The Federal Railroading of Victoria Sprouse
One of the outcomes of the housing meltdown has been a rash of federal prosecutions of mortgage brokers, attorneys, and people involved in various housing securities markets, claiming that it was their actions that brought down the housing market. While it is true that there really was a lot of fraud, whatever some brokers and others did was miniscule compared to the real fraud being committed by the Federal Reserve System and the government.
Last year, federal prosecutors arrested and charged Ralph Cioffi and Matthew Tanner, former Bear Stearns hedge fund managers, claiming that they were at the center of massive fraud in the housing securities market. As one of us pointed out, the facts of the case are much different than what prosecutors want to tell us, as we know now that the authentic fraud was perpetrated by Ben Bernanke and then—Secretary of the Treasury Henry Paulson. Like a true WWF tag team, the Bush administration gave the torch to the administration of Barack Obama and the politicians (aided by Bernanke) have simply pyramided one set of lies upon another.
However, the government is doing its best to try to convince Americans that all of this financial meltdown was due to greed and criminality by capitalists and people who advocate free markets. At the present time, federal prosecutors are going after hundreds of people who were involved in real estate transactions, claiming that they were the ones causing all of the trouble. One tragic example is that of Victoria Sprouse, 38, a real estate attorney in Charlotte, who is facing 25 years or more in prison after a dutiful federal jury convicted her.
We know something about her case, and we know even better the tactics that federal prosecutors have used in railroading her, tactics that are unacceptable in a supposedly free society. Although the crux of the case depends upon a few issues, the truth is that this prosecution is a classic situation of U.S. attorneys being able to tilt the field precariously in their direction while at the same time claiming that the defendant is receiving a "fair trial."
(One important fact is that Charlotte is in the Fourth U.S. Circuit, which means that if criminal convictions are appealed, they must go to the notoriously pro-government Fourth Circuit Court of Appeals. This court already has declared that in the Fourth Circuit, the ancient and critical doctrine of mens rea, once the bedrock of English and American criminal law, does not need apply to criminal cases. In other words, people can go to prison for committing "crimes," even if they had been told by attorneys and other legal professionals that their actions were legal, and they believed them to be legal.)
In her heyday, Sprouse was an attorney who closed thousands of real estate deals. Not surprisingly, during the height of the housing bubble, she helped to close thousands of loans and in the process made a lot of money, perhaps much more than she could have imagined as a person who had her own law practice. Apparently, some of the information that the mortgage brokers submitted to her was not accurate. For example, they lied on the loan applications about who would be living in the house, or about the amount of money paid on a down payment.
Having been involved in real estate closings involving attorneys, we can attest to the fact that lawyers pretty much stamp the paperwork, and many states don't require attorneys at the closings at all. (Maryland, where one of us has lived since 2001, is a state that does have attorneys, but they are paid a relatively small fee and simply do the official filing.)
The case revolved around this simple question: What did Sprouse know, and when did she know it? The prosecutors were able to convince the jury that not only she knew about the fraud schemes, but that she masterminded them. However, the amazing thing was that they were able to do it without the kind of evidence needed to prove intent or even to prove she had knowledge of what was happening.
For example, read the following from one news story:
Prosecutors say Vicki Sprouse created fake documents and signed off on forged signatures to flip hundreds of homes and make millions.
The problem is that prosecutors never established any payoff scheme. After paying her staff and other overhead, Sprouse probably made $40 to $50 per closing. (The fee was $500, but that was before any expenses were paid.) Furthermore, prosecutors have alleged that there were about 200 mortgages that were "crooked," but all the others were legitimate.
If we even take the original $500 fee and multiply by 200, we get $100,000. Moreover, prosecutors admitted that they found no payoff schemes and that Sprouse's compensation came from the fees. Thus, they were claiming — according to the stenographers posing as journalists in Charlotte — that Sprouse made "millions" from crooked mortgages, yet established that the most she possibly could have made — if she masterminded these schemes — was $100,000 before paying expenses and about $10,000 afterward. Where else but in U.S. federal court can $10,000 be called "millions" of dollars?
In other words, prosecutors were lying, and it already is well-established that federal investigators and prosecutors lie as a matter of course. (Read Bill Moushey's powerful series on the federal system to get a picture of life with the feds.) Furthermore, apparently no reporter in Charlotte, either with television news or the Charlotte Observer, which had this the afternoon of the jury's decision:
Sprouse, 38, was accused of lying to lenders, falsifying settlement statements and stealing from her clients while reaping millions of dollars for her and co-conspirators. They included mortgage brokers, real estate agents and an appraiser.
The jury today convicted her of bank fraud and money laundering, among other crimes.
Again, we see the fuzzy math that only state-worshiping journalists can give us. No one is arguing otherwise that after expenses, she made about $40 or $50 per closing, and even if one claims that the $500 per closing was her actual take-home income, the number that the prosecution gives us is far less than even a million dollars, yet the "made millions" lie persists.
One of the things that the press decided was not important to report was that the prosecutors used the RICO statutes to seize her property before the trial, which meant she no longer had the funds by which to pay her attorney. Her original attorney asked the trial judge if she could be assigned to the case, but the judge told her that the court would allocate only $25,000 for the defense.
The attorney replied that the sum would not begin to cover the legal expenses and that if she stayed on the case, she would "bankrupt" her law firm. Thus, Sprouse was declared "indigent" and assigned attorneys whose "legal" experience in federal court has been pleading out drug cases, and who had no desire to take the case to court, demanding that Sprouse take a plea and accept 20 years in prison. Victoria Sprouse was alone in that courtroom, facing federal prosecutors who were being untruthful about how much money she made and having attorneys who clearly did not care about their client behind her.
During preparations, Sprouse found her attorneys fighting every move she made, all the time telling her she could not win at trial. Furthermore, during the trial, prosecutors claimed that Sprouse signed illegal documents, but failed to point out that many of those documents had been approved by the banks and had been notarized even before Sprouse signed them.
You see, there is a difference between intentionally preparing false documents or signing documents someone else has prepared that are false. If Sprouse was guilty, then so were the appraisers, the bankers (and their lawyers) and everyone else in the pipeline.
The worshipful North Carolina press (the same media that treated Michael Nifong like a Greek God Avenger of Justice during the infamous Duke Lacrosse Case) also failed to let its news consumers know about another fact: the statute of limitations twice ran out on this case, and prosecutors asked Sprouse for a continuance both times.
Now, a person who knew he or she were guilty would have jumped at the chance to have the charges behind them. However, Sprouse believed she had a case for innocence and wanted that opportunity to demonstrate such in a court of law. (Well, we forget that federal courts long ago stopped being "courts of law," as they now are the fiefdoms of ambitious prosecutors.)
There were more falsehoods. The prosecution claimed that it was people like Sprouse who were responsible for the meltdown in the housing market; that simply is not true, and has been handled many times over on this page. Yet, time and again, we see federal prosecutors pulling out that hoary lie and convincing jurors that the reason for the meltdown was people like Vickie Sprouse instead of people like Alan Greenspan and others who created the housing bubble.
As a Charlotte TV station declared:
Prosecutors said she contributed to a wave of foreclosures in the Charlotte area, and that such frauds have played a significant role in the banking meltdown that has crippled the U.S. economy.
Interestingly, the prosecution never did present evidence of that statement during the trial. Yes, some of the properties which she helped close went into foreclosure, but if that is going to become a crime in the USA, then a lot of bankers, mortgage brokers, real estate agents, and attorneys are going to be filling the jails.
What we are seeing in the Sprouse conviction is the beginning of a coming wave in which business and financial failures are going to become criminalized. The last thing the government wants Americans to believe is that government policies — legal government policies (we are playing loose with "legal") — had anything to do with the economic meltdown that goes on around us.
Instead, government prosecutors will continue to convince jurors that the economic implosion is due to criminal behavior by people who were involved in daily business transactions, and the general public will buy it. Thus, while the Obama administration (like the Bush administration before it) continues to hurl the economy into the abyss of depression and inflation, like the Romans who believed Nero's lies that the Christians burned down Rome, American jurors and voters will continue to swallow the government's line that everyone was at fault except for the real culprits.
William L. Anderson, Ph.D. [send him mail], teaches economics at Frostburg State University in Maryland, and is an adjunct scholar of the Ludwig von Mises Institute. He also is a consultant with American Economic Services. Candice E. Jackson [send her mail] is an attorney and graduate of Pepperdine Law School.
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