United States v. Lomas

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 08-5026
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
MICHAEL A. LOMAS,
Defendant - Appellant.
Appeal from the United States District Court for the Eastern
District of North Carolina, at Raleigh. W. Earl Britt, Senior
District Judge. (5:07-cr-00117-BR-1)
Argued: March 26, 2010 Decided: August 3, 2010
Before MICHAEL and DAVIS, Circuit Judges, and Eugene E. SILER,
Jr., Senior Circuit Judge of the United States Court of Appeals
for the Sixth Circuit, sitting by designation.
Affirmed by unpublished per curiam opinion.
ARGUED: Elizabeth Brooks Scherer, SMITH MOORE LEATHERWOOD LLP,
Raleigh, North Carolina, for Appellant. Anne Margaret Hayes,
OFFICE OF THE UNITED STATES ATTORNEY, Raleigh, North Carolina,
for Appellee. ON BRIEF: Stephen W. Petersen, SMITH MOORE
LEATHERWOOD LLP, Raleigh, North Carolina, for Appellant. George
E. B. Holding, United States Attorney, Jennifer P. May-Parker,
Assistant United States Attorney, OFFICE OF THE UNITED STATES
ATTORNEY, Raleigh, North Carolina, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
2
PER CURIAM:
Michael A. Lomas was indicted in a multi-count indictment
charging conspiracy in violation of 18 U.S.C. § 371 and mail
fraud in violation of 18 U.S.C. § 1341. Lomas pled guilty to one
count of mail fraud pursuant to a plea agreement in which the
parties left the issue of restitution for the sentencing court’s
determination. The district court sentenced Lomas to serve 240
months in prison and to pay $45,675,365.97 in restitution to 993
victims of his mail fraud scheme. On appeal, Lomas contends
that under the Mandatory Victim Restitution Act, 18 U.S.C.
§ 3663A, none of the 993 people in the restitution order qualify
as “victims of the offense” to which he pled guilty and asks
that we vacate the order of restitution. We reject Lomas’s
contention and, accordingly, we affirm.
I.
On May 10, 2007, Lomas was named in an 18-count indictment
in the United States District Court for the Eastern District of
North Carolina. Count One of the Indictment charged Lomas and
his co-defendants with conspiracy to commit mail fraud in
violation of 18 U.S.C. § 1341. Counts Two through Eighteen
charged Lomas and his co-defendants, as principals and aiders
and abettors, with individual substantive counts of mail fraud
in violation of 18 U.S.C. §§ 1341 and 2.
3
The Indictment began with a lengthy introduction that
described the operation and scope of the scheme to defraud and
set out the roles played by Lomas and his six co-defendants. It
clearly stated that the allegations set forth in the
introduction were incorporated into each count of the
Indictment. J.A. 56, ¶19 (“The allegations set forth in this
Introduction are incorporated into each count in this
Indictment.”).
The introduction catalogued the extensive overlapping
schemes that Lomas and his co-defendants used to defraud
individuals out of approximately $70 million. In 1999, Lomas
and co-defendant Michael Young operated an entity named The
Agency Alliance Group (TAAG). TAAG operated a “lease program”
in which individuals were promised a 15% annual return from
revenue generated by pay telephones, payable monthly, in
exchange for five annual investments of $6,000.
After Pennsylvania authorities issued TAAG a cease-and-
desist order, Lomas and his co-defendants renamed their
enterprise the “National Payphone Corporation” and reworked the
terms of their scam, promising a 14.35% annual return and
requiring a $7,000 annual investment. Otherwise, they continued
to operate the same scheme. After a federal agency sued an
unrelated entity that promised similar terms to investors, Lomas
changed the name and appearance of his enterprise yet again.
4
In early 2001, Lomas and his co-defendants formed Mobile
Billboards of America, Inc. This time they promised a 13.49%
annual return, required seven annual investments of $20,000, and
purported to generate revenue by selling ad space on the sides
of trucks. Between 2001 and 2004, Lomas directed the promotion
and sale of the “investments.” The Indictment charged that Lomas
made extensive use of false and misleading statements, both
spoken and written, all of which were aimed at persuading his
“investors” that he was operating a legitimate business that
would generate sufficient money to make the promised investment
returns and would carry little or no risk.
Lomas and his co-defendants scammed approximately $70
million through various iterations of this investment scheme.
At the peak of his scheme in 2004, Lomas and his co-defendants
took in approximately $4 million monthly. The government
estimates that individuals lost tens of millions dollars to
Lomas and his co-defendants.
On December 17, 2007, Lomas entered into a plea agreement
with the government pursuant to which he agreed to plead guilty
to Count Two of the Indictment. Count Two charged, in material
part, that, on or about March 13, 2003, Lomas and his co-
defendants “having devised a scheme and artifice to defraud, and
to obtain money and property by means of materially false and
fraudulent pretenses, representations, and promises,” and “for
5
the purpose of executing such scheme and artifice,” “placed in a
post office and authorized depository for mail matter” a letter
(sent by co-defendant Scott B. Hollenbeck) to retiree “GW” in
Roanoke Rapids, North Carolina. J.A. 59-60.
In exchange for Lomas’s guilty plea to Count Two of the
Indictment, the government agreed to dismiss the remaining
counts of the Indictment, including the conspiracy charge. Also
as a part of his plea agreement, Lomas agreed to “make
restitution to any victim in whatever amount the Court may
order, pursuant to 18 U.S.C. 3663 and 3663A.” J.A. 64. The
district court accepted Lomas’s guilty plea on January 7, 2008.
On August 18, 2008, the district court sentenced Lomas to the
statutory maximum of 240 months.
The sentencing court also ordered Lomas to pay restitution.
In Lomas’s Pre-Sentence Report, the Probation Officer reported
that “[d]uring the course of the instant offense, 1,231 victims
were defrauded and suffered a loss of $70,967,712.90.”
J.A. 197, ¶18. Nevertheless, the probation officer initially
stated that restitution could not be ordered in this case. The
government objected, and filed a memorandum asking the district
court to order Lomas to pay $45,675,365.97 in restitution to 993
victims. On October 9, 2008, following a hearing, the district
court ordered Lomas to pay $45,675,365.97 to 993 victims,
stating that Lomas was jointly and severally liable with his
6
four co-defendants for this sum. In support of its ruling, the
district court cited the very broad definition of “offense” in
18 U.S.C. § 3663A(a)(2), and noted that Count Two of the
Indictment, the count to which Lomas pled guilty, explicitly
incorporated the description of the scheme from the Indictment’s
introductory section.
On October 14, 2008, Lomas filed a timely notice of appeal.
We have jurisdiction pursuant to 28 U.S.C. § 1291 and 18 U.S.C.
§ 3742(a).
II.
We review criminal restitution orders under an abuse of
discretion standard. United States v. Henoud, 81 F.3d 484, 487
(4th Cir. 1996); United States v. Hoyle, 33 F.3d 415, 420
(4th Cir. 1994). A sentencing court's discretion in ordering
restitution “is circumscribed by the procedural and substantive
protections” of the statute authorizing restitution. Henoud, 81
F.3d at 487. Here, the applicable statute is 18 U.S.C. § 3663A,
the Mandatory Victim Restitution Act of 1996 (“MVRA”). 1
1
Restitution in federal court is governed by one of two
statutes: the Victim Witness Protection Act (“VWPA”), 18
U.S.C. § 3663, or the Mandatory Victim Restitution Act of 1996
(“MVRA”), 18 U.S.C. § 3663A. The structure and language of both
the MVRA and the VWPA are substantially the same, other than in
one respect: the VWPA permits a district court to order
restitution subject to a defendant’s ability to pay and the MVRA
(Continued)
7
III.
The district court, after conducting a hearing, granted
restitution in the amount of $45,675,365.97 to 993 victims. It
clearly stated its reasoning on the record:
The Court holds that the amount of restitution is not
limited to the counts of conviction. The court bases
its reasoning on 18 U.S.C. Section 3663(a)(2) [sic]
for the purposes of restitution and victim and offense
that involves as a scheme or pattern of criminal
activity means any person directly in harm of the
defendant’s criminal conduct in the course of the
scheme, conspiracy or pattern.
Now, in the case of United States versus Henoud,
81 F.3d 484, the Fourth Circuit said this amendment is
widely viewed as partially overruling Hughey’s
restrictive interpretation of the VWPA and expanding
on the Courts’ authority to grant restitution.
Federal courts now allow broader restitution
orders encompassing losses that resulted from a
criminal scheme or conspiracy regardless of whether
the defendant is convicted for each criminal act
within that scheme. The harm must be a direct result
of the defendant’s criminal conduct though or closely
related to the scheme.
The scheme, in my view, and I so hold, is clearly
described in the indictment in the introduction, which
as I have pointed out earlier, is by paragraph 19 on
page 7 incorporated into each count of the Indictment
and the count to which the defendant pled guilty,
Count 2, specifically refers to having devised a
scheme and artifice to defraud.
And United States versus Karam, 201 F.3d 320, the
Fourth Circuit said that where one count specifically
incorporated all of the factual allegations contained
in another count, that the court could order or should
order restitution based on that.
mandates restitution for certain crimes without consideration to
the defendant’s ability to pay. 18 U.S.C. §§ 3663 & 3663A.
There is no dispute that this case is controlled by the MVRA.
8
So this court holds that . . . by pleading
guilty, the Defendant Lomas pled guilty and he
admitted the conduct set forth in the introduction and
incorporated into the count to which he plead guilty.
J.A. 117-18.
A.
Lomas contends that none of the 993 people in the
restitution order qualify as “victims of the offense” to which
he pled guilty under the MVRA. See 18 U.S.C. § 3663A(A)(1)
(“[T]he court shall order . . . that the defendant make
restitution to the victims of the offense.”). He argues, citing
Hughey v. United States, 495 U.S. 411 (1990), superseded by
statute, Crime Control Act of 1990, Pub. L. No. 101-647, § 2509,
104 Stat. 4863, as recognized in Henoud, 81 F.3d at 488, that
under the MVRA, the term offense is limited to indicate “the
offense of conviction,” and that his “offense of conviction” was
a very narrow mail fraud offense with a single victim. Thus,
Lomas argues that he should only be required to pay restitution,
if any, to “retiree G.W.,” the only victim who could have been
directly harmed by the specific, narrow scheme that Lomas
insists he pled guilty to when he pled guilty to Count Two of
the Indictment. 2
2
Lomas relies on United States v. Adams, 363 F.3d 363 (5th
Cir. 2004), but that case is easily distinguished. In Adams,
the Fifth Circuit held that the parties to a plea agreement may,
if they choose, narrow the scope of the scheme alleged in an
(Continued)
9
The government argues that Lomas was correctly ordered to
pay $45,675,365.97 in restitution to 993 people because the
Indictment plainly manifested that he defrauded all of those
victims. It argues that the allegations regarding Lomas’s five-
year scheme are detailed in the introduction of the Indictment
and are all explicitly incorporated into each count of the
Indictment, including Count Two. The government adds that
nothing in Lomas’s plea agreement or guilty plea colloquy
narrowed the factual basis of his conviction. Thus, the
government continues, Lomas’s conviction was sufficiently broad
to support the district court’s restitution order.
B.
The government clearly has the better of the argument here.
The 1990 amendments to the VWPA, as interpreted by Henoud, 81
F.3d at 488, fatally undermine Lomas’s argument that the law
indictment for restitution purposes. Adams, 363 F.3d at 366-68.
The court found on the facts in that case that the defendant and
the government (essentially by acquiescence to the defendant’s
insistence) narrowed the scope of the scheme in their plea
agreement from the broader scheme alleged in the indictment.
Id. at 367. Here, the parties did not narrow the scope of the
scheme alleged in the indictment in the plea agreement. To the
contrary, as part of the negotiated plea agreement in this case,
the parties agreed that Lomas would “make restitution to any
victim in whatever amount the Court may order, pursuant to 18
U.S.C. 3663 and 3663A.” J.A. 64. Thus, the parties expressly
left for the determination by the sentencing court the contours
of a restitution order.
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only required him to pay restitution to victims explicitly named
in the count of his Indictment to which he pled guilty.
Although Henoud interpreted the 1990 amendment as it applied to
the VWPA, a later amendment added identical language to the
MVRA. Compare Crime Control Act of 1990, Pub. L. No. 101-647,
§ 2509, 104 Stat. 4863 (codified as amended at 18 U.S.C.
§ 3663(a)(2)(1994)) with Antiterrorism and Effective Death
Penalty Act of 1996, Pub. L. No. 104-132, § 204(a), 110 Stat.
1227 (codified at 18 U.S.C. § 3663A(a)(2)(2000)). Accordingly,
our interpretation of the language in U.S.C. § 3663(a)(2) from
Henoud controls this case and we hereby adopt it.
In Henoud, 81 F.3d at 488, we explained that the 1990
amendment to 18 U.S.C. § 3663(a)(2) broadened the ability of
district courts to grant restitution. We stated:
The amendment is widely viewed as partially overruling
Hughey's restrictive interpretation of the VWPA and
expanding district courts' authority to grant
restitution. See United States v. Kones, 77 F.3d 66,
69 (3rd Cir. 1996); United States v. Broughton-Jones,
71 F.3d 1143, 1147 n.1 (4th Cir. 1995). The majority
view is that the 1990 amendment “did have a
substantive impact on the amount of restitution a
court could order when a defendant is convicted of an
offense involving a scheme, conspiracy, or pattern.”
United States v. DeSalvo, 41 F.3d 505, 515 (9th Cir.
1994). Federal courts therefore now allow broader
restitution orders encompassing losses that result
from a criminal scheme or conspiracy, regardless of
whether the defendant is convicted for each criminal
act within that scheme. See, e.g., United States v.
Manzer, 69 F.3d 222, 230 (8th Cir. 1995). The harm
must be a direct result of the defendant's criminal
11
conduct, though, or “closely related to the scheme.”
Kones, 77 F.3d at 70.
Id. (holding that the trial court did not err when it ordered
restitution for losses caused by acts for which the defendant
was not convicted).
Applying that analysis to the same language in the MVRA, 18
U.S.C. § 3663A(a)(2), it is clear that the district court here
properly ordered Lomas to pay restitution as it did. The MVRA
states, in pertinent part:
(a)(1) Notwithstanding any other provision of law,
when sentencing a defendant convicted of an offense
described in subsection (c), the court shall order . .
. that the defendant make restitution to the victim of
the offense . . .
(2) For the purposes of this section, the term
“victim” means a person directly and proximately
harmed as a result of the commission of an offense for
which restitution may be ordered including, in the
case of an offense that involves as an element a
scheme, conspiracy, or pattern of criminal activity,
any person directly harmed by the defendant's criminal
conduct in the course of the scheme, conspiracy, or
pattern. . . .
(3) The court shall also order, if agreed to by the
parties in a plea agreement, restitution to persons
other than the victim of the offense.
. . . .
(c)(1) This section shall apply in all sentencing
proceedings for convictions of, or plea agreements
relating to charges for, any offense—
(A) that is--
(i) a crime of violence, as defined in section 16;
(ii) an offense against property under this title, or
under section 416(a) of the Controlled Substances Act
(21 U.S.C. 856(a)), including any offense committed by
fraud or deceit; . . . .
18 U.S.C. § 3663A.
12
The MVRA requires the court to order a defendant to pay
restitution to victims of certain crimes. § 3663A(a)(1) (“the
court shall order”). Because mail fraud is a crime against
property under Title 18 of the United States Code, it triggers
the MVRA and thus the district court was required to order
restitution to the victims of Lomas’s crime.
The statute also clearly defines “victims.” Victims are
those who are “directly and proximately harmed as a result of
the commission of an offense.” § 3663A(a)(2). When the crime
involves a scheme or pattern of criminal activity, the universe
of victims includes “any person directly harmed by the
defendant’s criminal conduct in the course of the scheme,
conspiracy, or pattern.” Id. Lomas’s conviction was based on
his knowing participation in a scheme to defraud executed
through the use of the mails in violation of 18 U.S.C. § 1341.
Since mail fraud necessarily includes a scheme to defraud, and
in fact includes it as an element of the crime itself, United
States v. Curry, 461 F.3d 452, 457 (4th Cir. 2006), the victims
affected by Lomas’s offense include all persons harmed by Lomas
“in the course of [his participation in] the scheme.” See §
3663A(a)(2).
Lomas disputes the scope of the scheme. We reject his
contention that the plea agreement narrowed the scope of the
charged scheme, and we can discern no other basis on which to
13
adopt Lomas’s contentions. We most recently discussed this
issue in United States v. Karam, 201 F.3d 320, 325-26 (4th Cir.
2000). 3 There, Thomas E. Karam, a certified public accountant,
was indicted for wire fraud, money laundering, and aiding and
abetting. Id. at 323. The indictment charged him with
executing a multi-year scheme to defraud private medical
entities such as Fairfax Anesthesiology Associates, Inc., out of
millions of dollars. Id. at 325. Karam pled guilty to a single
count of wire fraud in which he was charged with executing the
scheme by requesting an electronic funds transfer of $150,000.
That count of the indictment specifically incorporated all of
the factual allegations contained in the indictment, allegations
that detailed Karam’s long-term scheme to defraud private
medical practices. Id. The district court sentenced Karam to
24 months imprisonment and ordered him to pay $774,508 in
restitution, an amount covering losses beyond the losses arising
from the count of conviction. Id. at 323-24. On appeal, Karam
challenged the amount of the restitution order, arguing that he
was required to pay only $150,000, the amount explicitly stated
3
Again, Karam addresses the application of 18 U.S.C. §
3663(a)(2), rather than 18 U.S.C. § 3663A(a)(2). As discussed
above, both restitution statutes contain the same definition of
“victim,” including the definition that applies when the offense
of conviction has a scheme as an element of the offense. See 18
U.S.C. §§ 3663(a)(2) & 3663A(a)(2).
14
in the count of conviction. Id. at 325. He argued that the
additional $624,508 in restitution was not directly related to
the conduct underlying his conviction.
We rejected Karam’s contentions and affirmed, holding that,
“[f]ederal courts may order restitution encompassing losses
resulting from a criminal scheme ‘regardless of whether the
defendant is convicted for each criminal act within the scheme,’
so long as the loss is a direct result of the defendant's
criminal conduct or is ‘closely related to the scheme.’” Id. at
325-26 (citing Henoud, 81 F.3d at 488). We evaluated the
$624,508 in restitution that was ordered in addition to the
$150,000 and found that the additional money was “directly
related to the conduct underlying Karam’s conviction” because it
represented losses that resulted from the same scheme to steal
money from medical professionals by purporting to invest their
money in fraudulent investment schemes. Id. at 326.
Specifically, in addition to stealing money (by failing to meet
payroll tax liabilities) from medical groups, Karam also stole
from individual physicians by inviting them to “defer” their
bonuses and purporting to “invest” their money in a business
that promised a 15% return.
Thus, under Karam, a sentencing court may order restitution
for losses resulting from a scheme even if the defendant is not
convicted of each individual criminal act, e.g., indictment
15
count, as long as the acts are the direct result of the
defendant's criminal conduct or are “closely related to the
scheme.” 4 Id.; see also Henoud, 81 F.3d at 488. Here, both
condition precedents are fulfilled. The financial harm
inflicted on Lomas’s victims was the direct result of Lomas’s
knowing participation in the overall scheme to defraud
individuals by inducing them to invest in fraudulent business
enterprises. And Lomas’s knowing participation in the charged
scheme to defraud satisfies the “closely related” standard. The
district court required Lomas to pay restitution to individuals
whom he defrauded via mail fraud in the same manner as he
attempted to defraud the individual identified in Count Two
(“retiree GW”). In fact, Lomas’s schemes are more tightly
connected than the schemes carried out in Karam because Lomas
actually used the various derivations of the same scheme to
4
Our sister circuits agree that when the crime of
conviction includes a scheme as an element of the offense,
restitution may be ordered based on acts for which the
defendants was not convicted. E.g., United States v. Brock-
Davis, 504 F.3d 991, 999 (9th Cir. 2007) (“when the crime of
conviction includes a scheme, conspiracy, or pattern of criminal
activity as an element of the offense, . . . the restitution
order[may] include acts of related conduct for which the
defendant was not convicted"); United States v. Holthaus, 486
F.3d 451, 458 n.6 (8th Cir. 2007) (explaining that MVRA
superseded Hughey’s holding and that it authorizes restitution
for every victim harmed in the course of the defendant’s scheme,
not just the offense of the conviction); United States v.
Hensley, 91 F.3d 274, 277 (1st Cir. 1996) (same).
16
defraud his victims, whereas in Karam, the defendant employed
two related but separate schemes. Either way, the restitution
ordered in this case falls safely within the boundaries staked
out in Karam and Henoud.
Thus, the district court fully acted within its discretion
when it awarded $45,675,365.97 in restitution to Lomas’ 993
victims.
IV.
For all of these reasons, the district court decision is
AFFIRMED.
17