U.S. v. Van Brocklin, s. 96-2326
| Citation | 115 F.3d 587 |
| Decision Date | 15 July 1997 |
| Docket Number | Nos. 96-2326,s. 96-2326 |
| Parties | UNITED STATES of America, Appellee, v. Darrell Dean VAN BROCKLIN, Appellant. UNITED STATES of America, Appellee, v. Travis Edward ATTERBERRY, Appellant. UNITED STATES of America, Appellee, v. Lawrence Kermit PYATT, Appellant. UNITED STATES of America, Appellee, v. Susan Kay HASTINGS, Appellant. to 96-2329. |
| Court | United States Courts of Appeals. United States Court of Appeals (8th Circuit) |
Bruce A. Hubbard, argued, Sturgis, SD, for Van Brocklin.
Richard Holland Sindel, argued, Clayton, MO (N. Scott Rosenblum and Susan Kister, on the brief), for Atterberry and Pyatt.
Robert W. Van Norman, argued, Rapid City, SD, for Hastings.
Robert Aaron Mandel, Assistant U.S. Attorney, argued, Rapid City, SD, for appellee.
Before MAGILL, BEAM, and LOKEN, Circuit Judges.
Defendants were convicted on various counts arising from a scheme to defraud a South Dakota bank. We affirm the convictions of all defendants. We conclude, however, that the district court erred in sentencing defendants Van Brocklin, Pyatt, and Atterberry. We also vacate the district court's forfeiture order regarding defendant Hastings, and remand for new findings regarding the restitution order and the fine imposed on defendant Hastings.
We summarize the facts of this case in the light most favorable to the verdicts. First Federal Savings Bank (First Federal) is a now defunct bank that had its main office in Rapid City, South Dakota. In 1989 the federal Office of Thrift Supervision (OTS) audited the bank and determined that it had a large capital deficit and inadequate management. As a result, the bank entered into a consent agreement with OTS. Thereafter, First Federal was under the close supervision of OTS.
At the urging of OTS, First Federal hired defendant Darrell Van Brocklin as its president in 1989. By 1991, however, it became clear that the bank would have to be sold. Under the agency's direction, the bank took steps to increase its liquidity in order to be more attractive to potential buyers. One of the bank's assets targeted for sale was a portfolio of real estate loans that it had purchased some years earlier. These loans, known as the First Western Mortgage Corporation (FWMC) loans, were secured by commercial properties, mostly in California, and had at that time an aggregate outstanding principal balance of approximately $50 million.
Defendants Travis Atterberry and Lawrence Pyatt owned First National Funding F, a Florida corporation that brokered loan sales. In 1991, FNF began negotiating with a First Federal employee about purchasing the FWMC loans. Beginning in November 1991, Van Brocklin personally continued the discussions with Atterberry and Pyatt. In December 1991, FNF offered, subject to OTS approval, to purchase the FWMC loans for a price of "81 cents," that is, 81% of the loans' aggregate principal value.
Van Brocklin sent a letter accepting the offer, but did not notify the bank's board of directors of the proposed deal. At a board meeting on December 17, Van Brocklin informed the board that some Florida buyers were interested in purchasing the loans for about 80 cents, but not that he had previously accepted FNF's 81 cent offer. The matter rested until mid-January of 1992, when Van Brocklin asked John Jones, an employee of the Resolution Trust Corporation (RTC), to evaluate the FWMC loans and give an opinion whether an 81 cent offer would be a good deal for the bank. 1 After reviewing the loans, Jones told Van Brocklin on January 17, 1992, that this was a good price, since the RTC would expect to charge a purchaser approximately 70 cents if it were to sell the portfolio after assuming control of the bank.
On January 21, 1992, FNF made a new offer for the entire FWMC portfolio. This time, FNF offered to purchase the loans for a price of 70 cents, or approximately $39 million. Van Brocklin related this offer to William Hawthorne, the OTS agent supervising the bank, but did not inform Hawthorne of the earlier 81 cent offer. Hawthorne approved the proposed sale at 70 cents. On January 29, 1992, the bank's board of directors voted to accept the offer.
At the same meeting, the board also approved a second deal with FNF at Van Brocklin's recommendation. This was for the sale to FNF of $8.3 million in "charged-off" loans. The charged-off loans were approximately 1,200 unrelated loans that the bank had, at various times, determined were uncollectible or inadequately collateralized, and had reduced to a zero book value and written off as assets. 2 As with the FWMC loans, OTS had been urging the bank to find a buyer for the charged-off loans. The board agreed to sell the charged-off loans to FNF for a price of approximately $167,000--2% of the loans' aggregate principal.
During the meeting, Van Brocklin also informed the board that he had received an offer of employment from FNF, and for that reason would not vote on the loan sales. Van Brocklin did not inform the board, however, that FNF was negotiating a simultaneous resale of the FWMC loans, and that he would be receiving a share of FNF's profits from that transaction. On February 12, 1992, Van Brocklin signed an employment agreement with FNF. On February 17, while the loan sales were pending, Van Brocklin and FNF entered into another agreement. This agreement provided that Van Brocklin could form a South Dakota corporation also called First National Funding F-SD, which would service the charged-off loans. Under this deal, FNF-SD would retain sixty percent of collections on the loans, with the remaining profits going to FNF. On February 14, 1992, Van Brocklin incorporated FNF-SD. The same day, Van Brocklin received from FNF a check for a $50,000 "signing bonus."
Defendant Susan Hastings was a senior vice-president of the bank and a member of the board of directors. It was Hastings who prepared FNF-SD's articles of incorporation for Van Brocklin. On the same day, Hastings also sent a check (postdated to February 18) to Pyatt and Atterberry for $71,010.31. This money was to represent an interest rate adjustment for overcharges made to the FWMC loans' borrowers. Van Brocklin, however, had instructed Pam Brekke, a bank employee, to calculate the adjustment based not on the entire portfolio, but for only certain loans representing less than half the value of the $50 million portfolio. Hastings sent this partial payment even though FNF's offer had been for the entire portfolio, and the board had agreed to sell FNF all of the FWMC loans at the 70 cent price. Atterberry and Pyatt deposited this check, but never passed the funds on to the institution that ultimately purchased the FWMC loans.
On February 18, 1992, Van Brocklin attended the first closing for the FWMC loan sales in California. At the closing, FNF purchased less than half of the loans. At the same closing, FNF immediately resold the loans to another loan broker for a price of 78 cents. The escrow agent conducting the closing issued a check to FNF for $1,343,138.75, representing most of its profit from the resale. The agent also issued a second check, made out to "First National Funding, Inc." for $230,000. This check went, however, to South Dakota, and was deposited in a bank account established for Van Brocklin's company FNF-SD. The same day, Hastings prepared checks, which were signed by Van Brocklin, transferring these funds to two other accounts.
On February 20, 1992, Van Brocklin reported to the bank's board that FNF had purchased some of the loans, but that closings on the rest of the portfolio were expected by the end of the month. Van Brocklin also announced that he had signed an employment contract with FNF. Neither Van Brocklin nor Hastings informed the board that Van Brocklin had already received the $50,000 "signing bonus" and $230,000 from the first closing, nor that they had incorporated FNF-SD to service the charged-off loans.
There were two more closings for the FWMC loans. In meetings on February 28 and March 2, 1992, FNF purchased three loans for 70 cents, then immediately resold them for 91.4 cents. Van Brocklin represented First Federal at the closing, although by now he had entered into an employment agreement with FNF, and had received $280,000 from FNF. From this sale, Atterberry and Pyatt received $386,059.10. On March 6, the last closing took place. Pam Brekke represented the bank at the closing. FNF bought five loans with an aggregate principal value of approximately $10 million, again at the 70 cent price, and immediately resold them for 91.4 cents. From this sale, the escrow agent wired $1,362,142.92 to FNF in Florida. Much as in the first closing, the agent issued to "First National Funding, Inc.," an additional check for $750,000. Atterberry gave Brekke an envelope containing this check and instructed her to give it to Van Brocklin.
The next day, a Saturday with the bank closed, Brekke met Van Brocklin and Hastings at the bank and delivered the envelope to Van Brocklin. The following Monday, Hastings deposited this check in FNF-SD's account, then immediately prepared checks that transferred the money to a variety of accounts, investment funds, and to Van Brocklin's personal account. In the end, First Federal realized about $22 million from the FWMC loan sales, even though FNF had agreed to buy the entire portfolio for approximately $39 million. Pyatt's and Atterberry's profit from FNF's simultaneous resale of the loans at the three closings totaled more than $3 million. Van Brocklin received $980,000.
Meanwhile, the charged-off loans began to pay off handsomely. Three loans involved commercial properties in Minnesota known as the HDA properties, which had been in receivership. The receiver had been holding $97,000 in rental payments from the properties and seeking instruction from Van Brocklin and Brekke on how to dispose of those funds. Shortly after the sale of the...
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