U.S. v. Davis

• Decision Date: 22 January 1992
• Docket Number: Nos. 89-8051,89-8052,90-8057,90-8058,s. 89-8051
• Citation: 953 F.2d 1482
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Don C. DAVIS, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. Daniel M. BURKE, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1482

953 F.2d 1482

UNITED STATES of America, Plaintiff-Appellee, v. Don C. DAVIS, Defendant-Appellant.

UNITED STATES of America, Plaintiff-Appellee, v. Daniel M. BURKE, Defendant-Appellant.

Nos. 89-8051, 89-8052, 90-8057, 90-8058.

United States Court of Appeals, Tenth Circuit.

Jan. 22, 1992.

Todd L. Vriesman (John A. Sbarbaro with him on the brief) of Kirkland & Ellis, Denver, Colo., for defendant-appellant Don C. Davis.

E. James Burke and Rhonda S. Woodard, of Burke, Woodard & Bishop, P.C., Cheyenne, Wyo., for defendant-appellant Daniel M. Burke.

Francis Leland Pico, Asst. U.S. Atty. (Richard A. Stacy, U.S. Atty., & David A. Kubichek with him on the brief), Cheyenne, Wyo., for plaintiff-appellee.

Before ANDERSON, BALDOCK and EBEL, Circuit Judges.

BALDOCK, Circuit Judge.

This case involves the theft of federally insured deposits through a series of complicated financial transactions involving collusion, deception, self-dealing and conflict of interest. Defendants Don C. Davis and Daniel M. Burke diverted or misapplied millions of dollars at the expense of several banks and savings and loan institutions, and ultimately the United States treasury. ¹ The fraud required false representations to, and the concealing of important information from, bank examiners, bank directors and bank officers.

By superseding indictment, both defendants were charged with one count of conspiracy to commit offenses against and to defraud the United States (count 1), 18 U.S.C. § 371; nine counts of wire fraud (counts 2-10), 18 U.S.C. § 1343; five counts of misapplying federally insured funds (counts 11-14, 16), 18 U.S.C. § 657; three counts of making false entries in bank books and records or unlawful receipt of benefits (counts 15, 20 & 21), 18 U.S.C. § 1006. Davis also was charged in two counts of overvaluing security and making false statements (counts 18 & 19), 18 U.S.C. § 1014. After a ten-week trial in which the trial judge displayed consummate patience, the jury convicted Davis on fourteen counts including the conspiracy count (count 1), five counts of wire fraud (counts 3-6, 9), four counts of misapplying federally insured funds (counts 11-13, 16), two counts of aiding and abetting false entries (counts 15 & 21), one count of aiding and abetting in the unlawful receipt of benefits (count 20), and one count of overvaluing security (count 18). The jury convicted Burke on eleven counts, including the conspiracy count (count 1), three counts of wire fraud (counts 4-6), four counts of misapplying federally insured funds (counts 11, 12, 14 & 16) two counts of making false entries (count 15 & 21) and one count of unlawfully receiving benefits (count 20). The district court, for these pre-Sentencing Guidelines offenses, sentenced Davis to six years imprisonment and Burke to four years. These appeals followed.

After submission of these appeals, we affirmed the imposition of civil monetary penalties against defendants based on violations of cease and desist orders of the Federal Reserve Board. Burke v. Board of Governors, 940 F.2d 1360 (10th Cir.1991). Burke died on December 6, 1991. Thereafter, the government filed a suggestion of death. Burke's counsel, on behalf of the family, opposed dismissal, seeking an appellate decision on the merits. We respect the wishes of the family, but the law provides a more advantageous resolution: "death pending direct review of a criminal conviction abates not only the appeal but also all proceedings had in the prosecution from its inception." See Durham v. United States, 401 U.S. 481, 483, 91 S.Ct. 858, 860, 28 L.Ed.2d 200 (1971) (per curiam) (footnote omitted), overruled on other grounds, Dove v. United States, 423 U.S. 325, 96 S.Ct. 579, 46 L.Ed.2d 531 (1976) (per curiam) (eliminating Durham rule for petitions for certiorari, but not for appeals of right). See also United States v. Williams, 874 F.2d 968, 970 (5th Cir.1989); United States v. Schumann, 861 F.2d 1234, 1236 (11th Cir.1988); United States v. Mollica, 849 F.2d 723, 725-26 (2d Cir.1988); United States v. Littlefield, 594 F.2d 682, 683 (8th Cir.1979); United States v. Bechtel, 547 F.2d 1379, 1380 (9th Cir.1977). Accordingly, as to Burke, we shall dismiss his appeal and remand the criminal judgment against him to the district court with instructions to vacate the judgment and dismiss the underlying indictment. See Id.

I.

The government's case involved five transactions. We briefly outline these transactions before reaching the merits of Davis's appeal.

A. Acquisition of FNBE

The first transaction involved the acquisition of the First National Bank of Evanston, Wyoming ^BE by EVCO, Inc., a bank holding company, by a group of investors. Defendants Burke, Davis and Edmiston, see supra n. 1, first sought to acquire FNBE in 1982. All were well connected with other federally insured financial institutions. Davis was a major stockholder, board chairman and president of the Stockgrower's State Bank Company (SSBC), the bank holding company which owned Stockgrower's State Bank (SSB). Likewise, Edmiston was a stockholder and board member of SSBC. Burke was a board member of Guaranty Federal Bank (GFB).

Ultimately, the Federal Reserve Bank approved a $10 million acquisition of FNBE by a different investor group (the Burke group) with no more than a 3:1 debt-to-equity ratio ($7.5 million of debt) and no involvement of Davis and coinvestor Robert L. Anderson. Based on a series of false representations by Davis and Burke, however, the acquisition was financed for $12.5 million by Omaha National Bank, SSB, GFB and Provident Federal Bank. With the assistance of Burke, Davis directed the wire transfer of over $2 million for uses unrelated to the acquisition of FNBE. A total of $3.1 million of the acquisition funding was diverted to Davis and Anderson.

B. GFB Purchase of Bank Holding Company Securities

GFB, and its wholly owned subsidiary Powder River Service Corp. (PRSC), purchased $1.5 million in subordinated debentures and $1 million in preferred stock issued by EVCO and another bank holding company, SSBC. Burke and Davis exercised control of GFB as part of a group which had majority stock ownership. While Burke served as a director, Davis frequently gave financial advice to the board and attended several GFB board meetings. Burke and Davis were instrumental in persuading GFB's president, Tom Hogan, to purchase these securities. See X Tr. 60. The proceeds were to enable EVCO and SSBC to activate Wyoming Financial Services (WFS), a recently formed corporation. In reality, WFS served as a conduit to funnel approximately $701,000 to Davis and $54,000 to Burke. See XII Tr. 100-11.

C. Elkhorn Land Deal

In May 1984, a limited partnership, in which PRSC had an 84% interest, purchased land owned by the Elkhorn Land and Livestock Company. Burke and Davis persuaded the GFB Board to fund PRSC's participation in the amount of $1.65 million, with the understanding that the proceeds would be used to pay existing indebtedness on the land. Only $1.15 million was used for that purpose; Davis received the remaining $500,000 as a secret commission. Several months later, Burke and Davis had GFB's attorney prepare a "clarifying" minute entry indicating that the commission had been authorized by the GFB board when, in fact, it had not. See Pl. ex. 914; VIII R.S. 19. Although Burke abstained from the vote on the amendment, he and Davis took steps leading to its preparation. GFB executive vice-president Mike Brown approved the amendment only because he did not want to be fired. XXXII Tr. 31. ²

D. Dakota Minerals Deal

Burke and Davis agreed to purchase stock in Dakota Minerals, Inc. (Dakota) and initially secure a $1.75 million loan for Dakota. Dakota would pay a future fee of $4 million and grant stock options to Burke and Davis for their assistance in securing additional financing. At a GFB board meeting in June 1984, Burke and Davis advocated a $1.75 million loan to Dakota and Burke voted in favor of it, all without mention of their personal interest in the loan. The agreement between Davis, Burke and Dakota, though partially performed, was never executed. Davis and Burke expressed apprehension about signing the agreement when bank examiners were examining GFB.

E. GFB Loan to Tired Iron, Inc.

The final transaction concerned GFB's $650,000 loan to Tired Iron, a company owned by Davis. Davis agreed to provide an itemized list of collateral (aircraft parts, supplies and tools) with a value of $893,000 to secure the note. Pl. ex. 739, 747 & 751. Almost a year later, Davis provided the list which appraised the collateral at $1.45 million. Pl. ex. 752. The appraisal was done by Jay Johnson at the request and direction of Davis. Johnson had seen the parts one or two years previously, but did not inspect the inventory at the time he provided his estimate of a retail value of $1.45 million. The evidence tended to show that the parts were worth a maximum of $425,000 at retail and $170,000 at wholesale; a more realistic figure was $50,000 to $60,000, given a quick sale. Pl. ex. 754; XXXIII Tr. 42-110.

II.

Defendant Davis first argues that his convictions under 18 U.S.C. § 657 and § 1006 are invalid because the trial evidence did not establish an essential element of those offenses, namely that Davis was an officer, agent or employee of a federally insured institution. "[T]he relevant question is whether, after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt." Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 2789, 61 L.Ed.2d 560 (1979).

Under § 657, it is unlawful for a person who is "an officer, agent or employee of or connected in any capacity with" an insured institution to willfully misapply funds belonging to the institution. Likewise, under § 1006, it is unlawful for "an officer, agent or employee of or connected in any...