*1 stating instruction that ing reference PANNER, District Judge, concurring: con kidnapings the four be to employee’s to sidered show the state excellent, I am to pleased concur testimony during negotiations. mind The opinion court. well-reasoned I write determination relevant was because separately express view that we are negotiations had failed was instru deciding only preemptive DOHSA’s effect mental CNL’s decision seek GSF brought on the claims here survival under testimony was assistance. he the ATS. kidnaped
afraid that he be provided would
context his assessment status court with
negotiations. district was in admitting
in its discretion this testimo
ny. finally argue
Plaintiffs by failing provide court erred
district explanation part of each chal detailed America, UNITED STATES of ruling, why the evidence lenged Plaintiff-Appellee, court, unfairly prejudicial. The district however, required “in was not engage v.
mechanical recitation Rule 403’s formula BENNETT, James Davis Defendant- long on the record ... as it appears [a]s Appellant. the record a whole that trial No. 06-50580. adequately weighed the judge probative prejudicial value and effect of proffered of Appeals, United States Court before admission.” evidence . Ninth Circuit. Sangrey, F.2d States Cir.1978). The record here indicates the Argued and Feb. Submitted 2010. court aware of district was well Rule Sept. 10, Filed requires the factors it to weighed. be objections Plaintiffs’ in district court to the
challenged all raised the issue reason, For must
prejudice. Rule 403 “figured crucially in the court’s Verduzco,
mind.” United (9th Cir.2004) (finding
F.3d 1030 n. *2 A.
Phillip Trevino of Law Offices (Los CA) Angeles, for the Phillip Trevino appellant. Adkins, Cardona, prosecution, C.
George S. Robb Sagel A. of the Office of the have found a reasonable and Brett doubt that (Santa procured by” Office “fi- Attorney’s “owned *3 CA) Ana, and Kin of the United nancial institution.” Curtis (Los CA) Attorney’s Angeles, Office appellee. for the I. BACKGROUND broker, mortgage
James Bennett —a real estate and appraiser, agent— escrow operated a sophisticated property flipping in Southern California. “A scheme fraud- ulent in flip scheme which individuals, businesses, straw bor- and/or KLEINFELD, Before ANDREW J. buy rowers properties among and sell and KIM MeLANE WARDLAW artificially themselves to inflate the value CALLAHAN, M. Circuit CONSUELO property.” of the Fed. Fin. Inst. Exami- Judges. Council, nation Detection and Deter- of Mortgage Against rence Fraud Finan- OPINION (“FFIEC (Apr.2010) cial Institutions 36 WARDLAW, Judge: Circuit Report”). A Federal Bureau of Investiga- knowingly It is federal crime to exe- report explains: tion execute, cute, attempt to a scheme or or Property is flipping best as described “(1) to artifice defraud a institu- purchasing and properties artificially in- tion; moneys, obtain flating through their value false apprais- funds, credits, assets, securities, or other artificially als. The properties valued by, custody or under the are repurchased then several times for institution, by a financial control higher price by “flip- associates of the pretenses, false or means fraudulent sales, per.” After or four three sham representations, the properties are foreclosed by vic- defined, § 1344. “Financial institution” is tim flipped lenders. properties Often as appeal, as relevant this bank or are ultimately repurchased for 50 to 100 savings association percent original of their value. Deposit are insured the Federal Insur- Section, F.B.I., Financial Crimes Financial (“FDIC”). See Corporation ance (FY 2007). Report Public Crimes to the 1813(c)(2). 20(1); U.S.C. “This designed scheme is extract Bennett challenges sufficiency James much cash from possible property, of the evidence his supporting convictions the loan are proceeds and often used for on three counts of a twelve-count su- on the purposes application.” stated perseding charging indictment him with Report FFIEC at 36. bank fraud under These three arise mortgages buildings counts from multi-unit identified fraudulently procured Equicredit that were listed for sale in low-income wholly-owned subsidiary neighborhoods Angeles Long Corporation, Los (“BOA”). Although provided family Bank America Beach. He members institution,” is not a at Equicredit purchase properties “financial with cash to whether, We must listed He viewing price. BOA is. decide their market then identi- purchasers” repurchase the evidence most favorable to fied “straw mortgages, typically their defaulted on family from Ms members properties same transaction, leaving Sometimes, within months of drastically prices. inflated properties on the the lenders to foreclose asso- were Bennett’s purchasers the straw at a loss. members, at other family ciates or times, unwitting participants they were was one' of Bennett’s victims. into the transactions were lured who undisputed Three facts about incentives, cash rebates lucrative such as First, appeal. to Bennett’s are central zero-money-down mortgages. not a “financial institution” meaning of the bank fraud stat- within the prop- Bennett facilitated the sale *4 not introduce government ute. The did straw buyers the initial to the erties from Equicredit that was FDIC-in- evidence by appraising the began He purchasers. statutory met defi- sured or otherwise the fair their at 30% to 50% above properties institution,” “financial nor does nition of Then, the mort- acting value. market Equicredit government argue broker, helped purchas- he the straw gage Second, appeal. “financial institution” on mortgages in the amounts ers obtain was, times, all a at relevant The documents property inflated values. wholly-owned subsidiary of BOA. Christine lending insti- that he submitted to various president Costamagna, a BOA vice and re- acquire mortgages were tutions secretary, and Milton corporate assistant misrepresentations about plete with Chadwick, attorney, a BOA testified that and the borrowers. Not properties owned all stock at all BOA appraised did he inflate the value charges against Ben- times relevant to misrepresented but he also properties, introduced government nett. The also potential their rental income and fabricat- establishing documents grant reports deeds and title to conceal ed was BOA’s sub- family members’ involvement with the his Third, sidiary. is a “financial institu- BOA He also submitted false infor- properties. it The tion” because is FDIC-insured. employment the borrowers’ mation about a government introduced certificate of they statuses and incomes so that would coverage, BOA’s FDIC insurance and Ben- would qualify mortgages for otherwise dispute that is a “finan- nett does not BOA Finally, acting as the escrow be denied. 2003, January In a feder- cial institution.” agent, copies Bennett used falsified jury an indictment grand al returned rep- checks and forms to deposit cashier’s against Bennett and several of associ- had been made to resent “executing] ates for scheme to defraud accounts, when, fact, they escrow in money mortgage lenders and obtain not. materially property by means of false and lending Bennett ensnared several insti- pretenses, representations, fraudulent tutions in his web of lies. Provided with In September grand properties false information about the and jury superseding returned a twelve-count borrowers, duped these institutions were in- only. The indictment issuing mortgages pur- into to the straw charged dictment Bennett with four counts 2(b) in an profited §§ chasers. Bennett amount fraud under 18 U.S.C. wire the mort- equal to the difference between counts of fraud under 1343 and seven bank fraudulently obtained from Each of the fraud gage proceeds 1344. wire in paid the lender and the amount cash and bank fraud counts involved different market a different acquire price. mortgage for Meanwhile, count of many Southern California. twelfth purchasers of the straw of fact charged indictment Ben- could have found the superseding essential ele- continuing financial ments of operating nett with the crime a reasonable Virginia, of 18 doubt.” Jackson v. enterprise crimes violation (1979). L.Ed.2d 560 Jackson, Under begin by viewing “[w]e January jury convicted Ben- produced at trial in the most all twelve counts. Bennett moved nett on prosecution.” favorable to the judgment acquittal, which was Nevils, States v. granted as to the twelfth count because Cir.2010) (en banc). Then, “[mjoving failed to introduce evi- Jackson, step second we must con- dence that Bennett received million or $5 evidence, sider whether the as construed enterprise, required by more from the above, is sufficient to allow 225(a)(2). statute. See 18 U.S.C. to conclude that the has district court denied Bennett’s motion for proof.” carried its burden of acquittal as to all other counts. *5 III. DISCUSSION appeals
Bennett his convictions as ten, eight through charged to counts which part Enacted as of Comprehensive arising him with bank fraud out of mort- 1984, Crime Act Control of Pub.L. No. 98- gages from obtained three 473, II, 1108(a), § Title the federal bank Beach; Long properties different Ben- fraud statute makes it a federal crime not contest nett does his convictions or execute, knowingly to or attempt to exe- through sentence on counts one seven or “(1) cute, a scheme or artifice to defraud a count The eleven. sole issue raised on institution; financial any or to obtain appeal government present- is whether the funds, credits, assets, moneys, securi- ed sufficient evidence from which ra- ties, or other property by, owned or under tional could find a reasonable custody a control financial insti- doubt that the “financial institution” ele- tution, by means false or fraudulent ment of the bank fraud statute was satis- pretenses, representations, fied circumstances where the fraudu- § 1344. The statute is “de- lently mortgages obtained were loaned signed to an provide effective vehicle for Equicredit, wholly-owned subsidiary of a prosecution of frauds in which the “financial institution.” victims are S.Rep. financial institutions.” 98-225, (1983), No. at 377 1984 II. AND JURISDICTION STANDARD 3182, U.S.C.C.A.N. 3517. “Financial insti- OF REVIEW tution” is defined to include bank or juris The district court savings exercised association 3231, § pursuant diction to 18 U.S.C. are insured the FDIC. See 18 U.S.C. 20(1) jurisdiction § we have over a final (cross-referencing the definition of § pursuant to 28 U.S.C. 1291. review depository We “insured institution” in 12 1813(c)(2)). de a claim challenging sufficiency By novo criminalizing supporting of the evidence an element of perpetrated against frauds FDIC-insured Sullivan, banks, an offense. See United States v. the statute strong furthers “[the] (9th Cir.2008). 967, 522 974 A protecting F.3d claim federal interest in the financial of insufficient if integrity S.Rep. evidence fails “after view of these institutions.” No. 98-225, 377, ing 3182, the evidence in the light most favor at 1984 U.S.C.C.A.N. prosecution, any able to the rational trier shareholders, latter and that the that of its that Bennett’s concedes government nor corporate property own the neither perpetrated
fraud was
earnings.”
meet
Miller v. McCol
does not
419,
“financial institu-
110 P.2d
statutory definition
gan,
Cal.2d
Therefore,
does not
(1941).
Supreme
tion.”
In
the Delaware
1344(1)
(i.e., that Ben-
applies
argue
like
rejected
argument
an
Court
—much
institution”).
a financial
“defraud[ed]
nett
parent corpo
here —that
fraudulent-
Instead,
argues
it
subsidiary’s
wholly-owned
ration owns its
by” a
funds “owned
ly obtained
See Buechner
assets.
Farbenfabriken
1344(2).
purposes
institution
(Del.1959).
154 A.2d
Bayer,
that,
as a matter
contends
mo
plaintiffs
affirming the denial
as-
“owns” the
law,
of the defendant
tion to seize the
subsidiary, and
wholly-owned
sets of its
subsidiary, the
corporation’s
fraudulently ob-
therefore
explained
Buechner court
BOA, a financial
by”
tained assets “owned
any specific
interest of
company “has no
institution,
mortgages
when he obtained
subsidiary]”
[wholly-owned
Equicredit.1
entity,
an
corporation is
“[t]he
because
corporate law
century
than a
if
More
even
distinct from its stockholders
Dane,
See, e.g.,
otherwise.
Wells
says
by one
subsidiary’s
wholly
stock is
(1905) (“The
A.
Me.
686-87;
see
corporation.”
person
notwith-
corporation,
was not the
plaintiff
Kanter,
Ala.
Finley v.
also
major-
he owned and controlled
standing
(1950) (“A
*6
347,
corporation is
349-50
So.2d
or control
He did not own
ity of its stock.
legal entity, separate and distinct
a distinct
Martin, 127
Huber v.
property....”);
its
officers, and the
from its shareholders and
(1906)
1031,
412,
Wis.
105 N.W.
representing
capital
the
property
(“Where
the net assets
ownership
is the
of
by the
in and owned
corporation is vested
company located?
mutual insurance
of a
doctrine is well
corporation.
general
This
corporation
in the
legal
That the
title is
at law and in
both
established
obtains
1926,
early
saying.”). As
goes without
Jones, 184
Am. State Bank v.
equity.”);
recognized that
Supreme
“[t]he
Court
(“It
(1931)
144,
Minn.
239 N.W.
company
in a
of stock
owner of
shares
taking over of the
difficult to see how the
prop-
corporation’s
the owner of the
is not
share
deprives
of the bank
property
[the
Doughton,
erty.”
Hosp.
R.I.
Trust Co.
title
any property. He had no
of
holder]
involving Equicredit would should be cast aside in the context stand. Second, it was the Cart- applying. statute the dis- wright appreciate court failed to
Here,
the government
misapplying
between
tinction
the act of
fraudulently pro
that Bennett
financial
belonging to
institution
Equicredit;
Equi
funds from
cured
act of
value of a
diminishing
and the
wholly-owned subsidiary
was a
credit
Though
financial institution’s assets.
both
BOA;
a “financial insti
BOA was
might
objectionable, Congress
actions
be
it
tution” because was FDIC-insured. We
only criminalized the former.
must be
We
that, based on
facts and the
hold
these
Congress
the precise language
mindful of
offense,
law at
governing
the time of the
illegal
used to describe the
conduct. Un-
rational trier of
have found
no
fact could
statutes,
like other
the bank fraud statute
by” a
procured
“owned
make it a
does not
crime “to devalue”
financial institution.
financial institution’s
“to affect” a
assets or
otherwise,
us to
Urging
conclude
See, e.g.,
institution.
United
reject
century’s
asks
us to
(2d
Bouyea,
v.
States
152 F.3d
and in-
corporate jurisprudence
worth of
Cir.1998) (finding
jury
could con-
opinion
follow a
thirty-year-old
stead
wholly-
that wire
clude
fraud
Fifth Circuit
See
Appeals.
Court of
“affects” the
cor-
Cartwright,
United States
Pelullo,
poration);
*8
(5th Cir.1980).
In Cartmight,
the Fifth
(3d
(same).
Cir.1992)
In-
F.2d
215-16
subsidiary’s
Circuit concluded that a
assets
stead, the bank
makes it a
fraud statute
“belonged
pur-
to” a
fraudulently
crime
“to obtain” assets
it a
poses
of 18 U.S.C.
which made
by”
“owned
financial
Be-
institution.
misapply
to
belonging
crime
funds
con-
cause no rational trier of fact could
Cartwright,
632 F.2d
institution.
fraudulently
clude that the assets Bennett
Cartwright
at 1292. The
court acknowl-
Equicredit
from
were “owned
procured
edged
perhaps
that it “is
true that under
BOA,
by”
sup-
sufficient
does not
evidence
corporations
principles law the assets of
port Bennett’s conviction on that basis.
wholly-owned
‘belong’
do not
legal
government
argue
the sole
in a
sense.”
does not
shareholder
“custody
It nonetheless
that the sub-
that BOA had
or control”
concluded
1344(2)
sidiary’s
“belonged
Equicredit’s
to”
under
—in-
deed,
argument,
at oral
re W. States Wholesale Natural
Litig.,
Gas
support
that the record would not
stated
(D.Nev.2009),
F.Supp.2d
may
finding.
such a
The dissent nevertheless
issued,
have funded
the loans
juror
maintains that
rational
could find see,
Chandler,
e.g., United States v.
“custody or control” based on the undis-
(8th Cir.1995);
F.3d 1460
wholly
fact
puted
(1st
Brandon,
Cir.1994),
2. Because the terms (defining "control” ate statute, are not defined "custody” charge bank fraud we as the "immediate and con- *9 according "construe to person [them] [their] ordi- trol ... exercised or an authori- nary, contemporary, meaning[s].” ty”). common thing To "control” a is "to exercise Grace, over; dominate, regu- See States v. W.R. restraint or direction (9th Cir.2007). late, ordinary usage, College to or command.” Webster’s Dic- (Random 1991); "custody” thing tionary over a is to have it in House see also "keeping; guardianship; Collegiate Dictionary one's care.” [or] Webster's New (Random ed.1983) College Dictionary (defining “power Webster's "control” as the or 1991); Collegi- authority guide House manage”). see also Webster's New or meaning within the “financial institution” CONCLUSION § § it is a 1344.1 Under of 18 U.S.C. not ar- does that the Given execute, at- knowingly or crime to federal financial in- that Bennett defrauded gue “(1) execute, a or artifice tempt to scheme juror stitution, could that no rational institution; a financial or to defraud that the doubt beyond a reasonable find credits, funds, moneys, any of the obtain under by, or at issue were “owned securities, assets, other or financial insti- custody or control of’ of, custody or control under the by, or in the circumstances tution institution, by means of false for here, and sentence Bennett’s conviction representations, or pretenses, fraudulent vacated. ten must be eight through counts consistent proceedings for remand We opinion. this with there sufficient I would find that was juror for a rational in the record and REMANDED. VACATED that Bennett obtained to find CALLAHAN, Judge, dissenting: Circuit “custody under if actual- BoA even BoA did not control” of majority’s holding from the I dissent Equicredit. ly actual control over (“Bennett”) exercise Davis Bennett’s that James present- was at trial evidence Specifically, eight through ten of on counts conviction BoA, per- owned 100 parent, ed that the must be vacat- his twelve-count indictment subsidiary, Equi- cent of the shares of its because, light in the best for ed viewed favorable light in the most credit. Viewed insufficient evi- there was prosecution, juror a rational could prosecution, for the on those support his conviction dence supported conclude that this evidence I affirm. counts. would shareholder, that, BoA conclusion as sole First, majority I agree with authority level of had the to exercise some the two- standard of review is applicable Therefore, by de- Equicredit. control over articulated in Jackson v. step standard frauding Equicredit, Bennett was defraud- 99 S.Ct. Virginia, 443 U.S. BoA, ing the financial institution which (1979), viewing L.Ed.2d 560 which “custody control” over its right favorable to light the evidence in the most subsidiary meaning within whether prosecution, we then consider affirm. I would therefore conclude that the any rational proof. met its burden of Here, there is no doubt fraud that he has mortgage
committed the only question convicted
been
whether, in the best for viewed there was sufficient evidence
prosecution, juror to conclude that the committed
mortgage fraud Bennett (“Equicre-
against Equicredit Corporation
dit”), which (“BoA”), against a Bank of America Corporation. See 18 Insurance
1. A institution” is defined “financial 20(1); 1813(c)(2). savings association the bank or Deposit are insured the Federal