U.S. v. Chaney ( 1992 )

UNITED STATES COURT OF APPEALS
FIFTH CIRCUIT
______________________________
No. 91-8206
______________________________
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
BARBARA CHANEY,
Defendant-Appellant.
___________________________________________________
Appeal from the United States District Court
for the Western District of Texas
___________________________________________________
(June 19, 1992)
Before BROWN, GARWOOD, and EMILIO M. GARZA, Circuit Judges.
EMILIO M. GARZA, Circuit Judge:
This case involves "sham loans" allegedly made by Barbara
Chaney during the years 1983-1985 in her capacity as president
and chief executive officer of Western Bank in El Paso, Texas.
Specifically, Chaney allegedly made loans to individuals with
"related interests" that were actually made for the benefit of
those individuals' businesses. Following trial, a jury found
Chaney guilty of conspiracy to make false entries in Western Bank
books with the intent to deceive examiners of the Texas
Department of Banking (TDB) and the Federal Deposit Insurance
Corporation (FDIC), a violation of 18 U.S.C. §§ 371, 1005 (Count
One), and making false entries in Western Bank records in
violation of 18 U.S.C. § 1005 (Count Six). The district court
sentenced Chaney to concurrent five-year terms of imprisonment
for each of these counts, suspended execution of the term of
imprisonment for Count One, and ordered Chaney jointly and
severally liable for restitution to the FDIC in the amount of
$1,141,285.00. Chaney appeals, asserting that: (i) the district
court erred in refusing her requested good faith instruction,
(ii) Count One of the indictment is fundamentally defective
because it fails to allege an object of the conspiracy charged,
(iii) there is insufficient evidence of a conspiracy to commit an
offense, and (iv) restitution is improper because the loss
suffered was not the result of the offenses of conviction.
Finding no error, we affirm.
I
The indictment alleges that Chaney conspired with
businessmen Richard T. Cassidy, Chris Cummings, Lawrence Bower,
and George Wallace to disguise both the purpose and relatedness
of loans she made to these individuals--loans that violated both
the legal lending limit established by the TDB and the policy
instituted by Western Bank to comply with the TDB's regulations.1
1
At the time the alleged conspiracy took place, the TDB
examined banks jointly with the FDIC and the Federal Reserve Bank
and, by regulation, imposed a legal lending limit on state-
chartered banks based upon the banks' capital structure and
certified capital surplus. See TEX. REV. CIV. STAT. ANN. arts. 342-
114, 342-202, 342-203, 342-204, 342-208 (West Supp. 1992)
(examination function is currently responsibility of Banking
Commissioner who appoints bank examiners and assistant bank
examiners to carry it out). Dennis Lebo, a bank examiner and
former departmental examiner for the TDB, testified at trial that
a major part of the examination procedure is to review the banks'
loan portfolios. See Record on Appeal, vol. 3, at 71, United
States v. Chaney, No. 91-8206 (5th Cir. filed July 31, 1991)
-2-
2
This Western Bank lending policy--a written 26-page lending
policy that explicitly warned against concentration of credit to
related interests2--was instituted in 1983 after bank examiners
["Record on Appeal"]. According to Lebo, if examiners determine
that a loan is unsatisfactory (for example, in instances where
the legal lending limit is exceeded), they assign it an
unsatisfactory loan classification and include it in their
examination report. All loans classified unsatisfactory during a
bank examination are checked again during the next examination.
Id. at 81.
2
The policy stated, in part:
A concentration is defined as any group of related
credits, either by individual borrower or specific
industry, that equals or exceeds 25% of the bank's
gross capital funds. Management is aware of the
inherent risks involved in lending large sums to a
group of related borrowers or to a single industry.
All loan request [sic] should detail related
credits of individual borrowers. This detail should
include all direct, indirect and related debt of the
borrower, all overdrafts, unfunded commitments or lines
of credit, and letters of credit. Each such
concentration will be considered individually at the
time of any new loan request. Generally speaking a
concentration to any one individual borrower or group
of borrower [sic] is discouraged, and will require
prior approval of the president.
Government Exhibit 79, at Part XIX (entitled "Concentrations of
Credit"), in Record on Appeal. The policy also:
(1) established lending limits and a method for making
relevant calculations;
(2) stated that loan officers were responsible for
protecting depositors' funds and stockholders' equity;
(3) required written loan authorization by officers for
all loans;
(4) required on-site inspections for all commercial
business loans of $50,000 or more and recommended such
inspections for all commercial business loans;
(5) required loan officers to "determine that the
borrower is basically honest and is a credit-worthy
individual"; and
(6) required loan officers to:
(i) understand the specific purpose of the
loan;
(ii) understand the source and plan of
repayment with emphasis on the cash flow of
the company and its ability to repay;
-3-
3
from the TDB adversely classified $847,000 of Western Bank's
assets and urged the bank's management to "expedite its
formulation and implementation of written loan policy guidelines
as the substantial increase in severity of loan classification
presents cause for concern."3
A
During 1983-1985, Chaney authorized numerous loans in the
names of Bower, Cassidy, Cummings, Wallace, CCG Investment
("CCG"), C.O.R., Incorporated ("COR"), and ResortAmerica
Corporation ("RAC"). The record establishes that the interests
of these individuals and entities clearly overlapped: (i)
Cummings and Wallace were in business together in CCG, RAC, COR,
and other entities;4 (ii) Bower was associated with Cummings and
(iii) evaluate back-up sources of repayment;
and
(iv) find that the purpose, plan of
repayment, and collateral were acceptable,
reasonable, practical, and accomplishable
within the normal framework in which the
borrower operated, and document any
undesirable features.
Id. at Parts XIV-XV (entitled "Basic Credit Policies" and "Loan
Review").
3
Record on Appeal, vol. 4, at 182-84. These examiners
also reported that "[c]ontinued close credit supervision is
warranted to prevent further deterioration in the bank's expanded
loan portfolio. . . ." Id. The examiners concluded that "[t]he
bank's volatile dependency ratio of 10.23% continues to compare
unfavorably with peer group norms" and that "[c]urrent
examination's classifications substantially reduce an already
marginal reserve account and it is recommended that current
year's provisions be sufficient to maintain the reserve at or
near peer group levels. . . ." Id. An auditor discovered many of
these same problems.
4
Record on Appeal, vol. 3, at 281 (Bower Testimony):
Q Who are you in business with?
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4
Wallace from 1983-85 as a real estate broker, and, as of 1985,
described himself as a "partner" with Cummings and Wallace in
CCG, RAC, and other entities;5 (iii) Cummings, Wallace, and Bower
often borrowed money under their own names for the benefit of
A My two partners are Chris A. Cummings and
George B. Wallace.
Q How long have you been in business with Chris
Cummings and George Wallace?
A Since 1983 as a broker with them and then I
became a partner in their entities in January and April
of 1985.
Q What entities are we talking about?
A CCG, ResortAmerica and then subsequent to
that, other entities that were created.
5
Id. The three bought, subdivided, and sold real estate
together. Id. at 283 (Bower testimony):
Q Now what kinds of things would your
organization, you, Chris Cummings and George Wallace
get involved in?
A We would look at the programmata of real
estate activities in this area, Ruidosa, New Mexico,
and then later, into Houston, Texas. Primarily, we
were active here. We would look at land deals. We
would buy land, subdivide it, break it up and sell it
in small parcels on a note and Deed of Trust. We would
buy buildings, get the buildings turned around and
increase occupancy and increase the income of it and
then sell it.
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5
their businesses, and Chaney was aware that they did so;6 and
(iv) Cassidy was a shareholder in RAC until 1982.7
In October 1983, Chaney and Bower negotiated the first of
these loans--a $125,000 loan to CCG. Chaney knew that CCG was a
partnership owned by Wallace and Cummings.8 In June 1984, Chaney
and Bower negotiated another loan for CCG in the amount of
$50,000. The following month, Bower negotiated a third loan,
this one for $200,000, which paid off the existing $125,000 and
6
Record on Appeal, vol. 3, at 307-08 (Bower testimony):
A When we discussed the restructuring, [Chaney]
said [she'd] like to put all of these notes into
individual names.
* * *
A We often borrowed money in our own name for
the benefit of the corporations. That was not unusual.
Q And Barbara Chaney knew that?
* * *
A Yes.
Id. at 296 (Bower testimony):
Q And did you have discussions to that effect
with Barbara Chaney, did she know that you and Chris
Cummings and George Wallace were related borrowing
entities?
A I believe she did.
7
Record on Appeal, vol. 3, at 282 (Bower testimony):
Q. Okay. What about Richard Cassidy?
A. Mr. Cassidy was a shareholder and owner
partner in ResortAmerica before I came on and I believe
in 1982[.] [A]fter the hotel El Paso Del Norte was
sold, he wanted to become less active and he sold his
stock back to ResortAmerica.
8
This fact was mentioned during the loan negotiations.
See Record on Appeal, vol. 3, at 286 (Bower Testimony):
Q And in the course of your conversations
with Barbara Chaney, did it come up that CCG
Investment was an organization, a partnership
that was owned by George Wallace and Chris
Cummings?
A I'm sure it did.
-6-
6
$50,000 notes and enhanced CCG's debt by $25,000. Although this
$200,000 loan was made in CCG's name, according to Bower, the
funds from the loan went to RAC and CCG "because the assets that
the two entities owned were intermingled."9
The upgrade of loans continued, and the overall amount of
liability grew. Western Bank made three loans to the related
borrowing entities on December 28, 1984: (i) a $550,000 loan was
made to RAC; (ii) COR received a $600,000 loan, authorized by
Chaney, which was used to pay off a $600,000 loan in CCG's name;
and (iii) Wallace negotiated a $600,000 loan for working capital
for a condominium project in Ruidoso, Mexico (the Tierra
Condominium) involving Cummings, Wallace, and Bower. All three
notes were due on March 29, 1985. On that day, Bower made it
clear that the borrowers were not ready to pay the outstanding
principal, and the three loans were renewed until June 27, 1985.
B
During the spring of 1985, a bank examination appeared
imminent. Although the legal lending limit for related borrowers
at Western Bank was $665,000,10 the three related loans and
interest owed to Western Bank by Cummings, Wallace, and Bower--
all of which were due to expire on June 27, 1985--totalled
$1,750,000-2,000,000. When Bower approached Chaney about
9
Record on Appeal, vol. 3, at 294. For example, CCG and
RAC used the same land as collateral.
10
Western Bank's legal lending limit was $646,500-
$665,000 through 1985. Chaney's lending limit under the bank's
policy was $600,000 from August 31, 1984 until December 17, 1985,
and then became the legal lending limit of the bank.
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7
renewing the loans at their expiration in June 1985, Chaney
agreed but decided that the loans had to be "restructured"--that
is, Chaney wanted the loans to be under the names of individuals.
Bower agreed to restructure and assumed one of the loans;
Cummings took another, and Wallace was already on the third.
According to Bower's testimony, Chaney said Cummings would not be
acceptable and suggested that Cassidy's name be used on the
renewal of the $550,000 RAC note. When Bower approached Cassidy,
he agreed to allow his name to be used and did not ask for any of
the loan proceeds.11 This loan was renewed, RAC's name was
replaced with Cassidy's, and the loan amount was increased from
$550,000 to $645,000.12 Chaney also renewed the $600,000 COR
11
Bower also testified that he, not Cassidy, handled all
of these loan negotiations and that, from their conversation
about restructuring the loan, Chaney would have known that the
$645,000 in loan proceeds would be used for the benefit of RAC.
Record on Appeal, vol. 3, at 312:
Q Did, was it very very clear that the money
that was funding that six hundred and forty-five
thousand dollar loan was for the benefit of
ResortAmerica?
A In my view it was, yes.
Q Did you discuss the purpose of that loan with
Barbara Chaney?
A I believe that the conversation was that it
was, in restructuring at the previous working and
capital loan, that was the purpose of it.
The bank's internal loan documents ("spread sheets") were blank
in the spaces where related Western Bank debt and collateral
pledged as support for related loans should have been listed, and
where Cassidy should have indicated that he was borrowing for
another person or entity.
12
When the loan check was issued to Cassidy on July 31,
1985, "For deposit only, 191-141-9, ResortAmerica Corporation"
was typed on the back of it. Cassidy endorsed the check and
deposited it into the Texas Commerce Bank account of RAC;
$565,453.47 ($550,000 plus interest) of the loan went to pay off
the $550,000 RAC loan at Western Bank. Bower, not Cassidy, made
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8
loan, changing the borrower to Bower and extending the loan
amount to $650,000,13 as well as the Wallace loan, which was
increased from $600,000 to $648,000.14
In November 1985, Chaney authorized another $440,000 loan to
Bower. This loan was made when Bower told Chaney that he had a
$187,000 loan due at another bank which he was unable to repay.
Chaney chose to loan Bower $440,000 so that he could use $224,000
interest payments on this loan--payments that were made from
RAC's account and, when that account was insufficient, from the
CCG account.
13
Although the $650,000 actually went to RAC, the spread
sheets for this loan indicated that its purpose was "investment
in real estate." As on the Cassidy loan, the "related debt"
section of the spread sheets was left blank.
14
Just as the loans shifted hands, so did the underlying
collateral. As collateral for the $645,000 loan, Cassidy had
pledged a 640-acre section of land in El Paso referred to as "the
public school lands" to Western Bank--land transferred to Cassidy
when he agreed to allow his name to be used for the loan.
Cassidy then conveyed another section of this "public school"
land to Bower for $10 by warranty deed, and Bower pledged his
newly-acquired share of the same land as collateral for the
$650,000 loan made in his name. Although Chaney was aware that
Western Bank's lending policy required her to conduct an on-site
inspection of all collateral securing loans of $50,000 and more,
Chaney did not conduct such a personal inspection of the
property; instead, she sent her assistant to fly over the land in
a helicopter. Although Cassidy's financial statement submitted
for the $645,000 loan listed this 640 acres as worth $1,279,360
and Bower submitted an appraisal valuing the land at $1,999 per
acre, a government appraiser--finding the land to have serious
water shortage problems and no evidence of residential
development--valued this land at just $195-$315 per acre.
Moreover, when Chaney permitted this loan to be increased to
$645,000 and allowed the borrower's name to be changed to
Cassidy, she also allowed this land to replace a second mortgage
in the Tierra Condominium--property valued at $1,200,000-
$1,600,000--which had secured the loan.
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9
of the loan for a down payment on other real estate.15
Nevertheless, the loan presentation, initialed by Chaney, states
that the loan's purpose was to "payoff Montwood National Bank";
there is no indication in the loan presentation or in the spread
sheets that the loan would be used for investment in other real
estate. When this loan was renewed in 1986, the bank's work
sheet and Bower's renewal request stated that the original
purpose of the loan had been investment in real estate, and the
"related debt" section of the spread sheet was blank.
C
Western Bank was examined by the TDB and the FDIC in June
1986, and the Chaney-Bower negotiated loans caught the examiners'
attention.16 In September 1990, Chaney, Cummings, Bower, and
Wallace were indicted for misapplication of Western Bank funds
and making false entries in the bank's books.17 Cummings, Bower,
15
Record on Appeal, vol. 4, at 213 (Chaney testimony):
Q Two hundred and twenty-four thousand dollars
was a figure that you chose?
A It was a figure that I chose.
Q Why?
* * *
A Because as I understand the transaction, Mr.
Bower was involved in some real estate transactions
whereby the money was going to go to a gentlem[a]n
name[d] Newell Hayes who has been identified.
16
Because of a manpower shortage at the Texas Department
of Banking, there was no on-site examination of western Bank by
bank examiners from April 1984 until June 1986.
17
Specifically, the indictment charged:
Count One. Conspired to wilfully misapply monies,
funds, and credits entrusted to the care of Western
Bank in violation of 18 U.S.C. § 371; conspired to make
false entries in the books of Western Bank with the
intent to deceive the examiners of the Texas Department
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10
of Banking and the Federal Deposit Insurance
Corporation ("FDIC"), in violation of 18 U.S.C. § 1005,
such conspiracy being a violation of 18 U.S.C. § 371;
Count Two. Aided and abetted by Richard Cassidy (a
named, unindicted co-conspirator), knowingly made or
caused to be made a false entry in a book, report or
statement of Western Bank in connection with a nominee
loan in the amount of $645,000 made in Cassidy's name,
in violation of 18 U.S.C. §§ 2, 1005;
Count Three. Aided and abetted by Cassidy, misapplied
monies, funds, and credits entrusted to the care of
Western Bank in violation of 18 U.S.C. §§ 2, 656 by
funding a $645,000 nominee loan in Cassidy's name when
she knew that the true borrower and recipient of
$565,453.46 of the loan was ResortAmerica Corporation,
and when she knew that to extend credit to
ResortAmerica Corporation would exceed and violate
Western Bank's legal lending limit,;
Count Four. Aided and abetted by Lawrence Bower (a co-
defendant who plead guilty), made a false entry in a
book, report, and statement of Western Bank in
connection with a nominee loan in the amount of
$440,000 to Bower, when she made the records of the
bank reflect that Bower was the borrower, although she
knew that the true borrower and recipient of the
proceeds were Chris A. Cummings and ResortAmerican
Corporation--a violation of 18 U.S.C. §§ 2, 1005;
Count Five. Aided and abetted by Bower, misapplied and
caused to be misapplied monies, funds, and credits
entrusted to the care of Western Bank, in violation of
18 U.S.C. §§ 2, 656, by funding a nominee loan in the
amount of $440,000 in the name of Bower, when she knew
that the proceeds of the loan would go to benefit,
among others, ResortAmerica Corporation, and she knew
that to extend credit on that date to ResortAmerica
Corporation would exceed and violate Western Bank's
legal lending limit; and
Count Six. Made and caused to be made a false entry in
a book, report, and statement of Western Bank, with the
intent to injure and defraud Western Bank and to
deceive the examiners and agents of the FDIC and the
Texas Department of Banking; falsely stated in an
Officer's Questionnaire that since the last bank
examination she had made no extensions of credit for
the accommodation of others than those whose name
appeared on the bank's records or on credit instruments
in connection with such extensions, when she in fact
knew that she had extended credit for the accommodation
of Cummings and ResortAmerica Corporation, and the
names Cummings and ResortAmerica Corporation did not
-11-
11
and Wallace were also charged with offenses related to the
submission of false financial statements to Western Bank in
violation of 18 U.S.C. § 1014. Chaney's co-defendants pled
guilty to submitting false financial statements, and Chaney went
to trial.
The district court granted Chaney's pre-verdict motion for
judgment of acquittal as to the conspiracy to misapply funds
count (part of Count One) and the substantive misapplication of
funds counts (Counts Three and Five). However, the jury found
Chaney guilty as to the false entry conspiracy charge (a portion
of Count One) and as to the substantive false entry charge
concerning a Western Bank Officer's Questionnaire (Count Six),18
but acquitted her on the remaining counts (Counts Two and
Four).19 Chaney moved for judgment of acquittal notwithstanding
the verdict as to Count One, and that motion was denied. Chaney
appeals.
appear on the bank's records or on credit instruments
in connection with such extensions--all in violation of
18 U.S.C. § 1005.
18
During the 1986 Western Bank examination, Chaney was
asked to respond to an Officer's Questionnaire, question five of
which required Chaney to "[l]ist all extensions of credit made
since the last examination for the accommodation of others than
those whose names appear on the bank's records or on credit
instruments in connection with such extensions." Chaney's
response was "None."
19
See supra note 17 (summarizing the indictment). The
district court granted Chaney's Rule 29(a) motion for judgment of
acquittals on the charges of conspiracy to misapply funds (part
of Count One) and on all substantive misapplication of funds
counts (Counts Three and Five), but denied this motion as to the
remaining counts.
-12-
12
II
Chaney raises the following contentions:
(a) the district court erred in refusing her requested
instruction that good faith belief in the truth of her
statements is a complete defense to the charge of
making a false entry in Western Bank's books;
(b) Count One of the indictment is fundamentally
defective because it fails to allege an object of the
conspiracy charged;
(c) the district court erred in refusing to grant
Chaney's motions for judgment of acquittal as to Count
One on the grounds that there is insufficient evidence
of a conspiracy to commit an offense; and
(d) the district court erred in imposing restitution
because the loss suffered was not the result of the
offenses of conviction.
A
Chaney contends that her conviction on Count Six--the
substantive false entry charge concerning her response to a
question on the Officer's Questionnaire--should be reversed
because the district court refused to give her proposed good
faith instruction.20 We disagree.
20
Chaney requested the following instruction:
The good faith of the defendant Barbara Chaney is
a complete defense to the charges in all counts of the
indictment because good faith on the part of the
defendant is simply inconsistent with a finding of
knowingly and willfully making false statements as
alleged in the indictment.
A person who acts on a belief or an opinion
honestly held is not punishable under this statute
merely because the belief or opinion turns out to be
inaccurate, incorrect, or wrong. An honest mistake in
judgment or an error in management does not rise to the
level of knowledge and wilfulness required by the
statute.
This law is intended to subject to criminal
punishment only those people who knowingly and
willfully attempt to deceive. While the term good
-13-
13
We afford the district court substantial latitude in
formulating its instructions, and we review a district court's
refusal to include a defendant's proposed jury instruction for
abuse of discretion. See United States v. Sellers, 926 F.2d 410,
414 (5th Cir. 1991); United States v. Rochester, 898 F.2d 971,
978 (5th Cir. 1990). In applying this abuse-of-discretion
standard, we read the district court's instruction as a whole to
determine whether that instruction fairly and accurately reflects
the law and covers the issues presented in the case. See United
States v. Daniel, 957 F.2d 162, 169-70 (5th Cir. 1991) (viewing
jury instruction as a whole and holding that lack of good faith
instruction and inclusion of instruction on deliberate ignorance
does not constitute reversible error); United States v. Hagmann,
950 F.2d 175, 180 (5th Cir. 1992) ("When a charge is challenged
on appeal, we evaluate it in its entirety, looking to see whether
faith has no precise definition, it means, among other
things, a belief or opinion honestly held, an absence
of malice or ill will, and an intention to comply with
known legal duties.
In determining whether or not the government has
proven that the defendant acted in good faith or acted
knowingly and willfully in making false statements, the
jury must consider all of the evidence in the case
bearing on the defendant's state of mind.
The burden of proving good faith does not rest
with the defendant because the defendant does not have
an obligation to prove anything in this case. It is
the government's burden to prove to you, beyond a
reasonable doubt, that the defendant Barbara Chaney
acted knowingly and willfully to make false statements.
If the evidence in the case leaves the jury with a
reasonable doubt as to whether the defendant Barbara
Chaney acted in good faith, the jury must acquit the
defendant.
Record on Appeal, vol. 1, at 47-49.
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14
the charge as a whole was correct."). Specifically, where the
contention is that the district court has refused to give an
instruction, we determine whether the requested instruction: (1)
is a correct statement of the law; (2) was substantially given in
the charge as a whole; and (3) concerns an important point in the
trial, the omission of which seriously impaired the defendant's
ability to present a given defense effectively. See United
States v. Marcello, 876 F.2d 1147, 1151 (5th Cir. 1989); United
States v. Rubio, 834 F.2d 442, 447 (5th Cir. 1987), quoting
United States v. Grissom, 645 F.2d 461, 464 (5th Cir. 1981).
For section 1005 purposes, specific intent is the "intent to
injure or defraud a bank, . . . or any individual person, or to
deceive any officer of such bank, or the Comptroller of the
Currency, or the Federal Deposit Insurance Corporation, or any
agent or examiner appointed to examine the affairs of such bank
. . . ." 18 U.S.C. § 1005; United States v. McCright, 821 F.2d
226, 233 (5th Cir. 1987), cert. denied, 484 U.S. 1005, 108 S. Ct.
697 (1988); United States v. Adamson, 700 F.2d 953, 965 (5th
Cir.) (en banc), cert. denied, 464 U.S. 833 (1983). The district
court instructed the jury that it was required to find beyond a
reasonable doubt that Chaney "made such [false] entry wilfully
with knowledge of its falsity," and that she did so "with the
intent of defrauding or deceiving the person named in the
indictment."21 The district court also instructed the jury that:
21
Record on Appeal, vol. 5, at 62 (emphasis added).
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15
[a] person acts with intent or intentionally with
respect to an act or a result of her conduct if it is
her conscious objective or desire to engage in the act
or to cause the result.
* * *
The word knowingly as that term has been used from time
to time in these instructions means that the act was
done voluntarily and intentionally, not because of
mistake or [accident]. The purpose of adding the word
knowingly as that term has been used from time to time
is to [e]nsure that no one will be convicted for an act
done because of a mistake or accident or other innocent
reason . . . . Evidence that Barbara Chaney acted or
failed to act because of being misinformed of or not
knowing applicable Federal regulations is a factor you
may consider in determining whether she acted or failed
to act with a requisite criminal intent required for
conviction. 22
Although this instruction is not the one proposed by Chaney,
it is, in essence, a good faith instruction. Moreover, Chaney
had an opportunity to argue good faith to the jury, and she
substantiated this assertion by testifying that, based on her
understanding and knowledge of the loans at the bank and the
applicable regulations, it was her good faith belief that she
answered the Officer's Questionnaire correctly.23 See Rochester,
22
Record on Appeal, vol. 5, at 64, 65-66.
23
Chaney's counsel strenuously argued to the jury that
Chaney acted in good faith:
We may agree or disagree to the answer that was put
down on question five about the accommodation of other
parties, none, when those other parties had no loans at
the bank . . . . Well, maybe that was the right answer
and maybe it was the wrong answer, we may agree or
disagree on that . . . . She may have done it
differently today than she did then, but agreeing or
disagreeing, that we would have done things differently
at different times, is not a crime. Mrs. Chaney didn't
intend to defraud her bank. She didn't intent to
deceive anyone. She acted in a way that she thought
was proper.
* * *
If Mrs. Chaney made an entry or answered a question
-16-
16
898 F.2d at 978 ("[F]ailure to instruct on good faith is not
fatal when the jury is given a detailed instruction on specific
intent and the defendant has the opportunity to argue good faith
to the jury."). Accordingly, we find that (1) the instruction
given by the district court is a correct statement of the law,
(2) a good faith instruction was substantially given in the
charge as a whole, and, (3) although the specific intent element
of section 1005 of Title 18 concerns an important point in
Chaney's trial, the omission of which would have seriously
impaired Chaney's ability to present an effective good faith
defense, we find that this point was dealt with adequately during
Chaney's trial and in the district court's instructions. See
Rubio, 834 F.2d at 450 (holding instruction sufficient where
defense counsel "had a charge on which to hand his mens rea
arguments[,]" his "legal theory was covered in the charge, and
differently than you or I might do today, that doesn't
mean nor should it that her actions were criminal. She
made a mistake in judgment so be it, but we don't
convict people for making mistakes.
Record on Appeal, vol. 5, at 28-29, 31. This assertion was
substantiated by Chaney's testimony:
Q And if you could read that question to us?
A "List all extensions of credit made since the
last examination for the accommodation of others than
those whose name[s] appear on the bank's record or on
credit instruments in connection with such
extension[s]."
Q Okay, and what was your answer to that?
A None.
Q And why did you answer that?
A Because there were none.
Q Okay. So you felt that that is a true and
correct answer?
A That's right.
Record on Appeal, vol. 4, at 164.
-17-
17
his ability to present a defense was not impaired").24
Therefore, we find that the district court's refusal to give the
good faith instruction proposed by Chaney does not constitute
reversible error.25 See Rochester, 898 F.2d at 978, citing
United States v. Hunt, 794 F.2d 1095 (5th Cir. 1986) (holding
that failure to instruct on good faith is not fatal when jury is
given detailed instruction on specific intent and defendant has
opportunity to argue good faith to jury); see also United States
24
In Rubio, as in the case before us, defense counsel
proposed an intent instruction which was the district court
refused to give, choosing instead to charge the jury with its own
variation of this instruction. In upholding the district court's
instruction, this court stated:
We do not face a situation where no instruction
was given whatsoever. The judge gave Rubio's requested
instruction on the definition of the term "knowingly."
The judge simply refused an instruction which
reemphasized the government's burden of proving mens
rea as an element of the offense. Moreover, counsel
argued this theory extensively to the jury.
Id. at 449-50.
25
Chaney also raises a related but subtler contention--
that the language "a belief or opinion honestly held" and
"defendant's state of mind" is significant in that it reflects a
more expansive approach to the good faith defense recently
recognized by the Supreme Court in Cheek v. United States, __
U.S. __, 111 S. Ct. 604 (1991) (defendant charged with willful
failure to file tax return is entitled to instructions that
inform jury that good faith belief that one need not file tax
return need not be objectively reasonable to be valid defense).
We find Cheek inapplicable because its statutory interpretation
of "willfulness" is "an exception to the traditional rule and is
a statutory element of special treatment of criminal tax
offenses." United States v. Arditti, 955 F.2d 331, 340 (5th Cir.
1992); see United States v. Dockray, 943 F.2d 152, 156 (1st Cir.
1991) (Holding that Cheek is unique to tax evasion cases since
the willfulness requirement in tax evasion cases "is not
synonymous with the intent to defraud requirement in the mail and
wire fraud statutes."); United States v. Dashney, 937 F.2d 532,
539 (10th Cir.) (refusing to extend the Cheek statutory
interpretation of "wilfulness" to other criminal statutes), cert.
denied, __ U.S. __, 112 S. Ct. 402 (1991).
-18-
18
v. Chenault, 844 F.2d 1124, 1130 (5th Cir. 1988) (holding that
omitting good faith instruction is not reversible error where
jury is not prevented from considering that defense).
B
Chaney challenges Count One of her indictment, contending
that it is fundamentally defective because it fails to allege an
object of the conspiracy charged. We disagree.
Whether an indictment sufficiently alleges the elements of
an offense is a question of law which we review do novo. See
United States v. Shelton, 937 F.2d 140, 142 (5th Cir. 1991)
(citation omitted); United States v. Contris, 592 F.2d 893, 896
(5th Cir. 1979). Although an indictment must be a "plain,
concise and definite written statement of the essential facts
constituting the offense charged" to satisfy Rule 7(c) of the
Federal Rules of Criminal Procedure, this court has held that:
an indictment is sufficient if it [1] contains the
elements of the offense charged and [2] fairly informs
a defendant of the charge against him[,] and [3]
enables him to plead acquittal or conviction in bar of
future prosecutions for the same offense.
United States v. Hagmann, 950 F.2d 175, 183 (5th Cir. 1991),
quoting United States v. Stanley, 765 F.2d 1224, 1239 (5th Cir.
1985). Practical, not technical, considerations govern the
validity of an indictment,26 and the test of the validity of an
indictment is "not whether the indictment could have been framed
in a more satisfactory manner, but whether it conforms to minimal
26
See United States v. Maggitt, 784 F.2d 590, 598 (5th
Cir. 1986) (citation omitted).
-19-
19
constitutional standards." United States v. Webb, 747 F.2d 278,
284 (5th Cir. 1984) (citation omitted), cert. denied, 469 U.S.
1226, 105 S. Ct. 1222 (1985); see also United States v. De La
Rosa, 911 F.2d 985, 988-89 (5th Cir. 1990), cert. denied, 111 S.
Ct. 2275 (1991); United States v. Wilson, 884 F.2d 174, 179 (5th
Cir. 1989). Because Chaney raises her indictment challenge for
the first time on appeal, we review Count One with "maximum
liberality"--that is, we will find Count One sufficient "unless
it is so defective that it does not, by any reasonable
construction, charge an offense for which the defendant was
convicted." See Shelton, 937 F.2d at 143 (quotation omitted),
cert. denied, 112 S. Ct. 607 (1991); United States v. Wilson, 884
F.2d 174, 179 (5th Cir. 1989); United States v. Rivera, 879 F.2d
1247, 1251 n.3 (5th Cir.) (citation omitted), cert. denied, 493
U.S. 998, 110 S. Ct. 554 (1989).
Excluding introductory allegations and alleged overt acts,
Count One of the indictment, which charges that Chaney committed
a false entry conspiracy in violation of 18 U.S.C. § 371, reads
as follows:
COUNT ONE
(18 U.S.C. § 371)
That beginning on or about December 19, 1983, and
continuing until on or about March 12, 1987, in the
Western District of Texas, and elsewhere, the
Defendants, BARBARA R. CHANEY, CHRIS A. CUMMINGS,
LAWRENCE M. BOWER, did knowingly and wilfully combine,
conspire, confederate and agree with each other, with
Richard T. Cassidy, a principal not indicted herein,
and others known and unknown to the Grand Jury, [to
violate Title 18, United States Code, Section 656; that
is to say . . . that Defendants . . . conspired
with . . . BARBARA R. CHANEY, President of Western
-20-
20
Bank, and with Richard T. Cassidy, a principal not
indicted herein, to wilfully misapply monies, funds and
credits which had been entrusted to the care of Western
Bank,] and further, the said Defendants and unindicted
co-conspirator caused to be made false entries in the
books of said bank with the intent to deceive the
examiners of the Texas Department of Banking and the
Federal Deposit Insurance Corporation, in violation of
Title 18, United States Code, Section 1005 . . . .27
Chaney claims that Count One charges her only with participating
in a conspiracy to misapply bank funds, and that the indictment's
false entries language does not refer back to the conspiracy--
that is, Chaney contends that she was not put on notice that the
conspiracy for which she was charged included a second alleged
objective of making false entries.
As recently stated by this court, "[a]n indictment's most
basic purpose--a fundamental objective that must be realized--is
`to fairly inform a defendant of the charge against him.'"
Hagmann, 950 F.2d at 182 (emphasis in original) (citation
omitted). Therefore, we look to see whether this basic purpose
was realized, and we begin with the plain language of the
indictment: After alleging that Chaney and others conspired to
violate section 656, Count One charges that "the said Defendants
and unindicted co-conspirator caused to be made false entries in
the books of said bank." Beyond the literal clarity of its
language, Count One is written to establish the essential
elements of a section 371 conspiracy, which are:
27
Emphasis added. After the district court granted
Chaney's motion for judgment of acquittal as to all the 18 U.S.C.
§ 656 misapplication of funds counts and before it submitted the
indictment to the jury, the court, at Chaney's request, redacted
the bracketed language.
-21-
21
(1) an agreement by two or more persons to combine
efforts ("Defendants . . . did knowingly and wilfully
combine, conspire, confederate and agree with each
other");
(2) for an illegal purpose ("to wilfully misapply
monies, funds and credits" and "ma[ke] false entries in
the books of said bank with the intent to deceive the
examiners of the Texas Department of Banking and the
Federal Deposit Insurance Corporation"); and
(3) an overt act by one of the members in furtherance
of that agreement ("the said Defendants and unindicted
co-conspirator caused to be made false entries in the
books of said bank").
See United States v. Schmick, 904 F.2d 936, 941 (5th Cir. 1990),
cert. denied, 111 S. Ct. 782 (1991); United States v. Yamin, 868
F.2d 130, 133 (5th Cir.), cert. denied, 492 U.S. 924, 109 S. Ct.
3258 (1989); United States v. Gordon, 780 F.2d 1165, 1170 (5th
Cir. 1986). This interpretation of the meaning of Count One's
actual language is reinforced by the fact that it is explicitly
designated a conspiracy count by the citation to 18 U.S.C. § 371
in its heading. See United States v. Boyd, 885 F.2d 246, 249
(5th Cir. 1989) (statutory citation increases indictment's
clarity); Wilson, 884 F.2d at 179 (statutory citation reinforces
other references within the indictment); United States v. Campos-
Asencio, 822 F.2d 506, 508 (5th Cir. 1987). Accordingly, we find
that Count One sufficiently informed Chaney that she was charged
with participating in a section 371 conspiracy with the dual
objectives of misapplying funds and making false entries.
C
Asserting that there is insufficient evidence to support her
conviction, Chaney also challenges the district court's refusal
-22-
22
to grant her motion for judgment of acquittal for conspiracy to
violate 18 U.S.C. § 1005 as charged in Count One.28 That Count
alleges that Chaney, Bower, and Cummings, along with their
unindicted co-conspirator, Richard Cassidy, conspired to make
false entries in bank records related to nominee loans with the
intent to deceive bank examiners.
It is well-established that juries are "free to choose among
all reasonable constructions of the evidence"29--that is, we will
affirm a jury's verdict if any rational trier of fact could have
found the essential elements of the offense beyond a reasonable
doubt. See Jackson v. Virginia, 443 U.S. 307, 319 (1979); Logan,
949 F.2d at 1380 ("The ultimate test for sufficiency of evidence
challenges is whether a reasonable jury could find that the
evidence establishes guilt beyond a reasonable doubt."); United
States v. Nixon, 816 F.2d 1022, 1029 (5th Cir. 1987), cert.
denied, 484 U.S. 1026, 108 S. Ct. 749 (1988). In other words,
the "rule of reason" governs what a fact finder is permitted to
infer from the evidence in a particular case, and fact finders
may "use their common sense and evaluate the facts in light of
their knowledge of the natural tendencies and inclinations of
28
Chaney does not challenge the sufficiency of the
evidence supporting her conviction on Count Six of the
indictment, the substantive section 1005 charge relating to the
Officer's Questionnaire.
29
United States v. Berisha, 925 F.2d 791, 795 (5th Cir.
1991); see United States v. Logan, 949 F.2d 1370, 1380 (5th Cir.
1991), cert. denied, 112 S. Ct. 1597 (1992); United States v.
Molinar-Apodaca, 889 F.2d 1417, 1423 (5th Cir. 1989); United
States v. Punch, 722 F.2d 146, 153 (5th Cir. 1983).
-23-
23
human beings." United States v. Ayala, 887 F.2d 62, 67 (5th Cir.
1989) (quotation omitted). In applying this rule of reason
standard, "this Court is obliged to view the evidence, whether
direct or circumstantial, and all inferences reasonably drawn
from it, in the light most favorable to the verdict." Molinar-
Apodaca, 889 F.2d at 1423; see also Berisha, 925 F.2d at 795;
Logan, 949 F.2d at 1380; United States v. Bryant, 770 F.2d 1283,
1288 (5th Cir. 1985) (standard of review is same whether evidence
is direct or circumstantial), cert. denied, 475 U.S. 1030, 106 S.
Ct. 1235 (1986). To sustain a jury verdict, the evidence
certainly need not exclude every reasonable hypothesis of
innocence nor be inconsistent with every conclusion except that
of guilt. See United States v. Bell, 678 F.2d 547, 549 (5th Cir.
1982) (en banc), aff'd on other grounds, 462 U.S. 356, 103 S. Ct.
2398 (1983).
To establish a substantive violation of section 1005, the
government must prove that: (1) an entry made in bank records is
false; (2) the defendant made the entry or caused it to be made;
(3) the defendant knew the entry was false at the time he or she
made it; and (4) the defendant intended that the entry injure or
defraud the bank or public officers.30 See United States v.
30
The purpose of section 1005 is to ensure that
inspection of a bank's books will yield an accurate picture of
that bank's condition. See United States v. Cordell, 912 F.2d
769, 773 (5th Cir. 1990); cf. United States v. Darby, 289 U.S.
224, 226, 53 S. Ct. 573, 574 (1933). During the time of the acts
alleged in Count One, section 1005 read, in pertinent part:
Whoever makes any false entry in any book, report,
or statement of [any Federal Reserve bank, member
bank . . . insured bank . . . ] with intent to injure
-24-
24
Kington, 875 F.2d 1091, 1104 (5th Cir. 1989); United States v.
Jackson, 621 F.2d 216, 219 (5th Cir. 1980). The government need
not prove intent to cause the bank injury; all that is required
is that the defendant intended to defraud one or more of the
bank's officers, auditors, examiners, or agents. See United
States v. Tullos, 868 F.2d 689, 695 (5th Cir.), cert. denied, 490
U.S. 1112, 109 S. Ct. 3171 (1989), citing United States v.
Stovall, 825 F.2d 817 (5th Cir. 1987). To establish a conspiracy
under 18 U.S.C. § 371, the government must prove beyond a
reasonable doubt that the defendant entered into an agreement
with at least one other person to commit a crime against the
United States and that any one of these conspirators committed an
overt act in furtherance of that agreement. See United States v.
Schmick, 904 F.2d 936, 941 (5th Cir. 1990); United States v.
Yamin, 868 F.2d 130, 133 (5th Cir.), cert. denied, 492 U.S. 924,
109 S. Ct. 3258 (1989); see also supra Part II.B. The government
must also prove that the defendant knew of the conspiracy and
voluntarily became part of it. Yamin, 868 F.2d at 133. The
existence of a conspiracy may be proved by circumstantial
evidence. Id. The agreement between or among co-conspirators
also may be proved by circumstantial evidence. See United States
or defraud . . . the Federal Deposit Insurance
Corporation, or any agent or examiner appointed to
examine the affairs of such bank . . .
Shall be fined not more than $5,000 or imprisoned
not more than five years, or both.
18 U.S.C. § 1005 (1988). Congress amended section 1005 in 1989
to, among other things, increase the possible penalty to
$1,000,000 and twenty years imprisonment. See 18 U.S.C.A. § 1005
(West Supp. 1992).
-25-
25
v. Goff, 847 F.2d 149, 168 (5th Cir.), cert. denied, 488 U.S.
932, 109 S. Ct. 324 (1988).
According to Chaney, because she was acquitted of making
false statements in the loan files of the bank as was charged in
Count Six,31 there is no overt act to support the charge that she
conspired to make a false statement on the Officer's
Questionnaire or otherwise conspired to falsify bank records.32
Chaney contends that she is not challenging her conspiracy
conviction under Count One based upon an inconsistent jury
verdict;33 rather, she asserts that her conspiracy acquittals on
31
See supra note 17 (summarizing indictment).
32
Specifically, Chaney asserts that,
[e]ven assuming that [she] were guilty on Count Six,
that she intentionally lied to the bank examiners by
denying that she had any loans at the bank that were
made for the accommodation of others than those whose
names appeared in the records of the bank, there is
simply no evidence that indicates she conspired with
anyone to commit this offense.
* * *
[She] participated, with her co-defendants, in making
the loans, which the jury did not find to be illegal.
She, on her own, later characterized the loans in a way
that the jury found to be inaccurate, and therefore
illegal. The government presented no evidence of a
conspiracy. Accordingly, this conviction must be
reversed.
Brief for Appellant at 30, United States v. Chaney, No. 91-8206
(5th Cir. filed Sept. 11, 1991). Since there is ample evidence
in the record to support the agreement element of this conviction
(see infra note 40), our discussion is limited to Chaney's
contention that the government has failed to establish an overt
act in furtherance of the conspiracy for which she was convicted.
33
It is well-settled that a defendant cannot challenge
her conviction based upon inconsistent jury verdicts. See, e.g.,
United States v. Powell, 469 U.S. 57, 64-67, 105 S. Ct. 471, 476-
77 (1984) ("We also reject, as imprudent and unworkable, a rule
that would allow criminal defendants to challenge inconsistent
verdicts . . . ."); cf. United States v. Zuniga-Salinas, 952 F.2d
-26-
26
other counts demonstrate that there is a lack of evidence to
support such a conviction under Count One. We disagree.
At trial, Chaney did not dispute that she had approved all
the loans at issue. In fact, Chaney admitted knowing that the
borrowers and their interests were related,34 and that she had
violated her own lending policy by lending more than $600,000 to
a related group of borrowers.35 It is clear that the loans made
to this related group of borrowers grossly exceeding the legal
lending limit of Western Bank and the lending policy instituted
in 1983 by Western Bank.36
Moreover, the record establishes that Chaney acted to
conceal the relatedness of these borrowers and the true nature of
876, 878 (5th Cir. 1992) (en banc) ("An inconsistent verdict
should no longer be a bar to conviction where all other co-
conspirators are acquitted.").
34
Specifically, Chaney: acknowledged that Cassidy, RAC,
CCG, "and the other borrowers" were related borrowers; agreed
that CCG, Bower, Cummings, and Wallace were "all a group of
related borrowers"; admitted that she was aware that the Cassidy
and Bower loans were related; that Cassidy "was well known to
have officed with Mr. Cummings and been associated with [Bower
and Wallace]"; and that she was aware that Cassidy, Bower,
Wallace, and Cummings had worked together on various real estate
projects. Record on Appeal, vol. 4, at 192, 194, 217, 219-21,
227, 233 (Chaney testimony).
35
Chaney testified as follows:
Q Well, I think my question was, you violated
your own lending policy by extending more than six
hundred thousand dollars to a "related group of
borrowers", didn't you?
A Yes.
Record on Appeal, vol. 4, at 217.
36
See supra notes 2, 10 and accompanying text.
-27-
27
the loans at issue.37 The transactions underlying Chaney's
conviction involve a series of loan upgrades in which the
expanding debt and underlying collateral were shifted among a
group of individuals with a shared interest in gaining access to
Western Bank funds.38 Effecting these transactions required the
preparation of numerous documents--documents that contain both
false entries and factual omissions which disguised the nature of
the loans and actual borrowers from Western Bank and the TDB
37
See supra Parts I.A and I.B.
38
See supra Part I.B.
-28-
28
examiners.39 Accordingly, we affirm Chaney's conviction for
39
Chaney was charged under Count One with conspiracy to
falsify Western Bank records. The omission of material
information, as well as actual misstatements, qualifies as a
false entry under 18 U.S.C. § 1005 and can serve as the requisite
overt act for conspiracy under 18 U.S.C. § 371. See United
States v. Cordell, 912 F.2d 769, 773 (5th Cir. 1990) (holding
that omission of material information qualifies as false entry
for section 1005 purposes); United States v. Kington, 875 F.2d
1091, 1105 (5th Cir. 1989) (stating that defendants need only
have conducted transactions in way that would purposely defeat
reporting requirements). The record is bursting with evidence
that Chaney and other actors conspired to make such omissions and
misstatements: Bower and Chaney made false entries on Western
Bank loan documents for the $200,000 loan negotiated July 19,
1984--although they knew that the proceeds would be commingled
with those of RAC, Chaney and Bower made it appear as though CCG
was the actual borrower; Chaney directed her assistant to prepare
a loan presentation for the $265,000 loan and caused the purpose
section to be left blank; Chaney caused documents for the
$550,000 loan to reflect that RAC was the borrower when $285,000
of the proceeds went to CCG and caused spread sheets for that
loan to fail to reflect any related debt at Western Bank; Chaney
authorized a $600,000 loan on December 28, 1984, and caused the
bank records to show that COR was the borrower when the proceeds
actually paid off a Western Bank loan to CCG; Chaney and Bower
explicitly agreed that they would use Cassidy's name on loan
documents for the $645,000 loan when the knew that the real
borrower was RAC and, to effect this loan, caused the loan
request documents to falsely list Cassidy as the actual borrower;
Chaney caused the spread sheets for this loan to fail to (1)
specify any related debt at Western Bank and (2) list related
collateral, such as section 1 of block 5, which Bower used as
collateral for loans in his name, and later caused the loan
renewal work sheet to falsely indicate that the loan was for an
individual; Chaney caused her assistant to prepare spread sheets
for the $650,000 loan in Bower's name when she knew that the loan
was actually to RAC, and she also failed to indicate that there
was related debt at Western Bank; Bower submitted misleading
appraisals of public school lands in support of loans made in the
names of Bower and Cassidy with the intent to deceive bank
examiners into believing these loans were adequately
collateralized; when authorizing the $440,000 loan to Bower in
November 1985, Chaney falsely indicated that the loan proceeds
would be used to pay off Bower's indebtedness to Montwood
National Bank when Chaney and Bower knew that $224,000 of the
loan was to be used for a down payment on real estate; and, one
month after renewing this $440,000 loan, Chaney falsely indicated
on her Officer's Questionnaire that she had made no nominee
("sham") loans since the last bank examination. See supra Parts
-29-
29
conspiracy to make false entries.
D
Finally, Chaney contends that the district court erred in
imposing joint and several liability among Chaney and her co-
defendants for restitution in the amount of $1,141,285.40
According to Chaney, no loss flowed from the offenses of
conviction--that is, from Chaney's conviction for conspiracy to
make false entries (Count One), and from her conviction on the
substantive false entry charge relating to the Officer's
Questionnaire (Count Six)--and no restitution is appropriate.41
1
Restitution under the Victim and Witness Protect Act
(VWPA)42 is limited to losses caused by the specific conduct that
is the basis of the offense of conviction, Hughey v. United
I.A and I.B.
40
The district court originally ordered Chaney to pay
restitution in the amount of $1,926,681. The only explanation in
the record for this reduction is testimony from Bower's
sentencing hearing that the $440,000 loan had been paid. The
government has requested that this court take judicial notice of
this portion of the Bower record. Brief for the United States of
America at 63 n.32, United States v. Chaney, No. 91-8206 (5th
Cir. filed Dec. 20, 1991).
41
Specifically, Chaney asserts that "[t]he loss to the
bank, if it was caused by any of Mrs. Chaney's acts, was caused
by the making of the loans. Mrs. Chaney was acquitted on the
counts relating to the making of the loans. Therefore, the
restitution was improperly imposed." Brief for Appellant at 31,
United States v. Chaney, No. 91-8206 (5th Cir. filed Sept. 11,
1991) ["Chaney Brief"].
42
18 U.S.C. §§ 3579-3580 (1982 ed.) (renumbered §§ 3663,
3664 pursuant to Pub.L. 98-473, Title II, c. II, § 235, Oct. 12,
1984, 98 Stat. 2031) (VWPA).
-30-
30
States, __ U.S. __, __, 110 S. Ct. 1979, 1984 (1990), but we have
held that this VWPA restriction is not applicable to cases
involving restitution ordered pursuant to the Federal Probation
Act, 18 U.S.C. § 3651 (repealed eff. Nov. 1, 1986) (FPA). See
United States v. Hunt, 940 F.2d 130, 131 (5th Cir. 1991).43
Chaney's offenses were committed while the Probation Act was in
effect, and the record is not conclusive as to whether the
district court ordered restitution under the Probation Act or
under the VWPA. As stated in United States v. Cook, 952 F.2d
1262, 1264 (10th Cir. 1991), "where both statutes authorize
restitution, district courts should specify whether the FPA or
VWPA governs." When district courts fail to do so, "unless a
clear intention appears to the contrary, we will assume
restitution orders are made pursuant to the broader provisions of
the VWPA." Id., citing United States v. Padgett, 892 F.2d 445,
448 (6th Cir. 1989); see United States v. Kress, 944 F.2d 155,
158 (3d Cir. 1991) ("Where the district court fails to specify
43
See also United States v. Haile, 795 F.2d 489, 491 (5th
Cir. 1986) (Section 3651 of the Probation Act "gives broad
authority to district courts to impose conditions of probation
that in the judgment of the sentencing judge serve to
rehabilitate the criminal or secure compliance with court orders,
and otherwise are in the public interest.") (holding, however,
that FPA precludes monetary penalties other than those enumerated
in the statute); United States v. Van Cauwenberghe, 827 F.2d 424,
435 (9th Cir. 1987) (holding that joint and several liability for
entire actual loss could have been imposed on each fraud
defendant as condition of probation), cert. denied, 484 U.S.
1042, 108 S. Ct. 773 (1988); United States v. Tzakis, 736 F.2d
867, 871 (2d Cir. 1984) (holding that district court did not
abuse its discretion by imposing on defendant, as condition of
probation, joint and several liability with co-defendant for
restitution of full amount of losses caused by their crime).
-31-
31
whether the FPA or the VWPA authorized its actions, the general
rule is that the VWPA controls."), cert. denied, 112 S. Ct. 1163
(1992).
Restitution under the VWPA is a criminal penalty and a
component of the defendant's sentence. See United States v.
Snider, 957 F.2d 703, 705 (9th Cir. 1992); id. at 1113 ("Because
restitution under the VWPA is a criminal penalty, its imposition
must comport with the substantive and procedural requirements of
due process."). Therefore, when the legality of a restitution
award is questioned, we review that award de novo. See United
States v. Badaracco, 954 F.2d 928, 942 (3d Cir. 1992) (stating
that review of restitution order is bifurcated: plenary review
over whether the award is permitted under law is followed by
review of the particular award for abuse of discretion); United
States v. Cook, 952 F.2d 1262, 1263 (10th Cir. 1991); Snider, 945
F.2d at 1110. If we conclude that the sentence is legal, we then
review the restitution award for abuse of discretion. See United
States v. Gelais, 952 F.2d 90, 97 (5th Cir. 1992) (finding that
the "district court neither abused its discretion in choosing not
to articulate its findings nor in determining the amount of
restitution"); United States v. Ryan, 874 F.2d 1052, 1054 (5th
Cir. 1989) (Where defendant challenged award of restitution
pursuant to the VWPA, holding that "[d]istrict courts are
accorded broad discretion in ordering restitution.").
-32-
32
2
The government charged, and the jury found, Chaney guilty of
(1) the general, substantive charge of conspiring to make false
entries in Western Bank records and (2) making a false statement
on the Officer's Questionnaire--that is, Chaney failed to
disclose that she had made extensions of credit to benefit those
whose names did not appear on bank records in connection with
these extensions.44 This scheme for which Chaney was convicted
is amorphous by nature, but we have found that Count One was
defined with enough specificity to sustain Chaney's challenge to
its sufficiency.45
Restitution under the VWPA is limited to losses resulting
from the specific conduct underlying Chaney's convictions. See
Hughey v. United States, __ U. S. __, 110 S. Ct. 1979, 1983-84
(1990). Although there is overlap between the charges within
Chaney's indictment,46 Chaney was convicted on the more general
Count One--the conspiracy count alleging the overall scheme. We
will not be distracted by inconsistencies in the jury's verdict:
Hughey holds that "Congress intended restitution to be tied to
the loss caused by the offense of conviction[,]"47 and, as in
Hughey, our analysis builds upon the conduct for which Chaney was
44
See supra note 17 (summarizing indictment).
45
See supra Part II.B.
46
See supra note 17.
47
Hughey, __ U.S. at __, 110 S. Ct. at 1984 (emphasis
added).
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convicted. Accordingly, we reject Chaney's proposal that we turn
the Hughey rule inside-out, interpreting it as "Restitution under
the Victim and Witness Protect Act is forbidden for losses that
may be attributed to conduct that is the basis of charges for
which the defendant is acquitted."48
48
Chaney's interpretation of Hughey is simply too broad.
We are not confronted with a situation in which Chaney was
acquitted of conduct that completely and conclusively encompasses
the conduct underlying her convictions. At the very least, the
conduct supporting her convictions protrudes outside the edges of
the more specific conduct underlying her acquittals. See supra
note 17 (summarizing indictment). This disparity in breadth
between the conduct underlying Chaney's convictions and the
conduct underlying her acquittals distinguishes Chaney's case
from those she cites as authority--cases in which defendants were
charged with specificity and courts held that they could not be
required to make restitution for losses resulting from this same
specific conduct. See, e.g., United States v. Kane, 944 F.2d
1406, 1415 (9th Cir. 1991) (where overt acts charged in counts on
which defendant was acquitted were same as overt acts alleged in
conspiracy count on which defendant was convicted, holding that
defendant could not be required to make restitution for losses
from conduct for which defendant had been specifically charged
and acquitted); United States v. Sharp, 941 F.2d 811, 813 (9th
Cir. 1991) (holding that defendant could not be ordered to make
restitution based on entire $8,500,000 wire fraud scheme when he
pleaded guilty to only one count of wire fraud alleging a $3,000
fraudulent transfer). This same distinction holds true for
Hughey, where, pursuant to a plea agreement, Hughey pled guilty
to using one unauthorized credit card and the district court
ordered restitution for his theft and use of 21 cards. Noting
that "[t]he essence of a plea agreement is that both the
prosecution and the defense make concessions to avoid potential
losses[,]" the United States Supreme Court reversed the district
court's restitution order, holding that a VWPA restitution award
is authorized only for the losses caused by the one unauthorized
credit card use that was the basis of Hughey's conviction. Our
survey of other cases--cases decided subsequently to those cited
by the parties--limiting restitution orders in accordance with
Hughey also involve instances where a defendant has been charged
with and convicted of specific conduct and courts have limited
restitution to the losses resulting from that specific conduct;
in many of these cases, as in Hughey, defendants entered into
plea agreements which constrained restitution. See, e.g., United
States v. Clark, 931 F.2d 292, 297 (5th Cir. 1991) (where
defendant pled guilty to four counts of aiding and abetting false
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It is well-established that, as a participant in the false
entry conspiracy, Chaney is legally liable for all the actions of
her co-conspirators in furtherance of this crime. See United
States v. Kissel, 218 U.S. 601, 608, 31 S. Ct. 124, 126 (1910)
("[T]he conspiracy continues up to the time of abandonment or
success.") ("A conspiracy is a partnership in criminal
purposes . . . [and] an overt act of one partner may be the act
of all without any new agreement specifically directed to that
act."); see also Hyde v. United States, 225 U.S. 347, 369, 32 S.
Ct. 793, 803 (1912) (the liability of an individual conspirator
continues until the conspiracy accomplishes its goals or that
conspirator withdraws, the latter of which requires an
affirmative action). Conspiracy is, therefore, a continuing
statements to a federally insured savings and loan, holding that
government cannot exceed convictions it bargained for by ordering
restitution for other counts); see also United States v. Young,
953 F.2d 1288, 1290 (11th Cir. 1992) (where defendant approved at
least thirty loans in exchange for "gifts" while acting as a bank
loan officer, and then pled guilty to only two counts of
accepting and receiving a commission or gift in connection with a
loan approval, holding that restitution had to be limited to
losses resulting from those two offenses); United States v.
Wainwright, 938 F.2d 1096, 1098 (10th Cir. 1991) (where defendant
pled guilty to one count of bank fraud, holding that restitution
ordered encompasses losses stemming from charges which were
dismissed).
Moreover, even if we were to follow the approach Chaney
proposes by eliminating all conduct for which Chaney was
acquitted, Chaney was generally charged and convicted of
conspiring to make false entries in Western Bank records. Chaney
was acquitted only of specific conduct--conduct included within
Charge One but not encompassing the conduct alleged in that
charge. Therefore, the district court was not precluded from
basing its restitution award on losses resulting from the conduct
protruding beyond her acquittals, such as the false entries made
in connection with the three renewals--November 1985, May 1986,
and September 1986--of the $645,000 loan. See generally supra
note 39 (listing other instances of false entries and omissions).
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offense and, in accordance with this principle, "[t]he district
court had the authority to order restitution for the losses
caused by the entire fraud scheme, not merely for the losses
caused by the specific acts of fraud proved by the government at
trial." United States v. Brothers, 955 F.2d 493, 497 (7th Cir.
1992) (holding that restitution order did not exceed scope of
convictions where defendant, challenging that order under Hughey,
argued that district court could only require restitution for
checks he was convicted of improperly receiving) (remanded on
grounds that restitution order was unacceptably vague),
discussing United States v. Bennett, 943 F.2d 738, 741 (7th Cir.
1991); see United States v. Wallen, 953 F.2d 3, 5-6 (1st Cir.
1991) (holding that, "although it may encompass a number of
underlying acts, a RICO conviction is a conviction for a single
offense" for VWPA purposes and a defendant may be ordered to pay
restitution for all losses resulting from this continuing
offense); Bennett, 943 F.2d at 741 (7th Cir. 1991) (where eighty
acts constituting mail fraud scheme were discussed in plea
agreement but only two specific fraudulent acts supported
defendant's two mail fraud convictions, holding that district
court had authority to order restitution for losses caused by
entire scheme).
Because they caused Western Bank to issue and then not
question the cumulative loans, the false entries effected by
Chaney and her co-conspirators,49 along with Chaney's failure to
49
See supra note 39 and accompanying text.
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36
accurately respond to question five on the Officer's
Questionnaire,50 were part of a continuing conspiracy offense and
they are inextricably related to the losses suffered as a result
of default on the loans.51 Accordingly, we affirm both the
district court's award of restitution and the joint and several
liability imposed upon Chaney for that restitution.52
50
See supra note 18.
51
Chaney's convictions do not leave us with unidentified
victims. See United States v. Angelica, 951 F.2d 1007, 1009 (9th
Cir. 1991) (ordering district court to redetermine amount of
restitution where restitution order encompassed losses sustained
by fifteen victims, seven of whom were not subjects of counts of
conviction). Rather, Chaney's entire case centered around a
focused conspiracy by a related group of individuals to gain
access to Western Bank funds through specific loans. The loss
resulting from this conspiracy--the sum total of loans made
possible by Chaney's misstatements and failure to disclose
information--was also precisely defined. Therefore, although the
jury did acquit Chaney of charges that rely upon specific
instances of conduct within this overall conspiracy, Chaney was
convicted of generally participating in a well-defined
conspiracy--a conspiracy with identified actors and focused
objectives. This distinguishes Chaney from United States v.
McHenry, 952 F.2d 328 (9th Cir. 1991), amended, 1992 WL 103088,
where the Ninth Circuit held that,
[a]ccording to the district court, however, the unnamed
`victims' of the conspiracy are entitled to a refund.
Apparently the district court assumed the jury believed
that the defendants committed each and every act
alleged by the government. This assumption is not
warranted by the verdict. At most, it reveals that the
jury did not believe the government proved mail and
wire fraud beyond a reasonable doubt, but that the
government did satisfy this burden with respect to the
conspiracy count.
Id. at *3.
52
See United States v. Hand, 863 F.2d 1100, 1106 (3d Cir.
1988) (Holding that, in ordering restitution under the VWPA, the
fact that the burden of restitution lays entirely on one
defendant were two co-defendants were equally culpable did not
offend the Constitution and "certainly . . . did not constitute
an abuse of discretion."); see also United States v. All Star
Industries, No. 91-2439 (5th Cir. 1992) (holding that district
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III
For the foregoing reasons, we AFFIRM.
court did not abuse its discretion in imposing joint and several
liability for all losses to victims of four-year conspiracy
proved at trial); United States v. Van Cauwenberghe, 827 F.2d
424, 435 (9th Cir. 1987) (holding that joint and several
liability for entire actual loss could have been imposed on each
fraud defendant as condition of probation); cert. denied, 484
U.S. 1042, 108 S. Ct. 773 (1988); United States v. Tzakis, 736
F.2d 867, 871 (2d Cir. 1984) (holding that district court did not
abuse its discretion by imposing on defendant, as condition of
probation, joint and several liability with co-defendant for
restitution of full amount of losses caused by their crime).
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