Opinion ID: 794067
Heading Depth: 1
Heading Rank: 5

Heading: sufficiency of the evidence

Text: 77 The Defendants contend that there was insufficient evidence to sustain their bank fraud convictions on at least two grounds: first, that there was no evidence that the banks suffered any loss as a result of the scheme to defraud and, second, that there was no evidence that they had any intent to defraud the banks as opposed to the banks' customers, the debtors from whom the cars had been seized. [A] claim of insufficiency of the evidence places a very heavy burden on the appellant. United States v. Dent, 149 F.3d 180, 187 (3d Cir.1998). We must view the evidence in the light most favorable to the government, and will sustain the verdict if any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt. See id. (citations and quotations omitted). After reviewing the record in this matter, we conclude that there was sufficient evidence to sustain the Defendants' convictions.
78 As explained above, § 1344 requires that the fraudulent scheme exposed the bank to some type of loss. E.g., Khorozian, 333 F.3d at 504-05. As an initial matter, we note that the loss or liability that must be caused by the scheme to defraud can either be an actual loss by the bank, or it can be a potential loss, what we termed in Khorozian the risk of loss. Id. Nor is a financial loss the only cognizable injury under the bank fraud statute: we have recognized that exposing a bank to civil liability is sufficient under the bank fraud statute. See id. at 505 n. 5 (noting that the UCC makes a bank liable to a drawer of a check if it pays on a forged indorsement). On the record before us, and viewing the evidence in the light most favorable to the Government, there is sufficient evidence to support the finding that the Defendants' conduct exposed the banks to a risk of loss. 79 In particular, by not returning the full sale price of the automobiles to the banks, the Defendants increased the amount of the deficiencies that the banks had to collect from the banks' customers indebted on the loans. One banker explained what was meant by deficiency: [t]he balance [of the loan to the borrower] less the proceeds of the sale. App. at 2896a. Given that the banks were already dealing with customers who had defaulted on their loan obligations, a jury could readily infer that the Defendants conduct made it more likely that the banks would not be able to collect the full deficiencies. 80 Testimony at trial indicated that it was normal that after the auction of an automobile, a deficiency on the outstanding loan would still remain, and that it was rare for an auction to fetch a price sufficient to cover the entire loan amount. Chris Mulvihill of Midlantic Bank explained: [w]hat would happen is the customer would have a loan. The loan was generally more than the value of the car was for. We would sell the car. Whatever we got for the car, the customer had to pay that difference back. App. at 1113a. Similarly, Louis Credle of the Police and Fire Federal Credit Union testified that [i]f we have to repo the car, then it goes to auction, and then we have a default balance ... [.][T]hat would be normal. App. at 233a. Another banker also noted that on one or two rare occasions[,] a customer had so much equity in the car when we sold it, they ended up getting money back, so that doesn't happen all the time. But it's very rare. App. at 151a. 81 Because it was routine for the auction to yield a price insufficient to cover the amount of the outstanding debt, bank representatives testified that it was critical for the banks to get the best possible price so as to minimize the amount of the deficiency. For instance, one banker testified that his bank sent cars to the auction to minimize our cost on [those] vehicle[s] so that we could attain a high value of return and cut our deficiency. App. at 88a. Another banker testified that, because each repossessed car was the subject of a loan, obtaining the highest price at auction meant that the bank could eliminate the deficiency balance as much as possible and reduce the loss on that loan. App. at 2992a. Similarly, another banker testified that it was important for the bank to get the highest price possible at auction because lower prices increased the amount of the deficiency the bank faced, a balance that could ultimately have to be written off against the banks' reserves for loan losses. App. at 2883a, 2896a-97a; see also App. at 1113a (testimony of bank representative that we wanted to sell the cars for the most amount we could in order to reduce the bank's losses). Once the cars had been auctioned, the banks typically looked to the customer for satisfaction of any deficiency balance. See App. at 2896a (testimony that following the auction, the bank attempts to make arrangements for him [the customer] to pay the deficiency). However, testimony at trial confirmed the obvious proposition that the customers from whom the cars had been repossessed, having failed once to pay their loan obligations, were unlikely to pay additional money towards satisfying any remaining deficiency. As one banker noted, it was important to get the best price because most of the time [the customers] are not paying you. App. at 110a. Viewing the evidence in the light most favorable to the Government, a jury could readily infer that the Defendants' conduct, by increasing the amount of deficiency the banks had to pursue from their riskiest customers, exposed the banks to a risk of loss, i.e., the risk that the banks' customers would not be able to satisfy the greater deficiency balance. 17 82 Not only did the Defendants' conduct expose the banks to the risk of non-payment of a greater deficiency balance, the Defendants' conduct threatened to impair the banks' ability to pursue legal remedies against the deficiency debtors. Article 9 of the UCC requires a secured creditor to dispose of collateral in a commercially reasonable manner. See 13 Pa. Cons. Stat. § 9504 recodified at 13 Pa. Cons.Stat. § 9610; N.J. Stat. Ann. § 12A:9-504 recodified at N.J. Stat. Ann. § 12A:9-610. Indeed, bank representatives testified that selling the automobiles in a commercially reasonable manner was critical to preserving the bank's ability to seek a deficiency judgment in a subsequent proceeding against the automobile's owner. E.g., App. at 1113a (We also wanted to be able to exercise a commercially reasonable sale, so that we could recover the deficiency balance for these cars.). The banks chose to consign the automobiles to Carriage Trade for auction precisely because they sought to comply with the requirements of state law. E.g., App. at 1114a (We felt that [the auction was best] because of the fact that there were more bidders bidding on the car, that we would get a better price. These little lots that were selling the vehicles generally was a handful of people bidding on the cars, but literally hundreds of people attended the auctions. So the idea was to have more action, more people making bids on the car.). 83 However, the Defendants' conduct deprived the banks of the opportunity to dispose of their collateral in a commercially reasonable manner, thereby exposing the banks to a risk that they would be unable to pursue successful deficiency claims against their debtor customers. For instance, one bank representative noted that because all they had in their possession were the false bills of sale, which were evidence that the cars were effectively bought by Carriage Trade for its own inventory at artificially low values, they would have difficulty in court in establishing a claim for a deficiency. See App. at 1125a (We needed this documentation that the auction provided, as I stated earlier, in order to be able to collect the rest of the money that the customer may owe. And certainly if the same auction that the car was auctioned at had purchased the car, that would create a problem if we went to court and tried to get that money back.); App. at 1275a (noting that the false bills of sale in the banks' possession didn't reduce our losses but rather increased our losses because if we had to go to court ourselves, if were suing someone on a deficiency, we'd have to have the bill of sale); App. at 881a (noting that it was important to demonstrate that the car had been sold for the most money because it showed that ... it [the car] went to an auction where they [the customer] know you didn't give the car away, so to speak); App. at 1113a-14a (noting that a commercially reasonable sale was important because we were pursuing the customer for the rest of the money that was owed and we needed to be able to prove that we did the best job we could in selling the car). Thus, the evidence supported a jury finding that the Defendants' conduct exposed the banks to a risk of loss in the sense that the disposition of the collateral could be found to be commercially unreasonable, thereby impairing the banks' ability to collect on any deficiency balances. 84 Despite the evidence of risk of loss to the banks caused by the scheme to defraud, the Defendants insist that the Government was required to introduce specific evidence as to each of the 311 cars that the banks in fact had a deficiency balance remaining following Carriage Trade's remittance of the fraudulent sales price. In particular, the Defendants contend that because there is no evidence that the banks suffered any uncollected deficiencies as to the defaulted borrowers with respect to any of the 311 cars, the jury could not infer whether a bank was harmed by less than the full sale price the Defendants returned. 18 We reject the Defendants' argument because it conflates a showing of actual loss with the risk of loss. Evidence of uncollected deficiencies with respect to each of the 311 cars goes only to whether the banks suffered an actual loss, in fact, on the deficiency balance; to the extent that some banks may have successfully collected the higher deficiency balances from the borrowers does not negate the fact that the Defendants' conduct exposed the banks to a risk of loss, i.e., the threat of non-payment by the bank's riskiest customers as well as the impairment of the banks' legal remedies to collect on the deficiencies. See Khorozian, 333 F.3d at 505 n. 6 (That Hudson United never actually suffered harm is also immaterial to Khorozian's defense. Section 1344 only requires that the bank be placed at risk of loss.); Monostra, 125 F.3d 183 at 188 (As we have noted in the past, the government need not show that the banks actually incurred a loss in order to prove a scheme or artifice to defraud. Exposure to potential loss is sufficient.). The evidence of the loan balances with respect to the 311 cars is irrelevant to showing a risk of loss. The fact that the Defendants' scheme to defraud may have fortuitously failed to impede the banks' ability to collect on some of the deficiencies does not mean that the scheme did not involve a risk of loss to the banks. 19 85 Finally, the Defendants contend that not every bank representative testified with sufficient clarity that his or her particular bank was exposed to any risk of loss as a result of the scheme to defraud. We disagree. Viewing the evidence in the light most favorable to the Government, there was sufficient evidence for a jury to infer that each bank faced a comparable risk of loss from the Defendants' fraudulent scheme. Certainly, there is no requirement that each bank representative had to testify using the magic words risk of loss to support a jury's finding to this effect. The Government's evidence, taken as a whole, was sufficient to support a jury finding of a risk of loss as to each bank. 20 86
87 The Defendants contend that there was insufficient evidence to support a finding that they had an intent to defraud the banks, as opposed to the banks' customers, the debtors on the car loans. We disagree. 88 Testimony at trial permitted the jury to infer that the Defendants knew their conduct was fraudulent and deceptive toward the banks and could cause loss to the banks. For instance, most of the bank representatives testified that they never gave the Defendants permission to purchase the cars for their own inventories, and several bank representatives testified that they affirmatively prohibited Defendants from purchasing the cars for themselves. E.g., App. at 1155 (banker testified that he told the Defendants numerous times that they weren't allowed to purchase the cars). As one banker explained, the reason why the banks did not authorize Carriage Trade to purchase the cars for its own inventory, despite several such requests, was that a direct sale to Carriage Trade did not involve competitive bidding and [w]ithout competitive bidding, you really can't establish a proper deficiency. App. at 1262a. 89 Moreover, evidence at trial indicated that Carriage Trade held itself out as an auction service able to obtain the best prices for the automobiles in the quickest and most efficient manner. To a large extent, the banks relied on Carriage Trade to value the cars for purposes of resale in a manner that would fetch the best price. As one bank representative testified, we had no idea of knowing what the condition [of the cars] was. We never saw the cars. And ... we never went to the auction so we had no idea what the cars looked like. So we put our trust in them informing us of what the condition was, which was pretty much how they based the value of the car. App. at 209a. Another banker testified: I was pretty much a layperson. What I know is that these people knew more than me. I was relying heavily on them. They were in the business. They were the professionals. They were telling me they were getting the best prices for the car. App. at 1194a-95a; see also App. at 2821a (in opening statement, Government argued: [i]t was the defendants who held themselves out as being experts on putting value on these cars so that they could be sold for the most money. Then the bank could put that money toward the outstanding loan.). From such evidence, a jury could find that the Defendants knew they were under an obligation to obtain the highest price for the cars and that failure to do so would violate their agreements with the banks. Moreover, the Defendants' argument that they lacked an intent to defraud the banks based on the fact that they returned to the banks the minimum floor price set by the banks for each of the 311 cars misses the point. The banks clearly had an expectation, as the Defendants must have known, that if a car was sold above the minimum floor, the banks, not Carriage Trade, should receive the difference. 90 The Defendants, however, contend that the Government argued to the jury that their fraudulent scheme injured not only the banks but also the banks' customers, the debtors on the 311 cars. By arguing that the debtors were the victims of the scheme, the Defendants argue that the Government violated Thomas, which requires that the banks be the intended victim of the bank fraud, as opposed to some third party. However, we have already explained earlier in Part III.A why Thomas 's intent to victimize language is inapplicable to this case, as Khorozian makes clear that no intent to victimize is required where the bank is the direct target of the deceptive conduct. In any event, it is well-established that a bank need not be the sole or immediate victim of the fraud. See Moran, 312 F.3d at 489 (citation omitted), cited in Khorozian, 333 F.3d at 505; United States v. McNeil, 320 F.3d 1034, 1037 (9th Cir.2003); Brandon, 298 F.3d at 311 (citation omitted); Crisci, 273 F.3d at 240. So long as the defendant had an intent to defraud the bank, and the bank suffered loss or risk of loss as a result of the deceptive conduct, § 1344 is implicated even if a third party is also injured as a result of the fraudulent conduct. See also McNeil, 320 F.3d at 1037 (noting that defendant's deception was plainly directed at First Interstate Bank as well as at the IRS, and the scheme to deceive the bank was essential to McNeill's overall plan. Thus, the bank was not merely an unwitting instrumentality of a scheme to defraud the IRS, it was also a victim of [defendant's] deception.); Crisci, 273 F.3d at 240 (holding that defendant is not relieved of criminal liability for bank fraud because his primary victim was the employer from which he embezzled funds by submitting fraudulent check requests). Even if the banks' customers were harmed as a result of the fraudulent scheme, there is still ample evidence that the Defendants' had an intent to defraud the banks within the meaning of Khorozian. 21