When FBI Agents (Allegedly) Talk In The Hallway; Or Why Even A Lawyer Should Not Talk To The FBI If There's A Real Estate Fraud Investigation Afoot

more+
less-
more+
less-

Marc Engelmann was accused of conspiracy to commit bank and wire fraud, as well as bank and wire fraud. He was convicted at trial after some very shady stuff might have happened between two FBI agents. The Eighth Circuit (yes, the Eighth Circuit!) remanded in United States v. Engelmann.

Dual Price Real Estate Deals

Mr. Engelmann was a real estate attorney. He represented a seller in nine different deals that the government thought broke the law.

In each deal, the buyers and the sellers entered into "dual price" purchasing agreements. Basically, that means they agreed that they would tell the lenders that they were buying the property at a higher price than the actually were, so that the lender would lend more money.

No one would be surprised to learn that the mortgages ultimately went into default and the properties were sold at foreclosure.

645099_the_secret.jpgMr. Engelmann's Trial

At trial for his role in defrauding these lenders, Mr. Engelmann's defense was that he thought the lenders knew about the dual price agreements. If the lenders knew, then there's no harm to them. (though it's not totally clear what the point of a dual price agreement would be, but ok)

At trial, the district court entered a sequestration order - anyone who would be a witness had to leave the courtroom so that the witnesses couldn't tailor their testimony to what they'd already heard.

Two FBI Agents testified at trial. They both said that Mr. Engelmann told them that he knew that the lenders were unaware of the dual pricing agreements. Mr. Engelmann testified that he told the agents, instead, that if the lenders didn't know of the agreements, then it would be fraud.

The prosecutor argued in closing that the Agent's testimony about what Mr. Engelmann told them was

"the most important evidence that has been presented" and "the most powerful evidence about the defendant's guilt in this case." The prosecutor argued Agent [One]'s testimony regarding the statement was especially credible since Agent [One] was not in the courtroom while Agent [Two] testified and thus "didn't have the benefit of hearing Special Agent [Two]'s testimony" before giving his own.

The jury convicted Mr. Engelmann.

A Phone Call To Chambers

After the jury verdict, a man called the district court judge's chambers. The man's name was McNamara. Here's how the district court summarized the call:

[McNamara] informed the Court that he had attended the Engelmann trial and wanted to advise the Court of what he perceived as an "injustice" that had occurred during trial. Mr. McNamara reported that, during a court recess after [Agent 2] had testified, Mr. McNamara observed [Agent 2] talking to [Agent 1], who had not been in the courtroom during [Agent 2's] testimony. According to Mr. McNamara, the two agents were discussing [Agent 1's] testimony regarding the procedure and techniques the agents had used during the case investigation. Mr. McNamara also reported that he saw [Agent 2] look at the notes he had referred to during his testimony. Mr. McNamara said he felt this observation was significant because [Agent 1] later gave testimony consistent with [Agent 1's] testimony regarding the agents' procedure and techniques in their investigation and as to what [Engelmann] had told them during the interview. Mr. McNamara further expressed that it was his recollection that the Government argued in closing that [Agent 2] and [Agent 1] had testified independently and that they had never spoken to one another about their testimonies.

So, basically, McNamara alleged that the two agents colluded on what they'd say in the middle of trial. And the prosecutor hit that colluded testimony hard in closing argument.

And, because any trial lawyer will wonder about this - The first agent to testify was the case agent (who is allowed to sit in during the trial) the second agent to testify was not the case agent.

The District Court Springs Into Inaction

The district court wrote to both of the parties and told them about this.

Mr. Engelmann moved for a new trial and asked for an evidentiary hearing.

The district court said no. No hearing, no new trial. The district court said there wasn't much reason to believe McNamara and also that the agents colluding on their testimony in the hallway didn't violate the sequestration order.

And, the district court added, if it did violate the sequestration order, well, it didn't really matter, because McNamara only said they talked about their "procedure and techniques" in the investigation.

The Eighth Circuit Disagreed

The Eighth Circuit remanded and directed that the district court hold a hearing to develop the testimony about what happened. There are two conclusions that are interesting.

First, the court of appeals held that

Since sequestration orders are meant "to prevent witnesses from tailoring their testimony to that of prior witnesses," it would be illogical to hold that [one] Agent, excluded from the courtroom pursuant to a sequestration order, could wait outside the courtroom doors and then discuss with [the other] Agent the testimony which [the other] Agent had just given.

Second, and sort of deliciously for those defense-minded folk among us, the Eighth Circuit addressed whether the error was harmless.

The court of appeals said that because the prosecutor said this was "the most powerful evidence of the defendant's guilt in the case," this was a serious enough issue that a hearing on the sequestration violation was warranted.

If you'd like to speak with us, please call (202) 640-2850. Odds are we'd love to talk to you.

 

Topics:  Bank Fraud, Conspiracies, FBI, Sequestration

Published In: Criminal Law Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© The Kaiser Law Firm PLLC | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »