USA. v. Anderson

• Decision Date: 19 August 1999
• Docket Number: No. 98-4146,98-4146
• Citation: 188 F.3d 886
• Parties: (7th Cir. 1999) United States of America, Plaintiff-Appellee, v. Kay Anderson, Defendant-Appellant
• Court: U.S. Court of Appeals — Seventh Circuit

Page 886

188 F.3d 886 (7th Cir. 1999)

United States of America, Plaintiff-Appellee, v. Kay Anderson, Defendant-Appellant.

No. 98-4146

United States Court of Appeals, Seventh Circuit

Argued June 9, 1999

Decided August 19, 1999

Appeal from the United States District Court for the Central District of Illinois. No. 97 CR 30028--Michael M. Mihm, Judge.

Before Posner, Chief Judge, and Bauer and Diane P. Wood, Circuit Judges.

Bauer, Circuit Judge.

Kay Anderson was convicted by a jury of three counts of bank fraud, in violation of 18 U.S.C. sec. 1344. She was sentenced to 24 months imprisonment and ordered to pay a $200,000 fine, along with $554,500 in restitution. For the reasons set forth below, we reverse her conviction.

I. BACKGROUND

Mendon State Bank ("MSB") was a small, federally insured bank located in Mendon, Illinois. According to its chairman, Donald Schoch, it was primarily a farm lender. Beginning at some point in the 1980's, MSB began doing business with a real estate company named Choice 2000 ("Choice"). Although MSB had a legal lending limit of $100,000 per customer, by July of 1986, it had loaned Choice a total of over $3,000,000. Because of these extensive loans and Choice's constant over-drafting of its checking account, MSB was in considerable financial difficulty by mid-1986.

It was about this time in 1986 when the president of Choice introduced Anderson to Schoch. Anderson, a representative of AMZ Trust ("AMZ") in Houston, was to help Choice finance various real estate centers in several major cities within the United States. On July 18, 1986, MSB made four separate loans of $350,000 to Carlyle Buss, Michael Crocker, Aaron Gochman, and Charles Ragland. In addition, Schoch issued four separate money orders, each for $143,500. Three were payable to MSB, and one was payable to Choice. The three money orders made payable to MSB were sent to AMZ to purchase four zero coupon bonds of $350,000, apparently to act as security for the aforementioned loans. The $143,500 given to Choice was also wired to AMZ two days later.

Anderson opened an Asset Reserve Account at E.F. Hutton in the name of AMZ in Houston in late July of 1986. Between July 25, 1986 and August 1, 1986, three deposits totaling $470,000 were transferred into AMZ's account at E.F. Hutton, and a few weeks later, three zero coupon bonds of $350,000 each were also credited to the account. According to the government, shortly after the money was deposited, Anderson began personally drawing checks on the account and incurring debits. Throughout the month of August, MSB officials tried to collect repayment of the original loans in the form of the zero coupon bonds from Anderson. By the end of August, MSB was closed, and the FDIC was appointed receiver of the bank. In May of 1987, AMZ opened an account at Merrill Lynch. The FDIC, claiming to have an interest in the zero coupon bonds as MSB's successor in interest, made repeated (unsuccessful) attempts throughout 1987 to try to retrieve these funds from Anderson and AMZ.

Ten years after the closing of MSB, Schoch, along with his brother Eldon, the president of MSB, pleaded guilty to several improprieties that occurred while MSB was over-lending money to Choice, even though MSB had exceeded its lending limit with Choice and Choice was carrying a negative balance in its checking account. Additionally, Jerry Pardue, chairman of Choice, was convicted of embezzlement and misapplication of bank funds in connection with the same activity. No charges were brought against Anderson at that time. It was not until June 19, 1997 that a federal grand jury charged Anderson with three counts of bank fraud. The indictment charged Anderson with devising a scheme to defraud and obtain monies of MSB, and later the FDIC as the bank's successor in interest. The indictment also charged that this scheme lasted from July of 1986 until at least August 7, 1987. Furthermore, the indictment charged her with taking funds of MSB and purchasing three zero coupon bonds, each with a par value of $350,000 and failing to maintain the bonds for MSB. It also charged her with taking money from MSB and using it for her own purposes. All of this conduct occurred prior to June 19, 1987, ten years before the date of the indictment. The three substantive charges of bank fraud in the indictment, however, are based on transactions in which Anderson transferred funds from AMZ's account at E.F. Hutton to its account at Merrill Lynch. The first transfer occurred on June 19, 1987, the second on July 1, 1987, and the last on or about August 6, 1987.

Anderson's jury trial began on June 22, 1998. On June 30, 1998, the jury returned a guilty verdict on all three counts. Anderson was sentenced to 24 months imprisonment for counts one and two, to run concurrently. The sentence on count three was suspended. This appeal followed.

II. DISCUSSION

Anderson raises several issues on this appeal; however, we need only to address her statute of limitations argument to dispose of the case. We review de novo a trial court's decision about whether the statute of limitations has run. Garrison v. Burke, 165 F.3d 565, 569 (7th Cir. 1999).

Anderson was convicted of three counts of bank fraud, in violation of 18 U.S.C. sec. 1344. That section states:

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 no more than 30 years, or both.

Id. The statute of limitations for bringing an action for bank fraud is ten years. See 18 U.S.C. sec. 3293. Statutes of limitations are imposed "to limit exposure to criminal prosecution to a certain fixed period of time following the occurrence of those acts the legislature has decided to punish by criminal sanctions." Toussie v. United States, 397 U.S. 112, 114 (1970). The United States Supreme Court has stated on more than one occasion that criminal statutes of limitations are to be "liberally interpreted in favor of repose" so that prompt investigation of criminal activity is encouraged. Id. at 115 (quoting United States v. Scharton, 285 U.S. 518, 522 (1932)).

The bank fraud statute was enacted in October of 1984 and was modeled after the federal mail and wire fraud statutes. Steven M. Biskupic, Fine Tuning the Bank Fraud Statute: A Prosecutor's Perspective, 82 Marq. L. Rev. 381, 382 (Winter 1999). Just as mail fraud is punishable once the material is placed in the mail, see United States v. Barger, 178 F.3d 844, 847 (7th Cir. May 10, 1999), the crime of bank fraud is complete when the defendant places the bank at a risk of financial loss, and not necessarily when the loss itself occurs. Cf. United States v. Longfellow, 43 F.3d 318, 324 (7th Cir. 1994) (citing United States v. Hord, 6 F.3d 276, 282 (5th Cir. 1993) for the proposition that "risk of loss, not just loss itself, supports conviction"). The phrase "scheme to defraud" is to be construed liberally, only to be limited by the criminal's creativity. United States v. Yoon, 128 F.3d 515, 522 (7th Cir. 1997) (quoting United States v. Norton, 108 F.3d 133, 135 (7th Cir. 1997), cert. denied, ___ U.S. ___, 118 S. Ct. 66 (1997)). Thus, a scheme will include all conduct designed to deceive in order to obtain something of value. Yoon, 128 F.3d at 522.

Anderson claims that any fraud that occurred did so in 1986 when she originally obtained the monies from MSB in relation to the loans that MSB made to Choice, and not when she transferred funds from AMZ's account at E.F. Hutton to its account at Merrill Lynch (which she claims only occurred because her broker had moved from E.F. Hutton to Merrill Lynch). Therefore, she claims that any fraudulent scheme must have been executed before June 19, 1987, and the statute of limitations had run prior to her indictment. In rejecting this argument, the district court relied heavily on our decision in Longfellow, supra, and the Second Circuit's decision in United States v. Duncan, 42 F.3d 97 (2nd Cir. 1994). Based on those decisions, the district court determined that the conduct charged in counts 1-3 of the indictment (the transferring of the funds from AMZ's E.F. Hutton account to its Merrill Lynch account) constituted a continuation of Anderson's scheme to defraud. Since the charged conduct occurred after June 19, 1987, the district court ruled that the statute of limitations was not violated. While both Longfellow and Duncan are good reference points in determining what conduct amounts to execution of a fraudulent scheme, the district court's heavy reliance on them is misplaced; both cases involve conduct that constitutes execution of bank fraud schemes that are radically different from any conduct involved here.

In Longfellow, we ruled that the bank fraud statute is meant to punish each "execution" of the scheme to defraud, and not each act in furtherance of the scheme to defraud. Longfellow, 43 F.3d at 323 (quoting United States v. Molinaro, 11 F.3d 853, 859 (9th Cir. 1993)). Thus, it is entirely possible to have more than one execution of the same criminal scheme. Ultimately, the decision of whether an action is an execution of the criminal scheme will be fact intensive; there are several factors to consider, including, but not limited to, the ultimate goal of the scheme, the nature of the scheme, the benefits intended, the interdependence of the acts, and the number of parties involved. Longfellow, 43 F.3d at 323. Longfellow involved a scheme in which the defendant, as President and CEO of a Credit Union, made a series of loans to individuals so that they could purchase land owned by the defendant. Id. at 319. The loans were never properly or fully recorded, and the land titles...