Court Opinion

ID: 5120986
Source: CourtListenerOpinion
Date Created: 2021-10-25 20:01:37.971961+00
Date Added: 2024-06-11T08:22:20.379367
License: Public Domain

In the

    United States Court of Appeals
                 For the Seventh Circuit
                     ____________________
No. 20-2734
UNITED STATES OF AMERICA,
                                                   Plaintiff-Appellee,
                                 v.

CARL P. PALLADINETTI,
                                               Defendant-Appellant.
                     ____________________

         Appeal from the United States District Court for the
           Northern District of Illinois, Eastern Division.
          No. 13-CR-771-3 — Virginia M. Kendall, Judge.
                     ____________________

  ARGUED SEPTEMBER 28, 2021 — DECIDED OCTOBER 25, 2021
                ____________________

   Before FLAUM, KANNE, and SCUDDER, Circuit Judges.
    KANNE, Circuit Judge. Carl P. Palladinetti participated in a
scheme to defraud lenders into facilitating certain real estate
transactions. He and his co-defendants were charged with
many counts of bank fraud and making false statements. The
district court held a bench trial on one of the bank fraud
counts. The only issue was whether one of the banks Palladi-
netti defrauded was insured by the Federal Deposit Insurance
2                                                  No. 20-2734

Corporation (“FDIC”). The district court determined that it
was and found him guilty. We aﬃrm.
                       I. BACKGROUND
    A. Scheme
    Palladinetti admits to knowingly participating in a years-
long scheme to defraud lenders. He and several others used
this scheme to purchase at least thirty apartment buildings in
the Chicago area and resell the individual apartments as con-
dominiums. Using a process that Palladinetti helped create,
his co-defendants bought the buildings without providing
down payments, while falsely representing to lenders fund-
ing the purchases that they had. Palladinetti served as his co-
defendants’ attorney for the purchase of the buildings and the
sale of the condominiums, and as the registered agent for lim-
ited liability corporations formed to facilitate the scheme. The
group recruited buyers for the condominiums and prepared
their mortgage applications, misrepresenting certain facts to
ensure they qualiﬁed for the loans.
    On September 26, 2013, a grand jury returned a sixteen-
count indictment charging Palladinetti and his co-defendants
with seven counts of bank fraud, in violation of 18 U.S.C.
§ 1344(1) and (2), and nine counts of making false statements
on loan applications, in violation of 18 U.S.C. §§ 1014 and 2.
Most relevant to this appeal is count one, which involves a
$345,000 mortgage that Palladinetti’s wife obtained from
Washington Mutual Bank, FA for the purchase of a residence
located at 7024 Rockwell Street #1, Chicago, Illinois. The ap-
plication for this mortgage was prepared and submitted using
the group’s fraudulent scheme on July 14, 2005. The
No. 20-2734                                                  3

government agreed to dismiss all other counts if Palladinetti
were convicted on count one.
   Palladinetti and the government proceeded via bench trial
on count one. Because Palladinetti stipulated to facts satisfy-
ing almost all elements of the § 1344(1) bank fraud charge in
count one, the trial was limited to one issue: whether the bank
he defrauded was insured by the FDIC when the mortgage
application was submitted.
   B. Evidence
   The government’s ﬁrst nine exhibits were admitted with-
out objection at the beginning of the trial.
    The ﬁrst three are certiﬁcates issued by the FDIC attesting
that it insures the deposits of the institutions named therein.
All three certiﬁcates share the same number: 32633. The insti-
tutions named are:
   •   Washington Mutual Bank, FA (Stockton, CA) (dated
       October 1, 1997)
   •   Washington Mutual Bank (Stockton, CA) (dated April
       4, 2005)
   •   Washington Mutual Bank (Henderson, NV) (dated
       September 23, 2005)
   The fourth exhibit is an Amended Form 10-K that Wash-
ington Mutual, Inc. submitted to the Securities and Exchange
Commission (“SEC”) for the year ending December 31, 2005.
The 10-K includes a section that explains that Washington
Mutual, Inc. owns two federal savings associations that
merged and underwent a name change:
           The federal savings associations are subject to
       extensive regulation and examination by the [Oﬃce
4                                                     No. 20-2734

       of Thrift Supervision (“OTS”)], their primary federal
       regulator, as well as the [FDIC]. On January 1, 2005,
       the Company’s state savings bank, the former Wash-
       ington Mutual Bank merged into Washington Mu-
       tual Bank, FA, and ceased to exist; subsequently,
       Washington Mutual Bank, FA changed its name to
       Washington Mutual Bank (“WMB”). …
           Both of the Company’s banking subsidiaries are
       under the common control of Washington Mutual,
       Inc. and are insured by the FDIC.
    The government’s ﬁfth exhibit is a certiﬁed copy of a
mortgage that was recorded with the Cook County recorder
of deeds for the residence at 7024 Rockwell Street #1, Chicago,
Illinois. The ﬁrst page of the mortgage lists as the lender
“Washington Mutual Bank, FA, a federal association.” It is
dated July 14, 2005. Included with the mortgage are an
adjustable-rate rider and a condominium rider, both also
dated July 14, 2005. Both list as the lender “Washington
Mutual Bank, FA.”
   The government’s sixth and seventh exhibits are Housing
and Urban Development (“HUD”) settlement statements—
known as “HUD-1s”—that show that the lender related to the
transaction at issue is “Washington Mutual Bank, F.A.”
    The eighth exhibit is a letter, dated January 25, 2005, from
the corporate secretary at Washington Mutual Bank, FA to the
OTS, the regulatory body with primary oversight over the
bank at that time. In the letter, the secretary explained that
Washington Mutual Bank, FA had recently merged with
Washington Mutual Bank, and the resulting entity was taking
the formal step of changing its corporate title to “Washington
Mutual Bank,” while also continuing to do business under the
No. 20-2734                                                    5

name “Washington Mutual Bank, FA.” The letter provided
that the name change would be eﬀective as of April 4, 2005.
    The ninth and ﬁnal exhibit admitted at the beginning of
the trial is a Certiﬁcate of Succession in Interest issued by the
OTS recognizing that the two banks had merged on January
1, 2005; that the resulting institution was “Washington Mutual
Bank, FA, Stockton, California”; that that institution changed
its corporate title to “Washington Mutual Bank” on April 4,
2005; and that the bank’s bylaws permitted doing business
under the name “Washington Mutual Bank, FA.”
  Three witnesses testiﬁed at the trial: Brett Hellstrom, John
Lombardo, and Geraldine Schnock.
    The ﬁrst to testify was Hellstrom, who worked as a senior
mortgage underwriter for Washington Mutual Bank from Jan-
uary 2005 until September 2008, when it was acquired by JP
Morgan Chase. Hellstrom testiﬁed that while he was working
at the bank, the name changed from “Washington Mutual
Bank, FA” to “Washington Mutual Bank,” but that it contin-
ued to do business under both names. During Hellstrom’s tes-
timony, the government highlighted supporting information
from the 10-K, the January 25, 2005 letter to the OTS, and the
OTS Certiﬁcate of Succession in Interest. Hellstrom also testi-
ﬁed that his day-to-day duties did not change after the name
change and that the bank did, in fact, continue to do business
under the “FA” name.
    Next to testify was Lombardo, who at the time of the trial
had worked for the FDIC for twenty-six years and served as a
case manager for seventeen of those years. He testiﬁed that
FDIC certiﬁcates reﬂect the insured status of a ﬁnancial insti-
tution and contain the institution’s number, a unique
6                                                  No. 20-2734

identiﬁer that remains constant across name changes. Then,
addressing the certiﬁcates admitted in evidence, he testiﬁed
that the ﬁrst shows that Washington Mutual Bank, FA was in-
sured beginning in 1997, the second reﬂects a name change to
“Washington Mutual Bank” in April of 2005, and the third re-
ﬂects a change in the address of the main oﬃce of the bank
from Stockton, California to Henderson, Nevada. Moreover,
Lombardo testiﬁed that the institution number on each certif-
icate is the same: 32633. He also said that nothing in the
FDIC’s records indicates a break in the institution’s insured
status between 1997 and 2008.
    The last witness to testify was Schnock, a woman who had
been a close friend of Palladinetti’s for twenty years. She tes-
tiﬁed that Palladinetti asked her in 2014 to research Washing-
ton Mutual Bank’s FDIC insurance status. After she pulled the
institution’s insurance history from the FDIC website, she cor-
responded with someone from the FDIC via email. She asked
that person whether Washington Mutual, FA still existed and
was still insured after the April 2005 name change. She testi-
ﬁed that she received a response indicating that Washington
Mutual Bank, FA no longer existed. The government did not
object to the admission of the response email, though it did
note that it is hearsay.
    The district court weighed the evidence and concluded
that the government had met its burden to show that the de-
posits of the lender who provided the mortgage at issue were
insured by the FDIC at the relevant time. Accordingly, the
court found Palladinetti guilty of bank fraud. Palladinetti now
appeals, challenging the suﬃciency of the evidence the dis-
trict court relied on in ﬁnding him guilty.
No. 20-2734                                                      7

                          II. ANALYSIS
    We use the same standard for a suﬃciency-of-the-
evidence challenge to a conviction stemming from a bench
trial as we do for one resulting from a jury trial. See United
States v. O’Leary, 957 F.3d 731, 733 (7th Cir. 2020). We have
characterized such a challenge as an “uphill battle,” United
States v. Angle, 234 F.3d 326, 339 (7th Cir. 2000), where a
defendant faces a “nearly insurmountable” burden, United
States v. Grayson Enters., Inc., 950 F.3d 386, 405 (7th Cir. 2020).
“[W]e review the evidence in the light most favorable to the
government, and we will overturn a … verdict only if no
rational trier of fact could have found the essential elements
of the crime beyond a reasonable doubt.” United States v.
Ginsberg, 971 F.3d 689, 695 (7th Cir. 2020) (quoting United
States v. Orlando, 819 F.3d 1016, 1021 (7th Cir. 2016)). “We will
not re-weigh the evidence or second-guess credibility
determinations.” Id.
    For the district court to convict Palladinetti of bank fraud
under 18 U.S.C. § 1344, the government was required to prove
beyond a reasonable doubt that: “(1) there was a scheme to
defraud a [ﬁnancial institution]; (2) [Palladinetti] knowingly
executed or attempted to execute the scheme; (3) [Palladinetti]
acted with the intent to defraud; (4) the scheme involved a
materially false or fraudulent pretense, representation, or
promise; and (5) at the time of the charged oﬀense the bank’s
deposits were insured by the [FDIC].” United States v. Fried-
man, 971 F.3d 700, 712–13 (7th Cir. 2020); see also 18 U.S.C.
§ 1344.
   Because Palladinetti stipulated to facts satisfying the ﬁrst
four elements, only the last element is disputed. We conclude
that Palladinetti has not overcome his “nearly
8                                                 No. 20-2734

insurmountable” burden because the district court’s ruling is
supported by more than enough evidence from which a ra-
tional trier of fact could have found the essential elements of
the crime beyond a reasonable doubt.
    We begin with the loan document, which lists the lender
as “Washington Mutual Bank, FA, a federal association.” Hell-
strom testiﬁed that the “FA” stands for “federal association.”
Moreover, the adjustable-rate rider and the condominium
rider—both of which were included with the mortgage and
executed on the same day (July 14, 2005)—name the lender as
“Washington Mutual Bank, FA.” The district court permissi-
bly concluded that these names refer to the same entity.
   The next question is whether that entity’s deposits were
insured by the FDIC on July 14, 2005. In early 2005, the entity
was called “Washington Mutual Bank, FA.” Hellstrom testi-
ﬁed that the bank changed its name by dropping the “FA”
sometime in 2005 but continued doing business under both
the new and old names. This is also supported by the 10-K, a
sworn statement submitted to the SEC, which indicated that
“Washington Mutual Bank” merged into “Washington Mu-
tual Bank, FA” and ceased to exist. The 10-K also says that
Washington Mutual Bank, FA, the surviving entity, subse-
quently changed its name to “Washington Mutual Bank.”
This is further supported by the letters to and from the OTS,
which pinpoint the change in corporate title to April 4, 2005,
and likewise state that the bank is permitted to conduct busi-
ness under both names.
   On July 14, 2005, the date the mortgage was executed, the
corporate title of the lender was “Washington Mutual Bank,”
but its “doing business as” name, “Washington Mutual Bank,
FA,” appeared on the loan documents.
No. 20-2734                                                   9

    The testimony of Lombardo and the FDIC certiﬁcates
show that this entity was continuously insured by the FDIC
from 1997 to 2008, including on the date the mortgage was
executed. The ﬁrst FDIC certiﬁcate reﬂects that, beginning in
1997, “Washington Mutual Bank, FA” was insured under cer-
tiﬁcate number 32633. Then, tracking the other name-change
testimony and related documents, the second certiﬁcate, is-
sued on April 4, 2005, shows that “Washington Mutual Bank”
was insured under the same number. Finally, a certiﬁcate is-
sued on September 23, 2005 indicates that “Washington Mu-
tual Bank” was still insured under the same number but that
its main oﬃce had moved to Nevada.
    The district court permissibly concluded that the testi-
mony and admitted exhibits presented at trial demonstrated
that one entity was continuously insured from 1997 to 2008,
that on the date the mortgage was executed that entity was
formally called “Washington Mutual Bank” but also did busi-
ness as “Washington Mutual Bank, FA,” and that that entity
was the lender that provided the mortgage at issue to Palladi-
netti’s wife. This evidence, paired with the stipulations, was
suﬃcient for a rational trier of fact to ﬁnd Palladinetti guilty
of bank fraud beyond a reasonable doubt.
    Palladinetti relies on United States v. Alexander, 679 F.3d
721 (8th Cir. 2012), for the proposition that “merely pointing
out that a ﬁnancial entity has a similar name as an FDIC-
insured ﬁnancial entity, without more … is insuﬃcient for the
purpose of sustaining a conviction for federal bank related
crimes.” Appellant’s Br. 12. In Alexander, the defendant stipu-
lated that “Bank of America” was FDIC-insured, but the insti-
tutions she defrauded were “Bank of America, N.A.” and
“Bank of America Mortgage.” 679 F.3d at 727. Because the
10                                                  No. 20-2734

names were substantially diﬀerent, in the absence of evidence
showing that the defrauded institutions were independently
FDIC-insured or alter egos of “Bank of America,” there was a
failure of proof on the insurance element, and the court va-
cated the convictions. Id. at 727–28. By contrast, here, the evi-
dence was suﬃcient to show that the lender was “Washington
Mutual Bank, FA” despite the fact that the name on the ﬁrst
page of the mortgage also showed what FA stands for: “a fed-
eral association.” Thus, Palladinetti’s reliance on Alexander is
misplaced.
                       III. CONCLUSION
    For the reasons explained above, the district court did not
err in ﬁnding Palladinetti guilty of bank fraud. We AFFIRM.