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United States v. Kubini

United States District Court, W.D. Pennsylvania

June 14, 2017





         This complex mortgage fraud case returns to the Court once again to resolve contested issues related to the timing and propriety of the Government's disclosures under Brady, Giglio, the Jencks Act, and this Court's prior Orders, as they relate to ongoing sentencing enhancement and restitution proceedings involving Defendants George Kubini, Dov Ratchkauskas, and Arthur Smith.[1] (Docket Nos. 614; 617; 620; 624). At the behest of the assigned prosecutor, Assistant United States Attorney Brendan T. Conway, ("AUSA Conway"), the Court held lengthy evidentiary hearings with sessions on October 7, 2015, October 27, 2015, November 10, 2015, January 27, 2016, February 23, 2016, May 13, June 1, 2016 and June 2, 2016.[2] Prior to the commencement of the proceedings, Defendants, particularly Smith, repeatedly requested that Brady/Giglio and Jencks materials as to the sentencing proceedings be made available to Defendants. (Docket No. 614). AUSA Conway ignored these requests for several months, until he finally assured all that the required disclosures had been made in both an email sent a few days prior to the commencement of the proceedings and then reiterated the same orally at the outset of the October 7, 2015 session. See 10/4/15 email; Hr'g Trans. 10/7/15. In light of these disputes, the Court ordered that "fundamental fairness dictates that all witnesses must be disclosed to the defense in a timely fashion and that all relevant discovery documents as to such witnesses must be made available for review by defense counsel." (Docket No. 494).

         The proceedings were contentious, to say the least, with numerous objections to the admission of evidence during the course of same. Most pertinent here, the Court overruled several objections lodged by Smith to the admission of hearsay statements of a cooperating witness, Rochelle Roscoe ("Roscoe") of Riverside Mortgage, through the case agents, Secret Service Special Agent Daniel Fisher, ("SA Fisher"), and IRS Special Agent Amanda Avoilia, ("SA Avolia"). After the evidentiary record closed, AUSA Conway admits that he failed to disclose to the defense that he had decided not to call Roscoe as a witness at trial because, as he wrote in a sealed 5K1.1 motion[3] he filed on her behalf, he believed she was not "particularly reliable" as a witness and the Government felt that calling her at trial would do "more harm than good" to the Government's case. (Docket Nos. 614-6; 620; 620-13). The Government also concedes that it failed to disclose that its counsel sought input for the 5K motion from the entire prosecution team, noting himself that he was "not sure" Roscoe was credible and in response SA Fisher stated that Roscoe was "completely not credible." (Docket No. 620).

         Presently before the Court for disposition are a number of matters including: Smith's motion to supplement the record which is joined by Ratchkauskas and is opposed by the Government, in part, (Docket Nos. 614; 617; 620; 624); and the parties' proposed findings of fact and conclusions of law on the various objections to the sentencing enhancements and restitution, (Docket Nos. 629; 630; 631; 671); their respective responses, (Docket Nos. 640; 641; 644; 647); and replies, (Docket Nos. 651; 657; 660; 669). For the following reasons, the Court grants Smith's Motion [614] and will write separately to address the parties' objections to the various sentencing enhancements and the restitution claims.


         A. Brief Overview of Sentencing Disputes

         All four of the codefendants in this action pled guilty to criminal charges pursuant to plea agreements with the Government in February of 2015, but they have not yet been sentenced as numerous disputes as to applicable sentencing enhancements and restitution remain. Relevant here, the Government is seeking several sentencing enhancements against Kubini, Ratchkauskas and Smith including: increases of sixteen (16) levels for alleged lender losses under Guideline § 2B1.1; an additional two (2) levels under Guideline 2B1.1 attributable to purported borrower losses (in addition to the lender losses); at least a four4evel enhancement under Guideline § 2B 1.1(b)(2)(B) as the Government contends that the number of victims (lenders plus borrowers) is in excess of 50[4]; a two-level enhancement under Guideline § 3Al. 1(b)(1) because the criminal conduct allegedly targeted vulnerable victims, i.e., the borrowers who were first time home buyers with little or no experience in the financing process; and, a two-level enhancement for gross receipts in excess of $1, 000, 000.00. (Docket No. 630). The Government also seeks enhancements of two-levels for sophisticated means against Kubini and Ratchkauskas and two-levels for obstruction of justice against Smith and Ratchkauskas. (Id.). The Government further contends that Ratchkauskas should not be granted a two-level downward adjustment for acceptance of responsibility given his bond violations and obstruction of justice. (Id.). Naturally, the application of all of these enhancements to the offense level computations has an impact on the advisory guidelines ranges for each of these Defendants, significantly increasing their sentencing exposure under the advisory sentencing guidelines. Defendants contest, in whole or part, the application of all of these enhancements. (Docket Nos. 629; 631; 640; 647; 660).

         The Government presented a series of charts listing 109 real estate transactions with real estate closings that took place between November 23, 2005 and December 15, 2008. (See Govt. Ex. E). At the hearings, the Government admitted that it did not have sufficient evidence to conclude that two of the transactions involved fraud, with buyers Hubert Smith on Rosyln Street on 5/23/2006 and Zachary Engler on Northumberland Street on 7/25/2007. (SA Fisher Testimony, 1/27/16, Docket No. 574 at 80-1). According to the Government, the remaining 107 transactions included some type of bank fraud, including that:

• No down payments were made by any of the buyers, despite indications on the settlement statements that down payments were being made at the closings;
• The buyers' income and assets were often overstated on mortgage applications, supported by fake verification of deposits made by bank insiders;
• The buyers listed on the mortgages were sometimes not the true purchasers of the properties, with older relatives serving as straw buyers;
• Cash back was paid to many of the buyers but not disclosed to the lenders;
• Agreements to make repairs on properties were entered into at the closing between several of the buyers and sellers but not shared with the lenders;
• Silent second mortgages were taken out on the properties by the sellers and agreed to by a few buyers but same were not provided to the lenders;
• Double closings were sometimes conducted which involved the sellers purchasing the properties from third parties and then selling to the buyers immediately (or, even prior to the initial sale).

(Govt. Ex. AA). The Government seeks to hold each of the Defendants responsible for any losses to victims that occurred after the date that they joined the mortgage fraud conspiracy. In this regard, the Government asserts that:

• Kubini is responsible for losses resulting from all 107 fraudulent transactions because he joined the conspiracy on the date of its inception, i.e., November 23, 2005. (Govt. Ex. E);
• Ratchkauskas joined the conspiracy on March 22, 2007 and is responsible for any losses in 95 transactions, (Govt. Ex. F);
• Finally, Smith may be responsible for losses in any of the 83 transactions that occurred after he joined on July 12, 2007. (Govt. Ex. G).

         With that said, no losses are claimed for a number of these properties by either the lender or the borrowers. (Govt. Ex. E).

         Another of the core disputes between the parties that has been at issue throughout these proceedings is whether the borrowers are properly classified as victims of the offenses under the Guidelines and restitution statutes, as maintained by the Government, or if they are participants to the fraud, as the Defendants have advocated. These arguments present legitimate questions because the borrowers signed the relevant loan applications submitted to the lenders overstating their respective assets and the settlement statements from the real estate closings indicating that they had made down payments on the properties when they had not put any money down as part of the transactions. (Govt. Ex. AA). The borrowers likewise endorsed checks made out to them during the closings that were generated by the closing attorney and were utilized to misrepresent to the lender that a down payment had been made; however, the reality of the transaction was that no down payment was made by any of the borrowers. (Id.). Other borrowers received cash back at the closings and still others were straw buyers as the purchasers did not intend to live at the home as their relatives, mostly sons or daughters, were the real buyers but their credit was too poor to obtain a mortgage. (Id.). Several borrowers have been prosecuted by the Government as part of this scheme and the related ones, i.e., Daniel Hoey; Robert McCully; and, Jason Moreno. See Crim. Nos. 09-200 (Hoey); 09-201 (McCully); and 10-117 (Moreno). JP Morgan Chase has advanced a restitution claim against Defendants related to many of the properties at issue. (Govt. Ex. H). Some of the individual borrowers - or their relatives - have also submitted victim-impact statements with corresponding restitution claims. (Govt Exs. 150-213).

         With a single exception, i.e., Moreno, the Government has not pursued the victim-related enhancements against any of the participants in this wire fraud conspiracy.[5] This would include, among others: real estate brokers: Robert Arakelian, Eric Hall, Rhonda Roscoe, and Rochelle Roscoe; closing attorneys: James Steiner and Daniel Sporrer; closing agent, Karen Atkison; appraisers: Joel Reck and Howard Reck; and bank employees: Bartholomew Matto, Cynthia Pielin and Crystal Spreng. See Crim. Nos. 09-198 (Arakelian); 09-202 (Spreng); 09-223 (Atkison); 09-311 (Sporrer); 10-106 (Hall); 10-232 (Howard Reck); 11-15 (Matto); 11-16 (Rhonda Roscoe); 11-17 (Rochelle Roscoe); 11-221 (Joel Reck); 11-255 (Pielin). The Government has also not sought to hold any of these individuals responsible for the "relevant conduct" of the entire conspiracy. By comparison, each of these coconspirators faced relatively nominal advisory guidelines ranges when compared to the advisory guidelines ranges proffered by the Government in this matter, i.e., Ratchkauskas, total offense level of 41 and criminal history category of I, resulting in 324 months to life imprisonment; Kubini, total offense level of 37 and criminal history category of I, resulting in 210-262 months' imprisonment; and Smith, total offense level of 35 and criminal history category of I, resulting in 168-210 months' imprisonment. (Docket No. 630).

         B. Relevant Background Concerning Government's Disclosures

         During pretrial litigation of this case, AUSA Conway represented to the parties and the Court in public filings on the CM/ECF System that Rochelle Roscoe of Riverside Mortgage would be called as a government witness at trial, with the earliest of such public disclosures appearing to have been made on August 30, 2013 and September 5, 2013 and the last one being on February 19, 2015. (See e.g., Docket No. 180 at 2 ("both Rhonda and Rochelle Roscoe, pleaded guilty and are likely witnesses at the trial."); see also Crim. No. 11-17, Docket No. 40 at 1 ("The defendant [Rochelle Roscoe] is scheduled to testify at the upcoming trial of the United States v. George Kubini, et al., Criminal No. 11-014, in the Western District of Pennsylvania.")). The expectation of Rochelle Roscoe's trial testimony was referenced multiple times throughout the course of the extensive litigation in this case, and as a result, was noted by the Court several times in written decisions ruling on various motions. For example, in deciding a pre-trial Brady dispute between Smith and the Government on May 13, 2014, the Court noted that:

[a]t this point of the case, the roles of both [Rochelle] Roscoe and [James] Steiner are clear because both have pled guilty to participating in the instant mortgage fraud scheme and will testify as key prosecution witnesses at trial consistent with their admissions that they acted with intent to defraud in conjunction with the real estate transactions.

United States v. Kubini, 19 F.Supp.3d 579, 632 (W.D. Pa. 2014). Later, in a January 5, 2015 decision, the Court commented that "Government counsel has previously advised that it intends to call certain witnesses at trial, including Robert Arakelian (Pittsburgh Home Loans); Rochelle Roscoe (Riverside Mortgage); and James Steiner (Hergenroeder, Rega & Sommer)." United States v. Kubini, 304 F.R.D. 208, 218 (W.D. Pa. 2015).

         As noted, there have been regular disputes between AUSA Conway and counsel for Smith regarding the Government's disclosures throughout the case. Smith's counsel filed his first motion seeking the disclosure of Brady/Giglio materials on the date of Smith's arraignment, April 16, 2013, (Docket No. 115), and has repeatedly and persistently made similar requests throughout the course of these proceedings. (See e.g., Docket Nos. 251; 256). The Government made certain of these materials, (including some related to Rochelle Roscoe), available for review by Defendants and their counsel on a computer terminal in the U.S. Attorney's Office as early as the fall of 2013. This procedure engendered disputes between the Government and Smith, leading the Court to prospectively define the scope of Brady material as to Rochelle Roscoe prior to trial, as follows:

the Court agrees with Smith that the prior statements to the agents by Roscoe and Steiner, which are consistent with Smith's position that he was advised that the lenders were made aware of the "gifts of equity, " are material evidence on the central issue of whether he acted with intent to defraud in this case. In this Court's opinion, this information "is particularly solid impeachment evidence because it goes against the thrust of the prosecution's case." Starusko, 729 F.2d at 261. Although the Government proffers that Roscoe and Steiner later retracted those statements, the fact that the prior statements may be used to impeach the witnesses does not alter the character of the evidence under Brady if it is material to the determination of defendant's guilt or innocence at trial, as is the case here. See Friedman, 658 F.3d at 358. To the extent that Smith's counsel's summary of the information in the agents' memoranda is accurate, which the Court has no reason to doubt, the same is the type of information which should be produced under Brady in accordance with the Court's deadline for same which will be set in its Pretrial Order.

Kubini, 19 F.Supp.3d at 632-33. The Court also issued a Memorandum Order and corresponding Pretrial Order on September 18, 2014. (Docket Nos. 282, 283). In the Memorandum Order, the Court noted the distinction between Jencks materials and Brady/Giglio materials and the differences in the Court's authority to order pretrial production of these types of materials. The Court reasoned that:

[t]he parties do not dispute the generally applicable legal principles which permit the Government to withhold pure Jencks Act materials until after a witness testifies on direct examination, 18 U.S.C. § 3500(b), and precludes the Court from ordering production until that time. United States v. Maury, 695 F.3d 227, 247-48 (3d Cir. 2012). They also recognize that courts have long promoted and encouraged early disclosure of Jencks Act materials by the Government in order to avoid delays at trial. See Id. at n.18 ("Despite this limitation, many federal prosecutors routinely turn over Jencks material a few days before the witness testifies."). They further concur that the Court retains the general discretionary authority to order pretrial disclosure of Brady and Giglio impeachment materials. See United States v. Higgs, 713 F.2d 39, 42, n.6 (3d Cir. 1983); United States v. Starusko, 729 F.2d 256, 261 (3d Cir. 1984) ("[t]he district court may dictate by court order when Brady material must be disclosed").

(Docket No. 282 at 11). In light of this distinction, the Court's Pretrial Order established a deadline of February 2, 2015 for the Government's production of "any Brady/Giglio impeachment materials not previously disclosed." (Docket No. 282). The Court also strongly encouraged the Government to produce its Jencks Act material by the same deadline. (Id.).

         As the March 2, 2015 trial date approached, AUSA Conway took various steps to reinforce the previously stated position that Rochelle Roscoe would be called as a trial witness by the Government. To this end, AUSA Conway listed Rochelle Roscoe as a witness on the Government's witness list, filed under seal with the Court, on February 2, 2015. (Docket No. 333 at 7). To the Court's knowledge, the Government's witness list was neither shared with Defendants nor their counsel at that time.[6] Additionally, information concerning Rochelle Roscoe (including several interview reports and her plea agreement) was forwarded to defense counsel on a computer disk on February 2, 2015 as part of what AUSA Conway described as the Government's "Jencks/Brady materials." (Docket Nos. 614-7 (listing materials as to Rochelle Roscoe disclosed to defense); 620-7, Ex. G (AUSA Conway letter to defense counsel dated 2/2/15 "Enclosed herein please find Jencks/Brady materials in the above-entitled case. We are providing these materials prior to trial under" a number of listed conditions.)). In the same correspondence, AUSA Conway advised the defense attorneys that "[i]f additional Jencks/Brady materials become known, they will be made available to you." (Docket No. 620-7).

         AUSA Conway and the case agents reportedly met with Rochelle Roscoe in a trial preparation session on February 16, 2015. (Docket No. 620). The interview was not recorded and the agents were instructed not to take notes.[7] On the next day, February 17, 2015, AUSA Conway appeared at a preliminary pretrial conference hosted by the Court's Law Clerk, which was also attended by trial counsel for Ratchkauskas, Svaranowic and Smith. (See Docket No. 283). During the conference, [8] AUSA Conway advised that he had neglected to include Rochelle Roscoe's Presentence Investigation Report along with the Government's other disclosures and his paralegal forwarded same to counsel later that afternoon by email, stating "[e]nclosed please find the Presentence Investigation Report for Rochelle Roscoe, which we inadvertently omitted from the previously provided Jencks Act material." (Docket No. 624-1). AUSA Conway also sent a letter to counsel on February 17, 2015 disclosing some aspects of the meeting with Rochelle Roscoe earlier in the week which affected the evaluation of her credibility as a witness, i.e., mental health treatment she was receiving. (Docket No. 620-11). Then, two days later, on February 19, 2015, AUSA Conway wrote a letter to all counsel stating, in part, "[i]n meeting with Rochelle Roscoe, Special Agent Daniel Fisher paid for her lunch at Jimmy Johns." (Docket No. 620-12).

         Also, on February 19, 2015, AUSA Conway stated the following in a filing he made on the Court's CM/ECF System at 8:55 a.m.:

6. Riverside Mortgage (RM-1 through RM-633)
In addition to the other objections related to exhibits described above, defendant Smith also objects to the admission of the records from Riverside Mortgage on authenticity grounds. At trial, the government intends to present the testimony of Rochelle Roscoe, who will testify that the Riverside Mortgage records are her original business records that she provided to the investigators during the course of the investigation. It is the government's view, therefore, that the Court will be unable to resolve the authenticity objection until trial.
Respectfully submitted, DAVID J. HICKTON United States Attorney
Assistant United States Attorney

(Docket No. 382 at 9 (emphasis added)). In this brief, AUSA Conway also noted that "certain developments" had occurred in the cases against Kubini, Ratchkauskas and Svaranowic, i.e., they had reached plea agreements, but continued that Smith was likely to proceed to trial and set forth the Government's position on exhibit objections. (Id.). The Court was forwarded plea agreements as to Kubini, Ratchkauskas and Svaranowic on the afternoon of February 19, 2015. (Docket Nos. 383; 384; 386). The Court's staff was also made aware by co-counsel for the Government that he and Smith's counsel planned to meet on the afternoon of February 19, 2015 for the purpose of a Court ordered "meet and confer" on trial issues, (see Docket No. 368), and that he would also make a final plea offer to Smith at that time.[9] In anticipation of a trial against Smith only, the Court's law clerk circulated drafts of voir dire and initial instructions to counsel for the Government and Smith at the close of business on February 19, 2015. The next morning, February 20, 2015, at 9:17 a.m., counsel for Smith responded that his client would plead guilty and asked that the plea be set for Monday, February 23, 2015, a request the Court honored. (Docket No. 385).

         It is undisputed that AUSA Conway did not retract any of his prior statements that Rochelle Roscoe would be called as a witness at trial prior to the entry of the guilty pleas by any of the Defendants. Relevant here, Smith entered his guilty pleas to counts of bank fraud, money laundering conspiracy and failing to file tax returns on Monday, February 23, 2015 in a proceeding starting at 9:00 a.m. and ending at 10:05 a.m. (Docket No. 388). AUSA Shaun Sweeney handled this hearing on behalf of the Government and SA Avolia attended in person. (Docket No. 387). (AUSA Conway did not attend). Ratchkauskas and Svaranowic changed their pleas to guilty in separate hearings held on February 24, 2015 - both pled guilty to bank fraud and Ratchkauskas also pled guilty to money laundering conspiracy. (Docket Nos. 391; 394). Kubini pled guilty to bank fraud, money laundering conspiracy and filing false tax returns the following day, February 25, 2015. (Docket No. 397).

         C. Relevant Sentencing Related Proceedings

         At the conclusion of the change of plea proceedings for each Defendant, the Court issued standard presentence orders, scheduling their respective sentencings on different dates/times during July of 2015. (Docket Nos. 389 (Smith sentencing set for July 10, 2015); 392 (Ratchkauskas sentencing set for July 17, 2015); 395 (Svaranowic sentencing set for July 24, 2015); 398 (Kubini sentencing set for July 31, 2015)). However, during the change of plea proceeding for Ratchkauskas, AUSA Conway advised the Court that he would be requesting that multiple days of joint hearings be scheduled for the purpose of resolving anticipated sentencing enhancement disputes between the parties. (Docket No. 402 at 26 ("I think with all four of these defendants, we should have probably two days' worth of hearings on the applicability of enhancements where we anticipate presenting evidence related to, among other things, loss, and victim-related enhancements that are potentially applied here that I anticipate there being dispute about.")). The Court did not immediately act on this request deferring until it received and reviewed the presentence investigation reports as to each of the Defendants and the parties' positions in response.

         In the interim, Ratchkauskas was charged with criminal contempt and falsification of a passport form via a criminal complaint filed at Magistrate Case No. 15-240. He was arrested and detained on March 4, 2015. (Docket Nos. 399; 401). This Court held revocation proceedings at Crim. No. 11-14 on March 9, 2015, at which time Ratchkauskas' bond was revoked, after the Court found that he had violated the conditions of his bond. (Docket Nos. 403; 404; 405). To this end, Ratchkauskas had traveled outside of the jurisdiction on multiple occasions without leave of court and he appeared to be a flight risk given his procurement of an Israeli passport during 2012 and his more recent attempt to obtain an expedited United States passport. (Docket Nos. 404; 405). Ratchkauskas has been in custody since that time.

         As part of the presentence investigation process, AUSA Conway sent a lengthy submission to the Probation Office on March 11, 2015 setting forth its factual proffer of the offense conduct, relevant conduct and the sentencing computations for the Defendants, including information relevant to Roscoe. (Govt. Ex. AA). Upon receipt of this pleading, Smith's counsel renewed his discovery requests once again, stating:

Please consider this our request for all information, statements, materials, documentation or evidence that could support a defense position that any of the enhancements sought by the government may not apply to Mr. Smith, as required by internal DOJ guidelines, statutes, the U.S. Constitution, and case law including Brady, Giglio, and their progeny (all of which apply with equal force to factors that affect sentencing). This request includes a request that the government specifically identify such materials even if the government contends that it previously made such materials available.

(Docket No. 614 at 9). AUSA Conway did not respond to this request. (Id. at 9, n.3).

         On May 12, 2015, Smith moved to continue his sentencing hearing and related due dates for presentencing submissions as his counsel was scheduled to take a medical leave. (Docket No. 416). In response, AUSA Conway reiterated his request that the Court schedule joint hearings on disputed sentencing enhancements and restitution. (Docket No. 419 ("The government, however, would make one request in that regard. Many of the sentencing issues - loss and restitution amounts, the vulnerable victim enhancement, and other enhancements - may require lengthy hearings and are common among many of the defendants. Thus, the government anticipates requesting joint hearings on those enhancements to allow for the most efficient presentation of that evidence.")). Svaranowic joined Smith's motion to continue and the Court held a status conference to discuss the matter. (Docket Nos. 424; 425). Ultimately, the Court agreed to schedule the requested hearing and entered an Order on May 19, 2015, setting this matter for a joint-hearing on October 7, 2015 and October 8, 2015.[10] (Docket No. 425). Ratchkauskas later objected to this procedure; but the Court overruled his position during a telephone conference. (Docket Nos. 431; 435).

         Smith renewed his requests for Brady, Giglio and Jencks information several times in advance of the hearing on September 1, 2015; September 30, 2015; and October 3, 2015 and also requested a corresponding list of the witnesses that would be testifying. (Docket No. 614 at 9, n.3 ("As you know, Brady obligations apply in full to sentencing procedures. We also demand that you produce any and all information showing or tending to show that Mr. Smith did not have knowledge of the other alleged conspirators' actions."); September 30, 2015 ("When may we expect a witness list and production of Jencks Act/Brady/Giglio materials for the witnesses?"); October 3, 2015 ("While we continue to hope that stipulations will be reached that will avoid the need for a hearing as to Mr. Smith altogether, at this point if a hearing is necessary we will not be able to be prepared without the government identifying who its witnesses will be and producing updated Jencks/Giglio/Brady information for such witnesses.")). On September 30, 2015, the Court's Law Clerk also requested that the Government provide a list of the witnesses that it planned to call in email correspondence. The Government responded on October 1, 2015, advising that it planned to call the case agents, SA Fischer and SA Avolia; Kathleen Val of JPMC; and, coconspirator Joel Reck. The prosecutor also stated that "[w]e will then call various borrowers. We are not sure how many or who they are at this point. We will be requesting that the Court allow many of them to testify over the telephone as well."

         AUSA Conway followed up on October 4, 2015, stating:

Counsel - we do not yet know who the borrower witnesses will be. I will let you know when we have that information. I estimate that we will call about five of them. Certainly, Tomieka Jackson is a likely witness. In terms of updated Jencks / Giglio information, we are aware of our obligations and intend to fully comply. The only incremental Jencks Act/Giglio material is the material related to Ms. Val, which was already provided.
Please confirm whether you received government exhibits IRS-70 through IRS-183, which are the summary exhibits of the individual transactions. We were completing those as the change of pleas occurred and my records are unclear about whether those exhibits were provided.
Brendan Conway

         At 7:30 p.m. on the eve of the hearing, October 6, 2015, the AUSA explained that "[i]n terms of borrower witnesses, we are still contacting them, but we expect to present at least Theresa Osborne, Marissa Aversa, Vipporah Moses (daughter of Vanessa Moses), Theresa Osborne (now known as Theresa Ward), and Jaqueline Clancy. The agents are still trying to contact Tomeika Jackson, Steven Pressley, and Stephanie Parker Jones. The borrowers will not be testifying until Thursday." On the same evening, Smith filed a motion to continue the hearing, citing, among other things, the Government's failure to timely identify witnesses among the potential 100 plus borrowers and the corresponding failure to provide related Brady and Jencks Act materials in advance of the hearing.[11] (Docket No. 484). At the commencement of the October 7, 2015 hearing, the Court heard oral argument from counsel on the motion to continue at which time AUSA Conway challenged defense counsel for, among other things, complaining about the Government's disclosures and repeatedly maintained that all Jencks Act materials had already been made, commenting that the Defendants and their counsel had access to this material for many "months" or "years." 10/7/15 Hr 'g Trans, at 15-6 ("But we've provided - in terms of the material needed to cross-examine these witnesses, Your Honor, they've had, as Mr. Stallings noted, access to loan files, literally for years, access to the Jencks Act material for years, and there are only potentially seven of them. So we're not talking about a monstrous undertaking in order to cross-examine these witnesses about whether they knew about the fraud."). AUSA Conway admitted that he refused to communicate with Smith's counsel, [12] and claimed that the Government was not trying to conceal information from the Defendants. 10/7/15 Hr g Trans, at 14 ("We've made a good faith effort to try as best we can to provide you with information so that you can make an informed decision about this important matter. But we certainly haven't made any effort to conceal anything from the Court or from the parties. We've made every effort to provide them the information as soon as we get it, frankly, and provide that information in a timely manner. The motion ought to be denied. The notion that we have to prepare for a borrower witness that has been - the Jencks Act material has been provided years ago is just not well taken.").

         The hearing did not proceed as scheduled; rather, the Government presented its witness on lender loss and restitution, JP Morgan Chase representative Kathleen Val, because she had traveled from Florida. (Docket No. 486). The matter was continued as to all other witnesses for the following reasons. (Id.). The Court granted the continuance to the Defendants as result of the AUSA's failure to timely identify potential borrower-witnesses for the hearing and to make necessary disclosures pertaining to their respective testimony. (Id.). The Government also agreed to the continuance because counsel and staff had located errors in the various summary exhibits that were to be introduced through the other witnesses. (Id.). As a result of the disputes at and before the October 7, 2015 session, the Court ruled that "fundamental fairness dictates that all witnesses must be disclosed to the defense in a timely fashion and that all relevant discovery documents as to such witnesses must be made available for review by defense counsel." (Minute Entry, 10/26/15, Docket No. 494). In addition, "[t]he Court ordered the Government to make available all loan origination and workout files and Mr. Smith's closing files as to all of the alleged victim buyers who have been disclosed as Government witnesses and for the Government to timely disclose any additional buyer witnesses to the defendants as soon as they are known." (Docket No. 486).

         The Court set the matter for a continued hearing on October 27, 2015. (Docket No. 486). The Government sent a series of emails setting forth continuing changes to its witness list. On the evening of Friday, October 23, 2015, the Government forwarded a list that included in excess of 30 possible borrower witnesses. (See Docket No. 492). Given same, upon returning to Chambers on Monday, October 26, 2015, the Court entered an order continuing the matter to November 10, 2015 and added that "[n]o further supplementation of the Government's exhibits or witness list will be permitted in advance of the proceeding set for November 10, 2015, absent a motion showing good cause for the failure to timely provide same." (Docket No. 492). The Government moved for reconsideration, upon which, the Court held a telephone status conference with counsel and granted the motion, ordering the Government to submit a complete list of borrower witnesses who would be appearing to testify at the proceeding. (Docket No. 494). The Court also raised the issue of whether the borrower witnesses should be appointed counsel given expected cross-examination would potentially implicate them in the offense conduct. (Docket No. 497). After hearing from the parties, and over the Government's objections, the Court advised that it would be "prepared to instruct all testifying witnesses concerning their rights to counsel as a witness being questioned about potential criminal activities. To the extent that any individual requests counsel, the Court will permit them the opportunity to consult with counsel and defer their testimony to some other time." (Docket No. 494).

         Unfortunately, between the Court's issuance of the initial order and then the later vacation of same, Ratchkauskas' then-counsel accepted a court appointment and agreed to appear in the Court's Johnstown division on October 27, 2015. (Docket No. 497). The Court heard an oral motion to continue via telephone conference which was granted, in part, as the Court limited the October 27, 2015 proceeding to conducting the colloquy with the borrower-witnesses and heard oral argument on legal disputes raised by Smith and Kubini that did not involve Ratchkauskas. (Id.). The attorneys spent significant time debating the questions to be posed to the borrowers and the Court made clear that it would conduct the colloquy individually with each of them. (Id.). During a break in the proceedings, and without alerting the Court, AUSA Conway and the case agents asked all of the Government's subpoenaed witnesses to sit in the courtroom, filling the jury box and the gallery. The Court returned to the bench and instructed these individuals to leave the courtroom as the above described legal dispute had not been finally resolved. Upon their departure, the Court then proceeded to conduct the colloquy with several individuals but did not allow substantive questioning given that Ratchkauskas did not have counsel present. (Id.).

         The Court set the next session for November 10, 2015 and directed the Government to file a witness list and to provide the criminal histories of the borrower witnesses to Defendants. The Government placed 17 individuals on this witness list and the criminal histories were forwarded a few days later. (Docket No. 499). Another contentious telephone status conference was held on November 4, 2015. (Docket No. 507). Government counsel suggested that he could present the testimony of 12-13 witnesses at the hearing. (Id.). On November 10, 2015, the Court heard the complete testimony of 3 borrower witnesses. (Docket No. 512). The examination of one additional witness, Jaqueline Clancy, was not finished and her examination was held over to the next session. (Id.). At the conclusion of this proceeding, the attorneys advised that they would like to meet and confer in an effort to limit the scope of the borrower-witness presentations. (Id.). The Court acquiesced.

         After numerous emails and yet another status conference, (Docket No. 518), the parties advised that they had reached a stipulation, which was filed of record on December 9, 2015. (Docket No. 520). Essentially, the parties agreed that aside from concluding the examination of Clancy, that the Government would defer calling any additional borrower witnesses. (Id.). With respect to Clancy, the parties agreed that "[t]he government shall insure that Ms. Clancy is present at said hearing to be subjected to cross-examination by defendants" and that "[f]or purposes of determining whether or not the defendants' guideline sentencing ranges should be enhanced pursuant to the provisions of U.S.S.G. [§§ 3A1.1 and 2B1.1(b)(2)], the Court may consider the testimony of witnesses Ward, McCabe, Jackson and Clancy (if Clancy appears for cross-examination), as well as all of the exhibits admitted in connection with their testimony." (Id. at ¶¶ 1-3). However, they also agreed that "[n]othing in this stipulation is intended to limit the parties' rights to call witnesses or introduce other evidence directed to other disputed sentencing issues." (Id. at ¶ 6). In light of the parties' stipulation, the Court entered an order scheduling the matter for a continued hearing on January 27, 2016; setting a deadline for the parties to file witness and exhibit lists by January 20, 2016; and once again ordering them to meet and confer in an effort to reach stipulations on the application of the guidelines enhancements. (Docket No. 525). The witness and exhibit filings were made, as the Court had directed. (DocketNos. 535, 536, 537, 538).

         At the January 27, 2016 session, Clancy retook the stand. (Docket No. 536). But after some questioning, she decided that she no longer wanted to testify and was excused prior to completing her testimony. (Id.). SA Fisher was next called by the Government. (Id.). His testimony was completed at the session on February 23, 2016. (Docket No. 549). During that session of the hearing, the Government also presented the testimony of paralegal Diane Wikert and commenced the examination of SA Avolia. (Id.). SA Avolia's testimony concluded on May 13, 2016. (Docket No. 576). The Government rested its presentation, reserving the right to call additional borrower witnesses per the parties' stipulation. (Docket No. 576).

         Rathckauskas called his wife, Amit, who testified on May 13, 2016 and June 1, 2016. (Docket No. 576, 589). He also testified on June 1, 2016.[13] (Docket No. 589). Smith offered the testimony of James Fellin, as an expert witness, on June 1, 2016. (Id.). Kubini testified on June 2, 2016. (Docket No. 590). The proceedings finally concluded after brief rebuttal testimony from SA Avolia. (Id.).

         D. Evidentiary Presentations

         1. Relevant Portions of Case Agents' Testimony

         The case agents, SA Fisher and SA Avoila provided wide-ranging testimony. (Docket Nos. 574; 575; 603). They discussed the general nature of the scheme, identified the key players and their roles, reviewed various spreadsheets and explained their involvement in preparing same. (Id.). As expected, much of the case agents' testimony was in the form of hearsay, [14]relating information that was provided to them during the course of their investigation from cooperating witnesses, the Defendants, other coconspirators, lender representatives and borrowers on several of the properties. (Id.). Among other things, the agents offered some very general assertions regarding pre-trial interviews that were conducted with some of the borrowers in the case and were summarized in memoranda of interview ("MOI") reports that they had prepared, including their opinions that the borrowers were not aware of the fraud, and were victims of the fraud. However, they admitted that they had not spoken to any of the borrowers about the Victim Impact Statements ("VIS") that they submitted to the U.S. Attorney's Office and did not verify anything that was contained therein. (Docket No. 475 at 45-52). They also did not conduct a detailed investigation into the borrowers' backgrounds, including their criminal histories, prior to making the assessment that they were victims and did not re-interview them after obtaining such information. (Id.). Notably, the case agents were not sequestered during these proceedings and attended every session of the hearings. (Docket No. 574 at 9 ("THE COURT: ... has there been any discussion about sequestering witnesses or not? MR. CONWAY: We are sequestering Diane Wikert and Miss Clancy. Obviously the case agents are not sequestered.")).

         SA Fisher and SA Avoila also offered lengthy testimony relating hearsay information that was provided to them by Rochelle Roscoe. Specifically, on January 27, 2016, AUSA Conway elicited testimony from SA Fisher seeking to introduce hearsay statements of Rochelle Roscoe. (Docket No. 574 at 161-66). The area of inquiry was Smith's testimony before the grand jury and was presented for the purpose of establishing that Smith lied to the grand jury in support of the obstruction of justice enhancement that the Government is pursuing against him. At issue once again was a letter signed by Roschelle Roscoe directed to Smith's contact at the title insurance carrier he used, Alfred V. Watterson, Jr., Esq. dated May 15, 2008, wherein she advises that "[p]lease be advised for each of the above closings [involving Real Estate Closing Investments, LLC, from 2007-2008] a gift of equity was provided by the seller. These loans were approved by the Investor on this basis. Accordingly, the gift of equity was not shown on the settlement sheet, or is it ever shown on the settlement sheet." (AJS-200). Smith's counsel objected to the introduction of such hearsay testimony by the case agent.

         The entirety of the exchange follows:

Q. Page 56, line 16, "A letter has been given to me, and a letter has been given to the U.S. Attorney's Office that I received from the lender that these types of gifts of equity were okay." Do you recall the letter that they're talking -Mr. Smith's talking about there?
A. I do. And that's inconsistent with that statement.
Q. Was the letter actually from any lender?
A. It was not. It was from Rochelle Roscoe of Riverside Mortgage, a mortgage broker.
Q. Now, in terms of that letter, what was the sort of genesis of that letter?
A. The genesis of that letter seemed to arise from the audit of Mr. Smith's files, and his explanation - he needed an explanation to give to his title company about the transactions that they had uncovered. Mr. Smith had stated that he requested one from Miss Roscoe. Miss Roscoe stated that Mr. Smith instructed her to fill one out. And she wrote - according to Miss Roscoe, she wrote the letter, FAXed it to Mr. Smith, and he corrected it, which Mr. Smith also stated that he did revise the letter, and Miss Roscoe FAXed it back to Mr. Smith.
MR. STALLINGS: Judge, we have an objection to that testimony and move to strike it. It's different with Miss Roscoe for a number of reasons. Miss Roscoe gave, as the Court is probably aware, several inconsistent statements to the Government regarding various issues related to this particular letter.
She is a Defendant in a separate case and, as a result, is not available to us to cross-examine on that matter. She is available to the Government. The Government has not made her available to us. And this witness ought not to be permitted to give hearsay testimony of some of the things she said. It's inherently unreliable.
We have no ability to test it, given the nature of Miss Roscoe in the matter - MR. CONWAY: Of course, Mr. Stallings has the subpoena power and can subpoena Miss Roscoe to appear here. She's completely available to him. So that is complete common sense. He's able to cross-examine Mr. Fisher with regard to the various statements. So that's common sense.
And hearsay is admissible, as you've ruled repeatedly here.
THE COURT: And as Miss Roscoe is also in front of me, I think I have been privy to her various statements and the like. So I'm going to overrule the objection.
MR. CONWAY: Just for the record, Your Honor, the defense has marked this as AJS-200, the second page -
MR. CONWAY: So we'll go ahead and move for admission of ...

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