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Ninth Circuit:
Employee of Fannie Mae Is ‘Public Official,’ Boosting Sentence
By a MetNews Staff Writer
An employee of Fannie Mae, though it’s a private corporation, is a “public official,” subject to a sentencing enhancement for wire fraud based on that status, the Ninth U.S. Circuit Court of Appeals held Friday, affirming a sentence of six years and four months in prison meted out to a woman who engaged in a multimillion-dollar scheme involving kickbacks from real estate brokers.
A three-judge panel, in a memorandum, decision, affirmed the conviction of Shirene Hernandez, spurning her claims of instructional error, and upheld the sentence determined by District Court Judge Andrew J. Guilford of the Central District of California.
Hernandez, from 2010-15, worked as a sales representative in the Irvine Office of the Federal National Mortgage Association—better known as “Fannie Mae.” During that period, she arranged discounted sales of Fannie Mae-owned properties, with brokers, some of whom were relatives of hers, raking in more than $3 million in commissions and kickbacks.
Guideline Commentary
Friday’s opinion rejects her contention that she was wrongly sentenced as a “public official” under United States Sentencing Guidelines §2C1.1 It notes that under a commentary to that guideline, a public official includes “an individual who...is in a position of public trust with official responsibility for carrying out a government program or policy.”
The opinion says:
“Fannie Mae was privatized in 1968. but it was placed under government conservatorship in 2008 during the housing crises….
“Hernandez falls within the Guidelines’ ‘broadly construed’ definition of a ‘public official.’ Hernandez’s fraud undermined Fannie Mae’s ‘public mission’ to “facilitate the financing of affordable housing . . . while maintaining a strong financial condition[.]’…Hernandez was ‘in a position of public trust’ in her capacity at Fannie Mae. and she had ‘official responsibility for carrying out a government program or policy’….”
Oral Argument
In so ruling, the judges discarded the argument put forth by Hernandez’s attorney, Timothy Allen Scott, at oral argument on July 7 that it would be incongruous for the government to say that while Fannie Mae was not a government agency for purpose of the conservatorship, “it is when you’re seeking to punish a criminal defendant.” He commented:
“It strikes us that that is simply the opposite of the rule of lenity, if nothing else, and shouldn’t be applied that way in this case.”
Assistant U.S. Attorney Consuelo Woodhead told the judges that “what determines whether the defendant was a public official in this context” is a commentary to the guideline saying that “the term ‘public official’ is ‘to be construed broadly.’ ”
Restitution Ordered
In addition to imposing a prison sentence, Guilford, ordered the defendant to pay $982,516 in restitution to Fannie Mae.
Fannie Mae purchases mortgages from large financial institutions and holds properties that are foreclosed upon. By contrast, Freddie Mac—the Federal Home Loan Mortgage Corp.— buys mortgages from smaller banks.
At the time of Hernandez’s sentencing on Jan. 14, 2020, the U.S. Attorney’s Office for the Central District of California said in a press release:
“Hernandez—using intermediaries and alter egos—bought at least one Fannie Mae-owned property in Sonoma for herself at a below-market price. She ensured that multiple offers higher than her own below-market price were rejected. Hernandez then paid for the property using a duffel bag filled with $286,450 in cash, which she gave to her sister-in-law to bring to the sale’s closing.
“Hernandez also helped family members become Fannie Mae-approved brokers, and then steered nearly $80 million in Fannie Mae listings to them, resulting in nearly $2 million in commissions in less than three years.
“In total, Hernandez received more than $1 million in benefits, including the cash kickbacks and rent that she collected and equity that she built in the Fannie-Mae property she bought for herself.”
The case is United States v. Hernandez, 20-50012.
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