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Court Affirms Developer’s Bank Fraud Convictions

The 4th Circuit upholds defendant real estate developer’s convictions on 13 charges arising from his wide-ranging schemes to defraud banks and other entities in an effort to keep afloat his real estate empire, which included a Seven Falls resort with an Arnold Palmer golf academy in western North Carolina; the court also affirms defendant’s 216-month prison sentence.

The trial evidence emphasized defendant’s ongoing efforts to defraud various banks and others in seeking to salvage his floundering real estate empire, particularly the Seven Falls Golf and River Club in western North Carolina. Defendant acted through various entities, including Seven Falls LLC, of which he was the principal. In his efforts, defendant used a dizzying array of fraudulent activities, including those referred to herein as the Lot Loan Scheme, the Plastics Plant Scheme, the Check Fraud Scheme, the Burnett Straw Loan, the Worlund Straw Loan, the Zeiger Straw Loan and the Queens Gap Scheme. Defendant’s fraudulent activities contributed to the insolvency of two FDIC-insured banks in western North Carolina – the Bank of Asheville and Pisgah Community Bank – leading the FDIC to become receiver for each failed bank.

On appeal, defendant pursued three contentions of error: that the evidence was insufficient to support his convictions of the charged offenses; the trial court erred in giving a willful blindness jury instruction; and his 216-month sentence is substantively unreasonable.

Bank fraud conspiracy

There was sufficient evidence to convict defendant of bank fraud conspiracy under 18 U.S.C. § 1349, in connection the Lot Loan Scheme. Defendant and his cohorts failed to disclose to the lender material terms of lot loan transactions, including that the loans were being obtained by straw borrowers for defendant’s benefit; that, pursuant to side agreements between defendant and the straw borrowers, defendant promised to repurchase the lots, to make the straw borrowers’ loan payments for two years, to pay them monthly kickback and to give them “seller concessions’ covering their down payments; that the borrowers were simultaneously obtaining loans on additional lots from other banks; and that fraudulently inflated appraisals were being used. The evidence established that, if those terms had been disclosed, the banks’ respective loan committees would not have approved the loans.

That certain bank officers were aware of all the loan terms is not a valid defense for defendant on the bank fraud conspiracy charges, in that such bank officers were part and parcel of the conspiracy to both defraud the banks and obtain bank funds by false and fraudulent pretenses. And there was ample evidence that defendant knew the criminal objective of the bank fraud conspiracy and willfully joined that conspiracy with the intent to further its unlawful purpose.

Defrauding the U.S.

Counts 2 and 9 of the indictment charged defendant with separate conspiracies to commit offenses against and to defraud the U.S., in violation of 18 U.S.C. § 371. The alleged objects of the count 2 conspiracy offense – involving the BOA-related Plastics Plant Scheme, Check Fraud Scheme, Burnett Straw Loan and Queens Gap Scheme – included fraud impairing the functions of the FDIC, plus the offenses of making false entries in bank records under 18 U.S.C. § 1005, misapplication of bank funds under 18 U.S.C. § 656, wire fraud affecting a bank under 18 U.S.C. § 1343 and bank fraud under 18 U.S.C. § 1344.

As to count 2, the jury found against defendant on each alleged object of the conspiracy offense, but needed to find only one. We conclude the evidence was sufficient to sustain defendant’s conviction as to several objects. The evidence also showed, in support of count 9, that defendant conspired with others to commit the offense of misapplication of bank funds and bank fraud.

In sum, we conclude the prosecution presented adequate proof of each of the 13 charges lodged against defendant in the indictment. The trial court also did not err in instructing the jury on willful blindness. Where the evidence supports both actual knowledge on the part of defendant and deliberate ignorance, a willful blindness instruction is proper. There was ample evidence that defendant knowingly and intentionally engaged in fraudulent activities – including evidence that defendant himself paid kickbacks to straw borrowers, signed contracts and closing documents that misrepresented the purpose and material terms of loan transactions and engaged in a pattern of writing checks for thousands and even hundreds of thousands more dollars that were in the relevant bank accounts. Email and other communications with his cohorts corroborated defendant’s guilty knowledge.

U.S. v. Vinson (King) No. 15-4384, March 24, 2017; USDC at Asheville, N.C. (Reidinger) John C. Fischer for appellant; Amy E. Ray, AUSA, for appellee. VLW 017-2-075, 44 pp.

VLW 017-2-075

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