United States v. Frenkel
682 F. App'x 20
2d Cir.2017Background
- Frenkel, acting as escrow agent, fabricated documents and misrepresented Mark Stern’s equity to induce Citigroup to make $126 million in loans to Stern-controlled entities to buy shopping malls.
- Frenkel was convicted by a jury of conspiracy to commit wire fraud and wire fraud; trial occurred before a visiting judge and sentencing before Judge Román.
- At trial Frenkel sought to introduce evidence that Citigroup was negligent in its due diligence; the district court excluded that theory as a defense to fraud.
- At sentencing the court attributed $70 million in loss to Frenkel under U.S.S.G. § 2B1.1 and imposed joint-and-several restitution of $70 million to Citigroup.
- Frenkel appealed, arguing (1) erroneous exclusion of victim-negligence evidence, (2) improper jury instruction on materiality, (3) clear-error in loss calculation, and (4) error in the restitution order.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether victim negligence is admissible as a defense to wire fraud | Victim negligence is irrelevant to elements of fraud; exclusion proper | Citigroup’s negligence in due diligence should negate fraud or mitigate culpability | Exclusion affirmed — victim negligence is not a defense to federal fraud offenses |
| Proper standard for materiality in jury instruction | Objective reasonable-person standard governs materiality | Materiality should be judged by the victim’s subjective perspective | Instruction using objective standard was correct; any variance harmless given overwhelming evidence |
| Whether $70M loss under U.S.S.G. § 2B1.1 was clearly erroneous | Government: court reasonably estimated loss; decline in collateral value irrelevant | Frenkel: could not foresee market collapse; loss thus not attributable to him | Loss determination affirmed — collateral-value decline foreseeability not required; reasonable estimate upheld |
| Whether restitution should be reduced for amounts Citigroup has recovered from others | Government: joint-and-several restitution proper; order need not specify credits | Frenkel: restitution should be reduced or expressly offset by recoveries from others | Restitution affirmed — joint-and-several award appropriate; court need not explicitly state offsets; defendant may seek modification if others pay |
Key Cases Cited
- Neder v. United States, 527 U.S. 1 (defining materiality and explaining common-law incorporation into federal fraud statutes)
- Gaudin v. United States, 515 U.S. 506 (materiality as a decisionmaking influence)
- United States v. Thomas, 377 F.3d 232 (victim gullibility/neglect not a defense to fraud)
- United States v. Autuori, 212 F.3d 105 (materiality element in fraud prosecutions)
- United States v. Turk, 626 F.3d 743 (decline in collateral value need not be foreseeable for loss calculation)
- United States v. Lacey, 699 F.3d 710 (standard of review and deference for sentencing loss estimates)
- United States v. Nucci, 364 F.3d 419 (restitution cannot allow victim to recover more than its loss; joint-and-several restitution principles)
- United States v. Zangari, 677 F.3d 86 (standard of review for MVRA restitution orders)