United States v. Prieto
2016 U.S. App. LEXIS 962
| 1st Cir. | 2016Background
- Michael Prieto ran a "mortgage rescue" operation (2005–2008) that solicited distressed homeowners to transfer title in return for reduced rent and an option to repurchase; straw purchasers and new mortgages were used to extract equity.
- Straw buyers falsely represented primary residency, income, and assets on mortgage applications; lenders issued loans larger than original mortgages and funds were diverted to Prieto's organizations.
- The scheme involved 86 transactions across 30 lenders, produced over $5 million in loan proceeds, produced foreclosures, and left homeowners, straw purchasers, and lenders with losses or liabilities.
- Prieto and several associates were indicted: a single count of mail fraud alleging one overarching scheme (and separate money-laundering counts later dismissed at trial).
- A jury convicted Prieto of mail fraud; the district court imposed restitution and denied some defense requests (limited CJA expert funding); Prieto appealed conviction and restitution amount.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duplicity of indictment | Gov charged a single, unified scheme encompassing various acts | Prieto: indictment improperly joined multiple distinct offenses into one count | Court: No duplicity; indictment alleged a single overarching scheme and jury was instructed accordingly; no risk of surprise or nonunanimity |
| Variance between indictment and proof | Gov followed indictment's single-scheme theory | Prieto: trial proof shifted emphasis (e.g., lenders vs homeowners) and called few homeowner witnesses, prejudicing defense | Court: No prejudicial variance; trial evidence aligned with the charged unified scheme; departures did not impair substantial rights |
| Sufficiency — materiality of misrepresentations | Gov: loan applications and industry testimony show statements had tendency to influence lenders | Prieto: misrepresentations immaterial, lenders didn’t necessarily verify or rely on them | Court: Evidence (false loan applications + broker testimony) was sufficient to show materiality (natural tendency to influence) |
| Sufficiency — intent to defraud lenders | Gov: Prieto ran and organized the fraudulent scheme and directed falsifications | Prieto: insufficient proof he intended to defraud lenders specifically | Court: Ample evidence (organizational control, admissions from sham borrowers, conduct) supported finding of intent |
Key Cases Cited
- Neder v. United States, 527 U.S. 1 (legal standard for materiality in fraud prosecutions)
- United States v. Appolon, 715 F.3d 362 (1st Cir.) (loan-application falsehoods can be material even without proof of actual reliance)
- United States v. Santos, 553 U.S. 507 (Sup. Ct.) (limiting reach of §1956 money-laundering where proceeds are reinvested to sustain the underlying crime)
- United States v. Wihbey, 75 F.3d 761 (1st Cir.) (variance doctrine and review standard)
- United States v. Trainor, 477 F.3d 24 (1st Cir.) (duplicity and variance principles)
- United States v. Burgos-Montes, 786 F.3d 92 (1st Cir.) (standard of review for sufficiency challenges)
- United States v. Valerio, 48 F.3d 58 (1st Cir.) (risk of nonunanimity from duplicitous counts)
- United States v. Hebshie, 549 F.3d 30 (1st Cir.) (intent element in mail fraud)
- United States v. Doherty, 867 F.2d 47 (1st Cir.) (variance that produces a "stripped-down" case does not automatically require new trial)
- United States v. Lyons, 740 F.3d 702 (1st Cir.) (preservation of sufficiency objections)