United States v. Phillip E. Hill

• Court: Court of Appeals for the Eleventh Circuit
• Decided: June 14, 2011
• Docket: 07-14602
• Status: Published

Opinion

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT FILED ________________________ U.S. COURT OF APPEALS ELEVENTH CIRCUIT JUNE 14, 2011 No. 07-14602 JOHN LEY ________________________ CLERK

D. C. Docket No. 05-00269-CR-TWT-11-1

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

versus

PHILLIP E. HILL, MARCUS ALCINDOR, a.k.a. Christopher Alcindor, ROBERT POWERS, CHRISTINE LAUDERMILL, DAVID VAN MERSBERGEN, FRED FARMER, DAVID THOMAS, LESLIE RECTOR, BARBARA BROWN, a.k.a. Barbara Eubanks,

Defendants-Appellants.

________________________

Appeals from the United States District Court for the Northern District of Georgia _________________________

(June 14, 2011) Before EDMONDSON, CARNES, and ANDERSON, Circuit Judges.

CARNES, Circuit Judge:

When Phillip Hill was a young man growing up in the small town of

Sumatra, Florida he helped tend his grandfather’s beehives. He would, as his

lawyer would later tell the jury, “get the honey out of the hives.” And he was

good at what he did, being named “Florida beekeeper of the year” when he was

twenty years old. Three decades later, Hill got involved in the busy hive of

Atlanta’s high-end residential real estate market. His goal was still to get out as

much honey as he could. From 2000 to 2003 Hill and his associates scooped out

of the market almost $22 million in illicit gain. They did it by fraudulently

obtaining over 300 mortgage-backed loans for buyers who used the loans to

purchase Atlanta-area houses and condominiums from Hill and his associates at

more than market value. Almost all of those loans, totaling $110 million, went

into default causing lenders and guarantors to be stung with over $38 million in

losses. Innocent homeowners in neighborhoods that were hit with foreclosures

and distorted property values caused by the scheme also felt the pain, and many

people who were used as straw buyers suffered ruined credit and a number of them

went bankrupt.

2 Big fraud schemes generally give rise to big prosecutions, and this one is no

exception. In this trial alone there were a dozen defendants, and the 187-count

indictment against them involved more than 300 transactions. The government’s

exhibit list, which was 178 pages long, included 1,135 exhibits that filled 8 filing

cabinets. The government also presented more than 100 witnesses, either through

live testimony or the parties’ stipulation about what that testimony would be. The

presentation of the evidence took 31 trial days. In the end, all but two of the

twelve defendants were convicted of at least some charges, and they were

sentenced to terms of imprisonment ranging from 5 months to 28 years.

Big multi-defendant prosecutions generally give rise to big appeals and long

opinions. Regrettably, this one is no exception.

I. Factual Background

A. The Scheme

Hill or entities he created purchased properties that they sold to straw

buyers for substantially more than the cost or value of those properties. The sales

were financed with mortgages based on property values that were inflated by

various fraudulent representations that Hill orchestrated. The buyers ultimately

defaulted on the loans and the mortgages were foreclosed, but by then Hill and his

3 associates had gotten their profits from the sweet deals they had made by selling

the properties at inflated prices.

The higher the property value the larger the loan, the larger the loan the

higher the sales price, and the higher the sales price the larger the profit. In order

to obtain loans for the highest possible property value, and reap the highest

possible profit, Hill and his associates made a multitude of misrepresentations to

lenders. They lied a lot. They lied about the true buyers, and they lied about the

source of the down payments, and they lied about the value of the properties, and

they lied about the income and employment of the buyers, and they lied about

whether the buyers would occupy the properties, and they lied about whether any

other properties owned by the buyers were being leased.

Hill and his associates lied about the true owners of the properties in order

to disguise the fact that Hill-owned entities were behind all of the transactions and

were actually selling the properties to themselves. Unbeknownst to the lenders,

Hill had recruited people with good credit scores to serve as straw buyers of the

properties. He even had some of them purchase several properties from him using

loans from different lenders, all of which were obtained within a short period of

time so that each successive lender would not find out about the other loans to that

borrower. Once multiple loans or mortgages showed up on the buyer’s credit

4 report, which typically took a few weeks, it became difficult for that buyer to

qualify for new loans. At that point, the buyer’s usefulness to Hill was at an end

and he would recruit a new buyer.

Hill and his associates lied about the source of the down payments to cover

up the fact that Hill had supplied most or all of that money to the straw buyers.

Lenders want to know that money for a down payment actually comes from the

buyer because a buyer who has a substantial stake in the property is considered a

better credit risk. That is why they inquire about the source of a down payment

before making a loan. Hill circumvented that safeguard in a variety of ways.

Sometimes Hill or an associate would give a borrower money to park in her bank

account just long enough for the lender to verify the money’s presence, then they

would take it back. Other times they falsified the HUD-1 settlement statements1

that were signed at the closings to show “cash from borrower” when the money

had actually come from Hill, an entity he controlled, or one of his associates. Yet

other times cashier’s checks were forged or altered to show earlier earnest money

payments from the buyers to Hill as seller, when in fact that money had come from

1 “The Housing and Urban Development-1 (‘HUD-1’) statement is a settlement form used in closing a property sale; it details the costs and fees associated with a mortgage loan.” Busby v. JRHBW Realty, Inc., 513 F.3d 1314, 1319 (11th Cir. 2008) (citing United States v. Gaudin, 515 U.S. 506, 508, 115 S.Ct. 2310, 2312 (1995); Briggs v. Countrywide Funding Corp., 188 F.R.D. 645, 646 (M.D. Ala.1999)). 5 other sources. The false checks were created by altering actual checks from the

bank account of a straw buyer. With most or all of the loans, the borrowers signed

documents at closing falsely representing that they were supplying the down

payment money.

Hill and his associates lied about the value of the properties to circumvent

lenders’ loan-to-value requirements and increase the selling price. Those lies were

told through fraudulently inflated property valuations that Hill procured. For

example, a bank would make a loan for $200,000 under the assumption that it was

lending 80% on a property worth $250,000, when in reality the bank was lending

133% on a property worth only $150,000. To pull this off Hill needed the

cooperation of appraisers, and he bought what he needed. The appraisers

supported their inflated valuations by cherry-picking inappropriate comparative

sales; by concealing recent prior sales of the same property for far lower amounts;

by including upgrades that had not actually been done; and by neglecting to report

conditions that would depress property values, such as a property’s proximity to

railroad tracks or a landfill or its infestation with black mold.

Hill and his associates lied about the straw buyers’ income on the loan

applications in order to qualify the buyers for loans of the size they were seeking.

And those lies in turn required lies about the buyers’ employment and positions to

6 avoid arousing suspicions about the reported income. As part of the lies some

borrowers got “promoted” on their loan applications. For example, Eddie

Blanchard, a postal clerk in a small Louisiana town, became “Postmaster of

Atlanta” on his application. Other buyers acquired impressive-sounding executive

titles at companies where they had never worked or at companies that did not even

exist. If the lenders tried to verify the employment and income information, Hill’s

associates would generate fake W-2s and pay stubs, or they would answer phone

calls posing as the borrower’s employer.

Hill and his associates lied about the intended use of the properties in order

to get the better loan terms and interest rates available for owner-occupied

properties. Lenders operate on the assumption that a borrower will be more

motivated to make payments on his own home than on an investment property,

which is why investment loans require higher interest rates and larger down

payments. As for condominiums, some developments had restrictions on the

percentage of units that could be rented out, and many lenders would not lend on

condominium units if the complex’s owner-occupancy rate was below a certain

level. Carrying out Hill’s instructions, straw buyers represented on each loan

application that they intended to use the property as their “primary residence,”

even though they actually were buying multiple properties and had no intention of

7 moving into any of them. Some of the buyers slipped up and pointed this out at

closings. Most of them were told by those conducting the closing (who were

being paid by Hill) that they had to say they were going to occupy the property in

order to get the loan. Other buyers signed their name to blank application forms,

leaving Hill and his associates to generate whatever false information was

necessary to meet the lender’s underwriting standards.

Hill and his associates lied about whether any residences that the buyers

already owned and occupied would be leased in order to cover up the fact that the

new properties would not be used as residences. Again, owner-occupied housing

attracts better loan-to-value ratios than investment property does. And the straw

buyers who did disclose to lenders that they were buying the properties for

investment needed to show that the properties would produce enough rental

income to cover the mortgage payments. Hill and his associates met this need by

generating fake lease contracts with nonexistent tenants or by grossly inflating the

income generated by properties that actually were rented.

Hill’s scheme needed not only a lot of lying liars but also a slew of straw

buyers. Hill recruited the straw buyers by pitching a business model that

supposedly involved buying distressed properties at a discount, renovating and

furnishing them, renting them out on lucrative short-term leases to corporate

8 executives, athletes, and entertainers, and later selling them for a handsome profit.

He told his “investors” — the straw buyers — that they would not have to put any

of their own money into the deal, just their name and good credit. Hill assured

them that he would take care of mortgage payments, taxes, insurance, association

fees, and all other expenses, and that he would maintain the properties, lease them,

and collect the rents.

After the straw buyers purchased properties, Hill would have them sign

quitclaim deeds, conveying the properties back to him. Those quitclaim deeds

were concealed from the lenders, and they were not recorded until Hill was ready

to resell the property. Ordinarily, the earlier mortgages would have been picked

up on a title search before a later loan was made, but Hill bribed some of the

attorneys doing the closing work to report clear title to the lenders. In that way he

was able to run some of the properties through the lending process more than

once, thereby generating a second or third round of illicit gains.

In order to get the money he needed for the down payments that the straw

buyers fraudulently claimed to have provided at their closings, Hill borrowed

“hard money” — short-term cash loans at double-digit interest rates — from

wealthy acquaintances like Fred Filsof and John Kruger. The success of the

scheme depended on the fraudulently obtained loan proceeds coming in fast

9 enough to pay off the hard money loans. The only way Hill could stay current on

existing mortgage loans was by using the incoming flow of sales proceeds.

Eventually the whole house had to collapse. Within a few months of their

closings, straw buyers found themselves besieged with letters and phone calls

from banks complaining that payments on their loans were not being made. Hill

promised the straw buyers he would take care of the payments, but he never did.

Once their credit was ruined, they were no longer of any use to him and he quit

returning their calls.

Although all of the buyers had good credit scores before they met Hill, most

of them lacked the assets to make down payments on the properties. Many would

have had difficulty making the payment on a single loan, let alone on the multiple

mortgages that were taken out in their names. Although some (maybe all) of the

borrowers suspected something fishy was going on, they played their roles

anyway. When questioned, some of them claimed that they thought that the

transactions must be legal because there were attorneys present at the closings.

The attorneys, however, made a point of leaving the room when the checks were

passed around.

In return for their part in the scheme, the buyers were paid anywhere from

$10,000 to $40,000 for each loan transaction. As some of them later testified at

10 trial, however, those payments were not worth the damage done to their credit

records once the loans went into default and the mortgages were foreclosed.

Those Hill lured in as straw buyers were not the only ones who were injured

by the scheme. The neighborhoods where the properties were located suffered

from depressed housing values because of the foreclosures that always followed

the purchases. The collateral damage from Hill’s fraud was even worse at the

condominium complexes because, as we have mentioned, once the percentage of

investor-owned units exceeds a certain threshold, lenders generally will refuse to

loan money for any other units in that complex. At complexes where Hill had

bought and flipped numerous units, the value-distorting fraudulent appraisals,

foreclosures, and related litigation between Hill and the condominium associations

destroyed value, tied up title, and made it difficult or impossible for the hundreds

of legitimate owner-occupiers to sell or refinance their own units. Because Hill’s

units failed to pay their dues, the complexes also lacked the funds necessary to

maintain common areas, which further depressed the value of the properties.

B. Hill’s Associates2

2 Although numerous people were involved in every step of Hill’s scheme, in order to simplify the discussion in this subsection, we name only those who were prosecuted in this case. 11 Hill could not carry out such a sophisticated scheme without plenty of help.

He had a swarm of loan brokers, closing attorneys, appraisers, assistants, and

recruiters.

Leslie Rector began working for Hill during the summer of 2000 and

became his right-hand man. He was responsible for managing, coordinating, and

facilitating Hill’s scheme, and he worked with all of the key co-conspirators,

including the straw buyers, recruiters, brokers, appraisers, and closing attorneys.

He supplied the false lease agreements used to obtain loans, and after the closings

he got the straw buyers to sign quitclaim deeds conveying the properties back to

Hill in return for a promise that Hill would make the mortgage payments for them.

Several mortgage brokers, including Robert Powers, actively deceived the

lenders by representing that the borrowers intended to use the properties as a

primary residence, or by concealing the true origin of the down payments.

Appraisers such as Fred Farmer and Barbara Brown performed fraudulent

appraisals on the properties, giving them inflated values and concealing earlier

sales so that the buyers could obtain more money from lenders than the properties

were actually worth.

To feed the scheme’s appetite for straw buyers, Hill used a network of

recruiters. Marcus Alcindor, Riley Graham, Christine Laudermill, and David

12 Thomas all recruited straw buyers by telling them that they would be purchasing

the properties for Hill when in reality they were buying them from him. The

recruiters would promise the buyers that Hill would pay the mortgages on their

“investment properties.” Cheryl Denny, David Thomas, and David Van

Mersbergen were among the large number of people who served as straw buyers

for properties associated with Hill.

C. The Properties

Hill’s scheme involved a host of houses, condominium units, and some

residential lots in the Atlanta area. Some of the properties had been on the market

for months without selling. After Hill bought them, he immediately re-sold them

at much higher prices to his straw buyers in deals financed by fraudulently

procured loans. Some of the properties Hill bought had fallen into a bad state

while they sat vacant, but that did not stop him from using them. For example,

after buying one house for $1.4 million, Hill used an inflated valuation to re-sell it

to a straw buyer for $2.8 million, even though the house was infested throughout

with black mold.

In a similar fashion, Hill bought and resold one group of residential lots. He

used one of his companies, Estates Atlanta, Inc., to purchase 34 residential lots

and six completed homes located in the Cascade subdivision. Later, Marcus

13 Alcindor and Riley Graham (aka Riley Williams) formed the Alcindor-Williams

Group, LLC, which bought 27 of the 34 Cascade lots from Estates Atlanta with a

loan from Centrum Financial. In their loan application Alcindor and Graham

made several false statements and representations, including a fraudulent financial

statement and falsified sales agreements between Estates Atlanta and straw buyers

of some of the lots. The loan request also included a fraudulent appraisal that

valued the 27 lots at $2.7 million but failed to reveal the earlier purchase of all 34

lots for less than that amount or that these “luxury” lots were actually bordered by

a railroad track and a landfill.

Like the fraudulent loans on houses and condominiums, Alcindor and

Graham had to show Centrum that they had a stake in the Cascade venture in order

to qualify for the loan. To make that showing, they presented Centrum with

altered checks as evidence of their payments for marketing work that was never

actually done, Hill perjured himself in an affidavit stating that the Alcindor-

Williams Group had paid him $150,000, and Alcindor and Graham presented at

closing a check that was supposedly paid to Hill, when it actually came from Hill.

Unbeknownst to Centrum, the Alcindor-Williams Group had entered into an

agreement with Hill, through Estates Atlanta, for a second loan secured by a

promissory note that was to be funded by the money they made from fraudulent

14 sales to straw buyers of three Hill-owned houses in the Cascade subdivision. Hill

then used those fraudulently obtained loan proceeds to pay off one of his own

creditors who had loaned him money on the lots.

D. The Charter Bank Fraud

Once mortgage lenders began to catch on to the fraud, several quit dealing

with Hill. Desperate to keep the hive humming, Hill sought out a new source of

financing. Christopher Baker, a banking client of Charter Bank, introduced him to

Fred Vargas, a vice president at Charter. Baker presented Hill as someone who

needed a loan and who also could provide Vargas with an exciting real estate

opportunity. Vargas was excited by the Hill investment scheme and the chance to

make some quick money. He bought several condominiums from Hill at

“discounted” prices with the intention of flipping them at a profit and replacing the

money he had stolen before anyone noticed it was gone. In order to finance his

purchase of those properties, Vargas stole money from the bank by using

fraudulently created lines of credit.

Exploiting the opportunity presented by his new confederate in crime, Hill

got Vargas to issue lines of credit to two Hill-controlled entities, Atlanta Condo

Parking and Storage and Atlanta Millennium, which were supposedly secured by

extra parking spaces for sale in condominium complexes and by (nonexistent)

15 “accounts receivable.” Because Vargas only had authority to make loans of

$100,000 or less without seeking the approval of a supervisor, he set up two

separate lines of credit for the two Hill entities, one at $90,000 and one at $80,000.

After Hill defaulted on these loans, as did a suspiciously high number of other

borrowers who had worked with Vargas, the bank investigated and uncovered

Vargas’ scheme in late 2002, which eventually led to his resignation from the bank

in March 2003.

E. The Investigation

Lenders began investigating after they noticed a high number of loan

defaults associated with certain brokers. During their internal investigations,

auditors uncovered falsified information and valuations in some loan applications.

In 2001 Fannie Mae began an investigation, and then the IRS initiated its own

criminal investigation. Investigators approached several participants in August

and September of 2001 to discuss plea deals. In the meantime, Hill kept his

scheme going by continuing to fraudulently “flip” houses and condominiums well

into 2003 despite his awareness from late 2001 onward that he was under

investigation; he was even receiving subpoenas during that time.

Wayne Jenkins and Ted Tagalakis, loan brokers who had worked for Hill,

began cooperating with the government’s investigation in late 2001 and early

16 2002. Each of them pleaded guilty in separate cases and received reduced

sentences in exchange for their cooperation and testimony at trial.

Rector, who was Hill’s second in command, was approached by

investigators in February 2003. He began giving interviews and providing

documents, and he continued cooperating well into 2005 until negotiations broke

down, and he was indicted in January 2006.

Vargas began cooperating with the government’s investigation near the end

of 2003, implicating Hill in the Charter line of credit fraud. In May 2004 Vargas

pleaded guilty in a separate case to charges of conspiracy and bank fraud and was

sentenced to 51 months imprisonment. After he testified for the government in

this trial, his sentence was reduced under a Rule 35 motion to 26 months. See

Fed. R. Crim. P. 35.

In November of 2004, Hill, Baker and other Vargas bank clients were

indicted in a case involving the Charter line of credit conspiracy. Hill’s case was

later severed from that one and the charges against him were consolidated with

others in this case.

II. Procedural History

A. The Indictment

17 This case went to trial on the third superseding indictment, which was

returned in November 2006. It charged 18 defendants with a total of 187 counts,

including three separate conspiracies and a host of substantive counts.3 The

charges were grouped around each of the three conspiracies.

The first group of charges, Counts 1 through 14, charged Hill and Baker

with conspiracy to defraud Charter Bank and Trust in violation of 18 U.S.C. §

371; with bribing Vargas in connection with Charter’s business and transactions in

violation of 18 U.S.C. §§ 215(a)(1); with two instances of bank fraud in violation

of 18 U.S.C. § 1344; with four instances of making false statements to influence

the credit decision of a financial institution in violation of 18 U.S.C. § 1014; and

with six instances of money laundering in violation of 18 U.S.C. § 1957.

The second group of charges, Counts 15 through 18, charged Hill, Alcindor,

Moss, Baker, and Graham with conspiring to defraud Centrum Financial Services

3 Several defendants who had been charged in earlier incarnations of the indictment or separately by information opted to plead guilty, including: appraiser Julian Perez and his assistant Jeremy Dercola; loan brokers Wendell Higgs, Brant Petree, Wesley Golden, and Michael Flake; recruiters Rashid Muhammad and Willam Chavis; straw buyer Cortney Jackson; and closing attorneys Chris Halcomb and Andrew Wolf. Perez, Higgs, Petree, Muhammad, Chavis, Halcomb, and Wolf all testified for the government at trial.

Apart from the nine appellants, defendants who were named in the third and final superseding indictment included: Hill associate Christopher Baker and straw buyer Carl Best, for whom arrest warrants were still outstanding at the time of trial; straw buyer Cheryl Denny and marketing consultant James Moss, who were acquitted in this trial on Rule 29 motions; recruiter and straw buyer Dean Thomas (brother of David Thomas, an appellant who was also a recruiter and straw buyer), who was convicted in this trial but did not appeal; and straw buyer Annette Spear, who was severed from this trial along with Graham. 18 in connection with the sale of the 27 lots in the Cascade subdivision to the

Alcindor-Williams Group in violation of 18 U.S.C. § 371, and with three

substantive counts of wire fraud in violation of 18 U.S.C. § 1343.

The third group of charges begins with Count 19, which charged that all of

the appellants conspired with each other and with Carl Best, Annette Spear, Dean

Thomas, William Chavis, Cheryl Denny, Michael Flake, and Graham to defraud

various mortgage lenders in violation of 18 U.S.C. § 371. Counts 20 through 33

charged those defendants with making false statements to influence the credit

decision of a bank in violation of 18 U.S.C. § 1014, with each charge relating to

the particular mortgage loans in which each defendant was involved. Counts 34

through 38 charged specific instances of mail fraud related to mortgage loans in

violation of 18 U.S.C. § 1341, and Counts 39 through 48 charged specific

instances of wire fraud related to mortgage loans in violation of 18 U.S.C. § 1343.

Counts 49 through 181 charged money laundering related to transactions

involving the proceeds of the frauds alleged in the prior counts of the indictment

in violation of 18 U.S.C. §§ 1956 and 1957. Finally, Counts 182 through 187

charged additional counts of credit application fraud related to mortgage loans

obtained from Flagstar Bank in violation of 18 U.S.C. § 1014.

B. Pretrial Motions

19 Alcindor, Rector, Van Mersbergen, Moss, David Thomas, Graham, and

Annette Spear moved to sever their cases. The court granted Graham’s motion

after finding that his insistence on proceeding pro se would cause delay and

distraction at the main trial. It granted Spear’s motion for a severance because the

only evidence of her involvement stemmed from her prior relationship with

Graham.4

Before trial, a dispute arose over Rector’s proffer agreement when the

government moved in limine to bar the defendants from mentioning in their

opening statements that they had tried to cooperate by making proffers and that the

government only prosecuted them because it was dissatisfied with what they had

to say. Rector responded to the government’s motion by filing a motion in limine

of his own to enforce the part of the proffer agreement that barred the government

from using proffer-derived evidence against him except in limited circumstances.

Because the motions were filed just before trial, the district court opted to take

them under advisement.

C. Trial

4 The government dropped all charges against Spear before Graham went to trial. Graham was convicted in a separate trial and his appeal was consolidated with this one. In a separate opinion issued today, we are affirming Graham’s conviction. See United States v. Graham, No. 08-14736, — F.3d — (11th Cir. June 14, 2011). 20 The nine appellants — Hill, Alcindor, Powers, Laudermill, Van

Mersbergen, Farmer, Rector, David Thomas, and Brown — plus Dean Thomas,

Cheryl Denny, and James Moss pleaded not guilty and went to trial. The trial

lasted from January 16 through March 14, 2007. The government’s case consisted

of 1,135 exhibits and the testimony (or stipulation about the testimony) of more

than 100 witnesses, some of whom were cooperating co-conspirators. Others were

officials or agents of the victim lenders. An investigating agent also testified to

provide, among other things, an overview of the case.

The district court worked hard to keep the trial from getting out of control

and consuming even more time and resources than it did. In the interests of

efficiency and judicial economy, the court limited opening statements, sometimes

restricted cross-examination, urged both sides to stipulate to the authenticity of

various records and to what lenders would say, and in the presence of the jury

encouraged both the prosecution and the defense to “move on.” In exchange for

the defendants’ making reasonable and appropriate stipulations at trial in order to

streamline the proceedings, the court promised to reward their cooperation at

sentencing, and on at least one occasion the court intimated that failure to do so

might lead to less favorable treatment at sentencing.

21 At the end of the government’s case in chief, the court heard arguments on

the defendants’ Rule 29 motions for judgments of acquittal. Each defendant went

in alphabetical order, beginning with Alcindor. The court granted Alcindor’s

motion for acquittal on Counts 38 and 94, agreeing with him that the evidence on

those counts pointed only to the companies controlled by Alcindor and Graham

and did not show Alcindor’s individual involvement.5 The court granted a

judgment of acquittal for Cheryl Denny and James Moss on all counts after

concluding that there was insufficient evidence that their involvement in the

scheme was with knowledge of the fraud. The court denied the other defendants’

Rule 29 motions. And after reconsidering the matter, the court reversed its earlier

ruling that had granted Alcindor’s motion for acquittal on Counts 38 and 94.

Following the rulings on their Rule 29 motions, the defendants presented

some evidence and witnesses. The strategy that they pursued was to argue that

they acted in good faith and lacked any criminal intent because they had no idea

that what they were doing was criminal. That strategy may have been hampered

by the fact that none of the defendants took the stand. Nor did they present a

5 Both of those counts related to the August 2002 mortgage loan transaction on the house at 105 Beracah Walk, a deal for which Graham had recruited Cortney Jackson to act as a straw buyer. Count 38 charged mail fraud based on the mailing of the deed from the county clerk’s office, and Count 94 charged money laundering for the wiring of loan proceeds to the account of Bristol Homes, a company controlled by Alcindor and Graham.

22 united front. The defendants who were Hill’s associates and subordinates pointed

the finger at him, while Alcindor blamed Graham, and Hill claimed innocence and

reliance on the advice of counsel as a defense.

The jury was instructed on March 5, and it returned its verdict on March 14,

2007, following eight days of deliberations. The jury delivered split verdicts on

Farmer, Hill, Rector, and Dean Thomas, finding them guilty on some counts and

not guilty on others, while Alcindor, Brown, Laudermill, Powers, David Thomas,

and Van Mersbergen were found guilty on all counts.

III. The Severance Motions Issues

Before trial, Powers filed a motion for severance based on, among other

things, antagonistic defenses. Rector and Van Mersbergen also filed motions for

severance, contending that they should be tried separately because they were

charged with only one of the three conspiracies alleged in the indictment.

Although Alcindor made no motion of his own, he did adopt the severance

motions of co-defendants Rector, Dean Thomas, and James Moss. The Thomas

motion stated as its ground antagonistic defenses, while Moss’ motion contended

that because the evidence in his case was the same as that in Riley Graham’s case

he should be tried with Graham, who was likely to be granted a severance.6

6 The district court had indiciated that it was inclined to grant a motion for severance if Graham should file one because Graham insisted on representing himself, which would have 23 We review a district court’s denial of a motion for severance only for an

abuse of discretion. United States v. Ramirez, 426 F.3d 1344, 1353 (11th Cir.

2005). In determining whether a joint trial is appropriate, the district court must

“balance the prejudice that a defendant may suffer from a joint trial, against the

public’s interest in judicial economy and efficiency.” United States v. Cross, 928

F.2d 1030, 1037 (11th Cir. 1991). We are “reluctant to reverse a district court’s

denial of severance, particularly in conspiracy cases, as generally persons who are

charged together should also be tried together.” United States v. Knowles, 66 F.3d

1146, 1158 (11th Cir. 1995) (quotation marks omitted). A district court’s denial

of a severance warrants reversal only if the defendant can demonstrate that the

denial was a “clear abuse of discretion” and that as a result he suffered

“compelling prejudice against which the district court could offer no protection.”

United States v. Walser, 3 F.3d 380, 385 (11th Cir. 1993). A defendant may show

that he suffered compelling prejudice by demonstrating “that the jury was unable

to sift through the evidence and make an individualized determination as to each

defendant.” United States v. Schlei, 122 F.3d 944, 984 (11th Cir. 1997) (quotation

marks omitted).

A. Rector

disrupted and slowed down the trial of the other defendants. 24 Rector contends that it was an abuse of discretion not to grant him a

severance because the indictment charged three separate and distinct conspiracies,

two of which did not implicate him. Because the other two conspiracies differed

in time, in some of the participants, and in factual particulars from the residential

mortgage fraud scheme charged against him in Count 19, he argues that his case

was improperly joined under Federal Rule of Criminal Procedure 8(b) and should

have been severed under Rule 14.

Rule 8(b) provides that: “The indictment or information may charge 2 or

more defendants if they are alleged to have participated in the same act or

transaction, or in the same series of acts or transactions, constituting an offense or

offenses,” and the “defendants may be charged in one or more counts together or

separately,” but they “need not be charged in each count.” Fed. R. Crim. P. 8(b).

Although Rector was not charged with crimes in connection with two of the three

conspiracies, the Count 19 conspiracy with which he was charged is the big one.

He was actually charged in two-thirds of the counts (121 of 187) in the

indictment.7

In any event, “separate conspiracies with different memberships may still be

joined if they are part of the same series of acts or transactions.” United States v.

7 Rector was charged in Counts 19, 20–33, 34–48, 63–94, and 129–187. 25 Weaver, 905 F.2d 1466, 1476 (11th Cir. 1990) (quotation marks and alteration

omitted). In this case the three conspiracies and the various substantive counts

arrayed around them were properly joined because each of the charges arose out of

Hill’s master scheme to defraud lenders through a common plan and design. The

fact that Hill used a different set of actors to perform the three acts of his play did

not transform it into three different plays.

Rector has also failed to demonstrate that he suffered any specific and

compelling prejudice from the court’s refusal to sever his case from that of his co-

defendants. Most of the evidence that was introduced at trial related to the 121

counts with which he was charged. But even if, as Rector asserts, there had been

an “enormous disparity” in the amount of evidence that related to other defendants

or charges compared with the evidence that related to him, “[a] defendant does not

suffer compelling prejudice, sufficient to mandate a severance, simply because

much of the evidence at trial is applicable only to co-defendants.” Schlei, 122

F.3d at 984 (quotation marks omitted). Although the district court, in the interests

of efficiency and judicial economy, understandably refused to give the jury a

curative instruction every time evidence irrelevant to the charges against Rector

was introduced, the court did give the jury a closing instruction that it must

26 consider the evidence separately as to each defendant with respect to each charge.8

We generally presume that jurors follow their instructions. Greer v. Miller, 483

U.S. 756, 766 n.8, 107 S.Ct. 3102, 3109 n.8 (1987); United States v. Stone, 9 F.3d

934, 938 (11th Cir. 1993). More specifically, we apply “the strong presumption . .

. that jurors are able to compartmentalize evidence by respecting limiting

instructions specifying the defendants against whom the evidence may be

considered.” United States v. Blankenship, 382 F.3d 1110, 1123 (11th Cir. 2004).

Even without presumptions, it is obvious that the jury followed the court’s

instructions in this case. After deliberating for eight days, the jury acquitted

Rector of 25 of the 121 charges against him, a result that demonstrates the care

with which the jury sifted through the evidence and considered the charges. See

United States v. Baker, 432 F.3d 1189, 1237 (11th Cir. 2005) (“In evaluating a

8 The district court gave the following instruction regarding the jury’s consideration of the evidence as to each defendant:

Now, ladies and gentlemen, a separate crime or offense is charged against one or more of the defendants in each count of the indictment. Each charge and the evidence pertaining to it should be considered separately.

Also the case of each defendant should be considered separately and individually. The fact that you may find any one or more of the defendants guilty or not guilty of any of the offenses charged should not affect your verdict as to any offense or any other defendant.

I caution you, members of the jury, that you are here to determine from the evidence in this case whether each defendant is guilty or not guilty. Each defendant is on trial only for the specific offense alleged in the indictment.

27 jury’s ability to sift through the evidence presented and to make individualized

interpretations of guilt, an appellate court may consider whether the jury issued a

‘split’ verdict, finding guilt as to some defendants or charges but not as to others.

Split verdicts weigh against a finding of undue ‘spillover.’”). The district court

did not abuse its discretion by denying Rector’s motion for a severance.

B. Van Mersbergen

Van Mersbergen contends that it was an abuse of discretion for the district

court not to grant his severance motion because he was prejudiced by the district

court’s efforts to effectively manage the unwieldy trial of 12 defendants. Before

voir dire, the district court determined that the government would be given 10

peremptory strikes and the defendants would be collectively allotted 16, and the

court permitted the defendants to determine the method they would use to exercise

those strikes. When the defendants failed to reach an agreement about that, the

court allotted one strike to each of the defendants and then distributed the

remaining four strikes to the defendants who would figure most prominently in the

trial: two to Hill, one to Farmer, and one to Rector. The district court then

devised a rotating method for exercising the strikes under which the defendants

would exercise two strikes and the government one until all of the strikes were

used.

28 The district court also decided that instead of permitting counsel for each of

the 12 defendants and an attorney representing the government to question

prospective jurors, the court would do the questioning. Counsel for each party

was allowed input into the questions that would be asked and also allowed to

suggest follow-up questions. Opening statements were limited to accommodate

the number of attorneys involved. Each defendant was given 15 minutes, except

for Powers and Farmer who were given 20 minutes each, Rector who was given 30

minutes, and Hill who was given 45 minutes.

Van Mersbergen argues that he was prejudiced as a result of the joint trial

because the large number of defendants resulted in his peremptory strikes being

reduced from the normal 10 to only 1; his counsel was not allowed to question

prospective jurors directly; his time for opening statements was reduced; he was

not permitted a full opportunity to further develop his Batson challenge; and one

witness was allowed to testify that when he heard Hill’s sales pitch (outside the

presence of Van Mersbergen), the witness had told Hill that what he was

describing was mortgage fraud.

Van Mersbergen did not properly raise all of these prejudice arguments in

the district court. He did adopt the motions of his co-defendants, but their

motions did not assert that a severance was necessary to avoid all of the types of

29 prejudice that Van Mersbergen now argues the district court should have

considered. Instead, the co-defendants’ motions that Van Mersbergen adopted

asserted only that a failure to sever would result in three types of prejudice:

reduction in the number of peremptory strikes each individual defendant was

allotted, curtailment of the jury voir dire that might otherwise occur, and a

reduction in the time given each defendant for opening statements.9

The district court did not abuse its discretion by concluding that the

interests of efficiency and judicial economy outweighed any prejudice that might

befall Van Mersbergen in a joint trial with his co-defendants. Although he was

not allowed to individually exercise the number of peremptory strikes that he

would have had if tried separately, Van Mersbergen and his co-defendants were

9 While our review probably should be limited to those three asserted types of prejudice, we will address the other two here as well because Van Mersbergen’s contentions about them clearly are meritless. The first is his argument that the district court’s failure to sever resulted in his inability to further develop his Batson challenge because the court refused to hear further argument from the defendants after it ruled that they had failed to make out a prima facie case of discrimination based on the government’s use of its peremptory strikes. Absent a prima facie case, a Batson claim fails, so the district court’s denial of the claim rises or falls on the correctness of its prima facie case ruling, which we will discuss in Part IV B of this opinion. There is no indication that the district court would have allowed any further argument on that issue if there had been fewer defendants, and Van Mersbergen has not described any additional arguments he would have made in the district court if he had been given the opportunity to do so.

Van Mersbergen’s other belated assertion of prejudice involves the testimony of Paul McCoury, a loan officer, that when he had declined to participate in a similar scheme that Hill had pitched to him in 1999, he told Hill that “what you’re describing to me is mortgage fraud.” No one moved for a severance based on that testimony and, in any event, the district court instructed the jury that it was to consider the evidence separately as to each defendant. See supra n.8. 30 jointly given 16 strikes, which is more than the 10 strikes normally allotted to a

defendant or to jointly tried defendants under Rule 24(b)(2) of the Federal Rules

of Criminal Procedure. There is no constitutional right to peremptory strikes,

Rivera v. Illinois, ___, U.S. ___, 129 S.Ct. 1446, 1453 (2009), and the rotation-

sharing method used for the exercise of the defendants’ joint strikes in this case is

similar to one that we approved in United States v. Romero, 780 F.2d 981, 984

(11th Cir. 1986) (upholding a district court’s use of six rotating rounds of

peremptory challenges in a case involving multiple defendants).

As for the attorneys not being allowed to directly question the venire

members, a district court has discretion about how to conduct voir dire, including

whether to have counsel submit questions in writing. United States v. Brooks, 670

F.2d 148, 152 (11th Cir. 1982). The same goes for the amount of time allotted for

opening statements. United States v. Zielie, 734 F.2d 1447, 1455 (11th Cir.

1984), abrogated on other grounds by Bourjaily v. United States, 483 U.S. 171,

177–79, 107 S.Ct. 2775, 2779–80 (1987), as recognized in United States v.

Chestang, 849 F.2d 528, 531 (11th Cir. 1988). Van Mersbergen has failed to

convince us that the district court abused its discretion in taking the reasonable

steps it did to manage the difficulties presented by trial of a case of this magnitude,

31 considered either apart from or in the context of the denial of his motion for

severance.

Van Mersbergen also insists that because he was charged with only one of

the three conspiracies his due process rights were violated by the joint trial.

Although he was charged as part of the big Count 19 conspiracy, Van Mersbergen

was named in only 14 of the counts, which involved only three of the properties.

To the extent that he claims he was a victim of “spillover” prejudice or

transference of guilt, however, his claim fails for the same reason as Rector’s.

While there was less evidence relevant to the charges against Van Mersbergen

than to all of the charges against his co-defendants, that fact is not enough to

demonstrate compelling prejudice. If it were enough, in every joint trial the

defendant facing the fewest charges with the least amount of evidence would be

automatically entitled to a severance. Then, the next defendant left who faced the

fewest charges and least amount of evidence would be automatically entitled to a

severance, and so on, until only one or a few defendants remained in the trial.

That cannot be, and it is not, the law.

Even though Van Mersbergen was convicted on all 14 counts against him,

the fact that the jury returned split verdicts against some of his co-defendants

shows its ability to separate out the charges and evidence. A defendant cannot

32 demonstrate that he suffered compelling prejudice merely because the jury

ultimately concluded that he was guilty as charged. For all of these reasons, the

district court did not err by denying the severance motions of Van Mersbergen or

those of his co-defendants that he was deemed to have adopted.

C. Alcindor

Alcindor presents us with the novel theory that the district court abused its

discretion by refusing to sever him from the joint trial so that he could be tried

together with Graham, who had been granted a severance. Alcindor’s contention

is that it violated due process to try him separately from Graham, because that

permitted the government to advance in the two trials inconsistent positions

regarding the culpability of the two men for the fraud on Centrum Bank. There are

a number of reasons that contention does not entitle him to a new trial.

First, Alcindor failed to assert the potential for inconsistent prosecution

theories as a ground for a severance in the district court. He did not file his own

severance motion but instead adopted those of three of his co-defendants, none of

whom asserted that severance should be granted to permit the movant to be tried

with Graham in order to foreclose the possibility of the government pursuing

inconsistent theories of guilt. We will not hold that the district court abused its

discretion in failing to grant a severance on a ground that was never brought to its

33 attention. The best that Alcindor is entitled to is plain error review, and the failure

to grant a severance in these circumstances does not qualify as plain error by any

stretch of the imagination.

For one thing, Alcindor’s contention suffers from a fundamental flaw. The

last severance motion was denied in this case in December of 2006, the trial itself

was over in March of 2007, and Graham’s trial did not begin until February of

2008. At the time the district court denied the severance motions in this case,

neither Alcindor nor anyone else had suggested that the government might pursue

inconsistent theories of prosecution in Alcindor’s and Graham’s trials, and there

was no reason to believe that it would. We do not require that trial courts be

clairvoyant and grant motions on grounds not asserted because of events that have

not yet happened. Instead, they may treat as gospel the age-old advice to take “no

thought for the morrow: for the morrow shall take thought for the things of itself.

Sufficient unto the day is the evil thereof.” Matthew 6:34 (King James).

Even putting aside that fatal flaw in Alcindor’s position, and assuming for

present purposes that trial courts have a duty to foresee the future, it is not at all

plain that a defendant has a right to prevent the prosecution from using

inconsistent theories to prosecute two separately tried defendants charged with the

same crime. In Parker v. Singletary, 974 F.2d 1562, 1577–78 (11th Cir. 1992), we

34 rejected a claim that the prosecution violated due process by arguing at the

defendant’s trial that he was the triggerman while failing to disclose to him that it

had argued in the separated trials of his two co-defendants that each one of them

had been the triggerman. We stressed that the prosecution in those cases did not

use “necessarily contradictory evidence,” and “the only inconsistency was in the

state’s alternative arguments” about what inference the jury should draw from the

same evidence. Id. at 1578; see also Bradshaw v. Stumpf, 545 U.S. 175, 190, 125

S.Ct. 2398, 2409–10 (2005) (Thomas, J., concurring) (“This Court has never

hinted, much less held, that the Due Process Clause prevents a State from

prosecuting defendants based on inconsistent theories.”); Fotopoulos v. Sec.,

Dep’t of Corr., 516 F.3d 1229, 1234–35 (11th Cir. 2008) (concluding that a

holding that the presentation of inconsistent theories at the trial of two defendants

charged with the same crime did not violate due process was not contrary to

clearly established law).

Likewise, there was no “necessarily contradictory evidence” in the two trials

involved here. In the trial of this case, as Alcindor points out, the government

made little mention of Graham in its opening and closing statements, but that is

understandable since Graham was not one of the dozen defendants on trial. At no

time during this trial did the government ever take the position that Graham was

35 not guilty of the Centrum Bank fraud, and at no time during the later trial of

Graham did the government ever take the position that Alcindor was not guilty of

it. In fact, during the present trial several government witnesses testified to

Graham’s guilt, and during Graham’s trial several testified to Alcindor’s guilt.

The government’s consistent position in both trials was that both Alcindor and

Graham were guilty of the Centrum Bank fraud counts.

Alcindor’s argument that the government took inconsistent positions

focuses on the testimony of Quianna Wasler, Graham’s long-time girlfriend, in the

two trials. Alcindor claims that in this trial he was unable to succeed with his

defense of no criminal intent because government witnesses such as Wasler

testified to his personal participation in several components of the fraud against

Centrum Financial. According to Alcindor, later at Graham’s trial the government

used Wasler’s testimony to point the finger at Graham who had directed her to

participate in the fraud, and by doing that the government was making essentially

the same point that Alcindor had sought to establish in his trial — that Graham

manipulated Alcindor and others into becoming unwitting participants in his

fraudulent scheme.

The fact is, however, that Wasler testified consistently in both trials. She

told both juries that: Graham directed her to falsify pay stubs and W-2 forms in

36 the names of straw buyers for the Centrum loan package; she and Graham

“inflated” items on Alcindor’s personal financial statement; and she and Graham

falsified cashier’s checks made out to Alcindor and the Alcindor-Williams Group.

Wasler’s testimony at both trials implicated Alcindor and Graham together in the

fraud on Centrum. She testified that both of them were present at the closings for

the straw purchases of Cascade lots, and that they both assisted three straw buyers

in falsifying the purchases of pre-existing homes in order to finance the purchase

of the Cascade subdivision by the Alcindor-Williams Group.

Other matters that Alcindor considers stark inconsistencies between the

evidence at the two trials are easily understood in the context of the separate trials,

the different defendants, and the inevitable difference in questions asked of the

witnesses. How far Alcindor strains to find some differences is apparent from his

use of testimony about whether both he and Graham were present at some of the

closings. For example, in this trial of Alcindor the government offered testimony

that he and Graham were both present at the closings involving the Alcindor-

Williams Group, thus undermining Alcindor’s defense that he was out of the

country at those times. He argues that the testimony he was present at those

closings is inconsistent with what Michael Key10 “made clear” in his testimony at

10 Key was a former closing attorney who testified for the government at Graham’s trial about his own involvement in mortgage fraud transactions and how the fraud typically worked. 37 Graham’s trial, which is that only Graham was present at the closings on behalf of

the Alcindor-Williams Group. The record shows, however, that Key actually

admitted during his testimony at Graham’s trial that in addition to Graham “[t]here

could have been others” present.

The government’s consistent theory was that both Alcindor and Graham

were guilty to the gills of the Centrum Bank fraud charges against them, and the

evidence at both trials supported that position. We cannot say, to borrow a few

key words from an Eighth Circuit opinion, that the government used “inherently

factually contradictory theories” and changed the color of its stripes from one trial

to the next by advancing an “inconsistency . . . at the core of the prosecutor’s

[separate] cases against defendants for the same crime.” Smith v. Groose, 205

F.3d 1045, 1052 (8th Cir. 2000). Far from it.

So, Alcindor loses on the severance issue because he failed to raise in the

district court the inconsistent prosecution theories and evidence ground that he

now asserts; because we do not require district courts to foretell that the

prosecution theory or evidence in a future trial of a co-defendant will be different

from what it is in the trial then before the court; because it is not plain that

inconsistent prosecution theories and evidence would violate a defendant’s rights;

and because, even if they would, Alcindor has not shown inconsistency here.

38 D. Powers

Powers, who acted as a mortgage broker in some of the transactions,

contends that it was an abuse of discretion for the district court not to grant his

motion for a severance on the ground of antagonistic defenses. Part of his defense

was that he was an innocent participant who had been duped by the straw buyers,

while the defense of the straw buyer defendants was that they themselves had been

unwitting participants which, if true, would rule out their duping Powers or

anyone else. After the court restricted a portion of Powers’ cross-examination of

Wayne Jenkins, he renewed his motion for severance, and he was joined by

Denny, one of the straw buyer defendants.

The law is that defendants indicted together generally should be tried

together; the fact that a defendant’s chances of acquittal are materially better in

separate trials is not enough; a defendant is not entitled to a severance merely

because of antagonistic or mutually exclusive defenses; and a defendant must

show that the joint trial caused him such compelling prejudice that he was

deprived of a fair trial. Zafiro v. United States, 506 U.S. 534, 537–41, 113 S.Ct.

933, 937–39 (1993); see also Blankenship, 382 F.3d at 1125 (“The Supreme Court

has held that co-defendants do not suffer prejudice simply because one

co-defendant’s defense directly inculpates another, or it is logically impossible for

39 a jury to believe both co-defendants’ defenses.”). Powers clearly has not made

that showing. As we said of the two appellants in the Blankenship case, “[a]side

from pointing out their mutually antagonistic defenses, however, neither . . . ha[s]

shown how the joint trial prejudiced them in any other legally cognizable way.”

Id. There was no abuse of discretion in denying Powers’ motion for a severance.

IV. Jury Selection Issues

Van Mersbergen contends that the district court erred by not permitting the

prospective jurors to be asked during voir dire about each of the witnesses who

would testify during the trial.11 All of the appellants contend that the district court

erred in not granting their Batson v. Kentucky, 476 U.S. 79, 106 S.Ct. 1712

(1986), objection to the government’s use of its peremptory strikes.

A. Failure to Ask the Venire About All Government Witnesses

Jury selection took place during two days. As part of its effort to streamline

and effectively manage a trial involving so many defendants and attorneys, the

district court decided that members of the jury venire would be asked about their

familiarity with only the most important witnesses. To that end, the court directed

11 His contention and arguments about this are adopted by five other appellants: Brown, Farmer, Hill, Laudermill, and Powers.

David Thomas also attempts to adopt this argument, but he cannot do so. He entered into a post-conviction agreement with the government in which he received the benefit of a U.S.S.G. § 5K1.1 substantial assistance motion. In return, Thomas agreed to and did waive his right to appeal issues relating to his conviction. 40 both the prosecution and the defendants to submit lists of each side’s 10 most

important witnesses to be published to the venire instead of the names of the 185

or so potential witnesses on their lists.

Perhaps as a result, the prospective jurors were not asked if they knew a

government witness named Brenda Stewart.12 Early in the trial Stewart testified

that she and her brother had negotiated with Hill for her brother to buy one of the

completed houses in the Cascade subdivision and for a new house to be built for

herself and her mother on one of the empty lots. Before those negotiations could

be completed, however, Stewart shifted to dealing with Alcindor and Graham who

had purchased the Cascade subdivision from Hill through the Alcindor-Williams

Group. Stewart testified that during the course of their dealings she and her

brother paid $25,000 in earnest money to Hill and another $7,500 to the Alcindor-

Williams Group, money which she was never able to recover after she learned that

neither she nor her brother would receive the houses they had contracted to buy.

Shortly after Stewart was called to testify, the court interrupted the

government’s examination to ask Stewart if she were acquainted with Rosemary

Burton. Burton was one of the alternate jurors, and she had apparently alerted a

court security officer that she knew Stewart. Defense counsel for Farmer and

12 We say “perhaps as a result” because we are unable to locate the name “Brenda Stewart” on the lists of potential witnesses contained in the record. 41 Brown complained that if Stewart’s relationship with Burton had been revealed

earlier during voir dire, the defendants could have used a peremptory strike to

remove her. The court questioned Burton outside the presence of the other jurors,

but in open court, regarding her relationship with Stewart. Burton stated that they

worked in different departments and on different floors of the Social Security

Administration, and that they were acquaintances who had interacted only on a

limited basis. Burton assured the court that she would not give any additional

weight to Stewart’s testimony and that knowing Stewart would have no effect on

her ability to serve as a fair and impartial juror.

The court found that Burton could be fair and impartial, and no defendant

asked that she be removed from the jury. Nevertheless, Van Mersbergen contends

that the court empaneled a jury in violation of his constitutional right to a fair trial

by seating Burton, who he argues should have been struck for cause and would

have been if the court had permitted the venire to be asked about all of the names

on the witness list. Van Mersbergen further contends that the district court

abridged his right to exercise his peremptory challenges by failing to show the jury

a complete list of witnesses. He says that if the district court had done so, the

relationship between Burton and Stewart would have come to light, and Van

Mersbergen would have used one of his peremptory challenges to strike Burton

42 from the jury. Alternatively, he argues that even if the empaneled jury was fair

and impartial, reversible error occurred when the government during its closing

arguments mentioned Stewart, but not other “investors,” by name. Actually, what

the government did in its closing was mention Stewart’s name along with the

names of all of those who were involved in the Cascade/Centrum fraud when it

was discussing the details of that fraud.

“The method of conducting the voir dire is left to the sound discretion of the

trial court and will be upheld unless an abuse of discretion is found.” United

States v. Vera, 701 F.2d 1349, 1355 (11th Cir. 1983). It is well established that

“[t]he voir dire conducted by the trial court need only provide reasonable

assurance that prejudice will be discovered if present.” Id. (citation and quotation

marks omitted). Any error involving Burton’s service on the jury is subject to

review only for plain error because no defendant objected to her continued service,

asked that she be questioned further, or took issue with the court’s finding that she

could be fair and impartial. United States v. Raad, 406 F.3d 1322, 1323 (11th Cir.

2005) (“When a defendant fails to object to an error before the district court, we

review the argument for plain error.”).

Burton’s continued presence on the jury could not have been error — much

less plain error — because she did not sit on the final jury that rendered the verdict

43 in this case. Even if Van Mersbergen could convince us that Burton was biased

and should have been excluded from the jury, he cannot prove that he was

prejudiced by the district court’s failure to exclude her because Burton was an

alternate juror who never participated in the jury’s deliberations.13 She could not

have had any effect on the verdicts in the case. Furthermore, Van Mersbergen has

failed to cite to any authority demonstrating that a district court abuses its

discretion by failing to publish the government’s complete list of witnesses to the

venire. We are satisfied that the district court did not abuse its discretion by

disclosing to the venire a list that included 41 corporate victims, 8 affected

condominium complexes, and the government’s 10 most important witnesses, but

failed to include Burton.

Van Mersbergen’s contention that the court’s failure to ask the venire about

all of the witnesses, including Stewart, abridged his right to exercise a peremptory

strike against Burton fails for similar reasons. Since Burton did not serve on the

jury that convicted him, Van Mersbergen was not harmed by the fact that he did

not strike her from the jury. Instead, he gained the opportunity to use that strike

against another venire member.

B. The Batson Issue

13 When the jury was polled after rendering its verdict, Burton’s name was not called. 44 All of the appellants contend that the government improperly used its

peremptory strikes to remove black jurors on the basis of their race, and that the

district court erred in denying their challenge of the government’s strikes under

Batson v. Kentucky, 476 U.S. 79, 106 S.Ct. 1712 (1986). That decision, of course,

established that the Equal Protection Clause forbids the exercise of peremptory

jury strikes on the basis of race. In Batson and its progeny, the Supreme Court

laid out a three-part inquiry for deciding whether a party’s strikes were motivated

by race. Id. at 97–98, 106 S.Ct. at 1723–24; see also Snyder v. Louisiana, 552

U.S. 472, 476–77, 128 S.Ct. 1203, 1207 (2008), Johnson v. California, 545 U.S.

162, 168, 125 S.Ct. 2410, 2416 (2005).

First, the district court must determine whether the party challenging the

strikes has established a prima facie case by showing facts sufficient to support an

inference of discriminatory motive. Johnson, 545 U.S. at 170, 125 S.Ct. at 2417;

United States v. Ochoa-Vasquez, 428 F.3d 1015, 1038 (11th Cir. 2005). If a prima

facie showing is made, Batson’s second step requires the striking party to offer a

race-neutral explanation for its strikes. Ochoa-Vasquez, 428 F.3d at 1038. The

reason given for the peremptory strike need not be a good reason. It can be an

irrational, “silly or superstitious” reason, as long as it is not a discriminatory

reason. Purkett v. Elem, 514 U.S. 765, 768, 115 S.Ct. 1769, 1771 (1995).

45 However, the ultimate burden of persuasion remains with the party challenging the

strike as discriminatory. Id.; Ochoa-Vasquez, 428 F.3d at 1038. In the third and

final stage, the district court must evaluate the persuasiveness of the proffered

reason and determine whether, considering all relevant circumstances, the objector

has carried the burden of proving discrimination. Ochoa-Vasquez, 428 F.3d at

1039.

In this case after the defendants made their Batson objections, the district

court initially had the government state some reasons for its peremptory strikes

against black venire members, but the court cut that process short by not allowing

the appellants to respond fully to the stated reasons. The court denied the Batson

claim both on the ground that there was no prima facie case and also on the ground

that the government’s explanations for its strikes were “legitimate and non-

discriminatory.” Any error in not allowing the defendants to respond to the stated

reasons is purely academic if the court’s finding that there was no prima facie case

stands. See Ochoa-Vasquez, 428 F.3d at 1038 (“Our precedent makes clear that

‘the establishment of a prima facie case is an absolute precondition to further

inquiry into the motivation behind the challenged strike.”) (quoting Central

Alabama Fair Housing Ctr. v. Lowder Realty Co., 236 F.3d 629, 636 (11th Cir.

2000)); Lowder, 236 F.3d at 636 (“[T]he threshold task in considering a Batson

46 challenge, for a district court as well as this Court, is to determine whether a prima

facie case was established. If the answer is no, then the inquiry ceases, and the

challenge should be denied.”).

For standard of review purposes, “[t]he Batson issue before us turns largely

on an evaluation of credibility.” Felkner v. Jackson, ___ U.S. ___, 131 S.Ct.

1305, 1307 (2011) (quotation marks omitted). Accordingly, “[t]he trial court’s

determination is entitled to great deference, and must be sustained unless it is

clearly erroneous.” Id. (citations and quotation marks omitted); see also United

States v. Walker, 490 F.3d 1282, 1292 (11th Cir. 2007) (“We give great deference

to the district court’s determination of a prima facie case.”); Ochoa-Vasquez, 428

F.3d 1015 at 1039 (“We give great deference to a district court’s finding of

whether a prima facie case of impermissible discrimination has been

established.”); United States v. Allen-Brown, 243 F.3d 1293, 1298 (11th Cir.

2001) (“[a]pplying the highly deferential standard of review required by our

precedent” to the prima facie case determination of the district court); King v.

Moore, 196 F.3d 1327, 1334 (11th Cir. 1999) (whether a prima facie showing has

been made is “treated as a question of fact to be decided by the trial judge”);

United States v. Stewart, 65 F.3d 918, 923 (11th Cir. 1995) (“[W]e give great

deference to the district court’s finding as to the existence of a prima facie case.”);

47 United States v. David, 803 F.2d 1567, 1571 (11th Cir. 1986) (“The question [of

whether a prima facie case has been established] is one of fact.”).

After some venire members were excused for hardship and others were

removed for cause, there remained 54 from which the jury was to be selected. One

group of 38 venire members was used to select the first 12 jurors, while the other

group of 16 was used to select six alternate jurors. However helpful that division

may have been for administrative purposes, the law of this circuit is that in

determining whether a prima facie case has been established the peremptory

strikes used to select alternates are to be considered together with those used to

select the initial 12 jurors. Ochoa-Vasquez, 428 F.3d at 1045 n.41 (“In

determining whether a statistical pattern of discrimination exists, our precedent

looks to the total number of peremptory strikes available to the striker, including

the peremptory strikes against alternates.”); see also Johnson v. California, 545

U.S. 162, 164, 125 S.Ct. 2410, 2414 (2005) (considering the racial composition of

“[t]he resulting jury, including alternates”); United States v. Campa, 529 F.3d 980,

998 (11th Cir. 2008) (considering the fact that “the jury included three black jurors

and an alternate black juror”) (emphasis added); Ochoa-Vasquez, 428 F.3d at

1046 (looking to how many of the jurors and alternates were Hispanic); United

States v. Allison, 908 F.2d 1531, 1538 (11th Cir. 1990) (including alternate jurors

48 in the statistical analysis for prima facie case purposes); United States v. Dennis,

804 F.2d 1208, 1211 (11th Cir. 1986) (considering “the fact that the prosecutor

used three of the four peremptory challenges he exercised to strike blacks from the

panel of potential jurors and alternates”) (emphasis added).

Of the total group of 54 venire members from which the jurors and

alternates were struck, 22 (41%) were black, 30 (56%) were white, and 2 (4%)

were Asian. The government had, and it exercised, 14 peremptory strikes; it used

9 (64%) of them against black venire members. The final jury of 18 (12 plus six

alternates) included nine (50%) blacks. If the government had exercised all of the

strikes it could against black venire members, the resulting 18 jurors and alternates

would have included only four (22%) blacks.

Under our precedent these statistics, without more, do not establish a prima

facie case. In United States v. Campa, 529 F.3d 980, 989 (11th Cir. 2008), the

government was allotted 11 peremptory strikes and used 9 of them. Seven of

those nine strikes (78%) were used against blacks. Id. The 16 jurors (there were

four alternates) who were selected included four (25%) blacks. The district court

had found a prima facie case, but we overturned that finding. Id. at 998. Our

decision that a prima facie case had not been established was based primarily on

the fact that “the government did not attempt to exclude as many black persons as

49 it could from the jury,” and the jury with alternates included four blacks. Id. at

998; see also Lowder Realty Co., 236 F.3d at 638 (“This Court has held that the

unchallenged presence of jurors of a particular race on a jury substantially

weakens the basis for a prima facie case of discrimination in the peremptory

striking of jurors of that race.”); United States v. Puentes, 50 F.3d 1567, 1578

(11th Cir.1995) (“Although the presence of African-American jurors does not

dispose of an allegation of race-based peremptory challenges, it is a significant

factor tending to prove the paucity of the claim.”); United States v. Allison, 908

F.2d 1531, 1537 (11th Cir. 1990) (reasoning that the unchallenged presence of

blacks on a jury undercuts the inference of impermissible discrimination that

might arise solely from striking other black prospective jurors).

The case for finding no prima facie case is even stronger here than it was in

Campa. Here the government used a smaller percentage of its strikes against

blacks than in Campa (64% versus 78%), the number of black jurors it could have

but did not exclude was greater than in Campa (five versus two), and there were

more blacks left among the jurors who were selected than in Campa (nine or 50%

versus four or 16%). See also Ochoa-Vasquez, 428 F.3d at 1045–46 (no prima

facie case where 44 of the 82 (54%) of the venire members were Hispanic, the

government used 5 of its 9 (56%) strikes against Hispanics, and 6 of the 17 (35%)

50 jurors and alternates selected to serve were Hispanic); Dennis, 804 F.2d at 1209,

1211 (affirming finding of no prima facie case where “the government did not

attempt to exclude all blacks, or as many blacks as it could, from the jury,” and

“the unchallenged presence of two blacks on the jury undercuts any inference of

impermissible discrimination that might be argued to arise from the fact that the

prosecutor used three of the four peremptory challenges [the government]

exercised to strike blacks from the panel of potential jurors or alternates”).

Of course, the prima facie case determination is not to be based on numbers

alone but is to be made in light of the totality of the circumstances. Johnson v.

California, 545 U.S. 162, 168, 125 S.Ct. 2410, 2416 (2005) (the defendant must

make out a prima facie case “by showing that the totality of the relevant facts

gives rise to an inference of discriminatory purpose”) (quoting Batson, 476 U.S. at

93–94, 106 S.Ct. at 1712); Ochoa-Vasquez, 428 F.3d at 1044 (in order to

determine whether a prima facie case has been established “courts must consider

all relevant circumstances”). In this case, however, there is no circumstance other

than numbers to support an inference of discrimination.

The subject matter of the case can sometimes suggest a motive for

discriminatory use of peremptory strikes. Ochoa-Vasquez, 428 F.3d at 1045 n.39

(“In some Batson claims, the subject matter of the case may be relevant if it is

51 racially or ethnically sensitive.”). For example, in United States v. Stewart, 65

F.3d 918 (11th Cir. 1995), we noted that “Batson teaches that a prima facie case

determination should include an examination of all relevant circumstances,” and

“[a]mong the relevant circumstances is the subject matter of the case being tried.”

Id. at 925 (quotation marks omitted). In Stewart, where the challenge was to the

defendants’ use of peremptory strikes against white venire members, the subject

matter weighed heavily in favor of a prima facie case finding because the

defendants were Ku Klux Klan members who were being prosecuted for a racially

motivated hate crime against blacks. Id. at 921–22, 925–26. Another example is

Johnson, where the Supreme Court determined that the defendant had established

a prima facie case that the prosecution had used its strikes in a racially

discriminatory way against blacks. 545 U.S. at 173, 125 S.Ct. at 2419. In the

course of making that determination, the Court quoted with approval a lower

court’s statement that the fact “a black defendant was ‘charged with killing his

White girlfriend’s child’” was a “highly relevant” circumstance. Id. at 167, 125

S.Ct. at 2415 (quotation marks omitted). Here, by contrast, the subject matter of

the case is not the least bit racial. This is a mortgage fraud case in which the

victims are colorless institutions. The only relevant color is the color of money,

and that shade of green is race neutral.

52 The fact that the defendants are the same race as the struck jurors is another

circumstance that can be relevant to the prima facie case question. See Bui v.

Haley, 321 F.3d 1304, 1318 (11th Cir. 2003) (though not dispositive, it may be

“noteworthy” for Batson purposes whether defendants or victims are of same race

as excluded jurors); Allen-Brown, 243 F.3d at 1298 (race of defendants can be

considered as relevant circumstances in evaluating Batson challenge). In this case,

however, most of the defendants being tried were not of the same race as the jurors

against whom the challenged strikes were made. Nine of the 12 defendants (75%)

were white, as were 11 of the 13 (85%) defense lawyers at counsel table. Because

the predominant race of the defendants and their attorneys could not have supplied

a motive for the government to remove blacks from the jury, it does not weigh in

favor of a prima facie case. The appellants have not suggested any other

circumstance that points toward the existence of a prima facie case of a

Batson violation.

For these reasons, and giving the district court’s finding the deference that it

is due, we cannot conclude the court erred in determining that the defendants

failed to establish a prima facie case that the government used its peremptory

strikes in a racially discriminatory manner.

V. Evidentiary Issues

53 A. Lay Opinion Testimony

At trial, the district court permitted several representatives of victim lending

institutions, all of whom were involved in mortgage and loan approval for their

respective companies, to testify about whether the disclosure of misrepresentations

in some of the fraudulent loan applications would have had any effect on their

decision to approve the mortgage or loan. Farmer objected to this line of

questioning several times, and he now contends that the district court erred by

admitting what he characterizes as expert testimony without following the proper

procedures for qualifying an expert witness or for disclosing the contents of the

expert’s testimony as required by Rule 16(g) of the Federal Rules of Criminal

Procedure.14 We review a lower court’s decision to admit evidence only for an

abuse of discretion. United States v. Kennard, 472 F.3d 851, 854 (11th Cir. 2006).

According to Federal Rule of Evidence 701, a lay witness may offer

opinions that are: “(a) rationally based on the perception of the witness, (b)

helpful to a clear understanding of the witness’ testimony or the determination of a

fact in issue, and (c) not based on scientific, technical, or other specialized

14 Brown, Hill, Powers, and Van Mersbergen adopt this argument. David Thomas attempts to do so but cannot because he waived his right to appeal his conviction. See supra, n.11.

54 knowledge within the scope of Rule 702.”15 Fed. R. Evid. 701. The Advisory

Committee explained that the purpose of the 2000 amendment that added

subsection (c) to Rule 701 was “to eliminate the risk that the reliability

requirements set forth in Rule 702 will be evaded through the simple expedient of

proffering an expert in lay witness clothing.” Fed. R. Evid. 701 Advisory Comm.

Notes. Farmer argues that the district court permitted the government to disguise

its experts in lay witness clothing by allowing witnesses from lending institutions

to answer the government’s hypothetical questions about their lending decisions

despite the fact that the hallmark of an expert witness is his ability to answer

hypothetical questions. See United States v. Henderson, 409 F.3d 1293, 1300

(11th Cir. 2005).

As the Advisory Committee made clear and as we have held, however, Rule

701 does not prohibit lay witnesses from testifying based on particularized

knowledge gained from their own personal experiences. In Tampa Bay

15 Rule 702 provides:

If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.

Fed. R. Evid. 702. 55 Shipbuilding & Repair Co. v. Cedar Shipping Co., Ltd., 320 F.3d 1213 (11th Cir.

2003), which the district court relied upon, we addressed whether the amended

version of Rule 701 permits an officer or employee of a corporation to offer lay

opinion testimony about industry standards and pricing. We concluded that the

district court had not abused its discretion in permitting officers and employees to

testify as lay witnesses about the reasonableness of their corporation’s pricing in

light of industry standards. Our reasoning was that their testimony was “based

upon their particularized knowledge garnered from years of experience within the

field.” Id. at 1223. As we noted in Tampa Bay, the Advisory Committee notes to

the 2000 amendments specifically carve out the lay opinion testimony of business

owners or officers from subsection (c)’s exclusion, and explain that:

most courts have permitted [owners and officers] to testify . . . without the necessity of qualifying the witness as an . . . expert. Such opinion testimony is admitted not because of experience, training or specialized knowledge within the realm of an expert, but because of the particularized knowledge that the witness has by virtue of his or her position in the business. The amendment does not purport to change this analysis.

Tampa Bay, 320 F.3d at 1222 (quoting Fed. R. Evid. 701 Advisory Comm. Notes).

Farmer also complains that the lender representatives should not have been

allowed to testify about what their institutions would have done had they known

that several representations in various loan applications were falsified. He argues

56 that “the ability to answer hypothetical questions is the essential difference

between expert and lay witnesses.” Henderson, 409 F.3d at 1300 (quotation marks

and alteration omitted). As the Advisory Committee’s notes indicate, however,

“[t]he amendment does not distinguish between expert and lay witnesses, but

rather between expert and lay testimony.” Fed. R. Evid. 701 Advisory Comm.

Notes. And we held in Tampa Bay that the opinion testimony of a business owner

or officer about the manner in which that company conducts its business, which is

based on particularized knowledge she gained in her position, is properly treated

as lay testimony. Admission of that testimony does not require that she be

qualified as an expert under Rule 702.

Most of the lay witnesses who answered hypothetical questions in this case

did not do so based on any “scientific, technical or other specialized knowledge,”

but instead based their testimony on their personal experiences as officers of

financial institutions with knowledge of their companies’ policies and of the

specific transactions at issue. Besides, it does not take any specialized or technical

knowledge to realize that lending institutions would be reluctant to approve a loan

application if they knew that it contained false statements about material facts.

Because of that, there is little or no danger that lay witness testimony was used to

evade the reliability requirements of Rule 702. For these reasons, the district court

57 did not abuse its discretion by permitting the witnesses who had personally dealt

with the fraudulent loan transactions at issue to respond to the government’s

questions about what would have happened if the facts had been different. See

United States v. Munoz-Franco, 487 F.3d 25, 35–36 (1st Cir. 2007) (permitting a

bank vice president to offer his opinion that the bank’s loan classifications would

have been improper based on certain facts because his opinion “was based on

knowledge of [the bank’s] practices that he acquired during his employment

there”).

As for the witnesses who were not personally involved with the transactions

at issue, any error in admitting their testimony was harmless. United States v.

Frazier, 387 F.3d 1244, 1266 n.20 (11th Cir. 2004) (en banc) (requiring reversal in

a criminal case only if erroneously admitted evidence “[had] a substantial

influence on the outcome of a case or [left] grave doubt as to whether they affected

the outcome of a case”) (quotation marks omitted). Several factors weigh against

a conclusion that the erroneous admission of these witnesses’ opinions had a

substantial impact on the outcome of this case. One is that other testimony to

exactly the same effect by representatives of other institutions with personal

knowledge of and involvement in similar transactions was properly admitted, as

we have just discussed. All of the appellants who now claim that the district court

58 erred, with the exception of Farmer and Brown, invited similar testimony from

other identically situated lay witnesses by entering into stipulations about how

those witnesses would testify. Farmer and the other appellants failed to object to

the same type of testimony by other lay witnesses. And the court explained to the

jury that it should consider witnesses’ answers to hypothetical questions only to

the extent that the facts assumed in the hypothetical questions were proven. In

light of those considerations and the overwhelming amount of other evidence

presented at trial, we are not left with a grave doubt that the outcome was affected

by any error in admitting the testimony. Instead, we are convinced that any such

error was harmless.

B. Summary Charts

Brown contends that she and her co-defendants were subjected to a “trial by

charts” in violation of their right to a fair trial because the district court permitted

the government to introduce summary charts and to introduce testimony that

explained and summarized the contents of the charts without qualifying the

witnesses as experts.16 See United States v. Richardson, 233 F.3d 1285 (11th Cir.

2000). Permitting the use of summary evidentiary charts is within the discretion

16 Farmer, Hill, Laudermill, Powers, and Van Mersbergen adopt this argument. David Thomas attempts to do so but cannot because he waived his right to appeal his conviction. See supra, n.11.

59 of the district court, id. at 1293, but Laudermill argues that the district court

abused its discretion because the charts were misleading, wasted time, and

violated various rules of evidence.

The government complied with the requirements of Rule 1006 by making

the summary charts and related exhibits available to defense counsel before trial.

There was initially some dispute about that, but it was resolved when the

government used a copy service to scan all of the exhibits into electronic form and

made them available to defense counsel before trial. Even if the charts were

improperly admitted, Brown and the other appellants have failed to demonstrate

how they were prejudiced by the error. All of the defendants had access to the

government’s documentary evidence months before trial and to the marked and

numbered exhibits themselves before trial, the underlying documents were

admitted into evidence before the summaries, and each of the defendants had an

opportunity to cross-examine the government’s witnesses about the summaries.

Not only that, but Brown and her co-defendants also used the government’s

charts at various times during the trial — during direct examination, cross-

examination, and in their closing arguments. Finally, the district court gave

several cautionary instructions regarding the use of the summary charts, and we

presume that the jury followed those instructions. United States v. Stone, 9 F.3d

60 934, 938 (11th Cir. 1993) (“The crucial assumption underlying the system of trial

by jury is that juries will follow the instructions given them by the trial judge.”

(quotation omitted)).

C. Amount of Loss

We also reject Laudermill’s contention that the district court committed

reversible error by admitting during the trial evidence about the amount of loss

that resulted from the fraud and money laundering.17 Laudermill argues that while

the fact of loss had to be proven, the amount of the loss was irrelevant, and the

prejudicial effect of the amount of the loss substantially outweighed any probative

value it had.

The district court did not abuse its discretion. The amount of the loss, of

course, demonstrates the fact of loss. Beyond that, the victims’ loss is related

enough to the defendants’ gain to bear on the motive that the defendants had for

committing the fraud. “[M]otive is always relevant in a criminal case, even if it is

not an element of the crime.” United States v. Sriyuth, 98 F.3d 739, 747 n.12 (3d

Cir. 1996). And with financial crimes, the more money, the more motive. We are

not surprised that Laudermill has been unable to cite a single decision from any

17 Brown, Farmer, Hill, Powers, and Van Mersbergen adopt this argument. David Thomas attempts to do so but cannot because he waived his right to appeal his conviction. See supra, n.11.

61 court holding that the amount of loss inflicted on the victim by the defendant’s

crime is inadmissible under Rule 401, Rule 403, or for any other reason.

D. Alcindor’s Evidence About Criminal Intent

Alcindor contends that the district court abused its discretion by excluding

as irrelevant evidence that he says would have helped show that he was merely

used by Graham. The proffered evidence was that others believed that Graham

had taken advantage of them. What others felt about their own roles is not

probative of whether Alcindor himself lacked criminal intent, and, in any event,

the jury did hear testimony from some other witnesses that they felt used by

Graham.

Alcindor also contends that it was an abuse of discretion for the district court

to exclude evidence in the form of his “employee service record,” which he

asserted would show “where he was working, what he was making, [and] how

much he gave up” in order to invest with Graham in the Cascade development.

Alcindor’s position was that his proffered evidence about what he had given up to

invest with Graham would show that he lacked any intent to defraud, but that

evidence does not make it any less likely that Alcindor did not intend to

participate in the fraudulent activities. Alcindor’s investment in the scheme

reflects a belief that the likelihood and amount of reward was worth what he was

62 risking, but that says nothing about whether he believed the scheme was

legitimate. In fact, the more of his own money Alcindor invested in the

undertaking, the more motive he had to engage in any action necessary to prevent

losing it.

In any event, even if the court should have permitted Alcindor to introduce

that evidence, we are convinced that he was not prejudiced by its exclusion.

Alcindor’s brothers were allowed to testify that they had to wire him money after

he had expended his savings, retirement, and 401(k) funds on the Cascade project,

and Alcindor made arguments based on that testimony in his closing.

E. Powers’ Brady Claim

Powers contends that the government improperly withheld evidence in

violation of Brady v. Maryland, 373 U.S. 83, 83 S.Ct. 1194 (1963). The evidence

in question is an e-mail addressed to Rector from a sender Powers identified as

“Sanski.” Powers claims that name was being used by Alex Rybinski, who is the

brother of Wayne Rybinski, a straw buyer. The e-mail, dated August 15, 2001, to

Rector from “Sanski” stated:

I need to know if you can lend my brother $15,000.00? he is willing to pay another $1,500.00. Powers sent him papers for seven units. E-mail or call. thanks for your time. A.W.

63 Powers claims that the e-mail was favorable to his defense because Wayne

Rybinkski testified during trial that Powers had directed him to contact Rector in

order to request a short-term loan that would inflate Rybinski’s bank account so

that he would have enough of a balance in it to qualify for a loan in a straw

transaction. Powers argues that the e-mail contradicts that testimony. When

viewed in the context of other evidence introduced at trial regarding the Rybinski

straw transactions, however, the e-mail is consistent with the testimony of Wayne

Rybinski.

The evidence showed that Rybinski engaged in multiple transactions to

purchase condominiums, each of which required him to have $15,000 in his bank

account in order to acquire the loans necessary to complete the purchases. In May

2001, in order to complete the first transaction Rybinski combined some of his

own money with money he had borrowed from family members. Rybinski

testified that after that transaction and before his next set of purchases, Powers had

again informed him that he would need a balance of $15,000 in the bank. Because

Rybinksi did not have the funds, Powers instructed him to call Rector. Bank

records show a $15,000 wire transfer from Rector to Rybinski on August 2, 2001.

Rybinski testified that Rector called him after the first wire transfer to tell him that

the loan transactions were not ready, and as a result, Rybinski returned the money

64 by wire transfer on August 6. Bank records also show a second $15,000 wire

transfer from Rector to Rybinski on August 20, which was after the loans were

ready to be completed, and they show that Rybinski returned the money to Rector

by wire transfer on August 23.

The email in question was dated August 15, which was after the first set of

wire transfers but before the second. That is consistent with the statement in the e-

mail that “he is willing to pay another $1,500.00.” Because of its timing the e-

mail does not contradict Rybinski’s testimony that he contacted Rector to request a

loan at the suggestion of Powers. Powers’ Brady claim focuses on Rybinski’s

testimony about his request for a loan from Rector that generated the first set of

wire transfers. Those were completed before the email in question was sent on

August 15. The e-mail referred to the second set of wire transfers.

Because the e-mail was not inconsistent with Rybinski’s testimony, it could

not have been used to impeach his testimony against Powers. For that reason

evidence of it was neither favorable to Powers nor material to the result of the

trial. There was no Brady violation. See Strickler v. Greene, 527 U.S. 263, 290,

119 S.Ct. 1936, 1952 (1999); Allen v. Sec’y, Florida Dep’t of Corr., 611 F.3d 740,

745–46 (11th Cir. 2010); Hammond v. Hall, 586 F.3d 1289, 1305 (11th Cir. 2009).

VI. Miscellaneous Trial Issues

65 A. Antagonism Toward the Defendants

Van Mersbergen contends that the district court abused its discretion and

violated his Fifth and Sixth Amendment rights in the manner in which the court

conducted the trial, specifically by making critical and “harsh” statements to some

of the defense counsel at trial.18 Out of the nineteen exchanges between the court

and defense counsel that are cited by Van Mersbergen, however, two occurred at

pretrial conferences, eleven occurred during the trial but outside the presence of

the jury, and only six occurred within the presence of the jury. “Because a clear

effect on the jury is required to reverse for comment by the trial judge,” we will

only consider the trial court’s comments that were made in the presence of the

jury. United States v. Palma, 511 F.3d 1311, 1317 (11th Cir. 2008) (quotation

A trial court is required to “exercise reasonable control over the mode and

order of interrogating witnesses and presenting evidence” in order to ensure that

evidence is presented effectively for the ascertainment of truth, time is conserved,

and witnesseses are protected from harassment. See Fed. R. Evid. 611(a). “The

discharge of this responsibility necessarily entails the exercise of discretion.”

18 Brown, Hill, Farmer, and Powers adopt this argument. David Thomas attempts to do so but cannot because he waived his right to appeal his conviction. See supra, n.11. 66 Haney v. Mizell Mem’l Hosp., 744 F.2d 1467,1477 (11th Cir. 1984). And that

discretion is broad.

In conducting a trial, the judge “may comment on the evidence, may

question witnesses and elicit facts not yet adduced or clarify those previously

presented, and may maintain the pace of the trial by interrupting or cutting off

counsel as a matter of discretion.” Moore v. United States, 598 F.2d 439, 442 (5th

Cir. 1979)19 (citations omitted). The trial court abuses its discretion “[o]nly when

the judge’s conduct strays from neutrality,” id., and even then only when its

remarks demonstrate “pervasive bias and unfairness” that actually prejudice a

party, United States v. Ramirez-Chilel, 289 F.3d 744, 750 n.6 (11th Cir. 2002).

In this case the district court’s comments were not derogatory or

disparaging, and none of them were about the credibility of witnesses or the

substance of any evidence. They were directives to defense counsel aimed at

moving things along. There is no likelihood that the statements made in the

presence of the jury led it to believe that the judge was biased against any of the

defendants. That is especially true given that the judge was evenhanded, directing

as many comments and reprimands at the government’s attorneys as he did at

defense counsel. For example, on more than one occasion the judge scolded the

19 In Bonner v. City of Prichard, 661 F.2d 1206 (11th Cir. 1981) (en banc), we adopted as binding precedent the decisions of the former Fifth Circuit issued before October 1, 1981. 67 government attorneys for presenting cumulative evidence or otherwise delaying

the proceedings. The judge also instructed the jury to disregard any of the

comments he made to counsel during trial, and we presume the jury followed those

instructions. See Stone, 9 F.3d at 938.

Considering the record as a whole, Newman v. A.E. Staley Mfg. Co., 648

F.2d 330, 334–35 (5th Cir. Unit B. 1981), we conclude that “[t]he actions of the

trial court challenged here amount to no more than attempts by the presiding judge

to expedite the proceedings,” United States v. Hill, 496 F.2d 201, 202 (5th Cir.

1974). And when we say that the judge was trying to “expedite” the trial, we

mean that he was trying to keep it from bogging down. There were a dozen

defendants being jointly tried on a total of 187 counts, involving more than 300

transactions, and more than a dozen attorneys were participating in the trial. As it

was, the presentation of evidence alone took 31 trial days, and if the judge had not

kept a firm hand on the wheel, the trial might have skidded off the road; the

journey to judgment certainly would have taken much longer than it did. Even if

the judge was understandably a little impatient at times, we have explained before

that “an occasional lapse of patience from the bench will not suffice to overturn a

conviction returned after a full and fair presentation of the evidence.” Id. There

was no rush to judgment.

68 B. The District Court’s Encouragement to Stipulate

Nor were any of the defendants railroaded. Van Mersbergen contends that

he was, arguing that he was deprived of due process because the district court

threatened to punish the defendants at sentencing if they refused to agree to

reasonable stipulations in order to expedite the trial proceedings.20 Van

Mersbergen focuses on this comment by the district court:

The Court: Well, the failure to agree to reasonable and usual stipulations is not technically an obstruction of justice but it’s certainly a factor that I can consider in future proceedings, if there are any in this case. Who wouldn’t agree to the stipulations?

Ms. Nelan: I believe it was Mr. Farmer. . . .

Farmer agreed to some stipulations but not to others. He stipulated to the

authenticity of several checks and to the testimony of several borrowers; he

declined to stipulate to the testimony of officials from the defrauded lenders.

We have stated that “[f]ederal law places no limitation on the information

which a court can consider in determining an appropriate sentence.” United States

v. Rodriguez, 765 F.2d 1546, 1554–55 (11th Cir. 1985) (citing 18 U.S.C. § 3661

(originally enacted as 18 U.S.C. § 3577)). To the same effect is 18 U.S.C. § 3661,

which provides: “No limitation shall be placed on the information concerning the

20 Brown, Hill, Farmer, and Powers adopt this argument. David Thomas attempts to do so but cannot because he waived his right to appeal his conviction. See supra, n.11.

69 background, character, and conduct of a person convicted of an offense which a

court of the United States may receive and consider for the purpose of imposing an

appropriate sentence.” 18 U.S.C. § 3661.

We have recognized, however, that in spite of § 3661’s broad language, a

“sentencing court cannot consider against a defendant any constitutionally

protected conduct.” United States v. Rodriguez, 959 F.2d 193, 197 (11th Cir.

1992) (quotation marks omitted); see also U.S.S.G. § 1B1.4 (“In determining the

sentence to impose within the guideline range, or whether a departure from the

guidelines is warranted, the court may consider, without limitation, any

information concerning the background, character and conduct of the defendant,

unless otherwise prohibited by law.”) (emphasis added); United States v. Burgos,

276 F.3d 1284, 1291–92 (11th Cir. 2001). If one considers a criminal defendant’s

failure to stipulate to be the exercise of a constitutional right, it would seem that

increasing a defendant’s sentence because of his failure to stipulate crosses the

line. But some of the lines in this area are blurry.

In United States v. Malekzadeh, 855 F.2d 1492 (11th Cir. 1988), the

defendant argued that she had been punished for exercising her constitutional right

not to testify because the sentencing court gave her a longer sentence as a result of

her refusal to testify against the man she considered her husband. Id. at 1498.

70 Because it was a joint trial, id. at 1494, the defendant would have had to plead

guilty in order to testify against the man who was her co-defendant. We did not

dispute what she claimed had happened, but we rejected her argument on the

ground that “a court is absolutely entitled to consider a defendant’s failure to

cooperate.” Id. We cited for that proposition Roberts v. United States, 445 U.S.

552, 100 S.Ct. 1358 (1980). In Roberts the Supreme Court held that a court could

lengthen a defendant’s term of imprisonment by imposing consecutive instead of

concurrent sentences because he had refused to cooperate in the investigation of

another crime in which he was a confessed participant. We interpreted the Roberts

decision as being based on the sentencing court’s need “to reward those who had

cooperated and to encourage those who might cooperate in the future.”

Malekzadeh, 855 F.2d at 1498. That those who fail to cooperate receive longer

sentences than those who are equally culpable but do cooperate is an inevitable

product of encouraging cooperation.

That principle is written throughout our criminal law. For example, the

Supreme Court has held that it is entirely permissible for prosecutors to threaten a

defendant with a harsher charge carrying a much longer sentence in order to

pressure him into pleading guilty, and then carry through with the threat when the

defendant has the temerity to insist on his constitutional right to trial.

71 Bordenkircher v. Hayes, 434 U.S. 357, 98 S.Ct. 663 (1978). And the sentencing

guidelines reward those who accept responsibility, the chief indicia of which is

that they helped the prosecution get the case to the sentence stage more efficiently

by pleading guilty. See U.S.S.G. § 3E1.1.

A distinction might be drawn between the carrot and the stick, between

rewarding a defendant for giving up rights to which he is entitled on one hand, and

punishing him for refusing to give up those rights on the other. The argument

against that distinction is that the result for the defendant is the same. If a

defendant receives a sentence of 100 months because he went to trial while his

equally culpable co-defendant gets 50 months because he cooperated by pleading

guilty, is a stick being administered to the defendant or a carrot being given to the

co-defendant?

Whatever may be said about the use of sticks, the law seems to be clear that

he who receives a break has gotten a carrot, and there is nothing wrong with

doling them out. And that is enough to decide this case. At trial, the district court

sometimes expressed its sentiment regarding stipulations by indicating that

cooperation would result in a lower sentence, and at other times by indicating that

failure to cooperate would result in a higher one. At sentencing, however, there

were only carrots — cooperation was rewarded all around. The court specifically

72 told Hill, Powers, Van Mersbergen, Thomas, and Farmer that each of them

received lower sentences than they otherwise would have because each had agreed

to reasonable and appropriate stipulations during the trial.

Van Mersbergen insinuates that prejudice nevertheless resulted because the

court did in fact punish Farmer for his refusal to enter into some of the

stipulations, see supra at 72, as evidenced by the disparity between Farmer’s

sentence (127 months) and Brown’s (5 months).21 The record, however, reflects

that the district court explicitly stated that it sentenced Farmer towards the low end

of his guidelines range (121–151 months) because he had entered into reasonable

stipulations that shortened the trial, which reduced the costs to the government in

time and money. The court did not intimate that it was imposing a longer sentence

because Farmer had not entered into some of the other stipulations.

The government also points out that Farmer deserved a much longer

sentence than Brown because he participated in far more transactions than she did.

The court adequately explained its reasons for both sentences, and those reasons

did not involve a difference in the number of stipulations the two defendants

entered into. The reasons the court gave for Farmer’s sentence (which was, as we

have mentioned, near the bottom of the guidelines range) included the magnitude 21 Of course, Van Mersbergen has no standing to complain about what happened to Farmer, but his argument on this issue has been adopted by Farmer, so we will consider the argument as though it were in Farmer’s own brief. 73 of the crime, the loss involved, and Farmer’s lack of remorse. As for Brown, the

court explained that it was sentencing her to only five months when the guidelines

recommended a sentence between 63 and 78 months because of “her extraordinary

lack of profit” and because the amount of loss grossly overstated her criminal

conduct compared to that of the other defendants. Those are reasonable bases for

the difference in sentences imposed on Farmer and Brown.

C. Powers’ Contentions

Powers contends that the district court abused its discretion in various

rulings on his objections and motions relating to evidentiary matters. First,

Powers contends that the court abused its discretion in preventing him from

attacking the credibility of one of the government’s witnesses. Elizabeth

Rusciano, a straw borrower, had testified that she applied for loans using Powers

and Wayne Jenkins as her loan officers on separate occasions but that she was

completely unaware that the applications they filled out for her contained

fraudulent information. During his cross-examination of Wayne Jenkins, Powers’

counsel sought to elicit testimony that in reality Rusciano was complicit in

concocting the fraudulent lease used in the loan she obtained through Jenkins.

The district court cut short this line of questioning, explaining that it was

“remote,” “inconsequential,” and a “needless expenditure of time” because

74 whether or not Rusciano had conspired with Jenkins was irrelevant to whether

Powers had prepared fraudulent loan applications for her. That was not an abuse

of discretion.

Powers also argues that the court’s comments when ruling on that matter so

prejudiced him that the court should have granted a mistrial. Even improper

comments by a judge warrant reversal only if they had such a prejudicial effect on

the jury that they denied the defendant a fair trial. United States v. Tampas, 493

F.3d 1291, 1303 (11th Cir. 2007). The comments that Powers complains about

could not have had any effect on the jury because they were made outside its

presence. Although the court did ask Powers’ attorney in the presence of the jury

about the relevance of his line of questioning, that was an entirely proper question

and could not have unfairly prejudiced the jury. See Tampas, 493 F.3d at 1303

(“[T]he brief question to defense counsel in the context of an evidentiary objection

had no clear effect on the jury.”). And, as we have mentioned before, the court

instructed the jury to disregard any comments by it or the attorneys.

Powers also contends that he was prejudiced by three statements or

comments one of the prosecutors made at the trial: a question about Powers being

terminated from his job at First Realty Mortgage; the prosecutor’s statement to the

court about a question she wanted to ask a witness about Powers’ income; and the

75 prosecutor’s mention of evidence related to a dismissed count during closing

arguments. “Prosecutorial misconduct requires a new trial only if we find the

remarks (1) were improper and (2) prejudiced the defendant’s substantive rights.

In order to assess the prejudicial impact of a prosecutor’s statements, we must

evaluate them in the context of the trial as a whole and assess their probable

impact on the jury.” United States v. Hernandez, 145 F.3d 1433, 1438 (11th Cir.

1998). For a prosecutor’s prejudicial comments to affect a defendant’s substantial

rights, there must be a reasonable probability that, but for the remarks, the

outcome would have been different. United States v. Hall, 47 F.3d 1091, 1098

(11th Cir. 1995).

Considering the pile of evidence proving the prosecutor’s case against

Powers, even if we were to assume that her remarks or questions were improper,

Powers has not demonstrated that his substantial rights were prejudiced,

particularly in light of the court’s instructions to the jury to disregard any

comments made by the attorneys during the trial. See Hall, 47 F.3d at 1098.

Finally, Powers contends that the district court erred by denying his motion

for a mistrial based on the prosecutor’s reference to evidence about Count 33, a

charge that had already been dismissed (on the government’s motion because it

76 listed the wrong lender). Powers failed to object to the prosecutor’s statement, and

that statement did not rise (or sink) to the level of plain error.22

VII. Jury Instruction Issues

Brown, Farmer, Hill, and Van Mersbergen challenge the district court’s

refusal to give some of their requested jury instructions.23 Hill asked for one about

good faith reliance on the advice of counsel as a defense, which the district court

rejected on the basis that there was insufficient evidence to support it. All of the

defendants requested a general instruction on good faith. The government did not

oppose one, except as to the 18 U.S.C. § 1014 false credit application charges; it

asked that the good faith instruction be modified so that it did not apply to the §

1014 charges. The government also asked that the good faith instruction include a

caveat to the effect that ignorance of the law was not a defense. The court granted

the government’s requests and issued a modified good faith instruction that

included the so-called “ignorance of the law” instruction.

22 Powers also contends that even if no single ruling or occurrence about which he complains deprived him of a fair trial, the cumulative effect of all of them did. See United States v. Baker, 432 F.3d 1189, 1223 (11th Cir. 2005). We disagree. Powers may not have gotten a perfect trial, but he was not entitled to one. See United States v. Ramirez, 426 F.3d 1344, 1353 (11th Cir. 2005) (“A defendant is entitled to a fair trial but not a perfect one.”) (quotation marks omitted). He did receive a fair trial. 23 David Thomas also makes this argument, but we cannot consider it as to him because he waived his right to appeal his conviction. See supra, n.11.

77 The court also granted, over the defendants’ objections, the government’s

request for an instruction regarding deliberate ignorance. Brown and Powers

argue that was error. The court denied as argumentative Powers’ request for a

theory of defense charge, and he argues that was error.

While we review de novo issues about whether the content of instructions

that were given are correct statements of law, United States v. Chandler, 996 F.2d

1073, 1085 (11th Cir. 1993), we review only for an abuse of discretion a district

court’s refusal to give a requested jury instruction. See United States v. Sirang, 70

F.3d 588, 593 (11th Cir. 1995). We will reverse a district court’s refusal to give

an instruction only if: “(1) the requested instruction was a correct statement of the

law, (2) its subject matter was not substantially covered by other instructions, and

(3) its subject matter dealt with an issue in the trial court that was so important that

failure to give it seriously impaired the defendant’s ability to defend himself.”

United States v. Jordan, 582 F.3d 1239, 1247–48 (11th Cir. 2009); see also Sirang,

70 F.3d at 593.

A. Hill’s Proposed Instruction about Good Faith Reliance on Advice of Counsel

Hill argues that because he used attorneys for most of the fraudulent

transactions and closings, he was entitled to rely on their implied advice that what

78 he was doing was legal.24 He requested that the jury be instructed that good faith

reliance on his counsel’s advice was a complete defense to the charges against

him. The government opposed the instruction on the ground that it would be

misleading because Hill’s attorneys were also co-conspirators. The district court

denied Hill’s request, finding that there was insufficient evidence to support the

instruction because there had been no testimony that any of the defendants actually

did rely on advice of counsel. In denying Hill’s post-trial motion for acquittal, the

district court reiterated that there was no evidence to support the instruction. It

added that the fraud was obvious from the face of the documents and that the

attorneys who testified about the residential mortgage fraud scheme were admitted

co-conspirators.

In order to qualify for an instruction on good faith reliance on the advice of

counsel, a defendant must show that (1) he fully disclosed to his attorney all

material facts that are relevant to the advice for which he consulted the attorney;

and (2) thereafter, he relied in good faith on advice given by his attorney. See

United States v. Miles, 290 F.3d 1341, 1354 (11th Cir. 2002); United States v.

Condon, 132 F.3d 653, 656 (11th Cir. 1998); United States v. Johnson, 730 F.2d

683, 686 (11th Cir. 1984). 24 Brown, Farmer, and Van Mersbergen adopt this argument. David Thomas attempts to do so but cannot because he waived his right to appeal his conviction. See supra, n.11.

79 Although the burden on a defendant to put forth sufficient evidence to

support a proposed jury instruction is low, United States v. Ruiz, 59 F.3d 1151,

1154 (11th Cir. 1995), Hill failed to meet it because there was no evidence to

support the instruction. Hill points out that attorneys were used by many of his

“investors” as well as by the lenders, and he was personally represented by at least

five different attorneys over the course of the events. At no point, however, did

any of the attorneys advise Hill that the overall scheme or all of its essential

components were legal.

Hill argues that he relied on the advice of attorneys Dewrell and Sacks with

respect to Counts 1–14, which charged him with the line of credit fraud on Charter

Bank. Both of those attorneys testified, but they did not say that they had

represented Hill in his dealings with Charter, or that they had reviewed and

advised Hill about the false statements on the credit applications, the false

statements on Hill’s and Graham’s financial statements, or the false statements that

Hill made to Hungerford, a vice president of Charter Bank who had requested

assurances that Hill’s lines of credit were sufficiently secured.

Attorneys Dewrell and Sacks did testify that they advised Hill concerning

the formation and business of Atlanta Condo and Atlanta Millenium (the Hill-

controlled entities involved in the Charter Bank fraud), and that they advised him

80 about his personal transactions with Vargas (his co-conspirator at Charter who

helped him get the lines of credit). Those transactions were not, however, the

basis of the fraud charges. Hill has not pointed to a single piece of evidence

indicating that he fully disclosed to any attorney the material facts relevant to his

obtaining the lines of credit from Charter Bank, or any evidence indicating that

any attorney advised him that his fraudulent representations to Charter were legal.

So, no advice of counsel instruction was warranted on Counts 1–14.

Hill also argues that he relied upon the advice of his co-conspirator

attorneys Halcomb and Wolf with respect to Counts 19–187, charging him with

the multi-property mortgage fraud. Halcomb and Wolf both testified, however,

that at no time did they believe that Hill had come to them for advice, and they

specifically denied ever giving him an opinion as to the legality of those

transactions. Given the lack of evidence to support an advice of counsel

instruction, the district court’s refusal to give one was not an abuse of discretion.25

B. The Good Faith Instruction That Was Given

According to Hill, the court’s instruction on good faith as a defense was

erroneous because it did not cover the false credit application counts, and because

25 We need not reach the government’s alternative arguments that the instruction was properly refused because the fraud was obvious and therefore the reliance could not have been in good faith, or that a defendant may not claim good faith reliance on advice of counsel where the counsel was a co-conspirator who participated in the fraud.

81 its effect was not strong enough to survive the government’s closing argument that

“ignorance of the law is not a defense.”26 We reject both of those arguments.

1. Refusal to Instruct on Good Faith as to the Section 1014 Charges

Hill asked the court to give the pattern jury instruction on good faith as a

defense to all of the charges in the indictment. The court gave that instruction as

to all of the fraud charges in the indictment, except the § 1014 false credit

application charges. At the government’s request, the court left those charges out

of the scope of the good faith instruction. This is what the court told the jury

about good faith as a defense:

Ladies and gentlemen, good faith is a complete defense to the bank, wire and mail fraud charges in the indictment since good faith on the part of the defendant is inconsistent with intent to defraud or willfulness, which is an essential part of such charges.

The burden of proof is not on the defendant to prove good faith, of course, since the defendant has no burden to prove anything. The government must establish beyond a reasonable doubt that the defendant acted with specific intent to defraud as charged in the indictment.

One who expresses an honestly held opinion or an honestly formed belief is not chargeable with fraudulent intent even though the opinion is erroneous or the belief is mistaken; and, similarly, evidence

26 Brown also makes these same arguments about the good faith jury instruction, while Farmer, Laudermill, Powers, and Van Mersbergen adopt Hill’s arguments on it. David Thomas attempts to do so but cannot because he waived his right to appeal his conviction. See supra, n.11.

82 which establishes only that a person made a mistake in judgment or an error in management or was careless does not establish fraudulent intent.

On the other hand, an honest belief on the part of the defendant that a particular business venture was sound and would ultimately succeed would not in and of itself constitute good faith as that term is used in these instructions if in carrying out that venture the defendant knowingly made false or fraudulent representations to others with the specific intent to deceive them.

(emphasis added). Hill’s complaint, as we said, is not with the content of the good

faith instruction as to the “bank, wire and mail fraud charges in the indictment,”

but with the failure to instruct the jury that good faith is also a complete defense to

the § 1014 credit application fraud charges. We assume for present purposes that

good faith is a defense to those charges, which would mean that “the requested

instruction was a correct statement of the law,” the first requirement for finding an

abuse of discretion based on a refusal to give a requested instruction. Jordan, 582

F.3d at 1247.

That assumption without more does not, however, establish that the refusal

to give the good faith instruction as to the § 1014 charges was an abuse of

discretion. As we have explained, the “failure to give the proffered instruction on

good faith is not per se error [because] we must examine the facts of the case to

determine the adequacy of the instructions as a whole and the effect of the

omission on the defendant’s case.” Sirang, 70 F.3d at 594. To move the analysis

83 along, we will assume that there was an evidentiary basis for the good faith

instruction on the § 1014 charge insofar as Hill (and the other defendants who are

pursuing this issue) are concerned. Still, in order to prevail, the defendants must

establish that the subject matter of the requested instruction “was not substantially

covered by other instructions,” and that it “dealt with an issue in the trial court that

was so important that failure to give it seriously impaired the defendant’s ability to

defend himself.” Jordan, 582 F.3d at 1247–48. That is where their position

falters.

The good faith defense for the § 1014 crime was substantially dealt with in

the instructions on the elements of the crime and on the definitions of the required

state of mind. This is what the court instructed the jury about the elements of the §

1014 crime:

Now, ladies and gentlemen, Title 18, United States Code Section 1014 makes it a federal crime or offense for anyone to willfully make a false statement to a federally insured financial institution.

The defendant can be found guilty of that offense only if all of the following facts are proved beyond a reasonable doubt: First, that the defendant knowingly made a false statement or report to the financial institution described in the indictment; second, that the deposits of the institution were insured by the Federal Deposit Insurance Corporation; and, third, that the defendant made the false statement or report willfully and with intent to influence the action of the institution upon an application, advance, commitment or loan or any change or extension thereof.

84 A statement or report is false when made if it is untrue and is then known to be untrue by the person making it.

It is not necessary, however, to prove that the institution involved was, in fact, influenced or misled. The gist of the offense is an attempt to influence such an institution by willfully making a false statement or report concerning the matter.

(emphasis added). See Eleventh Circuit Pattern Jury Instructions (Criminal) at

232–33, Offense Instruction 39 (West 2003).

The definitions the court gave the jury on the key mental state terms were

these:

The word “knowingly,” as that term is used in the indictment or in these instructions, means that the act was done voluntarily and intentionally and not because of mistake or accident.

The word “willfully,” as that term is used in the indictment or in these instructions, means that the act was committed voluntarily and purposely with the specific intent to do something the law forbids, that is, with bad purpose either to disobey or disregard the law.

While you must find that the defendants acted willfully as I have just instructed you, willfulness does not require that the defendants specifically know that the conduct alleged in the indictment constitutes a criminal violation or specifically know which federal or state criminal—excuse me, which federal or state criminal prohibition such conduct may violate.

(emphasis added).

The closest precedent on this issue is United States v. Martinelli, 454 F.3d

1300 (11th Cir. 2006), where we found no reversible error under similar

85 circumstances. The district court in that case refused to give the defendant’s

proffered instruction on good faith as a defense to the charge of conspiracy to

launder money. The court did, however, instruct the jury that the defendant “had

to know the money represented the proceeds of the specified unlawful activity of

mail fraud.” Id. at 1315. The instructions also properly defined the term

“knowingly” so that “the jury plainly had to rule out the possibility that [the

defendant] actually harbored a good-faith belief in the legitimacy of the business

before it could have found that he knew the money represented proceeds of mail

fraud.” Id. at 1316. “In other words, based on the instructions the district judge

gave, if the jury concluded that [the defendant] had a good-faith belief in the

legitimacy of the business, it could not have found that he knew the funds were the

proceeds of mail fraud.” Id.

The same reasoning applies in this case. The court instructed the jury that

the defendants had to have made the false statements wilfully and with intent to

influence the lenders. The instructions properly defined “wilfully” so that the jury

plainly had to rule out the possibility that the defendants actually harbored a good

faith belief in the legitimacy of the scheme before the jury could have found that

they made the false statements wilfully and with the intent to influence the lenders.

See Sirang, 70 F.3d at 595 (“As we have said, the finding of specific intent to

86 deceive categorically excludes a finding of good faith.”) In other words, based on

the instructions the district judge gave, if the jury had concluded that the

defendants had a good faith belief in the legitimacy of the scheme, it could not

have found that they made the false statements wilfully and with the intent to

influence the lenders. The Martinelli decision and common sense compel that

conclusion.

It follows that the instruction on good faith as a defense to the § 1014

charge was “substantially covered by other instructions,” Jordan, 582 F.3d at

1247, so that there was no abuse of discretion in failing to give it, although we

note, as the Martinelli opinion did, that “it would have been wiser to instruct on

the defense of good faith.” Martinelli, 454 F.3d at 1317.

2. “Ignorance of the Law Is Not a Defense”

In addition to modifying the good faith instruction to exclude the false

credit application charges, the district court granted the government’s request to

include an additional instruction to the effect that ignorance of the law is not a

defense, although the instructions did not use those words. The language added to

the instructions at the government’s request stated that:

While you must find that the defendants acted willfully as I have just instructed you, willfulness does not require that the defendants specifically know that the conduct alleged in the indictment constitutes a criminal violation or specifically know which federal or state 87 criminal—excuse me, which federal or state criminal prohibition such conduct may violate.

At closing, the government paraphrased this language by arguing to the jury that

“ignorance of the law is not a defense.” After Hill argued in closing that he had

relied in good faith on the advice of his attorneys, the government responded by

urging the jury to “remember, ignorance of the law is not a defense.”

A court’s improper jury instruction necessitates reversal only if we are left

with “a substantial and ineradicable doubt as to whether the jury was properly

guided in its deliberations.” United States v. Beasley, 72 F.3d 1518, 1525 (11th

Cir. 1996). We are not convinced that, viewing the charges as a whole, the jury

was confused or misguided by the court’s inclusion of the ignorance of the law

instruction. See Everett v. Carnival Cruise Lines, 912 F.2d 1355, 1358 (11th Cir.

1990). The jury was correctly instructed as to good faith, about the mental states

required to sustain a conviction, and that “willfulness does not require that the

Defendants specifically know that the conduct alleged in the indictment

constitutes a criminal violation.” (emphasis added). We find no error in that

combination of instructions.

C. The Deliberate Ignorance Instruction

Powers argues that the district court committed reversible error by

instructing the jury on deliberate ignorance when there was no evidentiary basis 88 from which a jury could have found that he was deliberately ignorant of material

facts. 27 Even assuming there was no evidence that Powers was deliberately

ignorant and for that reason the instruction should not have been given, it was

harmless to do so because there was sufficient evidence to prove beyond a

reasonable doubt that he had actual knowledge. See United States v. Steed, 548

F.3d 961, 978 (11th Cir. 2008) (declining to address whether the facts at trial

supported a deliberate ignorance instruction “because any shortcoming in the

evidence about deliberate ignorance was rendered harmless by the sufficiency of

the evidence of actual knowledge”) (citation and quotation marks omitted); United

States v. Kennard, 472 F.3d 851, 858 (11th Cir. 2006) (“[A]ny error in giving an

unwarranted deliberate ignorance instruction is harmless if the jury could have

convicted on an alternative, sufficiently supported theory of actual knowledge.”);

United States v. Stone, 9 F.3d 934, 937–41 (11th Cir. 1993) (same).28 27 Brown also raises this issue in her brief, while Farmer, Hill, and Van Mersbergen adopt it. (David Thomas attempts to adopt it but cannot because he waived his right to appeal his conviction. See supra, n.11.) For the sake of simplicity and because Brown makes substantially the same arguments as Powers, we will refer to this as Powers’ argument. The same principles and result apply to the other defendants because for each of them there was evidence of actual knowledge, making any error in giving the instruction on deliberate ignorance harmless.

28 We also note that there was some evidence in the record to support the district court’s deliberate ignorance instruction. John Hain, Powers’ supervisor at First Realty Mortgage, indicated to Andrew Wolf, one of Hill’s closing attorneys, that if asked he would deny that he had knowledge that straw buyers had not supplied the down payments at their closings. Wolf testified that in order to “cover [his] butt,” he and Hain exchanged drafts of a memo that was designed to make it explicit that Hain did know about the falsified down payments. Wolf also testified that, while he may not have faxed Powers a copy of the e-mail, he did have discussions with Powers at First Realty Mortgage. Combined with the evidence of Powers’ involvement, the 89 D. Brown’s Theory of Defense Instruction

Brown argues that the district court erred in declining to give an instruction

on her theory of defense that she, as a new appraiser, relied in good faith on her

employer’s supervision and guidance. Because Brown did not request such an

instruction or object to the failure to give one, our review is only for plain error.

Sirang, 70 F.3d at 594. There is no plain error for several reasons, including the

fact that the point of law was substantially covered by the general good faith

instruction that the court did give.

E. Powers’ Theory of Defense Instruction

Unlike Brown, Powers did request a specific theory of defense charge. The

district court correctly concluded, however, that the requested instruction should

not be given because it was less a theory of defense than an argument that Powers

should be acquitted. See United States v. Paradies, 98 F.3d 1266, 1287 (11th Cir.

1996) (holding that the district court correctly refused a requested instruction that

contained the defendants’ “partisan” argument and proposed factual findings).

The non-argumentative parts of Powers’ proffered instruction were adequately

covered by the instruction that the court did give on good faith.

VIII. Sufficiency of the Evidence

jury was presented with sufficient evidence from which it could have concluded that Powers remained willfully ignorant of the fraudulent misrepresentations, just as his supervisor had attempted to do. 90 Hill, Alcindor, Brown, Farmer, Laudermill, Powers, and Van Mersbergen

challenge the sufficiency of the evidence presented at trial. We review the issues

de novo, and “we will not disturb a guilty verdict unless, given the evidence in the

record, no trier of fact could have found guilt beyond a reasonable doubt.” United

States v. Silvestri, 409 F.3d 1311, 1327 (11th Cir. 2005) (quotation marks

omitted). In reviewing the sufficiency of the evidence, “we look at the record in

the light most favorable to the verdict” and draw all reasonable inferences and

resolve all questions of credibility in its favor. United States v. Marte, 356 F.3d

1336, 1344 (11th Cir. 2004).

A. Farmer

Farmer contends that we must vacate his convictions for money laundering

and his conviction for conspiracy, which included allegations of money laundering

as overt acts performed in furtherance of the conspiracy.29 He relies on United

States v. Santos, 553 U.S. 507, 128 S.Ct. 2020 (2008), in which the Supreme

Court held that laundering of the “receipts” of an illegal gambling operation — as

opposed to the “profits” — did not constitute money laundering. Farmer argues

that Santos applies to this case because there was no proof that the “proceeds”

alleged and proven were “profits” and not simply gross receipts or expenses of the

29 Hill, Alcindor, Brown, Laudermill, Van Mersbergen and Powers have adopted Farmer’s argument regarding the money laundering charges. 91 fraudulent scheme. The government argues that we should review this contention

only for plain error because Farmer failed to raise it properly in the district court.

Under any standard of review, Farmer’s contention is foreclosed by our

decision in United States v. Jennings, 599 F.3d 1241 (11th Cir. 2010). In that

decision we refused to extend the rationale of Santos to cases involving mail or

wire fraud due to the “limited precedential value,” id. at 1252 (quoting United

States v. Demarest, 570 F.3d 1232, 1242 (11th Cir. 2009)), of Justice Stevens’

plurality opinion in Santos, which we treat “as controlling in its narrowest form.”

Id. In light of Jennings, we reject Farmer’s Santos-based contention that we

should vacate his convictions for money laundering in connection with mortgage

fraud.

B. Hill

Hill contends that the government did not present sufficient evidence to

sustain his convictions for bank fraud (Counts 3–4) and false credit applications

(Counts 5–8) in relation to the fraud on Charter Bank. He also challenges the

sufficiency of the evidence supporting his convictions for mail fraud (Counts 35,

36, and 38).

1. Hill’s Convictions for Bank Fraud and False Credit Applications

92 To prove bank fraud under 18 U.S.C. § 1344, the government must show

that: (1) a scheme existed to obtain money, funds, or credit in the custody or

control of a federally insured financial institution; (2) the defendant participated in

the scheme by means of material false pretenses, representations, or promises; and

(3) the defendant acted knowingly. United States v. Williams, 390 F.3d 1319,

1324 (11th Cir. 2004). To prove that a defendant filed a false credit application

under 18 U.S.C. § 1014 the government must show that: (1) the defendant

knowingly made a false statement or report; and (2) he did so for the purpose of

influencing the conduct of a federally-insured bank with respect to an application,

advance, commitment, or loan. United States v. Thorn, 17 F.3d 325, 327 (11th

Cir. 1994).

The evidence showed that in order to obtain two lines of credit from

Charter, Hill and his associates submitted applications in the name of two Hill-

owned entitites, Atlanta Condo and Storage, Inc., and Atlanta Millenium

Investments, L.L.C. Hill represented to Charter that Christopher Graham, his

employee who performed maintenance and furniture moving services, owned a 25

percent stake in Atlanta Condo (valued at $180,000) and also $20,000 in

furnishings. Hill’s own financial statement indicated that he was receiving an

income of $20,000 per week from Atlanta Condo and that his ownership interest

93 was worth $570,000. In reality, Graham’s name was listed on the Atlanta Condo

application in order to obscure Hill’s involvement from disgruntled residents.

And Atlanta Condo was not worth $750,000, as Hill had represented. The

company had no accounts receivable, it had conducted no business, and according

to Hill’s tax returns, it was valued at only $90,000.

The evidence also showed that Hill presented Charter with a shareholder

agreement between himself and Graham that was dated Ocotober 6, 2001, but

Graham testified that he did not know Hill in 2001 and he did not move to the

address listed as his residence on the application until March of 2002. Finally,

Hill represented to Charter that the line of credit would be used for working

capital. Instead, Hill used the money to buy things for himself and for his

daughter and to pay for expenses associated with his personal residence.

There was also sufficient evidence to sustain Hill’s convictions for bank

fraud and false credit applications regarding the Atlanta Millenium line of credit

(Counts 4 and 6). The evidence showed that Hill again represented to Charter that

the funds would be used for working capital, but he and Vargas, his co-conspirator

and inside man at Charter, knew at the time that the loan would be used to fight a

temporary restraining order that resulted from litigation over Hill’s sale of some

condominiums (Counts 19–187). Also like the Atlanta Condo transaction, Hill

94 offered a security interest in Atlanta Millenium’s assets even though the company

had conducted no business and had no accounts receivable. Even if Charter would

have had an interest in any future accounts receivable, as Hill now argues, the

evidence still showed that the application was fraudulent because of Hill’s

representations to Charter, which he knew to be false.

The evidence showed that Hill’s fraud on Charter continued even after

Vargas was asked to resign once his involvement in several suspicious

transactions came to light. When Charter discovered that Hill was connected to

the Atlanta Condo and Atlanta Millenium transactions, Hill met with Hungerford,

a Charter Bank Vice President, to discuss the prospects of repayment. In that

meeting, Hill reaffirmed that the Atlanta Condo line of credit was secured by the

accounts receivable, which Hill knew did not exist, and he further represented that

the Atlanta Millenium line of credit was secured by a $400,000 note from

“Alcindor Williams,” which he expected to be paid in two weeks. Hill concealed

the fact that the Alcindor-Williams Group had already filed for bankruptcy and

that there was no real hope that the note would be paid any time soon, if ever.

The evidence showed that Hill later sent a fax to Hungerford indicating that

the lines of credit were also secured by a primary mortgage on Lot 33 of the

Cascade subdivision as well as secondary liens on 28 homesites. He concealed the

95 fact that Lot 33 had already been conveyed to the Alcindor-Williams Group,

which had contracted to build a house on the land (an obligation that was never

performed). Hill also failed to disclose that a secondary lien on any of the 28

homesites was worthless because Centrum was foreclosing on its primary lien that

was valued at $1.2 million.

The government produced enough evidence at trial from which a reasonable

factfinder could conclude beyond a reasonable doubt that many material

misrepresentations Hill made to Charter Bank were fraudulent. His insufficiency

of the evidence contentions are all meritless.

2. Hill’s Convictions for Mail Fraud

Hill also contends that his convictions for mail fraud and conspiracy to

commit mail fraud (Counts 19, 35, 36, and 38) should be reversed because the

government failed to prove that the mails were used in furtherance of his scheme

to defraud. “Mail fraud consists of the following elements: (1) an intentional

participation in a scheme to defraud a person of money or property, and (2) the use

of the mails in furtherance of the scheme.” United States v. Sharpe, 438 F.3d

1257, 1263 (11th Cir. 2006) (quotation marks omitted).

The only mailings alleged by the indictment were of the file-stamped copies

of transfer deeds and lien documents by the county clerk’s office that were mailed

96 to the closing attorneys who then saw that the lenders got copies. Hill argues that

those mailings were not done in furtherance of his scheme to defraud because they

did not occur until the scheme had already succeeded. The government has

conceded that the mailings by the clerk’s office were not sufficiently essential to

the fraudulent scheme unless they were necessary to lull the lenders into believing

that the fraudulent transactions were actually legitimate.

In order to fall within the scope of 18 U.S.C. § 1341, a mailing must

constitute part of the execution of the fraud. United States v. Evans, 473 F.3d

1115, 1118–19 (11th Cir. 2006). “To be part of the execution of the fraud,

however, the use of the mails need not be an essential element of the scheme. It is

sufficient for the mailing to be incident to an essential part of the scheme or a step

in [the] plot.” Schmuck v. United States, 489 U.S. 705, 710–11, 109 S.Ct. 1443,

1447–48 (1989) (citations and quotation marks omitted). There does come a point

at which a mailing will no longer be considered part of the execution of a

fraudulent scheme. After a scheme has “reached fruition” mailings generally

cannot have been “‘for the purpose of executing’ the scheme,” as 18 U.S.C. § 1341

requires. United States v. Georgalis, 631 F.2d 1199, 1204 (5th Cir. 1980); see also

United States v. Adkinson, 158 F.3d 1147, 1163 (11th Cir. 1998) (“We have not

hesitated to reverse mail fraud convictions where the underlying scheme has

97 reached fruition prior to the mailing.”). But there is a lulling exception to that

rule.

Under the lulling exception, mailings are sufficiently a part of the execution

of a fraudulent scheme if they are used to lull the scheme’s victims into a false

sense of security that they are not being defrauded, thereby allowing the scheme to

go undetected. Georgalis, 631 F.2d at 1204. And a lulling mailing may be

“incident to an essential part of the scheme” even after the fraud has been

successfully perpetrated if the mailing is critical to conceal the scheme. For

example, in Schmuck, a used car distributor sold cars to dealers at inflated prices

after he rolled back the odometers. 489 U.S. at 707, 109 S.Ct. at 1446. Then, in

order to complete sales to innocent buyers, the dealers mailed title applications to

the state motor vehicle agency to transfer title from the dealer to the buyers. Id.,

109 S.Ct. at 1446. The Supreme Court upheld Schmuck’s conviction for mail

fraud based on the mailing of the title applications by the dealers even though

Schmuck had already successfully swindled the dealers by the time the mailings

were done. Id. at 715, 109 S.Ct. at 1450. The Court concluded that a reasonable

juror could have inferred that the continued success of Schmuck’s fraudulent

scheme was inextricably intertwined with his good relationships with the

defrauded dealers, which were in turn dependent on the passage of title from

98 dealer to buyer. Id. at 711–12, 109 S.Ct. at 1448–49. Therefore, even though the

mailings did not occur until after Schmuck’s own deals were completed and he

had the fruits of the fraud in hand, the mailings furthered his scheme to defraud

because they were essential to prevent the dealers from discovering that they had

been duped. Id., 109 S.Ct. at 1448–49.

Hill argues that, unlike Schmuck, the mailings by the clerk’s office in this

case were not in furtherance of any scheme to defraud because they were not

necessary for him to obtain funds from the lenders or to buy or sell the properties.

As the government points out, however, Hill’s scheme was ongoing. In order to

keep it going, the closing attorneys had to receive file-stamped copies of deeds

and lien documents from the clerk’s office, and that office used the mail to get

those documents to the closing attorneys. The closing attorneys then forwarded

the documents in the completed loan packages to the lenders. Otherwise, the

lenders would have realized that the straw buyers had no real interest in the

property, and the fraud machine would have come to a grinding halt. The mailings

of the file-stamped copies of the documents oiled the machinery and kept it

running. But for those documents, Hill would not have been able to avoid

detection as long as he did, and there would not have been as many fraudulent

loans and as much illicit gain.

99 Because the scheme depended on the observance of normal filing

procedures, it was not “fully consummated” before the mailings were sent, even

though the loans had already been processed. See United States v. Evans, 473

F.3d 1115, 1120 (11th Cir. 2006). When, as here, “the scheme includes not only

obtaining the benefit of the fraud but also delaying detection of the fraud by

lulling the victim after the benefit has been obtained, the scheme is not fully

consummated, and does not reach fruition, until the lulling portion of the scheme

concludes.” Id.

Even so, Hill argues that his mail fraud convictions cannot be based on the

lulling theory because it was not alleged in the indictment or charged to the jury.

It is true that “[t]his Court cannot affirm a criminal conviction based on a theory

not contained in the indictment, or not presented to the jury.” United States v.

Elkins, 885 F.2d 775, 782 (11th Cir. 1989) (citation omitted). However, that

simply means that “a court cannot permit a defendant to be tried on charges that

are not made in the indictment against him.” Stirone v. United States, 361 U.S.

212, 217, 80 S.Ct. 270, 273 (1960); see also Georgalis, 631 F.2d at 1205 (“A

variance between indictment and proof is fatal only when it affects the ‘substantial

rights’ of the defendant by insufficiently notifying him of the charges against him

so that he may prepare a proper defense.”).

100 Hill was not convicted of any charges that were not contained in the

indictment, nor were his rights violated because the indictment failed to notify him

of the charges he faced. It specifically charged that Hill committed mail fraud by,

among other things, causing the title and lien documents to be mailed in

furtherance of a scheme to defraud lenders.30

As for the jury not being instructed on the lulling theory, the Supreme Court

has upheld a mail fraud conviction based on that theory even though the jury was

not specifically instructed on it. See United States v. Lane, 474 U.S. 438, 452–53,

106 S.Ct. 725, 734 (1986). In Lane, the Court held that “[t]he jury was properly

instructed that each charged mailing must have been made both ‘for the purpose of 30 The indictment charged that: [Hill and his co-conspirators] devise[d] a scheme and artifice to defraud mortgage companies by submitting and causing to be submitted materially false qualifying information and documentation and other fraudulent representations to obtain mortgage loans, causing the Postal Service and other interstate carriers to be used and interstate wire communications to be made in furtherance of said scheme and artifice to defraud, in violation of Title 18, United States Code, Sections 1341 and 1343 ; and . . .

As part of the closing process of the transactions specified above . . . closing attorneys Christopher Halcomb and Andrew Wolf submitted transfer deeds and lien documents to the appropriate county clerk property recording department with a request that stamped-filed copies of these documents be returned to him. Pursuant to these instructions, such documents were returned to the relevant closing attorney by United States Mail. Halcomb and Wolf also mailed a complete closing package to the lender by United States mail or commerical interstate carrier.

Doc. 702, Third Superseding Indictment, at ¶¶ 21(a), 23(c).

101 executing the scheme to defraud’ and prior to the scheme’s completion, and

further that mailings ‘which facilitate concealment of the scheme’ are covered by

the statute.” Id. (citations and emphasis omitted). That was enough in the

Supreme Court’s view.

The jury in this case was also instructed on the three components that the

Supreme Court identified in Lane as a sufficient basis for the lulling theory: (1)

the mailing must have been done “for the purpose of executing the scheme to

defraud”; (2) the mailing must have occurred before the scheme was complete; and

(3) the statute covers a representation that conceals a material fact.31 See id.

31 Specifically, the jury in this case was charged, in relevant part, as follows: The Defendant can be found guilty of [mail fraud] only if all of the following facts are proved beyond a reasonable doubt: . . . That the Defendant used the United States Postal Service by mailing or by causing to be mailed . . . some matter or thing for the purpose of executing the scheme to defraud[;]

What must be proved beyond a reasonable doubt is that the Defendant, with the specific intent to defraud, knowingly devised, intended to devise, or participated in, a scheme to defraud substantially the same as the one alleged in the indictment, and that the use of the United States mail was closely related to the scheme because the Defendant either mailed something or caused it to be mailed in an attempt to execute or carry out the scheme[;]

A statement or representation may also be “false” or “fraudulent” when it constitutes a half truth, or effectively conceals a material fact, provided it is made with intent to defraud.

(emphasis added). 102 Under the Lane decision Hill’s contention that the jury was not sufficiently

instructed on the lulling theory fails.

The remaining question is whether the government was required to put on

evidence that if the lenders had not received file-stamped documents regarding

the loans they had made and their security interests, they would have become wise

to Hill’s scheme and quit dealing with him and his associates. If evidence was

required, there was enough of it.

As we discussed earlier, see supra, Part V, Section A, representatives of

several lenders — including a representative of Alliance Mortgage, the lender for

the loan at issue in Count 35 — testified that their institutions would not have

approved the loans if they had known that information in the applications had been

falsified. There was a stipulation that if the lenders for the loans at issue in Counts

36 and 38 had known those applications contained false information about owner-

occupancy, appraisals, earlier sales, the source of any down payment, the existence

of quitclaim deeds, or money paid to the borrower for use of his or her credit, that

knowledge would have affected their decisions. An underwriter and attorney for a

title insurance company even instructed her closing attorneys to cease closing on

any loans involving Hill once she learned of the scheme, and a bank’s underwriter

added Farmer, Hill, and one of their closing agents to the bank’s exclusionary list

103 after an internal audit uncovered several instances of fraud in loan applications.

And one of Hill’s closing attorneys testified that a lender’s receipt of the closing

package, including the deeds that had been filed and mailed back from the clerk’s

office, was a vital part of the transaction. All of that evidence was more than

enough to prove beyond a reasonable doubt that the mailings were an essential

part of the overall scheme, that they occurred before the scheme had reached

fruition, and that they were necessary to conceal the fraud from the lenders and to

keep the scheme going. Hill’s convictions for mail fraud and conspiracy to

commit mail fraud (Counts 19, 35–36, and 38) are supported by the evidence.

Alcindor contends that there was insufficient evidence to prove that he was

guilty of the conspiracy alleged in Count 19, the mail and wire fraud charges

alleged in Counts 38 and 46–47, and the money laundering charges alleged in

counts 85–90, 94, and 179–180. All of those charges against Alcindor stem from

his involvement in transactions with straw buyers Annette Spear, Cheryl Denny,

and Cortney Jackson. Alcindor asserts that the government did not produce any

evidence implicating him personally in any fraud or money laundering with

respect to transactions involving those three straw buyers.

104 Alcindor concedes that he was part of the Alcindor-Williams Group, that

two of the three fraudulent sales used to fund the promissory note backing the

$400,000 loan from Estates Atlanta involved the Alcindor-Williams Group as

seller, and that funds from each of the three transactions were transferred to

accounts associated with his group. But he asserts that the only evidence that

involved him personally was of a wire transfer to his credit union account as part

of the Annette Spear transaction, and he argues that single connection was

insufficient to sustain his convictions on any of the counts involving Spear,

Denny, and Jackson as straw buyers.

But Alcindor’s challenged convictions are also supported by the evidence

underlying his convictions stemming from the fraudulent Centrum loan. Alcindor

falsely represented to Centrum that the $400,000 equity requirement would be

paid by the Alcindor-Williams Group. He then signed an undisclosed $400,000

note that was to be funded in part by the fraudulent sale of three properties in the

Cascade subdivision to Annette Spear, Cheryl Denny, and Cortney Jackson. Each

of those transactions involved inflating the purchase price, falsifying the

qualifications of the straw buyers in order to obtain better financing, and

misrepresenting the source of the down payment as having come from the straw

borrower.

105 The government produced evidence at trial that all three transactions

involved fraudulent representations that the down payment came from the

borrower and evidence connecting Alcindor to each of those false representations.

In the Spear transaction, the fraudulent misrepresentation involved two altered

checks that were either payable to, or endorsed and deposited by, Alcindor. In the

second transaction, Alcindor recruited Denny, his cousin, to serve as the straw

buyer, and another altered check was used to falsify the source of the down

payment. The final transaction was in the name of Cortney Jackson, and it, too,

involved a fraudulent misrepresentation that cash came from the borrower as well

as a deposit of over $150,000 in proceeds into an account owned by Bristol

Homes, a building entity that belonged to the Alcindor-Williams Group.

Alcindor makes much of his alibi that he was in St. Lucia at the time of the

Denny transaction. That, however, is only one of the transactions, and even if

there were no evidence to directly connect Alcindor to any of the straw

transactions, there is plenty connecting him to the overall conspiracy. He is

therefore liable under Pinkerton for the acts of his co-conspirators done in

furtherance of the conspiracy even if he did not personally take part in the

transactions. Pinkerton v. United States, 328 U.S. 640, 646–47, 66 S.Ct. 1180,

106 1183–84 (1946). There was enough evidence to prove him guilty on all of the

counts on which he was convicted.

D. Brown

Brown challenges the sufficiency of the evidence supporting her

convictions for conspiracy (Count 19) and for wire fraud (Counts 41 and 43). To

prove wire fraud under 18 U.S.C. § 1343, “it is enough to prove that the defendant

knowingly and voluntarily agreed to participate in a scheme to defraud and that

the use of the interstate wires in furtherance of the scheme was reasonably

foreseeable.” United States v. Hasson, 333 F.3d 1264, 1270 (11th Cir. 2003).

Brown contends that there was no evidence that she intended to commit

fraud in connection with the inflated appraisals she prepared for the properties that

were the subject of the wire fraud counts. Her insufficiency of the evidence

argument has two components. First, she emphasizes that no defendant testified

that she was present when the fraud was being discussed or that she was ever

asked to fraudulently inflate her appraisals. Second, she stresses that she was a

secretary and novice appraiser who was learning on the job, she was

inexperienced, she did sloppy work and relied on appraisals done by others, and

she was an apprentice to and was supervised by Wilson, her employer, and the

government has never contended that he was a participant in the fraud.

107 The jury could, as it did, reasonably conclude that Brown knew about the

conspiracy and participated in it. Under her property appraisals, as the district

court put it, the value of the property involved in the scheme “astronomically

increased” almost overnight. The record includes several examples of Brown’s

inflated appraisals, which were essential to the scheme. For example, Hill

purchased a property on Huntcliff Trace for $1,100,000, and Brown appraised the

same property twice only a month later, once at $2,000,000 and then again at

$2,300,000. There was no evidence of anything that would have caused the value

to skyrocket more than 100 percent in a month. Another example is a

condominium unit in the Deere Lofts that Hill bought for $183,000, and Brown

appraised it a mere two days later for $360,000, omitting from the appraisal report

any mention of the recent sale to Hill. Again, there was no evidence of any reason

for the sudden jump in the “value” of the property other than the fact that it was

necessary to the functioning of the conspiracy.

The jury could have inferred from all of this and other circumstantial

evidence that Brown was aware of the fraud and knowingly participated in it

because anyone would know that the properties she appraised had not doubled in

value within such short periods of time with no legitimate explanation. A jury is

108 not required to put aside its common sense or to assume that defendants have

none.

The other part of Brown’s insufficiency argument, that she was working

under the supervision of Wilson who was not charged, is equally unavailing. The

core of that argument is the assumption that Wilson was not charged because he

was not guilty, and if he was not guilty, then Brown wasn’t either. We reject this

argument which insists on innocence as a matter of law by proxy. We do not

know how much Wilson knew, what he did, or why he was not charged. It may

have been because there was less evidence of Wilson’s guilt, or because he

cooperated in some aspect of the investigation, or simply because of a mistake or

oversight. We do not mean to imply that Wilson was guilty of wrongdoing, but

his guilt or innocence does not matter for purposes of Brown’s insufficiency

argument.

Even if we assume that Wilson is every bit as guilty or innocent as Brown,

the government’s decision not to prosecute him does not entitle her to a judgment

of acquittal. Just as an inconsistent jury verdict, standing alone, is not a basis for

setting aside a conviction, United States v. Powell, 469 U.S. 57, 68–69, 105 S.Ct.

471, 479 (1984), United States v. Mitchell, 146 F.3d 1338, 1344–45 (11th Cir.

1998), neither is a prosecutor’s inconsistent charging determination, see

109 Bordenkircher v. Hayes, 434 U.S. 357, 364, 98 S.Ct. 663, 668 (1978) (“In our

system, so long as the prosecutor has probable cause to believe that the accused

committed an offense defined by statute, the decision whether or not to prosecute,

and what charge to file or bring before a grand jury, generally rests entirely in his

discretion.”), Newman v. United States, 382 F.2d 479, 480 (D.C. Cir. 1967) (“Few

subjects are less adapted to judicial review than the exercise by the Executive of

his discretion in deciding when and whether to institute criminal proceedings, or

what precise charge shall be made, or whether to dismiss a proceeding once

brought.”). The law does not contain a perfect injustice principle providing that if

some guilty parties escape punishment, all must be permitted to do so. Instead, the

law accommodates imperfection and is home to the idea that it is better to have

some justice than none.

Brown’s arguments of limited involvement sound more in sentencing than

in conviction, and undoubtedly explain why she received the lightest sentence of

any of the convicted co-conspirators.

E. Laudermill

For her role in recruiting straw buyers to participate in Hill’s scheme,

Laudermill was convicted of the overall conspiracy (Count 19), of filing a false

credit application (Counts 31, 182), of wire fraud (Count 41), and of money

110 laundering (Counts 75–76, 80, 129, 133–35, 137–39, 142, 147–49, 159, 164, 170)

She challenges the sufficiency of the evidence supporting all of those convictions

on the basis of what she calls her “limited involvement.” Laudermill does not

deny the existence of the conspiracy, or the existence of fraud, or the fact that she

received proceeds for recruiting the straw borrowers. Instead, she argues that she

was unaware of any fraud, and she points to the fact that she recruited her friends

and family as evidence of her unawareness.

Laudermill’s defense that she acted in good faith and without any

knowledge of the fraud or conspiracy is belied by the evidence, which showed that

she was aware that lenders were being deceived as to the qualifications of

borrowers and the source of down payments. In one transaction, Laudermill even

went so far as to add one of the straw buyers to her own bank account when he

failed to qualify for a loan because he lacked the funds for a down payment. With

her help in that regard, the straw buyer was able to submit a verification of deposit

to the lender that made it appear as though he had sufficient funds when he

actually did not, and in that way he was able to get the loan.

The jury also could have concluded that Laudermill knowingly participated

in the fraud and the conspiracy based on her assurances to straw buyers. The

evidence showed that she knew that the straw buyers were not supplying their

111 down payments, as they had represented to the lenders; there was testimony that

she had told some of them that they did not need to have money for a down

payment. Laudermill also reminded one straw borrower that the lenders were

unaware of the agreements between Hill and the straw buyers that Hill would

make the mortgage payments and compensate the “investors” and “recruiters.”

That Laudermill used at least some of her family and friends as straw

borrowers does not entitle her to escape the consequences of her conduct. If it did,

everyone in a fraud scheme could avoid punishment by that simple expedient of

victimizing those who trusted them the most. The jury was free to infer from the

fact that Laudermill did recruit her friends and family that she was not very loyal

to them, or that she let her greed unravel whatever ties she had to them, or that she

simply tried not to think about it. The jury was not required to infer from the fact

that she involved her friends and family that Laudermill did not know what other

evidence showed she knew.

F. Van Mersbergen

Van Mersbergen was found guilty of conspiracy (Count 19), of filing false

credit applications (Counts 23–24), and of money laundering (Counts 53–56, 99,

103, 108, 110, 113, 117), and he contends that there was insufficient evidence to

support any of his convictions. Essentially, Van Mersbergen argues that the

112 evidence was insufficient because he was an unwitting participant who was caught

up in Hill’s swarm of conspirators. Although he served as a straw borrower for

three transactions and worked as Hill’s employee and runner, Van Mersbergen

insists that he lacked any knowledge of the scheme to defraud. He claims that he

was simply following orders and that he relied on the statements of an attorney at

one of the closings that the transactions were legal.

The government produced evidence at trial that in his capacity as a straw

borrower Van Mersbergen filed falisified loan applications, he lied in occupancy

statements, and he submitted fraudulent HUD-1 settlement statements to lenders.

As Hill’s employee, Van Mersbergen delivered checks to the closing attorneys for

the down payments that were from Hill or one of Hill’s associates but were

represented on the HUD-1 settlement statements to have come from the straw

buyers. He personally helped two other straw buyers qualify for loans by signing

a fraudulent compensation check in one case and a falsified employment

verification in the other. Despite his insistence that he acted only in good faith,

there was plenty of evidence from which a reasonable jury could have found Van

Mersbergen guilty beyond a reasonable doubt of each charge.

As for Van Mersbergen’s contention that he was simply following Hill’s

orders, that is no defense. See O’Rourke v. Hayes, 378 F.3d 1201, 1210 n.5 (11th

113 Cir. 2004) (“[S]ince World War II, the ‘just following orders’ defense has not

occupied a respected position in our jurisprudence.”); United States v. Brandon,

17 F.3d 409, 438 (1st Cir. 1994) (“This ‘just following orders’ defense cannot

stand in the face of the evidence showing that Landman knew down payments

were being falsified, that he agreed to safeguard Reisch’s down payment funds,

and that he personally falsified two down payments by returning the funds to

Reisch.”). And, for reasons we have already explained, his contention that

because other straw borrowers were not prosecuted he himself must not be guilty

fails as well.

IX. Alcindor’s Double Jeopardy Claim

At the end of the government’s case in chief, the district court heard

arguments on all of the twelve defendants’ Rule 29 motions for judgments of

acquittal. They were taken up in alphabetical order, beginning with Alcindor’s.

The court orally granted Alcindor’s motion for acquittal as to Counts 38 and 94,

agreeing with him that the evidence did not show that he was personally involved

in those fraudulent transactions, although it did show that companies he and

Graham controlled were. The court then took up the motions for judgment of

acquittal of the other defendants.

114 Ninety-three pages of transcript (and a lunch break) later, the court had

heard argument on all the motions for judgment of acquittal but had not adjourned

the hearing. Before the court did so, the government asked the court to reconsider

its ruling earlier in the hearing granting Alcindor’s motion for acquittal on Counts

38 and 94. The government argued that under Pinkerton v. United States, 328

U.S. 640, 646–47, 66 S.Ct. 1180, 1183–84 (1946), a defendant is criminally liable

for the acts of co-conspirators in furtherance of the conspiracy, even if the

defendant did not personally take part in those actions. The government also

pointed out that acquitting Alcindor would be inconsistent with the rulings that the

court had made later in the hearing denying on Pinkerton grounds some other

defendants’ motions for judgment of acquittal. The court replied, “I think I made a

mistake about that but I’m not sure I can fix it now,” and added, “If I have the

power to reconsider the ruling I’ll reconsider it.” Convinced that it did have

power to do so, eight lines of transcript later the court reversed its earlier ruling on

Alcindor’s motion. It did so before the hearing on the motions for judgment of

acquittal had ended and before its earlier ruling in Alcindor’s favor had been

reduced to writing. Alcindor objected on double jeopardy grounds to the change

of ruling.

115 Both Alcindor and the government agree that this issue is controlled by

Smith v. Massachusetts, 543 U.S. 462, 125 S.Ct. 1129 (2005). In that case the

Supreme Court held that the Double Jeopardy Clause did not permit a judge to

reconsider and reverse her midtrial judgment of acquittal on a charge after the

defendant had rested his case but before closing arguments. Id. at 473, 125 S.Ct.

at 1137. The judge had granted Smith’s motion for a judgment of acquittal on one

count based on insufficiency of the evidence, had made a handwritten notation on

the motion that it was granted, and then the ruling was entered on the formal

docket. Id. at 465, 125 S.Ct. at 1132–33. The trial proceeded and Smith’s co-

defendant introduced evidence. Id., 125 S.Ct. at 1133. Smith and his co-

defendant rested their cases on the remaining charges. Then, just before closing

arguments the prosecutor convinced the trial judge that her acquittal decision was

contrary to controlling precedent, she reversed herself, and that count was

submitted to the jury along with the other two. Id. at 466–66, 125 S.Ct. at 1133.

Smith was convicted on all three counts, including the one that was reinstated by

the trial court.

The Supreme Court reversed, concluding that a defendant could not be

subjected to further fact finding proceedings about guilt or innocence after a final

judgment of acquittal was entered. “[A]fter a facially unqualified midtrial

116 dismissal of one count, [if] the trial has proceeded to the defendant’s introduction

of evidence, the acquittal must be treated as final, unless the availability of

reconsideration has been plainly established by pre-existing rule or case authority

expressly applicable to midtrial rulings on the sufficiency of the evidence.” Id. at

473, 125 S.Ct. at 1137.

The first question, according to Smith, is whether the trial judge’s initial

ruling on Alcindor’s Rule 29 motion was a judgment of acquittal. Id. at 467, 125

S.Ct. at 1134. It was. For double jeopardy purposes a ruling is a judgment of

acquittal regardless of its form if it “actually represents a resolution, correct or not,

of some or all of the factual elements of the offense charged.” United States v.

Martin Linen Supply Co., 430 U.S. 564, 571, 97 S.Ct. 1349, 1355 (1977). In

orally granting Alcindor’s Rule 29 motion, the district court “evaluated the

Government’s evidence and determined that it was legally insufficient to sustain a

conviction,” see id. at 572, 97 S.Ct. at 1355, because Alcindor was not personally

involved in the transactions charged in Counts 38 and 94. That determination may

have been erroneous, but we will assume for the sake of discussion that it was a

judgment of acquittal.

The remaining question is whether that judgment of acquittal was final and

therefore not subject to reconsideration. Under Smith once an acquittal becomes

117 final it may not be reconsidered on appeal or otherwise.32 Smith, 543 U.S. at 469

n.4, 125 S.Ct. at 1135 n.4 (citing Smalis v. Pennsylvania, 476 U.S. 140, 106 S.Ct.

1745 (1986) and Justices of Bos. Mun. Court v. Lydon, 466 U.S. 294, 104 S.Ct.

1805 (1984)). Although the Supreme Court in Smith did not announce a generally

applicable rule about when an acquittal becomes final for these purposes, it did

indicate that the point of finality is passed when changing the ruling would require

the accused to stand trial a second time for the same offense. Id. at 473 n.7, 125

S.Ct. at 1137 n.7. And we know, of course, from Smith itself that once a trial has

moved on from the judgment of acquittal to the presentation of evidence in further

fact finding proceedings, it is too late for a court to take back that judgment.

The Supreme Court, however, indicated in Smith that a judgment of

acquittal is not final as soon as it is spoken or written. Responding to concerns

that a judge might never be able to correct an erroneous judgment of acquittal, the

Court explained that “[d]ouble-jeopardy principles have never been thought to bar

the immediate repair of a genuine error in the announcement of an acquittal, even

one rendered by a jury.” Smith, 543 U.S. at 474, 125 S.Ct. at 1138. “Moreover, a

prosecutor can seek to persuade the court to correct its legal error before it rules,

or at least before the proceedings move forward.” Id., 125 S.Ct. at 1138 (emphasis 32 The government does not contend that the exception Smith left open for plainly established pre-existing rule or case authority, Smith, 543 U.S. at 473, 125 S.Ct. at 1137, applies in this case. 118 added). Those last seven words are important, and their meaning is illustrated by

what the prosecutor did and failed to do in the Smith case.

The prosecutor in that case did not convince the judge to alter or amend her

ruling before the proceedings moved on to the next stage. Instead, the prosecutor

rested the Commonwealth’s case, Smith’s co-defendant put on a witness, and

Smith and the co-defendant rested. Only then, and just before closing arguments

were to begin, did the prosecutor persuade the court to take back its judgment of

acquittal. As the Supreme Court explained, “[h]ad [the prosecutor] sought a short

continuance at the time of the acquittal motion, the matter could have been

resolved satisfactorily before petitioner went forward with his case.” Smith, 543

U.S. at 475, 125 S.Ct. at 1138 (emphasis added).

In this case, by contrast, the matter was “resolved satisfactorily before

[Alcindor] went forward with his case.” See id., 125 S.Ct. at 1138. And that

makes all the difference. Nothing was done, or could have been done, in reliance

on the acquittal ruling between the time that ruling was announced and the time it

was rescinded. All that happened in the interval (other than a lunch break) was

that the court continued to hear and decide motions for judgment of acquittal from

the other defendants. No one put on any evidence. No one opened or closed his

case. No one did anything in front of the jury. The proceedings did not move

119 forward until after the hearing on all of the motions to acquit had concluded, and

by that time the judgment acquitting Alcindor on the two counts had already been

rescinded.

Smith had “no reason to doubt the finality of the state court’s ruling,” Smith,

543 U.S. at 470, 125 S.Ct. at 1135, and every reason to believe that his acquittal

on one of the charges was final after the prosecutor had rested, the co-defendant

had put on evidence, and then both she and Smith had rested their cases. By

contrast, Alcindor had no reason to believe that his acquittal was final before the

hearing on the motions to acquit had even concluded. See Price v. Vincent, 538

U.S. 634, 643 n.2, 123 S.Ct. 1848, 1855 n.2 (2003) (collecting cases finding no

double jeopardy violation in similar circumstances). There was no double

jeopardy violation.

X. Rector’s Kastigar Claim

A. Introduction

The investigation in this case began in 2001, but the first indictment was not

returned until 2005. In February of 2003, Rector began cooperating with the

government in the hopes of receiving leniency. He was interviewed extensively

— he claims for about 60 or 70 hours. He also provided the government with a

large number of documents — he claims it was hundreds of documents amounting

120 to “hundreds, if not thousands, of pages.” Rector’s cooperation was provided

under the terms of a proffer agreement in which the government promised Rector

that, if the negotiations failed, it would not use the information he provided

against him in its case in chief, with certain exceptions. Disagreement about the

nature and extent of those exceptions gave rise to this issue after the government

and Rector failed to reach a plea bargain agreement.

B. The Pre-Trial Motions

The first rumblings the record reveals about this issue occurred on the eve

of trial when the government filed a motion in limine to prevent Rector from

arguing to the jury in his opening statement or otherwise that the government had

indicted him in retaliation because it did not like what he had said during the

proffer interviews. The motion asserted that since Rector had sought and received

protection in the agreement from the government’s using against him statements

he made to investigators, it would be unfair for him to use against the government

the fact that he had made statements. The court indicated that if Rector did use

before the jury the fact that he had cooperated, the government would be allowed

to introduce in its case in chief the statements Rector had made while cooperating.

Rector reacted to that prospect with a written response to the government’s

motion in limine. In his response Rector argued that under the terms of the proffer

121 agreement no information or documents that he had provided or any derived leads

could be used against him, unless he testified at the trial contrary to the statements

he had made under the proffer agreement. He asserted that it was critical to his

defense that the jury know he had cooperated with the government, and argued

that allowing the government to use statements he had made or documents he had

supplied under the proffer agreement, or leads derived from them, would deprive

him of a fair trial and the benefit of his proffer bargain.

On the same day that Rector filed his motion in response to the

government’s motion in limine, he also filed his own motion in limine seeking to

exclude from the trial any evidence the government had obtained as a result of his

cooperation. In that motion, Rector claimed that under Kastigar v. United States,

406 U.S. 441, 92 S.Ct. 1653 (1972), the government was barred by the proffer

agreement “from presenting to or arguing to the jury any and all evidence it

obtained, either directly or indirectly, from information and documents [he]

provided to the government.” Rector pointed to the language in the agreement

which prohibited the use against him of “[a]nything related to the proffer . . . in

any government case-in-chief.” He asked the court to enforce the proffer

agreement and argued that under Kastigar and the terms of the agreement that “the

122 government has an affirmative duty to prove to the Court that no part of its case

against [him] is ‘related’ to the information [he] provided.”

Soon thereafter, Rector supplemented his motion in limine with another

motion and exhibits consisting of memoranda prepared by the government’s

investigators detailing his substantial cooperation. For example, the memoranda

showed that Rector had provided the government with four books of documents,

with copies of lease agreements, with copies of W-2 forms, and with other

documents, all detailing the relationships between Hill and his investors. Rector

argued that the investigators’ memoranda showed that he “was the source, either

directly or indirectly, of much of the evidence the government intends to introduce

in the trial of this case.” In light of the government’s affirmative burden to prove

that the evidence it planned to present against Rector had not been obtained as a

result of his proffer, he argued that the government should be required to

demonstrate outside the presence of the jury that it had an independent source for

every document or witness it planned to introduce against him at trial.

Not relishing the prospect of delaying the trial while it conducted a hearing

on the parties’ dispute about the proffer agreement, the district court took

Rector’s motions “under advisement.” If the court ever expressly ruled on those

motions, the parties have not cited that ruling to us and we have not been able to

123 find it. As we have mentioned, however, the court had already indicated that if

Rector put before the jury the fact that he had cooperated with the government, the

government could introduce the statements he made while cooperating.

Undoubtedly as a result of that ruling, Rector’s counsel did not mention Rector’s

cooperation to the jury during his opening statement or at any other time during

the trial.

C. The Issue During and After the Trial

During the course of the trial, Rector did unsuccessfully object on at least

eleven different occasions to the admission of documents on the ground that they

had been derived from his proffer statements. He did not object on that ground to

any testimony.

After Rector was convicted on 95 of the 120 counts against him that were

submitted to the jury,33 he filed a “Motion to Dismiss Convicted Counts,” which

asserted that it was filed “pursuant to Rule 33 of the Federal Rules of Criminal

Procedure and the Fifth Amendment to the Constitution of the United States and

the Due Process Clause.” In that motion Rector asked the district court “to

dismiss the counts of which he was convicted” on the ground that the government

had violated the proffer agreement by using against him at trial information and 33 Rector was convicted of conspiracy, mail fraud, wire fraud, and making false credit applications as charged in Counts 19, 32, 34–38, 41–48, 63–85, 89–90, 129–49, 151–54, and 158–87 of the indictment. 124 documents he had provided, as well as other evidence obtained through leads he

had provided. The motion promised that a supplemental one would be filed, and it

was.

In his supplemental post-trial motion, Rector argued that any ambiguity in

his proffer agreement should be construed against the government as the drafter,

citing United States v. Pielago, 135 F.3d 703 (11th Cir. 1998). He asserted that

the proffer agreement the government had drafted and signed broadly prohibited it

from using information directly obtained from him or indirectly obtained from him

through use of the information and documents he had provided. Rector argued

that the government had clearly used against him at trial information “related to”

— the key term from the agreement — his statements and documents.

Specifically, he asserted that he had provided the government with information

related to 24 of the witnesses that the government called at trial, 19 of the entities

discussed in the government’s case in chief, 148 end-user lease agreements, and

the documents that were later introduced as Government Exhibits 409, 546, 913,

917, and 918. He also asserted that he was one of the first people interviewed as

part of the government’s investigation and that his cooperation led to much of the

evidence the government used at trial. In fact, according to Rector, his

125 cooperation was so instrumental to the government’s case that his “proffers mirror

the government’s case.”

The government responded to Rector’s supplemental motion by arguing that

it was the well-established policy of the United States Attorney’s Office to grant

only direct use immunity, not derivative use immunity, in proffer agreements and

that its agreement with Rector was consistent with that policy. The government

also argued that Rector’s agreement was not controlled by Kastigar because that

case involved a statutory grant of immunity, which necessarily prohibits derivative

use as well as direct use. By contrast, Rector’s immunity agreement was

contractual in nature and therefore was controlled by the terms of the agreement.

The government conceded that under Pielago and other decisions an

ambiguous proffer agreement is to be construed against the government as the

drafter. It argued, however, that while Rector’s proffer agreement prohibited

direct use of statements he had made and documents he had provided, it

unambiguously permitted the use of those statements and documents to “develop

leads; seek like documentation from other sources; or to question other witnesses

about certain conduct or refresh a witness’ own recollection.”

The government’s position was that the proffer agreement was not

ambiguous and none of its terms were in conflict because, under Pielago, “a

126 proffer’s ‘derivative use’ provision should be read as qualifying, instead of

contradicting, the paragraph of the proffer agreement prohibiting the ‘direct use’

of statements and information obtained in a proffer.” If that position were

accepted, the government could use against Rector any evidence that was derived

from statements he made or documents he supplied during the proffer period.34

The government’s position was based on the language of the agreement providing

that “the Government is completely free to pursue any and all investigative leads

derived in any way from the proffer.”

The government opposed Rector’s request for an evidentiary hearing by

arguing that “it would make no sense to hold a hearing in which the government

would have to prove that its evidence against Rector is not directly or indirectly

traceable to the information [he] provided [because] . . . [t]he proffer agreement

expressly permits the government to do just that.”

The government denied Rector’s contentions that he had provided

documents that were later introduced as exhibits at trial. It asserted that “[t]he

source of every piece of documentary evidence was identified at the trial, either

34 The government also contended that it was free to use any statements Rector had made before the proffer agreement, and that it also could use any statements and documents obtained from him during the period of the agreement to rebut his testimony or in a perjury prosecution. Rector does not contest the last two of those points about use in rebuttal or in a perjury prosecution, but he never testified, so they are irrelevant. As to the first point, about pre- agreement statements, the record does not indicate that any of those were used at the trial, so that point appears to be irrelevant as well. 127 through a stipulation as to its source and authenticity or through the producing

witness on the stand,” and it insisted that none of that evidence had come from

Rector. In other words, Rector was not “the lynchpin of the investigation” that he

made himself out to be. Instead, the government argued that it had received much

of the same evidence from multiple sources.

In his reply to the government’s response, Rector pointed out that the

proffer agreement expressly permitted the government to use any information he

supplied to rebut any testimony from him that was contrary to his proffered

statements and in a prosecution of him for perjury. His point was that there was

not a similar provision expressly permitting the government to use the information

he provided to develop other evidence to use against him even though he did not

testify and was not prosecuted for perjury.

In support of his construction of the agreement, Rector contrasted its terms

with those of another one the government had drafted and entered into with a

different defendant in this case, one who did not go to trial. That other agreement

prohibited the use of proffer-derived information in grand jury proceedings but

expressly permitted the use of it against that defendant in his trial if no plea

agreement were reached. The same was true of the proffer agreement in the

Pielago case. See Pielago, 135 F.3d at 710. Rector also pointed out that the

128 immunity-promising language the government put in his proffer agreement was

broader than the language it put into the proffer agreements it entered into with

Alcindor and some of the other co-defendants.

As for the government’s contention that Rector’s proffer agreement

expressly provided for derivative use, Rector argued that the government’s

interpretation “improperly tries to equate the right to ‘pursue’ investigative leads

with the right to ‘use’ such evidence against Rector in its case in chief.”

Furthermore, if the agreement’s proscription precluded only the direct use of

information related to Rector’s proffer, then the language permitting the

government to “pursue any and all investigative leads derived in any way from the

proffer” would be superfluous. In addition, Rector relied on United States v.

Schmidgall, 25 F. 3d 1523, 1529 n.5 (11th Cir. 1994), to counter the

government’s position that he was not entitled to a Kastigar hearing merely

because his immunity stemmed from an informal agreement instead of a statute.

D. The August 16, 2007 Hearing

Following the salvo of motions, on August 16, 2007 the court held a hearing

on Rector’s post-trial motion to dismiss on Kastigar grounds all of the counts on

which he had been convicted. Rector told the court that the government had

admitted using in its investigation evidence that it had derived from his proffer.

129 The court asked the Assistant United States Attorney if that was true. She

responded: “Derivative use, Your Honor. Not — when you say used, I mean, to

— in furthering the leads in the case and in interviewing witnesses.” While

adamantly denying that any of Rector’s information or statements were directly

admitted at trial, she conceded that “we did what the Government always does in

these cases, and that is, we followed in a derivative way; that is, used these things

for leads and so forth.” She argued that if the proffer agreement barred derivative

use of Rector’s statements against him, the government would have had to create a

“taint box,” which it had not done in this case because “no one does it.” In other

words, the AUSA admitted that there had been no effort to separate the attorneys

and agents who interviewed and obtained documents from Rector from those who

subpoenaed documents, interviewed witnesses, prepared the case for trial, and

eventually tried the case against Rector. There was no taint box, no Chinese wall.

Everyone involved in the prosecution had access to all of Rector’s proffered

statements and documents. Or so the representative of the government admitted

on that occasion.

After hearing from both sides, the district court agreed with Rector that the

proffer agreement prohibited the government from using against him any evidence

obtained by using the information and documents he had given the government

130 during the proffer period. The court told the government that under its reading of

the proffer agreement, “you can investigate all you want, but this says you’re not

going to use anything that he gives you against him in his case in chief.” The

court asked the government to respond in writing with a supplemental motion

identifying an independent source for each of the exhibits that Rector had claimed

were violations of the proffer agreement.

Rector pointed out to the district court that even if the government were able

to identify an independent source for each of the exhibits he had objected to, that

did not mean that the government had not breached the agreement. As he

explained, the exhibits he identified were only examples of what he had provided

the government. Rector’s counsel stated, “I obviously can’t tell you all the

evidence, particularly when they’ve admitted that they used the leads to get other

evidence, get in documents.” The government’s theory during the investigation

and trial was that it could use the information Rector supplied not only for the

purpose of pursuing leads against others but also in order to obtain evidence to use

in its case in chief against Rector. Rector’s counsel argued that “I don’t know how

you get away from that by saying, well, now, we got the documents from [Rector]

and you call someone else to bring [those documents] with you.”

E. The Post-Hearing Motions

131 After the August 16, 2007 hearing, the government filed its supplemental

response to Rector’s motions. The lengthy supplemental response included some

documents submitted in camera as well as three binders of documents purportedly

establishing an independent source for the specific evidence that Rector had

alleged violated the proffer agreement. The government argued that to the extent

it had put into evidence anything obtained from Rector, that evidence was only

used against other defendants and related to counts in which Rector was not

charged.

The government’s response summarized the extensive evidence of Rector’s

guilt that it had before he started cooperating under the proffer agreement, and it

argued that Rector had exaggerated the extent of his cooperation, pointing out that

others had cooperated long before Rector did. The government insisted that all the

evidence used against Rector at trial came from the witnesses who had been

interviewed or from documents that had been subpoenaed before Rector began

cooperating.

The government added that Rector had waived any challenge to the

admission of some of its exhibits at trial. For example, the government pointed

out that Exhibits 1–54 and 60–325 were admitted pursuant to a stipulation signed

by all of the defense attorneys, including Rector’s counsel, on behalf of their

132 clients. The government also argued that any Kastigar issues involving any of the

other evidence to which Rector had not objected were waived because the district

court had denied Rector’s request for a continuing objection on that ground to all

of the evidence.

Rector filed a “partial reply” to the government’s supplemental response.

He characterized his motion as only a partial reply because he insisted that he

could not adequately reply to the government’s response without additional

discovery. Rector requested a chance to review the documents that the

government had submitted in camera as well as other documents, including: “all

subpoenas issued by the government after the initial proffer of the Defendant; all

diaries and memoranda of the government agents involved in the Hill

investigations; all internal government memoranda concerning the Hill

investigation after the Defendant’s proffer; and all documents obtained by the

government after the Defendant’s initial proffer.”

Rector pointed out that even if the government had received evidence from

other sources before he started cooperating, several of the government’s witnesses

were interviewed after he had provided information, and the burden was on the

government to demonstrate an independent source for the testimony of those

witnesses. Furthermore, Rector argued, any evidence obtained from him and

133 admitted at trial constituted a violation of the proffer agreement even if that

evidence pertained only to charges against other defendants because Rector was

denied a severance and “the government blended all counts, facts, documents and

witnesses together.”

Responding to the government’s argument that he had waived any

objections to the admissibility of certain documents based on his stipulations to

their authenticity, Rector pointed out that the stipulations did “not waive any

objection to the admission of said document[s] on any other grounds.” He also

reiterated that the burden was not on him to ensure that the agreement was

enforced, but instead the burden was on the government to ensure that the

agreement was not breached. For support, Rector cited United States v. Gregory,

730 F.2d 692 (11th Cir. 1984), in which we explained that “a [Kastigar] ruling

only on [the admission of] those items identified [and objected to] by the

defendants is not sufficient” because the “defendants could not be presumed to

have knowledge of all of the evidence presented to the grand jury or employed in

the Government’s investigation.” Id. at 698. We had remanded that case for an

evidentiary hearing for the government to “show how it acquired all of the

evidence admitted below.” Id. (citing United States v. Seiffert, 463 F.2d 1089,

1092 (5th Cir. 1972)).

134 F. The December 12, 2007 Hearing

Following this second volley of responses and replies, the district court

scheduled a second hearing on Rector’s motion to dismiss, noting that Rector’s

counsel would have an opportunity to review documents submitted in camera and

make further arguments to the court. The hearing was scheduled for December

12, 2007. On that date, the court gave Rector’s attorney approximately 30 minutes

to review all of the transaction reports and grand jury subpoenas that predated

Rector’s proffer, and then it denied his request for an evidentiary hearing. The

court found that “the parties [had] submitted everything that could be submitted on

this issue of whether or not the agreement has been violated.” It noted that Rector

had “submitted all of [his] interviews,” and “exhibits that [he] contend[ed] were

derived or the fruits of those interviews,” and the “Government [had] gone to

massive effort and submitted these three huge notebooks of materials plus all the

material that [Rector] reviewed in camera today.”

Despite finding that the language of the proffer agreement was broad

enough to encompass derivative use, the court concluded that “as to each exhibit

to which there was an objection the Government’s supplemental response shows

that the Government had an independent legitimate source for the document,” and,

therefore, “the Government [had] met its burden of showing that there was no

135 violation of the proffer agreement.” (emphasis added). The court further

concluded that Rector’s motion to dismiss should be denied because: (1) his

statements and the documents he provided were not admitted at trial; (2) he had

not objected to the testimony of any witnesses on the grounds that it was derived

from (or “related to”) his proffer; (3) the government was not required to negate

every possibility that evidence tainted by Rector’s proffer was used against him;

and (4) any error was harmless beyond a reasonable doubt. On those bases the

court denied Rector’s motion to dismiss all of the counts on which he had been

convicted.

G. The Kastigar Issue on Appeal

Rector contends that the government breached the proffer agreement and

thereby violated his rights to due process and a fair trial. In reviewing the district

court’s decision of this issue, “we resolve issues of law, including the meaning of

[Rector’s] immunity agreement, de novo.” United States v. Schwartz, 541 F.3d

1331, 1355 n.69 (11th Cir. 2008). We review the district court’s denial of an

evidentiary hearing only for an abuse of discretion and any fact findings only for

clear error. United States v. Kapordelis, 569 F.3d 1291, 1308, 1313 (11th Cir.

2009). A court, by definition, abuses its discretion when it bases a decision on an

erroneous legal premise. Koon v. United States, 518 U.S. 81, 100, 116 S.Ct. 2035,

136 2047 (1996); Young v. New Process Steel, LP, 419 F.3d 1201, 1203 (11th Cir.

2005); United States v. Brown, 332 F.3d 1341, 1343 (11th Cir. 2003). A clear

error in judgment also constitutes an abuse of discretion, as does a decision

applying the law in an unreasonable or incorrect manner. Norelus v. Denny’s,

Inc., 628 F.3d 1270, 1280 (11th Cir. 2010); Brown v. Ala. Dept. of Transp., 597

F.3d 1160, 1173 (11th Cir. 2010); Moorer v. Demopolis Waterworks & Sewer

Bd., 374 F.3d 994, 996–97 (11th Cir. 2004).

“Due process requires the government to adhere to the terms of any plea

bargain or immunity agreement it makes.” United States v. Harvey, 869 F.2d

1439, 1443 (11th Cir. 1989) (en banc). And “because due process requires us to

enforce the government’s agreement . . . , we apply the same rules and method of

analysis to an informal grant of use or transactional immunity as we would to a

formal grant.”35 Id. at 1444. Since Rector’s immunity stems from his agreement

35 This is not inconsistent with our conclusion in Taylor v. Singletary, 148 F.3d 1276 (11th Cir. 1998), that an informal immunity agreement does not provide the same protections as a formal statutory grant of immunity under 18 U.S.C. §§ 6001–03. Id. at 1282–83 n.7. In Taylor, we held that a habeas petitioner’s testimony given under an informal immunity agreement in an earlier federal prosecution was not per se involuntary, which might have prevented it from being used to impeach his testimony at his own state prosecution. “Because an informally-immunized witness retains his Fifth Amendment privilege, he must invoke that privilege if he wishes to preclude the use of the testimony against him in a criminal case; he cannot later claim that he was ‘compelled’ to testify simply because he fulfilled his promise to the prosecutor and did not invoke the privilege.” Id.

This case is not like Taylor. Rector does not suggest that he was compelled to testify against himself. Instead, Rector insists that the government breached its agreement with him not to use in its case in chief the information that he had provided it, and by doing so the government 137 with the prosecutor and not from a formal statutory grant of immunity, in order to

determine the scope of his immunity, we must look to and, if necessary, interpret

the text of the agreement. Taylor, 148 F.3d at 1284 (“When enforcing an

immunity agreement, we look to the terms of the agreement itself . . . .”); United

States v. Thompson, 25 F.3d 1558, 1562 (11th Cir. 1994) (“In determining the

extent of immunity afforded a defendant under an [informal] immunity agreement,

a court should apply basic principles of contract law.”). In this sense, the proffer

agreement is a contract Rector is seeking to enforce. The contracting parties

disagree about the meaning of its terms.

1. The Scope of the Proffer Agreement

We must first determine the scope of the promise the government made to

Rector in the proffer agreement. The district court ruled that the government had

promised not to use in its case in chief against Rector any evidence derived from

the information and documents he provided under the agreement. We agree. The

proffer agreement states, in relevant part, that:

Anything related to the proffer cannot and will not be used against [Rector] in any Government case-in-chief. Nor would any statements be used against [Rector] to increase his offense level pursuant to the Sentencing Guidelines (Section 1B1.8) should charges be filed or a conviction occur. However, any previous statements by [Rector] do not

violated his rights to due process and a fair trial. Although an informal grant of immunity does not bring with it the full panoply of benefits associated with a statutory grant of immunity, the government still must be held to its end of the bargain. 138 fall within this 1B1.8 protection. Also, the Government is completely free to pursue any and all investigative leads derived in any way from the proffer. Similarly, nothing, including Rule 11(e)(6), Federal Rules of Criminal Procedure, shall prevent the Government from using the substance of the proffer and/or leads derived therefrom for impeachment or in rebuttal testimony should [Rector] subsequently testify in any proceeding contrary to the substance of the proffer or in a prosecution for perjury, false statements, or obstruction of justice.

The two sentences to which we have added emphasis point in opposite

directions. The first one points toward Rector’s position because the participial

phrase “related to” is a broad one, and evidence developed using the information

he proffered is “related to” the proffer. See Moshea v. Nat’l Transp. Safety Bd.,

570 F.3d 349, 352 (D.C. Cir. 2009) (“Without getting into a metaphysical

discussion of the meaning of the phrase ‘related to,’ it suffices here to say that the

words ‘related to’ are broad.”) (citing Celotex Corp. v. Edwards, 514 U.S. 300,

307–08, 115 S.Ct. 1493, 1498–99 (1995)); Pennzoil Exploration and Prod. Co. v.

Ramco Energy Ltd., 139 F.3d 1061, 1067 (5th Cir. 1998) (“[C]ourts distinguish

‘narrow’ arbitration clauses that only require arbitration of disputes ‘arising out of’

the contract from broad arbitration clauses governing disputes that ‘relate to’ or

‘are connected with’ the contract.”); Random House Webster’s Unabridged

Dictionary 1626 (2d ed. 1993) (defining “related” to mean “associated[,]

connected,” and “allied by nature, origin, kinship, marriage, etc.”). The second 139 emphasized sentence points toward the government’s position because the

combined force of the adverb and predicate adjective “completely free,” which

describes the liberty the government has to pursue investigative leads derived from

the proffered information, is also broad. When two sentences diverge in a single

paragraph and the reader cannot tell which direction to take, the one who laid out

the diverging paths loses. Ambiguities are construed against the government as

the drafter of proffer agreements, Pielago, 135 F.3d at 709–10, Harvey, 869 F.2d

at 1452, and that makes all the difference.

There is also force to Rector’s point about the agreement explicitly

providing that nothing would prevent the government “from using the substance of

the proffer and/or leads derived therefrom for impeachment or in rebuttal

testimony should [Rector] subsequently testify in any proceeding contrary to the

substance of the proffer or in a prosecution for perjury, false statements, or

obstruction of justice.” The point is that the agreement expressly permits the

government to use leads derived from the proffered information against Rector in

specified circumstances, none of which is its case in chief. The inference is that

which is not included is excluded. See In re Celotex Corp., 487 F.3d 1320, 1334

(11th Cir. 2007) (“The doctrine of expressio unius est exclusio alterius instructs

that when certain matters are mentioned in a contract, other similar matters not

140 mentioned were intended to be excluded.”) (quotation marks omitted); United

States v. Transfiguracion, 442 F.3d 1222, 1232 (9th Cir. 2006) (construing plea

agreement against the government and applying the canon of expressio unius est

exclusio alterius); see also United States v. Koonce, 991 F.2d 693, 698 (11th Cir.

1993) (“The [expressio unius interpretative] canon is frequently cited and

employed because in many circumstances it makes good sense.”).

Finally, there is also the fact that in other proffer agreements, including ones

the government used with other defendants in this very case, it expressly reserved

the right to use derived evidence against the defendant. For example, the

agreement the government drafted and entered into with co-defendant Alcindor

stated that the government “reserves the right to pursue any and all investigative

leads derived from statements and information and to use such derivative evidence

in any criminal or civil proceeding against Mr. Alcindor and others.” See

Schwartz, 541 F.3d at 1355 (quoting the proffer agreement in that case which

expressly provided that “[t]he United States may make derivative use of the

statements [the defendant] makes during the proffer and may pursue investigative

leads therefrom, and would not be required to prove an independent source at any

Kastigar or other hearing held thereon.”); Pielago, 135 F.3d at 710 (quoting the

proffer agreement in that case which stated that “[t]he government also expressly

141 reserves the right to pursue any and all investigative leads derived from [the

defendant’s] statements or information and use such derivative evidence in any

criminal or civil proceeding against her and/or others.”). The agreements it

drafted in Schwartz, in Pielago, and in this very case for co-defendant Alcindor

show that the government knows how to clearly and expressly reserve the right to

make derivative use of proffered information against the one supplying it when the

government wants to do so. For whatever reason, the government did not do that

in Rector’s case. Because of that, and given the ambiguity in the language it did

use, the government was not entitled to use derivative evidence against Rector,

who never took the stand and who was not being prosecuted for perjury or false

statements or obstruction of justice.

For those reasons, we agree with the district court’s interpretation of the

proffer agreement: it forbids the use of derivative evidence against Rector. For

the reasons that follow, however, we disagree with the district court about whether

the hearing it conducted was sufficient for it to decide that the government did not

use against Rector any evidence derived from the information he supplied under

the proffer.

2. The Denial of an Evidentiary Hearing on the Issue of Whether Derivative Evidence Was Used Against Rector

142 “[W]hen presented with a Kastigar challenge, a court’s task is to determine

whether any of the evidence used against the defendant was in any way derived

from his compelled immunized testimony.” Schmidgall, 25 F.3d at 1528; United

States v. Hampton, 775 F.2d 1479, 1485 (11th Cir. 1985). The government has

the burden of proving that all of the evidence it obtained and used against the

defendant, including the testimony of other witnesses, was untainted at every step

of the investigation by immunized testimony. See Schmidgall, 25 F.3d at 1528

(citing Hampton, 775 F.2d at 1489). Even if the government did use immunized

testimony in its case against Rector, “an indictment or conviction may be upheld

on a finding that the use of such tainted evidence was harmless beyond a

reasonable doubt.” Schmidgall, 25 F.3d at 1529.

The district court made several legal errors in deciding that the hearing it

conducted was sufficient for it to conclude that the government had not violated

its agreement not to use derivative evidence against Rector. One of those errors is

that, at the government’s urging, the court considered the derivative evidence issue

only as to the evidence to which Rector had objected during the trial. That is

contrary to our decision in United States v. Gregory, 730 F.2d 692 (11th Cir.

1984). In that case, as in this one, the district court required the government to

show an independent source for only the evidence that the defendants had

143 identified and objected to. We found “no support for affirmance of that practice in

light of Kastigar, and this Court’s application of Kastigar in United States v.

Seiffert, 463 F.2d 1089 (5th Cir. 1972).” Id. at 698. We explained that the

problem was that “[t]he defendants could not be presumed to have knowledge of

all of the evidence . . . employed in the government’s investigation. Under such

circumstances, a ruling only on those items identified by the defendants is not

sufficient.” Id.; see also Hampton, 775 F.2d at 1485 (“[I]n order to sustain [an]

indictment, the government [has] the burden of establishing that all of the

evidence presented to the grand jury (and ultimately all of the evidence to be

utilized at trial) was derived from legitimate, independent sources.”). We

remanded for an evidentiary hearing to determine whether the government could

prove that all of the evidence it introduced at trial — not just the evidence the

defendants objected to — was derived from a source independent from the

testimony that was compelled under a grant of immunity. Gregory, 730 F.2d at

698.

Our Gregory decision requires a remand for a full evidentiary hearing in this

case at which the government will have the burden of showing that it did not

violate the terms of its proffer agreement with Rector. The government must

144 “show how it acquired all of the evidence admitted [against Rector] below.”

Gregory, 730 F.2d at 698 (quoting Seiffert, 463 F.2d at 1092).

Although the government included portions of interviews conducted and

copies of subpoenas issued before Rector’s proffer as part of the materials it

submitted to the district court, that was not enough to carry its burden. Those

materials did not rule out the possibility that some of the information that Rector

supplied was used to develop some of the evidence presented against him at trial.

The inquiry that Gregory and decisions like it require can seldom be satisfied by a

mere document dump. And even if it could be, the defendant must be given

adequate time to pick through the dump. Rector’s counsel was given only 30

minutes to review all of the in camera materials that the government had submitted

to the court.

There is another problem with the procedure that was followed. Despite

Rector’s request, the hearing on the Kastigar issue was not an evidentiary one, at

least not in the sense that testimony was taken (although documents were

submitted). As we have explained, “[u]nless the government relies solely upon

evidence obtained prior to the immunized testimony, the principles of

Kastigar generally require (as a practical matter) a showing that prosecuting

officials and their agents were aware of the immunity problem and followed

145 reliable procedures for segregating the immunized testimony and its fruits from

officials pursuing any subsequent investigations.” Hampton, 775 F.2d at 1490

(citation omitted). It is undisputed that the government attorneys and agents were

unaware of the derivative use problem and made no effort to keep the information

Rector provided and its fruits away from those who prosecuted him at trial.

We know that they made no effort to do that because at the August 16, 2007

hearing the government took the position that it had been completely free to use

derivative evidence against Rector. The AUSA told the court, among other things,

that it was perfectly okay for the government to use Rector’s information in a

“classic derivative” way by confronting another witness with it in order to

persuade him to plead guilty and testify against Rector. That “classic derivative”

use of Rector’s testimony would have violated the proffer agreement as the

district court and this Court have interpreted it. See Schmidgall, 25 F.3d at 1528

(“Prohibited indirect derivation includes using immunized testimony to help shape

the questioning of another witness.”).

We know that the government’s attorneys and agents took no precautions to

ensure that the information Rector supplied was not used to develop evidence

against him because that is what the AUSA told the district court at the August 16,

2007 hearing. She forthrightly admitted that if the government had known the

146 proffer agreement barred derivative use of Rector’s statements against him, the

government would have had to create a “taint box,” which it did not do in this case

because “no one does it.” By “no one does it,” we assume she meant that the

government had been careful in other cases to draft immunity agreements to

permit derivative use, something it neglected to do in Rector’s case.

There is another fact that stands up and shouts from the transcript. Before

she knew that the district court would rule otherwise, the AUSA conceded to the

district court that “we did what the Government always does in these cases, and

that is, we followed in a derivative way; that is, used these things for leads and so

forth.” That statement can be interpreted as an admission that the government did

violate the proffer agreement, as the district court and this Court have interpreted

it. The AUSA’s statement may be subject to another interpretation but, at the very

least, if she fails to testify and credibly explain that statement, the government will

not be able to carry its burden of proving that it made no derivative use of Rector’s

information.36 In view of all of these circumstances, a thorough evidentiary

inquiry, including testimony from all of those who built and presented the case

36 We do not mean to imply that the AUSA or anyone involved in the investigation or presentation of the government’s case acted in bad faith in regard to the proffer agreement. It is evident that the attorneys for the government interpreted that agreement differently from the way that the district court and this Court have interpreted it. Their different interpretation, however, does make it more likely that the agreement was violated, albeit not in bad faith. Bad faith is not required for a violation of the proffer agreement. 147 against Rector, is necessary for the district court to determine whether the

government has carried its burden of proving that there was no derivative use.

The district court did find, alternatively, that any violation of the proffer

agreement was harmless beyond a reasonable doubt. That finding was premised,

however, on the mistaken belief that the derivative use inquiry was limited to the

evidence to which Rector had objected. No reliable harmlessness determination

can be made until a full evidentiary hearing is conducted into the derivative use

issue as to all of the evidence used against Rector. Only after that hearing will the

district court be able to reliably determine which evidence the government has

failed to show was obtained independently and whether the admission of that

evidence was harmless.

We realize that the evidentiary hearing will be a burden on the district court

and the attorneys for both sides, but that is what the law requires under the

particular circumstances of this case.37 We will vacate the district court’s order

denying Rector’s motion to dismiss the counts on which he had been convicted

and will remand his case for further proceedings consistent with this opinion.

37 By stating that the law “requires” an evidentiary hearing, we do not mean to imply that the parties are precluded from avoiding the necessity for that hearing and further proceedings by settling the case. Before we ordered him released pending this appeal, Rector had already served approximately three years of his 84-month sentence and it may be that the parties can negotiate a plea bargain at this stage of the case. We are not recommending that to the parties but mention the possibility of it only to make it clear that our decision does not preclude it.

148 XI. Sentencing Issues

Hill, Farmer, and Laudermill challenge their sentences on both procedural

and substantive grounds.38 We review sentencing decisions only for an abuse of

discretion, using a two-step process. United States v. Shaw, 560 F.3d 1230, 1237

(11th Cir. 2009); see also United States v. Irey, 612 F.3d 1160, 1245–49 (11th Cir.

2010) (en banc). First, we review the sentencing decision to “ensure that the

district court committed no significant procedural error, such as failing to calculate

(or improperly calculating) the Guidelines range, treating the Guidelines as

mandatory, failing to consider the § 3553(a) factors, selecting a sentence based on

clearly erroneous facts, or failing to adequately explain the chosen sentence —

including an explanation for any deviation from the Guidelines range.” Gall v.

United States, 552 U.S. 38, 51, 128 S.Ct. 586, 597 (2007); Shaw, 560 F.3d at

1237. If we conclude that the sentence was procedurally reasonable, we then

proceed to the second step to determine whether it was substantively reasonable

under the totality of the circumstances. Shaw, 560 F.3d at 1237. 38 The only sentencing-related claim that David Thomas raises is that his counsel was ineffective at sentencing for failing to request a reduction of his guidelines offense level for acceptance of responsibility, notwithstanding the fact that he pleaded not guilty and went to trial. “We will not generally consider claims of ineffective assistance of counsel raised on direct appeal where the district court did not entertain the claim nor develop a factual record. If the record is sufficiently developed, however, this court will consider an ineffective assistance of counsel claim on direct appeal.” United States v. Bender, 290 F.3d 1279, 1284 (11th Cir. 2002) (citations omitted); see also United States v. Millwood, 961 F.2d 194, 195 (11th Cir. 1992) (declining to consider ineffective assistance of counsel claim on direct appeal from defendant’s sentence). The record is not sufficiently developed for us to decide this claim. 149 A. The Procedural Reasonableness Claims

1. Alleged Mandatory Presumption in Favor of the Guidelines

Hill, Laudermill, and Farmer contend that their sentences are procedurally

unreasonable because the district court applied a presumption in favor of the range

of sentences recommended by the guidelines. They base their contention not just

on comments at sentencing in this case in 2007 but also on the same judge’s

remarks in three unrelated cases from 2005 that purportedly indicate he considered

the guidelines either binding or presumptively reasonable, contrary to the Supreme

Court’s holding in United States v. Booker, 543 U.S. 220, 125 S.Ct. 738 (2005), as

developed in Rita v. United States, 551 U.S. 338, 127 S.Ct. 2456 (2007).

According to these three appellants, it was the judge’s policy to impose a sentence

within the guidelines range unless there were unusual circumstances that would

result in fundamental unfairness approaching a miscarriage of justice.

“A sentence may be unreasonable if it is the product of a procedure that

does not follow Booker’s requirements, regardless of the actual sentence.” United

States v. Hunt, 459 F.3d 1180, 1182 n.3 (11th Cir. 2006). While it is permissible

for appellate courts to apply a presumption of reasonableness to a sentence within

a properly calculated guidelines range, “the sentencing court does not enjoy the

benefit of a legal presumption that the Guidelines sentence should apply.” Rita,

150 551 U.S. at 351, 127 S.Ct. at 2465. If a district court applies the guidelines as

though they were mandatory or treats the range as presumptively reasonable, that

is procedural error.

Hill argues that the district court “slavishly” adhered to the guidelines in

arriving at his sentence. He claims that the judge has a pattern of sentencing

defendants to a term of imprisonment within the advisory guidelines range. That a

judge imposes sentences within the guidelines range in most cases is not a cause

for concern. We suppose that can be said of many judges. Neither 18 U.S.C. §

3553 nor Booker establishes a quota of sentences outside the guidelines range.

Hill does not, and in view of the sentences imposed on some of his co-

defendants cannot, assert that the district court judge in this case never varies from

the guidelines range or only rarely does so. Of the eleven sentences he imposed as

a result of this mortgage fraud scheme, three were outside the guidelines range —

one was above it and two were below it.

Faced with that fact about the sentences imposed in this and the related case

of Riley Graham39 from late 2007 through early 2008, Hill cites comments of the

district court judge from sentence proceedings in earlier, unrelated cases. First, in

United States v. Battle, No. 04-CR-00076, at 51 (N.D. Ga. April 1, 2005)

39 See supra, n.4. 151 (transcript of sentencing proceedings), the judge said to the defendant at the

sentencing hearing in April of 2005:

Well, as I’ve said before, my reading of Booker is that the guidelines remain an important factor in deciding the sentence in a criminal case, and that a non-guideline sentence is only to be imposed in unusual circumstances where the structure of the guidelines or the sentencing range produced by the guidelines produces a fundamentally unfair result.

Id. Then, in May 2005, the same judge remarked at another sentencing hearing:

Well as I’ve said many times by now, the guidelines bring a measure of consistency and fairness to sentencing, and it’s just fundamentally unfair for a defendant to get a sentence of 151 months in my courtroom and then get a sentence of probation in the next courtroom, and the only way that consistency is going to be achieved in federal sentencing is to follow the guidelines, except in extraordinary cases where there’s some fundamental unfairness inherent in the structure of the guidelines or in their application to a particular case.

The one non-guideline sentence that I have imposed was a result of that where, because of a quirk in the way the case was indicted, two individuals who engaged in exactly the same conduct and who had exactly the same background, exactly the same criminal record, weren’t treated the same; they were treated dramatically differently.

United States v. House, No. 02-CR-00745, at 112–13 (N.D. Ga. May 10, 2005)

(transcript of sentencing proceeding).

Finally, the district court made the following remarks at the sentencing of

another defendant in the House case, also in May 2005: “As I’ve said in other

cases, in order to impose a non-guideline sentence, I believe there must be some

152 fundamental unfairness approaching a miscarriage of justice . . . .” United States

v. House, No. 02-CR-00745, at 27 (N.D. Ga. May 16, 2005) (transcript of

sentencing proceeding). But the judge also stated in that case that following

Booker he treated the guidelines as advisory, not mandatory. Id.

The statements from the three earlier cases are problematic. However, those

statements were not made at sentencing in any of the cases before us in this

appeal. They were made in April and May of 2005, only months after Booker was

decided in January of that year, and a full two years before the Rita decision was

issued. By the time that these defendants were sentenced two years later, the post-

Booker sentencing law on this point had been clarified by the Rita decision.

The district court said nothing in this case indicating a lack of awareness of

the Rita decision or suggesting that it was treating the guidelines as anything other

than advisory. As Farmer points out, the court did invite the attorney for each

defendant to address the issue of whether it should impose a sentence within the

advisory guidelines range or outside the range, but there is nothing wrong with

that. It is a question every sentencing judge faces in virtually every case, and

asking the question actually indicates that the judge fully understands that the

guidelines range is only advisory.

153 Laudermill points to a single statement the court made during her sentence

hearing. The court said to her counsel: “Well, Mr. Rowsey, if I could give your

client any more breaks than I already have within the guidelines and under the law,

I would do it . . . . But I think I have given your client every break I can give her.”

We do not read that as anything more than an indication that the court felt it had

calculated the guidelines correctly and had carefully considered all of the non-

guidelines factors “under the law,” that law being 18 U.S.C. § 3553. The court

believed it had been as lenient with Laudermill as it could justify being.

For all of these reasons we are unpersuaded by the contention of Hill,

Laudermill, and Farmer that the district court treated the guidelines in a manner

that was inconsistent with the Booker and Rita decisions. The district court

properly considered the § 3553(a) factors as well as the guidelines range, it varied

upward or downward where it thought the circumstances justified doing so, and it

gave well-reasoned explanations for each of its sentencing decisions.

2. Laudermill’s Separate Contentions

Laudermill also contends that her sentence was procedurally unreasonable

for three reasons specific to her. First, she argues that the district court erred by

applying the 2001 version of the sentencing guidelines. According to Laudermill,

the court should have applied the 2000 version of the guidelines because the last

154 conduct for which she was convicted occurred no later than August of 2001. That

is not so. Laudermill was convicted of a conspiracy that extended well beyond the

effective date of the 2001 edition of the guidelines. See U.S.S.G. §1B1.3(a)(1)(B).

As the presentence report noted, even some of Laudermill’s own conduct in

furtherance of the conspiracy occurred after August 2001. The district court

applied the correct version of the guidelines.

Second, Laudermill claims that her guidelines range was improperly

calculated because the loss amount attributed to her should not have exceeded

$200,000. We disagree. The district court properly applied a 20-level adjustment

for a loss of more than $7,000,000 but less than $20,000,000 because Laudermill

was accountable for a loss of $9,027,933 due to her involvement in the conspiracy.

U.S.S.G. § 2B1.1(b)(1)(K) (2001); U.S.S.G. § 1B1.3.

Finally, Laudermill argues that the district court should not have applied an

enhancement for money laundering under § 2S1.1 because she had no intent to

conceal her share of the proceeds from the real estate closings. There was

evidence that Laudermill intentionally concealed the source of her proceeds. The

sentencing court could, and apparently did, find she was aware that payments to

straw buyers and recruiters such as herself were concealed from the lenders

through side deals between Hill and the straw buyers. Therefore, a two-level

155 enhancement was appropriate based on her conviction under 18 U.S.C. §

1956(a)(1)(B)(i). See U.S.S.G. § 2S1.1(b)(2)(B) (2001). Even if there were no

evidence that Laudermill intended to conceal the money she made from the

fraudulent transactions, the enhancement under § 2S1.1(b)(2)(B) would still have

been appropriate because she was convicted under 18 U.S.C. § 1956(a)(1)(A)(ii)

for money laundering with the intent to promote the illegal enterprise.

Laudermill has not convinced us that there was any procedural error in the

imposition of her sentence.

B. Substantive Reasonableness

Farmer, Laudermill, and Hill contend that their sentences are substantively

unreasonable.

1. Farmer

Farmer argues that his 127-month sentence, which was near the low end of

his guidelines range of 121 to 151 months, was substantively unreasonable

because it was greater than necessary to comply with the goals of sentencing. The

district court denied Farmer’s request for a below-guidelines sentence after noting

the presence of several aggravating factors, including: the magnitude of the

fraudulent scheme; the costs borne by the government, the victim lenders, and the

taxpayers; and Farmer’s lack of remorse as well as his sophisticated background in

156 the mortgage industry. Despite those factors calling for a higher sentence, the

court sentenced Farmer to just 6 months above the bottom of his guidelines range.

It justified that leniency on the ground that Farmer had joined in some stipulations

that helped move things along at trial and because the court thought the sentence

was consistent with the § 3553(a) factors. Given all of the aggravating

circumstances, it borders on the frivolous to argue that Farmer’s sentence near the

low end of the advisory guidelines was unreasonable.

2. Laudermill

Laudermill, who served the conspiracy by recruiting straw buyers, argues

that her 87-month sentence, which was at the bottom of the 87 to 108 months

guidelines range, was substantively unreasonable because: the straw buyers she

recruited were equally or more blameworthy than she but were not prosecuted; her

convictions were not within the “heartland” of money laundering cases; and the

district court did not give enough weight to her limited involvement in the scheme.

The government’s decision to prosecute Laudermill but none of those who

were merely straw buyers does not render her sentence unreasonable. Whether the

straw buyers were victims or uncharged co-conspirators is irrelevant to the

reasonableness of Laudermill’s sentence.

157 Laudermill’s outside-the-heartland argument is that money laundering is

usually associated with organized crime and drug trafficking, which is why the

guidelines lead to such harsh sentences for the crime. She reasons that because

she was not convicted of drug trafficking or organized crime — not in the usual,

La Cosa Nostra sense, even though she was part of a well-organized criminal

scheme — she ought to be given a special break at sentencing. Laudermill,

though, was found guilty of money laundering under 18 U.S.C. § 1956, which

plainly encompasses her conduct as part of Hill’s mortgage fraud scheme, and she

was sentenced accordingly. She got a heartland sentence for a heartland crime.

Laudermill’s final argument is that the district court failed to adequately

consider the nature and consequences of her offenses and her minor role in the

conspiracy. The record of the sentencing proceeding does not support her

argument. After acknowledging that the government was correct in arguing that

Laudermill played an integral and active role in the mortgage fraud conspiracy, the

district court went on to note that some leniency was in order because she had

agreed to reasonable stipulations at trial and because, compared to other

defendants, Laudermill deserved a smaller share of the blame. As the district court

explained:

[I]n perhaps the ordinary case and even in another mortgage fraud case we wouldn’t characterize [Laudermill] as a minor participant. But 158 compared to Phillip Hill and compared to the professionals that were involved, the appraisers, the lawyers, the brokers, I think giving her a downward adjustment for minor role when her guideline offenses are driven not by what she profited in the scheme but by the total amounts of the loans and the money that were laundered, it seems to me the fair way to balance those two is to give her the minor role adjustment and depart downward on criminal history because of overrepresentation from Level Three to Level Two and give a sentence at the low end of the guideline range. That seems to me to be the fair thing to do under all the circumstances of this case.

Without the downward adjustments for playing a minor role and for an

overrepresented criminal history, Laudermill’s guidelines range would have been

121–151 months. Through those adjustments, however, the court reduced her

guidelines range to 87–108 months, and then sentenced her to the very bottom of

that lower range. Her sentence was not substantively unreasonable.

3. Hill

Hill argues that the district court’s treatment of the guidelines as

presumptively reasonable led it to impose a substantively unreasonable sentence

that violates the “parsimony provision” of 18 U.S.C. § 3553(a), which directs

courts to impose a sentence that is “‘sufficient, but not greater than necessary’ to

accomplish the goals of sentencing.” Kimbrough v. United States, 552 U.S. 85,

101, 128 S.Ct. 558, 570 (2007); 18 U.S.C. § 3553(a). According to Hill, the court

arrived at a sentence that was “unnecessarily harsh” by focusing on the range of

159 sentences recommended by the guidelines after calculating the myriad of

enhancements that were applicable to his case.

We have recently recognized that what some call the “parsimony principle,”

expressed in § 3553(a), actually requires “that a sentencing court when handing

down a sentence be stingy enough to avoid one that is too long, but also that it be

generous enough to avoid one that is too short.” United States v. Irey, 612 F.3d

1160, 1197 (2010) (en banc). This “Goldilocks principle,” as it has also been

called, directs the district court to impose a sentence that is “just right to serve the

purposes of § 3553(a).” Id.

In its endeavor to arrive at a sentence that was just right for Hill, the district

court noted that “[t]here are a number of aggravating factors that weigh in favor

not only of a sentence within the guideline range but a sentence at the very top of

the guideline range.” The court observed that: (1) the amount of loss was not

fully taken into account in calculating the guideline range; (2) mortgage fraud is a

serious crime and the banks that lost the money are not the only victims of it; (3)

mortgage fraud affects innocent individuals who live next to foreclosed properties;

(4) many of the unwitting straw buyers had their credit ruined and were forced to

declare bankruptcy; (5) Hill employed his co-defendants, many of whom had no

criminal history, to assist him in his fraud, eventually subjecting them to long

160 prison sentences; (6) Hill had a history of fraud, as he had previously perpetrated a

similar scheme in Carroll County before moving on to Atlanta; and (7) Hill

continued his scheme long after he was aware that he was under investigation.

In spite of all those aggravating factors, the court still chose not to sentence

Hill at or near the top of his guidelines range. It rewarded him with leniency for

reducing the cost to the public of the trial by agreeing to reasonable and

appropriate stipulations. Nevertheless, the court decided that it could not in good

conscience sentence Hill to the shortest sentence recommended by the guidelines

“given the aggravating circumstances and the enormity of the losses.” The court

then imposed a sentence of 336 months, which was closer to the bottom of the

324–405 months guidelines range than it was to the top. The court’s balancing of

the § 3553(a) factors and all of the circumstances falls well within the parameters

of § 3553(a), and Hill’s within-guidelines sentence is neither too harsh nor too

lenient.

Finally, Hill argues that his sentence is unreasonable because it varies

greatly from the sentences of his co-defendants and the sentences of other high-

profile fraud defendants nationwide. First, Hill’s co-defendants who received

much more lenient sentences were not leaders in the conspiracy; he was the leader,

the kingpin who orchestrated the whole thing. Without Hill there would have

161 been no conspiracy, no massive amount of mortgage fraud resulting from it, and

no ruined lives in the wake of it. He bore the greatest responsibility for the

massive crime and deserved the longest sentence. Although “the need to avoid

unwarranted sentence disparities” is a factor to be considered in sentencing, see §

3553(a)(6), there is no unwarranted disparity between Hill’s sentence and those of

his co-defendants.

As for Hill’s argument that there was an unwarranted disparity between his

sentence and others who have been convicted of similar fraud crimes elsewhere in

the nation, that would be difficult to gauge. And we are not convinced that a

sentence imposed in this circuit is subject to a national grade curve. In any event,

the Supreme Court has instructed us that the “avoidance of unwarranted disparities

was clearly considered by the Sentencing Commission when setting the Guidelines

ranges. Since the District Judge correctly calculated and carefully reviewed the

Guidelines range, he necessarily gave significant weight and consideration to the

need to avoid unwarranted disparities.” Gall, 552 U.S. at 54, 128 S.Ct. at 599.

The same is true here.

As we noted at the beginning of this opinion, Hill put in place and ran a

massive conspiracy involving $110 million of fraudulent loans, almost all of

which went into default causing more than $38 million in direct losses to lenders.

162 The people Hill used in his criminal scheme suffered greatly, and the economic

pain he inflicted to satisfy his own greed was felt by countless homeowners in

neighborhoods where the foreclosures that were a by-product of the scheme

reduced property values. His sentence of 336 months is not substantively

XII. Conclusion

We AFFIRM all of the convictions and sentences of all of the appellants in

all respects, except that we VACATE the district court’s order denying Rector’s

motion to dismiss, which asserted as its ground that the government had breached

the proffer agreement; as to that motion, we REMAND Rector’s case for further

proceedings consistent with this opinion.

AFFIRMED IN PART, VACATED IN PART, and REMANDED.