U.S. v. Swanson
| Decision Date | 26 January 2004 |
| Docket Number | No. 03-3018.,03-3018. |
| Citation | 360 F.3d 1155 |
| Parties | UNITED STATES of America, Plaintiff-Appellee, v. Timothy J. SWANSON, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Lee Thompson, of Thompson, Stout & Goering, Wichita, KS, for Defendant-Appellant.
Eric F. Melgren, United States Attorney (Debra L. Barnett, Assistant United States Attorney, with him on the brief), Wichita, KS, for Plaintiff-Appellee.
Before HENRY, BALDOCK, and TYMKOVICH, Circuit Judges.
Appellee's motion to publish the order and judgment filed on January 26, 2004 is granted. A copy of the published opinion is attached.
Timothy J. Swanson was convicted of one count of bank fraud under 18 U.S.C. § 1344(1), which makes it a crime to "knowingly execute[], or attempt[] to execute, a scheme or artifice to defraud a financial institution." The underlying indictment charged that Mr. Swanson defrauded NationsBank, N.A. of Wichita and two other financial institutions by means of a check kite scheme. Mr. Swanson engaged in an elaborate scheme of circulating checks backed by insufficient funds among eleven bank accounts. When NationsBank detected the scheme, it stopped Mr. Swanson's check writing ability and allowed all outstanding checks to be presented against his accounts. The resulting overdraft was approximately $522,000. Following a jury verdict of guilty, Mr. Swanson was sentenced to a prison term of 51 months. Mr. Swanson now appeals both his conviction and sentence; for the reasons below, we AFFIRM.
Since 1989, Mr. Swanson has managed oil and gas businesses in Kansas and Oklahoma under his own name and under the umbrella of other entities. During this period, Mr. Swanson maintained at least eleven personal and business checking accounts at NationsBank in Wichita, Kansas. Mr. Swanson had signatory powers on all of these accounts. Mr. Swanson and his companies also borrowed substantial sums of money from NationsBank. These loans were secured by personal guarantees and collateral, which included mortgages of oil and gas properties.
As a customer of NationsBank, Mr. Swanson frequently wrote checks that caused his accounts to be overdrawn, sometimes in amounts as high as $100,000. These overdrafts were routinely paid by NationsBank. In February 1999, NationsBank gave Mr. Swanson, in his capacity as owner and manager of Swanson Oil, the use of a "Controlled Disbursement Account" ("CDA"), an account reserved for use by businesses. A CDA is a checking account that provides the account holders with a daily report on which checks will be clearing the account and on what collected balances they have in the account, allowing businesses to determine their daily cash position. The CDA was coded "pay all," meaning that the bank would pay all the checks presented against the account. This account also had a feature providing for an automatic transfer of funds from the CDA, which was maintained at a remote site, into a regular business account. The remote location had the effect of lengthening the "float time" before posting for the checks written on the account.
In March 1999, Mr. Swanson started "day trading" in the stock market, using his established brokerage accounts at Prudential Securities in Wichita to buy and sell blocks of securities on a daily basis, in an attempt to make money on changes in market prices. Mr. Swanson's daily purchases and sales of securities frequently exceeded $100,000 a day. Mr. Swanson's brokerage accounts at Prudential also had check writing privileges through banks in Columbus, Ohio and Boston. These banks required stock values or deposits sufficient to cover all of the checks Mr. Swanson wrote on these accounts. This requirement resulted in a daily "margin call" in which Mr. Swanson was required to deposit funds with Prudential which were adequate to cover the value of the stocks he had purchased "on the margin," i.e., with money borrowed from the brokerage firm. Prudential did not accept payments for the daily margin calls based on uncollected funds. Therefore, when Mr. Swanson delivered checks to Prudential, which he did on a daily basis, the Prudential staff called NationsBank to confirm that Mr. Swanson had collected funds in his accounts sufficient to cover his checks. Eventually, for administrative convenience, Prudential required Mr. Swanson to provide cashier's checks, a cash equivalent, to cover his margin calls.
In spring and summer of 1999, Mr. Swanson's losses in the stock market grew, and margin calls became more difficult to meet. Thus, Mr. Swanson began to use the float time provided by the CDA as a means of gaining time in meeting financial demands, writing and cross-depositing numerous checks among eleven of his NationsBank accounts. In addition, Mr. Swanson purchased cashier's checks from NationsBank nearly every day. Each time Mr. Swanson requested a cashier's check, the bank teller would determine whether the account on which the check would be drawn contained sufficient collected funds. The bank teller testified that normally they did not. Thus, the teller was required to seek the approval of a bank officer before she issued the cashier's check to Mr. Swanson. The bank officers routinely approved such cashier's checks.
On July 16, 1999, a computer operation of NationsBank in Florida informed the Wichita branch that they believed that Mr. Swanson was running a "check kite"1 due to his pattern of writing checks. That same day, Tom McGrath, one of the NationsBank Wichita officers, caused all of Mr. Swanson's accounts to be changed from "pay all" to an immediate charge, creating an overdraft of $522,064.30. Mr. McGrath notified Mr. Swanson of this overdraft, and they discussed converting the overdraft into a promissory note to be collateralized by the existing oil and gas mortgages and the stock accounts. Within two weeks of its discovery, Mr. Swanson paid the entire overdraft.
On March 12, 2002, Mr. Swanson was indicted on one count of violating 18 U.S.C. §§ 1344(1) and (2), and he proceeded to a jury trial. At trial the government showed that between March 1, 1999, and June 30, 1999, Mr. Swanson wrote and made more than 787 checks and transfers drawn on one of the eleven accounts and subsequently deposited into another of the eleven accounts, causing the numerical balances in the accounts to be artificially inflated. The government also showed that Mr. Swanson obtained approximately 150 cashier's checks from NationsBank, valued at $10,371,695, which he deposited into one of the eleven checking accounts at NationsBank. The government demonstrated that at the time all of the checks were written and deposited, the checking accounts had insufficient legitimate funds to properly cover the checks when they were deposited and later presented to the drawee banks. Thus, from March 1, 1999, to June 30, 1999, Mr. Swanson deposited $73,450,244.18 into the eleven checking accounts, of which amount $71,352,184.18 resulted from the deposits of 787 kited checks and transfers and 150 cashier's checks.
The jury convicted Mr. Swanson of one count of bank fraud under 18 U.S.C. § 1344(1), which, under the Sentencing Guidelines, warrants a base offense level of 6. USSG § 2B1.1(2001). The testimony of the government's expert, FBI Special Agent Randall Wolverton, as well as the pre-sentence report, established that the amount of loss to the bank was $522,064.30, which increased Mr. Swanson's base offense level by 14 levels to 20. USSG § 2B1.1(b)(1)(H)(2001). The court also found that because Mr. Swanson's crime affected a financial institution and he derived more than $1,000,000 in gross receipts from the offense, his offense level should be increased to 24. USSG § 2B1.1(b)(12)(A)(2001). Mr. Swanson was sentenced to a prison term of 51 months.
On appeal, Mr. Swanson argues that (A) risk of loss is an element of a violation of 18 U.S.C. § 1344(1); (B) the district court erred when it denied his motion for judgment of acquittal because the government failed to establish the elements of a violation of 18 U.S.C. § 1344(1); and (C) the district court erred in its instructions to the jury regarding proof of risk of loss. In addition, Mr. Swanson argues that (D) his sentence should be reversed and remanded because the district court sentenced him in a manner which contravened the Ex Post Facto Clause of the U.S. Constitution and which was based on improper and inadequate findings; and (E) the district court erred in calculating the amount of loss by failing to make proper and adequate findings as to the amount of loss at the time of sentencing and also by failing to grant credit for immediately available collateral. We address each of Mr. Swanson's arguments below, and affirm his conviction and sentence.
The federal bank fraud statute, 18 U.S.C. § 1344 reads,
Whoever knowingly executes, or attempts to execute, a scheme or artifice —
(1) to defraud a financial institution; or
(2) to obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises; shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.
Mr. Swanson was convicted for a violation of § 1344(1), not of § 1344(2), but we include subsection (2) to underscore a distinction that is relevant to our discussion below of the evidence required to prove a scheme to defraud. See Section II.B.2.
In order to establish a violation of § 1344(1), the government must show: "(1) that the defendant knowingly executed or attempted to execute a scheme or artifice to defraud a financial institution; (2) that...
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