U.S. v. Serrano
| Citation | 870 F.2d 1 |
| Decision Date | 05 December 1988 |
| Docket Number | 85-1913,Nos. 85-1912,88-1268 and 86-1164,s. 85-1912 |
| Parties | 27 Fed. R. Evid. Serv. 880 UNITED STATES of America, Appellee, v. Miguel A. SERRANO, d/b/a Ponce Developers, Inc., Defendant, Appellant. UNITED STATES of America, Appellee, v. Juan Luis BOSCIO, Defendant, Appellant. UNITED STATES of America, Appellee, v. William STAMPS, Defendant, Appellant. . Heard |
| Court | United States Courts of Appeals. United States Court of Appeals (1st Circuit) |
Carlos V. Garcia Gutierrez, San Juan, P.R., for defendant, appellant Juan Luis Boscio.
Blas C. Herrero, Jr., Hato Rey, P.R., for defendant, appellant Miguel A. Serrano.
Stanley Neustadter with whom Rafael Gonzalez Velez, Santurce, P.R., was on brief for defendant, appellant William Stamps.
Jorge L. Arroyo, Asst. U.S. Atty., Old San Juan, P.R., with whom Daniel F. Lopez-Romo, U.S. Atty., Hato Rey, P.R., Charles E. Fitzwilliam, Acting U.S. Atty., Jose R. Gaztambide, Asst. U.S. Atty., Rio Piedras, P.R., Criminal Div., and Carlos A. Perez, Asst. U.S. Atty., San Juan, P.R., Criminal Div., were on briefs for the United States.
Before CAMPBELL, Chief Judge, COFFIN and SELYA, Circuit Judges.
Miguel A. Serrano, Juan Luis Boscio, and William Stamps appeal from their convictions of mail and wire fraud. 18 U.S.C. Secs. 1341, 1343 (1982). We affirm the convictions of Serrano and Boscio, but vacate Stamps's conviction and remand his case for a new trial.
The defendants' convictions arose out of a series of complex financial transactions involving a number of entities in Puerto Rico. Both Serrano and Stamps worked for Shearson/American Express of Puerto Rico, Inc. ("Shearson"), a subsidiary of Shearson/American Express, Inc. Serrano was a broker and senior vice-president at Shearson; Stamps was Operations Manager at Shearson. Boscio was a local attorney, a member of the Ponce municipal assembly, and president of the board of directors of the Ponce Municipal Development Authority ("Authority"). The Authority was created by the municipality of Ponce to promote and develop new housing for the area. Along with Shearson and the Authority, the following entities were involved in the financial transactions relevant to this case: 1) Citibank; 2) Ponce Developers, Inc. ("PDI"), an entity created and owned by Serrano; and 3) Home Federal Savings and Loan Association of Puerto Rico ("Bank"), the victim of the fraudulent scheme alleged in the indictment.
In the early 1980s, the Bank was in dire financial straits; it had been losing money for several years and needed an infusion of capital to avoid bankruptcy. The Authority also needed funds to finance new housing in Ponce and to subsidize rents. In early 1982, purporting to help the Bank and the Authority raise these needed funds, Serrano arranged a series of Sale, Repurchase and Pledge of Securities Agreements, known as "REPOs" in the financial world. A REPO is essentially a short-term loan agreement whereby the lender loans money to a borrower in return for collateral such as securities owned by the borrower. A REPO may also entail the lender investing the loan proceeds on behalf of the borrower. The lender would then pay the borrower a "spread," which is the difference between the return on the investment and the interest payments the borrower owes the lender for the loan.
In arranging the REPOs in this case, Serrano opened a client account at Shearson for the Authority. As a result, the Authority began receiving monthly client account statements from Shearson. In filling out the form to open the Authority's account, Serrano listed the Bank as the "custodial agent" for assets generated by the Authority's Shearson account, although this was not the case; this automatically triggered the mailing of duplicates of the Authority's client account statements to the Bank. The receipt of these duplicate client statements led the Bank mistakenly to believe that it had an active account at Shearson and that the statements were for its own account. In fact, the Bank was not a Shearson client and did not have an account there. While Serrano did not open an account for the Bank, he opened one for PDI. In opening this account, Serrano did not disclose, as required by Shearson, that he owned PDI.
On May 19-20, 1982, the various entities entered into four related REPOs, each with a five-year term: 1) Citibank loaned Shearson $3 million in return for $3 million in collateral and a letter of credit; 2) Shearson loaned this $3 million to the Authority in return for $3 million in collateral; 3) the Authority loaned the $3 million to PDI in return for $3 million in collateral; 4) PDI loaned $2 million to the Bank in return for $3 million in collateral. The same collateral was used in all four REPOs--approximately $3 million in "Title I notes and FHA mortgages" and conventional mortgages owned by the Bank. Serrano told Bank officials that the $2 million that PDI had loaned the Bank was reinvested in a certificate of deposit ("CD") in a bank in the Bahamas. This CD earned interest at a rate of 11 1/16 percent payable every 90 days; the Bank was to be paid a spread of 1 1/3 percent from the CD.
While on the surface these complex financial transactions at first appeared legitimate to the parties involved, the evidence at trial revealed a fraudulent scheme devised by Serrano and allegedly executed with the help of Boscio and Stamps. In particular, $1 million of the $3 million loan from Shearson to the Authority was transferred to PDI's account at Shearson. Serrano ordered this transfer without the authorization of either the Authority or Shearson. The $1 million was then diverted to Serrano's own personal use. In addition, the Bank was defrauded of $1.7 million worth of mortgages it had pledged in its REPO with PDI; Citibank, the initial source of the $3 million loan and the ultimate recipient of the $3 million in mortgages pledged as collateral, apparently never received $1.7 million of the collateral, nor has it ever been located.
This fraudulent scheme was accomplished by a variety of ruses and misrepresentations: 1) Contrary to Serrano's representations to the Bank, the $2 million CD was not held in its name but in the Authority's name. Thus, the Bank never received the $2 million it was supposed to have received in its REPO with PDI. 2) Serrano, allegedly with the aid of Boscio and Stamps, kept the parties in the dark as to who they actually were dealing with. Shearson did not know that PDI (which was not even incorporated) was a front for Serrano, nor did it know of or authorize a REPO with PDI or the Bank. The Bank, based on Serrano's representations and having received the duplicate client statements, was led to believe that it was dealing directly with Shearson, that it had an asset-filled account there, and that PDI was merely a Shearson subsidiary. 3) On November 10, 1982, Serrano sent a confirmation letter to Bank auditors that falsely stated that the Bank had an account at Shearson and that a $2 million CD was held in its name. 4) On February 23, 1983, a letter signed by Stamps and prepared by Serrano was sent to the Bank with a copy being sent to the Bank's auditors. This letter also falsely stated that the Bank had an account at Shearson and that the CD was being held in its name.
Partly because of the losses it sustained in the REPO transactions, the Bank collapsed, thus triggering a multitude of audits, investigations (including an investigation by the FBI), and civil suits. These investigations not only revealed the fraudulent scheme that led to the indictments in this case, but also a series of kickbacks and public corruption involving local government officials. Serrano, granted immunity from local prosecution by the Puerto Rico House of Representatives, testified in legislative hearings regarding this public corruption and his financial dealings at Shearson.
These revelations led to three separate indictments. Count One of the indictment returned in this case charged that, by wiring funds in the May 19-20 REPOs, Serrano, Boscio and Stamps, aiding and abetting each other, committed wire fraud in violation of 18 U.S.C. Secs. 2, 1341. This count alleged that the three defendants,
aiding and abetting each other, devised and intented [sic] to devise a scheme and artifice to defraud the Home Federal Savings and Loan Association of Puerto Rico and to obtain Title I notes and FHA mortgages from said Association with a value of approximately $1.7 million dollars and to obtain a million dollars from the proceeds of the Repo # 196 loan by means of false and fraudulent pretenses, representations, and promises ... well knowing that the pretenses, representations and promises would be and were false when made....
Counts Two, Three and Four each alleged mail fraud in violation of 18 U.S.C. Sec. 1343. Count Two charged Serrano with mailing, for the purpose of executing the scheme to defraud, a knowingly false confirmation letter dated November 10, 1982, to the Bank's auditors regarding the "financial position of the [Bank] as to [its] account with Shearson/American Express...." Count Three charged Serrano and Stamps, aiding and abetting each other for the purpose of executing the scheme to defraud, with mailing the Bank a knowingly false "memorandum dated February 23, 1983 reflecting and representing the financial position of the [Bank] as to [its] account with Shearson American Express...." Count Four charged Serrano and Stamps, aiding and abetting each other for the purpose of executing the scheme to defraud, with mailing two knowingly false "client statement sheets to the name of the [Bank] reflecting the financial position" of the Bank.
The jury convicted all three defendants as charged. Each of the defendants now appeals, advancing arguments as to why his conviction should be overturned. We will discuss each defendant's...
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