Kurt Johnson, 47, of Sunnyvale, and Dale Heineman, 48, of Union City, ran a program called the "Dorean Process" in which they told homeowners they could get rid of their mortgage debt.
They persuaded homeowners to transfer their property titles to a trust run by the two men, recorded fraudulent documents indicating that the previous mortgages were canceled and had the homeowners refinance their houses.
Prosecutors said the two men collected more than $3 million in fees and victimized at least 3,500 homeowners and 20 banks in the nationwide scheme.
Johnson and Heineman acted as their own defense lawyers and were each convicted of one count of conspiracy and 34 counts of mail fraud after a month-long trial in federal court in San Francisco in 2007.
U.S. District Judge William Alsup sentenced Johnson to 25 years in prison and Heineman to 21 years and eight months.
In their appeal, the two men claimed they didn't have a fair trial because they had engaged in allegedly "nonsensical legal antics" during the proceedings. They argued in the appeal that they should not have been allowed to represent themselves.
The two defendants' strategy during their trial included insisting on wearing prison clothing in front of the jury and presenting a legal theory described by the appeals court as gibberish.
But a three-judge panel of the 9th U.S. Circuit Court of Appeal said Alsup had properly allowed the two men to exercise their right under U.S. Supreme Court doctrines to act as their own lawyers.
The court said psychiatric exams had shown they had no mental disorders, the judge had patiently explained their right to have a lawyer if they wished, and the two men had generally followed correct trial procedures.
Circuit Judge Barry Silverman wrote, "The record clearly shows that the defendants are fools, but that is not the same as being incompetent."
Silveman said that under two Supreme Court rulings, "they had the right to represent themselves and go down in flames if they wished, a right the district court was required to respect."
