Gott v. United States

• Decision Date: 27 March 2019
• Docket Number: Case No. 1:16-cv-30
• Parties: PAUL GOTT, III, Petitioner, v. UNITED STATES OF AMERICA, Respondent.
• Court: U.S. District Court — Eastern District of Tennessee

PAUL GOTT, III, Petitioner, v. UNITED STATES OF AMERICA, Respondent.

Case No. 1:16-cv-30

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF TENNESSEE AT CHATTANOOGA

March 27, 2019

Judge Curtis L. Collier

MEMORANDUM

Before the Court is a motion by Petitioner to vacate, set aside, or correct his sentence pursuant to 28 U.S.C. § 2255. (Docs. 1, 209¹). The United States of America ("the Government") has responded. (Doc. 215). The time for Petitioner to reply has lapsed. See E.D. Tenn. L.R. 7.1(a)(3). For the following reasons, the Court will DENY Petitioner's motion (Doc. 209.)

I. BACKGROUND

A. The Offense Conduct

Three individuals, Travis Shields, Joshua Dobson, and Tommy Dobson, started a business called Southern Group, LLC ("Southern"), which, in concert with various subsidiaries, was to develop real estate communities. One of Southern's projects included developing "The Preserve," a 3,000-acre piece of real estate in Rising Fawn, Georgia. Joshua Dobson was in charge of the presentation and sale of lots on The Preserve. Petitioner was a close friend of Joshua Dobson, and with his Bachelor's Degree in finance and prior experience working at a bank, Petitioner served as an independent contractor for Southern. Petitioner communicated with real estate purchasers andprepared financial packages for banks and closing agents to enable purchasers to close on the sales of lots in The Preserve. Because of a downturn in the economy, however, Southern experienced a sharp decline in the sale of its properties, and was having difficulty servicing its loans at various financial institutions. Instead of abandoning the project, however, Petitioner and Dobson concocted a scheme to obtain money for Southern by generating purported sales of Southern's properties in order to receive payments from financial institutions.

As early as 2007, Petitioner and Dobson sold lots by promising purchasers that there was no required down payment on the property, and that Southern would make all the monthly payments to the banks for a three-year period out of an escrow account maintained by Southern. In addition, Southern stated it would retain the option to buy back the lot at the end of the three-year period, all at a profit to the purchaser. The banks that financed the loans to purchase the properties, however, were none the wiser to this plan—Southern did not disclose to those lenders that it was providing the down payments to the purchasers or that it was making initial mortgage payments. And for good reason: banks wanted to be sure that purchasers were solvent and could afford the Preserve properties without assistance from Southern. Once a falsely financed purchase was made, Southern would receive the proceeds from the mortgage loan, and could use the money to pay for making more down payments on Southern properties, for making initial mortgage payments on previously purchased properties, or for servicing Southern's loans.

Beginning in approximately 2009, the scheme began to involve "gift letters." The letters were an effort to disguise the fact that Southern was furnishing money for down payments on property purchases. Under the scheme, a third person would sign a "gift letter," which would state that a third person was related to the purchaser and was gifting funds to the purchaser to use as a down payment. Southern would provide the down payment funds to the third person, who, in turn,would provide them to the purchaser for the down payment at closing. On two occasions, the author of the gift letter was not actually a relative of the purchaser.

Because of Petitioner's and Dobson's representations, a number of individuals who did not have the financial ability or interest in purchasing properties and paying loans became the de facto purchasers of Southern properties. Meanwhile, financial institutions were fraudulently induced to make sizable loans to borrowers who could not actually afford to make a down payment. The proceeds of those loans were paid to Southern. When lot sales still continued to decrease, however, Southern did not have an influx of funds. And when Southern stopped making any monthly mortgage payments, almost all of the mortgages for Southern properties defaulted. Financial institutions lost millions of dollars, and approximately 225 investors' credit histories were ruined because loans for Southern properties had been made in their names.

B. Procedural History

On May 1, 2012, Dobson and Petitioner were charged with one count of conspiracy to commit wire fraud and money laundering, seven counts of wire fraud, and four counts of money laundering. Petitioner was initially represented by attorney Leslie Cory. Petitioner attended an initial proffer session with the Government while represented by Cory. Within nine days of Petitioner's indictment, Petitioner was provided with an attorney from the Criminal Justice Act Panel (the "CJA Panel"), John McDougal. (Doc. 4.)

As the case proceeded to trial, the issues involved whether Dobson and Petitioner made down payments for purchasers through disguised gifts, and whether they engaged in such acts with intent to defraud. Dobson and Petitioner planned to defend the Government's allegations, in part, by claiming that Keith Smartt, a mortgage broker for purchasers of Southern property, had told them that a down-payment gift giver need not be a family member.

1. Pre-Trial Disclosure

In the course of providing discovery to the Government, McDougal gave the Government three documents, consisting of four pages, which contained statements by Petitioner which were subject to the attorney-client privilege or were work product.

Two pages consisted of an email dated September 21, 2012 from Petitioner to his counsel. The email, in full and with errors in original, said the following:

Here is the way that all of the 3 gift transactions went down. The economy had just tanked and the first programs that the banks and lenders cut were the raw land programs.

Southern Group had some cabins for sell but they ran into the same problem with home loans as the cabin loans. They had borrowed with good credit, low debt but now the 20% downpayment.

I randomly called several mortgage companies and ask if anyone had a program were the seller could contribute to the downpayment. All of them said no (The government has a statement from Chris Shoemake that will confirm this. Chris thought he had a gift program but it turned out he did not.) I randomly called Financial Solutions and Keith Smartt picked up the phone. I asked him if he had a program where the seller could contribute in the downpayment. He told me he had a couple of lenders that did gift loans. He said that as long as the funds were sourced and seasoned for 30 days, the lenders did not care where the gifter got their funds from. I had never heard of a gift loan and had never heard of this procedure. I had Josh call him to make sure that I was understanding what Mr. Smartt the way that I was interpreting it. He told Josh the same thing over the phone. Josh and I got together and called Mr. Smartt on a conference call and he again told us it did not matter where the gifter got the funds from as long as it was from a family member. He also said that each lender and underwriter was different.

By this he was saying no one really paid attention to where the gifter got the funds. Josh and I then made an arrangement to see Mr. Smartt in person and went to Financial Solutions on Brainerd Road where he told us in person the same thing he had told us several times before. He processed 2 files to start and sent me the gift letter and instructions (You have emails of this). On Mr. Giles, you should have emails were I was going to send his son the money. Mr. Jiles and Louise Joseph were represented by Shirley Connor. Ms. Connor talked Mr. Dobson into givingher $500 per gift transfer (since these were her clients) plus her standard commission. On Tahira Malik, the money went to her niece and then the niece sent it to Tahira (just as Mr. Smartt had instructed us).

Basicallly this problem started because Southern Group did not pay the payments for the two years as promised. Mr. Ruffin came to my house and told me this was wrong. I immediately cancelled two loans that I still had at Financial Solutions. I then hired Mrs. Cory to represent me in meeting with the government. I sent Mr. Smartt and email and asked him what he had repeatedly told me. I asked him, As long as the money is sourced and seasoned, it did not matter where the money to the gifter came from right? He then responded yes. The government said that my timing of the email was wrong but when I emailed Mr. Smartt I was not charged with anything. I then asked Mr. Smartt if he had any problems in talking with Mrs. Cory. She said not and she called him. The conversation was only between he and Mrs. Cory. He told Mrs. Cory he was under 'the don't ask don't tell' when it came to gifter's funds. That is why I think Mrs. Cory is so valuable. He told her this on his on free accord. I also think the email from him to Josh and myself is key because he acknowledges the problems on the previous two loans because he knew the funds did not come from the gifter.

Mr. Smartt was a broker employed by Financial Solutions. He was the only person that was allowed to talk to the banks and the underwriters. All I could do was gather information that he needed and fax or email it to him. On one of the deals, the seller is the Chattocchee corporation. I did not even get paid for the deal. I made a total of $2600 on the other two deals. On the Chattocchee deal, Southern Group had a hard money loan and put up a cabin for the collateral. If you look at the settlement statement, Southern Property management got a check. This was to pay commissions and two years worth of payments.

All of the gift transactions orginated with Financial Solutions which is a mortgage broker. None of these originated with Cornerstone Bank. I think it would be

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