United States v. Davis

• Decision Date: 19 August 2013
• Docket Number: No. 12–20443.,12–20443.
• Parties: UNITED STATES of America, Plaintiff–Appellee v. Grady DAVIS, Defendant–Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

735 F.3d 194

UNITED STATES of America, Plaintiff–Appellee

v.Grady DAVIS, Defendant–Appellant.

No. 12–20443.

United States Court of Appeals, Fifth Circuit.

Aug. 19, 2013.

April Anita Christine, Esq., Assistant U.S. Attorney, U.S. Department of Justice, Washington, DC, Renata Ann Gowie, Assistant U.S. Attorney, U.S. Attorney's Office, Houston, TX, for Plaintiff–Appellee.

Miguel Andres Sanchez–Ross, Foreman, DeGeurin & DeGeurin, Houston, TX, for Defendant–Appellant.

Appeal from the United States District Court for the Southern District of Texas.

Before ELROD and HIGGINSON, Circuit Judges, and MARTINEZ, District Judge.^*

HIGGINSON, Circuit Judge:

Defendant–Appellant Grady Davis was charged with one count of conspiracy to commit bank fraud and with six counts of the substantive offense of, and aiding and abetting in, bank fraud. The charges arose from Davis's alleged participation in a scheme to fraudulently obtain funds by straw credit card purchases. After a four-day trial, a jury acquitted Davis of the conspiracy count but found him guilty of each of the six bank-fraud counts. On appeal, Davis challenges, among other things, the sufficiency of the evidence undergirding the “financial institution” element of each of the bank-fraud crimes of conviction. Because we hold that the government did not support with sufficient proof the essential financial-institution element of the bank-fraud counts charged in the indictment, we REVERSE Davis's convictions and REMAND for further proceedings in accordance with this opinion.

FACTS AND PROCEEDINGS

Counts Two through Seven of the indictment all charge that between approximately June 2008 and March 2010, Davis and his co-defendants, Gentry Wilson and Igor Dukhin,

aiding and abetting each other, did knowingly execute and attempt to execute a scheme and artifice to defraud American Express Company, which is a depository institution holding company as defined in section 3(w)(1) of the Federal Deposit Insurance Act....

(Emphasis added). Wilson and Dukhin struck plea deals, under which each agreed to plead guilty to the conspiracy charge in Count One of the indictment and to cooperate with the government. Davis entered a not-guilty plea, and went to trial.

At trial, the government introduced evidence that Davis played the central role of the “collusive merchant” in a “credit card bust-out scheme” in which Davis charged Wilson and Dukhin's fraudulently-obtained credit card for fictitious retail transactions. The three parties shared the reimbursement Davis subsequently received from the credit card company. Specifically, Dukhin testified that he and Wilson, looking to generate cash for a potential business venture, decided to obtain a high-limit corporate American Express credit card. They purchased a shell corporation, which they renamed Applied Interests & Energy Development (“AIED”). They drafted and submitted an application on behalf of AIED for an American Express credit card, which American Express approved.

To extract cash from the card, Dukhin and Wilson enlisted Davis, who operated a luxury car dealership, to charge the card for fictitious purchases and, in exchange for a percentage of the proceeds, to wire the funds American Express provided. According to Dukhin, Davis negotiated to retain ten percent of the sums he transmitted and convinced his counterparts to charge a total of at least $1.2 million, a sum Davis believed would give him a sufficient return to make his effort worthwhile. The three men also agreed to mask their purchases as sales of tractor-trailer trucks for use in AIED's fictionalized petroleum operations. Before American Express put a stop to their enterprise, Wilson, Dukhin, and Davis had incurred over $621,000 in charges.

Most relevant for our purposes, the government called the lead investigating agent in the case, U.S. Secret Service Special Agent Christina Foley, to the stand. The district court permitted the government to elicit testimony from Foley concerning the structure of the victim financial institution, overruling Davis's objection “for lack of foundation and hearsay.” The relevant sequence follows:

Q. [prosecutor]. Now, we typically think of American Express as just a credit card company. How is it that American Express is also a bank?

....

[A Foley.] American Express is an FDIC-insured bank. So, American Express is their own banking institution; and they also have the credit card side of the house, as well. So, they are kind of two entities under one American Express.

Q. And in this particular scheme, was American Express the victim bank?

A. Yes.

Q. You mentioned earlier that American Express was an FDIC institution. I would like to bring to your attention Government's Exhibit 1.

Do you recognize this document?

A. Yes, ma'am.

Q. What is it?

A. It is the certificate that shows that American Express is FDIC insured.

Q. And did you obtain this document in conjunction with your investigation?

A. Yes, I did.

Q. Now, the whole idea of whether a bank is an FDIC institution, would it be fair to say either a bank is an FDIC intuition [sic] or it is not; is that correct?

A. Yes, that is correct.

Q. There's really no middle ground. So, it either is or isn't?

A. That is correct.

Q. And in this case American Express is an FDIC institution, correct?

A. Yes. That's why they were able to be able to produce the certification showing this.

Government's Exhibit One, referenced in the exchange, is a Federal Deposit Insurance Corporation (“FDIC”) certificate for an entity named American Express Centurion Bank (“AECB”) that is dated July 1, 1996.¹

After the government rested its case, Davis moved under Federal Rule of Criminal Procedure 29 for a judgment of acquittal, arguing that the government did not sustain its burden of proving “each element of each count.” The district court denied the motion without comment. The defense then rested and did not call any witnesses. In closing argument, the government did not infer from the proof supplied any depository institution holding company relationship in addressing the financial-institution element of the bank-fraud counts. Instead, the government argued that AECB's FDIC-insurance certificate and the witness testimony described provided sufficient evidence to prove the financial-institution element.

In its jury charge on the substantive bank-fraud counts, the district court first repeated the language in Counts Two through Seven of the indictment, including that the defendants “did knowingly execute and attempt to execute a scheme and artifice to defraud American Express Company, which is a depository institution holding company as defined in section 3(w)(1) of the Federal Deposit Insurance Act....” Apparently adapting the pattern jury instruction to delineate the obligatory elements of the bank-fraud offenses, however, see Fifth Circuit Pattern Jury Instructions (Criminal Cases) 2.61 (2012), the district court did not reiterate the indictment's depository holding company theory but instead specified an unindicted, alternative version of the financial-institution element. It informed the jury that to convict Davis it “must be convinced that the Government has proved for each count under consideration ... beyond a reasonable doubt ... [t]hat AMEX [defined earlier by the district court to stand for ‘American Express Company’] was insured by the Federal Deposit Insurance Corporation.”

As described, the jury found Davis not guilty of the conspiracy count. However, it returned a verdict of guilty for each of the bank-fraud offenses in Counts Two through Seven of the indictment. Following trial, Davis filed a renewed motion for a judgment of acquittal, arguing that the government did not offer proof that “American Express Company” was a depositoryinstitution holding company as the indictment charged. The district court denied the motion. At sentencing, the district court imposed sentences of fifty-seven months of imprisonment and three years of supervised release for each of Counts Two through Seven, to be served concurrently. The district court also found Davis jointly and severally liable with Dukhin for $421,997 in restitution to American Express. Davis timely appealed. SeeFed. R.App. P. 4(b).

Davis's principal argument on appeal is that the government's proof of the financial-institution element of the bank-fraud counts, largely in the form of Agent Foley's testimony, was insufficient to support his convictions. He urges this court to reverse his convictions and to remand to the district court to enter a judgment of acquittal on Counts Two through Seven.

STANDARD OF REVIEW

When a defendant has timely moved for a judgment of acquittal, we review challenges to the sufficiency of the evidence de novo. United States v. Winkler, 639 F.3d 692, 696 (5th Cir.2011) (citation omitted); see United States v. Resio–Trejo, 45 F.3d 907, 910 n. 6 (5th Cir.1995). Even when examined de novo, “review of the sufficiency of the evidence is highly deferential to the verdict.” United States v. Moreno–Gonzalez, 662 F.3d 369, 372 (5th Cir.2011) (internal quotation marks and citation omitted). “Viewing the evidence in the light most favorable to the government, we must determine whether any rational jury could conclude from the evidence presented at trial that the government had proven all of the elements of the offense beyond a reasonable doubt.” United States v. Carbajal, 290 F.3d 277, 289 (5th Cir.2002) (citation omitted). Our de novo review, imbued as it is with deference, nonetheless necessarily requires us to consider trial evidence that countervails the jury's verdict, and allows us to “draw upon only reasonable inferences from the evidence to support the verdict.” United States v. Moreland, 665 F.3d 137, 149 (5th Cir.2011) (internal quotation marks and citation omitted).

DISCUSSION

“[T]he Due Process Clause protects the accused against conviction except upon proof beyond a reasonable doubt of every fact necessary to...