U.S. v. Stalnaker

• Decision Date: 10 June 2009
• Docket Number: No. 07-60247.,No. 07-60079.,07-60247.,07-60079.
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Kenneth STALNAKER; Kimberly A. Castle, Defendants-Appellants. United States of America, Plaintiff-Appellant, v. Richard B. Lucas; Kimberly A. Castle; Kenneth Stalnaker, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

571 F.3d 428

UNITED STATES of America, Plaintiff-Appellee, v. Kenneth STALNAKER; Kimberly A. Castle, Defendants-Appellants.

United States of America, Plaintiff-Appellant, v. Richard B. Lucas; Kimberly A. Castle; Kenneth Stalnaker, Defendants-Appellees.

No. 07-60247.

No. 07-60079.

United States Court of Appeals, Fifth Circuit.

June 10, 2009.

Gaines H. Cleveland, Asst. U.S. Atty. (argued), Gulfport, MS, Glenda R. Haynes, Jackson, MS, for U.S.

Richard B. Lucas, Texarkana, TX, pro se.

John Mark Colette (argued), John M. Colette & Associates, Jackson, MS, for Kimberly A. Castle.

James Lloyd Davis, III (argued), Law office of Jim Davis, Gulfport, MS, for Kenneth Stalnaker.

Appeals from the United States District Court for the Southern District of Mississippi.

Before DAVIS, SMITH and OWEN, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

Kenneth Stalnaker and Kimberly Castle were found guilty of various crimes, including bank fraud and wire fraud. After the verdict, the district court dismissed the bank fraud-related counts. The government appeals that dismissal; Stalnaker and Castle appeal their convictions and Castle her sentence. We affirm the convictions and sentence and, as a result, do not reach the merits of the government's appeal.

I.

A.

Richard Lucas orchestrated an elaborate mortgage fraud operation that purchased cheap property and, through various acts of fraud, resold it at a higher price. He first bought inexpensive pieces of property, often in his half-brother's name. Then, several licensed appraisers, including Stalnaker, produced inflated appraisals of the properties.

Other members of the conspiracy recruited buyers, most of whom were falsely promised that the properties were investments and that Stalnaker would find tenants, collect rent, and use that money to pay the mortgages. The buyers were further enticed by "no money down" promises or, in some cases, paid for their participation. If they did not have the means to buy the properties honestly, still more members of the conspiracy would forge documents (such as W-2's and paystubs) that would be used to obtain mortgage loans.

Castle is the attorney who handled the closings on the original property purchase and the inflated resale. At closing, the mortgage company wired Castle the money with instructions not to release it until the down payment had been received. Castle ignored the instructions and released the money immediately; Lucas then improperly used the money to make the down payment, which enabled him to entice buyers with a no-money-down promise. He also used some of the profits from the sale to pay buyers for their participation.

B.

Lucas and a dozen others were charged in a twelve-count indictment with bank fraud, wire fraud, conspiracy to commit money laundering, and conspiracy to commit bank fraud, wire fraud, and submission of false statements.¹ Ten of the defendants pleaded guilty, leaving Lucas, Stalnaker, and Castle to face trial. With three mostly irrelevant exceptions, the jury found them guilty.² The district court then dismissed, for lack of jurisdiction, the bank fraud count and the bank fraud object of the conspiracy count.

II.

A.

Stalnaker claims there is insufficient evidence to support a conviction.³ After briefly stating the elements of the crime and the standard of review, he says,

The issue for appellate review is whether reasonable minds could have found evidence inconsistent with every reasonable hypothesis of innocence. United States v. Escobar, 674 F.2d 469 (5th Cir.1987 [1982]). There is no hypothesis that evidence supports that Kenneth Stalnaker knew or was a knowing participant in any bank fraud scheme. Defendant Stalnaker's conviction for wire fraud should be set aside and vacated.

Stalnaker does not discuss the facts of the case, cite the record or anything other than general sufficiency-of-the-evidence caselaw, or explain his "hypothesis of innocence." Where a defendant asserts "that the evidence was insufficient to convict him" but fails "to make any argument whatsoever to support this contention," the issue is considered abandoned. United States v. Beaumont, 972 F.2d 553, 563 (5th Cir.1992).

There is easily enough evidence that Stalnaker was an active participant in the conspiracy. Indeed, his brief includes trial excerpts of a witness's testimony that Stalnaker manipulated appraisals to match Lucas's requested valuations.

B.

The government presented witness Janet Chatman, who, on direct examination, experienced what appeared to be a panic attack, which twice interrupted her questioning. After taking a break, she was unable to return. The court struck her testimony and instructed the jury to disregard it. Stalnaker unsuccessfully moved for a mistrial on grounds that his Sixth Amendment right to cross-examine was violated; the court denied that request.

"Alleged violations of the Confrontation Clause [of the Sixth Amendment] are reviewed de novo, but are subject to harmless error analysis." United States v. Bell, 367 F.3d 452, 465 (5th Cir. 2004). "Ordinarily, a witness is considered to be a witness `against' a defendant for purposes of the Confrontation Clause only if his testimony is part of the body of evidence that a jury may consider in assessing his guilt." Cruz v. New York, 481 U.S. 186, 190, 107 S.Ct. 1714, 95 L.Ed.2d 162 (1987). This follows from the "almost invariable assumption of the law that jurors follow their instructions...." Richardson v. Marsh, 481 U.S. 200, 206, 107 S.Ct. 1702, 95 L.Ed.2d 176 (1987).⁴

Because of the court's instruction, Chatman's stricken testimony was not part of the "body of evidence" that the jury could consider in assessing guilt and thus could not be the basis for a confrontation violation. Accordingly, the court did not err in denying a mistrial.⁵

C.

Stalnaker filed several unsuccessful motions to sever. He contends that he was prejudiced by having to go to trial with a "bad person co-defendant" and was "convicted by the overwhelming spillover proof of guilt of Richard Lucas."

"We review a grant or denial of severance for abuse of discretion." United States v. Lewis, 476 F.3d 369, 383 (5th Cir.2007). "A severance is reversible only on a showing of specific compelling prejudice. There is a preference in the federal system for joint trials of defendants who are indicted together,' particularly in conspiracy cases." Id. (quoting Zafiro v. United States, 506 U.S. 534, 537, 113 S.Ct. 933, 122 L.Ed.2d 317 (1993)) (internal citation omitted).

In Lewis, id. at 384, we held that a "district court did not abuse its discretion in denying [defendants'] motions for severance" in which they "complain[ed] broadly of the volume of evidence, the disparity of evidence between defendants, and a generalized spillover effect," but "[n]one point[ed] to any specific prejudice resulting from their combined trial." Stalnaker raises identical arguments; the district court did not abuse its discretion.⁶

Moreover, the jury found Stalnaker not guilty on two counts on which it found his co-defendants guilty. That suggests that the jury did not blindly convict Stalnaker on spillover evidence but instead gave each defendant and each count separate consideration.

D.

Stalnaker alleges that the above errors cumulatively deprived him of a fair trial. But where "we find no merit to any of [the defendant's] arguments of error, his claim of cumulative error must also fail." United States v. Moye, 951 F.2d 59, 63 n. 7 (5th Cir.1992).

III.

A.

Castle appeals the denial of her motion to suppress. The facts are that one of the buyers recruited into Lucas's scheme, Tyronica James, decided to go to the police. She gave Detective Rusty Keyes copies of her closing papers, which were prepared by Castle and contained an inflated appraisal and fraudulent financial information (e.g., reporting that she earned $1800 per month when she only earned $800). Following up on this lead, Keyes contacted a former Countrywide office manager, who reported that she had quit doing business with the Lucas group and Castle when she noticed that two loans had the same bank statements attached. Keyes next spoke with a Countrywide regional manager who stated that there were many delinquent loans that she believed were connected to loans from the same group involved in the James incident.

Based on the information from James and the two Countrywide managers, Keyes received a warrant to search Castle's law office for documents related to closings performed for Lucas. Before trial, Castle unsuccessfully moved to suppress the fruits of that search.

"When the district court denies a motion to suppress, we review factual findings for clear error and conclusions of law de novo." United States v. Payne, 341 F.3d 393, 399 (5th Cir.2003). Probable cause questions are evaluated in two steps: "First we determine whether the good-faith exception to the exclusionary rule ... applies. If it does, we need not reach the question of probable cause for the warrant unless it presents a novel question of law, resolution of which is necessary to guide future action by law enforcement officers and magistrates." Id. (internal citations and quotation marks omitted).

Under the good-faith exception, evidence obtained during the execution of a warrant later determined to be deficient is admissible nonetheless, so long as the executing officers' reliance on the warrant was objectively reasonable and in good faith.... The good faith exception cannot apply if one of four circumstances is present: (1) If the issuing magistrate/judge was misled by information in an affidavit that the affiant knew was false or would have known except for reckless disregard of the truth; (2) where the issuing magistrate/judge wholly abandoned his or her judicial role; (3) where the warrant is based on an affidavit so lacking in indicia of probable cause as to render official belief in its existence entirely unreasonable; and (4) where the warrant is so...