United States v. Lonich, No. 18-10298 (9th Cir. 2022)
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In schemes involving Sonoma County, California real estate, attorney Lonich conspired with Sonoma Valley Bank (SVB) officers Melland and Cutting to obtain fraudulent loans. The Ninth Circuit affirmed their convictions but vacated their sentences.
The Sixth Amendment’s Speedy Trial Clause was not violated with respect to charges first brought in a superseding indictment. Even assuming the clock started with the original indictment, the delay caused no relevant prejudice. With respect to money laundering (18 U.S.C. 1957) and misapplication of bank funds (18 U.S.C. 656) charges, the district court’s general “knowingly” jury instruction was permissible. Sufficient evidence supported Melland’s conviction for bribery by a bank employee (18 U.S.C. 215(a)(2)). The district court appropriately instructed the jury that, to find Melland “acted corruptly,” the jury must determine he “intend[ed] to be influenced or rewarded in connection with any business or transaction of” a financial institution. Sufficient evidence also supported Lonich’s conviction for attempted obstruction of justice (18 U.S.C. 1512(c)(2)) by encouraging a straw buyer to mislead the grand jury about his role in the scheme.
The district court applied several enhancements that dramatically increased the recommended Guidelines sentencing ranges, premised on a finding that defendants caused SVB to fail, making them responsible for associated losses. The court applied a “clear and convincing evidence” standard and noted the district court made no independent findings about the cause of the bank’s collapse. Restitution orders ($20 million) were premised on the same theory.
Court Description: Criminal. The panel affirmed Sean Cutting’s, Brian Melland’s, and David Lonich’s convictions, but vacated their sentences and remanded for resentencing, in a complex case arising from fraudulent schemes concerning bank loans and real estate in Sonoma County, California. The panel held the Sixth Amendment’s Speedy Trial Clause was not violated. Defendants claimed a Speedy Trial Clause violation as to all charges first brought in the October 2016 superseding indictment. Defendants then argued this court should reverse their convictions as to the charges in the original March 2014 indictment because of “prejudicial spillover” from evidence used to prove the charges in the allegedly unconstitutional superseding indictment. The panel had no occasion to consider defendants’ “prejudicial spillover” theory because the panel held that the government’s decision to file new charges in the superseding indictment did not infringe defendants’ Speedy Trial Clause * The Honorable Clifton L. Corker, United States District Judge for the Eastern District of Tennessee, sitting by designation. 4 UNITED STATES V. LONICH rights. As to the first factor in the balancing test set forth in Barker v. Wingo, 407 U.S. 514 (1972), the length of the delay, the parties disagreed on when defendants’ Speedy Trial Clause rights attached for the new charges first brought in the superseding indictment. Defendants argued the original indictment should be used as the start date for the new charges in the superseding indictment. The government contended the date it filed the superseding indictment should be used. The panel did not need to resolve that debate because it concluded that, even assuming the clock started at the time of the original indictment, there was no Speedy Trial Clause violation because the delay caused no relevant prejudice to defendants. Defendants challenged the jury instructions on the money laundering (18 U.S.C. § 1957) and misapplication of bank funds (18 U.S.C. § 656) charges, contending that the instructions’ overarching definition of “knowingly” conflicted with the required mental states for the two charged offenses. The panel held that the district court’s general “knowingly” instruction was permissible and that defendants in any event did not show prejudice from the instruction. Melland argued that there was insufficient evidence to support his conviction for bribery by a bank employee (18 U.S.C. § 215(a)(2)), which was based on his securing a $50,000 investment in Melland’s energy-drink start-up. The panel held that, as the parties effectively agree, the district court appropriately stated the law when it instructed the jury that, to find Melland “acted corruptly,” as required under § 215(a)(2), the jury must determine he “intend[ed] to be influenced or rewarded in connection with any business or transaction of” a financial institution. Noting that the UNITED STATES V. LONICH 5 circumstantial evidence was plentiful, the panel held that there was sufficient evidence to support the conviction. Lonich argued that there was insufficient evidence to support his conviction for attempted obstruction of justice (18 U.S.C. § 1512(c)(2)) by encouraging a straw buyer to mislead the grand jury about his role in a scheme to gain control of a real estate development. The panel held that § 1512(c)(2) requires a showing of nexus to an official proceeding, but rejected Lonich’s argument that no reasonable jury could have found the required nexus here. Noting that neither party disputes using a “consciousness of wrongdoing” mens rea requirement for purposes of evaluating the sufficiency of the evidence, the panel held that a reasonable jury could find that the government met its burden of proof in demonstrating Lonich’s criminal intent. The panel held that defendants’ sentences must be vacated. The district court applied several enhancements that dramatically increased defendants’ recommended Guidelines sentencing ranges. These enhancements were premised on a critical factual finding: that defendants caused Sonoma Valley Bank (SVB) to fail, making defendants responsible for associated losses. Addressing the standard of proof that the government was required to meet to demonstrate whether defendants caused SVB to fail, the panel focused on factors five and six of the non-exhaustive factors set forth in United States v. Valencia, 222 F.3d 1173 (9th Cir. 2000). Given the extremely disproportionate sentences that the disputed enhancements produced, the panel held that a clear and convincing evidence standard applies to the factual underpinnings for these enhancements. The panel concluded that the government did not demonstrate by clear and convincing evidence that defendants caused SVB to fail, where the district court made 6 UNITED STATES V. LONICH no independent findings about the cause of the bank’s collapse beyond adopting the Presentence Investigation Reports (PSRs) and rejecting defendants’ objections without explanation, and neither the PSRs nor the additional materials the government now cites sufficiently show that defendants were responsible for SVB failing, especially given indications in the record that other factors internal and external to the bank may have contributed to the bank’s collapse. This meant that the government did not sufficiently support defendants’ 20-level loss enhancement under U.S.S.G. § 2B1.1(b)(1)(K). The panel wrote that its determination that the government did not adequately prove defendants caused SVB to fail means that enhancements under U.S.S.G. § 2B1.1(b)(2)(A)(i) (ten or more victims) and § 2B1.1(b)(17)(B)(i) (jeopardizing the safety and soundness of a financial institution) are infirm as well. The panel wrote that the same is true of defendants’ approximately $20 million restitution orders, which were likewise premised on the government’s theory that defendants caused the bank to fail. The panel vacated defendants’ sentences and remanded for resentencing on an open record. The panel rejected defendants’ remaining challenges to their convictions in a memorandum disposition. UNITED STATES V. LONICH 7
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