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United States v. Siciliano

March 11, 2009

UNITED STATES OF AMERICA,
v.
DANA SICILIANO AND JUNE KODIAK.



The opinion of the court was delivered by: Baylson, J.

MEMORANDUM RE: LOSS CALCULATION FOR SENTENCING

This Memorandum discusses the issue raised by Defendants Dana Siciliano and June Kodiak regarding loss calculation for their sentencing, and elaborates on this Court's ruling on the issue at the February 27, 2009 hearing.

I. Background

On July 18, 2006, Dana Siciliano and June Kodiak, along with eight other individuals, were indicted for their involvement in a scheme led by co-defendant Mahn Huu Doan. See (Doc. 1 - Indictment). The following facts summarize the indictment, to which all defendants have entered guilty pleas. Over a period of several years, Doan purchased or borrowed the identities of many individuals in the Asian-American community and used those identities to purchase properties throughout Philadelphia. In conducting his scheme, Doan would first buy the homes from the existing owners with one of his recruited identities in the "A" transaction.*fn1 After the A purchase, Doan would then sell the properties to another acquired identity (in effect, to himself) in the "B" transaction at an artificially inflated price. Doan enlisted the help of an appraiser for the B transaction; the appraiser attested to the inflated values of the homes by claiming that they had been renovated or were in the process of being renovated. Using this sham appraisal, Doan would obtain a mortgage at the artificially inflated value of the home.

For the financing of the transactions, Doan utilized Encore Mortgage company, where both Dana Siciliano and June Kodiak were employed. In addition to conventional ones, many of the mortgages that Doan obtained for the B transaction were FHA-insured loans through HUD. From September 2001 until February 2003, Siciliano and Kodiak knowingly accepted fraudulent documentation in approving these FHA-insured and conventional mortgages. At one point in the scheme, several of the mortgages that were still partially unpaid were refinanced at an even higher value; the proceeds of these new mortgages were used to maintain payments on other outstanding mortgages. At another point in the scheme, Doan was incarcerated for another crime and was no longer able to maintain the mortgage payments on the properties. Siciliano's boss, Vincent Sirolli, with the knowledge that foreclosure on the properties might arouse the suspicion of law enforcement, directed Siciliano to keep track of all the outstanding mortgages in the scheme and maintain the payments.

As to the two Defendants at issue here, Siciliano pled guilty on September 12, 2006 to conspiracy, wire fraud, making false statements to HUD, and identity fraud. (Doc. 78, 81). Kodiak also pled guilty on September 26, 2006 to the same four counts. (Doc. 87, 88).

In anticipation of all defendants' sentencing hearings, on September 23, 2008, the Government filed the "Government's Sentencing Memorandum Concerning Loss Calculation for All Defendants." (Doc. 205). In that Memorandum, the Government discussed the method it used to estimate the loss caused by the scheme for purposes of § 2B1.1 of the Sentencing Guidelines.*fn2 The Government later filed a revised Memorandum and spreadsheet on October 6, 2008, which included additional paid off loans in its loss estimation. (Doc. 212). On January 12, 2009, the Government filed individualized Sentencing Memoranda for Dana Siciliano (Doc. 237) and June Kodiak (Doc. 238); those Memoranda apply the loss calculation methodology to both Defendants in particular.

Siciliano filed her own Sentencing Memorandum in response on January 16, 2009. (Doc. 242). Siciliano took issue with the methodology offered by the Government to calculate loss under the Guidelines. To rebut the Government's methodology, she offered an expert report concerning the amount of loss.

On January 21, 2009, the Court held a sentencing hearing for Siciliano (Doc. 268), where she presented the expert testimony of Eugene Pasymowski, MAI, a real estate appraiser, who offered Siciliano's alternative method of estimating losses, described below. During the sentencing for Kodiak on January 22, 2009 (Doc. 263), Kodiak agreed to adopt the expert testimony and arguments offered by Siciliano subject to agreement by Siciliano's counsel, which was forthcoming. Both sentencing hearings were adjourned to allow the Government to advocate its position on the case law for loss calculation under the Sentencing Guidelines in similar cases. (Doc. 289 - Govt's Letter of Jan. 28). Siciliano responded (Doc. 290 - Siciliano Letter of Feb. 11), and the Government provided its reply (Doc. 291 - Govt's Letter of Feb. 12).

The sentencing for both Siciliano and Kodiak resumed on February 27, 2009. This Court ruled on the relevant loss calculation for the sentence and then issued a sentence for both Defendants. This Memorandum elaborates on the rationale underlying that ruling, and it is limited to the record established at the hearings for these two Defendants.

II. Framework of the Sentencing Guidelines

The primary issue disputed by the parties concerns the amount of loss incurred by the victim entities, either HUD or the conventional mortgagee, which were entitled to the balance due on the mortgages on which Defendants defaulted. Although agreeing that the applicable section of the Sentencing Guidelines is § 2B1.1 and that the base offensive level is 6, the parties disagree as to the enhancement that Defendants Siciliano and Kodiak deserve under the Sentencing Guidelines for the amount of loss caused by their conduct, which factors into the applicable offense level. There are two types of loss that a district court can use for the loss calculation in § 2B1.1(b)(1): actual loss or intended loss. "Subject to the exclusion in subdivision (D), loss is the greater of actual loss or intended loss." USSG § 2B1.1, app. n. 2(A) (Nov. 1, 2002). In this case, both parties appear to agree that this Court should calculate the actual loss, rather than the intended loss.

Actual loss is defined as "the reasonably foreseeable pecuniary harm that resulted from the offense." USSG § 2B1.1, app. n. 2(A)(i). Pecuniary harm is determined to be "reasonably foreseeable" when "the defendant knew or, under the circumstances, reasonably should have known, [that it] was a potential result of the offense." USSG § 2B1.1, app. n. 2(A)(iv). A loss estimate by a district court should be based on several factors:

(i) The fair market value of the property unlawfully taken or destroyed; or, if the fair market value is impracticable to determine or inadequately measures the harm, the cost to the victim of replacing that property.

(ii) The cost of repairs to damaged property.

(iii) The approximate number of victims multiplied by the average loss to each victim.

(iv) More general factors, such as the scope and duration of the offense and revenues ...


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