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Parties Involved:
Patrick Lee
Appellant
United States of America
Appellee

Document Text:

PUBLISH FILED ~~ United States Court of Appe&ea Tenth Citt11H 

UNITED STATES COURT OF APPEALS APR 2 7 1995 

UNITED STATES OF AMERICA, 

Plaintiff-Appellee, 

v. 

PATRICK LEE, 

Defendant-Appellant. 

TENTH CIRCUIT 

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PATRICKFISHEB 

Oer'a 

No. 94-1164 

ON APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF COLORADO 

(D.C. No. 93-CR-221) 

Charlotte J. Mapes, Assistant United States Attorney (Henry L. 

Solano, United States Attorney; Kyra Jenner, Assistant United 

States Attorney, on the briefs) for Plaintiff-Appellee. 

Warren R. Williamson, Assistant Federal Public Defender (Michael 

G. Katz, Federal Public Defender, with him on the brief), Denver, 

Colorado, for Defendant-Appellant. 

Before BRORBY, GODBOLD* and HOLLOWAY, Circuit Judges. 

BRORBY, Circuit Judge. 

The defendant, Patrick Lee, appeals his conviction for equity 

skimming, aiding and abetting, and mail fraud arguing the jury was 

improperly instructed. We have jurisdiction pursuant to 18 u.s.c. 

§ 1291, and affirm. 

* The Honorable John Cooper Godbold, Senior Circuit Judge for the 

Eleventh Circuit, sitting by designation. 

Appellate Case: 94-1164 Document: 01019282123 Date Filed: 04/27/1995 Page: 1 
BACKGROUND 

Beginning in September 1988 and continuing through March 

1990, Mr. Lee, in conjunction with his codefendant, Douglass 

Nelson, purchased twenty-three townhomes and condominiums by 

assuming non-qualifying Federal Housing Authority loans insured by 

the Department of Housing and Urban Development ("HUD") .1 Mr. 

Lee convinced many of the individual sellers to convey their 

property to him by presenting his credit report, indicating he had 

a guaranteed income from the Veterans' Administration, and falsely 

stating his intent to occupy the homes personally. 

Shortly after Mr. Lee purchased each property, it was 

transfered to Mr. Nelson by warranty deed. Mr. Nelson insisted 

such transfers take place as soon as possible so that the loans 

were current in order to minimize the number of mortgage payments 

that Mr. Nelson would have to be make. Subsequently, the 

properties were rented under the direction of Mr. Nelson and rent 

proceeds collected, but no mortgage payments were made on the 

properties. The proceeds were distributed to a number of people, 

including Mr. Lee, and used for personal expenses. Mr. Nelson 

admitted at trial he never had any intention of making mortgage 

payments on the properties. The mortgages on the twenty-three 

properties went into default within one year of purchase; all of 

1 The HUD program enabled purchasers to assume existing loans on 

property without qualifying for new loans, simply by transfering 

the existing mortgages from the seller to the purchaser for a $45 

transfer fee, provided the mortgage payments were paid up-to-date 

at the time of assumption. 

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the properties were foreclosed; and HUD incurred losses in the 

neighborhood of $900,000 as a result. 

The government filed a five-count indictment against Mr. Lee. 

Count I charged equity skimming and aiding and abetting in 

violation of 12 U.S.C. § 1709-2 and 18 U.S.C. § 2. Counts II, 

III, IV, and VI charged mail fraud and aiding and abetting in 

violation of 18 U.S.C. §§ 1341 and 2. A jury found Mr. Lee guilty 

of Counts I and VI and acquitted him on counts II, III, and IV. 

DISCUSSION 

Mr. Lee argues the district court erred in three respects 

regarding jury instructions. We review the district court's 

refusal to give a particular jury instruction for abuse of 

discretion. United States v. Vasquez, 985 F.2d 491, 496 (lOth 

Cir. 1993). In assessing whether the court properly exercised 

that discretion, a reviewing court must examine the instructions 

as a whole to determine if they sufficiently cover the issues in 

the case and focus on the facts presented by the evidence. Id. 

The question of whether a jury was properly instructed is a 

question of law, and thus, our review is de novo. United States 

v. Joe, 8 F.3d 1488, 1500 (lOth Cir. 1993), cert. denied, 114 s. 

Ct. 1239 (1994). 

A. 

The crime charged in Count I is violation of 12 U.S.C.A. 

§ 1709-2 (1989), which provides, in pertinent part: 

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Whoever, with the intent to defraud, willfully engages 

in a pattern or practice of --

(1} purchasing one- to four-family dwellings 

which are subject to a loan in default at the 

time of purchase or in default within one year 

subsequent to the purchase and the loan is secured 

by a mortgage or deed of trust insured or held by 

the Secretary of Housing and Urban Development ... , 

(2} failing to make payments under the 

mortgage or deed of trust as the payments become 

due, regardless of whether the purchaser is 

obligated on the loan, and 

(3} applying or authorizing the application of 

rents from such dwellings for his own use, 

shall be fined not more than $250,000 or imprisoned not 

more than 5 years, or both. 

Mr. Lee argues the district court should have instructed the jury 

according to his proposed jury instruction number 23 which 

apparently2 provided that in order to find Mr. Lee guilty of 

equity skimming, the government must prove he knew or intended, at 

the time the properties were purchased, that: (1} the mortgages 

would not be paid; (2} the properties would be rented; and (3} the 

rental income from the properties would be applied to personal 

use. As we understand it, Mr. Lee argues instruction 23 is 

necessary in order to distinguish the crime of equity skimming 

from that of simple or generic fraud. 

2 We note that while Mr. Lee has referred this court to volume 1, 

document 13, instruction 23, as the instruction at issue, no such 

instruction appears in the record. Nevertheless, because both 

parties are in agreement as to the substance of that instruction 

and because the district court ruled on this instruction, we are 

able to review this allegation of error based on the record before 

us. 

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Appellate Case: 94-1164 Document: 01019282123 Date Filed: 04/27/1995 Page: 4 
18 U.S.C.A. § 1341 (1984), the general, federal fraud 

statute, provides in part: 

Whoever, having devised or intending to devise any 

scheme or artifice to defraud, or for obtaining money or 

property by means of false or fraudulent pretenses, 

representations, or promises for the purpose of 

executing such scheme or artifice or attempting so to 

do, places in any post office ... any matter or thing 

whatever to be sent or delivered ... shall be fined not 

more that $1,000 or imprisoned not more than five years, 

or both. 

In contrast, the federal equity skimming statute prohibits 

willfully engaging in a pattern or practice of purchasing one- to 

four-family dwellings that are secured by mortgages or deeds of 

trust insured or held by the Secretary of Housing and Urban 

Development, failing to make payments on the mortgage, and 

applying or authorizing the application of rents from such 

dwellings for his own use, with the intention to defraud. 

Thus, it is perfectly clear while many acts of equity 

skimming could amount to simple fraud (equity skimming requires 

the intention to defraud though not the use of the post office in 

furtherance of that intent) , not all acts of simple fraud are 

equivalent to equity skimming (one can defraud without acquiring 

federally insured dwellings, failing to make mortgage payments, or 

misappropriating rental proceeds) . As such, instruction 23 is not 

necessary to distinguish equity skimming from generic fraud. 

Moreover, reviewing the instructions tendered as a whole, it 

is clear instruction 23 simply would have been redundant; adding 

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Appellate Case: 94-1164 Document: 01019282123 Date Filed: 04/27/1995 Page: 5 
nothing to what the tendered instructions required. The jury was 

instructed: 

In order to sustain its burden of proof for the 

crime of equity skimming as charged in Count 1 of the 

indictment, the government must prove the following six 

elements beyond a reasonable doubt. First, the 

government must prove that the defendants engaged in a 

pattern or practice of purchasing one to four family 

dwellings. Second, it must prove that the defendants 

acted willfully in engaging in this practice of 

purchasing one to four family units. Third, it must 

prove that the dwellings were secured by a mortgage 

insured by the Secretary of Housing and Urban 

Development or the Veterans Administration. Fourth, it 

must prove that the defendants failed to make payments 

when due, and the loan was in default or came into 

default within one year from the date of purchase. 

Fifth, it must prove that the defendants applied the 

rents from such dwelling to their own use. Sixth, it 

must prove that the defendants engaged in this conduct 

with the intent to defraud. 

This instruction tracks, nearly word for word, the language 

of § 1709-2 and necessarily includes each and every element of the 

crime of equity skimming as it has been defined by Congress. With 

respect to the mens rea required to prove the crime of equity 

skimming, the instruction specifically required the government to 

carry its burden of proving Mr. Lee acted "with the intent to 

defraud." In a separate instruction, the court defined intent to 

defraud as follows: 

Fraud is an intentional or deliberate misrepresentation 

of the truth for the purpose of inducing another in 

reliance on it to part with a thing of value or [t]o 

surrender a legal right. Fraud then is a deceit which 

whether perpetrated by words, conduct or silence, is 

designed to cause another person or institution to act 

upon the representation or silence to his or her or its 

legal injury. 

A statement, claim or document is fraudulent if it 

was falsely made or made with reckless indifference as 

to its truth or falsity, or made or caused to be made 

with an intent to deceive. 

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To act with an intent to defraud, as is 

required by all of the charges here, means to act 

knowingly and with the intention or the purpose to 

deceive or cheat someone. An intent to defraud is 

accompanied ordinarily by a desire or purpose to bring 

about some benefit or gain to cne's self or some other 

[person] , or by a desire or purpose to cause loss to 

some other person. 

We have previously noted instructions identical or substantially 

similar to this one properly define the meaning of the phrase 

"intent to defraud. " E.g. , United States v. Hilliard, 31 F. 3d 

1509, 1518 (lOth Cir. 1994); United States v. Simpson, 950 F.2d 

1519, 1524 (lOth Cir. 1991), see also Devitt et al., Federal Jury 

Practice and Instructions, 4th ed., §§ 16.07 & 16.08. 

In order to find Mr. Lee acted with the requisite intent to 

commit the crime of equity skimming, the jury had to find he 

purchased the properties in conjunction with Mr. Nelson through 

deceit, with the desire or purpose to bring about some benefit to 

himself or another. By requiring that Mr. Lee, in engaging in the 

pattern or practice defined in § 1709-2, acted with the intent to 

defraud, these instructions necessarily required a finding Mr. Lee 

did not purchase the twenty-three properties with innocent 

intentions: The intent instruction required a finding that the 

properties were purchased fraudulently through deception or 

untr~ths, for the purpose of bringing about a benefit to Mr. Lee 

or another. This is essentially what instruction 23 would have 

required the jury to find. As such, we conclude the substantive 

content of instruction 23 was conveyed to the jury, and therefore, 

instruction 23 was simply redundant. 

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The district court did not abuse its discretion in refusing 

to instruct the jury according to instruction 23. 

B. 

Next, Mr. Lee argues the district court erred in instructing 

the jury concerning deliberate indifference. The argument is 

premised on the contention the government presented no evidence 

to support a finding Mr. Lee consciously avoided knowledge that 

any of the properties had been foreclosed on or knew Mr. Nelson 

did not intend to pay the mortgages on the properties. 

A deliberate indifference instruction is appropriate if the 

defendant denies knowledge of an operative fact and the evidence 

demonstrates or creates the inference the defendant deliberately 

avoided actual knowledge of that fact. United States v. Custodio, 

39 F.3d 1121, 1124-25 (lOth Cir. 1994); United States v. Hilliard, 

31 F.3d 1509, 1514 (lOth Cir. 1994). Such an instruction is 

proper "only when 

defendant purposely 

United States v. 

evidence has been presented showing the 

contrived to avoid learning the truth." 

de Francisco-Lopez, 939 F.3d 1405, 1409 (lOth 

Cir. 1991). In reviewing whether a deliberate indifference 

instruction was properly tendered, we view the evidence in the 

light most favorable to the government. United States v. Fingado, 

934 F.2d 1163, 1166 (lOth Cir.), cert. denied, 502 U.S. 916 

(1991). 

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In response to Mr. Lee's objection to instructing the jury on 

the theory of deliberate indifference, the district court 

reasoned: 

I think that there is some suggestion in Mr. Lee's 

defense, particularly the reliance on Mr. Nelson and the 

emphasis on the fact that he didn't know how Mr. Nelson 

was behaving in failing to pay the mortgages raises 

issues of deliberate ignorance .... 

The pattern itself raises issues as to whether 

a reasonable person in his position would have known 

what Mr. Nelson was doing. It's arguable. [3] 

While we agree with the district court the pattern engaged in 

here raises some suspicion as to whether a reasonable person would 

have known Mr. Nelson was engaged in equity skimming, that is not 

the standard to be used in determining whether a deliberate 

indifference instruction is appropriate. On the contrary, " [t] he 

3 The district court instructed the jury: 

The government may prove that a defendant acted 

knowingly by proving beyond a reasonable doubt that the 

defendant deliberately closed his eyes to what would 

otherwise have been obvious to him. No one can avoid 

responsibility for a crime by deliberately ignoring what 

is obvious. 

A finding beyond a reasonable doubt of an intent of 

the defendant to avoid knowledge or enlightenment would 

permit the jury to infer knowledge. Stated another way, 

a defendant's knowledge of a particular fact may be 

inferred from a deliberate blindness to the existence of 

the fact. It is, of course, entirely up to you as to 

whether you find any deliberate ignorance or deliberate 

closing of the eyes in this case. It is entirely up to 

you as to the inferences to be drawn by any such 

evidence. 

You may not infer that a defendant had knowledge, 

however, from proof of mistake, negligence, carelessness 

or belief in an inaccurate proposition. 

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evidence must establish that the defendant had subjective 

knowledge of his criminal behavior. Such knowledge may not be 

evaluated under an objective, reasonable person test." de 

Francisco-Lopez, 939 F.3d at 1409. As such, the district court 

erred in evaluating the propriety of giving a deliberate 

indifference instruction under an objective, reasonableness test. 

The question remains, however, whether there is sufficient 

evidence of purposeful and deliberate avoidance of knowledge to 

support the giving of this instruction. See Swoboda v. Dubach, 

992 F.2d 286, 291 (lOth Cir. 1993) (appellate court may affirm the 

district court's judgment on grounds other than those relied on by 

the district court) . 

When viewed in the light most favorable to the government, we 

conclude substantial evidence was presented from which the jury 

could reasonably infer Mr. Lee consciously avoided actual 

knowledge of Mr. Nelson's equity skimming practices. First, the 

evidence established Mr. Nelson, on a number of occasions, 

expressed his dissatisfaction with Mr. Lee's failure to transfer 

property to him as soon as possible. Because these HUD insured 

properties only could be sold or transfered while the mortgage 

payments were current, Mr. Nelson explained to Mr. Lee that "I 

prefer to buy them, you know, a lot sooner than two months after 

you purchase them. Now, that is two months of payments that I 

have to make up, and that's not good." While such a sentiment 

could be consistent with innocent behavior,4 the jury could 

4 For instance, it could be inferred from this that Mr. Nelson 

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reasonably infer Mr. Lee consciously avoided inquiring as to the 

necessity of a speedy transfer because he did not want to learn 

Mr. Nelson never intended to pay the mortgages on any of the 

properties subsequently acquired by Mr. Lee. 

Second, a number of tenants of the properties testified they 

received mail from various mortgage companies addressed to Mr. Lee 

at their residences. Frequently, the letters contained 

foreclosure notices addressed to Mr. Lee. The tenants, however, 

were unable to contact Mr. Lee in order to give these letters to 

him. Mr. Lee testified, while he never saw the letters, he was 

confident the tenants had in fact received them. His confidence 

was based on the nature of the "assumption packages" designed by 

Mr. Nelson. Mr. Lee testified as to his confidence that the 

mortgage companies would send information (which, it turned out, 

contained foreclosure notices) to the properties he had purchased 

and transfered to Mr. Nelson, but he made no attempt to get those 

letters or learn of their contents. From this testimony, the jury 

could reasonably have inferred he was deliberately avoiding 

knowledge of those letters and their contents. This, in turn, 

could lead to the inference Mr. Lee sought to avoid knowledge of 

Mr. Nelson's likely intentions with respect to properties Mr. Lee 

would acquire in the future. 

simply sought to rent the properties as soon as possible in order 

to enable him to pay mortgages with rental proceeds. The problem 

with such an inference in this case, however, is that a number of 

properties were being rented prior to the time Mr. Lee purchased 

them and continued to be rented until the time of transfer to Mr. 

Nelson. 

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Finally, the evidence at trial established Mr. Lee was 

actually aware of the fact two of the properties he had previously 

transfered to Mr. Nelson had gone into foreclosure.S When Mr. Lee 

confronted Mr. Nelson with this fact, his concern and inquiry was 

directed solely at the impact these foreclosures would have on his 

credit rating and the possibility of being sued. Mr. Lee did not, 

however, inquire if Mr. Nelson had the intent or the financial 

5 At oral argument, counsel for Mr. Lee 

significance of this fact to the issue presented. 

Lopez, 939 F.2d at 1410, this court held, 

questioned the 

In de Francisothe same fact or facts cannot be used to prove both 

actual knowledge and deliberate indifference because the 

two are mutually exclusive concepts. If evidence proves 

the defendant actually knew an operant fact, the same 

evidence could not also prove he was ignorant of that 

fact. Logic simply defies that result. 

In a dissenting opinion, Judge Baldock took issue with the 

majority's reasoning, arguing that 11 [t]he difficulty with this 

approach is that it assumes that each circumstantial fact admits 

only of a single inference, knowledge or ignorance, unaffected by 

the other facts at trial. 11 (Baldock, J., dissenting). Id. at 

1414. 

This panel, even if it were so inclined, is not at liberty 

either to overrule or ignore the holding of de Francisco-Lopez. 

See In re Smith, 10 F.3d 723, 724 (lOth Cir. 1993), cert. denied, 

115 S. Ct. 53 (1994). It is our judgment, however, that this 

holding is not implicated by the fact relied on here. 

As explained above, the crime of equity skimming requires a 

showing of an intent to defraud. This intent must be shown to 

have existed prior to or in conjunction with the conduct described 

in the statute in particular, engaging in the pattern or 

practice of purchasing family dwellings. As such, the fact Mr. 

Lee knew two properties had been foreclosed on does establish he 

actually knew that Mr. Nelson did not intend to pay the mortgages 

on those properties at the time he, Mr. Lee, purchased them. As 

such, knowledge of those two foreclosures does not establish 

actual knowledge and thus, reliance on this fact to infer 

deliberate indifference does not violate the rule of de FrancisoLopez. 

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wherewithal to pay the mortgage on any future properties Mr. Lee 

might purchase and transfer to him. Within the following month, 

Mr. Lee acquired five 

subsequently transfered 

on. 

additional properties, which were 

to Mr. Nelson and ultimately foreclosed 

In our judgment, the jury could reasonably have inferred from 

these facts that Mr. Lee deliberately avoided inquiry into Mr. 

Nelson's future intentions because he sought to continue acquiring 

and transfering property in the absence of specific knowledge that 

once transfered Mr. Nelson would not pay the mortgage on them. 

We conclude there was no error in instructing the jury on 

deliberate indifference. Substantial evidence was presented from 

which the jury could infer Mr. Lee purposely avoided knowledge of 

the fact Mr. Nelson had no intention of paying the mortgages on 

the properties transfered to him by Mr. Lee. 

c. 

Lastly, Mr. Lee argues the district court erred in rejecting 

his proffered instruction on aiding and abetting. 

was made, our review is limited to that of plain 

As no objection 

error. United 

States v. Smith, 13 F.3d 1421, 1424 (lOth Cir.), cert. denied, 115 

S. Ct. 209 (1994). 

In order to show a defendant aided and abetted the commission 

of a criminal offense, the government must prove: 

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• 

(1) that the defendant associated herself with a 

criminal venture; {2) that the defendant participated in 

the venture as something she wished to bring about; (3) 

that she sought by her actions to make it succeed; and, 

lastly, (4) that the proof establishes the commission of 

the offense by someone and the aiding and abetting by 

the defendant so charged. 

United States v. Hanson, 41 F.3d 580, 582 (lOth Cir. 1994). 

Mr. Lee argues the district court should have instructed the 

jury that in order to prove he aided and abetted the offense of 

equity skimming the government had to show he "shared in the 

intent to commit the offense." 

The jury specifically was instructed that in order to convict 

Mr. Lee for aiding and abetting, it must find "that the defendant 

acted with the intent to cause, help or bring about the offense 

and that he sought by his actions to make that venture 

succeed." Mr. Lee fails to explain how his proffered instruction 

requires proof of anything more or different from that required by 

the instruction given to the jury, and we can discern only a 

semantic difference between the two. We conclude, therefore, no 

plain error was committed with respect to the instruction on 

aiding and abetting. 

The judgment of conviction is AFFIRMED. 

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