United States District Court, E.D. Pennsylvania
For JONATHAN GANZ, Defendant: DAVID E. SHAPIRO, LEAD ATTORNEY, PHILADELPHIA, PA; MICHAEL R. SHAPIRO, LEAD ATTORNEY, LAW OFFICES OF DAVID E. SHAPIRO, PHILADELPHIA, PA; STEPHEN LACHEEN, LACHEEN DIXON WITTELS & GREENBERG LLP, PHILADELPHIA, PA.
For USA, Plaintiff: JOEL D. GOLDSTEIN, LEAD ATTORNEY, U.S. ATTORNEY'S OFFICE, PHILADELPHIA, PA; MICHAEL S. BLUME, UNITED STATES ATTY'S OFFICE, PHILADELPHIA, PA.
Hon. Petrese B. Tucker, United States Chief Judge.
This criminal case arises out of Defendant Jonathan Ganz's fraudulent scheme to obtain mortgage loans to finance home improvements for consumers. Defendant pleaded guilty to one count of wire fraud in violation of 18 U.S.C. § 1343. Presently before the Court is the Government's request for an order of restitution pursuant to the Mandatory Victims Restitution Act (" MVRA" ), 18 U.S.C. § 3663A. Upon consideration of the parties' arguments and submissions, and for the following reasons, the Court orders restitution in the aggregate amount of $170,538.82.
I. FACTUAL AND PROCEDURAL HISTORY
Defendant's criminal conduct stems from his collaboration with co-Defendant Calvin Harris in a home improvement scheme to defraud consumers and mortgage lenders. In 2003, Harris operated the Philadelphia Home Improvement Outreach Program (" PHIOP" ), which promised to undertake home improvement projects for customers and to assist in obtaining any necessary financing. Defendant, a loan processor in the Philadelphia area, helped Harris to obtain mortgages for PHIOP customers by deceiving lenders such as Wells Fargo Bank, N.A. (" Wells Fargo" ) and Chase Bank USA, N.A. (" Chase" or, collectively, " Banks" ). Defendant and Harris used false income and/or employment documents in loan applications. In 2005 and 2006, when financing proved more difficult to obtain, Defendant arranged for some PHIOP customers' properties to be transferred to his mother as a straw purchaser because she could obtain mortgages on them. The customers then paid rent to PHIOP to satisfy the mortgages and to purchase the property back. The closing documents on these land purchases falsely reflected that Defendant's mother brought cash to the closings when she did not. The defendants also concealed the fact that the original homeowner had entered into an agreement to buy back the property at a later date. As a result, the Banks approved several thousand dollars' worth of mortgage loans (" PHIOP loans" ).
Despite the loans, Harris had insufficient funds for PHIOP operations and he continually sought new customers to finance the projects of current ones. The scheme continued from October 2003 to April 2006 when PHIOP collapsed, resulting in substantial pecuniary loss to homeowners and mortgage lenders. PHIOP customers also suffered incomplete or substandard home improvement work and some were required to repay the mortgages fraudulently obtained by the defendants.
On March 26, 2010, Defendant was charged by information for one count of wire fraud in violation of 18 U.S.C. § 1343 and § 2. Defendant pleaded guilty, which the Court accepted on July 26, 2010. After two sentencing hearings, the Court sentenced Defendant to five years of probation, six months of home monitoring, and a special assessment of $100. The Government also requested an order of restitution but Defendant disputed any obligation for restitution to Wells Fargo or Chase, arguing that they were not " victims" under the MVRA. The Court reserved ruling on the issue and took the matter under review.
II. STANDARD OF REVIEW
Restitution is mandatory under the MVRA for certain types of crimes, including any offense " in which an identifiable victim or victims has suffered a physical injury or pecuniary loss." 18 U.S.C. § 3663A(c)(1)(B). The MVRA defines " victim" to mean " a person directly and proximately harmed as a result of the commission of an offense for which restitution may be ordered[.]" Id. § 3663A(a)(2). If the offense " involves as an element a scheme, conspiracy, or pattern of criminal activity", the term " victim" includes " any person directly harmed by the defendant's criminal conduct in the course of the scheme, conspiracy, or pattern." Id.
The Third Circuit adopted a two-prong test to determine whether a victim was " directly and proximately harmed" such that restitution is appropriate under the MVRA. U.S. v. Fallon, 470 F.3d 542, 548-49 (3d Cir. 2006). First, " [r]estitution should not be ordered in respect to a loss which would have occurred regardless of the defendant's conduct." Id. at 549 (quoting U.S. v. Vaknin, 112 F.3d 579, 589 (1st Cir. 1997)); see U.S. v. Akande, 200 F.3d 136, 141 (3d Cir. 1999) (" [C]ourts have held that a defendant may not be ordered to pay restitution for losses unrelated to the acts for which he was convicted." ). Second, " [e]ven if but for causation is an acceptable theory, limitless but for causation is not. Restitution should not lie if the conduct underlying the offense of conviction is too far removed, either factually or temporally, from the loss." Fallon, 470 F.3d at 549; see U.S. v. Kones, 77 F.3d 66, 70 (3d Cir. 1 996) (" [W]e interpret 'direct' to require that the harm to the victim be closely related to the scheme, rather than tangentially linked." ).
If a court determines that restitution is required under the MVRA, it is to " order restitution to each victim in the full amount of each victim's losses as determined by the court and without consideration of the economic circumstances of the defendant." 18 U.S.C. § 3664 (f)(1)(A); id. § 3663A(d). If the amount of restitution is in dispute, the court is to determine the proper amount by the preponderance of the evidence. Id. § 3664(e). The Government has the " ...