U.S. v. Harvard, 95-40818

• Decision Date: 07 January 1997
• Docket Number: No. 95-40818,95-40818
• Citation: 103 F.3d 412
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Jack C. HARVARD, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 412

103 F.3d 412

UNITED STATES of America, Plaintiff-Appellee, v. Jack C. HARVARD, Defendant-Appellant.

No. 95-40818.

United States Court of Appeals Fifth Circuit.

Jan. 7, 1997.

Michael E. Savage, Asst. U.S. Attorney, United States Attorney's Office, Plano, TX, Jeffrey John Strand, Asst. U.S. Attorney, Office of the United States Attorney, Tyler, TX, for plaintiff-appellee.

Herbert V. Larson, Jr., New Orleans, LA, for defendant-appellant.

Appeal from the United States District Court for the Eastern District of Texas.

Before WISDOM, JONES and WIENER, Circuit Judges.

EDITH H. JONES, Circuit Judge:

Appellant Jack C. Harvard appeals his convictions for conspiracy, bank fraud, misapplying bank funds, causing false bank entries to be made, and receiving a bribe for a bank transaction. The most difficult question he raises on appeal is whether 18 U.S.C. § 1005, which criminalizes the act of causing false bank entries to be made, embodies a requirement of materiality for an actual misstatement. We hold that it does not and affirm Harvard's conviction on this and the other counts against him.

I. FACTUAL BACKGROUND

A detailed recitation of the facts as presented at Harvard's trial is necessary for resolution of the issues presented.

A. Harvard's Many Hats

In 1983, Harvard, then vice-president at Northpark Bank of Dallas ("Northpark"), led a group of investors in borrowing $1,493,000 from Northpark to organize Willow Bend National Bank ("Willow Bend"), a federally insured bank. Harvard served as chairman of the board and chief executive officer at Willow Bend until August 1989. Willow Bend Bancshares, Inc. ("Bancshares"), a bank holding company in which Harvard became chairman of the board, was formed in 1984 to acquire Willow Bend. Bancshares also acquired Bonham State Bank ("Bonham"). Harvard was a director at Bonham from 1984 to 1989. Incidentally, Harvard served as mayor of Plano, Texas during the mid-1980s.

B. The Cheng/Schapiro Loans

In 1987, Diana Cheng, a Dallas businesswoman, needed $400,000 and a $1,000,000 letter of credit in order to undertake a $2,000,000 Indonesian lumber import deal. A customer and shareholder of Willow Bend, Cheng had been involved in commercial real estate in the Dallas area for several years. Cheng discussed her needs for the Indonesian transaction with Thomas C. Flood, a loan officer at Willow Bend. Flood informed Cheng that Willow Bend could not grant her the loan because she had reached her borrowing limit. Nevertheless, Flood arranged a meeting among Harvard, Cheng, and himself at which Harvard informed Cheng that Willow Bend could lend the money if something was in it for him. By the end of the meeting, Cheng had agreed to give Harvard and Flood, respectively, a 10% and 5% share of the import business. At the meeting, Flood intimated that Cheng should create a real estate note to pledge as collateral for the loan. Cheng did so by creating a $395,600 note payable by her joint venture to the fictitious name of C.D. Donge (the "Donge note"). In connection with these events, Cheng pleaded guilty to conspiring to give money to Harvard and Flood and creating a false document to obtain a loan from Willow Bend. She testified against Harvard.

Harvard then asked Jay Paul Schapiro, an acquaintance through bank-related business and various civic activities, to purchase the Donge note from Willow Bend "to get it off the books." ¹ Harvard told Schapiro that the note was secured by undeveloped real estate. When Schapiro stated that he could not pay off the note in the event of default, Harvard assured him that he would find a guarantor, who turned out to be Ms. Cheng. Schapiro purchased the note. Although such notes would usually be purchased at a discount, in this transaction Schapiro borrowed the face value of the note--$395,000--from Willow Bend in return for a $9,000 fee. Apparently unbeknownst to Schapiro, the actual discounted price of the note was $345,000; the remaining balance, less Schapiro's fee, went to Willow Bend. Schapiro never made any payments on the note and was told by Harvard and Flood to ignore late notices and demands for collection. In May of 1987, Flood had the deed of trust for the Donge note recorded in the county real estate records, even though the Donge note was dated December 9, 1985. Cheng gave cash payments of $15,000 to Flood and $10,000 to Harvard. Flood pleaded guilty to bank bribery.

C. The Joint Venture Loan

In 1985 Harvard had a 10% interest in the Plano-Shiloh Joint Venture (the "Joint Venture"), which purchased and operated a strip mall in Plano, Texas. By March of 1986, the Joint Venture was not self-sustaining and each partner was requested to contribute additional capital. The Joint Venture experienced a loss in excess of $81,986 in 1986, and by 1987 was still losing money. When the Joint Venture decided to refinance with a different lender to reduce interest expenses, Harvard volunteered to assist in having the note refinanced at Bonham where, as stated earlier, he was a director. Harvard solicited John Armstrong, then a bank officer who had risen to chairman of the board by the time of trial, and assured Armstrong that the loan was performing and that the shopping center was "cash flowing." Armstrong also asked for and received assurance that an appraisal substantiating the value of the Joint Venture property would be provided.

The Board of Bonham approved the loan. Although Harvard did not vote on the loan the directors were well aware that Harvard was the chairman of Bancshares, Bonham's holding company. Additionally, on at least one occasion, Harvard reminded Warren Jamieson--president and chief executive officer of Bonham--of Harvard's control of Bonham and his ability to replace Jamieson. In extending the loan to the Joint Venture, Bonham required personal guarantees of the individual joint venture participants. On May 29, 1987, the title company forwarded all documents for the loan, including the guarantees, to Nancy Long, Harvard's then-secretary at Willow Bend. ² Oddly, the guarantee agreements showed the Joint Venture to be indebted to Willow Bend, not Bonham. Harvard was aware of these defects of the guarantees.

After closing on the loan with Bonham, Brenda Brown, a one-percent participant in the Joint Venture and an employee of the Joint Venture's management company, was instructed by her boss at the managing company to write a check in the amount of $10,640 (one percent of the loan amount) payable to Harvard and to call it a "consulting fee." This payment to Harvard was not disclosed on the settlement sheet to Bonham nor was it disclosed by any of the other partners of the Joint Venture.

D. The Unauthorized Cashier's Check

In 1989 Willow Bend's procedure for the issuance of cashier's checks required bank tellers, at the time that cashier's checks were issued, to collect payment of either cash or a cash equivalent. After doing so, a special machine would imprint the appropriate amount on the check along with a machine imprinted signature. Amounts in excess of $5000 required a bank officer's signature; very large amounts required the signature of Willow Bend's vice-president. The details regarding the issuance of all cashier's checks--including the date, check number, remitter, payee, and amount--were to be entered into a cashier's check log at the time of issuance.

On March 7, 1989, Harvard called Warren Jamieson, who was still president, chief executive officer, and--at this time--a director of Bonham, to borrow money from Bonham for the purchase of a house at a foreclosure sale. Harvard represented to Jamieson that he needed only interim financing for the house as he had already obtained a commitment for personal financing from Plano Savings and Loan conditioned on his becoming the successful bidder. Jamieson told Harvard that he did not have the authority to approve another $175,000 debt to Harvard, but he would seek the Board's approval, which was obtained that day. Jamieson informed Harvard, however, that the loan would not be funded until Bonham received the loan documents. The loan documents prepared at Willow Bend were faxed to Bonham the following day, March 8. On that day, Bonham wire transferred $175,000 to Harvard's personal account at Willow Bend.

On March 7, the day before the money was wired (and the same day that Harvard requested the loan from Jamieson), Janice Smith, a teller at Willow Bend, handed Harvard two blank cashier's checks. Ignoring Willow Bend's policy, she did not record in the cashier's check log the details of her parting with these checks. She knew that Harvard was the chief executive officer at Willow Bend, and she did not question him about the checks. She was also unaware that Harvard left the bank with both cashier's checks. Laura Palmer, Smith's supervisor, completed the log after Smith left for the day. Palmer entered "Farm and Home, $166,201" for one of the cashier's checks and initialed the entry; the other cashier's check was voided. Harvard ultimately completed the check by endorsing it and writing in by hand the amount of $166,201 payable to "Farm and Home Savings." This cashier's check was dated March 7, 1989, but the date stamp on the back of the check was March 8. The proof stamp on the face of the check was March 9. Neither Palmer nor Smith ever received any cash payment for either cashier's check. The cashier's check for $166,201 was used to purchase a house at a foreclosure sale on March 7. Willow Bend did not receive funds to pay for the check until June 11, 1989. As a result, Willow Bend suffered a cash loss of $117.73 in interest income it would have received from the $166,201.

E. Indictment and Convictions

After a trial to a jury, Harvard was convicted pursuant to the indictment of:

Count One--violating 18 U.S.C. § 371 by conspiring to (a) misapply monies belonging to Willow Bend, (b) make and cause to be made false entries in the books of Willow Bend,...