1"Whoever knowingly makes any false statement or report ...

for the purpose of influencing in any way the action of ... any

[federally insured] institution ... upon any application,

advance, discount, purchase, purchase agreement, repurchase

agreement, discount or loan ... shall be fined not more than

$1,000,000 or imprisoned not more than 30 years, or both." 18

UNITED STATES COURT OF APPEALS

For the Fifth Circuit

 

No. 93-1103

 

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

versus

BENNY JENKINS McDOW,

Defendant-Appellant.

Appeal from the United States District Court

for the Northern District of Texas

(July 14, 1994)

Before GOLDBERG, DAVIS and DeMOSS, Circuit Judges:

DeMOSS, Circuit Judge:

Benny Jenkins McDow appeals his conviction on three counts of

savings & loan fraud under 18 U.S.C. § 10141 and one count of using
U.S.C. § 1014.

 

2"Whoever ... for the purpose of obtaining anything of value

from any person ... with intent to deceive, falsely represents a

number to be the social security account number assigned by the

Secretary to him ... when in fact such number is not the social

security account number assigned by the Secretary to him ...

shall be guilty of a felony and upon conviction thereof shall be

fined under Title 18 or imprisoned for not more than five years,

or both." 42 U.S.C. § 408(7)(B).

 

3The parties do not dispute that, at the time of the offense

in 1986, Sunbelt Savings was a financial institution insured by

2

a false Social Security number under 42 U.S.C. § 408.2 We affirm

McDow's conviction on Count 1 but reverse his conviction on the

remaining counts because the evidence is insufficient to support

the conviction on these counts.

FACTS

In September 1986, appellant McDow and his wife Fay McDow

purchased a house and lot in Glenn Heights, Texas from Sunbelt

Savings Association of Texas ("Sunbelt Savings"), which had become

the owner of the property through foreclosure. Truman Rice, a real

estate agent, testified that in September 1986 his agency ran

advertisements on property being marketed by Sunbelt Savings. When

the McDows inquired about and decided to buy the house, Rice gave

them a preliminary loan application "to fill out and to take in to

the mortgage company." The mortgage company to which Rice referred

McDow was Sunbelt National Mortgage Corporation ("Sunbelt

Mortgage"), a wholly owned subsidiary of Sunbelt Savings

Association. The different roles of Sunbelt Savings and Sunbelt

Mortgage are important in this appeal because only Sunbelt Savings

was federally insured.3 Rice testified that he did not make a
the Federal Savings and Loan Insurance Corporation ("FSLIC"), and

was thus a "covered institution" under 18 U.S.C. § 1014. At

trial, the government introduced into evidence a letter from the

federal Office of Thrift Supervision, which certified Sunbelt

Savings' insured status. We recently reaffirmed that the

government must prove federal insurance status as an essential

element of a § 1014 conviction, as well as to establish federal

jurisdiction. United States v. Schultz, 17 F.3d 723, 725 (5th

Cir. 1994). However, the government does not have to prove that

the defendant knew of the institution's insured status. United

States v. Thompson, 811 F.2d 841, 844 (5th Cir. 1987).

3

distinction between the two entities: "Sunbelt is how I looked at

it. I basically view it as one institution, so Sunbelt something

was doing the financing." 

The loan application that Rice gave to McDow to fill out was

obtained from the loan files of the now-defunct Sunbelt Savings and

was introduced into evidence at trial. In connection with the loan

application, McDow made four materially false statements, which are

numbered below as in the indictment: 

(Count 1): McDow provided a Social Security number that was not

his own, but rather had been assigned to his son. 

(Count 2): McDow stated that he had $19,236 in savings

deposited at the "American Eagle Credit Union." No such credit

union existed; the address McDow submitted as the credit

union's was his own former business address in Dallas, Texas.

(Count 3): McDow submitted a reference letter that gave a false

verification of his rental residence. The letter purported to

be from Larry Cole as owner of the property at 7409 Long Canyon

Trail in Dallas. At trial, a Mr. Larry Coy testified that he

owned that property but that he never had rented it to McDow.

(Count 4): When Sunbelt Mortgage sought verification that McDow

had the funds on deposit with the credit union, McDow caused to

be submitted to the mortgage company a false "Verification of

Deposit" form which purported to be from the nonexistent

American Eagle Credit Union.

McDow took the stand at trial and admitted signing the loan
4

application and participating in closing on the house. He denied

filling in the false statements and claimed that his now-deceased

son filled out the loan application, telling him: "Just sign it,

daddy, and [I]'ll do the rest." McDow admitted that he had never

dealt with an American Eagle Credit Union and that the Social

Security number on the application was not his. 

On cross-examination, McDow admitted that he used a false name

and Social Security number while living in California to avoid

being arrested, after hearing that the FBI had a warrant out for

his arrest in Texas because of the house he bought in 1986. McDow

also admitted giving made-up Social Security numbers to police

officers at various times when he was arrested. McDow said he did

this because he wanted to avoid arrest, keep working and support

his family. The government was also allowed to question McDow about

his past convictions and arrests for bad checks, burglary/grand

theft and being a fugitive from justice.

Involvement of Sunbelt Savings and Sunbelt Mortgage

Sunbelt Mortgage was the named lender on the promissory note,

deed of trust and related documents signed by McDow. But the

mortgage company -- a wholly owned subsidiary of Sunbelt Savings --

had to borrow from Sunbelt Savings in order to fund the loan to

McDow. The money used to fund the loan thus came from the federally

insured deposits of the mortgage company's corporate parent,

Sunbelt Savings. Barry Johnson, vice-president of Sunbelt Mortgage,

testified that if the mortgage company experienced a loss on the

loan, it would diminish the assets of Sunbelt Savings. However,
 

4The two "loan application forms" admitted into evidence are

substantially identical except that one is dated July 19, 1986,

was filled out partially by hand and partially by typewriter, and

is signed by Benny McDow only; the other, dated September 30,

1986, the settlement date, is filled out by typewriter and is

signed by both Benny McDow and his wife, Fay McDow. Both contain

the false rental residence address, the false Social Security

number and the false credit union information.

5

creditors of the mortgage company could not have reached the assets

of the parent corporation, absent any reason to pierce the

corporate veil. The subsidiary, Sunbelt Mortgage, was not federally

insured and had no deposits of its own, but it had a "mortgage

warehouse lending" line of credit with its corporate parent,

Sunbelt Savings. Johnson testified that warehouse lending

arrangements are a common way for banks and mortgage companies to

do business. 

There was no direct evidence that McDow knew the money he

borrowed would ultimately come from Sunbelt Savings rather than

Sunbelt Mortgage. There was no direct evidence that McDow knew

whether either institution was federally insured, or whether he

knew if Sunbelt Savings would review his loan application or have

any part in his loan transaction. However, right above McDow's

signature on the loan application, the following statement appears:

"I/we fully understand that it is a federal crime

punishable by fine or imprisonment, or both, to knowingly

make any false statements concerning any of the above

facts as applicable under Title 18, United States Code,

Section 1014."

McDow admitted signing the loan application. His signature appears

on two versions of the loan application, both containing the above

reference to 18 U.S.C. § 1014.4
6

McDow testified that as far as he understood, "Sunbelt bank"

was the owner of the property, and "Sunbelt Mortgage Company" was

to provide the loan. McDow stated that he made an effort to read

all of the documents at the closing "so as not to look stupid," and

because he knew the documents were important, but stated that he

was not able to read everything he signed.

The defense made timely motions for a judgment of acquittal,

arguing that, assuming McDow made false statements, they were made

to Sunbelt Mortgage for the purpose of influencing it, not to

Sunbelt Savings, the federally insured institution. The trial court

denied the motions.

The jury convicted McDow on September 30, 1992 on all four

counts. On January 22, 1993, the trial court sentenced McDow to one

year of imprisonment on each of the three savings & loan fraud

counts (to run concurrently) and five years of probation for the

Social Security count. McDow filed notice of appeal on February 2,

1993. The main issue we address in this opinion is whether -- with

regard to the S&L fraud counts -- the jury could reasonably

conclude that McDow made his false statements with intent to

influence a federally insured financial institution, as required by

18 U.S.C. § 1014.

DISCUSSION

McDow argues that his motion for acquittal should have been

granted because any false statements he made in his loan

application were not "for the purpose of influencing" a federally

insured financial institution, but rather were for the purpose of
 

5United States v. Huntress, 956 F.2d 1309, 1318 (5th Cir.

1992), cert. denied, 113 S.Ct. 2330 (1993). "Fact-finders have

considerable leeway in drawing inferences from the evidence

presented to them. They may use their common sense and evaluate

the facts in light of their knowledge of the natural tendencies

and inclinations of human beings." Id. at 1318.

 

6Bowman, 783 F.2d at 1199; United States v. Thompson, 811

F.2d 841, 844 (5th Cir. 1987); United States v. Lentz, 524 F.2d

69, 71 (5th Cir. 1975)(as clarified by Bowman, 783 F.2d at 1198);

Williams v. United States, 102 S.C. 3088 (1982); see also United

States v. Bellucci, 995 F.2d 157, 159 (9th Cir. 1993).

7

influencing the non-insured subsidiary mortgage company. 

McDow's complaint is a challenge to the sufficiency of the

evidence to support his conviction under 18 U.S.C. § 1014.

Therefore we must: (1) consider all evidence in the light most

favorable to the government; (2) accept all reasonable inferences

which tend to support the jury's verdict; and (3) determine whether

a rational trier of fact could have found that the evidence

establishes guilt beyond a reasonable doubt.5

To sustain a conviction under § 1014, the government must

demonstrate that the defendant (1) made a "false statement or

report" and (2) did so "for the purpose of influencing in any way

the action of" a federally insured institution engaged in a lending

activity. United States v. Bowman, 783 F.2d 1192, 1197 (5th Cir.

1986). 

Under Fifth Circuit case law interpreting § 1014, it is not

required that the defendant actually make the false statement

directly to the insured institution to be found guilty under the

statute, nor is it required that the government show that the

defendant knew which particular institution was involved.6 The
8

defendant does not even have to know that the institution he is

trying to influence is federally insured, as long as the proof

shows the insured status. Thompson, 811 F.2d at 844. But we made

it clear in Bowman that "the government must still prove that the

defendant knew that it was a bank that he intended to influence."

Bowman at 1199 (emphasis added).

In United States v. White, 882 F.2d 250, 254 (7th Cir. 1989),

the Seventh Circuit concluded that the evidence was insufficient to

support the conviction. In that case, the defendant made false

statements to an equipment-leasing corporation that was a wholly

owned subsidiary of a federally insured bank. The government rested

its whole case on trying to persuade the court that the non-insured

leasing corporation -- because of its subsidiary relationship with

the federally insured bank -- was itself a "covered institution"

under § 1014. White, 882 F.2d at 254. The court held that the

subsidiary leasing corporation was not a "federally insured bank"

within the meaning of § 1014, and reversed White's conviction. The

opinion noted, however, that a different strategy in the case might

have resulted in White's conviction being affirmed:

"We repeat that if White had intended by making false

statements to the leasing corporation to influence the bank as

well, the fact that the statements were not made to the bank

would not prevent his conviction.... It would be enough if

White had known that the loan he was getting from the leasing

corporation would be assigned to the bank. But the government

proposed no such theory of liability in this case.... It staked

its all on persuading the district court and us that the

leasing corporation is a bank."

Id. at 254 (emphasis added). We now apply this law to the facts

presented in today's case. First, it is clear that McDow's intent
9

that his false statements influence the uninsured institution,

Sunbelt National Mortgage Corp., to make a loan does not constitute

a violation of § 1014. Second, an erroneously held belief by McDow

that Sunbelt National Mortgage was an insured institution would

also be insufficient to establish a § 1014 violation. The question

therefore narrows to whether, on this record, a reasonable jury

could infer that McDow knew that Sunbelt Mortgage would obtain the

loan proceeds with which to make his loan from Sunbelt Savings or

some other insured entity.

The government produced no direct evidence that McDow knew

that Sunbelt Mortgage would acquire the funds to make his loan from

another entity. Indeed the government does not suggest how McDow

might have acquired this knowledge. The record does not address

McDow's educational background; nor does it suggest that he had any

particular expertise in banking matters. He worked as a coffee

salesman for approximately ten years between 1979 and 1989.

Thereafter he drove a truck and moved and stored furniture.

We have carefully reviewed the testimony of the witnesses who

testified for the government who assisted McDow in completing this

transaction. Mr. Truman Rice, the real estate agent who sold McDow

the house, testified that he was not sure which of the Sunbelt

institutions was financing the property. He considered Sunbelt

Savings and Sunbelt Mortgage as one and the same. It is clear from

this witness's testimony that he was unaware that federally insured

funds played a role in financing this transaction.

Mr. Barry Johnson, vice-president and general counsel of
10

Sunbelt National Mortgage Corporation, confirmed that Sunbelt

Savings was insured by FSLIC and that Sunbelt National Mortgage

Company, a separate corporate entity did not have this insurance.

He provided the details of the relationship between Sunbelt Savings

and Sunbelt Mortgage and described how Sunbelt Mortgage obtained

the funds from Sunbelt Savings with which to make the loan. But he

did not testify that this information was imparted to McDow. Also,

a jury could not infer from his testimony that the public generally

knew that the insured institution's subsidiary mortgage company

ordinarily received its funding for such loans from the insured

institution. At argument the government pointed to the warning

contained in McDow's application which cautioned that any false

statements made therein would constitute a federal offense under 18

U.S.C. § 1014. This warning certainly may have put McDow on notice

-- although erroneously -- that submission of false statements in

the application to Sunbelt Mortgage would constitute a violation of

§ 1014. But we fail to see how this warning would enlighten Mr.

McDow on the critical fact: Sunbelt Mortgage acquired the funds to

make loans from an insured institution. 

We conclude that on this record a reasonable jury could not

find that McDow knew that the false statements he made in his

application to Sunbelt Mortgage would influence any party other

than Sunbelt Mortgage. Because Sunbelt Mortgage is not an insured

entity, the evidence is insufficient to support an essential

element of counts 2, 3 and 4 charging § 1014 violations. We
 

7 This disposition of the § 1014 counts makes it

unnecessary for us to address McDow's argument that the court's

jury charge amounted to an impermissible constructive amendment

of the indictment.

11

therefore reverse the conviction on those counts.7

Count 1: False Use of Social Security Number

The jury also convicted McDow under Count 1, the false use of

a Social Security number under 42 U.S.C. § 408. We assume from the

broad language of McDow's notice of appeal that Count 1 was

appealed along with the other three counts, but McDow makes no

argument for its reversal. In any case, the evidence clearly showed

that McDow submitted his son's Social Security number in the loan

application, falsely representing the number to be his own. Section

408 has no "federally insured" element; it requires only the

submission of the false number to any person, "with intent to

deceive." A reasonable jury could have inferred that, by submitting

his son's number in place of his own, McDow had the intent to

deceive. The jury could also have inferred an intent to deceive

from McDow's admission on the stand that he also used a false

Social Security number to avoid arrest while living in California.

Therefore, the jury's verdict on Count 1 is supported by sufficient

evidence, and is hereby affirmed.

CONCLUSION

For the reasons stated above, we reverse the convictions on

Counts 2, 3, and 4 charging violations of § 1014. We affirm the

conviction on Count 1, but vacate the sentence on that count and

remand this case for resentencing on Count 1.