Don Gossman is the Managing Director of the IRR-Residential office in Kansas City.  Following is the second part of a two part series that discusses a 2006/2007 assignment he was involved with that resulted in a number of mortgage fraud convictions.  Part one described how he was contacted by a lender to appraise a home for $1,473,000 which was then listed for $699,000.  Mr. Gossman contacted the FBI and under their direction conducted the inspection and completed the appraisal, all under wiretap. 

This part two describes the Grand Jury and the Trial. Part one describes the Case and the Investigation.
                
THE GRAND JURY
I was contacted by Assistant US Attorney Linda Parker Marshall who asked me to come in so she could describe the events that would take place in the Grand Jury.  I met with her and the FBI agents at the US Courthouse in late December 2006. It was finally sinking in that this was really going all the way. I had been hoping for guilty pleas so I wouldn’t have to testify, but that was not to be the case.

When the January 4, 2007 Grand Jury date arrived, I went through my morning like it was any other day. I completed two appraisal inspections then went home to put on a suit and tie. I wasn’t hungry for lunch that day for some reason. I drove to the courthouse and parked in the FBI lot as instructed by Agent Shaffer. I took a deep breath and said to myself “Don, let’s do this.” I walked into The U.S. Courthouse knowing that if the Federal Grand Jury believed me, they would hand down indictments on 11 people and charge them with Federal crimes.

I waited for almost an hour before Assistant US Attorney Marshall came to get me. I walked into the room and told my story. I cannot reveal anything about what happened in that room or the people that were there. This was our government working at the basic level of the criminal justice system.  I was in there for about an hour then left. I walked out to my car knowing I had made the right choice to get involved when I called Agent Jensen that first day.

On my way home I turned on the radio and switched channels to talk radio. The announcer broke in with a news update stating “A Federal Grand Jury in Kansas City has handed down Mortgage Fraud indictments against 11 people including the Jackson County Executive and her lawyer husband.”  When I arrived home I turned on the TV. The charges were being reported on all of the local stations. I watch the news but had never been a part of the news.

The trial was set for February but was delayed until June after the election. The County Executive did go on to run for the Mayor’s office, but only received 1.5% of the vote. The same day her TV ads for Mayor came out was the day the mortgage fraud indictment  was brought against her and her husband as the sellers. I found it interesting that no one was talking about the buyers who were part of a larger fraud group that had committed over 100 cases of mortgage fraud in the Kansas City area in the prior 18 months causing millions of dollars in losses.

In May, the US Assistant Attorney contacted me to prepare for the trial.  We met with the two FBI agents at the U.S. Courthouse and listened to the tapes that I had made. This was the first time that I had heard them. I can never explain the thoughts that were going through my head. “I AM AN APPRAISER,” I am not supposed to be sitting in the Federal Court House with the US Assistant Attorney and two FBI agents listening to tapes of myself and criminals committing mortgage fraud. But I was. The trial was delayed again until November 2007. I thought, “Five more months of waiting.”

THE TRIAL
After the trial was postponed for the second time the legal maneuvering started between the US Government lawyers and the defense lawyers. Seven people in the transaction plead guilty to the charges against them. Leaving four people left to be tried. I was to be the lead witness in the US Government’s case that was expected to last two weeks.

The jury was to be seated on Monday morning with opening statements later that morning. The US Attorney asked me to be at the Federal Court House at 1:00 PM on Tuesday, November 6, 2007. I showed up during the lunch break and found the jury had not yet even been seated due to the larger than normal jury pool resulting from all the publicity.  I waited in the witness room for four hours. The jury was finally seated and the opening arguments were made.  Then the judge said, “That is enough for today we will reconvene at 9:00 AM the next day.” I thought, “One more sleepless night.”

The trial had been portrayed in the media as a political witch hunt by the new US Attorney against a local politician. I knew nothing about that. All I knew was that someone tried to defraud a lender and I did my job by protecting their interest in the property they had hired me to appraise. For me, that was it. Period. That is what an appraiser does. The mortgage industry had seemed to forget that the appraiser’s role in the underwriting of a loan is to make sure that the subject property value is sufficient to support the loan. 

I was back in the witness room the next morning. I was not nervous. After what I had been through the last year, this was going to be a breeze. I was just simply going in to tell the truth. I went down the hall to get a drink when I heard the Judge say “Mrs. Prosecutor... call your first witness.”

The doors opened and I walked inside. I felt all of the eyes in the room follow me on my way to the witness stand to be sworn in. I looked out over the court room. To my right were the 14 jurists, 12 on the jury and 2 alternates. To my left were the US Federal Judge and the court reporter. At the defense table were the four defendants, their three lawyers and three assistants.  At the prosecutors table were two FBI agents, two US Assistant Attorneys and their support staff. There were four rows of seats for the public. The newspaper, TV and radio stations from across the Midwest were in the audience.  

Assistant US Attorney Marshall lead my questioning. She asked me my name, address and occupation. She walked me through how I became part of the case. When I was explaining the events that unfolded, I could hear the responses from the audience. It seemed they were surprised by the actions that I had taken.  Rather than just walk away, I chose to do what was right! After 1 hour and 45 minutes the prosecutor was finished. The judge called for a 15 minute break, which I welcomed. They did not make the witness seat for comfort.
      
When the break was over the first defense lawyer questioned me for over an hour. He was the hardest on me while questioning my ethics and motives behind my actions.  He tried to get me upset and succeeded on a few occasions. The judge warned me twice to limit my answers to the questions asked. The second lawyer asked me two questions and was done. The third lawyer played the “good lawyer” as compared to the first lawyer’s hard line of questioning. His approach seemed to be since I had such a good reputation as an appraiser; my involvement somehow negated the possibility of their truly being fraud in the transaction.  I replied, “They called the wrong appraiser to facilitate mortgage fraud this time.”

After four hours on the stand my part of the trial was over. The trial would go on for another eight days. The jury deliberated for four days and came back with two guilty and two not guilty verdicts. In the end, nine of the eleven parties either plead or were found guilty. The two sellers were the only individuals not found guilty.

The mortgage and financial markets are in a mess at the present time. We will get through it like we did with the high interest rates of the early 1980’s, the recession of the early 1990’s, the first and second Gulf Wars and 9/11.  We need better protection of the separation of the origination of mortgages from the valuation of the underlying collateral properties. We need better enforcement of national and state laws regarding such separation. Appraisers serve a vital role in the mortgage origination process.  Lenders, insurers, bankers, brokers and appraisers who helped cause the mess should be prosecuted if they did not perform their function and role properly and ethically.

We in the mortgage business need to rebuild the trust in our banking and mortgage businesses upon which the rest of the world has always depended. 

Donald J Gossman SRA
Managing Director
IRR-Residential Metro Real Estate Services
www.irr-residential.com
dgossman@irr-residential.com