U.S. v. Cloud

• Decision Date: 05 April 1989
• Docket Number: No. 87-1197,87-1197
• Citation: 872 F.2d 846
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Ronald V. CLOUD, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 846

872 F.2d 846

UNITED STATES of America, Plaintiff-Appellee, v. Ronald V. CLOUD, Defendant-Appellant.

No. 87-1197.

United States Court of Appeals Ninth Circuit.

Argued and Submitted June 15, 1988.

Decided April 5, 1989.

Howard L. Weitzman and Steve Cochran, Wyman, Bautzer, Christensen, Kuchel & Silbert, Los Angeles, Cal., for defendant-appellant.

Ross W. Nadel, Asst. U.S. Atty., San Francisco, Cal., for plaintiff-appellee.

David T. DiBiase, Michael S. Robinson, Anderson, McPharlin & Conners, Los Angeles, Cal., for the amicus curiae, Continental Ins. Co.

Appeal from the United States District Court for the Northern District of California.

Before WALLACE, ALARCON and HALL, Circuit Judges.

CYNTHIA HOLCOMB HALL, Circuit Judge:

Appellant Ronald V. Cloud appeals from his conviction following a jury trial on charges of aiding and abetting bank fraud, in violation of 18 U.S.C. Secs. 2 and 1344 (1982 & Supp. IV 1986), and conspiracy to commit bank fraud, in violation of 18 U.S.C. Sec. 371 (1982). Cloud also challenges the district court's order, entered pursuant to the Victim and Witness Protection Act of 1982, 18 U.S.C. Secs. 3663-3664 (Supp. IV 1986) ("VWPA"), requiring him to pay $7.5 million restitution to the insurance company that compensated the direct victim of the bank fraud at issue in this case. We affirm both appellant's conviction and the district court order of restitution.

I

The charges in this case stem from the January 1985 sale of the Cal-Neva Lodge, a hotel and casino complex located in the Lake Tahoe area near the California-Nevada border, by Ronald Cloud to Jon R. Perroton and Cobalt Capitol Corporation, a business association controlled by Perroton. ¹

Viewed in the light most favorable to the government, the evidence adduced at trial is as follows. Appellant Ronald Cloud is a sophisticated, 68-year old entrepreneur who has been in business for over forty years. He currently owns companies in the business of plumbing, irrigation, electric appliances, and grape cultivation. Cloud is experienced in the purchase and sale of real property and has extensive real estate holdings, valued at the time of trial at over $65 million. Appellant also has experience in the fields of banking and finance, having been the founder and chairman of Continental National Bank of Fresno.

In July of 1980, Cloud (along with his wife, Jessman Cloud) ² purchased the Cal-Neva Lodge for $10 million from Tracinda Corporation. To finance this purchase, Cloud assumed a $4.3 million loan with First Interstate Bank and Tracinda carried another $4.8 million in the form of a second mortgage. Cloud's equity in the Lodge at the time of purchase appears to have been approximately $1.9 million. After three years of mounting operating losses, Cloud closed the Lodge and actively began seeking a new buyer in October of 1983.

Cloud's first contacts with Jon Perroton took place over a year later in December of 1984. At that time the two men met and orally agreed that Cloud would transfer the Cal-Neva Lodge to Perroton for $18 million. Cloud refused to sign any documents with respect to the sale at that stage of their dealings.

On January 2, 1985, Perroton first met with an officer of Hibernia Bank, a vice president for corporate lending named Louis Chou, to discuss a possible loan transaction to finance his purchase of the Cal-Neva Lodge. It is undisputed that Perroton made multiple false representations during the financing negotiations and presented falsified documents, including a forged sales agreement, in order to obtain the $20 million loan that Hibernia approved on January 9, 1985. In particular, Perroton told Chou that the sale price for the Lodge was to be $27.5 million and that $7.5 million had already been paid to the Clouds outside of escrow. Perroton also falsely asserted that Sheraton Hotels would lease and operate the Cal-Neva, and would guarantee any loan Hibernia made to finance the acquisition of the Lodge.

The Cal-Neva transaction proceeded swiftly toward closing. An escrow was opened with Transamerica Title Company on January 8, 1985, by an escrow officer named Mickey Eakin. At that time, Perroton misrepresented the essential terms of the sale to Eakin, just as he had to Hibernia. Cloud met with Perroton again for approximately half an hour on January 9, 1985, at which time they agreed to adjust the sale price downward to $17,030,000. On January 11, 1985, Hibernia prepared cashier's checks totalling $20 million for deposit in escrow to be held uncashed by Eakin until the close of escrow. Although Hibernia issued these checks on January 14, 1985, the funds continued to be the bank's property until the close of escrow.

According to Eakin, Cloud spoke with her three or four times over the telephone prior to closing to inquire about the progress of the transaction and the projected closing date. Cloud met Eakin in person for the first time on January 15, 1985. On that date Perroton and his partner, Gene Cochran, drove Cloud--along with his son Steve Cloud, and attorney, James Samarco--to the San Francisco offices of Transamerica Title from the airport into which the Cloud party had flown from Fresno in Cloud's private plane. The purpose of the January 15 meeting was to sign mutual escrow instructions on the Cal-Neva Lodge sale.

Eakin testified that the five men met that day in a conference room at Transamerica, outside of her hearing, to discuss the escrow instructions that she had presented. The only evidence of what happened in the conference room came from Ronald and Steve Cloud and James Samarco. Their testimony revealed that Cloud reviewed the escrow instructions, and noticed that the sale price and down payment figures were inaccurately stated at $27.5 million and $7.5 million, respectively. Cloud also noticed that the Hibernia loan to Perroton was for $20 million, almost $3 million above what he knew to be the true sale price.

The Clouds and Samarco were clearly concerned about the false figures that appeared in the escrow instructions, especially about the tax consequences of the inflated sale price. Without explanation, Samarco asked Eakin to make certain additions to the escrow instructions, including the following language: "Seller to net the sum of $17,030,000 plus or minus the proration of taxes and bonds and less the first and second trust deeds." (Emphasis added). As thus amended, the escrow instructions continued to reflect a sale price of $27.5 million and a down payment of $7.5 million, figures that Perroton insisted were "for [his] purposes only."

Cloud signed the amended escrow instructions and the grant deeds to the property, and took both sets of documents home to Fresno so that his wife could sign them. Cloud returned the signed escrow instructions to Transamerica Title three days later, on January 18, 1985. Hibernia was informed on January 22, 1985 that the instructions had been signed.

The Cal-Neva Lodge escrow closed on January 23, 1985, at a meeting at Transamerica Title at which Cloud, Samarco, Perroton, and Cochran were present. Eakin disbursed the $20 million loan proceeds after receiving authorization from Hibernia. Eakin also prepared a settlement statement for the transaction containing the same false $27.5 million sale price and $7.5 million "cash outside of escrow" figures that had been supplied by the parties. Cloud reviewed the settlement statement at the closing but did not discuss its contents. Finally, Eakin issued checks to Cloud personally for $10,067,137, and to Cloud's mortgagees for $6,971,803. Taken together these checks totalled $17,038,940--roughly the amount that Cloud's amendments to the escrow instructions indicated he was to "net" from the sales proceeds.

Hibernia claims that its losses on the Cal-Neva Lodge loan exceeded $24.5 million. The bank has recovered a substantial portion of this asserted loss from, among others, its insurer, Continental Insurance Company. Pursuant to a settlement agreement executed on July 19, 1985, Continental paid $7.5 million to resolve Hibernia's claim of loss under the terms of a "banker's blanket bond." Hibernia also recovered $1.5 million from Cloud upon an settlement agreement executed on June 18, 1987. ³

II

Cloud argues that the foregoing evidence is insufficient to support his convictions for aiding and abetting bank fraud and for conspiracy. There is sufficient evidence to support a conviction if, viewing the evidence in the light most favorable to the government, any rational trier of fact could have found each of the essential elements of the crime beyond a reasonable doubt. United States v. Penagos, 823 F.2d 346, 347 (9th Cir.1987); United States v. Pemberton, 853 F.2d 730, 733 (9th Cir.1988).

A

In order to obtain a conviction for bank fraud in violation of 18 U.S.C. Sec. 1344, ⁴ the government must prove beyond a reasonable doubt that the defendant knowingly (1) engaged in a scheme to defraud a federally chartered or insured financial institution, or (2) participated in a scheme to obtain money under custody or control of a federally chartered or insured financial institution by means of material, false statements or representations. See United States v. Goldblatt, 813 F.2d 619, 624 (3d Cir.1987). For purposes of the bank fraud statute, the terms "scheme" and "artifice" are defined to include "any plan, pattern or cause [sic] of action, including false and fraudulent pretenses and misrepresentations, intended to deceive others in order to obtain something of value, such as money, from the institution to be deceived." Id. It is sufficient to prove that there was a fraudulent scheme in which the defendant participated; it is not determinative that a defendant was not on hand at the "launching" of the scheme if he "came aboard" later. See United States v. Toney, 598 F.2d 1349, 1356 (5th Cir.1979), cert. denied, 444 U.S. 1033, 100 S.Ct. 706, 62 L.Ed.2d 670 (1980) (mail fraud).

Conviction as an aider...