[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
________________________ SEPT. 27, 2001
THOMAS K. KAHN
Nos. 00-10201& 00-13319 CLERK
________________________
D.C. Docket No. 92-00230 CR-DMM
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
FRED DE LA MATA,
ENRIQUE FERNANDEZ, a.k.a. Henry,
MANUEL A CALAS,
OSCAR CASTILLA,
Defendants-Appellants.
________________________
Appeals from the United States District Court
for the Southern District of Florida
_________________________
(September 27, 2001)
Before ANDERSON, Chief Judge, RONEY and FAY, Circuit Judges.
FAY, Circuit Judge:
Fred De La Mata, Manuel A. Calas, Oscar Castilla and Enrique Fernandez
(“appellants”) appeal their criminal convictions and sentences for bank fraud in
violation of 18 U.S.C. § 1344, conspiracy to defraud the United States in violation
of 18 U.S.C. § 371, misapplication of bank funds, in violation of 18 U.S.C. § 656,
making false statements to a federally insured financial institution, in violation of
18 U.S.C. § 1014, money laundering, in violation of 18 U.S.C. § 1956, making or
causing to be made false entries, in violation of 18 U.S.C. § 1005, and engaging
and conspiring to engage in a pattern of racketeering activities in violation of 18
U.S.C. §§ 1962(c) and(d). Appellants contend that the ex post facto clause barred
their prosecution, that the indictment and jury instructions were fatally defective,
that there was insufficient evidence to support their convictions and that the
discovery of new evidence mandated the grant of a new trial. We find that
appellants’ convictions on two counts of bank fraud violated the ex post facto
clause, but affirm their convictions and sentences in all other respects.
I. Background
The charges arose out of several transactions involving the Republic
National Bank (“RNB” or “the Bank”), a nationally chartered financial institution
2
headquartered in Dade County, Florida. We summarize the facts, viewed in the
light most favorable to the jury’s verdict.
De La Mata, Calas, and Castilla (hereinafter the “bank insiders”) were
employed by RNB prior to 1983 until they resigned in the fall of 1988. De La
Mata served as RNB’s Deputy President until 1985, thereafter as President and
Chief Operating Officer, and at all times a member of the Board of Directors.
Calas served as the RNB’s Senior Vice President until July 1988, and thereafter as
Executive Vice President. Castilla was Senior Vice President during the entire
period. In addition, De La Mata, Calas and Castilla were all members of RNB’s
Loan Committee. Fernandez was a local real estate speculator, ostensibly
unconnected with RNB.
A. The Bank Branch Transactions
1. The Westlands branch
In May 1983, Calas retained attorney Anthony Silva to act as “trustee” in the
purchase of certain real property located in Hialeah, Florida (hereinafter the
“Westlands”). Calas, through Silva, obtained a contract to purchase the tract for
$325,000, and provided Silva with the money for the initial deposit. Calas also
directed Silva to form a corporation called Hialeah Properties, Inc., for the purpose
of acquiring the Westlands property. The corporation’s shares were initially issued
3
in the name of Daniel Blanco, but that stock issuance was later voided and the
shares were divided among De La Mata (50%), Calas (25%), and Castilla (25%).
Calas approached Daniel Blanco to head the corporation, which Blanco understood
to be a “ceremonial” position since he would not have a financial or operational
stake in the corporation. The purpose of his job, according to Blanco, was to act as
owner of the property in order to conceal Calas’ involvement from RNB.
After procuring the purchase contract, Calas proposed to Luis Botifoll,
Chairman of the Board of RNB, that RNB acquire the Westlands site for use as a
branch banking facility. Calas did not disclose the bank insiders’ financial interest
in the property. Silva testified that he also discussed the proposal with Botifoll,
fully aware that he was not to reveal the identities of the true parties in interest.
Thereafter, Calas arranged for Botifoll to meet Blanco, the purported owner of the
Westlands site, whereupon the two, on behalf of RNB and the “trust,” negotiated a
30 year lease with an option to purchase the site. The rent commenced at $6500
per month, and escalated each year according to the cost of living. A government
expert witness testified at trial that RNB had paid $362,000 above the fair market
rental value as of the date of indictment.
On July 21, 1982, RNB’s Board of Directors approved the lease Botifoll had
negotiated. De La Mata participated in the vote, and concealed the bank insiders’
4
personal interest in the transaction. In this way, De La Mata also caused RNB to
fail to disclose, in the bank’s application to the Office of the Comptroller of the
Currency (“OCC”) to open a branch facility, the involvement of bank officers in
the transaction.
2. The Little Havana branch
In September 1983, Fernandez obtained a purchase contract for $700,000 for
a site in Little Havana consisting of a bank building (two ground leases) and its
adjoining parking lot (fee simple lot). Fernandez obtained the purchase contract in
the name of the Fernandez Land Trust, an entity initially created for the benefit of
Fernandez but later secretly amended to include the bank insiders as named
beneficiaries accordingly: De La Mata 37-1/2%, Calas 18-3/4%, Castilla 18-3/4%
and Fernandez 25%. Calas provided a substantial portion of the $70,000 that
Fernandez tendered as a down payment.
Thereafter, De La Mata proposed that RNB acquire the Little Havana site for
use as a branch facility, and introduced Fernandez to Botifoll as the property’s
owner. At an October 1983 meeting of the RNB Directors, De La Mata
participated in discussions to acquire the Little Havana branch building, and
initiated the motion to apply to the OCC for a license to open the branch.
Ultimately, RNB agreed to lease the Little Havana site for three years at an annual
5
rate of $156,000, and to pay $100,000 per year to maintain an option to purchase
the building.
In December 1983, the RNB Loan Committee approved a $700,000 loan to
the Fernandez Land Trust, thus, completely underwriting the purchase of the Little
Havana property. De La Mata, Calas and Castilla all voted to approve the loan to
the Fernandez Land Trust while concealing their interest therein. In effect, the
bank insiders caused RNB to misrepresent to the OCC in its branch opening
application that no bank employees were involved in the transaction.
In August 1984, RNB needed additional parking for the Little Havana site.
De La Mata proposed that RNB acquire, for an additional $150,000, the adjacent
parking lot, the purchase of which RNB had unknowingly financed through the
$700,000 loan to the Fernandez Land Trust. At the RNB Board meeting on August
22, 1984, De La Mata concealed his interest in the subject property and voted to
approve the acquisition.
At the conclusion of the three year lease, on December 24, 1986, RNB
purchased the Little Havana site from the Fernandez Land Trust for $1,000,000,
including the option payments. The uncontested appraised value of the property,
including the parking lot, was $291,000, resulting in approximately $850,000 loss
to RNB.
6
3. The International Private Banking branch
In March 1984, Calas, Castilla and Fernandez retained attorney William
Shockett to represent them in the purchase of property on LeJeune Road, near
Miami International Airport. Shockett, as “trustee,” entered into a contract to
purchase the site for $700,000. Calas and Castilla provided the $70,000 down
payment. At some point, De La Mata proposed to bank officials that RNB acquire
the property for use as its International Private Banking (“IPB”) branch, and
arranged for a meeting between Botifoll and Fernandez, who purported to be the
site’s owner. Although Shockett advised his clients on the necessity of disclosure,
Fernandez concealed the identities of his co-venturers from Botifoll.
Appellants, through a Florida corporation entitled “Real Estate Partners,”
applied to RNB for a loan to finance the purchase of the IPB site. When Shockett
learned that RNB might not only lease, but also finance and lease back the property
from its own officers, Shockett again warned of the conflict of interest and again
was reassured that the Bank knew everything. Yet, the financial statement
submitted in support of Real Estate Partners’ loan application to RNB blatantly
misrepresented Fernandez to be the sole shareholder of the corporation. It is
undisputed that the shares of Real Estate Partners were divided among De La Mata
(37-1/2%), Calas (18-3/4%), Castilla (18-3/4%) and Fernandez (25%).
7
On June 27, 1984, the RNB Board voted to pursue this site as a branch
location. De La Mata participated in the discussion and cast an affirmative vote
without disclosing his, or Calas’ and Castilla’s ownership interest in the property.
After some negotiation, RNB entered into an agreement dated August 3, 1984, to
lease the IPB site from Real Estate Partners for $165,000 per year with an option to
purchase the property and premises after eight years. The evidence at trial showed
that RNB paid $510,000 in excess of the fair market rental value during the first
seven years of the lease.
On August 9, 1984, RNB’s Loan Committee approved two loans, one to
Real Estate Partners in the amount of $560,000 and one to Fernandez in the
amount of $190,000, the proceeds of which were used to acquire the IPB property.
De La Mata, Calas and Castilla all voted to approve the requested loans, without
disclosing that they were the recipients. As a result of the bank insiders’ deception,
RNB filed an OCC bank branch application which failed to disclose the interest of
its own officers in the site’s acquisition.
On or about April 1, 1985, Real Estate Partners applied to RNB for another
loan, in the amount of $180,000, for the construction of additional floor space at
the IPB branch site. Calas prepared the paperwork for the loan, and the loan was
issued without presentation to, or approval by, the Loan Committee.
8
Around May of 1987, Real Estate Partners pledged the IPB site and rents
due under the pending lease with RNB to Ocean Bank as collateral for a loan in the
amount of $1,000,000. Real Estate Partners satisfied its $700,000 debt obligation
to RNB, and distributed the remaining proceeds to the appellants.
4. The Orange Bowl branch
In March 1985, Fernandez again retained Shockett to draft a contract, this
time for the acquisition of property located near the Orange Bowl in Miami
(hereinafter “Orange Bowl” site). Shockett obtained a contract to purchase the
property for $300,000 in the name of “Fernandez as trustee.” On June 19, 1985,
prior to closing, Fernandez assigned the purchase contract to Real Estate Partners.
Acting through Fernandez, Real Estate Partners applied to RNB for
financing, again misrepresenting Fernandez as the sole corporate shareholder. In
addition, the loan application introduced as evidence at trial revealed that Real
Estate Partners received a pre-approved loan on De La Mata’s authorization. The
loan, in the amount of $250,000, was disbursed to Real Estate Partners on June 19,
1985. The Loan Committee subsequently ratified the loan on June 27, 1985, with
De La Mata, Calas and Castilla all voting in favor thereof.
9
At a meeting of the RNB Executive Committee1 on September 24, 1985, De
La Mata proposed that RNB acquire the Orange Bowl site for use as a branch
facility. De La Mata revealed that he had already negotiated tentative terms with
Fernandez, the purported owner of the property, for the construction of a bank
building and a five year lease with option to purchase the property and premises.
De La Mata did not disclose to the other directors that the bank insiders owned the
Orange Bowl property. Thereafter, Calas took charge of overseeing construction
costs and negotiating lease terms.
In the spring of 1986, Real Estate Partners applied to RNB for two loans, the
proceeds of which would be used for the construction of the Orange Bowl bank
building. In support of this application, Real Estate Partners again submitted a
financial statement falsely stating that Fernandez owned 100% of the corporation’s
stock. The Loan Committee approved the loans at its meeting of June 19, 1986.
De La Mata, Calas and Castilla each voted to extend credit without disclosing their
personal financial interest in Real Estate Partners.
1
Established by the Board of Directors, the Executive Committee was composed of
Board members and was authorized to make operational and management decisions arising
between monthly Board meetings. The Executive Committee was composed, at this time, of Mr.
Isaias, RNB’s majority shareholder, Dr. Botifoll, Mr. Sastre, Mr. Gonzalez-Blanco, and Mr. De
La Mata.
10
RNB ultimately decided to purchase rather than lease the Orange Bowl
property.2 Fernandez offered the site and its newly constructed building for $1.15
million, but following negotiations, RNB agreed to purchase the site for $960,000.
Given that Real Estate Partners had spent $300,000 to purchase the land, and
$277,000 to construct the building (based on cancelled checks from Real Estate
Partners’ bank account with RNB), plus some incidental costs, appellants realized
approximately $380,000 profit on the deal in one year. The Executive Committee
approved the purchase price on June 23, 1986, at which time De La Mata cast an
affirmative vote while concealing the insiders’ conflict of interest.
B. Foreclosed Real Estate (“OREO” properties)3
In early 1986, RNB foreclosed on some property that collateralized a
defaulted loan. The evidence showed that Calas had been the loan officer on the
account, and approximately $200,000 was due on the balance. Appellants created
“Great Group Investments” (hereinafter “Great Group”), a Florida corporation, and
distributed the shares to De La Mata’s family (37-1/2%), Calas (18-3/4%), Castilla
2
The evidence showed that the Bank’s decision to buy rather than lease the Orange
Bowl site was in large part based on the desire to complete and cease further business with
Fernandez. Mr. Isaias testified that it had become a hassle to continually obtain Board approval
for the rising costs of construction claimed by Fernandez.
3
OREO stands for “other real estate property” signifying property that the Bank had
acquired trying to collect loans as distinguished from property used in the Bank’s operations.
11
(18-3/4%) and Fernandez (25%). Acting as the corporation’s owner, Fernandez
made an offer to purchase the OREO properties from RNB for $130,000. It had
been appraised at $207,000. On February 14, 1986, the committee responsible for
reviewing all defaulted loans and approving sales of OREO properties approved
the sale to Great Group. De La Mata, a member of this committee, voted in favor
of the transaction without disclosing his personal interest in Great Group.
When Great Group applied to RNB for a $100,000 loan to finance the
purchase, it submitted a financial statement falsely representing Fernandez as the
sole shareholder of Great Group. The RNB Loan Committee considered and
approved the loan on June 5, 1986. In customary fashion, De La Mata
affirmatively voted in favor of the application while concealing the ownership
interest of the bank insiders in Great Group. Over the course of the following year,
Great Group sold the OREO properties for $340,000, thereby realizing a profit of
$210,000. RNB lost $81,000 on the properties.
In October 1986, Calas and Castilla informed attorney Shockett that RNB
held two defaulted notes secured by real property whose appraised value greatly
exceeded the remaining balances due on the loans. At the direction of Calas and
Castilla, Shockett formed a corporation named “CSEC,” and divided the ownership
between Castilla’s niece, Myra Espinola and her husband (together 75%) and
12
Shockett (25%). Castilla helped Shockett purchase the defaulted notes by
arranging for an unsecured loan in the amount of $100,000 through RNB.
Shockett thereafter sold the real estate that served as collateral for these loans at a
substantial profit, largely for the benefit of Calas and Castilla.
C. Unrelated Real Estate Ventures
In September 1983, De La Mata approached his friend and RNB client,
Jorge Sarria, and identified a vacant lot owned by the EWL Corporation as a
potential site for the operation of a gasoline distributorship. Sarria owned and
operated gasoline service stations in the Miami-Dade area, and testified that he and
De La Mata had a long-standing agreement to invest jointly in a service station
when the opportunity arose. The evidence showed that Calas had apparently
learned of the opportunity as EWL’s account officer at RNB.
De La Mata, Calas and Sarria thereafter entered into an understanding
whereby Sarria would receive RNB’s financial backing to acquire the lot and
construct a retail service station in exchange for De La Mata’s and Calas’s
undisclosed interest therein. Sarria obtained a contract for the purchase of the
property in the name of “Sarria and assigns,” and assigned the purchase contract to
Sarocco, Inc. prior to closing on December 19, 1983. At trial, Sarria testified that
13
Sarocco, Inc. was incorporated on December 9, 1983, and the shares were divided
among Sarria (50%), De La Mata (25%) and Calas (25%).
At its December 1983 meeting, the RNB Loan Committee approved a loan
to “Sarria and assigns” in the amount of $425,000 for the acquisition and
construction of a gas station. De La Mata initiated the motion to approve the loan,
and both De La Mata and Calas voted in favor thereof, without disclosing their
financial interest in the venture. Several years later, in November 1986, De La
Mata and Calas voted to approve the extension of the loan to $550,000, again
without making any disclosure of their personal interest.
In December 1986, De La Mata, through his family members, invested in a
real estate development venture named “Estate Land Development.” Thereafter,
De La Mata facilitated a $313,000 loan to that entity, and formally voted to grant
the loan at a meeting of the RNB Loan Committee, without disclosing the fact of
his family’s 25% interest therein.
II. Procedural History
On April 14, 1992, a federal grand jury sitting in the Southern District of
Florida returned an indictment charging De La Mata, Calas, Castilla, Fernandez
and corporate co-defendants, Real Estate Partners, Inc. and Hialeah Properties,
Inc., on seventy-eight counts arising out of three separate conspiracies, namely the
14
bank branch transactions, the OREO properties, and the corporate loans. Each
count incorporated by reference certain “general allegations” set forth at the
beginning of the indictment which described the bank insiders’ disclosure
obligations under federal banking statutes and regulations, internal bank
procedures, and the common law.
Appellants filed numerous pretrial motions to dismiss the indictment
arguing, inter alia, that the bank fraud and money laundering counts failed to state
offenses,4 that the bank fraud and money laundering charges violated the ex post
facto clause, and that the bank fraud counts were multiplicitous and were barred by
the applicable statute of limitations. In addition, De La Mata moved to dismiss
charges of making false entries, in violation of 18 U.S.C. § 1005, and of conspiring
to defraud the United States, in violation of 18 U.S.C. § 371, on the grounds that
appellants did not, as a matter of law, have the legal duties alleged by the
government. Calas and Castilla moved to strike as surplusage and to exclude from
evidence proof of civil and regulatory disclosure requirements on the grounds that
it was improper for the government to rely on a civil violation to prove a criminal
act.
4
Appellants challenged the acts which the indictment alleged as “executing” the bank
frauds, and argued that the indictment failed to charge money laundering offenses separate and
distinct from the bank fraud offenses.
15
The district court, Honorable K. Michael Moore presiding, conducted
pretrial hearings regarding the motions on October 13 and 14, 1992. Except for the
multiplicity challenge, which the court took under advisement, the district judge
denied the defense motions.
Trial commenced on October 15, 1992. The government demonstrated that
appellants engaged in a pattern of deception by repeatedly and willfully concealing
the bank insiders’ personal financial interest in various entities in order to induce
RNB to enter into transactions remunerative to the appellants. The government
introduced expert and bank witnesses who established the disclosure requirements
imposed by federal regulations, as well as RNB’s own internal rules prohibiting
self-dealing without disclosure and abstention. The government proved appellants’
ownership interests in the various entities through uncontroverted documentary
evidence, and appellants’ intent to deceive the Bank though their own attorneys
and “front” men like Blanco.5
In defense, appellants sought to prove that they lacked intent to financially
harm the bank. The bank insiders contended that they did not know they were
required to disclose their involvement and to refrain from voting in the proposed
5
Perez testified that he did not know that the bank insiders were involved in the
transaction. Silva testified that his ethical and legal duties as an attorney precluded him from
disclosing the identity of his client. Shockett believed that it was the bank insiders’
responsibility to disclose their interest.
16
transactions because RNB did not have a written code of conduct until 1988. In
addition, appellants asserted that, because all material financial terms were
disclosed, the failure to disclose the bank insiders’ interest did not expose the Bank
to a risk of loss that it did not knowingly accept.6 Arguing that only economic
injury was cognizable under the bank fraud statutes, appellants requested an
instruction informing the jury that “risk of loss” was an essential element of the
crimes of bank fraud and misapplication.
The district court denied the defendants’ motions for the aforementioned
requested jury instructions. However, by order dated December 16, 1992, the
district court ruled that certain bank fraud counts were multiplicitous and required
the government to elect which bank fraud charges it wanted the jury to consider.
As a result of the court striking various counts, the case went to the jury on fifty-
nine counts.
The jury returned verdicts adjudging De La Mata and Fernandez guilty as
charged. The jury also found Calas and Castilla guilty on all counts, save the
6
Appellants conceded earning substantial profits on the transactions, but countered that
RNB had also benefitted. Appellants contended that the loans had been repaid with interest, that
the OREO transactions allowed RNB to remove defaulted loans from the books, and that the
bank branches had operated successfully.
17
substantive offenses arising from the CSEC transaction. The parties entered into
stipulations regarding the forfeiture counts.7
On April 23, 1993, the district court sentenced the appellants, over objection,
under the money laundering guidelines. De La Mata, Calas, Castilla and
Fernandez were sentenced to terms of imprisonment of 121, 109, 97 and 97
months, respectively, to be followed in each case by a three year term of
supervised release. The district court ordered restitution against De La Mata, Calas
and Castilla, jointly and severally in the amount of $1,786,194, and against
Fernandez in the amount of $1,424,000. In order to strengthen the possibility of
restitution, the district court did not impose fines. The district court granted bond,
pending appeal,8 and appellants timely filed notices of appeal.9
III. Discussion
7
The parties stipulated to the entry of an Order requiring appellants to transfer their two
remaining branch leases to the United States, and permitting the government to hold other
property as security on the money judgment portion of the forfeiture.
8
The district court ruled that appellants had raised an issue which presented a substantial
question of law within the meaning of 18 U.S.C. § 3143(b)(2): Whether the court erred in
denying an instruction that risk of loss constitutes an element of bank fraud and misapplication
of bank funds. See Memorandum Order and Opinion dated July 22, 1993.
9
Appellants initial direct appeal was dismissed in February 1994, when appellants
moved for a new trial on the basis that Judge Moore had been under investigation in the Eastern
District of New York during appellants’ trial. The district court, Hon. William O’Kelley sitting
by designation, granted the motion for new trial, however, this Court reinstated the judgment and
verdict. See United States v. Cerceda, 172 F.3d 806 (11th Cir. 1999)(en banc).
18
Appellants contend (1) that application of the newly enacted ten year statute
of limitations for financial institution offenses, and their prosecution for the bank
frauds charged in counts 2, 3 and 6 violated the ex post facto clause; (2) that the
indictment failed to state offenses and was constructively amended at trial; (3) that
the jury instructions failed to charge that risk of loss is an essential element of the
crimes of bank fraud and misapplication; (4) that Fernandez was incorrectly
sentenced under the money laundering guidelines; (5) that the evidence was
insufficient to support the convictions of Castilla; and (6) that the district court
erred in denying appellants’ motion for a new trial based on newly discovered
evidence.
A. Ex Post Facto
We review de novo whether appellants’ prosecution contravened the ex post
facto clause of the U.S. Constitution. United States v. Muench, 153 F.3d 1298,
1300 (11th Cir. 1998).
1. Application of Section 3293
Effective August 9, 1989, Congress extended the statute of limitations for
“financial institution offenses” (including 18 U.S.C. §§ 656, 1005, 1014 and 1344)
from five to ten years. See 18 U.S.C. § 3293. Moreover, Congress expressly made
the prolonged limitations period applicable to all such offenses which had been
19
committed but as to which the former five year limitations period had not yet run.
See Pub.L. No. 101-73, § 961(l)(3), 103 Stat. 501 (1989). Thus, offenses
committed on or before August 9, 1984, would be barred by the five-year statute of
limitations while offenses committed after August 9, 1984, would be governed by
the new ten-year limitations period.
Appellants concede that the alleged offenses were subject to prosecution at
the time § 3293 was enacted, however they assert that extending the limitations
period violated the ex post facto clause because it deprived them of an affirmative
defense which they could otherwise have interposed. In other words, appellants
maintain that all but three of the substantive financial institution offenses allegedly
occurred on or before April 13, 1987, when the five-year limitations period was in
effect, and would have been time-barred on the date of indictment, April 14, 1992.
This argument misperceives the law.
The ex post facto clause prohibits the enactment of statutes which: (1)
punish as a crime an act previously committed which was innocent when done: (2)
make more burdensome the punishment for a crime, after its commission; or (3)
deprive one charged with a crime of any defense available according to law at the
time when the act was committed. Collins v. Youngblood, 497 U.S. 37, 52, 110
S.Ct. 2715, 2724 (1990). Only statutes withdrawing defenses related to the
20
essential elements of a crime, or to matters which a defendant might plead as
justification or excuse fall into this latter category. See id. at 49-50, 110 S.Ct. at
2723.
Moreover, the law is well-settled that extending a limitation period before a
given prosecution is barred does not violate the ex post facto clause. See United
States v. Grimes, 142 F.3d 1342, 1345 (11th Cir. 1998) (collecting cases). The
universal vindication of § 3293 against ex post facto challenge is founded on an
unbroken line of cases, consistently upholding such extensions, and stretching as
far back as Learned Hand’s opinion in Falter v. United States, 23 F.2d 420, 426
(2nd Cir.), cert. denied, 277 U.S. 590, 48 S.Ct. 528 (1928) (“... while the chase is
on, it does not shock us to have it extended beyond the time first set...”). Thus, we
follow our sister circuits in holding that § 3293 did not deprive appellants of a
defense within the meaning of the ex post facto clause. See United v. Brechtel,
997 F.2d 1108, 1113 n.14 (5th Cir. 1993) (collecting cases).10
10
Appellants would have us find that Grimes was wrongly decided, and that 72 years of
uniform jurisprudence has been overruled sub silentio by Lynce v. Mathis, 519 U.S. 433, 117
S.Ct. 891 (1997) and Carmell v. Texas, 529 U.S. 513, 120 S.Ct. 1620 (2000). In Lynce, the
Supreme Court invalidated a Florida statute which cancelled early release credits awarded to
prison inmates, resulting in the reincarceration of many offenders, because the law retroactively
increased the severity of punishment. See Lynce, 519 U.S. at 446-447; 117 S.Ct. at 898.
Moreover, the Court rejected the government’s argument, propounded by appellants here, that
the early release credits were awarded pursuant to a statute enacted after the date of offense;
despite modifications in subsequent years, the basic statute was in effect at the time of
petitioner’s crime. See id. 519 U.S. at 447-48; 117 S.Ct. at 899. In Carmell, the Supreme Court
held that a Texas statute permitting conviction in rape cases solely upon the testimony of the
21
2. Prosecution for Bank Fraud
Appellants contend that counts 2, 3 and 6 infringe the ex post fact clause
because they are premised on lease agreements validly executed prior to the
enactment of the bank fraud statute, 18 U.S.C. § 1344, on October 12, 1984. Thus,
they argue that any fraud that occurred in connection with the bank branch
transactions was completed upon the execution and delivery of the lease
agreements on November 3, 1983, August 21, 1984, and August 3, 1984,
respectively. The government responds that bank fraud is a continuing offense
such that the schemes charged in counts 2, 3 and 6 merely commenced with the
signing of the leases and continued as long as the leases were in effect because
they posed a continuing risk of injury to the bank. Moreover, the government
contends that a single bank fraud may be executed numerous times, and that each
of the bank frauds charged in counts 2, 3 and 6 was “executed” after the statute
was passed.
First, we must determine what constitutes the offense of bank fraud. Under
18 U.S.C. § 1344, a person is guilty of bank fraud if he “ knowingly executes, or
attempts to execute, a scheme or artifice ... to defraud a federally chartered or
victim could not be retroactively applied because it reduced the quantum of evidence needed to
convict. See Carmell, 529 U.S. at 552, 120 S.Ct. at 1643. These cases simply do not call into
question the well-established principle that Congress may extend the limitations period before
the original limitations period has expired.
22
insured financial institution ....” 18 U.S.C. § 1344 (1985). The unit of the offense
created by § 1344 is each execution or attempted execution of the scheme to
defraud, not each act in furtherance thereof. See United States v. Molinaro, 11
F.3d 853, 856-60 (9th Cir. 1992); accord United States v. Longfellow, 43 F.3d 318,
323 (7th Cir. 1995) (citing cases). Each component act of a scheme to defraud is
not a separate violation because otherwise a single criminal transaction could result
in an infinite number of prosecutable offenses having no particular relevance to the
purpose of the bank fraud statute. See Molinaro, 11 F.3d at 860 (finding
multiplicitous bank fraud counts charging separately each submission of
documents to bank because they were not executions but acts in furtherance of real
estate/loan fraud scheme). Accordingly, a bank fraud offense is complete upon the
“execution,” or attempted execution of the scheme. See United States v. Lemons,
941 F.2d 309, 318 (5th Cir. 1991).11
Yet, the government is correct that a single scheme can be executed a
number of times, and a defendant may be charged in separate counts for each
11
Lemons involved a loan fraud scheme in which a bank officer caused his savings and
loan institution to fund a large loan in excess of the purchase price and authorized an assignment
fee from the loan funds, from which the defendant was to receive a portion for his personal
benefit. See Lemons, 941 F.2d 311-312. However, the defendant tried to conceal his
participation by receiving the money in six separate payments over the course of several months.
See id. at 313. The Fifth Circuit held that although the payments were in furtherance of the
scheme to defraud, as concerned the savings and loan, there was but one execution of that
scheme. See id. at 318.
23
“execution” of the scheme to defraud. See United States v. Sirang, 70 F.3d 588,
595 (11th Cir. 1995). In Sirang, the defendant was convicted on six counts of bank
fraud for depositing bogus checks, i.e., checks written on accounts which he knew
did not have sufficient funds. See id. We upheld the convictions against a
challenge of multiplicity,12 reasoning that “‘two transactions may have a common
purpose but constitute separate executions of a scheme where each involves a new
and independent obligation to be truthful.”’ Id. at 596 (quoting Molinaro,13 11 F.3d
at 861 n.16).
The question, then, is what constitutes an “execution” of the scheme. In
Sirang, we distinguished check-kiting cases, in which each check increases the risk
faced by the financial institution, from component acts in “a scheme to obtain a
certain amount of funds or to obtain financing for a particular transaction[.]” Id. at
596 (quoting United States v. Barnhart, 979 F.2d 647, 650-51 (8th Cir. 1992). In
other words, each part of the scheme that creates a separate financial risk for the
financial institution constitutes a separate execution. See, e.g., Longfellow, 43
12
An indictment is multiplicitous if it charges the same offense in more than one count.
See Sirang, 70 F.3d at 595.
13
In Molinaro, the Ninth Circuit found each transfer of property to be a separate
execution in a scheme where straw buyers purchased property to make a savings and loan look
profitable and to conceal the real purchaser. See Molinaro, 11 F.3d 853. The court explained
that the transactions were separate executions because they were chronologically and
substantively independent, neither depended on the other for its existence, and each had its own
functions and purpose. Id. at 860.
24
F.2d at 324. For example, Longfellow involved a scheme in which the defendant
granted a series of loans to members of a credit union to facilitate the sale of his
own property, without disclosing his interest in the loans and without transferring
title to the credit union as collateral for the loans. See id. at 319. Although the
original loans were time-barred, Longfellow refinanced one of the loans within the
limitations period. See id. The Seventh Circuit held that the renewal of the loan
constituted a separate execution of the scheme because it created a new,
independent risk for the credit union. See id. at 324.
Ultimately, the decision of whether a particular transaction is an “execution”
of the scheme or merely a component of the scheme will depend on several factors
including the ultimate goal of the scheme, the nature of the scheme, the benefits
intended, the interdependence of the acts, and the number of parties involved.
Longfellow, 43 F.3d at 323. For example, in United States v. Duncan, 42 F.3d 97
(2nd Cir. 1994), certain directors of a savings and loan association (“the bank”)
conspired to purchase two properties with the intention of leasing and/or selling
them back to the bank while concealing their interest therein from the other
directors. See id. Raising an ex post facto challenge on appeal, Duncan asserted
that the alleged bank fraud was completed when the bank insiders agreed to usurp
the corporate opportunity, i.e., to purchase the properties. See id. at 104. The
25
Second Circuit held that the scheme was not fully executed until the insiders sold
the second property to the bank, in April 1985, because the central purpose of the
scheme was not merely to seize the properties at a bargain, but also to sell the
properties back to the bank at a premium. See id; cf. Lemons, 941 F.2d at 315
(finding sufficient evidence to sustain conviction because loan scheme was not
complete, or executed, until defendant received his benefit from the transaction).
Returning to the case at bar, the government contends that bank fraud is a
continuing offense. A continuing offense is one which is not complete upon the
first act, but instead continues to be perpetrated over time. United States v. Gilbert,
136 F.3d 1451, 1453 (11th Cir. 1998). Because the continuing offense doctrine
extends the statute of limitations, we are admonished to construe them narrowly.
See Toussie v. United States, 397 U.S. 112, 114-15, 90 S.Ct. 858, 860 (1970).
Thus, offenses should not be considered continuing unless “the explicit language
of the ... statute compels such a conclusion, or the nature of the crime involved is
such that Congress must assuredly have intended that it be treated as a continuing
[offense].” Id.
The government asserts that the bank frauds continued until appellants were
indicted in 1992 because appellants continued to collect lease payments from RNB
and because the purchase options relating to the IPB and Westlands branches
26
remained pending. In other words, the fraud continued as long as the leases did,
because that was the means by which the appellants were enriched. Taken to its
logical conclusion, the collection of rents on a lease obtained by fraud, for a term
of 99 years, would toll the statute of limitations for 99 years. We think this goes
too far. The law is clear that the bank fraud statute imposes punishment for each
“execution” of the scheme to defraud, and not each act in furtherance. See
Longfellow, 43 F.3d at 323 (citing cases); see also United States v. Hare, 618 F.2d
1085 (4th Cir. 1980) (holding that indictment for allegedly receiving something of
value pursuant to 18 U.S.C. § 201(g) when defendant accepted a loan was time-
barred despite defendant’s continued receipt of favorable interest and payment
benefits during the term of the loan).
In this regard, the government misplaces reliance on Duncan and
Longfellow. Duncan, as discussed above, involved a scheme strikingly similar to
the one at bar, in which bank insiders induced the bank to finance the purchase of
certain property which they then leased, and ultimately sold to the bank. See
Duncan, 42 F.3d 97. We acknowledge that the court characterized conspiracy and
bank fraud as continuing offenses, however, the court cited exclusively to
conspiracy cases as support for that proposition. See id. at 104 (emphasis added).
Furthermore, because the defendants conceded that bank fraud was a continuing
27
offense, the language is dicta. See id. Instead, the court held that “the scheme was
not fully executed” until the defendants sold the second parcel of land to the bank,
after the effective date of the bank fraud statute. Id. Thus, the conviction did not
violate the ex post facto clause because the second sale constituted an “execution”
of the scheme.
In Longfellow, the court loosely refers to the scheme as continuing in
rejecting the defendant’s argument that the scheme was barred by the statute of
limitations.14 See Longfellow, 43 F.3d at 325. The court goes on to explain that
“[t]he fact that only one or two executions fell within the Statute of Limitations
does not detract from the entire pattern of loans’ being a scheme, and renders
Longfellow no less culpable for the entire scheme.” Id. The court ultimately holds
that the renewal of a loan constituted a separate “execution” of the defendant’s
scheme, which brought the entire scheme within the limitations period. Thus,
Duncan and Longfellow demonstrate not that bank fraud is a continuing offense,
but that a single bank fraud scheme can be executed multiple times.15
14
The court stated that “the scheme continued until the Credit Union was taken out of
Longfellow’s hands in March 1986.” Longfellow, 43 F.3d at 325. However, the court opined
that the scheme was executed each time Longfellow arranged loans from the Credit Union,
received loan proceeds as payment for the property, and failed to transfer title. See id., 43 F.3d
at 324. The government did not attempt to indict Longfellow for each execution, presumably
because the earlier transactions occurred outside the limitations period. Id. at 325.
15
We distinguish United States v. Paradies, 98 F.3d 1266, 1284 (11th Cir.1996) in which
this court upheld a conviction for mail fraud pursuant to 18 U.S.C. § 1346 because the defendant
28
Next, we must consider whether counts 2, 3 and 6 properly charged post-
1984 conduct that “executed” the bank fraud schemes.16 As to count 2, we find
that the sale of the Little Havana groundleases constituted a separate execution of
the scheme to defraud RNB. Even though the purchase option derives from a lease
predating the bank fraud statute, appellants had an obligation to disclose their
ownership interest in the property at the time RNB exercised the option, in
December 1986. The failure to do so in connection with the sale constituted a
separate financial risk to the bank. See, e.g., Longfellow, 43 F.2d at 324.
Appellants argue that the alleged bank fraud was “executed” when the lease was
consummated because that agreement exposed RNB to all, if any risk of loss.
However, the risk inherent in the purchase of the property was separate from the
lease and was wholly speculative until RNB actually exercised the option. In this
continued to use the mail to perpetrate his scheme after the effective date of the statute. See id.
at 1273; cf. United States v. Garfinkle, 29 F.3d 1253, 1259-60 (8th Cir. 1994) (holding that mail
fraud scheme continued past the effective date of § 1346, even though mailing occurred on same
day § 1346 was signed into law).
16
The indictment charged the following acts and dates of execution:
count 2 12-24-86 Sale of the Little Havana groundleases to RNB through
Fernandez Land Trust for $1 million
count 3 10-19-90 Disbursement of accumulated rental payments received by
Hialeah Properties from RNB under Westlands lease to De
La Mata, Calas and Castilla
count 6 6-11-87 Receipt of $1 million loan from Ocean Bank collateralized
by IPB property and conditional assignment of lease
payments due Real Estate Partners from RNB
count 17 7-30-86 Sale of Orange Bowl to RNB, and contract to construct
bank branch building.
29
way, the lease and subsequent exercise of the purchase option are similar to the
separate extensions of a loan agreement found to be separate executions of a
scheme to defraud. See United States v. Harris, 805 F.Supp. 166, 174-175
(S.D.N.Y. 1992) (reasoning that defendants were faced with a new obligation to be
truthful each time they sought a loan extension).
We do not believe that counts 3 and 6 charged executions of the appellants’
scheme to defraud RNB. Although the appellants continued to receive lease
payments on the Westlands and IPB branches, the fraud was completed when
appellants fraudulently obtained the leases with the intent at that time to collect
future rent. See United States v. Gregg, 179 F.3d 1312 (11th Cir. 1999) (holding
that bank fraud was a completed crime when the defendant fraudulently obtained
the deposit of the proceeds of a check with the intent to withdraw the money at a
later time). The essence of bank fraud is the obtaining of money or property
through fraud--in this case, the failure to disclose the insiders’ involvement. In
order to find that the disbursement of rent and of the Ocean Bank loan,
collateralized by rent due from RNB, constituted executions separate from the
underlying leases we would have to hold that appellants had a continuing duty to
disclose, i.e., to tell the bank that they owned the property each time they accepted
30
a rent check on the leases. As we discussed above, we do not think the bank fraud
statute dictates this result.17
Our conclusion is further reinforced by the fact that two of the money
laundering counts (counts 5 and 10) charge those transactions that allegedly
executed the bank frauds set forth in counts 3 and 6, as transactions involving
proceeds of “specified unlawful activity.” For example, count 5 charged that
appellants knowingly engaged in a transaction involving the proceeds of unlawful
activity, i.e., bank fraud, with the intent to conceal the nature, source and
ownership of such proceeds. The transaction involving illicit proceeds was
identified as the disbursement of rent made by RNB under the Westlands lease to
De La Mata, Calas and Castilla on October 19, 1990. The same disbursement of
rent could not complete the offense of bank fraud and constitute the offense of
money laundering. See United States v. Christo, III, 129 F.3d 578, 579 (11th Cir.
1997). Accordingly, appellants’ convictions on counts 3 and 6 violated the ex post
facto clause.
17
At oral argument, counsel for the government offered the following hypothetical:
Suppose an individual submits a false loan application to induce a bank to extend credit, but the
individual has not received the funds yet. Government counsel posited that the fraud was
executed upon the making of false statements. This supports our conclusion that the bank branch
schemes were executed upon the signing of the lease and loan agreements which materially
misrepresented the bank insiders’ financial interest.
31
Appellants maintain, without further explanation, that we must reverse their
convictions for money laundering because those charges were “predicated upon the
time-barred bank fraud[.]” First, we need only address counts 4 and 5 because they
are the only money laundering charges predicated solely upon the bank fraud
alleged in count 3, which we have reversed.18 Second, we clarify our holding that
18 U.S.C. § 1344 could not be retroactively applied to prosecute appellants’
scheme to defraud RNB in connection with the Westlands and IPB branches
without infringing the ex post facto clause. This is because appellants did not have
fair notice that they could be prosecuted for bank fraud when those leases were
executed. See Weaver v. Graham, 450 U.S. at 28-30, 101 S.Ct. at 964-65 (stating
that ex post facto prohibition protects against arbitrary changes in the law and
assures that legislative Acts give fair warning of their effect). However, we are
unaware of any legal bar to their prosecution for laundering the proceeds of what
was clearly “specified unlawful activity” under 18 U.S.C. § 1956 of the Money
Laundering Control Act of 1986.19
18
Counts 10-16 alleged transactions involving proceeds derived from the misapplication
of bank funds, charged in counts 7-9, in addition to the bank fraud charged in count 6.
19
The two provisions of 18 U.S.C. § 1956 under which appellants were charged provide:
(a)(1) Whoever, knowing that the property involved in a financial
transaction represents the proceeds of some form of illegal activity,
conducts or attempts to conduct such a financial transaction which
in fact involves the proceeds of specified unlawful activity–
(A)(i) with the intent to promote the carrying on of specified
32
That statute makes it illegal to knowingly enter into a financial transaction
involving the proceeds of a “specified unlawful activity” with the intent to conceal
or disguise the nature, location, source, ownership, or control of those proceeds.
United States v. Miller, 22 F.3d 1075, 1079 (11th Cir. 1994). “Specified unlawful
activity” includes, inter alia, any racketeering offense listed in 18 U.S.C. § 1961(1).
18 U.S.C. § 1956(c)(7)(A). In turn, bank fraud is one of the offenses listed in §
1961(1). A conviction for money laundering does not require proof that the
defendant committed the specific predicate offense. See United States v. Smith, 46
F.3d 1223, 1234 (1st Cir. 1995). It merely requires proof that the monetary
transaction involved the proceeds of the predicate offense identified in the
indictment. See Miller, 22 F.3d at 1079; see also United States v. Mankarious, 151
F.3d 694, 703 (7th Cir. 1998). In this way, the First, Fifth, Seventh and Tenth
Circuits have upheld money laundering convictions even though the defendant was
not convicted of the underlying offense by which he obtained the money. See
United States v. Richard, 234 F.3d 763, 770 (1st Cir. 2000); Mankarious, 151 F.3d
unlawful activity; or
***
(B) knowing that the transaction is designed in whole or in part–
(i) to conceal or disguise the nature, the location, the source, the
ownership, or the control of the proceeds of specified unlawful
activity;....
18 U.S.C. § 1956.
33
694, 703 (dismissing mail fraud counts); United States v. Tencer, 107 F.3d 1120,
1130 (5th Cir. 1997) (reversing convictions for mail fraud); United States v.
Kennedy, 64 F.3d 1465, 1480 (10th Cir. 1995) (affirming acquittal on mail fraud
counts).
Similarly, although appellants could not be prosecuted for bank fraud ex
post facto, it does not necessarily follow that they cannot be convicted for the
laundering of proceeds obtained after the enactment of the bank fraud statute. We
hold that these proceeds derived from “specified unlawful activity” i.e., bank fraud,
because the Bank occupied the leased premises during a period after federal law
prohibited schemes, like the one at bar, aimed at defrauding financial institutions.
Appellants’ prosecution for this conduct does not implicate the due process or ex
post facto clauses because appellants were on clear notice that federal law
prohibited their scheme yet they failed to take any remedial action. It is well
settled that Congress may pass new laws which require us to alter our conduct or
risk prosecution. See Samuels v. McCurdy, 267 U.S. 188, 45 S.Ct. 264 (1925)
(holding that Georgia prohibition statutes could be applied to a defendant who had
lawfully acquired the liquor before the effective date of the statute, but continued
the possession for several years after the change in the law); Chicago & Alton R.R.
Co. v. Tranbarger, 238 U.S. 67, 35 S.Ct. 678 (1915) (affirming penalty against
34
railroad for maintaining embankment in a manner prohibited by new law).
Counts 4 and 5 charged that appellants obtained rent proceeds from Hialeah
Properties’ account in 1990, after enactment of the bank fraud statute and after
Congress had declared bank fraud a “specified unlawful activity” under the money
laundering statutes. Moreover, the jury found that appellants engaged in this
transaction in order to conceal the source, nature or identity of these funds, and to
further promote their scheme. Thus, appellants had a choice; they could have
altered their conduct and renegotiated the leases with the Bank after giving full
disclosure of their interests, or they could continue conduct that was now clearly
illegal. Appellants chose to continue collecting and laundering the rent proceeds,
and thus, we uphold appellants’ convictions on counts 4 and 5.
Finally, appellants contend that the use of bank fraud as RICO predicates
violated the ex post facto clause because bank fraud was not a predicate act until
August 1989. See Pub. L. No. 101-73, § 968. Assuming, without deciding, that
the predicate acts of bank fraud were based on pre-1989 conduct, the jury found,
by special verdict, that appellants’ committed over 30 acts of racketeering. Only 6
of these were based on bank fraud. Thus, we sustain appellants’ convictions on
counts 58 and 59 for racketeering and racketeering conspiracy.
B. The Sufficiency of the Indictment and Proof at Trial
35
Appellants contend that the indictment should have been dismissed,20
because every count therein (the bank fraud, misapplication, false statements, and
hence, the RICO and money laundering counts) was based upon non-existent or
mis-stated disclosure duties, and thus, the indictment failed to state offenses as a
matter of law. We find it noteworthy that appellants moved pretrial to strike from
the indictment and to exclude from evidence, as superfluous and prejudicial, any
reference to civil banking laws and regulations requiring disclosure of insider
transactions.21 Now appellants assert that their convictions can only be sustained if
they had the disclosure duties attributed to them by the federal banking statutes and
regulations described in the indictment.
Appellants provide no support for the proposition that a scheme to defraud a
financial institution must be predicated upon an affirmative duty to disclose. See,
e.g., United States v. Colton, 231 F.3d 890 (4th Cir. 2000) (finding that active
concealment with intent to deceive constitutes actionable fraud under 18 U.S.C. §
1344). Assuming, arguendo, that an affirmative duty to disclose material
20
In the district court, appellants moved to dismiss the charges of making false entries
for failure to state offenses. Appellants invite us to find that the district court erred in ruling that
the accuracy of the alleged duties constituted a factual question. However, our review of the
record reveals that the district court found that the challenged counts properly stated offenses.
We agree.
21
The district court denied the motion to strike and/or exclude evidence that civil
regulations required disclosure of insider transactions on the grounds that such evidence was
probative of the appellants’ knowledge and intent.
36
information is essential to state a cause of action under the bank fraud statutes, we
find such a duty based upon appellants’ fiduciary relationship with RNB, the
bank’s own internal policies, and federal banking laws and regulations.
1. Fiduciary Duties
First, appellants were not customers dealing at arm’s length with RNB, nor
were they mere salaried employees of the bank. De La Mata, Calas and Castilla
were director and senior officers of RNB, and as such, owed a fiduciary duty to the
bank and its depositors. See F.D.I.C. v. Gonzalez-Gorrondona, 833 F.Supp. 1545,
1549 (S.D.Fla. 1993). The fiduciary duty, or duty of loyalty, obligates officers and
directors to avoid fraud, bad faith, usurpation of corporate opportunities,22 and self-
dealing. Id.
Appellants assail the indictment’s allegations of a duty to guide the bank to
decisions “most favorable” to it, arguing that the banking regulations only require
that insider transactions be conducted on the “same terms” as those applicable to
others. However, we believe that the common law fiduciary duty is distinct and
separate from appellants’ duties under the banking regulations, which we take up
below. Accordingly, we hold that appellants had a fiduciary duty to inform the
22
A corporate opportunity is a business opportunity in which the corporation has a valid
and significant corporate purpose. See Cohen v. Hattaway, 595 So.2d 105 108 (Fla.5th DCA
1992).
37
Board of Directors of their interests in the transactions they conducted with RNB,
and to avoid participating in any bank transactions that affected them personally.
See United States v. Henderson, 19 F.3d 917, 923 (5th Cir. 1994) (stating that
fiduciary duty required disclosure and abstention).
2. RNB’s Internal Rules and Policies
RNB’s own internal rules prohibited self-dealing without disclosure and
abstention in order to protect the bank’s depositors from financial mismanagement.
See United States v. Clark, 765 F.2d 297, 303 (2nd Cir. 1985) (finding that violation
of internal bank rule or policy designed to protect bank’s pecuniary interests
evidenced scheme to defraud). The testimony of the bank’s principal owner, its
chairman, and every officer and employee who testified at trial established RNB’s
policy that its officers and directors disclose and abstain from self-interested
transactions. The testimony established that self-interested transactions included
those involving officers’ and directors’ immediate family members. In furtherance
of the policy of disclosure, each executive officer was required to complete an
annual questionnaire disclosing all business interests in which s/he, or an
immediate family member, maintained a direct or indirect interest. In fact,
appellants’ appreciation of these rules was proven at trial through incidents of
disclosure and abstention made in their presence by other bank officials and in one
38
instance, by De La Mata himself. Therefore, we reject the contention that the bank
insiders were unacquainted with RNB’s policy prohibiting self-dealing.
3. Federal Banking Laws and Regulations
In 1978, Congress amended the Federal Reserve Act in response to an
alarming string of bank failures, in part due to insider abuses. See United States v.
McCright, 821 F.2d 226, 231 at n.3 (5th Cir. 1987). In proposing the revised
legislation, the bill’s House sponsor articulated the motivation behind increased
federal oversight: “It clearly emphasizes that bankers and savings and loan
executives are operating with other people’s money and that charters for financial
institutions are not franchises to establish playpens for insiders.” Id. (quoting H.R.
Rep. No. 1383, 95th Cong., 2d Sess. 200, reprinted in 1978 U.S.C.C.A.N. 9273,
9331).
a. Extensions of Credit
Under 12 U.S.C. § 375(a), the Federal Reserve was authorized to prescribe
rules concerning extensions of credit to bank insiders. See 12 U.S.C. § 375(a)(10).
Pursuant to that mandate, 12 C.F.R. § 215.4, or “Regulation O” as it is better
known, prohibits the extension of credit to a bank insider, or his related entities,
when the total indebtedness of such party exceeds $500,000 unless: (i) the loan is
approved in advance by a majority of the entire board of directors; and (ii) the
39
interested party abstains from participating directly or indirectly in the voting. The
very first loan which appellants fraudulently obtained from RNB amounted to
$700,000 (to finance the purchase of the Little Havana site), and their outstanding
balance with RNB never fell below the threshold amount.
Regulation O set forth additional reporting requirements. Section 215.7
required the bank to maintain records of loans extended to executive officers and
their related interests, and for this purpose, required executive officers to annually
identify their “related interests.” See 12 C.F.R. § 215.7. Section 215.9 required
the bank to report all insider loans to federal regulators on an annual basis. See 12
C.F.R. § 215.9. In this way, the bank insiders’ deception, particularly De La
Mata’s failure to disclose his business interests in RNB’s annual questionnaire,
caused RNB to violate numerous federal reporting regulations.
b. Purchases and sales of property
Under 12 U.S.C. § 375, purchases and sales of property between the bank
and its directors are permitted: (1) when such transaction is made in the regular
course of business upon terms not less favorable to the bank than those offered to
others; or (2) when the transaction is authorized by a majority of the board of
directors not interested therein. See 12 U.S.C. § 375. Moreover, the statute
provided authority for the reporting of such conflicted transactions to federal
40
banking regulators. See id. The evidence at trial showed that the term “in the
regular course of business” is commonly understood to mean through a public
market. Appellants do not contend that the purchases of OREO property or the
lease/sale of branch sites to RNB were conducted on an open market. Rather, they
assert that disclosure was not required because these purchases and sales were
conducted on fair and reasonable terms. This argument misses the point.
The appropriateness of these transactions was not for the bank insiders to
unilaterally determine. The statute dictates that that determination could only be
made by disinterested directors. We also find the duty to disclose plain on the face
of the statute, and thus, reject appellants’ contention that there was no violation
unless and until the FRB promulgated appropriate disclosure forms and
regulations. Thus, the indictment correctly alleged that appellants were obligated
to gain the approval of a disinterested majority of RNB directors prior to engaging
in these transactions.
c. Bank Branch Transactions
In order to open new branches, national banks must obtain the prior approval
of the OCC, which is granted plenary power over such requests. See 12 U.S.C. §
36(e). During the time period in issue, the OCC required banks to state whether
the new branch property was to be leased or purchased from an officer or
41
director,23 and reserved the right to deny such applications if the terms of the site
were more favorable to the insiders than would be available in a comparable
transaction with unrelated parties. See 12 C.F.R. § 5.30 (c)(2)(iii). Once again,
appellants do not contest the disclosure requirements, but contend that the
commercial reasonableness of the bank branch transactions precluded the OCC
from denying them. We reject appellants’ argument for the reasons set forth
above. Accordingly, we conclude that the indictment sufficiently and accurately
alleged appellants’ duty to disclose and abstain from self-interested transactions,
and thus, stated offenses as a matter of law.
De La Mata makes the related argument that he could not be charged with
making false entries in annual OCC disclosure forms, RNB questionnaires, and
representation letters to RNB’s outside auditors because there was no statutory or
23
If the new branch property was leased or purchased from a bank insider, the OCC
required the bank to provide an independent appraisal or survey of comparable purchases/leases
in the market area and to attach a resolution of the Board of Directors approving the transaction
with the officer or director abstaining from the vote. See Comptroller of the Currency,
Comptroller’s Manual for Corporate Activities, Vol.2, Jan. 1992, at 47-54.
42
regulatory duty to disclose the information sought therein.24 Appellant, however,
misconstrues the law.
The prohibition of false entries is in broad and comprehensive terms.25 Mr.
Justice Cardozo, in describing 12 U.S.C. § 592, a forerunner of the modern bank
fraud statutes, defined false entries to include “any entry on the books of the bank
which is intentionally made to represent what is not true or does not exist, with the
intent to deceive it’s officers or to defraud the association.” United States v.
Darby, 289 U.S. 224, 226, 53 S.Ct. 573, 574 (1933) (quotation omitted). The
purpose of the statute is to help insure that inspection of a bank's books will yield a
true picture of the bank's condition. See United States v. Manderson, 511 F.2d
24
Counts 44-47 charged De La Mata with failing to disclose to the OCC (1) every
business interest he, his spouse, or child had an interest in during the preceding year; and (2)
every reportable transaction he, his spouse, child, or any of their related business interests had
with the bank in the preceding year. Counts 50-53 alleged that De La Mata falsely stated in
annual letters to RNB’s outside auditors that all “related party transactions” had been disclosed.
Counts 54-57 charged De La Mata with falsely representing, in RNB’s annual questionnaire of
executive officers and directors, that he did not own, directly or indirectly, more than 25% of any
business, and that his loans obtained, directly or indirectly, from RNB did not exceed $100,000.
25
At the time of De La Mata’s acts, 18 U.S.C. § 1005 read in pertinent part:
Whoever makes any false entry in any book, report, or statement of
such bank...with intent to injure or defraud such bank or any other
company, body politic or corporate, or any individual person, or to
deceive any officer of such bank, or the Comptroller of the
Currency, or the Federal Deposit Insurance Corporation, or any
agent or examiner appointed to examine the affairs of such bank,..
or the Board of Governors of the Federal Reserve System--
Shall be fined not more than $5,000 or imprisoned not more than
five years, or both.
18 U.S.C. § 1005 (1988).
43
179, 180-81 (5th Cir. 1975). As such, an omission of material information as well
as an actual misstatement qualifies as a false entry under the statute. See United
States v. Jackson, 621 F.2d 216, 219 (5th Cir. 1980).
The forms at issue here are annual disclosure forms to the OCC, annual
representation letters to RNB’s outside auditors, and RNB’s annual questionnaire
of executive officers and directors. Irrespective of whether these specific forms or
the information requested therein was authorized or required by law, the reports
were made in the regular course of the business of the Bank and pertained to the
Bank’s financial position. Accordingly, we conclude that the indictment stated
offenses of making false entries. See e.g., United States v. McCright, 821 F.2d 226
(5th Cir. 1987) (holding that bank officer’s failure to disclose information in bank
questionnaire constituted false entry in violation of 18 U.S.C. § 1005).
4. Constructive amendment and the doctrine of corporate
opportunity
Appellants make two final arguments related to the indictment. First, they
contend that the government constructively amended26 the indictment by
abandoning the theory presented to the grand jury, i.e., that appellants’ crimes were
26
Under the law in this circuit, “an amendment occurs when the essential elements of
the offense contained in the indictment are altered to broaden the possible bases of conviction
beyond what is contained in the indictment.” United States v. Keller, 916 F.2d 628, 634 (11th
Cir. 1990).
44
based on violations of federal banking laws and regulations, and proving instead
that the fraud was based upon the breach of the common law doctrine of “corporate
opportunity.” However, we have already established that the indictment asserted
three sources of duty, including appellants’ fiduciary duties. Since the
appropriation of a corporate opportunity constitutes breach of a fiduciary’s duties,
see Cohen v. Hattaway, 595 So.2d 105, 108-9 (Fla. 5th DCA 1992), we find no
merit in this argument.
Finally, appellants assert that the government’s amended theory of
prosecution was flawed because the Florida Legislature abrogated the common law
doctrine of corporate opportunity. We disagree.
It is a cardinal principle that an officer or director of a corporation will not
be permitted to make out of his official position an undisclosed profit adverse to
the corporation’s interests and because of their fiduciary character will not be
permitted to acquire for their own advantage interests adverse or antagonistic to the
corporation. See Independent Optical Co. v. Elmore, 289 So.2d 24, 25 (Fla. 2nd
DCA 1974). Indeed, Florida law continues to recognize official liability for
misappropriation of a corporate opportunity. See Florida Discount Properties v.
Windermere Condo., Inc., 786 So.2d 1271, 1272 (Fla. 4th DCA 2001); see also
45
Cohen v. Hattaway, 595 So.2d at 108. Thus, we read F.S. § 607.083127 as
codifying the “business judgment rule” in Florida. Accord In re Toy King Distr.
Inc., 256 B.R. 1, 173 (M.D.Fla. 2000).
The business judgment rule protects disinterested directors. Disinterested
directors neither appear on both sides of a transaction nor expect to derive any
personal benefit from it in the sense of self-dealing-- as opposed to a benefit which
devolves upon the corporation or all stockholders generally. Id. (quotation
omitted); see also Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984). In this way,
F.S. § 607.0831(3)(c) establishes that it is not inappropriate, per se, for a director to
derive personal benefit from a transaction which benefits the corporation generally.
However, § 607.0831 did not abrogate the prohibition against theft of corporate
opportunities or any other form of self-dealing. Cf. Perlow v. Goldberg, 700 So.2d
148, 150 (Fla. 3rd DCA 1997) (stating that F.S. § 607.0831 does not shield officers
and directors charged with criminal activity, fraud or self-dealing). The evidence
27
That statute, entitled “Liability of directors” reads, in pertinent part:
(3) A director is deemed not to have derived an improper personal
benefit from any transaction if the transaction ... [is] not prohibited
by state or federal law or regulation and,
...
(c) The transaction was fair and reasonable to the corporation at
the time it was authorized by the board, a committee, or the
shareholders, notwithstanding that a director received a personal
benefit.
F.S. § 607.0831.
46
at trial established that in 1983, RNB’s Board of Directors, including De La Mata,
identified a need to open additional bank branches. Armed with this knowledge,
De La Mata, Calas and Castilla acquired properties, with RNB’s own financing,
and then induced the Bank to lease back these properties at rates well above those
available on the open market. Accordingly, we find no error with the introduction
of evidence at trial that appellants usurped corporate opportunities in furtherance of
their plan to defraud RNB.
C. Jury Instructions
Appellants next contend that risk of loss is an essential element of bank
fraud and misapplication, and the district court’s failure to instruct the jury on this
alleged element mandates reversal of their convictions for violation of both §§
1344 and 656. We review the district court’s refusal to give appellants’ proposed
instructions for abuse of discretion. See United States v. Cunningham, 194 F.3d
1186, 1199 (11th Cir. 1999). The district court’s refusal to give the requested
instruction is reversible error only if (1) the instruction is substantially correct, (2)
the instruction was not addressed in the charge actually given, and (3) the failure to
give the requested instruction seriously impaired the defendant’s ability to present
an effective defense. See id. at 1200.
1. Bank fraud
47
Although incapable of precise definition, the term “scheme to defraud”
includes “any pattern or cause of action, including false and fraudulent pretenses
and misrepresentations, intended to deceive others in order to obtain something of
value, such as money, from the institution to be deceived.” United States v.
Goldblatt, 813 F.2d 619, 624 (3rd Cir. 1987). To prove bank fraud under 18 U.S.C.
§ 1344, the government must show that the defendant (1) engaged in a scheme or
artifice to defraud, or made materially false statements or representations to obtain
moneys, funds or credit from; (2) a federally insured financial institution; and (3)
that the defendant acted knowingly. United States v. Goldsmith, 109 F.3d 714,
715 (11th Cir. 1997); see also United States v. Brandon, 17 F.3d 409, 424 (1st Cir.
1994). The question here is whether the government must also prove that
appellants exposed the Bank to a risk of loss as part of the scheme to defraud.28
This is an issue of first impression in this Circuit. The Ninth Circuit has
observed that the “Courts of Appeals that have adopted a ‘risk of loss’ analysis
have not made clear whether its proof is necessary or merely sufficient to show
intent.” United States v. Wolfswinkel, 44 F.3d 782, 785-786 (9th Cir. 1995). The
First Circuit, sitting en banc, has held that “intent to harm” is not an element of
28
On November 18, 1988, Congress enacted 18 U.S.C. § 1346 stating that for purposes
of Title 18, “the term ‘scheme or artifice to defraud’ includes a scheme to deprive another of the
intangible right to honest services.” 18 U.S.C. § 1346. Section 1346 does not apply here because
the alleged bank fraud took place before its effective date.
48
bank fraud. See United States v. Kenrick, 221 F.3d 19, 26-29 (1st Cir. 2000) (en
banc) (holding that intent element of bank fraud is an intent to deceive the bank in
order to obtain something of value, irrespective of an intent to harm the bank). Our
review of the cases reveals that courts apply the risk of loss analysis in determining
whether a scheme primarily directed at a non-bank third party can still give rise to
bank fraud. See Brandon, 17 F.3d at 426 (citing cases); see also United States v.
Jacobs, 117 F.3d 82, 92-92 (2nd Cir. 1997) (upholding bank fraud conviction where
defendant marketed fraudulent certified drafts for purchase by debtors because he
intended, even instructed, debtors to submit drafts to banks for release of
indebtedness). Therefore, we believe that “risk of loss” is merely one way of
establishing intent to defraud in bank fraud cases. Accord United States v.
Hoglund, 178 F.3d 410, 413 (6th Cir. 1999).
In this case, we need not decide whether exposing RNB to a risk of loss was
necessary to show appellant’s intent. If it is necessary, the government offered
sufficient evidence at trial to prove that the appellants’ scheme exposed the Bank
to potential and actual harm. First, the evidence at trial established that appellants
embezzled millions of dollars from RNB. Second, appellants’ scheme exposed
RNB to potential governmental sanction for the circumvention of regulatory
requirements. Accord United States v. Parekh, 926 F.2d 402, 408 (5th Cir. 1991).
49
Third, appellants’ usurpation of RNB’s corporate opportunities caused the Bank
economic loss.
Appellants contend that the scheme did not subject RNB to a risk of loss that
it did not knowingly assume because all the financial terms were disclosed and
approved by the Board. In addition, appellants assert that the loans were made at
ordinary rates of interest, that the loans were secured either with a mortgage or
with RNB’s lease payments, and that RNB knew how much profit was involved in
these transactions (because RNB knew the purchase prices). The only fact that
RNB did not know was that its own officers shared in the profits. This, however,
is a clever way of saying that RNB did not know how good a deal it could have
gotten. De La Mata, Calas and Castilla had a clear duty, under the federal banking
regulations, to disclose self-interest in transactions vis-a-vis the bank. They also
had a fiduciary duty to abstain from profiting out of their official positions and
from acquiring for their own advantage interests adverse to the bank. In other
words, appellants’ scheme deprived RNB of the right to conduct these transactions
on the same terms as its own faithless officers. Common sense dictates that RNB
suffered a loss, albeit maybe not a bottom line deficit. Accordingly, we hold that
50
the failure to give a “risk of loss” instruction did not seriously impair appellants’
ability to present their defense.29
We view appellants’ argument concerning risk of loss synonymous with a
challenge to the district court’s instruction on intent, and thus do not address the
intent instruction separately.30
2. Misapplication
To establish the offense of misapplication of bank funds pursuant to 18
U.S.C. § 656 the government must prove: (1) that the accused was an officer,
director, agent or employee of a bank; (2) that the bank was in some way
connected with a national or federally insured bank; (3) that the accused willfully
misapplied the monies or funds of the bank; and (4) that the accused acted with
intent to injure or defraud the bank. United States v. Morales, 978 F.2d 650, 652
(11th Cir. 1992). The “intent to injure or defraud the bank” element is established
29
Appellants cite United States v. Devegter, 198 F.3d 1324 (11th Cir. 2000) for the
proposition that risk of economic loss is an essential element of bank fraud, and thus, the district
court committed reversible error in failing to instruct the jury accordingly. However, Devegter
held that the indictment alleged facts sufficient to state an offense pursuant to § 1346. We have
already found that the indictment was sufficient, and now conclude that the jury was correctly
charged on the elements of bank fraud, including the intent to wrongfully obtain money or other
property from the Bank.
30
The district court charged that intent to defraud means “to act knowingly and with
specific intent to deceive someone, ordinarily for the purpose of causing some financial loss to
another, or bringing about some financial gain to one’s self.”
51
by proof that the defendant knowingly participated in a deceptive or fraudulent
transaction. United States v. Blanco, 920 F.2d 844, 845 (11th Cir. 1991).
Appellants contend that they could not be convicted of misapplication absent
a jury finding that the extensions of credit charged in counts 7-9, 18-20 and 28
exposed RNB to a risk of loss. See United States v. Clark, 765 F.2d at 302-03.
However, the court in Clark explained that conviction for misapplication of bank
funds requires that the bank officers’ conduct involve more than the violation of a
rule or policy not designed to protect the bank against monetary risk. See id.
(distinguishing bank loan limits from rule prohibiting, solely for political reasons,
loans to companies doing business with the apartheid government of South Africa).
The Second Circuit concluded that the failure to charge on risk of loss was not
erroneous because the rule in question was designed to protect the bank against
monetary risk, and thus, equated to a finding that the defendant intentionally
circumvented risk-related restrictions in order to obtain money for themselves. See
id.
In this case, the record is clear that, in addition to the violation of federal
regulations, appellants violated internal bank rules aimed at protecting RNB’s
assets; they intentionally provided false information to acquire loans. Moreover,
they induced RNB to extend the loans, and thus, took financial advantage of a
52
confidential relationship. Accord. United States v. Bates, 852 F.2d 212, 215-216
(7th Cir. 1988). We find no abuse of discretion in the district court’s refusal to give
the requested instruction.
Finally, Castilla argues that the district court improperly denied his proposed
instruction on good faith and advice of counsel, while at the same time giving such
an instruction on behalf of Fernandez. The failure to give a proposed charge
constitutes reversible error only if it has adequate legal and factual underpinnings.
United States v. Terebecki, 692 F.2d 1345, 1351 (11th Cir. 1982). After reviewing
the record and all relevant testimony, we agree with the district court that the
proposed charge lacked evidentiary support. Castilla’s defense at trial was not that
he had proceeded on the good faith belief that his conduct was lawful, but rather
that he did not intend to harm the bank. Castilla elected not to testify at trial, and
the evidence relied on to exonerate him simply does not support the notion that
Castilla acted in good faith. The evidence also refutes Castilla’s asserted reliance
on advice of counsel. Shockett was falsely told that the requisite disclosures had
been made, Silva testified that he was cognizant of his need to conceal from RNB
the participation of the bank insiders, and Perez was never informed as to the
identities of the purchasers. Finally, we note that defense counsel fully aired
Castilla’s good faith defense in closing arguments, and the district court reinforced
53
the theory by informing the jury that Castilla contended that he did not intend to
injure the Bank. In view of the underlying evidence and the district court’s
specific intent instructions, we find no abuse of discretion.31
D. Evidentiary Rulings
Fernandez contends that the district court’s rulings sustaining hearsay
objections deprived him of the fundamental right to testify in his own defense.
Fernandez claims that he attempted to recount conversations he had with various
bank officials in order to show that the bank knew about his co-defendants’
interest. He maintains that the statements were not offered for their truth, but for
the effect on his state of mind and thus were relevant to show that he lacked the
requisite criminal intent.
The district court has broad discretion in ascertaining admissibility of
hearsay evidence, which we will not disturb absent abuse of discretion. United
States v. NationsBank of Fla. N.A., 53 F.3d 1548, 1554 (11th Cir. 1995).
Moreover, the harmless error standard applies to erroneous evidentiary rulings.
See Aetna Cas. & Surety Co. v. Gosdin, 803 F.2d 1153, 1159 n.12 (11th Cir. 1986).
31
We also find that the appellants’ requested jury instruction regarding the statute of
limitations applicable to the fraud and misapplication charges (18 U.S.C. §§ 656 and 1344) was
correctly rejected by the district court as lacking the necessary evidentiary foundation. Aside
from counts 3 and 6, see infra, there was no conflicting evidence presented at trial that the
challenged offenses were committed prior to August 9, 1984. We find no merit, and thus, do not
address appellants’ remaining arguments with respect to the jury instructions.
54
After reviewing the record, we find that the exclusion of this testimony did not
substantially affect Fernandez’s ability to present his good faith defense. See
Fed.R.Crim.P. 52(a). The defense could have cross-examined or recalled bank
officials to testify concerning their dealings with Fernandez, if indeed these
statements could have been helpful to Fernandez’s defense. Moreover, the
evidence overwhelmingly established that Fernandez intentionally concealed the
identities of his partners. During the course of the scheme, Fernandez made more
than twenty statements, in the form of loan applications or financial statements, to
RNB that fraudulently concealed the bank insiders’ interest in the proposed
transactions. Accordingly, we conclude that the exclusion of this testimony was
harmless error, if error at all.
E. Sufficiency of the evidence
Castilla contends that the evidence does not support any of his 37 counts of
conviction. We review the sufficiency of the evidence de novo, viewing the
evidence and all reasonable inferences and credibility choices made in the
government’s favor. See United States v. Calderon, 127 F.3d 1314, 1324 (11th Cir.
1997). We will reverse a conviction only if we find that a reasonable fact-finder
could not find proof of guilt beyond a reasonable doubt. See United States v.
Adkinson, 158 F.3d 1147, 1150 (11th Cir. 1998).
55
Essentially, Castilla assails the government’s proof of his intent to defraud
RNB. He asserts that the evidence failed to establish that he knowingly and
voluntarily agreed to defraud the Bank, or that he committed any acts designed to
facilitate the alleged scheme. The evidence refutes this contention.
First, Castilla held a 25% stake, the equivalent of Calas’, in the various front
companies appellants formed to conceal the bank insiders’ interest. This included
Hialeah Properties, the Fernandez Land Trust, Real Estate Partners, Great Group
and CSEC. Second, Castilla’s interest in these entities was not an act of charity, as
he would have us find, but compensation for his active role in promoting the affairs
of the enterprise. As a member of RNB’s Loan Committee, Castilla voted to
extend loans to these entities, while concealing the insiders’ conflict of interest, on
at least nine occasions. Castilla arranged for CSEC, an entity nominally owned by
Castilla’s family and Shockett, to receive an unsecured loan for the purchase of
OREO property from RNB. Castilla, along with Calas, received a substantial
portion of the profit on the resale. Moreover, the jury could have concluded that
Castilla recruited Fernandez as the insiders’ front man since Fernandez had been
Castilla’s banking customer and friend for many years. In fact, Castilla provided
Fernandez with the initial deposit for the Little Havana site. Castilla also provided
part of the down payment on the IPB branch. The evidence showed that Calas and
56
Castilla retained Shockett to represent them in the IPB transaction because
Castilla’s niece was Shockett’s secretary. Castilla falsely told Shockett that he had
disclosed his conflict of interest to RNB, further evincing Castilla’s criminal intent.
Finally, illicit proceeds from the various transactions were continuously deposited
into a joint account that Castilla maintained with Calas, yet Castilla never
questioned or repudiated his share of the profits. Although Castilla contends that
he did not know the source or the fact of such deposits, the evidence showed that
an account at a small savings and loan was opened for the sole purpose of
concealing his share of the profits.32 Thus, we find sufficient evidence that Castilla
actively participated in virtually every aspect of the scheme with the intent to
defraud RNB.
F. Sentencing
Fernandez asserts that the district court should have computed his offense
level under the more lenient fraud guidelines because the money laundering was a
minor, incidental part of the appellants’ scheme, and thus, outside the “heartland”
of the money laundering guideline. We review the district court’s application of
32
The evidence showed that a joint account in the name of Calas and Castilla was
opened at Metropolitan Bank on October 10, 1984, with an initial deposit of $55,125. That same
day, the proceeds from the sale of the Little Havana parking lot were disbursed from Fernandez’
account in the form of two checks drawn in the amount of $55,125 each. The second check was
deposited into De La Mata’s account at the Metropolitan, an account that was also opened on
October 10, 1984, with that initial deposit.
57
the Sentencing Guidelines under a de novo standard, but review its findings of fact
only for clear error. See United States v. Harness, 180 F.3d 1232, 1234 (11th Cir.
1999).
Appellants were convicted of bank fraud, money laundering, false
statements, false entries and misapplication of bank funds. The district court
assigned all counts of conviction to a single group pursuant to U.S.S.G. § 3D1.2(d)
(requiring grouping when the offense level is determined on the basis of the total
amount of harm or loss, or if the offense behavior is ongoing or continuous in
nature and the offense guideline is written to cover such behavior). The grouping
is not challenged on appeal. Having grouped the offenses, the district court applied
the guideline that produced the highest offense level as instructed by U.S.S.G. §
3D1.3(b). With respect to Fernandez, the bank fraud counts carried an offense
level of 24, U.S.S.G. § 2F1.1(a), while the money laundering counts carried a level
of 28, U.S.S.G. § 2S1.1(a)(1). Thus, the district judge sentenced Fernandez to 97
months, at the lowest end of the laundering guideline range of 97-121 months.
Fernandez relies on United States v. Smith, 186 F.3d 290 (3rd Cir. 1999), in
which the Third Circuit opined that a sentencing court should consider whether the
designated guideline applies or whether the conduct is “atypical” in comparison to
that usually punished by the statute of conviction, and if so decides which
58
guideline is more appropriate. Id. at 297; but see U.S.S.G., Supplement to App. C,
Am. 591, at 32 (2000) (removing the “atypical” language from the Guideline and
explaining that it had been improperly used by courts to decline to use the offense
guideline in cases that were allegedly “outside the heartland”). However, we have
rejected this approach. In United States v. Adams, 74 F.3d 1093 (11th Cir. 1996),
the district court applied the fraud rather than money laundering guidelines
reasoning that the gravamen of the defendants’ unlawful scheme was fraud and that
the subsequent deposit of illicit proceeds was merely incidental. See id. at 1101.
This Court reversed and held that the money laundering convictions had to be
considered in determining the defendants’ base offense levels because, otherwise,
the jury’s guilty verdict on the money laundering would be nullified. See id.
In any event, we conclude that the money laundering at bar was integral to
appellants’ scheme. See Smith, 186 F.3d at 298 (quoting Sentencing Commission
Report to Congress that the “heartland” of money laundering includes separate
monetary transactions designed to conceal past criminal conduct or to promote
further criminal conduct). Pursuant to a special verdict, the jury specifically found
that appellants engaged in money laundering in order to conceal the origins of the
illicit proceeds and to continue the bank fraud scheme. Thus, we find no error in
sentencing Fernandez under the money laundering guideline for this conduct.
59
Fernandez also claims that the district court erred in denying his request for
a downward departure because this was an extraordinary case involving deals
favorable to the bank and approved by bank officials. We review the district
court’s discretionary refusal to depart downward only if the district court
erroneously believed it did not have the statutory authority to do so. See United
States v. Sanchez-Valencia, 148 F.3d 1273, 1274 (11th Cir. 1998). Fernandez
contends that the district court wholly failed to address the grounds for his request,
and thus, was ambiguous as to whether the court had authority to depart from the
guideline. However, our review of the record reveals that Fernandez requested a
downward departure on the basis that he was not a bank officer, and thus, was less
culpable than his co-defendants. Accordingly, the district court rejected the
request stating that the money laundering guidelines did not overstate Fernandez’s
role in the scheme, which required the concerted effort of each of the appellants.
We will not disturb the district court’s discretionary refusal to depart downward.
Finally, Fernandez contends that the district court erred in enhancing his
sentence for obstruction of justice, and in denying him the opportunity to be heard
prior to its ruling. Fernandez concedes that the government’s response to
Fernandez’s Pre-Sentence Report put him on notice that the government was
seeking application of the obstruction enhancement over five weeks before the
60
sentencing hearing commenced. However, he argues that he was not given an
adequate opportunity to respond because the government did not identify specific
instances of perjured testimony.
After reviewing the record and sentencing hearing transcripts, we find no
merit in this position. First, Fernandez failed to file any response or objection to
the government’s initial request for enhancement. At the sentencing hearing, on
April 21, 1993, the government supplemented its earlier written submission by
enumerating specific examples of Fernandez’s perjury. The following day, the
government filed with the court, and served on defense counsel, an additional
written memorandum further refining the government’s position. Defense counsel
again elected not to file any response.
When the sentencing hearing was renewed on April 23, 1993, the court
concluded that Fernandez had perjured himself on at least four occasions when he
testified that bank officials approached him and persuaded him to use the various
properties as branch sites instead of developing shopping centers as he had
planned. The district court found that this testimony was not credible and
moreover, was specifically contradicted by the testimony of Dr. Botifoll and Mr.
Isaias, who both stated that Fernadez solicited them. We give due deference to the
district court’s opportunity to determine credibility, see 18 U.S.C. § 3742(e), and
61
thus, cannot conclude that the enhancement for obstruction of justice was clearly
erroneous. See United States v. Simmons, 924 F.2d 187, 191 (11th Cir. 1991).
G. Motion for New Trial
Alas, appellants’ attack with respect to every aspect of their prosecution
would not be complete without an argument that newly discovered evidence
mandates a new trial. They contend that the district court erred in summarily
denying their motion for new trial and/or vacatur of the restitution order33 in light
of the terms of the “Settlement Agreement” entered into between the government
and RNB in January, 1994. That understanding, among other things, resolved
RNB’s corporate liability in connection with a pending investigation of narcotics
money laundering activities that occurred at the Bank during the insiders’ tenure.
The Settlement Agreement also provided that RNB would purchase the IPB and
Westlands sites at the conclusion of the respective leases, at a price to be
determined by an independent appraiser, subject to a credit for excessive rents,
which rent the government would continue to collect, per the forfeiture order. The
IPB lease expired, and appellants allege that the government’s resulting failure to
33
On April 23, 1993, the district court entered an Order of Restitution, pursuant to 18
U.S.C. § 3663, in favor of RNB against appellants in the amount of $1,786,194. That sum
represented illicit profits earned on the OREO purchases and on the sale of the Little Havana and
Orange Bowl branches, and rent paid in excess of the fair market rental value on the Westlands
and IPB leases as of October 1992.
62
remit the excessive rents, in addition to the sale of the property to a third party for
$1.4 million, far greater than that established at trial, constitute new evidence that
the bank branch leases were fair. Moreover, appellants’ assert that the post-trial
execution of the Settlement Agreement reveals RNB’s previously undisclosed
motive to curry favor with the government, by suppressing the true value of the
bank branch sites.
After reviewing the parties’ briefs, the Settlement Agreement, and all other
relevant parts of the record, we find no abuse of discretion. First, the IPB
transaction constituted one part of the appellants’ intricate fraud, and only one of
several components of the district court’s restitution calculation. Second, the rental
overcharges incorporated into the restitution order and those dealt with in the
Settlement Agreement are separate and distinct. The restitution order required
appellants to restore to RNB only the excessive rent payments which the Bank
actually made during the 1984-1992 period. The Settlement Agreement, on the
other hand, deals with the rent paid after January 1, 1994. Thus, the Settlement
Agreement did not affect the amount of restitution.
Moreover, assuming that risk of economic loss is an element of bank fraud,
the increased value of the IPB site does not constitute new evidence entitling
appellants to a new trial on all charges, or even the invalidation of the restitution
63
order. The only valuation which was relevant at trial was the property’s objective
fair market value in 1984. This figure is based on publicly reported sales of
comparable property at the same time, and is not discredited by a price commanded
in 2000. Moreover, even if we were to find, which we do not, that an increase in
market value would constitute evidence that the rents were not excessive, the
appreciation would also increase the value of the opportunity usurped by the bank
insiders. In other words, although the rental payments might be viewed as less
exorbitant, the illicit profit anticipated by appellants on the resale would be
substantially increased. Accordingly, we find no abuse of discretion in the district
court’s judgment that this evidence did not entitle appellants’ to a new trial and/or
vacatur of the restitution order.
IV. Conclusion
For the reasons set forth above, we reverse appellants’ convictions on counts
3 and 6, and sustain their convictions on all other counts. Because of the grouping
prescribed by the sentencing guidelines, we find that the reversal of counts 3 and 6
does not alter in any way the sentences imposed.
AFFIRMED in part and REVERSED in part.
64
65
United States v. Fred De La Mata
Court: Court of Appeals for the Eleventh Circuit
Date filed: 2001-09-27
Citations: 266 F.3d 1275
Copy CitationsCombined Opinion