U.S. v. Irvin

• Citation: 86 Fed. R. Evid. Serv. 525,656 F.3d 1151
• Decision Date: 31 August 2011
• Docket Number: Nos. 10–3106,10–3107.,s. 10–3106
• Parties: UNITED STATES of America, Plaintiff–Appellee,v.Hallie IRVIN and F. Jeffrey Miller, Defendants–Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

656 F.3d 1151

86 Fed. R. Evid. Serv. 525

UNITED STATES of America, Plaintiff–Appellee,

v.Hallie IRVIN and F. Jeffrey Miller, Defendants–Appellants.

Nos. 10–3106

10–3107.

United States Court of Appeals, Tenth Circuit.

Aug. 31, 2011.

John T. Carlson, Assistant Federal Public Defender (Raymond P. Moore, Federal Public Defender, and O. Dean Sanderford, Assistant Federal Public Defender, with him on the briefs), Denver, CO, for Defendant–Appellant, Irvin.Jeffrey D. Morris of Berkowitz Oliver Williams Shaw & Eisenbrandt LLP, Kansas City, MO, for Defendant–Appellant, Miller.Richard L. Hathaway, Assistant United States Attorney (Barry R. Grissom, United States Attorney, and Christine E. Kenney, Assistant United States Attorney, with him on the briefs), District of Kansas, Topeka, KS, for Plaintiff–Appellee.Before MURPHY, EBEL, and TYMKOVICH, Circuit Judges.MURPHY, Circuit Judge.I. Introduction

Appellants F. Jeffrey Miller and Hallie Irvin were charged in an eleven-count indictment with a variety of crimes stemming from an alleged conspiracy to defraud mortgage lenders in connection with the subprime housing market. After a month-long jury trial, Miller and Irvin were each convicted on several of the charges and sentenced. They now appeal their convictions, citing numerous evidentiary and legal errors. Miller also challenges his sentence. Exercising jurisdiction under 28 U.S.C. § 1291, we now REVERSE their convictions in part, AFFIRM their convictions in part, and REMAND for further proceedings.

II. Background

Miller was a builder and developer involved in residential construction in Kansas, Missouri, and other states.¹ There being many competing developers marketing their homes to well-qualified buyers, Miller chose to focus his business on the relatively untapped subprime market, i.e., buyers with low income and poor credit. The marketing of Miller's homes was handled by Stephen Vanatta, who would refer potential buyers to a mortgage broker named James Sparks for financing. Upon the successful closing of a home sale, Miller was paid out of the mortgage loan proceeds while Sparks received a commission from the mortgage lender, which he shared with Vanatta. Because a prior felony conviction for passing a bad check prohibited Vanatta from maintaining a checking account, his portion of commissions were paid by checks issued to his wife, appellant Irvin.

Despite the eagerness of lenders to extend mortgage loans, Sparks often had trouble securing financing for Vanatta's subprime applicants. In order to ensure that otherwise unqualified buyers could obtain financing, Sparks and Vanatta enhanced such buyers' apparent creditworthiness by, among other things, overstating the buyers' income, altering bank statements to add deposits, and drafting false letters of employment. The mortgage lenders were further induced to extend financing through Miller's use of inflated home appraisals, overvaluing the relevant properties and thereby enhancing the lenders' perceived loan-to-collateral ratio.² Reflecting these inflated home valuations, however, occasionally required Sparks to surreptitiously increase the sales price on previously signed sales contracts. To convince the surprised buyers to proceed with their purchase after discovering the price change, Miller would himself offer to extend a second mortgage, referred to as a seller carryback, covering the difference between the first mortgage and the adjusted purchase price. Finally, to bring the effective purchase price back in line with the originally agreed-upon amount, Miller would agree to discount the amount owed on the seller carryback if the buyer successfully refinanced the first and second mortgages.³

The government became aware of these fraudulent activities due to a report made by the accounting firm, Meara King & Company (“Meara King”). Meara King was monitoring Miller's business activities in accordance with a certain agreement entered into by Miller as a condition of his release in connection with another criminal prosecution (the “Monitoring Condition”).⁴ While reviewing a home sale referred to herein as the “Jordan Transaction,” Meara King noted a sizable discrepancy between the reported value of the property and the value assigned to it by Meara King's appraiser. It reported this discrepancy to the United States Attorney's Office, which began an investigation. The investigation ultimately led to Miller, Vanatta, Sparks, Irvin, and Miller's former employee Sandra Harris, being charged with a variety of criminal offenses including bank fraud, conspiracy to commit bank fraud, money laundering, and criminal contempt for knowingly violating the order setting Miller's conditions of release in Miller I.

Sparks pled guilty to one count of conspiracy pursuant to an agreement whereby he agreed to testify against his co-defendants as a cooperating witness. The remaining defendants were tried on the following charges: conspiracy (Count 1); two counts of bank fraud (Counts 2 & 3); two counts of money laundering, each count tied to one of the substantive bank fraud charges (Counts 4 & 5); destroying records in a federal investigation (Count 6); corruptly influencing a witness (Count 8); and four counts of criminal contempt, for either violating the Monitoring Condition set in Miller I, or for aiding and abetting in those violations (Counts 9–12).⁵ Following a lengthy trial, the jury acquitted Harris of all charges. Miller, Vanatta, and Irvin were each found guilty of Counts 1, 5, 9, and 10. Vanatta and Irvin were additionally found guilty of Counts 2 and 4.

Prior to sentencing, Miller, Vanatta and Irvin moved for entry of judgments of acquittal, alleging insufficient evidence to sustain a conviction. Alternately, the defendants requested a new trial based upon certain alleged errors committed by the trial court. These motions were denied by the district court. Miller and Irvin now challenge their convictions on essentially the same grounds presented below. Miller also challenges his sentence.

III. DiscussionA. Challenges to Admitted Evidence1. Admission of Exhibit 1–2

The testimony of cooperating defendant Sparks formed much of the government's case against Miller and Irvin. Over the course of four days, Sparks described the various forgeries, misrepresentations, and other fraudulent activities he allegedly engaged in with Vanatta to obtain financing for unqualified buyers. In all, Sparks related the particulars of twenty-two separate transactions involving Miller-built homes. During this testimony, continual reference was made to government Exhibit 1–2, a chart displayed before the jury that purported to summarize the relevant details of these transactions. This chart was entitled “Summary of Fraud for JEFF MILLER et al., Fraud That Can Be Identified By James Sparks.” It included information identifying the date, location, and buyer for each transaction, as well as a column labeled “False Statements to Lenders,” which listed the various specific fraudulent representations and actions described by Sparks.

Exhibit 1–2 was initially offered by the government under Fed.R.Evid. 1006 as a summary of several boxes of “loan files” pertaining to the allegedly fraudulent home sales. The defendants vigorously resisted the admission of the summary chart, filing a motion in limine and repeatedly objecting during trial. The district court ultimately agreed with the government and admitted Exhibit 1–2 under Rule 1006. Arguing the requirements of Rule 1006 were not satisfied and the loan files upon which Exhibit 1–2 was based constituted inadmissible hearsay, Miller and Irvin contend the district court's decision is reversible error. We review a district court's decision to admit summary charts under Rule 1006 for abuse of discretion. United States v. Thompson, 518 F.3d 832, 858 (10th Cir.2008).

Rule 1006 provides, in relevant part: “The contents of voluminous writings, recordings, or photographs which cannot conveniently be examined in court may be presented in the form of a chart, summary, or calculation. The originals, or duplicates, shall be made available for examination or copying, or both, by other parties at reasonable time and place.” Fed.R.Evid. 1006. Although the materials upon which a Rule 1006 summary is based need not themselves be admitted into evidence, they must at least be admissible. United States v. Samaniego, 187 F.3d 1222, 1223 (10th Cir.1999).

Miller and Irvin argue the loan files purportedly summarized in Exhibit 1–2 constituted hearsay that was not shown to qualify for any exception to the prohibition on hearsay evidence. When this same challenge was raised before the district court, the government attempted to show the loan files were admissible under the business records exception established by Fed.R.Evid. 803(6). Pursuant to Rule 803(6), business records are admissible despite their hearsay nature if the records' custodian, or another qualified witness, testifies the records (1) were prepared in the normal course of business; (2) were made at or near the time of the events recorded; (3) were based on the personal knowledge of the entrant or of a person who had a business duty to transmit the information to the entrant; and (4) are not otherwise untrustworthy. United States v. Ary, 518 F.3d 775, 786 (10th Cir.2008). The government offered Sparks as the witness qualified to make these foundational showings. Sparks, however, testified the loan files were largely maintained by various title companies for whom he had not worked and under circumstances of which he had no personal knowledge. Furthermore, Sparks could not state whether the loan files were made or kept by the title companies in the regular course of their businesses. He also indicated that various documents within the loan files had been removed, destroyed, or otherwise modified. His testimony, therefore, was insufficient to establish the admissibility of the loan files as business...