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United States v. Springer

United States Court of Appeals, Eighth Circuit

August 9, 2017

United States of America Plaintiff- Appellee
v.
Jason Springer Defendant-Appellant United States of America Plaintiff- Appellee
v.
Rick Makohoniuk Defendant-Appellant

          Submitted: June 7, 2017

         Appeals from United States District Court for the Southern District of Iowa - Des Moines

          Before WOLLMAN, ARNOLD, and GRUENDER, Circuit Judges.

          ARNOLD, Circuit Judge.

         Jason Springer and Rick Makohoniuk appeal their convictions for bank fraud under 18 U.S.C. § 1344(1), raising a myriad of discursive challenges. We affirm the judgment of the district court.[1]

         This story begins with two other people-Nathan Smith and Patrick Steven. Smith and Steven created a business to help people who were struggling to repay mortgage-secured loans by negotiating with lenders to modify the terms of those loans. They discovered that some homeowners did not want to modify their loans but wanted instead to escape them by selling their homes and paying off the debt. Many of these homeowners, however, owed more than their homes were worth, so a sale could not satisfy the debt in full. Nonetheless, lenders sometimes allowed homeowners to sell their homes for less than the remaining debt and would accept the proceeds in full satisfaction of the debt. Lenders agreed to these so-called "short sales" partly because of the high costs of foreclosure. So in addition to negotiating loan modifications, Smith and Steven began negotiating short sales with lenders on behalf of cash-strapped homeowners.

         Smith and Steven devised a strategy to make money from these short sales: their business would pitch lenders on a short sale by representing that a buyer stood willing to purchase the property, who, unbeknownst to the lender, would be Smith or Steven. While negotiating the short sale, Smith and Steven would try to find someone to buy the property from them for more than they were going to pay for it in the short sale. Once they found a buyer and received a lender's approval to make the short sale, Smith and Steven would close the short sale and soon after (sometimes on the same day) close on the sale to the buyer they had located and keep the difference. They sold the property quickly so that the proceeds they received selling the property could fund their purchase of the property. So, for example, they would purchase property in a short sale for, say, $50, 000, and then immediately resell it for $100, 000, and use the proceeds received in the $100, 000 sale to fund their $50, 000 purchase.

         The indictment charged Smith and Steven with bank fraud for misrepresenting and concealing the fact that they had agreements to flip the properties after the short sale. The indictment also charged the appellants for participating in the alleged scheme. Springer was an attorney who allegedly helped Smith and Steven carry out the scheme by closing several of the transactions. He allegedly completed each transaction's HUD-1 settlement statement falsely by representing that Smith and Steven had paid cash at closing when he knew that they had not. Makohoniuk was a real estate agent who the government alleged misrepresented that Smith and Steven did not have an agreement to flip a particular house when he knew that they did. Smith and Steven pleaded guilty and cooperated with the government, but Springer and Makohoniuk opted to take their cases to trial.

         Employees for the lenders testified at the trial that the lenders would not have approved the short sales had they known of the property flips because they would have wanted to realize the higher price that the ultimate buyer paid. In fact, many of these lenders had rules to prevent quick property flips after a short sale. For example, many required that the properties be marketed for a certain length of time before they would approve a short sale, which helped ensure that they would receive the best offer possible. To circumvent this requirement, Smith and Steven gave lenders false listing agreements with real estate agents and false for-sale-by-owner letters purporting to show that the properties had been marketed, when they actually had not. Lenders also required the short sale to be at arm's length. To overcome this hurdle, Smith and Steven would identify a trust as the buyer whose trustee was either Smith or Steven, whichever one was not negotiating with that particular lender. By structuring the transaction this way, Smith and Steven were able to conceal that they were not only negotiating on behalf of the homeowner but also buying the property. Another lenders' rule was that the buyer in the short sale had to demonstrate that it had cash or financing to purchase the property. In response, Smith and Steven provided false statements showing that they had financing to buy the property. At least one lender required a signed affidavit stating that no agreements were in place with other buyers to sell the property immediately after the short sale. Finally, lenders for the ultimate purchaser of the property typically would not approve a loan if the property had changed ownership within a certain amount of time, such as 90 days. To avoid this requirement, Smith and Steven convinced their clients to deed their properties into the trust almost immediately after agreeing to negotiate the short sale on their behalf to make it appear as though ownership had changed much earlier than when the short sale was approved and consummated.

         The appellants first maintain that insufficient evidence supports their convictions for bank fraud under 18 U.S.C. § 1344(1), a crime that occurs when someone "knowingly executes, or attempts to execute, a scheme or artifice . . . to defraud a financial institution." Makohoniuk moved for judgment of acquittal on the ground that the government had failed to prove that the entity he defrauded was a "financial institution" under § 1344(1). To be a "financial institution, " the entity must be, as relevant here, insured by the FDIC or a "mortgage lending business." 18 U.S.C. § 20(1), (10). The government maintained that the entity Makohoniuk defrauded-GMAC-was indeed a mortgage lending business, that is, "an organization which finances or refinances any debt secured by an interest in real estate, including private mortgage companies and any subsidiaries of such organizations, and whose activities affect interstate or foreign commerce." 18 U.S.C. § 27. The district court agreed with the government that GMAC was a mortgage lending business and therefore denied Makohoniuk's motion. We review the denial of a motion for a judgment of acquittal based on evidence sufficiency de novo, and we will affirm unless, viewing the evidence in a light most favorable to the government and accepting all reasonable inferences that can be drawn in favor of the verdict, no reasonable jury could have found the defendant guilty. United States v. Chatmon, 742 F.3d 350, 352 (8th Cir. 2014).

         The district court concluded that GMAC was a mortgage lending business because a representative from the U.S. Department of Housing and Urban Development testified that, at the time at issue, GMAC was in the mortgage lending business since it had made hundreds or thousands of loans secured by mortgages in 2010 and 2011 in states all across the country. Makohoniuk contends that this testimony falls short of proving that GMAC's activities affect interstate commerce or that GMAC owned this particular loan. We disagree. Construing the testimony in a light most favorable to the government, we think the fact that GMAC made hundreds or even thousands of loans in states throughout the country sufficiently establishes that its activities affect interstate commerce. And we discern no requirement in the definition of "mortgage lending business" that the business own the particular loan in question; it need only finance or refinance any debt secured by an interest in real estate, or, in other words, be in the interstate mortgage lending business in general.

         Makohoniuk and Springer raise a somewhat similar but nevertheless different argument on appeal. They maintain that the government failed to establish that the precise corporate entities they were charged with defrauding were "financial institutions." They invoke our decision in United States v. Alexander where we vacated a bank fraud conviction under 18 U.S.C. § 1014. 679 F.3d 721, 728 (8th Cir. 2012). There, the defendant stipulated that Bank of America was FDIC insured, but the evidence showed that entities named Bank of America, N.A., and Bank of America Mortgage were the victims of the fraud. We explained that since the stipulation was the only evidence of FDIC insurance in the case, and it did not mention Bank of America, N.A. or Bank of America Mortgage, the government had failed to establish that the defrauded entities were FDIC insured.

         Because Springer and Makohoniuk did not make this argument to the district court, we review for plain error only, Byers v. United States, 561 F.3d 832, 836 (8th Cir. 2009), and will reverse only if they show that the district court committed a plain error affecting their substantial rights and seriously affecting the fairness, integrity, or public reputation of judicial proceedings. United States v. Binkholder, 832 F.3d 923, 930 (8th Cir. 2016). Springer and Makohoniuk, however, emphasize that we and other courts have labeled this and similar elements as "jurisdictional" because they require a connection to interstate commerce. See Alexander, 679 F.3d at 726; United States v. Ayewoh, 627 F.3d 914, 917 (1st Cir. 2010). Thus, they contend, the insufficiency of the evidence on this element can be raised anytime and so cannot be subject to mere plain-error review.

         But when courts refer to an element connected to interstate commerce as jurisdictional, they are talking about how Congress got power to criminalize certain acts or to legislate over a particular field. See Torres v. Lynch, 136 S.Ct. 1619, 1624-25 (2016). In other words, they are talking about legislative jurisdiction. That does not mean that the government's failure to establish a connection with interstate commerce in a particular case deprives the court of jurisdiction over that case. See United States v. Foster, 443 F.3d 978, 981 (8th Cir. 2006). It just means the ...


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