U.S. v. Mancuso

• Citation: 42 F.3d 836
• Decision Date: 09 November 1994
• Docket Number: 92-5842,92-5841,92-5831,92-5832,93-5011,Nos. 92-5819,s. 92-5819
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Louis T. MANCUSO, Defendant-Appellant (Two Cases). UNITED STATES of America, Plaintiff-Appellee, v. Robert S. SCHMIDT, Defendant-Appellant (Two Cases). UNITED STATES of America, Plaintiff-Appellee, v. Susan L. MANCUSO, Defendant-Appellant (Two Cases). UNITED STATES of America, Plaintiff-Appellee, v. R. Philip HARTMAN, Defendant-Appellant (Two Cases). UNITED STATES of America, Plaintiff-Appellee, v. HARTMAN RACK PRODUCTS, INCORPORATED, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellant, v. Louis T. MANCUSO, Robert S. Schmidt; Susan L. Mancuso; R. Philip Hartman; Hartman Rack Products, Incorporated, Defendants-Appellees. to 93-5014 and 93-5123.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 836

42 F.3d 836

UNITED STATES of America, Plaintiff-Appellee, v. Louis T. MANCUSO, Defendant-Appellant (Two Cases).

UNITED STATES of America, Plaintiff-Appellee, v. Robert S. SCHMIDT, Defendant-Appellant (Two Cases).

UNITED STATES of America, Plaintiff-Appellee, v. Susan L. MANCUSO, Defendant-Appellant (Two Cases).

UNITED STATES of America, Plaintiff-Appellee, v. R. Philip HARTMAN, Defendant-Appellant (Two Cases).

UNITED STATES of America, Plaintiff-Appellee, v. HARTMAN RACK PRODUCTS, INCORPORATED, Defendant-Appellant.

UNITED STATES of America, Plaintiff-Appellant, v. Louis T. MANCUSO, Robert S. Schmidt; Susan L. Mancuso; R.

Philip Hartman; Hartman Rack Products,

Incorporated, Defendants-Appellees.

Nos. 92-5819, 92-5831, 92-5832, 92-5841, 92-5842, 93-5011 to

93-5014 and 93-5123.

United States Court of Appeals, Fourth Circuit.

Argued Dec. 6, 1993.

Decided Nov. 9, 1994.

ARGUED: Thomas Courtland Manning, Cheshire, Parker & Manning, Raleigh, NC, for appellant Louis Mancuso; Roger William Smith, Tharrington, Smith & Hargrove, Raleigh, NC, for appellants Hartman and Hartman Rack Products; Franklyn M. Gimbel, Gimbel, Reilly, Guerin & Brown, Milwaukee, WI, for appellant Schmidt; Edwin Chrisco Walker, Asst. Federal Public Defender, Raleigh, NC, for appellant Susan Mancuso. Scott L. Wilkinson, Asst. U.S. Atty., Raleigh, NC, for appellee. ON BRIEF: Robert M. Hurley, Cheshire, Parker & Manning, Raleigh, NC, for appellant Louis Mancuso; Douglas A. Ruley, Tharrington, Smith & Hargrove, Raleigh, NC, for appellants Hartman and Hartman Rack Products; Kathryn A. Keppell, Gimbel, Reilly, Guerin & Brown, Milwaukee, WI, for appellant Schmidt. James R. Dedrick, U.S. Atty., Raleigh, NC, for appellee.

Before ERVIN, Chief Judge, MICHAEL, Circuit Judge, and SPROUSE, Senior Circuit Judge.

Convictions affirmed, sentences affirmed in part and vacated and remanded in part by published opinion. Chief Judge ERVIN wrote the opinion, in which Judge MICHAEL and Senior Judge SPROUSE joined.

OPINION

ERVIN, Chief Judge:

Louis Mancuso, Susan Mancuso, Philip Hartman, Hartman Rack Products, Inc. and Robert Schmidt bring a direct appeal for review of their criminal convictions and sentences for bank fraud in violation of 18 U.S.C. Sec. 1344, conspiracy to defraud the United States in violation of 18 U.S.C. Sec. 371, and making false statements to a federally-insured financial institution, in violation of 18 U.S.C. Sec. 1014. For the reasons set out below, we affirm each of the convictions. Finding error in the district court's interpretation of the United States Sentencing Guidelines, however, we vacate the sentences of Louis and Susan Mancuso and remand for resentencing. We affirm the sentences of Robert Schmidt and Philip Hartman.

I.

The facts of this case are long and complex, and due to the nature of several of the matters appealed, it is necessary to lay them out in detail. Louis Mancuso (Mancuso) was the president and sole shareholder of two companies, Precision Erectors, Inc. (Precision) and Piedmont Installers, Inc. (Piedmont), which installed automated storage retrieval systems. Apparently a manufacturer of storage retrieval systems would close a contract with a company needing its product, and then would hire another company, such as Precision, to do the installation work. Susan Mancuso is Mr. Mancuso's wife and the secretary and treasurer for Precision and Piedmont, and was responsible for maintaining their books and records and for depositing checks. The companies were maintained in Youngsville, N.C.

By 1989, the Mancusos' business had fallen on hard times, and the companies had accumulated debts to their commercial lending bank, the First Federal Savings and Loan Association of Raleigh (FFSLAR), totalling $798,500. Over the course of 1989, Mancuso entered into negotiations with FFSLAR to restructure the relationship with FFSLAR, which resulted in two agreements executed in October 1989. First, the Mancusos received a "workout" loan from FFSLAR of $798,500 that consolidated all the previous loans. The security for this loan included a series of life insurance policies, real property mortgages, chattel property and "all present accounts receivable now owned and hereafter acquired due from contractors now in process." Both Mr. and Mrs. Mancuso accepted this loan by signing the offer on October 6, 1989. The loan was to have a term of one year.

On the same day, the Mancusos entered into a second loan arrangement with FFSLAR ("the master agreement"). This agreement established a revolving line of credit, also with a one-year term, to finance future projects and to generate funds to repay the workout loan. The revolving line of credit was somewhat complex in its terms. It had a total loan limit of $500,000, and a per contract limit of $250,000, with no more than 5 contracts being financed at any time. The master agreement contained a rollover provision so that if a contract required a loan greater than $250,000, the Mancusos could borrow $250,000, repay that entire amount and then draw down the line of credit again for the same contract. Although it is not stated anywhere in the contract, testimony at trial indicated that the parties understood that the Mancusos could not draw down an amount for any contract that exceeded 75% of the contract value. ¹

Under the master agreement, each separate loan to finance a new contract was to be secured by a lien on the particular job contract for which financing was provided. The lien gave the bank the right to receive 100% of the proceeds under the job contract, even though the bank would lend only up to the lesser of 75% or $250,000 of the contract value; the remaining amount would be used to pay interest on the line of credit draft, and interest and principal on the workout loan. Pursuant to the commitment letter, the Mancusos agreed that all checks due as a result of work performed under contracts financed through the line of credit would be made jointly payable to Precision (or Piedmont) and FFSLAR. Although initially these payments were sent by the contractor to the Mancusos, beginning in late spring of 1990 the bank instituted a requirement that the funds be mailed directly to it.

For each loan tied to a new contract, Mancuso was required to execute a commitment letter stipulating that the security for the loan would be the assignment of the relevant job contract. Mancuso also executed a promissory note and a security agreement for each new loan. Once a loan was granted for a new contract, the party hiring Precision or Piedmont would receive a notice of assignment of rights, which they were required to acknowledge and return to FFSLAR. These notices informed the contractor to make payments jointly to FFSLAR and Precision or Piedmont, and, once the requirement that checks be sent directly to FFSLAR was implemented, provided the address to which they should be sent.

This criminal prosecution arose out of circumstances related to three major contracts that Piedmont entered into. As the facts related below indicate, the Mancusos and individuals at each of the contracting parties engaged in acts that diverted the funds due to FFSLAR under the contracts to the Mancusos directly, and then attempted to cover up the wrongdoing.

A.

The Hartman Rack Products Contract. On May 11, 1990, Precision entered into a contract with Hartman Rack Products, Inc. (HRP) to install HRP systems at a Pratt & Whitney warehouse in Connecticut. HRP agreed to pay Precision $443,925 under the contract. To finance the project, Precision borrowed $250,000 under the FFSLAR line of credit. Pursuant to the master agreement, Precision, through Mancuso, assigned the proceeds of the HRP contract to FFSLAR as collateral for the loan, and executed an assignment of job contract that provided that checks from HRP were to be made out jointly and sent to FFSLAR directly; this agreement was sent to HRP and acknowledged by HRP at Philip Hartman's direction. Mr. Hartman was the president and majority owner of HRP.

On August 9, 1990, HRP sent its first payment under the contract, in the amount of $52,920, to FFSLAR, made out jointly to Precision and FFSLAR. Sometime in August after that date, Mancuso had a telephone conversation with FFSLAR loan officer Bill Robbins, the loan officer handling the Mancuso loans. The exact content of that conversation is in dispute. According to Mancuso's trial testimony, Robbins informed him that the Office of Thrift Supervision had placed restrictions on FFSLAR lending. Mancuso testified that Robbins told him that the bank had suspended all commercial lending on the orders of a regulatory agency, ² and that there would be no further money available under the line of credit, including no money to complete the Pratt & Whitney job for HRP once the initial loan of $250,000 was repaid. Mancuso testified that he specifically asked Robbins whether he would be able to finance any future jobs under the line of credit, and was explicitly told he could not.

Mr. Robbins' recounting of that conversation is quite different. His testimony was that a major part of their conversation concerned the renewal of the workout loan and the master agreement to finance new projects, which were up for renewal at the end of September. He testified at trial that he told Mancuso that he did not know whether or under what conditions they would be renewed, but that he was going to try to get them renewed. Although at trial he stated that he told Mancuso that he "did not know at that moment what the status was on the line of credit," which lends some credence to Mancuso's story, Robbins continued the sentence by stating that "I was going to try to get it renewed if there was any way possible." In the second trial, this same issue came up, and the question and response were more explicit:

Q: Mr. Robbins, do you recall whether or not you made any statement to Mr. Mancuso regarding, as of August 1990, what the status of the...