Appeals from the United States District Court for the District of Minnesota.
The opinion of the court was delivered by: Riley, Circuit Judge
Submitted: March 13, 2009
Before WOLLMAN, RILEY, and COLLOTON, Circuit Judges.
On October 18, 2007, the government filed a four-count criminal information in the District of Minnesota charging Michael Parish (Michael), Ardith Parish (Ardith), Christopher Troup (Troup), and Parish Marketing and Development Corporation (PMDC), with various offenses committed during the execution of a mortgage fraud scheme. Count one charged Michael, Ardith, and Troup (collectively, defendants) with conspiracy to commit mail fraud in violation of 18 U.S.C. § 371, and counts two through four separately charged PMDC, Michael, and Troup with money laundering in violation of 18 U.S.C. §§ 1956(a)(1)(A)(i) and 1957. On November 2, 2007, defendants pled guilty to the charged offenses. After a lengthy evidentiary hearing, the district court*fn1 sentenced Michael to 156 months imprisonment, Ardith to 60 months imprisonment, and Troup to 120 months imprisonment. Defendants now appeal their sentences. We affirm.
Michael and Ardith, husband and wife, were the owners and officers of PMDC, a residential development corporation operating primarily in the southern suburbs of Minneapolis and St. Paul, Minnesota. From 1980, when PMDC was incorporated, until 2007, PMDC built thousands of homes. Michael served as PMDC's president, while Ardith worked as the company bookkeeper. Michael and Ardith also employed their son-in-law, Troup, who worked as an agent of PMDC.
Beginning in 2004, PMDC began to encounter substantial financial problems. When PMDC could not find buyers for the homes PMDC built, defendants began applying for mortgage loans in the names of various straw buyers.*fn2 Defendants solicited family members and friends to act as straw buyers. Some of the straw buyers were offered incentives, such as a payment of $2,000 for the use of their name and credit information, which defendants would then use to obtain a fraudulent loan.
The straw buyers, except for Troup, did not view the homes they were purchasing, they did not negotiate the purchase price of the homes, and they often did not execute the required sale and loan documents. Instead, the documents were typically signed by defendants pretending to be the straw buyers. To ensure the straw buyers would be issued the loan proceeds, defendants often manufactured false documentation and inflated the assets of the straw buyers. For example, defendants would provide false documentation stating the straw buyers were employed by a company owned by Troup, or the straw buyers had other assets which the straw buyers did not actually possess.
In addition to inflating the assets of the straw buyers, Troup also provided false information to appraisers, such as false rental agreements overstating the amount of rent generated each month by the property. This resulted in appraisals which exaggerated the market value of the homes, and permitted defendants to obtain mortgage loans for an amount which exceeded the value of the homes.
In total, defendants used straw buyers to obtain mortgage loans fraudulently on approximately 208 properties, chiefly in the cities of New Prague, New Market, and Lonsdale, Minnesota. Defendants obtained nearly $100 million in fraudulent loan proceeds, with PMDC receiving over $25 million from the scheme. The vast majority of the loan proceeds obtained by PMDC were used to perpetuate the conspiracy. Because the straw buyers did not intend to have any financial responsibility over the homes, PMDC was responsible for making mortgage payments on all of the properties obtained with fraudulent loans. In order to pay on one loan, defendants would simply take out another loan. Proceeds from one fraudulent sale were used to make payments to lenders from previous fraudulent sales. The scheme collapsed, and almost all of the properties went into foreclosure. At least four other individuals pled guilty to various charges stemming from the conspiracy.
The losses which resulted from the conspiracy were widespread and significant. Lenders lost millions of dollars on the mortgage loans which were given to straw buyers. Many of the properties were rented to individuals who were forced to vacate upon foreclosure. Other properties were sold to individuals on a contract-for-deed basis. These buyers were not informed of the circumstances, and many of them made large down payments on the contract or made extensive improvements to the property and were unable to recover their losses.
The cities of New Prague, New Market, and Lonsdale, Minnesota, also suffered large losses as a result of the conspiracy. Many new homes are currently sitting vacant, and this has required the communities to expend resources addressing issues such as lawn maintenance, vacant home maintenance, erosion control, drainage, flooding, deteriorating neighborhoods, vandalism, increased police patrols, and code enforcement. Additionally, several subcontractors and suppliers suffered losses when PMDC failed to compensate the subcontractors for their services or the suppliers for their goods. While others were losing money, defendants personally were able to obtain millions of dollars from the scheme in salaries and commissions.
Defendants were charged with conspiracy to commit mail fraud. Michael and Troup were also charged with money laundering. Defendants pled guilty to the charged offenses pursuant to a plea agreement, and acknowledged their involvement in a mortgage fraud scheme in which the mortgages were fraudulently obtained for the sale of over 200 properties to straw buyers. Under the plea agreements, the parties agreed to litigate several contested sentencing issues, including the amount of loss, the number of victims, and the appropriate role adjustments under the advisory United States Sentencing Guidelines (U.S.S.G. or Guidelines).
The district court held an evidentiary hearing on July 1, 2008, during which the government called eighteen witnesses and introduced numerous exhibits. Following the hearing, the parties submitted memoranda setting forth their respective arguments regarding the contested sentencing issues. On July 31, 2008, at defendants' sentencing hearing, the district court sentenced Michael to 156 months imprisonment, Ardith to 60 months imprisonment, and Troup to 120 months imprisonment. Each defendant was also sentenced to 3 years supervised release. Following an ...