Opinion ID: 664075
Heading Depth: 2
Heading Rank: 7

Heading: Sufficiency of Evidence Points

Text: 61 Appellants challenge the sufficiency of the evidence to support their convictions. In assessing the sufficiency of the evidence, we determine whether, viewing the evidence and the inferences that may be drawn therefrom, a rational jury could have found the essential elements of the offense beyond a reasonable doubt. United States v. Pruneda-Gonzalez, 953 F.2d 190, 193 (5th Cir.), cert. denied, --- U.S. ----, 112 S.Ct. 2952, 119 L.Ed.2d 575 (1992). We review the evidence, whether direct or circumstantial, and all reasonable inferences drawn therefrom in the light most favorable to the verdict. United States v. Salazar, 958 F.2d 1285, 1290-91 (5th Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 185, 121 L.Ed.2d 129 (1992). [I]t is not necessary that the evidence exclude every reasonable hypothesis of innocence or be wholly inconsistent with every conclusion except that of guilt, provided that a reasonable trier of fact could find that the evidence established guilt beyond a reasonable doubt. United States v. Stephens, 964 F.2d 424, 427 (5th Cir.1992).
62 Formann was convicted of conspiracy under Count 1, seventeen counts of submitting false appraisals under 18 U.S.C. Sec. 1014, two counts of wire fraud under 18 U.S.C. Sec. 1343, and one count of misapplying funds of a federally insured institution under 18 U.S.C. Sec. 657. He claims insufficient evidence as to all of these counts. 63 To establish guilt for conspiracy, the government must prove beyond a reasonable doubt that two or more people agreed to pursue an unlawful objective together, that the defendant voluntarily agreed to join the conspiracy, and that one of the members of the conspiracy performed an overt act to further the conspiracy. United States v. Parekh, 926 F.2d 402, 406 (5th Cir.1991). Each element may be inferred from circumstantial evidence. United States v. Cardenas, 9 F.3d 1139, 1157 (5th Cir.1993); United States v. Shivley, 927 F.2d 804, 809 (5th Cir.), cert. denied, --- U.S. ----, 111 S.Ct. 2806, 115 L.Ed.2d 979 (1991). 64 In rendering its verdict on Count 1, the jury found that of the four defendants only Formann conspired to overvalue land under Sec. 1014. 34 As explained above in the discussion of the variance issue, the jury's finding that the three other appellants had not conspired with Formann to overvalue land does not mean that Formann's conspiracy conviction cannot stand. 35 We find sufficient evidence that Formann was part of the overall conspiracy alleged in Count 1 and that he conspired with Paul Tannehill, Larry Hutson or others to inflate the appraisals. Formann was a former examiner for the Federal Home Loan Bank Board and had at one time served as the managing officer of a Texas savings and loan institution. The jury could reasonably infer that he understood the role his appraisals played in the I-30 loans and land flips. Evidence was presented that Formann had numerous dealings with Faulkner and Sinclair, and that appraisals were prepared on the I-30 properties at each stage of the land flips. Parties who knowingly participate with core conspirators to achieve a common goal may be members of an overall conspiracy.... The members of a conspiracy which functions through a division of labor need not have an awareness of the existence of the other members, or be privy to the details of each aspect of the conspiracy. United States v. Richerson, 833 F.2d 1147, 1154 (5th Cir.1987). Tannehill was Formann's boss during part of 1982 and 1983. He signed appraisals prepared by Formann during this period. Formann and Tannehill had a joint interest in one I-30 property and succeeded in reselling it at a profit. The two received a fixed percentage of each appraisal fee paid. While working with Tannehill Formann could not sign appraisals since he was not an MAI appraiser. At one point in 1983 one of Tannehill's employees suggested that the company cease preparing appraisals on the I-30 properties because the workload had become too great. Tannehill's response was, I know it, Dolly, but I am in too deep and I can't get out, I have to unload my condos first. The jury could reasonably infer that they conspired to inflate appraisals. Formann claims that there was no evidence that any alleged coconspirator ever asked him to inflate any requested appraisal. However, [a] conspiracy agreement may be tacit, and [n]o evidence of overt conduct is required. United States v. Hernandez-Palacios, 838 F.2d 1346, 1348 (5th Cir.1988). Larry Hutson, another appraiser, testified that there was no need to tell Toler and Faulkner he was falsifying appraisals, because [t]hey knew what the values were. Likewise, he testified that when Ray Evans of Empire would request an appraisal, he would ask me to appraise a particular tract and he would usually tell me what his loan amount was and I would do some calculations and come up with an appraisal price to cover the loan amount.... He knew what the sales price was, he knew what the loan amount was. I mean, I didn't say this is a false appraisal. He was smart enough to know that. 65 Formann further claims that the conspiracy count and the individual substantive counts on which he was convicted for overvaluing land under Sec. 1014 were not supported by sufficient evidence that land was overvalued and that he intentionally overvalued land. To prove a violation of Sec. 1014 the government must show that the defendant knowingly made a false statement as to a material fact to a financial institution for the purpose of influencing the financial institution's decision. United States v. Trice, 823 F.2d 80, 85 (5th Cir.1987). Intent can be inferred from the fact that the defendant made statements with the capacity to influence the institution's decision. United States v. Stephens, 779 F.2d 232, 237 (5th Cir.1985). We find sufficient evidence that Formann intentionally overvalued the properties in his appraisals. 36 The evidence established that Faulkner and Toler would simply decide what they wanted for their property, and that appraisals on these initial sales and later sales were always supported by appraisals valuing the properties at or above the sales price. When asked how the appraisals were obtained, Sinclair testified that Faulkner and Toler arranged for the appraisals, and that most came from Formann. Sinclair testified that Faulkner originally introduced Sinclair to Formann, and that Faulkner described Formann as his appraiser. Expert witnesses testified that the appraisals were seriously flawed, inconsistent, and otherwise highly overvalued. Expert testimony was offered that the appraised land values were so high that the market would not support condominiums built on them, and that mere incompetence could not explain the inconsistent adjustments in the appraisals and nonconformities with appraisal theory, since they always erred in the same direction--above the actual selling price. Other witnesses with knowledge of land values in the area testified that they did not believe the land could be worth the appraised values. Sinclair testified that on one group of appraisals, Formann told him he had been given a value to reach by Faulkner and Toler. Hughes testified that on one appraisal Faulkner and Toler were informed that Formann was not going to reach a value needed for a transaction, and that Faulkner had a little talk with Mr. Formann and we received the appraisal. Larry Hutson testified that although he sometimes served as a review appraiser for Formann, he in fact did no review at all and would simply sign his name to the appraisals. At one point Sinclair testified that he did not remember discussing a particular appraisal with Formann other than the fact that we told [Formann] what we had to have per square foot, and the appraisals were always placed in there higher than the selling price. On another occasion Sinclair, at Faulkner's suggestion, paid Formann an up-front bonus of $30,000 to prepare appraisals on two properties. He received other smaller bonuses from Sinclair as well. Formann complains that the experts did not personally prepare appraisals on the various properties. On these facts, however, we do not agree that the preparation of such appraisals was essential to the government's proof. 66 Formann also asserts that appraisals on land that has not yet sold are necessarily mere opinions, cannot be characterized as true or false, and do not fall within the purview of Sec. 1014. He cites Williams v. United States, 458 U.S. 279, 102 S.Ct. 3088, 73 L.Ed.2d 767 (1982), which held that an alleged check-kiting scheme did not fall within Sec. 1014. The Court reasoned: 67 Although petitioner deposited several checks that were not supported by sufficient funds, that course of conduct did not involve the making of a false statement, for a simple reason: technically speaking, a check is not a factual assertion at all, and therefore cannot be characterized as true or false.... Each check did not, in terms, make any representation as to the state of petitioner's bank balance. 68 Id. at 284-85, 102 S.Ct. at 3091. We find Williams distinguishable. An appraisal, unlike a check, contains statements as to the fair market value of property, and Sec. 1014 expressly reaches one who willfully overvalues land. In Williams, the Court was faced with a situation where the statute does not explicitly reach the conduct in question.... Id. at 286, 102 S.Ct. at 3092. 69 Formann also complains that he was convicted on several counts relating to appraisals signed by Paul Tannehill. These appraisals indicated that Formann assisted in their preparation. Evidence was presented that while Formann worked for Tannehill, Formann was assigned to do the I-30 appraisals. Tannehill would sign all of the appraisals Formann worked up, because that was the practice at that office, and because industry practice was to have appraisals signed by an MIA appraiser, the MIA designation indicating membership in the American Institute of Real Estate Appraisals. At the time Formann was not an MIA appraiser. On all of these counts we note that Formann was indicted under Sec. 1014, but was also indicted under 18 U.S.C. Sec. 2 for aiding and abetting Tannehill. A defendant may be convicted for aiding and abetting the commission of a crime if he was  'associated with a criminal venture, participated in the venture, and sought by his action to make the venture succeed.'  United States v. Parekh, 926 F.2d 402, 406 (5th Cir.1991) (quoting United States v. Holcomb, 797 F.2d 1320, 1328 (5th Cir.1986)). As to the appraisals signed by Tannehill, we find sufficient evidence to support all of the convictions for overvaluing land under Sec. 1014 or for aiding and abetting Tannehill to commit these offenses. Tannehill's signature on these appraisals may go to the weight of the evidence, but does not in our view render the evidence insufficient on these counts. 70 Count 13 involved an appraisal for a property known as On The Point. Neither Formann nor Tannehill signed this appraisal; however, Tannehill had an ownership interest in this property, and Formann had an undisclosed profits interest and received one-third of the profit made on the resale of the property. Larry Hutson testified that he prepared an overvalued appraisal on this property at the request of Tannehill. Tannehill explained to him that another appraiser must sign off on this appraisal since Tannehill could not appraise property that he owned. Hutson met with Formann and Tannehill regarding the appraisal, and was told by Tannehill the dollar figure that was needed in the appraisal. Formann had prepared a preliminary handwritten appraisal report. Tannehill and Formann supplied Hutson with backup documents as well to accompany the report. Formann made a profit of approximately $226,000 when the property sold. We find this evidence sufficient to uphold Formann's conviction on this count. 71 Formann claims insufficient evidence to sustain his wire-fraud convictions under Counts 10 and 48. He recognizes that under the Pinkerton rule [a] party to a conspiracy may be held responsible for a substantive offense committed by a coconspirator in furtherance of the conspiracy, even if that party does not participate in or have any knowledge of the substantive offense, United States v. Garcia, 917 F.2d 1370, 1377 (5th Cir.1990), but argues that these convictions should be overturned since his conspiracy conviction cannot stand. We have concluded, however, that the conspiracy conviction should stand. 72 Formann also claims insufficient evidence to support his conviction under Count 12, for aiding and abetting Blain's misapplication of funds under 18 U.S.C. Sec. 657. Establishing an offense under Sec. 657 requires the government to prove that (1) the defendant was an officer, agent or employee of, or connected in some way with, a federally insured savings and loan association, (2) he willfully misapplied funds of the association, and (3) he acted with intent to injure or defraud the association. United States v. Hopkins, 916 F.2d 207, 215 (5th Cir.1990). Under this statute, one way that the Government may prove willful misapplication of funds is by showing that a person has deliberately converted bank funds to his own use or to the use of a third person, or that the person has used funds in violation of the law. Id. This count concerns a loan made by Blain to finance the sale of On The Point. We find evidence from which a rational jury could conclude that (1) Formann had an undisclosed profits interest in this property, (2) he assisted in the preparation of a false appraisal on it, (3) Tannehill was unable to sell condominiums on this project and wanted out of it (4) Faulkner and Tannehill agreed on a sales price that would assure Formann and Tannehill each received over $200,000 when the property sold, (5) Blain had Empire make the loan for the sale, (6) Faulkner prevailed upon Sinclair, Hughes and Cansler to purchase seven condominiums each (7) Empire relied on Formann and Tannehill to supply appraisals, and (8) the sale was just one more of a series of inflated land sales which furthered the conspiracy by enriching at least two of the conspirators and perpetuating the appearance of a land boom where properties were rapidly selling at ever-increasing prices. We find this evidence sufficient to support Formann's conviction as a substantive offense committed in furtherance of the conspiracy, and under a theory of aiding and abetting.
73 Faulkner claims insufficient evidence to support his conviction under Count 37, a wire fraud count based on a wire transfer. The wire transfer for approximately $6.5 million was from Ozark Service Corporation (Ozark), a subsidiary of First State Building & Loan Association of Mountain Home, Arkansas (First State), another lender on I-30 projects. Ozark was similar to Empire's subsidiary, Statewide, in that both invested directly in the I-30 projects. The offense of wire fraud requires proof of a scheme to defraud and the use of interstate wire communications in furtherance of the scheme. United States v. Shively, 927 F.2d 804, 813 (5th Cir.), cert. denied, --- U.S. ----, 111 S.Ct. 2806, 115 L.Ed.2d 979 (1991). The indictment alleged that the Count 1 conspiracy was the scheme to defraud. As explained above, we have concluded that the conviction of all appellants on Count 1 should stand. Hence, under general conspiracy law their culpability extends to all substantive offenses committed in furtherance of that conspiracy. United States v. Berkowitz, 662 F.2d 1127, 1140 (5th Cir.1981). Further, under the wire fraud statute in particular, [o]nce membership in a scheme to defraud is established, a knowing participant is liable for any wire communication which subsequently takes place or which previously took place in connection with the scheme. Shively, 927 F.2d at 813 (quoting United States v. Westbo, 746 F.2d 1022, 1025 (5th Cir.1984)). We find sufficient evidence that the wire transfer was in furtherance of the overall conspiracy described in Count 1. Evidence was submitted to support the following scenario. The wire transfer was connected with two projects known as Bahama Glen and The Cabanas. Ozark owned an interest in the Cabanas, a project built on property earlier sold by Faulkner and Toler. Empire had funded the Ozark purchase. The Cabana units were not selling and Ozark wanted to unload them. Tommy Nelson of First State agreed to fund the purchase of Bahama Glen in exchange for Faulkner's and Toler's agreement to help Ozark out of The Cabanas. Like Blain and Jensen, Nelson was richly rewarded for serving as a lender on the I-30 properties. On one occasion Faulkner and Sinclair arranged a complicated land flip whereby one Sinclair company sold property to Nelson and repurchased it from him in the course of a single closing, netting Nelson $1 million. Toler found buyers for the Cabanas and arranged for Empire to finance the sale. The buyers include Sinclair, Kenneth Cansler, Wailen York, and Ernie Hughes. Ozark earned a substantial profit on the sale. Ozark then funded the sale of Bahama Glen. Faulkner and Toler each made $1.4 million on the sale. Hughes found investors to purchase Bahama Glen. The money to close the Bahama Glen sale was the subject of the wire transfer alleged in count 37. We agree with the government that the jury could conclude that [t]he entire transaction concocted by Faulkner, Toler, Blain, and Nelson was designed to enable the co-conspirators to purchase yet another piece of inflated property, thereby enriching themselves through the funding of another loan, and to prevent Nelson's defaulting on the Cabanas, which might have alerted the bank regulators to the scheme and frightened off potential future investors. 74 A similar analysis applies to the remaining insufficiency claims. Faulkner claims insufficient evidence with respect to Counts 38 and 43. These counts assert violations of 18 U.S.C. Sec. 1006 by Blain, and aiding and abetting by Faulkner and Toler. They concern payments Blain received in connection with Empire loans on projects known as Spring Garden and Cheshire Creek. A violation of Sec. 1006 may be established by proof that (1) the defendant was an officer, agent, or employee of a federally insured savings and loan association, (2) that he knowingly and willfully participated, shared, or received, directly or indirectly, benefits through any transaction or loan of the bank, and (3) that he acted unlawfully and intended to defraud or deceive the institution or United States. Id. It makes no difference whether the objective of the fraud was to obtain an advantage or to cause the principal to suffer a loss. United States v. Munna, 871 F.2d 515, 517 (5th Cir.1989), cert. denied, 493 U.S. 1059, 110 S.Ct. 871, 107 L.Ed.2d 955 (1991). Again, the evidence is sufficient to establish that Blain violated the statute and that this offense was in furtherance of the conspiracy. Faulkner discussed with Sinclair and Blain his interest in purchasing a larger Lear jet through a land transaction. He indicated that if Blain would finance the transaction Blain would receive his other Lear jet and a condominium. Blain loaned Sinclair $1.8 million to purchase Spring Glen. When the land was resold, Blain received the condominium, the jet, and approximately $3 million, which was received through a trustee. Such rich rewards for Blain were in furtherance of the conspiracy, since Blain controlled Empire and made all of Empire's loan decisions. Similar evidence was presented regarding Cheshire Creek. A Toler company contracted to buy the property. Empire loaned approximately $2 million for the initial purchase of this property. It was subdivided and resold by Ernie Hughes through a second, much larger loan from First Savings and Loan Association of Burkburnett. Hughes testified that the Cheshire Creek transaction was arranged by Faulkner and Toler as a means of benefitting Blain. Faulkner and Toler each made over $3 million from the resale. Blain's daughters received more than $400,000 from the sale. Blain also directed payments to three other Empire directors intended to enable them to purchase Blain's stock in Empire and allow him to retire to Colorado. By it terms Sec. 1006 does not require direct payment to the defendant, and covers a defendant who participates or shares in or receives directly or indirectly profits or benefits through any transaction or loan by a savings and loan. Again, this evidence is sufficient to establish that Blain violated Sec. 1006, and that this violation was in furtherance on the conspiracy. 75 Toler complains of the wire fraud convictions related to brokered deposits. The indictment alleged 24 counts of wire fraud for 24 separate occasions where brokered deposits were wired to Lancaster, Empire and Bell. Six of these counts were submitted to the jury, the others having been dismissed on the government's motion. Blain, Toler and Faulkner were all convicted on all six counts. Evidence was presented that Faulkner, Blain and Toler were all aware of the use of brokered deposits and that such deposits were essential to supplying the huge growth in deposits needed by the institutions to fund the I-30 loans. Evidence was also offered that Faulkner and Toler paid the broker's fee on some of these deposits, that on occasion Faulkner would talk to one of the brokers, and on one such occasion had thanked him for the money we were sending and keep up the good job and etc., etc. As to counts 65 and 66, evidence was offered that the Bell's brokered deposits were used on a specific Faulkner project known as Faulkner Meadows II, one of the projects on which inflated appraisals were prepared and which was otherwise a part of the alleged conspiracy. In interpreting the similar mail fraud statute, we have held that when an individual does an act with the knowledge that the use of the mails will follow in the ordinary course of business, or when such use can reasonably be foreseen, even though not actually intended, then he/she 'causes' the mails to be used under that statute. United States v. Shaid, 730 F.2d 225, 229 (5th Cir.), cert. denied, 469 U.S. 844, 105 S.Ct. 151, 83 L.Ed.2d 89 (1984). See also United States v. Bruno, 809 F.2d 1097, 1104 (5th Cir.) (cases construing mail fraud statute apply to wire fraud statute as well), cert. denied, 481 U.S. 1057, 107 S.Ct. 2198, 95 L.Ed.2d 853 (1987). We find the evidence sufficient to affirm the convictions on these counts. 76 As to the four other counts, however, no evidence was offered that the brokered deposits described were actually used on one of the I-30 projects or were directly linked in any way to the conspiracy. An essential element of wire fraud is the use of interstate communications in furtherance of the scheme to defraud. Id. We think the general use of brokered deposits by Empire and Lancaster to fund the I-30 loans and, for all we know, other totally unrelated loans, is simply too little evidence to sustain these convictions. Accordingly, we vacate the convictions of Blain, Toler, and Faulkner or Counts 52, 53, 60, and 61. 37