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United States v. Khan

United States District Court, N.D. California, Oakland Division

July 10, 2014

SALEEM M. KHAN, Defendant



Pending before this Court is Plaintiff United States' Motion for Restitution, wherein it seeks an order requiring Defendant Saleem M. Khan ("Khan") to pay restitution to E-Trade Bank in an amount of no less than $313, 665.98. (Dkt. 58.) In opposition to the Government's Motion and any order awarding restitution, Defendant Khan has filed a Response to Motion for Restitution for Victim E-Trade Bank. ("Oppo."; Dkt. 60.) Thereafter, the Government filed a Reply in Support of Motion for Restitution, reiterating its position and requesting, in the alternative, an evidentiary hearing during which it may call live witnesses to substantiate further the loss amount. (Dkt. 62.)

The instant motion follows this Court's March 13, 2014 sentencing of Mr. Khan to a 21-month custodial sentence after he entered an "open" guilty plea to one count of bank fraud in violation of Title 18 U.S.C § 1344 and one count of making false statements to a financial institution in violation of Title 18 U.S.C § 1014. For the reasons set forth below, the Court FINDS that the Government has met its burden of proof regarding the restitution due to the victim of the bank fraud, and consequently, that an evidentiary hearing is not warranted. Accordingly, the motion is GRANTED.


Based upon the comprehensive factual background set forth in the Presentence Investigation Report ("PSR"; Dkt. 36) to which no objections were filed ( id. at 17), and the Government's proffered evidence, the Court makes the following findings of fact and deems them relevant to the appropriate calculation of restitution:

On September 2, 2005, Khan obtained a home equity line of credit from E-Loan with a credit limit of $345, 000 secured by his residence on Appian Way ("the HELOC"). (Dkt. 56, Exh. 1. (Bates U.S. 000746, -775, -776, & -779).) Khan initially drew $60, 000 thereon. E-Loan sold the HELOC to E-Trade Bank on September 25, 2005 for the face value of the loan plus a premium of 4.38% (or $2, 628) for a total amount of $62, 628. ( Id., Exh. 2, ¶ 3.) Thereafter E-Trade hired PNC Bank to service the HELOC.

Bank servicing records indicate that Khan made additional draws against the HELOC. The December 16, 2005 statement shows an advance of $285, 000 which was then paid off by April 2007. ( Id., Exhs. 4 and 5.) Again, additional draws were taken on the HELOC resulting in a balance of $346, 497.80 by March of 2008. ( Id., Exh. 6.) While Khan made regular payments on the HELOC, the balance never fell below $346, 000.

Notably, in January 2010, Khan made his last payment on the HELOC when the outstanding principal balance on the HELOC was approximately $344, 854.32. (Doc. 40, Exh. 3.) The Court finds that this is the point at which the fraudulent intent was made manifest and the point at which his illegal scheme commenced. In January 2010, Khan intentionally failed to make any further payments on the HELOC, thereby sending the HELOC into default status. Given his significant professional knowledge, acumen, and expertise in real estate transactions and markets, Khan understood that a few months of default status would be required before his scheme could come to fruition.

According to a banking document provided by Khan, a "Pre-Foreclosure Equity Analysis" of the Appian Way property was conducted in early June 2010, showing an "Original Appraised Value" of $775, 000 and a "Current Value" of $449, 900, which when adjusted for costs and the superior lien left "Available for CLC" the amount of $73, 949.38.[1] (Dkt. 39-1.)

Thereafter, and in furtherance of his scheme, on July 13, 2010, Khan falsely stated in a telephone call with a PNC representative that he had defaulted on payments on the HELOC because he had been laid off from his job for 14 months. In truth, Khan had been continuously employed since July 1995 and had been working as a consultant for Kaiser Permanente since December 2008. On July 29, 2009, Khan had been hired as a full-time employee of Kaiser Permanente, with a bi-weekly net salary of approximately $3, 190 as of January 2011.

Based upon Khan's representations concerning the status of his HELOC loan, on October 29, 2010, PNC charged off the HELOC with E-Trade's concurrence. Had Khan not engaged in the conduct set forth above and continued remit payments on his loan as he had done prior to January 2010, the charge off would not have occurred. Khan waited until this point to advise a default specialist in PNC's recovery department that he was in financial hardship and wanted to settle the HELOC. (Dkt. 36, ¶ 11.) Despite the representation, Khan's personal "OptionsHouse" accounts and another, which he opened in his brother-in-law's name to hide his trading gains from creditors, showed a combined balance of $2, 737, 110.04 as of December 31, 2010 (and $2, 301, 638.03 as of December 31, 2011). (Dkt. 63.)

On January 13, 2011, in response to a request from the PNC default specialist, Khan sent an e-mail from the Northern District of California to the default specialist in Pennsylvania, which included attached documents supporting his offer to settle the HELOC for $45, 000. To support his offer, Khan provided PNC with a so-called hardship letter in which Khan falsely stated that he had lost his job at the end of 2007 and was not able to secure a stable job until July 2010. Next, Khan provided altered pay statements, falsely indicating that he was employed by AB Star Group, from which he purportedly received a bi-weekly net salary of approximately $1, 900. He obtained this paystub by having his nephew Kamran Khan "photoshop" false information onto the submitted paystub. Finally, Khan submitted an income and expense statement falsely listing a monthly income of $4, 117. Nowhere did Khan reference the fact that he had earned $870, 000 by buying and selling options and by conducting other transactions through brokerage accounts between April 2010 and January 2011. Based upon the default posture and Khan's false representations, E-Trade (through PNC) accepted Khan's offer of $45, 000 and closed out the HELOC.

In advance of sentencing, the defendant admitted in writing as follows (in pertinent part): "I illegally settled my HELOC with the bank to benefit myself in ...

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