U.S. v. Gaudin

• Decision Date: 21 June 1994
• Docket Number: No. 90-30334,90-30334
• Citation: 28 F.3d 943
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Michael E. GAUDIN, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 943

28 F.3d 943

UNITED STATES of America, Plaintiff-Appellee, v. Michael E. GAUDIN, Defendant-Appellant.

No. 90-30334.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Nov. 18, 1993.

Decided June 21, 1994.

Richard Hansen, David Allen, and Todd Maybrown, Allen & Hansen, Seattle, WA, for defendant-appellant.

Kathleen A. Felton, U.S. Dept. of Justice, Washington, DC and Kris A. McLean, Asst. U.S. Atty., Helena, MT, for plaintiff-appellee.

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

Before: WALLACE, C.J., HUG, TANG, FLETCHER, REINHARDT, BEEZER, KOZINSKI, LEAVY, RYMER, T.G. NELSON, and KLEINFELD, Circuit Judges.

Opinion by Judge HUG; Dissent by Judge KOZINSKI.

HUG, Circuit Judge:

We granted rehearing en banc in United States v. Gaudin, 997 F.2d 1267 (9th Cir.), rehearing granted, 5 F.3d 374 (1993), to decide whether the element of materiality in 18 U.S.C. Sec. 1001 is a question of fact that must be determined by the jury. We hold that it is.

Michael E. Gaudin was convicted of one count of equity skimming in violation of 12 U.S.C. Sec. 1709-2 for failing to pay United States Housing & Urban Development/Federal Housing Administration ("HUD/FHA") insured loans, and 43 counts of making false statements on loan documents in violation of 18 U.S.C. Sec. 1001. A panel of this court affirmed the equity skimming conviction but reversed the false statements convictions because the district court failed to submit the element of materiality to the jury. United States v. Gaudin, 997 F.2d 1267, 1273 (9th Cir.1993).

The Government's petition for rehearing requested that we reconsider our circuit precedent holding that materiality is an element of the offenses charged under 18 U.S.C. Sec. 1001 that must be submitted to the jury. We affirm the opinion of the panel for the reasons therein stated. In this opinion, we discuss in more detail the reasons why we adhere to our authority that the element of materiality must be submitted to the jury.

I.

A more comprehensive statement of the facts of this case concerning all charges is set forth in the panel opinion. The facts relevant to the issue discussed in this opinion are set forth as follows.

Gaudin became involved in purchasing and renovating rental housing during the recession of 1981-82 when demand for real estate diminished. He purchased many government repossessions, which he held in his or his company's name, and renovated them to rent or resell. Gaudin solicited friends and relatives to buy the houses from him on terms he arranged using FHA-secured loans. He guaranteed he would repurchase the house at a $1,000 profit, if they chose to sell it. In most instances, they did sell the house back to Gaudin for the $1,000 profit. In some instances, the buyer put up a cash down payment, but in most instances, the buyer deeded a percentage interest in the equity in his or her own home as the down payment.

Gaudin made all the necessary arrangements for each loan, including obtaining an appraisal of the refurbished house. Each loan was designed with the lender as an FHA-insured loan. Thus, HUD/FHA forms were utilized in the sales and loan transactions.

The Government contended that Gaudin misled the FHA because the buyers of these houses were not legitimate buyers, but rather "strawbuyers" who only served as a conduit for Gaudin to obtain the houses for himself with FHA loans. Gaudin was not charged with any crime of fraud or substantive statutory violation for obtaining the FHA loans through "strawbuyers;" instead, he was charged with making material false statements on certain FHA forms that caused the FHA to insure the loans.

Gaudin was convicted on Counts 2-17, 19-42, and 44-46. Counts 44-46 charged that the false statements were made on HUD/FHA form 92800-5, certifying an appraised value of the property securing the loan. The charge in these counts is not complex--it is simply that the amounts of the appraisals were knowingly inflated. Counts 2-17 and 19-42 involved HUD/FHA form HUD-1, which is the final settlement statement for the closure of the sales transaction. The nature of the charged false statement is more complex in these counts. A copy of the HUD-1 form involved in one of the transactions is shown in Appendix A, and is representative of the HUD-1 forms involved in all of these counts.

The HUD-1 settlement form is the type of form generally used in closing real estate sales transactions. It shows the sales price, the down payment, the loan amount, and the closing costs charged either to the buyer or the seller. The amounts due to and from the buyer and seller are tallied, and a balance is either due to or from the buyer. On these HUD/FHA forms, the buyer is designated as the "borrower" and the balance is shown on line 303 of the borrower's side of the form with a block to check showing that cash is either due "to" or "from" the borrower. In three of the transactions, this balance was due "to" the borrower and the appropriate block was checked. In another, neither block was checked. In the remaining transactions, the balance was due "from" the buyer. It is significant that the only possible blocks to be checked are cash "to" or "from" the "borrower." This is mirrored on the seller's side of the form with a block to be checked as to whether the cash was "to" or "from" the "seller."

These balances generally were fairly small--ranging from $31 to several hundred dollars. In a few cases, where no equity transfer or cash down payment was made, the amounts were several thousand dollars. The certification that the buyer and seller signed at the bottom of the second page of the form states, "I have carefully reviewed the HUD-1 Settlement Statement and to the best of my knowledge and belief it is a true and accurate statement of all receipts and disbursements made on my account or by me in this transaction." (Emphasis added.)

It is true that Gaudin, not the buyer, either paid or received these cash balances, but a genuine factual question arises as to how significant who paid or received the balance could be to the FHA. It appears quite doubtful from the format of the form and the certification on the form that it was designed to ferret out situations where the buyer might be serving as a stand-in for the seller or another person and did not intend to keep the house. If so, the form and the certification are very poorly designed to do so. This surely leads to a legitimate factual inquiry as to whether FHA officials pay any attention at all to line 303 of the HUD-1 form in their determination to insure the loan. Obviously, testimony or other evidence would be necessary to show that the block checked on line 303 was of any significance. Testimony was, indeed, taken from FHA officials to establish that factual contention.

The question then becomes whether the judge determines this factual component of the materiality issue or whether this is a factual matter that must be determined by the jury.

II.

We recognize that most other circuits have held that the determination of materiality in criminal perjury and false statement statutes is a question of law for determination by the judge. In our circuit, we have held that the issue of materiality in most of these statutes is a question of law for the judge. The exception has been section 1001 cases, in which we have held that it is an element of the crime that must be determined by the jury. United States v. Valdez, 594 F.2d 725, 728-29 (9th Cir.1979). On the basis of Valdez, we reversed Gaudin's convictions on Counts 2-17, 19-42, and 44-46 because the district court removed the issue from the jury, instructing that the Government had established materiality as a matter of law.

The opinions holding that the issue of materiality in these criminal cases is a matter of law for the court to decide have relied on the 1929 Supreme Court case of Sinclair v. United States, 279 U.S. 263, 49 S.Ct. 268, 73 L.Ed. 692 (1929), which involved a congressional investigation into the Teapot Dome Scandal. The defendant was charged with a violation of 18 U.S.C. Sec. 192 for failing to answer a question that was "pertinent to the question under inquiry." The Court held that the issue of pertinency was akin to determining relevance in the admission of evidence in a trial and therefore was a matter of law reserved for the court. Id. at 298, 49 S.Ct. at 273.

The essential issue before us is whether the opinions relying on Sinclair survive the more recent holdings of the Supreme Court that the Sixth Amendment and the Due Process Clause require that the facts essential to establish the elements of a crime must be decided by a jury.

III.

In the oft-quoted opinion of In re Winship, 397 U.S. 358, 364, 90 S.Ct. 1068, 1072-73, 25 L.Ed.2d 368 (1970), the Supreme Court stated:

Lest there remain any doubt about the constitutional stature of the reasonable-doubt standard, we explicitly hold that the Due Process Clause protects the accused against conviction except upon proof [to a proper factfinder] beyond a reasonable doubt of every fact necessary to constitute the crime with which he is charged.

The application of this imperative has been developed in later Supreme Court opinions. See, e.g., Sandstrom v. Montana, 442 U.S. 510, 520-21, 99 S.Ct. 2450, 2457 (1979); Cabana v. Bullock, 474 U.S. 376, 384-85, 106 S.Ct. 689, 695-96, 88 L.Ed.2d 704 (1986); Carella v. California, 491 U.S. 263, 268-69, 109 S.Ct. 2419, 2422-23, 105 L.Ed.2d 218 (1989) (Scalia, J., concurring); Yates v. Evatt, 500 U.S. 391, 399-400, 111 S.Ct. 1884, 1891, 114 L.Ed.2d 432 (1991); Sullivan v. Louisiana, --- U.S. at ----, ----, 113 S.Ct. 2078, 2082, 124 L.Ed.2d 182 (1993). It is clear from this authority that under the Sixth Amendment the proper factfinder in serious criminal offenses is the jury. The Court in Cabana stated:

A defendant charged with a serious crime has the right to have a jury determine his guilt or...