United States v. Lacey Phillips
2013 U.S. App. LEXIS 18430
7th Cir.2013Background
- Phillips and Hall (unsophisticated first-time buyers) applied for a mortgage; Associated Bank denied them and broker Brian Bowling steered them to Fremont, a lender known for "stated-income" ("liars' loans") practices.
- Bowling prepared an application that omitted Hall’s name, attributed combined income to Phillips, inflated that combined income, and misstated Phillips’s job; Phillips signed but allegedly did not read the form.
- Fremont funded the loan, the couple defaulted, and later lost the house; Bowling cooperated with prosecutors.
- Defendants were convicted under 18 U.S.C. § 1014 (making false statements to influence a federally insured lender) and sentenced; a panel affirmed but the full court granted en banc rehearing.
- At trial the district judge excluded testimony about what Bowling told the defendants (e.g., that combining incomes was acceptable or that the bank did not read applications); the majority held that exclusion erroneous because it bore on both knowledge and intent to influence.
Issues
| Issue | Government's Argument | Defendants' Argument | Held |
|---|---|---|---|
| Scope of § 1014's "for the purpose of influencing" element | Requires only subjective intent to influence; materiality not an element | If defendants believed the misstatements would not influence the lender (or that lender already decided), there is no intent to influence | Majority: jury must be allowed to hear evidence (Bowling's statements) that negates intent to influence; exclusion reversible error |
| What constitutes a "knowingly" false statement under § 1014 | Jury found defendants knew application contained falsehoods; criminal liability follows | Testimony showing broker-caused misunderstandings could show absence of knowledge of falsity | Majority: evidence about broker's statements was relevant to whether defendants knowingly made false statements; exclusion reversible error |
| Relevance/hearsay of broker's out-of-court statements | Such statements would be hearsay or legally irrelevant (e.g., mistake of law) | Statements offered to show defendants' state of mind and what they believed Bowing meant (not to prove truth) — admissible | Majority: broker statements admissible nonhearsay to show defendants' beliefs and intent; exclusion improper |
| Effect of multiple falsehoods on sufficiency and verdict form | Conviction may rest on any falsehood the jury found knowing; general verdict sufficient | Exclusion of broker evidence could have been harmless given other false, knowing misrepresentations (e.g., doubled income, fake job) | Dissent: Affirms conviction—evidence supports that defendants knowingly made material misstatements to influence lender; exclusion not prejudicial |
Key Cases Cited
- United States v. Wells, 519 U.S. 482 (Sup. Ct.) (materiality not an element of § 1014 but immateriality is evidence negating intent to influence)
- United States v. Lane, 323 F.3d 568 (7th Cir. 2003) (discussing § 1014 intent requirement)
- Kungys v. United States, 485 U.S. 759 (Sup. Ct.) (statements made to influence are typically material)
- Black v. United States, 561 U.S. 465 (Sup. Ct.) (general criminal verdicts need not identify which theory jury relied on)
- Griffin v. United States, 502 U.S. 46 (Sup. Ct.) (a general verdict may be upheld if any valid theory is supported by the evidence)
- Cheek v. United States, 498 U.S. 192 (Sup. Ct.) (limits on mistake-of-law defenses)
- Commonwealth v. Fremont Investment & Loan, 452 Mass. 733 (Mass. 2008) (describing Fremont's business model and stated-income loan practices)