U.S. v. Hildenbrand

• Decision Date: 13 May 2008
• Docket Number: No. 07-10211.,No. 07-10210.,07-10210.,07-10211.
• Citation: 527 F.3d 466
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Barbara HILDENBRAND, Defendant-Appellant. United States of America, Plaintiff-Appellee, v. Gerald Stone, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

527 F.3d 466

UNITED STATES of America, Plaintiff-Appellee, v. Barbara HILDENBRAND, Defendant-Appellant.

United States of America, Plaintiff-Appellee, v. Gerald Stone, Defendant-Appellant.

No. 07-10210.

No. 07-10211.

United States Court of Appeals, Fifth Circuit.

May 13, 2008.

Marc Woodson Barta (argued), Dallas, TX, for Plaintiff-Appellee.

Andrea L. Nation, John Davidson Nation (argued), Dallas, TX, for Barbara Hildenbrand.

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

Before DAVIS and SOUTHWICK, Circuit Judges, and DRELL, District Judge:^*

W. EUGENE DAVIS, Circuit Judge:

Defendants Barbara Hildenbrand and Gerald Stone appeal their guilty plea convictions for defrauding the Department of Housing and Urban Development, conspiring to steal from an organization receiving federal funds, and tax evasion primarily on the basis that the factual resumes submitted in support of their guilty pleas are insufficient to support their convictions of these crimes. We disagree and affirm appellants' convictions. Because of our disposition of this threshold issue and the appeal waiver in their plea agreements, we do not reach any other issues raised by the defendants and dismiss the appeals of their sentences.

I.

Barbara Hildenbrand conducted business in the name of Community Housing Fund (CHF), a § 501(c)(3) nonprofit organization out of Irving, Texas. CHF was formed for the purpose of providing affordable housing to low-income persons. Hildenbrand was the president of CHF and responsible for all operations. CHF was selected to participate in HUD's Single Family Affordable Housing Program (SFAHP or "the program"), which was designed to help persons with low-to-moderate incomes purchase affordable homes. Under the SFAHP, HUD offered certain of its properties to nonprofit companies for purchase at discounted prices, usually 10% to 30% below the fair market value.

Through CHF, Hildenbrand purchased discounted homes from HUD under the program. She then engaged contractors to rehabilitate the houses for sale. Hildenbrand used several contractors to perform the rehabilitation work on the houses CHF purchased, but Gerald Stone, who later became her husband and who conducted business under the name of Ranscott Construction, Inc. (RCI), performed the vast majority of the repair and warranty work on the program houses.

HUD created the SFAHP to sell properties at a discount to nonprofits, who would then pass on the discount received from HUD to increase home ownership opportunities for low- and moderate-income families and individuals. The agency has rules about the price nonprofits could realize from the property—for example, limiting the sales price of properties sold at a 30% discount to a maximum of 110% of the net development cost of the property. Rehabilitation expenses are an allowable cost in calculating net development cost. Thus if Hildenbrand's and Stone's scheme fraudulently increased the development cost of a property, it would in turn increase the property's allowable sales price thus thwarting the goal of the program to pass the discount granted by HUD onto the ultimate home owner or renter.

In her factual resume, Hildenbrand made admissions regarding her purchase of two discounted houses from HUD under the SFAHP. On January 25, 1999, she purchased, through CHF, residential property at 5720 Forest Oaks, Dallas, at a 30% discount, worth $5,025. On December 6, 1999, she purchased a residence at 2449 Maverick, also in Dallas, for which she received a 30% discount, worth $15,900. Hildenbrand stipulated that she received the discounts for the purchase of these two homes from HUD with the intent to defraud HUD and unlawfully to defeat its purposes. Hildenbrand used Stone, through RCI, to perform the repair work on the program homes. Hildenbrand admitted that, by using CHF money, she and Stone defrauded HUD and defeated the purposes of the SFAHP by increasing the costs associated with the particular houses through improper payments to RCI. This in turn increased the ultimate prices of the residences, making them less affordable to the low income purchasers of the homes, the intended beneficiaries of the program.

Specifically, Hildenbrand and Stone engaged in a conspiracy to steal funds from CHF by writing checks to RCI and by falsely documenting the stolen money as being related to repair costs payable to RCI. Hildenbrand admitted issuing a CHF check on January 20, 2000, for $24,000, payable to cash, used to purchase a Florida cashier's check in the same amount payable to a realty escrow account for the purchase of a condominium in Stone's name. She further admitted issuing a CHF check on January 28, 2000, for $222,927.73, payable to cash, which was used to purchase another cashier's check, which was in turn used to purchase the condominium in Stone's name. On the same date, Stone used the $246,927.73 in CHF funds to purchase a condominium in North Palm Beach, Florida.

On or about May 8, 2000, Hildenbrand issued a CHF check for $246,500, payable to RCI, which Stone endorsed back to CHF to document the CHF funds he had already received for the January 2000 condominium purchase. On the same date, Hildenbrand, aided by CHF's bookkeeper, falsely documented in CHF records that $30,000 of the payments related to the January 2000 condominium purchase were for work performed by Stone in relation to the addresses at 5720 Forest Oaks and at 2449 Maverick. However, CHF's books reflected that final payment had been made to RCI for work done on both properties. For example, CHF acquired the house on Maverick on December 10, 1999; it paid RCI $500 on that date and an additional $5,500 on January 7, 2000, for rehabilitation work. The January 7, 2000, payment was marked "final," by the RCI invoice and CHF records. However, on May 8, 2000, CHF paid RCI an additional $20,000 for supposed rehabilitation work on the Maverick residence. The funds for that additional payment were lumped with a number of other payments used to document funds previously paid to RCI through the CHF checks issued on January 20 and 28, 2000 for the Palm Beach Condo. The invoices for work on the Forest Oaks residence had similarly been marked "final" on June 1, 1999, but on May 8, 2000, CHF paid RCI an additional $10,000 for supposed rehabilitation work on that address.

Investigation revealed that Hildenbrand, operating through CHF, purchased at least 23 houses in Texas and Florida during 1999 and 2000 from HUD under the SFAHP, receiving discounts totaling $152,906.80 as inducement to purchase the homes. CHF would secure interim financing for program houses without disclosing to the banks the discount it received from HUD; it would use those funds to pay RCI to rehabilitate the homes. In many instances, the actual cost to rehabilitate the houses was less than the amount paid to RCI. Additionally, HUD requires that SFAHP participants use independent, unrelated contractors for work on program properties. In violation of this rule, Stone was intimately involved with Hildenbrand's business dealings, and was listed on bank documents as CHF's area manager and vice president, with cosignatory authority on CHF's bank account.

In his factual resume, Stone admitted that he and Hildenbrand willingly conspired to embezzle, convert, and misapply property in excess of $5,000 owned by an organization receiving federal assistance, in violation of 18 U.S.C. § 666. Specifically, Stone admitted that he and Hildenbrand stole and unlawfully converted money from CHF bank accounts for non-business-related purchases, then falsely claimed that portions of the payments were made for legitimate rehabilitation work performed by Stone through RCI. The factual resume listed 23 homes purchased by CHF from HUD under the SFAHP in Texas and Florida at discounts of 10% to 30% below the fair market value. Stone admitted that he coordinated the repair and warranty work on the Texas homes but that Hildenbrand hired a different contractor to do the work on the Florida residences.

For the Texas homes, Hildenbrand had the CHF bookkeeper make entries showing amounts paid to Stone were for rehabilitation of properties in Texas that had previously been marked as having received "final payment." For example, CHF purchased a residence at 1502 Bayshore in Garland, Texas, in March 1999; it paid RCI $10,000 on March 25, 1999, for rehabilitation work and paid $5,000 on June 7, 1999, which payment was marked "final" by RCI and CHF records. Over one year later, on July 6, 2000, CHF paid RCI an additional $165,400 for supposed rehabilitation work on the Bayshore house. The funds for this payment were lumped in with a number of other payments used to document funds previously paid to RCI through a CHF check on March 13, 2000, in the amount of $212,500.

Additionally, Hildenbrand had the CHF bookkeeper document falsely that several amounts paid to Stone on January 20 and 28, 2000, were related to rehabilitation of properties in St. Petersburg and Ft. Lauderdale, Florida, despite the fact that Stone did not perform any work on those Florida properties. Stone stipulated that the listed payments were not legitimate and constituted theft from CHF; he further conceded that, in 2000, he received $459,427.73, in unlawfully converted funds from CHF, which money he used to purchase the aforementioned condominium and a $212,500 yacht known as the "Shelby Jean."

Stone additionally admitted that the $459,427.73 qualified as taxable income for federal income tax purposes, which income he intentionally failed to report on his 2000 individual tax return, filed on July 27, 2001. Stone conceded that he willfully attempted to evade and defeat a large part of the income tax due to the U.S. for the calendar year 2000. As a result of his intentional failure to report his true income, Stone admitted that he failed to report and pay additional taxes in the amount of $179,479 to the U.S. for...