United States v. Nicholas Lindsey
2017 U.S. App. LEXIS 3482
| 9th Cir. | 2017Background
- Nicholas Lindsey, a Nevada mortgage loan officer and broker, recruited straw buyers and submitted falsified loan applications (e.g., overstated income, occupancy) to obtain mortgages on multiple Las Vegas properties from ~2006–2007.
- Straw buyers (including an impoverished individual and Lindsey’s sister) were induced with payments; loans went into foreclosure, causing multi-million dollar losses and giving Lindsey commissions, rent, and escrow diversion.
- Lindsey was indicted and convicted on nine counts of wire fraud (18 U.S.C. § 1343) and one count of aggravated identity theft (18 U.S.C. § 1028A); the district court sentenced him to 132 months and ordered restitution.
- At trial the government moved to exclude evidence and argument that individual lenders’ negligent or intentional underwriting practices made Lindsey’s misstatements immaterial; the district court limited such evidence but allowed evidence of general industry lending practices.
- The jury convicted; on appeal Lindsey argued the evidentiary exclusions denied his constitutional right to present a complete defense by foreclosing proof that certain loan types or particular lenders would have approved loans regardless of his misstatements.
Issues
| Issue | Plaintiff's Argument (Lindsey) | Defendant's Argument (Government) | Held |
|---|---|---|---|
| Whether lender negligence is a defense to wire fraud | Lender negligence/’stated income’ loan practices show misstatements were not material | Negligence of victim irrelevant to materiality; cannot excuse fraud | Negligence is not a defense; evidence of lender negligence inadmissible to rebut materiality |
| Whether lenders’ intentional disregard/lack of reliance defeats materiality | Evidence that a lender intentionally ignored info (or would not rely) shows statements immaterial | Intentional disregard or non-reliance by victim is irrelevant to objective materiality | Intentional disregard is not a defense; such evidence inadmissible to disprove materiality |
| Admissibility: industry-wide standards vs. individual lender behavior | Admissible to show loan types (e.g., stated/no-doc) made misstatements immaterial; proffered evidence included particular lenders’ prior practices | Industry practices may be relevant, but evidence about specific lenders risks inviting negligence/non-reliance defenses | Court: General industry lending standards admissible to challenge materiality; evidence about specific lenders’ behavior is inadmissible |
| Whether exclusion denied right to present a complete defense | Exclusion prevented Lindsey from fully arguing materiality of his misstatements | District court permitted industry evidence and limited only improper, prejudicial specifics | No constitutional violation; defendant could present general-market evidence and argue immateriality; conviction affirmed |
Key Cases Cited
- Gaudin v. United States, 515 U.S. 506 (materiality standard for false statements)
- Kungys v. United States, 485 U.S. 759 (definition of materiality)
- Neder v. United States, 527 U.S. 1 (materiality and no justifiable-reliance requirement in federal fraud statutes)
- Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (materiality in False Claims Act; treatment of past payment practices)
- United States v. Jinian, 725 F.3d 954 (elements of wire fraud)
- United States v. Peterson, 538 F.3d 1064 (objective test for materiality)
- United States v. Colton, 231 F.3d 890 (victim negligence not a defense to fraud)
- United States v. Svete, 556 F.3d 1157 (same)
- United States v. Ciccone, 219 F.3d 1078 (wire fraud protects both naïve and worldly-wise; reliance not required)
- United States v. Blixt, 548 F.3d 882 (misrepresentations may be material absent actual reliance)
- United States v. Reynolds, 189 F.3d 521 (non-reliance by victim does not negate materiality)