U.S. v. Celesia

• Decision Date: 25 October 1991
• Docket Number: 91-5002,Nos. 91-5001,s. 91-5001
• Citation: 945 F.2d 756
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Angelo J. CELESIA, Jr., Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. Gilbert E. HOLT, Jr., Defendant-Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 756

945 F.2d 756

UNITED STATES of America, Plaintiff-Appellee, v. Angelo J. CELESIA, Jr., Defendant-Appellant.

UNITED STATES of America, Plaintiff-Appellee, v. Gilbert E. HOLT, Jr., Defendant-Appellant.

Nos. 91-5001, 91-5002.

United States Court of Appeals Fourth Circuit.

Argued June 7, 1991.

Decided Sept. 18, 1991.

As Amended Oct. 25, 1991.

Stanley E. Sacks, Sacks & Sacks, Norfolk, Va., argued, for defendants-appellants.

Alan Mark Salsbury, Asst. U.S. Atty., Norfolk, Va., argued (Henry E. Hudson, U.S. Atty., on brief), for plaintiff-appellee.

Before ERVIN, Chief Judge, HALL, Circuit Judge, and GARBIS, District Judge for the District of Maryland, sitting by designation.

OPINION

ERVIN, Chief Judge:

Angelo J. Celesia, Jr. and Gilbert E. Holt, Jr. appeal from their conviction for bank fraud in violation of 18 U.S.C. § 1344 and for conspiracy to commit bank fraud in violation of 18 U.S.C. § 371. We find that the evidence of record amply supports the district court's finding that Holt and Celesia, by intentionally depositing worthless checks and withdrawing funds thereon, knowingly executed a scheme to defraud a financial institution. We therefore affirm the convictions.

I.

Appellants Celesia and Holt are partners in a construction business operating in eastern Virginia. They wholly own a Virginia corporation known as Signet Enterprises, Ltd. (Signet), which in turn is a component of a Virginia general partnership, Pear Ridge Associates. In addition, Appellants are individual partners in another Virginia general partnership, Southside Meadows Associates.

Appellants maintained a commercial checking account at Investors Savings Bank (ISB) in the name of Signet. Appellants maintained two other separate commercial checking accounts, in the names of Pear Ridge and Southside Meadows, at Trustbank Savings, a federally insured financial institution. In addition, Celesia and Holt each kept personal money market checking accounts with the brokerage firm of Dean Witter Reynolds.

On October 11 and 12, 1989, Appellants deposited eight checks totalling $610,000, drawn on their ISB Signet account, into their Pear Ridge and Southside Meadows accounts at Trustbank. $305,000 was deposited into each of these accounts. Trustbank followed its past practice of granting Appellants' deposits immediate credit, on the basis of their status as construction loan customers of several years' standing. On the same dates, eight checks totalling $610,000, which had been drawn by the appellants on the two Trustbank accounts and deposited by them into the other bank checking accounts which they controlled, were presented to Trustbank for payment. In reliance on what appeared to be a collectable balance of $305,000 in each of the two accounts, Trustbank paid these checks. In the absence of the ISB deposits, the balances in the two Trustbank accounts were grossly insufficient to cover the $610,000 worth of checks written by Appellants.

On October 13, 1989, four of the eight ISB Signet checks totalling $250,000 were presented to ISB for payment. ISB saw that on October 12, six checks totalling $410,008 had been deposited in the Signet account; however, the $410,008 had not cleared the originating accounts on which those checks had been drawn. Normally, ISB allowed Appellants' checks to clear on uncollected funds, a practice the bank followed with certain customers who did a lot of business with the bank. Because of the large amount involved in this transaction, however, ISB attempted to verify that the $410,008 was collectable and drawn on sufficient funds. Without the $410,008, the Signet account balance on October 13 was only $56,246.24.

The October 12 deposit of $410,008 consisted of three checks written on Celesia's personal money market account at Dean Witter totalling $250,000, and three checks, totalling $205,008, written on Holt's money market account with Dean Witter. Upon contacting Dean Witter ISB learned that these checks were not good. ISB further discovered that the six worthless Dean Witter checks had been deposited on the afternoon of October 12 at three different branches of ISB in Virginia Beach, over a ninety-minute period, in an apparent effort to avoid triggering a hold and funds verification that ISB automatically conducted when presented with sizable single deposits.

Armed with this information, ISB dishonored the four checks for $250,000 that Trustbank had presented for payment. ISB notified Celesia on the morning of October 13 that it would dishonor the checks. On Monday, October 16, Celesia directed ISB to stop payment on the eight ISB checks, including the four that ISB had already dishonored. Meanwhile, Appellants took the $610,000 they had obtained when Trustbank paid the eight ISB checks and deposited the funds back into the other checking accounts which they controlled: $360,000 was deposited into Appellants' ISB Signet account, $125,000 into Holt's Dean Witter account, and $125,000 into Celesia's Dean Witter account. As the result of these transactions, Trustbank incurred a loss of $610,000.

Appellants were subsequently indicted in the Eastern District of Virginia at Newport News on one count each of bank fraud in violation of 18 U.S.C. § 1344 and conspiracy to commit bank fraud in violation of 18 U.S.C. § 371. After waiving jury trial, Appellants were tried before the district court, which found them guilty as charged on both counts and sentenced each to an 18-month term of imprisonment on each count, to run concurrently. The court also ordered each defendant to make restitution to Trustbank in the amount of $304,914.55. Celesia and Holt now appeal.

II.

This appeal raises the question of whether check kiting constitutes a violation of the Bank Fraud Statute, 18 U.S.C. § 1344. That statute provides as follows:

Whoever knowingly executes, or attempts to execute a scheme or artifice--

(1) to defraud a financial institution; or

(2) to obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations or promises; shall be fined not more than $1,000,000 or imprisoned not more than 20 years, or both.

18 U.S.C.A. § 1344 (West Supp.1991).

Congress passed the Bank Fraud Statute in 1984, in response to Williams v. United States, 458 U.S. 279, 102 S.Ct. 3088, 73 L.Ed.2d 767 (1982). In Williams the Supreme Court held that check kiting was not a "statement" within the meaning of 18 U.S.C. § 1014 (the bank false statement statute) and therefore did not constitute a violation of that statute. Having determined that check kiting is "one of the most pervasive forms of bank fraud," Congress wished to limit the potential exculpatory reach of Williams. S.Rep. No. 98-225, 98th Cong., 2d Sess. 377, reprinted in 1984 U.S.Code Cong. & Admin.News 3182, 3517-19.

Since the enactment of the Bank Fraud Statute several courts, citing Williams, have nevertheless refused to find that passing worthless checks constitutes a "false representation" for purposes of Section 1344(2). United States v. Falcone, 934 F.2d 1528, 1540 (11th Cir.1991); United States v. Medeles, 916 F.2d 195, 200 (5th Cir.1990); United States v. Cronic, 900 F.2d 1511, 1516 (10th Cir.1990) (all holding that mere depositing of a check, without other acts or communications, is not a representation that bank account on which it was drawn has sufficient balance to cover check). Nevertheless, the courts have construed Section 1344's provisions disjunctively, so that one may commit a bank fraud under Section 1344(1) by defrauding a financial institution, without making the false or fraudulent promises required by Section 1344(2). Thus, an indictment which, like the one in the present case, tracks the language of both provisions is not dependent on proof of the (2) elements. United States v. Schwartz, 899 F.2d 243, 246-47 (3d Cir.), cert. denied, --- U.S. ----, 111 S.Ct. 259, 112 L.Ed.2d 217 (1990); see also Medeles, supra, 916 F.2d at 197 (reversing conviction under Section 1344(2) where indictment did not allege violation of Section 1344(1)). We join those courts of appeal which have held that check kiting can constitute a "scheme or artifice to defraud" in violation of Section 1344(1). Schwartz, supra, 899 F.2d at 246; United States v. Bonnett, 877 F.2d 1450, 1454 (10th Cir.1989). See also Falcone, supra, 934 F.2d at 1540 n. 30; United States v. Rafsky, 803 F.2d 105, 107 n. 1 (3d Cir.1986), cert. denied, 480 U.S. 931, 107 S.Ct. 1568, 94 L.Ed.2d 760 (1987)....