Opinion ID: 202748
Heading Depth: 2
Heading Rank: 4

Heading: Bank Fraud with Respect to Mirandes Loans

Text: 80 The jury also found appellants Muñoz-Franco and Sánchez-Arán guilty of bank fraud in violation of 18 U.S.C. § 1344 with respect to the Mirandes loans. The Mirandes scheme involved many of the same elements as the Gutiérrez loans. In September 1981, Muñoz-Franco asked Mirandes to take over ownership of a project called Reparto Valenciano, and Mirandes, then the contractor for the project, agreed. At the time the project was in debt to Caguas for $2.2 million, and delays and other problems continued after Mirandes assumed ownership. On an ongoing basis, Muñoz-Franco and Sánchez-Arán supervised the transfer of funds from other projects to pay down the debt on the Reparto Valenciano project. For example, on September 30, 1986, approximately $2.2 million was applied to the Reparto Valenciano project from other Mirandes projects. 25 Muñoz-Franco and Sánchez-Arán did not disclose these transfers of money among various Mirandes projects to the Board. After the Reparto Valenciano debt increased to $3.2 million, Mirandes received five contracts from the Puerto Rico Housing Department to build basic housing. Although Caguas initially denied Mirandes' application for funding for these projects, it subsequently agreed to finance the Villas de Gurabo project if Mirandes would agree to apply the profits of that project to the debt and interest of the Reparto Valenciano project. These transfers temporarily sustained the Mirandes projects, but the decreased funds available to successive projects ultimately made it impossible for those projects to be completed or to yield profits. 81 Both Muñoz-Franco and Sánchez-Arán were intimately involved with the administration of the Mirandes loans. Sánchez-Arán met with Mirandes on many occasions, including, during one seven or eight month period, meetings every fifteen days. Sánchez-Arán was involved in most of the disbursements for the Mirandes projects, whereas for other loans he was typically involved only if a problem arose. Muñoz-Franco was also involved in the Mirandes loans: he originally met with Mirandes to get him to take over the loans, met with Mirandes several times thereafter, was regularly informed of the loans' progress, and reported on the loans' status to the Board. 82 Beginning thirty days after the Reparto Valenciano loan agreement was signed, Sánchez-Arán authorized many certifications for completed work. With two exceptions, no work on the project had been completed at the time of the authorizations. On several occasions, a transfer of funds from one loan to another or an increase in the amount of a loan was authorized without the approval of the loan committee or the Board. Mirandes also testified that the disbursement schedule for loans normally . . . wasn't complied with because money was taken out to pay interest. Thus, the disbursement schedule that the Board approved was not the schedule that Muñoz-Franco and Sánchez-Arán subsequently followed. 83 Enriquez testified such practices were not standard at Caguas; along with the Gutiérrez loans, the Mirandes loans were the only ones for which disbursements were authorized for work that was not completed. According to Enriquez, the Mirandes projects commonly received special certifications, which meant that [w]hen one project didn't have a line [of credit] it would be taken from another project. When regular certifications were submitted, they would have an itemization of expenses attached; special certifications would not include such an itemization and thus would not disclose the destination of the funds. 84 Sánchez-Arán also caused Caguas to finance the sale of land from one Mirandes company to another in order to pay interest on the Reparto Valenciano loan. On September 11, 1984, Mirandes' company Deproco purchased property for $60,000, and, three months later, sold the property to Bubao, another Mirandes company, for $94,000. The proceeds from the sale were used to pay interest on the Reparto Valenciano loan. The sale occurred despite the fact that, according to Mirandes, the land was not worth the purchase price and no improvements to the land were made in the interim. The minutes did not reflect that the Board was informed of the transaction. 85 After Mirandes was unable to improve the finances of the Reparto Valenciano project, he was awarded five projects from the Housing Department, including Villas de Gurabo, but was denied funding from Caguas. At that point, Mirandes met with Muñoz-Franco and Sánchez-Arán and asked to be released from the debt on the Reparto Valenciano project because he felt that the debt was not my problem and needed to seek financing for the project from another bank. Muñoz-Franco and Sánchez-Arán refused to release Mirandes from the debt. Subsequently, however, Kareh informed Mirandes that Caguas would give him financing on Villas de Gurabo, but that the proceeds from that loan would have to be used to pay off the debt on the Reparto Valenciano project. Mirandes reluctantly agreed, and this plan was implemented. Again, the minutes did not reflect that the Board was informed of this transaction. 86 The Denby letter provides further support for the jury's finding of fraud. Drafted and signed by Muñoz-Franco, it explicitly denies that Caguas' Board approved the practice of borrowers using construction loan proceeds to pay interest on unrelated loans. At the time of the letter, however, Muñoz-Franco and Sánchez-Arán had on many occasions authorized the payment of debts on the Reparto Valenciano project with funds from other Mirandes loans. The fact that the Denby letter was signed by all the members of the Board would allow a reasonable jury to conclude beyond a reasonable doubt that Muñoz-Franco misrepresented the practices associated with the Mirandes loans to the Board. 87 This circumstantial evidence of the requisite intent was bolstered by more explicit evidence of appellants' knowledge. Mirandes was concerned that, on the Reparto Valenciano project, some projects were being emptied out in order to deal with others and worried that it was going to become paralyzed. Mirandes testified that he and Sánchez-Arán spoke constantly about his concerns, and that he also expressed his concerns to Muñoz-Franco. Despite Mirandes' repeated statements of concern, Sánchez-Arán explicitly told Mirandes that the practices had to continue. In many cases, the bank authorized the disbursements directly rather than seeking authorization from Mirandes, and Mirandes testified that, although he knew of these disbursements, he was not in agreement with them. The evidence that appellants continued with their scheme even over Mirandes' objections demonstrated that they acted deliberately to defraud the bank. 88 Taken in the light most favorable to the government, the evidence shows that Muñoz-Franco and Sánchez-Arán repeatedly authorized disbursements for work that was not completed and concealed relevant information from the Board. As a result of these activities, Caguas continued lending money to Mirandes-owned companies despite their financial instability. This course of conduct constitutes a knowing scheme to defraud Caguas by means of material misrepresentations within the meaning of 18 U.S.C. § 1344. Consequently, we conclude that a reasonable jury could have found beyond a reasonable doubt that Muñoz-Franco and Sánchez-Arán were guilty of bank fraud with respect to the Mirandes loans. 89