United States v. Kyle Grasso
2013 U.S. App. LEXIS 15285
| 9th Cir. | 2013Background
- Mark Abrams and Charles Fitzgerald ran an 80-transaction mortgage-fraud scheme in Westside Los Angeles that obtained loans for inflated purchase prices; lenders lost at least $46 million.
- Kyle Grasso, a high-producing real estate agent with an ownership interest in Cal Title (via FSC Ventures/Prudential), recruited and assisted the conspirators by identifying properties, manipulating MLS listings, arranging straw purchasers, and providing access to Cal Title which produced dual closing documents (inflated for lenders; true price for sellers).
- The government focused on six transactions (Claridge, Alta, Mandeville Canyon, Claircrest, Yoakum, Benedict Canyon) and produced testimony from co-conspirators (Abrams, Matykowski) that Grasso knew and participated in the scheme; Grasso received referral payments (kickbacks) after two later transactions.
- Indictment charged conspiracy (18 U.S.C. § 371), bank fraud (18 U.S.C. § 1344), loan fraud (18 U.S.C. § 1014), and money laundering (18 U.S.C. § 1956) tied to specific transactions and the referral payments.
- Jury convicted Grasso on conspiracy, bank fraud, multiple loan-fraud counts, and two money-laundering counts; district court denied Rule 29 motion and sentenced Grasso to 12 months and 1 day and ordered $13 million restitution.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Conspiracy: whether Grasso had knowing connection to a scheme to defraud banks | Prosecution: circumstantial evidence (inflated MLS, false statements, role in securing Cal Title, co-conspirator testimony) shows Grasso knew the fraudulent objective and participated | Grasso: he was used for legitimate agent tasks and unaware of the fraud's objective | Held: Evidence sufficient; jury could infer knowledge and knowing participation (affirmed) |
| Loan fraud (§1014): whether false statements were made knowing they would influence a federally insured bank | Prosecution: Grasso, an experienced agent, knew loan applications would be used to obtain bank funding and therefore intended to influence banks | Grasso: limited to legitimate steps; lacked knowledge that lenders would be defrauded | Held: Evidence sufficient for Claridge; Pinkerton liability applied for other transactions as foreseeable acts in conspiracy (affirmed) |
| Bank fraud (§1344): whether Grasso executed scheme to defraud financial institutions with intent to defraud | Prosecution: same knowledge evidence as conspiracy and loan fraud shows intent to defraud banks | Grasso: lacked requisite intent/knowledge of scheme aimed at banks | Held: Evidence sufficient to prove intent and execution; conviction affirmed |
| Money laundering (§1956): whether referral payments were "proceeds" or essential expenses that merge with underlying fraud (Santos merger issue) | Grasso: referral fees were essential operating expenses of the fraud (payments for access to Cal Title) and thus merge with underlying offenses; cannot be separately punished under Santos | Prosecution: under Ninth Circuit precedents, co-conspirator transfers and non-central or non-profit distributions may be "proceeds"; kickbacks were isolated and not central, so money-laundering convictions are distinct | Held: Applying pre‑FERA Santos analysis and circuit precedent, no merger problem; referral fees could be treated as gross receipts/proceeds and money‑laundering convictions affirmed |
Key Cases Cited
- United States v. Nevils, 598 F.3d 1158 (9th Cir. 2010) (standard for reviewing sufficiency of evidence in criminal convictions)
- United States v. Rizk, 660 F.3d 1125 (9th Cir. 2011) (same fraud conspiracy; relevant holdings on conspirator knowledge)
- Santos v. United States, 553 U.S. 507 (2008) (plurality, concurrence, and dissent on definition of "proceeds" under §1956 and the merger concern)
- United States v. Van Alstyne, 584 F.3d 803 (9th Cir. 2009) (merger analysis post‑Santos; central‑component test)
- United States v. Webster, 623 F.3d 901 (9th Cir. 2010) (holding co‑conspirator transfers of drug‑sale receipts can be "proceeds")
- United States v. Wilkes, 662 F.3d 524 (9th Cir. 2011) (kickbacks/transfers to co‑conspirators held to be proceeds; concealment analysis)
- United States v. Bellucci, 995 F.2d 157 (9th Cir. 1993) (knowledge that loan applications would reach banks suffices for §1014)
- Pinkerton v. United States, 328 U.S. 640 (1946) (co‑conspirator liability for reasonably foreseeable substantive offenses)