U.S. v. Gilberg

• Decision Date: 09 November 1995
• Docket Number: No. 95-1586,95-1586
• Parties: UNITED STATES of America, Plaintiff, Appellee, v. Gary S. GILBERG, Defendant, Appellant. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 15

75 F.3d 15

UNITED STATES of America, Plaintiff, Appellee, v. Gary S. GILBERG, Defendant, Appellant.

No. 95-1586.

United States Court of Appeals First Circuit.

Heard Nov. 9, 1995.

Decided Jan. 31, 1996.

Gary C. Crossen, with whom Toni G. Wolfman, Mark D. Rosen, Cindy M. Lott and Foley, Hoag & Eliot, Boston, MA, were on brief, for appellant.

Wan J. Kim, Attorney, Department of Justice, Washington, DC, with whom Donald K. Stern, United States Attorney, Boston, MA, Mark D. Seltzer, Acting Director, New England Bank Fraud Task Force, and James P. Gillis, Washington, DC, Trial Attorney, New England Bank Fraud Task Force, were on brief, for appellee.

Before SELYA, CYR and STAHL, Circuit Judges.

CYR, Circuit Judge.

Defendant Gary S. Gilberg challenges several district court rulings relating to his trial and sentencing for conspiring to make, and making, false statements to financial institutions in order to procure mortgage loan financing, see 18 U.S.C. §§ 371 & 1014. We affirm all but the restitutionary sentence.

I BACKGROUND

During the 1980s, after borrowing almost $5 million which he agreed to repay from future condominium sale proceeds, Gilberg launched Chancery Court, a forty-unit condominium project in Lynn, Massachusetts. Condominium sales did not proceed apace, however, and Gilberg decided to lure prospective buyers by promising to obtain 100% mortgage financing for them, obviating the need for down payments. To this end, Gilberg would inflate the purchase price stated on the sales agreement which he submitted to the bank in support of the buyer's mortgage loan application. A so-called "amended" sales agreement, containing the true purchase price, would be retained in Gilberg's private files, and the buyer was told not to mention the "amendment" to the bank. On other occasions, Gilberg provided prospective buyers with second mortgage financing, which he concealed from the first-mortgage lenders by instructing his attorney not to record the second mortgages, or to record them late. Gilberg attended each loan closing, personally signing HUD-1 settlement statements which he knew to contain false information. These means enabled Gilberg to sell thirty-seven condominium units, which were financed through various banks.

In August 1993, Gilberg was indicted in one count for conspiring to make false statements on twenty-one loan applications to three FDIC-insured financial institutions, see 18 U.S.C. § 371, and in thirteen counts for making false statements to FDIC-insured institutions, see id. § 1014. Several condominium buyers, as well as Gilberg's attorney, testified that Gilberg originated and orchestrated the scheme. The jury convicted on all counts and the district court sentenced Gilberg to thirty-six months' imprisonment and ordered $3,635,000 in restitution.

II DISCUSSION

A. The Trial Related Rulings

1. "Good faith" Jury Instruction

Gilberg first contends that the final jury instruction misdefined the mens rea element in 18 U.S.C. § 1014, which criminalizes "knowingly mak[ing] any false statement or report ... for the purpose of influencing in any way the action of ... any [FDIC-insured bank] ... upon any application, advance, ... commitment, or loan." (Emphasis added.) Gilberg argues that section 1014 affords a "good faith" defense where the defendant knew the statement or report contained false information but acted without the "bad" purpose to influence the bank's actions. He proffered evidence that he knew and believed, at the time of the various loan applications, that the prevailing banking practice was to approve or disapprove applications based solely on the appraised value of the real property securing the loan, rather than on whether the real estate sale itself involved price "discounts" or secondary mortgage financing. Thus, Gilberg argues, the district court hobbled his defense by instructing the jury that "a defendant does not act in good faith even if he honestly holds a particular opinion or belief and, yet, knowingly makes false and fraudulent statements or misrepresentations."

Gilberg concededly raised no objection to the jury instruction. See Fed.R.Crim.P. 51. Consequently, we review for plain error, see Fed.R.Crim.P. 52(b), and may reverse only if (i) the final jury instruction constituted error (ii) which was or should have been "obvious" in the sense that the governing law was clearly settled to the contrary, and (iii) appellant proves that the error resulted in "prejudice," or in other words, that it affected his substantial rights. See United States v. Hurley, 63 F.3d 1, 9 (1st Cir.1995) (citing United States v. Olano, 507 U.S. 725, 732-34, 113 S.Ct. 1770, 1777, 123 L.Ed.2d 508 (1993)). Even if these three criteria are met, however, we do not "notice the error unless it caused 'a miscarriage of justice' or [seriously] undermined 'the integrity or public reputation of judicial proceedings.' " Id. (citations omitted).

Though the statutory interpretation posited by Gilberg is dubious at best, cf., e.g., United States v. Wilcox, 919 F.2d 109, 112 (9th Cir.1990) ("The requisite intent [under § 1014] is the intent to influence an action, and nothing more."), we do not reach the merits. Gilberg cites to no authority--let alone to a controlling United States Supreme Court or First Circuit decision--clearly holding that the "good faith" instruction given below contained an erroneous statement of the mens rea requirement under section 1014. See Olano, 507 U.S. at 732-34, 113 S.Ct. at 1777 ("At a minimum, the Court of Appeals cannot correct an error pursuant to Rule 52(b) unless the error is clear under current law.") (emphasis added). ¹ Hence, any error in the challenged instruction was neither "obvious," nor cognizable under Criminal Rule 52(b).

2. Motion in Limine

Gilberg next assigns error in the district court order precluding evidence that the defrauded banks had relied exclusively on property appraisals in determining whether to approve loan applications, and not on the apparent absence of "discounts" and second mortgage financing. He claims that this ruling prejudiced him because the excluded evidence would have bolstered his "good faith" defense. See supra Section II.A.1. ²

Once again we review for plain error, since Gilberg first raised this claim on appeal. See Hurley, 63 F.3d at 9. As there was no plain error in rejecting the "good faith" defense instruction, a fortiori there can have been no plain error in excluding evidence offered in support. Furthermore, given Gilberg's concession that a representative sampling of this "good faith" evidence was admitted at trial, he has failed to demonstrate "prejudice." Olano, 507 U.S. at 1778-79, 113 S.Ct. at 1778 (noting that, unlike Rule 52(a), Rule 52(b) provides that "the defendant rather than the Government ... bears the burden of persuasion with respect to prejudice") (emphasis added).

B. The Sentencing Rulings

1. Amount of Loss (U.S.S.G. § 2F1.1)

Gilberg contends that the district court committed three errors in calculating the amount of loss under the then-applicable version of U.S.S.G. § 2F1.1, and that the combined effect of its miscalculations ballooned the total loss from $1-2 million to the $2-5 million range, which in turn led the court to make a ten-level (rather than a nine-level) upward adjustment in his base offense level of six. ³

First, Gilberg argues that the loss calculation should not have included $726,637 in accrued mortgage loan interest. See U.S.S.G. § 2F1.1, comment. (n. 7) (excluding from the loss calculation the "interest the victim could have earned"); United States v. Hoyle, 33 F.3d 415, 419 (4th Cir.1994). But the settled law in this circuit is to the contrary. See United States v. Goodchild, 25 F.3d 55, 65-66 (1st Cir.1994) (holding that accrued finance charges on credit cards are not lost "opportunity costs," and may be included in amount of loss) (citing United States v. Lowder, 5 F.3d 467, 471 (10th Cir.1993)). Gilberg's attempt to distinguish Goodchild is unavailing. As the Goodchild panel's citation to Lowder and other authority makes clear, we have found no principled difference between interest earned on a credit card (a/k/a "finance charges") and interest earned on other types of loans. See Hurley, 63 F.3d at 9 (noting that newly-constituted panels are bound by a prior panel decision on point). Since it was proper to include the $726,637 in interest as part of the loss, the other loss calculation errors raised on appeal need not be addressed because the unimpeachable loss totalled no less than $2,669,065, well within the $2-5 million range necessary to trigger a ten-level upward adjustment.

2. The "Role in Offense" Enhancement

Gilberg challenges the four-level upward adjustment based on his role in the offense, see U.S.S.G. § 3B1.1, contending that the government improperly singled him out for prosecution by cutting deals with the real "leaders" of the Chancery Court scheme--his attorney and a business partner. Second, he complains that the district court failed to make express findings of fact regarding the comparative responsibilities of the participants in the scheme. We review for "clear error," see United States v. Akitoye, 923 F.2d 221, 227 (1st Cir.1991), mindful that "battles over a defendant's [role in the offense] ... will almost always be won or lost in the district court," United States v. Graciani, 61 F.3d 70, 75 (1st Cir.1995). Gilberg's case is no exception.

Gilberg concedes that the evidence could support a rational inference that he orchestrated the criminal conduct alleged in the indictment. The evidence disclosed that he was a sophisticated real estate developer who supplied false purchase prices to his attorney, instructed his attorney and prospective buyers to conceal his false statements, and secreted the documentation containing the actual terms. Gilberg cites no authority--nor is there any--for the proposition that a sentencing court must...