United States v. Glenn

          OPINION

          SLOMSKY, J.

         I. INTRODUCTION

         On March 12, 2015, Defendant John D. Glenn, Jr. (“Defendant”) was charged in an Indictment with one count of conspiracy to commit bank fraud and two counts of bank fraud. (Doc. No. 1.) The Indictment concerned, among other things, a property known as “the Waverly Property” and involved a scheme, in which Defendant played a central role, to induce mortgage lenders to make a loan secured by this property through misrepresentations and fraudulent conduct. (Id.) These mortgage lenders were Orton Equities Inc. (“Oroton”), Stout Street Funding LLC (“Stout Street”), and National Capital Management, LP (“National Capital Management”). (Id.) On February 23, 2017, following an eight-day trial, a jury convicted Defendant of conspiracy to commit bank fraud, in violation 18 U.S.C. § 1349, and bank fraud, in violation of 18 U.S.C. § 1344^[1] and 2.^[2] (Doc. No. 141.) On March 13, 2017, Defendant filed a pro se Motion for Judgment of Acquittal or New Trial. (Doc. No. 151.) On August 24, 2018, in an Opinion and Order, the Court denied Defendant's pro se Motion, finding that (1) the evidence presented by the Government at trial was sufficient to establish Defendant's guilt beyond a reasonable doubt on all charges, and (2) the interest of justice did not require a new trial. (Doc. No. 232.)

         On August 29, 2018, Defendant was sentenced to serve 168 months' imprisonment to be followed by five years of supervised release. (Doc. No. 237.) Restitution of $981, 717.70 and a special assessment of $300 were ordered to be paid. (Id.) That same day, Defendant appealed his conviction and sentence to the Third Circuit Court of Appeals. (Doc. No. 234.)

         Despite his case being on appeal, Defendant filed on January 7, 2019 a second pro se Motion for Acquittal/New Trial, this time under Federal Rule of Criminal Procedure 33(b)(1) (“Newly Discovered Evidence”).^[3] (Doc. No. 259.) In this second pro se post-trial Motion, Defendant claims that the three victim mortgage lending companies in this case were not financial institutions under the bank fraud statutes because they were “hard money lenders.”^[4] Defendant contends that he learned of this fact after reading the trial transcripts.^[5] (Doc. No. 260 at 34.) As such, he claims that this information was “newly discovered” and therefore his current claim about the lenders not being financial institutions is timely. Defendant also asserts that correspondence he received from the Federal Deposit Insurance Corporation (“FDIC”) on March 7, 2019, stating that Oroton, Stout Street, and National Capital Management were not affiliated with an FDIC insured institution, is also “newly discovered evidence” supporting his claim that the victim companies were not financial institutions under the bank fraud statutes.

         On May 5, 2019, the Third Circuit stayed Defendant's appeal and directed this Court to address and dispose of Defendant's second Motion for Acquittal/New Trial. (Doc. No. 264.) On June 11, 2019, the Government filed a Response to Defendant's post-trial motion. (Doc. No. 269.) In its response, the Government contends that when the bank fraud statutes and associated definitional statutes are examined, the victim companies undoubtedly were “financial institutions.” Moreover, the Government claims that Defendant had ample opportunity to raise his challenge to the status of the victim mortgage lenders much earlier in the case and for this reason the evidence he relies upon is not newly discovered. The Court agrees with the Government on both points, albeit for a modified reason on the second point regarding the effect of what Defendant contends is his new evidence, and therefore Defendant's second motion for a new trial and/or acquittal will be denied.^[6]

         II. BACKGROUND

         A. The Indictment and the Scheme to Defraud Three Mortgage Lending Businesses

         On March 12, 2015, a grand jury returned a three-count Indictment against Defendant. (Doc. No. 1.) The Indictment charged him with one count of conspiracy to commit bank fraud, in violation of 18 U.S.C. § 1349, and two counts of bank fraud, in violation of 18 U.S.C. § 1344 and 2. Count I states in part:

From in or about June 2010 through at least September 2010, in the Eastern District of Pennsylvania, and elsewhere, defendant

JOHN D. GLENN, JR.,

knowingly and willfully conspired and agreed, together and with Otis M. Johnson^[7]and others known and unknown to the Grand Jury, to knowingly and willfully execute and attempt to execute a scheme and artifice to defraud Oroton, Stout Street and National Capital, which are mortgage lending businesses, and to obtain monies owned by and under the care, custody and control of those mortgage lending businesses by means of materially false and fraudulent pretenses, representations and promises, in violation of 18 U.S.C. § 1344.

(Doc. No. 1 ¶ 11.) (Emphasis added.)

         Count II states in part:

In or about June 2010 through at least September 2010, in the Eastern District of Pennsylvania, defendant

JOHN D. GLENN, JR.,

together with Otis M. Johnson, and others known and unknown to the Grand Jury, knowingly executed, and aided and abetted the execution of, a scheme to defraud Stout Street, a mortgage lending business, to obtain monies owned by and under the care, custody and control of that financial institution by means of materially false and fraudulent pretenses, representations and promises.

(Id. at 11 ¶ 2.) (Emphasis added.)

         And Count III states in part:

In or about August 2010 through at least September 2010, in the Eastern District of Pennsylvania, defendant

JOHN D. GLENN, JR.,

together with Otis M. Johnson, and others known and unknown to the Grand Jury, knowingly executed, and aided and abetted the execution of, a scheme to defraud National Capital, a mortgage lending business, to obtain monies owned by and under the care, custody and control of that financial institution by means of materially false and fraudulent pretenses, representations and promises.

(Id. at 13 ¶ 2.) (Emphasis added.)

         B. Overview of the Scheme to Defraud Three Mortgage Lending Businesses

         In mid-2010, a residential property (“the Waverly property”) located in Bryn Mawr, Pennsylvania was in foreclosure. (Id. at 1 ¶ 1.) Michael Meehan, who co-owned the property with his then-wife, Karen Meehan, sought to sell it by way of a short sale to avoid foreclosure.^[8] (Id.) Initially, they entered into an agreement of sale of the Waverly property for $856, 431 with a Thomas Cappie. (Doc. No. 157 at 17:17-20:2.) Cappie, however, was unable to secure financing to complete the transaction. (Id. at 20:17-21:2). As a result, Cappie assigned his interest to Defendant, who had agreed to purchase the Waverly property. (Id. at 22; Doc. No. 1 at 1 ¶¶ 2-3.)

         To secure funding for the purchase, Defendant applied for loans from the three mortgage lending businesses: Oroton, Stout Street, and National Capital Management. (Doc. No. 1 at ¶ 13.) To do so, he held himself out as the principal of two businesses, International Small Business Network, LLC (“ISBN”) and SSJ Realty, LLC (“SSJ Realty”). He also claimed that he was a successful real estate investor to further induce the companies to make the loans. (Id. ¶ 3.)

         1. Scheme to Defraud Oroton

         In June 2010, Defendant applied for a loan of $1.6 million under Cappie's name with Oroton. (Id. at 5 ¶ 1.) Defendant told the Oroton loan officer that the purpose of the loan was to finance the purchase of the Waverly property from Meehan to Cappie, even though Cappie was no longer part of the Waverly transaction. (Id.) Defendant represented that his company, ISBN, would then purchase the property from Cappie for $1.85 million with funds it had received from another lender, Stout Street. (Id.) In reality, Stout Street had not agreed to such a transaction. Defendant also provided Oroton with another agreement of sale between Cappie as the seller and Shannen Kurz and ISBN as the buyers.^[9] (Doc. No. 157 at 103:5-10.)

         Oroton agreed to loan the $1.6 million contingent on the second sale of the Waverly property to ISBN. (Doc. No. 1 at 6 ¶ 3.) On July 7, 2010, the closing for the loan took place. (Id. ¶ 4.) Defendant, along with a representative of Oroton, Cappie, Michael Meehan, and Otis Johnson attended the closing. (Id.) Before the closing was complete and Oroton wired the funds, the Oroton loan officer discovered that the actual payoff amount of the existing mortgages was only approximately half the amount of the Oroton loan about to be committed. (Id.) He also was unable to verify the Stout Street $1.85 million loan commitment. (Id.) Ultimately, Oroton declined to fund the loan. (Id. ¶ 5.) Thus, Oroton is not a named victim in a substantive bank fraud charge.

         2. Scheme to Defraud Stout Street

         Meanwhile, also in June 2010, Defendant approached Stout Street for a $480, 000 loan to finance the same Waverly property. (Id. at 7 ¶ 6.) Defendant sought the loan purportedly on behalf of ISBN and represented that Shannen Kurz, as the vice president of ISBN, would be the named borrower. (Id. ¶ 8.) He provided Stout Street with an agreement of sale of the Waverly property for $800, 000 showing Michael Meehan as the seller and Kurz, on behalf of ISBN, as the buyer. (Doc. No. 158 at 19:10-25.) The document was notarized by Defendant. (Id. at 24:8-17.) Defendant also submitted ISBN's purported corporate resolution to show that Kurz had authority to bind the company in real estate transactions, as well as ISBN's articles of organization, IRS tax form, operating agreement, and certificate of formation to prove the company's legitimate LLC status. (Id. at 33:15-35:6.)

         On July 19, 2010, Stout Street approved the loan of $480, 000 to ISBN to finance the purchase of the Waverly property and wired the funds to an escrow account maintained by Otis Johnson's title company, Mabstract. (Doc. No. 1 at 7 ¶ 9.) This loan was to be secured by a first position mortgage on the property. (Id.) Any prior existing mortgages were to be satisfied at closing with the funds from Stout Street. (Id.) Johnson, the title agent, with the complicity of Defendant, handled this settlement of the Waverly transaction and falsely represented on a HUD-1 settlement document^[10] that Shannen Kurz, on behalf of ISBN, was the buyer and that Michael and Karen Meehan were the sellers. (Id. ¶ 10, Doc. No. 158 at 35:11-35:3, 85:11-19.) The settlement document also falsely showed that Defendant provided $450, 000 in earnest money towards the Waverly property purchase and that the sellers provided $53, 548 to cover costs. (Doc. No. 1 ¶ 11.)

         Stout Street understood that the $480, 000 loan was to be used to purchase the Waverly property and would be distributed in strict accordance with the settlement document instructions. (Id. at 8 ¶ 13.) This was not done. Instead, Defendant and Johnson agreed to keep the funds in the Mabstract escrow account. (Id. ¶ 14.) At Defendant's direction, Johnson deposited $40, 000 of the funds into the business bank account of Defendant's childhood friend, Hassan Shaheed.^[11] (Id. ¶ 15.) Shaheed confirmed at trial that this money went to Defendant. (Doc. No. 159 at 49:3-50:24.)

         3. Scheme to Defraud National Capital Management

         Later on, in August 2010, Defendant also sought a loan to purchase the Waverly property from National Capital Management. (Doc. No. 1 at 9 ¶ 16.) This time, he held himself out as the principal of SSJ Realty, LLC and applied for a loan in the amount of $550, 000. (Id.) The loan was to be secured by a first position mortgage on the Waverly property. Along with his application, Defendant provided the National Capital Management loan officer with a personal financial statement listing his assets and liabilities (Doc. No. 158 at 167:19-168:3, 170:10-24), an agreement of sale showing Michael Meehan as the seller and SSJ Realty, LLC as the buyer (Id. at 171:7-25), and his own federal tax returns (Id. at 174:3-175:177:9).

         National Capital Management required that Defendant be represented by counsel and further required an opinion of counsel. (Id. at 179:16-180:10.) Defendant provided such a letter, which National Capital Management viewed as insufficient. (Id. at 180:4-14.) The loan officer at National Capital Management then spoke with Defendant's counsel who requested from the officer a boilerplate version of a standard letter with the opinion of counsel. (Id. at 180:15-181:1.) The loan officer provided the letter and Defendant's counsel subsequently sent back a completed version. (Id. at 181:5-8.) The letter, dated August 26, 2010 and written by an employee of counsel, indicated that SSJ Realty was a valid LLC operating in good standing under the laws of Pennsylvania. (Id. at 181: 15-24; Gov't Ex. 7-8.) 24.) He also provided cash from the account to Defendant at Defendant's direction. (Id. at 52:16-24.)

         On August 27, 2010, National Capital Management approved the loan and deposited a total of $550, 000 in the Mabstract escrow account. (Doc. No. 1 at 9 ¶ 18.) At the closing, a false settlement document was created, showing Michael and Karen Meehan as the sellers and Defendant as the buyer with a sale price of $855, 000 for the Waverly property. (Doc. No. 158 at 186:4-16.) It also showed that Defendant deposited $344, 000 in the Mabstract escrow account as earnest money. (Doc. No. 1 at 9 ¶ 17.) He made no such deposit.

         Again, Johnson did not distribute the escrow funds as per the settlement instructions and did not pay off the prior existing mortgages on the Waverly property. (Id. ¶ 19.) Rather, Defendant and Johnson agreed to misappropriate the funds lent by National Capital Management. (Id.) On or about August 30, 2010, Defendant directed Johnson to take $80, 000 of National Capital Management's funds in the Mabstract escrow account and deposit the money into Hassan Shaheed's business account. (Id. at 10 ¶ 20.) Defendant then directed Shaheed to make deposits and payments to Defendant and other individuals from this account. (Id. ¶ 21; Doc. No. 159 at 47:16-23, 49:20-50:3, 50:6-24.)

         III. ...