1The Honorable Harold D. Vietor, Senior United States District Judge for the

Southern District of Iowa, sitting by designation.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

Nos. 98-2289/2290

___________

United States of America, *

*

Appellee/Cross-Appellant, *

* Appeals from the United States

v. * District Court for the District of 

* Nebraska.

John C. Whitehead, *

*

Appellant/Cross-Appellee. *

___________

Submitted: January 14, 1999

Filed: April 8, 1999

___________

Before BOWMAN, Chief Judge, MURPHY, Circuit Judge, and VIETOR,1 Senior

District Judge.

___________

VIETOR, Senior District Judge.

John C. Whitehead appeals on numerous grounds his convictions of two counts

of bank fraud under 18 U.S.C. § 1344(1), and one count of making a false statement

to a financial institution under 18 U.S.C. § 1014. Count I of the indictment charges

a violation of § 1344(1) based on an alleged check kiting scheme involving four

federally insured financial institutions running from October 1991 through March

1992. Count II charges a violation of § 1344(1) based on an alleged scheme to
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defraud Columbus Bank and Trust Company ("CBTC"), in connection with a loan

forgiveness agreement entered between Whitehead and CBTC on January 4, 1990.

 Count III charges a violation of § 1014 based on an alleged misrepresentation of

insolvency that Whitehead made to CBTC in the January 4, 1990, loan forgiveness

agreement. Whitehead also appeals from the district court's sentence on all counts,

arguing the court improperly determined the amount of loss. The government crossappeals the loss calculation with regard to Count I. For the reasons discussed below,

we reverse Whitehead's convictions on Counts II and III and remand for a new trial

on these counts in accordance with this opinion. We affirm the conviction on Count

I, but remand for re-sentencing in accordance with this opinion. 

EVIDENCE AT TRIAL

Whitehead was engaged in a farming enterprise in the 1980s. In 1987,

Whitehead and his wife, Linda, maintained three credit lines at CBTC—one for

Whiteacre Farms, a farming operation; one personal; and one for Whitehead Brothers,

a general partnership comprised of Whitehead and his wife and Whitehead's brother

and his wife. The Whitehead Brothers credit line stemmed from a March 19, 1986,

promissory note signed by all four members of the general partnership. The

promissory note states that "I agree to provide to you, upon request, any financial

statements or information you may deem necessary. I warrant that all financial

statements and information I provide to you are or will be accurate, correct, and

complete." 

Each of the three credit lines were in default by late 1987. Also in late 1987,

Whitehead and CBTC agreed that these credit lines would be liquidated and the

underlying collateral sold. Pursuant to this agreement, Whitehead and CBTC

executed a February 13, 1988, loan agreement ("Agreement") that provided for the

forgiveness of the personal credit line in return for a cash payment of $35,000. The

Agreement stated:
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Bank desires to express its release of claims against Whiteheads, and

each of them, subject only to performance of this Agreement, and to

enter into its binding, unconditional covenant to forego collection of any

deficiency balance, and not to sue Whiteheads, or either of them, for any

deficiency sums remaining after performance of the terms of this

Agreement. 

Whitehead's attorney, David Domina, drafted the Agreement. The Agreement did not

cancel or forgive the Whitehead Brothers credit line. Domina testified that he

explained to Whitehead that the Agreement would release Whitehead and his wife

from personal liability from all three credit lines. 

Whitehead was able to borrow the $35,000 from another financial institution,

Equitable Savings & Loan Association ("Equitable"). In a letter written to Whitehead

and his wife, Equitable stated that the $35,000 loan was "subject to our favorable

review of a letter from your creditors indicating that the $89,000 deficit figure, which

indicates your value in Whitehead Brothers, will not become a future cause of a

deficiency action." In response to Equitable's request, CBTC wrote a letter dated July

13, 1988, to Whitehead and his wife stating: "This is to advise that the Columbus

Bank and Trust Company will not instigate a deficiency legal action against you and

Linda for any shortfall that may occur on the Whitehead Bros. credit line."

On July 17, 1988, Whitehead's mother-in-law died. Whitehead's wife inherited

approximately $55,000 in cash and $77,000 in farmland from her. Whitehead never

informed CBTC of this inheritance, but did inform other banks of these assets. On

January 4, 1990, a loan forgiveness agreement ("Forgiveness Agreement") was

entered into between CBTC, Whitehead and his wife, and Whitehead's brother and

his brother's wife. The bank agreed that if Whitehead Brothers paid a total of

$80,000, the bank would forgive the remaining principal and interest on the debt,

totaling approximately $243,000. The Forgiveness Agreement contained this recital:
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"Borrowers are insolvent and are unable to pay the total amount of the debt." Domina

testified that Whitehead was insolvent at the time of the Forgiveness Agreement.

Whitehead contended CBTC never required that he submit a personal financial

statement in conjunction with the Forgiveness Agreement. An executive at CBTC

testified that if Whitehead had been more forthcoming about his assets, including

those inherited as a result of his mother-in-law's death, CBTC would have sought

more money from Whitehead in exchange for the Forgiveness Agreement.

From October 1991 through April 1992, Whitehead engaged in a scheme

involving four banks and five checking accounts. The banks include Sherman

County Bank, Republic Bank of Nebraska, First National Bank and Trust Company

("First National"), and CBTC. All of the banks are located in Nebraska. The scheme

consisted of Whitehead systematically depositing insufficient funds checks into one

or more of the accounts that were drawn on accounts at the other banks. This activity

erroneously inflated Whitehead's balances on the receiving bank's official books and

records. First National honored the insufficient funds checks it received, but charged

an overdraft fee. Whitehead payed these overdraft fees, but often used insufficient

funds checks from other accounts to do so. This activity was a cyclical and

continuous scheme. Over the six month period, for example, Whitehead wrote in the

neighborhood of 50 insufficient funds checks to First National alone. On March 31,

1992, a $4000 check written by Whitehead on an account maintained at Sherman

County Bank was returned to First National due to insufficient funds. First National

personnel then inspected Whitehead's account, revealing activity indicating a check

kiting scheme, and reported the activity to authorities. An investigation commenced,

leading to Whitehead's prosecution in this case.

ISSUES ON APPEAL

Whitehead raises several issues on appeal. He challenges two of the district

court's evidentiary decisions: (1) the admission, over his objection, of the
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government's expert testimony on check kiting, and (2) the admission, over his

objection, of evidence of events after July 13, 1988. Whitehead makes a Brady

challenge to the government's alleged failure to reveal exculpatory material.

Whitehead also contends that the district court erred when instructing the jury in two

respects: (1) failing to give Whitehead's requested instruction regarding the legal

standard for fraud under § 1344, and (2) failing to define for the jury the term

"insolvent." Whitehead further contends that the verdicts on all three counts are not

supported by sufficient evidence. Finally, Whitehead contends that at sentencing the

district court miscalculated the amount of the loss on all Counts and improperly

ordered restitution on Counts II and III. The government cross-appeals the district

court's finding of loss regarding Count I. 

EXPERT TESTIMONY

FBI Special Agent Daniel Dubree testified as an expert for the government on

check kiting activity. He testified to the meaning and definition of check kiting,

explaining that a check kiting scheme "is a systematic depositing of nonsufficient

funds checks into one or more accounts, which causes the bank balance on the official

books and records of that bank to be increased, to be inflated." Tr. 563:21-24.

Dubree also discussed some of the most common characteristics of check kiting:

[T]he checks being written among the accounts are in whole dollar

amounts, and that is they have no cents to them, for example $2000

even, $3000 even. Another characteristic is there's a substantially large

volume of checks being written among the accounts that are within the

common control of the parties involved. Other characteristics seems

[sic] to be that there is a common control, that, for example, that in the

situation where if one person's conducting a kite, they have caused or

written the majority of the checks to be deposited. Normally there are

[sic] more than one bank involved. . . .

Tr. 565:14-25.
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Whitehead challenges the admissibility of Dubree's testimony, arguing that

under Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), the

expert's testimony should have been excluded. We review district court decisions

regarding the admissibility of expert testimony for an abuse of discretion. See

Peitzmeier v. Hennessy Indus., Inc., 97 F.3d 293, 296 (8th Cir. 1996). After a hearing

that elicited detailed testimony regarding Dubree's background and methodology, the

district court ruled, citing United States v. Yoon, 128 F.3d 515, 527-28 (7th Cir.

1997), that his testimony was reliable and would aid the trier of fact in understanding

the evidence. In Yoon, the defendants were convicted of bank fraud by way of a

check kiting scheme in violation of 18 U.S.C. § 1344. The Seventh Circuit Court of

Appeals agreed with the trial court's decision to admit an FBI Special Agent's expert

testimony regarding the series of financial transactions involved in the alleged

scheme. See Yoon, 128 F.3d at 528. The Yoon court stated that the Special Agent's

expertise "was perfectly fitted to the facts of this case," id. at 527, and that allowing

such testimony "was a perfectly acceptable way to present evidence as to a

complicated series of financial transactions." Id. at 528. The expert in Yoon used

substantially the same methodology and offered similar testimony as the expert here.

Consequently, like the district court, we find the Yoon court's rationale and

conclusions regarding the admission of the expert testimony applicable and

persuasive. We find no error; the district court properly acted within its discretion

in allowing the expert testimony. 

EVENTS AFTER 7-13-88

Whitehead also challenges the admissibility of the evidence concerning events

occurring after July 13, 1988. The government contends that the district court did not

abuse its discretion in admitting the evidence. Prior to trial, Whitehead filed a motion

in limine, requesting exclusion of the evidence concerning events occurring after July

13, 1988, that related to his personal assets. At trial Whitehead renewed his
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objections contained in the motion in limine. Whitehead reasoned that the Agreement

executed on February 13, 1988, and the July 13, 1988, letter written by CBTC,

agreeing not to bring a deficiency action against Whitehead and his wife to collect the

outstanding debt on the Whitehead Brothers credit line, extinguished his personal

liability for any deficiency. In its order denying the motion in limine, the district

court stated that the 1988 Agreement and letter did not irrefutably establish that

Whitehead no longer possessed any personal liability on the outstanding Whitehead

Brothers debt. 

A district court's decision denying a motion in limine is reviewed for an abuse

of discretion. See White Consol. Indus., Inc. v. McGill Mfr. Co., 165 F.3d 1185,

1192 (8th Cir. 1999) (stating that decisions regarding motions in limine are

essentially evidentiary in nature, thus analyzed using an abuse of discretion standard);

United States v. Tucker, 137 F.3d 1016, 1035 (8th Cir. 1998). We will reverse only

"when an improper 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. Darden, 70 F.3d 1507, 1528 (8th Cir. 1995) (quoting United States v.

Ballew, 40 F.3d 936, 941 (8th Cir. 1994)). 

Based on the plain language of the Agreement and letter alone, the district

court was correct in its conclusion. Through the Agreement and letter, CBTC did not

eliminate or forgive Whitehead's debt, it merely promised not to institute a legal

deficiency action. Additionally, the CBTC executive who wrote the letter, Robert

Labenz, testified that he wrote the letter for the sole purpose of responding to

Equitable's request and inducing its loan of $35,000. See Tr. 82:4-8. This testimony

further supports the district court's ruling. We conclude that the district court did not

abuse its discretion in denying Whitehead's motion in limine and in allowing

evidence of events after July 13, 1988, to be introduced at the trial. 

THE BRADY ISSUE
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Whitehead argues that the district court erred in denying his motion to dismiss

Count I of the indictment because the government failed to provide exculpatory

material in violation of Brady v. Maryland, 373 U.S. 83 (1963). To succeed on a

Brady claim,

"[Whitehead] must show that the prosecution suppressed the evidence,

the evidence was favorable to the accused, and the evidence was

material to the issue of guilt or punishment." Evidence is material under

Brady "only if there is a reasonable probability that, had the evidence

been disclosed to the defense, the result of the proceeding would have

been different."

 

United States v. Flores-Mireles, 112 F.3d 337, 339-40 (8th Cir. 1997) (internal

citation omitted) (quoting United States v. Duke, 50 F.3d 571, 577 (8th Cir. 1995)).

The government need not disclose evidence that is, inter alia, available through other

sources or not in the possession of the prosecutor. See Flores-Mireles, 112 F.3d at

340. 

The material in issue is a pre-trial statement by Gerald Micek, a commercial

lender at First National Bank in Columbus, Nebraska, one of the financial institutions

involved in the scheme alleged in Count I. In a pretrial interview with government

agents, Micek opined that Whitehead did not engage in check kiting. Despite

Whitehead's discovery request and a court order directing the government to release

all Brady material, the government did not inform Whitehead of Micek's statement.

Whitehead's counsel, however, interviewed Micek prior to trial and learned of his

statement to the prosecution. During the trial, Whitehead's counsel cross-examined

Micek regarding his statement. Obviously, Micek's opinion was made available to

the defense through a source other than the government—Micek himself.

Even if the government had disclosed Micek's statement, this court concludes

that there is not a reasonable probability that the result of the trial on Count I would

have been different. During cross-examination, Micek testified that he had told
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members of the prosecution team that in his opinion Whitehead had not engaged in

check kiting because the bank was in no way defrauded. Thus, the government's

alleged suppression of the statement did not prevent the statement from surfacing at

trial. Notwithstanding Micek's opinion, the jury found Whitehead guilty. The

statement was not, therefore, material evidence. Whitehead's Brady challenge fails.

JURY INSTRUCTIONS

Whitehead objects to two of the district court's jury instructions. This court

reviews a district court's decision to grant or deny a request for a particular jury

instruction under an abuse of discretion standard, taking into account the full context

of the charge. See Tucker, 137 F.3d at 1036; United States v. Dreamer, 88 F.3d 655,

658 (8th Cir. 1996) ("We review the adequacy of the jury instructions by considering

them as a whole."). A defendant is entitled to a specific jury instruction "that conveys

the substance of his request if his request is timely, it is supported by evidence in the

case, and is a correct statement of the law." Tucker, 137 F.3d at 1036. This

entitlement does not guarantee that a defendant will be granted a particular

formulation. Instead, a district court may fashion its own instruction that adequately

conveys the law. See id. A reversal of a conviction is warranted only if the district

court's alleged erroneous failure to give a particular instruction was prejudicial. See

United States v. Whatley, 133 F.3d 601, 604-05 (8th Cir. 1998).

Failure to Give Requested Fraudulent Intent Instruction on Count I

Whitehead challenges as reversible error the district court's failure to give his

requested instruction pertaining to Count I. The district court gave the following

instruction, No. 16:

The phrase "scheme or artifice to defraud" means a deliberate plan

of action or course of conduct by which someone intends to deceive or

to cheat another or by which someone intends to deprive another of
2Whitehead's reference to Instruction No. 2 is probably a reference to his

requested instruction outlining the elements of Count I. The district court's

Instruction No. 14 outlines the elements of Count I. No. 14 states: 

Count I of the Indictment charges that the defendant, John C.

Whitehead, from on or about March 1, 1991 to on or about March 31,

1992, in the District of Nebraska, did knowingly execute a scheme or

artifice to defraud four financial institutions insured by the Federal

Deposit Insurance Corporation, namely, Columbus Bank and Trust

Company, First National Bank and Trust Company, Sherman County

Bank, and Republic Bank of Nebraska, in that the defendant, John C.

Whitehead, conducted transactions called "check kiting."

Section 1344 of Title 18 of the United States Code provides, in

part, that:

"Whoever knowingly executes . . . a scheme or artifice to

defraud a financial institution shall be guilty of an offense

against the United States."

The crime of bank fraud, as charged in Count I of the Indictment,

has three essential elements, which are:

One, the defendant knowingly executed a scheme and artifice to

defraud four financial institutions;

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something of value. The government must show that some actual harm

or injury was contemplated by the defendant.

It is not necessary for the government to prove that anyone lost

any money or property as a result of the scheme or plan to defraud. 

Whitehead argues that this court's holding in United States v. Jain, 93 F.3d 436 (8th

Cir. 1996), supports his position that the jury should have been further instructed, as

he requested, as follows:

In regard to the charge of bank fraud in Count I, you are

instructed that the Court has found as a matter of law that no bank

suffered a loss.

Consequently, the Government has an additional burden of proof on

Count I, beyond the elements set forth in Instruction No. 2 [sic].2
Two, the defendant did so with intent to defraud; and 

Three, the financial institutions were insured by the Federal

Deposit Insurance Corporation.

Negotiating an insufficient funds check, in and of itself, is not a

criminal act.

* * * *

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The Government must prove, beyond a reasonable doubt, that

some harm or injury was contemplated by John C. Whitehead. In other

words, the Government must produce evidence independent of the

alleged scheme to show defendant Whitehead's alleged fraudulent intent.

(Footnote added). Whitehead's proposed jury instruction is incorrect. The evidence

would not permit the district court judge to find as a matter of law that the bank

suffered no loss. Furthermore, Whitehead's proposed instruction misstates the law.

Whitehead is incorrect in stating that in order to prove a contemplation of harm or

injury evidence independent of the scheme itself must be offered. The scheme itself

often serves as evidence of a defendant's intent to defraud. See Yoon, 128 F.3d at

523 (discussing the defendant's intent to defraud, the court stated that "[w]hile it is

true that there is no evidence that [the defendant] said, 'I intend to defraud these

banks,' the sheer numbers of checks and amounts of money involved in this scheme

during the ten-month period provide a surrogate for [the defendant's] knowledge").

Moreover, Whitehead misapplies our decision in Jain to the facts here. We

stated in Jain that under the mail fraud statute, "[t]he essence of a scheme to defraud

is an intent to harm the victim." Jain, 93 F.3d at 442; see United States v. Mueller,

74 F.3d 1152, 1159 (11th Cir. 1996) (stating that the bank fraud statute is modeled

on the mail fraud statute); United States v. Saks, 964 F.2d 1514 (5th Cir. 1992)

(discussing the applicability of decisions under the mail fraud statute to the bank

fraud statute). At a minimum, there must be a "cognizable scheme to defraud." Jain,

93 F.3d at 442 (quoting United States v. McNeive, 536 F.2d 1245, 1252 (8th Cir.

1976)). Based on this standard, in Jain we overturned a conviction under the mail
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fraud statute because, inter alia, the government failed to show, at a minimum, a

scheme to defraud, or in other words, that the defendant intended to cause harm. See

id. Sufficient evidence exists to find that Whitehead engaged in a scheme to defraud,

and also that he intended to cause harm to the victim banks. This evidence consists

of testimony of witnesses, including an expert witness, and numerous bank records

placed in evidence.

 Admittedly, in Jain we noted that the government shouldered an additional

burden of providing evidence independent of the alleged scheme to show an intent

to defraud. This burden existed, however, because there was insufficient evidence

of both a scheme to defraud and actual harm. In Whitehead's case, the government

provided sufficient evidence of both a scheme to defraud and actual harm. 

The instruction given by the district court regarding Count I adequately

reflected the evidence produced at trial and communicated the proper legal standard

to the jury. The district court did not abuse its discretion in refusing to give

Whitehead's additional requested instruction pertaining to Count I.

Failure to Give Requested "Insolvent" Definition Instruction—Counts II and III

Whitehead also contends that the district court committed prejudicial error in

respect to Counts II and III by refusing to instruct the jury on the legal definition of

the term "insolvent." At the jury instructions conference, Whitehead's attorney and

the district court judge had the following exchange:

Attorney: Judge, just to make sure our record is complete, we would

also add [sic] the Court – request the Court to instruct the jury as a

matter of law that an accepted definition of "insolvency" is inability –

The Court: Where did you tender that? Which instruction are you

talking about?
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Attorney: I'm making an oral motion now. I think we made it during

trial. But we are asking the Court to instruct the jury as a matter of law

that the term "insolvency" includes a definition that an individual is

unable to pay their debts as they accrue in the normal course of business.

The Court: Well, that's – Mr. Domina said you can use either one.

Attorney: That's correct, that's why we're asking for that. And also – 

The Court: Well, I think he said it's – depends on which definition you

want to use.

Tr. 1164:13-25, 1165:1-5. The government does not dispute that the proffered

definition of "insolvent" is an accurate statement of the law; it argues only that the

requested instruction was not necessary, and that its absence was not prejudicial error.

The government's argument lacks merit; we agree with Whitehead. 

The district court gave the jury two instructions that incorporated the term

"insolvent." In explaining the government's burden on Count II in Instruction No. 15,

the district court instructed the jury that

Count II of the Indictment charges that the defendant, John C.

Whitehead, from on or about December 1, 1987 to on or about January

4, 1990, in the District of Nebraska, did knowingly execute a scheme or

artifice to defraud the Columbus Bank and Trust Company culminating

in a loan forgiveness agreement with the Columbus Bank and Trust

Company wherein the defendant falsely stated that he was insolvent on

January 4, 1990.

* * * *

Instruction No. 17 reads:

Count III of the Indictment charges that on or about January 4,

1990, in the District of Nebraska, the defendant, John C. Whitehead,
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knowingly made and caused to be made the false statement that he was

insolvent in conjunction with the loan forgiveness agreement submitted

by him to the Columbus Bank and Trust Company and that the

defendant made the false statement for the purpose of influencing the

action of the Columbus Bank and Trust Company to approve the loan

forgiveness agreement of January 4, 1990.

* * * * 

The crime of making a false statement to a financial institution,

as charged in Count III of the Indictment, has three essential elements,

which are:

One, the defendant knowingly made a false statement that he was

insolvent on January 4, 1990;

Two, the defendant made the false statement for the purpose of

influencing the action of the Columbus Bank and Trust Company upon

the loan forgiveness agreement on January 4, 1990; and 

Three, that the Columbus Bank and Trust Company was insured

by the Federal Deposit Insurance Corporation.

A statement is "false" if the statement is untrue when made.

* * * * 

As the district court recognized in Instruction Nos. 15 and 17, Counts II and III turned

on the issue of whether Whitehead knowingly made a false representation of

insolvency. In fact, both the district court and the government noted that the issue of

insolvency was a threshold question for the jury. See United States v. Whitehead,

Docket No. 8:96CR119, at 2 (D. Neb. April 6, 1998) (District Court Order) ("In order

to find the defendant guilty of Counts II and III of the indictment, the jury had to find

that the defendant's representation of insolvency was false on January 4, 1990.");

Brief for Appellee at 28 ("In order to find the Appellant guilty of Counts II and III of

the Indictment, the jury had to find that the Appellant's representation of his

insolvency in the January 4, 1990, loan forgiveness agreement was false."). Despite

the centrality of this term to Counts II and III, the district court failed to define

insolvency for the jury.
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The government argues, echoing the view of the district court, that the term

"insolvent" is one with a common usage and understanding, and that when used in the

loan forgiveness agreement it had no special meaning. This argument lacks merit.

The term "insolvent" encompasses distinctly different meanings in the law. An

insolvent person means someone who "cannot pay his or her debts as they become

due." Neb. Rev. Stat. § 1-201(23) (Uniform Commercial Code); see also Neb. Rev.

Stat. § 36-703(b) (Uniform Fraudulent Transfer Act) ("A debtor who is generally not

paying his or her debts as they become due is presumed to be insolvent."); Black's

Law Dictionary 716 (5th ed. 1979) ("[Insolvency is] . . . the condition of a person

who is unable to pay his debts as they fall due, or in the usual course of trade and

business."). Insolvency also means a "financial condition such that the sum of such

entity's debts is greater than all of such entity's property, at a fair valuation." 11

U.S.C. § 101(32)(A) (Bankruptcy Code); see also Neb. Rev. Stat. § 36-703(a) ("A

debtor is insolvent if the sum of the debtor's debts is greater than all of the debtor's

assets at a fair valuation."). Even the dictionary definition, which could be thought

to inform jurors' "common sense" and "general understandings" of the term, provides

a two-tiered definition for "insolvent." See Webster's Third New International

Dictionary 1170 (1986) (defining insolvent as "unable or having ceased to pay debts

as they fall due in the usual course of business;" or more specifically as "having

liabilities in excess of a reasonable market value of assets held"). The dictionary's

two-tiered explanation for the term insolvent illustrates that in general usage the term

is of a complex nature, thus warranting explanation.

 In their entirety, the instructions lack explanation of the term "insolvent,"

despite the fact that this term was a determinative component of Counts II and III.

"[W]here terms are not readily understood by the jury or where the possibility of

confusion concerning a term exists, the court should define or explain such term."

Westborough Mall, Inc. v. City of Cape Girardeau, 794 F.2d 330, 338 (8th Cir. 1986);

cf. Federal Enters., Inc. v. Greyhound Leasing & Fin. Corp., 786 F.2d 817, 819 (8th

Cir. 1986). In the absence of such an explanation, the jury was left to speculate about
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the meaning of this key term. The potential for such speculation and possibility of

confusion was prejudicial to Whitehead's case.

Implicitly acknowledging that more than one definition exists for the term

insolvent, the district court stated that "there was sufficient evidence from which the

jury could reasonably find that the defendant was solvent on January 4, 1990, under

any meaning of the terms 'insolvency' and 'insolvent.' " United States v. Whitehead,

Docket No. 8:96CR119, at 3 (D. Neb. April 6, 1998) (District Court Order). While

we agree with the district court that the government presented sufficient evidence on

Counts II and III, this does not eliminate the prejudice caused by failing to instruct

the jury on the term "insolvent." Even though there was sufficient evidence to

convict on Counts II and III, it is entirely possible, based on the evidence presented,

that the jury could have reached a not guilty verdict on both counts had it been

instructed that one definition of the term insolvent is the inability to pay debts as they

come due. In the same vein, it is entirely possible that the jury arrived at its verdict

based solely on the view that the definition of the term insolvent includes only the fair

market value of assets being less than debts. We can only speculate about this point,

which further illustrates the prejudice caused by the district court's failure to instruct

the jury as to the definition of the term insolvent. Consequently, we must reverse

Whitehead's convictions on Counts II and III and remand for new a new trial on these

counts. Because we reverse and remand for a new trial, we need not address

Whitehead's complaints about loss and restitution on these counts. 

SUFFICIENCY OF EVIDENCE

Whitehead argues that the evidence produced at trial was insufficient to support

his convictions as to all counts. In reviewing the sufficiency of the evidence, this

court must adhere to a strict standard. We may reverse a conviction "only if no

reasonable jury could have found [the defendant] guilty beyond a reasonable doubt."

United States v. Hawkey, 148 F.3d 920, 923 (8th Cir. 1998). Moreover, this court
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cannot weigh the evidence, and all inferences about and examinations of the evidence

are drawn in a light most favorable to the verdict. See id.

 Under § 1344(1), the government must prove beyond a reasonable doubt that

Whitehead "knowingly execute[d], or attempt[ed] to execute, a scheme or artifice .

. . to defraud a financial institution." 18 U.S.C. § 1344(1). This standard requires

evidence that the defendant intended to defraud the victim financial institution. See

United States v. Clapp, 46 F.3d 795, 803 (8th Cir. 1995); United States v.

Stavroulakis, 952 F.2d 686, 694 (2d Cir. 1992). Whitehead principally challenges the

sufficiency of the evidence offered to support the intent to defraud element of §

1344(1). Cf. Hawkey, 148 F.3d at 924. In waging such a challenge, Whitehead

argues three points: (1) the bank did not suffer a loss; (2) the record lacks a claim by

the bank that it was defrauded; and (3) the evidence demonstrated an "informal

overdraft protection system" that negated the intent element. We easily dispose of

Whitehead's first point. The government need not prove loss to show that a defendant

committed bank fraud under § 1344. See United States v. Ponec, 163 F.3d 486, 487

(8th Cir. 1998) ("We hold, among other things, that the crime of bank fraud under 18

U.S.C. § 1344 does not require a showing that the defrauded bank suffered a financial

loss."). We also easily dispose of Whitehead's second point. Fraud can be proven in

numerous ways; the government need not specifically prove that bank personnel

claimed the bank was defrauded. Cf. United States v. Saks, 964 F.2d 1514, 1518 (5th

Cir. 1992).

Lastly Whitehead argues that there was an "informal draft protection system"

that in effect negates the existence of criminal intent. This so-called "informal draft

protection system" was the routine practice of a bank, First National for example,

deciding to honor an insufficient funds check, allow the overdraft, and then charge

an overdraft fee. In response to this argument, the government cites United States v.

Unruh, 855 F.2d 1363 (9th Cir. 1987), and contends that such a "system" is not a per

se defense to check kiting. Instead, argues the government, such a "system" is an
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evidentiary matter for the jury's consideration. While the Unruh case dealt with the

analogous § 656 of Title 18 of the United States Code, we agree with its rationale that

valid consent is not dispositive on the intent element. Instead, evidence of consent

is for the jury to consider in deciding the issue of intent. Cf. United States v.

Ripinsky, 109 F.3d 1436, 1441 (9th Cir. 1997), opinion amended on denial of reh'g,

129 F.3d 518 (9th Cir. 1997) ("While Unruh involved section 656 rather than section

1344, the same concerns apply [to § 1344]."); United States v. Woods, 877 F.2d 477,

480 (6th Cir. 1989) (discussing that the requisite intent to defraud is the same for 18

U.S.C. §§ 656 & 1344). In light of our conclusions here, our strict mandate for

review, and the evidence contained in the record, we hold that there was sufficient

evidence for the jury to convict the defendant of the crime charged in Count I of the

indictment.

Likewise, the evidence introduced in support of Counts II and III was sufficient

to sustain convictions on those counts, albeit those counts must be retried because of

error in the instructions.

SENTENCING—AMOUNT OF LOSS

The government cross-appeals on the issue of the amount of loss on Count I

that the district court found for the purpose of determining the offense level under §

2F1.1 of the United States Sentencing Guidelines. The district court determined the

amount of loss to be $4000, which the government argues under-represents the actual

loss. The government contends the actual loss is $30,823.30. Whitehead argues the

district court erred, contending that the actual loss is zero. 

We apply a clearly erroneous standard of review to a district court's finding of

loss under § 2F1.1 of the United States Sentencing Guidelines. See United States v.

Morris, 18 F.3d 562, 570 (8th Cir. 1994). We review de novo the district court's
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construction and application of the Sentencing Guidelines. See United States v.

Wells, 127 F.3d 739, 746 (8th Cir. 1997).

The pre-sentence report prepared for Whitehead's sentencing determined the

actual loss on Count I to be $4000. This figure was determined after a review of

numerous documents. The $4000 figure is the total amount in float when the check

kiting scheme ended on April 1, 1992. The government objected to this figure.

Relying on a report prepared by FBI Supervisory Special Agent Daniel D. Dubree,

the government argued the loss totaled $30,823.30. Agent Dubree refers to this figure

as the "cumulative loss." This "cumulative loss" figure reflects the cumulative

amount of overdrafts, disregarding any deposits made before the discovery of the

check kiting scheme. 

At the sentencing hearing, the district court found that Whitehead did not

intend to cause a loss to the victim banks. The government does not dispute this

finding on appeal and we accept the finding as it was not clearly erroneous under all

the evidence presented. Cf. United States v. Shaffer, 35 F.3d 110, 113 (3d Cir. 1994).

The United States Sentencing Guidelines direct courts to consider the actual loss if

this figure exceeds that of the intended loss. U.S.S.G. § 2F1.1 n.8 (1998). Since the

district court found the intended loss was zero, it was correct in proceeding to

consider the actual loss. The district court found that the actual loss was $4000 based

on all the evidence submitted. The $4000 figure reflected, according to the district

court, the amount of the "insufficient fund check that had to be covered when the

check kiting was discovered," or the amount in float at the time of discovery. In

arriving at this figure, the district court rejected both Whitehead's argument that the

total loss was zero and the government's position that the total loss was $30,823.30.

Whitehead reasoned the total loss was zero, in part, because he pledged $4000 to

satisfy the amount in float. The district court rejected Whitehead's position because

the $4000 in restitution was pledged to satisfy the amount in float after the scheme

was discovered. The district court properly rejected Whitehead's argument. The
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amount of actual loss is determined at the time the check kiting scheme is discovered,

not at the time of sentencing, meaning that restitution made after the discovery does

not offset the total amount of loss. See, e.g., United States v. Akbani, 151 F.3d 774,

778 (8th Cir. 1998); cf., e.g., United States v. Flowers, 55 F.3d 218, 221-22 (6th Cir.

1995) ("'The fact that a check kiter enters into a repayment scheme after the loss has

been discovered does not change the fact of the loss . . . .'") (quoting United States v.

Mau, 45 F.3d 212, 216 (7th Cir. 1995)). 

The district court's finding of a $4000 loss is not clearly erroneous and is in

accordance with our recent holding in Akbani regarding loss determinations. See

Akbani, 151 F.3d at 778-79 (discussing that the rule that the amount of loss is to be

determined at the time of the check kiting discovery should not be narrowly read as

to prevent consideration of outstanding fraudulent checks not yet submitted for

payment). Accordingly, we uphold the district court's finding that the actual loss on

Count I is $4000.

We AFFIRM the Count I conviction. We REVERSE the convictions on

Counts II and III and remand for a new trial on those counts. We also remand on

Count I for re-sentencing, since Whitehead's total offense level will be lower in the

event he is not found guilty on re-trial of Counts II and III, and might be different

even if he is convicted on Counts II and III.

 

A true copy.

 Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.