Court Opinion

ID: 1016091
Source: CourtListenerOpinion
Date Created: 2013-07-04 21:43:25.442937+00
Date Added: 2024-06-11T15:13:43.246381
License: Public Domain

UNPUBLISHED

                   UNITED STATES COURT OF APPEALS
                       FOR THE FOURTH CIRCUIT

                            No. 03-4899

UNITED STATES OF AMERICA,

                                             Plaintiff - Appellee,

          versus

MACY WALKER MCLEAN,

                                            Defendant - Appellant.

                            No. 03-4922

UNITED STATES OF AMERICA,

                                             Plaintiff - Appellee,

          versus

PAUL ZIMMERMAN,

                                            Defendant - Appellant.

                            No. 03-4923

UNITED STATES OF AMERICA,

                                             Plaintiff - Appellee,

          versus
JAMES EDWARD MCLEAN, JR.,

                                           Defendant - Appellant.

                             No. 04-4038

UNITED STATES OF AMERICA,

                                            Plaintiff - Appellee,

           versus

DEBBIE ZIMMERMAN,

                                           Defendant - Appellant.

Appeals from the United States District Court for the Western
District of North Carolina, at Charlotte.  Lacy H. Thornburg,
District Judge. (CR-02-156-T)

Argued:   February 2, 2005                  Decided:   May 2, 2005

Before MOTZ, TRAXLER, and SHEDD, Circuit Judges.

Affirmed in part, vacated in part, and remanded by unpublished per
curiam opinion.

ARGUED: Lawrence Wilson Hewitt, JAMES, MCELROY & DIEHL, P.A.,
Charlotte, North Carolina; Claire J. Rauscher, Charlotte, North
Carolina; Trevor Michael Fuller, Charlotte, North Carolina, for
Appellants. Michael E. Savage, Assistant United States Attorney,
OFFICE OF THE UNITED STATES ATTORNEY, Charlotte, North Carolina,
for Appellee. ON BRIEF: Preston O. Odom, III, JAMES, MCELROY &
DIEHL, P.A., Charlotte, North Carolina, for Appellant James E.
McLean, Jr.; Danielle B. Obiorah, MASON-WATSON, OBIORAH &
SINGLETARY, Charlotte, North Carolina, for Appellant Debbie

                                  2
Zimmerman.   Gretchen C. F. Shappert, United States Attorney,
Jennifer Marie Hoefling, Assistant United States Attorney,
Charlotte, North Carolina, for Appellee.

Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).

                               3
PER CURIAM:

        Defendants were convicted of various charges related to a

mortgage company’s scheme to defraud the Federal National Mortgage

Association (“Fannie Mae”) and the Government National Mortgage

Association (“Ginnie Mae”). Defendants raise several challenges to

their convictions and sentences.            We affirm their convictions, but

we vacate their sentences in light of United States v. Booker, 125

S. Ct. 738 (2005), and remand for resentencing.

                                        I.

     Defendants James and Macy McLean were officers and owners of

First Beneficial Mortgage Corp (“FBMC”), a mortgage company based

in North Carolina.      As a qualified Federal Housing Administration

(“FHA”) lender with direct endorsement authority, FBMC had the

authority to approve mortgage loans for federal FHA insurance.                An

FHA-insured mortgage loan, in turn, is “readily saleable” on the

secondary mortgage market.           FBMC was also an approved Fannie Mae

lender, meaning FBMC could originate a mortgage loan with the

borrower and then Fannie Mae would immediately buy the mortgage on

the secondary market without doing its own underwriting evaluation.

     FBMC created a subsidiary company, First Beneficial Homes

(“FBH”), which was in the business of building modular homes

financed by FBMC.       Paul and Debbie Zimmerman, both of whom were

employed by FBMC, were officers in FBH, as was Macy McLean.                   In

order    to   obtain   funds   for    FBH    to   build   homes,   the   McLeans,

                                        4
Zimmermans and a third couple, the Greens, recruited individuals,

primarily friends and relatives, to sign mortgage loan notes

purporting to secure funds advanced by FBMC for homes that, in

fact, did not exist or were owned by someone other than the

“borrower” named on the note.     The McLeans and Zimmermans induced

these individuals to sign the mortgage notes by paying them various

amounts   to   participate   in   an    “investment”   opportunity   and

representing that, by signing, the “investors” did not actually

incur any repayment obligation.        The McLeans and Zimmermans also

signed similar fictitious mortgage notes themselves.        None of the

individuals signing these documents ever acquired or possessed any

ownership interest in the properties listed on the notes.

     FBMC would then sell these “instruments” to Fannie Mae on the

secondary market, representing by the terms of the note that the

borrower signing the note had an ownership interest in the listed

property, that FBMC had a security interest in the property, and

that the property was of sufficient value to protect the lender --

or any secondary purchaser of the loan such as Fannie Mae -- in the

event of default.   As an approved Fannie Mae lender, FBMC had the

authority to transfer its loans to Fannie Mae without having to

submit the loans to any underwriting review process by Fannie Mae.

Essentially, FBMC was empowered to make underwriting decisions on

behalf of Fannie Mae.

                                   5
       Eventually,    Fannie     Mae     detected      irregularities      in    FBMC’s

underwriting practices and conducted an audit of the loans it had

purchased.     A physical inspection of the properties for which FBMC

had purportedly financed the purchase of a completed home revealed

that the many of the lots were either vacant or contained a

partially completed house.              Additionally, some of the lots that

ostensibly secured mortgage loans already purchased by Fannie Mae

were   being     offered   for    sale.        James      McLean   claimed   that    he

incorrectly assumed that Fannie Mae would purchase construction

loans, which disburse funds in piecemeal fashion as each new phase

of construction begins.           Fannie Mae, however, does not purchase

construction loans, which FBMC was not authorized to sell.                         And,

FBMC had not sold the loans as construction loans to Fannie Mae in

any event.     In November 1998, when FBMC could not account for all

of the irregularities, Fannie Mae suspended FBMC as an approved

lender.

       Faced with the collapse of the Fannie Mae scheme, James McLean

agreed to repurchase the loans FBMC sold to Fannie Mae.                      Although

he told Fannie Mae that he had secured investors willing to fund

the repurchase of these loans, he refused to divulge the identity

of the investors.      In fact, FBMC secured funds to repurchase the

loans by simply continuing the Fannie Mae “investor” scheme with

Ginnie    Mae.       Ginnie      Mae,     which      is    owned    by    HUD,   sells

mortgage-backed      securities        which   are     created     from   “pools”    of

                                           6
mortgage loans.      A qualified mortgage lender originates several

FHA-insured mortgages, “pools” them together, and sells them --

without any review -- to Ginnie Mae.      Ginnie Mae, in turn, sells an

interest in the mortgage pool to investors.        FBMC was qualified as

a Ginnie Mae lender and issuer, meaning that not only did Ginnie

Mae implicitly approve of any mortgage loan extended by FBMC, but

FBMC could actually issue Ginnie Mae securities.

     The McLeans and Zimmermans used the same lots and “investor

scheme” with Ginnie Mae that they had used for Fannie Mae, and the

overall process was essentially the same.           James McLean paid a

commission to the Zimmermans for each “investor” they recruited.

The Zimmermans brought their investors to Macy McLean.           Macy then

gave her assistant these names, along with an address and a

purported loan amount, which the assistant inserted into a mortgage

note.    Ginnie Mae would not accept mortgage loans that were not

federally insured, so one of FBMC’s loan officers was directed to

“supply” an FHA number for the note.       The mortgage notes were then

signed   by   the   “investors,”   and,   as   required   by   Ginnie   Mae,

delivered to FBMC’s Ginnie Mae document custodian, BB&T bank, for

initial certification.      James and Macy McLean also had to file

certain information electronically.        FBMC then issued securities

which were sold to Ginnie Mae investors.          The purchase price was

wired to FBMC’s account at BB&T.

                                    7
     FBMC also obtained a line of credit at BB&T to fund loans to

its customers.    As collateral to secure the line of credit, FBMC

supplied BB&T with fictitious mortgage notes signed by “investors”

who had no ownership interest in the property purportedly secured

by the note.     Although the line of credit was to be used by FBMC

strictly for funding mortgage loans to FBMC clients, FBMC used line

of credit money to pay down the fictitious loans sold to Ginnie Mae

as well as to repurchase loans from Fannie Mae.

     The government’s evidence showed that only seven percent of

the proceeds from the sale of the fictitious notes to Ginnie Mae

went to fund legitimate expenses such as construction and land for

FBH’s business.    One million dollars was allocated to the growing

monthly payments on the increasing number of false mortgage notes,

and approximately $340,000 was paid out to the Zimmermans and the

Greens   for    commissions.     The   Zimmermans   used   structured

transactions to deposit half of this into their personal accounts.

And $7.5 million of the Ginnie Mae funds were simply transferred to

Fannie Mae to repurchase the false notes.

     The charges set forth in the 66-count indictment fell into

eight groups:     wire fraud to sell fraudulent mortgages to Fannie

Mae; wire fraud through the transmission of false HUD documents to

secure Ginnie Mae mortgage securities; submitting false statements

in connection with the Ginnie Mae scheme in violation of 18 U.S.C.

§ 1001; making false entries on monthly status reports required by

                                  8
HUD in violation of 18 U.S.C. § 1006;          making and passing false

mortgage notes to influence HUD in violation of 18 U.S.C. § 1010;

bank fraud against BB&T in violation of 18 U.S.C. § 1344; money

laundering under 18 U.S.C. § 1956; and conspiracy to commit the

above-mentioned substantive offenses.

     James McLean was convicted on all 66 counts.          Macy McLean was

convicted on all counts except those relating to the entry of

monthly status reports required by HUD in violation of 18 U.S.C.

§ 1006; and Paul and Debbie Zimmerman were convicted of conspiracy

and of passing to HUD false mortgage notes dated after February 1,

2000, in violation of 18 U.S.C. § 1010.

                                    II.

     Defendants raise a number of challenges to the district

court’s jury instructions.         We review both “[t]he decision of

whether   to   give   a   jury   instruction   and   the   content   of   an

instruction . . . for abuse of discretion.”            United States v.

Abbas, 74 F.3d 506, 513 (4th Cir. 1996).       Finding no such abuse of

discretion by the district court, we conclude that defendants’

arguments are without merit.

                                     A.

     Macy McLean and the Zimmermans argue that the district court

abused its discretion in giving the jury a willful blindness (or

deliberate avoidance) instruction.         The district court gave a

lengthy “good faith” instruction, explaining that good faith was a

                                     9
defense   that,    if   proven,     was    inconsistent     with   an   intent    to

deceive. As part of the good faith instruction, the court charged:

“a defendant also does not act in good faith if the government

proves . . . she deliberately closed [her] eyes to what would

otherwise have been obvious.”             J.A. 2010-11.

       A willful blindness instruction is proper “when the defendant

asserts a lack of guilty knowledge but the evidence supports an

inference of deliberate ignorance.”                See Abbas, 74 F.3d at 513

(internal quotation marks omitted).              If the evidence supports such

an inference, then the willful blindness instruction “allows the

jury to impute the element of knowledge to the defendant.”                 United

States    v.    Schnabel,     939    F.2d      197,   203   (4th    Cir.   1991).

Furthermore, a willful blindness instruction is proper “where the

evidence presented in the case supports both actual knowledge on

the part of the defendant and deliberate ignorance.”                    Abbas, 74

F.3d at 513.     Macy McLean and both Zimmermans claim that they acted

in good faith and lacked the requisite guilty knowledge to support

a conviction on any of the charges against them.                   However, while

there is clearly evidence that would permit the jury to find actual

knowledge, the evidence also supports the conclusion that if they

were    not    specifically    aware      that    they   were   defrauding       the

government, they were willfully blind to that fact.

       With respect to Macy McLean, she claims that “throughout the

trial, she continually contested that she did not knowingly or

                                          10
intentionally attempt to defraud Fannie Mae, Ginnie Mae, or BB&T;”

that   she   did   not   “knowingly   make   false    entries,    [or]   false

statements;” or that she did not “knowingly launder money” or “aid

or abet others in any criminal activity.”            Brief of Appellants at

29.    Specifically, Macy took the position that she had no real

input into how FBMC was run, that her husband exercised substantial

control   over     her   employment   activities,    and   that   she    merely

followed his directives.       The evidence, however, showed that Macy

was an officer of FBMC; that she was in charge of payroll and loan

funding; that she handled questions from FBMC’s document custodian

for the Ginnie Mae mortgage notes; that she created the bogus

mortgage notes; that she told the “investors” that they would not

have to pay money on the notes they signed; that she endorsed the

notes over to Fannie Mae; and that she offered a former FBMC

employee $5,000 to use her son’s name on a mortgage loan.

       As for the Zimmermans, they contend there is no evidence that

either of them understood how the mortgage transactions worked such

that they would know the transactions were improper, and both

indicated that they were unaware that the notes being signed by the

investors were being submitted to quasi-governmental bodies.                We

disagree.     Evidence of their actual knowledge of the scheme to

defraud the government included Paul Zimmerman’s testimony that he

and his wife heard James McLean say that FBMC was “HUD-supported”

and that he understood the mortgage notes that they were having

                                      11
executed bore an FHA number and other FHA markings.          It also

included the testimony of Eric Brown, who explored the possibility

of financing a family-owned real estate venture through FBMC in the

early part of 2000.   Upon arriving at FBMC for what Brown believed

was a preliminary meeting, Debbie Zimmerman presented him with

mortgage documents bearing his name and the names of his parents as

the purported debtors. Brown testified that Debbie told him he had

to sign the notes immediately so the documents could be sent to HUD

for processing.     When Brown balked at signing and asked if his

attorney could review the documents, James McLean explained, with

Debbie Zimmerman present, that the scheme was “legal, but . . . not

really legal.”    J.A. 1056.   Paul Zimmerman explained to Brown that

if they signed, they would have no obligation under the notes, and

that FBMC was obtaining its financing through some federal agency.

Debbie Zimmerman’s brother testified that she approached him, but

that he objected when he learned that the note would be used to

obtain funds from Fannie Mae.

     Additionally, there was evidence from which a jury could have

inferred that Macy McLean and the Zimmermans were aware or closed

their eyes to the fact that the mortgage notes contained false

information; that no houses were being sold in connection with

these loans; and that “investors” were receiving money for signing

and that they were not going to be obligated under the note.    This

evidence would support an inference of deliberate ignorance.     The

                                   12
district court, therefore, did not err by instructing the jury on

willful blindness.

                                    B.

      Defendants take exception to the district court’s refusal to

give a “good faith” instruction on the counts alleging the passing

of false mortgage instruments to HUD under § 1010.       The court gave

a lengthy instruction on “good faith” as a “complete defense” to

conspiracy and the court reminded the jury of good faith when

instructing on wire fraud, bank fraud, and money laundering.           The

court, however, refused to give an additional instruction on good

faith with respect to the passing of a false mortgage instruments

under § 1010.

      The statute says:

           Whoever, for the purpose of obtaining any loan . .
      . from any person . . . with the intent that such loan .
      . . shall be offered to or accepted by [HUD] 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,
      or . . . forges, or counterfeits any instrument, paper,
      or document, . . . knowing it to have been . . . forged,
      or counterfeited . . . [is subject to 2 years in prison].

18 U.S.C. § 1010.

      Defendants do not challenge the elements as charged by the

court.   Rather, defendants argue that they were entitled to a good

faith instruction because they held a good faith belief that they

were participating in a lawful investor program.       We disagree.    On

the   knowledge   element,   the   district   court   charged   that   the

                                    13
Government was required to prove defendants “knew that the mortgage

notes were actually false or counterfeited” and that they “knew

[the notes] would be offered for some purpose to HUD.”    J.A. 2040-

41.   This is consistent with 18 U.S.C. § 1010.   Defendants’ desire

to have good faith charged does not correspond to the elements of

this offense.   As long as defendants knew the information on the

documents they procured was false and that the documents were

headed to HUD (i.e., Ginnie Mae), defendants’ belief that the

scheme was lawful, even if true, was not a defense.

      Accordingly, we conclude that the district court did not abuse

its discretion in refusing to charge good faith in connection with

the § 1010 counts.*

                                III.

      Macy McLean next argues that the district court abused its

discretion by refusing to permit her to introduce details regarding

her children’s health problems.    Part of Macy’s defense was that

she was so busy homeschooling her six children and caring for her

daughters, who suffer from rickets, that she did not have the time

or energy to investigate the propriety of FBMC’s activities.

Although the district court refused to permit evidence providing

specific details about the children’s condition, it allowed general

      *
      We also reject, after careful consideration, the related
argument by Macy McLean and the Zimmermans that the district court
erred in failing to charge the jury that their reliance on the
expertise of James McLean was a defense to the charges.

                                  14
testimony that the children suffered physical ailments that added

to   Macy’s   family     responsibilities.        The     district   court        also

permitted the name of the girls’ medical condition to come in

before the jury.       Macy contends that the court’s refusal to allow

this additional evidence hurt her rebuttal of the willful blindness

theory -- that she was far too overloaded to notice and purposely

ignore wrongdoing.

      We disagree.       The additional questions proffered by defense

counsel did not add much, focusing on the fact that Macy was the

one who took the children to the doctor, that all of her time

outside of work was taken up with child care, and that her children

were sometimes in pain.         The excluded details, however, did not

change   Macy’s    substantial     involvement      in    the   details      of   the

transactions.       On    the   other   hand,    the     possibility    of     undue

prejudice to the prosecution was real.             With the prospect of the

father being in prison, it would be tempting for a juror to focus

on the plight of Macy’s six needy children.                     Thus, we cannot

conclude that the district court abused its discretion by excluding

the additional details.

                                        IV.

      Defendants    contend     that    the     evidence    presented     by      the

government was so insufficient that it failed to support the jury’s

finding of guilt on even one of the multiple counts of conviction.

In considering defendants’ incredibly broad argument, we will

                                        15
affirm the jury’s verdict “if there is substantial evidence, taking

the view most favorable to the government, to support it.” Glasser

v. United States, 315 U.S. 60, 80 (1942).        All that is really

necessary is that the evidentiary basis be sufficient to permit “a

reasonable trier of fact [to] have found the defendant guilty

beyond a reasonable doubt.”     United States v. Rahman, 83 F.3d 89,

93 (4th Cir. 1996).    Having carefully reviewed the record evidence

in the light most favorable to the government, we conclude that

there was ample evidence for a reasonable trier of fact to have

found defendants guilty beyond a reasonable doubt on each count of

conviction.

                                   V.

     For each defendant, the district court increased the base

offense level for sentencing according to its determination of the

amount of loss under section 2F1.1(b) of the Sentencing Guidelines.

Defendants argue that the district court erred in imposing a

sentence based on facts not found by the jury, in violation of the

Sixth Amendment.     See Booker, 125 S. Ct. at 756.   Defendants raise

this argument for the first time on appeal.             We agree with

defendants that the district court plainly erred in imposing their

sentences.    See United States v. Hughes, 2005 WL 628224 (4th Cir.

March 16, 2005).      Thus, we vacate the sentences and remand for

resentencing in light of Booker.    In doing so, we note that we have

considered    each   defendant’s   argument   with    respect   to   the

                                   16
application of the guidelines and conclude that the district court

committed no error in that regard.   Thus, on remand the district

court should consider the guideline range previously determined, as

well as other relevant factors set forth in the guidelines and 18

U.S.C. § 3553(a) before imposing sentence.

                                                 AFFIRMED IN PART,
                                                  VACATED IN PART,
                                                      AND REMANDED

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