United States v. Stephanie Corsmeier

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 10a0246p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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Plaintiff-Appellee, -
UNITED STATES OF AMERICA,
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No. 08-3668
v.
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Defendant-Appellant. -
STEPHANIE CORSMEIER,
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Appeal from the United States District Court
for the Southern District of Ohio at Cincinnati.
No. 06-00076-001—S. Arthur Spiegel, District Judge.
Argued: April 30, 2010
Decided and Filed: August 16, 2010
Before: MARTIN, CLAY, and KETHLEDGE, Circuit Judges.
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COUNSEL
ARGUED: Kevin M. Schad, FEDERAL PUBLIC DEFENDER’S OFFICE, Cincinnati,
Ohio, for Appellant. Benjamin C. Glassman, ASSISTANT UNITED STATES
ATTORNEY, Cincinnati, Ohio, for Appellee. ON BRIEF: Richard Smith-Monahan,
FEDERAL PUBLIC DEFENDER’S OFFICE, Cincinnati, Ohio, for Appellant.
Benjamin C. Glassman, ASSISTANT UNITED STATES ATTORNEY, Cincinnati,
Ohio, for Appellee.
CLAY, J., delivered the opinion of the court, in which MARTIN, J., joined.
KETHLEDGE, J. (pp. 8-10), delivered a separate dissenting opinion.
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OPINION
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CLAY, Circuit Judge. Defendant Stephanie Corsmeier appeals following her
conviction for conspiracy to commit bank, wire and mail fraud in violation of 18 U.S.C.
1
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§ 1349, three counts of bank fraud in violation of 18 U.S.C. § 1344, three counts of wire
fraud in violation of 18 U.S.C. § 1343, three counts of mail fraud in violation of
18 U.S.C. § 1341, and conspiracy to commit money laundering in violation of 18 U.S.C.
§ 1956(h). For the following reasons, Defendant’s conviction is REVERSED, and the
case is REMANDED for a new trial.
STATEMENT OF FACTS
Stephanie Corsmeier was indicted on June 7, 2006 along with one of her
employees, Stacey Lester, who faced similar charges. All charges against Defendant and
Lester stemmed from the same mortgage fraud scheme. The scheme was initiated by
two mortgage brokers, Clarence Harris and Ike Bronson. As mortgage brokers, Harris
or Bronson would find interested buyers for houses who did not have sufficient money
to make a down payment. Harris and Bronson would agree for the buyer to purchase the
house at a given price and then, in official loan documents, state a higher price. The loan
application would specifically state that the buyer was paying the down payment from
his or her own funds. An unknowing mortgage lender would send the mortgage loan
money to Defendant’s company, American Security Title (“AST”). AST would then
provide a “payoff” check from the loaned funds to Harris or Bronson. Harris or Bronson
would then cash the check and, after skimming some money off the top, obtain a
cashier’s check to be used by the buyer as the down payment. An employee of AST
would serve as the closing agent and complete the United States Housing and Urban
Development Settlement Statement (“HUD-1”), which would attest that the buyer had
provided the down payment. Of the alleged 42 illegal transactions, roughly half were
brought to AST by Harris and half by Bronson. The government charged the activities
in securing loans for three separate houses as individual counts of mail fraud, wire fraud,
and bank fraud.
Defendant does not deny that any of these transactions occurred but took the
stand to testify that she was unaware of the fraud taking place. She testified that she
believed that the loans were legitimate and that the payoffs were construction payoffs
based on rehabilitation work that Harris and Bronson supposedly had done on the
No. 08-3668 United States v. Corsmeier Page 3
houses. She believed the fraudulent HUD-1 forms were justified because the down
payment came on a certified check that identified the buyer.
The government asserted in its indictment that Defendant’s motivation was the
legitimate fees that she charged for each closing. One week before the trial, the
government stated its intention to submit evidence that Harris provided cocaine to
Defendant on several occasions as proof of Defendant’s motive. The district court held
an evidentiary hearing prior to trial to consider the admissibility of the evidence under
Federal Rule of Evidence 404(b). Harris testified at the evidentiary hearing that he had
provided cocaine to Defendant twice at the AST office and two or three times in a
hospitality suite at hotels during conferences. Harris further testified that the amounts
provided were “a gram to a little bit over a gram.” According to Harris, Defendant
requested that he bring the cocaine to her office, but he brought the cocaine to the
conferences on his own and provided it on those occasions to multiple individuals.
Harris could not remember the “date or the year” of the two times that he provided
cocaine at AST. (Evidentiary Hr. Tr. 49). No evidence was submitted indicating
Bronson ever provided or used cocaine with Defendant. Following the evidentiary
hearing, the district court overruled Defendant’s objection and ruled that the evidence
was admissible.
On May 25, 2007, the jury acquitted Lester but found Defendant guilty of all
charges. On May 22, 2008, the district court sentenced Defendant to 60 months’
imprisonment. Defendant then filed this timely appeal.
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DISCUSSION
Defendant asserts that she is entitled to a new trial based on the district court
admitting evidence of her alleged past cocaine use pursuant to Rule 404(b).1 In
evaluating the admissibility of Rule 404(b) evidence, the district court must determine
whether there is sufficient evidence the “other acts” took place. Next, it must determine
whether those other acts are admissible for a proper purpose. Finally, the district court
must determine whether the “other acts” evidence is more prejudicial than probative.
United States v. Lattner, 385 F.3d 947, 955 (6th Cir. 2004).
Defendant argues that the government cannot satisfy the second and third prongs
of the analysis because the cocaine evidence was used for an improper purpose and the
evidence was more prejudicial than probative. The government moved for the admission
of the 404(b) evidence on the theory that it was admissible to show Defendant’s motive,
a permissible use of “other acts” evidence. See Fed. R. Evid. 404(b) (“Evidence of other
crimes, wrongs, or acts is not admissible to prove the character of a person in order to
show action in conformity therewith. It may, however, be admissible for other purposes,
such as proof of motive . . .”). It is not enough that the government alleges that the
evidence is being offered for a proper purpose; the evidence must be “probative of a
material issue other than character.” United States v. Bell, 516 F.3d 432, 441 (6th Cir.
2008) (quoting United States v. Carney, 387 F.3d 436, 451 (6th Cir. 2004)). The
evidence is probative of a material issue if (1) the evidence is offered for an admissible
purpose, (2) the purpose for which the evidence is offered is material or “in issue,” and
(3) the evidence is probative with regard to the purpose for which it is offered. Bell, 516
F.3d at 441-42.
1
Defendant also alleges that evidence was improperly destroyed and that the government
committed prosecutorial misconduct. The destruction of evidence did not violate Defendant’s
constitutional rights because the district court’s determination that the officer whose incompetence led to
the destruction of evidence did not act in bad faith is not clearly erroneous. See United States v. Branch,
537 F.3d 582, 590 (6th Cir. 2008) (“Negligence, even gross negligence on the part of the government does
not constitute bad faith”). Since we remand for a new trial, we need not reach the allegations of
prosecutorial misconduct.
No. 08-3668 United States v. Corsmeier Page 5
The evidence of this occasional provision of small amounts of cocaine may not
have any probative value at all. Whatever minimal probative value it may have,
however, is surely outweighed by the prejudicial effect of admitting the evidence. As
this Court has previously remarked, motive is defined as “‘something within a person
. . . that incites him to action,’ or ‘the consideration or object influencing a choice or
prompting an action.’” Servo Kinetics, Inc. v. Tokyo Precision Instruments Co., 475
F.3d 783, 792 (6th Cir. 2007) (quoting Webster’s Third New International Dictionary
1475 (1993)). Quite simply, the allegations made by Harris in no way suggest that his
very occasional provision of small amounts of cocaine to Defendant incited Defendant
to participate in the scheme or that it influenced her choice to participate in the scheme.
Defendant is accused of very significant felonies, participating in a mortgage
fraud scheme at least 42 times that provided her company with $42,000 in fees. While
the provision of drugs in some cases could provide the impetus for a person to participate
in a separate illegal scheme, the small quantity and infrequent provision of drugs in this
case compared with the size of the illegal activity is strong evidence that the drugs
played no role in enticing Defendant to participate in the scheme. Defendant’s company
allegedly reaped at least $42,000 by closing fraudulent loans. Given the large financial
gain, it seems absurd to argue that part of Defendant’s motivation was the fact that she
received what the government must admit was less than $500 worth of cocaine on a
handful of occasions over several years.
Perhaps most importantly, Bronson and Defendant were allegedly engaged in the
exact same scheme, yet no evidence exists that Bronson ever provided cocaine to
Defendant, used cocaine with Defendant, or knew anything about Defendant’s alleged
cocaine use. At the pre-trial evidentiary hearing, Harris named people who used cocaine
with Defendant and never mentioned Bronson. The government would therefore have
this Court believe that Harris’ very occasional provision of a modest amount of cocaine
motivated Defendant to commit dozens of felonies, but Defendant committed those exact
same felonies in collaboration with Bronson without the inducement of cocaine.
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The only evidence indicating that the very occasional provision of drugs
encouraged Defendant to participate in the scheme was Harris’ own statement that he
provided the drugs to “enhance the relationship.” Harris’ own opinion, however, says
little about what was actually motivating Defendant, who allegedly consented to
participate in the scheme with Bronson without any drugs being provided to her. That
Harris would attribute an outsized influence to the importance of cocaine is not
surprising because Harris appears to be a drug addict. While on probation for an assault
conviction, Harris on multiple occasions tested positive for cocaine, and he admitted to
using cocaine weekly. The fact that a drug addict believed that his provision of cocaine
motivated Defendant’s criminal behavior does not make the evidence probative when
he provided a relatively small quantity of drugs on just a few occasions, and when
Defendant proved willing to participate in the same scheme with another person without
receiving any drugs.2
Whatever minimal probative value the cocaine evidence may have, the evidence
does not satisfy the requirements of Rule 403 that its probative value not be substantially
outweighed by its prejudicial effect. We acknowledge that due to “the highly
discretionary nature of this balancing process, the district court’s decision is afforded
great deference.” Bell, 516 F.3d at 445. Even under this deferential standard of review,
the minimal, at best, probative value of Harris’ provision of cocaine could not outweigh
the highly prejudicial effect of telling the jury that Defendant used cocaine. “[E]vidence
of a defendant’s involvement in drugs is highly prejudicial.” United States v. Cummins,
969 F.2d 223, 226 (6th Cir. 1992). The prejudicial effect was heightened in this case
because Defendant had no criminal record, and apart from this testimony, was implicated
at trial in no illegal behavior other than that alleged in the instant case. Instead, the
government attempted to present the evidence to demonstrate that Defendant had not
2
The dissent argues that the provision of cocaine must have had some impact on Defendant
because otherwise “vendors and professional firms would send their clients a lot fewer sports tickets and
fruit baskets around the holidays.” (Dissent at 9). Presumably if these professional firms knew a
competitor was receiving the exact same business without ever providing those perks, the firms would stop
their excess spending because it would be apparent that their clients are not providing business because
of the fruit baskets they received.
No. 08-3668 United States v. Corsmeier Page 7
only participated in other illegal activity but that she had participated in other illegal
activity with her alleged co-conspirator.
The cocaine evidence muddied the image of a successful businesswomen that
Defendant hoped to paint. The dissent argues that the cocaine evidence is less
prejudicial because she was not charged with drug use. We disagree. Illegal drug use
not only indicates a propensity to use drugs but a willingness to break laws. Defendant
undoubtedly participated in a fraudulent scheme; the only question is whether she did
so knowingly. The cocaine evidence indicates to a jury that she was not only willing to
break the law but to do so with her alleged co-conspirator, Harris. Such a showing is
highly prejudicial and would outweigh any de minimus probative value the cocaine
evidence may have. For these reasons, the evidence was improperly admitted, and we
must remand for a new trial.3
CONCLUSION
For the foregoing reasons, Defendant’s conviction is REVERSED, and the case
is REMANDED for a new trial.
3
The government makes a cursory argument that even if admitting the 404(b) evidence was an
error, it was harmless. An error is not harmless if it affected Defendant’s “substantial rights.” Kotteakos
v. United States, 328 U.S. 750, 765 (1946). The government has sufficient evidence to convict Defendant
without the cocaine evidence, but we cannot say “with fair assurance, after pondering all that happened
without stripping the erroneous action from the whole, that the judgment was not substantially swayed by
error.” Kotteakos, 328 U.S. at 765.
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DISSENT
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KETHLEDGE, Circuit Judge, dissenting. The government presented
overwhelming evidence at trial that Harris and Bronson had operated a mortgage-fraud
scheme through Corsmeier’s title company. The only real dispute was whether
Corsmeier was in on the scheme. She insisted that she was not—that she had instead
been duped by Harris and Bronson. To bolster that defense, Corsmeier argued that she
had little incentive to participate in the scheme, because her company received the same
fees from the fraudulent closings initiated by Harris and Bronson as it did from
legitimate ones initiated by other mortgage brokers. To rebut that argument, the
government offered evidence that Harris had provided Corsmeier with free cocaine on
four or five occasions over the three years that the scheme was in operation. The district
court admitted the evidence, cautioning the jury to consider it “only in relation to
. . . Corsmeier’s motives, if any, to commit the crimes charged in the indictment.” In my
view, the district court did not abuse its discretion in doing so.
There is only a minor role in this case for Federal Rule of Evidence 404(b),
which makes “[e]vidence of other crimes, wrongs, or acts” inadmissible “to prove the
character of a person in order to show action in conformity therewith.” The government
did not offer the cocaine evidence “to show action in conformity therewith”—i.e., to
prove that Corsmeier used cocaine on occasions other than the ones to which the
evidence pertained. Rather, it offered the evidence as proof of Corsmeier’s motive to
participate in the fraud, which is one of the permissible purposes listed in the rule. See
Fed. R. Evid. 404(b). The evidence at issue, therefore, was not propensity evidence in
the usual sense.
The majority does not dispute any of this. It concludes instead that the cocaine
evidence was irrelevant to the issue of Corsmeier’s motive, primarily because Harris
gave Corsmeier relatively small amounts of cocaine, and then only to improve his
“relationship” with her. But evidence is relevant if it has “any tendency to make the
No. 08-3668 United States v. Corsmeier Page 9
existence of any fact that is of consequence to the determination of the action more
probable or less probable than it would be without the evidence.” Fed. R. Evid. 401.
And I think it a basic fact of human nature—at least as commonly perceived—that a
person is more likely to accommodate the request of another if the latter person has at
some point given the former something of value. Otherwise, for example, vendors and
professional firms would send their clients a lot fewer sports tickets and fruit baskets
around the holidays. Free cocaine, for persons who like to use it, does not seem to me
any different. Evidence that Harris provided Corsmeier with free cocaine thus made it
more likely that she was inclined to participate in the fraud. Since “any tendency” is
enough, the evidence was relevant.
For two reasons, I also think that the evidence’s probative value was not
substantially outweighed by its prejudicial effect. See Fed. R. Evid. 403. First,
Corsmeier herself injected the issue of motive into the case. This case is unlike a drug-
trafficking one in which the government proffers a prior conviction to prove an
element—such as knowledge or intent to distribute—that is technically at issue but in
fact not disputed by the defendant. Cf. United States v. Johnson, 27 F.3d 1186, 1192
(6th Cir. 1994); United States v. Jones, 455 F.3d 800, 812 (7th Cir. 2006) (Easterbrook,
J., concurring). The evidence went to a seriously contested issue here.
Second, the crimes with which Corsmeier was charged were completely different
from the prior acts to which the evidence pertained. In this regard too her case is unlike
the typical drug-trafficking prosecution, where the obvious fit between prior conviction
and current charge can make the inference of propensity irresistible. Where, as here, the
evidence concerns an act different in kind from the charged offense, the jury can better
separate the legitimate purpose from the forbidden one and thus follow the limiting
instruction. “Once a drug dealer, always a drug dealer” is a seductive line of reasoning.
“Once a drug user, always a fraudster,” less so.
I therefore believe that the district court did not abuse its discretion in admitting
evidence of Corsmeier’s cocaine use. Because I think that her Youngblood and
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prosecutorial-misconduct claims fail as well, I would affirm the judgment of the district
court.
For these reasons, I respectfully dissent.