## F I L E D United States Court of Appeals Tenth Circuit 

### December 19, 2005

Clerk of Court PUBLISH UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

UNITED STATES OF AMERICA, Plaintiff-Appellee, v. GARLAND LEE WALDROOP II, Defendant-Appellant. No. 04-6308

Appeal from the United States District Court for the Western District of Oklahoma

(D.C. No. 03-87-R)
Robert G. McCampbell, United States Attorney (SusanDickerson Cox, Assistant United States Attorney with him on the brief), U.S. Attorney’s Office, Oklahoma City, Oklahoma, for the Plaintiff-Appellee. Gerald L. Hilsher, Boone, Smith, Davis, Hurts & Dic kman, Tulsa, Oklahoma, for the Defendant-Appellant.

Before LUCERO , ANDERSON, and MURPHY , Circuit Judges.

LUCERO , Circuit Judge.

Garland Lee Waldroop II, having been convicted of b ank fraud and conspiracy to commit bank fraud, appeals his convic tions on the basis of- 2 -

insufficient evidence. He also argues that his sen tence was impermissibly enhanced based on judge-found facts in violation of United States v. Booker , 125 S. Ct. 738 (2005) and that, when enhancing his sent ence based on the amount of losses he caused, the district court should have ta ken into account his civil settlement with the bank he defrauded. None of the se arguments is availing. We exercise jurisdiction pursuant to 28 U.S.C. § 1291 and AFFIRM Waldroop’s conviction and sentence.
I The facts of this case are rooted in an ill-fated r elationship between a banker of questionable ethics and Waldroop, a busin essman with the dangerous combination of bad financial luck and tastes that w ell exceeded his means. As things this combustible often do, the relationship between Mike Mayfield, the banker, and Waldroop ignited and caused hundreds of thousands of dollars of losses to Mayfields’ employer, First State Bank. When he met Waldroop, Mayfield was an Executive Vic e President at First State Bank. Mayfield was also involved in an enormous fraudule nt loan scheme with a local businessman named Larry Paul that woul d soon be discovered. However, at the time, he was a respected banker and a man on the rise in the bank. Waldroop, too, was successful, operating his family steel construction- 3 -

business. He was also well known in the literally fast-paced world of competitive midget-car racing. Mayfield recruited Waldroop to join the bank’s “Bus iness Manager” program, which provided bridge financing for small businesses. This allowed small business owners to borrow against their recei vables, allowing them to pay their expenses with credit and to repay the bank af ter they had billed their clients. Waldroop was admitted to the Business Manager progr am and began receiving credit from First State Bank. In addition to the Business Manager loans, Mayfield approved a number of loans to Waldroop and his businesses, including per sonal loans that allowed Waldroop to buy real estate and luxury cars. In to tal, Mayfield authorized loans of over $1 million to Waldroop and his related comp anies. At First State Bank, both bank officers and borrowers were subject to le nding limits. Each individual officer had a limit on how much he could lend to any one individual. Further, no individual officer could authorize the bank to lend more than a certain total amount to any one borrower, based on credit-worthin ess. Debt limits for individuals included all associated entities, inclu ding corporations controlled by the individual. The money extended to Waldroop exc eeded both the bank’s normal limit for an individual and the amount Mayfi eld was personally authorized- 4 -

to loan to an individual. However, the Board of D irectors agreed to expand Waldroop’s global limit. Eventually, the Board of Directors made it clear th at it would not approve any more exceptions to their ordinary debt limits. Waldroop wanted to buy a new red Chevrolet Corvette but Mayfield told him that t he bank would not give him any more financing. Waldroop complained to the chairman of the bank, Fr ank Swan Sr., that Mayfield was not being cooperative. Swan told Mayfield to “get it resolved,” but did not specify about how Mayfield s hould solve Waldroop’s complaints. Faced with this dilemma, Waldroop hatched an idea: the bank could nominally loan money to Waldroop’s employee, David Chandler, but Waldroop would use the money to purchase the Corvette and wo uld be responsible for the loan. This is a financing scheme known as a ‘nomine e’ or ‘straw’ loan. Mayfield agreed to nominally loan money to Chandlerthat was in fact intended for Waldroop. His reasons for doing so ar e not entirely clear, but may have been a response to a threat by Waldroop to def ault on his debts to the bank. As Waldroop’s debts increased, Mayfield had become further enmeshed in the fraudulent loan scheme with Larry Paul. Mayfield w as desperate to keep this scheme quiet and he thought that if Waldroop defaul ted, Mayfield’s other loans would be investigated. When combined with the bank chairman’s instruction to- 5 -

“get it resolved,” Mayfield apparently had enough i ncentive to go along with Waldroop’s scheme. Mayfield approved a loan to Chandler for the Corvette. The Corvette served as collateral on the loan, but Chandler neve r actually owned the car. Instead, it was titled to a corporate entity contro lled entirely by Waldroop. Waldroop personally received the cash rebate offere d by the car dealer to purchasers of Corvettes. This loan was quickly followed by three other nomin ee loans to Chandler that allowed Waldroop to purchase a Chevrolet pick- up truck and a bright purpleand-yellow Corvette with crossed racing flags paint ed on the side that served as the pace car for an IndyCar race. Mayfield also le nt money to Chandler that allowed Waldroop to obtain a huge trailer to haul m idget racing cars. In each case, the collateral was not owned by Chandler, the nominal recipient of the loan, but was instead in the hands of a Waldroop-controll ed corporate entity. After making these nominee loans to Chandler, anoth er problem emerged. The total amount of these loans to Chandler was nea ring the limit Mayfield could approve to any one individual. Mayfield and Waldro op decided to begin using different nominees and developed a plan to invest i n real property. First, Mayfield lent money to an ostensibly independent co mpany called Leecor Development that was actually controlled by Waldroo p to buy a piece of property.- 6 -

They then used that piece of property as collateral on a loan to Steelcraft Construction, a company owned by Waldroop’s father. The money from that loan was given to a Waldroop-controlled company. They t hen approved a loan to Waldroop’s mother, collateralized by the same piece of property, and gave the money to another Waldroop company. Mayfield approved a nominee loan to Waldroop’s brot her that allowed Waldroop to buy a rig to pull the midget racing cartrailer. This was part of a complicated multi-transaction loan. First, money w as lent to Chandler to buy the trailer. Then, that loan was paid off with the pro ceeds of a nominee loan to Waldroop’s brother. The loan to Waldroop’s brotherwas bigger than the loan to Chandler and so the remainder of the borrowed moneywas used to pay off some of Waldroop’s debts. Waldroop’s brother thought he was getting title to the trailer in the deal, but Chandler and then a Waldro op-controlled corporation actually had title and never gave it to Waldroop’s brother. After the loan to Waldroop’s brother paid off the loan to Chandler for the trailer, Mayfield was able to loan Chandler more mo ney. Mayfield approved a loan to Chandler to buy a piece of property on whic h to build a midget sports car race track. So that the loan could be approved, Wa ldroop had Chandler list a “drot crane” that belonged to Waldroop as one of hi s assets, as well as the Corvette that was purchased with a previous nominee loan. Waldroop eventually- 7 -

moved into a house on the property. Mayfield then approved another loan to Waldroop’s mother using the race-ranch property as collateral. The proceeds were split between a Waldroop-controlled corporate entity and Chandler. In total, Mayfield approved ten nominee loans to Wa ldroop. In all but two cases, the collateral on the loan was not owned by the nominal borrower. For all ten loans, the loan documents contained falsehoods. In all ten cases, Waldroop was eventually able to use the borrowed money. Wal droop secured all ten loans after being informed that he was over his debt limi t and after proposing to use nominee loans to circumvent the bank’s lending limi t policy. Throughout this period, Waldroop’s businesses were failing. The loans from First State Bank, both the legitimate loans an d nominee loans, were propping up the failing businesses. Although he wa s actually responsible for the loans, he was not making payments on any of them. The scheme collapsed when the bank began investigat ing Mayfield for his loans to Larry Paul. After the bank discovered the illegal loans to Paul, the information was turned over to the government. May field agreed to plead guilty to one count of bank fraud and to assist the federa l government in their prosecution of Paul and anyone else with whom he pa rticipated in fraudulent loan transaction in return for the government recommendi ng a downward departure at- 8 -

sentencing. Mayfield was sentenced to five years’ probation and ordered to pay $3,529,000 in restitution. At this point, the FBI began investigating the loan s to Waldroop. During an interview with the FBI, Mayfield stated that the Waldroop loans were not improper. In a later FBI interview, Mayfield recanted this te stimony and described in detail the nominee loans that he and W aldroop created in order to get around Waldroop’s lending limit. The FBI investigation of Waldroop’s loans began in March 2000. In August 2000, Waldroop entered into a civil settleme nt with First State Bank. The bank settled its claims against Waldroop in return for all collateral in his possession and the dismissal of his lender liability claims against the bank. Waldroop was indicted for bank fraud and aiding and abetting in violation of 18 U.S.C. § 1344 and 18 U.S.C. § 2 and conspirac y to commit bank fraud in violation of 18 U.S.C. § 371. He was tried alongsi de Chandler, who was also indicted for bank fraud and conspiracy to commit ba nk fraud. Following a jury trial, Waldroop was found guilty on both counts and Chandler was acquitted on both counts. After a sentencing hearing, the distr ict court found, for sentencing purposes, that the losses caused by Waldroop’s frau d amounted to $179,979. This corresponded to a seven-level enhancement. Waldroo p was sentenced at the top- 9 -

of the applicable sentencing range to two thirty-mo nth terms of imprisonment to be served concurrently.
II Waldroop argues that the government presented insuf ficient evidence to support his convictions for bank fraud and conspira cy to commit bank fraud. Sufficiency of evidence is a question of law that w e review de novo. United States v. Dazey , 403 F.3d 1147, 1159 (10th Cir. 2005). Viewing al l evidence in the light most favorable to the government, “[w]e e xamine all of the evidence and the reasonable inferences to be drawn from that evi dence, to determine whether any rational juror could have found the elements of the crime beyond a reasonable doubt.” Id. Because a rational juror could find Waldroop gui lty beyond a reasonable doubt, his challenge fails. Waldroop was found guilty of bank fraud and conspir acy to commit bank fraud. To prove bank fraud, the government must sh ow that (1) the defendant knowingly executed or attempted to execute a scheme or artifice to defraud a financial institution, (2) the defendant had the in tent to defraud a financial institution and (3) the bank involved was federally insured. 18 U.S.C. § 1344; United States v. Hill , 197 F.3d 436, 444 (10th Cir. 1999). To prove con spiracy, the government must show there was an agreement to break the law, that there was an overt act which was in furtherance of the co nspiracy’s object, and that the- 10 -

defendant wilfully entered the conspiracy. Dazey , 403 F.3d at 1159. Although he acknowledges that he knew the terms of each of the loans, Waldroop argues that there is no evidence that he knew the bank was dece ived by the schemes. Further, he argues that he did not have the requisite intentto commit bank fraud. Finally, he claims that there was insufficient evidence to s upport his conviction for conspiracy to commit bank fraud because he did not have the requisite intent to commit bank fraud in the first place. Nominee loans are not inherently illegal, but are i llegal if they are used to deceive a financial institution about the true iden tity of a borrower. See United States v. Doke , 171 F.3d 240, 245 (5th Cir. 1999) (“a nominee loa n is not illegal where there is no evidence that the transaction is concealed from the bank, and where the loan documents make the relationship betw een the various transactions very clear”); United States v. Willis , 997 F.2d 407, 410 n.2 (8th Cir. 1993) (“Nominee loans are not illegal per se. They are i llegal, however, when the borrower and the bank officer fail to state the rea l borrower and recipient of the funds, thereby obtaining the loans by means of fals e pretenses.”). In United States v. Bonnett , 877 F.2d 1450 (10th Cir. 1989), this court explained that a borrower who receives funds from anominee loan is guilty of bank fraud if he intends to conceal the fact that h e will receive the funds (and knows that such information is being concealed). I f the true recipient of a- 11 -

nominee loan “received the money, and this was inte ntionally concealed from Bank’s board of directors and federal regulatory au thorities,” then that person is guilty of bank fraud. Id. at 1459. Notably, neither a nominal borrower’s knowledge about the terms of a nominee loan nor the nominal borrower’s ability to pay back a nominee loan is a defense. Id. at 1462. The government introduced three crucial types of ev idence showing that Waldroop both knew he was deceiving First State Ban k and intended to do so. The first, and most important, were the loan docume nts themselves. In each and every case, the documents contained no information that money was actually flowing to Waldroop or his related companies. More over, in most of the loans, the pledged collateral actually belonged to Waldroo p or a Waldroop-controlled entity and not to the nominal borrower. This false hood had the effect of substantially increasing the risk to the bank. As Mayfield testified, “on a nominee loan, . . . the bank would be in a situation that i t could only go against [the nominee] for the face amount of the note and may no t have any perfected lien on the actual property that may be endowed.” The second crucial piece of evidence was Mayfield’s testimony. Mayfield testified that he told Waldroop that the bank would not loan Waldroop any more money because Waldroop had reached his loan limit. He also testified that Waldroop came up with the plan to use nominee loans as a way around this limit,- 12 -

suggesting that First State Bank loan money to him based on loan documents that did not have his name on them. Further, Mayfield t estified that Waldroop bullied him into complying with the nominee loan scheme by threatening to default on his legitimate loans. Finally, Waldroop’s co-defendant, Chandler, testifi ed that Waldroop said that he personally could not get a loan from First State Bank and suggested that Chandler sign the loan applications so that Waldroo p could get additional credit. In response, Waldroop argues that he informed Mayfi eld and Mayfield’s secretary of his involvement with the loans. Howev er, this is not a defense to the charge that he colluded with Mayfield to commit ban k fraud. “It is the financial institution itself – not its officers or agents – t hat is the victim of the fraud [18 U.S.C. § 1344] proscribes. . . . It follows that b ank customers who collude with bank officers to defraud banks may also be held cri minally accountable either as principals or as aiders and abettors.” United Stat es v. Saks , 964 F.2d 1514, 1518- 19 (5th Cir. 1992). Waldroop did not present any e vidence that Mayfield tricked him into signing false loan documents. Waldroop also claims that he openly used and posses sed the items that he purchased through the use of the nominee loans. Fu rther, he argues that Mayfield was not trustworthy and had lied to the FBI. This was surely considered by the jury when it considered the evidence in the case. When reviewing challenges to- 13 -

the sufficiency of the evidence, this court does no t suddenly transform itself into a jury; we simply examine whether there was enough evidence presented that a rational juror could find the defendant guilty beyo nd a reasonable doubt. Importantly, “we do not weigh conflicting evidence or consider witness credibility, as that duty is delegated exclusively to the jury.” United States v. Castorena-Jaime , 285 F.3d 916, 933 (10th Cir. 2002). In this case , there was more than enough evidence presented that Waldroop w as guilty of bank fraud and conspiracy to commit bank fraud. Accordingly, his challenge fails.
III Waldroop advances two arguments challenging the dis trict court’s sentencing decision. First, he argues that the dis trict court violated his Sixth Amendment rights pursuant to United States v. Booke r , 125 S.Ct. 738 (2005), by relying on judge-found facts to enhance his sentenc e. He also argues that the district court erred in excluding his civil settlem ent with First State Bank when determining the amount of loss for sentencing enhan cement purposes. Both of these claims lack merit. The court calculated the amount of loss for the pu rposes of imposing a § 2F1.1 sentencing enhancement under the 1998 editi on of the United States Sentencing Guidelines manual. After rejecting Wald roop’s argument that mandatory application of the sentencing guidelines would violate Blakely v.- 14 -

Washington , 542 U.S. 296 (2004), the court found that a seven -level enhancement was appropriate and then sentenced Waldroop to 30 m onths imprisonment, the top of the applicable range. The district court clearly committed constitutional Bookererror by finding facts to increase a sentence. See United States v. Gonzalez-Huerta , 403 F.3d 727, 731 (10th Cir. 2005) (Constitutional Bookererror occurs when the district court relies “upon judge-found facts, other than those of prior convictions, to enhance a defendant’s sentence mandatorily.”) (internal quotation marks omitted). Where a sentencing court commits constitutional Bookererror, and the defendant objected below on Booker(or Blakely ) grounds, the government bears the burden of proving beyond a reasonable doubt that the error wa s harmless. United States v. Riccardi , 405 F.3d 852, 874-75 (10th Cir. 2005). It has do ne so in this case. Waldroop was sentenced to the highest possible term in the sentencing range. Id. at 876 (“Having exercised his limited discretion u nder the pre-Booker system to give Mr. Riccardi the highest permissible sentence, there is no reason to think the judge would exercise his now-greater disc retion to reduce the sentence.”) Further, during sentencing, the distri ct court lectured Waldroop on the avarice he showed in committing fraud and in in volving his loved ones in his pursuit of more and more material possessions: I was rather startled at the time of trial by the g reed that you showed, that you were willing to involve your brother and y our mother and –- 15 -

is it your father that was also involved – but at l east your other friends in your pursuit of greed to buy Corvettes a nd to buy property and other items just to satisfy your own – your own greed. And there’s got to be a consequence to that. And it wi ll be reflected in the sentence imposed by the Court. All evidence in the record points to the fact that, given greater discretion, the district court would not reduce Waldroop’s sentence . Accordingly, the error was harmless. Waldroop’s other argument challenging his sentence is similarly unavailing. When enhancing a sentence pursuant to USSG § 2F1.1 (since repealed), the district court must determine the “actual loss” cau sed by the fraud. Waldroop argues that the district court improperly refused t o reduce the amount of actual loss because of his civil settlement with First State Bank. Had the court included the settlement in its calculation of “actual loss,” the amount of loss would have been zero. First State Bank agreed to settle all c laims against Waldroop in return for the loan collateral and the dismissal of his le nder liability claims against the bank. “We review the district court’s determinatio n of USSG § 2F1.1 loss under the clearly erroneous standard, but we review the f actors the district court may properly consider de novo.” United States v. Moore , 55 F.3d 1500, 1501 (10th Cir. 1995). Waldroop’s argument conflicts with the Sentencing G uidelines. Application Note 7(b) to USSG § 2F1.1 then stated: “[t]he loss is the amount of1 Waldroop argues that our decision in United States v. Gallegos , 975 F.2d

710, 712-13 (10th Cir. 1992), mandates that his settlement with First State Bank be included in the calculation of actual loss. Thi s is not right. We specifically rejected this reading of Gallegos in Pappert . The plaintiff in Pappertrelied on Gellegos “for his assertion that the amounts repaid to his creditors should be subtracted from the loss total. Gallegos does not support this position . . . . We did not hold that the guidelines require deduction of monies actually returned to the victims.” Pappert , 112 F.3d at 1079 n.2. - 16 - the loan not repaid at the time the offense is disc overed , reduced by the amount the lending institution has recovered (or can expec t to recover) from any assets pledged to secure the loan” (emphasis added). Alth ough the Guidelines are now advisory, application notes are authoritative aboutthe proper interpretation of the Guidelines, unless they violate the Constitution, afederal statute, or are inconsistent with the text. See Stinson v. United States , 508 U.S. 36, 38 (1993). The offense was clearly discovered by the time of W aldroop’s civil settlement and, hence, was properly excluded from the districtcourt’s determination about the actual loss caused by Waldroop’s fraudulent act ions. Waldroop’s argument also directly conflicts with th e clear precedent of this court. In United States v. Pappert , 112 F.3d 1073, 1079 (10th Cir. 1997), we made clear that civil settlements made after the di scovery of fraud are excluded from consideration when calculating the “actual los s” for the purposes of the USSG § 2F1.1 enhancement. 1 Although the actual amount of loss should be calculated “by subtracting the value of what was gi ven to the victim(s) during the- 17 -

course of the transaction from the value of what wa s fraudulently taken,” settlements made with victims of fraud after the fr aud is discovered are not payments made during the transaction. Id. at 1079. “Were we to hold that it was erroneous for the court to sentence him based on re imbursed losses, we would enable defendants to buy a sentence reduction afterbeing caught. The guidelines do not authorize such a principle, and we reject it .” Id. The district court properly excluded Waldroop’s settlement with First State Bank when calculating the actual loss caused by his fraud.
IV There was more than sufficient evidence to convict Waldroop of bank fraud and conspiracy to commit bank fraud. Additionally, although the district court committed constitutional Bookererror, that error was harmless. Waldroop’s settlement with First State Bank was properly exclu ded from the court’s calculation of the actual loss caused by his fraud. Accordingly, we AFFIRM the district court.