Opinion ID: 2996273
Heading Depth: 3
Heading Rank: 7

Heading: Cole Taylor.

Text: No. 01-4084 13 and will not reverse a jury verdict if the erroneous ruling is determined to be harmless. Fed. R. Crim. P. 52(a); Rehling v. City of Chicago, 207 F.3d 1009, 1017 (7th Cir. 2000). An “[a]buse of discretion only occurs when no reasonable person could take the view of the trial court.” United States v. Hilgeford, 7 F.3d 1340, 1345 (7th Cir. 1993). The government argues that Lane has waived this issue on appeal because before the district court Lane objected to the extrinsic act evidence on the basis that it would portray him as a “deadbeat” and now argues that the evidence was used to portray him as a “liar.” If a claim is not preserved we review for plain error. However, we find that Lane has adequately preserved this claim on appeal. He briefed his Rule 404(b) and Rule 403 objections fully before trial, and at trial made repeated objections to the other debt evidence. The district court overruled those objections. At one point during trial, the government agreed that Lane had preserved his objections to the other debt evidence: “Your Honor, I think that a standing objection to the evidence regarding Mr. Lane’s debts would preserve their record and we would not think it’s necessary or appropriate to object every time there is a reference to it.” The government’s distinction between a “deadbeat” and a “liar” is de minimis and Lane’s Rule 404(b) and 403 objections at the district court sufficiently alerted the court and the government as to the arguments that Lane now raises on appeal. See United States. v. Manso-Portes, 867 F.2d 422, 426 (7th Cir. 1988). The primary issue, therefore, is whether the government’s introduction of Lane’s outstanding debts and other financial obligations was correctly treated as direct or inextricably intertwined evidence, and therefore outside the scope of Rule 404(b), or whether should it have been treated as character evidence. Rule 404(b) is inapplicable 14 No. 01-4084 where the “bad acts” alleged are really direct evidence of an essential part of the crime charged. United States v. Elder, 16 F.3d 733, 737 (7th Cir. 1994). Similarly, cases applying the “intricately related” doctrine have recognized that evidence concerning the chronological unfolding of events that led to an indictment, or other circumstances surrounding the crime, is not evidence of “other acts” within the meaning of Rule 404(b). See Hilgeford, 7 F.3d 1340, 1345-46 (7th Cir. 1993) (evidence of a defendant’s litigation concerning ownership of farm lost in foreclosure was intricately related to subsequent prosecution for filing false tax returns where knowledge of nonownership was at issue). Although inextricably related evidence does not have to satisfy 404(b), it still must satisfy the balancing test of Rule 403. See United States v. Ward, 211 F.3d 356, 362 (7th Cir. 2000). Against this backdrop we then consider whether the evidence to which Lane objects was direct, or intricately related, evidence of the charged offenses. To answer this question we turn to the statute un- der which he was charged, 18 U.S.C. § 1014. Section 1014 criminalizes “knowingly mak[ing] any false statement or report . . . for the purpose of influencing in any way the action” of a Federal Deposit Insurance Corporation (FDIC) insured bank “upon any application, advance, . . . commitment, or loan.” United States v. Wells, 519 U.S. 482, 490 (1997) (citing 18 U.S.C. § 1014). Counts 6-9 of the indictment alleged that Lane falsely stated in his guarantees of payment to ANB and South Shore that there was no litigation pending which might adversely affect his ability to honor his debts to those institutions. In order to show that Lane’s statements to the banks were false, the government had the burden of proving that Lane’s debts, and specifically his debt to NIRT and subsequent $2.4 million judgment, could adversely affect his performance No. 01-4084 15 on those guarantees. Under §1014, the government also had to prove that Lane knew that he could not honor those guarantees at the time the agreements were executed. In order to establish this knowledge the government offered evidence of Lane’s net worth and annual income, of which Lane’s tax returns served as direct evidence. Because his net worth and available income was relevant to Lane’s ability, and knowledge of his ability, to honor the guarantees, the tax returns were properly categorized as non-404(b) evidence. Additionally, under Count 3, which charged that Lane falsely stated to ANB that the tenant under the lease had tendered a security deposit, the government had the burden to show that this statement was false because Lane himself had tendered the deposit. Therefore, the evidence introduced concerning Lane’s $240,000 debt to Reverend Daniel, incurred to obtain the money for the security deposit, was properly categorized as direct evidence of Lane’s false statements to ANB. The admissibility of the remaining extrinsic debt evidence turns on whether it was intricately related to Lane’s charged criminal activity. “This Circuit has a well-established line of precedent which allows evidence of uncharged acts to be introduced if the evidence is ‘intricately related’ to the acts charged in the indictment.” United States v. Ryan, 213 F.3d 347, 350 (7th Cir. 2000) (quoting United States v. Gibson, 170 F.3d 673, 680 (7th Cir. 1999)). Under the “intricately related” doctrine, the admissibility of Lane’s uncharged activity turns on: whether the evidence is properly admitted to provide the jury with a complete story of the crime [on] trial, . . . whether its absence would create a chronological or conceptual void in the story of the crime, . . . or whether it is so blended or connected that it incidentally in16 No. 01-4084 volves, explains the circumstances surrounding, or tends to prove any element of, the charged crime. Ryan, 213 F.3d at 350, quoting United States v. Ramirez, 45 F.3d 1096, 1102 (7th Cir. 1995) (citations omitted). Here, the extrinsic debt evidence introduced by the government provided the jury with both the complete story of Lane’s fraud and tended to prove the charged offenses. The existence of the outstanding and past due loans to a variety of organizations, banks, and one individual, see supra n. 2, demonstrated Lane’s complete financial situation as well as provided to the jury a timeline as to Lane’s increasing debts and lack of financial liquidity to meet those obligations. The extrinsic debts also completed the story of Lane’s fraud by demonstrating his actual, as opposed to claimed, financial worth. Specifically the extrinsic debt evidence, which was also undisclosed to the defrauded banks, showed that Lane’s financial statements were incomplete. Finally the evidence tended to show Lane’s intent to defraud, in contrast to his defense that a mistake had been made in the refinancing application to ANB, because more than just his debt to NIRT was omitted from his financial statement. The basis for the criminal charges against him were his efforts to induce financial institutions to refinance his debts, and by failing to disclose these other debts he was able to achieve this goal. If the government had been limited to only the introduction of Lane’s own financial statements, which were admittedly incorrect, it would not have provided the jury with a complete picture of the Lane’s knowledge of the falsity of his statements and his purpose in obtaining the refinancing from ANB and South Shore. Accordingly, because we find that the evidence of Lane’s outstanding debts was both direct evidence of his fraudulent activity as well as intricately related to the crimes No. 01-4084 17 charged, we need not address Lane’s concerns under Rule 404(b). See Ward, 211 F.3d at 362. The question remains as to whether the district court abused its discretion in admitting this evidence, because intricately intertwined evidence must still satisfy the “balancing test” requirements of Rule 403. Rule 403 provides that, although relevant, evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or potential to mislead the jury. Fed. R. Evid. 403. Lane argues that because it is obvious that a $2.4 million judgment can “materially affect” the ability of someone whose claimed net worth is $2.5 million to repay a $1.9 million loan, this evidence had no probative value. In other words, he concedes that the Casita Bonita judgment alone showed his inability to make good on the refinancing scheme and therefore no other evidence was necessary. Lane also claims that the Swain financial statement from 1995 had no bearing on the 1993 and 1994 charged crimes, and was only introduced to provide additional fodder for the government’s prejudicial argument that Lane should be found guilty because he is a liar. However, the government’s evidence gave a clear indication as to what Lane’s financial situation was, and how he misrepresented it. Although the evidence was harmful to Lane, it was not unfairly prejudicial within the meaning of Rule 403. The probative value of the evidence outweighed any prejudicial effect of its admittance in that the government had the burden of showing that Lane knew his statements to ANB and South Shore were false and also that the statements were made with the intent to induce the banks into lending him more money. Moreover, even if some of the evidence was improperly admitted, it was harmless error. At the close of trial, at 18 No. 01-4084 Lane’s request, the district court instructed the jury as follows: “You have heard the evidence of acts of the defendant other than those charged in the indictment. You may consider this evidence only on the question of the defendant’s motive, intent, knowledge, and absence of mistake or accident. You should consider this evidence only for this limited purpose.” This limiting instruction mitigated whatever unfair prejudice may have existed. See United States v. Macey, 8 F.3d 462, 467 (7th Cir. 1993) (holding that improper introduction of extrinsic acts evidence was harmless in light of overwhelming evidence of guilt as well as limiting instructions). Additionally, the direct evidence of fraud was overwhelming, considering the existence of the NIRT debt and proof of Lane’s knowledge of that debt, and therefore any error was harmless. See United States v. Manganellis, 864 F.2d 528, 539 (7th Cir. 1988) (“An error is harmless if the other untainted incriminating evidence is overwhelming.”). 2. Exclusion of lack of intent evidence. Next, Lane contends that the district court improperly prevented him from presenting evidence that he lacked the specific intent required by 18 U.S.C. § 1014. Specifically, Lane argues that the district court erroneously prevented him from introducing: (1) evidence relating to Loyola’s involvement in the refinancing of the ANB loan and the fact that the alleged “victim”—ANB—actually benefitted from the refinancing; (2) evidence that ANB had already determined that Lane had a negative net worth, and had further determined from this that it would not have done the deal without Loyola’s Put Agreement, which Lane knew; (3) evidence relating to a post-closing conversation that Lane had with ANB bankers and lawyers on February 16, 1994; and (4) testimony from the No. 01-4084 19 drafter of the Amendment to Lease that the language in the Amendment did not prohibit Lane or anyone else from advancing the security deposit on behalf of the supermarket tenant. This court reviews the exclusion of evidence for abuse of discretion. United States v. Foster, 30 3 F.3d 65, 67 (7th Cir. 1994). Lane first contends that if the court had allowed him to introduce evidence of Loyola’s involvement with the shopping center refinancing scheme and ANB’s determination of his net worth, it would have proven the overwhelming importance of Loyola’s Put Agreement in ANB’s decision to refinance. Essentially he claims that ANB did not rely on his net worth in the refinancing but instead only relied on Loyola to repay the debt in case of a default. Because his guarantee was immaterial to the deal, he argues, he had no motivation to misstate his finances. However, the materiality of Lane’s guarantee and ANB’s reliance thereon is irrelevant. Section 1014 does not require that a false statement must be material or even mention materiality. Specifically § 1014 only criminalizes “knowingly mak[ing] any false statement or report . . . for 3 Lane suggests that any curtailing of his ability to elicit testimony about the losses by ANB and Loyola may violate his Sixth Amendment right to confront witnesses against him. The Confrontation Clause guarantees the right of criminal defendants to cross-examine witnesses in order to show their possible motive, self-interest or lack of credibility. See Delaware v. Van Arsdall, 475 U.S. 673, 679 (1986). However, a trial judge may still limit cross-examination based on issues such as harassment, prejudice, confusion of the issues, repetitiveness or lack of relevance. Id.; see also United States v. Cavender, 228 F.3d 792, 798 (7th Cir. 2000). Therefore, the court’s rulings on Lane’s objections are still scrutinized under Rule 403. 20 No. 01-4084 the purpose of influencing in any way the action” of a Federal Deposit Insurance Corporation (FDIC) insured bank “upon any application, advance, . . . commitment, or loan.” Wells, 519 U.S. at 490 (citing 18 U.S.C. § 1014), cf. United States v. Erskine, 588 F.2d 721, 722 (9th Cir. 1978) (holding that the “elements of a section 1014 violation include these requisite mental states: knowledge of falsity, and the intent to influence action by the financial institution concerning a loan or one of the other transactions listed in the statute”). We have previously and repeatedly interpreted § 1014 to exclude any element of materiality. See United States v. Swanquist, 161 F.3d 1064, 1075 (7th Cir. 1998) (citing Wells, 519 U.S. at 490-91) (“[M]ateriality is not, and never was, an element of the crime of knowingly making a false statement to a federally-insured bank under § 1014.”); see also United States v. Reynolds, 189 F.3d 521, 525-26 (7th Cir. 1999); United States v. Krilich, 159 F.3d 1020, 1028 (7th Cir. 1998). Based on this line of case law, the district court excluded any evidence that tended to show that ANB and Loyola did not rely on Lane’s financial condition in deciding to participate in the refinancing. Because this evidence was irrelevant to the crimes charged and therefore had limited probative value, we find that by excluding it, the district court did not abuse its discretion. See United States v. Adames, 56 F.3d 737, 746 (7th Cir. 1995) (stating that a district court’s balancing of probative value versus prejudice is a “highly discretionary function which is afforded great deference by this Court”). Lane also contends that the district court erred in excluding evidence of Loyola’s involvement with the shopping center refinancing scheme because the manner in which ANB and Loyola structured the deal prevented losses to either party in the transaction. In turn Lane reasons that No. 01-4084 21 the evidence that neither the bank nor ANB sustained a loss would have tended to show that he did not have the requisite intent to defraud ANB. However, much like materiality, loss is not an element under § 1014. Because the lack of loss is not a defense, evidence regarding the lack of loss is irrelevant. See United States v. Waldrip, 981 F.2d 799, 806 (5th Cir. 1993). In response, Lane cites United States v. Copple, 24 F.3d 535, 545 (3d Cir. 1995), for the proposition that “when the contested issue is intent, whether or not victims lost money can be a substantial factor in the jury’s determination of guilt or innocence.” Copple, 24 F.3d at 545. See also United States v. Foshee, 569 F.2d 401, 403-04 (5th Cir. 1978) (superseded on other grounds by United States v. Foshee, 578 F.2d 629 (5th Cir. 1978)). Copple and Foshee both involve mail fraud under 18 U.S.C. § 1344. Section 1344 proscribes any scheme to defraud or obtain money or property from a financial institution by means of false and fraudulent pretenses, representations or promises. 18 U.S.C. § 1344. However, the district court properly observed that the intent described by § 1014 is different from the intent delineated in § 1344. Section 1344 requires the showing of an intent to deceive a bank in order to obtain from it money or other property. See United States v. Kenrick, 221 F.3d 19, 26-27 (1st Cir. 2000). On the other hand, § 1014 proscribes false statements made “for the purpose of influencing in any way the action” of the lending institution. 18 U.S.C. §1014 (emphasis added). See also United States v. Madsen, 620 F.2d 233, 235 (10th Cir. 1980) (“(T)he only intent necessary (is) an intent to influence the bank, and not an intent to harm the bank or to profit.”). Therefore, even if this evidence may have tended to show that Lane did not intend to cause ANB or Loyola a loss, it would not necessarily have been probative on the issue of whether he intended to influence the banks to issue the loan with his 22 No. 01-4084 own false statements. Even if the court had considered whether the victims suffered a loss as relevant to the issue of intent, the court did not improperly exclude this evidence, considering its lack of probative value and the possibility that the jury would consider the evidence for irrelevant purposes. Therefore the district court did not abuse its discretion in excluding the evidence of ANB’s and Loyola’s losses on the refinancing. Lane also contests the district court’s exclusion of a conversation in February 1994, and a related memo, where he and his attorney advised ANB that Lane had forestalled the opening of Shopper’s Lane, and that he was negotiating with other tenants for the anchor tenant space. Lane claims that this evidence “demonstrated for the jury that [defendant] was communicating to ANB in good faith about the status of the grocery store tenant, and that ANB knew about the uncertainty of the anchor tenant.” The district court properly excluded this evidence for several reasons. First, the evidence was properly categorized by the district court as inadmissible hearsay because, even under Lane’s theory of the case, the statements of Lane and his attorney were relevant only if true. Fed. R. Evid. 801, 802. Lane relies on United States v. McClure, 546 F.2d 670, 672-73 (5th Cir. 1977), for the proposition that this evidence was not offered for the truth of the matter asserted but instead was admissible as non-hearsay evidence to prove his lack of intent to defraud. McClure does not support this position. In that case, evidence of a series of threats made by the government’s confidential informant was admitted to show that the informant had entrapped other drug dealers. The evidence was not admitted to prove the defendant’s intent, but rather to show that he was entrapped. Id. No. 01-4084 23 Second, it is not clear how a conversation on February 16, 1994 is relevant to the statements made on November 1, 1993, when the refinancing, including the fraudulent leasing agreement, was executed. This is especially so when those statements were not admissions of fraudulent activity or attempts to cure the fraud, but instead were explanations of delays caused by the fraud and requests for more time to find a qualified tenant. Even if we were to assume that the evidence would have shown that Lane was acting in good faith in February 1994, the fact that he may have been communicating to the bank in good faith in February 1994 has no bearing on whether he was honest with the bank in November 1993. See United States v. Winograd, 656 F.2d 279, 284 (7th Cir. 1981) (defendant may not seek to establish his innocence through proof of the absence of criminal acts on other specific occasions). Due to these concerns, we find that the district court did not abuse its discretion in excluding Lane’s post-offense statements. Lane also contends that the district court erred by precluding Keith Moore, the attorney for the Seventh Day Adventists and Continental Partners, from testifying that the Amendment to Lease did not prohibit Lane from advancing the deposit on behalf of the supermarket tenant. The district court excluded this testimony, finding that the document adequately spoke for itself. The district court’s ruling was proper under Rule 403 because the meaning of the Lease Amendment was plain from the face of the document, and hence the probative value of Moore’s testimony was minimal. Second, any such testimony from one of Lane’s own attorneys would be selfserving and certainly extrinsic absent any ambiguity in the document. Additionally, Lane’s counsel was able to, and did, make this point during closing argument. Moreover, 24 No. 01-4084 any probative value was substantially outweighed by the dangers of unfair prejudice and juror confusion. Therefore the court did not abuse its discretion in excluding Moore’s testimony. Considering the district court’s evidentiary rulings under the standard that an “[a]buse of discretion only occurs when no reasonable person could take the view of the trial court.” United States v. Hilgeford, 7 F.3d 1340, 1345 (7th Cir. 1993), we find that the district court did not abuse its discretion in the admission or exclusion of evidence at trial. To the extent that any errors were made, they were harmless considering the wealth of evidence presented against Lane as to his debt to NIRT and knowledge of the falsity of the financial statements he provided to ANB. Rehling, at 1017.