U.S. v. Longfellow, 94-1629

• Decision Date: 03 February 1995
• Docket Number: No. 94-1629,94-1629
• Citation: 43 F.3d 318
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Robert LONGFELLOW, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 318

43 F.3d 318

UNITED STATES of America, Plaintiff-Appellee, v. Robert LONGFELLOW, Defendant-Appellant.

No. 94-1629.

United States Court of Appeals,

Seventh Circuit.

Argued Sept. 16, 1994.

Decided Dec. 22, 1994.

Rehearing and Suggestion for Rehearing En Banc Denied Feb. 3, 1995.

Hilary W. Frooman, Asst. U.S. Atty. (argued), Urbana Div., Urbana, IL, for plaintiff-appellee.

J. Steven Beckett, Holly Clemons (argued), Beckett & Associates, Urbana, IL, for defendant-appellant.

Before CUMMINGS, CUDAHY and RIPPLE, Circuit Judges.

CUDAHY, Circuit Judge.

Robert Longfellow appeals his conviction for bank fraud, false reporting to a credit union and embezzlement from a credit union on evidentiary, statute of limitations and laches grounds. We affirm.

At all times relevant to this case, Robert Longfellow was President and Chief Executive Officer of Grant and Ross Township Community Credit Union in Hoopeston, Illinois (Credit Union). In March of 1986, the Illinois State Department of Financial Institutions (DFI) and the National Credit Union Administration took control of the Credit Union. After the takeover, officials from DFI and the Federal Bureau of Investigation reviewed files and interviewed employees concerning alleged improprieties in loans to Credit Union customers. Following this investigation, in November 1992 Longfellow was indicted for perpetrating a scheme to defraud the Credit Union. In a series of real estate transactions between 1980 and 1984, Longfellow allegedly made loans to borrowers so that they might buy property that he owned, failed to properly prepare and record the deeds and mortgages establishing the Credit Union's interest in these loans and property, and concealed his interest in these transactions from the other directors of the Credit Union. Longfellow's first trial in March of 1993 ended in a hung jury; he was reindicted and in a second trial in November 1993 was convicted of violating 18 U.S.C. Sec. 1344(2) (bank fraud), 18 U.S.C. Sec. 1006 (false reports to a credit union) and 18 U.S.C. Sec. 657 (embezzlement from a credit union). He was subsequently sentenced to three years imprisonment, $50,000 in fines and $67,342.02 in restitution.

I. Facts

Robert Longfellow began working for the Credit Union in the late 1950s, became its full-time Manager in the 1960s and at the time of these alleged incidents had become President and Chief Executive Officer. While holding this position he made a series of loans to Credit Union members, which the members in turn used to purchase property owned by Longfellow. These transactions were neither fully nor properly recorded, and the titles to the property were left in Longfellow's name rather than being transferred to the Credit Union as collateral for the loans.

Longfellow asserts that he acted in the best interest of the Credit Union, and that he kept title to the property in his name because he intended to pay off the loans should problems arise.

The first such sale that Longfellow arranged was the purchase in December 1980 of Longfellow's lot and trailer by Larry and Leigh Ann Ward. Longfellow authorized a loan from the Credit Union for the $10,500 purchase price, prepared the documentation himself and kept the title to the property in his name. When the Wards failed to meet their payments in March of 1991, Longfellow took out a loan in his wife's name from the Credit Union and used that money to pay the balance of the Wards' loan.

Once he had recovered the lot and trailer from the Wards by paying off the loan, Longfellow resold the property to the Byerlys for $12,500, again authorizing a loan, completing the paperwork himself and retaining title to the trailer and land. The money from this sale was used to pay off the earlier loan in his wife's name. The Byerlys continued to pay on their loan until the Credit Union failed, at which point Longfellow deeded the property to the Byerlys.

In the third transaction, Longfellow sold another trailer and lot to Shirley Ann Leppard in October of 1982, again with a loan authorized by Longfellow and with no transfer of title as evidenced by the deed. The documents of sale were left blank except for Leppard's signature. After about a year, Leppard abandoned the trailer and stopped making payments.

In February of 1983, a DFI examiner performed a surprise examination of the Credit Union, finding a real estate loan file with incomplete documentation (a promissory note signed in blank). The examiner testified at trial that the Credit Union already had a history of incomplete documentation, that he explained to Longfellow and the other directors of the Credit Union that the blank note violated the Illinois Credit Union Act and that he had issued a "Cease and Desist" order citing the Credit Union for the incomplete note. Mr. Longfellow promised the examiner that in the future files relating to transactions would be completed.

Longfellow next sold a lot and mobile home to Donald Robinson in May 1983. Robinson already had an existing loan at the Credit Union, which was "rolled over" and added to the purchase price of the real estate. The mortgage was never recorded, nor was the deed transferred from Longfellow to Robinson. Robinson filed for bankruptcy one year later.

In June of 1983, Bobby Kinnaird also purchased a mobile home and lot from Longfellow, and also had a pre-existing loan rolled over and added to the price of the real estate. The promissory note, security agreement and mortgage were signed by the purchaser, but were otherwise blank. The loan was refinanced twice, first on July 31, 1984 and again in April 1985. The loan was apparently never paid, and Longfellow retained title to the property. ¹

The next sale was in February of 1984, when Daniel Brunner purchased a small house and lot from Longfellow, again with a loan Longfellow obtained for him from the Credit Union. Brunner subsequently received a second loan from the Credit Union to build a garage on the property. Once again, the documents were left mostly blank. The title to the property was never given to Brunner, although he did eventually pay off the loan after he sold the house in August of 1991.

Finally, Dani Means bought a house and lot from Longfellow in January of 1986. Once again, Longfellow arranged for an existing loan of Means' to be "rolled over" and combined with the purchase price, even though Means was already behind in his payments on the existing loan.

In March of 1986, the Illinois Department of Financial Institutions and the National Credit Union Administration took control of the Credit Union and began the process of investigating allegations of improprieties in loans to Credit Union customers.

II. Analysis

Longfellow raises three issues on appeal, 1) that the district court committed reversible error in refusing to admit evidence of an unrelated land transaction in Watseka, Illinois because that evidence was relevant to Longfellow's motive and good faith defense, 2) that this prosecution was barred by the Statute of Limitations, and 3) that the prosecution was barred by the equitable doctrine of Laches.

A. Watseka Land Transaction

Longfellow argues that he should have been permitted to present evidence regarding an unrelated purchase of land by the Credit Union in Watseka, Illinois. He claims that the details of this purchase, although unrelated to the sales of his own real estate in question here, will explain why he believed that keeping the title to real estate in his own name would be beneficial to the Credit Union.

In the Watseka transaction, the Credit Union sought to purchase land to open a branch in Watseka. However, before the Credit Union could officially purchase the land and hold title in its own name, it was required to obtain permission from the DFI. Because another organization was also trying to purchase the building in question, forcing the Credit Union to move quickly, the Board of Directors approved the purchase under Longfellow's name. The Credit Union's attorney prepared the paperwork, and the building was purchased and held in trust, with Longfellow holding all of the beneficial interest in the trust. On the advice of the Credit Union's attorney, Longfellow also signed a blank "assignment of beneficial interest," permitting his interest to be transferred to the Credit Union at any time.

The Credit Union then petitioned the DFI for permission to purchase the building. At first the permission was refused, and the DFI issued a Cease and Desist order because the Credit Union had not acquired prior approval. After repeated requests by the Credit Union's attorney and Board of Directors, however, the DFI approved the transfer of title to the Credit Union, with the understanding that the loans that Longfellow had received to purchase the building would be canceled upon completion of the transfer. Def.Br. at 25.

Longfellow contends that this transaction taught him that it was beneficial to the Credit Union for him to keep title to property in his name, and that Cease and Desist orders were not matters of great importance. The district court excluded this evidence on relevance grounds.

Longfellow argues that United States v. Rubin, 591 F.2d 278 (5th Cir.), cert. denied, 444 U.S. 864, 100 S.Ct. 133, 62 L.Ed.2d 87 (1979), and United States v. Martin-Trigona, 684 F.2d 485 (7th Cir.1982), require that the Watseka evidence be admitted because it goes to his good faith defense. In Rubin, the defendant was accused of embezzling union funds and claimed lack of criminal intent as a defense. He argued that statements made by past presidents of the Union led him to understand that his actions in disbursing funds were proper under the Union's constitution, and that these statements were therefore improperly excluded as hearsay. The court concluded that the statements were not hearsay because they were not offered for the truth of the matter asserted, and that, because they were directly relevant to ...