Ryan Zundel v. USA

Filing

OPINION filed : we AFFIRM the district court's imposition of a 120-month sentence and REMAND the issue of restitution to the district court, decision not for publication. Martha Craig Daughtrey, Circuit Judge; Jeffrey S. Sutton, Circuit Judge and Bernice Bouie Donald, Authoring Circuit Judge.

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NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 14a0164n.06
Case No. 13-1300
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT

FILED
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
RYAN ZUNDEL,
Defendant-Appellant.

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Feb 27, 2014
DEBORAH S. HUNT, Clerk
ON APPEAL FROM THE UNITED
STATES DISTRICT COURT FOR
THE EASTERN DISTRICT OF
MICHIGAN
OPINION

BEFORE: DAUGHTREY, SUTTON, and DONALD, Circuit Judges.
Bernice B. Donald, Circuit Judge. Pursuant to a Rule 11 Plea Agreement, Appellant
Ryan Zundel pleaded guilty to two counts of conspiracy to commit wire fraud in violation of 18
U.S.C. § 371. The district court sentenced Zundel to two consecutive sixty-month prison terms,
imposed a mandatory $200 special assessment, and ordered him to pay $34,548,879 in
restitution. Zundel now appeals, arguing that the district court improperly imposed a two-level
Sentencing Guidelines enhancement for a crime with more than ten victims and that the district
court’s restitution order was issued in error. We AFFIRM Zundel’s sentence but REMAND on
the issue of restitution.

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Case No. 13-1300
United States of America v. Zundel
I.
From 2003 to 2007, Zundel participated in a scheme to defraud Detroit-area mortgage
lenders out of millions of dollars. Zundel owned Bretlin Home Mortgage, where he directed
loan processors who both submitted fraudulent loan applications and prepared fraudulent loans
for closing. This scheme involved two types of false loans—“real” loans and “ghost” (or “G”)
loans. Typically, the same residential property would be used simultaneously as the collateral
for one “real” loan and as the purported collateral for several “G” loans funded by different
lenders. Though these “real” loans involved actual title companies and had properly recorded
deeds and mortgages, the applications and other documents for them were false. The borrowers
in the “real” loan applications were straw buyers who were recruited, often by Zundel, and paid
handsomely. Down payments in these “real” loan transactions were made using proceeds from
the scheme, rather than the supposed borrower’s personal funds.

For “G” loans, only the

mortgage lenders were real; everything else was fabricated by participants in the scheme.
Lenders in these “G” loan transactions were left unsecured and without collateral.
On June 16, 2010, the government initially charged Zundel, along with six others, with a
single count of conspiracy to commit wire fraud in violation of 18 U.S.C. § 1349, an offense
carrying a 360-month maximum sentence.

After plea bargaining, the government filed a

superseding information on August 2, 2011, charging Zundel with two counts of conspiracy
under 18 U.S.C. § 371; since each of these counts carried a 60-month maximum sentence,
Zundel’s maximum potential incarceration time dropped from thirty years for the single count
under 18 U.S.C. § 1349 to ten years for the two counts under 18 U.S.C. § 371.
On February 7, 2012, Zundel pleaded guilty pursuant to a Rule 11 plea agreement. Under
this agreement, Zundel pleaded guilty to Count One (pertaining to the “real” loans) and Count

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Two (pertaining to the “G” loans) of the superseding information, both of which alleged
conspiracy to commit wire fraud in violation of § 371. The agreement acknowledged that the
parties disagreed about the applicable Sentencing Guidelines’ range. The government argued
that Zundel’s range should be 121 to 151 months (capped by the 120-month statutory maximum)
based on an adjusted offense level of 32—enhanced from the base offense level of 6 due to a loss
amount of $34,548,879 (twenty-two levels under U.S.S.G. § 2B1.1(b)(1)(L)), there being more
than ten victims (two levels under § 2B1.1(b)(2)(A)), and the use of sophisticated means to
perpetuate the crime (two levels under § 2B1.1(b)(9)(c)), coupled with a three-level upward
adjustment for Zundel’s playing a managerial or supervisory role under § 3B1.1(b) and a threelevel downward adjustment for acceptance of responsibility under § 3E1.1. Zundel, on the other
hand, placed the loss amount at $16,755,960, contended that his conduct did not involve ten or
more victims, and disputed that he was a manager or supervisor; he calculated his total offense
level as 25 and his recommended range as 57-71 months. The agreement stipulated that the
district court would make the factual findings necessary to resolve these disputes by a
preponderance of the evidence.
The plea agreement contained two other provisions pertinent to this appeal.

First,

regarding restitution, the agreement provided: “The court shall order restitution to every
identifiable victim of defendant’s offenses and all other relevant conduct. The victims and their
respective loss amounts will be identified at sentencing.” Second, the agreement contained a
waiver of right to appeal, which stated in relevant part that if the district court imposed a prison
term between 72 and 151 months, then Zundel could only appeal adverse rulings on Sentencing
Guidelines disputes regarding the amount of loss, the number of victims, or his role as a manager
or supervisor.

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On April 10, 2012, the United States Probation Office prepared a Presentence Report
(“PSR”) for Zundel. The PSR, which tracked the government’s calculation in Zundel’s plea
agreement, placed Zundel’s total offense level at 32 and calculated the loss at $32,548,879 for
the purposes of restitution. The government filed its sentencing memorandum on January 3,
2013, and Zundel filed his on January 8, 2013. Zundel’s memorandum challenged, among other
things, the number of victims, stating:
The parties agreed to disagree on the number of victims. While given the number
of financial institutions listed in the PSR as victims, it may be questionable
whether the number of victims attributable to Defendant’s conduct will be under
ten, the number will be unknown until Defendant has had the opportunity to
review the loan documents regarding the questioned loans in the spreadsheet.
After postponing sentencing at Zundel’s request four different times over the course of
five months, the district court finally held the sentencing hearing on February 12, 2013. During
this hearing, Zundel argued that his offense only involved nine, rather than ten or more, victims.
Zundel also challenged the government’s loss calculation. After hearing argument from both
parties, the district court overruled Zundel’s objections to the enhancements under U.S.S.G. §§
2B1.1(b)(1)(D) (pertaining to the amount of loss) and 2B1.1(b)(2)(A)(i) (pertaining to the
number of victims). The court determined that his Guidelines range was 135 to 168 months,
though capped at 120 months by statute, and sentenced Zundel to 120-months incarceration.
Although Zundel asked that the district court reserve the issue of restitution, the district court
further ordered Zundel to pay restitution in the amount of $34,548,879.
On February 15, 2013, Zundel filed a motion for a restitution hearing. On March 6,
2013, while that motion was still pending, the district court entered judgment reflecting its
rulings at the sentencing hearing; Zundel filed a notice of appeal the same day. After holding a
hearing on Zundel’s motion, on May 15, 2013 the district court entered an order stating that

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Zundel’s appeal vested jurisdiction in the appellate court and therefore deprived the district court
of jurisdiction to resolve Zundel’s motion for a restitution hearing. The order noted, however,
that if this Court were to remand the case, then the district court would grant Zundel’s motion in
part by permitting briefs regarding restitution and then, if appropriate, scheduling a restitution
hearing. Fed. R. Crim. P. 37 and Fed. R. App. P. 12.1 required that Zundel promptly notify this
Court of the district court’s May 15, 2013 order. The record indicates that Zundel did not notify
the Court until he filed his brief on October 11, 2013.
II.
We review the district court’s interpretation of the Sentencing Guidelines de novo and its
sentencing determination for abuse of discretion. United States v. Baker, 559 F.3d 443, 448 (6th
Cir. 2009); see also Gall v. United States, 552 U.S. 38, 51 (2007). We accept the district court’s
findings of fact unless they are clearly erroneous and give deference to the district court’s
application of the Guidelines to the facts. United States v. Galaviz, 645 F.3d 347, 358 (6th Cir.
2011).
A.
Zundel first challenges the district court’s application of a two-level enhancement under
U.S.S.G. § 2B1.1(B)(2)(A)(i) for a crime involving ten or more victims. Zundel contends that he
raised a factual objection to the number of victims listed in the PSR, which shifted the burden to
the government to prove the facts necessary for the ten-or-more-victims enhancement by a
preponderance of the evidence, and that the government did not present sufficient evidence to
justify the enhancement. Zundel misapprehends his and the government’s duties.
“When a defendant fails to produce any evidence to contradict the facts set forth in the
PSR, a district court is entitled to rely on those facts when sentencing the defendant.” United

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States v. Geerken, 506 F.3d 461, 467 (6th Cir. 2007). Further, as we stated in United States v.
Lang, 333 F.3d 678 (6th Cir. 2003):
A defendant cannot show that a PSR is inaccurate by simply denying the PSR’s
truth. Instead, beyond such a bare denial, he must produce some evidence that
calls the reliability or correctness of the alleged facts into question. If a defendant
meets this burden of production, the government must then convince the court
that the PSR’s facts are actually true. But the defendant gets no free ride: he must
produce more than a bare denial, or the judge may rely entirely on the PSR.
Id. at 681 (quotation omitted).

Although Zundel’s sentencing memorandum noted that he

disputed the number of victims, Zundel never filed objections to the PSR and did not produce
evidence to support his opposition to the PSR’s calculation of the number of victims before his
sentencing hearing.
During his sentencing hearing, Zundel orally objected to the PSR’s number of victims.
Zundel’s counsel explained that although he had not intended to pursue this objection, he had
changed his mind the night before the hearing because, after speaking with Zundel, he concluded
that “there’s a possibility that there is less than ten [victims].” Zundel contended that he had
reviewed the list of victims in the PSR but that he could only remember dealing with nine
primary mortgage lenders and that he therefore reserved the right to object to a finding of ten or
more victims. Further, Zundel argued that these primary lenders may have sold the mortgages to
other holders, who, in turn, could have again resold the mortgages. Zundel argues that because
mortgages are generally resold without recourse, only the parties who suffered financial loss
should qualify as victims. Zundel contended then, as he does now, that the PSR’s victim list
over-represents the number of victims by impermissibly counting multiple holders of the same
loan as multiple victims.
Zundel offered neither evidence of the mortgages having been resold and bundled nor
evidence of multiple holders of the same loan being counted as multiple victims. On questioning
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from the district court, Zundel admitted that the only evidence to support his contention was his
own oral identification of the nine lenders with whom he had dealt and that he had not advised
the government of which victims he believed did not belong on the victim list. Zundel later
admitted that he lacked any specific facts to address the list of alleged victims. As the district
court stated, Zundel’s bare allegations left it with two options: “taking [Zundel’s] comments and
viewing them as being speculative or treating the Government’s assertions as being
uncontested.” Because Zundel did not produce evidence to call the reliability of the PSR’s
victim list into question, the burden of persuasion never shifted to the government. See Lang,
333 F.3d at 681. Accordingly, the district court did not err in overruling Zundel’s objection and
relying on the PSR’s findings regarding the number of victims.
Even if Zundel had satisfied Lang’s requirement to introduce evidence supporting his
challenge to the PSR and shifted the burden to the government, a review of the record indicates
that Zundel’s argument that there may be fewer than ten victims is unfounded.

As the

government explained during the sentencing hearing, it only counted one victim per transaction.
Likewise, Zundel stated “my suspicion is that for each individual loan, ultimately, there’s going
to be one victim.” Under this one-loan-one-victim theory, Zundel’s involvement with far more
than ten “G” loans—each of which left a lender unsecured and without collateral—provides
enough victims to justify applying U.S.S.G. § 2B1.1(B)(2)(A)(i).
The Seventh Circuit employed similar reasoning in United States v. Knox, 624 F.3d 865,
872 (7th Cir. 2010). The Knox defendant used a fraudulent real estate flipping scheme wherein
he duped buyers into purchasing properties at inflated prices and then tricked lenders into
extending mortgages based on these exaggerated values. Id. at 867. Knox argued that because it
was uncertain whether the buyer or the lender in each transaction sustained the actual loss, the

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number of victims could not be determined. Id. at 873. The Seventh Circuit, however, held that
because Knox had acknowledged that there would be at least one victim for every transaction,
the court could apply U.S.S.G. § 2B1.1(B)(2)(A)(i) without having to identify exactly who bore
the loss for each transaction. Id. at 872. The rationale from Knox imports nicely here; in each
fraudulent loan transaction, of which there were more than ten, someone—be it the originating
lender or a successor—suffered an actual loss and thus qualifies as a victim for the purposes of
U.S.S.G. § 2B1.1(B)(2)(A)(i). The district court, therefore, did not err in applying the ten-ormore-victims enhancement.
B.
Zundel also relies on evidence presented at the sentencing of his co-conspirator, Ronnie
Duke, to argue that the ten-or-more-victims enhancement should not apply. Pursuant to a Rule
11 plea agreement, Duke pleaded guilty on July 5, 2012 to one count of conspiracy to commit
wire fraud in violation of 18 U.S.C. § 1349. Although § 1349 carries a thirty-year maximum
sentence, based on Duke’s substantial assistance, his plea agreement capped his maximum
sentence at fifteen years. As here, the parties disagreed about Duke’s applicable Guidelines
range, particularly the number of victims (over fifty) and the loss amount ($100 million). In the
plea agreement, the government placed Duke’s range at 360 months to life, whereas Duke
calculated his range at 262 to 327 months. After a later-filed PSR factored in Duke’s entire
criminal history, his range—even without the disputed enhancements for more than fifty victims
and a $100 million in losses—shifted to 324 to 405 months.
Duke was the last of the co-conspirators to be sentenced; his sentencing hearing took
place roughly two months after Zundel’s on April 8, 2013. At sentencing, Duke objected to the
government’s calculations of loss amount and the number of victims.

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He bolstered his

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objections with an opinion witness, Chip Cummings, who concluded that Duke’s loss amount
was $94 million and that Duke’s crimes only affected forty victims. So that there would not be
any Guidelines disputes, the government agreed to accept these findings. The government now
explains that it did not endorse Cummings’s calculations but decided not to contest them because
the bottom of Duke’s range exceeded the 180-month cap and therefore any additional Guidelines
determinations would be wholly academic. Over the government’s objection that the issues were
undisputed, the district court allowed Cummings to testify regarding his quantification of victims
and loss.
Zundel latches onto Cummings’s analysis indicating that there were fewer than fifty
victims in Duke’s case to support his argument that there were fewer than ten victims in his own
case. Because Duke was the mastermind of the entire mortgage fraud scheme, Zundel contends
that the victim list attached to Duke’s restitution order comprises an exhaustive list of victims for
the entire scheme. Zundel claims that comparing the government’s loss spreadsheet in his case
with the restitution order in Duke’s judgment proves that, in his case, only nine entities suffered
losses and thus that there were only nine victims. Our review indicates that Zundel must have
miscounted. In its loss chart for Zundel’s case, the government identified twenty-two lenders1
whose loans resulted in a loss. Of these twenty-two lenders, ten2 appear as victims in Duke’s
restitution order. The overlap of these ten institutions reaffirms that Zundel’s crime involved ten

1

These twenty-two lenders in the government’s chart are Aames Funding Corp., Aegis Wholesale Corp., Argent
Mortgage, Bayrock, BNC Mortgage, Chase Bank, Credit Suisse Financial, Decision One Mortgage, Entrust
Mortgage, FMF Capital, Fremont Investment, Impac Funding Corp., Lime/Green Light Financial Services, Long
Beach Mortgage, MILA, Inc., Novastar Mortgage, People’s Choice, PHM Financial Inc., Rocky Mountain
Wholesale, Saxon Mortgage, Southstar Funding, and Wilmington Finance.
2
The ten overlapping lenders are Aegis Wholesale, Argent Mortgage, Chase Bank (listed as “JP Morgan Chase”),
Credit Suisse Financial, Fremont Investment, Novastar Mortgage, People’s Choice, PHM Financial, Saxon
Mortgage (listed as “Morgan Stanley-Saxon Mortgage Services”), and Wilmington Finance.

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or more victims and that the district court properly applied a two-level enhancement under
U.S.S.G. § 2B1.1(B)(2)(A)(i).
III.
Zundel also contends that the district court erred in issuing its restitution order because it
did not specifically identify the victims who suffered losses and the amount owed to each victim.
After his sentencing, Zundel filed a motion for a restitution hearing on February 15, 2013.
Without ruling on Zundel’s motion, the district court entered judgment on March 6, 2013.
Zundel filed a notice of appeal the same day, thereby divesting the district court of its
jurisdiction to hear his motion for a restitution hearing. On May 15, 2013, the district court
entered an order stating that it lacked jurisdiction to entertain Zundel’s motion for a restitution
hearing. Consistent with Fed. R. Crim P. 37(a), the order noted that if this Court were to remand
the case, then the district court would grant Zundel’s motion in part by permitting briefing on the
issue of restitution and then scheduling a restitution hearing if the court deemed it appropriate.
We now remand the question of restitution to the district court.
We end with two observations. First, Zundel completely neglected both Fed. R. Crim. P.
37(b) and Fed. R. App. P. 12.1(a)’s requirements to “promptly notify” the clerk of this Court
about the district court’s order of May 15, 2013. His failure to comply with these notice
requirements could permit us to conclude that Zundel had forfeited his restitution argument, were
we so inclined. Second, we note that the appeal-waiver provision of Zundel’s plea agreement
forecloses his ability to appeal the district court’s eventual ruling on his motion for a restitution
hearing.

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IV.
For the foregoing reasons, we AFFIRM the district court’s imposition of a 120-month
sentence and REMAND the issue of restitution to the district court.

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