UNITED STATES DISTRICT COURT DISTRICT OF NEVADA -ooo-

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1 Case :0-cr-000-RLH -GWF Document Filed 0// Page of DANIEL G. BOGDEN United States Attorney BRIAN PUGH SARAH E. GRISWOLD Assistant United States Attorneys South Las Vegas Blvd., Suite 000 Las Vegas, Nevada 0 (0) UNITED STATES DISTRICT COURT DISTRICT OF NEVADA -ooo- UNITED STATES OF AMERICA, ) ) :0-cr-000-RLH-GWF Plaintiff, ) ) vs. ) UNITED STATES RESPONSE TO ) DEFENDANT EVE MAZZARELLA S EVE E. MAZZARELLA, ) SENTENCING MEMORANDUM ) AND OBJECTIONS TO PRESENTENCE Defendant. ) INVESTIGATION REPORT ) THE UNITED STATES OF AMERICA, by and through Daniel G. Bogden, United States Attorney, Brian Pugh and Sarah E. Griswold, Assistant United States Attorneys, submits this Response to Defendant Eve Mazzarella s Sentencing Memorandum and Objections to Presentence Investigation Report (Doc. No. ). The United States concurs with Probation that a sentence of 0 years, rather than life, is appropriate for Defendant Mazzarella. / / / / / / / / / / / /

2 Case :0-cr-000-RLH -GWF Document Filed 0// Page of 0 0 I. PROBATION CORRECTLY CALCULATED MAZZARELLA S TOTAL OFFENSE LEVEL A. Mazzarella Caused Over $ Million in Actual Loss. Actual Loss Is the Amount of Unpaid Principal Minus the Foreclosure Sale Price Mazzarella objects to the loss amount. (Memo. at :-:.) The actual loss in this case exceeds $ million. Under Section B.(b)(), [a]ctual loss means the reasonably foreseeable pecuniary harm that resulted from the offense. U.S.S.G. B. comment. (n.(a)(i)). In the context of mortgage fraud, the unpaid principal balance of the fraudulently obtained loans is the actual loss. The houses obtained with the mortgage loans constitute collateral pledged for the loans. The loss amount is then reduced by the amount the victim has recovered at the time of sentencing from disposition of the collateral, or if the collateral has not been disposed of by that time, the fair market value of the collateral at the time of sentencing. U.S.S.G. B. comment. (n.(e)(ii)). See also United States v. Washington, F.d 0, (0th Cir. 0)( [I]n a mortgage fraud scheme such as this, the loss is not the decline in value of the collateral; the loss is the unpaid portion of the loan as offset by the value of the collateral. ); United States v. Turk, F.d, (d Cir. 00) ( [A] loan is merely the exchange of money for a promise to repay, with no assumption of upside benefit. At any given time, the buildings in this case were nothing more than insulation against loss. ); United States v. Mallory, 0 F. Supp. d, 0 (E.D. Va. 00) ( [T]he unpaid principal on these loans is the reasonably foreseeable pecuniary harm that constitutes the initial measure of loss for purposes of B.. This measure of loss is appropriately reduced by the amount recovered by the banks from the sale of the subject properties.... ). In this case, lending institutions made over $00,000,000 worth of mortgage loans on properties as a result of defendants fraudulent scheme. The vast majority of these properties were purchased with 00% financing, and were foreclosed. Mortgage payments made prior to foreclosure went mostly to interest on the first and second mortgages. The unpaid principal on these loans was approximately equal to the original loan amounts, which with 00% financing,

3 Case :0-cr-000-RLH -GWF Document Filed 0// Page of 0 0 also equaled the straw buyer s purchase price. This approximation constitutes a reasonable estimate of the loss. See U.S.S.G. B. comment. (n.(c)). The unpaid principal is then reduced by the amount the lenders have recovered from disposing of the properties through foreclosure sales. Here, lenders obtained over $0 million through foreclosure sales. Public records from the Clark County Recorder s Office reveal that with this credit, the loss relating to 0 of the properties is $,,0.. $ Million of Actual Loss Is Attributable to Mazzarella Mazzarella contends that the loss amount overstates the loss caused by her. (Memo. at :-.) But, as even Mazzarella s Memoraundum concedes, the loss attributable to Mazzarella is the loss that fell within the scope of her agreement in the conspiracy and that was reasonably foreseeable. (Memo. at 0:- (quoting United States v. Treadwell, F.d 0, 00 (th Cir. 00).) The assertion that some of the losses were not attributable to her ignores the very case law defense counsel quotes regarding the scope of one s agreement. (Compare Memo. at 0:- with Memo. at :-.) Here, Mazzarella was a leader in the conspiracy. She recruited straw buyers, controlled bank accounts of shell companies to receive money from the transactions, ran a real estate agency, worked as a real estate agent and broker, hired and oversaw others working under her on the fraudulent real estate purchases, and worked with coschemer loan officer Skip Young to submit fraudulent loans for her transactions. Mazzarella participated in the conspiracy for the duration of its existence. The evidence at trial showed that the scope of her agreement was the scope of the conspiracy. The amount of loss that was reasonably foreseeable is the amount of unpaid principal on the fraudulently obtained loans. See, e.g., Mallory, 0 F. Supp. d at 0 ( [T]he unpaid principal on these loans is the reasonably foreseeable pecuniary harm that constitutes the initial measure of loss for purposes of B.. This measure of loss is appropriately reduced by the amount recovered by the banks from the sale of the subject properties.... ). It is this amount of unpaid principal, which is reasonably foreseeable, that is then reduced by any amount the lender

4 Case :0-cr-000-RLH -GWF Document Filed 0// Page of 0 0 was able to recover through foreclosure by the time of sentencing. U.S.S.G. B. comment. (n.(e)(ii)). It was also reasonably foreseeable to Mazzarella as a real estate agent and broker that loans would be resold or repackaged. Thus, the unpaid balance owed to subsequent lenders minus any foreclosure recovery also amount to reasonably foreseeable loss amounts. See, e.g., Washington, F.d 0.. The Decline in the Housing Market Is Not an Intervening Cause of the Loss Defense counsel contends that the collapse of the nation s housing market constitutes a significant intervening cause that should reduce the amount of loss attributable to Mazzarella. (Memo at :-.) What happened to the housing market after the fraudulent loans were obtained does not factor into the loss calculation for purposes of Section B.(b)(). As set forth in Section I.A.. above, credits against loss include the amount recouped from selling collateral before sentencing. The amount of this credit need not be reasonably foreseeable. This conclusion results from reading the plain language of B. and its accompanying application notes, and from considering the policies underlying that section of the Guidelines. Mallory, 0 F. Supp. d at 0. Indeed, as the Second Circuit explained, it remains the case that the victims' loss was the unpaid principal, and we hold that the decline in value in any purported collateral need not have been foreseeable to [the defendant] in order for her to be held accountable for that entire loss. Turk, F.d at. Mazzarella s Memorandum indicates that she intends to call an expert to testify that any loss attributable to Ms. Mazzarella s conduct was not greater than $0 million. (Memo. at :-.) To the extent the expert would testify about the collapse of the nation s housing market, this analysis is not appropriate to determine loss, is not relevant, and should be excluded. See U.S.S.G. A.(a) ( [T]he court may consider relevant information without regard to its admissibility under the rules of evidence applicable at trial, provided that the information has sufficient indicia of reliability to support its probable accuracy. (emphasis added)). / / /

5 Case :0-cr-000-RLH -GWF Document Filed 0// Page of 0 0 B. Mazzarella Was a Leader in This Massive Fraud Mazzarella objects to the application of a four-level enhancement for her role as an organizer or leader. (Memo. at :-.) Where a defendant was an organizer or leader of a criminal activity that involved five or more participants or was otherwise extensive, a four-level enhancement applies. U.S.S.G. B.. Far more than five people participated in this scheme. Fifteen people have been charged in this scheme, ten of whom pleaded guilty, three of whom were found guilty at trial, and two of whom have pending cases. Nine cooperators testified at trial, all of whom pleaded guilty. This scheme involved individuals serving various functions, including real estate agents and employees, mortgage brokers, loan officers, loan processors, and escrow officers and assistants. Mazzarella owned and controlled Distinctive Real Estate and Investments, the real estate brokerage used for the straw buyer purchases. The evidence at trial showed that she oversaw a team of real estate agents, transaction coordinators, and other employees to carry out the fraud. These people included Kathleen Tinaglia, David Mark, Kimberly Brown, Lisa Adams, Cable Hoover, Cathy Rojas, and Chad Loucel. She organized the sending of straw buyer loans to Skip Young, and recruited and oversaw Shauna Labee and Benjamin Labee during part of the conspiracy. The four-level enhancement applies to Mazzarella. C. Mazzarella Is Responsible for the Document Destruction That Obstructed Justice When a defendant obstructs or impedes the administration of justice, a two-level enhancement applies. U.S.S.G. C.. A defendant who conspires with others is responsible for the actions of the other conspirators performed during the course and in furtherance of the conspiracy. If one member of a conspiracy commits a crime in furtherance of a conspiracy, the other members have also, under the law, committed that crime. th Cir. Model Crim. Jury Instr.. (00 ed.). It is a crime to destroy records with the intent to impede or obstruct a federal investigation. U.S.C.. Evidence at trial showed that Grimm ordered a shredding event after he found out the FBI was investigating him. Grimm, Beecroft, Shauna Labee, Benjamin Labee, and perhaps Daicy

6 Case :0-cr-000-RLH -GWF Document Filed 0// Page of 0 0 Vargas participated in the shredding. This document destruction was done in furtherance of the conspiracy, and amounts to obstruction of justice for purposes of the enhancement. Mazzarella was a member of the conspiracy when her coconspirators destroyed documents to avoid detection by law enforcement. It was reasonably foreseeable that Mazzarella s coschemers would seek to destroy incriminating documents to keep them from the FBI. Mazzarella was married to defendant Grimm. The two of them organized and oversaw the fraud scheme. Grimm had copies of all the files that had closed. He bragged that his name was not on anything, and that the brokers would go down, not him. Mazzarella is liable for the substantive act of obstruction of justice committed by her coconspirators. Accordingly, this enhancement applies. D. Mazzarella Rejected the Government s Plea Offer Mazzarella makes incorrect assumptions in every argument she makes related to the government s mid-trial plea offer. In order to understand the Guideline calculations offered, it is important to understand the background of the offer. Mid-trial, counsel for defendant Grimm approached the government with a request for a plea offer. Counsel for defendant Grimm made it clear that he was not looking for a benefit for his client, rather, Grimm was hoping the government would give a benefit to his wife, defendant Mazzarella. With that request in mind, the government made its plea offer to all three defendants.. Mazzarella Was an Organizer or Leader of Criminal Activity of Five or More Participants Mazzarella contends that because the government offered her a three-level enhancement for her role in the offense that the government believed she was merely a manager or supervisor. Not so. This was merely one of the ways in which the government honored defendant Grimm s request that the government give his wife, Mazzarella, a benefit in the plea offer. As argued The government notes it would not initiate an argument infusing the parties plea negotiations into its sentencing memorandum. The government is merely correcting Mazzarella s inaccuracies.

7 Case :0-cr-000-RLH -GWF Document Filed 0// Page of 0 above, in Section I.B, Mazzarella ran her own business employing as many as seven conspirators and directing others on the outside, including Skip Young. She also controlled millions of dollars that came into her business and shell companies registered in her name.. Mazzarella Is Responsible for Obstructing Justice Mazzarella also asserts that because the government s plea offer did not include an enhancement for obstruction of justice, that the government believes the enhancement does not apply. Wrong. This was yet another benefit offered to Mazzarella to plead guilty. She refused the offer. Mazzarella is not entitled to the benefit of a plea offer that she rejected now that she has been convicted at trial.. The Loss Is Greater than $0 Million. Mazzarella argued that the loss is less than $0 million because the government s midtrial plea offer stated a loss less than $0 million. This argument ignores the facts argued by the parties in their pleadings since the convictions at trial. Mazzarella is aware that the government did not recalculate the loss until after the trial. To argue what the government believed before the recalculation is intended to mislead this Court. II. SECTION FACTORS DO NOT WARRANT A SENTENCE BELOW 0 YEARS Mazzarella led the largest mortgage fraud scheme charged in the District of Nevada. Her 0 fraud extended from 00 to March of 00. She recruited straw buyers and sucked money out of the fraudulent transactions for herself. She operated a real estate company to purchase houses through straw buyers so that she could personally benefit. Mazzarella s scheme used fraudulent transactions involving properties. She apparently also gained nationwide recognition as a top 0 under 0 real estate agent by virtue of the high volume of fraudulent transactions she closed. Mazzarella owned some properties in names of her own shell companies. When the market began to turn, she sold some of them at inflated prices to straw buyers, including two properties to Chad Loucel. Loucel was an employee of Mazzarella s recovering from cancer. Mazzarella took advantage of him, unloading her own properties onto him taking more than

8 Case :0-cr-000-RLH -GWF Document Filed 0// Page of 0 0 $0,000 from the transactions. When Loucel wanted to get out from under the debt caused by the properties Mazzarella unloaded on him, she told him he would have to find straw buyers to buy them from him. A. Mazzarella s Extensive Fraud Does Not Warrant a Non-Guideline Sentence Mazzarella contends that the Guidelines overstate the seriousness of her crime. She objects to lengthy sentences for non-violent white collar criminals. (Memo. at :-:.) The Guidelines, however, were developed in part to address inconsistencies in treatment, such as punishing economic crime less severely than other apparently equivalent behavior. U.S.S.G. Ch. Pt. A()() at p.. Imposing a sentence that reflects the severity of the offense and her culpability would not be wasteful of tax payer dollars [or] insulting to victims of violent crimes. (See Memo. at :-.) It would reflect the severity of her offense, and the impact her fraud has had on our community, including innocent third parties who purchased homes while Mazzarella and others like her were artificially inflating the values of homes in the Las Vegas community. These artificially inflated prices created unnatural market factors that innocent people and professionals did not recognize. Many innocent people purchased homes during this period of time, only to find themselves upside down on mortgages far in excess of the true value of their homes. These innocent third parties are left with only negative consequences of trying to short sell their homes, walking away from a bad investment and ruining their credit, or accepting the obligation of paying far more for their house than it is worth. Mazzarella also contends that the Guidelines do not account for her level of personal culpability. (Memo. at :-0:.) There is no explanation in the Memorandum as to how Mazzarella s personal culpability is overstated. She hired people to commit fraud for her. She recruited straw buyers. She received millions of dollars in commissions and third party disbursements when the transactions closed. The Guidelines accurately reflect her culpability. Mazzarella also disputes the Guidelines as a reason to depart or vary downward. The Guidelines enhancements capture distinct aspects of Mazzarella s fraud. Mazzarella contends that

9 Case :0-cr-000-RLH -GWF Document Filed 0// Page of 0 0 the enhancements somehow overlap and should therefore be discounted. (Memo at 0:-.) The enchantments that apply to Mazzarella apply individually. Not all of these enhancements apply to every coschemer. To discard enhancements that distinguish Mazzarella from the coschemers she controlled would understate her culpability. Mazzarella is not similarly situated to the cooperators who testified at trial. (Cf. Memo. at :0-:.) They did not direct the scheme. They did not make millions off of the scheme. As set forth in Section I.A. above, the actual loss exceeds $ million. That figure is not exaggerated. (Cf. Memo. at 0:.) It is the amount of actual loss suffered in this case. The enhancements that apply to Mazzarella are a result of her participation in the scheme. Mazzarella s efforts to contend that her large role in such a massive fraud somehow justifies a lesser sentence must fail. Nor does the fact that Mazzarella is a woman or a mother justify a lesser sentence. (Cf. Memo. at :-:, :-:.) The law does not apply differently to men and women or to parents and non-parents. Mazzarella chose to lead an extensive fraud scheme for more than years. She was convicted of her crimes. That her children may need to be raised by her parents or other relatives while she is incarcerated is a collateral consequence of her own choices and actions. B. Mazzarella Is Not Similarly Situated to Connie Farris Mazzarella prays the court to compare her case to the Connie Farris case, where this court departed dramatically downward to reach a sentence of twelve years in prison. Farris crimes were nothing like Mazzarella s. Farris was not given an enhancement for sophisticated means because there was nothing sophisticated about her fraud. She merely had five trust deed investments that failed to close and rather than give investors their money back, she sent the interest payments for approximately eighteen months. Mazzarella however, () created shell companies to receive and conceal illicit nature of proceeds; () instructed listing realtors to change the list price in the multiple listing service to facilitate appraisals at the inflated sale price; () ensured that straw buyers purchased three to five properties close in time to ensure they would not show up on the buyer s credit report

10 Case :0-cr-000-RLH -GWF Document Filed 0// Page 0 of 0 0 and reveal to lenders that the buyer was purchasing multiple properties; and () caused straw buyers multiple loans to be sent to different lenders to ensure lenders would not know the buyer was buying multiple properties. Farris was not given an enhancement for receiving more than $,000,000 from a financial institution. Farris did not. Mazzarella and her husband, defendant Grimm, personally received more that $,000,000 from financial institutions. Farris brokered hard money loans. Her victims were experienced investors who came to her seeking to invest their money in hard money loans. Farris intended that the hard money loans would go through. Farris crime was deceiving her victims by sending them interest payments. Whereas, Mazzarella recruited unsophisticated people to invest their credit in real estate. She used these people to strip millions of dollars out of hundreds of fraudulent mortgage transactions. When the economy would no longer support the artificially inflated prices, Mazzarella let the properties go into foreclosure ruining the credit of approximately ninety straw buyers. Mazzarella s crime also impacted numerous innocent home buyers who purchased homes whose value had been artificially inflated by the hundreds of fraudulent comparables created by this scheme around the valley. Every time Mazzarella caused a listing agent to raise the list price to accommodate a fraudulent transaction, the community of neighbors, appraisers and real estate professionals believed it represented market appreciation. Mazzarella did that approximately 0 times. Countless innocent home buyers are upside down on mortgages exacerbated by this crime and others like it. Others committed mortgage fraud in Las Vegas, but nobody did it more than Mazazarella and Grimm. Mazzarella is nothing like Connie Farris. C. Mazzarella s Character Does Not Warrant a Lesser Sentence Mazzarella s letters of support paint a glowing picture of her character including kindness and integrity. The government has two observations.. Defendant Knew Better Based upon the qualities described in the letters, Mazzarella had an upbringing and 0

11 Case :0-cr-000-RLH -GWF Document Filed 0// Page of 0 0 education that taught her that what she did in this case is wrong. Chrissy Russo who wrote a letter of support said of the charges, I find that behavior to be totally out of line with what I ve come to know of her. Numerous others who have known Mazzarella before and since her crime spree expressed similar sentiments. Yet, she set her integrity aside for five years in the pursuit of millions of dollars. Despite her kindness she used people to feed her greed. She used her mother, her brother, her best friend Shauna Labee, cancer patient Chad Loucel, and countless others. And when the economy turned, she had no kindness for the numerous employees and straw buyers she used along the way.. People Who Interacted with Defendant During the Crime Paint a Different Picture The government has attached hereto a sampling of FBI forms FD-0 of interviews of people who provided information regarding Mazzarella that create an entirely different picture than that created by the letters of support. Attached hereto as exhibit A is an FBI FD-0 for witness and victim Chad Loucel. Loucel said said renters were still paying rent but Grimm and Mazzarella weren t paying the mortgages. Loucel went on to say: Loucel also said: Mazzarella is very greedy, to the point where she will never give security deposits back to renters because she doesn't want to pay out any money. New renters still go to the Distinctive office and put money down as a deposit on a rental, then the home will get foreclosed on, therefore leaving the renter without a place to live, and Mazzarella will refuse to return their deposit money. Mazzarella once fired an employee, Melanie [], for not going to work the day her husband got into an automobile accident. When people made her mad, she would stop paying their mortgages and they would go into foreclosure. She did this to an ex-employee, Lisa [], and her own brother, Cable Hoover, who now lives in the Seattle area. Mazzarella tells everyone what to do, and no one will say anything to her for fear of repercussions. Loucel fears that he may upset her and lose his job. Mazzarella has even been known to play up the fact that she is of Italian descent as an intimidation tool, eluding to the fact that she may have connections to the Mafia.

12 Case :0-cr-000-RLH -GWF Document Filed 0// Page of 0 0 Attached hereto as exhibits B and C are FBI FD-0 forms for interviews of witnesses Victoria Crain and Kimberly Brown. Crain and Brown corroborated what Loucel said about Mazzarella keeping renter s payments. Crain said: When Mazzarella needed cash, Grimm would transfer the property management duties from Crain to Mazzarella so that Mazzarella could simply keep the cash that the tenants paid. If any issues arose with the tenants, Grimm would transfer management back to Crain. Kimberly Brown said: Cash payments received by Mazzarella from tenants were never put into a bank account. Mazzarella and Grimm simply pocketed the third party payout money from some of the newer investor properties, and not a single mortgage payment was made. Mazzarella always has approximately $0,000 in cash with her. Brown also corroborated what Loucel said about Mazzarella s intimidating people. Brown said: Mazzarella is very vindictive and Brown worries that Mazzarella might actually put a hit out on her if Mazzarella ever found out she had talked to the FBI. Grimm and Mazzarella both carry hand guns with them at all times. Attached hereto as exhibit D is an FBI FD-0 for Cathy Rojas, a former employee of Mazzarella. Rojas corroborated that Mazzarella intimidates her employees. Rojas also said the following: Everyone at Distinctive always has to put on a good show and act like one big happy family. Mazzarella is very concerned about her reputation. Her reputation is more important to her than her kids. Mazzarella has negative character traits not found in her support letters. Moreover, the traits described by these individuals who worked for either her or her husband, defendant Grimm, paint a different picture of Mazzarella s character. As dos the evidence presented at trial. Rather than a picture of kindness and integrity, they paint a picture of vindictiveness and greed. III. PROBATION UNDER-IDENTIFIED THE AMOUNT OF RESTITUTION The documentary information provided to Probation presented a loss figure of $,,0 for of the properties that formed the basis of the conspiracy conviction. This

13 Case :0-cr-000-RLH -GWF Document Filed 0// Page of figure omitted the loss figures for four properties, which total an additional $,.. The total loss for 0 of the properties is $,,0. Restitution to all victims of the conspiracy is warranted. See, e.g., U.S. v. Rizk, 0 F.d (th Cir. 0) (restitution exceeding $0 million due where defendant convicted of conspiracy and other charges in indictment that listed only nine of at least properties involved). CONCLUSION For the foregoing reasons, the United States concurs with Probation that a sentence of 0 years incarceration would be appropriate in this case. DATED this nd day of March 0. 0 Respectfully submitted, DANIEL G. BOGDEN United States Attorney /s/ Sarah E. Griswold SARAH E. GRISWOLD Assistant United States Attorney 0

14 Case :0-cr-000-RLH -GWF Document Filed 0// Page of CERTIFICATE OF ELECTRONIC SERVICE This is to certify that the undersigned has served the foregoing RESPONSE TO DEFENDANT EVE MAZZARELLA S SENTENCING MEMORANDUM AND OBJECTIONS TO PRESENTENCE INVESTIGATION REPORT on counsel of record by means of electronic filing. DATED this nd day of March 0. /s/ Sarah E. Griswold Sarah E. Griswold 0 0

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