146 F.

3d 6

UNITED STATES, Appellee,

v.
Karla Lee GRAHAM, a/k/a Karla Zahoruiko, Defendant-Appellant.
No. 97-1274.

United States Court of Appeals,

First Circuit.
Heard Oct. 8, 1997.
Decided June 5, 1998.

Bjorn Lange, Assistant Federal Defender, Federal Defender Office, for

appellant.
Jean B. Weld, Assistant United States Attorney, with whom Paul M.
Gagnon, United States Attorney, was on brief for appellee.
Before BOUDIN, Circuit Judge, GODBOLD* and CYR, Senior Circuit
Judges.
GODBOLD, Senior Circuit Judge.

Karla Graham appeals from her conviction and sentence for making false
statements in loan documents presented to a federally insured bank in violation
of 18 U.S.C. 1014. We affirm both.

I. Factual and Procedural History

2

The jury was entitled to find the following facts, either as undisputed or based
on sufficient evidence.

Between 1987 and 1989 Karla Graham worked as a mortgage account

executive for Dime Real Estate Services of New Hampshire (Dime-NH)a
wholly owned subsidiary of Dime Savings Bank of New York (Dime-NY) that
provided residential mortgage loans. Graham originated the loans and was paid

on commission. During this time the bank had a low-documentation lending

program that approved loan applications without verification of income,
employment or assets as long as the borrowers could make a twenty percent
down payment with their own funds. Graham and her co-defendants found
ways to avoid the down payment requirement and submitted fraudulent loan
applications to the bank's underwriters in Massachusetts (Dime-MA). Dime-NY
provided the funds for these mortgages, and all mortgages were eventually
assigned to Dime-NY. Dime-NY is a federally chartered savings bank with
deposits insured by the Federal Deposit Insurance Corporation (FDIC).
4

After a large scale investigation into Dime's operations, a federal grand jury
returned a sixty-count indictment against Graham and six co-defendants.
Graham was charged in eleven counts of the indictment. Two of these counts
were severed and later dismissed by the government. Graham was tried by a
jury on the remaining counts. Count 1 charged her with conspiring to make
false statements for the purpose of influencing Dime-NY on loan applications
in violation of 18 U.S.C. 371. Counts 17 through 26 charged her with
knowingly submitting materially false statements on ten different loan
applications, HUD-1 Settlement Statements, and Fannie May Affidavits for the
purpose of influencing Dime-NY in violation of 18 U.S.C. 1014. The jury
returned a verdict of guilty on counts 18 and 25 and not guilty on the remaining
counts. The district court sentenced her to eighteen months imprisonment on
each count to be served concurrently and a term of one year supervised release.

II. Discussion of the Issues

5A. Selective Prosecution and Conflict of Interest
6

Graham asserts that her conviction violated her right to due process because it
was the product of selective prosecution on the part of the government. She
maintains that the district court erred in failing to hold an evidentiary hearing
on the issue of selective prosecution. Graham points to the fact that Dime
Bank-New York was not indicted on criminal charges after it gave a $2,000,000
donation to a nonprofit housing program in Manchester, New Hampshire. She
also notes that the U.S. Attorney in charge of the case resides in the New
Hampshire community that received the donation. Further complicating this
picture is the fact that DimeNY was partially owned by the FDIC and that the
decision not to indict the bank came just before a successful public offering of
shares in the bank, thus benefitting the FDIC by ensuring that the sale would
not be marred by threats of future criminal liability. By cumulating all of these
circumstances, Graham suggests that she was selectively prosecuted either
because she did not have the wealth to avoid criminal liability through civic

contributions or because a government conflict of interest kept the bank from

being prosecuted.
7

An improper selective prosecution arises when a defendant "has been singled

out for prosecution when others similarly situated have not been prosecuted and
the prosecutor's reasons for doing so were impermissible." U.S. v. Magana, 127
F.3d 1, 8 (1st Cir.1997); see also U.S. v. Penagarcano-Soler, 911 F.2d 833, 83738 (1st Cir.1990). The prosecutor is presumed to have acted "in good faith for
reasons of sound governmental policy." Penagarcano-Soler, 911 F.2d at 837
(citing U.S. v. Saade, 652 F.2d 1126, 1135 (1st Cir.1981)). But if the defendant
alleges facts that tend to show that she has been selectively prosecuted and that
raise a reasonable doubt about the propriety of the government's purpose, then
she is entitled to an evidentiary hearing unless the government "puts forward
adequate countervailing reasons to refute the charge and ... the court is
persuaded that the hearing will not be fruitful." U.S. v. Goldberg, 105 F.3d 770,
776 (1st Cir.1997) (internal quotations and citations omitted).

Although Graham may have presented enough evidence to create a prima facie
case of selective prosecution by suggesting that the bank's monetary charitable
contribution precluded its prosecution, the government refuted this presumption
with adequate reasons for its decisions. Specifically the government offered a
list of eight factors it considered in its decision not to indict Dime-NY: (1)
Dime's merger with Anchor in 1995; (2) the fact that current senior
management was not in those positions during the years of suspected criminal
activity; (3) the bank and its shareholders had suffered significant losses from
the fraudulent conduct of former employees; (4) the newly formed institution
had implemented stringent fraud detection procedures; (5) the rehabilitative
step of contributing $2,000,000 to the Manchester Neighborhood Housing
Services, Inc.; (6) the implementation of the Dime Borrowers Associations
Borrowers Assistance Program II; (7) payment of $150,000 to the Dime
Borrowers Associations; and (8) the continued cooperation of Dime-NY in the
ongoing grand jury investigation.

The district court considered this list of factors and found that it adequately
explained the government's actions and that no evidentiary hearing on the issue
of selective prosecution was needed. The court further found that the
accusations of government conflict of interest were not substantial enough to
raise any presumption of prosecutorial misconduct.

10

We review a district court's decision not to hold an evidentiary hearing on

selective prosecution for abuse of discretion. Goldberg, 105 F.3d at 776 (citing
U.S. v. Gary, 74 F.3d 304, 313 (1st Cir.), cert. denied, 518 U.S. 1026, 116 S.Ct.

2567, 135 L.Ed.2d 1084 (1996)). In deciding whether the district court should
have granted an evidentiary hearing on the issue of selective prosecution we are
faced with a "judgment call--tempered on appeal by the deferential standard of
review--as to the force and specificity of the allegations, the strength of the
response, and the likelihood that a hearing would be helpful." Goldberg, 105
F.3d at 776 (citing U.S. v. Lpez, 71 F.3d 954, 963-64 (1st Cir.1995), cert.
dismissed, 518 U.S. 1057, 117 S.Ct. 38, 135 L.Ed.2d 1129 (1996)). In this case
the district court carefully considered both Graham's allegations and the
government's explanation before denying an evidentiary hearing.
11

Although the timing of the donation may have created a reasonable doubt about
the propriety of the government's purpose, we agree that the government
adequately refuted the charge so that a hearing was not necessary. Furthermore
we also agree that Graham's allegation of conflict of interest concerning the
FDIC's financial interest in the bank does not create a presumption of improper
prosecutorial selection. We have found no case law to support the preclusion of
the Department of Justice from cases involving banks in which the FDIC has an
interest. Accordingly, we find no abuse of the district court's discretion in
denying Graham's request for an evidentiary hearing or in denying her motion
to dismiss.

B. Sufficiency of the Opening Statement

12

Graham contends that she should have been granted a judgment of acquittal
after the government's opening statement because it failed to point to proof for
every element of each count contained in the indictment. Graham concedes that
the government did mention proof for the elements of the two counts upon
which she was convicted. The decision to grant a motion for acquittal after a
prosecutor's opening statement is discretionary and should be made only where
the statement contains a clearly admitted fact that must defeat its case. See U.S.
v. Ingraldi, 793 F.2d 408, 414 (1st Cir.1986); U.S. v. Capocci, 433 F.2d 155,
158 (1st Cir.1970). Furthermore, we have held that a district court's denial of a
motion for acquittal on the basis of the government's opening statement is not
reviewable and that any error in this respect can be raised in a challenge to the
sufficiency of the evidence. Ingraldi, 793 F.2d at 414.

13

Graham asserts that the district court erred by failing to recognize its discretion
to grant the motion. Instead the district court correctly recognized that it did not
have the discretion to grant a motion for acquittal at the close of the
government's opening statement in this situation. The prosecutor admitted no
fact that clearly defeated the government's case. Failure to outline all of the
evidence in the opening statement did not create a right to an acquittal. See

Ingraldi, 793 F.2d at 414. In fact the government does not have an obligation to
make any opening statement. Id.
14

We have no power to review the denial of Graham's motion for acquittal after
the government's opening statement, but even if we did, we would find that the
district court did not err.

C. Sufficiency of the Evidence

15

Graham was convicted of violating 18 U.S.C. 1014, which makes it unlawful

to "knowingly make[ ] any false statement or report, or willfully overvalue[ ]
any land, property or security, for the purpose of influencing in any way the
action of ... any institution the accounts of which are insured by the Federal
Deposit Insurance Corporation." 18 U.S.C. 1014. Graham contends that her
conviction was insufficiently supported because the government failed to prove
that she purposefully sought to influence a federally insured bank. Dime-NH,
out of which Graham operated, is not insured by the FDIC. She contends that at
the most, the evidence showed that she intended to influence Dime-NH or
Dime-MA, which approved the mortgage applications. However Dime-NH and
Dime-MA are wholly owned subsidiaries of Dime-NY, which is a federally
insured institution. Dime-NY was the entity actually financing all of Graham's
mortgages and all mortgages were eventually assigned to it. Nonetheless,
Graham asserts that because she was based in New Hampshire and submitted
all of her documents to the Dime-NH office, the government failed to prove that
her purpose was to influence a federally insured bank.

16

Graham's assertion fails for two reasons. First, this court has held that "the
government does not have to show the alleged scheme was directed solely
toward a particular institution; it is sufficient to show that defendant knowingly
executed a fraudulent scheme that exposed a federally insured bank to a risk of
loss." U.S. v. Brandon, 17 F.3d 409, 426 (1st Cir.1994) (holding that "it is also
unnecessary for the government to prove that a defendant knows which
particular bank will be victimized by his fraud as long as it is established that a
defendant knows that a financial institution will be defrauded.") (citing U.S. v.
Barakett, 994 F.2d 1107, 1110-11 (5th Cir.1993); U.S. v. Morgenstern, 933
F.2d 1108, 1114 (2d Cir.1991)).1 In this case as in Brandon, proof that Graham
knew she was defrauding a bank was sufficient to prove a violation of the
statute.

17

Second, even if the statute required that the government prove that Graham
knew she was fraudulently influencing a federally insured bank, the evidence
offered by the government was sufficient to do so. Graham was a loan

originator for Dime-NH, and she had been sent to training at Dime-NY. The
evidence showed that at this training she was informed of the history and
structure of Dime Bank and was given instruction on all of its loan programs. In
fact Graham admitted that she often relied on Dime Bank's size and prominence
to solicit new borrowers. Given the small size of the New Hampshire operation,
she must have been referring to its parent, Dime-NY. Graham was not an
unsophisticated private borrower, but an employee of Dime Bank specifically
instructed on how the loan process worked. This circumstantial evidence was
sufficient to prove that she understood that Dime-NY ultimately provided the
funding for the loans although they originated in New Hampshire and were
approved by Dime-MA.
18

The government offered sufficient evidence to support Graham's convictions

under 18 U.S.C. 1014.

D. The Court's Questioning of the Witnesses

19

Graham contends that the trial court's questioning of certain witnesses deprived
her of a fair trial and created prejudice in favor of the government. Because
Graham failed to contemporaneously object to the court's comments, we review
the district court's questioning for plain error. Fed.R.Crim.P. 52(b).

20

"A trial judge retains the common law power to question witnesses and to
comment on the evidence." U.S. v. Gonzalez-Soberal, 109 F.3d 64, 72 (1st
Cir.1997) (citations omitted). After reviewing the instances of which Graham
complains we find no error on the part of the district court. At most, the court
sought to clarify testimony given by the witnesses in question and helped to
move the proceedings along in an orderly fashion. Considering the wide
latitude granted a trial judge in managing a trial, we find no error so obvious
that it could rise to the level of substantial and fundamental prejudice required
by plain error review. See U.S. v. Ortiz, 23 F.3d 21, 26 (1st Cir.1994)
(discussing plain error standard of review).

E. Loss Calculation for Sentencing

21

Although the two counts on which Graham was convicted involved no loss to
the victim, she was sentenced based on related, acquitted conduct after the
district court found by a preponderance of the evidence that she had participated
in a conspiracy that resulted in a loss of $1.46 million to the victim. This loss
resulted in a total offense level of 17 which imposes a sentencing range of 2430 months. After Graham pointed out that the loss attributed to her was
substantially higher than the loss attributed to other similarly situated

defendants who had cooperated with the government, the government

recommended a downward departure for Graham on the ground that the loss
figure overstated her culpability. The district court agreed and granted Graham
a two-level downward departure resulting in a sentence of 18 months on each
count to be served concurrently.
22

Graham contends that the disparity in loss calculations violated her right to due
process and equal protection because it was the result of sentencing factor
manipulation. In response to the district court's questioning on this issue, the
government explained that any disparity was the result of early guilty pleas and
cooperation agreements by other defendants.2 The district court accepted this
explanation and Graham did not specifically object to this ruling or ask for an
evidentiary hearing on the issue. We find no plain error in the district court's
decision.

23

Even assuming that Graham could prove that the government improperly
manipulated her loss calculation, the district court's downward departure
remedied her grievance. "[W]here government agents have improperly enlarged
the scope or scale of the crime, the sentencing court 'has ample power to deal
with the situation ... by departing from the [guideline sentencing range].' " U.S.
v. Montoya, 62 F.3d 1, 3 (1st Cir.1995) (quoting U.S. v. Connell, 960 F.2d 191,
196 (1st Cir.1992)). To the extent that Graham's appeal suggests that the
departure was inadequate, absent an error of law this court has no jurisdiction to
consider the extent of a permitted departure. U.S. v. Webster, 54 F.3d 1, 4 (1st
Cir.1995). We find no such error of law.

III. Conclusion
24

We AFFIRM Graham's conviction and sentence under 18 U.S.C. 1014.

Of the Eleventh Circuit, sitting by designation

Although the quoted language from Brandon involved a conviction under 18

U.S.C. 1344, rather than 1014, the language and elements of the two
statutes are so similar that the logic of Brandon applies here. Brandon involved
a conviction under both 1344 and 1014 and the court interpreted the
knowledge requirement in both statutes as the same. See Brandon, 17 F.3d at
425 n. 13 ("We find the language of 1014 sufficiently similar to 1344 to
warrant a similar conclusion about Congress'[s] intent with respect to the
knowledge requirement in the bank fraud statute.")

Section 1B1.8 of the sentencing guidelines restricts the government from using
self-incriminating evidence provided by cooperating defendants in determining
the applicable guideline range for those defendants. USSG 1B1.8