U.S. v. Mmahat

• Decision Date: 07 February 1997
• Docket Number: No. 95-30154,95-30154
• Citation: 106 F.3d 89
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. John A. MMAHAT and Joseph C. Mmahat, Jr., Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 89

106 F.3d 89

UNITED STATES of America, Plaintiff-Appellee, v. John A. MMAHAT and Joseph C. Mmahat, Jr., Defendants-Appellants.

No. 95-30154.

United States Court of Appeals Fifth Circuit.

Feb. 7, 1997.

Thomas M. Gannon, Department of Justice, Criminal Division, Washington, DC, Eileen Gleason, US Attorney's Office, New Orleans, LA, for plaintiff-appellee.

Thomas Aquinas Kehoe, Harahan, LA, for Joseph C. Mmahat, Jr., defendant-appellant.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before HIGGINBOTHAM, SMITH and BARKSDALE, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

John Mmahat and Joseph Mmahat, Jr., have brought appeals from their convictions for misapplying bank funds, making false entries in bank records, making false statements to influence a federal agency, and conspiracy to commit each of the same. We affirm John Mmahat's conviction and affirm in part and vacate in part Joseph Mmahat's conviction.

I.

John and Joseph Mmahat, who are brothers, were chairman and president, respectively, of Gulf Federal Savings Bank ("Gulf"), a federally insured financial institution in Metairie, Louisiana. In April 1983, an audit by the Federal Home Loan Bank Board ("FHLBB") showed that Gulf was essentially insolvent and that some of its commercial loans were unlikely to be paid back. The FHLBB commenced a follow-up audit of Gulf in November 1984.

The audit placed the Mmahats in a precarious position. If Gulf were to close, they would lose their considerable investments in the thrift; John Mmahat additionally would lose the substantial stream of income his law firm received from work associated with Gulf's loan closings, and Joseph Mmahat his six-figure salary. The Mmahats thus undertook to have Gulf make sham loans to shell corporations and loan swaps with other banks so as to conceal its weak financial position.

The effect of these transactions was temporarily to decrease Gulf's delinquent loan balance and inflate its income on its 1984 financial statement. Ultimately, however, the scheme failed, and Gulf went into receivership in November 1986.

The first of the sham loans stemmed from a transaction involving CPA Associates ("CPA"), an investment partnership that previously had acquired a set of town homes in Gretna, Louisiana, known as Cypress Park, with the intention of converting them into condominiums. Gulf had financed this original purchase with a $2,069,000 loan. By late 1984, however, CPA was seriously delinquent on this original loan, and Gulf was considering foreclosure. Instead of having Gulf foreclose, the Mmahats arranged for Cypress Park to be purchased by K & K Financial Services ("K & K"), a company owned by codefendant William Mulderig. Thus on December 28, 1994, K & K bought Cypress Park from CPA Associates for $2,069,000, and Gulf loaned K & K slightly more than that amount.

The second loan was similar. In the early 1980's, Gulf had financed the purchase by Ronald Frank of an apartment complex called Nel Place. A downturn in the real estate market made Frank unable to meet his monthly loan payments, and Gulf determined that the value of the apartments did not support the loans. Rather than foreclose, however, Gulf persuaded Mulderig to purchase Nel Place and replaced the failing loan with one to Dermul Management ("Dermul"), one of his companies. On December 28, 1984, Frank sold Nel Place to Dermul for $1,632,730, and Gulf loaned Dermul that amount plus a substantial amount of excess cash, secured by a deed of trust for property Mulderig owned in Goshen, New York.

The gravamen of most of the charges against the Mmahats is that the K & K and Dermul loans were closed in haste in order to deceive FHLBB regulators and that Gulf's lending policies and procedures were violated. Specifically, the K & K loan was never authorized by Gulf's loan committee; no mortgage was ever obtained on the property in Goshen that was to secure the excess on the Dermul Management loan; the documentation on the Dermul management loan was substantially incomplete at the time it was executed; and nobody involved in the Dermul or K & K loans had individual authority to make them.

Further to bolster Gulf's apparent financial position, John Mmahat also orchestrated an exchange of questionable loans with First Progressive Bank ("First Progressive"). On December 20, 1984, Gulf's loan committee considered six prospective loan participations with First Progressive and approved only one, a $200,000 loan to Philip Capitano. On December 28, 1984, John Mmahat asked two of Gulf's employees to deliver documents relating to the Cypress Park loan to First Progressive. One of the employees, David Lichtenstein, returned to Gulf with participation certificates not only for the loan that had been approved but also for one of the ones that had not, a $250,000 participation to Jack Parker.

John Mmahat hastily closed the Parker participation himself and warned Lichtenstein to keep the exchange a secret. On January 3, 1985, Lichtenstein resubmitted the Parker and Capitano participations to Gulf's loan committee under more favorable terms than those of the original proposal. The committee, despite the fact that the participations had already been funded and the loans closed, approved the two transactions. None of the Gulf personnel involved in these transactions had individual authority to make the loans.

The sham transactions thus having been completed, it remained only for the individuals involved to cover them up. In 1985, Lichtenstein and Michael Farley, one of Gulf's consumer loan officers, approached David Resha, a member of Gulf's loan committee who had not been present at the December 27, 1984, meeting. Lichtenstein and Farley induced Resha to sign a backdated and incomplete approval for the Dermul loan, which had already closed. The approval sheet was also signed by both of the Mmahats.

II.

The result of this series of events was a lengthy indictment charging both Mmahats with conspiracy to misapply bank funds (18 U.S.C. § 657), to make false entries in bank records (18 U.S.C. § 1006), and to make false statements to influence a federal agency (18 U.S.C. § 1008) (collectively, count one); substantive misapplication of bank funds (18 U.S.C. § 657) (counts three and five); and substantive making of false entries in bank records (18 U.S.C. § 1006) (count four). John Mmahat was also charged with five additional counts of misapplication of bank funds (counts six through ten).

The defendants were convicted of all the above offenses; John Mmahat was sentenced to 21 years' imprisonment and ordered to pay $2,032,000 in restitution; Joseph Mmahat was sentenced to 29 months' imprisonment and ordered to pay $46,000 in restitution. During the pendency of this appeal, Joseph Mmahat died. His counsel subsequently moved to vacate Joseph's indictment, conviction, and sentence, or in the alternative to pursue his appeal on behalf of his heirs. Because the death potentially moots some of the substantive arguments before the court, we first consider its effect on the appeal.

III.

Normally, the death of a criminal defendant during the pendency of his appeal abates the entire proceeding ab initio. United States v. Asset, 990 F.2d 208, 210 (5th Cir.1993); United States v. Schuster, 778 F.2d 1132, 1133 (5th Cir.1985); United States v. Pauline, 625 F.2d 684, 684-85 (5th Cir.1980). In Asset, however, we held that a conviction that results in a sentence of restitution presents a special circumstance, for the abatement principle is premised on the fact that criminal proceedings are penal. Asset, 990 F.2d at 211. After thoroughly analyzing the issue, we concluded that restitution has "both compensatory and penal aspects" and that the nature of any specific restitution order depends "on the purpose for which the obligation is imposed." Id. at 213.

When restitution is ordered simply to punish the defendant, it is penal and abates with the rest of his conviction. When it is designed to make his victims whole, however, it is compensatory and survives his death. Id. at 213-14. In such a case, only the portion of the proceedings unrelated to the restitution order is abated. See, e.g., United States v. Dudley, 739 F.2d 175, 179 (4th Cir.1984).

We conclude that the purpose of the restitution ordered against Joseph Mmahat was to compensate the entities that he damaged. The payments ordered were $45,000 to the Federal Savings and Loan Insurance Corporation ("FSLIC") and $1,000 to Ronald Frank. Although the district court did not make any specific findings as to the losses Joseph Mmahat caused to the FSLIC and Frank, we think it self-evident, in light of the nature of his crimes, that these entities sustained losses and that the purpose of the restitution was to compensate them.

This in turn means that only the portion of Joseph Mmahat's criminal proceeding wholly unrelated to the restitution order may be abated. Because the restitution order survives, however, we grant the motion for his heirs to continue the appeal in his stead. Furthermore, as Joseph Mmahat's substantive arguments potentially could result in a reversal of his conviction and sentence, we give them full consideration hereinbelow.

IV.

The Mmahats contend that the government violated Brady v. Maryland, 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963), by failing specifically to point the defense to a pair of allegedly exculpatory bank board resolutions. In order to establish a Brady violation, the Mmahats must show that the information allegedly withheld from them was not available through due diligence. United States v. Aubin, 87 F.3d 141, 148-49 (5th Cir.1996), cert. denied, --- U.S. ----, 117 S.Ct. 965, 136 L.Ed.2d 850 (1997); United States v. Brown, 628 F.2d 471, 473 (5th Cir.1980).

The facts surrounding this claim are unfortunate. Some months before trial, the government gave the defense access to a 500,000-page cache of documents...