998 F.2d 1275 (5th Cir. 1993), 92-8108, United States v. Reese
|Docket Nº:||92-8108, 92-8109.|
|Citation:||998 F.2d 1275|
|Party Name:||UNITED STATES of America, Plaintiff-Appellee, v. Louis G. REESE, III, Defendant-Appellant.|
|Case Date:||August 13, 1993|
|Court:||United States Courts of Appeals, Court of Appeals for the Fifth Circuit|
Travis R. Phillips, Law Office of Travis R. Phillips, Austin, TX, Ross A. Nabatoff, Brand & Lowell, Washington, DC, for defendant-appellant in No. 92-8108.
Dan H. Mills, Asst. U.S. Atty., Austin, TX, Richard L. Durbin, Jr., Asst. U.S. Atty., Ronald F. Ederer, U.S. Atty., San Antonio, TX, for plaintiff-appellee in No. 92-8108.
Travis R. Phillips, Phillips, Neal & Woods, Austin, TX, Ross A. Nabatoff, Brand & Lowell, Washington, DC, for defendant-appellant in No. 92-8109.
Dan H. Mills, Asst. U.S. Atty., Austin, TX, Robert E. Lindsay, Alan Hechtkopf, Dept. of Just., Tax Div., Washington, DC, for plaintiff-appellee in No. 92-8109.
Appeals from the United States District Court for the Western District of Texas.
Before WISDOM, JOLLY, and DeMOSS, Circuit Judges.
DeMOSS, Circuit Judge:
Lewis G. Reese III (Reese) and his Dallas based companies were major developers of real estate in Texas. During the middle 1980's Reese financed several of his real estate deals with Lamar Savings and Loan Association (Lamar) and Western Savings and Loan Association (Western).
On August 7, 1990, Reese along with four Lamar officials, were indicted in the Western District of Texas, Austin Division, in Cause No. A-91-CR-85 for conspiracy to defraud the United States and its agency, the Federal Home Loan Bank Board, in violation of 18 U.S.C. § 371. Count one of the indictment charged Reese as a co-conspirator involved with conduct to defraud the United States, to misapply federally insured funds in violation of Title 18 U.S.C. § 657; to cause false entries to be made in the books, reports and statement of Lamar Savings Association, a federally insured savings and loan, in violation of Title 18 U.S.C. § 1006; and to make false and fraudulent statements to the Federal Home Loan Bank Board in violation of Title 18 U.S.C. § 1001. On June 19, 1991, a one-count information was filed in the Northern District of Texas in Cause No. A-91-CR-85, charging Reese with conspiring to defraud the United States by impeding and impairing the lawful functions of the Internal Revenue Service, in violation of 18 U.S.C. § 371. The case was subsequently transferred to the Western District of Texas and consolidated with Criminal Cause No. A-90-CR-117, the Lamar case.
Although both cases arose out of Reese's real estate dealings, each case involved independent events.
A. The Lamar Savings and Loan Association Case
Lamar was a savings and loan institution located in Austin, Texas. In 1985, The Federal Home Loan Bank Board (FHLBB) notified Lamar that there were deficiencies in its net worth related to real estate which Lamar had acquired through foreclosure (REO Properties); and that Lamar would be required to dispose of these REO properties in order to correct the deficiencies and to avoid a supervisory agreement ordered by FHLBB.
Lamar decided that it would be difficult to dispose of the REO properties in the ordinary course of business because the real estate market was poor at that time. Consequently, it devised a plan whereby borrowers would be required to purchase an REO property as a condition of receiving a loan on other property, thereby making it appear to the regulators that Lamar had sold off the REO property. Lamar would finance both the legitimate loan and the REO property sale by lending more money to the borrower than the original loan request would have required. Lamar executed its scheme by lending more money to a single borrower than permitted by the regulators and disguised these excess loans to one borrower by using nominee borrowers. 1 Lamar was therefore able to deceive the federal regulators as to Lamar's true financial condition.
In order to carry out its plans, Lamar contacted potential borrowers and let them know that Lamar was prepared to lend money but only under the above stated conditions.
Reese needed financing to purchase and develop a 225 acre parcel of land located in DeSoto, Texas (the DeSoto property). On June 29, 1985 Lamar agreed to lend $37,000,000 to Reese's corporation, Louis Reese, Inc. with the DeSoto property as collateral.
As a condition of the loan, Reese agreed to acquire or cause someone else to acquire two of the REO properties, the "Witte" and "Ponderosa" properties, which were classified as non-performing assets on Lamar's books. The down payment for these properties was funded by Lamar lending excess money with respect to the DeSoto property and the borrower, Louis Reese, Inc., would pass the funds on to the nominee purchaser. The DeSoto property was thus used to generate
money which would be used to purchase the Witte and Ponderosa properties from Lamar. Proceeds from the DeSoto loan were $14,634,663 in excess of the purchase price needed to purchase the DeSoto property. Approximately $11,000,000 of the excess funds were used to facilitate the purchase of the Witte and the Ponderosa properties. These sham transactions created false entries and artificially inflated Lamar's net worth, resulting in deception of the FHLBB.
Because the aggregate of the $37,000,000 loan and the loans for the balance of the sales price of the REO properties would have exceeded Lamar's legal lending limits to any one borrower, Reese gave a business acquaintance, Robert Brown, all of the stock of Berkshire Realty, Inc. (Berkshire), a shelf corporation 2 owned by Reese and arranged for Berkshire, to purchase the Witte and Ponderosa properties as a nominee for Reese. Brown and Berkshire were thereby used in the loan transaction to circumvent the "loan-to-one-borrower" limitation.
The entire transaction proved to be unsuccessful, and Lamar eventually foreclosed on the Witte and Ponderosa properties and took back the DeSoto property in settlement of the loan. Reese agreed to forego any litigation against Lamar for its alleged breaches of promises to Reese.
Lamar was able to later sell the two REO properties for a profit of $1,626,857. However, the DeSoto property which was deeded back to Lamar in August 1986 was appraised in October, 1986 for $13,000,000. Lamar was subsequently taken over by the Federal Deposit Insurance Corporation (FDIC).
B. The IRS Case
In 1984, two individuals, identified as "A" and "B" approached Reese and proposed a real estate transaction.
Individual "A" had advanced $2,300,000 toward the purchase of a horse farm in Kentucky and wanted to use Reese's equity in a parcel of land, LBJ/Central property, located in Dallas, Texas, to fund the remainder of the purchase price. Reese, Individual "A" and a third party, Individual "B" agreed to form Slew Farms, Inc., a Cayman Island partnership, to control the property. Individual "A" also formed Haft, Inc. in Nevada. Haft, Inc. was wholly owned by Slew Farms.
On October 19, 1984, Reese conveyed the LBJ/Central property to Haft, Inc. for $15,900,000. On the same day, Haft, Inc. sold the same property to a corporation owned by "B" for $28,186,565. Western Savings Association financed the sale with a $29,000,000 loan to "B" 's corporation. Haft, Inc. thus realized a $12,000,000 profit on the sale. "A" then wire transferred the $12,000,000 proceeds from the sale, plus the proceeds from a $2,000,000 loan, through an Allied Bank account in Dallas, Texas, to a Guiness Mahon Cayman Trust Ltd. account in New York City, to an account in the name of Warrenton Farms, Inc. in Fayette Commerce Bank in Lexington, Kentucky. Warrenton Farms, Inc., was wholly owned by Slew Farms, Inc. Individual "A" used the $14,000,000 to buy the Kentucky horse farm. Haft, Inc. never filed a corporate income tax return and did not pay any corporate income taxes.
These transactions were planned in such a manner that the true nature of the deal was not disclosed in the loan documents to Western and the loan documents did not disclose the relationship between the parties to the sale of the LBJ/Central property. Western suffered a $12,100,000 loss as a result of the scheme.
On July 9, 1991, pursuant to a plea agreement, Reese entered a plea of guilty to Count one of the indictment in the Lamar case, Cause No. A-90-CR-117, and to the one-count information in the IRS case, Cause No. A-91-CR-85.
C. The Sentences
The federal probation department concluded in a court-ordered presentence investigative report (PSR) that there was a $9,265,829 loss with respect to the Lamar transaction and that Western lost $12,100,000 as a result of its loan to B's corporation.
On February 19, 1992, the trial court held a hearing on restitution. Federal Bureau of Investigation Agent Matt Gravelle, a Certified Public Accountant, testified for the government about the loss created by the DeSoto loan in the Lamar transaction. Agent Gravelle offered two calculations to determine the loss. 3 In the second computation, the one eventually adopted by the court, the loss was determined by tracing monies expended at the closing of the DeSoto loan that Gravelle considered not related to the acquisition or development of the DeSoto property. According to Gravelle, out of the $28,717,000 funded at the DeSoto loan closing, $12,274,000 were funds not related to the DeSoto loan. From that amount, Reese was credited with the $3,700,000 certificate of deposit that Reese ultimately returned to Lamar Savings. 4 This produced a figure of $8,574,000 to which loan brokerage fees of $129,000 from the Ponderosa loan and $544,000 from the Witte loan were added. The result, the $9,264,000 number, was very similar to the...
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