U.S. v. Bennett, 93-1732
| Decision Date | 06 June 1994 |
| Docket Number | No. 93-1732,93-1732 |
| Citation | 37 F.3d 687 |
| Parties | UNITED STATES, Appellant, v. George S. BENNETT, Jr., Defendant, Appellee. . Heard |
| Court | U.S. Court of Appeals — First Circuit |
William P. Stimson, Asst. U.S. Atty., Economic Crimes Div., with whom Donald K. Stern, U.S. Atty., Boston, MA, was on brief, for appellant.
Morris M. Goldings, with whom John F. Aylmer, II and Mahoney, Hawkes & Goldings, Boston, MA, were on brief, for appellee.
Before SELYA, Circuit Judge, CAMPBELL, Senior Circuit Judge, and LAGUEUX, District Judge. *
George S. Bennett, Jr., defendant-appellee, was formerly a general manager, officer, and director of Daniel Webster Mortgage Company, Inc., which originated, underwrote, and sold mortgage loans. Bennett was also an attorney. On December 2, 1991, Bennett was charged, in a nine-count indictment, with violating the bank fraud statute, 18 U.S.C. Sec. 1344 (1988). 1 The indictment alleged that, from August 1988 until October 1989, Bennett obtained nine loans--corresponding to the nine counts--totaling $900,000 by, among other things, providing knowingly false and misleading information concerning the identity of the borrower or borrowers and by concealing his and his wife's interest in the loans.
On February 16, 1993, a jury trial began in the United States District Court for the District of Massachusetts. Eight days later, the jury found Bennett guilty on all nine counts. Following a sentencing hearing on May 18 and 19, 1993, the district court sentenced Bennett to twenty-four months probation with six months home detention. He was also ordered to pay a special assessment of $450 pursuant to 18 U.S.C. Sec. 3013 (1988). Judgment was entered on May 24, 1993. The Government appeals from the sentence. 2 We vacate and remand for resentencing.
Daniel Webster Mortgage Company, Inc. ("Daniel Webster"), which maintained a place of business in Marshfield, Massachusetts, originated and underwrote residential mortgage loans for consumers. To finance its mortgage underwriting activities, Daniel Webster borrowed money under lines-of-credit that it maintained with Plymouth Federal Savings Bank ("Plymouth Federal")--a federal mutual savings bank with its principal place of business in Plymouth, Massachusetts--and New Bedford Institution for Savings (NBIS)--a state-chartered bank based in New Bedford, Massachusetts. 3 To obtain line-of-credit advances, Daniel Webster needed only to contact the banks by telephone and provide a borrower's name and an amount to be disbursed. After making a mortgage loan, Daniel Webster would assign the promissory note and the accompanying mortgage from its customer to whichever bank advanced the funds. Daniel Webster would also record the mortgage and the assignment at the appropriate registry of deeds. When the mortgage loan was sold on the secondary market, Daniel Webster would use the proceeds to repay the principal borrowed from the lending bank, plus accrued interest.
George S. Bennett, Jr. was general manager of Daniel Webster from August 1985 until May 3, 1990, when he was asked to resign. He was also an officer of the company from May 1986 and a director from April 1987. On May 20, 1988, Bennett obtained two mortgage loans from Daniel Webster, each for $159,000. Bennett used the proceeds to purchase two parcels of real property in Hingham, Massachusetts. Title to these parcels was taken in the names of two nominee realty trusts, Prospect Woods Realty Trust and Prospect Forest Realty Trust. Bennett and his wife, Patricia A. Bennett, were the sole beneficiaries of each trust, and Mrs. Bennett was appointed trustee. Bennett's plan was to develop two homes on the parcels, occupy one, and sell the other.
In or about September 1988, Bennett applied directly to Robert E. Dawley, then-president of Plymouth Federal, for financing to construct the two residences on the Hingham property. He sought loans of $410,000 and $425,000. Dawley thought that Plymouth Federal should not lend Bennett this money. Accordingly, after consulting with Plymouth Federal's loan committee, Dawley rejected Bennett's applications.
Thereafter, Bennett used his position with Daniel Webster to cause the banks to lend him money under their lines-of-credit. 4 On more than ten separate occasions, Bennett obtained advances under the lines-of-credit by misrepresenting to the banks that he was financing mortgage loans underwritten by Daniel Webster in its regular course of business. To conceal his personal interest in the loans, Bennett, on many occasions, gave the banks fictitious borrower names such as "Woods," "Forest," "Foster," "Floras," "Powers," and "Kallan." Although Bennett and/or his wife executed promissory notes and mortgages for each new loan, Bennett failed to record any of the mortgages or assign them to the banks. Consequently, the line-of-credit advances were effectively unsecured, and Bennett avoided creating a public record of his borrowing activity. Bennett also created a lender loan file for each new loan that contained "filler" documents--such as settlement statements, credit applications, title insurance policies, and real estate appraisals--that, upon close inspection, bore no relationship to the particular loan. Rather, many of these documents were photocopies of the materials prepared in connection with the two $159,000 loans obtained by Bennett in May 1988. To avoid detection, Bennett kept the promissory notes, mortgages, and loan files in his personal possession.
In or about March and April 1990, the Federal Deposit Insurance Corporation (FDIC) examined Plymouth Federal, including the Daniel Webster line-of-credit. One examiner demanded the supporting documentation for a $125,000 advance under the name "Bennett"--Count 7 of the indictment. In response, Bennett provided, among other things, a promissory note, a mortgage, and an assignment of the mortgage to Plymouth Federal. The mortgage and the assignment had recording stamps, bearing instrument numbers 36241 and 36242, indicating that they had been received by the Plymouth County Registry of Deeds on May 12, 1989, at 12:12 p.m. On further inspection, however, the mortgage and the assignment were found to be unrecorded, and the recording stamps to have been forged. A search at the Plymouth County Registry of Deeds revealed that the instrument numbers belonged to documents filed in an unrelated transaction.
The full extent of Bennett's borrowing was revealed on or about May 3, 1990. Plymouth Federal thereupon terminated its line-of-credit, putting Daniel Webster out of business. Bennett was asked to resign from Daniel Webster.
On May 22, 1990, Plymouth Federal and Daniel Webster sued Bennett, claiming, inter alia, that he had committed fraud. Bennett denied liability. On February 1, 1991, the parties entered into a settlement agreement. Bennett agreed to turn over to Plymouth Federal certain cash and other property, including the part of the Hingham property that had not earlier been sold. The district court found the value of the cash and property transferred in the settlement to be "at least" $660,000.
During the civil law suit, Bennett, in answers to interrogatories, listed the loans that he had obtained from May 20, 1988, through March 1, 1990. The Government provides the following chart, which includes the nine transactions, designated A through I, charged in the indictment:
Whether "Borrower Date Princ
Charged/ Name" on Princ. Balance
Date Design. Amount Bank Docs. Repaid (5-3-90)
5-20-88 no $159,000 Bennett -- $159,000
5-20-88 no $159,000 Bennett -- 159,000
7-5-88 no 180,000 Bennett 9-30-88
8-11-88 yes (A) 40,000 Woods 9-22-88
9-22-88 no 185,000 Bennett 10-13-88
9-22-88 yes (B) 90,000 Forest 7-7-89
10-4-88 no 100,000 Bennett -- 100,000
10-4-88 yes (C) 141,700 Woods 7-7-89
10-4-88 yes (D) 145,300 Foster 7-7-89
3-31-89 yes (E) 75,000 Woods -- 75,000 5
3-31-89 yes (F) 105,000 Floras 7-7-89
5-12-89 yes (G) 125,000 Bennett -- 125,000
8-2-89 yes (H) 67,000 Powers 9-30-89
10-2-89 yes (I) 111,000 Kallan -- 111,000
3-1-90 no 108,000 Sou -- 108,000
---------- --------------
$1,791,000 $837,000
As the Government's chart indicates, several of the
loans were repaid before May 3, 1990, the date when
Bennett's offense was discovered. According to Bennett, the
remaining loans were repaid when he entered into the
settlement agreement with Daniel Webster and Plymouth
Federal on February 1, 1991.
At sentencing, the Government maintained that, because Bennett's scheme to defraud continued after the November 1, 1989, amendment to the loss table in U.S.S.G. Sec. 2F1.1(b)(1), there was no ex post facto problem created by using--as is ordinarily done--the version of the Guidelines Manual that was in effect (i.e., November 1, 1992) when Bennett was sentenced. The Government also argued that (1) in addition to the $900,000 in charged loans, the district court should consider $1,016,000 in other loans as relevant conduct, for a total loss of $1,916,000; 6 (2) the $1,916,000 loss figure should not be reduced to reflect any repayments made by Bennett because this was not a "fraudulent loan application" case within the meaning of U.S.S.G. Sec. 2F1.1, comment. (n. 7(b)); (3) Bennett did nothing to manifest any appreciation of the criminality of his conduct; and (4) the district court should apply upward adjustments to the offense level under U.S.S.G. Secs....
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