Contractor Fraud Texas Tarrant

My Contractor Pulled a Houdini! Now what? | Construction Fraud Under Texas Law

By | Fraud

Contractor Fraud Texas TarrantHave you sustained property damage in a powerful storm? If so, you probably had to call a contractor to do necessary repairs. It is sometimes customary in the construction industry for contractors to ask homeowners to pay for some of the work up front, and pay the remaining balance upon completion. Some contractors will ask you to fork over a hefty deposit to someone you do not know, yet you are trusting to get the job done. You are not alone. The good news is that most contractors will operate above the board. Even though social media reviews and ratings sites, such as Angie’s List, are sensible ways of vetting contractors and service providers in 2020, they cannot predict future white collar crimes perpetrated by individuals who are focused on scamming construction deposits out of desperate homeowners.

What Happens if Your Contractor is a Crook? | Construction Fraud in Tarrant County

What legal remedies are available to homeowners in Texas when a contractor pulls a Houdini, vanishing into thin air, cash in hand, without completing the repair work? Contractual breach is the most common civil cause of action. Generally, a contractual breach occurs when (1) there is an existing contractual agreement that is (2) performed (paid for) by one party, yet (3) the other party did not perform as agreed to, which (4) caused damages to the performing (paying) party. Material breach of a roofing contract may occur without intention, when a contractor takes too long to complete a project, or perhaps uses substandard materials, for example. This civil cause of action addresses the damages to the individual, but does not hold the wrongdoer accountable in a criminal court.

So what about those instances in which a scammer intentionally preys upon homeowners in the hopes of pocketing the cash and skipping town? Is this a criminal act?

Construction Fraud Prosecutions in Texas

Tarrant County, Texas has recently begun focusing prosecution efforts on contractor fraud. Homeowners in Tarrant County may call their local police agency to make an initial report. Additionally, homeowners may call the Tarrant County District Attorney’s White Collar Crime and Public Integrity Unit, created by Sharen Wilson, the District Attorney in Tarrant County. Wilson stated in a recent news article, “Construction fraud is a crime, and our citizens need to be protected from it.

When homeowners call the DA’s office, they will talk with a representative to see if the wrongdoing rises to the level of a complaint. If a complaint is filed, the DA’s office reviews the facts of the complaint for potential prosecutable offenses based on a variety of legal theories in criminal law. If the DA’s office finds elements of criminality, an investigation ensues which may result in criminal charges for the wrongdoer.

Construction Fraud Under the Texas Penal Code

The Texas Penal Code does not specifically provide a code section for construction or contractor fraud crimes. What are some of the legal theories and statutes the DA’s office is using to go after these home repair Houdinis? The Tarrant County DA’s office has prosecuted construction and roofing contractors who have absconded with the funds for misappropriation of fiduciary property, theft, insurance fraud, and elder financial abuse, to name a few.

Recently, the Tarrant County DA’s White Collar Crime Team prosecuted a man for theft from elderly victims. For his crimes, this man received three years in jail and an order to make restitution of $77,000.00 to his elderly victims. On multiple occasions, the man used aliases to approach homeowners in the mid-cities and Fort Worth areas, soliciting demolition and repair work. He accepted large sums of money, but never completed the work, or, did substandard work.

In January of 2019, another man pled guilty to Theft of $150,000- $300,000, for scamming 41 residents in the Arlington, North Richland Hills, and Mansfield areas, out of funds they paid him for roofing repairs. This man’s scheme involved sending employees door-to-door to sign customers up for repairs. The employees took checks from the victims, but the roofing work never began. As part of his plea agreement, the man was ordered pay the victims $230,000.00 in restitution.

Each of these types of cases is fact-specific and context-laden. Tarrant County has decided to take a strong stand against construction fraud. “We have made it a priority to put white-collar criminals on notice in Tarrant County—we will not tolerate scammers preying on our residents,” says Matt Smid, chief of the DA’s White Collar Crime Team. The county has also taken steps to provide the public with information regarding scams and fraud that is targeted at seniors. If you feel that you have been a victim of contractor fraud, you do have some options in Tarrant County.

Special Note to Attorneys who represent victims or perpetrators of constructions scams, implicating civil and criminal causes of action: Texas Disciplinary Rule of Professional Conduct 4.04(b) states that a lawyer shall not present, participate in presenting, or threaten to present criminal charges solely to gain advantage in a civil matter. According to the Texas Center for Legal Ethics, “giving notice required by law or applicable rules of practice, or procedure as a prerequisite to instituting criminal charges, does not violate the Rule, unless the underlying criminal charges were made without probable cause.

Probable Cause Affidavit Franks Hearing

Challenging the Probable Cause Affidavit | Franks Hearing Requirements

By | Fraud

Problems with Probable Cause: Law Enforcement Allegedly Used Conflicting Third Party Statements as the basis for a Search Warrant

Probable Cause Affidavit Franks HearingEvidence obtained by a valid search warrant can be used at trial. But what if the search warrant was based on information provided by a third party who later recants the information he provided? Further, what if law enforcement mischaracterized the evidence when presenting it to the magistrate in the application for the warrant? What legal remedy, if any, exists to support defendants who find themselves in this situation? The Fifth Circuit heard United States v. Minor in August, this article summarizes the Court’s surprising holding.

See the full text of the 5th Circuit’s decision in United States v. Minor (USCA 5th Cir. 2016)

US v. Minor – Rogue Bank Employee Hatches Identity Theft Scheme

Anthony Minor and his friend Katrina Thomas, a Fannie Mae employee, hatched a plan to steal the identities of numerous Fannie Mae clients with the intention of using the personal information to obtain entry into checking and savings accounts. Thomas created a list of client names and personal information while at work, and then provided Minor with the information. Minor was successful in using the data to steal money from those individuals’ bank accounts by contacting banks, pretending to be the individual, and transferring funds to Minor’s personal account.

During the time of these crimes, Minor was frequenting a hotel. Eventually, law enforcement began investigating Minor; the lead investigator assigned to the case was Albert Moore. In a warrant affidavit, Moore states that Will Crain, the director of security at the hotel, reported to law enforcement that he had seen Minor with expensive merchandise. That statement was used to establish probable cause for obtaining a search warrant. Law enforcement used the search warrant to search Minor’s dwellings, and the search rendered evidence of the crimes. Minor was arrested on numerous bank fraud charges.

Minor Goes to Trial on Federal Fraud Charges

At trial, a jury found Minor guilty of bank fraud, aiding and abetting bank fraud, conspiracy to commit bank fraud, using or trafficking in an unauthorized access device, aggravated identity theft, and aiding and abetting aggravated identity theft. Minor was sentenced to 192 months’ imprisonment, a sentence that incorporated a six-level enhancement, but was set well below the federal Sentencing Guidelines recommendation at the trial judge’s discretion.

Minor appealed to the Fifth Circuit Court of Appeals, arguing that the search warrant contained false information and that he is entitled to a Franks Hearing to establish the facts surrounding the statements used to support the finding of probable cause for the search warrant.

Minor Appeals to the Fifth Circuit Arguing Agents Lacked Probable Cause for Search Warrant

Minor appealed to the Fifth Circuit Court of Appeals, arguing:

  1. that the trial court should have held a Franks Hearing to determine whether law enforcement improperly obtained a search warrant for his car,
  2. that even if Minor’s case does not meet the requirement for a Franks Hearing, that an exception be carved out specifically for his case, and
  3. that his sentence should not have included a six-level enhancement (more prison time).

Minor alleged that Crain, the hotel’s security guard, testified at trial that he did not see Minor carrying merchandise and therefore, law enforcement did not have probable cause to secure a search warrant.

Franks Hearing Requirements—A Supreme Court Precedent

In Franks v. Delaware, 438 U.S. 154 (1978), the Supreme Court held that

“where the defendant makes a substantial preliminary showing that a false statement knowingly and intentionally, or with reckless disregard for the truth, was included by the affiant in the warrant affidavit, and if the allegedly false statement is necessary to the finding of probable cause, the Fourth Amendment requires that a hearing be held at the defendant’s request.”… [Further, if the] “allegation of perjury or reckless disregard is established by…a preponderance of the evidence…the search warrant must be voided and the fruits of the search excluded to the same extent as if probable cause was lacking on the face of the affidavit.”

Id. at 155-56.

Federal Sentencing Guidelines for Bank Fraud Crimes

“U.S.S.G. § 2B1.1 (2014), provides that “if the defendant’s offense involved 250 or more victims, then § 2B1.1(b)(2)(C) requires the court to increase the defendant’s offense level by 6 levels. U.S.S.G. §2.B1.1(b)(2)(C).

The Fifth Circuit Weighs In; Holds that the Affiant’s statements were not “deliberately false or made with reckless disregard for the truth.”

The Fifth Circuit relied heavily on Supreme Court precedent with regard to the evidentiary appeal and deferred to the reasoning of the trial court with regard to sentencing.

As “Minor concedes that Agent Moore did not intentionally insert false information into the affidavit, or act with reckless disregard for the truth…and because Minor failed to make the requisite substantial preliminary showing, [Minor] is not entitled to a Franks hearing.” Secondly, “[Minor] asks us to hold that in a case where a law enforcement affiant is relying upon information….from other[s]…the challenger should not be required to meet the intentional or reckless requirement to proceed a Franks hearing.” Here, “Minor’s argument is meritless under any standard…[and he] has not cited any authority recognizing his proposed exception to Franks…we decline…to create a new exception to well-established Supreme Court precedent.

Further, the Fifth Circuit said, “we agree with the district court that Minor…actively employed the means of identification of over 250 victims in furtherance of their bank fraud scheme…with the object of unlawfully accessing those customers’ bank accounts without their consent.” Accordingly, the Fifth Circuit affirms the holding and sentence of the trial court.

MVRA Restitution Victim Benns

Who Qualifies as a “Victim” Under the Mandatory Victims Restitution Act?

By | Fraud

Definition of “Victim” under the MVRA, leaves HUD out in the Cold | Who Qualifies for Relief Under the Mandatory Victims Restitution Act?

HUD MVRA Restitution Victim BennsUnited States v. Benns (5th Circuit, 2016) is a case regarding the Mandatory Victims Restitution Act (MVRA).  In this case, the US Court of Appeals for the Fifth Circuit held that HUD is not a victim of the defendant’s crime, even though the HUD was out a considerable amount of money after defendant forged a credit application. Read more about USA v. Benns below.

Anxious Couple Seeks Help for Mortgage Default

Desperate for relief from a mortgage in arrears, Michael and Brenda Arnold conveyed ownership rights of their Arlington home to Rickey Benns. At the time of the conveyance, Benns agreed to rent the home and pay the mortgage from the profits made from future tenants. The mortgage loan, held by Bank of America and insured by the United States Department of Housing and Urban Development (“HUD”), remained in the Arnold family’s name. Unfortunately, Benns reneged on his agreement and failed to pay off the mortgage, triggering foreclosure proceedings against the Arnolds, unbeknownst to them.

Looming Foreclosure Leads to Desperate Acts of Forgery

In an attempt to prevent foreclosure of the property, Benns secretly tried to refinance the property. Benns forged Arnolds’s signatures on loan modification documents and used a false pay stub to trick the bank into believing the Arnolds were creditworthy and still owned the property. After the application was denied by the bank, the property was eventually foreclosed on and sold below market value. Because Bank of America’s mortgage was insured by HUD, HUD paid the bank $54,906.59—the difference between what HUD paid Bank of America following foreclosure and the later sale price of the property.

A Plea is Entered and Restitution is Ordered

Benns plead guilty to one count of making false statement on a credit application, a violation of 18 U.S.C. § 1014. Upon entering the guilty plea, Benns “accepted the accuracy of a factual resume prepared by the government…author[izing] restitution to the victims of the community…includ[ing] restitution arising from all relevant conduct, not limited to that arising from the offense of conviction alone.” Benns was sentenced to twenty-seven months imprisonment, five years of supervised release, and ordered to pay restitution, totaling $544,602.42, under the federal Mandatory Victims Restitution Act (“MVRA”). Benns appealed to the United States Court of Appeals for the Fifth Circuit, arguing that HUD was not a victim of his convicted offense.

What is the Mandatory Victims Restitution Act (“MVRA”)?

The MVRA requires district courts to order restitution payments to crime victims during sentencing. 18 U.S.C. § 3663A. Under federal law, a victim is defined as, “a person directly and proximately harmed as a result of the commission of an offense for which restitution may be ordered.” Id. Typically, restitution is limited to losses arising from underlying conduct of a defendant’s offense of conviction. Hughley v. United States, 495 U.S. 411, 412-13 (1990); United States v. Espinoza, 677 F.3d 730, 732 (5th Cir. 2012); United States v. Maturin, 488 F.3d 657, 660-61 (5th Cir. 2007). To be a considered a victim under the MVRA, a person or organization must “suffer a foreseeable loss as a result of the conduct underlying the convicted offense.” Id. The government must establish, by a preponderance of the evidence, direct or proximate causation between the conduct underlying the offense and the actual loss suffered by the victim. United States v. Reese, 998 F.2d 1275, 1282 (5th Cir. 1993).

The Big Issue: Is HUD really a victim of Benns’s forgery scheme?

The United States Court of Appeals for the Fifth Circuit must determine whether HUD was a victim of Benn’s convicted offense. If the Court finds that HUD was a victim, then HUD will receive restitution under the MVRA. If the Court finds that HUD was not a victim, then Benns’ restitution award, which was imposed by the district court, could be amended or vacated altogether.

The Court of Appeals for the Fifth Circuit Weighs In with a Surprising Twist

Here, the Court weighs the argument made by the government against the facts of the case. The government argues that HUD’s loss was a direct result of Benn’s false credit application because the filing of the application itself delayed the foreclosure, which resulted in HUD selling the property at a loss. However, the Court states that the government did not produce evidence that the false credit application resulted in a delay, or that such a delay resulted in a greater loss for HUD than if HUD had sold the property any sooner than it actually did. The Court holds, because of the lack of evidence connecting the false credit application with the loss incurred by HUD, HUD is not to be considered a “victim” under the MVRA and, accordingly, cannot receive an award of restitution. “Benns was indicted and pleaded guilty to one count of filing a false credit application…it therefore does not follow that the behavior underlying Benn’s offense was the cause of HUD’s loss.”

Restitution could have only been awarded had the government established a direct or proximate causation between Benn’s false credit application and HUD’s loss when HUD sold the property at a foreclosure auction. The Court says the government failed to do so. Even though HUD was out $54,906.59, the Court does not consider HUD to be a victim of Benn’s convicted offense and vacates the restitution award.

Fraudulent execution of document Texas

Court Sets Aside Fraud Conviction Based on the Meaning of One Common Word in the Statute

By | Fraud

What does it mean to cause someone to fraudulently execute a document?

Fraudulent execution of document TexasRoger and Aaron Liverman filed separate mechanic’s lien affidavits with the Denton County clerk, claiming that they had worked on Katheryn Payne’s home and had not been paid. The county clerk filed and recorded the liens, which is the customary practice. The mechanic’s liens were determined to be fraudulent, and the Livermans were charged with securing the execution of documents by deception. The Livermans were convicted and placed on community supervision.

On appeal, the court of appeals reversed the Livermans’ convictions. The State appealed to the Court of Criminal Appeals. Because the case turned on an interpretation of statutory language, the CCA reviewed the case de novo; in other words, rather than reviewing the reasonableness of the lower court’s decision, the CCA made its own independent decision based on the facts and the statute.

OpinionLiverman v. StateTexas Court of Criminal Appeals 2015

The language of the statute under which the Livermans were convicted states that a person commits a crime if, “with intent to defraud or harm any person, he, by deception causes another to sign or execute any document affecting property or service . . . .” The case before the CCA boiled down to three questions: (1) What does the term “execute” mean in the statute? If nothing was executed, there was no offense. (2) Did the Livermans’ action of filing the fraudulent liens meet the definition of execution? (3) Who actually executes a mechanic’s lien when it is filed? The offense involves deceptively causing “another” to sign or execute a document. If the clerk’s actions constituted execution, the Livermans might be guilty. If the Livermans executed the affidavits themselves by filing them, then they could not be convicted under the statute.

Arguments against Fraudulent Execution of a Document

The State and the Livermans put forward a number of arguments for their respective positions. The arguments involved comparing the “sign and execute” language of the statute with a related provision that uses the phrase “file and record;” consideration of the legislative intent and history when the statute was enacted; and which action actually perfected the liens. After reviewing the arguments and performing its own analysis, the CCA concluded:

(1) The term “execute” means more than just to sign a document and involves the broader act of bringing a document to its final, legally enforceable form.

(2) When the Livermans filed the affidavits with the clerk, the affidavits accomplished their role in perfecting the mechanic’s lien. Therefore, the act of filing the affidavits was equivalent to execution.

(3) Because Texas law requires the person claiming a mechanic’s lien to “file” the affidavit, then the Livermans did execute the affidavits by filing them. However, the CCA considered whether the clerk’s actions might also constitute execution. Although the county clerk is required by law to record or index a filed affidavit, the clerk’s failure to do so does not invalidate the lien. If the clerk’s action of recording or indexing can be omitted and the affidavit still be valid, then the clerk’s actions clearly did not “execute” the affidavits.

But, asked the Court, did the clerk “execute” the affidavits by accepting them when the Livermans filed them? The CCA answered in the negative. The statutory requirement to file the affidavit “with the county clerk” means that the clerk is simply the recipient of the filing and plays no role in its execution.

Because no action of the clerk executed the affidavits, the CCA held, the Livermans did not cause “another” to “execute” the documents as required for the offense of which they were convicted. The CCA agreed with the court of appeals, with the result of setting aside the Livermans’ conviction.

Many people will recall President Bill Clinton’s grand jury testimony in the Monica Lewinsky case. When asked why he wasn’t lying when the told his aides that there was nothing going on between him and Miss Lewinsky, the President said “[i]t depends on what the meaning of the word ‘is’ is.”

While many will find the President’s response amusing, a Criminal Defense Attorney in Fort Worth may see an opportunity. Although not nearly so salacious as the Monica Lewinsky affair, the Livermans’ case truly turned on what the meaning of the word “execute” is.

A Criminal Defense Attorney in Fort Worth will understand and appreciate the nuances of the statutory language and may succeed in acquittal by arguing that the law does (or does not) say what it seems to say.