FEDERAL JURY ACQUITS TWO IN MORTGAGE FRAUD CASE: USA V LOUDERMILK AND MARSHALL

A federal jury in the Eastern District of California, in Sacramento, on Thursday, March 26, 2015, acquitted two defendants, Deborah Loudermilk and Buena Marshall, of mail fraud charges arising from allegations that they participated in a 2006 mortgage fraud scheme.

In the prosecution of the case, the government presented 26 witnesses and more than 300 exhibits. Unconvinced, the jury acquitted the defendants of all six charges after slightly more than one day.

Loudermilk was represented in the case by Summit Defense Attorneys Senior Trial Counsel James Reilly, a former Orange County prosecutor who has been practicing criminal law for more than 39 years. Marshall was represented by Attorney Mark Reichel of the Sacramento law firm Reichel & Plesser. Reichel is a former federal public defender with more than 23 years experience in criminal defense.

It was also the first time in his 23 years on the federal bench that Judge Garland E. Burrell, Jr., had presided over a trial in which the defendants were acquitted. 

It took more than 8 years to get the case to trial because the allegations were not even investigated until early 2010 and charges were not filed until October of 2011.

During the more than three years that the case was pending, four of the original six defendants entered into "cooperative" plea agreements, under which they agreed to testify against the remaining defendants.

Among the prosecution witnesses were five convicted felons, including the four former co-defendants. In his closing argument, Loudermilk's attorney characterized the presentation of these witnesses as a "parade of the horribles". In a discussion with the attorneys after the trial concluded, several jurors agreed, indicating they had given little credence to the testimony of the convicted felons.

Reilly's closing argument also called the case the story of "Debbie v. Goliath", noting that it was investigated by both the FBI and the IRS. The government was represented in court by three Assistant US Attorneys, a US Attorney's paralegal, and an IRS Special Agent. Despite the government's investment of resources in the case, he characterized the investigation against his client as inadequate and a rush to judgment. In particular, he noted that the investigators failed to record interviews with the suspects and ignored exculpatory evidence provided by Loudermilk.
Jurors found the failure to record the interviews significant because Loudermilk testified that she did not make incriminating admissions described in the summary report prepared by the investigators and testified to in court by the IRS investigator. As a result, jurors indicated they gave equal weight to the investigator's and Loudermilk's testimony and therefore disregarded the purported admissions.

The jury foreman also indicated that the government had done a good job of proving the case against those who had already pled guilty, but that the investigation had "cast too wide a net" in ensnaring Loudermilk and Marshall, who were real estate agents in the six purchases at issue.

The case was charged as "mail fraud" because interstate mail was used to send documents involved in the scheme, which was conceived and executed primarily by two co-defendants, Kadesta Harris and Temika Reed. The two received the bulk of the approximately $200,000 in "cash-back-to-buyers" payments generated by the six purchases.

Loudermilk testified in her own defense, denying that she was aware that fraud was being committed or that she had any intent to defraud either the sellers or lenders involved in the two transactions in which she served as an agent. Marshall did not testify, but Reichel, in his argument, contended that the evidence also failed to prove her participation in the scheme to defraud or that she had intended to defraud anyone.

In the end, the jurors agreed, concluding that the evidence did not show that either Loudermilk or Marshall had been knowing participants in the scheme to defraud, that either had committed any act material to the fraud, or that either had exhibited any intent to defraud the lenders in these transactions.

The defeat was a rarity for the US Attorney's Office, which routinely obtains convictions in nearly all of its cases. In 2014, the cases of 908 criminal defendants were concluded, with 902 of them being convicted, either through guilty pleas or jury verdicts. Only six were acquitted at trial. It was also the first time in his 23 years on the federal bench that Judge Garland E. Burrell, Jr., had presided over a trial in which the defendants were acquitted.