U.S. v. Mann

• Decision Date: 23 November 1998
• Docket Number: No. 96-50609,96-50609
• Citation: 161 F.3d 840
• Parties: -7344, 50 Fed. R. Evid. Serv. 964 UNITED STATES of America, Plaintiff-Appellee-Cross Appellant, v. James Scott MANN; William M. Moore, Defendants-Appellants-Cross Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 840

161 F.3d 840

82 A.F.T.R.2d 98-7344, 50 Fed. R. Evid. Serv. 964

UNITED STATES of America, Plaintiff-Appellee-Cross Appellant, v. James Scott MANN; William M. Moore Defendants-Appellants-Cross Appellees.

No. 96-50609.

United States Court of Appeals Fifth Circuit.

Nov. 23, 1998.

Rehearing and Suggestion for Rehearing En Banc Denied Jan. 12, 1999.

Joseph H. Gay, Jr., U.S. Atty., San Antonio, TX, Mark Randolph Stelmach, Asst. U.S. Atty., Austin, TX, James Kevin Blankinship, Alpine, TX, for Plaintiff-Appellee-Cross Appellant.

Michael E. Tigar, Washington, DC, Saskia Audrey Jordan, Ty C. Gee, Haddon, Morgan & Foreman, Denver, CO, for James Scott Mann.

David L. Botsford, Austin, TX, for William M. Moore.

Appeals from the United States District Court for the Western District of Texas.

Before REAVLEY, DAVIS and DUHE, Circuit Judges.

REAVLEY, Circuit Judge:

Appellants James Mann and William Moore were convicted on numerous counts relating to their dealings with Jefferson Savings and Loan Association, McAllen, Texas (Jefferson), and its successor institutions. They challenge the sufficiency of the evidence and raise numerous other grounds for reversal. The government cross-appeals on a sentencing issue. We affirm.

A. Sufficiency of the Evidence

When reviewing the sufficiency of the evidence to support a conviction, we view the evidence, including all reasonable inferences drawn therefrom and all credibility determinations, in the light most favorable to the verdict. ¹ The verdict will be upheld if a rational jury could have found the essential elements of the offense beyond a reasonable doubt. ² With these standards in mind, we do not attempt a comprehensive recitation of the evidence, much of which was conflicting. We endeavor here only to explain, after a careful review of the evidence, our conclusions regarding the sufficiency points of error.

1. Count 1 and Related Counts

Mann and Moore challenge the sufficiency of the evidence on count 1 and related counts of the superseding indictment on which they were tried. These counts concern Jefferson's purchase of oil and gas properties known as the Tartan properties in late 1982. Count 1 charged Peter Gallaher, Moore, Julian Alsup, Charles Christensen (GMAC), ³ and Mann with conspiracy in violation of 18 U.S.C. § 371. Generally, "[t]o establish guilt for conspiracy, the government must prove beyond a reasonable doubt that two or more people agreed to pursue an unlawful objective together, that the defendant voluntarily agreed to join the conspiracy, and that one of the members of the conspiracy performed an overt act to further the conspiracy." ⁴ By its terms, § 371 provides that the unlawful objective of the conspiracy may be "to commit any offense against the United States," i.e. to commit a federal crime, or "to defraud the United States."

In order to convict a defendant of conspiracy, the prosecution must offer substantial evidence that the defendant was a member of the conspiracy. ⁵ However, each element of a conspiracy may be inferred from circumstantial evidence. ⁶ An agreement may be inferred from a "concert of action." ⁷ A conspiracy may exist by tacit agreement; an express or explicit agreement is not required. ⁸

Count 1 charged that GMAC and Mann conspired:

(a) to defraud the United States by impeding, impairing, obstructing and defeating the lawful governmental functions of the Federal Home Loan Bank Board (FHLBB) in the regulation, supervision, and examination of the affairs of Jefferson;

(b) to willfully misapply monies, funds, assets, and credits of Jefferson in violation of 18 U.S.C. § 657; (c) to make false entries in the records, reports, and statements of Jefferson, in violation of 18 U.S.C. § 1006;

(d) to defraud the United States by impeding, impairing, obstructing and defeating the lawful governmental functions of the Internal Revenue Service in the ascertainment, computation, assessment, and collection of revenue, namely, income taxes; and

(e) to make and file with the Internal Revenue Service false income tax returns in violation of 26 U.S.C. § 7206(1).

Regarding the underlying substantive federal offenses referenced, establishing an offense under 18 U.S.C. § 657 requires proof that the accused was an officer, agent or employee of, or connected in some way with, a federally insured savings and loan association, he willfully misapplied funds of the association, and he acted with intent to injure or defraud the association. ⁹ To establish a false entry in violation of 18 U.S.C. § 1006, the government must prove that the accused was an officer, agent, or employee of a lending institution authorized by and acting under the laws of the United States, that he knowingly and willfully made, or caused to be made, a false entry concerning a material fact in a book, report, or statement of the institution, and that he acted with the intent to injure or defraud the institution or any of its officers, auditors, examiners, or agents. ¹⁰ A violation of 26 U.S.C. § 7206(1) is established by proof that the accused willfully made and subscribed to a tax return, the return contained a written declaration that it was made under penalties of perjury, and the accused did not believe that the return was true as to every material matter. ¹¹

A rational jury could have found the following based on the evidence presented. Jefferson was a financially troubled institution, owned by Guillermo Cartaya. Mann and GMAC were interested in acquiring Jefferson. Mann and GMAC had become acquaintances through various business dealings. Mann dropped out of the acquisition group, in part because of concern that his prior bankruptcy might concern regulators. GMAC, principally through Moore, and Mann hatched a byzantine scheme to acquire Jefferson by stealing $4 million of the institution's own assets. This fraud was effected when Mann purchased the Tartan properties for $9.6 million, and simultaneously sold the properties to Jefferson for $13.8 million, thus clearing a $4.2 million profit. Mann ultimately kept part of the profit, and transferred part of the profit to GMAC, who then used the funds to buy Jefferson.

Mann located the Tartan properties, which were for sale. In dealing with the sellers, Mann purported to be acting as an agent or "trustee" for Jefferson, even though GMAC had not yet acquired Jefferson. Mann used a company he had incorporated a few months earlier, Camco Financial Corporation (Camco), in the course of negotiations to buy the Tartan properties. Mann negotiated a $9.6 million purchase price with Forbes Gordon, acting on behalf of the owners of the properties. Mann testified in a civil deposition that he dealt exclusively with Moore in negotiating to sell the properties to Jefferson, and that Moore knew what Mann was paying for the properties. In December of 1982, Moore and Fred White, who wanted to remain as president of Jefferson, caused Jefferson to wire $13.8 million in cash from Jefferson to Mann's Camco "trustee account." Of these funds, $9.6 million went to the sellers of the Tartan properties. The properties were assigned to Jefferson. In monthly and quarterly filings with the FHLBB, Jefferson reported assets based on the $13.8 million price it had paid for the Tartan properties, rather than the $9.6 million price Mann had paid.

Of the $4.2 million profit Mann made on the purchase and simultaneous sale of the Tartan properties, Mann proceeded to funnel $4 million to GMAC, who ultimately used the funds to acquire Jefferson. The transactions that followed in the space of a few days could not have been less straightforward. Hitting the high points, Mann kept $200,000 of the profit. Camco paid off $4 million in debt on a shopping center owned by Parkway Square Joint Venture, in which Moore and Gallaher had an interest. The shopping center was transferred to Parkway South Development Corporation (PSDC), a company controlled by Moore and Gallaher. PSDC issued a $4 million promissory note to Camco (the PSDC note). Jefferson paid PSDC approximately $6 million in cash and three parcels of land for the shopping center. PSDC transferred approximately $5 million in cash to GMAC, and GMAC executed a note to PSDC. The GMAC partners also individually signed $900,000 notes payable to PSDC. GMAC paid Cartaya, the owner of Jefferson, $5 million in cash for his stock in Jefferson. Cartaya transferred $1.5 million in cash to PSDC and received three parcels of land. Mann later sold the $4 million PSDC note to Alsup and Christensen for approximately $1 million in cash, property and a note. Payments were not made on the PSDC note. For years after GMAC acquired Jefferson, PSDC filed tax returns identifying a $4 million "loan from stockholders," rather than revealing $4 million in income to GMAC that was used to acquire Jefferson.

Two former members of the Jefferson board testified that the old board had not approved the acquisition of the oil and gas properties, and that a board resolution purporting to state otherwise was false. A rational jury could find that Moore or another conspirator fabricated the board resolution approving the transaction before GMAC acquired Jefferson.

A rational jury could find that the price Jefferson paid for the Tartan properties was grossly inflated. First, the very nature of the transactions support such a finding. Mann and Gordon, on behalf of the sellers, reached an arms-length price that was $4.2 less than the price Jefferson paid. The incentive on the part of those who controlled Jefferson to cause Jefferson to overpay is manifest: GMAC were thereby able to use Jefferson's own federally insured deposits to acquire Jefferson; Mann personally profited by over $1 million; and Cartaya was able to unload his troubled institution and walk away with approximately $5 million in cash and real estate. The rank self-dealing, by itself, is compelling evidence that Jefferson paid too much. The complex nature of the...