Olivia Covington for www.theindianalwyer.com
Two men convicted in an elaborate fraud scheme involving the Indianapolis Land Bank have lost their federal appeal, with the 7th Circuit Court of Appeals ruling Friday there was sufficient evidence to support their multiple fraud convictions.
As manager of the city-run Indianapolis Land Bank, Reginald Walton was charged with overseeing the process of acquiring troubled properties and selling them for a productive use. But in May 2011, Walton began working with Aaron Reed, founder of Naptown Housing Group, in a scheme to make money off the properties in the Land Bank.
As part of the scheme, Walton would work with specific nonprofit organizations that he knew would transfer the properties back to Reed, Naptown or a private buyer and turn over profits from the sales. Once a property was sold to a nonprofit, Naptown would either sell the property to a private buyer, renovate it for sale or prepare it as a rental. Reed shared half of his profits with Walton in cash as a kickback for Walton pushing the property through his department, the Department of Metropolitan Development.
When some of the nonprofits Walton and Reed used for their earlier transaction became unavailable, David Johnson, who ran the nonprofit Indianapolis Minority Aids Coalition, began using IMAC to acquire Land Bank properties to sell for profit for the scheme participants. Johnson received money in exchange for assisting Walton and Reed.
Meanwhile, in August 2012, the Marion County Prosecutor’s Office charged Sheila Amos with selling properties she did not own to poor Hispanic families. Some of the properties were in the Land Bank, so Walton agreed to help the victims and told them they could purchase their homes through a nonprofit for either $1,000 or $2,500.
However, after pushing the sale of the properties through IMAC, Walton told the victims they had to pay $4,000 cash to benefit IMAC. Johnson kept the extra cash and paid a portion out to Walton.
In May 2013, the government indicted Walton, Johnson, Reed and other participants in their scheme alleging they committed honest services wire fraud. Additional charges of wire fraud and conspiracy to commit money laundering were alleged against Walton and Johnson, and a charge of receiving a bribe was alleged against Walton.
Reed and the other participants pleaded guilty and testified against Walton and Johnson, who were both found guilty as charged. Walton received an enhanced nine-year sentence, while Johnson received an enhanced 5½ year sentence.
Judge Ann Claire Williams wrote the government offered “extensive evidence” to prove Walton intended to commit fraud and “deprive the City of his honest services by accepting bribes and kickbacks”. Similarly, evidence of Johnson’s participation in the scheme, including the fact that he wrote false entries on the memo line of kickback checks, proved his intent to commit fraud, Williams said.
Further, Williams said there was no question Walton intended to benefit from raising the prices on the Amos victims, so the evidence proves that he was guilty of wire fraud. The men also asked the court to vacate their money laundering convictions if their fraud convictions were overturned, but because the 7th Circuit affirmed those convictions, it also declined to vacate the money laundering convictions.
The 7th Circuit also found no plain error in the district court’s instructions to the jury, specifically rejecting Walton’s argument the jury was permitted to convict him of accepting a “gratuity,” rather than a bribe. The men were also not entitled to a good faith instruction because they were convicted of crimes that required the jury to find bad faith, the judge said.
Finally, the court upheld Walton and Johnson’s enhanced sentences because the district court correctly found Walton to be a high-ranking public official and the Amos victims to be “vulnerable victims.”
The case is United States of America v. David Johnson and Reginald T. Walton, 15-3830 and 16-1471.