United States v. Howard W. Kindig, Jr., and A. Larry Tullos
Docket: 87-3781
Court: Court of Appeals for the Fifth Circuit; August 26, 1988; Federal Appellate Court
The case involves defendants Howard W. Kindig, Jr. and A. Larry Tullos appealing their convictions for violating federal banking laws. The appeals court affirmed the convictions, finding no merit in the defendants' claims of error. The factual background reveals that John M. "Jack" Kent, the founder of Blast Abrasives, sought a $13.5 million loan package from Sun Belt Federal Savings and Loan Association due to financial difficulties in the offshore oil and gas sector. Ultimately, Sun Belt approved a loan package totaling approximately $7.5 million, which included a $3 million loan to Blast Abrasives, a $1.5 million loan to Kent, and a $3 million loan to Kindig, who would lend those funds to Kent.
Due to federal regulations limiting loans to one borrower based on the lender's net worth, Tullos, a senior lending officer at Sun Belt, proposed that Kindig borrow the $3 million and lend it to Kent. Kindig agreed to this arrangement, seeking safeguards such as the creation of an escrow account for loan payments and a first mortgage on Kent's 84-acre property. There was a dispute regarding the approval timeline of Kindig's loan; while the minutes from a July 19, 1983 meeting indicated approval, the government pointed to an August 2, 1983 summary for additional context. The court's decision reflects the complexity surrounding the loan structure and regulatory compliance.
The July 19 meeting minutes indicate that a loan to Kindig would be secured by a mortgage on Kent's property, but the loan summary specifies that the loan's purpose was to facilitate Kindig's purchase of Kent's land. Supporting documents include Kindig's loan application from July 25, 1983, and a loan commitment letter from July 26, 1983, detailing the loan's purpose. On July 28, 1983, three loans were closed: Sun Belt loaned Kent $1.5 million; Kindig received $3 million from Sun Belt; and Kindig lent Kent $2,783,156.34 at a $280,000 fee. Kindig's loan from Sun Belt had a 14.25% annual interest rate, amortized over thirty years and payable over five years, with a balloon payment due thereafter. Kent's loan from Kindig was at 16.00% under similar terms. Kent ceased payments on his loan from Kindig after six months, leading to Kindig's failed foreclosure attempt. By fall 1985, Kindig's loan from Sun Belt defaulted following Sun Belt's acquisition by the Federal Savings and Loan Insurance Corporation. A four-count indictment was returned against Tullos and Kindig on March 5, 1987, for false representations regarding the loan purpose and misapplication of funds, violating various U.S. codes. Tullos was convicted on Counts I, II, and III, while Kindig was convicted on Count III, with a mistrial declared for other counts. Appeals were filed by both defendants, with Tullos arguing the evidence was insufficient for his convictions due to discrepancies in the timing of the loan approval relative to the application and commitment letter dates.
Tullos asserts that the Sun Belt executive committee could not have been misled regarding the loan's purpose for Kindig, referencing supporting documents. He claims there is no evidence that the loan commitment letter or application were presented to the committee. Regarding Count III, Tullos argues that the evidence was insufficient for his conviction, particularly criticizing the testimony of FSLIC examiner Norman K. Lloyd, who concluded the loan was for a purchase but had not reviewed the committee's July 19, 1983 meeting minutes, which only indicated the loan would be secured by a mortgage on Kent's property. Tullos also points out inconsistencies in Lloyd’s findings with examination work papers suggesting Kent retained title to the mortgaged property. Additionally, he contends that Federal Home Loan Bank agent John C. Anderson's testimony improperly conflated civil regulations with criminal conduct. The court rejects these claims, noting that the jury could reasonably determine that the loan approval occurred on August 2, 1983, and that the legal elements of 18 U.S.C. § 1014 can be satisfied even if false documents were presented only after the loan was disbursed. It emphasizes that the statute requires all statements to lending institutions to be accurate or not knowingly false, regardless of whether specific documents were relied upon by the committee. The appellate review standard affirms that if evidence exists that could lead a rational jury to find guilt beyond a reasonable doubt, the conviction stands. The documentation was required by bank policy, and testimonies indicated the executive committee believed the loan was intended for property purchase, providing sufficient grounds for the jury to infer Tullos's knowledge of the falsity of the statements.
Tullos has not provided valid grounds to overturn his conviction on Count III. The jury was justified in accepting the testimony of bank examiner Norman Lloyd, who claimed he was misled by the commitment letter regarding the purpose of Kindig's loan. This testimony was deemed credible, and the court concluded that a reasonable jury could infer that the letter was created with deceitful intent. Tullos' argument regarding "loans to one borrower" is unconvincing; the indictment was modified to comply with relevant legal standards, and the jury was instructed not to consider potential civil regulation violations as criminal acts.
Kindig challenged his conviction on Count III, arguing insufficient evidence for aiding and abetting Tullos under 18 U.S.C. Sec. 1006, asserting that his mere signature on the loan commitment letter was inadequate proof of criminal intent. He claimed a lack of testimony regarding the letter and cited his own assertion of signing without reading it. Additionally, he referenced meeting minutes that did not clarify the mortgage's context and argued that the loan's indirect nature did not constitute a crime. The court dismissed these claims, noting that Kindig's extensive experience with loans and his control over the transactions provided ample evidence for a jury to infer his knowledge of the letter's contents and the deceit involved. The coincidence of his loan application affirming its purpose and his refusal to acknowledge understanding the commitment letter were factors that could lead a jury to reject his defense.
Judge Polozola's ruling that Kindig could not cross-examine co-defendant Tullos was challenged by Kindig as a violation of his Sixth Amendment right to confrontation. The judge had determined that if the defendants opted for separate defenses, they could not question each other's witnesses, though they could call one another if the co-defendant testified in his own defense. Kindig did not call Tullos to the stand. He argued that limiting cross-examination of Tullos, who provided some inculpatory testimony, infringed upon his rights. Kindig pointed to several aspects of Tullos’ testimony that he claimed could be interpreted as incriminating. However, the court rejected this claim, asserting that the Sixth Amendment ensures the opportunity to confront adverse witnesses, not the right to confront those who testify in favor of the defendant. The court emphasized that Tullos’ testimony was not adverse to Kindig; in fact, Tullos denied any intent to deceive in relation to the loan and provided exculpatory evidence that Kindig had received the loan proceeds as intended. Thus, the court concluded that no confrontation right was implicated, as Tullos' testimony ultimately did not harm Kindig's defense.
Tullos and Kindig's testimonies align closely, supporting the assertion that Kindig's potential profit from their transactions was a reasonable return given his financial risks. Both witnesses clarified that Kindig was a legitimate borrower, not a "strawman," and highlighted that Kindig and Kent were distinct borrowers from Sun Belt. They also admitted to not reading the commitment letter, which specified that the loan's purpose was the purchase of Kent's property. Kindig argues that the jury did not adhere to the specific instructions for evaluating evidence against each defendant independently, which he claims led to his conviction based on evidence related to Tullos' case, violating his Fifth Amendment rights. However, the court emphasized that the integrity of jury instructions is foundational to the trial system, and the assumption is that juries follow those instructions. The court found no evidence of jury confusion that would warrant a reversal, asserting that substantial evidence supported Kindig's conviction on Count III. As a result, both Tullos and Kindig's convictions were affirmed. The jury was instructed that violations of the "loan to one borrower" rule are civil matters and should not be viewed as criminal violations, but may inform the jury's assessment of intent regarding the charged crimes.
