United States v. Gilbert Lundstrom
880 F.3d 423
8th Cir.2018Background
- Gilbert Lundstrom, TierOne CEO/Chair, was convicted on multiple counts for a scheme (2008–2009) to delay appraisals and understate loan-loss reserves, misleading regulators and shareholders; co‑conspirators Laphen and Langford pled guilty and testified against him.
- TierOne shifted into risky commercial/construction lending (“Turbo Assets”); deterioration in real‑estate markets produced large unrecognized losses and growing foreclosed‑property inventories.
- The OTS downgraded TierOne in 2008, required an 8.5% core capital ratio, and issued a 2008 Report finding underfunded reserves and inadequate appraisals; TierOne executed a Supervisory Agreement in Jan. 2009.
- Furnas prepared spreadsheets quantifying substantial potential reserve additions ($35M–$113M); Lundstrom ordered the spreadsheets, resisted placing them in official board binders, and approved loan extensions/modifications without updated appraisals.
- TierOne filed misleading OTS and SEC reports and press releases asserting compliance with capital requirements; after appraisals were obtained in Q3 2009, TierOne restated losses and its capital ratio collapsed; bank failed in 2010.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sufficiency of evidence / denial of acquittal | Govt: circumstantial evidence (emails, spreadsheets, approvals, false filings) shows Lundstrom knowingly conspired and intended to defraud regulators/shareholders. | Lundstrom: no direct proof he agreed to delay appraisals or intended to defraud; relied on subordinates. | Affirmed — evidence sufficient; intent and knowledge may be inferred from conduct and documents. |
| Bill of particulars / notice | Govt: provided extensive discovery (searchable DB, indices, 400 "hot documents") and identified key docs tied to counts. | Lundstrom: indictment and discovery were too vague to prepare defense. | Denied — no abuse of discretion; no prejudice or surprise. |
| Admission of hearsay (agent/co‑employee & business records) | Govt: emails and OTS reports admissible as party‑opponent statements (agency) and as business records under Rule 803(6). | Lundstrom: McCool/Frances statements not agency; OTS reports excluded by Rule 803(8)(A)(iii) public‑records exception and are prejudicial. | Harmless or correct — court admitted emails as agent statements (any error harmless because cumulative). OTS reports admissible as business records; 803(8)(A)(iii) not dispositive and authors testified; any error harmless. |
| Jury instructions (willful blindness; advice of counsel) | Govt: willful‑blindness appropriate; evidence shows Lundstrom deliberately avoided learning the truth. | Lundstrom: claiming reliance on others and on counsel; requested advice‑of‑counsel instruction. | Affirmed — willful‑blindness instruction proper; advice‑of‑counsel instruction denied (no evidence he fully disclosed material facts to counsel or relied on advice). |
| Sentencing — loss calculation & leadership enhancement | Govt: Guidelines method (average price during fraud vs 90‑day after disclosure) yields $24.4M loss; leadership enhancement warranted. | Lundstrom: court should use individual trading data, account for market forces, and not apply 3B1.1(a) enhancement absent clear organizer role. | Affirmed — district court reasonably applied Guidelines loss method and considered market effects; leadership enhancement and 132‑month sentence (after large downward variance) not erroneous. |
| Restitution — accounting for market forces | Govt: restitution based on class‑action claims data for purchases during fraud period; market declines irrelevant where fraud induced purchases. | Lundstrom: restitution should discount losses caused by external market forces. | Affirmed — restitution proper; where fraud induced entry into market, defendant bears risk of market forces. |
Key Cases Cited
- United States v. Kelley, 861 F.3d 790 (evidence reviewed in light most favorable to verdict)
- United States v. Foster, 740 F.3d 1202 (circumstantial evidence can prove conspiracy/knowledge)
- United States v. Turner, 583 F.3d 1062 (jury may draw inferences from actions/statements re: state of mind)
- United States v. Boesen, 491 F.3d 852 (conspiracy may be implied from surrounding circumstances)
- United States v. Louper‑Morris, 672 F.3d 539 (fraudulent intent may be inferred from circumstances)
- United States v. Krug, 822 F.3d 994 (evidence may support competing theories; jury credibility determinations respected)
- United States v. Whitehill, 532 F.3d 746 (willful‑blindness instruction appropriate when deliberate ignorance supported by evidence)
- United States v. Williams, 720 F.3d 674 (government documents may qualify as business records under Rule 803(6))