U.S. v. CLOUDNo. 87-1197.
872 F.2d 846 (1989)
UNITED STATES of America, Plaintiff-Appellee,
Ronald V. CLOUD, Defendant-Appellant.
Ronald V. CLOUD, Defendant-Appellant.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted June 15, 1988.
Decided April 5, 1989.
Howard L. Weitzman and Steve Cochran, Wyman, Bautzer, Christensen, Kuchel & Silbert, Los Angeles, Cal., for defendant-appellant. Ross W. Nadel, Asst. U.S. Atty., San Francisco, Cal., for plaintiff-appellee. David T. DiBiase, Michael S. Robinson, Anderson, McPharlin & Conners, Los Angeles, Cal., for the amicus curiae, Continental Ins. Co.
Before WALLACE, ALARCON and HALL, Circuit Judges.
CYNTHIA HOLCOMB HALL, Circuit Judge:
Appellant Ronald V. Cloud appeals from his conviction following a jury trial on charges of aiding and abetting bank fraud, in violation of 18 U.S.C. §§ 2 and 1344 (1982 & Supp. IV 1986), and conspiracy to commit bank fraud, in violation of 18 U.S.C. § 371 (1982). Cloud also challenges the district court's order, entered pursuant to the Victim and Witness Protection Act of 1982, 18 U.S.C. §§ 3663-3664 (Supp. IV 1986) ("VWPA"), requiring him to pay $7.5 million restitution to the insurance company that compensated the direct victim of the bank fraud at issue in this case. We affirm both appellant's conviction and the district court order of restitution.
The charges in this case stem from the January 1985 sale of the Cal-Neva Lodge, a hotel and casino complex located in the Lake Tahoe area near the California-Nevada border, by Ronald Cloud to Jon R. Perroton and Cobalt Capitol Corporation, a business association controlled by Perroton.
Viewed in the light most favorable to the government, the evidence adduced at trial is as follows. Appellant Ronald Cloud is a sophisticated, 68-year old entrepreneur who has been in business for over forty years. He currently owns companies in the business of plumbing, irrigation, electric appliances, and grape cultivation. Cloud is experienced in the purchase and sale of real property and has extensive real estate holdings, valued at the time of trial at over $65 million. Appellant also has experience in the fields of banking and finance, having been the founder and chairman of Continental National Bank of Fresno.
In July of 1980, Cloud (along with his wife, Jessman Cloud)
Cloud's first contacts with Jon Perroton took place over a year later in December of 1984. At that time the two men met and orally agreed that Cloud would transfer the Cal-Neva Lodge to Perroton for $18 million. Cloud refused to sign any documents
On January 2, 1985, Perroton first met with an officer of Hibernia Bank, a vice president for corporate lending named Louis Chou, to discuss a possible loan transaction to finance his purchase of the Cal-Neva Lodge. It is undisputed that Perroton made multiple false representations during the financing negotiations and presented falsified documents, including a forged sales agreement, in order to obtain the $20 million loan that Hibernia approved on January 9, 1985. In particular, Perroton told Chou that the sale price for the Lodge was to be $27.5 million and that $7.5 million had already been paid to the Clouds outside of escrow. Perroton also falsely asserted that Sheraton Hotels would lease and operate the Cal-Neva, and would guarantee any loan Hibernia made to finance the acquisition of the Lodge.
The Cal-Neva transaction proceeded swiftly toward closing. An escrow was opened with Transamerica Title Company on January 8, 1985, by an escrow officer named Mickey Eakin. At that time, Perroton misrepresented the essential terms of the sale to Eakin, just as he had to Hibernia. Cloud met with Perroton again for approximately half an hour on January 9, 1985, at which time they agreed to adjust the sale price downward to $17,030,000. On January 11, 1985, Hibernia prepared cashier's checks totalling $20 million for deposit in escrow to be held uncashed by Eakin until the close of escrow. Although Hibernia issued these checks on January 14, 1985, the funds continued to be the bank's property until the close of escrow.
According to Eakin, Cloud spoke with her three or four times over the telephone prior to closing to inquire about the progress of the transaction and the projected closing date. Cloud met Eakin in person for the first time on January 15, 1985. On that date Perroton and his partner, Gene Cochran, drove Cloud — along with his son Steve Cloud, and attorney, James Samarco — to the San Francisco offices of Transamerica Title from the airport into which the Cloud party had flown from Fresno in Cloud's private plane. The purpose of the January 15 meeting was to sign mutual escrow instructions on the Cal-Neva Lodge sale.
Eakin testified that the five men met that day in a conference room at Transamerica, outside of her hearing, to discuss the escrow instructions that she had presented. The only evidence of what happened in the conference room came from Ronald and Steve Cloud and James Samarco. Their testimony revealed that Cloud reviewed the escrow instructions, and noticed that the sale price and down payment figures were inaccurately stated at $27.5 million and $7.5 million, respectively. Cloud also noticed that the Hibernia loan to Perroton was for $20 million, almost $3 million above what he knew to be the true sale price.
The Clouds and Samarco were clearly concerned about the false figures that appeared in the escrow instructions, especially about the tax consequences of the inflated sale price. Without explanation, Samarco asked Eakin to make certain additions to the escrow instructions, including the following language: "Seller to net the sum of $17,030,000 plus or minus the proration of taxes and bonds and less the first and second trust deeds." (Emphasis added). As thus amended, the escrow instructions continued to reflect a sale price of $27.5 million and a down payment of $7.5 million, figures that Perroton insisted were "for [his] purposes only."
Cloud signed the amended escrow instructions and the grant deeds to the property, and took both sets of documents home to Fresno so that his wife could sign them. Cloud returned the signed escrow instructions to Transamerica Title three days later, on January 18, 1985. Hibernia was informed on January 22, 1985 that the instructions had been signed.
The Cal-Neva Lodge escrow closed on January 23, 1985, at a meeting at Transamerica Title at which Cloud, Samarco, Perroton, and Cochran were present. Eakin disbursed the $20 million loan proceeds after receiving authorization from Hibernia. Eakin also prepared a settlement statement
Hibernia claims that its losses on the Cal-Neva Lodge loan exceeded $24.5 million. The bank has recovered a substantial portion of this asserted loss from, among others, its insurer, Continental Insurance Company. Pursuant to a settlement agreement executed on July 19, 1985, Continental paid $7.5 million to resolve Hibernia's claim of loss under the terms of a "banker's blanket bond." Hibernia also recovered $1.5 million from Cloud upon an settlement agreement executed on June 18, 1987.
Cloud argues that the foregoing evidence is insufficient to support his convictions for aiding and abetting bank fraud and for conspiracy. There is sufficient evidence to support a conviction if, viewing the evidence in the light most favorable to the government, any rational trier of fact could have found each of the essential elements of the crime beyond a reasonable doubt. United States v. Penagos,
In order to obtain a conviction for bank fraud in violation of 18 U.S.C. § 1344,
Conviction as an aider and abettor requires proof beyond a reasonable doubt that the defendant willingly associated himself with a criminal venture and participated therein as something he wished to bring about. United States v. Zemek,
The evidence in this case established that sometime in December of 1984 or early January of 1985, Jon Perroton "launched" a fraudulent scheme to obtain money from Hibernia Bank by means of false representations. It is uncontroverted that Perroton falsely stated the sale price and down payment for the Cal-Neva Lodge, and presented a forged sales agreement to the bank, in order to obtain funds with which to complete the Cal-Neva transaction with Cloud.
The issue before this court, however, is whether a rational trier of fact could conclude on the basis of all the evidence that Cloud at some point knowingly "came aboard" and participated in Perroton's bank fraud scheme. We conclude that a reasonable jury could have found that Cloud "came aboard" on January 15, 1985, at the meeting to sign the escrow instructions, if not before.
There is no question Cloud knew that the sale price was not $27.5 million, that he had not received $7.5 million outside of escrow, and that on their face the escrow instructions (as well as the settlement statement later derived from them) reflected these false figures. There is likewise no doubt that Cloud, who was a sophisticated businessman with extensive experience both in real estate transactions and in banking, knew that the escrow would not have closed and that the Hibernia funds would not have been disbursed if he had not signed the escrow instructions.
Cloud's primary contention regarding the sufficiency of the evidence to support his bank fraud conviction, however, is that the amendments upon which his attorney insisted served to correct or clarify any possible false representations in the escrow instructions.
Cloud does not even attempt to argue, moreover, that the changes his attorney requested did anything to "correct" the falsely-stated figure for cash he purportedly received outside of escrow. The government was not required to prove every allegation of fraud; proof of this one material misrepresentation might have been sufficient to support Cloud's conviction. See United States v. Halbert,
We are persuaded that, viewed in a light most favorable to the government, there was sufficient evidence upon which a rational jury could conclude that Cloud affirmatively assisted in the execution of Perroton's fraudulent scheme to obtain the
Cloud also contends that there was insufficient evidence to support his conspiracy conviction. The elements of conspiracy are: (1) an agreement to accomplish an illegal objective, (2) coupled with one or more acts in furtherance of the illegal purpose, and (3) the requisite intent necessary to commit the underlying substantive offense. Pemberton, 853 F.2d at 733; United States v. Indelicato,
A rational jury could conclude beyond a reasonable doubt from the evidence in this case that Cloud and Perroton agreed on January 15, 1985, to engage in a bank fraud scheme. Specifically, the jury reasonably could have inferred that an "agreement" was reached during the meeting at which Cloud and Perroton, along with their associates, discussed the discrepancy between the true sale price and downpayment figures and those appearing on the escrow instructions presented by Eakin. Emerging to sign the escrow instructions after resolving an admitted dispute over the accuracy of those figures is conduct from which it can be inferred that Cloud and Perroton came to a "meeting of the minds" to go forward with the Cal-Neva deal using falsified documents to memorialize the transaction.
As for the other conspiracy elements, the execution of mutual escrow instructions containing materially false representations
Cloud raises several challenges to the district court's order under which he is required to pay a $500,000 fine and $7.5 million in restitution to Continental Insurance Company. First, he argues that the district court was not authorized under the Victim and Witness Protection Act to order restitution in this case because an agreement he entered into with Hibernia Bank, and another contract executed by Hibernia and Continental, fully settled all the victims' claims against him. Second, Cloud contends that the district court abused its discretion by ordering restitution, without making explicit findings of fact, in an amount that was excessive in light of his relative culpability and his net profit on the Cal-Neva Lodge transaction. Finally, Cloud contends that the restitution order and fine were illegal insofar as the district court ordered that the remaining unpaid balance of either penalty will become immediately due and payable upon his death. We will consider each of Cloud's arguments in turn.
We have recently held that an insurance company is a proper beneficiary of a VWPA restitution order, under 18 U.S.C. § 3663(e)(1) (formerly 18 U.S.C. § 3579(e)(1)), where the insurer has compensated the direct victim of a criminal offense. United States v. Youpee,
Prior to sentencing, Cloud entered into an "AGREEMENT REGARDING SETTLEMENT, RESTITUTION AND MUTUAL RELEASE" by which he agreed to pay Hibernia a total of $1.5 million to settle all its remaining claims against him. Pursuant to a "SETTLEMENT AGREEMENT AND MUTUAL RELEASE" executed with Hibernia, Continental waived "all subrogation claims and rights which may arise by virtue of its payment to Hibernia [of $7.5 million] pursuant to this Agreement and all direct rights or causes of action against any party arising out of or in any way connected with the Hibernia claim." (Emphasis added).
Relying primarily on language in a Fourth Circuit case, United States v. Bruchey,
810 F.2d at 460 (emphasis in original). We believe that these statements, which clearly constitute dicta,
A faulty premise underlying Cloud's argument here is that Continental had a pre-existing "right" to receive restitution under the VWPA that it could assert or waive. The Supreme Court has held that criminal restitution is not ordered because victims have an independent legal entitlement to it but, rather, as a means of achieving penal objectives such as deterrence, rehabilitation, or retribution:
Kelly v. Robinson,
Under the reasoning of Kelly, neither Hibernia nor Continental had an independently enforceable right to receive restitution under the VWPA. It follows that Continental did not waive either a direct or subrogation right to receive VWPA restitution when it settled Hibernia's claim of loss. We therefore conclude that, despite the existence of settlement agreements among the parties, the district court was authorized by the VWPA to order Cloud to pay restitution to the insurance company in this case.
We turn next to Cloud's argument that an excessive amount of restitution was ordered
Under the VWPA, the district court may order restitution to any positively identifiable victim of a fraudulent scheme in a definite amount that is supported by the evidence, limited by the victim's actual losses, and judicially established in a proceeding in which the defendant has the opportunity to refute the amount ordered. United States v. Pomazi,
In a section entitled "Procedure for issuing order of restitution," the VWPA specifically requires the district court to "consider" the amount of loss sustained by the victim, the financial resources and earning ability of the defendant, the financial needs of the defendant and her dependents, and other factors it deems appropriate. 18 U.S.C. § 3664(a). The VWPA also provides, however, that the imposition of a restitution order should not "unduly complicate or prolong the sentencing process." 18 U.S.C. § 3663(d).
It is clear from the record in this case that the district court considered the relevant factors as required by the VWPA. At sentencing, the court commented on Cloud's financial resources and his role and culpability in the fraud. Further, the sentencing court indicated before ordering $7.5 million restitution that it had considered the following materials: the presentence report prepared by the probation office, the evidence presented at trial, letters of recommendation and materials submitted by Continental, memoranda and other documents submitted by the government and Cloud's attorney, and the arguments of the parties.
Cloud contends, however, that the district court erred by failing to consider
Cloud also argues that the amount of restitution ordered was excessive because he claims to have "netted" only $2.9 million on the sale of the Cal-Neva Lodge.
Cloud's final contention is that the district court's order is illegal to the extent that it directs payment of any unpaid fine and restitution upon his death. Appellant argues that such a provision violates the abatement rule of United States v. Oberlin,
Concisely stated, the rule of abatement is that "[d]eath pending appeal of a criminal conviction abates not only the appeal but all proceedings in the prosecution from its inception." Oberlin, 718 F.2d at 895-96. In Oberlin, we held that a criminal prosecution,
The rule of abatement is basically one that precludes review of a criminal conviction or sentence or other penal sanction where the accused has died during the pendency of an appeal of right. Where, as here, the defendant has not died pending resolution of his appeal, the rule of abatement is simply inapplicable.
Cloud also argues that the provision by which the unpaid balance of the restitution payments becomes due and payable upon his death is void under 18 U.S.C. § 3565(h) (1982) (repealed effective November 1, 1987). Before it was repealed, section 3565(h) provided that an "... obligation to pay a fine or penalty ceases upon the death of the defendant...." We need not decide this issue, however, because it does not appear that Cloud presented it to the court below. United States v. Grewal,
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