Court Opinion

ID: 4325913
Source: CourtListenerOpinion
Date Created: 2018-10-31 00:00:19.416963+00
Date Added: 2024-06-11T07:49:14.612878
License: Public Domain

Case: 18-40036   Document: 00514704142       Page: 1   Date Filed: 10/30/2018

        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT
                                                                 United States Court of Appeals
                                                                          Fifth Circuit

                                                                        FILED
                                   No. 18-40036                   October 30, 2018
                                                                   Lyle W. Cayce
UNITED STATES OF AMERICA,                                               Clerk

            Plaintiff - Appellee

v.

SILVIA BEATRIZ PEREZ-CEBALLOS,

            Defendant - Appellant

                Appeal from the United States District Court
                     for the Southern District of Texas

Before JONES, BARKSDALE, and WILLETT, Circuit Judges.
EDITH H. JONES, Circuit Judge:
      Following a jury trial, appellant Perez-Ceballos was exonerated of money
laundering but convicted for bank fraud perpetrated upon a branch of
J.P. Morgan Chase Bank under 18 U.S.C. § 1344(1). After carefully reviewing
the record, we conclude there was insufficient evidence to sustain the
conviction and therefore REVERSE.
                               BACKGROUND
      Silvia Beatriz Perez-Ceballos moved to the United States in May 2013
after her husband, Jose Manuel Saiz-Pineda, lost his position as Secretary of
Finance and Administration for the State of Tabasco, Mexico, in the 2012
elections. She testified that she has not returned to Mexico since. Shortly after
her arrival in Texas, in June 2013, Perez-Ceballos opened a bank account in
    Case: 18-40036    Document: 00514704142     Page: 2   Date Filed: 10/30/2018

                                 No. 18-40036
her name at J.P. Morgan Chase Bank (“Chase Bank”) at its Richmond Sage
branch in Houston. No false statements were alleged to have been made in
connection with opening this account. Nevertheless, in 2017, Perez-Ceballos
was convicted of defrauding Chase Bank based on her transfer of certain funds
to and through this account.
      To properly trace Perez-Ceballos’s transfers of funds, it is necessary to
backtrack several years. In 2010, while living in Mexico, Perez-Ceballos and
her husband opened a securities account at HSBC U.S. Bank (“HSBC”). The
couple represented to HSBC that the source of funds for the account was their
accumulated savings and savings/employment. Perez-Ceballos acknowledged
to the HSBC financial advisor, Sonia Fernandez, that she was a “politically
exposed person” (“PEP”), a designation reserved for individuals who hold office
in a foreign government and for their families.      In 2012, after Fernandez
transferred to UBS Financial Services (“UBS”) and HSBC decided to close its
PEP accounts, Perez-Ceballos and Saiz-Pineda contacted Fernandez and
transferred their assets from HSBC to UBS. The PEP designation followed
Perez-Ceballos and Saiz-Pineda when they transferred their assets to UBS
because once someone is designated a PEP, she is always a PEP—even if she
or her family member leaves office.
      Perez-Ceballos and Saiz-Pineda maintained their account with UBS
until the political upheaval in Mexico. After he was ousted from office, Saiz-
Pineda was apprehended while trying to enter the United States in June 2013,
after which he was arrested by the Mexican authorities and charged with
illegal enrichment. Upon learning of his arrest, Fernandez notified Perez-
Ceballos that UBS could no longer service the account and that she would need
to transfer the assets elsewhere. Fernandez advised Perez-Ceballos of her
options: she could transfer the assets in kind, which would require “a brokerage

                                       2
    Case: 18-40036    Document: 00514704142    Page: 3   Date Filed: 10/30/2018

                                No. 18-40036
relationship in the same name,” or she could liquidate the account and “then
send the money wherever it was that she had a relationship.”
      Around that same time, Perez-Ceballos was referred to Paul Arnold, an
international financial advisor with Chase Investment Services Corporation
(“Chase Investment”), to discuss potential investment strategies for the assets
held at UBS. Arnold met exclusively with clients whose primary residence was
outside the United States, because only non-resident aliens were eligible for
the tax-exempt investments that he oversaw.        During their consultation,
Perez-Ceballos falsely told Arnold that her primary residence was in Mexico.
Based on this misrepresentation and after discussing her investment aims,
Arnold recommended that she apply for a brokerage account with Sun Life
Financial, an insurance company registered in Bermuda that operates like a
trust. Perez-Ceballos would not have been deemed eligible for this account if
she had honestly informed Arnold that her primary residence was in Texas.
Notably for jurisdictional purposes, neither Arnold’s employer (Chase
Investment) nor Sun Life Financial is FDIC-insured.
      In the course of opening her Sun Life Financial account, Perez-Ceballos
made several additional misrepresentations to Arnold and Sun Life Financial:
she represented that she was separated from her husband; that she was not a
PEP; and that she signed the requisite documents in Mexico where they had
been mailed to her (as required) when in fact she signed them in Houston after
she sent her brother to retrieve the documents and bring them back to the
United States. Perez-Ceballos also gave Arnold a UBS statement from August
2013, from which she had removed Saiz-Pineda’s name as a joint account
holder.
      In October 2013, having secured an account at Sun Life Financial, Perez-
Ceballos liquidated her account at UBS, transferring over $1.9 million to her
Chase Bank savings account. At Perez-Ceballos’s direction, Chase Bank wired
                                      3
    Case: 18-40036   Document: 00514704142     Page: 4   Date Filed: 10/30/2018

                                No. 18-40036
that $1.9 million to Sun Life Financial. The funds did not return to Chase
Bank after that point. However, in May 2017, Perez-Ceballos attempted to
withdraw funds from Sun Life Financial and again falsely affirmed that she
lived in Mexico. Had her withdrawal been successful, the $1.9 million would
have most likely been transferred back to Perez-Ceballos’s Chase Bank savings
account.
     This last series of transactions—the transfer of $1.9 million from UBS to
Chase Bank to Sun Life Financial in 2013 and the attempted transfer of
$1.9 million from Sun Life Financial back to Chase Bank in 2017—formed the
heart of Perez-Ceballos’s bank fraud conviction. Because the account at Sun
Life Financial was procured by false misrepresentation, the government
contends that the October 2013 transfer through Chase Bank and the May
2017 attempted transfer to Chase Bank exposed Chase Bank to a risk of loss.
     In April 2017, Perez-Ceballos was indicted—along with Saiz-Pineda and
another co-conspirator—on one count of conspiracy to launder monetary
instruments, in violation of 18 U.S.C. § 1956, and one count of conspiracy to
commit bank fraud, in violation of 18 U.S.C. §§ 1344, 1349. The original
indictment alleged that Perez-Ceballos had executed or attempted to execute
“a scheme and artifice to defraud Morgan Stanley Smith Barney, Royal Bank
of Canada, and J.P. Morgan Chase Bank.” The case went to trial. After the
government rested, Perez-Ceballos moved for judgment of acquittal under Fed.
Rule Crim. Pro. 29, based in part on the government’s failure to prove FDIC-
insured status for the banks listed in the indictment.       The government
conceded lack of federal criminal jurisdiction as to Morgan Stanley and the
Royal Bank of Canada, but not as to Chase Bank. The district court accepted
this concession and denied the motion as to Chase Bank. Following another
unsuccessful attempt by Perez-Ceballos to dismiss pursuant to Rule 29, the
jury acquitted Perez-Ceballos of money laundering but found her guilty of bank
                                      4
    Case: 18-40036     Document: 00514704142     Page: 5   Date Filed: 10/30/2018

                                  No. 18-40036
fraud under 18 U.S.C. § 1344(1). The jury rejected all forfeiture contentions,
apparently for lack of sufficient evidence to hold that the property in question
was derived from proceeds obtained through the alleged bank fraud conspiracy.
Perez-Ceballos was sentenced to ten months’ imprisonment.
      Perez-Ceballos    appeals    her   conviction,   contending   that   (1) the
government failed to establish federal criminal jurisdiction; (2) there was
insufficient evidence to support her conviction; and (3) prosecutorial
misconduct occurred at several points during trial. Because this court reverses
Perez-Ceballos’s bank fraud conviction, the prosecutorial misconduct claim is
moot; the following analysis is limited to issues of federal jurisdiction and
evidentiary sufficiency.
                           STANDARD OF REVIEW
      “When a defendant has timely moved for a judgment of acquittal, we
review challenges to the sufficiency of the evidence de novo.” United States v.
Davis, 735 F.3d 194, 198 (5th Cir. 2013). This same standard is used to review
jurisdictional challenges based on lack of FDIC-insured status in prosecutions
under 18 U.S.C. § 1344. Id. at 198–99. Nevertheless, “review of the sufficiency
of the evidence is highly deferential to the verdict.” United States v. Moreno-
Gonzalez, 662 F.3d 369, 372 (5th Cir. 2011) (internal quotation marks and
citation omitted). A conviction must be affirmed if “any rational trier of fact
could have found the essential elements of the crime beyond a reasonable
doubt.” United States v. Vargas-Ocampo, 747 F.3d 299, 301 (5th Cir. 2014) (en
banc) (emphasis omitted).
                                  DISCUSSION
    I.   Federal Jurisdiction
      To sustain a conviction for bank fraud under 18 U.S.C. § 1344, the victim
bank must be FDIC-insured. See Davis, 735 F.3d at 198. “As this Court has
repeatedly and consistently stated” when reviewing bank fraud convictions,
                                         5
    Case: 18-40036     Document: 00514704142     Page: 6   Date Filed: 10/30/2018

                                  No. 18-40036
“proof of FDIC insurance is not only an essential element” of the crime, “but it
is also essential for the establishment of federal jurisdiction.” United States v.
Schultz, 17 F.3d 723, 725 (5th Cir. 1994). Where the government fails to
sufficiently prove the FDIC-insured status of the victim bank, this court has
overturned bank fraud convictions for lack of jurisdiction. See, e.g., Davis,
735 F.3d at 199 (collecting cases). Perez-Ceballos contends that her conviction
should likewise be reversed because the government failed to prove beyond a
reasonable doubt that Chase Bank, the only federally-insured institution
remaining in the case, was the victim of any fraud. Absent proof that Chase
Bank was defrauded, Perez-Ceballos argues, there is no federal jurisdiction.
      We disagree. Whether Chase Bank was the victim of bank fraud goes to
the merits of Perez-Ceballos’s appeal, not to jurisdiction. In this circuit and
others, courts generally wrestle with § 1344 jurisdiction when defendants are
convicted of defrauding a non-FDIC insured institution.         See, e.g., Davis,
735 F.3d at 196, 200–01 (refusing to find jurisdiction where the defendant was
convicted of defrauding American Express Company, which lacked FDIC-
insured status); Schultz, 17 F.3d at 724, 726 (refusing to find jurisdiction where
the defendant was convicted of defrauding TCB-Sugar Land, which lacked
FDIC-insured status); United States v. Edelkind, 467 F.3d 791, 797–98 (1st
Cir. 2006) (upholding jurisdiction where the direct victim was not FDIC
insured after finding that Lehman Brothers, an FDIC-insured institution, was
also victimized by the defendant’s fraud). In this case, by contrast, the FDIC-
insured status of Perez-Ceballos’s alleged victim, Chase Bank, is established
by the record. Both the indictment and jury instructions indicate that Perez-
Ceballos was charged with defrauding Chase Bank, an FDIC-insured
institution. The jury verdict confirms that Perez-Ceballos was convicted of
defrauding Chase Bank, not Chase Investment or Sun Life Financial. Because
the alleged victim bank is FDIC insured, jurisdiction exists.
                                        6
    Case: 18-40036     Document: 00514704142    Page: 7   Date Filed: 10/30/2018

                                 No. 18-40036
   II.     Sufficiency of Evidence
         Despite establishing jurisdiction, the government failed to produce
sufficient evidence to convict Perez-Ceballos of defrauding Chase Bank. Under
18 U.S.C. § 1344(1), a defendant is guilty of bank fraud if she “knowingly
executes, or attempts to execute, a scheme or artifice—(1) to defraud a
financial institution.”    To sustain a conviction under this statute, the
government must prove both intent to defraud and FDIC-insured status. See
Loughrin v. United States, 134 S. Ct. 2384, 2389–90 (2014) (“[T]he first clause
of § 1344, as all agree, includes the requirement that a defendant intend to
‘defraud a financial institution’; indeed, that is § 1344(1)’s whole sum and
substance.”) (emphasis in original).       “The essence of fraud is that its
perpetrator has persuaded his victim to believe, beyond the dictates of reason
or prudence, what is not so.” United States v. Church, 888 F.2d 20, 24 (5th Cir.
1989). Intending “a scheme to defraud” has a broader definition that “includes
fraudulent pretenses or representations intended to deceive others, in order to
obtain money from the victim institution.”        United States v. Barakett,
994 F.2d 1107, 1110–11 (5th Cir. 1993) (internal quotation marks and citations
omitted). Therefore, “[w]hile section 1344(1) prohibits only crimes directed at
financial institutions, we have not held that the statute punishes only schemes
directed solely at institutional victims. We have recognized that knowing
execution of schemes causing risk of loss—rather than actual loss—to the
institution, can be sufficient to support conviction.”    Id. at 1111 (internal
citations omitted).
         Even against this expansive backdrop, Perez-Ceballos’s bank fraud
conviction cannot stand. First, the government failed to adduce evidence that
Perez-Ceballos made any false statements to Chase Bank. No Chase Bank
witness testified at trial. According to the evidence at trial, Perez-Ceballos’s
numerous false statements were all made either to Chase Investment (through
                                       7
     Case: 18-40036       Document: 00514704142          Page: 8     Date Filed: 10/30/2018

                                       No. 18-40036
Arnold) or to Sun Life Financial. Neither the government’s briefing nor oral
argument cites evidence that clearly established (or even directly alleged) that
Perez-Ceballos fraudulently made Chase Bank believe anything. The closest
the government came to offering such proof occurred in a brief exchange in
which Arnold testified that Perez-Ceballos was referred to him “from the
banking side of JPMorgan [i.e., Chase Bank],” and that he “believe[d] it was
the branch manager” who made the referral.                      At oral argument, the
government insisted that this testimony justified an inference that Perez-
Ceballos     made     misrepresentations          to   Chase    Bank.        Whether      any
misrepresentations by Perez-Ceballos to Chase Bank necessarily underlay this
referral is, however, entirely speculative, and Arnold’s minimal testimony did
not connect the dots back to Chase Bank. Even viewing the evidence in the
light most favorable to the verdict, these passing statements of a single witness
unconnected with Chase Bank are insufficient for any reasonable trier of fact
to conclude beyond a reasonable doubt that Perez-Ceballos persuaded Chase
Bank to believe what was false. See Church, 888 F.2d at 24. 1
       Second, the government also failed to prove that Perez-Ceballos intended
to “obtain money from the victim institution” or otherwise exposed Chase Bank
to “risk of loss.” See Barakett, 994 F.2d at 1111. The $1.9 million that Perez-
Ceballos transferred to and through Chase Bank was her money, which she
had authority to withdraw freely. Relying on the testimony of Arnold from
Chase Investment and Fernandez from UBS, the government nevertheless

       1  There is some indication from the briefing that the government considers Perez-
Ceballos’s act of ordering a $1.9 million wire transfer from Chase Bank to Sun Life Financial
to be a misrepresentation. However, as this court held in United States v. Briggs, “The bare
act of instructing a bank to transfer funds is not a factual representation; thus, it cannot be
a misrepresentation, a false representation, or any kind of representation.” 939 F.2d 222,
226 (5th Cir. 1991) (emphasis in original). Although Briggs was reviewing a conviction under
18 U.S.C. § 1344(2), the same logic applies here.

                                              8
     Case: 18-40036       Document: 00514704142         Page: 9    Date Filed: 10/30/2018

                                      No. 18-40036
insists that Chase Bank became vulnerable when it became the way-station
for money transferred to a fraudulently-opened brokerage account. Under the
government’s theory, however, Arnold’s and Fernandez’s testimony on risk of
loss was largely predicated on the assertion that Perez-Ceballos’s funds were
proceeds from a money laundering scheme. The jury’s refusal to convict on
money laundering removes that predicate, and the government offers no other
evidence that Chase Bank suffered any risk of loss from the defendant’s merely
opening the account and moving from it money within her legal control.
       Moreover, neither Arnold nor Fernandez worked for Chase Bank or
spoke specifically to the risks that Chase Bank faced from Perez-Ceballos’s
misrepresentations. Their testimony focused primarily on the liability their
own employers could face from the false statements Perez-Ceballos made to
their institutions. Arnold did testify that Chase Bank “[a]bsolutely” has “to
follow a lot of rules set forth by the OCC, the SEC, and other governmental
entities” and that “if the bank doesn’t follow those rules,” it could be sued, cited,
or fined. 2 Such generalized observations about banking industry regulations
are a far cry from demonstrating that Chase Bank faced any risk of loss for
depositing Perez-Ceballos’s own money into her savings account and then
transferring it at her request. Although risk of loss need not be “substantial”
to support a conviction, the evidence on risk of loss does need to be sufficient.
See United States v. McCauley, 253 F.3d 815, 820 (5th Cir. 2001) (“[T]he
government need not prove a substantial likelihood of risk of loss to support

       2 Arnold was also asked on direct examination whether “if someone turns over falsified
documents to the bank, either JP Morgan Chase or Morgan Stanley, could that potentially
put [a] bank at risk of civil liability?” Although the question was phrased broadly, Arnold
limited his response to his own experiences working in the investment sector, couching his
reply almost entirely in “I” statements. In any case, because the government failed to show
that Chase Bank received any falsified documents, this line of questioning was irrelevant for
purposes of evidentiary sufficiency.
                                             9
    Case: 18-40036    Document: 00514704142    Page: 10   Date Filed: 10/30/2018

                                No. 18-40036
the convictions.”).   The evidence provided by the government here is
insufficient.
      In the absence of sufficient evidence that Perez-Ceballos made false
statements to Chase Bank or that she made false statements to another party
while intending to obtain money from Chase Bank in a way that exposed Chase
Bank to a risk of loss, the government failed to prove that Perez-Ceballos
defrauded Chase Bank. Without an FDIC-insured victim, there is no basis for
upholding Perez-Ceballos’s federal bank fraud conviction.
                              CONCLUSION
      For the foregoing reasons, Perez-Ceballos’s conviction is REVERSED.

                                     10