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United States v. Prieto

United States Court of Appeals, First Circuit

January 20, 2016

MICHAEL T. PRIETO, Defendant, Appellant

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[Copyrighted Material Omitted]

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Jean C. LaRocque for appellant.

Seth R. Aframe, Assistant United States Attorney, with whom John P. Kacavas, United States Attorney, was on brief, for appellee.

Before Lynch, Stahl, and Kayatta, Circuit Judges.


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KAYATTA, Circuit Judge.

The criminal prosecution giving rise to this appeal stems from a so-called mortgage rescue program organized and operated by Michael Prieto. In brief, Prieto's organization garnered large sums of money, while homeowners, sham buyers, and lenders to whom Prieto and his operatives made a series of false representations ended up with substantial losses and liabilities. The United States viewed the whole arrangement as fraudulent. A jury agreed, convicting Prieto of mail fraud under 18 U.S.C. § 1341. Prieto now appeals both his conviction and the portion of his sentence that fixes the amount of restitution that the district court ordered he pay to his victims. Seeing no reversible error, we affirm.

I. Background

We begin by summarizing the evidence that sets the stage for evaluating Prieto's challenges to the sufficiency of the government's proof in support of the offense for which Prieto was charged and convicted. In so doing, we take the evidence in a light favorable to the jury verdict. United States v. Burgos-Montes, 786 F.3d 92, 99 (1st Cir.), cert. denied, 136 S.Ct. ___, 193 L.Ed.2d 479 (2015) (mem.) (sufficiency challenge); United States v. Wihbey,

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75 F.3d 761, 774 (1st Cir. 1996) (variance challenge).

Prieto advertised the organization that he formed in 2005 and ran until 2008 (under various names) as a " mortgage rescue program" designed to assist homeowners struggling to make mortgage payments. Prieto and his associates began by identifying distressed homeowners facing foreclosure and then solicited the participation of those homeowners through targeted advertising. The pitch to these homeowners was that Prieto's organization would tap a " pool of investors" to " get rid of this bad debt" and let participants stay in their homes. Individuals who signed up with Prieto agreed to transfer their homes to the organization. In return, the organization promised to satisfy each homeowner's delinquent mortgage obligation and to charge the homeowner a monthly rent that would be less than the homeowner's previous monthly mortgage payment. Homeowners were also promised the opportunity to repurchase their properties after two years of timely payments.

The organization then arranged sham transfers to straw purchasers who received lump sum payments from Prieto's group for their services. Falsely claiming, among other things, an intention to use the homes as primary residences, the straw purchasers then applied for residential mortgages, which were always larger than the original homeowner's mortgage and often equal to the total value of the underlying residence. The straws then executed quitclaim deeds, conveying the properties over to the organization.

The organization applied the funds from the new mortgages to the remaining balance on each original homeowner's mortgage. Once that first mortgage was satisfied, Prieto's organization extracted the remaining funds in the second mortgage through one of two methods. One method, used from March 2005 to April 2006, was to have a corporation controlled by the organization file a false mortgage lien against the property before the transfer to the straw purchaser. The straw purchaser could then use the funds from the second mortgage to pay off the sham lien at closing. After being fined by a state regulator for this practice, the organization abandoned this method and began simply instructing straw purchasers to directly transfer the excess mortgage funds to one of the organization's corporations.

Prieto was ultimately involved in 86 transactions with a total of 30 mortgage lenders. While some of the homeowners managed to stay in their homes for a time at the reduced rent payments, Prieto's organization failed to stay current on the mortgage obligations. Foreclosure proceedings were instituted against nearly all of the organization's properties. The straw purchasers--who had been promised that their responsibility ended at the sham closing--unexpectedly found themselves on the hook for the unpaid mortgage obligations. Authorities ultimately arrested Prieto and five of his associates. The other members of the scheme entered guilty pleas pursuant to plea agreements and cooperated with the government's investigation and prosecution.

The ensuing indictment detailed all stages of the foregoing scheme, and expressly included all stages as parts of how " the scheme worked." It described deceit of homeowners, straws, and lenders, with loans collectively exceeding foreclosure proceeds by over $5 million. It packaged all averments under a single mail fraud count. In short, the indictment previewed the evidentiary proof of a single scheme that worked by deceiving and defrauding homeowners, straws, and lenders, all of whom were collectively left holding the

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bag for the sums Prieto extracted from the equity and the lenders.[1]

II. Analysis

A. The Indictment

Prieto rests the bulk of his argument on a claim that the indictment improperly characterized a series of distinct criminal activities as a single, overarching scheme. Such an argument " implicate[s] both the doctrine of 'duplicity'--the joining of two or more distinct offenses in a single count of an indictment, and the doctrine of 'variance'--the presentation at trial of evidence that varies materially from the crime charged in the indictment." United States v. ...

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