United States v. Lochmiller

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT April 15, 2013
Elisabeth A. Shumaker
Clerk of Court
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v. No. 12-1097
(D.C. No. 1:09-CR-00529-PAB-1)
PHILIP R. LOCHMILLER, (D. Colo.)
a/k/a Philip R. Lochmiller, Sr.,
Defendant-Appellant.
ORDER AND JUDGMENT*
Before BRISCOE, Chief Judge, HOLLOWAY, Senior Circuit Judge, and
TYMKOVICH, Circuit Judge.
A jury convicted Philip Lochmiller, Sr. of various crimes arising from an
investment scheme, including conspiracy to commit mail and securities fraud,
conspiracy to commit money laundering, and multiple substantive counts of mail
fraud and money laundering. The district court sentenced Mr. Lochmiller to 405
months in prison and ordered him to pay more than $18.6 million in restitution. In
*
After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral
estoppel. It may be cited, however, for its persuasive value consistent with
Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
this direct appeal, Mr. Lochmiller challenges his conspiracy convictions, claiming
they were predicated on insufficient evidence and a flawed jury instruction. We have
jurisdiction under 28 U.S.C. § 1291 and affirm Mr. Lochmiller’s convictions.
I
In 1999, Mr. Lochmiller began soliciting investors to develop low-income
residential communities. At the time, Mr. Lochmiller was president and founder of
Valley Mortgage, Inc., or Valley Investments, Inc., as it came to be known, a
mortgage brokerage firm based in Grand Junction, Colorado. Mr. Lochmiller’s
step-son, Philip Lochmiller, Jr. (“Philip”), joined the firm that same year, and
together the two men turned the company into something of a Ponzi scheme.
Mr. Lochmiller and his son would advertise in a local paper and mail out promotional
materials promising investors a 10%, 14%, or even a 20% return on two-year
investments. They told investors that obtaining bank financing was more onerous
than their offer, which pledged as security a promissory note and first deed of trust
recorded against specific property planned for development. The property’s value
was supposed to be commensurate with the investment amount, and investors had the
option of choosing simple or compound interest, which was actually paid to some
investors. What investors did not know, however, was that the interest was actually
paid from new investments rather than company profits, and the trust deeds were
almost always recorded against previously encumbered and inadequately valued lots,
if they were recorded at all.
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As early as 2001, the state of Colorado ordered Mr. Lochmiller to stop
soliciting investments because neither he nor his company was licensed to sell
securities. Mr. Lochmiller ignored the order, however, and in the coming years, he
diverted significant investment funding from project development to personal use.
Indeed, he used the money to pay for homes and cars for himself and his family, a
vacation property in Mexico, and his daughter’s salary despite the fact that she never
worked for Valley Investments. Mr. Lochmiller even deposited company funds into
his own “private venture” account, R., Vol. 5 at 1252, all without any knowledge to
his investors.
In 2005, Philip hired an assistant named Shawnee Carver, who took charge of
tracking the number of trust deeds recorded against or “stacked” on a particular lot.
Ms. Carver also helped prepare false promotional materials, notarize forged investor
signatures, and mislead investors into releasing their deeds of trust. She kept much
of the individual investor documents away from the company’s chief financial
officer, Richard Langley, but Mr. Langley, who was hired in May 2008 and resigned
four months later, eventually accessed some materials. What he found was
staggering but perhaps not surprising: the company was losing as much as $60,000
on any given home sale, and the interest rates promised to investors were
“unsustainable,” id. at 1244. Mr. Langley urged Mr. Lochmiller to reduce the
interest rates and revise his development plans, but Mr. Lochmiller rejected
Mr. Langley’s suggestions and intensified his efforts to solicit more investments.
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By 2009, Mr. Lochmiller had amassed an estimated $34 million in liabilities.
The company went into receivership, and Mr. Lochmiller, Philip, and Ms. Carver
were charged in a multi-count superceding indictment. Ms. Carver pleaded guilty to
conspiracy to commit mail and securities fraud and testified at Mr. Lochmiller’s trial,
as did Philip, who pleaded guilty to conspiring to commit mail and securities fraud
and conspiring to commit money laundering. For his part, Mr. Lochmiller was
convicted on one count of conspiracy to commit mail and securities fraud, 18 U.S.C.
§ 371; one count of conspiracy to commit money laundering, 18 U.S.C. § 1956(h);
ten counts of mail fraud and aiding and abetting, 18 U.S.C. §§ 1341, 2; and twenty
counts of money laundering and aiding and abetting, 18 U.S.C. §§ 1957, 2.
II
A. Sufficiency of the Evidence
Mr. Lochmiller first challenges the sufficiency of the evidence supporting his
conspiracy convictions. He first raised this issue at the close of the government’s
case-in-chief, when he moved for a judgment of acquittal under Fed. R. Crim. P. 29.
The district court denied the motion, as well as Mr. Lochmiller’s renewed motion for
acquittal. On appeal, Mr. Lochmiller maintains there was insufficient evidence of a
conspiracy and if there was any such evidence, it showed only a variance.1
1
A variance occurs when “an indictment charges a single conspiracy, but the
evidence presented at trial proves only the existence of multiple conspiracies.”
United States v. Caldwell, 589 F.3d 1323, 1328 (10th Cir. 2009) (internal quotation
marks omitted).
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Our review is limited by the considerable deference owed to the jury’s verdict.
See United States v. King, 632 F.3d 646, 650 (10th Cir. 2011). We review the
sufficiency of the evidence de novo but ask “only whether taking the evidence—both
direct and circumstantial, together with the reasonable inferences to be drawn
therefrom—in the light most favorable to the government, a reasonable jury could
find the defendant guilty beyond a reasonable doubt.” Id. (internal quotation marks
omitted).
1. Conspiracy Convictions
Mr. Lochmiller was convicted of conspiracy to commit mail and securities
fraud and conspiracy to commit money laundering. To obtain these convictions, the
government was obligated to prove “(1) two or more persons agreed to violate the
law, (2) the defendant knew the essential objectives of the conspiracy, (3) the
defendant knowingly and voluntarily participated in the conspiracy, and (4) the
alleged coconspirators were interdependent.” United States v. Fishman, 645 F.3d
1175, 1186 (10th Cir. 2011); see also United States v. Cooper, 654 F.3d 1104, 1116
(10th Cir. 2011) (setting forth elements of mail fraud); United States v. Lewis,
594 F.3d 1270, 1274 (10th Cir. 2010) (setting forth elements of securities fraud);
United States v. Keck, 643 F.3d 789, 794 (10th Cir. 2011) (setting forth elements of
conspiracy to commit money laundering). “[C]onspiracy convictions may be based
on circumstantial evidence, and the jury may infer conspiracy from the defendants’
conduct and other circumstantial evidence indicating coordination and concert of
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action.” United States v. Wardell, 591 F.3d 1279, 1287 (10th Cir. 2009) (internal
quotation marks omitted). “Interdependence is present if the activities of a defendant
charged with conspiracy facilitated the endeavors of other alleged coconspirators or
facilitated the venture as a whole.” Id. at 1291 (internal quotation marks omitted).
The government clearly met its burden here. The conviction for conspiracy to
commit mail and securities fraud was supported by evidence that Mr. Lochmiller,
Philip, and Ms. Carver worked together to send false and misleading solicitations to
investors via the mail. The parties stipulated that the promissory notes were
securities, see Aplee. Addendum at 124-25, and there was evidence that the notes and
trust deeds were represented to secure investments in entry-level home construction.
Philip testified that he and Mr. Lochmiller told investors the funds were to be used
for building entry-level homes throughout the Rocky Mountain region, R., Vol. 5 at
1026, though he acknowledged that four of their five communities in Colorado, Utah,
and Idaho were never fully approved for development, see id. at 1047-52. Investors
were told by Mr. Lochmiller and his son that the property securing their money was
worth as much as their investment or more. Most investors simply trusted that they
had priority on the encumbered property, but a few demanded a first deed of trust. In
those instances, Ms. Carver would mail a packet to senior lien holders, asking them
to release their deeds of trust because the property had been sold. On several
occasions when a release was not returned before a scheduled closing, Philip testified
that he would confer with Mr. Lochmiller and forge the investor’s signature on the
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release. Ms. Carver would then facilitate the scheme by notarizing the forged
release, though she claimed the document was signed outside of her presence, and the
closing would go forward, along with the investment.
Once an investment matured, Mr. Lochmiller, Philip, and Ms. Carver would
mail to investors false promotional materials, touting the success and growth of
Valley Investments and encouraging investors to renew their accounts to obtain
interest rates as high as 20%. These letters were generally drafted by Mr. Lochmiller
and typed by Ms. Carver, even after Mr. Langley alerted the Lochmillers to the
company’s dire financial state. Mr. Lochmiller and Philip also went so far as to send
letters and solicitations to investors explaining why Valley Investments continued to
expand and outperform the competition, even during the financial recession.
Of course, none of these improprieties were known to investors. Among
numerous material omissions and misrepresentations, investors were never told that
Mr. Lochmiller and Philip had prior bankruptcy discharges or that Mr. Lochmiller
had been previously convicted of felony securities fraud. Nor were investors told
that most of the interest payments made to investors were derived from new
investments rather than company profits. Additionally, investors were never told that
their supposed first deed of trust would be recorded behind as many as ten or twelve
other investors, if it was recorded at all. In fact, Ms. Carver testified that she mailed
out deeds of trust listing particular lot numbers that did not even exist. She also
admitted that on occasions when investors demanded a recorded first deed of trust,
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she persuaded other investors to release their trust deeds by lying to them that the
property had been sold. And when investors asked why they had not received their
deeds of trust, she intentionally stalled, telling them the delay was caused by the
clerk and recorder’s office. Finally, she misrepresented to investors in England the
number of homes sold each month and falsely assured other investors that business
was “thriving” because they had a “niche product of entry level homes,” R., Vol. 5 at
523.
Ample evidence also supports Mr. Lochmiller’s conviction for conspiracy to
commit money laundering. Philip admitted that investor funds were regularly
diverted to the Lochmillers’ personal expenses, including a condo in Mexico
purchased by Mr. Lochmiller with funds wired to him by Philip; more than $144,000
for Mr. Lochmiller’s back taxes, hand-delivered to the IRS by Philip; and mortgage
payments for a home occupied by Philip’s older sister, who was allowed to retain the
sale proceeds when the home sold, even though it was owned by Valley Investments.
Additionally, Mr. Lochmiller directed—and Philip authorized—payments for Philip’s
mother and a salary to Philip’s younger sister, neither of whom worked for the
company; personal credit cards; cars and trucks; Mr. Lochmiller’s $1.5 million
custom-built home; and $150,000 to prevent a former employee from disclosing the
company’s insolvency, see R., Vol. 5 at 1535-40.
Apart from these expenses, Philip corroborated Mr. Langley’s testimony that
Mr. Lochmiller maintained a separate checking account as his own “private venture.”
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Id. at 1252. Mr. Lochmiller had opened this account in the name of New Liberty
Homes and used it to deposit rebate checks issued to Valley Investments by one of its
vendors. But rather than use those funds for developing low-income communities,
Mr. Lochmiller exploited it for his own personal gain. All of this evidence amply
supports Mr. Lochmiller’s convictions for conspiracy to commit mail and securities
fraud and conspiracy to commit money laundering. Mr. Lochmiller’s assertion that
there was no testimony of an express agreement is unavailing because there was no
need for such testimony. See Cooper, 654 F.3d 1104, 1115 (10th Cir. 2011).
2. Variance
Despite the evidence underlying his convictions, Mr. Lochmiller suggests
there was a variance from the overall conspiracies charged in the indictment. We
disagree. Given the difficulty of distinguishing between a single conspiracy and
multiple smaller conspiracies indicating a variance, we “generally defer to the jury’s
determination of the matter.” Fishman, 645 F.3d at 1189. The “focal point of the
analysis is whether the alleged coconspirators’ conduct exhibited interdependence,”
that is, whether they “intend[ed] to act together for their shared mutual benefit within
the scope of the conspiracy charged.” Id. (alterations and internal quotation marks
omitted).
The foregoing evidence demonstrates the extent of interdependence exhibited
by Mr. Lochmiller, Philip, and Ms. Carver. These were not mere business associates
working in the same environment, making similarly bad decisions; these were closely
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aligned actors who coordinated their roles to facilitate their fraudulent scheme,
conceal their deceptive conduct, and perpetuate their unlawful practices. See United
States v. Baldridge, 559 F.3d 1126, 1136 (10th Cir. 2009) (“What is required is a
shared, single criminal objective, not just similar or parallel objectives between
similarly situated people.”). Mr. Lochmiller and Philip worked together for years to
defraud investors out of millions of dollars that they used for their own personal
expenses. After Ms. Carver joined the firm, she furthered the goals of the conspiracy
by lying to investors, misrepresenting the solvency of the company, notarizing forged
documents, and restricting Mr. Langley’s access to investor materials that would
have, and indeed did, disclose the true state of affairs. There was no variance here.
B. Jury Instruction
Mr. Lochmiller next contends the jury was given a prejudicial instruction that
allowed him to be convicted for the actions of his co-conspirators. Because he failed
to object in the district court, we review only for plain error. See Fed. R. Crim. P.
52(b). “Under plain error review, we may not reverse unless we find (1) error,
(2) that is plain, and (3) that affects substantial rights. If all three conditions are met,
we may then exercise discretion to notice a forfeited error, but only if (4) the error
seriously affects the fairness, integrity, or public reputation of the judicial
proceedings.” United States v. Knight, 659 F.3d 1285, 1287 (10th Cir. 2011), cert.
denied, 132 S. Ct. 1954 (2012) (internal quotations and brackets omitted). We
perceive no error.
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The district court instructed the jury as follows:
If you find the defendant guilty of the conspiracy charged in
Count 1 and you find beyond a reasonable doubt that during the time the
defendant was a member of that conspiracy another coconspirator
committed one or more of the offenses in Counts 24-33, and that the
same offenses in Counts 24-33 were committed to achieve an objective
of or were a foreseeable consequence of that conspiracy, then you may
find the defendant guilty of the offenses charged in Counts 24-33, even
though the defendant may not have participated in any of the acts which
constitute the offenses described in Counts 24-33 . . . .
....
Likewise, if you find the defendant guilty of the conspiracy
charged in Count 2 and you find beyond a reasonable doubt that during
the time the defendant was a member of that conspiracy another
coconspirator committed one or more of the offenses in Counts 3-6,
8-21, and 23, and that the same offenses in Counts 3-6, 8-21, and 23
were committed to achieve an objective of or were a foreseeable
consequence of that conspiracy, then you may find the defendant guilty
of the offense charged in Counts 3-6, 8-21, and 23, even though the
defendant may not have participated in any of the acts which constitute
the offenses described in Counts 3-6, 8-21, and 23 . . . .
R., Vol. 2 at 81-82.
These instructions, which track nearly verbatim Tenth Circuit Criminal Pattern
Jury Instruction 2.21, correctly state that Mr. Lochmiller may be held criminally
liable for the reasonably foreseeable crimes committed by his co-conspirators in
furtherance of the conspiracy. See Pinkerton v. United States, 328 U.S. 640, 647
(1946). Mr. Lochmiller seems to argue that only crimes committed as an object of
the conspiracy, rather than those that were reasonably foreseeable, could be imputed
to him, but that is not the law. “The Pinkerton doctrine holds each member of a
conspiracy legally responsible for the reasonably foreseeable crimes of fellow
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conspirators committed in furtherance of the conspiracy.” Wardell, 591 F.3d at 1291.
Our pattern jury instruction, which incorporates Pinkerton, specifically states that a
crime “committed to achieve an objective of or was a foreseeable consequence of
th[e] conspiracy” may be attributed to the defendant. 10th Cir. Crim. Pattern Jury
Instruction 2.21. Hence, the jury was correctly instructed that Mr. Lochmiller could
be held criminally liable for reasonably foreseeable crimes committed by his
co-conspirators in furtherance of the conspiracy.
Mr. Lochmiller’s convictions are affirmed.
Entered for the Court
Timothy M. Tymkovich
Circuit Judge
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