United States v. Forde ( 2011 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 09-4704
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
RICHARD ADOLPHUS FORDE, a/k/a Euburn Richard A. Forde,
Defendant - Appellant.
Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. Anthony J. Trenga,
District Judge. (1:08-cr-00401-AJT-1)
Argued: October 27, 2010 Decided: January 10, 2011
Before TRAXLER, Chief Judge, DAVIS, Circuit Judge, and Damon J.
KEITH, Senior Circuit Judge of the United States Court of
Appeals for the Sixth Circuit, sitting by designation.
Affirmed by unpublished per curiam opinion.
ARGUED: Elita C. Amato, Arlington, Virginia, for Appellant.
Thomas Higgins McQuillan, OFFICE OF THE UNITED STATES ATTORNEY,
Alexandria, Virginia, for Appellee. ON BRIEF: Neil H. MacBride,
United States Attorney, Alexandria, Virginia, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
Richard Adolphus Forde was convicted of bankruptcy fraud,
see 18 U.S.C.A. § 157 (West Supp. 2010); conspiracy to commit
bankruptcy fraud, see 18 U.S.C.A. § 371 (West 2000); and bank
fraud, see 18 U.S.C.A. § 1344 (West 2000). Forde appeals,
raising various challenges to his convictions. Finding no
reversible error, we affirm.
I.
Viewed in the light most favorable to the government, the
evidence presented at trial established the following. In the
fall of 2001, Forde was facing substantial financial problems
and was on the verge of losing his multi-million-dollar home
through foreclosure. Forde and his wife filed a Chapter 11
bankruptcy petition, and Forde also began working with mortgage
broker David Freelander to try to refinance his mortgage. When
it became clear that refinancing would not be possible, Forde
began seeking a buyer for his house.
Forde contacted Allodean Allobaidy, a real estate broker
who had previously expressed interest in buying the house. When
Allobaidy told Forde that he could not afford the house (which
Forde said was worth more than $2 million), Forde responded,
“Don’t worry about it. I do have someone who could help you out
with that.” J.A. 525. Forde, Allobaidy, and Freelander
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thereafter began discussions about Allobaidy buying the house.
During the course of the negotiations, Allobaidy made it clear
to Forde and Freelander that he would not qualify for a mortgage
loan, that he would not make a down payment, that he would not
make any mortgage payments, and that he should receive a
commission for the sale of the house. The parties ultimately
came up with a deal, and Allobaidy and Forde signed a contract
for the sale of the property.
The contract, which was drafted by Leslie Lickstein,
Forde’s bankruptcy attorney, listed the sales price as
$5,495,000, and required from Allobaidy a down payment of
$450,000; a conventional loan in the amount of $3,846,500, to be
secured by a first mortgage; and a promissory note payable to
Forde in the amount of $1,099,000, to be secured by a second
mortgage. An addendum to the contract established what can only
be described as a “slush fund,” providing that approximately
$700,000 of funds that Forde would receive at closing would be
placed in a separate account as a “move-in and fix-up allowance”
for Allobaidy. J.A. 1326. Allobaidy testified, however, that
the real purpose of the slush fund was to provide funds with
which the first-mortgage payments would be made. Allobaidy also
testified that, despite the terms of the contract, everyone
involved in the transaction knew and agreed that he would not be
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making any down payment, mortgage payments, or payments on the
promissory note.
Lickstein submitted the sales contract to the bankruptcy
court and obtained approval for the sale of Forde’s house.
Lickstein testified that the down-payment and the seller-held
promissory note were very important terms of the contract from
the bankruptcy perspective because the down-payment and the
payments to be made under the note would be available to Forde’s
creditors.
Freelander worked to obtain the first mortgage through
Lehman Brothers Bank. Allobaidy testified that he and
Freelander, with Forde’s knowledge, provided Lehman with false
documents and false information to make Allobaidy appear
qualified for the loan. Among the documents that Freelander
submitted to Lehman was the sales contract. Before submitting
the contract to Lehman, however, Freelander removed the addendum
that established the slush fund, telling Forde and Allobaidy
that Lehman probably would not approve the loan if it knew about
the slush fund.
Lehman approved the loan to Allobaidy, and the sale closed
on June 28, 2002, in Lickstein’s office. The terms of the
contract had changed by the time of closing, calling for a sales
price of $5,995,000; a down payment of $550,000; a first
mortgage in the amount of $3,896,750; and a promissory note from
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Allobaidy in the amount of $1,498,750. The slush fund provided
for in the addendum was reduced from the original $700,000 to
just over $477,000.
The HUD-1 closing statement, which was signed by Forde,
Forde’s wife, and Allobaidy, showed a down payment of $550,000,
even though no down payment was in fact made. The HUD-1
statement also showed that a portion of the mortgage proceeds
($539,000) was used to satisfy a lien filed against the property
by Isaac Archibald in connection with a loan Archibald made to
Forde. The government’s evidence, however, established that
there had never been a loan from Archibald to Forde and that the
Archibald lien had actually been filed against the property by
Lickstein at Forde’s direction. After closing, Lickstein wired
the $539,000 into an account controlled by Freelander, who in
turn paid out some of the funds in accordance with Forde’s
directions and used some of the funds for his own benefit. The
money for the slush fund was initially maintained in Lickstein’s
escrow account. At Forde’s direction, Lickstein later
transferred the funds to a brokerage account in Forde’s name.
Forde and his wife remained in the house after the sale.
Allobaidy never took possession of the house, and Forde never
paid him rent. Payments on the Lehman first mortgage were made
from the slush fund for a period of time, but the slush fund
eventually ran out and the mortgage went into default.
5
In November 2002, the bankruptcy court converted Forde’s
Chapter 11 proceeding to a Chapter 7 proceeding. The Chapter 7
trustee began looking into the sale of Forde’s house and
ultimately filed a civil action against Forde to recover for the
benefit of Forde’s creditors the monies Forde received from the
sale of the house. Counsel for the trustee sought to depose
Forde, Freelander, and Allobaidy (among others), and the three
men met to discuss how the depositions should be handled.
Freelander asked Allobaidy to lie and say that he had made the
down payment. Allobaidy in fact did testify at his deposition
that he had made the down payment.
Forde later brought Barton Gold, who had solicited
investors for Forde’s online business Tutornet.com, into the
scheme, convincing Gold to sign back-dated, false documents
showing that the $539,000 Archibald loan had actually been made
by Gold and only guaranteed by Archibald. At the deposition
conducted on behalf of the bankruptcy trustee, Forde offered up
the Gold/Archibald story and documents to explain the $539,000
distribution made at closing. Gold later gave similar false
testimony in his own deposition.
The bankruptcy trustee’s investigation into the sale of
Forde’s house ultimately led to the filing of criminal charges
against Forde, Freelander, Lickstein, and Allobaidy. Freelander
pleaded guilty to charges of bank fraud and bankruptcy fraud;
6
Lickstein and Allobaidy pleaded guilty to conspiracy to commit
bank fraud. Forde proceeded to trial, and Freelander,
Lickstein, and Allobaidy all testified against him. The jury
convicted Forde of bank fraud, bankruptcy fraud, and conspiracy
to commit bankruptcy fraud. The district court sentenced Forde
to 42 months’ imprisonment. This appeal followed.
II.
Forde first contends that the evidence was insufficient to
support the conviction for bank fraud. “A defendant challenging
the sufficiency of the evidence faces a heavy burden, because
the jury’s verdict must be upheld on appeal if there is
substantial evidence in the record to support it.” United
States v. Young, 609 F.3d 348, 355 (4th Cir. 2010) (citation and
internal quotation marks omitted). “Our review is thus limited
to determining whether, viewing the evidence and the reasonable
inferences to be drawn therefrom in the light most favorable to
the government, the evidence adduced at trial could support any
rational determination of guilty beyond a reasonable doubt.”
Id. (internal quotation marks and alteration omitted).
Section 1344 imposes criminal penalties on anyone who
“knowingly executes, or attempts to execute, a scheme or
artifice” in order to “defraud a financial institution,” 18
U.S.C.A. § 1344(1), or to “obtain any of the moneys, funds,
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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,” id. § 1344(2). As to § 1344(1), Forde contends that
it was Freelander who concocted and executed the scheme to
defraud Lehman. According to Forde, “[i]t was Freelander who
dealt with the bank, knew what they required and made decisions
of how to conform with the bank’s requirements.” Brief of
Appellant at 15. With regard to § 1344(2), Forde contends that
he, personally, did not make any false statements to Lehman,
because it was Freelander, not Forde, who provided the false
information and documents to Lehman. While Forde acknowledges
that Freelander told him about the problems that the slush fund
addendum could cause if the bank knew about it, Forde insists
that it was Freelander, “not Mr. Forde[,] who either made the
decisions that something should be handled a certain way or that
documents should not be provided to the bank or information not
revealed.” Id. We find these arguments unpersuasive.
Preliminarily, we note that while Forde may not have
personally submitted any documents to Lehman, he certainly made
false representations in documents that he knew would be
provided to Lehman -- Forde signed the sales contract, which
called for a down payment by Allobaidy and payments by Allobaidy
under a promissory note that the parties to the contract knew
8
would never be made; and Forde signed the HUD-1 statement,
which, among other things, showed the down payment as having
been made. Even assuming that this conduct somehow does not
amount to the making of false representations within the meaning
of § 1344(2), the government’s evidence was more than enough to
support Forde’s conviction under § 1344(1).
“The government need not offer evidence of
misrepresentations or a disclosure duty to prove a violation of
§ 1344.” United States v. Colton, 231 F.3d 890, 907 (4th Cir.
2000); see United States v. Celesia, 945 F.2d 756, 758 (4th Cir.
1991) (“[O]ne may commit a bank fraud under Section 1344(1) by
defrauding a financial institution, without making the false or
fraudulent promises required by Section 1344(2).”). “What is
essential is proof of a ‘scheme or artifice to defraud,’ which
can be shown by deceptive acts or contrivances intended to hide
information, mislead, avoid suspicion, or avert further inquiry
into a material matter.” Colton, 231 F.3d at 901.
The government’s evidence was certainly sufficient to
establish the existence of a scheme to defraud Lehman -- the
parties induced Lehman to make the loan by lying about a down
payment and by concealing the existence of the slush fund, facts
that a Lehman employee testified were material to Lehman’s
decision to make the loan. See id. at 901 (“[A]ctive or
elaborate steps to conceal information can constitute” a scheme
9
to defraud. (internal quotation marks omitted)). The
government’s evidence was likewise sufficient to establish that
Forde was at least as involved as Freelander in hatching and
executing that scheme to defraud. Although Forde insists that
Freelander came up with the scheme to defraud Lehman,
Allobaidy’s testimony alone would have been enough for the jury
to conclude that Forde was responsible for the scheme.
Moreover, the government’s evidence established that Forde and
Freelander controlled the mortgage proceeds that were used to
“satisfy” the fictitious Archibald lien. At Forde’s direction,
the Archibald proceeds were wired to a bank account controlled
by Freelander, a portion of which were later wired to a bank
account belonging to Forde’s then brother-in-law, to keep the
money out of Forde’s bankruptcy estate and thus out of the reach
of his creditors. The slush fund proceeds were similarly
transferred to a brokerage account belonging to Forde. Because
the evidence showed that Forde and Freelander both controlled
and received the benefit of these misappropriated mortgage
funds, the jury reasonably could have concluded that Forde and
Freelander both conceived and executed the scheme to defraud
Lehman. We therefore conclude that the evidence was more than
sufficient to support Forde’s conviction for bank fraud. 1
1
Given our disposition of this claim, it is unnecessary for
(Continued)
10
III.
Materiality is an element of bank fraud. See Neder v.
United States, 527 U.S. 1, 25 (1999); Colton, 231 F.3d at 903
n.5. The district court instructed the jury that the government
was required to prove the materiality of the representations
made to Lehman or the information concealed from Lehman,
defining “material fact” as “a fact that would be of importance
to a reasonable person in making a decision about a particular
matter or transaction.” J.A. 1225-26. Forde argues on appeal,
however, that the district court’s definition of materiality was
insufficient because it did not include language from the
Supreme Court’s decision in Neder generally defining a material
statement as one that “has a natural tendency to influence, or
is capable of influencing, the decision of the decisionmaking
body to which it was addressed.” Neder, 527 U.S. at 16(internal quotation marks and alteration omitted). Forde
further argues that the instruction as given “in essence took
away the element of materiality,” and that he was therefore
deprived of his Sixth Amendment right to a jury determination of
us to consider the government’s alternate argument that Forde’s
bank fraud conviction can be sustained because Forde caused
Freelander to commit bank fraud. See 18 U.S.C.A. § 2(b) (West
2000) (“Whoever willfully causes an act to be done which if
directly performed by him or another would be an offense against
the United States, is punishable as a principal.”).
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each element of the bank fraud charge. Brief of Appellant at
25. Because Forde did not object to the jury instruction below,
we review his claims for plain error only.
We see no significant difference between the instruction
sought by Forde and the instruction given, because a fact that
would be important when making a decision would likewise be
capable of influencing a decision. See Preston v. United
States, 312 F.3d 959, 961 & n.3 (8th Cir. 2002) (per curiam)
(concluding that instructions defining “material fact” as “a
fact that would be important to a reasonable person in deciding
whether to engage or not to engage in a particular transaction”
were “consistent with those reaffirmed by the Supreme Court in
Neder” (internal quotation marks omitted)). Because the
instructions as given “fairly state[d] the controlling law,”
United States v. McQueen, 445 F.3d 757, 759 (4th Cir. 2006)
(internal quotation marks and alterations omitted), there was no
error, plain or otherwise, in the court’s instructions on
materiality. See United States v. Heppner, 519 F.3d 744, 749
(8th Cir. 2008) (finding no error in jury instruction defining
“material fact” as “a fact which would be of importance to a
reasonable person making a decision about a particular matter or
transaction” (internal quotation marks omitted)).
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IV.
Forde next argues that the district court erred when it
stated, at the end of the instructions to the jury, that the
jury’s sole function “is to seek the truth from the evidence
received during the trial.” J.A. 1233. According to Forde, the
seek-the-truth statement negated the otherwise proper
reasonable-doubt instructions by permitting jurors to convict
simply because they believed him to be guilty, even if the
jurors also thought that the government had not actually proved
Forde’s guilt beyond a reasonable doubt.
Because the seek-the-truth language was included in the
jury charges that Forde himself sought, see J.A. 72, Forde
arguably has waived the right to even seek review of the issue.
See United States v. Quinn, 359 F.3d 666, 674-75 (4th Cir. 2004)
(“[T]he record shows . . . that the district court’s instruction
on this issue was precisely the instruction that they requested.
. . . [A]ny error committed by the district court in giving this
instruction was invited error and is not subject to review.”).
In any event, the district court repeatedly informed the jury
that Forde was presumed innocent, and the court mentioned the
requirement that the government must prove Forde’s guilt beyond
a reasonable doubt more than twenty times during its
instructions. Under these circumstances, we cannot conclude
that the single seek-the-truth reference, which the court made
13
in the course of admonishing individual jurors not to surrender
their honest convictions, negated or undermined the otherwise
proper reasonable-doubt instructions or otherwise amounted to
error. See United States v. Gonzalez-Balderas, 11 F.3d 1218,
1223 (5th Cir. 1994) (“There is no reasonable likelihood that
the jury inferred that the single reference at the end of the
charge to ‘seeking the truth,’ rendered as it was in the context
of an admonition to ‘not give up your honest beliefs,’ modified
the reasonable doubt burden of proof.”).
V.
As previously mentioned, the Chapter 7 bankruptcy trustee
investigated the sale of Forde’s house and brought a civil
action against Forde to recover funds associated with the sale
of the house. That action ended with Forde signing a consent
judgment obligating him to pay $800,000. The attorney who
represented the bankruptcy trustee testified at Forde’s
criminal trial and briefly mentioned the $800,000 consent
judgment in his testimony.
On appeal, Forde claims the testimony about the consent
decree violated Rule 408 of the Federal Rules of Evidence. See
Fed. R. Evid. 408(a) (prohibiting evidence of compromise or
offers to compromise “when offered to prove liability for,
invalidity of, or amount of a claim that was disputed as to
14
validity or amount, or to impeach through a prior inconsistent
statement or contradiction”). Forde also claims that even if
testimony about the consent judgment was proper under Rule 408,
the testimony was too prejudicial and therefore should have been
excluded under Rule 403. See Fed. R. Evid. 403 (“Although
relevant, evidence may be excluded if its probative value is
substantially outweighed by the danger of unfair prejudice,
confusion of the issues, or misleading the jury, or by
considerations of undue delay, waste of time, or needless
presentation of cumulative evidence.”).
We disagree. Assuming, without deciding, that the
admission of the testimony amounted to error under Rule 403 or
Rule 408, any such error would be harmless. The government’s
evidence of bankruptcy fraud was exceptionally strong, and the
testimony about the consent judgment was minimal. Moreover,
counsel for Forde during cross-examination established that the
bankruptcy proceedings were civil and governed by a lesser
burden of proof. Under these circumstances, we think it clear
that the jury’s verdict was not “substantially swayed” by any
error in admitting the evidence of the consent judgment. United
States v. Heater, 63 F.3d 311, 325 (4th Cir. 1995) (“[I]n order
to find a district court’s error harmless, we need only be able
to say with fair assurance, after pondering all that happened
without stripping the erroneous action from the whole, that the
15
judgment was not substantially swayed by the error.” (internal
quotation marks omitted)).
VI.
Finally, Forde contends that the district court erred by
rejecting his post-verdict claims of juror misconduct. In a
post-trial motion, Forde informed the district court that while
the trial was proceeding, a friend of the husband of the jury
foreperson posted on Twitter an explanation of the difference
between “assume” and “presume.” 2 Ford contended that, since the
posting occurred during trial, it was possible that the jury
foreperson had talked to her husband about the case, her husband
then talked to his friend about the case, the friend then posted
the statement on Twitter, and the foreperson saw the Twitter
posting. Forde thus requested that the district court hold a
hearing to investigate the potential misconduct. The district
court denied the request.
On appeal, Forde contends that the district court erred by
denying the requested hearing. We disagree. A district court
is obligated to investigate colorable claims of juror
misconduct. See, e.g., Smith v. Phillips, 455 U.S. 209, 215
2
The posting stated, “assume: suppose to be the case,
without proof; presume: suppose that something is the case on
the basis of probability.” J.A. 1423.
16
(1982) (“This Court has long held that the remedy for
allegations of juror partiality is a hearing in which the
defendant has the opportunity to prove actual bias.”); id. at
217 (“Due process means a jury capable and willing to decide the
case solely on the evidence before it, and a trial judge ever
watchful to prevent prejudicial occurrences and to determine the
effect of such occurrences when they happen. Such
determinations may properly be made at a [post-trial] hearing .
. . .”). However, “[t]he duty to investigate arises only when
the party alleging misconduct makes an adequate showing of
extrinsic influence to overcome the presumption of jury
impartiality. In other words, there must be something more than
mere speculation.” United States v. Barshov, 733 F.2d 842, 851
(11th Cir. 1984) (citation omitted); accord United States v.
Vitale, 459 F.3d 190, 197 (2d Cir. 2006) (“[A] trial court is
required to hold a post-trial jury hearing when reasonable
grounds for investigation exist. Reasonable grounds are present
when there is clear, strong, substantial and incontrovertible
evidence, that a specific, nonspeculative impropriety has
occurred which could have prejudiced the trial of a defendant.”
(citation and internal quotation marks omitted)). Forde’s
string of possibilities about the origin of the Twitter posting
-- that the foreperson possibly talked to her husband, who
possibly talked to his friend, who possibly took to Twitter in
17
response to what the husband possibly told him -- is nothing but
speculation and thus falls far short of establishing reasonable
grounds for investigation. The district court therefore did not
err by denying Forde’s request for an evidentiary hearing to
investigate his claim.
Forde also contends that the district court erred by
denying his post-verdict request for the issuance of subpoenas
directed to various internet service providers. Forde claims
that his business websites were viewed during the trial, and
that the subpoenas were necessary “to assess whether any of the
twelve jurors were the ones who had accessed the sites and
searched his name.” Brief of Appellant at 40. This argument is
utterly without merit, as it is even more speculative and less
grounded in fact than his other claim of juror misconduct. The
district court committed no error by refusing to issue the
subpoenas necessary for Forde’s fishing expedition.
VII.
Because we find no reversible error, we hereby affirm
Forde’s convictions and sentence.
AFFIRMED
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