Case 3:12-cr-00198-HLA-MCR Document 16 Filed 04/21/13 Page 1 of 9 PageID 87

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA JACKSONVILLE DIVISION UNITED STATES OF AMERICA v. LORRAINE BROWN ________________________ DEFENDANDANT'S SENTENCING GUIDELINES POSITIONS Lorraine Brown is due to be sentenced on April 23, 2013 at 11:00 a.m. following her guilty plea to conspiracy to commit mail fraud and wire fraud, in violation of 18 U.S.C. 371. This pleading is filed to provide the Court with our positions regarding the application of the Sentencing Guidelines. I. Introduction The Court has been provided with a thorough Presentence Report (PSR) by the Probation Office and a Comprehensive Sentencing Mitigation Report by the defense. The goal of this pleading, therefore, is to simply highlight for the Court the areas that are in dispute so the Court may better hone in on the issues. The guideline that guides this offense is USSG 2B1.1. There are two Specific Offense Characteristics where there is disagreement: USSG 2B1.1(b)(1) pertaining to "loss" and USSG 2B1.1(b)(2) pertaining to "victims." II. Loss The PSR indicates that "[b]ecause it is nearly impossible to determine the loss associated with this case, alternatively, the amount of gain is used." PSR, pg. 9, para. 38. In ruling on the loss issue, the Court is asked to consider: CASE NO.: 3:12-cr-198-J-25MCR

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1.

"The court shall use the gain that resulted from the offense as an alternative

measure of loss only if there is a loss but it reasonably cannot be determined." USSG 2B1.1, comment. (n. 3(B)). (Emphasis added.) 2. "Where there is no actual loss and no intended loss, the Guidelines do not permit

the substitution of the 'gain' measure for loss." United States v. Miller, 588 F.3d 560, 567 (8th Cir. 2009). 3. "The defendant's gain may be used only as an 'alternative estimate' of [the] loss; it

may not support an enhancement on its own if there is no actual or intended loss to the victims." United States v. Haddock, 12 F.3d 950, 960 (10th Cir. 1993). "If gain to the defendant does not correspond to any actual, intended, or probable loss, the defendant's gain is not a reasonable estimate of loss." Id. at 961. Accord United States v. Galloway, 509 F.3d 1246, 1252-53 (10th Cir. 2007). 4. We submit there is no actual or intended loss here. "'Actual loss' means the

reasonably foreseeable pecuniary harm that resulted from the offense." USSG 2B1.1, comment. (n. 3(A)(i)). (Emphasis added.) "'Intended loss' . . . means the pecuniary harm that was intended to result from the offense." USSG 2B1.1, comment. (n. 3(A)(ii)). (Emphasis added.) The reason there is no actual or intended loss is because it was not reasonably foreseeable to Ms. Brown that anyone would suffer pecuniary harm as a result of her offense conduct, and she did not intend pecuniary harm. In order to illustrate our point, the following example is used to contrast Ms. Brown's offense conduct with offense conduct where loss would be reasonably foreseeable and/or intended. Let's say Defendant (D) and Victim (V) go out to a restaurant for lunch. V gets a phone call and steps outside the restaurant to take it, leaving her purse on the table. D reaches inside V's

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purse, pulls out her checkbook, tears off a check, makes it out to himself in the amount of $100 and forges V's signature on the check. After lunch D heads to the nearest bank, endorses the check, and cashes it. Clearly D has committed the crimes of forgery and uttering a forged instrument and just as clearly it was reasonably foreseeable to D that the actual loss would be $100. Alternatively, if the bank teller becomes suspicious and calls the police, and D gets arrested before the check is cashed, the intended loss would be $100. This is completely different from Ms. Brown's offense conduct, where mortgage-related documents that needed to be signed and notarized were signed by someone not authorized to do so and notarized outside the presence of the signer. While Ms. Brown fully admits that what she did was wrong, the fact remains that it was not reasonably foreseeable to her that pecuniary harm would result. 5. If the Court disagrees and finds Ms. Brown did intend pecuniary harm, or that

pecuniary harm was reasonably foreseeable to her, the loss attributable to her should give her credit for the fact that she intended to fulfill the contract with the victims. "The present case is more like the one where fraud is committed in order to obtain a contract that the defendant might otherwise not obtain, but he means to perform the contract." United States v. Smith, 951 F.2d 1164, 1169 (10th Cir. 1991). (Internal citations and quotation marks omitted.) In United States v. Schneider, 930 F.2d 555, 558 (7th Cir. 1991), the Court distinguished between two types of fraud: One is where the offender--a true con artist . . . --does not intend to perform his undertaking, the contract or whatever; he means to pocket the entire contract price without rendering any service in return. In such a case the contract price is a reasonable estimate of what we are calling the expected loss, and we repeat that no more than a reasonable estimate is required. The other type of fraud is committed in order to obtain a contract that the defendant might otherwise not obtain, but he means to perform the contract (and is able to do so) and to pocket, as the profit from the fraud, only the difference between the contract price and his costs. This is such a case.

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(Internal citations omitted.) Clearly Lorraine Brown is not a "con man." She meant to perform and did perform the job she was hired to do. Her crime is that she allowed surrogate signers, rather than authorized signers, to sign the mortgage documents and to do so outside the presence of notaries. 6. If the Court adopts the Probation Office's position that there is a loss but it

reasonably cannot be determined, and that gain should be used as an alternative measure of loss, we submit that the gain figure should be substantially less than the $20,000,000 advocated by the PSR. This is because: a. The $20,000,000 LPS forfeited to the government is an arbitrary figure

that was negotiated by counsel for LPS and counsel for the United States. No doubt, both sides took into account the risks and costs of litigation when deciding to settle, and to settle for that amount. LPS had a tremendous incentive to agree to the forfeiture of the $20,000,000--as part of the settlement agreement, the government agreed not to prosecute LPS criminally. A felony conviction would have cost LPS millions, if not billions of dollars in lost business. b. Forfeiture and loss do not automatically equate.

[A]lthough forfeiture and loss bear similarities and are determined under the same burden of proof, the two require distinct calculations and need not be calculated identically. Criminal forfeiture is a form of punishment imposed by the jury to divest a defendant of the profits of his illegal activity. See 18 U.S.C. 982(a). Loss, on the other hand, focuses generally on the harm suffered by the victim of the criminal conduct rather than on the proceeds of the crime enjoyed by the defendant. See United States v. Snyder, 291 F.3d 1291, 1295-96 (11th Cir.2002). Because [f]orfeiture is a penalty imposed on a criminal independent of any loss to the crime victim, the amount of the jurys forfeiture verdict is not necessarily the correct measure of loss for sentencing purposes, and the procedures for arriving at a forfeiture amount and calculating loss are distinct. United States v. Dawkins, 202 F.3d 711, 715 (4th Cir.2000) (citation omitted). Thus, the district court erred to the extent it assumed that the forfeiture verdict necessarily dictated the loss amount as well. United States v. Hamaker, 455 F.3d 1316, 1337 (11th Cir. 2006). (Internal footnote omitted.)
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Accord United States v. Foley, 508 F.3d 627 (11th Cir. 2007). c. Ms. Brown did not gain $20,000,000, or anything close to it. If the Court

determines there is a loss but it reasonably cannot be determined, and that gain should be used as an alternative measure of loss, the amount of gain realized by Ms. Brown -- as opposed to LPS -should be used. Here is a realistic and tangible way to calculate that figure by dividing her manager's bonuses from 2005 to 2008 (in 2009, following expiration of her employment contract, Ms. Brown was an at will employee and no longer qualified for a manager's bonus) by the number of estimated tainted documents: From 2003 to 2009, DocX processed 5,617,467 documents. These documents consisted of lien releases (5,520,388), foreclosure assignments (80,754), servicing sale assignments (14,618), and recordation services (1,707). According to the PSR, "The exact number of documents created by DocX with forged signatures and fraudulent notarizations is presently unknown. Ms. Brown agrees however, that between 2003 and 2009, DocX executed and filed more than one million such documents with property recorders' offices across the nation." PSR, pg. 6, para. 20. For purposes of this calculation, 1,000,000 documents is used. 1,000,000 documents represents 17.8% of the 5,617,467 documents processed by DocX from 2003 to 2009. LPS purchased DocX from Ms. Brown and her partner in 2005. Following the purchase, Ms. Brown entered into a three year employment contract with LPS that called for her to receive a base salary of $150,000 (later raised to $200,000), as well as a manager's bonus that was based on profitability. As can be seen from the excerpted portion of her employment contract, the bonus called for her to receive 7% of DocX's net earnings

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before taxes. 1. Compensation. 1.1 Base Salary. As compensation for all services to be rendered by Employee under this Agreement, Company shall pay to Employee an annual base salary of One Hundred Fifty Thousand Dollars ($150,000) (the "Base Salary"), which shall be paid on a regular basis in accordance with Company's generally applicable payroll procedures and policies, as established from time to time. The amount of the Base Salary may be reviewed by the Managing Member, which may periodically adjust Employee's Base Salary upwards in its sole discretion. 1.2 Participation in Benefit Plans. Employee shall be entitled to participate in all employee benefit plans or programs generally available to employees of Company, to the extent that Employee is eligible to participate under the terms of each particular plan or program. 1.3 Bonus. For each full calendar year of the Term and any partial calendar year during the Term during which Employee is employed by Company pursuant to this Agreement, in addition to Employee's Base Salary, Employee shall be entitled to receive an annual bonus (the "Annual Bonus") equal to seven percent (7.0%) of the net earnings before taxes, as determined in accordance with generally accepted accounting principles applied on a basis consistent with the Company's practices prior to the date of this Agreement, of the Company's business and the Fidelity Loan Portfolio Services business generated after the Closing (as defined in the Purchase Agreement) for the full or partial calendar year in issue. Subject to Section 5.4 and Section 5.5 herein, the Annual Bonus payable to Employee hereunder shall be prorated to account for any partial year of service. From 2005 to 2008, Ms. Brown received $525,970 in manager's bonuses. 17.8% (the estimated number of fraudulent documents) of $525,970 (Ms. Brown's bonuses) equals $93,623. Utilizing this methodology, Ms. Brown's guideline range would be calculated as follows: Base Offense Level: Loss (or Gain) of More than $70,000: [10 or More Victims: Leadership Role: 6 8 2] Note: We maintain there are no victims. 4
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Abuse of Position of Trust: Acceptance of Responsibility

2 -3

If the Court finds there are no victims, the Total Offense Level would be 17, yielding a guideline range of 24-30 months. If the Court finds there are 10 or more victims, the Total Offense Level would be 19, yielding a guideline range of 30-37 months. III. Number of Victims According to the PSR, "The victims in this case are the residential mortgage servicers who hired DocX to create and execute mortgage related documents. There are approximately 38 such victims." PSR, pg. 8, para. 30. "'Victim' means . . . any person who sustained any part of the actual loss determined under [the guidelines][.]" USSG 2B1.1, comment. (n.1). As indicated above, it is our view that there is no actual loss in this case, and therefore there are no victims. From the perspective of the guidelines, the analysis should stop there. However, the following additional points are provided for the Court's consideration: The fact that a mortgage-related document, such as a lien release or a foreclosure assignment, bore the signature of a surrogate signer rather than an authorized signer, had no affect on the mortgage servicers. Their only interest was in having the documents processed, without concern for who signed them. See various News Releases, Consent Order, Reviews and Reports by the Office of the Comptroller of the Currency, United States Department of the Treasury and the Office of Inspector General, United States Department of Housing and Urban Development, attached to our PSR Points and Objections. These Reports clearly show that the mortgage servicers were using the same surrogate signing and bad notary practices as Ms. Brown, in addition to other deficient practices. They cannot be cast as victims at the very same time that they were engaged in

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the same illegal conduct as the defendant. According to the PSR, no declaration of loss affidavits have been received by the Probation Office from the mortgage servicers. Although not dispositive, see United States v. Foley, 508 F.3d 627, 633-34 (11th Cir. 2007), it is a factor the Court should consider. IV. Grounds for Departure and Variance There are a number of compelling reasons the Court should grant a downward departure and/or variance from whatever guideline range the Court determines is appropriate. These reasons will not be repeated here, as they are listed in the PSR. PSR, pg. 19, para. 95. V. Conclusion Through this pleading, as well as our Comprehensive Sentencing Mitigation Report and our PSR Points and Objections, we have attempted to inform the Court about the issues and considerations that we believe are significant. In the final analysis, we trust that the Court will impose a sentence that is sufficient, but not greater than necessary, to comply with the purposes of sentencing.

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Respectfully submitted, MARK ROSENBLUM Professional Association s/Mark Rosenblum Mark Rosenblum Florida Bar No. 289175 mark@markrosenblumlaw.com Vanessa Zamora Newtson Florida Bar No. 641723 vanessan@markrosenblumlaw.com 1300 Riverplace Blvd., Ste. 601 Jacksonville, Florida 32207 Telephone: 904-396-6100 Facsimile: 904-346-4481 Counsel for Defendant . CERTIFICATE OF SERVICE I HEREBY CERTIFY that on April 21, 2013 I electronically filed the foregoing with the Clerk of the Court by using the CM/ECF system, which will send a notice of electronic filing to all counsel of record.

s/Mark Rosenblum

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