United States v. Lloyd Mallory

UNPUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 10-4711

UNITED STATES OF AMERICA,

Plaintiff - Appellee,

v.

LLOYD MALLORY,

Defendant - Appellant.

Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. T. S. Ellis, III, Senior
District Judge. (1:09-cr-00228-TSE-2)

Argued: October 25, 2011 Decided: January 19, 2012

Before MOTZ, KING, and FLOYD, Circuit Judges.

Affirmed by unpublished per curiam opinion.

ARGUED: Barry Coburn, COBURN & COFFMAN, PLLC, Washington, D.C.,
for Appellant. Michael John Frank, OFFICE OF THE UNITED STATES
ATTORNEY, Alexandria, Virginia, for Appellee. ON BRIEF: Neil H.
MacBride, United States Attorney, Alexandria, Virginia, for
Appellee.

Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:

A grand jury charged Lloyd Mallory and two co-conspirators,

Michael Milan and Chris Evans, in a twelve-count superseding

indictment. It charged Mallory specifically with the following

three counts: wire fraud, in violation of 18 U.S.C. § 1343; mail

fraud, in violation of 18 U.S.C. § 1341; and conspiracy to

commit wire and mail fraud, in violation of 18 U.S.C. § 1349.

Mallory exercised his right to a trial by jury. At its

conclusion, the jury found Mallory guilty of mail fraud and

conspiracy to commit wire and mail fraud, but acquitted him of

wire fraud. The district court made a downward variance and

sentenced Mallory to 60 months’ imprisonment for each count of

his conviction, with the sentences to run concurrently. The

court also entered a restitution order for the amount of loss.

Mallory filed a timely appeal, raising six alleged errors. For

the reasons explained below, we affirm.

I.

The jury convicted Mallory, a certified public accountant

(CPA), of participating in a conspiracy between the fall of 2006

and June 2008 to defraud various money lenders by causing them

to issue mortgage loans to unqualified home buyers. Mallory did

this by producing fraudulent documents that supported false

claims about the borrowers’ employment and income. The evidence

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educed at trial established that Mallory drafted fraudulent tax

returns, W-2 forms, and CPA letters to convince the lenders to

issue the bad loans.

Melanie Eckstrom, a mortgage processor and one of the

government’s witnesses at trial, testified that she was part of

the scheme. Eckstrom was a mortgage processor at two mortgage

brokerages, Congressional Funding and Preferred Choice Mortgage.

As a part of her duties, Eckstrom prepared mortgage applications

and collected the documents lenders require to determine whether

to issue a loan, including such items as tax returns and W-2

statements. According to the testimony at trial, every loan

that Eckstrom processed was fraudulent in some manner.

During the relevant time period, Milan, Mallory’s co-

conspirator, was a mortgage broker for Congressional Funding

and, starting in October 2007, Preferred Choice Mortgage. Among

other things, mortgage brokers assist would-be borrowers in

completing the lender’s mortgage application. A mortgage broker

is paid in two ways: by the lender, when the loan is approved,

and by the borrower, when points are charged.

Eckstrom and Milan had an arrangement with Mallory whereby

Mallory would create fraudulent documents. During the relevant

time period, Eckstrom, Milan, and a phantom company created by

Milan, cleverly named “Phantom Financial, LLC,” received over

$100,000 in commissions.

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 Initially, Mallory was charged alongside co-conspirators

Milan and Evans. Milan and Evans, however, pled guilty before

trial.

At trial, Mallory testified in his own defense. Although

he acknowledged that he drafted the documents at issue, he

asserted that he did not know they were being used for an

unlawful purpose. Moreover, Mallory maintained that the false

tax returns that he compiled were for the purpose of exploring

potential tax strategies.

Following a five-day trial, the court convicted Mallory of

mail fraud and conspiracy to commit wire and mail fraud, but

acquitted him of wire fraud. The district court sentenced him

to 60 months’ imprisonment for each count of his conviction, to

run concurrently. The court also entered a restitution order

for the amount of loss. Mallory filed a timely appeal.

II.

Mallory first argues that the district court committed

reversible error by asking impermissible questions of Eckstrom

during the trial regarding Mallory’s state of mind. Because

Mallory failed to object to the questioning at trial, we review

only for plain error. See United States v. Lynn, 592 F.3d 572,

577 (4th Cir. 2010). To demonstrate plain error, a defendant

must establish (1) that the trial court erred, (2) that the

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error is clear and obvious, and (3) that the error affected his

substantial rights. United States v. Olano, 507 U.S. 725, 732-

34 (1993). Nevertheless, even if this burden is met, we have

discretion whether to recognize the error, and we will not do so

unless “the error seriously affect[s] the fairness, integrity or

public reputation of judicial proceedings.” Id. at 736

(alteration in original) (quoting United States v. Atkinson, 297

U.S. 157, 160 (1936)) (internal quotation marks omitted).

The questioning at issue occurred during Eckstrom’s

testimony regarding Mallory’s role in the mortgage fraud scheme.

Specifically, the district court inquired into Mallory’s

knowledge regarding the false tax returns. Mallory argues that

the district court improperly asked Eckstrom about Mallory’s

state of mind. The testimony Mallory finds objectionable is as

follows:

Eckstrom: [Mallory] was preparing fraudulent tax
returns for us.
Court: Did he know they were false?
Eckstrom: Yes.
Court: How? How do you know that?
Eckstrom: I guess I really can’t say how. I mean—

Questioning by the district court is plainly permissible.

See Fed. R. Evid. 614. The court must not, however, “give

. . . the appearance of bias or partiality in any way or become

. . . so pervasive in his interruptions and interrogations that

he may appear to usurp the role of either the prosecutor or the

5
defendant’s counsel.” United States v. Wilson, 135 F.3d 291,

307 (4th Cir. 1998) (omissions in original) (quoting United

States v. Parodi, 703 F.2d 768, 776 (4th Cir. 1983)) (internal

quotation marks omitted).

Assuming, without deciding, that the district court

improperly questioned Eckstrom as to Mallory’s state of mind, we

are unable to say that the questioning prejudiced Mallory. To

the extent that the district court improperly caused Eckstrom to

testify that Mallory knew that the tax returns were false, it

mitigated the error by following up with a question about how

she knew. She replied, “I guess I really can’t say how.”

Moreover, the district court ameliorated any error in its

questioning by giving the following instruction to the jury:

Now, during the course of the trial I occasionally
asked questions of a witness. Do not assume that I
hold any opinion on the matters to which my questions
may have related. The Court asked questions simply to
clarify matters, not to help one side of the case or
hurt the other.

As such, neither the fairness, integrity, or public

reputation of the proceedings nor Mallory’s substantial rights

were affected. Hence, we find no reversible error.

III.

Mallory next contends that the district court erred in

admitting into evidence a certification of business record,

6
which the government relied upon in introducing a Federal

Express (FedEx) tracking record into evidence. The tracking

record helped establish the mail fraud charge against Mallory.

According to Mallory, this admission violated his right to

confront the witnesses against him as guaranteed by the Sixth

Amendment. We review this issue de novo. United States v.

Williams, 632 F.3d 129, 132 (4th Cir. 2011).

The certification of business record was offered pursuant

to Federal Rule of Evidence 902(11) and signed under penalty of

perjury by a FedEx records custodian. In the certification, the

records custodian declared the following:

[T]he documents are original records or true copies of
records that were:

1. made at or near the time of the occurrence of the
matters described in the documents, by (or from
information transmitted by) a person with
knowledge of those matters;

2. kept in the course of regularly conducted
business activity; and

3. made by the said business activity as a regular
practice.

In Crawford v. Washington, 541 U.S. 36 (2004), the Supreme

Court made clear that the right of confrontation covers all

testimonial “statements that declarants would reasonably expect

to be used prosecutorily.” Id. at 51. (internal quotation marks

omitted). To be considered testimonial, the primary purpose of

the statement must be “to establish or prove past events

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potentially relevant to later criminal prosecution.” Davis v.

Washington, 547 U.S. 813, 822 (2006). Business records are

generally admissible, even without confrontation. Bullcoming v.

New Mexico, 131 S. Ct. 2705, 2714 n.6 (2011). “[H]aving been

created for the administration of an entity’s affairs and not

for the purpose of establishing or proving some fact at trial—

they are not testimonial.” Id. (quoting Melendez–Diaz v.

Massachusetts, 129 S. Ct. 2527, 2539-40 (2009)) (internal

quotation marks omitted).

It is beyond dispute that the FedEx tracking record was not

created “for the purpose of establishing or proving some fact at

trial.” Id. Thus, as was uncontested below, it was not

testimonial and was not subject to confrontation.

The certification of business record was, however, created

for the sole purpose of use at trial. Thus, we must consider

whether its admission violated Mallory’s Confrontation Clause

rights. In Melendez-Diaz, the Supreme Court described the

difference between an affidavit that is created for the purpose

of providing evidence against a defendant and an affidavit

created for the purpose of authenticating an admissible record.

It stated, “A clerk could by affidavit authenticate or provide a

copy of an otherwise admissible record, but could not

. . . create a record for the sole purpose of providing evidence

against a defendant.” Melendez-Diaz, 129 S. Ct. at 2539.

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Moreover, the majority dismissed the dissent’s fear that its

holding would disrupt the long-accepted practice of

authenticating documents pursuant to Rule 902(11): “Contrary to

the dissent’s suggestion, we do not hold, and it is not the

case, that anyone whose testimony may be relevant in

establishing the . . . authenticity of the sample . . . must

appear in person as part of the prosecution’s case.” Id. at

2532 n.1 (citation omitted).

Consequently, Melendez-Diaz makes clear that the Sixth

Amendment right to confront witnesses does not include the right

to confront a records custodian who submits a Rule 902(11)

certification of a record that was created in the course of a

regularly conducted business activity. Because the

certification does not trigger the Confrontation Clause, we are

unable to find a constitutional violation here.

IV.

Mallory next avers that there is insufficient evidence to

support his convictions. A defendant who challenges the

sufficiency of the evidence faces a “heavy burden.” United

States v. Beidler, 110 F.3d 1064, 1067 (4th Cir. 1997) (quoting

United States v. Hoyle, 51 F.3d 1239, 1245 (4th Cir. 1995))

(internal quotation marks omitted). “[A]n appellate court’s

reversal of a conviction on grounds of insufficient evidence

9
should be ‘confined to cases where the prosecution’s failure is

clear.’” United States v. Jones, 735 F.2d 785, 791 (4th Cir.

1984) (quoting Burks v. United States, 437 U.S. 1, 17 (1978)).

The jury’s verdict must be upheld on appeal if there is

substantial evidence in the record to support it. Glasser v.

United States, 315 U.S. 60, 80 (1942). We review the record in

the light most favorable to the government in determining

whether there is substantial evidence to support the conviction.

United States v. Penniegraft, 641 F.3d 566, 571 (4th Cir. 2011).

Circumstantial as well as direct evidence is considered, and the

government is allowed “the benefit of all reasonable inferences

from the facts proven to those sought to be established.”

United States v. Tresvant, 677 F.2d 1018, 1021 (4th Cir. 1982).

In evaluating the sufficiency of the evidence, we do not review

the credibility of the witnesses and we “assume that the jury

resolved all contradictions [in the testimony] in favor of the

government.” United States v. Romer, 148 F.3d 359, 364 (4th

Cir. 1998) (quoting United States v. United Med. & Surgical

Supply Corp., 989 F.2d 1390, 1402 (4th Cir. 1993)) (internal

quotation marks omitted).

A.

As to his sufficiency of the evidence claim, Mallory first

avers that the government failed to prove that he used the

10
United Postal Service or another interstate carrier for the

purpose of executing his fraudulent scheme. Pursuant to 18

U.S.C. § 1341, to prove mail fraud the government is required to

establish that the defendant (1) knowingly participated in a

scheme to defraud and (2) used the mail or another interstate

carrier for the purpose of executing such scheme. United States

v. Delfino, 510 F.3d 468, 471 (4th Cir. 2007).

Mallory contends that the government failed to present

substantial evidence as to whether FedEx is such an interstate

carrier. For the reasons set forth in the district court’s

comprehensive and well-reasoned order on this issue, we affirm.

See Order, United States v. Mallory, No. 1:09cr228 (E.D. Va. May

13, 2010), ECF No. 225.

B.

Mallory’s second sufficiency of the evidence claim is that

the government failed to put forth any evidence proving that he

had the requisite knowledge that the documents he created were

false, that he harbored any specific fraudulent intent in

crafting them, or that he knew that the documents were being

used for an unlawful purpose. Moreover, according to Mallory,

the government neglected to present expert testimony to

establish that the information he relied on to draft the

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documents he produced was inadequate from an accounting

perspective.

Quite simply, the evidence of Mallory’s knowledge of the

falsity of the documents that he produced, his knowledge of

their unlawful use, and his fraudulent intent is not only

substantial, it is overwhelming. The documentary evidence alone

establishes his knowledge and fraudulent intent. At trial, the

government presented false tax returns, fraudulent CPA letters,

and fake W-2 forms that Mallory prepared, which showed his

intent and knowledge. It also presented emails that

demonstrated the same. In addition, there was testimony at

trial that Mallory knowingly created the false documents.

Moreover, Mallory testified at trial that he was unaware

that the documents he prepared were being used for an unlawful

purpose. The jury, however, disbelieved his testimony. That

the jury found his testimony implausible may constitute

additional evidence in support of Mallory’s conviction. See

United States v. Burgos, 94 F.3d 849, 868 (4th Cir. 1996)

(“[T]he jury evidently believed [the defendant] perjured

himself. . . . [H]is perjured testimony could have been viewed

as affirmative evidence of his guilt. Thus, [the defendant’s]

lying on the stand may have aided in establishing the fact that

he was guilty.”); United States v. Bennett, 848 F.2d 1134, 1139

(11th Cir. 1988) (“By choosing to present a defense the

12
[defendants] incurred the risk that they might bolster the

government’s case. Indeed, this court has held that a

defendant’s implausible explanation may constitute positive

evidence in support of a jury verdict.”).

We disagree with Mallory’s contention that the government

was required to present expert testimony to establish that the

information he relied on to draft the documents he created was

insufficient from an accounting perspective. It suffices to say

that there is no requirement that the government present expert

testimony on this matter.

V.

According to Mallory, the district court violated his

rights pursuant to the Speedy Trial Act, 18 U.S.C. §§ 3161-3174,

in that the record fails to establish that the court conducted

the requisite balancing test when deciding whether to grant

three requests for a continuance. In considering Speedy Trial

Act arguments, we review the district court’s legal conclusions

de novo and its factual findings for clear error. United States

v. Kellam, 568 F.3d 125, 132 (4th Cir. 2009).

The Act requires that a criminal trial begin within seventy

days of the filing of an information or indictment, or of the

defendant’s initial appearance, whichever occurs later.

§ 3161(c)(1). To afford courts some flexibility in scheduling

13
trials, however, the Act provides that certain periods of delay

may be excluded from the seventy-day computation. As is

applicable in Mallory’s case, § 3161(h)(7)(A) excludes from the

seventy-day computation those delays in which the district court

finds “that the ends of justice served by granting [a]

continuance outweigh the public’s and defendant’s interests in a

speedy trial.” Zedner v. United States, 547 U.S. 489, 498–99

(2006).

The Act lists several factors that the district court must

consider when making the “ends of justice” assessment required

by § 3161(h)(7)(A), including whether the defendant needs

reasonable time to obtain counsel, whether counsel needs

additional time for effective preparation of the case, and

whether delay is necessary to ensure continuity of counsel.

§ 3161(h)(7)(B)(iv). The Act also makes clear that the district

court is not to grant a continuance because of a “lack of

diligent preparation or failure to obtain available witnesses on

the part of the attorney for the [g]overnment.”

§ 3161(h)(7)(C).

Before a delay can be considered excludable from the

seventy-day computation, the district court must explain,

“either orally or in writing, its reasons for finding that the

ends of justice served by the granting of such continuance

outweigh the best interests of the public and the defendant in a

14
speedy trial.” § 3161(h)(7)(A). The district court is required

to state its findings on the record by the time it rules on the

defendant’s motion to dismiss. Zedner, 547 U.S. at 506–07. It

also must be “clear from the record that the court conducted the

mandatory balancing contemporaneously with the granting of the

continuance.” United States v. Henry, 538 F.3d 300, 304 (4th

Cir. 2008) (quoting United States v. Keith, 42 F.3d 234, 237

(4th Cir. 1994)) (internal quotation marks omitted). If a

district court fails to state its findings on the record, then

the delay is not excludable under the Act. Zedner, 547 U.S. at

507.

The district court granted three continuances before the

case finally went to trial. Regarding the first continuance,

Mallory, along with his co-defendants, Milan and Evans,

requested a six-month continuance on the basis of the large

amount of discovery associated with the case. After

consideration of the request, the district court found the

request excessive and granted a continuance of four months

instead.

A little over two months later, counsel for Milan requested

a second continuance. In argument to the district court,

Milan’s counsel sought an additional four-month continuance

because of the size and complexity of the case. He indicated

that Mallory’s counsel did not oppose the request. In a

15
subsequent hearing, all defendants indicated their agreement

with the motion. Thus, the district court granted the

continuance. Milan and Evans subsequently pled guilty.

Just days before the trial began, after being surprised to

discover that the government was going to offer expert

testimony, Mallory requested a third continuance for the purpose

of procuring his own expert. The district court granted him an

additional two weeks to obtain an expert.

From our review of the record, it is evident that the

district court granted the three requested continuances based

upon a contemporaneous balancing of the required factors,

including a finding that Mallory’s counsel needed additional

time to prepare Mallory’s defense, and in utmost consideration

of the extent to which the continuances were needed to serve the

interests of justice. Furthermore, the district court abided by

the requirement that it state its findings on the record by the

time it ruled on the defendant’s motion to dismiss. In denying

the motion to dismiss, the district court stated the following:

[T]o be clear, the continuances granted were, in
fact, reasonably necessary . . . to serve the ends of
justice, and these ends outweighed the interest of the
public and Mr. Mallory in a speedy trial. This was
particularly true in light of the complex nature of
this fraud conspiracy case, the fact that there were
three defendants with potentially conflicting
defenses, the significant amount of electronic
evidence in issue, and the fact that Mr. Milan had
only a single court-appointed lawyer. Thus, the
factors required for a continuance under § 3161(h)(7)

16
 were clearly satisfied and the continuances were
granted for this reason.

United States v. Mallory, No. 1:09cr228, 2010 WL 1039831, at *3

(E.D. Va. Mar. 19, 2010). Accordingly, we find no error.

VI.

Next, Mallory avows that venue was improper in the Eastern

District of Virginia because his office was in Maryland and all

of the acts that he allegedly committed in furtherance of the

conspiracy occurred in Maryland. He also argues that the issue

is not waived.

The prosecution must establish venue by a preponderance of

the evidence, and we review de novo the district court’s

decision as to venue. United States v. Newsom, 9 F.3d 337, 338

(4th Cir. 1993). Venue is proper “in [any] district where the

offense was committed.” Fed. R. Crim. P. 18. “If an objection

to venue is not raised in the district court, the issue is

waived on appeal. A defendant, however, does not waive his

venue objection by failing to file a written pleading.” United

States v. Stewart, 256 F.3d 231, 238 (4th Cir. 2001) (citations

omitted). As the Stewart court recognized, there are two

purposes of the contemporaneous objection rule: (1) to preserve

judicial resources by making sure that the district court has

the opportunity to avoid errors that, if uncorrected, might

17
require a retrial, and (2) “to prevent counsel from

‘“sandbagging” the courts by withholding a valid objection from

the trial court . . . to obtain a new trial when the error is

recognized on appeal.’” Id. at 239 (quoting United States v.

David, 83 F.3d 638, 645 (4th Cir. 1996)).

If Mallory’s venue claim is waived, we need not reach the

merits of the issue. Thus we first consider whether the

argument is waived. In contending that his venue argument is

not waived, Mallory cites to language in Stewart where we made

clear that “[b]ecause proper venue is a constitutional right,

waivers of venue rights through failure to object should not

readily be inferred.” Id. at 238. Thus, “ambiguity as to the

defendant’s intent to waive venue should be interpreted in favor

of the defendant, in light of the constitutional underpinning of

the defendant’s right to proper venue.” Id. at 239.

In Stewart, we found the defendant had raised a venue

objection even though he did not file a written motion. Id. at

238. During oral argument of Stewart’s co-defendant’s written

motion challenging venue, Stewart indicated “that he was in a

similar position.” Id. at 239. On appeal, the government

acknowledged that it had understood he was challenging venue

and, accordingly, had argued venue was proper as to both Stewart

and the co-defendant. Id. This, we found, was sufficient to

permit the district court to rule on Stewart’s venue challenge

18
and to preserve the issue for appeal. Id. Based on this case,

Mallory argues he preserved the issue despite failing to move

formally to challenge venue.

But, the facts in Stewart are easily distinguishable from

those presented by Mallory. First, there was no motion

regarding venue filed by any defendant in the case at bar,

whereas in Stewart there was. But this, as noted above, is not

dispositive. There is also no indication that either the

government or the district court knew that Mallory was making a

venue challenge. Thus, the district court was not presented

with an opportunity to rule upon any venue issue. Nevertheless,

Mallory invites us to infer from his Crawford arguments, and

questioning concerning the FedEx tracking bill and the Rule

902(11) certificate, that he raised the issue of where the

charged criminal acts occurred and thereby made a venue

challenge. We must decline the invitation. Simply put, the

inference is too tenuous. Hence, we hold that this issue was

waived. Accordingly, we need not reach the merits of Mallory’s

venue claim.

VII.

Finally, Mallory contends that the district court erred in

finding that the loss of the entire unpaid principal of mortgage

loans was reasonably foreseeable to him in light of the collapse

19
of the housing market. Mallory is unable to prevail on this

issue.

In a fraud case such as this one, the government is

required to establish the amount of loss for sentencing purposes

by a preponderance of the evidence. United States v. Pierce,

409 F.3d 228, 234 (4th Cir. 2005). We review the amount of

loss, to the extent that it is a factual matter, for clear

error. United States v. West, 2 F.3d 66, 71 (4th Cir. 1993).

This deferential standard of review allows reversal only if we

are “left with the definite and firm conviction that a mistake

has been committed.” United States v. Stevenson, 396 F.3d 538,

542 (4th Cir. 2005) (quoting Anderson v. Bessemer City, 470 U.S.

564, 573 (1985)) (internal quotation marks omitted).

In sentencing for conspiracy to commit wire fraud and mail

fraud, the district court looks to U.S.S.G. § 2B1.1 and its

application notes to calculate the loss caused by the

defendant’s criminal conduct and then increases the offense

level accordingly. U.S.S.G. § 2B1.1. This calculation is a

two-step process. First, pursuant to Application Note 3(A)(i)

of this Guideline, “‘[a]ctual loss’ means the reasonably

foreseeable pecuniary harm that resulted from the offense.” Id.

cmt. n.3(A)(i). Second, the district court credits against the

loss “the amount the victim has recovered at the time of

sentencing from disposition of the collateral, or if the

20
collateral has not been disposed of by that time, the fair

market value of the collateral at the time of sentencing.” Id.

cmt. n.3(E)(ii).

Mallory takes issue with the second step of the district

court’s calculation because the court reduced the loss only by

the actual amount recovered from the foreclosure sales. He

maintains that the district court should have, instead, applied

a larger set off amount because it was not foreseeable that the

housing collapse would occur. This, according to Mallory,

caused the amount that the victims were able to recover to be

smaller than it otherwise would have been.

In support of this argument, prior to sentencing, Mallory

submitted to the district court affidavits from appraisers

stating what they thought the loss would have been but for the

housing collapse and asserting that the collapse was not

reasonably foreseeable.

Although the district court noted at sentencing that the

sentence of 60 months’ imprisonment would be the same even if it

adopted Mallory’s loss amount, the court rightly rejected

Mallory’s position. Simply put, the first step in calculating

the loss has a foreseeability prong to it, but the second step

does not. Accordingly, it is of no consequence that the housing

collapse was not reasonably foreseeable to Mallory. He receives

the benefit of what the victims recovered, not what they

21
foreseeably might have recovered. “To accept [Mallory’s]

argument would be to encourage would-be fraudsters to roll the

dice on the chips of others, assuming all of the upside benefit

and little of the downside risk.” United States v. Turk, 626

F.3d 743, 750 (2d Cir. 2010). Because we decline to provide

such encouragement, we reject Mallory’s argument.

VIII.

Wherefore, for the reasons stated above, Mallory’s

conviction and sentence are affirmed.

AFFIRMED

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