April 23, 2019

Archives for June 17, 2015

Tenth Circuit: Restitution Must Be Based on Actual Losses Suffered by Victims

The Tenth Circuit Court of Appeals issued its opinion in United States v. Howard on Tuesday, April 28, 2015.

Roger Howard pleaded guilty to three counts of wire fraud and one count of money laundering arising in his participation in three mortgage fraud schemes. The district court sentenced Howard to 108 months’ imprisonment and ordered him to pay $8,862,191.18 in restitution. Howard appealed, arguing the district court improperly increased his offense level by miscomputing the loss to the mortgage lenders and awarded restitution without evidence of the victims’ actual losses.

The Tenth Circuit first addressed Howard’s offense level argument. Under the fraud sentencing guideline, the offense level is based on the amount of loss. The district court calculated the loss based on the unpaid portion of the loan and determined it to be $8,862,191.18, which required an offense level of 20 because it was between $7 and $20 million. Defendant disputed the loss calculations, arguing the government’s evidence was insufficient to support $709,588 in losses on eight loans, the court should have reduced the loss amount by $973,935 to account for interest payments, and the court should not have included $313,261 in losses to a downstream noteholder. However, Defendant failed to raise his loss arguments below, and the Tenth Circuit evaluated for plain error. Finding none, the Tenth Circuit affirmed the district court’s offense level calculation.

As to the restitution calculation, Defendant argued the court wrongly computed the total amount due on the loans rather than the harm suffered by individual victims in calculating loss. The Tenth Circuit noted that under the Mandatory Victims Restitution Act, restitution is intended to make victims whole and cannot unjustly enrich them. By calculating restitution based on the amount due on the loans rather than the amount of loss actually suffered by victims, the district court applied an incorrect methodology. The Tenth Circuit remanded for the district court to vacate its restitution award and redetermine restitution based on actual victim losses.

The judgment of the district court was affirmed in part, reversed in part, and remanded for further proceedings.

Tenth Circuit: “Reverse Preemption” Deprived District Court and Tenth Circuit of Subject Matter Jurisdiction

The Tenth Circuit Court of Appeals issued its opinion in Western Insurance Co. v. A & H Insurance Inc. on Friday, April 24, 2015.

Western Insurance is insolvent and being liquidated in Utah state court. The liquidator brought suit against several of Western’s “affiliates” to recover funds Western had transferred to them. The defendants removed the ancillary proceeding to federal court under diversity jurisdiction, and the liquidator sought a remand, which the district court granted. Defendants appealed.

Because insolvent insurers are exempt from federal bankruptcy protection, state law governs insurer insolvency proceedings. After the defendants removed the case to federal court, liquidators argued the McCarran-Ferguson Act barred removal, as it is essentially a “reverse preemption” doctrine. The district court remanded “for the reasons stated on the record.”

The Tenth Circuit first evaluated its jurisdiction and found it could only proceed to entertain the appeal if the remand order was not based on lack of subject matter jurisdiction. In its order, the district court made several contradictory statements regarding its rationale for remand, leaving it unclear whether it relied on the McCarran-Ferguson Act’s “reverse preemption” in its remand order. However, the Tenth Circuit found that the bulk of the district court’s decision focused on the McCarran-Ferguson Act. Because the district court’s remand was based to a fair degree on lack of subject matter jurisdiction, the Tenth Circuit found it lacked jurisdiction to hear the appeal.

The appeal was dismissed.

Tenth Circuit: Mere Possession Not Enough to Support Distribution Charge

The Tenth Circuit Court of Appeals issued its opinion in United States v. Washington on Wednesday, April 22, 2015.

Two men made a car trip to McAlester, Oklahoma, and were arrested after an anonymous tipster alerted the police that their car contained drugs. In a related appeal, the Tenth Circuit found no error in co-defendant Maurice Edwards’ conviction. However, the Tenth Circuit reversed Anthony Washington’s conviction, finding the evidence insufficient to support the charges.

Police recovered roughly 7.5 kilograms of marijuana and 28 to 29 grams of methamphetamine, most of which were in a black duffel bag labeled with Edwards’ name and containing a receipt with Edwards’ signature. Drugs were also found in a red Cold-Eze box, a black bag, and a container for Green Tea Extract. Although both men were in the car with the drugs, mere presence was not enough to form the basis for Washington’s conviction. The prosecution argued that because drugs and scales were in the car, the car smelled strongly of marijuana, aluminum foil was present near Washington’s notebook, and Washington was present when Edwards borrowed the car from his mother, these facts supported an inference that he knew of the drugs and the sale.

The Tenth Circuit analyzed the evidence, and found that although Edwards’ luggage contained fourteen bricks of marijuana, there were no drugs or other incriminating evidence in Washington’s luggage. Further, there was no evidence that Washington could have seen inside Edwards’ duffel or the Cold-Eze box or Green Tea Extract bottle. As to the two scales in the car, the Tenth Circuit found they were not easily visible—one was designed to look like a regular iPhone and the other was in a black box.

The Tenth Circuit next addressed the inference from the strong marijuana smell and the aluminum foil, finding both suggested consumption and not distribution. Washington could have known about the small, personal use quantities of drugs without having knowledge that there were enough drugs in the car to sell. Because he was convicted of possession with intent to distribute or aiding and abetting that offense, mere possession was not enough to support conviction.

The Tenth Circuit addressed what it characterized as misinterpretations of evidence and testimony, and again found they did not support the distribution charge. The district court’s judgment was reversed and remanded with instructions to dismiss the indictment.

Tenth Circuit: Unpublished Opinions, 6/16/2015

On Tuesday, June 16, 2015, the Tenth Circuit Court of Appeals issued two published opinions and three unpublished opinions.

Brooks v. Board of Education Farmington Municipal Schools

United States v. Quoyah

United States v. Gaines

Case summaries are not provided for unpublished opinions. However, published opinions are summarized and provided by Legal Connection.