Tuesday, April 21, 2015
Ninth Circuit Orders New Hearing in Huge Nevada Mortgage Fraud
Panel Says Prosecutors Violated Brady in Prosecution of Daughter of Prominent San Diego Lawyer
By KENNETH OFGANG, Staff Writer
A broker convicted of what prosecutors said was the biggest mortgage fraud scheme in Nevada history is entitled to a hearing in her bid for a new trial, the Ninth U.S. Circuit Court of Appeals ruled yesterday.
The panel said prosecutors violated Eve Mazzarella’s rights under Brady v. Maryland by failing to disclose before trial that three of their witnesses may have testified in anticipation of immunity or government employment. While the prosecution presented a great deal of evidence tying Mazzarella to the fraud, and the defense did not establish that Mazzarella was prejudiced by the Brady violations, Judge Ronald Gould wrote for the appellate court, Mazzarella is entitled to discovery and an evidentiary hearing in her bid to prove that she would have been acquitted on at least some of the charges if favorable evidence had not been suppressed.
Mazzarella is the daughter of prominent San Diego trial lawyer Mark Mazzarella, a onetime chair of the State Bar’s Litigation Section and a regular on lists of the city’s top attorneys. Barred from the real estate industry pending the outcome of her appeal, she is reportedly working for her father’s law firm.
She and her former husband, Steven Grimm, were convicted on multiple counts of mail fraud, wire fraud, bank fraud, and conspiracy. Dubbed by one publication “the Bonnie and Clyde of Nevada real estate,” they engaged in approximately 450 straw buyer transactions involving approximately 227 properties with a total purchase price of over $107 million, prosecutors said.
Prosecutors presented testimony that the straw buyers were paid a few thousand dollars each for their services, and told that the defendants would make the mortgage payments for them.
When the market went bust, they defaulted on nearly all of the loans, costing the banks more than $52 million, prosecutors said
Senior U.S. District Judge Roger Hunt sentenced Grimm to 25 years in prison, and Mazzarella to 14 years. An agent who worked for them, Melissa Beecroft, was sentenced to three years.
Mazzarella spent nearly two years in custody before she was granted release pending appeal last year, after the Ninth Circuit panel said she had raised a substantial issue.
Hunt granted Grimm release on home detention after the Ninth Circuit allowed Mazzarella’s release. His appeal, raising several of the same issues, was scheduled to be heard last month before the panel took it off calendar pending its ruling on his ex-wife’s case.
New Trial Motion
In her motion for a new trial, Mazzarella argued that prosecutors should have disclosed that several of the witnesses had reason to color their testimony. The defense did not learn until after trial that Kim Brown, an employee who testified for the prosecution had copied thousands of pages of documents from the firm’s offices and turned them over to the government, and had received an informal promise of immunity from the government.
There were also belated disclosures that Alicia Hanna, a former employee of one of the banks, had been exchanging emails with an FBI agent beginning before the trial, and had suggested she was interested in working for the bureau. After Hunt denied the new trial motion, concluding that neither Brown nor Hanna had any reason to give false testimony and that jurors would likely have found them credible regardless of the later disclosures, the defense filed another motion, based on a new disclosure.
The last motion concerned Jennifer Wolff, who had testified against Mazzarella, and who testified in a related trial that she understood that she would not be prosecuted in return for testifying. Hunt denied that motion, after the government said the testimony was a product of a misunderstanding and that immunity had not been granted; the judge found that even if there was such a promise, its relationship to Mazzarella was “tenuous at best” because it was unclear whether Wolff thought she was to receive immunity based on her testimony at both trials or solely at the other trial.
Gould, writing for the Ninth Circuit, said the district judge was wrong in holding that the Brown and Hanna disclosures were not exculpatory under Brady.
The same prosecutor who tried the case against Mazzarella, Gould explained, later said at another trial that Brown had been promised immunity. Brown’s testimony that she approached the FBI out of a desire to do the right thing, and the seeming innocuousness of Hanna’s statements about working at the FBI, went to the question of prejudice, but did not justify a finding that timely disclosure would not have been favorable to the defense, Gould said.
The jurist went on to conclude that Brown’s copying of business records and delivery of them to the government may have been an illegal search, and that the district judge must allow discovery and hold an evidentiary hearing on that issue as well.
The issues the lower court will have to resolve, Gould said, are whether Brown acted on her own or at the government’s request, whether she had actual or apparent authority to turn over the documents to the government, whether the FBI or IRS actually received what Brown claimed to have turned over to them, whether any of the evidence presented at trial was derivative of anything Brown produced, and whether—if a Fourth Amendment violation did occur—the defendant was prejudiced by it.
The case is United States v. Mazzarella, 12-10171.
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