Five defendants convicted in a multimillion-dollar mortgage fraud scheme last May walked into a federal courtroom in Sacramento on Tuesday morning expecting to be sentenced and packed off to years in prison.
With their families in tow, they gathered in the 14th-floor courtroom of U.S. District Judge John A. Mendez facing anywhere from three to 20 years in prison for their part in a scam that prosecutors say allowed them to obtain more than $5 million in home loans during the height of the housing boom that precipitated the economic collapse of 2008.
Instead, as their attorneys stood in shock, the judge declared that none would go to prison and sentenced them to probation and months of wearing electronic ankle monitors as they return to their daily lives.
“The judge walked out and said, ‘You know, the government’s going to disagree with me, I know that, but this is wrong and none of these people should be going to prison,’ ” defense attorney Mark Reichel said afterward in an interview. “Our jaws just dropped. I was convinced they were all going to prison.”
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The U.S. attorney’s office declined to comment Tuesday on the unusual turn of events, which came four years after a federal grand jury indicted nine members of a Russian immigrant family in Sacramento on charges of acting as straw buyers for homes they purchased by using phony income documents to qualify for loans. The five were convicted in May on wire fraud charges after a 12-day trial in a case that generated more than 400 docket entries since the indictment.
The Sacramento region has been called “ground zero” for mortgage fraud crime, and prosecutors in the federal Eastern District of California based in Sacramento have made such cases a priority.
Reichel was representing Daniil Markevich, 38, a flooring contractor from Escondido who was convicted along with his wife, Svetlana. She was sentenced in September to time served and two years of supervised release in an outcome that appeared to allow for her to care for the couple’s two young children while Daniil Markevich did prison time.
“He thought they left her out on purpose so she could watch the kids,” Reichel said. “He’s the breadwinner. They have very impoverished means. He speaks no English. He would have to go to prison where no one speaks Russian.”
Federal probation officials had recommended a 37-month sentence for Markevich, who faced up to 20 years in prison for his part of the scheme, which officials said involved the purchase of two homes – one on Watercolor Lane in West Sacramento for $647,000, the other on Silvano Street in Sacramento for $289,000.
Markevich bought the homes after filing phony income documents with a lender and both fell into foreclosure. The West Sacramento home later sold for $265,000 and the Sacramento home went for $42,000, costing the lender $573,500.
Other defendants who faced prison time Tuesday included Daniil Markevich’s sister-in-law, Irina; his brothers Alex and Anatoliy; and Marina Pukhkan, Irina Markevich’s mother.
Prosecutors said the defendants were paid hundreds of thousands of dollars to participate in the scheme, and spent the money on such items as a Lincoln Navigator and a limousine.
The defense had argued that the five defendants in Tuesday’s sentencing were small fish and that the government’s focus should have been on bigger actors who helped arrange the schemes. But, after they were convicted, the defendants fully expected to go to prison, Reichel said.
“They couldn’t believe it,” he said. “They were still in shock. I think there was shock among everyone because the government kept arguing that the judge was wrong and that they needed to go to prison.”
One veteran Sacramento defense attorney – and former prosecutor in the U.S. attorney’s office – said the judge’s move was unusual, but not unheard of.
“That’s Mendez being Mendez; he’s an independent thinker,” said William Portanova, who said he witnessed a similar incident years ago in the judge’s courtroom when the government was pushing hard for a prison sentence to which the judge objected.
Portanova said federal sentencing guidelines have placed great power in the hands of prosecutors, who can convince judges to hand down sentences that would result in much less time in state prosecutions.
“The federal system has gotten out of control in terms of the sentences being handed down,” he said. “It attempts to result in a standardized system of justice as if justice itself were a McDonald’s cheeseburger.”
Portanova added that Tuesday’s decision by Mendez should not suggest the judge prefers light sentences. Two weeks ago, Mendez sentenced three defendants in a related $16 million mortgage fraud case to sentences of eight, 11 and 19 years, respectively.