White-Collar Crime

Closing attorney loses federal mortgage fraud appeal, now faces likely lengthy prison term

A federal appeals court has reinstated the conviction of a North Carolina real estate closing attorney who faces a sentence of up to 25 years in a mortgage-fraud case.

Convicted for her role in closing 210 transactions between 2000 and 2004, for which she received $235,000 in attorney fees, Victoria Sprouse had won a new trial from a federal district court that determined its own jury instructions on what constituted honest services fraud had involved plain error.

However, Sprouse had the burden of showing that the erroneous instruction adversely affected her substantial rights—which in this case meant she had to show that the jury convicted her based on the instruction. That she failed to do, and the district court abused its discretion in concluding otherwise, the Richmond, Va.-based 4th U.S. Circuit Court of appeals ruled Monday in a per curiam opinion (PDF).

A higher burden of proof applied because Sprouse did not object at trial to the honest services instruction, the 4th Circuit explained.

Sprouse now faces sentencing on remand concerning the multiple fraud, money-laundering, perjury and obstruction charges on which she was convicted.

The real estate “flipping” scheme in which Sprouse participated involved properties that were quickly bought and sold at an inflated profit, backed by documentation Sprouse created and, in some cases, notarized, that showed incorrect information concerning facts such as the amount of money put into the deal and who provided the cash, the opinion says.

A Department of Justice press release at the time of Sprouse’s conviction in 2009, provides more details about her conviction.

See also:

ABAJournal.com: “I Didn’t Know What I Was Signing, Testifies ‘Ruined’ NC Real Estate Attorney”

ABAJournal.com: “NC Lawyer Convicted in $15M Mortgage Fraud Case”

ABAJournal.com: “Real Estate Closing Attorney Wins Reversal of ‘Honest Services’ Mortgage Fraud Conviction”

Charlotte Observer (June 2012): “Victoria Sprouse to be jailed until trial for bankruptcy fraud charges”

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