U.S. v. Owens

• Decision Date: 19 August 2002
• Docket Number: No. 01-4373.,01-4373.
• Citation: 301 F.3d 521
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Reginald OWENS, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

301 F.3d 521

UNITED STATES of America, Plaintiff-Appellee, v. Reginald OWENS, Defendant-Appellant.

No. 01-4373.

United States Court of Appeals, Seventh Circuit.

Argued June 6, 2002.

Decided August 19, 2002.

Tu Pham (argued), Office of the United States Attorney Criminal Division, Chicago, IL, for plaintiff-appellee.

Robert G. Clarke (argued), Chicago, IL, for defendant-appellant.

Before EASTERBROOK, MANION, and KANNE, Circuit Judges.

KANNE, Circuit Judge.

A jury convicted real estate appraiser Reginald Owens of mail fraud and wire fraud for his part in a multi-million dollar real estate and mortgage fraud scheme. Owens appeals, contending that the district court improperly admitted evidence and that there was insufficient evidence to support his conviction. We affirm.

I. History

A. The Scheme

From 1995 until 1998, several individuals engaged in a multi-million dollar real estate and mortgage fraud scheme involving approximately eighty properties in the Chicago area. The scheme was a land "flip" scheme, which basically involved having people purchase distressed properties for cash and then immediately resell that same property at artificially-inflated prices. One of the ringleaders of this flip scheme was Brian Parr, who was personally involved in approximately sixty flip transactions. Parr's role in the scheme was to first identify the property he wanted to buy through realtors and by searching the Multiple Listing Services ("MLS"), a real estate computer database that showed properties for sale and the seller's listing price. Parr would then try to negotiate the lowest possible price for the property and would offer to buy the property in cash. At the same time that he was contracting for the purchase of the property, Parr would prepare to sell the property at an artificially-inflated price to a second buyer.¹ In order to accomplish this, Parr needed the second buyer to obtain approval for a home mortgage, and Parr needed to obtain an inflated appraisal that could be used to justify the higher sales price to the lending institution.

Parr's co-schemers worked to locate potential second buyers. As an incentive to second buyers, Parr instructed the co-schemers to offer to sell the properties for no money down and cash back at closing. Once the co-schemers identified a second buyer, the buyer had to qualify for and obtain a mortgage. The second buyers, however, typically did not have jobs or bank accounts and thus could not have normally qualified for a mortgage. To overcome this obstacle, several other co-schemers, including loan officer Tamira Smyth, created false documents to submit to the lender institutions. These false documents included W-2 tax forms, check stubs, employment verifications, and other documents.

In addition to the false documents, mortgage brokers also worked with an appraiser to ensure that the appraisal matched the contract price for the second sale in order for Parr to maximize his profits. The appraisers were able to inflate the value of these properties by omitting from their appraisal reports critical information from the MLS and by comparing the sale house involved in the flip transaction to houses that were far superior. The two primary appraisers in the scheme were Owens and Melva Wynn.² With the appraisers' help, Parr's profit ranged from approximately $10,000 to $180,000 per flip transaction. Parr then used the profits from each transaction to pay his co-schemers.

Parr's profits, however, came at the expense of lending institutions and the federal government because the second buyers could not or would not pay the mortgage payments due on the properties. Further, once these properties went into foreclosure, private lending institutions lost millions of dollars because the mortgages were based on inflated values for the properties and those inflated values had already been pocketed by Parr and the co-schemers. Moreover, because many of the loans on the properties were insured by the Federal Housing Authority ("FHA"), a substantial portion of the losses ultimately were incurred by the United States Department of Housing and Urban Development ("HUD").

B. The Trial

Owens was indicted on two counts of mail fraud and on one count of wire fraud for his part in the scheme. See 18 U.S.C. §§ 1341 & 1343. At trial, Parr testified on behalf of the government and explained the scheme described above. Parr testified that he first met Owens while completing a real estate transaction in February 1997. Subsequently, Parr began to use Owens as his appraiser on his flip transactions, and Owens appraised ten flip transactions for him. Parr explained that without an appraisal equal to the extremely inflated value of the second sale, the scheme would not have been successful. Parr testified that Owens always appraised the property at the value that Parr required and that he paid Owens a $500 bonus for these inflated appraisals in addition to Owens' standard appraisal rate.

Smyth also testified for the government and explained that she participated in eighteen to twenty flip transactions and that she asked Owens to perform appraisals on ten to twelve transactions. Smyth stated that she would call Owens and give him the address of the subject property as well as the value that she wanted for that property. Owens would usually respond that the desired value was too high and that he did not think he could appraise the property at that high of a value. Smyth would then offer Owens money to obtain the desired value, and he would eventually appraise the property at the desired figure. In order to support the inflated price, Smyth explained that Owens would take pictures of properties at certain angles in order to hide defects not reported in his appraisal and that sometimes Owens did not even visit the properties when he performed his appraisals.

Smyth further testified that for each appraisal, Owens was paid between $250 and $400 for his standard fees, which would appear on the closing contract, plus he was also paid a "kickback" of anywhere from $500 to $1,000. The kickback, of course, did not appear in the closing contract. Smyth also testified about recorded telephone calls she made to Owens, and transcripts of those calls were admitted at trial. During those calls, Owens and Smyth discussed $3,000 in kickbacks that were in arrears.

Several Federal Bureau of Investigation agents and HUD agents testified about interviews they conducted with Owens on three separate occasions. According to Agent Kelly Popovotis of HUD, Owens made the following statements: Owens initially stated that he had performed five appraisals for Parr before changing that answer to eight to ten appraisals and then finally to eleven. Owens also initially claimed in the first interview that he did not know the sale price of the properties (i.e., the price that Parr wanted on the appraisal) before doing the appraisals. Owens, however, admitted in his second interview that he had received the sale price before doing the appraisals. Further Owens initially explained that he had received $250 to $500 for each appraisal, but later changed that answer to $1,000 and claimed that the additional money was for a quick turnaround. Additionally, FBI Agent Ron Carver testified that during a third interview with Owens, Owens admitted that he believed that Parr was participating in land-flip transactions.

Finally, the government offered into evidence Owens' appraisal reports, and expert witness John Miaso analyzed these reports and testified about his findings. A summary of the appraisal reports showed the dollar value difference between the listing price on the property and Owens' inflated appraised value (i.e., the price at which Parr resold the property), as well as the percentage difference between the two. This evidence showed that Owens had over-appraised by at least $32,100 to as much as $153,000 per property, and the percentage increase ranged from a low of 32% to a high of 340%. For example, the listing price of the property at 4351 South Calumet was $49,000, and it was sold to a co-schemer for $45,000. Owens, however, signed off on an appraisal of $198,000, for a difference of $153,000 (a 340% increase). Miaso testified that although different appraisers may come up with different values for the same property, the variations would typically range from between five to ten percent.

Miaso also testified that all appraisals must meet the requirements of the Uniform Standards of Professional Appraisal Practice ("USPAP") and that all appraisers must certify that each appraisal they performed was conducted in conformity with USPAP. The USPAP requires certifying that the appraiser personally inspected the subject property and the comparable properties, that the appraiser was truthful in his comments on the subject property and the subject community, and that the comparable properties that were used were actually "comparable" and that any price adjustments were made accordingly to reflect differences between the subject property and the compared property. The appraiser's USPAP certifications also provided that:

I have not knowingly withheld any significant information from the appraisal report, and I believe to the best of my knowledge that all statements and information in the appraisal report are true and correct.

I have no present or contemplated future interest in the subject property, and neither my current nor future employment nor my compensation for performing this appraisal is contingent on the appraised value of the property.

I was not required to report a predetermined value or direction in value that favors the cause of the client or any related party, the amount of the value estimate, the attainment of the specific result, or the occurrence of a subsequent event in order to receive my compensation and/or employment for performing the appraisal. I did not base the appraisal report on a requested minimum...