The Honorable Joseph F. Bataillon, United State s District Judge for the District 1 of Nebraska, sitting by designation. United States Court of Appeals FOR THE EIGHTH CIRCUIT

___________ No. 97-3940

___________ United States of America, * * Appellee, * * Appeal from the United States v. * District Court for the Southern * District of South Dakota. Joe Leon Mulder, * * Appellant. *

___________ Submitted: March 10, 1998 Filed: June 16, 1998

___________ Before WOLLMAN and LOKEN, Circuit Judges, and BATAILLON, District Judge. 1

___________ BATAILLON, District Judge.
Joe Leon Muld er was convicted of one count of bank fraud in violation of 1 8 U.S.C. § 1344. The district court sentenced Mulder to eighteen months in prison, to be followed by three years of supervised release. Mulder appeals, asserting that th e dis trict court erred in making evidentiary rulings, in denying his motion for new tria l based on newly discovered evidence, and in construing the sentencing guidelinesAn entry dated May 1989, states “. . . owes $45,000 to Krog. . . .” The entry 2 dated Octo ber 11, 1989, states “has debt to neighbor of $50,000.00 on cattle." Th e en try dated February 6, 1990, states “[o]wes neighbor, Glen Krog, approximatel y $58,000 on cattle in yard.” Def. Ex. A.
-2- relating to downward departure. Upon review, we reverse and remand the case for a new trial.

I. BACKGROUND

Joe Leon Mulder resides in Lake Benton, Minnesota. In 1989, Mulder was in the business of feeding cattle and raising calves. He lived on a rented fifteen-acre farm site owned by Glenn K

rog, who also farms in Lake Benton. Beginning in 1987, Krog loaned Mulder money to buy calves, and Mulder remained indebted to him.
In May, 1989, Mulder applied for a l oan with the Corn Exchange Bank, located in nearby Elkton, South Dakota. Mulder wanted to purchase fifteen cows and twentyone heifers. Marvin Moore, a commercial lending officer, de alt with Mulder during his relationship with the bank. On May 31, 1989, Moore completed a financial statement which Mulder signed. Gov't Ex. 10. The financial statement indicated that Mulder did not ow n any real estate. Under the liabilities column, the financial statement had a n entry for c attle owing to Mr. Glenn Krog in the amount of $61,990.00. The backside of the financial statement r ecorded that Mulder’s liability to Krog was secured by 106 steers valued at $62,752.00.
In addition to financial statements, the bank maintained a l oan commentary sheet on Mu lder. Def. Ex. A. The commentary contains entries made by Moore and other bank employees from May 1989 through March 1995. The commentary sheet makes
no refe rence to Mulder owning real estate. Three separate entries on the loa n commentary sheet reference Mulder’s debt to Krog. 2-3-

To secure its promissory note, the bank entered into a security agreement with Mulder on May 31, 1989. It secured its interest with fifteen head of Holstein cows and twenty-one Holstein heifers. Gov't Ex. 11. In October 1989, the bank entered int o another security agreement with Mulder for the purpose of securing all swine and their youn g, their products and produce, and all feed produced in the farming operation

. Gov't Ex. 12. On May 7, 1990, the bank entered into a third security agreement with Mul der which covered inventory, equipment, farm products, accounts, instruments , documents, chattel paper and other payments, and general intangibles. Gov't Ex. 15. On August 3, 1990, the bank loaned Mulder $50,000.00 at an annual interes t rate of 12.5 percent for renewal of notes, feed, and the balance of the acreage. Gov't Ex. 17. The bank secured the note by a security agreement dated May 7, 1990. On August 31, 1990, the bank loaned Mulder $12,000.00 for the purchase of seve nteen heifers and for feed. Gov't Ex. 13. The bank secured this loan by security agreements dated May 31, 1989, October 11, 1989, and May 7, 1990.

On Februar

y 6, 1991, Moore completed another financial statement on Mulder which Mulder signed. Gov't Ex. 18. The finan cial statement lists farm real estate with
a value of $93,500.00. Schedule A lists two owned properties -- a ten-acre property known as Thom

pson farm valued at $17,000,00 and a fifteen-acre property known as Hol lywoodAcres valued at $76,500.00. The liabilities section of the financia l statement references no debt owing to Krog.
The bank generated a computerized commercial review spreadsheet on Mulder dated May 16, 1991. Def. Ex. B. Under current assets, the spreadsheet co ntains a zero value for the homestead, a land value of $16,000.00, and an improvements value o f $77,500.00. On June 21, 1991, the bank extended Mulder a line of credit in the amount of $165,000.00. Gov't Ex. 20. The bank dete rmined that the existing collateral for the line of credi t remained adequate. The bank secured its line of credit by the securit y agreement signed by Mulder on May 7, 1990.-4-

Mulder signed another financial statement for the bank on December 3, 1991

. The financ ial statement listed two fixed real estate properties -- a fifteen-acre hom e farm site valued at $80,000.00 and a ten-acre site valued at $50,000.00. The financial statement did not identify a liability to Krog. Gov't Ex. 21. On February 26, 1992, the bank loaned Mulder $60,000.00. Go v't Ex. 22. The bank secured its promissory note by a real estate mortgage dated February 23, 1992, and a security agreeme nt dated May 7, 1990. Mulder g ave the bank a mortgage on the fifteen-acre building site owned by Krog. Go v't Ex. 5. Moore testified that the bank did not verify ownership of th e mortgaged property prior to making the loan to Mulder. Tr. 91:7-8.
On July 31, 1992, Moore wrote Jerry Remund, a certified appraiser, requesting an appraisal on the dairy acreage. Def. Ex. D. Remund prepared an appraisal report as of August 15, 1992, and appraised the acreage at an a ppraised value of $41,000.00. Def. Ex. E . The appraised value was lower than any value recorded on Mulder’ s financial statements. The appraisal contained no title search and did not identify th e property owner of record.

Mu lder provided the bank with a signed financial statement dated August 14 , 1992, prepared by an outside source. Gov't Ex. 23. The financial statement listed two long-term farm assets -- a fifteen acre farmstead home valued at $100 ,000.00 and a tenacre Thompson’s dairy farm valued at $83,000.00. The financial statement identified no liability owing to Krog.
On November 13, 1992, Mulder signed a promissory note prepared by the bank in the amount of $145,000.00 for the renewa l of outstanding notes. Gov't Ex. 24. The bank se cured the note by a security agreement dated May 7, 1990, and a dair y assignment date d November 13, 1992. In February 1993, Mulder presented the bank with a signed financial statement prepared by an outside source. Gov't Ex. 25. Th e balance sheet listed long-term farm assets of buildings and improvements totalin g $210,500.00.-5-

The bank prepared another promissory note in the amount of $10,000.00 fo r Mulder on March 24, 1993, which was not signed by Mulder. Gov't Ex. 26. The bank
se cured the promissory note by a security agreement dated May 7, 1990, and a n assignment of a certificate of deposit. On June 21, 1993, Moore prepared a financial statem ent on Mulder which he signed. Gov't Ex. 27. This financial statement liste d two long-term or fixed assets -- a ten-acre dairy site valued at $100,000.00 and a fifteen-acre building site valued at $110,500.00.

On June 2 1, 1993, the bank prepared a promissory noted in the amount o f $1 41,850.17 secured by security agreements dated May 7, 1990, and November 13 , 1990. The promissory note was not signe d by Mulder. Gov't Ex. 28. On October 12, 1993, the bank prepared two promissory notes in the amounts of $137,000.00 an d $10,000.00. Gov't Exs. 29 & 30. These promissory notes were also not signed b y Mulder.
Glenn Krog testified that in June 1993, he discovered that the bank had taken
a mo rtgage on his acreage. Tr. 55:7-11. In June 1993, his attorney notified the bank by lette r that it had taken a mortgage on Krog’s property. Tr. 56:2-4. In Decembe r 19 93, Moore received documents from Krog evidencing Mulder’s indebtedness t o Krog. Gov't Exs. 7-8.

InDecember 1993, Mulder presented Moore with a financial balance shee t prepared by an outside source. Gov't Ex. 31. The financial statement listed two longterm f arm assets, a dairy valued at $100,000.00 and a home place valued a t $110,500.00. The balance sheet, dated Dec ember 3, 1993, was not signed by Mulder. As of December 1993, Mulder owed the bank $204,736.00 on two promissory notes. Tr. 107:23. Moore testified that the bank ultimately wrote off $132,000.00in bad loans to Mulder. Tr. 108:10-11.-6-

The i ndictment charges that from on or about February 6, 1991, and ending on
or about December 3, 1993, Mulder knowingly devised a scheme and artifice t o defraud the Corn Exchange Bank of Elkton, South Dakota, to obtain moneys, funds , credits, and ass ets owned by means of false and fraudulent representations. The case
was tried to a jury which found the defendant guilty of one count of bank fraud i n violation of 18 U.S.C. § 1344.

II. DISCUSSION

On app eal, Mulder makes several challenges to his conviction and sentence

. Throug h his counsel, Mulder contends that (1) the district court erred in excluding a financial stat

ement of Mulder’s dated October 18, 1991, (2) the district court erred in denying his motion for new trial, (3) the district court failed to depart downwar d pursuant to U.S.C.G. § 5K2.0, and (4) the district court erred in excluding testimony of a defense witness. We consider these arguments in turn.

Mulder first challenges the district court’s exclusion of Def. Ex. C, a financial statement on Mulder dated October 18, 1991. Defense counse l first introduced Exhibit C d uring the cross-examination of Marvin Moore, a Vice President and commercia l lender at Corn Exchange Bank. The document titled “Financial Statement and Loa n Application” was prepared by Russell Bank on October 18, 1991, and signed b y Mulder. The financial statement listed two properties under the category “Fixe d Assets” -- a fifteen-acre building site valued at $80,000.00 and a ten-acre building site
va luedat $50,000.00 for a total fixed asset value of $130,000.00. Below “Fixe d Assets” is a category “Rented Land” that records two properties -- a fifteen-acr e building site and a ten-acre building site.

On cr oss-examination of Marvin Moore, Mulder’s counsel established tha t Exhibit C had been supplied to the bank by the Russell Bank and that the financia l statement was contained in the bank's lending file on Joe Mulder. Tr. 123:16-23. The-7-

government objected to its admission, and the Court took the e xhibit under advisement. Tr. 1 24:4-15. Following the jury instruction conference, the district court hear d arguments on the admissibility of Defe nse Exhibit C. Tr. 156:10-25; 157:1-25; 158:1- 20. Defense counsel argued that the e xhibit was both relevant and crucial to Mulder’s good faith defense because Exhibit C supported Mulder’s contention that he advised the bank th at he rented the fifteen-acre building site. Tr. 156:13-19, 23-25; 157:1-4

. The government objected to Exhibit C because it was not one of the financia l statements relied on by the bank and was not relevant to the charges in the case. Tr. 158:7-11. The district court determined that Exhibit C was “internally inconsistent,” Tr. 158:13-15, was clearly erroneous in listing the ten-acre building site as rented, and was highlighted to divert the jury’s attentio n away from the valuations contained in the financial statement. Tr. 158:15-19. Based on these findings, the di strict court excluded Exhibit C.

On appeal , the defendant argues that the district court abused its discretion i n excluding Exhibit C. Th e defendant contends that Exhibit C is documentary evidence probative of Mulder’s contention that he was renting the farmstead, probative of hi s credibility and his good faith defense. Mulder also claims that Exhibit C affects th e outc ome of the action, because a prima facie element of the government’s case wa s Mulder’s representations relating to ownership of the fifteen-acre building site.

Relevant testimony is assumed admissible, Fed. R. Evid. 402, unless it s probative value is “substantially outweighed” by the possibility of unfair p rejudice. Fed. R. Evid. 403. Once a party has demo nstrated the relevance and probative value of the evidence, the role of the dis trict court is simply to determine whether admission of the exhibit would create an “undue tendency to suggest decision on an improper basis. ” Not es of Advisory Committee, Fed. R. Evid. 403. A district court may exclud e relevant evidence if the probati ve value of the evidence is substantially outweighed by the danger of u nfair prejudice. Fed. R. Evid. 403. A court of appeals gives broa d deference to a district court’s determinations under Rules 401-403 of the Federal Rules-8-

of Evidence. United States v. Holmes , 822 F.2d 8 02, 806 (8th Cir. 1987). An appeals court d oes not reweigh the evidence, but determines only whether the district cour t abused its discretion in excluding the evidence. Id. (citing United States v. Derring, 592 F.2d 1003, 1007 (8th Cir. 1979)).

We conclude that the distric t court abused its discretion in excluding Exhibit C. We agree that Exhibit C, which was in the bank’s possession and contained in th e defendant’s le nding file, was relevant to the requisite element of intent to defraud. Exhib it C was also probative of the defendant’s good faith defense. Good faith
con stitutes a complete affirmative defense to a charge of fraudulent intent. Willis v

. Un ited States, 87 F.3d 1004, 1008 (8th Cir. 1996). Moreover, Exhibit C was no t unfairly prejudicial to the government. During its case in chief, the go vernment offered three fi nancial statements prepared by outside sources. Gov't Exs. 23, 25 and 31

. Alth oughExhibit C can be construed as internally inconsistent, Mulder should hav e been all owed an opportunity to explain the inconsistencies to the jury. Becaus e Mulder’s intent to defraud was a material issue at trial, we conclude that the distric t court’s exclusion of Exhibit C constituted reversible error, and we remand for a new trial.

Inasmuch as this case requires a retrial, we consider the defendant’s othe r evid entiary claim that the district court erred in excluding evidence concerning th e routine practices of Marvin Moore in handling financial statements. “We review the evidentiary rulings of a district court only for abuses of discretio n, and will reverse only when an improper evidentiary ruling affects the substantial rights of the defendant or when we believe that the error has had more than a slight influence on the verdict. ” United States v. Ballew, 40 F.3d 936, 941 (8th Cir. 1994) (citations omitted).

Th e defendant contends that pursuant to Rule 406 of the Federal Rules o f Evidence, Mr. Dagel’s testimony was admissible as bearing on Marvin Moore’s routine practice in handling financial statements and for purposes of impeachment.-9-

Following an offer o f proof, the district judge excluded the testimony. After carefully reviewing the testimony of Marv in Moore, we conclude that the District Court did not abuse it s discretion when it excluded the evidence. The issue at trial was whethe r Mulder intentionally defrauded the bank by knowingly maki ng false representations for the p urpose of obtaining loan monies. The proffered testimony of Rex Dagel on th e routine practice of Marvin Moore in handling financial statements at the bank was not relevant to this issue. United States v. Elliott, 89 F.3d 1360, 1369 (8th Cir. 1996), cert denied, ____ U.S. ____, 117 S.Ct. 963 (1997)

. Dagel’s testimony may have been admissible for purposes of impeachment

. How ever, no evidence was elicited from Marvin Moore concerning either his routine practice, or his conduct in preparing the loan documents for the defendant. The issue of Moore’s routine practice was not squarely presented to the trial court. Hence, th e proffered testimony of Rex Dagel related to a peripheral matter on which the admission of extrinsic evidence is subject to the sound discretion of the trial court. United States
v. Joh nson, 968 F.2d 765, 766 (8th Cir. 1992). Because Rule 608(b) of the Federa l Rules of Evidence admonishes against the introduction of extrinsic evidence, w e conclude that the district court did not abuse its discretion when it excluded th e proffered testimony of Mr. Dagel.
In light of our disposition above, we need not a ddress the defendant’s remaining assignment of errors .

III. CONCLUSION

We reverse and remand this case for a new trial with the questioned evidence, if offered, to be admitted or excluded in accordance with this opinion.
WOLLMAN, Circuit Judge, concurring and dissenting.-10-

I concur in that portion o f the court’s opinion which holds that the district court did not err in excluding testimony concerning Moore’s practices in handling financial statements. I respectful ly disagree with the court’s holding that the district court abused its discreti on in excluding Exhibit C. If this case presented a close question on th e sufficiency of the evidence, I might well agree that Mulder suffered prejudice as a result of the district court’s ruling. When viewed in the light of the overall strength of the government’s case, however, Exhibit C’s probative value would ha ve been so slight that its exclusion does not undermine my confidence in the verdict. As the government points out, Exhibit C was prepared by a bank in Russell, Minnesot a, and not by Moore. Moreover, five of t

he six financial statements submitted by Mulder to Corn Exchange Bank were dated after October 18, 1991, the date shown on Exhibit C.
At best, then, Exhib it C would have constituted a straw floating on the massive sea of evidence against Mulder. Thus, the district court’s error in ex cluding the exhibit, if error at all, was harmless.

I would affirm the conviction. A true copy.
ATTEST: CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.