United States v. Rickey Benns

Case: 12-51038 Document: 00512507341 Page: 1 Date Filed: 01/21/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
January 21, 2014
No. 12-51038
Lyle W. Cayce
Clerk
UNITED STATES OF AMERICA,
Plaintiff - Appellee
v.
RICKEY D. BENNS,
Defendant - Appellant
Appeal from the United States District Court
for the Western District of Texas
Before OWEN, SOUTHWICK, and GRAVES, Circuit Judges.
JAMES E. GRAVES, Jr., Circuit Judge:
Rickey Benns appeals his sentence and restitution order following his
conviction for making false statements relating to a credit application. Because
we agree that the district court erred in calculating the loss amount attributable
to him under the Sentencing Guidelines and in awarding restitution based on
relevant conduct, we VACATE Benns’ sentence and restitution order and
REMAND the case to the district court for resentencing.
BACKGROUND
On March 14, 2012, Rickey Benns was named in a one-count indictment
charging him with making false statements relating to a credit application, in
violation of 18 U.S.C. § 1014. The indictment alleged that Benns “knowingly
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made a material false statement for the purpose of influencing the action of
Countrywide Bank, a bank then insured by the Federal Deposit Insurance
Corporation, in connection with an application for loan modification.”
Specifically, the indictment alleged that Benns “forged the signatures of
borrowers on an application for modification to a loan related to a property
located at 1301 Red Deer Way, Arlington, Texas, and created and submitted a
false pay stub in order to deceive Countrywide Bank into believing that the
borrowers were more credit-worthy than was actually the case.”
Benns pleaded guilty to the charge in the indictment without a plea
agreement. In entering his plea, Benns accepted the accuracy of a factual
resume prepared by the government. The resume stated that Benns acquired
an interest in a property located at 1301 Red Deer Way from B.A. and M.A.,
although B.A. and M.A. continued to hold the mortgage loan; that Benns forged
the signatures of B.A. and M.A. on an application to modify the mortgage loan;
and that Benns created and submitted a fake pay stub to support the
application. The factual resume also recited the penalties that could be imposed
by the court for a violation of 18 U.S.C. § 1014, including: “restitution to victims
or to the community, which may be mandatory under the law, and which
Defendant agrees may include restitution arising from all relevant conduct, not
limited to that arising from the offense of conviction alone.”
The presentence report (“PSR”) described an ongoing scheme by Benns to
target distressed properties (i.e. properties with little or no equity in them) that
had been on the market for at least ninety days. Benns would invite the
homeowner to deed the property to him without receiving any payment, and
would agree to take over the mortgage payments for the property and attempt
to sell it. Benns would then purport to sell the homes to rent-to-own buyers,
collecting down payments and monthly mortgage payments from the buyers.
However, Benns frequently collected money from the buyers but did not use it
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to make the monthly mortgage payments. The PSR listed ten properties
acquired by Benns that ultimately were foreclosed after mortgage payments
were not made.1 According to Benns’ statements in an interview with law
enforcement officers, “he did not intend for this to happen. He stated he was
trying to keep up with too many properties and did not have a good tracking
system.”
The property located at 1301 Red Deer Way, for which Benns submitted
the fraudulent loan modification application, was one of the properties acquired
by Benns. Benns admitted that he submitted the fraudulent application in an
attempt to save the home from foreclosure. Nevertheless, the property was
eventually foreclosed, resulting in a loss of $54,906.59 to the Department of
Housing and Urban Development (“HUD”).2 The other nine foreclosures resulted
in total losses of $489,695.83 to the mortgage holders and/or guarantors of the
properties. As the PSR explained, “[t]he loss amount from the mortgage
companies is the outstanding principal balance at the time of foreclosure, plus
any out-of-pocket costs related to the foreclosure, minus the resell value of the
property.”
Based on these losses, the PSR held Benns accountable for a total loss
amount of $544,602.42. The base level for Benns’ offense of conviction is 7.
U.S.S.G. § 2B1.1(a)(1). With his criminal history category of I, this produces an
1
Although the PSR provided a factual background for four of these properties, the other
six were merely named in “a list of properties that were foreclosed after Benns failed to make
the mortgage payments.” For example: “3404 Portico Lane, Dallas, Texas, seller: Cassandra
Carey, rent-to-own buyer: Shamondria Wheatley. According to Fannie Mae, due to the
foreclosure, they sustained a loss of $30,523.94.” The PSR also stated that Benns “committed
this same scheme” with four additional properties, but did not provide loss amounts; these
properties do not figure into the total loss amount.
2
The PSR characterized both Countrywide and Bank of America as the holder of the
mortgage on this property, yet stated that HUD suffered the loss. Although not explicitly
stated, it appears that Bank of America acquired the mortgage from Countrywide and HUD
guaranteed it.
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advisory guidelines range of zero to six months of imprisonment. However, the
loss amount of $544,602.42 increases the offense level fourteen points, to twenty-
one. U.S.S.G. § 2B1.1(b)(1)(H). This results in a guidelines range of thirty-seven
to forty-six months of imprisonment.
Benns objected to the inclusion of losses relating to the nine additional
properties. Benns argued that “[n]o illegal conduct [was] involved,” and that
“these additional losses are not causally related to the illegal conduct charged
in the Indictment.” Benns further argued that the additional losses are “not
relevant conduct under the Sentencing Guidelines,” and that he “did not receive
proper notice as to how those amounts were calculated.” Finally, Benns objected
to the additional loss amounts “to the extent they include costs and/or expenses
that are not legally attributable to [him] as actual or intended loss under the
Sentencing Guidelines and case law and to the extent that any fine is
determined by the total amount of loss.”
The probation officer rejected Benns’ arguments with the following
explanation:
Pursuant to USSG § 1B1.3(a)(2), the base offense level shall
be determined on the basis of all acts and omissions described in
subdivisions (1)(A) and (1)(B) that were part of the same course of
conduct or common scheme or plan as the offense of conviction.
Pursuant to USSG § 1B1.3, comment. [n.9], for two or more offenses
to constitute part of a common scheme or plan, they must be
substantially connected to each other by at least one common factor,
such as common victims, common accomplices, common purpose, or
similar modus operandi. In this case, the only difference between
the offense committed in the Indictment and the other losses caused
by this defendant, is the defendant tried to cover up his criminal
activity by forging documents. Otherwise, all other activity is the
same. Benns was committing criminal activity when it came to all
the homes listed in the presentence report. He committed fraud
when he had the original homeowners believing they had sold their
homes. He committed fraud when he collected down payments and
mortgage payments from the rent-to-own buyers, but did not make
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the mortgage payments. Money and documents that were sent to
Benns were sent through the mail. Some of the mortgage payments
were automatically deducted from checking accounts. The Federal
Government could have filed mail fraud, wire fraud, or other similar
charges. The Federal Government could have also filed Equity
Skimming, in violation of Title 12, U.S.C. § 1709-2. It is believed
the additional properties to which Rickey Benns is being held
accountable is relevant conduct to the Indictment.
At the sentencing hearing, Benns’ counsel explained that Benns did not
“contest anything in the PSR itself as far as the way it’s reported,” but
maintained that the losses from the additional properties should not count as
relevant conduct. The government argued that “the $540,000 comes from all the
properties that were foreclosed because of the defendant’s keeping the money
and not making the payments like he had planned to do that he told the buyers
and the sellers that he planned to do.” The district court overruled Benns’
objection, stating, with no further explanation: “I believe the probation
department’s position is correct.” After Benns received an offense level reduction
for acceptance of responsibility, his guidelines range became twenty-seven to
thirty-three months imprisonment. The district court sentenced Benns to
twenty-seven months of imprisonment, followed by five years of supervised
release. The district court also ordered restitution in the amount of $544,602.42,
to be paid to HUD, the Department of Veterans Affairs (“VA”), the Federal
National Mortgage Association (“Fannie Mae”), PMI Mortgage Insurance
Company, and Aurora Bank FSB. Benns now appeals, challenging the district
court’s calculated loss amount and the award of restitution.
DISCUSSION
I. LOSS AMOUNT
A defendant convicted of an offense involving fraud or deceit is sentenced
based on the amount of loss attributable to his conduct. See U.S.S.G. § 2B1.1(b).
In addition to losses attributable to the acts underlying the offense of conviction,
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the loss amount may include losses attributable to other acts that constitute
“relevant conduct” as defined in the Sentencing Guidelines. See U.S.S.G.
§ 1B1.3(a)(2).3 Relevant conduct includes “all acts and omissions . . . that were
part of the same course of conduct or common scheme or plan as the offense of
conviction.” Id.
We note at the outset that there is no evidence in the PSR, or elsewhere
in the record, establishing that Benns’ offense of conviction – submitting a forged
loan modification application and fake pay stub to Countrywide Bank – caused
any loss at all. The PSR does not even state whether the application was
granted, and it includes no loss suffered by Countrywide. Accordingly, Benns’
challenge to the loss amount focuses entirely on acts found to be relevant
conduct – specifically, his dealings with the home buyers and sellers.
A. Criminal conduct
On appeal, Benns does not dispute the facts recited in the PSR, including
the general description of his house-flipping scheme. However, Benns maintains
that his dealings with the home buyers and sellers were not fraudulent or
otherwise criminal. Only conduct that is criminal may be used as “relevant
conduct” to determine a defendant’s offense level. United States v. Peterson, 101
F.3d 375, 385 (5th Cir. 1996) (citations omitted). Although Benns concedes that
his business practices may have been unwise, he argues that they were
fraudulent only if he assumed the mortgages with the intent to not make the
payments. Benns contends that although the PSR “reflected [that he] had been
unsuccessful in his house-flipping endeavors, . . . it did not include sufficient
facts to back up the bald conclusion that his entering into house flipping
agreements had been criminally fraudulent at the outset.” Accordingly, Benns
3
Fraud and related offenses sentenced under § 2B1.1 are grouped with respect to
multiple counts. See § 3D1.2(d). Accordingly, relevant conduct for such offenses is determined
per the method set forth in § 1B1.3(a)(2).
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argues that the loss amounts resulting from the home foreclosures are not
properly attributable to him as “relevant conduct.”
The PSR initially included the total amount of loss from the ten foreclosed
properties as relevant conduct without even explaining which crimes Benns
committed in causing the losses. In responding to Benns’ objections, the
probation officer suggested that the government could have filed charges of “mail
fraud, wire fraud, or other similar charges,” or charges of equity skimming. At
the sentencing hearing, the district court made no factual findings and did not
discuss which crimes Benns had committed.
To prove mail or wire fraud, the government must prove “a scheme to
defraud, the use of the mail or wire communications, and a specific intent to
defraud.” United States v. McMillan, 600 F.3d 434, 450 (5th Cir. 2010) (citation
omitted). The crime of “equity skimming” applies to a defendant who,
with intent to defraud, willfully engages in a pattern or practice of--
(1) purchasing one- to four-family dwellings (including
condominiums and cooperatives) which are subject to a loan in
default at time of purchase or in default within one year subsequent
to the purchase and the loan is secured by a mortgage or deed of
trust insured or held by the Secretary of Housing and Urban
Development or guaranteed by the Department of Veterans Affairs,
or the loan is made by the Department of Veterans Affairs,
(2) failing to make payments under the mortgage or deed of trust as
the payments become due, regardless of whether the purchaser is
obligated on the loan, and
(3) applying or authorizing the application of rents from such
dwellings for his own use.
12 U.S.C. § 1709-2. The most obvious common factor in these offenses is the
fraudulent intent.
As Benns correctly notes, he did not necessarily commit any crimes in
failing to make mortgage payments on the homes he acquired. Benns could have
entered into his house-flipping scheme fully intending to fulfill his promises to
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the buyers and sellers, yet found himself unable to do so due to some
combination of misfortune and ineptitude. On the other hand, if he intended to
defraud the buyers and/or sellers at the time he induced them to enter into
transactions with him, he may have committed numerous crimes. Because
Benns specifically objected that his dealings with the buyers and sellers were not
criminal, the district court was aware of the need to establish that Benns had in
fact committed criminal acts that could properly be considered relevant conduct.
However, neither the district court nor the probation officer made any attempt
to identify evidence of Benns’ conduct or explain how such conduct satisfied the
elements of some criminal offense.
The probation officer concluded that Benns defrauded all of the home
buyers and sellers involved without any discussion of the facts on which this
conclusion was based. As noted above, there are literally no facts at all in the
PSR concerning Benns’ interactions with the buyers and sellers of six properties
for which he was held accountable. As to the other four properties, the facts in
the PSR do not unambiguously indicate fraud; for example, Benns undisputedly
made at least some mortgage payments on the properties he acquired. Finally,
the probation officer identified no facts showing that Benns used the mail or wire
communications to further his alleged fraud as to each property, and made no
attempt to explain how the elements of 12 U.S.C. § 1709-2 were satisfied as to
all ten properties.
Of course, the ultimate responsibility for determining relevant conduct and
calculating the guidelines range lies with the district court, not the probation
officer. Because the district court neither made factual findings concerning
Benns’ conduct nor explained which statutes Benns violated, we are unable to
determine whether Benns’ dealings with the home buyers and sellers were
criminal. Accordingly, we remand the case to the district court for resentencing,
to include specific findings as to the relevant conduct for which Benns is being
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punished. Although we decline to adopt an absolute rule, we emphasize that,
particularly when a defendant is being held accountable at sentencing for
uncharged conduct and has objected that the conduct is not criminal, meaningful
appellate review may be impossible without explicit findings by the district
court.4
B. Common scheme or plan
As noted above, relevant conduct includes “all acts and omissions . . . that
were part of the same course of conduct or common scheme or plan as the offense
of conviction.” U.S.S.G. § 1B1.3(a)(2). The probation officer’s response to Benns’
objections reveals that she considered Benns’ dealings with the home buyers and
sellers to be part of the same “common scheme or plan” as his offense of
conviction, making false statements relating to a credit application. The district
court made no findings on this issue.
“For two or more offenses to constitute part of a common scheme or plan,
they must be substantially connected to each other by at least one common
factor, such as common victims, common accomplices, common purpose, or
similar modus operandi.” U.S.S.G. § 1B1.3, cmt. 9(A). On remand, the district
court should explain how any relevant conduct attributed to Benns is “part of the
4
The Sixth Circuit’s comments in an analogous case involving relevant conduct are
instructive:
The district court did not state what criminal statute Catchings violated
with regard to his use of the U.S. Investments & Construction cards. We find
this omission problematic in this case for two reasons. First, Catchings
contested whether his conduct related to these cards was criminal. Therefore,
the district court was aware of the need to make an explicit finding of
criminality with regard to that conduct. Second, although relevant conduct can
include uncharged conduct, the fact that the U.S. Investments & Construction
cards were not listed in any charge against Catchings makes the need for an
express statement of what statute this conduct violated even greater. In
comparison, the other cards that were included in the relevant-conduct section
of the PSR were listed in the indictments.
United States v. Catchings, 708 F.3d 710, 721 n.8 (6th Cir. 2013).
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same course of conduct or common scheme or plan as the offense of conviction.”
Although we do not decide whether Benns’ dealings with the home buyers and
sellers are properly considered relevant conduct, we caution that the concept of
a “common scheme of plan,” while expansive, “cannot be too broad, otherwise
almost any uncharged criminal activity can be painted as similar in at least one
respect to the charged criminal conduct.” United States v. Ortiz, 613 F.3d 550,
557 (5th Cir. 2010) (quotation omitted). We note that Benns’ offense of
conviction, defrauding Countrywide Bank in a loan modification application, is
not connected to his dealings with the home buyers and sellers by common
victims, common accomplices, or a similar modus operandi. Moreover, although
Benns’ offense of conviction and alleged relevant conduct may be connected in
some sense by a common purpose, circuit precedent has rejected excessively
broad or general “purposes.” See, e.g., United States v. Wall, 180 F.3d 641, 645
(5th Cir. 1999) (finding a “common general purpose of importing marijuana for
distribution in the United States,” without more, to be insufficient to establish
a “common scheme or plan”); United States v. Rhine, 583 F.3d 878, 886 (5th Cir.
2009) (“[T]he only common purpose linking the two offenses is Rhine’s
motivation to profit from the distribution of crack cocaine, which—like the
marijuana importation in Wall—is by itself insufficient to connect the offenses
as separate parts of a common scheme or plan.”).
C. Causation of loss
Finally, if Benns is to be held accountable through relevant conduct for
losses to mortgage lenders caused by default and foreclosure, his criminal acts
must have actually caused these losses. See, e.g., United States v. Randall, 157
F.3d 328, 331 (5th Cir. 1998) (“Before a court may attribute losses to a
defendant’s fraudulent conduct, there must be some factual basis for the
conclusion that those losses were the result of fraud.”) (quotation and brackets
omitted). Although it is certainly possible that Benns’ allegedly fraudulent
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conduct caused the foreclosure losses, this is not obvious from the record. The
PSR explains that Benns targeted owners of distressed homes who may have
been facing imminent foreclosure, which suggests that Benns’ actions did not
necessarily cause or even exacerbate the lenders’ losses. Of course, causation is
a factual question that we do not purport to answer; we merely emphasize the
need for the district court to address causation in its findings.5
II. RESTITUTION
Benns argues that the district court erred in awarding restitution based
on losses caused by relevant conduct. Because Benns did not object to the
restitution award before the district court, we review for plain error. To
demonstrate plain error, an appellant must show an error that is clear and
obvious and that affected his substantial rights. Puckett v. United States, 556
U.S. 129, 135 (2009). If the appellant makes such a showing, this court has the
discretion to remedy the error, but should do so only if the error seriously affects
the fairness, integrity, or public reputation of judicial proceedings. Id.“The general rule is that a district court can award restitution to victims
of the offense, but the restitution award can encompass only those losses that
resulted directly from the offense for which the defendant was convicted.”
United States v. Maturin, 488 F.3d 657, 660-61 (5th Cir. 2007). However, “the
court may also order, if agreed to by the parties in a plea agreement, restitution
to persons other than the victim of the offense.” 18 U.S.C. § 3663(a)(1)(A); see
Maturin, 488 F.3d at 661.
5
We also question why, in calculating the loss amount and awarding restitution, the
district court considered only the losses suffered by mortgage lenders and guarantors, who
were at best indirect victims of Benns’ alleged fraud on the home buyers and sellers, and
ignored the losses that may have been suffered by the buyers and sellers themselves. The PSR
itself lists at least four buyers (Jeff Armendinger, Leon Hodge, Elfira Item, and Nancy
Thompson) who made payments on homes that were ultimately foreclosed, as well as other
victims who suffered losses that are perhaps less quantifiable.
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We agree that the district court erred by awarding restitution based on
relevant conduct that went beyond Benns’ offense of conviction. Moreover, an
award of restitution based on losses not resulting from the offense of conviction
is an error that is clear and obvious. See United States v. Inman, 411 F.3d 591,
595 (5th Cir. 2005). The error resulted in an award of more than half a million
dollars against Benns. “When a defendant is ordered to pay restitution in an
amount greater than the loss caused, the error affects substantial rights as well
as the fairness and integrity of the judicial proceeding.” United States v. Austin,
479 F.3d 363, 373 (5th Cir. 2007).
The government argues that Benns cannot show any error that affected
his substantial rights because he agreed – in the factual resume supporting his
guilty plea – that an award of restitution “may include restitution arising from
all relevant conduct, not limited to that arising from the offense of conviction
alone.” However, 18 U.S.C. § 3663(a)(1)(A) expressly states that expanded
restitution must be “agreed to by the parties in a plea agreement,” and there was
no plea agreement in this case. Accordingly, we vacate the district court’s award
of restitution.
CONCLUSION
Benns’ sentence and restitution award are VACATED, and the case is
REMANDED to the district court for resentencing consistent with this opinion.
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