IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
CASE NO. 05-10236
UNITED STATES OF AMERICA
ROBERT ANTONY XXX
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
BRIEF OF DEFENDANT-APPELLANT
CERTIFICATE OF INTERESTED PERSONS
Theundersigned counsel of record certifies that the following listed persons havean interest in the outcome of this case. These representations are made in order that the Judges of this Courtmay evaluate possible disqualifications or recusal.
TheAppellant, Robert Antony XXX, wastried and sentenced before the Honorable John H. McBryde, UnitedStates District Court Judge for the Northern District of Texas. The Honorable Charles Bleil, United States Magistrate Judge for the WesternDistrict of Texas conducted preliminary proceedings in this case.
TheAppellant was originally represented below by Andrew Platt and was represented at trial by Danny Duane Burns and was represented at sentencing by David Finn and F. Clinton Broden of the law firm Broden & Mickelsen. Appellant is represented on appeal by Mr. Broden.
TheAppellee, the United States of America, was represented below by David L.Jarvis and is represented on appealby Nancy Larson, Assistant UnitedStates Attorneys for the Northern District of Texas.
F.Clinton Broden STATEMENT REGARDING ORAL ARGUMENT
Oralargument is requested.
TABLE OF CONTENTS
CERTIFICATE OF INTERESTED PERSONS i
STATEMENT REGARDING ORAL ARGUMENT ii
TABLE OF CONTENTS iii
TABLE OF AUTHORITIES v
STATEMENT OF JURISDICTION 1
STATEMENT OF THE ISSUES 2
STATEMENT OF THE CASE 3
I. Proceedings Below 3
II. Statement of the Facts 3
SUMMARY OF THE ARGUMENT 7
I. THEDISTRICT COURT ERRED IN REFUSING TO INSTRUCT THE JURY THAT MR. XXX’S FALSESTATEMENT TO SUMMIT BANK HAD TO BE FALSE AT THE TIME THE STATEMENT WAS MADE. 9
II. THEDISTRICT COURT ERRED WHEN IT ALLOWED THE GOVERNMENT TO ARGUE IN ITS CLOSINGTHAT MR. XXX COULD BE CONVICTED OF BANK FRAUD EVEN IF MR. XXX DID NOT HAVE THEINTENT TO DECEIVE AT THE TIME HE MADE HIS REPRESENTATIONS TO SUMMIT BANK. 9
III. THEEVIDENCE WAS INSUFFICIENT TO SUPPORT THE JURY’S FINDING THAT MR. XXX INTENDEDTO DEFRAUD SUMMIT BANK AT THE TIME HE APPLIED FOR THE FUNDS IN QUESTION ON MAY12, 2000. 14
CERTIFICATE OF SERVICE 18
TABLE OF AUTHORITIES
Glasser v. United States, 315 U.S. 60 (1942) 14
In re Winship, 397 U.S. 358 (1970) 14
Jackson v. Virginia, 443 U.S. 307 (1979) 14
United States v. Begnaud, 783 F.2d 144 (8th Cir. 1986) 11
United States v. Brennan, 832 F. Supp. 435 (D. Mass. 1991), aff’d, 994
F.2d 918 (1st Cir. 1993) 11
United States v. Chendeka, 253 F.3d 815 (5th Cir. 2000) 14
United States v. Cihak, 137 F.3d 252 (5th Cir.), cert denied sub. nom.,
Bloch v. United States, 525 U.S. 847 (1998) 13
United States v. Fooladi, 746 F.2d 1027 (5th Cir. 1984), cert. denied,
470 U.S. 1006 (1985). 9
United States v. Fredette, 315 F.3d 1235 (10th Cir.), cert. denied,
538 U.S. 1045(2003) 10
United States v. McCarrick, 294 F.3d 1286 (11th Cir. 2002) 7, 11-13, 15-16
United States v. McClatchy, 249 F.3d 348 (5th Cir. 2001) 9
United States v. Milton, 8 F.3d 39 (D.C. Cir. 1993), cert. denied, 513 U.S.
919 (1994) 11
United States v. Phath, 144 F.3d 146 (1st Cir. 1998) 11
United States v. Shah, 44 F.3d 285 (5th Cir. 1995) 10-11
United States v. Thomas, 12 F.3d 1350 (5th Cir. 1994) . 14
18 U.S.C. § 1001 11
18 U.S.C. § 1344 3, 11
28 U.S.C. § 1291 1
STATEMENT OF JURISDICTION
Thejurisdiction of this Court is invoked pursuant to 28 U.S.C. § 1291, as this isan appeal from a final judgment entered by the United States District Court forthe Northern District of Texas.
STATEMENT OF THE ISSUES
I. Whether a District Court errs in refusing to instruct a jury that, forpurposes of the bank fraud statute, any alleged false representations to afinancial institution had to be false at the time the representations weremade.
II. Whether a District Court errs in allowing the government to argue that adefendant can be convicted of bank fraud even if the defendant does not havethe intent to deceive the financial institution at the time he makes therepresentations in question to the financial institution.
III. Whether the evidence was sufficient to support the jury’s verdict thatRobert XXX intended to defraud Summit Bank at the time he applied for the funds in question.
STATEMENT OF THE CASE
I. Proceedings Below
RobertAntony XXX was charged in a one count indictment with bank fraud, in violationof 18 U.S.C. § 1344. See Excerpts at 3. Mr. XXX was found guilty by a jury on October 5, 2004. Id at 4.
Hewas sentenced, on January 21, 2005, to six months imprisonment, five yearssupervised release and a $100 special assessment and was ordered to payrestitution in the amount of $390,000. Id. at 5.
OnFebruary 3, 2005, Mr. XXX filed a timely notice of appeal. Id. at 2.
II. Statement of the Facts
The facts of the case are simple and largelyundisputed.
ProgressiveTractor Corporation (“Progressive”) had a commercial instalment agreementproviding a line of credit with Summit Bank which allowed Progressive to borrowmoney to purchase various equipment which it would then lease out orresell. See Rec. Sup. I:80-81. Randall Mathews was the owner of Progressive and Robert XXXdid accounting work for Progressive. Id. at Sup. I:97-98.
OnMay 12, 2000 at 10:23 a.m., Robert XXX faxed a request to Summit Bankindicating that Progressive wanted to purchase two articulated dump trucks fromAmerican Midwest Equipment Company for $433,332.00 from Progressive’s line ofcredit. Summit Bank would fund$390,000 of the purchase price. See Sup. I:83 and Gov’t Exhibits 2-3. Mr.XXX also faxed to Summit Bank, at the same time, a Progressive check madepayable to American Midwest Equipment Company in the amount of $411,655 asevidence of the intent to purchase the trucks once funding was received fromSummit as well as a security document giving Summit a security interest in thetwo dump trucks (Serial No. 5365 and 5348). Id. at Sup.I:84-85 and Gov’t Exhibits 4-5. Once these documents were received by Summit Bank, it placed $390,000 inProgressive’s operating account at the bank. Id. at Sup.I:85 and Gov’t Exhibit 7.
Itwas later discovered by Summit Bank that the $411,000 check to American MidwestEquipment Company never cleared Progressive’s account. Id. at Sup. I:86. Upon inquiry, Mr. XXX admitted that Progressive owed the State of Texasback taxes that he was lead to believe by his boss, Randy Mathews, could bepaid from a large account receivable due Progressive from U.S. Stone. Nevertheless, when the U.S. Stoneaccount receivable was not received, Mr. XXX admitted that he used part of the$390,000 Summit Bank funds to pay the back taxes. Id. at Sup.I:87, 93-94, 106, 131, 132-33, 141. Indeed, Mr. XXX wrote two checks to the Texas Comptroller dated May 12,2000 and totalling $341,000 that cleared Progressive’s bank account on May 26,2000. Id. at Sup. I:91-92; Government Exhibits 6-7.
Mr.XXX testified that at the time he received the money from Summit Bank his intent was to pay for the trucks and that heintended to use the U.S. Stone Money to pay the back taxes. Id. at Sup. I:130, 132-33, 138, 141. In fact, on cross-examination of Mr. XXX, the followingexchange took place:
Q. [ByProsecutor] And at the moment at10:22 in the morning when you faxed that [material to Summit Bank], yourtestimony is that was a true statement and you fully intended to do that.
A. My intent was to use that money to purchase thosetrucks.
Id. atSup. I:138.
RandyMathews testified at trial that, approximately 30 days after receiving theSummit Bank funds, Mr. XXX sought funding for the two dump trucks (Serial No.5365 and 5348) from another bank, Deutsche Bank, and that Progressiveultimately purchased the dump trucks using that funding. Id. at Sup. I:100-01, 108. In other words, Mr. Mathews claimed that the trucks were doublefinanced. Nevertheless Mr. XXXtestified that he never purchased the trucks in question through DeutscheBank. Id. at Sup. I:125-26. In fact, at sentencing, it was learned that Deutsche Bankdid not finance the trucks andthat the trucks in question were simply never purchased when the Summit Bankmoney was used to pay the back taxes. See Sup. III:60;Defendant’s Exhibit 3. It was alsolearned that, after Mr. XXX left Progressive, Mathews sold Progressiveequipment out of inventory without repaying the banks that had securityinterests in the equipment. Id. at Sup. III:61-63.
SUMMARY OF THE ARGUMENT
The Eleventh Circuit’s decision in United States v.McCarrick, 294 F.3d 1286 (11th Cir.2002) is directly on point.
Inthis case, there was no evidence presented that Mr. XXX had the intent todefraud at the time he made the representations in question to SummitBank. Indeed, it was undisputedthat, at the time he made the representations in question to Summit Bank, hehad every reason to believe that Progressive would receive a large payment owedfrom U.S. Stone that would be used to pay the tax monies outstanding to theState of Texas. It was only afterthe U.S. Stone account receivable was not received and after the loan from Summit Bank had been received that Mr.XXX admittedly used the Summit Bank money to pay the tax monies to the State ofTexas rather than follow through with the purchase of the dump trucks. In other words, both the District Courtand the government contributed to the jury believing that Mr. XXX could beconvicted of bank fraud even if he did not have the intent to defraud SummitBank at the time he made his representations to the bank.
TheDistrict Court erred by refusing to instruct the jury that, for purposes of thebank fraud statute, a representation is “false” if it is known to be untrue oris made with reckless indifference as to its truth or falsity at the timethe representation is made. Likewise, this error was compoundedwhen the District Court allowed the government to argue in its closing:“Whether you believe [Mr. XXX] intended to deceive Summit at 10:22 in themorning on May 12 of 2000 or form[ed] the intent later that day or later thatmonth or through July...” he is guilty of bank fraud.
Moreover,to the extent the jury understood that it must determine whether Mr. XXX had anintent to defraud Summit Bank at the time he made his representations to the bank, the evidence was insufficientas a matter of law to support a finding that Mr. XXX had the intent to defraudat the requisite time.
I. THE DISTRICT COURT ERRED IN REFUSING TO INSTRUCT THE JURY THAT MR. XXX’SFALSE STATEMENT TO SUMMIT BANK HAD TO BE FALSE AT THE TIME THE STATEMENT WASMADE.
II. THE DISTRICT COURT ERRED WHEN IT ALLOWED THE GOVERNMENT TO ARGUE IN ITSCLOSING THAT MR. XXX COULD BE CONVICTED OF BANK FRAUD EVEN IF MR. XXX DID NOTHAVE THE INTENT TO DECEIVE AT THE TIME HE MADE HIS REPRESENTATIONS TO SUMMIT BANK.
The district court's refusal to grant a requested juryinstruction is reviewed for abuse of discretion. See United States v.McClatchy, 249 F.3d 348, 356 (5thCir. 2001). Nevertheless, reversible error occurs when the charge, “examined inthe full context of trial including the final arguments of counsel” hasthwarted defendant's presentation of his defense. United States v. Fooladi, 746 F.2d 1027, 1030-31 (5th Cir. 1984), cert.denied, 470 U.S. 1006 (1985).
Here,the government alleged that Mr. XXX committed bank fraud by making a falserepresentation to Summit Bank when he applied for the funds to buy the trucksin question. The jury wasinstructed that:
A representation is “false” if it is known to beuntrue or is made with reckless indifference as to its truth or falsity.
Rec. at I:85. Nevertheless, Mr. XXX objected and requested that “at the time therepresentation is made” be added to the end of that sentence of theinstructions. Id. at I:42, Sup. I:159, 182-83. Indeed, throughout trial, Mr. XXXadmitted that he misused the Summit Bank funds but argued that he did notcommit bank fraud because, at the time he made his representations to the bank,he intended to use the funds to purchase the trucks in question. The District Court refused hisrequest. Id. at Sup. I:159, 182-83.
TheDistrict Court’s failure to properly instruct the jury was compounded when thegovernment argued at closing: “Whether you believe [Mr. XXX] intended to deceive Summit at 10:22 inthe morning on May 12 of 2000 or form[ed] the intent later that day or laterthat month or through July...” he is guilty of bank fraud. Id. at Sup. I:169. AlthoughMr. XXX objected to this argument by the government, the District Court simplyresponded by stating: “I’m going to give the jury the instructions on the law,and they’ll be guided by the legal instructions I give them.”
ThisCourt has made clear that, in regard to false statements, “[t]he relevant factsmust be false when the statement is made, not before or after that time.” UnitedStates v. Shah, 44 F.3d 285, 294 n.16(5th Cir. 1995) (“The [district] court went on [when instructing the jury], ‘Astatement is false if it was untrue when made and then known to be untrue bythe person making it.’ This instruction represents a correct and adequatestatement of the law.”).
AlthoughShah dealt with a conviction under18 U.S.C. § 1001 rather than 18 U.S.C. § 1344, other courts have dealt withthis issue in the context of 18 U.S.C. § 1344. For example, in United States v. Brennan, 832 F. Supp. 435, 440 (D. Mass. 1991), aff’d, 994 F.2d 918 (1st Cir. 1993), the Court held that, inorder to sustain a conviction under 18 U.S.C. § 1344, the government wasrequired to prove that the alleged false statement was known by the defendantto be false “when made.” Similarly, in Phath, theFirst Circuit, following a bank fraud conviction, defined "'falsestatements and misrepresentations” as “any statement or assertion whichconcerns a material fact and which, at the time it was made, was either known to be untrue or was made withreckless indifference to its truth or falsity.” Phath, 144 F.3dat 148 (emphasis added). Likewise,the Eighth Circuit Pattern Jury Instruction in cases in which a defendant ischarged with violating 18 U.S.C. § 1344 recommends that the jury be chargedthat a representation is false if it is “untrue when made.” See http://www.juryinstructions.ca8.uscourts.govat pg. 274.
Directlyon point is the Eleventh Circuit’s recent decision in United States v.McCarrick, 294 F.3d 1286 (11th Cir.2002). There, the defendantMcCarrick was charged with a violation of 18 U.S.C. § 1344. Id. at 1288. He hadobtained a bank loan, inter alia,to purchase certain equipment for his automobile repair business. Id. He had submitted asale-proposal and acceptance for equipment he was to purchase from TerryMcVittie to the bank and the bank gave him a check made payable to both he andMcVittie which he (McCarrick) deposited into his account. Id. at 1288-89. Shortlythereafter, McCarrick’s business “experienced serious financial difficulties,and he canceled the order with [McVittie]” and used the money to “keep hisbusiness afloat.” Id. McCarrick argued on appeal that the evidence was insufficient to convicthim of bank fraud. Id.
TheEleventh Circuit noted that “[t]he government's sole allegation of fraud in[the] case [was] that, at the time McCarrick signed the loan documents, he hadno intention of buying the spray paint booth, as he represented.” Id. at 1290. On the otherhand, McCarrick argued, as did Mr. XXX in the instant case, that the evidenceshowed that everything on the documents he signed with the bank was truthfulbecause, at the time he signed the documents, he intended to purchase theequipment at issue. Id. at 1291. “Any wrongdoing he may have committed, McCarrick contend[ed], occurredsubsequent to the signing of the loan documents, and [was] insufficient tosupport the jury's inference that he intended to defraud the SBA at therequisite time.” Id (emphasis added). TheEleventh Circuit, when presented with almost the exact fact scenario as theinstant case, agreed:
No evidence was presented of events occurring prior toMcCarrick's signing of the loan documents that related to his alleged intent todefraud. The evidence at trial consisted entirely of events that occurredsubsequent to the signing of the loan documents. The government concedesthat any criminal intent McCarrick formed after signing the loan documentscannot support his convictions on the crimes charged in the indictment, whichrequire that McCarrick have acted with intent to defraud the SBA at the time ofthe signing of the loan documents.
Id.(emphasis added). In the instantcase, however, the government argued exactly contrary to what it conceded in McCarrick.
Inshort, the government essentially argued the jury to that anytime a person usesbank funds inconsistent with their original purpose, a person has committedbank fraud regardless of when theintent to engage in the inconsistent use takes place. This is not the law and the District Court refused to makethat clear to the jury. Thus thegovernment’s closing argument was error and the District Court’s error inrefusing to sustain Mr. XXX’s objection to that argument was then compoundedwhen it denied Mr. XXX’s requested jury instruction on the issue. Independently or cumulatively, theseerrors require that Mr. XXX be granted a new trial.
III. THE EVIDENCE WAS INSUFFICIENT TO SUPPORT THE JURY’S FINDING THAT MR. XXXINTENDED TO DEFRAUD SUMMIT BANK AT THE TIME HE APPLIED FOR THE FUNDS INQUESTION ON MAY 12, 2000.
TheDue Process Clause of the Fifth Amendment to the United States Constitutionrequires the government to prove beyond a reasonable doubt every element of acrime with which a person is charged. See In re Winship, 397 U.S.358, 365 (1970). In ruling on asufficiency of the evidence challenge, a court must examine trial evidence inthe light most favorable to the government with all reasonable inferences andcredibility choices made in favor of the verdict. Glasser v. United States, 315 U.S. 60 (1942). Evidence is sufficient if a rational trier of fact couldhave found the essential elements of the offense beyond a reasonable doubtbased upon the evidence presented at trial. Jackson v. Virginia, 443 U.S. 307, 319 (1979).
Itis well understood that the “intent to defraud” is an element of bankfraud. See,e.g., United Statesv. Chendeka, 253 F.3d 815, 819 (5thCir. 2000). As discussed above,the intent to defraud must exist at the time the representations are made. Here there was insufficient evidence tosupport this determination to the extent the jury understood that it must makethis determination.
Indeed,as also discussed above, the United States Court of Appeals for the EleventhCircuit faced almost the same fact scenario in McCarrick except that evidence of an intent to defraud at thetime the bank funds were obtained were stronger in that case. at 1290. There, McCarrick testified that, at the time he signed theloan documents, he intended to purchase the equipment at issue. McCarrick, 294 F.3d at 1291. Nevertheless, there was evidence introduced by thegovernment at trial to support its contention that McCarrick did not intend tobuy the equipment at the time he signed the loan documents. First, McCarrick's business bouncedapproximately twenty checks after the loan was authorized, but before theproceeds were disbursed at the closing. Second, McCarrick canceled his order for the equipment only four weeksafter McVittie (the equipment seller) ordered it from the manufacturer, eventhough McVittie told him it would probably take four-to-six weeks todeliver. Third, McCarrick'sgirlfriend signed McVittie's name on the loan check which McCarrick thendeposited into his business account. Id. at 1291. Ultimately, the Eleventh Circuitconcluded that the evidence was “insufficient to support the jury's inference that he intended todefraud the [financial institution] at the requisite time” and reversed the defendant’s bank fraudconviction. Id (emphasis added). It also noted that “[e]ven if we assume that, in depositingthe check into [his] business account, McCarrick wrongfully intended to use themoney for general business expenses until the spray paint booth arrived-andthen to pay for the booth from the commingled funds when it did arrive-itsimply does not follow that he did not intend to purchase the spray paint boothat the time he signed the loan documents.” Id. at 1291-92.
Here,of course, evidence of an intent to defraud at the time the representationswere made to Summit is even weaker than the evidence at issue in McCarrick. In theinstant case, it was undisputed that, at the time the representations were madeto Summit Bank, Progressive had every reason to believe it would receive alarge payment from U.S. Stone that would be used to pay the tax moniesowed. In contrast, in McCarrick, there was no evidence introduced as to how, at thetime the defendant made his representations to the financial institution andreceived the loan proceeds, he had intended to pay the operating expenses whichwere ultimately paid by the loan proceeds in order to “keep his businessafloat.” Id. at 1289.
Insum, the evidence of an intent to defraud “at the requisite time” is evenweaker in this case than the evidence in McCarrick. Theevidence is simply insufficient to support the verdict in this case.
Forthe foregoing reasons, Mr. XXX’s conviction should be reversed or, in thealternative, the case should be remanded for a retrial.
F. CLINTON BRODEN
Broden & Mickelsen
Dallas, Texas 75204
Robert Antony XXX
CERTIFICATE OF SERVICE
I,F. Clinton Broden, certify that on July 20, 2005, I caused two paper copies andone electronic copy of the foregoing Brief of Defendant-Appellant to be mailedby United States mail, postage prepaid, to Nancy Larson, Assistant United States Attorney, 801Cherry Street, Suite 1700, Fort Worth, Texas 76102-6897