Opinion ID: 195251
Heading Depth: 1
Heading Rank: 4

Heading: sufficiency of the evidence

Text: Seven of the eight defendants argue that the evidence introduced at trial was insufficient to support their convictions for bank fraud and conspiracy to commit bank fraud.10 They 10 Brandon does not challenge the sufficiency of the evidence against him on appeal. He does argue that certain evidentiary rulings deprived him of a fair trial because he was unable to present his theory of the case and convince the jury of his innocence. This issue is discussed below in Section VII. We -20- argue, with individual variations, that they did not have the requisite knowledge and intent to defraud Bay Loan because they did not know of, or intend to violate, any down payment requirements of the bank. With the few exceptions previously noted, we disagree. Before reviewing the evidence with respect to each defendant, we must first address some issues regarding the substantive offenses charged in this case.

To prove bank fraud under 18 U.S.C. 1344,11 the prosecution must show beyond a reasonable doubt that the defendant (1) engaged in a scheme or artifice to defraud, or made note for the record that the evidence against Brandon is not only sufficient but overwhelming. 11 At the time when the offenses occurred, 18 U.S.C. 1344 provided: Whoever knowingly executes, or attempts to execute, a scheme or artifice -- (1) to defraud a federally chartered or insured financial institution; or (2) to obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of a federally chartered or insured financial institution, by means of false or fraudulent pretenses, representations, or promises; [shall be guilty of an offense against the United States]. A technical amendment in 1989 deleted the words federally chartered or insured from the section leaving just financial institution. Pub. L. No. 101-73, Title IX, 961(k), Aug. 9, 1989, 103 Stat. 500. Apparently, no substantive change was intended by this amendment as the definition of financial institution for all of Title 18, now contained at 18 U.S.C. 20, still encompasses federally chartered or insured institutions. -21- false statements or misrepresentations to obtain money from; (2) a federally insured financial institution; and (3) did so knowingly. United States v. Goldblatt, 813 F.2d 619, 623-24 (3rd Cir. 1987); United States v. Cloud, 872 F.2d 846, 850 (9th Cir.), cert. denied, 493 U.S. 1002 (1989). The terms scheme and artifice are defined to include any plan, pattern or cause of action, including false and fraudulent pretenses and misrepresentations, intended to deceive others in order to obtain something of value, such as money, from the institution to be deceived. Goldblatt, 813 F.2d at 624 (citing United States v. Toney, 598 F.2d 1349, 1357 n.12 (5th Cir. 1979), cert. denied, 444 U.S. 1033 (1983)). The term 'scheme to defraud,' however, is not capable of precise definition. Fraud instead is measured in a particular case by determining whether the scheme demonstrated a departure from fundamental honesty, moral uprightness, or fair play and candid dealings in the general life of the community. Goldblatt, 813 F.2d at 624; see also United States v. Stavroulakis, 952 F.2d 686, 694 (2d Cir.), cert. denied, 112 S. Ct. 1982 (1992). The alleged scheme in this case is the fraudulent representation of down payments that were not actually paid in order to obtain loan financing from Bay Loan. There is little doubt that this scheme took place.12 Defendants argue, 12 Sufficient evidence exists to indicate Bay Loan provided the loans for the Dean Street project, required down payments for the loans, and approved loans and disbursed money based on the understanding that its lending requirement was satisfied. The evidence also clearly establishes that no down payments were -22- however, that they did not know of, or participate in, the scheme, and, to the extent that they did participate in activities related to the scheme, such actions were not illegal because the actions were not intended to deceive or defraud Bay Loan. Defendants claim they were either unaware that Bay Loan existed or else unaware that Bay Loan had a down payment requirement that prohibited the various down payment transactions in which they were involved. The central issue on appeal, therefore, is whether defendants possessed the requisite knowledge and intent. To act with the 'intent to defraud' means to act willfully, and with the specific intent to deceive or cheat for the purpose of either causing some financial loss to another, or bringing about some financial gain to oneself. Cloud, 872 F.2d at 852 n.6 (citations omitted) (finding intent to defraud where defendant signed instructions knowing that the bank could be deceived by materially false statements that appeared on the face of the instructions); see also United States v. Saks, 964 F.2d 1514, 1518 (5th Cir. 1992). It is a well-established principle that fraudulent intent may be established by circumstantial evidence and inferences drawn from all the evidence. Cloud, 872 actually made to Dean Street because the payments were either falsified or quickly returned to their source. Defendants did present evidence, mostly testimony by Brandon himself, that Bay Loan knew and approved of the down payment arrangements. However, more than sufficient evidence points to the contrary conclusion including the unequivocal testimony of Bay Loan's Vice President, Gormley, that the bank never knew of nor approved of the skirting of the down payment requirement. -23- F.2d at 852 n.6 (citations omitted); United States v. Celesia, 945 F.2d 756, 759-60 (4th Cir. 1991); see also United States v. Mason, 902 F.2d 1434, 1442 (9th Cir. 1990) (Specific intent is established by 'the existence of a scheme which was reasonably calculated to deceive persons of ordinary prudence and comprehension, and this intention is shown by examining the scheme itself.' (quoting United States v. Green, 745 F.2d 1205, 1207 (9th Cir. 1984) (additional internal quotation omitted))). Defendants argue that the government must prove that they knew that the victim of their fraud was a federally insured financial institution. We disagree. The status of the victiminstitution is not a separate knowledge element of bank fraud under 1344 but an objective fact that must be established in order for the statute to apply. The government produced evidence, and defendants do not dispute, that Bay Loan is federally insured. This is sufficient to satisfy the requirement under 18 U.S.C. 1344 that the defrauded bank be a federally insured bank. See United States v. McClelland, 868 F.2d 704, 709-11 (5th Cir. 1989); cf. United States v. Thompson, 811 F.2d 841, 844 (5th Cir. 1987) (finding that under 18 U.S.C. 1014, which criminalizes the making of false statements to a bank, the federal insured status of the victim institution is just a jurisdictional requirement and not a knowledge element of the offense); United States v. Trice, 823 F.2d 80, 86-87 (5th Cir. -24- 1987) (same).13 We decline to adopt defendants' analogy to one of the federal gambling statutes, 18 U.S.C. 1084(a), which we have previously held requires knowledge of the interstate nature of the wire communication involved in the offense. United States v. Southard, 700 F.2d 1, 24-25 (1st Cir.), cert. denied, 464 U.S. 823 (1983). Our holding in that case rested on the fact that the word knowingly in the statute could not reasonably refer to anything else except the interstate nature of the communication. Id. at 24 (noting one cannot unwittingly or unknowingly make a wire transmission). That is not the case with the bank fraud statute because knowingly in 1344 clearly applies to the 13 We find the language of 1014 sufficiently similar to 1344 to warrant a similar conclusion about Congress' intent with respect to the knowledge requirement in the bank fraud statute. 18 U.S.C. 1014 states in pertinent part: Whoever knowingly makes any false statement or report, or willfully overvalues any land, property or security, for the purpose of influencing in any way the action of . . . any institution the accounts of which are insured by the Federal Deposit Insurance Corporation [shall be guilty of an offense against the Unites States]. Defendants contend that the use of knowingly in this statute differs significantly from its use in 1344 which prohibits knowingly executing a scheme to defraud a federally chartered or insured financial institution. We reject this contention. The placement in 1344 of the words federally chartered or insured before the word institution instead of similar language being placed after institution, as in 1014, simply reflects the fact that federal insurance is separately defined in another subsection and thus there is no need to use the more awkward construction found in 1014. The different word placement is a distinction without a difference. -25- execution of a scheme or artifice to defraud. The word knowingly is necessary because one can execute a scheme without knowing or understanding that it is fraudulent. In fact, that is what many of the defendants themselves argue in this appeal: that they may have facilitated the false down payments but they did not know it violated the bank's requirements. Therefore, knowingly in 1344 has independent meaning without reference to the federally insured status of the financial institution. The defendants in this case also argue that the government must prove they knew that the end loans were provided by Bay Loan and not by some other institution, such as Homeowners or East West. In other words, there was no violation of 1344 because the scheme to defraud was not knowingly targeted at a federally insured financial institution, but instead at the nonfederally insured mortgage brokers. Defendants overstate the government's burden. The specific intent under 1344 is an intent to defraud a bank, that is, an intent to victimize a bank by means of a fraudulent scheme. See United States v. Stavroulakis, 952 F.2d 686, 694 (2d Cir. 1992); United States v. Mason, 902 F.2d 1434, 1442 (9th Cir. 1990). It has been established that the government does not have to show the alleged scheme was directed solely toward a particular institution; it is sufficient to show that defendant knowingly executed a fraudulent scheme that exposed a federally insured bank to a risk of loss. See, e.g., United States v. Barakett, 994 F.2d 1107, 1110-11 (5th Cir. 1993), petition for -26- cert. filed, (Sept. 22, 1993) (fraudulent scheme directed at checking account customers of bank but fraud victimized bank as well); United States v. Morgenstern, 933 F.2d 1108, 1114 (2d Cir. 1991), cert. denied, 112 S. Ct. 1188 (1992) (direct object of the fraud was to steal money from third parties with deposits at the defrauded bank). We hold that it is also unnecessary for the government to prove that a defendant knows which particular bank will be victimized by his fraud as long as it is established that a defendant knows that a financial institution will be defrauded.14 The bank fraud statute was designed to provide an effective vehicle for the prosecution of frauds in which the victims are financial institutions that are federally created, controlled or insured. S. Rep. No. 225, 98th Cong., 2d Sess. 377 (1983), 1984 U.S. Code Cong. & Admin. News 3517. In creating the statute, Congress noted that there is a strong Federal interest in protecting the financial integrity of these institutions, and the legislation in this part would assure a basis for Federal prosecution of those who victimize these banks through fraudulent schemes. Id. Thus, Congress intended to criminalize bank frauds that harm federally insured banks, not 14 We also reject a related claim made by several defendants that the district court had no jurisdiction over their bank fraud counts because the target of the alleged bank fraud -- Homeowners or East West as opposed to Bay Loan -- was not a federally insured financial institution. Bay Loan was in fact victimized by defendants' scheme to defraud. In addition, the scheme was designed to obtain funds from Bay Loan in particular by fraudulently avoiding one of Bay Loan's requirements. This more than satisfies the requirements for federal jurisdiction. -27- just bank frauds directed specifically toward federally insured banks. As other courts have noted, the legislative history supports a broad construction of the statutory language of the bank fraud statute. Mason, 902 F.2d at 1442; see also Stavroulakis, 952 F.2d at 694. Defendants are essentially seeking to sanitize their fraud by interposing an intermediary or an additional victim between their fraud and the federally insured bank. We reject this attempt to escape the reach of the bank fraud statute. Instead, we find that defendants need not have had the specific intent to defraud Bay Loan so long as they intended to defraud some financial institution. The fact that it should turn out that the financial institution actually defrauded was federally insured is a fortuitous stroke of bad luck for the defendants but does not make it any less of a federal crime. In this case, evidence beyond a reasonable doubt that defendants fraudulently evaded a known down payment requirement, whether thought to be imposed by Homeowners, East West, Bay Loan or some other financing entity, is sufficient to support a bank fraud conviction. Of course, the government must also establish that a federally insured bank, Bay Loan, was victimized or exposed to a risk of loss by the scheme to defraud. See United States v. Blackmon, 839 F.2d 900, 906 (2d Cir. 1988). This, however, is not seriously disputed in this case.15 15 The down payment scheme victimized Bay Loan because it devalued the mortgages that the bank was providing. Down payments on a loan decrease the risk of default or nonrepayment -28- Concerns about extending the reach of the bank fraud statute into broad new areas of financial activity stem from a misunderstanding of the nature of the statute. Financial transactions are becoming increasingly integrated and complex as more and more financial instruments are securitized and traded on national and global markets. Consequently, the effects of fraudulent actions against one institution are increasingly likely to spill over and detrimentally affect others. As Congress' main concern in 1344 was to provide jurisdiction for fraudulent schemes that harmed federally chartered or insured institutions, the increased risks to the institutions should be matched by increased coverage of the statute. We are not federalizing criminal transactions previously covered only by state law so much as recognizing that those criminal transactions by increasing the equity participation of the borrower and giving the borrower a larger stake in the venture. The down payments consequently have value to the lender bank and the failure to make them deprives the bank of this value. Cf. Mason, 902 F.2d at 1441-43 (finding intent to commit bank fraud where bank exposed to risk of loss through defendants' concealment from the bank that its customers were purchasing prostitution services and consequently were a greater credit risk to the bank which was processing the customers' credit card purchases from defendants' escort service). The fact that buyers were required to make their down payments to the seller, Dean Street, does not mitigate the risk of loss to Bay Loan from the down payment scheme. There would still be a higher risk of default and the absence of equity participation regardless of who was receiving, or failing to receive, the down payments. In addition, the value of the condominiums, the bank's collateral, becomes an issue where the bank, thinking it is only providing 80% of the purchase price, is actually lending 100% of the sale price. Ultimately, Bay Loan refused to provide 100% financing and explicitly required a down payment; the payment became a negotiated term of the mortgage contract and thus had some value to Bay Loan. -29- are becoming more federal in nature.16 An additional argument defendants make is that the government must prove defendants knew that Bay Loan's down payment requirement specifically prohibited the funding of buyers' down payments by someone other than the buyer. Defendants claim that they thought the funding of buyer down payments was just some complex financial arrangement, supplemental financing or required paperwork, and they did not know the funding was designed to defraud the bank. This misrepresents the nature of the fraud. Although Bay Loan did in fact prohibit third party funding of down payments, the key misrepresentation in this case was that the required down payments were being paid when they actually were not. Bay Loan required the buyers to make down payments to the seller, Dean Street, and the existence of the payments was represented to the bank on the closing settlement sheets. In reality, the payments were not being made, either because no funds were actually transferred or because the funds were 16 We do not address whether any scheme to defraud, regardless of its intended victim, can be prosecuted under the bank fraud statute as long as it has some detrimental effect on a federally insured bank. In this case at least, the government did prove the scheme was intended to defraud a financial institution: Homeowners or East West, if not Bay Loan itself. We also do not address possible statutory or jurisdictional limitations on the remoteness or foreseeability of the harm or the risk of loss to federally insured financial institutions beyond which 1344 will no longer apply. We simply note that this case presents a situation of direct harm to Bay Loan resulting from a scheme specifically designed to fraudulently avoid the requirements of that federally insured bank in order to obtain funds originating directly from Bay Loan. -30- returned by Dean Street to their source.17 Therefore, the government need only prove that defendants knew a down payment was required and that no real down payments were actually made. It need not establish that defendants knew all of the specifics of the down payment requirement such as restrictions on third party funding. In sum, to prove defendants knowingly engaged in the fraud, the government must establish that each defendant knew that some financial institution was lending the money for the motel-condominium project, knew that a down payment was required for these loans, knew that a scheme of one sort or another existed to make it appear that the down payments were being made when in fact they were not, and finally, that each defendant willfully participated in that scheme.
Each defendant contests the sufficiency of the evidence of his or her knowledge of the conspiracy to defraud Bay Loan and his or her level of participation in that agreed upon scheme. To prove conspiracy, the government must show the existence of an agreement between defendant and another to commit a crime,18 17 In those cases where Dean Street failed to repay down payment funds as promised, the intention was still to do so and to execute the same fraud as was executed on the other unit sales. 18 To the extent that the existence of a conspiracy is at issue, the evidence is overwhelming to support the convictions. A conspiracy is an agreement to commit a crime and may be inferred from the circumstances. United States v. Concemi, 957 F.2d 942, 950 (1st Cir. 1992). Brandon planned and executed a complex scheme to defraud Bay Loan that required the cooperation of investors, brokers, and other agents involved in facilitating the -31- that each defendant knew of the agreement, and that each defendant voluntarily participated in the conspiracy through conduct that was interdependent with the actions of the other conspirators. United States v. G mez-Pab n, 911 F.2d 847, 852-53 (1st Cir. 1990), cert. denied, 498 U.S. 1074 (1993); United States v. Evans, 970 F.2d 663, 668 (10th Cir. 1992), cert. denied, 113 S. Ct. 1288 (1993). The defendants must have both the intent to agree to participate in the conspiracy and an intent to commit the underlying substantive offense. G mez- Pab n, 911 F.2d at 853; United States v. Drougas, 748 F.2d 8, 15 (1st Cir. 1984). The government, however, need not prove that each defendant knew all of the details and members, or participated in all of the objectives, of the conspiracy as long as it can show knowledge of the basic agreement. G mez-Pab n, 911 F.2d at 853; United States v. Marsh, 747 F.2d 7, 13 (1st Cir. 1984). Such proof of knowledge and intent may consist of circumstantial evidence, including inferences from surrounding circumstances, such as acts committed by the defendant that furthered the conspiracy's purposes. G mez-Pab n, 911 F.2d at 853. The government must also establish defendants' participation in the conspiracy with the intent to further the transactions. Brandon told several co-conspirators of his plans to falsify down payments, including Marderosian, Reisch, Gauvin, Granoff, Hagopian, and Ward. The evidence indicates these defendants agreed to become involved in the conspiracy by performing such critical tasks as drawing up mortgage discharges, wiring money, and providing down payment checks that would not be used. -32- aims of the conspiracy. Direct Sales Co. v. United States, 319 U.S. 703, 712 (1943). Once a conspiracy is established, as well as defendant's intent to further it, any connection between the defendant and the conspiracy, even a slight one, will be sufficient to establish knowing participation. Marsh, 747 F.2d at 13. In this case, the government must prove that the defendants knew there was an agreement to fraudulently represent down payments in order to get loans from Bay Loan and that they willfully participated in this scheme by taking some overt action with the intent to further the scheme's objective. Thus, the evidence must be sufficient to establish the intent to commit bank fraud as discussed above and, in addition, must also establish an intent to commit the fraud in conjunction with the broader conspiratorial agreement.
Our task on review of the verdicts is to examine the evidence in its entirety in the light most favorable to the government to determine whether a rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt. The government receives the benefit of all legitimate and favorable inferences, and it can prove its case by circumstantial evidence without having to exclude every reasonable hypothesis of innocence. United States v. McLaughlin, 957 F.2d 12, 18 (1st Cir. 1992); United States v. Boldt, 929 F.2d 35, 39 (1st. Cir. 1991); United States v. Van Helden, 920 F.2d -33- 99, 101 (1st Cir. 1990). Below, we review each defendant's case individually.
Granoff was convicted of conspiracy and two counts of bank fraud in connection with his purchase of units on one occasion and with his funding of buyer down payments on another occasion. Granoff argues that the evidence in this case is insufficient to show that he was anything more than an innocent investor duped by his lawyer, Marderosian, into providing money for a project he really did not know anything about. Although the evidence against Marvin Granoff reveals a more circumscribed role than some of the other defendants, we are not prepared to overturn the jury's guilty verdict on either the conspiracy charge or on the two counts of bank fraud. Sufficient evidence supports the jury's conclusion that Granoff knew Bay Loan was funding Dean Street's condominium project, that he knew down payments were required from the buyers and that he knowingly participated in a scheme to deceive the bank into thinking the requirement was satisfied. To begin with, Granoff bought four units on one occasion and provided down payment funds on another occasion. Both times Bay Loan financed the purchases without knowing the required down payments were not actually made. Prior to each of these transactions, Granoff attended a series of meetings with Brandon concerning the motel condominium scheme. Brandon told Granoff that down payments were required and that he needed Granoff to provide money for the down -34- payments of other buyers.19 Granoff agreed to do so.20 For Granoff's purchase of units at the Charlestown Inn 19 Specifically, Marderosian testified that Brandon told Gauvin and Granoff in the summer of 1987 that Homeowners required a twenty-five percent down payment and while that down payment would not be required of Mr. Gauvin and Mr. Granoff, he did have the problem of the down payment with subsequent purchasers and he asked Mr. Gauvin and Mr. Granoff for their assistance in meeting that problem. Despite the offer to waive Gauvin and Granoff's down payments, checks representing down payments were required for their purchases. In another meeting, Brandon asked Gauvin and Granoff if they were willing to provide the down payment money for other purchasers and they agreed to do so. Marderosian also testified that Brandon told Granoff at a meeting in January of 1988 that he needed someone to provide funding for the certified down payment funds required from unit buyers. Brandon asked whether Gauvin and Granoff were interested in providing those certified funds and they agreed. 20 Marderosian testified that Granoff agreed on several different occasions to participate in Brandon's scheme and referred several times to the agreement Mr. Gauvin and Mr. Granoff made to provide Mr. Brandon with monies for the down payments. Despite this, Granoff argues that Marderosian's testimony indicates Granoff said little or nothing at the various meetings with Brandon and this is insufficient to establish Granoff agreed to participate in the conspiracy. The fact that Granoff provided $470,000 that was used for down payments following the meetings with Brandon in which the agreement was discussed, however, is sufficient to support the conclusion that Granoff in fact did agree and did participate in the conspiracy. Furthermore, Granoff's involvement in the conspiracy was more than just the provision of goods and services to an operation that he knew might use the funds illegally. See Direct Sales Co. v. United States, 319 U.S. 703, 711, 713 (1943); United States v. Falcone, 109 F.2d 579, 581 (2d Cir.), aff'd, 311 U.S. 205 (1940). The evidence, as we discuss below, indicates that Granoff provided money specifically for the purpose of funding down payments he knew would be falsified and was promised $1000 per unit for his efforts. Granoff's provision of down payment funds was a specialized transaction without loan documents or other paperwork and did not constitute merely the provision of goods or services to the conspiracy. Overall, the evidence is more than adequate to support the finding that Granoff adopted the goals of the conspiracy as his own and provided the down payment funds to further the conspiracy. -35- in August of 1987, his partner, Gauvin, provided down payments to Dean Street on Granoff's behalf in the form of checks that were not backed by sufficient funds. Copies of the checks were included in the closing files. The payments were returned to Gauvin two days later when Dean Street wrote identical checks back to Gauvin which Gauvin deposited in his account to cover the original down payment checks. The fact that Gauvin's checks, totalling $246,000, were drawn on an account with only $6000 at the time when they were written indicates that there was no intent on Gauvin's part to make an actual down payment in the first place.21 Granoff likewise provided down payment funds for other buyers and the evidence indicates he did this knowing and expecting that the money would be returned to him after the closing. Granoff provided $470,000 for down payments on the 21 Granoff argues that with respect to Count 2, charging him with bank fraud in connection with his purchase of a unit at the Charlestown Motor Inn, the requisite knowledge element was not established. Brandon had told Granoff that the down payment would be waived for his purchase and there was nothing, Granoff claims, in the closing procedure sufficient to support the conclusion that he knew his purchase took place under fraudulent pretenses. On the contrary, even if we disregard the reasonable possibility that Granoff's partner, Gauvin, told Granoff all about the complex recycling transaction Gauvin undertook with the checks used for Granoff's down payment, the fact that Granoff signed the HUD settlement sheets establishes a sufficient basis to conclude Granoff knew he was representing the existence of down payments that he was not actually paying. The HUD settlement sheet for Granoff's purchases clearly indicated that a $20,500 down payment was being paid by the buyer. If indeed Granoff was under the impression, up to that point, that the down payment had been waived, the $20,500 figure on the closing documents must have tipped him off that something suspicious was going on. -36- Atlantic Inn-Westerly units in the form of two checks, one for $270,000 from Marvin Granoff Real Estate and another for $200,000 from Granoff's Eastern Wire Products Co. In turn, Brandon promised to pay Granoff $1000 for each unit sold using Granoff's down payment money. As it turns out, Granoff was never paid back, but the evidence shows that Granoff expected and intended for this money to be promptly returned to him after the closings. A recycling arrangement had been used earlier for Granoff's own purchase, and for subsequent purchases funded by Gauvin, under the initial agreement between Granoff, Gauvin, and Brandon. More importantly, about two weeks after the first closings involving Granoff's $470,000, Gauvin sent a letter to Marderosian, on Manchester Associates22 letterhead, complaining that the transaction involving the $470,000 was taking too long. The letter stated that the transaction involving Granoff's $470,000 was to take at most two to three days. Marderosian also testified that on a different occasion, Gauvin told Marderosian that Gauvin and Granoff can make money without putting up any money. In addition, there was no promissory note or other formal documentation to indicate that the $470,000 was normal loan financing.23 Consequently, Granoff knew that his money 22 Manchester Associates was a partnership formed by and consisting of Gauvin and Granoff. 23 Gauvin and Granoff documented a previous loan to Brandon for the smaller sum of $200,000 indicating that if they really intended the money to be a loan instead of a tool to show down payments through a recycling transaction, they would have -37- was used to create the appearance that down payments were being paid when in fact they were not; they were being falsified. The arrangement of rapidly recycling down payment funds through Dean Street meant that, in reality, no down payments were being made at all. A paper trail was left in the closing files indicating that the buyer had made a down payment to the seller, Dean Street, when, in fact, the seller just returned the money to its source, effectively rendering that paper trail fraudulent. Bay Loan's down payment requirement was thus avoided without the bank's knowledge. As a knowing participant in this recycling scheme, Granoff possessed the necessary intent to defraud and the requisite level of involvement in the larger conspiracy to be found guilty of the offenses charged. Although not essential for upholding Granoff's conviction, we also find that the evidence is sufficient to show that Granoff knew Bay Loan was loaning the money for the condominium units. Granoff bought four units financed by Bay Loan and he put up nearly half a million dollars to provide down payment funds for other units to be purchased with Bay Loan financing. Homeowners furnished a letter at the closings including the closing on Granoff's purchases, which Granoff attended, stating that Homeowners had transferred all of its documented it. -38- rights and interests in the mortgage to Bay Loan.24 Granoff had occasion to see the letter and it is not unreasonably to assume he also read it. Granoff also attended a number of planning meetings with Brandon in which plans for closing on various units, the funding of down payments, and other details of the scheme were discussed. The evidence also indicates Granoff was continually kept abreast of various detail of Brandon's scheme; details, one could infer, that included the source of the financing. In the last half of 1987, Granoff and Gauvin formed a partnership called Manchester Associates for the purpose of real estate investment. On behalf of Manchester Associates, Gauvin met several times with Brandon who discussed his overall plans to close on over 400 motel units as well as the schedule for those closings. Letters referencing these meetings were written on Manchester letterhead and one could reasonably infer that Gauvin related the substance of the meetings to his partner Granoff.25 One such letter from 24 There is some dispute whether this letter, which was not signed by the parties, was included among the documents at the closings. Homeowners' Vice President, Gregory Cambio, testified that the letter was part of the closing package but also testified that it may have been sent after the closing. The trial exhibits containing the loan files for each of Granoff's purchases do contain the letter which is dated on the same date as the closing. However, the file contains both closing documents, signed by Granoff, as well as other documents that may or may not have been at the closing. The letter, therefore, is not dispositive of Granoff's knowledge, but does provide some evidence of knowledge that can be considered in conjunction with the other circumstantial evidence. 25 For example, Granoff was cc'd on a letter to Dean Street that referenced plans to close on 107 units and discussed the repayment of Granoff's $470,000. -39- Gauvin states that it would seem that the lending institutions will be in a position to begin closing. As Homeowners and Bay Loan were the only institutions involved at the time the letter was written, the plural reference to institutions indicates that Gauvin and his partner, Granoff, were aware not only of Homeowners but of Bay Loan as well. In sum, the evidence indicates that Granoff was aware, on a fairly detailed level, of a large real estate scheme whose only source of funding happened to be Bay Loan. With substantial sums of his own money at stake in this extensive project, Granoff was likely to become aware at some point of the source of money behind it all. It is not unreasonable to conclude, therefore, that Granoff knew of Bay Loan's involvement in the project. Furthermore, the fact that Bay Loan was providing the financing was known to several others who, like Granoff, were involved in buying and investing in the units. Brandon testified that he was completely open about, and made no secret of, Bay Loan's involvement. Although Brandon testified that he generally told people outside Dean Street that the lender was Homeowners and not Bay Loan, he also testified that he told Hagopian, Ward, Reisch, and Limoges about Bay Loan's involvement. These people, like Granoff, bought units or provided down payment funds and were not Dean Street employees. Even an investor named Michael Parvin, who bought only one unit, testified that he knew Bay Loan was involved. It is not unreasonable, therefore, for a jury to conclude that Granoff discovered this fact as well. -40- Granoff challenges any inferences of criminal knowledge or intent drawn from the pool of circumstantial evidence as impermissibly based merely on Granoff's association with his codefendants. He claims that amidst the fast-paced wheeling and dealing of the 1980s real estate market, investors did not have the ability to know all the details and purposes behind every one of their transactions. It was common for investors to entrust their money to developers and lawyers without learning any of the specifics of the various projects in which they were involved. Details such as the exact nature of a bank's down payment requirement were not, Granoff implies, important enough to be discussed between a developer and an investor. Add to these circumstances the unscrupulous and deceptive acts of Brandon and Marderosian, who allegedly got Granoff into this whole mess, and Granoff contends that we cannot help but conclude he was lied to about the true nature of the project. While it may be true that the typical real estate investor in the 1980s would readily put up hundreds of thousands of dollars for down payment funds, expect the money back in a few days, and still not suspect he is defrauding a bank, we are certainly not prepared, given the facts discussed above, to preclude a jury from concluding otherwise. The government need not disprove every reasonable hypothesis of innocence, provided the record in its entirety supports the jury's verdict. United States v. Ortiz, 966 F.2d 707, 714 (1st Cir. 1992), cert. denied, 113 S. Ct. 1005 (1993). In this case, the record does provide -41- the requisite support. Therefore, we affirm Granoff's convictions.
Gauvin was convicted of conspiracy and five counts of bank fraud in connection with his purchase of several units and his funding of buyer down payments. Gauvin was Granoff's business partner and the more active of the two in their dealings with Dean Street. According to the record, he knew at least as much as Granoff, and most likely more, about the scheme to defraud Bay Loan. Gauvin also participated to a greater extent in the scheme than Granoff did. Consequently, there is no need to discuss at length the evidence sufficient to support his conviction. The jury could have found that Gauvin knew Bay Loan was providing loans for the condominium project and requiring down payments for these loans based on the evidence of the several meetings Gauvin attended and correspondence that he exchanged with Brandon discussing the condominium projects and his agreement with Brandon to provide buyers with down payment funds that were required for the financing of the units. The jury could infer that Gauvin knew the down payments were not in fact being paid in violation of the bank's requirement, and that Gauvin willfully participated in the scheme to accomplish this fraud, based on the evidence that Gauvin: 1) delivered to Dean Street twelve down payment checks backed by insufficient funds for the Charlestown closings in August of 1987 and received -42- twelve equivalent checks back from Dean Street two days later which he used to cover his original checks; 2) provided down payment money for Reisch and others which was returned to him within a matter of days; 3) commented to Marderosian that the down payment checks he was providing did not have to be backed by good funds because the timing was so quick and that he and Granoff could make money without putting up any money; and 4) delivered Granoff's $470,000 in down payment funds to Dean Street and wrote in a subsequent letter to Brandon that he expected the transaction involving those funds to take at most two to three days. Gauvin argues that the evidence of his activities clearly indicates a lawful intent in his writing the checks to Dean Street. As he testified at trial, Gauvin thought he was simply lending money to Dean Street for its condominium project and he had no intention that his money be used for fraudulent purposes. Evidence in the record indicates that supplemental financing, similar to what Gauvin thought he was providing to Dean Street, was a standard practice in the industry. Gauvin also testified that he was surprised to see his first twelve checks come back so quickly. But Gauvin was not so surprised, apparently, so as to be tipped off that anything illegitimate was going on because such rapid turn around of loans was also a standard practice during the real estate boom of the 1980s. Gauvin suggests that maybe Dean Street was packaging the secondary financing and selling it off at a profit, thus removing -43- Gauvin's participation as a lender fairly quickly. Maybe, but then again, maybe not. The jury considered Gauvin's arguments and decided that the evidence proved Gauvin knew what was really happening at Dean Street. Our job on appeal is to measure the sufficiency of that evidence and not to search for every logical or rational conclusion that can be drawn. Ortiz, 966 F.2d at 714. Gauvin was told several times that funds were needed to make down payments for buyers. We find it rather difficult, therefore, to believe Gauvin thought he was legitimately loaning money for down payments when the recipient of the payments was giving the money right back to the lender. If Gauvin loaned money to a friend to buy a car and then had his loan paid off by the car dealership, we might wonder about his characterization of the transaction as normal financing. In the present case, the suspicious nature of the transactions, combined with evidence of the underlying scheme to defraud and an agreement between Gauvin and the scheme's mastermind to contribute funds to the scheme, is more than ample to support the jury's verdict.
Reisch was convicted of conspiracy and seven counts of bank fraud. The evidence against Reisch indicates that he knew Bay Loan was financing the condominium units, that he knew down payments were required for the condominium loans and that he knowingly participated in a scheme to recycle funds through buyers to make it look like these down payments were actually -44- being made. Reisch had at least a dozen discussions with Brandon and Marderosian about the 20% down payment requirement and ways that the requirement might be satisfied by alternative methods or might be avoided, including the use of second mortgages and loaning the down payment money to the buyers. Proof of Reisch's knowing participation in the conspiracy is as follows. Reisch bought four Charlestown units for which Gauvin provided the down payment funds. At the same time, Reisch provided another buyer with down payment money for three other units. Dean Street returned the money to Reisch the next day. Reisch later agreed with Brandon to wire money for down payments directly into buyers' accounts. After each closing that utilized Reisch's wired funds, the down payment money was returned to Reisch. On some occasions, the buyers' checks to Dean Street, which were funded by Reisch, were endorsed directly back over to Reisch. Reisch once remarked about this arrangement we would just have to keep bringing the funds back and rolling them to wire more funds out for the projects. As for Reisch's knowledge of Bay Loan, Brandon testified that it was very probable that he told Reisch about Bay Loan's involvement in the project during a conversation in the summer of 1988. The jury could reasonably conclude that Reisch had knowledge of Bay Loan even before this conversation. Reisch's contact with Brandon and his involvement in the down payment scheme was more significant than that of Granoff. Because we found sufficient evidence to support the conclusion -45- that Granoff had knowledge of Bay Loan, we think that, for the reasons discussed above, there is also sufficient evidence against Reisch. Like Gauvin and Granoff, Reisch argues that he was just making loans that he thought were completely legal. Like Gauvin and Granoff, we find this argument unconvincing, especially given Reisch's greater involvement in the scheme. We reject, moreover, Reisch's application of the holding in United States v. Falcone, 109 F.2d 579, 581 (2d Cir. 1940) (holding the mere delivery of goods or services to a conspiracy does not constitute membership in the conspiracy), to this case. Reisch's conduct amounted to more than a mere delivery of loans to a conspiracy. The evidence indicated that Reisch was involved in the planning of the down payment scheme and that he played a key role in furthering the success of a conspiracy that was starved for new funds before he began supplying them. In particular, Reisch provided a specific loan arrangement (involving a complex system of wired funds) especially tailored to falsifying the down payments. Reisch's actions thus were not limited to the mere provision of lending services but instead were strong evidence of an intent to further the conspiracy.
Hagopian was convicted of conspiracy and six counts of bank fraud for his role as a broker for Dean Street who solicited -46- buyers and facilitated their purchases.26 The evidence against Hagopian more than adequately establishes his knowledge of Bay Loan's down payment requirement and his knowing participation in various schemes to fraudulently represent the existence of those down payments. To begin with, Brandon testified that he told Hagopian about his relationship with Bay Loan, which establishes Hagopian's knowledge that Bay Loan was providing the financing. Hagopian knew a down payment was required for the units by virtue of the fact that he provided a down payment check for his own purchase, and he discussed down payments with some of the buyers he recruited.27 Hagopian also knew about and participated in the scheme to falsify the existence of the down payments. Hagopian purchased several condominium units and wrote a corresponding down payment check that Dean Street never negotiated. Hagopian told the buyers he recruited that they needed to write checks to Dean Street for the purchases of their units but that the checks would either not be used or would be covered by Dean Street itself.28 Hagopian also told some buyers that they would have 26 The court entered a mid-trial judgment of acquittal for Hagopian on one count of bank fraud. Hagopian was also found not guilty by the jury on two counts of bank fraud. 27 In addition, Hagopian's business partner, John Ward, who rounded up buyers with Hagopian, told one of these buyers to give Ward a check for the down payment that was required. 28 In addition, Hagopian was present during several meetings with Brandon including one where Brandon told a buyer that there were no down payments. Hagopian also told this to the buyer. The buyer eventually did produce a down payment check for his purchase and the check was never negotiated. Hagopian was -47- second mortgages to cover part of their down payment but these mortgages would later be discharged. All of these schemes were actually executed with many of the buyers Hagopian solicited. Sometimes Hagopian returned voided or nonnegotiated down payment checks back to the buyers. Hagopian also told buyers they would be paid for each unit they bought and he usually provided this rebate money to the buyers he had solicited after the closings. Hagopian adds a new twist to the familiar refrain that he thought he was participating in a perfectly legal real estate project. He claims that the fact he openly solicited buyers for a no money down investment opportunity proves that he had no knowledge that Brandon's down payment scheme defrauded the bank. Hagopian placed public advertisements for the condominiums that explicitly promised no money down. Hagopian contends that because Dean Street took care of all the financing, his job was limited to soliciting buyers for a type of real estate investment that was allegedly common at that time and not in any way suspicious.29 subsequently asked about that check by the buyer who expected it to be returned to him and was concerned it might actually be cashed. Hagopian said he would look into it. 29 Hagopian makes a related argument that his conduct did not further the conspiracy to a significant degree and that there was not sufficient interdependence between Hagopian and the other conspirators to establish that he joined the conspiracy as required. United States v. Evans 970 F.2d 663, 670 (10th Cir. 1992); United States v. Horn, 946 F.2d 738, 740-41 (10th Cir. 1991). All that is required is that the alleged conspirator facilitate the endeavors of other alleged co-conspirators or facilitate the venture as a whole. See Evans, 970 F.2d at 670; Horn 946 F.2d at 740-41. The government has more than met this burden. -48- The evidence clearly supports the jury's conclusion that Hagopian did more than innocently broker deals for Dean Street. Hagopian told buyers of his no money down investment opportunity to provide down payment checks that would not be cashed and to sign mortgages that would be discharged. His openness in advertising no money down investments simply shows he was actively soliciting buyers to further the scheme. The scheme relied on new faces to serve as frontmen for the individual bank loans and Hagopian's actions were an integral part of furthering the scheme's success. Hagopian was not open about the fact that no money down meant providing false paperwork to the bank so that it would think down payments were actually being made. Regardless of whether 100% financing was customary at the time and thus not suspicious, the fake down payments and fake second mortgages were certainly not customary (or if customary in the 1980s, still illegal), and the jury was warranted in concluding that Hagopian knew this. Finally, the jury could reasonably infer that the public advertising was just a necessary, and minor, risk taken by Hagopian to attract new buyers and not particularly convincing evidence of his innocence.
Ward was convicted of conspiracy and six counts of bank fraud for purchasing a unit and for soliciting and facilitating -49- unit sales.30 The evidence against Ward, at least in terms of knowledge and intent, is essentially the same as that against his partner, Hagopian, and the two played essentially the same role in the conspiracy. Brandon testified that he told Ward about his relationship with Bay Loan. Ward also knew that down payments were required as he was involved in many of the same discussions with potential buyers that Hagopian was involved in. Specifically, Ward told one buyer to give him a check for the down payment that was required. Ward knew down payments were not actually being made as his own down payment was not negotiated and he told one buyer, whose down payment funds were to be wired into that buyer's account, that the down payment check would be cashed the same day so that the people wiring the funds got their money back. We reject Ward's assertion that he thought Bay Loan approved all of the various down payment shenanigans in which he was involved. Ward contends that the down payment arrangement that he was aware of was simply a paperwork requirement and not a real requirement; that is, Ward only knew that some sort of paper representing down payments had to exist but thought no real funds were actually required from the buyers. We suppose Ward's contention is within the realm of the possible. However, the jury looked at the intricate down payment arrangements and the way Ward explained them to the buyers and found, quite reasonably 30 The district court entered a mid-trial judgment of acquittal in favor of Ward on one count of bank fraud. The jury found Ward not guilty on two additional counts of bank fraud. -50- we think, that Ward knew his actions were a departure from fundamental honesty. Goldblatt, 813 F.2d at 624. The common sense understanding of a down payment is the transfer of actual funds from the buyer to the seller or financier. With this in mind, it is more than reasonable for a jury to find that once a defendant learned of the structure of the down payment arrangement used in this case, with no real down payments changing hands, the defendant would be tipped off to the fact that a fraudulent transaction was contemplated. Even if we assume Brandon lied to Ward and told him that Bay Loan directed Dean Street to arrange for paper, as opposed to real, down payments, the evidence was sufficient to support a finding that Ward knew he was engaging in a sham transaction. The evidence is also sufficient to prove Ward's willful participation in the overall conspiracy and Ward's execution of the bank fraud scheme charged in Counts 9, 15, 18, and 19.31 However, the evidence is not sufficient to show that Ward took any actions that would constitute the engagement in bank fraud set forth in Counts 24 and 25 of the redacted indictment.32 Consequently we uphold the convictions on the former counts and reverse the verdict against Ward on the latter two counts. 31 Count 9 charges bank fraud in connection with Ward's purchase of a unit at the Bayside Motel. Counts 15, 18 and 19 charge bank fraud in relation to unit purchases at the Sandpiper Motel and the Hillside Motel that were facilitated by John Ward and others. 32 Counts 24 and 25 charged Ward and four other defendants with defrauding Bay Loan by obtaining an end loan for the purchases of units at the Sandcastle Motel by Bruce Schulbaum and John Mills,