Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-03-03617/USCOURTS-ca8-03-03617-0/pdf.json

Parties Involved:
Herman Staples
Appellant
United States of America
Appellee

Document Text:

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 03-3617

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United States of America, *

*

Appellee, *

* 

v. * 

* 

Herman Staples, * 

*

Appellant. *

___________

Appeals from the United States

No. 03-3994 District Court for the 

___________ Eastern District of Missouri.

United States of America, *

*

Appellee, *

*

v. *

*

Michael Washington, *

*

Appellant. *

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___________

No. 03-4021

___________

United States of America, *

*

Appellee, *

*

v. *

*

John Montgomery, *

*

Appellant. *

*

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No. 03-4023

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United States of America, *

*

Appellee, *

*

v. *

*

Evelyn Silinzy, *

*

Appellant. * 

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Submitted: April 11, 2005

Filed: January 23, 2006

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The Honorable Theodore McMillian died on January 18, 2006. This opinion

is filed by the remaining judges of the panel pursuant to 8th Cir. Rule 47E. 

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Before COLLOTON, McMILLIAN,1

 and BENTON, Circuit Judges.

___________

COLLOTON, Circuit Judge.

Herman Staples, Michael Washington, John Montgomery, and Evelyn Silinzy

were convicted of bank fraud charges. Washington appeals his sentence, and the

others challenge their convictions and sentences. We affirm with respect to Staples

and Washington, but reverse the convictions of Montgomery and Silinzy.

I.

The appellants were charged, along with seven other people, in a multi-count

indictment alleging various counts of bank fraud. The overall scheme, in which

different defendants participated to varying degrees, involved obtaining legitimate

cashier’s checks and altering the face amounts so that they appeared to be worth far

more than the amount for which they had been purchased. The altered checks were

then passed to title insurance companies in connection with real estate transactions

involving inflated land prices, where the “buyer” and “seller” of the properties were

actually participants in the scheme. As part of the real estate closings, the title

insurance companies would deposit into their bank accounts the altered checks that

were received from the buyers as payment for the properties, and then issue their own

legitimate checks to the sellers for the inflated prices. The sellers would then

negotiate these legitimate checks from the title companies and distribute part of the

proceeds to some of their confederates. When it was discovered that the cashier’s

checks were altered, and that the face amount was not collectible, the title company

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would suffer a loss from having paid the sellers an inflated amount based on the

altered cashier’s checks. 

Prior to trial, Washington and Staples pled guilty to aiding and abetting bank

fraud and attempted bank fraud, respectively. Montgomery and Silinzy proceeded to

trial, and we set forth the allegations against them in greater detail.

The indictment alleged, inter alia, that on October 29, 2001, a man identifying

himself as Antonio Hutti purchased a cashier’s check in the amount of $20 from

Gateway National Bank. The same man purchased a similar check on November 5,

2001. On November 16, 2001, John Montgomery sold two residences to the man

identified as Hutti, one for $62,300 and one for $40,500. At trial, a real estate

appraiser opined that the properties were worth only a total of $14,500. The man

identified as Hutti presented the two Gateway National Bank cashier’s checks,

originally for $20 but now altered so that they appeared to be in the amounts of the

sale prices of the properties, to Archway Title Company. Archway Title deposited the

checks into its accounts at Montgomery First National Bank and Allegiant Bank,

respectively, and then issued to John Montgomery a number of checks totaling the

sale prices of the residences, drawn on the Archway Title accounts at Montgomery

First National Bank and Allegiant Bank.

Montgomery used some of the checks, including several checks drawn on

Archway Title’s account with Montgomery First National Bank and a single check

drawn on Archway Title’s account at Allegiant Bank, to purchase additional checks

from Montgomery First National Bank, payable to various payees including himself.

Montgomery also received cash in two of those transactions. Montgomery cashed the

other checks he received from Archway Title at another bank.

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Montgomery was convicted after trial on one count of aiding and abetting bank

fraud against Montgomery First National Bank for negotiating at that bank the checks

drawn on the Archway Title account at that bank, and on another count of aiding and

abetting bank fraud against Montgomery First National Bank for negotiating at that

bank the check drawn on Archway Title’s account at Allegiant Bank. Montgomery

was acquitted on a third count of aiding and abetting bank fraud.

The indictment charged Silinzy with bank fraud in connection with her sale of

a property for $392,000. Rebecca Robinson, posing as “Sharon Woods,” gave

Phoenix Title Company four altered U.S. Bank cashier’s checks totaling $98,045.84

(initially the checks had a face value of $20 apiece). Phoenix Title deposited the

checks into its account at First Bank, in St. Charles, Missouri, and shortly thereafter,

as part of the closing, issued a check on its account in the amount of $51,250 payable

to Dolly Mae Morris, to pay off a promissory note associated with the property.

According to the government’s summary witness, Silinzy said that Phoenix Title told

her about the promissory note, and although she did not know Dolly Mae Morris, she

never raised any questions about the legitimacy of the promissory note. Judy Wilson,

a codefendant posing as Dolly Mae Morris, converted the $51,250 check into three

bank checks. Ultimately, the entire amount was converted to cash and divided among

Wilson, Silinzy, Washington, and others. Silinzy was convicted of one count of

aiding and abetting bank fraud for her part in causing Phoenix Title to create the check

to Dolly Mae Morris drawn on its First Bank account. Silinzy was acquitted of a

second count of aiding and abetting bank fraud.

II.

Staples argues that the district court erred when it failed to rule in a timely

manner on his motions to quash the indictment and for a copy of the minutes of grand

jury proceedings. A valid guilty plea, however, “operates as a waiver of all nonAppellate Case: 03-3617 Page: 5 Date Filed: 01/23/2006 Entry ID: 2000329
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jurisdictional defects or errors,” United States v. Vaughan, 13 F.3d 1186, 1188 (8th

Cir. 1994) (internal quotation omitted), and because Staples pled guilty, he is

precluded from raising these issues on appeal.

Staples also argues that the trial court abused its discretion by placing him on

supervised release for three years when, because he was taken into custody prior to

sentencing, he already had served his seven-month prison sentence prior to the

sentencing date. According to Staples, he had paid his debt to society by completing

the entire term of imprisonment, and thus “[t]he effect of placing him on supervised

release for three years and subjecting him to three years’ incarceration if he violated

the conditions of probation is an unjust result, which impedes his right to liberty and

justice without government interference.” (Appellant’s Br. at 10).

Because Staples did not object to the three-year term of supervised release, we

review the sentence for plain error. United States v. Olano, 507 U.S. 725, 731 (1993).

In his plea agreement, Staples acknowledged that he understood that the district court

may impose a term of supervised release to follow any term of incarceration, and that

the period of supervised release could be “not more than five years.” Staples asserts

that despite the written plea agreement, the “understanding” of the parties was that

supervised release would not apply under the circumstances of his case. He points to

no evidence in support of that position, and his position is contrary to paragraphs of

the presentence report to which Staples made no objection. A term of supervised

release of up to five years is authorized by statute, 18 U.S.C. § 3583(b)(1), and the

term of three years imposed by the district court is consistent with the sentencing

guidelines, USSG § 5D1.1(a). Staples’s contention that his early incarceration

somehow excuses him from a term of supervised release is therefore without merit.

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III.

Washington appeals his sentence, arguing that he was erroneously sentenced

under the mandatory sentencing guidelines that prevailed prior to United States v.

Booker, 125 S. Ct. 738 (2005). Washington pled guilty to aiding and abetting bank

fraud, in violation of 18 U.S.C. § 2 and §§ 1344(1) and (2). In his plea agreement,

Washington stipulated to a base offense level of six, USSG § 2B1.1(a)(2), with a

sixteen-level increase for the amount of loss, id. § 2B1.1(b)(1)(I), a three-level

adjustment for aggravating role in the offense, id. § 3B1.1(b), and a three-level

reduction for acceptance of responsibility, id. § 3E1.1(b). 

The district court, however, determined that the guidelines applied differently

than suggested in the plea agreement. In addition to the base offense level and the

increase for amount of loss, the court increased Washington’s offense level by two

levels under § 2B1.1(b)(9)(A) for production and/or trafficking of an unauthorized

counterfeit access device. The court also assessed a four-level increase for

aggravating role in the offense, finding that Washington was an organizer or leader,

not merely a manager or supervisor as he had stipulated. See USSG § 3B1.1(a). The

court next found that Washington should receive a two-level adjustment for

obstruction of justice, pursuant to USSG § 3C1.1, and that he was thus ineligible for

an acceptance-of-responsibility reduction. See USSG § 3E1.1, comment. (n.4). In

light of these findings, the district court calculated a total offense level of thirty.

Washington’s offense level and his criminal history, which placed him in category III,

produced a guideline range of 121 to 151 months’ imprisonment. The district court

imposed a term of 144 months.

Washington’s sole argument on appeal is that his sentence is unconstitutional

because the district court applied the sentencing guidelines in a mandatory fashion,

and increased his offense level based on facts neither charged in the indictment nor

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admitted by him. Because he raises the Booker issue for the first time on appeal,

Washington concedes that we should review for plain error. See United States v.

Pirani, 406 F.3d 543, 550 (8th Cir. 2005) (en banc). 

We conclude that although there was plain error in applying the mandatory

guidelines, Washington cannot show that the error affected his substantial rights, i.e.,

that there is a reasonable probability that but for the error, the district court would

have imposed a more favorable sentence. Id. at 553. The district court sentenced

Washington near the top of the applicable sentencing range, explaining that

Washington’s “extensive involvement in this was very serious, and the fact that

people [he] organized and led were people who had – many of those people, and I just

use Rebecca Robinson as an example, yeah, she was an addict, and [he] took

advantage of her need and her weakness to use her in this case, and there are many

others like that.” (S. Tr. at 183-84). The district court explained that “I picked that

point in the guidelines because I think it recognizes the seriousness of your offense,”

and added that it was toward the top of the range because, had the district court found

one more victim, the sentencing range would have increased to 151 to 188 months.

We have said that a Booker error is harmless where the district court “left unused

some of its discretion” that would have permitted a more favorable sentence under

even the mandatory regime, United States v. Perez-Ramirez, 415 F.3d 876, 878 (8th

Cir. 2005), and it follows a fortiori that Washington cannot meet the standard for

demonstrating plain error where the court did not deem it appropriate to sentence him

at the lower end of the applicable mandatory guideline range.

IV.

The appeals of Montgomery and Silinzy raise difficult issues concerning the

scope of the bank fraud statute. The circuits are divided in their approaches to the

statute, and this case is complicated further by the manner in which the district court

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The government’s proposed instruction cites Eighth Circuit Pattern Jury

Instruction 3.09, which concerns “elements of offense” and “burden of proof,”

without regard to a specific substantive statute. 

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(at the government’s suggestion) instructed the jury. We ultimately conclude that

given the law of the case as the elements were defined for the jury, there is insufficient

evidence to sustain the bank fraud convictions against Montgomery and Silinzy.

The bank fraud statute, 18 U.S.C. § 1344, makes it a crime to execute or attempt

to execute

a scheme or artifice –

(1) to defraud a financial institution; or

(2) to obtain any of the moneys, funds, credits, assets, securities, or other

property owned by, or under the custody or control of, a financial

institution, by means of false or fraudulent pretenses, representations, or

promises . . . .

We have read the statute to provide two distinct ways in which a person can

commit bank fraud. See United States v. Ponec, 163 F.3d 486, 488 (8th Cir. 1998).

Nonetheless, for reasons that are not explained, the government’s proposed jury

instructions for both Montgomery and Silinzy suggested that the jury be instructed in

the conjunctive – that is, for the defendant to be found guilty, the evidence must show

that the defendant engaged in a scheme or artifice to defraud a financial institution and

to obtain monies, funds, credits, and assets of the institution. (Gov’t Proposed

Instructions, filed Aug. 18, 2003, tenth unnumbered instruction) (emphasis added).2

The district court, without objection, adopted the government’s proposal and defined

the first element of bank fraud to require that “the defendant did aid and abet the

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The Eighth Circuit pattern instruction on bank fraud lists subsections (1) and

(2) of section 1344 as bracketed alternatives, and it lists ownership or custody of

monies as bracketed alternatives within the alternative for subsection 1344(2). Eighth

Circuit Pattern Jury Instruction 6.18.1344 (2005). The pattern instructions of other

circuits for § 1344(2) refer to monies owned by or under the custody and control of

a financial institution. E.g., Seventh Circuit Federal Jury Instructions: Criminal, at

266 (1999); Sixth Circuit Pattern Criminal Jury Instructions § 10.03 (2005). 

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execution of a scheme and artifice to defraud a financial institution, alleged in the

particular count and to obtain monies, funds, credits and assets owned by and under

the custody of that institution by means of materially false and fraudulent pretenses,

representations, and promises.” (Instruction No. 16, filed Sept. 4, 2003) (emphasis

added). This instruction thus required the jury to find that the defendant violated both

subsection 1344(1) and 1344(2). Furthermore, to find a violation of 1344(2), the

instruction advised the jury that it must find that the defendant’s scheme was designed

to obtain monies that were owned by and under the custody of the financialinstitution,

rather than monies that were owned by or under the institution’s custody.3

 

The government, therefore, assumed a burden to prove more than the statute

required. Where the instructions to the jury include elements that are not dictated by

statute, the instructions nonetheless become the law of the case. United States v.

Ausler, 395 F.3d 918, 920 (8th Cir. 2005); United States v. Tapio, 634 F.2d 1092,

1094 (8th Cir. 1980) (per curiam). In considering a challenge to the sufficiency of the

evidence under those circumstances, we must consider whether the evidence was

sufficient to meet the elements as defined for the jury. Id.

Several circuits have held that the bank fraud statute does not extend to

situations where the defendant has no intent to expose the bank to an actual or

potential loss, see United States v. Thomas, 315 F.3d 190, 200 (3d Cir. 2002); United

States v. Laljie, 184 F.3d 180, 189 (2d Cir. 1999); United States v. Rodriguez, 140

F.3d 163, 167 (2d Cir. 1998), or does not place the bank at risk of civil liability. 

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United States v. Odiodio, 244 F.3d 398, 401 (5th Cir. 2001); United States v. Sprick,

233 F.3d 845, 852 (5th Cir. 2000); United States v. Davis, 989 F.2d 244, 246-57 (7th

Cir. 1993). For example, a “scheme to pass bad checks,” and a “pigeon drop” scheme,

in which a victim is induced to withdraw money from a bank and entrust it to the

defendant, have been held insufficient to establish bank fraud. Laljie, 184 F.3d at 190.

The reasoning of these courts is typified by the statement of the Seventh Circuit that

the purpose of the bank fraud statute “is not to protect people who write checks to con

artists but to protect the federal government’s interest as an insurer of financial

institutions.” Davis, 989 F.2d at 247; see also Thomas, 315 F.3d at 199 (“Money is

taken from banks every day for countless foolish purposes, but in such instances,

banks are not exposed to liability nor is their integrity compromised.”).

Other circuits, however, have rejected the requirement of an intent to harm or

create a risk of loss to a financial institution, and have upheld convictions in the

absence of any such intent. See United States v. McNeil, 320 F.3d 1034, 1038 (9th

Cir. 2003); United States v. De la Mata, 266 F.3d 1275, 1298 (11th Cir. 2001); United

States v. Kenrick, 221 F.3d 19, 27 (1st Cir. 2000) (en banc); United States v. Sapp, 53

F.3d 1100, 1103 (10th Cir. 1995). Some of these courts have required the government

at least to prove that the defendant intended to deceive the bank, Kenrick, 221 F.3d at

29; De la Mata, 266 F.3d at 1298, although one circuit has gone so far as to say that

there is a violation of § 1344(2) if the defendant merely intends to defraud someone,

and then causes a bank, as an unwitting instrumentality, to transfer funds pursuant to

a fraudulent scheme. United States v. Everett, 270 F.3d 986, 991 (6th Cir. 2001).

For our part, we have treated the two subsections of the bank fraud statute

differently, on the view that “[o]therwise, there seems to be no reason for Congress

to have set out two separate ways in which bank fraud could be committed under this

statute.” Ponec, 163 F.3d at 488. Subsection (2), we concluded, appears to require

“some loss to the institution, or at least an attempt to cause a loss.” Id. As for

subsection (1), we have held that no actual loss or intent to cause a loss is required,

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so long as the defendant has “defraud[ed]” a financial institution. Id.; United States

v. Whitehead, 176 F.3d 1030, 1041 (8th Cir. 1999). Even then, however, we granted

that the government must prove that the defendant “deliberately made false

representations to the bank,” because “[o]therwise, there would be no scheme or

artifice to defraud.” Ponec, 163 F.3d at 489. In other words, Ponec indicates

agreement with those circuits that have said there must be a scheme or artifice to

defraud the bank to find a violation of subsection (1). See Kenrick, 221 F.3d at 29

(“[T]he intent element of bank fraud under either subsection is an intent to deceive the

bank in order to obtain from it money or other property.”).

Because this case was charged to the jury in the conjunctive, and, accordingly,

the evidence must be sufficient, under the law of the case, to prove the elements of

both § 1344(1) and (2), we do not think the convictions of Montgomery and Silinzy

can be sustained. The government concedes that the entire loss caused by the

fraudulent conduct was suffered by the title companies, and that the banks involved

in the counts of conviction were merely instrumentalities used to cash legitimate

checks written by the title companies. Under our court’s view of § 1344(2), the

evidence is therefore insufficient, because there was no loss, or attempt to cause a loss,

to a financial institution. Ponec, 163 F.3d at 488.

It seems doubtful that Montgomery could be convicted under subsection (1)

either, because there was no evidence that he intended to defraud the banks on whose

accounts Archway Title wrote legitimate checks, and Montgomery’s presentation of

the legitimate checks to the banks does not constitute a false representation. See

Williams v. United States, 458 U.S. 279, 284 (1982). The case under § 1344(1) is

stronger with respect to Silinzy, because one of her confederates falsely represented

herself to the bank as Dolly Mae Morris in order to cash the legitimate check. The

government, however, assumed the burden of proving a violation of both subsections

(1) and (2), and for the reasons discussed, the evidence in insufficient as to § 1344(2).

We note, moreover, that the court (at the government’s suggestion) also instructed the

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jury with respect to § 1344(2) that it must find that each defendant schemed to obtain

monies that were owned by and under the custody or control of a bank, (Instruction

No. 16; Proposed Instructions, tenth unnumbered instruction), and we see no evidence

that the banks owned the funds at issue. This is yet another shortcoming in the

evidence under the unusual law of the case developed in the district court.

* * *

For the foregoing reasons, we affirm the judgments of the district court as to

Washington and Staples, but reverse and vacate the judgments as to Montgomery and

Silinzy.

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