U.S. v. Thorn, 89-7101

• Decision Date: 31 October 1990
• Docket Number: No. 89-7101,89-7101
• Citation: 917 F.2d 170
• Parties: 31 Fed. R. Evid. Serv. 587 UNITED STATES of America, Plaintiff-Appellee, v. Charles THORN, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 170

917 F.2d 170

31 Fed. R. Evid. Serv. 587

UNITED STATES of America, Plaintiff-Appellee, v. Charles THORN, Defendant-Appellant.

No. 89-7101.

United States Court of Appeals, Fifth Circuit.

Oct. 31, 1990.

Rehearing Denied Nov. 28, 1990.

John H. Hagler, Michael P. Carnes, Dallas, Tex., for defendant-appellant.

Delonia A. Watson, Asst. U.S. Atty., Marvin Collins, U.S. Atty., Dallas, Tex., for plaintiff-appellee.

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

Before POLITZ, WILLIAMS, and SMITH, Circuit Judges.

JERRE S. WILLIAMS, Circuit Judge:

Appellant Charles Thorn, with Ronnie Whitfield and J.E. "Sonny" Jamison, was charged with conspiracy to commit mail fraud and equity skimming in violation of 18 U.S.C. Sec. 371; mail fraud in violation of 18 U.S.C. Sec. 1341; equity skimming in violation of 12 U.S.C. Sec. 1709-2; and aiding and abetting equity skimming and mail fraud in violation of 18 U.S.C. Sec. 2. Thorn had his trial severed from the other two men charged in the indictment. Thorn was found guilty of the conspiracy count, six counts of aiding and abetting mail fraud, and one count of aiding and abetting equity skimming. The judge sentenced Thorn to five years for conspiracy and three years for aiding and abetting equity skimming, with the sentences to run consecutively. The judge also fined Thorn $6,000 for the mail fraud counts, and ordered him to pay the Veterans' Administration $50,000 in restitution.

Appellant asserts that the evidence was insufficient to support the jury's verdict. He also claims that the district judge erred by excluding evidence of a state court indictment pending against a key prosecution witness. We affirm. The evidence in the record is sufficient to support Thorn's conviction on each of the charges. We also find no error in the district judge's ruling excluding evidence of the state court indictment pending against a prosecution witness.

I. Background

The case arose in the west Texas town of Abilene, a community dependent upon oil, ranching, and the military for its economic well-being. Dropping oil prices in the mid-1980's predictably had a devastating effect on Abilene. One victim of the stagnant economy was the housing market. Homeowners attempting to move from the city found few buyers for their properties and often had to accept offers far below their original asking price. To sell their houses, many homeowners permitted buyers to assume the non-qualifying mortgages on their houses without paying any equity.

Three persons were involved in the alleged criminal scheme. Appellant, Charles Thorn, was a real estate broker and part owner of an Abilene real estate firm known as Martha Thorn Century 21 Realtors. Ronnie Whitfield was an entrepreneur involved in real estate management and other investments. J.E. "Sonny" Jamison was an unemployed truck driver. Sometime in the early spring of 1986 Thorn became associated with Jamison and Whitfield. The government charges that this association led to the equity skimming scheme that was the basis of Thorn's conviction.

Equity skimming is defined in 12 U.S.C. Sec. 1709-2 as the practice of purchasing family dwellings subject to a loan guaranteed by the Veterans' Administration and subsequently applying some or all of the rental proceeds from these houses to personal gain rather than toward payment of the mortgage. The government offered evidence to prove that Thorn, Jamison, and Whitfield concocted a scheme to purchase houses in Abilene by assuming the mortgages, leasing the properties, collecting monthly rents, and converting the rental receipts to their personal use rather than to meeting the mortgage obligations. The mail fraud charges arose out of the collection by mail of the rents involved.

The government's evidence sought to show that Whitfield approached Jamison and asked him to act as nominal owner of the houses. At the time, Jamison was unemployed and had no assets. The plan was that Whitfield would rent and manage the properties, and Jamison would endorse all rental checks over to an account controlled by Whitfield. In return for his role in taking title, Whitfield agreed to pay Jamison ten percent of the rental receipts. The evidence showed that Thorn was present at this meeting.

Thorn acted as Jamison's agent to facilitate the purchase of the houses. Because the Abilene housing market was depressed, Jamison was able to acquire 17 houses by assuming the mortgages without any equity payments. In each of these assumptions the sellers also agreed to pay the closing costs and the real estate brokers' commissions. Thus, Whitfield, through Jamison, obtained 17 houses without spending any money. Thorn's firm received commissions ranging from $250 to $1000 on each of these assumptions.

The government also offered testimony that during negotiations with sellers, Thorn represented Jamison as the head of a group of investors from Fort Worth. Thorn told sellers and realtors that Jamison planned to lease the houses until the market turned around and the houses could be sold at a profit. Though the current rentals fell short of meeting the payments under the mortgages, Thorn assured the sellers that Jamison and his group of investors could withstand a substantial negative cash flow for a significant period of time. ¹

These representations form the basis for the government's charges against Thorn. The government offered proof that Thorn was present during the early meetings between Jamison and Whitfield, and that he knew that Jamison had no means of satisfying the mortgage payments on the houses. Thorn's representations about Jamison's ability to finance a negative cash flow justifies the inference that Thorn actively participated in the equity skimming scheme.

Although they collected monthly rent on the houses, Jamison and Whitfield defaulted on the mortgage payments. All but one of the seventeen houses went into foreclosure. ² The Veterans' Administration had to pay approximately $190,000 pursuant to its guarantee of the mortgages.

II. Sufficiency of the Evidence

Thorn first contends that the evidence is insufficient to support the jury's verdict. In reviewing the sufficiency of the evidence, we view the evidence and any inferences that may be drawn from it in the light most favorable to the verdict. United States v. Onick, 889 F.2d 1425, 1428 (5th Cir.1990). Our review does not encompass weighing the evidence or judging the credibility of witnesses. United States v. Davis, 752 F.2d 963, 968 (5th Cir.1985). We must affirm the conviction if a rational jury could have found the essential elements of the crimes beyond a reasonable doubt. United States v. Fortna, 796 F.2d 724, 740 (5th Cir.), cert. denied, 479 U.S. 950, 107 S.Ct. 437, 93 L.Ed.2d 386 (1986).

A. The Conspiracy Count

To prove Thorn guilty of conspiracy, 18 U.S.C. Sec. 371 requires the government to prove beyond a reasonable doubt: (1) an agreement between two or more persons, one of whom was Thorn, (2) to commit a crime against the United States, and (3) an overt act committed by one of the conspirators in furtherance of the agreement. United States v. Schmick, 904 F.2d 936, 941 (5th Cir.1990). The government had to prove that a conspiracy existed, that Thorn knew of the conspiracy and that he voluntarily became a part of it. United States v. Yamin, 868 F.2d 130, 133 (5th Cir.), cert. denied, --- U.S. ----, 109 S.Ct. 3258, 106 L.Ed.2d 603 (1989). If Thorn understood the unlawful nature of the activity and knowingly or intentionally joined it on at least one occasion, that was sufficient to convict him of conspiracy, even though he played only a minor role in the scheme. United States v. Gonzales, 866 F.2d 781, 787-88 (5th Cir.), cert. denied, --- U.S. ----, 109 S.Ct. 2438, 104 L.Ed.2d 994 (1989). Circumstantial evidence is sufficient to prove the existence of a conspiracy. An agreement may be inferred from concert of action among the alleged participants, and voluntary participation may be inferred from a collocation of circumstances. United States v. Espinoza-Seanez, 862 F.2d 526, 537 (5th Cir.1988).

The substantive crimes upon which the conspiracy count was based were equity skimming and mail fraud. The equity skimming statute mandates criminal penalties for "[w]hoever, with intent to defraud, willfully engages in a pattern or practice of (1) purchasing one- to four-family dwellings ... which are ... in default within one year subsequent to the purchase and the loan is ... guaranteed by the Veterans' Administration, or the loan is made by the Veterans' Administration, (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...." 12 U.S.C. Sec. 1709-2. The essential elements of mail fraud, under 18 U.S.C. Sec. 1341, are: (1) a scheme to defraud, (2) involving the use of the mail, (3) for the purpose of executing the scheme. United States v. Gordon, 780 F.2d 1165, 1170 (5th Cir.1986). We find the evidence sufficient to support Thorn's conviction for conspiracy to commit crimes under both of these statutes.

Thorn does not deny the existence of an equity skimming scheme, or that the mails were used to further that scheme. The undisputed facts show that Jamison assumed the mortgages on 17 houses in Abilene. The mortgage on each of these houses was guaranteed by the Veterans' Administration. The houses were then leased, but the rental proceeds were not used to pay the mortgages. ³ It is also undisputed that some of the leases required the renters to make their monthly payments by mail.

Thorn argues that assuming the scheme existed, he was not part of the conspiracy and had no knowledge of it. Thorn offered evidence at trial to show that he acted merely as a real estate agent. He claimed that his involvement with Jamison and...