Opposition Brief — Mohsin Raza, et al., Petitioners v. United States

No. 17-1314

In the Supreme Court of the United States

MOHSIN RAZA, ET AL., PETITIONERS

v.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

NOEL J. FRANCISCO

Solicitor General

Counsel of Record

JOHN P. CRONAN

Acting Assistant Attorney

General

FINNUALA K. TESSIER

Attorney

Department of Justice

Washington, D.C. 20530-0001

SupremeCtBriefs@usdoj.gov

(202) 514-2217

QUESTION PRESENTED

Whether the district court correctly instructed the

jury that, for purposes of a charge of wire fraud, in violation of 18 U.S.C. 1343, a false statement’s materiality

can be established by proof that the statement “would

reasonably influence a person to part with money or

property.”

(I)

TABLE OF CONTENTS

Page

Opinion below ................................................................................ 1

Jurisdiction .................................................................................... 1

Statement ...................................................................................... 1

Argument..................................................................................... 11

Conclusion ................................................................................... 27

TABLE OF AUTHORITIES

Cases:

Davis v. United States, 417 U.S. 333 (1974) ....................... 22

Hedgpeth v. Pulido, 555 U.S. 57 (2008) ............................... 23

Kungys v. United States, 485 U.S. 759 (1988) .............. 13, 14

Neder v. United States, 527 U.S. 1

(1999) ......................................................... 8, 11, 12, 13, 14, 23

United States v. Appolon, 715 F.3d 362 (1st Cir.),

cert. denied, 571 U.S. 929 (2013) ....................................... 19

United States v. Betts-Gaston, 860 F.3d 525

(7th Cir. 2017), cert. denied, 138 S. Ct. 689 (2018) .......... 17

United States v. Brien, 617 F.2d 299 (1st Cir.),

cert. denied, 446 U.S. 919 (1980) ................................... 9, 15

United States v. Colton, 231 F.3d 890 (4th Cir. 2000).......... 8

United States v. Curtis, 635 F.3d 704 (5th Cir.),

cert. denied, 565 U.S. 857 (2011) ....................................... 19

United States v. Daniel, 329 F.3d 480

(6th Cir. 2003) ................................................................ 17, 23

United States v. Davis, 226 F.3d 346 (5th Cir. 2000),

cert. denied, 531 U.S. 1181 (2001) ............................... 15, 17

United States v. Fallon, 470 F.3d 542 (3d Cir. 2006) ......... 20

United States v. Gaudin, 515 U.S. 506 (1995) .................... 14

United States v. Heppner, 519 F.3d 744 (8th Cir.),

cert. denied, 555 U.S. 909 (2008) ....................................... 18

(III)

IV

Cases—Continued:

Page

United States v. Holmes, 406 F.3d 337 (5th Cir.),

cert. denied 546 U.S. 871 (2005) ........................................ 20

United States v. Irvin, 682 F.3d 1254 (10th Cir. 2012) ........ 9

United States v. Lindsey, 850 F.3d 1009

(9th Cir. 2017) ............................................................ 9, 10, 18

United States v. Lucas:

516 F.3d 316, 341 (5th Cir.), cert. denied,

555 U.S. 822 (2008) .................................................... 19

709 Fed. Appx. 119 (3d Cir. 2017) .................................. 17

United States v. McAuliffe, 490 F.3d 526 (6th Cir.),

cert. denied, 552 U.S. 976 (2007) ................................. 22, 23

United States v. Morganfield, 501 F.3d 453

(5th Cir. 2007), cert. denied, 553 U.S. 1067 (2008)........... 19

United States v. Neder, 197 F.3d 1122 (11th Cir.

1999), cert. denied, 530 U.S. 1261 (2000) .......................... 20

United States v. Philip Morris USA Inc., 566 F.3d

1095 (D.C. Cir. 2009), cert. denied, 561 U.S. 1025

(2010) .................................................................................... 18

United States v. Rigas, 490 F.3d 208 (2d Cir. 2007),

cert. denied, 552 U.S. 1242 (2008) ..................................... 21

United States v. Rodriguez, 140 F.3d 163

(2d Cir. 1998) ................................................................. 21, 22

United States v. Rybicki, 354 F.3d 124 (2d Cir. 2003),

cert. denied, 543 U.S. 809 (2004) ....................................... 22

United States v. Svete, 556 F.3d 1157 (11th Cir.

2009), cert. denied, 559 U.S. 1009 (2010) .................... 14, 18

United States v. Tum, 707 F.3d 68 (1st Cir.),

cert. denied, 569 U.S. 1025 (2013) ..................................... 17

United States v. Weaver, 860 F.3d 90 (2d Cir. 2017) ..... 17, 22

United States v. Wells, 519 U.S. 482 (1997) ........................ 13

United States v. Williams, 865 F.3d 1302 (10th Cir.),

cert. denied, 138 S. Ct. 567 (2017) ..................................... 18

V

Cases—Continued:

Page

United States v. Wolf, 860 F.3d 175 (4th Cir. 2017) ............. 8

United States v. Wright, 665 F.3d 560 (3d Cir. 2012) ........ 19

Universal Health Servs., Inc. v. United States ex rel.

Escobar, 136 S. Ct. 1989 (2016) ......................... 9, 10, 15, 16

Wisniewski v. United States, 353 U.S. 901 (1957) ............. 22

Statutes:

18 U.S.C. 2 ................................................................................ 2

18 U.S.C. 1014 ........................................................................ 13

18 U.S.C. 1341 ........................................................................ 11

18 U.S.C. 1343 ...................................................................... 2, 6

18 U.S.C. 1349 ...................................................................... 1, 6

26 U.S.C. 7206(1) ................................................................... 14

Miscellaneous:

Restatement (Second) of Torts (1977) ............8, 12, 14, 15, 16

Restatement (Second) of Contracts (1981) ......................... 16

In the Supreme Court of the United States

No. 17-1314

MOHSIN RAZA, ET AL., PETITIONERS

v.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINION BELOW

The opinion of the court of appeals (Pet. App. 1a-41a)

is reported at 876 F.3d 604.

JURISDICTION

The judgment of the court of appeals was entered on

November 20, 2017. A petition for rehearing was denied

on December 18, 2017 (Pet. App. 43a-44a). The petition

for a writ of certiorari was filed on March 15, 2018. The

jurisdiction of this Court is invoked under 28 U.S.C.

1254(1).

STATEMENT

Following a jury trial in the United States District

Court for the Eastern District of Virginia, petitioners

were convicted of conspiracy to commit wire fraud affecting a financial institution, in violation of 18 U.S.C.

1349. Pet. App. 48a-49a. Petitioner Moshin Raza was

(1)

2

additionally convicted on three counts of wire fraud affecting a financial institution, in violation of 18 U.S.C.

1343 and 2. Pet. App. 49a. Petitioners Humaira Iqbal,

Farukh Iqbal, and Mohammad Ali Haider were each

convicted on one count of wire fraud affecting a financial

institution, in violation of 18 U.S.C. 1343 and 2. Pet.

App. 56a, 63a, 70a. Raza was sentenced to 24 months of

imprisonment, to be followed by two years of supervised

release. Id. at 50a-51a. Humaira Iqbal was sentenced

to 15 months of imprisonment, to be followed by two

years of supervised release. Id. at 57a-58a. Farukh Iqbal and Haider were each sentenced to 12 months and

one day of imprisonment, to be followed by two years of

supervised release. Id. at 64a-65a, 71a-72a. The court

of appeals affirmed. Id. at 1a-41a.

1. In 2006 and 2007, Raza opened and managed the

Annandale, Virginia, office of SunTrust Mortgage. Pet.

App. 6a; Gov’t C.A. Br. 4-5. Humaira, Raza’s wife,

worked as his personal assistant, although she also performed loan officer duties. Pet. App. 6a. Humaira’s

brothers, Farukh and Haider, worked for Raza as loan

officers. Ibid.

As loan officers, petitioners assisted prospective borrowers in obtaining residential mortgages and refinancing existing mortgages. Pet. App. 6a. During a consultation with a loan officer, a prospective borrower would

provide relevant information, either orally or in writing,

such as the prospective borrower’s income, employment, and assets. Ibid.; Gov’t C.A. Br. 5. The loan officer used that information to prepare the prospective

borrower’s mortgage loan application. Pet. App. 6a.

The loan officers, in preparing applications, selected the

type of loan that SunTrust should consider; each type of

3

loan had different rates and documentation requirements. Id. at 6a-7a. A “full document” loan, for example, required supporting documents corroborating the

loan applicant’s income, employment, and assets; a “noincome-verification” loan required proof of the applicants’ employment and current assets, but no proof of

current income; and a “stated income, stated asset” loan

required only those documents necessary to verify the

applicant’s employment for the prior two years. Id. at

7a; Gov’t C.A. Br. 6. Generally, the more documentation

that was required, the lower the interest rate for the

borrower. Gov’t C.A. Br. 6.

After completing a loan application, the loan officer

forwarded the application to a SunTrust underwriter in

Richmond for review and possible approval. Pet. App.

7a. The underwriter would sometimes approve a loan

application conditionally, subject to the bank’s receipt

of additional supporting documents. Ibid. If the loan

officer and the applicant thereafter fulfilled the specified conditions, such as by providing the underwriter

with the applicant’s pay stubs or bank statements, the

loan application would be approved for closing. Ibid.

SunTrust would then fund the loan by wiring money

from Georgia to a bank account in Virginia. Ibid. Following the loan closing, SunTrust paid a commission to

the loan officer. Ibid.

Petitioners’ fraudulent scheme involved mortgage

loans for 13 properties made by SunTrust between May

2006 and February 2007. Pet. App. 5a; Gov’t C.A. Br. 8.

For 12 of those properties, SunTrust made two simultaneous loans: one for 80% of the property value, and the

other for all or a portion of the remaining 20%. Gov’t

C.A. Br. 8. Farukh and Haider were the loan officers

4

for two of the properties. Ibid. Raza was the designated loan officer for the remaining 11 properties, although Humaira worked exclusively with the borrowers

on four of those properties. Ibid.

For each of the 13 loans, petitioners submitted loan

applications that stated higher incomes for the borrowers than they in fact earned. Gov’t C.A. Br. 8. The loans

for nine of the properties were “full-document” loans,

and the submitted files contained false pay stubs (showing the purported wages and earnings of the borrowers

for a particular two-week period), false W-2 tax forms

(showing the purported wages and earnings of the borrowers for a one-year period), or both. Id. at 8-9. The

loans for three of the properties were “no-incomeverification” loans, and the loans for the final property

were “stated income, stated asset” loans. Id. at 9.

Rina Delgado, a loan officer at the Annandale SunTrust branch, testified that either Raza or Humaira reviewed each loan application originated at Annandale

before it was submitted to the SunTrust underwriters.

Pet. App. 8a. Raza and Humaira would review an applicant’s income, assets, and liabilities; if the income was

insufficient, they would sometimes tell Delgado to inflate the income on the application. Ibid. On one occasion, Humaira had Delgado impersonate an applicant’s landlord over the phone and falsely confirm to a

SunTrust underwriter that the applicant was current on

his rental payments. Ibid. Delgado also provided Farukh and Haider with false bank statements to verify

assets shown on pending loan applications. Ibid.

Ranjit Singh, a tax preparer in Northern Virginia,

testified that Farukh and Haider would provide him

with the identities of loan applicants and the names of

purported employers, employment dates, and salaries.

5

Pet. App. 9a. Singh used that information to generate

false tax and payroll documents, which petitioners used

to help loan applicants obtain SunTrust mortgages.

Ibid. The false documentation frequently misrepresented not only the earnings and assets, but also the occupations, of the applicants (e.g., representing that a

cook and cabdriver was employed as a systems analyst).

Id. at 9a-13a. The misrepresentations included false information invented entirely by petitioners, rather than

information suggested or provided by the applicants

themselves. Ibid.

Barbara Daloia, a vice-president of SunTrust’s national underwriting team in North Carolina, explained

that “[a]ll” of the information on the loan applications

was “important” to SunTrust during the relevant time

period. Pet. App. 14a-15a (citation omitted). The same

was true of supporting documentation, which SunTrust

used to “authenticate the information on the loan application.” Ibid. Daloia explained that, although SunTrust

often contracted with investment banks to sell its mortgage loans on the secondary market, SunTrust remained exposed on those loans because the sales agreements required SunTrust to repurchase any loans that

failed to comply with its underwriting guidelines, including loans “procured by fraud.” Id. at 14a. In addition, as noted, home purchases were often financed with

two separate loans (a larger loan of 80%, and a smaller

loan of 20%). Ibid. Under those circumstances, SunTrust would “always” retain the second, smaller loan.

Ibid. Even if the first, larger loan was sold, therefore,

“SunTrust would nevertheless be exposed to the risk of

the smaller loan’s default.” Id. at 15a. Finally, the sup-

6

porting documentation submitted as part of the loan application was used by SunTrust to determine the loan’s

applicable interest rate. Id. at 7a; Gov’t C.A. Br. 6.

Petitioners’ fraudulent scheme caused SunTrust to

make mortgage loans based on applications that significantly misrepresented key information. One applicant,

for instance, obtained a $470,000 loan based on representations that the applicant’s wife worked as a systems

engineer earning $14,825 per month and had $45,000 in

a Wachovia Bank savings account; earnings and bank

statements were submitted to corroborate those numbers. Pet. App. 11a. In fact, the applicant’s wife was a

quality technician who earned $25,000 per year and had

never banked at Wachovia. Id. at 11a-12a. Another applicant obtained a $414,000 loan based on an earning

statement and W-2 form indicating that he was a practicing dentist who earned $11,580 per month and had

$68,000 in savings. Id. at 11a. In fact, the applicant did

clerical and maintenance work in his sister’s medical office, earned far less income, and had fewer assets. Ibid.

Other loans obtained based on applications submitted

by petitioners involved similar misstatements and

fraudulent documentation. Id. at 9a-13a.

2. Petitioners were charged with one count of conspiracy to commit wire fraud affecting a financial institution, in violation of 18 U.S.C. 1349, and with various

substantive counts of wire fraud affecting a financial institution, in violation of 18 U.S.C. 1343. Pet. App. 4a-5a.

Petitioners proceeded to trial.

Before deliberations, petitioners asked the district

court to instruct the jury that the materiality element

of wire fraud could be satisfied only if a false statement

has “a natural tendency to influence or be capable of influencing a decision of the particular decisionmaker to

7

whom it is addressed—here, the decision of SunTrust to

approve and fund mortgages for the properties named

in the indictment.” Pet. App. 17a (citation omitted). The

prosecution proposed a materiality instruction explaining that a “statement or representation is ‘material’ if it

has a natural tendency to influence or is capable of influencing a decision or action.” Ibid. (citation omitted).

The district court instructed the jury that the government was obliged to prove that “the scheme or artifice

to defraud, or the pretenses, representations, or promises, were material; that is, they would reasonably influence a person to part with money or property.” Pet. App.

20a (citation omitted). The court further instructed that

a particular fact is material if it “may be of importance

to a reasonable person in making a decision about a particular matter or transaction” and that “[a] statement

or representation is material if it has a natural tendency

to influence or is capable of influencing a decision or action.” Id. at 20a-21a (citations omitted).

The jury found all four petitioners guilty of conspiracy to commit wire fraud. Pet. App. 17a. The jury also

found Raza guilty on three counts of substantive wire

fraud and found Humaira, Farukh, and Haider guilty on

one count of wire fraud each. Ibid. Raza was sentenced

to 24 months of imprisonment, Humaira was sentenced

to 15 months of imprisonment, and Farukh and Haider

were each sentenced to 12 months and one day of imprisonment. Id. at 17a-18a.

3. On appeal, petitioners argued that the instructions improperly failed to advise the jury that it had to

find that their misrepresentations and false statements

were subjectively material to their victim, SunTrust,

and instead had erroneously instructed the jury on a

8

“reasonable lender” standard of materiality. Pet. App.

20a. The court of appeals disagreed.

The court of appeals observed that in Neder v.

United States, 527 U.S. 1 (1999), this Court held that

“Congress intended to incorporate common law materiality principles” into fraud offenses and thus “relied on

the objective materiality test spelled out in the Second

Restatement of Torts.” Pet. App. 26a (citing Neder, 527

U.S. at 22 n.5). The court of appeals observed that, under that test, “a fact is material if a ‘reasonable man

would attach importance to its existence or nonexistence

in determining his choice of action in the transaction in

question.’ ” Id. at 26a-27a (quoting Neder, 527 U.S. at

22 n.5, in turn quoting Restatement (Second) of Torts

§ 538, at 80 (1977)). Where the defendant has been

charged with “a fraud scheme that targets a private

lender such as SunTrust,” the court determined, materiality can thus be established by evidence that a rational lender would have been influenced by the fraud.

Id. at 26a. The court also noted that the Neder Court

“declined to incorporate” into the mail, wire, and bank

fraud offenses “the common law elements of reliance and

damages,” which would have required “proof that the

misrepresentations actually influenced and harmed the

target.” Id. at 27a n.7 (citing Neder, 527 U.S. at 24-25).

The court of appeals further observed that, “[c]onsistent with Neder,” its precedent had “adhered to an

objective standard of materiality for a criminal fraud offense that targeted a private lender.” Pet. App. 27a (citing United States v. Wolf, 860 F.3d 175, 193-196

(4th Cir. 2017)); see id. at 28a (citing United States v.

Colton, 231 F.3d 890, 903 n.5 (4th Cir. 2000), for the

proposition that “the susceptibility of the victim of the

fraud, in this case a financial institution, is irrelevant to

9

the analysis”). Several other circuits, the court noted,

had reached similar conclusions. Id. at 28a-30a (citing

United States v. Lindsey, 850 F.3d 1009, 1010-1019

(9th Cir. 2017); United States v. Irvin, 682 F.3d 1254,

1267 (10th Cir. 2012); United States v. Brien, 617 F.2d

299, 311 (1st Cir.), cert. denied, 446 U.S. 919 (1980)).

The court of appeals rejected petitioners’ contention

that this Court’s decision in Universal Health Services,

Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989

(2016), required a different approach. Pet. App. 30a34a. First, the court of appeals reasoned that “to the

extent Universal Health altered the concept of materiality in fraud proceedings, it is not likely that its impact

extends beyond the context of qui tam actions,” which

are civil proceedings that protect the federal government. Id. at 32a. The court noted Universal Health’s

recognition that the False Claims Act’s “materiality

standard is demanding,” and that the Act “is not an allpurpose antifraud statute.” Ibid. (quoting Universal

Health, 136 S. Ct. at 2003).

Second, the court of appeals observed that “if Universal Health controlled our decision on materiality in

these appeals, it is unclear what the impact might be.”

Pet. App. 32a. The court noted that although Universal

Health stated that “ ‘materiality looks to the effect on

the likely or actual behavior of the recipient of the alleged misrepresentation,’ ” this Court also emphasized

that a matter is material under the common law of torts

“ ‘if a reasonable man would attach importance to it in

determining his choice of action in the transaction in

question,’ ” suggesting that “those two standards * * *

are not in tension.” Id. at 32a-33a (quoting 136 S. Ct. at

2002-2003) (brackets omitted). Put another way, the

court of appeals continued, an objective materiality test

10

does “ ‘look to the effect on the likely or actual behavior

of the recipient,’ ” as Universal Health contemplates; “[i]n

those circumstances, however, the recipient is a ‘reasonable man.’ ” Id. at 33a (quoting 136 S. Ct. at 2002-2003).

Finally, the court of appeals noted, “Universal

Health involved a civil fraud scheme that had targeted

the federal government.” Pet. App. 33a. The court reasoned that although “evidence of a government entity’s

past disregard of particular types of false statements

might undermine the materiality element” in that context, a similar principle “does not apply when the fraud

victim is a private lender.” Ibid. “The weight the Government gives to a particular statutory, regulatory, or

contractual requirement,” the court explained, “is analogous not to the weight an individual lender gives to a

statement on its loan application, but rather the weight

the entire mortgage industry gives to that type of statement.” Id. at 34a (quoting Lindsey, 850 F.3d at 1017).

In addition to determining that “the district court

did not err in failing to require the misrepresentations

in the SunTrust loan applications to be material to

SunTrust as the fraud victim,” Pet. App. 34a, the court

of appeals also held in the alternative that, even assuming the trial court had “somehow misstated the applicable principles concerning materiality, that error would

be entirely harmless,” id. at 34a n.9. The court determined that “[t]he evidence established that certain

types of loans required supporting documents verifying

the various loan applicants’ income, employment, and

assets.” Ibid. The court found that to be why petitioners went to “great lengths” to falsify those documents

in order to support the misrepresentations in the loan

applications, including by “seeking out and purchasing

fraudulent W-2s and pay stubs from a reprobate tax

11

preparer,” and by making “ludicrous misrepresentations” regarding applicants’ qualifications. Ibid.; see

ibid. (applicant was identified on an application as “a

‘senior analyst’ at Ikon Solutions” even though he in fact

“cooked pizzas for Pizza Hut”). The court thus determined that testimony “stress[ing] the importance of accurate information being reflected on all loan applications” had merely “confirmed the obvious. SunTrust

would not have funded the loans had [petitioners]

painted an accurate picture of the applicants’ qualifications.” Ibid.

ARGUMENT

Petitioners renew their argument (Pet. 8-21) that the

jury instructions for their fraud charges were deficient

because they required the jury to find that petitioners’

false statements were capable of influencing a reasonable decisionmaker, rather than the particular victim to

which the statements were addressed (SunTrust). The

court of appeals correctly rejected that argument, and

its decision does not conflict with any decision of this

Court or another court of appeals. In any event, the

court of appeals expressly held, in the alternative, that

any error in the jury instructions was harmless. Further review is not warranted.

1. Under the federal wire fraud statute, it is unlawful to use a wire to execute or further “any scheme or

artifice to defraud, or for obtaining money or property

by means of false or fraudulent pretenses, representations, or promises.” 18 U.S.C. 1341. In Neder v. United

States, 527 U.S. 1 (1999), the Court concluded that Congress intended to incorporate into the mail and wire

fraud statutes the common law requirement of materiality. Id. at 20-25. Neder thus construed the meaning

of materiality under the statute by reference to the two-

12

part, disjunctive common law definition, as articulated

in the Restatement of Torts:

The Restatement instructs that a matter is material

if:

“(a) a reasonable man would attach importance to

its existence or nonexistence in determining his

choice of action in the transaction in question; or

“(b) the maker of the representation knows or has

reason to know that its recipient regards or is likely

to regard the matter as important in determining his

choice of action, although a reasonable man would

not so regard it.”

Id. at 22 n.5 (quoting Restatement (Second) of Torts

§ 538, at 80) (emphasis added).

Consistent with that understanding, the district court

here instructed the jury that a particular fact is material if it “may be of importance to a reasonable person

in making a decision about a particular matter or transaction,” and also instructed that a “statement or representation is material if it has a natural tendency to influence or is capable of influencing a decision or action.”

Pet. App. 20a-21a (citations omitted). As the court of

appeals correctly explained, those instructions, which

track the Restatement, were a correct statement of the

materiality requirement. Id. at 34a.

Petitioners nevertheless contend (Pet. 13-16) that

this Court’s decisions require proof that a misstatement

or omission had the capability to influence the “intended

victim,” even if it is undisputed that the misstatement

or omission had the capability of influencing a reasonable decisionmaker. Pet. 14 (emphasis omitted). Petitioners’ argument, which relies on selective quotations

13

from cases in which the question presented here played

no role in the decision, is incorrect.

First, petitioners point (Pet. 13-14) to this Court’s

decision in United States v. Wells, 519 U.S. 482 (1997).

Yet the holding in Wells was that that materiality is not

an element of 18 U.S.C. 1014, which prohibits the making of false statements to federally insured financial institutions. In so holding, Wells understood the proposed materiality standard to require that a falsehood

have “a natural tendency to influence, or [is] capable of

influencing, the decision of the decisionmaking body to

which it was addressed.” 519 U.S. at 489 (quoting

Kungys v. United States, 485 U.S. 759, 770 (1988)). But

the Court did not state—much less hold—that misstatements are not material if they are capable of influencing

a reasonable decisionmaker. To the contrary, the Court

found “no controversy over the law as stated in [the

jury] instructions,” which informed the jury that a material fact is one “ ‘that would be important to a reasonable person in deciding whether to engage or not to engage in a particular transaction.’ ” Id. at 485 (emphasis

added; citation omitted). Those instructions are nearly

identical to the instructions given in this case.

Petitioners next rely (Pet. 14-15) on Neder, where

the Court similarly stated, while discussing tax-fraud

charges under a separate statute, that “[i]n general, a

false statement is material if it has a natural tendency

to influence, or is capable of influencing, the decision of

the decisionmaking body to which it was addressed.”

527 U.S. at 16 (brackets, citation, and internal quotation

marks omitted). But the relevant question in Neder was

whether the defendant’s “failure to report substantial

amounts of income on his tax returns [was or] was not

14

‘a material matter’ ” under the tax statute. Ibid. (quoting 26 U.S.C. 7206(1)). There was no dispute about

whether the federal government viewed the significance

of the information differently than a hypothetical reasonable decisionmaker would have. Indeed, the language in Neder (and Wells) on which petitioners rely

originated in Kungys, in which the Court explained that

the “the central object of the inquiry” into materiality

is “whether the misrepresentation or concealment was

predictably capable of affecting, i.e., had a natural tendency to affect, the official decision.” 485 U.S. at 771

(emphasis added). And the Court in United States v.

Gaudin, 515 U.S. 506 (1995), on which Neder (and

Wells) also relied, see 527 U.S. at 16, explained that the

“materiality inquiry” under the Kungys formulation involves “assessments of the inferences a reasonable

decisionmaker would draw from a given set of facts.”

515 U.S. at 512 (emphasis added; brackets, citation, and

internal quotation marks omitted); see id. at 509.

Petitioners’ crabbed reading of selected statements

in prior decisions rests, at bottom, on a false dichotomy.

The fact that a statement is material if it is capable of

influencing the intended victim is entirely consistent

with a rule that a statement may also be material if it is

capable of influencing a reasonable decisionmaker. The

Restatement, quoted in Neder, is explicit on that point:

Either finding is enough to prove materiality. See Restatement (Second) of Torts § 538; see also Neder,

527 U.S. at 22 n.5. As courts of appeals have explained,

“[p]roof that a defendant created a scheme to deceive

reasonable people is sufficient evidence that the defendant intended to deceive, but a defendant who intends to deceive the ignorant or gullible by preying on

their infirmities is no less guilty.” United States v.

15

Svete, 556 F.3d 1157, 1165 (11th Cir. 2009) (en banc)

(emphasis added), cert. denied, 559 U.S. 1009 (2010);

see United States v. Davis, 226 F.3d 346, 358-359

(5th Cir. 2000) (a misstatement is material “if a reasonable person would rely on it” or “if the maker knew or

had reason to know his victim was likely so to rely”),

cert. denied, 531 U.S. 1181 (2001); United States v.

Brien, 617 F.2d 299, 311 (1st Cir.) (finding “no intention

on the part of Congress to differentiate between

schemes that will ensnare the ordinary prudent investor and those that attract only those with lesser mental

acuity”), cert. denied, 446 U.S. 919 (1980); see also Restatement (Second) of Torts § 538 cmt. f (“One who

practices upon another’s known idiosyncrasies cannot

complain if he is held liable when he is successful in

what he is endeavoring to accomplish.”).

For similar reasons, petitioners are incorrect in arguing (Pet. 16) that this Court’s decision in Universal

Health Services, Inc. v. United States ex rel. Escobar,

136 S. Ct. 1989 (2016), supports their position. That

case addressed the False Claims Act, which (unlike the

mail fraud statute) “is not an all-purpose antifraud statute.” Id. at 2003 (citation and internal quotation marks

omitted). The Court stated there that the materiality

standard “looks to the effect on the likely or actual behavior of the recipient of the alleged misrepresentation.” Id. at 2002 (brackets and citation omitted). But

the Court did not thereby suggest that materiality (particularly in the wire-fraud context) cannot be proved objectively. To the contrary, the Court noted that, under

the common law, a matter is material in either of “two

circumstances”:

16

(1) “if a reasonable man would attach importance to

it in determining his choice of action in the transaction”; or (2) if the defendant knew or had reason to

know that the recipient of the representation attaches importance to the specific matter “in determining his choice of action,” even though a reasonable person would not.

Id. at 2002-2003 (quoting Restatement (Second) of Torts

§ 538) (brackets omitted). A similar disjunctive standard exists in contract law. See id. at 2003 (citing Restatement (Second) of Contracts § 162(2) & cmt. c, at

439, 441 (1981)). As the court below correctly observed,

the references in Universal Health to a statement’s potential impact both on the intended victim and on a reasonable decisionmaker suggests that these tests “are

not in tension.” Pet. App. 33a.

In sum, this Court has never endorsed the principle

advocated by petitioners here: that a statement may be

material only if it is capable of influencing the particular victim to whom the statement was addressed, even

if the statement is capable of influencing a reasonable

decisionmaker. To the contrary, this Court’s decisions

indicate that a showing as to either standard is sufficient to establish materiality.

2. Petitioners assert (Pet. 8-13) that the courts of appeals conflict as to whether, in a fraud case involving a

private victim, the government must establish that the

misstatement or omission is capable of influencing the

intended victim, rather than a reasonable decisionmaker. Petitioners’ assertion of a circuit conflict, like

their assertions about this Court’s cases, relies on selective quotations from decisions in which the distinction

was not at issue. Petitioners have identified no decision

17

in which a court of appeals overturned a conviction because of a materiality instruction that permitted a guilty

verdict based on proof about a statement’s effect on a

reasonable decisionmaker.

First, every court of appeals has stated that a false

statement or omission is material if it is capable of influencing a reasonable decisionmaker. See United States v.

Tum, 707 F.3d 68, 72 (1st Cir.) (wire fraud requires

proof of “false or omitted statements that a reasonable

person would consider important in deciding what to

do”), cert. denied, 569 U.S. 1025 (2013); United States v.

Weaver, 860 F.3d 90, 94 (2d Cir. 2017) (per curiam) (“A

statement is material if the misinformation or omission

would naturally tend to lead or is capable of leading a

reasonable person to change his conduct.”) (brackets,

citation, and internal quotation marks omitted); United

States v. Lucas, 709 Fed. Appx. 119, 123 (3d Cir. 2017)

(“[M]ateriality is an objective test, and requires showing that a defendant’s misrepresentations would have

been important to a reasonable person deciding whether

to take the requested action, not that the victim actually

relied on those misrepresentations.”); Pet. App. 34a

(4th Cir.) (materiality “measures a misrepresentation’s

capacity to influence an objective ‘reasonable lender’ ”);

Davis, 226 F.3d at 358-359 (5th Cir.) (a misstatement is

material “if a reasonable person would rely on it” or “if

the maker knew or had reason to know his victim was

likely so to rely”); United States v. Daniel, 329 F.3d 480,

487 (6th Cir. 2003) (finding material misstatements supporting wire fraud conviction where defendant “made

several assertions he knew were false and that would

have affected a reasonable person’s actions in the situation”); United States v. Betts-Gaston, 860 F.3d 525, 532

18

(7th Cir. 2017) (en banc) (“[W]hether a statement is material depends on its effect on a reasonable person—or,

in this case, a reasonable lender.”) (citation and internal

quotation marks omitted), cert. denied, 138 S. Ct. 689

(2018); United States v. Heppner, 519 F.3d 744, 749

(8th Cir.) (“[A] material fact is a fact that would be important to a reasonable person in deciding whether to

engage or not to engage in a particular transaction.”)

(citation and internal quotation marks omitted), cert.

denied, 555 U.S. 909 (2008); United States v. Lindsey,

850 F.3d 1009, 1014 (9th Cir. 2017) (“The element of materiality is evaluated under an objective test, in which

we must examine the intrinsic capabilities of the false

statement itself, rather than the possibility of the actual

attainment of its end.”) (citation and internal quotation

marks omitted); United States v. Williams, 865 F.3d

1302, 1312 (10th Cir.) (addressing whether “misrepresentations had the capability or natural tendency to influence a reasonable bank’s decision of whether to provide a loan”) (citation and internal quotation marks

omitted), cert. denied, 138 S. Ct. 567 (2017); Svete,

556 F.3d at 1165 (11th Cir.) (“Proof that a defendant

created a scheme to deceive reasonable people is sufficient evidence that the defendant intended to deceive,

but a defendant who intends to deceive the ignorant or

gullible by preying on their infirmities is no less guilty.”);

United States v. Philip Morris USA Inc., 566 F.3d 1095,

1122 (D.C. Cir. 2009) (“This materiality requirement is

met if the matter at issue is of importance to a reasonable person in making a decision about a particular matter or transaction.”) (citation and internal quotation

marks omitted), cert. denied, 561 U.S. 1025 (2010).

Petitioners cite no court of appeals decision holding

that a misstatement or omission cannot be material if it

19

is capable of influencing a reasonable decisionmaker,

but not the intended victim. Instead, petitioners rely on

decisions (Pet. 10-12) in which a court of appeals, in determining that sufficient evidence existed for a jury to

find that a misstatement or omission was material, considered evidence of the impact of the misstatement on

the intended victim. See, e.g., United States v. Appolon,

715 F.3d 362, 368 (1st Cir.) (finding sufficient evidence

to support materiality based on “information material

to [a mortgage company’s] decisionmaking process,”

combined with the fact that the company’s “loan application explicitly sought [certain] information from the

applicant”), cert. denied, 571 U.S. 929 (2013); United

States v. Wright, 665 F.3d 560, 574-575 (3d Cir. 2012)

(finding sufficient evidence that misstatements were

material where victim “testified that the presence of

any renters or squatters in the building would have

been material to him as, in effect, its purchaser”);

United States v. Curtis, 635 F.3d 704, 719 n.51 (5th Cir.)

(finding sufficient evidence of material misstatements

where “[r]epresentatives from each of the lending institutions * * * testified that had they known these representations in the loan documents were false, they would

not have approved the loans”), cert. denied, 565 U.S. 857

(2011); United States v. Lucas, 516 F.3d 316, 341 (5th Cir.)

(finding sufficient evidence of material misstatements

where “[a] witness who had asked [the defendant]

whether there were any wetlands on the property testified that it ‘would have made a huge difference’ in her

decision to buy the property if [the defendant] had informed her that it contained wetlands”), cert. denied,

555 U.S. 822 (2008); United States v. Morganfield,

501 F.3d 453, 463 (5th Cir. 2007) (finding sufficient evi-

20

dence of material misstatements where “[b]ank representatives testified that a d/b/a certificate was necessary to open a checking account, as was valid personal

identification,” such that defendants’ misrepresentations “directly influenced the banks’ decisions to open

checking accounts in the names of the shell companies”), cert. denied, 553 U.S. 1067 (2008); United States

v. Holmes, 406 F.3d 337, 355 (5th Cir.) (finding sufficient evidence that misstatement regarding filing date

of civil lawsuit was material where the misrepresented

date “could have saved the suit from the time-bar thenbeing pressed by * * * defense counsel”), cert. denied

546 U.S. 871 (2005); see also United States v. Neder,

197 F.3d 1122, 1130-1131 (11th Cir. 1999) (failure to instruct jury on materiality requirement harmless where

“[t]he Government elicited testimony from all of the

lenders that if they had known the truth, they would not

have approved Neder’s land acquisition loans on the same

terms and conditions, if at all”), cert. denied, 530 U.S.

1261 (2000); cf. United States v. Fallon, 470 F.3d 542,

547 (3d Cir. 2006) (as to materiality of false statement,

error in excluding evidence regarding industry practice

was harmless in light of other evidence of industry custom and practice, as well as evidence that victim “himself relied upon” the defendant’s misstatements).

None of those decisions, however, turned on the difference between the fraud’s effect on the intended victim, as opposed to its effect on a reasonable decisionmaker. That is unsurprising: as the court below noted,

evidence regarding a statement’s effect on the actual

victim often speaks as well to how a reasonable decisionmaker was likely to react. Pet. App. 32a-33a. And as

noted, the Restatement defines materiality to include

21

evidence that would satisfy either formulation. See

pp. 15-16, supra.

Nor do the remaining cases upon which petitioners

rely demonstrate a conflict among the circuits. Petitioners contend (Pet. 8) that United States v. Rigas, 490 F.3d

208 (2d Cir. 2007), cert. denied, 552 U.S. 1242 (2008),

held that misstatements are material only if they are

capable of influencing the intended victim (as opposed

to a reasonable decisionmaker). That is incorrect. The

misstatements in question (about leverage ratios) had

been alleged as material only to a particular decision

(what interest rate to choose). Id. at 234-235. But the

government failed to establish that the bank “could make”

that particular decision, which had been “cabined” by

contract. Id. at 235. In other words, the government

never proved that the misstatements were made to a

“decisionmaker” with authority to make the relevant

“decision.” See ibid. (“For those misstatements to be

material, however, they had to be capable of influencing

a decision that the bank was able to make.”).

Petitioners also err in contending (Pet. 8-9) that the

Second Circuit reversed the defendant’s conviction in

United States v. Rodriguez, 140 F.3d 163 (1998), because the charged misrepresentations were incapable of

influencing the particular victim to which they were directed. In fact, the court reversed because the defendant was charged with defrauding a bank by depositing

checks that she knew had not been authorized by the

issuing company, and the act of “simply depositing

checks into a bank account where the depositor knows

that he/she is not entitled to the funds does not alone

constitute false or fraudulent pretenses or representations.” Id. at 168; see ibid. (“[T]he act of presenting

those checks to Chemical Bank for deposit and payment

22

is not a deceptive course of conduct.”). The only actual

misrepresentation was the defendant’s false claim

about her employer in her application to open an account, but “[t]here simply was no evidence adduced at

trial” that such a misstatement was material—whether

to the particular bank or to a hypothetical rational bank.

Ibid. Indeed, the Second Circuit in Rodriguez expressly described the materiality standard in objective

terms, see ibid. (“A misrepresentation is material if it is

capable of influencing a bank’s actions.”) (emphasis

added), belying petitioners’ claim that the court rejected an objective test in favor of a subjective one.

In any event, as petitioners acknowledge (Pet. 9 n.2),

the Second Circuit has recently confirmed that a “statement is material if the ‘misinformation or omission would

naturally tend to lead or is capable of leading a reasonable person to change his conduct.’ ” Weaver, 860 F.3d

at 94 (quoting United States v. Rybicki, 354 F.3d 124,

145 (2d Cir. 2003) (en banc), cert. denied, 543 U.S. 809

(2004)) (brackets omitted). This Court does not typically grant certiorari to address assertions of an intracircuit conflict. See Davis v. United States, 417 U.S.

333, 340 (1974); Wisniewski v. United States, 353 U.S.

901, 902 (1957) (per curiam).

Finally, contrary to petitioner’s claim (Pet. 12), the

Sixth Circuit did not apply an “intended victim” standard in United States v. McAuliffe, 490 F.3d 526, cert.

denied, 552 U.S. 976 (2007). Rather, the court there

concluded only that an indictment is not “fatally insufficient” when it fails to explicitly refer to materiality, so

long as “the facts alleged in the indictment warrant the

inference of ” materiality. Id. at 532. In reaching that

conclusion, the court quoted Neder’s statement that a

23

misrepresentation “is material if it has a natural tendency to influence, or is capable of influencing, the decision of the decision-making body to which it was addressed.” Id. at 531 (quoting Neder, 527 U.S. at 16). The

court did not distinguish between a statement’s effect

on a reasonable decisionmaker and its effect on the intended victim; there was no suggestion in McAuliffe

that the fraud’s victim (an insurance company) was anything other than reasonable. See id. at 532. As petitioners acknowledge (Pet. 12), the Sixth Circuit has separately endorsed a “reasonable person” standard. Daniel, 329 F.3d at 487.

3. Even if a conflict among the circuits did exist, this

case would be a poor vehicle through which to address

it. The court of appeals expressly held that, even “[i]f

the trial court somehow misstated the applicable principles concerning materiality, that error would be entirely harmless” in light of overwhelming evidence that

petitioners’ misrepresentations were in fact material to

SunTrust. Pet. App. 34a n.9; see Hedgpeth v. Pulido,

555 U.S. 57, 61 (2008) (per curiam) ( jury instruction error involving omission or misstatement of an element of

the offense is reviewed for harmlessness). That alternative holding precludes the question presented by petitioners from having any potential to affect the judgment below.

First, all of the materiality evidence introduced at

trial was directed at the actual decisionmakers in this

case, the SunTrust underwriters. See Gov’t C.A. Br. 24.

The government made no argument about how a “reasonable decisionmaker” other than SunTrust would have

reacted to petitioners’ misrepresentations. And the trial

evidence overwhelmingly demonstrated that SunTrust’s

underwriters were, in fact, capable of being influenced

24

by the misrepresentations. Evidence showed that petitioners “repeatedly mischaracterized the loan applicants’ qualifications” and “went to great lengths” to obtain “supporting documents verifying” those qualifications. Pet. App. 34a n9. One loan applicant “walked into

SunTrust’s Annandale branch a custodian in a medical

office, but left as a licensed medical professional.” Ibid.

Another “understood that he cooked pizzas for Pizza

Hut” but was “identified on SunTrust loan documents

as a ‘senior analyst’ at Ikon Solutions.” Ibid. A jury

could only acquit if it believed that “those ludicrous misrepresentations [we]re meaningless, i.e., that SunTrust

would have funded [those] loans in any event.” Ibid.

Yet “[i]f that were the case, why make such misrepresentations” and “surreptitiously purchase and submit

fraudulent documents?” Ibid. Indeed, the vice-president

of SunTrust’s national underwriting team also “stressed”

in her testimony “the importance of accurate information being reflected on all loan applications.” Ibid. She

explained that, even though SunTrust sold many first

mortgages, it continued to hold the second mortgages

and therefore was exposed to loss in the event of a default. Id. at 14a; Gov’t C.A. Br. 8. Her testimony thus

“confirmed the obvious. SunTrust would not have funded

the loans had [petitioners] painted an accurate picture

of the applicants’ qualifications.” Pet. App. 34a n.9.

Petitioners criticize the court of appeals (Pet. 20) for

relying, in its harmless-error analysis, on petitioners’

“wrongful intent.” But petitioners misunderstand the

court’s point about the import of petitioners’ actions.

The fact that petitioners, who were SunTrust employees, went to extraordinary lengths to falsify loan applications and supporting documentation showed that they

believed SunTrust was capable of being influenced by

25

such misrepresentations. That is powerful evidence that

SunTrust was, in fact, capable of being influenced just

as petitioners believed.

Petitioners likewise err in asserting (Pet. 20) that

there was “ample evidence” from which a jury could infer that the misrepresentations were immaterial. Petitioners cite “testimony from a former SunTrust underwriter that ‘what a borrower wrote down on a loan application didn’t matter at all to SunTrust.’ ” Pet. 20 (quoting C.A. J.A. 309). That quotation, however, is from

counsel’s opening statements, not from any trial testimony. See C.A. J.A. 309. The underwriter’s actual testimony was different: She testified only that she “believe[d]” that it was common knowledge at SunTrust

that there were misrepresentations in loan applications,

id. at 1117, and that she “felt like [there was] a don’t

ask/don’t tell policy,” id. at 1124. But, the premise of a

don’t ask/don’t tell policy is that it matters if you do tell;

the witness’s testimony thus indicated that petitioners’

lies and false documentation were necessary to maintain a pretense of regularity that, if punctured, would

have required SunTrust to reject the applicants. The

witness’s belief was predicated, moreover, on a misunderstanding that “SunTrust was making all these loans

just to sell them to somebody else.” Id. at 1119. In fact,

SunTrust did not sell any of the second mortgages that

it issued, Pet. App. 14a, and all but one of the 13 properties at issue in this case involved a second mortgage,

Gov’t C.A. Br. 8.

Petitioners suggest that petitioners’ misstatements

did not affect loan approvals because SunTrust approved 98.7% of mortgage applications during the relevant period. Pet. 20 (citing C.A. J.A. 1165). That suggestion lacks support in the evidence. It is based on

26

Home Mortgage Disclosure Act data showing that SunTrust’s “rejection rate” during the relevant period was

1.3%. See C.A. J.A. 1165. But that statistic does not

account for applications that were withdrawn or for

which the files were incomplete. Gov’t C.A. Br. 37-38;

see C.A. J.A. 1168-1170. In fact, SunTrust’s approval

rate was substantially lower than 99%—and was only

slightly higher than Bank of America’s—when those

incomplete and withdrawn applications are accounted

for. See Gov’t C.A. Br. 37; C.A. J.A. 1168-1170. In any

event, even if SunTrust routinely granted mortgage applications for applicants who claimed high incomes and

assets (even if the information was false), that says

nothing about whether SunTrust would have granted

those applications had the applicants’ true (and far less

favorable) financial circumstances been disclosed. Petitioners plainly did not think so, which is why they took

such great pains to falsify the application information

and supporting documentation.

Finally, neither the purported testimony of the underwriter nor the rejection-rate statistic undermines

the court of appeals’ harmless-error analysis, as they

speak at most to the materiality of misrepresentations

on the loan applications; they say nothing about the materiality of the falsified documentation that petitioners

created to support those misrepresentations. Indeed,

petitioners have not disputed that the amount of documentation affected the interest rate paid by the borrower, and each of the loans at issue in this case was

supported by such documentation. Pet. App. 7a; Gov’t

C.A. Br. 6. Even if petitioners were correct (Pet. 20)

that SunTrust approved every application because the

information on an application “didn’t matter,” petition-

27

ers’ false documents would have affected SunTrust’s decisions about which interest rates to approve for the

loans. And even if SunTrust was primarily concerned

with origination of loans of any sort, the existence of

multiple tiers of loans illustrates that it was not indifferent to interest rates.

If petitioners were correct (Pet. 17) that a genuine

circuit conflict affecting “countless” fraud prosecutions

does exist, then the Court will have the opportunity to

address it in a case that lacks a harmless-error alternative holding. Further review in this case, however, is

not warranted.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

NOEL J. FRANCISCO

Solicitor General

JOHN P. CRONAN

Acting Assistant Attorney

General

FINNUALA K. TESSIER

Attorney

MAY 2018