United States v. Godfrey

• Citation: 787 F.3d 72
• Decision Date: 26 May 2015
• Docket Number: Nos. 14–1227,14–1250.,s. 14–1227
• Parties: UNITED STATES of America, Appellee, v. Christopher S. GODFREY; Dennis Fischer, Defendants, Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

787 F.3d 72

UNITED STATES of America, Appellee

v.Christopher S. GODFREY; Dennis Fischer, Defendants, Appellants.

Nos. 14–1227

14–1250.

United States Court of Appeals, First Circuit.

May 26, 2015.

William J. Lovett, with whom Anthony E. Fuller, Melissa Baldwin, and Collora LLP were on brief, for appellant Godfrey. Robert L. Sheketoff on brief for appellant Fischer.

Stephan E. Oestreicher, Jr., with whom Carmen M. Ortiz, United States Attorney, Adam J. Bookbinder, Assistant United States Attorney, Mona Sedky, Attorney, Criminal Division, Leslie R. Caldwell, Assistant Attorney General, and Sung–Hee Suh, Deputy Assistant Attorney General, were on brief, for appellee.

Before LYNCH, Chief Judge, THOMPSON and KAYATTA, Circuit Judges.

Opinion

KAYATTA, Circuit Judge.

In 2009, when many homeowners faced foreclosure, defendants Christopher Godfrey and Dennis Fischer started and ran a company that purported to sell mortgage modifications. For a hefty price, the company actually sold a doctored version of a free government form. Securing sales nationwide, company employees systematically lied to customers through personalized mailings and cold calls. After the company bilked distressed homeowners across the country for almost two years, law enforcement officials came knocking, a grand jury handed down indictments, and Godfrey and Fischer were convicted of mail fraud, wire fraud, and misuse of a government seal, as well as conspiring to commit these crimes.

On appeal, Godfrey and Fischer challenge their convictions by advancing four arguments: (1) the district court violated their confrontation rights by admitting into evidence customer complaints and cease-and-desist letters from regulators; (2) the district court constructively amended the indictment by admitting evidence of their lies to the IRS and then allowing the jury to convict them based on those lies; (3) the district court erred in instructing the jury on the elements of the charged misuse of a government seal; and (4) the district court abused its discretion by not dismissing a juror for bias mid-trial. Finding none of these arguments persuasive, we affirm.

I. Background ¹

In early 2009, the federal government started the Home Affordable Modification Program (“HAMP”) to provide financial relief during the foreclosure crisis. HAMP provided incentives for lenders to modify existing loans when homeowners had financial hardship and an ability to repay under new terms. To apply for HAMP relief, homeowners filled out a Request for Modification and Affidavit form, available for free on the Treasury Department's website. That form had a free counseling hotline number: the Homeowner's HOPE hotline (888–995–HOPE).² Submission of the form simply started a process, the outcome of which was ultimately dependent on whether the applicant's lender approved a mortgage modification. At some major banks, a mere ten percent of applicants received relief through the HAMP program.

Seeing a market for financial snake oil, Godfrey and Fischer founded a Florida company—Home Owner Protection Economics, Inc. (“HOPE”). According to its bylaws, HOPE was a “nonprofit organization,” established “exclusively for charitable, scientific[,] and education purposes.” HOPE purported to sell mortgage modifications for an up—front fee of $400 to $900. After receiving the fee, HOPE provided the homeowner with an application form that differed in just one respect from the Treasury Department's free HAMP form: HOPE's phone number (877–HOPE–801) replaced the government's official phone number (888–995–HOPE).

Located in Delray Beach, Florida, HOPE operated out of a “boiler room.” The room contained rows of cubicles filled with telemarketers.³ Godfrey, the president,⁴ and Fischer, the vice president,⁵ sat atop a raised platform overlooking the room. Vernell Burris, the general manager,⁶ sat “shoulder-to-shoulder” with Godfrey and Fischer on the platform.

Godfrey and Fischer paid employees on commission only, and fired employees “daily” for making too few sales. Fischer recruited labor from nearby drug rehabilitation facilities because, in his view, those people “were manipulative ... [and] smooth about lying.” Few new employees lasted more than a week.

Godfrey and Fischer encouraged their employees to lie. For example, when Burris first started working at HOPE, he had trouble making sales. Fischer encouraged him to tell customers, among other lies, that HOPE had a “98 percent success rate” in achieving loan modifications. As already mentioned, the record suggested that only around ten percent of applications at major banks achieved modification through HAMP. Brian Kelly, one of HOPE's top-selling telemarketers, estimated that only four or five of his 150–plus customers acquired a modification. Godfrey instructed employees to say at the beginning of the process that their request for loan modification was approved, and required only the completion of additional paperwork and, of course, the receipt of a check. In fact, the loan modification request could never have been granted at the outset of the process, much less by HOPE rather than the lender.

After not receiving the benefits promised to them, customers complained both to HOPE and to state authorities. Many sent e-mails directly to Godfrey and Fischer trying to get refunds. In general, the complaints informed defendants that customers felt misled and had sought refunds with no success. Burris generally fielded customer complaints, but he discussed them with Godfrey and Fischer. Six states sent cease-and-desist letters directly to HOPE.⁷ Those letters—addressed to HOPE—informed HOPE that it lacked a license required to engage in loan modification services. A letter from Maine's Bureau of Financial Institutions informed HOPE that its solicitations were deceptive.

In response to the cease-and-desist letters, Godfrey constructed a list of “do not call states,” including HOPE's home state of Florida.⁸ In January 2011, Fischer distributed a restrictive covenant for employees to read and sign. That covenant forbade employees from making misrepresentations and from disclosing HOPE's business methods. According to Burris, the covenant was intended to “cover our butt[s]” in case the government ever investigated HOPE.

Godfrey and Fischer enjoyed lavish trips with their ill-gotten gains. When funds ran low, Godfrey instructed Burris to “[l]et the dogs out,” i.e., do whatever necessary to increase sales. All told, HOPE raked in over $3.2 million, before the scheme came to an end when authorities searched HOPE's office in April 2011.

In August 2011, a grand jury indicted Godfrey, Fischer, Burris, and Kelly for mail fraud, 18 U.S.C. § 1341, wire fraud, id. § 1343, misuse of a government seal,⁹ id. § 1017, and conspiracy to commit these crimes, id. § 371.¹⁰ Burris and Kelly pleaded guilty and testified against Godfrey and Fischer. Nine of HOPE's victims also testified. After an eight-day trial, the jury convicted Godfrey and Fischer on all counts.¹¹ The district court sentenced them each to 84 months in prison.

II. Analysis

A. Confrontation Clause Challenge

At trial, the principal defense was that Godfrey and Fischer did not know of their “rogue” employees' fraudulent sales tactics.¹² Countering this defense, the government introduced thirty-two emails from complaining customers addressed to either Godfrey or Fischer, and six cease-and-desist letters addressed to HOPE. The district court admitted these communications for the limited purpose of showing that Godfrey and Fischer had notice of customers complaining about fraudulent activities. The district court admitted the communications without redaction and gave multiple limiting instructions.¹³

Defendants argue that statements in the complaints and cease-and-desist letters describing fraudulent activity by HOPE employees were testimonial hearsay, and thus were submitted to the jury—over objection—in violation of the Sixth Amendment's Confrontation Clause. The simple answer to this argument is that these exhibits were not offered to prove the truth of the assertions of wrongdoing contained within the exhibits. Rather, they were offered to disprove the defendants' principal defense: that they did not know what their employees were doing. Neither the rules of evidence, see Fed.R.Evid. 801(c)(2), nor the Confrontation Clause, Williams v. Illinois, –––U.S. ––––, 132 S.Ct. 2221, 2235, 2256, 2268, 183 L.Ed.2d 89 (2012), prohibits such a use. See generally United States v. Cruz–Díaz, 550 F.3d 169, 176 (1st Cir.2008) (“Out-of-court statements offered ... for the limited purpose of showing what effect the statement had on the listener ... are not hearsay.”).

But, say defendants, there was no need for the jury to see the substance of the complaints. Of course there was. Because the complaints described alleged fraudulent sales tactics, one can infer that Godfrey and Fischer had notice that their employees were likely engaged in such tactics. Had the complaints and letters claimed only that HOPE employees were unlawfully parking in a neighbor's parking lot, the nexus to the proffered defense would have been severed.

Second, even were this a Confrontation Clause violation, we would find it harmless beyond a reasonable doubt. See United States v. Cameron, 699 F.3d 621, 652 (1st Cir.2012) (when deciding whether violation was harmless, we consider whether “statements were merely cumulative,” “the strength of corroborating or contradicting evidence,” and the case's “overall strength” (internal quotation marks omitted)). There was no dispute at trial that the company's employees made the fraudulent sales that we have described and about which the customers and regulators complained. So, even if the jury considered the complaints for the purpose of showing that those customers were defrauded, nothing material would have been added to the case. The government's case, too, was not merely strong; it was overwhelming. The notion that, perched like commanders...