Crime - Sacto 911

Jury verdict a rare acquittal in federal mortgage fraud trial

Two defendants in a mortgage fraud trial in Sacramento federal court had a rare experience Thursday. They were acquitted.

Statistically, it was a notable event.

The jury’s verdict flies in the face of a 93 percent conviction rate in federal criminal cases nationwide.

In the Sacramento-based Eastern District of California, the 2014 conviction rate was 92.7 percent. Of that, 97.8 percent were defendants pleading guilty and 2.2 percent were defendants found guilty at trial. There were 902 defendants convicted; 882 pleaded guilty, 20 were found guilty at trial and six were acquitted.

It is also the first acquittal before U.S. District Judge Garland E. Burrell Jr. in his 23 years on the federal bench.

At the conclusion of a trial that was in session 11 days beginning March 3, the jury found Deborah Loudermilk and Buena Marshall not guilty on all six mail fraud counts they were charged with in the mortgage fraud case.

In a prepared statement, U.S. Attorney Benjamin Wagner said, “This office has secured well over 200 felony convictions in mortgage fraud cases since 2010, and many of those were cases we regarded as more significant than this one.

“We have had tremendous success in mortgage fraud cases over the last several years, but it is unrealistic to expect that we will get the outcome we are seeking in every single case. We respect the criminal trial process and accept the jury’s verdict in this case, and we are turning our attention to other mortgage fraud cases set for trial in the coming months.”

Marshall, 69, of Sacramento, was represented by seasoned criminal defense lawyer Mark Reichel.

Reichel said the government’s biggest mistake was using as witnesses four co-defendants of his client who had pleaded guilty and agreed to testify for the prosecution in return for leniency in sentencing.

He said jurors told him after they were discharged that they resented the fact the case was built around four witnesses who were testifying for reduced prison sentences.

“The jurors felt there should have been some substantial evidence presented other than the testimony of those four,” Reichel said. “And,” he said, “the cross-examination really destroyed their credibility and made them out to be untruthful.

“In the information they supplied to prosecutors in connection with their plea agreements, in the government’s opening statement at trial, and during direct examination of these four, my client was said to have recruited them and explained how the scheme would work,” Reichel said. “On cross-examination, all four of them acknowledged that was not true.”

Loudermilk, 57, of Suisun City, was represented by James Reilly, a criminal defense lawyer from San Rafael with almost 40 years of legal experience. He agreed with Reichel’s assessment of the four defendants turned government witnesses.

“I called them a ‘parade of horribles’ in my closing argument,” Reilly said. “Even though the prosecutors put on more than 20 witnesses, the fact is they asked the jury to rely on these four convicted felons, and their testimony just didn’t support the charges.

“A juror told me after the trial that the jury felt the government cast too wide a net when they charged my client,” he said.

One of the defendants-turned-witness awaiting sentencing, Reginald Dodson Sr., had told the FBI and the prosecutors that Loudermilk “structured” part of the fraudulent scheme charged in the indictment, according to Reilly.

But, Reilly said, “When he got on the stand and looked at my client, he said he had been thinking of someone else. He said he had never seen Debbie before; didn’t know who she was.”

According to the indictment, Temika Reed purchased seven houses between October 2006 and January 2007, falsely claiming in each instance that she would reside in the house as her primary residence. Reed, along with loan officers Jake Weathers, Dodson and others, falsified Reed’s income and employment history on successive loan applications and concealed her multiple purchases from lenders, the indictment alleges.

The defendants inflated the purchase prices of the properties and diverted part of the sales proceeds to their personal use, the indictment charges.

It says Kadesta Harris operated a business called the Cushite Gospel Music Course, which had an account at Redwood Credit Union. This account, according to the indictment, was used to receive ill-gotten gains generated by the scheme.

In addition to Dodson, 44, of Tracy, Reed, 35, of Bay Point, and Harris, 61, of Suisun City, pleaded guilty to mail fraud and testified for the government. Weathers, 39, of Sacramento, pleaded guilty to conspiracy to commit mail fraud and testified.

Call The Bee’s Denny Walsh, (916) 321-1189.