U.S. v. Kane

• Decision Date: 02 October 1991
• Docket Number: No. 90-3318,90-3318
• Citation: 944 F.2d 1406
• Parties: 34 Fed. R. Evid. Serv. 272 UNITED STATES of America, Plaintiff-Appellee, v. Kenneth KANE, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1406

944 F.2d 1406

34 Fed. R. Evid. Serv. 272

UNITED STATES of America, Plaintiff-Appellee, v. Kenneth KANE, Defendant-Appellant.

No. 90-3318.

United States Court of Appeals, Seventh Circuit.

Argued June 13, 1991.

Decided Oct. 2, 1991.

Andrew B. Baker, Jr., Asst. U.S. Atty., argued, Dyer, Ind., for plaintiff-appellee.

Jeffrey Urdangen, argued, Chicago, Ill., for defendant-appellant.

Before CUMMINGS and RIPPLE, Circuit Judges, and FAIRCHILD, Senior Circuit Judge.

CUMMINGS, Circuit Judge.

Steven Molnar and Tim Martin found a way to exploit the eagerness with which some banks approve car loans. In 1982, while Martin was employed at the First Bank of Whiting, he told his friend Molnar that it would be easy to obtain loan checks by calling in to apply for car loans on fictitious cars. Various banks approve auto loans, sometimes in as little as 24 Martin predictably lost his job at First Bank of Whiting when the bank discovered that he was authorizing fraudulent auto loans, and the pair turned to victimizing other banks. Martin directed Molnar to contact defendant Kenneth Kane, who operated a used car business called J & K Kars in Highland, Indiana. Subsequently when individuals hired by Martin and Molnar posed as applicants, Kane pretended to be the seller of the car and supplied to the bank a description of the car and a vehicle identification number ("VIN"). He also represented that he had title to the car and therefore that the bank would be able to assert a lien against the title at the time the loan check was cashed. Kane participated in making applications for five loans at three different banks in the spring and summer of 1984. In some cases, he phoned in the application himself as the dealer applying for a loan on behalf of a car buyer. He and his wife cashed some of the loan checks, which named both the car dealer and the purported buyer as payees. Kane admitted that he received $500 from each loan check. In all cases, the cars and accompanying VINs were fictitious and the banks never received loan repayment or title to the cars.

                hours, after checking the applicant's credit and employment.   Molnar and Martin recruited impostors to apply for loans at First Bank of Whiting.   The impostor would claim to be a person with a favorable credit history whose name Martin had obtained from a credit bureau.   Once the bank issued the loan check, the impostor would pick it up from the bank, cash it, and distribute the proceeds amongst the schemers
                

An alert loan officer at Peoples Federal Savings and Loan foiled the scheme in August 1984. While processing a loan application over the phone, she noted that the voice of the applicant sounded similar to the voice of a previous applicant whose loan had been problematic. She notified her superior who in turn contacted the FBI. An FBI agent confronted Molnar, Kane and a man named Peter Perich, the would-be applicant, at the bank when the three arrived to pick up the loan check. The men were not arrested at that time, but discontinued making loan applications.

On February 23, 1990, a grand jury returned a six-count indictment against Kenneth Kane. Count I charged him with conspiracy to defraud federally insured banks and savings and loan associations in violation of 18 U.S.C. § 371. Counts II through VI charged Kane with taking bank funds with intent to steal them in violation of 18 U.S.C. § 2113(b) and 2 in connection with the five separate loan applications. Counts II, III and IV charged that Kane had taken $6,750, $7,500 and $10,500 respectively from Calumet National Bank in Dyer, Indiana. Count V charged Kane with taking $6,400 from Hoosier State Bank in Hammond, Indiana. Count VI charged Kane with taking $8,200 from American Savings and Loan Association, also in Hammond. The same acts charged in Counts II through VI were the overt acts alleged to be in furtherance of the conspiracy charged in Count I.

After a two-day trial in July 1990, at which Molnar was the main prosecution witness, the jury convicted Kane on Counts I, IV, V and VI and acquitted him on Counts II and III. At sentencing, the district judge suspended the imposition of sentence and placed Kane on probation for a period of five years on each of the four counts on which he was convicted, with the sentences to run concurrently. Pursuant to the Victim and Witness Protection Act ("VWPA"), 18 U.S.C. §§ 3663, 3664, the court also ordered Kane to make restitution in the sum of $24,750 to Calumet National Bank, $6,400 to Gainer Bank (successor to Hoosier Bank) and $8,200 to American Savings and Loan Association.

Kane challenges his conviction primarily on grounds of sufficiency of the evidence. He also complains that certain evidence was wrongly admitted at trial and that his trial counsel was ineffective. With respect to his sentence he argues that he cannot be ordered to make restitution of the amounts charged in the counts on which he was acquitted. We affirm the conviction and remand for resentencing.

ANALYSIS

A. Sufficiency of the Evidence

Kane contends on appeal, as he did at trial, that he cannot be convicted on Count I for conspiracy because he never knew the illicit purpose of the conspiracy run by Molnar and Martin. He states correctly that a conspiracy conviction must be supported by substantial evidence that the alleged conspirator was aware of the essential nature and scope of the enterprise and intended to participate in it. United States v. Muehlbauer, 892 F.2d 664, 667 (7th Cir.1990); United States v. Durrive, 902 F.2d 1221 (7th Cir.1990). Kane argues in addition that the convictions on Counts IV, V and VI for bank theft were improper because 18 U.S.C. § 2113(b) likewise requires knowing conduct. See United States v. Harrod, 856 F.2d 996, 1001 (7th Cir.1988).

Kane admits that he answered inquiries from banks, supplied VINs and falsely represented to banks that he had title to cars, but he claims that in doing so he was helping Molnar sell repossessed cars, not defrauding banks in the manner described in the indictment. According to Kane, Molnar occasionally sold repossessed cars, but because he had no auto dealer's license, he could not obtain car loans on behalf of his buyers. Kane testified Molnar supplied him with VINs and auto descriptions after Kane agreed to pose as the seller of the repossessed cars in Molnar's stead for the purpose of applying for car loans. Molnar assertedly was simply "borrowing" Kane's dealer's license in order to apply for loan money on behalf of his buyers. Kane stated that he obtained the loan funds and turned them over to Molnar in the belief that the funds would be applied legitimately to the retail prices of repossessed cars. Kane also testified that the $500 fee he received for each loan was his reward for performing this small favor.

The evidence, when viewed in the light most favorable to the government, see United States v. Durrive, 902 F.2d 1221, 1229 (7th Cir.1990), supports the jury's rejection of Kane's exculpatory explanation and its conclusion that Kane was aware that the scheme's purpose was to defraud banks of loan funds. Either direct or circumstantial evidence can show a defendant's knowledge of a conspiracy's aims. United States v. Vega, 860 F.2d 779, 792 (7th Cir.1988). Here the evidence of Kane's knowledge was circumstantial, but reasonable inferences drawn therefrom support the guilty verdict.

Kane was not a peripheral actor. He argues that he was an innocent pawn in the game masterminded by Molnar and Martin, but his level of involvement suggests otherwise. Kane admitted making applications for loans over the phone and answering phone inquiries from banks about vehicle descriptions and VINs. He provided at least one false bill of sale for a non-existent vehicle in connection with the loan made by Hoosier State Bank. When that bank was slow to issue its loan check, he called the bank manager and claimed he needed the check to meet his payroll. He joined Molnar and the impostor loan applicants when they picked up loan checks from the banks. He and his wife both cashed loan checks, thereby representing that Kane as the dealer had good title to the vehicles being sold.

Thus this is not a case in which the defendant played a significantly more menial role in the scheme than the admitted conspirators, suggesting that the defendant had not been exposed to the conspirators' aims. See United States v. Bailey, 859 F.2d 1265, 1274-1275 (7th Cir.1988) (no intent to defraud proven on part of two businessmen recruited by real estate brokers to apply for fraudulent loan, where businessmen were outsiders lacking real estate expertise that would allow them to suspect an illegal transaction), certiorari denied sub nom. Ticktin v. United States, 488 U.S. 1010, 109 S.Ct. 796, 102 L.Ed.2d 787; United States v. Pearlstein, 576 F.2d 531, 541 (3rd Cir.1978) (reversing mail fraud convictions of salesmen who used misleading sales literature developed by their superiors in absence of evidence that they had positions of authority in company). While there was no direct evidence that Kane was told of the illegal objectives of the scheme, his working relationship Moreover, Kane's version of events was discredited. He did not introduce any evidence which corroborated his story that he was helping Molnar sell repossessed cars. Molnar flatly denied that he ever asked to use Kane's license to sell repossessed cars (Tr. 335). Instead his testimony suggested that Kane was brought into the larger scheme to defraud banks of loan funds after being told of the contours of the scheme. For example, he noted that Martin contacted Kane with the names in which applications should be made (Tr. 337), thereby casting doubt on Kane's assertion that he had involved himself only with Molnar and only to obtain loans for legitimate buyers.

                with Molnar and Martin supports an inference of involvement and understanding.   See Pearlstein, 576 F.2d at 542 (continuing

...