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The Seventh Circuit Reminds Us That Loss Is Not Equal To Restitition (also, pleading open has benefits).

Tomas Leiskunas, a man who “at 26 years old . . . had a minor criminal history and at least two aliases,” was charged with being a straw purchaser in a mortgage fraud scheme in the federal district court in Chicago.

United States v. Leiskunas, would take out fake mortgages in Mr. Leiskunas’s name* on houses that he was never going to live in. He would attend real estate closings and say that he was going to live in the houses.

That’s against the law.

Mr. Leiskunas decided to plead guilty. He declined to accept a plea agreement from the government, deciding, instead, that he would like to plead open. (For prior posts on defendants who have done well on appeals by pleading open, check out this post, this post, or this post).

The biggest effect of an open guilty plea is that there are no agreements about the person’s sentencing guidelines. In a fraud case, as in almost any white-collar case, loss amount is the largest question on the table. In Mr. Leiskunas’s case, it was also responsible for his win in the Seventh Circuit.**

The starting point for most white-collar sentencing guidelines is section 2B1.1 of the federal sentencing guidelines. The biggest factor driving a white-collar case is normally loss amount.

The guidelines say that the loss amount is the amount of money that is reasonably foreseeable to be lost to the person charged with the crime.

In Mr. Leiskunas’s case, the government had a novel and concrete theory of loss.

The total amount loaned in the closings that Mr. Leiskunas participated in was $4,473,161.55.

Because, as you may have noticed, the housing market is not doing well, each house involved in Mr. Leiskunas’s case was foreclosed on (that they were a part of a mortgage fraud conspiracy may have been a contributing factor). The total value of money raised at these foreclosure sales was $1,792,000 less than the total amount loaned.

Thus, the government argued, the amount the banks lost must have been the amount that was reasonably foreseeable to Mr. Leiskunas.

The district court adopted the government’s calculation of loss without much discussion.

The Seventh Circuit reversed because the district court did not offer an explanation for accepting the government’s position.

The appeals court did not opine on the merits of the government’s position. It did not note, for example, that there was no way Mr. Leiskunas could have known what the houses would fetch later at a foreclosure sale. The court of appeals did not explain that the amount used as a loss number was the amount of harm actually suffered, which is very different than the amount of harm that Mr. Leiskunas would have been able to predict when he participated in the mortgage fraud. The Seventh Circuit also did not point out that the government’s test completely fails to account for the way the guidelines explicitly say that loss amount should be calculated.

Nope, the Seventh Circuit just sent it back for a better explanation.

 

* Or, if not his actual name, one he would be willing to answer to during a real estate closing.

** Sort of. The Seventh Circuit also reversed on the district court’s determination that Mr. Leiskunas did not play a minor role in the mortgage fraud scheme. The district court expressed the belief that the law was that Mr. Leiskunas could not be a minor player if he was essential to the scheme or was involved, in a minor way, a number of times. This was not the law, according to the Seventh Circuit. For more, see USSC S 3B1.2.