IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLORADO

Criminal Action No. 11-cr-355-MSK

UNITED STATES OF AMERICA,

Plaintiff,

v.

1. WAUNITA WEINGART,

2. JOHN PHILLIP GALLEGOS,

3. ALOIS CRAIG WEINGART,

Defendants.

GOVERNMENT’S PROFFER RELATING TO THE METHODOLOGY USED BY

WITNESS DANA CHAMBERLIN AND MEMORANDUM OF LAW

I. Introduction

This pleading discusses the methodology used by witness Dana Chamberlin in

arriving at her expert opinions, the facts and data required to be considered by that

methodology, the manner in which she employed that methodology in this case, and the

facts and data she considered. It also includes a memorandum of law pertaining to Ms.

Chamberlin’s proffered testimony.

II. The Methodology Used by Dana Chamberlin and the Facts and Data Required

to be Considered for that Methodology

Dana Chamberlin is a certified fraud examiner and certified public

accountant. In connection with her expert opinions, she employed the fraud examination

methodology endorsed by the Association of Certified Fraud Examiners as set forth in The

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Case No. 1:11-cr-00355-MSK Document 161 filed 10/17/12 USDC Colorado pg 1 of 32
Fraud Examiner’s Manual, 2012 US Edition (hereinafter “FEM”).1

This methodology requires that there first be a sufficient reason (predication)

to conduct a fraud examination. A predication is the totality of circumstances that would

lead a reasonable, professionally trained, and prudent individual to believe that a fraud has

occurred, is occurring, and/or will occur. (FEM I-7). If a predication exists, the examiner is

then to follow the fraud theory approach.

The fraud theory approach begins with the assumption, based on the known

facts, of what might have occurred. (FEM I-7). The fraud theory approach requires the

examiner to then analyze the available data, create a hypothesis, test the hypothesis, and

refine or amend the hypothesis. (FEM I-7). The examiner’s initial efforts are to be spent

identifying, collecting, and securing all possibly relevant documents. (FEM 3.401). A fraud

examiner is to strive to make certain that all relevant documents are included in her

analysis, and that all irrelevant documents are eliminated. (FEM 3.101). At each step in the

fraud examination process, the evidence obtained is to be continually assessed. (FEM I-7).

The fraud theory approach takes into account that each specific fraud has

its own unique characteristics, (FEM I-9), that fraudulent intent must be established (FEM

I-15), and that white collar perpetrators typically take steps to conceal the fraud from their

victims (FEM I-15 - I-16). To hide their actions, fraud perpetrators often create complex

financial trails. (FEM I-16).

In a case in which financial transactions are to be traced directly, the fraud examiner

must obtain all available relevant financial records. (FEM 3.805). The fraud theory

The sections of The Fraud Examiner’s Manual cited herein are included in 1

Attachment 1.

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Case No. 1:11-cr-00355-MSK Document 161 filed 10/17/12 USDC Colorado pg 2 of 32
approach recognizes bank records as the single most important source of financial

information available to a fraud examiner. (3.805). Where a potential loan fraud is the basis

of the examination, as here, the lenders’ records relating to the suspect loans are the most

directly relevant records to be considered. 

In this case, the FBI began an investigation of what appeared to be mortgage fraud. 

Ms. Chamberlin was informed that Waunita Weingart, Alois Craig Weingart,

and John Phillip Gallegos (hereinafter “the subjects”) had repeatedly refinanced their

residential properties located at 7766 Saxeborough Drive, Castle Rock, Colorado and 141

Lost Angel Road, Boulder, Colorado (hereinafter “Saxeborough” and “Lost Angel”) without

paying off the prior outstanding mortgages. She was also informed that their title

companies, Colorado County and Community Title, LLC (hereinafter “CCCT”) and Real

Estate Title, LLC, (hereinafter “RET”) were involved in the closings.

Based on this predication, Ms. Chamberlin assumed that mortgage fraud

may have been committed by the subjects in connection with their refinancings of their

properties on Saxeborough and Lost Angel and that they may have used their title

companies to facilitate the fraud. Ms. Chamberlin first acquired bank account records for

the subjects’ personal and business accounts, as well as the lenders’ records for the loans

then known to be in question. She then summarized the bank account records and began

analyzing both sets of documents. This work led her to discover new sources of relevant

data, which she subsequently obtained. The additional material included bank account

information for other accounts controlled by one or more of the subjects, lenders’ records 2

There were ultimately twenty-six bank accounts in all. 2

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Case No. 1:11-cr-00355-MSK Document 161 filed 10/17/12 USDC Colorado pg 3 of 32
pertaining to other loans acquired by the subjects for the refinancings of Saxeborough and

Lost Angel, and public records relating to the relevant properties and mortgages. 

As her analysis of the lenders’ records and bank records progressed, Ms.

Chamberlin created various hypotheses, which she then tested. Where a hypothesis could

not be proved, she amended and retested it. In order to describe the manner in which she

applied the above-described methodology, and which specific parts of the bank records

and lenders’ records she considered, her opinions have been grouped here by topic. The 3

specific opinions derived from her application of this methodology are set forth in the

Parties’ Second Amended Joint Motion Under Fed.R.Evid. 702 (Doc. 160).

III. The Manner in Which the Methodology was

Applied and the Facts and Data Considered

A. Ms. Chamberlin’s Analysis of the Inter-Relationships Among Liabilities

Listed on the Subjects’ Applications for their Refinancings of Saxeborough

and Lost Angel, Information Listed in the Schedules of Real Estate Owned

Set Forth in those Applications, Mortgage Liabilities Listed on Credit

Reports Used in the Application Process for Those Loans, and the

Subjects’ Prior Mortgages

1. Analysis of available data: Given the above-described predication that the

subjects repeatedly acquired loans to refinance Saxeborough and Lost Angel, but did not

pay off the prior mortgages in the process, Ms. Chamberlin reviewed the subjects’ loan

applications to see if their loans to refinance Saxeborough and Lost Angel were being

represented as liabilities on their subsequent loan applications. In particular, she reviewed

the “Liabilities” and “Schedule of Real Estate Owned” sections of those applications. In

In some respects, her analysis of certain records pertaining to the different

3

topics was done nearly simultaneously. 

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Case No. 1:11-cr-00355-MSK Document 161 filed 10/17/12 USDC Colorado pg 4 of 32
reviewing the Schedule of Real Estate Owned, she noticed that on each application, only

one outstanding mortgage was listed for Saxeborough and/or Lost Angel. She also noticed

that there were multiple other properties listed in the Schedule of Real Estate Owned

identified as having outstanding mortgages. Whereas the Schedule of Real Estate Owned

section identified each property by street address and gave an outstanding mortgage

balance, the “Liabilities” section did not require addresses be provided for the listed

mortgage liabilities.4

Based on her training, experience, and specialized knowledge as a certified fraud

examiner, and in particular as a certified fraud examiner of mortgage fraud, she knew that 

the mortgage liabilities on a loan application should correspond to the properties and

mortgages listed on the Schedule of Real Estate Owned. She also knew that the debts on

the borrower’s credit report reviewed by the lender in determining whether to approve the

loan should correspond to the liabilities listed on the loan application.

2. Accordingly, she formed the following hypothesis: The mortgage liabilities

listed in the “Liabilities” section of the loan applications for each of the subjects’

Saxeborough and Lost Angel loans correspond to the properties and mortgages listed in

the Schedule of Real Estate Owned for that loan.

3. She then tested that hypothesis: Based on her knowledge, skill, experience,

and training as a certified fraud examiner, and in particular as a fraud examiner of

mortgage frauds, Ms. Chamberlin expected to see the following for each loan:

 In some cases, she observed handwritten notes in the “Liabilities” section of the 4

application and/or on the related credit report reflecting the addresses of the properties

listed in the Schedule of Real Estate Owned.

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a. the outstanding balance for each of the mortgage liabilities listed in

the “Liabilities” section of the application would correspond to an

outstanding mortgage amount set forth for one of the properties listed

in the Schedule of Real Estate Owned (hereinafter “SREO”);

b. the amount of the monthly mortgage payment for each mortgage

liability listed in the “Liabilities” section of the application would

correspond to the amount of the monthly payment set forth for one of

the properties listed in the SREO;

c. the lender’s name, account number, outstanding balance, and

monthly payment amount set forth for each mortgage liability listed in

the “Liabilities” section of the loan application would correspond to a

debt on the credit report;

d. the “high credit balance” and debt “open date” listed on the credit

report would correspond to a note and deed of trust pledging the

particular property listed on the SREO as collateral.

Ms. Chamberlin examined each loan application and each credit report the

government had obtained from the lenders for the subjects’ refinancings of Saxeborough

and Lost Angel. She noticed that on each application, there were multiple mortgage

5

liabilities listed in the “Liabilities” section of the application, and that there were multiple

properties identified by address in the SREO, each of which was described as having an

outstanding mortgage. She examined each mortgage liability listed on each loan

As the investigation progressed, more loans were identified, and the lenders’ 5

records relating to those were provided to Ms. Chamberlin.

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Case No. 1:11-cr-00355-MSK Document 161 filed 10/17/12 USDC Colorado pg 6 of 32
application.

Ms. Chamberlin knew, based on her experience and training as a certified fraud

examiner, that loan identification numbers, names of the lenders, and payment amounts

often change during the life of a mortgage loan. She was aware that lenders typically

assign or sell their notes to other lenders, and that they may employ servicing companies

to collect monthly payments. She also knew that in such instances, the successor lender

or servicer might assign a new identification number to the loan. 

In order to keep track of the loan identification numbers, Ms. Chamberlin started to

compile a list of the original loan identification numbers and lenders’ names. In order to

determine the original loan identification numbers, she reviewed items provided by the

lenders, (primarily the notes, the deeds of trust, and the HUD-1 Settlement Statements).

If she observed that an account number for one of the mortgage liabilities listed in the

“Liabilities” section of the application corresponded to an original loan identification number

associated with one of the known refinancings for Saxeborough or Lost Angel, she

concluded that the listed liability was for that loan, which was collateralized by

Saxeborough or Lost Angel, depending on the loan.

If the account number for a mortgage liability listed in the “Liabilities” section of the

application did not correspond to an original loan identification number for any of the known

refinancings of Saxeborough or Lost Angel, Ms. Chamberlin tried to determine whether the

account number for the listed liability was a successive loan identification number for one

of the refinancings. To determine the successive loan identification numbers and/or

successive lender’s and/or servicer’s names, Ms. Chamberlin reviewed the lenders’

records to find documents (such as payment histories and correspondence with the

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Case No. 1:11-cr-00355-MSK Document 161 filed 10/17/12 USDC Colorado pg 7 of 32
borrowers) that would identify a successive identification number. If she found

documentation provided by the lender for that loan which identified the successive

identification number for that loan, Ms. Chamberlin concluded that the liability with the

corresponding number related to that loan which was collateralized by Saxeborough or

Lost Angel, depending on the loan. As she linked various successive loan identification

numbers to certain refinancings of Saxeborough or Lost Angel, she added that information

to the summary of loan identification numbers. See Attachment 2. Attachment 3 is Ms.

Chamberlin’s Summary of Loan Codes, codes which she used as a shorthand reference

to specific loans.

If there was no documentation of a successive loan identification number in the

lender’s file for that loan, Ms. Chamberlin employed her specialized knowledge, training,

and experience as a certified fraud examiner, and in particular as a certified fraud examiner

of mortgage frauds, to look elsewhere for the successive loan identification number. In

some cases, she reviewed credit reports appearing in other loan files.

Ms. Chamberlin knewthat credit reports contain certain identifying information about

the individual’s debts. In particular, for each debt, credit reports typically provide:

1. Creditor name of the institution reporting the information

2. Account number associated with the account

3. Account type (i.e., revolving account, auto loan, real estate loan)

4. Monthly payment (the minimum amount required to be paid each month)

5. Date opened (the month and year the account was established)

6. Balance (the amount owed on the account at the time data was reported)

7. High balance or high credit (for installment loans, the original loan amount)

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Based upon Item #5 (Date Opened) and Item #7 (High Balance or High Credit), Ms.

Chamberlin was able to identify which of the Saxeborough or Lost Angel loans was listed

as a debt on the credit report by referring back to her summary of loan identification

numbers and matching the original date and original loan amount to a particular known 

loan.

If she matched such information, she concluded that the debt on the credit report

under the successor name and/or account identification number was for that particular

loan, and that the mortgage liability listed in the “Liabilities” section of the application with

that account number was for that particular loan.6

Ms. Chamberlin observed that the SREOs made it appear as though the mortgage

liabilities listed in the “Liabilities” section of the application related to the outstanding

mortgages associated with other properties (not Saxeborough or Lost Angel) that were

identified in the SREOs. Ms. Chamberlin concluded that certain liabilities listed in the

“Liabilities” section of the subjects’ applications actually corresponded to prior

Saxeborough and Lost Angel loans which were not disclosed as outstanding mortgages

in the SREOs of those applications. 

During this process of identifying liabilities associated with Saxeborough and Lost

Angel, Ms. Chamberlin realized that there were still liabilities listed on a number of

applications that appeared to correspond to other properties listed on that application’s

SREO. Ms. Chamberlin was aware of two other properties owned by John Gallegos,

Ms. Chamberlin followed this procedure as she examined each of the mortgage 6

liabilities listed in the “Liabilities” section of the loan applications for each of the

subjects’ refinancings of Saxeborough and Lost Angel.

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namely 430 E. 6 Ave., Denver, Colorado and 7603 California Ave. SW, Seattle, th

Washington, (hereinafter “6 Ave.” and “California Ave.”). She noticed that those th

addresses were among the addresses that appeared on the SREOs of various loan

applications. She therefore amended her original hypothesis.

4. Her amended hypothesis was as follows: The mortgage liabilities listed in the

“Liabilities” section of the loan applications for the refinancings of Saxeborough and Lost

Angel related only to prior mortgages taken by one or more of the subjects for their

purchases or refinancings of their Saxeborough, Lost Angel, 6 Ave., and California Ave. th

properties, and not to the other properties listed on their Schedules of Real Estate Owned.

5. Ms. Chamberlin then tested the amended hypothesis: Based on her

knowledge, skill, experience and training as a certified fraud examiner and what she had

learned from testing her first hypothesis, she expected to see that:

a. the outstanding balance for each of the mortgage liabilities listed in

the “Liabilities” section of the application would correspond to an

outstanding mortgage balance set forth in the SREO;

b. the amount of the monthly mortgage payment for each mortgage

liability listed in the “Liabilities” section of the application would

correspond to the amount of the monthly payment for one of the

subjects’ outstanding loans for Saxeborough, Lost Angel, 6 Ave., or th

California Ave.;

c. the lender’s name, account number, outstanding balance, and

monthly payment amount set forth for each mortgage liability in the

“Liabilities” section of the loan application would correspond to a debt

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Case No. 1:11-cr-00355-MSK Document 161 filed 10/17/12 USDC Colorado pg 10 of 32
on the credit report;

d. for each of the subjects’ mortgages for their purchases and

refinancings of Saxeborough, Lost Angel, 6 Avenue, or California th

Ave., there would be a note and a deed of trust that would confirm the

existence of the debt and identify the property pledged as collateral

as being Saxeborough, Lost Angel, 6 Avenue, or California Avenue.

th

Ms. Chamberlin re-examined the loan applications and credit reports, and also

focused on the notes and deeds of trust relating to the subjects’ loans for the purchases

and refinancings of their Saxeborough, Lost Angel, 6 Ave. and California Ave. properties. th

For each loan application, she compared the information related to each mortgage liability

listed in the “Liabilities” section and the information provided in connection with each

property listed in the SREO (including properties other than Saxeborough, Lost Angel, 6

th

Avenue, and California Avenue) to the information on the loans taken by one or more of

the subjects against their Saxeborough, Lost Angel, 6 Avenue, and California Ave. th

properties. She used her summary of the loan identification numbers and lender/servicer

names as and aid. Her examination revealed that in most instances:

a. the outstanding balances on the mortgage liabilities listed in the

“Liabilities” section of the loan applications corresponded to the

balances on the loans the subjects had taken to refinance their

Saxeborough, Lost Angel, 6 Ave, and California Ave. properties; th

b. the monthly payment amounts for the mortgage liabilities listed in the

“Liabilities” section of the loan applications corresponded to the

monthly payment amounts for the prior outstanding mortgages the

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Case No. 1:11-cr-00355-MSK Document 161 filed 10/17/12 USDC Colorado pg 11 of 32
subjects had obtained for the purchase or refinancing of their 

Saxeborough, Lost Angel, 6 Ave. and California Ave. properties; th

c. the lenders’ names, account numbers, outstanding balances, and

monthly payment amounts set forth in the “Liabilities” section of the

loan applications corresponded to particular debts on the credit

reports in the same loan file; and

d. taking into account the various changes to the loan numbers, lenders’

names, and monthly payment amounts, the mortgage liabilities listed

in the “Liabilities” section of the loan applications corresponded to the

notes and deeds of trust for the subjects’ prior outstanding mortgages

on the Saxeborough, Lost Angel, 6 Ave., and California Ave. th

properties. 

Ms. Chamberlin’s specific expert opinions which were the product of her application

of the methodology described above in Part II and in this Section III A are set forth in

Parties’ Second Amended Joint Motion Under Fed.R.Evid. 702 (Doc. 160 at 3-63). By way

of example, key documents relating to Ms. Chamberlin’s Opinions #A8(a) and #A8(g)

appear in Attachment 4 hereto; key documents relating to Opinion #A27(k) appear in

Attachment 5 hereto.

B. Ms. Chamberlin’s Analysis as to Whether the Loan Proceeds from Each

Refinancing of Saxeborough and Lost Angel Were Used to Promptly Pay Off

the Prior Outstanding Mortgage as Required by the Lender

1. Analysis of available data: Based on her knowledge, experience, and

training, Ms. Chamberlin knew that the majority of the proceeds for the refinancing of a

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Case No. 1:11-cr-00355-MSK Document 161 filed 10/17/12 USDC Colorado pg 12 of 32
mortgage should be used to promptly fund the payoff of the loan being refinanced. Even

so, as a result of her above-described analysis of each of the Saxeborough and Lost Angel

loan applications and credit reports relating to those applications, she could see that

numerous prior loans for Saxeborough, Lost Angel, 6 Ave., and California Ave. appeared

th

to be outstanding long after they should have been paid off. Although many of the

mortgage liabilities on the subjects’ loan applications appeared to correspond to other

properties listed on their Schedule of Real Estate Owned, Ms. Chamberlin had concluded

that those liabilities actually corresponded to the subjects’ Saxeborough, Lost Angel, 6

th

Ave., and California Ave. properties. (See Section III A, above).

By examining the HUD-1 Settlement Statements in the lenders’ files for the subjects’

refinancings of Saxeborough and Lost Angel, she could see that one of the subjects’

companies usually served as the settlement agent at the closing. Based on her knowledge,

education, training, and experience as a certified fraud examiner, Ms. Chamberlin was

aware that the settlement agent at a loan closing typically receives the loan proceeds from

the lender in escrow, and is required to disburse those funds as directed by the lender. 

In examining the subjects’ business bank account records, and in particular the

account records of their title and escrow companies, Ms. Chamberlin could see numerous 7

deposits of what appeared to be loan proceeds. However, she saw very few withdrawals

which would be consistent with payoffs following those deposits. 

Initially, Ms. Chamberlin was aware that one or more of the subjects controlled 7

CCCT and RET. As the investigation progressed, she became aware of other

companies one or more of them controlled, including Paradigm Escrow and Title, LLC

and Escrow Closing Services, LLC, and others not relevant to this particular analysis.

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2. She formed the following hypothesis: Proceeds of the subjects’ loans for their

refinancings of Saxeborough and Lost Angel were not used to promptly pay off the prior 

outstanding mortgages, as required by the lenders.

3. She then tested the hypothesis: In order to determine whether or not the loan

proceeds were used to promptly pay off the prior outstanding mortgage as required by the

lender, Ms. Chamberlin had to first determine where the proceeds had been deposited. 

Ms. Chamberlin expected to see that the proceeds were deposited into a bank account of

the entity which served as the settlement agent for the loan (in this case, usually CCCT or

RET).

Deposits of the Proceeds

Based on her knowledge, experience, and training as a certified fraud examiner,

Ms. Chamberlin knew that the dollar amount of the loan proceeds is neither the dollar

amount on the promissory note nor any amount listed on the HUD-1 Settlement Statement. 

Therefore, to determine where the proceeds were deposited, Ms. Chamberlin had to first

identify the specific amount of the loan proceeds. 

Based on her knowledge, experience, and training, Ms. Chamberlin also knew that

the disbursement of loan proceeds does not always occur on the date of the closing. The

lenders’ records did not usually identify the amount and date of the disbursement or the

bank account into which the proceeds were deposited. The bank records revealed only

pieces of information that helped Ms. Chamberlin identify the loan. 

Ms. Chamberlin examined documents the lenders had provided to determine

whether any of those documents revealed the amount of the proceeds and to what

particular bank account the proceeds were deposited. Although in a few cases, Ms.

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Chamberlin could rely solely on a document provided by a lender which identified the bank

account, the deposit date, and the amount of the proceeds, in most cases the lenders'

records did not contain such information. Since Ms. Chamberlin did not have the

settlement agents’ records, which typically contain that information, she relied on her skills

and training as a certified fraud examiner to identify the amount of the proceeds, the date

of the deposit of the proceeds, and the specific bank account into which the proceeds had

been deposited.

She next examined the bank account records for CCCT and RET. On the account

statements, she noticed multiple deposits of what appeared to be proceeds for loans. 

Since any title or escrow company would be expected to receive loan proceeds on a

regular basis, Ms. Chamberlin needed to narrow her review of the deposits in these bank

accounts. She did so by concentrating her search around the time of each of the loan

closing dates for the subjects’ refinancings of their Saxeborough and Lost Angel loans.

She observed that the bank account records for deposits and incoming wire

transfers sometimes provided information that identified the loan and/or lender. In some

cases, the records identified the lender by name and the loan by the loan identification

number. In those cases, Ms. Chamberlin, using her summary of loan identification numbers

(Attachment 2) as an aid, concluded that the deposit constituted the proceeds of a

particular known loan. 

In other cases, the bank account records provided very little, if any, information

which would identify the loan. In those cases, she could sometimes conclude that a

particular deposit was the loan proceeds for a particular loan based on the following: the

date of the deposit was close in time to the date of the loan closing; the amount of the

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Case No. 1:11-cr-00355-MSK Document 161 filed 10/17/12 USDC Colorado pg 15 of 32
deposit corresponded to the original loan amount; and her summaries of all of the bank

accounts, both personal and business, indicated that no other deposit corresponded to the

particular loan proceeds she was reviewing. 

For each deposit of funds which appeared to be a deposit of loan proceeds for the

subjects’ loans into one of the accounts controlled by one or more of the subjects, Ms.

Chamberlin followed the same procedure. In this manner, she concluded that not all of the

loan proceeds deposited into accounts controlled by the subjects corresponded to their

refinancings of Saxeborough and Lost Angel, but that some of the deposits were the

proceeds of John Gallegos’ refinancings of his California Ave. property.

Identification of Prior Outstanding Mortgages to be Paid Off

Once Ms. Chamberlin had identified particular deposits as the proceeds of particular

known loans, she determined which prior outstanding mortgage the lender had designated

to be paid off as a condition of the approval of each loan. She examined the HUD-1

Settlement Statement as well as any payoff statement that may have been provided by the

lender associated with that refinancing. She noticed that the HUD-1 Settlement Statement

typically only showed the lender of the loan to be paid off and not the particular loan

number. If the payoff statement provided a loan number which corresponded with a

particular loan she had identified, she concluded that was the loan designated to be paid

off with the proceeds of the new loan. 

If a payoff statement had not been provided by the lender, Ms. Chamberlin

had to use her expertise as a certified fraud examiner to determine which loan the lender

had designated to be paid off with the proceeds of the new loan. Based upon her abovedescribed analysis of the loan applications, Ms. Chamberlin was aware that only one

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Case No. 1:11-cr-00355-MSK Document 161 filed 10/17/12 USDC Colorado pg 16 of 32
outstanding mortgage for Saxeborough or Lost Angel had been disclosed on the loan

application. She therefore reviewed the loan application to determine which outstanding

loan for Saxeborough or Lost Angel had been disclosed. She concluded that the sole

outstanding loan for that property which had been disclosed to the lender was the loan that

had been designated by the lender as the loan to be paid off with the proceeds of the new

loan.

Use of the Proceeds

With the aid of her summaries of bank account transactions, Ms. Chamberlin then

examined the withdrawal activity following the deposit of the particular proceeds. In many

cases, she observed that the proceeds or portions of the proceeds had been transferred

to other accounts over which one or more of the subjects had control. She then examined

the withdrawal activity in that account or accounts to determine whether the proceeds had

been used to pay off any prior outstanding mortgage, and in particular, the prior

outstanding mortgage designated by the lender to be paid off as a condition of the approval

of the loan.

To determine if the proceeds thus traced were used to pay off a particular loan, Ms.

Chamberlin analyzed her bank account summaries to see whether there was a large

withdrawal which would correspond to the loan designated as the loan to be paid off

following the deposit of proceeds for a particular loan.

Ms. Chamberlin concluded that in all but one instance, the proceeds from the loans

for Saxeborough and Lost Angel were not used to pay off the prior outstanding mortgage

designated by the lender to be paid off as a condition of the approval of the loan. Ms.

Chamberlin also concluded that on some occasions, the loan proceeds were used to pay

17

Case No. 1:11-cr-00355-MSK Document 161 filed 10/17/12 USDC Colorado pg 17 of 32
off a prior outstanding mortgage other than the one designated by the lender to be paid off

as a condition of the approval of the loan.

Her specific opinions that the proceeds of certain loans were deposited into certain

bank accounts on certain dates, and her specific opinions as to whether those particular

proceeds were used to pay off the prior mortgages designated by the lender to be paid off

as a condition of the approval of the loan, all of which are the product of her application of

the methodology described above in Part II and this Section III B, are set forth in the

Parties’ Second Amended Joint Motion Under Fed.R.Evid. 702 (Doc. 160 at 64-78). By way

of example, key documents relating to Ms. Chamberlin’s Opinions #B14(a) and #B14(b)

appear in Attachment 6 hereto.

C. Ms. Chamberlin’s Analysis as to Whether Monthly Payments Were Made from

Accounts Controlled by One or More of the Subjects for Each Loan Listed as

an Outstanding Mortgage Liability in the “Liabilities” Section of the Loan

Applications for the Refinancings of Saxeborough and Lost Angel. 

I. Analysis of available data: As Ms. Chamberlin was analyzing the Liabilities

and Schedule of Real Estate Owned sections of the subjects’ loan applications, she

observed that there were outstanding mortgage loans listed as liabilities. Her analysis of

those applications led her to conclude that those outstanding mortgages did not relate to

the properties listed on the subjects’ Schedules of Real Estate Owned, but rather to their

prior outstanding mortgages on their Saxeborough, Lost Angel, 6 Ave., and California

th

Ave. properties. (See Section III A, above).

In reviewing the subjects’ bank account records, Ms. Chamberlin observed that in

many of the accounts, there were multiple payments to various lending institutions which

appeared to be monthly payments to mortgage lenders. In reviewing the lenders’ records,

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Case No. 1:11-cr-00355-MSK Document 161 filed 10/17/12 USDC Colorado pg 18 of 32
she knew that some payments had been made on particular loans. In addition, Ms.

Chamberlin’s analysis of whether the loan proceeds were used to pay off the outstanding

mortgages had led her to conclude that proceeds of the loans had been deposited to bank

accounts controlled by the subjects, but that those funds, for the most part, had not been

used to pay off the outstanding mortgage being refinanced. (See Section III B, above).

II. The hypothesis: For each of the loans for Saxeborough, Lost Angel, 6th

Avenue and California Ave., monthly mortgage payments were made with funds held in

accounts over which one or more of the subjects had control.

III. Testing the hypothesis: Ms. Chamberlin compared the lenders’ payment

records to the subjects’ bank account records to see if she could identify a bank withdrawal

which corresponded to the payment received. The bank records did not usually readily

identify to which loan a payment had been made, and the lenders’ records rarely identified

the bank account from which the payment had been made. The lenders did not always

provide complete payment records, if any. 

As a result, Ms. Chamberlin could not usually readily identify from her examination

of the bank records, which loans were associated with which payments. Similarly, from her

examination of the lenders’ records alone, she could rarely identify which bank account

was associated with which payment.

To test her hypothesis, Ms. Chamberlin looked first to determine whether the lender

had provided a payment history. If it had, she reviewed all of her bank account summaries

to identify the related payments. She examined the dates of the payments, the amounts

of the payments, the payees, and any original and successive loan identification numbers

set forth in the payment histories and the bank records. Where the information from the

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payment history corresponded to the information from the bank records relating to a

particular withdrawal, she concluded that the withdrawal was a payment on the loan for

which the payment history had been provided.

If the lender had not provided a payment history, Ms. Chamberlin reviewed the bank

records for withdrawals which referenced a loan identification number, were payable to a

lender, and occurred monthly. If she found such a withdrawal, she reviewed her loan

identification number summary to see if she had previously linked that identification

number to a particular loan. If she had, she concluded that the withdrawal was a payment

that had been made on that loan. 

In some instances, where a payment history was not provided by the lender and

the bank record did not provide the loan identification number, Ms. Chamberlin looked

elsewhere to find information which would link the withdrawal to a specific loan. For

example, in some instances, she compared the date and amount of the withdrawal in the

bank records to the initial monthly payment for the loan and first payment due date as set

forth in the promissory note or other initial payment documentation prepared for the loan

closing. Where this information linked the payment to the loan, she concluded that the

withdrawal was a payment on that loan. If she saw that the same amount was withdrawn

from a bank account the next month, she concluded that the withdrawal was a payment

on that loan. Ms. Chamberlin continued to identify each monthly payment for each loan

in a similar fashion. 

Ms. Chamberlin also reviewed records from Speedpay, an electronic bill-paying

service. Speedpay provided documentation as to some payments on some loans. The

Speedpay documents included information which identified the loans by lender name, loan

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identification number, approximate date the payment would have been withdrawn from the

bank account, the bank account number from which payment was withdrawn, and the

amount of the payment (plus any processing fees). This information helped confirm Ms.

Chamberlin's conclusions regarding some of the monthly mortgage payments on some of

the loans. 

As a result of this analysis, Ms. Chamberlin concluded that for a period of years,

specific monthly mortgage payments had been made with funds from fifteen of the

subjects’ personal and business accounts on specific loans which should have been paid

off previously through refinancing. No one account was used exclusively to make the

payments on a particular loan, and most of the accounts were used to make payments on

several loans. Each of Ms. Chamberlin’s opinions as to which bank account was used to

fund each mortgage payment on the fifty-eight loans which were the subject of her analysis

is listed in the Parties’ Second Amended Joint Motion Under Fed.R.Evid. 702 (Doc. 160

at 79-123). These opinions were the product of her application of the methodology

described in Part II above and this Section III C. By way of example, key documents

relating to Ms. Chamberlin’s Opinion #C1088 appear in Attachment 7 hereto; key

documents relating to her Opinion #C1389 appear at Attachment 8 hereto.

IV. Memorandum of Law

A. Introduction

Federal Rule of Evidence 702 requires that a proffered expert be qualified “by

knowledge, skill, experience, training, or education” to render her opinion, and that the

opinion assist “the trier of fact to understand the evidence or to determine a fact in issue.” 

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This rule also requires that “(1) the testimony is based upon sufficient facts or data; (2) the

testimony is the product of reliable principles and methods; and (3) the expert has reliably

applied the principles and methods to the facts of the case.” Fed. R. Evid. 702. “In the 10th

Circuit, the Rule 702 analysis has two steps: first, the Court determines whether the expert

is qualified to render the proffered opinion, and second, the Court examines whether the

opinion itself is reliable.” United States v. Crabbe, 556 F. Supp. 2d 1217, 1221 (D. Colo.

2008) (citing 103 Investors I, L.P. v. Square D Co., 470 F.3d 985, 990 (10th Cir. 2006));

see Kuhmo Tire Company, LTD., v. Carmichael, 526 U.S. 137, 156-57 (1999) (the Court

is to “decide whether [the proffered] expert had sufficient specialized knowledge to assist

the jurors ‘in deciding the particular issues in the case’” and whether the “principles and

methods employed” by that expert “have been properly applied to the facts of the case”)

(citations omitted).

The party offering the expert testimony has the burden of “establishing that the

pertinent admissibility requirements are met by a preponderance of the evidence.” United

States v. Nacchio, 555 F.3d 1234, 1251 (10th Cir. 2009) (citation omitted). The proponent

is not required to prove that the opinion is objectively correct, but rather, “only that the

witness has sufficient expertise to choose and apply a methodology, that the methodology

applied was reliable, that sufficient facts and data as required by the methodology were

used and that the methodology was otherwise reliably applied.” Crabbe, 556 F. Supp. 2d.

at 1221 (citations omitted). 

B. Non-Scientific Expert

In Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 589 (1993),

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the Supreme Court focused on the admissibility of scientific expert testimony and set forth

the district court’s gatekeeping obligation to determine that such testimony “both rests on

a reliable foundation and is relevant to the task at hand.” Id. at 597. In Kuhmo Tire, the

Supreme Court determined that Daubert also applies to testimony based on “technical” and

“other specialized” knowledge. Kuhmo Tire, 526 U.S. at 141. In non-scientific cases, “the

relevant reliability concerns may focus upon personal knowledge or experience” of the

proffered expert. Kuhmo Tire, 526 U.S. at 150. The Court pointed out that “no one denies

that an expert might draw a conclusion from a set of observations based on extensive and

specialized experience.” Id. at 156; see also Crabbe, 556 F. Supp. 2d at 1222 (Rule 702

is not limited to scientific opinions “but instead, is an inquiry into whether the methodology

is a scientific or logical method that can be replicated and validated”) (citing Kuhmo Tire,

526 U.S. at 152)). Federal Rules of Evidence 702 and 703 provide expert witnesses

testimonial latitude based on the “assumption that the expert’s opinion will have a reliable

basis in the knowledge and experience of his discipline.” Daubert, 509 U.S. at 592.

C. Certified Fraud Examiner and Certified Public Accountant Dana Chamberlin

Ms. Chamberlin is a Certified Fraud Examiner (CFE) and Certified Public Account

(CPA). Ms. Chamberlin has been a CFE for thirteen years and a CPA for over twenty-one

years. For the last twenty years, Ms. Chamberlin has worked as a financial analyst with

the FBI and as an auditor with the United States Attorney’s Office. In those capacities, she

has focused on the analysis of various topics which arise in wire fraud, mail fraud, bank

fraud, mortgage fraud, securities fraud, and money laundering investigations. The United

States seeks to introduce the expert opinions reached by Ms. Chamberlin in analyzing

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certain aspects of the evidence in this case. Individuals with credentials such as Ms.

Chamberlin’s have routinely been allowed to offer expert opinions. United States v.

Cantwell, 41 Fed. App’x 263, 269-70 (10th Cir. May 15, 2002) (district court did not abuse

its discretion in allowing CFE as an expert to testify about pyramid schemes and their

characteristics); Lindley v. Lindley, Nos. 92-6067, 92-6081, 1993 WL 279764, at *2 (10th

Cir. July 19, 1993) (rejecting defendant’s challenge to the qualifications of plaintiff’s expert

witness who was a CPA and CFE with extensive experience in fraud investigation).

D. Methodology

Consideration of a proposed expert’s methodology entails two inquiries: “(I) what

methodology did the witness use to reach the opinion; and (ii) is that methodology

generally deemed ‘reliable’ in the field in which the expert works.” Crabbe, 556 F. Supp.

2d at 1222. The methodology used by Ms. Chamberlin is described above. 

In determining whether a proposed expert’s testimony is reliable, Daubert identified

a number of factors that the district court may consider, which factors are geared more

toward scientific testimony. Daubert made clear that these factors do not constitute a

8

“definitive checklist or test,” but rather must be tied to the facts of a particular case. 

Daubert, 509 U.S. at 591-93. Accordingly, the Court in Kuhmo Tire held that “[t]he factors

identified in Daubert may or may not be pertinent in assessing reliability, depending on the

nature of the issue, the expert’s particular expertise, and the subject of his testimony.” 526

 These factors include 1) whether a “theory or technique . . . can be (and has

8

been) tested”; 2) whether it “has been subjected to peer review and publication”; 3)

whether, in respect to a particular technique, there is a high “known or potential rate of

error” and whether there are ‘standards controlling the technique’s operation” and 4)

whether the theory or technique enjoys “general acceptance” within a “relevant scientific

community.” Daubert, 509 U.S. at 592-94.

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U.S. at 150 (citation omitted). The district court is granted “broad latitude to determine”

whether Daubert’s specific factors “are or are not reasonable measures of reliability in a

particular case.” Id. at 153. 

“[I]t is the specific relation between an expert’s method, the proffered conclusions,

and the particular factual circumstances of the dispute, and not asymptotic perfection, that

renders testimony both reliable and relevant.” Bitler v. A.O. Smith Corp., 400 F.3d 1227,

1233-34 (10th Cir. 2004). Indeed, “a methodology that does not enjoy peer review or

testing may nevertheless be reliable simply because it constitutes a generally-accepted

practice in the discipline.” Crabbe, 556 F. Supp. 2d at 1223 (citing Bitler, 400 F.3d at

1235). The inquiry is whether “the methodology is a scientific or logical method that can

be replicated and validated.” Crabbe, 556 F. Supp. 2d at 1222; see also Orth v. Emerson

Electric Co., 980 F.2d 632, 637 (10th Cir. 1992) (pre-Daubert opinion holding that “as long

as a logical basis exists for an expert’s opinion . . . the weaknesses in the underpinnings

of the opinion[ ] go to the weight and not the admissibility of the testimony”) (citation

omitted); Werth v. Makita Electric Works, LTD., 950 F.2d 643, 651-52 (10th Cir. 1991) (preDaubert opinion holding the same). “Once a court is satisfied that the methodology is

generally reliable, suggestions that the witness should have engaged in additional testing

to achieve certainty in his or her conclusions are matters going to the weight of the opinion,

not its admissibility.” Crabbe, 556 F. Supp. 2d at 1223 (citing Bitler, 400 F.3d at 1236 &

n.2).

In addressing non-scientific disciplines where the opinion addresses “a factual issue

of consequence to the legal regime underlying a claim or defense, where the use of

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professional judgment may produce a broad range of acceptable opinions, so long as the

expert possesses at least one of the qualifying attributes listed in Rule 702 (specialized

knowledge, skill, education, experience or training), has employed a methodology

recognized in the profession or by the courts, and can identify the source of the facts and

data underlying the opinion (demonstrating a connection of the opinion to the facts of the

case), a probing cross-examination and presentation of opposing experts and evidence will

permit the fact-finder to judge the soundness of the expert’s judgment, as well as the

expert’s credibility and potential bias, in order to assess how much weight to accord the

expert’s opinion.” In re Commercial Financial Services, Inc. v. Chase Manhattan Bank

USA, N.A., 350 B.R. 520, 528-29 (N.D. Ok. 2005).

Finally, the proponent of the expert opinion must show that the witness gathered

“sufficient facts and data” to formulate the opinion, and that she “reliably applied the

methodology” to those facts and data. Crabbe, 556 F. Supp. 2d at 1223. 

E. Relevance

The district court must also determine whether the proposed testimony is “relevant

to the task at hand.” Daubert, 509 U.S. at 597. The Court in Daubert described

consideration of relevant evidence as one of “fit.” Id. at 591 (citation omitted). In making

this determination, the Court “must look at the logical relationship between the evidence

proffered and the material issue that evidence is supposed to support to determine if it

advances the purpose of aiding the trier of fact.” Bitler, 400 F.3d at 1234.

F. Lay Versus Expert Testimony

Lay testimony is not permitted as to matters “which are beyond the realm of

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common experience and which require the special skill and knowledge of an expert

witness.” James River Ins. Co. v. Rapid Funding, LLC., 658 F.3d 1207, 1214 (10th Cir.

2011) (citation omitted); see id. at 1214 (“a person may testify as a lay witness only if his

opinions or inferences do not require any specialized knowledge and could be reached by

any ordinary person”); United States v. Mejia, 545 F.3d 179, 194 (2nd Cir. 2008)

(“[t]estimony is properly characterized as ‘expert’ only if it concerns matters that the

average juror is not capable of understanding on his or her own”). “[K]nowledge derived

from previous professional experience falls squarely within the scope of Rule 702 and thus

by definition outside of Rule 701.” James River, 658 F.3d at 1215 (citation omitted).

In Mejia, an investigator with the New York State Police Department was qualified

as an expert to testify, inter alia, about the background, structure and activities of the MS13 gang. Defendants argued that several portions of the law enforcement officer’s

testimony were outside the scope of expert testimony because that testimony was readily

understandable by the jurors. 545 F.3d at 194-95. The officer testified, among other

things, to the number of firearms and ammunition seized by the FBI from the MS-13 gang,

that members of the gang had been arrested on Long Island for dealing narcotics, and that

the gang had committed between 18 and 23 murders between June 2000 and the trial. Id.

at 194-95. On appeal, the Second Circuit held that no expertise was “required to

understand any of these facts. Had the government introduced lay witness testimony,

arrest records, death certificates, and other competent evidence of these highly specific

facts, the jury could have ‘intelligently’ interpreted and understood it.” Id. at 195. The

Court noted that “[e]xpert testimony might have been helpful in establishing the relationship

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between these facts and MS-13, but it was not helpful in establishing the facts themselves.” 

Id. (emphasis added).

In the instant case the government intends to offer the expert opinions of Ms.

Chamberlin as to (1) the inter-relationships among certain liabilities listed on the

defendants’ loan applications, certain information provided in the Schedules of Real Estate

Owned on those applications, mortgage liabilities listed on the credit reports used in the

application process for those loans, and the defendants’ prior mortgages; (2) whether the

loan proceeds from particular loans were used to promptly pay off particular prior

outstanding mortgages as required by the lenders; and (3) the linkage between specific

monthly payments made from accounts controlled by one or more of the defendants to the

loans listed as outstanding mortgage liabilities on their loan applications, most if not all of

which should have previously been paid off through refinancing. 

Ms. Chamberlin’s testimony will not be offered as a short-cut to establishing the

underlying facts, as was the witness’ testimony in Mejia. Ms. Chamberlin formed her

opinions by “applying [her] extensive experience and a reliable methodology” to the

evidence. Mejia, 545 F.3d at 197. The source of Ms. Chamberlin’s opinions has been

clearly set forth in discovery, and her opinions are the result of her “synthesis of [these]

various source materials.” Id. 

Unlike Mejia, the government will not attempt to “substitute expert testimony for

factual evidence” of the loan transactions “in the first instance.” 545 F.3d at 195. Adhering

to the holding of Mejia, Ms. Chamberlin will “explain how [she] had pieced together bits of

information from different sources and reached a studied conclusion” pertaining to the

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mortgage loans at issue in this case. Id. at 197-198. This expert testimony will be

necessary to show meaningful connections among many pieces of evidence, and

addresses topics beyond the ken of average juror. Unlike the witness in Mejia, Ms.

Chamberlin will not be merely repeating the contents of the source materials she reviewed

she will explain how she analyzed their contents in order to be able to identify meaningful

connections of materials obtained from different sources. See id. at 198. As stated in Parts

II and III above, Ms. Chamberlin will be “applying [her] extensive experience and a reliable

methodology” to the evidence. See id. at 197; United States v. Christian, 673 F.3d 702,

710 (7th Cir. 2012) (“the government wasn’t merely seeking lay opinion testimony [from

Agent Manns]; the government was asking Agent Manns to bring his experience to bear

on his personal observations and ‘mak[e] connections for the jury based on that specialized

knowledge”) (citation omitted)

The Second Circuit held that the law enforcement officer’s testimony in Mejia

violated Crawford v. Washington, 541 U.S. 36 (2004) in that much of his testimony

“involved merely repeating information he had read or heard.” Mejia, 545 F.3d at 197. In

expressing her opinions, Ms. Chamberlin will not be merely repeating information she has

read or heard. She will be “applying [her] training and experience to the sources before

[her] and reaching an independent judgment”, such that there will be no Crawford problem. 

United States v. Johnson, 587 F.3d 625, 635 (4th Cir. 2009). Each of her expert opinions

will be “an original product that can be tested through cross-examination.” Id.

While Mejia involved the admission of expert testimony which as presented was lay

testimony, the opposite occurred in James River. There, the defendant sought to introduce

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expert testimony from Andrew Miller as to the value of a building destroyed by fire. The

district court ruled that Mr. Miller’s proposed testimony did not meet the requirements of

Rule 702, however, it allowed Mr. Miller to offer his lay opinion as to the building’s

valuation. James River, 658 F.3d at 1211. The Tenth Circuit held that the district court

erred in permitting Mr. Miller to offer his opinions as to the value of the property as lay

opinions: “Mr. Miller’s valuation testimony was expert opinion based on technical or

specialized knowledge and therefore inadmissible under Rule 701(c).” Id. at 1214. The

Tenth Circuit further held that the error was not harmless and therefore reversed the

verdict. Id. at 1219-22.

V. Conclusion

For the reasons set forth above, and based on the evidence and argument the

government will present at the Rule 702 hearing in this matter, the United States submits

that it will establish the Fed.R.Evid. 702 foundational prerequisites for the admission of Ms.

Chamberlin’s opinion testimony.

Respectfully submitted this 17 day of October, 2012. th

JOHN F. WALSH

United States Attorney

By: s/ Linda Kaufman 

Linda Kaufman

Assistant United States Attorney

1225 Seventeenth Street, Suite 700

Denver, Colorado 80202

Telephone: (303) 454-0100

Facsimile: (303) 454-0404

E-mail: Linda.Kaufman@usdoj.gov

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By: s/ Martha Paluch 

Martha Paluch

Assistant United States Attorney

1225 Seventeenth Street, Suite 700

Denver, Colorado 80202

Telephone: (303) 454-0100

Facsimile: (303) 454-0404

E-mail: Martha.Paluch@usdoj.gov

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CERTIFICATE OF SERVICE

I certify that on this 17 day of October, 2012, I electronically filed the foregoing th

GOVERNMENT’SPROFFER RELATING TO THE METHODOLOGYUSED BYWITNESS

DANA CHAMBERLIN AND MEMORANDUM OF LAW with the Clerk of the Court using

the CM/ECF system which will send notification of such filing to the following e-mail

addresses:

Martin Adam Stuart

E-mail: martinstuartlaw@solucian.com

Darlene Ann Bagley

E-mail: bagley@ridleylaw.com

William Lewis Taylor

E-mail: wltaylorpc@gmail.com

Paula M. Ray

E-mail: paulamray@earthlnk.net

 

By: s/ Solange Reigel 

SOLANGE REIGEL

Legal Assistant to AUSA Linda Kaufman

United States Attorney’s Office

1225 - 17 Street, Suite 700 th

Denver, CO 80202

Telephone: (303) 454-0244

Fax: (303) 454-0402

E-mail: solange.reigel@usdoj.gov

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