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Souels v. United States

United States District Court, D. New Jersey

July 19, 2018

SEAN A. SOUELS, Petitioner,



         Pro se petitioner Sean A. Souels (“Petitioner”) brings this habeas corpus action pursuant to 28 U.S.C. § 2255 against Defendant United States of America, seeking to vacate, set aside, or correct his sentence after conviction of conspiracy to commit wire fraud, entered after Petitioner pled guilty to such a charge on September 4, 2014. [Docket Item 3 at 2.] Petitioner was subsequently sentenced on May 14, 2015 to a term of imprisonment for forty-six (46) months, supervised release of three years, and restitution in the total amount of $283, 256.26 (consisting of $30, 000.00 to be paid to K.P., a victim of the fraud, followed by $253, 256.26 to West Coast Servicing, Inc., the successor to the original lender). Id. Petitioner sought to set aside his sentence on a variety of grounds. Id. at 5-16.

         Petitioner's amended petition [Docket Item 3] raised three grounds, essentially, as follows:

Ground One: “Violation of Mandatory Victims Restitution Act 1996”--asserting that amount of restitution to victims and of loss under U.S.S.G. § 2B1.1 were incorrectly computed for the fraudulent mortgage where the Court determined these figures by reducing the amount of the fraudulent loans by the amount obtained by the lender's successor upon resale of the real estate collateral. Petitioner argues that the mortgage lender agreed to a short sale, not a foreclosure, and that the short sale mea ns there was no loss and no victim of his crime. Petitioner asserts: “The District Court violated the Mandatory Victim's Restitution Act, by allowing K.P. and/or West Coast Financing [sic] to receive restitution when they are not owed any.” (Id. at 6.)
Ground Two: “Illegal Sentence”--asserting that the defrauded lender's short sale of the underlying property yielded no loss for Sentencing Guidelines purposes because “the total mortgage loan was satisfied, ” and the 12-point loss enhancement pursuant to U.S.S.G. § 2B1.1(b) was improper. (Id. at 7.)
Ground Three: “Ineffective Assistance”--asserting that because the lender of the fraudulent loans reacquired the collateral real estate and sold it by short sale rather than foreclosure, counsel was ineffective in failing to object since, in Petitioner's view, the entire mortgage indebtedness was cancelled. (Id. at 9.)

         This Court issued a Memorandum Opinion and Order (filed August 24, 2017) ruling that Petitioner's petition be dismissed for lack of subject matter jurisdiction as to Ground One and that it be denied on the merits as to Ground Two and Ground Three. [Docket Items 23 & 24.]

         After reviewing the circumstances of Petitioner's fraud, the Court held that Ground One should be dismissed because an order for restitution is not normally reviewable under § 2255 because reducing or eliminating the restitution does not result in the petitioner's release from custody nor does it negate the underlying conviction. [Memorandum Opinion and Order, Docket Item 23 at 7.] The Court held, with respect to both Grounds Two and Three, that the loss or intended loss under U.S.S.G. § 2B1.1(b)(1) and Application Note 3(E)(ii) was properly computed; in this case, where the victim has recovered the fraudulent mortgage loan collateral (here, title to the real property) and then disposed of it by a reasonable sale, the loss amount is reduced by the amount recovered by the victim from the disposition. The Court rejected Petitioner's argument that the lender suffered no loss when it acquired the property back from the straw purchaser (K.P.) for $1, 000 and cancelled her indebtedness, that the loss became zero. The Court agreed with the Government's position that this formulation provides a reasonable estimate of loss where the lender (Gateway Funding) sold this mortgage in a pool of loans to West Coast Servicing, which obtained title from the titled owner (K.P.) and resold the underlying collateral to recoup part of the loss. (Memorandum Opinion filed Aug. 24, 2017 at 4, citing Kramer Statement at Gov't Br., Ex. D, and Final PSR ¶ 95.) Accordingly, for reasons explained in the Memorandum Opinion, the loss was properly determined at sentencing as the difference between the outstanding amount of the fraudulent loans ($478, 256.26) for Unit 203, less the proceeds obtained by West Coast Servicing as Gateway's successor ($225, 000.00), yielding a net loss of $253, 256.26, causing a 12-level enhancement under U.S.S.G. § 2B1.1(b).

         Petitioner subsequently filed the present motion pursuant to Rule 59(e), Fed. R. Civ. P., seeking reconsideration of that Memorandum Opinion and Order [Docket Item 25], along with Petitioner's Motion to Reopen pursuant to Rule 60, Fed. R. Civ. P., alleging fraud by the Government [Docket Item 28].[1]

         Specifically, Petitioner argues upon reconsideration that this Court should vacate its Memorandum Opinion and Order of August 24, 2017 to correct manifest errors of law or fact and to present newly discovered and previously unavailable evidence. He challenges this Court's finding that it lacks jurisdiction under § 2255 to reduce or eliminate the restitution ordered as part of his sentencing. He alleges that the Court erroneously determined the amount of loss upon the fraudulent mortgage loans under U.S.S.G. § 2B1.1(b)(1), overlooking Petitioner's argument that the financial institution that made the loans allegedly sold the mortgage note to a successor institution at a substantial discount, such that the amount of loss should be calculated only from the successor lender's cost of acquiring the mortgage less the amount the successor lender received when the property was sold, because the original lender's loss should not be counted. Thus, Petitioner seeks to set aside this Court's denial of his petition on Grounds Two and Three concerning the amount of loss calculation.

         With regard to his Rule 60 motion to reopen the § 2255 denial, Petitioner invokes Rule 60(b)(3) and accuses the Government of fraud in misrepresenting that Souels's Criminal History Category (CHC) was III when it fact it was I. He alleges that “[I]n adjudicating the § 2255 motion this court relied upon the fraud that the defendant had a criminal history of 3 and not of 1, ” and he seeks reopening of the § 2255 motion for reconsideration by applying the accurate CHC of I. [Docket Item 28 at 2.]

         The principal issues to be decided are:

(1) Whether the determination that § 2255 relief was unavailable regarding the amount of restitution to the victims of Petitioner's fraud overlooked controlling decisions;
(2) Whether reconsideration is warranted for the determination of the amount of “actual or intended loss” on the fraudulent mortgage loans of U.S.S.G. §2B1.1(b) and Application Note 3(A)(ii) ...

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