues that the district court
improperly allowed documents into evidence as business records without an
adequate foundation. And, third, Mr. Powers contends that the district court
3
Although he originally filed a notice of appeal regarding the
restitution, Mr. Powers does not challenge the restitution order on appeal.
5
incorrectly applied the gross-receipts enhancement.
As to Mr. Powers’s first two claims, which implicate the propriety of his
conviction, upon concluding that he failed to preserve these claims, we review
them for plain error and determine that the district court committed no clear or
obvious error. Accordingly, we uphold Mr. Powers’s conviction. On the
sentencing question, by contrast, we find it necessary to clarify the correct scope
of the gross-receipts enhancement. Having done so, we remand this case to the
district court for re-sentencing in accordance with this order and judgment.
II
We begin with Mr. Powers’s assertion that the district court erred under
Federal Rule of Evidence 701 4 by improperly allowing the lender witnesses to
give expert opinion testimony and to testify to legal conclusions. Before
addressing the merits of this claim, however, we first consider whether or not Mr.
Powers preserved this issue. The government argues that, although Mr. Powers
undoubtedly objected at trial to much of the testimony that is the focus of this
appeal, he did not do so expressly on the basis of Rule 701. Instead, the
government asserts that Mr. Powers merely raised a variety of objections on other
4
Rule 701 limits opinion testimony from witnesses who are not
qualified as experts. Such testimony must be “(a) rationally based on the
witness’s perception; (b) helpful to clearly understanding the witness’s testimony
or to determining a fact in issue; and (c) not based on scientific, technical, or
other specialized knowledge within the scope of Rule 702.” Fed. R. Evid. 701.
6
specific grounds: speculation, lack of personal knowledge, assuming facts not in
evidence, improper hypothetical, and lack of foundation. Mr. Powers disagrees.
He claims that he satisfied the preservation requirement in Federal Rule of
Evidence 103 because it was “apparent from the context” of his objections that he
was objecting to improper lay-witness testimony under Rule 701. Aplt. Reply Br.
at 1 (quoting Fed. R. Evid. 103(a)(1)(B)) (internal quotation marks omitted).
Resolving this dispute is our first order of business.
A
“A timely objection, accompanied by a statement of the specific ground of
the objection, must be made when evidence is offered at trial to preserve the
question for appeal, unless the ground is apparent from the context of the
objection.” United States v. Norman T., 129 F.3d 1099, 1106 (10th Cir. 1997)
(citing Fed. R. Evid. 103(a)(1)). “Absent a timely and specific objection, this
court reviews such challenges for plain error.” United States v. McGlothin, 705
F.3d 1254, 1260 (10th Cir.), cert. denied, --- U.S. ----, 133 S. Ct. 2406 (2013);
see United States v. Ramirez, 348 F.3d 1175, 1181 (10th Cir. 2003).
Although Mr. Powers made numerous timely and specific objections at
trial, the Rule 701 issue that he presses on appeal was not the basis for any of
them. 5 It is well established in this circuit that “[t]he specific ground for reversal
5
Mr. Powers made one objection that could conceivably be read as
(continued...)
7
of an evidentiary ruling on appeal must . . . be the same as that raised at trial.”
Ramirez, 348 F.3d at 1181 (omission in original) (quoting Norman T., 129 F.3d at
1106) (internal quotation marks omitted); accord United States v. Taylor, 604
F.3d 1011, 1015 (7th Cir. 2010). Mr. Powers argues that, even without express
invocation of Rule 701, the nature of his concerns was clear in context because
his objections went to the “heart” of the rule’s foundational requirements. The
record, however, does not bear this assertion out.
Mr. Powers’s objections—scattered across approximately 600 pages of trial
testimony—specifically raised a variety of concerns other than Rule 701. These
objections never called “the nature of the [alleged Rule 701] error . . . to the
attention of the [district court], so as to alert [it] to the proper course of action
and enable opposing counsel to take proper corrective measures.” Fed. R. Evid.
5
(...continued)
implicating Rule 701. It came after one of the lender witnesses, a Mr. Rowland,
stated that interest rates are generally lower for individuals borrowing money to
purchase primary residences than for those purchasing investment properties
“because . . . there is less risk for the mortgage company.” R., Vol. III, at 683
(Trial Tr., dated Apr. 7–20, 2011). Mr. Powers’s attorney objected, stating: “I
don’t know on what basis Mr. Rowland is stating these conclusions about less risk
and more risk. There seems to be a scientific basis or something to do that, and I
don’t know if he has that basis.” Id. (emphasis added). We are not convinced
that one objection referring obliquely to the expert-opinion rules, buried in over
600 pages of trial testimony, can bear the weight of preserving a Rule 701
objection for the broad swath of testimony challenged here. Even if this objection
sufficiently stated a Rule 701 ground for Mr. Powers’s objection to the Rowland
testimony, any error in overruling the objection was harmless “given the wealth
of evidence put forth by the prosecution.” United States v. Cass, 127 F.3d 1218,
1225 (10th Cir. 1997).
8
103 advisory committee’s note. As such, Mr. Powers’s specific objections were
not enough to preserve the alleged errors that he presses on appeal. 6 We thus
proceed with our analysis of Mr. Powers’s Rule 701 objections to the lender
witnesses’ testimony under the plain-error standard. 7
6
Mr. Powers directs us to several cases from our sister circuits, which
he claims found a Rule 701 issue adequately preserved by objections similar to
those in this case. His reliance on those cases is misplaced. Some of them fail to
help Mr. Powers because the decisions do not describe the character of the
objections that the courts relied on in finding the Rule 701 issue preserved. See
United States v. Johnson, 617 F.3d 286, 292 n.6 (4th Cir. 2010) (finding that Rule
701 objection was clear in the context of the “many” other objections during the
challenged testimony, but silent as to what these other objections were); United
States v. Freeman, 498 F.3d 893, 904 (9th Cir. 2007) (same). Without that crucial
information, these cases merely stand for the proposition that context sometimes
is enough; they do not speak to whether the context should be deemed sufficient
here. Other cases Mr. Powers cites do not actually address the preservation issue.
See United States v. Graham, 643 F.3d 885, 896 (11th Cir. 2011) (declining to
reach the preservation question because “[r]egardless of the applicable standard of
review, the record clearly show[ed] that [the witness] was testifying based on his
own personal knowledge . . . , and the district court did not err by admitting his
testimony”); Bank of China v. NMB LLC, 359 F.3d 171, 180–81 & n.10 (2d Cir.
2004) (noting that “the District Court . . . concluded that the testimony satisfied
the requirements for lay opinion testimony”). The other cases Mr. Powers points
to are distinguishable because the objections more directly suggested a Rule 701
objection. See, e.g., United States v. Massino, 546 F.3d 123, 129 (2d Cir. 2008)
(objecting that testimony was “the opinion of this witness”); Hirst v. Inverness
Hotel Corp., 544 F.3d 221, 225 (3d Cir. 2008) (objecting that witness was “[n]ot
an expert witness” (alteration in original)).
7
To the extent that Mr. Powers raises an additional challenge based on
his contention that the lay witnesses were allowed to testify to “impermissible
legal conclusions about materiality,” Aplt. Opening Br. at 32, we find that this
challenge, too, was not preserved, because Mr. Powers made no such objection at
trial. Indeed, the record shows not only that Mr. Powers failed to raise a
sufficiently specific objection to the materiality line of questioning, but also that
Mr. Powers actually engaged in precisely the same sort of questioning he now
(continued...)
9
B
To succeed under our “rigorous plain-error standard,” Mr. Powers must
demonstrate: “(1) an error, (2) that is plain, which means clear or obvious under
current law, and (3) that affects substantial rights. If he satisfies these criteria,
this Court may exercise discretion to correct the error if [4] it seriously affects the
fairness, integrity, or public reputation of judicial proceedings.” United States v.
Cooper, 654 F.3d 1104, 1117 (10th Cir. 2011) (alteration in original) (quoting
United States v. Goode, 483 F.3d 676, 681 (10th Cir. 2007)) (internal quotation
marks omitted).
As for the second prong, we have clarified that “to be clear or obvious, the
error must be contrary to well-settled law.” United States v. Taylor, 514 F.3d
1092, 1100 (10th Cir. 2008). “In general, for an error to be contrary to well-
settled law, either the Supreme Court or this court must have addressed the issue.”
United States v. Ruiz-Gea, 340 F.3d 1181, 1187 (10th Cir. 2003). And, although
the “absence of such precedent will not . . . prevent a finding of plain error if the
7
(...continued)
argues was inappropriate. Accordingly, we find that Mr. Powers’s argument that
the district court erred by admitting testimony concerning the “materiality” to the
underwriting process of the various types of information included on the loan
application forms is waived under the invited-error doctrine, which “precludes a
party from arguing that the district court erred in adopting a proposition that the
party had urged the district court to adopt.” ClearOne Commc’ns, Inc. v. Bowers,
643 F.3d 735, 771 (10th Cir. 2011) (quoting FTC v. Accusearch Inc., 570 F.3d
1187, 1204 (10th Cir. 2009)) (internal quotation marks omitted).
10
district court’s interpretation [of statutory or regulatory provisions] was ‘clearly
erroneous,’” id. (quoting United States v. Brown, 316 F.3d 1151, 1158 (10th Cir.
2003)), “[g]enerally, such a circumstance [i.e., the absence of controlling
precedent] will close the door on a claim that the error . . . is clear or obvious,”
United States v. Schneider, 704 F.3d 1287, 1304 (10th Cir.) (Holmes, J.,
concurring, joined by Martinez, J.), cert. denied, --- U.S. ----, 133 S. Ct. 2868
(2013). This is especially true where caselaw from our sister circuits does not
definitively support a finding of error. See Schneider, 704 F.3d at 1304 (Holmes,
J., concurring, joined by Martinez, J.); cf. United States v. Hardwell, 80 F.3d
1471, 1484 (10th Cir. 1996) (“Although neither the Supreme Court nor this court
has decided the issue, given the weight of authority from other circuits, we
conclude that the error was sufficiently clear and obvious to be plain error . . . .”);
cf. also United States v. Ahidley, 486 F.3d 1184, 1193 n.7 (10th Cir. 2007) (“[W]e
do not believe the presence of contrary circuit authority should control our
determination of whether the district court’s error was plain.”).
In this case, even assuming arguendo that there was error, it would not be
clear or obvious; accordingly, we need not determine under the first prong of the
plain-error standard whether the district court actually erred. See Abernathy v.
Wandes, 713 F.3d 538, 553 (10th Cir. 2013) (“We need not decide whether there
was error . . . because even assuming arguendo that there was error, it would not
be plain (i.e., clear or obvious).”), cert. denied, --- U.S. ----, 134 S. Ct. 1874
11
(2014). Mr. Powers’s argument is that the lender witnesses’ testimony failed to
satisfy any of the requirements of Rule 701, which says that lay-witness opinion
testimony must be “(a) rationally based on the witness’s perception; (b) helpful to
clearly understanding the witness’s testimony or to determining a fact in issue;
and (c) not based on scientific, technical, or other specialized knowledge within
the scope of Rule 702.” Fed. R. Evid. 701. For the reasons explained below, the
lender witnesses’ testimony at issue in this case did not clearly or obviously run
afoul of any of these three requirements.
1
Rule 701(a) requires lay-witness opinion testimony to be based on the
witness’s “first-hand knowledge or observation.” Fed. R. Evid. 701 advisory
committee’s note. This “perception requirement stems from [Rule] 602 which
requires a lay witness to have first-hand knowledge of the events he is testifying
about so as to present only the most accurate information to the finder of fact.”
United States v. Bush, 405 F.3d 909, 916 (10th Cir. 2005) (quoting United States
v. Hoffner, 777 F.2d 1423, 1425 (10th Cir. 1985)) (internal quotation marks
omitted); see Fed. R. Evid. 602 (“A witness may testify to a matter only if
evidence is introduced sufficient to support a finding that the witness has personal
knowledge of the matter.”). Mr. Powers asserts two different errors with respect
to this requirement. First, he argues that the lender witnesses were not personally
involved in the loans at issue in this case and thus had no first-hand knowledge of
12
why these particular loans were approved. Second, he argues that because the
lender witnesses lacked personal involvement in the transactions, it was
inappropriate for the district court to allow these witnesses to answer hypothetical
questions relating to the transactions.
However, although the witnesses were not directly involved in the
transactions, and thus lacked contemporaneous personal knowledge of them, they
did have personal knowledge of their respective employers’ lending practices at
the time the transactions took place and, by the time of trial, had become familiar
with the specific loan documents as well. The question is thus whether it was
clear or obvious error for the district court to treat this kind of personal
knowledge—contemporaneous knowledge of the policies and practices of a
business combined with after-acquired knowledge of particular transactions—as
sufficient under Rule 701(a), and whether it was clear or obvious error to allow
such testimony when it included witnesses’ opinions on the implications of
various hypothetical changes to specific transactions.
That we have been unable to find any Supreme Court or Tenth Circuit
caselaw that is directly on point (and Mr. Powers directs us to none) itself
suggests that any error committed by the district court was not clear or obvious.
See Ruiz-Gea, 340 F.3d at 1187. Cases from our sister circuits, while instructive
to a degree, do not substantially clarify the picture—certainly not in a such a way
that the district court’s decision to allow the lender witnesses’ testimony
13
constituted clear or obvious error. In United States v. Hill, 643 F.3d 807 (11th
Cir. 2011), for example, which involved a very similar scheme to the case on
appeal, the defendant argued that the district court had improperly allowed expert
testimony masquerading as lay testimony. Id. at 840. As in Mr. Powers’s case,
[a]t trial, the district court permitted several representatives of
victim lending institutions, all of whom were involved in
mortgage and loan approval for their respective companies, to
testify about whether the disclosure of misrepresentations in
some of the fraudulent loan applications would have had any
effect on their decision to approve the mortgage or loan.
Id. The Eleventh Circuit concluded that the district court “did not abuse its
discretion by permitting the witnesses who had personally dealt with the
fraudulent loan transactions at issue to respond to the government’s questions
about what would have happened if the facts had been different,” id. at 842,
indicating that in the Eleventh Circuit’s view, there was nothing inherently
inappropriate about lay witnesses answering hypothetical questions regarding
transactions based on their personal knowledge.
The Eleventh Circuit’s conclusion in Hill that the district court did not
abuse its discretion, standing alone, lends some support for the view that the
district court did not err here, where the lay witnesses answering the hypothetical
questions possessed personal knowledge of their respective lenders’ policies and
procedures and knowledge of the loan files at issue. However, without
elaboration, the Hill court also observed that, “[a]s for the witnesses who were
14
not personally involved with the transactions at issue, any error in admitting their
testimony was harmless.” Id. This language seemingly points in the opposite
direction on the question of whether the district court erred here, suggesting that
the Eleventh Circuit believed it would be error to allow lay witnesses to answer
hypothetical questions about transactions as to which they did not have personal
involvement. But the court did not expressly render such a holding in Hill and it
did not offer any reason for drawing the distinction it did between those witnesses
who were personally involved in the transactions and those who were not.
The best that we can say about Hill is that it sends unclear signals on the
propriety under Rule 701 of the challenged lay witness testimony in this case.
And, even if Hill tilts toward a conclusion that the district court erred here, it is
only one case, and Mr. Powers has not demonstrated that Hill’s interpretation of
the personal-knowledge requirement is representative of the weight of authority
among our sister circuits. Accordingly, Hill will not take Mr. Powers across the
finish line on the second prong of the plain-error test.
Furthermore, Mr. Powers’s argument is undermined by decisions in a
number of other circuits explaining that lay witnesses may, consistent with Rule
701(a), testify broadly regarding an employer’s practices, policies, and
procedures, so long as their testimony is derived from personal knowledge and
experience at the business. See, e.g., United States v. Valencia, 600 F.3d 389,
416 (5th Cir. 2010) (ruling that a former risk officer’s testimony “recreat[ing]
15
much of the analysis he regularly performed when evaluating risk tolerances” was
“properly characterized as . . . lay opinion” testimony because his “knowledge
and analysis were derived from duties he held at [the firm]”); US Salt, Inc. v.
Broken Arrow, Inc., 563 F.3d 687, 690 (8th Cir. 2009) (“[P]erceptions based on
industry experience[] [are] a sufficient foundation for lay opinion testimony.”
(first alteration in original) (quoting Burlington N. R.R. Co. v. Nebraska, 802 F.2d
994, 1004–05 (8th Cir. 1986)) (internal quotation marks omitted)); United States
v. Munoz-Franco, 487 F.3d 25, 36 (1st Cir. 2007) (holding that a former
executive’s testimony regarding what information company’s board “should have”
had in its decisionmaking process was lay opinion testimony because her position
and regular attendance at board meetings gave her the requisite personal
knowledge); Tampa Bay Shipbuilding & Repair Co. v. Cedar Shipping Co., 320
F.3d 1213, 1223 (11th Cir. 2003) (determining that district court did not abuse its
discretion in permitting officers and employees to testify as lay witnesses, based
on their “particularized knowledge garnered from years of experience within the
field,” about the reasonableness of their corporation’s pricing in light of industry
standards).
In the instant case, where the lender witnesses’ testimony was based on
their personal knowledge and experience with their respective firms’ application-
assessment policies and procedures, it requires no great stretch of the imagination
to see how a court could conclude that this testimony was based on the witnesses’
16
“first-hand knowledge or observation” as required by Rule 701(a). See Fed. R.
Evid. 701 advisory committee’s note. In sum, where “we cannot say . . . that the
district court was clearly wrong,” Ruiz-Gea, 340 F.3d at 1188, any error
committed by the district court here under Rule 701(a) was not plain.
2
We next consider Mr. Powers’s arguments regarding Rule 701(b), which
requires a witness’s testimony to be helpful to the jury. Mr. Powers argues that
the challenged testimony was not helpful because it was based on “hypothetical
facts” and on “documents not in evidence,” i.e., the lending institutions’
underwriting guidelines. Aplt. Opening Br. at 31.
With respect to use of hypothetical facts, we note again that Mr. Powers
has identified no case from this court or the Supreme Court that clearly prohibits
lay witnesses from offering opinion testimony based on their personal experience
in response to hypothetical questions. Indeed, the only case Mr. Powers cites for
this proposition is the Eleventh Circuit’s decision in United States v. Henderson,
409 F.3d 1293 (11th Cir. 2005), which does recite, in dicta, the view that “the
ability to answer hypothetical questions is ‘[t]he essential difference’ between
expert and lay witnesses.” Id. at 1300 (alteration in original) (quoting Asplundh
Mfg. Div. v. Benton Harbor Eng’g, 57 F.3d 1190, 1202 n.16 (3d Cir. 1995)). But
Henderson’s dictum is belied by the Eleventh Circuit’s own more recent decision
in Hill, which—as noted above—did not consider it an abuse of discretion for the
17
district court to allow lay witnesses to “answer[] hypothetical questions . . .
based . . . on their personal experiences as officers of financial institutions with
knowledge of their companies’ policies and of the specific transactions at issue.”
Hill, 643 F.3d at 842. Even the Eleventh Circuit, then, does not appear to
categorically reject lay witness opinion testimony in response to hypothetical
facts, but instead considers the propriety of such testimony by reference to the
basis of personal knowledge of the witness.
Thus, Mr. Powers cannot establish by reference to the Eleventh Circuit or
otherwise that it is well-settled law that the mere fact that lender witnesses offer
opinion testimony in response to hypothetical facts renders their testimony
categorically unhelpful to the jury. And, considering that the witnesses here
testified largely based on their knowledge and experience, as already discussed,
we conclude that it was not clear or obvious error for the district court to
determine that this testimony was in fact helpful to the jury. Any error in
admitting this testimony—based on hypothetical questions—thus was not plain.
Mr. Powers’s second contention under Rule 701(b) is that the lender
witnesses’ testimony was not helpful because they testified on the basis of the
lenders’ underwriting guidelines, which Mr. Powers asserts were not in evidence.
At the outset, we note that Mr. Powers proceeds from a false factual predicate.
The underwriting guidelines for two of the four lenders—SunTrust and National
City Mortgage—actually were in evidence. The jury therefore had the
18
opportunity to compare the witnesses’ testimony with the actual guidelines with
respect to the five loans (out of nine) underwritten by these two lenders, and Mr.
Powers was, of course, free to argue to the jury that they should afford less
weight to the testimony about the guidelines that were not in evidence.
Considering these facts, and considering that Mr. Powers has not pointed us to
any caselaw or other authority that would suggest that the district court’s
admission of the testimony of the lender witnesses was clearly or obviously
wrong under Rule 701(b), we conclude that Mr. Powers has not carried his burden
on the second prong of the plain-error test.
3
Finally, we turn to Mr. Powers’s contentions regarding Rule 701(c), which
disallows testimony based on “scientific, technical, or other specialized
knowledge within the scope of Rule 702.” Fed. R. Evid. 701(c). Mr. Powers
argues that the lender witnesses’ testimony was based on specialized knowledge
of underwriting practices in the mortgage industry and thus was not admissible
under Rule 701. The government responds that the testimony was admissible lay
testimony because it was based on the witnesses’ personal familiarity with the
specific underwriting processes and policies of their employers and had been
acquired through their employment with the lenders.
Our decision in James River Insurance Co. v. Rapid Funding, LLC, 658
F.3d 1207 (10th Cir. 2011), offers a useful framework for analyzing Mr. Powers’s
19
challenge. The testimony at issue there consisted of a real estate investor’s
valuation of property owned by his company; we concluded that it constituted
expert opinion testimony. Specifically, starting from the general principle that
“Rule 701 ‘does not permit a lay witness to express an opinion as to matters
which are beyond the realm of common experience and which require the special
skill and knowledge of an expert witness,’” id. at 1214 (quoting Randolph v.
Collectramatic, Inc., 590 F.2d 844, 846 (10th Cir. 1979)), we identified in James
River four “reasons [to] support our conclusion that [the] testimony fell outside
the category of lay opinion,” id. To be clear, while we seek guidance from James
River, we remain cognizant of the fact that we did not declare there that these
four reasons would necessarily be cogent or even relevant in every case, nor did
we purport to establish an exhaustive four-factor test.
Regarding the first factor, in James River, we noted that the valuation
testimony both required the exercise of technical judgment (in choosing among
alternative methodologies for calculating depreciation, for example) and involved
calculations that “require[d] more than applying basic mathematics.” Id. Second,
the witness’s calculations in James River were “based in part on his professional
experience,” which the court also found suggested that the testimony was expert
opinion because “[k]nowledge derived from previous professional experience falls
squarely within the scope of Rule 702.” Id. at 1215 (alteration in original)
(quoting United States v. Smith, 640 F.3d 358, 365 (D.C. Cir. 2011)) (internal
20
quotation marks omitted). Third, the witness “relied on a technical report by an
outside expert” that ran over fifteen hundred pages and used “specialized
accounting calculations.” Id. Fourth, and finally, James River involved
“landowner testimony about land value,” and the court observed that “the Federal
Rules of Evidence generally consider [such testimony] to be expert opinion.” Id.
Using James River’s four factors as a framework for our analysis—insofar
as these facts are relevant on this record—we conclude that the district court did
not commit clear or obvious error in concluding that the lender witnesses’
testimony complied with Rule 701(c)’s requirements. With respect to the first
factor, Mr. Powers argues that “[t]he lender representatives in this case were
asked to perform debt-to-income ratio calculations . . . requiring them to apply
specialized knowledge and prior experience in the mortgage industry well beyond
that of the average lay person.” Aplt. Opening Br. at 33. We disagree.
The calculation of debt-to-income ratios is the kind of basic math that we
have permitted lay witnesses to include in their testimony. Compare Ryan Dev.
Co. v. Ind. Lumbermens Mut. Ins. Co., 711 F.3d 1165, 1170–71 (10th Cir. 2013)
(ruling that an accountant’s calculation of lost income and other claims using only
“basic arithmetic, personal experience, and no outside expert reports” fell “under
Rule 701 as lay testimony”), and Bryant v. Farmers Ins. Exch., 432 F.3d 1114,
1124 (10th Cir. 2005) (holding that the calculation of the arithmetical mean of
103 numbers was “well within the ability of anyone with a grade-school
21
education” and “aptly characterized as a lay opinion”), with LifeWise Master
Funding v. Telebank, 374 F.3d 917, 929 (10th Cir. 2004) (concluding that a
calculation of lost profits that involved sophisticated economic models including
“moving averages, compounded growth rates, and S-curves” was “technical” and
“specialized” and could not be offered as lay opinion testimony). Calculating
such debt-to-income ratios simply involves dividing the loan applicant’s monthly
debts by her monthly income—a calculation, on the one hand, certainly no more
complicated than finding the arithmetical mean of a large group of numbers, see
Bryant, 432 F.3d at 1124, and hardly comparable, on the other hand, to the kind
of complex computations described in either James River or Lifewise.
Regarding the second James River factor, we used somewhat categorical
language in articulating it—viz., “[k]nowledge derived from previous professional
experience falls squarely within the scope of Rule 702,” 658 F.3d at 1215—that
could conceivably be read as placing under Rule 702 all witness testimony that
stems to any degree from knowledge acquired through professional experience.
But we believe that such an expansive reading of this language would be
mistaken. Indeed, in James River, we noted that lay witnesses could properly
offer testimony that involved “a limited amount of expertise.” Id. at 1214. And
such expertise surely could be (and often will be) the product of prior
professional experience. Cf. Fed. R. Evid. 701 advisory committee’s note
(“[M]ost courts have permitted the owner or officer of a business to testify to the
22
value or projected profits of the business, without the necessity of qualifying the
witness as an accountant, appraiser, or similar expert. Such opinion testimony is
admitted not because of experience, training or specialized knowledge within the
realm of an expert, but because of the particularized knowledge that the witness
has by virtue of his or her position in the business.” (citation omitted)); James
River, 658 F.3d at 1216 (recognizing that we have previously “allowed business
owners to testify [under Rule 701] about business (as opposed to property) value”
where that testimony was based on “sufficient personal knowledge of their
respective businesses and of the factors on which they relied to estimate lost
profits” and where “the owners offered valuations based on straightforward,
common sense calculations” (quoting LifeWise, 374 F.3d at 929–30) (internal
quotation marks omitted)).
Furthermore, such a broad reading of this second-factor language of James
River would be inconsistent with our recognition in Ryan Development that
witnesses with arguably pertinent professional experience could nevertheless offer
Rule 701 lay testimony under certain circumstances, including where they possess
personal familiarity with documentary evidence at issue. See Ryan Dev., 711 F.3d
at 1170 (allowing accountants to testify as lay witnesses regarding lost income
where their testimony was based on “personal experience” analyzing the
documentary evidence at issue and involved only basic calculations, even
“[t]hough accountants often testify as expert witnesses” ); cf. Peshlakai v. Ruiz,
23
No. CIV 13-0752 JB/ACT, 2013 WL 6503629, at *18 n.8 (D.N.M. Dec. 7, 2013)
(“[A]lthough there is logic in the assumption that almost all of a physician’s
treatment of her patients relies on scientific technical, or other specialized
knowledge, requiring it to be admitted under rule 702, the Tenth Circuit does not
seem to draw such a bright line. Although the Tenth Circuit has not defined the
bounds of permissible testimony for a treating physician as a lay witness, it seems
that it is permissible for a treating physician to provide testimony about the
treatment of the physician’s patients.”).
Like the accountants who were allowed to testify as lay witnesses in Ryan
Development, the lender witnesses in this case testified based on their personal
experience, employed only basic calculations, and did not rely on outside expert
reports. Indeed, their testimony was—like the testimony of the business owner or
officer discussed in the advisory committee’s note to Rule 701—based on
“particularized knowledge” that they possessed “by virtue of [their] position[s]”
at their respective employers. Fed. R. Evid. 701 advisory committee’s note.
Thus, we are convinced that the district court would not—at the very least—have
clearly or obviously strayed from the teaching of this second James River factor
in concluding that the lender witnesses’ testimony did not qualify as expert
testimony, even though it was based in part on knowledge derived from their
relevant professional experience. As for the third and fourth James River factors,
they are not relevant here: there were no outside expert reports for the lay
24
witnesses to rely on, and the testimony was not related to land valuation.
Therefore, we go no further than the first two factors. Based upon the foregoing
analysis, we cannot say that the district court in this case committed a clear or
obvious error under Rule 701(c).
In sum, we conclude that Mr. Powers’s arguments relating to the admission
of the lender witnesses’ testimony as lay testimony under Rule 701 fail under
plain-error review. Consequently, we do not disturb the district court’s decision
to admit this testimony.
III
We turn now to Mr. Powers’s second challenge on appeal. He argues that
the district court erred in allowing the admission of loan records related to loans
issued by RFC Cameron Financial Group, Inc. (“Cameron”). Four of the
seventeen counts on which Mr. Powers was found guilty relate to loan
transactions involving Cameron. At trial, the government did not seek to admit
into evidence loan records that were obtained directly from Cameron. Instead, the
government successfully entered into evidence Cameron loan documents that were
in the files of companies that serviced Cameron loans. The original Cameron
loan documents were apparently unavailable, having been destroyed some time
prior to the government’s attempt to obtain them (which itself occurred some time
after Cameron declared bankruptcy and went out of business).
Mr. Powers argues that Cameron’s loan applications and other relevant loan
25
documents were admitted erroneously under the business-records exception to the
hearsay rule found in Federal Rule of Evidence 803(6), “which provides that
certain records of regularly conducted business activity are admissible for their
truth even though they contain hearsay.” United States v. Blechman, 657 F.3d
1052, 1065 (10th Cir. 2011). At the outset, the government contends that Mr.
Powers failed to properly preserve an objection to the admission of these records
under Rule 803(6), and that, accordingly, we should review Mr. Powers’s claim
on appeal under the plain-error standard instead of for an abuse of discretion.
Thus, as with Mr. Powers’s Rule 701 claims, we begin by inquiring
whether Mr. Powers properly preserved his objections. Concluding that he did
not, we proceed with our analysis under the demanding plain-error standard. We
determine that, even assuming arguendo that the district court erred in admitting
the Cameron documents, it did not clearly or obviously do so. Thus, Mr. Powers
cannot prevail on this ground under the rigorous plain-error standard.
A
Mr. Powers does not claim to have objected during the trial to the
introduction of the Cameron documents. But, in Mr. Powers’s view, he did not
need to because he had properly preserved this claim by objecting to the
documents in a motion in limine. “A pretrial motion in limine to exclude
evidence will not always preserve an objection for appellate review,” but we have
held that it “may . . . when the issue (1) is fairly presented to the district court,
26
(2) is the type of issue that can be finally decided in a pretrial hearing, and (3) is
ruled upon without equivocation by the trial judge.” United States v. Mejia-
Alarcon, 995 F.2d 982, 986 (10th Cir. 1993); see also Fed. R. Evid. 103(b)
(“Once the court rules definitively on the record—either before or at trial—a
party need not renew an objection . . . to preserve a claim of error for appeal.”).
Under these standards, we conclude that Mr. Powers did not preserve his
business-records claim because the district court did not rule definitively or
unequivocally on Mr. Powers’s objection on this ground.
Prior to trial, Mr. Powers filed a motion in limine objecting to the
introduction of the Cameron records as business records of the loan servicers. He
argued, inter alia, that:
It is not sufficient that the United States present testimony from
the loan servicers to the effect that their records contain
documents from Cameron’s loan file; what is important is that
the custodian of records of a loan servicing company cannot
authenticate the . . . entire contents of the records of the separate
business which created them [i.e., Cameron].
R., Vol. I, at 589 (Mot. in Limine & Reply, filed Jan. 26, 2011).
The district court ruled on the motion orally at a hearing, and during a brief
exchange there, Mr. Powers explained that his objection was directed at the
adequacy of the foundation for the records. After the government responded that
it would be able to lay appropriate foundations at trial for these records through
witnesses from the loan servicing companies, the district court overruled Mr.
27
Powers’s objections, “[s]ubject to foundation being laid.” Id., Vol. III, at 204
(Hr’g Tr., dated Feb. 9, 2011) (emphasis added). In other words, the district
court’s ruling in favor of the admissibility of the documents was expressly
contingent on the government laying a proper foundation for the documents.
The court’s explicit statements therefore seemingly belie any suggestion
that it ruled “definitively” or “without equivocation” on Mr. Powers’s objection,
see Fed. R. Evid. 103(b); Mejia-Alarcon, 995 F.2d at 986, and Mr. Powers points
to no authority that would lead us to a contrary conclusion. Consequently, Mr.
Powers was obliged to renew his foundation objections at trial; this he failed to
do. Therefore, he has not preserved them for appeal, and our review is only for
plain error.
B
Even if we assume arguendo that the district court erred by allowing the
government to admit the Cameron loan documents as business records of the
various companies that serviced the loans, we conclude that Mr. Powers cannot
satisfy the second prong of the plain-error test because any such error was not
clear or obvious. Our analysis of Mr. Powers’s argument under Rule 803(6)
requires some discussion of the alleged errors, even though we need not and do
not decide whether there was actually any error in this case.
Mr. Powers claims that the district court erred by failing to properly heed
the requirements set forth in Rule 803(6), which articulates an exception from the
28
hearsay doctrine for
[a] record of an act, event, condition, opinion, or diagnosis if:
(A) the record was made at or near the time by—or from
information transmitted by—someone with knowledge; (B) the
record was kept in the course of a regularly conducted activity of
a business, organization, occupation, or calling, whether or not
for profit; (C) making the record was a regular practice of that
activity; (D) all these conditions are shown by the testimony of
the custodian or another qualified witness . . . ; and (E) neither
the source of information nor the method or circumstances of
preparation indicate a lack of trustworthiness.
Fed. R. Evid. 803(6). In essence, Mr. Powers argues that it was error for the
district court to admit the Cameron files as the business records of the loan
servicing companies, because the records custodians of those companies were not
in a position to establish the required foundation under the Rule. 8 In particular,
8
We have interpreted Rule 803(6) to require the records custodian or
another qualified witness to lay foundation testimony establishing that
the records (1) were prepared in the normal course of business;
(2) were made at or near the time of the events recorded; (3)
were based on the personal knowledge of the entrant or of a
person who had a business duty to transmit the information to the
entrant; and (4) are not otherwise untrustworthy.
United States v. Irvin, 682 F.3d 1254, 1261 (10th Cir. 2012). Here, the
government put on three witnesses to lay the foundation for the Cameron
documents. The first witness, the records custodian for Specialized Loan
Services, testified that the documents were “records of acts and events made at or
near the time, by or from information transmitted by a person with knowledge of
the events recorded in th[e] documents”; “kept in the course of Specialized Loan
Services’ regularly conducted business activity”; that it was “the regular practice
of Specialized Loan Services’ business activity to make those records”; the
records were “true and accurate copies of th[e] originals”; and they were “records
collected or generated by Specialized Loan Services in connection with loans
(continued...)
29
according to Mr. Powers, because Cameron created the documents, witnesses
from the loan servicing companies could not offer the required proof that the
documents were prepared in the normal course of business or that they were
prepared at or near the times of the transactions. Nor, reasons Mr. Powers, could
they speak to whether the documents were complete or accurate.
Mr. Powers’s arguments boil down to an assertion that the district court
erroneously applied the so-called “adoptive business records” doctrine, under
which “a record created by a third party and integrated into another entity’s
records” can be “admissible as the record of the custodian entity,” so long as
certain other requirements are met that fully satisfy the strictures of Rule 803(6).
Brawner v. Allstate Indem. Co., 591 F.3d 984, 987 (8th Cir. 2010). He argues
that we should either reject this doctrine outright—and, therefore, presumably
conclude that the district court erred in resorting to it—or, alternatively, embrace
the doctrine but hold that, in order for witnesses to satisfy its requirements, they
must provide substantial foundational testimony relating to matters such as the
record-keeping system of the business that prepared the records. If we elect to
adopt the latter approach, Mr. Powers urges us to conclude that the district court
8
(...continued)
applied for in connection with the purchase of [the property at issue].” R., Vol.
III, at 665–66. The other two witnesses testified similarly for their respective
companies. In short, all three records custodians offered testimony that was
purportedly designed to satisfy the foundational requirements set out in Rule
803(6).
30
erred in admitting the challenged loan documents because “[t]he custodians here
could only confirm that the loan servicers collected Cameron’s documents but had
no knowledge as to how Cameron’s records were produced” or whether the
documents “were complete or accurate.” Aplt. Opening Br. at 48–49.
Because we are reviewing Mr. Powers’s challenge only for plain error,
however, we have no need to comprehensively engage in an analysis of the
substance of Mr. Powers’s arguments, and we decline to do so. Notably, we need
not definitively opine on whether the district court erred (as a categorical matter)
in recognizing the adoptive business records doctrine, or erred in applying the
doctrine on the facts of this case. In other words, we need not address the first
prong of the plain-error test. Instead, we elect to restrict our analysis to the
second prong, that is, whether the district court committed clear or obvious error.
With respect to that prong, we conclude that there is no controlling
precedent—from our court or the Supreme Court—that definitively speaks to the
vitality of the adoptive business records doctrine, much less precedent that
explicitly prohibits the district court from recognizing that doctrine, or that
mandates that the district court apply the doctrine in any particular way.
Furthermore, we have no reason to believe that the court’s tacit interpretation of
Rule 803(6) as embodying such a doctrine is otherwise clearly erroneous.
Accordingly, for these reasons, we determine that Mr. Powers cannot satisfy the
second prong of the plain-error test.
31
As previously noted, our analysis on this prong generally turns on whether
“either the Supreme Court or this court . . . have addressed the issue.” Ruiz-Gea,
340 F.3d at 1187. However, in the absence of such precedent, we may find this
prong satisfied where the district court’s interpretation of the statutory or
regulatory provision at issue is “clearly erroneous,” United States v. Story, 635
F.3d 1241, 1248 (10th Cir. 2011) (internal quotation marks omitted); accord
United States v. Poe, 556 F.3d 1113, 1129 (10th Cir. 2009). Mr. Powers
recognizes that our circuit has not previously opined in a controlling decision on
the vitality or propriety of the adoptive business records doctrine. See Irvin, 682
F.3d at 1265 (“This court has . . . never decided whether ‘adoptive business
records’ are admissible under Rule 803(6).”). 9 Nor has the Supreme Court opined
on the subject. Thus, if Mr. Powers hopes to keep the door open on his claim that
the district court clearly or obviously erred in recognizing and applying the
doctrine, cf. Schneider, 704 F.3d at 1304 (Holmes, J., concurring, joined by
Martinez, J.) (noting that, “[g]enerally, such a circumstance [i.e., the absence of
controlling Tenth Circuit or Supreme Court precedent] will close the door on a
9
Irvin clarified any ambiguity over whether we had previously
recognized the doctrine in United States v. Carranco, 551 F.2d 1197 (10th Cir.
1977). Irvin made clear that Carranco merely “recognized [that] such an
argument could have been made on the facts of that case, but declined to
separately consider it because the necessary objections had not been made before
the trial court.” Irvin, 682 F.3d at 1265. “At best,” we wrote, “Carranco can be
read as assuming, without deciding, that one company can ‘adopt’ the business
records of another company for purposes of Rule 803(6).” Id.
32
claim that the error . . . is clear or obvious”), he must demonstrate that the district
court’s tacit interpretation of Rule 803(6) as embodying such a doctrine is clearly
erroneous. This he cannot do.
In this regard, our survey of the landscape of our sister circuits’ decisions
indicates that—far from acting in a clearly erroneous fashion—the district court’s
tacit reading of the scope of Rule 803(6) to include the adoptive business records
doctrine was quite reasonable (if not mandatory). Specifically, the courts of
appeals have overwhelmingly chosen to recognize—either explicitly or
implicitly—an adoptive business records doctrine. See, e.g., Brawner, 591 F.3d
at 987 (collecting cases and agreeing with the “[s]everal other courts [that] have
held that a record created by a third party and integrated into another entity’s
records is admissible as the record of the custodian entity, so long as the
custodian entity relied upon the accuracy of the record and the other requirements
of Rule 803(6) are satisfied”); United States v. Adefehinti, 510 F.3d 319, 326
(D.C. Cir. 2007) (collecting cases and joining the “several courts [that] have
found that a record of which a firm takes custody is thereby ‘made’ by the firm
within the meaning of the rule (and thus is admissible if all the other requirements
are satisfied)”); Air Land Forwarders, Inc. v. United States, 172 F.3d 1338,
1342–44 (Fed. Cir. 1999) (reviewing cases and holding that testimony regarding
“first-hand knowledge as to the procedures used in the original preparation of
each of the [documents at issue] . . . is not necessary where an organization
33
incorporated the records of another entity into its own, relied upon those records
in its day-to-day operations, and where there are other strong indicia of
reliability”).
In the face of this widespread acceptance of the adoptive business records
doctrine among our sister circuits, Mr. Powers fails to direct us to any court that
has specifically rejected the doctrine. Indeed, the only legal authority Mr. Powers
cites in opposition to the doctrine’s applicability is the dissenting opinion in Air
Land Forwarders. This lopsided support for the doctrine indicates that Mr.
Powers cannot possibly demonstrate here that the district court’s reading of Rule
803(6) to encompass the doctrine is clearly erroneous. Cf. Story, 635 F.3d at
1248 (“Our circuit precedent has repeatedly noted that a circuit split is strong
evidence that an error is not plain.”). Thus, in this case, the absence of
controlling authority from our court or the Supreme Court regarding the adoptive
business records doctrine does “close the door,” Schneider, 704 F.3d at 1304
(Holmes, J., concurring, joined by Martinez, J.), on Mr. Powers’s claim that the
district court clearly or obviously erred in admitting the Cameron records based
on the testimony of the loan-servicing-company records custodian witnesses.
Thus, Mr. Powers cannot satisfy the second prong of the plain-error test on this
ground.
IV
Lastly, we address Mr. Powers’s argument that the district court incorrectly
34
applied the gross-receipts enhancement of the Guidelines in calculating his
sentence. This enhancement provides that if a “defendant derived more than
$1,000,000 in gross receipts from one or more financial institutions as a result of
the offense,” he is subject to a two-level increase to his base offense level.
U.S.S.G. § 2B1.1(b)(14)(A). The commentary to this section explains that “the
defendant shall be considered to have derived more than $1,000,000 in gross
receipts if the gross receipts to the defendant individually, rather than to all
participants, exceeded $1,000,000.” U.S.S.G. § 2B1.1 cmt. n.11(A) (emphasis
added). Mr. Powers’s appeal focuses on the district court’s interpretation of the
term “participants”—specifically, he argues that the district court erroneously
failed to treat the buyers for whom Mr. Powers prepared falsified loan
applications as “participants” within the meaning of the application note, and thus
erred by attributing to Mr. Powers money that was ultimately transferred to the
buyers.
The meaning of “participants” in this context is an issue of first impression
in this court. Addressing it here, we clarify that district courts identifying
“participants” in a fraud for purposes of U.S.S.G. § 2B1.1(b)(14)(A) should
employ the definition of “participant” set forth in U.S.S.G. § 3B1.1 cmt. n.1 and
ask whether an individual was a “participant” in the “relevant conduct” as defined
35
in U.S.S.G. § 1B1.3(a)(1)(B). 10 Recognizing that the record here does not permit
us to apply this standard without engaging in fact-finding—which the courts of
appeals eschew—we remand to the district court with instructions to vacate Mr.
Powers’s sentence; to determine, consistent with this order and judgment, which
of the buyers were “participants” in Mr. Powers’s charged scheme and its relevant
conduct; and to re-sentence Mr. Powers accordingly.
We review the district court’s legal interpretation of the Guidelines de
novo, see United States v. Hamilton, 587 F.3d 1199, 1222 (10th Cir. 2009), and
“interpret the Sentencing Guidelines according to the accepted rules of statutory
construction,” United States v. Nacchio, 573 F.3d 1062, 1066 (10th Cir. 2009).
10
In pertinent part, U.S.S.G. § 1B1.3 explains that offense
characteristics under chapter two of the Guidelines and adjustments under chapter
three “shall be determined on the basis of”:
(1) (A) all acts and omissions committed, aided, abetted,
counseled, commanded, induced, procured, or willfully
caused by the defendant; and
(B) in the case of a jointly undertaken criminal activity (a
criminal plan, scheme, endeavor, or enterprise undertaken
by the defendant in concert with others, whether or not
charged as a conspiracy), all reasonably foreseeable acts
and omissions of others in furtherance of the jointly
undertaken criminal activity,
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)(A)–(B).
36
When we interpret a guideline, we look first to the language of the guideline
itself, and then to the guideline’s interpretive and explanatory commentary, which
“is authoritative unless it violates the Constitution or a federal statute, or is
inconsistent with, or a plainly erroneous reading of, that guideline.” Nacchio, 573
F.3d at 1066–67.
In this case, neither the text of U.S.S.G. § 2B1.1(b)(14)(A) nor the
commentary to this section offers a definition of “participants,” though we
consider it relevant that this word is employed, rather than a more specific term
such as “codefendants.” We have not previously defined the scope of the word
“participants” for purposes of the gross-receipts enhancement, and the Supreme
Court also has been silent on the subject. This is not to say that we have not
previously interpreted the terms of the enhancement. In particular, in United
States v. Weidner, 437 F.3d 1023 (10th Cir. 2006), we clarified that the
enhancement precludes attribution of the same money to multiple codefendants.
Id. at 1046. Weidner also contains language that suggests that the term
“participants” is not synonymous with the term “codefendants.” 11 See id.
(distinguishing a Third Circuit opinion by noting that there was no indication in
that case “that the individuals to whom the defendant transferred the receipts were
11
Although Weidner does contain language that suggests a broader
reading of the term “participants” than “codefendants,” we recognize that this
language is arguably dictum on the facts of Weidner because there the gross-
receipts enhancement was applied based on the conduct of codefendants.
37
codefendants or otherwise participated in the criminal scheme” (emphasis
added)).
Because the text and commentary of U.S.S.G. § 2B1.1(b)(14)(A) are both
silent concerning the definition of its term “participants” and because controlling
caselaw is as well, we turn to the traditional tools of statutory construction. See
United States v. Marrufo, 661 F.3d 1204, 1207 (10th Cir. 2011) (“We interpret
the Sentencing Guidelines according to accepted rules of statutory construction.”
(quoting Nacchio, 573 F.3d at 1066) (internal quotation marks omitted)). As
particularly relevant here, it is well-settled that “[t]he normal rule of statutory
construction assumes that identical words used in different parts of the same act
are intended to have the same meaning.” Sorenson v. Sec’y of Treasury, 475 U.S.
851, 860 (1986) (internal quotation marks omitted); accord First Nat’l Bank of
Durango v. Woods (In re Woods), 743 F.3d 689, 697 (10th Cir. 2014); see Brown
v. Gardner, 513 U.S. 115, 118 (1994) (“[T]here is a presumption that a given term
is used to mean the same thing throughout a statute . . . .”); see also Antonin
Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts
170–73 (2012) (discussing the “presumption of consistent usage”).
In light of this canon of construction, we find it particularly worthy of
attention that another provision of the Guidelines expressly defines the term
“participant.” Cf. Nacchio, 573 F.3d at 1073 & n.11 (noting that our
interpretation of “gain” in one section of the Guidelines “comports with another
38
reference to ‘gain’ in the Guidelines”). U.S.S.G. § 3B1.1 provides adjustments to
a defendant’s offense level based on his or her role in the offense, measured by
key factors such as the number of “participants” involved in the offense. For
example, the guideline provides for a four-level increase where a defendant “was
an organizer or leader of a criminal activity that involved five or more
participants.” U.S.S.G. § 3B1.1(a).
In the application notes to § 3B1.1, the advisory committee defined
“participant”: “A ‘participant’ is a person who is criminally responsible for the
commission of the offense, but need not have been convicted. A person who is
not criminally responsible for the commission of the offense (e.g., an undercover
law enforcement officer) is not a participant.” U.S.S.G. § 3B1.1 cmt. n.1. In
light of the well-established presumption of consistent usage, and in the absence
of any contrary authority, we conclude that the word “participants” for purposes
of the gross-receipts enhancement of U.S.S.G. § 2B1.1 should be read
consistently with the role-in-the-offense definition of the essentially identical
term in the commentary to U.S.S.G. § 3B1.1. And, under that definition, a
“participant” need not have committed the same criminal offense as the
defendant; it is enough that the “participant” was criminally involved in—and,
therefore, culpable for—the same relevant conduct, as that concept is explicated
in U.S.S.G. § 1B1.3. See, e.g., United States v. VanMeter, 278 F.3d 1156, 1166
(10th Cir. 2002).
39
In VanMeter, we explained that courts must “consider all relevant conduct
under U.S.S.G. § 1B1.3 in determining the application of a U.S.S.G. § 3B1.1
aggravating role adjustment.” Id. And we specifically held that it made “no
difference” that the alleged participant “may not have been responsible for
violating [the statute under which the defendant was convicted],” because the
defendant had “supervis[ed]” the alleged participant’s criminally culpable acts
that were a part of the “relevant conduct” for the defendant’s offense of
conviction. See id.
Thus, applying U.S.S.G. § 3B1.1’s definition of “participant” in the context
of the gross-receipts enhancement, the material inquiry is not whether the home
borrowers recruited by Mr. Powers were charged or convicted of the same crimes
but, rather, whether they were involved in the same relevant conduct as Mr.
Powers—that is, whether they should be considered criminally culpable actors in
the same relevant conduct. Put another way, in seeking under U.S.S.G.
§ 2B1.1(b)(14)(A) to identify participants—that is, those individuals whose
obtaining of monetary receipts affects the application of the gross-receipts
enhancement—courts should focus on the putative participants’ criminal
culpability for the same relevant conduct attributed to the defendant; participants
can include individuals who have been neither charged nor indicted, and
40
participants need not be culpable for the same offense as the defendant. 12
In this case, the standard we have articulated means that if the buyers were
criminally culpable for acts that are part and parcel of the relevant conduct of Mr.
Powers’s mortgage fraud scheme, the cash back that they received would not
qualify as “gross receipts to the defendant [i.e., Mr. Powers] individually, rather
than to all participants,” and thus could not be factored into the determination of
whether Mr. Powers received the requisite amount, in excess of $1,000,000,
which would trigger the enhancement under U.S.S.G. § 2B1.1. The district court
did not make factual findings regarding the criminal culpability of the buyers in
Mr. Powers’s relevant conduct. Accordingly we are not in a position to determine
whether any or all of the buyers ought to have been considered participants for
purposes of the gross-receipts enhancement under U.S.S.G. § 2B1.1. For this
reason, we remand the case to the district court with instructions to vacate the
portion of its judgment related to Mr. Powers’s sentence; to determine, consistent
with this order and judgment, which of the buyers were “participants” in Mr.
Powers’s scheme; and to re-sentence Mr. Powers accordingly.
V
12
Mr. Powers has consistently expressed his approval of a similar view,
arguing that the buyers in this case should have been counted as participants for
purposes of the gross-receipts enhancement simply because they “were involved
in the fraud scheme.” Aplt. Opening Br. at 64; see also id. (arguing that
“participants” should not be limited to codefendants or distinguish between
indicted and unindicted individuals).
41
For the foregoing reasons, we AFFIRM Mr. Powers’s conviction but
REMAND the case to the district court with directions to VACATE Mr.
Powers’s sentence and re-sentence Mr. Powers consistent with this order and
judgment and, in particular, with our analysis of the term “participants” in the
gross-receipts enhancement of U.S.S.G. § 2B1.1. 13
Entered for the Court
JEROME A. HOLMES
Circuit Judge
13
The government filed a motion to supplement the record, which Mr.
Powers did not oppose. We GRANT that motion.
42