Opinion ID: 665997
Heading Depth: 1
Heading Rank: 1

Heading: sufficiency of the evidence

Text: 20 Henderson raises three specific issues concerning the sufficiency of the evidence presented at his trial. First, Henderson questions whether an interest based on an unenforceable oral contract can support a conviction for bank fraud, misapplication, or false statements. Second, Henderson argues that a bank officer's failure to disclose a personal interest in a loan cannot constitute bank fraud. Finally, Henderson asks whether a loan to a credit-worthy borrower constitutes misapplication of bank funds because the loan officer has an undisclosed interest in the proceeds of the loan. 6
21 Henderson's statute of frauds argument proceeds in two steps. First, Henderson argues, the statute of frauds makes the oral agreement with Dr. Howard unenforceable. Henderson then contends that there is no obligation to disclose unenforceable contracts. This argument misconstrues both the statute of frauds and the substantive federal criminal provisions involved in this case. 22 [T]o prevent fraud by those who would misrepresent verbal promises, the statute [of frauds] require[s] written proof in certain cases before performance can be enforced in the courts. Clements v. Withers, 437 S.W.2d 818, 821 (Tex.1969) (Reavley, J.). Henderson contends that the statute of frauds would slam the door shut on Dr. Howard had the doctor tried to enforce the contract. However, that is not the question. The question is whether or not Henderson stood to benefit from the loans to Dr. Howard. 23 The statute of frauds does not shield Henderson from federal banking regulations. If Henderson hoped to profit on the Jones Road property, he was interested. It doesn't matter whether Henderson was a full partner or just held an option on the property. Either way, Henderson stood to gain as a result of FB & T's decision to extend credit to Dr. Howard. Henderson breached his fiduciary duty as a member of the FB & T Board by failing to disclose his interest. The only way the statute of frauds would change this analysis is if Dr. Howard had already rejected the agreement when the loans were made. Henderson has made no such claim. 24 The statute of frauds may not be used to facilitate the execution of a fraud. Henderson's covert agreement with Dr. Howard was oral to prevent its detection. To use the statute of frauds to invalidate this agreement would insulate Henderson's fraudulent activities. The Texas Supreme Court has held that such conduct cannot be protected by invoking the statute of frauds. Nagle v. Nagle, 633 S.W.2d 796, 799 (Tex.1982) (citing Hooks v. Bridgewater, 111 Tex. 122, 229 S.W. 1114, 1116 (1921)). 25 Henderson argues that an interest in the subject of a bank transaction must be a legally enforceable interest to warrant disclosure. We disagree. It is enough that Henderson intentionally hid his interest in the Jones Road property. See, e.g., United States v. Kington, 875 F.2d 1091, 1100-01 (5th Cir.1989) (failure to disclose that a loan was made to purchase bank stock from the loan officer is fraudulent and supports a conviction under 18 U.S.C. Sec. 656 (misapplication of bank funds)).
26 Henderson's second sufficiency argument focuses on the bank fraud count for the 1985 FB & T loan to Dr. Howard. Henderson contends that this case involves nothing more than a breach of fiduciary duty, and therefore, does not constitute a scheme or artifice to defraud under 18 U.S.C. Sec. 1344. We disagree. 27 In the first place, this case involves more than a breach of fiduciary duty. Henderson's activities violated federal banking regulations and exposed FB & T to civil penalties. Further, Henderson did more than sit quietly by while the FB & T Board approved a loan in which he was interested. Henderson had an obligation to avoid participating in any bank transactions that affected him personally. Henderson was also obliged to inform the Board of Directors of his interest--however he defined it--in the Jones Road real estate. Finally, Henderson had a duty to abstain from the Board vote on the Jones Road loans. 28 There was also evidence that Henderson took active steps to keep his agreement with Dr. Howard concealed. Howard testified that Henderson wanted their agreement oral so that no one could trace the loan back to Henderson. Henderson accepted Howard's financial statements without question, even though those statements clearly indicated that Howard had a silent partner paying half the loan costs. Finally, there was evidence that Henderson created bogus letters to characterize his interest in the Jones Road property as an option. There was sufficient evidence to allow a rational juror to conclude, beyond a reasonable doubt, that Henderson's actions constituted a scheme or artifice to defraud FB & T. 7
29 Henderson's final sufficiency attack goes to count two: misapplication of bank funds in violation of 18 U.S.C. Sec. 656. This count is based on Henderson's role in securing the 1985 FB & T loan for Dr. Howard. Henderson argues that because Dr. Howard was a credit worthy borrower, there can be no violation of section 656. Again, we disagree. 30 In United States v. Saks, 964 F.2d 1514, 1519 (5th Cir.1992), this court held that the financial well being of the borrower would not prevent a conviction for bank fraud under 18 U.S.C. Sec. 1344. In support of this conclusion, the court approvingly cited cases from other circuits, including United States v. Walker, 871 F.2d 1298 (6th Cir.1989). Walker involved a conviction for misapplying bank funds. The following excerpt is particularly appropriate: 31 In this case, evidence of Hastings' and Hollaway's credit worthiness and their understanding of the obligation to repay was irrelevant, as the trial court held. Mr. Walker arranged these loans for his own benefit, concealing his interest in them from other bank officials. With these facts, the government adequately established Walker's intent to defraud the bank. The fact that the loans were otherwise good loans, and that the named borrowers understood their obligation to repay the loans if Walker defaulted on them, is irrelevant because Walker personally benefited from the transactions at issue. 32 Walker, 871 F.2d at 1307. We adopt the reasoning of the Sixth Circuit and hold that the credit worthiness of Dr. Howard was irrelevant to the misapplication of bank funds charge against Henderson.