Fourth Circuit Affirms Wire Fraud Convictions; OK’s District Court’s Jury Instructions

United States v. Moshin Raza (No. 16-4247)

United States v. Farukh Iqbal (No. 16-4259)

United States v. Mohammad Ali Haider (No. 16-4261)

United States v. Humaira Iqbal (No. 16-4262)

The defendants were convicted by a jury in the Eastern District of Virginia of the offenses of wire fraud and conspiracy to commit wire fraud . Their alleged crimes were predicated on a fraudulent mortgage lending scheme centered at the Annandale branch of SunTrust Mortgage in Fairfax County, Virginia. The defendants were former employees of that branch, and the substance of the charges involved 25 mortgage loans made by SunTrust from May 2006 through February 2007. The government alleged that the defendants prepared fraudulent mortgage applications, which included false employment claims, inflated incomes, and overstated assets. By preparing these documents and submitting them to SunTrust’s underwriters in Georgia for approval, the defendants caused SunTrust to fund 25 of the mortgages at issue in this case. The defendants were paid a commission for each approved mortgage, which was their motive (according to the government) for submitting falsified documents.

During the course of these activities the defendants presented false information in the mortgage applications, manufactured and delivered false supporting documents (payroll documents, tax-related documents, pay stubs, W2 forms, bank statements) with those applications to support the applications’ false claims.

The defendants presented three witnesses at trial, seeking to show that the misrepresentations made on the mortgage applications were not important to the bank’s loan process. The defendants also sought to prove that their scheme did not present substantial risk of injury to SunTrust. According to the first defense witness, SunTrust aggressively sought to originate mortgage loans in order to sell them on the secondary mortgage market. In other words SunTrust sought to sell the loans immediately after origination, before the borrowers could default and undermine the loans’ marketability; consequently, the witness stated, SunTrust discouraged its mortgage underwriters from raising red flags when loan applications contained questionable information about income, employment, or assets, as long as the borrowers had good credit. Another defense witness testified that SunTrust’s actions were “reckless” in that they approved far more mortgage loan applications than their competitors.

(1) The first issue in this appeal relates to the district court’s jury instructions. In order to convict, the jury was required to find that the defendants had made materially false statements to SunTrust. The defendants wanted the court to define this subjectively – “a materially false statement was one that would have a natural tendency to influence or be capable of influencing a decision of the particular decisionmaker to whom it was addressed – here, the decision of SunTrust to approve and fund mortgages for the properties named in the indictment.” The prosecution sought an objective instruction: “a materially false statement was one that would have a natural tendency to influence or be capable of influencing a decision or action.” The district court gave the prosecution’s proposed instruction.

The defendants argue that the district court’s objective materiality instruction authorized the jury to convict them on the basis of false statements that an objective, reasonable lender might have considered material, but that SunTrust itself did not deem to be material in the circumstances.

The Fourth Circuit, however, explains that according to its precedents, “frauds perpetrated on private lending institutions are judged according to an objective, ‘reasonable financial institution’ standard.” See United States v. Colton , 231 F.3d 890, 903 n.5 (4th Cir. 2000); see also United States v. Brien, 617 F.2d 299, 311 (1st Cir. 1980)(“If a scheme to defraud has been or is intended to be devised, it makes no difference whether the persons the schemers intended to defraud are gullible or skeptical, dull or bright. These are criminal statutes, not tort concepts.”). The Court goes on to say that “the relevant elements of wire fraud are an intent to defraud and materiality, which Colton defined as “what a reasonable financial institution would want to know in negotiating a particular transaction.” Id. at 903 n.5 (emphasis added).

(2) Next, the defendants argue that the district court erred when it instructed the jury that in order to convict, the jury must find that the defendants acted “knowingly and with the intention . . . to deceive or to cheat.” The defendants contend that the court’s use of the disjunctive “or” in that instruction “erroneously allowed conviction for wire fraud based just on intent to deceive without an intent to deprive SunTrust of anything of value. The Court rejects this argument, noting that the instructions as a whole adequately conveyed to the jury that a scheme to defraud requires that “someone intends to deprive another of something of value.”

(3) The Court similarly dispenses with the defendants’ final claim of error. There, the defendants argue that the district court failed to adequately instruct the jury that it had to consider the guilt of each defendant separately, and that the jury should allow the guilt of one defendant to control its verdict as to the remaining defendants. The Court holds that that the district court’s instructions as a whole sufficiently addressed this issue, and rejects the defendants’ claim of error on that basis.

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