Tuesday, November 28, 2017

Fraudulent mortgage lending conspiracy convictions affirmed

US v. Raza, et al.:  Four former employees of SunTrust Mortgage in Annadale, Virginia, appealed their wire fraud and conspiracy to commit wire fraud convictions, specifically, the jury instructions on materiality and intent to defraud instructions.  Additionally, the defendants argued that the district court failed to instruct the jury that it had to individually assess the guilt of each of the defendants as to each count.  The Fourth Circuit, finding no errors, affirmed the convictions.

In its reasoning, the Fourth Circuit noted that the defendants’ proposed instruction for the wire fraud offense required proof of five elements that the court tracked in its charge to the jury.  The Fourth Circuit found several similarities between this case and one from the 9th Circuit, wherein it concluded that adopting a subjective test of materiality, as defendants urged here, would “essentially grant blanket absolution to low-level fraudsters because of the widespread sins of the mortgage industry.”  Further, the Fourth Circuit discussed the controlling import of its earlier cases, finding that the correct test for materiality is an objective one, “which measures a misrepresentation’s capacity to influence an objective ‘reasonable lender,’ not a renegade lender with a demonstrated habit of disregarding materially false information.”

As to the intent instruction, the Fourth Circuit found that its earlier decision in Wynn explained how the district court’s instruction in this case was correct, that is, the government had to prove more than an intent to deceive; it also had to prove an intent to harm “in some sense.”

With the last challenge, the defendants claimed that the district court’s instructions allowed the jury to find guilty by association.  During the jury’s three days of deliberations, the jury sent a question to the court to clarify if they found the defendants guilty of the conspiracy, was guilt to be assumed, then, for all other counts, and the district court advised them that no, the jury had to look at each count facing each defendant.  The Fourth Circuit found the instructions and the supplement, as well as the separate verdict forms for each defendant, with the counts listed separately, appropriately gave individual consideration to each count alleged. 

Wednesday, November 15, 2017

Jury instruction challenge fails in sex trafficking appeal

US v. Banker:  In this appeal, the Fourth Circuit heard Banker’s appeal of his convictions for conspiracy to engage in sex trafficking of a minor, sex trafficking of a minor, and enticement of a minor for illegal sexual activity.  Chiefly, he contended that his jury had been instructed improperly on the scienter element of each offense because they require proof that he knew the victim was a minor.  Secondly, he argued the insufficiency of the evidence.  The Fourth Circuit affirmed.

To reach its decision, the Fourth Circuit agreed with the government’s arguments that unpublished opinions from this Circuit and sister circuits have held that the element of age can be proven by either “knowledge” or “reckless disregard,” a position consistent, according to the Fourth Circuit, with the wording and punctuation of the pertinent statutes.  Accordingly, the Fourth Circuit held that the district court did not err in its instructions to the jury as to the scienter elements of the offenses.  Further, the government had to prove only that the victim was a minor, not that the defendant had actual knowledge of that fact. 

With respect to the sufficiency of evidence at trial, the Fourth Circuit found that Banker could not meet his burden to disrupt the jury’s verdict, as testimony from his co-conspirator and victim, as well as “numerous” other pieces of evidence, including Facebook posts, supported a finding that Banker recklessly disregarded the victim’s age.  The evidence at trial, according to the Fourth Circuit, readily satisfied the standard, i.e., supported a rational determination of guilty beyond a reasonable doubt. 

Wednesday, November 01, 2017

Any Materiality Error in Health Care Fraud Prosecution Harmless

US v. Palin: Palin owned an operated a drug testing facility (assisted by her co-defendant, Webb), which used two kinds of tests: a less expensive "quick-cup" test and a more expensive "analyzer" test. They ran a system whereby uninsured patients who paid cash were only given the quick-cup tests, while insured patients were given both tests, with insurers (including Medicare) being billed for both. As a result, insurers were billed for additional and more expensive tests that were not medically necessary. Palin and Webb were convicted after a bench trial of health care fraud and conspiracy. After the Supreme Court's decision in Universal Health Services, they filed a motion for acquittal or a new trial arguing that the case had changed the standard for materiality in such cases and the court had not found that element proven by the Government. The court denied the motion.

On appeal, the Fourth Circuit affirmed Palin and Webb's convictions. Accepting the Government's concession that materiality was an element of health care fraud, the court held that even if the district court overlooked materiality (it's initial opinion convicting Palin and Webb didn't mention it at all), any error was harmless because the record showed that the insurers wouldn't have paid for the more expensive tests had they known they weren't medically necessary. As for Palin and Webb's argument that Universal Health Services require the use of a more stringent materiality standard, the court did not decide whether that was correct, but concluded that the standard was met, anyway. The court distinguished Universal Health Services, where the victim of the fraud knew the requirements for the payments it made were being violated, there was no such evidence in the record of this case.

North Carolina Assault Inflicting Serious Bodily Injury Crime of Violence Under Residual Clause

US v. Thompson: Thompson pleaded guilty to being a felon in possession of a firearm and drug possession with intent to distribute. In the PSR, his offense level was enhanced because he had a prior conviction for a "crime of violence" - North Carolina assault inflicting serious bodily injury ("AISBI"). He was sentenced to 120 months in prison. On appeal, Thompson argued that AISBI was not a crime of violence. The Fourth Circuit held the case in abeyance pending Beckles. Once that case was decided, it ordered additional briefing on whether AISBI was still a crime of violence under the residual clause of the crime of violence definition.

The Fourth Circuit ultimately concluded it was a crime of violence under the residual clause and affirmed Thompson's sentence. In doing so, the court was forced to determine what the Supreme Court's 2015 decision in Johnson meant for Guideline residual clause analysis going forward. The court concluded that Johnson did not overrule the Begay "similar in kind" test the court adopted before Johnson, but it did clarify that the analysis is to be based on "the ordinary case" in both the similar in kind and "degree or risk" assessments. Noting that under state law AISBI involves assaults that are "especially violent and result in the infliction of extremely serious injuries" and therefore had a degree of risk similar to the enumerated offenses in USSG 4B.2. The court rejected Thompson's argument that North Carolina's case law was so broad as to make it impossible to identify the "ordinary case" of AISBI, concluding that it requires actual intent and thus is similar in kind to the "purposeful, violent, and aggressive" offenses enumerated in the Guideline.

26-month CP Sentence Substantively Unreasonable

US v. Zuk: Zuk began collecting and sharing child pornography while in high school, then continued when he began college. As part of his involvement with CP, he corresponded with a 16-year old in Texas who was sexually abusing his 5-year old cousin. Among other things, Zuk had this person produce CP images of the cousin as his specific request. Eventually, Zuk was charged with multiple counts related to CP, including possession, receiving, and distributing. Pursuant to a plea agreement, he pled to one count of possession. Although his advisory Guideline range was 324 to 405 months, his plea capped his statutory maximum at 240 months, with no mandatory minimum. After a two-day sentencing hearing, which included testimony from multiple experts on Zuk's mental issues and potential for treatment, the district court imposed a sentence of time served (26 months) and a lifetime term of supervised release "contingent on his successful completion of [a] residential treatment program."

The Government appealed and the Fourth Circuit vacated Zuk's sentence.

First, the court concluded that the Government could, in fact, appeal the sentence. Zuk waived his right to appeal on any grounds other than ineffective assistance of counsel, which he argued meant that the Government had "implicitly" waived similar rights. However, in this plea agreement the Government explicitly reserved its appeal rights. The court found there was no great asymmetry in this, as the Government gave up a lot (dismissing the other charges, all of which included mandatory minimums higher than the sentence Zuk received). That distinguished this case from one where the plea agreement was silent on the Government's appeal rights.

Second, the court concluded that Zuk's sentence was substantively unreasonable. That was primarily because the district court "focused almost entirely on Zuk's autism spectrum" diagnosis. That was particularly problematic because the record didn't support a conclusion that Zuk's condition caused his criminal behavior (he admitted, when caught, that he knew what he was doing was illegal). That was a legitimate consideration in determining sentence, but couldn't be the driving factor. In addition, Zuk's sentence created serious issues of disparity with similarly situated defendants - including the 16-year old in Texas who got 50 years in state court for his role and the "other members of his online community [who] received sentences of 96 to 222 months' imprisonment." Zuk's sentence was also much lower than the Guidelines recommended for a non-aggravated possession conviction.

WV Aggravated Robbery Requires Use of Force

US v. Salmons: Salmons was convicted of being a felon in possession of a firearm. In the PSR, his offense level was enhanced because he had a prior conviction for a "crime of violence" - West Virginia aggravated robbery. Salmons objected, back in the pre-Beckles days, that his prior didn't involve the use of force and therefore couldn't be a crime of violence. The district court disagreed and denied the objection, calculating Salmons's Guideline range to be 30 to 37 months. The district court imposed a sentence of 12 months and 1 day.

Salmons appealed his sentence, which the Fourth Circuit affirmed. The court held that "aggravated" robbery - which requires strangulation, suffocation, striking, beating, or other violence to the person, or the threat or presentment of firearms or "other deadly weapon or instrumentality whatsoever" qualified as a crime of violence under the force clause. "These are brutal acts," the court concluded. The court found no distinction between this prior and SC strong-arm robbery and federal bank robbery, all of which require "violent force" as defined by the Supreme Court. The court noted that West Virginia distinguishes between regular and aggravated robberies "to expressly delineate the more violent forms of the offense." Furthermore, Salmons couldn't point to any WV case suggesting the offense could be committed by something other than the use of force.