U.S. v. Stefan

Decision Date20 March 1986
Docket NumberNos. 83-5590,83-5687,s. 83-5590
Citation784 F.2d 1093
PartiesUNITED STATES of America, Plaintiff-Appellee, v. Joseph STEFAN, Irvin Freedman, Defendants-Appellants. UNITED STATES of America, Plaintiff-Appellee, v. Irvin FREEDMAN, Defendant-Appellant.
CourtU.S. Court of Appeals — Eleventh Circuit

Roy E. Black, Black & Furci, P.A., Miami, Fla., William A. Meadows, South Miami Fla., for defendants-appellants.

Ronald A. Dion, Entin, Schwartz, Dion & Sclafani, North Miami Beach, Fla., for Freedman.

Lorraine C. Holmes, Miami, Fla., for Stefan.

J. Brian McCormick, Sp. Atty., Fort Lauderdale, Fla., Paul J. Larkin, Jr., Washington, D.C., Vincent L. Gambale, William C. Bryson, Dept. of Justice, Crim. Div., Washington, D.C., for plaintiff-appellee.

Appeals from the United States District Court for the Southern District of Florida.

Before HATCHETT and CLARK, Circuit Judges, and ALLGOOD *, Senior District Judge.

CORRECTED OPINION

HATCHETT, Circuit Judge:

In this case the appellants seek reversal of criminal convictions for numerous criminal offenses, including misapplication of bank funds, wire fraud, mail fraud, interstate transportation of stolen property, and racketeering. We affirm.

FACTS

This case began with an indictment charging Joseph Stefan and Irvin Freedman, the appellants, with a scheme to defraud Miami National Bank (MNB), of over $4.5 million in connection with a construction project operated by the Outrigger Club, Inc. Stefan was president of the bank. Freedman originally owned the Outrigger but transferred 50 percent of his interest in the corporation to Kenneth Wilpon, a real estate investor from New York, in exchange for Wilpon's commitment to obtain refinancing for completion of the Outrigger project. Separate corporate entities were established to develop each phase of the Outrigger project: 13499 Corporation was established to develop the residential section; Biscayne South, Inc. was formed to control the commercial properties of the Outrigger; and Harbor Edge Yacht and Tennis Club, Inc. was formed to develop the marina section.

Freedman and Wilpon were successful in obtaining $4.5 million in loans from MNB for the Outrigger project. Loans were made directly to Freedman and Wilpon, to the three newly-formed Outrigger corporations which Freedman and Wilpon controlled, to several other companies controlled by Freedman and Wilpon (including subcontractors on the Outrigger project), and to straw borrowers.

Title 12 U.S.C. Sec. 84 prohibits a national bank from lending more than 10 percent of its capital in surplus account to any one borrower or group of related borrowers. MNB's legal lending limit was $580,000. Despite this limitation, Stefan either approved or obtained approval for over $4.5 million in loans for the Outrigger project.

After a three-month trial, the district court acquitted Stefan of a RICO conspiracy charge before sending the case to the jury. The jury subsequently convicted Stefan of five counts of misapplication of bank funds, two counts of wire fraud, two counts of making false statements to a federal bank examiner, one count of mail fraud, one count of interstate transportation of stolen property, and one count of filing a false bank report. Stefan received concurrent sentences of five years probation and 1,000 hours of community service on each count. The jury convicted Freedman on the RICO conspiracy count, nine counts of misapplication of bank funds, two counts of wire fraud, one count of interstate transportation of stolen property, two counts of bankruptcy fraud, and two counts of making false statements on his income tax returns. Freedman received concurrent sentences in the aggregate of seven years.

The issues we resolve regard sufficiency of the evidence, admission of evidence, prosecutorial misconduct, indictment sufficiency, and transcript deficiencies.

SUFFICIENCY OF THE EVIDENCE

Stefan contends that the evidence adduced at trial is insufficient to support his convictions. Freedman adopts Stefan's argument on the misapplication of bank funds charges and contends that he cannot be convicted of aiding and abetting misapplication of bank funds because the evidence is insufficient to support Stefan's convictions.

In reviewing challenges to sufficiency of the evidence, we must view the evidence in the light most favorable to the government and affirm the convictions if a reasonable trier of fact could find that the evidence establishes guilt beyond a reasonable doubt. Glasser v. United States, 315 U.S. 60, 79, 62 S.Ct. 457, 469, 86 L.Ed. 680, 704 (1942); United States v. Cruz, 765 F.2d 1020, 1025 (11th Cir.1985). It is not necessary that the evidence exclude every reasonable hypothesis of innocence or be wholly inconsistent with every conclusion except that of guilt. United States v. Bell, 678 F.2d 547, 549 (5th Cir. Unit B 1982) (en banc), aff'd, 462 U.S. 356, 103 S.Ct. 2398, 76 L.Ed.2d 638 (1983).

Under this standard, we find the evidence sufficient to support Stefan's convictions on all counts. The jury convicted Stefan of five counts of misapplication of bank funds under 18 U.S.C. Sec. 656 which prohibits bank officers from "willfully misapplying" bank funds. In order to convict under this statute, the government must prove that the accused knowingly participated in a deceptive or fraudulent transaction. United States v. Adamson, 700 F.2d 953 (5th Cir. Unit B 1983). The required intent, i.e., knowledge, may be inferred "from the defendant's reckless disregard of the interest of the bank ..." United States v. Adamson, 700 F.2d at 965.

Stefan contends that he lacked the requisite criminal intent and that a reckless disregard of a bank's interest cannot be inferred from his actions which amounted only to "bad judgment calls."

The jury, however, had before it evidence that: (1) Stefan knew that all of the borrowers to whom he made loans were bad credit risks; (2) Stefan knew that all of the loans were for the financially troubled Outrigger project; (3) Stefan did not look to several of the Outrigger borrowers to repay their loans; and (4) Stefan tried to conceal the extent of his Outrigger related transactions.

Although the evidence was not overwhelming, a rational jury could conclude beyond a reasonable doubt that Stefan misapplied Miami National Bank funds by acting in reckless disregard of the bank's interests. Stefan's convictions for wire fraud, making false statements to a federal bank examiner, mail fraud, interstate transportation of stolen property, and filing false bank reports all emanated from his misapplication convictions. Ample evidence exists to support the jury's guilty verdicts on all of the other counts as well.

Since we find the evidence sufficient to support Stefan's convictions, Freedman's argument that he cannot be convicted of aiding and abetting because the proof failed to establish that Stefan misapplied bank funds, must fail. Freedman also argues "that the evidence presented at trial did not sufficiently establish [that he had] knowledge of the alleged illegal acts of bank personnel nor his desire to participate therein."

The jury had before it evidence that Freedman arranged straw borrowers, prepared loan applications, and discussed financing for the debt-ridden Outrigger project with MNB bank officials. A reasonable jury could have found from the evidence that Freedman knowingly aided and abetted the misapplication of MNB funds. We therefore affirm Freedman's convictions for violating 18 U.S.C. Sec. 656 as an aider and abettor.

EVIDENCE AND INSTRUCTIONS REGARDING VIOLATIONS OF 12 U.S.C.

Sec. 84

Stefan and Freedman next contend that the district court erred in allowing the introduction of evidence concerning infractions of 12 U.S.C. Sec. 84, a civil regulatory banking statute, and by instructing the jury that it could infer criminal intent from infractions of that statute.

The district court allowed the government to introduce testimony concerning infractions of 12 U.S.C. Sec. 84; it allowed the introduction of charts designed to show how the Outrigger related loans contravened the statute; and it allowed reference to section 84 violations in opening and closing statements. The court's instructions also focused the jury's attention on section 84.

Stefan and Freedman rely on United States v. Christo, 614 F.2d 486 (5th Cir.1980), for the proposition that evidence of a violation of a civil regulatory statute is irrelevant and prejudicial in a criminal case based upon misapplication of bank funds. In Christo, the government contended that the defendants' violation of 12 U.S.C. Sec. 375a, a civil regulatory banking statute limiting the amount that a national bank may lend its executive officers, also constituted violations of 18 U.S.C. Sec. 656, the criminal misapplication statute. The Christo court reversed the convictions, holding that the instructions as well as the "whole tenor of the trial" constituted plain error. The court stated: "A conviction, resulting from the government's attempt to bootstrap a series of checking account overdrafts, a civil regulatory violation, into an equal amount of misapplication felonies, cannot be allowed to stand." Christo, 614 F.2d at 492. The court also stated that "[a]fter examining the record of the trial, one questions whether Christo was found guilty of willful misapplication with intent to injure and defraud the bank or ... for overdrafting his checking account." Christo, 614 F.2d at 492.

For the reasons set forth below, we disagree with Stefan and Freedman's conclusion that Christo compels a reversal of their convictions.

1. Evidence Regarding Section 84 Violations

Christo forbids introducing evidence of civil banking statute violations solely for the purpose of proving criminal misapplication; however, it does not hold that such evidence can never be introduced in a criminal misapplication case. In other words, it is not always error to allow evidence of civil banking...

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