## Facts

- Five defendants participated in a Boston-area mortgage-fraud scheme that generated nearly $2 million in illegal proceeds between May 2005 and June 2006.
- The conspirators used straw buyers to purchase properties at the stated asking price while submitting falsified mortgage applications to obtain financing based on artificially inflated purchase prices.
- The conspirators kept the difference between the inflated loan proceeds and the true economics of the transactions.
- The scheme involved repeated transactions using false borrower information (including income and asset representations) and coordinated distribution of proceeds among participants.
- The loans on the properties eventually defaulted, and most properties went into foreclosure, causing large lender losses.
- A federal grand jury charged defendants with conspiracy to commit wire fraud (18 U.S.C. § 371) and multiple counts of wire fraud (18 U.S.C. § 1343), with aiding and abetting (18 U.S.C. § 2); two defendants were also charged with money laundering (18 U.S.C. § 1957).
- After a six-week jury trial in the District of Massachusetts, the jury returned guilty verdicts on most counts; one defendant was acquitted on some wire-fraud and money-laundering counts.
- The district court imposed prison terms followed by supervised release, and defendants appealed convictions and sentences.

## Issues

1. Whether the evidence was sufficient to prove conspiracy and wire fraud beyond a reasonable doubt as to each defendant.
2. Whether the district court abused its discretion in admitting documentary and testimonial evidence concerning the mortgage transactions and related conduct.
3. Whether the jury instructions on conspiracy, knowledge, intent, and good faith misstated the law or misled the jury.
4. Whether the district court correctly calculated loss and applied the Sentencing Guidelines, and whether the resulting sentences were reasonable.

## Decision

- The First Circuit affirmed the judgments of conviction and the sentences for all five defendants.
- The court held the evidence permitted a rational jury to find knowing participation in a common mortgage-fraud scheme and to convict on conspiracy and substantive wire-fraud counts.
- The court found no reversible error in the challenged evidentiary rulings, concluding the evidence was relevant and not unfairly prejudicial under Rule 403, particularly given limiting instructions.
- The court upheld the jury instructions when considered as a whole, finding they correctly stated the elements and did not shift the burden of proof.
- The court affirmed the loss calculation and related Guideline applications, including enhancements supported by the record.

## Legal Principles

- On sufficiency review, the evidence is assessed in the light most favorable to the verdict; convictions stand if a rational juror could find all elements beyond a reasonable doubt.
- Coordinated use of straw buyers, falsified loan applications, and distribution of inflated-loan proceeds can support findings of knowledge, intent, and agreement for conspiracy and wire fraud.
- Evidentiary rulings are reviewed for abuse of discretion; relevant transaction records central to explaining the mechanics of a fraud may be admitted if the risk of unfair prejudice does not substantially outweigh probative value.
- Jury instructions are evaluated as a whole; minor imperfections do not require reversal if the charge accurately states the law and preserves the government’s burden to prove knowledge and intent.
- For mortgage-fraud cases involving foreclosure, actual loss is calculated as the original loan amount minus the final foreclosure sale price, less any principal repayments.

## Conclusion

The First Circuit upheld convictions and sentences arising from a straw-buyer mortgage-fraud scheme, rejecting challenges to the proof, evidentiary rulings, and jury instructions, and approving a foreclosure-based loss methodology measuring actual loss by loan amount minus foreclosure proceeds (adjusted for principal repaid).


United States v. Appolon, 695 F.3d 44 (1st Cir. 2012)