U.S. v. Pettigrew

• Decision Date: 11 March 1996
• Docket Number: Nos. 94-50182,94-50183,s. 94-50182
• Citation: 77 F.3d 1500
• Parties: 44 Fed. R. Evid. Serv. 152 UNITED STATES of America, Plaintiff-Appellee, v. Hal PETTIGREW, Craig Walker, and Chad Powell, Defendants-Appellants. UNITED STATES of America, Plaintiff-Appellee, v. George MONTAGUE, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1500

77 F.3d 1500

44 Fed. R. Evid. Serv. 152

UNITED STATES of America, Plaintiff-Appellee, v. Hal PETTIGREW, Craig Walker, and Chad Powell, Defendants-Appellants.

UNITED STATES of America, Plaintiff-Appellee, v. George MONTAGUE, Defendant-Appellant.

Nos. 94-50182, 94-50183.

United States Court of Appeals Fifth Circuit.

March 11, 1996.

Samuel J. Buffone, Washington, DC, James A. Rolfe, Dallas, TX, Ropes & Gray, Washington, DC, Thomas B. Smith, Washington, DC, Jack Paul Leon, San Antonio, TX, for Hal Pettigrew.

John W. Sweeney, Jr., Douglas, Kessler, & Wuester, P.C., Fort Worth, TX, for Craig Walker.

John Fahle, Gerald Goldstein, Goldstein, Goldstein & Hilley, San Antonio, TX, for Chad Powell.

Michael P. Carnes, Dallas, TX, Terrance G. Reed, Reed & Hostage, Washington, DC, for George Montague.

Solomon L. Wisenberg, Richard L. Durbin, Jr., Asst. U.S. Attys., James H. DeAtley, Acting U.S. Atty., San Antonio, TX, for U.S.

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

Before WISDOM, GARWOOD and JONES, Circuit Judges.

GARWOOD, Circuit Judge:

Defendants-appellants Hal Pettigrew (Pettigrew), Chad Powell (Powell), George Montague (Montague), and Craig Walker (Walker) appeal their convictions for alleged criminal activities relating to their dealings with Victoria Savings Association (VSA). We affirm in part, reverse in part, and in part reverse and remand for a new trial, as well as partially remanding for resentencing.

Facts and Proceedings Below

During 1986, Pettigrew engaged in three real estate transactions involving VSA that later became the subject of the present indictment. In each of these transactions, Pettigrew would purchase property on the open market which he would then sell to third party buyers who received financing for the purchase through VSA. The loans made by VSA to the third party purchasers were allegedly over funded, with the excess profits being disguised through the use of sham liens on the properties. Pettigrew would then use these excess funds to purchase "real estate owned" (REO) that VSA had acquired through foreclosure, thereby allowing VSA to remove those properties from its books without suffering any loss due to depressed real estate values. The first of these transactions, referred to as the "Irving/River Run" transaction, occurred in November 1986. William Snider (Snider), acting as trustee for Llano Land Services (Llano Land), a Pettigrew-controlled company, purchased approximately 55 acres of land located in Irving, Texas, for $6.5 million. Later the same day, Snider sold the property to Linus Baer and Carl Bohn, buyers allegedly located by VSA chairman Rupert Hays (Hays) and Powell, for $12,000,020. The approximately $5.5 million profit on the sale was disguised by placing a $5 million sham lien on the property in favor of Loch P. Lomond Production Company (Loch P. Lomond), another Pettigrew-controlled entity. Llano Land then used the $5 million to purchase the River Run Condominiums from VSA, removing them from VSA's inventory of REO. Upon the advice of attorney Ray Williamson (Williamson), Pettigrew sent a letter to VSA purporting to detail the terms of the transaction.

The next transaction, known as "McPherson Park/Luck Field," was similar in its details to the Irving/River Run deal. In December 1986, Donald Johnson, acting as trustee for Crown Oaks Employee Profit Savings Trust (COEPST), another Pettigrew entity, purchased Luck Field for approximately $4.8 million. In January 1987, COEPST sold the Luck Field property to McPherson Park, Ltd. (McPherson Park), a buyer selected by VSA, for approximately $12.5 million financed by VSA. Again, a sham lien for $10 million was placed on the property in favor of Midwest Credit Company (Midwest Credit). Following the closing, $6,100,000 was placed in certificates of deposit held by VSA. Montague sent a letter to Hays at VSA purporting to disclose the terms of the transaction.

The third transaction, known as "Cottonwood/White's Branch," began with the purchase of 205 acres of land for $4,150,000 by Craig Walker (Walker) through his Cottonwood Capital Corporation (CCC), acting as trustee for Pettigrew. The property was sold one week later to White's Branch, Inc. for approximately $6.9 million, financed in part by a $3,100,000 loan from VSA. A lien in favor of Rand Financial Corporation (Rand) was placed on the property for $2.5 million. Once again, Montague sent a letter to Hays purportedly setting forth the terms of the transaction. Approximately $1 million in profits from the McPherson Park/Luck Field and Cottonwood/White's Branch transactions were used to make "commission payments" to one H.E. Preble through an account at VSA which funds were ultimately used to pay delinquent interest on a note held by VSA.

Although the offenses for which the appellants were convicted relate predominantly to the three transactions described above, three additional real estate transactions are relevant to Powell's convictions. During the fall of 1986, R. Mark Pitzer (Pitzer) and Ronnie E. Collins (Collins) approached Hays and Powell at VSA seeking refinancing of notes held on a property referred to as "Barthold Road." VSA allegedly conditioned the refinancing on Pitzer and Collins' agreement to purchase two pieces of VSA's REO, the Cheyenne Plaza Shopping Center (Cheyenne Plaza) and Frankfort Square Shopping Center (Frankford Square), using $800,000 in excess funds to be included in the Barthold Road loan. Attorney J. Mark Hesse (Hesse), Pitzer and Collins' attorney, acted as a third party purchaser of the properties acting through his company, Proformance Incorporated (Proformance), using the excess funds from the Barthold Road loan to make the downpayments. Hesse additionally received "bottom" fifty percent liability on the Cheyenne Plaza and Frankford Square notes. VSA also allegedly agreed to include an additional $700,000 in the Barthold Road loan to secure the cooperation of Pitzer and Collins. Powell was allegedly aware of the structure of the transaction, yet signed loan committee applications that failed to disclose that the purpose of the loan was to finance the purchase of REO from VSA.

A second transaction involved a VSA loan of $6 million to Pitzer and Collins through their Bloomdale Road Joint Venture # 1 (Bloomdale Road) purportedly for the purchase of 149 acres in McKinney, Texas. However, the government alleged that the loan was overfunded by approximately $3 million, which was used for the personal benefit of Hays, Powell, Pitzer, and Collins. For example, Powell purchased Hays' share of the Fall Creek Ranch with the proceeds of a sale of a partial interest in the Fall Creek Ranch venture to Pitzer and Collins. Pitzer and Collins had purchased that interest from Powell with a loan from Union Bank which was collateralized by CD's purchased with the proceeds of the Bloomdale Road loan. Once again, it is alleged that Powell was aware that the Bloomdale Road loan was overfunded yet failed to disclose this fact to VSA on committee loan applications that he signed as a VSA officer.

The third transaction involved Powell's receipt of a loan through his wholly-owned company, Royston Properties, Inc. (Royston loan). Powell obtained this loan for the purpose of paying interest on a note (Santexco note) held by First City Bank on which Hays was the guarantor. Hays' interest in the loan was not disclosed to VSA.

On June 23, 1993, a grand jury convened in the Western District of Texas returned a thirty-six count indictment naming Pettigrew, Powell, Montague, and Walker, as well as seven other defendants. The indictment charged the defendants with two conspiracies, as well as numerous substantive offenses relating to their dealings with VSA, primarily bank fraud (18 U.S.C. § 1344(a)(1)) and the making of false entries in the books or records of a lending institution (18 U.S.C. § 1006). Four defendants, including Hays, pleaded guilty either before or during the early stages of the trial, while three others were acquitted by the jury.

Following trial, Pettigrew was convicted of two counts of conspiracy, two counts of bank fraud (18 U.S.C. § 1344), three counts of aiding and abetting false entries in the records of a lending institution (18 U.S.C. § 1006), and one count of money laundering (18 U.S.C. § 1957). Powell was convicted of the two conspiracy counts as well, along with six counts of making false entries (18 U.S.C. § 1006), five counts of aiding and abetting insider participation in the receipt of loan proceeds with the intent to defraud VSA and an agency of the United States (18 U.S.C. § 1006), two counts of bank fraud (18 U.S.C. § 1344(a)(1)), and one count of misapplication of funds (18 U.S.C. § 657). Walker and Montague were both acquitted of the two conspiracy counts charged in the indictment. However, Walker was convicted of one count of aiding and abetting bank fraud and one count of aiding and abetting the making of false entries, while Montague was convicted of two counts of bank fraud (18 U.S.C. § 1344(a)(1)) and three counts of aiding and abetting the making of false entries (18 U.S.C. § 1006). Appellants now bring this appeal.

Discussion

I. Instructional Errors

The trial court's refusal to include a requested instruction in the charge to the jury is usually reviewed for abuse of discretion, and the court is given substantial latitude in formulating the charge. United States v. Storm, 36 F.3d 1289, 1294 (5th Cir.1994), cert. denied, --- U.S. ----, 115 S.Ct. 1798, 131 L.Ed.2d 725 (1995). Generally, refusal to include a requested instruction is reversible error only if the requested instruction is substantially correct, the actual charge given the jury did not substantially cover the content of the proposed instruction, and the omission of the proposed instruction would seriously impair the defendant's ability to present a defense. Id; United States v. Correa-Ventura, 6...