United States v. Bianucci, William L. ( 2005 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 04-2004
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
WILLIAM L. BIANUCCI,
Defendant-Appellant.
____________
Appeal from the United States District Court for
the Northern District of Illinois, Eastern Division.
No. 02 CR 583—Charles R. Norgle, Sr., Judge.
____________
ARGUED MAY 12, 2005—DECIDED JULY 29, 2005
____________
Before RIPPLE, ROVNER and SYKES, Circuit Judges.
ROVNER, Circuit Judge. A jury found William Bianucci
guilty of one count of bank fraud in violation of 18 U.S.C.
§ 1344, and thirteen counts of making false statements to
a bank in violation of 18 U.S.C. § 1014. Bianucci appeals
both his conviction and his sentence. We affirm the con-
viction but order a limited remand for further proceedings
on his sentence under the procedure established in
United States v. Paladino, 401 F.3d 471, 483-84 (7th Cir.
2005).
2 No. 04-2004
I.
Bianucci was the controller for Erickson Cosmetics
Corporation (“ECC”), a Chicago-based contract manufac-
turer of cosmetic products. As controller, Bianucci was re-
sponsible for the day-to-day management of the finances of
ECC. He reported to the company’s president, James
Pickering, his co-defendant in this case. ECC was a pri-
vately held and sometimes financially troubled company. In
1994, before Bianucci was hired, ECC was in Chapter 11
bankruptcy. ECC’s owner, Wallace Erickson, hired
Pickering to lead the company out of bankruptcy. Pickering
hired Bianucci to work as ECC’s controller in 1996. In this
role, Bianucci oversaw accounting functions, payroll,
costing, accounts receivable, accounts payable, inventory,
and credit.
In 1997, ECC’s lender, American National Bank, declined
to renew a credit line for ECC and Bianucci was responsible
for finding a new lender. Bianucci contacted First Bank
National Association (“First Bank”) with whom Erickson
had a prior banking relationship. First Bank referred the
loan request to Republic Acceptance Corporation
(“Republic”). Republic had been an unregulated commercial
finance company specializing in loans to small businesses
until First Bank purchased Republic in 1993. The govern-
ment’s witnesses variously described Republic as a “divi-
sion,” “part,” or “subsidiary” of First Bank. One government
witness labeled Republic “the name used for the asset lend-
ing part of the bank.” Republic became subject to banking
regulations when First Bank acquired it. According to
government witnesses, when Republic made a loan, First
Bank provided the money. When a loan serviced by Repub-
lic went bad, it was the bank that lost money.
On May 14, 1997, ECC entered into a Financing
Agreement with First Bank. Pickering signed the Financing
Agreement in his capacity as president of ECC. Barry Davis
No. 04-2004 3
signed for First Bank using the title “Account Executive.”
The very first line of the agreement identifies First Bank as
the lender. Nonetheless, many of the people who negotiated
the terms of the Financing Agreement on behalf of First
Bank held job titles at Republic as well as at the bank. At
trial, some of the government’s witnesses testifying about
the loan negotiations identified First Bank as their em-
ployer, some named Republic, and one identified both First
Bank and Republic as his employer (First Bank in direct
testimony and Republic in cross-examination). Although the
corporate structure of First Bank and Republic was un-
doubtedly confusing to its employees and customers, the
Financing Agreement at issue here clearly identified First
Bank as the lender. A Security Agreement signed by
Pickering on behalf of ECC that same day identified the
secured party as First Bank. First Bank later merged with
U.S. Bank and the combined entity was named U.S. Bank.
For the sake of clarity and because much of the subsequent
paperwork referred to U.S. Bank, we will refer to the bank
as U.S. Bank hereafter.
The Financing Agreement provided for a revolving line of
credit for ECC. In this kind of loan arrangement, the
borrower may request cash advances on a day-to-day basis
provided that the bank determines there is enough collat-
eral to secure the loan. The loan from U.S. Bank to ECC
was secured in part by a percentage of eligible accounts
receivable that would be assigned by ECC to the bank. The
original Financing Agreement permitted ECC to borrow up
to $6 million on the basis of then-existing eligible accounts
receivable. The Financing Agreement was subsequently
amended four times to increase the amount of money that
ECC was permitted to borrow to $14 million. Each of those
amendments identified the bank as the lender. Under the
terms of the Financing Agreement, ECC was prohibited
from borrowing against certain types of accounts receivable
that were not considered to be good collateral. For example,
4 No. 04-2004
ECC could not borrow against accounts receivable that were
unpaid for more than ninety days. Nor could ECC borrow
against any accounts receivable balances owed by a particu-
lar customer if 20% or more of accounts receivable owed by
that customer were ineligible. For example, if 20% of a
customer’s account with ECC was more than ninety days
old, ECC could not borrow against the remaining 80% of the
customer’s accounts receivable even if that balance was
otherwise eligible. Additionally, ECC could not borrow
against billings based on partial completion of a project,
and could not borrow against accounts where no services
had yet been performed and no products had yet been
delivered.
In order for the bank to monitor the loan, the Financing
Agreement required ECC to submit to U.S. Bank various
records documenting the eligible accounts receivable. The
key documentation was a form called a “borrowing base
certificate” or “BBC.” ECC submitted a new BBC each time
ECC requested a new advance of funds. ECC would list on
the BBC any new invoices generated by the company since
the last BBC had been submitted. The new invoices (or
accounts receivable), if eligible under the Financing Agree-
ment, provided collateral for additional funds that would be
available to ECC for loans. ECC submitted invoice registers
rather than copies of the invoices themselves in support of
the billing figures on the BBCs. Once submitted on a BBC,
an account was assigned to U.S. Bank to increase the
collateral on the line of credit. With each BBC, ECC
conveyed to U.S. Bank the company’s current accounts
receivable so that the bank could calculate from day to day
the amount of funds available for advances on the line of
credit.
As the controller of ECC, Bianucci was responsible for
certifying the accuracy of the BBCs. The BBC forms were
labeled “Republic Acceptance Corporation” and were sub-
No. 04-2004 5
mitted to Republic. The bottom of each BBC contained a
signature block preceded by the following language:
TO REPUBLIC ACCEPTANCE CORPORATION: In
compliance with the Financing Agreement between us
we hereby certify that the above is true and correct, and
that each schedule of or other information concerning
our inventory, accounts, instruments, chattel paper,
and other rights to payment of money that are attached
hereto are true and correct, in each case as of the date
specified in the Borrowing Base Certificate. We hereby
acknowledge and agree that you have a security inter-
est in all of our inventory, accounts, instruments,
chattel paper, other rights to payment of proceeds
thereof, together with any other assets covered by our
Security Agreement(s) with you. Except as otherwise
specifically stated with respect to a particular item, we
warrant that all listed receivable items are genuine,
that the amount set opposite each debtor’s name is the
true, correct, collectible, noncontingent and undisputed
amount owing by such debtor, and that none of said
items is subject to any defense at law or inequity [sic],
to any offset, or to contra account. We hereby further
certify that we have no knowledge of the existence of
any breach or default of any representations, warranties
or agreements with you, as set forth in the Financing
Agreement, the Security Agreement(s) and any other
agreement between you and us, except as described in
a separate attachment to this Certificate.
Gov. Ex. U.S. Bank Group #4a. Bianucci signed the certi-
fications at the end of each BBC in his capacity as Control-
ler of ECC. The Financing Agreement also required ECC to
produce accounts receivable aging reports. These reports
listed accounts receivable by invoice date or due date so
that the lender could determine which accounts were
ineligible to serve as collateral for the loan.
6 No. 04-2004
In spring 1998, ECC had cash flow problems and could
not pay its bills in a timely way. In order to increase the
amount of money ECC could borrow under the Financing
Agreement, Pickering told Bianucci that it was time to “get
creative.” Pickering discussed with Bianucci “re-aging”
accounts receivable and creating false invoices to support
the BBCs. By re-aging accounts, some accounts that would
have been ineligible to serve as collateral appeared to the
bank to be eligible. The false invoices deceived the bank
into believing that additional loans would be collateralized
by legitimate, collectible invoices. Bianucci signed certifica-
tions on more than a dozen BBCs that contained false
information. As a result, the bank advanced more funds to
ECC than it would have advanced had it known the true
state of affairs.
In September and October of 1998, collateral analyst Jeff
Alderson conducted an audit of ECC and discovered that $4
million in loaned funds were unsupported by legitimate
collateral. The bank confronted Pickering and Bianucci with
this news and informed the pair that there was not enough
money in ECC’s account to cover the company’s then-
current payroll obligations. Neither Pickering nor Bianucci
explained to the bank how such a large amount of the loan
was unsupported by legitimate collateral. Two months after
the audit results were announced, ECC fired Pickering, who
was eventually charged, along with Bianucci, with bank
fraud and making false statements to a bank. Pickering
faced an additional charge related to unauthorized loans
that he took from ECC’s coffers and never paid back.
Bianucci was charged with one count of bank fraud in
violation of 18 U.S.C. § 1344, and sixteen counts of making
false statements to a bank in violation of 18 U.S.C. § 1014.
Pickering pled guilty and testified against Bianucci at trial.
A jury convicted Bianucci of one count of bank fraud and
thirteen counts of making false statements to a bank and
acquitted him on three counts of making false statements
to a bank. Bianucci appeals.
No. 04-2004 7
II.
On appeal, Bianucci contends that the government
produced insufficient evidence to demonstrate that he in-
tended to influence an FDIC-insured bank when he sub-
mitted the BBCs to Republic, which was not a bank. He
asks this court to reverse his conviction and remand with
directions to acquit on all counts. He also challenges his
sentence on the grounds that the district court treated the
Sentencing Guidelines as binding rather than advisory, in
violation of the Fifth and Sixth Amendments to the Consti-
tution. We turn first to Bianucci’s challenge to his convic-
tion.
A.
We have often described challenges to the sufficiency of
the evidence as “uphill battles” and this one is no exception.
In reviewing Bianucci’s claim, we must determine whether,
after viewing the evidence in the light most favorable to the
prosecution, any rational trier of fact could have found the
essential elements of the crime beyond a reasonable doubt.
United States v. Fleischli, 305 F.3d 643, 657 (7th Cir. 2002),
cert. denied, 538 U.S. 1001 (2003); United States v. Copus,
93 F.3d 269, 271 (7th Cir. 1996); United States v. Reynolds,
64 F.3d 292, 297 (7th Cir. 1995), cert. denied, 516 U.S. 1138(1996). We may reverse a conviction only when the record
is devoid of evidence, regardless of how it is weighed, from
which a reasonable jury could find guilt beyond a reason-
able doubt. Fleischli, 305 F.3d at 657; Copus, 93 F.3d at
271; United States v. Rodriguez, 53 F.3d 1439, 1444 (7th
Cir. 1995). We will not reweigh the evidence or judge the
credibility of the witnesses. Reynolds, 64 F.3d at 297.
Section 1014 provides, in relevant part:
Whoever knowingly makes any false statement or re-
port . . . for the purpose of influencing in any way the
action of . . . any institution the accounts of which are
8 No. 04-2004
insured by the Federal Deposit Insurance
Corporation . . . shall be fined not more than $1,000,000
or imprisoned not more than 30 years, or both.
18 U.S.C. § 1014. Section 1344, the other statute under
which Bianucci was charged, similarly provides criminal
penalties for persons who knowingly execute a scheme to
defraud a financial institution. 18 U.S.C. § 1344.
Bianucci maintains that he dealt entirely with Republic,
a company separate from U.S. Bank that was not itself a
bank, did not take deposits, and was not insured by the
FDIC. He sent the BBCs to Republic, not the bank, and the
information on the BBCs was therefore intended to influ-
ence Republic, not the bank. Bianucci argues that, under
our decision in United States v. White, 882 F.2d 250 (7th
Cir. 1989), his conviction may not stand because the
government did not prove beyond a reasonable doubt that
he intended to influence the bank when he submitted the
BBCs but rather intended to influence Republic, a non-bank
entity. Some of the evidence certainly supports Bianucci’s
version of events. One of the first documents to exchange
hands on the loan was a letter from Michael Pierce (who
carried a business card identifying him as an employee of
Republic) to Bianucci describing the general terms and
conditions that Republic might extend to ECC. The letter,
which clarifies that it is for discussion purposes only, is on
Republic Acceptance Corporation letterhead. The attached
term sheet, describing the particulars of the proposed loan,
lists the lender as Republic Acceptance Corporation, and
states that a collateral account is to be established for the
benefit of Republic. All of the BBCs are titled “Republic
Acceptance Corporation,” and the signature certification
block (signed repeatedly by Bianucci) begins with the
words, “TO REPUBLIC ACCEPTANCE CORPORATION.”
Gov. Exs. U.S. Bank Group 4a - 13a, 15a, 16a, 18a, 19a. At
trial, Jeff Alderson, a government witness and collateral
analyst, first testified that he was employed by U.S. Bank
No. 04-2004 9
but on cross-examination admitted that Republic was his
employer. He also conceded that the money advanced to
ECC was paid by Republic, that ECC had approached the
bank first for the loan and had been referred to Republic,
that the loan was “totally a loan by Republic,” and that the
bank decided not to exercise an option it had to participate
in up to 50% in the loan.
These were all points for Bianucci to argue to the jury,
just as the government was allowed to argue the evidence
that supported its version of events, namely that the
Financing Agreement and all subsequent amendments to it
were signed by ECC and the bank (first by First Bank and
later by U.S. Bank), and that as Controller of ECC,
Bianucci undoubtedly knew he was dealing with a bank
when he sent the BBCs to Republic, which was simply
servicing the loan for the bank. The government had much
evidence demonstrating its view of the facts. For example,
the term sheet also specified as a condition precedent:
Completion of all documentation (filing and financing
agreement to be under the name of First Bank) and res-
olution of the final terms of the financing in a manner
satisfactory to Republic and Republic’s counsel.
Gov. Ex. Erickson Group 1. Most conclusive is the
Financing Agreement itself, together with the Security
Agreement and four separate Amendments to the Financing
Agreement. These documents, which controlled the entire
loan arrangement, identified First Bank and later U.S.
Bank as the lender and as the secured party in each and
every final, executed draft. Bianucci himself testified that
the Financing Agreement identified the bank as the lender
and that he read the complete Financing Agreement at the
time it was signed. The jury was entitled to infer from the
documents, from Bianucci’s position as Controller at ECC,
and from the testimony of Bianucci and other witnesses
including co-defendant Pickering, that Bianucci knew ECC
10 No. 04-2004
was dealing directly with the bank and that the BBCs were
intended to induce the bank to advance more funds to ECC.
That is all the government needed to prove and there was
more than sufficient evidence in the record to meet this
element of the charge. The jury simply did not credit
Bianucci’s testimony that he believed he was dealing with
Republic, a non-bank, non-FDIC-insured entity when he
certified the BBCs.
Our opinion in White does not aid Bianucci. The
defendant in that case was convicted of violating section
1014 by making knowingly false statements to a leasing
corporation that was a wholly-owned subsidiary of a bank.
White, 882 F.2d at 250-51. The indictment against White
did not charge that White made the statements to the leas-
ing company intending to influence its parent, the bank;
rather, the indictment charged that White made the state-
ments intending to influence the leasing company. White,
882 F.2d at 251. The question thus presented to the court
was whether the subsidiary leasing corporation also quali-
fied as an FDIC-insured bank within the meaning of section
1014. We rejected the government’s argument that we
should treat the subsidiary as if it were a bank because
federal regulations subjected it to all banking laws and
regulations. White, 882 F.2d at 252. We found there was “no
(or only the most attenuated) federal stake in preventing
fraud against affiliates of a federally insured bank, as
distinct from fraud against the bank itself.” White, 882 F.2d
at 253. We clarified our decision:
[I]f White had intended by making false statements to
the leasing corporation to influence the bank as well,
the fact that the statements were not made to the bank
would not prevent his conviction; the language of the
statute is clear on this point. Nor would the intent to
influence the bank have to be the primary motivation
for the making of the statements. It would be enough if
White had known that the loan he was getting from the
No. 04-2004 11
leasing corporation would be assigned to the bank. But
the government proposed no such theory of liability in
this case. It was content to show that White made false
statements to influence the leasing corporation. It
staked its all on persuading the district court and us
that the leasing corporation is a bank.
White, 882 F.2d at 254 (citations omitted).
Unlike White, Bianucci was charged with making false
statements for the purpose of influencing the bank to
advance funds to ECC. As we have described above, there
is sufficient evidence to show that Bianucci knew the bank
was identified as the lender, and that, although Republic
may have been servicing the loan, the bank was advancing
the money. The jury was entitled to infer that when
Bianucci sent BBCs to Republic, he intended for that in-
formation to influence the bank and in particular to cause
the bank to advance more funds to ECC. The government
did not stake its case on proving that Republic was an
FDIC-insured entity but rather on demonstrating that
Bianucci, as Controller of ECC, knowingly submitted false
BBCs with the intent to influence First Bank and later U.S.
Bank, the lenders identified in the Financing Agreement.
We thus affirm Bianucci’s conviction.
B.
The district court sentenced Bianucci to forty-six months’
imprisonment, to be followed by five years of supervised
release. The court also ordered Bianucci to pay $3,418,854
in restitution and a $1400 assessment. In calculating
Bianucci’s sentence, the district court accepted the recom-
mendations of the Presentence Investigation Report
(“PSR”), which set the base offense level at six, added two
points for more than minimal planning, two more points for
obstruction of justice, and thirteen points for the amount of
loss to the victim, resulting in an adjusted offense level of
12 No. 04-2004
twenty-three. Bianucci did not object to the proposed
Guidelines calculations, although he did move for a three-
level downward departure and also objected to the sentenc-
ing disparity between himself and his co-defendant, James
Pickering who received a twenty-seven month prison term.
The court denied the motion for a downward departure,
which resulted in a Guidelines range of forty-six to fifty-
seven months’ imprisonment. The court selected a sentence
at the low end of that range, noting there were “many good
things to say about Mr. Bianucci.” In sentencing Bianucci,
the district court treated the Sentencing Guidelines as
binding. Bianucci did not allege a constitutional violation or
object to his sentence on Apprendi grounds at that time.
On appeal, Bianucci argues that his sentence violated the
Supreme Court’s dictate in United States v. Booker, 125 S.
Ct. 738 (2005). Under Booker, any fact other than a prior
conviction that increases the maximum penalty established
by a jury verdict or guilty plea must be admitted by the
defendant or proved to a jury beyond a reasonable doubt.
Booker, 125 S. Ct. at 756. Here, the court increased
Bianucci’s sentence with facts not found by the jury or
admitted by the defendant. In particular the court made
findings related to the amount of the loss to the bank, the
degree of planning needed to commit the crime, and
Bianucci’s obstruction of justice. Although Bianucci asked
the court to depart downward and to impose a “just punish-
ment” lower than the bottom of the Guidelines range,
Bianucci did not preserve a Booker-type argument and we
therefore review the sentence for plain error. See
United States v. Paladino, 401 F.3d 471 (7th Cir. 2005). It
is unclear from the record as it now stands whether the
district court would have imposed the same sentence had it
been aware that the Guidelines were to be treated as
advisory rather than mandatory.
We therefore order a limited remand to permit the sen-
tencing judge to determine whether he would have imposed
No. 04-2004 13
a different sentence had he known that the Guidelines were
merely advisory rather than mandatory. Paladino, 401 F.3d
at 483-84; United States v. Mykytiuk, 402 F.3d 773, 779 (7th
Cir. 2005). The district court judge should follow the
procedure we outlined in Paladino. That is, the court should
obtain the views of counsel, at least in writing, but need not
require the presence of the defendant. On reaching a
decision whether to resentence, the district court must
either place on the record a decision not to resentence, with
an appropriate explanation or inform this court of its desire
to resentence the defendant. Mykytiuk, 402 F.3d at 779;
Paladino, 401 F.3d at 484. If the district court indicates
that it wishes to resentence Bianucci, this court will vacate
the sentence and remand for resentencing. At that point,
the district court must, with the defendant present,
resentence in accordance with the Supreme Court’s Booker
decision and all relevant provisions of the Sentencing
Reform Act. See 18 U.S.C. § 3553. During the limited
remand, this court will retain jurisdiction over the case. See
United States v. Williams, 410 F.3d 397, 404 (7th Cir. 2005).
III.
We AFFIRM Bianucci’s conviction. However, because the
court sentenced Bianucci believing that the Sentencing
Guidelines were binding rather than advisory, we order a
LIMITED REMAND so that the district court may determine
whether it would be inclined to sentence Bianucci to a
lesser prison term knowing that it has the discretion to do
so after Booker. We retain appellate jurisdiction pending
the outcome of this remand.
14 No. 04-2004
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—7-29-05