Court filing
Motion in Limine re Lenders by USA as to Eric Dean Sheppard. Responses due by 12/18/2023 — USA v. Sheppard (Dkt. 152, S.D. Fla.)
Filed December 4, 2023 in USA v. Sheppard; one of 253 filings from this case.
Record facts
| Court | U.S. District Court for the Southern District of Florida |
|---|---|
| Filed | 2023-12-04 |
U.S. District Court for the Southern District of Florida · No. 1:22-cr-20290-BB · Doc. 152 · 2023-12-04 · Docket on CourtListener
Full text
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 22-20290-CR-BLOOM(s)
UNITED STATES OF AMERICA
vs.
ERIC DEAN SHEPPARD
Defendant.
/
UNITED STATES’ MOTION TO
PRECLUDE DEFENSE CROSS EXAMINATION AND
ARGUMENT REGARDING ALLEGED VICTIM NEGLIGENCE
The United States, by and through the undersigned Assistant United States Attorney,
moves to preclude the defense from cross examination and argument regarding alleged negligence
by the lenders and loan processors responsible for administering loans that Defendant fraudulently
obtained. The defense should also be precluded from inquiring regarding financial gain obtained
by the lenders in offering CARES Act loans. The government intends to call as witnesses
representatives from Cross River Bank, Northeast Bank, and the SBA (which administered
Defendant’s EIDL loans). These witnesses, in addition to PayPal and WebBank, are the victims of
Defendant’s fraud. Yet based on defense counsel’s cross examination last week of the Paypal
witness and documents provided by the defense in advance of the upcoming witness’ testimony,
the government has reason to believe that the defense intends to improperly delve in victim
blaming as part of the defense. They should not be permitted to do so, as evidence of alleged lender
negligence and profit is irrelevant to the question of Defendant’s guilt and is inadmissible as a
defense.
Case 1:22-cr-20290-BB Document 152 Entered on FLSD Docket 12/04/2023 Page 1 of 8
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Argument
A. Courts Routinely Find Evidence of Lender Negligence is Inadmissible
The Eleventh Circuit has held that evidence of a lender’s alleged negligence is not relevant
and is properly excluded at trial. United States v. Powell, 509 F. App’x 958, 967 (11th Cir. 2013)
(“Whether the lenders in this case knew or should have known that the loan applications were
fraudulent is of no consequence to this action. It has no bearing on the essential element of
[defendant’s] conduct, namely her intent to participate in the mortgage fraud scheme.”).
“Likewise, whether the lenders negligently created an environment of lax lending standards is
irrelevant. Contributory negligence is not a defense to the crime of fraud.” Id. “[W]hatever role,
if any, a victim’s negligence plays as a bar to civil recovery, it makes little sense as a defense under
a criminal statute that embraces ‘any scheme or artifice to defraud.’ A perpetrator of fraud is no
less guilty of fraud because his victim is also guilty of negligence.” United States v. Svete, 556
F.3d 1157, 1165 (11th Cir. 2009) (citations omitted).
More recently, in United States v. Rabuffo, 716 F. App’x 888, 899 (11th Cir. 2017), the
Eleventh Circuit declined the defendants’ argument to overturn their convictions for bank and wire
fraud in an extensive mortgage fraud scheme based on the district court’s exclusion of certain
evidence at trial. The defendants’ “arguments rest[ed] on the contention that bad conduct by [the
mortgage company] and its employees undercut the government’s case, and was relevant to
whether they (and their co-defendants) committed bank fraud.” Id. Specifically, and relevant
here, the defendants “contend[ed] that they could not have committed bank fraud because, even if
[the mortgage company] knew their mortgage applications contained false representations, the
applications would have been approved anyhow,” and their convictions should be overturned
Case 1:22-cr-20290-BB Document 152 Entered on FLSD Docket 12/04/2023 Page 2 of 8
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because the district court excluded such evidence at trial. Id. The Eleventh Circuit, however,
rejected defendants’ argument, affirmed the convictions and sentences, and held that “the lender’s
negligence, or even intentional disregard, cannot excuse another’s criminal fraud.” Id. at 900
(quoting United States v. Lindsey, 850 F.3d 1009, 1014 (9th Cir. 2017)). In affirming the district
court’s decision to exclude the evidence, the Rabuffo court noted that “the gravamen of § 1344 is
the ‘scheme,’ rather than the ‘completed fraud,’ and . . . the offense therefore does not require
‘damage’ or ‘reliance.’” Rabuffo, 716 F. App’x at 899 (quoting Loughrin v. United States, 573
U.S. 351, 372 (2014)).
B. Whether a Victim is Sophisticated or Not is Immaterial to the Intent to Defraud
In the Eleventh Circuit, as in other circuits, the government need not prove that a fraud
scheme was calculated to deceive only persons of ordinary prudence and comprehension, as fraud
statutes protect the naïve as well as the sophisticated, and it is immaterial whether only the most
gullible victims would have been deceived. Svete, 556 F.3d at 1165 (“Proof that a defendant
created a scheme to deceive reasonable people is sufficient evidence that the defendant intended
to deceive, but a defendant who intends to deceive the ignorant or gullible by preying on their
infirmities is no less guilty. Either way, the defendant has criminal intent.”); see also United States
v. Hendrick, 663 F. App’x 788, 790 (11th Cir. 2016) (holding that the wire fraud statute “prohibits
‘any scheme or artifice to defraud,’ no matter how fanciful and without regard to whether a person
of ordinary prudence and comprehension would rely upon the misrepresentation”) (citing Svete,
556 F.3d at 1169); United States v. Masino, 2021 U.S. App. Lexis 22615, 26*-27* (11th Cir. 2021)
(affirming a wire fraud conviction and holding that “the government did not need to prove that the
victims were actually tricked—or even that a person of ordinary prudence would have been tricked
by defendants’ scheme”); United States v. Teers, 591 F. App’x 824, 844 (11th Cir. 2014) (“[T]he
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negligence of the victim in failing to discover a fraudulent scheme cannot be a defense to bank or
wire fraud ….”).
The susceptibility of a victim to a fraud scheme, including a victim financial institution, is
irrelevant to a defendant’s guilt or innocence. As explained by the Fourth Circuit in United
States v. Colton, 231 F.3d 890, 903 (4th Cir. 2000): “The susceptibility of the victim of the fraud,
in this case, a financial institution, is irrelevant to the analysis: If a scheme to defraud has been
or is intended to be devised, it makes no difference whether the persons the schemers intended to
defraud are gullible or skeptical, dull or bright. These are criminal statutes, not tort concepts.”
Whether the institutional victim’s internal controls or personnel were sufficient to detect and
prevent fraud is irrelevant to the crimes charged in this case, and inadmissible as a defense.
C. Victim Negligence is Irrelevant for Assessing the Materiality of a False Statement
The federal mail fraud, wire fraud, and bank fraud statutes generally require a
misrepresentation or concealment of material fact. See Neder v. United States, 527 U.S. 1, 22-25
(1999). In assessing whether a misrepresentation of fact was material, the Eleventh Circuit has
time and time again rejected the argument, commonly made by defendants in fraud cases, that
victim negligence is somehow relevant to materiality. The materiality requirement does not
permit defendants to backdoor victim negligence into a case because materiality is an objective,
rather than subjective, test. See Svete, 556 F.3d at 1165 (holding that “the focus of the mail fraud
statute … is on the violator, [therefore] the purpose of the element of materiality is to ensure that
a defendant actually intended to create a scheme to defraud….and whatever role, if any, a victim’s
negligence plays as a bar to civil recovery, it makes little sense as a defense under a criminal statute
that embraces ‘any scheme or artifice to defraud.’”); United States v. Scott, 701 F.2d 1340, 1344-
45 (11th Cir. 1983) (rejecting defendant’s assertion that loan officers’ testimony that they were not
Case 1:22-cr-20290-BB Document 152 Entered on FLSD Docket 12/04/2023 Page 4 of 8
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actually influenced by defendant’s false statements was evidence that the defendant lacked the
intent to influence).
The materiality requirement is not concerned with whether a decisionmaker relied on a
false statement, but instead materiality focuses on whether a false statement “has a tendency to
influence or is capable of influencing a decision.” United States v. Neder, 197 F.3d 1122, 1128
(11th Cir. 1999); see also United States v. Swearingen, 858 F.2d 1555, 1558 (11th Cir. 1988)
(holding that a bank’s actual reliance on false statements is not determinative of materiality;
materiality turns on “whether the false representations were capable of influencing the Bank’s
actions”).
Along similar lines, the Eleventh Circuit has held that actual reliance is not a requirement
for materiality. See Powell, 509 F. App’x at 967 (“Whether the lenders in this case knew or should
have known that the loan applications were fraudulent is of no consequence to this action.”); see
also Neder, 197 F.3d at 1129 (“[T]he issue is whether a statement has a tendency to influence or
is capable of influencing a decision, and not whether the statement exerted actual influence, a false
statement can be material even if the decision maker did not actually rely on the statement.”)
As noted above, the Eleventh Circuit in Rabuffo rejected the argument, commonly made
by defendants in fraud cases, that victim negligence is somehow relevant to materiality. As the
Rabuffo court observed, the materiality requirement does not allow defendants to backdoor victim
negligence into a case because materiality is an objective, not subjective test. Rabuffo, 716 F.
App’x at 899-900 (holding that defendants’ contention that they could not have committed bank
fraud if the negligent or complicit mortgage processer knew that the statements were false
“misse[d] the mark” because materiality focuses on the violator’s intent); see also Lindsey, 850
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F.3d at 1015 (“A false statement is material if it objectively had a tendency to influence, or was
capable of influencing, a lender to approve a loan.”). The materiality requirement is not
concerned with a statement’s subjective effect, but instead on a statement’s objective reliability.
Svete, 556 F.3d at 1165; see also Neder, 527 U.S. at 24–25 (“The common-law requirement[ ] of
‘justifiable reliance’ ... ha[s] no place in the federal fraud statutes.”).
D. The Relevant Inquiry is of the Defendant’s Intent, Not the Victim’s Negligence
In the instant case, the relevant inquiry is whether: (i) Defendant submitted fraudulent loan
applications; (ii) whether Defendant had the requisite intent to defraud the SBA, PPP lenders and
processors, and financial institutions holding the accounts into and through which fraudulent loan
proceeds were deposited or transferred; and (iii) for the purpose of certain counts, whether the
information that Defendant submitted and withheld from the SBA, PPP lenders and processors,
and financial institutions had the natural tendency to influence or was capable of influencing them.
Hindsight challenges to any of these institutional victims’ internal controls are irrelevant, a waste
of time, and create the risk of jury confusion. See Fed. R. Evid. 404(b).
Accordingly, this Court should prohibit Defendant from introducing evidence or making
arguments concerning any supposed victim negligence, including any criticism of a PPP lender,
processor, or SBA’s internal controls, as well as the internal controls of banks and financial
institutions whose accounts were used to receive or transfer fraudulent loan proceeds. See United
States v. Biesiadecki, 933 F.2d 539, 544 (7th Cir. 1991) (upholding exclusion of testimony that
“would have improperly shifted the jury’s attention away from the knowledge and intent of
[defendant] and focused instead on the beliefs of the victim of the alleged scheme to defraud”).
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For similar reasons, the Court should exclude any evidence or arguments concerning the
SBA’s guarantees to PPP lenders as a defense to the alleged fraud. The government does not
know on what basis the defense would try to introduce evidence or make arguments concerning
this guarantee, but any such evidence or argument would be irrelevant to the case, a waste of time,
and tend to confuse and mislead the jury, and as such it should be excluded. Even in civil cases,
where a victim’s negligence might be relevant to damages, evidence of financial compensation
(insurance) is inadmissible to prove negligence or wrongdoing. Fed. R. Evid. 411. This is even
more true in the criminal context of the instant case, where victim negligence is irrelevant, and
should therefore be excluded.
E. The Court should preclude the defense from introducing evidence and arguments
concerning any profit by the above-referenced victims.
The Eleventh Circuit has held that “[w]hether the lenders were motivated by profit or did,
in fact, profit from [defendant’s] efforts is equally immaterial.” Powell, 509 F. App’x at 967.
“[T]he government can convict a person for mail or wire fraud even if his targeted victim never
encountered the deception—or, if he encountered it, was not deceived.’” Id. (quoting United States
v. Svete, 556 F.3d 1157, 1166 (11th Cir.2009) (en banc) (internal quotations and citations
omitted)); see also Rabuffo, 716 F. App’x at 900 (“Our precedent thus establishes that whether
[the victims] . . . would have or in fact did rely on the fraudulent statements contained in the
mortgage applications does not undermine the fairness of the trial or the jury’s findings.”); United
States v. Gray, 367 F.3d 1263, 1269-70 (11th Cir. 2004) (finding defendant guilty of mail fraud
the moment the defendant mailed a letter with fraudulent misstatements, noting that even had
victim not received the letter defendant would still be guilty of mail fraud). Therefore, the Court
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should exclude any evidence or arguments concerning any profits the victim lenders may have
made as a result of the loans that are at issue in this conspiracy.
The undersigned AUSA has conferred with Defendant’s counsel, who indicated that the
Defendant opposes this motion in limine.
Conclusion
Accordingly, the defense should be prohibited from delving into improper argument
regarding victim negligence or financial gain/profit motive, whether through cross examination or
the introduction of evidence.
Respectfully submitted,
MARKENZY LAPOINTE
UNITED STATES ATTORNEY
By: s/Aimee Jimenez___________
Aimee C. Jimenez
Assistant United States Attorney
Court No. A5500795
99 Northeast 4th Street
Miami, Florida 33132-2111
Tel: (305) 961-9028
Email: aimee.jimenez@usdoj.gov
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on December 4, 2023, I electronically filed the foregoing
document with the Clerk of the Court using CM/ECF, which will send Notices of Electronic Filing
to all counsel of record. A copy of this motion is also being served on counsel of record in person.
s/Aimee Jimenez____________
Aimee C. Jimenez
Assistant United States Attorney
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