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United States v. Wolf

United States Court of Appeals, Fourth Circuit

June 19, 2017

UNITED STATES OF AMERICA, Plaintiff - Appellee,
v.
NATHAN SHANE WOLF, Defendant-Appellant.

          Argued: December 7, 2016

         Appeal from the United States District Court for the Western District of North Carolina, at Charlotte. Graham C. Mullen, Senior District Judge. (3:12-cr-00239-GCM-DCK-16)

         ARGUED:

          Mark Patrick Foster, Jr., RAWLS, SCHEER, FOSTER & MINGO PLLC, Charlotte, North Carolina, for Appellant.

          Maria Kathleen Vento, OFFICE OF THE UNITED STATES ATTORNEY, Charlotte, North Carolina, for Appellee.

         ON BRIEF:

          Jill Westmoreland Rose, United States Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Charlotte, North Carolina, for Appellee.

          Before NIEMEYER, TRAXLER, and HARRIS, Circuit Judges.

          TRAXLER, Circuit Judge:

         Nathan Wolf was convicted by a jury on three counts stemming from a mortgage fraud conspiracy occurring between 2005 and 2007: conspiracy to violate the Racketeer Influenced and Corrupt Organizations Act ("RICO"), see 18 U.S.C. § 1962(d); bank fraud, see 18 U.S.C. § 1344; and conspiracy to launder money, see 18 U.S.C. § 1956(h). The district court imposed a term of 84 months imprisonment after granting Wolf a downward variance of ten levels. Wolf appeals, challenging both his conviction and sentence on various grounds. As explained below, we affirm.

         I.

         Before and during the conspiracy for which Wolf was charged, tried and convicted, Wolf was a licensed real estate agent and broker in North Carolina. During the licensure process, Wolf was required to complete various real estate courses during which he was instructed that "a real estate agent [is not] allowed to pay someone for referring a buyer if that person is not licensed, " J.A. 459; that a real estate agent commits loan fraud "by misleading the lender by . . . either misrepresenting information or withholding information in order to obtain a loan that is larger than the lender might ordinarily make, " J.A. 462; and that unlawful "[c]ontract kiting" occurs when "one contract . . . for sale between the seller and buyer . . . is provided to the lender [with] one price, " while "[a] second contract [with a lower price] is prepared between the seller and buyer but is not provided to the lender. The higher priced contract goes to the lender so [that] the lender will make a higher loan, but the . . . contract they actually enforce . . . is the one with the lower amount so that the buyer does not have to come up with as much down payment." J.A. 463 (emphasis added). In these required courses, Wolf would have also learned that a broker is responsible for attending the closing and reviewing the accuracy of the Housing and Urban Development Settlement Statement ("HUD-1"), and that federal law "prohibit[s] certain kickbacks for settlement services." J.A. 469. Additionally, licensed agents are "prohibited . . . [from] misrepresent[ing] any material fact to any party . . . [i]ncluding the lender." J.A. 482.

         Co-conspirators' testimony about Wolf's involvement in fraudulent real estate deals

         At trial, the government presented evidence that Wolf was involved in a series of fraudulent real estate transactions in his capacity as a licensed broker. The government's evidence consisted primarily of testimony from Wolf's co-conspirators. Mark Wittig, a residential builder and the owner of Touchstone Homes, testified that he partnered with Wolf on 14 or 15 transactions. According to Wittig, Wolf created a scheme whereby Wittig would build a house and then reach an agreement with a buyer as to its price, as he normally would in any sales transaction. This agreed-upon price, to which Wolf referred as the "strike price, " J.A. 256, roughly reflected fair market value. That is, the "strike price" was the "the actual price of the house" the buyer agreed to pay. When it came time to list the property for sale, however, Wolf would "list the house at an inflated price, " J.A. 250, which Wolf termed the "gross price" or "bank price, " J.A. 259, because the inflated price was used in the sales contract and closing documents provided to the mortgage lender. Thus, the loan value was based on the inflated "gross" price, and the "gross" price was reflected on the HUD-1. J.A. 259-60. The difference between the strike price and the gross price would go back to the buyer as a kickback. Wolf also told Wittig that the kickback "money would go back to the buyer in a company's name." J.A. 262. Wolf directed every aspect of the scheme. Not only did Wolf list Wittig's houses, but he was involved in the design of the houses and even sent Wittig the plans on numerous occasions. Wolf advised Wittig to build "box style" two-story houses rather than "a sprawling ranch" so "there would be more money at the end for a kickback to the buyer." J.A. 263-64. Although Wittig did not make any extra money from the kickback scheme, he participated in the scheme because Wolf provided guaranteed buyers for his homes.

         One such guaranteed buyer brought in by Wolf was Waylon Long. Long was introduced to Wolf by a college fraternity brother who had already participated in the kickback scheme. Wolf identified several properties for Long and gave Long the expected compensation that would be paid after closing; if Long "liked [the] numbers, " they would "move forward with [the] transaction." J.A. 387.

         Long's first purchase from Wittig with Wolf serving as a dual agent was a house at 2900 Crane Road in Marvin, North Carolina. Wolf drafted a sales agreement between Long as the purchaser and Touchstone Homes as the seller, which contained a merger provision indicating that the sales agreement contained "the entire agreement" between the parties. J.A. 254. According to the sales agreement that was given to the mortgage lender, Long was purchasing the property for $1, 350, 000, a figure that Wolf determined. Wolf was listed a dual agent for the transaction. In addition to the sales agreement, Wolf also drafted a "compensation agreement" between Long and Wittig that referred to both the actual or "strike" price of the house ($765, 000) and the inflated or gross price ($1, 350, 000), as well as the $585, 000 Long would be receiving at closing, which was "the difference between the gross price and the strike price." J.A. 391. The compensation agreement, however, indicated that Advantage Investor Enterprises, LLC, a company owned by Long, would be receiving the $585, 000 instead of Long himself. The compensation agreement, therefore, stated that "Advantage Investor Enterprises shall receive for construction design services $585, 000, " J.A. 389, even though the company performed no services or work of any kind in connection with the construction of the house at 2900 Crane Road. Long testified that Wolf told him the HUD-1 settlement statement could not reflect that money was going to him individually but instead "a company had to be created in order to receive those funds at closing." J.A. 389. Finally, the HUD-1 form provided by Wolf for the purchase of 2900 Crane Road listed the purchase price as $1, 350, 000-Wolf's inflated gross price, and it falsely indicated that Long was receiving $2, 604 at closing.

         Long purchased a second house built by Wittig's company. Wolf brokered the transaction and drafted the sales and compensation agreements, just as he had done for Long's purchase of 2900 Crane Road. According to Long, "the process" for the second transaction "was pretty much identical" to the first one, resulting in another "big kickback" for Long. J.A. 396. For these two transactions combined, Wolf took commissions totaling about $100, 000.

         In addition to receiving funds for serving as a buyer, Long, who was not a real estate agent, received a "fee for bringing [borrowers] to the table, " J.A. 396, i.e., for recruiting buyers. One buyer Long recruited was Benjamin Clarke, a former mortgage loan officer, who testified that he "was looking to get cash back at closing or a seller kickback." J.A. 422. In Clarke's first deal, he received a kickback of $67, 559 for purchasing a house at 9609 Tralee Court. The HUD-1 settlement statement showed a gross purchase price of $556, 000, which had been set by Wolf, and showed design fees of $67, 559 going to First Capital Development Corporation. According to Clarke, Wolf asked for a company name to use for the HUD-1 form. Clarke told Wolf to use Clarke's company, First Capital, even though First Capital performed no services whatsoever in connection with 9609 Tralee Court. Clarke further testified that Wolf gave him a compensation agreement, describing it in terms similar to those used by Long. Based on Clarke's experience in the mortgage industry, he "was aware that [the transaction] was something that [he] shouldn't do." J.A. 428. Clarke testified that the bank was unaware "that money was being paid to [Clarke] as the buyer" and that "[t]he bank would not approve a loan where money is going to a company that I own if I'm the buyer." J.A. 428-29. The closing documents reflected that Wolf earned $22, 000 for the deal.

         Wolf brought a property to Clarke for his second purchase, which was structured the same way as his first purchase. Clarke decided to serve as the buyer because Wolf told him he "could get around [$]150, 000 out of it at closing." J.A. 430. Clarke was supposed to bring $40, 000 to the closing as the purchaser, but he did not have the money. Wolf arranged for Brighton Developers to send the money to the closing attorney. Once again, Wolf determined the gross purchase price to be given to the lender. Long's company, Advantage Investors, received $70, 000 in the deal as well. Ultimately, as reflected in an email from Wolf to the closing attorney, First Capital (Clarke's company) received $180, 000 as part of the transaction.

         Wolf also recruited Ralph Johnson, who testified that "[Wolf] would have some properties that he needed to be sold. He would come to me. We would discuss an amount that he wanted to net, " and "[a]nything above that amount would come to me and my company." J.A. 487. Johnson indicated that he "purchased homes, " "forged some documents, " and "[l]ied on the amount that [he] made . . . [and] the work that was done through [his] company." J.A. 486-87. According to Johnson, Wolf provided a compensation agreement for "any transaction I've done with [him]." J.A. 488. Johnson testified that he created a shell company called Pinnacle Investments "[j]ust to receive monies from the purchases of homes, " J.A. 488, because "[t]hat's the only way the lender would sign off on the loan, that work was done and that there was a reason for you to be receiving this type of money, " J.A. 490. Johnson indicated that he even used straw buyers such as Damali Neal, who allowed Johnson to use "all of her pertinent information as far as driver's license, social security" to purchase the properties. J.A. 491. Johnson estimated that during these deals with Wolf, the amounts he received "varied from fifty thousand to some hundred, two hundred thousand." J.A. 496. Johnson explained that after the closings, "we . . . tried to put tenants in [the homes]" and "[t]ake care of the mortgage[s]." J.A. 496. And, Johnson testified that he and Wolf discussed how important it was that the homes not go into foreclosure because that would bring the "feds" or "[p]olice" or "heat on us. They would have people looking at us as to why those houses are foreclosing." J.A. 497.

         Wittig noted several other similar transactions he made with buyers recruited by Wolf. One buyer was Denetria Myles, who purchased a home from Wittig located at 1044 Antioch Woods Drive. Myles' compensation agreement indicated that Jimario Dyson and New Vision, a company created by Myles, would be receiving $79, 000 for services rendered, even though, according to Wittig, neither Dyson nor New Vision did any work related to the property. The HUD-1 listed the gross price, which had been inflated from the actual price by Wolf, and indicated that Myles was actually paying rather than receiving money at the closing. Wolf received a commission of $15, 000 for the transaction.

         Nina Maiden was another buyer of a house built by Wittig. The HUD-1 settlement statement for the house at 9215 Woodhall Lake Drive, reflected a purchase price of $2, 100, 000, as well as a $594, 950 payment to Brighton Developers for work which, according to Wittig, was never done. Although the HUD-1 also indicated that Maiden was bringing $215, 000 cash to the closing as a down payment, Maiden admitted at trial that she did not bring any money to the closing. The down payment was actually provided by Brighton Developers, a shell company used by members of the conspiracy "to fund fraudulent mortgage transactions" and "to receive and distribute the proceeds from such mortgage frauds."[1] J.A. 34. Wolf served as the real estate agent and took a $55, 000 commission.

         Victoria Hunt, who was associated with Brighton Developers, also helped to fund a $183, 000 down payment on a home at 2817 Cutter Court that was purportedly being purchased by Jamaine Wallace. Wolf attended the closing and received a commission of about $11, 000. Hunt and Wallace were among those receiving kickbacks through Charlotte Business Investor Group and other entities such as Stir, Inc., a nightclub, that did not perform any work on the property.

         Danielle Vaughn, a mortgage broker who obtained loans for some of Wolf's buyers, confirmed that Maiden obtained a loan for 9215 Woodhall Lake Drive and that Wallace secured a loan to purchase 2817 Cutter Court. Maiden's loan application was referred to Vaughn by James Tyson, one of Brighton Developers' principals. Vaughn testified that she was aware that Hunt, not the purchaser Wallace, brought the required cash to the closing for 2817 Cutler Court. Vaughn also testified that Wolf instructed her that there were some documents "he [did] not want to go to the underwriter, " including the compensation agreement. J.A. 658.

         Testimony of government's expert witness on mortgage-lending practices

         Before trial, Wolf filed a motion in limine to exclude the testimony of Dr. Debra Sherrill, the government's expert witness on the mortgage industry, the mortgage-lending process and typical lender practices. Wolf argued that the district court should exclude Dr. Sherrill's testimony as "irrelevant" and "beyond the scope of evidence permissible under Fed.R.Evid. 702." J.A. 112. Wolf believed that such testimony was too general and that "[o]nly an authorized representative of each lender" should be allowed to testify based on "personal knowledge" as to what information "that lender would have considered . . . material in its underwriting decision back in 2006-2007." J.A. 112. In response, the government argued that "the test for whether a false statement to a bank is material is an objective one." J.A. 115. Additionally, the government suggested to the court that "[e]xpert testimony is an efficient and appropriate way of helping the jury to understand the basics of obtaining a mortgage loan . . . and helping the jury understand what would be important to a reasonable lender." J.A. 116. The district court agreed that Dr. Sherrill could testify and denied the motion.

         Dr. Sherrill, a professor who taught mortgage banking and had 20 years experience in mortgage processing and underwriting, explained to the jury how residential real-estate transactions work. First, Dr. Sherrill testified that the "sales price is the agreed upon price that the buyer agrees to pay for that house, " and that "the seller agrees to sell the house for." J.A. 153. Dr. Sherrill testified that "the lender [makes] a determination of how much to loan, " "based on that sales price." Id. She explained that down-payment money "represents the buyer's equity, " J.A. 155, and that it "[a]bsolutely" matters to the lender whether or not the buyer is really putting the down payment money down, J.A. 156.

         When asked how would it "affect the appraisal if there were a large amount of money being paid from the seller to the buyer, " Dr. Sherrill explained that the appraiser "would have to lower the amount of the appraisal." J.A. 161. According to Dr. Sherrill, lenders only allow sellers to pay buyers a certain amount of cash-usually three to six percent of the contract. If the seller were to exceed this limit, the lender "would automatically lower that value and then make a loan amount determination based off the lower value." J.A. 162. Dr. Sherrill further confirmed that all information supplied by a prospective buyer on the Uniform Residential Loan Application matters to the lender so that it can determine the buyer's "capacity to repay." J.A. 164.

         Finally, Dr. Sherrill explained that the Real Estate Settlement Procedures Act (RESPA) requires the use of the HUD-1 settlement statement which must list "[e]very fee connected to a residential real estate transaction, " J.A. 167, including "the real sales price, " any "deposit or earnest money, " and "cash at settlement from or to [the] borrower." J.A. 168. And, she explained that "[y]ou cannot have any fee on this HUD-1 that is not earned" and that "whatever that fee is, the person had to [have] perform[ed] that work." J.A. 171.

         Testimony of Wolf's real estate closing attorney

         Christine Gates, a real estate attorney who was involved with Wolf in several fraudulent transactions, testified that she received compensation agreements reflecting a gross price and a strike price. She never disclosed these agreements to the lenders, however, because she "knew that the bank[s] . . . wouldn't do the loan[s]." J.A. 734. Gates testified that she and Wolf never discussed whether "it was legal to structure a real estate deal this way, to have two prices" in "a compensation agreement." Id. Gates likewise indicated that she never told Wolf "that it would be legal for buyers to receive money so long as they used a company name instead of their own name on the HUD-1." J.A. 735. Gates further explained that the bank would not have approved the loan if it had been told the strike price "because the difference [between the gross and strike prices was] going out to a third party [that] had nothing to do with the properties." J.A. 733.

         Wolf's testimony

         After the government rested, Wolf testified in his own defense. Wolf claimed that he sought the advice of a lawyer to ensure that his way of structuring transactions was legal, suggesting that he was going to pursue an advice-of-counsel defense. Wolf claimed that he consulted an attorney named Dale Fussell, who actually prepared the compensation agreements Wolf used in his transactions. Wolf testified that he "fully disclose[d] to [Fussell] . . . the details of the transaction . . . to be used in the compensation agreement, " and that, based on his consultation with Fussell, he understood his approach "was acceptable." J.A. 828. He further claimed that "[a]ny time anybody . . . wanted any disbursements on a HUD-1 settlement statement, " Wolf would have the closing attorney "go over how they wanted their transaction to transpire at the closing, " as well as "the compensation agreement . . . to make sure we were making full disclosure [on the HUD-1]." J.A. 831. Wolf additionally testified that he used the compensation agreements "to disclose to the attorney and to the lender and to disclose between the parties [how] the monies . . . [were] being distributed" and claimed the compensation agreements were provided to the lending institutions. J.A. 830. Wolf acknowledged that he went through training as a real estate agent. He testified that RESPA applied to "government insured loans, " but not "commercial or investor purchase[s] of real estate." J.A. 829. Wolf indicated that "it was the responsibility of the attorney, " rather than the real estate agent, "to ensure that [the HUD-1] was complete and accurate." J.A. 828.

         Wolf then testified about a number of individual transactions, offering his explanation to contradict the testimony of the government's parade of witnesses. For each transaction he addressed, Wolf denied setting the price of the house, stated the house was worth the purchase price, recited his commission for the transaction, and denied "there was anything fraudulent about [the] transaction." J.A. 842. Moreover, when asked about the large sum going to a designated company-at closing-for various services rendered, Wolf testified the money was for work that needed to be completed. For example, Wolf testified that Wittig, the builder, set the gross price of $1, 350, 000 for the 2900 Crane Road property purchased by Long. According to Wolf, the house was initially listed at $1, 050, 000 before it was built, but Wittig asked Wolf to raise the listing price to $1, 350, 000 after it was completed. When questioned about the $585, 000 sum to be disbursed to Advantage Investor Enterprises for "[d]esign service fees, " Wolf asserted that "the house was not exactly complete and there were additional landscaping and other things that needed to occur and . . . basically [the $585, 000] allow[ed] the buyer to dictate who would complete the project." J.A. 839.

         Finally, Wolf denied "reach[ing] any kind of agreement [with any of his co-conspirators] to purposely misrepresent things to lenders" or "conspir[ing] . . . to commit fraud, " J.A. 915, but agreed "some people may have" "engaged in fraud in the transactions of which [he was] a part." J.A. 920.

         After Wolf rested, the government called Fussell, the attorney, in rebuttal. Fussell testified unequivocally that he did not draft the compensation agreement, or anything like it, that had been used in the transactions at issue. Fussell likewise testified that he never gave Wolf advice "on how to structure transactions so that money could go back to companies owned by buyers, " J.A. 965, because such a transaction would be illegal. Fussell also indicated that he did not know the terms gross price, strike price, or "construction design services, " which were frequently used in connection with Wolf's real estate transactions, J.A. 966-67.

         At the close of the government's evidence and at the conclusion of all of the evidence, Wolf unsuccessfully moved for judgment of acquittal. The jury found Wolf guilty of all counts.

         Sentencing

         In calculating the advisory Guidelines range, Wolf's presentence report ("PSR") started with a base offense level of 7 pursuant to the guideline for fraud offenses, see U.S.S.G. § 2B1.1(a)(1)[2], then made the following adjustments based on applicable specific offense characteristics: a 20-level enhancement for a loss between $7 and $20 million, see U.S.S.G. § 2B1.1(b)(1)(K); a two-level enhancement for more than 10 victims, see U.S.S.G. § 2B1.1(b)(2)(A)(i); a two-level enhancement for use of sophisticated means, see U.S.S.G. § 2B1.1(b)(10)(C); and a two-level enhancement for a conviction under 18 U.S.C. § 1956, see U.S.S.G. § 2S1.1(b)(2)(B). The PSR then recommended the imposition of a three-level manager or supervisor enhancement, see U.S.S.G. § 3B1.1(b); a two-level enhancement for abuse of a position of trust, see U.S.S.G. § 3B1.3; and a two-level obstruction-of-justice enhancement, see U.S.S.G. § 3C1.1. Thus, the PSR's adjusted offense level was 40. Wolf objected to the enhancements based on loss amount, number of victims, role in the offense, sophisticated means, abuse of a position of trust, and obstruction of justice. The government did not pursue the obstruction enhancement at sentencing.

         The district court adopted all of the PSR's recommended enhancements except the two-level obstruction-of-justice enhancement. Thus, the district court determined Wolf's total offense level was 38, which, when coupled with his criminal history category of I, yielded an advisory guideline range of 235 to 293 months.

         Wolf moved under 18 U.S.C. § 3553(a) for a significant downward variance "to a sentence of less than 36 months imprisonment." J.A. 1633. The government likewise requested a downward variance, but a much more modest one. The government asked that the district court vary downward from the advisory sentencing range of 235 to 293 to a range of 121-151 months. The district court granted the motion for a downward variance and imposed a sentence of 84 months imprisonment.

         Post-Trial Motions

         A.

         After trial, Wolf filed a motion for new trial and a renewed motion for acquittal. Wolf claimed that he had come into possession of a "compensation agreement that was not included in the discovery provided by the government and which was not part of the evidence presented at trial, " J.A. 1167, although Wolf conceded that he had the document in his possession a week before trial. Specifically, Wolf asserted that this compensation agreement was very similar to those presented at trial, included the terms "gross price" and "strike price, " and was signed by Fussell in his capacity as an attorney. Accordingly, Wolf contended that this document contradicted Fussell's testimony that he was unfamiliar with the meaning of the terms "gross price" and "strike price." J.A. 1167. Wolf also renewed his Rule 29 motion for acquittal, arguing that "there was a lack of evidence from which the jury could have found beyond a reasonable doubt that the alleged representations or misrepresentations would have been important to a reasonable lender." J.A. 1172.

         The district court held an evidentiary hearing on the motion for a new trial. At the hearing, Fussell agreed that his signature appeared on a number of compensation agreements, that the compensation agreements contained the terms "gross price" and "strike price, " and that the compensation agreements indicated that payments were going to various companies. Fussell, however, reaffirmed his position at trial that he did not know what those terms meant or who owned the companies named in the compensation agreements or what they did. Fussell testified further that he had never prepared such an agreement that would "kick[] money back to a buyer, " J.A. 1262, because "that is mortgage fraud, " J.A. 1266. Fussell also testified that he did not "have a recollection of [Wolf] or these closings, " which had occurred 10 years earlier and amounted to four out of 1, 000 closings Fussell did annually. J.A. 1261. Finally, Fussell denied that Wolf ever asked him "how to make sure that he could legally get money to go back to a company owned by a buyer." J.A. 1266.

         The district court denied Wolf's motion for new trial, concluding "that the evidence at trial, absent the testimony of Mr. Fussell, was more than adequate to have the jury return the verdict that they did." J.A. 1275. Further, the district court found that the evidence relied upon by Wolf did not constitute "newly discovered evidence." Id. And finally, the district court found that Fussell had not perjured himself at trial or during the hearing, as he "clos[ed] ...


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