Real estate broker James Montgomery and his wife formed Sun
Village Realty Inc. to rent vacation homes owned by absentee owners. Rental
commissions of 25 percent to 30 percent were charged to the owners.
The management contracts with the owners did not prohibit or
permit use of the houses by the rental agency employees or guests without
notice or payment to the owners.
Purchase Bob Bruss reports online.
After 1992, Mary O'Connor managed the rental agency office.
Evidence showed the houses were being rented, but the owners were not fully
compensated for the rent paid by guests.
In 1999, a grand jury indicted Montgomery, Mrs. Montgomery
and O'Connor for 19 counts of mail fraud involving the rentals. Before trial,
Mrs. Montgomery agreed to testify against her husband and O'Connor.
Evidence showed 1,006 discrepancies between the owners'
statements and the vacation-home cleaning records and reservation calendars;
2,154 rental nights were not reported to the owners; and $264,021 income was
lost by the owners.
If you were the judge would you convict Mr. and Mrs.
Montgomery and O'Connor of using the mails to defraud the vacation homeowners?
The judge ruled (1) the case against Mrs. Montgomery is
dismissed for her valuable testimony; (2) Mr. Montgomery is entitled to the
marital privilege to bar the testimony and evidence presented by his wife
against him; and (3) based primarily on the testimony of Mrs. Montgomery, Mary
O'Connor is convicted of mail fraud and sentenced to 18 months in federal
prison.
The evidence showed Mary O'Connor, who managed the real
estate rental agency, allowed use of the vacation homes without rental payments
and rent was often received but not reported to the absentee owners, the judge
explained.
"Finally, a reasonably jury could have found that
O'Connor understood that her use of vacant units without paying rent was
fraudulent, and that she used the mails to perpetrate the fraudulent
activity," the judge ruled.
Based on the 2004 U.S. Court of Appeals decision in U.S.
v. Montgomery, 384 Fed.3d 1050.
(For more information on Bob Bruss publications, visit his
Real Estate Center).
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