UNITED STATES оf America, Plaintiff-Appellee, v. Ronald C. BRECHTEL and Phillip H. Gattuso, Defendants-Appellants.
No. 92-3342.
United States Court of Appeals, Fifth Circuit.
Aug. 2, 1993.
Rehearing Denied Sept. 21, 1993.
997 F.2d 1108
Frank G. DeSalvo, New Orleans, LA, for Ronald C. Brechtel.
Patrick Fanning, New Orleans, LA, for Phillip H. Gattuso.
Before POLITZ, Chief Judge, KING and DUHÉ, Circuit Judges.
PER CURIAM:
Ronald Brechtel and Phillip Gattuso appeal their convictions of unlawful participation in benefits from savings and loan transactions, in violation of
Background
Brechtel and Gattuso served as directors of Enterprise Federal Savings & Loan (EFS & L). Brechtel also served as secretary of the board and as a member of the loan committee. In addition to their involvement with EFS & L, Brechtel and Gattuso had interests in the Saulet and Ames Farm partnerships, two real estate development concerns owning land in Jefferson Parish, Louisiana. Gattuso‘s cousin Roy Gattuso managed those partnerships.
In 1984 and 1985, Gattuso executed documents by which Saulet and Ames Farm granted options on parcels of land. Stavros Amitsis, holder of thе Saulet option, had exhausted his credit line and could not secure financing at EFS & L to purchase this property. Nikitas Pepis and Lynn Yao—two Amitsis associates—sought EFS & L loans with which to purchase the Saulet and Ames Farm parcels. Marilyn Ortalano, an EFS & L loan officer, informed the loan committee that if the loans were approved, Amitsis ultimately would receive the proceeds thereof. She also informed them that Robert Evans, EFS & L‘s board chairman, wanted the Yao and Pepis loans approved to keep Amitsis afloat. Brechtel urged the loan committee to approve the transactions.
On December 18, 1984, the $420,000 Pepis loan received committee approval. At a Jan
In March 1985, the loan committee approved the $500,000 Yao transaction. The record contains no minutes reflecting approval of this loan by the full EFS & L board. On April 1, 1985, Yao took title to the Ames Farm parcel, giving in return cash and a note secured by the property. Brechtel and Gattuso attended that closing and signed the act of sale. EFS & L received a second mortgage on the Ames Farm property.
By 1986, Pepis and Yao were experiencing difficulty meeting their obligations under the Saulet and Ames Farm notes. On April 22, 1986, to avoid a foreclosure EFS & L purchased the first mortgage on the Saulet parcels. On April 29, 1986, Gattuso and Brechtel were advised by letter from Roy Gattuso of Yao‘s delinquency on the Ames Farm note and that Yao would seek to refinance his debt to the partnership through EFS & L. Roy Gattuso also advised that if Yao failed to obtain supplemental financing through EFS & L, foreclosure proceedings would be initiated. On June 19, 1986, the EFS & L board approved a $1.8 million loan permitting Yao to work out his financial problems. Brechtel, but not Gattuso, attended the June 19 meeting. Brechtel testified that he disclosed his and Gattuso‘s interest in the Yao loan and abstained from voting on it. The minutes from the Junе 19 meeting and the testimony of two other board members belie Brechtel‘s statement.
The grand jury indicted Brechtel and Gattuso on four counts of unlawful participation in benefits from savings and loan transactions, in violation of
Analysis
On appeal, both defendants challenge the sufficiency of the evidence and contend that the district court improperly рermitted testimony regarding their violation of civil banking regulations. Brechtel further challenges the district court‘s refusal to: (1) dismiss counts of the indictment as multiplicitous, (2) permit his presentation of habit evidence, and (3) grant him a new trial. He also maintains that the statute of limitations barred his prosecution.
1. Multiplicity
Brechtel first faults the district court‘s denial of his motion to dismiss portions of the indictment on multiplicity grounds. An indictment is multiplicitous if it charges a single offense in multiple counts,2 thus raising the potential for multiple punishment for the same offense, implicating the fifth amendment double jeopardy clause.3 Legislative intent typically is dispositive of the multiplicity inquiry. When considering an indictment charging separate offenses arising from a series of related acts, we must determine whether Congress intended separate punishments.4 Where a defendant suffers convictions on multiplicitous counts, we must remand so that the government may dismiss improper charges and the trial court may resentence the dеfendant.5 Like other determinations regarding double jeopardy, we review district court rulings on multiplicity claims de novo.6
Brechtel suggests that the two loans to Yao constituted individual steps in an overarching scheme to procure improper benefit from EFS & L through sale of the Ames Farm parcel. By charging the two Yao transactions as separate offenses, Brechtel argues that the government improperly splintered a single offense. He claims that in United States v. Lemons,7 we found that multiplicity tainted an indictment under identical circumstances. We are not persuaded.
Lemons involved a bank-fraud prosecution under
Because of the differences between
2. Limitations Period
Brechtel next asserts that the five-year limitations period of
Recent Supreme Court teachings reject the proposition that retroactive legislation violates the ex post facto clause merely because it adversely affects the position of criminal defendants.11 Rather, that clause prohibits only enactment of statutes which: (1) punish as a crime an act previously committed which was innocent when done; (2) make more burdensome the punishment for a crime, after its commission; or (3) deprive one charged with a crime of any defense available according to law at the time when the act was committed.12 Only statutes withdrawing defenses related to the definition of the crime, or to the matters which a defendant might plead as justification or excuse fall within the latter group.13 Plainly, extension of the limitations period neither criminalizes previously innocent conduct nor enhances the punishment for an existing crime. Further, while
3. Habit Evidence
At trial, Brechtel sought to present testimоny by his stock broker James Mangum. Through Mangum‘s testimony, Brechtel sought to establish that, as a matter of habit, he took an entirely passive role in his real estate and stock investments, permitting advisors to act on his behalf without inquiry into the substance of the transactions they proposed.15 Mangum‘s testimony, Brechtel asserts, would have tended to negate the mental state required for conviction under
Relying on our opinion in United States v. Riley,17 Brechtel argues that the district court erred in refusing to permit Mangum‘s testimony. The defendant in Riley, indicted for misapplication of bank funds under
Mangum‘s proffered testimony did not involve Brechtel‘s business relationship with real estate advisor Sam Gattuso. Further, it involved Brechtel‘s standard operating procedure for stock transactions, which involve substantially less formality than the real estate transactions here at issue. Thus, Mangum‘s proffered testimony had at best tenuous relevance18 and, even if relevant, would have had far less probative force than the evidence at issue in Riley. The chain of analogies required to ground relevance of this evidence might well have rendered it confusing to the jury. Well-settled rubrics consign rulings on admissibility of evidence to sound trial court discretion,19 and require particular appellate court deference to rulings under Fed.R.Evid. 403 based on the risk of jury confusion.20 While the discretion which district courts enjoy does not extend to the exclusion of crucial relevant evidence establishing a valid defense,21 the questionable relevance, low probative value and potential for jury confusion presented by Mangum‘s testimony distinguish this case from Riley and persuade that its exclusion did not amount to an abuse of discretion.22
4. Evidence of Regulatory Violations
Both Brechtel and Gattuso claim that the district court erred in permitting testimony by Ronald Hall, an examiner with the Office of Thrift Supervision. Over defense objection, Hall testified that regulations require directors to disclose any interest they may have in transactions under consideration by the bank and abstain from deliberations concerning such transactions, and prohibit loans in which bank officials have an interest unless made directly to the official in question.23 They argue that this testimony improperly suggested criminal liability flowing from a civil violation, and further improperly suggested the criminal intent required to convict them under
In United States v. Christo,25 relied upon by Brechtel and Gattuso, we reviewed a prosecution for misapplication of bank funds in which the government presented evidence of
The case at bar differs substantially from Christo. Testimony regarding civil regulations constituted only a minor portion of Hall‘s testimony. To the extent that he mentioned disclosurе requirements, they permissibly assisted the jury in understanding the significance of EFS & L‘s board minutes and management disclosures to thrift authorities. Hall‘s statement concerning the prohibition on interested director transactions properly tended to demonstrate the defendants’ motive for nondisclosure.29 The government did not argue that any civil regulatory violation by Brechtel and Gattuso could alone give rise to criminal liability, and the district court admonished the jury that “[a] violation of banking regulations in and of itself does not amount to criminal conduct under federal law. The government must prove the elements of the offense beyond a reasonable doubt.” We cannot conclude that Hall‘s testimony regarding civil regulations “impermissibly infect[ed] the very purpose for which the trial was being conducted.”30 The district court did not abuse its discretion in permitting Hall‘s testimony.
5. Sufficiency of the Evidence
Both Brechtel and Gattuso challenge the sufficiency of the evidence supporting their convictions.31 In order to convict a defendant of improper participation in bank transactions under
We have long recognized the
Well-settled law governs our sufficiency inquiry. We must view the evidence, giving due regard to the trier‘s credibility calls, and draw all reasonable inferences which favor the verdict.37 If the evidence so viewed would permit a rational jury to find all elements of the crime beyond a reasonable doubt, we must affirm the conviction.38 The evidence need not exclude all hypotheses of innocence.39 Applying these standards, we find the evidence sufficient to support the convictions in this case.
a. Brechtel
Special Agent David Lyons of the F.B.I. testified that Brechtel acknowledged an expectation that Yao would use proceeds of both EFS & L loans for purchase of the Ames Farm parcel. The jury properly could discredit Brechtel‘s denial on the witness stand that he ever had such an understanding. Marilyn Ortalano‘s testimony permitted a jury conclusion that Brechtel knowingly failed to disclose his interest in the initial Yao transaction and acted to procure its approval by the loan committee. Such evidence adequately supports Brechtel‘s conviction on count two.
With regard to count four, Roy Gattuso‘s April 29 letter аnd Brechtel‘s claim that he abstained from voting on the Yao workout loan reflect Brechtel‘s knowledge of his interest in that transaction on June 19, the date it obtained board approval. Discrediting Brechtel‘s contrary testimony, the jury reasonably could have inferred from the absence of contrary mention in the June 19, 1986 board minutes that Brechtel failed to disclose his interest in the latter Yao transaction and participated in its consideration. Brechtel‘s conviction on count four finds ample support in the record.
b. Gattuso
EFS & L minutes and Gattuso‘s own testimony indicate his presence at the meeting during which the board ratified the initial Pepis loan. Gattuso‘s insistence on the wit
Although a closer case than count one, we likewise believe that constitutionally sufficient evidence supports Gattuso‘s conviction on the second count of the indictment. The key issue here is whether there was sufficient evidence of Gattuso‘s intent to defraud EFS & L regarding the first of the two loans made by EFS & L to Yao on March 19, 1985. As discussed above, Yao paid over the proceeds from that loan to the partnership in which Gattuso and Brechtel possessed an interest.
At trial, the government‘s theory regarding Gattuso‘s guilt on the second count was that he attended the March 19, 1985 board meeting and even voted to approve the first Yao loan, while both knowing of his indirect pecuniary interest in the loan and without disclosing that interеst to the board. We agree with the government that a section 1006 violation is clearly established when a member of a federally insured financial institution‘s board fails to disclose a direct or indirect pecuniary interest in a loan being approved by the board.42 The only question regarding Gattuso‘s conviction on count two is whether there was sufficient evidence from which a rational jury could find beyond a reasonable doubt that Gattuso both knew about the first Yao loan before it was finalized and failed adequately to disclose his interest in the loan to responsible persons at EFS & L.
Because there is little question that no disclosure occurred by Gattuso or Brechtel regarding the partnership‘s interest in the first Yao loan, our chief inquiry is whether the evidence at trial, which was wholly circumstantial, would permit a rational jury to find beyond a reasonable doubt that Gattuso knew that EFS & L was making a loan to Yao. At the outset, we observe that three larger circumstаnces militate in favor of such a finding: first, a jury could rationally conclude that a sophisticated real estate broker such as Gattuso—who had been in the real estate business for over three decades—would not likely have been in the dark about important business transactions directly affecting a partnership in which he had a significant interest. This is particularly true in view of the substantial evidence that Gattuso himself, on behalf of the partnership, signed the documents closing the sale of the Ames property to Yao contemporaneously with the finalization of the first loan to Yao.43
Second, we observe that there was substantial evidence that Gattuso‘s co-defendant and business partner, Brechtel, and Gattuso‘s cousin and attorney for the partnership, Roy Gattuso, were both well aware that Yao was in the process of obtaining financing from EFS & L for the purpose of purchasing the Ames Farm property in early 1985.44 Although the fact that one‘s close business associates were privy to information highly relevant to a joint business concern does not by itself support a finding that the information was passed on to the other partner, certainly it is probative and, when combined with other evidence, would permit an inference that communication occurred.45
Third, we observe that the timing of Yao‘s exercise of the option on the Ames property and Yao‘s obtaining the loan, which occurred in early 1985, were roughly contemporaneous with Gattuso‘s involvement in the Pepis loan scheme.46 Although the two real estate transactions were distinct, the government presented substantial evidence that Nikitas Pepis and Lynn Yao were each affiliated with Stavros Amitsis.47 A jury could rationally infer that Pepis and Yao acted in conjunction. That is, in view of the overlapping timing between the Pepis and Yao transactions and corresponding loans and the debtors’ common link to Amitsis, a rational jury could believe that the Yao loan and the Pepis loan were part of a common plan or scheme to defraud EFS & L. Cf. Fed.R.Evid. 404(b). Accordingly, a rational jury could infer that Gattuso‘s guilty knowledge regarding the Pepis loan extended to the Yao loan.
Yet such larger circumstantial factors, by themselves, would not permit a rational jury to find Gattuso‘s guilt beyond a reasonable doubt. Thus, an examination of the government‘s other evidence is in order. Of particular importance is Government Exhibit 20, a two-page document entitled “Executive Committee Meeting of March 7, 1985, Loans for Ratification,” which lists a dozen or so loans to be later ratified by the board of directors. Among them is a $500,000 line of credit to Lynn Yao. Although a notation on the document states, “SECURED BY VARIOUS PROPERTIES“—and thus makes no specific mention of the Ames Property—the closing of the sale of the Ames Property occurred less than two weeks later, on April 1, 1985. We believe that, assuming Gattuso saw this document, a rational jury сould believe that Gattuso knew that the notation about Yao must have concerned a loan for the sale of the Ames Property.
At issue, however, is whether that document was seen by Gattuso at the March 19, 1985 board meeting. Admittedly, the two pages of typed minutes from the meeting make no reference to the ratification of the executive committee‘s loans (including Yao‘s) on March 7, 1985. Moreover, Gattuso denied knowing that Yao was seeking financing for the purchase of the Ames Property until after the loan was finalized. Two pieces of evidence belie his claim. First, it is clear that Gattuso attended the board meetings in early 1985, including the March 1985 meeting, and there is no indication that he made disclosure of his interest in the Yao loan or
We additionally observe that the $500,000 loan to Yao in the spring of 1985 was in the form of a line of credit. The promissory note and collateral mortgage note executed by Yao in favor of EFS & L were signed on April 1, 1985. According to the express terms of the collateral mortgage note, “Lender has this date agreed to make a loan ... to Borrower up to the amount of Five Hundred Thousand and No/100 ($500,000) DOLLARS....” Thus, Yao‘s actual line of credit was formally opened on April 1, 1985. Notably, the date that the Ames Property sale closed was also April 1, 1985. It is undisputed that Phillip Gattuso attended the closing; indeed, his signature appears on the documentation memorializing the closing. Because Gattuso signed documentation at the closing, a jury could rationally infer that he knew that the sale of the property was being financed by EFS & L.48 Thus, even if Gattu
In sum, although admittedly a close case, we conclude that a rational jury could find beyond a reasonable doubt, in view of the totality of circumstantial evidence, that Gattuso, with the intent to defraud, knowingly “share[d] in or receive[d] directly or indirectly ... money ... through” EFS & L.
With respect to count four, we also believe that a rational jury could find beyond a reasonable doubt that Gattuso intended to defraud EFS & L in violation of
We hold that the government need not offer evidence that a board member such as Gattuso actually voted or otherwise engaged in affirmative conduct, in his capacity as a responsible bank official, to secure a loan in which he possessed a pecuniary interest. Rather, mere knowledge that such a loan is being obtained coupled with a failure to disclose his interest establishes a violation of
6. New Trial Motion
In his final assignment of error, Brechtel essentially reiterates his previous points, asserting that at minimum they required the district court to grant his motion for new trial. The trial court‘s superior vantage point on the weight and effect of evidence
Conclusion
For the foregoing reasons, the convictions are AFFIRMED.
POLITZ, Chief Judge, Concurring in Part and Dissenting in Part:
I agree with most of the majority opinion. There is sufficient evidence to support Brechtel‘s convictions on counts two and four and Gattuso‘s conviction on count one. I concur in the affirmance of the convictions on these counts. I find the evidence in support of Gattuso‘s convictions on counts two and four to be woefully inadequate. I must dissent from the majority‘s holding to the contrary.
It is not the function of an appellate court to fill in the gaps and voids in the evidence and to rule on the basis of evidence which could have or might have been offered. We are to review solely on the basis of what in fact was offered in evidence at trial.
In order to sustain a conviction the evidence need not eliminate all hypotheses of innocence. Our precedents, however, make equally clear that mere consistency with a theory of guilt will not suffice. Rather, where the evidence viewed most favorably to the government provides equal or near equal support to inferences of guilt and innocence,
The majority initially reasons that, in view of Government Exhibit 20 and Gattuso‘s testimony regarding EFS & L loan approval practices, a rational jury could conclude that the full EFS & L board considered and approved the Yao transaction at its March 19, 1985 meeting. Government Exhibit 20 consists of two pages detailing approval of loans by the bank executive committee. Its first page indicates that the executive committee considered those transactions on March 7, 1985. At the top of its second page, which contains the reference to the initial Yao transaction, Government Exhibit 20 bears the notation “March 19, 1985, Cont.” Further, during cross-examination, Gattuso testified to his belief that, in early 1985, loans generally required approval from both the full board and the executive committee.2 Certainly, if the EFS & L board approved the initial Yao transaction at that time—concededly in Gattuso‘s presence—a jury could infer the mental state required by
The record is silent about the discrepancy in dates between the first and second pages of Exhibit 20 or the significance of the “March 19, Cont.” notation. At best, that exhibit permits an inference as to the date on which the executive committee approved the initial Yao transaction. It does not purport to indicate when or if the full board acted on the transactions detailed. Although Gattuso testified that transactions generally required approval by the full board as well as the executive committee, the government produced no evidence tying the initial Yao loan
Alternatively, the majority suggests that even if Gattuso did not vote to approve the initial Yao loan on March 19, the jury could have inferred his knowledge that EFS & L financed the Ames Farm purchase from his presence at the April 1 closing. The majority opines that if Gattuso learned of EFS & L‘s interest in the loan on April 1, his failure to stop the transaction and inform the bank of his interest gives rise to an inference of intent to defraud under
Lynn Yao produced a cashier‘s check—not a bank check—at closing. Further, Roy Gattuso—not Phillip Gattuso—managed the Ames Farm partnership. The government produced no evidence that Roy Gattuso ever informed Phillip Gattuso regarding Yao‘s financing, or even that he generally provided such information to his cousin regarding real
As to Count 4, the majority reasons that receipt of Roy Gattuso‘s April 29, 1986 letter placed Phillip Gattuso on notice of his interest in the latter Yao transaction. It then holds that, given such knowledge, the jury could infer intent to defraud from Gattuso‘s failure to make disclosure, notwithstanding his absence from the meeting at which the board approved that loan and the absence of any evidence indicating his active pursuit of its approval. The April 29 letter, in relevant part, stated “Mr. Yao is seeking financial arrangements with Enterprise Federal for payment of the above captioned debt. If Enterprise fails to extend credit to Mr. Yao, I will commence foreclosure proceedings immediately.” Receipt of this letter does not
For these reasons, I concur in part and dissent in part.