Opinion
CASE NO. 8:08-CR-441-T-17MAP.
May 7, 2010
ORDER
This cause is before the Court on:
Dkt. 131 Notice of Filing Statement of Stipulated and Disputed Facts
Dkt. 141 Memorandum of Movants
Dkt. 143 Response of Defendant Coon
Dkt. 144 Evidentiary Hearing Brief of USA
Dkt. 152 Notice of Filing — Report Concerning Victim Notification
Dkt. 153 Request for Judicial Notice
Dkt. 162 Movants' Response to Report Concerning Victim Notification
Dkt. 179 Motion to Strike
Dkt. 183 Amended Exhibit List — Government
Dkt. 185 Fourth Amended Exhibit List — Movants
Dkt. 194 Transcript (12/7/2009)
Dkt. 195 Transcript (12/8/2009)
Dkt. 197 Transcript (12/9/2009)
Dkt. 198 Transcript (12/10/2009)
Dkt. 199 Transcript (12/21/2009)
Dkt. 200 Transcript (12/28/2009)
Dkt. 207 Request for Judicial Notice
Dkt. 208 Movants' Final Argument on Entitlement to Restitution
Dkt. 209 Coast Bank Borrowers' Appendix to Final Argument
Dkt. 210 Memorandum of Defendant Coon Regarding Investors' Entitlement to Restitution
Dkt. 211 United States' Post-Evidentiary Hearing Brief and Proposed Findings of Fact and Conclusions of Law
Dkt. 212 Movants' Rebuttal Argument on Entitlement to Restitution
Dkt. 213 Movants' Appendix
Dkt. 214 Movants' Appendix
Dkt. 215 Movants' Appendix
Dkt. 216 Movants' Appendix
Dkt. 217 Movants' Appendix
Dkt. 218 Movants' Appendix
Dkt. 219 Movants' Appendix
Dkt. 220 Movants' Appendix
Dkt. 221 Movants' Appendix
Dkt. 222 Request for Judicial Notice
The Court conducted an evidentiary hearing in this case on December 7, 8, 9, 10, 21 and 28, 2009. By stipulation, the evidentiary hearing was limited to the issue of whether Movants, Coast Bank Borrowers, are entitled to restitution from Defendant Coon.
Movants, Coast Bank Borrowers, seek restitution for Movants' losses in connection with Movants' purchases of lot-home packages, which were financed with construction loans from Coast Bank.
I. Evidentiary Issues A. Dkt. 153 Request for Judicial Notice
Movants Coast Bank Borrowers request that the Court take judicial notice of the mortgage foreclosure complaint filed in Charlotte County Circuit Court by First Bank, successor to Coast Bank, against Movant Janis Stewart, pursuant to Fed.R.Ev. 201(b)(2). The Court previously deferred ruling (Dkt. 160).
A judicially noticed fact must be one not subject to reasonable dispute in that it is either: 1) generally known in the territorial jurisdiction of the trial court; or 2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned. Fed.R.Ev. 201(b). The effect of taking judicial notice is to preclude a party from introducing contrary evidence, and, in effect, directing a verdict against that party as to the fact noticed.
A court may take judicial notice of a document filed in another court "not for the truth of the matters asserted in the other litigation, but rather to establish the fact of such litigation and related filings."U.S. v. Jones, 29 F.3d 1549 (11th Cir. 1994) (citing Liberty Mutual Ins. Co. v. Rotches Pork Packers, Inc., 969 F.2d 1384, 1388-89 (2d Cir. 1992).
The Court grants the Request for Judicial Notice for the limited purpose of establishing that a mortgage foreclosure complaint was filed against Movant Janis Stewart in Charlotte County Circuit Court by First Bank, successor to Coast Bank.
B. Dkt. 179 Motion to Strike
On December 28, 2009, Defendant Coon made an oral motion to strike the testimony of Movants' expert witness Dennis Black. Defendant Coon has withdrawn the motion to strike (Dkt. 210, p. 2). The Court denies the motion to strike as moot.
C. Dkt. 207 Request for Judicial Notice Movants' Exhibits 74-78
Construction Compliance, Inc. was a builder who participated in the program offering qualified buyers lot-house packages with a fixed price of 90 percent of the appraised value and with no money down. (Dkt. 131, Ex. A, p. 2).
Movants, Coast Bank Borrowers, request that the Court take judicial notice of the following documents filed in the bankruptcy proceeding of Construction Compliance, Inc. ("CCI"), Case No. 8:07-BK-02650-CPM, pursuant to Fed.R.Ev. 201(b)(2): 1) Monthly Operating Reports of Debtor from 4/3/2007 to 5/20/2007; 2) Complaint of Construction Compliance, Inc. v. Coast Bank of Florida, Inc., et al.; 3) CCI's Joint Plan of Liquidation; 4) Order Confirming CCI's Joint Plan of Liquidation; 5) CCI's Post Confirmation Quarterly Operating Report for 7/1/2009 to 9/30/2009.
A court may take judicial notice of a document filed in another court "not for the truth of the matters asserted in the other litigation, but rather to establish the fact of such litigation and related filings."U.S. v. Jones, 29 F.3d 1549 (11th Cir. 1994) (citing Liberty Mutual Ins. Co. v. Rotches Pork Packers, Inc., 969 F.2d 1384, 1388-89 (2d Cir. 1992).
1. Exhibit 74 — Debtor's Monthly Operating Reports
Movants have requested that the Court take judicial notice of the accounts receivable schedule included in Debtor's Monthly Operating Report for the period 4/3/2007 to 5/20/2007 to show the "overall mess left by CCI" and the status of each defaulted CCI home construction contract. (Dkt. 208, p. 17).
Movants argue that the imposition of the additional point caused proximate harm to the borrowers. Movants argue that Movants' Victim Impact Statements ("VIS") show that 65 were left with a bare lot and 71 were left with a partially-completed home (Dkt. 208, p. 17).
The Court understands that Movants argue that Defendant Coon's conduct caused CCI to have less money available for Movants' homes to be completed, therefore making it less likely that the homes would be completed. However, establishing the presence of a risk is not the same as establishing proximate causation. Since the issue of proximate cause is a disputed issue, the Court cannot take judicial notice of the allegations within the documents for their truth. The Court will rely on the testimony of the lay and expert witnesses and other evidence offered in this case as to the issue of proximate cause.
2. Exhibit 75 — Complaint
Movants request that the Court take judicial notice of an adversary proceeding filed by Construction Compliance, Inc. against Coast Bank, American Mortgage Link, Solutions Processing and John Miller. In Movants' Final Argument on Entitlement to Restitution (Dkt. 208, p. 13), Movants argue that the increased points starved Movants' loans of needed construction funds.
The Court cannot take judicial notice of a document filed in another court for the truth of the matters asserted. To the extent that Movants argue for the presence of a conspiracy involving other participants besides Defendant Coon and Mr. Miller, and argue that the filings in Case No. 8:07-BK-02650-CPM support Movants' theory, the Court will take judicial notice of the documents only to establish the fact that a complaint was filed and allegations were made. In other words, the Court does not accept the complaint to which Movants refer as circumstantial evidence of a larger conspiracy involving other persons or entities not named in the Information filed in the case before the undersigned. The Government and Defendant Coon dispute the existence of such a conspiracy, and, for this reason alone, it is not appropriate for the Court to take judicial notice of allegations of the complaint for their truth.
3. Exhibit 76 — Joint Plan of Liquidation 4. Exhibit 77 — Order Confirming Joint Plan 5. Exhibit 78 — Post Confirmation Quarterly Operating Report Movants do not specify the reason for Movants' request for judicial notice of the above Exhibits. The Court assumes that the reason is additional support for Movants' theory of an over arching conspiracy.After consideration, the Court grants Movants' Request for Judicial Notice only to establish that the documents were filed in CCI's bankruptcy proceeding.
D. Dkt. 222 Request for Judicial Notice
Movants, Coast Bank Borrowers, request that the Court take judicial notice of the document filed in the bankruptcy proceeding of Construction Compliance, Inc., pursuant to Fed.R.Ev. 201(b)(2): 1) Order Abating Liquidating Trustee's Omnibus Objection to Claims, Second Omnibus Objection to Claims, Third Omnibus Objection to Claims, Fourth Omnibus Objection to Claims, Objection to Claims of Timothy and Cynthia Walsh, Objection to Claims of Farrukh and Sheila Zaida and Objection to Claims of James Prowak.
The above document was filed after the parties and Movants filed their post-hearing memoranda. The Court assumes that Movants have filed this Request for Judicial Notice in response to the Court's question during the evidentiary hearing as to the current status of CCI's bankruptcy case.
The Court grants the Request for Judicial Notice only to establish that the document was filed in CCI's bankruptcy proceeding.
E. Government Exhibits Series (1) and (m)
The Court heard oral argument regarding admission of Government Exhibits Series (1), Settlement Agreement or other disposition package, and (m), Victim Impact Statements ("VIS"), on December 28, 2009. The Court deferred ruling (Dkt. 178).
1. Series (1) — Settlement Agreements or Other Disposition
The Government has offered the "workout agreements" entered into between First Bank, successor to Coast Bank, and borrowers into evidence.
Movants object to the admission into evidence of the workout agreements because the events are remote in time from Movants' losses. Movants argued that Defendant Coon's conduct took place between 2004 and 2006, and the workout agreements were entered into after First Bank acquired Coast Bank in 2007. Movants argue that the "skimmed point" could not have been included in the workout agreements in that the criminal charges against Defendant Coon were not filed until 2008.
Defendant Coon objects on the basis of relevance. The parties and Movants agreed to a bifurcated proceeding. The only issue before the Court at this time is the entitlement to restitution. The evidentiary hearing did not involve the separate issue of the specific amount of restitution to which each borrower may be entitled.
After consideration, the Court denies the motion to admit the Series (1) documents into evidence without prejudice, as the documents are related to the determination of specific amounts of loss, which is beyond the scope of the issue which the Court is considering.
2. Series (m) — Victim Impact Statements ("VIS")
The Government has offered the VIS at the request of Movants, and does not vouch for the contents of the VIS. The Government does not object to the admission of the VIS. The Government argued that the HUD-1 for each borrower provides a starting point for determination of the amount of a borrower's loss. Where the VIS includes statements such as "the builder did not pay the closing costs," the Government has considered the statement to be a legal conclusion rather than a statement of fact.
The Government used its Victim Notification System ("VNS") to provide notice to Coast Bank borrowers or, if represented, borrowers' counsel, of their potential victim status, CVRA rights, and the U.S. Attorney's Office website (Dkt. 252, p. 9). On November 13, 2009, the Government notified the Coast Bank borrowers of the evidentiary hearing scheduled for December 8, 2009 via VNS. The VNS notice advised the Coast Bank borrowers that if they intended to submit a Victim Impact Statement, they had to do so no later than November 20, 2009. Some borrowers submitted Victim Impact Statements with little or no documentation. Some borrowers did not submit Victim Impact Statements. The Government subpoenaed additional supporting information from First Bank.
Movants submitted Victim Impact Statements ("VIS") to the Government. Movants' VIS include the amount of restitution requested, a "builder default scenario," the resolution of the loan (refinanced, foreclosed with deficiency judgment, paid off, etc.) and a resolution of the property (sold "as is," completed then sold home, completed home but still retain, lot only but still retain, etc.).
Movants acknowledge that Movants' VIS are not offered as proof on issues addressed at the evidentiary hearing, including specific statements to which objections were raised. Defendant Coon objected to statements within the VIS, such as Movants' statements "the skimmed point was funded from my loan," and "the builder did not pay the skimmed point."
The Court notes that some local Movants appeared and testified at the evidentiary hearing. Movants argue that the Victim Impact Statements should be considered by the Court because the VIS were the only practical way for the bulk of the movants to submit proof of their claim. Movants argue that Defendant Coon had the opportunity to refute the VIS, and the VIS bear "minimal indicia of reliability." U.S. v. Hairston, 888 F.2d 1349 (11th Cir. 1989).
To the extent that the VIS show that the transactions at issue were substantially similar, the Court grants the Motion in part. The Court notes that VIS 10, Zanuel Johnson, is an atypical transaction. To the extent that the Government offers the VIS to establish entitlement to a specific amount of restitution, it is not necessary for the Court to rule on this issue before ruling on the threshold issue of entitlement to restitution. The Court therefore denies the Motion in part without prejudice.
F. Admissibility of Deposition Transcripts Movants' Exhibits 72, 73
Witness Jesse Brown Battle, III testified at the evidentiary hearing. (Dkt. 194, pp. 268-294; Dkt. 195, pp. 6-125). On cross-examination, Movants' counsel posed questions to Mr. Battle, and used Exhibits 72 and 73 to refresh Mr. Battle's recollection (Dkt. 195, pp. 40-49, 59-60, 72-75, 77-8, 101-102, 107-109).
Movants request that the transcripts be admitted into evidence. Movants argue that hearsay evidence may be considered in determining a sentence of restitution, as long as the defendant is given an opportunity to refute the evidence, and the evidence bears minimal indicia of reliability. U.S. v. Hairston, 888 F.2d 1349 (11th Cir. 1989).
Defendant Coon objects to the admission of the deposition transcripts into evidence (Dkt. 210, pp. 31-2, n. 17). Defendant Coon argues that the admission of transcripts from another proceeding is permitted when the witness is unavailable, under Fed.R.Ev. 804(a), and only when the opposing party "had an opportunity and similar motive to develop the testimony by direct, cross or redirect examination." See Fed.R.Ev. 804(b)(1). Defendant Coon also challenges the indicia of reliability, and further argues that, at the evidentiary hearing, Movants did not indicate what specific portion of the deposition on which Movants intended to rely. Defendant Coon further argues that Movants do not specify Mr. Battle's memory lapses.
Mr. Battle appeared to testify at the evidentiary hearing, and Movants had a full opportunity to question the witness. Movants questioned the witness about many issues involving specific details of the background of CCI, how CCI conducted its business, and the financial affairs of CCI. When Mr. Battle testified that he could not recall, Movants used the prior depositions to refresh Mr. Battle's recollection. The depositions were not used to impeach Mr. Battle's testimony during the evidentiary hearing. If the depositions had been used to impeach the testimony of Mr. Battle at the evidentiary hearing, the depositions still could not be considered as substantive evidence. Mr. Battle's testimony at the hearing is the evidence, not the depositions.
At the evidentiary hearing, the Court questioned Mr. Battle directly (Dkt. 195, pp. 120-125) and stated the Court's concern with the status of the bankruptcy proceedings, and whether inconsistent positions were taken in Bankruptcy Court. (Dkt. 195, pp. 221-224).
After consideration, the Court denies Movants' request to admit the depositions into evidence.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
The issue the Court must determine is Movants' entitlement to restitution from Defendant Coon for Movants' pecuniary losses. The Court has reviewed the transcript of the evidentiary hearing (1300 pages). After consideration of the testimony, both lay and expert, the exhibits, the parties' and Movants' stipulation, and arguments of counsel, the Court makes the following findings of fact and conclusions of law. To the extent that any of the findings of fact might constitute conclusions of law, they are adopted as such. To the extent that any legal conclusions constitute a finding of fact, they are adopted as such.
II. Findings of Fact
1. The Information (Dkt. 1) in this case charges Defendant Coon with conspiracy to commit: 1) wire fraud and thereby to deprive Coast Bank of Florida of the intangible right of honest services, in violation of 18 U.S.C. Sees. 1343 and 1346; and 2) money laundering, in violation of 18 U.S.C. Sec. 1957.
2. Defendant Coon entered into a plea agreement on October 8, 2008 (Dkt. 3), in which Defendant Coon pleaded guilty to Count One of the Information.
3. The Plea Agreement contains a Factual Basis which sets out in detail the conspiracy carried out by Defendant Coon and a co-conspirator, commencing in late 2004, which the Court incorporates by reference. The Factual Basis (Dkt. 3, p. 19) includes the following statements:
The scheme gave the defendant incentive to deal with AML, which resulted in Coast having a higher concentration of loans in one particular area with one particular builder than was prudent. The scheme also exposed Coast Bank to the risk of litigation brought by one or more of the participants in the residential development/home loan program from which the defendant procured the illicit proceeds. The defendant reasonably should have foreseen that Coast might suffer an economic harm as a result of his breach of fiduciary duty.
4. As to restitution, the plea agreement provides (Dkt. 3, p 12):
1. Restitution, Special Assessment and Fine
The defendant understands and agrees that the Court, in addition to or in lieu of any other penalty, shall order the defendant to make restitution to any victim of the offense, pursuant to 18 U.S.C. Sec. 3663A, for all offenses described in 18 U.S.C. Sec. 3663A(c)(1) (limited to offenses committed on or after April 24, 1996); and the Court may order the defendant to make restitution to any victim of the offense, pursuant to 18 U.S.C. Sec. 3663 (limited to offenses committed on or after November 1, 1987) or Sec. 3579, including restitution as to all counts charged, whether or not the defendant enters a plea of guilty to such counts, and whether or not such counts are dismissed pursuant to this agreement. On each count to which a plea of guilty is entered, the Court shall impose a special assessment, to be payable to the Clerk's Office, United States District Court, and due on date of sentencing. The defendant understands that this agreement imposes no limitation as to fine.
STIPULATED FACTS
4. The Court includes the parties and Movants' Stipulated Facts (Dkt. 131-2):
A. Beginning in 2004, Coast Bank of Florida (Coast), a handful of builders but primarily Construction Compliance, Inc. (CCI), and American Mortgage Link (AML), participated in a program that offered qualified borrowers (primarily investors) their choice of a limited number of model homes to be built on specific lots (lot-house packages) at a fixed price of 90 percent of appraised value with no money down at closing.
B. Coast, as well aa other builders, participated in the program by providing 100 percent of the financing for the purchase, that is, 100 percent of 90 percent of appraised value of the lot-house packages.
C. AML, of which John Robert Miller served as president, acted as a broker, obtaining loan commitments from Coast. The borrowers entered into mortgage brokerage fee agreements with AML.
D. To acquire a place in the program, AML initially proposed to charge a loan origination fee of one percent.
E. It was anticipated that the construction loans would be converted to "permanent loans" at the time occupancy certificates were tendered.
F. To qualify for financing, a prospective borrower was required to have a certain minimum credit score, verified assets of a specific amount, and verified employment or self-employment for a stated period of time. Applicants for loans were permitted to state their income.
G. CCI and Enchanted Homes, among others, agreed to sell the lot-home packages for 90 percent of appraised value.
H. The builders in their construction contracts with the borrowers agreed to pay closing costs as well as interest during the construction period. Per the borrowers' loan agreements with Coast Bank, the borrowers maintained full responsibility to repay the full amount of the loan funds disbursed including the loan funds disbursed at closing.
I. At closing, each builder received the price of the lot as calculated by the builder as well as a percentage of the overall construction costs.
J. In lieu of the builders delivering funds at closing to pay the closing costs, the proceeds due the builders out of the first loan disbursement at closing were reduced by the amount of the closing costs.
K. Consistent with the concept of the program, borrowers paid no money at closing.
L. 12. Philip William Coon, Executive Vice President of mortgage lending for Coast, approached Mr. Miller with a plan to charge the borrowers a loan origination fee that was one percent higher than AML intended to charge. Part of the plan proposed to Mr. Miller by Mr. Coon was that 75 percent of the proceeds of the additional point charged by AML be paid to Mr. Coon. Mr. Miller agreed.
M. The amount of the loan origination fee was disclosed and agreed to by all interested parties and was within the market range of fees for investment properties.
N. Mr. Miller paid Mr. Coon 75 percent of the proceeds of the additional point charged by AML. Those payments made by Mr. Miller to Mr. Coon were the basis of the Government charging that Coast was deprived of its intangible right to the honest services of its employee, Mr. Coon.
0. Many of the houses under the program were never completed. CCI declared bankruptcy in February of 2007, defaulting on a number of home construction contracts.
P. On August 12, 2008, Mr. Miller was charged with conspiracy to commit wire fraud and, thereby, to deprive Coast Bank of the intangible right to honest services, in violation of 18 U.S.C. Sees. 1343 and 1346, and 18 U.S.C. Sec. 371. Mr. Miller pleaded guilty pursuant to a plea agreement.
Q. On October 15, 2008, Mr. Coon was charged with conspiracy to commit (1) wire fraud and, thereby, to deprive Coast Bank of the intangible right to honest services, in violation of 18 U.S.C. Sees. 1343 and 1346, and (2) money laundering, in violation of 18 U.S.C. Sec. 1957, all in violation of 18 U.S.C. Sec. 371. Mr. Coon pleaded guilty pursuant to a plea agreement. Mr. Coon's case, case number 8:08-CR-441-T-17MAP, is assigned to the Honorable Elizabeth A. Kovachevich.
The Court intentionally omits the final two stipulated facts, which involve Movants' actions taken to assert Movants' CVRA rights after this case was filed, and which are not relevant to the issue the Court must now determine.
5. Defendant Coon testified as to how the loan program worked (Dkt. 194, p. 67, l.3-19). Defendant Coon testified that the price of each lot-house package was determined by an appraisal (Dkt. 194, p. 143, l.17-1. 22). Defendant Coon further testified that the contracts were fixed price contracts, not cost plus contracts. (Dkt. 194, p. 143, l.23-p. 144, l.9).
6. John Robert Miller testified that the contracts were fixed price contracts, and the amount of the loan origination fee did not change any other aspect of the program. (Dkt. 194, p. 188, 1. 9-p. 190, l.20. Mr. Miller denied that he ever provided the contract prices to the appraiser in advance. (Dkt. 194, p. 200, l.9-17).
7. The Government's expert witness, Edward Peters, a certified residential appraiser, testified that he began doing appraisals for American Mortgage Link in 2000 or 2001. (Dkt. 195, p. 247, 1. 8-11). Edward Peters further testified that he performed appraisals on homes constructed by CCI and financed by Coast Bank in 2005. (Dkt. 195, p. 247, l.19-p. 248, l.5). Edward Peters further testified as to the methodology for the appraisals he conduct in 2005 and 2006 (Dkt. 195, p. 248, l.22-p. 257, l.7). Edward Peters testified that the amount of closing costs did not affect his appraisal (Dkt. 195, p. 250, 1. 8-17) and the contract sales price did not affect his appraisal (Dkt. 195, p. 252, l.6-8). Edward Peters denied entering into any agreement with Defendant Coon to produce an inflated appraisal. (Dkt. 197, p. 59, l.20-p. 60, l.2).
8. Movants' expert witness, Dennis Black, testified that, in his opinion, the appraisals of the lot-house packages were not accurate and were inflated (Dkt. 200, p. 44, l.19-p. 65, l.16). Dennis Black further testified that the appraisals were inflated by more than one percent of the purchase price of the lot-house packages. (Dkt. 200, p. 76, l.13-18).
9. Movants' expert witness, Clifford King, testified that he heard no evidence that the prices charged to the borrowers, and therefore the loan amounts, were increased by one percent to take into account the increased loan origination fee that was charged and paid to Defendant Coon pursuant to Defendant Coon's agreement with Mr. Miller. (Dkt. 200, p. 173, l.19-p. 174, l.1).
10. As stipulated, upon the closing of each loan, the builder became entitled to a draw for the purchase price of the lot and a percentage of the construction costs. The builder was contractually obligated to pay for the closing costs of each loan. Rather than pay for the closing costs of each loan with a separate check, the builder elected to pay for the closing costs of each loan from the draw due to the builder at the time of closing. The Court notes that CCI used the above method to pay for the closing costs for each transaction.
11. Trish Miller, an independent closing agent, testified that the closing instructions from the lender provided that the builder was responsible for payment of the closing costs (Dkt. 195, p. 165, l.8-14). Mary O'Grady, an independent closing agent, also testified that the builder was responsible for payment of the closing costs. (Dkt. 195, p. 193, l.11-24).
12. Nikki Farr of Coast Bank testified that Coast Bank calculated the amount of the initial disbursement of loan proceeds due to the builder at closing based upon a pre determined, fixed amount of closing costs, not the actual amount of the closing costs in a particular transaction. (Dkt. 195, p. 135, l.16-19).
13. The Government's expert witness, Derek Houston, testified that a change in the amount of closing costs could not affect the purchase price or initial draw to the builder. (Dkt. 197, p. 105, l.9-p. 110, l.12).
CAUSATION "But For" Causation
14. The closing costs for each transaction were not included in the loans obtained by Movants. (Govt. Exh. 2D).
15. As stipulated, Movants' contracts with the builder/seller required the builder/seller to pay all of the closing costs on the transaction.
16. The amount of the closing costs included in the initial draw payable to the builder was set as a fixed amount at the draw payable to the builder was set as a fixed amount at the beginning of the program. The additional point did not impact the amount or manner of disbursement of each Movant's loan. If the closing costs for each loan had been reduced, the total amount of each construction loan would not have changed.
PROXIMATE CAUSATION
17. The additional point charged by John Robert Miller did not cause any pecuniary harm to any borrowers on the day of closing because they paid no money at closing and the additional point was paid out of the seller's proceeds after the closing pursuant to the seller's contract with the borrowers.
18. The additional point charged by John Robert Miller did not cause any pecuniary harm to any borrowers as the borrowers repaid their loans because the additional point did not affect the amount of the loan. This is because the purchase price of the lot-house package was based on 90% of its appraised value, and the loan amount was 100% of the purchase price. Any deficiencies in the appraisals did not cause the additional point to affect the purchase price or loan amount, because the purchase price was based on the appraisal.
19. The additional point charged by John Robert Miller did not cause any pecuniary harm to any borrowers as the borrowers repaid their loans because the additional point did not affect the manner in which the loan was disbursed. This is because the allowance for closing costs in the initial draw was set as a fixed amount at the outset of the program prior to the change in the amount of points, and did not vary based on the amount of the actual closing costs.
20. With or without the additional point caused by the offense, the amount of money the borrowers were obligated to repay to Coast Bank would have been identical.
21. At the beginning of the "no money down" "90 percent of appraised value" program, some homes were completed and sold for a profit, including homes completed by Construction Compliance, Inc. No borrower suffered a pecuniary loss as a result of those transactions.
22. Some builders completed all of the homes they contracted to build under the program. No borrower suffered any pecuniary loss as a result of any of those transactions.
23. Construction Compliance, Inc., the builder for many of Movants' homes, declared bankruptcy in 2007. CCI did not complete construction of some of Movants' homes. Jesse Battle, III, testified that CCI owed almost $11 million when CCI declared bankruptcy, including $6 million owed to its subcontractors. Movants may have suffered pecuniary losses as a result of CCI's failure and defaults. (Dkt. 194, p. 140; Dkt. 195, p. 88).
24. Movants have argued that, because CCI paid increased costs for Defendant Coon's conduct, Movants' loans were starved for funds needed for construction. Movants therefore admit that in fact CCI paid the closing costs for Movants' loans. (Dkt. 200, p. 168, l.1-4).
25. Jesse Battle, III, testified that permitting delays and associated interest expenses, a shortage of qualified subcontractors, the crash of the Florida real estate market, hurricanes, the increased cost of labor and construction, and the efforts of some investors to delay closings contributed to CCI's bankruptcy. (Dkt. 194, pp. 282-85; Dkt. 195, pp. 8-11, 16).
26. Jesse Battle, III testified that he diverted funds from Construction Compliance, Inc. by purchasing a commercial office building, real estate in North Carolina, a trailer park, and more than $20 million from CCI to his related company, CCI Land (Dkt. 195, pp. 85, 116-18).
27. The additional point paid by CCI as a result of Defendant Coon's offense was not a "but for" cause of CCI's bankruptcy and liquidation. There is no reasonable likelihood that Movants' losses flowing from CCI's failure would not have occurred if Defendant Coon had not asked Mr. Miller to charge an additional point in the closing costs.
28. The additional point was not a proximate cause of any of Movants' losses flowing from CCI's failure. Those losses are temporally and factually attenuated from Defendant Coon's offense, and were brought about by the intervening and superceding causes noted above (pars. 25, 26). There is no evidence in the record that establishes that the intervening causes were directly related to the offense conduct.
III. CONCLUSIONS OF LAW
1. The Court has "no inherent authority to order restitution, and may do so only as explicitly empowered by statute." United States v. Henslev, 91 F.3d 274, 276 (1st Cir. 1996).
2. The wire fraud statute, 18 U.S.C. Sec. 1343, provides:
Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than 20 years, or both. If the violation affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years or both.
3. The Information (Dkt. 1) alleges that from late 2004 through January 17, 2007, Defendant Coon conspired to commit wire fraud and money laundering. The Information identifies the manner and means of the conspiracy (Dkt. 1, pars. 6-15) and the overt acts committed in furtherance of the conspiracy (Dkt. 1, pars. 16(a)-(d). The Information further alleges that Defendant Coon shall forfeit to the United States of America property identified in pars. 2(a)-(i), which includes a forfeiture money judgment in the amount of $1,528,616.46.
4. The Mandatory Victims Restitution Act ("MVRA"), 18 U.S.C. Sec. 3663A, obligates the Court to order restitution in cases which involve certain offenses, including offenses against property committed by fraud and deceit, such as conspiracy to commit wire fraud.
5. 18 U.S.C. Sec. 3664, Procedure for issuance and enforcement of order of restitution, requires the Court to "order restitution in the full amount of each victim's losses and without consideration of the economic circumstances of the defendant." 18 U.S.C. Sec. 3664(f)(1)(A).
6. 18 U.S.C. Sec. 3663A provides:
(a)(1) Notwithstanding any other provision of law, when sentencing a defendant convicted of an offense described in subsection (c), the court shall order, in addition to, or in the case of a misdemeanor, in addition to or in lieu of, any other penalty authorized by law, that the defendant make restitution to the victim of the offense or, if the victim is deceased, to the victim's estate.
(2) For the purposes of this section, the term "victim" means a 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. In the case of a victim who is under 18 years of age, incompetent, incapacitated, or deceased, the legal guardian of the victim or representative of the victim's estate, another family member, or any other person appointed as suitable by the court, may assume the victim's rights under this section, but in no event shall the defendant be named as such representative or guardian.
(3) The court shall also order, if agreed to by the parties in a plea agreement, restitution to persons other than the victim of the offense.
. . . .
(c)(1) This section shall apply in all sentencing proceedings for convictions of, or plea agreements relating to charges for, any offense —
(A) that is —
. . . .
(ii) an offense against property under this title, or under section 416(a) of the Controlled Substances Act ( 21 U.S.C. 856(a)), including any offense committed by fraud or deceit;
. . . .
(B) in which an identifiable victim or victims has suffered a physical injury or pecuniary loss.
7. In U.S. v. Dickerson, 370 F.3d 1330 (11th Cir. 2004), the Eleventh Circuit Court of Appeals considered the appropriate award of restitution for scheme-based offenses. In Dickerson, a case involving a defendant who pled guilty to 36 counts of wire fraud and one count of Social Security fraud, at sentencing the defendant was ordered to pay restitution for the entire scheme, including the part of the scheme for which the defendant was not charged. The defendant was ordered to pay restitution for the charged offenses and any relevant conduct. The defendant objected to the amount of restitution for conduct which took place in the time period which was beyond the statute of limitations. On appeal, the Eleventh Circuit Court of Appeals affirmed the district court's restitution order, and explained in detail the appropriate analysis for scheme-based offenses to which 18 U.S.C. Sec. 3663A applies.
Below the Court includes the Dickerson analysis, on which the Court relied to reach a reasoned understanding of the scope of the conspiracy, and to identify its victims, i.e. persons who were directly and proximately harmed by Defendant Coon's conduct.
In Dickerson, supra, the Eleventh Circuit Court of Appeals considered the language of 18 U.S.C. Sec. 3663A, including, inter alia, the definition of "victim":
(2) For the purposes of this section, the term "victim" means a person directly and proximately harmed as a result of the commission 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. . . .
The Eleventh Circuit Court of Appeals considered the extent to which the decision in Hughev v. United States, 495 U.S. 411 (1990) controlled the restitution ordered. The Eleventh Circuit noted that:
The courts have held that by defining "victim" expansively in scheme-based crimes, Congress "partially overrul[ed] Huqhey's restrictive interpretation of the VWPA and expand[ed] district courts' authority to grant restitution." United States v. Henoud, 81 F.3d 484, 488 (4th Cir. 1996). We consider three categories of cases, those concerning the compensable victims, punishable acts, and temporal limitations of restitution.
First, the courts have held that restitution may be ordered to a victim not named in the indictment, provided that the victim was "directly harmed by the defendant's criminal conduct in the course of a scheme or conspiracy." Henoud, 81 F.3d at 489; see United States v. Pepper, 51 F.3d 469, 473 (5th Cir. 1995) (affirming an order of restitution to a group of investors harmed by the defendant's fraudulent marketing scheme, but not named in the indictment); United States v. Upton, 91 F.3d 677, 686 (5th Cir. 1996) (acknowledging Pepper, but denying restitution to materialmen and suppliers who were "not victims of the scheme alleged in the indictment," i.e., conspiracy to defraud and presenting false claims to the United States in roofing contracts (emphasis added)). Consistent with this rule, the court in United States v. Kones, 77 F.3d 66, 70 (3d Cir. 1996), observed that
where a defendant is convicted of defrauding person X and a fraudulent scheme is an element of that conviction, the sentencing court has power to order restitution for the loss to defrauded person Y directly caused by the defendant's criminal conduct, even where the defendant is not convicted of defrauding Y.
In such cases, "the harm to the victim must be closely related to the scheme, rather than tangentially linked." Id.
Second, the courts have held that "when the crime of conviction includes a scheme, conspiracy, or pattern of criminal activity as an element of the offense," the court may order restitution for "acts of related conduct for which the defendant was not convicted," United States v. Lawrence, 189 F.3d 838, 846 (9th Cir. 1999), at least when such conduct occurred within the statute of limitations. FN15 Thus, the Lawrence court ordered the defendant, convicted of mail and bankruptcy fraud, to pay the full amount of restitution ordered by the district court, even though only a fraction of the amount "[was] directly attributable to the acts for which the jury found [him] guilty." Id. at 847. Our cases have followed this line of reasoning. See United States v. Hasson, 333 F.3d 1264, 1276 n. 13 (11th Cir. 2003) (noting that the Crime Control Act and the MVRA "supersede[d] our interpretation of § 3663(a) in United States v. Stone, 948 F.2d 700, 704 (11th Cir. 1991), that restitution for mail or wire fraud is limited to the specific act of fraud underlying the mailing or use of the wires for which the defendant is convicted, rather than the entire scheme or artifice to defraud furthered by the mailing or use of the wires."); cf. United States v. Obasohan, 73 F.3d 309, 311 (11th Cir. 1996) ("[A] district court does not exceed its authority by ordering a defendant to pay restitution for losses which result from acts done in furtherance of the conspiracy of which the defendant is convicted."). Other courts have reached similar results. See United States v. Henslev, 91 F.3d 274, 277 (1st Cir. 1996) ("[T]he outer limits of a VWPA § 3663(a)(2) restitution order encompass all direct harm from the criminal conduct of the defendant which was within any scheme, conspiracy, or pattern of activity than was an element of any offense of conviction."); cf. United States v. Bovd, 222 F.3d 47, 50 (2d Cir. 2000) ("The MVRA definition of victim' traces verbatim the amended language of the [VWPA], which *1340 courts have uniformly read to provide for restitution payable by all convicted co-conspirators in respect of damage suffered by all victims of a conspiracy, regardless of the facts underlying counts of conviction in individual prosecutions.").
FN15. These cases do not directly address the statute of limitations issue we face today, and it is unclear whether they extend to permit restitution for conduct outside of the statute of limitations. As the parties agree, this is an issue of first impression in our circuit.
The third category of cases, dealing with the temporal limits of restitution, places some limitations on the reach of §§ 3663A(a)(2) and 3663(a)(2). FN16 These cases do not make a fortress of Hughey, however.
FN16. In this category, the Government urges upon us the Fifth Circuit's decision in United States v. All Star Industries, 962 F.2d 465 (5th Cir. 1992), rev'd on other grounds, United States v. Calverlev, 37 F.3d 160 (5th Cir. 1994) (en banc). In All Star, the district court ordered the defendant to pay restitution for conspiracy to violate the antitrust laws. Id. at 476. The defendant appealed, claiming that the statute of limitations barred restitution for losses occurring more than five years before the indictment. Id. The court upheld the restitution order. Id. at 477. It reasoned that because the defendant was "convicted of participating in a single continuing conspiracy that began more than five years before the indictment was returned, but which did not end until . . . a time within" the statute of limitations, it was proper to order restitution in the full amount of the victims' losses. Id. We decline to extend All Star to the instant case, not merely because it involved a criminal conspiracy, but since it arose out of an order of restitution under the now-repealed Probation Act. See id. at 476-78 n. 22. Nowhere in its analysis of the challenged restitution order does the All Star court discuss Hughey's impact upon the VWPA or the statutory definition of "victim" at issue in this case.
In United States v. Hughey, 147 F.3d 423 (5th Cir. 1998) ("Hughey II"), the defendant was convicted on several counts, including bank fraud. The district court ordered him to pay restitution to various banks. Id. at 436. The Fifth Circuit reversed the restitution order as to two of those banks. Id. at 438. Recognizing the effect of the Crime Control Act of 1990 upon § 3663, the court nonetheless held that "[t]hat part of [the Supreme Court's opinion in] Hughey which restricted the award of restitution to the limits of the offense . . . still stands." Id. at 437. The court noted that the indictment, returned in July 1995, charged Hughey with a scheme running from April through September of 1993, but that some of the losses included in the restitution order occurred before that time. Id. at 438. Since those losses "[fell] outside the offense as defined in the indictment, and the trial record [did] not otherwise tie those losses to Hughey's fraudulent scheme," the court excluded them from the restitution order. Id. In its view, such losses were "in excess of those amounts attributable to the conduct made the basis of Hughey's conviction," and therefore, at odds with the Supreme Court's Huahey decision. Id.
In United States v. Akande, 200 F.3d 136 (3d Cir. 1999), the defendant, pursuant to a plea agreement, pled guilty to conspiracy to commit credit card fraud. The conspiracy, according to the information, plea agreement and colloquy, lasted from December 1997 to July 1998. Id. at 138. The district court ordered Akande to pay a sum of restitution that accounted for two acts of fraud before December 1997. Id. The Third Circuit reversed, holding that
the "offense of conviction" as defined by [the Supreme Court's opinion in Hughey] remains the reference point for classifying conduct that determines liability for restitution. Although the [CCA] expanded the breadth of the definition of victims, the text did not extend the length of the period attributable to the offense of conviction. . . . [T]he offense of conviction is temporally defined by the period specified in the indictment or information.
Id. at 141. Because conduct occurring before December 1997 "[was] not mentioned in the Information or during the plea colloquy," the court excluded from the restitution order the victim's losses from that conduct. Id. at 143.
Taken together, Hughey and Akande do not severely restrict the reach of the CCA and the MVRA. Both cases suggest that a district court may not order a defendant to pay restitution for criminal conduct unrelated to the offense of conviction, i.e., conduct not alleged in the indictment, specified in the plea agreement, or otherwise made a part of the record. We read these cases narrowly for the proposition that even after the CCA and the MVRA, a criminal defendant cannot be compelled to pay restitution for conduct committed outside of the scheme, conspiracy, or pattern of criminal behavior underlying the offense of conviction. FN17 To the extent that these cases say anything more, we reject them.
FN17. This reasoning is consistent with the Seventh Circuit's holding in United States v. Brothers, 955 F.2d 493 (7th Cir. 1992), decided before the CCA or the MVRA took effect. Brothers was convicted of three counts of mail fraud and three counts of making false statements to the United States Department of Labor. Id. at 494. The indictment alleged that between 1972 and 1989, Brothers engaged in a unitary scheme to defraud the United States of worker's compensation benefits. Id. at 497. The district court ordered Brothers to pay restitution for all of the benefits he received throughout this period, and the Seventh Circuit affirmed. Id. at 498. Recognizing Huahey as binding precedent, the court nonetheless held that "because proof of a scheme is an element of the offense of mail fraud . . . actions pursuant to that scheme should be considered conduct that is the basis of the offense of conviction." Id. at 497 (marks and citations omitted). Citing Brothers, the Fifth Circuit adopted this same approach in United States v. Stouffer, 986 F.2d 916, 928-29 (5th Cir. 1993). Whatever the wisdom of this reasoning, we need not apply it here. We base our judgment upon the identical definitions of "victim" found in §§ 3663 and 3663A.
B.
Our brief survey of the lav; shows that the CCA and the MVRA all but eviscerated Hughey with respect to crimes involving schemes. In light of this observation, we must consider whether we should hold that a district court may order restitution for all losses resulting from a common scheme, even those caused by conduct occurring outside of the statute of limitations.
Although there is a dearth of authority on this question, we find useful the Eighth Circuit's opinion in United States v. Welsand, 23 F.3d 205 (8th Cir. 1994). In Welsand, the defendant concealed his employment and assets in order to qualify for a pension from the United States Veterans Administration, now the Department of Veterans Affairs ("VA"). Id. at 206. The VA paid Welsand's pension from 1981 through 1991 in reliance on his misrepresentations. Id. Welsand was thereafter convicted, among other things, on three counts of mail fraud. Id. The district court ordered him to pay restitution for the entire amount he received from the VA from 1981 to 1991. Id. Welsand argued on appeal that he was liable only for the pension payments corresponding to the three counts of mail fraud for which he was convicted. Id. Recognizing that "some of the acts constituting [the] mail fraud scheme antedate[d] the indictment by more than eleven years," id. at 206, the Eighth Circuit nonetheless affirmed the restitution order. The court based its ruling on the fact that "Welsand's interrelated acts [pursuant to the overarching fraudulent scheme] constituted the `conduct underlying the offenses of conviction'" under Hughey. Id. at 207. Put another way, the court determined that the "`offense' described in each count of Welsand's indictment reache[d] out to include all acts encompassed within the `scheme or artifice to defraud' described in" the mail fraud statute. Id.
Although the Welsand court did not explain its reasoning in great detail, FN18 we agree with the result it reached and affirm the restitution order here. The district court's restitution order squares with our precedent. We decided in another context that a district court may consider conduct occurring outside of the statute of limitations in sentencing. In United States v. Behr, 93 F.3d 764 (11th Cir. 1996), the defendant, an insurance agent, defrauded pension fund investors by taking their money for his own personal use. Behr's insurance company lost over $300,000 as a result of his "overall activities involving thefts, verbal misrepresentations, and unauthorized withdrawals from clients' accounts." Id. at 765. Behr pled guilty to one count of wire fraud. Id. at 764. In committing this single offense, he caused only $12,000 of loss. Id. at 765. Nonetheless, in the PSI, the probation officer identified the $300,000 sum as "relevant conduct" under the United States Sentencing Guidelines, and recommended that the district court increase Behr's offense level by eight levels. Id. "At the sentencing hearing, Behr admitted to all the facts contained in the PSI, including the probation officer's description of his relevant conduct." Id. But he also claimed that the court should not consider his company's $300,000 loss, since the conduct that caused this loss was outside of the statute of limitations. Id. The district court rejected Behr's argument and enhanced his sentence according to the probation officer's recommendation. Id. We affirmed, noting that "the five Circuits that [had addressed the issue] all held that the district court may consider criminal conduct that occurred outside of the statute of limitations period as relevant conduct for sentencing purposes." Id. at 765-66.
FN18. The approach the Eighth Circuit took in this brief opinion appears to mirror the one set forth in Brothers and Stouffer. See supra note 17. The CCA governed only in Welsand, however. Compare Welsand, 23 F.3d at 207 (noting that the 1990 amendments to the VWPA applied to the challenged restitution order), with Stouffer, 986 F.2d at 929 n. 19 ("[W]e do not rely upon Congress' 1990 amendment to the VWPA due to ex post facto concerns"), and Brothers, 955 F.2d at 496 n. 1 ("The [VWPA] was amended after Brothers was sentenced by the Crime Control Act of 1990"). Although the courts in Stouffer, 986 F.2d at 929 n. 19, and Brothers, 955 F.2d at 497 n. 3, stated that their rulings were harmonious with the CCA, both statements were dicta.
We conclude that the reasoning in Behr applies with equal force to the case at hand. If a district court may consider relevant conduct occurring outside of the statute of limitations in determining the offense level (and, indirectly, the range of possible sentences), we fail to see what precludes it from considering such conduct in fashioning a restitution order. Therefore, we hold that where a defendant is convicted of a crime of which a scheme is an element, the district court must, under 18 U.S.C. § 3663A, order the defendant to pay restitution to all victims for the losses they suffered from the defendant's conduct in the course of the scheme, even where such losses were caused by conduct outside of the statute of limitations. FN19 The district court must find that the victims' losses resulted "directly" from the defendant's criminal conduct in the course of the scheme. The "harm to the victim [must be] closely related to the scheme, rather than tangentially linked." Kones, 77 F.3d at 70; see United States v. Brothers, 955 F.2d 493, 497 (7th Cir. 1992) ("[T]he indictment specifically defined the fraud scheme in this case. There is thus no risk that the restitution order was based upon broad, unsubstantiated conduct." (marks and citations omitted)).
FN19. We suspect that our rule applies similarly to cases (1) proceeding under § 3663, and (2) arising from crimes that involve as an element a conspiracy or pattern of criminal conduct. We need not decide this today, however. We cabin our rule to scheme-based crimes for which restitution is mandatory under § 3663A.
The Court has included the above lengthy discussion to underscore that, in the context of restitution, to accurately identify the victims of a scheme-based offense, it is critical to first identify the nature and extent of the scheme, which in this case is the conspiracy to commit wire fraud. In 1990 Congress added the "scheme" provision to the MVRA, in response to Hughey v. U.S., 495 U.S. 411 (1990), in which the Supreme Court held that the statutory language authorized the award of restitution only for the loss caused by the specific conduct that is the basis of the offense of conviction. The "scheme" provision enlarged the set of victims to whom restitution can be awarded, as restitution can be awarded for the pecuniary loss caused by conduct underlying an element of the offense of conviction or by conduct that is part of a pattern of criminal activity that is an element of the offense of conviction. In this case, the Court cannot award restitution to victims who suffer losses which are caused by acts which are beyond the scope of the conspiracy to commit wire fraud and its direct consequences.
8. The Court also notes the discussion of the restitution award in United States v. Brothers, 953 F.2d 493 (7th Cir. 1992), cited in Dickerson, supra:
Brothers is incorrect. He fails to note that the indictment alleged a mail fraud scheme from 1972 until 1987 to defraud the United States. The district court had the authority to order restitution for the losses caused by the entire fraud scheme, not merely for the losses caused by the specific acts of fraud proved by the government at trial. See United States v. Bennett, 943 F.2d 738, 741 (7th Cir. 1991). In Bennett, the defendant pleaded guilty to two counts of mail fraud. Bennett agreed as a part of the plea agreement that the court could impose restitution with respect to eighty other acts of mail fraud. Pursuant to the agreement, the district court ordered restitution for the loss caused by the more than eighty fraudulent acts discussed in the plea agreement rather than the loss caused by the two specific offenses of conviction. Id., at 739. We affirmed the restitution order because "[p]roof of a scheme is an element of the offense of mail fraud, and therefore, actions pursuant to that scheme should be considered `conduct that is the basis of the offense of conviction.'" Id. at 740 (quoting Hughey, 495 U.S. at 413, 110 S.Ct. at 1981). FN2 We also admonished that: "The scheme concept is by its nature an amorphous one, and may only support an award of restitution if it is defined with specificity. A contrary rule would allow vague allegations of a scheme to support restitution based upon broad, unsubstantiated conduct." Id. at 741.
Because Brothers was indicted and convicted for engaging in a scheme to defraud the United States, Bennett applies and the restitution ordered does not exceed the scope of his convictions. FN3 See also United States v. Braslawsky, 951 F.2d 149 (7th Cir. 1991) (holding that under § 3663 the defendant's sentence of restitution for interstate transportation of stolen property was limited to the damages caused by the crime of conviction).
FN2. Section 3663(a)(3), as amended by the Crime Control Act of 1990, is consistent with the holding of Bennett. That section provides that: "The court may also order restitution in any criminal case to the extent agreed to by the parties in a plea agreement."
FN3. We note that, as amended, § 3663(a)(2) would compel the same result as Bennett.
That section provides that:
For the purposes of restitution, a victim of an offense that involves as an element a scheme, a conspiracy, or a pattern of criminal activity means any person directly harmed by the defendant's criminal conduct in the course of the scheme, conspiracy or pattern.
See also United States v. Arnold, 947 F.2d 1236 (5th Cir. 1991).
We conclude that the fraud scheme alleged in the indictment is defined with adequate specificity. The indictment defines the exact period of Brothers' violations and the methods he used. As we stated earlier, the jury must have believed that the indictment was entirely accurate because it convicted Brothers on all counts. This confirms our view that the indictment "specifically defined" the fraud scheme in this case. Bennett, 943 F.2d at 741. There is thus no risk that the restitution order was "based upon broad, unsubstantiated conduct." Id.
The Court has included the above discussion in support of the Court's conclusion that, in the context of restitution, in order to identify the victims of an offense, the critical first step is to accurately define the scope of the conspiracy.
9. An award of restitution must be based on the amount of the loss actually caused by the defendant's conduct. U.S. v. Liss, 265 F.3d 1220, 1231 (11th Cir. 2001).
10. The government bears the burden of proving the amount of the loss by a preponderance of the evidence. 18 U.S.C. Sec. 3664(e); U.S. v. Hairston, 888 F.2d 1349, 1354 (11th Cir. 1989).
11. To establish proximate cause, "the government must show not only that a particular loss would not have occurred but for the conduct underlying the offense of conviction, but also that the causal connection between the conduct and the loss is not too attenuated (either factually or temporally)." See U.S. v. Robertson, 493 F.3d 1322, 1334 (11th Cir. 2007) (citing U.S. v. Cutter, 313 F.3d 1, 7 (1st Cir. 2002) (internal quotation marks omitted)). "Defendant's conduct need not be the sole cause of the loss, but any subsequent action that contributes to the loss, such as intervening cause, must be directly related to the defendant's conduct. The causal chain may not extend so far, in terms of the facts or the time span, as to become unreasonable." United States v. Gamma Tech Indus., Inc., 265 F.3d 917, 928 (9th Cir. 2001) (citations omitted); see also U.S. v. Donaby, 349 F.3d 1046, 1054 (7th Cir. 2003) ("victim" under Restitution Act harmed by likely and foreseeable outcome of the crime). U.S. v. Robertson, 493 F.3d 1322, 1334 (11th Cir. 2007).
12. A loss is proximately caused by a defendant if it is reasonably foreseeable as a natural and probable consequence of the defendant's criminal conduct. See United States v. Robertson, 493 F.3d 1332, 1335 (11th Cir. 2007).
13. Where losses flow from the independent acts of others, the losses may not be included in a restitution order against the defendant. See United States v. Robertson, 493 F.3d 1332, 1334 (11th Cir. 2007).
14. Where the loss for which restitution is sought would have occurred regardless of the defendant's misconduct underlying the offense of conviction, restitution is not appropriate. See United States v. Cutter, 313 F.3d, 1, 7 (1st Cir. 2002).
15. Restitution is inappropriate if the conduct underlying the conviction is too far removed, either factually or temporally, from the loss. See United States v. Cutter, 313 F.3d 1, 7 (1st Cir. 2002).
16. Proximate cause is a factual finding which is reviewable for clear error. A finding of fact is clearly erroneous "when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." U.S. v. Robertson, 493 F.3d 1322, 1334 (11th Cir. 2007) (citing Anderson v. City of Bessemer, N.C., 105 S.Ct. 1504 (1985)). "If the district court's account of the evidence is plausible in light of the record viewed in its entirety, the court of appeals may not reverse even though convinced that had it been sitting as the trier of fact, it would have weighed the evidence differently. Where there are two permissible views of the evidence, the factfinder's choice between them cannot be clearly erroneous, (citations omitted). This is so even when the district court's findings do not rest on credibility determinations, but are based instead on physical or documentary evidence or inferences from other facts." Anderson, supra, at 1511, 1512. A finding of fact is clearly erroneous only if the record lacks substantial evidence to support it. Johnson v. Hamrick, 296 F.3d 1065, 1074 (11th Cir. 2002).
17. The Court notes that the Information alleges a scheme which was carried out by two co-conspirators during a specific period of time. The Information does not allege or imply that the scheme was part of a larger, ongoing scheme of any kind.
18. The provisions in the Plea Agreement as to restitution are standard provisions. Those provisions are not sufficient to establish an agreement to pay restitution to persons other than victims of the offense.
19. Ordinarily, the Government has the burden to establish by a preponderance of the evidence that a victim's losses are causally related to the offense. In this case, the Government has argued that Movants' losses were not caused by Defendant Coon's offense. Movants have had a full opportunity to present evidence and argument which establishes that Movants suffered actual pecuniary losses as a direct and proximate result of Defendant Coon's offense. The Court finds that Movants have not established by a preponderance of the evidence that Movants suffered any actual pecuniary loss as a direct and proximate result of Defendant Coon's offense.
20. The Court concludes that Movants have not established that Defendant Coon's offense was a "but for" cause or a proximate cause of any specific pecuniary loss sustained by Movants.
21. The Court concludes that Movants' losses were temporally and factually remote and attenuated from Defendant Coon's offense, and were not reasonably foreseeable to Defendant Coon as a natural or a probable result of the offense.
22. The Court concludes that the chain of causation between Defendant Coon's offense and any specific pecuniary loss sustained by Movants as a result of the bankruptcy and liquidation of Construction Compliance, Inc. was interrupted by intervening and superceding causes unrelated to Defendant Coon's conduct, including the diversion of corporate funds by Jesse Battle, III, permitting delays and associated interest expenses, a shortage of qualified subcontractors, the real estate market crash, hurricanes, and the increased costs of labor and construction, as well as the efforts of some borrowers to delay closings to prevent the conversion of the construction loans on which Construction Compliance, Inc. paid the interest to permanent loans that became the responsibility of the borrowers. The intervening and superceding causes, which are not directly related to Defendant's offense, preclude any finding of proximate causation between Defendant Coon's offense and any specific pecuniary loss by any borrower as a result of the bankruptcy and liquidation of Construction Compliance, Inc.
23. Movants' losses which are based on the payment of attorney's fees are consequential damages and are not subject to a restitution award. See United States v. Diamond, 969 F.2d 961, 968 (10th Cir. 1992).
24. Based on the amount of time and the voluminous record required to resolve the issue of Movants' entitlement to restitution from Defendant Coon, the Court suspects that 18 U.S.C. 3663A (c)(3)(B) applies to the determination of specific amounts of loss:
(3) This section shall not apply in the case of an offense described in paragraph (1)(A)(ii) if the Court finds, from facts on the record, that —
(B) determining complex issues of fact related to the cause or amount of the victim's losses would complicate or prolong the sentencing process to a degree that the need to provide restitution to any victim is outweighed by the burden on the sentencing process.
However, because the Court has determined that Movants' losses were not caused by Defendant Coon's offense conduct, the Court does not reach this issue.
24. Movants have not established their entitlement to restitution, and therefore Movants' motions for restitution are denied. DONE and ORDERED in Chambers, in Tampa, Florida.