United States v. Maurice H. Doke Larry W. Bass
171 F.3d 240 (1999)
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Rule of Law:
Concealing the identity of the true beneficiary of a loan from a federally-insured financial institution to circumvent federal lending regulations constitutes bank fraud under 18 U.S.C. § 1344. The economic substance of the underlying transaction or the creditworthiness of the nominal borrower is not a defense to the charge.
Facts:
- Maurice Doke, a real estate developer, held an option to purchase a tract of land but was near his individual lending limit at Champions Point National Bank ('Champions').
- Doke's attorney, Larry Bass, was a director at Champions and had a significantly higher personal lending limit at the bank.
- In July 1985, Bass applied for and received a $600,000 loan from Champions in his own name to purchase the land from a Doke entity.
- Doke secretly provided Bass with the $200,000 for the down payment.
- For the next two years, Doke provided Bass with the funds to make all the semi-annual payments on the loan.
- Following a real estate market crash in 1987, Doke could no longer fund the payments, and Bass subsequently defaulted on the loan in February 1988.
- Champions eventually foreclosed on the property, and after the bank later failed, the property was sold at a loss.
Procedural Posture:
- Maurice Doke and Larry Bass were indicted in federal court on one count of conspiracy, one count of bank fraud, and two counts of making false statements to a financial institution.
- Following a jury trial in the United States District Court (the trial court), both defendants were found guilty on all four counts.
- Doke and Bass, as appellants, appealed their convictions to the United States Court of Appeals for the Fifth Circuit, challenging the sufficiency of the evidence among other issues.
- The United States, as appellee, responded to the appeal, seeking to have the convictions affirmed.
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Issue:
Does secretly using a nominee borrower to obtain a bank loan in order to circumvent federal lending limits constitute bank fraud under 18 U.S.C. § 1344, even if the underlying transaction is economically viable?
Opinions:
Majority - Judge Edith H. Jones
Yes. A nominee loan structured to conceal the true borrower's identity from a bank in order to evade federal lending regulations constitutes a scheme to defraud under 18 U.S.C. § 1344. The court found there was sufficient evidence for a jury to conclude that Doke and Bass intentionally concealed Doke's involvement to circumvent the loan-to-one-borrower limit, which he had nearly exhausted. The court rejected the argument that the loan could not be fraudulent because the underlying real estate transaction had economic substance. Citing precedent like United States v. Saks, the court affirmed that the creditworthiness of the nominal borrower is not a defense to bank fraud. The fraudulent act was the deception itself, which exposed the bank to the risk of violating banking regulations, regardless of the transaction's legitimacy.
Analysis:
This decision solidifies the principle that the act of deception is the central element of bank fraud, independent of the transaction's financial viability or the borrower's ability to repay. It clarifies that exposing a bank to regulatory risk by misrepresenting a material fact—such as the true identity of a borrower—is a cognizable harm under the bank fraud statute. The ruling serves as a strong precedent against the use of nominee or straw-borrower schemes designed to circumvent lending laws, reinforcing that intent to deceive the institution is the critical focus of the inquiry.
