Archives : 2006 : May

State Court Misdemeanors and Felonies

By: Victor Comstock, Attorney at Law and Jay Mykytiuk

The vast majority of defendants are prosecuted in State courts. All states (excluding the District of Columbia) have their own criminal code, and defendants who violate this code are tried in the state in which the violation occurs.

Both misdemeanor and felony offenses may be tried in State court. If you have been arrested or are under investigation by a local police department, you will most likely be prosecuted in a State court. State court crimes are violations of State and local statutes or ordinances. They are prosecuted in either Municipal or Superior Courts in the county in which the charges are filed, by either City Attorneys or District Attorneys.

Misdemeanors

Misdemeanors are generally considered lesser criminal acts. They are usually punishable by a maximum fine of $1000 and a county jail term of one year or less. Misdemeanor convictions may also result in loss of privileges, such as professional licenses, public offices, or public employment. Examples of misdemeanor violations include:

• Petty theft
• Prostitution
• Vandalism
• Drunk driving
• Simple assault
• Trespass

Felonies

Felony crimes are more serious, and are generally punishable by a state prison term or, in certain instances and States, death. Typically, felony convictions also result in a forfeiture of certain civil rights, including the right to vote. Examples of felony crimes include:

• Murder
• Burglary
• Possession of dangerous drugs for sale
• Robbery
• Rape
• Assault and Battery

The process of bringing a defendant to trial in State court varies from state to state, but the general steps in each state include:

• Investigation and Arrest
• Booking
• Preliminary hearing
• Indictment or Information
• Arraignment
• Adjudication
• Sentencing
• Appeal

For a more detailed explanation of the criminal process, see the page on Criminal Case Process.

Criminal laws, penalties, and procedure vary from state to state, and it is important to obtain an attorney who is knowledgeable of the law in the state where you will be tried.

If you are arrested for violation of a State law, a criminal defense attorney may:

• Advise you of your rights and of what lies ahead in the criminal process
• Contact the police and/or prosecution to negotiate dropping charges or filing a lesser charge
• Arrange bail
• Make a motion for your release
• Make a motion to suppress illegally obtained evidence
• Examine prosecution witnesses at your preliminary hearing
• If necessary, represent you at trial

Imhoff & Associates, P.C. Criminal Defense Attorneys represents clients nationwide in State Courts. You can assist in your defense by:

• Gathering documentation of your good character (reference letters, employment history, community service, etc.)
• Exercising your right to remain silent
• Retaining qualified counsel as soon as possible
• Keeping a diary of all significant events and potential witnesses (this information will help your attorney prepare the best possible defense)

DRUGS: The Differences Between Sales, Manufacturing, Trafficking and Distribution of Drugs

By Mitch Nelson, Attorney at Law and Natalie Banach

$321 Billion. —That is the cursory estimate of the value of the international drug trade, according to the United Nations 2005 World Drug Report. What’s more, about 200 million people (5 percent of the population ages 15-64) are thought to have consumed illegal drugs at least once in the last year. It is undeniable that the global drug trade is large, widespread and deadly.

The high demand for illegal drugs and paraphernalia has led to the emergence of complex black markets all over the world. As with legal commerce, the illegal drug trade is multi-layered with manufacturers, processors, distributors, wholesalers and retailers all caught up in the mix. These international networks also deal in smuggling and trafficking.

Severity of Drug Offenses

In addition to being widespread and complex, however, the drug trade is also highly fragmented. It is the particular nature of production and manufacture of the different drugs that accounts for this. One of the most popular illegal substances, cannabis, is usually grown and sold locally. On the other hand, substances such as cocaine and heroin usually require either large swaths of land to grow or elaborate labs to manufacture. For this reason, large organized drug cartels are often behind the distribution of these drugs. The different offenses associated with the drug trade are as far-reaching as the trade itself. A drug offense can refer to anything from the possession, to the use, to the sale or to the furnishing of any drug or intoxicating substance that is prohibited by law. Most of these offenses are felonies and the penalties can be severe. Some of the factors that determine the severity of a sentence include the quantity of the drug, its classification and the purpose of the possession (for personal use or sale). In addition, factors such as weapons possession or having large amounts of money on one’s body, can also affect the ultimate punishment for a drug offense. In the United States, the foundation for the government’s fight against the abuse of drugs is the Controlled Substance Act. This law was put into affect in 1970 and is a consolidation of the various laws regulating the manufacture and distribution of narcotics, stimulants, depressants, hallucinogens, anabolic steroids, and chemicals used in the illegal production of controlled substances. The following article will outline the differences between the sale, manufacturing, trafficking and distribution of drugs.

Drug Manufacturing

The manufacture of an illicit drug or substance is defined as the either the preparation or completed acts to produce, propagate, compound or process that drug or substance. According to the Controlled Substances Act, this process can be done directly, indirectly, by the extraction of substances of natural origin, or by means of chemical synthesis. In addition, the term manufacturer refers to the person who manufactures the drug or substance. The manufacture of illegal drugs can be broken down into two classes: those extracted from plants and those synthesized through chemical processes. Drugs such as cannabis and cocaine, where farming is needed for mass production, fall under the first class. In the second class such as methamphetamines, the chemical processes associated with manufacture are more important. In general, penalties for the manufacture of illegal drugs or substances can include imprisonment, anything from a term of years to life, and substantial fines. The severity of the penalties can depend on the amount being manufactured, prior convictions and the type of drug being manufactured.

Trafficking of Drugs

The term drug trafficking refers to the illegal commercial activities associated with the participation in an illegal drug network. Often thought of as smuggling, drug traffickers seek to transfer illegal drugs and substances across jurisdictions, whether it is state or national borders. According to the U.S. Customs Services, each year about 60 million people enter the country via more than 675,000 commercial and private flights. In addition, another 6 million people come by sea, and 370 million by land. More than 90,000 merchant and passenger ships dock at U.S. ports. Amidst all this travel and commercial activity, drug traffickers conceal cocaine, heroin, marijuana and methamphetamines for the subsequent distribution of the drugs in U.S. neighborhoods. Penalties for the trafficking of illegal drugs and substances can include substantial fines in the millions of dollars, as well as imprisonment. Again, the severity of the penalties can depend upon whether or not death or serious injury occurs (in the case of “mules”), the type of drugs being smuggled, the amount and prior convictions.

Drug Distribution

The term distribution means to deliver (other than by administering or dispensing) an illicit drug or substance. In addition, delivery includes both the actual or attempted transfer of a controlled substance. The difference between the sale of an illegal drug and the distribution of an illegal substance is that with distribution the substance does not necessarily have to be sold to the user. In regards to the illegal drug trade, there are two primary means of distribution: a hierarchy and a hub-and-spoke layout. A hierarchal arrangement refers to a system in which the manufacturer uses their own men to smuggle, distribute and store the narcotics. A hub-and-spoke layout, conversely, uses local gangs and crime organizations to distribute and sell the drugs. At the center of the hub-and-spoke layout may be cartel, which dictates how the product of the manufacturers gets to the distributors. In general, penalties for the distribution of illegal drugs are severe and can include substantial fines and even life in prison with no parole. However, the penalty can depend upon prior convictions, the amount being distributed, the type of drug and the extent of the network.

Sale of Drugs

The legal definition of a sale entails an agreement where one party, the seller, gives full possession of something, in exchange for a certain amount of money, to the other party, the buyer, who agrees on that price. In terms of a drug offense, the “thing” being handed over will be the controlled or intoxicating substance. For a sale to be proven four elements need to be met. (1) The presence of a buyer and a seller, (2) the existence of the controlled substance to be sold, (3) an agreed upon price, (4) the consent of both parties and the performance of certain acts necessary to complete the transaction, such as the actual handing over of the object. In regards to the illegal drug network, the sale is often the ultimate transfer. It is the sale that transfers the illicit drug into the hands of the user.

Federal Crimes: Criminal Court Jurisdiction

By Brian Barrido, Attorney at Law and Jay Mykytiuk

Most criminal offenses are charged under state laws, investigated by local and state law enforcement agencies, and tried in state courts. However, a crime is a federal offense if it is made illegal by statute or if it occurs on U.S. federal property. These crimes are investigated by the federal agencies such as the FBI, and prosecuted in federal courts.

More Crimes Considered Federal Offenses

Historically, almost all crimes were handled by the states. Only a small number of crimes involving offenses against the country, such as treason or bribery of federal officials, were prosecuted under federal law. But in recent years Congress has passed numerous statutes that mandate long federal prison terms for crimes ranging from drug dealing to kidnapping. There are now over 100 categories of offenses that are considered to be federal crimes. This includes over 4000 individual offenses. Examples include:

• Counterfeiting
• Drug Manufacturing
• Drug Possession/Sales
• Drug Trafficking
• Gun Law Violations
• Health Care Fraud
• Immigration Law Violations
• Kidnapping
• Mail Fraud
• Money Laundering
• RICO Crimes
• Securities Fraud
• Social Security Fraud
• Tax Crimes
• Terrorism
• Weapons Charges
• Wire fraud

Crimes Committed on Federal Property

In addition to the long list of specific federal crimes, any crime that is committed on federal property is subject to federal prosecution and comes under the jurisdiction of the federal court system. This includes crimes committed in government buildings, airports, national wildlife refuges, national forests, military installations, and Veteran Affairs medical centers. For example, an assault committed in a post office will be prosecuted under federal law, even though there is no federal assault law.

Federal Sentencing Guidelines Harsher than State

Whether a crime is prosecuted under state or federal law is important, mostly due to differences in sentencing guidelines. Federal sentencing is controlled by the United States Code and the Federal Sentencing Guidelines. Under the Guidelines, a federal judge is required to sentence according to a formula, which consists of a combination of the offense and the defendant’s criminal history. Judges must impose pre-determined minimum mandatory sentences and they have virtually no authority to deviate from sentencing guidelines even if they feel that the sentence is excessive.

Partly due to the federal sentencing guidelines, federal sentences are often considerably harsher than the equivalent state sentence. For instance, a United States Sentencing Commission study found that drug offenders prosecuted in federal court served approximately 84 months in prison, while those prosecuted in state courts usually serve an average of 20 months.

Because navigating federal law can be challenging, it is important that you are represented by an attorney who is familiar with federal court procedures. An attorney who can navigate the complicated federal sentencing guidelines may be able to obtain a reduced sentence or even dismissal.

The Obstacle in Empanelling an Impartial Jury in a High-Profile Case

By Tony Partipilo, Attorney at Law and Helen O. Kim

Sixth Amendment: Defendant Rights Jury Trial

In Duncan v. Louisiana, 391 U.S. 145 (1968), the Supreme Court recognized that the Sixth Amendment right to a jury trial in criminal cases is fundamental to the American scheme of justice. The purpose of a jury trial is to (1) prevent oppression by the government, (2) provide a safeguard against a corrupt or overzealous prosecutor and/or a biased or compliant judge, (3) give defendants the opportunity to be tried by his or her peers, and (4) reflect reluctance to entrust the liberty and life of an individual to one judge. See id. Unfortunately, there are also drawbacks to being tried by a jury. The role of a jury is to remain impartial and apply the facts of a given case to the law. However, a jury is often composed of individuals with various backgrounds and experiences who have pre-formed judgments and opinions about an issue even before entering the courtroom. It is difficult for individuals to abandon their life-long belief systems in the courtroom simply because they are instructed by a judge to remain neutral. Thus, jury selection is an important screening process to ensure that a cross-section of the community is represented in a jury to provide the defendant with a fair trial by his peers.

Jury Selection

Jury selection is comprised of several stages. First, a large master list of prospective jurors is compiled. This list is usually derived from a combination of public and governmental sources, such as telephone books, DMV records, and voter registration lists. The master list is narrowed down to a smaller list, or venire, through random selection. These prospective jurors are asked to supply basic information about themselves, and may be disqualified or exempted based on the information. Prospective jurors may be disqualified based on lack of citizenship, underage status, and felony convictions while prospective jurors may be excused due to personal hardships, such as financial and physical infirmities. After the venire has been finalized, the next stage of jury selection consists of voir dire.

Voir Dire: Voir dire provides judges, prosecutors, and defense attorneys with information that allows for the exclusion of prospective jurors based upon bias. During voir dire, the trial judge, prosecutor, and defense attorney ask prospective jurors questions in person. Depending on the jurisdiction, voir dire may be conducted by only the prosecutor and the defense attorney, only the trial judge, or all three. During voir dire, each party may introduce prospective jurors with the issues that pertain to a particular case in order to determine their personal opinions. The prosecutor and the defense attorney may challenge for cause against prospective jurors they believe to be biased. The trial judge then grants or denies the challenges based upon the information obtained from the prospective juror. The prosecution and the defense are also granted a certain number of peremptory challenges, which they can use to dismiss potential jurors without any explanation. Once both parties have exhausted their challenges, a jury is sworn in.

High-Profile Cases

In high-profile cases, it is difficult to find a potential juror who has not been exposed to the case at hand and has not already formed an opinion about the case or the parties involved. In such cases, extensive voir dire is conducted to choose an impartial jury. In ABC, Inc. v. Stewart, 360 F.3d 90 (2nd Cir. 2004), there was a two-part voir dire process because of the difficulty in impaneling an unbiased jury due to the high level of media attention and publicity. In Stewart, the district court issued an Order excluding the media from attending the voir dire process and prohibiting the media from publishing or otherwise disclosing the identity of prospective jurors. Instead, the Order granted public access to the transcripts of each days voir dire, with the names of prospective jurors and their personal information omitted. The rationale for the media exclusion during the voir dire process was to encourage juror candor since there was a possibility that prospective jurors would not be entirely upfront in the presence of the press and media. Id.

In Stewart, ABC, Inc. and other news organizations argued that voir dire transcripts were insufficient substitutes for personal attendance since visual and audible emotions and gestures were lost in transcripts. Thus they argued that the Order was an infringement on their First Amendment right to access criminal proceedings since criminal trials are open to the press and the general public. Open criminal trials ensure safeguards for the defendant by providing public scrutiny of the criminal process. The Supreme Court has recognized that the guarantee of open public proceedings in criminal trials extends to the voir dire process. However, a proceeding will be closed if there is finding of (1) substantial probability that public will prejudice the defendants right to a fair trial, and (2) there are no reasonable alternatives to protect the defendants right to a fair trial. Id., at 98.

The court in Stewart concluded that an open voir dire proceeding would not prejudice the defendant because (1) members of the media had not conducted themselves improperly in covering the case; (2) prospective jurors were likely to have preconceptions about the defendants in any high-profile criminal case with or without the presence of the media; (3) the defendants were to be present in the voir dire process and if prospective jurors did not have problems being candid in the presence of the actual defendants, then they would not have problems revealing their biases in the presence of reporters as well; and (4) there werent any controversial issue to be probed in voir dire that might impair the candor of prospective jurors. Id., at 101.

On the other hand, in United States v. King, 140 F.3d 76 (2d Cir. 1998), the court decided differently in the issue of an open voir dire process. The Court issued an Order providing the press with limited access to the voir dire proceeding (the press was denied access to transcripts of individual voir dire questioning of prospective jurors until the jury was impaneled as well as the transcripts of voir dire from the first trial, which resulted in a mistrial). Id., at 78. In King, the Court reasoned that juror candor regarding the attitude toward the defendant was of particular importance because of the delicate issue area of possible racial bias. Id., at 83. While a prospective juror in Stewart would have no reason to shy away from showing bias and distaste against insider trading, a prospective juror in King would have reason to hide personal racial biases in the presence of media during voir dire, making the entire process ineffective and depriving the defendant of a fair trial by an impartial jury.

Safeguards

There are few remedies against prejudicial pretrial publicity. See Studebaker & Penrod, Pretrial Publicity: the Media the Law, and Common Sense, 3 Psychol. Pub. Poly. & L. 428 (1997.) First, a court may grant a continuance of a case in the hope of dissipating publicity over time. However, with a continuance, there is a risk of losing evidence, especially evidence pertaining to the memory of an eyewitness. Another option is to conduct an extensive voir dire process to weed out prospective jurors who show great influence from publicity. However, having an open voir dire proceeding may influence potential jurors to be indirect and insincere in their answers. Other possibilities include a change of venue (move the trial to another location) or a change of venire (bring in jurors from another jurisdiction), but a majority of the American public is exposed to high-profile cases such as the Stewart and King cases, regardless of where the alleged crime actually took place.

Conclusion: Sixth Amendment Right Threatened

In todays world always around-the clock news coverage and advancements in the media, the American public is within arms reach to any type of news, anywhere. Such developments in the media can pose a threat to a defendants Sixth Amendment right to a fair trial by influencing the jury pool with premature information.

Bail Issues: Can You Bail Me Out of Jail?

By Colin McKibbin, Attorney at Law and Helen O. Kim

Timeline of an Arrest

• An individual is arrested and charged with an offense.
• The defendant makes an initial appearance where either the defendant is released on her own recognizance or bail is set.
• Defendant either pays bail with a bond and is released pending trial or remains detained until trial.
• If the Defendant appears for trial. Then the bond money is returned to the defendant or his surety.
• If the Defendant fails to appear for trial. Then court keeps the bond money.

The Initial Appearance in Front of a Judicial Officer

After an individual is arrested and charged with a criminal offense, the defendant must make an initial appearance in front of a judicial officer. At this time, the judicial officer informs the defendant of the charges against her and of her rights, and either releases her on her own recognizance, sets bail, or other conditions of release pending trial. Bail, also known as pretrial release, prevents imprisonment of a defendant pending trial. A judicial officers decision to release the defendant before trial is based on the risk of the defendants nonappearance and the likelihood that the defendant will flee once she is released.

A defendant may be released on personal recognizance (the defendants pledge or promise to appear at all future court dates) or upon execution of a bond. 18 U.S.C.S. 3142(b). A bond is a written and sealed obligation of payment by the defendant or his surety to insure the defendants appearance in court. A bail bond is the most common form of pretrial release where the defendant avoids imprisonment by promising to pay a prescribed amount if he or she fails to appear in court.

The Bail Reform Act provides that a person may be released pending trial upon execution of a bail bond in an amount deemed reasonably necessary to assure the individuals appearance. In most cases, the bond amount depends on the nature of the defendants charge. The rationale for this practice is that the more serious the charge, the more reluctant the defendant will be to appear in court since the consequences are greater. In very serious crimes or cases where the defendant cannot be trusted to appear in court, the judicial officer intentionally sets the bond amount high so that the defendant will not be able to meet it and the defendant will be detained in jail until her trial date.

Reduction of Bail

In United States v. Lemos, 876 F. Supp. 58 (D.N.J. 1995), the defendant was charged with conspiracy to distribute cocaine. The magistrate set the defendants bail at $25,000 and the defendant moved for a reduction of the bail to $2,500 because he was not able to raise $25,000. The defendant stated that the Bail Reform Act of 1984 entitled him to bail at an amount he could afford. He argued that pursuant to 18 U.S.C.S. 3142(c)(2), [t]he judicial officer may not impose a financial condition that results in the pretrial detention of the person. However, the court stated that under Section 3142(c) a judge may set the bail high if the judge believes that a high bail is the only means of assuring the defendants appearance. If the defendant is unable to post bail to insure his appearance, then the only assurance for the defendants appearance is detainment.

On the other hand, in United States v. Leisure, 710 F.2d 422 (8th Cir. 1983), the court granted the defendants motion for reduction of bail because a high bail was not the only means of assuring the defendants appearance in court. The defendants were charged with participating in racketeering activities that carried a maximum penalty of twenty years of imprisonment and a $25,000 fine. Their bail was set at $1 million and $2 million. The court reduced the defendants bail after considering the nature and extent of the circumstance. The court determined that the defendants would appear for trial after their release because they had resided in the city for a long time, their immediate families also resided in the city, they owned real property in the city, they were employed in the city, and they had a good track record of appearing in court for other criminal proceedings. Id.

Surety: Defendant’s Appearance in Court

In many instances, a defendant is released pending trial on a bond secured by property belonging to the defendants family members. The family member(s) act as a surety and are responsible for the defendants appearance in court. Pursuant to Federal Rules of Criminal Procedure 46(e)(1), once a defendant appears for trial, [t]he court must exonerate the surety and release any bail. The court must exonerate a surety who deposits cash in the amount of the bond or timely surrenders the defendant into custody. However, if the defendant flees upon release, the surety assumes the bond amount. In United States v. Nguyen, 279 F.3d 1112 (9th Cir. 2002), the defendant was convicted of loan fraud and sentenced to a thirty-month prison term. The district court increased his bond from $50,000 to $100,000 and released him pending appeal. The defendants sister and brother-in-law acted as the defendants sureties and secured the bail bond with their equity in residential properties. The defendant failed to appear in court due to various medical problems but the court stated that the defendants medical problems were not exigent circumstances and did not prevent him from appearing in court. The defendant was arrested and the district court entered judgment against the sureties for the entire bond amount of $100,000. The Court of Appeals affirmed the district courts decision and stated that as sureties, the defendants relatives had an obligation to assure the defendants appearance and to learn whether he was in violation of the bond requirement. The sureties were aware of the consequences when they entered the bond agreement and they needed to accept the cost. Id., at 1118.

In Bridges v. United States, 588 F.2d 911 (4th Cir. 1978), defendants were charged and convicted of violating narcotics law. Many of the defendants had secured money for the cash bond from their relatives and friends. The defendants satisfied the terms of the bond by appearing at trial and the defendants sureties sought a return of the bond money. Id., at 912. The controversy arose when the government moved to secure the bond money in a trust and use it to pay the defendants fines associated with their crime instead of returning it to the defendants relatives and friends. The court stated that such practice was allowed if the bond money belonged to the actual defendants and not their sureties. The court stated that there is a presumption that the money deposited by each defendant [as bail] was his own where the names of third party claimants to the money did not appear of record. Id. Thus the sureties needed to prove that they were entitled to a refund of the bond money because it belonged to them and not the defendants although their names were not on record.

Conclusion: Complications in Bail Setting

As the above cases indicate, bail setting may create complications to an already distraught defendant who is charged with an offense. A defendant should contact a defense attorney to represent the defendant in the initial appearance proceeding and bail setting hearing to avoid imprisonment before trial. Individuals who act as sureties to a defendant should also contact an attorney to discuss their responsibilities and possible consequences that may arise from their agreement.

Real Estate Fraud: State and Federal Fraud Laws

By Brian Barrido, Attorney at Law and Jay Mykytiuk

Anyone who has bought, sold, or shopped for a home this millennium knows firsthand that housing prices have undergone a dramatic and unprecedented increase. In the last two years alone, the price of a home rose 32% in Nevada, 23% in California, and 23% in Washington, D.C. One unfortunate by-product of this red-hot real estate market has been an increase in certain consumer and professional practices that come under the large umbrella known as real estate fraud.

Couples trying to get into their dream houses and real estate insiders trying to tap into massive profit potential have frequently and sometimes unknowingly broken state and federal fraud laws. Generally, fraud is a deliberate misrepresentation which causes another person to suffer damages, usually monetary losses. Examples of fraud in the real estate context include a borrower who exaggerates his financial situation to qualify for a loan, or a real estate professional that misrepresents the value of a property in order to turn a larger profit. Often it involves a combination of both.

Fraud for Housing

As home prices have skyrocketed, many buyers have found that, based on their income and assets or a poor credit rating, their dreams of owning a home have grown increasingly out of reach. Especially in hot real estate markets, potential homeowners often worry about whether they will ever be able to afford a home. Out of desperation, many borrowers, often with the help of loan originators, misrepresent their financial circumstances in an effort to get into a home before they are further priced out of the market. These misrepresentations are commonly known as fraud for housing.

Typical acts of fraud for housing involve providing false information on a home-loan application. Often, loan officers and consumers may work together to manufacture W-2s or credit scores, submit bogus financial and tax documents, or fake employment verifications. Not only are these buyers risking fines and jail time, but may also be drowning in a mortgage payment they cant really afford.

Home buyers could also face fraud charges for so-called “straw buyer” transactions. This real estate transaction involves a buyer with bad credit who finds a stand-in with a better financial position to purchase a home. The stand-in fills out the mortgage paperwork and obtains the property, then relinquishes the deed to the true buyer. While this process may be simply the means to an end of home ownership, it also constitutes real estate fraud.

For borrowers who have been untruthful on their loan documents, being detected is easier than they probably think. The IRS can access mortgage documents in an audit. If a borrower said he made $40,000 a year on his tax forms, but claimed an income of $80,000 on his mortgage application, this discrepancy would be readily apparent. Discovery would likely mean paying back taxes and penalties, and could possibly mean criminal prosecution for Fraud.

Fraud for Profit

Real estate investors and professionals are also at risk of criminal prosecution for certain business practices. In a 2005 report, the Federal Bureau of Investigations Financial Crimes Section has indicated that its main focus in the real estate fraud area is on illegal activity known as fraud for profit. Fraud for Profit is sometimes referred to as “Industry Insider Fraud” and, like it sounds, involves real estate insiders who run afoul of fraud statutes in their pursuit of financial gain.

The most common activity that may land real estate investors and professionals in hot water is known as flipping. Flipping involves buying a house, holding on to it for a short time, and then selling it at a higher price then one paid for it. Often this process involves buying an undervalued house, fixing it up, and putting it back on the market at a higher price. By itself, this process is not per se illegal. Buying low and selling high is still considered good old-fashioned capitalism. But when investors, mortgage brokers, loan officers, and appraisers get together to paint a better picture of a homes worth, fraud for profit is often perpetrated.

There are many variations of illegal flipping, but it often includes inflating appraisals, gifting down payments, drawing up false W-2′s, or writing inaccurate credit letters. The FBI has specifically targeted property flippers. As the industry has become more concerned with fraudulent practices, those engaged in flipping have come under closer scrutiny. Making large profits on quick home sales is certainly still permissible. However, real estate professionals that conduct business with anything less than complete candor may increasingly find themselves targets of fraud investigations.

The Risks

Would-be homebuyers who get caught being creative (Fraud) with their loan applications, will likely have to pay back any money they received, and may even spend time in prison. While to date, prosecutions of borrowers have been rare, the FBIs increased efforts to combat real estate fraud may result in more charges filed against individual homebuyers. The much more common targets of fraud investigations have been real estate investors, mortgage brokers, and appraisers who have engaged in questionable business practices.

Currently, most real estate fraud cases are prosecuted under federal law. Federal statutes include: False Statements on a Loan or Credit Application; Mail Fraud; Wire Fraud; Bank Fraud; and a host of others. In recent years Congress has dramatically increased the penalties for knowingly making false statements for the purpose of influencing the action of any insured banking institution on a loan or certain other types of financial transactions. The current federal penalties for this crime are a maximum of 30 years imprisonment and/or a fine of $1 million.

States have also begun to get tough on mortgage fraud / Fraud for Profit. A new law in Georgia increases the penalties for residential mortgage fraud. Those convicted can be sentenced one to 10 years in prison and be fined up to $5,000, while those found guilty of multiple frauds can be imprisoned for three to 20 years and be fined up to $100,000. Other states have considered similar provisions amid growing concerns with real estate fraud.

Whether you are a home buyer who stretched the truth on a loan application in order to buy that dream house, or a real estate professional who massaged numbers to increase profit, you may have committed real estate fraud. A skilled criminal attorney may be able to help you avoid a stiff financial penalty or jail time. More importantly, knowledge of state and federal fraud laws may help you avoid needing an attorney at all.