United States District Court, D. New Jersey
Paul J. Fishman, United States Attorney, Jacqueline Carle, Assistant U.S. Attorney OFFICE OF THE U.S. ATTORNEY, Camden, NJ., Attorney for the United States.
Thomas J. Cammarata, Esq., CAMMARATA, NULTY & GARRIGAN LLC, Jersey City NJ., Attorney for Defendant John Leadbeater.
JEROME SIMANDLE, Chief District Judge.
Defendant John Leadbeater stands accused of one count of conspiracy to commit wire fraud in violation of 18 U.S.C. § 1349, and one count of conspiracy to commit money laundering in violation of 18 U.S.C. § 1956(h). The Superseding Indictment, filed on March 20, 2013, alleges that Leadbeater profited from the sale of ocean-town condominiums overbuilt by financially distressed developers by obtaining mortgage loans using fraudulent loan applications, fraudulent HUD-1 Settlement Statements, and other documents, and by using straw purchasers who had good credit but who would not pay deposits or closing costs and/or would not manage the properties or make mortgage payments on them.
Before the Court are motions in limine by the United States [Docket Items 39, 44, & 68], Defendant Leadbeater [Docket Item 38], and co-Defendant Daniel Cardillo [Docket Items 40 & 42]. The Court will address each in turn.
The Superseding Indictment identifies 26 allegedly fraudulent real estate transactions from 2006 to 2008 involving Defendant Leadbeater that followed two general patterns. The first pattern involved same-day closings, in which Leadbeater would purchase the property "dry, " meaning that little or no funds were produced for the transaction, and then a straw purchaser would purchase the same property on the same day at a substantially increased sales price, using false documents. (Superseding Indictment [Docket Item 15] ¶ 19.) Leadbeater allegedly directed title clerks to prepare documents for the closings, including fraudulent HUD-1 Uniform Settlement Statements signed by the straw purchasers "reflecting deposits and funds brought to closing by the Straw Purchaser that had never been made." (Id. ¶ 19(e).) The title companies allegedly distributed proceeds of fraudulently obtained mortgage loans to the conspirators by wiring funds into an account controlled by Leadbeater or by issuing a check made payable to one of Leadbeater's companies, such as BCJL Enterprises or Lead 1 Investments. (Id. ¶ 19(f).)
The second pattern involved fraudulent line-item payments off of the HUD-1 Settlement Statements. (Id. ¶ 20.) According to the Superseding Indictment, Leadbeater and co-conspirators recruited a straw purchaser to buy real estate "at a sales price that included a substantial increase to cover a pay-out" to Leadbeater or his co-conspirators. (Id. ¶ 20(b).) Again, the straw purchasers obtained loan applications with false documentation, and attended closings at which Leadbeater directed the title clerks to prepare documents and distribute proceeds to Leadbeater or his companies, or to a coconspirator's company. (Id. ¶ 20(c)-(e).) Defendant Cardillo is alleged to be one of the straw purchasers. Pursuant to the Court's Order [Docket Item 60], Cardillo will be tried separately following the trial of Defendant Leadbeater.
The Superseding Indictment also charges Leadbeater with a conspiracy to commit money laundering, by causing $13 million in allegedly fraudulent mortgage loans to be funded. (Id. at 21 ¶ 3.) Conspirators allegedly extracted funds from the title company's escrow account and wired money or issued checks to Leadbeater and co-conspirators, who, in turn, transmitted a portion to straw purchasers. (Id.)
Defendant Leadbeater brings several motions in limine, joins others brought by Defendant Cardillo, and opposes motions filed by the Government. Specifically, Leadbeater seeks disclosure from the Government of certain material, including any potentially exculpatory evidence known to the Government and prior bad act evidence that the Government intends to use at trial. He seeks an order for Government agents to preserve and produce rough interview notes of Government witnesses and for the Government to produce original documents as evidence. Leadbeater also seeks to dismiss Count I of the Superseding Indictment because it is time-barred and because it is duplicitous, meaning that it charges more than one conspiracy in a single count, in violation of Fed. R. Crim. P. 8(a). He also brings a motion to strike surplusage from the Superseding Indictment.
The Government moves to admit certain evidence against Leadbeater under Fed.R.Evid. 404(b); to preclude Leadbeater from arguing in favor of jury nullification; to preclude him from arguing that a lack of diligence by the victim lenders is a defense to the charged offenses; to preclude him from referring to the national foreclosure crisis and the Government's actions to resolve it; to preclude him from raising a defense based on an assignment-of contract theory; and to preclude him from arguing the affirmative defense of reliance on counsel. The Court heard oral argument on these motions and invited supplemental briefing related to the statute of limitations question.
1. Duplicity of Count I
Both Defendants argue that Count I, which lists 26 separate real estate transactions, actually "charges a series of separate and distinct conspiracies lumped together in this one count in violation of Fed. R. Crim. P. 8(a)." (Leadbeater Mot. at 10.) Rule 8 provides: "The indictment... may charge a defendant in separate counts with 2 or more offenses if the offenses charged... are of the same or similar character, or are based on the same act or transaction, or are connected with or constitute parts of a common scheme or plan." Fed. R. Crim. P. 8(a).
The Third Circuit employs a three-step inquiry for determining whether there are multiple conspiracies charged in a single count:
First, we examine whether there was a common goal among the conspirators. Second, we look at the nature of the scheme to determine whether the agreement contemplated bringing to pass a continuous result that will not continue without the continuous cooperation of the conspirators. Third, we examine the extent to which the participants overlap in the various dealings.
United States v. Kelly, 892 F.2d 255, 259 (3d Cir. 1989) (citations and quotation marks omitted); see also United States v. Kemp, 500 F.3d 257, 287 (3d Cir. 2007) (quoting Kelly). The Third Circuit has held that a conviction must be vacated when "(1) there is a variance between the indictment and the proof presented at trial and (2) the variance prejudices a substantial right of the defendant." Kemp, 500 F.3d at 287 (quoting Kelly, 892 F.2d at 258).
Leadbeater argues there was no common goal among the Defendants and the co-conspirators, many of whom had no connection to each other. (Id. at 16-17.) He argues that the indictment alleges two patterns of transactions: one involving same-day closings, the other involving fraudulent line item payments off of the HUD-1 Settlement Statements. (Id. at 10-11.) He argues that the charged transactions involve different buyers, sellers, mortgage brokers, and lenders, and different forms of alleged fraud. (Id. at 16.) While some of the individuals overlapped in some of the transactions, Leadbeater argues that "there was never a fusion into a single enterprise." (Id. at 17.) He cites United States v. Cambindo Valencia, 609 F.2d 603, 626 (2d Cir. 1979), for the proposition that the alleged co-conspirators must be "fused into a single enterprise." (Id. at 18.)
Leadbeater also analogizes this case to Kotteakos v. United States, 328 U.S. 750 (1946), in which the defendants allegedly fraudulently obtained loans and advances offered by the Federal Housing Administration. In that case, there was one central figure who knew all of the co-conspirators and who pleaded guilty, but the Supreme Court found several conspiracies existed because the defendants could be clustered into separate, independent groups. Kotteakos, 328 U.S. at 758. The Court stated that the "dangers for transference of guilt from one to another across the line separating conspiracies, subconsciously or otherwise, are so great that no one really can say prejudice to substantial right has not taken place." Id. at 774. Leadbeater argues that this case is similar: that the Government has alleged several spokes meeting at a hub (in the figure of Leadbeater), but no rim to enclose the wheel, leaving independent conspiracies emanating from Leadbeater. (Leadbeater Mot. at 18.) The Supreme Court later summarized Kotteakos, saying that multiple conspiracies existed in that case because "no conspirator was interested in whether any loan except his own went through. And none aided in any way, by agreement or otherwise, in procuring another's loan. The conspiracies therefore were distinct, not parts of a larger general scheme...." Blumenthal v. United States, 332 U.S. 539, 558 (1947). In Blumenthal, by contrast, a single ...