IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_____________________

No. 94-40897

_____________________

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

versus

BEN D. CAMPBELL and JOHN G. CAMPBELL,

Defendants-Appellants.

_________________________________________________________________

Appeals from the United States District Court for the

Eastern District of Texas

_________________________________________________________________

(September 12, 1995)

Before GARWOOD, JOLLY, and BARKSDALE, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

John and Ben Campbell, father and son, appeal their

convictions for conspiracy and bank fraud, and Ben appeals his

conviction for making a false entry in bank records, all resulting

from Ben Campbell's mortgage of property, which he did not own, to

the now-failed Flower Mound Bank. The mortgaged property was owned

by West-Butte Corporation, a small family owned company formed to

develop the property. Our opinion focuses primarily on the alleged

conspiracy to defraud the bank (now Security Bank of Flower Mound)

by depriving it of its security. The government contends that this

conspiracy to defraud the bank began only after Ben defaulted on
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the loan--not when Ben mortgaged the property to the bank. Once

the bank began its attempts to foreclose on the property, John,

with Ben's help, demanded release of the property and took legal

action to reclaim it from the bank. The government argues that

these efforts amounted to a conspiracy to commit bank fraud. 

Although we easily conclude that the evidence supports Ben's

conviction for fraudulently mortgaging the property by falsely

signing as president of West-Butte Corporation, we find that the

evidence does not support an illegal conspiracy to deprive the bank

of its security. Because the evidence supporting the bank fraud

count is the same as that supporting the reversed conspiracy

convictions, we also reverse these convictions. We thus affirm in

part, reverse in part, and remand.

The facts underlying the alleged conspiracy are complicated,

and the government's theory of the illegality of the conspiracy is

somewhat unsure or at least not easily grasped. To understand this

appeal, we must first set out the facts in laborious detail.

 I

A

In 1978, John Campbell purchased for development as a resort

6.2 acres of land near Crested Butte, Colorado (the "Crested Butte

property" or the "property"). Daniel Thurman, a life-time friend

and business associate of John Campbell, assisted in the

development from 1978 until 1984, specifically, by attempting to

obtain water rights for the Crested Butte property. In 1984,
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Thurman, John Campbell, and Ben D. Campbell--John Campbell's son

and co-defendant-appellant--formed West-Butte Corporation ("WestButte") to continue with development of the Crested Butte property.

John Campbell contributed to West-Butte the Crested Butte property

by warranty deed. The Crested Butte property was West-Butte's sole

asset. 

West-Butte's Articles of Incorporation listed its officers as

Dan Thurman, president; Ben Campbell, vice president; and Shirley

Thurman, secretary-treasurer. These same individuals comprised the

three-member board of directors. Finally, the Articles of

Incorporation authorized, but did not issue, 120,000 shares of

common stock. The minutes of the initial organizational meeting

for the corporation authorized and directed the president and the

secretary to issue 10,000 shares to CATV Systems, Inc. ("CATV"), a

corporation wholly-owned by Ben Campbell, and 10,000 shares to Ben

Campbell, individually. Two stock certificates were partially

completed designating CATV and Ben Campbell as the owners of the

shares, but the certificates were never signed as required by WestButte's bylaws.

B

In addition to his involvement with West-Butte, Ben Campbell

owned and operated several companies, including Frontier GMC. In

connection with Frontier GMC, Ben Campbell entered into a trust

agreement with GMAC for supply and payment of cars. In August

1986, however, GMAC discovered that Ben Campbell sold vehicles
 

1The deed was defective under Colorado law because it failed

to designate the grantee, West-Butte Corporation, as a Colorado

corporation.

 

2Ben Campbell testified that he told the board of directors

that the purpose of the loan was to resolve Frontier GMC's

financial problems. FMB's loan committee approval form, however,

stated that the purpose of the loan was to provide operating funds

for another of his ventures, El Centro Ranch.

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without paying GMAC, in violation of the trust agreement. As a

result, Ben Campbell owed GMAC approximately $280,000. GMAC

ultimately gave Ben Campbell until December 10, 1986, to correct

Frontier GMC's financial delinquency.

To meet GMAC's demands, Ben Campbell first turned to MBank

Fort Worth ("MBank"). He agreed to pledge as collateral the

Crested Butte property. Upon their examination, however, MBank

discovered Ben Campbell did not own the Crested Butte property; it

was owned by West-Butte. Furthermore, the warranty deed conveying

the Crested Butte property from John Campbell to West-Butte was

defective.1 Thus, John Campbell would need to reconvey the Crested

Butte property to West-Butte. Under these circumstances, MBank

denied the loan. 

In late 1986, Ben Campbell turned to his own bank, Flower

Mound Bank ("FMB"), where he chaired the board of directors. He

applied for a $90,000 loan2 and again agreed to pledge the Crested

Butte property as collateral for his loan. This deal was more

complicated, however, because Ben had ten prior unsecured notes

held by FMB and executed by Ben, individually, or on behalf of one
 

3At trial, Ben Campbell testified that he told John Campbell

that because of a problem with the filing of the warranty deed,

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of his companies. Thus, it was agreed that the Crested Butte

property would serve as security for all of Ben's indebtedness.

Joseph Ackley, president of FMB during the time this

transaction took place, asked attorney Boyd Newman, a director of

FMB, to provide legal services with regard to Ben Campbell's loan.

Newman refused to act as FMB's attorney in this matter, but

contacted Robert Wright, a Colorado attorney, to assist in

preparing a mortgage in favor of FMB and obtaining title insurance.

After performing a title search, Wright informed Newman that WestButte--not Ben Campbell--owned the Crested Butte property. Newman

then advised Ackley that a corporate resolution from West-Butte was

needed in order to grant Ben Campbell the authority to encumber

West-Butte's property. Amazingly, FMB never obtained a corporate

resolution from West-Butte allowing Ben Campbell to mortgage the

Crested Butte property. Wright also informed Newman that the

warranty deed conveying the Crested Butte property from John

Campbell to West-Butte was defective. Newman asked Wright to

prepare a correction deed and a mortgage in favor of FMB.

Wright prepared a quitclaim deed from John Campbell to

West-Butte and a mortgage on the Crested Butte property from

West-Butte in favor of FMB and sent these documents to Newman. On

December 8, 1986, John executed the quitclaim deed correcting the

title problem3 and the deed was properly notarized. The quitclaim
John Campbell needed to reconvey the Crested Butte property to

West-Butte by quitclaim deed so that West-Butte would hold clear

title to the Crested Butte property.

 

4During the investigation of this case before trial, John

Campbell told a Federal Bureau of Investigations ("FBI") agent that

he saw reorganization papers (i.e., the minutes from the "special

meeting" of shareholders) that might have given Ben Campbell the

authority to mortgage the property.

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deed was filed in Colorado and vested clear title to the Crested

Butte property in West-Butte. On December 10, 1986, Ben Campbell

executed the mortgage in favor of FMB. The mortgage was signed on

behalf of West-Butte by "Ben Campbell, as President" and his wife,

"Phyllis Campbell, as Secretary." Ben then gave Wright

authorization to affix a blank seal of West-Butte on the mortgage.

Ben next engaged in a series of actions in an effort to

provide corporate ratification for his false signature as president

of West-Butte. On December 15, 1986, Ben asked Phil Klingsmith,

West-Butte's attorney, to send him West-Butte's corporate seal and

to issue the West-Butte stock 50% to him and 50% to his wife.

Klingsmith sent the seal and unsigned stock certificates.

Furthermore, Ben Campbell testified that, additionally, on

December 15, he conducted a "special meeting" of the shareholders

and appointed himself president of West-Butte and his wife

secretary/treasurer.4 However, the annual corporate reports filed

on behalf of West-Butte from June 1986 through June 1989 reflected

no change in the officers chosen to serve at West-Butte's
 

5On March 3, 1988, the Federal Deposit Insurance Corporation

(the "FDIC") declared FMB insolvent and sold all of its assets to

Security Bank.

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inception--Dan Thurman as president; Ben Campbell as vicepresident; and Shirley Thurman as secretary/treasurer. 

Things did not improve for Ben Campbell. On April 28, 1987,

Ben filed for bankruptcy in the United States Bankruptcy Court for

the Eastern District of Texas, individually, and on behalf of the

companies he owned, including CATV, El Centro Ranch, and Frontier

GMC. Ben advised FMB that he would not contest foreclosure on the

Crested Butte property. The Texas bankruptcy court, however,

determined that it did not have jurisdiction to resolve any claim

to the Crested Butte property because it was located in Colorado.

Ben Campbell was discharged in bankruptcy.

The bank's claim on the Crested Butte property, however,

remained unresolved. On January 31, 1989, Security Bank of Flower

Mound ("Security Bank")5 made a demand on Ben Campbell, as required

under Colorado law, for the amount of the defaulted promissory

notes secured by the mortgage on the Crested Butte property. On

February 16, Security Bank filed a complaint in Colorado state

court requesting foreclosure on the Crested Butte property. The

complaint was served on Klingsmith, the registered agent for WestButte. Security Bank also filed a notice of lis pendens to prevent

any conveyance of the property. Because no answer was filed on
 

6Thurman testified that he received a letter from Klingsmith

on February 28, 1989, stating that he accepted service of the

summons and complaint in the foreclosure action. Thurman stated

that he instructed Klingsmith that he would take no action against

the foreclosure because he was no longer involved with the Crested

Butte property or West-Butte. He further stated, however, that

John Campbell was handling any matters concerning the property. 

 

7The court did not enter judgment against Ben Campbell because

he had been discharged in bankruptcy.

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behalf of West-Butte,6 the Colorado court entered a default

judgment against the Crested Butte property on May 10, 1989.7 The

court denied West-Butte's motion to set aside the default judgment

and scheduled a sheriff's sale of the Crested Butte property for

June 30. 

C

West-Butte, led by John Campbell, fought back. On June 28,

1989, to prevent sale of the Crested Butte property, the board of

directors of West-Butte, including Ben Campbell, authorized the

voluntary bankruptcy of West-Butte. On June 30--before the time of

the scheduled sheriff's sale--West-Butte filed bankruptcy in the

United States Bankruptcy Court for the District of Colorado through

its bankruptcy attorney David Oppenheim. The sheriff's sale of the

Crested Butte property was stayed.

West-Butte's legal battle to claim the property went forward.

On September 15, 1989, the voluntary bankruptcy petition of WestButte was dismissed on West-Butte's motion. Thereafter, on

September 25, 1989, at John Campbell's instruction, Brad Breslau,

West-Butte's appellate attorney, appealed the default judgment
 

8The court held that because the trial court failed to provide

West-Butte three days notice before entering the default judgment

as required under Rule 55(b) of the Colorado Rules of Civil

Procedure, the judgment was void. 

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entered against the Crested Butte property in the foreclosure

action. On November 21, 1990, the Colorado appellate court

reversed the default judgment entered by the lower court in the

foreclosure action.8 In the meantime, West-Butte failed to post an

appeal bond, which was a condition of the stay on the sale of the

Crested Butte property. Security Bank proceeded to purchase the

property on October 11, 1989, subject to a right of redemption.

West-Butte filed a lis pendens notice preventing further sale of

the Crested Butte property.

D

We now turn the clock back a bit to examine John Campbell's

culpability in the alleged illegal conspiracy. 

John Campbell learned of Ben Campbell's unauthorized mortgage

no later than early 1987, when, after unsuccessful attempts at

development as a resort, John Campbell and Daniel Thurman listed

the Crested Butte property for sale. In early 1987, Thurman

learned through the real estate agent with whom the property was

listed that the Crested Butte property was pledged as security to

FMB by Ben Campbell. Thurman then contacted Klingsmith and both

men informed John Campbell of the mortgage. Both Thurman and

Klingsmith testified that John Campbell seemed genuinely surprised

and angered that Ben Campbell mortgaged the property when he
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clearly did not have the authority to do so. The government, on

the other hand, argued at trial that John Campbell not only knew of

the unauthorized mortgage at the time that it was made in December

1986, but also aided and abetted Ben Campbell in deceiving the bank

with the defective mortgage. The jury, however, acquitted John of

aiding and abetting Ben in this crime. 

Upon learning of Ben Campbell's unauthorized mortgage of the

Crested Butte property, John Campbell took various steps to prevent

FMB and later Security Bank from foreclosing on the Crested Butte

property. Both Thurman and John Campbell instructed Klingsmith to

inform FMB that the mortgage was invalid because Ben Campbell

lacked the authority to pledge West-Butte's property. On

February 8, 1988, Klingsmith sent a letter to Joe Ackley, the

president of FMB, stating that the mortgage executed by Ben

Campbell was invalid because it was not executed by Daniel Thurman

as president or Shirley Thurman as secretary, and demanded that the

mortgage be released. John Campbell additionally contacted Ackley

and told him that Ben Campbell did not have the authority to pledge

the Crested Butte property. 

John Campbell also made several unsuccessful demands on

Security Bank for settlement of the dispute over the Crested Butte

property. Sometime during April or May 1988, John contacted Gary

Acker, the first president of the newly organized Security Bank,

and stated that Ben did not have the authority to mortgage the

Crested Butte property. John offered to settle the dispute with
 

9On September 14, 1990, a corporate report was filed listing

John G. Campbell as president, Dan Thurman as vice-president, and

John Campbell's wife, Jo Campbell, as secretary/treasurer. These

same three individuals comprised the entire board of directors.

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Security Bank and, when his offer was refused by Acker, John stated

that he would pursue his claim "even if he had to go to the Supreme

Court." Additionally, John told Security Bank vice president Frank

Sheer that Security Bank would have the Crested Butte property over

his dead body. Months later, John again contacted Acker. He

suggested a settlement with Security Bank and again threatened to

take his case all the way to the Supreme Court when Acker refused

his offer to settle. 

Sometime after November 21, 1990, when the Colorado appellate

court reversed the default judgment, John Campbell9 and Security

Bank, through its new president, Bill Ellis, began negotiations to

settle. Ellis testified at trial that John Campbell informed him

that Ben did not have the authority in 1986 to pledge the property

to FMB. He made the decision to settle, however, after examining

Security Bank's records on this loan and realizing that FMB

actually had failed to obtain a corporate resolution. On

January 18, 1991, West-Butte's board of directors (i.e., John

Campbell, Dan Thurman, and Jo Campbell) authorized John to enter

into a settlement with Security Bank on behalf of West-Butte for

the Crested Butte property. All parties agreed upon and signed the

settlement--Ellis for the bank, John Campbell as president of WestButte, Ben Campbell, individually, and on behalf of both Frontier
 

10On its face, the final settlement does not appear to have

shortchanged the bank--the bank realized $150,000 plus on security

it acquired when it made a $90,000 loan.

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GMC and CATV. The Crested Butte property was then sold for

$320,000. John Campbell, the original contributor of the property,

received $150,000 from the proceeds of the sale.10

II

Based on their actions taken to prevent foreclosure on the

Crested Butte property, John Campbell and Ben Campbell were

indicted on conspiracy to commit bank fraud in violation of 18

U.S.C. § 371 and on the substantive offense of bank fraud in

violation of 18 U.S.C § 1344. Additionally, Ben Campbell was

indicted on the charge of false entry in bank records with intent

to deceive in violation of 18 U.S.C. § 1005 because of his false

signature as president of West-Butte on the mortgage to FMB and

John Campbell was charged with aiding and abetting in this offense.

Both defendants were convicted of bank fraud and conspiracy to

commit the same. Ben Campbell alone was convicted of false entry

in bank records; John was acquitted. 

On appeal, both John and Ben Campbell argue that the evidence

presented at trial is insufficient to convict them of conspiracy to

commit bank fraud and of bank fraud. Ben additionally argues that

the evidence is insufficient to convict him of false entry in bank

records. Ben finally argues that the district court erred in

admitting evidence of his other financial difficulties and evidence
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of his other civil banking violations. In addition to the

sufficiency of the evidence arguments, John argues that the

district court erred first in admitting evidence of Ben's civil

banking violations because this evidence deprived him of a fair

trial and also in refusing to grant his motion for severance from

Ben. 

III

In reviewing the sufficiency of the evidence, we determine

whether, "viewing the evidence and the inferences that may be drawn

from it in the light most favorable to the verdict, a rational jury

could have found the essential elements of the offense beyond a

reasonable doubt." United States v. Rodriquez, 993 F.2d 1170, 1175

(5th Cir. 1993). A verdict must be upheld if there is substantial

evidence to support it. United States v. Kindig, 854 F.2d 703,

706-07 (5th Cir. 1988). We turn first to Ben's conviction for a

false entry in bank records.

A

To prove Ben Campbell made a false entry with intent to

deceive in violation of § 1005, the government must prove beyond a

reasonable doubt that (1) the entry was false; (2) Ben Campbell

either made the entry or caused it to be made; (3) Ben Campbell

knew the entry was false when he made it; and (4) he intended that

the entry injure or deceive the bank officers. United States v.

Jackson, 671 F.2d 216, 219 (5th Cir. 1980). 
 

11Implicit in the government's theory that Ben intended to

defraud FMB was that he had no authority from anyone to sign on

behalf of West-Butte. If, for example, John had acknowledged that

Ben had authority to give the mortgage to the bank, and if there

had been no effort to regain the Crested Butte property, it is

certain that no criminal prosecution would have resulted from the

fact that Ben signed the mortgage as president of West-Butte when

in fact he was not. Yet the government's argument--at least before

John's acquittal on this charge--to support the illegal conspiracy

count was that John had in fact authorized Ben to mortgage the

property to the bank. The government continues to argue that

John's statement to the bank that he had not authorized Ben to make

the mortgage is a misrepresentation, suggesting that John in fact

authorized Ben to make the mortgage; it seems to us that if the

government truly believed that John authorized Ben to make the

mortgage, then it is difficult to contend at the same time that Ben

gave the mortgage with the intent to deceive the bank. To be sure,

however, the government's position on this and other related points

is fuzzy.

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The government argued at trial that Ben Campbell made a false

entry in the records with intent to deceive the bank when he

submitted to FMB the real estate mortgage on West-Butte's property,

which he had falsely signed as president of West-Butte.11 Ben

Campbell agrees that he made a false entry in the records of FMB,

but argues that he did not intend to deceive FMB, a requirement

under § 1005. Therefore, our only task here is to determine

whether a rational juror could have concluded that Ben Campbell

intended to injure or deceive the officers of FMB when he submitted

the mortgage signed as president of West-Butte.

On December 10, 1986, when Ben Campbell signed the mortgage,

West-Butte's Articles of Incorporation had authorized, but had not

issued 120,000 shares of stock. Of these 120,000 shares, 10,000

shares were designated for Ben Campbell, individually, as owner,
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and 10,000 shares were designated for CATV as owner. Ben Campbell

owned 100% of the stock of CATV. Ben therefore contends that at

the time he signed the mortgage as president of West-Butte he

thought that he owned West-Butte and its sole asset--the Crested

Butte property--because he owned 100% of the issued stock. 

The government contends that Ben Campbell's rejected loan

attempt with MBank established his knowledge that the land was

owned by West-Butte. Furthermore, the government argues that his

signature on the mortgage was not a mistake because he similarly

signed a statement to Wright giving him the authority to impose the

blank corporate seal of West-Butte on his mortgage. Finally, the

government contends that Ben Campbell's motive is clear from his

unstable financial condition and need for money to support Frontier

GMC.

We agree that the evidence presented at trial is more than

sufficient for a reasonable juror to conclude that Ben Campbell

intended to deceive FMB when he falsely signed the mortgage as

president of West-Butte. In fact, with the exception of his own

self-serving testimony, the record fails to reflect any substantial

testimony that Ben did not intend to deceive FMB by signing as

president. In any event, viewing the evidence, as we must, in the

light most favorable to the jury's verdict, we affirm Ben

Campbell's conviction for false entry in bank records. 
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We now turn to consider the sufficiency of the evidence

supporting the defendants' convictions for conspiracy to commit

bank fraud.

B

(1)

To establish a violation of 18 U.S.C. § 371, the government

must prove beyond a reasonable doubt (1) that two or more people

agreed to pursue an unlawful objective; (2) that the defendant

voluntarily agreed to join the conspiracy; and (3) that one or more

of the members of the conspiracy committed an overt act to further

the objectives of the conspiracy. United States v. Tullos, 868

F.2d 689, 693 (5th Cir.), cert. denied, 490 U.S. 1112, 109 S.Ct.

3171, 104 L.Ed.2d 1033 (1989). The government argues that the

unlawful object of the conspiracy was to defraud the bank in

violation of 18 U.S.C. § 1344 by depriving the bank of all or part

of the value of the Crested Butte property. Fraud under § 1344

involves the knowing execution of or attempt to execute a scheme or

artifice (1) to defraud a financial institution; or (2) to obtain

any property owned by, or under the custody or control of, a

financial institution, by means of false or fraudulent pretenses,

representations or promises. United States v. Barakett, 994 F.2d

1107, 1110 (5th Cir. 1993). A "scheme to defraud," under §

1344(1), includes the use of fraudulent pretenses or

representations intended to deceive to obtain something of value

from a financial institution. Barakett, 994 F.2d at 1111. Intent
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to defraud is established if the defendant acted knowingly and with

the specific intent to deceive. United States v. Saks, 964 F.2d

1514, 1518 (5th Cir. 1992). Under § 1344(2), the defendant must

make a material misrepresentation to the bank, which is defined as

one having "the natural tendency to influence, or was capable of

influencing the decision of the lending institution." United

States v. Heath, 970 F.2d 1397, 1403 (5th Cir. 1992).

(2)

As noted, the government argued to the jury that the purpose

of the conspiracy was to "prevent Security Bank from getting all or

part of the value of [the] land." The government's present theory

of the illegality of the object of the conspiracy is unclear from

the briefs and from oral argument. The indictment alleges (and the

government argued to the jury as well) that the scheme to defraud

did not actually begin until on or about May 1987. After Ben

Campbell filed bankruptcy and the need for foreclosure became

evident, the defendants devised a scheme to defraud FMB and

Security Bank of the Crested Butte property by obstructing

foreclosure and by threatening future litigation if FMB or Security

Bank refused to release a portion of the value of the Crested Butte

property. The indictment charges that John and Ben Campbell

advanced this scheme by threatening and initiating litigation from

October 1987 until January 1991, against FMB and Security Bank.

They further promoted the scheme by causing Security Bank to enter

into a settlement whereby the Crested Butte property was sold and
 

12At oral argument, the government contended at one point that

John knew of the false pledge when made on December 10, 1986, and

at another point--because of John's acquittal on the false entry

count--that he learned of the fraudulent pledge at some indefinite

time after December 10, 1986, but before the alleged conspiracy

began in May 1987. John Campbell argues that there is no evidence

that would support, beyond a reasonable doubt, that he knew of

Ben's mortgage of the property on December 10, 1986. We agree that

the evidence supporting John's knowledge on this date is thin. We

avoid, however, analyzing this evidence to determine whether it

would support the jury's verdict because for purposes of this

opinion we accept what still appears to be the government's

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John Campbell, as trustee, obtained partial value. Finally, the

indictment states that John Campbell, having known of and assisted

Ben Campbell in the fraudulent pledge, made false representations

to FMB and Security Bank that he was not aware of, and that he did

not agree to Ben Campbell's pledge of the Crested Butte property.

Thus, before the jury acquitted John of involvement in Ben's

fraudulent pledge to the bank, the government's theory of the

illegality of the conspiracy to deprive the bank of the Crested

Butte property was predicated on a contention that John was aware

of and assisted in the fraudulent pledge of the property at the

time it was given to FMB. In view of John's acquittal of the

aiding and abetting charge, the government stated at oral argument

that it does not base its theory of the illegality of the

conspiracy on the fact that John Campbell assisted in the pledge of

the Crested Butte property. The government apparently does

contend, however, that John nevertheless knew of the pledge when

given to the bank, yet said nothing until it was necessary to

regain the property.12 For purposes of our analysis, we will
contention that John had knowledge of the false pledge on

December 10, 1986.

 

13It is clear that West-Butte owned the Crested Butte property;

what is unclear is who owned West-Butte. As we have earlier noted,

although West-Butte initially authorized 120,000 shares of stock,

none of these shares were formally issued--20,000 were designated,

but not issued, for Ben and his company, CATV.

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therefore assume, as the government argues, that John Campbell in

fact knew of the mortgage when given. Against this backdrop, we

turn to examine the evidence supporting the government's theory of

the illegality of the conspiracy.

(3)

We begin by examining the claims of John Campbell, West-Butte,

and FMB and Security Bank to the Crested Butte property. WestButte, as the owner of the Crested Butte property, clearly had a

legal right to contest the bank's security because Ben Campbell at

no time had the authority to pledge the property.13 John Campbell

held at least an equitable claim to the security because he

contributed the property to West-Butte as its sole asset and had

not been compensated for it. On the other hand--a point on which

the government agrees--neither FMB nor Security Bank held a valid

lien on the Crested Butte property at any time material to this

appeal. Instead, FMB and Security Bank had, at most, some

equitable claim, which was weakened on account of the bank's

knowing failure to obtain a corporate resolution authorizing Ben

Campbell to pledge West-Butte's property. Thus, on the face of

these facts, it was hardly illegal for John Campbell or West-Butte
-20-

to pursue legal remedies--specifically, the bankruptcy proceeding

and the appeal of the default judgment--to enforce the rights of

West-Butte against the admittedly invalid mortgage to Security

Bank.

(4)

In contending that John and Ben conspired to deprive Security

Bank of its collateral the government focuses primarily on the

conduct of John, who was the active "co-conspirator"; Ben's part

in the conspiracy, according to the government, was limited to his

approval of West-Butte's bankruptcy and execution of the settlement

agreement--essentially a passive role. Consequently, our analysis

focuses primarily on John's conduct. If John did not conspire to

commit bank fraud, obviously, Ben could not conspire with himself.

To establish the object of bank fraud, the government must

show that John Campbell conspired to deprive Security Bank of the

Crested Butte property either through some scheme of deceit or

through material misrepresentations. Thus, we begin with the

premise that, absent some scheme of deceit or material

misrepresentation, John Campbell was entitled to act as he did in

pursuing available legal remedies to regain control of the Crested

Butte property for West-Butte. Stated differently, John Campbell's

actions taken simply to deprive Security Bank of the collateral

securing the invalid mortgage, without more, do not amount to bank

fraud. It is clear that whatever deceit John may have employed, it

was not of a surreptitious or of a clandestine nature: through
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plain conversations and direct legal action, he was as open as the

sky. 

Although the government argues that West-Butte's bankruptcy

proceeding and its appeal of the default judgment entered against

the Crested Butte property constituted part of the conspiratorial

scheme, the government does not demonstrate how John Campbell

deceived Security Bank through these legal proceedings into signing

the settlement agreement that deprived it of a portion of the value

of the security. In short, the government simply failed to present

adequate evidence of John Campbell's intent to deceive to transform

his lawful actions into a scheme to commit bank fraud. Thus, we

look only to whether John, in his effort to regain the property,

deceived the bank through material misrepresentations.

According to the government's argument, the misrepresentations

that John Campbell took to regain the Crested Butte property began

with his demands on FMB through Klingsmith to release the Crested

Butte property because FMB's lien was invalid. Next, John made

representations to FMB and Security Bank that Ben had no authority

to pledge the Crested Butte property. He further represented to

FMB and Security Bank that he neither knew of nor authorized Ben

Campbell's fraudulent pledge. He therefore demanded that FMB and

Security Bank settle the dispute over the Crested Butte property.

In sum, the government alleges that John Campbell made the

following misrepresentations to FMB and Security Bank: that he
 

14Although the record contains ample evidence that John did

inform the bank that he did not know of the pledge and that Ben had

no authority to pledge the property, our review of the record

reveals no representation by John to the bank that he did not

authorize the pledge. In fact, John held no position to authorize

such an encumbrance on the property, as indeed the government

itself points out in support of the conspiracy count. We

nevertheless address this contention of the government.

 

15As is clear from the facts above, John Campbell had no

relationship with FMB concerning this loan. It was not until he

demanded the release of the Crested Butte property that he had any

contact with the bank concerning the mortgage. Absent any

relationship other than that created by John's claim to the same

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never agreed to Ben's pledge of the property; that he had not

authorized it; and that he did not know of it until much later. 

As we have noted, the record contains no evidence that John

Campbell authorized Ben Campbell's false pledge; indeed, only a

corporate resolution, which the bank knowingly failed to obtain,

could have authorized Ben to pledge the property to satisfy his

personal debts.14 Moreover, the government's argument on appeal is

not premised on any culpable involvement of John in Ben's falsely

signing the mortgage as president of West-Butte. Thus, the

government's argument concerning John's misrepresentations can

assume at most that John knew of the mortgage and said nothing to

the bank until it attempted to foreclose on the property. It is in

this light that we must evaluate whether his subsequent statement

to FMB and Security Bank that he did not know of the pledge

constituted a misrepresentation. The more precise question,

however, is whether John's statements concerning his lack of

knowledge were material misrepresentations,15 i.e., that they had
property as that claimed by the bank, it is difficult to see either

what special obligation John had to distill the truth to the bank

or indeed what right the bank had to rely on any representations he

may have made. Generally speaking, one does not burden himself

with special duties as a claimant to disputed property.

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the natural effect of influencing Security Bank's decision to

settle the controversy over the security. See Heath, 970 F.2d at

1403. 

As Security Bank's president testified, Security Bank agreed

to settle the dispute only after reviewing its records and

realizing that it held an invalid lien on the security because of

FMB's failure to obtain a corporate resolution. Thus, Security

Bank recognized that it had no legal claim to the Crested Butte

property. The government clearly had the burden of proof to show

that John's simple knowledge--under whatever circumstances he may

have gained that knowledge--would have had the natural effect of

influencing the bank's decision to settle the case, a burden the

government has failed to satisfy. The government adduced no

evidence that Security Bank settled the dispute because of John's

statements concerning his lack of knowledge. In point of fact the

bank apparently disregarded such statements until the default

judgment against the property was reversed and Security Bank was

threatened with actually losing the security because of the

weakness of its legal position. We thus conclude that the evidence

fails to show that Security Bank was deprived of part of the value
-24-

of its security because of any material misrepresentation of John

Campbell.

In sum, we find that the evidence is insufficient to support

a finding that John Campbell conspired to commit bank fraud. John

Campbell acted within the perimeters of his legal rights to assert

the claims of West-Butte against this admittedly invalid mortgage.

Moreover, in asserting the claims of West-Butte--and thereby his

own claims indirectly--he engaged in no material misrepresentation

to the bank. Our finding that John did not engage in an illegal

conspiracy necessitates vacating Ben's conviction for conspiracy as

well, as a single defendant cannot conspire with himself.

We turn now to examine the evidence supporting the defendants'

convictions for the substantive offense of bank fraud. 

C

The indictment charges both defendants with committing bank

fraud, specifically, from March 1987 until June 1991. It charges

that the defendants, having devised a scheme to defraud the bank of

its security, executed this scheme by causing Security Bank to

enter into the settlement agreement depriving it of a portion of

the value of the security. The government argues that the

defendants achieved this fraud by the same manner and means as

employed in the conspiracy. Furthermore, the government relies on

the same evidence supporting the defendants' convictions for

conspiracy to support their convictions for bank fraud.
-25-

For the same reasons we found that John Campbell did not

conspire to defraud FMB or Security Bank of the security, we hold

that he did not commit the substantive offense of bank fraud.

Accordingly, we reverse his remaining conviction for bank fraud. 

As to Ben Campbell, the government in its brief summarily

states "once the conspiracy to commit bank fraud is established,

Ben Campbell is liable for his father's foreseeable violation of 18

U.S.C. § 1344 even if he did not act himself to defraud Security

Bank." Because we have held that John Campbell in fact did not

commit bank fraud and because there is no evidence that Ben

Campbell deceived Security Bank during the relevant time frame for

the charged bank fraud offense, we hold that Ben's conviction for

bank fraud must be reversed as well.

IV

In conclusion, we find insufficient evidence for a rational

juror to convict John and Ben Campbell of either conspiracy to

commit bank fraud or bank fraud as charged in the indictment.

Accordingly, we REVERSE and VACATE each defendant's conviction on

these offenses. We AFFIRM Ben Campbell's conviction on false entry

in bank records. We therefore REMAND this case to the district

court for entry of a judgment of acquittal as to John Campbell and
 

16We need not address John Campbell's remaining arguments

because we find the evidence insufficient to convict him of either

conspiracy or bank fraud.

Ben Campbell additionally argues that the district court

abused its discretion in admitting evidence of his violations of

certain banking regulations, such as the regulation limiting

indebtedness to "one borrower," and in admitting evidence of his

financial difficulties with Frontier GMC. Because we find this

evidence relevant to Ben's intent to deceive in the false entry

count, the district court clearly did not abuse its discretion by

admitting this evidence. United States v. Hays, 872 F.2d 582, 587

(5th Cir. 1989) (reviewing district court's evidentiary rulings

only for abuse of discretion). In any event, because the evidence

supporting Ben's remaining conviction--false entry--is so

overwhelming, any error resulting from admission of this evidence

is harmless. See FED. R. CRIM. P. 52(a) (disregarding any error not

affecting substantial rights).

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resentencing as to Ben Campbell.16 The judgment of the district

court is therefore

AFFIRMED in part; 

REVERSED and VACATED in part; 

and REMANDED.