Opinion ID: 675769
Heading Depth: 2
Heading Rank: 1

Heading: Relevant Conduct--Dismissed Counts

Text: 18 Sheahan pleaded guilty to count X of the indictment, which charged him with writing three insufficient funds checks drawn on Mark Twain Bank that Vogt accepted and posted to reduce the balance on the Avanti account at Mercantile Bank. In determining the amount of loss, the district court also looked to the amount of loss that could be attributed to the checks written on the closed accounts, the loan agreements Sheahan signed with Vogt, and the collateral pledged by Sheahan to cover those accounts. Sheahan contends that this conduct was the factual basis for counts I through IX of the indictment, which were dismissed under the plea agreement, and that the district court should not have considered this conduct as relevant conduct in determining the amount of loss. 19 Sheahan concedes that we have interpreted the relevant conduct guideline, U.S.S.G. Sec. 1B1.3, to allow the sentencing court to consider conduct beyond the count of conviction, United States v. Galloway, 976 F.2d 414, 425 (8th Cir.1992) (en banc), including conduct contained in dismissed counts of the indictment, United States v. Streeter, 907 F.2d 781, 791 (8th Cir.1990). Sheahan argues, however, that the conduct the district court considered in this case does not qualify as relevant conduct under U.S.S.G. Sec. 1B1.3 for the purposes of the section 2F1.1 loss calculation and, therefore, should not have been considered. Specifically, Sheahan first contends that the conduct that was the basis of counts I through IX was not part of the same course of conduct or common scheme or plan as the conduct to which he pleaded guilty, writing the insufficient funds checks to Mercantile Bank drawn on his Mark Twain account. Sheahan also argues that the conduct charged in counts I through IX was not relevant conduct because that conduct does not constitute a criminal offense. 20 Relevant conduct is defined as all acts and omissions that were part of the same course of conduct or common scheme or plan as the offense of conviction. U.S.S.G. Sec. 1B1.3(a)(2) (emphasis added). This is a factual determination subject to review under the clearly erroneous standard. United States v. Prendergast, 979 F.2d 1289, 1291 (8th Cir.1992). Under the Guidelines, [f]or two or more offenses to constitute part of a common scheme or plan, they must be substantially connected to each other by at least one common factor, such as common victims, common accomplices, common purposes, or similar modus operandi. U.S.S.G. Sec. 1B1.3, comment. (n. 9). Here, Sheahan's conduct charged under counts I through IX revolving around the checks written on his closed accounts at Mercantile Bank and his conduct in writing insufficient funds checks on the Mark Twain Bank to reduce the Avanti balance at Mercantile Bank are properly considered to be part of a common scheme or plan. Mercantile Bank was a common victim, and Vogt was a common accomplice in both of these situations. Hence, the district court committed no clear error in considering the checks written on the closed accounts to be part of the same course of conduct or common scheme or plan as the offense of conviction. 21 Sheahan next argues that the district court should not have considered the conduct charged in counts I through IX as relevant conduct in determining the amount of loss under U.S.S.G. Sec. 2F1.1 because that conduct was not criminal conduct. We agree that the relevant conduct the sentencing court should consider in the section 2F1.1 loss calculation is that which is attributable to the defendant's criminal conduct. See Kok v. United States, 17 F.3d 247, 250 (8th Cir.1994) (citing United States v. Wilson, 980 F.2d 259, 261 (4th Cir.1992)) (the task of the district court [under section 2F1.1] is to determine the amount of loss that is attributable to the defendant's criminal conduct). Thus, the government had the burden of proving by a preponderance of the evidence that Sheahan's conduct as charged in counts I through IX constituted criminal conduct before the district court could consider it as relevant conduct. 22 Sheahan argues that his conduct charged in counts I through IX--writing the checks on closed accounts, entering into loans on the debts created, and pledging collateral to secure those loans--does not constitute criminal conduct on the facts in this case. In counts I through IX, the indictment charged Sheahan and Vogt with acting in a joint scheme or artifice to defraud Mercantile Bank of money and property or the honest services of its employee, Larry Vogt, all in violation of 18 U.S.C. Secs. 1344, 1346, and 2. 23 Counts I through IX of the indictment clearly alleged offenses that are subject to prosecution under 18 U.S.C. Secs. 1344 and 1346. To prove a section 1344 violation, the government must show that the defendant executed a scheme to defraud a federally insured bank. United States v. Britton, 9 F.3d 708, 709 (8th Cir.1993). The term 'scheme to defraud,' however, is not capable of precise definition. United States v. Brandon, 17 F.3d 409, 424 (1st Cir.1994) (quoting United States v. Goldblatt, 813 F.2d 619, 624 (3d Cir.1987)). We have stated: 24 A scheme violates Sec. 1344(a) if the scheme is a departure from fundamental honesty, moral uprightness, or fair play and candid dealings in the general life of the community. The bank fraud statute condemns schemes designed to deceive in order to obtain something of value. 25 Britton, 9 F.3d at 709 (quoting Goldblatt, 813 F.2d at 624). A scheme to defraud under section 1344 also exists where it includes activity designed to deprive the bank of the honest services of its employee. 18 U.S.C. Sec. 1346. The government need not demonstrate that the defendant made false representations or that the bank was actually defrauded. Britton, 9 F.3d at 709. Moreover, the fact that a bank customer colludes with a bank officer does not prevent the offense from constituting bank fraud. United States v. Saks, 964 F.2d 1514, 1518-19 (5th Cir.1992). 26 Because the allegations in counts I through IX are legally sufficient, the issue here is whether the government demonstrated by a preponderance of the evidence that Sheahan acted with Vogt in a scheme that deprived Mercantile Bank of Vogt's honest services or deprived Mercantile Bank of money or property. We conclude that the government satisfied this burden. 27 Sheahan and the government have stipulated that: the checking accounts were closed in December 1988 and that Vogt continued to allow Sheahan to write checks on the closed accounts; Vogt knew the accounts were closed and continued to allow Sheahan to write the checks without the knowledge of Mercantile Bank's Board of Directors; and this practice deprived Mercantile Bank of Vogt's honest services because this practice violated generally accepted banking procedures and was conducted without knowledge or approval of the Board of Directors. (Appellant's Rev.App. at 30-32.) On appeal, Sheahan attempts to distance himself from this stipulation by arguing that he was not a knowing participant in this practice, a prerequisite to a section 1344 violation. He thus asserts that he was not part of a scheme to deprive Mercantile Bank of Vogt's honest services because he did not know that the accounts had been closed. The district court specifically found, however, that Sheahan knew the accounts were closed. (Sent.Tr., Vol. III at 8, 9.) We review this finding for clear error. 28 Agent Armstrong testified at the sentencing hearing that Sheahan told him in an interview that Sheahan was aware that Vogt was accepting the closed account checks, rolling them into the line of credit, and subsequently formalizing the amounts paid out by Mercantile Bank into loans. (Sent.Tr. at 31.) Sheahan indicated, however, that he did not think that the practice was out of the ordinary. (Id.) Armstrong also testified that Sheahan would pay off some of the checks in cash (id. at 92-93), which the government asserts supports an inference that Sheahan knew the accounts were closed. We cannot find that the district court committed clear error in finding that Sheahan knew the accounts were closed. 4 Hence, we conclude that the government established by a preponderance of the evidence that Sheahan's conduct with Vogt was a departure from fundamental honesty, moral uprightness, or fair play and candid dealings, see Britton, 9 F.3d at 709, and served to deprive Mercantile Bank of Vogt's honest services in violation of section 1344 and 1346. 29 Even assuming that the government failed to prove a scheme to deprive Mercantile Bank of Vogt's honest services, we conclude that a preponderance of the government's evidence demonstrated, at a minimum, that Sheahan and Vogt participated in a scheme to deprive Mercantile Bank of money or property. For example, the government presented evidence that Sheahan and Vogt engaged in practices that were connected to the closed account checks that ultimately left Mercantile Bank significantly undersecured on the Avanti account. Sheahan double-pledged at least one item of collateral as security for a loan Avanti received from Mercantile Bank, which he previously pledged for a loan at Mark Twain. (Sent.Tr. at 325-31, 341-47). Moreover, Mercantile Bank, acting through Vogt, released other pledged collateral to Sheahan at different times without requiring replacements of additional collateral. (Id. at 273.) Further, much of the collateral Sheahan pledged for Avanti loans was of poor quality and worth substantially less than the amount of the loan extended. (Id.) These practices violated Mercantile Bank's standard practice that the loans be fully collateralized and allowed Sheahan to obtain funds from Mercantile Bank he likely would not have obtained under standard practices. These practices ultimately left Mercantile Bank with insufficient security on the Avanti debt. (Id. at 273.) 30 We conclude that this evidence likewise demonstrates that Sheahan and Vogt were engaged in a scheme that was a departure from fundamental honesty, moral uprightness, or fair play and candid dealings see Britton, 9 F.3d at 709, that deprived Mercantile Bank of money or property. The evidence of double pledging, itself, is enough to establish a section 1344 violation. United States v. Matousek, 894 F.2d 1012, 1013-14 (8th Cir.1990). 31 We conclude that the district court properly considered the conduct charged in counts I through IX as relevant conduct. This conduct was part of a common scheme or plan with the conduct under count X, to which Sheahan pleaded guilty. Likewise, the government established by a preponderance of the evidence that the conduct constituted criminal conduct which could be considered for the purposes of the section 2F1.1 loss calculation. 32 The district court correctly concluded that Sheahan's relevant conduct figured prominently into the loss Mercantile Bank suffered. He wrote the checks, which was the fountainhead of all the illegal conduct that followed. Moreover, he continued to participate throughout the entire scheme by engaging in other conduct in furtherance of the scheme, such as double-pledging collateral and paying off some of the checks in cash. To the extent that he argues that it was Vogt's conduct, not his own, that caused the losses to Mercantile Bank, that argument is unavailing. Section 1B1.3(a)(1)(B) of the Sentencing Guidelines provides that Vogt's conduct as a joint participant in criminal activity with Sheahan may be counted as Sheahan's own relevant conduct if Vogt's activities were reasonably foreseeable to Sheahan. Even if we were to assume that Vogt's conduct caused the loss, the district court would not have been in error to find that Vogt's conduct was reasonably foreseeable to Sheahan. Thus, the district court committed no error in looking to the conduct underlying the dismissed counts as relevant conduct for the section 2F1.1 loss calculation. 33