Case o' The Week: Stretch on Loss Gets Sentence Tossed - Gainza and Guideline Loss Calculations for Identity and ATM Schemes

 "The lesson in this case is that trying is not the same as succeeding."

United States v. Gainza, 2020 WL 7222136, *1 (9th Cir. Dec. 8, 2020), decision available here.

Players: Decision by Judge McKeown, joined by Judge Nguyen and visiting DJ Vitaliano. Nice win for ED AFPD David Porter.  

Facts: Gainza and his co-D set up “skimmers” in ATMs, along with hidden cameras to capture pin numbers. Id. at *1. Though over eight hundred people used these compromised ATMs, only 37 reported fraudulent access. Id. at *2.

  Gainza and his co-D were arrested, charged with conspiracy to possess at least fifteen counterfeit access devices, bank fraud, access device fraud, possession of device-making equipment, and aggravated identity theft. Id. They plead guilty to all charges.

  Over defense objection, at sentencing the district court calculated guideline loss by multiplying the number of people that visited the ATMs by $500 (resulting in loss amounts of several hundred thousand dollars). Id. The pair were hit with a twelve offense level by virtue of these loss amounts, and sentenced to four and five years. Id.

 Issue(s): “The issue on appeal . . . is how much loss the scheme caused.” Id. at *1. “[T]he Guidelines recommend that a minimum of $500 in loss be applied for each account number that Gainza and Gabriele-Plage obtained. The pivotal question, then, is how many account numbers [they] obtained.” Id. at *3.

Held: “In calculating the loss amount, the district court concluded that Gainza and Gabriele-Plage obtained account information for each person who visited the ATMs while the cameras and skimmers were installed. But while there is evidence that Gainza and Gabriele-Plage hoped to obtain account information for each ATM customer, there is insufficient evidence that they succeeded in doing so. The district court's conclusion to the contrary was clear error, so we promptly vacated the sentences and remanded the cases for resentencing.” Id. at *1.

  “The government offered insufficient evidence that the defendants obtained or used 852 account numbers. And while the government showed how many people used the ATMs while the skimmers were installed, it did not provide any evidence of the skimmer success rate, either for these transactions or even for hypothetical transactions. Without this evidence, the record cannot support a finding that Gainza and Gabriele-Plage obtained information ‘that can be used to initiate a transfer of funds’ from each ATM customer. 18 U.S.C. § 1029(e)(1). And while it is true that the sentencing judge ‘need only make a reasonable estimate of the loss,’ U.S.S.G. § 2B1.1 cmt. n.3(C), that estimate must be based on facts, not conjecture.” Id. at *3.

 Of Note: The Ninth had decided the sentences were erroneous several months before the opinion was ready. To its great credit, way back in October the panel issued an order “vacating the sentences and remanding for expeditious sentencing.” Id. at *1 & n.1. The happy result? Both defendants were sentenced to time served, long before this opinion was even issued. Id. This is an admirable approach (particularly in the era of COVID): would be nice to see these expedited orders more often, in defense sentencing wins.

 How to Use: Note an important caveat: Judge McKeown doesn’t say the government couldn’t prove possession of cards or account numbers – just that it failed to do so here. She works through cases where the government met that burden, where defendants had spreadsheets with credit card numbers, possessed stolen cards, or used account numbers. Id. at *3. Very fact-based stuff, making Gainza an important Guidelines read.                                            

For Further Reading: Who will get the COVID vaccines, and when? In a courageous letter, Oregon Chief D.J. Hernandez argued that criminal defendants should get a shot (pun intended). See article here. 

  California is deciding vaccine schedules now. Incarcerated folks should be in Phase 1b, before the judiciary. See OpEd here.  

 

WC Fields quote from https://www.quotemaster.org/trying+and+succeeding

Image of COVID vaccine from https://www.usatoday.com/story/news/health/2020/12/07/covid-vaccine-pfizer-board-member-disagrees-us-distribution-plan/3860363001/ 

Steven Kalar, Federal Public Defender N.D. Cal. Website at www.ndcalfpd.org

 

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Case o' The Week: Show Me the Money - Yeung and Restitution Orders

There's "good enough for government work." 

And there is, sadly, "good enough for guideline calculations." See generally USSG §2B1.1(b)(1) comment. n.3. 

But as Judge Ikuta explains in a great new decision, "close enough" doesn't cut it when it comes to restitution orders. United States v. Judy Yeung, 2012 WL 432289 (9th Cir. Feb. 13, 2012), decision available here.

Players: Decision by Judge Ikuta. Laudable victory for ND Cal CJA Panel Attorney Martha Boersch.   

Facts: Yeung was convicted of mortgage fraud. Id. at *1. The schemes involved false info on mortgage applications, and straw buyers who ultimately defaulted on the loans. Id. at *1-*2.

After trial the district court held evidentiary hearings on restitution. Government witnesses did not identify the details of the home-sale transactions after default. Id. The court ordered restitution, using the same loss figures as it had for the guideline calculations. Id. at *3-*4.  The total restitution order was over $1.3 million – reflecting the government’s calculations of the outstanding principal balance of the loans minus proceeds recovered from the sale of the collateral (the homes). Id. at *3.

The restitution order did not make a finding of the value of the loan at the point the secondary-purchaser victim acquired it. Id. at *6. The order also did not make findings of the value of the property at the time the victim took possession. Id. at *7.

Issue(s): “On appeal, Yeung argues that the district court erred in all restitution orders.” Id. at *4.

Held: “First, the district court did not make a finding that [one of the secondary-market loan purchasers] paid an amount equal to the unpaid principal balance of the loans when purchasing the loans, and the government witness acknowledged that she did not have any information on that point.” Id. at *6. “In the absence of any evidence as to value of the loans at the time the victim acquired them, we cannot conclude that the district court’s restitutionary award was free from error.” Id. at *6.

 [In addition], “the court cannot rely on the subsequent sales price of the real property unless it provides reasons why that sales price reflects the value of the real property on the date [the property buyer] took control of the property.” Id. at *7. “Because the district court did not provide reasoning to explain its determination of loss for purposes of § 3663(b)(1)(B), and because the district court did not determine the value of the collateral at the time [the victim-buyer] took title, we must remand for the district court to recalculate and provide its reasoning for this award.” Id. at *8 (emphasis added).

Of Note: This is a big defense win, with a remand on the restitution calculations. Does this also mean that the guideline calculations – based on the same loss figures – were wrong?

   Nope. Id. at *7.

  As Judge Ikuta explains, an estimate of loss is appropriate under the Guidelines. For the guideline calculations (in contrast to restitution), intended loss is fair game, as is gain realized by the defendant. Id.; see also USSG §2B1.1(b)(1) comment. n.3

This is often a difficult concept for clients (and for many of us attorneys, to be honest): broad estimates of guideline loss are OK for sentencing, even if the restitution order is lower than these guideline-loss figures. Yeung is a good teaching tool to explain this counterintuitive concept.

How to Use: If you have a mortgage fraud case, sharpen your pencil, don your green eyeshade, and study Judge Ikuta’s restitution instructions in Yeung. Id. at *5-*6. She provides a step-by-step guide on calculating restitution in these daunting cases, explaining what to do when the ultimate victim bought the loan in the secondary market. Id. at *5. It is the clearest explanation around of a very complicated process: the decision takes pains to demand considerable accuracy in determining these restitution orders. Id. at *5. 

It is worth bearing in mind that while our mortgage fraud clients admittedly aren’t angels, no one thinks that these secondary-market firms are saints. Judge Ikuta is careful in Yeung to lay out a process that avoids any restitution windfall to the “victim” secondary loan markets.
                     
For Further Reading: Wow. When we blogged the tremendous Lopez-Avila prosecutorial-misconduct decision we urged a quick read, before the Az. USAO got the AUSA’s name removed. See previous blog here ("for further reading.")

No need to rush, now. In a remarkable order, Judge Bea flatly denied the government’s motion to redact the AUSA’s name. Judge Bea observes, “If federal prosecutors receive public credit for their good works—as they should—they should not be able to hide behind the shield of anonymity when they make serious mistakes.” See order here.

If you’ve ever been victim of prosecutorial misconduct, trust us – you want to read Judge's Bea order.



Image of the Honorable Sandra Ikuta from http://www.bmi.com/photos/entry/551405

Image of an accountant from http://phillygabe-n-terisa.blogspot.com/2011/11/things-im-thankful-for-day-12.html


Steven Kalar, Senior Litigator N.D. Cal FPD. Website at www.ndcalfpd.org


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Case o' The Week: Good Dictum on Victims, Armstead and 2B1.1 Victim Enhancements

Judge Tashima writes for a very good panel, and gives us welcome new rules on identifying "victims" for fraud and theft cases under USSG § 2B1.1. United States v. Armstead, __ F.3d __, 2008 WL 4570608 (9th Cir. Oct. 15, 2008), decision available here.

Players: Decision by Judge Tashima (left), joined by Judges Reinhardt and McKeown

Facts: Armstead lead a bank fraud conspiracy, doling out “packets” of stolen identity information to co-conspirators. Id. at *1. Using these packets, the crew would cash stolen checks, create credit accounts, and buy merchandise. Id. Armstead got 50% of the take, with the loss amount topping $400,000. Id. at *2.

After losing at trial, Armstead received a guideline sentence of 210 months. Id. That sentence included a four-level bump for over fifty victims. Id. at *6; see also USSG § 2B1.1(b)(2). Those victims included sixteen banks and victims of retail fraud, together with an unstated number of individuals and companies whose personal information was stolen by the conspirators. Id.

Issue(s): “Armstead contends that the district court erred by counting as victims those individuals and companies whose losses were not included in the loss calculation.” Id.

Held: “We agree.” Id. “While other persons conceivably may have sustained pecuniary harm in the form of time and money spent procuring new identification and credit cards, opening new bank accounts, and mending their credit, those losses were not included in the calculated loss amount. Therefore, the district court erred by including those individuals in the number-of-victim calculations.” Id.

Of Note: As Arizona Defender Jon Sands noted in his blog post this week, in Armstead the Ninth joins the Second and Tenth Circuits with a rule on “victims” for guideline sentencing: a “victim” for Guideline § 2B1.1(b)(1) is a person or business that suffered pecuniary harm that is included in the actual loss calculations. Id. at *7.

What about individual victims who are immediately reimbursed for their losses by their banks? With another good rule, the Ninth joins the Fifth and Sixth Circuits: “A loss that is reimbursed immediately does not amount to a pecuniary harm because the ultimate loss cannot be measured in monetary terms. If, however, the reimbursement takes a longer period of time and requires a great deal of effort on the part of the individual, it is conceivable that the individual may suffer additional pecuniary harm that is not fully reimbursed. If that loss amount is included in the loss calculation, the victim associated with the loss should be included in the victim calculation.” Id. at *8.

How to Use: The “number of victims” bump is a big one: in this case, it added four offense levels. What’s the key to counting “victims” for this dangerous enhancement? Start with the loss calculation, explains the Court. Id. at *9. Judge Tashima goes to considerable lengths to distinguish an Eleventh Circuit case (Lee) and to emphasize that identifying victims begins with calculating loss. Id.

A court should analyze and quantify pecuniary harm when making the loss calculation, not when determining the number of victims. If a person suffered pecuniary harm beyond the amount by which the person was reimbursed, then that amount should be included in the loss calculation. Once a loss amount is included in the loss calculation, then the person associated with that loss should also be included in the victim calculation. If the temporary loss results in no additional pecuniary harm, then there is nothing to include in the loss calculation and thus no additional victim in the victim calculation.

Id. at *9.

For Further Reading: For the Party Line on calculating loss, the Sentencing Commission has a training manual available here. For a discussion on the developing circuit split on the meaning of “victim,” visit a Sentencing Law and Policy guest post here

For some of the – unfortunate – facts of the Armstead case itself, visit a newspaper article here.



Picture of the Honorable A. Wallace Tashima from http://www.downtown-los-angeles-jacl.org/us-supreme-court.html

Steven Kalar, Senior Litigator N.D. Cal. FPD. Website at www.ndcalfpd.org

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