U.S. v. Matt

• Decision Date: 04 June 1997
• Docket Number: No. 96-1614,96-1614
• Citation: 116 F.3d 971
• Parties: UNITED STATES of America, Appellee, v. John L. MATT, Defendant-Appellant.
• Court: U.S. Court of Appeals — Second Circuit

Page 971

116 F.3d 971

UNITED STATES of America, Appellee, v. John L. MATT, Defendant-Appellant.

No. 96-1614.

United States Court of Appeals Second Circuit.

Argued April 25, 1997.

Decided June 4, 1997.

Spiros A. Tsimbinos, Kew Gardens, NY, for Defendant-Appellant.

Elizabeth S. Riker, Assistant United States Attorney, Northern District of New York, Syracuse, NY, for Appellee.

Before: McLAUGHLIN, JACOBS, Circuit Judges, and STEIN, District Judge. ^*

PER CURIAM:

BACKGROUND

This is an appeal from the district court's judgment of conviction and sentence entered after a jury trial in which Appellant John L. Matt ("Matt") was convicted of a single count of bank fraud in violation of 18 U.S.C. § 1344. (Munson, S.J.) (N.D.N.Y.). Judge Munson sentenced Matt to a term of imprisonment of one year and one day, three years of supervised release, and a special assessment of $164,041.82.

The evidence at trial showed that at all relevant times Matt controlled three banking accounts. The first was a checking account with the Upstate Federal Credit Union ("UFCU"). The second was a checking account with Key Bank. Key Bank, for a ten dollar fee, allowed Matt to write checks against this account even though checks he had deposited in the account had not cleared. The third was a "Financial Management Account" ("FMA") with Shearson Lehman Brothers ("SLB").

Bank officials from these institutions, FBI agents, and the defendant himself testified that Matt established a scheme whereby he would float checks from one institution to the next, even though he did not have the funds on deposit to support the checks. The scheme worked as follows. Matt would pay for his business expenses with checks drawn on his SLB account. When SLB noticed that Matt did not have sufficient funds on deposit to cover the check, SLB would telephone him and tell him that he had to deposit funds. An SLB official testified that it was SLB's practice to allow customers time to bring in funds to cover overdrafts.

SLB would only accept bank checks from Matt to cover these overdrafts. Consequently, Matt would write a check drawn on his UFCU account for the amount in question, even though he had insufficient funds in his UFCU account. Because UFCU did not issue official bank checks, he would deposit the UFCU check in his account at Key Bank. For a ten dollar fee, Key Bank would allow Matt to draw a check against this account even though the account contained "uncollected funds." With the check from Key Bank (drawn on an account supported by uncollected funds), Matt would purchase a cashier's check from Key. He would then deposit this cashier's check with SLB. Matt would then write a check on his SLB account to deposit in his UFCU account to cover the original check he wrote to deposit at Key Bank, and the cycle would start over.

SLB notified Matt sometime in early May, 1992 that it would close his account in ten to fifteen days because of administrative problems. On May 18, 1992, SLB closed the account. As a result, the SLB checks on deposit with UFCU did not clear, causing the check he deposited at Key Bank to bounce. Consequently, UFCU lost approximately $104,000, and Key Bank lost approximately $124,000. UFCU was reimbursed by a surety and Matt began to pay the surety monthly payments to repay the debt. Key Bank sued Matt for the amounts owed, and eventually settled for $30,000.

The government indicted Matt on one count of bank fraud in violation of 18 U.S.C. § 1344. The government produced witnesses from each of the three banking institutions to explain Matt's arrangements. The government also produced FBI agents familiar with the investigation into Matt's affairs, both of whom testified that, in their estimation, Matt was involved in a check kiting scheme.

Matt's principal defense was that he did not intend to defraud the financial institutions because he believed that his account at SLB provided him with overdraft protection and a line of credit, which SLB would extend to him in order to cover the checks he wrote to UFCU. He testified that the termination of this line of credit is what caused UFCU and Key Bank to lose funds. In support of this defense he presented into evidence a brochure describing the Financial Management Account offered by SLB which stated that one of its available features was an "overdraft line of credit." He also produced his accountant, Michael Spohn, to testify that Matt had an overdraft line of credit with SLB, and an expert witness, Helen Chaitman, who testified that Matt had established a de facto overdraft line of credit with SLB through a course of dealing. In support of the expert's testimony, Matt noted that on at least one occasion, in September 1990, SLB had paid one of Matt's overdrafts in the amount of $7,620.53.

During trial, Judge Munson vigorously questioned Matt regarding chronology and the series of accounts he maintained. Ms. Chaitman testified that, in her opinion, SLB had extended Matt a line of credit for overdraft protection through a course of dealing. Judge Munson then questioned Ms. Chaitman on whether SLB could make a profit operating Matt's accounts in that fashion. Judge Munson then sought to clarify a portion of Ms. Chaitman's testimony in which she seemed to state that if an SLB statement showed a negative balance at the end of the month, all of the customer's checks must have been paid. The following colloquy took place:

The Court: [T]hat is not true ... is it? The checks could have been paid the last day of the month and reflect a negative balance because the deposit was also made that last day of the month and hadn't been recorded, because it was recorded after closing hours.

CHAITMAN: What I testified, your Honor--

The Court: No, I wrote it down. What you testified, you said that there couldn't be a negative balance unless the checks had been paid throughout the month. Now, that is not correct.

* * * * * *

Now, tell me what in your experience and expertise is a classic check kiting scheme?

CHAITMAN: In my experience, Your Honor, a classic check kiting scheme is a real scam.

The Court: I don't know what it is?

CHAITMAN: There's no legitimate underlying business for the flow of funds.

The Court: That is not my experience. That is all right. I don't know who you've been dealing with.

The Court then presented Chaitman with a hypothetical about a check kiting scheme, and asked, "Isn't that a check kite?" Chaitman testified that if the person's intent was to defraud the institution that was issuing the funds, then it was a check kite. However, Chaitman added it may be that the "person's intent is to borrow money because commonly businesses borrow money." The Court responded, "Not that way."

At sentencing, the district court enhanced the offense level pursuant to U.S.S.G. § 2F1.1, based on the loss incurred by the victims of the fraud. The district court took into consideration the full amount of loss incurred by the banks. Matt argued, however, that the district court should not consider those sums which he repaid to the banks after his scheme was discovered.

Matt appeals arguing that: (1) because he believed that his SLB account provided an overdraft line of credit, there was insufficient evidence of an intent to defraud, and his conviction under 18 U.S.C. § 1344 should be overturned; (2) Judge Munson denied him a fair trial by assuming the role of a prosecutor in questioning his defense witnesses; and (3) the judge should not have considered amounts he repaid when enhancing his sentence under U.S.S.G. § 2F1.1.

DISCUSSION

A. Evidence of Intent

We review sufficiency of evidence determinations de novo. United States v Sirois, 87 F.3d 34, 38 (2d Cir.), cert. denied, --- U.S. ----, 117 S.Ct. 328, 136 L.Ed.2d 241 (1996). A defendant challenging the sufficiency of evidence must persuade the court that, "viewing the evidence in the light most favorable to the government, ... no rational trier of fact could have found the essential elements of the crime charged beyond a reasonable doubt." United States v. Taylor, 92 F.3d 1313, 1333 (2d Cir.1996) (internal quotation marks and citation omitted), cert. denied, --- U.S. ----, 117 S.Ct. 771, 136 L.Ed.2d 717 (1997). To prove a violation of the bank fraud statute, the government must establish beyond a reasonable doubt that the defendant intended to defraud the bank. See United States v. Chandler, 98 F.3d 711, 715 (2d Cir.1996).

Matt argues that his testimony that he believed that he had an overdraft line of credit, coupled with the brochure explaining that an available feature of his SLB account was overdraft protection, the testimony of his accountant and expert that he had an overdraft line of credit, and the fact that SLB paid an overdraft in 1990, preclude the possibility that any rational juror could have concluded that he had the...