United States v. Parks

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

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No. 94-20464
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UNITED STATES OF AMERICA,
Plaintiff-Appellee,

VERSUS

MICHAEL PARKS, JULIAN MOSS, AND CHARLES MICHAEL O'NEAL,
Defendants-Appellants.

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Appeal from the United States District Court
for the Southern District of Texas
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(CR. H-92-244)

October 26, 1995

Before KING and JONES, Circuit Judges, and KAZEN, District Judge.*

KAZEN, District Judge:

Defendants Michael Parks, Julian Moss, and Charles Michael

O'Neal were charged with conspiring to misapply funds from a

federally insured financial institution and to make false entries

in the books and records of the institution in violation of 18

U.S.C. §371 (Count One); misapplication of funds, in violation of

18 U.S.C. §657 (Count Two); and making false entries in the books

and records of the institution, in violation of 18 U.S.C. §1006

*
District Judge for the Southern District of Texas, sitting
by designation.
(Count Three). All three Defendants were convicted on Counts One

and Two. Moss and O'Neal were convicted on Count Three, but Parks

was acquitted. All Defendants have appealed. First, they

challenge the sufficiency of the evidence to support their

convictions. Second, they claim that the trial court committed

reversible error in admitting testimony concerning civil banking

regulations. Third, they claim that pre-indictment delay violated

their Fifth Amendment due process rights. We affirm.

I.

BACKGROUND

At the time of the transaction in question, Defendants Parks

and Moss were the named shareholders in a Houston law firm. Both

were instrumental in establishing a federally insured savings and

loan, Village Savings Association ("Village"), which became a

client of the firm. In addition to being investors in and counsel

for Village, Parks served as Chairman of the Board and Moss as

Secretary to the Board. Defendant O'Neal, who was not affiliated

with the law firm, served as the President of Village.

Also among the law firm's clients was a Canadian condominium

developer, Len Cassack ("Cassack"), and his joint venture, West

Oaks Development 100 ("WOD"). As was customary at the time to

qualify for development loans, Cassack recruited investors to sign

earnest-money contracts ("pre-development contracts") to buy

unbuilt condominium units at a discount price. If Cassack sold the

unit at a higher price prior to completion, the pre-development

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investor would keep the profit. If no buyer was found, the

investor would be required to purchase the unit under the terms of

the pre-development contract. In the late 1970's, Parks and Moss,

through an investment partnership known as Parks and Moss II ("P&M

II"), signed pre-development contracts for two units in Cassack's

Briar Hollow project. As contemplated, the Briar Hollow units

later were sold by Cassack, and P&M II made a profit.

In 1981, Cassack approached Parks and Moss with a similar

investment opportunity in a different development. Along with

three partners in the law firm1, Parks and Moss formed an

investment group called Parks and Moss III ("P&M III"), which

signed two pre-development contracts for condominium units in

Cassack's Park Square project. Prior to completion, Cassack sold

one unit but could not find a buyer for the second unit ("Unit

802"). In November 1981, P&M III was required to purchase Unit 802

at the pre-development contract price of $223,448.00. Several

years later, Village agreed to buy Unit 802. On August 31, 1984,

P&M III transferred the title to Cassack's WOD, which

simultaneously transferred title to Village. WOD received nothing

for its participation in the transfer. Village's money was

disbursed by the title company, partly to pay off P&M III's

mortgage and the balance going to P&M III as profit.

In December of 1985, the participation of P&M III in the

transaction came to the attention of Village's Board of Directors.

Recognizing potential regulatory violations due to Parks'

1
Frank Ban, George Bamberg and Jerry Schutza.

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involvement, the board initiated an internal investigation. Parks

and Moss were asked to resign in early 1986. A subsequent

investigation by the Federal Home Loan Bank Board (FHLBB) resulted

in an indictment against the Defendants on October 13, 1992.

II.

INSUFFICIENCY OF THE EVIDENCE

All Defendants challenge the sufficiency of the evidence on

all of their convictions. "In reviewing a verdict challenged on

the sufficiency of the evidence, this Court views the evidence,

whether direct or circumstantial, and all reasonable inferences

drawn from the evidence, in the light most favorable to the jury's

verdict ... [to] determine whether `a rational trier of fact could

have found that the evidence established the essential elements of

the offense beyond a reasonable doubt'." United States v. Willis,

6 F.3d 257, 264 (5th Cir. 1993) (citations omitted).

A. Misapplication of Funds

To establish misapplication of funds in violation of 18 U.S.C.

§657, the government must show: (1) that the savings and loan

institution was authorized under the laws of the United States; (2)

that the accused was an officer, director, agent or employee of the

institution; (3) that the accused knowingly and willfully

misapplied the monies or funds of the institution; and (4) that the

accused acted with intent to injure or defraud the institution.

See United States v. Tullos, 868 F.2d 689, 693 (5th Cir.), cert.

denied, 490 U.S. 1112 (1989).

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 Intent

All Defendants dispute the sufficiency of the evidence on the

intent element. Intent "is proven by showing a knowing, voluntary

act by the defendant, the natural tendency of which may have been

to injure the bank even though such may not have been his motive."

United States v. Parekh, 926 F.2d 402, 408 (5th Cir. 1991)

(citation omitted). Intent may be shown by direct or

circumstantial evidence that allows an inference of an unlawful

intent. United States v. Aggarwal, 17 F.3d 737, 740 (5th Cir.

1994).

Moss' secretary, Patricia Wellborn, testified that Moss and

O'Neal arranged the transfer of Unit 802 to Village, through WOD,

in order to avoid drawing the auditors' attention to Parks'

participation. According to Wellborn, O'Neal told Moss that

auditors and regulators might question why Village was buying a

condominium from P&W III at the price in question, and that there

would be "less questions asked" if Unit 802 were not sold by P&M

III "directly" to Village. There was also evidence from which the

jury could infer that O'Neal was familiar with applicable banking

regulations, but nevertheless completed the transaction without

seeking approval from his board or from the FHLBB. The Defendants

stoutly maintain that Unit 802 was worth the purchase price of

$300,000.00. However, there was evidence from which a reasonable

jury could find that the market for condominiums was poor in 1984,

that no unit of comparable size had sold for $300,000.00 that year,

and that Unit 802 would not have been worth the purchase price on

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the open market. The evidence would also allow a reasonable jury

to reject O'Neal's contention that Unit 802 was a good investment

for resale by Village or that it was useful to house out-of-town

customers and investors. Indeed, Village still owned Unit 802 some

16 months after the purchase, and the unit was unfurnished and

apparently unused.

Causation

Parks and Moss contend that there was insufficient evidence to

show that they caused any misapplication of funds. In United

States v. Rochester, 898 F.2d 971, 978 (5th Cir. 1990), we found it

unnecessary to decide if the causation standard applicable to a

violation of 18 U.S.C. §656 should similarly apply to a violation

of 18 U.S.C. §657. The two sections are virtually identical except

that one applies to banks and the other to savings and loan

associations. We now hold that the same standard should apply

under both statutes.

In United States v. McCright, 821 F.2d 226, 230 (5th Cir.

1987), cert. denied, 484 U.S. 1005 (1988), we said that "[m]anifest

in the use of the term 'misapply' is a requirement that the

defendant made, or influenced in a significant way, as an officer

of the bank, the decision to extend the loan." McCright involved

a bank loan made to a corporation for development of a golf course

and country club. The defendant, a bank officer, had a personal

financial interest in the corporation which was concealed from the

bank. He was not, however, the loan officer who approved the loan,

and the officer who did approve the loan apparently had no criminal

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knowledge or intent. We held that §656 required not merely that a

defendant stood to benefit from the loan but that he authorized or

caused it to be authorized. Invoking McCright, Parks and Moss

contend that at most they only benefitted from a loan which they

neither authorized nor caused.

This argument ignores the theory of aiding and abetting, which

is implicit in all indictments for substantive offenses. Jacobs v.

Scott, 31 F.3d 1319, 1329 (5th Cir. 1994), cert. denied, 115 S.Ct.

711 (1995). The instant indictment cited both the substantive

statutes and 18 U.S.C. §2. The trial judge also charged the jury

on aiding and abetting. Under this theory, the government need not

show that Parks and Moss were guilty of every element of the crime.

See Parekh, 926 F.2d at 407. Unlike the situation in McCright, the

present case involved three Defendants acting in concert to

accomplish the misapplication of funds. Thus, the government need

only show that the Defendants willfully associated themselves with

and participated in a criminal venture, seeking to make the venture

succeed, and that each element of the offense was committed by some

party to the venture. See United States v. Beuttenmuller, 29 F.3d

973, 981-82 (5th Cir. 1994). In this case, there is evidence that

O'Neal actually caused the loan to be made. The testimony of

Patricia Wellborn was sufficient to support a finding that Moss

willfully associated himself with O'Neal in the criminal venture

and sought to make that venture succeed through his directions to

his own secretary.

Although the evidence of Parks' role in the venture is not as

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direct, the evidence showed that Parks was a founder of Village,

the chairman of its Board of Directors, and a member of its

Executive Committee. Parks and Moss were also majority owners of

P&M III, each holding approximately a 40% interest. That

partnership had owned Unit 802 for three years and had been unable

to sell it. It was becoming a financial drain and the partners

were eager to sell. Prior to the ultimate sale of Unit 802, Parks

and Moss had advised their fellow investors that the unit was going

to be purchased by Village, although the Board of Directors had not

been apprised of that circumstance. When the transaction was

actually consummated, however, Parks and Moss signed a deed to WOD

rather than to Village. The following year, when confronted by

another member of the Board of Directors, Parks initially stated

that he was unaware that Village had purchased Unit 802.

Parks suggests that his acquittal on Count Three, the false

entry count, should impact the Court's sufficiency analysis with

regard to Counts One and Two. This argument is without merit as it

is well established that juries are entitled to render inconsistent

verdicts. United States v. Powell, 469 U.S. 57, 64-65 (1984).

Indeed, this Court has held that "a not guilty verdict on one count

does not establish any facts favorable to the defense for the

purpose of determining the sufficiency of the evidence on the

counts of conviction." United States v. Nguyen, 28 F.3d 477, 480

(5th Cir. 1994). In this case, albeit not necessarily in all

cases, the misappropriation under §657 was aided and implemented by

means of documents placed in the records of Village which disguised

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the true nature of the purchase of Unit 802.

In United States v. Faulkner, 17 F.3d 745, 771 (5th Cir.),

cert. denied, 115 S.Ct. 193 (1994), we found sufficient evidence to

convict an appraiser, not a bank official, of a §657 violation

under an aiding and abetting theory. The appraiser had an

undisclosed profit interest in certain property and prepared a

false appraisal used by a cooperating bank officer to justify a

loan allowing sale of the property at a price that would assure the

appraiser a profit. Similarly, in United States v. Kington, 875

F.2d 1091, 1103 (5th Cir. 1989), we upheld the conviction of one

bank officer who "withheld objections to and informations about

(another bank officer's) unlawful loans in order to reap the

benefits of the continuing scheme."

In the instant case, while Parks and Moss did not directly

make or authorize the appropriation of funds to purchase Unit 802,

there was sufficient evidence to support a jury finding that they

aided and abetted O'Neal in committing that offense.

B. False Entries

O'Neal and Moss challenge the sufficiency of the evidence to

support their convictions for making false entries. To establish

a violation of 18 U.S.C. §1006, the government must show: (1) that

the institution is a lending institution authorized and acting

under the laws of the United States; (2) the defendant was an

officer, agent, or employee of the institution; (3) the defendant

knowingly and willfully made, or caused to be made, a false entry

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concerning a material fact in a book, report, or statement of the

institution; and (4) the defendant acted with intent to injure or

defraud the institution or any of its officers, auditors,

examiners, or agents. Beuttenmuller, 29 F.3d at 982; Tullos, 868

F.2d at 693-94. Material information is that which has the

capacity to impair or pervert the functioning of the institution.

Beuttenmuller, 29 F.3d at 982. A false entry can be either an

omission of material information or a misstatement. United States

v. McCord, 33 F.3d 1434, 1448 (5th Cir. 1994), cert. denied, 115

S.Ct. 2558 (1995). Neither defendant disputes the proof of

elements one and two.

The "material" information in this case was P&M III's

involvement in the transaction, the omission of which had the

capacity to "pervert the functioning" of Village. As we have

previously discussed, there was evidence indicating that Moss and

O'Neal deliberately arranged to prepare documents showing WOD

rather than P&M III as the seller of Unit 802. Indeed, Wellborn

testified that the discussion of that arrangement occurred after

initial deeds had already been prepared, apparently implying that

the transaction had first been structured directly between P&M III

and Village. Village's treasurer testified that his file on Unit

802, which he considered complete, contained only a closing

statement reflecting a sale between WOD and Village, with a copy of

the $300,000.00 check from Village to the title company. From this

evidence, the jury could conclude that the Defendants caused an

omission of material information to exist in the Village files.

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 Defendants point to a letter by Frank Ban, a investor in P&M

III, which was written several months after the purchase of Unit

802 and which was placed in the Village file. The letter was

addressed to O'Neal and forwarded homestead exemption information

forms. In passing, the letter refers to a condominium purchased by

Village "from Parks and Moss III." The letter refers to Unit 602

of the Park Square I Condominiums, but presumably was intended to

refer to Unit 802. In any event, the timing of this letter, the

reason it was sent, and the fact that it was authored by a person

not an officer at Village would not necessarily negate the

conclusion that months earlier, in August 1984, Moss and O'Neal

conspired to make a false entry on the books of the institution.

The Defendants also speculate on the possible existence of a

missing file for Unit 802, which might have contained information

revealing the connection between P&M III and the transaction.

There was no solid evidence, however, that any such file existed

and there was evidence from which a reasonable jury could find that

no such other file did exist.

O'Neal and Moss also argue that the Government is

impermissibly using a civil violation as the basis for a criminal

conviction. Irrespective of any civil violations, the evidence in

this case supports the jury's finding that O'Neal willfully omitted

a material fact with the intent to defraud the institution and the

auditors, a violation of 18 U.S.C. §1006. Moss' conviction for

false entries is supported under an aiding and abetting theory.

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 C. Conspiracy

Count One of the indictment charged all three Defendants with

the crime of conspiracy in violation of 18 U.S.C. §371. The

indictment alleged that the defendants conspired to commit two

separate offenses, misapplication of funds in violation of 18

U.S.C. §656 and making false entries in Village's books in

violation of 18 U.S.C. §1006. To establish a §371 conspiracy, the

government must prove, first, that two or more people agreed to

pursue an unlawful objective; second, that each defendant

voluntarily agreed to join the conspiracy; and third, that one or

more members of the conspiracy performed an overt act to further

the objectives of the conspiracy. Beuttenmuller, 29 F.3d at 978-

79. When a conspiracy to violate two statutes is alleged, the jury

may find the defendant guilty if the evidence establishes beyond a

reasonable doubt that the defendant conspired to violate either one

of the statutes. United States v. Lyons, 703 F.2d 815, 821 (5th

Cir. 1983).

In this appeal, the Defendants do not directly address the

conspiracy count other than to list the elements under §371 and

state that they challenge the sufficiency of the evidence. Based

on the evidence we have recited above, we find enough to support a

conviction under Count One.

III.

CIVIL BANKING REGULATIONS

All Defendants claim the trial court committed reversible

error by admitting testimony that certain civil banking regulations

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were violated.2 Evidence of violations of civil banking

regulations cannot be used to establish criminal conduct. United

States v. Christo, 614 F.2d 486, 492 (5th Cir. 1980). Evidence of

such violations may, however, be admitted for the limited purpose

of showing the defendants' motive or intent to commit the crime

charged. See United States v. Cordell, 912 F.2d 769, 774-76 (5th

Cir. 1990). The trial court denied Defendants' pretrial motion in

limine to exclude evidence of the alleged bank regulation

violations, but limited use of the evidence to the issue of intent

or motive. We review a trial court's evidentiary rulings for abuse

of discretion. United States v. Brechtel, 997 F.2d 1108, 1114 (5th

Cir.), cert. denied, 114 S.Ct. 605 (1993).

All three Defendants argue that the court erred in admitting

this evidence because there was no proof that they knew of the

regulations. In response, the government points to the testimony

of two former Village board directors regarding their own

familiarity with the regulations. The government argues that the

jury could infer that the Defendants were similarly familiar with

the regulations. Also, Parks testified that, upon learning Village

was going to buy Unit 802, he asked O'Neal whether they needed

board approval, and that he generally relied on O'Neal's

familiarity with and knowledge of the regulations. The testimony

of Wellborn that Moss and O'Neal discussed changing the structure

2
The "banking regulations" which Defendants allegedly
violated were 12 C.F.R. §§563.41 (affiliated persons restrictions)
and 571.2 (conflict of interest), which at the time were
regulations of the Federal Home Loan Bank Board.

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of the transaction to raise fewer questions by regulators also

supports a finding that they knew of the regulations. The trial

court did not abuse its discretion in admitting this evidence to

show intent.

Defendants also claim that the court's admonishments to the

jury did not cure the "repeated reference[s] to non-criminal

misconduct" which "infected the purpose of the trial." See, e.g.,

Christo, 614 F.2d at 492. The references made during trial were:

(1) testimony that the board often discussed conflicts of interest

and the need to make disclosures to the board; (2) testimony that

Village contacted the FHLBB because the Unit 802 transaction was a

potential conflict of interest; (3) the testimony of William

Couhig, an examiner with the Office of Thrift Supervision,

regarding prohibitions against buying or selling from parties

affiliated with a savings and loan institution; and (4) several

references to the foregoing testimony in the government's closing

argument.

These references to regulatory violations comprise

approximately thirteen pages out of approximately 700 pages of

trial transcript. At one point in the trial, the district court

told the jury that "[c]ivil charges are not charges that are

criminal and they do not support criminal charges. So don't get

mixed up between civil and criminal." In its closing argument, the

government argued that while the civil regulations and violations

. . . are not violations of the law . . . [the testimony] may be

helpful for you in considering the motivation and intent to commit

14
the crimes that are charged." In addition, in charging the jury,

the court stated:

Now, you have heard testimony that the failure to
disclose the sale of property by an affiliated person to
the financial institution may be a violation of civil
banking regulations. A violation of a civil statute or
regulation is not a criminal offense. Such a violation
would merely subject an institution or, in some cases an
individual, to civil penalties which is not the same as
a crime.

You must not consider any evidence concerning civil
disclosure regulations in deciding only if the defendant
committed the acts charged in the indictment. The only
reason that this evidence was admitted was for the
purpose of your determining if it aids your
determination, whether the defendants had the intent and
purpose of violating the law as charged in the
indictment. Before you may consider such reasonable
doubt from other evidence in the case that the defendant
violated the law as charged in the indictment. If you
are so convinced, then this evidence may be considered by
you, if you believe it helpful, in determining whether or
not the defendant had a motive or intent to commit the
crimes charged in the indictment.

We conclude that the testimony regarding civil regulatory

violations did not impermissibly infect the purpose of trial, and

the trial court did not abuse its discretion in permitting evidence

of the civil regulations.

IV.

PREJUDICIAL PRE-INDICTMENT DELAY

Before trial, Defendants filed motions to dismiss their

indictments on the ground that they had been prejudiced by the

government's eight-year delay in bringing charges, thereby

violating their due process rights. To prevail on these motions,

Defendants had to prove the threshold requirement of actual

15
prejudice.3 United States v. Lovasco, 97 S.Ct. 2044, 2048-49

(1977); United States v. Beszborn, 21 F.3d 62, 66 (5th Cir.), cert.

denied, 115 S.Ct. 330 (1994). The trial court denied the motions

because it had not "heard anything that comes up to the level of

prejudice to the Defendants." Prejudice findings are reviewed

under the clear error standard. Beszborn, 21 F.3d at 66.

Defendants argue that the death of two potentially material

witnesses in the eight-year gap between the Unit 802 sale and the

indictment prejudiced their cases. However, because these

witnesses both died in 1985, before the investigation of the Unit

802 sale even began, any delay in prosecuting this case did not

cause whatever prejudice resulted from their deaths. Defendants

also contend that the death of the real estate appraiser who

performed the 1981 and 1982 appraisals of Unit 802 prejudiced their

cases. These appraisals were admitted into evidence without any

challenge from the government, and we fail to discern any

prejudice. Defendants also argue that O'Neal's recollection that

an appraisal of Unit 802 had been performed in 1984 could not be

corroborated because the alleged appraiser had purged his records

3
In its appellate brief, the government argued that the
Defendants were required to show both prejudice and deliberate
governmental delay to prevail. See United States v. Beszborn, 21
F.3d 62, 65-66 (5th Cir.), cert. denied, 115 S.Ct. 330 (1994).
While the appeal was pending, a panel of this Court held that the
defendants did not have to show deliberate governmental delay.
United States v. Crouch, 51 F.3d 480, 483 (5th Cir. 1995). Crouch
will now be heard en banc, so that the panel opinion currently has
no precedential value. United States v. Pineda-Ortuno, 952 F.2d
98, 102 (5th Cir.), cert. denied, 112 S.Ct. 1990 (1992).
Nevertheless, since we find no prejudice from the delay in this
case, we do not reach the question of deliberate delay.

16
and had no independent recollection of performing that appraisal.

No other witness recalled having heard of or seen such an

appraisal, and we conclude that the claim of prejudice is

speculative, not actual. The Defendants also complain of missing

Executive Committee meeting minutes showing approval of the

acquisition of Unit 802, but the evidence did include a 1986 letter

from O'Neal stating that he and Herb Axelrad approved the

transaction at a meeting that Parks did not attend and at which

Moss did not vote.

Lastly, Defendants point to the failing memory of Wellborn

regarding the circumstances surrounding the preparation of the

documents for the Unit 802 transaction. Her statement before trial

was firm--that she was asked to change the documents to conceal the

P&M III ownership. At trial she equivocated, claiming she did not

know if she actually heard that information from the Defendants

prior to the sale or whether the information came only from

accusations made by others after the sale. After carefully

reviewing her testimony, we conclude that her equivocation tended

to operate more to the Defendants' advantage than to their

prejudice.

For the foregoing reasons, the convictions of all Defendants

are AFFIRMED.

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