U.S. v. Sheehy, 75-1361

Decision Date07 September 1976
Docket NumberNo. 75-1361,75-1361
Citation541 F.2d 123
CourtU.S. Court of Appeals — First Circuit
PartiesUNITED STATES of America, Appellee, v. Paul J. SHEEHY, Defendant-Appellant.

John Albert Johnson, Boston, Mass., with whom F. Lee Bailey, Boston, Mass., was on brief for appellant.

Michael A. Collora, Asst. U. S. Atty., Boston, Mass., with whom James N. Gabriel, U. S. Atty., Boston, Mass., was on brief, for appellee.

Before COFFIN, Chief Judge, McENTEE and CAMPBELL, Circuit Judges.

McENTEE, Circuit Judge.

After trial to a jury appellant was convicted on each of eight counts of an indictment charging him with making false statements in loan applications, and causing false entries to be made in bank records. 18 U.S.C. §§ 1005 and 1014 (1970). The court sentenced him to 60 days imprisonment and a probationary term of two years concurrent on all counts. On this appeal he challenges the sufficiency of the evidence and contends that certain of the counts in the indictment are multiplicitous and should have been merged. We examine these claims in order.

Evidence presented at trial indicated that appellant assisted in the founding of the Lowell Bank and Trust Company ("Lowell Trust") in 1969 and served as a director and secretary of the corporation, and also as a clerk, and a member of the bank's executive committee. The function of the latter group was to review all loans made by the bank. Appellant continued in these positions until February, 1973 at which time he resigned as clerk; in 1974 he resigned from all the other positions. During the period of his formal association with the bank he borrowed extensively from it. It is these loan transactions that are the primary basis of the charges against him.

In 1970 appellant borrowed $5,000 from the Lowell Trust; this loan was unsecured by any collateral. He defaulted on it in 1972 and it remained in default until June, 1974. 1 In March, 1972 appellant sought a mortgage loan from the bank for $30,000 for property in Seabrook, New Hampshire. (Count I). In his application 2 appellant listed the purchase price as $36,000. Although much of the application was incomplete it was reviewed and approved by the executive committee on the same day. A more complete application for the same property dated April 20, 1971, was subsequently filed with the bank. This application listed appellant's income as $21,400 and the purchase price as $37,500. The testimony of a real estate broker involved in the transaction indicated that the actual purchase price of the Seabrook property was only $24,500. In addition, according to evidence from appellant's tax returns, his income was not $21,400 as he had stated in the application but somewhat under $16,000. After approval of the mortgage loan appellant received the $30,000 in the form of three cashier's checks ($23,500, $1,000, and $5,500 respectively) all payable to him personally. The note fell into default in 1972 and was not repaid until 1974.

On May 10, 1971, appellant applied for a mortgage loan from the Commercial Bank and Trust Company in Wilmington for property in Lowell, Massachusetts (Count II). On the loan application he listed the purchase price of the property as $26,000 and his income as $25,000 after taxes. He stated that he had only one liability, a mortgage to the Central Savings Bank for $14,000. He failed to list his $30,000 liability to the Lowell Trust. In addition, witness Maynard, the seller of the property in question, testified at trial that the selling price was only $20,000. Appellant's income tax returns for 1970 and 1971 indicated that his after-tax income in those years was less than $7,000. 3

On February 13, 1973, appellant signed a personal financial statement which was filed with the Lowell Trust. Testimony at trial indicated that such statements were used by the bank in deciding whether to grant or maintain loans. 4 Ten days later he resigned his position as clerk, 5 and shortly thereafter obtained a $40,000 unsecured loan from the bank. In this financial statement, which was the subject of Count III, appellant indicated that his income was $46,800; that he owed $66,000 on real estate and chattel mortgages; and that he had no contingent liabilities. He listed the price of the Lowell, Massachusetts property recently purchased as $25,000 and that of the Seabrook, New Hampshire property as $34,000. Although appellant certified that the information in the financial statement was "true and accurate" there were substantial misstatements. While the statement indicates $6,000 in cash on hand, appellant's account at the Lowell Trust was overdrawn. He had omitted listing among his liabilities a $5,000 unsecured note then owing at the Lowell bank, and an investigation by the FBI indicated that he also had a contingent liability of $17,000 (viz. a loan to one of his relatives by the Lowell Trust) which he failed to include on the statement. Moreover, evidence at trial indicated that his income in 1972 and 1973 was something less than $17,000 and not $50,000 as recorded on the form.

Counts IV through VIII of the indictment are based on a real estate transaction in March, 1973 involving the Lowell Trust. The relevant facts are as follows. In 1971 appellant had obtained an option to purchase a house at 10 Nashua Street in Seabrook, New Hampshire. In late 1972 he notified the seller's representative that he wanted to exercise the option and on March 4, 1973 transmitted a portion of the purchase price. It was not until late August of that year, however, that he made his final payment and obtained title to the property. On March 28, 1973, before he actually had title, appellant filed an application with the Lowell Trust for a $40,000 construction loan. His application was substantially incomplete. It failed to list the owner, the selling price, or his income. Despite these deficiencies the executive committee considered the application on the following day. Witness Marshall, a bank vice president testified that appellant was present at this meeting and that he claimed to have a commitment for a permanent mortgage on the property. 6 The executive committee approved the application on March 29 notwithstanding the lack of documentation, and appellant received $10,000 in cash the same day.

Further legal work on the loan was handled for the bank by one Owens, a law associate of appellant. Owens testified that he received the documents from appellant's secretary in April, 1973 and began checking legal title; he concluded that the original seller of the property still had title. Nevertheless, Owens certified on the back of the application that the Lowell Trust's mortgage was recorded. He did not, however, actually file the mortgage, but instead gave the mortgage and the application to appellant's secretary who turned it over to the appellant. 7 Appellant himself refiled with the bank the application containing the certification, 8 although he was aware that the mortgage had not been recorded. See n. 13 infra. Although the bank's ledger card indicated the loan was secured, in fact no mortgage was ever filed on this property running in favor of the bank.

Disbursements to appellant on this construction loan continued through June, 1973 and totalled $36,000. All payments were in cash except for a credit memo of $2,000. 9 Both this construction loan and appellant's previous unsecured loan of $40,000 fell into default in the spring of 1973. By May of that year appellant owed the bank $113,000 plus additional monies from an overdraft in his account of approximately $4,800.

The government also presented at trial testimony that was designed to establish appellant's motivation for the double financing on the 10 Nashua Street property, see discussion and n. 6 supra. Witness Bowers, a law associate of appellant, testified that appellant had run for Congress in 1972 and that in March, 1974 had admitted he still owed money from that campaign totalling $20,000 in addition to an outstanding $1,000 gambling debt. Witness Desmond, an officer of Lowell Trust who had attempted to collect $86,000 which appellant owed the bank, testified that appellant explained the debt as due in part to excessive gambling and to campaign expenses. Testimony in a similar vein was given by witness Lampert, an attorney for the Lowell Trust who had discovered that the bank's construction loan to appellant was never secured by a mortgage on the 10 Nashua Street property.

Appellant contends there was insufficient evidence to convict him in Counts I, II, III, V, and VII, each of which charged a violation of 18 U.S.C. § 1014 (1970). 10 In evaluating such a claim our criterion is "whether a rational juror drawing reasonable inferences from the evidence viewed in the light most favorable to the government could have found guilt beyond a reasonable doubt." Villarreal Corro v. United States, 516 F.2d 137, 140 (1st Cir. 1975) (citations omitted). The challenged counts all involved the making of allegedly false statements to influence bank actions. Count I dealt with appellant's application to Lowell Trust for a mortgage on property in Seabrook, New Hampshire. In this application he stated that the purchase price was $37,500 11 when it was actually $24,500; and he stated his income as $21,400, although it was under $16,000.

Appellant's principal contention 12 is that the discrepancy in purchase price was not shown to be a material false statement made with the intent of fraudulently influencing the bank's action. In this regard he points out that the bank's appraisal of the property in question was $36,000 and claims that therefore the bank was not misled by the value stated on the application of approximately the same amount. See n. 11 supra. This claim, however, cannot prevail. Testimony indicates that bank policy restricted mortgages to 80 percent of the purchase price (with the remainder a required down payment on the property),...

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