A "victim's" participation in a fraudulent mortgage
scheme, regardless of criminal liability, will generally exclude the victim
from restitution, according to a recent Massachusetts decision.
With the help of Ryan Lazar, a loan originator, R.L. and
B.L. participated in a fraudulent mortgage scheme by falsifying documents, taking
mortgage proceeds, and failing to disclose Lazar's misrepresentations.
Lazar eventually pled guilty to two counts of wire fraud,
but B.L. and R.L. were not charged with a criminal offense. In a matter of
first impression, the court in United
States v. Lazar, 2011 U.S. Dist. LEXIS 29181 (D. Mass. Mar. 22, 2011) [enhanced version available to lexis.com subscribers], was
May restitution be ordered
in circumstances in which the alleged victim, although not charged with a
criminal offense, is nonetheless a knowing participant in the fraudulent
obtaining of mortgage financing or would such an order "so adversely
[reflect] on the public reputation of the judicial proceedings" as to be
barred by considerations of public policy or statutory interpretation?
The court underscored the Second and Ninth Circuits'
coconspirator exception to the Mandatory Victims Restitution Act (MVRA), citing
three cases to delineate the exception's scope:
In denying restitution to B.L. and R.L., the court considered
their role in the mortgage financing fraud. The court held:
B.L. and R.L. were not the
instigators, or the main executors of the scheme, but their intent was in pari
materia with that of Lazar. Under the law of conspiracy, they are not
exonerated by their claim of imperfect knowledge of all of the details and
workings of the scheme. While the court is not without sympathy, given the sad
series of events that plunged B.L. and R.L. into dire economic distress, and
while the court understands the impulse that led them to a desperate effort to
rescue the only home they had ever owned from foreclosure, thousands of other
homeowners have faced similar hardships without resorting to mortgage fraud.
For evident reasons of
public policy, a federal court cannot be seen as engaging in the shifting of
criminal proceeds among or between coconspirators. Consequently, I hold that restitution may not be ordered under the MVRA to a
conspirator who participates in a fraudulent scheme with the same criminal
intent as his or her coconspirators, whether or not the conspirator is formally
charged as a defendant.
For more information about LexisNexis products and
solutions connect with us through our corporate