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Parties Involved:
James Allen Ratchford
Appellant
United States of America
Appellee

Document Text:

PUBLISH 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

FI LED 

United States Court of Appeals 

Tenth Ciratit 

AUG 12 1991 

ROBERT L. HOECKER 

Clerk 

UNITED STATES OF AMERICA, ) 

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Plaintiff-Appellee, 

v. No. 90-6343 

JAMES ALLEN RATCHFORD, 

Defendant-Appellant. 

Appeal from the ·united States District Court 

for the Western District of Oklahoma 

(D.C. No. CR-90-89-P) 

Jay F. Mccown, Oklahoma City, Oklahoma, for defendant-appellant. 

Vicki Zemp Behanna, Assistant United States Attorney (Timothy D. 

Leonard, United States Attorney, with her on the brief), Oklahoma 

City, Oklahoma, for plaintiff-appellee. 

Before MCKAY and LOGAN, Circuit Judges, and BRIMMER, Chief 

District Judge.* 

LOGAN, Circuit Judge. 

* The Honorable Clarence A. Brimmer, Chief Judge, United States 

District Court for the District of Wyoming, sitting by designa- tion. 

Appellate Case: 90-6343 Document: 01019731434 Date Filed: 08/12/1991 Page: 1 
Defendant James Allen Ratchford was convicted following a 

jury trial of nine counts of bank fraud and two counts of misapplication of funds, in violation of 18 U.S.C. §§ 1344(1) and 657. 

The nine counts of bank fraud were in connection with an alleged 

check kiting scheme and the two counts of misapplication of funds 

were for an alleged diversion to personal use of moneys belonging 

to a savings and loan association. He now appeals, arguing that 

(1) there was insufficient evidence to support his convictions on 

the first three bank fraud counts and the two misapplication of 

funds counts; (2) reversal is required because the prosecutor made 

prejudicial misstatements in her closing remarks; and (3) the 

court failed to properly instruct the jury on defendant's good 

faith defense on counts four through nine. 

I 

Defendant first contends that the government presented insufficient evidence to convict him on the first three bank fraud 

counts of the indictment. Specifically, defendant argues that his 

bank accounts, when combined, contained sufficient funds on 

April 6, 1987, to cover the three checks that formed the basis of 

counts one, two, and three. 

"Evidence is considered sufficient to support a criminal 

conviction if, when viewed in the light most favorable to the 

government, a reasonable jury could find the defendant guilty 

beyond a reasonable doubt." United States v. Culpepper, 834 F.2d 

879, 881 (10th Cir. 1987) (citing Jackson v. Virginia, 443 U.S. 

307 (1979)). Applying this standard to the instant case, we find 

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Appellate Case: 90-6343 Document: 01019731434 Date Filed: 08/12/1991 Page: 2 
sufficient evidence in the record to support defendant's convictions. 

Defendant, an accountant and businessman, formed Home Management, Inc. and three related companies in 1980: HMI Property 

Management, Inc., HMI Realty, Inc., and HMI Construction Company. 

The indictment charged that in January 1987, defendant began 

kiting checks at three different banks utilizing the accounts of 

his companies, his personal account, and an account labeled HMI 

Investors Trust Account; that defendant's activities continued 

until April 1987, ultimately causing a loss to two of the banks of 

nearly $50,000. Count one charged defendant with writing a check 

in the amount of $4,300 on January 21, 1987, count two a check of 

$4,500 on February 9, 1987, and count three a check of $4,900 on 

March 20, 1987, while "knowing or having reason to know that the 

funds in [the respective accounts] were not sufficient to pay such 

•.• check[s]," in violation of 18 u.s.c. § 1344(1). Indictment, 

I R. tab 5/9/90, at 3, 4. 

The government's evidence at trial showed that on the dates 

the checks charged in counts one through three were written, there 

were insufficient funds in the respective accounts to cover the 

checks. The evidence also shows that the covering deposits for 

these checks were in the form of checks written on either the account to which the original indicted check was deposited or an 

account of one of defendant's other companies involved in the 

float scheme. The only argument defendant makes is that the 

existence of sufficient funds on April 6, 1987, negates a finding 

of guilt because in a true check kiting scheme, there is never a 

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Appellate Case: 90-6343 Document: 01019731434 Date Filed: 08/12/1991 Page: 3 
positive balance of funds exclusive of inter-account transfers. 

We disagree. The insufficient fund checks charged in counts one, 

two, and three were written on January 21, February 9, and 

March 20, 1987, respectively. For purposes of § 1344(1), the 

relevant inquiry is whether defendant knowingly had insufficient 

funds in the accounts being utilized on the date the checks were 

written. The amount contained in those accounts on April 6 is 

irrelevant to this determination. 

Based on the evidence, we hold that a jury could find beyond 

a reasonable doubt that defendant "knowingly execute[d] .•• a 

scheme or artifice to defraud a financial institution." 18 u.s.c. 

§ 1344(1). 

II 

Defendant's misapplication of funds conviction stemmed from 

his activities as head of HMI Property Management, Inc. (HMI 

Property). HMI Property acted as property manager for Valley 

Forge, an apartment complex owned by two Oklahoma savings and loan 

institutions. In the spring of 1987, the apartment complex 

sustained hail damage which resulted in a cash settlement from the 

insurance company. Defendant diverted $8,800 of this settlement 

to his personal account, using the money to pay his charge card 

debt. HMI Property never repaired the damage to the complex. 

Defendant argues that the evidence was insufficient to 

convict him of misapplication of funds under the language of 18 

u.s.c. § 657. Specifically, defendant contends that at the time 

he procured the funds from the insurance settlement, he was not 

"connected" with a federally insured institution as required by 

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Appellate Case: 90-6343 Document: 01019731434 Date Filed: 08/12/1991 Page: 4 
§ 657. Defendant argues that his only connection was with First 

Capital Mortgage, the loan servicer for the the two savings and 

loans, and that this contact is too remote for purposes of § 657. 

We disagree. 

Section 657 imposes criminal liability on any "officer, agent 

or employee of or connected in any capacity with" a savings and 

loan who embezzles or willfully misapplies any money or funds 

belonging to such institution. 18 u.s.c. § 657 (emphasis added). 

In the instant case, defendant's was connected to a savings and 

loan through his association with First Capital, who employed his 

company to manage an apartment complex owned by two Oklahoma savings and loans. 1 As president and owner of the managing company, 

defendant was aware of the savings and loans' ownership of the 

complex and that his ultimate responsibility was to these owners. 

It was in this position of trust that he diverted funds he knew 

belonged to these institutions to his own personal use. The check 

defendant diverted in part to pay his personal charge card debt 

was made out to "OK Federal S & L DBA Valley Forge Apts C/O Jim 

Gladney, Home Mgmt Inc." Addendum Exhibits of Appellee's Brief at 

77 (ex. 65). Jim Gladney signed the check for Home Management, 

Inc. and turned it over to defendant. III R. at 257. 

Although each case is fact specific, the courts have given a 

broad interpretation of § 657 to effectuate congressional intent 

to protect federally insured lenders from fraud. See United 

1 First Capital, as loan servicer, was responsible for taking in 

principal and interest payments and disbursing them to the 

mortgage holders of the property. A loan servicer performs this 

task in the same manner as would a savings and loan. IV R. at 

289. 

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Appellate Case: 90-6343 Document: 01019731434 Date Filed: 08/12/1991 Page: 5 
States v. Prater, 805 F.2d 1441, 1446 (11th Cir. 1986). "'In 

cases where the defendant is not directly employed by the insured 

bank, courts have focused on the relationship between the 

employing entity and the bank's business in deciding whether there 

is a sufficient "connection" for purposes of the statute.'" Id. 

(quoting 

1981)). 

United States v. Fulton, 640 F.2d 1104, 1106 (9th Cir. 

See also United States v. Harris, 729 F.2d 441, 445 (7th 

Cir. 1984) (employees of state agency receiving 60% of operating 

funds from HUD, working on 100% HUD funded project, are 

"connected" to HUD sufficiently to support conviction under 

§ 657). Given the facts of the instant case and the broad 

interpretation normally afforded§ 657, we conclude that defendant 

was sufficiently connected· with an insured savings and loan 

association to support his convictions for misapplication of funds 

belonging to it. 

III 

Defendant next argues that the prosecutor made prejudicial 

misstatements concerning the law and evidence during her closing 

argument. In his brief, defendant identifies four false and 

misleading remarks by the prosecutor that, even though he failed 

to object, require reversal of his conviction under the plain error rule. 

In cases involving a failure to object, Rule 52(b) of the 

Federal Rules of Criminal Procedure authorizes a court to review 

the evidence or statement for plain error. The plain error 

doctrine of Rule 52(b) "tempers the blow of a rigid application of 

the contemporaneous-objection requirement." United States v. 

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Appellate Case: 90-6343 Document: 01019731434 Date Filed: 08/12/1991 Page: 6 
Young, 470 U.S. 1, 15 (1985). "The Rule authorizes the Courts of 

Appeals to correct only 'particularly egregious errors,' those 

errors that 'seriously affect the fairness, integrity or public 

reputation of judicial proceedings.'" Id. (citations omitted). 

Rule 52 should be "'used sparingly, solely in those circumstances 

in which a miscarriage of justice would otherwise result.'" Id. 

(quoting United States v. Frady, 456 U.S. 152, 163 n.14 (1982)). 

Defendant points to the following four statements and 

corresponding evidence in support of his arguments: 

First mistatement of the evidence: 

"There are some other facts in this case 

that are undisputed and that is that the 

defendant overdraf ted his account and he knew 

the account was overdrafted and he went to 

Mustang Bank to try to get a loan to cover the 

overdraft situation." 

V R. at 599. 

Corresponding Evidence: 

"Q [by prosecutor]: The money [from the loan] 

was to cover overdrafts, wasn't it Mr. 

Ratchford? 

A: Not at the time we applied. Not at the 

time that was had our first meeting and I -- or I thought that the loan had been approved. 

We issued checks only in the belief that we 

would have the loan and would have the funds 

coming in and our issuing checks on that 

belief is what created the overdraft." 

Id. at 526. 

Second mistatement of the evidence: 

"[Defendant] was trained 

identify a check kite. 

auditor for Pete Marwick 

check kiting was." 

Id. at 605. 

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in school at OSU to 

He was trained as an 

[sic] to know what 

Appellate Case: 90-6343 Document: 01019731434 Date Filed: 08/12/1991 Page: 7 
Corresponding Evidence: 

"Q [by Prosecutor]: And you know what check 

kiting is? 

A [by Defendant]: I have a general idea. 

Q: Were you not taught that in school? 

A: Not to my recollection. 

Q: Were you not taught that as an auditor at 

Pete Marwick [sic]? 

A: Not specifically. 

Q: Was it not one of your jobs to identify 

kiting procedures in • . . your customers accounts? 

A: No, ma 'am. " 

Id. at 519. 

Third mistatement of the evidence: 

"Does he ever address to you, does he ever 

explain to you once what that money [from the 

insurance settlement] was used for, why he 

felt he was entitled to that money? He 

doesn't because there is no explanation for 

it. II 

Id. at 621. 

Corresponding Evidence: 

Several times during trial, defendant testified 

that he was entitled to the money pursuant to his 

property ownership. IV R. 352, 447, 459, 460; V R. 

574-75. 

Mistatement of the law: 

"Ladies and gentlemen, in order for you to 

find the defendant not guilty in this case, 

you're going to have to disbelieve the 

testimony of three bank officers, two FBI 

agents, two employees and a vice president of 

a savings and loan, OK Federal Savings & Loan. 

I submit to you, ladies and gentlemen, that 

those individuals were not mistaken about what 

occurred. They were not mistaken about their 

recollections and their conversations with the 

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Appellate Case: 90-6343 Document: 01019731434 Date Filed: 08/12/1991 Page: 8 
defendant. They have absolutely no reason to 

come to you during the course of this trial 

and tell you anything but the truth." 

V R. at 606-07. 

Corresponding Law: 

"[E]ven assuming the testimony of the Prosecution and Defense witnesses contained unavoidable contradiction, it of course does not follow as a matter of law that in order to acquit 

[the defendant] the jury had to believe the 

agents had lied. . • [T]o tell the jurors 

that they had to choose between the two 

stories was error." 

United States v. Vargas, 583 F.2d 380, 387 (7th Cir. 

1978). 

We are satisfied that these statements of the prosecutor did 

not rise to the level of plain error. The prosecutor's comments 

on defendant's loan application and knowledge of check kiting were 

within the range of reasonable inferences that could be drawn from 

the evidence. See United States v. Manriquez Arbizo, 833 F.2d 

244, 247 (10th Cir. 1987). The record shows that defendant's 

account was overdraf ted when he applied for the loan and that 

accountants of similar background and training were instructed on 

the nuances of check kiting. We also see nothing misleading about 

the prosecutor's statements on defendant's use of the insurance 

settlement. Finally, although it may have been error for the 

prosecutor to tell the jury members that they had to disbelieve 

several witnesses before they could acquit defendant, see United 

States v. Vargas, 583 F.2d 380, 387 (7th Cir. 1978), this comment 

was not so prejudicial as to require reversal. The record 

contains substantial evidence apart from this remark to support 

defendant's convictions. Furthermore, the trial judge instructed 

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Appellate Case: 90-6343 Document: 01019731434 Date Filed: 08/12/1991 Page: 9 
the jury that the arguments and statements of counsel are not 

evidence, that they could reject even uncontradicted testimony, 

and that they are the sole judges of the facts. 

IV 

Finally, defendant argues that the district court did not 

properly instruct the jury on his good faith defense to the bank 

fraud charges. He contends that the court should have included in 

its instruction the following statement: "Defendant's belief that 

he was acting in good faith need not be rational nor reasonable if 

Defendant's beliefs were truly held." Appellant's Brief at 12. 2 

2 The district court instructed the jury as follows: 

"The defendant states that he acted in good faith 

and that he did not.intend to defraud any of the 

financial institutions in question, or anyone else. 

Good faith is a complete defense to the charges in 

the indictment, since good faith on the part of the 

defendant is inconsistent with intent to defraud or 

willfulness which is an essential part of the 

charges. The burden of proof is not on the 

defendant to prove his good faith, of course, since 

he has no burden to prove anything. The government 

must establish beyond a reasonable doubt that the 

defendant acted with the specific intent to defraud 

as charged in the indictment. 

A defendant who acts upon an opinion honestly 

held by him at the time of the alleged acts, or 

pursuant to a belief honestly entertained by him at 

the time of the alleged acts, is not chargeable 

with fraudulent intent even though his opinion is 

erroneous or his belief is mistaken or wrong. 

Similarly, evidence which establishes only that a 

person made a mistake in judgment or an errror in 

management or was careless, does not establish 

fraudulent intent. In order to establish 

fraudulent intent on the part of a person, it must 

be established that the person knowingly and 

intentionally intended to deceive another. 

On the other hand, the defendant's good faith 

must have existed at the time the alleged unlawful 

Continued to next page 

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Appellate Case: 90-6343 Document: 01019731434 Date Filed: 08/12/1991 Page: 10 
A defendant is entitled to an instruction on a theory of 

defense if it is legally sound and supported by the evidence 

presented at trial. A trial judge, however, "is given substantial 

latitude and discretion in tailoring and formulating the instructions so long as they are correct statements of law and fairly and 

adequately cover the issues presented." United States v. Pack, 

773 F.2d 261, 267 (10th Cir. 1985) (citation omitted). Applying 

this standard to the instant case, we are satisfied that the 

district court did not err in instructing the jury on defendant's 

good faith defense. Under the court's instruction, the jury was 

informed that a defendant acting upon an honest opinion or belief 

is not chargeable with fraudulent intent even if his opinion is 

erroneous or his belief is mistaken or wrong. This instruction is 

an adequate statement of the law, ~ United States v. Cronic, 839 

F.2d 1401, 1403 (10th Cir. 1988); United States v. Hopkins, 744 

Continued from previous page 

acts were committed. One cannot assert good faith 

as a defense if the opinions or beliefs advanced as 

justifications for the good faith defense were 

formulated after the commission of criminal acts. 

Good faith does not mean a hope that money 

obtained pursuant to a scheme to defraud will 

eventually be put back. 

It is for you the jury to determine whether 

the defendant truly held the beliefs or opinions in 

question at the time of the alleged acts. 

Moreover, it will be for you, the jury, to 

determine, from all of the facts and circumstances 

appearing before you, if the government has 

established, beyond a reasonable doubt, that the 

defendant had the requisite state of mind in connection with the alleged offenses." 

I R. tab 59, inst. 20-A. 

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Appellate Case: 90-6343 Document: 01019731434 Date Filed: 08/12/1991 Page: 11 
F.2d 716, 717-18 (10th Cir. 1984), and sufficiently broad to 

include even beliefs not rationally or reasonably held. 

AFFIRMED. 

( 

\ 

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