United States v. Jason Moreno , 809 F.3d 766 ( 2016 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
______
No. 14-1568
______
UNITED STATES OF AMERICA
v.
JASON MORENO,
Appellant
______
On Appeal from the United States District Court
for the Western District of Pennsylvania
(W.D. Pa. No. 10-cr-00117-001)
District Judge: Honorable Nora Barry Fischer
______
Argued September 15, 2015
Before: FISHER, CHAGARES, and JORDAN, Circuit
Judges
(Filed: January 5, 2016 )
Brett G. Sweitzer, Esq. [ARGUED]
Federal Community Defender Office for the Eastern District
of Pennsylvania
Suite 540 West, The Curtis Center
601 Walnut Street
Philadelphia, PA 19106
Attorney for Appellant
David J. Hickton, Esq. United States Attorney
Jane M. Datillo, Esq. [ARGUED]
Rebecca R. Haywood, Esq.
Office of United States Attorney
700 Grant Street, Suite 4000
Pittsburgh, PA 15219
Attorneys for Appellee
______
OPINION OF THE COURT
______
2
FISHER, Circuit Judge
Jason Moreno was involved in a mortgage-fraud
scheme as an appraiser who supplied inflated appraisals to
other members of the scheme in exchange for money. He was
also more directly involved—as broker, buyer, or seller, for
instance—in other fraudulent transactions. At trial, Moreno
was found guilty of five counts of wire fraud and two counts
of conspiracy to commit wire fraud. After receiving his
sentence of 96 months’ imprisonment, Moreno appealed.
Three issues are presented in this appeal. First, at trial,
a cooperating witness read statements of a non-testifying U.S.
Secret Service Special Agent into the record, which Moreno
claims violated both the Confrontation Clause and the rule
against hearsay. Second, at sentencing, the District Court
concluded that there were more than 50 victims in the case
and thus applied a four-level enhancement under the
Sentencing Guidelines on that basis. Moreno contends that
the record does not support such a finding and that the
District Court’s application of the enhancement was plain
error. Third, during Moreno’s sentencing allocution, the
prosecutor, without leave of court, engaged in a vigorous
cross-examination of Moreno. On appeal, Moreno says that
the District Court plainly erred in permitting this cross-
examination. We will affirm Moreno’s conviction and the
District Court’s application of the sentencing enhancement,
but we will vacate Moreno’s sentence and remand for
resentencing based on the violation of Moreno’s right of
allocution.
3
I.
A.
This case arose out of mortgage-fraud schemes that
were perpetrated in the Pittsburgh area from July 2005 to
November 2007, and centers on the involvement of Jason
Moreno, an appraiser. Moreno and his business partner, Joel
Reck, started an appraisal company called Platinum Appraisal
Services. Reck was a licensed appraiser, but Moreno was not.
Early in Platinum Appraisal Services’s existence, Reck
became ill and, for the most part, stopped working. To fill the
void left by Reck, Moreno began performing the appraisal
work himself, frequently signing Reck’s name electronically
to appraisals without Reck’s knowledge. Many of these
appraisals violated professional norms and assigned inflated
values to properties. Moreno provided these appraisals to two
different companies engaged in mortgage-fraud schemes:
Pittsburgh Home Loans, which was owned by a mortgage
broker named Robert Arakelian; and Easy Realty Solutions,
which was owned and operated by James Platts.
The Pittsburgh Home Loans scheme worked by
helping home-buyers with bad credit and limited assets get
lender financing. To accomplish this in a given transaction,
Arakelian of Pittsburgh Home Loans would provide a false
settlement statement at closing, which would contain an
inflated sales price. Based on the inflated sales price, a bank
would lend more than the actual sales price of a property, and
the extra money would cover the cost a down payment,
closing costs, and a payment to Arakelian. As a result, banks
often gave loans in amounts that were 120-300% of the actual
purchase price. Because a lender would receive paperwork
4
representing the inflated purchase price, the lender would
believe the loan met its underwriting guidelines (typically an
80-95% loan-to-value ratio). At closing, however, loan
proceeds would be distributed according to the true nature of
the transaction: the seller would receive less than the reported
purchase price, Arakelian would receive an undisclosed
payment, and loan funds would be used to make the down-
payment and cover closing costs. A number of people were
essential to the successful operation of the scheme,1 including
Moreno, whose appraisals matched the fraudulent sales prices
provided by Arakelian.
The Easy Realty Solutions scheme was similar. Platts
of Easy Realty Solutions located distressed houses and buyers
to whom they could be sold, and then acted as a secret
intermediary to the transactions. Platts would purchase a
house and then resell it to a buyer at a higher price using a
mortgage transaction. Buyers paid nothing out of pocket.
Easy Realty Solutions’s involvement as an intermediary was
concealed from lenders so that, in a given transaction, it
appeared that the original seller sold the house directly to the
eventual buyer. Platts would pocket the difference between
the sales prices. Platts made numerous misrepresentations to
lenders: he concealed his role as conduit; he misrepresented
1
Michael Ferrazza, Arakelian’s business partner,
located prospective buyers through an entity known as
Mortgage 911; Karen Atkinson and Daniel Sporrer, Esq.,
prepared false settlement statements and prematurely
disbursed loan funds to allow their use as down payments;
Crystal Spreng, a branch manager at Citizens Bank, falsely
certified buyers’ assets and provided certified checks in
buyers’ names bought with prematurely disbursed loan
proceeds.
5
buyers’ assets; he falsified settlement statements to show that
buyers were making down payments that Platts had actually
made and that buyers had received permissible seller
financing that was actually a sham.2 For this scheme, Moreno
provided inflated appraisals to support the higher values
needed.
At trial, the government offered documentary evidence
of 110 mortgage transactions—which were financed by 24
different lenders—that were affected by one scheme or the
other. Testimonial evidence was provided for some of those
transactions; the government called 15 buyers as witnesses,
each of whom testified that the house he or she purchased was
in poor condition and had been purchased with no down
payment. Most buyers who testified stated that they went into
foreclosure shortly after closing.
Moreno gave inflated values for houses he appraised.
Pittsburgh Home Loans used Moreno specifically because he
was willing to provide the necessary inflated appraisals, and,
in exchange, Pittsburgh Home Loans would pay Moreno an
extra fee ranging from $300 to $800. Moreno did not offer
objective opinions of value but instead started with the
predetermined value requested by Pittsburgh Home Loans
and worked backwards, manipulating the selection of
comparable houses and misrepresenting condition reports for
properties. The government introduced testimony from buyers
and sellers who said that the houses in these transactions were
in far worse condition than reported; the government also
introduced an expert-witness appraiser who evaluated twelve
Platinum Appraisal Services appraisals and concluded that
2
Platts also relied on other participants in his scheme,
including Deean Haggerty, a mortgage broker, and Bernard
Flugher, Esq., a closing agent.
6
each substantially overstated the actual value of the house. In
some instances, Moreno received extra payments from buyers
for whom he was providing inflated appraisals. For example,
Earl Rodgers, a buyer who worked with Arakelian, paid
Moreno an extra $500 because the comparable houses would
not substantiate the necessary value. Once paid, Moreno drew
up an appraisal with the requested value.
Moreno provided similarly inflated appraisals for Easy
Realty Solutions. For example, in one transaction, Easy
Realty Solutions purchased a property for $95,000 and sold it
almost immediately to a buyer with bad credit and no money
for $130,000. Platinum Appraisal Services valued the
property at $145,000, citing numerous improvements that had
never actually been done. Easy Realty Solutions took
approximately $26,000 of the loan proceeds.
Moreno’s involvement in the Pittsburgh Home Loans
and Easy Realty Solutions schemes was not limited to
providing inflated appraisals. The government introduced
evidence that in seven instances Moreno co-brokered deals or
arranged to purchase properties. By so doing, he received
significant payments from the loan proceeds. In one deal,
Moreno and Platts purchased a property for $50,000 and
resold it the same day for $95,000. Moreno appraised it at
$95,000, once again using Reck’s name. Moreno received
$2,500 of the buyer’s earnest money and $16,500 once the
deal closed.
Moreno and Arakelian completed several similar
transactions. For instance, Moreno purchased a house for
$19,000 and, with Arakelian’s help, sold it to an
impoverished buyer the same day for $70,000. Moreno
appraised the property at $70,000. Arakelian took $13,000
from the loan proceeds, and Moreno took roughly $12,000.
Moreno’s appraisal of that house stated that it was
7
functionally adequate, had no physical deficiencies, and had
been completely remodeled. None of this was true: the house
was in deplorable condition. In another deal, Moreno
purchased a house through his mother for $95,000. Despite
serious problems with the septic tank (which he did not
disclose), Moreno appraised the property at $180,000. The
settlement statement showed a $37,000 cash payment at
closing, which the buyer had never made. Moreno took more
than $21,000 from the loan proceeds, and Arakelian took
roughly $12,000.
Moreno purchased another house for $72,000. He
appraised the house at $135,000, misrepresented the house’s
condition, provided false information about bank accounts
and his monthly income, and falsely represented that he was
putting $40,000 into the purchase. Arakelian convinced the
realtor to change the listing price so that the lender would not
discover that Moreno’s appraisal overstated the house’s actual
value. Moreno participated in several other similar
transactions from which he profited.
B.
Moreno was charged with two counts of conspiracy to
commit wire fraud, in violation of 18 U.S.C. § 1349; and five
counts of wire fraud in violation of 18 U.S.C. §§ 1343 and 2.
He pleaded not guilty and proceeded to trial. On September
19, 2013, the jury returned a verdict of guilty on all seven
counts.
Arakelian was one of the government’s cooperating
witnesses at trial. On cross-examination, defense counsel
attempted to impeach Arakelian with his government
cooperation. Specifically, Moreno’s lawyer asked Arakelian
questions about how his sentence could be affected by his
cooperation against Moreno. Early in the government’s direct
examination of him, however, Arakelian had admitted that he
8
had entered into a plea agreement with the government, that
he was cooperating with the government, and that he hoped to
receive a lighter sentence as a result of his cooperation.
Defense counsel’s cross-examination on this subject was
duplicative of Arakelian’s earlier testimony.
Nevertheless, on redirect, the prosecutor sought to
admit as substantive evidence portions of memoranda written
by U.S. Secret Service Special Agent Keith Heckman, which
summarized Heckman’s pretrial interviews with Arakelian.
Defense counsel objected, though it is unclear whether he did
so on the basis of hearsay or the Confrontation Clause. The
prosecutor argued that the memoranda should be admitted
pursuant to Federal Rule of Evidence 801(d)(1)(B), which
permits as non-hearsay prior consistent statements of a
witness offered to rebut a charge of recent fabrication or
improper influence. The District Court overruled the
objection and admitted the evidence.
The prosecutor gave Arakelian four memoranda of
interviews to review silently. Arakelian confirmed that each
accurately reflected information he had provided, and so the
prosecutor then had Arakelian read portions of each into the
record. The portions included Heckman’s assertions that:
according to Arakelian, Moreno greatly inflated values and
was sometimes paid extra for doing so; Moreno partnered
with Arakelian on the acquisition of a property and pocketed
some of the loan proceeds; and Moreno thought he was
insulated from criminal liability for the fraud because the
appraisals bore Reck’s signature.
In February 2014, Moreno was sentenced. At the
sentencing, Moreno called eight character witnesses. Defense
counsel asked questions of each, and the prosecutor
questioned three of them. After the final witness, defense
counsel informed the Court that Moreno wanted to exercise
9
his right of allocution. Then Moreno, under oath, addressed
the Court directly without questions from defense counsel. He
asked the Court for mercy and listed several mitigating
circumstances for the Court—among other things, he
apologized to his victims, explained that he was relatively
young when he committed the crimes, spoke of recent
changes in his life, said that he had become more religious,
and stated that he was dedicating his life to preventing others
from making the mistakes he had made. He also stated that he
was prepared to accept the consequences of his actions, and
he asked the Court for mercy. He did not attempt to re-contest
factual issues of innocence and guilt.
When Moreno had finished speaking, the prosecutor—
without leave of court—engaged in an extensive cross-
examination in which he questioned Moreno about his
criminal conduct. Defense counsel did not object. Moreno,
who had not testified at trial, had no choice but to testify on
matters of his guilt. The prosecutor explained to the District
Court, “[W]hat I’m trying to figure out is what . . . he
knowingly, fraudulently submitted to the lenders.” (App.
1706-07). The prosecutor asked Moreno: “Tell the Court,
what were the other lies that were in these appraisals that you
were submitting to the lender?” (App. 1704). When Moreno
asked for clarification on a question, the prosecutor
responded, “Tell the Court, you’re the one accepting
responsibility now.” (App. 1705). The prosecutor got Moreno
to admit that the evidence of fraud introduced at trial was
“just the tip of the iceberg.” (App. 1710).
After the cross-examination, the District Court offered
defense counsel the opportunity to ask questions, which he
took. The District Court then made findings of fact regarding
the testimony of the witnesses, Moreno’s statement, and the
prosecutor’s cross-examination. The prosecutor’s sentencing
10
argument addressed Moreno’s statement and then argued that
the seriousness of the offense had been “ratcheted up” based
on what he had been able to “drag out” of Moreno on cross-
examination. (App. 1755). The prosecutor also referred to the
cross-examination to undercut Moreno’s expression of
remorse.
When explaining the sentence, the District Court
referenced the cross-examination in rejecting various defense
arguments for a lower sentence. The District Court also noted
Moreno’s admission during the cross-examination that he had
prepared more than the 110 fraudulent appraisals that had
been proven at trial. The District Court also concluded that
the case involved more than 50 victims and thus imposed a
four-level enhancement pursuant to U.S.S.G. § 2B1.1(b)(2).
Defense counsel did not object to the application of this
sentencing enhancement.
After concluding that Moreno had a criminal history
category of I and a total offense level of 33, the District Court
determined that the applicable Guidelines range was 135–168
months’ imprisonment. The Court varied downward based
primarily on Moreno’s post-offense rehabilitation and after
consideration of all the factors under 18 U.S.C. § 3553(a).
The District Court then imposed a sentence of 96 months’
imprisonment for each count, which were to run concurrently,
three years’ supervised release, and $20,000 in restitution.
Following the sentence, Moreno appealed.
II.
The District Court had jurisdiction over the
prosecution pursuant to 18 U.S.C. § 3231. We have
jurisdiction over this appeal pursuant to 28 U.S.C. § 1291 and
18 U.S.C. § 3742(a).
This Court exercises “plenary review over
Confrontation Clause challenges, but review[s] a
11
nonconstitutional challenge to the admission of hearsay for
abuse of discretion.” United States v. Berrios, 676 F.3d 118,
125 (3d Cir. 2012) (citations and internal quotation marks
omitted).3
Unpreserved challenges to the application of
sentencing enhancements are reviewed for plain error, United
States v. Wood, 486 F.3d 781, 790 (3d Cir. 2007), as are
unpreserved violations of the right of allocution, United
States v. Paladino, 769 F.3d 197, 200 (3d Cir. 2014). “For
reversible plain error to exist, there must be (1) an error; (2)
that is plain; (3) that affects substantial rights; and (4) which
seriously affects the fairness, integrity, or public reputation of
judicial proceedings.” United States v. Tai, 750 F.3d 309,
313–14 (3d Cir. 2014) (citing Johnson v. United States, 520
U.S. 461, 466–67 (1997)).
III.
A.
The Sixth Amendment’s Confrontation Clause
provides that “[i]n all criminal prosecutions, the accused shall
enjoy the right . . . to be confronted with the witnesses against
him.” U.S. Const. amend. VI. The Confrontation Clause bars
“admission of testimonial statements of a witness who did not
appear at trial unless he was unavailable to testify, and the
defendant had had a prior opportunity for cross-examination.”
Crawford v. Washington, 541 U.S. 36, 53–54 (2004).
3
Unpreserved Confrontation Clause challenges are
reviewed for plain error. United States v. Mussare, 405 F.3d
161, 167–68 (3d Cir. 2005). The parties disagree over
whether Moreno preserved the Confrontation Clause issue.
For the purposes of this Opinion, we will assume without
deciding that the issue was preserved.
12
1.
Our Confrontation Clause inquiry is twofold. “First, a
court should determine whether the contested statement by an
out-of-court declarant qualifies as testimonial under Davis [v.
Washington, 547 U.S. 813 (2006)] and its progeny.” Berrios,
676 F.3d at 127 (footnote omitted). “[S]tatements made under
circumstances that would lead an objective witness
reasonably to believe that the statement would be available
for use at a later trial are testimonial.” United States v.
Hinton, 423 F.3d 355, 360 (3d Cir. 2005). The core class of
testimonial statements includes “material such as affidavits,
custodial examinations, prior testimony that the defendant
was unable to cross-examine, or similar pretrial statements
that declarants would reasonably expect to be used
prosecutorially; extrajudicial statements contained in
formalized testimonial materials, such as affidavits,
depositions, prior testimony, or confessions.” Melendez-Diaz
v. Massachusetts, 557 U.S. 305, 310 (2009) (alteration
omitted) (quoting Crawford, 541 U.S. at 51–52).
The second step in our Confrontation Clause inquiry
requires that a court apply the appropriate safeguard: “If the
absent witness’s statement is testimonial, then the
Confrontation Clause requires ‘unavailability and a prior
opportunity for cross-examination.’” Berrios, 676 F.3d at 127
(quoting Crawford, 541 U.S. at 68).
It is clear that a Confrontation Clause violation
occurred here. First, the memoranda that Arakelian read into
the record were testimonial. They were Heckman’s
summaries of what Arakelian purportedly told him during a
series of interviews—that is to say, they are investigative
reports prepared by a government agent in actual anticipation
of trial. As such, they were “statements that were made under
circumstances which would lead an objective witness
13
reasonably to believe that the statement would be available
for use at a later trial.” Melendez-Diaz, 557 U.S. at 310
(2009) (quoting Crawford, 541 U.S. at 52). Second, Heckman
was available but did not testify at trial. 4
2.
Our conclusion that a Confrontation Clause violation
occurred, however, does not end the analysis. If we determine
that the error was harmless, we may nevertheless affirm the
conviction. Fed. R. Crim. P. 52(a); United States v. Jimenez,
513 F.3d 62, 78 (3d Cir. 2008) (“The erroneous admission of
testimonial hearsay in violation of the Confrontation Clause is
simply an error in the trial process itself that we may affirm if
the error was harmless.” (internal quotation marks and
alterations omitted)). “[B]efore a federal constitutional error
can be held harmless, the court must be able to declare a
belief that it was harmless beyond a reasonable doubt.”
Chapman v. California, 386 U.S. 18, 24 (1967). “[T]he
relevant question under Chapman is not whether, in a trial
that occurred without the error, a guilty verdict would surely
have been rendered, but whether the guilty verdict actually
rendered in this trial was surely unattributable to the error.”
United States v. Waller, 654 F.3d 430, 434 (3d Cir. 2011)
(quoting Gov’t of the V.I. v. Martinez, 620 F.3d 321, 337 (3d
Cir. 2010)).
We consider several factors in determining whether a
Confrontation Clause violation was harmless to a defendant,
such as “the importance of the testimony to the Government’s
case, the cumulative nature of the evidence, the existence of
corroborating evidence, the extent of cross-examination
allowed in the case, and the strength of the Government’s
case as a whole.” Jimenez, 513 F.3d at 78 (citing Delaware v.
4
The government does not contest this conclusion.
14
Van Arsdall, 475 U.S. 673 (1986)). We conclude that the
Confrontation Clause violation was harmless because the
statements were of limited importance to the government’s
case and because the government’s case against Moreno was,
as a whole, very strong.
First, the statements at issue, Heckman’s memoranda,
played a small role in the government’s case. The prosecutor
introduced the memoranda after defense counsel cross-
examined Arakelian about his cooperation with the
government. The memoranda merely summarized what
Arakelian had told Heckman in a series of interviews before
Arakelian entered into a plea agreement with the government.
The purpose of introducing the memoranda, then, was to
rebut defense counsel’s attempt to undermine Arakelian’s
credibility. But defense counsel’s cross-examination in this
regard added nothing to what Arakelian had already admitted
at the beginning of direct examination: that he had entered
into a plea agreement with the government, that he was
cooperating with the government in the Moreno investigation,
and that he was doing so in order to receive a more lenient
15
sentence. (App. 223). The memoranda were, therefore, not
important to the government’s case.5
Second, the government’s case as a whole was
undeniably strong. That would remain true even if we were to
discount the entirety of Arakelian’s testimony. The Easy
Realty Solutions scheme was not connected to the Pittsburgh
Home Loans scheme that was run by Arakelian. Moreno’s
involvement in that scheme was proved by other witnesses,
such as Bernhard Flugher, who performed closings on behalf
of Easy Realty Solutions, and Deean Haggerty, who was a
mortgage officer associated with the scheme. The government
also presented substantial evidence that Moreno participated
in—and personally profited from—several real estate deals,
some of which did not even involve Arakelian. Furthermore,
5
It is important not to conflate Heckman’s
memoranda—which violated the Confrontation Clause—with
Arakelian’s in-court testimony—which did not. If we view
the transcript of Arakelian’s time on the witness stand without
Heckman’s improperly admitted memoranda, the ultimate
effect is the same. Defense counsel’s limited cross-
examination questions touching on Arakelian’s cooperation
with the government did not unravel the lengthy and detailed
testimony that Arakelian had provided. In fact, it added
nothing to what Arakelian had already admitted on direct
examination. Omitting Heckman’s statements does not alter
the value of Arakelian’s testimony. Rather, the Heckman
memoranda merely showed that Arakelian had made prior
statements that were consistent with his testimony, which was
of little value because the cross-examination added nothing to
what Arakelian had already admitted on direct. In this regard,
the out-of-court statements were cumulative, and that factor
also weighs in favor of finding harmlessness.
16
the government introduced testimony about Moreno’s
involvement with Arakelian from other witnesses. For
example, Joel Reck, Moreno’s business partner at Platinum
Appraisal Services, testified that Moreno regularly provided
fraudulent appraisals, that Moreno signed Reck’s name to
hundreds of appraisals without his knowledge; that these
appraisals dramatically overvalued properties; and that
Moreno said he would deny his own participation in creating
the appraisals to which he had signed Reck’s name. (App.
815–16).
The record reveals a strong government case that was
not affected at all by the admission of Heckman’s
statements—the guilty verdict here was surely unattributable
to the unnecessary rehabilitation provided by the
17
memoranda.6 Thus, despite our conclusion that a
Confrontation Clause violation occurred, we will affirm the
verdict because the government has demonstrated beyond a
reasonable doubt that the guilty verdict here was not affected
by the admission of statements from Heckman’s memoranda.
3.
Moreno also contends that the admission of
Heckman’s statements was a violation of the rule against
hearsay. A preserved evidentiary error is harmless if “it is
‘highly probable that the error did not contribute to the
judgment.’” United States v. Brown, 765 F.3d 278, 295 (3d
Cir. 2014) (quoting United States v. Cunningham, 694 F.3d
372, 391–92 (3d Cir. 2012)). Thus, the government needs to
meet a slightly less onerous standard: if it is highly probable
6
The other factors in this analysis are less pertinent
under these circumstances, but we will address them briefly.
As for “the presence or absence of evidence corroborating or
contradicting the testimony of the witness on material points,”
Van Arsdall, 475 U.S. at 684, this factor weighs in favor of a
finding of harmlessness because Arakelian’s own prior
testimony regarding his cooperation is consistent with
Heckman’s memoranda. Furthermore, Moreno has not
pointed to any evidence that contradicts Heckman’s
memoranda or anything in the record that suggests that
Arakelian made up his testimony after entering into a plea
agreement with the government. As for the extent of cross-
examination otherwise permitted, it has to be acknowledged
that no other cross-examination of Heckman was permitted
because Heckman did not testify. However, in light of the
other factors and the limited subject matter on which
Heckman could have been cross-examined, this factor alone
does not alter our conclusion.
18
that the hearsay violation did not contribute to the verdict,
then we should affirm.
Having already concluded that the Confrontation
Clause violation was harmless beyond a reasonable doubt, we
need not reach the hearsay issue. Even if we concluded that
the District Court’s admission of the testimony was a hearsay
violation, it would necessarily be harmless.
B.
We turn now to Moreno’s contention that the District
Court erred in applying a four-level sentencing enhancement
for 50 or more victims. Because Moreno failed to object that
the District Court had incorrectly applied the Guidelines, we
review for plain error. Wood, 486 F.3d at 790. We exercise
plenary review over the District Court’s interpretation of the
Guidelines. United States v. Smith, 751 F.3d 107, 118 (3d Cir.
2014). The burden of proof for facts at sentencing is
preponderance of the evidence. United States v. Grier, 475
F.3d 556, 568 (3d Cir. 2007). On appeal, we “review factual
findings relevant to the Guidelines for clear error.” Id. at 570.
“A finding is clearly erroneous when, although there is
evidence to support it, the reviewing body on the entire
evidence is left with the definite and firm conviction that a
mistake has been committed.” Id. (internal quotation marks
and alterations omitted).
The Sentencing Guidelines provide that if the offense
“involved 50 or more victims,” a four-level enhancement
should be applied. U.S.S.G. § 2B1.1(b)(2)(B) (amended
2015). A victim under § 2B1.1 is “any person who
sustained . . . actual loss.” Smith, 751 F.3d at 118 (quoting
U.S.S.G. § 2B1.1 cmt. n.1). “‘Actual loss,’ in turn, is defined
as ‘the reasonably foreseeable pecuniary harm that resulted
from the offense.”’ Id. (quoting U.S.S.G. § 2B1.1 cmt.
n.3(A)(i)). Pecuniary harm is monetary harm or harm that is
19
otherwise measureable in money. Id. The bar is not high. For
example, in the bank fraud context, monetary harm can
include even “the expenditure of time and money to regain
misappropriated funds and replace compromised bank
accounts.” Id. at 119. The reason for this is that “an account
holder who must spend time and resources to dispute
fraudulent activity, recoup stolen funds, and repair his or her
credit and financial security has suffered a monetizable loss
that is a reasonably foreseeable and direct consequence of the
defendant’s theft or fraud.” Id.
The District Court noted that evidence had been
introduced at trial that Moreno was responsible for over 110
fraudulent appraisals and that the presentence report indicated
that the number was closer to 250 fraudulent appraisals. (App.
1769, 1792). This alone would be sufficient to establish that
more than 50 victims were affected by Moreno’s crimes
because buyers paid for appraisals that were fraudulent. There
is also the financial impact on buyers who were induced by
Moreno’s appraisals to purchase properties for prices above
their market values. As the District Court explained,
Moreno’s criminal conduct “involved the procurement of
fraudulent loans which totaled in excess of $9 million and
caused losses between $1 million and $2.5 million to lenders
and the unsophisticated buyers who were duped into
purchasing properties well in excess of their true fair market
values . . . .” (App. 1769).
On this record, the District Court’s conclusion that
more than 50 victims were affected by Moreno’s crimes was
not clearly erroneous. We will therefore affirm its application
of the four-level sentencing enhancement pursuant to
U.S.S.G. § 2B1.1(b)(2)(B).
20
C.
Finally, we turn to the issue of allocution. Before
imposing sentence, a district court must “address the
defendant personally in order to permit the defendant to speak
or present any information to mitigate the sentence . . . .” Fed.
R. Crim. P. 32(i)(4)(A)(2). Moreno contends that this right
was violated when, immediately following the allocution, the
prosecutor engaged in a vigorous and lengthy cross-
examination of him. Moreno concedes that the issue was not
preserved and is therefore subject to plain error review.
1.
“‘The right of allocution is deeply rooted in our legal
tradition’ and dates back to at least the fifteenth century.”
United States v. Ward, 732 F.3d 175, 180–81 (3d Cir. 2013)
(alteration omitted) (quoting United States v. Adams, 252
F.3d 276, 282 (3d Cir. 2001)), cert. denied, 134 S. Ct. 2684
(2014). Although the right of allocution “is not a right
guaranteed by the Constitution,” we have explained that
Congress, “acknowledging the historical and common law
roots of the right of allocution, . . . codified the right in 1944
by promulgating Federal Rule of Criminal Procedure 32.” Id.
at 181. “Furthermore, while the right of allocution is not
constitutional, nonetheless it is ancient in origin, and it is the
type of important safeguard that helps assure the fairness, and
hence legitimacy, of the sentencing process.” Adams, 252
F.3d at 288 (citing Green v. United States, 365 U.S. 301,
304–05 (1961)).
As we stated in Ward, the critical purpose of Rule 32
is threefold: “(1) to allow the defendant to present mitigating
circumstances, (2) to permit the defendant to present personal
characteristics to enable the sentencing court to craft an
21
individualized sentence, and (3) to preserve the appearance of
fairness in the criminal justice system.” Ward, 732 F.3d at
181. We further explained that “allocution ‘is designed to
temper punishment with mercy in appropriate cases, and to
ensure that sentencing reflects individualized
circumstances.’” Id. (quoting United States v. De Alba Pagan,
33 F.3d 125, 129 (1st Cir. 1994)). Allocution also “has value
in terms of maximizing the perceived equity of the process,
because the defendant is given the right to speak on any
subject of his choosing prior to the imposition of
sentence.” Id. at 181–82 (emphasis added) (internal citations
and quotation marks omitted).
The government contends that the District Court did
not err in permitting the prosecutor to cross-examine Moreno
because Rule 32 does not explicitly prohibit cross-
examination and because neither the Supreme Court nor our
Court of Appeals has ever specifically held that the practice is
impermissible.7 But cross-examination is still contrary to the
7
Nevertheless, at argument, appellate counsel for the
Government explained that it was not the Office’s policy or
practice to cross-examine a defendant at allocution. She
further explained that it was not trial counsel’s specific
practice either but that, in this instance, he became
overzealous when he perceived Moreno’s statements to be
testimony in support of a sentencing variance. While district
courts must be vigilant in protecting the right to allocution,
which is an opportunity for the defendant to personally
address the court, a defendant who wants to give testimony
still must take the stand and be made available for cross-
examination. In this case, however, appellate counsel
conceded that Moreno’s statements were not testimonial but
were “a classic allocution.”
22
purpose of allocution as outlined in Rule 32, which is to
“permit the defendant to speak or present any information to
mitigate the sentence.” Fed. R. Crim. P. 32(i)(4)(A)(ii). As
we said in Ward: “The reason for allocution is not to permit
the defendant to re-contest the factual issues of innocence and
guilt. Rather, the purpose of allocution is to afford the
defendant an opportunity to raise mitigating circumstances
and to present his individualized situation to the sentencing
court.” Ward, 732 F.3d at 182.
In his statement to the District Court, Moreno did not
attempt to re-contest factual issues of guilt or innocence. To
the contrary, Moreno presented personal characteristics and
explained at length that, though he had gone to trial, he was
accepting responsibility for his crimes. But the prosecutor
used his cross-examination to do exactly what we said in
Ward was impermissible for a defendant to do: he bolstered
the factual case against Moreno by drawing out several
admissions about the scope of the conspiracy, which he then
used in his sentencing argument.
Cross-examination on the subject of Moreno’s guilt
was contrary to the purpose of Rule 32 and to the purposes of
allocution as stated in Ward. The District Court thus
committed error in permitting the prosecutor to cross-examine
Moreno.
2.
We also hold that the error was plain because it was
clear and obvious in light of this Court’s discussion in Ward.
The government argues that, if there was error, it could not
have been plain since no authority (a constitutional or
statutory text or precedent of the Supreme Court or this
Circuit) specifically states that cross-examination is not
permitted during allocution. But this argument takes an overly
constricted view of our prior authority. That no previous
23
cases have explicitly proscribed cross-examination during
allocution does not mean that clear authority does not exist on
the subject. To the contrary, Ward provides clear authority on
the purpose of allocution: “the purpose of Rule 32 is to give
the defendant an opportunity to speak about mitigating
circumstances and offer his reasoning for a more lenient
sentence.” Ward, 732 F.3d at 183. The issue in Ward was
whether the defendant had the right to deliver an unsworn
allocution. In holding that he did not have such a right, we
reasoned, “[w]hether an allocution is sworn or unsworn does
not affect a defendant’s right to make a statement to the
sentencing court nor does it subvert the policy goals of Rule
32.” Id. at 182. Cross-examination, on the other hand,
clearly affects a defendant’s right to make a statement to the
court and subverts the policy goals of Rule 32 as elucidated in
Ward.8
8
In Ward we distinguished a case from an
intermediate Tennessee appellate court, State v. Keathly, 145
S.W.3d 123 (Tenn. Crim. App. 2003), which we said
“appear[ed] to be the only court to have addressed the right to
an unsworn allocution.” Ward, 732 F.3d at 183 n.7. The court
in Keathly found that the defendant’s right of allocution had
been violated because the defendant should have been
“permitted to make an unsworn statement to the court without
having been subjected to rigorous cross-examination.”
Keathly, 145 S.W.3d at 130. We said that “the fact that the
allocution was subject to cross-examination appears to be the
dispositive issue in Keathly.” Ward, 732 F.3d at 183 n.7. The
defendant in Ward had not been cross-examined, and we
distinguished Keathly on that basis. In this case, however, we
are dealing with a defendant who was subjected to cross-
examination during allocution.
24
The lengthy cross-examination specifically
questioning Moreno on his criminal behavior (including
actions that were not even brought up at trial) was clearly
contrary to the purpose of Rule 32 as we have explained it.
3.
Plain error review also requires us to find that the
District Court’s error affected Moreno’s substantial
rights. With respect to this prejudice prong, we have
explained, “in the context of violations of the right of
allocution, ‘as a general matter . . . prejudice should be
presumed whenever the opportunity exists for this violation to
have played a role in the district court’s sentencing
decision.’” Paladino, 769 F.3d at 201 (quoting Adams, 252
F.3d at 289).
Here, the record actually demonstrates prejudice. The
prosecutor made use of the information from the cross-
examination in his sentencing argument, saying, “I want to
first talk about Mr. Moreno’s testimony today.” (App. 1754).
He specifically argued: “the loss amount is much more than
as stated in the guidelines as, we know now, because Mr.
Moreno has admitted that this was the tip of the iceberg in
terms of the fraud he was personally involved in. So the
seriousness of the offense, Your Honor, has now ratcheted
up.” (App. 1755) (emphasis added). Moments later, the
prosecutor stated, “We had to drag it out of him, but
eventually Mr. Moreno admitted that one of the things they
were doing was providing elevated values of the properties
serving as collateral for these loans.” Id.
The District Court then relied on the contents of the
cross-examination in making sentencing determinations. In
concluding that a variance was not warranted on the basis of a
policy disagreement with the Guidelines, the District Court
said, “there were at least 100 fraudulent transactions proven
25
in this court,” and “[t]here are at least 250 more that
occurred . . . based on Mr. Moreno’s testimony here.” (App.
1765) (emphasis added). Later, the Court said, “The Court
would note and I think Mr. Moreno acknowledged here today,
he committed much of these crimes even before he became a
licensed appraiser.” (App. 1774) (emphasis added). When
going through factors pursuant to 18 U.S.C. § 3553(a), the
Court stated, “The other thing that strikes me here is that this
was two conspiracies, but, as you stated here today, it went
beyond those.” (App. 1792) (emphasis added). The District
Court thus relied on the substance of the impermissible cross-
examination in reaching a sentence, and so, even though
prejudice is presumed, it has been demonstrated in this case.
4.
The fourth prong of plain error review is met if the
matter affects the fairness, integrity, or public reputation of
judicial proceedings and “is satisfied where a violation of the
right of allocution has been established.” Paladino, 769 F.3d
at 201–02. Thus, “a defendant is automatically entitled to
resentencing if the trial court violates the defendant’s right of
allocution.” Adams, 252 F.3d at 281.
Because all four prongs have been met, we hold that it
was plain error for the District Court to permit Moreno to be
cross-examined during his allocution. We therefore remand
the case to the District Court for resentencing.
5.
Even if we were to conclude that the error in this case
was not plain (and we do not so hold), we would nevertheless
exercise our supervisory power and hold that a defendant may
not be cross-examined during allocution. Courts of appeals
have the power “to mandate ‘procedures deemed desirable
from the viewpoint of sound judicial practice although in
nowise commanded by statute or by the Constitution.’”
26
Thomas v. Arn, 474 U.S. 140, 146–47 (1985) (quoting Cupp
v. Naughten, 414 U.S. 141, 146 (1973)); see also United
States v. Bazzano, 712 F.2d 826, 843 (3d Cir. 1983) (“[T]here
is no doubt that this Court has supervisory power to
promulgate rules of practice and procedure for the better
administration of the judicial process.”). We have noted that
“our supervisory authority should not be invoked lightly.”
United States v. Wecht, 484 F.3d 194, 205 (3d Cir. 2007), as
amended (July 2, 2007) (quoting Sowell v. Butcher & Singer,
Inc., 926 F.2d 289, 295 (3d Cir. 1991)). But, given the
importance of the right of allocution and the potential of
cross-examination to subvert the goals of allocution, we
would not hesitate to invoke our supervisory authority in this
instance. Thus, if Rule 32 did not prohibit cross-examination
of a defendant during allocution, we would still mandate the
procedure that at sentencing a defendant must be provided the
opportunity to speak directly to the court, either sworn or
unsworn, and not be subject to cross-examination.9
IV.
For the foregoing reasons, we will affirm Moreno’s
conviction. We will also affirm the District Court’s
application of the sentencing enhancement. We will,
however, vacate the sentence and remand for resentencing
because of the violation of Moreno’s right of allocution.
9
We reiterate here that “the defendant’s right of
allocution is not unlimited” and that “[t]he sentencing judge
has always retained the discretion to place certain restrictions
on what may be presented during an allocution.” Ward, 732
F.3d at 182. Our holding today is not to the contrary.
27