Court Opinion

ID: 71556
Source: CourtListenerOpinion
Date Created: 2010-04-26 07:19:54+00
Date Added: 2024-06-11T14:58:53.598400
License: Public Domain

United States Court of Appeals,

                             Eleventh Circuit.

                               No. 95-4648.

            UNITED STATES of America, Plaintiff-Appellee,

                                       v.

         Maria J. De CASTRO, a.k.a Fifi, Defendant-Appellant.

                              April 30, 1997.

Appeal from the United States District Court for the Southern
District of Florida. (No. 94-320-CR-EBD), Edward B. Davis, Judge.

                     ON SUA SPONTE RECONSIDERATION

Before TJOFLAT and BLACK, Circuit Judges, and REAVLEY*, Senior
Circuit Judge.

     REAVLEY, Senior Circuit Judge:

     The    prior   panel   opinion,    reported   at   104 F.3d 1289,   is

withdrawn, and the following opinion is substituted in its stead.

Appellant Maria De Castro complains that the district court erred

in failing to let the jury decide the element of materiality in her

trial for making false statements in violation of 18 U.S.C. § 1010.

In light of the Supreme Court's recent decision in United States v.

Wells,1 we conclude that materiality is not an element of this

crime.    We also conclude that the admission of evidence regarding

a government investigation was not plain error.               Accordingly we

affirm.

                                BACKGROUND

     De Castro was charged with conspiracy to make and making false

     *
      Honorable Thomas M. Reavley, Senior U.S. Circuit Judge for
the Fifth Circuit, sitting by designation.
     1
      --- U.S. ----, 117 S. Ct. 921, 137 L. Ed. 2d 107 (1997).
statements to the Department of Housing and Urban Development

(HUD), for the purpose of obtaining federally insured mortgages, in

violation of 18 U.S.C. §§ 371 and 1010.                    She was convicted of

conspiracy and five of the six substantive counts.

     The government's proof showed that De Castro and others

submitted applications for mortgages insured by the Federal Housing

Administration (FHA), an agency within HUD, on behalf of low income

applicants.          The     applications     contained       false     employment

information regarding the applicants.               De Castro was a mortgage

broker who acted as an authorized underwriter for the loans.                    De

Castro, two real estate brokers, and several putative "employers"

participated    in     the    scheme   to    obtain    the    government-backed

mortgages.     The "employers" were business owners paid to submit

false   employment     verifications        that    were    part   of   the   loan

documentation. De Castro decided the amount of income indicated in

these documents, so as to meet HUD requirements.                   She signed a

certification form for each of the mortgages, stating that she had

reviewed the case file and found that it met HUD's requirements.

The real estate brokers, Virginia and Osvaldo Labrador, as well as

several of the loan applicants and false employers, testified for

the government.        One of the brokers testified that "with [De

Castro's] signature, the cases could be approved" by the FHA.

     The district court instructed the jury that materiality was an

element   of   the    offense.      The     court   further    instructed     that

materiality was a question of law for the court to decide and that

the court had already determined that the alleged false statements

were material. The defendant objected to the instruction and moved
for a mistrial.             Because it was then well-established in this

circuit that materiality was a question of law,2 the district court

overruled the objection and denied the motion.

           After the Supreme Court's decision in               United States v.

Gaudin, however, we now know that the Constitution requires the

jury       to   determine    whether   a   false   statement    is   material   if

materiality is an element of the offense.3

                                       ANALYSIS

A. Materiality Is Not an Element of 18 U.S.C. § 1010

           Whether materiality is an element of 18 U.S.C. § 1010 is an

issue of law reviewed de novo.4            Section 1010 reads, in pertinent

part:

       Whoever, for the purpose of obtaining any loan ... from any
       person ... with the intent that such loan ... shall be offered
       to or accepted by the Department of Housing and Urban
       Development for insurance, ... or for the purpose of
       influencing in any way the action of such Department, makes,
       passes, utters, or publishes any statement, knowing the same
       to be false ... shall be fined not more than $5,000 or
       imprisoned not more than two years, or both.

       As we noted in the prior panel opinion, the word "material"

does not appear in the statute.             However, in   Gevinson v. United

States, we upheld an indictment charging violations of § 1010

because "[m]ateriality, while not alleged in haec verba, is alleged

       2
      See United States v. Kramer, 73 F.3d 1067, 1074 (11th
Cir.1996) (noting that it was well-established that materiality
was a question of law before Gaudin ).
       3
      United States v. Gaudin, --- U.S. ----, ----, 115 S. Ct.
2310, 2320, 132 L. Ed. 2d 444 (1995) (materiality under 18 U.S.C. §
1001 is a question for the jury); Kramer, 73 F.3d at 1074
(applying Gaudin to 18 U.S.C. § 1623).
       4
      See United States v. Hooshmand, 931 F.2d 725, 737 (11th
Cir.1991) (statutory interpretation is a question of law reviewed
de novo).
in substance and this is sufficient."5      We stated that the evidence

at trial was sufficient to make out a case "of knowingly and

wilfully uttering and passing a false material statement with the
                                                                       6
intent to influence FHA in a transaction pending before FHA."

Relying on Gevinson, we stated in United States v. Black that in

order to obtain a valid conviction under § 1010, "it was necessary

for the government to prove beyond a reasonable doubt that [the

defendant] knowingly made a false statement concerning a material

fact to HUD as charged in the indictment...."7

     We   have   previously   implied   a   materiality   element   into

analogous false statement statutes.     For example, in United States

v. Swearingen, we held that materiality was an element of 18 U.S.C.

§ 1344(a)(2),8 and in United States v. Rapp, we listed materiality

as an element of 18 U.S.C. §§ 1005 and 1014.9

     5
      358 F.2d 761, 763 (5th Cir.), cert. denied, 385 U.S. 823,
87 S. Ct. 51, 17 L. Ed. 2d 60 (1966).
     6
      Id. at 765 (emphasis added).
     7
      644 F.2d 445, 447 (5th Cir.), modified on other grounds,
651 F.2d 392 (5th Cir.1981) (emphasis added).
     8
      858 F.2d 1555, 1556, 1558 (11th Cir.1988), cert. denied,
489 U.S. 1083, 109 S. Ct. 1540, 103 L. Ed. 2d 844 (1989). At the
time, 18 U.S.C. § 1344 stated:

           (a) Whoever knowingly executes, or attempts to execute,
           a scheme or artifice—(1) to defraud a federally
           chartered or insured financial institution; or (2) to
           obtain any of the moneys, funds, credits, assets,
           securities, or other property owned by or under the
           custody or control of a financial institution by means
           of false or fraudulent pretenses, representations, or
           promises shall be fined not more than $10,000 or
           imprisoned not more than five years, or both.
     9
      871 F.2d 957, 963-64 (11th Cir.), cert. denied, 493 U.S.
890, 110 S. Ct. 233, 107 L. Ed. 2d 184 (1989). 18 U.S.C. § 1005
reads in pertinent part:
      In Wells, the Supreme Court held that materiality was not an

element of § 1014.        The Court expressly overruled Rapp.10 It began

its analysis with "a natural reading of the full text" of the

statute, noting that the text of § 1014 does not contain an express

materiality requirement.11            It then rejected the argument that "at

common law the term "false statement' acquired [an] implication of

materiality that came with it into § 1014."12               It noted that § 1014

was originally enacted by Congress as part of its recodification of

the   federal     criminal     code    in   1948,    and   that   materiality      was

included in other provisions involving false representations.13 The

Court therefore inferred that Congress had deliberately chosen not

to include the term materiality in § 1014.                  It also noted that,

despite      amendments   to    the    statute      over   the    years,   the    core

phraseology      criminalizing        "false   statement[s]"       made    "for    the

purpose of influencing" the actions of enumerated institutions had

                   Whoever makes any false entry in any book, report,
              or statement of [any Federal Reserve bank, member bank,
              national bank or insured bank] with intent to injure or
              defraud such bank [or various government actors] shall
              be fined not more than $5,000 or imprisoned not more
              than five years, or both.

              18 U.S.C. § 1014 reads in pertinent part:

                   Whoever knowingly makes any false statement or
              report, or willfully overvalues any land, property or
              security, for the purpose of influencing in any way the
              action of ... any [FDIC-insured bank] upon any ... loan
              shall be fined $5,000 or imprisoned not more than two
              years, or both.
      10
           Wells, --- U.S. at ---- & n. 3, 117 S. Ct. at 925 & n. 3.
      11
           Id. at ---- - ----, 117 S. Ct. at 926-27.
      12
           Id. at ----, 117 S.Ct. at 927.
      13
           Id. at ----, 117 S.Ct. at 928.
not changed.14     The Court also rejected the argument that implying

a   materiality     element   was    necessary    to   prevent    criminalizing

relatively trivial or innocent conduct, and the argument that the

rule of lenity was applicable.15

       We conclude that the reasoning employed by the Court in Wells

when it analyzed § 1014 applies with equal force to § 1010.

Beginning with the text of the statute, § 1010, like § 1014, lacks

an express materiality requirement.             Both were passed as part of

the   1948      recodification,      62   Stat.    751-52.        Section   1010

criminalizes statements made to HUD by one "knowing the same to be

false." Section 1014 applies to one who "knowingly makes any false

statement" to the agencies covered.             Like § 1014, § 1010 has been

amended over the years, 16 but the core phraseology describing the

conduct and mens rea of the defendant has not changed.                 We can see

no basis for requiring materiality under § 1010 when the Supreme

Court has ruled that there is no such requirement under § 1014.                 To

the extent that Gevinson and Black hold to the contrary, we

conclude that they have been overruled sub silentio by Wells.

B. Admission of HUD Findings

      De Castro separately argues that the district court erred in

permitting the government to introduce a HUD "finding" of fraud.

Scott Kottman, a loan specialist and investigator for HUD, was the

government's      first   witness.        He   testified   that   he    began   an

      14
           Id. at ----, 117 S.Ct. at 929.
      15
           Id. at ----, 117 S.Ct. at 931.
      16
      See 18 U.S.C.A. § 1010 historical notes (1976 & Supp.1997)
(noting 1967 and 1994 amendments).
investigation after a large number of mortgage defaults in the

Phoenix area.       He noticed that the majority of the bad loans

involved the same broker, Virginia Labrador, and that the same

employers kept appearing in the files.      He then discovered that

home buyers were not employed where the files indicated, and linked

the paperwork in the files to De Castro.    Kottman testified that he

investigated De Castro's company, Phoenix Mortgage, because of

"[t]he unusually large number of false claims."       He went on to

testify that after the investigation De Castro was suspended from

doing business with the FHA. The suspension letter was admitted

into evidence without objection.

     Citing United States v. Christo17 and other authority, De

Castro complains that it is error to allow the introduction of the

results of an agency's "findings" in a criminal trial. She further

argues that the error was compounded by the prosecutor's statements

in his opening and closing arguments, such as the statement in

opening argument that HUD "found evidence of fraud," and the

statement in closing argument that HUD "concluded there was fraud

on the part of Phoenix."

     De Castro concedes that there was not a proper objection to

the evidence or the argument of the prosecutor, and accordingly the

plain error of review standard applies.18
      In Christo, the defendant was convicted of misapplication of

bank funds.      The government's theory was that bank overdrafts in

     17
          614 F.2d 486 (5th Cir.1980).
     18
      See United States v. Olano, 507 U.S. 725, 730-32, 113
S. Ct. 1770, 1776, 123 L. Ed. 2d 508 (1993).
violation      of     a   civil     banking      statute     constituted         criminal

misapplication.           The jury was further instructed that the civil

violation could be considered in deciding criminal liability.                         The

court      found    plain   error      based   on    "the    inclusion      of    [civil]

violations in the case," and "indeed the whole tenor of the

trial."19      In these regards Christo bears little similarity to our

case.      In our case the government never contended, nor was the jury

instructed, that a violation of a civil statute was sufficient to

establish, or even relevant to, guilt under a criminal statute made

the basis of the indictment.

      The error here, if any, does not rise to the level of plain

error.      Kottman did not testify that there was an agency finding of

"fraud."        The government offered extensive evidence from the

participants in the scheme that De Castro submitted fraudulent

documents to HUD. The prosecutor never argued that a HUD finding of

fraud was sufficient to convict De Castro, and instead reminded the

jurors in closing argument of the testimony of ten witnesses

besides Kottman.          Under the plain error standard, De Castro does

not   carry     her   burden      of   showing      that    the   claimed    error    was

prejudicial, meaning "that the error affected the outcome of the

District Court proceedings."20 Even if De Castro had met this prong

of the plain error test, we should not exercise our discretion to

correct a plain error unless the error seriously affected "the

fairness, integrity or public reputation of judicial proceedings."21

      19
           Id. at 492.
      20
           Olano, 507 U.S. at 733-736, 113 S.Ct. at 1778.
      21
           Id. at 730-32, 113 S.Ct. at 1776.
The     error,   if   any,   in   allowing   the   evidence   of   the   HUD

investigation does not satisfy this last element of the plain error

test.

      AFFIRMED.