U.S. v. Barnes, 84-1109

• Citation: 761 F.2d 1026
• Decision Date: 16 May 1985
• Docket Number: No. 84-1109,84-1109
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Nathan W. BARNES, and Kenneth L. McGinn, Defendants-Appellants
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 1026

761 F.2d 1026

UNITED STATES of America, Plaintiff-Appellee, v. Nathan W. BARNES, and Kenneth L. McGinn, Defendants-Appellants

No. 84-1109.

United States Court of Appeals, Fifth Circuit.

May 16, 1985.

Leighton Cornett, Paris, Tex., for defendants-appellants.

Edward C. Prado, U.S. Atty., John Emerson, Sidney Powell, Asst. U.S. Attys., San Antonio, Tex., Mervyn Hamburg, Atty., Dept. of Justice, Washington, D.C., for plaintiff-appellee.

Appeals from the United States District Court for the Western District of Texas.

Before GOLDBERG, RUBIN and HILL, Circuit Judges.

ROBERT MADDEN HILL, Circuit Judge.

Appellants Nathan W. Barnes and Kenneth L. McGinn were charged with conspiracy to convert monies of the United States to their own use contrary to 18 U.S.C. Sec. 371 ¹ and conversion of said monies to their own use contrary to 18 U.S.C. Sec. 641. ² Both were charged with conspiracy in count 1 of a superseding indictment; Barnes was charged with conversion of government funds in counts 2, 4, 5, 6 and 7 while McGinn was charged with the same violation in counts 2, 3, 4 and 8 of the superseding indictment. The charges arose as a result of misrepresentations and irregularities that occurred with Farmers Home Administration (FmHA) loans which McGinn borrowed and which Barnes, as county supervisor of the FmHA, authorized and monitored. ³

The jury found Barnes and McGinn guilty on all counts as charged. ⁴ Barnes and McGinn appeal their convictions challenging (1) the alleged failure of the government to prove criminal intent and (2) the alleged failure of the government to prove two essential elements of section 641: (a) that the government suffered actual property loss and (b) that no consideration was received for the borrowed federal funds. For the reasons stated below, we affirm all the convictions.

I. Facts

In count 2, Barnes and McGinn were charged with converting $10,000 in government funds. ⁵ McGinn and Barnes helped McGinn's nephew Glenn McGinn (Glenn) apply for and secure an FmHA loan despite the fact that Glenn did not possess the ten years' farming or ranching experience that was a prerequisite for the loan. McGinn directed Glenn to indicate on the application that he possessed ten years of ranching experience. Barnes then indicated on Glenn's farm and home plan that $17,630 was required to purchase forty cows, two bulls, a used pickup truck and a tractor and shredder.

Subsequently a United States Treasury check in the amount of $17,630 was drawn in favor of Glenn and deposited in a checking account at the Fairfield State Bank. Barnes cautioned Glenn that checks written on this FmHA-supervised account would be invalid unless they were countersigned by Barnes. Glenn later appeared in Barnes' office and signed a blank Fairfield State Bank check allegedly for the purpose of purchasing the livestock and equipment listed on the farm and home plan. Barnes told Glenn that his assistant would fill in the necessary information on the check later. This check was negotiated on June 14, 1978, at which time it was countersigned by Barnes, was payable to McGinn in the amount of $13,430 and was endorsed by McGinn. Neither Barnes nor McGinn ever told Glenn that McGinn was the payee nor did they indicate to Glenn who owned the livestock or equipment he had allegedly purchased. That same day McGinn took the check to the First National Bank of Teague, and made a net deposit into his personal account of $10,330--this sum represents the balance of the $13,430 check less $3,100 McGinn received in cash.

A short time later Charles Armstrong, a cattle rancher, applied for an FmHA loan to purchase cattle and rent pasture land. While in Barnes' office for the purpose of the loan closing, he was asked to help Barnes purchase a jeep from an individual named Bob Eckerson. According to Barnes the purchase price was $1,000 and Barnes could not lawfully make the purchase for unexplained reasons. Barnes displayed a check face down and asked Armstrong to sign it on the back in order to facilitate the purchase. Armstrong agreed and signed his name at the place ordinarily reserved for endorsements. Armstrong did not look at the front of the check and never saw the check again before it was negotiated.

Some time after Armstrong had affixed his signature on the check, the names of the maker, payee and final endorser were added. When completed, the check, in the amount of $10,000, bore the signature of McGinn as the maker, Armstrong as the payee and Barnes as the final endorser. The check was written on the same personal account at the First National Bank of Teague into which McGinn had earlier deposited $10,330. ⁶ On the same day, Barnes deposited the $10,000 check in another account at the First National Bank of Teague and then wrote a check payable to himself on the same account in the same amount; he then used the proceeds to pay off certain personal notes. ⁷

After having signed the $13,430 loan-check in Barnes' office, Glenn accompanied McGinn to a pasture that was supposed to contain the forty cows and two bulls that he had purchased. Glenn saw only thirty cows there; McGinn told Glenn that he need not worry about the shortage and that he would locate the ten missing cows. McGinn also volunteered to assist with the branding, a requirement of the FmHA contract. In fact McGinn did not locate or explain the absence of the missing cattle nor were any of the livestock supposedly purchased by Glenn ever branded. Of the thirty cows that could be accounted for, eight or nine strayed away and were never found, while others died and had to be replaced by subsequent purchases.

Later Glenn told Barnes that the pasture land was dry and that the cattle were starving. He requested release of the amount remaining in his FmHA-supervised account so that he could purchase feed. Barnes suggested that Glenn's best course would be to sell the cattle. Accordingly, Glenn transferred his remaining cows and two bulls to Barnes' pasture; thereafter, Barnes advised Glenn that the cattle had been sold. He summoned Glenn to the FmHA office where Glenn endorsed and left a check representing the proceeds of the sale of the remaining livestock. Barnes did not apply any of the sale proceeds to offset the amount owed by Glenn on the original $17,630 FmHA loan. Neither the supervised bank account nor the FmHA record of Glenn's deposits and withdrawals reflected any credit for the sale of the remaining livestock. Moreover, since the number of cows purported to have been sold on behalf of Glenn was merely half the number originally purchased, Glenn realized that he still owed a debt to the FmHA. When he asked Barnes and McGinn about the loan balance, both of them told him not to concern himself about it because the balance would be written off.

Counts 3 and 8 involved only McGinn. They concern McGinn's use of funds from his own FmHA-supervised account for purposes outside those authorized by the loan which created the account. In count 3, McGinn was charged with converting $4,800 which represents a check drawn from his FmHA account, countersigned by Barnes, and payable to McGinn's nephew, Jackie Daniels, ostensibly for the purchase of fifteen cows. McGinn directed Daniels to endorse the check and then directed another nephew, Edgar McGinn, to further endorse the check in order to purchase a used front-end loader and a logging truck. The purpose of these transactions was to enable Edgar to enter the logging business even though McGinn's FmHA-supervised account was for the stated purpose of improving certain lands and for obtaining cattle, a tractor, a pickup truck and a trailer. After two months, the logging operation was shut down and McGinn subsequently sold the two vehicles to his son Larry. In count 8, McGinn persuaded a third party to cash a $1,200 check drawn on his FmHA-supervised account ostensibly for the purchase of a bull. That person then returned the money to McGinn.

The transactions underlying counts 4 through 7 appear to have arisen from Barnes' desire to sell cattle to FmHA borrowers, an activity that he admits violated FmHA guidelines. See note 3, supra. In count 4 the buyer already had an FmHA loan. In counts 5, 6 and 7 the buyers did not yet have an FmHA loan. In each case where the buyer did not yet have an FmHA loan he was unqualified for one; Barnes or McGinn would help each buyer fill out an application for a loan that contained false statements about the borrower's qualifications.

Once the buyer had a loan, Barnes, sometimes with McGinn's help, would set up a bogus cattle-sale to hide his role in the exchange. In counts 4 and 5 Barnes used a falsified bill of sale to reflect purchases by the borrowers from a local rancher. ⁸ He would have checks made payable to the borrowers and record them as reimbursement to the borrowers for the fake purchases that had ostensibly already taken place. The borrowers would then turn the money over to Barnes as "consideration" for their purchase of Barnes' cattle. In counts 6 and 7 he would have a check from an FmHA-supervised account made out to a third person who actually had no role in the sale, and record it as the borrower's purchase of livestock or equipment from that third person. He would then induce the third person to endorse the check over to him (Barnes). In all cases it appears that the FmHA-supervised loan funds were used for purposes other than that for which they were intended.

II. Criminal Intent

Barnes and McGinn argue that the prosecution wholly failed to prove they possessed the criminal intent necessary to sustain their convictions. Their argument essentially challenges the sufficiency of the evidence brought forth by the government to prove criminal intent. Accordingly, we view the evidence and given inferences that may be drawn therefrom in the light most favorable to the government. See Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 469, 86 L.Ed. 680 (1942). ...