United States v. Ryan, Patrick J. ( 2000 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 99-1600
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
PATRICK J. RYAN,
Defendant-Appellant.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 96 CR 743-2--Harry D. Leinenweber, Judge.
Argued February 10, 2000--Decided May 16, 2000
Before COFFEY, FLAUM and DIANE P. WOOD, Circuit
Judges.
COFFEY, Circuit Judge. On November 20, 1996,
Defendant-Appellant Patrick J. Ryan ("Ryan") was
indicted and charged in Count one with
participating in a scheme to defraud financial
institutions and in Counts two through six with
making false statements on loan or credit
applications, and went to trial in the Northern
District of Illinois on December 9, 1997. At the
conclusion of a jury trial, the defendant was
found guilty on all counts and on February 11,
1999, the court sentenced Ryan to thirty-three
months on each count, ordered to run concurrently
and concurrent with each other, restitution in
the amount of $676,880.00, and upon release, a
three year supervised release term. After his
conviction and sentencing, Ryan filed a motion
for a new trial, which was denied by the court.
Thereafter, Ryan appealed, arguing that the court
abused its discretion when it admitted evidence
that he failed to report about $136,000.00 in
kickbacks and commissions on his tax returns and
when it denied his motion for a new trial because
newly discovered evidence revealed that one of
the government’s key witnesses later admitted to
embezzling money from his employer. We AFFIRM.
I. BACKGROUND
In 1989, Michael Notaro ("Notaro"), president of
Statistical Tabulating Corporation ("STC"), a
computer services company located in Chicago,
Illinois, attempted to obtain refinancing on the
company’s printers and computers. After
rejections from several banks and finance
companies, Notaro approached defendant Ryan to
assist STC in obtaining financing. Ryan at the
time was the vice- president of a company that
located and brokered financing for businesses.
The bank fraud scheme in this case is
theoretically simple but factually complex:
Notaro and Ryan submitted loan applications with
false financial documentation that inflated the
financial soundness of STC. Specifically, to
obtain loans and refinancing agreements from
First National Bank of Dolton, Standard Federal
Savings and Loan Association, and LaSalle Bank
Lakeview, Notaro and Ryan submitted false STC
financial statements that listed collateral that
did not exist as security for the loans and
fraudulent invoices for payment of equipment that
was never purchased. Notaro paid Ryan
approximately $136,000.00 in kickbacks and
commissions for his assistance in securing the
financing from the loan and refinancing proceeds.
When STC went down and filed for bankruptcy, the
banks were left with substantial losses.
At trial, over Ryan’s objection, the court
admitted evidence that the defendant failed to
report the $136,000.00 that he had received from
Notaro for his assistance in the bank fraud
scheme. Following his conviction but before
sentencing,/1 Ryan moved for a new trial based
on newly discovered evidence, revealing that a
government witness, William T. Roberts
("Roberts"), the lending officer for LaSalle Bank
Lakeview, had confessed to his own embezzlement
of over $500,000 from the bank. The district
court denied the defendant’s motion, finding that
his motion for a new trial did "not attack the
fundamental finding that LaSalle, a federally
secured institution, made a loan to [STC] based
on false information that was provided to the
bank by Ryan." The defendant appealed.
II. ISSUES
On appeal, the defendant claims that the court
abused its discretion when it: (1) admitted
evidence that he had failed to report the
$136,000.00 in kickbacks and commissions on his
tax returns; and (2) denied his motion for a new
trial despite newly discovered evidence revealing
the illegal activity of one of the government’s
key witnesses.
III. DISCUSSION
A. The Admissibility of Ryan’s Failure to Report
His Kickback Payments
Ryan contends that the court abused its
discretion when it admitted evidence that
established his failure to report on his tax
returns the $136,000.00 he received from Notaro
for his assistance in securing financing for STC.
We review a trial judge’s evidentiary ruling for
abuse of discretion. See United States v. York,
933 F.2d 1343, 1348 (7th Cir. 1991). Indeed, we
afford "great deference to the trial court’s
determination of the admissibility of evidence
because of the trial judge’s first-hand exposure
to the witnesses and the evidence as a whole, and
because of the judge’s familiarity with the case
and ability to gauge the impact of the evidence
in the context of the entire proceeding." United
States v. Van Dreel, 155 F.3d 902, 905 (7th Cir.
1998).
Ryan argues that this evidence was excludable
as other bad acts evidence under Federal Rule of
Evidence 404(b). We see no need to engage in Rule
404(b) analysis, however, because it is clear
from the record that this evidence was
"intricately related" to the bank fraud offense
charged in the indictment. "[T]his [C]ircuit has
a well-established line of precedent which allows
evidence of uncharged acts to be introduced if
the evidence is ’intricately related’ to the acts
charged in the indictment." United States v.
Gibson, 170 F.3d 673, 680 (7th Cir. 1999). Under
the "intricately related" doctrine, the
admissibility of Ryan’s failure to disclose the
$136,000.00 as income on his tax returns turns
on:
whether the evidence is properly admitted to
provide the jury with a complete story of the
crime on trial, whether its absence would create
a chronological or conceptual void in the story
of the crime or whether it is "so blended or
connected" that it incidentally involves,
explains the circumstances surrounding, or tends
to prove any element of, the charged crime.
United States v. Ramirez, 45 F.3d 1096, 1102 (7th
Cir. 1995) (alterations and citations omitted)
(emphasis added).
The trial judge concluded and we agree that the
crime that Ryan was charged with in Count one
(bank fraud under 18 U.S.C. sec. 1344) is a
specific intent crime. The judge found that the
evidence of his failure to report the kickbacks
in his tax returns "is evidence of a cover-up,
attempted cover-up, which has generally been held
to be admissible as far as casting some
reflection on how the defendant evaluated his own
conduct." The judge further concluded that the
probative value of the evidence outweighed its
prejudice because it tended to "prove [the bank
fraud] by acts [committed] afterwards."
Indeed, "[a] conviction for bank fraud under 18
U.S.C. sec. 1344 requires proof that the
defendant acted ’willfully and with specific
intent to deceive or cheat, usually for the
purpose of getting financial gain for one’s self
or causing financial loss to another.’" United
States v. Pribble, 127 F.3d 583, 592 (7th Cir.
1997) (quoting United States v. Moede, 48 F.3d
238, 241 (7th Cir. 1995)). Further,
[i]ntent to defraud must be proven to obtain a
conviction for bank fraud. Howard, 30 F.3d at
874; United States v. LeDonne, 21 F.3d 1418, 1426
(7th Cir. 1994). We have defined intent to
defraud as acting willfully and with specific
intent to deceive or cheat, usually for the
purpose of getting financial gain for one’s self
or causing financial loss to another. United
States v. Sims, 895 F.2d 326, 329 (7th Cir.
1990). Intent to defraud can be proven by
circumstantial evidence and by inferences drawn
from the scheme itself. Howard, 30 F.3d at 874;
LeDonne, 21 F.3d at 1426. Circumstantial evidence
of intent to defraud includes such conduct as
knowingly depositing a forged check, knowingly
depositing an NSF check, knowingly writing checks
on an inadequate account balance, violating bank
rules, and providing falsified information on
loan documents. See, e.g., Howard, 30 F.3d at
874; LeDonne, 21 F.3d at 1427-28; Hammen, 977
F.2d at 384; United States v. Ragosta, 970 F.2d
1085, 1090-91 (2nd Cir. 1992), cert. denied, 506
U.S. 1002, 113 S. Ct. 608, 121 L. Ed. 2d 543
(1992).
Moede, 48 F.3d at 241-42 (emphasis added).
Thus, Ryan’s efforts to conceal his
participation in the bank fraud scheme by failing
to report the some $136,000.00 in kickbacks and
commissions received from Notaro, constituted
"[c]ircumstantial evidence of intent to defraud."
See id. The tax-return evidence also tended to
"cast doubt on the credibility of" his defense
that he advanced at trial--that he was ignorant
of the fraudulent aspects of the transactions.
See Gatineau v. Fleet Mortgage Corp., 137 F.3d
490, 495-96 (7th Cir. 1998). Because this
evidence was highly probative of his specific
intent to commit bank fraud and rebutted his
"ignorance" defense, we conclude that the trial
judge did not abuse his discretion in admitting
evidence of his failure to report his kickbacks
and commissions received from Notaro on his tax
returns.
B. Motion for a New Trial
We next turn to the defendant’s claim that the
court abused its discretion when it denied his
motion for a new trial because newly discovered
evidence existed that would have exonerated him.
Federal Rule of Criminal Procedure 33 provides
that "[o]n a defendant’s motion, the court may
grant a new trial to that defendant if the
interests of justice so require." As we have
previously stated, "[p]robably the most frequent
basis for a Rule 33 motion--and the only one
specifically mentioned in the rule--is one ’based
on the ground of newly discovered evidence.’"
United States v. Woolfolk, 197 F.3d 900, 905 (7th
Cir. 1999) (citing United States v. Kamel, 965
F.2d 484, 490 (7th Cir. 1992)). As a reviewing
court, "we approach such motions with great
caution and are wary of second-guessing the
determinations of both judge and jury." United
States v. DePriest, 6 F.3d 1201, 1216 (7th Cir.
1993); Kamel, 965 F.2d at 490. As such, we review
motions for a new trial based on newly discovered
evidence for abuse of discretion. Woolfolk, 197
F.3d at 904.
To receive a new trial based on newly
discovered evidence, the defendant must
demonstrate that the evidence (1) came to their
knowledge only after trial; (2) could not have
been discovered sooner had due diligence been
exercised; (3) is material and not merely
impeaching or cumulative; and (4) would probably
lead to an acquittal in the event of a retrial.
United States v. Kamel, 965 F.2d 484, 490 (7th
Cir. 1992); Jarrett v. United States, 822 F.2d
1438, 1445 (7th Cir. 1987).
Ryan argues that the discovery of the illegal
embezzlement activity by the LaSalle Bank loan
officer, who testified at trial on behalf of the
government, justified the granting of a new
trial. But the district court concluded and we
agree that this new evidence "does not attack the
fundamental finding that LaSalle, a federally
insured institution, made a loan to [STC] based
on false information that was provided to the
bank by Ryan. . . . It in no way tends to prove
that Ryan may have been innocent of the scheme."
Indeed, Roberts’ testimony at trial simply
established that he was the bank officer who
handled loan applications and relied upon the
information given to him by Ryan and Notaro.
Further, the defendant has failed to direct this
Court’s attention to any fact that establishes
that Roberts’ embezzlement from LaSalle Bank was
connected to Ryan’s participation in the bank
fraud scheme. This new evidence neither casts
doubt nor supports Ryan’s theory of defense--that
he relied on and believed Notaro when he
submitted the false financial information. Thus,
because Roberts’ illegal activity was unrelated
to Ryan’s participation in the bank fraud scheme,
the defendant has failed to establish and we are
unconvinced that Roberts’ embezzlement of funds
from LaSalle Bank would probably lead to an
acquittal in the event of a retrial. Kamel, 965
F.2d at 490. We conclude that the judge did not
abuse his discretion when he denied the
defendant’s motion for a new trial.
IV. CONCLUSION
The court did not abuse its discretion when it
admitted evidence of Ryan’s failure to report the
some $136,000.00 in kickbacks and commissions he
received from Notaro on his tax returns and when
it denied his motion for a new trial. We AFFIRM the
defendant’s conviction and sentence.
/1 Notaro entered a plea of not guilty, but died due
to illness prior to trial.