United States v. Cavallo

• Citation: 790 F.3d 1202
• Decision Date: 22 June 2015
• Docket Number: 13–12009.,Nos. 12–15660,s. 12–15660
• Parties: UNITED STATES of America, Plaintiff–Appellee, v. George R. CAVALLO, Paula L. Hornberger, Joel A. Streinz, Defendants–Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

790 F.3d 1202

UNITED STATES of America, Plaintiff–Appellee

v.George R. CAVALLO, Paula L. Hornberger, Joel A. Streinz, Defendants–Appellants.

Nos. 12–15660

13–12009.

United States Court of Appeals, Eleventh Circuit.

June 22, 2015.

Linda Julin McNamara, Anita M. Cream, Cherie Krigsman, Robert E. O'Neill, Josephine W. Thomas, Christopher P. Tuite, U.S. Attorney's Office, Tampa, FL for Plaintiff–Appellee.

Fritz J. Scheller, Fritz Scheller, PL, Orlando, FL, Thomas A. Burns, Burns, PA, Stephen Vincent Iglesias, Law Office Of Stephen V. Iglesias, Tampa, FL, for Defendants–Appellants.

Appeals from the United States District Court for the Middle District of Florida. D.C. Docket No. 8:10–cr–00550–EAK–MAP–6.

Before TJOFLAT and JULIE CARNES, Circuit Judges, and DuBOSE^* , District Judge.

Opinion

JULIE CARNES, Circuit Judge:

The defendants in this case—George Cavallo, his wife Paula Hornberger, and Joel Streinz—were players in one of the most long-lasting mortgage fraud conspiracies in the history of central Florida. From approximately October 1997 through March 2008, these three defendants, along with about a dozen other people, conspired to solicit and assist friends, family members, and business associates to fraudulently purchase and sell over thirty residential real estate properties that were ultimately used as primary residences or for investment purposes.

Fifteen of the defendants' cohorts pled guilty either to the conspiracy count or to at least one substantive count. Only Cavallo, Hornberger, and Streinz went to trial,¹ and, after a three-month trial, the jury convicted each of them on the count charging conspiracy to commit wire fraud and to make false statements to an FDIC-insured bank in violation of 18 U.S.C. § 371. Cavallo and Hornberger were also convicted of one substantive count of making false statements to an FDIC-insured bank in violation of 18 U.S.C. § 1014.

Cavallo was sentenced to 120–months imprisonment. Hornberger was sentenced to twelve months and one day imprisonment. Both were ordered to pay over $13 million in restitution. Streinz was sentenced to 60–months imprisonment and ordered to pay $2,322,676 in restitution. All three appeal their convictions. Cavallo and Hornberger also appeal their sentences. After careful consideration of the record and all the briefs, we affirm Cavallo's and Hornberger's convictions and sentences, except that we vacate and remand the orders of restitution issued as to them. We reverse and vacate Streinz's conviction.

I. BACKGROUND

The leader of the conspiracy, Craig Adams, devised and led the fraud scheme, which was referred to at trial as “Craigonomics.” The conspirators would fraudulently obtain the maximum amount of possible loans for each property by using false statements on mortgage applications, allowing the conspirators to minimize the funds needed for closing. The parties would then sell, or “flip,” the properties to turn a profit. To accomplish this objective, the conspirators would falsely inflate the sale price of properties in the loan documents they submitted to lenders and then resell the properties either among themselves, as “friendly” buyers and sellers, or to others outside the conspiracy. To further reduce the amount of money needed for closing, the conspirators sometimes obtained second mortgages from different lenders without disclosing the first mortgage.

The loan applications contained material falsehoods concerning: (1) the purchaser's and/or buyer's income, assets, and liabilities; (2) the purchase or sale price; (3) the amount and source of the down-payment; (4) the identity of the seller and purchaser/borrower; (5) the familial relationship of the parties; (6) the purchaser's/borrower's intended use of the property; and (7) the disbursement of the loan proceeds. Some conspirators lived in the fraudulently-acquired homes, but because most could not afford the mortgage payments and maintenance costs of the properties, they rented out the homes for additional income. Even then, the borrowers experienced cash flow problems, and they often took out home equity loans on their existing properties or acquired new properties and fraudulently extracted cash from them.

The leader of the scheme, Craig Adams, initiated and orchestrated the conspiracy by locating properties and recruiting individuals to participate. Adams, who pled guilty, recruited Richard Bobka, who is defendant Cavallo's brother, to act as a real estate agent, buyer, and seller. Bobka then partnered with Cavallo and Cavallo's wife, defendant Hornberger, to fraudulently obtain more properties. On several occasions, Hornberger served as a friendly buyer because she had a good credit score. Cavallo handled the bookkeeping, banking, and taxes for many properties that he and Hornberger acquired with Bobka. Cavallo and Hornberger listed several of the fraudulently-acquired properties on their joint tax returns by claiming rental income and expenses. Cavallo, Bobka, and Hornberger maintained a joint bank account that they used to hold the fraudulently-acquired loans. Bobka also recruited defendant Joel Streinz to participate in the conspiracy as a friendly buyer and seller for two properties.

On appeal, the three defendants before us raise several issues. Streinz argues that the district court violated his Sixth Amendment right to counsel when the court prohibited him from consulting with his attorney during the time period in which he was testifying: a period that covered three days of trial and two overnight recesses. Cavallo argues (1) that there was insufficient evidence to convict him of making false statements to an FDIC-insured bank in violation of 18 U.S.C. § 1014 and (2) that his sentence is substantively and procedurally unreasonable. Cavallo and Hornberger, together, argue that the district court erred in (1) ordering and calculating restitution and (2) using sidebar conferences in violation of their Sixth Amendment right to a public trial. Finally, all three defendants argue that the district court erred by: (1) failing to fully investigate possible juror misconduct; (2) failing to conduct an evidentiary hearing on allegations of witness misconduct in grand jury; and (3) failing to conduct an evidentiary hearing on alleged defense witness intimidation. We address first any contentions that challenge the validity of a conviction, after which we turn to challenges to the sentences imposed.

II. STREINZ'S ACCESS TO COUNSEL CLAIM

A. Background

After his co-defendants had rested their cases, Streinz informed the court that he wanted to testify on his own behalf. That testimony was delayed, however, because on the morning that Streinz's testimony was scheduled to begin, Government counsel informed the trial court that Streinz had just produced documents that were pertinent to his testimony and that should have been provided much earlier, during discovery. The district court convened a hearing, and Streinz testified that he had recently found the documents at home, while preparing for trial. At the Government's request, the court ordered Streinz, his attorney, the prosecutor, and a federal agent to go to Streinz's house to retrieve any other documents that were subject to discovery. The court recessed the proceedings, postponing Streinz's testimony and directing him “not to communicate with anyone whatsoever with regard to the documents located at your home.”

Accompanied by the prosecutor, a detective, a federal agent, and his own attorney, Streinz traveled to his home. Upon entering the house, the group went directly to an office that contained stacks of papers that Streinz had been examining in preparation for trial. The situation became heated, with Streinz asserting that the officers were engaging in a more intrusive search than was appropriate for their limited mission, and with the detective, who contended that Streinz was not complying with the officer's directives, ultimately calling for backup. To prevent matters from getting further out of hand, Streinz's attorney quickly tried to identify any pertinent documents and brought those documents to the courtroom, where the prosecutor began reviewing them. While examining these papers, the prosecutor saw a handwritten notation indicating that the documents contained Streinz's work product. Concerned that he might be improperly examining a defendant's work product, the prosecutor ceased his review and asked Streinz's attorney to keep the documents in a box in the courtroom in case an issue arose.

Streinz's attorney moved for a mistrial the next morning, arguing that his defense had been compromised by the document retrieval and review procedure. The court denied the motion and asked Streinz if he still wanted to testify. Streinz indicated that he did, although he expressed concern that his defense had been “jeopardized” by the previous day's events. Streinz's direct examination then began. As the trial recessed at the end of the day, the court instructed Streinz that he could not discuss his testimony with “anyone,” but that he could talk to his lawyer about his “constitutional rights.” The court did not, however, explain what that phrase might mean.

Prior to resuming his direct testimony the next day, Streinz sent a letter directly to the court expressing distress at his situation. As set out in that document, Streinz noted uncertainty whether it was appropriate to send the judge a letter, but, given the court's earlier restriction on conversations with his attorney, he felt that he could not talk with the latter about his concerns without “cross[ing] a line of violating the court['s] restrictions.” Streinz stated, among other things, that his preparation, particularly for cross-examination, had been hampered because he had been deprived of trial documents that were “seized without any advance notice,” thereby preventing him from being able to inventory or make copies of the documents.

The court acknowledged Streinz's letter and, while the other trial...