A federal appeals court has ordered a new trial for a Mason homebuilder convicted in connection with a $3.5 million fraud scheme involving multimillion-dollar homes.
Bernard J. Kurlemann, 59, was convicted in November 2010 of making false statements to a lending institution and bankruptcy fraud and ordered to serve two concurrent 24-month sentences and pay back $1.1 million in restitution.
The Sixth Circuit Court of Appeals in Cincinnati Tuesday reversed Kurlemann’s conviction of making false statements while upholding his bankruptcy fraud convictions.
He was released from federal prison on March 1 after serving his full sentence.
Prosecutors say Kurlemann participated in a mortgage fraud concocted by Eric Duke, a self-employed tax preparer and interior designer. The conspiracy involved the sale of homes by using straw buyers and phony financial documents.
Duke, 36, of Newport, was sentenced April 1, 2011 to 60 months in prison and ordered to pay about $2.1 million in restitution and forfeiture. Five others were also sentenced in connection with the scheme.
The three-judge panel found that prosecutors included an erroneous legal theory when giving instructions to the jury on how they should deliberate the false statements charge.
Although Kurlemann provided false information on loan documents regarding down payments that were never made, his actions amounted more to concealment than to knowingly making a false statement, as required in the statute he was convicted under, ruled the court.
“Until Congress opts to extend (the false statements statute) to material omissions, implied misrepresentations or fraud — all ways of getting at deceptive ‘half-truths’ — we must take the statute as we find it, and as the Supreme Court has construed it,” the court said in its ruling.
Kurlemann’s attorney, Erik Scharf, declined to comment.
The court ordered a new sentencing hearing for Duke, who served as the key witness against Kurlemann and pleaded guilty to seven charges, including loan fraud and making false statements to a lending institution.
The court ruled Duke’s five-year sentence to be “procedurally unreasonable.”
Calls to the Ohio Attorney General’s office were not returned.