U.S. v. Laykin

• Citation: 886 F.2d 1534
• Decision Date: 26 September 1989
• Docket Number: Nos. 88-1326,88-1327,s. 88-1326
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Michael Robert LAYKIN, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. Dennis Lee CRAIN, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1534

886 F.2d 1534

58 USLW 2219

UNITED STATES of America, Plaintiff-Appellee, v. Michael Robert LAYKIN, Defendant-Appellant.

UNITED STATES of America, Plaintiff-Appellee, v. Dennis Lee CRAIN, Defendant-Appellant.

Nos. 88-1326, 88-1327.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted June 29, 1989.

Decided Sept. 26, 1989.

Robert C. Moest, Los Angeles, Cal., for defendant-appellant Laykin.

James E. Guesman, Las Vegas, Nev., for defendant-appellant Crain.

Paul Ernest Wommer, Las Vegas, Nev., for plaintiff-appellee.

Appeal from the United States District Court for the District of nevada.

Before TANG, REINHARDT and WIGGINS, Circuit Judges.

REINHARDT, Circuit Judge:

Michael Laykin and Dennis Crain appeal from their convictions following a jury trial on one count of equity skimming in violation of 12 U.S.C. Sec. 1709-2 (1980), and one count of conspiracy to commit equity skimming. We affirm.

STATEMENT OF FACTS

The T.L. Corporation was incorporated on June 28, 1985. Robert Terry was the principal incorporator and the "T" in T.L. Corporation; Laykin was the president, secretary and treasurer of the company and the "L". In the summer following the incorporation of T.L. Corporation, the company began to seek and acquire single-family homes in the Las Vegas area. Using the Century 21 office owned by Robert Terry and the services of Crain, an independent agent operating from the office, T.L. Corporation purchased over 100 homes. Crain was the principal agent for identifying properties for purchase and Laykin negotiated most of the purchases.

T.L. Corporation utilized essentially the same technique for effecting each purchase. In general, it bought homes with existing mortgages and simply agreed to make the payments. If the seller had any equity in the property, the corporation would give him a note for the amount of the equity, secured by a deed of trust. The note provided for monthly interest payments and a balloon payment of the capital at the end of a term of years. To this point, there was nothing particularly unique about the purchase method. However, the purchases were negotiated through an unusual escrow account arrangement which precluded the giving of notification to the mortgage lenders that the properties were being sold or that T.L. Corporation had purchased them.

After T.L. Corporation purchased a property, Laykin arranged for Century 21 to manage it. Century 21 collected the rents and deducted both a 10% fee and the funds necessary to maintain a reasonable upkeep of the property. However, Century 21 was not permitted to pay the mortgage. It was required to turn over the remaining funds to T.L. Corporation or to Laykin personally. Whatever purpose the funds were put to, it is abundantly clear that they were not used to pay off the existing mortgage.

Beginning as early as August, 1985, the former homeowners began to call the rental office, complaining that they were receiving notices from their mortgage lenders that payment had not been made on their mortgages. Because T.L. Corporation never assumed any of the mortgages, the lenders informed the former owners that they were still liable on those debts. Century 21 told Laykin of the complaints. Nevertheless, neither Laykin nor T.L. Corporation made the mortgage payments. Because of all of the complaints, Century 21 refused to manage T.L. Corporation's properties after October 1985.

Crain then located another rental agent, the PM Corporation, to manage the properties. However, PM Corporation operated under somewhat different instructions than did Century 21. Instead of remitting the excess rental payments directly to Laykin, PM Corporation deposited the money into its own trust account. Subsequently, Laykin would instruct the rental agents to send funds to various travel agents, accountants, and lawyers, among others. Laykin also instructed the rental agents to write a large number of checks directly to him or to companies he controlled. These checks totalled approximately $9000. Laykin also directed that four checks totalling $2,000 be issued to Crain.

Soon, however, PM Corporation began to receive the same complaints about nonpayment of mortgages as did Century 21 and eventually resigned as the rental agent. By the winter of 1985, most of the homes owned by T.L. Corporation were in foreclosure proceedings. The six properties named in the indictment had mortgages that were either issued or guaranteed by either the Veterans Administration (VA) or the Federal Housing Administration On January 21, 1987, Laykin and Crain were each indicted and charged with one count of equity skimming in violation of 12 U.S.C. Sec. 1709-2 (1980), and one count of conspiracy to commit equity skimming. ² Equity skimming is defined as the practice of purchasing one-to-four family dwellings subject to a loan insured by either the FHA or the VA and applying the rent receipts for personal gain rather than towards payment of the mortgages. See H.Rep. No. 91-1556, 91st Cong., 2d Sess., reprinted in 1970 U.S. Cong. & Admin. News 5582, 5650.

                (FHA). 1   The mortgages on these six properties eventually went into default and then foreclosure, resulting in a loss of over $100,000 to the government
                

At trial, the government argued that the foreclosures were the planned result of a scheme to skim off the profits of the housing venture and avoid payment of the mortgages in violation of Section 1709-2. The defendants contended that the losses were the unfortunate result of erroneous predictions about the Las Vegas housing market. The jury chose to believe the government and convicted the defendants on both counts of the indictment. Laykin was sentenced to five years in prison, with a substantial portion of the sentence suspended on the condition that he serve six months in jail and perform three hundred hours of community service. Crain was likewise sentenced to five years imprisonment with his sentence suspended on the condition that he serve ninety days in jail and perform two hundred and fifty hours of community service. Appellants were also jointly ordered to pay restitution of approximately $97,000 to the VA and the FHA. This appeal followed. ³

ANALYSIS

I

As an initial matter, Laykin argues that the indictment charging him with equity skimming is fatally defective because it does not affirmatively allege that he knew or should have known that the properties were insured by FHA or the VA and that he acted with the intent to defraud those insurers. He also contends that the jury instructions given by the district court were defective for the same reason.

12 U.S.C. Sec. 1709-2 provides, in pertinent part, that

Whoever, with intent to defraud, willfully engages in a pattern or practice of--

(1) purchasing one- to four-family dwellings ... secured by a mortgage or deed of trust insured or held by the Secretary of Housing and Urban Development or guaranteed by the Veterans' Administration, or the loan is made by the Veterans' Administration,

(2) failing to make payments under the mortgage or deed of trust as the payments become due, regardless of whether the purchaser is obligated on the loan, and

(3) applying or authorizing the application of rents from such dwellings for his own use ... shall be fined not more that $5,000 or imprisoned not more than three years, or both.

Laykin argues that the statute is ambiguous as to whether an individual charged with a violation must know that a federal agency is the insurer and must intend to defraud that federal agency. Therefore, he argues, the rule of lenity is applicable and the statute must be construed in favor of the defendant. In United States v. Capano, 786 F.2d 122 (3d Cir.1986), the Third Circuit construed the equity skimming provisions of 12 U.S.C. Sec. 1715z-4(b), which prohibits equity skimming from federally assisted multiple family housing projects. The court concluded that the language of the statute was ambiguous as to whether a On the other hand, in United States v. Yermian, 468 U.S. 63, 104 S.Ct. 2936, 82 L.Ed.2d 53 (1984), the Supreme Court held the rule of lenity inapplicable when interpreting a statute it found to be unambiguous. The Court was construing the Federal False Statements Act, 18 U.S.C. Sec. 1001, which provides in pertinent part:

                violation could occur if the debtor had not received an extension of time in which to cure any default or obtain a modification of the mortgage terms.  After examining the structure of the statute, as well as its legislative history, the court determined that the statute did not apply if the debtor had not received the extension.  Id. at 125-27.    Although the court could have ended its inquiry at this point and based its decision simply on general principles of statutory interpretation, the court bolstered its conclusion by looking to the rule of lenity.  "It is well-settled that where a court's interpretative effort fails to eliminate ambiguity in the meaning of a criminal statute, [and this statute is at best ambiguous], the residual uncertainty will be resolved in favor of lenity."    Id. at 128
                

"Whoever, in any matter within the jurisdiction of any department or agency of the United States knowingly and willfully ... makes any false, fictitious or fraudulent statements or representations ... shall be fined...." The Court held that the statutory language did not require any specific knowledge on the part of the defendant that his statements were made in a matter within the jurisdiction of a federal agency. 468 U.S. at 75, 104 S.Ct. at 2942-43. In reaching its conclusion, the Court first considered the language of the statute and its structure and decided that the statute "unambiguously dispenses with any requirement that the Government ... prove that [the false] statements were made with actual knowledge of federal agency jurisdiction." Id. at 69-70, 104 S.Ct. at 2940. Because the statute was not ambiguous, the Court refused to apply the...