UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 93-1103
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
BENNY JENKINS McDOW,
Defendant-Appellant.
Appeal from the United States District Court
for the Northern District of Texas
(July 14, 1994)
Before GOLDBERG, DAVIS and DeMOSS, Circuit Judges:
DeMOSS, Circuit Judge:
Benny Jenkins McDow appeals his conviction on three counts of
savings & loan fraud under 18 U.S.C. § 10141 and one count of using
1
"Whoever knowingly makes any false statement or report ...
for the purpose of influencing in any way the action of ... any
[federally insured] institution ... upon any application,
advance, discount, purchase, purchase agreement, repurchase
agreement, discount or loan ... shall be fined not more than
$1,000,000 or imprisoned not more than 30 years, or both." 18
a false Social Security number under 42 U.S.C. § 408.2 We affirm
McDow's conviction on Count 1 but reverse his conviction on the
remaining counts because the evidence is insufficient to support
the conviction on these counts.
FACTS
In September 1986, appellant McDow and his wife Fay McDow
purchased a house and lot in Glenn Heights, Texas from Sunbelt
Savings Association of Texas ("Sunbelt Savings"), which had become
the owner of the property through foreclosure. Truman Rice, a real
estate agent, testified that in September 1986 his agency ran
advertisements on property being marketed by Sunbelt Savings. When
the McDows inquired about and decided to buy the house, Rice gave
them a preliminary loan application "to fill out and to take in to
the mortgage company." The mortgage company to which Rice referred
McDow was Sunbelt National Mortgage Corporation ("Sunbelt
Mortgage"), a wholly owned subsidiary of Sunbelt Savings
Association. The different roles of Sunbelt Savings and Sunbelt
Mortgage are important in this appeal because only Sunbelt Savings
was federally insured.3 Rice testified that he did not make a
U.S.C. § 1014.
2
"Whoever ... for the purpose of obtaining anything of value
from any person ... with intent to deceive, falsely represents a
number to be the social security account number assigned by the
Secretary to him ... when in fact such number is not the social
security account number assigned by the Secretary to him ...
shall be guilty of a felony and upon conviction thereof shall be
fined under Title 18 or imprisoned for not more than five years,
or both." 42 U.S.C. § 408(7)(B).
3
The parties do not dispute that, at the time of the offense
in 1986, Sunbelt Savings was a financial institution insured by
2
distinction between the two entities: "Sunbelt is how I looked at
it. I basically view it as one institution, so Sunbelt something
was doing the financing."
The loan application that Rice gave to McDow to fill out was
obtained from the loan files of the now-defunct Sunbelt Savings and
was introduced into evidence at trial. In connection with the loan
application, McDow made four materially false statements, which are
numbered below as in the indictment:
(Count 1): McDow provided a Social Security number that was not
his own, but rather had been assigned to his son.
(Count 2): McDow stated that he had $19,236 in savings
deposited at the "American Eagle Credit Union." No such credit
union existed; the address McDow submitted as the credit
union's was his own former business address in Dallas, Texas.
(Count 3): McDow submitted a reference letter that gave a false
verification of his rental residence. The letter purported to
be from Larry Cole as owner of the property at 7409 Long Canyon
Trail in Dallas. At trial, a Mr. Larry Coy testified that he
owned that property but that he never had rented it to McDow.
(Count 4): When Sunbelt Mortgage sought verification that McDow
had the funds on deposit with the credit union, McDow caused to
be submitted to the mortgage company a false "Verification of
Deposit" form which purported to be from the nonexistent
American Eagle Credit Union.
McDow took the stand at trial and admitted signing the loan
the Federal Savings and Loan Insurance Corporation ("FSLIC"), and
was thus a "covered institution" under 18 U.S.C. § 1014. At
trial, the government introduced into evidence a letter from the
federal Office of Thrift Supervision, which certified Sunbelt
Savings' insured status. We recently reaffirmed that the
government must prove federal insurance status as an essential
element of a § 1014 conviction, as well as to establish federal
jurisdiction. United States v. Schultz, 17 F.3d 723, 725 (5th
Cir. 1994). However, the government does not have to prove that
the defendant knew of the institution's insured status. United
States v. Thompson, 811 F.2d 841, 844 (5th Cir. 1987).
3
application and participating in closing on the house. He denied
filling in the false statements and claimed that his now-deceased
son filled out the loan application, telling him: "Just sign it,
daddy, and [I]'ll do the rest." McDow admitted that he had never
dealt with an American Eagle Credit Union and that the Social
Security number on the application was not his.
On cross-examination, McDow admitted that he used a false name
and Social Security number while living in California to avoid
being arrested, after hearing that the FBI had a warrant out for
his arrest in Texas because of the house he bought in 1986. McDow
also admitted giving made-up Social Security numbers to police
officers at various times when he was arrested. McDow said he did
this because he wanted to avoid arrest, keep working and support
his family. The government was also allowed to question McDow about
his past convictions and arrests for bad checks, burglary/grand
theft and being a fugitive from justice.
Involvement of Sunbelt Savings and Sunbelt Mortgage
Sunbelt Mortgage was the named lender on the promissory note,
deed of trust and related documents signed by McDow. But the
mortgage company -- a wholly owned subsidiary of Sunbelt Savings --
had to borrow from Sunbelt Savings in order to fund the loan to
McDow. The money used to fund the loan thus came from the federally
insured deposits of the mortgage company's corporate parent,
Sunbelt Savings. Barry Johnson, vice-president of Sunbelt Mortgage,
testified that if the mortgage company experienced a loss on the
loan, it would diminish the assets of Sunbelt Savings. However,
4
creditors of the mortgage company could not have reached the assets
of the parent corporation, absent any reason to pierce the
corporate veil. The subsidiary, Sunbelt Mortgage, was not federally
insured and had no deposits of its own, but it had a "mortgage
warehouse lending" line of credit with its corporate parent,
Sunbelt Savings. Johnson testified that warehouse lending
arrangements are a common way for banks and mortgage companies to
do business.
There was no direct evidence that McDow knew the money he
borrowed would ultimately come from Sunbelt Savings rather than
Sunbelt Mortgage. There was no direct evidence that McDow knew
whether either institution was federally insured, or whether he
knew if Sunbelt Savings would review his loan application or have
any part in his loan transaction. However, right above McDow's
signature on the loan application, the following statement appears:
"I/we fully understand that it is a federal crime
punishable by fine or imprisonment, or both, to knowingly
make any false statements concerning any of the above
facts as applicable under Title 18, United States Code,
Section 1014."
McDow admitted signing the loan application. His signature appears
on two versions of the loan application, both containing the above
reference to 18 U.S.C. § 1014.4
4
The two "loan application forms" admitted into evidence are
substantially identical except that one is dated July 19, 1986,
was filled out partially by hand and partially by typewriter, and
is signed by Benny McDow only; the other, dated September 30,
1986, the settlement date, is filled out by typewriter and is
signed by both Benny McDow and his wife, Fay McDow. Both contain
the false rental residence address, the false Social Security
number and the false credit union information.
5
McDow testified that as far as he understood, "Sunbelt bank"
was the owner of the property, and "Sunbelt Mortgage Company" was
to provide the loan. McDow stated that he made an effort to read
all of the documents at the closing "so as not to look stupid," and
because he knew the documents were important, but stated that he
was not able to read everything he signed.
The defense made timely motions for a judgment of acquittal,
arguing that, assuming McDow made false statements, they were made
to Sunbelt Mortgage for the purpose of influencing it, not to
Sunbelt Savings, the federally insured institution. The trial court
denied the motions.
The jury convicted McDow on September 30, 1992 on all four
counts. On January 22, 1993, the trial court sentenced McDow to one
year of imprisonment on each of the three savings & loan fraud
counts (to run concurrently) and five years of probation for the
Social Security count. McDow filed notice of appeal on February 2,
1993. The main issue we address in this opinion is whether -- with
regard to the S&L fraud counts -- the jury could reasonably
conclude that McDow made his false statements with intent to
influence a federally insured financial institution, as required by
18 U.S.C. § 1014.
DISCUSSION
McDow argues that his motion for acquittal should have been
granted because any false statements he made in his loan
application were not "for the purpose of influencing" a federally
insured financial institution, but rather were for the purpose of
6
influencing the non-insured subsidiary mortgage company.
McDow's complaint is a challenge to the sufficiency of the
evidence to support his conviction under 18 U.S.C. § 1014.
Therefore we must: (1) consider all evidence in the light most
favorable to the government; (2) accept all reasonable inferences
which tend to support the jury's verdict; and (3) determine whether
a rational trier of fact could have found that the evidence
establishes guilt beyond a reasonable doubt.5
To sustain a conviction under § 1014, the government must
demonstrate that the defendant (1) made a "false statement or
report" and (2) did so "for the purpose of influencing in any way
the action of" a federally insured institution engaged in a lending
activity. United States v. Bowman, 783 F.2d 1192, 1197 (5th Cir.
1986).
Under Fifth Circuit case law interpreting § 1014, it is not
required that the defendant actually make the false statement
directly to the insured institution to be found guilty under the
statute, nor is it required that the government show that the
defendant knew which particular institution was involved.6 The
5
United States v. Huntress, 956 F.2d 1309, 1318 (5th Cir.
1992), cert. denied, 113 S.Ct. 2330 (1993). "Fact-finders have
considerable leeway in drawing inferences from the evidence
presented to them. They may use their common sense and evaluate
the facts in light of their knowledge of the natural tendencies
and inclinations of human beings." Id. at 1318.
6
Bowman, 783 F.2d at 1199; United States v. Thompson, 811
F.2d 841, 844 (5th Cir. 1987); United States v. Lentz, 524 F.2d
69, 71 (5th Cir. 1975)(as clarified by Bowman, 783 F.2d at 1198);
Williams v. United States, 102 S.C. 3088 (1982); see also United
States v. Bellucci, 995 F.2d 157, 159 (9th Cir. 1993).
7
defendant does not even have to know that the institution he is
trying to influence is federally insured, as long as the proof
shows the insured status. Thompson, 811 F.2d at 844. But we made
it clear in Bowman that "the government must still prove that the
defendant knew that it was a bank that he intended to influence."
Bowman at 1199 (emphasis added).
In United States v. White, 882 F.2d 250, 254 (7th Cir. 1989),
the Seventh Circuit concluded that the evidence was insufficient to
support the conviction. In that case, the defendant made false
statements to an equipment-leasing corporation that was a wholly
owned subsidiary of a federally insured bank. The government rested
its whole case on trying to persuade the court that the non-insured
leasing corporation -- because of its subsidiary relationship with
the federally insured bank -- was itself a "covered institution"
under § 1014. White, 882 F.2d at 254. The court held that the
subsidiary leasing corporation was not a "federally insured bank"
within the meaning of § 1014, and reversed White's conviction. The
opinion noted, however, that a different strategy in the case might
have resulted in White's conviction being affirmed:
"We repeat that if White had intended by making false
statements to the leasing corporation to influence the bank as
well, the fact that the statements were not made to the bank
would not prevent his conviction.... It would be enough if
White had known that the loan he was getting from the leasing
corporation would be assigned to the bank. But the government
proposed no such theory of liability in this case.... It staked
its all on persuading the district court and us that the
leasing corporation is a bank."
Id. at 254 (emphasis added). We now apply this law to the facts
presented in today's case. First, it is clear that McDow's intent
8
that his false statements influence the uninsured institution,
Sunbelt National Mortgage Corp., to make a loan does not constitute
a violation of § 1014. Second, an erroneously held belief by McDow
that Sunbelt National Mortgage was an insured institution would
also be insufficient to establish a § 1014 violation. The question
therefore narrows to whether, on this record, a reasonable jury
could infer that McDow knew that Sunbelt Mortgage would obtain the
loan proceeds with which to make his loan from Sunbelt Savings or
some other insured entity.
The government produced no direct evidence that McDow knew
that Sunbelt Mortgage would acquire the funds to make his loan from
another entity. Indeed the government does not suggest how McDow
might have acquired this knowledge. The record does not address
McDow's educational background; nor does it suggest that he had any
particular expertise in banking matters. He worked as a coffee
salesman for approximately ten years between 1979 and 1989.
Thereafter he drove a truck and moved and stored furniture.
We have carefully reviewed the testimony of the witnesses who
testified for the government who assisted McDow in completing this
transaction. Mr. Truman Rice, the real estate agent who sold McDow
the house, testified that he was not sure which of the Sunbelt
institutions was financing the property. He considered Sunbelt
Savings and Sunbelt Mortgage as one and the same. It is clear from
this witness's testimony that he was unaware that federally insured
funds played a role in financing this transaction.
Mr. Barry Johnson, vice-president and general counsel of
9
Sunbelt National Mortgage Corporation, confirmed that Sunbelt
Savings was insured by FSLIC and that Sunbelt National Mortgage
Company, a separate corporate entity did not have this insurance.
He provided the details of the relationship between Sunbelt Savings
and Sunbelt Mortgage and described how Sunbelt Mortgage obtained
the funds from Sunbelt Savings with which to make the loan. But he
did not testify that this information was imparted to McDow. Also,
a jury could not infer from his testimony that the public generally
knew that the insured institution's subsidiary mortgage company
ordinarily received its funding for such loans from the insured
institution. At argument the government pointed to the warning
contained in McDow's application which cautioned that any false
statements made therein would constitute a federal offense under 18
U.S.C. § 1014. This warning certainly may have put McDow on notice
-- although erroneously -- that submission of false statements in
the application to Sunbelt Mortgage would constitute a violation of
§ 1014. But we fail to see how this warning would enlighten Mr.
McDow on the critical fact: Sunbelt Mortgage acquired the funds to
make loans from an insured institution.
We conclude that on this record a reasonable jury could not
find that McDow knew that the false statements he made in his
application to Sunbelt Mortgage would influence any party other
than Sunbelt Mortgage. Because Sunbelt Mortgage is not an insured
entity, the evidence is insufficient to support an essential
element of counts 2, 3 and 4 charging § 1014 violations. We
10
therefore reverse the conviction on those counts.7
Count 1: False Use of Social Security Number
The jury also convicted McDow under Count 1, the false use of
a Social Security number under 42 U.S.C. § 408. We assume from the
broad language of McDow's notice of appeal that Count 1 was
appealed along with the other three counts, but McDow makes no
argument for its reversal. In any case, the evidence clearly showed
that McDow submitted his son's Social Security number in the loan
application, falsely representing the number to be his own. Section
408 has no "federally insured" element; it requires only the
submission of the false number to any person, "with intent to
deceive." A reasonable jury could have inferred that, by submitting
his son's number in place of his own, McDow had the intent to
deceive. The jury could also have inferred an intent to deceive
from McDow's admission on the stand that he also used a false
Social Security number to avoid arrest while living in California.
Therefore, the jury's verdict on Count 1 is supported by sufficient
evidence, and is hereby affirmed.
CONCLUSION
For the reasons stated above, we reverse the convictions on
Counts 2, 3, and 4 charging violations of § 1014. We affirm the
conviction on Count 1, but vacate the sentence on that count and
remand this case for resentencing on Count 1.
7
This disposition of the § 1014 counts makes it
unnecessary for us to address McDow's argument that the court's
jury charge amounted to an impermissible constructive amendment
of the indictment.
11