Argued, November 8, 2013
[Copyrighted Material Omitted]
Appeal from the United States District Court for the Northern District of Indiana, Hammond Division. No. 10-CR-88 -- Rudy Lozano, Judge.
For UNITED STATES OF AMERICA, Plaintiff - Appellee: Jill R. Koster, Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Hammond, IN.
For RANDALL B. CAUSEY, Defendant - Appellant: Richard Brian Woodward, Attorney, WOODWARD, BULS, BLASKOVICH & KING, Merrillville, IN.
Before POSNER, ROVNER, and WILLIAMS, Circuit Judges.
Williams, Circuit Judge
Randall Causey was part of a conspiracy that preyed
on novice real estate investors during the housing bubble in 2005-06, defrauding
both borrowers and lenders alike. A five-day trial revealed that Causey and his
co-conspirators would do just about anything to complete a sale and make a
profit, whether it was making promises they had no intention of keeping or
falsifying receipts, incomes or other information on loan forms. Causey, who was
the only co-conspirator that did not plead guilty, was convicted and sentenced
for his role in the fraud.
Causey raises five issues--four evidentiary and one sentencing-- on appeal. First, he argues the court improperly admitted irrelevant and prejudicial photographs taken of the houses around the time of trial rather than at the time of the sale. We reject this argument because the photographs gave the jurors a sense of the size, location and style of the house, and the jurors were repeatedly reminded when the pictures were taken. Second, evidence of a fraudulent sale that took place outside of the conspiracy was properly admitted because Causey placed his intent to defraud and knowledge of the fraudulent scheme at issue by claiming he was an innocent pawn, and this sale demonstrated his fraudulent knowledge and intent. Third, a defense witness's testimony was properly excluded as undisclosed expert testimony because the witness had no personal knowledge of the transactions at issue and was asked instead about industry norms, which is only permissible if a witness is qualified as an expert. Fourth, Causey argues the district court erred in allowing an unqualified co-conspirator to give broad expert testimony and allowing her to testify as both a fact and expert witness without a limiting instruction. Since the witness was never referred to as an expert in front of the jury, there was extensive cross examination about her credentials and the basis for her opinion, and her opinion was not significant to the government's case, we reject Causey's arguments. Finally, a two-level sentencing enhancement for being an " organizer, leader, manager, or supervisor of the conspiracy" was properly assessed because Causey was responsible for recruiting the buyers into the conspiracy and exercised control over them during their involvement, which included submitting fraudulent paperwork during closings, and some buyers were also uncharged criminally responsible parties.
We affirm the district court on each of these issues.
Sheila Chandler learned how to falsify documents and close fraudulent loans as a
mortgage broker in Gary, Indiana. She became familiar with the Gary real estate market, including a house's actual value, and, more importantly for her purposes, what the house would appraise for after a little cosmetic work. Sensing an opportunity, she devised a scheme to defraud both lenders and buyers. As part of that scheme, she approached Gordon Rainey in 2005 and suggested he start a construction company to make minimal changes to the houses and then charge inflated amounts that would be pocketed at closing. Defendant Randall Causey was living at Rainey's house at the time and asked if he could be involved, and Causey and Rainey subsequently co-founded and jointly owned a construction company called Netlink. With that, the conspiracy was off and running. By the time the three were arrested, they had executed the mortgage scheme twenty-five times between July 2005 and August 2006 in and around the Gary area.
The scheme worked as follows: First, the group needed buyers who were real estate novices. Causey used charm and false promises to recruit five of the seven buyers who purchased eighteen of the twenty-five Gary properties listed in the indictment. With a buyer in place, Chandler would fill out a mortgage application, falsifying income, down payments and any other information to make the buyer a viable loan candidate. She would then order appraisals, title work, and pre-approval from the lender. The conspirators would use " trainee" appraiser Henry Sterk to appraise most of the houses at a greatly inflated price. The next step was to close on the house. Chandler gave false information to the lenders on the HUD-1 statements, which itemize all charges imposed upon a borrower and seller for the transaction. Once the amounts on the HUD-1 were paid, the title company told Chandler how much remained of the loan. Chandler then made up false construction invoices for that remainder. After the closing, the conspirators divvied up the money paid for the false invoices. Chandler received $2,000 cash per house, while Causey received somewhere between $3,000 and $5,000.
Causey was directly or indirectly responsible for recruiting five of the buyers, but we highlight the experiences of two purchasers relevant to the appeal, Beatrice Mengich and Toi Lisa Mark. Beatrice Mengich was brought into the scheme by her aunt, Lillian Kimutai, who met Causey on a singles telephone line. After Kimutai bought into Causey's sales pitch, but before she realized she had been defrauded, Kimutai recommended to Mengich that Mengich also invest in Gary real estate. It was not until Mengich, at twenty-three years old, was flown up from North Carolina to Northwest Indiana for the closing that she learned for the first time that arrangements had been made for her to buy four houses rather than one, as she had previously been told.
Toi Lisa Mark was originally from Gary and had a mutual friend with Causey named George Hawkins. Hawkins suggested Mark invest with Causey. Like with other buyers, Causey told Mark that if she bought houses, he would fix them up, Netlink would handle all the property management issues, and she could rent out the houses. Causey said he was looking out for her because of their mutual friend, and promised her at least $7,000 cash back. Mark eventually bought two houses in May 2006, sight unseen. At the closing, Mark pointed with concern to the paperwork showing that she made a " major down payment," which she knew she had not, and Causey responded that he had taken care of it. Once Mark purchased the home, Causey became non-responsive.
As the scheme with Chandler and Rainey was winding down, Causey began recruiting buyers for a different scheme he was running with one of Chandler's former coworkers. One of those buyers was Kristen Dudley who bought a house in November 2006 when she was eighteen years old, sight ...