United States District Court, D. Kansas
MEMORANDUM AND ORDER
JULIE A. ROBINSON, District Judge.
F. Jeffrey Miller (Miller) was convicted by a jury of conspiracy to commit bank fraud, money laundering and criminal contempt charges. He was sentenced to 72 months of custody. After being released on January 10, 2014, his three year term of supervised release commenced. On October 29, 2014, the Court heard evidence on a petition to revoke Miller's supervised release for violation of four conditions of release. Because the Court concludes that Miller has violated all conditions of release that underlie the petition for revocation, the Court orders that Miller's term of supervised release be revoked. The Court will later issue a notice scheduling the sentencing hearing.
Petition for Revocation
The petition for revocation alleges that Miller committed four violations of the conditions of supervised release. First, he violated a special condition that he not be employed in any capacity in which he has discretionary authority over financial matters, without approval of the probation officer. Secondly, Miller violated a standard condition that he answer truthfully all inquiries by the probation officer and follow instructions of the probation officer. Thirdly, Miller violated the standard condition that he not commit another federal, state or local crime by submitting false monthly reports to his probation officer, under penalty of perjury. And fourthly, Miller violated the standard condition that he not commit another federal, state or local crime by traveling in interstate commerce and using a telephone to communicate in interstate commerce a threat of bodily harm with the intent to extort money.
The Business of TSH and Miller's involvement with TSH
The Court heard testimony in a day-long revocation hearing, and received documentary evidence from both parties. Much of the evidence concerned the business practices and transactions of Tri-States Holding, LLC (TSH), a company owned by Miller's son Brandon Miller (Brandon), but actually controlled and operated by Miller. The alleged violations of supervised release all spring from Miller's involvement with TSH; he lied to his probation officer about his true role in TSH which included his control of operational and financial matters, and he threatened Lisa Montgomery with bodily harm, if she did not pay money associated with her purchase of a house from TSH. Moreover, while the petition for revocation does not allege that Miller committed a violation of law by operating TSH, the Court heard substantial evidence about the fraudulent practices and transactions of TSH under the control and direction of Miller. This evidence was not offered as a separate violation of the conditions of supervised release, but it is highly relevant to the appropriate sentence to be imposed upon revocation.
Moreover, because this evidence concerning the business practices and transactions of TSH helps explain the evidence concerning Miller's role in TSH and his threats to Lisa Montgomery, the Court starts by summarizing the substantial evidence about the fraudulent practices and transactions of TSH. Based on the contracts and other transactional documents admitted into evidence, as well as emails that constitute party admissions by Miller and other TSH personnel, and based on the testimony of witnesses and the admitted statements and memoranda of interviews of many more witnesses,  the Court finds the following by a preponderance of evidence.
While Miller was still in prison, he formulated the business plan for TSH. In routinely-recorded prison phone calls, Bureau of Prison officials heard Miller discussing Miller's business plan with 23 year-old son, Brandon. Miller promised Brandon a car if Brandon would invest his college fund in the business. Bureau of Prisons officials also heard Miller asking Brandon for his social security number in order to open lines of credit. Miller later told others, including TSH employee Tony Caldwell and TSH investor Allen Roe, that he had used Brandon's college fund to start TSH. Roe stated that he believed Brandon had invested about $60, 000 in TSH.
Further, while still in prison, Miller discussed his business plans with other inmates, including Gerald Snow. At some point, Judy Snow, Gerald's mother, became Registered Agent of another LLC in Oklahoma, also called TSH; and upon Gerald's release from prison, Gerald reported to his probation officer in Oklahoma that he operated a business called TSH and employed other inmates at that business in Oklahoma. Miller also discussed his plan with fellow inmate Ray Ray Hickman, who upon release became one of the first to buy a house from TSH in Kansas City.
Bureau of Prisons officials were so concerned about what they heard about Miller's business plans, that before Miller was released from prison, they began contacting Wendy Landry, a United States Probation Officer for the District of Kansas and IRS Special Agent Travis Glaser, who had investigated Miller on the wide-ranging mortgage fraud for which Miller had previously been convicted. Bureau of Prisons officials continued to contact Landry, after Miller was moved to a halfway house in the Kansas City area and still under Bureau of Prisons custody.
By the time Miller commenced supervised release on January 10, 2014, Landry was well aware that the Bureau of Prisons personnel were concerned about Miller's planned activities, but neither she nor the prison officials knew exactly what Miller's plans were. Miller told Landry that his son Brandon had formed a business, TSH, to buy, refurbish and flip houses; and that Miller would be working for TSH merely as a laborer. Later, Landry told Miller that TSH needed to verify how much they were paying Miller for his labor; only then did TSH start paying Miller in checks.
TSH was not in the business of buying, refurbishing and flipping houses. Rather, TSH's business, in a nutshell, was a "contract for deed scam, " as Peter Hoffman, a legal aid attorney testified at the revocation hearing. Hoffman represents a number of the eighteen victims of TSH who have now filed consumer complaints with the Missouri Attorney General. Hoffman has also filed a civil lawsuit against TSH, Brandon, Miller and Tony Caldwell. TSH purchased more than 40 houses at Jackson County Missouri tax sales. TSH then advertised these houses for sale to low-income people in the urban core in Kansas City, Missouri. TSH offered them home ownership for just $500 down, sweat equity of no more than $2000 in the form of cosmetic repairs like painting and clean up; and then monthly payments of $399. The buyers signed contracts with TSH for purchase prices in the range of $35, 000.
Notably, the contracts stated that the buyers would make monthly payments of $399 on the financed amount, with interest of 6.55 percent per annum, but the contracts did not reveal the number of monthly payments, the amortization schedule or any other information concerning the total payments. The contract also stated that upon payment of all amounts due, TSH would deliver a "Statutory Warranty Deed" to the buyer in fulfillment of the contract. In practice however, TSH personnel, including Miller, represented to buyers and others that the buyers would receive a deed to the property at the outset of the contract. One example of such a representation is found in a form letter from TSH dated April 10, 2014 to "All, Homeowners" that states in pertinent part,
Upon receiving your April payment, you will be doing papers for your deed to be filed with the Jackson County Recorder of Deeds Office. Once that happens, this will allow you, as the listed property ...