U.S. v. Barnhart

• Decision Date: 16 December 1992
• Docket Number: No. 92-1194,92-1194
• Citation: 979 F.2d 647
• Parties: UNITED STATES of America, Appellee, v. D. Gary BARNHART, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 647

979 F.2d 647

UNITED STATES of America, Appellee, v. D. Gary BARNHART, Appellant.

No. 92-1194.

United States Court of Appeals,

Eighth Circuit.

Submitted Sept. 16, 1992.

Decided Nov. 10, 1992.

Rehearing Denied Dec. 16, 1992.

Stephen G. Mirakian, Kansas City, Mo., argued (James R. Wyrsch and Jacqueline A. Cook, on the brief), for appellant.

Marietta Parker, Asst. U.S. Atty., Kansas City, Mo., argued (Kenneth E. Weinfurt, Asst. U.S. Atty., on the brief), for appellee.

Before JOHN R. GIBSON, Circuit Judge, FLOYD R. GIBSON, Senior Circuit Judge, and BEAM, Circuit Judge.

FLOYD R. GIBSON, Senior Circuit Judge.

D. Gary Barnhart ("Barnhart") appeals his conviction on one count of aiding and abetting the execution of a scheme to defraud a federally insured bank in violation of 18 U.S.C. §§ 2 and 1344 (1988). We vacate Barnhart's conviction and remand for further proceedings consistent with this opinion.

I. FACTS

Barnhart founded the Tomahawk Mortgage Company ("Tomahawk") sometime in the 1960s. In 1972, William Lunday joined the company to serve as executive vice president and manage Tomahawk's daily business and financial operations. Eventually, Lunday was offered an opportunity to acquire an ownership interest in the company; Barnhart retained 47% of the stock, Lunday purchased 46%, and the remaining stock was owned by Barnhart Brothers, a separate entity consisting of Barnhart's father, uncle, and other relatives. Once Lunday began working for the company, Barnhart's role in Tomahawk's operations changed; whereas he had formerly overseen the company's daily operations, Barnhart ceased coming into the company's offices on a regular basis and began "wining and dining," playing golf with, and taking trips with, prospective and current clients.

As part of its business, Tomahawk made loans to individuals wanting to purchase homes. In order to prevent its capital from being tied up in these long-term loans, Tomahawk frequently (but not always) "warehoused" loans by selling them on a secondary market. Tomahawk pledged the note and deed of trust to a bank in order to obtain interim financing, which was made available to Tomahawk pursuant to a line of credit. The bank returned the note and deed of trust to Tomahawk in exchange for a trust receipt. Once Tomahawk sold the note and deed of trust in the secondary market, Tomahawk was required to pay off the bank loan.

At issue are a series of specific mortgage transactions, three involving the Union Bank and five involving Centerre Bank. The notes were sold to the Federal National Mortgage Association ("Fannie Mae") on the secondary market, and Fannie Mae wired the purchase price directly to Tomahawk's account at Merchant's Bank. Approximately two days later, Tomahawk received a list of loans Fannie Mae had purchased and the purchase price for the loans. At that time, Tomahawk was supposed to repay the bank from which it had made the draw on its line of credit. However, in the beginning and middle of 1987, Tomahawk was experiencing serious problems with its cash flow. This situation not only made operating the company difficult, but also threatened to cause problems with Fannie Mae. In order to help the company survive these difficulties, Lunday instructed one of Tomahawk's accountants, Betty Bosch, that the proceeds received from Fannie Mae be used either to pay various operating expenses or to pay other loans; the proceeds were not used to pay the banks for the money borrowed in conjunction with the mortgage that had been sold.

Lunday pleaded guilty to two counts of bank fraud and agreed to assist the government in its continuing investigation of Tomahawk. Barnhart was indicted on eight counts of executing a scheme to defraud a federally insured bank. The indictment listed eight mortgages for which Tomahawk received money from Fannie Mae but failed to repay the corresponding bank loans and charged Lunday with one count of executing a scheme to defraud in relation to each mortgage. Barnhart pleaded not guilty and proceeded to trial.

Pursuant to his plea agreement, Lunday testified against Barnhart. He testified that the two of them discussed the company's problems in February of 1987 and discussed a variety of measures designed to keep Tomahawk afloat. The two agreed that the company should try to obtain financing by using the company's furniture as collateral, by laying off some employees, and by selling some of its servicing rights. Barnhart also agreed to try to repay some of the money he had borrowed from the company. Lunday further testified that the two of them discussed the scheme of "mismatching" the proceeds from the sales of mortgages on the secondary market. In addition to Lunday's testimony, Tomahawk's accounts payable supervisor, Carol Dombrowski, testified that she "overheard" Barnhart and Lunday discussing "which loans to pay." Barnhart testified on his own behalf and denied having any knowledge of Lunday's actions until Lunday told him on or around October 13, 1987 about the financial mismatching.

The above-described testimony was the only direct evidence bearing on Barnhart's knowledge of the scheme prior to October 13, 1987. There was also evidence that the company's financial problems were due, in part, to Barnhart's substantial draws on the company's funds, and that Barnhart regularly received financial statements indicating that the company was having financial difficulty.

On October 16, 1987, Lunday, Barnhart, and Tomahawk's attorney met with officials from Union Bank and disclosed the mismatching. The testimony is in conflict as to whether this meeting was called by Barnhart or by Union Bank's representatives. On October 21, Barnhart called a similar meeting with Centerre Bank's representatives.

Over Barnhart's objection, the court read the following instruction on "deliberate indifference," telling the jury

You may find that the defendant acted knowingly if you find beyond a reasonable doubt that the defendant was aware of a high probability that the proceeds from the sale of mortgages to Fannie Mae were being used to pay Tomahawk's operating expenses or being used to repay loans on other mortgages ... and that he deliberately avoided learning the truth. The element of knowledge is satisfied if defendant deliberately closed his eyes to what would otherwise have been obvious to him. You may not find that the defendant acted knowingly, however, if you find that the defendant was simply careless. A showing of negligence, mistake, or carelessness is not sufficient to support a finding of knowledge.

The jury acquitted Barnhart on seven of the eight counts; the guilty verdict was returned on the last count, which involved a mortgage taken out by Callis and Lynette Morrill ("the Morrill loan"). Tomahawk took money on its line of credit for the Morrill loan on October 14 and sold the loan to Fannie Mae on October 16; however, as of December 17, Centerre Bank had not been repaid.

II. DISCUSSION

A. Sufficiency of the Evidence

Barnhart argues the evidence was insufficient to sustain the jury's verdict that he executed or aided and abetted the scheme with regard to the Morrill loan. In light of the fact that we review this claim by construing all reasonable inferences in favor of the jury's verdict, United States v. Foote, 898 F.2d 659, 663 (8th Cir.1990), we disagree with Barnhart. The testimony clearly established that a scheme to defraud existed. Furthermore, Lunday's testimony allowed the jury to believe Barnhart knew and approved of the scheme from its inception, and Dombrowski's testimony allowed the jury to believe Barnhart helped execute the scheme by discussing with Lunday which loans should be paid off. Based on this evidence, viewed in favor of the verdict, "a reasonable fact-finder could have found guilt beyond a reasonable doubt." Id.

Barnhart, recognizing the heavy burden he carries in challenging the sufficiency of the evidence, raises two additional arguments that require further attention. First, he contends Dombrowski's testimony about the discussions over "which loans to pay" does not definitely indicate that these discussions involved the scheme to mismatch repayments. Second, he contends Lunday's testimony should not be considered in viewing the sufficiency of the evidence because the jury obviously disbelieved it; had Lunday been believed, the jury would have convicted Barnhart on all the counts in the indictment.

We agree that Dombrowski's testimony is less than clear as to the context of the "overheard" discussions. However, we do not weigh the evidence; the jury does. On appellate review, we must construe all the evidence--including the admittedly vague testimony from Dombrowski--in favor of the government. Her testimony's shortcomings may be of concern to a juror, but are not so great that a reasonable juror could not rely on her statements in finding Barnhart guilty beyond a reasonable doubt.

With regard to Barnhart's second point, we recognize the lure of finding additional legal importance in Barnhart's acquittals. However, we have previously held that "inconsistency between verdicts on separate counts of an indictment does not entitle a defendant to reversal of a conviction on insufficient-evidence grounds." United States v. Kragness, 830 F.2d 842, 859 (8th Cir.1987) (citing United States v. Powell, 469 U.S. 57, 68-69, 105 S.Ct. 471, 478-79, 83 L.Ed.2d 461 (1984)). Consequently, the jury's decision to acquit Barnhart with regard to the first seven loans does not mean there was insufficient evidence to convict him with regard to the eighth.

B. Multiplicity in the Indictment

Barnhart argues the indictment was multiplicitous; that is, it charged a single offense in multiple counts. Gerberding v. United States, 471 F.2d 55, 58 (8th Cir.1973). We disagree. 18 U.S.C. § 1344 (1988), the statute at issue in this case, provides as follows:

Whoever knowingly executes, or attempts to execute, a scheme or...