U.S. v. Sandlin

• Decision Date: 01 December 2009
• Docket Number: No. 08-41277.,08-41277.
• Citation: 589 F.3d 749
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. James W. SANDLIN, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

589 F.3d 749

UNITED STATES of America, Plaintiff-Appellee, v. James W. SANDLIN, Defendant-Appellant.

No. 08-41277.

United States Court of Appeals, Fifth Circuit.

December 1, 2009.

Randall A. Blake, Asst. U.S. Atty., Sherman, TX, Andrew Levchuk (argued), John Park Pearson, Trial Atty., U.S. Dept. of Justice, Crim Div., Fraud Section, Washington, DC, for U.S.

Gary Alan Udashen (argued), Sorrels, Udashen & Anton, Dallas, TX, for Sandlin.

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

Before BARKSDALE, SOUTHWICK and HAYNES, Circuit Judges.

LESLIE H. SOUTHWICK, Circuit Judge:

James Sandlin was convicted by a jury for making false statements on two loan applications in violation of 18 U.S.C. § 1014. Sandlin argues on appeal that the evidence was insufficient to sustain his convictions, that his sentence was procedurally and substantively improper, and that his conviction should be overturned on the basis of outrageous government conduct. We find no error in the conviction, and no basis to conclude that outrageous conduct occurred. We therefore AFFIRM the conviction. However, we find an absence of evidence that the omissions on his applications caused the loans to be made. We therefore VACATE and REMAND for resentencing.

I. FACTS AND PROCEDURAL HISTORY

James Sandlin was a real estate developer from Arizona who moved to Sherman, Texas. In Sherman, Sandlin met Jim and Mary Louise Ricketts, from whom he borrowed $996,000 ("the Ricketts Loan"). The loan was made in September of 2005. There is some suggestion that Sandlin agreed to pay an unusually high rate of interest, but he has met his repayment obligations. The loan was secured by property Sandlin owned in Cochise County, Arizona. Though not directly involved in the case before us, criminal investigators in Arizona who were focusing on a United States Congressman became interested in the loan. Sandlin's prosecution arose out of the Arizona investigation.

After the Ricketts Loan was obtained, Sandlin decided to develop a parcel of land in Mohave County, Arizona. In order to secure a performance bond on the project, Sandlin applied in April 2006 for a $950,000 letter of credit from the Independent Bank of Sherman. Among the assets used as collateral for the letter of credit was a certificate of deposit which was partially funded by the Ricketts Loan proceeds. The letter of credit was to be paid only upon Sandlin's failure to perform, and no call on that letter was ever made.

In the process of obtaining the letter of credit, Sandlin completed and signed a personal financial statement for Independent Bank. All financial liabilities and promissory notes were to be listed, but Sandlin did not reveal the Ricketts Loan in the required documents. Sandlin listed the Cochise County property as an asset, but did not state that it was encumbered.

Sandlin received two other extensions of credit based on the same incomplete financial information. In May 2006, Sandlin sought a separate $700,000 line of credit. Independent Bank agreed. It took a first lien on the Mohave property and cross-applied the certificates of deposit pledged to secure the original letter of credit. In November 2006, Sandlin also renewed a previously issued $1,000,000 letter of credit, referencing his earlier and faulty financial documents. Sandlin provided no further security on the renewal.

In late December 2006, Sandlin submitted a second personal financial statement, which again omitted the Ricketts Loan. Independent Bank extended two further lines of credit based on the second application form. First, Sandlin received $800,000 for the purchase of new property. Second, he renewed the $700,000 line of credit issued in May 2006. On both financial statements, Sandlin checked "yes" to the question, "Do any of your assets secure any debts which have not been reported in the previous schedules?" However, Sandlin did not reveal on either document the character or amounts of those debts.

Sandlin was indicted on two counts of violating 18 U.S.C. § 1014—one count for each financial statement omitting the Ricketts Loan. During the trial, both of the Ricketts and representatives from Independent Bank testified on Sandlin's behalf. The bank asserted that all of Sandlin's loans were fully collateralized, and that the bank had not lost any money in its transactions with Sandlin. Testimony from bank representatives revealed that the false loan documents were not required and were probably never reviewed. Nevertheless, Sandlin was convicted by a jury on both charges.

The Probation Office prepared a Pre-sentence Investigation Report ("PSR") recommending a guideline term of imprisonment between fifty-one and sixty-three months. The two counts were calculated together for the purpose of sentencing. See U.S.S.G. § 3D1.2(d). Sandlin's offense level was calculated by starting with a baseline offense level of seven under Section 2B1.1 and applying a single enhancement up to level twenty-four based on the conclusion that Sandlin had "derived more than $1,000,000 in gross receipts from one or more financial institutions as a result of the offense." U.S.S.G. § 2B1.1(b)(14)(A).¹ Sandlin objected to the "gross receipts" enhancement, noting that in its absence, his base offense level would have been seven, resulting in a term of zero to six months' imprisonment. The district court overruled Sandlin's objection, and instead applied a downward departure reducing his offense level to twenty on the rationale that the bank had not suffered any financial loss as a result of his false statements.²

II. DISCUSSION

We first review the questions raised about conviction. Sandlin claims that the proof was inadequate as to his state of mind and his specific intent in making the false statements to the bank.

A. Sufficiency of the Evidence for Conviction

When the issue has been properly preserved, as it was here, we review a claim that the evidence was insufficient by determining whether any rational trier of fact could have found the evidence to establish the elements of the offense beyond a reasonable doubt. United States v. Villarreal, 324 F.3d 319, 322 (5th Cir.2003) (citing Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 61 L.Ed.2d 560 (1979)).

The elements of guilt under Section 1014 are these: (1) the defendant knowingly and willfully made a false statement to the bank, (2) the defendant knew that the statement was false when he made it, (3) the defendant made the false statement for the purpose of influencing the bank to extend credit, and (4) the bank to which the false statement was made was federally insured. See 18 U.S.C. § 1014; see also United States v. Devoll, 39 F.3d 575, 578 (5th Cir.1994). Sandlin alleges that the Government failed to establish the second and third elements beyond a reasonable doubt.

First, Sandlin challenges the Government's proof concerning whether the false statements were "knowing and willful." We agree that the burden is not met with a showing that he "forgot" to list the Ricketts Loan.

At trial, the Government emphasized that Sandlin made regular monthly payments on the Ricketts Loan, even during the period when he filed the defective financial statements. The Government also highlighted the size of the loan—nearly one million dollars—a fact that could have led the jury to conclude that the Ricketts Loan was simply too large of an expense to forget. There was no suggestion from Sandlin's counsel other than that the loan may have been forgotten to explain its omission.

While the evidence lends itself to different interpretations, the jury has wide discretion to choose among them. See United States v. Clark, 577 F.3d 273, 284 (5th Cir.2009). To support a jury verdict, the evidence need not "exclude every reasonable hypothesis of innocence or be wholly inconsistent with every conclusion except that of guilt ..." Id. (citations and quotations omitted).

Sandlin further contends that the Government's evidence of intent weighs equally in favor of innocence and guilt, thus requiring his conviction to be overturned. There are statements in some of our opinions that where the evidence gives nearly equal circumstantial support to a theory of guilt or innocence, the defendant is entitled to reversal. E.g., United States v. Mackay, 33 F.3d 489, 493 (5th Cir.1994). However, there is no such equality here. Most of the circumstantial evidence presented at trial supports the jury's inference of guilt. Sandlin speculated that the Ricketts Loan might have been forgotten, but there was little to support his theory. Sandlin merely suggested that a person with significant wealth might forget a single loan among his many liabilities. The Government, on the other hand, demonstrated Sandlin's business savvy and his desire to obtain the extensions of credit in question, as well as the size of the Ricketts Loan and Sandlin's continued monthly payments. In fact, the evidence showed that Sandlin paid nearly $100,000 in interest alone on the Ricketts Loan during the 2006 calendar year. He also omitted the loan—which was costing him thousands of dollars in principal and interest—twice in the space of ten months. Upon reviewing the evidence, "the sole inquiry is not whether the jury's verdict was ultimately correct, but whether the jury made a reasonable decision based upon the evidence introduced at trial." United States v. Pando Franco, 503 F.3d 389, 394 (5th Cir. 2007) (citation omitted). As is its prerogative, the jury in this case found that Sandlin's actions evinced a knowing and willful state of mind. We will not disturb that finding.

Second, Sandlin contends that the Government did not present adequate evidence that he intended to induce the bank to make the loan through his failure to list the loan. This issue focused on Sandlin's subjective state of mind. A false statement need not be material nor relied upon by the bank to violate Section 1014. See United States...