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Information - United States v. Tracy and Carolyn Wade

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Court	U.S. District Court for the Southern District of Florida
Filed	2024-04-02

U.S. District Court for the Southern District of Florida · No. 0:23-cr-60173-KMW · Doc. 35 · 2024-04-02 · Docket on CourtListener

Summary

The United States' first motion in limine in United States v. Carolyn Denise Wade, No. 0:23-cr-60173-KMW, in the U.S. District Court for the Southern District of Florida, entered April 2, 2024 as Document 35. It asks the Court to bar the defendant from offering evidence or argument about alleged negligence by the victim lenders, their loan processors or the SBA, about any profit by those victims, and about jury nullification, including the government's charging decisions. The motion states that the September 14, 2023 Indictment charges one count of wire fraud under Title 18, United States Code, Section 1343, alleging a PPP loan of $20,833 based on a claimed 2019 gross business income of $113,560. It cites Eleventh Circuit cases including United States v. Svete for the position that victim negligence is not a defense to fraud. It is signed by AUSA David A. Snider.

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA

CASE NO. 23-60173-CR-WILLIAMS

UNITED STATES OF AMERICA

vs.

CAROLYN DENISE WADE,

Defendant.
/

FIRST MOTION IN LIMINE BY THE UNITED STATES

Introduction

The United States of America, by and through its undersigned counsel, in advance of the
jury trial as to Defendant Carolyn Denise Wade (“Defendant”), hereby moves the Court for in
limine rulings as follows:
1.
The Court should preclude Defendant from introducing evidence and arguments
concerning any alleged negligence by the victim lenders, their loan processors, or
the United States Small Business Administration (“SBA”);
2.
The Court should preclude Defendant from introducing evidence and arguments
concerning any profit by the above-referenced victims; and
3.
The Court should preclude Defendant from introducing any evidence and argument
relating to jury nullification, including evidence and argument about the nature of
the prosecution, use of federal resources, and the Government’s charging decisions.
The Court should grant the relief requested by the United States for the reasons addressed
below.
Case 0:23-cr-60173-KMW Document 35 Entered on FLSD Docket 04/02/2024 Page 1 of 12

Background

On September 14, 2023, a grand jury sitting in the Southern District of Florida returned the
Indictment (ECF No. 3) charging Defendant with one count of wire fraud, in violation of Title 18,
United States Code, Section 1343. In sum, the Indictment alleges that, from May 2021 through
August 2021, Defendant devised and participated in a scheme to defraud the SBA and its
participating lenders by, among other things, submitting and causing the submission of a materially
false and fraudulent application for a loan through the SBA’s Paycheck Protection Program
(“PPP”). The PPP, which authorized forgivable loans to small businesses for job retention and
certain other expenses, was created by the Coronavirus Aid, Relief, and Economic Security
(CARES) Act to provide emergency financial assistance to the millions of Americans who were
suffering from the economic effects caused by the COVID-19 pandemic.

As part of the scheme to defraud, Defendant received a PPP loan in the amount of $20,833
for herself as a purposed sole proprietor with the business legal name “Carolyn Wade.”
Specifically, as a result of Defendant’s false and fraudulent PPP loan application, Defendant
received from Lender 1 the proceeds of the PPP loan ($20,833) in her personal bank account,
having account number ending in 3926, at USAA Federal Savings Bank on or about June 7, 2021,
via Automated Clearing House (ACH) transfer, which was a communication transmitted by wire
in interstate commerce.

The Indictment alleges, and the United States intends to prove at trial, that Defendant’s
PPP loan application and supporting documents submitted therewith contained materially false
and fraudulent information as to the respective borrower (Defendant’s) gross business income for
the tax year 2019, including a falsified Internal Revenue Service (IRS) tax form submitted with
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the PPP loan applications in support thereof. In particular, the United States intends to prove that
Defendant’s PPP loan application falsely represented that, for the tax year 2019, the business
“Carolyn Wade” had “$113,560” in gross business income and, in support thereof, included an
IRS Form 1040, Schedule C, which also falsely represented that the business “Carolyn Wade” had
“113,560” in gross income. At trial the United States will prove with documentary and
testimonial evidence that, among other things: 1) Defendant knew that the above-stated 2019 gross
income information was included in Defendant’s PPP application and was false; 2) the above-
stated 2019 gross income information was about a material fact, that is, an important fact that a
reasonable person would use to decide whether to do or not do something; and 3) Defendant acted
with intent to defraud, that is, Defendant intended for the false 2019 gross income information to
be included in Defendant’s PPP loan application so that Defendant would receive the PPP loan.
Argument
I.
The Court should preclude Defendant from introducing evidence and arguments
concerning any alleged negligence by the victim lenders, loan processors, and the
SBA.

At trial, the United States intends to call witness representatives from Cross River Bank,
Prestamos (and/or its loan processor Blueacorn), and the SBA (which administered the PPP
program and backed its loans, among other things). The United States respectfully askes the
Court to preclude Defendant from introducing evidence and arguments concerning any alleged
negligence by these victims.
A.
Courts routinely find evidence of lender negligence 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)
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(“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. Whether
the lenders were motivated by profit or did, in fact, profit from [the defendant’s] efforts is equally
immaterial). “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. The Eleventh Circuit,
however, rejected defendants’ argument, affirmed the convictions and sentences. Id. 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.’” Id. at 899 (quoting Loughrin v. United States, 573 U.S. 351, 372
(2014)); see also id. (quoting United States v. Lindsey, 850 F.3d 1009, 1014 (9th Cir. 2017) (the
“lender’s negligence, or even intentional disregard, cannot excuse another’s criminal fraud.”).
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Other circuits have reached similar conclusions. See Lindsey, 850 F.3d at 1014 (affirming
district court’s decision to exclude any evidence of victim negligence and citing cases from the
Second, Third, Fourth, and Fifth Circuits); United States v. Coyle, 63 F.3d 1239, 1244 (3d Cir.
1995) (“[T]he negligence of the victim in failing to discover a fraudulent scheme is not a defense
to criminal conduct.”); United States v. Moore, 923 F.2d 910, 917 (1st Cir. 1991) (“[I]t is not a
defense that the bank might have prevented its losses had it better internal controls or
procedures.”); United States v. Winkle, 477 F.3d 407, 418 (6th Cir. 2007) (approving the exclusion
of an FDIC report that criticized the bank fraud victim’s failure to detect a fraud scheme); United
States v. Rennert, 374 F.3d 206, 213 (3d Cir. 2004) (“fraud victim’s negligence or lack of diligence
in uncovering the fraud is not a defense”); United States v. Thomas, 377 F.3d 232, 243-44 (2d
Cir. 2004) (affirming restrictions on cross of victim; rejecting defendant’s argument that victim’s
foolishness vitiated defendant’s fraudulent intent); United States v. Frenkel, 682 F. App’x 20, 22
(2d Cir. 2017) (“A victim’s negligence is not a defense under the federal fraud statutes.”) (citing
United States v. Thomas, 377 F.3d 232, 240-43 (2d Cir. 2004)); United States v. Ellison, 704 F.
App’x 616, 620 (9th Cir. 2017) (“a victim’s negligence is not a defense” to securities fraud); United
States v. Palamarchuk, 791 F. App’x 658, 660 (9th Cir. 2019) (“neither individual victim lender
negligence nor an individual victim lender’s intentional disregard of relevant information is a
defense to mail fraud”).
B.
Whether a victim is sophisticated 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. Svete, 556 F.3d at 1165 (“Proof that a
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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, No. 18-15019, 2021
WL 3235301, at *9 (11th Cir. July 30, 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 negligence of the victim in failing to discover a
fraudulent scheme cannot be a defense to bank or wire fraud ….”); accord 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.”)
Accordingly, whether the institutional victims’ 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–
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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 . . . . [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.’”); 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
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
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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
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 or caused to be
submitted fraudulent PPP loan applications; (ii) whether Defendant had the requisite intent to
defraud; and (iii) whether the information that Defendant caused to be submitted to the victim
lenders was material, that is, had the capacity or natural tendency to influence a person’s decision.
Hindsight challenges to any of these institutional victims’ internal controls are irrelevant, waste
time, and create the risk of jury confusion. See Fed. R. Evid. 404(b).
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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. 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”).
For similar reasons, the Court should exclude any evidence and arguments concerning the
SBA’s guarantees to PPP lenders as a defense to the alleged fraud. The government does not
know on what basis Defendant would try to introduce evidence or make arguments concerning
this guarantee, but any such evidence or argument should be excluded as irrelevant to the case, a
waste time, and tending to confuse and mislead the jury. 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 truer in the criminal
context of the instant case, where victim negligence is irrelevant, and should therefore be excluded.
II.
The Court should preclude Defendant 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 at 1166 ; 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
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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 should exclude any evidence and arguments concerning any profits the victim lenders may
have made as a result of the loans that are at issue in this scheme.
III.
The Court should preclude Defendant from introducing evidence and argument
relating to jury nullification, including evidence and/or argument about the
nature of the prosecution, use of federal resources, and the Government’s
charging decisions.

Any statements or arguments from the defense regarding uncharged co-conspirators, or
selective prosecution, are not relevant to the defendant’s guilt, have no probative value, and should
be precluded. United States v. Armstrong, 517 U.S. 456, 463 (1996) (“[a] selective-prosecution
claim is not a defense on the merits to the criminal charge itself, but an independent assertion that
the prosecutor has brought the charge for reasons forbidden by the Constitution”); United States
v. Shaygan, 652 F.3d 1297, 1314 (11th Cir. 2011) (“[T]he Government retains ‘broad discretion’
as to whom to prosecute,” and the “decision to prosecute is particularly ill-suited to judicial
review.”) (quoting Wayte v. United States, 470 U.S. 598, 607 (1985)). Any statements by defense
counsel regarding the exercise of prosecutorial discretion in this case have no probative value and
are only meant to prejudice the jury. Fed. R. Evid. 403.
Moreover, permitting such argument would be tantamount to a request for jury
nullification. “Nullification is, by definition, a violation of a juror’s oath to apply the law as
instructed by the court – in the words of the standard oath administered to jurors in the federal
courts, to ‘render a true verdict according to the law and the evidence.’” United States v. Thomas,
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116 F.3d 606, 614 (2d Cir. 1997) (citation omitted; emphasis in original). The Eleventh Circuit
has unequivocally disapproved of this practice and has issued clear instructions that “defense
counsel may not argue jury nullification during closing argument.” United States v. Trujillo, 714
F.2d 102, 106 (11th Cir. 1983); see United States v. Funches, 135 F.3d 1405, 1409 (11th Cir. 1998)
(collecting cases in support of proposition that a defendant has no right to present evidence or
make arguments geared towards nullification). Because “the potential for nullification is no basis
for admitting otherwise irrelevant evidence,” Funches, 135 F.3d at 1409, the Government moves
to exclude evidence and to preclude argument designed to convince the jury to acquit not because
the Government failed to prove the charged crimes, but because a guilty verdict would be contrary
to a sense of justice, morality, or fairness. Washington v. Watkins, 655 F.2d 1346, 1374 n.54 (5th
Cir. 1981) (noting that with respect to jury nullification, courts “have almost uniformly held that a
criminal defendant is not entitled to an instruction that points up the existence of that practical
power to his jury”); United States v. Gorham, 523 F.2d 1088, 1097–98 (D.C. Cir. 1975) (affirming
trial court’s refusal to admit evidence bearing no legal relation to the charges but which might
encourage a “conscience verdict” of acquittal).
Improper arguments would include, for example, suggestions that the prosecution is unfair
because the Government has prosecuted some individuals, but not others. Furthermore, the
identity and quantity of individuals charged in connection with the scheme at issue, the reasons
behind the Government’s charging decisions, and the culpability of the Defendant as compared to
other individuals are all examples of irrelevant and unfairly prejudicial evidence aimed at jury
nullification. See, e.g., United States v. Thompson, 253 F.3d 700 (5th Cir. 2001) (upholding grant
of the Government’s motion in limine to prevent counsel from comparing defendant’s conduct to
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that of other uncharged or immunized witnesses); United States v. Re, 401 F.3d 828, 833 (7th Cir.
2005) (finding that the Government’s exercise of prosecutorial discretion is not proper subject for
cross-examination). Thus, Defendant should be precluded from making arguments or comments
to the jury—and from eliciting statements on cross-examination—which are irrelevant to the
record evidence and charges and that are, instead, designed to encourage a verdict without regard
to the law.
Certificate Pursuant to Local Rule 88.9

Pursuant to Local Rule 88.9, undersigned counsel contacted counsel of record for
Defendant, Attorney Johnny McCray, by email on April 1, 2024, for his position on the relief
requested herein by the government. As of the filing of this motion, undersigned counsel has not
received a response from Mr. McCray as to Defendant’s position on the Motion.
Conclusion

For the foregoing reasons, the United States of America respectfully submits that the Court
should grant the relief requested herein.
Respectfully submitted,

MARKENZY LAPOINTE

UNITED STATES ATTORNEY

By: /s/ David A. Snider

David A. Snider
Assistant United States Attorney
Court ID No. A5502260
500 E. Broward Blvd
Fort Lauderdale, FL 33394
Tel: (954) 660-5696
Fax: (954) 356-7336
Email: david.snider@usdoj.gov

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