United States v. De Castro

113 F.3d 176

• Court: Court of Appeals for the Eleventh Circuit
• Decided: April 30, 1997
• Docket: 95-4648
• Status: Published

Opinion

PUBLISH

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT _____________________

No. 95-4648 _____________________ (D.C. Docket No. 94-320-CR-EBD)

UNITED STATES OF AMERICA, Plaintiff-Appellee,

versus

MARIA J. DE CASTRO, a.k.a Fifi,

Defendant-Appellant.

_______________________________________________________

Appeal from the United States District Court for the Southern District of Florida _______________________________________________________ (April 30, 1997)

ON SUA SPONTE RECONSIDERATION

Before TJOFLAT and BLACK, Circuit Judges, and REAVLEY*, Senior Circuit Judge.

REAVLEY, Senior Circuit Judge:

The prior panel opinion, reported at 104 F.3d 1289, is

withdrawn, and the following opinion is substituted in its stead.

Appellant Maria De Castro complains that the district court erred

in failing to let the jury decide the element of materiality in

her trial for making false statements in violation of 18 U.S.C. §

1010. In light of the Supreme Court’s recent decision in United States v. Wells,1 we conclude that materiality is not an element

* Honorable Thomas M. Reavley, Senior U.S. Circuit Judge for the Fifth Circuit, sitting by designation. 1 117 S. Ct. 921 (1997). of this crime. We also conclude that the admission of evidence

regarding a government investigation was not plain error.

Accordingly we affirm.

BACKGROUND

De Castro was charged with conspiracy to make and making

false statements to the Department of Housing and Urban

Development (HUD), for the purpose of obtaining federally insured

mortgages, in violation of 18 U.S.C. §§ 371 and 1010. She was

convicted of conspiracy and five of the six substantive counts.

The government’s proof showed that De Castro and others

submitted applications for mortgages insured by the Federal

Housing Administration (FHA), an agency within HUD, on behalf of

low income applicants. The applications contained false

employment information regarding the applicants. De Castro was a

mortgage broker who acted as an authorized underwriter for the

loans. De Castro, two real estate brokers, and several putative

“employers” participated in the scheme to obtain the government-

backed mortgages. The “employers” were business owners paid to

submit false employment verifications that were part of the loan

documentation. De Castro decided the amount of income indicated

in these documents, so as to meet HUD requirements. She signed a

certification form for each of the mortgages, stating that she

had reviewed the case file and found that it met HUD’s

requirements. The real estate brokers, Virginia and Osvaldo

Labrador, as well as several of the loan applicants and false employers, testified for the government. One of the brokers

2 testified that “with [De Castro’s] signature, the cases could be

approved” by the FHA.

The district court instructed the jury that materiality was

an element of the offense. The court further instructed that

materiality was a question of law for the court to decide and

that the court had already determined that the alleged false

statements were material. The defendant objected to the

instruction and moved for a mistrial. Because it was then well-

established in this circuit that materiality was a question of

law,2 the district court overruled the objection and denied the

motion.

After the Supreme Court’s decision in United States v.

Gaudin, however, we now know that the Constitution requires the

jury to determine whether a false statement is material if

materiality is an element of the offense.3

ANALYSIS

A. Materiality Is Not an Element of 18 U.S.C. § 1010

Whether materiality is an element of 18 U.S.C. § 1010 is an

issue of law reviewed de novo.4 Section 1010 reads, in pertinent

part:

2 See United States v. Kramer, 73 F.3d 1067, 1074 (11th Cir. 1996) (noting that it was well-established that materiality was a question of law before Gaudin). 3 United States v. Gaudin, 115 S. Ct. 2310, 2320 (1995) (materiality under 18 U.S.C. § 1001 is a question for the jury); Kramer, 73 F.3d at 1074 (applying Gaudin to 18 U.S.C. § 1623). 4 See United States v. Hooshmand, 931 F.2d 725, 737 (11th Cir. 1991) (statutory interpretation is a question of law reviewed de novo).

3 Whoever, for the purpose of obtaining any loan . . . from any person . . . with the intent that such loan . . . shall be offered to or accepted by the Department of Housing and Urban Development for insurance, . . . or for the purpose of influencing in any way the action of such Department, makes, passes, utters, or publishes any statement, knowing the same to be false . . . shall be fined not more than $5,000 or imprisoned not more than two years, or both.

As we noted in the prior panel opinion, the word “material”

does not appear in the statute. However, in Gevinson v. United

States, we upheld an indictment charging violations of § 1010

because “[m]ateriality, while not alleged in haec verba, is

alleged in substance and this is sufficient.”5 We stated that

the evidence at trial was sufficient to make out a case “of

knowingly and wilfully uttering and passing a false material

statement with the intent to influence FHA in a transaction

pending before FHA.”6 Relying on Gevinson, we stated in United

States v. Black that in order to obtain a valid conviction under

§ 1010, “it was necessary for the government to prove beyond a

reasonable doubt that [the defendant] knowingly made a false

statement concerning a material fact to HUD as charged in the

indictment . . . .”7

We have previously implied a materiality element into

analogous false statement statutes. For example, in United States v. Swearingen, we held that materiality was an element of

5 358 F.2d 761, 763 (5th Cir.), cert. denied, 87 S. Ct. 51 (1966). 6 Id. at 765 (emphasis added). 7 644 F.2d 445, 447 (5th Cir.), modified on other grounds, 651 F.2d 392 (5th Cir. 1981) (emphasis added).

4 18 U.S.C. § 1344(a)(2),8 and in United States v. Rapp, we listed

materiality as an element of 18 U.S.C. §§ 1005 and 1014.9

In Wells, the Supreme Court held that materiality was not an element of § 1014. The Court expressly overruled Rapp.10 It

began its analysis with “a natural reading of the full text” of

the statue, noting that the text of § 1014 does not contain an

express materiality requirement.11 It then rejected the argument

that “at common law the term ‘false statement’ acquired [an]

8 858 F.2d 1555, 1556, 1558 (11th Cir. 1988), cert. denied, 109 S. Ct. 1540 (1989). At the time, 18 U.S.C. § 1344 stated:

(a) Whoever knowingly executes, or attempts to execute, a scheme or artifice--(1) to defraud a federally chartered or insured financial institution; or (2) to obtain any of the moneys, funds, credits, assets, securities, or other property owned by or under the custody or control of a financial institution by means of false or fraudulent pretenses, representations, or promises shall be fined not more than $10,000 or imprisoned not more than five years, or both. 9 871 F.2d 957, 963-64 (11th Cir.), cert. denied, 110 S. Ct. 233 (1989). 18 U.S.C. § 1005 reads in pertinent part:

Whoever makes any false entry in any book, report, or statement of [any Federal Reserve bank, member bank, national bank or insured bank] with intent to injure or defraud such bank [or various government actors] shall be fined not more than $5,000 or imprisoned not more than five years, or both.

18 U.S.C. § 1014 reads in pertinent part:

Whoever knowingly makes any false statement or report, or willfully overvalues any land, property or security, for the purpose of influencing in any way the action of . . . any [FDIC-insured bank] upon any . . . loan shall be fined $5,000 or imprisoned not more than two years, or both. 10 Wells, 117 S. Ct. at 925 & n.3. 11 Id. at 926-27.

5 implication of materiality that came with it into § 1014.”12 It

noted that § 1014 was originally enacted by Congress as part of

its recodification of the federal criminal code in 1948, and that

materiality was included in other provisions involving false

representations.13 The Court therefore inferred that Congress

had deliberately chosen not to include the term materiality in §

1014. It also noted that, despite amendments to the statute over

the years, the core phraseology criminalizing “false

statement[s]” made “for the purpose of influencing” the actions

of enumerated institutions had not changed.14 The Court also

rejected the argument that implying a materiality element was

necessary to prevent criminalizing relatively trivial or innocent

conduct, and the argument that the rule of lenity was

applicable.15

We conclude that the reasoning employed by the Court in

Wells when it analyzed § 1014 applies with equal force to § 1010.

Beginning with the text of the statute, § 1010, like § 1014,

lacks an express materiality requirement. Both were passed as

part of the 1948 recodification, 62 Stat. 751-52. Section 1010

criminalizes statements made to HUD by one “knowing the same to

be false.” Section 1014 applies to one who “knowingly makes any

false statement” to the agencies covered. Like § 1014, § 1010

12 Id. at 927. 13 Id. at 928. 14 Id. at 929. 15 Id. at 931.

6 has been amended over the years,16 but the core phraseology

describing the conduct and mens rea of the defendant has not

changed. We can see no basis for requiring materiality under §

1010 when the Supreme Court has ruled that there is no such

requirement under § 1014. To the extent that Gevinson and Black

hold to the contrary, we conclude that they have been overruled

sub silentio by Wells.

B. Admission of HUD Findings

De Castro separately argues that the district court erred in

permitting the government to introduce a HUD “finding” of fraud.

Scott Kottman, a loan specialist and investigator for HUD, was

the government’s first witness. He testified that he began an

investigation after a large number of mortgage defaults in the

Phoenix area. He noticed that the majority of the bad loans

involved the same broker, Virginia Labrador, and that the same

employers kept appearing in the files. He then discovered that

home buyers were not employed where the files indicated, and

linked the paperwork in the files to De Castro. Kottman

testified that he investigated De Castro’s company, Phoenix

Mortgage, because of “[t]he unusually large number of false

claims.” He went on to testify that after the investigation De

Castro was suspended from doing business with the FHA. The

suspension letter was admitted into evidence without objection.

16 See 18 U.S.C.A. § 1010 historical notes (1976 & Supp. 1997) (noting 1967 and 1994 amendments).

7 Citing United States v. Christo17 and other authority, De

Castro complains that it is error to allow the introduction of

the results of an agency’s “findings” in a criminal trial. She

further argues that the error was compounded by the prosecutor’s

statements in his opening and closing arguments, such as the

statement in opening argument that HUD “found evidence of fraud,”

and the statement in closing argument that HUD “concluded there

was fraud on the part of Phoenix.”

De Castro concedes that there was not a proper objection to

the evidence or the argument of the prosecutor, and accordingly

the plain error of review standard applies.18

In Christo, the defendant was convicted of misapplication of

bank funds. The government’s theory was that bank overdrafts in

violation of a civil banking statute constituted criminal

misapplication. The jury was further instructed that the civil

violation could be considered in deciding criminal liability.

The court found plain error based on “the inclusion of [civil]

violations in the case,” and “indeed the whole tenor of the

trial.”19 In these regards Christo bears little similarity to

our case. In our case the government never contended, nor was

the jury instructed, that a violation of a civil statute was

sufficient to establish, or even relevant to, guilt under a

criminal statute made the basis of the indictment.

17 614 F.2d 486 (5th Cir. 1980). 18 See United States v. Olano, 113 S. Ct. 1770, 1776 (1993). 19 Id. at 492.

8 The error here, if any, does not rise to the level of plain

error. Kottman did not testify that there was an agency finding

of “fraud.” The government offered extensive evidence from the

participants in the scheme that De Castro submitted fraudulent

documents to HUD. The prosecutor never argued that a HUD finding

of fraud was sufficient to convict De Castro, and instead

reminded the jurors in closing argument of the testimony of ten

witnesses besides Kottman. Under the plain error standard, De

Castro does not carry her burden of showing that the claimed

error was prejudicial, meaning “that the error affected the

outcome of the District Court proceedings.”20 Even if De Castro

had met this prong of the plain error test, we should not

exercise our discretion to correct a plain error unless the error

seriously affected “the fairness, integrity or public reputation

of judicial proceedings.”21 The error, if any, in allowing the

evidence of the HUD investigation does not satisfy this last

element of the plain error test.

AFFIRMED.

20 Olano, 113 S. Ct. at 1778. 21 Id. at 1776.