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.
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
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.
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.
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.
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 at least four years old, and that there were multiple leaks at the time of his inspection. Based upon the foregoing, we find that defendant knew that Kelley's certification was false and that he submitted it to FHA notwithstanding.
The Smith house at 158 W. Hortter Street was the subject of a certification signed by Nussbaum that he had inspected the plumbing and heating systems and that they were "in satisfactory working condition at this time with all drains being free of obstruction." In contrast to Nussbaum's certification, Mr. Smith testified that after he moved in, the leak from the second floor bathroom into the living room was so severe that the ceiling was half caved in and the plaster was down (this situation had been covered over by new wallpaper!);
the second floor bathroom sink drainpipe leaked; steam was escaping from the radiators. We credit this testimony. In our view, the defects in the plumbing and heating systems found by FHA's expert inspector, Edward R. O'Brien, some two years later were of such magnitude that they must have inhered in the condition of the property at the time of settlement. These defects included low water pressure; a water heater in very poor condition; the main drain discharging through the wall from three different locations; a cracked rear basement drain; badly leaking kitchen faucets; problems in the second floor bathroom, including leaking sink faucets, a bad trap, a leaking tub drain, and a broken toilet; problems in the third floor bathroom, such as leaking tub faucets and defective toilet; and bad pipes around the boiler, leaking basement mains, and indications of leaking air vent valves. Nussbaum never inspected the property because defendant gave him the wrong key and he could not gain entrance. He signed the certification because of defendant's assurances that the plumbing and heating systems were in good condition. Defendant was not only the owner of the property, but, as a licensed real estate broker, sold the property after having shown it to the Smiths through his salesman. We thus find on multiple grounds that defendant in fact knew the condition of the property, and that Nussbaum's certification was known by defendant to be false.
Nussbaum also prepared a certification that the plumbing and heating systems were in good order with respect to the McCafferty property at 1938 E. York Street. Nussbaum testified that he told defendant that certain heating ducts in the cellar were defective and needed repair; defendant told him that they would be repaired and requested that he issue the certification anyway, and Nussbaum did so. Although defendant denied this conversation, we credit Nussbaum's testimony. Since, contrary to defendant's representation, the work in question was not performed by the time of settlement, the certification was false and defendant knew that it was false. We note too that the McCaffertys, unlike the other purchasers, had been living in the premises under lease for some time. They also complained that the heater transformer was defective and that there was no heat in the back bedroom or kitchen. Defendant had gone through the property with the McCaffertys. Our finding that defendant knew that the plumbing and heating certification with respect to 1938 E. York Street was false is thus based upon more than sufficient evidence.
We now turn to the defendant's most egregious wrongdoing -- the Ben Johnson matter. Defendant sold the property at 1210 W. Allegheny Avenue to Isaac Johnson and his wife. The FHA mortgage insurance was procured with the aid of a certification on the letterhead of "Ben Johnson, Registered Plumbing-Heating, 1230 Melon Street," which read:
I have inspected the plumbing and heating systems at the above referenced property and find that all the equipment is in good operating condition including all the outside drains.