The facts of U.S. v. Hill can be summarized as a scheme to obtain over 300 mortgage-backed loans for buyers who used the loans to purchase houses and condominiums from Hill and his associates for more than market value. Almost all of the loans went into default causing losses of 38 million to lenders and guarantors. Hill and his associates sold properties to straw buyers for substantially more than the cost or fair market value. Properties often went into default. In order to obtain the highest possible loans values (for these inflated prices) the lenders were given multitude of false statements: source of down payment, value of properties, income and employment of buyers, whether buyers would occupy properties, and whether any properties were being leased. Hill recruited people with good credit scores to serve as straw buyers of the properties. Often he made up employment of his straw buyers to convince lenders they could qualify for a loan, even to the extent of generating fake w-2s and pay stubs or answering the phone as the borrower’s employer. The final indictment had 187 counts ranging from conspiracy, wire fraud, mail fraud, false statements to a bank, money laundering.
Several issues were raised. Four defendants asked for their trials to be severed from their codefendants’ trials on various ground including mutually antagonistic defenses, prejudice from being tried with codefendants, or inability to pick a fair jury. All lost on this challenge. A Batson challenge to the jury selection was raised and the court found no evidence the prosecution used its peremptory strikes in a racially discriminatory manner.
Another issue raised was the use of the victim witnesses who were representatives of the victim lenders to testify about whether the misrepresentations in fraudulent loan applications would have had any effect on their decision to approve a loan. The objection was that these lay witnesses giving expert witness testimony were not qualified to give expert testimony. The court found it was properly treated as lay testimony for the bank representatives who testified about how the company does business as it was based on particularized knowledge gained in their position.
There was no error in the use of charts. Rewarding defendants for stipulating to evidence to move along trial was found proper. Regarding jury instruction issues, the court upheld the failure to give the good faith reliance upon counsel because of lack of evidence to support the instruction, and denied the objection raised to deliberate ignorance instruction finding there was evidence of actual knowledge and any error would have been harmless. The sufficiency of the evidence found for all defendants.
One defendant, Rector, had a proffer agreement with the government in which he agreed to provide hundreds of documents and in exchange the government promised not to use against him at his trial if the negotiations failed, with certain exceptions. When the plea discussions broke down there were disagreements with the government and Rector about the nature and extent of those exceptions. This Kastigar issue did warrant a remand. Prior to the trial the government threatened that if the defense put before the jury the fact he had cooperated, it threatened to introduce the statements he made while cooperating. As a result the defense did not mention his cooperation. During the trial he also objected to the admission of documents that had been derived from his statement. The agreement the court found did not permit the government to use derivative evidence against Rector since he never took the stand. The court of appeals decided that the district court did not conduct a sufficient hearing to decide that the government did not use against Rector any evidence derived from the information he supplied under his cooperation proffer.
What is remarkable about this opinion is found in footnote 37. “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.” Sound like a suggestion to this blog.