United States v. John Markert

39-year parties sentence —which America, UNITED mandatory STATES

agreed was the minimum sen- Plaintiff-Appellee in prison case—he would be tence years old. Yet the district until he was 95 impose court felt the need to a 115-month Anthony MARKERT, John

sentence followed two life sentences. Defendant-Appellant. justified The district court the sentence history “criminal emphasizing Scott’s No. 12-3332. protect public.” just the need to But Appeals, United States Court of protection public how much does the need Eighth a 95-year-old man-assuming from Scott Circuit. long? According live to the Submitted: June 2013. Reports, National Vital at Statistics sentenced, Filed: expected

time he was Scott was Oct. years,

to live for another or until he is years Sherry

about 83 old. See L. Mur- al.,

phy et National Center for Health Sta-

tistics, Reports, National Vital Statistics 8, 2013), (May

Vol. No. avail- http://www.cdc.gov/nchs/data/nvsr/

able at A

nvsr61/nvsr61-04.pdf. 39-year sentence enough

would have been more than appropriate

serve as deterrent and an

punishment robberies, for a series of bank

during gun which no one fired a and no physically injured. instead,

one was But imposed

the district court substantially greater

unreasonable sentence that is than

necessary accomplish goals of sen- 3553(a).

tencing. See 18 U.S.C. This justified

sentence is not improper and is I will not affirm a sentence that

obviously imposed too harsh and simply to

appear tough on crime.

I would reverse and remand this case

with instruction to the district court

impose a sentence greater no than a 39-

year sentence.

officer, 656; aiding 18 U.S.C. and and abetting conspiring to commit those lengthy offenses. After a trial and three deliberations, days jury convicted Markert of willful but ac- quitted him of bank fraud. The con- acquitted victed Wintz of bank fraud but him aiding abetting misappli- willful cation, Pederson, acquitted Gregory and it the commercial loan officer involved transactions, of all At charges. sentenc- ing, the district court found that Markert’s equal offenses caused a loss to the total (approxi- amount of the five nominee loans million), mately resulting in a 16-level $1.9 enhancement, guidelines and sentenced prison. him to 42 ap- months Markert conviction, peals his in- arguing there was sufficient evidence and instruction er- ror, sentence, and his challenging the affirm court’s calculation of loss. We agree erroneously conviction but loss was resentencing. calculated remand for and Background I. Joseph Friedberg, argued, Minne- S. (Robert Richman, apolis, MN D. Saint We summarize the evidence at trial Park, MN, brief), on the for Plain- Louis light viewed in the most favorable to the

tiff-Appellee. jury verdict. See United States v. Thom- Otteson, AUSA, Min- argued, William J. as, (8th Cir.2005). In (David Genrich, AUSA, neapolis, on MN named President and Markert was brief), Defendant-Appellant. (“Pinehurst” of Pinehurst Bank CEO Bank”), “the a small bank in Saint Paul. LOKEN, BRIGHT, BYE, Before and Pinehurst, Markert was joining Prior to Judges. Circuit Bank, community President of Northstar LOKEN, Roseville bank with branches suburban Judge. Circuit and White Bear Lake. As Pinehurst’s approved Bank President John Markert President, Markert had unilateral authori- by five nominee loans the bank to friends $250,000 ty approve up any loans family George and of bank customer totaling between one customer. Loans used to cover a Wintz. $250,000 $500,000 required approval and checking million overdraft in a Wintz by majority four-person of a Officer by collapse account at the bank caused (“OLC”) by Loan Committee dominated check-kiting of Wintz’s fraudulent scheme. and he recruited from Markert officers discovered, After the Markert fraud was $500,000 totaling Loans over fraud, Northstar. charged with bank Wintz were Board of 1344; required approval the Bank’s five counts of willful U.S.C. by a bank Directors. misapplication of bank funds long- Saturday, Pinehurst his On March Markert and brought to Wintz customer, friends, George and bank met

time friend with two Wintz’s both of Wintz, trucking the owner of and ware- previously money, whom had lent Wintz Transfer, named McCallum house entities ask for additional loans. Without disclos- Warehouse, Triangle Properties. and Cue ing check-kiting, Markert advised that checking ac- opened two business Wintz account at Wintz’s Pinehurst was over- Pinehurst, one for McCallum counts drawn, lending and he was over the Bank’s Properties; he Transfer and one for Cue fail, limit. Markert said Bank could Triangle left Warehouse’s account with career, ending banking Markert’s unless approved a series of Northstar. up money came with Wintz to cover the Wintz, reaching quickly loans to expressed sympa- overdraft. The friends $250,000 lending limit of his unilateral au- thy money. but refused to lend more Wintz $500,000 thority. soon reached the Wintz What Markert did next formed the basis sought limit of the additional OLC By for his conviction. Mon- personally vouched for loans. Markert day, March persuaded Wintz had five Wintz, Board that he had informing the family sign friends and members docu- twenty-one years. been Wintz’s banker for obligating repay ments them to the follow- By additional loans. approved The Board ing loans Bank: Pinehurst February Wintz reached the Bank’s (cid:127) McDonald, William Wintz’s friend and legal lending nearly limit of million. $1.2 Northstar, former banker at borrowed Crowley, JoAnn had been Pinehurst’s who $200,000. McDonald was led to be- Chief Financial Officer since the Bank that lieve Wintz needed a short-term opened repeatedly warned Mar- payroll. loan to make Wintz’s over- checks,”1 may “kiting that kert Wintz be check-kiting draft and were not dis- system a him to using that allowed make closed. deposits coming without the bank. (cid:127) Lenertz, Julianne girl- Wintz’s former Indeed, These concerns went unheeded. friend, $350,000, borrowed ostensibly Crowley. Markert fired pay owing taxes from her sale of a March, early In Northstar employees business to Wintz Wintz kiting discovered that Wintz was checks agreed pay. had Lenertz testified between his accounts at the two banks. nothing she knew about terms of On Thursday, March Northstar re- the loan. fifteen totaling turned to Pinehurst checks (cid:127) Edlin, brother, Lance Lenertz’s bor- nearly due to million insufficient $1.9 $350,000, believing rowed he was co- funds. Wintz had drawn these checks on signing help pay loan to his sister’s his Triangle Warehouse account at North- tax debt. He nothing knew of Wintz’s star into deposited them his McCallum check-kiting. overdraft or Pinehurst, Transfer account at which had (cid:127) Cook, Nancy long-time Wintz’s secre- deposits. deposit credited With the $500,000 Northstar, tary, borrowed checks dishonored in the Pinehurst name of nearly faced a million Triangle Logistics, company loss on Wintz’s $1.9 overdrawn McCallum Transfer account. “gave” Wintz to Cook in 2004. Cook funds, kiting 1. designed supported by Check is a form of fraud checks not sufficient time, "float,” fraudulently utilize the or needed for one kiter inflates the account bal- ances, enabling bank to collect on checks drawn on accounts him to write checks to third By transferring parties unsuspecting pay other banks. funds be- that the banks until using exposed. tween accounts at different banks the scheme is reviewed the Bank’s loans to Wintz and agreed to borrow that she testified why not know Wintz money but did it must book an additional determined know the it. did not needed She million of reserves for increased loss rate the loan or the interest amount of Bank exposure, which rendered the insol- Bank on March arriving at the before later, regulators vent. Three months Pinehurst Bank. closed (cid:127) Strom, daughter, bor- Debra Wintz’s $500,000 in the name of

rowed Win II. Discussion com- Properties, another Wintz-owned being Markert was convicted of made her President pany. Wintz federally officer of a insured bank who loan sign so she could Properties Win “willfully any moneys, misapplie[d] documents. funds or credits of such bank.” 18 U.S.C. signed Although the nominal borrowers § 656. Conviction of a bank officer under repay, obligating loan documents them requires proof statute he the real each understood that Wintz was “wil[l]fullymisapplied funds for the benefit for the responsible borrower and would be person, pur of himself or another for the principal payments. and interest pose defrauding injuring the bank.” of his allies on the with the assistance Barket, United States v. and closed the five nominee prepared OLC (8th Cir.1975), Monday, Disguised on March 9. as loans 50 L.Ed.2d 282 On Properties, the loan investments Cue appeal, argues that he was first funneled into Wintz’s proceeds were wrongly five nominee convicted because account, immediately then Properties Cue Bank to approve loans he caused the re-directed and credited to his McCallum simply “a transfers” series intrabank account. After discussions with Transfer (i) March the Bank’s new CFO never lost control of the Markert on which the Bank by (ii) checks returned North- post did not the the effect of the proceeds, loan and a million star that would have caused benefit, not to harm transactions was to No overdraft until March 10. overdraft inter financially. the Bank Based on this by then the loan was recorded because transactions, Markert ar pretation of the had infused the account with suf- insufficient, gues that the evidence was funds. ficient court’s instructions errone and the district week, That the Board of Directors met ous, on the essential elements of willful The five nominee monthly meeting. for its to defraud. We misapplication and intent monthly in infor- loans were included the turn, re challenges these two address them to nothing mation but linked packet, statutory interpreta of viewing questions meeting the but Markert attended Wintz. Reed, v. tion de See United States novo. tell the Board about Wintz’s near- did not (8th Cir.2012). 978, 668 F.3d 982 check-kiting activities. overdraft or his It has Misapplication. A. Willful evidence that Markert and There was also “willfully or mis- been a crime to embezzle the loan docu- his OLC allies backdated federally- funds or credits of a apply” the loans and concealed the nominee ments 1864. regulated or bank since chartered who was not from the member of the OLC 55, 3, 1864, § 116. 13 Stat. See Act of June January In inner circle. part of Markert’s misapplication, unlike em- Because willful files, 2010, during a routine audit of bank bezzlement, technical mean- had no settled purpose the true of an auditor uncovered law, Supreme the Court ing at common im- Markert was the five nominee loans. on this important limitation regulators prescribed Bank mediately terminated. 926 Cir.) denied, added), cert. (emphasis v. term in United States elastic

potentially 148, 655, 666-67, 2 L.Ed.2d 87 Britton, S.Ct. 105 S.Ct. 107 U.S. U.S. (1883): (1984). quoted pas court The district 27 L.Ed. on the five sage instructing the made misapplication think the -willful We misapplication. of willful counts means a mis- by this statute an offense use, benefit, gain the or application Sufficiency Evidence. charged, compa- or of some party of the Overstating prior extent to which cases [banking] other than the ny person misapplication limited willful to the have Therefore, to constitute association. “conversion,” customary legal definition of misapplication, there offense of willful in argues trial evidence was to his own use or must be a conversion government sufficient because the failed moneys of the the use of some one else tempo “that at least prove the defendant party the association and funds of rarily deprive[d] posses the bank of the charged. sion, control, funds.” or use of its United standard, the Court Brit- Applying this (4th Duncan, v. States of the indict- ton dismissed certain counts Cir.), cert. they “charge[d] maladminis- ment because Bank 62 L.Ed.2d 96 nev bank, the affairs of the rather tration of funds, asserts, er lost control of its he funds.” than criminal its because the five nominee loans were struc Id. so that the nominal never tured borrowers Britton, many decisions of True a proceeds, “[n]ot controlled the loan our sister circuits have ob this court and penny proceeds” of the was withdrawn gist of the offense of that “the served depleted from the Bank or assets. its the conversion of willful a bookkeeping “This was series of entries federally insured bank [a funds of concludes, more,” nothing bank either to his own use or officer] example classic maladministration person, a third with intent to the use of affairs, misap Bank’s rather than criminal bank,” limit injure or defraud the without plication disagree. of its funds. We any common law or ing the offense assume, government We and the of “conversion.” Bark statutory definition concedes, legal premise more or less et, 186-87; F.2d at see Dow v. United that willful misapplication required proof (“con Cir.1897) States, F. degree the Bank lost some of control form”); version some Johnson United alleged over the to funds credits be Cir.1938) States, (4th 813, 95 F.2d 817 misapplied, whether or not the nominee (“conversion deposited proceeds] loan [of were, sense, proceeds loan in a technical form”); Beran, in some United States v. so, being converted. But that Markert’s (8th Cir.1976) (“Con 1316, 546 F.2d 1320 is, record, argument factually on this trial encompassed funds ... is version of bank unsound. His focus on the nominee bor misapplication.”), within of criminal the definition simply rowers’ lack of control is irrelevant. denied, 916, t. 430 U.S. 97 cer Supreme explained As the Court in Brit- 1330, 51 L.Ed.2d 595 As we S.Ct. ton, willful occurs when a summarized principle in United States “ (in bank officer converts the bank’s funds Mohr, ‘Misapplication’under v. 18 U.S.C. manner) use, some to his “or the use of improper 656 covers unauthorized and else,” conduct, some one with intent to defraud the typically conversion of bank Here, a bank. as other cases where nom personal funds for use bank officer or (8th 1132, camouflage were to fraudu- party.” third 728 F.2d 1134 inee loans used

927 merit” the contention “that the funds transactions, “some one else” was lent Wintz,- not borrower, kiter ... long check were lost before the issuance the real pro- The loan borrowers. the nominee cashier’s checks.” 355 F.2d these funds unquestionably were (7th Cir;), denied, ceeds cert. is, did relevant

Bank. So the (1966).2 question 1465, 16 L.Ed.2d 540 Like S.Ct. those temporary control over have Wintz wise, willfully misapplied Markert' loan to his they credited proceeds when proceeds for the control and benefit No, argues account? Transfer McCallum Compare customer Wintz. United States Markert, money no ever left because (8th Ness, 248, 249, 665 F.2d Cir. v. were used to proceeds Bank when the 1981). century ago, As we noted over a “it in that ac- overdraft impending avoid the always necessary money not should is count. bank, actually withdrawn from a be sense contention defies common This constitute a criminal of its ” banking. of commercial and the realities States, Rieger v. 107 F. funds.... United deposits a loan and a makes When bank Cir.), U.S. checking ac- in a customer’s proceeds (1901); 45 L.Ed. 1030 count, use and con- acquires the customer Rickert, accord United States v. 459 F.2d funds, subject terms and to the trol of the (5th Cir.1972) (“It not neces relationship. of the account conditions actually ... sary cash leave Here, nominee gained control of the Wintz bank.”). account, his deposited into proceeds loan That the Bank suffered harm encom relations pre-existing but his contractual misapplication provi passed the willful to these right the Bank immediate gave ways §in in other as sion 656 is evident paid parties had third funds. The Bank through By lending money well. to Wintz previously checks written on honor concealing nominees and that fact from account, leaving that Transfer McCallum Directors, Markert caused the Board of insufficient funds to cover the account with companies and his Bank to lend Wintz by Northstar. Under checks returned federally regulated million more than its circumstances, the Bank was con- these lending government allowed. The limit loan tractually entitled to use the nominee course, testimony lending limits Wintz, presented proceeds repay itself. safety by reduc immediately by avoiding large a bank’s financial protect benefitted severely dam- that would have too by committing overdraft caused ing risk financial interests. aged his business and single borrower. “Viola capital much may indi policy law or bank tion of state parties third paid the Bank When Mohr, misapplication.” cate [willful] that the loan were used funds 1134; v. accord United States misappli repay is irrelevant to the willful (2d Cir.1985) Clark, 297, 303 analysis. example, cation For United (nominee lending loans above the bank’s Mullins, the defendant where States pecuniary sufficient “risk of pose limits checks, cashier’s rather bank officer used misapplication); to constitute United loss” loans, check-kiting to conceal a than new 970, 972-73 Dougherty, v. 763 F.2d States scheme, gov that the the court concluded Cir.1985) (8th (using unapproved bankers’ proved misapplication willful ernment checks, was will acceptances to conceal overdrafts finding the “no the amounts of complex factually indistinguishable. two opinion No that this "does 2. The dissent asserts images ever be "mirror” single facts fraud cases will to a case that mirrors the not cite view, our Mullins is each other. we have before us.” In 928 belonging Markert caused loan or funds to or intrusted to the misapplication).

ful purpose used for a that the custody to be or care of Pinehurst Bank.... not) (and not indeed could Board would with intent Bank.” defraud Pinehurst v. See United States approved. have The court further instructed: Cir.1992), (7th Crabtree, 1261, 1267 979 F.2d phrase “willfully misapplies” denied, 878, 114 rt. 510 U.S. S.Ct. ce unauthorized, unjustifiable means the or (1993); 216, 126 173 United States L.Ed.2d wrongful or use of a bank’s funds. Mis- (6th Cir.1989) Woods, 477, 480 v. 877 application wrongful taking includes the (“the effectively deprived,'with bank was money or use of of the bank a bank consent, over its funds for out its of control employee officer or for his own benefit twenty-two months. That an additional or for the benefit of use and some other control sufficient to con deprivation of is person. funds.”); misapplication stitute of bank “Misapplication of bank funds” covers 260, Shively, v. 715 F.2d United States conduct,3 improper unauthorized and Cir.1983) (willful (7th misapplica 265-66 typically conversion of bank funds for require money that the bank’s tion “must personal use a bank officer or a third for a that purpose have been used party. agreed bank would not have to had it argues the court erred it when was”), purpose known what the cert. de “willfully instructed that misapplies” nied, 1007, 1001, 465 104 S.Ct. 79 U.S. (1984). unjustifiable means “the unauthorized or L.Ed.2d wrongful use of bank’s funds.” He Michael, v. 456 F.Supp. United States that, posits by failing to instruct that will (D.N.J.1978), on which Markert ful misapplication requires proof that the relies, distinguishable is because the court Bank at temporarily least lost control or granted a motion to dismiss counts funds, possession of its in instruction charging misapplication, indictment willful imprudent cluded loans that do not involve whereas here we have a full trial record. conversion, the essential element of “there categorical To the extent statements by improperly criminalizing banking.” bad opinion contrary are to our construc- Markert acknowledges that our review is offense, tion of the willful plain object for error he not because did unpersuasive we find Michael and decline Gill, this instruction. See United States v. long have follow it. We held that with- Cir.), 513 F.3d drawal of funds from the victim bank is not element, L.Ed.2d necessary long requi- so as the proved. site intent to defraud We conclude that the district court’s

2. A Misapplication Instruction Is- willful misapplication instruction was not objection, sue. Without the district court error, error, plain much jury primarily instructed less the five willful reject the reasons we challenge counts the indictment Markert’s required government prove sufficiency to the of the evidence on this “willfully misapplied moneys issue. As we explained, have the evidence (8th Cir.2013), questioned Eighth 3. We have Circuit n. interpreting 18 U.S.C. Jury "misap- Model Instruction that defines § a statute modeled on 656. But that plication” to include "unauthorized” conduct present concern is not here because the in- simply using because bank funds without au- clearly required structions to find may necessary thorization lack the mens rea. that Markert acted with intent to defraud. Robertson, United States against recourse that the Bank lost control five nominee borrow- plainly showed proceeds they loan when First, of the nominee disagree. ers. We the contention is deposited into Wintz’s McCallum legally unsound. explained, As we have account at the Bank. checking Transfer knowing violation of designed pro- rules that, jury to con- The court instructed the tect a safety stability, bank’s financial and Markert, misap- find that he vict it must limits, legal lending such as when done and did so with intent to plied bank funds (for with the intent to deceive the bank request, defraud the Bank. At Markert’s example, protect employment one’s or “[g]ood that the court further instructed customer), to conceal bank fraud falls complete charge faith is a defense to each squarely within the offense of willful mis- funds,” of ... of and bank application Second, of bank funds. only that “evidence which establishes factually contention is unsound. Markert person judgment made a mistake in or committed the Bank’s loan reserves to management an ... does not es- error nominee loans the Board of Directors and tablish fraudulent intent.” When consid- regulators bank would not have approved, whole, ered as a these instructions defined to avoid an resulting overdraft condition the essential elements of the offense and from the real borrower’s fraudulent check- sufficiently guarded against a conviction kiting, a clearly transaction that created a on negligence, poor judgment, based or probable risk of further loss to the Bank. banking practices “technical” violations of regulatory requirements. jury nec- to defraud “exists if a per found, Intent essarily based on more than suffi- son acts if evidence, knowingly and the natural re cient willfully and of surreptitiously misapplied the nominee sult his conduct would be to ... defraud proceeds loan for the use and benefit of though may the bank even not have borrower, Wintz, George the real with the Beran, been his motive.” intent to the Bank. defraud omitted). (quotations That Markert in hoped tended or help Pinehurst avert an B. Intent to Though no Defraud. overdraft loss does not establish he statute, longer expressly stated all defraud, lacked an intent though may it agree courts that intent to in defraud or lack injure. evidence of an intent to Mar jure the bank remains essential element kert much negligently ap did more than of the willful offense under prove imprudent See, Barket, nominee loans. He e.g., 18 U.S.C. 656. helped again argues F.2d at 186. Markert insuffi Wintz deceive the nominee borrow ciency ers, of the jury documents, evidence and instruction backdated loan concealed error as to this element the offense. the nominee from the loans fourth member OLC, falsely of the structured Sufficiency the Evidence. Proper transactions as investments in Cue Markert argues the evidence was insuffi purpose ties to conceal the true prove requi cient to that he acted with the putative loans from both the borrowers injure site intent to defraud or the Bank and the Bank’s Board of All Directors. because requires proof intent to defraud this is more than sufficient evidence for Bank, probable loss to the and the trial requisite to find the intent evidence demonstrated that the nominee defraud. “The fact that did not [Markert] loan the Bank because benefitted (i) personally profit from his criminal conduct they costly avoided a overdraft condi legal is not a excuse for his action.” tion in Wintz’s McCallum Transfer ac (ii) count, Dougherty, left the Bank at least some 763 F.2d at 972.

930 with the intent pretenses doing when so The Intent to Instruc Defraud to defraud the bank. the district court objection, tion. Without to “intent defraud” phrase defined the objection joined timely Wintz’s de knowingly with intent to “to act mean pursues appeal, and the issue on so we cheat, causing of a purpose for the ceive review this instruction for abuse of discre bringing else or to someone financial loss tion, recognizing the district court has to the defendant or gain a financial about latitude, long so entire charge, wide as the argues the appeal, On another.” whole, fairly considered as a when it to in erred when failed plainly court adequately applicable contains the law. defraud, that, an intent to struct to find See, Bevans, e.g., v. United States that Markert’s actions jury must find the (8th Cir.1974). Applying 499 this to increased risk of subjected the bank standard, plainly Instruction No. 20 was a disagree. The court’s loss. pecuniary We portion relating correct of the instructions Eighth with Cir instruction was consistent in 2. It charges to the bank fraud Count Jury Instruction cuit Model Criminal carefully description tracked our of “nomi ap instruction we and with the 6.18.656 Willis, in nee loans” United 997 States 763 F.2d at 973. In proved Dougherty, Cir.1993), 2 n. addition, “[g]ood the instructed that court S.Ct. charge complete faith defense each is a (1994), case, a bank fraud L.Ed.2d ... it is misapplication of ... because encouraged by with the defense addition — defraud, intent inconsistent with the counsel at the instruction conference—of charges.” of those which is an element significant proviso, doing “when so error, plain no or otherwise. There was with the intent to the bank.” defraud appeal, On Markert of course our shifts Loan In C. The Nominee away charge focus from a Count the indictment struction. Count Rather, acquitted. which he was he now charged Markert and his co-defendants argues that this instruction was an abuse 1344(1) As 18 U.S.C. with bank fraud. of the district court’s discretion instruct- requires, alleged “a scheme and Count ing on the willful artifice to defraud Pinehurst Bank” is (Counts 3-7) it charges because failed to concealing five loans to suing and “straw that a instruct defendant does not act with commonly ... borrowers known as ‘nom intent to defraud unless he knows that the inee loan’ scheme.” The district court ad nominal financial borrower lacks the abili- allegation Jury dressed Instruction ty repay the nominee loan. In instruct- No. 20: 3-7, ing explained: on Counts the court charges Two ... Count through charge Counts Three Seven ... accomplished scheme to defraud was of bank funds through nominee loans. Nominee loans accomplished by approval was are loans in which the nominal borrower funds disbursement bank for five actually obtaining money was nominee loans to of George borrowers party’s third benefit. mere transfer already I have defined Wintz. “nominee party of a loan’s to a third Jury loans” Instruction No. 20. However, illegal. may not such a loan objection be unlawful when the borrower and the There was no to this instruction. bank officer fail to state the real borrow- Nor was the issue of the nominee borrow- funds, thereby ability er and ever recipient repay ers’ raised Therefore, obtaining the loans means of false instruction conference. our re- loan as it their loans was not essential to ques view of the nominee instruction plain for error. relates to Counts 3-7 is tion whether the scheme resulted in the misapplication proceeds. willful of the loan court’s The district definition strong There was evidence the nominal loans,” from of “nominee taken verbatim borrowers were deceived pur about the Willis, opinion unobjectionably in was our loans, pose of the did not know the loan in loans are loans which simple—“Nominee terms, clearly and some rather lacked the actually borrower was obtain the nominal ability repay. to As the district court’s money party’s for a third ing the benefit.” instructions, whole, considered fairly as complex can debata What is more and be adequately presented and the essential ele nominee defining ble is when the use of offense, ments of the willful liability. Bank gives loans rise to criminal error, plain we conclude there was no fraud and willful of bank otherwise, in the manner in which the offenses, has funds are distinct but each incorporated court its nominee loan bank the essential element intent to defraud. misappli fraud instruction into the willful included that properly The district court charged cation offenses in the indictment. in No. 20 and then element Instruction in further included intent defraud its Sentencing III. The Issue Thus, instructions on Counts 3-7. the nom way sentencing, in no Prior to the Revised inee loan instruction diluted that find Investigation Report court’s instruction must Presentence recom mended, intent to defraud to convict Markert of explanation, finding without misapplication. willful that willful misapplication Markert’s of equal fenses caused a loss to the total with disagree We Markert’s asser loans, nearly amount of the five nominee ability tion that a nominee borrower’s million, in resulting a 16-level always the lack of intent repay establishes advisory Sentencing crease under example, to defraud. For when a bank 2Bl.l(b)(l)(I). § U.S.S.G. Guidelines. See uses nominee to conceal that officer loans government’s sentencing memoran he will use the own inter his supported dum this recommendation on ests, puta “the financial condition of the (1) have grounds: two numerous cases tive borrower is irrelevant.” United check-kiting is cal held loss cases Steffen, v. 641 F.2d States fashion, culated in this check- Wintz’s Cir.), U.S. kiting was relevant conduct in Markert’s 3091, 69 L.Ed.2d 959 The evidence (2) offense; “the amount of loss presented analogous in this case situa misapplication and fraudulent loan cases is tion-use of nominee loans to conceal that citing misapplied,” the amount of funds the true borrower had exceeded his lend Hulshof, v. United States 23 F.3d ing agree limits.4 with We (8th Cir.1994). sentencing Markert’s ability the nominee borrower’s and intent argued, argues ap memorandum as he on repay will be relevant in some cases. peal, that both the actual loss to the Bank Brennan, Compare United States (1st resulting from the nominee loan transac Cir.1993), with United tions, inflict, Parsons, and the loss he intended to States v. 1279-80 (8th Cir.1981). view, were zero. As the Bank’s loss caused But in our the evi al completed check-kiting that Wintz’s had strongly suggested dence this case incurred, net ability repay ready explained, the nominal borrowers’ been he Moreover, although necessary pre- Markert did receive viewed the transactions as not proceeds, employment. the loan was evidence he serve his there tended to resolve several issues had between what difference loss—“the C., U.S.S.G.App. split the circuits. See the victim recov- paid and what victim II, 617, at Vol. Amend. 130-86. Under argued, anything, If he ered”—was zero. guideline, “actual de revised loss” now Bank’s improved the the nominee loans pecu reasonably fined as “the foreseeable position. financial niary harm that resulted from the of sentencing, At over Markert’s ob 2B1.1, comment. fense.” U.S.S.G. the loss adopted the district court jection, (n.3(A)(i)). “Actual loss” under the revised PSR, explain recommended the figure guideline concept is a “net loss” based ing: upon “the difference between what the misapplication The of the bank funds paid victim and what the victim recovered through the nominee loan scheme was plus any reasonably other forms of fore responsibility used to avoid detection pecuniary seeable harm that resulted from to- underlying check kite which of Hartstein, the offense.” United States million. amount of funds taled The (8th 790, Cir.2007), 500 F.3d 798 n. 3 cert. in a misapplied is the amount of the loss denied, 128 S.Ct. U.S. misapplication case and here those nomi- (2008); § L.Ed.2d 734 2B1.1 comment. million. nee loans totaled $1.8 (n.3(E)); Smith, accord United States v. (10th produced Cir.1991). This 16-level increase an adviso 951 F.2d As ry range of to 108 months. guidelines Sentencing explained: the Commission The court varied downward and sentenced provides The loss definition also for the prison. ap Markert to 42 months in He exclusion from loss of certain economic peals the fraud loss determination. We victims, benefits transferred to to be findings fact review the district court’s measured at the time of detection the [of interpretation clear error and its provision offense]. This codifies the advisory guidelines approach developed de novo. See United “net loss” that has Holthaus, crediting ap- States v. the case law.... This Cir.), proach adopted is because the serious- 343, 169 culpability ness of the offense and the Although L.Ed.2d 241 the by a defendant is better determined us- court granted a substantial downward vari ing a net rec- ance, increase, approach. approach This proce the if it 16-level was error, ognizes the offender who transfers dural guidelines cannot be deemed something gen- of value to the ] harmless. victim! erally committing a less serious of- defending In the district court’s fense than an offender who does not. ruling misapplied that the amount of funds II, 183; App. C.—Vol. Amend. ac- equals the amount of actual loss a willful comment, § (background). cord 2B1.1 case, government cites only decision, § one That government’s actual loss Hulshof. distinguishable misap case is because the by the adopted contention as district court plied at issue not the funds ignored change the revised loss of new loans the victim bank. More guideline by failing acknowledge importantly, was decided before monetary value of the nominee loans Hulshof Sentencing adopted exten Commission Bank in exchange received for the sive guidelines revisions to the and com misapplied proceeds, measured at the time mentary detected, governing the calculation of loss offense was offenses, for theft and revisions in be credited actual loss.5 The against fraud must contrast, By repayment discovery a defendant's funds of a fraud offense is after BRIGHT, Judge, dissenting. actual Circuit prove the burden to has government the evidence. preponderance loss majority’s I with the decision to concur considerable ef- record reflected The trial resentencing, sepa- remand for but write repayment of by the Bank to obtain fort rately express my strong disagreement loans, by the nominal either the nominee majority’s with the conclusion the evi- The net value of byor borrowers Wintz. support dence was sufficient to John Mar- loans, at the time their measured those conviction. Markert’s actions did kert’s detected, may be diffi- nominal nature was any posses- Bank of deprive not Pinehurst only sion, control, “The court need cult to measure. or use of its funds. There- fore, I respectfully estimate of the loss.” dissent. Because Mar- make a reasonable comment, 3(C). I unproved, kert’s crime is would reverse 2B1.1, But here no n. prison. conviction and release him from his what value was made to determine attempt A calculation. credit in the actual loss briefly I summarize the facts. will required. remand is Wintz, George through companies he con- trolled, check-kiting in a scheme engaged brief, the appeal to its In a footnote Bank) (the Bank involving Pinehurst that alternatively contended government Bank, rapidly transferring North Star the amount actual loss should be Markert’s artificially funds between the two banks to check-kiting of the “float” when Wintz’s By inflate his account balances. the time unraveled, in finding upheld a we scheme the defendant Markert was notified of this fraud, check-kiting case of Unit- an earlier in activity, approximately hung million $1.9 Whitehead, 1030, 176 F.3d ed States sought way a to the balance. Cir.1999). (8th reject this con- We 1042 impending cover Wintz’s overdraft. as a cate- adopt did not tention. We lending previously Bank had reached its impor- More gorical rule Whitehead. meaning companies, limit to and his Wintz a tantly, charged Markert was not with any directly. to of them it could not lend offense, acquitted check-kiting and he was Bank, Markert attempt In an to save the with charge conspired that he Wintz five “nominee” loans to cover the arranged commit bank fraud. million overdraft. Five individuals Bank, to take out loans from the agreed guideline, revised the amount Under the to allow the loan to be imme- but greater of actual of loss continues to be diately through his transferred Wintz 2B1.1, § or intended loss. See U.S.S.G. company accounts. (n.3(A)). Here, in response to comment. 2010, Bank January In an audit of the the intended Markert’s contention had issued the nom- revealed subjective loss was zero because he had no resulting inee loans to cover the overdraft Bank, government intent to harm the check-kiting scheme. The from Wintz’s any disclaimed reliance on appeal on indicted Markert on various Government Thus, theory. the issue intended loss counts, fraud including one count of bank flawed calculation of actual turns on its § and five in violation of 18 U.S.C. 1344 loss. of bank misapplication of willful counts of affirm Markert’s conviction and re- a bank officer violation 18 We funds § A convicted him of the resentencing. U.S.C. mand Stennis-Williams, Cir. sentencing. 557 F.3d See U.S.S.G. not relevant 2009). (n.3(E)); § States v. 2B1.1 comment. United funds, of tributed three of the loans into the nomi- of but five counts accounts, him of bank fraud. The district acquitted checking then to nee borrowers’ to months court sentenced Markert account, Properties finally Wintz’s Cue prison. appeals. He to Wintz’s McCallum Transfer account. The other two nominee loans were trans- should not stand.

Markert’s conviction directly Properties ferred into Cue as follows. In order The relevant law is account and then to the McCallum Trans- of bank prove a crime account. The chain of transactions fer was 18 U.S.C. the Govern funds under only bookkeeping matter and re- was that Markert required prove ment was If, here, corded a matter of seconds. as federally insured the funds of a converted “control” over the funds so short in is time himself or another for the benefit of bank any practically one cannot exercise injure or person, with the intent to defraud all, control at it follows that the bank is not Barket, States v. the bank. United deprived “possession, control or use (8th Cir.1975), cert. de 186-87 required of its funds” that is for a conver- nied, U.S. sion. (1976); L.Ed.2d 282 see United States v. (8th Cir.1976) Beran, Cognizant that the nominee borrowers (“Conversion personal of bank funds for funds, any lacked control over the use, or for the use another individual or majority supports now the conviction with encompassed within the corporation, theory that was never advanced misapplication.”), definition of criminal Wintz, Government —that not the nominee denied, 916, 1330, cert. 430 U.S. S.Ct. borrowers, temporary had control over the L.Ed.2d 595 In order to establish proceeds they when were credited to his the on de conversion which control, McCallum Transfer account. This pends, prove must either the Government contends, majority the is sufficient to es- “actual loss” or “that the defendant at However, a in tablish conversion. its the bank of temporarily deprive[d] least brief, crystal the in Government is clear its the of its funds.” possession, control or use view that Markert converted the at funds Duncan, United States v. they the time distributed to were the nom- Cir.1979), inees, brief, In not to Wintz. its the Gov- (1979); L.Ed.2d 96 ernment states: States, see Dow v. 82 F. United Here, conversion of bank funds within (8th Cir.1897) (“To complete misapplica a meaning precedents the of this Court’s bank, tion of it the funds of the was neces was established. Markert caused the sary that portion some thereof should be Bank to capital, commit its and disburse

withdrawn from the or control possession general from its in funds million $1.9 bank, of the in some form a conversion proceeds new loans. He caused the loan thereof, should be made so the bank nominees, to be disbursed to Wintz’s in thereof.”). deprived would be of the benefit violation of the policy Bank’s and state clearly stated, As there must be conver lending requirements. Conversion oc- sion. disbursement, curred at the time Here, the not prove Government did nominees, Bank, point which not the that Markert The Bank converted funds. possession had and control funds. suffered no it actual loss because retained (Gov. 35-36.) added). (emphasis Br. at loans, all the funds nor from the nominee brief, Later in its again did the Bank the Government ever lose control funds at issue. On March Markert dis- insists that Markert converted the funds notes, gained because “the nominee borrowers As final I would observe that the proceeds the loan as soon as control over majority does not cite to a single case that (Gov. 40.) them.” Br. at I they received mirrors the facts we have before us. majority’s take the shift focus to wheth- Moreover, there was no evidence that control the funds er Wintz exercised over actually injured the Bank. The recognition as a tacit that the Government evidence is to contrary, jury’s prove theory has not and cannot its acquittal of Markert on one count of bank conversion to the nominee borrowers to (Count 1) fraud negate should any support support Markert’s conviction. for a determination that the bookkeeping Ironically, majority’s theory new entries directed in any way fares no better than the Government’s the- defrauded the Bank. ory. majority now contends that a stated, For the reasons I would reverse gained conversion occurred when Wintz Markert’s conviction for misapplication of proceeds control of the million in loan $1.9 bank funds under 18 U.S.C. 656 because they at the time were distributed into his the evidence was insufficient to establish I disagree. McCallum Transfer account. conversion. I would be remiss if I did not proceeds At the time the were distributed that, express my also account, view on Wintz’s McCallum Transfer remand for approximately there resentencing, was million of the district court should ac- “in overdraft float” due to Wintz’s check- knowledge degree the true of actual loss in kiting majority scheme. But as the ob- this case: zero. There was no loss to the serves, preexisting Wintz’s contractual re- Bank, and Markert did not enrich himself gave lations the Bank right” “immediate during processing and distribution of control, possession, and use of the funds at Simply the nominee loans. put, we have they the time deposited enough people jail long for too a time.6 account, McCallum Transfer which is held longer Markert should no be one of them. by Pinehurst Bank. The own Government’s analyst agreed financial that the

from the nominee loans “came into [the] (Trial 40.)

account and zeroed it.” Tr. circumstances,

Given these Wintz could practically

have never exercised control any given deposit

over funds that the

funds in his account resulted a zero Thus, balance, access,

balance. no no

no conversion occurred. spread In his remarks to the American Bar Associa- incarceration is unsustainable because 12, 2013, Delegates August “imposes significant tion’s House of on it economic burden'—(cid:127) Attorney emphasized totaling General Eric Holder $80 billion in 2010 it alone —and many go many "that too Americans to too comes with human and moral costs that are prisons long, truly good impossible for far too and for no to calculate.” Id. Given these sub- Holder, costs, agree law enforcement reason.” Eric At- stantial economic and moral I States, torney Attorney General of the United United with the General that we must en- Justice, Department justice system States Remarks at the sure that our criminal is "tar- Meeting geting Annual "prose- American Bar Associa- the most serious offenses” and 12, 2013), Delegates (Aug. tion’s cuting dangerous House of the most criminals.” Id. http://www.justice.gov/iso/opa/a^ available at Even if I were to assume that Markert was convicted, speeches/2013/ag-speech-l30812.html. rightly Attor- his case does not fall into ney explained category. General Holder that wide- either

Case Details

Case Name: United States v. John Markert

Court Name: Court of Appeals for the Eighth Circuit

Date Published: Oct 22, 2013

Citation: 732 F.3d 920

Docket Number: 19-8019

Court Abbreviation: 8th Cir.