United States v. Nathan Wolf

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 15-4560
UNITED STATES OF AMERICA,
Plaintiff – Appellee,
v.
NATHAN SHANE WOLF,
Defendant - Appellant.
Appeal from the United States District Court for the Western District of North Carolina,
at Charlotte. Graham C. Mullen, Senior District Judge. (3:12-cr-00239-GCM-DCK-16)
Argued: December 7, 2016 Decided: June 19, 2017
Before NIEMEYER, TRAXLER, and HARRIS, Circuit Judges.
Affirmed by published opinion. Judge Traxler wrote the opinion in which Judge
Niemeyer and Judge Harris joined.
ARGUED: Mark Patrick Foster, Jr., RAWLS, SCHEER, FOSTER & MINGO PLLC,
Charlotte, North Carolina, for Appellant. Maria Kathleen Vento, OFFICE OF THE
UNITED STATES ATTORNEY, Charlotte, North Carolina, for Appellee. ON BRIEF:
Jill Westmoreland Rose, United States Attorney, OFFICE OF THE UNITED STATES
ATTORNEY, Charlotte, North Carolina, for Appellee.
TRAXLER, Circuit Judge:
Nathan Wolf was convicted by a jury on three counts stemming from a mortgage
fraud conspiracy occurring between 2005 and 2007: conspiracy to violate the Racketeer
Influenced and Corrupt Organizations Act (“RICO”), see 18 U.S.C. § 1962(d); bank
fraud, see 18 U.S.C. § 1344; and conspiracy to launder money, see 18 U.S.C. § 1956(h).
The district court imposed a term of 84 months imprisonment after granting Wolf a
downward variance of ten levels. Wolf appeals, challenging both his conviction and
sentence on various grounds. As explained below, we affirm.
I.
Before and during the conspiracy for which Wolf was charged, tried and
convicted, Wolf was a licensed real estate agent and broker in North Carolina. During
the licensure process, Wolf was required to complete various real estate courses during
which he was instructed that “a real estate agent [is not] allowed to pay someone for
referring a buyer if that person is not licensed,” J.A. 459; that a real estate agent commits
loan fraud “by misleading the lender by . . . either misrepresenting information or
withholding information in order to obtain a loan that is larger than the lender might
ordinarily make,” J.A. 462; and that unlawful “[c]ontract kiting” occurs when “one
contract . . . for sale between the seller and buyer . . . is provided to the lender [with] one
price,” while “[a] second contract [with a lower price] is prepared between the seller and
buyer but is not provided to the lender. The higher priced contract goes to the lender so
[that] the lender will make a higher loan, but the . . . contract they actually enforce . . . is
the one with the lower amount so that the buyer does not have to come up with as much
2
down payment.” J.A. 463 (emphasis added). In these required courses, Wolf would have
also learned that a broker is responsible for attending the closing and reviewing the
accuracy of the Housing and Urban Development Settlement Statement (“HUD-1”), and
that federal law “prohibit[s] certain kickbacks for settlement services.” J.A. 469.
Additionally, licensed agents are “prohibited . . . [from] misrepresent[ing] any material
fact to any party . . . [i]ncluding the lender.” J.A. 482.
Co-conspirators’ testimony about Wolf’s involvement in fraudulent real estate deals
At trial, the government presented evidence that Wolf was involved in a series of
fraudulent real estate transactions in his capacity as a licensed broker. The government’s
evidence consisted primarily of testimony from Wolf’s co-conspirators. Mark Wittig, a
residential builder and the owner of Touchstone Homes, testified that he partnered with
Wolf on 14 or 15 transactions. According to Wittig, Wolf created a scheme whereby
Wittig would build a house and then reach an agreement with a buyer as to its price, as he
normally would in any sales transaction. This agreed-upon price, to which Wolf referred
as the “strike price,” J.A. 256, roughly reflected fair market value. That is, the “strike
price” was the “the actual price of the house” the buyer agreed to pay. When it came
time to list the property for sale, however, Wolf would “list the house at an inflated
price,” J.A. 250, which Wolf termed the “gross price” or “bank price,” J.A. 259, because
the inflated price was used in the sales contract and closing documents provided to the
mortgage lender. Thus, the loan value was based on the inflated “gross” price, and the
“gross” price was reflected on the HUD-1. J.A. 259-60. The difference between the
strike price and the gross price would go back to the buyer as a kickback. Wolf also told
3
Wittig that the kickback “money would go back to the buyer in a company’s name.” J.A.
262. Wolf directed every aspect of the scheme. Not only did Wolf list Wittig’s houses,
but he was involved in the design of the houses and even sent Wittig the plans on
numerous occasions. Wolf advised Wittig to build “box style” two-story houses rather
than “a sprawling ranch” so “there would be more money at the end for a kickback to the
buyer.” J.A. 263-64. Although Wittig did not make any extra money from the kickback
scheme, he participated in the scheme because Wolf provided guaranteed buyers for his
homes.
One such guaranteed buyer brought in by Wolf was Waylon Long. Long was
introduced to Wolf by a college fraternity brother who had already participated in the
kickback scheme. Wolf identified several properties for Long and gave Long the
expected compensation that would be paid after closing; if Long “liked [the] numbers,”
they would “move forward with [the] transaction.” J.A. 387.
Long’s first purchase from Wittig with Wolf serving as a dual agent was a house
at 2900 Crane Road in Marvin, North Carolina. Wolf drafted a sales agreement between
Long as the purchaser and Touchstone Homes as the seller, which contained a merger
provision indicating that the sales agreement contained “the entire agreement” between
the parties. J.A. 254. According to the sales agreement that was given to the mortgage
lender, Long was purchasing the property for $1,350,000, a figure that Wolf determined.
Wolf was listed a dual agent for the transaction. In addition to the sales agreement, Wolf
also drafted a “compensation agreement” between Long and Wittig that referred to both
the actual or “strike” price of the house ($765,000) and the inflated or gross price
4
($1,350,000), as well as the $585,000 Long would be receiving at closing, which was
“the difference between the gross price and the strike price.” J.A. 391. The
compensation agreement, however, indicated that Advantage Investor Enterprises, LLC,
a company owned by Long, would be receiving the $585,000 instead of Long himself.
The compensation agreement, therefore, stated that “Advantage Investor Enterprises shall
receive for construction design services $585,000,” J.A. 389, even though the company
performed no services or work of any kind in connection with the construction of the
house at 2900 Crane Road. Long testified that Wolf told him the HUD-1 settlement
statement could not reflect that money was going to him individually but instead “a
company had to be created in order to receive those funds at closing.” J.A. 389. Finally,
the HUD-1 form provided by Wolf for the purchase of 2900 Crane Road listed the
purchase price as $1,350,000—Wolf’s inflated gross price, and it falsely indicated that
Long was receiving $2,604 at closing.
Long purchased a second house built by Wittig’s company. Wolf brokered the
transaction and drafted the sales and compensation agreements, just as he had done for
Long’s purchase of 2900 Crane Road. According to Long, “the process” for the second
transaction “was pretty much identical” to the first one, resulting in another “big
kickback” for Long. J.A. 396. For these two transactions combined, Wolf took
commissions totaling about $100,000.
In addition to receiving funds for serving as a buyer, Long, who was not a real
estate agent, received a “fee for bringing [borrowers] to the table,” J.A. 396, i.e., for
recruiting buyers. One buyer Long recruited was Benjamin Clarke, a former mortgage
5
loan officer, who testified that he “was looking to get cash back at closing or a seller
kickback.” J.A. 422. In Clarke’s first deal, he received a kickback of $67,559 for
purchasing a house at 9609 Tralee Court. The HUD-1 settlement statement showed a
gross purchase price of $556,000, which had been set by Wolf, and showed design fees of
$67,559 going to First Capital Development Corporation. According to Clarke, Wolf
asked for a company name to use for the HUD-1 form. Clarke told Wolf to use Clarke’s
company, First Capital, even though First Capital performed no services whatsoever in
connection with 9609 Tralee Court. Clarke further testified that Wolf gave him a
compensation agreement, describing it in terms similar to those used by Long. Based on
Clarke’s experience in the mortgage industry, he “was aware that [the transaction] was
something that [he] shouldn’t do.” J.A. 428. Clarke testified that the bank was unaware
“that money was being paid to [Clarke] as the buyer” and that “[t]he bank would not
approve a loan where money is going to a company that I own if I’m the buyer.” J.A.
428-29. The closing documents reflected that Wolf earned $22,000 for the deal.
Wolf brought a property to Clarke for his second purchase, which was structured
the same way as his first purchase. Clarke decided to serve as the buyer because Wolf
told him he “could get around [$]150,000 out of it at closing.” J.A. 430. Clarke was
supposed to bring $40,000 to the closing as the purchaser, but he did not have the money.
Wolf arranged for Brighton Developers to send the money to the closing attorney. Once
again, Wolf determined the gross purchase price to be given to the lender. Long’s
company, Advantage Investors, received $70,000 in the deal as well. Ultimately, as
6
reflected in an email from Wolf to the closing attorney, First Capital (Clarke’s company)
received $180,000 as part of the transaction.
Wolf also recruited Ralph Johnson, who testified that “[Wolf] would have some
properties that he needed to be sold. He would come to me. We would discuss an
amount that he wanted to net,” and “[a]nything above that amount would come to me and
my company.” J.A. 487. Johnson indicated that he “purchased homes,” “forged some
documents,” and “[l]ied on the amount that [he] made . . . [and] the work that was done
through [his] company.” J.A. 486-87. According to Johnson, Wolf provided a
compensation agreement for “any transaction I’ve done with [him].” J.A. 488. Johnson
testified that he created a shell company called Pinnacle Investments “[j]ust to receive
monies from the purchases of homes,” J.A. 488, because “[t]hat’s the only way the lender
would sign off on the loan, that work was done and that there was a reason for you to be
receiving this type of money,” J.A. 490. Johnson indicated that he even used straw
buyers such as Damali Neal, who allowed Johnson to use “all of her pertinent
information as far as driver’s license, social security” to purchase the properties. J.A.
491. Johnson estimated that during these deals with Wolf, the amounts he received
“varied from fifty thousand to some hundred, two hundred thousand.” J.A. 496. Johnson
explained that after the closings, “we . . . tried to put tenants in [the homes]” and “[t]ake
care of the mortgage[s].” J.A. 496. And, Johnson testified that he and Wolf discussed
how important it was that the homes not go into foreclosure because that would bring the
“feds” or “[p]olice” or “heat on us. They would have people looking at us as to why
those houses are foreclosing.” J.A. 497.
7
Wittig noted several other similar transactions he made with buyers recruited by
Wolf. One buyer was Denetria Myles, who purchased a home from Wittig located at
1044 Antioch Woods Drive. Myles’ compensation agreement indicated that Jimario
Dyson and New Vision, a company created by Myles, would be receiving $79,000 for
services rendered, even though, according to Wittig, neither Dyson nor New Vision did
any work related to the property. The HUD-1 listed the gross price, which had been
inflated from the actual price by Wolf, and indicated that Myles was actually paying
rather than receiving money at the closing. Wolf received a commission of $15,000 for
the transaction.
Nina Maiden was another buyer of a house built by Wittig. The HUD-1
settlement statement for the house at 9215 Woodhall Lake Drive, reflected a purchase
price of $2,100,000, as well as a $594,950 payment to Brighton Developers for work
which, according to Wittig, was never done. Although the HUD-1 also indicated that
Maiden was bringing $215,000 cash to the closing as a down payment, Maiden admitted
at trial that she did not bring any money to the closing. The down payment was actually
provided by Brighton Developers, a shell company used by members of the conspiracy
“to fund fraudulent mortgage transactions” and “to receive and distribute the proceeds
from such mortgage frauds.” 1 J.A. 34. Wolf served as the real estate agent and took a
$55,000 commission.
1
According to Victoria Hunt, who was paid by Brighton Developers to bring in
“investors,” Brighton Developers obtained the cash for the down payment from a handful
(Continued)
8
Victoria Hunt, who was associated with Brighton Developers, also helped to fund
a $183,000 down payment on a home at 2817 Cutter Court that was purportedly being
purchased by Jamaine Wallace. Wolf attended the closing and received a commission of
about $11,000. Hunt and Wallace were among those receiving kickbacks through
Charlotte Business Investor Group and other entities such as Stir, Inc., a nightclub, that
did not perform any work on the property.
Danielle Vaughn, a mortgage broker who obtained loans for some of Wolf’s
buyers, confirmed that Maiden obtained a loan for 9215 Woodhall Lake Drive and that
Wallace secured a loan to purchase 2817 Cutter Court. Maiden’s loan application was
referred to Vaughn by James Tyson, one of Brighton Developers’ principals. Vaughn
testified that she was aware that Hunt, not the purchaser Wallace, brought the required
cash to the closing for 2817 Cutler Court. Vaughn also testified that Wolf instructed her
that there were some documents “he [did] not want to go to the underwriter,” including
the compensation agreement. J.A. 658.
Testimony of government’s expert witness on mortgage-lending practices
Before trial, Wolf filed a motion in limine to exclude the testimony of Dr. Debra
Sherrill, the government’s expert witness on the mortgage industry, the mortgage-lending
process and typical lender practices. Wolf argued that the district court should exclude
Dr. Sherrill’s testimony as “irrelevant” and “beyond the scope of evidence permissible
of professional football players who believed they were investing in a real estate project
and that their investment was “secured by a lot.” J.A. 224.
9
under Fed. R. Evid. 702.” J.A. 112. Wolf believed that such testimony was too general
and that “[o]nly an authorized representative of each lender” should be allowed to testify
based on “personal knowledge” as to what information “that lender would have
considered . . . material in its underwriting decision back in 2006-2007.” J.A. 112. In
response, the government argued that “the test for whether a false statement to a bank is
material is an objective one.” J.A. 115. Additionally, the government suggested to the
court that “[e]xpert testimony is an efficient and appropriate way of helping the jury to
understand the basics of obtaining a mortgage loan . . . and helping the jury understand
what would be important to a reasonable lender.” J.A. 116. The district court agreed that
Dr. Sherrill could testify and denied the motion.
Dr. Sherrill, a professor who taught mortgage banking and had 20 years
experience in mortgage processing and underwriting, explained to the jury how
residential real-estate transactions work. First, Dr. Sherrill testified that the “sales price is
the agreed upon price that the buyer agrees to pay for that house,” and that “the seller
agrees to sell the house for.” J.A. 153. Dr. Sherrill testified that “the lender [makes] a
determination of how much to loan,” “based on that sales price.” Id. She explained that
down-payment money “represents the buyer’s equity,” J.A. 155, and that it “[a]bsolutely”
matters to the lender whether or not the buyer is really putting the down payment money
down, J.A. 156.
When asked how would it “affect the appraisal if there were a large amount of
money being paid from the seller to the buyer,” Dr. Sherrill explained that the appraiser
“would have to lower the amount of the appraisal.” J.A. 161. According to Dr. Sherrill,
10
lenders only allow sellers to pay buyers a certain amount of cash—usually three to six
percent of the contract. If the seller were to exceed this limit, the lender “would
automatically lower that value and then make a loan amount determination based off the
lower value.” J.A. 162. Dr. Sherrill further confirmed that all information supplied by a
prospective buyer on the Uniform Residential Loan Application matters to the lender so
that it can determine the buyer’s “capacity to repay.” J.A. 164.
Finally, Dr. Sherrill explained that the Real Estate Settlement Procedures Act
(RESPA) requires the use of the HUD-1 settlement statement which must list “[e]very fee
connected to a residential real estate transaction,” J.A. 167, including “the real sales
price,” any “deposit or earnest money,” and “cash at settlement from or to [the]
borrower.” J.A. 168. And, she explained that “[y]ou cannot have any fee on this HUD-1
that is not earned” and that “whatever that fee is, the person had to [have] perform[ed]
that work.” J.A. 171.
Testimony of Wolf’s real estate closing attorney
Christine Gates, a real estate attorney who was involved with Wolf in several
fraudulent transactions, testified that she received compensation agreements reflecting a
gross price and a strike price. She never disclosed these agreements to the lenders,
however, because she “knew that the bank[s] . . . wouldn’t do the loan[s].” J.A. 734.
Gates testified that she and Wolf never discussed whether “it was legal to structure a real
estate deal this way, to have two prices” in “a compensation agreement.” Id. Gates
likewise indicated that she never told Wolf “that it would be legal for buyers to receive
money so long as they used a company name instead of their own name on the HUD-1.”
11
J.A. 735. Gates further explained that the bank would not have approved the loan if it
had been told the strike price “because the difference [between the gross and strike prices
was] going out to a third party [that] had nothing to do with the properties.” J.A. 733.
Wolf’s testimony
After the government rested, Wolf testified in his own defense. Wolf claimed that
he sought the advice of a lawyer to ensure that his way of structuring transactions was
legal, suggesting that he was going to pursue an advice-of-counsel defense. Wolf
claimed that he consulted an attorney named Dale Fussell, who actually prepared the
compensation agreements Wolf used in his transactions. Wolf testified that he “fully
disclose[d] to [Fussell] . . . the details of the transaction . . . to be used in the
compensation agreement,” and that, based on his consultation with Fussell, he understood
his approach “was acceptable.” J.A. 828. He further claimed that “[a]ny time anybody . .
. wanted any disbursements on a HUD-1 settlement statement,” Wolf would have the
closing attorney “go over how they wanted their transaction to transpire at the closing,”
as well as “the compensation agreement . . . to make sure we were making full disclosure
[on the HUD-1].” J.A. 831. Wolf additionally testified that he used the compensation
agreements “to disclose to the attorney and to the lender and to disclose between the
parties [how] the monies . . . [were] being distributed” and claimed the compensation
agreements were provided to the lending institutions. J.A. 830. Wolf acknowledged that
he went through training as a real estate agent. He testified that RESPA applied to
“government insured loans,” but not “commercial or investor purchase[s] of real estate.”
12
J.A. 829. Wolf indicated that “it was the responsibility of the attorney,” rather than the
real estate agent, “to ensure that [the HUD-1] was complete and accurate.” J.A. 828.
Wolf then testified about a number of individual transactions, offering his
explanation to contradict the testimony of the government’s parade of witnesses. For
each transaction he addressed, Wolf denied setting the price of the house, stated the house
was worth the purchase price, recited his commission for the transaction, and denied
“there was anything fraudulent about [the] transaction.” J.A. 842. Moreover, when
asked about the large sum going to a designated company—at closing—for various
services rendered, Wolf testified the money was for work that needed to be completed.
For example, Wolf testified that Wittig, the builder, set the gross price of $1,350,000 for
the 2900 Crane Road property purchased by Long. According to Wolf, the house was
initially listed at $1,050,000 before it was built, but Wittig asked Wolf to raise the listing
price to $1,350,000 after it was completed. When questioned about the $585,000 sum to
be disbursed to Advantage Investor Enterprises for “[d]esign service fees,” Wolf asserted
that “the house was not exactly complete and there were additional landscaping and other
things that needed to occur and . . . basically [the $585,000] allow[ed] the buyer to dictate
who would complete the project.” J.A. 839.
Finally, Wolf denied “reach[ing] any kind of agreement [with any of his co-
conspirators] to purposely misrepresent things to lenders” or “conspir[ing] . . . to commit
fraud,” J.A. 915, but agreed “some people may have” “engaged in fraud in the
transactions of which [he was] a part.” J.A. 920.
13
After Wolf rested, the government called Fussell, the attorney, in rebuttal. Fussell
testified unequivocally that he did not draft the compensation agreement, or anything like
it, that had been used in the transactions at issue. Fussell likewise testified that he never
gave Wolf advice “on how to structure transactions so that money could go back to
companies owned by buyers,” J.A. 965, because such a transaction would be illegal.
Fussell also indicated that he did not know the terms gross price, strike price, or
“construction design services,” which were frequently used in connection with Wolf’s
real estate transactions, J.A. 966-67.
At the close of the government’s evidence and at the conclusion of all of the
evidence, Wolf unsuccessfully moved for judgment of acquittal. The jury found Wolf
guilty of all counts.
Sentencing
In calculating the advisory Guidelines range, Wolf’s presentence report (“PSR”)
started with a base offense level of 7 pursuant to the guideline for fraud offenses, see
U.S.S.G. § 2B1.1(a)(1) 2, then made the following adjustments based on applicable
specific offense characteristics: a 20-level enhancement for a loss between $7 and $20
million, see U.S.S.G. § 2B1.1(b)(1)(K); a two-level enhancement for more than 10
victims, see U.S.S.G. § 2B1.1(b)(2)(A)(i); a two-level enhancement for use of
sophisticated means, see U.S.S.G. § 2B1.1(b)(10)(C); and a two-level enhancement for a
2
The PSR grouped Counts 1, 3 and 5 together for purposes of calculating the
guidelines. See U.S.S.G. § 3D1.2(d).
14
conviction under 18 U.S.C. § 1956, see U.S.S.G. § 2S1.1(b)(2)(B). The PSR then
recommended the imposition of a three-level manager or supervisor enhancement, see
U.S.S.G. § 3B1.1(b); a two-level enhancement for abuse of a position of trust, see
U.S.S.G. § 3B1.3; and a two-level obstruction-of-justice enhancement, see U.S.S.G. §
3C1.1. Thus, the PSR’s adjusted offense level was 40. Wolf objected to the
enhancements based on loss amount, number of victims, role in the offense, sophisticated
means, abuse of a position of trust, and obstruction of justice. The government did not
pursue the obstruction enhancement at sentencing.
The district court adopted all of the PSR’s recommended enhancements except the
two-level obstruction-of-justice enhancement. Thus, the district court determined Wolf’s
total offense level was 38, which, when coupled with his criminal history category of I,
yielded an advisory guideline range of 235 to 293 months.
Wolf moved under 18 U.S.C. § 3553(a) for a significant downward variance “to a
sentence of less than 36 months imprisonment.” J.A. 1633. The government likewise
requested a downward variance, but a much more modest one. The government asked
that the district court vary downward from the advisory sentencing range of 235 to 293 to
a range of 121-151 months. The district court granted the motion for a downward
variance and imposed a sentence of 84 months imprisonment.
Post-Trial Motions
A.
After trial, Wolf filed a motion for new trial and a renewed motion for acquittal.
Wolf claimed that he had come into possession of a “compensation agreement that was
15
not included in the discovery provided by the government and which was not part of the
evidence presented at trial,” J.A. 1167, although Wolf conceded that he had the document
in his possession a week before trial. Specifically, Wolf asserted that this compensation
agreement was very similar to those presented at trial, included the terms “gross price”
and “strike price,” and was signed by Fussell in his capacity as an attorney. Accordingly,
Wolf contended that this document contradicted Fussell’s testimony that he was
unfamiliar with the meaning of the terms “gross price” and “strike price.” J.A. 1167.
Wolf also renewed his Rule 29 motion for acquittal, arguing that “there was a lack of
evidence from which the jury could have found beyond a reasonable doubt that the
alleged representations or misrepresentations would have been important to a reasonable
lender.” J.A. 1172.
The district court held an evidentiary hearing on the motion for a new trial. At the
hearing, Fussell agreed that his signature appeared on a number of compensation
agreements, that the compensation agreements contained the terms “gross price” and
“strike price,” and that the compensation agreements indicated that payments were going
to various companies. Fussell, however, reaffirmed his position at trial that he did not
know what those terms meant or who owned the companies named in the compensation
agreements or what they did. Fussell testified further that he had never prepared such an
agreement that would “kick[] money back to a buyer,” J.A. 1262, because “that is
mortgage fraud,” J.A. 1266. Fussell also testified that he did not “have a recollection of
[Wolf] or these closings,” which had occurred 10 years earlier and amounted to four out
of 1,000 closings Fussell did annually. J.A. 1261. Finally, Fussell denied that Wolf ever
16
asked him “how to make sure that he could legally get money to go back to a company
owned by a buyer.” J.A. 1266.
The district court denied Wolf’s motion for new trial, concluding “that the
evidence at trial, absent the testimony of Mr. Fussell, was more than adequate to have the
jury return the verdict that they did.” J.A. 1275. Further, the district court found that the
evidence relied upon by Wolf did not constitute “newly discovered evidence.” Id. And
finally, the district court found that Fussell had not perjured himself at trial or during the
hearing, as he “clos[ed] a thousand loans a year” and could not reasonably be expected to
“uncover this fraud.” Id.
B.
Eight months after the trial, the government filed an ex parte motion to disclose
material pursuant to a protective order. The government revealed that on December 6,
2013, about two months after the conclusion of Wolf’s criminal trial, a “grand jury
investigation involving possible ‘short sale’ fraud” was opened, and the Assistant United
States Attorney handling the new grand jury investigation learned that Fussell “served as
the closing attorney for most of the approximate[ly] 100 short sales under investigation.”
J.A. 1424. Furthermore, the government indicated that the new investigation uncovered
“two facts which have made Attorney Fussell a subject of such investigation”: (1) that
“Attorney Fussell has signed a document certifying to the bank that [he] knew of no
subsequent contract or arrangement to sell property, when in fact it appears that . . .
Attorney Fussell did know of a subsequent transaction;” and (2) that the mother of one of
the targets of the investigation claimed that Attorney Fussell “advised [the target] and his
17
mother to close a home that was for [the target’s] personal use in the name of [the
target’s] mother” and that the target’s mother lied on the HUD-1 Settlement Statement
about who supplied the down payment. J.A. 1425.
The government sought permission to disclose this information to Wolf even
though the government asserted that it was “not subject to Brady-Giglio because it was
not known to the prosecution at the time of . . . Fussell’s testimony.” J.A. 1425. The
district court issued a protective order granting the government’s ex parte motion, and the
government promptly disclosed the information to Wolf.
C.
Following the government’s disclosure of this new information pursuant to the
protective order, Wolf filed a “motion for government to provide Brady and Giglio
material to defense—under seal.” J.A. 1430. Specifically, Wolf noted that the
government disclosed in its ex parte motion that Fussell “‘was the closing attorney for
most of the approximate[ly] 100 short sales under investigation.’” J.A. 1432.
Complaining that “the government’s motion sought to disclose only one such short sale
file,” id., Wolf argued that “there is good reason to believe that the other approximately
99 short sale fraud files may also contain material inconsistent with Fussell’s testimony”
and “request[ed] that these files be made available to [Wolf] pursuant to Brady and
Giglio,” J.A. 1433.
The district court denied Wolf’s motion. The district court concluded that the
information sought by Wolf could not be “fairly characterized as Brady material” and
that it was “not material for the purposes of [Wolf’s] quest for a new trial.” J.A. 1616.
18
The district court described Wolf’s motion for disclosure of the short sale fraud materials
as “yet another attempt to engage in a wide-ranging fishing expedition post-trial, which
[the court could not] permit.” J.A. 1617.
D.
Based upon the documents the government disclosed under the protective order,
Wolf filed a second motion for a new trial on the grounds that “important portions of
attorney Fussell’s testimony now clearly appear to be false.” J.A. 1526. Wolf noted that
his “defense was that Fussell had signed off on various transactions and provided legal
advice as to their legality” and “[t]he new evidence contradicts Fussell’s trial rebuttal
testimony that he would not participate in such [fraudulent] transaction[s].” J.A. 1527.
Wolf also alleged that “before, during and after [his] trial,” Fussell had a large contract
with HUD “to act as its closing agent for the Eastern Region of North Carolina,” J.A.
1592, but that these facts were never disclosed.
The district court concluded that Wolf failed to demonstrate that he was entitled to
a new trial. First, the district court concluded that the information Wolf relied upon was
“merely cumulative and impeaching.” J.A. 1613. The court found that “[n]othing about
the [documents disclosed by the government] meaningfully contradicts” Fussell’s rebuttal
testimony that he did not draft Wolf’s compensation agreements or advise Wolf that his
scheme was legal. Id. Indeed, the newly disclosed “documents reference wholly separate
transactions involving different actors suspected of engaging in ‘short sale’ fraud, which
is different from the method of fraud employed . . . in this case.” J.A. 1613-14. Second,
the court found that the new information was “not material for the purposes of a motion
19
for [a] new trial.” J.A. 1614. The district court reasoned that, “[h]ad [Wolf] had this new
evidence at trial, it would, at most, have allowed him to impeach Fussell by asking him if
he had ever given anyone else legal advice that resulted in a different kind of fraudulent
transaction.” J.A. 1615. Finally, the court stated that the new evidence “would not
probably produce an acquittal.” Id. The court noted that the evidence against Wolf was
overwhelming, and the new evidence would not have changed the jury’s rejection of
Wolf’s advice-of-counsel defense—which was based not only on Fussell but also Gates,
who “testified that she did not provide [Wolf] legal advice, despite his testimony and
assertions to the contrary.” J.A. 1614.
E.
Finally, Wolf filed a third motion for a new trial, arguing that the government
“failed to comply with its obligations under Giglio to disclose impeachment evidence
regarding witness Dale Fussell.” J.A. 1321. Specifically, Wolf asserted that he was
entitled to a new trial based upon undisclosed evidence that Fussell had a lucrative
contract to perform legal work for HUD—that he “was a highly paid federal government
contractor at the time of his trial testimony as a government witness against Wolf.” J.A.
1324.
The district court denied Wolf’s third new-trial motion as well. The court found
that “this information is, at best, merely impeaching, that it is not material because its
cumulative effect would not have changed the result of the proceedings, and that its
introduction would not probably produce an acquittal.” J.A. 1617-18.
20
II.
Wolf first challenges the denial of his multiple motions for a new trial based on
newly discovered evidence relating to the Government’s rebuttal witness. This court
reviews “the district court’s denial of a motion for a new trial under an abuse of
discretion standard” of review. United States v. Wilson, 624 F.3d 640, 660 (4th Cir.
2010); United States v. Bartko, 728 F.3d 327, 338 (4th Cir. 2013) (“It is an abuse of
discretion for the district court to commit a legal error—such as improperly determining
whether there was a Brady violation—and that underlying legal determination is
reviewed de novo.” (internal quotation marks omitted)). With regard to the district
court’s Brady ruling, we apply de novo review to its legal determinations and clear error
review to its factual findings. See United States v. Parker, 790 F.3d 550, 558 (4th Cir.
2015). 3
In order to succeed on a motion for a new trial on the basis of newly discovered
evidence, the proponent must establish each of the following:
(a) The evidence must be, in fact, newly discovered, i.e., discovered since
the trial;
3
We reject Wolf’s contention that a de novo standard of review applies to the
denial of each of his new-trial motions because, according to Wolf, each new trial motion
was based upon asserted Brady violations. Wolf’s first two new-trial motions did not
implicate Brady, and therefore abuse of discretion is the appropriate standard of review
for those. To the extent Wolf’s third new-trial motion is founded upon an alleged Brady
violation, we review for abuse of discretion. See United States v. Bartko, 728 F.3d 327,
338 (4th Cir. 2013). However, “[i]t is an abuse of discretion for the district court to
commit a legal error-such as improperly determining whether there was a Brady
violation.” Id. (internal quotations omitted).
21
(b) facts must be alleged from which the court may infer diligence on the
part of the movant;
(c) the evidence relied upon must not be merely cumulative or impeaching;
(d) it must be material to the issues involved; and
(e) it must be such, and of such nature, as that, on a new trial, the newly
discovered evidence would probably produce an acquittal.
United States v. Singh, 54 F.3d 1182, 1190 (4th Cir. 1995) (quotations and alterations
omitted). To succeed on a Brady violation, the proponent must “show that the
undisclosed evidence was (1) favorable to him either because it is exculpatory, or because
it is impeaching; (2) material to the defense, i.e., prejudice must have ensued; and (3) that
the prosecution had materials and failed to disclose them.” Wilson, 624 F.3d at 661
(internal quotation marks omitted). As set forth below, we conclude that the district court
did not abuse its discretion in denying Wolf’s three motions for a new trial.
A.
First, we consider whether the district court abused its discretion in denying
Wolf’s initial motion for a new trial based on “newly discovered” evidence. We
conclude that it did not.
After trial, Wolf’s counsel “came into possession” of a compensation agreement,
signed by Fussell as the closing attorney, that was used by Wolf in a separate transaction
that was not part of the evidence at trial. J.A. 1186. Like the compensation agreements
Wittig testified were given to him by Wolf, this one contained the terms “strike price”
and “gross price.” J.A. 1186. Thus, Wolf argued that Fussell, the government’s rebuttal
witness, had been dishonest on the stand.
22
The district court held an evidentiary hearing on this issue. Fussell testified during
the hearing and admitted that his signature appeared on several similar compensation
agreements. Fussell agreed that the compensation agreements contained the terms “gross
price” and “strike price,” but he reaffirmed that he had no idea what those terms meant.
Indeed, the terms of the typical compensation agreement used by Wolf and Wittig
indicated the money was going to a company for services rendered rather than to an
individual. Fussell also testified that he did not advise Wolf to use compensation
agreements, and that he “would not ever draft a document to kickback money to a buyer
from a closing not disclosed to a lender” as he was “absolutely certain that is mortgage
fraud.” J.A. 1266.
The district court denied Wolf’s first motion for new trial, concluding that “the
evidence at the trial, absent the testimony of Mr. Fussell, was more than adequate to have
the jury return the verdict that they did.” J.A. 1275. Furthermore, the district court found
that the compensation agreement signed by Fussell did not constitute “newly discovered
evidence.”
The district court is correct. Wolf’s own memorandum to the district court makes
clear that he was in possession of the compensation agreement prior to trial, as it was in a
box given to him by a former assistant the week before trial. Thus, this evidence was not
“newly discovered,” and Wolf could not show that he exercised diligence in uncovering
the documents, supporting the denial of the new-trial motion. Moreover, as Wolf’s
argument effectively concedes, the evidence was, at best, impeaching. At most, the
“newly acquired” compensation agreement signed by Fussell established that the terms
23
“strike price” and “gross price,” which Fussell testified at trial were unfamiliar to him,
appeared on documents that he had signed several years earlier. Moreover, Wolf failed to
demonstrate that the evidence was material and would probably produce an acquittal.
The evidence of Wolf’s guilt was overwhelming. Through the testimony of numerous
witnesses, including co-conspirators, and hundreds of documents, the government proved
not only that Wolf engaged in numerous fraudulent mortgage transactions, but also that
he did so knowingly. Wolf’s advice-of-counsel defense was not only refuted by Fussell,
but it was also refuted by Gates and by the testimony of Wolf’s co-conspirators that Wolf
knowingly structured the transactions and the paper trail to deceive the lenders. The
district court reasonably concluded that the evidence that Fussell signed certain of the
compensation agreements years before his testimony was not material and would not
likely have produced an acquittal.
B.
Next, Wolf challenges the district court’s denial of Wolf’s second new trial
motion. We conclude that the district court was well within its discretion in denying the
motion.
This motion stemmed from the government’s post-trial disclosure of material from
the separate investigation months after the trial. Included in the material disclosed by the
government was evidence showing that Fussell had served as the closing attorney on a
number of short sale transactions under grand jury investigation. Wolf thus filed a
second motion for a new trial on the grounds that “important portions of attorney
Fussell’s testimony now clearly appear to be false.” J.A. 1526. In Wolf’s view, “[t]he
24
new evidence contradicts Fussell’s trial rebuttal testimony that he would not participate in
such [fraudulent] transaction[s].” J.A. 1527.
The district court denied the motion for a new trial. First, the court concluded that
the new information was “merely cumulative and impeaching,” and that nothing in the
new evidence “meaningfully contradict[ed] t[he] testimony” Fussell gave at trial because
the new information “reference[d] wholly separate transactions . . . involving ‘short sale’
fraud, which is different from the method of fraud employed” by Wolf and his co-
conspirators. J.A. 1613-14. Second, the district court found that the new evidence was
“not material,” J.A. 1614, finding no reasonable probability that the outcome would have
been different with this information. Even if Wolf had had this new evidence at trial, “it
would, at most, have allowed him to impeach Fussell by asking him if he had ever given
anyone else legal advice that resulted in a different kind of fraudulent transaction.” J.A.
1615. The district court found the evidence immaterial because Wolf’s testimony would
not have established an advice-of-counsel defense, even if not contradicted by Fussell’s
testimony. As the district court explained, Wolf “did not testify that he told Fussell all
the pertinent facts,” J.A. 1614, and on that basis alone, his advice-of-counsel defense
would fail. Additionally, he asserted that he received similar advice from Gates and other
attorneys, but Gates “testified unequivocally that no such advice was given.” J.A. 1614-
15.
Finally, the district court correctly concluded that this new evidence would not
have probably produced an acquittal. This element of the newly-discovered-evidence test
requires the district court “to make a credibility determination . . . focus[ing] on whether
25
a jury probably would reach a different result upon hearing the new evidence.” United
States v. Lighty, 616 F.3d 321, 374-75 (4th Cir. 2010) (internal quotation marks omitted).
The district court made that credibility determination and concluded that Wolf’s guilt was
supported by the testimony of numerous witnesses who described “in great detail” the
activities of the co-conspirators and Wolf’s role in the conspiracy. J.A. 1615. The
district court noted that this testimony was supported by hundreds of documents, many of
which directly implicated Wolf. In light of the strength of the government’s evidence of
Wolf’s guilt and the relatively minor contribution Fussell’s testimony made to the totality
of the government’s case, the district court reasonably concluded that the short-sale
evidence did not create a reasonable probability of a different result. Particularly in light
of the overwhelming evidence that Wolf knew he was facilitating fraudulent transactions,
the district court reasonably concluded that “the cumulative effect of this additional
evidence would not create a reasonable probability that the outcome of the trial would
have been different.” J.A. 1615.
The district court was clearly within its discretion to deny the second motion for a
new trial. We affirm this decision.
C.
Wolf argues that the district court committed reversible error by denying his third
motion for a new trial based on information Wolf discovered while his second new trial
motion was pending. More than a year after his own trial, Wolf discovered that Fussell
testified during a civil trial in the United States Court of Federal Claims that he had had a
lucrative contract to perform legal work for HUD since 2011. Wolf asserts that Fussell
26
was therefore “a highly paid federal government contractor at the time of his trial
testimony as a government witness against Wolf.” J.A. 1324.
The government never disclosed this impeachment evidence, and Wolf was unable
to impeach Fussell with it during Fussell’s rebuttal testimony. Wolf did not assert that
the prosecutors were aware that Fussell did contract legal work for HUD. Nonetheless,
Wolf contended that the government had knowledge of this information and had a duty to
disclose it under Giglio v. United States, 405 U.S. 150 (1972), and Brady v. Maryland,
373 U.S. 83 (1963). Wolf sought a new trial based on the government’s alleged violation
of its duty of disclosure, arguing that there was a reasonable probability that the result of
the trial would have been different had Wolf been able to use the information to impeach
Fussell.
The district court denied Wolf’s third new-trial motion as well. The court noted
“that this information is, at best, merely impeaching, that it is not material because its
cumulative effect would not have changed the result of the proceedings, and that its
introduction would not probably produce an acquittal.” J.A. 1617-18.
We see no error on the part of the district court. To receive a new trial based on
the government’s violation of Giglio or Brady, the defendant must “show that the
undisclosed evidence was (1) favorable to him either because it is exculpatory, or because
it is impeaching; (2) material to the defense, i.e., prejudice must have ensued; and (3) that
the prosecution had [the] materials and failed to disclose them.” United States v. Wilson,
624 F.3d 640, 661 (4th Cir. 2010) (internal quotation marks omitted). Wolf does not
suggest the prosecutors in his case had these materials until well after trial. Wolf also
27
cannot demonstrate prejudice, in light of the overwhelming evidence of guilt that we have
detailed above. We find no abuse of discretion in the district court’s denial of Wolf’s
third motion for a new trial.
D.
Finally, Wolf challenges the district court’s denial of his motion to compel the
government to produce approximately 99 “short sale” files discovered during a separate
and unrelated grand jury investigation in which Fussell was the closing attorney. Wolf
argued that “there is good reason to believe that the other approximately 99 short sale
fraud files may also contain material inconsistent with Fussell’s testimony” and
“request[ed] that these files be made available to [Wolf] pursuant to Brady and Giglio,”
J.A. 1433.
The district court denied Wolf’s motion, stating that the information sought by
Wolf could not be “fairly characterized as Brady material” and that it was “not material
for the purposes of [Wolf’s] quest for a new trial.” J.A. 1616. The district court
described Wolf’s motion for disclosure of the short sale fraud materials as “yet another
attempt to engage in a wide-ranging fishing expedition post-trial, which [the court could
not] permit.” J.A. 1617.
Once again, we agree with the district court. To prevail on a Brady claim, a
defendant must show that “(1) the evidence is favorable to the accused because it is
exculpatory or impeaching; (2) the evidence was suppressed by the government, either
willfully or inadvertently; and (3) the evidence is material.” United States v. McLean,
715 F.3d 129, 142 (4th Cir. 2013). “To be material, there must be a reasonable
28
probability that disclosure of the evidence would have produced a different outcome.”
Id.
The government did not have this evidence until after Wolf’s trial ended.
Therefore there was no Brady violation. Furthermore, any argument that the evidence
would have produced a different outcome was based on sheer speculation. As the district
court pointed out, Wolf was trying to use Brady to engage in a post-trial fishing
expedition for material evidence. “Brady requests cannot be used as discovery devices.”
United States v. Caro, 597 F.3d 608, 619 (4th Cir. 2010). “There is no general
constitutional right to discovery in a criminal case, and Brady did not create one.” Id.
(internal quotation marks omitted)).
III.
Next, Wolf argues that the district court erroneously denied his motion in limine to
exclude testimony from Dr. Sherrill, the government’s expert witness on mortgage
banking practices. This court reviews a district court’s decision on the admissibility of
evidence for abuse of discretion. See Minter v. Wells Fargo Bank, N.A., 762 F.3d 339,
349 (4th Cir. 2014).
Dr. Sherrill testified to the jury as an expert witness. She was allowed by the court
to testify as to whether certain categories of information would have been material to
lenders. For example, over objection, Sherrill was allowed to testify to the materiality of
representations about down payments (because the buyers in Wolf’s scheme did not ever
put money down):
29
Q. Does it matter typically to a lender whether or not the buyer is really
putting the down payment down?
A. Absolutely.
J.A. 155-56. Wolf argues Dr. Sherrill was not qualified, due to lack of personal
knowledge and adequate expertise, to testify about the materiality of the alleged
misrepresentations—apparently because she had never worked with the specific lenders
involved here. This is a losing argument, because the test for whether a false statement to
a bank is material is an objective one; it does not change from bank to bank. See United
States v. Irvin, 682 F.3d 1254, 1267 (10th Cir. 2012) (explaining that “materiality in the
bank fraud context [is] an objective quality, unconcerned with the subjective effect that a
defendant’s representations actually had upon the bank’s decision”).
Wolf’s primary attack seems to be that Dr. Sherrill’s testimony as to materiality
constituted an improper legal conclusion. Rule 702(a) of the Federal Rules of Evidence
provides that “if . . . specialized knowledge will help the trier of fact to understand the
evidence or to determine a fact in issue,” then “[a] witness . . . qualified as an expert by
knowledge, skill, experience, training, or education may testify in the form of an
opinion.” Wolf argues that under Rule 702, “[e]xpert testimony that merely states a legal
conclusion is less likely to assist the jury in its determination.” United States v. Barile,
286 F.3d 749, 760 (4th Cir. 2002).
Sherrill was not offering legal conclusions. She was testifying, based on her
extensive experience, about the mortgage process, about which most lay people know
very little. Expert testimony intended to help the jury understand the relevant industry is
30
admissible. As the Eighth Circuit explained, “[m]ortgage underwriting standards are
beyond the experience of the typical juror,” and thus expert testimony is admissible to
“help[] the jury to understand documents with which they may not have been familiar,
and [to give] them a basis for determining whether [the defendant’s] alleged
misrepresentations were material.” United States v. Spencer, 700 F.3d 317, 321 (8th Cir.
2012). The district court was well within its considerable discretion in admitting
Sherrill’s expert testimony.
IV.
Wolf next challenges the sufficiency of the evidence to support a finding of
materiality. Wolf was convicted on three counts in the indictment. Count 1 charged
Wolf with RICO conspiracy to commit the predicate acts of bank fraud, wire fraud, and
money laundering in violation of 18 U.S.C. § 1962(d); Count 3 charged bank fraud in
violation of 18 U.S.C. § 1344; and Count 5 charged conspiracy to launder money in
violation of 18 U.S.C. § 1956(h). Following trial, Wolf renewed his motion for acquittal,
arguing that the government was required to prove materiality with respect to each count
but failed to do so.
We apply a de novo standard of review when considering a challenge to the
district court’s denial of a motion for acquittal based on sufficiency of the evidence.
United States v. Reed, 780 F.3d 260, 269 (4th Cir. 2015). Any defendant who contends
that there was insufficient evidence to sustain a guilty verdict against him “must
overcome a heavy burden.” United States v. Hoyte, 51 F.3d 1239, 1245 (4th Cir. 1995).
The court “must uphold the jury’s verdict if, viewing the evidence in the light most
31
favorable to the government, substantial evidence supports it.” United States v. Kiza, 855
F.3d 596, 601 (4th Cir. 2017). “[S]ubstantial evidence is evidence that a reasonable
finder of fact could accept as adequate and sufficient to support a conclusion of a
defendant’s guilt beyond a reasonable doubt.” United States v. Cornell, 780 F.3d 616,
630 (4th Cir. 2015) (internal quotation marks omitted). “Reversal for insufficient
evidence is reserved for the rare case where the prosecution’s failure is clear.” United
States v. Ashley, 606 F.3d 135, 138 (4th Cir. 2010) (internal quotation marks omitted).
A.
The district court gave a materiality instruction with respect to both Count 1 (the
RICO conspiracy charge) and Count 3 (the bank fraud charge). Regarding Count 1, the
district court instructed that for Wolf to be guilty of the RICO conspiracy offense, the
government must prove beyond a reasonable doubt that he joined “a conspiracy” that
“existed to participate in . . . an enterprise that affected interstate . . . commerce through a
pattern of racketeering activity.” J.A. 1112-13. In turn, the court instructed the jury that
“[a] pattern of racketeering activity requires as least two acts of racketeering activity,”
which here “include[d] bank fraud, wire fraud, or money laundering.” J.A. 1115.
The district court then instructed the jury on the predicate act of wire fraud under
18 U.S.C. § 1343, explaining that materiality was an element of wire fraud: “A violation
of this statute . . . require[s] proof that the defendants . . . devised . . . a scheme to
defraud or for obtaining money or property by means of false or fraudulent . . .
representations . . . that were material.” J.A. 1117 (emphasis added). The court likewise
instructed the jury that to find Wolf guilty of bank fraud—which was charged in the
32
indictment both as a predicate act of racketeering and as a separate substantive offense—
the government would have to prove that he “knowingly executed or attempted to
execute a plan . . . to obtain [money] . . . under the custody or control of [a] bank”; that he
executed the plan by means of “false pretenses, representations or promises”; and “that
the fraudulent pretenses, representations or promises were material.” J.A. 1126-27
(emphasis added).
With respect to money laundering under 18 U.S.C. § 1956(h)—which was also
charged as a predicate act of racketeering and as a separate substantive offense—the
district court instructed that the government was required to prove that Wolf “conducted
or attempted to conduct a financial transaction; . . . [which] involved the proceeds of
specified unlawful activity; . . . [knowing] that the property involved . . . the proceeds of
some form of unlawful activity;” J.A. 1135, in order to “conceal or disguise the nature . .
. of the unlawful activity,” id., or “to promote the carrying on of the . . . unlawful
activity,” J.A. 1136. Finally, the jury was told that “[w]ire and bank fraud are specified
unlawful activities.” J.A. 1137. 4
Finally, the district court defined the meaning of a “material” statement or
representation as follows:
A statement or representation is material if it has a natural tendency to
influence or is capable of influencing a decision or action of the decision-
4
Therefore, Wolf’s motion for acquittal based on insufficient evidence of
materiality also encompassed the separate money laundering count because the money
laundering count “was premised on either Count One or Count Three being the specified
unlawful activity.” Appellant’s Reply Brief at 11.
33
maker. . . . [T]he government need not prove that any particular lender
subjectively relied upon the alleged statement or representation, but must
prove beyond a reasonable doubt that such statements or representations
would have been important to a reasonable lender.
J.A. 1120 (emphasis added). 5
B.
There was plenty of evidence from which a reasonable juror could conclude
beyond a reasonable doubt that Wolf’s “statements or representations would have been
important to a reasonable lender.” J.A. 1120. Ample evidence was presented that, in
every transaction he conducted, Wolf lied on documents that lenders considered
extremely important, such as HUD-1 settlement statements, sales contracts, and
appraisals.
Gates, an attorney who closed real estate transactions for Wolf and who was
charged as one of Wolf’s co-conspirators, testified that she was aware of the
compensation agreements used in his transactions. According to Gates, the fraudulent,
inflated “gross” price was used in the sales contract and the HUD-1 settlement statement
and that “[e]verything was based off of that price.” J.A. 733. Gates, a sole practitioner
focusing on real estate transactions, stated that she never provided the actual or “strike”
price of any property to any bank “because [she] knew that the bank wouldn’t do the
closing. It wouldn’t do the loan.” J.A. 734.
5
The government takes the position that materiality does not have to be proven to
establish that Wolf engaged in a RICO conspiracy to commit wire fraud, bank fraud, and
money laundering. Our conclusion would be the same, however, regardless of whether
materiality is an element of the RICO conspiracy charged in Count 1.
34
Clarke, a co-conspirator who purchased homes in Wolf’s scheme, worked in the
mortgage industry as a loan officer from 1998 to 2005. Clarke testified that he did not
disclose to the lender that he was receiving a sum of money through the transaction,
explaining that “[t]he bank would not approve a loan where money [was] going to a
company that I own[ed] if [I was] the buyer.” J.A. 428-29. Likewise, Vaughn testified
that she was serving as “a loan officer working for two mortgage companies,” J.A. 638,
during her dealings with Wolf. According to Vaughn, Wolf sent her compensation
agreements and other documents related to the real estate transactions Wolf had brokered,
but indicated that he did not want Vaughn to pass them along to the lending institution.
And Long, who participated as the buyer in two deals with Wolf, understood that if the
lending institution had been aware that he was receiving enormous kickbacks at closing,
it would not have agreed to make the loan.
Finally, Dr. Sherrill, the government’s expert witness, testified that the kinds of
misrepresentations Wolf made during all of these transactions would have mattered
greatly to any mortgage lender. According to Dr. Sherrill, “the lender will make a
determination [on] how much to loan,” J.A. 153, based on the sales price. Dr. Sherrill
explained that whether the buyer makes a down payment and, if so, how much the buyer
puts down are questions that a lender considers of vital importance—“[i]t represents the
risk involved in the transaction. . . . [T]he more the down payment . . . , the less the risk.”
J.A. 156. Dr. Sherrill also explained that if it were disclosed that “a large amount of
money [was] being paid from the seller to the buyer,” the appraiser “would have to lower
the amount of the appraisal”—obviously an important consideration for a lender. J.A.
35
161. Dr. Sherrill stated that the information set forth on the HUD-1 settlement statement
is exceptionally important to a bank. The HUD-1 settlement statement, which federal
law requires for every residential real estate transaction, requires the disclosure of
“deposit or earnest money” as well as “cash at settlement from or to [the] borrower.”
J.A. 168. And, no fee can appear on the HUD-1 form “that [has not been] earned.” J.A.
171.
Any reasonable juror could conclude beyond a reasonable doubt, based on the
evidence in the record, that false representations made in the documents connected to the
real estate transactions at issue would have been of critical importance to the lenders. We
conclude that the record contains more than adequate evidence of materiality to sustain
Wolf’s convictions.
V.
Finally, Wolf challenges various aspects of his sentence. We review a district
court’s findings of fact related to the application of the Sentencing Guidelines for clear
error, whether the findings involve the amount of loss, see United States v. Keita, 742
F.3d 184, 191 (4th Cir. 2014); the number of victims, see Bartko, 728 F.3d at 346; an
aggravated role in the offense, see United States v. Llamas, 599 F.3d 381, 389 (4th Cir.
2010); or use of sophisticated means. Application of the abuse-of-a-position-of-trust
enhancement is reviewed de novo, although the underlying factual findings are reviewed
for clear error. See United States v. Brack, 651 F.3d 388, 392 (4th Cir. 2011).
A.
36
Wolf asserts that the district court committed error in finding that a loss of $7.1
million was reasonably foreseeable to Wolf under U.S.S.G. § 2B1.1. Section 2B1.1(b)(1)
provides for an enhancement based upon the “greater of actual loss or intended loss.”
U.S.S.G. § 2B1.1 cmt. n.3(A). “Actual loss” is defined as “the reasonably foreseeable
pecuniary harm the resulted from the offense.” U.S.S.G. § 2B1.1 cmt. n.3(A)(i). The
loss amount “must be supported by a preponderance of the evidence” but “need not be
determined with precision.” Keita, 742 F.3d at 192 (internal quotation marks omitted).
“The determination of loss attributable to a fraud scheme is a factual issue for resolution
by the district court, . . . [and] [t]he court need only make a reasonable estimate of the
loss, given the available information.” Id. at 191-92 (internal quotation marks omitted).
The district court calculated the loss by taking the total loan amount for each
property involved, which was based on Wolf’s inflated prices, and then subtracting the
amount recovered by the lender after the foreclosure sale. This was a reasonable method
of determining actual loss. See United States v. Farano, 749 F.3d 658, 664-65 (7th Cir.
2014) (loss in elaborate real estate financing fraud scheme was the amount of the original
loan minus the proceeds from the foreclosure sale). The district court used this method to
calculate the actual loss for each of the properties. For example, in calculating the loss
associated with the 2900 Crane Road property for which Long served as the buyer, the
actual loss was the total original loan amount, $1,335,702.79, less the $400,000 recovered
from the foreclosure sale, which resulted in a net actual loss of $935,702.79 for 2900
Crane Road. Using this method to determine the actual loss for each property, the court
added up the loss amount for all the properties and arrived at a final sum of more than
37
$7.1 million. The district court thus applied the prescribed 20-level enhancement for a
loss between $7 and $20 million. See U.S.S.G. § 2B1.1(b)(1)(K).
Wolf argues that, based on the evidence provided at sentencing, the court’s
method was faulty. Specifically, Wolf points to the government’s spreadsheet that breaks
down, for each property involved, the original loan amount, the intended loss, and the
resale amount following foreclosure. Wolf believes that the spreadsheet reflects that for
most of the properties, the lender “appears” to have sold its devalued loan on the
secondary market prior to foreclosure. Wolf contends that since there is no evidence
regarding how much these loans were sold for, it is impossible to know how much harm
the lender suffered. Wolf suggests the district court should have used the “intended”
loss—that is, the amount Wolf and his friends intended to take from the bank by fraud. If
this measure were used, the total loss would be $3.3 million.
In response, the government suggests that Wolf misapprehends the foreclosure
process. “When a property forecloses, the bank first purchases the property in a
foreclosure sale, almost always as a trustee, i.e., it purchases its own loan so that it can
subsequently sell the property in foreclosure to a third party. It is that subsequent sale, to
someone other than the bank that held the note, that is the true foreclosure sale, and it is
that sale that the district court properly used in calculating the loss reasonably foreseeable
to [Wolf].” Brief of Appellee at 58.
Based on the record, it is difficult to determine precisely what happened to each
loan. We need not make that determination to affirm the district court’s calculation of
loss, however. The only task for the sentencing court is to make a reasonable estimate of
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“the reasonably foreseeable pecuniary harm the resulted from the offense.” U.S.S.G. §
2B1.1 cmt. n.3(A)(i). “Reasonably foreseeable pecuniary harm” is “pecuniary harm that
the defendant knew or, under the circumstances, reasonably should have known, was a
potential result of the offense.” U.S.S.G. § 2B1.1, cmt. 3(A)(iv). Clearly Wolf must
have known that houses purchased in his scheme were very likely to go into foreclosure,
in view of the fact that straw purchasers overpaid for them with fraudulently obtained
mortgage loans. Thus, the difference between the total loan amount and the amount
recovered in foreclosure proceedings is the appropriate measure of loss. Thus, we reject
Wolf’s argument that actual loss cannot be determined in this case because the record
does not contain information relating to sales on the secondary mortgage market. See
Farano, 749 F.3d at 664-65 (rejecting the argument that refinancing breaks the causal
link between the original fraud; the difference between the original loan amount and the
proceeds from the foreclosure sale was the reasonably foreseeable pecuniary harm that
resulted from the offense).
Accordingly, we conclude that the district court’s determination of loss was not
clearly erroneous based on the information available to it, and the court’s finding was
supported by a preponderance of the evidence. We conclude that the district court did not
commit reversible error in its application of an enhancement for a loss amount of $7.1
million.
B.
Next, Wolf argues that the district court erroneously applied a three-level
enhancement based on its finding that Wolf was a manager or supervisor of criminal
39
activity. Under U.S.S.G. § 3B1.1(b), the sentencing court applies a three-level
enhancement “[i]f the defendant was a manager or supervisor (but not an organizer or
leader) and the criminal activity involved five or more participants or was otherwise
extensive.” Because “the Guidelines do not define the term manager,” this court has
consulted the dictionary definition of “manager” to derive its meaning under U.S.S.G. §
3B1.1(b): “[A] person whose work or profession is the management of a specified thing
(as a business, an institution, or a particular phase or activity within a business or
institution).” United States v. Slade, 631 F.3d 185, 190 (4th Cir. 2011) (internal
quotation marks omitted). For this three-level enhancement to apply, there must be
“record evidence that the defendant actively exercised some authority over other
participants in the operation or actively managed its activities.” Id. at 190; United States
v. Bartley, 230 F.3d 667, 673 (4th Cir. 2000) (“The record supports the district court’s
finding that Bartley was a manager or supervisor in each of the conspiracies. The
government presented evidence that Bartley controlled the activities of other participants
in the drug distribution conspiracy . . . .).
It is clear from the evidence that Wolf played at least a manager’s role in the
scheme, drawing up compensation agreements and deciding on a property’s gross price,
selecting floor plans, determining what information to include on the HUD-1 settlement
statements, recruiting new participants in the conspiracy, and controlling which
documents would and would not be submitted to the lender. We find no error in the
district court’s application of a three-level enhancement for a manager’s or supervisor’s
role.
40
Wolf focuses on application note four, which sets forth a non-exclusive, seven-
factor list for sentencing courts to consider in distinguishing a leadership and
organizational role from one of mere management or supervision.” U.S.S.G. § 3B1.1
cmt. n.4 (emphasis added).
Factors the court should consider include the exercise of decision making
authority, the nature of participation in the commission of the offense, the
recruitment of accomplices, the claimed right to a larger share of the fruits
of the crime, the degree of participation in planning or organizing the
offense, the nature and scope of the illegal activity, and the degree of
control and authority exercised over others.
U.S.S.G. § 3B1.1 cmt. n.4 (emphasis added); see United States v. Otuya, 720 F.3d 183,
192-93 (4th Cir. 2013).
Wolf contends that he received a relatively small portion of the proceeds and
therefore should not be considered a manager or supervisor, focusing on the guideline
commentary that states that a manager or supervisor is likely to “claim[] [the] right to a
larger share of the fruits of the crime.” U.S.S.G. § 3B1.1 cmt. n. 4. By its very terms,
however, application note four does not provide guidance for determining whether to
apply—in the first place—an aggravating role enhancement. Rather, it is for
“distinguishing a leadership and organizational role from one of mere management or
supervision.” Id. Accordingly, we reject Wolf’s challenge to the manager or supervisor
enhancement, which the district court properly applied.
C.
Wolf likewise argues that the court did not have a sufficient basis for applying a
sophisticated-means enhancement. Section 2B1.1(b)(10)(C) directs the sentencing court
41
to increase the offense level by two levels if “the offense otherwise involved
sophisticated means.” The commentary to the Guideline provides examples warranting
application of the sophisticated-means enhancement, including “[c]onduct such as hiding
assets or transactions, or both, through the use of fictitious entities, corporate shells, or
offshore financial accounts.” U.S.S.G. § 2B1.1 cmt. n.9(B). As we previously observed,
“[t]he enhancement requires some means of execution that separates the offense before us
from the ordinary or generic.” United States v. Jinwright, 683 F.3d 471, 486 (4th Cir.
2012) (examining identical “sophisticated means” enhancement under the tax fraud
guideline). A defendant, however, “need not utilize the most complex means possible to
conceal his fraudulent activities in order for the court to find that he used sophisticated
means. . . . The court need only find the presence of efforts at concealment that go
beyond (not necessarily far beyond) the concealment inherent in [the] fraud.” Id.
(internal quotation marks and alteration omitted).
Here, there was sufficient evidence for the district court to conclude that Wolf
used a means of concealment that went beyond the concealment inherent in bank fraud.
Wolf disguised the kickbacks to the straw buyers as payments to companies for work
done on the property. In actuality, Wolf asked the buyers to identify a company name to
use on the HUD-1 as the company receiving payment for services rendered, even though
no work was ever performed. Wolf even ensured that fraudulent invoices purporting to
reflect the nonexistent work were provided to the bank through the closing attorney. This
conduct fits well within the guideline parameters for a sophisticated means enhancement.
See, e.g., United States v. Huston, 744 F.3d 589, 592 (8th Cir. 2014) (concluding that
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sophisticated-means enhancement was appropriate where “the conspirators recruited
straw buyers, obtained inflated appraisals, and created two entities to submit fraudulent
billings and disburse loan proceeds to themselves and kickbacks to the buyers without
arousing lender suspicion”). We conclude the district court did not clearly err in
imposing a two-level sophisticated-means enhancement.
D.
Finally, Wolf argues that there was an insufficient basis for applying a two-level
enhancement for abuse of a position of trust. Under U.S.S.G. § 3B1.3, “[i]f the defendant
abused a position of public or private trust, or used a special skill, in a manner that
significantly facilitated the commission or concealment of the offense,” then the
sentencing court must increase defendant’s offense level by two levels. “‘Public or
private trust’ refers to a position of public or private trust characterized by professional or
managerial discretion.” U.S.S.G. § 3B1.3, cmt. n.1. “[T]he central purpose of § 3B1.3 is
to penalize defendants who take advantage of a position that provides them with the
freedom to commit a difficult-to-detect wrong.” Brack, 651 F.3d at 393–94 (internal
quotation marks and alterations omitted). “The abuse-of-trust enhancement accordingly
applies when a victim’s trust is based on the defendant’s unique position, but not when
trust is created in an arms-length commercial relationship. . . . Before imposing a § 3B1.3
enhancement, courts consequently look for evidence indicating a fiduciary or personal
trust relationship exists between the victim and the defendant.” Id. (internal quotations
marks omitted).
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However, “[f]or this adjustment to apply, the position of public or private trust
must have contributed in some significant way to facilitating the commission or
concealment of the offense (e.g., by making the detection of the offense or the
defendant’s responsibility for the offense more difficult).” U.S.S.G. § 3B1.3, cmt. n.1. A
“position of public or private trust must . . . contribute in some significant way to
facilitating the commission or concealment of the defendant’s underlying crime.” Brack,
651 F.3d at 393 (internal quotation marks and alteration omitted).
We have no difficulty concluding that Wolf’s position as a licensed real estate
broker contributed to the execution and cover-up of the bank fraud scheme. The more
troublesome question is whether Wolf occupied a position of public or private trust. A
real estate broker certainly has special or fiduciary obligations to the buyer, the seller, or
both. See United States v. Akinkoye, 185 F.3d 192, 203-04 (4th Cir. 1999). Because we
assess whether Wolf held a position of trust under § 3B1.3 from “the perspective of the
victim,” id., the question is whether Wolf, as a real estate broker, held “[s]omething . . .
akin to a fiduciary function,” United States v. Agyekum, 846 F.3d 744, 756 (4th Cir.
2017) (internal quotation marks omitted), with respect to the lenders.
In North Carolina, a real estate agent’s duties extend beyond the principals they
represent “to other parties (i.e., ‘third persons’) with whom the agent deals in any real
estate transaction.” J.A. 1690. According to the North Carolina Real Estate Manual in
effect in 2003, a real estate agent’s duties to third persons include:
● [The] [d]uty to refrain from misrepresenting or failing to disclose a
material fact as prohibited by the North Carolina Real Estate License
Law
44
● [The] [g]eneral duty of “honesty and fairness” under the common
law
● [The] [d]uty to refrain from unfair or deceptive trade practices which
are prohibited by consumer legislation
J.A. 1691. The Manual also touches on loan fraud, noting that North Carolina law
prohibits real estate agents from making misrepresentations “to anyone involved in a real
estate transaction, including a lender.” J.A. 1696-97 (emphasis added). See N.C. Gen.
Stat. § 93A-6(a)(1)&(10).
In light of these obligations, we conclude that Wolf’s duties and responsibilities
towards a lender in connection with a real estate transaction are akin to fiduciary duties.
He used his knowledge and position as a real estate broker to assist the commission of
bank fraud, as well as its concealment. Real estate agents owe a special duty of honesty
and fair dealing to third parties, such that the lender and the agent have a trust
relationship with respect to real estate transactions. Wolf abused his position of trust by
engaging in the fraudulent conduct previously described in detail. Thus, we conclude
that the district court properly applied the two-level enhancement for abuse of a position
of trust. 6
6
Wolf also raised a challenge to the district court’s application of a two-level
enhancement for Wolf’s offense having more than ten victims. See U.S.S.G. §
2B1.1(b)(2)(A)(i). The PSR identified 11 lender victims based on the evidence at trial. It
also indicated that pursuant to Mandatory Victim Restitution Act, all of the victims were
“afforded the opportunity to identify any restitution due” and provide any other “loss
information,” but the probation office received “no response” from any of the lenders.
J.A. 1494. Wolf argues that because none of the victims responded to the inquiries of the
probation office, then it cannot be established that there were ten or more victims. The
guidelines do not require a victim’s response before this enhancement may be applied,
(Continued)
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VI.
For the foregoing reasons, Wolf’s convictions and sentence are hereby affirmed.
AFFIRMED
and Wolf cites no authority to support this proposition. We reject this sentencing
challenge as well.
46