U.S. v. Bonnett, 88-1723

Citation877 F.2d 1450
Decision Date07 June 1989
Docket NumberNo. 88-1723,88-1723
Parties28 Fed. R. Evid. Serv. 414 UNITED STATES of America, Plaintiff-Appellee, v. Bruce BONNETT, Defendant-Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (10th Circuit)

Kenneth P. Snoke, Asst. U.S. Atty. (Tony M. Graham, U.S. Atty., Ron Wallace, and Susan W. Pennington, Asst. U.S. Attys., with him on the briefs), Tulsa, Okl., for plaintiff-appellee.

Stephen Jones of Jones, Bryant & Nigh, Enid, Okl., for defendant-appellant.

Before SEYMOUR, BARRETT and BRORBY, Circuit Judges.

BRORBY, Circuit Judge.

Bruce Bonnett appeals his conviction of one count of conspiracy to violate 18 U.S.C. Sec. 1344 (Supp. II 1984) in violation of 18 U.S.C. Sec. 371 (1982), and fifty-six counts of bank fraud in violation of 18 U.S.C. Sec. 1344 (Supp. II 1984). We AFFIRM.

Facts

The First National Bank of Sapulpa, Oklahoma, (Bank) was chartered and opened in 1982. In May 1984, Mr. Bonnett purchased approximately five percent of the capital stock of Bank and began purchasing certificates of deposit eventually totalling $750,000. When Mr. Bonnett first purchased certificates of deposit he came into Bank with a briefcase containing approximately $160,000 in cash and purchased sixteen certificates of deposit, each for just under $10,000.

Between September 1984 and January 1985, co-defendant Lester Dierksen opened checking accounts in eleven different banks located in three states. Mr. Dierksen usually opened new accounts immediately following the closure of the existing account by the bank which had the old account. He opened each of these accounts with an initial deposit and, with one exception, made no subsequent deposits. The initial deposit of all eleven accounts totaled just under $9,000. The first of these accounts was opened in Vernon, Texas, with a deposit of $4,000; $2,500 thereof was furnished by Mr. Bonnett. The same day this account was opened, Mr. Dierksen gave Mr. Bonnett a check drawn on this account in the amount of $102,500, which Mr. Bonnett deposited in his account in Sapulpa on September 22. Between September 17 and October 23, Mr. Dierksen gave to Mr. Bonnett checks for $770,200 drawn on this account, all of which Mr. Bonnett deposited in his account in Sapulpa. The bank in Vernon, Texas returned these checks for lack of sufficient funds in Mr. Dierksen's account and then closed Mr. Dierksen's account. Subsequently, Mr. Dierksen opened ten more accounts in as many banks, with a nominal initial cash deposit usually ranging from $150 to $400. Simultaneously with the opening of these accounts, Mr. Dierksen wrote checks drawn upon each of these accounts to Mr. Bonnett for five and six figures, which Mr. Bonnett deposited in his account in Sapulpa.

Co-defendant Carroll G. Bernard was the Chairman of the Board and Chief Executive Officer of Bank, and co-defendant Katherine Joanne Voigt, who was Mr. Bernard's sister-in-law, was the Cashier. When Mr. Bonnett deposited the Dierksen checks into his account with Bank, through the actions of Mr. Bernard, Bank gave him immediate credit for the uncollected funds. Mr. Bonnett immediately wrote checks on his account, and Bank honored them upon presentment. When various banks returned the Dierksen checks for insufficient funds, Mr. Bernard and Ms. Voigt sent the checks back for collection a second time. The payor bank would refuse to accept the check for collection a third time. On occasion, Ms. Voigt held Mr. Bonnett's checks in her drawer for a few days until his account balance was sufficiently high to allow the checks to be processed. When a Dierksen check was finally acknowledged by Bank as being insufficient, Mr. Bernard or Ms. Voigt telephoned Mr. Bonnett who promptly replaced the dishonored Dierksen check with yet another Dierksen check. The result was that Mr. Bonnett's account balances were continually shown on the books of Bank with an artificially high balance. This, in turn, allowed Mr. Bonnett the interest-free use of the depositors' monies and allowed both Bank and Mr. Bonnett to exceed Bank's lending limit. The Dierksen checks subsequently totaled in excess of three million dollars. These transactions formed the bases for counts 2 through 47.

The remaining ten counts charged Mr. Bonnett and Mr. Bernard with participating in acts to enable various persons to obtain loans from Bank, when in fact all loan proceeds went directly to Mr. Bonnett, thus circumventing the lending limits of Bank and of Bank's board of directors that Mr. Bonnett was to obtain no loans without the prior approval of the directors. The acts giving rise to these charges were contained in counts 48 through 57.

I.

Mr. Bonnett first contends that in light of Williams v. United States, 458 U.S. 279, 102 S.Ct. 3088, 73 L.Ed.2d 767 (1982), counts 2 through 47, the counts based on the Dierksen checks, cannot stand. Mr. Bonnett asserts that the indictment and proof charged the defendant with bank fraud by presenting a series of insufficient funds checks and obtaining credit thereon based upon the implied representation that the checks were backed by sufficient funds. We disagree with Mr. Bonnett's interpretation of the government's theory and hold that neither the indictment nor the proof was based upon an implied representation that Mr. Dierksen had adequate funds to pay the checks, but rather was based upon the defendants' deceptive practices in their use of the worthless checks. Consequently, Williams does not apply to defeat the convictions herein.

The statute which forms the basis of counts 2 through 47, 18 U.S.C. Sec. 1344, reads in pertinent part as follows:

(a) Whoever knowingly executes ... a scheme or artifice--

(1) to defraud a federally ... insured financial institution; or

(2) to obtain any of the moneys, funds, credits, ... or other property ... of a federally ... insured financial institution by means of false or fraudulent pretenses, representations, or promises shall be....

(Emphasis added.)

The plain language of 18 U.S.C. Sec. 1344 sets forth two distinct crimes concerning federally insured financial institutions. Each crime requires a defendant first to knowingly execute a scheme or artifice. To convict a defendant of a crime under subsection (1), the government would have to prove the scheme defrauded the financial institution. To convict a defendant under subsection (2), the government would have to prove the scheme enabled the defendant to obtain certain property "by means of false or fraudulent pretenses representations or promises," (emphasis added).

The superseding indictment charged Mr. Bonnett with violating both subsections of the statute; defrauding Bank and obtaining property by making of false pretenses, representations, or promises. The trial court, however, instructed the jury that to convict Mr. Bonnett, they had to find a scheme to defraud or to obtain property from Bank by means of false or fraudulent pretenses, representations, or promises. The jury returned its verdict finding Mr. Bonnett guilty on all counts. Because the jury could have convicted under either prong of the statute, we must examine the legal applicability of both to the facts presented here.

A. The Scheme to Defraud

We must first address whether passing a series of worthless checks can constitute a scheme to defraud in violation of 18 U.S.C. Sec. 1344(a)(1). We review this issue under the non-deferential de novo standard of review, United States v. Ortiz, 804 F.2d 1161, 1164 (10th Cir.1986), and hold that it does.

We begin our analysis by examining Williams v. United States, 458 U.S. 279, 102 S.Ct. 3088, 73 L.Ed.2d 767 (1982). In Williams, a bank president engaged in a series of transactions seemingly amounting to "check kiting" between his accounts in federally insured banks, first drawing a check far in excess of his account balance in one bank and depositing it in his account in the other, and then reversing the process between his accounts. He was charged with two counts of 18 U.S.C. Sec. 1014 (1982), for "knowingly mak[ing] any false statement or report, or willfully overvalu[ing] any ... security, for the purpose of influencing in any way the action of" a federally insured bank. Williams, 458 U.S. at 282, 102 S.Ct. at 3090. In reversing the appellate court, the Supreme Court held that the deposit of a check backed by insufficient funds did not constitute the making of a false statement. "[T]echnically speaking, a check is not a factual statement at all, and therefore cannot be characterized as 'true' or 'false.' " Id. at 284, 102 S.Ct. at 3091.

In so holding, the court stated that it believed Congress did not intend to make "a surprisingly broad range of unremarkable conduct" a violation of federal law. Id. at 286, 102 S.Ct. at 3092. The Supreme Court analyzed the legislative history of the statute and concluded that it was designed primarily to apply to borrowers. Most importantly, the Court distinguished a single insufficient funds check from a scheme involving the passing of a series of bad checks:

Under the Court of Appeals' approach, the violation of Sec. 1014 is not the scheme to pass a number of bad checks; it is the presentation of one false statement--that is, one check ... at the moment of deposit....

Id. at 286, 102 S.Ct. at 3092-93. In our view, Williams does not apply to the instant case, wherein the conduct involved a massive scheme to defraud.

Our conclusion is supported by the legislative history of 18 U.S.C. Sec. 1344. Congress passed this general bank fraud provision in response to Williams and other Supreme Court decisions narrowing the applicability of then-existing bank fraud statutes. The Senate report thus states:

Recent Supreme Court decisions have underscored the fact that serious gaps now exist in Federal jurisdiction over frauds against banks and other credit institutions which are organized or operated under Federal law or whose deposits are federally insured.

S.Rep. No. 98-225, 98th Cong, 2d Sess....

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