U.S. v. Greene

• Decision Date: 12 January 1989
• Docket Number: No. 88-3106,88-3106
• Citation: 862 F.2d 1512
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Thomas H. GREENE, Defendant-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1512

862 F.2d 1512

UNITED STATES of America, Plaintiff-Appellee, v. Thomas H. GREENE, Defendant-Appellant.

No. 88-3106.

United States Court of Appeals, Eleventh Circuit.

Jan. 12, 1989.

Robert P. Smith, Jr., Tallahassee, Fla., for defendant-appellant.

Curtis Fallgatter, Asst. U.S. Atty., Jacksonville, Fla., for plaintiff-appellee.

Appeal from the United States District Court for the Middle District of Florida.

Before HILL and JOHNSON, Circuit Judges, and NICHOLS, ^* Senior Circuit Judge.

JOHNSON, Circuit Judge:

Thomas Greene appeals his conviction after a jury trial on four counts of making false statements to influence a federally insured bank in violation of 18 U.S.C.A. Sec. 1014. We affirm.

I. FACTS

Greene was convicted on three counts of violating 18 U.S.C.A. Sec. 1014 by misrepresenting his net worth and ability to pay to a Florida bank in order to obtain the favorable settlement of a judgment debt which stemmed from a defaulted loan. Greene was also convicted on a fourth count of making false statements on a loan application to a New York bank in violation of 18 U.S.C.A. Sec. 1014. ¹ Greene failed on a motion to have Counts 1-3 dismissed as not within the scope of section 1014. After a prolonged jury trial, he was convicted on all four counts and was sentenced to three concurrent terms of two years on Counts 1-3, and one term of two years on Count 4 to be served consecutively with the sentences imposed for Counts 1-3.

II. DISCUSSION

A. Counts 1-3: The Scope of Section 1014

Greene was indicted under 18 U.S.C.A. Sec. 1014, which states:

Loan and credit applications generally; renewals and discounts; crop insurance

Whoever knowingly makes any false statement or report, or willfully overvalues any land, property or security, for the purpose of influencing in any way the action of ... any bank the deposits of which are insured by the Federal Deposit Insurance Corporation ... upon any application, advance, discount, purchase, purchase agreement, repurchase agreement, commitment, or loan, or any change or extension of any of the same, by renewal, acceptance, release, or substitution of security therefor, shall be fined not more than $5,000 or imprisoned not more than two years, or both.

(emphasis added) The indictment charged that Greene "knowingly and willfully did make materially false statements in connection with a request and application to settle an outstanding judgment of $123,413.58 obtained by Flagship Bank." The judge charged the jury that "[f]alse statements to a federally insured bank during negotiations to settle a judgment can constitute a crime under 18 U.S.C. Section 1014." The issue on appeal is whether section 1014 covers Greene's conduct.

Nearly every case construing section 1014 involves misstatements made in applications to obtain loans. See, e.g., United States v. Wuagneux, 683 F.2d 1343, 1360 (11th Cir.1982), cert. denied, 464 U.S. 814, 104 S.Ct. 69, 78 L.Ed.2d 83 (1983). The false statements made by Greene occurred well after the loan was applied for, issued, and defaulted. He did not lie to the bank until settlement negotiations had begun on the judgment debt arising from the loan. Some guidance as to whether Greene's conduct came within the proper scope of section 1014 can be found in Williams v. United States, 458 U.S. 279, 102 S.Ct. 3088, 73 L.Ed.2d 767 (1982), where the Court considered whether writing bad checks as part of a check-kiting scheme violated section 1014. The Court held such conduct was not within the scope of section 1014 because a bad check was not a "false statement" made to a bank. Significantly, the Court did not limit the reach of section 1014 to loan applications. It spoke in terms of "representations made in connection with conventional loan or related transactions." Id. at 288-89, 102 S.Ct. at 3093-94 (emphasis added). The government in this case argues that Greene's request to settle his judgment debt was a "related transaction," or that his participation in the settlement negotiations, including the misrepresentations of his net worth, constituted an "application." ²

Greene claims that section 1014 by its terms does not reach so far. If Congress had wanted to prohibit all misstatements to banks, it could have done so. ³ Greene also relies on Williams, which explains that:

To obtain a conviction under Sec. 1014, the Government must establish two propositions: it must demonstrate (1) that the defendant made a "false statement or report," or "willfully overvalue[d] any land, property or security," and (2) that he did so "for the purpose of influencing in any way the action of [a described financial institution] upon any application, advance, ... commitment, or loan."

458 U.S. at 284, 102 S.Ct. at 3091. Greene reads this formulation of the elements of a section 1014 offense to preclude his conviction for any misrepresentations except those made on a loan application. Because section 1014 does not clearly prohibit his conduct, Greene argues, any interpretation which would encompass his conduct in effect establishes a new offense.

Greene finds support in the familiar principle that "[t]here are no constructive offenses; and before one can be punished it must be shown that his case is plainly within the statute." McNally v. United States, 483 U.S. 350, 107 S.Ct. 2875, 2881, 97 L.Ed.2d 292 (1987) (mail fraud statute does not prohibit schemes to defraud people of right to impartial government) (quoting Fasulo v. United States, 272 U.S. 620, 47 S.Ct. 200, 71 L.Ed. 443 (1926)). Greene is absolutely correct in stating that a court may not rely wholly on the spirit, rather than the language, of a criminal statute to uphold a conviction. See United States v. Resnick, 299 U.S. 207, 57 S.Ct. 126, 81 L.Ed. 127 (1936) (statute prohibiting deviation from exact bushel standard in numerous sizes of hampers not violated when defendant deviated by using a size hamper not expressly listed). Greene relies heavily on Resnick. In Resnick, the spirit of the Standard Container Act was violated, but its express provisions were not. Greene's fraud easily falls within the spirit of section 1014, but, he claims, his misconduct is not expressly prohibited by the statute.

In denying Greene's motion to dismiss the indictment, the district court held that because intentional misstatements made in applying for a loan are prohibited by section 1014, it would be illogical to find that intentional misstatements made in the course of settling a defaulted loan reduced to judgment would not be covered. The court concluded that the settlement negotiations must be "related transactions" under Williams. The case law supports this conclusion. In United States v. Gardner, 681 F.2d 733 (11th Cir.1982) (per curiam), this Court held that section 1014 may be violated even when the false statements are made after the loan has issued. The defendant in Gardner took out a loan. When he defaulted on the loan, the bank filed suit. At that point, he induced the bank "to defer the civil action by assigning to the bank his interest in accounts receivable based on fictitious invoices." Id. at 733. The Court found these misrepresentations to be within the scope of section 1014. Although the bank in Gardner had not yet reduced the defaulted loan to judgment, the case is quite similar to the one presently before the Court. There is no logical basis for a distinction between making misstatements to a bank to delay litigation and making misstatements to obtain a favorable settlement after judgment. ⁴ See United States v. Baity, 489 F.2d 256, 257 (5th Cir.1973) (false documents submitted after loan approval fell within section 1014); accord United States v. Kindig, 854 F.2d 703, 706 (5th Cir.1988).

Section 1014 prohibits fraud perpetrated in credit transactions with federally insured banks. Greene's settlement negotiations arose from loan transactions with a federally insured bank and were therefore part of a credit transaction within the purview of section 1014. Consequently, we affirm the district court's denial of Greene's motion to dismiss and affirm his conviction on the first three counts of the indictment.

B. Count 4: Venue

Count 4 was also brought under 18 U.S.C.A. Sec. 1014, but alleged a different transaction. Greene wanted to invest in a tax shelter being set up by a certain Mr. Erber. Greene, however, lacked sufficient funds to participate. In order to raise those funds, Greene submitted a fraudulent loan application to Erber's bank in New York, Peoples Bank. Peoples Bank wisely rejected Greene's application, and Erber took the application to another New York bank, Marine Midland, which accepted it.

Greene argues that venue was improper in the Middle District of Florida. Venue is proper in section 1014 cases "in the district where the false statement is prepared and mailed, or where the statement is received." Wuagneux, 683 F.2d at 1356. Greene admits venue would be proper in New York, where Erber received the false statement. Greene argues that venue was improper in Florida because, although he prepared the loan application in the Middle District of Florida, he never mailed the loan application to Marine Midland. ⁵ This Court in Wuagneux sidestepped the issue of whether mailing was a necessary prerequisite to proper venue in a district where fraudulent documents were prepared. Id. at 1357 (avoiding question of whether "preparation and execution alone would be insufficient" by finding sufficient evidence of mailing). In the present case, we must confront the mailing issue directly, because it is undisputed that Greene did not mail the application to Marine Midland Bank.

The reasoning of the Court in Wuagneux indicates that venue is proper in Florida even if Greene did not mail the application directly to Marine Midland. The Court held that section 1014 cases should be governed by the same "general rule of venue" as cases brought under 18 U.S.C.A. Sec. 1001. ⁶ This Court recently...