708 F.3d 722 (6th Cir. 2013), 11-3394, United States v. Kurlemann
|Docket Nº:||11-3394, 11-3544, 11-3397.|
|Citation:||708 F.3d 722|
|Opinion Judge:||SUTTON, Circuit Judge.|
|Party Name:||UNITED STATES of America, Plaintiff-Appellee/Cross-Appellant (11-3394 & 11-3544), Plaintiff-Appellee (11-3397), v. Bernard J. KURLEMANN, Defendant-Appellant/Cross-Appellee (11-3394 & 11-3544), Eric Duke, Defendant-Appellant (11-3397).|
|Attorney:||Erik W. Scharf, Erik W. Scharf, P.A., Coconut Creek, Florida, for Appellant/Cross-Appellee in 11-3394 and 11-3544. David E. Mills, The Mills Law Office LLC, Cleveland, Ohio, for Appellant in 11-3397. Christopher K. Barnes, United States Attorney's Office, Cincinnati, Ohio, for Appellee/Cross-Appe...|
|Judge Panel:||Before: GUY, SUTTON and COOK, Circuit Judges.|
|Case Date:||February 13, 2013|
|Court:||United States Courts of Appeals, Court of Appeals for the Sixth Circuit|
Argued: Jan. 23, 2013.
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Eric Duke and Bernard Kurlemann sold expensive homes to straw buyers who had
little income and insufficient cash to make down payments on the sales. The effective buyers, once the scheme unraveled and the buyers defaulted, became the banks. Federal prosecutors caught wind of the deception and charged Duke and Kurlemann with making false statements to a lending institution and on top of that charged Kurlemann with bankruptcy fraud. Duke pled guilty; Kurlemann went to trial. Duke appeals his sentence; Kurlemann appeals his jury conviction. The government cross-appeals the district court's rejection of its forfeiture request against Kurlemann. We affirm in part and reverse in part.
For more than two decades, Kurlemann has built and sold luxury homes in southern Ohio. Troubles began in 2005, when he borrowed $1.5 million to build a house at 8662 Hampton Bay in Mason, Ohio. He borrowed another $1.9 million in 2006 to construct a house at 8657 Emerald Isle in the same town. Neither home sold quickly, and neither was cheap to keep. Together the mortgages cost more than $16,000 a month to hold and maintain. Eager to stop the financial bleeding, he enlisted realtor Eric Duke.
Duke found two straw buyers, Francisca Webster and Christopher Gagnon, each willing to lie about their income and assets on the loan applications, and Duke submitted the applications to Washington Mutual Bank. Kurlemann disclaims knowing anything about the lies.
Duke first submitted a purchase agreement for the Hampton Bay home, proposing that Webster borrow the twenty-percent down payment from Kurlemann. But the mortgage broker told Duke that Washington Mutual would not approve a loan with a seller-financed down payment. So Duke revised the purchase contract with this addendum: " Builder also accepts a payment of $229,000.00 to be applied as down payment to meet qualifications for the loan as specified by the lender, received by builder as of 12/01/06." R.244 at 22. At the broker's request, Duke amended the addendum to reflect that $29,000 was for furniture, leaving $200,000 for the down payment. With this assurance, Washington Mutual approved a $1.9 million loan. At the closing on January 12, 2007, the title company presented a settlement statement summarizing the transaction. Under the heading " Amounts paid by or in behalf of Borrower," the statement said, " Deposit or Earnest Money: $200,000.00." Gov. Br. App'x 37. Kurlemann (through his agent) signed the statement. Webster signed another document stating that she had paid $200,000 to Kurlemann in cash and that Kurlemann had not promised to pay or loan her anything outside of the purchase agreement. Truth was, Webster made no cash payment. Her down payment was a promissory note and a second mortgage, committing to pay Kurlemann $229,000 within a year. She signed the note that same day, January 12, immediately after the Washington Mutual loan closing.
Duke used a similar approach for the Emerald Isle home, using Gagnon as the buyer. The purchase agreement said that a " deposit of $280,000.00 (the " Deposit" ) has been paid to Owner upon signing of this Contract." R.118 at 74-75. This time, Washington Mutual demanded proof that the buyer had released the funds for the deposit. Duke and Kurlemann met this challenge through indirection: Kurlemann transferred $280,000 from Kurlemann Homes of Long Cove to Long Cove Management (both of which he controlled); Long Cove Management transferred the money to Duke's company, Rivendale Management; Duke bought a $280,000
cashier's check, payable to Gagnon; Duke exchanged that cashier's check for another cashier's check from Gagnon to Long Cove; Kurlemann accepted the check as payment from Gagnon; and Duke emailed a copy of the check to the mortgage broker. With proof of the check, though not its itinerary, in hand, Washington Mutual approved a loan for $2 million. At the closing, the settlement statement reported that Kurlemann had received a down payment by listing " Earnest Money Retained by Seller" as " $280,000.00." Gov. Br. App'x at 99. Kurlemann signed this statement. Gagnon signed documents disclaiming borrowing any part of the down payment.
The predictable, perhaps inevitable, happened. Both buyers defaulted on their loans. The bank investigated, and federal prosecutors filed a raft of charges against Duke and Kurlemann. Duke pled guilty to seven counts, including loan fraud and making false statements to a lending institution, and agreed to testify at Kurlemann's trial. A jury convicted Kurlemann of six counts, including making false statements to a lending institution, see 18 U.S.C. § 1014; and committing bankruptcy fraud, 18 U.S.C. § 157. The district court sentenced Kurlemann to concurrent 24-month sentences, one for the false-statement convictions and one for the bankruptcy-fraud convictions, and ordered him to pay $1.1 million in restitution. The district court sentenced Duke to 60 months.
Kurlemann challenges his false-statement and bankruptcy-fraud convictions.
Section 1014 prohibits individuals from " knowingly mak[ing] any false statement or report" for the purpose of influencing a lending institution. 18 U.S.C. § 1014. A " statement may be false," according to one of the jury instructions in Kurlemann's case, " when it contains a half-truth or when it conceals a material fact." R.244 at 21. That is not right.
In full, § 1014 says:
Whoever knowingly makes any false statement or report, or willfully overvalues any land, property or security, for the purpose of influencing in any way the action of the Federal Housing Administration, the Farm Credit Administration, Federal Crop Insurance Corporation or a company the Corporation reinsures, the Secretary of Agriculture acting through the Farmers Home Administration or successor agency, the Rural Development Administration or successor agency, any Farm Credit Bank, production credit association, agricultural credit association, bank for cooperatives, or any division, officer, or employee thereof, or of any regional agricultural credit corporation established pursuant to law, or a Federal land bank, a Federal land bank association, a Federal Reserve bank, a small business investment company, as defined in section 103 of the Small Business Investment Act of 1958 (15 U.S.C. 662), or the Small Business Administration in connection with any provision of that Act, a Federal credit union, an insured State-chartered credit union, any institution the accounts of which are insured by the Federal Deposit Insurance Corporation, any Federal home loan bank, the Federal Housing Finance Agency, the Federal Deposit Insurance Corporation, the Farm Credit System Insurance Corporation, or the National Credit Union Administration Board, a branch or agency of a foreign bank (as such terms are defined in paragraphs (1) and (3) of section 1(b) of the International Banking
Act of 1978), an organization operating under section 25 or section 25(a) of the Federal Reserve Act, or a mortgage lending business, or any person or entity that makes in whole or in part a federally related mortgage loan as defined in section 3 of the Real Estate Settlement Procedures Act of 1974, upon any application, advance, discount, purchase, purchase agreement, repurchase agreement, commitment, loan, or insurance agreement or application for insurance or a guarantee, or any change or extension of any of the same, by renewal, deferment of action or otherwise, or the acceptance, release, or substitution of security therefor, shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both. The term " State-chartered credit union" includes a credit union chartered under the laws of a State of the United States, the District of Columbia, or any commonwealth, territory, or possession of the United States
18 U.S.C. § 1014 (emphasis added).
That is a long way of saying that making a " false statement or report" to a bank in order to get a loan is prohibited. And that is a long way of not saying that the statute prohibits " half-truths," " material omissions" or " concealments," which takes us to the nub of the matter. Whether made orally or offered through a written report, a " false statement" must be that— a statement, a " factual assertion"...
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