U.S. v. Schuchmann, 95-10212

• Decision Date: 24 May 1996
• Docket Number: No. 95-10212,95-10212
• Citation: 84 F.3d 752
• Parties: UNITED STATES of America, Plaintiff-Appellant, v. Bernard SCHUCHMANN, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 752

84 F.3d 752

UNITED STATES of America, Plaintiff-Appellant, v. Bernard SCHUCHMANN, Defendant-Appellee.

No. 95-10212.

United States Court of Appeals, Fifth Circuit.

May 24, 1996.

Susan B. Cowger, Office of the United States Attorney, Dallas, TX, for United States of America, plaintiff-appellant.

Gary Alan Udashen, Milner, Lobel, Goranson, Sorrels, Udashen and Wells, Dallas, TX, Douglas Paul Lobel, Kelley, Drye and Warren, Washington, DC, for Bernard Schuchmann, defendant-appellee.

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

Before POLITZ, Chief Judge, and GOODWIN ¹ and DUHE, Circuit Judges.

DUHE, Circuit Judge:

The government appeals the district court's judgment of acquittal. Because the government did not prove the knowledge element of the alleged crimes beyond a reasonable doubt, we affirm.

BACKGROUND

In early 1985, Bernard Schuchmann purchased Taos Savings & Loan and renamed it First American Savings Bank ("FASB"). In February 1985, Schuchmann obtained approval to charter a new institution, American Federal Savings Bank, which was later renamed Americity Federal Savings Bank ("Americity"). Under the banking regulations, Schuchmann had twelve months to capitalize this new institution.

Schuchmann solicited several business colleagues to invest in Americity. Among these investors was Steve Sloan, a businessman who had a prior business relationship with Schuchmann and FASB. Sloan agreed to purchase $645,000 worth of the newly issued stock. Although other investors obtained loans from FASB to invest in Americity, Sloan was unable to do so because he previously borrowed a substantial sum of money from FASB and FASB's loans-to-one-borrower limit precluded an additional loan.

As a result of this limitation, Sloan asked his administrative assistant, Laura Bentley, to request a loan from FASB for $210,000. Bentley completed a loan application and signed a promissory note, both provided to her by Sloan. On the application she listed $21,000 as her monthly salary, $48,000 as her savings, and $9,600 in director's fees, dividends, interest, and bonuses. Sloan then signed a promissory note in Bentley's favor and gave her a letter, made out "to whom it may concern," describing his own responsibility for repaying the money.

Bentley had no contact with anyone at FASB about her loan before it was approved. Schuchmann personally granted the loan and $210,000 was wired into Bentley's personal account. Bentley then wrote Sloan a check for $210,000, and Sloan thereafter provided her with the funds to make the loan payments. Bentley paid the loan off with interest.

The jury found Schuchmann guilty as charged. After the jury returned its verdicts, the district court granted a judgment of acquittal pursuant to Federal Rule of Criminal Procedure 29 and conditionally granted a new trial.

DISCUSSION

Under Rule 29, a trial judge "has the duty to grant the motion for judgment of acquittal when the evidence, viewed in the light most favorable to the government, is so scant that the jury could only speculate as to defendant's guilt." United States v. Herberman, 583 F.2d 222, 231 (5th Cir.1978). In reviewing challenges to the sufficiency of the evidence, we view the evidence in the light The jury found Schuchmann guilty of conspiracy to defraud the United States and Federal Home Loan Bank Board and to violate 18 U.S.C. §§ 1006, 657 in violation of 18 U.S.C. § 371 (count one); ² making false entries in bank records in violation of 18 U.S.C. § 1006 (counts two through four); ³ and willful misapplication of funds in violation of 18 U.S.C. § 657 (count five). ⁴ The defendant's knowledge is an essential element of all five counts of conviction. Thus, the government must prove beyond a reasonable doubt that Schuchmann knew in October 1985, when he made the Bentley loan, that the loan was made for Sloan's benefit.

                most favorable to the jury verdict and will affirm "if a rational trier of fact could have found that the government proved all essential elements of the crime beyond a reasonable doubt."  United States v. Castro, 15 F.3d 417, 419 (5th Cir.), cert. denied, --- U.S. ----, 115 S.Ct. 127, 130 L.Ed.2d 71 (1994).   If, on the other hand, "the evidence viewed in the light most favorable to the prosecution gives equal or nearly equal circumstantial support to a theory of guilt and a theory of innocence, the conviction should be reversed."  United States v. Pennington, 20 F.3d 593, 597 (5th Cir.1994)
                

Our task, therefore, is to review the evidence bearing on Schuchmann's mens rea and determine whether a jury could reasonably infer from this evidence that he made the loan to Bentley knowing it was really for Sloan. After a careful review of the record, we hold that the district court properly granted the judgment of acquittal. Although jury verdicts should be overturned with great hesitancy, the evidence viewed as a whole does not meet the constitutionally high standard of proof beyond a reasonable doubt.

There were only two witnesses at the trial who testified regarding Schuchmann's knowledge of the Bentley loan, Don Faraone and Laura Bentley. Steve Sloan, as an indicted co-defendant, did not testify. Laura Bentley, the straw borrower, testified that she did not know whether Schuchmann knew that Sloan would receive the loan proceeds:

THE COURT: So I'm understanding this, you don't know of your own personal knowledge whether Mr. Schuchmann knew about the real deal on the two hundred ten thousand dollar loan, that Sloan was really getting the money. Is that what you are telling us?

BENTLEY: I have no personal knowledge. (R. 9, p. 50)

When Bentley characterized her activities with Sloan as "deceptive," the court again asked for clarification:

THE COURT: Ma'am, I'm not clear about something. When did you come to the conclusion that it was deceptive? Are you saying you didn't think it was back then?

BENTLEY: Again, that wasn't my focus. I know the fact that it was very private and not to be talked about other than between Steve and myself. (R. 10, p. 107)

Although Bentley had no personal knowledge of Schuchmann's involvement, the government argues that there was insufficient information about Bentley's creditworthiness Even if Schuchmann knew Bentley's income information was incorrect, however, the evidence shows that Bentley's family wealth provided Schuchmann a legitimate reason for approving the loan. Bentley admitted that it was likely that Schuchmann knew about her family wealth at the time her loan was approved. She testified that the director's fees listed on her loan application were from her service on the Board of Directors of the Trident Corporation, a large and successful corporation owned by her father. Eric Stattin, the only expert witness with underwriting experience, testified that a banker would consider the wealth of the borrower's family in deciding whether to approve a loan:

                on her loan application to justify the loan, and therefore, Schuchmann must have known that Bentley was a nominee for Sloan.   On the loan application, Bentley listed $21,000 as her monthly salary, $48,000 as her savings, and $9,600 additional income from director's fees, dividends, interest, bonuses, and commissions.   Bentley testified that the income she had mistakenly listed as monthly was really her yearly income.   Because Schuchmann knew about Bentley's employment as Sloan's administrative assistant, the government contends that Schuchmann would have recognized this error and concluded that Bentley was not qualified for the loan
                

Question: Would it be reasonable, in your professional opinion, for the banker, in determining whether or not to make a loan, to take into consideration the wealth of the borrower's family?

Stattin: Yes. (R. 20, p. 74)

Moreover, the government's witness William Gilligan testified to this reality:

Question: And a lender might take into consideration things that are not shown in the loan application or anything else that he sees in paper?

Gilligan: That's right, sure.

Question: I mean, there are things like the wealth of the borrower's family. Those are things that any lender would consider, is it not?

Gilligan: I would, yes. I think most would. (R. 15, p. 208)

This testimony demonstrates that Schuchmann may have believed that Bentley was qualified for the loan and thus permits the inference that Schuchmann was acting with lawful intent.

The first, perhaps only, conversation that Bentley had with Schuchmann concerning the loan further connects Bentley's credit standing to her family wealth. Bentley was uncertain of when the conversation took place, her best estimate putting it in August of 1986. Schuchmann told Bentley that the bank examiners had flagged her loan and some others and were questioning them. Schuchmann then told Bentley:

[H]e had taken care of it. He had spoken to the examiners himself and he was taking care of the questions that they had raised. And that he had mentioned to them about the wealth of my father, and that he was going to personally vouch for my good credit standing. And that if anybody approached me, questioning me about this loan, any examiner, then I was to not respond, but to tell Bernie about it and he would handle it. (R. 10, p. 148-49)

The government argues that this conversation proves that Schuchmann knew about the nominee nature of the loan and wished to deceive the FHLBB about it. We disagree. This testimony provides equal circumstantial support to a theory of innocence, indicating that Schuchmann believed Bentley's family wealth played a role in assessing her creditworthiness. Sloan's involvement in the loan was not acknowledged during this conversation, and the government failed to prove the impropriety of Schuchmann's request that Bentley refer questions about her loan to him.

Bentley's understanding of her arrangement with Sloan further supports the defense's position that Schuchmann expected Bentley to bear...