United States v. Richard Woolsey

NOT RECOMMENDED FOR PUBLICATION
File Name: 16a0037n.06
Nos. 14-1693/2488
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT FILED
Jan 22, 2016
UNITED STATES OF AMERICA, ) DEBORAH S. HUNT, Clerk
)
Plaintiff-Appellee, )
)
v. ) ON APPEAL FROM THE
) UNITED STATES DISTRICT
RICHARD DEAN WOOLSEY, ) COURT FOR THE EASTERN
) DISTRICT OF MICHIGAN
Defendant-Appellant. )
)
)
BEFORE: BATCHELDER and GRIFFIN, Circuit Judges; and CARR, District Judge.*
ALICE M. BATCHELDER, Circuit Judge. A jury convicted Richard Woolsey of one
count of Conspiracy to Commit Mail and Wire Fraud and one count of Aiding and Abetting Wire
Fraud. The district court ordered Woolsey to pay $6,167,230.83 in restitution and sentenced him
to ninety months of imprisonment followed by three years of supervised release. Woolsey
appeals the district court’s calculation of both the restitution amount and the applicable
sentencing guideline range. We affirm.
I. Background
A. The Scheme
Sometime around 2006, Woolsey devised a plan to fraudulently buy sixteen cabins in
Sevierville, Tennessee, for use as vacation rentals. The scheme worked as follows. Woolsey
* The Honorable James G. Carr, United States District Judge for the Northern District of Ohio, sitting by
designation.
Nos. 14-1693/14-2488, United States v. Woolsey
recruited straw buyers from among friends and family, including co-defendant Ryan Vinco (who
is not a party to this appeal), marketing the properties as investment opportunities. He managed
to set the purchase prices for these cabins higher than the sellers had agreed to accept, funneling
the excess (about $150,000 per cabin) to the real estate company that he owned in the form of
commissions. Unbeknownst to the lenders, Woolsey, not the straw buyers, provided the money
for the down payments and used rental income from the properties as well as money from the
commissions to make the mortgage payments.
Woolsey overestimated the demand for these rentals, however, and it soon became
evident that the rental income and commissions were going to be insufficient to keep up with the
mortgage payments. To cover the shortfall, Woolsey decided to buy up homes in southeastern
Michigan in order to flip them for a profit or to refinance them.
Woolsey and Vinco purchased dozens of homes in Michigan using a straw buyer ploy
similar to the one used to buy the Tennessee cabins. These purchases involved $2,500 payments
to the straw buyers in exchange for their names and credit. As in Tennessee, the straw buyers
did not pay the down payments and did not expect to pay the mortgages. Woolsey would then
sell the properties and include large commissions to his real estate company, which he used to
pay off the Tennessee mortgages and to help fund down payments for straw buyers.
The Michigan houses, however, failed to provide the necessary cash, and Woolsey and
Vinco decided to make a last-ditch effort to keep up with the mounting mortgage obligations.
Woolsey acted as straw buyer for a property in Northville, Michigan (the Clover Hill property).
He applied for an $880,000 loan, stating, falsely, that he intended to live in the house. An
appraiser who worked for Woolsey then appraised the Clover Hill property at $1.1 million. In
fact, the Clover Hill property was worth only about $663,000. Woolsey convinced the seller to
-2-
Nos. 14-1693/14-2488, United States v. Woolsey
accept $610,000 for the house, and the excess loan money went to Woolsey’s real estate business
as a commission.
Woolsey made only two payments on the mortgage, and the lender eventually foreclosed.
Woolsey was indicted and convicted on charges of Conspiracy to Commit Mail and Wire Fraud
and of Aiding and Abetting Wire Fraud.
B. Sentencing
Following Woolsey’s convictions, the probation department recommended a sentencing
range of 168–210 months based on a loss amount of at least $11 million. Woolsey submitted his
own calculation, ostensibly to point out the errors in the government’s proposed loss amount,
which put the losses at roughly $2,750,000. At the sentencing hearing, the district court accepted
Woolsey’s lower number and reduced the guidelines range to 97–121 months. After explaining
its calculation, the district court asked if “anyone ha[d] any objection . . . to anything I have
said.” The government responded that it did not. And defense counsel stated that, “as far as the
advisory guidelines, I would concur . . . . I would concur with the guideline range at this point,
your honor.” The district court varied downward from the guideline range and sentenced
Woolsey to ninety months of imprisonment followed by three years of supervised release.
With regard to restitution, the government initially estimated the loss at $11 million.
It based this determination on evidence and testimony at trial as well as from investigative
subpoenas, payment histories, and public records. Woolsey disputed this amount, and the
government revised its estimate by disregarding every property that Woolsey had said that he
was not involved with, giving him credit for every payment he claimed to have made, and
correcting the mortgage amounts he disputed. It then reduced the loss by the resale price of each
piece of property. Thus, for example, it concluded that the lender on the Clover Hill property
-3-
Nos. 14-1693/14-2488, United States v. Woolsey
lost $488,000 using the following calculation: Mortgage ($880,000) – Mortgage Payments Made
($17,000) – Resale Price ($375,000). The district court accepted the government’s approach and
ordered Woolsey to pay $6,167,230.83 in restitution.
II. Analysis
A. Restitution
When considering fraud schemes such as this one, the sentencing court may order
restitution to all of the victims of a defendant’s scheme, “even when the defendant was not
indicted or convicted of fraud with respect to each victim.” United States v. Jones, 641 F.3d 706,
714 (6th Cir. 2011); accord 18 U.S.C. § 3663A(a)(2). This applies only insofar as the “loss is
attributable to the precise scheme that was an element of the defendant’s convicted offense.”
Jones, 641 F.3d at 714 (emphasis added). When, as here, “a defendant is convicted by a jury . . .
the scope of the scheme is defined by the indictment.” Id. The indictment in this case alleged
that Woolsey engaged in fraud by providing false and inflated appraisals, disguising the source
of down payments, providing false income information for straw buyers, providing false bank
account balances, falsely stating that the buyers would use the property as primary residences,
and concealing the fraud by making mortgage payments on the properties. Woolsey argues that
the government failed to prove that the scheme extended beyond the Clover Hill purchase to the
other properties in Michigan and Tennessee.
We review de novo whether a restitution order is permitted under law. United States v.
Batti, 631 F.3d 371, 379 (6th Cir. 2011). If it is, the amount of restitution is reviewed for an
abuse of discretion. Id.
Woolsey is correct that not every piece of property was purchased using all of the
fraudulent methods employed by Woolsey and Vinco. But there is ample reason to think that
-4-
Nos. 14-1693/14-2488, United States v. Woolsey
both the Clover Hill property and the other properties were all part of a single scheme: Woolsey
and Vinco consistently employed straw buyers, they concealed from lenders that the straw
buyers would not be paying the down payments or mortgages, and they saw to it that Woolsey’s
real estate business received very large commissions. The Michigan purchases, moreover, were
a continuation of the Tennessee scheme, used in order to get the cash necessary to make
mortgage payments on the Tennessee properties.
Woolsey contends that, even if these transactions were part of the same scheme, the
government failed to prove the loss amount. This argument too lacks merit. Woolsey is correct
that there were no loss letters from the lenders and that two of the government’s witnesses
testified at trial that they did not know exactly how much the bank had lost on the Clover Hill
property. Such information, especially loss letters, might have been helpful, but Woolsey cites
no authority suggesting that such loss letters are required or that the government’s witnesses had
to know at trial precisely how much a lender lost on a particular property. The method used by
the district court was reasonable and does not support a finding that it abused its discretion.
B. Guidelines
Woolsey also argues that the district court’s sentencing guideline determination was
based on an erroneous loss calculation and on the unjustified conclusion that the fraud affected
ten or more victims. Woolsey’s trial counsel, however, waived any challenge to the district
court’s guideline calculation by agreeing with that calculation at the hearing. “An attorney
cannot agree in open court with a judge’s proposed course of conduct and then charge the court
with error in following that course.” United States v. Aparco-Centeno, 280 F.3d 1084, 1088 (6th
Cir. 2002) (alterations and internal quotation marks omitted); accord United States v. Olano,
507 U.S. 725, 733–34 (1993).
-5-
Nos. 14-1693/14-2488, United States v. Woolsey
Sensing that his arguments regarding district court’s guideline calculation were doomed,
Woolsey also argues in his reply brief that his trial lawyer’s failure to object denied him effective
assistance of counsel at sentencing. This point is not well taken. To begin with, habeas corpus
review, not direct appeal, “is the preferred mode for raising a claim of ineffective assistance of
counsel.” United States v. Ferguson, 669 F.3d 756, 762 (6th Cir. 2012). More fundamentally,
relief on this issue is foreclosed on direct appeal because it is raised for the first time in a reply
brief. See United States v. Campbell, 279 F.3d 392, 401 (6th Cir. 2002).
III. Conclusion
For the foregoing reasons we affirm the district court’s restitution order and sentencing
decision.
-6-