Wednesday, February 19, 2014

Loss in Real Estate Fraud Scheme Not Offset by Value of Homes; Mass-Marketing Enhancement Applies if Advertisement Reaches Large Number of Persons

Jason Heath Morrison, indicted for his part in a real estate scheme designed to defraud multiple parties, appealed his sentence, challenging the district court’s calculation of the loss amount and its application of the sentencing enhancement for “mass-marketing.” Morrison, who fled to Washington and attempted to change his identity, also challenged the sentencing enhancements for sophisticated means and obstruction of justice, as well as the PSR’s failure to reduce his sentencing level for acceptance of responsibility. The panel affirmed.

The PSR recorded an intended loss of $769,365 after totaling all the mortgages involved in the scheme and subtracting what was paid to the lenders. Morrison objected, citing Application Note 3(E) of U.S.S.G. § 2B1.1—which provides that in calculating the victims’ pecuniary losses for fraud offenses, that amount shall be reduced by the value of the collateral—and arguing that the loss should be reduced by the value of the underlying property to $111,912.96. In response to Morrison’s invocation of Application Note 3(E) of U.S.S.G. § 2B1.1, the district court mistakenly deemed the guideline inapplicable to the case, claiming that “the credits against loss only apply where the property is returned prior to detection by law enforcement.” The panel acknowledged that the district court’s interpretation of Application Note 3(E) of U.S.S.G. § 2B1.1 may have been error but held that any error was harmless. The evidence suggesting that the defendants did not intend to repay the mortgage loans was sufficient to support the district court’s decision to ignore collateral value when calculating the financial damages and its discretion to employ an intended loss calculation in lieu of an actual loss calculation.     

Morrison also contested the methods used by the district court to increase his offense level by two for the “mass-marketing” enhancement. Morrison argued that the intended number of victims was nine, one purchaser for each property, and nothing more. The panel disagreed with Morrison’s reasoning, citing United States v. Magnuson, 307 F.3d 333, 335 (5th Cir. 2002), which ruled that the mass-marketing enhancement “merely requires advertising that reaches a large number of persons.” The panel found no error in the district court’s application of the mass-marketing enhancement.

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