UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 03-4899
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
versus
MACY WALKER MCLEAN,
Defendant - Appellant.
No. 03-4922
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
versus
PAUL ZIMMERMAN,
Defendant - Appellant.
No. 03-4923
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
versus
JAMES EDWARD MCLEAN, JR.,
Defendant - Appellant.
No. 04-4038
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
versus
DEBBIE ZIMMERMAN,
Defendant - Appellant.
Appeals from the United States District Court for the Western
District of North Carolina, at Charlotte. Lacy H. Thornburg,
District Judge. (CR-02-156-T)
Argued: February 2, 2005 Decided: May 2, 2005
Before MOTZ, TRAXLER, and SHEDD, Circuit Judges.
Affirmed in part, vacated in part, and remanded by unpublished per
curiam opinion.
ARGUED: Lawrence Wilson Hewitt, JAMES, MCELROY & DIEHL, P.A.,
Charlotte, North Carolina; Claire J. Rauscher, Charlotte, North
Carolina; Trevor Michael Fuller, Charlotte, North Carolina, for
Appellants. Michael E. Savage, Assistant United States Attorney,
OFFICE OF THE UNITED STATES ATTORNEY, Charlotte, North Carolina,
for Appellee. ON BRIEF: Preston O. Odom, III, JAMES, MCELROY &
DIEHL, P.A., Charlotte, North Carolina, for Appellant James E.
McLean, Jr.; Danielle B. Obiorah, MASON-WATSON, OBIORAH &
SINGLETARY, Charlotte, North Carolina, for Appellant Debbie
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Zimmerman. Gretchen C. F. Shappert, United States Attorney,
Jennifer Marie Hoefling, Assistant United States Attorney,
Charlotte, North Carolina, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
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PER CURIAM:
Defendants were convicted of various charges related to a
mortgage company’s scheme to defraud the Federal National Mortgage
Association (“Fannie Mae”) and the Government National Mortgage
Association (“Ginnie Mae”). Defendants raise several challenges to
their convictions and sentences. We affirm their convictions, but
we vacate their sentences in light of United States v. Booker, 125
S. Ct. 738 (2005), and remand for resentencing.
I.
Defendants James and Macy McLean were officers and owners of
First Beneficial Mortgage Corp (“FBMC”), a mortgage company based
in North Carolina. As a qualified Federal Housing Administration
(“FHA”) lender with direct endorsement authority, FBMC had the
authority to approve mortgage loans for federal FHA insurance. An
FHA-insured mortgage loan, in turn, is “readily saleable” on the
secondary mortgage market. FBMC was also an approved Fannie Mae
lender, meaning FBMC could originate a mortgage loan with the
borrower and then Fannie Mae would immediately buy the mortgage on
the secondary market without doing its own underwriting evaluation.
FBMC created a subsidiary company, First Beneficial Homes
(“FBH”), which was in the business of building modular homes
financed by FBMC. Paul and Debbie Zimmerman, both of whom were
employed by FBMC, were officers in FBH, as was Macy McLean. In
order to obtain funds for FBH to build homes, the McLeans,
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Zimmermans and a third couple, the Greens, recruited individuals,
primarily friends and relatives, to sign mortgage loan notes
purporting to secure funds advanced by FBMC for homes that, in
fact, did not exist or were owned by someone other than the
“borrower” named on the note. The McLeans and Zimmermans induced
these individuals to sign the mortgage notes by paying them various
amounts to participate in an “investment” opportunity and
representing that, by signing, the “investors” did not actually
incur any repayment obligation. The McLeans and Zimmermans also
signed similar fictitious mortgage notes themselves. None of the
individuals signing these documents ever acquired or possessed any
ownership interest in the properties listed on the notes.
FBMC would then sell these “instruments” to Fannie Mae on the
secondary market, representing by the terms of the note that the
borrower signing the note had an ownership interest in the listed
property, that FBMC had a security interest in the property, and
that the property was of sufficient value to protect the lender --
or any secondary purchaser of the loan such as Fannie Mae -- in the
event of default. As an approved Fannie Mae lender, FBMC had the
authority to transfer its loans to Fannie Mae without having to
submit the loans to any underwriting review process by Fannie Mae.
Essentially, FBMC was empowered to make underwriting decisions on
behalf of Fannie Mae.
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Eventually, Fannie Mae detected irregularities in FBMC’s
underwriting practices and conducted an audit of the loans it had
purchased. A physical inspection of the properties for which FBMC
had purportedly financed the purchase of a completed home revealed
that the many of the lots were either vacant or contained a
partially completed house. Additionally, some of the lots that
ostensibly secured mortgage loans already purchased by Fannie Mae
were being offered for sale. James McLean claimed that he
incorrectly assumed that Fannie Mae would purchase construction
loans, which disburse funds in piecemeal fashion as each new phase
of construction begins. Fannie Mae, however, does not purchase
construction loans, which FBMC was not authorized to sell. And,
FBMC had not sold the loans as construction loans to Fannie Mae in
any event. In November 1998, when FBMC could not account for all
of the irregularities, Fannie Mae suspended FBMC as an approved
lender.
Faced with the collapse of the Fannie Mae scheme, James McLean
agreed to repurchase the loans FBMC sold to Fannie Mae. Although
he told Fannie Mae that he had secured investors willing to fund
the repurchase of these loans, he refused to divulge the identity
of the investors. In fact, FBMC secured funds to repurchase the
loans by simply continuing the Fannie Mae “investor” scheme with
Ginnie Mae. Ginnie Mae, which is owned by HUD, sells
mortgage-backed securities which are created from “pools” of
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mortgage loans. A qualified mortgage lender originates several
FHA-insured mortgages, “pools” them together, and sells them --
without any review -- to Ginnie Mae. Ginnie Mae, in turn, sells an
interest in the mortgage pool to investors. FBMC was qualified as
a Ginnie Mae lender and issuer, meaning that not only did Ginnie
Mae implicitly approve of any mortgage loan extended by FBMC, but
FBMC could actually issue Ginnie Mae securities.
The McLeans and Zimmermans used the same lots and “investor
scheme” with Ginnie Mae that they had used for Fannie Mae, and the
overall process was essentially the same. James McLean paid a
commission to the Zimmermans for each “investor” they recruited.
The Zimmermans brought their investors to Macy McLean. Macy then
gave her assistant these names, along with an address and a
purported loan amount, which the assistant inserted into a mortgage
note. Ginnie Mae would not accept mortgage loans that were not
federally insured, so one of FBMC’s loan officers was directed to
“supply” an FHA number for the note. The mortgage notes were then
signed by the “investors,” and, as required by Ginnie Mae,
delivered to FBMC’s Ginnie Mae document custodian, BB&T bank, for
initial certification. James and Macy McLean also had to file
certain information electronically. FBMC then issued securities
which were sold to Ginnie Mae investors. The purchase price was
wired to FBMC’s account at BB&T.
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FBMC also obtained a line of credit at BB&T to fund loans to
its customers. As collateral to secure the line of credit, FBMC
supplied BB&T with fictitious mortgage notes signed by “investors”
who had no ownership interest in the property purportedly secured
by the note. Although the line of credit was to be used by FBMC
strictly for funding mortgage loans to FBMC clients, FBMC used line
of credit money to pay down the fictitious loans sold to Ginnie Mae
as well as to repurchase loans from Fannie Mae.
The government’s evidence showed that only seven percent of
the proceeds from the sale of the fictitious notes to Ginnie Mae
went to fund legitimate expenses such as construction and land for
FBH’s business. One million dollars was allocated to the growing
monthly payments on the increasing number of false mortgage notes,
and approximately $340,000 was paid out to the Zimmermans and the
Greens for commissions. The Zimmermans used structured
transactions to deposit half of this into their personal accounts.
And $7.5 million of the Ginnie Mae funds were simply transferred to
Fannie Mae to repurchase the false notes.
The charges set forth in the 66-count indictment fell into
eight groups: wire fraud to sell fraudulent mortgages to Fannie
Mae; wire fraud through the transmission of false HUD documents to
secure Ginnie Mae mortgage securities; submitting false statements
in connection with the Ginnie Mae scheme in violation of 18 U.S.C.
§ 1001; making false entries on monthly status reports required by
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HUD in violation of 18 U.S.C. § 1006; making and passing false
mortgage notes to influence HUD in violation of 18 U.S.C. § 1010;
bank fraud against BB&T in violation of 18 U.S.C. § 1344; money
laundering under 18 U.S.C. § 1956; and conspiracy to commit the
above-mentioned substantive offenses.
James McLean was convicted on all 66 counts. Macy McLean was
convicted on all counts except those relating to the entry of
monthly status reports required by HUD in violation of 18 U.S.C.
§ 1006; and Paul and Debbie Zimmerman were convicted of conspiracy
and of passing to HUD false mortgage notes dated after February 1,
2000, in violation of 18 U.S.C. § 1010.
II.
Defendants raise a number of challenges to the district
court’s jury instructions. We review both “[t]he decision of
whether to give a jury instruction and the content of an
instruction . . . for abuse of discretion.” United States v.
Abbas, 74 F.3d 506, 513 (4th Cir. 1996). Finding no such abuse of
discretion by the district court, we conclude that defendants’
arguments are without merit.
A.
Macy McLean and the Zimmermans argue that the district court
abused its discretion in giving the jury a willful blindness (or
deliberate avoidance) instruction. The district court gave a
lengthy “good faith” instruction, explaining that good faith was a
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defense that, if proven, was inconsistent with an intent to
deceive. As part of the good faith instruction, the court charged:
“a defendant also does not act in good faith if the government
proves . . . she deliberately closed [her] eyes to what would
otherwise have been obvious.” J.A. 2010-11.
A willful blindness instruction is proper “when the defendant
asserts a lack of guilty knowledge but the evidence supports an
inference of deliberate ignorance.” See Abbas, 74 F.3d at 513
(internal quotation marks omitted). If the evidence supports such
an inference, then the willful blindness instruction “allows the
jury to impute the element of knowledge to the defendant.” United
States v. Schnabel, 939 F.2d 197, 203 (4th Cir. 1991).
Furthermore, a willful blindness instruction is proper “where the
evidence presented in the case supports both actual knowledge on
the part of the defendant and deliberate ignorance.” Abbas, 74
F.3d at 513. Macy McLean and both Zimmermans claim that they acted
in good faith and lacked the requisite guilty knowledge to support
a conviction on any of the charges against them. However, while
there is clearly evidence that would permit the jury to find actual
knowledge, the evidence also supports the conclusion that if they
were not specifically aware that they were defrauding the
government, they were willfully blind to that fact.
With respect to Macy McLean, she claims that “throughout the
trial, she continually contested that she did not knowingly or
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intentionally attempt to defraud Fannie Mae, Ginnie Mae, or BB&T;”
that she did not “knowingly make false entries, [or] false
statements;” or that she did not “knowingly launder money” or “aid
or abet others in any criminal activity.” Brief of Appellants at
29. Specifically, Macy took the position that she had no real
input into how FBMC was run, that her husband exercised substantial
control over her employment activities, and that she merely
followed his directives. The evidence, however, showed that Macy
was an officer of FBMC; that she was in charge of payroll and loan
funding; that she handled questions from FBMC’s document custodian
for the Ginnie Mae mortgage notes; that she created the bogus
mortgage notes; that she told the “investors” that they would not
have to pay money on the notes they signed; that she endorsed the
notes over to Fannie Mae; and that she offered a former FBMC
employee $5,000 to use her son’s name on a mortgage loan.
As for the Zimmermans, they contend there is no evidence that
either of them understood how the mortgage transactions worked such
that they would know the transactions were improper, and both
indicated that they were unaware that the notes being signed by the
investors were being submitted to quasi-governmental bodies. We
disagree. Evidence of their actual knowledge of the scheme to
defraud the government included Paul Zimmerman’s testimony that he
and his wife heard James McLean say that FBMC was “HUD-supported”
and that he understood the mortgage notes that they were having
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executed bore an FHA number and other FHA markings. It also
included the testimony of Eric Brown, who explored the possibility
of financing a family-owned real estate venture through FBMC in the
early part of 2000. Upon arriving at FBMC for what Brown believed
was a preliminary meeting, Debbie Zimmerman presented him with
mortgage documents bearing his name and the names of his parents as
the purported debtors. Brown testified that Debbie told him he had
to sign the notes immediately so the documents could be sent to HUD
for processing. When Brown balked at signing and asked if his
attorney could review the documents, James McLean explained, with
Debbie Zimmerman present, that the scheme was “legal, but . . . not
really legal.” J.A. 1056. Paul Zimmerman explained to Brown that
if they signed, they would have no obligation under the notes, and
that FBMC was obtaining its financing through some federal agency.
Debbie Zimmerman’s brother testified that she approached him, but
that he objected when he learned that the note would be used to
obtain funds from Fannie Mae.
Additionally, there was evidence from which a jury could have
inferred that Macy McLean and the Zimmermans were aware or closed
their eyes to the fact that the mortgage notes contained false
information; that no houses were being sold in connection with
these loans; and that “investors” were receiving money for signing
and that they were not going to be obligated under the note. This
evidence would support an inference of deliberate ignorance. The
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district court, therefore, did not err by instructing the jury on
willful blindness.
B.
Defendants take exception to the district court’s refusal to
give a “good faith” instruction on the counts alleging the passing
of false mortgage instruments to HUD under § 1010. The court gave
a lengthy instruction on “good faith” as a “complete defense” to
conspiracy and the court reminded the jury of good faith when
instructing on wire fraud, bank fraud, and money laundering. The
court, however, refused to give an additional instruction on good
faith with respect to the passing of a false mortgage instruments
under § 1010.
The statute says:
Whoever, for the purpose of obtaining any loan . .
. from any person . . . with the intent that such loan .
. . shall be offered to or accepted by [HUD] for
insurance, . . . or for the purpose of influencing in any
way the action of such Department, makes, passes, utters,
or publishes any statement, knowing the same to be false,
or . . . forges, or counterfeits any instrument, paper,
or document, . . . knowing it to have been . . . forged,
or counterfeited . . . [is subject to 2 years in prison].
18 U.S.C. § 1010.
Defendants do not challenge the elements as charged by the
court. Rather, defendants argue that they were entitled to a good
faith instruction because they held a good faith belief that they
were participating in a lawful investor program. We disagree. On
the knowledge element, the district court charged that the
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Government was required to prove defendants “knew that the mortgage
notes were actually false or counterfeited” and that they “knew
[the notes] would be offered for some purpose to HUD.” J.A. 2040-
41. This is consistent with 18 U.S.C. § 1010. Defendants’ desire
to have good faith charged does not correspond to the elements of
this offense. As long as defendants knew the information on the
documents they procured was false and that the documents were
headed to HUD (i.e., Ginnie Mae), defendants’ belief that the
scheme was lawful, even if true, was not a defense.
Accordingly, we conclude that the district court did not abuse
its discretion in refusing to charge good faith in connection with
the § 1010 counts.*
III.
Macy McLean next argues that the district court abused its
discretion by refusing to permit her to introduce details regarding
her children’s health problems. Part of Macy’s defense was that
she was so busy homeschooling her six children and caring for her
daughters, who suffer from rickets, that she did not have the time
or energy to investigate the propriety of FBMC’s activities.
Although the district court refused to permit evidence providing
specific details about the children’s condition, it allowed general
*
We also reject, after careful consideration, the related
argument by Macy McLean and the Zimmermans that the district court
erred in failing to charge the jury that their reliance on the
expertise of James McLean was a defense to the charges.
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testimony that the children suffered physical ailments that added
to Macy’s family responsibilities. The district court also
permitted the name of the girls’ medical condition to come in
before the jury. Macy contends that the court’s refusal to allow
this additional evidence hurt her rebuttal of the willful blindness
theory -- that she was far too overloaded to notice and purposely
ignore wrongdoing.
We disagree. The additional questions proffered by defense
counsel did not add much, focusing on the fact that Macy was the
one who took the children to the doctor, that all of her time
outside of work was taken up with child care, and that her children
were sometimes in pain. The excluded details, however, did not
change Macy’s substantial involvement in the details of the
transactions. On the other hand, the possibility of undue
prejudice to the prosecution was real. With the prospect of the
father being in prison, it would be tempting for a juror to focus
on the plight of Macy’s six needy children. Thus, we cannot
conclude that the district court abused its discretion by excluding
the additional details.
IV.
Defendants contend that the evidence presented by the
government was so insufficient that it failed to support the jury’s
finding of guilt on even one of the multiple counts of conviction.
In considering defendants’ incredibly broad argument, we will
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affirm the jury’s verdict “if there is substantial evidence, taking
the view most favorable to the government, to support it.” Glasser
v. United States, 315 U.S. 60, 80 (1942). All that is really
necessary is that the evidentiary basis be sufficient to permit “a
reasonable trier of fact [to] have found the defendant guilty
beyond a reasonable doubt.” United States v. Rahman, 83 F.3d 89,
93 (4th Cir. 1996). Having carefully reviewed the record evidence
in the light most favorable to the government, we conclude that
there was ample evidence for a reasonable trier of fact to have
found defendants guilty beyond a reasonable doubt on each count of
conviction.
V.
For each defendant, the district court increased the base
offense level for sentencing according to its determination of the
amount of loss under section 2F1.1(b) of the Sentencing Guidelines.
Defendants argue that the district court erred in imposing a
sentence based on facts not found by the jury, in violation of the
Sixth Amendment. See Booker, 125 S. Ct. at 756. Defendants raise
this argument for the first time on appeal. We agree with
defendants that the district court plainly erred in imposing their
sentences. See United States v. Hughes, 2005 WL 628224 (4th Cir.
March 16, 2005). Thus, we vacate the sentences and remand for
resentencing in light of Booker. In doing so, we note that we have
considered each defendant’s argument with respect to the
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application of the guidelines and conclude that the district court
committed no error in that regard. Thus, on remand the district
court should consider the guideline range previously determined, as
well as other relevant factors set forth in the guidelines and 18
U.S.C. § 3553(a) before imposing sentence.
AFFIRMED IN PART,
VACATED IN PART,
AND REMANDED
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