U.S. v. Cowart

Citation595 F.2d 1023
Decision Date22 May 1979
Docket NumberNo. 78-5175,78-5175
PartiesUNITED STATES of America, Plaintiff-Appellee, v. John P. COWART, Defendant-Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)

L. Paul Cobb, Jr., Atlanta, Ga., for defendant-appellant.

William L. Harper, U. S. Atty., Gale McKenzie, Asst. U. S. Atty., Atlanta, Ga., for plaintiff-appellee.

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

Before GOLDBERG, SIMPSON and CLARK, Circuit Judges.

SIMPSON, Circuit Judge:

This appeal follows a bench trial, at which John P. Cowart was found guilty under all thirteen counts of an indictment. Counts 1 through 12 charged aiding and abetting the commission of wire fraud, in violation of 18 U.S.C. §§ 2 and 1343 (1976), and Count 13 charged conspiring to commit wire fraud, in violation of 18 U.S.C. §§ 371 (1976) and 1343 (1976). Appellant was adjudged guilty and sentenced to eighteen months confinement on each of the twelve substantive counts, to be served concurrently. He was given a three year confinement sentence under Count 13 for conspiracy, to be served consecutively to the substantive counts, but with its execution suspended, subject to probation for five years.

Cowart's appeal raises two points. First, he asserts that the United States Constitution's Fifth Amendment double jeopardy clause was violated when the trial court convicted and sentenced him for conspiring to commit wire fraud as well as aiding and abetting the commission of the same wire fraud. His second contention is that the trial evidence in support of the twelve substantive counts, or either of them, was insufficient for conviction. We find no merit in either point and affirm.

I. FACTS

Appellant was the co-owner with Joseph Emory Suggs 1 of Cowart and Suggs Realty Company, Incorporated ("C & S Realty"), a real estate brokerage firm located in Cobb County, Georgia. This firm was engaged in the sale of houses constructed by Cowart and Suggs Builders, Incorporated, also co-owned by the appellant and Suggs, as well as others. Financing for the sale of these houses was obtained through Charter Mortgage Company ("Charter").

Charter, during 1972 and 1973, was a multi-state mortgage company with its home office in Jacksonville, Florida. Its business included the origination, the purchase and sale of conventional mortgage loans. In extending financing, Charter would lend no more than ninety-five percent of the purchase price, and only to qualified borrowers with the required minimum five percent down payment. Charter never offered one hundred percent financing. 2

Jessie Madden, 3 a loan officer employed by Charter in its Atlanta, Georgia branch office, was the Charter representative with whom C & S Realty dealt on all its sales. Madden's responsibilities as a loan officer including soliciting residential loans, accepting loan applications, ascertaining that the applications were properly documented, and submitting applications to Charter's Jacksonville home office for analysis and approval. Madden did not have authority to approve loan applications.

Properly documented loan packages, submitted to Charter's Jacksonville office, were analyzed by home office underwriters. These individuals analyzed the credit worthiness of the prospective borrower and the value and quality of the property the applicant wished to purchase with the proceeds of the subject loan. In deciding whether to approve the loan, Charter relied upon various documents contained in the loan package: the loan application completed by the prospective borrower, the sales contract prepared by the real estate broker, a verification of deposit, a verification of employment, property appraisals, and a credit report prepared by an independent credit agency. Approval of loan applications was communicated to the Atlanta branch office from Jacksonville by telephone and/or telecopier.

Cowart admits that "(s)ome where between 1971 and 1973, (he) and Suggs formulated an idea to permit 100% Financing on the homes they were selling based on rebate gimmicks utilized in other industries". Brief for Appellant at 7. Cowart implemented this "idea" by placing the following advertisement in a local newspaper:

AN OFFER YOU CAN'T REFUSE

We will put you in the home of your choise (sic) regardless of past credit problems or present cash problems, because we have the best financing plan in town.

"UP TO 100 PERCENT FINANCING"

We have a wide selection of quality homes from which to choose in Douglas, Cobb & Paulding County, Priced from the low $20's to high $30's. Call one of our courteous agents today and see for yourself why we have AN OFFER YOU CAN'T REFUSE.

COWART-SUGGS REALTY
942-0028

MIKE GRAY 942-0028 STEVE CORDER 942-1832 ANN BOONE 943-3808 DIANE HORNSBY 942-7683

Government Exhibit 28.

The evidence adduced at trial indicated that the procedures devised by Madden, Suggs, and Defendant Cowart to offer prospective purchasers "up to 100% Financing" "regardless of past credit problems or present cash problems" included: preparing credit reports without required "legals", soliciting inaccurate verifications of employment, furnishing fictitious credit references, and procuring misleading and fraudulent verifications of deposit.

Rachael Coffee, an employee of Retailers Commercial Agency in 1972 and 1973, testified about preparation of credit reports in Charter's loan packages. She testified that Retailers, retained by Madden as an independent credit agency to prepare credit reports on prospective borrowers, was Not requested to perform "legal checks" on loan applicants. Specifically, question 19, which appears on each and every credit report, reads, "Did you learn of any failures, bankruptcies, mortgage foreclosures, suits, judgments, or garnishments? If so, state when?" In every instance the response to this question was "No." However, "legals" were not performed by Retailers unless requested, and Madden did not request them.

Sherry Condit, employed in 1972 and 1973 by Charter's Atlanta office as a loan processor, testified that Madden instructed her to order credit reports without "legals". Under Charter's underwriting guidelines, however, investigative credit reports were required to contain "legals". Moreover, if credit reports accidentally showed "legals", Condit explained, Madden would order another credit report through a different credit agency. Condit also testified with respect to verifications of employment and credit references.

Verifications of employment ("VOE") forms request, Inter alia, information regarding the salary earned by the loan applicant. Condit testified that when an applicant's VOE showed a salary insufficient to qualify for a mortgage loan, Madden would instruct her to contact Cowart and inform him that the applicant was "low on salary". Cowart's response, as testified to by Condit, was, "Send it to me; I'll take care of it". Eventually, Condit would receive a VOE with a qualifying salary. Mike Gray, a salesperson for C & S Realty in 1972, testified that when applicants needed additional salary to qualify, C & S Realty agents would suggest to these applicants that they speak with their employers and ask these employers to verify that they earned a higher salary than was actually the case.

Condit also testified that Madden instructed her to notify Cowart when an applicant had not listed a sufficient number of credit references to qualify for a mortgage. Cowart's response, Condit testified, was, "We'll get something". Thereafter, Condit would receive sufficient credit references for that particular applicant. Gray and Steve Corder, another C & S salesperson, confirmed that Cowart supplied fictional credit references for loan applicants.

The centerpiece of Cowart's one hundred percent financing "idea" involved the verifications of deposit required by Charter. A verification of deposit ("VOD") is a request from a lender to the loan applicant's bank seeking verification of the amount of funds held by the bank in the applicant's account. Charter, as a prudent lender, required prospective borrowers to have sufficient funds to make the required down payment on the house, with enough remaining to pay the closing costs and anticipated moving expenses.

Gray and Corder testified that Cowart personally explained to them how a loan applicant's VOD should be handled when, in fact, the prospective borrower did not have the required down payment. Cowart instructed his salespeople to have the purchaser issue a personal check, payable to Cowart & Suggs Builders or whomever the other vendor was, in the required amount. If the purchaser did not have a checking account, he was instructed to open one with five or ten dollars. In every transaction forming the basis for each of the twelve substantive counts in the indictment, the purchaser did not have sufficient funds to cover the personal check issued. Nevertheless, in every 4 transaction the purchaser's personal check was endorsed by Cowart, presented to a bank where Cowart did business, 5 and exchanged for a cashier's check. The cashier's check would be made payable to the same individual purchaser who drew the personal check, would be in an amount equal to that of the personal check, and would bear the caption "refund down payment". This cashier's check would then be taken to the purchaser's bank and deposited into his account. At the same time the deposit was made, Cowart, or one of his salespeople, would obtain a VOD from the purchaser's bank: based upon the temporarily inflated balance produced by the cashier's check, the bank would verify that the prospective borrower had sufficient funds. Subsequently, the personal check and cashier's check deposited would cancel each other out. No bona fide down payment was made in any of the transactions forming the basis for Counts 1 through 12 of the indictment. In each instance, Cowart's VOD procedure was utilized.

Corder and Gray testified that VOD forms...

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