U.S. v. Bruun

• Citation: 809 F.2d 397
• Decision Date: 09 March 1987
• Docket Number: Nos. 85-1311,85-1909,s. 85-1311
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. David BRUUN and Ronald Berkovitz, Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 397

809 F.2d 397

UNITED STATES of America, Plaintiff-Appellee, v. David BRUUN and Ronald Berkovitz, Defendants-Appellants.

Nos. 85-1311, 85-1909.

United States Court of Appeals Seventh Circuit.

Argued Dec. 11, 1986.

Decided Jan. 13, 1987.

Rehearing Denied March 9, 1987 in No. 85--1311.

George P. Lynch, George P. Lynch, Ltd., Chicago, Ill., for defendants-appellants.

Sharon E. Jones, Asst. U.S. Atty., Anton R. Valukas, U.S. Atty., Chicago, Ill., for plaintiff-appellee.

Before POSNER and COFFEY, Circuit Judges, and ESCHBACH, Senior Circuit Judge.

ESCHBACH, Senior Circuit Judge.

This is an appeal from judgments of conviction against the defendants on one count of conspiracy to commit offenses against the United States, in violation of 18 U.S.C. Sec. 371 (1982), and several substantive counts involving: (1) the transportation of stolen securities in interstate commerce in violation of 18 U.S.C. Sec. 2314, (2) aiding and abetting the willful misapplication of the moneys, funds and credits of a federally insured bank in violation of 18 U.S.C. Secs. 2 and 656, and (3) aiding and abetting the making of false entries in the books, reports, or statements of such a bank in violation of 18 U.S.C. Secs. 2 and 1005. For the reasons stated herein, we will affirm in part and reverse in part.

I.

Defendant Ronald Berkovitz met William Giova, a senior vice president in the commercial loan department of the First National Bank of Cicero ("FNBC"), a federally insured institution, in September or October of 1981. Berkovitz was a "loan broker," that is, a person who would refer borrowers to lending institutions for a fee. Giova had authority to approve loans by FNBC of up to $50,000, and his compensation from FNBC was in part a commission on the amount of loans that he processed. After the meeting, Berkovitz began to refer a number of brokered loans to Giova. Giova would generally inform FNBC when he was processing a brokered loan. Such loans generally present a greater risk to the lending institution than ordinary loans due to the fact that the borrowers who use such arrangements are typically poorer credit risks.

In early December of 1981, FNBC decided that it would no longer accept loans from Berkovitz. Giova was informed of this decision and relayed it to Berkovitz. However, Berkovitz continued to submit loans to Giova, who continued to process them. He did not inform FNBC of Berkovitz's involvement in the loans.

At about the same time, Giova decided to resign his position at FNBC and go into business with Berkovitz. In April of 1982, he tendered his resignation, effective June 15. ¹ He did not inform FNBC of his intention to work with Berkovitz. Giova processed a series of loans referred by Berkovitz in late 1981 and early 1982.

A. Brokered Loans

The first of these loans was to Ezekiel Lopez, the owner of Lopez Construction Company. In November of 1981, Mr. Lopez spoke with Edward Bontkowski about obtaining a business loan of $20,000. Bontkowski referred him to Berkovitz and requested that he borrow an additional $15,000 to loan to Bontkowski. Berkovitz referred him to Giova for a loan of $45,000 ($10,000 of which was used to pay off a pre-existing mortgage on collateral used for the loan). Giova processed the loan, and on December 10, 1981, Berkovitz called Giova to request that the proceeds be issued in several checks, including one for $4,500 and one for $15,000. After this was done, Lopez endorsed the $15,000 check and turned it over to Bontkowski and endorsed the $4,500 check and turned it over to Giova. The $4,500 check represented Berkovitz's fee for arranging the transaction.

In February of 1982, the Taylor brothers, owners of a trucking concern, met with Berkovitz to try to obtain a $75,000 loan. Berkovitz referred them to Giova, with the understanding that they would pay Berkovitz $5,000 for the referral. Prior to processing the loans, Giova met with Berkovitz and informed him that the loans were above his lending limit and would thus require approval. Berkovitz suggested that Giova process two loans for less than $50,000 each, totalling $75,000. Giova processed a $40,000 loan for the Taylors on March 4, 1982 and a $35,000 loan on March 20, 1982. A false, backdated memorandum was prepared by Giova, indicating the bank's approval of a $75,000 line of credit for the Taylors. The Taylors used part of the proceeds to obtain a $5,000 cashier's check payable to Berkovitz from another bank. Berkovitz had told them not to get the check from FNBC or otherwise use his name there. Giova did not inform FNBC of Berkovitz's involvement in the transactions.

In December of 1981, Joseph Witkowski, a partner in Jordan-Whitney Construction Company ("Jordan-Whitney" or "the Company"), asked Ralph Rose, the owner of a currency exchange, whether Rose knew of anyone who could obtain a business loan for him. Rose referred Witkowski to Berkovitz. Witkowski and his partner, Rick Jordan, met with Berkovitz and asked him to obtain a $30,000-$35,000 loan. Berkovitz told them that they could get up to $100,000 if they wanted to, but they said that would be too much. Berkovitz gave them documents to complete and referred them to Giova. They met with Giova in early January, 1982, and signed a $33,000 note. As directed by Berkovitz, they deposited the proceeds of the loan in a newly opened checking account at FNBC and brought 10-15 signed, blank checks to Berkovitz. He wrote some of the checks to suppliers and retained the rest.

Witkowski later returned to Berkovitz and signed several FNBC judgment notes, which had been provided by Giova, for additional loans. Giova processed several loans from the judgment notes. Typically, he would receive a call from Berkovitz requesting an advance of a certain amount on the Jordan-Whitney line of credit. Giova would then process the loan ² using a signed, blank judgment note forwarded by Berkovitz. Berkovitz told Giova that the Company had contracts with the City of Chicago that would provide additional collateral for the loans, and that FNBC would be named as co-payee on contract disbursements to the company. In fact, no such contracts existed. ³

Several loans were obtained on the Jordan-Whitney account without the knowledge of the Company from February 5 through May 24, 1982. These loans totaled over $170,000, and the bank was not adequately secured for this amount. Several of the Jordan-Whitney checks were also written and cashed without the knowledge of the Company. The bulk of the checks were written to a currency exchange, although some were written to James Adamczyk ⁴ or to a printing business owned by Adamcyzk's father. Giova never informed FNBC of Berkovitz's involvement in the Jordan-Whitney loans, nor does Berkovitz's name appear in the bank records in connection with the transactions. In all, the total debt of Jordan-Whitney to FNBC exceeds $200,000.

B. Loans Involving Stolen Securities

On February 25, 1982, Berkovitz called Giova and told him that Edward Bontkowski would be coming to the bank the following day to obtain a loan using bearer bonds as collateral. Part of the loan proceeds was to be used to pay chattel mortgage loans that Bontkowski had at FNBC, and the remainder was to be used to acquire property for Bontkowski's business. Bontkowski signed a note for $370,000 and presented as collateral bearer bonds issued by the Industrial Development Corporation of Corpus Christi, which had a market value of approximately $480,000 (the "Corpus Christi Bonds"). On Berkovitz's instructions, Giova disbursed $122,000 of the loan proceeds in the form of five cashier's checks in amounts ranging from $20,000 to $35,000 and credited the remainder to Bontkowski's account. Later that day, Berkovitz instructed Giova to make an additional advance of $100,000 against the bonds, and Giova did so.

The Corpus Christi Bonds had been stolen from Lewco Securities Corporation in New York on February 10, 1982. However, the theft of the bonds was not entered into the Securities Information Center database, a computerized registry for information concerning stolen stocks and bonds, until February 23, 1982. In early February, Berkovitz and Albert Rabin, who were both FBI informants, had separately reported to FBI agent Spinelli, their usual contact, that stolen bonds from New York were available in the Chicago area for 20-30% of their face value. Spinelli checked with the Securities Information Center about the Corpus Christi Bonds and informed Berkovitz and Rabin that the bonds had not been reported as stolen. On February 18, Berkovitz and Rabin informed Spinelli that the bonds were no longer available for sale.

C. Involvement of Defendant Bruun

In late 1981 or early 1982, Giova called David Bruun, an attorney he had dealt with since the 1970's, and told him that he would like to introduce him to a potential "superclient," i.e., Berkovitz. They met with Berkovitz at his apartment. Berkovitz described some of his business affairs and told Bruun to keep whatever services he might perform in the strictest confidence.

They met again and Berkovitz further described his current and potential business enterprises. He told Bruun that he and Giova would go into business together after Giova left FNBC. Berkovitz promised Bruun a retainer and annual fees of $60,000-$80,000 per year, which represented roughly a doubling of Bruun's annual income. Berkovitz told Bruun that his first assignment would be to act as borrower for a loan against certain unidentified collateral that would be taken to FNBC. Berkovitz further admonished Bruun not to "advertise" the fact that he was representing Berkovitz or his companies.

In early March, Giova told Bruun that the collateral had arrived and that he should come to FNBC to sign the necessary papers. Bruun went to FNBC on March 11, 1982, and Giova showed him the collateral, which consisted of 99 Intermountain Power Agency bearer bonds with a market value of...