United States v. Conley D. Wolfswinkel

Citations: 44 F.3d 782; 95 Cal. Daily Op. Serv. 181; 1995 U.S. App. LEXIS 49; 1995 WL 2434Docket: 93-10763

Court: Court of Appeals for the Ninth Circuit; January 5, 1995; Federal Appellate Court

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Conley Wolfswinkel was convicted of bank fraud, conspiracy to commit bank fraud, misapplication of bank funds, and aiding and abetting misapplication of bank funds. His appeal was heard by the Ninth Circuit Court of Appeals, which affirmed the conviction. Wolfswinkel, a real estate developer in Arizona, implemented a scheme from June to August 1986 to manage his business's cash needs by writing checks without sufficient funds and covering them with checks from other accounts, which were also often NSF. He persuaded a bank officer, John O'Neill, to allow purchases of cashier's checks using NSF checks and to delay processing those checks. O'Neill later pled guilty and testified against Wolfswinkel.

The jury found him guilty of bank fraud related to a specific $1,760,546 cashier's check and of aiding O'Neill's misapplication of bank funds, leading to a sentence of five years probation and a $75,000 fine. Wolfswinkel asserted that his convictions constituted double jeopardy, claiming that the bank fraud and misapplication convictions were for the same offense. The court referenced precedents establishing that multiple punishments for distinct offenses are permissible if Congress intended them as separate offenses. The Ninth Circuit concluded that Wolfswinkel's double jeopardy rights were not violated and affirmed the lower court's ruling.

To determine whether bank fraud and misapplication of bank funds constitute the same offense, the analysis follows the Blockburger test, which examines if each statute requires proof of a fact that the other does not. Applying this test reveals that the bank fraud statute (18 U.S.C. § 1344) necessitates proof of a scheme or artifice to defraud a financial institution, while the misapplication statute (18 U.S.C. § 656) requires only an isolated act of misapplication by a bank officer. Consequently, each statute demands proof of distinct elements, indicating they do not punish the same offense. Legislative intent further supports this conclusion; the history of § 1344 reflects Congress's aim to establish federal jurisdiction over banking offenses without negating the applicability of both statutes. The appellant's request for a less rigid application of the Blockburger test is dismissed based on the Supreme Court's ruling in United States v. Dixon, which affirms that a strict analysis of charged statutes is suitable in cases of multiple punishments. Thus, the district court's conviction and sentencing under both statutes did not violate double jeopardy principles.

Appellant argues insufficient evidence supported his bank fraud conviction under 18 U.S.C. Sec. 1344(1), claiming the prosecution must prove that his scheme posed a risk of loss to at least one bank. The district court instructed the jury accordingly. However, the government contends that risk of loss is not an essential element but merely a means to demonstrate intent to defraud. The Ninth Circuit has not established a "risk of loss" requirement for bank fraud cases. 

Even if such a requirement exists, the government presented adequate evidence showing that United Bank faced a risk of loss. Appellant purchased a $1,760,546 cashier's check from United Bank using a business check that bounced due to insufficient funds, which obligated United Bank to pay the cashier's check regardless of funds. Appellant argued that United Bank's risk was mitigated by collateral he had provided, exceeding $4 million in real property value. However, the court noted several factors indicating a risk remained, including potential foreclosure costs, the possibility of declining property values, and appellant's financial instability, evidenced by a recent high-interest loan. Thus, sufficient evidence was found to uphold the conviction for bank fraud.

Appellant argues that the evidence was insufficient to support his conviction for aiding and abetting the misapplication of bank funds. To establish misapplication, the prosecution must demonstrate a willful misapplication of funds from a federally insured bank, intended to injure or defraud the bank, by an employee of the bank. The government can satisfy the misapplication element by showing that the bank was deprived of its right to control the use of its funds, which occurs when funds are disbursed under false pretenses to deceive bank officials.

Appellant does not dispute that he encouraged John O'Neill, a bank officer, to issue multi-million dollar cashier's checks in exchange for non-sufficient funds (NSF) checks and to delay processing these NSF checks until he could cover them. Evidence showed that O'Neill's actions violated bank policy, as issuing cashier's checks against NSF checks constituted unauthorized short-term loans exceeding O'Neill's lending authority. O'Neill’s actions also concealed from senior bank officials the true nature of these transactions, preventing them from making informed decisions regarding loan disbursements. Consequently, O'Neill's actions constituted misapplication of bank funds, which appellant aided and abetted by requesting such actions.

The prosecution was not required to demonstrate that appellant specifically encouraged O'Neill to delay processing cashier's checks instead of NSF checks, as the established practices were adequate for convicting appellant of aiding and abetting misapplication of bank funds.

Additionally, appellant claims that references to Charles Keating during the trial compromised his right to a fair trial. It is established that guilt cannot be proven through a defendant's association with disreputable individuals. Such references constitute prosecutorial misconduct unless they are relevant to the defendant's guilt.

Appellant failed to timely object to most of the prosecution's references to Keating, leading to a review under the plain error standard, which requires a showing that the references undermined the trial's fundamental fairness and contributed to a miscarriage of justice. The district court found some references to Keating unfortunate and improper, particularly the characterization of him as a hypothetical fraud perpetrator, but determined these did not render the trial fundamentally unfair. The court's denial of a mistrial was upheld, receiving deference as the judge was best positioned to assess the prejudicial impact. Additionally, these references were not central to the prosecution's case. The district court mitigated any potential prejudice by instructing the jury that appellant had not been charged with any misconduct related to Keating. Consequently, even if there were errors, they did not meet the plain error threshold. 

Regarding the two references to Keating to which appellant objected, the court found no error, as they were relevant to demonstrating that appellant's financial records did not accurately reflect a loan from Keating, which was pertinent to establishing appellant's motive for obtaining funds fraudulently. Thus, the prosecution was not merely attempting to imply guilt by association. The ruling was affirmed.