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UNITED STATES v. CLEARFIELD

April 25, 1973

UNITED STATES
v.
Theodore CLEARFIELD


Edward R. Becker, District Judge.


The opinion of the court was delivered by: BECKER

Edward R. Becker, District Judge.

 I. Preliminary Statement

 We have before us the motions of defendant Theodore Clearfield for a new trial and arrest of judgment in the wake of a four-week-long non-jury trial *fn1" in which he was charged with sixteen counts of violating or aiding and abetting violations of 18 U.S.C. § 1001. *fn2" Defendant is a licensed real estate broker who sold a considerable number of inner city houses, which he owned, with the aid of FHA-insured mortgages which he obtained for the purchasers. The gravamen of the government's case was that the FHA mortgage insurance was obtained as the result of certifications submitted to the FHA by defendant which falsely represented the condition of the properties in question. In a general verdict at the conclusion of the trial, *fn3" we acquitted defendant on nine counts but adjudged him guilty on seven counts of the indictment. *fn4"

 The motions raise three principal claims: first, that there was insufficient evidence that defendant knew that the certifications were false to permit a finding of knowing and willful conduct by defendant to sustain the verdict (18 U.S.C. §§ 2 and 1001 proscribe only willful conduct); second, that the indictment was faulty in that it charged defendant under a statute of general application (18 U.S.C. § 1001), whereas a statute of specific application carrying a lesser penalty was available (18 U.S.C. § 1010, which proscribes the making of false statements for the purpose of influencing the action of the Department of Housing and Urban Development; and third, that it was error to convict defendant of aiding and abetting his co-defendants when the government did not succeed in convicting any of them as a principal.

 Neither the government nor the defendant has ordered the notes of testimony; however, we took detailed notes at the trial and our recollection of the testimony is clear. We conclude that there was indeed sufficient evidence of willfulness to sustain the verdict. Because we also find the remaining claims to be lacking in merit, defendant's motions will be denied. *fn5"

 Generally, in evaluating the sufficiency of evidence to sustain a conviction, the Court must view all the facts and the inferences reasonably to be drawn therefrom in the light most favorable to the government, United States v. Dukow, 465 F.2d 688 (3d Cir. 1972). That standard seems somewhat inappropriate in reviewing a non-jury case where the judge is able to articulate his findings. In the summary that follows, the facts which we recite are those which, as the finder of fact, we found. As will be seen, by any standard they sustain the conviction.

 Defendant acquired title to the dwellings in question in the names of himself and his wife. Looking toward the sale of the properties through the vehicle of FHA-insured mortgages, he arranged, through several mortgage brokerage companies with which he had a course of dealing, for the properties to be inspected and appraised by FHA. *fn6" Under the FHA procedure, the inspection identified those defects in the property which must be remedied so that the property will comply with FHA standards. At the time in question the FHA determination as to compliance was a non-objective one: there was no requirement that the plumbing, heating, or electrical systems, for instance, comply with any fixed national or local code or standard; rather, the FHA inspector made a subjective determination as to whether the item he was inspecting functioned adequately and whether repairs and improvements were performed in a workmanlike manner. *fn7" The appraisal, on the other hand, fixed the value (anticipating the repairs) of the property for FHA mortgage purposes, thereby determining the amount of the mortgage on the property that FHA would insure.

 After review of the inspection and appraisal reports, FHA prepared the document, central to this case, known as the conditional commitment. That document constituted an agreement between FHA and the buyer *fn8" that FHA would insure the mortgage on the subject property at a given figure so long as those items of work noted on the conditional commitment were properly performed. According to the evidence, under the FHA procedures at the time in question, the requirements of the conditional commitment were to be satisfied by a combination of two methods: (1) submission by a tradesman of a certification that the roof, plumbing and heating, or electrical system was in good order and repair; and (2) an "architectural" reinspection as to other items by an FHA staff employee. The evidence showed that the inspector making the architectural reinspection would generally chock only the items of which reinspection was requested and would not look beyond them or make a general reinspection of the house to see if it was in good condition.

 Having secured a conditional commitment for a given property, defendant would proceed in two directions. First, he would direct one of several contractors with whom he had a general course of dealing to perform necessary repairs upon the house or to inspect the house and supply him with a certification that a system in question was in good order and repair. Second, he would list the house for sale and find a purchaser. Each prospective purchaser would be shown the house by defendant or one of his salesmen before signing the agreement, and upon signing the agreement the purchaser would be directed to the mortgage broker or company with which defendant was dealing. There the necessary credit information was procured and the mortgage application was completed. Prior to the date scheduled for settlement, defendant would procure from his tradesmen the necessary certifications, sending a copy to the mortgage company and retaining the original for transmission to FHA via the title clerk who presided at the settlement. *fn9" Where necessary, an architectural reinspection would also be arranged.

 As we noted at the outset, the government's case was that defendant submitted (or aided and abetted the submission of) false certifications as to the condition of the properties involved in the various counts of the indictment. In terms of the precise statutory language, each count charged that defendant and the tradesman preparing the certification made a false statement as to material facts in a matter within the jurisdiction of FHA, in that a certification submitted to the FHA stated the condition of a certain portion of the premises whereas the tradesman in fact knew that the premises was not in such condition. Four tradesmen were named as codefendants: Bruce Hammer (Hammer), an electrician, Edward Goodman (Goodman), a plumber, Clayton Kelley (Kelley), a roofer, and one "Ben Johnson," allegedly a plumber. The identity and indeed even the existence of "Ben Johnson" was a major issue at the trial (see infra).

 We granted a motion for judgment of acquittal as to Hammer and Goodman at the conclusion of the government's case because, inter alia, the government produced no evidence showing that they knew that the certifications which they made were destined for FHA. *fn10" Kelley had entered a guilty plea prior to trial and appeared as a government witness. In the course of his testimony, it appeared that he too was unaware of the destination of the certifications (he had previously worked for defendant in matters involving the Philadelphia Housing Authority (PHA)), and there was evidence that Kelley thought that PHA was involved in the present case. Accordingly, even though we believed that some of Kelley's certifications were false, we permitted him to withdraw his plea and the government ultimately dismissed the indictment as to him. "Johnson" never appeared. The indictment also charged that one Marvin Nussbaum (Nussbaum), a plumber, made false certifications which defendant submitted to FHA. Nussbaum was not named as a defendant, and appeared as a government witness at trial.

 The bulk of the government's evidence came from the mouths of homebuyers who, one after another, testified that when they moved into the properties *fn11" there was an enormous variety of major problems -- serious roof leaks, malfunctioning heating systems, defective wiring and inadequate outlets, missing pipes and pipes with holes, rotten sewer lines, clogged and cracked drains, stopped-up toilets, leaking bathtubs, sinks and toilets, improperly connected plumbing lines, weak water pressure, disconnected rain conductors, and so forth. Although defendant, who took the witness stand, minimized the purchaser's complaints, he did not for the most part deny them and instead stressed the efforts that he made to correct the defective conditions.

 We turn first to the question whether the government proved that defendant knew the certifications were false, for that is the principal area of defendant's concern. We will deal, of course, only with those counts on which we found defendant guilty. *fn12" Of the seven counts on which we adjudged defendant guilty, three counts involved certifications submitted by Kelley, two involved certifications submitted by Nussbaum, and two involved certifications submitted by "Ben Johnson." We shall take them up in that order.

 Defendant sold a house at 5653 McMahon Street to one Juanita Adams. In order to induce FHA to insure the mortgage, he submitted a certification signed by Kelley to the effect that Kelley had placed a new roof on the property and that the roof was in good condition. The defendant told Mrs. Adams that the roof was new; however, at the first rain after she moved in the roof leaked "everywhere." Edward Donnelly, a roofing expert retained by FHA, examined the roof and we credit his testimony that one-third of the main roof had been newly (although poorly) refinished within the last couple of years with rolled roofing, but that the remainder of the roof was in poor condition and had had no new roofing for at least forty years. Kelley testified that he had applied a new "hot" roof to the back of the property but that with respect to the front of the property, where the slate roof was in poor condition, he had done nothing. Kelley further testified that he had informed defendant that he did not do slate work and that he had not replaced that portion of the roof, whereupon, according to Kelley, defendant said that he would "take care of it." We credit that testimony and also find that defendant never did "take care of it." Defendant's personal familiarity with the property was demonstrated by the credited testimony of Ellsworth Williams, a contractor employed by defendant (see extended discussion infra), that defendant visited the properties (including 5653 McMahon) while the rehabilitation was underway and inspected the work. Having found the foregoing facts, we conclude that when defendant submitted the certification that there was a new roof on the property and that the roof was in good condition, he knowingly submitted a false certification. *fn13"

 Kelley also submitted a certification with respect to the condition of the roof at 1938 E. York Street which had been sold to the McCafferty family. The certification was to the effect that the "roof was in good condition." On the other hand, we find that Kelley had told defendant that the roof was in bad shape and that it needed at least a one-ply roof which would cost from $200 to $300. There was also evidence from which we found that the leaks in the property were visible and that defendant had personally visited the property to make an inspection. Kelley certified the work because of defendant's promise that he would tell him to go ahead with the work when he was "sure the property is mine."13a However, defendant never authorized Kelley to do the work, although after the certification had been submitted, the mortgage insured, and title passed to the buyers, defendant paid Mr. McCafferty $175 to cover repairs which Mr. McCafferty thereafter made himself. From the foregoing, we find that when defendant submitted Kelley's certification to FHA, he knew that the roof was in poor condition and he knew that the certification was false. *fn14"

 Kelley also signed a certification with respect to 158 W. Hortter Street. Kelley had inspected the premises and found that the wood shingle roof needed repair (the shingles were broken, the rafters were exposed, etc.). He testified, and we find, that he told defendant that it needed repair and that it was likely to leak if there was a heavy rain, but that he did not do that kind of work. We further find that Kelley certified the roof as being in good condition because defendant said he would take care of it, but that defendant never did so. When the buyers, the Calvin Smiths, moved in, the leaks in the shed kitchen roof and the main roof were severe. Indeed, the effect of the leak on the shed kitchen wall had been seen by defendant's salesman when he was showing the home to the buyers, and the salesman had said that it would be taken care of, but, as noted, it was not. The FHA expert, Donnelly, whom we credit, testified that there had been no reroofing on the main roof for at least ten years, that the shingles on the south side of the roof were worn through, exposing the roof in over a dozen places, that the holes were as large as two inches in diameter and were ...


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