|
|
U.S. v. CLOUD
872 F.2d 846 (1989)
UNITED STATES of America, Plaintiff-Appellee,
v.
Ronald V. CLOUD, Defendant-Appellant.
No. 87-1197.
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. IThe 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.1 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)2 purchased the Cal-Neva Lodge for $10 million from Tracinda Corporation. To finance this purchase, Cloud assumed a $4.3 million loan with First Interstate Bank and Tracinda carried another $4.8 million in the form of a second mortgage. Cloud's equity in the Lodge at the time of purchase appears to have been approximately $1.9 million. After three years of mounting operating losses, Cloud closed the Lodge and actively began seeking a new buyer in October of 1983. 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
with respect to the sale at that stage of their dealings.
1. On June 21, 1985, Jon Perroton was sentenced to twenty years in prison after he pleaded guilty to three counts of bank larceny, interstate transportation of moneys taken by fraud, and bank fraud, in violation of 18 U.S.C. §§ 2113(b), 2314, and 1344 (1982 & Supp. IV 1986), respectively. Perroton was prosecuted in the district court for the Northern District of California in case CR-85-0130-SC. Only the bank fraud count arose out of his purchase of the Cal-Neva Lodge. Perroton was also ordered to pay restitution in the amount of $10 million, or a sum to be determined by the probation office. 2. Although she was nominally a party to the transactions by which her husband purchased and resold the Cal-Neva Lodge, Jessman Cloud was not charged in connection with the bank fraud at issue in this case. 3. Hibernia acquired the Cal-Neva Lodge and sold it for $10 million; the bank also recovered $2.2 million from Perroton, and $2.6 million from the law firm that prepared its escrow instructions for the Cal-Neva transactions. To date, then, it appears that Hibernia has recovered $23.8 million of its losses. 4. Section 1344(a) defines bank fraud as the knowing execution or attempted execution of "a scheme or artifice — (1) to defraud a federally chartered or insured financial institution; or (2) to obtain any of the moneys ... owned by or under the custody or control of a federally chartered or insured financial institution by means of false or fraudulent pretenses, representations, or promises...." 18 U.S.C. § 1344(a) (Supp. IV 1986). 5. In an argument that he seems to have abandoned in his reply brief, Cloud mistakenly relies on United States v. Bales,813 F.2d 1289 (4th Cir.1987), for the proposition that the government must prove he knowingly made false representations directly to a bank. The bank fraud statute itself contains no such requirement. See 18 U.S.C. § 1344. A careful reading of its opinion, moreover, indicates that the Bales court imposed no such requirement. Id. 813 F.2d at 1293 n. 2 (conviction under 18 U.S.C. § 1014 requires proof that defendant made a false statement to a bank; conviction under 18 U.S.C. § 1344 requires proof that the defendant knowingly executed or attempted to execute a scheme or artifice to obtain money or property owned by or under the custody or control of a federally chartered or insured bank, by means of false pretenses, representations or promises).
Even assuming the government must prove that false representations were made to a bank for purposes of section 1344, there was sufficient evidence to support Cloud's conviction for aiding and abetting bank fraud. As an aider and abettor, Cloud is liable for Perroton's false representations to the bank. As noted infra, moreover, Cloud provided confirmation of the false statements in the escrow instructions to Eakin, an escrow officer who was acting in part as an agent for the bank, in full awareness that she would have stopped the transaction from closing if he had not done so. 6. Cloud also appears to argue that: (1) even if the escrow instructions falsely stated the sales price and down payment figures, these representations were not made with the intent to deceive the bank; and (2) the bank did not rely on any material misrepresentations in the escrow instructions that were attributable to him. We reject both arguments.
To act with the "intent to defraud" means to act willfully, and with the specific intent to deceive or cheat for the purpose of either causing some financial loss to another, or bringing about some financial gain to oneself. See United States v. Peden,556 F.2d 278 (5th Cir.) cert. denied, 434 U.S. 871, 98 S.Ct. 216, 54 L.Ed.2d 150 (1977); see also E. Devitt & C. Blackmar, Federal Jury Practice and Instructions § 16.05 (3d ed. 1977). It is a well-established principle that fraudulent intent may be established by circumstantial evidence and inferences drawn from all the evidence. See Bales, 813 F.2d at 1294 (citing Mitchell v. Union Pacific Railroad Co.,188 F.Supp. 869, 872 (S.D.Cal.1960)). There was evidence before it from which the jury could infer that Cloud made a calculated decision to sign the instructions in order to obtain his share of the loan proceeds, knowing that the bank could be deceived by materially false statements that appeared on the face of the instructions. For example, the jury heard evidence that Cloud decided to sell the Cal-Neva Lodge after three years of mounting operating losses, and that five years after he purchased the Lodge he sold the losing business at a before-tax profit of over $7 million. The fact of Hibernia's reliance on false representations made by Cloud, likewise, can hardly be doubted on the facts of this case. The falsely-stated sales price and down payment were the same figures upon which Hibernia officials had relied in approving the loan to Perroton. Both Chou and Eakin testified that the escrow never would have closed, and that the Hibernia funds would not have been disbursed, if Cloud had objected to the misstated information or declined to sign the escrow instructions. At a minimum it appears that Eakin, who was acting in part as an agent of Hibernia, relied on Cloud's apparent confirmation of the false figures. A rational trier of fact could also have concluded, on the basis of Chou's and Eakin's testimony and evidence that Hibernia authorized disbursement of the loan proceeds only after Chou was notified that the escrow instructions had been signed, that Hibernia itself relied on misrepresentations attributable to Cloud. 7. Cloud also argues, somewhat incredibly, that he was an intended third-party beneficiary of the agreement by which Continental waived its subrogation and direct rights to sue "any party" in connection with the Cal-Neva transaction. A third party qualifies as a beneficiary under a contract if the parties intended to benefit the third party, and the terms of the contract make that intent evident. See Karo v. San Diego Symphony Orchestra Ass'n,762 F.2d 819, 821-22 (9th Cir.1985). Under California law, a third-party may enforce a contract made expressly for her benefit at any time before the parties rescind it. Cal.Civ.Code § 1559 (West 1982). If Cloud could establish that he was an intended third-party beneficiary, perhaps he could assert the waiver provision as a defense to a civil action commenced by Continental. It does not follow, however, that he can assert any contractual rights he might have to defeat the jurisdiction of a federal court to order restitution pursuant to the VWPA. In any event, we need not resolve the parties' dispute about Cloud's third-party beneficiary claim because he failed to raise it in the district court in the first instance. See United States v. Grewal,825 F.2d 220, 223 (9th Cir.1987) (citing United States v. Whitten,706 F.2d 1000, 1012 (9th Cir.1983), cert. denied 465 U.S. 1100, 104 S.Ct. 1593, 80 L.Ed.2d 125 (1984)). 8. The facts in Bruchey, briefly stated, were that the district court had compelled the defendant to sign a long-term promissory note payable to the victim as a form of restitution. Because the court failed to make specific findings of fact, and because the term of the restitution order exceeded time limits established by the VWPA, see 18 U.S.C. § 3663(i)(2), the Fourth Circuit vacated and remanded. Bruchey, 810 F.2d at 458-60. The existence of a promissory note or other settlement agreement was, therefore, not material to the court's judgment. 9. The Kelly Court went on to endorse the view of the judge who had decided the case before it in the bankruptcy proceedings below:
"Unlike an obligation which arises out of a contractual, statutory or common law duty, [the restitution] obligation is rooted in the traditional responsibility of a state to protect its citizens by enforcing its criminal statutes and to rehabilitate an offender by imposing a criminal sanction intended for that purpose." Kelly, 479 U.S. at 52, 107 S.Ct. at 362 (quoting In re Pellegrino,42 B.R. 129 (D.Conn.1984)). 10. We do not by our holding mean to imply that Continental, or any other recipient of VWPA restitution, may obtain a double recovery for injuries resulting from the relevant criminal offense. The VWPA itself expressly forecloses this possibility. See 18 U.S.C. §§ 3663(e)(1) and (2). District courts can factor into their sentencing decisions the existence of settlement agreements between the defendant and any victims of the offense. In fact, when ordering restitution under the VWPA, the district court arguably is required by sections 3663(e)(1) and (2) to consider such agreements. The district court in this case was fully apprised of, and clearly considered, the existence and terms of the settlement agreements among the parties. 11. In a footnote in his opening brief, Cloud argues that the district court was required to make clear findings of fact before entering an order of restitution, and that the failure to do so was an abuse of discretion. This court has recently held that a district court is required to make "factual determinations" under the VWPA and enter a specific order of restitution based on such facts. United States v. Weir,861 F.2d 542, 546 (9th Cir.1988). After citing to a Tenth Circuit case, United States v. Watchman,749 F.2d 616, 618 (10th Cir.1984), the Weir court sketched only a bare outline of the factfinding process that is required before imposition of a VWPA restitution order. The object, of course, is to make an order of restitution that is complete and accurate, and one that has a sound basis in fact. Weir, 861 F.2d at 546.
Other courts that have considered this issue have held that the district court is required to make clear and specific findings of fact before entering a restitution order. See, e.g., Bruchey, 810 F.2d at 459; United States v. Palma,760 F.2d 475, 480 (3d Cir.1985); and United States v. Durham,755 F.2d 511, 514-15 (6th Cir.1985). These courts presumably envision some sort of formal adversarial presentation of evidence, after which the court can resolve factual disputes and enter findings accordingly. Prior to Weir, however, this court held that neither the VWPA nor Fed.R.Crim.P. 32 requires the district court to hold a full-blown evidentiary hearing on the issue of restitution. United States v. Keith,754 F.2d 1388, 1393 (9th Cir.), cert. denied, 474 U.S. 829, 106 S.Ct. 93, 88 L.Ed.2d 76 (1985); see also United States v. Ruffen,780 F.2d 1493, 1495 (9th Cir.), cert denied, 479 U.S. 963, 107 S.Ct. 462, 93 L.Ed.2d 407 (1986). More recently, we have held that the district court is not required to discuss on the record the factors Congress has listed in section 3664(a). Grewal, 825 F.2d at 223. There is nothing in the text or legislative history of the VWPA to indicate that Congress intended the sentencing hearing to be transformed into a second trial on the issue of restitution. If anything, congressional intent appears to have been quite the contrary. See, e.g., 18 U.S.C. § 3663(d). Accordingly, we decline to read Weir, by its uncritical and passing reference to Watchman, as having worked any major change in the law of this circuit. The sentencing hearing in this case was adequate, and we are satisfied by the record that the district court was well within its discretion to order $7.5 million restitution to Continental on the basis of the materials submitted and arguments presented by the parties. Formal findings of fact were not required. 12. An attorney representing Continental was present at the sentencing hearing but declined the court's invitation to present any argument. 13. It may well have been that the district court actually did consider Cloud's relative culpability when it ordered him to pay Continental $7.5 million restitution. The parties had supplied the sentencing court with the "Judgment and Probation/Commitment Order" by which Jon Perroton was ordered to pay $10 million restitution. The court also knew, however, that Perroton was incarcerated, that he had a negative net worth, and that Cobalt Capital Corporation was bankrupt.
In addition to Perroton, however, Cloud maintains that the district court should have considered the relative fault of Hibernia Bank, Hibernia's lawyers, and Transamerica Title Company in setting the amount of restitution. The notion that a sentencing court should consider the comparative fault of a crime victim when ordering restitution is a strange one indeed. A secondary theme in Cloud's "relative culpability" argument is that he was not directly responsible for Hibernia's (now Continental's) losses. We note that there appears to be a conflict in this circuit regarding the nexus the government must establish between the defendant's criminal conduct and the victim's losses to support a VWPA restitution order. Compare Spinney, 795 F.2d at 1417 (government need not prove that the defendant was directly responsible for the loss); with United States v. Tyler,767 F.2d 1350, 1351-52 (9th Cir.1985) (restitution is proper only for losses directly resulting from the defendant's offense). Under either test, we believe Cloud's responsibility was sufficiently direct to warrant the district court in ordering him to restore $7.5 million of the estimated $24.5 Hibernia lost as a result of the bank fraud for which both he and Perroton were convicted. 14. We also note our recent holding that joint and several liability for the entire loss may be imposed by the sentencing court, pursuant to an order of restitution, on each of the participants in a fraudulent scheme. United States v. Van Cauwenberghe,827 F.2d 424, 435 (9th Cir.1987) (amended opinion). Subject to the statutory limitation on double recovery, both Cloud and Perroton could have been ordered to restore Continental's entire loss, plus the amount of unrecovered loss suffered by Hibernia. As in Van Cauwenberghe, then, it was not an abuse of discretion for the district court to order the lower amount. 15. Cloud's calculation takes into consideration improvements he made on the property, taxes paid on the sales proceeds, and operating losses of nearly $4 million during his ownership. The district court was fully apprised of Cloud's proposed method for computing his "profits" on the sale, and did not abuse its discretion by choosing a different formula. 16. Cloud also challenges the district court's order imposing a $500,000 fine on the ground that it violated the rule of abatement. In light of our holding that the abatement rule is inapplicable where a defendant has not died pending appeal, there is no reason to disturb the district court's order imposing the fine.
|
|