United States v. De Castro

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withdrawn, and the following opinion is substituted in its stead.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