U.S. v. Cooks

• Decision Date: 23 November 2009
• Docket Number: No. 07-11151.,07-11151.
• Citation: 589 F.3d 173
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Vernon COOKS, Jr., Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

589 F.3d 173

UNITED STATES of America, Plaintiff-Appellee, v. Vernon COOKS, Jr., Defendant-Appellant.

No. 07-11151.

United States Court of Appeals, Fifth Circuit.

November 23, 2009.

Joseph Francis Palmer (argued), U.S. Dept. of Justice, Office of Sol. Gen., Washington, DC, Tamara Lynn Reno, Plano, TX, for U.S.

Bruce Cameron Kaye (argued) (Court-Appointed), Dallas, TX, for Cooks.

Appeal from the United States District Court for the Northern District of Texas.

Before HIGGINBOTHAM and STEWART, Circuit Judges, and ENGELHARDT, District Judge.^*

CARL E. STEWART, Circuit Judge:

Vernon Cooks, Jr. ("Cooks") appeals his conviction and sentence for seven counts of wire fraud, one count of bank fraud, and six counts of money laundering. Finding no reversible error in his conviction and sentence, we affirm.

I.

Cooks was convicted of being the mastermind behind an ingenious but misguided scheme to cheat mortgage lenders by fraudulently obtaining house mortgage loans. In most of the accused transactions the documentary evidence and trial testimony show that Cooks followed the same basic pattern. For each transaction, Cooks first recruited an inexperienced real estate investor to serve as the nominal owner of the house, a so-called "straw purchaser." When Cooks found a house for sale, he then contracted with its owner to buy it. At the same time, Cooks entered into a contract to sell the same house to the straw purchaser for a much higher price. Cooks worked with one of two mortgage brokers, Abdul Karriem ("Karriem") and Deirdre Anderson ("Anderson"), to handle the mortgage loan process for each straw purchaser.

To obtain each loan for the higher price, Cooks and one of the mortgage brokers created a loan application for the straw purchasers that would persuade the lender of two things: one, that the house was worth substantially more than its real value; and two, that the straw purchaser qualified for the loan. To that end, Cooks and his broker cohorts forged and faked key documents for each application, or directed the straw purchasers to make false representations themselves. For each transaction, these documents included an appraisal (forged with the name and license number of a real licensed appraiser), a loan application that vastly overstated the straw purchaser's income and assets, and fake financial documents (tax returns, W-2's, rent verification forms, etc.). After the sales closed, the difference in sales price was left in a bank account controlled by Cooks. Cooks initially sent each straw purchaser checks to pay the mortgage, as promised. After a short period of time — generally less than six months — the payments from Cooks stopped, and the straw purchasers were then forced into foreclosure.

Cooks varied his methods in two transactions. In one case, there was no bona fide seller at all because Cooks already owned the house at the time of sale. In most other respects, however, this transaction followed Cooks's pattern: a straw purchaser bought the home, with a loan fraudulently obtained by Cooks and his mortgage brokers. In another variation, Cooks contracted with a construction company to buy a house for $79,900. He then submitted a duplicate contract with a sales price of $125,000 to the mortgage lender. In support of the copycat contract, Cooks submitted a duplicate warranty deed and a HUD settlement statement listing the $125,000 price. Cooks pocketed the $45,100 difference, with the mortgage company receiving $4,300, more than half of which went to the mortgage broker Anderson.

Cooks was indicted on wire fraud, bank fraud, and money laundering charges. Karriem and Anderson were also indicted. Karriem pleaded guilty and testified for the Government. Following an initial mistrial, the district court held a three-week trial in 2007. Witnesses included the bona fide sellers, straw purchasers, representatives of the mortgage companies involved, and Karriem. Expert witnesses in appraisal and mortgage fraud also testified. The Government submitted the fraudulent appraisals, tax returns, rental verifications, loan applications, title documents, sales contracts, closing documents, and the checks and bank account records used to carry out the transactions. Cooks testified in his own defense.

The jury acquitted Anderson, but convicted Cooks on all charges. The district court sentenced Cooks to 135 months' imprisonment, nearly one and one half million dollars in restitution, and a five-year term of supervised release.

II.

On appeal, Cooks raises six points of error which we address in turn.

A.

Cooks first contends that the district court erred by admitting the expert testimony of a Government witness. Cooks argues that the expert, Agent Steve Overby ("Overby") of the Federal Deposit Insurance Company, was not qualified to give expert testimony on the subject of mortgage fraud because he lacked sufficient experience.

This court reviews a trial court's decision to admit expert testimony under an abuse of discretion standard, subject to harmless error analysis. Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 152, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999); General Elec. Co. v. Joiner, 522 U.S. 136, 141-43, 118 S.Ct. 512, 139 L.Ed.2d 508 (1997). Accordingly, we have recognized that district courts are given "wide latitude in determining the admissibility of expert testimony, and the discretion of the trial judge ... will not be disturbed on appeal unless manifestly erroneous." Watkins v. Telsmith, Inc., 121 F.3d 984, 988 (5th Cir. 1997) (quoting Eiland v. Westinghouse Elec. Corp., 58 F.3d 176, 180 (5th Cir. 1995) (internal quotations omitted)).

In deciding whether the district court abused its discretion in qualifying Overby as an expert witness, we are guided by the Supreme Court's decision in Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993), and Federal Rule of Evidence 702.

In Daubert, the Supreme Court instructed district courts to function as gatekeepers and permit only reliable and relevant expert testimony to be presented to the jury. See Daubert, 509 U.S. at 590-93, 113 S.Ct. 2786. Before a district court may allow a witness to testify as an expert, it must be assured that the proffered witness is qualified to testify by virtue of his "knowledge, skill, experience, training, or education." FED. R. EVID. 702. A district court should refuse to allow an expert witness to testify if it finds that the witness is not qualified to testify in a particular field or on a given subject. See Wilson v. Woods, 163 F.3d 935, 937 (5th Cir. 1999).

If the witness is only testifying as a lay witness, the witness's testimony in the form of opinions or inferences is limited to those opinions or inferences which are (a) rationally based on the perception of the witness, (b) helpful to a clear understanding of the witness' testimony or the determination of a fact in issue, and (c) not based on scientific, technical, or other specialized knowledge within the scope of Rule 702. FED. R. EVID. 701. "[T]he distinction between lay and expert witness testimony is that lay testimony results from a process of reasoning familiar in everyday life, while expert testimony results from a process of reasoning which can be mastered only by specialists in the field." United States v. Yanez Sosa, 513 F.3d 194, 200 (5th Cir.2008) (internal quotations omitted). As explained by the Second Circuit, "a lay opinion must be the product of reasoning processes familiar to the average person in everyday life." United States v. Garcia, 413 F.3d 201, 215 (2d Cir.2005). Moreover, any part of a witness's opinion that rests on scientific, technical, or specialized knowledge must be determined by reference to Rule 702, not Rule 701. FED. R. EVID. 701 advisory committee's note.

The Government argues that Overby's limited experience as a white collar fraud investigator and general certification as a fraud examiner qualifies him as an expert in any area of fraud. We are unconvinced by this argument. Prior to the instant case, Overby had sparse experience working on mortgage fraud cases and in fact had never been qualified as an expert in any case involving mortgage fraud. Unsurprisingly, he had no specialized training or classes in mortgage fraud and was seemingly unaware of basic statutes and literature which govern the field. Additionally, Overby had never taken any classes in appraising properties. Overby's lack of formal training and practical experience in mortgage fraud leads us to the conclusion that the district court abused its discretion when it qualified him as an expert.

While Overby should not have been qualified as an expert, our inquiry does not end there. An examination of Overby's disputed testimony reveals that much of it was merely descriptive and summarized the factual information and documents gathered throughout the investigation of Cooks and thus constituted permissible lay testimony. But, some of Overby's testimony, specifically his opinion regarding the legality of Cooks's scheme, should not have been admitted by the district court because Overby's opinion required specialized "knowledge, skill, experience, training, or education" in mortgage fraud which he lacked. However, the error was harmless because there was other extensive evidence that the transactions were fraudulent and that Cooks was the major beneficiary. See United States v. Mendoza-Medina, 346 F.3d 121, 127 (5th Cir.2003) (under the harmless error doctrine, even if the district court abuses its discretion in admitting or excluding evidence, we will affirm "[u]nless there is a reasonable possibility that the improperly admitted evidence contributed to the conviction"); see also FED. R. CRIM. P. 52(a) ("Any error, defect, irregularity, or variance that does not affect substantial rights must be disregarded.").

B.

The jury convicted Cooks on seven counts of money laundering, under 18 U.S.C. § 1957(a), a provision that...