United States v. David Lonich

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS JAN 10 2022 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA, No. 18-10298 18-10395 Plaintiff-Appellee, D.C. No. 3:17-cr-00139-SI-3 v.

DAVID LONICH, MEMORANDUM*

Defendant-Appellant.

UNITED STATES OF AMERICA, No. 18-10299 18-10408 Plaintiff-Appellee, D.C. No. 3:17-cr-00139-SI-2 v.

BRIAN SCOTT MELLAND,

UNITED STATES OF AMERICA, No. 18-10300 18-10394 Plaintiff-Appellee, D.C. No. 3:14-cr-00139-SI-2 v.

DAVID LONICH,

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Defendant-Appellant.

UNITED STATES OF AMERICA, No. 18-10301 18-10407 Plaintiff-Appellee, D.C. No. 3:14-cr-00139-SI-4 v.

UNITED STATES OF AMERICA, No. 18-10303 18-10405 Plaintiff-Appellee, D.C. No. 3:14-cr-00139-SI-3 v.

SEAN CLARK CUTTING,

UNITED STATES OF AMERICA, No. 18-10304 18-10390 Plaintiff-Appellee, D.C. No. 3:17-cr-00139-SI-1 v.

Appeal from the United States District Court for the Northern District of California Susan Illston, District Judge, Presiding

2 Argued and Submitted February 10, 2021 San Francisco, California

Before: HURWITZ and BRESS, Circuit Judges, and CORKER,** District Judge.

Sean Cutting, Brian Melland, and David Lonich appeal their convictions and

sentences arising from complex fraudulent schemes involving bank loans and real

estate. In an opinion issued concurrently with this memorandum disposition, we

reject certain of defendants’ challenges to their convictions but vacate their

sentences and restitution orders and remand for resentencing. In this memorandum

disposition, we reject defendants’ remaining challenges to their convictions.1

1. We review de novo a district court’s denial of a new trial based on a

claimed violation of Napue v. Illinois, 360 U.S. 264 (1959). See United States v.

Rodriguez, 766 F.3d 970, 980 (9th Cir. 2014). The district court’s underlying factual

findings are reviewed for clear error. See United States v. Inzunza, 638 F.3d 1006,

1020 (9th Cir. 2011).

The district court did not err in rejecting defendants’ claim that the

government violated their due process rights under Napue when it examined House

** The Honorable Clifton L. Corker, United States District Judge for the Eastern District of Tennessee, sitting by designation. 1 We address an ancillary challenge to the district court’s forfeiture order in a separate concurrently filed opinion. See United States v. 101 Houseco, LLC, No. 18-10305 (9th Cir. 2021).

3 at trial about his contact with SVB employees. To prevail on a Napue claim, “a

defendant must show that (1) the testimony . . . was actually false, (2) the

prosecution knew or should have known that the testimony was actually false, and

(3) that the false testimony was material.” United States v. Houston, 648 F.3d 806,

814 (9th Cir. 2011) (quotations omitted).

Read in context, House’s testimony was neither false nor misleading, nor is

there a basis to conclude that the government “knowingly created a false

impression.” Towery v. Schriro, 641 F.3d 300, 309 (9th Cir. 2010). There is also

not a “reasonable likelihood” that House’s statements materially “affected the

judgment of the jury.” Houston, 648 F.3d at 814. Defendants cross-examined House

extensively on the point in question, and the government’s presentation of evidence

and closing argument sufficiently corrected any potential misunderstanding.

2. Providing the jury with House’s unredacted plea agreement did not

violate defendants’ Sixth Amendment Confrontation Clause rights under de novo

review. See Dickson v. Sullivan, 849 F.2d 403, 405–08 (9th Cir. 1988). There is not

“a reasonable possibility that the extrinsic material could have affected the verdict.”

United States v. Prime, 431 F.3d 1147, 1157 (9th Cir. 2005) (quoting Dickson, 849

F.2d at 405). House’s unredacted plea agreement was but one of thousands of

exhibits and it largely restated the government’s theory at trial, of which the jury

already heard extensive evidence. See Dickson, 849 F.2d at 406 (identifying a series

4 of factors for consideration in the prejudice analysis). The jury also received limiting

instructions emphasizing that it could only consider the plea deal to determine

House’s credibility, further mitigating any prejudice.

3. The district acted within its discretion in denying defendants’ motion

for a new trial based on alleged prosecutorial misconduct during closing argument.

See United States v. Barragan, 871 F.3d 689, 707 (9th Cir. 2017) (standard of

review). Although the prosecutor could have more precisely framed the challenged

statement about Cutting’s potential personal liability for legal lending limit

violations, we do “not lightly infer that a prosecutor intends an ambiguous remark

to have its most damaging meaning.” Donnelly v. DeChristoforo, 416 U.S. 637, 647

(1974); see also United States v. Alcantara-Castillo, 788 F.3d 1186, 1195 (9th Cir.

2015) (finding no misconduct rising to the level of plain error where prosecutor’s

statement was “ambiguous”). Here, it is unclear that the prosecutor knew or should

have known that the statement was false rather than simply imprecise. Regardless,

there is no basis to conclude that the challenged statement “affected the jury’s

verdict.” United States v. Simtob, 901 F.2d 799, 806 (9th Cir. 1990). The district

court gave a curative instruction, and the government later clarified the statement in

question.

4. Defendants argue that the district court impermissibly instructed the

jury that it could convict defendants for wire fraud on a fraud-by-omission theory

5 based on Lonich’s allegedly trusting relationship with DebtX. But we must uphold

a conviction when the jury instructions and supporting evidence provide alternate

bases to convict a defendant, even if “one of the[] [instructions] lacks adequate

evidentiary support.” United States v. Gonzalez, 906 F.3d 784, 790–91 (9th Cir.

2018).

Here, the jury had extensive evidence by which to convict defendants for wire

fraud on alternative grounds—based on Lonich’s affirmative misrepresentations and

half-truths. This included Lonich submitting a false certification to DebtX claiming

that (1) 101 Houseco had no relation to anyone with outstanding FDIC debt, (2) the

bid was not structured to circumvent FDIC’s eligibility rules, and (3) the bid was

“genuine and submitted in good faith.” Lonich made similar false statements in

certifying the take-out financing application for Freddie Mac. The evidence

supporting the wire fraud convictions on these grounds was overwhelming.

“Because ‘jurors are well equipped to analyze the evidence,’ we can be confident

that the jury chose to rest its verdict on the [theory] that was supported by sufficient

evidence, rather than” a theory that defendants claimed lacked evidentiary support.

Gonzalez, 906 F.3d at 791 (quotations omitted). We reject as speculative

defendants’ claim that the jury must have relied on the omission theory to convict

them on Counts 10–15 because jurors acquitted defendants on Count 16. Count 16

differed from the other wire fraud charges in that Lonich disclosed Madjlessi’s role

6 in the project to Terra Capital.

5. We review “the denial of a motion to suppress de novo and the district

court’s findings of fact for clear error.” United States v. Flores, 802 F.3d 1028, 1042

(9th Cir. 2015). The district court correctly rejected Lonich’s argument that the

government’s search warrant was overbroad. The most reasonable reading of the

warrant is that it was limited to the 101 Houseco scheme. See United States v. SDI

Future Health, Inc., 568 F.3d 684, 702 (9th Cir. 2009) (noting “the requirement that

the scope of the warrant be limited by the probable cause on which the warrant is

based” (quoting In re Grand Jury Subpoenas Dated Dec. 10, 1987, 926 F.2d 847,

856–57 (9th Cir. 1991))). Nor has Lonich demonstrated that the government’s

execution of the search warrant supports his overbroad interpretation of that

document.

6. Even assuming the district court erred in permitting parts of Gerrish’s

memorandum to be read to the jury under Federal Rule of Evidence 803(5), “we find

‘it is more probable than not that the error did not materially affect the verdict.’”

United States v. Torres, 794 F.3d 1053, 1056 (9th Cir. 2015) (quoting United States

v. Seschillie, 310 F.3d 1208, 1214 (9th Cir. 2002)).

The evidence of Cutting’s guilt was overwhelming. See United States v.

Sayakhom, 186 F.3d 928, 936 (9th Cir.), amended by 197 F.3d 959 (9th Cir. 1999)

(holding that any error in admitting testimony was harmless because “[t]he

7 government presented compelling evidence of [defendant’s] guilt”). The Gerrish

memorandum concerned only the 101 Houseco scheme and so had minimal, if any,

effect on Cutting’s convictions relating to the legal lending limit scheme. As for the

101 Houseco scheme, extensive evidence showed that 101 Houseco was a fraudulent

enterprise and Cutting knew this, and that Cutting played a key role in securing the

false asset verification letters that straw buyers needed for Madjlessi to gain control

over the PLV East project. The Gerrish memorandum was also duplicative of other

evidence presented at trial, and it was not the government’s central focus at closing

argument.

The memorandum did not materially affect Lonich and Melland’s verdicts

either. Cutting’s effective confession, as recounted in the Gerrish memorandum,

only indirectly implicated the other defendants. Besides, overwhelming evidence

implicated Lonich and Melland in the 101 Houseco schemes.

7. “The admissibility of lay opinion testimony under Rule 701 is

committed to the sound discretion of the trial judge and h[er] decision will be

overturned only if it constitutes a clear abuse of discretion.” United States v.

Gadson, 763 F.3d 1189, 1209 (9th Cir. 2014) (quoting Nationwide Transp. Fin. v.

Cass Info. Sys., Inc., 523 F.3d 1051, 1058 (9th Cir. 2008)). The district court did

not abuse its discretion in admitting the challenged testimony for eight lay witnesses.

A fact witness may testify as to matters for which he has personal knowledge.

8 See Fed. R. Evid. 602. Federal Rule of Evidence 701 also allows a lay witness to

offer opinions that are “(a) rationally based on the witness’s perception; (b) helpful

to clearly understanding the witness’s testimony or to determining a fact in issue;

and (c) not based on scientific, technical, or other specialized knowledge within the

scope of Rule 702.” “[W]hether evidence is more properly offered by an expert or

a lay witness ‘depends on the basis of the opinion, not its subject matter.’” United

States v. Perez, 962 F.3d 420, 436 (9th Cir. 2020) (quoting Barragan, 871 F.3d at

704).

We have carefully reviewed the challenged testimony of the eight lay

witnesses. Nearly all of it was factual in nature, based on personal perception and

the recollection of events relating to each witness’s involvement in investigating

defendants’ schemes. In the limited instances when it veered closer to opinion

testimony, the district court acted within its discretion by admitting it because the

witnesses testified based on their own perceptions. See Gadson, 763 F.3d at 1206

(under Rule 701, “[a] lay witness’s opinion testimony necessarily draws on the

witness’s own understanding” of events, based on his “experience and knowledge”).

Regardless, the challenged testimony did not prejudice defendants. Any of

the testimony that could arguably be characterized as opinion testimony that

exceeded the limits of Rule 701 was infrequent at best. See United States v.

Rodriguez, 971 F.3d 1005, 1019 (9th Cir. 2020) (holding wrongfully admitted lay

9 testimony “was harmless” because “[t]he majority of the [witnesses’] testimony did

pass muster under the Rules of Evidence”). In addition, the challenged testimony

did not concern defendants’ mental state for their crimes. It instead mainly

concerned whether SVB violated California’s legal lending limits, which is not itself

a criminal offense, a point about which the district court instructed the jury. See

Perez, 962 F.3d at 437 (harmless to admit testimony that is “informative but only

tangentially relevant information” to the charged offenses).

8. Because none of defendants’ arguments demonstrate error in their

convictions, there is likewise no basis to overturn the convictions under the

cumulative error doctrine. See United States v. Lindsey, 634 F.3d 541, 555 (9th Cir.

2011).

* * *

For these reasons and those set forth in our accompanying opinion, we affirm

defendants’ convictions. But we vacate defendants’ sentences and remand for

resentencing on an open record.

AFFIRMED in part, VACATED in part, and REMANDED.