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United States v. Owens

August 19, 2002

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE,
v.
REGINALD OWENS, DEFENDANT-APPELLANT.



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 00 CR 586--Harry D. Leinenweber, Judge.

Before Easterbrook, Manion, and Kanne, Circuit Judges.

The opinion of the court was delivered by: Kanne, Circuit Judge

ARGUED JUNE 6, 2002

A jury convicted real estate appraiser Reginald Owens of mail fraud and wire fraud for his part in a multi-million dollar real estate and mortgage fraud scheme. Owens appeals, contending that the district court improperly admitted evidence and that there was insufficient evidence to support his conviction. We affirm.

I. History

A. The Scheme

From 1995 until 1998, several individuals engaged in a multi-million dollar real estate and mortgage fraud scheme involving approximately eighty properties in the Chicago area. The scheme was a land "flip" scheme, which basically involved having people purchase distressed properties for cash and then immediately resell that same property at artificially-inflated prices. One of the ringleaders of this flip scheme was Brian Parr, who was personally involved in approximately sixty flip transactions. Parr's role in the scheme was to first identify the property he wanted to buy through realtors and by searching the Multiple Listing Services ("MLS"), a real estate computer database that showed properties for sale and the seller's listing price. Parr would then try to negotiate the lowest possible price for the property and would offer to buy the property in cash. At the same time that he was contracting for the purchase of the property, Parr would prepare to sell the property at an artificially-inflated price to a second buyer. *fn1 In order to accomplish this, Parr needed the second buyer to obtain approval for a home mortgage, and Parr needed to obtain an inflated appraisal that could be used to justify the higher sales price to the lending institution.

Parr's co-schemers worked to locate potential second buyers. As an incentive to second buyers, Parr instructed the co-schemers to offer to sell the properties for no money down and cash back at closing. Once the co-schemers identified a second buyer, the buyer had to qualify for and obtain a mortgage. The second buyers, however, typically did not have jobs or bank accounts and thus could not have normally qualified for a mortgage. To overcome this obstacle, several other co-schemers, including loan officer Tamira Smyth, created false documents to submit to the lender institutions. These false documents included W-2 tax forms, check stubs, employment verifications, and other documents.

In addition to the false documents, mortgage brokers also worked with an appraiser to ensure that the appraisal matched the contract price for the second sale in order for Parr to maximize his profits. The appraisers were able to inflate the value of these properties by omitting from their appraisal reports critical information from the MLS and by comparing the sale house involved in the flip transaction to houses that were far superior. The two primary appraisers in the scheme were Owens and Melva Wynn. *fn2 With the appraisers' help, Parr's profit ranged from approximately $10,000 to $180,000 per flip transaction. Parr then used the profits from each transaction to pay his co-schemers.

Parr's profits, however, came at the expense of lending institutions and the federal government because the second buyers could not or would not pay the mortgage payments due on the properties. Further, once these properties went into foreclosure, private lending institutions lost millions of dollars because the mortgages were based on inflated values for the properties and those inflated values had already been pocketed by Parr and the coschemers. Moreover, because many of the loans on the properties were insured by the Federal Housing Authority ("FHA"), a substantial portion of the losses ultimately were incurred by the United States Department of Housing and Urban Development ("HUD").

B. The Trial

Owens was indicted on two counts of mail fraud and on one count of wire fraud for his part in the scheme. See 18 U.S.C. §§ 1341 & 1343. At trial, Parr testified on behalf of the government and explained the scheme described above. Parr testified that he first met Owens while completing a real estate transaction in February 1997. Subsequently, Parr began to use Owens as his appraiser on his flip transactions, and Owens appraised ten flip transactions for him. Parr explained that without an appraisal equal to the extremely inflated value of the second sale, the scheme would not have been successful. Parr testified that Owens always appraised the property at the value that Parr required and that he paid Owens a $500 bonus for these inflated appraisals in addition to Owens' standard appraisal rate.

Smyth also testified for the government and explained that she participated in eighteen to twenty flip transactions and that she asked Owens to perform appraisals on ten to twelve transactions. Smyth stated that she would call Owens and give him the address of the subject property as well as the value that she wanted for that property. Owens would usually respond that the desired value was too high and that he did not think he could appraise the property at that high of a value. Smyth would then offer Owens money to obtain the desired value, and he would eventually appraise the property at the desired figure. In order to support the inflated price, Smyth explained that Owens would take pictures of properties at certain angles in order to hide defects not reported in his appraisal and that sometimes Owens did not even visit the properties when he performed his appraisals.

Smyth further testified that for each appraisal, Owens was paid between $250 and $400 for his standard fees, which would appear on the closing contract, plus he was also paid ...


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