Appeal from the United States District Court for the Central District of California. D.C. No. 2:07-cr-00755-DDP-2. Dean D. Pregerson, District Judge, Presiding.
The opinion of the court was delivered by: IKUTAá, Circuit Judge
Argued and Submitted December 6, 2012
Before: Marsha S. Berzon, Sandra S. Ikuta, and Jacqueline H. Nguyen, Circuit Judges. Opinion by Judge Ikuta; Partial Concurrence and Partial Dissent by Judge Berzon. BERZON, Circuit Judge, concurring in part and dissenting in part.
The panel affirmed convictions for money laundering, bank fraud, loan fraud, and conspiracy to commit loan and bank fraud stemming from a Los Angeles-based scheme to defraud mortgage lenders.
Affirming the conspiracy conviction, the panel held that the government presented more than sufficient evidence that the defendant knew the objectives of the fraudulent scheme.
Affirming the loan fraud convictions, the panel held that a jury could reasonably (1) conclude that the defendant knew that his false statements made to obtain a loan would ultimately influence a federally insured bank, and (2) find all the necessary elements to impose Pinkerton liability.
Affirming the bank fraud conviction, the panel held that there was ample evidence that the defendant was well aware of the scheme's fraudulent objective and that he intentionally furthered the fraud.
Because the money laundering convictions do not raise a merger problem with respect to either the loan fraud or bank fraud convictions, the panel defined "proceeds" to mean "gross receipts," and concluded that the "referral fees" the defendant received from Yoakum Drive and Benedict Canyon Drive transactions may be viewed as "proceeds" of the loan and bank fraud. The panel on that basis rejected the defendant's argument that the government presented insufficient evidence that his money laundering charges were based on "separate and distinct" activity from the Yoakum and Benedict transactions. The panel therefore affirmed the money laundering convictions under 18 U.S.C. § 1956(a)(1)(A)(i).
Concurring in the affirmance of the conspiracy, loan fraud, and bank fraud convictions, Judge Berzoná wrote separately to express concern that some of the majority's quotations could be read to suggest that a defendant may be convicted without participating in a conspiracy, if he simply has knowledge of the conspiracy and a "connection" to its participants. She dissented from the affirmance of the money laundering convictions because the government introduced no evidence that the Benedict- and Yoakum-related commission payments were made with profits, as opposed to gross revenues, of the overall bank fraud scheme.
Kyle Grasso appeals his convictions for money laundering, bank fraud, loan fraud, and conspiracy to commit loan and bank fraud, stemming from a Los Angeles-based scheme to defraud mortgage lenders. We conclude that the evidence adduced at trial, taken in the light most favorable to the government, was adequate to enable a rational trier of fact to find the essential elements of each conviction. See United States v. Nevils, 598 F.3d 1158, 1163-64 (9th Cir. 2010) (en banc). Accordingly, we affirm on all counts.
We have already explained how this scheme operated in United States v. Rizk, 660 F.3d 1125 (9th Cir. 2011) (affirming conviction of Lila Rizk, a real estate appraiser in the scheme and one of Grasso's co-defendants). Therefore, we provide only a brief overview of the scheme before detailing the particular aspects relevant to Grasso's appeal.
The scheme, as crafted by Mark Abrams, a mortgage broker, and Charles Elliott Fitzgerald, a real estate developer, took advantage of the real estate frenzy of the early 2000s. The conspirators would enter into a purchase agreement for a home in an exclusive Westside Los Angeles community, and then obtain a loan for significantly more than the sale price, pocketing the extra money. For this scheme to work, the conspirators had to exert control over multiple aspects of each real estate transaction. Among other things, the sellers and agents had to keep the true purchase price of the home confidential; the appraisal reports had to show the falsely inflated values of the homes; the title and escrow companies had to prepare two sets of documents, one showing the actual purchase price (for the seller) and one showing the inflated purchase price (for the lender); and finally the Multiple Listing Service (MLS) had to show the falsely inflated sales price of the homes. Abrams and Fitzgerald coordinated the efforts of a range of colleagues to make this conspiracy work. Abrams relied on Jamieson Matykowski, one of his employees, and Richard Maize, who controlled Americorp Funding, among others. Americorp, a mortgage broker, would send loan packages to lending agents for review and approval. The conspirators generally targeted banks that did not require their lending agents to use rigorous documentation and approval standards. Over the course of the scheme, the conspirators conducted roughly 80 fraudulent transactions. The banks that ultimately financed the loans that their lending agents approved, including Lehman Brothers (through its lending agent, Aurora Loan Services), GreenPoint Bank (through its lending agent, GreenPoint Mortgage), and RBC Mortgage Company, together lost at least $46 million in the Abrams-Fitzgerald conspiracy.
Grasso was one of Abrams and Fitzgerald's recruits for this scheme. Grasso and his partner Joseph Babajian were successful real estate agents in the same affluent area that Abrams and Fitzgerald targeted, Westside Los Angeles. From 2000 to January 2001, Grasso and Babajian were the top-producing real estate agents at Fred Sands Realtors in Beverly Hills. Grasso and Babajian subsequently left Fred Sands and became affiliated with Prudential California Realty. Prudential compensated Grasso and Babajian for their move by conveying an ownership interest in several of Prudential's subsidiaries to Grasso and Babajian's wholly owned company, FSC Ventures. One of these subsidiaries was Cal Title, a title insurance company whose lax approval process would become instrumental to the co-conspirators' operation.
At trial, the government presented evidence to prove that Grasso became involved in the Abrams-Fitzgerald scheme some time in 2000 and worked with them through at least late 2002. According to the government, Grasso participated primarily by identifying houses to be included in the scheme, ensuring that the seller would keep the sales price confidential, managing the information reported in the MLS listings, and obtaining the title insurance and escrow documents needed for the conspiracy through his access to Cal Title. The government's case against Grasso rested heavily on evidence relating to six real estate transactions, which we describe in the order they occurred.
We begin with Grasso's purchase of a property on Claridge Drive, Beverly Hills for his personal use. In July 2000, after Grasso separated from his wife, he was in the market for his own home, and focused on the Claridge Drive property. According to the evidence adduced at trial, Abrams thought that Grasso's skills and contacts were useful in furthering the scheme and wanted to "ingratiate" himself with Grasso to induce him to continue helping with the fraud. Therefore, Abrams offered to help Grasso purchase the Claridge Drive property by following the same basic blueprint used for other transactions in the scheme. Under the plan, Abrams would front Grasso the money for a down payment, Grasso would obtain an inflated loan, and then use the extra funds to pay Abrams back. According to Abrams, Grasso knew how the scheme worked and was a willing participant. Matykowski confirmed that Grasso acknowledged he was "going to do one of our deals" by inflating the purchase price of the Claridge Drive property "to forego putting a large down payment down."
The plan moved forward over the summer. Grasso entered into a purchase agreement with Jose Menendez, the owner of the Claridge Drive property, to purchase the house for $890,000.*fn2 In early September 2000, Grasso submitted two fraudulent loan applications to Americorp Funding, one seeking a first mortgage of $746,250, and the second seeking a home equity credit line of $149,200. Both applications stated that the purchase price of the home was $995,000, and the first application stated that Grasso was making a down payment of some $120,000. Americorp submitted Grasso's application to GreenPoint Mortgage. In reviewing the applications, GreenPoint Mortgage identified a red flag: Grasso already owned a home that had a higher value than the Claridge Drive property, which raised the inference that Grasso planned to use the Claridge Drive property as a rental. In response to GreenPoint Mortgage's inquiry on this point, Grasso falsely stated that he and his wife intended to move into the home. Satisfied with that explanation, GreenPoint Mortgage approved Grasso's loans. As was the standard procedure for all loans that GreenPoint Mortgage originated at that time, GreenPoint Bank funded the loan.
At closing, Abrams's in-house escrow company prepared fraudulent documents reflecting a purchase price of $995,000, but sent a settlement statement to Menendez stating the correct $890,000 sales price.
At the same time he was purchasing the Claridge Drive property, from August to á September 2000, Grasso sought Abrams and Fitzgerald's help with a client's property on Alta Drive in Beverly Hills. The property had been on the market for nearly a year, and the seller, Vigen Shaghzo, was putting pressure on Grasso to sell it. Abrams and Fitzgerald agreed to buy the Alta Drive property if they could work one of their fraudulent deals.
The Alta Drive transaction unfolded as follows. In early August 2000, Abrams offered $2,000,000 to Shaghzo in the name of Abrams's father, a straw purchaser. According to Abrams, Grasso knew that Abrams's father was not actually purchasing the home. After Shaghzo accepted the $2,000,000 offer, Grasso withdrew the $2,050,000 MLS listing for the house and relisted it for $4,495,000. This false relisting caused a problem, however: when Shaghzo found out about it, he ordered Grasso to correct the misinformation, and Grasso agreed to do so. Abrams and Fitzgerald then submitted a fraudulent loan application for an inflated purchase price of $4,395,000 to Aurora Loan Services for approval. A loan for the full amount was funded by Lehman Brothers. After the sale closed in September 2000, and the escrow company disbursed the loan proceeds from Lehman Brothers, Abrams paid Grasso's firm $46,436 in commissions. Several months later, MLS reported the property sold at its true price of $2,000,000. To prevent Aurora Loan Services and Lehman Brothers from seeing this accurate listing, Grasso again arranged to change the MLS listing to show a sales price of $4,495,000.
In January 2001, after Grasso became affiliated with Prudential and obtained an indirect interest in Cal Title, Abrams and Fitzgerald began using Cal Title to provide title insurance for their purchases. Cal Title was willing to prepare two title insurance policies, one with the inflated purchase price (which would be provided to the lender) and the second with the actual purchase price (that the seller could review). Although Abrams and Fitzgerald attempted to use other title companies for their transactions, these companies soon declined to work with them, and Abrams and Fitzgerald began using Cal Title exclusively, whether or not Grasso or Babajian was acting as the agent for the transaction.
Sometime in 2001, Grasso called Matykowski to complain that Abrams and Fitzgerald had been using Cal Title for transactions where he was not the agent. Grasso was agitated about this development, and forbade the Abrams-Fitzgerald team from using Cal Title unless Grasso and Babajian were in the deal. Abrams later told Matkyowski that he agreed to pay Grasso and Babajian—via Prudential—a commission on transactions where Cal Title was involved, even when they were not serving as agents.
From approximately February 2001 through summer 2002, Grasso represented Abrams and Fitzgerald in their acquisition of four additional properties relevant to this appeal. For a property on Mandeville Canyon Road, Beverly Hills, Grasso submitted several unsuccessful purchase offers using the names of different straw buyers, before submitting a third, successful offer on behalf of "Jamieson Matykowski and/or assignee." While the transaction was in escrow, Matykowski purportedly assigned the purchase agreement to yet another straw buyer. As in the Alta Drive transaction, the straw buyer was not the true purchaser and in fact did not know the conspirators had used his name. In addition to multiple straw purchasers, the conspirators also used two different escrow companies: the original escrow company resigned after determining it was uncomfortable with the transaction, and was replaced by Cal Title. FSC Ventures (Grasso and Babajian's wholly owned company) earned $19,231 in commissions for the deal.
Grasso also assisted the conspirators in purchasing a property on Claircrest Drive in Beverly Hills. According to Matykowski, Grasso was aware that the conspirators were using a straw purchaser for this property, as well. At one point, Matykowski testified, he was in Grasso's office, and jokingly told Grasso, "Turn your back for a second I'm going to sign this contract." Matykowski then forged the name "Hugo Wendt" on the purchase offer. Grasso treated this forgery as "just normal." Once the seller accepted the offer for the Claircrest Drive property, Grasso asked the escrow officer to assign the purchase agreement to a different straw purchaser. Abrams and Fitzgerald paid FSC Ventures $21,490 in commissions for this transaction when it closed.
In summer 2002, Abrams and Fitzgerald purchased two more Beverly Hills properties, one on Yoakum Drive and the other on Benedict Canyon Drive. Although they did not use either Grasso or Babajian as their real estate agent, they did use Cal Title. Consistent with Abrams's prior agreement, Abrams paid Prudential (which in turn paid Grasso and Babajian through FSC Ventures) a three percent commission for each transaction, which together amounted to $50,833. Abrams made these payments separately after the deals closed and the bank had already wire transferred the loan proceeds; the payments did not go through escrow or show up on the settlement statements for the transactions. Abrams and Grasso characterized these payments as "referral fees."
In August 2007, a grand jury indicted Grasso for one count of conspiracy to commit bank fraud and loan fraud, in violation of 18 U.S.C. § 371.*fn3 This charge named Grasso and three co-defendants, including Rizk and Babajian, along with six other co-conspirators, including Abrams and Fitzgerald. Listing nine transactions as overt acts, the government alleged that the co-conspirators devised and executed a scheme to commit bank fraud against Lehman Brothers, GreenPoint Bank, and other federally-insured institutions between 2000 and 2003, and to commit loan fraud by submitting false statements, reports, and valuations in connection with the listed transactions.*fn4
The indictment also charged Grasso with one count of bank fraud and aiding and abetting, in violation of 18 U.S.C. §§ 2,*fn5 1344(1);*fn6 seventeen counts of loan fraud and aiding and abetting, in violation of 18 U.S.C. §§ 2, 1014;*fn7 and three counts of money laundering and aiding and abetting, in violation of 18 U.S.C. §§ 2, 1956(a)(1).*fn8 The bank fraud charge named all four defendants and rested on the same allegations as the conspiracy charge. The money laundering and loan fraud charges related to specific real estate transactions.*fn9 The three money laundering charges related to individual "referral" payments that Abrams made to Prudential after the Yoakum Drive and Benedict Canyon Drive transactions.
After a jury trial, Grasso was convicted on all conspiracy, bank fraud, and money laundering charges, and on the loan fraud charges relating to the Claridge Drive, Alta Drive, Mandeville Canyon Road, and Claircrest Drive transactions. Grasso moved for acquittal on all charges or in the alternative for a new trial. The district court denied these motions, rejecting his sufficiency of the evidence ...