United States v. Schone ( 1999 )

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
MAY 28 1999
TENTH CIRCUIT
PATRICK FISHER
Clerk
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v. No. 98-6360
(D.C. No. CR-98-041-C)
STANLEY C. SCHONE, (W.D. Okla.)
Defendant-Appellant.
ORDER AND JUDGMENT *
Before SEYMOUR, Chief Judge, EBEL, and MURPHY, Circuit Judges.
Defendant-Appellant Stanley C. Schone appeals his conviction under 18
U.S.C. § 1014 for making a false statement for purposes of obtaining a bank loan.
Schone argues that there was insufficient evidence to support his conviction, and
that the district court erred in admitting evidence of Schone’s “other bad acts.”
We affirm.
*
This order and judgment is not binding precedent, except under the doctrines of
law of the case, res judicata, and collateral estoppel. This court generally disfavors the
citation of orders and judgments; nevertheless, an order and judgment may be cited under
the terms and conditions of 10th Cir. R. 36.3.
BACKGROUND
This appeal concerns a single loan in a series of small loans obtained by
Defendant-Appellant Stanley Schone from Quail Creek Bank in Oklahoma City
for Schone’s lawn mowing and yard maintenance business, Green Grass, LLC
(“Green Grass”).
In April 1995, Schone started Green Grass with two other men, Shannon
Self and Ray Lees. In August 1995, Self asked Schone to buy out Self’s and
Lees’ interest in Green Grass and to exonerate them from a loan the parties had
obtained from Union Bank to start the business. Schone agreed and in September
1995 spoke with Quail Creek Bank loan officer Jon Tucker McHugh about
obtaining loans to buy out the other men’s interests and to provide additional
funds to cover start-up costs for Green Grass. Schone discussed Green Grass’
financial condition with McHugh, including Green Grass’ existing contracts in the
Oklahoma City and Edmond areas.
Between September 1995 and April 1996, Quail Creek Bank issued four
separate loans to Green Grass. The first was issued on September 28, 1995, for
$14,228; the second was issued on November 9, 1995, for $2,035; the third was
issued March 1, 1996, for $2,555; and the fourth was a consolidation loan issued
April 25, 1996, for $17,301, which consolidated the remaining balances on the
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first three loans into a single note. 1 The only loan at issue in this appeal is the
second loan, made in November 1995, for $2,035.
More than a year after these loans were issued, the FBI launched an
investigation into alleged criminal activity at the Edmond Parks & Recreation and
Kickingbird Golf Course in Edmond. The FBI interviewed Schone as part of this
investigation, apparently because Schone had purchase order accounts with the
City of Edmond and Edmond All Sports to perform services at Kickingbird Golf
Course. Schone later became a target of the FBI investigation and was ultimately
indicted on three counts of making false statements for the purpose of obtaining
loans, in violation of 18 U.S.C. § 1014. The district court dismissed the first
count for insufficient evidence, and a jury acquitted Schone of the third count.
However, the jury convicted Schone on Count II, which alleged that Schone
falsely told Quail Creek Bank that Green Grass had a one-year contract with the
City of Edmond to maintain certain ballfields starting in February 1996; that this
contract would generate income of $7,500/month or $91,500/year; and that
Schone made this statement for the purpose of influencing the bank to approve his
November 1995 loan.
1
Quail Creek Bank later declared the fourth loan to be in default.
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Count II: The November 1995 Loan
Quail Creek Bank loan officer McHugh was the government’s sole witness
to Schone’s alleged false statement with respect to the November 1995 loan.
McHugh testified at trial that when Schone came to him in September seeking the
first loan, Schone told him that he was planning to bid on a significant contract
with the City of Edmond. McHugh further testified that when Schone
reapproached him in early November 1995 for the second loan, Schone told him
that he had secured the contract with the City to maintain the ballfields. The
government introduced McHugh’s November 2, 1995 handwritten file memo,
which stated:
Contract on baseball fields
Mitch & Hafer Park $91,500
for one year
Contract rollover at the end of one
year to a five year roll.
7500/mo income
In fact, Schone did not have at that time a contract with the City of Edmond to
maintain the Mitch and Hafer Park ballfields, nor did he later procure such a
contract. Nonetheless, the bank issued the loan for $2,035 on November 9, 1995.
On cross-examination of McHugh, defense counsel attempted to prove that
at most, Schone had merely indicated to McHugh in November 1995 that it was
likely that Green Grass would get the contract with the City -- not that Green
Grass already had the contract. Specifically, defense counsel elicited from
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McHugh that he originally told the FBI during an interview that Schone told him
that Schone “either had the contract or was getting the contract and that it would
be a ‘slam dunk.’” Defense counsel argued that Schone simply was predicting a
future event, and that such predictions cannot give rise to criminal liability under
18 U.S.C. § 1014. McHugh at trial explained his FBI comment as perhaps
relating to an earlier period of time when the September loan was sought. In any
event, at trial McHugh was clear and unequivocal that by the time the November
loan was sought, Schone had told him that he had an existing contract covering
the Mitch and Hafer Park fields.
The jury convicted Schone of making the false statement, and the court
sentenced Schone to a 4-year term of supervised release with a period of home
confinement not to exceed 120 days, and to pay a $500 fine. Schone now appeals.
DISCUSSION
Sufficiency of the Evidence
In reviewing a challenge to the sufficiency of the evidence,
we examine, in the light most favorable to the government, all of the
evidence together with the reasonable inferences to be drawn
therefrom and ask whether any rational juror could have found the
essential elements of the crime beyond a reasonable doubt. We
consider both direct and circumstantial evidence and accept the jury’s
resolution of conflicting evidence and its evaluation of the credibility
of witnesses.
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United States v. Grissom, 44 F.3d 1507, 1510 (10th Cir.) (internal quotations and
citations omitted), cert. denied, 514 U.S. 1076 (1995).
18 U.S.C. § 1014 prohibits making false statements to a federally insured
financial institution for the purpose of influencing that institution to act upon a
loan. The government must prove: 1) that the defendant made a false statement to
a bank; 2) that the defendant did so for the purpose of influencing the bank’s
actions; and 3) that the defendant made the false statement knowingly. See id. at
1510 (citing United States v. Haddock, 956 F.2d 1534, 1549 (10th Cir. 1992)). 2
The government need not prove that the defendant intended to harm the bank or to
profit personally, or that the bank suffered actual loss. See id. (citing United
States v. Whitman, 665 F.2d 313, 318 (10th Cir. 1981)). Finally, the defendant’s
intent to influence is what must be shown; actual reliance by the bank need not be
proved in a § 1014 case. See United States v. Mitchell, 15 F.3d 953, 956 (10th
Cir. 1994).
Schone argues that at most, he told McHugh in November 1995 that he
might get the contract with the City. As such, he submits, this was merely an
2
Grissom, relying on Haddock, also cited as an element of § 1014 that the
statement’s falsity must be material. See Grissom, 44 F.3d at 1510. However, the
Supreme Court later held in United States v. Wells, 519 U.S. 482 (1997), that the
materiality of the false statement is not an element of a § 1014 offense. This
Circuit recognized the Supreme Court’s ruling in Wells in United States v.
Pappert, 112 F.3d 1073, 1077 (10th Cir. 1997).
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opinion regarding a possible future event – not a false statement of fact – and
therefore not a violation of § 1014.
The transcript of McHugh’s trial testimony reveals that any ambiguity
McHugh may have expressed to the FBI with respect to Schone’s contractual
status with the City concerned the initial conversation Schone had with McHugh
in September 1995 when Schone first approached Quail Creek Bank. At that
time, Schone mentioned to McHugh that he was going to bid on the contract. As
to the November conversation however, McHugh never equivocated; McHugh
consistently and repeatedly testified that Schone told him in November 1995 that
Green Grass already had the contract with the City of Edmond. It was within the
province of the jury to weigh any conflict in McHugh’s testimony and reasonably
conclude that Schone in fact falsely told McHugh that the contract already existed
in November when Schone applied for the second loan. 3
As a result, McHugh’s testimony provided sufficient evidence to support
the jury’s verdict on Count II.
3
Schone argues in the alternative that, even if he had told McHugh that the
contract existed, it still did not constitute a statement concerning a present fact,
because the contract was not scheduled to take effect until February 1996 (three
months in the future). Whether the contract was to take effect in the future is
irrelevant; the statement in November 1995 that a contract existed with the City is
the falsity for which Schone was prosecuted.
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Evidence of “Other Bad Acts”
Schone also argues that the district court committed reversible error by
admitting prejudicial evidence of several instances of unrelated other bad acts.
The government responds that the evidence was primarily intrinsic to the charged
offenses, and to the extent that it was extrinsic, it was admissible under Fed. R.
Evid. 404(b) 4 on the issues of motive, intent, knowledge, and absence of mistake
or accident.
We review a district court’s decision to admit evidence, including evidence
under Fed. R. Evid. 404(b), only for abuse of discretion. See Grissom, 44 F.3d at
1513.
Schone objected at trial to the testimony of Johnny Nix, a customer who
was unhappy with Green Grass’ service 5; the testimony of Schone’s former
partner Shannon Self, who stated that Schone had not been honest with Self about
the projected income of Green Grass and that Schone had acted irresponsibly
when he left equipment on the street which was impounded by police; and the
4
Fed. R. Evid. 404(b) provides in relevant part:
Evidence of other crimes, wrongs, or acts is not admissible to prove
the character of a person in order to show action in conformity
therewith. It may, however, be admissible for other purposes, such
as proof of motive, opportunity, intent, preparation, plan, knowledge,
identity, or absence of mistake or accident . . . .
On appeal, Schone also challenges the admission of testimony from
5
customer Kathy Wallis. However, Schone did not object to her testimony below,
so we consider that argument only for plain error, and we find no such error here.
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testimony of Richard Malone, Senior Vice President of Quail Creek Bank, who
stated that Schone improperly disposed of a piece of equipment pledged as
collateral and did not thereafter turn over the proceeds to Quail Creek Bank.
The court did not abuse its discretion in admitting any of this evidence.
First, Nix’s testimony was properly admitted as intrinsic evidence, as it was
offered to explain the circumstances that led Quail Creek Bank to declare the
April 1996 consolidation loan to be in default. 6 Second, Self’s testimony was
admissible under Fed. R. Evid. 404(b) as evidence of Schone’s motive, intent,
knowledge and absence of mistake or accident. Self’s testimony was offered to
establish the background for the business relationship that was created between
Green Grass and Quail Creek Bank, and to explain that Self withdrew from the
company because he was disappointed with its financial performance and because
Schone’s income projections were not being met. Self further attested that he
took possession of the primary equipment of the company after it had been
impounded, and that as a condition of returning the equipment, Self required
6
McHugh testified that, prior to declaring Schone’s April 1996 loan to be in
default, McHugh contacted customers Johnny Nix and Kathy Wallis, asking them
to pay the bank any money Green Grass earned under its contracts with them.
Soon after speaking with them, he decided to declare the loan in default. Nix
testified that his business had been dissatisfied with Schone’s work, and that his
business terminated the contract with Green Grass. Nix’s testimony provided the
jury with a basis for inferring what McHugh learned from his phone calls with the
customers that led him to declare the loan in default.
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Schone to obtain funds to pay off Green Grass’ original bank loan. Self’s
statements tended to show that Schone was in a somewhat precarious financial
situation when he approached Quail Creek Bank in September 1995 and thus that
he had a motive to lie about Green Grass’ financial condition to obtain a loan.
Finally, Richard Malone’s testimony regarding Schone’s improper
disposition of a diesel walker mower pledged as collateral was properly admitted
under Rule 404(b) on the issue of motive, intent, knowledge or absence of
mistake or accident, as it showed that Schone failed to honor his known
obligations regarding the bank’s collateral. The court gave an appropriate
limiting instruction with respect to this evidence.
CONCLUSION
We find that there was sufficient evidence to support Schone’s conviction
under 18 U.S.C. § 1014 for making a false statement to a bank for purposes of
obtaining a loan. We further find no abuse of discretion by the district court in
admitting other acts evidence in this case. Accordingly, the judgment and
evidentiary rulings of the district court are AFFIRMED.
ENTERED FOR THE COURT
David M. Ebel
Circuit Judge
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