USA v. Ted Murray

Filing

PUBLISHED OPINION FILED. [09-20813 Affirmed] Judge: WED , Judge: ECP , Judge: PRO. Mandate pull date is 08/17/2011 for Appellant Ted Russell Murray [09-20813]

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IN THE UNITED STATES COURT OF APPEALS
United States Court of Appeals
FOR THE FIFTH CIRCUIT
Fifth Circuit

FILED
July 27, 2011

No. 09-20813

Lyle W. Cayce
Clerk

UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
TED RUSSELL SCHWARTZ MURRAY,
Defendant-Appellant.

Appeal from the United States District Court
for the Southern District of Texas

Before DAVIS, PRADO, and OWEN, Circuit Judges.
DAVIS, Circuit Judge:
Following his conviction for making and subscribing to a false tax return
and multiple counts of conspiracy, mail fraud, and securities fraud, Ted Russell
Schwartz Murray appeals his sentence on the following four grounds: (1) the
application of the 2001 version of the United States Sentencing Guidelines1
(U.S.S.G.) to his case violated the ex post facto clause; (2) the district court used
improper methodology in computing the amount of loss under U.S.S.G. §
2B1.1(b)(1); (3) the district court committed plain error in applying the U.S.S.G.

1

All references in this opinion are to the 2001 version.

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§ 3B1.1(a) leader/organizer enhancement; and (4) the district court imposed a
substantively unreasonable sentence. Finding no reversible error, we AFFIRM.
I. Facts
The appellant, Ted Russell Schwartz Murray (Murray), was the majority
shareholder, President, and Chief Executive Officer (CEO) of Premiere Holdings,
which was created by merging Murray’s solely-owned company, Money Mortgage
Corporation of America, with Lapin & Wiggington, an asset management
company owned by his codefendants, David Lapin and Carl Wiggington.
Premiere solicited money from investors to fund real estate loans through its
P72 Program. Murray and his codefendants falsely promised to give investors
an interest in safe and secure real estate investments that yielded 12% returns.
In many instances, Premiere lent to highly risky borrowers and did not
obtain the high-quality collateral promised to secure the loans. Also, Murray
charged a 25% loan origination fee, a material fact that was never disclosed to
investors. Because most of the loans Premiere made were nonperforming, later
investors’ funds were used to pay the promised 12% returns to earlier investors,
thus hiding Premiere’s true financial condition.
By September 2001, several of the largest loans were in default and
Premiere could not recruit enough new investors to hide the losses. Murray and
his codefendants used the economic decline following the September 11 terrorist
attacks as an excuse for the failure of the P72 Program, and Premiere filed for
Chapter 11 bankruptcy on October 2, 2001. At that time, Premiere had
outstanding loans totaling $165 million. A group of the defrauded investors
(who banded together and asserted their claims under the name Presidential
Partnership), Lapin, and the bankruptcy trustee took over the loans in an
attempt to recover any outstanding value remaining in the underlying collateral.
After Murray was convicted of all counts by a jury, the district court used
the 2001 edition of the Sentencing Guidelines to determine his sentence. He had
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a base offense level of six under U.S.S.G. § 2B1.1(a). Based on the court’s finding
that the amount of loss was $84 million, his offense level was raised by 24
pursuant to U.S.S.G. § 2B1.1(b)(1)(M). Murray’s offense level was also increased
by four because the district court found that he was a leader or organizer.
U.S.S.G. § 3B1.1(a). After additional enhancements, Murray’s total offense level
was 43 with a criminal history category of I. His guidelines sentencing range was
360 months to life. The district court imposed a below-guidelines sentence of 240
months imprisonment with three years of supervised release. Murray appeals
that sentence.
II.
A. Ex Post Facto Clause
Murray argues first that the district court violated the ex post facto clause
when it calculated his sentence using the 2001 version of the Sentencing
Guidelines, which became effective November 1, 2001. He argues that the
conspiracy ended before that effective date with the filing of the bankruptcy
petition on October 2, 2001. Because Murray raises this issue for the first time
on appeal, we review for plain error. United States v. Castillo-Estevez, 597 F.3d
238, 240 (5th Cir. 2010). To demonstrate reversible plain error, Murray must
show “(1) error (2) that is plain and (3) that affects his substantial rights.” Id.
“To be ‘plain,’ legal error must be ‘clear or obvious, rather than subject to
reasonable dispute.’” Id. at 241 (quoting Puckett v. United States, 129 S.Ct.
1423, 1429 (2009)). We will exercise our discretion to correct plain error if it
seriously affected the fairness, integrity, or public reputation of the judicial
proceeding. Id. at 240.
In Castillo-Estevez, a panel of this Court held that United States v. Booker,
543 U.S. 220 (2005), which rendered the sentencing guidelines advisory, made
it unclear and subject to reasonable dispute whether the ex post facto clause
prohibits the application of a new advisory guideline to a crime committed before
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the guideline’s effective date. 597 F.3d at 241. Therefore, regardless of the date
the Premiere conspiracy ended, it was not plain error for the district court to
apply the 2001 guidelines in determining Murray’s sentence. See United States
v. Marban-Calderon, 631 F.3d 210, 211-12 (5th Cir. 2011) (holding that any ex
post facto violation in applying an amended guideline is not plain error because
Castillo-Estevez controls).2
B. Amount of Loss
The district court calculated Murray’s guidelines range using $84 million
as the amount of loss. Murray challenges the methodology the district court
used to arrive at that amount and also argues that the amount of loss should
have been adjusted downward to account for economic conditions beyond his
control. We review factual determinations in determining the loss amount for
clear error, United States v. Setser, 568 F.3d 482, 496 (5th Cir. 2009), but to the
extent the district court’s methodology for calculating losses involves an
application of the guidelines, we review such legal conclusions de novo. United
States v. Goss, 549 F.3d 1013, 1016 (5th Cir. 2008).
Under U.S.S.G. § 2B1.1, the guidelines range calculation for the amount
of loss is based upon the amount of financial loss to the victims, here, the
investors. The amount of loss is to be the greater of actual or intended loss.
U.S.S.G. § 2B1.1 app. n.2(A). In this case, we are dealing with the actual loss,
which is the “reasonably foreseeable pecuniary harm that resulted from the
offense.” U.S.S.G. § 2B1.1 app. n.2(A)(i).
1. The District Court’s Methodology

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Murray argues that, post-Booker, this circuit has held that applying new guidelines
to offenses predating the effective date violates the ex post facto clause. See United States v.
Austin, 479 F.3d 363, 367 (5th Cir. 2007); United States v. Reasor, 418 F.3d 466, 479 (5th Cir.
2005). However, Castillo-Estevez distinguished those cases and clearly established that there
is currently a “reasonable dispute” on the issue, preventing a defendant from establishing
plain error. 597 F.3d at 241 n.1.

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The PSR used the amount of outstanding loans at bankruptcy, $165
million, as the amount of loss. Murray objected to the PSR, arguing that he
should receive credit for the value of the collateral securing the loans. He
argued that, where the defendant has pledged or “otherwise provided” collateral,
the guidelines advise courts to reduce the loss by “the amount the victim has
recovered at the time of sentencing from disposition of the collateral, or if the
collateral has not been disposed of by that time, the fair market value of the
collateral at the time of sentencing.”

U.S.S.G. § 2B1.1 app. n.2(E)(ii).

At sentencing, the district court was originally prepared to accept the
PSR’s loss determination. However, after significant discussion between the
court and Murray’s counsel, the Government suggested that the court use the
loss amount of $84 million that was supported by the trial testimony of Dennis
Arnie, a Certified Public Accountant who studied the Premiere accounts
extensively. He testified that the losses already realized at the time of trial were
$67.1 million, which accounted for the $50 million that the investors recovered
from the collateral and from the loans. He testified that another $17 million
would never be recovered, bringing the total loss figure to $84 million.3 In light
of the Government’s concession, the district court decided to adopt $84 million
as the amount of loss.
2. Legal Analysis of the Methodology

3

Arnie testified as follows:
The total loss from the Presidential Partnerships realized to-date was
$54,579,878. Additional losses which will likely be incurred of 17,570,512. So,
from Presidential Partnerships, a little bit in excess of 84 million.
From the ones Mr. Lapin worked himself, a little over 5.4 million. And there
were some other, four or five, miscellaneous loans of 7 million. So, the total
losses, summary of investor losses, is 67,198,000–a little over 67 million –
realized– I'm sorry. $67,198,134 realized losses. 17,570,512 of losses that, from
an accounting standpoint, would be recognized as losses. So, total losses
between the two categories of a little in excess of $84 million.

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According to Murray, the “true losses” were only $28 million. He bases
that claim on a statement in the PSR stating that the “fixed losses” were $28
million. But the PSR does not explain what is meant by this term or how the
probation officer arrived at this figure. We reject this argument because no
correlation is shown between this figure and the total losses to the victims.
Murray maintains his original objections to the $165 million figure, which
he argues informed the court’s reasoning in reaching the $84 million figure. He
also argues that the $84 million figure accounts for the value of the outstanding
loans and the “amount deemed unrecoverable” but fails to account for the value
of the collateral that was undisposed of at the time of sentencing.
In United States v. Goss, a mortgage fraud case, we determined that the
actual loss was determined by deducting the value of the collateral from the total
loan amounts. 549 F.3d at 1017-18. Goss supports the use of the total amount
of outstanding loans ($165 million) as the starting point from which the value
of collateral is then deducted. See id. We do not read Arnie’s testimony as
estimating likely losses without considering the value of the unsold collateral.
We understand his testimony to mean that, starting with the outstanding loan
amount of $165 million, then deducting from that figure the amount actually
recovered by the victims together with the amount Arnie estimated they could
recover on the remaining collateral, the investors would suffer $84 million in
total losses.
The record makes it clear that Arnie had studied Premiere’s loans
extensively, and his testimony summarizing the losses was based on voluminous
exhibits explaining in detail how he arrived at his conclusion. Although these
exhibits are not in the record, Murray had the right to fully cross-examine Arnie
about all of them. The district court was entitled to rely on Arnie’s expert
testimony, included in the PSR Addendum, that the victims’ losses amounted to
$84 million. Murray presented no evidence, expert or otherwise, tending to
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refute Arnie’s testimony. See United States v. Rome, 207 F.3d 251, 254 (5th Cir.
2000) (“If a defendant presents no rebuttal evidence, the facts contained in the
PSR may be adopted without further inquiry so long as the facts rest on an
adequate evidentiary basis.”).
As we stated in Goss, a district court need only make a reasonable
estimate of loss, and, “because the sentencing judge is in a unique position to
assess the evidence and estimate the loss . . . the court’s loss determination is
entitled to appropriate deference.” Id. at 1019 (internal quotation and citation
omitted). We find that the district court made a reasonable estimate of the total
loss and correctly applied the guidelines.4
3. External Factors
Murray also argues that the total loss amount should be discounted to
account for the decreased value of the collateral resulting from external market
factors. The Government argues that the losses were not caused by the 9-11
attack or other external factors, but rather were caused by the company’s
inability to generate funds from new investors, which ultimately precipitated the
collapse of the Ponzi scheme. In response, Murray argues that the program was
not a Ponzi scheme because it had actual investments that were affected by
market factors. Ponzi schemes, he argues, are entirely fraudulent and do not
have assets.
Murray defines “Ponzi scheme” too narrowly. “The term [Ponzi scheme]
has come to be used to describe a scheme whereby the swindler uses money from
later victims to pay earlier victims.” Guidry v. Bank of LaPlace, 954 F.2d 278,
280 n.1 (5th Cir. 1992); see also Janvey v. Alguire, 2011 WL 2937949 (5th Cir.
2011). Therefore, the existence of assets does not prevent the conspiracy from

4

Even if the district court accepted Murray’s argument that the amount of loss was $28
million, his guidelines range would have been 292 to 365 months, well above his 240-month
sentence.

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amounting to what the district court and the PSR characterized as a Ponzi
scheme.
We held in United States v. Olis, a securities fraud case, that the district
court erred in computing the actual loss because it failed to consider extrinsic
factors that caused some of the decline in the value of stock. 429 F.3d 540, 548549 (5th Cir. 2005). However, the guidelines do not require sentencing courts
to consider extrinsic factors that affect the value of collateral when using the
collateral to discount the amount of loss. The loss should be discounted by the
fair market value of collateral, not by the value the collateral could have had in
better economic conditions. See U.S.S.G. § 2B1.1 app. n.2(E)(ii). We therefore
find that the district court correctly refused to estimate the collateral’s value
under different market conditions.
C. Murray as a Leader or Organizer
Murray contends that the district court misapplied the sentencing
guidelines by applying § 3B1.1(a)’s four-level enhancement to his offense level
based on his “leader/organizer” role. Because Murray did not raise an objection
in the court below, we review the district court’s determination that he was a
leader or organizer for plain error. Castillo-Estevez, 597 F.3d at 240.
A defendant “must have been the organizer or leader of at least one other
participant” to qualify as a leader/organizer. United States v. Ronning, 47 F.3d
710, 712 (5th Cir. 1995). In assessing a defendant’s role as a leader/organizer,
the Sentencing Guidelines direct a court to consider: (1) the defendant’s exercise
of decision making authority, (2) the nature of the defendant’s participation in
the commission of the offense, (3) the defendant’s claimed right to a larger share
of the fruits of the offense, (4) the defendant’s degree of participation in the
planning or organizing of the offense, (5) the nature and scope of the illegal
activity, and (6) the degree of control and authority exercised by the defendant
over others. U.S.S.G. § 3B1.1 app. n.4.
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Murray argues that he does not qualify as a leader/organizer because he
did not exercise control over either of his codefendants. According to Murray, he
and Lapin were functional equals in the company, but only Lapin could qualify
as a leader because he alone supervised Wiggington.
operated separate “spheres” of Premiere.

Lapin and Murray

Lapin ran the investor services

subsidiary (Lapin & Wigginton) and Murray ran the mortgage subsidiary
(Money Mortgage). Furthermore, Murray argued that it was Lapin’s idea to
create Premiere out of their previously separate companies.
The Government need not produce direct evidence demonstrating that
Murray directed or controlled other participants. See United States v. Barnett,
273 F.3d 1094, *4 (5th Cir. 2001) (unpublished) (noting that although no direct
evidence precisely established that the defendant directed or controlled other
participants, the evidence did give a strong inference to that effect). However,
a district court may infer from available facts, including circumstantial evidence,
that a defendant exercised a leader/organizer role. See United States v. Cabrera,
288 F.3d 163, 174 (5th Cir. 2002) (finding that the evidence provided an
adequate basis for the inference that defendants were leaders/organizers in light
of the U.S.S.G. § 3B1.1 app. n.4 factors).
Although Murray ran the“mortgage side” of the scheme while Lapin ran
the “investor side” with Wiggington working under him, evidence supports the
inference that Murray had a degree of control over the other participants
because the two sides of the business were not completely independent as
Murray contends. Murray was the President and CEO of Premiere; he had a
right to the largest share of the profits. He ran weekly meetings that Lapin and
Wigginton attended, which suggests coordination between the investment and
mortgage sides of the operation. In at least one instance, Lapin’s “investment”
side of the firm compiled packets as instructed by Murray for one of Murray’s
“mortgage side” meetings, suggesting that Lapin’s side of the operation was
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answerable to Murray. We therefore find that the district court committed no
plain error in applying the leader/organizer four-level enhancement.
D. Substantive Reasonableness
Murray asserts that his 240-month sentence, which is 120 months below
the low end of his guidelines range, is substantively unreasonable because it is
greater than necessary to effect the purposes of sentencing. See 18 U.S.C. §
3553(a) (advising sentencing courts to “impose a sentence sufficient, but not
greater than necessary to comply with the specific purposes” of 18 U.S.C. §
3553(a)(2)). He argues that the guidelines create an artificially high starting
point for sentencing that over-punishes securities fraud because the
enhancement factors are inherent in any large-scale securities fraud and lack
empirical grounds. He also argues that the sentence resulted in sentencing
disparity between himself and his coconspirators (Lapin and Wigginton received
three-year sentences following their guilty pleas) and punished him at the same
level as defendants convicted of multibillion dollar frauds.
Murray raised the same arguments at sentencing when he argued for a
below-guidelines sentence. The district court took his arguments into account
when it articulated its reasons for the below-guidelines sentence according to the
§ 3553(a) factors. The court explained the seriousness of Murray’s offense and
noted that the factors did not necessarily weigh in favor of a below-guidelines
sentence. For example, Murray could have received a total sentence of as long
as 1,572 months. The court noted that the monetary loss understated the harm
caused by Murray’s crimes in some respects because the victims had also
suffered “physically, mentally, [and] emotionally,” some losing their life savings.
The district judge stated that Murray’s actions were “pathological,” and that he
was “arrogant and unremorseful and unrepentant for the harm that he has
caused to numerous—over 500 victims in this case.”

Rejecting Murray’s

contention that he should be sentenced more leniently because he was a white10

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collar criminal, the district court noted that “the astounding loss amount caused
by this complex scheme that was headed by this defendant, organized by this
defendant, masterminded by this defendant, has [a] far-reaching impact on
hundreds of victims.”
The district court considered the more lenient sentences received by Lapin
and Wigginton and, based in part on that consideration, concluded that a 30year sentence was greater than necessary to meet the sentencing objectives and
to sanction Murray’s conduct, given his age and health. The court determined
that a below-guidelines, 240-month sentence accounted for this factor as well as
any overlap between the various guidelines enhancements.
We traditionally entrust sentencing “to the discretion of district courts,
[which are] close to the ground and more cognizant of the details of [the] offender
and offense that should be determinative of [the] sentence.” United States v.
Duarte, 569 F.3d 528, 531 (5th Cir. 2009). We find that the sentencing court
imposed a substantively reasonable sentence and did not abuse its discretion.
See United States v. Goodman, 307 F. App’x 811, 812 (5th Cir. 2009)
(unpublished) (holding that a below-guidelines sentence afforded a rebuttable
presumption of reasonableness).
III. Conclusion
For the reasons stated above, we AFFIRM Murray’s sentence.

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