U.S. v. Willis

• Decision Date: 01 July 1993
• Docket Number: No. 92-2765,92-2765
• Parties: UNITED STATES of America, Appellee, v. Steven C. WILLIS, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 407

997 F.2d 407

UNITED STATES of America, Appellee, v. Steven C. WILLIS, Appellant.

No. 92-2765.

United States Court of Appeals,

Eighth Circuit.

Submitted Feb. 15, 1993.

Decided July 1, 1993.

David R. Gienapp, Madison, SD, argued, for appellant.

Kevin V. Schieffer, Sioux Falls, SD, argued, for appellee.

Before BOWMAN, WOLLMAN, and HANSEN, Circuit Judges.

WOLLMAN, Circuit Judge.

Steven C. Willis appeals from his conviction on seven counts of defrauding a federally insured savings bank, in violation of 18 U.S.C. § 1344 and § 2, one count of conspiring to defraud a federally insured savings bank, in violation of 18 U.S.C. § 371, and one count of bribing an officer of a financial institution, in violation of 18 U.S.C. § 215. Willis raises several arguments that the district court ¹ committed reversible error during and after his trial, including denying his motion for a new trial, allowing the introduction of his coconspirators' guilty pleas, and imposing his sentence. We affirm.

I.

Willis graduated from law school in 1976, receiving a Masters in Business Administration degree at the same time. After working for two years as a certified public accountant with an accounting firm in Sioux Falls, South Dakota, Willis opened a law office in 1978. Over the next several years he specialized in setting up limited partnerships for various real estate projects, often acting as one of the project's general partners.

According to the evidence at trial, Willis sometimes directed potential investors in his limited partnerships to Steve Ettles. At the time, Ettles, a longtime friend and fraternity brother of Willis, was the manager of the Sioux Falls branch of First Federal Savings Bank ("First Federal"), headquartered in Rapid City, South Dakota. The evidence showed that during this time period Willis sent numerous checks to Ettles in various names, including S.E. Consulting. Willis testified that these checks constituted payments for consulting services rendered by Ettles. To the contrary, Ettles testified that there was no business named S.E. Consulting, that he had performed no consulting duties, and that the payments were kickbacks for loans he had made through First Federal.

In November 1982, Willis approached Charles Hopp about buying Davis Tailors, a dry cleaning business in Sioux Falls. Having concluded that Davis Tailors presented a good investment opportunity, Willis and Hopp entered into a 50/50 partnership to purchase and manage the business. Willis ultimately took over the management of the business, conducting all of Davis Tailors' financial affairs.

In early 1985, Willis, Hopp, and Ettles formed a partnership named RecCo to purchase the Recreation Bowl ("Rec Bowl"), a bowling alley and lounge in Sioux Falls. According to the partners' agreement, Ettles and Willis each had forty percent interests and Hopp had a twenty percent interest. RecCo bought the Rec Bowl on a contract for deed for a total purchase price of $625,000. The purchase agreement called for an immediate down payment of $50,000, a second $50,000 payment within the first year, and the remainder to be amortized through monthly payments.

All three partners needed to finance their contributions to the partnership, including the initial $50,000 down payment. Ettles made loans of $24,000 and $12,000 to Willis and Hopp respectively, although both men were now Ettles's business affiliates and therefore should not have been receiving loans through him. Because Ettles did not want anyone at First Federal to know of his involvement in RecCo, he did not tell his superiors about the loans, in violation of bank policy and federal regulations. Ettles obtained his financing through another Sioux Falls bank.

Hopp, who had some experience in the food and liquor business, managed the bowling alley and the lounge on a day-to-day basis. Willis controlled the business's financial matters. Despite the partners' ambitions, the Rec Bowl quickly developed financial difficulties. The three partners met periodically at the bowling alley to discuss solutions to their cash flow problems. Willis and Hopp obtained additional loans through Ettles at First Federal until January 1987, when Ettles's superiors, still ignorant of Ettles's involvement in RecCo, told Ettles to stop extending credit to Willis and Hopp. By that time, RecCo had also obtained a $25,000 loan from Norwest Bank to help meet the Rec Bowl's operating expenses.

According to the trial testimony of Hopp and Ettles, at one of the partners' meetings, Ettles told his partners that they could borrow no more money from First Federal. Faced with a steady stream of bills at both the Rec Bowl and Davis Tailors, the partners decided to seek out individuals to borrow money on their behalf. From August 1987 to December 1989, each of the partners solicited friends and employees to obtain loans from First Federal through Ettles and then deliver the proceeds to the partnerships. The partners succeeded in persuading seven individuals to take out loans in their own names totalling more than $77,000. ²

Typically, events tracked the following course. When the partners determined that they needed additional funds to meet a large upcoming payment such a contract-for-deed payment, a loan payment, or a tax payment, one of the partners would assume the responsibility to find a willing borrower with some creditworthiness, if possible. The partner would either call in a favor from the borrower or offer the borrower a $250 payment. The borrower would then visit Ettles at First Federal, where Ettles and the borrower would complete the loan application and the borrower would endorse the loan proceeds check over to Ettles or another partner. Ettles would fill in on the application a seemingly proper, though factually incorrect, purpose for the loan. He would normally state that the unsecured loan was for personal expenditures or personal investment so that no one at First Federal would suspect that the loan proceeds were actually going to RecCo or Davis Tailors.

With respect to a loan taken out by Becky Hewitt, an employee at Davis Tailors, the evidence showed that Willis had been involved in completing the loan application. Hewitt's application contained false information regarding her salary and assets, as well as a false statement regarding the expected use of the loan proceeds. Hewitt testified that she did not enter any of the false information and was not even aware of it. To the contrary, Willis testified that he may have filled in the incorrect numbers but that Hewitt had supplied the information that he had written down.

For the most part, the partners were not able to repay these loans as they came due. As a result, they often had to convince the borrowers to renew the loans. Ettles also drafted letters of credit without First Federal's knowledge for several of the nominee borrowers, obligating the bank to repay the loan to itself if the loan was defaulted. When the partners failed to make timely payments on one of the nominee loans, the borrower presented his letter of credit to First Federal, which had no record of the letter's existence because Ettles had never placed a copy in the master file. The bank reluctantly acknowledged the letter of credit and ultimately wrote off the loan. The letter of credit raised the bank's suspicions regarding Ettles, who by this time had left the bank. The bank's investigation ultimately led to federal bank fraud charges against Ettles, Hopp, and Willis.

Ettles faced charges not only for the RecCo loans, but also for his dealings with Stuart Swann, a Sioux Falls developer. Ettles reached a plea agreement with the government whereby he pled guilty to bank fraud concerning the RecCo nominee loans, accepting gifts from Willis and Swann for procuring loans, and conspiring to defraud a federally insured bank. Ettles also promised to cooperate with the government's investigation and to testify against any of the other individuals involved in the two schemes. In exchange, the government agreed to drop any other charges against Ettles and to move the district court to reduce Ettles's offense level by two levels for acceptance of responsibility.

A federal grand jury returned a nine-count indictment against Hopp and Willis. Although Hopp initially entered a not guilty plea, he ultimately chose to enter a plea agreement. He pled guilty to one count of conspiring to defraud the bank and promised to cooperate with the government in exchange for the dismissal of the remaining counts against him. Hopp testified at Willis's trial and was later sentenced to ninety days' work release.

Willis elected to take his case to trial. The jury heard testimony for five days, ultimately returning a guilty verdict on all nine counts. The district court sentenced Willis to thirty-six months' imprisonment on the bank fraud and conspiracy counts, enhancing Willis's offense level by two levels for obstruction of justice, by six levels for the amount of loss, by two levels for more than minimal planning, and by four levels for his role as an organizer in the offense. The court also sentenced Willis to a concurrent thirty-six month term of imprisonment on the pre-Guidelines bribery count. Finally, the district court ordered Willis to pay restitution in the amount of $23,806.74.

Willis raises numerous arguments on appeal. He claims that the district court erred in denying his motion for a new trial based on the government's failure to produce discoverable material. Second, he argues that the district court improperly admitted evidence concerning the guilty pleas and convictions of Ettles and Hopp. Next, he claims that the district court improperly limited his cross-examination of Ettles and Howard Legge, a supervisor at First Federal. Finally, he raises several claims that the district court erred in imposing his sentence. We will address his arguments in turn.

II.

After his trial but before the...