U.S. v. Muñoz-Franco

• Decision Date: 22 May 2007
• Docket Number: No. 04-1534.,No. 04-1533.,No. 04-1532.,No. 04-1535.,04-1532.,04-1533.,04-1534.,04-1535.
• Citation: 487 F.3d 25
• Parties: UNITED STATES of America, Appellee, v. Lorenzo MUÑOZ-FRANCO, Francisco Sánchez-Arán, Ariel Gutiérrez-Rodríguez, and Wilfredo Umpierre-Hernández, Defendants, Appellants.
• Court: U.S. Court of Appeals — First Circuit

487 F.3d 25

UNITED STATES of America, Appellee, v. Lorenzo MUÑOZ-FRANCO, Francisco Sánchez-Arán, Ariel Gutiérrez-Rodríguez, and Wilfredo Umpierre-Hernández, Defendants, Appellants.

No. 04-1532.

No. 04-1533.

No. 04-1534.

No. 04-1535.

United States Court of Appeals, First Circuit.

Heard December 6, 2006.

Decided May 22, 2007.

Mark J. Rochon, with whom Duncan N. Stevens and Miller & Chevalier were on brief, for appellant Sánchez-Arán.

Francisco M. Dolz-Sánchez for appellant Umpierre-Hernández.

R. Jack Cinquegrana, with whom Jennifer T. Connor, Jennifer E. Tracy, and Choate, Hall & Stewart were on brief, for appellant Muñoz-Franco.

Michael S. Pasano, with whom Zuckerman Spaeder LLP was on brief, for appellant Gutiérrez-Rodríguez.

Elizabeth A. Olson, Criminal Division, Appellate Section, U.S. Department of Justice, with whom Rosa E. Rodriguez-Velez, U.S. Attorney, and Maria A. Dominguez, Assistant U.S. Attorney, were on brief, for appellees.

Before BOUDIN, Chief Judge, CYR, Senior Circuit Judge, and LIPEZ, Circuit Judge.

LIPEZ, Circuit Judge.

Appellants Lorenzo Muñoz-Franco, Francisco Sánchez-Arán, Ariel Gutiérrez-Rodríguez, and Wilfredo Umpierre-Hernández appeal their convictions for bank fraud, conspiracy, and misapplication of bank funds, stemming from conduct that persisted for nearly a decade. Muñoz-Franco and Sánchez-Arán appeal their convictions for bank fraud and conspiracy for a similar but separate series of transactions also involving the improper use of bank funds. Appellants challenge the sufficiency of the evidence and raise many other substantive and procedural claims relating to their fifteen-month trial. After careful review of this immense record, we affirm.

I.

A. Factual Overview

We provide here an overview of the relevant conduct drawn from the record, saving additional details for our sufficiency analysis. Throughout the opinion, we consider the evidence "in the light most favorable to the prosecution." See Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 61 L.Ed.2d 560 (1979).

1. The Gutiérrez Loans

During the relevant time period charged in the Third Superseding Indictment, Muñoz-Franco was President and Chief Executive Officer of Caguas Central Federal Savings Bank of Puerto Rico ("Caguas"), a federally chartered savings and loan association. Sánchez-Arán was Executive Vice President and Chief Lending Officer of Caguas. Gutiérrez was a land developer who owned several companies that received loans from Caguas. Umpierre-Hernández was an officer of several companies belonging to Gutiérrez.

For nearly a decade, Muñoz-Franco and Sánchez-Arán supervised a scheme to use proceeds from various loans for purposes not authorized by Caguas' Board of Directors ("Board").¹ The loans were granted for land development projects involving companies that Gutiérrez owned and Umpierre-Hernández helped to operate, including Transglobe, Modules, and Transhore. In many instances the appellants used proceeds from loans to Gutiérrez-owned companies to make payments on prior loans to Gutiérrez-owned companies without Board approval. In other instances Muñoz-Franco and Sánchez-Arán submitted loans to Gutiérrez-owned companies to the Board for approval without disclosing the Gutiérrez-owned companies' failure to complete work on previous projects. On many occasions Gutiérrez and Umpierre-Hernández submitted certifications for construction work that had not yet been completed, and Muñoz-Franco and Sánchez-Arán accepted the certifications and ordered disbursement of funds for the projects. The Board also was not informed of this practice. In January 1988, Muñoz-Franco drafted and obtained Board approval to send a letter to Richard Denby, the Federal Home Loan Bank Board auditor supervising Caguas, which responded to Denby's concerns regarding Caguas' lending practices ("Denby letter"). The letter contained many misrepresentations regarding the status of Gutiérrez-related projects and loans.

As the government explained in its opening statement, this scheme contributed to the appearance that Caguas remained a financially viable institution under the leadership of Muñoz-Franco and Sánchez-Arán. If the problems with the bank became known and Muñoz-Franco and Sánchez-Arán were removed from their positions, "not only would that have deprived them of a very lucrative job, but it also would have made it very difficult for them to obtain new employment in the banking industry." The scheme also maintained the appearance of solvency for the Gutiérrez companies, thus protecting the livelihood and professional reputation of Gutiérrez and Umpierre-Hernández.

The projects for which Gutiérrez-owned companies received loans included La Marina, Los Mameyes, Cerrovista, and Jardines de Villa Alba. We provide a brief overview of these projects here.²

a. La Marina

In June 1980, Muñoz-Franco and Sánchez-Arán caused Caguas to grant a $1,450,000 loan to Transglobe to finance the construction of seventy-five units of residential housing, with construction to begin within one month and to be completed within one year. As of September 1981, the loan limit had been increased four times, adding a total of $1.8 million, yet not a single house had been built. Funds were disbursed from the loan for the project based on certifications submitted by Gutiérrez and Umpierre-Hernández and approved by Sánchez-Arán, and approximately $2 million was used to pay unrelated Gutiérrez debts with a different bank. In October 1984, Muñoz-Franco and Sánchez-Arán caused Caguas to finance the sale of the La Marina project to DO.W Group. The agreement for this sale provided that Transglobe would remain the contractor for the project despite its failure to build a single house in the preceding four years. In approving the loan, the Board was not informed of Transglobe's prior poor performance. After this sale, appellants continued to apply funds from the La Marina loan to other projects and to disburse funds for work not completed. Not a single house was ever built on the project, and, in 1989, Caguas entered into a settlement agreement with DO.W releasing DO.W's debt on the project, which totaled over $2 million.

b. Los Mameyes

In late 1985, Muñoz-Franco and Sánchez-Arán caused the Board to grant Modules a commercial line of credit to build two hundred housing units. Between December 1985 and March 1986, Gutiérrez and Umpierre-Hernández submitted a series of certifications stating that a total of two hundred housing units had been built. Even though Caguas' inspector reported that only fifty-five units had been completed, Sánchez-Arán approved disbursements totaling about $800,000. In March 1986 Gutiérrez and Umpierre-Hernández submitted a certification requesting $69,000 for "payment of subcontractors," but attached a list of interest payments due on the Jardines de Villa Alba, Levittown, Country Club, La Marina, and Los Caciques projects totalling exactly $69,000. Sánchez-Arán approved the certification and Caguas disbursed the funds.

c. Cerrovista

In the spring of 1986, John Burns, a developer, applied to Caguas for a loan to build residential housing on land he owned but his application was denied. After meeting with Umpierre-Hernández and agreeing to use Modules as a contractor, Caguas approved Burns' application for a loan to build twenty-three units of housing in what became known as the Cerrovista project. Burns' loan was approved on the condition that he sign a $2 million note as a down payment to Modules. Burns signed the note. Shortly thereafter, however, Umpierre-Hernández told Burns that the project needed a new "sponsor" because Burns had been "gossiping." Umpierre-Hernández then began to negotiate the sale of Cerrovista to Iantho, a company owned by Walter Frambes. In August or September 1986, Burns read newspaper articles indicating that the Cerrovista project might be affected by the Puerto Rico Department of Transportation's plans to build a hospital and an expressway. He inquired with the Department and received confirmation that the development of four lots would be "frozen." When Burns brought this information to Umpierre-Hernández, Umpierre-Hernández told him to "hide it, boy."

On September 10, 1986, Sánchez-Arán received Board approval to offer Iantho an $8.9 million loan, specifying that $1,412,177 would be used to purchase land for the Cerrovista project. The sale was then finalized on September 28. However, the actual land cost was only $480,000, and the remaining $932,000 was used to make principal and interest payments on other loans to Gutiérrez-owned companies. Over the next few months Gutiérrez and Umpierre-Hernández submitted certifications showing approximately $908,000 for "premanufacture" of housing units, and Sánchez-Arán authorized disbursement of these funds. As of May 1988, however, not a single unit had been built on the project.

d. Jardines de Villa Alba

In 1985, a developer named Emilio Montilla sought financing to build housing units on land he owned, and Caguas repeatedly denied his requests. Montilla then met with Umpierre-Hernández, who told him that if he used Modules as a contractor his request would be approved. In July 1985, the Board considered a proposed loan to Montilla with Modules as contractor. Although by this time Modules had failed to perform on the La Marina project for several years, the Board was not informed of this information when it considered the Jardines de Villa Alba project. Moreover, over $231,000 was disbursed before the Jardines de Villa Alba loan agreement was signed. Although the Board eventually approved the loan, this prior disbursement took place without Board knowledge or approval. Only one unit was ever completed on the Jardines de Villa Alba project. However, the Board was not informed of this fact. The Denby letter, which was drafted by Muñoz-Franco in January 1988 and signed by the Board members, refers to the "units" completed on this project.

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