United States v. Foley
2015 U.S. App. LEXIS 5265
1st Cir.2015Background
- From Dec. 19, 2006 to Jan. 12, 2007 Foley, as closing attorney/settlement agent, caused HUD-1 settlement statements to be sent to lenders for 33 condo closings at 135 Neponset Ave., some signed and some unsigned, each falsely indicating a buyer down payment that never occurred.
- Lenders wired mortgage proceeds to Foley's IOLTA; Foley disbursed funds to seller Elizabeth (Lisa) Reed after obtaining Reed-signed "disbursement authorization" forms that reduced Reed's proceeds to create the appearance of a borrower down payment; when lenders sought proof, Foley arranged bogus checks and redeposit maneuvers.
- Reed and Sean Robbins (Foley's associate) pleaded guilty and testified for the government; Foley went to trial asserting a good-faith belief that buyer funds would arrive.
- Foley was convicted on 33 wire-fraud counts (18 U.S.C. § 1343) and five money-laundering counts (18 U.S.C. § 1957); district court sentenced him to 72 months (below Guidelines) and ordered $2,198,204 restitution.
- On appeal Foley challenged sufficiency of evidence (signature/materiality), money-laundering proceeds definition under Santos, three evidentiary rulings, alleged prosecutorial misconduct, sentencing (loss calculation and "sophisticated means" enhancement), and restitution math and recipients.
Issues
| Issue | Plaintiff's Argument (United States) | Defendant's Argument (Foley) | Held |
|---|---|---|---|
| Sufficiency of evidence as to HUD-1s (signed & unsigned) for wire fraud | HUD-1s (signed or unsigned) falsely represented "cash from borrower" and were material; lenders wired funds in reliance; evidence supports conviction | Only signed HUD-1s (settlement-agent certification) could be misrepresentations; unsigned forms insufficient; materiality negated by lenders accepting unsigned forms | Affirmed: both signed and unsigned HUD-1s could be fraudulent misrepresentations; misrepresentation of "cash from borrower" was material and supported jury verdict (unpreserved signature argument reviewed only for clear and gross injustice) |
| Money-laundering (§1957) — whether transfers were "proceeds" | Transfers of loan funds (fraudulently obtained) were criminally derived property; no merger problem — wire fraud completed on receipt of funds | Santos requires "proceeds" = profits (to avoid merger problems); transfers here were not profits | Affirmed: no Santos-based merger problem; transfers were proceeds for §1957 purposes in this context |
| Admission and scope of Robbins's testimony (guilty plea / statement that he knew Foley committed mortgage fraud) | Testimony about Robbins's guilty plea and related statements is admissible to assess witness credibility; limiting instruction mitigates prejudice | Robbins's testimony that he knew Foley committed fraud was unfairly prejudicial and improperly sugered Foley's guilt | No abuse of discretion: admission appropriate and limiting instruction cured prejudice |
| Prosecutorial misconduct in closing (misstating Robbins's testimony and urging jury to "hold Foley accountable") | Prosecutor's characterizations were fair response to defense themes; did not misstate the record as to Robbins; rebuttal comment responding to defense blame-shifting was permissible | Prosecutor misstated testimony (implying Foley admitted earlier knowledge) and improperly invited juror sentencing/adjudication beyond evidence by saying it was "time for Mr. Foley to be held accountable" | No misconduct: court correctly found prosecutor's remarks consistent with testimony and permissible rebuttal to defense argument |
| Sentencing — loss amount and "sophisticated means" enhancement | Loss measured as outstanding loan minus foreclosure sale proceeds (or assessment if not sold); Foley's conduct foreseeably led to defaults; concealment steps justified 2-level sophisticated-means enhancement | Loss overstated; scheme aimed to succeed (not foresee foreclosure); enhancement unwarranted | Affirms loss calculation (district court's methodology and foreseeability analysis) and affirms sophisticated-means enhancement; below-Guidelines 72-month sentence upheld as reasonable |
| Restitution calculation and recipients | Restitution should be set to compensate lending victims; offset by foreclosure sale proceeds or assessment when sale not occurred; some allocations need clarification | Various errors: included unsold Unit 5, failed to offset borrower principal repayments, misallocated Units 2 and 32, and improperly awarded restitution for unrelated 343 Centre St. loss | Remand in part: vacated $118,104 restitution to Argent (343 Centre St.) and remanded to recalculate/clarify restitution for Unit 5, to apply borrower principal offsets, and to determine proper recipients for Units 2 & 32; district court's offset method (sale proceeds or assessment) upheld under Robers |
Key Cases Cited
- United States v. Santos, 553 U.S. 507 (plurality and concurring analyses on meaning of "proceeds" under money-laundering statute)
- Robers v. United States, 134 S. Ct. 1854 (2014) (restitution offset must be by money actually received from sale of collateral)
- United States v. Appolon, 695 F.3d 44 (1st Cir. 2012) (mortgage-fraud loss measured as loan amount minus foreclosure sale proceeds; foreseeability of foreclosure losses)
- United States v. García-Pastrana, 584 F.3d 351 (1st Cir. 2009) (discussion of Santos and definition of "proceeds")
- United States v. Evano, 553 F.3d 109 (1st Cir. 2009) (standards and application of sophisticated-means enhancement)