Petition — Fairbanks v. United States

Supreme Court, U. & »

FILED =

ocT 30 1916

MICHAEL 200AK, JR., CLERK |

IN THE

SUPREME COURT OF THE

UNITED STATES

OCTOBER TERM, 1976

No.'76-611

WILLIAM H. FAIRBANKS, Petitioney

UNITED STATES, Respondent

PPIPPDL PD DL PD ODO DDD ODP LIDD DDD DD DDD LPL DD DOD DODD DODD DDD DODD DODD DOPOD OOOO

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

PIPL PLD PLP LP DDD DD DDD DDD DD DDO DOP DODD DD DODD DODD DOP DD OD DODP DDO ODDO O OD OO ODD

MAURICE R. FRANKS

Post Office Bin 1

Silver Cliff, Colorado 81249

Telephone ‘303) 783-2226

Counsel for Petitioner

INDEX

OPINION BELOW ........

i ps) ee

QUESTIONS PRESENTED

STATUTORY PROVISIONS INVOLVED

STATEMENT OF THE CASE ...

REASONS FOR GRANTING THE WRIT _.

ARERR SAIN FR ER et RE a ad Le

APPENDIX A — Opinion and Judgment of

Court of Appeals . Prat ees INES

APPENDIX B— Order Denying Rehearing in

Court of Appeals ............0.......

APPENDIX C — Stay of Mandate of

Court of Appeals

bo

)

INDEX — Continued

CITATIONS

CASES:

Dickinson v. Petroleum Conversion Corp., 338

cf S 2) | nee

John Hancock Ins. Co. v. Bartels, 308 U.S. 180

(1939)

Kovens v. United States, 338 F.2d 611 ‘5th Cir.

|

Maggio vy. Zeitz, 333 U.S. 56 11948)

Reass vy. United States, 99 F.2d 752 ‘4th Cir.

1938)

United States v. Braverman, 522 F.2d 218 ‘7th

> =. . a eee enleenae esr

United States v. Goberman, 458 F.2d 226 ‘3rd

SRM oe aos

United States v. Kramer, 500 F.2d 1185 (10th

Cir. 1974) BO ee Nene eae oe

ID. ic occsecues

United States v. Sabatino, 485 F.2d 540 ‘2nd

I cavaseines Penis

United States v. Simons, 503 F.2d 831 (5th Cir.

1974)

CONSTITUTIONAL AND

STATUTORY MATERIAL:

U.S. Const., Amend. VI

18 U.S. Code §$ 1014

Page

6

6

5, 6

to

to

IN THE

SUPREME COURT OF THE

UNITED STATES

OCTOBER TERM, 1976

WILLIAM H. FAIRBANKS, Petitioner

UNITED STATES, Respondent

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

The petitioner, William H. Fairbanks, respectfully

prays that a writ of certiorari issue to review the judg-

ment and opinion of the United States Court of Appeals

for the Tenth Circuit entered in this proceeding on 7 Sep-

tember 1976. Rehearing was denied by the said Court of

Appeals on 6 October 1976. Stay of the mandate was granted

on 19 October 1976, upon a showing that the instant peti-

tion for a writ of certiorari is not frivolous.

bo

OPINION BELOW

The judgment and opinion of the United States Court

of Appeals for the Tenth Circuit, not vet reported, appears

in the Appendix hereto.

JURISDICTION

The judgment and opinion of the Court of Appeals

was entered on 7 September 1976. A petition for rehearing

was timely filed on 21 September 1976. Rehearing was

denied by the Court of Appeals on 6 October 1976. This

Court's jurisdiction is invoked under 28 U.S. Code § 1254.

QUESTIONS PRESENTED

Two questions are presented by the instant petition:

1. Does the Sixth Amendment of the Bill of Rights

countenance denying a professional accused of felony —

and more importantly a citizen of America on trial before

his peers — of his right to cross-examine prosecution wit-

nesses in a § 1014 case concerning customary practices in

construction loans, concerning the personal interests of the

officers of the savings and loan association allegedly “‘in-

fluenced”, and concerning the complicity in the scheme of

those very officers and witnesses?

2. More specifically, did Congress intend “purpose of

influencing” to be an element of 18 U.S. Code $ 1014, or

are those words mere meaningless verbiage? |

STATUTORY PROVISIONS INVOLVED

United States Code, Title 18:

S$ 1014. Lean and credit applications generally; re-

newals and discounts; crop insurance

Whoever knowingly makes any false statement or

report, or willfully overvalues any land, property or

3

security, for the purpose of influencing in any way

the action of .. . any institution the accounts of which

are insured by the Federal Savings and Loan Insur-

ance Corporation ... ,upon any application, advance,

- discount, purchase, purchase agreement, repurchase

* agreement, commitment, or loan, or any change or

extension of any of the same, by renewal, deferment

of action or otherwise, or the acceptance, release, or

substitution of security therefor, shall be fined not

more than $5,000 or imprisoned not more than two

years, or both.

STATEMENT OF THE CASE

Petitioner William Fairbanks, an architect, was con-

victed of having made false statements “for the purpose

of influencing” the actions of a savings and loan associa-

tion in violation of 18 U.S. Code § 1014, and of the related

conspiracy and aiding and abetting charges. The evidence

showed that, at the request of his employers, Mr. Fairbanks

submitted inflated invoices to his employers for his archi-

tectural services. His employers, in turn, used the inflated

invoices to obtain construction financing.

It is undisputed that Fairbanks made no representa-

tions directly to the savings and loan association; that the

inflated disbursements were used and controlled solely by

the developers; that Fairbanks gained nothing from the

inflated invoices. It is equally undisputed that Fairbanks

did not receive more money than he was entitled to, and

that his invoices ‘even as inflated) were reasonable for his

services.

At his trial, the district court excluded evidence of the

knowledge and complicity of the officials of the savings

and loan association in the scheme. On cross-examination

of the prosecution's witnesses, Fairbanks attempted to

elicit testimony concerning usual practices in the construc-

tion and construction loan industries, and concerning the

personal interests of certain officers of the savings and loan

association involved in the case, to show that persons in,

control of the savings and loan association were aware of

the developers’ inflated disbursement scheme, acquiesced

and participated in it, and profited from it. The govern-

ment’s objections to such testimony, on grounds of irrele-

vance, were sustained by the district court. ‘Testimony of

toger Lane, Transcript Vol. J, p. 25: Testimony of Robert

T. Irwin, Transcript Vol. I, pp. 80, 82.)

It is petitioner's position that the “purpose of influ-

encing’ element of 28 U.s. Code § 1014 is negated by the

actual knowledge and participation of savings and loan

officials in the scheme, and that the distinguished district

court's refusal to permit the jury to hear of that partici-

pation Was a grievous error of law and a shocking injustice.

REASONS FOR GRANTING THE WRIT

This is another business fraud case. This time, the

government has branded as a felon an architect who, it is

undisputed, received no more money than he was entitled

to, who gained nothing from the scheme of his employers,

and whose invoices ‘even as inflated: were entirely reason-

able for his services. This travesty occurred because the

defendant was denied the right to show the complicity in

the scheme of the officials of the savings and loan associa-

tion allegedly “influenced.”

In Kovens v. United States, 338 F.2d 611 + Sth Cir. 1965),

the court stated that “the purpose of Section 1014 is to pro-

tect authorized functions of specified institutions from ‘de-

ceptive practices,’ {citations omitted|.”” Thus, the intent

5

to influence and deceive, and guilty knowledge of the like-

lihood of such influence and deception, are primary ingre-

dients of the government’s case. United States v. Simons,

503 F.2d 831 (5th Cir. 1974). Also see Reass v. United

States, 99 F.2d 752 (4th Cir. 1938).

The case of United States v. Kramer, 500 F.2d 1185

(10th Cir. 1974), was decided by a distinguished panel that

included Judge Moore of the Second Circuit sitting by spe-

cial designation. That case is squarely in petitioner’s favor.

It says: ,

Finally, sufficient evidence does not exist by which

a jury could find that the financial statement was

submitted to the bank for the purpose of influencing

the loan. A financial statement was not necessary, as

a current one already was on file with the bank. And

Kramer, as the bank’s president, has unrestricted au-

thority to make loans up to the bank’s maximum lend-

ing limit. Under these circumstances a false financial

statement could serve no useful or influencing pur-

pose. Kramer and the person approving the loan would

be one and the same.

The government, however, argues that the state-

ment served to influence the bank’s board of directors.

We cannot agree. The evidence discloses that the board

members did not review, and were not directly autho-

rized to review, the financial statement. They approved

the Fuller loan based on their faith in Kramer and

his assertions about the loan. More important, how-

ever, is the fact that the loan was made and its pro-

ceeds placed in the bank’s stock escrow account on

August 23, 1971. It already had been obtained by the

time the board of directors could vote on it. Their sub-

sequent approval of the loan appears to have been

little more than a mere formality.

6

United States «. Kramwer, 500 F.2d 1185 110th

Cir. 1974).

The decision in Arame, is sensible. The weight of au-

thority, however, is to the contrary. United State v. Bravei-

man, 522 F.2d 218 ‘7th Cir. 1975) ; United States v. Saba-

tino, 485 F.2d 540 (2nd Cir. 1973); United States v. Gob-

erman, 458 F.2d 226 13d Cir. 1972) ; United States v. Niro,

338 F.2d 439 ‘(2d Cir. 1964). The majority of the courts of

appeals have gradually emasculated the “purpose of influ-

encing”’ requirement of § 1014. The time is right for this

honorable Court to restore to the courts below the element

that is so clear in the statutory language.

The decision of the Tenth Circuit in the case at bar

conflicts with the earlier decision of the Tenth Circuit in

the Aramer case, decided by a different panel that included

Judge Moore of the Second Circuit sitting by special desig-

nation. Conceding that a conflict between decisions of the

same court of appeals ordinarily is not a basis for granting

a writ of certiorari, nonetheless where there is only a super-

ficial basis for “distinguishing” two conflicting cases from

one court of appeals |in the situation at bar, the decision

in United States v. Kramer, 500 F.2d 1185 (10th Cir. 1974)

as against the decision in the instant case|, the two cases

may be said to present an intracircuit conflict between dif-

ferent panels of the same court. In such a situation, this

Court has on occasion granted the precious writ. John Han-

cock Ins. Co. v. Bartels, 308 U.S. 180 11939); Maggio v.

Zeitz, 333 U.S. 56 11948) ; Dickinson v. Petroleum Conver-

sion Corp., 338 U.S. 507 11949).

Until the instant decision, there was indeed a split of

authority between the circuits: Kramer standing in direct

opposition to Braverman, Sabatino, Goberman and Niro.

7

That conflict should not now be put to rest without any

opportunity for review of the matter by the high Court.

The statutory language seems sufficiently clear, and the

logic of Kramer sufficiently cogent, to warrant review of

the instant decision.

CONCLUSION

For these reasons, a writ of certiorari should issue to

review the judgment and opinion of the Tenth Circuit.

Respectfully submitted,

MAURICE R. FRANKS

Post Office Bin 1

Silver Cliff, Colorade 81249

Telephone (303) 783-2226

Counsel for Petitioner

APPENDIX A

PUBLISH

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

No. 75-1432

v.

(75-CR-27)

WILLIAM H. FAIRBANKS,

Defendant-Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLORADO

Michael A. Williams for Appellant.

James P. Gatlin, Assistant United States Attorney ‘James

L. Treece, United States Attorney, on the brief) for

Appellee.

Before LEWIS, Chief Judge: SETH and BARRETT, Cir-

cuit Judges.

LEWIS, Chief Judge.

10

Defendant Fairbanks was found guilty of having made

false statements “for the purpose of influencing’ the ac-

tions of a savings and loan association insured by the Fed-

eral Savings and Loan Insurance Corporation in violation

of 18 U.S.C. $$ 1014, 2, 371. The issue on appeal is whether

one’s knowledge of the complicity of employees and officers

of a federally-insured savings and loan association in a

scheme of inflated construction loan disbursements indi-

cates that he does not have the requisite intent to make false

statements for the “purpose of influencing’’ the disburse-

ment decisions of said savings and loan association in vio-

lation of section 1014. If so, the defendant argues that the

trial court erroneously excluded evidence of such a com-

plicity in the instant case.

Robert T. Irwin and Ray M. Bone, both Colorado

Springs real estate developers, were involved in a multi-

million dollar shopping center project. On May 1, 1973,

Irwin and Bone entered into an owner-architect agreement

with the defendant Fairbanks, a Colorado Springs archi-

tect. The architect’s fees in this agreement amounted to

$59,526. Sometime subsequent to the execution of the first

agreement, Irwin and the defendant Fairbanks executed

an identical owner-architect agreement, except the fees in

the second agreement were inflated by 100 percent. Irwin

testified that the purpose behind the second agreement was

to allow them to prepare inflated draw requests and use

the excess loan disbursals on other developments.

Irwin and Bone borrowed $3,400,000 from Security

Savings and Loan Association in Colorado Springs for the

shopping center project. The loan funds were placed in a

special account and were to be disbursed during the course

of the construction project as costs arose. Irwin and Bone

were to submit loan disbursement requests, containing an

itemization of costs incurred and the payee, plus documen-

11

tation supporting the costs, usually submitted in the form

of invoices from the subcontractors and suppliers. Security

Savings’ construction loan department would then com-

pare the disbursement requests with a cost breakdown of

the project, would sometimes conduct a field inspection, and

would examine the invoices before approving the disbursal.

Evidence indicated that at the request of Irwin and

Bone, Fairbanks would submit inflated invoices for his

architectural services to Irwin and Bone. The developers

would then prepare a loan disbursement request, append a

copy of Fairbanks’ inflated invoice, together with a copy

of a check payable to Fairbanks in the amount of the in

voice, and submit the request to Security Savings. After

approval of the disbursement request, Security Savings

would send Irwin and Bone a check for the total amount.

Then, having written void on the original check made pay-

able to Fairbanks, Irwin and Bone would give Fairbanks

another check for the sum actually owing instead of the

inflated sum. During the course of the construction, Secur-

ity Savings changed this process somewhat requiring Irwin

and Bone to submit their original checks payable to the

suppliers with the disbursement request and the invoices.

After Security Savings approved the disbursement request,

it would send Irwin and Bone’s original check directly to the

suppliers, in this case Fairbanks. When this was done, either

Fairbanks would bring the original check to Irwin and

Bone and exchange it for a check in the amount actually

owing or someone would exchange the checks at Fairbanks’

office.

Although it was established that Fairbanks did not re-

ceive more money than he was entitled to, his participation

in the scheme seemed to be in consideration for prospective

architectural work on other development projects. Fair-

banks’ own testimony before the grand jury indicated that

12

he knew the purpose and use of his inflated invcices and

voluntarily participated in the scheme.

Fairbanks’ contention on appeal is that his knowledge

of the complicity of several of the officers of Security Sav-

ings in the scheme of inflated loan disbursements somehow

prevented him from having the “purpose of influencing”

the actions of Security Savings necessary for a conviction

under 18 U.S.C. § 1014 and that the court erred in exclud-

ing evidence of this complicity. In support of this position,

Fairbanks relies on our decision in United States v. Kramer,

10 Cir., 500 F2 1185, wherein we held the evidence insuffi-

cient to convict a bank president “of aiding, abetting, in-

ducing and procuring” a false financial statement from a

customer for the purpose of influencing the actions of a

federally-insured bank in violation of 18 U.S.C. § 1014.

Avamer, a case limited by the peculiarity of its facts, in-

volved a financial statement, false in substance but not

proven by the Government to be known to be false by the

defendant nor in any way a limitation on the defendant

president's unrestricted authority to grant the loan. The

joan Was not one subject to review by the board of directors,

was not reviewed before it was granted, and the board's

subsequent approval was merely perfunctory in nature.

Avamer involved a single bank officer with complete dis-

cretion over the issuance of a loan, who was allegediy “in-

fluenced” by a false financial statement that he had “‘in-

duced” a third party to make. Our holding in Kramer is

simply that the defendant there was not influenced by his

own actions within the meaning of the penal statute. Such

is not the case at bar.

In this case there is some indication of possible com-

plicity and self-dealing by several, but not all, employees

of Security Savings responsible for processing the loan and

loan disbursements. For example, Raymond C. Renner-

13

berger, the son-in-law of the president of Security Savings,

was an undisclosed partner in the shopping center project.

Also, Mike Hinton, Security Savings’ loan officer for this

particular loan, was involved in several joint ventures with

Irwin and Bone. Irwin testified that some of the diverted

funds were used on the projects in which Hinton was par-

ticipating.

Several cases have held that some knowledge and com-

icity on the part of bank officers or employees is not

enough to avoid conviction under 18 U.S.C. § 1014 for

having made false statements to a federally-insured bank

“for the purpose of influencing” some action of the bank.

United States v. Braverman, 7 Cir., 522 F2 218, cert. de-

nied, 423 U.S. 985: United States v. Tokoph, 10 Cir., 514

2 597: United States v. Niro, 2 Cir., 338 F2 439. Typical

of these cases is Niro, where the defendants argued that

since the president of the savings and loan institution had

participated in the fraudulent scheme, their false state-

ments could not have been made “for the purpose of influ-

encing” any action of the savings and loan. The court, how-

ever, concluded otherwise, stating:

The words “for the purpose of influencing” were in-

cluded in the statute to define the quality of the re-

quired intent, not to immunize a party from criminal

liability because an officer of the bank was involved

in the fraudulent scheme.

United States v. Niro, supra, at 441.

As we have indicated, the financial statement in

Kramer was not used to influence the approval of the loan

by the board of directors, since the board’s approval was

made after the fact and was “little more than a mere for-

mality.” Jd at 1188. The fraudulent schemes in the other

1d

cases, and here, needed more than merely the approval of

the bank officer participating in the scheme. For example,

in Vero, even though the president of the association was

participating in the fraudulent scheme, the loan not only

needed his approval, but also the approval of the board of

directors, who knew nothing of the false statement. In the

instant case, Hinton, the loan officer in charge of Irwin

and Bone’s construction loan, apparently was aware of the

inflated disbursement requests. Also, the president of Se-

curity Savings, Connover, may have been aware of the

scheme. But even if the complicity of Hinton and Connover

were clearly established, this alone would not be enough

to bring this case within our holding in Aramer. Here, un-

like Avamer, there were other employees who participated

in the loan and the loan disbursals who were totally unaware

of the inflated invoices and disbursement requests. Roger

Lane, the executive vice-president of Security Savings anda

member of the loan committee that granted approval for

the 33,400,000 loan, testified that he was unaware of the

inflated lean disbursement requests. Likewise, George

Organ, a loan disbursing officer in Security Savings’ con-

struction loan department, stated that he had no reason to

doubt the validity of the Fairbanks’ invoices that accom-

vanied the loan disbursement requests and relied on them

in making disbursements. Thus, in spite of Fairbanks’ ap-

parent knowledge of the possible complicity of several of

the officers of Security Savings in the scheme of inflated

loan disbursals, the complicity was not sufficient to pre-

vent the jury from finding that Fairbanks had the “purpose

of influencing” the actions of Security Savings required for

conviction under 18 U.S.C. § 1014.

Finally, there is no indication at all that the trial court

excluded any evidence pertaining to the alleged complicity

ot employees and officers of Security Savings. Defense

counsel Was permitted on several occasions to ask questions

15

concerning the complicity. In fact, the court permitted the

defense to call both Hinton and Connover as Witnesses and

in no Way circumscribed the defense’s examination of these

witnesses.

The judgment is affirmed.

17

APPENDIX B

SEPTEMBER TERM — October 6, 1976

Before The Honorable David T. Lewis, Ghief Judge,

The Honorable Oliver Seth and

The Honorable James E. Barrett, Circuit Judges

UNITED STATES OF AMERICA,

Plaintitt-Appellee,

Vs. 79-1432

WILLIAM H. FAIRBANKS,

Detendant-Appellant.

This matter comes on for consideration of appellant's

petition for rehearing in the captioned cause.

Upon consideration whereof, the petition for rehear-

ing is denied.

HOWARD K. PHILLIPS

Clerk

By

LINDA 0. HALL

Deputy Clerk

19

APPENDIX C

SEPTEMBER TERM — October 19, 1976

Before The Honorable David T. Lewis, Chief Judge,

The Honorable Oliver Seth and

The Honorable James E. Barrett, Circuit Judges

UNITED STATES OF AMERICA,

Plaintitt-A ppellee,

Vs. No. 75-1432

WILLIAM H. FAIRBANKS,

Detendant-Appellant.

This matter comes on for consideration of appellant's

motion to substitute privately retained counsel. The Court

also has for consideration appellant’s motion fer stay of

mandate.

Upon consideration whereof, it is ordered that Maurice

R. Franks is substituted as privately retained counsel for

appellant is place of Michael A. Williams, court-appointed

attorney, who is excused from further duty with the Court’s

appreciation for his services.

It is further ordered that the mandate shall be stayed

until November 19, 1976, pending certiorari; and that if on

20

or before that date there is filed with the Clerk of the

Court of Appeals a notice from the Clerk of the Supreme

Court of the United States that appellant has timely filed

a petition for writ of certiorari in the Supreme Court, the

stay shall continue until final disposition by the Supreme

Court.

HOWARD K. PHILLIPS _

Clerk

By ——————————————

LINDA 0. HALL

Deputy Clerk