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United States v. Lillie

October 28, 2009


The opinion of the court was delivered by: Robert M. Dow, Jr. United States District Judge


The Court has before it the Government' s motion in limine [52] to preclude Defendant Brian K. Lillie ("Lillie") from arguing, or otherwise presenting evidence suggesting, that he did not act with intent to defraud because he made false statements in good faith or with other beneficial motivation. For the reasons stated below, government' s motion [52] is granted in part and denied in part.

I. Background

On September 10, 2008, a federal grand jury returned a one-count indictment [1] against Defendants Lillie and Andre Johnson ("Johnson") charging them with mail fraud in violation of 18 U.S.C. § 1341.*fn1 The indictment charges that Johnson and Lillie engaged in a scheme to defraud the United States Department of Housing and Urban Development ("HUD"), Wells Fargo Home Mortgage, Inc. ("Wells Fargo"), and two individuals, Pamela Moore ("Moore") and Jannice Hawkins ("Hawkins"), in connection with a HUD 203(k) program rehabilitation mortgage loan for a building located at 5358 South Wells Street in Chicago, Illinois ("the Wells Street Property"). According to the indictment, the 203(k) program is designed to allow purchasers of distressed property to obtain funding to cover the costs of rehabilitating the property. Under the program, loan funds allocated to rehabilitation are placed in an escrow account. Contractors hired to perform the rehabilitation work may be paid out of the escrow account before the entire rehabilitation is completed, but only for work that they actually have completed. The lending institution holding the escrow funds will release the funds only after receiving a "draw request" and a compliance inspection report, both of which must certify that the work for which the contractor is being paid has been completed. Draw requests must be signed by the contractor and the borrower, and the compliance inspection report must be signed by a HUD-certified 203(k) program inspector.

The indictment alleges that Moore and Hawkins purchased distressed property with a HUD 203(k) program rehabilitation mortgage loan and hired Johnson as the general contractor to complete the rehabilitation work. Moore and Hawkins also hired Lillie as a certified HUD inspector. Between July 23, 2003 and September 16, 2003, Lillie and Johnson submitted three draw requests (as well as three inspection reports and other documents) to the lending institution, Wells Fargo, thereby inducing Well Fargo to release more than $90,000 of funds from the escrow account. According to the indictment, the draw requests (executed by Moore, Hawkins, Lillie and Johnson) and inspection reports (signed by Lillie) falsely represented that Johnson had completed work on the property, when in fact the work had not been done. The government maintains that Lillie received approximately $480 of the more than $90,000 of funds released from the escrow account.

II. Legal Standard

District courts have broad discretion in ruling on evidentiary questions presented before trial through motions in limine. Jenkins v. Chrysler Motors Corp., 316 F.3d 663, 664 (7th Cir. 2002). The power to exclude evidence in limine derives from the Court' s authority to manage trials. Luce v. United States, 469 U.S. 38, 41 n.4 (1984). Evidence should be excluded in limine only where it is clearly inadmissible on all potential grounds. Id. "Unless evidence meets this high standard, evidentiary rulings should be deferred until trial so that questions of foundation, relevancy and potential prejudice may be resolved in proper context." Hawthorne Partners v. AT&T Techs., Inc., 831 F. Supp. 1398, 1400 (N.D. Ill. 1993). Thus, the party moving to exclude evidence in limine has the burden of establishing that the evidence is not admissible for any purpose. Id. Denial of a motion in limine does not mean that all evidence contemplated by the motion will be admitted at trial. Id. at 1401. Rather, denial simply means the court cannot determine whether the evidence in question should be excluded outside of the trial context. United States v. Connelly, 874 F.2d 412, 416 (7th Cir. 1989); Broom v. Bozell, Jacobs, Kenyon & Eckhardt, 867 F. Supp. 686, 690-91 (N.D. Ill. 1994). Accordingly, this Court will entertain objections as they arise at trial, even if the proffer falls within the scope of a motion in limine that has been denied. See also Robenhorst v. Dematic Corp., 2008 WL 1766525, at *2 (N.D. Ill. April 14, 2008).

Because motions in limine are filed before the Court has seen or heard the evidence or observed the trial unfold, rulings in limine may be subject to alteration or reconsideration during the course of trial. Connelly, 874 F.2d at 416; see also Luce, 469 U.S. at 41-42 ("Indeed, even if nothing unexpected happens at trial, the district judge is free, in the exercise of sound judicial discretion, to alter a previous in limine ruling."). In addition, if the in limine procedural environment makes it too difficult to evaluate an evidentiary issue, it is appropriate to defer ruling until trial. Jonasson, 115 F.3d at 440 (delaying until trial may afford the judge a better opportunity to estimate the evidence's impact on the jury).

III. Analysis

Lillie is charged with mail fraud in violation of 18 U.S.C. § 1341. The mail fraud statute prohibits devising a "scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises," and executing that scheme by use of the mails. 18 U.S.C. § 1341. "A conviction must satisfy three elements: (1) the defendant's participation in a scheme to defraud; (2) the defendant' s intent to defraud; and (3) the defendant' s use of the mails in furtherance of the fraudulent scheme." United States v. Henningsen, 387 F.3d 585, 589 (7th Cir. 2004). The motion in limine at issue is directed at the second prong -- whether Lillie acted with intent to defraud.

The Government contends that Lillie acted with intent to defraud if he knowingly submitted false draw requests in order to induce Wells Fargo to release the escrow funds, regardless of his subjective motivations. According to the Government, whether Lillie did so in good faith and with a positive and beneficial intent, thinking that his actions ultimately were in the best interest of all parties, including the bank, is irrelevant. Indeed, according to the Government, any argument by Lillie that he had good intentions could be designed only to invite jury nullification, and therefore must be barred at trial.

Lillie responds that mail fraud is a specific intent crime, and therefore the government must show more than that he knowingly told a material lie; it also must prove that he did so in order to cause a gain of money or property to himself or the potential loss of money or property to another. According to Lillie, he does not plan to argue that he lacked intent to defraud because he acted with good motives, but rather because he neither acted to benefit himself, nor intended to cause anyone a loss. Rather, he believed, among other things, that the money belonged to the borrowers and that they asked him to submit the draw requests. Lillie contends that he must be permitted to tell the jury what he intended at the time that he submitted the draw requests.

The Seventh Circuit "has found that to act with intent to defraud means to act ' willfully and with specific intent to deceive or cheat, usually for the purpose of getting financial gain for one' s self or causing financial loss to another.'" Henningsen, 387 F.3d at 590-91. Therefore, the Seventh Circuit pattern jury instructions provide that "'intent to defraud' means the acts charged were done knowingly with the intent to deceive or cheat the victim in order to cause a gain of money or property to the defendant or the potential loss of money or property to another." The pattern instruction references "potential loss" because the mail fraud statute does "not require the government to prove either contemplated harm to the victim or any loss." United States v. Leahy, 464 F.3d 773, 786-87 (7th Cir. 2006). It is sufficient to show that the defendant intended to impose a substantial risk of loss on another person of which that person is unaware. See United States v. Catalfo, 64 F.3d 1070, 1079 (7th Cir. 1995) ("the intent to impose a large risk on another person through deliberate misrepresentation could constitute the requisite intent to sustain a conviction under mail and wire fraud statutes"); United States v. Davuluri, 239 F.3d 902, 906 (7th Cir. 2001) ("Exposing the victim to a substantial risk of loss of which the victim is unaware can satisfy the intent requirement.").

"Intent to defraud can be proven by circumstantial evidence and by inferences drawn from the scheme itself." United States v. Moede, 48 F.3d 238, 241-42 (7th Cir. 1995). "Circumstantial evidence of intent to defraud includes such conduct as knowingly depositing a forged check, knowingly depositing an NSF check, knowingly writing checks on an inadequate ...

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