U.S. v. Lee, 94-1164

Decision Date27 April 1995
Docket NumberNo. 94-1164,94-1164
Citation54 F.3d 1534
PartiesUNITED STATES of America, Plaintiff-Appellee, v. Patrick LEE, Defendant-Appellant.
CourtU.S. Court of Appeals — Tenth Circuit

Charlotte J. Mapes, Asst. U.S. Atty. (Henry L. Solano, U.S. Atty., Kyra Jenner, Asst. U.S. Atty., on the briefs), Denver, CO, for plaintiff-appellee.

Warren R. Williamson, Asst. Federal Public Defender (Michael G. Katz, Federal Public Defender, with him on the brief), Denver, CO, for defendant-appellant.

Before BRORBY, GODBOLD * and HOLLOWAY, Circuit Judges.

BRORBY, Circuit Judge.

The defendant, Patrick Lee, appeals his conviction for equity skimming, aiding and abetting, and mail fraud arguing the jury was improperly instructed. We have jurisdiction pursuant to 28 U.S.C. Sec. 1291, and affirm.

BACKGROUND

Beginning in September 1988 and continuing through March 1990, Mr. Lee, in conjunction with his codefendant, Douglass Nelson, purchased twenty-three townhomes and condominiums by assuming non-qualifying Federal Housing Authority loans insured by the Department of Housing and Urban Development ("HUD"). 1 Mr. Lee convinced many of the individual sellers to convey their property to him by presenting his credit report, indicating he had a guaranteed income from the Veterans' Administration, and falsely stating his intent to occupy the homes personally.

Shortly after Mr. Lee purchased each property, it was transferred to Mr. Nelson by warranty deed. Mr. Nelson insisted such transfers take place as soon as possible so that the loans were current in order to minimize the number of mortgage payments that Mr. Nelson would have to make. Subsequently, the properties were rented under the direction of Mr. Nelson and rent proceeds collected, but no mortgage payments were made on the properties. The proceeds were distributed to a number of people, including Mr. Lee, and used for personal expenses. Mr. Nelson admitted at trial he never had any intention of making mortgage payments on the properties. The mortgages on the twenty-three properties went into default within one year of purchase; all of the properties were foreclosed; and HUD incurred losses in the neighborhood of $900,000 as a result.

The government filed a five-count indictment against Mr. Lee. Count I charged equity skimming and aiding and abetting in violation of 12 U.S.C. Sec. 1709-2 and 18 U.S.C. Sec. 2. Counts II, III, IV, and VI charged mail fraud and aiding and abetting in violation of 18 U.S.C. Secs. 1341 and 2. A jury found Mr. Lee guilty of Counts I and VI and acquitted him on counts II, III, and IV.

DISCUSSION

Mr. Lee argues the district court erred in three respects regarding jury instructions. We review the district court's refusal to give a particular jury instruction for abuse of discretion. United States v. Vasquez, 985 F.2d 491, 496 (10th Cir.1993). In assessing whether the court properly exercised that discretion, a reviewing court must examine the instructions as a whole to determine if they sufficiently cover the issues in the case and focus on the facts presented by the evidence. Id. The question of whether a jury was properly instructed is a question of law, and thus, our review is de novo. United States v. Joe, 8 F.3d 1488, 1500 (10th Cir.1993), cert. denied, --- U.S. ----, 114 S.Ct. 1236, 127 L.Ed.2d 579 (1994).

A.

The crime charged in Count I is violation of 12 U.S.C.A. Sec. 1709-2 (1989), which provides, in pertinent part:

Whoever, with the intent to defraud, willfully engages in a pattern or practice of--

(1) purchasing one- to four-family dwellings ... which are subject to a loan in default at the time of purchase or in default within one year subsequent to the purchase and the loan is secured by a mortgage or deed of trust insured or held by the Secretary of Housing and Urban Development ...,

(2) failing to make payments under the mortgage or deed of trust as the payments become due, regardless of whether the purchaser is obligated on the loan, and

(3) applying or authorizing the application of rents from such dwellings for his own use,

shall be fined not more than $250,000 or imprisoned not more than 5 years, or both.

Mr. Lee argues the district court should have instructed the jury according to his proposed jury instruction number 23 which apparently 2 provided that in order to find Mr. Lee guilty of equity skimming, the government must prove he knew or intended, at the time the properties were purchased, that: (1) the mortgages would not be paid; (2) the properties would be rented; and (3) the rental income from the properties would be applied to personal use. As we understand it, Mr. Lee argues instruction 23 is necessary in order to distinguish the crime of equity skimming from that of simple or generic fraud.

18 U.S.C.A. Sec. 1341 (1984), the general, federal fraud statute, provides in part:

Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises ... for the purpose of executing such scheme or artifice or attempting so to do, places in any post office ... any matter or thing whatever to be sent or delivered ... shall be fined not more than $1,000 or imprisoned not more than five years, or both.

In contrast, the federal equity skimming statute prohibits willfully engaging in a pattern or practice of purchasing one-to four-family dwellings that are secured by mortgages or deeds of trust insured or held by the Secretary of Housing and Urban Development, failing to make payments on the mortgage, and applying or authorizing the application of rents from such dwellings for his own use, with the intention to defraud.

Thus, it is perfectly clear while many acts of equity skimming could amount to simple fraud (equity skimming requires the intention to defraud though not the use of the post office in furtherance of that intent), not all acts of simple fraud are equivalent to equity skimming (one can defraud without acquiring federally insured dwellings, failing to make mortgage payments, or misappropriating rental proceeds). As such, instruction 23 is not necessary to distinguish equity skimming from generic fraud.

Moreover, reviewing the instructions tendered as a whole, it is clear instruction 23 simply would have been redundant; adding nothing to what the tendered instructions required. The jury was instructed:

In order to sustain its burden of proof for the crime of equity skimming as charged in Count 1 of the indictment, the government must prove the following six elements beyond a reasonable doubt. First, the government must prove that the defendants engaged in a pattern or practice of purchasing one to four family dwellings. Second, it must prove that the defendants acted willfully in engaging in this practice of purchasing one to four family units. Third, it must prove that the dwellings were secured by a mortgage insured by the Secretary of Housing and Urban Development or the Veterans Administration. Fourth, it must prove that the defendants failed to make payments when due, and the loan was in default or came into default within one year from the date of purchase. Fifth, it must prove that the defendants applied the rents from such dwelling to their own use. Sixth, it must prove that the defendants engaged in this conduct with the intent to defraud.

This instruction tracks, nearly word for word, the language of Sec. 1709-2 and necessarily includes each and every element of the crime of equity skimming as it has been defined by Congress. With respect to the mens rea required to prove the crime of equity skimming, the instruction specifically required the government to carry its burden of proving Mr. Lee acted "with the intent to defraud." In a separate instruction, the court defined intent to defraud as follows:

Fraud is an intentional or deliberate misrepresentation of the truth for the purpose of inducing another in reliance on it to part with a thing of value or [t]o surrender a legal right. Fraud then is a deceit which whether perpetrated by words, conduct or silence, is designed to cause another person or institution to act upon the representation or silence to his or her or its legal injury.

A statement, claim or document is fraudulent if it was falsely made or made with reckless indifference as to its truth or falsity, or made or caused to be made with an intent to deceive.

....

... To act with an intent to defraud, as is required by all of the charges here, means to act knowingly and with the intention or the purpose to deceive or cheat someone. An intent to defraud is accompanied ordinarily by a desire or purpose to bring about some benefit or gain to one's self or some other [person], or by a desire or purpose to cause loss to some other person.

We have previously noted instructions identical or substantially similar to this one properly define the meaning of the phrase "intent to defraud." E.g., United States v. Hilliard, 31 F.3d 1509, 1518 (10th Cir.1994); United States v. Simpson, 950 F.2d 1519, 1524 (10th Cir.1991), see also Devitt et al., Federal Jury Practice and Instructions, 4th ed., Secs. 16.07 & 16.08.

In order to find Mr. Lee acted with the requisite intent to commit the crime of equity skimming, the jury had to find he purchased the properties in conjunction with Mr. Nelson through deceit, with the desire or purpose to bring about some benefit to himself or another. By requiring that Mr. Lee, in engaging in the pattern or practice defined in Sec. 1709-2, acted with the intent to defraud, these instructions necessarily required a finding Mr. Lee did not purchase the twenty-three properties with innocent intentions: The intent instruction required a finding that the properties were purchased fraudulently through deception or untruths, for the purpose of bringing about a benefit to Mr. Lee or another. This is essentially what instruction 23 would have required the...

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