United States v. Appolon

• Decision Date: 19 September 2012
• Docket Number: 10–2266,10–2350,11–1130,Nos. 10–2243,10–2313.,s. 10–2243
• Citation: 695 F.3d 44
• Parties: UNITED STATES of America, Appellee, v. Daniel APPOLON; Ernst Appolon; Latoya Haltiwanger; J. Daniel Lindley; and Eric L. Levine, Defendants, Appellants.
• Court: U.S. Court of Appeals — First Circuit

695 F.3d 44

UNITED STATES of America, Appellee,

v.Daniel APPOLON; Ernst Appolon; Latoya Haltiwanger; J. Daniel Lindley; and Eric L. Levine, Defendants, Appellants.

Nos. 10–2243, 10–2350, 10–2266, 11–1130, 10–2313.

United States Court of Appeals,

First Circuit.

Heard Dec. 8, 2011.

Decided Sept. 19, 2012.

Jeanne M. Kempthorne for appellant Daniel Appolon.

Mark E. Howard for appellant Ernst Appolon.

Tina Schneider for appellant Latoya Haltiwanger.

James C. Rehnquist for appellant J. Daniel Lindley.

Dana A. Curhan for appellant Eric L. Levine.

Vijay Shanker, Attorney, United States Department of Justice, Criminal Division, Appellate Section, with whom Carmen Milagros Ortiz, United States Attorney, Victor A. Wild, Ryan M. DiSantis, and Mary Beth Murrane, Assistant United States Attorneys, Lanny A. Breuer, Assistant Attorney General, and Greg D. Andres, Acting Deputy Assistant Attorney General, were on brief, for appellee.

Before TORRUELLA, BOUDIN, and LIPEZ, Circuit Judges.

LIPEZ, Circuit Judge.

Appellants Daniel Appolon (“Daniel”), Ernst Appolon (“Ernst”), Latoya Haltiwanger, J. Daniel Lindley, and Eric L. Levine were players in the Boston real estate market. Along with six coconspirators, appellants devised and executed a mortgage fraud scheme which netted them illegal profits of nearly $2 million between May 2005 and June 2006. The scheme itself was uncomplicated: appellants and their coconspirators arranged for straw buyers to purchase real property at the asking price, falsified mortgage loan applications for the straw buyers to obtain financing for an artificially-inflated purchase price, and pocketed the difference. The loans secured by each of the properties involved in appellants' scheme eventually went into default, and most of the properties were forced into foreclosure at huge losses for the lenders.

Appellants and their coconspirators were indicted by a federal grand jury on May 15, 2008. Appellants were each charged with one count of conspiring to commit wire fraud in violation of 18 U.S.C. § 371 and with multiple counts of committing wire fraud in violation of 18 U.S.C. § 1343. (Daniel was charged with five counts of wire fraud, Ernst with thirty-four, Haltiwanger with seven, and Lindley and Levine each with forty-one.) In addition, Lindley and Levine were charged with nineteen counts of money laundering in violation of 18 U.S.C. § 1957. All of the counts in the indictment included a charge of aiding and abetting in violation of 18 U.S.C. § 2.

On June 2, 2010, after a six-week jury trial in the United States District Court for the District of Massachusetts, appellants were found guilty of the charges against them, except that Lindley was found not guilty of eleven counts of wire fraud and four counts of money laundering.¹ Each appellant was sentenced to a term of imprisonment, followed by a period of supervised release.²

Appellants now raise a series of challenges to the district court's management of this case, evidentiary rulings, jury instructions, sentencing calculations, and other orders. Included in our analysis of these challenges is a rejection of Haltiwanger's argument that a district court may not undermine a jury's nullification power by explicitly instructing the jury that it has a duty to return a guilty verdict if it is convinced beyond a reasonable doubt of a defendant's guilt. We also explain the proper method of calculating loss in a mortgage fraud case such as this.

After carefully considering each challenge, we affirm.

I.

We provide here only a brief synopsis of the essential facts of this case, in the light most favorable to the jury's verdict, see United States v. Mubayyid, 658 F.3d 35, 41 (1st Cir.2011), reserving additional detail for the analysis that follows.

Levine, a real estate attorney who had been suspended from the practice of law, shared office space in Boston with Lindley, another attorney. During Levine's suspension, he transferred components of his real estate practice in early 2005 to Lindley, who thereafter handled all property closings for Levine. Levine and Lindley sometimes worked with Haltiwanger, a residential mortgage broker at Topdot Mortgage Company, and with Ernst, a realtor at New England Merchants and a principal at Oligarchy Funding. Daniel, Ernst's brother, recruited clients and did odd jobs for New England Merchants.

In mid–2005, appellants hatched their mortgage fraud scheme, which began with Ernst identifying properties for sale in the Boston area and negotiating purchase prices with the sellers. Assisted by Daniel and others, Ernst then recruited straw buyers for these properties, targeting individuals with good credit scores who were willing to trade their complicity in appellants' scheme for a cut of the profits. The standard pitch delivered to a straw buyer was that, in exchange for the use of his or her name, the straw buyer could expect to earn approximately $10,000 and would not be responsible for any down payment or mortgage payments. Next, aided by Lindsay MacPhee (Levine's administrative assistant), Levine, Lindley, Ernst, and Haltiwanger prepared and filed falsified mortgage loan applications, purchase-and-sale agreements, and HUD–1 settlement statements on behalf of the straw buyers, misrepresenting the straw buyers' eligibility for the loans and overstating the purchase prices of the properties.³ (Haltiwanger also served as a straw buyer for one property.) Once the falsified applications were approved by unsuspecting mortgage lenders, the loan proceeds were wired to Lindley's Interest on Lawyers Trust Account (“IOLTA”), from which the actual purchase prices were paid to the sellers and the excess was disbursed to the conspirators, usually after passing through bank accounts held by Levine. The loans secured by the properties were then permitted to default. Most of the properties were forced into foreclosure, and one was burned for insurance money.

In all, twenty-one properties were involved in appellants' scheme. For each of these properties, two separate HUD–1 forms were created, with one form reflecting the actual purchase price and the other reflecting the artificially-inflated price listed on the falsified mortgage loan application. In addition, separate closings, presided over by Lindley, were held for many of the properties in order to distance the straw buyers from the sellers and keep secret the existence of the scheme. By June 2006, the conspirators had earned nearly $2 million in illegal profits, commissions, and fees.

II.

Our analysis begins with Ernst's pretrial motion for severance. It then turns to the sufficiency of the evidence, moves to assorted evidentiary issues raised by appellants during trial, proceeds to the district court's jury instructions and sentencing calculations, and concludes with Levine's post-trial motion for an evidentiary hearing or discovery.

A. Ernst's Motion for Severance

Levine was represented at trial by Isaac Borenstein of the law firm Denner Pellegrino, LLP (“Denner Pellegrino”).⁴ During jury selection, Ernst's counsel notified the district court that, prior to trial, another Denner Pellegrino attorney, Jeffrey Denner, had discussed with Ernst the possibility of representing him in this case. Although Denner Pellegrino never took on Ernst's representation, Ernst's counsel asserted that a severance of Ernst from his co-defendants was necessary to preserve Ernst's constitutional right to testify in his own defense, see Rock v. Arkansas, 483 U.S. 44, 51, 107 S.Ct. 2704, 97 L.Ed.2d 37 (1987), since Ernst's interests at trial differed from Levine's, and Borenstein had the ability to cross-examine Ernst with confidential information that he disclosed to Denner.

Borenstein explained to the district court that he brought Levine's representation with him when he joined Denner Pellegrino from another law firm. When Borenstein arrived at Denner Pellegrino, Denner informed him that he had previously had a non-substantive conversation with “someone whose name [was] Appolon”about taking over his representation in this case. Borenstein and Denner then consulted with Levine, who waived any potential conflict of interest. Borenstein represented to the court that he had no further discussions with Denner “or anybody at Denner Pellegrino” about Ernst and had acquired no confidential information about him.

The district court then held an in camera hearing on the conflict claim followed by fact-finding. In 2008, while awaiting trial, Ralph Appolon (Ernst's brother and coconspirator in this case) became frustrated with his court-appointed counsel and contacted Denner, who had represented him in 2005 in an unrelated matter. Denner sent Paul Andrews, an associate at Denner Pellegrino, to meet with Ralph and Ernst, who also was represented by court-appointed counsel at the time. Denner also may have met personally with Ralph. He did not meet with Ernst, however. Neither Ralph nor Ernst retained Denner Pellegrino's services.

The district court found that it was unclear what exactly transpired in these preliminary meetings. Ralph testified that he provided one of the Denner Pellegrino attorneys with detailed written notes that he and Ernst had prepared. However, the attorneys stated that they had no notes from the meetings and that there were no relevant documents in Denner Pellegrino's files. The court found that “there must have been some discussion of the indictment, at least in general terms, ... between Ernst and Andrews,” but that any discussion was “exploratory as to whether there would be representation” and could not have been “in-depth.” The court concluded that “the extent to which substantive confidential information was exchanged was probably not very great” and that no confidential information about Ernst was subsequently shared with Borenstein.

The court expressed some concern that Andrews played a “minor” role in Levine's defense after Borenstein joined Denner Pellegrino, including drafting...