F I LED

United States Court of Appeals

Tenth Circuit

July 3, 2007

Elisabeth A. Shumaker

Clerk of Court

PUBLISH

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

UNITED STATES OF AMERICA, 

Plaintiff - Appellee,

v.

GARY W. FLANDERS,

Defendant - Appellant.

 No. 05-6379

 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE WESTERN DISTRICT OF OKLAHOMA

(D.C. No. 03-CR-243-F)

Sean Connelly, Reilly, Pozner & Connelly LLP, Denver, Colorado, for

Defendant-Appellant.

Vicki Zemp Behenna, Assistant United States Attorney (John C. Richter, United

States Attorney with her on brief), Oklahoma City, Oklahoma, for PlaintiffAppellee.

Before LUCERO, McKAY, and MURPHY Circuit Judges.

McKAY, Circuit Judge.

A jury convicted Defendant Gary Flanders, former CEO and supermajority

shareholder of MetroBank, of two counts of willful misapplication of bank funds,
 Defendant does not appeal his conviction under § 1014. 1

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in violation of 18 U.S.C. § 656, two counts of scheming to defraud a bank, in

violation of 18 U.S.C. § 1344(1), one count of making a false entry in a bank

record, in violation of 18 U.S.C. § 1005, and one count of conspiring to make a

false statement to a bank, in violation of 18 U.S.C. § 1014. 

Defendant was sentenced to ninety-six months’ imprisonment—some

eighteen months above the Sentencing Guideline recommendation—and ordered

to pay $80,000 restitution, among other penalties. Defendant appeals his

conviction alleging insufficiency of the evidence on five of the six counts,1

violation of his Sixth Amendment right to chosen counsel, and commission of

numerous sentencing errors.

BACKGROUND

In providing the pertinent facts, we view the record in the light most

favorable to the government. United States v. Weidner, 437 F.3d 1023, 1027

(10th Cir. 2006). 

Defendant acquired MetroBank, a federally chartered, FDIC-insured bank

operating in Oklahoma City, Oklahoma, from the FDIC in 1989 by purchasing a

bank stock loan on which the original investors defaulted. In September 1997,

Defendant took out two loans totaling $3,838,000 from Bridgeview Bank Group

(“Bridgeview”) primarily to satisfy the bank stock loan that he used to acquire
 In August 1998, Defendant bounced several loan payment checks drawn 2

on an account at Rocky Mountain Bank.

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MetroBank. As collateral for this loan, Bridgeview took Defendant’s certificate

for 248,000 shares of MetroBank stock and placed liens on Defendant’s Colorado

Springs, Colorado home, a separate 125-acre tract in Colorado Springs, and

miscellaneous assets. 

Defendant’s first payment obligation to Bridgeview was due January 1998. 

It went unpaid, and payment negotiations between Defendant and Bridgeview

ensued. These negotiations dragged on for months without Defendant ever

tendering valid payment. On October 16, 1998, not long after Bridgeview 2

informed Defendant of its intention to accelerate the loan and ultimately

foreclose, Defendant filed for Chapter 11 bankruptcy. Defendant’s attempts to

reorganize under Chapter 11 protection proved unsuccessful. As a result, the

bankruptcy court converted Defendant’s Chapter 11 bankruptcy to Chapter 7 on

December 17, 1999.

In accordance with Chapter 7 procedure, the bankruptcy court appointed a

trustee to liquidate Defendant’s assets, including his MetroBank stock. Due to

FDIC rules that require bank officers and directors to own stock in the banks they

serve, Defendant faced removal. At a special shareholders’ meeting on January

19, 1999, Defendant resigned his position, and the MetroBank board of directors

ratified his resignation. 
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Defendant’s six-count conviction arose out of four transactions—an

automobile loan, two independent real estate loans, and the attempted sale of the

MetroBank building—conducted during Defendant’s bankruptcy. Defendant

initiated these transactions in an apparent attempt to generate funds with which to

satisfy his substantial outstanding debts. As the supermajority shareholder,

Defendant received dividends from MetroBank profits. Defendant typically took

upward of ninety percent of the profits in dividends. These dividends were

Defendant’s sole source of income.

A. The Fischer Automobile Loan

1. Automobile Ownership

In January 1998, the Office of the Comptroller of the Currency (“OCC”), a

division of the United States Treasury Department tasked with supervising the

operations of federally chartered banks, learned that Defendant had been driving a

1995 Mitsubishi Eclipse owned by MetroBank. MetroBank acquired the

Mitsubishi following its repossession due to an unrelated, unpaid loan. The OCC

criticized Defendant’s personal use of the vehicle without reimbursing MetroBank

for expenses associated with its use. It demanded that Defendant either reimburse

the bank or purchase the vehicle outright. 

Defendant selected the latter option. In late January 1998, he purchased the

vehicle from MetroBank on credit by executing a $9,000 note in favor of
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MetroBank with MetroBank taking a lien against the vehicle. Defendant

thereafter timely made the monthly loan installment payments. In early January

1999, however, Defendant approached Nancy Bainbridge, MetroBank’s chief

financial officer, about reversing the loan and returning the vehicle to

MetroBank’s possession. Ms. Bainbridge informed Defendant that the loan

reversal was not possible. 

At that point, Defendant informed Ms. Bainbridge that he had failed to title

the vehicle in his name. The existing title certificate listed MetroBank as the

owner on the front side, but the back side bore a notarized acknowledgment of the

transfer of ownership to Defendant. Defendant requested that Ms. Bainbridge

obtain a duplicate title, which would not bear notarized evidence of the previous

transfer. Defendant claimed that with the duplicate title he could properly title

the vehicle without having to pay a penalty for not having titled the vehicle

within the time allotted by the Oklahoma department of motor vehicles. Ms.

Bainbridge refused Defendant’s request. 

Nevertheless, a title was issued on January 12, 1999, listing MetroBank as

the owner of the vehicle. Despite the title confusion, an OCC examiner testified

that the car in fact belonged to Defendant.

2. Automobile Loan

In March 1999, Defendant sold the Mitsubishi for $10,000 to Michelle
 The original indictment, filed on November 19, 2003, also charged co- 3

defendant David Solomon in four of the six bank fraud charges. On April 23,

2004, however, Mr. Solomon was deemed incompetent to stand trial. This

resulted in a superseding indictment filed some ten months later, on February 16,

2005. That indictment continued to list Mr. Solomon as a co-defendant, but the

counts were amended to charge only Defendant with the underlying offenses

rather than conspiracy.

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Fischer, an acquaintance of co-defendant David Solomon. Defendant required 3

that Ms. Fischer make a $1,000 down payment. Ms. Fischer obtained the

remaining $9,000 from a MetroBank loan issued on March 19, 1999. MetroBank

took a lien against the vehicle, which had a Kelley Blue Book value of between

$9,000 and $10,000. Mr. Solomon acted as a guarantor.

According to Cody Machala, a junior loan officer at MetroBank, Defendant

asked him to examine Ms. Fischer’s loan application. Mr. Machala’s examination

revealed that both Ms. Fischer and Mr. Solomon had poor credit. As a result, Mr.

Machala “did not feel comfortable making this loan.” (App. at 671.) Mr.

Machala, however, did not explain his concerns to Defendant because he felt “a

little intimidated” by Defendant and because he believed Defendant wanted him

to make the loan. (App. at 672.) Instead, Mr. Machala sought the advice of two

more senior MetroBank loan officers. Those loan officers both stated that

because the amount of the loan was within Defendant’s lending authority, Mr.

Machala should make the loan. At least one of the loan officers cautioned Mr.

Machala, however, to put Defendant’s initials on the paperwork to signify that
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Defendant was in fact the loan officer of record. 

Defendant informed Mr. Machala to distribute the loan proceeds to two of

Defendant’s outstanding loans with MetroBank. Mr. Machala applied $6,476.85

to Defendant’s car loan, completely paying off that debt. He applied the

remaining proceeds plus the $1,000 down payment to another of Defendant’s

loans. This distribution was recorded on several official bank forms as well as a

nonstandard memorandum created by Mr. Machala for the express purpose of

detailing the loan proceed distribution “due to where the proceeds were going.” 

(App. at 676.)

Ms. Fischer timely tendered the first three monthly loan installment

payments before defaulting. Mr. Solomon then paid approximately four months’

worth of delinquent payments before also defaulting. Ultimately, MetroBank

repossessed the Mitsubishi and sold it at auction for $7,130.

B. The Nelco Real Estate Loan

1. The Transaction

In early 1999, Defendant approached Ms. Bainbridge seeking advice

regarding the possible purchase by MetroBank of a 160-acre tract in Newcastle,

Oklahoma. Defendant explained to Ms. Bainbridge that the property represented

a lucrative development opportunity given the State’s intended installation of a

nearby turnpike. Ms. Bainbridge informed Defendant that banks were prohibited
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from buying and holding land for purposes of speculation.

Around this time, Mr. Solomon introduced Defendant to unindicted coconspirator Nels Bentson, an entrepreneur who owned a chain of small-loan and

check-cashing service stores for which Mr. Solomon occasionally performed

work. Defendant, Mr. Solomon, and Mr. Bentson agreed to purchase the 160-acre

parcel and turn it into a housing development known as Eden Estates. Mr.

Bentson was in charge of developing Eden Estates, Mr. Solomon of marketing and

selling the developed lots, and Defendant of financing the project. 

At Defendant’s suggestion, Mr. Bentson formed Nelco, Inc. (“Nelco”). 

Nelco would obtain a $500,000 loan from MetroBank in order to purchase and

develop the property. Of the loan proceeds, $352,000 was earmarked to purchase

the land with the remaining funds available to draw upon as Nelco incurred

development costs. At some point, Mr. Solomon was injected as an intermediate

buyer. The transaction then was arranged as a double-escrow closing such that

Mr. Solomon would purchase the land for $352,000 and immediately transfer it to

Nelco at a cost of $1.2 million, a figure apparently representing a portion of the

property’s post-development value. In return, Nelco would issue a $910,000

promissory note to Mr. Solomon, who in turn would sell it to MetroBank for a

mere $10,000.

The proposed loan transaction was presented to the MetroBank board of
 Defendant previously presented a differently structured loan transaction to 4

the MetroBank loan committee on March 4, 1999. The terms of that transaction

called for a $514,000 loan, with $170,000 going to purchase the land, $200,000

returning to MetroBank as a finder’s fee, and the remaining funds financing the

development. The loan committee expressed doubts over the land valuation and

voiced concerns over the legality of collecting a finder’s fee. That meeting

adjourned without voting on the transaction.

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directors for approval on April 6, 1999. Despite concerns over the valuation 4

attached to the land as well as to the promissory note, the board approved the loan

subject to removing Mr. Solomon from the transaction. This conditional approval

was prompted due to Mr. Solomon’s poor credit and the presence of tax liens

against Mr. Solomon that could effect the chain of title. According to notes taken

by Ms. Bainbridge at that meeting, the board refused to “deal with David

Solomon due to his credit report” and required “[g]ood and clear title.” (App. at

820-21.)

Following this meeting, on April 15, 1999, Mr. Solomon incorporated

TransTech Properties, Inc. (“TransTech”) at Defendant’s suggestion. TransTech

was then substituted as the intermediary purchaser. Although a MetroBank

employee prepared a credit memorandum detailing Mr. Solomon’s ownership of

TransTech, it is not clear that this memorandum was made available to the board

until April 22, 1999, the day after the Nelco transaction closed. It is clear that

board members expressed dissatisfaction over Mr. Solomon’s continued

involvement in the transaction when the issue came up at the May 13, 1999 board
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meeting.

2. The Bank Records

Yet, one month later, at a June 23, 1999 board meeting, the board approved

a version of the April 6, 1999 meeting minutes that omitted any mention of the

conditions imposed. Chris Rauchs, an outside contractor, had produced written

draft minutes of the April 6 meeting based on a tape recording made of that

meeting. Ms. Rauch’s initial draft listed the conditions imposed on the Nelco

loan approval. Defendant then called Ms. Rauchs to request that she delete that

portion of the minutes and she complied with that request. 

MetroBank loan officer Virginia Evans alerted the OCC of the discrepancy

in the various draft minutes during a standard OCC review conducted on or

around June 14, 1999. She did not report the discrepancy to the board of

directors prior to or during the June 23, 1999 board meeting at which the altered

minutes were approved.

C. The Reisig Real Estate Loan

Nelco’s Eden Estate development was located in close proximity to other

housing developments, including Meadowview Estates and Oak Forest, which

were both developed by M.C. Land, a property development company co-owned

by Mike Campbell and Ross Morris. Mr. Campbell was acquainted with

Defendant because MetroBank had provided the financing for Meadowview’s
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development. Mr. Campbell also was acquainted with Mr. Solomon, whom he

described as Defendant’s “envoy.” (App. at 1270.)

In Fall 1999, Mr. Solomon approached Mr. Campbell regarding M.C.

Land’s desire to sell seven, undeveloped, one-acre lots in the Oak Forest

development. Mr. Solomon stated that he had located a potential buyer who was

interested in starting a property development business. Mr. Campbell indicated

that he would sell all seven lots for $10,000 per lot, or $70,000.

Around the same time, Mr. Solomon approached an acquaintance, Jon

Reisig, about purchasing these lots. Mr. Solomon introduced Mr. Reisig to

Defendant, who told Mr. Reisig about the potentially lucrative opportunity

presented by the Oak Forest lots. Defendant also told Mr. Reisig that MetroBank

would provide any necessary financing. Without seeking an appraisal or

conducting a survey or even seeing each lot, Mr. Reisig agreed to purchase all

seven lots for $11,500 per lot, or $80,500.

Mr. Campbell and Mr. Reisig never negotiated with one another, so neither

was aware of the price disparity. Indeed, Mr. Reisig was under the impression

that $11,500 per lot amounted to $90,000, the final sale price as set by Mr.

Solomon and Defendant. The entire transaction was based on oral promises; the

parties never entered into a written contract.

Defendant asked John DeFrees, MetroBank’s senior lending officer, to

prepare and present the loan to the loan committee for approval. Defendant was
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unable to do so himself because the OCC had suspended Defendant’s lending

authority following his issuance of a number of questionable loans. Mr. DeFrees

passed the loan off to Bob Osborne, a lending officer with more real estate loan

experience. Under the terms of loan, MetroBank would loan $248,000 to Reisig

Enterprises, a corporation wholly owned by Jon Reisig. The total loan amount

was based on $90,000 for the purchase of the seven lots, $82,000 for the purchase

of a modular show home, and $76,000 for a revolving line of credit for costs

associated with building homes on any sold lots. The loan committee initially

rejected the loan. Defendant, Mr. DeFrees, and Mr. Osborne then reworked the

proposal to address the committee’s concerns. On December 9, 1999, the loan

was again presented to the loan committee, and approval was granted.

Just before the closing, Defendant informed Mr. DeFrees that $40,000 of

the $90,000 purchase price was to be distributed to TransTech as a finder’s fee. 

Mr. DeFrees informed Mr. Osborne, who had the closing documents changed to

reflect this disbursement. In order to effectuate this disbursement, Defendant had

TransTech inserted as an intermediary buyer/seller of the lots. Despite these

changes, the loan was not presented to the loan committee for reapproval. 

Mr. Campbell also was notified of a last minute change. The day before

the closing, Mr. Campbell received a telephone call from Defendant informing

him that Mr. Reisig’s wife had “thrown a fit” over the sale price. (App. at 1275,

1276.) According to Defendant, Mr. Reisig was now willing to pay only $7,000
 These loans had a total principal value of around $25,000. Mr. DeFrees 5

testified that charged-off loans typically sell for around ten percent of their

principal value. Mr. Solomon paid more than seventy-five percent.

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per lot, or $49,000. Mr. Campbell reluctantly agreed to the new price. Mr.

Reisig and his wife testified that Defendant’s representations were false.

On December 22, 1999, the parties met at MetroBank for the closing. At

that time Mr. Campbell became aware of TransTech’s involvement. Having

received his payment, however, he signed the appropriate documents and left. 

Mr. Reisig apparently remained unaware of TransTech’s involvement and its

receipt of $40,000. Mr. Reisig never read the closing documents or retained

counsel to assist in reviewing the deal.

Immediately after the closing, Mr. Solomon gave roughly $19,000 to

MetroBank to purchase six, nonperforming, uncollectible loans, otherwise known

as charged-off loans. In addition, approximately $1,600 went to make delinquent 5

payments on the Fischer car loan. Mr. Solomon also attempted to give $10,000 to

Mr. Reisig as repayment for a failed investment Mr. Reisig had made at Mr.

Solomon’s urging.

D. The Attempted Building Sale

As noted above, Defendant’s Chapter 11 bankruptcy was converted to

Chapter 7 on December 17, 1999. Pursuant to the bankruptcy code, the Chapter 7

trustee at that point became the statutory owner of all Defendant’s assets,
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including his MetroBank stock. The trustee informed Defendant on January 4,

2000, that a special board meeting would be held on January 19. That meeting

was scheduled in order to discuss Defendant’s inability to continue to serve on the

MetroBank board due to his lack of stock ownership.

On January 11, 2000, Defendant contacted real estate attorney Kiran

Phansalkar to assist in the sale of MetroBank building. Defendant represented

that he had authority to sell the bank building and that the sale was aimed at

achieving tax breaks. Although the board had granted Defendant authority to

explore the sale of bank assets nearly one month earlier, that authority was

conditioned on obtaining regulatory approval from the OCC prior to effectuating

any sale. At a meeting at Mr. Phansalkar’s office on January 17, 2000, Defendant

informed Mr. Phansalkar that Oklahoma Central Railroad (“OCRR”), a company

wholly owned by Defendant’s wife, would be the purchaser. Mr. Phansalkar

expressed concerns about the inside nature of the transaction, but was reassured

by Defendant about his authority to conduct the sale. Mr. Phansalkar later

learned that OCRR’s corporate status had been suspended, meaning it was not

legally able to conduct business operations.

According to the terms of the transaction, OCRR would buy the building on

credit for $2 million, but would only make a $10,000 down payment. OCRR

would then lease the building back to MetroBank at a monthly rent of $20,000 for

a period of twenty-five years. According to Defendant’s wife, OCRR did not
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have the funds to effectuate the sale. Defendant attempted to arrange the

financing through Old Standard Life Insurance (“Old Standard”). Defendant had

his wife sign a check to Old Standard for $10,000 in exchange for a commitment

letter regarding a $2 million loan. That commitment never came. Nevertheless,

Defendant and his wife signed all the necessary sale documents on January 18,

2000, the night before the special shareholder’s meeting. At Defendant’s urging,

Mr. Phansalkar placed the documents in escrow subject to closing.

Unbeknownst to Mr. Phansalkar, the next day the MetroBank board of

directors removed Defendant from the board and relieved him of his role at the

bank. At no point in that meeting did Defendant advise the board of the

impending sale. Two days later, the incoming MetroBank president learned of the

attempted sale. He immediately contacted Mr. Phansalkar and stopped the

transaction.

ANALYSIS

I. Sufficiency of the Evidence

We review sufficiency of the evidence challenges de novo to determine

whether, viewing the evidence in the light most favorable to the government, any

rational trier of fact could have found the defendant guilty beyond a reasonable

doubt. United States v. Yehling, 456 F.3d 1236, 1240 (10th Cir. 2006). We

consider both direct and circumstantial evidence, together with the reasonable
-16-

inferences to be drawn therefrom. Id. We do not, however, weigh conflicting

evidence or consider witness credibility. Id.

We also generally review de novo a district court’s denial of a motion for

judgment of acquittal. United States v. Apperson, 441 F.3d 1162, 1209 (10th Cir.

2006). This circuit, however, follows the waiver rule. Under that rule, “‘a

defendant who moved for a judgment of acquittal at the close of the government’s

case must move again for a judgment of acquittal at the close of the entire case if

he thereafter introduces evidence in his defense.’” United States v. Bowie, 892

F.2d 1494, 1496 (10th Cir. 1990) (quoting United States v. Lopez, 576 F.2d 840,

842 (10th Cir. 1978). Because Defendant failed to reaffirm his motion for

judgment of acquittal after testifying in his own defense, we review for plain

error under Fed. R. Crim. P. 52(b). Id. The analysis, however, is “essentially the

same” as under sufficiency of the evidence. Id.

A. § 656

A conviction for willful misapplication of bank funds under 18 U.S.C. §

656 requires the government to prove that (1) the defendant was a bank officer or

director (2) of a national or federally insured bank (3) from which the defendant

willfully misapplied funds and (4) that the defendant acted with intent to injure or

defraud the bank. United States v. Rackley, 986 F.2d 1357, 1361 (10th Cir.

1993). Although “intent to injure or defraud” is not an explicit statutory element
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of § 656, the Courts of Appeals all agree that “intent to injure or defraud” must be

established. See Bates v. United States, 522 U.S. 23, 30 n.4 (collecting cases). 

This court has stated that evidence of an “intent to deceive” may be sufficient, in

certain circumstances, to supply the necessary proof of criminal intent required

under § 656. United States v. Harenberg, 732 F.2d 1507, 1511-12 (10th Cir.

1984) (relying upon implicit holding of United States v. Twiford, 600 F.2d 1339,

1341 (10th Cir. 1979)).

Defendant asserts that his conviction “extends the misapplication statute in

an unprecedented fashion” (Appellant’s Br. at 22) because there was insufficient

evidence of his intent to conceal the use of the funds at issue.

1. The Fischer Automobile Loan

According to Defendant, the fact that he truthfully and openly disclosed the

Fischer loan proceeds in the loan documents renders misapplication impossible as

a matter of law. The use of the Fischer loan proceeds to pay off Defendant’s own

car loan as well as other MetroBank debts was stated on the face of the loan

documents. In addition, Mr. Machala created a separate, nonstandard

memorandum detailing the disbursements. This made Defendant’s personal

benefit readily apparent to anyone reviewing the loan file. 

The government points out that “to be convicted under § 656, a defendant

need not have made a false statement or representation.” United States v.
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Haddock, 961 F.2d 933, 935 (10th Cir. 1992). Rather, under the government’s

theory, Defendant intended to defraud MetroBank simply by granting a loan to an

uncreditworthy borrower. The indictment charged Defendant with “caus[ing] a

car loan to be made to a borrower, who could not otherwise qualify for the loan,

and then us[ing] the proceeds for his own personal benefit.” (App. at 61, Count

1, ¶ 3.) The prosecutor’s synopsis of misapplication in her closing argument

bears striking similarity: “Misapplication occurs . . . when . . . a loan officer . . .

provides a loan to an individual who is not creditworthy for his own personal

benefit.” (App. at 1961.) Thus, the question before the court is whether a

defendant who grants a loan to an uncreditworthy borrower possesses the

necessary criminal intent to be guilty of willful misapplication where the bank is

fully aware of the borrower’s poor credit history and where the defendant’s

personal benefit is fully disclosed.

The term “willful misapplication” has “no settled technical meaning,” but

“was intended to include acts not covered by the words ‘embezzle’ or ‘abstract’

as such are used in the statute.” United States v. King, 484 F.2d 924, 926 (10th

Cir. 1973). However, “‘misapplication has been distinguished from

‘maladministration.’” Id.; see also United States v. Blasini-Lluberas, 169 F.3d 57,

63 (1st Cir. 1999) (noting that uncertain definition of willful misapplication has

“posed a challenge to courts attempting to distinguish bad judgment from bad

conduct that is illegal”). In United States v. Davis, this court illustrated two
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examples of misapplication in relation to 18 U.S.C. § 657, a parallel statute

governing misapplication at federal savings and loan institutions:

Misapplication may occur when an officer, director, employee or

other person subject to the statute knowingly lends money to a sham

borrower or causes all or part of the loan to be made for his own

benefit while concealing his interest from the bank. Misapplication

of funds “occurs when funds are distributed under a record which

misrepresents the true state of the record with the intent that bank

officials, bank examiners, or the [FDIC] will be deceived.” Thus,

when a person within the ambit of § 657 receives material benefits

of loans without disclosing this fact, misapplication has occurred.

953 F.2d 1482, 1493 (10th Cir. 1992) (quotations and citations omitted). Under

both examples, concealment of a personal stake is crucial. Similarly, in Rackley,

986 F.2d at 1361, we held that a bank could be defrauded under § 656 even when

some bank employees knew about the nature of the transactions if the defendant

failed to “disclos[e his] interest on the loan documents, thereby flouting banking

rules and regulations designed to protect the financial integrity of the bank.” 

Defendant argues that while § 656 does not require a false statement or

representation, it does require at least some attempt at concealment. Absent that,

Defendant argues that his fully disclosed involvement in a loan to an

uncreditworthy individual cannot satisfy the intent to injure or defraud element. 

Indeed, the jury was instructed that “intent to defraud” requires “the specific

intent to deceive or cheat” (App. at 120), and the government does not argue that

this instruction was erroneous. Even the case on which the government relies,

United States v. Unruh, 855 F.2d 1363, 1375 (9th Cir. 1987), indicates that more
 We note that many opinions conflate the recitation of the law. See, e.g.,

6

Golden v. United States, 318 F.2d 357, 360-61 (1st Cir. 1963) (upholding jury

instruction and noting that instruction stated proper test for intent to injure or

defraud as “whether or not the bank was defrauded of something, defrauded of its

right to have custody of [its] funds, the right of the bank to make its own

decisions as to how these funds were to be used, and to act under other

regulations promulgated in protection of banking”). Nevertheless, the majority of

opinions conduct the factual application of intent to injure and intent to defraud

separately. See, e.g., United States v. Evans, 42 F.3d 586, 590 (10th Cir. 1994). 

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is required than just showing that the defendant made a loan to an uncreditworthy

individual: “The creditworthiness of the borrowers is relevant because a bank

officer who, with intent to defraud or injure, makes loans to ‘financially

incapable’ individuals is guilty of misapplication of bank funds.” Id. (emphasis

added); see also id. at 1371 (noting that difference between upheld and

overturned § 656 convictions was lack of bank record falsification in overturned

conviction).

We agree with our sister circuits that the intent to injure and the intent to

defraud are distinct options under § 656 violations. See United States v. Lung 6

Fong Chen, 393 F.3d 139, 145-46 (2d Cir. 2004) (“Section 656’s intent

requirement is properly read in the disjunctive and thus proof of intent to injure

or defraud is sufficient to support a conviction.”); Valansi v. Ashcroft, 278 F.3d

203, 210 (3d Cir. 2002) (stating that intent “may be shown either by intent to

injure or intent to defraud”); United States v. Castro, 887 F.2d 988, 995 (9th Cir.

1989) (“Intent to injure need not be shown if there is intent to deceive or
-21-

defraud.”); United States v. Angelos, 763 F.2d 859, 861 (7th Cir. 1985) (“[I]t is

important to distinguish between intent to injure and intent to defraud; either will

do, and they are not the same.”). Proving that a defendant acted with the intent to

defraud requires evidence of an intent to deceive, such as “misrepresent[ing] the

purpose of the loan,” Blasini-Lluberas, 169 F.3d at 64, or “concealing vital

information,” United States v. Watts, 122 Fed. App’x 233, 239 (6th Cir. 2005). 

See, e.g., United States v. Giraldi, 86 F.3d 1368, 1377 (5th Cir. 1996) (approving

jury instruction stating that “intent to defraud means to act with an intent to

deceive or cheat someone, ordinarily for the purpose of causing some finance

[sic] loss to another or bringing about some financial gain to oneself” (alteration

in original)). To prove an intent to injure, the prosecutor must show that the

defendant knowingly committed a voluntary act, the “natural tendency of which

would be to injure the bank,” regardless of whether the defendant had a

“subjective intent” to harm the bank. United States v. Bruun, 809 F.2d 397, 408

(7th Cir. 1987) (collecting cases); cf. Evans, 42 F.3d at 590 (using phrases

“natural tendency . . . could not have been to injure” and “tended to injure”

without clearly distinguishing intent to injure from intent to defraud). 

The government has failed to establish that Defendant acted with an intent

to defraud MetroBank. The loan file contained all the appropriate documentation,

as well as additional information specifically detailing Defendant’s benefit. 

Defendant made no attempt to conceal the loan, the borrower’s poor credit, or the
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disbursement of loan proceeds. Although Defendant exercised control over the

bank employees and encouraged them to issue a questionable loan, the

government presented no evidence that Defendant tampered in any way with the

loan or misled the bank or its employees. Cf. Haddock, 961 F.2d at 935 (finding

misapplication where bank president defendant’s “substantial control” over bank

employees and “over much of what occurred at the bank” prevented his massively

overdrawn check from bouncing for nearly two weeks). Rather, Defendant

handed the loan to Mr. Machala for review despite himself possessing the

authority to issue the loan without loan committee or board approval, thus making

the transaction that much more transparent. 

The government cites to Defendant’s inappropriate personal use of the

vehicle, his request to reverse his own car loan, his application for duplicate title,

and his early lien release as evidence of misapplication. Some or all of these

actions may constitute misapplication in and of themselves, but these actions did

not form the basis of the misapplication charge for which Defendant was

convicted. And while these facts certainly indicate Defendant’s desire to be free

from his loan obligation, they do not show that he had any intent to defraud

MetroBank by issuing the Fischer loan. See United States v. Valadez-Gallegos,

162 F.3d 1256, 1262 (10th Cir.1998) (“[W]e may not uphold a conviction

obtained by piling inference upon inference.”). 

Nor did the government produce any evidence of Defendant’s intent to
-23-

injure MetroBank. Whatever Defendant’s motivation, we cannot say that the

Fischer loan posed an “indefensible risk” to MetroBank. King, 484 F.2d at 927

(quotation omitted). Ms. Fischer was cognizant of her loan obligation, and the

testimony establishes that the loan was adequately collateralized. We recognize

that certain cases within this circuit have hinted that a borrower’s adverse credit

history may influence a misapplication determination. See, e.g., Evans, 42 F.3d at

590. However, the parties have not alerted us to any case holding that the

borrower’s inadequate credit is sufficient in and of itself to sustain a conviction,

nor have we located any such case. Accordingly, we will not extend the reach of

§ 656 by reading it so broadly that we criminalize the making of a loan to an

uncreditworthy individual even where a personal benefit is derived absent further

circumstances.

2. The Reisig Real Estate Loan

Whether Defendant possessed the intent to injure or defraud MetroBank is

also central to Defendant’s conviction for misapplication on the Reisig loan. As

before, the nature of the loan makes analysis of the misapplication statute

difficult. The government argues that Defendant “used his position to push

through a loan” (Appellee’s Br. at 19) and that the entire transaction was “rife

with deception” (id. at 23). We agree that deception played a major role in this

transaction. The evidence at trial, however, predominately focused on
-24-

Defendant’s alleged fraud against Mr. Campbell and Mr. Reisig in relation to the

sale and purchase price disparity. The government’s attempt to establish

misapplication by bootstrapping from that fraud leaves a limited record of proof

supporting Defendant’s intent to injure or defraud MetroBank.

 Yet, that record is sufficient to uphold Defendant’s conviction on this

count. From the inception of this deal, Defendant caused MetroBank to issue a

loan in excess of the sale value by inflating the sale price. That disparity was

heightened by Defendant’s surreptitious, last-minute rejiggering of the sale price. 

Mr. Campbell, Mr. Reisig, and, most importantly, MetroBank, were unwitting

dupes. 

True, the $40,000 benefit to TransTech was fully disclosed in the loan

documents. However, the testimony established that the MetroBank board

previously had refused to deal with Mr. Solomon and, by implication, TransTech. 

As a result, Defendant’s last-minute insertion of TransTech could have led the

jury to infer that Defendant was generating income for himself and Mr. Solomon

at the bank’s expense in a manner designed to keep the loan committee and the

board in the dark.

Indeed, Defendant inserted TransTech as an intermediary buyer/seller in

order to have a vehicle through which to withdraw those funds. Defendant

skimmed the money off the loan transaction in order to funnel it to Mr. Solomon

and himself. Defendant had Mr. Solomon use $21,000 to purchase charged-off
-25-

loans and pay off overdue loan balances in an effort to make it appear as if

MetroBank had generated income from which Defendant could take dividends.

The remainder of the money flowed directly out of the bank: $10,000 went back

to Mr. Reisig to cover a debt Mr. Solomon incurred, roughly $1,000 went to

unindicted co-conspirator Bentson, and some $6,000 went into Mr. Solomon’s

pocket. 

Defendant’s actions in pushing through a fraudulent loan posed an

“indefensible risk” of default to MetroBank. King, 484 F.2d at 927 (quotation

omitted). Collateralization and creditworthiness aside, by lying about the sale

price to all parties involved in order to carve out funds for his personal use,

Defendant caused MetroBank to pay out $40,000 that, upon discovery of the ruse,

would likely never be paid back. We are convinced, therefore, that the scheme

was not only done with the intent to defraud MetroBank, but also that it was

likely to cause injury to the bank.

B. § 1344(1)

Under 18 U.S.C. § 1344(1), the government must prove that: (1) the

defendant knowingly executed or attempted to execute a scheme or artifice to

defraud a financial institution; (2) the defendant had the intent to defraud a

financial institution; and (3) the bank involved was federally insured. United

States v. Waldroop, 431 F.3d 736, 741 (10th Cir. 2005). Consistent with the
-26-

common law definition of “fraud,” § 1344(1) requires “a misrepresentation or

concealment of material fact.” Neder v. United States, 527 U.S. 1, 22 (1999).

“Section 1344 was intended to reach a wide range of fraudulent activity

that undermines the integrity of the federal banking system.” Rackley, 986 F.2d

at 1361. Accordingly, “courts have liberally construed the statute.” United States

v. Bernards, 166 F.3d 348 (10th Cir. 1998) (table) (“‘The broad range of schemes

covered by the statute is limited only by a criminal’s creativity.’” (quoting United

States v. Norton, 108 F.3d 133, 135 (7th Cir. 1997))). 

1. The Nelco Real Estate Loan

Defendant argues that the Nelco loan was “an economically sound loan that

benefitted the bank and brought Defendant no personal gain.” (Appellant’s Br. at

34.) Consistent with the courts’ broad reading of the statute, as outlined above,

as well as the statute’s express purpose of punishing the scheme to defraud and

not the completed fraud, the government need not prove damages. Neder, 527

U.S. at 25.

Defendant further argues that the final terms of the Nelco loan were fully

disclosed and that the MetroBank board “indisputably approved” the loan. 

(Appellant’s Br. at 34.) Defendant also argues that the board’s only reason for

removing Mr. Solomon was due to the presence of tax liens against him that could

have clouded the chain of title. According to Defendant, by replacing Mr.
-27-

Solomon with TransTech he adequately addressed that concern. 

There is substantial evidence, however, that the board conditioned its

approval of the Nelco loan not only on the receipt of good and clear title, but also

on the removal of Mr. Solomon from the transaction. The latter concern was

spurred by Mr. Solomon’s poor credit history and pattern of bad business

practices. The jury heard testimony regarding this concern from several

MetroBank board members and employees. It also saw documentary evidence

expressly stating this condition. 

As the evidence sufficiently establishes, Defendant schemed to defraud

MetroBank by concealing Mr. Solomon’s continued involvement in the

transaction. See United States v. Hill, 197 F.3d 436, 444 (10th Cir. 1999) (“[T]he

phrase ‘scheme or artifice to defraud’ simply requires a design, plan, or ingenious

contrivance or device to defraud.”). Following the April 6, 1999 board meeting at

which these conditions were imposed, Defendant caused an attorney to prepare

papers incorporating TransTech with Mr. Solomon as its sole shareholder. Mr.

Solomon signed the incorporation papers on April 15, 1999. Defendant then had

a MetroBank employee prepare a credit memorandum clearly listing TransTech’s

involvement in the Nelco loan and identifying Mr. Solomon as TransTech’s sole

owner. That credit memorandum was signed by Defendant on April 19, 1999, and

placed into the credit file. The Nelco loan closed on April 21, 1999. There was

evidence that Defendant did not present the revised transaction to the board and
-28-

that no MetroBank board member became aware of Mr. Solomon’s continued

involvement until after the loan closed. See United States v. Cronic, 900 F.2d

1511, 1513-14 (10th Cir. 1990) (noting that a defendant need not make an

affirmative misrepresentation to violate § 1344(1)). The jury heard testimony

from board members that Mr. Solomon’s replacement with TransTech violated the

board-imposed conditions. Cf. United States v. Ventura, 17 F. Supp. 2d 1204,

1208 (D. Kan. 1998) (“Banks are in the business of assuming risks. Section

1344(1) of the bank fraud statute, however, prohibits individuals from exposing a

bank to a risk of loss that the bank did not knowingly assume.”). 

In addition, the government presented testimony that, following the loan

closing, Defendant sought to book the $910,000 note that the bank had purchased

for only $10,000 as $900,000 in income. The jury heard testimony that

Defendant’s sole source of income was derived from bank stock dividends and

that MetroBank had to turn a profit in order to generate dividends. It was

reasonable for the jury to infer, therefore, that Defendant concocted the Nelco

loan in order to generate fictitious income for MetroBank. See id. (“A false

representation by an individual as to the purpose of a loan may be sufficient to

support a conviction of bank fraud under section 1344(1).” (citing collected

appellate cases)). It was further reasonable for the jury to conclude that

Defendant incorporated TransTech in order to mislead MetroBank about Mr.

Solomon’s continued involvement because Defendant required Mr. Solomon’s
-29-

continued participation in and acquiescence to the scheme in order to obtain the

$910,000 note with the intention of overbooking its value.

2. The Attempted Building Sale

The government presented testimony that a June 1999 OCC examination of

MetroBank revealed that MetroBank had issued a number of questionable loans,

had strained its operating capital, and had violated a number of lending laws,

including statutes capping the bank’s lending limit and restricting insider

transactions. As a result, MetroBank and the OCC entered into a memorandum of

understanding (“MOU”) on October 13, 1999. That MOU was “designed

specifically to control or limit” Defendant’s actions, including his lending

authority and his ability to withdraw dividends. (App. at 1486.) The MOU also

prevented Defendant from affecting “[t]he acquisition or sale of any fixed asset

owned by the bank involving more than $2,500.” (App. at 2331; see also App. at

1488.) The MetroBank building was a fixed asset.

As noted above, the bankruptcy court converted Defendant’s Chapter 11

proceedings to Chapter 7 liquidation on December 17, 1999. Four days later,

MetroBank held a board meeting at which Defendant requested permission to sell

unspecified bank assets. The board granted Defendant the authority to sell bank

assets “subject to regulatory authority.” (App. at 2338; see also App. at 1636.) 

The testimony reflected that this condition referred to OCC approval. At no point
-30-

did Defendant inform the board that his assets, including his bank stock, were

now in the possession of the Chapter 7 trustee.

The jury heard testimony that Defendant contacted Mr. Phansalkar and, as

detailed above, set in motion the proposed sale of the bank building. According

to the testimony of board members present at the January 19, 2000 special board

meeting, Defendant made no mention of the impending sale. Yet Mr. Phansalkar

testified that Defendant called him after that meeting and told him that

“everything went smoothly” and that the board had “approved the transaction.” 

(App. at 1522.) 

Defendant appears to argue that the board-mandated regulatory approval

was not necessary because the building sale was coupled with a leaseback such

that MetroBank would not have to cease operating at its present location. This

argument defies logic. The exact structure of that sale is irrelevant. There is

abundant evidence that Defendant attempted to effect a sale of the building and

schemed to defraud MetroBank by circumventing both the OCC and the

MetroBank board restrictions. Defendant’s contention that he committed no

crime because the sale never closed is equally perplexing. The law clearly

punishes the scheme rather than the completed fraud, and for that reason requires

no proof that the bank actually suffered damages. Neder, 527 U.S. at 25.

Defendant also asserts that a letter he submitted after his removal urging

the MetroBank board to approve the sale establishes that he never attempted to
-31-

defy the sales restriction. The jury, however, heard the testimony of the incoming

bank president that, in early January 2000, Defendant attempted to have the

phrase “subject to regulatory approval” stricken from the December 21, 1999

meeting minutes. Thus, the jury could have reasonably inferred that his efforts to

alter the meeting minutes was done in order to close the sale in secret.

C. § 1005

To prove a § 1005 violation, the government must establish that: “‘(1) an

entry made in bank records is false; (2) the defendant made the entry or caused it

to be made; (3) the defendant knew the entry was false at the time he . . . made it;

and (4) the defendant intended that the entry injure or defraud the bank or public

officers.’” United States v. Weidner, 437 F.3d 1023, 1037 (10th Cir. 2006)

(alteration in original) (quoting United States v. Chaney, 964 F.2d 437, 448 (5th

Cir. 1992)). The purpose of the statute is to ensure that “upon an inspection of a

bank, public officers and others would discover in its books of account a picture

of its true condition.” United States v. Darby, 289 U.S. 224, 226 (1933).

Defendant argues that he could not commit a § 1005 violation until the

MetroBank board meeting minutes in question became “official” minutes. The

minutes at issue did not become “official” until approved by the board at the June

23, 1999 meeting. The minutes were not approved until after Virginia Evans, a

MetroBank employee, alerted the OCC examiners that the proposed minutes
-32-

omitted the board’s statement that its approval of the Nelco loan was conditioned

on removing Mr. Solomon from the transaction. Regardless of when the minutes

became official, there was ample evidence from bank employees and OCC

examiners that neither set of minutes would have provided inspectors with a

complete account of the loan. Defendant counters that the May 13, 1999 meeting

minutes fully disclosed Mr. Solomon’s continued involvement and “the internal

dispute regarding whether [his continued participation] complied with the board’s

conditions.” (Appellant’s Reply Br. at 13.) However, the falsification of the

original minutes “is rendered no less false simply because, through considerable

effort and a piecing together of minute details, the bank might have been able to

discover the truth.” Weidner, 437 F.3d at 1037 (quoting United States v. Luke,

701 F.2d 1104, 1108 n.7 (4th Cir. 1983)).

In addition, the testimony made clear that Defendant instructed Chris

Rauchs, a contract typist, to delete the reference restricting Mr. Solomon’s

participation in the loan. The testimony reveals that Defendant ordered Ms.

Rauchs to remove mention of that condition and that Ms. Rauchs complied with

that order. “Under § 1005, ‘an omission of material information qualifies as a

false entry.’” Weidner, 437 F.3d at 1037 (quoting United States v. Cordell, 912

F.2d 769, 773 (5th Cir. 1990)). It is beyond cavil that Defendant omitted material

information by deleting the condition of loan approval. Moreover, it is

inconsequential that Defendant did not personally make the false entry: “‘it
-33-

suffices that he set in motion management actions that necessarily caused [bank

personnel] to make false entries.’” Id. (alteration in original) (quoting United

States v. Wolf, 820 F.2d 1499, 1504 (9th Cir. 1987).

II. Sixth Amendment Right to Chosen Counsel

Due to Defendant’s bankruptcy, he received appointed counsel on

December 9, 2003. Because trial was set to begin January 12, 2004, Defendant’s

counsel moved for a pro forma continuance in order to allow additional time for

preparation. This continuance was granted, and trial was rescheduled for April

12, 2004. 

On April 2, 2004, Defendant met in camera with the district court. At this

meeting, Defendant explained that he wished to terminate his court-appointed

attorney because he believed counsel’s strained schedule prevented counsel from

adequately preparing for trial. Defendant also informed the district court that he

was attempting to retain private counsel, but that his bankruptcy proceedings and

divorce proceedings complicated his ability to do so. He stated that he had

petitioned the Colorado divorce court to release marital estate funds for that

purpose and that he had an attorney lined up to begin working on the defense as

soon as those funds were approved. The district court interpreted Defendant’s

request as a second motion for a continuance and denied that motion. 

At an April 9, 2004 hearing, however, the district court disqualified Mr.
-34-

Solomon’s counsel. That required rescheduling trial for June 14, 2004. Then, on

April 23, 2004, Mr. Solomon was deemed incompetent to stand trial. This led to

a lengthy trial delay, which the district court admonished both parties’ counsel to

use in preparing for trial. The prosecution did not file a superseding indictment

eliminating the conspiracy charges until February 16, 2005; apparently the

prosecution was waiting to see if the forced administration of psychotropic drugs

would return Mr. Solomon to competency. Defendant’s trial was set for April 11,

2005.

 On March 15, 2005, the Colorado divorce court finally approved

Defendant’s request for marital estate funds, but did not release those funds until

March 29, 2005. Earlier on March 29, 2005, Defendant filed what the court

interpreted to be Defendant’s third motion for a continuance. This request was

predicated on the need for further discovery, as the prosecution previously had

failed to turn over certain discovery materials. On March 31, 2005, Defendant

advised the court of the change in his financial status. 

The district court conducted a hearing on April 4, 2005, to examine the

continuance issue. It then denied the continuance, citing the age of the case and

the “substantial likelihood” that Defendant would make an “eleventh-hour plea”

for another continuance. (App. at 241.) The district court ordered Defendant’s

court-appointed counsel to remain as defense counsel alongside Defendant’s

newly hired counsel. Defendant sought reconsideration of the district court’s
-35-

ruling on April 5, 2005, and this motion was promptly denied.

Defendant argues that the district court’s refusal to grant the third

continuance constituted an abuse of discretion that violated his Sixth Amendment

right to be represented by counsel of his choice. 

Following the Supreme Court’s decision in United States v. GonzalezLopez, --- U.S. ----, 126 S. Ct. 2557 (2006), the only question facing this court is

whether the district court “wrongly denied” the continuance that would have

permitted sole representation by Defendant’s hired counsel. Id. at 2563; accord

United States v. Zangwill, 197 Fed. App’x 888, 891 n.1 (11th Cir. 2006)

(unpublished) (“In order for the automatic rule of Gonzalez-Lopez to apply, in

other words, it must first be shown that the trial court “wrongly” or “erroneously”

denied the defendant his choice of counsel.”); United States v. Hickey, No.

97-0218, 2006 WL 1867708, at *14 (N.D. Cal. July 6, 2006) (“[A]s a threshold

matter for the Gonzalez-Lopez rule to apply, a court must have ‘wrongly’ denied

defendant’s choice of counsel.”). We review the district court’s decision for

abuse of discretion, United States v. Dowlin, 408 F.3d 647, 663 (10th Cir. 2005),

balancing the defendant’s “‘constitutional right to retain counsel of . . . choice

against the need to maintain the highest standards of professional responsibility,

the public’s confidence in the integrity of the judicial process and the orderly

administration of justice,’” United States v. Mendoza-Salgado, 964 F.2d 993,

1015 (10th Cir. 1992) (alteration in original) (quoting United States v. Collins,
-36-

920 F.2d 619, 626 (10th. Cir. 1990)). In striking that balance, we consider

whether: 1) the continuance would inconvenience witnesses, the court, counsel, or

the parties; 2) other continuances have been granted; 3) legitimate reasons

warrant a delay; 4) the defendant’s actions contributed to the delay; 5) other

competent counsel is prepared to try the case; 6) rejecting the request would

materially prejudice or substantially harm the defendant’s case; 7) the case is

complex; and 8) any other case-specific factors necessitate or weigh against

further delay. Id. at 1015.

There is no evidence that the district court’s denial was due to unreasonable

or arbitrary concerns. Although we question whether the district court could

entirely fault Defendant for the numerous delays in bringing this case to trial, that

was not the only reason provided. The age of the case was a serious concern. 

While not a particularly complex case, it involved multiple instances of fraud. 

Thus, it required testimony of numerous witnesses. Due to the scheduling

burdens of the district courts, “assembling the witnesses, lawyers, and jurors at

the same place at the same time” necessitates that “broad discretion . . . be

granted trial courts on matters of continuances; only an unreasoning and arbitrary

insistence upon expeditiousness in the face of a justifiable request for delay

violates the right to the assistance of counsel.” Morris v. Slappy, 461 U.S. 1,

11-12 (1983) (quotation omitted); see also Gonzalez-Lopez, 126 S.Ct. at 2565-66

(recognizing “a trial court’s wide latitude in balancing the right to counsel of
-37-

choice against the needs of fairness and against the demands of its calendar”)

(citation omitted).

While the Supreme Court has stated that those without the means to hire

counsel have no cognizable complaint in the face of adequate court-appointed

representation, Caplin & Drysdale, Chartered v. United States, 491 U.S. 617, 624

(1989), the right to hire preferred counsel “derives from a defendant’s right to

determine the type of defense he wishes to present.” Mendoza-Salgado, 964 F.2d

at 1014. Defendant, however, fails to argue on appeal how the denial of the

continuance affected trial preparation or defense strategy, or how the “hybrid

representation” foisted upon him by the district court negatively impacted his

defense. Even if Defendant had made such an argument, the record would not

support it. Defendant received notice that funds would be released more than one

week before trial. Defendant had contacted his hired attorney nearly one year

before, and it was understood that the attorney would begin working on the case

as soon as it became clear that funds would be available. Moreover, the record

contains no evidence that hired and appointed counsel differed in their approach

to the case. The district court noted its respect for appointed counsel’s ability on

several occasions, and appointed counsel in turn observed that hired counsel was

a highly experienced criminal defense attorney. Although Defendant expressed

dissatisfaction with what he perceived to be a lack of preparedness on the part of

appointed counsel at the April 2, 2004 in camera meeting, there is no evidence
 These provisions correspond to the 1998 edition of the Sentencing 7

Guidelines, which the district court correctly referenced.

-38-

that Defendant’s opinion persisted, especially after the lengthy continuance

caused by Mr. Solomon’s incompetency and the prosecution’s subsequent delay in

filing a superseding indictment.

For the foregoing reasons, we are unable to say that the district

court’s denial of Defendant’s third motion for a continuance on the eve of trial

constituted an abuse of discretion.

III. Sentencing

Defendant’s ninety-six month term of imprisonment resulted from a 12-

level enhancement under U.S.S.G. § 2F1.1(b)(1) for intending to cause a $2

million loss; four separate 2-level enhancements for violation of a memorandum

of understanding under U.S.S.G. § 2F1.1(b)(4)(B), more than minimal planning

under U.S.S.G. § 2F1.1(b)(2), obstruction of justice under U.S.S.G. § 3C1.1, and

abuse of a position of private trust under U.S.S.G. § 3B1.3; and an eighteen- 7

month increase above the Sentencing Guidelines range pursuant to § 3553.

Defendant also was ordered to pay $80,000 restitution. Defendant appeals each of

these sentencing determinations.

In reviewing sentencing decisions, we review a district court’s factual

findings for clear error but its legal determinations de novo. United States v.
-39-

Kristl, 437 F.3d 1050, 1054 (10th Cir. 2006). Similarly, we review the legality of

restitution orders de novo, the underlying factual findings for clear error, and the

amount for abuse of discretion. United States v. Osbourne, 332 F.3d 1307, 1314

(10th Cir. 2003). We also review the district court’s interpretation of the

Mandatory Victim’s Restitution Act (“MVRA”) de novo. United States v. Barton,

366 F.3d 1160, 1164-65 (10th Cir. 2004).

Because we have reversed Defendant’s conviction for willful

misapplication in association with the Fischer automobile loan, resentencing will

be necessary. Nevertheless, we address Defendant’s sentencing arguments since

the same issues are certain to arise at resentencing.

A. Intended Loss

Under § 2F1.1(b)(1)(M) of the 1998 Sentencing Guidelines, a sentence

should increase 12 levels for a loss of more than $1.5 million but less than $2.5

million. Where the intended loss is greater than the actual loss, the amount of

intended loss should be used for sentence calculation purposes. See U.S.S.G. §

2F1.1(b)(1) cmt. 8 (1998). The district court granted the enhancement based on

Defendant’s attempted sale of the MetroBank building for $2 million; no actual

loss occurred. The district court did, however, reject the government’s suggestion

that the intended loss totaled $6 million because insufficient evidence supported

the government’s asserted valuation. Rather, the district court determined that
-40-

Defendant intended to defraud MetroBank of $2 million by selling the MetroBank

building to a financially incapable entity owned by Defendant’s then-wife for that

amount. 

Defendant argues that the intended loss was zero because he could not have

sold the building without MetroBank board and/or OCC regulatory approval and

would not have been unable to dividend out that money. Certainly, we have held

that “the loss defendant subjectively intended to cause is not controlling if he was

incapable of inflicting that loss.” United States v. Galbraith, 20 F.3d 1054, 1059

(10th Cir. 1994) (finding intended loss inapplicable where defendant’s conduct

occurred in context of undercover sting operation that prevented loss to “victim,”

a non-existent pension fund); accord United States v. Ensminger, 174 F.3d 1143,

1146 (10th Cir. 1999) (reversing sentencing enhancement after concluding that

scheme to use falsified seizure order to have U.S. Marshall’s Office seize real

property and/or sale proceeds had no chance of succeeding); United States v.

Santiago, 977 F.2d 517, 524 (10th Cir. 1992) (reducing value of intended loss to

comport with “economic reality” of what insurance company would have paid for

stolen vehicle, not amount defendant claimed vehicle was worth). However,

contrary to Defendant’s suggestion, the district court did not find that the sale and

dividend payment never would have occurred, but that Defendant would not have

been “entitled” to take either action. (App. at 2208.) 

The district court observed that Defendant had become “a desperate man”
-41-

(App. at 2208) intent on making $2 million. The district court further observed

that the evidence presented at trial established Defendant’s desire to obtain this

money and that he “did not intend to jeopardize his plan to sell the building by

exposing himself to the risk that the board would reject the transaction or delay it

or impose conditions that would have made the transaction impossible to

consummate.” (App. at 2192.) The incoming board president testified that

Defendant attempted to delete from the board minutes the restriction on

Defendant’s ability to sell MetroBank assets. Defendant also made no mention of

the impending sale to the board but informed the real estate attorney that the

board had approved the transaction. Indeed, only the inadvertent, last-minute

discovery of the looming sale by the incoming bank president prevented the

transaction from closing. Defendant’s “surreptitious and furtive” actions (App. at

2192) and near success render his situation insufficiently comparable to those in

which this court found “no possibility for [the defendants] to have succeeded.”

Ensminger, 174 F.3d at 1146 (noting that “[n]o record facts suggest that there was

even a remote probability” of completing the scheme).

Defendant also contests the finding of an intended loss of $40,000 in

conjunction with the Reisig real estate loan. Because this amount does not

increase the intended loss into the next loss range as set by U.S.S.G. §

2F1.1(b)(1)(M), we need not consider Defendant’s argument.
-42-

B Memorandum of Understanding

The district court imposed a two-level enhancement under U.S.S.G. §

2F1.1(b)(4)(B) for violating an administrative order. On October 13, 1999, the

MetroBank board and the OCC agreed that Defendant would operate MetroBank

consistent with the provisions of a memorandum of understanding (“MOU”). The

OCC initially attempted to impose a “cease and desist order” or a “consent order.” 

According to the testimony of an OCC examiner, those terms are used

interchangeably to define a publicly available punitive order. After some

negotiation with MetroBank, the OCC lowered its punishment to the MOU, which

is a confidential agreement between the OCC and the bank that acts as a

rehabilitory measure “designed to . . . return [the bank] to a satisfactory

condition.” (App. at 1485.) The district court correctly concluded that the MOU

qualifies under U.S.S.G. § 2F1.1(b)(4)(B) as an administrative order. See United

States v. Spencer, 129 F.3d 246, 252 (2d Cir. 1997) (finding formal adversary

proceeding unnecessary where negotiation between parties results in binding

agreement). 

The extent to which the MOU restricted Defendant’s conduct is another

matter. Article XXI of the MOU stated in pertinent part: “The acquisition or sale

of any fixed assets owned by the bank involving more than $2,500 should require

prior Board approval.” (App. at 2331.) The district court determined that

Defendant’s attempted sale of the bank building, a fixed asset within the meaning
-43-

of the provision, violated Article XXI. Defendant argues that because the

provision’s language is precatory, not mandatory, his actions did not violate the

MOU.

We agree. In United States v. Tisdale, 248 F.3d 964, 977 (10th Cir. 2001),

this court analyzed the difference between “should” and “shall.” After examining

the words’ respective dictionary definitions, noting the Supreme Court’s

“directive that courts are to give words their ordinary meaning,” and commenting

favorably upon the Second Circuit’s interpretation of this issue in United States v.

Maria, 186 F.3d 65, 70 (2d Cir. 1999), we determined that “should” is a

permissive construction. See Qwest Corp. v. FCC, 258 F.3d 1191, 1200 (10th

Cir. 2001) (“The term ‘should’ indicates a recommended course of action, but

does not itself imply the obligation associated with ‘shall.’” (citing Maria, 186

F.3d at 70)). The MOU only recommended board approval; it did not mandate it. 

Accordingly, the district court erred in imposing the two-level enhancement under 

U.S.S.G. § 2F1.1(b)(4)(B).

C. Miscellaneous Enhancements

The district court imposed three other two-level enhancements. Defendant

argues only that these enhancements “should be set aside and remanded for

reconsideration if this Court vacates any of the underlying convictions” because

the district court’s findings would necessarily rely on overturned convictions. 
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(Appellant’s Br. at 55.) 

As illustrated below, however, the district court’s findings were based

largely on Defendant’s actions with respect to transactions other than the Fischer

automobile loan. Consequently, we see no reason why the district court’s

meticulously explained findings are rendered erroneous.

1. More Than Minimal Planning

The district court correctly applied a 2-level enhancement for more than

minimal planning pursuant to U.S.S.G. § 2F1.1(b)(2)(A) after finding “with a

very, very high degree of certainty” that Defendant’s crimes involved substantial

planning. (App. at 2138.) The district court relied primarily on the attempted

sale of the bank building, which the court considered “far and away the easiest”

example because the sale “involved a course of conduct that began several weeks”

prior to the planned closing. (App. at 2138.) Indeed, the district court saw “no

need to address anything other than the Reisig loan and the Nelco loan and the

proposed sale of the bank property.” (App. at 2138.)

2. Obstruction of Justice

The district court also properly imposed a 2-level enhancement under

U.S.S.G. § 3C1.1 for obstruction of justice after finding that Defendant offered

materially false testimony. We need not decide whether Defendant obstructed

justice in connection with the Fischer automobile loan in order to uphold this
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enhancement. The district court highlighted six instances in which Defendant

provided materially false testimony regarding the Reisig and Nelco real estate

loans and the attempted building sale.

3. Abuse of a Position of Private Trust

Lastly, the district court appropriately enhanced Defendant’s sentence two

levels under § 3B1.3 for abusing his position as MetroBank CEO. The district

court stated that Defendant’s position rendered application of the enhancement

“almost self-proving” and that the evidence clearly illustrated Defendant’s

coercive manner and deceptive actions. (App. at 2139.) Moreover, the district

court correctly noted that every single count involved an abuse of private trust.

D. Unreasonableness

Defendant argues that his sentence was “patently unreasonable” in part

because of “rhetorically charged” statements made by the district court.

(Appellant’s Br. at 59.) He argues that these statements ignore the fact that

MetroBank was not harmed financially and, therefore, that his sentence was

wrongly calculated. In making this argument, Defendant reiterates his argument

above related to the 12-level enhancement. As detailed above, we are not

persuaded by that argument. In addition, it is clear from the sentencing transcript

that the district court articulated well-grounded reasons under its § 3553 analysis.

Defendant also contends that the district court impermissibly departed
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upward by eighteen months without providing presentence notice of its intention

to do so. Federal Rule of Criminal Procedure 32(h) states:

Before the court may depart from the applicable sentencing range

on a ground not identified for departure either in the presentence

report or in a party’s prehearing submission, the court must give the

parties reasonable notice that it is contemplating such a departure. 

The notice must specify any ground on which the court is

contemplating a departure.

When, as here, a district court enhances the recommended Guidelines range under

the § 3553(a) factors, “the increase . . . is called a ‘variance.’” United States v.

Atencio, 476 F.3d 1099, 1101 n.1 (10th Cir. 2007). After United States v.

Atencio, Rule 32(h) applies to both variances and departures. Therefore, district

courts must “give advance notice of their intent to sentence above or below the

identified advisory Guidelines range.” Id. at 1104. 

On the first day of Defendant’s sentencing, the district court acknowledged

that, because it had not given notice of its intent to depart, that was “not even an

option.” (App. at 2165.) It then stated simply that it would issue a Guidelines

sentence or an outside-the-Guidelines sentence. This is plainly insufficient under

Rule 32(h). See Atencio, 476 F.3d at 1104 (“Rule 32(h) . . . leave[s] no doubt that

the defendant has a right to know in advance the very ground upon which the

district court might upwardly depart or vary.”); see also United States v.

Calzada-Maravillas, 443 F.3d 1301, 1304 (10th Cir. 2006) (“The notice

requirement is not burdensome—its key component is that the parties have notice
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in advance of the sentencing hearing.”). Before resentencing, the district court

must provide the requisite detailed notice if it intends to vary from the

recommended Guidelines sentence.

Even though Defendant was sentenced prior to Atencio, the notice

requirement still applies. What does not apply, per Atencio, is the requirement

that Defendant object to the lack of notice during sentencing in order to preserve

the issue for appeal. Atencio, 476 F.3d at 1105 n.6 (overruling United States v.

Bartsma, 198 F.3d 1191 (10th Cir. 1999), but applying objection requirement

“prospectively”). 

E. Restitution

The district court ordered Defendant to pay $80,000: $40,000 each to Mike

Campbell and Jon Reisig for defrauding them in connection with the Reisig real

estate loan. Defendant asserts that the award should be cut in half or eliminated

entirely because both buyer and seller received exactly what they expected. The

district court, however, stated that Defendant manipulated the parties in a “classic

dishonest broker situation” in order to carve out $40,000 for himself and codefendant Solomon. (App. at 2214.) Defendant stripped Mr. Campbell of what

he could have gotten absent the deceit, while Defendant led Mr. Reisig to overpay

by $40,000 from the moment the sale was proposed. Given that Defendant

victimized both parties to the sale, we find the district court’s restitution award
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entirely appropriate.

CONCLUSION

Having determined that insufficient evidence supported Defendant’s

conviction for willful misapplication in connection with the Fischer automobile

loan, that the district court incorrectly applied a 2-level sentencing enhancement

for violating an administrative order, and that the district court failed to

adequately notify Defendant of its intention to vary upward, we REVERSE

Defendant’s conviction on Count One and REMAND for resentencing consistent

with the rulings made and guidance given in this opinion.