U.S. v. Rochester

• Decision Date: 06 April 1990
• Docket Number: 89-1068,Nos. 88-7037,s. 88-7037
• Citation: 898 F.2d 971
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Louis ROCHESTER, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 971

898 F.2d 971

UNITED STATES of America, Plaintiff-Appellee, v. Louis ROCHESTER, Defendant-Appellant.

Nos. 88-7037, 89-1068.

United States Court of Appeals, Fifth Circuit.

April 6, 1990.

Rehearing and Rehearing En Banc Denied May 11, 1990.

John H. Hagler, Dallas, Tex., for defendant-appellant.

LeRoy Morgan Jahn, Asst. U.S. Atty., Helen M. Eversberg, U.S. Atty., Philip Police, and W. Ray Jahn, Asst. U.S. Attys., San Antonio, Tex., for plaintiff-appellee.

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

Before WISDOM, JOHNSON and DUHE, Circuit Judges.

JOHNSON, Circuit Judge:

Louis Rochester was charged in a twenty-five count indictment with various violations of federal law stemming from a loan commitment by an Odessa, Texas, savings and loan. The indictment included a forfeiture provision pursuant to 18 U.S.C. Sec. 1963.

A jury found Rochester guilty of four counts. Specifically, Rochester was convicted of Count 16 (mail fraud in violation of 18 U.S.C. Sec. 1341), Count 17 (misapplication of funds of a federally insured institution in violation of 18 U.S.C. Sec. 657), Count 18 (false entry in a loan record in violation of 18 U.S.C. Sec. 1006) and Count 19 (fraudulent participation in a loan transaction in violation of 18 U.S.C. Sec. 1006). Punishment was assessed at five years' probation as to all four counts, ordered to run concurrently. Additionally, the court ordered Rochester to make restitution in the amount of $15,453.70. The court also ordered Rochester to pay a fine, perform community service and reside for six months in alternative housing. Rochester timely appealed to this Court.

At the sentencing hearing, the trial judge stated that the Federal Savings and Loan Insurance Corporation (hereinafter FSLIC) had requested entry of an order of restitution. The trial court ultimately entered such an order, over Rochester's objection, directing that Rochester pay to the FSLIC the sum of $7,180,099.46. Rochester timely appealed from this order.

I. BACKGROUND

The facts established at trial outline appellant Rochester's involvement in Odessa Savings (hereinafter referred to as Odessa). Rochester was an early board member of Odessa, stepping into that position in 1959. By 1974, Rochester owned in excess of ten percent of the stock of Odessa. During that year, Odessa sought to participate in a joint venture land development project. The land was to be developed by Rochester. Because of the Federal Home Loan Bank Board's (FHLBB) prohibition against members of the board of a savings and loan placing themselves in positions raising a potential conflict of interest, Odessa sought authority to participate in the transaction from the FHLBB. In the course of seeking this authorization, A.H. "Happy" Dyer, Odessa's chief executive officer, disclosed to the FHLBB the personal interest of Rochester.

The FHLBB's ultimate approval was conditioned, among other things, on the resignation of Rochester as a director and on Rochester divesting himself of enough stock to reduce his sharehold to less than ten percent. After his resignation from the board, Rochester was permitted to remain as an advisory director. Furthermore, the testimony and evidence produced at trial indicate that Rochester did not fully sever his ties to a more than ten percent ownership share of Odessa. Instead, Rochester transferred his excess stock to associates or to his son, each of whom held it for Rochester's benefit. These transferees paid the dividends received on the stock to Rochester, and conveyed the stock back to Rochester upon his request.

Over the next ten years, Odessa entered into numerous joint venture agreements with Rochester. Odessa provided the financing for these ventures and Rochester acted as the managing partner. To facilitate Odessa's joint venture activities, Mid-Central Financial Group, Incorporated was formed in 1981 to hold all the stock in Odessa. Prior to the formation of Mid-Central, a director borrowing from Odessa in connection with a real estate transaction in which he held an interest was limited by applicable federal regulations to ten percent; sometime subsequent to the formation of Mid-Central, that figure was increased to twenty-five percent. In 1981, Rochester held eight percent of Odessa's stock in his own name. In 1984, Rochester owned twenty-three percent of Mid-Central stock in his own name.

The charges in the instant case stem from a series of transactions commencing in 1984. In that year, James Pruett, a real estate developer in Arlington, Texas, contacted Rochester regarding Odessa's willingness to participate in a land development project. Pruett's project, "Stagecoach Estates," consisted of 110 acres to be developed as single family residences.

On April 18, 1984, subsequent to Rochester's initial contact with Pruett concerning the Stagecoach venture, a report of examination by the Texas Savings and Loan Department was presented to Odessa. This report indicated that Odessa had exceeded its loan limit to a single borrower and indicated that Rochester could borrow no more money from Odessa. Rochester, as the director charged with reviewing reports from federal and state examiners, presented this report to the Odessa Board.

At or around May of 1984, Rochester approached David Baum, then president of Odessa, about the possibility of Odessa entering into the Stagecoach development project which was ostensibly owned by Pruett. Rochester did not indicate any personal involvement on his part. In late May of 1984, the board adopted a resolution authorizing Odessa to grant a loan to and enter into a profit sharing agreement with Pruett.

Though present at the meeting at which the resolution passed, Rochester did not disclose his interest. The board members later testified that they had no knowledge that Rochester was to have a twenty-five percent interest in the project, believing that only Pruett and his company were involved. At one early board meeting, another director asked Rochester if, because of his expertise in such matters, Rochester might oversee the project and look after Odessa's interest. Rochester agreed but did not disclose his personal interest. On another occasion, Baum specifically asked Rochester if he had any interest in Stagecoach. Rochester replied that the entire interest was Pruett's.

Pruett and Odessa signed a letter of intent on May 30, 1984. A commitment letter was signed by Baum for Odessa Savings on July 12, 1984, and sent to Pruett. Pruett then began the initial work to develop the property. At one point during that summer, Pruett and Rochester executed an agreement splitting Pruett's interest in Stagecoach Estates between himself and Rochester. This split included both the profits and the obligations. This agreement was signed on the day of the closing of the loan and participation agreement, August 13, 1984. Odessa committed to loan Pruett's company $8 million, and entered into a fifty percent participation agreement. Pruett, whose financial statements reflected assets in excess of a million dollars, personally guaranteed the loan. Odessa officials were unaware of the side agreement between Pruett and Rochester.

Throughout the development process, Baum received periodic financial information from Michael Dulle, Pruett's chief financial officer. Dulle submitted these reports on a regular basis at Rochester's request. The payment of a profit-share to Rochester was reflected in the financial report for April of 1986. When Baum received this report, he sent it to Dyer, still Chairman of the Board, redlining the disbursement to Rochester. When Baum questioned Pruett as to the payment, Pruett indicated that it was a management fee.

After the closing, Baum approved the funding requests on the project as Pruett submitted them. As of the date of trial, roughly $7,500,000 had been drawn on the loan commitment. The project proved not to be profitable, and James Pruett Construction owed approximately $6,000,000 in principal and $1,000,000 in interest to Odessa.

Rochester was charged in a twenty-five count indictment with various violations of federal law. After he entered a plea of not guilty, the case proceeded before a jury. The jury acquitted Rochester on all but the four counts previously enumerated. The district court sentenced Rochester and ordered restitutionary relief in favor of the FSLIC.

Rochester asserts twelve grounds of error in this appeal encompassing challenges to the sufficiency of the evidence, challenges to the jury instructions, a double jeopardy challenge and challenges to the propriety of the restitutionary awards. ¹

We address each of these areas in turn.

II. DISCUSSION

A. Sufficiency of the Evidence

In ruling on a challenge to the sufficiency of the evidence, this Court must examine the evidence in the light most favorable to the Government with all reasonable inferences and credibility choices made in favor of the verdict. Glasser v. United States, 315 U.S. 60, 62 S.Ct. 457, 86 L.Ed. 680 (1942). If the evidence, when viewed in this light, is such that a rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt, this Court must affirm. Jackson v. Virginia, 443 U.S. 307, 99 S.Ct. 2781, 61 L.Ed.2d 560, reh'g denied, 444 U.S. 890, 100 S.Ct. 195, 62 L.Ed.2d 126 (1979).

In Count 16 of the indictment, the Government alleged that Rochester attempted to defraud the United States by executing a side agreement with Pruett and subsequently concealing from Odessa the one-half of Pruett's interest which was conveyed to Rochester. Specifically, the Government charged that Rochester committed the offense of mail fraud by causing a "loan commitment letter from Odessa Savings to James Pruett" to be mailed in violation of 18 U.S.C. Sec. 1341. In Count 17, the Government alleged that Rochester misapplied monies and funds totalling approximately $8 million in violation of 18 U.S.C....