United States Court of Appeals
For the First Circuit
Nos. 04-1532, 04-1533, 04-1534, 04-1535
UNITED STATES OF AMERICA,
Appellee,
v.
LORENZO MUÑOZ-FRANCO, FRANCISCO SÁNCHEZ-ARÁN,
ARIEL GUTIÉRREZ-RODRÍGUEZ, and WILFREDO UMPIERRE-HERNÁNDEZ,
Defendants, Appellants.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Daniel R. Domínguez, U.S. District Judge]
Before
Boudin, Chief Judge,
Cyr, Senior Circuit Judge,
and Lipez, Circuit Judge.
Mark J. Rochon, with whom Duncan N. Stevens and Miller &
Chevalier were on brief, for appellant Sánchez-Arán.
Francisco M. Dolz-Sánchez for appellant Umpierre-Hernández.
R. Jack Cinquegrana, with whom Jennifer T. Connor, Jennifer E.
Tracy, and Choate, Hall & Stewart were on brief, for appellant
Muñoz-Franco.
Michael S. Pasano, with whom Zuckerman Spaeder LLP was on
brief, for appellant Gutiérrez-Rodríguez.
Elizabeth A. Olson, Criminal Division, Appellate Section, U.S.
Department of Justice, with whom Rosa E. Rodriguez-Velez, U.S.
Attorney, and Maria A. Dominguez, Assistant U.S. Attorney, were on
brief, for appellees.
May 22, 2007
LIPEZ, Circuit Judge. Appellants Lorenzo Muñoz-Franco,
Francisco Sánchez-Arán, Ariel Gutiérrez-Rodríguez, and Wilfredo
Umpierre-Hernández appeal their convictions for bank fraud,
conspiracy, and misapplication of bank funds, stemming from conduct
that persisted for nearly a decade. Muñoz-Franco and Sánchez-Arán
appeal their convictions for bank fraud and conspiracy for a
similar but separate series of transactions also involving the
improper use of bank funds. Appellants challenge the sufficiency
of the evidence and raise many other substantive and procedural
claims relating to their fifteen-month trial. After careful review
of this immense record, we affirm.
I.
A. Factual Overview
We provide here an overview of the relevant conduct drawn
from the record, saving additional details for our sufficiency
analysis. Throughout the opinion, we consider the evidence "in the
light most favorable to the prosecution." See Jackson v. Virginia,
443 U.S. 307, 319 (1979).
1. The Gutiérrez Loans
During the relevant time period charged in the Third
Superseding Indictment, Muñoz-Franco was President and Chief
Executive Officer of Caguas Central Federal Savings Bank of Puerto
Rico ("Caguas"), a federally chartered savings and loan
association. Sánchez-Arán was Executive Vice President and Chief
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Lending Officer of Caguas. Gutiérrez was a land developer who
owned several companies that received loans from Caguas. Umpierre-
Hernández was an officer of several companies belonging to
Gutiérrez.
For nearly a decade, Muñoz-Franco and Sánchez-Arán
supervised a scheme to use proceeds from various loans for purposes
not authorized by Caguas' Board of Directors ("Board").1 The loans
were granted for land development projects involving companies that
Gutiérrez owned and Umpierre-Hernández helped to operate, including
Transglobe, Modules, and Transhore. In many instances the
appellants used proceeds from loans to Gutiérrez-owned companies to
make payments on prior loans to Gutiérrez-owned companies without
Board approval. In other instances Muñoz-Franco and Sánchez-Arán
submitted loans to Gutiérrez-owned companies to the Board for
approval without disclosing the Gutiérrez-owned companies' failure
to complete work on previous projects. On many occasions Gutiérrez
and Umpierre-Hernández submitted certifications for construction
work that had not yet been completed, and Muñoz-Franco and Sánchez-
Arán accepted the certifications and ordered disbursement of funds
for the projects. The Board also was not informed of this
1
The Board was a body of ten to fifteen members responsible
for establishing policy for the operation of Caguas and overseeing
the general operation of the bank. The Board oversaw the Executive
Committee (which reviewed and approved commercial and real estate
construction loans in excess of $500,000) and the Loan Committee
(which reviewed and approved commercial and real estate loans under
$500,000).
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practice. In January 1988, Muñoz-Franco drafted and obtained Board
approval to send a letter to Richard Denby, the Federal Home Loan
Bank Board auditor supervising Caguas, which responded to Denby's
concerns regarding Caguas' lending practices ("Denby letter"). The
letter contained many misrepresentations regarding the status of
Gutiérrez-related projects and loans.
As the government explained in its opening statement,
this scheme contributed to the appearance that Caguas remained a
financially viable institution under the leadership of Muñoz-Franco
and Sánchez-Arán. If the problems with the bank became known and
Muñoz-Franco and Sánchez-Arán were removed from their positions,
"not only would that have deprived them of a very lucrative job,
but it also would have made it very difficult for them to obtain
new employment in the banking industry." The scheme also
maintained the appearance of solvency for the Gutiérrez companies,
thus protecting the livelihood and professional reputation of
Gutiérrez and Umpierre-Hernández.
The projects for which Gutiérrez-owned companies received
loans included La Marina, Los Mameyes, Cerrovista, and Jardines de
Villa Alba. We provide a brief overview of these projects here.2
2
Similar conduct also occurred on other Gutiérrez projects,
including Levittown, Country Club, Los Caciques, Quintas de
Humacao, and Quintas de Fajardo.
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a. La Marina
In June 1980, Muñoz-Franco and Sánchez-Arán caused Caguas
to grant a $1,450,000 loan to Transglobe to finance the
construction of seventy-five units of residential housing, with
construction to begin within one month and to be completed within
one year. As of September 1981, the loan limit had been increased
four times, adding a total of $1.8 million, yet not a single house
had been built. Funds were disbursed from the loan for the project
based on certifications submitted by Gutiérrez and Umpierre-
Hernández and approved by Sánchez-Arán, and approximately $2
million was used to pay unrelated Gutiérrez debts with a different
bank. In October 1984, Muñoz-Franco and Sánchez-Arán caused Caguas
to finance the sale of the La Marina project to DO.W Group. The
agreement for this sale provided that Transglobe would remain the
contractor for the project despite its failure to build a single
house in the preceding four years. In approving the loan, the
Board was not informed of Transglobe's prior poor performance.
After this sale, appellants continued to apply funds from the La
Marina loan to other projects and to disburse funds for work not
completed. Not a single house was ever built on the project, and,
in 1989, Caguas entered into a settlement agreement with DO.W
releasing DO.W's debt on the project, which totaled over $2
million.
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b. Los Mameyes
In late 1985, Muñoz-Franco and Sánchez-Arán caused the
Board to grant Modules a commercial line of credit to build two
hundred housing units. Between December 1985 and March 1986,
Gutiérrez and Umpierre-Hernández submitted a series of
certifications stating that a total of two hundred housing units
had been built. Even though Caguas' inspector reported that only
fifty-five units had been completed, Sánchez-Arán approved
disbursements totaling about $800,000. In March 1986 Gutiérrez and
Umpierre-Hernández submitted a certification requesting $69,000 for
"payment of subcontractors," but attached a list of interest
payments due on the Jardines de Villa Alba, Levittown, Country
Club, La Marina, and Los Caciques projects totalling exactly
$69,000. Sánchez-Arán approved the certification and Caguas
disbursed the funds.
c. Cerrovista
In the spring of 1986, John Burns, a developer, applied
to Caguas for a loan to build residential housing on land he owned
but his application was denied. After meeting with Umpierre-
Hernández and agreeing to use Modules as a contractor, Caguas
approved Burns' application for a loan to build twenty-three units
of housing in what became known as the Cerrovista project. Burns'
loan was approved on the condition that he sign a $2 million note
as a down payment to Modules. Burns signed the note. Shortly
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thereafter, however, Umpierre-Hernández told Burns that the project
needed a new "sponsor" because Burns had been "gossiping."
Umpierre-Hernández then began to negotiate the sale of Cerrovista
to Iantho, a company owned by Walter Frambes. In August or
September 1986, Burns read newspaper articles indicating that the
Cerrovista project might be affected by the Puerto Rico Department
of Transportation's plans to build a hospital and an expressway.
He inquired with the Department and received confirmation that the
development of four lots would be "frozen." When Burns brought
this information to Umpierre-Hernández, Umpierre-Hernández told him
to "hide it, boy."
On September 10, 1986, Sánchez-Arán received Board
approval to offer Iantho an $8.9 million loan, specifying that
$1,412,177 would be used to purchase land for the Cerrovista
project. The sale was then finalized on September 28. However,
the actual land cost was only $480,000, and the remaining $932,000
was used to make principal and interest payments on other loans to
Gutiérrez-owned companies. Over the next few months Gutiérrez and
Umpierre-Hernández submitted certifications showing approximately
$908,000 for "premanufacture" of housing units, and Sánchez-Arán
authorized disbursement of these funds. As of May 1988, however,
not a single unit had been built on the project.
d. Jardines de Villa Alba
In 1985, a developer named Emilio Montilla sought
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financing to build housing units on land he owned, and Caguas
repeatedly denied his requests. Montilla then met with Umpierre-
Hernández, who told him that if he used Modules as a contractor his
request would be approved. In July 1985, the Board considered a
proposed loan to Montilla with Modules as contractor. Although by
this time Modules had failed to perform on the La Marina project
for several years, the Board was not informed of this information
when it considered the Jardines de Villa Alba project. Moreover,
over $231,000 was disbursed before the Jardines de Villa Alba loan
agreement was signed. Although the Board eventually approved the
loan, this prior disbursement took place without Board knowledge or
approval. Only one unit was ever completed on the Jardines de
Villa Alba project. However, the Board was not informed of this
fact. The Denby letter, which was drafted by Muñoz-Franco in
January 1988 and signed by the Board members, refers to the "units"
completed on this project.
2. The Mirandes Loans
As will be described in more detail in our sufficiency
discussion, Muñoz-Franco and Sánchez-Arán supervised a similar
scheme to use loan proceeds for purposes not authorized by the
Board with respect to companies owned by Francisco Mirandes.3
Mirandes received construction loans from Caguas for at least
3
The Third Superseding Indictment did not charge Gutiérrez
and Umpierre-Hernández with involvement in this scheme.
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fourteen different projects. In December 1989, the Mirandes
corporations collapsed due to insolvency, owing Caguas a total of
$23 million. In 1997, Mirandes pled guilty to charges of
participating in a conspiracy to defraud Caguas, the Board, and the
regulatory institution, and to misapplication of bank funds. As
part of his plea agreement, he testified for the government at
appellants' trial.
B. Procedural History
On November 22, 1995, the government filed an indictment
charging appellants with conspiracy, bank fraud, misapplication of
bank funds, and making false entries. Three superseding
indictments subsequently were filed on March 5, 1997; May 13, 1997;
and March 6, 1998.4 The third superseding indictment charged
Muñoz-Franco, Sánchez-Arán, Gutiérrez, Umpierre-Hernández, Enrique
Gutiérrez (Ariel Gutiérrez's brother, who was also involved in
running the Gutiérrez corporations), and Rafael Domínguez Wolff
(who purchased several projects from the Gutiérrez brothers)5 with
bank fraud, in violation of 18 U.S.C. § 1344; conspiracy to commit
bank fraud, misapply bank funds, and make false entries, in
violation of 18 U.S.C. § 371; and misapplication of bank funds, in
4
Appellants protest the delay both preceding and resulting
from this series of superseding indictments on Fifth and Sixth
Amendment grounds. We will discuss the events surrounding this
series of indictments in more detail in Section IV.C, infra.
5
Wolff died prior to trial.
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violation of 18 U.S.C. § 657. The indictment also charged Muñoz-
Franco and Sánchez-Arán with bank fraud under 18 U.S.C. § 1344 and
conspiracy under § 18 U.S.C. § 371 with respect to the Mirandes
loans.
The trial began in federal district court in Puerto Rico
in January 2001 and the presentation of evidence concluded in April
2002. On May 16, 2002, the jury convicted Muñoz-Franco, Sánchez-
Arán, Ariel Gutiérrez, and Umpierre-Hernández on all charged
counts, but acquitted Enrique Gutiérrez. Following the verdict,
appellants filed motions for a judgment of acquittal pursuant to
Federal Rule of Criminal Procedure 29, raising numerous grounds,
including the sufficiency of the evidence. In a thoughtful
seventy-seven page opinion, the district court denied all of the
motions.6
Sentencing proceedings began on December 15, 2003. On
February 12, 2004, the district court sentenced Muñoz-Franco and
Sánchez-Arán to a term of forty-six months on the conspiracy and
bank fraud counts and a concurrent term of sixty months on the
misapplication count. It also imposed a fine of $50,000 on each
defendant. The court sentenced Gutiérrez to a term of thirty-seven
months on the conspiracy and bank fraud counts, and imposed a
6
In addition to the sufficiency of the evidence, the district
court considered and rejected claims of prosecutorial misconduct,
improper jury instructions, inconsistent verdicts, and violation of
the right to a speedy trial, as well as challenges to the admission
of certain evidence and testimony.
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concurrent term of sixty months on the misapplication count. It
also imposed a $60,000 fine. Finally, it sentenced Umpierre-
Hernández to a term of twenty-four months on all counts.
C. Issues on Appeal
Appellants raise thirteen major issues for our
consideration on appeal. Three of these claims — concerning the
statute of limitations, the Ex Post Facto Clause, and the pre-
indictment and pre-trial delay — implicate what might be termed the
validity of the entire proceedings. Although courts often begin by
addressing such issues, we find, in light of the exceptionally
large record, that we must review the sufficiency of the evidence
in order to assess the viability of any of appellants' other
claims. Thus, we will first resolve two evidentiary issues to
determine the content of the record properly before us. We will
then employ that record in conducting our analysis of the
sufficiency of the evidence. Informed by a full understanding of
the record, we will then turn to the host of other issues raised by
appellants.
II.
We begin with two evidentiary issues: whether the
district court allowed witnesses to testify beyond their personal
knowledge, and whether the minutes from the Board meetings were
improperly admitted.
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A. Personal Knowledge
Appellants argue that the district court improperly
permitted prosecution witnesses to testify beyond their personal
knowledge, in violation of Federal Rule of Evidence 602. Rule 602
states, in pertinent part: "A witness may not testify to a matter
unless evidence is introduced sufficient to support a finding that
the witness has personal knowledge of the matter." Fed. R. Evid.
602. Interpretation of the Federal Rules of Evidence is a question
of law subject to de novo review, but the application of a rule is
reviewed for abuse of discretion. United States v. Sposito, 106
F.3d 1042, 1046 (1st Cir. 1997).
1. Arturo Somohano
Appellants argue that Arturo Somohano (the vice president
of Caguas' commercial loan department until 1988, at which time he
became Caguas' chief lending officer) testified beyond his personal
knowledge on three occasions: (1) in claiming that the bank's
outside auditors were replaced for improper reasons; (2) in stating
that Caguas' loan classifications for the loans to Modules were
improper; and (3) in questioning the propriety of certain
construction loans. The district court excluded the first of these
statements after appellants objected, and we therefore do not
consider it further.7
7
With respect to the replacement of the bank's outside
auditors, appellants object to Somohano's testimony that he knew
why Caguas' outside auditors were replaced because "someone told
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With respect to Somohano's testimony that Caguas' loan
classifications for Modules were improper, appellants objected on
the ground that Somohano had previously stated that he was unaware
of the bank's classifications for those loans. Somohano
acknowledged that he did not remember seeing the loan
classifications for Modules while at Caguas, but his testimony did
not rely on such knowledge of Modules' status. Instead, Somohano
explained that loans at Caguas were classified from one (best) to
ten (worst) based on the amount of risk involved in the loan, and
that the bank would attach greater reserves to riskier loans.
While still on the witness stand, Somohano then reviewed financial
statements indicating that Modules had a negative net worth of $7.6
million at the end of 1986, and that Caguas' reserves would not
cover the loans to Modules because the reserves equalled only ten
or fifteen percent of the loans Modules was sustaining. Based
strictly on the amount of reserves, Somohano would expect the
Modules loan to have received a favorable classification of either
two or three; however, he testified that, based on Modules'
"insolvent" financial status, such classification would have been
me." This characterization is incomplete. Upon further
questioning, Somohano stated that he also knew this information
based on "[m]y own personal observations," specifically, the fact
that "the reserves were totally inadequate to guarantee that the
bank would not shake if a loss could occur." After the government
asked how Somohano's observation related to the auditors' removal,
however, appellants objected, and, after a lengthy sidebar and
research, the court excluded the testimony altogether.
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improper.
According to Federal Rule of Evidence 701, a lay witness
may offer opinions that are "(a) rationally based on the perception
of the witness, (b) helpful to a clear understanding of the
witness' testimony or the determination of a fact in issue, and (c)
not based on scientific, technical, or other specialized knowledge
within the scope of Rule 702." Fed. R. Evid. 701. Under Rule 701,
courts have allowed lay witnesses to express opinions about a
business "based on the witness's own perceptions and 'knowledge and
participation in the day-to-day affairs of [the] business.'"
United States v. Polishan, 336 F.3d 234, 242 (3d Cir.
2003)(alternation in original)(quoting Lightning Lube, Inc. v.
Witco Corp., 4 F.3d 1153, 1175 (3d Cir. 1993)); see also Medforms,
Inc. v. Healthcare Mgmt. Solutions, Inc., 290 F.3d 98, 110-11 (2d
Cir. 2002)(allowing a computer programmer to testify about the
meaning of terms used in the copyright registrations for programs
he had helped design); Williams Enters., Inc. v. Sherman R. Smoot
Co., 938 F.2d 230, 233-34 (D.C. Cir. 1991)(allowing an insurance
broker who had personal knowledge of an insured's business to offer
lay opinion testimony on the cause of an increase in the insured's
premiums). Here, Somohano's testimony was based on knowledge of
Caguas' banking practices that he acquired during his employment
there, and thus the opinions he expressed were properly within the
scope of Federal Rule of Evidence 701.
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Finally, appellants protest, without providing specific
examples, that Somohano "was permitted to testify about the
propriety of certain construction loans even though he was not part
of the construction loan department and has no firsthand knowledge
of those loans." We find this generalized objection unfounded.
Somohano's opinions about the loans were based on his firsthand
observations of Caguas' practices with respect to these loans. He
testified that, when the Modules loan was restructured, he did not
think Caguas ever would be repaid, and he provided other examples
of Gutiérrez loans receiving special treatment. Given Somohano's
banking experience and his particular knowledge about the Gutiérrez
loans, his testimony about these loans also was properly admissible
as a lay opinion within the scope of Rule 701. Consequently, we
find no abuse of discretion in the district court's handling of
Somohano's testimony.
2. Anabel Enriquez
Appellants also argue that Anabel Enriquez (the senior
vice president of Caguas' mortgage department from 1980-87, who
reported directly to Sánchez-Arán) testified beyond her personal
knowledge when she stated, based on her review of the minutes of
Board and Executive Committee meetings, that certain information
was not discussed at the meetings that should have been discussed.
This objection is unfounded. At trial, Enriquez read the Board
meeting minutes into evidence, including minutes for meetings at
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which she was not present. Appellants objected, and, after
considerable debate, the district court ruled "that [Enriquez] may
literally read what each paragraph [of the minutes] says. If the
United States then wants an explanation as to the paragraph she
must then have an independent source of knowledge." Thus, Enriquez
did not testify whether certain events actually happened at a Board
meeting unless she was present; for meetings she did not attend,
she testified only "whether the minutes reflect" that certain
information was discussed. The district court enforced this
limitation, and required the prosecutor to rephrase questions on
more than one occasion.8 Similarly, Enriquez's testimony that the
Board "should have been told" certain information was a lay opinion
properly admitted under Rule 701. Her position as a senior vice
president of Caguas' mortgage department and her regular attendance
at Board meetings established her familiarity with Caguas' business
operations and made it appropriate for her testify about
information the Board needed to make its decisions. Again, the
district court did not abuse its discretion in allowing such
testimony.
8
For example, when the prosecutor asked whether the Board was
told certain information about Modules, the court interrupted: "You
don't know what the board was told unless you're there. The most
you can state is whether or not the minutes reflect that
information." The prosecutor rephrased the question, and Enriquez
then responded that "from what I remember of having reviewed the
minutes, there is no mention anywhere of that fact."
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3. Victor Lugo
As part of its case, the government sought to prove that
Muñoz-Franco and Sánchez-Arán concealed material information
relating to the Gutiérrez loans from the Board. Victor Lugo, the
Board president, offered testimony that he was not told or was not
aware of significant information. Appellants claim that Lugo's
testimony showed that he had no independent recollection of the
events in question, some of which occurred nearly twenty years
before trial. However, appellants misconstrue Lugo's testimony
about his own memory. For example, when asked whether he was
informed of Modules' performance history when the Board was making
decisions on the company's loans in July 1985, he stated: "I don't
recall that it was discussed. I believe that if it was discussed
I would remember and it is not reflected in the minutes."
Similarly, when asked whether the number of houses built on Modules
projects was discussed when the Board was again making decisions on
the loans in September 1986, he stated definitively: "No . . . that
was not discussed." These statements show that Lugo had sufficient
recall to testify from his personal knowledge about the information
given to the Board.
Appellants also complain that the government improperly
suggested the truth of hypothetical scenarios presented in certain
questions to Lugo. The purpose of these questions was to probe
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whether the Board would have considered Gutiérrez companies' past
performance in deciding to approve later loans. For example, the
prosecutor asked Lugo: "[I]f the Gutiérrez company, out of these 96
[housing] units only built 22, would that have been information
. . . which you would have been interested in knowing for purposes
of voting on the approval of this loan?" The court explained at
sidebar that it would only allow such hypotheticals when the
government had already introduced evidence that was the basis for
the hypothetical — specifically, when "there is a document from the
bank that clearly establishes a certain fact." It also instructed
the jurors that they should not take the facts that were the basis
for the hypotheticals as true:
Okay. The fact that the Court has authorized
that question, ladies and gentlemen of the
jury, does not mean . . . that the Court is
concluding it is a foregoing fact that you
should take those facts as true. Those facts
are subject to your analysis and your
credibility.
In other words, you have to decide in
your deliberations whether or not this project
called for 96 houses and you have to decide
whether or not actually 22 were built or
whatever number was built, that is subject to
your credibility.
The fact that the Court is authorizing
that this question be expressed in these terms
does not at all mean that the Court has
already determined that it is a fact at all.
You have to decide. That's one of the issues
that you're going to have to decide in this
case.
The court reiterated this instruction several times. This detailed
instruction was sufficient to advise the jury that it should not
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accept the facts set forth in the hypotheticals as true. Thus,
Lugo's response to these questions did not have the effect of
allowing him to testify beyond his personal knowledge to the
factual correctness of the hypothetical. The district court did
not abuse its discretion in allowing such testimony.
4. Victor Kareh
Finally, appellants assert that Victor Kareh (the
assistant vice president of the construction loan department from
1980 to 1990) "was permitted . . . to opine about what the project
documents and ledger cards indicated, without any clear memory of
the events and mixing summary testimony with what was improper
expert testimony." To support this proposition, appellants cite to
three thirty-page sections of the trial transcript, without
specifying the testimony to which they object or the grounds for
their objections. Although Kareh did not author all of the
documents about which he testified, this in itself is not a basis
for excluding his testimony about the documents. Without developed
argumentation on this issue, we cannot conclude that the district
court abused its discretion in allowing Kareh's testimony. United
States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990)("[I]ssues
adverted to in a perfunctory manner, unaccompanied by some effort
at developed argumentation, are deemed waived.").
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B. Admission of Minutes from Board Meetings
At trial, the prosecution introduced the Board and
Executive Committee meeting minutes under Federal Rule of Evidence
803(6), which states that business records are not excluded by the
rule against hearsay "if kept in the course of a regularly
conducted business activity, and if it was the regular practice of
that business activity to make the . . . record . . . unless the
source of information or the method or circumstances of preparation
indicate lack of trustworthiness." Appellants do not claim that
the minutes themselves were improperly admitted, but rather protest
the prosecution's reliance on the absence of certain information
from the minutes to prove that the Board was not informed about
such matters. Appellants argue that this use violated their rights
under the Confrontation Clause and the rule against hearsay. We
examine these claims in turn. We review alleged violations of the
Sixth Amendment's Confrontation Clause de novo. United States v.
Rondeau, 430 F.3d 44, 47 (1st Cir. 2005). As discussed above,
interpretation of the Federal Rules of Evidence is subject to de
novo review, but application of a rule is reviewed for abuse of
discretion. Sposito, 106 F.3d at 1046.
1. Confrontation Clause
The Confrontation Clause of the Sixth Amendment
guarantees defendants the right to confront adverse witnesses. The
Supreme Court has explained that only "testimonial" statements
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"cause the declarant to be a 'witness' within the meaning of the
Confrontation Clause." Davis v. Washington, 126 S. Ct. 2266, 2273
(2006)(citing Crawford v. Washington, 541 U.S. 36, 51 (2004)).9
Thus, "[i]t is the testimonial character of the statement that
separates it from other hearsay that, while subject to traditional
limitations upon hearsay evidence, is not subject to the
Confrontation Clause." Id. Although the Court has yet to
articulate a precise definition of "testimonial,"10 it is beyond
debate that the Board minutes are nontestimonial in character and,
consequently, outside the class of statements prohibited by the
Confrontation Clause. The Court in Crawford plainly characterized
business records as "statements that by their nature [are] not
testimonial." 541 U.S. at 56. If business records are
nontestimonial, it follows that the absence of information from
those records also must be nontestimonial. Thus, the Confrontation
Clause presents no bar to reliance on the absence of certain
9
Appellants filed their briefs before the Court's decision in
Davis, and thus do not discuss its significance.
10
The Court has held that the term "testimonial" includes "at
a minimum . . . prior testimony at a preliminary hearing, before a
grand jury, or at a former trial; and . . . police interrogations."
Crawford, 541 U.S. at 68. In the context of police interrogations,
the Court indicated that a key factor is whether "the primary
purpose of the interrogation is to establish or prove past events
potentially relevant to later criminal prosecution." Davis, 126 S.
Ct. at 2274. In United States v. Hansen, 434 F.3d 92, 100 (1st
Cir. 2006), we also found that statements that "the declarant would
not reasonably expect to be available for use at a later trial"
were nontestimonial in character.
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information from the Board meeting minutes to prove that the Board
was not given that information.
2. Hearsay
Appellants also complain that, once the minutes were
admitted, the prosecution used the absence of certain information
from the minutes to demonstrate that Muñoz-Franco and Sánchez-Arán
failed to inform the Board of these matters in violation of the
rule against hearsay. Appellants argue that the minutes were
intended to be a summary, rather than an exhaustive record, of the
events that took place at Board meetings, and that, consequently,
the minutes do not indicate whether such information was disclosed
to the Board.
Federal Rule of Evidence 803(7) states that the rule
against hearsay does not exclude
[e]vidence that a matter is not included in
the . . . records . . . kept in accordance
with the provisions of [Fed. R. Evid. 803(6)],
to prove the nonoccurrence or nonexistence of
the matter, if the matter was of a kind of
which a . . . record . . . was regularly made
and preserved, unless the sources of
information or other circumstances indicate
lack of trustworthiness.
Fed. R. Evid. 803(7). The Advisory Committee Note to Rule 803(7)
also states that the "[f]ailure of a record to mention a matter
which would ordinarily be mentioned is satisfactory evidence of its
-22-
nonexistence."11 Thus, the absence of certain information in
minutes admissible under Rule 803(6) would be admissible to show
that the Board was not given that information unless the
circumstances indicated some reason that these omissions from the
record were untrustworthy.
We note that Rule 803(6) excludes business records if
"the source of information or the method or circumstances of
preparation indicate lack of trustworthiness," Fed. R. Evid.
803(6), while Rule 803(7) excludes records otherwise admissible
under Rule 803(6) if "the sources of information or other
circumstances indicate lack of trustworthiness," Id. 803(7). We
think this repetition indicates that even if a business record is
deemed sufficiently trustworthy to be admissible for its contents
under Rule 803(6), other circumstances might render omissions in
that record untrustworthy to show that the events omitted did not
occur. Thus, appellants' concession that the records are
admissible under Rule 803(6) does not necessarily preclude them
11
The Advisory Committee Notes leave open the possibility that
the absence of evidence from a record is not hearsay at all. Fed.
R. Evid. 803(7) advisory committee notes ("While probably not
hearsay as defined in Rule 801, decisions may be found which class
the evidence not only as hearsay but also as not within any
exception. In order to set the question at rest in favor of
admissibility, it is specifically treated here."). Moreover, at
least one court recently has noted the possibility that "evidence
that a record does not exist arguably is not hearsay at all."
United States v. Cervantes-Flores, 421 F.3d 825, 832 n.4 (9th Cir.
2005). For present purposes we assume that such evidence is
hearsay, but admissible under Rule 803(7).
-23-
from arguing that omissions from the records are not admissible
under Rule 803(7).
The government introduced testimony from Enriquez, the
vice-president who reported directly to Sánchez-Arán, explaining
that the minutes were prepared by one of the executive vice
presidents before 1982, by Luis Pastor (an administrative assistant
to Muñoz-Franco) from 1982 to 1986, and by Enriquez after that
time. Enriquez stated that the records prior to 1982 "were
prepared and reviewed by the board, they were set forth in a record
book and the secretary of the board and the president would sign
them." The government submitted an affidavit from Pastor, dated
March 21, 2001, verifying that the documents it introduced were, in
fact, the minutes from 1982 to 1986 and explaining that the minutes
"consist of transcriptions made from notes taken by someone who was
present at each meeting" and that the minutes "were kept in the
regular course of business of Caguas . . . . [I]t was the regular
business practice of Caguas to compile and prepare [the minutes]
and to maintain them in its files."
Finally, Enriquez explained that, after 1986, "[w]hen I
was present I would take notes, subject to the agenda and what was
approved." When Enriquez was not present, Eliza Balina, the
executive secretary for Muñoz-Franco, would take notes at the
meetings, and Enriquez would then "review the files that were
prepared for use by the directors. And upon that review, if there
-24-
was something I did not understand then I could ask the president."
Enriquez noted that the minutes "were always ratified at the
following board meeting," and that, after ratification, the minutes
would be stored either in the president's office or in the bank
vault.
Appellants emphasize that Lugo (the president of the
Board) acknowledged on cross-examination that the minutes were only
a summary of the meetings and did not "word for word report
discussions." However, a review of the Board and Executive
Committee minutes reveals that, while not word for word renditions
of the meetings, the minutes capture more than a skeletal outline
of each meeting and include descriptions of the considerations
relevant to each loan rather than simply the fact that the loan was
discussed and approved.12
After considering this evidence, we conclude that the
district court did not abuse its discretion in allowing the use of
the minutes to demonstrate that the Board did not receive material
information about many of the transactions it considered.
12
In a typical example involving a loan to a developer on a
project that did not involve any of the appellants, the Executive
Committee Minutes report: "Mr. Kareh explained that as a result of
discrepancies between the developer and the builder, this project
was par[y]lized for many months. The developer requested that he
be allowed to substitute builders in order to finish the project.
Original builder was Las Américas Construction and the new builder
would be a local small contractor known as D.C. Inc. with ample
experience in this field. Mr. Kareh also explained that further
delay in the conclusion of the project would probably affect the
final outcome of the project."
-25-
Enriquez's testimony and Pastor's affidavit demonstrate that the
business records were prepared regularly after every meeting,
reviewed and ratified by the Board, and stored securely following
ratification. These circumstances do not indicate lack of
trustworthiness. Indeed, they permit a finding of trustworthiness.
Moreover, given the minutes' thorough description of information
discussed at the meetings, we conclude that the missing information
relating to the loan transactions was a "matter . . . of a kind of
which a memorandum, report, record, or data compilation was
regularly made and preserved." Fed. R. Evid. 803(7).13
III.
We proceed to the sufficiency of the evidence, including
in our analysis the previously-discussed witness testimony and the
absence of certain information from the Board minutes.
In considering the sufficiency of the evidence to support
a guilty verdict, "'the relevant question is whether, after viewing
the evidence in the light most favorable to the prosecution, any
rational trier of fact could have found the essential elements of
the crime beyond a reasonable doubt.'" United States v. Woodward,
149 F.3d 46, 56 (1st Cir. 1998)(quoting Jackson v. Virginia, 443
U.S. 307, 319 (1979)). In performing this inquiry, we "neither
13
Appellants wisely do not attempt to argue that it was
unnecessary for them to present such information to the Board. As
we will discuss more thoroughly in Section III, infra, this
information was highly material to the Board's decisions regarding
the loans.
-26-
weigh[] the credibility of the witnesses nor attempt[] to assess
whether the prosecution succeeded in eliminating every possible
theory consistent with the defendant's innocence." United States
v. Noah, 130 F.3d 490, 494 (1st Cir. 1997). Similarly, we
"review[] a district court's denial of a defendant's motion for a
judgment of acquittal 'using the identical standard employed to
measure the sufficiency of evidence supporting a guilty verdict.'"
United States v. Loder, 23 F.3d 586, 590 (1st Cir. 1994)(quoting
United States v. Sanchez, 943 F.2d 110, 114 (1st Cir. 1991)).
A. Bank Fraud with Respect to the Gutiérrez Loans
The jury found all four appellants guilty of bank fraud
with respect to the Gutiérrez loans. To prove bank fraud under 18
U.S.C. § 1344, the government must show that the appellants
knowingly engaged in a scheme or artifice to defraud or obtain
money from a federally insured financial institution by means of
materially false statements or misrepresentations. See United
States v. Kenrick, 221 F.3d 19, 30 (1st Cir. 2000).14 We first
consider the evidence against bank officers Muñoz-Franco and
14
In full, 18 U.S.C. § 1344 provides: "Whoever knowingly
executes, or attempts to execute, a scheme or artifice (1) to
defraud a financial institution; or (2) to obtain any of the
moneys, funds, credits, assets, securities, or other property owned
by, or under the custody or control of, a financial institution, by
means of false or fraudulent pretenses, representations, or
promises; shall be fined not more than $1,000,000 or imprisoned not
more than 30 years, or both."
-27-
Sánchez-Arán, and then the evidence against Gutiérrez and Umpierre-Hernández.
1. Muñoz-Franco and Sánchez-Arán
In their positions as President and Executive Vice
President, respectively, Muñoz-Franco and Sánchez-Arán were
responsible for keeping the Board informed of information relevant
to current and prospective loans. Moreover, Sánchez-Arán was the
primary supervisor of the construction and commercial loans to
Modules, a Gutiérrez-owned company involved in many of the
fraudulent transactions. Muñoz-Franco supported Sánchez-Arán's
recommendations on these projects. At trial, Lugo, the president
of the Board of Directors, explained that he and the other Board
members relied on the reports prepared by Muñoz-Franco and Sánchez-
Arán in making decisions regarding loans. Lugo explained that it
was not his job to "verify the accuracy of information that was
being given" to him by the management of the bank, and added that
he "trusted fully that the information that was being provided me
was whole and true."
Despite their responsibility to keep the Board fully
apprised, Muñoz-Franco and Sánchez-Arán concealed important
information on many occasions. For example, in July 1985 Caguas
considered the Jardines de Villa Alba project, for which Modules
would be the contractor. As of October 29, 1984, Modules had
completed none of the 212 units planned for the La Marina project,
even though the original loan agreement from June 25, 1980 called
-28-
for construction to begin in thirty days and for seventy-five units
to be completed within twelve months. Despite the lack of
progress, the loan amount had been increased four times between
August 7, 1980 and September 17, 1981. Lugo testified that this
poor performance history was not discussed during the loan
presentation for the Jardines de Villa Alba project. Lugo stated
unequivocally that he would have wanted to know Modules'
performance history in evaluating the Jardines de Villa Alba loan,
demonstrating the materiality of such information.
Lugo further testified that, after the original loan
presentation, Muñoz-Franco and Sánchez-Arán continued to withhold
information from the Board regarding the Jardines de Villa Alba
loan. Although the record shows $231,000 was paid to Modules
before the Jardines de Villa Alba loan agreement was signed, even
at trial Lugo expressed surprise that this had happened and stated
that "it would have been difficult for me to believe that" this
occurred. More than a year after the Jardines de Villa Alba loan
was approved, in September 1986, Lugo did not know that only one
house had been built on the project. Lugo also testified that as
of September 1986 the performance history of Modules "as to
construction of homes that were to be constructed versus the ones
that were constructed . . . was not discussed." Finally, on
January 10, 1988, Lugo signed the Denby letter, which was prepared
by Muñoz-Franco and which referred to the "units" built on Jardines
-29-
de Villa Alba, without realizing that only one house had been built
on the project.
Lugo also testified that Muñoz-Franco and Sánchez-Arán
did not inform him and the Board of other material information
relating to Modules. For example, he did not know that Modules
remained the contractor after the La Marina, Country Club, and
Levittown projects were sold from Transglobe to DO.W in October
1984. He also did not know that, between 1984 and 1986, Modules
did not make any principal or interest payment on any loan to
Caguas with funds generated from its own business as opposed to
proceeds from other loans. Likewise, he was not informed, when the
Board approved the sale of Modules to Camero on September 10, 1986,
in conjunction with a restructuring of its loans, that
approximately seventy percent of Modules' debt was with Caguas and
that over seventy-one percent of Modules' assets were intangibles.15
Finally, Lugo testified that when the board approved a
loan of $1,412,077 for land acquisition for the Cerrovista project,
for which Modules also was the contractor, Muñoz-Franco and
Sánchez-Arán did not advise him or the Board that the cost of the
land was actually only $480,000 — in other words, that $932,177
would be used to make principal and interest payments on other
Modules loans.
15
The high percentage of assets that were intangible might
raise concerns about the ability of Modules to pay off its debts.
Such information would be relevant to the Board's decision process.
-30-
Lugo's testimony is corroborated by the absence of this
and other material information from the Board minutes. Although
the government did not rely heavily on the absence of such
information, we have found these omissions properly admissible
under Federal Rule of Evidence 803(7) and note that they lend
support to the prosecution's case.
There was substantial evidence that Muñoz-Franco and
Sánchez-Arán withheld all of this information from the Board with
full knowledge of the problems with Modules and other Gutiérrez
companies. Anabel Enriquez, who reported directly to Sánchez-Arán,
explained that the handling of Gutiérrez certifications at Caguas
concerned her "[b]ecause practically monthly, each time they
invoiced[,] the certifications would be ahead of the construction."
She discussed her concerns with Muñoz-Franco at least by the time
La Marina was going to be sold to DO.W in 1984, and with Sánchez-
Arán around the same time. She also discussed her concern with
Muñoz-Franco that, following the sale, Modules would remain a
contractor for La Marina, Levittown, and Country Club. However,
Muñoz-Franco and Sánchez-Arán took no action in response to
Enriquez's concerns.
Finally, Muñoz-Franco and Sánchez-Arán took steps to
conceal their misrepresentations from both internal and external
auditors. Juan Hernández, Caguas' internal auditor, testified
that, in 1981, Kareh (the assistant vice president of the
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construction loan department) initially provided information in
connection with an audit of the construction loan department, but,
after a short meeting with Sánchez-Arán, Kareh stopped providing
the information Hernández requested. Hernández further testified
that, although he requested the auditing committee "several times"
between 1980 and 1990 to allow him to audit the construction loan
department, Muñoz-Franco and Sánchez-Arán did not allow the audit
to take place. In a letter dated January 22, 1985, an external
auditing firm, Stephen P. Bradics and Company, recommended "that
the scope of internal auditing be expanded to include . . .
construction loans." After Caguas received this letter, Hernández
again recommended to the audit committee on several occasions that
he should be allowed to audit the construction department, but he
still was not allowed to do so. The audit committee minutes
reflect his recommendation at several meetings at which Muñoz-
Franco and Sánchez-Arán were present. At one meeting, on January
28, 1988, Muñoz-Franco responded by telling Hernández that
"construction loans was the area most audited by senior
management."16 Sánchez-Arán heard and agreed with Muñoz-Franco's
response, and Sánchez-Arán had also made similar statements to
Hernández in the past. However, Hernández was never provided with
any internal audit conducted by either Muñoz-Franco or Sánchez-
16
Hernández testified that "senior management" consisted of
Muñoz-Franco and Sánchez-Arán.
-32-
Arán.
Muñoz-Franco and Sánchez-Arán also concealed information
regarding Caguas' lending practices from external authorities.
Critically, Muñoz-Franco drafted and obtained Board approval to
send the Denby letter, which states: "This Board of Directors
wishes to state in no unclear and uncertain terms that it has never
considered and much less approved any policy or practice of
permitting borrowers to use construction loan proceeds to satisfy
or make interest payment[s] on other unrelated loans."17 At the
time of the letter, however, Muñoz-Franco and Sánchez-Arán had, as
discussed above, approved loans for such purposes on many
occasions.
Taken in the light most favorable to the government, the
evidence demonstrates that Muñoz-Franco and Sánchez-Arán repeatedly
concealed material information regarding the status of the
Gutiérrez loans from the Board, approved disbursements for work
that was not completed, and prevented audits. Such conduct caused
Caguas to continue lending money to Gutiérrez-owned companies
despite the companies' financial instability, which demonstrates
appellants' knowing scheme to defraud Caguas by means of material
misrepresentations within the meaning of 18 U.S.C. § 1344.
Consequently, we affirm the district court's finding that a
17
At trial, Joseph Gonzalez (an examiner for the Federal Home
Loan Bank) testified that "[a] loan that has a different borrower,
different property to me would be an unrelated loan."
-33-
rational jury could have found Muñoz-Franco and Sánchez-Arán guilty
of bank fraud.
2. Gutiérrez and Umpierre-Hernández
The record also contained considerable evidence from
which a reasonable jury could have found beyond a reasonable doubt
that Gutiérrez and Umpierre-Hernández knowingly engaged in a scheme
to defraud Caguas by misrepresenting material information. The
certifications they submitted and signed contained many
misrepresentations. For example, on the Los Mameyes project,
between December 9, 1985 and January 10, 1986, Gutiérrez and
Umpierre-Hernández submitted nine certifications attesting to the
manufacture of 74 housing units and requesting payments totaling
$380,000, even though the inspector's report stated that only 19
houses had been built. Between January 16 and February 21, 1986,
Gutiérrez and Umpierre-Hernández submitted 10 more certifications
attesting to the manufacture of 90 additional housing units and
requesting payment of approximately $500,000, at which point
payment had been disbursed for at least 164 housing units even
though only 40 units had been manufactured. As of February 25,
1986, Gutiérrez and Umpierre-Hernández had certified the completion
of 200 units, but an inspection report dated March 23, 1986,
indicated that only 55 units had been built. On March 31, 1986,
Gutiérrez and Umpierre-Hernández submitted a certification
requesting $69,000 for "payment of subcontractors" along with a
-34-
list of interest payments they had made on other projects,
including Jardines de Villa Alba, Levittown, Country Club, La
Marina, and Los Caciques, which equalled exactly $69,000. Finally,
on June 26, 1986, Gutiérrez and Umpierre-Hernández submitted a
"special certification" of $85,000 with no justification for work
allegedly completed; Kareh testified that such a certification was
not a usual practice. Sánchez-Arán authorized the disbursements
based on these certifications.
Gutiérrez and Umpierre-Hernández submitted similar
certifications for work not completed on other projects. For
example, on the Jardines de Villa Alba project, Modules had
installed only one unit as of the time of the Denby letter on
January 10, 1988; however, on October 22, 1985 Gutiérrez and
Umpierre-Hernández certified that twenty-two units had been
completed, causing $626,000 to be disbursed to Modules.
Gutiérrez and Umpierre-Hernández perpetuated their scheme
by recruiting other developers to obtain loans from Caguas on the
condition that they use Modules as the contractor. This conduct
allowed Gutiérrez and Umpierre-Hernández to obtain new funding for
Modules, which they would then use to pay down prior loans and keep
Modules from collapsing. Developer Burns, the original owner of
the Cerrovista project, was a typical example. After
unsuccessfully applying to Caguas for a loan to build residential
housing on land he owned, Burns met with Umpierre-Hernández, who
-35-
told him that if he used Modules as his contractor and signed a $2
million note he would be approved for a loan. A week later Burns
received financing for the Cerrovista project. He testified that
the approval was "[d]efinitely[] because of the use of Modules."
Burns met with Umpierre-Hernández on "many other occasions," and,
after problems arose with the Cerrovista project, with Umpierre-
Hernández and Sánchez-Arán in Sánchez-Arán's office. Subsequently,
Umpierre-Hernández told Burns that the project would be sold to
Iantho, and explained that "this project was going to contribute to
paying off some interest for some of the projects that were in
default," which caused Burns to understand "that was the
reason . . . I was rejected as sponsor."18
On September 10, 1986, Sánchez-Arán presented, and the
Board approved, a loan of $8.9 million to Iantho Corporation to
take over the Cerrovista project; the loan agreement specified that
Modules would be the contractor for the project's two hundred
units. Burns testified that, around the time the project was being
sold, he received confirmation that the Department of
Transportation's plans to build a hospital and expressway would
cause the development of four lots of the project to be "frozen."
When told the news, Umpierre-Hernández responded, "hide it, boy."
18
Gutiérrez and Umpierre-Hernández implemented similar schemes
involving developer Montilla on the Jardines de Villa Alba project
and developer Santiago on the Caciques project. The contours of
these schemes are similar to that involving Burns, and thus we need
not recount them in detail here.
-36-
On September 28, 1986, Cerrovista was sold to Iantho with no
mention of the impending development.
Taken in the light most favorable to the government, the
evidence shows that Gutiérrez and Umpierre-Hernández knowingly
concealed information relevant to the viability of the Cerrovista
project and submitted many certifications for work that was not
completed. To sustain their schemes, they recruited other
developers and helped them receive funding from Caguas on the
condition that these developers use Modules as a contractor. These
activities caused Caguas to continue lending money to Gutiérrez-
owned companies despite the companies' financial instability,
providing an ample basis for a jury to find that appellants
knowingly schemed to defraud Caguas by means of material
misrepresentations within the meaning of 18 U.S.C. § 1344.
Consequently, we conclude that a reasonable jury could have found
beyond a reasonable doubt that both Gutiérrez and Umpierre-
Hernández were guilty of bank fraud.
B. Conspiracy with Respect to the Gutiérrez Loans
The four appellants were charged with conspiring, in
violation of 18 U.S.C. § 371, to commit bank fraud (18 U.S.C. §
1344), misapply bank funds (18 U.S.C. § 657), and make false
entries in the books and records of the bank (18 U.S.C. § 1006).
To establish a conspiracy, the government must prove beyond a
reasonable doubt that (1) a conspiracy existed; (2) the defendant
-37-
knew of and voluntarily participated in the conspiracy; and (3)
there was an overt act in furtherance of the conspiracy. United
States v. Blasini-Lluberas, 169 F.3d 57, 67 (1st Cir. 1999).19 The
government must prove both intent to agree and intent to commit the
substantive offense. United States v. Rivera-Santiago, 872 F.2d
1073, 1079 (1st Cir. 1989). A formal agreement is not required,
Am. Tobacco Co. v. United States, 328 U.S. 781, 809 (1946); rather,
"[t]he agreement may be shown by a concert of action, all the
parties working together understandingly, with a single design for
the accomplishment of a common purpose." Am. Tobacco Co. v. United
States, 147 F.2d 93, 107 (6th Cir. 1944); see also Adver. Special
Nat'l Ass'n v. FTC, 238 F.2d 108, 115 (1st Cir. 1956). Where, as
here, the indictment alleges a conspiracy to commit multiple
offenses, the charge may be sustained by sufficient evidence of
conspiracy to commit any one of the offenses. See Griffin v.
United States, 502 U.S. 46, 56-57 (1991); see also United States v.
Wedelstedt, 589 F.2d 339, 341-42 (8th Cir. 1978)("[P]roof that
[defendant] agreed to commit one of the multiple illegal objectives
of the conspiracy sufficed to sustain the conviction on that
count.").
19
In pertinent part, 18 U.S.C. § 371 states: "If two or more
persons conspire either to commit any offense against the United
States, or to defraud the United States, . . . and one or more of
such persons do any act to effect the object of the conspiracy,
each shall be fined under this title or imprisoned not more than
five years, or both."
-38-
On the verdict form, the jury found Muñoz-Franco,
Sánchez-Arán, Gutiérrez, and Umpierre-Hernández guilty of
conspiracy "as charged in the indictment." Docket Nos. 1291, 1292,
1294, 1295. In considering appellants' motion for judgment of
acquittal, the district court found that there was more than enough
evidence with respect to bank fraud to sustain the conspiracy
conviction, and thus did not review the evidence concerning the
misapplication and false entry crimes.
We agree with the district court's assessment. First,
there was substantial evidence of an agreement among the four men
to defraud the bank. Sánchez-Arán directly supervised the
Gutiérrez loans and worked closely with Muñoz-Franco on the loans.
Enriquez testified that Muñoz-Franco and Sánchez-Arán always
reached an agreement regarding the treatment of these loans.
Gutiérrez and Umpierre-Hernández submitted many certifications for
work not yet completed, and Sánchez-Arán then repeatedly approved
disbursements for this work. Sánchez-Arán also facilitated
Gutiérrez's efforts to secure new borrowers by ensuring that a loan
would be approved if Modules was used as a contractor. Sánchez-
Arán and Umpierre-Hernández met frequently regarding the status of
the Gutiérrez companies. Burns testified, for example, that he met
with Umpierre-Hernández many times in Sánchez-Arán's office
regarding the Cerrovista project. Finally, Muñoz-Franco and
Sánchez-Arán failed to disclose material information to the Board
-39-
on many occasions, and this joint failure further demonstrates
their collaboration in defrauding the bank.
Given the many instances of concealing the Gutiérrez
companies' performance from the Board of Directors, submitting
certifications for work not completed, authorizing disbursements
for such work and preventing audits, a reasonable jury could easily
find the other two elements of conspiracy: that appellants knew of
and participated voluntarily in the conspiracy, and that each
committed overt acts in furtherance of the conspiracy. Viewed as
a whole, this synchronized pattern of conduct demonstrates
appellants' agreement to maintain the appearance of financial
viability of the Gutiérrez corporations by securing new loans to
make payments on outstanding loans. Thus, we find that a
reasonable jury could have found each element of conspiracy beyond
a reasonable doubt with respect to each of the four appellants.
C. Misapplication of Bank Funds
The jury found all four appellants guilty of
misapplication of bank funds under 18 U.S.C. § 657 for a single
transaction related to the Cerrovista project. The crime of
misapplication eludes easy definition.20 As we have previously
20
In pertinent part, 18 U.S.C. § 657 provides: "Whoever, being
an officer, agent or employee of or connected in any capacity with
the Federal Deposit Insurance Corporation . . . or savings and loan
corporation or association authorized or acting under the laws of
the United States . . . embezzles, abstracts, purloins or willfully
misapplies any moneys, funds, credits, securities or other things
of value belonging to such institution . . . [is guilty of
-40-
noted, "[t]he problem that has confronted and perplexed the courts
is that there is no statutory definition or common law heritage
that gives content to the phrase 'willfully misapplies.'" United
States v. Wester, 90 F.3d 592, 595 (1st Cir. 1996). However, we
have held that misapplication has two key elements: (1) wrongful
use of bank funds; and (2) intent to injure or defraud a bank.
Blasini-Lluberas, 169 F.3d at 63. We have also explained that “the
same facts can easily be the basis for deeming the conduct to be
wrongful and the intent fraudulent; both misapplication and
scienter are required.” Wester, 90 F.3d at 595. Finally, the
misapplication statute applies only to officers, agents, and
employees of a bank. Thus, appellants who do not hold one of these
positions — here Gutiérrez and Umpierre-Hernández — may not be
convicted as principals for misapplication, but may be convicted as
aiders and abettors. See Giragosian v. United States, 349 F.2d
166, 167 (1st Cir. 1965)("Since [defendant] was not an officer,
director, agent or employee of the bank, he could not be guilty as
a principal . . . for misapplication of the bank's funds, but only
as an aider and abettor.").21
misapplication of bank funds]."
21
Giragosian construed 18 U.S.C. § 656, which deals with banks
rather than savings and loan associations. However, "[i]n the
absence of legislative history to suggest that there is any
substantive difference in meaning, we find the reasoning in cases
construing § 656 equally applicable to our reasoning" in cases
involving § 657. Blasini-Lluberas, 169 F.3d at 63 n.8.
-41-
A reasonable jury could have concluded that appellants'
handling of the Cerrovista loan constituted misapplication. The
original loan offering, which was prepared according to Sánchez-
Arán's instructions, designated $1,412,177 for land costs and
$855,323 for "partial assumption of other loans."22 This document
did not disclose the purpose for which the funds were actually
used. Of the $1,412,177 designated for land, only $480,000 was
used to purchase land for the project. The remaining $932,177 was
disbursed to the Gutiérrez-owned Quintas de Humacao company and
immediately applied to other Gutiérrez projects: principal and
interest on the Quintas de Fajardo loan, interest on the Las
Gaviotas loan, and interest on a Modules commercial loan.
The documents associated with the Cerrovista loan
demonstrate appellants' intent to defraud Caguas by redirecting
these funds. Although the settlement statement23 for the Cerrovista
loan, dated September 29, 1986, lists a disbursement of $932,177
for "repayment of other loan" and lists the payee as "Quintas de
Humacao Inc. & Caguas Federal Savings," these disclosures appear in
22
The loan offering was a document prepared by bank management
(often Sánchez-Arán) that proposed the terms of a loan to be
offered to a borrower and was then submitted to the Board for
approval.
23
Kareh testified that the settlement statement "sums up the
conditions for the loan, the amount of the money, the payouts that
have been made for the loan and whatever pending balances may
remain for the loan in process" and was "created and maintained in
the regular course of business of the construction loan
department."
-42-
a markedly different type, as does the total loan amount. Kareh
testified that this different type indicates that "the entry was
made later or at another place," allowing an inference that the
document was amended to make it appear that the Board had approved
the use of loan proceeds to make payments on other loans. This
inference is bolstered by the fact that the loan settlement
statement was not prepared until after the Board had approved a
loan. Kareh also testified that, although the $855,323 amount
designated for "partial assumption of other loans" was listed on
the loan offering and disbursed on the date of closing, the
$855,323 amount was omitted from the settlement statement at
Sánchez-Arán's instruction.24 This omission concealed the fact that
two separate disbursements, in the amounts of $932,177 and
$855,323, were used to pay down other loans.
Each appellant was sufficiently involved in concealing
the use of funds to allow an inference of intent to defraud.
Sánchez-Arán drafted the original loan offering, which did not
disclose that the $932,177 difference between the amount allocated
for land purchase and the amount spent on land would be used to pay
principal and interest on other loans. Moreover, according to
Kareh, Sánchez-Arán explicitly instructed him to omit the $855,323
24
The district court's discussion of this issue suggests that
$932,177 was disbursed instead of $855,323, when in fact both
amounts were disbursed but the $855,323 was not disclosed on the
settlement statement.
-43-
amount from the loan settlement document. A jury could infer that
Muñoz-Franco helped to conceal this wrongful use of funds, thereby
intentionally defrauding Caguas, based on his supervisory role on
the Gutiérrez loans and his regular responsibility of conveying
information to the Board. Gutiérrez and Umpierre-Hernández were
also involved in the wrongful use of funds: they endorsed the
checks, accepted the funds, and immediately applied these funds to
pay down their other loans with the bank. Although appellants
assert that the loan settlement documents demonstrate that the
transaction was disclosed to the Board, the record indicates that
the loan settlement statement was prepared after the loan had
already been approved.
Appellants attempt to counter the charge by segregating
the activities relating to the Cerrovista loan into two separate
transactions: the disbursement of the $932,177 land purchase
differential to Quintas de Humacao, and the use of those funds to
pay down other Gutiérrez loans. They argue that, at the time the
funds were disbursed to the Gutiérrez-owned Quintas de Humacao,
they ceased to be "bank funds" under 18 U.S.C. § 657 and thus
cannot support a misapplication violation.
We do not find this technicality pertinent. The
disbursement of funds from the Cerrovista loan to Gutiérrez-owned
companies, and the subsequent use of these loans to pay down other
Gutiérrez loans, was a single unified transaction. The district
-44-
court explained:
The funds did not cease to be controlled by
the express purpose for which they were
disbursed. The fact the $932,177 check was
endorsed does not change the express purpose
for which said funds were to be used. The
second transfer, the Gutiérrez's endorsement
back to Caguas Central for the repayment of
four separate loans, is still the use of bank
funds and subject to misapplication.
By expressly designating these funds for "repayment of other
loan[s]," Muñoz-Franco and Sánchez-Arán retained control over the
funds even if the funds nominally changed hands. Moreover, Muñoz-
Franco and Sánchez-Arán supervised the entire transaction, as
demonstrated by four entries in Caguas' ledgers showing the
transfer of funds to the Gutiérrez accounts.
Critically, appellants also ignore the separate
concealment of the $855,323, which, although it was listed on the
original loan application, was left off of the loan settlement
statement of September 29, 1986 at Sánchez-Arán's explicit
instruction. Although the disbursement of the $855,323 was
disclosed to the Board, the fact that this disbursement was left
off the loan settlement statement indicates the bank officials'
efforts to conceal the fact that two separate disbursements, in the
amounts of $855,323 and $932,177, were used to pay down other
loans. In short, there was more than sufficient evidence for a
reasonable jury to conclude that appellants engaged in wrongful use
of bank funds with the intent to defraud the bank.
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D. Bank Fraud with Respect to Mirandes Loans
The jury also found appellants Muñoz-Franco and Sánchez-
Arán guilty of bank fraud in violation of 18 U.S.C. § 1344 with
respect to the Mirandes loans. The Mirandes scheme involved many
of the same elements as the Gutiérrez loans. In September 1981,
Muñoz-Franco asked Mirandes to take over ownership of a project
called Reparto Valenciano, and Mirandes, then the contractor for
the project, agreed. At the time the project was in debt to Caguas
for $2.2 million, and delays and other problems continued after
Mirandes assumed ownership. On an ongoing basis, Muñoz-Franco and
Sánchez-Arán supervised the transfer of funds from other projects
to pay down the debt on the Reparto Valenciano project. For
example, on September 30, 1986, approximately $2.2 million was
applied to the Reparto Valenciano project from other Mirandes
projects.25 Muñoz-Franco and Sánchez-Arán did not disclose these
transfers of money among various Mirandes projects to the Board.
After the Reparto Valenciano debt increased to $3.2 million,
Mirandes received five contracts from the Puerto Rico Housing
Department to build basic housing. Although Caguas initially
denied Mirandes' application for funding for these projects, it
subsequently agreed to finance the Villas de Gurabo project if
Mirandes would agree to apply the profits of that project to the
25
These transfers occurred on the last day of the bank's
fiscal year, thus improving the appearance of Caguas' finances to
anyone reviewing the bank's records.
-46-
debt and interest of the Reparto Valenciano project. These
transfers temporarily sustained the Mirandes projects, but the
decreased funds available to successive projects ultimately made it
impossible for those projects to be completed or to yield profits.
Both Muñoz-Franco and Sánchez-Arán were intimately
involved with the administration of the Mirandes loans. Sánchez-
Arán met with Mirandes on many occasions, including, during one
seven or eight month period, meetings every fifteen days. Sánchez-
Arán was involved in most of the disbursements for the Mirandes
projects, whereas for other loans he was typically involved only if
a problem arose. Muñoz-Franco was also involved in the Mirandes
loans: he originally met with Mirandes to get him to take over the
loans, met with Mirandes several times thereafter, was regularly
informed of the loans' progress, and reported on the loans' status
to the Board.
Beginning thirty days after the Reparto Valenciano loan
agreement was signed, Sánchez-Arán authorized many certifications
for completed work. With two exceptions, no work on the project
had been completed at the time of the authorizations. On several
occasions, a transfer of funds from one loan to another or an
increase in the amount of a loan was authorized without the
approval of the loan committee or the Board. Mirandes also
testified that the disbursement schedule for loans "normally . . .
wasn't complied with because money was taken out to pay interest."
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Thus, the disbursement schedule that the Board approved was not the
schedule that Muñoz-Franco and Sánchez-Arán subsequently followed.
Enriquez testified such practices were not standard at
Caguas; along with the Gutiérrez loans, the Mirandes loans were the
only ones for which disbursements were authorized for work that was
not completed. According to Enriquez, the Mirandes projects
commonly received "special" certifications, which meant that
"[w]hen one project didn't have a line [of credit] it would be
taken from another project." When regular certifications were
submitted, they would have an itemization of expenses attached;
special certifications would not include such an itemization and
thus would not disclose the destination of the funds.
Sánchez-Arán also caused Caguas to finance the sale of
land from one Mirandes company to another in order to pay interest
on the Reparto Valenciano loan. On September 11, 1984, Mirandes'
company Deproco purchased property for $60,000, and, three months
later, sold the property to Bubao, another Mirandes company, for
$94,000. The proceeds from the sale were used to pay interest on
the Reparto Valenciano loan. The sale occurred despite the fact
that, according to Mirandes, the land was not worth the purchase
price and no improvements to the land were made in the interim.
The minutes did not reflect that the Board was informed of the
transaction.
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After Mirandes was unable to improve the finances of the
Reparto Valenciano project, he was awarded five projects from the
Housing Department, including Villas de Gurabo, but was denied
funding from Caguas. At that point, Mirandes met with Muñoz-Franco
and Sánchez-Arán and asked to be released from the debt on the
Reparto Valenciano project because he "felt that the debt was not
my problem" and "needed to seek financing for the project from
another bank." Muñoz-Franco and Sánchez-Arán refused to release
Mirandes from the debt. Subsequently, however, Kareh informed
Mirandes that Caguas would give him financing on Villas de Gurabo,
but that the proceeds from that loan would have to be used to pay
off the debt on the Reparto Valenciano project. Mirandes
reluctantly agreed, and this plan was implemented. Again, the
minutes did not reflect that the Board was informed of this
transaction.
The Denby letter provides further support for the jury's
finding of fraud. Drafted and signed by Muñoz-Franco, it
explicitly denies that Caguas' Board approved the practice of
borrowers using construction loan proceeds to pay interest on
unrelated loans. At the time of the letter, however, Muñoz-Franco
and Sánchez-Arán had on many occasions authorized the payment of
debts on the Reparto Valenciano project with funds from other
Mirandes loans. The fact that the Denby letter was signed by all
the members of the Board would allow a reasonable jury to conclude
-49-
beyond a reasonable doubt that Muñoz-Franco misrepresented the
practices associated with the Mirandes loans to the Board.
This circumstantial evidence of the requisite intent was
bolstered by more explicit evidence of appellants' knowledge.
Mirandes was concerned that, on the Reparto Valenciano project,
"some projects were being emptied out in order to deal with others"
and worried that "it was going to become paralyzed." Mirandes
testified that he and Sánchez-Arán "spoke constantly" about his
concerns, and that he also expressed his concerns to Muñoz-Franco.
Despite Mirandes' repeated statements of concern, Sánchez-Arán
explicitly told Mirandes that the practices had to continue. In
many cases, the bank authorized the disbursements directly rather
than seeking authorization from Mirandes, and Mirandes testified
that, although he knew of these disbursements, he was not in
agreement with them. The evidence that appellants continued with
their scheme even over Mirandes' objections demonstrated that they
acted deliberately to defraud the bank.
Taken in the light most favorable to the government, the
evidence shows that Muñoz-Franco and Sánchez-Arán repeatedly
authorized disbursements for work that was not completed and
concealed relevant information from the Board. As a result of
these activities, Caguas continued lending money to Mirandes-owned
companies despite their financial instability. This course of
conduct constitutes a knowing scheme to defraud Caguas by means of
-50-
material misrepresentations within the meaning of 18 U.S.C. § 1344.
Consequently, we conclude that a reasonable jury could have found
beyond a reasonable doubt that Muñoz-Franco and Sánchez-Arán were
guilty of bank fraud with respect to the Mirandes loans.
E. Conspiracy with Respect to Mirandes Loans
The jury also found Muñoz-Franco and Sánchez-Arán guilty
of conspiracy with respect to the Mirandes loans. Although there
was no formal agreement among Muñoz-Franco, Sánchez-Arán and
Mirandes, the three acted in concert to defraud the bank. As
described above, Muñoz-Franco originally approached Mirandes to
assume the Reparto Valenciano loans, and Mirandes agreed. After
this initial agreement, Mirandes met frequently with Sánchez-Arán
and on several occasions with Muñoz-Franco.
The appellants participated voluntarily in the conspiracy
and took overt actions in its furtherance. When the Reparto
Valenciano project was unable to pay its debts, Muñoz-Franco and
Sánchez-Arán always attempted to find solutions to sustain the
project, frequently by transferring funds from one project to
another. Such transfers, as well as their approval of
certifications for work not completed, constituted overt acts in
furtherance of the conspiracy. Thus, we find sufficient evidence
to sustain the jury's verdict on charges of conspiracy to commit
bank fraud in violation of 18 U.S.C. § 1344 with respect to the
Mirandes loans.
-51-
The district court held that the evidence of conspiracy
to commit bank fraud was sufficient in itself to sustain the
conspiracy charges, but also noted that there was sufficient
evidence that appellants conspired to misapply bank funds in
violation of 18 U.S.C. § 657 and make false entries in violation of
18 U.S.C. § 1006. However, because we agree with that court's
assessment of the bank fraud conspiracy, we need not discuss the
other two bases for the conspiracy conviction.
IV.
Having found sufficient evidence to support the
convictions, we must now address three of appellants' claims that
challenge the validity of the proceedings. First, appellants claim
that the charges filed against them were barred by the statute of
limitations. Second, they argue that their convictions violated
the Ex Post Facto Clause. Finally, they contend that their
convictions were invalid because of pre-indictment and pre-trial
delay.
A. Statute of Limitations
Under 18 U.S.C. § 3293, an individual may not be charged
with bank fraud or conspiracy to commit bank fraud unless the
indictment is returned within ten years after the commission of the
offense.26 Appellants raise three arguments regarding this statute
26
Appellants do not contend that the misapplication charges
against them were outside the statute of limitations.
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of limitations. First, they argue that the original indictment was
untimely. Next, they argue that the First, Second, and Third
Superseding Indictments substantially amended the original
indictment, do not relate back, and consequently were untimely.
Finally, they argue that the district court erred in failing to
instruct the jury on the statute of limitations.
1. Timeliness of Original Indictment
We review de novo a district court’s decision not to
dismiss on statute of limitations grounds. López-Gonzáles v. Mun.
of Comerío, 404 F.3d 548, 551 (1st Cir. 2005). Here, the original
indictment was returned on November 22, 1995. Appellants contend
that the Board was fully informed of the practices at issue in two
of the alleged violations — bank fraud and conspiracy on the
Gutiérrez loans — by a regulator report dated August 31, 1985.
Consequently, they argue, any deception in the scheme ended more
than ten years prior to the original indictment, making the
indictment untimely for those charges.
In light of the activities discussed in Section III,
supra, most of which took place after November 22, 1985,
appellants' argument overstates the significance of the regulator
report in question. The report describes several Modules loans and
expresses general concern about Modules' financial state. The
report notes that the loans "are considered to be substandard loans
subject to special comment since the future viability of the main
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borrower, Modules, could be impaired by uncertainties involving the
collectibility of an accounts receivable due from an affiliated
party." These general statements do nothing to inform the Board of
such practices as the use of proceeds from one loan to make
payments on another loan or the ongoing certification of and
payment for work that was not completed. Moreover, the report
itself contains certain misleading statements by Sánchez-Arán. For
example, despite his knowledge of Modules' uncertain financial
status and poor performance on several projects, he defended the
loans to Modules by explaining that "the borrower should have
sufficient funds to satisfy the loans in a timely manner." Thus,
the district court did not err in ruling that the original
indictment was timely.
2. Relation Back of Superseding Indictments
Appellants next argue that each of the three superseding
indictments materially broadened and substantially amended the
charges against them and, consequently, do not relate back to the
date of the original indictment. As a result, they argue that
these indictments are untimely because they allege conduct that
concluded more than ten years previously.
In United States v. O'Bryant, 998 F.2d 21, 23 (1st Cir.
1993), we held that "a superseding indictment which supplants a
timely-filed indictment . . . is itself to be regarded as timely
. . . so long as it neither materially broadens nor substantially
-54-
amends the charges against the defendant." Consequently, "the
superseding indictment relates back to the filing date of the
original indictment so long as a strong chain of continuity links
the earlier and later charges." Id. at 24. We emphasized that
"notice-related concerns . . . comprise the touchstone for
determining when a superseding indictment materially broadens or
substantially amends earlier charges," explaining that a timely
indictment serves notice by apprising defendants "'that they will
be called to account for their activities and should prepare a
defense.'" Id. (quoting United States v. Grady, 544 F.2d 598, 601
(2d Cir. 1976)).
In this case, the original indictment charged the four
appellants with bank fraud and conspiracy, alleging fifty-eight
overt acts spanning nearly a decade and involving unlawful
disbursement of bank funds by Muñoz-Franco and Sánchez-Arán,
unlawful receipt of the funds by Gutiérrez, Umpierre-Hernández, and
Mirandes, and concealment of these activities from Caguas' Board of
directors and regulatory agencies. The First Superseding
Indictment, returned on March 5, 1997, added allegations concerning
five additional loan projects and forty-four overt acts and added
two additional defendants.27 It also changed the alleged starting
date of the conspiracy from December 1981 to June 1980, lengthening
27
Defendant Enrique Gutiérrez was acquitted by the jury, and
defendant Rafael Dominguez Wolff died before trial.
-55-
the duration of the conspiracy from eight years and five months to
nine years and eleven months. The Second Superseding Indictment,
returned on May 13, 1997, added allegations about two more loan
projects and ten overt acts. Finally, the Third Superseding
Indictment, returned on March 6, 1998, separated the allegations
relating to the Gutiérrez and Mirandes loans, which the previous
indictments had presented as a single unitary conspiracy, into two
separate conspiracies set forth in separate counts.
We conclude that these revisions do not materially
broaden or substantially amend the original indictment. The
government "is not limited in its proof at trial to those overt
acts alleged in the indictment." United States v. Adamo, 534 F.2d
31, 38 (3d Cir. 1976). Therefore, allegations of additional loan
projects and overt acts in the superseding indictments do not
broaden the original indictment; they simply provide more specific
examples to substantiate the original fraud and conspiracy charges.
Similarly, the addition of eighteen months to the
beginning of a conspiracy spanning nearly a decade does not
materially broaden the scope of the indictment. Virtually none of
the conduct supporting appellants' convictions occurred between
June 1980 and December 1981, and the dates were expanded primarily
to allow factual completeness by including the dates of the
original loans Caguas extended to various companies. Thus,
-56-
appellants had adequate notice of the charges against them despite
the expanded time frame.28
Finally, we find that the separation of the original
unitary bank fraud and conspiracy scheme into two separate schemes,
one alleging bank fraud and conspiracy with respect to the
Gutiérrez loans and one alleging bank fraud and conspiracy with
respect to the Mirandes loans, did not materially broaden or
substantially amend the indictment. Muñoz-Franco and Sánchez-Arán
still had to explain the same set of actions. With respect to
Gutiérrez and Umpierre-Hernández, the division also provided
adequate notice. The only difference was that they no longer had
to contend with the allegations that related only to the Mirandes
loans. Thus, we conclude that the Third Superseding Indictment
relates back to November 22, 1995, the date of the original
indictment, and find no error in the district court's refusal to
dismiss the indictment for untimeliness.29
28
Courts have recognized an expanded time span as a
substantial amendment only when the expansion was far more
significant than the one here, and then only in conjunction with
numerous other factors. See, e.g., United States v. Ratcliff, 245
F.3d 1246, 1253-54 (11th Cir. 2001)(finding that a superseding
indictment materially broadened or substantially amended the
original indictment when it increased the length of time of the
conspiracy from six or seven months to thirteen years, increased
the number of conspirators from five to fifteen, and increased the
amount of marijuana imported from 1,500 pounds to 6,800 pounds).
29
Appellants present various arguments that the alleged
conduct concluded more than ten years prior to the dates of the
First, Second, and Third Superseding Indictments. However, because
we find that the superseding indictments did not materially broaden
-57-
3. Jury Instruction on Statute of Limitations
Appellants also argue that the district court erred in
failing to instruct the jury on the statute of limitations on the
ground that the jury could have relied on conduct outside the
limitations period in finding defendants guilty. At trial,
however, Gutiérrez's attorney explicitly declined to seek a statute
of limitations instruction, and the other appellants made no
request for such an instruction.
We addressed a similar situation in United States v.
Walsh, 928 F.2d 7, 11-12 (1st Cir. 1991). There, we rejected the
defendant's claim that the district court should have issued an
instruction on the statute of limitations, explaining that the
defendant "failed to identify any point in the record where such an
instruction was requested. Absent such a request, the point was
waived." Id. at 12. This holding is logical because "[a] statute
of limitations claim presents ‘an affirmative defense’ that is ‘not
cognizable on appeal unless properly raised below.’" United States
v. Spero, 331 F.3d 57, 60 n.2 (2d Cir. 2003)(quoting United States
v. Walsh, 700 F.2d 846, 855-56 (2d Cir. 1983)). The situation here
is identical. We hold that because appellants failed to request an
instruction, the district court had no obligation to instruct sua
or substantially amend the charges, we need not address these
arguments.
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sponte on the limitations issue.30
B. Ex Post Facto
Appellants claim that their convictions for bank fraud
and conspiracy violated the Ex Post Facto Clause, U.S. Const. art.
I, § 9, cl. 3, because the bank fraud statute, 18 U.S.C. § 1344,
was not enacted until October 12, 1984, and the jury could have
convicted them entirely on the basis of conduct that occurred prior
to that date.31
The Ex Post Facto Clause "'forbids the application of any
law or rule that increases punishment for pre-existing conduct.'"
United States v. Regan, 989 F.2d 44, 48 (1st Cir. 1993)(quoting
United States v. Havener, 905 F.2d 3, 5 (1st Cir. 1990)). For
"continuing offenses" such as the bank fraud and conspiracy charges
30
We also note that there was more than sufficient evidence
to allow a reasonable jury to conclude that the alleged offenses
were completed within the limitations period, see supra Section
III, and thus our holding that appellants waived their right to
request an instruction on the statute of limitations in no way
risks a miscarriage of justice.
31
With respect to the Gutiérrez loans, the indictment alleged
a conspiracy to commit bank fraud among all four appellants from
approximately June 25, 1980 through May 25, 1990. It also charged
those appellants with bank fraud with respect to those loans "on or
about the dates listed below" and listed a series of fifty-eight
overt acts, of which the earliest took place on March 24, 1977, and
the latest took place on December 19, 1989. With respect to the
Mirandes loans, the indictment alleged a conspiracy to commit bank
fraud between Muñoz-Franco and Sánchez-Arán from approximately
December 1981 through May 25, 1990. It also charged Muñoz-Franco
and Sánchez-Arán with bank fraud with respect to the Mirandes loans
"on or about the dates listed below" and listed a series of forty-
seven overt acts, of which the earliest took place in December 1981
and the latest took place on December 7, 1989.
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at issue here, however, the critical question is when the conduct
ended.32 As we have explained, "[w]here a ‘continuing offense’
straddles the old and new law . . . applying the new is recognized
as constitutionally sound." Id. In other words, "[a] conviction
for a continuing offense straddling enactment of a statute will not
run afoul of the Ex Post Facto clause unless it was possible for
the jury, following the court's instructions, to convict
'exclusively' on pre-enactment conduct." United States v. Monaco,
194 F.3d 381, 386 (2d Cir. 1999)(citation omitted). As suggested,
"the question of whether the violation extended beyond the
effective date of [the statute is] one that ha[s] to be resolved by
the jury." United States v. Tykarsky, 446 F.3d 458, 480 (3d Cir.
2006).
Appellants contend that the district court should have
issued instructions informing the jury that it must find beyond a
reasonable doubt that the bank fraud and the conspiracy to commit
such fraud continued past October 12, 1984. In the absence of such
32
We have held that conspiracy is "often a continuing
offense," United States v. Welch, 15 F.3d 1202, 1207 (1st Cir.
1993), and, in the context of determining venue, we have
acknowledged that "[b]ank fraud is also a continuing offense,"
United States v. Scott, 270 F.3d 30, 36 (1st Cir. 2001). The other
circuits that have considered the issue generally have agreed that
both conspiracy and bank fraud are continuing offenses. See, e.g.,
United States v. Lemmon, 372 F.3d 535, 541 n.8 (3d Cir.
2004)(conspiracy); United States v. Nash, 115 F.3d 1431, 1440-41
(9th Cir. 1997)(bank fraud); United States v. Duncan, 42 F.3d 97,
104 (2d Cir. 1994)(bank fraud and conspiracy). Under the
circumstances present here, there is no question that the
conspiracy and bank fraud charges reflect continuing offenses.
-60-
an instruction, they argue, the jury's verdict was ambiguous
because it could have been premised exclusively on conduct that
occurred prior to the date of enactment. Under such circumstances,
a conviction either for bank fraud or conspiracy to commit bank
fraud would violate the Ex Post Facto Clause.
Appellants failed to raise the possibility of an ex post
facto violation at any time prior to or during trial, including in
their proposed jury instructions. They also failed to raise the
issue in their post-trial Rule 29 motions. In their pre-sentencing
briefs, they argued for the first time that their convictions
should be vacated on ex post facto grounds. The district court
rejected the claim.33
An unpreserved ex post facto claim is subject to plain
error review. See, e.g., Tykarsky, 446 F.3d at 479; United States
v. Julian, 427 F.3d 471, 481 (7th Cir. 2005). Under such review,
an appellant must show: "(1) that an error occurred (2) which was
clear or obvious and which not only (3) affected the defendant's
substantial rights, but also (4) seriously impaired the fairness,
integrity, or public reputation of judicial proceedings." United
States v. Duarte, 246 F.3d 56, 60 (1st Cir. 2001).
33
The court applied plain error review, finding that: (1) the
overwhelming weight of the evidence established bank fraud
continuing beyond the date § 1344 was enacted; (2) the conspiracy
statute, § 371, was valid prior to any of the conduct alleged; and
(3) the jury's conviction on the misapplication counts occurring in
1986 substantiated a finding of culpable conduct continuing beyond
the date § 1344 was enacted.
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In its brief, the government agrees that the district
court should have issued an instruction that the jury must find
that the conduct continued past the enactment date of the bank
fraud statute. Its position is consistent with recent circuit
court decisions holding that the failure to issue such an
instruction satisfies the first two prongs of the plain error
analysis by establishing that an error occurred that was obvious.
See Tykarsky, 446 F.3d at 479-80 ("[B]ecause the communications
spanned two different versions of the statute with different
minimum penalties, the question of whether the violation extended
beyond the effective date of the amended version was one that had
to be resolved by the jury . . . . We also conclude that the error
in not requiring a special jury finding was 'plain' in that it was
an obvious mistake in retrospect."); Julian, 427 F.3d at 482 ("This
was a plain error in the sense of being an obvious mistake in
retrospect."). Thus, our task is to determine whether this error
affected appellants' substantial rights, and, if so, whether the
fairness, integrity or public reputation of the judicial
proceedings was impaired.
The other circuits have taken varying approaches to
applying these prongs of the plain error test in assessing a
claimed ex post facto violation. In United States v. Calabrese,
825 F.2d 1342, 1346 (9th Cir. 1987), the Ninth Circuit held that
the "jury's verdict represents a finding that a crime was committed
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as alleged in the indictment." Because the indictment alleged an
offense that continued past the date of enactment, the court
concluded that there was no plain error in the court's failure to
issue an instruction. Id.
The Fifth Circuit has examined the record to see whether
the bulk of the evidence occurred after the enactment of the
statute. In United States v. Todd, 735 F.2d 146 (5th Cir. 1984),
that court held that where "[m]ost of the evidence focused on
events that occurred within the effective date of the amendments,"
and "the record . . . clearly establishes violations of the amended
act by the appellants during the relevant time period," the failure
to give the jury instruction did not "result in the likelihood of
a grave miscarriage of justice or circumstances that seriously
affect the fairness, integrity, or public reputation of judicial
proceedings." Id. at 150.
The Second and Third Circuits have adopted an approach in
which prejudice is established if there was a reasonable
possibility that the jury convicted appellant on the basis of pre-
enactment conduct. In Tykarsky, for example, the Third Circuit
explained that a district court's failure to issue an instruction
means that a defendant "has been prejudiced if there is a
reasonable possibility that a jury, properly instructed on this
point, might have found [the defendant] guilty based exclusively on
acts that occurred before the increased penalty took effect." 446
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F.3d at 480. The court noted that "[t]he most that can be said
here is that it is improbable, rather than impossible, as a factual
matter, that the jury convicted Tykarsky exclusively on the basis
of" pre-enactment conduct, which was "insufficient to persuade us
that [the defendant's] substantial rights were not affected." Id.
at 482.34 The court concluded that this prejudice "tainted the
integrity and reputation of the judicial process" and consequently
vacated the defendant's sentence and remanded to the district
court. Id. at 483.
Finally, in Julian, the Seventh Circuit considered an
alleged conspiracy and found, on the third prong of the plain error
analysis, that a court's failure to issue an ex post facto
instruction "affected [the defendant's] substantial rights in the
sense that it exposed him to a longer sentence." 427 F.3d at 482.
It then focused on the fourth prong, explaining that "[i]f a jury,
34
The Third Circuit's holding is similar to that of the Second
Circuit. See United States v. Harris, 79 F.3d 223, 229 (2d Cir.
1996)("Because the [ ] statute is a continuing crime statute, we
must determine whether it was possible for the jury, following the
district court's instructions, to convict [the defendant]
exclusively on pre-[ ]enactment conduct. After examining the jury
instructions, we think that such a scenario was impossible.").
Appellants also refer to United States v. Torres, 901 F.2d 205 (2d
Cir. 1990). However, that case is distinguishable because
appellants did raise a general ex post facto challenge before the
district court. Id. at 228. On appeal, the Second Circuit
discussed plain error review but did not explicitly apply such
review. Id. It concluded only that "it is inappropriate to impose
a mandatory life sentence upon [the defendants] where there was an
ex post facto violation in the instruction actually given, and the
defendants brought the general ex post facto question to the
attention of the district court." Id. at 229.
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properly instructed on this point, might have found that the
conspiracy had come to an end before the increased penalty took
effect or that [defendant] had withdrawn from the conspiracy before
that date, then the error is one that implicates the fairness,
integrity, or public reputation of the judicial process." Id. It
concluded that a reasonable jury could not have found that the
conspiracy at issue ended prior to the enactment date of the
statute. Id. at 483.
Ultimately, we need not settle on a rule here. The plain
error analysis used by the Second and Third Circuits is most
favorable to defendants because it requires a finding of prejudice
if there was a "reasonable possibility" that the jury convicted
appellants solely on the basis of pre-enactment conduct. Here,
even under that test, appellants cannot demonstrate an ex post
facto violation because no reasonable jury would have convicted
appellants based exclusively on conduct that occurred prior to the
enactment date. Moreover, even if we were to apply the
"miscarriage of justice" approach of the Seventh Circuit, we would
conclude there was no miscarriage of justice here because the
government presented so much evidence of the involvement of the
defendants in the ongoing conspiracy and bank fraud following the
enactment of the bank fraud statute in 1984.
As the district court correctly noted, the government
presented overwhelming evidence of appellants' conduct, the
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majority of which occurred after October 12, 1984. Relatively few
of the overt acts for any of the charges alleged in the indictment
occurred prior to October 12, 1984: only twelve of fifty-eight
overt acts on the charges of conspiracy and bank fraud with respect
to the Gutiérrez loans, and only ten of forty-seven acts on the
charges of conspiracy and bank fraud with respect to the Mirandes
loans. The government presented considerable evidence of
activities occurring after October 12, 1984, including all of the
transactions involving the Los Mameyes project, all of the
transactions involving the Jardines de Villa Alba project, and many
of the transactions involving the Reparto Valenciano project. The
Denby letter, which contained several material misrepresentations,
was not signed until 1987. Indeed, the bulk of our sufficiency
analysis details conduct occurring after the enactment date. See
Section III, supra.
Moreover, we find nothing to differentiate appellants'
pre-enactment conduct from subsequent conduct. The government's
key witnesses — Lugo, Mirandes, Enriquez, Somohano and Kareh —
testified to conduct that occurred both before and after the
enactment date. Given that the testimony of these witnesses
spanned the enactment date, we find it implausible that the jury
would find such testimony compelling only for events that occurred
prior to October 12, 1984. Similarly, no transformative event
occurred prior to October 12, 1984 that would alter a reasonable
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jury's perception of the nature of any appellant's involvement.
Although appellant Gutiérrez protests that he sold his construction
loans with Caguas on October 29, 1984, and sold Modules on December
31, 1985, it is uncontested that he and Umpierre-Hernández remained
employed by the company, and the record contains evidence that
their culpable conduct (such as submitting certifications for
incomplete work) continued uninterrupted after the sale of the
company.
Because we see no reason to differentiate the conduct
occurring prior to the enactment date, we find that a reasonable
jury would not have convicted the appellants based solely on pre-
enactment conduct. Thus, appellants were not prejudiced, nor did
their convictions implicate the fairness or integrity of the
judicial process. We conclude that there is no plain error from
the absence of a limiting instruction on the ex post facto issue.
C. Pre-Indictment and Pre-Trial Delay
Appellants argue that the district court erred in
refusing to dismiss on the grounds that (1) the five-year pre-
indictment delay violated their Fifth Amendment right to due
process, and (2) the five-year pre-trial delay violated their Sixth
Amendment right to a speedy trial. We review both claims for abuse
of discretion. United States v. Picciandra, 788 F.2d 39, 43 (1st
Cir. 1986)("[T]he district court did not abuse its discretion in
holding that the pre-indictment delays did not violate the
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defendants' fifth amendment rights of due process."); United States
v. Salimonu, 182 F.3d 63, 69 (1st Cir. 1997)("This circuit reviews
a district court's ruling on a Sixth Amendment speedy trial claim
for abuse of discretion.").
1. Pre-Indictment Delay
In United States v. Lovasco, 431 U.S. 783 (1977), the
Supreme Court noted that "statutes of limitations, which provide
predictable, legislatively enacted limits on prosecutorial delay,
provide the primary guarantee[] against bringing overly stale
criminal charges." Id. at 789 (citations and internal quotation
marks omitted). However, the Court also acknowledged that "the Due
Process Clause has a limited role to play in protecting against
oppressive delay." Id. A prosecutor is not obliged to file
charges as soon as probable cause exists, id. at 791, and has "wide
discretion" in delaying indictment "limited only by the requirement
that it not violate those 'fundamental conceptions of justice which
lie at the base of our civil and political institutions,'" United
States v. Ciampaglia, 628 F.2d 632, 639 (1st Cir. 1980)(quoting
Lovasco, 431 U.S. at 790). To show a violation of "those
'fundamental conceptions of justice' a defendant must prove that
(1) pre-indictment delay caused substantial prejudice to his right
to a fair trial and, (2) the Government intentionally delayed
indictment in order to gain a tactical advantage over the accused."
Picciandra, 788 F.2d at 42 (citation omitted). With respect to
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prejudice, a defendant must do more than allege that witnesses'
memories had faded or that evidence had been lost that might have
been helpful to him. United States v. Lieberman, 608 F.2d 889, 902
(1st Cir. 1979).
Appellants have failed to meet that burden here. They
assert that they suffered prejudice from the unavailability of
nineteen potential defense witnesses.35 However, we find that the
unavailability of these nineteen individuals did not impair
appellants' defense, either because appellants could have, but did
not, obtain testimony from similarly situated individuals who were
available to testify; or because appellants failed to demonstrate
that the testimony of these individuals would have included
exculpatory evidence.
Of the nineteen unavailable witnesses, appellants contend
that the deaths of two individuals — Phillip Saffold and Luis Dorta
— prevented cross-examination relating to reports these witnesses
prepared. Saffold was an investigator who authored reports that
appellants claim would have allowed them to impeach Roman Cruz, a
plant manager who testified that buildings were not built at the
Modules plant; however, Cruz's testimony was a minor part of the
government's case against appellants and appellants' inability to
impeach Cruz did not significantly prejudice them. Similarly,
35
Of these nineteen unavailable witnesses, fifteen had died,
three were seriously ill, and one could not be located.
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Dorta inspected the Transglobe and Modules sites and prepared
reports that were admitted at trial; appellants emphasize that his
death prevented them from cross-examining him, but do not specify
how this opportunity would have helped their case.
Appellants claim that nine other unavailable witnesses
(Gilberto Pol Segarra, Luis Acevedo Gonzalez, Jaime Sitiriche, Juan
Hernández, Celestino Seneriz, Pedro Bull Nater, Francisco Susoni
Lens, Jose Feliciano, and Rafael Toro Nazario) were members of the
Board who "could have testified to the extent of the disclosures
made to the Board, in response to Lugo[]'s imprecise testimony."
However, appellants offer no reason to believe that these Board
members would have offered testimony contradictory to Lugo's.
Moreover, appellants do not explain why they did not call as
witnesses other Board members who were available to testify
throughout the trial.
Finally, appellants contend that the remaining eight
unavailable witnesses (Gilberto Mayo Aguayo, Nelson Soto Velasquez,
Stephen P. Radics, Emil de Pentima, Troy Chapman, Stanley
Orenstein, Hugo Lopez, and Fernando Rivera) "could have testified"
or "could have confirmed" information relating to financial
practices at Caguas, without offering any evidence that these
individuals would, in fact, have been able to provide such
testimony.
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Similarly, appellants protest the unavailability of three
sets of documents: inspection reports, commercial loan files, and
miscellaneous Modules documents. With respect to the first two
sets of documents, however, appellants make no attempt to establish
that the reports disappeared after indictment but prior to trial.
With respect to the third, appellants claim only that "the
unavailability of the Modules documents made it impossible to
fairly cross examine [Transhore and Modules accountant Jorge]
Fabrigas" and that, generally, the evidence might have allowed them
to refresh witness recollection and corroborate their defense.
However, Fabrigas' testimony was a minor part of the trial, and
these generalized objections do not establish prejudice resulting
from an impaired defense.
Even if appellants had demonstrated some degree of
prejudice from the delay, they have made no concomitant showing
that the government intentionally delayed indictment to gain
tactical advantage. Thus, we conclude that the district court did
not abuse its discretion in denying their motion to dismiss for
pre-indictment delay.
2. Pre-Trial Delay
The Sixth Amendment right to a speedy and public trial
attaches upon arrest or indictment, whichever occurs first. United
States v. MacDonald, 456 U.S. 1, 6-7 (1982). Thus, the time frame
relevant to appellants' claim extends from the date of indictment,
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November 22, 1995, until the date of trial, January 29, 2001 — a
span of over five years. We note that appellants do not raise a
claim under the Speedy Trial Act, 18 U.S.C. § 3161, and thus their
claim is based exclusively on constitutional rather than statutory
grounds.
In Barker v. Wingo, 407 U.S. 514 (1972), the Supreme
Court established a four-part balancing test to determine whether
a defendant's Sixth Amendment right to a speedy trial has been
violated. Under Barker, a court should consider: (1) the length of
the delay; (2) the reasons for the delay; (3) the defendant's
assertion of his speedy trial right; and (4) the prejudice to the
defendant caused by the delay. Id. at 530. However, the Court
identified the first factor, the length of the delay, as "to some
extent a triggering mechanism. Until there is some delay which is
presumptively prejudicial, there is no necessity for inquiry into
the other factors that go into the balance." Id. The Court also
has indicated that post-accusation delay approaching one year is
presumptively prejudicial. Doggett v. United States, 505 U.S. 647,
652 n.1 (1992). Consequently, the five-and-a-half year delay in
this case creates a presumption of prejudice.
Under Barker, we must then consider the remaining three
factors. We have described the second factor, the reasons for the
delay, as "'the focal inquiry.'" See, e.g., United States v.
Santiago-Becerril, 130 F.3d 11, 22 (1st Cir. 1997)(citation
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omitted). Here, there are two main reasons for the pre-trial
delay. First, the appellants filed numerous requests for
continuances, some of which the district court granted, as well as
many motions requiring time and consideration by the district
court.36 Second, two days before the trial was originally scheduled
to begin on May 26, 1998, the government filed a motion to
disqualify the trial judge assigned to the case on the ground that
she had a banking relationship with Caguas that might prejudice her
in the trial of the case. The district court originally denied the
motion to disqualify and the government sought mandamus from this
court. We denied mandamus, but noted that "the judge would have
been well-advised either to bow out of the case or to ask that the
recusal motion be assigned to a different judge for hearing" and
that "the government hardly can be faulted for bringing" the
motion. In re United States, 158 F.3d 26, 33-34 (1st Cir. 1998).37
36
For example, on August 27, 1997, Muñoz-Franco filed
seventeen separate motions, including one entitled "Motion
Requesting Order Concerning Additional Motions." Similarly, on
March 24, 1998, Gutiérrez filed what the district court termed a
"deluge" of "ten separate and distinct motions of varying
complexity."
37
Appellants imply that the government acted in bad faith by
waiting to file the recusal motion until immediately prior to
trial. However, the government explains that it did not learn
about the banking relationship until one year prior to trial, and
was delayed in learning the details of the relationship due to
resistance to the subpoenas it filed. In fact, the government
still had not been able to obtain some of the documents it
requested by the time it filed the recusal motion. In light of
this explanation, and the fact that appellants produced no evidence
of bad faith on the part of the government below, we still have no
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The trial judge assigned to the case then recused herself
voluntarily, resulting in a delay in the proceedings of
approximately one year. In sum, the pre-trial delay arose largely
from the complexity of the case and the events related to the
recusal.
The third Barker factor weighs in favor of appellants.
They raised their speedy trial objection three times during the
proceedings below, and now renew that objection.
The Supreme Court has held that the final Barker factor
— prejudice to appellants — "should be assessed in the light of the
interests of defendants which the speedy trial right was designed
to protect." Barker, 407 U.S. at 532. The Court identified three
such interests: "(i) to protect oppressive pretrial incarceration;
(ii) to minimize anxiety and concern of the accused; and (iii) to
limit the possibility that the defense will be impaired." Id. The
first of these interests has no bearing here because appellants
remained free prior to trial. With respect to the second interest,
"considerable anxiety normally attends the initiation and pendency
of criminal charges; hence only 'undue pressures' are considered."
Santiago-Becerril, 130 F.3d at 23 (citations omitted). Appellants
allege no such "undue pressure," and therefore we assign negligible
weight to this interest. Finally, in our discussion of pre-
indictment delay, we have already analyzed appellants' arguments
basis for questioning the government's explanation.
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that their defense was impaired. These arguments are equally
applicable to the pre-trial time frame, and we find no material
prejudice resulting from the delay.38
The five years that elapsed between indictment and trial
is a troublesome length of time. Nonetheless, our inquiry has
revealed no constitutional violation. Thus, after considering the
factors listed in Barker, we conclude that the district court did
not abuse its discretion in denying appellants' motion to dismiss
for pre-trial delay.
V.
Appellants also raise several challenges to evidence they
contend was improperly admitted. We address these claims in turn.
A. Evidence Regarding Loss
Appellants challenge three aspects of the admission and
treatment of evidence regarding financial loss to Caguas. First,
they protest that such evidence was irrelevant and prejudicial in
violation of Federal Rule of Evidence 403. Second, they argue more
specifically that the government's Exhibit 40, aspects of which
were later shown to be inaccurate, was erroneously admitted.
38
We note that, of the nineteen unavailable witnesses that
appellants name in their brief, five of these witnesses (Hugo
Lopez, Celestino Seneriz, Pedro Bull Nater, Francisco Susoni Lens,
and Jose Feliciano) died prior to indictment and, consequently,
their unavailability does not implicate the Sixth Amendment
analysis under Barker. See MacDonald, 456 U.S. at 7 ("[N]o Sixth
Amendment right to a speedy trial arises until charges are
pending.").
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Finally, they argue that, even if evidence of loss and Exhibit 40
were properly admitted, the district court erred in refusing to
guide the jury with an instruction about the enactment of the
Financial Institutions Reform, Recovery, and Enforcement Act of
1989 ("FIRREA"), Pub. L. No. 101-73, 103 Stat. 183 (codified in
scattered sections of 12 U.S.C.).
1. General Evidence of Loss
We review evidentiary rulings on relevance and unfair
prejudice for abuse of discretion. United States v. Richardson,
421 F.3d 17, 37-38 (1st Cir. 2005). Loss is not an element of bank
fraud. United States v. Blasini-Lluberas, 169 F.3d 57, 65 (1st
Cir. 1999). However, courts have held repeatedly that loss is
relevant in fraud cases to demonstrate a defendant's knowledge or
intent to commit fraud. See, e.g., United States v. Heimann, 705
F.2d 662, 669 (2d Cir. 1983)("While technically the success or
failure of a scheme to defraud is irrelevant in a mail fraud case,
realistically, when the contested issue is intent, whether or not
victims lost money can be a substantial factor in a jury's
determination of guilt or innocence." (citation omitted)). Thus,
while "an ultimate purpose of either causing some financial loss to
another or bringing about some financial gain to oneself is not the
essence of fraudulent intent," United States v. Kenrick, 221 F.3d
19, 29 (1st Cir. 2000)(citation and internal quotation marks
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omitted), the knowledge that one's actions are, in fact, bringing
about such losses may demonstrate one's intent to commit fraud.
In this case, the government referred to loss throughout
the trial to demonstrate appellants' knowledge of the consequences
of their ongoing practices of using loan proceeds to make principal
and interest payments on unrelated loans, authorizing disbursements
for work not completed, and using funds for purposes not authorized
by the Board. For example, during its opening statement and
closing argument, the government noted that federal regulators
closed Caguas in 1990 due to the bank's lack of funds. On a few
occasions, the government also questioned witnesses about the
amount of loss that certain projects sustained and whether those
losses would have caused concern. However, these references did
not dominate the evidence because the government also presented
considerable other evidence of defendants' conduct, as we have
discussed at length in Section III, supra. Moreover, the district
court carefully managed the effect of evidence relating to loss on
the jury by preventing both parties from addressing loss in their
closing arguments and instructing the jury that loss was not an
element of the offenses charged. Finally, the court permitted
appellants to cross-examine vigorously the government witnesses who
discussed loss.
In sum, the general references to loss were relevant as
a means of demonstrating appellants' intent to defraud Caguas, and,
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given the carefully limited presentation of this evidence to the
jury, were not unduly prejudicial. The district court did not
abuse its discretion in admitting this evidence.
2. Exhibit 40
Following Caguas' closure in 1990, Banco Santander
acquired many of its assets, and prepared a document — government
Exhibit 40 — listing hundreds of Caguas' loans, the outstanding
balances on those loans, Banco Santander's valuation of the loans,
and the resulting discount (the difference between the outstanding
balance of the loan and the loan's value). At trial, Banco
Santander's comptroller attested that the bank had acquired all of
the loans summarized in Exhibit 40, and the exhibit served as part
of the basis for expert testimony regarding accounting practices by
Kathy McKinless, a partner at an accounting firm. By the time of
sentencing, however, the government discovered that the Resolution
Trust Company ("RTC"), a government-owned asset management company,
had retained many of the loans. Thus, the exhibit could not
actually have reflected valuations of the loans made by Banco
Santander upon purchase, and was not a reliable means of
establishing the magnitude of the loss experienced by Caguas.
Appellants now contend that Exhibit 40 was both
testimonial, in violation of the Confrontation Clause, and that the
exhibit was improperly admitted under the Federal Rules of
Evidence. The government's acknowledgment that Exhibit 40
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contained inaccurate information indicates that the exhibit should
have been excluded on that basis alone. However, we agree with the
district court that any error in its admission was harmless. Under
Fahy v. Connecticut, 375 U.S. 85, 86-87 (1963), the critical
question in assessing harmless error is "whether there is a
reasonable possibility that the evidence complained of might have
contributed to the conviction."
Several circumstances indicate that there is no
reasonable possibility that Exhibit 40 contributed to the
convictions here. First, the exhibit was relevant only to prove
appellants' fraudulent intent, and the government presented
considerable evidence of this intent from other sources. Second,
the court explicitly instructed the jury that loss was not an
element of bank fraud. Third, the exhibit was the subject of
direct examination for less than one-half of one day of a trial
spanning fifteen months. Fourth, defense counsel subjected
McKinless to searching cross-examination regarding the exhibit,
revealing several typographical errors and inaccuracies and
eliciting McKinless' acknowledgment that she could not confirm the
document's completeness. Finally, even if the loss calculations in
Exhibit 40 were not entirely accurate, other evidence at trial
demonstrated that Caguas suffered large losses on many of the loans
at issue. To some extent, the Exhibit 40 calculations replicated
evidence already in the record. Taking into account all of these
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circumstances, there is no reasonable possibility that the isolated
use of Exhibit 40 could have contributed to appellants'
convictions, and thus any error in its admission was harmless.
3. Jury Instruction on Loss
Appellants also challenge the district court's refusal to
give an instruction explaining that, when FIRREA was enacted in
1989, "many institutions immediately fell out of compliance with
regulatory capital requirements, making them subject to seizure by
thrift regulators." United States v. Winstar Corp., 518 U.S. 839,
857-58 (1996). Appellants contend that, given the admission of
evidence relating to financial loss, the jury should have been
instructed that bank failures were common in the aftermath of
FIRREA's enactment. In other words, the jury should have been told
that banks commonly lost money in the absence of fraud.
A district court's refusal to issue a jury instruction
"'constitutes reversible error only if the requested instruction
was (1) correct as a matter of substantive law, (2) not
substantially incorporated into the charge as rendered, and (3)
integral to an important point in the case.'" White v. N.H. Dep't
of Corrs., 221 F.3d 254, 263-64 (1st Cir. 2000)(citation omitted).
No such error occurred here. The FIRREA instruction was not
integral to an important point in the case because loss is not an
element of bank fraud. Moreover, the jury was instructed that the
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government need not prove loss. Thus, we find no reversible error
in the distrct court's decision.
B. Forgery and Check-Kiting Evidence
Appellants assert that the admission of evidence
regarding forged signatures on checks and evidence of a check-
kiting scheme constructively amended the indictment. A
constructive amendment occurs “‘when the charging terms of the
indictment are altered’ at trial so that they are different from
those handed up by the grand jury.” United States v. Rodriguez,
215 F.3d 110, 118 (1st Cir. 2000)(quoting United States v. Portela,
167 F.3d 687, 701 (1st Cir. 1999)). Appellants also argue that
this evidence constituted an improper variance from the indictment.
A variance occurs when the proof differs from the indictment's
allegations, and "is material and reversible only if it has
affected the defendant's 'substantial rights': to be informed of
the charges; and to prevent a second prosecution for the same
offense." United States v. Vavlitis, 9 F.3d 206, 210 (1st Cir.
1993)(citation omitted).
At trial, the government introduced evidence that
numerous checks issued by Caguas and made payable jointly to
Gutiérrez companies and third party contractors were deposited in
the accounts of the Gutiérrez companies after the contractor's
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endorsement was fraudulently added to the checks.39 The government
elicited this testimony as evidence of appellants' intent to
defraud the bank.
The district court addressed the forgery evidence in an
order denying appellants' motion to exclude it. The court found
that such evidence caused neither a constructive amendment nor a
variance, explaining that, "[s]ince some of the checks issued by
Caguas [that were ultimately used to make payments on failing
loans] were jointly issued to innocent third party payees, these
payees' endorsement would have been required before the checks
could actually be cashed or deposited in the bank." Since
"disbursement of the funds could not be completed until the checks
were cashed . . . in some cases forged endorsements would
necessarily be required." The court concluded that, rather than
constructively amending or varying the indictment, the forged
endorsements were direct evidence of one component of appellants'
scheme. Finally, to foreclose any possibility that the jury would
convict appellants based on the forgery evidence, the court issued
thorough instructions regarding the elements of bank fraud and
39
For example, the government elicited testimony from Luis
Garate, the former vice president of Bermudez and Longo, Inc., a
construction contractor in electrical and building mechanics.
Bermudez and Longo worked with the Gutiérrez company Transglobe on
the Modules project. Garate testified that he did not recognize
the endorsements on fifteen checks, totalling over $67,000, that
were issued by Caguas and made payable jointly to Transglobe and
Bermudez and Longo.
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conspiracy as well as an instruction specifically tailored to the
evidence of forgery: "You have heard evidence about checks with
allegedly forged endorsements. The crime of forgery is not charged
. . . . The fact that endorsements may be forged may only be used
to assist you, as you may find useful, in your evaluation of all
the evidence in the case . . . ."40
The district court's order accurately assesses the value
of the forgery evidence, and the admission of such evidence did not
constructively amend the indictment or result in a variance. We
further conclude that its instruction was more than sufficient to
inform the jury of the proper role of that evidence.
We view the check-kiting evidence similarly. The
disputed evidence consisted of testimony from Somohano (the vice
president of Caguas' commercial loan department) that in 1983 he
detected a check-kiting scheme involving two Gutiérrez
corporations' accounts at Caguas and Banco de Ponce. When he
informed Muñoz-Franco and Sánchez-Arán, Muñoz-Franco scolded
Somohano and denied that check-kiting was occurring. Somohano
further testified that Sánchez-Arán continued to honor the checks
sent to Caguas even after Banco de Ponce stopped honoring checks
40
Appellants did not object to the instruction, and
consequently the objections to the instruction that they raise on
appeal are reviewable only for plain error. See Fed. R. Crim. P.
30(d)("A party who objects to any portion of the instructions or to
a failure to give a requested instruction must inform the court .
. . before the jury retires to deliberate."). We see no such error
in the clear instruction issued here.
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deposited with them. The check-kiting continued, resulting in
overdrafts of more than $900,000 on the Gutiérrez-owned companies'
accounts at Caguas. This overdraft ultimately was converted into
a loan.
The district court did not err in admitting this
evidence. The reactions of Muñoz-Franco and Sánchez-Arán when
Somohano told them about the check-kiting scheme demonstrate both
their goal of preserving the Gutiérrez-owned companies' financial
status and the preferential treatment that these companies
received. This evidence was directly relevant to the charges of
bank fraud and conspiracy, and was not outside the scope of the
original indictment. Thus, we conclude that no constructive
amendment or improper variance occurred.
C. Evidence of Civil and Regulatory Violations
Appellants also protest that the district court
improperly admitted evidence of civil and regulatory banking
violations. Again, we review this evidentiary ruling for abuse of
discretion. Richardson, 421 F.3d at 37-38.
Evidence of civil or regulatory violations is admissible
so long as "the evidence is not presented in such a way that the
jury's attention is focused on the civil violations rather than the
criminal ones." United States v. Stefan, 784 F.2d 1093, 1098 (11th
Cir. 1986). The concern is that such evidence could create an
"alternative standard of guilt." United States v. Christo, 614
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F.2d 486, 491 (5th Cir. 1980)(prohibiting the introduction of civil
banking statutory violations solely for the purpose of proving
criminal misapplication).
Courts have allowed the introduction of evidence of civil
and regulatory violations in a variety of situations. In United
States v. Devin, 918 F.2d 280, 287 (1st Cir. 1990), we found no
abuse of discretion in a district court's decision to allow
evidence of violations of police department regulations to
demonstrate the knowledge and intent of a police officer charged
with RICO violations and attempted extortion. We explained that
"[s]uch evidence was unquestionably helpful to the jury in
determining whether . . . [the officer] was willing to disregard
his sworn obligations and accept things of value which influenced
his performance of official duties." Id. Similarly, in Stefan,
the district court permitted the government to introduce testimony
regarding violations of a civil regulatory banking statute and
charts illustrating how certain loans at issue contravened the
statute. It also allowed the government to refer to the statutory
violations in its opening statement and closing argument, and even
"focused the jury's attention" on the statute in the instructions.
784 F.2d at 1097. On appeal, the Eleventh Circuit found that the
defendant's scheme included efforts to avoid this statute, and that
the district court therefore did not abuse its discretion in
admitting such evidence to help the jury understand the scheme. In
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both of these cases, the courts placed emphasis on a jury
instruction which made clear that civil or regulatory violations
did not equate to criminal conduct. See Devin, 918 F.2d at 288
n.9; Stefan, 784 F.2d at 1099.41
Here, the court allowed the government to introduce
evidence that defendants violated certain regulations of the
Federal Home Loan Bank to provide context for their actions and to
establish their knowledge of the impropriety of their activities.
Although such evidence was discussed from time to time, it was not
central to the government's case, as our lengthy discussion of the
sufficiency of the evidence demonstrates, see Section III, supra.
Moreover, the district court issued a limiting
instruction on the use of evidence of civil and regulatory
violations:
You have heard testimony and evidence
that certain civil rules and/or regulations
which govern the conduct of banks may not have
been followed at times at Caguas.
You are hereby instructed that a
violation of any of these rules and
regulations is not a crime in and of itself,
and is not determinative of a defendant's
guilt or innocence.
The fact that certain civil rules and
regulations may have been violated at Caguas
41
For example, the instruction in Devin stated: "[R]ules and
regulations of the Boston Police Department were admitted into
evidence in this case. And while they may be relevant in order to
show a guideline or a code of conduct to a particular job, the
defendant is not here because he violated a rule or regulation. He
is charged here with violations of certain specific laws, not rules
or regulations." 918 F.2d at 288.
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may only be used by you to assist you, as you
may find useful, in determining a particular
defendant's motive or intent as to the crimes
charged in the third superseding indictment.
This instruction clearly conveys that civil and regulatory
violations do not establish criminal culpability. Appellants
protest that the instruction exacerbated the problem because the
reference to "the fact that certain rules and regulations may have
been violated" improperly suggested that such rules and regulations
had been violated. However, we see no such suggestion because the
phrase "may have been violated" makes clear to the jury that, if it
found that such violations had occurred, it could use those
violations as one piece of evidence in determining the ultimate
question of criminal guilt or innocence. Given this appropriate
limiting instruction, we find that the district court did not abuse
its discretion by admitting evidence of regulatory violations to
provide context and to demonstrate appellants' knowledge of their
criminal conduct.
VI.
Appellants challenge other aspects of the proceedings
against them, including the length of the trial, allegedly
disparaging and misleading statements by the prosecutor, the jury
instruction on misapplication, and alleged error in sentencing. We
now turn to these remaining issues.
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A. Length of Trial
Appellants argue that the sheer length of the trial and
the repetitive nature of the government's evidence denied them due
process. In denying appellants' motions for judgment of acquittal
on these grounds, the district court devoted more than ten pages of
its seventy-seven page opinion to a thorough examination of this
issue. We largely agree with its analysis. Thus, we merely
summarize its conclusions here and note only a few additional
points.
The trial lasted for fifteen months and the prosecution's
case lasted far longer than appellants' case. However, appellants
bore much of the responsibility for the length of the trial. They
either requested or agreed to several continuances after the trial
began.42 In response to the jury's request that the trial occur
five days per week, they requested that trial occur only four days
per week. Moreover, much of the time devoted to the government's
case consisted of the vigorous and lengthy cross-examination to
which the defense subjected government witnesses. Finally, nearly
all of the witnesses testified in Spanish and required the use of
42
In July 2001, the trial judge notified the parties that he
had a vacation scheduled for two weeks in September but stated that
he was "willing to forego, if there is absolutely any objection
from anyone," emphasizing that "if [there] is any problem
whatsoever, be it a due process claim or some sort of mistrial, I
want to know now." Defense counsel responded that there was "[n]o
objection whatsoever."
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interpreters, which contributed significantly to the length of the
trial.43
The government's presentation was not repetitive. For
example, although Enriquez (the senior vice president of the
mortgage department) and Kareh (the assistant vice president of the
construction loan department) both testified at length about the
same projects, Kareh offered more detailed information about the
loans themselves, while Enriquez provided insight into appellants'
knowledge about the loans and whether appellants provided certain
information to the Board. Although appellants can point to
instances in which the same story was told more than once, such
repetition often encompassed new and relevant details, and was not
unduly frequent given the complexity of the violations alleged and
the length of the trial.
Finally, there is no indication that the length of the
trial and the arguably cumulative nature of the evidence affected
the outcome of the trial in any way. In fact, the jury convicted
the four appellants while acquitting Enrique Gutiérrez on all
counts, which suggests that the jury was able to carefully weigh
the evidence against each defendant. See United States v. LiCausi,
43
Although procedures vary from trial to trial, questions from
attorneys are usually translated into Spanish upon completion.
With respect to witness testimony, the interpreter typically
instructs the witness to pause every few sentences to allow
translation of the testimony into English, and will stop the
witness if the witness does not remember to pause in giving a
longer answer.
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167 F.3d 36, 49 (1st Cir. 1999)(explaining that a jury's acquittal
of one defendant on two counts indicates that it "was not prevented
from making reliable judgments about guilt or innocence"). Given
appellants' failure to demonstrate any prejudice resulting from the
length of the trial, we find no due process violation under these
circumstances.
B. Prosecutorial Misconduct
Appellants claim that, throughout the trial, the
prosecutor made disparaging and misleading comments that prejudiced
the jury against them and require us to vacate their convictions.
The district court denied motions for a mistrial on such grounds on
at least six occasions.
We must first resolve the threshold question of whether
these comments were improper. Darden v. Wainwright, 477 U.S. 168,
180-81 (1986). If we answer that question in the affirmative, we
must determine whether the impropriety warrants vacating the
convictions. The issue is not whether "'the prosecutors' remarks
were undesirable or even universally condemned'"; rather, "[t]he
relevant question is whether the prosecutors' comments 'so infected
the trial with unfairness as to make the resulting conviction a
denial of due process.'" Id. at 181 (citations omitted). We have
held that the relevant factors include: "(1) whether the
prosecutor's misconduct was isolated and/or deliberate; (2) whether
the trial court gave a strong and explicit cautionary instruction;
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and (3) whether any prejudice surviving the court's instruction
likely could have affected the outcome of the case." United States
v. Auch, 187 F.3d 125, 129 (1st Cir. 1999). We may overturn the
convictions only if "the prosecutor's misguided tactic . . . could
have affected the outcome of the trial." Id. at 130.
1. Disparagement
Appellants first object to comments, made in the presence
of the jury, that they term “disparagement.” For example, the
prosecutor, on one occasion, stated that defense counsel “just lied
to the court” and referred to his statement as a
“misrepresentation.” On another occasion, the prosecutor asked the
court to “please direct [defense counsel] to refrain from his
offensive odious comment that [has] characterized [ ] this trial,”
concluding, “I don’t think that I need to endure this sort of
treatment from him.” On several occasions, the prosecutor
interrupted defense counsel’s objections with such comments as “say
something new,” and “Improper question. First year law school.
Improper question.”
Such comments are unfortunate and unprofessional.
However, the trial was highly contentious, and the record reveals
that appellants' trial counsel made a number of similar comments.
Although such exchanges between the prosecution and defense
occurred intermittently, their impact was diluted by the length of
the trial. Immediately following such exchanges, the court usually
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commented on their inappropriateness. For example, the court on
one occasion ordered “all counsel to measure their words, measure
their conduct, and measure their civility towards each other,”
noting, “I have observed both sides step over the line.” On
another occasion the court admonished counsel for improper comments
and stated: “And by counsel I included both sides. This is not an
admonition to one side or the other, both sides are included.”
Such statements from the court adequately informed the jury that
such conduct was inappropriate and assigned blame equally to both
sides. Finally, any prejudice that resulted from the prosecutor’s
role in these exchanges and survived the court’s instruction could
not have influenced the outcome in this case because, as we
explained in Section III, supra, the evidence of appellants’ guilt
was overwhelming. Thus, the prosecutor’s occasional remarks in
this long and contentious trial, although unfortunate, did not
infect the trial with such unfairness as to make the resulting
convictions a denial of due process. Darden, 477 U.S. at 181.
2. Misleading Statements
Appellants also assert that the prosecutors made
misleading statements and referred to information outside the
record. Many of appellants’ characterizations of the prosecution’s
presentation are simply inaccurate. For example, appellants claim
that the prosecutor falsely stated that Lugo (the Board president)
had testified that the Board was not told of Modules’ performance
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history, when Lugo had at most said he could not remember those
statements. This claim is unsupported by the record. Lugo in fact
testified: “I don’t recall that it was discussed. I believe that
if it was discussed I would remember and it is not reflected in the
minutes. . . . The best of my recollection is that it was not
discussed.” In another instance, appellants protest that the
prosecutor improperly suggested to Joseph Gonzalez (an examiner for
the Federal Home Loan Bank) that bank management, rather than the
Board, was responsible for Caguas' lending practices, when in fact
the prosecutor only elicited testimony that the Board relied on
Muñoz-Franco and Sánchez-Arán to provide information relevant to
its decisions, and often accepted Muñoz-Franco's recommendations
regarding these decisions. Such comments were not improper, let
alone prejudicial.
In other instances, even if we found the challenged
statements improper, any resulting prejudice was negated either by
appellants' own cross-examination or by a curative instruction from
the district court. For example, appellants assert that the
prosecution elicited testimony from Montilla (the developer on the
Jardines de Villa Alba project) that Caguas sued him but then
dismissed its claim, when in fact the bank settled with Montilla
and obtained title to all but one of the Jardines de Villa Alba
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lots.44 However, appellants then elicited the terms of the
settlement on cross-examination, remedying any prejudice. On
another occasion, the court addressed defense counsel’s allegations
that the prosecution's closing argument mentioned loans not charged
in the indictment and mischaracterized Victor Kareh's testimony
with a detailed curative instruction.45
In sum, any impact resulting from these alleged
misleading statements must be evaluated in light of the
overwhelming evidence presented at this fifteen-month trial. Under
such circumstances, we again conclude that the prosecutor's
comments could not have caused unfairness that resulted in a denial
of due process.
C. Jury Instruction on Misapplication
Appellants argue that the jury instructions improperly
permitted the jury to convict them on the misapplication charge if
it found them merely reckless. We review de novo a claim that the
44
Appellants did not object to this testimony at trial, and
thus we review their claim only for plain error. See United States
v. Duarte, 246 F.3d 56, 60 (1st Cir. 2001).
45
The complete instruction spanned several pages of trial
transcript, but a representative paragraph will demonstrate the
level of detail: "You heard reference to the Coamo loan during the
government's closing argument and entries on the Coamo ledger card.
Because the Coamo loan is not part of the charges in this case I
instruct you to disregard the prosecutor's comment about the Coamo
ledger card as they refer specifically to the Coamo loan. You may
consider, in evaluating all the evidence, whether any payments from
other loans were used or not used to make any payment in the Coamo
loan."
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district court erred in instructing the jury on the intent
necessary to support a conviction. United States v. Woodward, 149
F.3d 46, 68-69 (1st Cir. 1998).
The contested instruction stated that the government must
prove beyond a reasonable doubt
that the defendants acted with the intent to
injure, defraud or deceive the bank. You may
also consider whether defendants acted
recklessly, that is, in reckless disregard of
the interests of the bank. If you find that
defendants acted recklessly, with respect to
the alleged misapplications, you may find that
the defendants acted with intent to injure,
defraud or deceive the bank.
Relying on a Fifth Circuit case, United States v. Adamson, 700 F.2d
953, 965 (5th Cir. 1983), appellants contend that, contrary to this
instruction, reckless behavior is insufficient to establish
misapplication under 18 U.S.C. § 657.46 Contrary to the Fifth
Circuit, however, we have specifically held that "'the sine qua non
of charges of willful misapplication of bank funds is action taken
with the knowledge of harm to, intent to harm, or reckless
disregard for, the financial health of the bank.'" United States
v. Brennan, 994 F.2d 918, 923 (1st Cir. 1993)(emphasis
46
In Adamson, the trial court instructed the jury: "A reckless
disregard of the interest of the bank is the equivalent of intent
to injure or defraud the bank." 700 F.2d at 965. In reversing the
misapplication conviction, the court held that, "[i]n order to
convict a defendant for willfully misapplying funds with intent to
injure or defraud a bank, the government must prove that the
defendant knowingly participated in a deceptive or fraudulent
transaction." Id.
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added)(quoting United States v. Fusaro, 708 F.2d 17, 21 (1st Cir.
1983)); see also United States v. London, 66 F.3d 1227, 1241 (1st
Cir. 1995)("[T]he cases applying § 656 [the misapplication statute
that deals with banks rather than savings and loans institutions]
. . . have generally held reckless disregard to establish the
requisite intent to defraud."); United States v. Rodriguez-
Alvarado, 952 F.2d 586, 590 (1st Cir. 1991)("A reckless disregard
by a bank officer of his bank's interest . . . is sufficient to
establish the requisite intent to defraud . . . ."). In light of
these binding decisions, appellants' arguments are futile. We find
no error in the district court's instruction on the misapplication
charge.
D. Booker Error
Appellants were sentenced pursuant to a mandatory
sentencing scheme that has since been deemed unconstitutional,
United States v. Booker, 543 U.S. 220, 245 (2005), but they did not
preserve their claims that they were improperly sentenced. We have
held that such unpreserved claims are reviewed only for plain
error. United States v. Antonakopoulos, 399 F.3d 68, 76 (1st Cir.
2005). Appellants challenge their sentences on the ground that
"the Antonakopoulos plain error analysis does not comport with the
Supreme Court's decisions in [United States v. Olano, 507 U.S. 725,
734-36 (1993)] and Booker because it imposes on defendants the
burden of proving that error materially affected the proceedings
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below." Absent en banc or Supreme Court review, however, we are
bound to follow the Antonakopoulos framework, and thus we
acknowledge only that appellants have preserved this issue for
later review.
VII.
After concluding our review of the immense record in this
complicated case, we agree with the district court that
overwhelming evidence supported the jury verdicts. Also,
appellants have raised no other grounds that would justify vacating
their convictions.
We have been greatly aided in our review by the district
court's sensible management of this lengthy trial, as well as its
careful and thorough analysis of the issues that arose throughout
the proceedings. Its handling of this burdensome case was
exemplary.
We affirm the convictions and sentences of the appellants
on all counts.
So ordered.
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United States v. Munoz-Franco
Court: Court of Appeals for the First Circuit
Date filed: 2007-05-22
Citations: 487 F.3d 25
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