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United States v. Mallard

United States District Court, W.D. North Carolina, Charlotte Division

December 18, 2014

MALLARD, Defendant.


FRANK D. WHITNEY, Chief District Judge.

THIS MATTER is before the Court on Defendant's "Pro Se Motion to Withdraw Plea of Guilty." (Doc. No. 179). Since filing that motion, Defendant has retained counsel. (Doc. No. 187). The Court conducted a hearing on this motion on December 14, 2014, and heard evidence presented by both parties. Defendant also testified at that hearing. For the reasons that follow, the Court DENIES Defendant's motion.

I. Findings of Fact

1. Defendant pled not guilty to the original Bill of Indictment on November 23, 2011; the First Superseding Bill of Indictment on April 26, 2012; and the Second Superseding Bill of Indictment on October 3, 2012. Defendant was charged with one count of Mortgage Fraud Conspiracy, one count of Money Laundering Conspiracy, and one count of Wire Fraud Embezzlement Scheme. Defendant elected to plead not guilty before trial and declined to enter plea agreements offered by the government.
2. Defendant Michelle V. Mallard, a/k/a Michelle Crawford, is a well-educated college and business school graduate and previously licensed attorney, licensed real estate agent, and licensed notary public.
3. After granting several motions for continuances made by Defendant, the Court eventually called this matter for trial on July 8, 2013. Following jury selection that day, the Court promptly proceeded with opening statements and the presentation of evidence by the Government.
4. Trial continued a second day, and on July 9, 2013, the Court and jury continued to hear evidence presented by the Government. Later that night, Defendant's counsel sent written correspondence to the Court's clerk advising the Court that his client - Defendant - intended to plead guilty to the three counts against her from the Second Superseding Indictment. Defense counsel also had a conversation with counsel for the Government advising them of Defendant's intention to plead guilty.
5. Defendant was previously represented by Mr. Rick Winiker, an experienced local defense attorney who also has prior experience as an Assistant United States Attorney. Mr. Winiker represented Defendant from the time she was initially indicted, through pre-trial proceedings, trial, her mid-trial change of plea, and until her sentencing hearing when she first sought to withdraw her guilty plea. Before Mr. Winiker, Defendant was also represented pre-indictment by Lisa Costner and Jake Sussman, both experienced attorneys.
6. Among other witnesses, including an expert witness, several co-conspirators testified at trial as to the facts of the conspiracy and specifically as to Defendant's knowledge and involvement in the conspiracy.
7. Jimmy Hitchcock testified that he conspired to commit mortgage fraud with Lisa Staton, Walter Staton, Mitzi Jackson, and Defendant, among others. He pled guilty to the charges against him. He testified that his role in the conspiracy was to be either a home buyer or a promoter, and he would create bogus documents used for loan applications, set lawyers up with people, and match people with builders. In short, he said he helped bring other people together to commit mortgage fraud. Mr. Hitchcock said that Defendant was the lawyer that helped transfer the money to various bank accounts, sometimes for sham corporations, and closed the transactions. Mr. Hitchcock specifically testified that Defendant handled a closing at 1009 Berwick Court, a home owned by Mr. Hitchcock. In that transaction, Mr. Hitchcock obtained a buyer named Michael Marshall. According to the HUD, both Mr. Marshall as the buyer and Mr. Hitchcock as the seller were supposed to bring money to the closing. Ms. Staton closed the loan, and Defendant was not present at the closing, although she is identified as the closing attorney. Mr. Hitchcock testified that despite the fact that the disbursement sheet said that there were copies of these checks in the Defendant's file, neither he nor the buyer brought any money to the closing, but instead both people delivered checks to Defendant's office two days after the closing took place. Mr. Hitchcock additionally testified that Defendant failed to pay off his mortgage as part of the closing transaction. Upon learning that his mortgage had not been paid, Mr. Hitchcock confronted Defendant. Defendant denied not paying the mortgage but subsequently admitted to Mr. Hitchcock that she had not paid the mortgage. Mr. Hitchcock testified to another closing transaction that occurred approximately two months after the Berwick closing involving the same people including, among others, the Statons, Mr. Marshall, and Defendant for a property located at 5422 Piper Glen. Mr. Hitchcock testified that Mr. Marshall was to buy this property and there was going to be a "spread, " meaning a difference between the actual price and the inflated price of the property. In exchange for a payment, an appraiser had agreed to inflate the property value so that the purchaser could obtain a larger loan amount. The money distributed as a result of the "spread" would go to various companies, some of whom did not appear on the HUD statement. Mr. Hitchcock explained that the money he received from the transaction for "marketing fees" and "debt paid at closing" would be used by his companies to be distributed back to the buyers - mainly Mr. Marshall. Mr. Hitchcock testified that Defendant personally delivered him his check for the "debt paid at closing" owed to Phoenix Resources Financial Group. While Mr. Hitchcock was present at Defendant's office to get this check, he again inquired as to whether the mortgage from his prior closing for the Berwick property had been paid. According to Mr. Hitchcock, Defendant stated she had paid the mortgage and explained that it was not originally paid because she had used some of the money in her other businesses. Mr. Hitchcock testified that he closed additional fraudulent loans involving Ms. Staton with Defendant. Mr. Hitchcock testified that he would make copies of fake checks to make it look like the closing attorney had a copy on file for a check that was supposed to have been cashed. At some point during the conspiracy, Defendant could no longer close loans but instead arranged for others to close loans involving Ms. Staton and Mr. Hitchcock. Defendant's law firm closed a loan for 1615 Lookout Circle. Mr. Hitchcock understood that because Ms. Staton was involved with the loan that Defendant was actually closing the loan.
8. Troy Smith also testified at Defendant's trial. Prior to trial, Mr. Smith pled guilty to two counts of conspiracy to commit mortgage fraud and two counts of money laundering. Mr. Smith testified that he was the closing attorney in about six or seven fraudulent real estate transactions involving, among others, Jimmy Hitchcock, Lisa Staton, and Michael Marshall. Mr. Smith testified that as the closing attorney, he did not receive any kickbacks from closing proceeds for fraudulent closings. Mr. Smith received closing fees, and he testified that he charged and received higher closing fees for these fraudulent closings than he normally charged for legitimate closings. Mr. Smith testified that he knew that the closings he conducted involving Mr. Hitchcock and Mr. Marshall involved inflated appraisals; copies of checks that appeared to have been deposited in Mr. Smith's account, which never actually were deposited; and fraudulent invoices indicating that someone was owed money at closing for work performed for the seller, when the work was never actually performed. Mr. Smith testified that he closed transactions knowing that the debts reflected on the HUD for Phoenix Resources were not legitimate debts. Mr. Smith also testified that, as part of the closing transaction, he received fraudulent documents from Ms. Staton. Mr. Smith testified that he had no dealings with Defendant during the course of the mortgage fraud conspiracy involving Mr. Hitchcock, Ms. Staton, and others.
9. Lisa Staton also testified at trial. Ms. Staton worked as a processor of mortgage loans during the course of the conspiracy. Like the other fact witnesses, Ms. Staton pled guilty to conspiracy to commit mortgage fraud. She testified that she facilitated the creation of false documents, faxed these documents to mortgage companies, and used the fraudulent documents to obtain loans for real estate purchasers. She created a shell company that received funding and distributed the proceeds to various other shell companies. Ms. Staton testified that she used Defendant and Troy Smith to close these fraudulent loans. Ms. Staton originally met Defendant at a networking event, and the two subsequently became "very close" friends. Ms. Staton testified she completed over fifty different real estate closing transactions with Defendant and that not all of these transactions were fraudulent. During the course of their business relationship, Ms. Staton learned that Defendant had "issues" with her trust account after a buyer informed Ms. Staton that the buyer's mortgage had not been paid off at closing. Defendant explained to Ms. Staton that the failure to pay the mortgage was a clerical error. Then another buyer, someone from one of the "illegitimate deals we had done, " stated that his loan also had not been paid. Ms. Staton called Defendant, who stated she would take care of it and pay the late fees. Ms. Staton also learned that the North Carolina State Bar had some involvement with Defendant's trust account, which Ms. Staton understood resulted in Defendant losing her license to practice law. Nevertheless, Ms. Staton continued to conduct mortgage transactions at Defendant's law office. Ms. Staton testified that she would deal with Defendant but that the transactions would go through Daniell Jones' trust account. Ms. Jones was another attorney that Defendant had hired to work in her office. Ms. Staton testified that even though Ms. Jones was the closing attorney, Ms. Staton would still contact Defendant about loan closings, and Ms. Staton would then fax over the request to Defendant. After the mortgage company funded the loan, Defendant would pull the documents and close the loan. Ms. Staton stated that she never dealt with Ms. Jones at all. Ms. Staton testified, "I only did business with Michelle. Any contact that I had was with Michelle, so - I mean to me it would be she is the only one handling everything." Ms. Staton's testimony indicated that she still used Defendant to close loans even after the North Carolina State Bar had revoked her license to practice law.
10. Ms. Staton also testified regarding specific fraudulent loan closings involving Defendant. Ms. Staton stated that she worked with Mr. Marshall on a home purchase involving Defendant as the closing attorney. Ms. Staton testified that at the time, she was under the assumption that it was a legitimate loan, but she subsequently found out about two months later that it was not legitimate when the same buyer - Mr. Marshall - came back to close another loan. Mr. Marshall stated on both loans that each property was to be his primary residence, which would require the buyer to live in the property for at least a year before selling. Ms. Staton understood that under "mortgage company standards, " you are not allowed to own two primary properties. Ms. Staton nonetheless worked to close the loan because her company would make money from the proceeds of the loan. Defendant closed this loan for Mr. Marshall's second "primary residence" purchase only a few months after Defendant had closed the loan for another property he identified as his "primary residence." Although Ms. Staton knew about Defendant's problems with her trust account, Defendant told Ms. Staton that Defendant needed the loan closing business, so Ms. Staton resumed doing business with Defendant. As part of this loan closing, Mr. Hitchcock showed Ms. Staton how to obtain fraudulent proceeds by using a shell company, which Ms. Staton named "NP Home Improvement." Ms. Staton testified that Defendant prepared the HUD forms that identified payouts to these shell companies. Ms. Staton testified that she had informed Defendant when she created the shell company "NP Home Improvement" and that she explained to Defendant that Defendant had to hold checks in escrow at closing because the money owed from NP Home Improvement could not be covered. The address for NP Home Improvements was Ms. Staton's home address, a place Defendant had visited a couple of times. In regards to another transaction, Ms. Staton also testified that she wanted to purchase a home that she planned to live in, but needed someone else's credit scores to purchase the property. Ms. Staton testified she was the mortgage broker on this deal, even though she knew that a mortgage broker cannot broker a deal for their own purchases. Ms. Staton identified the borrower on this loan as "Lila Jones, " who is the mother of one of Ms. Staton's employees named Tyree Jones. Defendant had met Ms. Jones on numerous occasions. Ms. Staton prepared false invoices and submitted them via the builder to Defendant's law office in order to receive compensation from the loan proceeds. Ms. Staton testified that although cash was due from the borrower at closing, Ms. Jones did not deliver any cash or check. Instead, Ms. Staton prepared a fraudulent cashier's check made up for the earnest money deposit to provide to the closing attorney so that it would appear Ms. Jones had the money at closing. Once the deal closed, Ms. Staton would then cover the cost of the earnest money through NP Home Improvement. As part of this transaction, Ms. Staton delivered a check to Defendant via the builder and asked Defendant to hold the check until the loan closed because the money from NP Home Improvement would cover the cost after closing. Ms. Staton testified that Defendant knew she had to hold the check, and she did in fact hold the check until the loan closed. After closing the transaction for Lookout Circle, both Ms. Staton and Defendant went to the bank together to get the money to cover the check. Ms. Staton testified on cross-examination that Defendant withdrew the money and then Ms. Staton immediately deposited the money. Ms. Staton testified that she relied on Defendant to make the kickback payments from the loan proceeds to NP Home Improvements. Ms. Staton also testified that Defendant knew that NP Home Improvements was in fact a company owned by Ms. Staton. Ms. Staton also testified that she provided funds that should have been exchanged at closing a day after the closing actually occurred. Ms. Staton also testified that Defendant notarized Lila Jones' signature on documents, when in fact Lila Jones never appeared before Defendant to sign the document.
11. Ms. Staton testified that although she was aware that she could receive a reduced sentence for her cooperation with the Government, she "did not want [Defendant] to get in trouble for this." Although defense counsel cross-examined Ms. Staton on some of the fraudulent transactions and her possible motive to testify in order to receive a more favorable sentence, the Court recessed for the day prior to defense counsel's completion of the cross-examination of Ms. Staton on July 9, 2013.
12. On July 10, 2013, before the Government resumed with the cross-examination of Ms. Staton, Defendant indicated that she wished to change her plea and tender a plea of guilty to each of the Counts with which she was charged. The Court conducted a Rule 11 hearing to accept Defendant's change of plea.
13. The Government expended significant resources in preparing for Defendant Mallard's trial and conducting a significant portion of it.
14. The Court further finds that all trial witnesses were credible during their testimony. The witnesses appeared to testify truthfully and did not hesitate when thoroughly cross-examined by Mr. Winiker.
15. Although magistrate judges frequently conduct plea hearings in this district, because the jury had already been empanelled and because a significant portion of trial had already taken place, the undersigned conducted the Rule 11 plea hearing. At the plea hearing, Defendant stated that she understood that she was under oath and required to give truthful answers to the questions propounded to her. During the plea hearing, she stated that she understood the formal written charges against her. She stated that she had an opportunity to fully discuss the charges with her counsel. She stated that Mr. Winiker had answered all of her questions regarding the plea. When asked "Has anyone attempted in any way to force you to plead guilty or otherwise threatened you, " she responded without hesitation, "No." (Doc. No. 185, p. 5). The Court explained each of the elements of the counts in detail. Defendant consistently stated that she understood.
16. The Court initially asked Defendant to state in her own words the factual basis for her plea. Her attorney objected, and after some discussion, the Court requested the Government to briefly state a factual basis for the plea. In doing so the Court also specifically noted, "we have a day and a half of evidence, there's already a factual basis out there." (Doc. No. 185, p. 15). The Government stated in open court a factual basis for the plea. The Court then asked Defendant whether she disagreed with anything in the factual basis. Defense counsel requested a brief recess to discuss this with his client, and upon resuming the plea hearing, Mr. Winiker specifically argued there was "some differences of opinion regarding the February 2007 closing" on the Andiron Drive property. (Doc. No. 185, p. 26). Defense counsel also noted "there were statements made by the witness, Lisa Staton, and we wouldn't adopt all of those statements made by the witness as far as agreeing to those." (Doc. No. 185, p. 26). Mr. Winiker added, "I think she'll agree with me in response to the Court - acknowledges that she is guilty of the offenses and willfully joined the conspiracy knowing what was occurring during the conspiracy... two conspiracies...." (Doc. No. 185, p. 29).
17. Defendant agreed that there was sufficient evidence presented or proffered by the government so that she did not dispute the essential elements of the three offenses.
18. Defendant then unequivocally pled guilty to all three counts.
19. On the day of her sentencing hearing, October 28, 2014 - fifteen months after she pled guilty - Defendant sought to withdraw her guilty plea. The Court continued the sentencing hearing until December 15, 2014.
20. Defendant subsequently filed a written Pro Se Motion to Withdraw Her Plea on December 4, 2014. Despite admitting under oath that she was guilty as to all three counts, in both her oral and pro se written motion to ...

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