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United States v. Lindsey

United States Court of Appeals, Ninth Circuit

February 27, 2017

United States of America, Plaintiff-Appellee,
v.
Nicholas Lindsey, Defendant-Appellant.

          Argued and Submitted March 18, 2016 San Francisco, California

         Appeal from the United States District Court for the District of Nevada Lloyd D. George, Senior District Judge, Presiding D.C. No. 2:11-cr-00217-LDG-CWH-1

          William H. Gamage, Gamage & Gamage, Las Vegas, Nevada, for Defendant-Appellant.

          Peter S. Levitt (argued), Assistant United States Attorney; Elizabeth O. White, Appellate Chief; Daniel G. Bogden, United States Attorney; United States Attorney's Office, Las Vegas, Nevada; for Plaintiff-Appellee.

          Heather E. Williams, Federal Defender for the Eastern District of California; Hilary Potashner, Federal Defender for the Central District of California; Ann C. McClintock, Assistant Federal Defender; Office of the Federal Public Defender, Sacramento, California; Michael Tanaka, Deputy Federal Public Defender, Office of the Federal Public Defender, Los Angeles, California; Karen Lee Landau, Law Office of Karen Landau, Oakland, California; Barry L. Morris, Walnut Creek; for Amicus Curiae Federal Defenders for the Central and Eastern Districts of California.

          Before: Susan P. Graber, [*] Ronald M. Gould, and Michelle T. Friedland, Circuit Judges.

         SUMMARY[**]

         Criminal Law

         The panel affirmed convictions in a mortgage fraud case.

         The panel held (1) negligence is not a defense to wire fraud, and evidence of lender negligence is not admissible as a defense to mortgage fraud; (2) intentional disregard of relevant information is not a defense to wire fraud, and evidence of intentional disregard by lenders is not admissible as a defense to mortgage fraud; (3) evidence of individual lender behavior is not admissible to disprove materiality, but evidence of general lending standards in the mortgage industry is admissible to disprove materiality; and (4) the district court did not deny the defendant the opportunity to present a complete defense.

         The panel addressed other contentions in a concurrently-filed memorandum disposition.

          OPINION

          GOULD, CIRCUIT JUDGE:

         We address the admissibility of certain evidence in this criminal mortgage fraud case. We affirm the convictions, rejecting appellant's contentions that evidence was improperly excluded and that he was denied the ability to present a defense. In a separate memorandum disposition filed concurrently, we reject other challenges to the convictions and some challenges to the sentence.

         Nicholas Lindsey, a former mortgage loan officer and real estate broker, appeals his convictions and sentence for nine counts of wire fraud and one count of aggravated theft. For several years, Lindsey was involved in a complex mortgage fraud scheme that involved convincing individuals to "buy" residential properties in exchange for financial assistance. In some cases, Lindsey built up these individuals' credit ratings and deposited money into their bank accounts in order to fraudulently secure mortgages. He also submitted falsified loan documents to lenders in order to make the individuals appear more creditworthy, including falsely stating the applicants' earned income. The properties secured through this scheme were destined for foreclosure, creating large losses for financial institutions[1] while Lindsey benefitted financially from commissions, rent payments, and diverted escrow monies.

         Lindsey was charged with wire fraud under 18 U.S.C. § 1343, which requires the Government to prove that the defendant made "material" fraudulent representations, i.e., representations that had "a natural tendency to influence, or [were] capable of influencing" the decisions of the lenders who made the loans. United States v. Gaudin, 515 U.S. 506, 509 (1995) (quoting Kungys v. United States, 485 U.S. 759, 770 (1988)); Neder v. United States, 527 U.S. 1, 16 (1999). At his trial, the district court precluded Lindsey from presenting certain evidence regarding the practices of particular lenders. He appeals his convictions on the ground that he was denied his constitutional right to present a defense. We have jurisdiction under 18 U.S.C. § 3742(a) and 28 U.S.C. § 1291, and we hold that lender negligence in verifying loan application information, or even intentional disregard of the information, is not a defense to fraud, and so evidence of such negligence or intentional disregard by particular lenders is inadmissible as a defense against charges of mortgage fraud. We also hold that evidence of the general lending standards applied in the mortgage industry is admissible to disprove materiality, but evidence of individual lender behavior is not admissible for that purpose.

         I

         Lindsey worked for Clear Mortgage, Inc., in Nevada as a mortgage loan officer and team leader for a mortgage group. From about May 2006 to June 2007, while employed with Clear Mortgage, Lindsey recruited straw buyers for Las Vegas real estate and, in the process, made false statements in loan applications. In one illustrative example presented at trial, Lindsey recruited Madelon Bridges, a woman living in Louisiana with only $50 to her name, to "purchase" Villa Del Mar, a house in Las Vegas worth $720, 000. Lindsey flew Bridges to Las Vegas and promised to pay off her debt and give her $10, 000 in exchange for acting as a straw buyer. Bridges gave Lindsey her personal identification information, including her social security number and fingerprints, and Lindsey paid off her debt and transferred money into her bank account. Lindsey also had Bridges sign a loan application that falsely represented, inter alia, that she intended to live at the property she was applying for a loan to purchase, paid $3, 300 a month in rent, was gainfully employed, and had a sizeable bank account. After she was approved for the loan, Lindsey used Bridges's personal information to apply for another loan and purchase another home in her name without her knowledge. When Lindsey did not make mortgage payments as promised, Villa Del Mar went into foreclosure, negatively affecting Bridges's credit rating and causing losses to the lender. Lindsey perpetrated similar frauds with five straw buyers-including his sister-on nine home loans and eight different properties. From this scheme, Lindsey profited by receiving significant commissions, rent payments, and diverted escrow monies.

         Lindsey was arrested and indicted on nine counts of wire fraud under 18 U.S.C. § 1343 and one count of aggravated identity theft under 18 U.S.C. § 1028A. Before trial, the Government suspected that Lindsey was planning to defend himself by claiming that the lenders were at fault for failing to verify the information in the fraudulent loan applications. The Government filed a motion in limine to prevent Lindsey from introducing evidence of lender negligence. The district court declined to rule on the ...


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