Opinion ID: 578193
Heading Depth: 3
Heading Rank: 2

Heading: Failure to List the $10,000 Loan

Text: 57 Count 2 also alleges that Haddock failed to list on his personal financial statement a $10,000 loan that he had received from First Finance. At trial, Haddock testified that he had simply forgotten to list the outstanding loan. On appeal, Haddock contends that his failure to list the $10,000 loan was not material. To support this contention, Haddock points to the trial testimony of Gerald Lauber, President of Kaw Valley State Bank. Lauber testified that he might view the $10,000 loan to be a wash because the $10,000 loan to Haddock was from First Finance, a corporation of which Haddock owned 100% of the stock. Lauber also testified that inclusion of the $10,000 loan in the financial statement would not have had a significant bearing on the decision to make the loan. We also note that, at another point in the cross-examination by defendant's counsel, Lauber testified that if Mr. Haddock had an obligation to another entity, it should have been on the financial statement. 58 In the context of other false statements statutes, we have held that materiality is a question of law to be determined by the court. United States v. Daily, 921 F.2d 994, 1004 (10th Cir.1990) (18 U.S.C. § 1001, false statements as to matters within jurisdiction of a federal agency), cert. denied, --- U.S. ----, 112 S.Ct. 405, 116 L.Ed.2d 354 (1991); United States v. Vap, 852 F.2d 1249, 1253-54 (10th Cir.1988) (18 U.S.C. § 1623, perjury before a grand jury); United States v. Masters, 484 F.2d 1251, 1254 (10th Cir.1973) (18 U.S.C. § 1621, general perjury statute). Likewise, we hold that materiality under 18 U.S.C. § 1014 is a question of law. See United States v. Shriver, 842 F.2d 968, 976-77 (7th Cir.1988); United States v. Ryan, 828 F.2d 1010, 1018 (3d Cir.1987). 59 Also in the context of another false statements statute, [w]e have defined materiality as a natural tendency to influence, or the capability of influencing a decision maker. Daily, 921 F.2d at 1003 n. 9. Actual reliance by Kaw Valley State Bank on defendant's omission of the $10,000 loan need not be shown to meet the materiality requirement under § 1014; instead, we must only determine whether omission of the loan had the capacity to influence the bank's decision. See Shriver, 842 F.2d at 976 n. 11 (reliance and materiality are not the same thing § 1014; capacity to influence is the correct test); Theron v. United States Marshal, 832 F.2d 492, 497 (9th Cir.1987) (A statement concerns a material fact when the statement has the capacity to influence the lending decision.), cert. denied, 486 U.S. 1059, 108 S.Ct. 2830, 100 L.Ed.2d 930 (1988); United States v. McGee, 831 F.2d 670, 671 (6th Cir.1987) (statement is material if it has the capacity to influence a reasonable lender); Ryan, 828 F.2d at 1018 (it is enough that the statement is of a type that could disturb the balance of facts that would otherwise be available to the bank). 60 A loan in the amount of $10,000 is significant information that a bank normally would expect to evaluate with other financial information provided by a loan applicant. In addition, we note that we do not evaluate the materiality of the $10,000 loan from First Finance to Haddock in a vacuum; instead, we look at the materiality of the loan in the context of other relevant evidence. The government presented evidence, and the jury could have found, that Haddock also failed to list a $350,000 line of credit extended by First Finance to Haddock. Because the loan was made to First Finance and because the bank relied on the strength of Haddock's personal financial position, the frequent transfer of funds from First Finance to Haddock certainly was relevant to a complete evaluation of First Finance's creditworthiness by the bank. Under these circumstances, existence of the $10,000 loan from First Finance to Haddock had the capacity to influence the bank by disturb[ing] the balance of facts that would otherwise be available to the bank. Ryan, 828 F.2d at 1018. 14 We conclude that the $10,000 loan is legally material under § 1014. 61 Haddock also argues that the evidence related to omission of the $10,000 loan was insufficient to support the guilty verdict on Count 2. Failure to list outstanding loans on a form financial statement or loan application constitutes a false statement under § 1014. Robinson v. United States, 345 F.2d 1007, 1009-10 (10th Cir.), cert. denied, 382 U.S. 839, 86 S.Ct. 87, 15 L.Ed.2d 81 (1965); see also Theron, 832 F.2d at 497; United States v. Stephens, 779 F.2d 232, 237 (5th Cir.1985). Having reviewed the record thoroughly and viewing the evidence in the light most favorable to the government, we conclude that a reasonable jury could have found beyond a reasonable doubt that Haddock knowingly omitted the $10,000 loan from his financial statement with the purpose of influencing the bank's actions. Count 3 62 Count 3 charges Haddock with executing a scheme to defraud the Bank of White City in violation of 18 U.S.C. § 1344. The count alleges that the Bank of White City gave Haddock (on behalf of First Finance) a $250,000 cashier's check in relation to the purchase of the Easton loan package. Undisputed evidence shows that a notation on the cashier's check stated that the money was a downpayment on exclusive purchase rights. The count further alleges that instead of applying the funds to the purchase of the Easton loans, Haddock put $200,848.81 into the Herington Bancshares checking account on April 15, 1987 to cover a portion of the overdraft that is the basis of the charges in Count 1 and that Haddock used the remaining approximately $50,000 to fund the purchase of a personal residence. The parties do not dispute that Haddock eventually repaid $250,000 to the Bank of White City. 63 To prove a violation of § 1344, the government must prove that the defendant knowingly executed, or attempted to execute, a scheme or artifice either to defraud a financial institution or to obtain moneys or other property owned by a financial institution by means of false or fraudulent pretenses, representations, or promises. 18 U.S.C. § 1344. On appeal, Haddock argues that the evidence is conflicting as to whether he agreed to apply the $250,000 toward the purchase of the Easton loan package. Haddock also contends that the Bank of White City put no stipulation on the use of that $250,000 payment and that he was entitled to assume that he could use the money in any way he pleased. 64 At trial, the government introduced evidence that the $250,000 cashier's check contained the notation, for the down payment on exclusive purchase rights. In addition, the government introduced a commitment letter that reads in part as follows:The Bank of White City agrees to make a downpayment of $250,000 to First Finance, Inc. this April 3, 1987 for the exclusive rights to purchase all or any part of a group of loans being purchased from FDIC from the failed Easton State Bank. Any loans purchased by The Bank of White City will first be offset against these downpayment dollars. Any remaining downpayment dollars after 90 days will be totally refunded. 65 (Emphasis added.) Patricia Fells, an officer at the Bank of White City, testified that she understood from the notation on the check and the language in the commitment letter that Haddock was to use the $250,000 to purchase loans from the failed Easton State Bank. The government then introduced evidence, based on the investigations of FDIC examiner Byron Lange and his assistants, that Haddock used the $250,000 to fund a capital injection into the Bank of Herington and to partially fund the purchase of a personal residence. Despite Haddock's contentions that there was evidence to the contrary, we conclude that the proof introduced by the government was sufficient such that a reasonable jury could have found that Haddock defrauded the bank by applying the $250,000 in a way that was contrary to an agreement between the bank and First Finance, thereby violating 18 U.S.C. § 1344. Count 5 66 Count 5 charges Haddock with executing a scheme or artifice to obtain the moneys or funds of the Bank of White City by means of false or fraudulent pretenses, representations or promises in violation of 18 U.S.C. § 1344. The count alleges that Haddock executed this scheme by representing that the Bank of White City would have exclusive rights to purchase loans from the failed Easton State Bank. Undisputed evidence at trial shows that the Bank of White City gave Haddock (representing First Finance) $350,000 as another downpayment for exclusive rights to purchase the Easton loans. 67 With regard to Count 5, Haddock likewise argues that the arrangement with the Bank of White City did not prohibit First Finance from using the $350,000 in any way it chose. The government introduced evidence that a commitment letter accompanied the $350,000 cashier's check and that the letter contained language identical to language quoted above in relation to the letter accompanying the $250,000 downpayment. The government also introduced evidence that, prior to advancement of the $350,000, Haddock (and First Finance) had already pledged all of the Easton loans as collateral for a $711,000 loan from Kaw Valley State Bank. Moreover, Patricia Fells testified that she and others from the Bank of White City understood that the Bank of White City would have exclusive rights to the Easton loans. She also testified that the Bank of White City would not have given the $350,000 to First Finance had she and others at the bank been informed that the loans were already pledged as collateral elsewhere. Based on this evidence, we conclude that a reasonable jury could have concluded that, in order to receive the $350,000, Haddock defrauded the Bank of White City by representing that the bank would have exclusive rights to the Easton loans. Count 9 68 Count 9 likewise charges Haddock with executing a scheme or artifice to obtain the moneys or funds of the Bank of White City by means of false or fraudulent pretenses, representations or promises in violation of 18 U.S.C. § 1344. The count alleges that although the actual purchase price for the Galena loan package was $70,766.45, Haddock represented to the Bank of White City that the purchase price was $95,766.45. 69 At trial, Dave Farres, president of the Bank of White City, testified that he understood that the purchase price of the Galena loan package was $95,766.45. The government introduced into evidence an asset agreement between the Bank of White City and First Finance that reflected the $95,766.45 purchase price. The government also introduced into evidence an asset agreement from the FDIC files that shows the actual purchase price to be $70,766.45; testimony of FDIC examiner Byron Lange corroborated this purchase price. 70 Farres also testified that the Bank of White City issued both a $50,000 check and a $70,766.45 check (a total of $120,766.45) to First Finance so that First Finance could purchase the Galena loans. Farres testified that the bank agreed that the $25,000 difference between the $120,766.45 advanced by the bank and the $95,766.45 purchase price--as represented by Haddock--was to be a servicing fee to First Finance. Based on this evidence, we conclude that a reasonable jury could have concluded beyond a reasonable doubt that Haddock defrauded the Bank of White City by representing the purchase price to be $25,000 more than First Finance actually paid for the Galena loans.