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United States v. Hernandez

United States Court of Appeals, Fifth Circuit

November 22, 2017

UNITED STATES OF AMERICA, Plaintiff - Appellee
v.
MARIA GUADALUPE HERNANDEZ, also known as Lou Hernandez, Defendant-Appellant UNITED STATES OF AMERICA, Plaintiff - Appellee
v.
HILDA SIMENTAL MENDOZA, Defendant-Appellant

         Appeals from the United States District Court for the Western District of Texas

          Before DENNIS, CLEMENT, and GRAVES, Circuit Judges.

          PER CURIAM:

         Maria Hernandez and Hilda Mendoza, two former employees at El Paso Federal Credit Union, pleaded guilty to wire and bank fraud charges arising out of their modified "Ponzi scheme, " in the course of which they issued "unrecorded" share certificates and misappropriated the proceeds. In this consolidated appeal, both defendants challenge the sentences imposed by the district court. For the reasons discussed below, we affirm the district court's sentences.

         I

         Hernandez and Mendoza were employed as a manager and assistant manager, respectively, by El Paso Federal Credit Union. In 2015, both employees were charged with bank fraud, wire fraud, and conspiracy to commit both after a government investigation uncovered their scheme that involved fraudulently issuing "unrecorded" share certificates from the credit union. The credit union funded its operations in part by selling shares of the company to investors for a fixed principal amount, issuing share certificates as proof of ownership. The investors were then paid dividends during the term of the certificate and were owed a return of their principal at the end of the term. The credit union managed these transactions by maintaining detailed records of the money coming in and the schedule of payments owed.

         From 2007 until 2012, however, Hernandez and Mendoza sold as many as 111 share certificates without recording them or conveying the funds to the credit union, incurring substantial debt for the company without its knowledge. Because each share certificate required two employee signatures, Hernandez and Mendoza each signed every certificate. The employees hid the money paid by the investors in deceased customers' accounts, dormant accounts, and other accounts that Hernandez controlled. The defendants then used some of this money to continue the scheme by paying out dividends to purchasers of the unrecorded certificates, using the credit union's software and printer to print dividend checks with magnetic-ink routing numbers. Hernandez also used millions for personal expenses: funding vacations, gambling in Las Vegas, and purchasing real estate.

         This scheme was ultimately revealed after a 2011 audit by the National Credit Union Administration (NCUA) triggered a government investigation that uncovered the 111 unrecorded certificates. The credit union, having insufficient assets to pay the holders of these certificates, became insolvent, and the NCUA paid out approximately $18.3 million in claims to these investors.

         Hernandez and Mendoza were both indicted and pleaded guilty to all charges. Each defendant's presentence report (PSR) increased her base offense level under the United States Sentencing Guidelines by 20 for causing a loss of over $7 million. Additionally, both PSRs included a two-level enhancement pursuant to U.S.S.G. § 2B1.1(b)(11) for using an "authentication feature"-the magnetic-ink routing numbers-on the unrecorded dividend checks. At Hernandez's sentencing, the district court calculated her Guidelines range at 188-235 months and sentenced her to 188 months imprisonment. At Mendoza's sentencing, the district court reduced her offense level for acceptance of responsibility and for serving a relatively minor role in the fraud, calculating a final Guidelines range of 121-151 months and sentencing her to 121 months imprisonment. Both Hernandez and Mendoza timely appealed, Hernandez challenging her sentencing enhancements for using an authentication feature and for causing a loss over $7 million, and Mendoza challenging her sentence as substantively unreasonable.

          II

         We review the district court's interpretation and application of the Guidelines de novo and its factual findings for clear error. United States v. Trujillo, 502 F.3d 353, 356 (5th Cir. 2007). Sentences challenged for substantive reasonableness are reviewed for abuse of discretion. Gall v. United States, 552 U.S. 38, 51 (2007). If the defendant fails to object at sentencing to the procedural or substantive reasonableness of her sentence, we review only for plain error. United States v. Peltier, 505 F.3d 389, 391-92 (5th Cir. 2007).

         III

         Section 2B1.1(b)(11) of the United States Sentencing Guidelines provides for a two-level increase in the offense level if the defendant possessed or used an authentication feature to further the crime. An authentication feature is defined in relevant part by 18 U.S.C. § 1028(d)(1) as any "symbol, code, image, or sequence of numbers . . . used . . . to determine if the document is counterfeited, altered, or otherwise falsified." See U.S.S.G. § 2B1.1, comment. (n.10).

         Hernandez asserts that her conduct-printing checks with magnetic ink routing numbers using software available in the ordinary course of her employment-should not trigger this enhancement. She argues that the authentication-feature enhancement was intended for defendants who actively seek out machines capable of creating authentication features. Because the purpose of the enhancement, she alleges, is to deter those who "rise to the level of sophistication where they obtain ...


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