U.S. v. Dupre, 95-30275

• Decision Date: 11 July 1997
• Docket Number: No. 95-30275,95-30275
• Citation: 117 F.3d 810
• Parties: UNITED STATES of America, Plaintiff-Appellee-Cross-Appellant, v. Robert DUPRE and W. Harold Sellers, Defendants-Appellants-Cross-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 810

117 F.3d 810

UNITED STATES of America, Plaintiff-Appellee-Cross-Appellant, v. Robert DUPRE and W. Harold Sellers,

Defendants-Appellants-Cross-Appellees.

No. 95-30275.

United States Court of Appeals,

Fifth Circuit.

July 11, 1997.

Stephen A. Higginson, Patrice Harris Sullivan, Assistant U.S. Attorneys, Eddie J. Jordan, Jr., New Orleans, LA, for United States.

William Francis Wessel, Charlotte Ann Lagarde, Wessel and Associates, New Orleans, LA, for Robert Dupre.

Appeals from the United States District Court for the Eastern District of Louisiana.

Before DAVIS and DENNIS, Circuit Judges, and FALLON, ¹ District Judge.

W. EUGENE DAVIS, Circuit Judge:

W. Harold Sellers and Robert Dupre appeal their convictions on multiple counts related to loans received from the Oak Tree Savings Bank in New Orleans, Louisiana, to finance various real estate transactions in California. For the reasons that follow, we affirm their convictions on all counts and remand for fact-finding on two sentencing issues.

I.

In 1987, Dupre and Michael Barrack, both California businessmen, and Sellers, a Houston attorney, founded LaJolla Pacific Equities, Inc. (LPE), a California real estate operation. In 1988, LPE purchased four pieces of property from Braewood Development: Loma Linda, Sunrise Ranch, Lower Etiwanda, and Moreno Valley. Lomas Financial Corp. (Lomas), Braewood's parent company, financed the purchase. The deal included an interest reserve that allowed LPE to defer interest payments for approximately a year.

In the fall of 1988, as the deadline for the interest reserve approached, Sellers and Dupre sought refinancing for the Lomas loans. John Ohanian, an employee of Landmark Land of California, Inc. (LOCAL), contacted Sellers and Dupre about buying the Moreno Valley and Sunrise Ranch properties. Sellers and Dupre refused to sell, but gave LOCAL an option on the two properties in return for refinancing the Lomas debt. Ohanian and his boss, Ernie Vossler, worked with LOCAL's parent company, the Oak Tree Savings Bank (OTSB), to arrange the refinancing. Vossler recommended to the OTSB board that the bank provide a $69 million loan to LPE. This sum included $55.8 million to refinance the Lomas debt on all four properties, payment for various fees and taxes, and $4.2 million to allow LPE to purchase another property called Upper Etiwanda.

Sellers and Dupre told OTSB officials that Upper Etiwanda, a property adjacent to Lower Etiwanda, was priced at $6.2 million, and they requested $4.2 million to pay off the property. Dupre and Sellers did not reveal to the bank that Minter Interests, Inc., a company that Sellers created under an assumed name, already owned Upper Etiwanda. Appellants' corporation, Minter Interests, had purchased Upper Etiwanda for roughly $1.6 million; it "sold" the property to appellants for $6.2 million.

Meanwhile, Sellers, Dupre, and Barrack negotiated a loan discount from Lomas on their original debt by claiming inability to pay and threatening to sue for usury. Lomas agreed to a $3 million reduction on its $55.8 million loan. At the December 21, 1988, closing, appellants denied to Ohanian that they had received a discount on the Lomas debt. Shortly after OTSB distributed the full amount of the loan--$55.8 million--to Lomas, Lomas wired the $3 million loan discount to Sellers. Sellers and Dupre wired proceeds from both the loan discount and the sale of Upper Etiwanda to domestic accounts and accounts in the Cayman Islands.

Barrack testified for the government that as Sellers and Dupre left the OTSB loan closing, Dupre told him he had "taken care of" Ohanian, the LOCAL representative. Ohanian admitted accepting $75,000 from Dupre and pleaded guilty to the felony of accepting a gift to procure a loan, in violation of 18 U.S.C. § 215. Dupre and Sellers claim that Vossler arranged a "bonus" for Ohanian to be paid directly by Sellers and Dupre to avoid making other employees jealous. Vossler denied this in his testimony.

LOCAL purchased both Etiwanda properties in March 1989. OTSB required that $3.8 million from the sales be placed in a certificate of deposit (CD) for collateral on the loan for the Loma Linda property. In 1989, Sellers and Dupre obtained permission from OTSB to withdraw $1.5 million from the CD to buy four new properties that would serve as collateral for the loan. Dupre and Sellers, operating under Inland Pacific Real Estate, Inc., immediately used some of the funds for overhead and costs. They never purchased the properties.

The jury convicted Sellers and Dupre on one count of conspiracy, in violation of 18 U.S.C. § 371 (count 1); two counts of bank fraud, in violation of 18 U.S.C. § 1344 (counts 2 and 3); two counts of making false statements to a federally insured bank, in violation of 18 U.S.C. § 1014 (counts 4 and 6); and eight counts of money laundering, in violation of 18 U.S.C. § 1957. (counts 7-15). In a bifurcated proceeding, the jury returned a special forfeiture verdict of $7,070,463, representing the proceeds of money laundering, against both Sellers and Dupre. Sellers received concurrent sentences of 60 months for counts 1 and 2, 76 months for each of counts 3, 6, and 7-15, and 24 months for count 4, requiring him to serve a total of 76 months. He was ordered to pay $2,000,000 in restitution. Dupre received concurrent sentences of 60 months for counts 1 and 2, 70 months for each of counts 3, 6, and 7-15, and 24 months on count 4, requiring him to serve a total of 70 months. He was ordered to pay $500,000 in restitution. ²

The defendants timely appealed. We consider below appellants' challenges to their convictions.

II.

Sellers and Dupre first challenge the district court's instructions to the jury. Specifically, they argue that the materiality of their allegedly fraudulent statements was an essential element of the bank fraud and false statement offenses, and, therefore, that the district court erred in failing to submit materiality to the jury. The district court followed the law of this circuit at the time of trial and decided the issue of materiality as a matter of law. However, in June 1995, the Supreme Court overruled the position held by this court and most other federal circuits and concluded that when materiality is an element of the charged offense, it presents a mixed issue of law and fact to be decided by a jury. United States v. Gaudin, 515 U.S. 506, ---- - ----, 115 S.Ct. 2310, 2314-15, 132 L.Ed.2d 444 (1995). The appellants argue that the trial court's failure to submit the question of materiality to the jury violates their constitutional rights and requires reversal of their convictions on counts 2, 3, 4, and 6. ³

A.

Counts 2 and 3 charge appellants with bank fraud under 18 U.S.C. § 1344. The counts arise from appellants' misrepresentations about the purchase price of Upper Etiwanda and the loan discount (count 2) as well as the intended use of $1.5 million in released collateral (count 3). A violation of § 1344 is established when the government demonstrates that the defendant knowingly executed or attempted to execute a scheme or artifice (1) to defraud a financial institution or (2) to obtain any property owned by, or under the custody or control of, a financial institution, through false or fraudulent pretenses, representations, or promises. 18 U.S.C. § 1344. On its face, the text of the statute does not require that false statements integral to § 1344 be material. ⁴ Nevertheless, many circuits, including this one, have required a showing of materiality. See, e.g., United States v. Goldsmith, 109 F.3d 714, 715 (11th Cir.1997); United States v. Campbell, 64 F.3d 967, 975 (5th Cir.1995); United States v. Smith, 46 F.3d 1223, 1236 (1st Cir.), cert. denied, --- U.S. ----, 116 S.Ct. 176, 133 L.Ed.2d 116 (1995); United States v. Hutchison, 22 F.3d 846, 851 (9th Cir.1993); United States v. Davis, 989 F.2d 244, 247 (7th Cir.1993); United States v. Hollis, 971 F.2d 1441, 1452 (10th Cir.1992), cert. denied, 507 U.S. 985, 113 S.Ct. 1580, 123 L.Ed.2d 148 (1993); United States v. Sayan, 968 F.2d 55, 61 n. 7 (D.C.Cir.1992); United States v. Goldblatt, 813 F.2d 619, 624 (3d Cir.1987). A recent Supreme Court decision casts doubt on this determination. In U.S. v. Wells, --- U.S. ----, 117 S.Ct. 921, 137 L.Ed.2d 107 (1997), the Court considered whether 18 U.S.C. § 1014--which prohibits the making of a false statement to a federally insured bank--contains a materiality requirement when the statute itself does not mention materiality. It concluded, contrary to most circuit courts, that materiality was not an element of the offense under a plain reading of the text and that statutory history confirmed that reading. Id. at ---- - ----, 117 S.Ct. at 927-28.

Since Wells, we have not revisited whether materiality is an element of a § 1344 offense, which, like § 1014, does not contain an express materiality requirement. However, we conclude that appellants' convictions will stand even if materiality is an element of a § 1344 offense and the jury instructions were erroneous. Therefore, we need not determine here whether our previous holding that materiality is an essential element of a § 1344 offense survives Wells.

Although appellants objected to the court's treatment of materiality with respect to the § 1014 false statement counts, they did not object to the district court's failure to submit materiality to the jury on the § 1344 bank fraud counts. Sellers' attorney stated:

As to the false statements on page 23 [the page of the court's jury instructions on the § 1014 counts], we object to the failure to instruct the jury on materiality.... It's the position of the defendants that the failure to charge on that issue is vital [to] the defendants' right to a jury trial in that element to that offense.

This makes no reference to counts 2 and 3, the § 1344 counts, and, in fact, specifically limits the objection to the false statement counts. ⁵

The only indication that...