U.S. v. Benny
| Citation | 786 F.2d 1410 |
| Decision Date | 15 April 1986 |
| Docket Number | No. 84-1074,84-1074 |
| Parties | , RICO Bus.Disp.Guide 6253 UNITED STATES of America, Plaintiff-Appellee, v. George I. BENNY, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Sanfrod Svetcov, Asst. U.S. Atty., San Francisco, Cal., for plaintiff-appellee.
Jerrold M. Ladar, San Francisco, Cal., for defendant-appellant.
Appeal from the United States District Court for the Northern District of California.
Before DUNIWAY and TANG, Circuit Judges, and HUPP, * District Judge.
Appellant George Benny was convicted after a jury trial of twenty-one counts of mail fraud under 18 U.S.C. Sec. 1341-42 and one count of racketeering under RICO provision 18 U.S.C. Sec. 1962(c). The indictment arose out of two related and one unrelated schemes to defraud institutional lenders in the financing of a northern California apartment building and a planned community to be built on a Nevada ranch. Benny appeals his convictions on a number of grounds. First, he alleges that the RICO conviction must be reversed because the "defendant" and the "enterprise" cannot be the same individual. Second, Benny alleges the mail fraud conviction should be reversed because the district court erred in its jury instructions regarding intent to defraud and because of errors based on his non-assumption of fiduciary obligations, government interception of communications with his attorney, selective prosecution, the government's use of perjured testimony, the grand jury's consideration of perjured testimony, refusal of the district court to admit testimony, the mailing requirement of the mail fraud count, and the disparity of sentencing. We affirm.
The record indicates that Benny operated a sole proprietorship which engaged, inter alia, in the acquisition and management of real estate. In the course of his real estate business, Benny either employed or associated with four other defendants: Ariel Basse, James S. Urbanski, James A. Fagerhaugh and Robert M. Lawrence. Benny's conviction rested on two related and one unrelated series of transactions. These transactions are recounted in United States v. Benny, 559 F.Supp. 264, 265-66 (N.D.Calif.1983), and will be briefly summarized.
In 1977, Benny devised a scheme to defraud Wells Fargo Bank in connection with the purchase of Diamond Heights Village ("DHV"). Benny represented to Wells Fargo that he was purchasing DHV for $14.5 million and that he had placed a $2 million down payment in escrow. Instead, the purchase price of DHV was actually only $12.5 million and the $2 million check was written against an account balance of $5,000. Neither Benny nor the escrow company notified Wells Fargo when the check was dishonored. On the basis of Benny's representations, Wells Fargo loaned Benny $13.5 million to buy DHV in November of 1977.
In late 1979, defendants Benny, Basse, Fagerhaugh, Urbanski and Lawrence implemented a second series of transactions. They procured purported borrowers to submit loan applications to various lenders for the purported purchase of individual condominiums at DHV. Benny agreed to pay the downpayments into escrow and to make the monthly payments on the loans. Benny received the loan proceeds but kept the units.
The "straw sales" continued into 1981. During the course of these "sales", the defendants falsified financial information with respect to many of the purported borrowers to cause them to appear financially qualified for the loans, e.g., employment verifications and other documents reflecting income and assets. Many purported borrowers had multiple loans on DHV units which were concealed from the lenders. In addition, the defendants forged the names of purported borrowers on various documents.
Finally, the defendants inflated the purchase prices of the DHV units in order to obtain loans larger than otherwise would have been available. Since the "straw sales" did not involve actual arm's length negotiations, Benny himself set the sales prices at levels which far exceeded the actual market value of the units. Believing these sales to be the result of arm's length transactions, appraisers for the lenders and the mortgage brokers relied upon them to determine the value of the units on which new loans were being sought; these resulted in inflated appraisals. Consequently, banks and mortgage brokers made loans on the units in excess of their actual market value.
In December of 1980, Benny acquired a 160 unit condominium complex in Las Vegas known as the Casablanca condominium project. Shortly thereafter, Benny sought financing to enable him to purchase the 2300-acre Double Diamond Ranch near Reno, Nevada, on which he intended to build a planned community. Toward financing the purchase of Double Diamond, Benny borrowed approximately $13 million from Nevada National Bank and other lenders. These loans were to be repaid through the sales of Casablanca condominium units.
Instead of making sales, the defendants procured "straw" borrowers to apply for loans. Again, Benny agreed to make the downpayments and the monthly repayments of the loans. The purported borrowers executed quitclaim deeds to Benny. Thus, the Casablanca borrowers' loans were used by Benny to repay the short-term loan from Nevada National. As in the Diamond Heights Straw Buyer Operation, the defendants falsified the financial information pertaining to the purported borrowers and forged numerous documents involved in the Casablanca loan applications. Defendants Lawrence and Fagerhaugh were not named in this transaction.
Each of Benny's co-defendants pleaded guilty to lesser charges in exchange for their testimony against Benny at trial. Benny was sentenced to thirty years in prison.
This court reviews the sufficiency of an indictment de novo as an issue of law. United States v. Buckley, 689 F.2d 893, 897 (9th Cir.1982), cert. denied, 460 U.S. 1086, 103 S.Ct. 1778, 76 L.Ed.2d 349 (1983).
Benny was indicted (Count Thirty-two) and convicted for racketeering under 18 U.S.C. Sec. 1962(c) which states that:
It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt.
Such an indictment is proper when it preserves the enterprise's character as a separate element of the RICO offense. United States v. Turkette, 452 U.S. 576, 583, 101 S.Ct. 2524, 2528, 69 L.Ed.2d 246 (1981). RICO provision 18 U.S.C. Sec. 1961(4) defines "enterprise" to include "any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity."
RICO requires that the "person" who is employed by or is associated with the related "enterprise" be charged with a predicate offense, id., and that a nexus exist between the "enterprise" and the predicate offense through a pattern of racketeering activity. United States v. Brooklier, 685 F.2d 1208, 1216 (9th Cir.1982). RICO defines "person" as including "any individual or entity capable of holding a legal or beneficial interest in property." 18 U.S.C. Sec. 1961(3).
Assuming that Benny's fraudulent activity constituted a pattern of racketeering activity as that term is defined in the statute, 1 and that Benny conducted the affairs of his sole proprietorship through this pattern and that this conduct caused the injuries upon which the conviction was based, the indictment on count thirty-two was nevertheless sufficient only if the RICO statute provides that a sole proprietorship can be an "enterprise" with which the proprietor can be "associated".
Benny argues that the aforementioned proposition is a tautology: since he was a sole proprietorship he could not simultaneously associate with that sole proprietorship; one cannot associate with oneself any more than one can conspire with oneself. Citing United States v. Mazzei, 700 F.2d 85, 89 (2d Cir.1983) (), Benny concedes that this unworkable syllogism could have been avoided if the government had worded the indictment to charge Benny to be involved with an "association in fact," presumably among the other codefendants. The indictment, however, charged Benny to be associated with the enterprise "George I. Benny." Consequently, Benny argues that count thirty-two of the indictment was insufficient and must be reversed.
County thirty-two (the RICO count) distinguishes between George I. Benny, the enterprise, and George I. Benny, the individual alleged to be associated with the enterprise. It was alleged that "... George I. Benny has been an enterprise as that term is defined in Title 18, United States Code, Section 1961(4)." It was further alleged that "... George I. Benny, Ariel Basse, James S. Urbanski, James A. Fagerhaugh, defendants herein, were employed by, and associated with, George I. Benny, the enterprise." The indictment thus separated defendant Benny, an individual, from the enterprise, an association of four individuals allegedly operating under the name of one of them.
Benny bases his argument on Ninth, Seventh and Fourth Circuit holdings that in a given pattern of racketeering under RICO a corporate defendant cannot also be the related "enterprise." Rae v. Union Bank, 725 F.2d 478, 481 (9th Cir.1984); United States v. DiCaro, 772 F.2d 1314, 1319-20 (7th Cir.1985); Haroco v. American National Bank, 747 F.2d 384, 399-400 (7th Cir.1984), aff'd on other grounds, --- U.S. ----, 105 S.Ct. 3291, 87 L.Ed.2d 437 (1...
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