U.S. v. Lemons

• Decision Date: 27 August 1991
• Docket Number: No. 90-1287,90-1287
• Citation: 941 F.2d 309
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Woody F. LEMONS, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 309

941 F.2d 309

UNITED STATES of America, Plaintiff-Appellee, v. Woody F. LEMONS, Defendant-Appellant.

No. 90-1287.

United States Court of Appeals Fifth Circuit.

Aug. 27, 1991.

Michael P. Gibson, Burleson, Pate & Gibson, Dallas, Tex., for defendant-appellant.

Robert E. Hauberg, Jr., Sara Criscitelli, U.S. Dept. of Justice, Fraud Section, Crim. Div., Washington, D.C., Marvin Collins, U.S. Atty., Dallas, Tex., for plaintiff-appellee.

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

Before GOLDBERG, SMITH, and BARKSDALE, Circuit Judges.

PER CURIAM:

Woody F. Lemons was convicted on nine counts based on the bank fraud statute, 18 U.S.C. § 1344 (executing a scheme to defraud a federally insured financial institution), as well as on four related counts. His appeal turns primarily on the reach of § 1344. However, he does not appeal his convictions on five counts, including the first two for bank fraud (which concern several million dollars). Moreover, for those he does challenge, he principally claims (1) that he could not be convicted under § 1344, because he did not receive the money, or other benefit, in issue until after the statutorily proscribed bank fraud scheme was completed and (2) multiplicity. And, he challenges his pre-Sentencing Guidelines total sentence of 30 years imprisonment. We AFFIRM IN PART and REVERSE and VACATE IN PART.

I.

In 1972, Lemons joined Vernon Savings & Loan Association, a state chartered, federally insured and regulated institution, and became president in 1976. Vernon was a regional operation, with its main office in Vernon, Texas, and branches in small nearby communities. In 1982, Vernon was purchased by Don Dixon; and Lemons became chief executive officer and chairman of the board. Upon deregulation of the savings and loan industry, Vernon expanded into commercial real estate, primarily through its new Dallas office, where Lemons spent much of his time.

Lemons' indictment arose out of a $46 million real estate project in Arlington, Texas, known as the Arlington Waterway property, a planned residential and commercial development on 380 acres. In April 1984, a group of buyers contracted to buy the partially developed land for $14 million, but it was unable to secure financing for the purchase.

Ron Finley, a Vernon customer, became interested in the property and enlisted the aid of Gipp Dupree, a Dallas real estate broker. Dupree had an existing relationship with Vernon; during 1985, he brokered over $100 million in loans for it. His standard broker's fee was one percent of the total loan amount.

In September 1985, Dupree and Finley met with Vernon officers; and a loan in the range of $40-60 million was discussed. Arlington Waterway was appraised at several million dollars above the actual purchase price. Accordingly, had Vernon funded 100% of the appraised value, there would have been approximately $8-12 million in excess funding, the difference between the cost of the project and the loan amount. As part of the proposal, Dupree offered to use some of the excess funding to help Vernon rid itself of Real Estate Owned (REO)--foreclosed property on non-performing loans, especially on undeveloped land. A sale of REO property would improve Vernon's capital position and provide funds for new loans.

In November 1985, the group assigned its contract at no cost to Marathon Properties, a company owned by Dupree. As a part of the assignment, the owners required a $100,000 letter of credit, which was issued by Vernon and guaranteed by Dupree and Finley. An extension of the contract was obtained until January 15, 1986.

While reviewing the project, it was determined that Finley could not be the borrower, because he was already indebted to Vernon and the Arlington Waterway loan would exceed Vernon's loan to one borrower limit. It was agreed that another borrower would have to replace him. Finley introduced Dupree to Michael Blubaugh, a real estate developer who was not indebted to Vernon. Blubaugh expressed an interest in the waterway project and was introduced to Vernon officials. ¹

In December 1985, the loan was presented to Vernon's board of directors, but no mention was made of either excess funding or the loan amount containing an assignment fee or commission to Dupree for brokering the transaction. The board approved a $52 million loan, conditioned upon additional financial underwriting work.

In late January 1986, Dupree, Blubaugh, and Lemons agreed that Dupree would receive a $3.5 million fee in exchange for the assignment of his interest in the contract through Marathon Properties and a 1% commission as loan broker. Dupree had inserted Marathon into the chain of title at no cost. One Vernon officer described this assignment as a "flip". A flip occurs when there is a party in the chain of title that marks up the price without closing the property, so that no value is added to the property. Lemons told Vernon vice president John Hill that Dupree had agreed to make half of the fee available to Vernon for REO. Hill also testified that, in addition, Dupree agreed to put half of the fee in a new mortgage business Lemons hoped to start. There was no agreement that specific REO property would be purchased.

A new appraisal was performed in February 1986; and the loan was reduced to $46 million, 90% of the appraised value. Several Vernon officers testified that they were concerned about the amount of the loan on the basis of the appraisal and engineering study. Randy Hughes, the Vernon officer responsible for underwriting the loan, presented it to the loan committee in February 1986. The loan gave Vernon a 35% participation in profits on the project, less than Vernon's usual 50%. The loan was initially denied, but was later revived. Hughes continued underwriting the loan with Lemons.

The Arlington Waterway loan, the largest Vernon loan up to that time, was approved by the loan committee in March 1986, but could not be funded until April, due to Federal Home Loan Bank Board (FHLBB) restrictions. The loan closed on April 2, with the first payment of $9.7 million to Blubaugh. Of this initial draw, $2.3 million was paid to Vernon in points and fees; and Blubaugh paid Dupree $1 million in accordance with the earlier agreement and signed a note to Marathon for the $2.5 million balance. Dupree also received $460,000 as his 1% broker fee.

In April 1986, the FHLBB called for the resignations of Lemons and three other Vernon senior officials. (Vernon was closed by regulators in March 1987.) After Lemons' resignation on April 24, 1986, Blubaugh requested a $3.75 million draw, which included the $2.5 million balance on Dupree's assignment fee and $1.25 million to settle claims by the original group of buyers who were threatening suit. Hughes approved the draw request, forwarding it to another Vernon official, Richard Veteto. Veteto authorized disbursement of the $1.25 million, in order to avoid the potential lawsuit, but questioned the $2.5 million payment. Hughes told Veteto that the $2.5 million payment had Lemons' approval. Veteto questioned Lemons about the payment and was informed that the fee was created to allow Dupree to buy Vernon REO property. Lemons also told Veteto that the loan committee was aware of the assignment fee when it approved the loan, although the fee was not a line item on the budget. Because Lemons had resigned by that time, Veteto decided that he lacked authority to approve the payment and declined to fund it.

Only $1 million of the $3.5 million assignment fee was funded to Dupree. Lemons pressed Dupree for half; but Dupree was concerned that the payment would be illegal, because Lemons had resigned from Vernon and had no direct claim to the money. Lemons suggested that Dupree make the payments to him through a third party, and Dupree agreed.

Dupree would not agree to the amount Lemons requested, because Dupree had lent Blubaugh $500,000 in early April and he had tax liability on the $1 million. Lemons agreed to $250,000, but Dupree subsequently deducted other amounts which Lemons owed him. Accordingly, on June 30, 1986, Dupree gave Jack Franks, a real estate consultant who had dealt with Vernon, a check for $212,000, made payable to North Star Group, a company owned by Franks.

Lemons came to Franks on June 30 to receive the $212,000; but Franks advised him that if he gave him a check for the total amount on the same day, the transaction might be questioned. Franks suggested spreading the payments over different transactions over a period of time, and Lemons agreed.

That day (June 30), Franks gave Lemons a $40,000 check written on the account of Parkway Ventures. The payment was identified as a "consulting fee" for four months, at $10,000 a month. That same day, Franks issued a second check, on his North Star account, to Lemons for $22,500, which was identified as a commission payment. And, Lemons' debt to Franks for a Jeep Wagoneer he had purchased from Franks on June 11, 1986, was forgiven, in the amount of $20,000. The debt forgiveness and $22,500 check were purportedly in payment for Lemons' "assistance in obtaining [a] second mortgage" on a home Franks had purchased in Newport Beach.

On July 9, 1986, Franks authorized a $10,000 check on one of his companies to First Equity Mortgage, Lemons' company, designated as a "loan commitment fee". And, on August 6, Franks authorized a check to Lemons for $30,000, which was identified as payment for consulting fees.

Franks still owed Lemons approximately $90,000 of the $212,000; and, in an unrelated business venture, Lemons owed Franks approximately $70,000, due in June 1987. They agreed that the $70,000 debt would be offset against the balance due Lemons. The remainder was used by Franks for his tax liability on the $212,000.

In addition, during the Arlington Waterway negotiations, Dupree entered into a commission agreement with Lemons on behalf of Vernon to negotiate...