United States District Court, E.D. California
Domonic McCarns has proceeded through counsel with a motion
for new trial based on Federal Rule of Criminal Procedure 33,
claiming he received constitutionally ineffective assistance
of counsel. ECF No. 712. Defendant also requested an
evidentiary hearing to explore trial counsel’s
reasoning “relative to the allegations the defense has
leveled” against that counsel. ECF No. 726 at
The government opposed the motion and the request for
evidentiary hearing, and defendant filed a reply brief.
October 27, 2015, the parties were ordered to show cause why
defendant’s motion for new trial should not be denied
without prejudice to defendant’s right to pursue his
claims of ineffective assistance of counsel in collateral
proceedings under 28 U.S.C. § 2255. ECF No. 745. Both
parties timely responded to the order to show cause. ECF Nos.
751, 752. On December 9, 2015, the court heard argument, ECF
No. 755, and by order filed December 29, 2015, the order to
show cause was discharged and in lieu of an evidentiary
hearing defendant was granted leave to depose his trial
counsel, James Greiner (hereafter Greiner). ECF No. 758 at
3-4. The order placed specific limitations on the deposition.
Id. Trial counsel was deposed on February 9,
2016. Thereafter, the parties filed further
briefing in support of and opposition to the motion for new
trial. ECF Nos. 779, 780, 783. The court heard argument on
the motion on May 11, 2016 and took the motion under
submission. On June 29, 2016, the court denied the motion in
a summary oral ruling from the bench. ECF No. 790. For the
reasons explained in this order, that ruling is confirmed.
Motion for a New Trial under Fed. R. Crim. Proc. 33
Rule of Criminal Procedure 33 authorizes the court, on motion
of a defendant, to “vacate any judgment and grant a new
trial if the interest of justice so requires.” Fed. R.
Crim. P. 33(a). The court has discretion to consider a claim
of ineffective assistance of counsel on a motion for new
trial, see United States v. Steele, 733 F.3d 894,
897 (9th Cir. 2013), and, for the reasons set forth in the
December 29, 2015 order, has decided to review
defendant’s ineffective assistance of counsel claims on
the merits of the Rule 33 motion now pending before the
court. See ECF No. 758 at 3.
Conspiracy to Commit Mail Fraud In Violation of 18 U.S.C.
was convicted by a jury on December 2, 2013 of conspiracy to
commit mail fraud in violation of 18 U.S.C. § 1349. ECF
No. 466. The elements of conspiracy are “an agreement
between two or more persons to accomplish an illegal
objective, coupled with one or more overt acts in furtherance
of the illegal purpose.” United States v.
Hubbard, 96 F.3d 1223, 1226 (9th Cir. 1996).
“[I]nferences of the existence of such an agreement may
be drawn ‘if there be concert of action, all the
parties working together understandingly, with a single
design for the accomplishment of a common
purpose.’” United States v.
Melchor-Lopez, 627 F.2d 886, 890 (9th Cir.1980) (quoting
[United States v.] Monroe, 552 F.2d 
at 862-63 [(9th Cir. 1977)). “The agreement need not be
explicit, but may be inferred from circumstantial
evidence.” Id. at 891. Once evidence of a
conspiracy is established, only a slight connection between
the defendant and the conspiracy is necessary to convict the
defendant of knowing participation in the conspiracy.
Id.; United States v. Aichele, 941 F.2d
761, 763 (9th Cir.1991). However, mere association with
members of a conspiracy or knowledge of the conspiracy,
“without an intention and agreement to accomplish a
specific illegal objective, is not sufficient to make one a
conspirator.” Melchor-Lopez, 627 F.2d at 891.
Id. The crime of mail fraud has two elements:
“1) existence of a scheme to defraud, and 2) using or
causing the use of the mails in furtherance of the
scheme.” Id. at 1227-28. “‘To be
part of the execution of the fraud … the use of the
mails need not be an essential element of the scheme….
It is sufficient for the mailing to be ‘incident to an
essential part of the scheme’ … or ‘a step
in the plot.’” Id. at 1228 (quoting
Schmuck v. United States, 489 U.S. 705, 711-12
Ineffective Assistance of Counsel
federal law on claims of attorney ineffectiveness is clear:
First, the defendant must show that counsel’s
performance was deficient. This requires showing that counsel
made errors so serious that counsel was not functioning as
the “counsel” guaranteed by the Sixth Amendment.
Second, the defendant must show that the deficient
performance prejudiced the defense.
Strickland v. Washington, 466 U.S. 668, 687 (1984).
“[T]he performance inquiry must be whether
counsel’s assistance was reasonable considering all the
circumstances.” Id. at 688.
[S]trategic choices made after thorough investigation of law
and facts relevant to plausible options are virtually
unchallengeable; and strategic choices made after less than
complete investigation are reasonable precisely to the extent
that reasonable professional judgments supported the
limitations on investigation. In other words, counsel has a
duty to make reasonable investigations or to make a
reasonable decision that makes particular investigations
Id. at 690-91. The court must presume that counsel
acted effectively and evaluate strategic decisions to
determine whether they were “reasonable at the
time.” Harrington v. Richter, 562 U.S. 86, 107
(2011); see also Strickland, 466 U.S. at 689
(internal citation omitted) (“A fair assessment of
attorney performance requires that every effort be made to
eliminate the distorting effects of hindsight, to reconstruct
the circumstances of counsel’s challenged conduct, and
to evaluate the conduct from counsel’s perspective at
the time. Because of the difficulties inherent in making the
evaluation, a court must indulge a strong presumption that
counsel’s conduct falls within the wide range of
reasonable professional assistance; that is, the defendant
must overcome the presumption that, under the circumstances,
the challenged action ‘might be considered sound trial
Harrington, the Supreme Court emphasized the
deference Strickland requires, noting that a court
must presume that counsel acted effectively and reiterating
that “[t]he question is whether an attorney’s
representation amounted to incompetence under
‘prevailing professional norms, ’ not whether it
deviated from best practices or most common custom.”
562 U.S. at 105.
is petitioner’s burden to establish prejudice: “A
defendant must show that there is a reasonable probability
that, but for counsel's unprofessional errors, the result
of the proceeding would have been different. A reasonable
probability is a probability sufficient to undermine
confidence in the outcome.” Strickland, 466
U.S. at 694.
to satisfy either prong of the Strickland test
obviates the need to consider the other.” Rios v.
Rocha, 299 F.3d 796, 805 (9th Cir. 2002); see also
Siripongs v. Calderon, 133 F.3d 732, 737 (9th Cir. 1998)
(“[It] is unnecessary to consider the prejudice prong
of Strickland if the petitioner cannot even
establish incompetence under the first prong.”)
Superseding Indictment in this case alleges that between
March 19, 2005 to at least June 30, 2006, defendant McCarns
conspired with multiple co-defendants “to target
homeowners in financial distress and perpetrate an
‘equity stripping’ scheme and artifice to
defraud” the homeowners and “to obtain property
and money by means of materially false and fraudulent
pretenses, representations, and promises, and to use the
United States Mails and any private and commercial interstate
carrier to execute the scheme. . . .” ECF No. 153 at 2,
4. The scheme was run through Head Financial Services (HFS),
a company incorporated by co-defendant Charles Head (Head) in
August 2001, id. at 2, and Creative Loans, LLC
(Creative Loans), created by Head in June 2004. Id.
at 3. “Other business entities” also were
involved in the scheme, including property management
entities known as Nations Property Management and A-One
Property Investments. Id. Defendants also
“used other business names and websites to perpetuate
the fraud, including but not limited to Foreclosure.com,
Funding Foreclosure, and $30kperyear.com.” Id.
was tried with two co-defendants, Charles Head and Benjamin
Budoff. The government’s case-in-chief against McCarns
consisted of documentary evidence and testimony from
homeowner witnesses and company insiders. The government
called several other witnesses at trial to offer testimony
against Head and/or Budoff. In his motion for new trial,
McCarns contends he received constitutionally ineffective
assistance of counsel as a result of trial counsel’s
failure to object to the admission of three government
exhibits, Exhibits 60, 68, and 70; by counsel’s failure
to adequately cross-examine and impeach both homeowner and
company witnesses; and by his failure to seek an order from
the court granting immunity to exculpatory witnesses who
planned to assert their Fifth Amendment rights against
self-incrimination. The government argues counsel was not
ineffective in handling the exhibits that are the focus of
McCarns’ motion, Exhibits 60, 68, and 70, contending
counsel “deflected their sting by making clear to the
jury that they were not found with or possessed by
McCarns.” ECF No. 724 at 15. The government also argues
that counsel’s examination of the homeowner witnesses
was “exhaustive” and not ineffective,
id. at 19, and that the way counsel handled the
company insider witnesses also was within the bounds of
competent professional assistance, id. at 27.
Finally, the government contends the proposed motion to
compel immunity would have failed and counsel therefore was
not ineffective in failing to seek immunity for the
potentially exculpatory witnesses. Id. at 30-33.
opening statement, McCarns’ trial counsel introduced
the jury to the two part “theme” of the defense:
“No connection. Put it in writing.” ECF No. 548
at 44. He explained that the evidence would show no
connection between McCarns and the fraud conspiracy charged
by the government. Id. Second, he argued that
written evidence would contradict the government’s
assertions of alleged false statements by McCarns, and would
show that everything McCarns sold to the homeowners was put
into written documents sent to homeowners to read and review
before signing, and that there would be other documents
demonstrating that some of the government’s assertions
were false. Id. at 44-46. At his deposition taken in
connection with the pending motion, counsel testified
extensively concerning his use of this strategy with respect
to exhibits offered by the government and cross-examination
of both homeowner and company witnesses. See,
e.g., Greiner Dep. at 65-68, 72-73, 75, 79-81,
92-96, 103, 105, 107, 132-33, 144, 157, 162, 164, 166, 175,
188, 202. Independently, the court recalls that throughout
trial, trial counsel regularly paused once he had examined a
witness to compare notes with Mr. McCarns before yielding a
Exhibits 60, 68 and 70
Background re “Open” and “Secret”
substantial part of defendant’s motion is grounded in
his contention that from January 2004 to December 2004, Head
“ran a business based exclusively on fraud, ” ECF
No. 712 at 19, and that by the time McCarns was hired as a
sales agent in February 2005, “Head was using a
completely different business model.” Id. at
22. Defendant contends the post-2004 business model only
involved fraud by Head and “company managers” and
not by “sales agents, ” including McCarns.
McCarns contends sales agents, including him, “were not
instructed to deceive the homeowners at all” and
“uniformly believed they were selling a legitimate
product, helping homeowners, and had no idea that fraud was
being committed against financial institutions by Charles
Head and his managers.” Id. This premise
underlies the first part of McCarns’ ineffective
assistance of counsel claim, specifically, his contention
that counsel was ineffective in failing to object to the
admission of three documents, Exhibits 60, 68, and
70.McCarns argues these three documents were
integral to the government’s case against him and
highly prejudicial. Specifically, defendant contends these
three documents were linked by the government to testimony
from homeowners to whom McCarns sold the foreclosure rescue
program but were created and used only during the time prior
to McCarns’ employment.
outset, the court notes that at deposition, trial counsel
responded to questions about the business model used by
Charles Head during 2004, the so-called “50/50 split
with the LLCs.” Greiner Dep. at 46. This is the
business model McCarns contends was an “open
fraud” involving all of Head’s employees and
which he contrasts with the supposed “secret
fraud” during the period of his employment, which he
contends only involved management and not him or other sales
agents. Id.; see also ECF No. 712 at 19-23.
questioned during his deposition about this distinction and
an exhibit that might have been used to highlight differences
between the two periods, trial counsel responded that he had
determined not to draw a distinction between the conduct of
50/50 employees and McCarns because (1) there had been a
limiting instruction that the testimony of two witnesses,
Shannon Taylor and Justin Wiley, were admitted as to Head
only and could not be used against McCarns; and (2) McCarns
had not worked at Head Financial Services during the 50/50
time frame, and he “made that clear in [his] opening
and . . . in [his] closing.” Greiner Dep. at 46-47;
see also ECF No. 548 at 37-44; ECF No. 562 at 25,
36, 40, 53-57.
counsel’s first explanation, he is correct. At the
start of trial, the court instructed the jury that
“[s]ome evidence may be admitted for a limited purpose
only” and that when the court instructs the jury
“that an item of evidence will be or has been admitted
for a limited purpose, you must consider it only for that
limited purpose and for no other.” ECF No. 548 at 16.
During Shannon Taylor’s testimony, the court instructed
the jury that certain documents were “admitted with
respect to the Government’s case against Mr. Head. The
testimony is subject to the limiting instruction the court
gave at the beginning.” ECF No. 549 at 47. A limiting
instruction also was given at the start of Justin
Wiley’s testimony. See ECF No. 551 at 126
(“Ladies and gentlemen, I’m giving you an
instruction you’ve heard before, but it applies with
respect to this witness as well. I understand you are about
to hear evidence that Mr. Charles Head committed other acts
not charged here. You may consider this evidence only for its
bearing, if any, on the question of Mr. Head’s intent,
motive, opportunity, preparation, plan, absence of mistake,
absence of accident, and for no other purpose. You may not
consider this evidence as evidence of guilt of the crime for
which Mr. Budoff and Mr. McCarns are now on trial.”).
trial counsel’s second point, the record shows that in
both his opening statement and his closing argument, counsel
drew significant distinctions between the business model of
Head Financial Services during the “50/50 LLC”
period in 2004, and the business model to which the company
transitioned just before McCarns was hired in early 2005.
See ECF No. 548 at 37-44; ECF No. 562 at 53-56. In
his opening statement, counsel stated that when McCarns
arrived the business was “transforming and being
compartmentalized into various areas, ” that McCarns
was an employee with no management authority, and that sales
agents like McCarns operated very differently than the
individuals who had worked during the 50/50 era. ECF No. 548
at 41. Counsel used the anticipated testimony of Shannon
Taylor to highlight one of the key relevant differences: that
in 2004, Head and two of his employees came to her house with
documents to sign, while McCarns’ job was to talk to
people on the telephone. Id. at 39, 44. In closing,
counsel argued, inter alia that the business model
of Head Financial Services changed significantly after Keith
Brotemarkle was hired in January 2005, that Brotemarkle
“did a corporate takeover of Funding Foreclosures with
Kou Yang, ” that Brotemarkle and Yang were the two
committing fraud, and that “Brotemarkle raided that
company, set it up to hide his fraud and Kou’s fraud,
and used the employees, who worked diligently at their job
day in and day out” and that McCarns “got
physically beat up because he questioned management.”
See ECF No. 562 at 54-57.
Handling of Exhibits
challenge to the performance of his counsel concerning trial
exhibits 60, 68, and 70 is grounded in the fact that there
were significant similarities between the sales pitches
described in the documents and the testimony of homeowner
witnesses to whom McCarns sold the program.
60 is a five page document entitled “Foreclosure
Transaction Procedure” that details marketing
mechanisms, sales pitches including a section entitled
“BAIT-n-SWITCH”, and procedures to follow for
completing the transactions. ECF No. 712-16.
68 is a document from HFS setting forth a “Sales
Pitch.” It describes a program based on the equity in a
customer’s home, representing that HFS has investors
that will (1) give the customer money to help pay bills; (2)
pay all arrears on a loan “so you will be current if
there is little time before your sale date”; (3)
completely pay off a mortgage; and (4) “pay a firm to
handle credit repair. . . .” ECF No. 712-15. The sales
pitch represents that the customer’s monthly payment
will be lower than the current monthly payment and the
“only real drawback” is that the investor will
have to be on title with the customer for a period of time.
Id. It instructs to “STRESS” that the
customer will still be on title but the investor will also be
on title. Id. (emphasis in original). It then
provides instructions for proceeding if a customer
“say[s] yes.” Id.
70 is a multipage document, which includes a two-page
handwritten sample “Equity Purchase Agreement”; a
one-page document with two handwritten email addresses for
Charles Head; several pages of marketing efforts and costs;
several pages of what appear to be sales pitches to potential
customers; and a list of counties in Florida. ECF No. 712-17;
ECF No. 559 at 165-71.
the three documents played a significant role in the
government’s case against McCarns. In closing argument,
the government argued that Exhibit 68 was “the
foreclosure sales pitch.” ECF No. 561 at 144. The
government emphasized a section of the exhibit that in all
capital letters instructed the sales team to
“stress” to the homeowners that they would still
be on title but an investor would be on title with them.
Id. The government argued this instruction matched
the testimony from the homeowners, all of whom testified they
were told they would remain on title, and many of whom were
sold the program by McCarns. Id. at 143-44.
Similarly, Exhibit 70, the government argued, corroborated
the homeowners’ testimony that they were told they
would retain most of their equity; Exhibit 70 was the
“sales pitch” for that representation.
Id. at 146. The review of the homeowners’
testimony provided below shows that many homeowners did
testify consistently with these aspects of these exhibits.
noted above, defense counsel stipulated to the authenticity
of Exhibits 68 and 70 as part of a stipulation by the parties
concerning the admissibility of trial exhibits. ECF No. 431.
Exhibits 68 and 70 were offered into evidence through the
testimony of Chris Fitzpatrick, a special agent for the
Internal Revenue Service Criminal Investigation Division. ECF
No. 559 at 150, 164-65. Special Agent Fitzpatrick testified
that the documents were recovered in Charles Head’s
home during execution of a search warrant. Id. at
164-65. During cross-examination, McCarns’ trial
counsel elicited testimony from Fitzpatrick that there was no
evidence either exhibit was ever given to McCarns, and that
no copies of Exhibit 68 had been found at the business, or
any of several other business locations. ECF No. 560 at
82-84. At his deposition, counsel testified he did not view
Exhibit 68 as “critical” because his
cross-examination “placed the document into context in
front of the jury, ” i.e., that it was found in
Heads’ home office and that neither Exhibit 60 nor 68
were “critical” because “McCarns never saw
them, never had them.” Greiner Dep. at 34-35. He also
testified about his closing argument and his
cross-examination of Special Agent Fitzpatrick, both of which
emphasized that there was no connection between McCarns and
either Exhibit 68 or Exhibit 70. See, e.g., id. 52,
56-57, 67-68, 70. This approach was consistent with his
two-part trial strategy discussed above: to show no
connection between McCarns and any conspiracy, and to show
that written documents disproved any testimony concerning
alleged false statements by McCarns. See,
e.g., ECF No. 548 at 44-45; Greiner Dep. at 65-66.
now contends that “an informed, knowledgeable and
thorough examination of Exhibit 68 by Mr. McCarns’
attorney, in consultation with his client, ” would have
provided the basis for “a potentially successful
severance motion, ” an in limine motion limiting its
admissibility only to Charles Head, or at least a more
vigorous cross-examination of certain witnesses to establish
that Exhibit 68 related only to the 2004 business model. ECF
No. 712 at 27. The record shows that trial counsel made a
motion to sever raising several contentions but not relying
on Exhibit 68. ECF No. 288. The motion was denied without
prejudice. ECF No. 297. Given the similarities between
Exhibit 68 and the testimony of several homeowners to whom
McCarns sold the program, it is not at all clear that an in
limine motion restricting use of Exhibit 68 to Charles Head
would have been successful. Moreover, defendant has not shown
how using Exhibit 68 to support his severance motion would
have resulted in a different ruling.
counsel’s strategy for handling Exhibits 68 and 70 was
consistent with his overall trial strategy: he elicited
testimony that there was no evidence McCarns had any
connection to either of these documents. This falls within
“the wide range of reasonable professional
assistance” that is the governing standard for this
ineffective assistance of counsel claim. McCarns has failed
to demonstrate that counsel’s handling of these two
documents constituted ineffective assistance of counsel.
60 was offered into evidence through the testimony of Justin
Wiley, who worked for Head Financial Services. ECF No. 551 at
128, 141. As noted above, the court gave a limiting
instruction to the jury prior to the start of Justin
Wiley’s testimony. Wiley testified that Exhibit 60 was
a four-page script given to him and two others by Charles
Head during two weekend meetings at Head’s home in
March 2004. Id. at 130-31, 140-42. During
Wiley’s direct examination, McCarns’ trial
counsel interposed an objection designed to clarify that the
script had only been given to Wiley and two others, not
McCarns. Id. at 141. The witness clarified that
“Josh Coffman, Akemi Botari” and he had gone to
Head’s home for the two weekends in March 2004.
Id. at 142. On cross-examination, counsel elicited
testimony from Wiley that he had left working for Charles
Head in November 2004, prior to McCarns “ever showing
up and working.” Id. at 162-63. In closing,
the government argued that Exhibit 60 was brought in as to
Charles Head only. ECF No. 561 at 160. Trial counsel’s
handling of this document as well was not ineffective, and
McCarns suffered no prejudice from its admission.
case-in-chief, the government presented seven homeowner
witnesses who were victims of the charged fraudulent
foreclosure program and who testified that Domonic McCarns
either sold them the program or were involved in their
transaction with the company. Six of these witnesses
testified that McCarns had sold them the program: Sharolynn
Cardenas, Sheila Jones, Debra Kovacs, Bertha Woods, Denise
Ahearn, and Kelly DiSanto. Five testified that they always
spoke with McCarns over the telephone and never met him in
person, ECF No. 548 at 78, 143 (Cardenas); ECF No. 551 at
185-86 (Jones); ECF No. 553 at 195, 209 (Kovacs); ECF No. 554
at 94, 126-27 (Woods); ECF No. 554 at 174-75, 188-89
(Ahearn), and one testified simply that her contacts with
McCarns were over the telephone, ECF No. 559 at 105
(DiSanto). Deborah Brockway testified that she spoke with a
female sales agent and with McCarns as part of entering into
the program, and also when she received a check for
$108, 000 after she signed documents. ECF No. 555 at 116,
government presented two additional homeowner witnesses,
Jerome Pearlman and Alfred Limas, who testified concerning
their involvement with Funding Foreclosures (Pearlman) and
Nations Property Management/Creative Loans (Limas). Neither
testified they had worked with McCarns.
the exception of Pearlman, all the witnesses described a
testified as follows. She was referred to McCarns for help
after she and her husband filed for bankruptcy. ECF No. 548
at 77-78. In their second conversation, McCarns told her she
would receive a packet in the mail with papers to fill out
and that when she received the packet she and her husband
should tell their lawyer to cancel the bankruptcy action they
had filed. Id. at 79. He represented that the
program would help them “make good on [their]
credit” and, “within a year . . . be able to help
[them] get [their] home back.” Id.
Specifically, McCarns told her the equity in their home,
$200, 000, would be put in an escrow account and that after
they paid the mortgage for a year the equity would be
returned to them “to use to buy back [their]
home.” Id. at 80. Cardenas checked with their
mortgage broker who had referred her to McCarns to see if the
program was “legit” and the broker told her to
“go ahead.” Id. When she and her husband
went to the title company to sign the papers, they learned
they would be selling their home. Id. at 81. They
declined to sign the papers and instead went to the mortgage
broker’s office. Id. He reassured them they
would get their house back. Id. at 81-82.
Approximately forty-five minutes later, McCarns called
Cardenas. Id. He was angry she and her husband had
not signed the papers, and he told her that “after two
to three months [their] name would be back on the deed for
the home.” Id. Ultimately, they signed the
documents. Id. at 83. About a week later they
received documents that said they were renting their home for
$1500 per month, with no pets. Id. at 83-84. A quick
deed was included in the packet. Id. at 84. Cardenas
called McCarns again, who told her she would remain in the
house, no one would take it away from her, and within a year
she would get her money back and she could buy back her
house. Id. He reiterated that the equity in her
house, which she testified was supposed to be $200, 000,
would be held in escrow for a year. Id. at 85. As
part of the arrangement, she received a check for $20, 000 to
help pay bills and re-establish the family credit.
Id. She never received the $200, 000 back.
Id. After signing the documents, she made rent
payments to Funding Foreclosures, but stopped when the roof
on her home caved in; she could not get insurance proceeds to
fix the roof so had to close her in-home business.
Id. at 86-89. At the time of trial she was still
living in the home. Id. at 90.
testified that while she was going through a foreclosure, she
“received a little flyer in the mail that said Funding
for Foreclosures.” ECF No. 551 at 166. She called the
number on the flyer and spoke with McCarns. Id. He
told her she could not refinance the home, “but that he
had an angel investor that could help [her] out.”
Id. The “angel investor” would invest in
her home, which would be put in trust, and she could make
payments for a year, after which the house would be returned
to her and she would split the equity with the investor.
Id. at 166-67. The buy-back price she agreed to with
McCarns was $195, 000. Id. at 180. McCarns also told
her she would have to make payments of $1, 100 per month for
a year, and that she would receive $5, 000 to pay her
son’s tuition. Id. at 167-68. During the
signing, she noticed instructions not to transfer any funds
to the seller. Id. at 169. She sought and received
reassurance from the notary that her home would be put in
trust. Id. After the signing, she spoke with McCarns
who also reassured her the home would be put in trust.
Id. He also told her she had time to rescind, which
she did not do. Id. at 170. Three days after the
rescission period ended she received a check for $5, 000.
Id. at 170-71. She made her payments as required and
believed her home was in trust, “until the FBI showed
up.” Id. at 171. In fact, the initial set of
papers signed by Jones resulted in the transfer of her home
to Daniel Castillo, id. at 209, and the property was
not held in trust. Ultimately, Jones lost the home to
foreclosure. Id. at 180.
Kovacs made contact with Domonic McCarns in 2005 while she
was trying to refinance her home. ECF No. 553 at 194-95. He
called her at her home after she had been filling out
refinance forms online. Id. at 195. Kovacs told him
she had been told refinancing was not possible, but he
assured her he could refinance the home. Id. at 196.
After that, he called her to send her to a title company to
sign papers, but she “never made it there.”
Id. He called her again and told her it would be
easier to send someone to her house. Id. at 197.
Based on the conversations she had with McCarns, she thought
she would be refinancing the house and someone would be going
on the title with her for one year. Id. at 198. At
the end of a year, she would call McCarns, they would
refinance the house, and the other person would be taken off
the title, leaving her as the only person on the title.
Id. She understood she would be making monthly
payments. Id. at 199. She believed she had discussed
the equity in the home with McCarns, and that the equity
would stay in the home. Id. at 200. She received $1,
000.00 as part of the transaction. Id. at 201. In
fact, she signed a grant deed to her home, and ended up
losing the home. Id. at 203-04.
Woods fell behind on her mortgage payments and became
concerned about foreclosure. ECF No. 554 at 92-93. She was
referred to a company she remembered as
“foreclosure.com, ” and spoke to McCarns.
Id. at 93-94. He told her they could help with the
house and she could rebuild her credit if she made payments.
Id. at 94-95. He told her it would cost her “a
little more to get the house back.” Id. at 95.
She understood she would be making payments of $500 a month
to “some kind of management.” Id. at 96.
She decided to enter into the program, and a notary came to
her home with papers to sign. Id. She noticed
different names on the papers she was signing, and she called
McCarns. Id. He told her the names were those of
people in the firm “and this is the way they do
it.” Id. She had understood that the house
would still be hers. Id. at 97. But when the papers
came, she saw they were going to put it in a trust under
someone else’s name. Id. He assured her that
the name was of a person in the company and “everything
would be okay.” Id. When she signed the
papers, she still thought she would be the owner of the home.
Id. She also understood that if she did not keep up
the payments, breach the contract, or lose the home she would
get part of the equity and the company would get part of the
equity from the home. Id. at 98-99. About a month
later, she received notice that her mortgage had been paid in
full. Id. at 99. She also got a letter from an
attorney for Kenny and Marjorie Sly saying that the house was
foreclosed on and she had to move out of the house.
Id. at 100. Woods called McCarns’ number but
did not get through because the number had been
“changed or disconnected.” Id. at
100-01. Woods ended up talking to someone who told her the
house was still hers and she needed to call numbers for the
FBI and the IRS. Id. at 101. The house went through
foreclosure and a sheriff’s sale, but no one bought it
so she had a chance to get it back. Id. She was
still in the house at the time of trial. Id.
Denise Ahearn (Nowlin)
Ahearn, previously known as Denise Nowlin, testified that she
contacted Domonic McCarns after her mortgage broker had done
“everything he could to help [her] keep up.”
Id. at 174. It appears she consulted the mortgage
broker after receiving a notice of foreclosure from the bank.
See id. at 184-86. The mortgage broker referred her
to McCarns, who had reached out to the mortgage broker.
Id. at 174. Ahearn spoke with McCarns “many
times.” Id. at 175. He told her he could help
her save her house “by having a trustee or
investors” buy it. Id. She specifically asked
that her name be left on the deed because she
“didn’t want [her] house to get taken from
underneath [her]” and he assured her “that
wouldn’t happen.” Id. He told her that
after the trustee was put on the deed she would pay rent for
a year and then be able to buy the house back for less than
she put into it. Id. She was under the impression
that she would still own part of the house during this
period. Id. at 175-76. She was not willing to sign
unless McCarns guaranteed that he could not sell the house,
or she wanted her name on the deed to give her that
protection. Id. at 176. McCarns told Ahearn to file
for bankruptcy so that he could “get the investors that
he needed”, which she did. Id.
cross-examination, Ahearn testified she understood that the
bankruptcy filing would stop the foreclosure. Id. at
203. McCarns told her that once he got the investors, he
would call and tell her to cancel the bankruptcy.
Id. at 176. McCarns eventually called and told her
to cancel the bankruptcy, which she did. Id. at 177.
McCarns set up a meeting with a broker for her at a
McDonald’s to sign the paperwork. Id. She
signed the papers without reading them, and then asked for a
copy of the documents. Id. at 177-78. The broker
promised to send copies but never did. Id. at 178.
McCarns also told her she would get a copy of the documents,
but she never did. Id.
that, McCarns stopped responding to Ahearn’s calls,
even though she was trying to reach him to find out where to
send her $2, 000 rental payment. Id. at
Ahearn finally got an email from a woman with instructions
where to send the payment. Id. She sent one payment
and then fell behind again. Id. She started getting
mail for someone named Armil Rucker, and after consulting an
attorney she went to the registrar of deeds and found out
that Armil Rucker was the only name on the deed to her house.
Id. at 180. When asked by the prosecutor if she had
ever received a specific amount of equity from her home --
almost $72, 000 --, or whether she had “knowingly
give[n] permission to anyone else” to take that amount
of equity out of it, she responded she had not. Id.
at 182. Ahearn learned that what McCarns had told her about
keeping her name on the deed and keeping her home was not
true when she got a notice from the FBI that she “had
been a victim of a crime.” ECF No. 555 at 34.
DiSanto testified that she called a company called Creative
Loans after she and her husband ran into financial
difficulties. ECF No. 559 at 104-05. She spoke with McCarns,
who told her he would help save the house. Id. at
105. Again, McCarns told her the company would take joint
title on the house for a year, during which DiSanto and her
husband would pay rent less than the amount of their
mortgage. Id. At the end of the year, the company
would come off title, and they would split the equity in the
house. Id. at 105-06.
and her husband had to file bankruptcy to avoid foreclosure
because the process was taking “longer.”
Id. at 106. McCarns told her the company would
reimburse the DiSantos for the bankruptcy, but it never did.
Id. The DiSantos signed documents for the Creative
Loans program in the presence of a notary sent to their
house. Id. at 107.
couple of months after they signed the documents they
received their first rental bill. Id. at 108.
DiSanto made timely payments, and at the end of the year
contacted McCarns to find out what the next step was.
Id. at 108-09. He told her she and her husband were
ineligible because they had violated the contract by making
some of their payments late. Id. at 109. Ultimately
he told her they would have to buy the house back at a higher
price because of the late payments. Id. The higher
price was $670, 000, which was not consistent with the
original agreement. Id. at 109-10. They paid the
higher price because they were just starting a family and had
bought the house while it was still under construction and
did not want to lose it. Id. at 110.
Brockway, too, testified about being sold a program by
someone she would make payments to for over a year, at the
end of which time she could get her house back. ECF No. 555
at 116-17. She understood she would pay $25, 000 and would
receive $10, 000. Id. at 117. She worked with a
saleswoman named Beverly, but apparently was referred to
McCarns for “more explanations, more clarity”
during the initial stages. Id. at 119. Once Brockway
started writing checks to the company, someone who might have
been McCarns contacted her to tell her the company had found
a buyer for her home. Id. at 118-19. She had started
making payments right away, and the name of the company
changed along the way from Nations Property, to Creative
Loans. Id. at 120. Brockway’s house was then
sold to someone named Michael. Id. After the sale,
she received a check for $108, 000, which was the amount of
equity in her house. Id. She called and spoke with
McCarns, who told her that the check was not hers and needed
to go “directly to them.” Id. at 121.
She told him she did not think that was right; she thought it
was the proceeds from the sale of her home. Id.
McCarns was “very aggressive” and told her she
would be in “big trouble” if she did not send
“them” the check right away. Id. So she
then got a cashier’s check in the full amount and sent
it to McCarns. Id. at 122.
November 2006, Brockway received a call from someone who
identified himself as Michael Scallin and said he had bought
her house. Id. at 122-23. He told her he had bad
news, that the FBI was investigating the company, and that it
would be best if she did not send any more payments to him.
Id. He told her he was getting ready to go into
bankruptcy. Id. She did not still live in the house
at the time of trial. Id. at 125.
noted, the government also called homeowners Jerome Pearlman
and Alfred Lima. Pearlman testified that in early 2006 she
owned a house with her wife. Id. at 39. They had
fallen about four months behind on the payments and were
concerned about foreclosure. Id. at 39-40. They
received “an unsolicited phone call concerning help
with mortgage arrears” and “set up an appointment
to have someone come out and talk” to them about it.
Id. at 40. Approximately two weeks later someone
came to the house and described a program. Id. at
41. Pearlman could not recall who the person was, and
believed the group was named Funding Foreclosures.
Id. at 42. Ultimately the Pearlmans signed documents
with Funding Foreclosures as a party to the agreement.
Id. at 48. Besides the Pearlmans, the printed names
for the other two signatures were Charles Head and Jack
Corcoran. Id. at 49. Pearlman’s understanding
was that by going into the program “Funding
Foreclosures would be the intermediary between [the
Pearlmans] and the bank” and that after
“approximately 18 months, they would assist us in being
able to procure a standard mortgage through one of the
banks.” Id. at 51. Pearlman understood she and
her wife would still be on title. Id. at 52, 56-57.
Pearlmans decided to join the program and signed documents
when the notary brought them to their house. Id. at
53. They received copies of the documents, as the notary said
they would. Id. Pearlman sent monthly payments in
the amount of approximately $2, 000. Id. at 54.
Thereafter, her “next memory of the process” was
of “receiving a letter from the FBI.”
Id. After that letter, they also got a letter from
the bank that the house was going into foreclosure.
Id. at 54-55. That letter was also addressed to
Kerry Budoff, who the Pearlmans had been told “was the
point person if we ever - if we had issues.”
Id. at 55. They tried to contact Budoff, but the
number they had was “actually a number to an elderly
woman living in Encinitas, California.” Id. at
testified that in 2006 he had fallen far enough behind on
payments at his home “for them to want to foreclose on
it.” ECF No. 556 at 123-24. A woman at the title
company that was going to foreclose on the property referred
him to someone she thought could help. Id. at 124.
She referred him to Nations Property Management, and he
called it after the referral. Id. at 129. He told
the person he reached that he was behind on payments and
facing foreclosure, and that he did not want to lose all his
equity but wanted to try to use the equity to save the house.
Id. at 125. Subsequently, he signed documents.
Id. at 131. Limas understood he was selling his home
to pay off the existing mortgage, would receive $5, 000 in
cash, and “after 12 months, split the equity and
possibly re-buy [his] home back.” Id. at
131-32. During those twelve months, he would make payments to
Nations Property Management. Id. at 132. He received
the $5, 000, in the form of a check from Creative Loans,
id. at 141, and he sent the monthly payments by
check. Id. at 133. At some point, three of the
checks were returned to him. Id. at 134-35. He tried
to call the phone number he had and “never got a
response.” Id. at 135. It was around this time
that he had contact with IRS Special Agent Fitzpatrick.
Id. at 135, 164.
Defendant’s Contentions Concerning Homeowner
makes a number of contentions concerning alleged
ineffectiveness of his trial counsel in connection with
cross-examination of the homeowner witnesses. The contentions
fall into three general categories: that counsel had
information he could have used to impeach the homeowners but
did not; that counsel failed to conduct adequate
investigation, which would have uncovered the impeachment
information; and that there were several times counsel
elicited information favorable to McCarns during
cross-examination but then failed to use the information
during closing argument. The contentions as to each witness
are described in turn, to the extent they apply, as follows.
contends trial counsel was ineffective in not cross-examining
Cardenas about a civil lawsuit she had pending against
McCarns, Funding Foreclosures and others. He also contends
counsel failed to use a sworn declaration signed by Cardenas
from the civil suit, disclosed to him by the government, or
her July 2013 statement to the FBI, which would have revealed
a number of contradictions between her trial testimony and
the content of those declarations. He says her declaration
would have shown that she received documents in June 2005,
which “clearly articulated that she would be selling
her home, be receiving $26, 000 in consideration for the
equity in her home, and would be leasing her home for one
year, at the end of which, she could buy back her home at a
designated price if she fulfilled all of her obligations
under the agreement.” ECF No. 712 at 49. The
declaration would also have shown that she “physically
met” with Peahu, her mortgage broker, and on his advice
signed and mailed all the documents back to Funding
Foreclosures, and that it was Peahu, not McCarns, who told
her to tell her lawyer to dismiss the bankruptcy action.
Id. at 49-50. The declaration would further have
shown that Cardenas was aware funds from the house would be
sent to Creative Loans rather than held in escrow.
Id. at 50. The FBI statement would have shown that
she never had a conversation about removing equity from her
home,  and that her insurance claim was denied
because the insurance company determined “‘the
leak was caused by the ...