Five years after FBI raid, Nelson Miller goes before a jury

Arkansas Business, Nov 5, 2007 by Gwen Moritz

THE FEDERAL GOVERNMENT'S ACCUSATION against former Little Rock mortgage broker Nelson Miller is mundane: He and his employees at Freedom Financial Services allegedly airbrushed loan applications to make borrowers look more creditworthy than they were.

But the procedural path from an FBI raid on Freedom Financial's main office in March 2002 to Miller's trial on 16 felony counts scheduled to begin Monday morning has been, in a word, bizarre.

"You have to give [Miller] credit for making it bizarre. It's in his interest to do so," Assistant U.S. Attorney John Bush, who is prosecuting the case with Assistant U.S. Attorney George Vena, said after a motion hearing on Oct. 26.

Among the curious points:

* Although the actual losses by the government-insured lenders who accepted the fraudulent loan documents are apparently small, seven co-defendants pleaded guilty to various charges and an eighth, Bertram Case "Casey" Miller (no relation to Nelson Miller), was convicted by a jury.

* Nelson Miller, who became a fixture on local television through an extensive advertising campaign, pleaded guilty to two misdemeanors and, as sole owner of Freedom Financial, to a felony charge against the corporation. But he later withdrew the pleas, claiming that he and his lawyer, Gary Corum of Little Rock, were duped into an unfavorable plea agreement that could have sent him to prison for up to 24 months.

* Miller's trial, originally scheduled for April 2, has been delayed three times, once because of the "unexpected discovery" of videotapes that Miller made of his conversations with co-defendants shortly after the FBI raid and which had been in his possession for the subsequent five years.

The specific content of the videotapes has not been made public; even U.S. District Judge Leon Holmes had not seen it as of the Oct. 26 hearing. But the existence of the videotapes, apparently unknown even to Corum before April of this year, is one of the most unusual and procedurally problematic parts of the case.

"There are not many cases I've had where there are actual videotapes of the people involved talking among themselves a year and a half before the charges [were filed]," Corum told Holmes during the hearing. And the judge acknowledged that the situation was also a new one for him.

But Holmes was also sympathetic to the concerns of Bush and Vena, who described the tapes as "self-serving hearsay."

"The recordings were made at a time when the defendant knew of the government's investigation and clearly are not reliable," the prosecutors wrote in a motion asking Holmes to strictly limit the defense's use of the tapes.

While Holmes denied the government's motion, he assured the prosecutors that he would consider similar objections during the trial. And he warned Corum that Nelson could not "selectively waive his right not to incriminate himself"--that is, he won't be able to use the tapes as a substitute for actual testimony that would be subject to cross-examination.

"I do not think I will create a situation in which that is a concern," Corum responded.

The tapes can be used to dispute direct testimony of participants in the taped conversations, Holmes said.

Witnesses for the Prosecution

All the likely witnesses, for both prosecution and defense, will not be known until Monday morning, when potential jurors are interviewed. However, pre-trial motions reveal that the government will depend to some extent on two witnesses who were instrumental in the prosecution of Casey Miller: co-defendants Michael Dorsey, comptroller of Freedom Financial, and Melissa Horner, Dorsey's office manager.

Dorsey pleaded guilty to conspiracy, while Horner pleaded guilty to misprision of a felony--failure to report the crimes she witnessed while working for Nelson Miller. But both are additionally tainted: Horner also pleaded guilty to embezzling $153,000 from Freedom Financial, while Dorsey acknowledged in Casey Miller's trial that he was stripped of his license to practice law in Louisiana in 1991 for stealing almost $200,000 from his client trust accounts.

Sentencing for Horner and Dorsey--and for Casey Miller--has been delayed pending the outcome of Nelson Miller's trial.

Casey Miller, a native of Yellville, and Michael Dorsey first worked for Nelson Miller in Louisiana, one of three Southern states where he set up mortgage brokerages before entering Arkansas in 1996.

By the end of the 1990s, Nelson Miller's operations in Georgia, Louisiana and Mississippi had shut down, but Freedom Financial had staying power in Arkansas. Its revenue from mortgage origination fees grew to $3 million in 1999, $4.57 million in 2000 and $5.52 million in 2001, according to audited financial statements filed with the Arkansas Securities Department. (See table above.)

Thanks to aggressive advertising that cost the company between $900,000 and $1.3 million a year, Miller became what prosecutors described as "a recognizable celebrity on local television." (After Miller had accepted a plea agreement, federal prosecutors argued for a stiffer sentence because his offenses "were committed through use of mass-marketing.")