U.S. v. Sanders
| Decision Date | 18 August 2003 |
| Docket Number | No. 02-41514.,02-41514. |
| Parties | UNITED STATES of America, Plaintiff-Appellee, v. Cecil Allen SANDERS, Jr., Defendant-Appellant. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Terri Lynn Hagan, Asst. U.S. Atty. (argued), Plano, TX, for Plaintiff-Appellee.
Robert N. Udashen, Gary Alan Udashen (argued), Sorrels & Udashen, Dallas, TX, for Defendant-Appellant.
Appeal from the United States District Court for the Eastern District of Texas.
Before EMILIO M. GARZA, DeMOSS, Circuit Judges, and DUVAL,1 District Judge.
INTRODUCTION
Defendant was convicted by a jury of bank fraud in violation of 18 U.S.C. §§ 1344 and 2, and for making a false statement to the Small Business Administration in violation of 15 U.S.C. §§ 645(a) and 2. He appeals claiming the evidence was insufficient to support his conviction, the district court erred in admitting certain evidence, and the district court erred in sentencing him. We affirm the jury verdict because the evidence is sufficient and the district court did not err in admitting any of the complained of evidence. However, because the district court erred in sentencing Sanders, we vacate the sentence and remand to the district court for re-sentencing.
The facts established at trial are as follows. Cecil Allen Sanders, Jr. ("Sanders") and his wife wanted to open a dry cleaning business. In order to finance the business, which they called Number One Cleaners, Sanders and his wife applied for a business loan in the amount of $232,000 from Plano Bank & Trust on September 5, 1996.
The loan Sanders applied for was 75% guaranteed by the Small Business Administration ("SBA"). Therefore, in order to obtain the loan, Sanders had to fill out SBA Form 413 as part of his application process. SBA Form 413 requires full and complete disclosure of current assets and liabilities.
In preparing his loan package, Sanders was referred to Centinal Financial Corporation by Plano Bank. Centinal is a company hired by Plano Bank to assist SBA loan applicants in preparing their loan applications for submission to Plano Bank. Centinal interviews the applicants and pre-qualifies certain loans for approval by the bank. Chris Jones, a Centinal employee, reviewed Sanders's credit report, interviewed him, and helped him prepare SBA Form 413.
Sanders's credit report showed 28 credit card accounts and a high level of revolving credit. During the interview, Sanders told Jones that much of the credit card debt reflected on the report had been paid. As a result of Sanders's oral representations, Jones reported that Sanders's credit card debt was much lower than as reflected on the credit report. Jones testified that Centinal relies on the information provided by the borrower in making its recommendations to Plano Bank, and stated that he informed Sanders that Centinal was going to rely on the information he provided. Jones testified that he told Sanders that the bank would rely on SBA Form 413 when making its loan decision.
At trial, the government introduced evidence that during his interview with Jones, Sanders did not disclose that he had a substantial amount of unsecured obligations outside the representations he made to Jones. Specifically, Sanders owed Household Credit over $4,000, American Express Optima $3,500, Crestar Bank $4,000, AT&T Master Card $1,800, the Grantham Family $20,000, and Norma Boss $5,000.
The government also introduced evidence that Sanders misrepresented other information that led Plano Bank to think he was in better financial condition than he actually was. On page 3 of SBA Form 413, Sanders represented that he paid only $16,500 on charge accounts for the year. He had actually paid significantly more. He had paid $16,000 to MBNA America and over $21,500 to Choice Visa. The information Sanders provided on Form 413 was used to calculate his cash flow. Sanders's cash flow was listed as $4,100, while it should have shown a deficit of $62,318.
Ken Lawless, a commercial loan officer working at Plano Bank who approved the loan, testified that if the bank had been aware that Sanders had a negative cash flow, it would have denied the loan.
After the $232,000 loan amount was approved, Sanders's purchase of the dry cleaners fell through because there were environmental problems at the location of the cleaners that was to be purchased. Sanders and his wife found a different dry cleaners to purchase for a lower price, which they also called Number One Cleaners. Sanders resubmitted his loan application but this time for a new loan of $77,500 from Plano Bank & Trust with an 80% SBA guarantee.
Prior to the funding of the second loan, on April 7, 1997, Sanders signed an affidavit stating that his individual and corporate financial position had not changed substantially since his application for the first loan, and that his SBA Form 413 information was still accurate. Maria Lagusis, the bank employee who closed on the loan, testified that in signing the affidavit, Sanders was certifying that all the information in his SBA Form 413 was accurate and that she reviewed this paragraph with Sanders to make sure he understood what he was doing.
The new loan was disbursed in four installments. With each installment, Sanders completed an SBA Form 1050 in which he represented that there had been no substantial adverse change in his financial condition since he submitted his loan application.
In the meantime, Sanders's credit card and unsecured personal debt was mounting. By April 10, 1997, his debt was over $143,000. His undisclosed debt was $89,517 and his disclosed debt was $53,610. Special Agent Don Smiddy, of the United States Postal Inspection Service, showed the jury checks written and signed by Sanders around the dates of September 30, 1996, and April 10, 1997, payable to the credit card companies for debt Sanders did not disclose in his application or SBA Forms. This evidence was used to establish that Sanders was aware of this debt, but did not disclose it as an adverse change in his situation.
On October 8, 1997, Number One Cleaners filed for Chapter 7 Bankruptcy in the Northern District of Texas. Sanders had made three loan payments totaling $3,981, on the Plano Bank SBA guaranteed loan of $77,500. Four months later, on February 10, 1998, Sanders filed for personal bankruptcy in the Eastern District of Texas. In his personal bankruptcy, Sanders disclosed the credit card debt which he had not disclosed during the loan application process. The loan from Plano Bank was discharged in bankruptcy. After selling the assets of the cleaners, Plano Bank recovered $2,164.12, after deducting costs.
On February 13, 2002, a grand jury for the United States District Court for the Eastern District of Texas returned a two count indictment charging Sanders with bank fraud in violation of 18 U.S.C. §§ 1344 and 2, and for making a false statement to the Small Business Administration in violation of 15 U.S.C. §§ 645(a) and 2.
At Sanders's jury trial the government presented evidence demonstrating that Sanders had withdrawn a total of $21,659 from the Number One Cleaners bank account approximately 4 months before it went into Chapter 7 bankruptcy and did not disclose these withdrawals to the bankruptcy court. The district court gave a limiting instruction to the jury informing them that they could only consider the evidence to determine if Sanders had the requisite state of mind or intent to defraud, or whether he committed the acts by accident or mistake.
Sanders's defense at trial was that the documents he signed were vast and complicated. He testified that Jones and the other loan officers did not explain the documents to him. Additionally Sanders testified that he understood that the credit report would include all of his credit history. He also testified that he did not intentionally misrepresent anything to the bank. He stated that when he signed the affidavit, no one showed him the documents he had previously completed in order to determine if anything had changed.
On May 22, 2002, the jury found Sanders guilty as charged in both counts of the indictment. Sanders was sentenced to a term of 21 months imprisonment on each count of the indictment to be served concurrently and was ordered to pay restitution in the amount of $76,767.69, and a special assessment totaling $200. Sanders was also ordered to serve concurrent terms of supervised release on each count: 5 years on count 1 of the indictment, and 1 year on count 2 of the indictment.
Sanders timely filed notice of appeal. On appeal he argues that the government did not prove that Plano Bank and Trust was FDIC insured and therefore the evidence is insufficient to support his bank fraud conviction. Sanders also argues that the district court erred in admitting some of the evidence that was presented at trial. Finally, Sanders claims the district court erred in sentencing him.
"In reviewing a challenge to the sufficiency of the evidence, we must determine whether a rational jury could have found that the evidence established guilt beyond a reasonable doubt on each element of the offense, drawing all reasonable inferences from the evidence and viewing all credibility determinations in the light most favorable to the verdict." United States v. Solis, 299 F.3d 420, 445 (5th Cir.2002).
In Count One of the indictment, Sanders was convicted of bank fraud pursuant to 18 U.S.C. § 1344. We have held that proof of FDIC insurance is not only an essential element of the bank fraud crime, but it is also necessary for the establishment of federal jurisdiction. United States v. Schultz, 17 F.3d 723, 725 (5th Cir.1994); United States v. Slovacek, 867 F.2d 842, 845 (5th...
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