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4th Circuit upholds $1.4M restitution award against St. Michaels land buyer

The former owner of a real estate company must pay nearly $1.4 million to the purchaser of the bank he had lied to in securing a loan to buy property in St. Michaels, a U.S. appeals court said Tuesday.

In upholding a federal judge’s ruling, a three-judge panel of the 4th U.S. Circuit Court of Appeals said Timothy L. Ritchie must pay restitution to Bank of America, even though his 2005 deceit occurred when the lending institution was owned by Countrywide Bank.

Ritchie, who had owned and operated Richland Homes Inc., pleaded guilty in October 2015 to having misrepresented on a HUD statement 10 years earlier that he had $1.1 million in cash on hand for closing on three lots when he actually had no funds at all.

Countrywide, relying on Ritchie’s financial representation, provided a loan of more than $2.4 million to fund the settlement in July 2005.

In its decision, the 4th Circuit rejected Ritchie’s argument that the true “victim” of his offense under the federal Mandatory Victims Restitution Act was not a bank but HUD. The court also rejected Ritchie’s argument, through counsel, that paying restitution to Bank of America would be improper because it had not provided the loan and would thus receive windfall compensation from him.

“For purposes of the MVRA, the ‘victims’ of a fraud perpetrated against a federal agency are not limited to that agency alone” but also include those shortchanged as a result, including banks and their successors, the 4th Circuit said.

U.S. District Judge Richard D. Bennett sentenced Ritchie to a year and a day in prison and ordered him to pay approximately $1.4 million in restitution to Bank of America, which had bought Countrywide in 2008. Bennett based the restitution on the balance owed on the loan Countrywide had provided minus the $1.1 million Bank of America sold the property for in 2015 after Ritchie had defaulted on the mortgage in 2007.

The 4th Circuit panel split 2-1 in upholding Bennett’s calculation of restitution.

‘No impermissible punishment’

Judges William B. Traxler Jr. and Stephanie D. Thacker agreed with the district court judge, saying the difference between the Countrywide loan and Bank of America’s sale price was “the total, actual loss caused by Ritchie’s criminal conduct.”

“(R)itchie’s obligation to repay the money he stole did not end when Countrywide Bank ceased to exist, and this is true whether we view that obligation as having arisen via Countrywide Bank’s assignment of the legal right to repayment to Bank of America or by virtue of Bank of America’s acquisition of that right along with the other assets of Countrywide Bank,” Traxler wrote in the opinion Thacker joined. “The district court’s order of restitution serves the compensatory purpose of the MVRA and imposes no impermissible punishment upon Ritchie.”

But Judge Albert Diaz, in dissent, said the restitution owed should be the difference between what Bank of America paid Countrywide for Ritchie’s mortgage debt and the sales price of the property, a calculation that would presumably yield a lower restitution amount and is in keeping with the restitution formula announced by at least one other federal appeals court to have considered the issue.

Federal prosecutors “would face a thorny evidentiary problem in proving the amount that Bank of America paid for Ritchie’s loan,” Diaz wrote. But that difficult calculation is necessary to show the “actual loss sustained by the victim,” Bank of America, he added.

Like Diaz, Ritchie’s attorney noted the appellate panel’s decision conflicts with another federal circuit but said he and his client have not yet decided whether they will appeal the ruling and, if so, whether they will ask the full 4th Circuit to hear the case or seek review by the U.S. Supreme Court.

“We are evaluating the decision and will be considering our options,” added Jonathan Biran, of Biran Kelly LLC in Baltimore.

The 4th Circuit rendered its published decision in United States of America v. Timothy L. Ritchie, No. 16-4063.

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