U.S. v. Barsanti
| Decision Date | 19 August 1991 |
| Docket Number | Nos. 90-5341,s. 90-5341 |
| Parties | 34 Fed. R. Evid. Serv. 256 UNITED STATES of America, Plaintiff-Appellee, v. Adolph J. BARSANTI, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. Harold M. KLINE, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. Allen GRIFFEY, Defendant-Appellant. to 90-5343. |
| Court | U.S. Court of Appeals — Fourth Circuit |
Robert P. Watkins, Williams & Connolly, Washington, D.C., argued (Nancy R. Priess, Robert J. Shaughnessy, on brief), for defendant-appellant Kling.
Michael S. Lieberman, Dimuro, Ginsberg & Lieberman, P.C., Alexandria, Va., for defendant-appellant Griffey.
F. Michael Ballard, Fairfax, Va., for defendant-appellant Barsanti.
Paul George Cassell, Asst. U.S. Atty., Norfolk, Va., argued (Henry E. Hudson, U.S. Atty., on brief), for plaintiff-appellee.
Before ERVIN, Chief Judge, PHILLIPS, Circuit Judge, and BRITT, District Judge for the Eastern District of North Carolina, sitting by designation.
Adolph J. Barsanti, Harold M. Kline, and Allen Griffey were indicted in an eleven count indictment in the Eastern District of Virginia. They were charged with conspiracy, making false statements, and defrauding the United States. All three were convicted of the conspiracy charges. In addition, each was convicted of making false statements to the United States Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA). Barsanti, Kline and Griffey appeal their convictions asserting that numerous errors were committed by the district court during their trial and at sentencing. We find that the district court committed no error in the trial or at sentencing; therefore, we affirm the convictions and sentences of Barsanti, Kline, and Griffey.
Barsanti and Kline were two individuals who began acquiring condominiums at the Carlton condominiums complex for investment purposes. They acquired units with the assistance of two real estate agents at the Carlton, Griffey and Harriet Becker. Barsanti and Kline invested in various units at the Carlton by obtaining low-downpayment, owner-occupant HUD mortgage insurance.
Section 234 of the National Housing Act authorizes HUD to insure mortgages covering one-family condominium units. 12 U.S.C. § 1715y(c). Regulations implementing this program distinguish between "occupant" mortgagors and "non-occupant" mortgagors. See 24 C.F.R. § 234.27 (1985). A HUD-insured mortgage for an occupant mortgagor could cover as much as 97% of the value of the property. A non-occupant's HUD-insured mortgage could cover no more than 85% of the value.
In five of the six transactions in this case, a basic pattern of events occurred. An individual showed an interest in possibly purchasing a unit at the Carlton and subsequently made a deposit. At the time he made his deposit, he was told that he could change his mind within 10 days and get a full refund. The individual then changed his mind and attempted to get his deposit back. At that time, the real estate agent told him that there would be a delay in getting his deposit back, and then the agent told him about a great deal whereby he could get his deposit back and in addition make some extra money. The individual would buy the unit in a shared-equity arrangement with an investor (either Barsanti or Kline). The real estate agent, coincidentally, just happened to know of an investor who might be interested in such an arrangement. Together, the individual and the investor would apply for a HUD owner-occupant mortgage. Then, just after the loan came through, the investor would buy the individual out for $1500. Thus, the individual would make a small profit, and the investor would obtain a condominium with a small downpayment and a guaranteed loan.
When applying for the HUD-insured mortgage, both the individual and the investor filled out a form to be filed with HUD. In the form, the parties made the following certified statements:
(b) One of the undersigned is the occupant of the subject property.
(c) All charges and fees collected from me as shown in the settlement statement have been paid from my own funds, and no other charges have been or will be paid by me in respect to this transaction.
Both the investor and the individual signed the above certifications; however, the individual never moved into the condominium. Neither did the investor; therefore, there never was an "owner-occupant."
This basic chain of events occurred in five of the six transactions at issue in this case. In the sixth transaction, a couple (the Ohris) entered into a purchase agreement for a unit at the Carlton and paid a $2,000 deposit. They decided two months later that they wanted out of the deal. Real estate agent Griffey put the Ohris in contact with Barsanti, who agreed to buy the Ohris' condominium from them. The Ohris applied for the HUD-insured mortgage themselves; they signed the certification that they would be owner-occupants. Barsanti did not sign the certification. 1 The Ohris had already moved out of the unit before they applied for the HUD insurance, however, and again there was no "owner-occupant" in this unit. Barsanti bought the Ohris' condominium after the mortgage came through. Barsanti could do this because owner-occupant mortgages are assumable.
On December 13, 1989, a grand jury in the United States District Court for the Eastern District of Virginia returned an eleven count indictment against Barsanti, Kline, and Griffey. Count I charged all three with conspiracy to commit offenses against the United States including making false statements, mail fraud, misprision of felony, and defrauding the United States and its departments and agencies in violation of 18 U.S.C. § 371. Counts II through VII charged the appellants with making, or causing to be made, false statements to HUD and FHA on documents known as "Certificates of Commitment for HUD Insured Mortgage" in violation of 18 U.S.C. §§ 1001 and 2. Counts VIII through XI charged each of the appellants with mail fraud in violation of 18 U.S.C. § 1341.
The district court granted the government's pretrial motion to dismiss with prejudice Counts VI, VII, and IX through XI as to Barsanti; Counts II through IV and VIII through XI as to Kline; and Counts II, IV, V, and VIII through XI as to Griffey. As a result, at trial in February, 1990 each of the appellants was charged with one count of conspiracy (Count I); Barsanti was charged with four counts of false statements (Counts II, III, IV, and V) and one count of mail fraud (Count VIII); Kline was charged with three counts of false statements (Counts V through VII); and Griffey was charged with three counts of false statements (Counts III, VI, and VII).
After a jury trial, Barsanti was convicted on three of the false statement counts (Counts II, IV, and V); he was acquitted on Count III. Barsanti was also acquitted on the mail fraud charge (Count VIII). Kline was convicted on three false statement counts (Counts V, VI, and VII). Griffey was convicted on one of the false statement counts (Count III) and acquitted on two (Counts VI and VII). All three were convicted on the conspiracy charge in Count I. The district court denied appellants' motions for judgment of acquittal and for a new trial.
The district court held a post-trial hearing on whether the United States Sentencing Guidelines applied to the conspiracy convictions. At the hearing, the court ruled that the conspiracy continued after November 1, 1987 by virtue of several acts by Barsanti and Kline. The court explained:
I think the guidelines apply to Count 1. I think the retention of the units under their insured mortgage status, the making of mortgage payments, receipt of rents from others, that is others than those who signed up as ostensible occupants, all are acts in furtherance of the conspiracy.
The court then ruled that the Guidelines were applicable to the conspiracy convictions. The court then sentenced each of the appellants to a term of fourteen months imprisonment and a subsequent term of two years of supervised release. The court also imposed fines as follows: $20,000 each for Barsanti and Kline and $7,000 for Griffey. This appeal followed, and the district court granted the appellants' motions to remain free on bond pending appeal.
The appellants were charged, inter alia, with making false statements to a federal agency in violation of 18 U.S.C. § 1001. 2 The first issue raised by the appellants is whether the district court erred in refusing to let their expert witness, Philip Forest, testify concerning the allegedly false statements made by them. According to the proffer of Forest's testimony, he would have testified regarding the meaning of (1) owner-occupant; and (2) the language "this transaction" which was found in the (c) portion of the certification.
The trial court has broad discretion to determine whether to admit expert testimony, United States v. Portsmouth Paving Corp., 694 F.2d 312, 323 (4th Cir.1982), and will not be reversed absent a clear abuse of discretion. Friendship Heights Assoc. v. Vlastimil Koubek, A.I.A., 785 F.2d 1154, 1159 (4th Cir.1986). Thus, we must determine whether the district court abused its discretion in refusing to let Forest testify as to the two proffered subjects.
According to the proffer of Forest's testimony, he would have testified that "the statutes and regulations of HUD with respect to owner occupancy was [sic] insufficient to put defendants on notice of any potential violation that any false statement made could not be material as a matter of law because of the vagueness and confusion of the owner occupancy requirement; ..." The government objected to the testimony, and the district court sustained the objection. The court stated:
The issue in this case is whether there was a false statement made and conspiracy to do those offenses which are...
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