United States v. Bond, Johnnie ( 2000 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 99-4113
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
JOHNNIE BOND,
Defendant-Appellant.
Appeal from the United States District Court
for the Eastern District of Wisconsin.
No. 99 CR 73--Charles N. Clevert, Judge.
Argued September 14, 2000--Decided November 3, 2000
Before ROVNER, DIANE P. WOOD, and EVANS, Circuit
Judges.
EVANS, Circuit Judge. Before he was nabbed,
Johnnie Bond made $4 million out of shady real
estate deals in the inner city of Milwaukee,
Wisconsin. Having been caught, and now convicted
on two substantive violations of 18 U.S.C. sec.
2314 and one count of conspiracy to violate that
provision, Bond appeals, contending that the
evidence was insufficient to support his
convictions.
Bond’s appeal is from the denial of his motion
for a judgment of acquittal. To prevail, he must
establish that, judging the evidence in the light
most favorable to the United States, no rational
trier of fact could find the essential elements
of a charged offense beyond a reasonable doubt.
United States v. Hill, 187 F.3d 698 (7th Cir.
1999). This is a rigid standard, and we reverse
"only when the record is devoid of any evidence,
regardless of how it is weighed, from which a
jury could find guilt beyond a reasonable doubt."
United States v. Thompson, 106 F.3d 794, 798-99
(7th Cir. 1997). We recite the facts with that
standard in mind.
Bond operated at least six companies in
Milwaukee which were involved in residential real
estate transactions. Between June of 1997 and
March of 1999 he falsified documentation on more
than 150 real estate transactions and in the
process skimmed more than $4 million in loan
proceeds. With federal agents closing in on him,
in April 1999 Bond appeared in the office of the
United States Attorney and gave a statement
admitting his fraud. Apparently thinking better
of his conversations with the prosecutor’s
office, Bond denied on the stand at his jury
trial that he was guilty or that he had admitted
fraud to the U.S. Attorney. He said he went to
the U.S. Attorney’s office to explain his
conduct, not to confess guilt.
In any case, what the government determined
upon investigation of Bond’s conduct was that he
induced owners of residential property in
Milwaukee’s inner city to sell properties to him
by saying he would improve and then resell them
to inner-city residents. Bond made sure he was
not the purchaser of record. He recruited
"investors" who allowed their names and credit to
be used for mortgage loans to finance the
purchases. The investors were not required to put
any money down, and the profits from the resale,
which in fact never occurred, were to be split
between them and Bond. Bond promised each
investor that he would receive about $6,000 when
the deal closed.
Bond’s companies were the ones who solicited
the real estate mortgage loans to fund the
purchases. The documentation which the companies
forwarded to the lenders in support of the loans,
not surprisingly, did not reflect the actual
deal. For one thing, the purchase prices listed
were vastly inflated. For example, Bond agreed to
buy a property at 2229-31 North 47th Street for
$35,000, but the lending company and the investor
were told that the purchase price was $70,000.
The lending company was also told that the
investor was making a down payment of $15,677.37,
which was supposedly on deposit in an account at
Tri City National Bank in Milwaukee. Bond said he
would bring the money to the closing in the form
of a cashier’s check. The lender, in this case an
Illinois company, sent $56,000 to fund the deal.
Bond took control of the proceeds in excess of
the amounts due the seller by representing to the
closing agent that the funds were for "rehab"
work that one of his companies had performed. But
of course the work was not performed.
Amazingly, the scheme was repeated 150 times.
Bond skimmed money using construction invoices,
invoices from other real estate businesses, and
businesses such as True Management Group for
which he obtained "management" fees. The
mortgages exceeded $8 million; the amount of
fraudulent down payments was more than $2
million.
Tri City’s cashier’s checks and account
verifications were used for each transaction. The
cashier’s checks were brought to the closing as
down payments. The verifications were used to
show that the buyer had used an account balance
to fund the cashier’s check. In reality, the
cashier’s checks were issued without funds to
back them up. Bond managed this sleight of hand
because he was paying bribes to a bank employee.
That employee and a vice-president of the bank
were aware of the fraud.
Bond’s fraud left lenders holding mortgages that
far exceeded the value of the properties.
Predictably, the mortgage notes went into
default. And because the scheme left no money to
cover repairs, the properties failed to meet
Milwaukee code requirements.
After he was convicted and sentenced to 97
months in prison and ordered to make restitution
in the amount of $1.9 million, Bond filed this
appeal. He points out that the indictment alleges
a scheme to defraud mortgage lenders, investors,
and the City of Milwaukee and that the jury
instructions contain similar language. His
contention seems to be that because the victims
are set out in the conjunctive, the scheme as
alleged must necessarily include fraud on the
City. But, he contends, there is insufficient
evidence to support a finding that the City of
Milwaukee was a victim of the fraud and therefore
his conviction must be overturned. For several
reasons (almost any one of which could stand
alone), we find the argument unconvincing.
Bond was accused of violating the first
paragraph of sec. 2314, which provides that
[w]hoever transports, transmits, or transfers in
interstate or foreign commerce any goods, wares,
merchandise, securities or money, of the value of
$5,000 or more, knowing the same to have been
stolen, converted or taken by fraud;
. . . .
Shall be fined not more than $10,000 or
imprisoned not more than ten years, or both.
He was not charged under paragraph two, which
applies, in part, to those "having devised or
intending to devise any scheme or artifice to
defraud . . . [.]"
The elements of a paragraph one offense are
that the defendant caused money to be transported
in interstate commerce; that the money exceeded
$5,000; that the money was taken by fraud; and
that the defendant knew the funds had been
obtained by fraud. United States v. Gooch, 120
F.3d 78 (7th Cir. 1997); United States v.
Jaderany, 221 F.3d 989 (7th Cir. 2000). There is
no requirement for a scheme to defraud, though we
have to admit that it is a mind-bending task to
imagine a fraud without a scheme to defraud.
What, after all, is a scheme to defraud? It is a
plan for how to effectuate the fraud. Because
"fraud" is not something that happens by
accident, we can agree with the government when
it argues that "fraud" and "scheme to defraud"
pretty much mean the same thing in the statute.
We encountered a cousin of Bond’s argument in
United States v. Quintanilla, 2 F.3d 1469 (7th
Cir. 1993), where, as here, the government set
out a charge under paragraph one as involving a
"scheme to defraud." Quintanilla claimed that he
predicated his defense on refuting that there was
a "scheme to defraud." Then some counts of his
indictment were dismissed and the indictment was
redacted. In the process of redaction, reference
to a "scheme to defraud" was eliminated. We
rejected Quintanilla’s claim that the alteration
of the indictment deprived him of his right to
notice of the charges against him. We stated that
participation in a "scheme" to defraud is not an
essential element of a paragraph one offense and,
quoting United States v. Miller, 471 U.S. 130,
136 (1985), we said that a part of the indictment
which is unnecessary to the allegations of the
offense "may normally be treated as a ’useless
averment’ that ’may be ignored.’" So long as a
fraud was proved, the reference to a scheme was
a useless averment. Similarly, in Gooch, 120 F.3d
at 80, we said that a reference to a "scheme to
defraud" in a paragraph one charge "is mere
surplusage and will therefore be disregarded."
There is no requirement in paragraph one of sec.
2314 that there be a "scheme" or that victims of
the scheme be identified.
Bond’s precise argument on this point is hard
to pin down, but he seems to be saying that the
government said he was involved in a scheme to
defraud three victims and now it is stuck with
that claim. A related argument was made in United
States v. Mastrandrea, 942 F.2d 1291 (8th Cir.
1991), a case we relied on in Quintanilla. The
Mastrandrea court said that a scheme to defraud
is not an element of a paragraph one offense, and
including the phrase in the indictment does not
make it an element.
Furthermore, even if proof of the identity of
victims of the scheme was an essential element of
the crime, the general rule is that "when a jury
returns a guilty verdict on an indictment
charging several acts in the conjunctive . . .
the verdict stands if the evidence is sufficient
with respect to any one of the acts charged."
Turner v. United States, 396 U.S. 398, 420
(1970). In Griffin v. United States, 502 U.S. 46(1991), the Court considered a challenge to a
conviction based on an indictment which stated
that the objectives of a conspiracy were to
impede the Internal Revenue Service in computing
taxes and to impede the Drug Enforcement
Administration in obtaining forfeitable assets.
The objects of the conspiracy were set out in the
conjunctive in both the indictment and the jury
instructions. The defendant contended that the
evidence was not sufficient to connect her to the
object of the conspiracy involving the DEA. She
proposed instructions to the effect that she
could be convicted only if the jury found she was
aware of the object of the conspiracy involving
the IRS. She requested special interrogatories
asking the jury to identify which of the objects
of the conspiracy she was found to have had
knowledge. Her requests were denied. The Supreme
Court upheld the conviction based on a general
verdict. It distinguished cases which set aside
general verdicts because one of the alternate
bases of conviction was unconstitutional
[Stromberg v. California, 283 U.S. 359 (1931)] or
illegal [Yates v. United States, 354 U.S. 298(1957)]. In Griffin, as here, the argument was
merely that one of the bases of conviction was
not supported by sufficient evidence. Relying on
the language from Turner, which we just quoted,
the Court found no merit to the contention that
the conviction was invalid. We see no reason to
decide otherwise in Bond’s case. There was far
more than sufficient evidence that investors and
lenders were victims of Bond’s fraud.
Concluding as we do, that the scheme and the
parties defrauded are not elements of the
offense, and that even if they were, the
conviction would stand because there is more than
sufficient proof of investors and lenders being
victims, we will nevertheless proceed to other,
much simpler, reasons why Bond’s argument fails.
First, having concluded that it is unnecessary,
we note that there is, in fact, evidence that at
least in some instances the City was victimized.
As we have said, we will reverse a conviction
based on a claim that the evidence is
insufficient only when the record is devoid of
any evidence on which a conviction could be
based. Gooch. Here, Bond finds comfort in the
fact that the district judge called the evidence
that the City suffered "scant." And Bond thinks
scant means nonexistent. We think, rather, that
the evidence was scant only in comparison to the
evidence of fraud of lenders and investors. But
that does not mean that the record was devoid of
evidence. The government is not required to prove
that all victims were equally harmed or that the
City was hurt as much as the lenders or
investors. Several of the investors--Gregory
Powell, Phil Holidy, Lela Manning, Regina
Cleveland, and Beverly Montgomery--testified
about the run-down condition of the property they
now own. Holidy testified that Bond falsely
represented that he would handle City of
Milwaukee code compliance requirements, but at
the time of trial Holidy held properties with
several code violations. Holidy also testified to
the gap between the appraisals cited in the loan
documents and the city assessments. He testified
that he was informed by the City that the
assessment on one of his properties had, in fact,
dropped. Powell testified to code compliance
citations from the City, which persons at Bond’s
companies said they would take care of but which
they did not correct. So, unnecessary though it
was, there was evidence of the victimization of
the City.
Turning to another reason we reject Bond’s
argument, we look specifically at count one. It
alleges a conspiracy to cause in excess of $5,000
to be transmitted in interstate commerce knowing
the funds had been obtained through a scheme to
defraud. As with any conspiracy allegation, the
government need not prove a completed underlying
crime. United States v. Seawood, 172 F.3d 986(7th Cir. 1999). The government need only prove
the existence of an unlawful agreement. Here,
there was evidence of an agreement. Antoinette
Higgins, a former employee of Bond’s companies,
testified that Bond asked her to make up numbers
for an account verification. Annette Reynolds, a
vice-president at Tri City, testified that, under
an arrangement with Bond, she and another bank
employee allowed unfunded cashier’s checks to be
issued. The checks were used as part of the loan
scheme. There is sufficient evidence to support
the conspiracy count.
The same is true of the substantive offenses
set out in counts two and three. These counts
charge that Bond knowingly caused $68,800 and
$56,000, respectively, to be transmitted in
interstate commerce knowing the funds had been
obtained through the scheme to defraud. As we
have said, Bond contends that because the "scheme
to defraud" set out in the indictment lists as
victims investors, lenders, and the City, the
government must prove, as to each count, that all
three were defrauded. That contention could not
be sustained even if the scheme to defraud the
victims were an essential element of the offense.
Counts two and three are specific substantive
violations arising out of the fraud. A specific
offense could very well involve a scheme to
defraud in which the victim was an investor only,
or a lender only, or for that matter the City
only. That would not detract from the possibility
that a scheme to defraud all three existed. A
specific offense can be a subset of the scheme.
For all of these reasons, the conviction of
Johnnie Bond is
AFFIRMED.