Whether a defendant-who has fraudulently obtained a loan and thus owes restitution for the loan under 18 U.S.C. § 3663A(b)(1)(B) returns “any part” of the loan money by giving the lenders the collateral that secures the money?
Lower court opinion: United States v. Robers, 698 F.3d 937 (7th Cir. 2012)
In this case the Court will resolve a circuit split about the calculation of restitution under 18 U.S.C. § 3663A(b)(1), the Mandatory Victims Restitution Act (MVRA), in federal mortgage fraud prosecutions. The decision will be important to federal practitioners and, as the case arose in Wisconsin, will either validate or overturn current circuit precedent.
Briefly, Robers was convicted of wire fraud for his role as a “straw buyer” in a mortgage fraud scheme: He signed mortgage documents seeking loans which were based on false and inflated income and assets and based on his claim that he would reside in the houses as his primary residence and pay the mortgages. The loans went into default and the property that served as collateral for the loans was foreclosed upon and resold. 698 F.3d at 939, 940. The issue in the case is the amount of restitution Robers must pay under the MVRA, which provides that when return of stolen property is impossible or inadequate, restitution for property loss is determined by the value of the property, either on the date of loss or at the time of sentencing, minus “the value (as of the date the property is returned) of any part of the property that is returned.”
Robers argued the “offset” value should be based on the fair market value of the real estate collateral on the date the victim lenders obtained title to the houses following foreclosure because that is the “date the property is returned.” The government argued that money, not real estate, was the property stolen in the mortgage fraud scheme, so getting title to the collateral real estate through foreclosure is not a return of the property stolen; rather, the victims receive the type of property stolen–cash–only when the collateral real estate is resold. Thus, the offset value must be determined based on the eventual cash proceeds recouped following resale of the collateral. The different approaches make a difference in restitution: Robers surrendered the real estate to the lenders in 2006, before the real estate bubble burst, so the fair market value at that time was greater than the proceeds eventually realized when the real estate was finally resold in 2007 and 2008.
As the court below notes, the Second, Fifth and Ninth Circuits have held that in a mortgage fraud case, the offset value should be based on the fair market value of the real estate collateral at the time of foreclosure, when the victim gets title to the real estate. The Third, Eighth, and Tenth Circuits (and a dissent in the Ninth) have concluded the offset value should be based on the eventual amount recouped by the victim following sale of the collateral real estate. 698 F.3d at 939. The court followed the latter group, accepting the government’s reading of the MVRA. 698 F.3d at 939, 942-43.
While the decision in this case will be important to federal practitioners, it also has the potential to affect state practice. That is because a provision in Wisconsin’s restitution statute, Wis. Stat. § 973.20(2)(b)2., is virtually identical to the MRVA language at issue here. There are no cases addressing the “offset” language in the Wisconsin statute, but in the (probably rare) cases in which it might become an issue, the Court’s opinion here will be looked to for guidance.