«Nos. 10-2243, 10-2266, 10-2313, 10-2350, 11-1130 UNITED STATES OF AMERICA, Appellee, v. DANIEL APPOLON; ERNST APPOLON; LATOYA HALTIWANGER; J. DANIEL ...»
United States Court of Appeals
For the First Circuit
Nos. 10-2243, 10-2266, 10-2313, 10-2350, 11-1130
UNITED STATES OF AMERICA,
DANIEL APPOLON; ERNST APPOLON; LATOYA HALTIWANGER;
J. DANIEL LINDLEY; and ERIC L. LEVINE,
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS[Hon. George A. O'Toole, U.S. District Judge] Before Torruella, Boudin, and Lipez, Circuit Judges.
Jeanne M. Kempthorne for appellant Daniel Apollon.
Mark E. Howard for appellant Ernst Appolon.
Tina Schneider for appellant Latoya Haltiwanger.
James C. Rehnquist for appellant J. Daniel Lindley.
Dana A. Curhan for appellant Eric L. Levine.
Vijay Shanker, Attorney, United States Department of Justice, Criminal Division, Appellate Section, with whom Carmen Milagros Ortiz, United States Attorney, Victor A. Wild, Ryan M. DiSantis, and Mary Beth Murrane, Assistant United States Attorneys, Lanny A.
Breuer, Assistant Attorney General, and Greg D. Andres, Acting Deputy Assistant Attorney General, were on brief, for appellee.
September 19, 2012 LIPEZ, Circuit Judge. Appellants Daniel Appolon ("Daniel"), Ernst Appolon ("Ernst"), Latoya Haltiwanger, J. Daniel Lindley, and Eric L. Levine were players in the Boston real estate market. Along with six coconspirators, appellants devised and executed a mortgage fraud scheme which netted them illegal profits of nearly $2 million between May 2005 and June 2006. The scheme itself was uncomplicated: appellants and their coconspirators arranged for straw buyers to purchase real property at the asking price, falsified mortgage loan applications for the straw buyers to obtain financing for an artificially-inflated purchase price, and pocketed the difference. The loans secured by each of the properties involved in appellants' scheme eventually went into default, and most of the properties were forced into foreclosure at huge losses for the lenders.
Appellants and their coconspirators were indicted by a federal grand jury on May 15, 2008. Appellants were each charged with one count of conspiring to commit wire fraud in violation of 18 U.S.C. § 371 and with multiple counts of committing wire fraud in violation of 18 U.S.C. § 1343. (Daniel was charged with five counts of wire fraud, Ernst with thirty-four, Haltiwanger with seven, and Lindley and Levine each with forty-one.) In addition, Lindley and Levine were charged with nineteen counts of money laundering in violation of 18 U.S.C. § 1957. All of the counts in
United States District Court for the District of Massachusetts, appellants were found guilty of the charges against them, except that Lindley was found not guilty of eleven counts of wire fraud and four counts of money laundering.1 Each appellant was sentenced to a term of imprisonment, followed by a period of supervised release.2
district court's management of this case, evidentiary rulings, jury instructions, sentencing calculations, and other orders. Included in our analysis of these challenges is a rejection of Haltiwanger's
nullification power by explicitly instructing the jury that it has a duty to return a guilty verdict if it is convinced beyond a Five of appellants' coconspirators pleaded guilty before trial. The sixth, Ralph Appolon, was tried separately because his attorney withdrew shortly before trial. He was convicted on February 22, 2011, and his appeal is currently pending before this court. See United States v. Appolon, No. 11-1627.
Daniel was sentenced to forty-two months of imprisonment and three years of supervised release; Ernst to one hundred and twenty months of imprisonment and three years of supervised release;
Haltiwanger to thirty months of imprisonment and two years of supervised release; Lindley to seventy-two months of imprisonment and three years of supervised release; and Levine to one hundred and forty-four months of imprisonment and two years of supervised release.
facts of this case, in the light most favorable to the jury's verdict, see United States v. Mubayyid, 654 F.3d 35, 41 (1st Cir.
2011), reserving additional detail for the analysis that follows.
from the practice of law, shared office space in Boston with Lindley, another attorney. During Levine's suspension, he transferred components of his real estate practice in early 2005 to Lindley, who thereafter handled all property closings for Levine.
Levine and Lindley sometimes worked with Haltiwanger, a residential mortgage broker at Topdot Mortgage Company, and with Ernst, a realtor at New England Merchants and a principal at Oligarchy Funding. Daniel, Ernst's brother, recruited clients and did odd jobs for New England Merchants.
In mid-2005, appellants hatched their mortgage fraud scheme, which began with Ernst identifying properties for sale in the Boston area and negotiating purchase prices with the sellers.
Assisted by Daniel and others, Ernst then recruited straw buyers for these properties, targeting individuals with good credit scores
for a cut of the profits. The standard pitch delivered to a straw buyer was that, in exchange for the use of his or her name, the straw buyer could expect to earn approximately $10,000 and would not be responsible for any down payment or mortgage payments.
Next, aided by Lindsay MacPhee (Levine's administrative assistant),
falsified mortgage loan applications, purchase-and-sale agreements, and HUD-1 settlement statements on behalf of the straw buyers, misrepresenting the straw buyers' eligibility for the loans and overstating the purchase prices of the properties.3 (Haltiwanger also served as a straw buyer for one property.) Once the falsified applications were approved by unsuspecting mortgage lenders, the loan proceeds were wired to Lindley's Interest on Lawyers Trust Account ("IOLTA"), from which the actual purchase prices were paid to the sellers and the excess was disbursed to the conspirators, usually after passing through bank accounts held by Levine. The loans secured by the properties were then permitted to default.
The Real Estate Settlement Procedures Act of 1974, 12 U.S.C.
§§ 2601-2617, requires that a HUD-1 settlement statement be used in every real estate settlement "involving a federally related mortgage loan in which there is a borrower and a seller." 24 C.F.R. § 3500.8(a). Among other things, the HUD-1 form is meant to "conspicuously and clearly itemize all charges imposed upon the borrower and all charges imposed upon the seller in connection with the settlement." 12 U.S.C. § 2603; see also BancOklahoma Mortg.
Corp. v. Capital Tide Co., 194 F.3d 1089, 1096 (10th Cir. 1999) ("HUD-1 forms provide a detailed account of the disbursements of money [that] borrowers are to receive.").
appellants' scheme. For each of these properties, two separate HUD-1 forms were created, with one form reflecting the actual purchase price and the other reflecting the artificially-inflated price listed on the falsified mortgage loan application. In addition, separate closings, presided over by Lindley, were held for many of the properties in order to distance the straw buyers from the sellers and keep secret the existence of the scheme. By June 2006, the conspirators had earned nearly $2 million in illegal profits, commissions, and fees.
Our analysis begins with Ernst's pretrial motion for severance. It then turns to the sufficiency of the evidence, moves to assorted evidentiary issues raised by appellants during trial, proceeds to the district court's jury instructions and sentencing calculations, and concludes with Levine's post-trial motion for an evidentiary hearing or discovery.
A. Ernst's Motion for Severance Levine was represented at trial by Isaac Borenstein of the law firm Denner Pellegrino, LLP ("Denner Pellegrino").4 During Levine was also represented by another Denner Pellegrino attorney, Bruce Levin. Ernst does not challenge Levin's participation in Levine's defense.
prior to trial, another Denner Pellegrino attorney, Jeffrey Denner, had discussed with Ernst the possibility of representing him in this case. Although Denner Pellegrino never took on Ernst's representation, Ernst's counsel asserted that a severance of Ernst
constitutional right to testify in his own defense, see Rock v.
Arkansas, 483 U.S. 44, 51 (1987), since Ernst's interests at trial differed from Levine's, and Borenstein had the ability to crossexamine Ernst with confidential information that he disclosed to Denner.
brought Levine's representation with him when he joined Denner Pellegrino from another law firm. When Borenstein arrived at Denner Pellegrino, Denner informed him that he had previously had a non-substantive conversation with "someone whose name [was] Appolon" about taking over his representation in this case.
Borenstein and Denner then consulted with Levine, who waived any potential conflict of interest. Borenstein represented to the court that he had no further discussions with Denner "or anybody at Denner Pellegrino" about Ernst and had acquired no confidential information about him.
Pellegrino, to meet with Ralph and Ernst, who also was represented by court-appointed counsel at the time. Denner also may have met personally with Ralph. He did not meet with Ernst, however.
Neither Ralph nor Ernst retained Denner Pellegrino's services.
attorneys stated that they had no notes from the meetings and that there were no relevant documents in Denner Pellegrino's files. The court found that "there must have been some discussion of the indictment, at least in general terms,... between Ernst and Andrews," but that any discussion was "exploratory as to whether there would be representation" and could not have been "in-depth."
confidential information was exchanged was probably not very great" and that no confidential information about Ernst was subsequently shared with Borenstein.
meeting with Levine on one occasion. However, the court reiterated that there was no evidence that any confidential information about Ernst was ever disclosed improperly. Accordingly, the court denied Ernst's motion for severance. As a prophylactic measure, however,
court is empowered to sever co-defendants' trials if "there is a serious risk that a joint trial would compromise a specific trial right of one of the defendants, or prevent the jury from making a
prejudice resulted from the denial of severance, and prejudice in this context 'means more than just a better chance of acquittal at a separate trial.'" United States v. DeCologero, 530 F.3d 36, 52 (1st Cir. 2008) (quoting United States v. Boylan, 898 F.2d 230, 246 (1st Cir. 1990)). We review a district court's denial of a motion for severance for manifest abuse of discretion, see United States
findings. To the extent that Ernst disclosed protected information to Andrews while discussing the possibility of Denner Pellegrino taking on his representation, there is ample support for the court's finding that no such information was relayed to Borenstein, who obviously could not have cross-examined Ernst with confidential information he did not possess. As a result, we see no reasonable basis for Ernst to have feared cross-examination more than any other criminal defendant. Therefore, we find no manifest abuse of discretion in the denial of his severance motion.
B. The Sufficiency of the Evidence (Lindley, Ernest, and Levine)
reserved its ruling, the defendants renewed their motions at the close of all the evidence, and the court denied the motions at that time. See Fed. R. Crim. P. 29(b). Only Lindley, Ernst, and Levine now challenge the court's ruling. We review their challenges de novo, appraising the evidence in the light most favorable to the jury's verdict, see United States v. Rodríguez-Vélez, 597 F.3d 32,
32 (1st Cir. 2006). "The verdict must stand unless the evidence is so scant that a rational factfinder could not conclude that the government proved all the essential elements of the charged crime beyond a reasonable doubt." Rodríguez-Vélez, 597 F.3d at 39.
Lindley argues that the evidence adduced at trial was insufficient to prove that he either had actual knowledge of or was willfully blind to the mortgage fraud scheme. Such knowledge or willful blindness is an essential element of the thirty wire fraud counts, see 18 U.S.C. § 1343; United States v. Vázquez-Botet, 532 F.3d 37, 63 (1st Cir. 2008), fifteen money laundering counts, see 18 U.S.C. § 1957; United States v. Carucci, 364 F.3d 339, 343 (1st Cir. 2004), and one conspiracy count, see 18 U.S.C. § 371; United States v. Yefsky, 994 F.2d 885, 890 (1st Cir. 1993), of which he was convicted.
witnesses and documentary evidence. Lamerique, a coconspirator of appellants, testified at trial in exchange for the government's agreement to recommend a reduced sentence. However, it was well within the jury's province to choose to believe the testimony of a