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United States v. Scott

United States Court of Appeals, First Circuit

December 8, 2017

MICHAEL DAVID SCOTT, Defendant, Appellant.


          George F. Gormley, with whom Stephen Super and George F. Gormley, P.C. were on brief, for appellant.

          David B. Goodhand, Attorney, U.S. Department of Justice, Criminal Division, Appellate Section, with whom William D. Weinreb, Acting U.S. Attorney, Victor A. Wild, Assistant U.S. Attorney, Ryan M. DiSantis, Assistant U.S. Attorney, Kenneth A. Blanco, Acting Assistant Attorney General, U.S. Department of Justice, and Trevor N. McFadden, Deputy Assistant Attorney General, were on brief, for appellee.

          Before Howard, Chief Judge, Thompson and Kayatta, Circuit Judges.


         Michael David Scott appeals from his conviction and sentence for wire fraud, bank fraud, and money laundering, associated with a mortgage fraud scheme perpetrated in the Boston area. His principal argument is that the government unfairly procured his guilty plea by misusing information he provided during proffer sessions. He also challenges his sentence. For the following reasons, we affirm.

         I. Background

         In February 2008, the government began investigating Scott as a result of a civil case against him in Massachusetts state court involving a mortgage fraud scheme Scott operated in and around Boston. Scott purchased multi-family homes, divided them into condominium units, and then recruited straw buyers to purchase the units at prices favorable to Scott. He attracted buyers by promising that they would not have to put up any money for the purchase and would ultimately be able to sell for a profit. Scott and his team also prepared false mortgage applications and closing documents in order to secure inflated loans for the buyers. Scott then used the loan proceeds to pay off his own mortgage on the building, and pocketed the profit.

         In February 2009, the government informed Scott of the federal investigation against him. On February 23, 2009, Scott and his attorney met with two Assistant United States Attorneys, as well as three FBI Special Agents. At that meeting, Scott signed a proffer agreement with the government. The agreement provided, among other things:

1. No statements made or other information provided by Michael Scott will be used by the United States Attorney directly against him, except for purposes of cross-examination and/or impeachment should he offer in any proceeding statements or information different from statements made or information provided by him during the proffer, or in a prosecution of Michael Scott based on false statements made or false information provided by Michael Scott.
2. The government may make derivative use of, or may pursue any investigative leads suggested by, any statements made or other information provided by Michael Scott in the course of the proffer. Any evidence directly or indirectly derived from the proffer may be used against him and others in any criminal case or other proceeding. This provision is necessary in order to eliminate the possibility of a hearing at which the government would have to prove that the evidence it would introduce is not tainted by any statements made or other information provided during the proffer. See Kastigar v. United States, 406 U.S. 441 (1972).

         After he signed the proffer agreement, Scott gave the government information regarding the fraudulent condominium sales he had conducted, including information about the fake paperwork he provided to secure loans. Scott also provided information regarding the roles played by James Driscoll, a sales loan officer employed by both a mortgage company and a bank, and Michael Anderson, a real estate lawyer, in the mortgage fraud scheme. Over the course of three proffer sessions held in March 2009, Scott provided the government with detailed information regarding Driscoll -- that he often worked from home and that he kept copies of the mortgage paperwork from his employers at home -- as well as information regarding the physical layout of Driscoll's home. Using this information, the government applied for a search warrant of Driscoll's home, which was approved on March 16, 2009.

         On May 15, 2009, the government got Scott to sign two consent-to-search forms authorizing the government to make forensic images of his computer and server. The forms allowed the FBI to conduct "a complete search" of Scott's Compaq computer and Dell server. The forms stated, among other things, that Scott gave "permission for this search, freely and voluntarily, and not as the result of threats or promises of any kind" and "authorize[d] [FBI] Agents to take any evidence discovered during this search, together with the medium in/on which it is stored, and any associated data, hardware, software and computer peripherals." Scott's attorney was not present at this meeting, although he had authorized it. Scott continued to meet with the government for proffer sessions, for a grand total of eighteen sessions, ending in June 2010. Starting in the fall of 2009, Scott and the government also engaged in plea negotiations that ultimately fell apart.

         In January 2010, while proffer sessions and plea negotiations were ongoing, Scott began meeting with members of the accounting firm Verdolino & Lowey ("V&L"). Back in April 2009, Scott had filed for bankruptcy and a United States Trustee was appointed to oversee the proceeding. V&L served as the accountant for the bankruptcy trustee. Once Scott began meeting with V&L, he provided the firm with his business records in paper form, as well as access to images of the content of his computer server and laptop.

         About a month after the final proffer session with Scott, the government withdrew an unaccepted plea agreement it had proposed. Shortly thereafter, the government convened a grand jury, calling one of the FBI agents involved in Scott's case as its sole witness. The grand jury indicted Scott on 62 counts on August 26, 2010. On September 16, the government obtained a 68-count superseding indictment against Scott. The superseding indictment also charged Jerrold Fowler, the founder of an investment company, and Thursa Raetz, a credit union representative, for their participation in the mortgage fraud scheme.

         Seventeen months later, the bankruptcy trustee told prosecutors that he would likely dismiss Scott's bankruptcy petition. The prosecutors asked the trustee to preserve the materials Scott had provided to V&L, but the trustee did not turn over the materials, citing conflicting legal duties. The trustee dismissed Scott's petition on March 14, 2012, and the government soon after applied for a search warrant to seize the computer images and paper files Scott had provided to V&L. The affidavit submitted in support of the search warrant relied in large part on data obtained from Scott's server, which had been imaged in May 2009 pursuant to Scott's written consent. The application explicitly sought to search "the same server" as well as the boxes of materials that Scott had provided to V&L. The magistrate judge assigned to Scott's case approved the warrant application on March 21, 2012, and the government executed the warrant. In a discovery letter sent in June 2012, the government informed Scott that the hard drives it had imaged from V&L were the same as the images the government had taken directly from Scott in 2009.

         On February 6, 2013, the magistrate judge held a status conference, during which the government represented that, with one exception not relevant here, "every piece of information presented to the Grand Jury came from an independent source."[1] The implication of this statement in context was that the evidence presented to the grand jury was derivative of (but did not directly make use of) evidence obtained from Scott himself, and therefore conformed to the proffer agreement.

         When Scott learned that the government intended to use evidence from the March 2012 search of V&L in its case against him, he moved to suppress the evidence. Scott argued that using that evidence "was a blatant end-run around the proffer agreement" and that V&L, acting under the government's instruction, violated the Fourth Amendment when it retained custody of Scott's property after his bankruptcy petition was dismissed. The government countered that the terms of the consent Scott provided in May 2009 placed his searched property outside the scope of the proffer agreement, thereby rendering it unprotected. The government further argued that even if that were not the case, the use of data obtained in the March 2012 search was permissible derivative use. The court rejected the government's arguments and granted Scott's motion to suppress "the cloned files" seized pursuant to both Scott's consent forms and the search of V&L.

         Over a year later, on May 29, 2015, the district court accepted Scott's unconditional plea of guilty to the superseding indictment. At sentencing, the court determined the applicable guideline sentencing range to be 135 to 168 months. See U.S. Sentencing Guidelines Manual ("U.S.S.G.") ch. 5, pt. A (U.S. Sentencing Comm'n 2015). The court arrived at this range after a downward departure for Scott's acceptance of responsibility and another reduction of "two levels to give Mr. Scott the benefit of the doubt as to the loss calculation." The court ultimately sentenced Scott to 135 months' imprisonment on counts 1 through 46 and 120 months' imprisonment on counts 47 through 68, to be served concurrently.[2] Fowler and Raetz were each sentenced to 24 ...

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