United States of America v. Sean Cutting United States of America v. Brian Melland United States of America v. David Lonich

San Francisco - Criminal defense lawyer represented defendants with fraudulent schemes concerning bank loans and real estate charges.

The panel affirmed Sean Cutting's, Brian Melland's, and

David Lonich's convictions, but vacated their sentences and

remanded for resentencing, in a complex case arising from

fraudulent schemes concerning bank loans and real estate in

Sonoma County, California.

The panel held the Sixth Amendment's Speedy Trial

Clause was not violated. Defendants claimed a Speedy Trial

Clause violation as to all charges first brought in the October

2016 superseding indictment. Defendants then argued this

court should reverse their convictions as to the charges in the

original March 2014 indictment because of "prejudicial

spillover” from evidence used to prove the charges in the

allegedly unconstitutional superseding indictment. The

panel had no occasion to consider defendants' "prejudicial

spillover” theory because the panel held that the

government's decision to file new charges in the superseding

indictment did not infringe defendants' Speedy Trial Clause

* The Honorable Clifton L. Corker, United States District Judge for

the Eastern District of Tennessee, sitting by designation.

** This summary constitutes no part of the opinion of the court. It

has been prepared by court staff for the convenience of the reader.

4 UNITED STATES V. LONICH

rights. As to the first factor in the balancing test set forth in

Barker v. Wingo, 407 U.S. 514 (1972), the length of the

delay, the parties disagreed on when defendants' Speedy

Trial Clause rights attached for the new charges first brought

in the superseding indictment. Defendants argued the

original indictment should be used as the start date for the

new charges in the superseding indictment. The government

contended the date it filed the superseding indictment should

be used. The panel did not need to resolve that debate

because it concluded that, even assuming the clock started at

the time of the original indictment, there was no Speedy

Trial Clause violation because the delay caused no relevant

prejudice to defendants.

Defendants challenged the jury instructions on the

money laundering (18 U.S.C. § 1957) and misapplication of

bank funds (18 U.S.C. § 656) charges, contending that the

instructions' overarching definition of "knowingly”

conflicted with the required mental states for the two

charged offenses. The panel held that the district court's

general "knowingly” instruction was permissible and that

defendants in any event did not show prejudice from the

instruction.

Melland argued that there was insufficient evidence to

support his conviction for bribery by a bank employee

(18 U.S.C. § 215(a)(2)), which was based on his securing a

$50,000 investment in Melland's energy-drink start-up. The

panel held that, as the parties effectively agree, the district

court appropriately stated the law when it instructed the jury

that, to find Melland "acted corruptly,” as required under

§ 215(a)(2), the jury must determine he "intend[ed] to be

influenced or rewarded in connection with any business or

transaction of” a financial institution. Noting that the

UNITED STATES V. LONICH 5

circumstantial evidence was plentiful, the panel held that

there was sufficient evidence to support the conviction.

Lonich argued that there was insufficient evidence to

support his conviction for attempted obstruction of justice

(18 U.S.C. § 1512(c)(2)) by encouraging a straw buyer to

mislead the grand jury about his role in a scheme to gain

control of a real estate development. The panel held that

§ 1512(c)(2) requires a showing of nexus to an official

proceeding, but rejected Lonich's argument that no

reasonable jury could have found the required nexus here.

Noting that neither party disputes using a "consciousness of

wrongdoing” mens rea requirement for purposes of

evaluating the sufficiency of the evidence, the panel held that

a reasonable jury could find that the government met its

burden of proof in demonstrating Lonich's criminal intent.

The panel held that defendants' sentences must be

vacated. The district court applied several enhancements

that dramatically increased defendants' recommended

Guidelines sentencing ranges. These enhancements were

premised on a critical factual finding: that defendants

caused Sonoma Valley Bank (SVB) to fail, making

defendants responsible for associated losses. Addressing the

standard of proof that the government was required to meet

to demonstrate whether defendants caused SVB to fail, the

panel focused on factors five and six of the non-exhaustive

factors set forth in United States v. Valencia, 222 F.3d 1173

(9th Cir. 2000). Given the extremely disproportionate

sentences that the disputed enhancements produced, the

panel held that a clear and convincing evidence standard

applies to the factual underpinnings for these enhancements.

The panel concluded that the government did not

demonstrate by clear and convincing evidence that

defendants caused SVB to fail, where the district court made

6 UNITED STATES V. LONICH

no independent findings about the cause of the bank's

collapse beyond adopting the Presentence Investigation

Reports (PSRs) and rejecting defendants' objections without

explanation, and neither the PSRs nor the additional

materials the government now cites sufficiently show that

defendants were responsible for SVB failing, especially

given indications in the record that other factors internal and

external to the bank may have contributed to the bank's

collapse. This meant that the government did not

sufficiently support defendants' 20-level loss enhancement

under U.S.S.G. § 2B1.1(b)(1)(K). The panel wrote that its

determination that the government did not adequately prove

defendants caused SVB to fail means that enhancements

under U.S.S.G. § 2B1.1(b)(2)(A)(i) (ten or more victims)

and § 2B1.1(b)(17)(B)(i) (jeopardizing the safety and

soundness of a financial institution) are infirm as well. The

panel wrote that the same is true of defendants'

approximately $20 million restitution orders, which were

likewise premised on the government's theory that

defendants caused the bank to fail. The panel vacated

defendants' sentences and remanded for resentencing on an

open record.

The panel rejected defendants' remaining challenges to

their convictions in a memorandum disposition.

UNITED STATES V. LONICH 7

COUNSEL

George C. Harris (argued), The Norton Law Firm PC,

Oakland, California, for Defendant-Appellant David

Lonich.

Juliana Drous (argued), Law Office of Juliana Drous, San

Francisco, California, for Defendant-Appellant Brian Scott

Melland.

Steven J. Koeninger (argued), Assistant Federal Public

Defender; Steven G. Kalar, Federal Public Defender; Office

of the Federal Public Defender, San Francisco, California;

for Defendant-Appellant Sean Clark Cutting.

Francesco Valentini (argued), Trial Attorney; Brian C.

Rabbitt, Acting Assistant Attorney General; United States

Department of Justice, Criminal Division, Appellate

Section, Washington, D.C.; Adam A. Reeves and Robert

David Rees, Assistant United States Attorneys; David L.

Anderson, United States Attorney; United States Attorney's

Office, San Francisco, California; for Plaintiff-Appellee.

8 UNITED STATES V. LONICH

OPINION

BRESS, Circuit Judge:

This complex criminal appeal arises from fraudulent

schemes concerning bank loans and real estate in Sonoma

County, California. The three defendants, Sean Cutting,

Brian Melland, and David Lonich, appeal their convictions

and sentences, raising numerous issues for our review.

We affirm defendants' convictions. Among other things,

we hold that the government did not infringe defendants'

rights under the Sixth Amendment's Speedy Trial Clause;

that the district court's jury instructions for money

laundering and misapplication of bank funds do not require

reversal; and that sufficient evidence supported Melland's

conviction for bribery by a bank employee and Lonich's

conviction for attempted obstruction of justice.

However, we vacate defendants' sentences and remand

for resentencing. The defendants' advisory Sentencing

Guidelines ranges increased substantially based on

sentencing enhancements that hinged on finding that

defendants caused the Sonoma Valley Bank to fail. We hold

that because the government has not sufficiently

demonstrated that defendants caused the bank's failure, the

enhancements are not supported by the record.1

1 In a concurrently filed opinion, we reject a third party's ancillary

challenge to the district court's criminal forfeiture order. See United

States v. 101 Houseco, LLC, No. 18-10305 (9th Cir. 2021).

UNITED STATES V. LONICH 9

I. Facts and Procedural History

A

This case involves two overarching fraudulent schemes

involving bank officers, a real estate developer, and the

developer's lawyer. Defendants Sean Cutting and Brian

Melland were officers at Sonoma Valley Bank (SVB).

Cutting was SVB's Chief Lending Officer between 2005 and

2011. He joined its board of directors in 2008 and became

its CEO in 2009. Melland was a commercial loan officer at

SVB. Bijan Madjlessi was a real estate developer who died

shortly after being indicted in this case. Defendant David

Lonich worked as Madjlessi's in-house lawyer between

2009 and 2012.

Defendants' extensive fraudulent schemes took place

over many years. In the first scheme, which we will call the

"legal lending limit scheme,” Cutting and Melland conspired

with Madjlessi and Lonich to induce SVB to approve, over

a period of years, millions of dollars in bank loans to

Madjlessi and entities he controlled. These loans exceeded

SVB's legal lending limit—the maximum amount that

California law permits a bank to lend a borrower or his

affiliates.

Cutting and Melland recommended that SVB approve

these loans without disclosing to the bank's loan committee

that Madjlessi was the beneficiary. Madjlessi then used the

fraudulently obtained loans to pay the interest on preexisting

SVB loans. In one instance, Melland secured a loan for

Madjlessi only after Madjlessi (through a $50,000 payment

from his wife) agreed to invest in Melland's side business,

an energy drink start-up known as Magnus Innovations

Group.

10 UNITED STATES V. LONICH

In connection with this scheme to keep Madjlessi's

businesses afloat through fraudulent loans, Cutting and

Melland also conspired to conceal from the Federal Deposit

Insurance Corporation (FDIC) SVB's overall financial

exposure to Madjlessi. Ultimately, Cutting and Melland

enabled Madjlessi and his related entities to receive over

$35 million in loans from SVB (although the government

did not claim all these loans were fraudulent).

In the second scheme, which we will call the

"101 Houseco scheme,” Madjlessi and Lonich conspired

with Cutting and Melland to gain control of Park Lane Villas

East (PLV East), a Madjlessi real estate development in

Santa Rosa, California. By March 2009, Madjlessi had

defaulted on a separate $32 million loan from another bank,

IndyMac, secured by PLV East. IndyMac was in FDIC

conservatorship, and the FDIC scheduled a sale of

Madjlessi's defaulted note at an auction.

FDIC rules prohibited Madjlessi and his related entities

from participating in the auction. Nevertheless, the

defendants used a straw buyer, James House, and a sham

entity, 101 Houseco, LLC, to buy the IndyMac note at the

auction and thereby secure control of PLV East. House, the

straw buyer, was a contractor to whom Madjlessi owed

around $200,000. House took part in the scheme so that

Madjlessi would pay the $200,000.

The defendants created 101 Houseco, LLC solely for

bidding on the note, naming House as its owner on paper.

Lonich also had House fax to DebtX, the company managing

the FDIC auction, an eligibility certification in which House

falsely certified that he was not using the auction to "benefit

directly or indirectly” anyone "who otherwise would be

ineligible to purchase assets from the FDIC.” To fund the

deposit on the sale, Lonich had Melland transfer $100,000

UNITED STATES V. LONICH 11

from Madjlessi's daughter's account into House's business

account, further concealing Madjlessi's role from DebtX.

To finance the rest of the purchase of the note, Melland and

Cutting fraudulently secured for 101 Houseco a $5.4 million

loan from SVB. Using the loan proceeds, 101 Houseco

successfully bid $4.2 million to obtain Madjlessi's defaulted

IndyMac note, which had a face value exceeding

$27 million.

After the auction, SVB's loans to House continued under

the guise of allowing House to construct the Park Lane

Villas. SVB continued to increase the loan amount until it

reached $9.4 million. Of this $9.4 million, about

$4.5 million was passed to Madjlessi through one of his

construction companies. Madjlessi kept his side of the

bargain with House, paying him the $200,000 owed for past

contracting work. In line with the plan, Lonich later

transferred effective control of 101 Houseco to Madjlessi.

Lonich became 101 Houseco's sole manager. Madjlessi's

wife became the beneficiary of the trust that held a 99%

interest in 101 Houseco.

Madjlessi and Lonich wanted to refinance PLV East

through Fannie Mae or Freddie Mac programs for multifamily housing. In the meantime, however, Fannie Mae had

repossessed several condos in PLV East and was selling

them at auction. Fannie Mae preferred buyers who would

occupy the condos over outside investors. To get around

Fannie Mae's preferences, Madjlessi and Lonich used straw

buyers—including House, Madjlessi's personal assistant,

and the assistant's two sons—to purchase the condos. The

straw buyers then transferred the units to 101 Houseco.

12 UNITED STATES V. LONICH

Madjlessi and Lonich arranged the financing for these

straw purchases through Cutting and Melland. Lonich

drafted asset verification letters falsely stating that the

buyers had sufficient assets with SVB to fund the purchases

in full. Cutting and Melland then gave these letters back to

Lonich on SVB letterhead with Cutting's signature.

After the FDIC and the California Division of Financial

Institutions (DFI) examined SVB, DFI gave SVB the lowest

rating it could give a bank without closing it. In August

2010, California's Commissioner of Financial Institutions

seized control of SVB, ordering that the bank be liquidated

and its assets turned over to the FDIC.

When federal agents interviewed House, he admitted

wrongdoing and agreed to cooperate. In subsequent secretly

recorded meetings, Lonich advised House on how he should

testify before a grand jury. House later pleaded guilty to

bank and wire fraud charges for making false statements in

connection with the 101 Houseco application for the SVB

loan and the bid on the FDIC-owned note.

B

In March 2014, a federal grand jury returned a 29-count

indictment against Cutting, Melland, Lonich, and Madjlessi

for the 101 Houseco scheme (Madjlessi died soon after). In

October 2016, the grand jury returned a superseding

indictment adding charges for defendants' legal lending

limit scheme and their concealing from the FDIC SVB's risk

exposure to Madjlessi.

In the fall of 2017, and after a 31-day jury trial, the jury

convicted defendants on nearly all counts. This chart

summarizes the convictions:

UNITED STATES V. LONICH 13

Count 18

U.S.C. §

Offense Defendants

1 371 Conspiracy to commit

bank fraud

Cutting,

Lonich, and

Melland

2 1344 Bank Fraud Cutting,

Lonich, and

Melland

3–4 1005 Making a false bank

entry for certain

Madjlessi-related

loans

Melland

(Cutting

acquitted)

5 1005 Making a false bank

entry for certain other

Madjlessi-related

loans

Cutting and

Melland

6 371 Conspiracy to make

false statements to the

FDIC

Cutting and

Melland

7 656 Misapplication of

bank funds

Cutting and

Melland

8 1007 Making a false

statement to the FDIC

Cutting and

Melland

9 215 Receiving a gift for

procuring loans

Melland

10 1349,

1343

Conspiracy to commit

wire fraud

Cutting,

Lonich, and

Melland

14 UNITED STATES V. LONICH

11–15 1343 Wire Fraud for the

101 Houseco scheme

Cutting,

Lonich, and

Melland

19–30 1957 Money laundering for

transferring loan

proceeds House

controlled to

Madjlessi

Cutting,

Lonich, and

Melland

32–36 1005 Making a false bank

entry for Cutting's

false assetverification letters

relating to purchases

of PLV East condos

Cutting,

Lonich, and

Melland

37 1512(c) Attempted obstruction

of justice

Lonich

All three defendants were acquitted of Count 16, a wire fraud

charge. The government withdrew Counts 17, 18, and 31.

The advisory Sentencing Guidelines range adopted by

the district court for both Cutting and Melland was 235–293

months. The Guidelines range for Lonich was 292–365

months. The district court sentenced Cutting and Melland

each to 100 months in prison, and Lonich to 80 months. The

district court also ordered approximately $20 million in

restitution and the forfeiture of PLV East.

In this appeal, the defendants raise many challenges to

their convictions and sentences. We review the district

court's legal conclusions de novo. See United States v.

Gregory, 322 F.3d 1157, 1160 (9th Cir. 2003). And we

UNITED STATES V. LONICH 15

review its factual determinations for clear error. See id.

at 1161.

II. The Speedy Trial Clause

Defendants' lead argument is that their convictions are

invalid under the Sixth Amendment's Speedy Trial Clause.

Defendants claim a Speedy Trial Clause violation as to all

charges first brought in the October 2016 superseding

indictment. Defendants then argue we should reverse their

convictions as to the charges in the original March 2014

indictment because of "prejudicial spillover” from evidence

used to prove the charges in the allegedly unconstitutional

superseding indictment.

We have no occasion to consider defendants'

"prejudicial spillover” theory because we hold that the

government's decision to file new charges in the superseding

indictment did not infringe defendants' Speedy Trial Clause

rights.

A

Some additional background on the proceedings below

is necessary to understand our resolution of the Speedy Trial

Clause issue. In March 2014, the grand jury indicted

defendants on 29 charges related to the 101 Houseco

scheme. In May 2016, the district court ordered the

government to file any superseding indictment by October

28, 2016, and set a trial date of March 2017.

On October 27, 2016, the day before the court's deadline,

the grand jury returned the superseding indictment. Besides

the charges for the 101 Houseco scheme from the original

indictment, the superseding indictment included new

allegations for the legal lending limit scheme and

16 UNITED STATES V. LONICH

defendants' related fraud on the FDIC regarding SVB's

financial exposure to Madjlessi.

Criminal defendants enjoy certain protections from postindictment delays. Some are statutory, codified in the

Speedy Trial Act. See 18 U.S.C. § 3161; see also, e.g.,

United States v. Murillo, 288 F.3d 1126, 1131 (9th Cir.

2002). Others are constitutional, rooted in the Sixth

Amendment's Speedy Trial Clause. See, e.g., Barker v.

Wingo, 407 U.S. 514, 530–33 (1972); Murillo, 288 F.3d at

1131. "The specific time limits set by the Speedy Trial Act

are . . . different from the broader limits of the [S]ixth

[A]mendment” because the constitutional analysis "is

governed by the more flexible consideration of prejudice

caused by delay.” Murillo, 288 F.3d at 1131 (quoting United

States v. Pollock, 726 F.2d 1456, 1460 n.5 (9th Cir. 1984)).

Defendants did not assert either below or on appeal an

independent Speedy Trial Clause or Speedy Trial Act

violation for the 101 Houseco scheme charges that were in

the original indictment. The defendants had instead long

agreed to the approximately 3-year period between the

original March 2014 indictment and the original March 2017

trial date, based on their need to prepare a defense against

the indictment's complex allegations. See United States v.

Aguirre, 994 F.2d 1454, 1457 (9th Cir. 1993) ("The Speedy

Trial Clause primarily protects those who assert their rights,

not those who acquiesce in the delay—perhaps hoping the

government will change its mind or lose critical evidence.”).

Defendants contended below, however, that there was a

Speedy Trial Clause violation based on the new charges first

brought in the October 2016 superseding indictment

UNITED STATES V. LONICH 17

associated with the legal lending limit scheme and the

related fraud on the FDIC.2

The district court initially granted defendants' motion

asserting a Speedy Trial Clause violation and dismissed the

superseding indictment without prejudice. The court

calculated the period of delay using the March 2014 original

indictment date as the starting point and March 2017 (the

original trial date) as the end date. This three-year delay, the

district court held, presumptively prejudiced the defendants.

The district court also found that "[t]he government

could have filed all of the charges contained in the

superseding indictment when it filed the original indictment,

and the government has not adequately explained why it did

not do so.” According to the district court:

This is not a case where new evidence has

come to light that prompted the need to

supersede. Rather, the government simply

chose to seek indictment on some of the

charges of which it was aware, while holding

back on others. Then later—much later,

some 31 months later—it decided to

supersede to add the charges it had been

holding back, including a new conspiracy and

new substantive charges. Although the Court

does not find bad faith on the part of the

government, the Court does find that the

2 Defendants do not argue there was excessive pre-indictment delay

under the Fifth Amendment. See United States v. Corona-Verbera,

509 F.3d 1105, 1112 (9th Cir. 2007) ("The Fifth Amendment guarantees

that defendants will not be denied due process as a result of excessive

pre-indictment delay.” (quoting United States v. Sherlock, 962 F.2d

1349, 1353 (9th Cir. 1989))).

18 UNITED STATES V. LONICH

government acted deliberately and

intentionally with regard to charging the new

crimes added in the superseding indictment.

The district court further found that the government's

delay had prejudiced the defendants. Citing the

government's production of millions of pages of additional

documents, the poor quality of its electronic document

production, its general discovery delays, and the fact that the

broadened charges would require defendants to re-review

documents previously produced, the district court found that

the government had put defendants in an "untenable

position.” If the new charges remained in this case, "the

[March 2017] trial date would almost certainly need to be

continued in order to allow the defense time to prepare.” The

district court dismissed the superseding indictment without

prejudice, allowing the government to refile the new charges

in a new case.

The government moved for reconsideration, noting that

Speedy Trial Clause violations require dismissals with

prejudice. See, e.g., Strunk v. United States, 412 U.S. 434,

440 (1973); United States v. Saavedra, 684 F.2d 1293, 1297

(9th Cir. 1982). The government therefore suggested that

the district court's order would more properly be grounded

in Federal Rule of Criminal Procedure 48, which allows

dismissals without prejudice. See United States v. Yuan

Qing Jiang, 214 F.3d 1099, 1103 (9th Cir. 2000). Rule 48

permits a court to dismiss an indictment "if unnecessary

delay occurs in: (1) presenting a charge to a grand jury;

(2) filing an information against a defendant; or (3) bringing

a defendant to trial.” Fed. R. Crim. P. 48.

The district court granted the government's motion for

reconsideration, explaining that it had "clearly intended that

UNITED STATES V. LONICH 19

the dismissal be without prejudice, and the Court erred by

not grounding its order in Rule 48.” The court reiterated its

previous finding that "the government had unnecessarily

delayed in seeking the superseding indictment.” And it

again noted "the prejudice defendants would experience if

forced to proceed to trial in March 2017 on the new charges,

given the technical problems with the government's

discovery production as well as the new discovery produced

regarding the new charges.” The court then dismissed the

superseding indictment without prejudice under Rule 48.

In March 2017, in response to the district court's order,

the government filed a new action against defendants based

on an entirely new indictment concerning the legal lending

limit scheme. Not wanting two trials, defendants requested

that the district court consolidate the two cases. Defendants

also requested that the district court vacate the March 2017

trial date so they would have sufficient time to prepare for a

consolidated trial. The district court granted defendants'

request and re-set the trial for October 2017.

B

1

The Sixth Amendment provides that "[i]n all criminal

prosecutions, the accused shall enjoy the right to a speedy

and public trial, by an impartial jury . . . .” U.S. Const.

amend. VI. The Speedy Trial Clause limits the

government's ability to delay criminal trials once it has

"arrested or formally accused” a defendant of a crime.

Betterman v. Montana, 578 U.S. 437, 441 (2016). The

purpose of the Clause is to "prevent[] undue and oppressive

incarceration prior to trial, minimiz[e] anxiety and concern

accompanying public accusation, and limit[] the possibilities

that long delay will impair the ability of an accused to defend

20 UNITED STATES V. LONICH

himself.” Id. at 1614 (quoting United States v. Marion,

404 U.S. 307, 320–21 (1971)).

To assess whether the Speedy Trial Clause was violated,

we apply the four-part balancing test from Barker v. Wingo,

407 U.S. 514 (1972), considering (1) the length of the delay,

(2) the reason for the delay, (3) whether the defendant

asserted his rights, and (4) the prejudice to the defendant. Id.

at 530–33; see also Doggett v. United States, 505 U.S. 647,

651 (1992) (explaining that "[o]ur cases . . . have qualified

the literal sweep of the [Speedy Trial Clause] provision by

specifically recognizing the relevance of four separate

enquiries” set forth in Barker); United States v. King,

483 F.3d 969, 976 (9th Cir. 2007).

Importantly, "none of the four [Barker] factors . . . [i]s

either a necessary or sufficient condition to the finding of a

deprivation of the right of speedy trial. Rather, they are

related factors and must be considered together with such

other circumstances as may be relevant,” as part of "a

difficult and sensitive balancing process.” Barker, 407 U.S.

at 533; see also United States v. Mendoza, 530 F.3d 758, 762

(9th Cir. 2008) ("None of [the Barker] factors are either

necessary or sufficient, individually, to support a finding that

a defendant's speed[y] trial right has been violated.”);

Gregory, 322 F.3d at 1161–65 (discussing the Barker

factors).

The first Barker factor, the length of delay, is "a double

enquiry,” serving both as a triggering mechanism for the rest

of the Speedy Trial Clause evaluation and a factor in that

analysis. Doggett, 505 U.S. at 651–52. The "general

consensus” is that an eight-month delay "constitutes the

threshold minimum” to initiate the full Barker inquiry.

Gregory, 322 F.3d at 1162 n.3. If the delay crosses that

threshold, we generally proceed to the four-factor Barker

UNITED STATES V. LONICH 21

test. Id. at 1161. "Although there is no bright-line rule,

courts generally have found that delays approaching one

year are presumptively prejudicial.” Id. at 1161–62.

The parties spend considerable effort dueling over the

first Barker factor. They agree that the relevant end date for

our analysis is the original trial date in March 2017. But they

disagree on when defendants' Speedy Trial Clause rights

attached for the new charges first brought in the superseding

indictment. Defendants argue we should use the original

indictment as the start date for the new charges in the

superseding indictment. The government contends we

should use the date it filed the superseding indictment

because, in its view, the Speedy Trial Clause is "offense

specific” and the new charges involved different offenses

under Blockburger v. United States, 284 U.S. 299 (1932), the

seminal precedent in the Double Jeopardy context.

Essentially, the government argues that its superseding

indictment reset the Speedy Trial Clause clock here because

the new charges were not barred under Blockburger's

Double Jeopardy test.

We need not resolve that debate today because we

conclude that, even assuming the clock started at the time of

the original indictment, there was no Speedy Trial Clause

violation because the delay caused no relevant prejudice to

the defendants.

2

If we assume that the Speedy Trial Clause clock on the

charges in the superseding indictment started to run when the

initial indictment was filed, the delay from that point to the

original trial date was three years. That is a substantial delay.

But under Barker, it is not conclusively a Speedy Trial

Clause violation. It is not nearly as egregious as other cases

22 UNITED STATES V. LONICH

in which courts have found Speedy Trial Clause violations.

See, e.g., Doggett, 505 U.S. at 657 (8.5-year delay); United

States v. Black, 918 F.3d 243, 248–49 (2d Cir. 2019) (5.75-

year delay); United States v. Handa, 892 F.3d 95, 107 (1st

Cir. 2018) (6.5-year delay); United States v. Shell, 974 F.2d

1035, 1036 (9th Cir. 1992) (5-year delay).

Indeed, when considering the other Barker factors,

courts have held much longer delays than the one here

permissible under the Speedy Trial Clause. See, e.g., United

States v. Loud Hawk, 474 U.S. 302, 314–17 (1986) (more

than 7-year delay); Barker, 407 U.S. at 533–34 ("well over

five year[]” delay); United States v. Alexander, 817 F.3d

1178, 1183 (9th Cir. 2016) (per curiam) (5-year delay);

Corona-Verbera, 509 F.3d at 1116 ("nearly eight-year

delay”); Aguirre, 994 F.2d at 1456–58 (5-year delay);

Rayborn v. Scully, 858 F.2d 84, 89 (2d Cir. 1988) (over 7-

year delay). The three-year delay that we assume occurred

here was thus not dispositively unconstitutional, but instead

"presumptively prejudicial.” Gregory, 322 F.3d at 1162.

This means it is "sufficient to trigger inquiry into the other

three [Barker] factors.” Corona-Verbera, 509 F.3d at 1114.

The defendants argue that, combined with the

government's intentional decision to delay the superseding

indictment, the 3-year delay requires the government to

show that defendants were not prejudiced by the delay. We

assume defendants are correct on that point. See Shell,

974 F.2d at 1036. But as we have explained, "presumptive

prejudice is simply 'part of the mix of relevant facts, and its

importance increases with the length of the delay,'”

Gregory, 322 F.3d at 1162 (quoting United States v.

Beamon, 992 F.2d 1009, 1013 (9th Cir. 1993)), as well as the

reason for the delay, see Alexander, 817 F.3d at 1182. Here

the delay, while notable, was not on the high end of the range

UNITED STATES V. LONICH 23

where Speedy Trial Clause violations typically lie. And

most critically, regardless of who bears the burden to show

prejudice (or lack thereof), there is simply no basis to find

any Speedy Trial Clause prejudice on the facts of this case.

See Doggett, 505 U.S. at 658 n.4 (noting that the government

may "affirmatively prove[] that the delay left [the

defendant's] ability to defend himself unimpaired”).

The critical feature of this case is that the trial on the

charges in the original March 2014 indictment was already

set for March 2017. Defendants had no Speedy Trial Clause

(or Speedy Trial Act) objection to trying the charges in the

original indictment on that date. Indeed, they agreed to the

March 2017 trial date based on their need to prepare for trial

in a complex case, the amount of anticipated discovery, and

defendants' counsel's schedules.

Thus, even if the government had brought all the charges

in the original indictment, there is no reason to believe the

trial date would have been set any earlier than March 2017.

So, the government's filing of the superseding indictment at

most added seven months of delay, from March 2017 to the

eventual trial date in October 2017—a date to which all

parties agreed after the two cases were joined for trial at the

defendants' request.

The government has sufficiently demonstrated that the

extra seven-month delay did not cause defendants any

identifiable prejudice. Defendants were not incarcerated

pending trial. See Betterman, 578 U.S. at 442. And while

defendants presumably experienced some anxiety during the

entire pretrial period, there is no suggestion that the added

seven-month delay resulting from the new charges in the

superseding indictment created any material increase in

anxiety. See id.

24 UNITED STATES V. LONICH

Nor did the incremental delay "impair the ability” of

defendants to defend themselves. Id. Defendants did have

to defend against a broader set of charges involving a

broader body of evidence. But the "prejudice with which we

are concerned is prejudice caused by the delay that triggered

the Barker inquiry, not simply any prejudice that may have

occurred before the trial date but unrelated to the fact of the

delay itself.” Gregory, 322 F.3d at 1163.

The prejudice associated with defending against the

broader charges here is unrelated to the fact of the delay

itself. Gregory is relevant on that point. There, we held that

there was no Speedy Trial Clause violation when the

government filed a third superseding indictment after the

defendant had already pleaded guilty and served a prison

sentence on earlier related charges. Id. at 1159–65. As we

explained, even if the sequencing of the government's

charging decisions was "unusual,” the government's filing

of additional charges "is not in and of itself a constitutional

violation.” Id. at 1161.

That was because, as here, "[t]he government was free to

file a new indictment, rather than a superseding indictment,”

which "would have presented no constitutional speedy trial

problems.” Id. Indeed, that was so in Gregory even though

there (unlike here) the new charges in the superseding

indictment arose "out of the same course of conduct” as that

charged in the original indictments, and there (unlike here)

the defendant had even served time in prison on the earlier

charges. Id.

As in Gregory, any prejudice to the defendants here

"results solely from the government's choice not to bring”

the different charges together initially, which "has nothing

to do with the delay itself from the time of the indictment

until the time of trial.” Id. at 1164. If the government had

UNITED STATES V. LONICH 25

merely filed a second action in October 2016 instead of a

superseding indictment, defendants would have no basis to

complain under the Speedy Trial Clause. It should not

matter that the government initially joined the charges

together in one case through a superseding indictment, broke

them out to comply with the district court's Rule 48 order,

and then rejoined them for trial upon the defendants' request.

In response, defendants lean heavily on the district

court's prejudice analysis. But that analysis shows why the

district court was correct in concluding that dismissal with

prejudice was not warranted. The district court found that

the superseding indictment caused prejudice because it

would require defendants to prepare a defense against a

whole new set of allegations in time for a March 2017 trial.

That was indeed prejudicial, justifying the district court's

decision to order the government to file the new charges in a

new case. See Fed. R. Crim. P. 48(b). But that is not the

type of prejudice the Speedy Trial Clause protects against:

the Speedy Trial Clause relates to trial delay, not being

rushed into a trial. Cf. Loud Hawk, 474 U.S. at 311 ("The

Speedy Trial Clause does not purport to protect a defendant

from all effects flowing from a delay before trial.”); United

States v. MacDonald, 435 U.S. 850, 861 (1978) ("It is the

delay before trial, not the trial itself, that offends against the

constitutional guarantee of a speedy trial.”).

When defendants focus on areas of prejudice that could

implicate the Speedy Trial Clause, the weakness of their

prejudice theory becomes further apparent. Defendants note

that two SVB directors suffered from memory issues and

that a box of FDIC records from the May 2008 SVB

examination had gone missing. But these assertions of

prejudice are speculative, especially in view of the overall

scope of the government's prosecution and the

26 UNITED STATES V. LONICH

overwhelming evidence that defendants participated in

fraudulent schemes. See Loud Hawk, 474 U.S. at 315

("[T]he possibility of 'impairment of a fair trial that may

well result from the absence or loss of memory of witnesses'

. . . is not sufficient to support respondents' position that

their speedy trial rights were violated.” (quoting United

States v. Loud Hawk, 741 F.2d 1184, 1193 (9th Cir. 1984)).

Even if defendants had known to contact the two SVB

directors earlier, it is unclear if the witnesses' memories

would have been better then, since the events in question

were already somewhat dated. The same is true of other

witnesses who could not recall certain details at trial. As to

the box of documents, it is unclear when it went missing.

Plus, defendants had already extensively cross-examined the

government's investigator about the 2008 FDIC

examination. In short, there is no "non-speculative proof as

to how [defendants'] defense was prejudiced by the”

additional seven-month delay. Alexander, 817 F.3d at 1183.

3

Defendants also point to the district court's findings that

the government "deliberately and intentionally” delayed

pursuing the new charges in the superseding indictment.

This argument resonates most centrally in Barker's second

factor—the reason for the delay—which we have described

as "the focal inquiry” of the Barker analysis. Alexander,

817 F.3d at 1182 (quoting United States v. Sears, Roebuck

& Co., Inc., 877 F.2d 734, 739 (9th Cir. 1989)).

We agree with defendants that the government's reasons

for delay augment the presumed prejudice that we must

infer. See Doggett, 505 U.S. at 656–58; Shell, 974 F.2d at

1036. But defendants overstate the significance of this

Barker factor on the particular facts of this case. The

UNITED STATES V. LONICH 27

government did not act with reasonable diligence here, but

the district court also emphasized that it did not find any bad

faith. While "prejudice may be presumed” when the

government "intentionally delayed or negligently pursued

the proceedings,” Alexander, 817 F.3d at 1182, prejudice

does not somehow drop out of the analysis altogether simply

because the government may have acted strategically.

Instead, "the amount of prejudice” required to trigger a

Speedy Trial Clause violation "is inversely proportional to

the length and reason for the delay.” Id. at 1183. And

ultimately, and even if prejudice is presumed, the Speedy

Trial Clause and Barker inquiry seek to ensure that

defendants are not unduly harmed by excessive postindictment delay. See MacDonald, 456 U.S. at 8 ("The

speedy trial guarantee is designed to minimize the possibility

of lengthy incarceration prior to trial, to reduce the lesser,

but nevertheless substantial, impairment of liberty imposed

on an accused while released on bail, and to shorten the

disruption of life caused by arrest and the presence of

unresolved criminal charges.”).

Here, the problem for defendants remains the same: the

trial was already going to happen at least three years after the

original indictment. In this case, there is no basis to

conclude that the added delay resulting from the superseding

indictment worked any relevant prejudice to the defendants.

That is especially so when the government could have filed

these new charges in an entirely separate case, see Gregory,

322 F.3d at 1161—as the government in fact did in response

to the district court's Rule 48 dismissal. We may not abstract

one Barker factor from the others without considering the

28 UNITED STATES V. LONICH

overall facts and circumstances associated with the delay.

See Barker, 407 U.S. at 533.3

We do not minimize the district court's concerns with the

timing of the government's charging decisions. The

government's answering brief admits that it "takes the

district court's criticism seriously and is committed to

avoid[ing] such situations in the future.” We fully expect the

government to abide by that representation. And, the result

might well be different if meaningful Speedy Trial prejudice

resulted from the government's actions.

But the issue here is whether the defendants should

effectively reap a windfall when the timing of the

superseding indictment worked no meaningful Speedy Trial

Clause prejudice. Neither the Sixth Amendment nor Barker

support, much less require, that result. Given the effective

seven-month delay and the lack of material prejudice, we

hold that the Speedy Trial Clause was not violated.

III. Jury Instructions for Money Laundering and

Misapplication of Bank Funds

Defendants next challenge the jury instructions on the

money laundering and misapplication of bank funds charges.

Specifically, defendants contend that the instructions'

overarching definition of "knowingly” conflicted with the

required mental states for the two charged offenses. We

hold, however, that the district court's general "knowingly”

3 The Third Circuit's decision in United States v. Battis, 589 F.3d

673 (3d Cir. 2009), on which defendants rely, is distinguishable. That

case involved a 45-month delay, at least 35 months of which were

attributable to the government. Id. at 683. Battis also did not involve a

defendant who had already agreed to a substantial delay in the trial, as

here.

UNITED STATES V. LONICH 29

instruction was permissible and that defendants in any event

have not shown prejudice from the instruction.

A

Defendants were charged with twelve counts of money

laundering under 18 U.S.C. § 1957. These counts were

based on the 101 Houseco scheme for defendants

transferring the loan proceeds from House's construction

company and 101 Houseco to Masma Construction, a

Madjlessi construction company. Cutting and Melland were

also charged with one count of misapplication of bank funds

under 18 U.S.C. § 656 for arranging the fraudulent loans.

The district court proposed count-specific instructions

for the money laundering and misapplication of bank funds

charges that followed the Ninth Circuit's model jury

instructions. See Manual of Model Criminal Jury

Instructions for the Ninth Circuit § 8.41 (misapplication of

bank funds); id. § 8.150 (money laundering). The district

court also proposed defining "knowingly” for all charges in

a manner that tracked the model instruction. See id. § 5.7.

The defendants objected to part of this proposed

"knowingly” instruction, arguing that a phrase in the general

instruction—"[t]he government is not required to prove that

a defendant knew that his or her acts or omissions were

unlawful”—conflicted with the mens rea requirements in the

instruction specific to misapplication of bank funds. To

address that concern, the district court modified the general

"knowingly” instruction to clarify, with the language

underlined below, that the challenged sentence only applied

to commission of the act itself:

An act is done knowingly if the defendant is

aware of the act and does not act through

30 UNITED STATES V. LONICH

ignorance, mistake or accident. To prove that

an act is done knowingly, the government is

not required to prove that the defendant knew

that his or her acts were unlawful.

The government agreed with the revised instruction and

defendants did not object further. The district court used this

revised definition for "knowingly” to instruct the jury.4

B

"We review the formulation of jury instructions for

abuse of discretion, but review de novo whether those

instructions correctly state the elements of the offense and

adequately cover the defendant's theory of the case.” United

States v. Liew, 856 F.3d 585, 595–96 (9th Cir. 2017). "We

must determine whether the instructions, viewed as a whole,

'were misleading or inadequate to guide the jury's

deliberation.'” United States v. Kaplan, 836 F.3d 1199,

1215 (9th Cir. 2016) (quoting United States v. Moore,

109 F.3d 1456, 1465 (9th Cir. 1997) (en banc)). Absent

contemporaneous objection, we review for plain error.

United States v. Soto, 519 F.3d 927, 930 (9th Cir. 2008).

"Jury instructions, even if imperfect, are not a basis for

overturning a conviction absent a showing that they

prejudiced the defendant.” Kaplan, 836 F.3d at 1215

(quoting United States v. Christensen, 828 F.3d 763, 786

(9th Cir. 2015)). If an instruction is erroneous, "[w]e apply

harmless error analysis to determine whether an improper

4 In the final instructions, the underlined language was revised to

replace the word "done” with "committed.”

UNITED STATES V. LONICH 31

instruction constitutes reversible error.” United States v.

Munguia, 704 F.3d 596, 598 (9th Cir. 2012).

Although defendants did not object anew after the

district court revised its general "knowingly” instruction, the

government concedes that defendants adequately preserved

their objection as to the misapplication of bank funds

instructions. Thus, we review this claim for abuse of

discretion. Liew, 856 F.3d at 595–96. Although it is less

clear that the defendants preserved their arguments for the

money laundering instructions, we assume for purposes of

this appeal that they did. But even under abuse of discretion

review, defendants' claims fail.

1

We discern no error in the general "knowingly”

instruction as applied to the specific money laundering

instructions. Defendants do not contest that the district court

correctly stated the mens rea for money laundering, see

18 U.S.C. § 1957, when it instructed the jury that as to that

offense, the government must prove (as relevant here):

First, the defendants knowingly engaged or

attempted to engage in a monetary

transaction; [and]

Second, the defendants knew the transaction

involved criminally derived property.

Defendants contend, however, that the second sentence of

the overarching "knowingly” instruction—"[t]o prove that

an act is committed knowingly, the government is not

required to prove that a defendant knew that his or her acts

or omissions were unlawful”—contravened the requirement

that, for money laundering, the government must prove that

32 UNITED STATES V. LONICH

defendants "knew the transactions involved criminally

derived property.” United States v. Turman, 122 F.3d 1167,

1169 (9th Cir. 1997), abrogated on other grounds by

Henderson v. United States, 568 U.S. 266 (2013).

We disagree. The general "knowingly” definition, as the

district court revised it, only applied to whether "an act is

committed knowingly.” By the terms of that instruction,

"[a]n act is done knowingly if the defendant is aware of the

act and does not act through ignorance, mistake or accident.”

That provides the set-up for the key language as the district

court revised it: "To prove that an act is committed

knowingly, the government is not required to prove that the

defendant knew that his or her acts were unlawful.”

This general definition of "knowingly” did not extend to

the money laundering charge's second element, which

required the jury to find that defendants "knew the

transaction involved criminally derived property.” Rather,

the general "knowingly” instruction only applied to the

money laundering charge's first element, whether

defendants "knowingly engaged or attempted to engage” in

a monetary transaction. In other words, these instructions

"are substantively different because they address two

distinct types of subjective knowledge.” United States v.

Greer, 640 F.3d 1011, 1019–20 (9th Cir. 2011).

The district court also elsewhere reinforced that the

government must prove that defendants knew their

underlying conduct was illegal to convict them for money

laundering. After reciting the elements for money

laundering, the court instructed the jury that the

"government must prove that the defendants knew that the

property involved in the monetary transaction constituted, or

was derived from, proceeds obtained by some criminal

offense.” This dispelled "the possibility that the jury could

UNITED STATES V. LONICH 33

have omitted the second element of money laundering and

convicted without finding [defendants] knew the money

represented illegal . . . proceeds.” United States v. Knapp,

120 F.3d 928, 932 (9th Cir. 1997).

This case thus differs from United States v. Stein, 37 F.3d

1407 (9th Cir. 1994), on which defendants principally rely.

In Stein, we reversed the defendant's money laundering

convictions because the general jury instructions defined

"knowingly” in a way that conflicted with the jury

instruction specific to money laundering, which required that

the government prove defendant knew the money

represented illegal proceeds. Id. at 1410. There, the district

court's "knowingly” instruction broadly specified that "[t]he

Government is not required to prove that the defendant knew

that his acts or omissions were unlawful.” Id. We thus held

that the instruction was impermissible because the general

definition for "knowingly” "conflict[ed] with the district

court's previous specific instruction on money laundering,”

meaning that "a jury could convict Stein without finding that

he knew his predicate acts of fraud were unlawful.” Id.

The problematic unqualified instruction in Stein is

different than the more tailored "knowingly” instruction that

the district court gave here. Unlike this case, the district

court in Stein did not limit the general "knowingly”

definition to whether an act was committed knowingly. See

id..

This case more closely resembles Knapp, 120 F.3d at

931, in which we found no conflict between a general

"knowingly” definition and the money laundering

instructions. In Knapp, the district court provided a general

"knowingly” definition that:

34 UNITED STATES V. LONICH

An act is done knowingly if the defendant is

aware of the act and does not act or fail to act

through ignorance, mistake or accident. As to

money laundering, the government is not

required to prove that the defendant knew

that his acts or omissions were unlawful.

Id. at 931. We held that this instruction was

"distinguish[able] . . . from the one given in Stein.” Id.

at 932. It created no impermissible dissonance with the

money laundering mens rea requirements because the

"added phrase 'as to money laundering' made sufficiently

clear that the corresponding sentence applied only to the

crime itself.” Id.

If anything, Knapp presented a closer case than this one.

Here, the jury instruction explicitly stated that knowledge of

unlawfulness is unnecessary only when the question is

whether "an act is committed knowingly.” By focusing

specifically on the "act,” the added language was sufficient

to avoid interference with the specific mens rea requirements

for money laundering. See United States v. Golb, 69 F.3d

1417, 1428 (9th Cir. 1995) (holding that "general knowledge

instructions” did not "negate[] the scienter element of the

money-laundering offense”).

Our holding here is also consistent with cases in which

we have found no conflict between two mens rea instructions

that, like here, are "thematically similar” but "substantively

different.” Greer, 640 F.3d at 1019–20. For example, we

have held that an instruction that the government must prove

"the defendant knew that the firearm [he possessed] was a

machine gun,” did not conflict with a general knowledge

instruction stating that "[t]he government is not required to

prove that the defendant knew that his acts . . . were

UNITED STATES V. LONICH 35

unlawful.” United States v. Gravenmeir, 121 F.3d 526, 529–

30 (9th Cir. 1997). We reasoned that "a general instruction

that requires a defendant's awareness of his acts” did not

negate the requirement that the defendant "knew that the

firearm was a machine gun” because they dealt with two

different requirements. Id. at 530 (emphasis added); see also

Greer, 640 F.3d at 1020 (no conflict when general

"knowingly” instruction dealt with "knowledge of unlawful

activity,” while specific instruction dealt with "knowledge of

legal entitlement to the property the alleged extortionist tried

to obtain”).

Defendants point to a comment in the Manual of Model

Criminal Jury Instructions that, in discussing a different

money laundering provision, noted that "it is reversible error

to give [the model 'knowingly' instruction] in a money

laundering case” because "it is a specific intent crime.”

Ninth Circuit Manual of Model Criminal Jury Instructions

§ 8.146. But the district court did not give the model

"knowingly” instruction. Rather, it modified the definition

to limit it only to "acts” committed knowingly, negating the

concerns the Model Jury Instructions comment addressed.

2

For substantially the same reasons, we reject defendants'

contention that the general "knowingly” instruction conflicts

with the willfulness requirement for the misapplication of

bank funds offense.

The district court correctly instructed the jury that under

the misapplication of bank funds statute, 18 U.S.C. § 656,

the government had to prove that "defendants knowingly and

willfully stole, embezzled, or misapplied funds or credits

belonging to the bank or entrusted to its care in excess of

$1,000.” The district court also properly instructed the jury

36 UNITED STATES V. LONICH

that "'[w]illfully' as used in this instruction means

undertaking an act with a bad purpose,” so that "in order to

establish a willful violation of a statute, the government must

prove that the defendant acted with knowledge that his

conduct was unlawful.” Once again, nothing in the general

"knowingly” instruction—relating to whether "an act is

committed knowingly”—undermined the specific mens rea

requirements applicable to misapplication of bank funds.

See, e.g., Knapp, 120 F.3d at 931–32.

3

Even assuming the jury instructions were incorrect, the

error did not prejudice defendants. There was overwhelming

evidence that defendants had the required mens rea for both

sets of offenses: defendants clearly knew that the

101 Houseco disbursements were based on the proceeds of a

fraudulent loan to 101 Houseco, LLC.

We can see this most directly in defendants' convictions

for wire fraud and conspiracy to commit wire fraud (Counts

10 to 15). Those convictions were based on fraudulent

communications surrounding the 101 Houseco scheme. To

find defendants guilty of these wire fraud charges, the jury

had to conclude that defendants knowingly misrepresented

House as 101 Houseco's legitimate owner when they knew

that Madjlessi was the real buyer. Put differently, the jury

must have found that defendants knew House was a straw

purchaser.

Defendants do not contest this conclusion. They instead

note that knowing House was a straw buyer did not mean

that the defendants also "knew the proceeds of the HouseCo

loan were unlawful.” This argument is not tenable. It is

"clear beyond a reasonable doubt that a rational jury” would

find that defendants—members of the legal and banking

UNITED STATES V. LONICH 37

professions—knew it was illegal knowingly to help a straw

buyer secure a $10 million loan. See Munguia, 704 F.3d

at 603–04.

IV. Sufficiency of the Evidence on Bribery and

Obstruction of Justice Charges

Melland argues that there was insufficient evidence to

support his conviction for bribery by a bank employee

(Count 9). See 18 U.S.C. § 215(a)(2). Lonich contends that

there was insufficient evidence to sustain his conviction for

attempted obstruction of justice (Count 37). See 18 U.S.C.

§ 1512(c)(2). We must "determine whether 'after viewing

the evidence in the light most favorable to the prosecution,

any rational trier of fact could have found the essential

elements of the crime beyond a reasonable doubt.'” United

States v. Nevils, 598 F.3d 1158, 1163–64 (9th Cir. 2010) (en

banc) (quoting Jackson v. Virginia, 443 U.S. 307, 319

(1979)). We hold that sufficient evidence supported the

convictions for bribery and attempted obstruction of justice.

A

Melland's bribery charge was based on his securing from

Madjlessi a $50,000 investment in Magnus Innovations,

Melland's energy-drink start-up. Madjlessi wired Magnus

Innovations $50,000 using an overdraft check from

Madjlessi's wife, drawn from a Madjlessi entity's business

account. The very next day, Melland sought approval from

SVB's loan committee for the third pair of $1.86 million

Greenbriar loans (loans for another Madjlessi development).

In doing so, Melland misrepresented the borrower's liability

and hid Madjlessi's interest in the loans. After the jury

returned a guilty verdict on this charge, Melland moved for

a judgment of acquittal, arguing that the evidence against

38 UNITED STATES V. LONICH

him was insufficient. The district court did not err in

denying that motion.

Under 18 U.S.C. § 215(a)(2), whoever "as an officer,

director, employee, agent, or attorney of a financial

institution, corruptly solicits or demands for the benefit of

any person, or corruptly accepts or agrees to accept, anything

of value from any person, intending to be influenced or

rewarded in connection with any business or transaction of

such institution,” is subject to punishment. This offense—

specific to banking officials, employees, and agents—is not

one we have had much previous occasion to consider. But

as we remarked in the context of § 215's predecessor

provision, "[t]here can be no doubt that Congress intended,

by the enactment of this statute, to remove from the path of

bank officials the temptation to enrich themselves at the

expense of the borrowers or the bank, and also to prevent

improvident loans.” Ryan v. United States, 278 F.2d 836,

838 (9th Cir. 1960); see also United States v. Brunson,

882 F.2d 151, 155 (5th Cir. 1989) (identifying the elements

of a § 215(a)(2) violation).

Melland's challenge to his conviction centers on only

one aspect of the government's required § 215(a)(2)

showing: the requirement that Melland acted "corruptly,”

i.e., with corrupt intent. The mens rea "corruptly” has a

lengthy historical lineage. While the Model Penal Code

seems to resist it, see Model Penal Code §§ 240.1–7

Explanatory Note, the term "corruptly” still appears with

some frequency in the federal criminal code. See Eric

Tamashasky, The Lewis Carroll Offense: The EverChanging Meaning of 'Corruptly' Within the Federal

Criminal Law, 31 J. Legis. 129, 130–33 (2004). We

encounter it most commonly in criminal statutes involving

bribery, obstruction of justice, and tampering with

UNITED STATES V. LONICH 39

witnesses. See, e.g., 18 U.S.C. § 201 (bribery of public

officials and witnesses); id. § 226 (bribery affecting port

security); id. § 666 (theft or bribery concerning programs

receiving federal funds); id. § 1505 (obstruction of

proceedings before departments, agencies, and committees);

id. §§ 1512(b)–(c) (obstructing official proceedings); id.

§ 1517 (obstructing examination of a financial institution).

The district court instructed the jury that, to find Melland

"acted corruptly,” it must determine he "intend[ed] to be

influenced or rewarded in connection with any business or

transaction of” a financial institution. While we have not

specifically defined "corruptly” in the context of

§ 215(a)(2), we conclude that the district court's instruction

appropriately stated the law, as the parties effectively agree.

"As used in criminal-law” statutes, the term "corruptly”

usually "indicates a wrongful desire for pecuniary gain or

other advantage.” Black's Law Dictionary 435 (11th ed.

2019). In United States v. Rodrigues, 159 F.3d 439 (9th Cir.

1998), we commented—in the case of § 215(a)(2) in

particular—that "'[t]o corrupt' is a standard synonym for 'to

bribe,'” so that "[t]o accept corruptly something of value as

a reward is to accept a payoff or bribe.” Id. at 450.

That is essentially how we have interpreted "corruptly”

in the context of similar federal criminal statutes. See, e.g.,

Martinez-de Ryan v. Whitaker, 909 F.3d 247, 250 (9th Cir.

2018) (explaining that for purposes of 18 U.S.C. § 666,

which prohibits bribery in connection with programs

receiving federal funds, "'[a]n act is done 'corruptly' if it is

performed voluntarily, deliberately, and dishonestly, for the

purpose of either accomplishing an unlawful end or result or

of accomplishing some otherwise lawful end or lawful result

by an unlawful method or means'”) (quoting United States

v. McNair, 605 F.3d 1152, 1193 (11th Cir. 2010)); United

40 UNITED STATES V. LONICH

States v. Leyva, 282 F.3d 623, 626 (9th Cir. 2002)

(explaining for purposes of 18 U.S.C. § 201, which prohibits

bribery of public officials, that "corruptly” "refers to the

defendant's intent to be influenced to perform an act in

return for financial gain”). The district court's instruction

thus appropriately captured the plain meaning of "corruptly”

that we have set forth in our prior cases.

We now turn to whether the evidence was sufficient to

show that Melland acted "corruptly” in procuring

Madjlessi's $50,000 investment in Melland's energy-drink

enterprise. The government did not need a "smoking gun”

document or admission to show that Melland acted

"corruptly” through an apparent quid pro quo arrangement

with Madjlessi. Instead, it could prove Melland's criminal

intent through circumstantial evidence. See, e.g., United

States v. Kincaid-Chauncey, 556 F.3d 923, 937 (9th Cir.

2009), abrogated in part on other grounds, Skilling v. United

States, 561 U.S. 358 (2010).

The circumstantial evidence here was plentiful. Earlier,

and while Melland was pushing for SVB to approve the first

two pairs of Greenbriar loans that exceeded the legal lending

limit, Madjlessi hosted Melland and his business partner on

his yacht to discuss Magnus Innovations. Later, on March

25, 2008, Melland emailed Madjlessi with an "URGENT!!!”

solicitation to invest in that business. The very next day after

Madjlessi wired Melland a $50,000 investment in Magnus

Innovations, Melland presented the third pair of Greenbriar

loans (that exceeded the legal lending limit) to SVB's loan

committee. The timing of events strongly suggests that

Melland sought and accepted $50,000 from Madjlessi for

Melland's energy drink side business in return for helping

Madjlessi secure a large loan from SVB.

UNITED STATES V. LONICH 41

The government also showed that Melland and Madjlessi

each needed what the other could provide. Melland needed

seed money for his drink company. Melland knew that

Madjlessi needed the SVB loans because of Madjlessi's own

cash-flow issues. Melland also knew that Madjlessi could

pay for the Magnus Innovations investment using an

overdraft check because Melland could approve the

overdraft, which he evidently did.

Melland nonetheless contends it would be unreasonable

to infer any corrupt intent on his part because SVB had

previously approved several loans for Madjlessi. But a

properly instructed jury could certainly conclude otherwise.

Indeed, that SVB approved previous loans for Madjlessi

above the legal lending limit meant, if anything, that

Madjlessi had an even greater reliance on Melland. Melland,

as noted, had helped lock down the first two pairs of

Greenbriar loans while he negotiated with Madjlessi for an

investment in his start-up. Melland also knew that Madjlessi

needed him to recommend the third pair of loans to SVB's

loan committee, even though it far exceeded SVB's legal

lending limits for Madjlessi.

Melland responds that it was merely coincidental that he

took $50,000 from an investor whose loan requests Melland

was actively pressing before his bank. But in a sufficiency

of the evidence challenge it is immaterial that "there is an

equally plausible innocent explanation.” Nevils, 598 F.3d

at 1169. We thus hold that sufficient evidence supported

Melland's conviction for bribery by a bank employee.

42 UNITED STATES V. LONICH

B

1

We turn next to Lonich's claim that insufficient evidence

supported his conviction for attempted obstruction of justice

by encouraging House to mislead the grand jury about his

role in the 101 Houseco scheme. See 18 U.S.C.

§ 1512(c)(2). Lonich's conviction on this charge arose out

of two meetings involving Lonich, House, and Madjlessi.

Working with the government, House secretly recorded

these meetings. During trial, the government played the

video recordings for the jury.

At the first meeting, House handed Lonich and Madjlessi

a subpoena House had received commanding him "to appear

and testify before the Grand Jury” in the Northern District of

California. The subpoena also required House to produce

documents about a condominium he bought through

Madjlessi in Reno, Nevada.

House told Lonich and Madjlessi that the subpoena had

made him "a fucking wreck.” Lonich and Madjlessi then

tried to downplay the subpoena's significance. Lonich told

House that because the subpoena only referenced the Reno

condominium, House would not need to discuss

101 Houseco. But House responded that the agents "want to

talk about 101 Houseco to me.” This pattern repeated

throughout the conversation: Lonich returned to the

subpoena's Reno-related document request, while House

stressed that the agents wanted to talk about 101 Houseco.

House also informed Lonich that when he told the agents he

could not discuss 101 Houseco, they told him to "go tell it to

the Grand Jury.”

UNITED STATES V. LONICH 43

The next day, the three resumed their discussion. This

time, Lonich provided guidance to House on what he should

tell the grand jury. Among other things, Lonich instructed

House: "I think it's good for you to be able to say, I had a

guy running [101 Houseco]. I'm running my business. And

this was an investment that I made.” Later in the meeting

House asked: "What about a straw buyer for [101 Houseco]?

. . . I received money that was owed me.” Lonich again

instructed: "I think you are better off to say you received

money, not money that was owed you. You made an

investment. You know—you know, I don't care.” Lonich

reiterated: "My sense is I think it's much better that you got

paid. . . . Not that it was an old debt, but that you got paid.”

2

18 U.S.C. § 1512(c)(2) punishes anyone who "corruptly

. . . obstructs, influences, or impedes any official proceeding,

or attempts to do so.” Section 1512(f)(1) clarifies that "an

official proceeding need not be pending or about to be

instituted at the time of the offense.” An "official

proceeding” includes "a proceeding before . . . a Federal

grand jury.” 18 U.S.C. § 1515(a)(1)(A).

Lonich first contends that the government did not prove

a nexus between his actions and the grand jury proceeding.

We agree that § 1512(c)(2) has a nexus requirement.

Namely, § 1512(c)(2) "require[s] that (1) the obstructive

conduct be connected to a specific official proceeding . . .

that was (2) either pending or was reasonably foreseeable to

[the defendant] when he engaged in the conduct . . . .”

United States v. Young, 916 F.3d 368, 385 (4th Cir. 2019).

That nexus requirement is firmly rooted in law. The

Supreme Court has identified a nexus requirement in two

related obstruction provisions that employ similar statutory

44 UNITED STATES V. LONICH

language. See Arthur Andersen LLP v. United States,

544 U.S. 696, 707–08 (2005); United States v. Aguilar,

515 U.S. 593, 598–99 (1995). In Aguilar, the Court

considered the catchall provision in 18 U.S.C. § 1503, a

grand jury tampering statute. See 515 U.S. at 599. Section

1503 provides that a person may not "corruptly or by threats

or force . . . influence[], obstruct[], or impede[] . . . the due

administration of justice.” The only evidence the

government had shown to support the conviction in Aguilar

was that the defendant made false statements to an

investigating agent "who might or might not testify before a

grand jury.” 544 U.S. at 600. In reversing the conviction,

the Court held that § 1503 required a nexus showing,

namely, "that the act [had] a relationship in time, causation,

or logic with the judicial proceedings.” Id. at 599.

In Arthur Andersen, the Supreme Court applied Aguilar

to a related provision of the obstruction statute. See 544 U.S.

at 707–08. Arthur Andersen held that 18 U.S.C.

§ 1512(b)(2)(A), which prohibits tampering with documents

that would be used in an official proceeding, requires proof

of a "nexus between the 'persuasion' to destroy documents”

and the official proceeding. Id. at 707 (alterations omitted).

The Court thus held that a jury cannot convict a defendant

under § 1512(b)(2)(A) "when he does not have in

contemplation any particular official proceeding in which

those documents might be material.” Id. at 708.

Every other circuit to have considered the issue has

found that § 1512(c) requires a showing that the obstruction

was connected to a pending or reasonably foreseeable

official proceeding. See Young, 916 F.3d at 386 (citing, e.g.,

United States v. Martinez, 862 F.3d 223, 237 (2d Cir. 2017);

United States v. Petruk, 781 F.3d 438, 445 (8th Cir. 2015);

United States v. Tyler, 732 F.3d 241, 249–50 (3d Cir. 2013);

UNITED STATES V. LONICH 45

United States v. Friske, 640 F.3d 1288, 1292 (11th Cir.

2011); United States v. Phillips, 583 F.3d 1261, 1263–64

(10th Cir. 2009)). And United States v. Ermoian, 752 F.3d

1165 (9th Cir. 2013), although not directly resolving the

issue, we noted in construing § 1512(c)(2) that "Supreme

Court precedent requir[es] a nexus between the obstructive

act and criminal proceedings in court.” Id. at 1172 (citing

Arthur Andersen, 544 U.S. at 708).

We thus hold that § 1512(c)(2) requires a showing of

nexus. Nevertheless, we reject Lonich's argument that no

reasonable jury could have found the required nexus here.

Lonich asserts he did not contemplate an official proceeding

concerning 101 Houseco because he thought the grand jury

was investigating a separate issue about the purchase of a

condominium in Reno. Lonich's comments at the first

meeting with House and Madjlessi did focus on the Reno

property. But a jury need not accept his version of what he

allegedly believed.

In the meetings, House stressed to Lonich and Madjlessi

that federal agents wanted to talk to him about 101 Houseco

before the grand jury. And Lonich provided House with

specific guidance about what House should say to the grand

jury about the 101 Houseco arrangement. Given the explicit

discussions at the meetings about 101 Houseco and what

House should say on that topic, a reasonable jury could

easily conclude that when Lonich sought to frame the

subpoena as focused on a Reno property, he was seeking to

calm House and minimize both the significance of the

federal proceeding and the likelihood that House would offer

testimony adverse to Lonich and Madjlessi.

46 UNITED STATES V. LONICH

3

Lonich also maintains that the government did not prove

the statute's mens rea requirement that a defendant

"corruptly . . . obstructs, influences, or impedes any official

proceeding, or attempts to do so.” We have not yet defined

"corruptly” in § 1512(c). See United States v. Watters,

717 F.3d 733, 735 (9th Cir. 2013) (reserving the issue). We

have, however, affirmed an instruction stating that

"'corruptly' meant acting with 'consciousness of

wrongdoing'” because it, "if anything, . . . placed a higher

burden of proof on the government than section 1512(c)

demands.” Id. The district court provided an analogous

instruction to the jury, and neither party disputes using a

"consciousness of wrongdoing” mens rea requirement for

purposes of evaluating the sufficiency of the evidence.

Under that articulation, a reasonable jury could find that

the government met its burden of proof in demonstrating

Lonich's criminal intent. We focus on two exchanges on the

second day of meetings. The first involved Lonich

instructing House on "the story” he should tell the grand

jury. Lonich said he thought it was "good for [House] to be

able to say, [House] had a guy running [101 Houseco]” and

that House should say he entered the 101 Houseco

arrangement as "an investment.” Yet at trial, House

repeatedly testified that he only agreed to take part in the

101 Houseco scheme to get the $200,000 Madjlessi owed

him, and that House would only be the owner "on paper.”

In the second exchange, House asked Madjlessi and

Lonich how he should testify about being a "straw buyer.”

Madjlessi told House to say that he "made money,” but

House countered: "I received money that was owed me.” To

this Lonich said: "I think you are better off to say you

received money, not money that was owed you. You made

UNITED STATES V. LONICH 47

an investment.” Lonich soon after reiterated, "My sense is I

think it's much better that you got paid. . . . Not that it was

an old debt, but that you got paid.”

A reasonable jury could draw from these exchanges that

Lonich instructed House to deceive the grand jury. It is more

than reasonable to think, based on all the evidence presented

at trial, that Lonich knew House only took part in the scheme

to get the $200,000 Madjlessi already owed him. House

testified that Lonich knew about the arrangement. And that

Madjlessi and Lonich only "permitted [House] to retain”

approximately $200,000 reflected Madjlessi's existing debt

to House. A rational jury could conclude that House did not

make an "investment” to buy a property he knew would net

him only money already owed him. And that same jury

could also think it was deceitful for Lonich to tell House to

testify this was "not money that was owed to you.”

Lonich points to other aspects of the taped conversations

potentially more favorable to him, including his repeated

assertions to House that Lonich's version of the facts was the

"truth.” But a jury could focus on the parts of Lonich's

guidance that are more problematic. And Lonich

representing his advice as "truthful” does not make it so.

Lonich also argues that he was Houseco's lawyer and

that, under 18 U.S.C. § 1515(c), the prohibition on

obstructing an official proceeding "does not prohibit or

punish the providing of lawful, bona fide, legal

representation services in connection with or anticipation of

an official proceeding.” This argument is unavailing.

Lawyers of course have some latitude in helping clients

frame their anticipated testimony in a light most favorable to

them, consistent with the truth. The problem for Lonich is

that even assuming he had an attorney-client relationship

with House or a legal relationship with 101 Houseco (an

48 UNITED STATES V. LONICH

entity created to perpetuate a fraud), a rational jury could

find that Lonich's recorded conversations with House go far

beyond "lawful, bona fide” legal advice. Lonich urged

House to testify that he made an "investment” while

avoiding saying that money was owed to House—advice that

invited House to give grand jury testimony that was either

outright false, seriously misleading, or both.

Lonich also errs in relying on United States v. Liew,

856 F.3d 585, 604 (9th Cir. 2017), in which we reversed an

obstruction of justice conviction. In Liew, the only evidence

that the defendant tried to influence testimony was that he

told a potential witness not to discuss an issue with anyone

"because doing so would not be good for” the witness or his

family. Id. We found this insufficient to convict because it

was "the same advice that many criminal attorneys would

[give] in that situation[.] . . . Sometimes the best advice for

a potential criminal defendant is not to talk to anyone about

anything.” Id. But Lonich did not tell House to avoid

discussing 101 Houseco. He instead counseled House on

how to testify about 101 Houseco in ways that a jury could

find reflected a "consciousness of wrongdoing.” Arthur

Andersen, 544 U.S. at 706.5

V. Sentencing and Restitution

The principal issue we consider concerning sentencing is

the district court's adoption of several enhancements that

dramatically increased defendants' recommended

Guidelines sentencing ranges. These enhancements were

5 In a separate unpublished memorandum disposition, we reject

defendants' other challenges to their convictions. And because none of

defendants' arguments demonstrate error, the cumulative error doctrine

does not apply. See United States v. Lindsey, 634 F.3d 541, 555 (9th Cir.

2011).

UNITED STATES V. LONICH 49

premised on a critical factual finding: that defendants caused

SVB to fail, making defendants responsible for associated

losses. Most prominently, in calculating the financial loss

that defendants caused, the Presentence Investigation

Reports (PSRs) and the district court did not calculate loss

simply based on the amounts of the defaulted Madjlessirelated loans, but instead based on the total amount of loss

the federal government allegedly sustained because of

SVB's collapse.

We hold that defendants' sentences must be vacated.

The jury did not determine whether defendants caused

SVB's failure. And the government at sentencing did not

sufficiently prove that point. It may be that, on remand, the

government will be able to justify its requested

enhancements. But on this record, it has not done so.

A

Not only did the jury through its verdict never decide

whether defendants caused SVB's failure, the district court

prohibited the government from implying that causal

relationship when presenting its case. A pretrial order

provided that "[t]he government may not argue that

defendants' offense conduct caused the failure of SVB,”

"agree[ing] with defendants that because the government

need not prove causation for any of the charged crimes, the

probative value of evidence and arguments about what

caused the bank's failure is substantially outweighed by the

risk of undue prejudice and waste of time.” The

government's witnesses were thus not permitted to draw any

causal connection between the Madjlessi loans and the

bank's later collapse because, the court explained, "there

were other loans out there and other issues out there. This is

the biggest recession since the Great Depression. It would

be very complicated to prove what caused what.”

50 UNITED STATES V. LONICH

Nevertheless, after the jury returned its verdict, the

government's theory that defendants caused the bank's

failure resurfaced. The PSRs assigned each defendant a base

offense level of 7. But the PSRs recommended much higher

total offense levels for each defendant: 38 for Cutting and

Melland, and 40 for Lonich.

What accounted for the dramatic increases was the

PSRs' recommended sentencing enhancements. The PSRs

recommended a 20-level enhancement for each defendant

under U.S.S.G. § 2B1.1(b)(1)(K), asserting they were

responsible for a loss between $9.5 million and $25 million,

which the PSRs estimated at upwards of $20 million. The

PSRs also recommended a 2-level enhancement for each

defendant because the offenses involved ten or more victims,

see id. § 2B1.1(b)(2)(A)(i), and a 4-level enhancement for

each defendant for substantially jeopardizing the safety and

soundness of a financial institution, see id.

§ 2B1.1(b)(17)(B)(i).

The PSR did not base the 20-level loss enhancement on

amounts owed SVB on the Madjlessi-related loans. Instead,

the estimated losses were premised on the theory that

defendants "caused the eventual failure and closure of SVB,

which resulted in a loss totaling $20,120,000.” That figure

represented amounts the federal government allegedly lost

because SVB failed.

The PSRs rejected defendants' arguments that "events

independent of the offense conduct,” including a

"cataclysmic financial crisis,” caused SVB's demise.

Instead, the PSRs attributed the bank's downfall—and the

government's resulting losses—to defendants' schemes.

The critical paragraph in each of the PSRs stated:

UNITED STATES V. LONICH 51

In total, loans provided to Bijan Madjlessi,

directly to himself or through straw buyers,

totaled approximately $35,000,000, which

was approximately $24,700,000 over the

bank's lending limit in 2010. According to

the FDIC report, on December 21, 2009, they

were forced to downgrade SVB's capital due

to the relationship between the bank and

Bijan Madjlessi. The report specifically

notes that "Prior to the loss classification

[i.e., the FDIC downgrade], the $27,195,000

Bijan Madjlessi relationship represented 74%

of Total Risk Based capital. Several large

borrower concentrations (Brian Madjlessi

and [another borrower]) expose the

institution to significant risk.” After this

downgrade from the FDIC, the bank failed as

it was unable to provide the necessary

funding to stay afloat because 74% of their

risks were taken up by Bijan Madjlessi.

The "FDIC report” referred to in the above paragraph in

the PSRs downgraded SVB to the lowest possible rating and

was issued before SVB failed. While the FDIC report noted

that SVB had concentrated too much capital in Madjlessirelated loans, it also mentioned a host of other problems that

SVB faced. These included liquidity issues, "deteriorating

market conditions,” and concentrated capital with another

large borrower.

Lonich also objected to the PSR's recommended loss

enhancement for reasons more specific to him. He argued

that he had not caused any loss to SVB because he was only

involved with the 101 Houseco loan, and that loan was

repaid in full. Lonich also maintained that he "should not be

52 UNITED STATES V. LONICH

held accountable for any loans prior to his involvement in

the conspiracy.”

The PSR disagreed, responding that "Lonich's

significant role within the conspiracy negatively impacted

the safety and soundness of the bank.” The PSR concluded

that Lonich was still responsible for the bank's collapse

because the bank failed after Lonich had joined the

conspiracy, and Lonich "is responsible for all acts of the

conspiracy.”

After determining that defendants were responsible for

SVB's failure, the PSRs calculated the total loss amount—

approximately $20 million—based on amounts the federal

government lost because of the bank's failure. This loss fell

into two categories: $8.65 million that SVB was unable to

repay to the federal Troubled Asset Relief Program (TARP),

and $11.47 million that the FDIC paid out of its Deposit

Insurance Fund after SVB was forced to write off various

Madjlessi-related loans. The PSRs adopted the same losses

for restitution purposes as had "been determined by the

Government,” but did not specify the calculation method.

Before the sentencing hearing, the government filed a

sentencing memorandum. While maintaining that

defendants caused SVB's collapse, the memorandum did not

rely on the FDIC report referenced in the PSRs. Instead, it

attached law enforcement investigative reports summarizing

interviews of three witnesses bolstering the theory that

defendants were responsible for SVB's failure.

The government also argued for a much larger loss

amount than the PSRs originally recommended.

Specifically, it argued that because of SVB's failure, the

FDIC lost $39.18 million—meaning that, combined with the

TARP losses, defendants caused $47.84 million in losses to

UNITED STATES V. LONICH 53

the federal government. Despite the overall larger loss

estimation, the government claimed that the FDIC's

insurance fund experienced only $10.54 million in loss, a

discrepancy from the PSRs' calculation of $11.47 million.

At the sentencing hearing, the district court agreed with

the sentencing recommendations in the PSRs, rejecting the

government's request to increase the total loss amount to

$47.84 million. (Several months later in its restitution order,

the court explained why it had not adopted the government's

larger number. The court recounted how the government

had not objected to the PSRs' loss calculations, and how the

government had provided "no explanation” about why it did

not provide its much larger numbers sooner.)

At the sentencing hearing, the district court overruled all

objections to the PSRs, including defendants' objections to

loss-causation. The court stated that "losses to FDIC and

TARP [were] caused by the ultimate failure of the bank,” but

did not explain its rationale for that finding. At sentencing,

Lonich's counsel pressed for an explanation as to how

Lonich could be responsible for SVB failing when he did not

work at SVB and was involved in only the 101 Houseco

loan, which was repaid in full. The district court declined to

offer its reasoning.

Based on defendants' offense levels in light of the

proposed sentencing enhancements, the recommended

Guidelines ranges were 235–293 months each for Cutting

and Melland, and 292–365 months for Lonich. The district

court departed downward, sentencing Cutting and Melland

each to 100 months in prison, and Lonich to 80 months.

Even though the district court departed below the

recommended Guidelines ranges, it accepted those ranges as

the starting point because it agreed with the enhancements

54 UNITED STATES V. LONICH

used in the PSRs and rejected defendants' objections to

them. We thus must consider whether the government

sufficiently demonstrated that defendants should receive

certain enhancements—most centrally a 20-level loss

amount enhancement—based on their alleged role in causing

SVB to fail.

B

"[T]he government bears the burden of proof on the facts

underlying a sentence enhancement.” United States v. Zolp,

479 F.3d 715, 718 (9th Cir. 2007). We review de novo the

district court "selecting and properly interpreting the right

Guidelines provision.” United States v. Gasca-Ruiz,

852 F.3d 1167, 1170 (9th Cir. 2017) (en banc). We review

the district court's application of the Guidelines to the facts

for abuse of discretion, and its factual findings for clear

error. Id.

Before we examine the government's evidence that

defendants caused SVB to fail, we address the standard of

proof that the government was required to meet to

demonstrate this factual point. We hold that the clear and

convincing standard applies.

1

"As 'a general rule,' factual findings underlying a

sentencing enhancement need only be found by a

preponderance of the evidence.” United States v. Parlor,

2 F.4th 807, 816 (9th Cir. 2021) (quoting United States v.

Valle, 940 F.3d 473, 479 (9th Cir. 2019)). But in some

instances, a sentencing enhancement has an "an extremely

disproportionate impact on the sentence.” Valle, 940 F.3d at

479 (quoting United States v. Jordan, 256 F.3d 922, 930 (9th

Cir. 2001)). In those circumstances, we have held that due

UNITED STATES V. LONICH 55

process may require the government to demonstrate facts

underlying disputed enhancements by clear and convincing

evidence. Parlor, 2 F.4th at 816–17; Valle, 940 F.3d at 479.6

In determining when the government must meet a clear

and convincing standard of proof, we have said that "[w]e

look to the totality of the circumstances.” Valle, 940 F.3d

at 479 (citing United States v. Pike, 473 F.3d 1053, 1057 (9th

Cir. 2007)). In United States v. Valensia, 222 F.3d 1173,

1182 (9th Cir. 2000), and United States v. Jordan, 256 F.3d

922, 928 (9th Cir. 2001), we condensed the circumstances

requiring a heightened standard into six non-exhaustive

factors:

(1) whether "the enhanced sentence fall[s]

within the maximum sentence for the crime

alleged in the indictment;” (2) whether "the

enhanced sentence negate[s] the presumption

of innocence or the prosecution's burden of

proof for the crime alleged in the

indictment;” (3) whether "the facts offered in

support of the enhancement create new

offenses requiring separate punishment;”

(4) whether "the increase in sentence [is]

based on the extent of a conspiracy;”

(5) whether "the increase in the number of

offense levels [is] less than or equal to four;”

6 We recognize that other circuits have held that "due process does

not require sentencing courts to employ a standard higher than

preponderance-of-the-evidence, even in cases dealing with large

enhancements.” United States v. Jones, 829 F.3d 476, 477 (6th Cir.

2016) (per curiam) (quoting United States v. Brika, 487 F.3d 450, 462

(6th Cir. 2007)); see also United States v. Grubbs, 585 F.3d 793, 802–

03 & n.5 (4th Cir. 2009). But we are bound by our precedent, which

clearly requires a heightened standard in some circumstances.

56 UNITED STATES V. LONICH

and (6) whether "the length of the enhanced

sentence more than double[s] the length of

the sentence authorized by the initial

sentencing guideline range in a case where

the defendant would otherwise have received

a relatively short sentence.”

Jordan, 256 F.3d at 928 (alterations in original) (quoting

Valensia, 222 F.3d at 1182); see also Parlor, 2 F.4th at 817;

Valle, 940 F.3d at 479–80. In evaluating these factors, "we

consider only the cumulative effect of 'disputed

enhancements.'” Parlor, 2 F.4th at 817 (quoting Jordan,

265 F.3d at 927).

Even after our articulation of the six Valensia factors, we

have frequently commented that in this area, "[o]ur case law

has 'not been a model of clarity.'” Parlor, 2 F.4th at 817

(quoting Valle, 940 F.3d at 479 n.6); see also United States

v. Hymas, 780 F.3d 1285, 1289 (9th Cir. 2015) (same);

United States v. Berger, 587 F.3d 1038, 1048 (9th Cir. 2009)

(same). But some clarity can be found in how our cases

apply the factors.

The first two factors—whether the enhanced sentence

falls within the maximum sentence allowed and whether it

negates the presumption of innocence, Valensia, 222 F.3d

at 1182—are to some extent eclipsed by subsequent

developments in Sixth Amendment case law, including that

the Sentencing Guidelines are now merely advisory in

nature. See United States v. Booker, 543 U.S. 220 (2005);

Blakely v. Washington, 542 U.S. 296 (2004); Apprendi v.

New Jersey, 530 U.S. 466 (2000). In fact, in articulating its

first factor, Valensia itself noted the Supreme Court's thenrecent holding in Apprendi that "other than the fact of a prior

conviction, any fact that increases the penalty for a crime

UNITED STATES V. LONICH 57

beyond the prescribed statutory maximum must be

submitted to a jury, and proved beyond a reasonable doubt.”

Valensia, 222 F.3d at 1182 n.4 (quoting Apprendi, 530 U.S.

at 490).

We have further commented that "it is not entirely clear

how the first three Valensia factors were derived from our

decision in United States v. Restrepo, 946 F.3d 654 (9th Cir.

1991) (en banc), which Valensia cited as their source.”

Valle, 940 F.3d at 479 n.6. As a three-judge panel, we cannot

eliminate certain parts of a six-part test. See Miller v.

Gammie, 335 F.3d 889, 899–900 (9th Cir. 2003) (en banc).

But at the same time, it is appropriate to recognize that in

practice, and as our case law has developed, the first two

Valensia factors appear to do little independent work in

driving the analysis.

With an important caveat about the fourth Valensia

factor relating to conspiracies—which we will discuss in a

moment—the real action is in Valensia factors five and six.

We have repeatedly recognized that our cases commonly

turn on the last two factors: whether the enhanced sentence

is four or more offense levels higher (factor 5) and more than

double the initial sentencing range (factor 6). See, e.g.,

Parlor, 2 F.4th at 817 ("Later cases . . . have focused

specifically on the last two factors.”); Valle, 940 F.3d at 479

(explaining that Jordan and Valensia themselves

"disregarded the first four factors” and that "more recent

cases have also relied on only the[] last two factors”).

Focusing on factors five and six makes sense when one

considers why under our cases a clear and convincing

standard of proof is sometimes required. In the typical case,

the last two Valensia factors best capture the principle

underlying our precedents, which is that when disputed

sentencing enhancements significantly increase the sentence

58 UNITED STATES V. LONICH

that would otherwise apply, due process can require the

government to make a stronger showing. See Valle,

940 F.3d at 480.

Most commonly, the fifth and six factors will coincide:

when the offense levels go up substantially, this will at some

point generate a sentence that is more than twice the length

of the "relatively short sentence” that would have otherwise

applied. See, e.g., id. (holding that the clear and convincing

standard applied when disputed enhancements led to an 11-

level increase in offense level and "far more than doubled

[defendant's] sentencing range”); United States v. Gonzalez,

492 F.3d 1031, 1039–40 (9th Cir. 2007) (requiring clear and

convincing evidence when disputed enhancements resulted

in a 9-level increase in offense level and raised Guidelines

range "more than four times”); United States v. Mezas de

Jesus, 217 F.3d 638, 643 (9th Cir. 2000) (applying the clear

and convincing standard when challenged enhancements

resulted in a 9-level increase and more than doubled original

Guidelines range).

What happens when the fifth Valensia factor is met, but

the sixth is not? Consistent with the objective of applying a

heightened standard of proof only when "the combined

effect of contested enhancements would have 'an extremely

disproportionate effect on the sentence imposed,'” United

States v. Garro, 517 F.3d 1163, 1168–69 (9th Cir. 2008)

(quoting United States v. Staten, 466 F.3d 708, 718 (9th Cir.

2006)), we have recognized that district courts may apply a

preponderance of the evidence standard, notwithstanding an

increase in the offense level of four or more, when the

sentence did not otherwise double. See Parlor, 2 F.4th at

817 (holding that district court did not plainly err when the

disputed enhancements "did increase [defendant's] offense

level by more than four points,” but when they "did not more

UNITED STATES V. LONICH 59

than double his recommended Guidelines range”); United

States v. Riley, 335 F.3d 919, 927 (9th Cir. 2003) (same).

If we consider only the fifth and six factors, the result for

defendants here is obvious: the clear and convincing

standard must apply. All defendants challenge the 20-level

enhancement for losses between $9.5 and $25 million, see

U.S.S.G. § 2B1.1(b)(1)(K), and the 2-level enhancement for

10 or more victims, see id. § 2B1.1(b)(2)(A)(i). Lonich (but

not Cutting and Melland) also challenges his 4-level

enhancement for substantially jeopardizing the safety and

soundness of SVB. See id. § 2B1.1(b)(17)(B)(i). For two

defendants, the disputed enhancements increased their

Guidelines offense level by 22 levels. For Lonich, it was a

26-level increase.

Unsurprisingly, these substantial total offense-level

increases produced advisory Guidelines ranges for all three

defendants that were far more than double what they would

have obtained absent the SVB-related enhancements.

Absent just the 20-level enhancement for causing

$9.5 million or more in loss, U.S.S.G. § 2B1.1(b)(1)(K),

Cutting and Melland's recommended sentencing ranges

would have dropped from 235–293 months to 27–33

months. See U.S.S.G. Ch. 5, Pt. A (table). And Lonich's

recommended sentencing range would have plummeted

from 292–365 months to 33–41 months. See id. Valensia

factors five and six thus strongly counsel in favor of applying

a clear and convincing standard to factual findings

underlying defendants' disputed enhancements.

2

But what if the conduct that produced the monetary loss

is conduct for which the jury convicted the defendants? This

60 UNITED STATES V. LONICH

is where we encounter the government's principal argument,

and where the fourth Valensia factor comes into play.

The fourth factor is whether "the increase in sentence [is]

based on the extent of a conspiracy.” Valensia, 222 F.3d

at 1182. Although this factor is focused on conspiracy

charges, it is important to appreciate that it is framed in that

manner only because conspiracy convictions can present

borderline cases about whether certain conduct was within

the scope of convicted conduct. Ultimately, the fourth

Valensia factor is just an example of another broader

principle: if a defendant has already been convicted of

certain conduct (whether through a jury verdict or a guilty

plea), enhancements that are based on the conduct of

conviction do not require proof by clear and convincing

evidence. This is essentially what the third Valensia

factor—whether the facts offered in support of the

enhancement create new offenses—addresses in the nonconspiracy context. See Valensia, 222 F.3d at 1182; see also

United States v. Barragan, 871 F.3d 689, 718 (9th Cir. 2017)

(discussing third Valensia factor); United States v.

Johansson, 249 F.3d 848, 854–55 (9th Cir. 2001) (same).

The justification for the broader principle, of which the

fourth Valensia factor is an example, is that when an

enhancement is based on conduct for which the jury found

the defendant guilty beyond a reasonable doubt (or to which

defendant pleaded guilty), any due process concerns

associated with imposing enhancements based on this same

conduct are correspondingly lower. "[T]he defendants had

the opportunity at trial to challenge [the] evidence,” Hymas,

780 F.3d at 1292, and so a clear and convincing standard of

proof is not warranted.

Our decision in United States v. Garro, 517 F.3d 1163

(9th Cir. 2008), is instructive. In Garro, the defendant was

UNITED STATES V. LONICH 61

convicted of wire fraud and other offenses and sentenced to

135 months in prison. Id. at 1165. Applying the Guidelines

enhancements in place at the time, the district court imposed

a 16-level increase for the defendant causing losses that

exceeded $20 million. Id. at 1167. This enhancement had a

dramatic effect on defendant's sentence because his crime

had a base offense level of just six. Id. On appeal, the

defendant argued that the government was required to prove

the loss amount by clear and convincing evidence, rather

than by a preponderance. Id. at 1168.

We disagreed, explaining that "[i]n identifying the

appropriate standard of proof, we have distinguished

between enhancements based upon charged conduct for

which the defendant has been convicted, and enhancements

based upon uncharged conduct.” Id. at 1169.

Notwithstanding the substantial effect of a 16-level loss

enhancement on defendant's sentence, we held that because

defendant's "sentence for loss exceeding $20 million was

based on conduct for which [defendant] was charged and

convicted,” the government only had to prove the amount of

the loss at sentencing by a preponderance of the evidence.

Id.

Garro presented a straightforward case. Under our

precedents, another classically straightforward case would

arise if the conduct that forms the basis for the enhancement

is clearly not the conduct for which defendant was charged

and convicted. Our decision in United States v. Mezas de

Jesus, 217 F.3d 638 (9th Cir. 2000), provides an example of

this type of situation. There, the defendant was convicted of

being an undocumented immigrant in possession of a

firearm. Id. at 639. But at sentencing, the government

argued that the defendant had committed this offense during

a kidnapping, which was uncharged conduct. Id. The

62 UNITED STATES V. LONICH

district court found that the defendant possessed the firearm

in connection with the uncharged kidnapping. This resulted

in a 9-level upward adjustment and an increase in the

defendant's sentencing range from 21–27 months to 57–71

months. Id. at 643. This, we held, satisfied the "extremely

disproportionate” impact test, such that the kidnapping

would need to be established by clear and convincing

evidence. Id. at 645.

Decisions like Garro and Mezas de Jesus show that in

considering whether the clear and convincing or

preponderance standard should apply, it is not enough

simply to examine the effect on the sentence of the disputed

enhancements. Many of our cases apply the preponderance

standard to very large enhancements. See United States v.

Treadwell, 593 F.3d 990, 1001 (9th Cir. 2010) (22-level

increase), rev'd on other grounds by United States v. Miller,

953 F.3d 1095 (9th Cir. 2020); Garro, 517 F.3d at 1167 (9th

Cir. 2008) (16-level increase); United States v. Sanchez,

967 F.2d 1383, 1384, 1385–87 (9th Cir. 1992) (14-level

increase). Others have held that smaller enhancements

nonetheless required the higher clear and convincing

standard. See, e.g., Mezas de Jesus, 217 F.3d at 643 (9-level

increase); United States v. Hopper, 177 F.3d 824, 833 (9th

Cir. 1999) (7-level increase).

These holdings are consistent because the critical issue

in these cases was whether the enhancements were based on

the conduct of conviction. If they are based on such conduct,

the preponderance of the evidence standard applies. See

Garro, 517 F.3d at 1168–69. But if they are based on

conduct for which the defendant was not convicted, the clear

and convincing standard may apply. See Mezas de Jesus,

217 F.3d at 642–43.

UNITED STATES V. LONICH 63

Our conspiracy cases—and our application of Valensia

factor four—turn on this very same dichotomy, but often

present difficult questions in more complicated factual

scenarios about whether certain conduct is, in fact, based on

the conduct of conviction. We have "declined to apply the

clear and convincing standard of proof [when] the

enhancement at issue was 'based entirely on the extent of the

conspiracy.'” Garro, 517 F.3d at 1169 (quoting Riley,

335 F.3d at 926); see also, e.g., Valle, 940 F.3d at 480 n.8

(summarizing this line of cases). That is true regardless of

whether the disputed sentencing enhancements resulted in an

increase of the offense level by more than four points or

whether it resulted in a Guidelines range that more than

doubled. See, e.g., Barragan, 871 F.3d at 718 (holding that

the preponderance of the evidence standard applied when

enhancement was based on the scope of conspiracy, even

though it resulted in a 17-level increase in the offense level

and quadrupled the length of the sentencing range);

Treadwell, 593 F.3d at 1001–02 (holding that the

preponderance of the evidence standard applied when

enhancement was based on the scope of the conspiracy, even

though it resulted in a 22-level increase that multiplied the

sentencing range tenfold); Berger, 587 F.3d at 1041, 1048–

49 (holding that the preponderance of the evidence standard

applied, even though enhancement resulted in 14-level

increase in the offense level and more than quadrupled the

length of the sentencing range).

The rationale for our approach in the conspiracy context

once again lies in the distinction between those

enhancements that are based on convicted conduct and those

that are not. "Enhancements based on the extent of a

conspiracy,” we have reasoned, "are 'on a fundamentally

different plane than' enhancements based on uncharged or

acquitted conduct.” United States v. Armstead, 552 F.3d

64 UNITED STATES V. LONICH

769, 777 (9th Cir. 2008) (quoting Riley, 335 F.3d at 926).

The justification is the same as in non-conspiracy cases:

"due process concerns . . . are satisfied by a preponderance

of the evidence standard because the enhancements are

based on criminal activity for which the defendant has

already been convicted.” Id.

The government argues that a preponderance of the

evidence standard should apply here because the jury found

defendants guilty of a fraudulent conspiracy, and the district

court could then find that this criminal conduct caused the

bank to fail and produced the government's related losses.

We reject the government's position for two reasons.

First, there is a notable mismatch between the scope of

the criminal convictions and the losses that supposedly drove

the bank's failure. The PSRs described how the FDIC paid

out of its Deposit Insurance Fund $11.47 million. Of this,

approximately $10.3 million consisted of Madjlessi-related

loans that the government required SVB to write off. But

$3.27 million of these write-offs related to a loan for

132 Village Square, another Madjlessi-controlled entity, for

which the defendants were not charged with wrongdoing.

Also included within the $10.3 million was $3.88 million in

loans for the first two pairs of Greenbriar loans. But the jury

acquitted Cutting of making a false bank entry for these two

loans. As to Cutting in particular, over $7 million of the

$10.3 million in loans thus reflected uncharged or acquitted

conduct. And all these loans pre-dated Lonich even joining

the conspiracy.

This is therefore not a situation where the losses are

"based entirely on the extent of the conspiracy.” Riley,

335 F.3d at 926. Instead, by the terms of the PSRs and the

FDIC report on which they rely, a substantial amount of

uncharged and acquitted conduct contributed to the bank's

UNITED STATES V. LONICH 65

collapse, and thus the claimed losses. When uncharged or

acquitted conduct is in the mix to such an extent, the mere

fact of the conspiracy convictions—and thus Valensia factor

four—is not dispositive. See Hymas, 780 F.3d at 1290–93

(holding that a preponderance of the evidence standard

applied for losses associated with convicted conduct, but that

a clear and convincing standard applied for losses based on

uncharged loans); Armstead, 552 F.3d at 777.

Second, unlike our past conspiracy cases, this case

involves a substantial intermediate causation question: to

conclude that defendants' conspiratorial conduct caused the

government's losses, the district court had to determine that

defendants' criminal conduct caused the bank's collapse.

The logic of our decisions again does not support applying a

preponderance of the evidence standard in this situation.

The jury's guilty verdicts do not compel the conclusion—or

even plausibly demonstrate—that the defendants through

their criminal conduct were responsible for SVB's collapse.

In fact, the jury was not even permitted to hear evidence on

why the bank failed.

The preponderance of the evidence standard might have

been appropriate if, for example, the loss enhancements were

based on the value of defaulted Madjlessi loans. But here,

the linchpin of the disputed enhancements turns on a wholly

separate causal inquiry—the bank's failure—that is

thoroughly disconnected from the jury's verdict. It thus

cannot be said that defendants "had ample opportunity at

trial to challenge the government's evidence of the extent of

losses caused by the conspiracy.” Treadwell, 593 F.3d

at 1001.

In short, Valensia's fourth factor does not govern here.

The fifth and sixth factors do. Given the extremely

disproportionate sentences that the disputed enhancements

66 UNITED STATES V. LONICH

produced, a clear and convincing standard applies to the

factual underpinnings for these enhancements. This reflects

the trajectory of our precedents interpreting Valensia. The

first two Valensia factors are unlikely to add independent

weight to the analysis and do not do so here. The third and

fourth factors are effectively a threshold inquiry that asks

whether the enhancement is based on the conduct of

conviction, which, if so, means that the preponderance of the

evidence standard applies. Because the third and fourth

factors do not apply on these facts, we thus proceed to the

fifth and sixth factors, which require a clear and convincing

standard in this case.

3

We next turn to whether the government showed by clear

and convincing evidence that defendants caused SVB to fail.

This standard "requires that the government 'prove [its] case

to a higher probability than is required by the

preponderance-of-the-evidence standard.'” Jordan,

256 F.3d at 930 (alteration in original) (quoting California

ex rel. Cooper v. Mitchell Bros.' Santa Ana Theater,

454 U.S. 90, 93 n.6 (1981)). Under this standard, the

factfinder must have "'an abiding conviction that the truth of

[the] factual contentions' at issue is 'highly probable.'”

Mondaca-Vega v. Lynch, 808 F.3d 413, 422 (9th Cir. 2015)

(en banc) (alteration in original) (quoting Colorado v. New

Mexico, 467 U.S. 310, 316 (1984)); see also Black's Law

Dictionary 698 (11th ed. 2019) (clear and convincing

evidence requires "indicating that the thing to be proved is

highly probable or reasonably certain”). We hold that the

government did not show by clear and convincing evidence

that defendants caused SVB to fail.

The Guidelines require that a defendant's sentence "be

based on 'all harm that resulted from the acts or omissions'

UNITED STATES V. LONICH 67

of the defendant.” United States v. Hicks, 217 F.3d 1038,

1048 (9th Cir. 2000), as amended on denial of reh'g (July

31, 2000) (quoting U.S.S.G. § 1B1.3(a)(3)). The term

"'resulted from' establishes a causation requirement,” which

includes both cause-in-fact (but-for causation) and

proximate cause. Id. at 1048–49; see also United States v.

Peppel, 707 F.3d 627, 644 (6th Cir. 2013) (explaining that

under the Guidelines, "[c]ausation includes two distinct

principles, cause in fact, or what is commonly known as 'but

for' causation, and legal causation.” (quoting United States

v. Rothwell, 387 F.3d 579, 583 (6th Cir. 2004)).

These basic causation requirements apply to loss

enhancements. The Guidelines define "loss” to include not

only actual loss and intended loss, but also "reasonably

foreseeable pecuniary harm.” U.S.S.G. § 2B1.1 cmt.

n.3(A)(i). This "import[s] the legal concept of a causal

relationship between the defendant's conduct and the

determined loss.” Rothwell, 387 F.3d at 583. The

Guidelines' loss rules thus "do[] not obviate the requirement

to show that actual, defendant-caused loss occurred.”

Berger, 587 F.3d at 1045; see also U.S.S.G. app. C vol. II

amend. 617, at 178 (2003) (explaining that § 2B1.1

"incorporates [a] causation standard that, at a minimum,

requires factual causation (often called 'but for' causation)

and provides a rule for legal causation (i.e., guidance to

courts regarding how to draw the line as to what losses

should be included and excluded from the loss

determination)”). Applying this principle, we have vacated

sentences when the government failed to produce sufficient

evidence to show proximate or but-for cause for asserted loss

amounts. See Berger, 587 F.3d at 1046–47; Hicks, 217 F.3d

at 1047–49.

68 UNITED STATES V. LONICH

In this case, the district court made no independent

findings about the cause of the bank's collapse beyond

adopting the PSRs and rejecting defendants' objections

without explanation. But neither the PSRs nor the additional

materials the government now cites sufficiently show that

defendants were responsible for SVB failing, especially

given indications in the record that other factors internal and

external to the bank may have contributed to the bank's

collapse.

First, although the PSRs stated that defendants had

caused the bank to fail, they cited only the FDIC report.

Relying exclusively on that report, the PSRs explained that

regulators "were forced to downgrade SVB's capital due to

the relationship between the bank and Bijan Madjlessi,” and

that before the downgrade, the Madjlessi relationship

"represented 74% of Total Risk Based capital.” The PSRs

then found that "[a]fter this downgrade from the FDIC, the

bank failed as it was unable to provide the necessary funding

to stay afloat because 74% of their risks were taken up by

Bijan Madjlessi.”

There are several difficulties with the reliance on the

FDIC report. For one, the report did not find that defendants

caused SVB's failure. The FDIC issued its report before

SVB's failure, and the report instead concerned the FDIC

downgrading SVB. The FDIC report also does not blame all

the bank's problems on the Madjlessi-related loans. While

the FDIC report noted its concern for SVB concentrating too

much capital in Madjlessi, it also mentioned a host of other

issues besetting SVB, including poor management,

deteriorating market conditions, concentrated lending to

another larger borrower, poor financial reporting, and so on.

Madjlessi is mentioned by name in only one paragraph in the

eleven-page report.

UNITED STATES V. LONICH 69

The government argues in its briefing that the other

problems the FDIC report identifies are "all hallmarks of the

Madjlessi relationship.” But setting aside that the FDIC

report does not connect all the bank's problems to Madjlessi,

that the Madjlessi loans may have reflected the bank's

otherwise poor practices does not mean those loans (much

less defendants' criminal conduct) are, standing alone, what

caused the bank to fail. Based on the FDIC report, it is not

clear whether SVB's collapse was caused by defendants'

conspiracy-related loans or by other "intervening” and

"independent” factors, including outside economic forces.

Hicks, 217 F.3d at 1049.

Second, neither the PSRs nor the FDIC report focused on

those loans for which the jury convicted defendants. The

PSRs referenced the total amount of loans to Madjlessi—

$35,000,000. But not all the loans comprising this amount

were claimed to be unlawful. The "74%” figure referenced

in the PSR and FDIC report related to all Madjlessi-related

loans. And even then, it is not apparent from the FDIC report

that it is properly interpreted as meaning that 74% of the

bank's risks were taken up by Madjlessi-related loans.

The FDIC report similarly referenced the $10.3 million

write-off that the FDIC ordered SVB to take on Madjlessirelated loans. But as we noted above, this write-off included

an uncharged $3.27 million loan for 132 Village Square, and

$3.88 million for the first two pairs of Greenbriar loans for

which Cutting was acquitted. And all the loans that were

written off pre-dated Lonich's involvement in the

conspiracy. From a causation perspective, it is thus unclear

if the loans associated with defendants' criminal wrongdoing

led to the bank's failure.

Third, the government on appeal now points to three

"investigative reports” it included in its sentencing

70 UNITED STATES V. LONICH

memorandum. But the PSRs did not rely on any of these

investigative reports. And there is no indication the district

court did either. If anything, the court discounted the

government's sentencing memorandum after finding the

government belatedly changed its calculations and provided

conflicting numbers.

The three investigative reports have other important

limitations. They are essentially summaries of interviews of

two California bank examiners and one federal examiner.

Although these examiners generally opined that the

defendants caused the bank to fail, the written reports do not

identify the bases for those conclusory opinions. For

example, one state examiner reportedly "felt that the Bijan

Madjlessi loans exceeding the [legal lending limit] caused”

the bank's failure. The reports also do not discuss the role

of other potential factors flagged in the FDIC report, such as

adverse economic conditions or the bank's overall poor

management practices.

Fourth, while the government's causation theory lacked

support as to all defendants, it was particularly lacking as to

Lonich, who did not join the conspiracy until January 2009.

All damages listed in the government's calculation table

related to loans issued before Lonich joined the conspiracy.

"A defendant's relevant conduct does not include the

conduct of members of a conspiracy prior to the defendant

joining the conspiracy.” U.S.S.G. § 1B1.3, cmt. n.3(B); see

also United States v. Bad Wound, 203 F.3d 1072, 1077–78

(8th Cir. 2000) (vacating sentence because the district court

did not make a finding on when the defendant joined the

conspiracy, so that the court could not tell what percentage

of the loss should be attributable to him).

In response, the government points out that it charged

Lonich in connection with the 101 Houseco loan. But that

UNITED STATES V. LONICH 71

loan was fully paid and accounted for zero loss according to

the government's own calculations. It was also secured by

collateral worth twice the amount of the loan itself. It is thus

hard to see how Lonich—who did not even work at the bank

and was involved in only one loan—can be said to have

caused the bank's downfall, especially given the other

potential causal factors at play. The government tries to

advance a theory by which the 101 Houseco loan, while fully

paid, nonetheless contributed to the bank's problems. But

neither the PSR nor the district court made findings on that

point, and the government's logic is far from self-evident.

In short, the government did not demonstrate by clear

and convincing evidence that defendants caused SVB to

fail.7 This means that the government did not sufficiently

support defendants' 20-level loss enhancement. Perhaps the

government, at resentencing on an open record, can prove its

theory that defendants were responsible for SVB's failure.

We hold only that, on this record, defendants' 20-level loss

enhancement cannot be sustained.8

Our determination that the government did not

adequately prove defendants caused SVB to fail means that

other aspects of defendants' sentences are infirm as well.

The district court imposed a 2-level sentencing enhancement

under U.S.S.G. § 2B1.1(b)(2)(A)(i) because defendants'

offenses involved ten or more victims. But these victims

consisted of the FDIC, TARP, and shareholders of the bank.

7 Although we question whether the government even met the

preponderance of the evidence standard, we need not address that issue

in light of our holding as to the appropriate standard.

8 We thus do not reach defendants' alternative argument that even if

they caused SVB to fail, there was insufficient evidence supporting the

monetary losses identified in the PSR.

72 UNITED STATES V. LONICH

This enhancement thus likewise depended on the finding that

defendants were responsible for the bank's failure. Lonich's

4-level enhancement for jeopardizing the safety and

soundness of a financial institution, U.S.S.G.

§ 2B1.1(b)(17)(B)(i), encounters the same problem.9

The same is true of defendants' approximately

$20 million restitution orders, which were likewise premised

on the government's theory that defendants caused the bank

to fail. While the standard of proof for restitution is a

preponderance of the evidence, Hymas, 780 F.3d at 1293 n.4,

because we are already vacating defendants' sentences due

to the lack of demonstrated causal relationship between their

offenses and the bank's collapse and remanding for

resentencing, we likewise vacate the restitution order as

well. We thus do not reach defendants' other assignments

of error as to the restitution award.

* * *

For these reasons and those set forth in our

accompanying memorandum disposition, we affirm

defendants’ convictions. But we vacate defendants’

sentences and remand for resentencing on an open record.

See United States v. Matthews, 278 F.3d 880, 885 (9th Cir.

2002) (en banc) (“[A]s a general matter, if a district court

errs in sentencing, we will remand for resentencing on an

open record—that is, without limitation on the evidence that

the district court may consider.”).



AFFIRMED in part, VACATED in part, and

REMANDED.