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United States v. Peterson

United States Court of Appeals, Seventh Circuit

May 29, 2018

United States of America, Plaintiff-Appellee,
v.
Julius Peterson, also known as Eugene Peterson, Defendant-Appellant.

          Argued January 19, 2018

          Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 1:15-cr-00386-1 - Charles R. Norgle, Judge.

          Before Bauer, Manion, and Rovner, Circuit Judges.

          Rovner, Circuit Judge.

         On June 24, 2015, a grand jury indicted Julius Peterson on two counts of financial institution fraud, one count of making a false statement to a financial institution, and one count of bankruptcy fraud. Specifically, Counts One and Two alleged a violation of 18 U.S.C. § 1344 by submitting false documents in relation to his sale of 7931 S. Union Avenue and 6821 S. Dante Avenue in Chicago, Illinois, Count Three alleged a violation of 18 U.S.C. § 1014 by making a false statement to a financial institution that influenced a mortgage loan for one of those properties, and Count Four alleged that he violated 18 U.S.C. § 152(3) by making false statements in his bankruptcy petition.

         Peterson pled guilty to one count of financial institution fraud and one count of bankruptcy fraud. The district court sentenced him to 24 months' imprisonment, as well as five years of supervised release, and ordered him to pay restitution in the amount of $166, 936. On appeal, Peterson raises two challenges to that sentence. First, he asserts that the district court erred in imposing a two-level enhancement under U.S.S.G. § 2B1.1(b)(10)(C) because Peterson used "sophisticated means." Second, he argues that the district court erred in failing to provide reasons for the imposition of the terms of supervised release. We consider these issues in turn.

         The sophisticated means enhancement was imposed by the district court based on the nature of the offense. The facts underlying the offense were set forth in the PSR and were not objected to by Peterson. The conduct at issue in this case concerned a scheme to defraud financial institutions by false representations surrounding the sale of property. The sale of the property at 7931 S. Union Avenue is illustrative. Peterson sold property to the buyer, Victoria Nyarko, who obtained an FHA-insured loan for the property from a financial institution. In obtaining the loan, Nyarko submitted paperwork indicating that the downpayment was a gift from her aunt, Felicia Thomas, and included a "gift letter" in the application that had a signature purportedly of Thomas. Thomas, however, was not Nyarko's aunt, but instead was a friend of Peterson, and the signature was not hers. Peterson provided money to Thomas, and Thomas then provided a cashier's check to Nyarko with Thomas as the remitter. That money was deposited in Nyarko's account, and Nyarko then provided the downpayment with a cashier's check drawn on her account with her name as remitter. In that way, a financial institution examining the origin of the money for the downpayment would trace it as originating with Thomas, who was identified as the one gifting the downpayment. Peterson attended the closing and signed documents indicating that he had not paid or reimbursed Nyarko for any part of the cash downpayment and that Nyarko was providing those funds herself. Following the sale, Peterson deposited the approximately $169, 433 proceeds of the sale in a bank account in the name of Niya's Trucking and Transporting, a company controlled by Peterson. He then paid Thomas with a portion of the proceeds, and used $30, 000 of those funds to purchase a cashier's check payable to a company controlled by Nyarko, Victory Development Group. The account for that entity had only $100 in it prior to that $30, 000 deposit. When Nyarko defaulted on that FHA-insured loan, the Department of Housing and Urban Development paid out approximately $214, 075.

         Peterson argues that the district court erred in imposing a two-level enhancement for the use of sophisticated means, because the facts demonstrated only a garden-variety mortgage fraud scheme. He points to the language of the enhancement and the Application Note to that provision. Guideline §2B1.1(b)(10)(C) provides for a two-level enhancement "[i]f the offense otherwise involved sophisticated means, " and Application Note 9(B) states that sophisticated means includes

especially complex or especially intricate offense conduct pertaining to the execution or concealment of an offense. For example, in a telemarketing scheme, locating the main office of the scheme in one jurisdiction but locating soliciting operations in another jurisdiction ordinarily indicates sophisticated means. Conduct such as hiding assets or transactions, or both, through the use of fictitious entities, corporate shells, or offshore financial accounts also ordinarily indicates sophisticated means.

         Peterson contends that the conduct in this case does not fall within that definition. He argues that a "genuine U.S. corporate account" was used to undertake the relevant transactions, and therefore this case is not equivalent to the illustrative items such as fictitious entities, corporate shells, or offshore accounts. According to Peterson, the district court erred in crediting the government's argument that the conduct involved hidden transactions. Peterson contends that the district court was required to make findings that established that his offense conduct involved something akin to the use of fictitious entities, corporate shells, or other offshore accounts.

         That argument fails to appreciate that sophisticated means can vary based on the nature of the offense. It will not always involve means as elaborate as offshore accounts or corporate shells. The examples in the Application Note are merely illustrative of the type of conduct that could demonstrate sophisticated means. We have consistently recognized that "[a]pplication of the enhancement is proper 'when the conduct shows a greater level of planning or concealment than the typical fraud of its kind.'" United States v. DeMarco, 784 F.3d 388, 397 (7th Cir. 2015), quoting United States v. Knox, 624 F.3d 865, 871 (7th Cir. 2010); United States v. Sheneman, 682 F.3d 623, 631-32 (7th Cir. 2012).

         For instance, in Sheneman, the defendant argued that the sophisticated means enhancement should not apply because the offense was a garden variety home flipping scam. Id. at 632. We upheld the district court's imposition of the enhancement, holding that the offense conduct went beyond a simple scam and included the utilization of powers of attorney to conceal the activity, misrepresentations to buyers, falsification of loan documents, concealment of the source of down payments and closing costs, and artificial inflation of buyers' bank accounts. Id. We noted that we had upheld the enhancement in similar mortgage fraud schemes such as in Knox, 624 F.3d at 871-72 and United States v. Green, 648 F.3d 569, 576-77 (7th Cir. 2011). In Knox, we affirmed the enhancement where the defendant used fraudulent appraisals and false promises to buyers, and falsified loan applications to convince mortgage lenders to finance. The enhancement was also deemed applicable in Green where the defendants purchased seventy properties using fraudulent loan applications and fabricated documents to obtain the mortgages.

         Similarly, in United States v. Anobah, 734 F.3d 733, 739 (7th Cir. 2013), we rejected the defendant's argument that the offense did not involve a greater level of planning or concealment than a typical fraud of its kind. The district court found that the scheme involved property in two states, the use of straw buyers, false loan applications and other supporting documents, and the use of multiple people to aid in the scheme. Id. We held that the court did not clearly err in determining that the sophisticated means enhancement was applicable on those facts. Id.

         The present case involves similar allegations of planning and concealment, exceeding that of the "garden variety" mortgage fraud scheme. The conduct in this case went beyond that of a simple mortgage fraud case in which the defendant might provide funds to the buyer for the downpayment and forward a kickback to the buyer after the sale. In this case, the defendant engaged in significant efforts to conceal the source of the downpayment and the kickbacks paid. The downpayment was made through a friend of the defendant, Thomas, who was falsely identified as the aunt of the buyer, Nyarko. Money was not transferred directly from the defendant to Nyarko, but instead was deposited in Thomas' account, and Thomas then provided a cashier's check to Nyarko from her account, thus concealing the source of the funds. In furtherance of those efforts, a fraudulent document was provided identifying Thomas as Nyarko's aunt and the source of the downpayment funds. Efforts were also made to conceal the kickback paid to Nyarko. The proceeds of the sale were deposited in a bank account in the name of Niya's Trucking & Transporting, and a portion of those proceeds was paid to Nyarko by a cashier's check payable to Victory Development Group. As the district court pointed out, that company, Victory Development Group, had no interest or activity with respect to the real estate transaction for which the payment was made. The only reason for the payment to that business instead of directly to Nyarko was for ...


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