USA v. Brandon
Case Date: 03/23/1994
Court: United States Court of Appeals
Docket No: 92-1447
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March 23, 1994 UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT ____________________ No. 92-1447 UNITED STATES OF AMERICA, Appellee, v. PETER BRANDON, Defendant, Appellant. ____________________ No. 92-1465 UNITED STATES OF AMERICA, Appellee, v. CHARLES D. GAUVIN, Defendant, Appellant. ____________________ No. 92-1466 UNITED STATES OF AMERICA, Appellee, v. MARVIN GRANOFF, Defendant, Appellant. ____________________ No. 92-1467 UNITED STATES OF AMERICA, Appellee, v. RONALD R. HAGOPIAN, Defendant, Appellant. ____________________ No. 92-1468 UNITED STATES OF AMERICA, Appellee, v. MOMI A. KUMALAE, Defendant, Appellant. ____________________ No. 92-1469 UNITED STATES OF AMERICA, Appellee, v. OWEN B. LANDMAN, Defendant, Appellant. ____________________ No. 92-1470 UNITED STATES OF AMERICA, Appellee, v. NORMAN D. REISCH, Defendant, Appellant. ____________________ No. 92-1471 UNITED STATES OF AMERICA, Appellee, v. JOHN WARD, Defendant, Appellant. ____________________ Before Torruella, Circuit Judge, _____________ Campbell, Senior Circuit Judge, ____________________ and Boudin, Circuit Judge. _____________ _____________________ ORDER OF COURT Entered March , 1994 The opinion of this Court issued on January 31, 1994, is amended as follows: Page 50, last paragraph, line 3, delete the sentence that starts with "For the transactions . . ." and insert the following: "Ward helped to solicit the buyers involved in the transactions for these counts by telling them that no down payments were required." Page 51, line 2, delete the sentence that starts with "He nevertheless . . ." and insert the following: "He directed one of these buyers to provide a down payment check that would be funded by someone else and then cashed so that the funds could be returned." Page 51, line 10, delete "Brandon's insurance company" and insert "the buyer's insurance company." By the Court: Francis P. Scigliano Clerk. UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT ____________________ No. 92-1447 UNITED STATES OF AMERICA, Appellee, v. PETER BRANDON, Defendant, Appellant. ____________________ No. 92-1465 UNITED STATES OF AMERICA, Appellee, v. CHARLES D. GAUVIN, Defendant, Appellant. ____________________ No. 92-1466 UNITED STATES OF AMERICA, Appellee, v. MARVIN GRANOFF, Defendant, Appellant. ____________________ No. 92-1467 UNITED STATES OF AMERICA, Appellee, v. RONALD R. HAGOPIAN, Defendant, Appellant. ____________________ No. 92-1468 UNITED STATES OF AMERICA, Appellee, v. MOMI A. KUMALAE, Defendant, Appellant. ____________________ No. 92-1469 UNITED STATES OF AMERICA, Appellee, v. OWEN B. LANDMAN, Defendant, Appellant. ____________________ -2- No. 92-1470 UNITED STATES OF AMERICA, Appellee, v. NORMAN D. REISCH, Defendant, Appellant. ____________________ No. 92-1471 UNITED STATES OF AMERICA, Appellee, v. JOHN WARD, Defendant, Appellant. ____________________ APPEALS FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND [Hon. Ernest C. Torres, U.S. District Judge] ___________________ ____________________ Before Torruella, Circuit Judge, _____________ Campbell, Senior Circuit Judge, ____________________ and Boudin, Circuit Judge. _____________ _____________________ -3- Dana A. Curhan, by Appointment of the Court, for appellant _______________ Peter Brandon; John A. MacFadyen with whom Richard A. Gonnella, __________________ ____________________ was on brief for appellant Charles D. Gauvin; Thomas J. May, with _____________ whom Carol A. Fitzsimmons and Johnson, Mee & May, were on brief ____________________ __________________ for appellant Marvin Granoff; Barbara A. H. Smith for appellant ____________________ Ronald R. Hagopian; William C. Dimitri, by Appointment of the ___________________ Court, with whom Dimitri & Dimitri, was on brief for appellant __________________ Momi A. Kumalae; Donald P. Rothschild, by Appointment of the ______________________ Court, with whom Tillinghast Collins & Graham, was on brief for _____________________________ appellant Owen B. Landman; Barbara A. H. Smith for appellant ____________________ Norman D. Reisch; and Catherine C. Czar, by Appointment of the __________________ Court, for appellant John Ward. Craig N. Moore, Assistant United States Attorney, with whom ______________ Edwin J. Gale, United States Attorney, and Margaret E. Curran, ______________ ___________________ Assistant United States Attorney, were on brief for appellee. ____________________ January 31, 1994 ____________________ -4- TORRUELLA, Circuit Judge. The eight defendants in this _____________ case were convicted of conspiracy to commit bank fraud under 18 U.S.C. 371 and of a varying number of bank fraud counts under 18 U.S.C. 1344 and 2 following a jury trial in the district court. They now challenge their convictions and sentences on a wide variety of grounds. For the reasons set forth below, we affirm all of the convictions except for the bank fraud convictions on Counts 24 and 25 against defendant John Ward and the bank fraud convictions on Counts 23 through 26 against defendant Owen Landman, which we reverse. I. BACKGROUND I. BACKGROUND This case involves an alleged scheme to obtain loan financing from a federally insured bank by fraudulently representing the existence of down payments required by the bank from the investors on whose behalf the loans were made. According to the record in this case, viewed in the light most favorable to the government, United States v. Van Helden, 920 _____________ __________ F.2d 99, 101 (1st Cir. 1990), the facts of this scheme are as follows. On January 1, 1985, defendant Peter Brandon and two others formed a partnership called Dean Street Development ("Dean Street")1 for the purpose of buying, developing, and selling real estate. Specifically, Brandon planned to buy and renovate ____________________ 1 Several partnerships and corporations related to Dean Street were also involved in this case. Together they are collectively referred to here as "Dean Street." Brandon controlled all of the various entities. -5- motels along the Rhode Island seashore, convert them into condominiums and then sell the individual rooms to investors as condominium units. As part of this plan, the condominium buyers would lease the units back to Dean Street and Dean Street would then manage the properties as motels. Under the "lease-back" agreement with the buyers, Dean Street would apply the income from the operation of the motels to cover the monthly mortgage, tax and insurance costs incurred by the unit buyers. Any shortfalls in operating costs would be made up by Dean Street, leaving the buyers with no monthly costs on their investment. In addition, buyers would be allowed to use their units for two weeks out of the year. Dean Street would also guaranty them a certain level of profit at sale. Some buyers would receive rebates for each unit they purchased. In short, the buyers would be offered a sweet deal. To make the deal even sweeter, Brandon planned to arrange all the financing for the buyers. He hoped to obtain 100% financing, that is, loans for the complete purchase price of each unit. With such financing, buyers could invest in the project without putting any money down and consequently obtain that elusive -- yet apparently not uncommon for the fast-paced world of 1980s real estate -- deal of "something for nothing." In early 1987, Brandon approached Homeowner's Funding Corporation ("Homeowners"), a mortgage broker that acts as an intermediary between banks and borrowers, to obtain these "end loans" for the buyers. Homeowners' President told Brandon that -6- 100% financing was unavailable for the project. Rather, the best Brandon could hope to find was 80% financing with a 20% down payment required from the buyers. Homeowners subsequently searched for a lender and, after approaching several banks, located Bay Loan and Investment Bank ("Bay Loan"), a financial institution insured by the Federal Deposit Insurance Corporation. Bay Loan agreed to lend buyers of Dean Street's condominium units up to 80% of the required purchase price. Homeowners, as well as East-West Financial Corporation ("East West"), the other mortgage broker involved in this case,2 acted as brokers and servicing agents for Bay Loan. Bay Loan was the actual lender for the Dean Street project and it financed every condominium sale involved in the scheme. By prior agreement, Homeowners and East West provided the original mortgages for the buyers and then sold them to Bay Loan. Homeowners and East West would forward all the loan applications to Bay Loan for approval prior to providing the mortgages for the condominium units.3 The decision of whether to fund a particular mortgage rested entirely with Bay Loan and Bay Loan ____________________ 2 Toward the end of 1987, Brandon became dissatisfied with what he considered the slow pace at which Homeowners was processing the loans and, after a dispute with Homeowners, retained the services of East West to continue the project. East West continued where Homeowners left off with Bay Loan again agreeing to act as the end loan financier. 3 The brokers would not provide the financing to the buyers without first getting Bay Loan's agreement to purchase and fund the loans. In fact, Homeowner's line of credit for issuing funds to the buyers specifically prohibited the disbursement of money without a commitment from the ultimate lender, in this case, Bay Loan, to fund the loan. -7- set the terms and conditions of each mortgage. As Bay Loan Vice President of consumer lending, Joseph Gormley, explained to Brandon, the bank required each buyer of a condominium unit to make at least a 20% down payment to the seller, Dean Street, before Bay Loan could fund the loans. Instead of instructing buyers to provide the required down payments, however, Brandon concocted a scheme that permitted buyers to avoid the down payments altogether. As a result, he was able to pursue his original goal of obtaining 100% financing for the condominium project. The scheme was formulated during the spring and summer of 1987 when Brandon had several discussions with, among other people, his attorney, George Marderosian, and co-defendant Norman Reisch, another of Marderosian's clients, concerning ways that the 20% down payment requirement "might be satisfied by alternative methods or might be avoided." During that period, Brandon also told another person involved in the conspiracy, Claude Limoges, that the down payments would be falsified. Brandon planned and employed three basic methods of falsifying the down payments. The first method was simply providing money to the various buyers which the buyers would then use to make the down payments to Dean Street. Usually the money came from third-party investors to whom Brandon promised a commission for each down payment they funded. Once the buyer made the down payment to Dean Street, Dean Street would return the money to the investor leaving a paper trail for a down -8- payment that was never actually made. The second method involved obtaining down payment checks from the buyers and promising not to cash them. Copies of these nonnegotiated checks would remain in the loan file to give the appearance that real funds had actually been transferred. The third method was to provide second mortgages to the buyers to fund their down payments and then to discharge those mortgages after the closings.4 The first method of avoiding down payments was employed from the outset of the scheme. Co-defendants Charles Gauvin and Marvin Granoff, two clients of Marderosian, agreed with Brandon to purchase some units at the Charlestown Motor Inn. Gauvin and Granoff also agreed to provide down payment funds to other buyers for subsequent unit sales. Brandon promised them $1000 for each unit sold with their down payment funds. In August of 1987, Gauvin, Granoff and a third person each purchased four units. Marderosian conducted the closing and co-defendant Owen Landman, an attorney who shared office space with Marderosian, acted as escrow agent. During the closing, Marderosian recorded the amount of each down payment ($20,500) on the closing statements - - also called the HUD settlement sheets -- as "amounts paid by or in behalf of borrower."5 Gauvin provided the down payment funds for these twelve ____________________ 4 Brandon also falsified the loan applications of otherwise unqualified buyers. 5 Throughout the project, the HUD settlement sheets were signed by Brandon and the buyers, including those defendants who purchased units. -9- purchases but no actual payment was ever made; instead, the funds were passed through Dean Street and returned to Gauvin. At the closing, Gauvin delivered twelve separate checks for $20,500 each to Marderosian, drawn on an account that only had a $6000 balance at the time, and Landman deposited the checks in his escrow account. Landman then wrote twelve corresponding checks to Marderosian who in turn wrote checks to Dean Street for identical amounts of $20,500 each. Two days later, Dean Street wrote twelve checks back to Gauvin for the same amounts of $20,500 each and Gauvin deposited the money in the original checking account to cover his initial twelve checks written as down payments to the seller. In late August and September of 1987, Gauvin provided down payments for the purchase of units at the Charlestown Motor Inn and at the Bayside Motel by Reisch and others. As with the first purchases, Dean Street returned the down payment money within a matter of days and also paid Gauvin an additional $1000 per unit. In the beginning of 1988, Bay Loan began requiring that down payments be made with certified funds. Gauvin and Granoff agreed to provide buyers with funds so that they could obtain certified checks before the closings. In January and February of 1988, Granoff supplied $470,000 to Marderosian who deposited the funds and began distributing the money to prospective buyers. The original intention was that Dean Street would pay back the money to Granoff a few days after each closing as it had done in -10- the previous transactions. Brandon, however, never returned the money as planned.6 With no more money coming from Gauvin and Granoff, Brandon discussed the possibility of funding buyer down payments with Reisch. Reisch had earlier supplied down payment money for a buyer and was reimbursed by Dean Street the next day. Reisch agreed to provide the money, but only if he could wire the money directly to the buyers on a transaction by transaction basis in order to avoid having large amounts outstanding. Funds were wired to buyers on several occasions and the buyers then wrote down payment checks with the money. The checks were either deposited in Landman's escrow account or endorsed directly back over to Reisch. Those funds deposited in escrow were promptly returned to Reisch. The second method of falsifying down payments, using nonnegotiated checks, was employed less frequently. In October of 1987, co-defendants Ronald Hagopian and John Ward purchased several units at the Bayside Motel using nonnegotiated checks for their down payments. Brandon also enlisted Hagopian and Ward, both real estate brokers, to solicit other buyers for the project. Hagopian and Ward told several of the buyers they had recruited to provide down payment checks which they promised would never be cashed. These buyers proceeded to write checks to Dean Street and those checks were never negotiated. ____________________ 6 Brandon did eventually agree to a repayment schedule but, ultimately, none of Granoff's money was ever repaid. -11- The third method of falsifying down payments was through dischargeable mortgages. Joseph Gormley at Bay Loan approved a plan for buyers to make only 5% down payments in certified funds with the balance of a required 25% down payment to be satisfied by a second mortgage provided by Dean Street. Dean Street began providing these mortgages to the buyers, but the mortgages were promptly discharged7 after the closings because Dean Street never actually intended to obligate the buyers. The discharges were accomplished by a "purchase price adjustment" given to buyers after the sale to "compensate" them for promised renovations that Dean Street was suddenly unable to make. In reality, the renovations "were never going to happen" in the first place. At the closings, some of the buyers inquired about the second mortgage documents because Brandon had promised a discharge and the buyers wanted to know when that would take place. The "purchase price adjustment" letters that discharged the mortgages were excluded from the closing documentation so the bank would not see them. During the closings, Landman gestured to several buyers that they should not mention the matter to him. Brandon's assistant at Dean Street, co-defendant Momi Kumalae, did speak to buyers about the discharges and assured them that they would be taken care of. Kumalae also signed many of the ____________________ 7 Testimony was offered by defendants to the effect that the discharges provided by Dean Street were not legally enforceable and that the buyers are still obligated on the mortgages. We find this possibility irrelevant as the intent was clearly to discharge the mortgages. -12- discharge letters sent to the buyers. Despite the sale of almost 200 units, by the fall of 1988, the loan proceeds from Bay Loan's financing of unit purchases was falling well short of Dean Street's expenses and its own debt service. Dean Street quickly fell behind schedule in making the mortgage payments on all the Bay Loan condominium unit loans, and it eventually stopped making any payments by early 1989. Between August 1987 and October 1988, Dean Street had sold 196 units to 79 different buyers, all financed by Bay Loan in 176 separate loans. The face value of the loans was $18.8 million and Bay Loan actually distributed $17.3 million to Marderosian who passed on about $16.9 million to Dean Street (the balance was retained as fees or was paid to Landman for escrow services). As of the trial, approximately $16.3 million remained outstanding on the loans. Gormley at Bay Loan, who approved the loans, did not know that down payment funds came from sources other than the buyers, that some down payments were nonnegotiated checks, that second mortgages were being discharged, or that buyers were being paid to purchase units. Gormley testified that he would not have approved the loans if he had been aware of any of these circumstances. On February 28, 1991, a federal grand jury sitting in the District of Rhode Island handed down a 27-count indictment charging the eight appellants and four others with defrauding Bay -13- Loan, a federally insured financial institution, of approximately $18 million. Count 1 charged all twelve defendants with conspiracy to commit bank fraud in violation of 18 U.S.C. 371. Counts 2 through 27 charged various defendants with individual acts of bank fraud, under 18 U.S.C. 1344, based on individual loan transactions executed during the scheme to defraud.8 Four of the defendants pleaded guilty and did not go to trial. Two of the four, George Marderosian and Claude Limoges, testified for the government. After a trial in the United States District Court for the District of Rhode Island, the jury found all the defendants guilty of conspiracy and each defendant guilty on multiple counts of bank fraud. Some defendants were acquitted on individual bank fraud charges as discussed below. This appeal followed. II. FAILURE OF THE INDICTMENT TO STATE AN OFFENSE II. FAILURE OF THE INDICTMENT TO STATE AN OFFENSE Defendants first argue that the indictment failed to state an offense with respect to the conspiracy count because it did not allege that the United States or one of its agencies was the target of the conspiracy. Count I of the indictment charged defendants with conspiring to commit an offense against the ____________________ 8 One bank fraud count was later dismissed by the government so that 26 total counts remained for trial. Brandon was the only defendant charged in all of the counts. Each bank fraud count charges one or more of the defendants with facilitating in some way the fraudulent representation of the required down payment for a specific loan for an individual condominium unit. Although each unit purchase allegedly involved the same fraudulent scheme, only 26 specific executions of the scheme were originally charged. -14- United States in violation of 18 U.S.C. 371 by executing a scheme to defraud Bay Loan under 18 U.S.C. 1344. Section 371 makes it a crime to "conspire either to commit any offense ______ against the United States, or to defraud the United States, or __ any agency thereof" (emphasis added). The Supreme Court held in Tanner v. United States, 483 U.S. 107, 128-132 (1987), that in ______ _____________ order to establish a conspiracy to "defraud the United States," under the second clause of 371, the government must prove that the target of the fraud was the United States or one of its agencies. Id. (finding a recipient of federal financial __ assistance and supervision not to be an agency of the United States for purposes of 371). The defendants contend that this requirement should be extended to the first clause of 371 for alleged conspiracies "to commit any offense against the United States." 18 U.S.C. 371 creates two distinct criminal offenses: conspiracies to commit offenses against the United States and conspiracies to defraud the United States. See, e.g., United ___ ____ ______ States v. Haga, 821 F.2d 1036, 1039 (5th Cir. 1987). The "any ______ ____ offense" clause of 371 ("to commit offenses against the United States") is aimed at conspiracies to violate the laws of the United States. It does not refer to a particular victim of a particular crime like the second clause does, but instead applies generally to federal "offenses." The Tanner requirement should ______ not be extended to a large area of criminal conspiracies, such as mail and wire fraud, that victimize persons other than the -15- government or its agencies but traditionally have been prosecuted under the "any offense" clause of 371. See United States v. ___ _____________ Falcone, 960 F.2d 988, 990 (11th Cir.) (en banc), cert. denied, _______ ____ ______ 113 S. Ct. 292 (1992) (citing the reasoning in United States v. _____________ Falcone, 934 F.2d 1528, 1548-51 (11th Cir. 1991) (Tjoflat, C.J., _______ specially concurring, joined by Powell, Assoc. Justice, and Kravitch, J.) to overrule its previous extension of Tanner to the ______ "any offense" clause of 371 in United States v. Hope, 861 F.2d _____________ ____ 1574 (11th Cir. 1988)); United States v. Loney, 959 F.2d 1332, ______________ _____ 1338-40 (5th Cir. 1992); United States v. Gibson, 881 F.2d 318, _____________ ______ 321 (6th Cir. 1989). We therefore reject the contention that the indictment must assert that the United States or one of its agencies was a target of the alleged conspiracy in this case. III. MULTIPLICITY OF THE BANK FRAUD COUNTS III. MULTIPLICITY OF THE BANK FRAUD COUNTS Defendants challenge the validity of the indictment for charging twenty-five individual counts of bank fraud under 18 U.S.C. 1344, when, allegedly, all the counts relate to the single execution of one scheme to defraud Bay Loan. An indictment is multiplicitous and in violation of the Fifth Amendment's Double Jeopardy Clause if it charges a single offense in more than one count. United States v. Serino, 835 F.2d 924, _____________ ______ 930 (1st Cir. 1987). Under the bank fraud statute, 18 U.S.C. 1344, each execution of a scheme to defraud constitutes a separate indictable offense. United States v. George, 986 F.2d _____________ ______ 1176, 1179 (8th Cir.), cert. denied, 114 S. Ct. 269 (1993); ____ ______ United States v. Lemons, 941 F.2d 309, 317 (5th Cir. 1991). The _____________ ______ -16- central question for determining multiplicity is "whether a jury could plausibly find that the actions described in the [disputed] counts of the indictment, objectively viewed, constituted separate executions of the [bank fraud] scheme." United States _____________ v. Lilly, 983 F.2d 300, 303 (1st Cir. 1992). _____ A number of factors are relevant in determining whether a single or multiple executions of bank fraud have taken place, including the number of banks, the number of transactions, and the number of movements of money involved in the scheme. Lilly, _____ 983 F.2d at 305. Each time an identifiable sum of money is obtained by a specific fraudulent transaction, there is likely to be a separate execution of the scheme to defraud. See, e.g., ___ ____ United States v. Barnhart, 979 F.2d 647, 650-51 (8th Cir. 1992); ______________ ________ United States v. Mason, 902 F.2d 1434, 1436-38 (9th Cir. 1990); _____________ _____ United States v. Poliak, 823 F.2d 371, 372 (9th Cir. 1987), cert. _____________ ______ ____ denied, 485 U.S. 1029 (1988). ______ The government's position is that each transaction in which Bay Loan provided a mortgage (or end loan) to a buyer on the basis of a fraudulent representation of a down payment constitutes a single, independent execution of the scheme to defraud. We think that this position is the correct one when the scheme is viewed properly from an objective standpoint. See ___ Lilly, 983 F.2d at 303 (finding that the scheme should be _____ "objectively viewed" to determine multiplicity). The basic scheme to defraud Bay Loan involved the fraudulent representation of buyers' down payments in order to -17- obtain loan financing from the bank for Dean Street's condominium units. The scheme was not designed to get a set amount, or a preconceived sum, of money. Instead, the scheme functioned by obtaining as many loans as possible depending on the number of buyers Dean Street could recruit to apply for the mortgages. The structure of the scheme was such that individual buyers would be brought in to submit separate loan applications which would be fraudulently prepared and then sent on to Bay Loan for approval and the disbursement of the funds for that individual sale. Bay Loan approved each loan separately based on each individual application and each loan corresponded to an individual piece of property, that is, a separate condominium unit. Objectively viewed, each loan application appears to be a repeated execution of the basic scheme and not simply an additional step or stage of one unitary transaction. Although only one bank was involved in the scheme, there were over 176 separate loans to 79 different buyers involving many separate movements of money from Bay Loan to the mortgage brokers and from the mortgage brokers to Dean Street during the fifteen months in which the scheme was in operation. The fact that the end loans were sometimes processed in bulk does not alter the essential nature of the scheme. Defendants highlight the fact that, on some occasions, groups of mortgage applications were supplied to Bay Loan together and Bay Loan sometimes wired money to the brokers on a bulk basis. This was usually done, however, as a matter of convenience (such as -18- when several unit purchases closed at the same time) and not as a method to package the financing in a way necessary to accomplish a unified scheme.9 Arguably, one could view this case as a single execution by Dean Street of a broad scheme to use various buyers as fronts in order to get financing for a unitary motel condominium project. However, we feel it makes more sense to look at each mortgage application as an individual attempt to fraudulently obtain distinct amounts of money from Bay Loan. This is not, as defendants assert, a situation like the one in Lilly where a group of fraudulent mortgages was assigned _____ in a single package of documents to the defrauded bank as security for one sum of money used to buy a single apartment complex. See id. at 302-305. In that case, there was one ___ __ transaction with the defrauded bank which was executed "in order to obtain a single loan, the proceeds of which funded a single real estate purchase." Id. at 303. Consequently, we found the __ charges based on each mortgage to be multiplicitous. The present case is more akin to a check kiting scheme which we characterized in Lilly as involving multiple executions of a fraudulent scheme _____ because more than one bank was involved and because, "[m]ore ____________________ 9 At one point, Brandon could not guaranty clear title to Bay Loan on the condominium units until he sold enough units and obtained a large enough chunk of financing to pay off some of the original mortgages used to buy the motels in the first place. This did necessitate bulk processing of unit mortgages so that blocks of financing could be obtained at one time. The execution of the fraud, however, still remained the submission of individual loan applications as additional buyers were recruited. The block processing of loans did not correspond to one loan for each motel but were instead an amalgamation of individual loans for individual condominium units. -19- importantly, each check signifies a separate transaction requiring a separate issuance of money or credit on the part of the victimized bank." Id. at 304. __ Similarly, the other cases cited by defendants that invalidate indictments on grounds of multiplicity involve single loan transactions instead of the multiple and separate loans fraudulently obtained in this case. See United States v. Saks, ___ _____________ ____ 964 F.2d 1514, 1526 (5th Cir. 1992) (single loan transaction for single piece of property); United States v. Heath, 970 F.2d 1397, _____________ _____ 1401-02 (5th Cir. 1992), cert. denied, 113 S. Ct. 1643 (1993) ____ ______ (two loans involved in the case "were integrally related; one could not have succeeded without the other" and both were used to accomplish essentially one integrated real estate transaction); Lemons, 941 F.2d at 316-18 (separate payments of loan proceeds to ______ defendant were installments from a single loan transaction involving a single project). We hold, therefore, that each end loan provided by Bay Loan was the result of a separate fraud upon the bank which the indictment properly charged as an individual bank fraud offense. IV. SUFFICIENCY OF THE EVIDENCE IV. SUFFICIENCY OF THE EVIDENCE Seven of the eight defendants argue that the evidence introduced at trial was insufficient to support their convictions for bank fraud and conspiracy to commit bank fraud.10 They ____________________ 10 Brandon does not challenge the sufficiency of the evidence against him on appeal. He does argue that certain evidentiary rulings deprived him of a fair trial because he was unable to present his theory of the case and convince the jury of his innocence. This issue is discussed below in Section VII. We -20- argue, with individual variations, that they did not have the requisite knowledge and intent to defraud Bay Loan because they did not know of, or intend to violate, any down payment requirements of the bank. With the few exceptions previously noted, we disagree. Before reviewing the evidence with respect to each defendant, we must first address some issues regarding the substantive offenses charged in this case. A. The Offenses 1. Bank Fraud To prove bank fraud under 18 U.S.C. 1344,11 the prosecution must show beyond a reasonable doubt that the defendant (1) engaged in a scheme or artifice to defraud, or made ____________________ note for the record that the evidence against Brandon is not only sufficient but overwhelming. 11 At the time when the offenses occurred, 18 U.S.C. 1344 provided: Whoever knowingly executes, or attempts to execute, a scheme or artifice -- (1) to defraud a federally chartered or insured 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 federally chartered or insured financial institution, by means of false or fraudulent pretenses, representations, or promises; [shall be guilty of an offense against the United States]. A technical amendment in 1989 deleted the words "federally chartered or insured" from the section leaving just "financial institution." Pub. L. No. 101-73, Title IX, 961(k), Aug. 9, 1989, 103 Stat. 500. Apparently, no substantive change was intended by this amendment as the definition of "financial institution" for all of Title 18, now contained at 18 U.S.C. 20, still encompasses federally chartered or insured institutions. -21- false statements or misrepresentations to obtain money from; (2) a federally insured financial institution; and (3) did so knowingly. United States v. Goldblatt, 813 F.2d 619, 623-24 (3rd _____________ _________ Cir. 1987); United States v. Cloud, 872 F.2d 846, 850 (9th Cir.), _____________ _____ cert. denied, 493 U.S. 1002 (1989). The terms "scheme" and ____ ______ "artifice" are defined to include "any plan, pattern or cause of action, including false and fraudulent pretenses and misrepresentations, intended to deceive others in order to obtain something of value, such as money, from the institution to be deceived." Goldblatt, 813 F.2d at 624 (citing United States v. _________ ______________ Toney, 598 F.2d 1349, 1357 n.12 (5th Cir. 1979), cert. denied, _____ ____ ______ 444 U.S. 1033 (1983)). "The term 'scheme to defraud,' however, is not capable of precise definition. Fraud instead is measured in a particular case by determining whether the scheme demonstrated a departure from fundamental honesty, moral uprightness, or fair play and candid dealings in the general life of the community." Goldblatt, 813 F.2d at 624; see also United _________ ________ ______ States v. Stavroulakis, 952 F.2d 686, 694 (2d Cir.), cert. ______ ____________ ____ denied, 112 S. Ct. 1982 (1992). ______ The alleged scheme in this case is the fraudulent representation of down payments that were not actually paid in order to obtain loan financing from Bay Loan. There is little doubt that this scheme took place.12 Defendants argue, ____________________ 12 Sufficient evidence exists to indicate Bay Loan provided the loans for the Dean Street project, required down payments for the loans, and approved loans and disbursed money based on the understanding that its lending requirement was satisfied. The evidence also clearly establishes that no down payments were -22- however, that they did not know of, or participate in, the scheme, and, to the extent that they did participate in activities related to the scheme, such actions were not illegal because the actions were not intended to deceive or defraud Bay Loan. Defendants claim they were either unaware that Bay Loan existed or else unaware that Bay Loan had a down payment requirement that prohibited the various down payment transactions in which they were involved. The central issue on appeal, therefore, is whether defendants possessed the requisite knowledge and intent. "To act with the 'intent to defraud' means to act willfully, and with the specific intent to deceive or cheat for the purpose of either causing some financial loss to another, or bringing about some financial gain to oneself." Cloud, 872 F.2d _____ at 852 n.6 (citations omitted) (finding intent to defraud where defendant signed instructions "knowing that the bank could be deceived by materially false statements that appeared on the face of the instructions"); see also United States v. Saks, 964 F.2d _________ _____________ ____ 1514, 1518 (5th Cir. 1992). "It is a well-established principle that fraudulent intent may be established by circumstantial evidence and inferences drawn from all the evidence." Cloud, 872 _____ ____________________ actually made to Dean Street because the payments were either falsified or quickly returned to their source. Defendants did present evidence, mostly testimony by Brandon himself, that Bay Loan knew and approved of the down payment arrangements. However, more than sufficient evidence points to the contrary conclusion including the unequivocal testimony of Bay Loan's Vice President, Gormley, that the bank never knew of nor approved of the skirting of the down payment requirement. -23- F.2d at 852 n.6 (citations omitted); United States v. Celesia, _____________ _______ 945 F.2d 756, 759-60 (4th Cir. 1991); see also United States v. ________ _____________ Mason, 902 F.2d 1434, 1442 (9th Cir. 1990) ("Specific intent is _____ established by 'the existence of a scheme which was reasonably calculated to deceive persons of ordinary prudence and comprehension, and this intention is shown by examining the scheme itself.'" (quoting United States v. Green, 745 F.2d 1205, _____________ _____ 1207 (9th Cir. 1984) (additional internal quotation omitted))). Defendants argue that the government must prove that they knew that the victim of their fraud was a federally insured financial institution. We disagree. The status of the victim- institution is not a separate knowledge element of bank fraud under 1344 but an objective fact that must be established in order for the statute to apply. The government produced evidence, and defendants do not dispute, that Bay Loan is federally insured. This is sufficient to satisfy the requirement under 18 U.S.C. 1344 that the defrauded bank be a federally insured bank. See United States v. McClelland, 868 F.2d 704, ___ ______________ __________ 709-11 (5th Cir. 1989); cf. United States v. Thompson, 811 F.2d __ _____________ ________ 841, 844 (5th Cir. 1987) (finding that under 18 U.S.C. 1014, which criminalizes the making of false statements to a bank, the federal insured status of the victim institution is just a jurisdictional requirement and not a knowledge element of the offense); United States v. Trice, 823 F.2d 80, 86-87 (5th Cir. _____________ _____ -24- 1987) (same).13 We decline to adopt defendants' analogy to one of the federal gambling statutes, 18 U.S.C. 1084(a), which we have previously held requires knowledge of the interstate nature of the wire communication involved in the offense. United States v. _____________ Southard, 700 F.2d 1, 24-25 (1st Cir.), cert. denied, 464 U.S. ________ ____ ______ 823 (1983). Our holding in that case rested on the fact that the word "knowingly" in the statute could not reasonably refer to anything else except the interstate nature of the communication. Id. at 24 (noting one cannot unwittingly or unknowingly make a __ wire transmission). That is not the case with the bank fraud statute because "knowingly" in 1344 clearly applies to the ____________________ 13 We find the language of 1014 sufficiently similar to 1344 to warrant a similar conclusion about Congress' intent with respect to the knowledge requirement in the bank fraud statute. 18 U.S.C. 1014 states in pertinent part: "Whoever knowingly makes any false statement or report, or willfully overvalues any land, property or security, for the purpose of influencing in any way the action of . . . any institution the accounts of which are insured by the Federal Deposit Insurance Corporation [shall be guilty of an offense against the Unites States]." Defendants contend that the use of "knowingly" in this statute differs significantly from its use in 1344 which prohibits knowingly executing a scheme "to defraud a federally chartered or insured financial institution." We reject this contention. The placement in 1344 of the words "federally chartered or insured" before the word "institution" instead of similar language being placed after "institution," as in 1014, simply reflects the fact that federal insurance is separately defined in another subsection and thus there is no need to use the more awkward construction found in 1014. The different word placement is a distinction without a difference. -25- execution of a scheme or artifice to defraud. The word "knowingly" is necessary because one can execute a scheme without knowing or understanding that it is fraudulent. In fact, that is what many of the defendants themselves argue in this appeal: that they may have facilitated the false down payments but they did not know it violated the bank's requirements. Therefore, "knowingly" in 1344 has independent meaning without reference to the federally insured status of the financial institution. The defendants in this case also argue that the government must prove they knew that the end loans were provided by Bay Loan and not by some other institution, such as Homeowners or East West. In other words, there was no violation of 1344 because the scheme to defraud was not knowingly targeted at a federally insured financial institution, but instead at the non- federally insured mortgage brokers. Defendants overstate the government's burden. The specific intent under 1344 is an intent to defraud a bank, that is, an intent to victimize a bank by means of a fraudulent scheme. See United States v. Stavroulakis, 952 F.2d 686, 694 (2d ___ _____________ ____________ Cir. 1992); United States v. Mason, 902 F.2d 1434, 1442 (9th Cir. _____________ _____ 1990). It has been established that the government does not have to show the alleged scheme was directed solely toward a ______ particular institution; it is sufficient to show that defendant knowingly executed a fraudulent scheme that exposed a federally insured bank to a risk of loss. See, e.g., United States v. ___ ____ _____________ Barakett, 994 F.2d 1107, 1110-11 (5th Cir. 1993), petition for |