U.S. v. Kenrick, 98-1282

• Decision Date: 14 September 1999
• Docket Number: N,No. 98-1282,98-1282
• Citation: 221 F.3d 19
• Parties: (1st Cir. 2000) UNITED STATES, APPELLEE, V. ALBERT KENRICK, DEFENDANT, APPELLANT. UNITED STATES, APPELLEE, V. DEREK OBER, DEFENDANT, APPELLANT. o. 98-1283. . Heard:
• Court: U.S. Court of Appeals — First Circuit

Page 19

221 F.3d 19 (1st Cir. 2000)

UNITED STATES, APPELLEE,

V.

ALBERT KENRICK, DEFENDANT, APPELLANT.

UNITED STATES, APPELLEE,

V.

DEREK OBER, DEFENDANT, APPELLANT.

No. 98-1282, No. 98-1283.

United States Court of Appeals, For the First Circuit.

Heard: Sept. 14, 1999.

Decided: August 2, 2000.

APPEALS FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS.

Hon. Douglas P. Woodlock, U.S. District Judge.

[Copyrighted Material Omitted] Harry C. Mezer, with whom William A. Brown was on brief, for appellant Albert Kenrick.

Terrence F. Sheehy for appellant Derek Ober.

Ellen R. Meltzer, U.S. Department of Justice, with whom Donald K. Stern, U.S. Attorney, and Christopher L. Varner and Clifford I. Rones, U.S. Department of Justice, were on brief and Kirby A. Heller, U.S. Department of Justice, was on supplemental brief, for appellee.

Before Torruella, Chief Judge, Selya, Boudin, Stahl, Lynch and Lipez, Circuit Judges, Coffin and Campbell, Senior Circuit Judges.

OPINION EN BANC

Lipez, Circuit Judge.

Albert Kenrick and Derek Ober appeal from judgments of conviction entered after a jury trial in the United States District Court for the District of Massachusetts. The jury found Kenrick guilty of one count of bank fraud and Ober guilty of four counts of bank fraud and one count of perjury. They argue, for the first time on appeal, that the district court erred in instructing the jury on the intent required for a bank fraud conviction. Although the panel that originally heard this case agreed with the defendants, it held that there was no plain error warranting reversal. See United States v. Kenrick, No. 98-1282, slip op. at 22, 33 (1st Cir. Feb. 22, 2000) (withdrawn). A majority of the circuit judges in active regular service ordered rehearing en banc and requested supplemental briefs on the intent issue. We now hold that, contrary to the defendants' argument and the earlier holding of the panel, "intent to harm" is not an element of bank fraud. We take this opportunity to clarify the nature of the intent element required for a bank fraud conviction. We also reject both defendants' challenges to the sufficiency of the evidence, as well as sundry arguments raised by Ober. We therefore affirm the convictions.

I. BACKGROUND

We recite the facts in the light most favorable to the jury's verdict. See United States v. Escobar-de Jesus, 187 F.3d 148, 157 (1st Cir. 1999). In 1986, at the height of "New England's late, lamented real estate boom," United States v. Lilly, 983 F.2d 300, 302 (1st Cir. 1992), Derek Ober was the president of the Wakefield Cooperative Bank ("WCB" or "the bank") in Wakefield, Massachusetts. WCB is a state-chartered bank that has been insured by the FDIC since January 1986. Albert Kenrick, a real estate investor with substantial property in eastern Massachusetts, who had done business with WCB in the past, had an incentive to sell real estate in which he had large gains before January 1, 1987, because of a pending increase in capital gains taxes.

A. 222 Stackpole Street

Among Kenrick's properties was an eighteen-unit apartment building at 222 Stackpole Street in Lowell, Massachusetts. Kenrick discussed with Emily Flynn, a real estate broker whom he had dated in the past, the possibility of converting the building to condominiums and having Flynn sell them for him. Possibly contemplating the tax advantages of a sale before the end of 1986, however, Kenrick decided to sell the apartment building. Flynn had recently made a large profit on another condominium conversion, and she was interested in buying the Stackpole Street building with a partner. Although she wanted to have the same partner that she had had on her recent successful condo deal, Kenrick told her that Ober--whom Flynn had never met before--was interested in buying the property and that Kenrick preferred that Flynn and Ober purchase it as partners. On October 5, 1986, Flynn cooked a spaghetti dinner for Kenrick and Ober, and they negotiated a price for the Stackpole Street property of $935,000.

Flynn asked Ober where they could get financing for the purchase, and he answered, "Right here at this bank," i.e., WCB. Ober instructed Flynn that the loan application should be made in her name alone, even though they were equal partners, because he was going through a divorce. When she expressed doubt that she alone could qualify for such a large loan, he assured her that she could, and he filled out the application for her. Ober called John (Jay) Kimball, a lawyer who frequently represented WCB in mortgage transactions, and asked him to handle the paperwork for the Stackpole Street purchase. Kimball drafted the Riverview Development Trust, with Flynn as the trustee and only listed beneficiary, to hold title to the property. On Ober's instructions, Kimball also told Kenrick's attorney, who had drafted a purchase and sale agreement listing both Flynn and Ober as purchasers, that Flynn was to be listed as the only buyer.

An application for a $900,000 mortgage on the Stackpole Street property was filed with WCB. Pursuant to the standard procedure for mortgage applications at WCB, the applications went initially to Ober, who was both president and the bank's sole loan officer. The applications were then reviewed by two members of the Security Committee, a subcommittee of the Board of Directors, who set a value for the property, typically by visiting it themselves, without an outside appraisal. If approved by the Security Committee, loans would come before the Board of Directors at its monthly meeting for ratification. There was an unwritten policy that Board members should abstain from voting on loans in which they or their relatives had an interest.

Ober and another member of the Security Committee visited Stackpole Street, valued the property at $1,125,000, and recommended approval of the mortgage. The minutes of the Board of Directors meeting of November 26, 1986, indicate that the Board approved the Flynn loan. Three members of the Board, however, testified that the loan was never presented to them for a vote and that Ober never disclosed to them his interest in the property. An FBI document analyst testified that the entry in the Board minutes listing the loan was typed at a different time and with a different typewriter ball or wheel than the rest of the page.

The transaction closed on December 24, 1986. WCB provided a check for $900,000 and Flynn took title to the property as trustee of the Riverview Development Trust. Flynn herself provided the $50,000 down payment because Ober said he could not pay his half due to his pending divorce. The property was converted to condominiums, and seventeen of the eighteen units sold quickly, allowing Flynn to pay off the WCB loan in eight months. She shared the substantial profits equally with Ober, after repaying herself her contribution of his portion of the down payment. Ober assisted Flynn throughout the sales process, and managed to sell several units to friends and acquaintances, most of whom financed their purchases through WCB mortgages.

The eighteenth unit was harder to sell. Title to that unit was transferred to another trust prepared by Attorney Kimball, the D & E Realty Trust. Ober told Kimball that he had an interest in the unsold unit. Kimball therefore prepared two statements of beneficial interest for the trust, one listing Flynn as 100% beneficiary and the other listing Ober as 100% beneficiary; according to Flynn, they were equal partners in D & E as in Riverview. Ober was present when the trust was executed. He received half the net income from D & E and dealt with a condominium owner whose unit was damaged by flooding in the unit owned by D & E.

From the beginning of the transaction, Ober took steps to conceal his interest in 222 Stackpole Street. He arranged that Flynn should take title from Kenrick in her name only, as trustee of the Riverview Development Trust, and that she should be listed as the sole borrower on the $900,000 loan from WCB to purchase the property. Ober had a motive to conceal his interest because, as the jury was told, a loan of that nature to a bank officer was forbidden by Massachusetts law. See Mass. Gen. Laws ch. 170, § 19.¹ When Flynn was deposed by the attorney for the former Mrs. Ober, Ober instructed her to perjure herself by stating that he had no interest in the Stackpole Street property, and she did so. Before Flynn was questioned by the FBI, Ober told her, "I'll never admit to anything." Ober also denied his involvement in the Stackpole Street transaction at a 1991 WCB Board meeting.

B. 8-10 Emerson Street

At around the same time that he sold the Stackpole Street property, Kenrick sold a six-unit apartment building located at 8-10 Emerson Street in Wakefield to Chung Lee and her parents. The Lees were Korean immigrants who had formerly lived in a different building owned by Kenrick. They had purchased a two-family house on Willow Street in Melrose, Massachusetts, in 1983. Kenrick, who was dating Chung Lee, told her that he could teach her how to make a million dollars by investing in real estate. He suggested to her that she and her parents buy his Emerson Street building for $325,000. He advised financing the purchase with two loans from WCB: first, a $150,000 refinancing of the mortgage on the Willow Street property, which would provide money for the down payment, and then a $260,000 mortgage on 8-10 Emerson Street.

Although Chung Lee filled out an application for the Willow Street refinancing and filed it at WCB, it was not acted upon immediately. The original application was marked "Hold" in Ober's handwriting. After Kenrick met with Ober to negotiate the Stackpole Street sale, however, the refinancing was approved, with the commitment letter dated October 22, 1986. Kenrick himself filled out the application for the Lees' Emerson Street mortgage, and his appointment calendar indicated that he gave it to Ober...