U.S. v. Holley

• Citation: 23 F.3d 902
• Decision Date: 13 June 1994
• Docket Number: No. 93-1182,93-1182
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Jerry D. HOLLEY and Marvin D. Haass, Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 902

23 F.3d 902

UNITED STATES of America, Plaintiff-Appellee, v. Jerry D. HOLLEY and Marvin D. Haass, Defendants-Appellants.

No. 93-1182.

United States Court of Appeals Fifth Circuit.

June 13, 1994.

W.V. Dunnam, Jr., Waco, TX, Anthony Nims, Houston, TX, for Holley.

Burrell D. Johnston, Scott A. Young, Minton, Burton, Foster & Collins, Austin, TX, for Haass.

Nina Swift Goodman, David Kris, U.S. Dept. of Justice, Appellate Section, Crim. Div., Washington, DC, for appellee.

Appeals from the United States District Court for the Northern District of Texas.

Before GOLDBERG, HIGGINBOTHAM and EMILIO M. GARZA, Circuit Judges.

GOLDBERG, Circuit Judge:

Jerry D. Holley and Marvin D. Haass appeal their criminal convictions for various crimes committed in the course of the failure of Peoples Savings and Loan Association ("Peoples"). The appellants have raised numerous issues, including challenges to the sufficiency of the evidence, the jury charge, some of the district court's evidentiary and discovery rulings, and the amount of a restitution order. Although we have considered all of the issues advanced by Holley and Haass, we will not discuss some of the more meritless points that have been raised. We affirm the appellants's convictions, but vacate the district court's restitution order.

I. Background

Appellants Holley and Haass were the co-owners and two of the principal officers of Peoples, a state chartered, federally insured financial institution in Llano, Texas. In 1985, Peoples was beset by financial difficulties. Specifically, the appellants were growing increasingly concerned about the amount of Real Estate Owned ("REO")--property to which Peoples had acquired title--that appeared on Peoples's balance sheets. Peoples's REO, acquired primarily through foreclosure, included two apartment buildings in San Angelo, Texas and another apartment building in San Antonio, Texas. Because the market value of these apartments was declining, the appellants wished to sell these properties as soon as possible. More importantly, by selling the buildings, the appellants would avoid having to infuse capital into Peoples. ¹ Thus, in mid-1985, Haass and Lloyd Kitchen, an officer of Peoples, opened negotiations with James McClain, a potential buyer of Peoples's REO.

Meanwhile, Holley and Eileen Marcus, a real estate broker, entered into an arrangement to engage in real estate transactions in and around Dallas, Texas. Under this arrangement, Marcus was to find various properties that she and Holley could purchase and then resell, and Holley was to obtain the necessary financing. In the fall of 1985, Marcus raised with Holley the possibility of purchasing the Arapaho Station Shopping Center ("Arapaho Station") in Richardson, Texas. ² Holley demonstrated an interest in Arapaho Station. Holley and Marcus intended to purchase Arapaho Station and realize a quick profit by immediately reselling the property to a buyer at a price above what they had paid. Such a transaction is often called a "flip" of the property. On October 14, 1985, Marcus signed a contract to purchase Arapaho Station for $5,500,000, but this contract was never closed.

On November 27, 1985, Holley entered into a contract of his own to purchase Arapaho Station for $5,500,000. This contract called for a $100,000 letter of credit as earnest money. The amount of earnest money required was later raised to $110,000. Meanwhile, Dallas real estate agent Jerri Cook showed Arapaho Station to Jerry Ezell, an employee of Jim McClain. Holley then met with McClain to discuss a flip of Arapaho Station. McClain became interested when he learned that the potential profit from this transaction could be as high as $3 million.

The other major characters in this case were Cliff Brannon and Don Jones. Brannon and Jones owned Security Savings Association ("Security"), a state chartered, federally insured financial institution in Plano, Texas. In 1983, Holley and Haass entered into an arrangement with Brannon and Jones whereby Peoples and Security would make personal loans to the owners of the other institution without requiring any security or without inquiring into the adequacy of the collateral for the loans. The purpose of this arrangement was to evade regulations that limit the amount of loans that a savings and loan can make to its owners. Several million dollars in loans were extended through this arrangement.

In 1985, Security also experienced financial difficulties. One drain on Security's financial condition was a piece of REO called Executive Square. Security's ownership of Executive Square created the same problems for Security that Peoples's ownership of its REO created for Peoples. On December 11, 1985, Holley and Haass met with Brannon and Jones to formulate an agreement through which Peoples and Security could remove some of their REO from their books. Also present at this meeting were Peoples's president Joel Daniel, Lloyd Kitchen, Jim McClain, and Jerry Ezell. Under this agreement, Peoples would sell its REO apartments to First American Land & Development, Inc. ("First American"), a company wholly owned by McClain, and extend to First American a loan for the purchase price of those buildings. At the same time, Security would sell Executive Square to First American, also extending a loan for the purchase price of that property. To recognize these deals as the sale of Peoples's and Security's REO, applicable regulations required First American to provide a 10% down payment for each transaction. To satisfy this requirement, the appellants and Brannon and Jones agreed that Peoples and Security would issue a letter of credit to serve as the down payment for the sale of the other institution's REO to First American. At this meeting, the participants also discussed Holley's planned sale of Arapaho Station to McClain.

Later, on December 20, 1985, Holley assigned his contract to purchase Arapaho Station to City Group, Inc. ("City Group"), a shell corporation owned by McClain, for ten dollars. Peoples then issued the required $110,000 earnest money letter of credit to the receiver of Arapaho Station. However, this letter of credit had not been approved and was not supported by an obligation requiring City Group to repay Peoples. That evening, Haass and McClain negotiated an illicit "consulting fee" to be paid by McClain to Holley. Testimony at trial revealed that, during this meeting, Haass spoke to Holley on the telephone about the amount of this "fee." Further, Haass revealed that Holley had agreed to assign the fee to him in order to pay debts that Holley owed him. At the conclusion of the meeting between Haass and McClain, McClain presented Haass with a letter in which he (McClain) agreed to pay Holley $662,000, purportedly for the assignment of the Arapaho Station Contract, on the condition that the deal close by January 8, 1986.

The sale of Arapaho Station did not close on January 8, 1986 as required by the contract. On January 30, 1986, an attorney for the receiver of Arapaho Station presented the $110,000 letter of credit to Peoples for payment. When the attorney arrived at Peoples's offices, Joel Daniel telephoned Haass and McClain. Haass insisted that the letter of credit "couldn't be called [because] it wasn't any good." McClain said that he would not reimburse Peoples for the payment of the letter of credit. Peoples paid the letter of credit and, the next day, set up a loan on its books to City Group to cover the outlay of funds. This supposed loan was not supported by any promissory note or other specific document from City Group or McClain.

In February of 1986, the receiver of Arapaho Station entered into a contract to sell the shopping center to City Group for $5,500,000. McClain abandoned his hope of realizing a quick profit through a flip of Arapaho Station. Instead, the Arapaho Station transaction and the transaction involving McClain's "purchase" of Peoples's and Security's REO were arranged so that, in exchange for the "purchase" of Peoples's REO apartments, McClain would receive financing from Peoples for the purchase of Arapaho Station as well as approximately $500,000 in cash. Moreover, Haass agreed that McClain need not make any payments on the loans that his companies received from Peoples.

These transactions, designed to remove REO from Peoples's and Security's balance sheets, closed over a three-day period in February of 1986. Peoples sold its three REO apartment buildings to First American for $11,020,000, simultaneously loaning First American the purchase price for these buildings. The down payment for this purchase was a $1.6 million letter of credit issued by Security and secured by a second deed of trust on the REO apartments and on Arapaho Station. ³ Since the letter of credit down payment exceeded 10% of the purchase price, Peoples was allowed to remove the apartments from its REO holdings listing. At the same time, Security sold its REO property, Executive Square, to First American for $6.5 million. Security also simultaneously loaned First American the purchase price of this building. The down payment for the purchase of Executive Square was a $650,000 letter of credit issued by Peoples. Brannon testified that both Holley and Haass agreed to Peoples's issuance of the $650,000 letter of credit to Security. This letter of credit was secured by a second deed of trust on Executive Square. ⁴

During the February closing, City Group also purchased Arapaho Station for $5.5 million and immediately resold it to First American for the same amount. Peoples loaned First American $6,650,000 for the purchase of Arapaho Station. McClain and his companies received approximately $500,000 of the loan proceeds, including a $220,000 "commission" paid to Santa Fe Real Estate Development Corporation, a corporation controlled by McClain that had no role in the transactions. Neither McClain nor any of his companies contributed anything of value to...