United States v. Banyan

• Decision Date: 05 August 2019
• Docket Number: Nos. 17-6410/6493,s. 17-6410/6493
• Citation: 933 F.3d 548
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Amir Babak BANYAN (17-6410); Bryan Puckett (17-6493), Defendants-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

933 F.3d 548

UNITED STATES of America, Plaintiff-Appellee,

v.Amir Babak BANYAN (17-6410); Bryan Puckett (17-6493), Defendants-Appellants.

Nos. 17-6410/6493

United States Court of Appeals, Sixth Circuit.

Argued: October 4, 2018

Decided and Filed: August 5, 2019

KETHLEDGE, Circuit Judge.

In this case the government charged the defendants with the wrong crimes. Amir Banyan and Bryan Puckett engaged in a scheme in which they eventually obtained more than $5 million from a pair of mortgage companies by means of fraudulent mortgage applications. The scheme was revealed about two years after it began. Had the government charged Banyan and Puckett with mail or wire fraud within the five-year limitations periods for those offenses, the two likely would have lacked any plausible defense. But for whatever reason the government blew that deadline and instead later charged Banyan and Puckett with bank fraud, of which they were both convicted. That offense has a longer limitations period, but brings the complication that the fraud must be perpetrated against a bank —which (as a matter of statutory definition) the mortgage companies obviously were not, because they were not federally insured. Nor did the government make any effort at trial to prove that the loans were funded by the mortgage companies’ parent corporations, which were banks. The government now offers various theories to work around these deficiencies, but none has merit. We therefore reverse the defendants’ convictions.

I.

In January 2006, Puckett was a homebuilder in Nashville; Banyan was a mortgage broker who had previously worked at SunTrust Mortgage Company. Puckett was overloaded with debt incurred while building some half-dozen luxury homes that he had not yet sold. With Banyan, Puckett recruited straw buyers to purchase his unsold homes with loans funded by SunTrust Mortgage Company and Fifth Third Mortgage Company. For a fee typically in the neighborhood of $10,000, each buyer submitted to the mortgage company a loan application—in most cases filled out by Banyan—that overstated the buyer’s income and falsely stated that the buyer intended to live in the home, among other misrepresentations. None of those misrepresentations, on the record here, reached the parent corporations of the mortgage companies, namely SunTrust Bank and Fifth Third Bank, both of which were federally insured. Nor, on the record here, did either of the parent banks fund any of the loans.

Puckett received the proceeds of the loans, which he told the buyers he would use to make their mortgage payments for them. Altogether, pursuant to the scheme, Puckett sold eight homes to straw buyers and received more than $5 million from the mortgage companies. (Presumably Banyan took a share as well.) By late 2007, however, Puckett could not keep up with all the payments for the fraudulent loans and his preexisting debt. By the end of 2008, the mortgage companies had foreclosed on most if not all the homes.

Although the FBI began investigating the scheme in 2009, the government did not indict Banyan or Puckett until 2014, on various counts of bank fraud in violation of 18 U.S.C. § 1344 and conspiracy to commit bank fraud in violation of 18 U.S.C. § 1349. A jury convicted each defendant of two counts of bank fraud and one count of conspiracy. Although each defendant’s Guidelines range exceeded five years’ imprisonment, the district court sentenced each defendant to six months and ordered each released pending appeal. See 18 U.S.C. § 3143(b). This appeal followed.

II.

Banyan and Puckett challenge the sufficiency of the evidence for their convictions for bank fraud in violation of 18 U.S.C. § 1344. We must affirm their convictions if, based upon the evidence admitted at trial, "any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt." Jackson v. Virginia , 443 U.S. 307, 319, 99 S.Ct. 2781, 61 L.Ed.2d 560 (1979).

The issue here is more legal than factual. Section 1344 provides:

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 guilty of a crime].

As used in these provisions, the term "financial institution" means, as relevant here, a federally "insured depository institution." 18 U.S.C. § 20(1). (We shall use the term "bank" as a synonym for "financial institution.")

Here, each defendant was convicted under § 1344(1) and § 1344(2). Most of the parties’ arguments concern § 1344(2), so we begin our discussion there. That subsection "requires that a defendant ‘knowingly execute, or attempt to execute, a scheme or artifice’ with at least two elements." Loughrin v. United States , 573 U.S. 351, 355, 134 S.Ct. 2384, 189 L.Ed.2d 411 (2014) (brackets omitted). The first is that the defendant must "inten[d] to obtain bank property." Id. (internal quotation marks omitted). The second is that "the envisioned result—i.e. , the obtaining of bank property—[must] occur ‘by means of false or fraudulent pretenses, representations, or promises.’ " Id . at 355-56, 134 S.Ct. 2384. That second element is met when "the defendant’s false statement is the mechanism naturally inducing a bank (or custodian of bank property) to part with money in its control." Id . at 363, 134 S.Ct. 2384.

The government proved neither element here. The basic problem with the government’s case is that neither of the mortgage companies from which the defendants obtained funds were "financial institutions" as defined by § 20, because neither of those companies had deposits that were federally insured. See 18 U.S.C. § 20(1). That statutory determination is as straightforward as they come. Yet the government argues that we should regard the mortgage companies as banks because each of them is a wholly owned subsidiary of a bank. That argument is nearly frivolous: as the Second Circuit observed in rejecting it, "a ‘financial institution’ [as the term is used in § 20 ] is not a loose or colloquial term, but a term of precise [legal] definition that can lead to grave criminal consequences." United States v. Bouchard , 828 F.3d 116, 126 (2d Cir. 2016). The Supreme Court has also instructed that "[a] basic tenet of American corporate law is that the corporation [here, the mortgage companies] and its shareholders [here, the banks] are distinct entities." Dole Food Co. v. Patrickson , 538 U.S. 468, 474, 123 S.Ct. 1655, 155 L.Ed.2d 643 (2003). And Congress has precisely defined the term "financial institution," as relevant here, to apply to institutions that hold federally insured deposits—which the defrauded mortgage companies undisputedly did not.

Still the government persists, citing a potpourri of vague legislative history to the effect that, e.g. , "Congress wanted Section 1344 to have a broad scope." Gov’t Br. at 18. But "we do not resort to legislative history to cloud a statutory text that is clear." Ratzlaf v. United States , 510 U.S. 135, 147-48, 114 S.Ct. 655, 126 L.Ed.2d 615 (1994). Indeed all of the government’s legislative history is irrelevant, because "[e]xtrinsic materials" like legislative history "have a role in statutory interpretation only to the extent they shed a reliable light on the enacting Legislature’s understanding of otherwise ambiguous terms ." Exxon Mobil Corp. v. Allapattah Servs., Inc. , 545 U.S. 546, 568, 125 S.Ct. 2611, 162 L.Ed.2d 502 (2005) (emphasis added); see also, e.g. , Dep’t of Housing & Urban Dev. v. Rucker , 535 U.S. 125, 132, 122 S.Ct. 1230, 152 L.Ed.2d 258 (2002) ("reference to legislative history is inappropriate when the text of the statute is unambiguous"); United States v. Gonzales , 520 U.S. 1, 6, 117 S.Ct. 1032, 137 L.Ed.2d 132 (1997) ("Given the straightforward statutory command, there is no reason to resort to legislative history"). And the government nowhere identifies the purportedly ambiguous terms—by which, of course, the Supreme Court means the ambiguous words —that its legislative history purports to clarify. Meanwhile, a year after the events at issue here, Congress took the trouble to amend § 20 to add "mortgage lending businesses" (i.e. , mortgage companies) to its enumeration of "financial institutions" under that section. See Fraud Enforcement and Recovery Act of 2009, Pub. L. No. 111-21, § 2(a)(3). And the Supreme Court has repeatedly said that, " ‘[w]hen Congress acts to amend a statute, we presume it intends its amendment to have real and substantial effect.’ " Pierce Cty., Wash. v. Guillen , 537 U.S. 129, 145, 123 S.Ct. 720, 154 L.Ed.2d 610 (2003) (quoting Stone v. INS , 514 U.S. 386, 397, 115 S.Ct. 1537, 131 L.Ed.2d 465 (1995) ). The government’s argument that the mortgage companies themselves were "financial institutions" as defined by § 20 at the time of the defendants’ conduct, therefore, is meritless.

That means the government needed to prove, as the first element of § 1344(2), that these defendants intended to obtain bank property, rather than the property of the mortgage companies (whose property they actually did obtain). But the government did not prove that. The government offered no evidence, for example, that either of the parent banks funded the loans at issue and that the defendants were aware of such funding. That omission distinguishes this case from United States v. Rabuffo , 716 Fed. App'x 888, 898 (11th Cir. 2017) (unpublished, per curiam), where the government presented evidence that the defendant was well aware that a bank "would be handling any draw requests on the loans." (The Rabuffo opinion asserted—based upon its reading of the district court’s opinion in this case—that Banyan thought that SunTrust Bank had funded some of the transactions at issue here, id . at 899 ; but suffice it to say that the Eleventh Circuit...