United States of America v. Harold Stafford

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 11a0105p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
UNITED STATES OF AMERICA ,
Plaintiff-Appellee,
v.
HAROLD STAFFORD ,
Defendant-Appellant.
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No. 09-5749
Appeal from the United States District Court
for the Middle District of Tennessee at Nashville.
No. 07-00221-001—Aleta Arthur Trauger, District Judge.
Decided and Filed: April 27, 2011
Before: KENNEDY, BOGGS and SUTTON, Circuit Judges.
_________________
COUNSEL
ON BRIEF: Michael D. Noel, Brentwood, Tennessee, for Appellant. Byron M. Jones,
ASSISTANT UNITED STATES ATTORNEY, Nashville, Tennessee, for Appellee.
_________________
OPINION
_________________
SUTTON, Circuit Judge. Harold Stafford set out to make money from a quaint
phenomenon once known as rising home prices. The first premise of his plan was
legitimate but mistaken—that residential real estate would continue to appreciate in
value. The second premise of his plan was illegitimate and equally mistaken—that he
could get away with filing a series of fraudulent loan applications to purchase the
properties. When the predictable happened, a jury convicted him for violating several
white-collar criminal laws, and a judge sentenced him to 96 months in prison. Because
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No. 09-5749 United States v. Stafford Page 2
ample evidence supports the conviction and because his other challenges come to
naught, we affirm.
I.
The owner of a mortgage company, Stafford struck a deal with several sellers of
luxury homes in suburban Nashville. The quid: Stafford would find buyers willing to
purchase the homes for tens of thousands more than their listed prices. The quo: the
sellers would give Stafford the difference between the sales price and the asking price.
To implement the scheme, Stafford recruited seven “straw buyers,” people with
good credit who wanted to invest in real estate. Stafford referred the straw buyers to
Miles Black and Jeffrey Hathcock, who ran a branch office of Allied Home Mortgage
Capital Corporation. Allied submitted loan applications on the buyers’ behalf for “stated
income” loans, which banks extend to borrowers, most often self-employed borrowers,
who have difficulty proving their annual income. So long as the borrower has a
favorable credit score and the requisite debt-to-income ratio, many banks will approve
a stated income loan without verifying the borrower’s income.
All of this allowed Allied, at Stafford’s direction, to submit several loan
applications built on myths—that the applicants were wealthy, that they sought to
purchase just one home and that they sought a mortgage for a primary residence, not a
second home or an investment property. The applicants, in truth, possessed none of
these qualities. They made modest salaries, bought several homes as investments and
never intended to live in any of them. Black, Hathcock and their employee Greg Arias
forged the buyers’ signatures on many of the loan applications.
To induce the buyers to lend their names, if not their true backgrounds, to this
scheme, Stafford made three promises. He would pay them a lump sum at closing to
compensate them for investing in each house. He would find renters willing to lease the
homes initially and purchase them eventually, so that the rent payments could cover the
mortgage payments until a final sale was made. And he promised that the homes would
appreciate in value, allowing the buyers to exit the loan obligations with a profit.

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No. 09-5749 United States v. Stafford Page 3
Stafford (largely) kept his first promise. He paid most of the straw buyers a
portion of the kickbacks at closing. But see Tr. at 532–33, 546 (Stafford promised one
of the straw buyers $100,000 for his home purchases, but the buyer “didn’t get a
penny”).
The other promises fell victim to the vagaries of the housing market. As housing
prices flattened and eventually collapsed, Stafford could not find renters to cover most
of the mortgage payments, prompting the lenders to press the buyers to collect. At that
point, Black, Hathcock and Arias disclosed the mortgage scheme to law enforcement
officers and confessed to participating in it.
A federal grand jury indicted (1) Stafford on 51 counts of fraud, money
laundering and conspiracy to commit fraud, and (2) Black and Hathcock on 25 related
counts. See 18 U.S.C. §§ 2, 1343–44, 1349, 1957. Black and Hathcock pleaded guilty,
and Stafford went to trial. A jury found Stafford guilty on all counts, and the district
court sentenced him to 96 months in prison.
II.
Stafford raises three arguments on appeal: (1) the evidence does not support the
verdict; (2) the district court should have admitted prior inconsistent statements of a
government witness; and (3) the court improperly enhanced his guidelines offense level.
A.
In challenging the sufficiency of the evidence to support his conviction, Stafford
faces a steep climb. United States v. Abboud, 438 F.3d 554, 589 (6th Cir. 2006). He
must show that, after construing the evidence “in favor of the government,” United
States v. Hughes, 505 F.3d 578, 592 (6th Cir. 2007), no “rational trier of fact could have
found the essential elements of a crime beyond a reasonable doubt,” Jackson v. Virginia,
443 U.S. 307, 319 (1979).
Stafford principally claims that the government failed to prove that he
“knowingly and willfully joined in an agreement with” Black and Hathcock to commit

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No. 09-5749 United States v. Stafford Page 4
fraud. United States v. Cantrell, 278 F.3d 543, 546 (6th Cir. 2001). Without a
conspiracy, Stafford points out, a jury could not hold him liable for the fraudulent loan
applications that Allied submitted, nor could his money laundering convictions stand
because one “element[] of . . . money laundering [is] . . . knowledge that the funds are
proceeds of unlawful activity.” United States v. Prince, 214 F.3d 740, 747 (6th Cir.
2000); see 18 U.S.C. § 1957. Put another way, all of his convictions must fall in the
absence of a conspiracy.
Ample evidence, however, supports the view that Stafford was in on the scheme
and indeed hatched it. Start with the first straw buyers that Stafford referred to Allied.
According to Hathcock’s testimony, Stafford brought mortgage applications for Adam
Cohen and Michael Henderson to Allied’s office with these directions: “the mortgage
loans were going to be . . . stated [income] loans, and they were going to be run [as]
owner occupied.” Tr. at 698. Several days later, Stafford brought Allied more mortgage
loan applications for Cohen and Henderson. His instructions for the second loans
echoed those for the first: “run them [as] . . . stated [income], owner occupied again,
and . . . push them through pretty fast.” Tr. at 704. Cohen submitted a third loan
application through Allied, and Henderson submitted three more, all saying that Cohen
and Henderson planned to live in the houses.
The same holds true for the other buyers. In all, Stafford referred seven straw
buyers to Allied, who together bought 22 houses. Each of the loan applications sought
a stated income, owner-occupied loan.
A reasonable jury readily could infer that Stafford knew that 22 houses could not
serve as the primary residences for seven buyers and that Black and Hathcock thus
would need to file fraudulent loan applications in order to “run them [as] . . . owner
occupied.” Plus, Stafford directed the co-conspirators to fill out the applications in just
this way, permitting a jury to infer that the three men had entered into an agreement to
file the fraudulent loan applications.
Other evidence comes to the same end. When Stafford referred Adam Cohen to
Allied, Cohen worked for Stafford’s firm. Stafford signed Cohen’s paychecks, and thus

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No. 09-5749 United States v. Stafford Page 5
had ample reason to know that Cohen’s income could not cover the mortgage payments
on three luxury homes. Stafford nevertheless sent Cohen to Allied and directed Black
and Hathcock to apply for stated income loans for the three homes’ full value.
Add the experience of Uchendi Nwani, who purchased six houses through Allied.
Nwani sent Allied his tax returns, which reported an annual income of $40,000 or so.
Stafford told Nwani that the tax returns would not qualify for mortgage loans on luxury
homes. Instead of turning Nwani away, Stafford provided him with false tax returns
reporting an annual income of $200,000 and told Nwani to give the returns to Allied.
Allied submitted the loan applications, even after knowing of Nwani’s real as opposed
to fictional tax returns, providing still further evidence of an agreement among Black,
Hathcock and Stafford to commit fraud.
The testimony of Mark Mire, an IRS undercover agent, removes any remaining
doubt. Mire played a video of a meeting in which Arias introduced Mire as a
prospective buyer looking to invest in real estate. As part of his sales pitch, Stafford told
Mire and Arias that “you usually buy about three or four” houses and that “[y]ou gotta
get them all in there before it hits your [credit] bureau,” App’x 96, before in other words
the purchases appear on Mire’s credit report for the lenders to discover. Mire then
played an audiotape of a telephone conversation with Stafford. Mire asked whether he
would have to “inflate [his] income” because he could not afford to buy several homes,
and whether the homes would be listed as “primary residences.” App’x 113. Stafford
replied, “They know how to handle all of that. . . . Miles [Black] and Greg [Arias] got
that—they have that part handled.” App’x 113. Ample evidence supported the existence
of a conspiracy.
Stafford makes one other argument with respect to the money laundering
convictions—that he had no knowledge that the funds were the fruits of a crime. See
Prince, 214 F.3d at 747. Yet this point cannot escape the reality that Stafford acted as
a knowing member of a conspiracy to commit wire and bank fraud. The kickbacks he
received from sellers and builders came from loans secured by fraud, and Stafford knew
it. The evidence supports this conviction as well.

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No. 09-5749 United States v. Stafford Page 6
B.
Stafford argues that the district court should have admitted prior inconsistent
statements of Uchendi Nwani, a government witness. Nwani testified during cross-
examination that he was not a millionaire and did not earn over $250,000 a year.
Defense counsel sought to impeach Nwani with three publications, a book authored by
him (The Millionaire Ex-Convict) and articles in Ebony and Gospel Today magazines
about him, all saying he makes over $250,000 a year. The rub was that the writings
mentioned that Nwani had been convicted of a crime he had committed more than ten
years earlier, evidence barred by Evidence Rule 609(b).
Stafford “concedes that evidence of the prior conviction was properly excluded,”
yet maintains that exclusion of the book and articles, “which indirectly made reference
to his conviction, were improperly excluded and constituted prejudicial error.” Stafford
Br. at 57. The trial court, however, carefully navigated the competing considerations by
restricting questioning in this way: Defense counsel could ask Nwani whether “he’s
selling a book on the Internet that refers to [himself] as a millionaire without giving the
title of the book,” Tr. at 277; he could ask whether Nwani had told a magazine he earned
over $250,000 a year; and, if Nwani denied either fact, defense counsel could confront
him with the documents without putting them into evidence. But neither the questioning
nor any admitted exhibits, the court insisted, could reveal Nwani’s prior conviction.
In his testimony Nwani admitted that the book and articles characterized him as
a millionaire, but claimed that the statements in the publications were false. Defense
counsel drew out the discrepancies between his trial testimony and the writings, giving
the jury ample bases for assessing Nwani’s credibility. Stafford offers no better way to
manage the requirements of the rule, and we cannot think of one ourselves. No abuse
of discretion occurred. See United States v. Bender, 265 F.3d 464, 470 (6th Cir. 2001).

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No. 09-5749 United States v. Stafford Page 7
C.
Stafford challenges three sentencing enhancements—for obstructing justice, for
using sophisticated means to commit the crimes and for being an organizer of the
conspiracy.
Obstruction of Justice. The district court enhanced Stafford’s offense level by
two steps because he “obstructed or impeded, or attempted to obstruct or impede, the
administration of justice.” U.S.S.G. § 3C1.1. The enhancement applies when a
defendant tries to “unlawfully influenc[e]” a potential witness by asking him to lie to
investigators. Id. § 3C1.1 app. n. 4; United States v. Haynes, 98 F. App’x 499, 507 (6th
Cir. 2004), vacated and remanded on other grounds, 543 U.S. 1112 (2005). Stafford
asked two buyers to do just that. Nwani testified that Stafford “[t]old [him] don’t talk
to them and said the only thing they can get me on is tax evasion or money laundering
or something like that.” Tr. at 225. And Stafford told straw buyer Jeff Crenshaw that,
if he faced questioning, “we can’t say anything, we have got to stick together.” Tr. at
550.
Stafford protests that he simply did “what any person has a right to do”: advise
Nwani and Crenshaw of their “constitutional right to remain silent.” Stafford Br. at 45.
That is one possibility, but it is not the only one, and above all it was not the one the
district court credited. Because the district court found that Stafford was telling Nwani
and Crenshaw to impede any ensuing investigation of the mortgages and because that
factual determination is not clearly erroneous, United States v. McDonald, 165 F.3d
1032, 1034 (6th Cir. 1999), the enhancement was appropriate.
Sophisticated Means. Stafford adds that his conduct did not involve
“sophisticated means,” U.S.S.G. § 2B1.1(b)(9), as the conspirators did not engage in
“especially complex or especially intricate offense conduct pertaining to the execution
or concealment of an offense,” id. § 2B1.1 app. n. 8(B). The evidence tells a different
story: Stafford instructed Hathcock and Black to submit applications for stated income,
owner-occupied loans; told straw buyers to purchase all of their houses in the same
month before the purchases appeared on their credit reports; directed Allied to apply for

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No. 09-5749 United States v. Stafford Page 8
loans from different lenders; supplied Nwani with falsified tax returns; and otherwise
misused his specialized knowledge of the mortgage industry to create and sustain this
conspiracy. That is sufficiently sophisticated to warrant the enhancement. See United
States v. Kraig, 99 F.3d 1361, 1371 (6th Cir. 1996).
Organizer or Leader. Stafford concludes by arguing that he was not the
“organizer or leader” of the conspiracy. U.S.S.G. § 3B1.1(a). The district court
permissibly found that Stafford laid the foundation for, and provided much of the
infrastructure for, the conspiracy. He recruited seven straw buyers, enlisted builders and
others to sell them 22 homes and brought Black and Hathcock in on the scheme. At each
stage, he gave his confederates precise directions, all to the end of sustaining the ongoing
enterprise. Without Stafford’s expertise, connections and command, the conspiracy
would never have gotten off the ground. Stafford met the requirements of an “organizer
or leader” of the conspiracy. See United States v. Cook, 55 F. App’x 341, 342–43 (6th
Cir. 2003).
III.
For these reasons, we affirm.

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