United States v. David Ball

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS SEP 25 2017
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA, No. 15-10319
Plaintiff-Appellee, D.C. No.
2:13-cr-00018-JCM-GWF-10
v.
DAVID BALL, MEMORANDUM*
Defendant-Appellant.
UNITED STATES OF AMERICA, No. 15-10333
Plaintiff-Appellee, D.C. No.
2:13-cr-00018-JCM-GWF-2
v.
KEITH GREGORY,
Defendant-Appellant.
UNITED STATES OF AMERICA, No. 15-10369
Plaintiff-Appellee, D.C. No.
2:13-cr-00018-JCM-GWF-11
v.
EDITH GILLESPIE,
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Defendant-Appellant.
UNITED STATES OF AMERICA, No. 15-10371
Plaintiff-Appellee, D.C. No.
2:13-cr-00018-JCM-GWF-9
v.
SALVATORE RUVOLO,
Defendant-Appellant.
UNITED STATES OF AMERICA, Nos. 15-10421, 15-10422
Plaintiff-Appellee, D.C. Nos.
2:13-cr-00174-JCM-GWF-1,
v. 2:13-cr-00018-JCM-GWF-1
LEON BENZER,
Defendant-Appellant.
Appeal from the United States District Court
for the District of Nevada
James C. Mahan, District Judge, Presiding
Argued and Submitted July 14, 2017
San Francisco, California
Before: BEA and N.R. SMITH, Circuit Judges, and ROBRENO,** District Judge.
**
The Honorable Eduardo C. Robreno, United States District Judge for
the Eastern District of Pennsylvania, sitting by designation.
2
The five defendants in this consolidated appeal were part of a complicated
criminal conspiracy to take over and defraud Homeowners Associations (“HOAs”)
of condominium developments in the Las Vegas, Nevada area. One of the
defendants, Leon Benzer (“Benzer”), was one of two “masterminds” behind the
scheme, and the other four defendants played important roles in the conspiracy.1
Three defendants appeal their convictions, and three defendants appeal their
sentences.2 We have jurisdiction under 28 U.S.C. § 1291, and we affirm in part
and reverse in part.
1
This scheme had four main parts. First, Benzer and his associates identified
condominium developments to target. These developments usually had
construction defect settlement funds available or needed repair work done.
Second, Benzer recruited people to act as straw purchasers at the targeted
condominium development. These straw purchasers made false statements on
mortgage applications to purchase the condominiums, including falsely stating that
the down payment for the condominium was coming from their savings and
income when in fact that money was coming from Benzer. Benzer paid these
straw purchasers. Third, Benzer recruited “politicians” to run for board of
directors seats at the targeted HOA. These politicians also received cash from
Benzer for their efforts. Benzer and his associates rigged HOA elections to ensure
the election of their chosen politicians to the board of directors. Fourth, after a
majority of an HOA’s board of directors was in Benzer’s control, Benzer and
Nancy Quon (“Quon”), a lawyer who was the other mastermind behind the
scheme, would use that control to make money. Quon’s law firm received
considerable attorney’s fees by representing the HOA boards. For Benzer, the
HOA boards would make contracts with Silver Lining Construction (“Silver
Lining”), Benzer’s company, to perform construction work based on the
construction defect settlement funds that the HOAs had received from prior
litigation. Benzer intended for Silver Lining to acquire the entire value of the
construction defect settlement funds while performing minimal work.
2
Keith Gregory (“Gregory”) appeals both his conviction and sentence.
3
1. Edith Gillespie (“Gillespie”), who was convicted of conspiracy to commit
wire and mail fraud, 18 U.S.C. § 1349, and of wire fraud, 18 U.S.C. § 1343,
appeals her conviction and contends that insufficient evidence supports the jury’s
verdict. Conspiracy to commit mail and wire fraud requires the jury to find “(1) an
agreement to engage in criminal activity, (2) one or more overt acts taken to
implement the agreement, and (3) the requisite intent to commit the substantive
crime.” United States v. Green, 592 F.3d 1057, 1067 (9th Cir. 2010). The
government proved that there was an agreement to engage in criminal activity, and
Gillespie does not challenge that fact in her brief. As for the overt act and intent to
commit wire fraud requirements, the indictment charged Gillespie with committing
the following overt act in furtherance of the conspiracy: acting as “a straw
purchaser at Chateau Versailles HOA[.]” Anthony Wilson (“Wilson”), Benzer’s
realtor and chief recruiter, testified at trial that he met with Gillespie and went over
the details of the scheme, including her planned straw purchase at Chateau
Versailles. Wilson testified that he told her “the property would be in her name,”
but that “Leon [Benzer] would really own the property.” Wilson also testified that
he helped her with the sales contract. Corroborating this testimony, the
government introduced into evidence a chart Wilson created that identified
“Gillespie” as a straw owner at Chateau Versailles. The government introduced
into evidence Gillespie’s mortgage application for the Chateau Versailles unit.
4
This application stated that she did not borrow any portion of the down payment,
but testimony from Wilson established that Benzer had funded the entire down
payment. Therefore, sufficient evidence supports the jury’s verdict on the
conspiracy count.
Wire fraud in violation of 18 U.S.C. § 1343 has three elements: “(1) the
existence of a scheme to defraud; (2) the use of wire, radio, or television to further
the scheme; and (3) a specific intent to defraud.” United States v. Jinian, 725 F.3d
954, 960 (9th Cir. 2013). Gillespie was charged with wire fraud for receiving the
mortgage from a bank to finance her purchase of the Chateau Versailles unit. As
noted above, the government presented sufficient evidence that Gillespie
misrepresented the source of her down payment in the mortgage application. The
loan was funded through a wire transfer. Gillespie’s misrepresentation on the
mortgage application constituted sufficient evidence to convict Gillespie of wire
fraud based on a mortgage fraud theory. See United States v. Lindsey, 850 F.3d
1009, 1013–14 (9th Cir. 2017).
2. Gillespie also contends that the district court abused its discretion when it
denied her motion to dismiss the indictment on the basis of pre-indictment delay.
“[E]xorbitant delay” caused by “fundamentally unfair prosecutorial conduct”
violates the Due Process Clause. Betterman v. Montana, 136 S. Ct. 1609, 1613,
1617 (2016). To establish such a violation, a defendant must show (i) “actual, non-
5
speculative prejudice from delay” and (ii) that “the length of the delay, when
balanced against the reason for the delay . . . offend[s] those fundamental
conceptions of justice which lie at the base of our civil and political institutions.”
United States v. Huntley, 976 F.2d 1287, 1290 (9th Cir. 1992) (internal quotation
marks and citation omitted). To establish prejudice, a defendant “must
demonstrate by definite and non-speculative evidence how the loss of a witness or
evidence is prejudicial to the defendant’s case.” Id.The district court correctly held that Gillespie has not established prejudice.
According to Gillespie, the pre-indictment delay “left witnesses without specific
memories of the documents that were executed by whom.” However, Gillespie
does not point to specific witnesses whose memories decayed because of the
passage of time during the pre-indictment delay, which means the claimed
prejudice is speculative. Therefore, the district court did not abuse its discretion
when it denied Gillespie’s motion to dismiss.3
3
Gillespie has filed a motion to compel the government to supplement the record
on appeal. Gillespie requests that the government produce a report from an
internal investigation into an alleged leak of information that led to the recusal of
the District of Nevada United States Attorney’s Office. We do not allow parties to
supplement the record on appeal “except in extraordinary circumstances[.]”
United States v. Boulware, 558 F.3d 971, 976 (9th Cir. 2009) (citing Lowry v.
Barnhart, 329 F.3d 1019, 1024 (9th Cir. 2003)). Gillespie has not shown an
extraordinary circumstance because she has not shown in her motion why the
report was relevant to her defense or the issues she raises on appeal. Therefore, the
motion is DENIED.
6
3. Keith Gregory (“Gregory”), who was convicted of conspiracy to commit
wire and mail fraud and of wire fraud, appeals his conviction and contends that
there is insufficient evidence to support the verdicts against him.4 Gregory agrees
that Benzer and Benzer’s associates conspired to defraud HOAs and that Gregory’s
actions furthered the conspiracy’s objectives, but contends that he personally
lacked knowledge of the conspiracy and the intent to defraud.
There was sufficient evidence for the jury to determine that Gregory knew
about the takeover scheme and consciously helped facilitate the scheme through
his actions, which included misrepresentations to hide Benzer’s plan. Benzer was
seeking to defraud the Vistana HOA by overcharging the HOA for construction
defect work to be performed by Silver Lining. When Benzer needed immediate
payment from Vistana in the form of a “mobilization fee,” Benzer told Gregory
that “I need to get this [V]istana deposit done over the [next] few days, im [sic] in
real jeopardy of loosing [sic] my building that I worked on for years.” Gregory
then coordinated with Benzer and his associates to set up an emergency meeting of
the Vistana HOA board of directors in September 2007 to award the construction
defect litigation contract to Silver Lining. Gregory, with Benzer and his associates,
4
Gregory filed a motion to extend the time to file his reply brief, citing health
issues experienced by his counsel. Subsequently, Gregory filed a motion to allow
his reply brief to be filed late. We grant Gregory’s motion to extend the time to
file his reply brief and deny as moot his motion to file a late brief.
7
held a “pre-meeting” to script how the emergency board meeting would play out.
Also, as part of this plan, Gregory represented to the Vistana HOA, his client at the
time, that the reason for the emergency action was that Silver Lining had
threatened litigation based on its “right of first refusal” contract. However, the real
reason for the rush was that Benzer urgently needed liquidity to prevent a default
on a large loan. In fact, before the emergency board meeting, Benzer sent an email
to Gregory and the controlled board members at Vistana with an attached invoice
from Silver Lining. This email instructed the recipients: “pls dont [sic] leave the
meeting with out [sic] collecting this.” At the emergency meeting, the Vistana
HOA board awarded the construction defect remediation contract and a $1,300,000
mobilization fee to Silver Lining. Benzer then wrote Gregory a personal check for
$10,000 on September 24, 2007, which Gregory deposited on September 28, 2007.
On October 25, 2007, Gregory cashed a second personal check from Benzer for
$2,000.
Furthermore, Ralph Priola, a close Benzer associate, was asked at trial,
“[W]hich attorneys [did] you work[] with in connection with the HOA takeover
plan?” Mr. Priola responded that he “attended many meetings with Mr. Gregory,
at his office, with Leon [Benzer] and other [HOA] board members.”
Gregory also knew that Benzer was offering free legal services to his
controlled politicians on the HOA boards of directors because Benzer paid Gregory
8
to represent these politicians. In January 2007, Benzer paid Gregory to sue on
behalf of Arnie Myers, a prospective member of the Jasmine HOA board of
directors. In April 2007, Gregory submitted a response to a Nevada regulator on
behalf of the Vistana HOA board president, Steve Wark, who had been a straw
buyer for Benzer. Finally, on October 1, 2007, MaryAnn Watts, who had been
involved in the scheme, visited Gregory’s office and threatened that she would
report Benzer’s scheme to the authorities unless her demands were met.
4. Salvatore Ruvolo (“Ruvolo”), who was convicted of conspiracy to
commit wire and mail fraud and of wire fraud, and Gregory appeal their
convictions and contend that the district court’s comments during the trial showed
bias against defense counsel that amounted to judicial misconduct. Since the
defendants failed to object below, we review the alleged judicial misconduct for
plain error. United States v. Morgan, 376 F.3d 1002, 1006–07 (9th Cir. 2004). To
succeed on this claim, the record must show “actual bias” by the trial judge “or
leave [] the reviewing court with an abiding impression that the judge’s remarks
and questioning of witnesses projected to the jury an appearance of advocacy or
partiality.” United States v. Mostella, 802 F.2d 358, 361–62 (9th Cir. 1986)
(Kennedy, J.) (citation omitted).
Some of Judge James C. Mahan’s conduct towards defense counsel was
unfortunate, and some of Judge Mahan’s comments should have been rephrased to
9
avoid the appearance of partiality. Although the district court’s comments were at
times ill considered, they do not constitute judicial misconduct under plain error
review. Defendants contend that the district court interrupted defense counsel too
often, but some of these interruptions were reasonable attempts to minimize
repetition and save time. Also, some of the district court’s comments were proper
examples of the court limiting the scope of defense counsel’s questioning of
witnesses. Furthermore, the twenty-three instances of alleged misconduct
identified by Ruvolo and Gregory occurred over the course of a fifteen-day jury
trial. We did not reverse a district court when the judge’s comments were
“inconsistent with standards of judicial decorum” and the judge “interrupted and
admonished defense counsel over a hundred times during the course of a week-
long trial.” United States v. Scott, 642 F.3d 791, 799 (9th Cir. 2011).
Also, the district court gave a limiting instruction to the jury “not [to] read
into anything [the judge] may have said or done[.]” In Scott, we stated that such an
instruction can “alleviate any appearance of impartiality the judge’s questioning
may have conveyed.” Id. at 800 (citation omitted).
5. Gregory also appeals his sentence and contends that his sentence was
substantively unreasonable. The district court sentenced Gregory to 120 months’
imprisonment, which was 48 months below his United States Sentencing
10
Guidelines (“Guidelines”)5 range of 168 to 210 months. Gregory nonetheless
claims that he deserved an even lower sentence because his sentence was
“disproportionate” to his role in the conspiracy and other sentences given to co-
conspirators. We review the substantive reasonableness of a sentence for abuse of
discretion. United States v. Autery, 555 F.3d 864, 869–71 (9th Cir. 2009). A
sentence must reflect “rational and meaningful consideration of the factors
enumerated in 18 U.S.C. § 3553(a).” United States v. Ressam, 679 F.3d 1069,
1089 (9th Cir. 2012).
First, Gregory claims that his culpability was a “close question” and that he
deserved a lesser sentence as a result. The sufficiency of the evidence is not a
consideration laid out in 18 U.S.C. § 3553(a). Also, as described above, Gregory’s
claim is contrary to the record.
Second, Gregory claims that his role was “tangential” compared to other
conspirators who received lesser sentences. But the district court concluded that
Gregory was “the linchpin” of the operation. The record shows that Gregory
played a key role in the takeover of two HOAs, Vistana and Sunset Cliffs.
Third, Gregory claims that his sentence fails to reflect the fact that his
inability to practice law is a “severe punishment.” However, Gregory’s 120
5
The 2014 Guidelines Manual was in effect when the defendants in this case were
sentenced. All references to the Guidelines refer to this version of the Guidelines
Manual.
11
months’ sentence could be viewed as a reasonable sentence intended to deter other
attorneys from participating in frauds.
Fourth, the district court applied a two-level enhancement under Guidelines
section 2B1.1(b)(2)(A)(i) because Gregory’s crimes involved “10 or more
victims.” Gregory contends that the enhancement should not have been applied
because there were not ten victims. A victim under the Guidelines is “any person
who sustained . . . [an] actual loss.” U.S.S.G. § 2B1.1. cmt. 1. Actual loss is
defined as pecuniary harm, any harm that is monetary or measureable in money.
See U.S.S.G. §§ 2B1.1. cmt. 3(A)(i), (iii). The Vistana HOA contained 702
housing units. Each housing unit owner was a member of the HOA under Nevada
Law, NEV. REV. STAT. § 116.3101(2), and paid monthly dues to the HOA. Since
these homeowners’ dues were fraudulently diverted to Benzer’s scheme, these
homeowners suffered pecuniary harm and were victims. Thus, the court did not err
when it applied the enhancement for ten or more victims.
Fifth, Gregory claims that his sentence violates the Eighth Amendment. We
generally do not overturn a sentence on Eighth Amendment grounds when the
sentence is within the statutory limit, as was Gregory’s. United States v. Albino,
432 F.3d 937, 938 (9th Cir. 2005) (per curiam). Gregory has not shown that his
sentence is so “grossly disproportionate to the severity of [his] crime[s]” that it
must be overturned. Solem v. Helm, 463 U.S. 277, 306 (1983).
12
6. Benzer pleaded guilty to conspiracy to commit wire and mail fraud, wire
fraud, mail fraud, and tax evasion. The district court sentenced Benzer to 188
months’ imprisonment, which it said was “within the Guidelines range” without
expressly stating the Guidelines range. The Presentence Report (“PSR”) had
calculated Benzer’s Guidelines range based in part on a 24-level enhancement
pursuant to Guidelines section 2B1.1(b)(1)(M) because the loss caused by Benzer’s
crimes exceeded $50,000,000. Benzer disputes that the loss amount caused by his
crimes exceeded $50,000,000. The district court never expressly determined the
loss amount. However, the court appears to have assumed that the loss amount
exceeded $50,000,000 because it appears to have applied the Guidelines
enhancement when it stated that Benzer’s sentence was “within the Guidelines
range.”
Benzer appeals his sentence and contends that the district court erred when it
failed to rule on the loss amount dispute as required by Federal Rule of Criminal
Procedure 32(i)(3)(B) (“Rule 32(i)(3)(B)”). We agree. Rule 32(i)(3)(B) states,
“At sentencing, the court . . . must—for any disputed portion of the presentence
report or other controverted matter—rule on the dispute or determine that a ruling
is unnecessary either because the matter will not affect sentencing, or because the
court will not consider the matter in sentencing.” All rulings under Rule 32 must
be “express” or “explicit.” United States v. Doe, 705 F.3d 1134, 1153 (9th Cir.
13
2013) (quoting United States v. Houston, 217 F.3d 1204, 1208 (9th Cir. 2000)).
Rule 32(i)(3)(B) applies when there is a “specific factual objection” to a
presentence report. United States v. Petri, 731 F.3d 833, 841 (9th Cir. 2013). We
have held that when a defendant challenges the loss amount calculations for
purposes of applying a sentencing enhancement, the defendant raises both “a
factual and legal dispute.” United States v. Berger, 587 F.3d 1038, 1047 (9th Cir.
2009). Plain error review applies because Benzer did not make this claim below.
United States v. Christensen, 732 F.3d 1094, 1101 (9th Cir. 2013). “Under plain-
error review, reversal is permitted only when there is (1) error that is (2) plain, (3)
affects substantial rights, and (4) seriously affects the fairness, integrity, or public
reputation of judicial proceedings.” United States v. Flyer, 633 F.3d 911, 917
(9the Cir. 2011) (citation omitted).
The district court clearly erred when it did not rule on the amount of loss
dispute. After the district court rendered Benzer’s sentence, the government asked
the following question to the court: “Your Honor, just so the record is clear, you’ve
adopted the guidelines proposed in the PSR; is that correct?” The court responded:
“Yes, sir. That’s pretty much, yes. . . . It’s—of course the guidelines are not
binding, but I think they provide some guidance and help to us.” Contrary to the
government’s position, however, the district court’s response does not mean that
14
the court necessarily adopted the loss amount that was stated in the PSR nor that
the court ruled on the loss amount dispute as required by Rule 32.
Additionally, since the district court appears to have applied the Guidelines
section 2B1.1(b)(1)(M) enhancement on the grounds that the loss amount exceeded
$50,000,000 without stating as such or explaining its reasoning, the record is not
sufficiently clear to allow us to review how the district court computed the amount
of loss. See United States v. Emmett, 749 F.3d 817, 821 (9th Cir. 2014).
Benzer has met his “burden of persuading us that his substantial rights were
affected”—that is, he has established “that the probability of a different result is
sufficient to undermine confidence in the outcome of the proceeding.” United
States v. Ameline, 409 F.3d 1073, 1078 (9th Cir. 2005). Benzer, the government,
and the PSR each offered widely divergent loss amounts.
Therefore, we vacate Benzer’s sentence and remand for resentencing on an
open record. In light of this disposition, we need not address Benzer’s other claims
on appeal regarding his sentencing. See United States v. King, 257 F.3d 1013,
1029 (9th Cir. 2001).
7. David Ball (“Ball”), who was convicted of conspiracy to commit wire
and mail fraud and of wire fraud, appeals his sentence of 72 months’
imprisonment. At Ball’s sentencing, the district court emphasized that it was
imposing that sentence in order to avoid disparity with the sentences of Ball’s co-
15
defendants. As the court stated, “Part of the—a large part of what the Court tries
to do is to maintain parity or avoid disparity.” Since we hold that Benzer must be
resentenced, and, when sentencing Ball, the district court emphasized that it was
seeking to maintain parity with other co-defendants, we also vacate Ball’s sentence
and remand for resentencing on an open record. See generally 18 U.S.C. §
3553(a)(6).
8. Benzer also contends that the district court plainly erred when it ordered
him to pay restitution to the Vistana and Park Avenue HOAs.6 The Mandatory
Victims Restitution Act (“MVRA”) provides that, when sentencing a defendant for
“any offense committed by fraud or deceit[,]” the district court shall order the
defendant to make restitution to the victim of the offense. 18 U.S.C. §
3663A(c)(1)(A)(ii). Benzer claims that the Vistana and Park Avenue HOAs were
not victims under the MVRA. A victim under the MVRA is any 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.
18 U.S.C. § 3663A(a)(2). Benzer contends that the Vistana and Park Avenue
HOAs and board members included co-conspirators, and a co-conspirator cannot
6
Gregory was also ordered to pay restitution to the Vistana and Park Avenue
HOAs and joins Benzer’s claim.
16
recover restitution for crimes in which he participates. However, the HOAs
became victims when the conspirators made their way onto the HOAs’ boards of
directors through fraud and when the conspirators misappropriated HOA funds to
enrich Benzer and his associates. It was not plain error for the district court to
conclude that the HOAs were victims even though they had been infiltrated by
Benzer’s associates.
Benzer also claims that the district court erred because it did not explain how
it calculated the amount of restitution owed. The restitution order itself does not
explain why Benzer was ordered to pay $12,228,913.40 in restitution to the
Vistana and Park Avenue HOAs. However, at sentencing, the district court stated
that the restitution amount was “set out at Page 72” of the PSR. Page 72 of the
PSR lists the amount of restitution owed based on what the government reported in
its sentencing memorandum. The government calculated those numbers using trial
exhibits. Thus, the district court did not commit plain error when it selected the
restitution amounts.
Third, Benzer claims that the government did not prove causation.
Restitution may be awarded for losses only if “the defendant’s conduct was an
actual and proximate cause” of the victim’s losses. United States v. Swor, 728
F.3d 971, 974 (9th Cir. 2013). According to Benzer, he did not proximately cause
the Vistana and Park Avenue HOAs to pay legal fees to Quon’s law firm and to
17
Barry Levinson, who was another Benzer-affiliated attorney, because those
attorneys “provided the legal services and billed the respective HOAs.” However,
Benzer admitted in his plea agreement that the conspiracy specifically intended the
HOAs to hire Quon’s law firm and Mr. Levinson. Therefore, it was not plain error
for the district court to conclude that the attorney’s fees were a foreseeable loss the
HOAs would suffer and were caused by Benzer’s conduct in running the
conspiracy.
Finally, Benzer claims that the district court plainly erred when it ordered
him to pay restitution of $1,165,186.81 to the United States Treasury based on his
tax evasion counts because, according to Benzer, “there was insufficient
documentation of taxes owed, if any.” However, that figure was the amount of tax
liability the indictment charged Benzer with attempting to evade. The PSR
selected that same amount as restitution owed to the United States Treasury.
Benzer pleaded guilty to tax evasion and did not challenge below the fact that he
owed $1,165,186.81 in taxes to the United States Treasury. Therefore, the district
court did not plainly err when it selected that tax liability amount in the restitution
order.
9. The criminal forfeiture allegations that were originally included in the
indictment are dismissed as the government abandoned them. See generally FED.
18
R. CRIM. P. 48(b); Coffin v. United States, 156 U.S. 432, 443 (1895); United States
v. Samango, 607 F.2d 877, 884 (9th Cir. 1979).
AFFIRMED as to the convictions of Gillespie, Gregory, and Ruvolo,
Gregory’s sentence, and the restitution order, REVERSED AND
REMANDED as to the sentences of Benzer and Ball.
19