New hearing to start for 2 mortgage fraud defendants

Eve Mazzarella and Steven Grimm are getting a second chance this week to convince a federal judge that they were convicted on tainted government evidence in the largest mortgage fraud case in Nevada.

Mazzarella, a former real estate agent, and Grimm, her ex-husband and a former mortgage broker, raised several issues in a bid for a new trial following their 2011 convictions, including allegations federal agents conducted an unlawful search of Mazzarella's business and failed to provide the defendants with key evidence.

But the judge who presided over the trial refused to grant them a hearing before he denied the requests.

That caught the attention of a federal appeals panel in San Francisco, which earlier this year ordered a hearing on the issues to determine whether the case should be dismissed.

"Those charged with a crime deserve a fair shake from government prosecutors," the 9th U.S. Circuit Court of Appeals panel said in a 21-page decision in Mazzarella's case. "The prosecutors' duty is not to gain conviction at any cost but rather to help ensure that justice is done."

A federal jury in Las Vegas found Mazzarella and Grimm guilty in December 2011 of orchestrating the mortgage fraud scheme, which prosecutors said caused banks to lose more than $52 million from 2003 to 2008.

The scheme was described as the largest uncovered in Nevada. Lending institutions made more than $107 million worth of mortgage loans on 227 properties in the Las Vegas area, and most of the properties wound up in foreclosure, federal prosecutors said.

James Mahan, the new federal judge on the case, is to begin a three-day hearing on the allegations of government misconduct on Wednesday.

High on the defense's list of witnesses are attorney David Mark and his former fiancee, Kimberly Brown, who secretly provided FBI agents with thousands of pages of documents from Mazzarella's real estate company while they worked there.

Defense lawyers John Cline and Alina Shell argue in court papers that they were never informed before the trial that Mark and Brown had turned over the documents.

Brown did the copying at the direction of agents and that amounted to an unlawful search that violated the Fourth Amendment rights of the two defendants, according to the lawyers

Cline and Shell also contend prosecutors failed to inform the defense that the couple had been given immunity from prosecution for their cooperation.

Without that information and additional documents prosecutors did not turn over, the defense lawyers argued they had little evidence to impeach the testimony of Brown and several other witnesses at trial, giving the jury a clear path to convict the two defendants.

Prosecutors, however, countered in court papers that they presented overwhelming evidence of the guilt of the two defendants and the information that wasn't provided to the defense would not have undermined their convictions.

"The evidence adduced over the 10-week trial established the conspiracy and scheme to defraud, as well as Grimm's and Mazzarella's roles directing and participating in the fraud beyond a reasonable doubt," Assistant U.S. Attorney Sarah Griswold wrote.

Prosecutors ended up charging Mark after they accused him of violating his agreement. He stood trial and was convicted in April 2013.

But a 9th Circuit panel overturned his conviction in July. The panel concluded the federal judge who presided over his case relied on a "scant record" and "inaccurate information" from prosecutors about the immunity breach when he refused to dismiss Mark's indictment.

Mark, who lives in New Orleans, is seeking about $215,000 in legal fees and expenses from the government.

Griswold, who was one of the prosecutors criticized by the 9th Circuit in the Mark case, is expected to be called by the defense as a witness at Wednesday's hearing.

Contact Jeff German at jgerman@reviewjournal.com or 702-380-8135. Find him on Twitter: @JGermanRJ