1 Circuit Judge, of the Ninth Circuit, sitting by designation.

UNITED STATES COURT OF APPEALS

For the Fifth Circuit

No. 95-10212

UNITED STATES OF AMERICA,

Plaintiff-Appellant,

VERSUS

BERNARD SCHUCHMANN,

Defendant-Appellee.

Appeal from the United States District Court

For the Northern District of Texas

 May 24, 1996

Before POLITZ, Chief Judge, and GOODWIN1 and DUHÉ, Circuit Judges.

DUHÉ, Circuit Judge:

The government appeals the district court’s judgment of

acquittal. Because the government did not prove the knowledge

element of the alleged crimes beyond a reasonable doubt, we affirm.

BACKGROUND

In early 1985, Bernard Schuchmann purchased Taos Savings &

Loan and renamed it First American Savings Bank (“FASB”). In

February 1985, Schuchmann obtained approval to charter a new

institution, American Federal Savings Bank, which was later renamed

Americity Federal Savings Bank (“Americity”). Under the banking

regulations, Schuchmann had twelve months to capitalize this new
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institution.

Schuchmann solicited several business colleagues to invest in

Americity. Among these investors was Steve Sloan, a businessman

who had a prior business relationship with Schuchmann and FASB.

Sloan agreed to purchase $645,000 worth of the newly issued stock.

Although other investors obtained loans from FASB to invest in

Americity, Sloan was unable to do so because he previously borrowed

a substantial sum of money from FASB and FASB’s loans-to-oneborrower limit precluded an additional loan.

As a result of this limitation, Sloan asked his administrative

assistant, Laura Bentley, to request a loan from FASB for $210,000.

Bentley completed a loan application and signed a promissory noted,

both provided to her by Sloan. On the application she listed

$21,000 as her monthly salary, $48,000 as her savings, and $9,600

in director’s fees, dividends, interest, and bonuses. Sloan then

signed a promissory note in Bentley’s favor and gave her a letter,

made out “to whom it may concern,” describing his own

responsibility for repaying the money.

 Bentley had no contact with anyone at FASB about her loan

before it was approved. Schuchmann personally granted the loan and

$210,000 was wired into Bentley’s personal account. Bentley then

wrote Sloan a check for $210,000, and Sloan thereafter provided

her with the funds to make the loan payments. Bentley paid the

loan off with interest. 

The jury found Schuchmann guilty as charged. After the jury

returned its verdicts, the district court granted a judgment of
2 To establish a violation of 18 U.S.C. § 371, the government

must prove beyond a reasonable doubt: (1) an agreement between two

or more persons; (2) to commit a crime against the United States;

and (3) an overt act committed by one of the conspirators in

furtherance of the agreement. United States v. Mackay, 33 F.3d 489

(5th Cir. 1994).

3

acquittal pursuant to Federal Rule of Criminal Procedure 29 and

conditionally granted a new trial. 

DISCUSSION

Under Rule 29, a trial judge “has the duty to grant the motion

for judgment of acquittal when the evidence, viewed in the light

most favorable to the government, is so scant that the jury could

only speculate as to defendant’s guilt.” United States v.

Herberman, 583 F.2d 222, 231 (5th Cir. 1978). In reviewing a

judgment of acquittal, we view the evidence in the light most

favorable to the jury verdict and will affirm “if a rational trier

of fact could have found that the government proved all essential

elements of the crime beyond a reasonable doubt.” United States v.

Castro, 15 F.3d 417, 419 (5th Cir.), cert. denied, 115 S. Ct. 127

(1994). If, on the other hand, “the evidence viewed in the light

most favorable to the prosecution gives equal or nearly equal

circumstantial support to a theory of guilt and a theory of

innocence, the conviction should be reversed.” United States v.

Pennington, 20 F.3d 593, 597 (5th Cir. 1994).

The jury found Schuchmann guilty of conspiracy to defraud the

United States and Federal Home Loan Bank Board and to violate 18

U.S.C. §§ 1006, 657 in violation of 18 U.S.C. § 371 (count one)2;

making false entries in bank records in violation of 18 U.S.C. §
3 To establish a violation of 18 U.S.C. § 1006, the government

must show: (1) that the institution is a lending institution

authorized and acting under the laws of the United States; (2) the

defendant was an officer, agent, or employee of the institution;

(3) the defendant knowingly and willfully made, or caused to be

made, a false entry concerning a material fact in a book, report,

or statement of the institution; and (4) the defendant acted with

the intent to injure or defraud the institution or any of its

officers, auditors, examiners, or agents. United States v. Parks,

68 F.3d 860, 865 (5th Cir. 1995), cert. denied, 116 S. Ct. 825

(1996).

4 A conviction for misapplication of funds in violation of 18

U.S.C. § 657 requires that the government prove beyond a reasonable

doubt: (1) that the savings and loan institution was authorized

under the laws of the United States; (2) that the accused was an

officer, director, agent or employee of the institution; (3) that

the accused knowingly and willfully misapplied the monies or funds

of the institution; and (4) that the accused acted with intent to

injure or defraud the institution. Id. at 863.

4

1006 (counts two through four)3; and willful misapplication of

funds in violation of 18 U.S.C. § 657 (count five)4. The

defendant’s knowledge is an essential element of all five counts of

conviction. Thus, the government must prove beyond a reasonable

doubt that Schuchmann knew in October 1985, when he made the

Bentley loan, that the loan was made for Sloan’s benefit. 

Our task, therefore, is to review the evidence bearing on

Schuchmann’s mens rea and determine whether a jury could reasonably

infer from this evidence that he made the loan to Bentley knowing

it was really for Sloan. After a careful review of the record, we

hold that the district court properly granted the judgment of

acquittal. Although jury verdicts should be overturned with great

hesitancy, the evidence viewed as a whole does not meet the

constitutionally high standard of proof beyond a reasonable doubt.

There were only two witnesses at the trial who testified
5

regarding Schuchmann’s knowledge of the Bentley loan, Don Faraone

and Laura Bentley. Steve Sloan, as an indicted co-defendant, did

not testify. Laura Bentley, the straw borrower, testified that she

did not know whether Schuchmann knew that Sloan would receive the

loan proceeds: 

THE COURT: So I’m understanding this, you don’t know of

your own personal knowledge whether Mr. Schuchmann knew

about the real deal on the two hundred ten thousand

dollar loan, that Sloan was really getting the money. 

Is that what you are telling us?

BENTLEY: I have no personal knowledge. (R.9, p.50)

When Bentley characterized her activities with Sloan as

“deceptive,” the court again asked for clarification:

THE COURT: Ma’am, I’m not clear about something. When

did you come to the conclusion that it was deceptive?

Are you saying you didn’t think it was back then?

BENTLEY: Again, that wasn’t my focus. I know the fact

that it was very private and not to be talked about other

than between Steve and myself. (R. 10, p. 107)

Although Bentley had no personal knowledge of Schuchmann’s

involvement, the government argues that there was insufficient

information about Bentley’s creditworthiness on her loan

application to justify the loan, and therefore, Schuchmann must

have known that Bentley was a nominee for Sloan. On the loan

application, Bentley listed $21,000 as her monthly salary, $48,000

as her savings, and $9,600 additional income from director’s fees,

dividends, interest, bonuses, and commissions. Bentley testified

that the income she had mistakenly listed as monthly was really her

yearly income. Because Schuchmann knew about Bentley’s employment

as Sloan’s administrative assistant, the government contends that

Schuchmann would have recognized this error and concluded that
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Bentley was not qualified for the loan. 

Even if Schuchmann knew Bentley’s income information was

incorrect, however, the evidence shows that Bentley’s family wealth

provided Schuchmann a legitimate reason for approving the loan.

Bentley admitted that it was likely that Schuchmann knew about her

family wealth at the time her loan was approved. She testified

that the director’s fees listed on her loan application were from

her service on the Board of Directors of the Trident Corporation,

a large and successful corporation owned by her father. Eric

Stattin, the only expert witness with underwriting experience,

testified that a banker would consider the wealth of the borrower’s

family in deciding whether to approve a loan:

Question: Would it be reasonable, in your professional

opinion, for the banker, in determining whether or not to

make a loan, to take into consideration the wealth of the

borrower’s family?

Stattin: Yes. (R. 20, p. 74) 

Moreover, the government’s witness William Gilligan testified to

this reality:

Question: And a lender might take into consideration

things that are not shown in the loan application or

anything else that he sees in paper?

Gilligan: That’s right, sure.

Question: I mean, there are things like the wealth of the

borrower’s family. Those are things that any lender

would consider, is it not?

Gilligan: I would, yes. I think most would. 

(R. 15, p. 208) 

This testimony demonstrates that Schuchmann may have believed that

Bentley was qualified for the loan and thus permits the inference

that Schuchmann was acting with lawful intent. 

The first, perhaps only, conversation that Bentley had with
7

Schuchmann concerning the loan further connects Bentley’s credit

standing to her family wealth. Bentley was uncertain of when the

conversation took place, her best estimate putting it in August of

1986. Schuchmann told Bentley that the bank examiners had flagged

her loan and some others and were questioning them. Schuchmann

then told Bentley:

[H]e had taken care of it. He had spoken to the 

examiners himself and he was taking care of the questions

that they had raised. And that he had mentioned to them

about the wealth of my father, and that he was going to

personally vouch for my good credit standing. And that

if anybody approached me, questioning me about this loan,

any examiner, then I was to not respond, but to tell

Bernie about it and he would handle it. (R. 10, p. 148-

49)

The government argues that this conversation proves that Schuchmann

knew about the nominee nature of the loan and wished to deceive the

FHLBB about it. We disagree. This testimony provides equal

circumstantial support to a theory of innocence, indicating that

Schuchmann believed Bentley’s family wealth played a role in

assessing her creditworthiness. Sloan’s involvement in the loan

was not acknowledged during this conversation, and the government

failed to prove the impropriety of Schuchmann’s request that

Bentley refer questions about her loan to him.

Bentley’s understanding of her arrangement with Sloan further

supports the defense’s position that Schuchmann expected Bentley to

bear the burden of repaying her loan. Bentley testified that she

believed she was personally liable to the bank for her loan and

that the bank expected her (and not Sloan) to repay the loan.

Thus, to assuage her fears about repayment, Sloan agreed to
8

indemnify Bentley for the loan, but the letter of indemnification

was never provided to Schuchmann, perhaps signaling that Sloan and

Bentley never revealed their arrangement to Schuchmann. In

addition, Bentley personally wrote FASB an apology letter after

receiving a late notice, assuring FASB that all future payments

would receive prompt attention. 

The trail of the loan proceeds may similarly indicate an

attempt to deceive Schuchmann. In order to disguise the true

recipient of the funds, the loan proceeds were wired into Bentley’s

personal account, not Sloan’s, and Bentley repaid the loan by

writing checks from her personal account. Sloan designed this

scheme and advised Bentley about all aspects of her loan

application, including the appropriate terms for the promissory

note. Because no testimony establishes that Sloan needed to

consult Schuchmann for this information, Sloan and Bentley’s

“private” arrangement may not have included Schuchmann. 

The second key witness, Don Faraone, who was at the time

president of Americity, testified that Schuchmann told him that “we

have to take care -- reimburse Sloan in the form of his consulting

fees so that he can pay the loan that he has through Bentley.” (R.

19, p. 145) Schuchmann spoke in the present tense about Sloan

making payments on the loan. When cross-examined about the timing

of the conversation, Faraone testified that it occurred either (1)

when Sloan was moving into the Americity offices; or (2) when

Sloan’s consulting contract was being renegotiated. However, both

of these events occurred in the summer of 1987, approximately nine
9

months after repayment of the Bentley loan. Thus, in July of 1987,

there would have been no need to help Sloan repay his loan.

As a result of this inconsistency, the district court

concluded that it was factually impossible for this conversation to

have taken place. See United States v. Osum, 943 F.2d 1394, 1405

(5th Cir. 1991) (“[T]estimony generally should not be declared

incredible as a matter of law unless it asserts facts that the

witness physically could not have observed or events that could not

have occurred under the laws of nature.”). We do not find this

testimony incredible as a matter of law, because Faraone may have

simply confused the timing of the conversation or the verb tense

Schuchmann used. However, even when construed in favor of the jury

verdict, this evidence does not support the inference that

Schuchmann “knew” at the time the loan was made that it was a

nominee loan. Instead, this testimony only permits the inference

that Schuchmann knew at some point after Bentley received her loan

proceeds that she had given them to Sloan. 

Although not as direct as Faraone’s testimony, the government

also relies on the testimony of defense expert Eric Stattin and

bank examiner Ray Wiske to establish Schuchmann’s guilt. We find

the connections between the testimony of these two witnesses and

Schuchmann’s state of mind too attenuated to support his

conviction. According to the government, Eric Stattin testified

that, in preparing for the trial, he had been advised that Sloan

told Schuchmann that he, Sloan, would see to it that FASB was

repaid for Bentley’s loan.
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Question: So were you advised by the defense that

somebody told Mr. Schuchmann that there was a supporter

out there of Laura Bentley who would see to it that her

loan was paid back?

Stattin: Yes, I believe I was told that.

Question: Was that Mr. Sloan?

Stattin: Yes.

Question: Did Mr. Schuchmann ever say to you that he had

talked with Laura Bentley’s family?

Stattin: I don’t remember hearing that. (R.20, p. 110)

Even if Sloan told Schuchmann that he would support the loan,

nothing in this dialogue indicates that Sloan revealed the nominee

nature of the loan to Schuchmann. Indeed, a plausible

interpretation of this testimony is that when questioned by

Schuchmann about the Bentley loan, Sloan misled Schuchmann into

believing that Bentley, the true borrower, would not be a credit

risk. The nominee loan would not have been the first secret Sloan

kept from Schuchmann. Bentley testified that she and Sloan had a

practice of forging Schuchmann’s signature without his knowledge

and authorization.

Ray Wiske’s testimony is also insufficient. Wiske, a federal

bank examiner, testified that he reviewed FASB’s books and

discussed Bentley’s loan with Schuchmann in March of 1986. Wiske

criticized that loan, along with James Jarocki’s, on the ground

that the creditworthiness of the borrowers was not established by

the loan documentation. In explaining his actions, Schuchmann told

Wiske that “all these borrowers [Bentley, Jarocki, and the other

four Americity investors] are well-known to him and he expects no

problems with the loan payments. He said he had committed to make

the loans at the approximate time he gained control of the

association.” (R. 14, p. 11) According to the government, this
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statement refers to February of 1985 when Schuchmann gained control

of FASB. Although Schuchmann argues that this statement is plagued

by ambiguous language and may refer to a later date, we view the

statement in the light most favorable to the government. The

government argues that this statement was intended purposely to

mislead Wiske, because Schuchmann had never “committed” to make the

loan to Bentley in February of 1985. Although the government may

be really arguing that this statement proves Schuchmann had

committed to make the loan to Sloan (instead of Bentley), such an

inferential leap is simply too tenuous to support a finding of

intent beyond a reasonable doubt. Moreover, this statement is

insufficient to establish that Schuchmann was intentionally

misleading the bank examiner, since it is uncontested that he may

have committed to most of the loans referred to at that time. 

The government next highlights Schuchmann’s active role in

negotiating with other Americity investors to draw the inference

that Schuchmann monitored Sloan’s efforts to raise the necessary

investment funds. However, only five of the eighteen investors

obtained loans through FASB; eight of the remaining thirteen

investors funded their investments totally independent of

Schuchmann and FASB; and four were members of the Schuchmann

family. The remaining investor, Sloan, purchased $645,000 of

stock, using the $210,000 from the Bentley loan and $435,000 from

non-FASB sources to fund his investment. This pattern of

investment does not give rise to the inference that Schuchmann

participated in each investor’s financing, and therefore, would
12

have necessarily known how Sloan raised the funds for his

investment. 

Schuchmann’s prior business relationship with Sloan likewise

does not aid the government in establishing that Schuchmann

supervised Sloan’s investment. While Schuchmann and Sloan may have

had a close business relationship, the evidence demonstrates that

Schuchmann did not participate in many of Sloan’s business

ventures. Moreover, in October 1985, Schuchmann had no reason to

believe that Sloan was short of funds and needed to borrow

$210,000. Even if Schuchmann knew Sloan needed money, the evidence

shows that Schuchmann either could have personally lent Sloan the

money or cured the prospective loan-to-one-borrower problem.

Government witness James Neil testified that three weeks before the

Bentley loan Schuchmann had personally lent him $200,000, even

though Neil still had loan-to-one-borrower capacity. And

Schuchmann was certainly not lacking in funds with access to more

than $4.4 million in cash in October of 1985. Fred Miller, a

government witness, testified that Schuchmann could have withdrawn

$210,000 from his personal accounts at that time simply by writing

a check. (R. 16, p. 36) A personal loan, however, would not have

been Schuchmann’s only legal option to help Sloan raise the

necessary funds. Expert witness Rosemary Stewart, who in 1985 was

the Director of Enforcement for the Federal Home Loan Bank Board,

testified that in 1985 a savings and loan institution could easily

cure a prospective loan-to-one-borrower problem by selling to

another institution a participation in the borrower’s existing
13

loans. (R. 20, p. 162) 

Finally, the government emphasizes that Bentley’s loan

coincided with the five other loans made by Schuchmann’s bank to

the people who were investing in Americity. When examined closely,

however, this coincidence does not prove that Schuchmann knew that

the Bentley loan was intended for Sloan’s investment. There are

significant differences between the investors’ loans and Bentley’s

loan. The loans to the five investors were all dated October 15,

1985, had identical interest rates, and ranged in amount from

$40,000 to $90,000. By contrast, Bentley’s loan was dated three

days later (October 18, 1985), had a higher interest rate than the

investors’ loans, and totaled $210,000. (R.14, pp.10-11) We are

persuaded that, even when viewed in tandem with the other evidence,

this similarity in timing only permits a jury to “speculate” about

the defendant’s state of mind rather than infer knowledge beyond a

reasonable doubt.

All of this evidence, taken together and viewed in the proper

light, does not support the jury’s guilty verdicts. The evidence

provides equal circumstantial support to Schuchmann’s innocence,

leaving open the question whether Schuchmann was Sloan’s coconspirator or his victim. Thus, the government failed to prove

the knowledge element of the crimes charged beyond a reasonable

doubt. 

CONCLUSION 

For the foregoing reasons, the judgment of acquittal is

AFFIRMED.