Defendants must be given an opportunity to object to restitution claims

United States v. Chaika 2012 WL 4476680 (8th Cir. 2012)

Defendant must be given opportunity to object to restitution claims

​The defendant and a co-defendant, both real estate agents, formed Superior Investment Group (SIG) to acquire unsold homes at discounted prices, seek out buyers and arrange mortgage loans that would finance significantly inflated purchase prices, and use the inflated mortgage loan proceeds to pay fees to SIG and a defendant-owned company and provide cash back to the buyers. SIG did not disclose to mortgage lenders that buyers would receive significant portions of the loan proceeds. The artificially inflated prices were supported by false mortgage loan documents, including duplicate HUD forms to conceal price differentials; false appraisals; and bank statements that misrepresented buyers’ incomes and net worth. After the fraudulent transactions, many buyers could not afford the inflated mortgage payments, resulting in foreclosure sales at prices well below the unpaid mortgage balances. The two defendants arranged more than one hundred residential property transactions involving undisclosed cash payments to buyers, despite receiving legal advice that concealing these kickbacks from mortgage lenders was fraud. The defendant was convicted by a jury on seven counts of wire fraud, two counts of mail fraud, and one count of conspiracy to commit wire fraud and mail fraud.

The defendant’s PSR stated that “approximately 100 separate victims have been identified,” listed eight victims who had submitted claims for restitution totaling $6,077,795.30, and declined to make a restitution recommendation, noting the court’s authority to set a date for the final determination of victim losses within ninety days after sentencing. See 18 U.S.C. §3664(d)(5). Accordingly, neither party’s sentencing position paper addressed the issue of restitution. Six weeks later, without prior notice and without scheduling a hearing or inviting written comments or objections by the parties, the court entered an Order of Restitution directing that the two defendants were jointly and severally liable for $7,430,858.30. The Eighth Circuit reversed the restitution order: “although the district court properly deferred restitution issues for ninety days pursuant to §3664(d)(5), it committed reversible error by entering a final Order of Restitution without affording [the defendant] an opportunity to object to restitution claims being awarded.” See United States v. Vandeberg, 201 F.3d 805 (6th Cir. 2000).

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