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United States v. Rizk

October 19, 2011

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE,
v.
LILA MARIE RIZK, DEFENDANT-APPELLANT.



D.C. No.2:07-cr-00755- DDP-3 Appeal from the United States District Court for the Central District of California Dean D. Pregerson, District Judge, Presiding

The opinion of the court was delivered by: Gould, Circuit Judge

FOR PUBLICATION

OPINION

Argued and Submitted August 31, 2011-Pasadena, California

Before: Mary M. Schroeder and Ronald M. Gould, Circuit Judges, and Michael Patrick McCuskey, Chief District Judge.*fn1

OPINION

Lila Rizk appeals her jury conviction for one count of conspiracy in violation of 18 U.S.C. § 371; one count of bank fraud in violation of 18 U.S.C. § 1344(1); and thirteen counts of loan fraud in violation of 18 U.S.C. § 1014. Rizk contends that the district court committed prejudicial error by admitting two summary charts under Federal Rule of Evidence 1006. Rizk also contends that there was insufficient evidence to support each of her convictions. Rizk further contends that the district court erred in ordering her to pay restitution in the full amount of the victim lenders' loss, despite a prior civil settlement with the victim lenders that included a release from lia-bility. We have jurisdiction under 18 U.S.C. § 1291, and we affirm.

I.

A.

Lila Rizk was a licensed real estate appraiser based in Orange County, California. She did business with Mark Abrams, a mortgage broker, and his business partner Charles Elliott Fitzgerald, a real estate developer. Between July 2000 and January 2003, Abrams, Fitzgerald, and others associated with them initiated and carried out a scheme to defraud mortgage lenders. Abrams and Fitzgerald purchased homes in exclusive California communities at or near their true market values. In the purchase contracts they required sellers and their agents to keep the purchase prices confidential. Abrams and Fitzgerald then applied for loans in amounts far greater than the actual purchase prices. To deceive mortgage lenders into believing the loans were adequately secured by the properties, Abrams, Fitzgerald, and their associates made phony purchase contracts and gained inflated appraisal reports for the homes. Relying on this false documentation, mortgage lenders funded and bought loans in amounts exceeding the homes' actual purchase prices and market values. As a result, Abrams and Fitzgerald made, while the defrauded victim lenders lost, millions of dollars. Losses to these lenders in total exceeded $40 million.

Rizk actively participated in the mortgage fraud scheme. The lenders required appraisals before they would approve home loans. The appraisals generated by Rizk made the homes appear to be worth much more than their true values. The lenders relied on Rizk's inflated appraisals in funding and buying the loans. In providing the inflated appraisals, Rizk followed an array of improper and risk-enhancing practices. Rizk improperly ignored the original sellers' list prices, often hundreds of thousands or millions of dollars less than her appraisals. Rizk did not use genuinely comparable properties. Rizk used as "comparable" properties homes that were distant from, differed from, or had sold long before the homes being appraised. Rizk also used homes, for which she had previously given inflated appraisals, as "comparable" properties. Both from the improper acts that she did in fashioning appraisals, and from her failure to use appropriate practices in determining market values of comparable properties, there was abundant evidence that Rizk did not exercise an independent professional judgment in making her appraisals for Abrams and Fitzgerald.

B.

Before trial, the government moved in limine to introduce charts summarizing the properties involved in the scheme. The charts listed 96 properties in chronological order of the corresponding loan transactions. The first chart showed the following data for each property: 1) the actual escrow closing date and the date reported to the lender; 2) the actual sale price and the price reported to the lender; 3) the amount of the loan funded; 4) whether the real estate agents who participated in the scheme received a commission; 5) if so, how much; 6) the named appraisers on the appraisals submitted to the lender; and 7) whether Rizk provided records about the transaction to the government under subpoena.

The second chart showed the following data for each property: 1) the appraisal date; 2) the appraisal value submitted to the lender; 3) the named appraisers on the appraisals submitted to the lender; and 4) the addresses of comparable properties used in the appraisal. This chart used color-coding to show how Rizk used properties she had previously appraised at inflated values as comparables in later appraisals.

The district court granted the government's motion, concluding over objection that the charts were admissible under Federal Rule of Evidence 1006. Rizk and her co-defendants had argued that the charts were overbroad, including properties not specifically named in the indictment.*fn2 The district court, however, accepted that the purpose of the charts was to show the full scope of the fraudulent scheme and that the indictment "expressly include[d] more than the nine listed properties." And so the district court held that the summary evidence was within the scope of the indictment. The district court also stated that Rizk and her co-defendants had been given the underlying documents showing what was described in the summary charts, and that they had ample time to review them before trial.

Rizk was a named appraiser in only 39 of the 96 transactions shown on the charts. But at trial the government presented evidence showing that Rizk had prepared the appraisals for all 96 transactions. The summary charts showed that Rizk had produced records to the government regarding transactions in which she was not a named appraiser. These records included sketches, notes, emails, and at least one appraisal matching a submitted appraisal. The government introduced testimony that later in the scheme, Rizk's co-conspirators removed her name from the appraisals and substituted the names of unwitting appraisers not connected to the scheme. Her co-conspirators testified that Rizk knew and was relieved that her name was no longer being used on the appraisals. And the government showed that Rizk continued to receive compensation from Abrams and Fitzgerald long after the submitted appraisals stopped bearing her name.

At trial, Rizk admitted that her appraisals were too high, but argued that she made them in good faith and that she lacked knowledge of the conspiracy. Rizk argued that Abrams exploited her because she was based in Orange County and "didn't know" Los Angeles, Beverly Hills, or Bel Air, which housed the subject properties she appraised. She said that the only sale price she was given for a property was the falsified, inflated sale price (not the true sale price kept confidential) and that she used the price she was given as her starting point. She said that Abrams gave her the deficient comparable properties and misrepresented them to her, that she believed Abrams was credible, and that she did not know she was using bad comparables. Rizk also contested the government's proffer that she had performed the appraisals in all 96 transactions listed on the summary charts. She claimed that for some properties, Abrams, Fitzgerald, and their associates had produced the appraisals and forged her name. In short, Rizk's defense was that despite her failure to perform the due diligence required of her in making the appraisals, she did not knowingly participate in the scheme, and lacked the required intent to support a conviction for conspiracy, bank fraud, and loan fraud.

From the evidence presented to it, the jury might have viewed Rizk as a key and knowing participant in a deliberate fraud, or as an innocent and unknowing dupe used and manipulated by the ringleaders of the fraud. However, the jury did ...


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