IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________
No. 94-20464
_____________
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
VERSUS
MICHAEL PARKS, JULIAN MOSS, AND CHARLES MICHAEL O'NEAL,
Defendants-Appellants.
____________________________________
Appeal from the United States District Court
for the Southern District of Texas
____________________________________
(CR. H-92-244)
October 26, 1995
Before KING and JONES, Circuit Judges, and KAZEN, District Judge.*
KAZEN, District Judge:
Defendants Michael Parks, Julian Moss, and Charles Michael
O'Neal were charged with conspiring to misapply funds from a
federally insured financial institution and to make false entries
in the books and records of the institution in violation of 18
U.S.C. §371 (Count One); misapplication of funds, in violation of
18 U.S.C. §657 (Count Two); and making false entries in the books
and records of the institution, in violation of 18 U.S.C. §1006
*
District Judge for the Southern District of Texas, sitting
by designation.
(Count Three). All three Defendants were convicted on Counts One
and Two. Moss and O'Neal were convicted on Count Three, but Parks
was acquitted. All Defendants have appealed. First, they
challenge the sufficiency of the evidence to support their
convictions. Second, they claim that the trial court committed
reversible error in admitting testimony concerning civil banking
regulations. Third, they claim that pre-indictment delay violated
their Fifth Amendment due process rights. We affirm.
I.
BACKGROUND
At the time of the transaction in question, Defendants Parks
and Moss were the named shareholders in a Houston law firm. Both
were instrumental in establishing a federally insured savings and
loan, Village Savings Association ("Village"), which became a
client of the firm. In addition to being investors in and counsel
for Village, Parks served as Chairman of the Board and Moss as
Secretary to the Board. Defendant O'Neal, who was not affiliated
with the law firm, served as the President of Village.
Also among the law firm's clients was a Canadian condominium
developer, Len Cassack ("Cassack"), and his joint venture, West
Oaks Development 100 ("WOD"). As was customary at the time to
qualify for development loans, Cassack recruited investors to sign
earnest-money contracts ("pre-development contracts") to buy
unbuilt condominium units at a discount price. If Cassack sold the
unit at a higher price prior to completion, the pre-development
2
investor would keep the profit. If no buyer was found, the
investor would be required to purchase the unit under the terms of
the pre-development contract. In the late 1970's, Parks and Moss,
through an investment partnership known as Parks and Moss II ("P&M
II"), signed pre-development contracts for two units in Cassack's
Briar Hollow project. As contemplated, the Briar Hollow units
later were sold by Cassack, and P&M II made a profit.
In 1981, Cassack approached Parks and Moss with a similar
investment opportunity in a different development. Along with
three partners in the law firm1, Parks and Moss formed an
investment group called Parks and Moss III ("P&M III"), which
signed two pre-development contracts for condominium units in
Cassack's Park Square project. Prior to completion, Cassack sold
one unit but could not find a buyer for the second unit ("Unit
802"). In November 1981, P&M III was required to purchase Unit 802
at the pre-development contract price of $223,448.00. Several
years later, Village agreed to buy Unit 802. On August 31, 1984,
P&M III transferred the title to Cassack's WOD, which
simultaneously transferred title to Village. WOD received nothing
for its participation in the transfer. Village's money was
disbursed by the title company, partly to pay off P&M III's
mortgage and the balance going to P&M III as profit.
In December of 1985, the participation of P&M III in the
transaction came to the attention of Village's Board of Directors.
Recognizing potential regulatory violations due to Parks'
1
Frank Ban, George Bamberg and Jerry Schutza.
3
involvement, the board initiated an internal investigation. Parks
and Moss were asked to resign in early 1986. A subsequent
investigation by the Federal Home Loan Bank Board (FHLBB) resulted
in an indictment against the Defendants on October 13, 1992.
II.
INSUFFICIENCY OF THE EVIDENCE
All Defendants challenge the sufficiency of the evidence on
all of their convictions. "In reviewing a verdict challenged on
the sufficiency of the evidence, this Court views the evidence,
whether direct or circumstantial, and all reasonable inferences
drawn from the evidence, in the light most favorable to the jury's
verdict ... [to] determine whether `a rational trier of fact could
have found that the evidence established the essential elements of
the offense beyond a reasonable doubt'." United States v. Willis,
6 F.3d 257, 264 (5th Cir. 1993) (citations omitted).
A. Misapplication of Funds
To establish misapplication of funds in violation of 18 U.S.C.
§657, the government must show: (1) that the savings and loan
institution was authorized under the laws of the United States; (2)
that the accused was an officer, director, agent or employee of the
institution; (3) that the accused knowingly and willfully
misapplied the monies or funds of the institution; and (4) that the
accused acted with intent to injure or defraud the institution.
See United States v. Tullos, 868 F.2d 689, 693 (5th Cir.), cert.
denied, 490 U.S. 1112 (1989).
4
Intent
All Defendants dispute the sufficiency of the evidence on the
intent element. Intent "is proven by showing a knowing, voluntary
act by the defendant, the natural tendency of which may have been
to injure the bank even though such may not have been his motive."
United States v. Parekh, 926 F.2d 402, 408 (5th Cir. 1991)
(citation omitted). Intent may be shown by direct or
circumstantial evidence that allows an inference of an unlawful
intent. United States v. Aggarwal, 17 F.3d 737, 740 (5th Cir.
1994).
Moss' secretary, Patricia Wellborn, testified that Moss and
O'Neal arranged the transfer of Unit 802 to Village, through WOD,
in order to avoid drawing the auditors' attention to Parks'
participation. According to Wellborn, O'Neal told Moss that
auditors and regulators might question why Village was buying a
condominium from P&W III at the price in question, and that there
would be "less questions asked" if Unit 802 were not sold by P&M
III "directly" to Village. There was also evidence from which the
jury could infer that O'Neal was familiar with applicable banking
regulations, but nevertheless completed the transaction without
seeking approval from his board or from the FHLBB. The Defendants
stoutly maintain that Unit 802 was worth the purchase price of
$300,000.00. However, there was evidence from which a reasonable
jury could find that the market for condominiums was poor in 1984,
that no unit of comparable size had sold for $300,000.00 that year,
and that Unit 802 would not have been worth the purchase price on
5
the open market. The evidence would also allow a reasonable jury
to reject O'Neal's contention that Unit 802 was a good investment
for resale by Village or that it was useful to house out-of-town
customers and investors. Indeed, Village still owned Unit 802 some
16 months after the purchase, and the unit was unfurnished and
apparently unused.
Causation
Parks and Moss contend that there was insufficient evidence to
show that they caused any misapplication of funds. In United
States v. Rochester, 898 F.2d 971, 978 (5th Cir. 1990), we found it
unnecessary to decide if the causation standard applicable to a
violation of 18 U.S.C. §656 should similarly apply to a violation
of 18 U.S.C. §657. The two sections are virtually identical except
that one applies to banks and the other to savings and loan
associations. We now hold that the same standard should apply
under both statutes.
In United States v. McCright, 821 F.2d 226, 230 (5th Cir.
1987), cert. denied, 484 U.S. 1005 (1988), we said that "[m]anifest
in the use of the term 'misapply' is a requirement that the
defendant made, or influenced in a significant way, as an officer
of the bank, the decision to extend the loan." McCright involved
a bank loan made to a corporation for development of a golf course
and country club. The defendant, a bank officer, had a personal
financial interest in the corporation which was concealed from the
bank. He was not, however, the loan officer who approved the loan,
and the officer who did approve the loan apparently had no criminal
6
knowledge or intent. We held that §656 required not merely that a
defendant stood to benefit from the loan but that he authorized or
caused it to be authorized. Invoking McCright, Parks and Moss
contend that at most they only benefitted from a loan which they
neither authorized nor caused.
This argument ignores the theory of aiding and abetting, which
is implicit in all indictments for substantive offenses. Jacobs v.
Scott, 31 F.3d 1319, 1329 (5th Cir. 1994), cert. denied, 115 S.Ct.
711 (1995). The instant indictment cited both the substantive
statutes and 18 U.S.C. §2. The trial judge also charged the jury
on aiding and abetting. Under this theory, the government need not
show that Parks and Moss were guilty of every element of the crime.
See Parekh, 926 F.2d at 407. Unlike the situation in McCright, the
present case involved three Defendants acting in concert to
accomplish the misapplication of funds. Thus, the government need
only show that the Defendants willfully associated themselves with
and participated in a criminal venture, seeking to make the venture
succeed, and that each element of the offense was committed by some
party to the venture. See United States v. Beuttenmuller, 29 F.3d
973, 981-82 (5th Cir. 1994). In this case, there is evidence that
O'Neal actually caused the loan to be made. The testimony of
Patricia Wellborn was sufficient to support a finding that Moss
willfully associated himself with O'Neal in the criminal venture
and sought to make that venture succeed through his directions to
his own secretary.
Although the evidence of Parks' role in the venture is not as
7
direct, the evidence showed that Parks was a founder of Village,
the chairman of its Board of Directors, and a member of its
Executive Committee. Parks and Moss were also majority owners of
P&M III, each holding approximately a 40% interest. That
partnership had owned Unit 802 for three years and had been unable
to sell it. It was becoming a financial drain and the partners
were eager to sell. Prior to the ultimate sale of Unit 802, Parks
and Moss had advised their fellow investors that the unit was going
to be purchased by Village, although the Board of Directors had not
been apprised of that circumstance. When the transaction was
actually consummated, however, Parks and Moss signed a deed to WOD
rather than to Village. The following year, when confronted by
another member of the Board of Directors, Parks initially stated
that he was unaware that Village had purchased Unit 802.
Parks suggests that his acquittal on Count Three, the false
entry count, should impact the Court's sufficiency analysis with
regard to Counts One and Two. This argument is without merit as it
is well established that juries are entitled to render inconsistent
verdicts. United States v. Powell, 469 U.S. 57, 64-65 (1984).
Indeed, this Court has held that "a not guilty verdict on one count
does not establish any facts favorable to the defense for the
purpose of determining the sufficiency of the evidence on the
counts of conviction." United States v. Nguyen, 28 F.3d 477, 480
(5th Cir. 1994). In this case, albeit not necessarily in all
cases, the misappropriation under §657 was aided and implemented by
means of documents placed in the records of Village which disguised
8
the true nature of the purchase of Unit 802.
In United States v. Faulkner, 17 F.3d 745, 771 (5th Cir.),
cert. denied, 115 S.Ct. 193 (1994), we found sufficient evidence to
convict an appraiser, not a bank official, of a §657 violation
under an aiding and abetting theory. The appraiser had an
undisclosed profit interest in certain property and prepared a
false appraisal used by a cooperating bank officer to justify a
loan allowing sale of the property at a price that would assure the
appraiser a profit. Similarly, in United States v. Kington, 875
F.2d 1091, 1103 (5th Cir. 1989), we upheld the conviction of one
bank officer who "withheld objections to and informations about
(another bank officer's) unlawful loans in order to reap the
benefits of the continuing scheme."
In the instant case, while Parks and Moss did not directly
make or authorize the appropriation of funds to purchase Unit 802,
there was sufficient evidence to support a jury finding that they
aided and abetted O'Neal in committing that offense.
B. False Entries
O'Neal and Moss challenge the sufficiency of the evidence to
support their convictions for making false entries. To establish
a violation of 18 U.S.C. §1006, the government must show: (1) that
the institution is a lending institution authorized and acting
under the laws of the United States; (2) the defendant was an
officer, agent, or employee of the institution; (3) the defendant
knowingly and willfully made, or caused to be made, a false entry
9
concerning a material fact in a book, report, or statement of the
institution; and (4) the defendant acted with intent to injure or
defraud the institution or any of its officers, auditors,
examiners, or agents. Beuttenmuller, 29 F.3d at 982; Tullos, 868
F.2d at 693-94. Material information is that which has the
capacity to impair or pervert the functioning of the institution.
Beuttenmuller, 29 F.3d at 982. A false entry can be either an
omission of material information or a misstatement. United States
v. McCord, 33 F.3d 1434, 1448 (5th Cir. 1994), cert. denied, 115
S.Ct. 2558 (1995). Neither defendant disputes the proof of
elements one and two.
The "material" information in this case was P&M III's
involvement in the transaction, the omission of which had the
capacity to "pervert the functioning" of Village. As we have
previously discussed, there was evidence indicating that Moss and
O'Neal deliberately arranged to prepare documents showing WOD
rather than P&M III as the seller of Unit 802. Indeed, Wellborn
testified that the discussion of that arrangement occurred after
initial deeds had already been prepared, apparently implying that
the transaction had first been structured directly between P&M III
and Village. Village's treasurer testified that his file on Unit
802, which he considered complete, contained only a closing
statement reflecting a sale between WOD and Village, with a copy of
the $300,000.00 check from Village to the title company. From this
evidence, the jury could conclude that the Defendants caused an
omission of material information to exist in the Village files.
10
Defendants point to a letter by Frank Ban, a investor in P&M
III, which was written several months after the purchase of Unit
802 and which was placed in the Village file. The letter was
addressed to O'Neal and forwarded homestead exemption information
forms. In passing, the letter refers to a condominium purchased by
Village "from Parks and Moss III." The letter refers to Unit 602
of the Park Square I Condominiums, but presumably was intended to
refer to Unit 802. In any event, the timing of this letter, the
reason it was sent, and the fact that it was authored by a person
not an officer at Village would not necessarily negate the
conclusion that months earlier, in August 1984, Moss and O'Neal
conspired to make a false entry on the books of the institution.
The Defendants also speculate on the possible existence of a
missing file for Unit 802, which might have contained information
revealing the connection between P&M III and the transaction.
There was no solid evidence, however, that any such file existed
and there was evidence from which a reasonable jury could find that
no such other file did exist.
O'Neal and Moss also argue that the Government is
impermissibly using a civil violation as the basis for a criminal
conviction. Irrespective of any civil violations, the evidence in
this case supports the jury's finding that O'Neal willfully omitted
a material fact with the intent to defraud the institution and the
auditors, a violation of 18 U.S.C. §1006. Moss' conviction for
false entries is supported under an aiding and abetting theory.
11
C. Conspiracy
Count One of the indictment charged all three Defendants with
the crime of conspiracy in violation of 18 U.S.C. §371. The
indictment alleged that the defendants conspired to commit two
separate offenses, misapplication of funds in violation of 18
U.S.C. §656 and making false entries in Village's books in
violation of 18 U.S.C. §1006. To establish a §371 conspiracy, the
government must prove, first, that two or more people agreed to
pursue an unlawful objective; second, that each defendant
voluntarily agreed to join the conspiracy; and third, that one or
more members of the conspiracy performed an overt act to further
the objectives of the conspiracy. Beuttenmuller, 29 F.3d at 978-
79. When a conspiracy to violate two statutes is alleged, the jury
may find the defendant guilty if the evidence establishes beyond a
reasonable doubt that the defendant conspired to violate either one
of the statutes. United States v. Lyons, 703 F.2d 815, 821 (5th
Cir. 1983).
In this appeal, the Defendants do not directly address the
conspiracy count other than to list the elements under §371 and
state that they challenge the sufficiency of the evidence. Based
on the evidence we have recited above, we find enough to support a
conviction under Count One.
III.
CIVIL BANKING REGULATIONS
All Defendants claim the trial court committed reversible
error by admitting testimony that certain civil banking regulations
12
were violated.2 Evidence of violations of civil banking
regulations cannot be used to establish criminal conduct. United
States v. Christo, 614 F.2d 486, 492 (5th Cir. 1980). Evidence of
such violations may, however, be admitted for the limited purpose
of showing the defendants' motive or intent to commit the crime
charged. See United States v. Cordell, 912 F.2d 769, 774-76 (5th
Cir. 1990). The trial court denied Defendants' pretrial motion in
limine to exclude evidence of the alleged bank regulation
violations, but limited use of the evidence to the issue of intent
or motive. We review a trial court's evidentiary rulings for abuse
of discretion. United States v. Brechtel, 997 F.2d 1108, 1114 (5th
Cir.), cert. denied, 114 S.Ct. 605 (1993).
All three Defendants argue that the court erred in admitting
this evidence because there was no proof that they knew of the
regulations. In response, the government points to the testimony
of two former Village board directors regarding their own
familiarity with the regulations. The government argues that the
jury could infer that the Defendants were similarly familiar with
the regulations. Also, Parks testified that, upon learning Village
was going to buy Unit 802, he asked O'Neal whether they needed
board approval, and that he generally relied on O'Neal's
familiarity with and knowledge of the regulations. The testimony
of Wellborn that Moss and O'Neal discussed changing the structure
2
The "banking regulations" which Defendants allegedly
violated were 12 C.F.R. §§563.41 (affiliated persons restrictions)
and 571.2 (conflict of interest), which at the time were
regulations of the Federal Home Loan Bank Board.
13
of the transaction to raise fewer questions by regulators also
supports a finding that they knew of the regulations. The trial
court did not abuse its discretion in admitting this evidence to
show intent.
Defendants also claim that the court's admonishments to the
jury did not cure the "repeated reference[s] to non-criminal
misconduct" which "infected the purpose of the trial." See, e.g.,
Christo, 614 F.2d at 492. The references made during trial were:
(1) testimony that the board often discussed conflicts of interest
and the need to make disclosures to the board; (2) testimony that
Village contacted the FHLBB because the Unit 802 transaction was a
potential conflict of interest; (3) the testimony of William
Couhig, an examiner with the Office of Thrift Supervision,
regarding prohibitions against buying or selling from parties
affiliated with a savings and loan institution; and (4) several
references to the foregoing testimony in the government's closing
argument.
These references to regulatory violations comprise
approximately thirteen pages out of approximately 700 pages of
trial transcript. At one point in the trial, the district court
told the jury that "[c]ivil charges are not charges that are
criminal and they do not support criminal charges. So don't get
mixed up between civil and criminal." In its closing argument, the
government argued that while the civil regulations and violations
. . . are not violations of the law . . . [the testimony] may be
helpful for you in considering the motivation and intent to commit
14
the crimes that are charged." In addition, in charging the jury,
the court stated:
Now, you have heard testimony that the failure to
disclose the sale of property by an affiliated person to
the financial institution may be a violation of civil
banking regulations. A violation of a civil statute or
regulation is not a criminal offense. Such a violation
would merely subject an institution or, in some cases an
individual, to civil penalties which is not the same as
a crime.
You must not consider any evidence concerning civil
disclosure regulations in deciding only if the defendant
committed the acts charged in the indictment. The only
reason that this evidence was admitted was for the
purpose of your determining if it aids your
determination, whether the defendants had the intent and
purpose of violating the law as charged in the
indictment. Before you may consider such reasonable
doubt from other evidence in the case that the defendant
violated the law as charged in the indictment. If you
are so convinced, then this evidence may be considered by
you, if you believe it helpful, in determining whether or
not the defendant had a motive or intent to commit the
crimes charged in the indictment.
We conclude that the testimony regarding civil regulatory
violations did not impermissibly infect the purpose of trial, and
the trial court did not abuse its discretion in permitting evidence
of the civil regulations.
IV.
PREJUDICIAL PRE-INDICTMENT DELAY
Before trial, Defendants filed motions to dismiss their
indictments on the ground that they had been prejudiced by the
government's eight-year delay in bringing charges, thereby
violating their due process rights. To prevail on these motions,
Defendants had to prove the threshold requirement of actual
15
prejudice.3 United States v. Lovasco, 97 S.Ct. 2044, 2048-49
(1977); United States v. Beszborn, 21 F.3d 62, 66 (5th Cir.), cert.
denied, 115 S.Ct. 330 (1994). The trial court denied the motions
because it had not "heard anything that comes up to the level of
prejudice to the Defendants." Prejudice findings are reviewed
under the clear error standard. Beszborn, 21 F.3d at 66.
Defendants argue that the death of two potentially material
witnesses in the eight-year gap between the Unit 802 sale and the
indictment prejudiced their cases. However, because these
witnesses both died in 1985, before the investigation of the Unit
802 sale even began, any delay in prosecuting this case did not
cause whatever prejudice resulted from their deaths. Defendants
also contend that the death of the real estate appraiser who
performed the 1981 and 1982 appraisals of Unit 802 prejudiced their
cases. These appraisals were admitted into evidence without any
challenge from the government, and we fail to discern any
prejudice. Defendants also argue that O'Neal's recollection that
an appraisal of Unit 802 had been performed in 1984 could not be
corroborated because the alleged appraiser had purged his records
3
In its appellate brief, the government argued that the
Defendants were required to show both prejudice and deliberate
governmental delay to prevail. See United States v. Beszborn, 21
F.3d 62, 65-66 (5th Cir.), cert. denied, 115 S.Ct. 330 (1994).
While the appeal was pending, a panel of this Court held that the
defendants did not have to show deliberate governmental delay.
United States v. Crouch, 51 F.3d 480, 483 (5th Cir. 1995). Crouch
will now be heard en banc, so that the panel opinion currently has
no precedential value. United States v. Pineda-Ortuno, 952 F.2d
98, 102 (5th Cir.), cert. denied, 112 S.Ct. 1990 (1992).
Nevertheless, since we find no prejudice from the delay in this
case, we do not reach the question of deliberate delay.
16
and had no independent recollection of performing that appraisal.
No other witness recalled having heard of or seen such an
appraisal, and we conclude that the claim of prejudice is
speculative, not actual. The Defendants also complain of missing
Executive Committee meeting minutes showing approval of the
acquisition of Unit 802, but the evidence did include a 1986 letter
from O'Neal stating that he and Herb Axelrad approved the
transaction at a meeting that Parks did not attend and at which
Moss did not vote.
Lastly, Defendants point to the failing memory of Wellborn
regarding the circumstances surrounding the preparation of the
documents for the Unit 802 transaction. Her statement before trial
was firm--that she was asked to change the documents to conceal the
P&M III ownership. At trial she equivocated, claiming she did not
know if she actually heard that information from the Defendants
prior to the sale or whether the information came only from
accusations made by others after the sale. After carefully
reviewing her testimony, we conclude that her equivocation tended
to operate more to the Defendants' advantage than to their
prejudice.
For the foregoing reasons, the convictions of all Defendants
are AFFIRMED.
17