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United States v. Zar

United States Court of Appeals, Tenth Circuit

June 23, 2015

UNITED STATES OF AMERICA, Plaintiff - Appellee,
v.
DEREK ZAR, Defendant - Appellant. UNITED STATES OF AMERICA, Plaintiff - Appellee,
v.
MICHAEL JACOBY, Defendant - Appellant. UNITED STATES OF AMERICA, Plaintiff - Appellee,
v.
SUSANNE ZAR, a/k/a Susanne Hames, Defendant - Appellant

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Appeals from the United States District Court for the District of Colorado. (D.C. Nos. 1:10-CR-00502-KHV-2, 1:10-CR-00502-KHV-1, 1:10-CR-00502-KHV-3).

Ann Marie Taliaferro, Brown, Bradsha & Moffat, L.L.P., Salt Lake City, Utah, for Defendant-Appellant, Derek Zar.

Richard A. Hostetler, Law Firm of Richard A. Hostetler, Denver, Colorado, for Defendant-Appellant, Michael Jacoby.

Jonathan D. Reppucci, Reppucci Law Firm, P.C., Denver, Colorado, for Defendant-Appellant, Susanne Zar.

J. Bishop Grewell, Assistant United States Attorney (John F. Walsh, United States Attorney, with him on the brief) Office of the United States Attorney, Denver, Colorado, for Plaintiff-Appellee.

Before HARTZ, MATHESON, and MORITZ, Circuit Judges.

OPINION

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MORITZ, Circuit Judge.

Defendants Michael Jacoby, Derek Zar, and Susanne Zar appeal convictions and sentences arising from their participation in a mortgage fraud scheme. The government tried the defendants together, but each defendant separately appealed and filed separate briefs. Because the defendants assert both joint and individual challenges to their convictions and sentences, we permitted the government to file a single consolidated answer brief and heard combined oral argument. We now resolve these three related appeals in a single opinion. Exercising jurisdiction under 28 U.S.C. § 1291 and finding no reversible errors, we affirm each defendant's convictions and sentences.

Background

Between January 2005 and September 2006, real estate agent Michael Jacoby devised and executed a mortgage fraud scheme involving the purchase of 18 residential properties in Colorado. Jacoby recruited willing sellers to sell homes at inflated prices, willing buyers to purchase the homes by obtaining mortgage loans based on falsified loan applications, and willing investors to supply short-term loans to cover the buyers' down payments.

Jacoby acted as realtor for each transaction, while Derek Zar and his mother, Susanne Zar (collectively, " the Zars" ), were buyers. Derek Zar purchased seven of the properties with fraudulent loan applications and participated in the sales of four other properties either by arranging for the sale of or selling three properties to Susanne Zar and one to another buyer. Susanne Zar purchased six of the properties with fraudulent loan applications and participated in the sales of four other properties by preparing false documents to support Derek Zar's purchases.

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For some transactions, Jacoby arranged for sellers to " donate" part of the sales proceeds to grant programs without disclosing to lenders that the " donation" would be funneled back to buyers to repay short-term loans from investors covering the buyers' down payments. In other transactions, Jacoby arranged for back-to-back sales involving the same property. In the first sale, an LLC--usually one formed by the individual who acted as the buyer for the second sale--would purchase a new construction home from the home builder for cash at a discounted sales price. The LLC would then sell the home to the LLC's founder, as an individual buyer, at an artificially inflated price. As part of the second sale, the buyer would obtain a mortgage loan with a fraudulent loan application. The buyer would then use some of the excess loan proceeds to repay investors who contributed cash for the first sale to the LLC. Lenders eventually foreclosed on and sold all 18 homes but experienced collective losses of nearly $3 million.

Additionally, in 2007 Jacoby personally obtained two loans--one from First Bank to purchase a home and another from Citibank to refinance the same home. While securing the two loans, Jacoby made material misrepresentations and omissions by lying about his down payment source and income, failing to disclose that he did not initially purchase the home in an arm's length transaction, artificially inflating the home's sales price, and supplying an artificially inflated appraisal for the refinancing loan.

A federal grand jury indicted Jacoby, Derek Zar and Susanne Zar on charges of wire fraud and aiding and abetting in violation of 18 U.S.C. § § 1343 and 2 and money laundering in violation of 18 U.S.C. § 1957. Additionally, in connection with his two personal loans in 2007, the grand jury indicted Jacoby on two counts of bank fraud in violation of 18 U.S.C. § 1344.

Following a three-week joint trial, the jury convicted Jacoby of 11 counts of wire fraud, three counts of money laundering, and two counts of bank fraud; Derek Zar of four counts of wire fraud and one count of money laundering; and Susanne Zar of three counts of wire fraud and one count of money laundering. The district court sentenced each defendant to a term of imprisonment followed by a period of supervised release and ordered each defendant to pay restitution.

Discussion

We first consider challenges by Derek Zar and Susanne Zar to the district court's denial of three pretrial rulings: the Zars' joint motion to sever their trial from Jacoby's and their joint motion to dismiss the indictment, both of which were based on alleged violations of the statutory speedy trial right, and the Zars' joint motion to suppress statements they made to IRS agents. Next, we consider alleged trial errors, including the defendants' joint challenge to a jury instruction and Susanne Zar's individual argument that the district court violated her Sixth Amendment right to confront the witnesses against her, namely Derek Zar. Then, we consider whether to address the defendants' ineffective assistance of counsel claims, which they jointly raise for the first time on appeal. Finally, we turn to the defendants' sentencing challenges.

I. Pretrial Rulings

A. Speedy Trial Act (Derek Zar and Susanne Zar)

Both Zars challenge two pretrial rulings: (1) the denial of their motion to sever their trial from Jacoby's trial, and (2) the denial of their motion, jointly filed pro se, to dismiss the indictment. Both motions alleged

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violations of the Speedy Trial Act, 18 U.S.C. § § 3161-3174 (" the Act" ).[1]

Under the Act, federal criminal trials must commence within 70 days of public indictment or the defendant's first appearance, whichever is later. 18 U.S.C. § 3161(c)(1). But certain delays are excludable under 18 U.S.C. § 3161(h). As relevant here, § 3161(h)(1)(D) excludes periods of " delay resulting from any pretrial motion, from the filing of the motion through the conclusion of the hearing on, or other prompt disposition of, such motion." Section 3161(h)(6) excludes " [a] reasonable period of delay when the defendant is joined for trial with a codefendant as to whom the time for trial has not run and no motion for severance has been granted." And, § 3161(h)(7)(A) excludes " [a]ny period of delay resulting from a continuance granted by any judge . . . on the basis of his findings that the ends of justice served by taking such action outweigh the best interest of the public and the defendant in a speedy trial."

If a defendant is not brought to trial within the time limit set by § 3161(c) as extended by § 3161(h), " the information or indictment shall be dismissed on the motion of the defendant." 18 U.S.C. § 3162(a)(2).

Here, all parties agree the Zars' speedy trial clock began to run on October 19, 2010, the date of Derek Zar's initial appearance. The government brought the Zars to trial on August 7, 2012-658 days later. The parties also agree that the 51-day period from October 28, 2010, the date Susanne Zar filed a motion for continuance, through December 17, 2010, the date the court heard the motion, is excludable under § 3161(h)(1)(D). But the parties disagree as to the number of remaining days that can be excluded, and the Zars reassert two alleged speedy trial violations they raised below in a motion to sever and a subsequent motion to dismiss the indictment.[2] We address each motion in turn.

1. Motion to Sever

The Zars challenge the excludability of the 130-day delay between March 19, 2012, and July 26, 2012, resulting from the district court's decision, on March 1, 2012, to vacate the March 19, 2012, trial date without setting a new one.[3] Susanne Zar objected to vacating the trial date and, on March 8, 2012, moved to sever her trial from Jacoby's. The district court denied the motion on April 25, 2012. The Zars contend the district court abused its discretion in denying the severance motion because the 130-day delay violated their statutory speedy trial right.

We review the denial of a severance motion based on an alleged speedy trial violation for an abuse of discretion.

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United States v. Apperson, 441 F.3d 1162, 1190 (10th Cir. 2006). But compliance with the Speedy Trial Act's legal requirements is subject to de novo review. United States v. Banks, 761 F.3d 1163, 1174-75 (10th Cir.), cert. denied, 135 S.Ct. 308, 190 L.Ed.2d 142 (2014).

Preliminarily, the Zars acknowledge the existence of pending motions between January 23, 2012, and July 26, 2012. As such, we could simply conclude the disputed 130-day time period is excludable under § 3161(h)(1)(D). But because this continuance gave rise to the severance motion the Zars now claim the district court erroneously denied, we choose to address this particular delay in more detail.

During a motions hearing on January 18, 2012, the district court denied Jacoby's motion to sever the trial. At that time, the trial was scheduled to begin on March 19, 2012. In light of the denial of his severance motion, Jacoby orally moved to extend the deadline for expert witness disclosure. The court denied his oral motion but granted Jacoby leave to file a written motion. He did so on January 23, 2012, attaching the disclosure of his newly designated expert witness.

On March 1, 2012, after hearing oral arguments, the district court granted Jacoby's motion to designate the expert witness, reasoning that Jacoby did not act in bad faith in delaying his expert witness identification. The court noted the government intended to designate a rebuttal witness and acknowledged that Jacoby and the government had jointly moved for a hearing on the admissibility of the expert testimony under Federal Rule of Evidence 702. Based on the court's conclusion that it could not conduct that hearing before the March 19, 2012, trial date, the court vacated the trial date without setting a new one.

Susanne Zar objected and moved to sever the trial, arguing the indefinite continuance would " significantly prejudice[] her right to a speedy trial." Second Mot. to Sever, Mar. 8, 2012, Doc. 341, at 6-7. Raising similar arguments, Derek Zar subsequently sought leave to file his own severance motion.

Treating the Zars' motions as a jointly-filed severance motion, the district court denied the motion on April 25, 2012. The court recognized the Zars' substantial statutory right to a speedy trial, but concluded the Zars' " recent decision to invoke those rights is not sufficient to overcome the presumption favoring a joint trial." Order, Apr. 25, 2012, Doc. 365, at 3. Further, in light of its denial of the severance motion, the court held that the Zars remained subject to § 3161(h)(6), which excludes periods of reasonable delay related to continuances requested by joined codefendants. The court deemed " reasonable" the delay occasioned by Jacoby's expert witness designation and the corresponding need for a Rule 702 hearing. In so holding, the court relied on several circumstances: (1) the Zars were both free on bond, (2) neither previously had asserted a speedy trial demand, and (3) the government planned to present one primary body of evidence against the three defendants.

We find no abuse of discretion in the district court's denial of the severance motion. The court recognized the strong presumption favoring trying properly joined defendants together. See Zafiro v. United States, 506 U.S. 534, 537-38, 113 S.Ct. 933, 122 L.Ed.2d 317 (1993) (noting that a defendant seeking severance must show " a serious risk that a joint trial would compromise a specific trial right of one of the defendants" ). And, while further recognizing the significance of the Zars' speedy trial rights, the court considered appropriate factors in reaching its conclusion that the Zars failed to overcome that presumption. Consequently, we affirm the

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district court's denial of the severance motion and conclude the 130 days are excludable both for the reasons stated by the district court and because motions were pending during the entire 130-day period.

2. Motion to Dismiss

On October 28, 2010, Susanne Zar sought an 18-month continuance based on the case's complexity. On November 15, 2010, Derek Zar filed a similar motion, incorporating his mother's arguments, but seeking only a 12-month continuance. At the December 17, 2010, hearing, the district court agreed to a continuance and rescheduled the trial for November 28, 2011. In support, the court cited the complexity of the case and the time needed to prepare an adequate defense, concluding the continuance would serve " the ends of justice." See 18 U.S.C. § 3161(h)(7)(A) (tolling the speedy trial clock for period of delay resulting from ends-of-justice continuance); United States v. Margheim, 770 F.3d 1312, 1318 (10th Cir. 2014) (explaining that " [e]nds-of-justice continuances afford the district court a modicum of flexibility in managing particularly complex or difficult cases" ), cert. denied 135 S.Ct. 1514, 191 L.Ed.2d 448 (2015).

On June 12, 2012, after the district court declined to sever their trial from Jacoby's, the Zars filed a joint, pro se motion to dismiss the indictment, alleging the district court erred in granting the 346-day continuance between December 18, 2010, and November 28, 2011. The district court denied the motion and the Zars challenge that ruling on appeal, contending the district court failed to make adequate findings to support the continuance they requested, at least in part.[4]

We review both the denial of a motion to dismiss for Speedy Trial Act violations and the grant of an " ends-of-justice" continuance for an abuse of discretion. However, as noted, we review the district court's compliance with the Act's legal requirements de novo. Banks, 761 F.3d at 1174.

Before granting an ends-of-justice continuance, the district court must consider several factors. See 18 U.S.C. § 3161(h)(7)(B) (listing factors). Further, the court must make express findings on the record stating its reasons for granting a continuance. See 18 U.S.C. § 3161(h)(7)(A); see also Zedner v. United States, 547 U.S. 489, 506-07, 126 S.Ct. 1976, 164 L.Ed.2d 749 (2006); United States v. Toombs, 574 F.3d 1262, 1269 (10th Cir. 2009). But while " the record must clearly establish the district court considered the proper factors" at the time it granted the continuance, " the district court need not articulate facts which are obvious and set forth in the motion for the continuance itself." Toombs, 574 F.3d at 1269 (internal citations and quotation marks omitted); see United States v. Loughrin, 710 F.3d 1111, 1119 (10th Cir. 2013) (citing Toombs and noting courts can look to oral and written statements of the district court and moving party to determine whether record supports an ends-of-justice continuance).

At the motions hearing, Susanne Zar's counsel requested an additional 18 months for trial preparation based on the duration of fraudulent activities, the duration of the government's investigation (five years), the nature of the prosecution, and the volume

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of discovery documents (over 30,000). Derek Zar's counsel also sought a continuance, but asserted he could prepare in 12 months. After considering these arguments, the court granted an approximate 12-month continuance, stating,

So I think this case is complex in that it involves at least 29 transactions, maybe more transactions. It has four defendants. These transactions may be structured in an elaborate fashion, and I appreciate the need of counsel to prepare an adequate defense. Therefore, I technically am going to find that the case is complex under 18 U.S.C. Section 3161(h)(7)(B)(ii), but I also am going to find that additional time beyond the calculation for speedy trial is necessary for the defendants to adequately prepare a defense in deference to due diligence pursuant to Section 3161(h)(7)(B)(iv).
I find that the ends of justice are served by a continuance of this trial. I do not believe it requires 18 months' worth of preparation, and we all will have the pleasure of spending next December together. So we will set the trial for November 28th, 2011, 1:00 p.m.

Hr'g Tr., Dec. 17, 2010, Doc. 163, at 11-12.

Contrary to the Zars' contention, this record consists of more than " short, conclusory statements lacking in detail." See Toombs, 574 F.3d at 1271 (noting record must contain explanation of reasons supporting continuance and " short, conclusory statements lacking in detail" are insufficient). Further, given the Zars' detailed motions and arguments, the court was not required to restate the " facts which [were] obvious" from those motions and arguments. See Loughrin, 710 F.3d at 1119; Toombs, 574 F.3d at 1269, 1271.

Consequently, we conclude the district court did not abuse its discretion in granting the first continuance, and that this 346-day delay is excludable under § 3161(h)(7)(A). And, because the Zars objected only to this continuance in their motion to dismiss the indictment, we further conclude the district court did not abuse its discretion in denying the Zars' motion to dismiss the indictment.

3. Conclusion

To summarize, the speedy trial clock ran for eight days before Susanne Zar filed her first motion to continue the trial on October 28, 2010. That motion remained pending until December 17, 2010, rendering 51 days excludable under § 3161(h)(1)(D). Because the first ends-of-justice continuance is adequately supported by the record, the 346-day period from December 18, 2010, through November 28, 2011, is excludable under § 3161(h)(7)(A). The 51-day period between November 29, 2011, and January 18, 2012, is excludable under § 3161(h)(1)(D) due to pending motions. But the speedy trial clock ran for four days from January 19, 2012, through January 22, 2012, a period when no motions were pending, thus ticking off a total of 12 days. Motions were pending or under advisement during the 186-day period from January 23, 2012, through July 26, 2012, rendering that time excludable under § 3161(h)(1)(D) and § 3161(h)(1)(H). Finally, the government concedes that the speedy trial clock ran for 10 days between July 27, 2012, and August 6, 2012, before the trial began on August 7, 2012. Thus, the government correctly argues that only 23 days ticked off the speedy trial clock before the Zars were tried. Because the government brought the Zars to trial in compliance with the Speedy Trial Act, the district court did not abuse its discretion in denying the Zars' severance motion or their motion to dismiss the indictment.

B. Motion to Suppress (Susanne Zar)

Before trial, the Zars jointly moved to suppress statements they made to IRS

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agents Mike Garvey and Beverly Hood during an in-home interview. Following a hearing, the district court concluded the interview was not a custodial interrogation and denied the suppression motion. Only Susanne Zar appeals that denial, challenging two of the district court's factual findings and its ...


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