U.S. v. Harenberg, 82-1851

• Decision Date: 30 April 1984
• Docket Number: No. 82-1851,82-1851
• Citation: 732 F.2d 1507
• Parties: 15 Fed. R. Evid. Serv. 1502 UNITED STATES of America, Plaintiff-Appellee, v. Henry C. HARENBERG, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1507

732 F.2d 1507

15 Fed. R. Evid. Serv. 1502

UNITED STATES of America, Plaintiff-Appellee, v. Henry C. HARENBERG, Defendant-Appellant.

No. 82-1851.

United States Court of Appeals Tenth Circuit.

April 30, 1984.

Richard J. Smith, Asst. U.S. Atty., Albuquerque, N.M. (William L. Lutz, U.S. Atty., Albuquerque, N.M. with him on the brief), for plaintiff-appellee.

Winston Roberts-Hohl, Santa Fe, N.M. (James L. Brandenberg, P.C., Albuquerque, N.M. with him on the briefs), for defendant-appellant.

Before BARRETT and LOGAN, Circuit Judges, and JENKINS, District Judge. ^*

BARRETT, Circuit Judge.

Harenberg appeals from a jury verdict convicting him of a series of felony and misdemeanor offenses. Harenberg was found guilty of having violated four separate federal statutes: (1) 18 U.S.C. Sec. 371, which prohibits conspiring to impede the United States in its collection of income taxes; (2) 26 U.S.C. Sec. 7206(1), which prohibits the filing of a false tax return; (3) 18 U.S.C. Sec. 656 (seven counts), which prohibits the misapplication of funds of F.D.I.C.-insured banks; and (4) 18 U.S.C. Sec. 215 (seven counts), which prohibits bank officers from participating in "loan kickback" schemes.

Harenberg was indicted with Nick Kapnison and Ben Bronstein in Albuquerque, New Mexico. Pursuant to motion, the three were granted separate trials outside the Albuquerque area. Harenberg was then tried in Roswell, New Mexico. On the conspiracy charge, he was fined $10,000 and ordered imprisoned for eighteen months. On the falsification charge and the banking violations he was fined $5,000 for each offense. On all remaining counts he received a suspended sentence, probation, and certain community service obligations.

Facts

In 1976, Bronstein purchased the controlling interest in the First National Bank of Clovis, New Mexico. Soon thereafter, he appointed Harenberg as the Bank's president, and Kapnison became a director. Kapnison and Bronstein had also allied themselves in a small-business investment company called Venture Capital; Harenberg was vice-president of this company before moving on to the Bank. The case presented by the United States disclosed a scheme by which the three men used their positions at the Bank and Venture Capital to impose substantial "fees" on financially-troubled borrowers. In a nutshell, the scheme worked as follows: (1) Venture Capital functioned as a magnet attracting borrowers; (2) Bronstein or Kapnison would then "guarantee" a loan to the borrower, but only for a substantial fee; (3) The First National Bank would then approve the loan to the borrower; (4) the borrower would then pay Kapnison the "guarantee fee" out of the loan proceeds; (5) the fee would then be secretly split among Kapnison, Bronstein, and Harenberg. Apparently, the operation was quite successful; in the seven loans out of which the charges grew, approximately sixteen percent (16%) of the funds loaned by the bank made their way back to the defendants in the form of "guarantee fees." ¹ (Appellee's Brief at 6).

Eventually, Kapnison resigned from the Bank's board of directors, making himself legally eligible to receive guarantee fees. The United States presented testimony that Kapnison reported all of the guarantee fees as personal income, offsetting this amount with substantial deductions from his other business operations. Thus, the United States asserted that Kapnison's tax return was false because it claimed all of the kickback income, and that Bronstein's and Harenberg's were false because they claimed none of it.

On appeal, Harenberg makes numerous allegations of error. We find them without merit and, therefore, affirm.

I. Proof Relating to 18 U.S.C. Sec. 656

Harenberg argues the government failed to prove beyond a reasonable doubt all of the elements necessary for a conviction pursuant to 18 U.S.C. Sec. 656. As we have previously held, the statutory elements of a section 656 violation are: (1) the willful (2) misapplication (3) of money, funds or credits (4) of a federally-protected bank. United States v. Twiford, 600 F.2d 1339, 1343 (10th Cir.1979). Harenberg contends the government failed to prove that "bank funds" were involved or, alternatively, that Harenberg "willfully misapplied" such funds.

Bank Funds: Harenberg argues that under the definitions of the Uniform Commercial Code, the "fees" paid to him by Kapnison were not "bank money, funds or credits." He maintains that the First National Bank of Clovis lost all ownership interest in the funds loaned after it sent drafts to the borrowers. Consequently, Harenberg argues any "kickbacks" Harenberg may have received were no longer bank funds, but the funds of borrowers.

We believe this argument illustrates a myopic view of the loan transactions. By focusing upon the flow of funds and the consequent changes in the incidence of ownership, Harenberg ignores completely the substance of the transactions. The evidence shows Harenberg had a concealed interest in the loans involved in this case. This interest did not suddenly materialize after the bank funds were disbursed to the borrowers; rather, it existed well before the borrowers even made loan applications to the First National Bank of Clovis. In fact, according to the evidence, this interest was the motivating factor behind Harenberg's approval of the loans. Certainly, then, Harenberg's concealed interest related to "bank funds." To argue that this fact somehow disappears because the bank funds were disbursed to borrowers seems to us to miss the forest for the trees. ² We find the government's proof on this element was adequate.

Willful Misapplication: Harenberg also contends that the government did not show he possessed the requisite criminal intent to support a claim of willful misapplication. We disagree.

United States v. Twiford, id., included facts substantially similar to those involved in the present case. In Twiford, the defendant, an officer and director of the Bank of Colorado, made several loans to different parties and then received kickback fees from the borrowers. We held that this deceptive self-dealing fit within the definition of "willful misapplication." Id. at 1341. In reaching this conclusion, we noted that such kickback schemes involved the misrepresentation of the true state of bank records "with the intent that bank officials, bank examiners, or the Federal Deposit Insurance Corporation will be deceived." Id. [quoting United States v. Kennedy, 564 F.2d 1329, 1339 (9th Cir.1977)]. Twiford thus held implicitly that evidence of an "intent to deceive" supplied the necessary proof of criminal intent required by section 656. See also United States v. Cooper, 464 F.2d 648, 652 (10th Cir.1972). ³ Upon reviewing the record, we hold there is substantial evidence of Harenberg's intent to deceive the Bank's board of directors and, therefore, the government's proof was adequate.

II. Double Jeopardy

Because Harenberg was charged and convicted under two separate but similar federal banking statutes, 18 U.S.C. Sec. 656 (misapplication of bank funds) and 18 U.S.C. Sec. 215 (receiving loan kickbacks), he now contends he was placed twice in jeopardy for the same offense. He argues that the convictions rested solely upon the reception of kickbacks and, therefore, the section 656 misapplication charge was redundant and inappropriate. We disagree.

The established test for determining whether one transaction can provide the basis for conviction under two different statutes was stated in Blockburger v. United States, 284 U.S. 299, 304, 52 S.Ct. 180, 182, 76 L.Ed. 306 (1932):

The applicable rule is that where the same act or transaction constitutes a violation of two distinct statutory provisions, the test to be applied to determine whether there are two offenses or only one, is whether each provision requires proof of a fact which the other does not. (Emphasis added).

The Supreme Court has reaffirmed this test on many occasions, see, e.g., Albernaz v. United States, 450 U.S. 333, 337, 101 S.Ct. 1137, 1141, 67 L.Ed.2d 275 (1981), and the test has long been followed by this court. See, e.g., United States v. Neal, 692 F.2d 1296, 1306 (10th Cir.1982); Chrysler v. Zerbst, 81 F.2d 975, 976 (10th Cir.1936).

In applying this test to the present case, it is clear that each statute "requires proof of a fact which the other does not." The elements of a section 656 misapplication violation are: (1) the willful (2) misapplication (3) of money, funds, or credits (4) of a federally-protected bank. In contrast, the elements of a section 215 offense are: (1) the receiving or consenting to receive (2) a fee, commission, gift, or thing of value (3) for procuring or attempting to procure (4) a loan from a federally-protected bank. As we pointed out in Twiford, the "lack of identity between the two crimes is not merely a formalistic or semantic one." 600 F.2d at 1343. In this case, for example, the section 656 misapplication provision prohibited Harenberg's deceptive conduct and concealed interest in making loans; his conviction on this charge was not dependent upon his actual reception of a fee. The section 215 provision, on the other hand, specifically proscribed the taking of a fee; his conviction on this charge was not dependent upon his concealed interest or deception of the board. Thus, Harenberg's conviction under both provisions rested upon the proof of different statutory elements and different transactional facts. ⁴

III. Conspiracy Evidence

Harenberg next argues that the district court made various errors in admitting evidence relating to conspiracy. His primary contention is that the trial judge erroneously admitted hearsay evidence relating to the conspiracy under Fed.R.Evid. 801(d)(2)(E) ⁵ without having made an initial finding based upon independent evidence that a conspiracy existed and that the statements were made in furtherance of the conspiracy.

Harenberg relies upon our decision in United States v....