U.S. v. Henderson
| Decision Date | 13 April 1994 |
| Docket Number | No. 92-2707,92-2707 |
| Citation | 19 F.3d 917 |
| Parties | 40 Fed. R. Evid. Serv. 869 UNITED STATES of America, Plaintiff-Appellee, v. Kenneth P. HENDERSON, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Michael M. Essmyer, Clinard J. Hanby, Essmyer & Associates, Houston, TX, for appellant.
Guy L. Womack, Paula Offenhauser, Asst. U.S. Attys., James L. Turner, Ronald G. Woods, U.S. Atty., Houston, TX, for appellee.
Appeal from the United States District Court for the Southern District of Texas.
Before GARWOOD and BARKSDALE, Circuit Judges, and WALTER 1, District Judge.
Kenneth P. Henderson appeals his conviction for fraudulent banking activities. 2 Henderson questions the sufficiency of the evidence and several of the trial judge's evidentiary rulings. Finally, Henderson argues that the trial court erred in applying the sentencing guidelines to count one of the indictment. For the reasons that follow, we affirm in part and reverse in part.
This case involves a long-term professional relationship and personal friendship gone awry. Kenneth P. Henderson began to handle Dr. Charles Howard's banking business in 1970. Over the years, the two became close personal friends and trusted business associates. Unfortunately, this relationship led ultimately to Mr. Henderson disregarding important federal banking regulations. To understand how Mr. Henderson and Dr. Howard got to this point, we must retrace their relationship from its early days.
Kenneth Henderson met Dr. Howard in 1970, while Henderson was president of Northshore Bank in Houston, Texas. A friendship developed, and when Henderson left Northshore in 1973 to become president of Greater Houston Bank, he took Dr. Howard's account with him. Henderson left Greater Houston in 1979, taking over the Vice Presidency of the Board of Directors at First Bank and Trust (FB & T) in Tomball, Texas. Again, Dr. Howard's accounts followed. Henderson soon became the Chairman of the Board of Directors at FB & T.
Dr. Howard held investments in certain hospitals and other real estate in the Houston area. During a visit to one of these hospitals in 1982, Henderson and Howard discussed the prospects for opening a new bank. They believed that northwest Houston had growth potential and would be an excellent location for a bank. Dr. Howard and other businessmen then applied for a federal bank charter in the name of Cy-Fair Bank, N.A. (Cy-Fair). The charter was granted and Cy-Fair opened in a shopping center near Jones Road in northwest Houston.
Henderson and Howard began looking for property in the region to build a permanent bank building for Cy-Fair, complete with drive-through facilities. Sometime in 1982 or 1983, Henderson located a 9.3 acre parcel along Jones Road. Howard agreed that this lot would be a good location for the new Cy-Fair bank. Henderson and Howard then orally agreed to become partners in the acquisition of the Jones Road property. Howard agreed to borrow the money for the purchase in his own name, and Henderson agreed to reimburse Howard for half the loan payments and other costs associated with the Jones Road property.
Henderson and Howard agreed to borrow the money for the Cy-Fair bank property from FB & T, a bank owned by Henderson. 3 In April of 1983, Henderson, acting as loan officer for FB & T, made a $456,818.62 loan to Dr. Howard for three acres of the Jones Road property. This loan was ratified by the FB & T Board at its May, 1983 meeting. 4 Henderson made a second loan to Dr. Howard on April 16, 1984, for $443,000.00, which covered another 1.5 acres along Jones Road. The FB & T Board ratified this loan at its May, 1984 meeting. Dr. Howard received a third loan--again with Henderson acting as loan officer--for the Jones Road real estate on April 11, 1985. The FB & T Board ratified this loan in May, 1985. The 1985 loan covered the remaining Jones Road acreage and consolidated the previous two loans; the 1983 and 1984 loans were paid, including $100,000 in interest, with the 1985 loan. The 1985 loan was for $1,435,000.00 and had a maturity date of April 11, 1987. On April 11, 1986, Henderson extended the Jones Road loan, changing the maturity date to April 11, 1989.
All the loans on the Jones Road property were in Howard's name. However, the financial statements filed by Dr. Howard for the 1984 and 1985 loans indicated that only half the payments were being made from Howard's own assets. Henderson voted to ratify these loans at the FB & T Board meetings, over which he presided. It was clear from the minutes of these meetings that the other directors knew Henderson had personally made these loans to Dr. Howard. Henderson never disclosed that he was Dr. Howard's "silent partner" in the Jones Road property.
In June of 1985, Henderson and Dr. Howard decided to bring in two additional partners to spread the risk associated with the Jones Road venture. Leo Kalantzakis and Dr. Richard Hausner became full partners during the summer of 1985, each assuming responsibility for one-quarter of the costs of the property. Both testified that Henderson and Howard held themselves out as partners in this investment. They also testified that Henderson never acted as though his interest in the Jones Road development differed in any way from that of the other partners. Henderson paid for his share of the loan costs, taxes, and other expenses.
Two factors combined to doom the plans for the new Cy-Fair bank. First, the Houston economy began to slump during late 1985 and remained flat through 1986 and 1987. Second, five new banks were granted charters within a five mile radius of Cy-Fair. These conditions did not favor the Cy-Fair Bank expansion. Therefore, the Jones Road partners--Henderson, Howard, Kalantzakis, and Hausner--decided to put off building the new Cy-Fair Bank building. This decision made it difficult for the partners to make their payments on the FB & T loan.
During 1986, Henderson applied for and received a $147,500 loan from Cy-Fair. He presented two financial statements, dated June 15, 1984, and July 1, 1986, neither of which indicated any interest in the Jones Road property. Nor did Henderson disclose that he was making payments related to the Jones Road property on the cash flow portion of these financial statements.
In late 1987 an FDIC examination began to focus on FB & T's 1985 loan to Dr. Howard. An FDIC report, dated November 21, 1987, classified that loan as "worrisome". When Henderson found out about this investigation, he contacted Dr. Howard and asked for a letter showing that Henderson was never a partner in the Jones Road venture, but held an option to purchase an interest in the property. Howard testified that he agreed to sign such a letter out of compassion for Henderson. Henderson presented this letter at trial bearing a November 5, 1985 date.
The government presented several reasons to doubt the authenticity of the November 5, 1985 letter. First was Dr. Howard's direct testimony that the letter was prepared by Henderson and signed in either late 1987 or early 1988. Next the government pointed out that the November 5, 1985 letter referred to 6.14 acres, although Howard and his partners owned 9.32 acres at that time. 5 Further, the letter referred to a maturity date of April 11, 1989, although the Jones Road loan had a maturity date of April 11, 1987 on November 5, 1985. The maturity date was extended to 1989 when the loan was refinanced on April 11, 1986. Finally, Dr. Hausner testified that Dr. Howard told him of Henderson's request for a "sham option" letter sometime during early 1988. Howard told Hausner that he expected Henderson to try to use the letter to avoid liability on the FB & T loan.
Henderson presented two additional letters, allegedly signed by Dr. Howard, to show that he held only an option on the Jones Road property. A letter dated November 4, 1985 indicated that Henderson held an option to purchase one-half of Dr. Howard's interest in the Jones Road lot. The second letter, dated April 16, 1987, stated that Henderson's option had been terminated because of his failure to make the required payments. Both letters were attacked as bogus by the government. Howard denied ever seeing or signing either letter. Neither letter was similar in type style to the November 5, 1985 letter.
An expert on banking regulations testified that Henderson's actions jeopardized the financial integrity of both FB & T and Cy-Fair. According to this expert, Henderson's conduct exposed both banks to regulatory penalties, which can have an indirect, detrimental effect on a bank's business. Further, Henderson exposed the banks to direct risk of loss by making or requesting funds for suspect projects without disclosing all the details of these endeavors.
Board members from FB & T and Cy-Fair testified that both loans probably would have been made even if Henderson had disclosed his interest in the property. These directors also testified that they were aware of the regulations requiring disclosure of such interests, and that an interested director is prohibited from taking part in transactions affecting his interest. The FB & T directors stated that, in their opinion, Henderson should not have acted as loan officer for the Jones Road loans and that he should not have participated in the ratification votes on these loans. It was also shown that Henderson had properly disclosed an interest in bank loans in the past, indicating that he understood the relevant regulations.
Henderson raises three specific issues concerning the sufficiency of the evidence presented at his trial. First, Henderson questions whether an interest based on an unenforceable oral contract can support a conviction for bank fraud, misapplication, or false statements. Second, Henderson argues that a bank officer's failure to disclose a personal interest in a...
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