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United States v. Bailey

decided*fn*: May 11, 1984.


Appeal from the United States District Court for the Central District of Illinois, Rock Island Division. Criminal No. 82-40003 -- Robert D. Morgan, Judge.

Cummings, Chief Judge, Wood, Circuit Judge, and Campbell, Senior District Judge.*fn**

Author: Campbell

CAMPBELL, Senior District Judge.

William Bailey, a former attorney, was charged by the Grand Jury with three violations of 18 U.S.C. § 641*fn1 (embezzlement of public funds) and one violation of 18 U.S.C. § 1001*fn2 (making a false statement to a government agency). The allegations arose out of certain irregularities which occurred in Farmers Home Administration (FmHA) loan transactions in which Bailey was the closing attorney. The jury found the defendant guilty on all counts and the court sentenced him to concurrent prison terms of ten years as to each of the embezzlement counts and five years on the false statement charge. Bailey appeals his convictions raising issues as to the sufficiency of the evidence, the propriety of the jury charge, the effectiveness of defense counsel, and the severity of the sentence. For the reasons stated below, we affirm.

Appellant's convictions arose out of three separate real estate transactions. The lender in each case was the FmHA, an agency of the United States government. The borrowers were private parties. Bailey was the closing attorney in each transaction. However, his responsibilities exceeded those of a normal real estate lawyer engaged in private representation.*fn3 He was trained and certified by the FmHA to be a closing attorney for its loans and he received specific directions from it regarding his duties with respect to each transaction. Technically, however, he was employed by the borrower although he also acted as the escrow agent for the funds involved in each transaction. The facts of the three transactions involved in this case are summarized below.

The Johnson Loan

In September 1978 appellant was retained as the closing attorney for a FmHA loan to Janice Johnson. Johnson received a loan of approximately $33,000 to purchase a house from Thomas and Peggy Bein. The Beins had a FmHA mortgage on the house in the approximate amount of $33,000. Bailey received from the agency a United States Treasury check for $33,488 made out to Janice Johnson along with written instructions regarding the transaction. He was directed to use the loan proceeds to satisfy the outstanding loan of the FmHA and to pay certain fees and costs involved in the closing. Johnson endorsed the check to the defendant who then deposited it in his trust account at the Rock Island Bank. Thereafter, Bailey disbursed approximately $4,200 from the trust account in five separate checks to cover various expenses related to the loan. Under the loan closing instructions, the defendant should have satisfied the FmHA loan by sending back to the agency the balance of the loan proceeds. However, on September 28, 1978, Bailey submitted a loan closing statement which represented that $32,908.55 had been paid to the Beins to satisfy the outstanding mortgage on the property, but it is undisputed that the appellant had only disbursed $1,426.77 to the Beins.

In February 1980 a FmHA official asked the appellant about the money the agency should have received at the conclusion of the Johnson loan transaction. Bailey stated that he had sent the agency a check for the balance, but approximately a month later the appellant told another inquiring FmHA official that he was still working on the loan and would soon send the agency a check. Nonetheless, the FmHA never received any check from the defendant with regard to the Johnson closing.

Count 1 of the indictment alleged that the defendant had embezzled the loan proceeds from the Johnson loan and Count 4 alleged that the defendant had knowingly made a false statement to the agency in the loan closing statement.

The Powell Loan

In January 1979 Bailey was retained as the loan closing attorney of a FmHA loan to Vaughn Powell. The loan was for $206,000 and was intended to permit the borrower to remove the various liens from his farm property and to consolidate his debts. Bailey received specific instructions from the agency to satisfy the various liens, to execute the mortgage documents, and to remit any balance to the FmHA. Powell endorsed the $206,000 United States Treasury check and gave it with another check for $12,042, from an earlier FmHA loan, to the appellant. Bailey deposited the checks in his trust account at the First National Bank of Rock Island. Thereafter, he disbursed $213,042.87. The remaining $4,099.13 was never accounted for and no loan closing statement was ever sent to the FmHA.

Count 2 of the indictment alleged that the defendant's retention of the excess funds constituted embezzlement of United States government property.

The Weeks Loan

In early 1979 Ronald and Anna Weeks obtained a loan from the FmHA to finance and consolidate their debts including three non-real estate FmHA loans. Two United States Treasury checks were issued by the agency to the borrowers, one for $28,500 and one for $2,000. The appellant was retained as the closing attorney and received instructions from the agency to clear title to the real estate, supervise the execution and recording of a FmHA mortgage, and then to deposit the proceeds into a bank account supervised by the FmHA. Mr. and Mrs. Weeks endorsed the checks to the defendant, who deposited them in his trust account at the Rock Island Bank. However, no creditors of Mr. and Mrs. Weeks were ever paid by Bailey and no money was ever returned to the FmHA. As in the Powell transaction, no closing statement was ever submitted by Bailey to the FmHA. Count 3 of the indictment alleged that the defendant embezzled the entire amount of the proceeds from the loan to Mr. and Mrs. Weeks.

In addition to evidence regarding those transactions, the government introduced bank records showing the activity in the defendant's trust accounts during the relevant time period. The records revealed that on July 26, 1979, approximately one month after depositing the checks from the loan to the Weeks, the defendant withdrew $31,500 to open an account at the Rock Island Bank for a corporation called Yong Sun, Inc. Bailey's business partner, Mrs. Yong Sun Chong, subsequently bought a tavern and liquor store in Rock Island. At trial, the defendant called Mrs. Chong who testified that she and the defendant were in the liquor business together. She stated that she and Bailey had bought the business for $130,000 and that they had to pay a $40,000 down payment. However, she claimed that they had borrowed the money from the Rock Island Bank although she produced no documentation nor could she recall any of the terms of the loan.

The jury found the defendant guilty of all four counts in the indictment. At the sentencing hearing Bailey testified that he was presently unable to make restitution although he had discussed the matter with his bonding company. He expressed a willingness to pay restitution over a period of time if his business ventures provided sufficient income to do so. In imposing the sentence, the court stated:

THE COURT: Well, Mr. Bailey, the Court has considered this matter very carefully and, as you know, I presided at the trial. The jury was satisfied of your guilt of all four counts, and I am fully satisfied of your conscious guilt in this matter, that you didn't ...

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