Case 1:10-cr-20285-CMA Document 157 Entered on FLSD Docket 11/15/2010 Page 1 of 6

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA CASE NO. 10-20285-CR-ALTONAGA UNITED STATES OF AMERICA v. IVANHOE SMESTER, Defendant. ________________________________/ UNITED STATES MOTION IN LIMINE REGARDING REFERENCES TO MORTGAGE LENDERS, FORECLOSURE CRISIS AND ANY GOVERNMENT ACTION DURING FORECLOSURE CRISIS The United States of America, through the undersigned Assistant United States Attorney, hereby files this motion in limine to exclude defendant in the above-captioned case from referring to (1) the mortgage lenderss negligence and/or failure to investigate further any issues with the mortgage applications; (2) the present foreclosure crisis and the role of the mortgage lenders in any on going foreclosure actions and (3) any government action managing the foreclosure crisis. In support of its motion, the United States as follows. FACTUAL BACKGROUND The Indictment in this case charges one count of conspiracy to commit bank and wire fraud, in violation of Title 18, United States Code, Section 1349, a substantive count of bank fraud, in violation of Title 18, United States Code, Section 1344 and substantive count of wire fraud, in violation of Title 18, United States Code, Section 1343, as to each defendant for the specific mortgage transactions each were involved in. (Indictment, Docket Entry No. 3.) The charges stem from the fraudulent purchase of multiple properties in Miami-Dade and Broward Counties. (Id. at 16-17.) Defendant Ivanhoe Smester illegally profited from mortgage proceeds from transactions

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related to a property in Cocnut Grove, Florida. This case involves a scheme to defraud mortgage lenders of money and property through the use of false and fraudulent mortgage loan applications, using interstate wires, as set forth in detail in the Indictment. ARGUMENT A. Defendants Should Be Precluded from Referring to the Victims Conduct At the Time of the Scheme The role, if any, played by the victim at the time of the fraud is irrelevant to the determination of whether defendants committed a crime. The Government therefore respectfully requests that the Court preclude the defendants from making any suggestion or argument that the victim mortgage lenders were negligent, or could have been more diligent, in their dealings with the defendants. As the Eleventh Circuit has held, whatever role, if any, a victims negligence plays as a bar to civil recovery, it makes little sense as a defense under a criminal statute that embraces any scheme or artifice to defraud. United States v. Svete, 556 F.3d 1157, 1165 (11th Cir. 2009)(emphasis in original). Put another way, [t]he negligence of the victim in failing to discover a fraudulent scheme is not a defense to criminal conduct. United States v. Coyle, 63 F.3d 1239, 1244 (3d Cir. 1995)(citing United States v. Davis, 226 F.3d 436, 358-59 (5th Cir. 2000). Since the negligence of the victim is not a defense to a criminal fraud charge, the defendant should be precluded from referring to it at trial. Th case before the Court is similar to United States v. Falkowitz, 214 F. Supp. 2d 365 (S.D.N.Y. 2000). In Falkowitz, the defendants were charged with mail fraud for orchestrating an 2

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insurance fraud scheme.

The defendants exploited a perceived weakness in the insurance

underwriting process to perpetrate the scheme. In order for the scheme to be successful, defendants recruited HIV positive patients to intentionally misrepresent that they were in good health and purchase insurance policies they would not otherwise qualify. Id. at 370-71. The defendants would then purchase the fraudulently obtained policies, market the policies to investors and make a profit from the policies. Id. Defendants sought to dismiss the indictment on the grounds that they did not defraud the victims because the misrepresentations made were apparent and related to matters that the insurance companies could easily confirm through readily available external sources and that, though having the affirmative obligation to investigate, the insurers chose not to. Id. at 374. The district court denied the motion, discussing at length the federal criminal fraud statutes, and stating plainly that the statutes explicitly hinge on the existence of a scheme intended to defraud using mail or wire means to further the deceptive purpose. Id. (citations omitted). The statutes are intended to punish the scheme to defraud and do not require that the intended victim be intentionally defrauded, nor that any private injury or damage be proved. Id. Even if the insurers could have discovered the fraud in the insurance policy applications which misrepresented their health, any failure by the insurers to do so was held to be immaterial to the scheme to defraud. Falkowitz at 383. Even if the insurers had been able to verify with doctors the state of the applicants health, this would require a further affirmative step. Id. As in the case before the Court, there was collusion among the parties to prevent the insurers from finding out the truth about the borrowers. Id. at 384. In the end, [d]efendants knew, at the time the [applications] were filed,

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contained false information the insurance companies would act on, as expected to the insurers detriment and Defendants profit. Falkowitz at 386. The mortgage lenders actions are irrelevant to whether the defendants perpetrated a scheme to defraud on the lenders, and therefore, the defendants should be precluded from referring to any perceived or actual negligence by the victim mortgage lenders. B. Defendants Should be Precluded from Referring to the Foreclosure Crisis and the Governments Actions in Seeking to Resolve the Crisis The present foreclosure crisis is irrelevant to whether the defendants participated in a scheme to defraud mortgage lenders, as is any Government action, whether at the federal or state level, to resolve the crisis. Conduct in 2009 and 2010 is not relevant to the issue of whether the defendants participated in a scheme to defraud in 2006 and 2007. Therefore, it is inadmissible under Federal Rule of Evidence 401. Federal Rule of Evidence 401 defines [r]elevant evidence as evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would without the evidence. Fed. R. Evid. 401. In other words, for evidence to be relevant (1) [t]he evidence must be probative of the proposition it is offered to prove, and (2) the proposition to be proved must be one that is of consequence to the determination of the action. United States v. Glasser, 773 F.2d 1553, 1559 n.4 (11th Cir. 1985) (quotation omitted). If the evidence does not meet both of these relevancy requirements, then Rule 402 says that it is not admissible. Fed. R. Evid. 402. Even if the Court were to deem the evidence admissible, it should still be excluded under Federal Rule of Evidence 403. The only purpose of presenting evidence of the present foreclosure 4

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crisis is to mislead the jury and confuse the issues that the jury will be wrestling with during trial. Under Federal Rule of Evidence 403, this evidence should be excluded. Federal Rule of Evidence 403 provides in relevant part that [a]lthough relevant, evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury. Fed. R. Evid. 403. Exclusion for risk of unfair prejudice, confusion of issues, misleading the jury, or waste of time, all find ample support in the authorities. Id., Advisory Committee Notes on 1972 Proposed Rules. The Eleventh Circuit, while noting that the application of Rule 403 must be sparing, has said that the rules major function is limited to excluding matter of scant or cumulative probative force, dragged in by the heels for the sake of its prejudicial effect. United States v. Meester, 762 F.2d 867, 875 (11th Cir. 1985). Rule 403 is meant to relax the iron rule of relevance, to permit the trial judge to preserve the fairness of the proceedings by exclusion despite its relevance. Id. The same analysis applies to any references to the United States of Americas actions, through its agencies, to alleviate or ameliorate the crisis. Any mention of the role the Federal Reserve, the Securities and Exchange Commission or any other entitys role in dealing with and managing the crisis, include resolution of pending civil and criminal charges, is an attempt to include a matter of scant . . . probative force, dragged in by the heels for the sake of prejudicial effect. United States v. Utter, 97 F.3d 509, 514-515 (11th Cir. 1996).

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CONCLUSION For these reasons, the Court should preclude defendant from referring to any purported or actual victim negligence, at any point during trial, including opening statements and closing arguments as irrelevant and/or unduly prejudicial. In addition, any mention of the present foreclosure crisis and the Governments action in seeking to resolve the foreclosure crisis, should be excluded as irrelevant and/or unduly prejudicial.

Respectfully submitted, WIFREDO A. FERRER UNITED STATES ATTORNEY By: /s Cristina Prez Soto A. CRISTINA PEREZ SOTO Assistant United States Attorney District Court No. A5501166 99 N.E. 4th Street, 4th Floor Miami, Florida 33132-2111 Tel: (305) 961-9122 Fax: (305) 530-6168 Cristina.Soto@usdoj.gov

CERTIFICATE OF SERVICE I HEREBY CERTIFY that I electronically filed the foregoing document with the Clerk of the Court using CM/ECF on November 15, 2010. s/ Cristina Prez Soto Cristina Prez Soto Assistant United States Attorney