Opinion ID: 202748
Heading Depth: 2
Heading Rank: 2

Heading: Forgery and Check-Kiting Evidence

Text: 144 Appellants assert that the admission of evidence regarding forged signatures on checks and evidence of a check-kiting scheme constructively amended the indictment. A constructive amendment occurs `when the charging terms of the indictment are altered' at trial so that they are different from those handed up by the grand jury. United States v. Rodriguez, 215 F.3d 110, 118 (1st Cir.2000)(quoting United States v. Portela, 167 F.3d 687, 701 (1st Cir.1999)). Appellants also argue that this evidence constituted an improper variance from the indictment. A variance occurs when the proof differs from the indictment's allegations, and is material and reversible only if it has affected the defendant's `substantial rights': to be informed of the charges; and to prevent a second prosecution for the same offense. United States v. Vavlitis, 9 F.3d 206, 210 (1st Cir.1993) (citation omitted). 145 At trial, the government introduced evidence that numerous checks issued by Caguas and made payable jointly to Gutiérrez companies and third party contractors were deposited in the accounts of the Gutiérrez companies after the contractor's endorsement was fraudulently added to the checks. 39 The government elicited this testimony as evidence of appellants' intent to defraud the bank. 146 The district court addressed the forgery evidence in an order denying appellants' motion to exclude it. The court found that such evidence caused neither a constructive amendment nor a variance, explaining that, [s]ince some of the checks issued by Caguas [that were ultimately used to make payments on failing loans] were jointly issued to innocent third party payees, these payees' endorsement would have been required before the checks could actually be cashed or deposited in the bank. Since disbursement of the funds could not be completed until the checks were cashed . . . in some cases forged endorsements would necessarily be required. The court concluded that, rather than constructively amending or varying the indictment, the forged endorsements were direct evidence of one component of appellants' scheme. Finally, to foreclose any possibility that the jury would convict appellants based on the forgery evidence, the court issued thorough instructions regarding the elements of bank fraud and conspiracy as well as an instruction specifically tailored to the evidence of forgery: You have heard evidence about checks with allegedly forged endorsements. The crime of forgery is not charged . . . . The fact that endorsements may be forged may only be used to assist you, as you may find useful, in your evaluation of all the evidence in the case. . . . 40 147 The district court's order accurately assesses the value of the forgery evidence, and the admission of such evidence did not constructively amend the indictment or result in a variance. We further conclude that its instruction was more than sufficient to inform the jury of the proper role of that evidence. 148 We view the check-kiting evidence similarly. The disputed evidence consisted of testimony from Somohano (the vice president of Caguas' commercial loan department) that in 1983 he detected a check-kiting scheme involving two Gutiérrez corporations' accounts at Caguas and Banco de Ponce. When he informed Muñoz-Franco and Sánchez-Arán, Muñoz-Franco scolded Somohano and denied that check-kiting was occurring. Somohano further testified that Sánchez-Arán continued to honor the checks sent to Caguas even after Banco de Ponce stopped honoring checks deposited with them. The check-kiting continued, resulting in overdrafts of more than $900,000 on the Gutiérrez-owned companies' accounts at Caguas. This overdraft ultimately was converted into a loan. 149 The district court did not err in admitting this evidence. The reactions of Muñoz-Franco and Sánchez-Arán when Somohano told them about the check-kiting scheme demonstrate both their goal of preserving the Gutiérrez-owned companies' financial status and the preferential treatment that these companies received. This evidence was directly relevant to the charges of bank fraud and conspiracy, and was not outside the scope of the original indictment. Thus, we conclude that no constructive amendment or improper variance occurred. 150