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United States v. O'Brien

July 9, 1997

UNITED STATES OF AMERICA,

PLAINTIFF-APPELLEE,

v.

LOLA O'BRIEN,

DEFENDANT-APPELLANT.



Appeal from the United States District Court for the Western District of Wisconsin.

No. 95 CR 83 John C. Shabaz, Chief Judge.

Before ESCHBACH, COFFEY and DIANE P. WOOD, Circuit Judges.

COFFEY, Circuit Judge.

ARGUED JANUARY 16, 1997

DECIDED JULY 9, 1997

Defendant-appellant Lola O'Brien (O'Brien) was convicted by a jury of one count of bank fraud, in violation of 18 U.S.C. sec. 1344, and one count of wire fraud, in violation of 18 U.S.C. sec. 1343. She was sentenced to twenty-seven months' incarceration, and ordered to pay $129,937.80 in restitution. O'Brien appeals, challenging her conviction and sentence. We affirm.

I. FACTUAL BACKGROUND

Prior to 1987, O'Brien was married to Robert O'Brien, who owned and operated O'Brien Oil, located in Superior, Wisconsin. When Robert O'Brien died in September 1987, Lola O'Brien inherited O'Brien Oil, and became the company's president and sole shareholder. Shortly thereafter in January 1988, O'Brien decided to explore the possibility of selling O'Brien Oil to Como Oil, located in Duluth, Minnesota. She met with Robert Hall, president of Como Oil, in January 1988, and suggested a selling price of $500,000 for O'Brien Oil, which Hall declined to pay. Negotiations ceased, and O'Brien assumed control of the business, and arranged for O'Brien Oil to receive a $100,000 line of credit from the National Bank of Commerce (the "Bank"), which had been doing business with O'Brien Oil for over forty years. This line of credit allowed O'Brien Oil to access working capital throughout the year without a specific payback date. In order to obtain the line of credit, O'Brien signed an agreement which pledged all of O'Brien Oil's assets as security for the payment of the money the company accessed through the line of credit. In addition to the line of credit, O'Brien also obtained a $53,000 real estate loan from the Bank in November 1989, which was secured by a mortgage on O'Brien Oil's main business facility. Finally, in yet another separate transaction, the defendant arranged in April 1992 for O'Brien Oil to receive a $55,779.55 loan, the purpose of which was to consolidate three previous loans the company had received to purchase equipment which were coming due. To obtain the consolidation loan, O'Brien was required to sign an agreement pledging all of the assets of O'Brien Oil as security for the loan.

In early December 1992, O'Brien again advised Hall at Como Oil's offices in Duluth, Minnesota that she was looking to sell O'Brien Oil by December 18, because she wanted to transfer her residence from Superior, Wisconsin to Florida, where two of her three daughters lived. O'Brien told Hall that she wanted to sell the business by December 18. Shortly after O'Brien's call, Hall, along with Como Oil's treasurer, Mark Oesterich, visited O'Brien Oil to inspect the premises. During that meeting, O'Brien told Hall that her asking price for O'Brien Oil was now $90,000. After returning to Como Oil's offices in Duluth, Hall determined that $90,000 was a fair price for O'Brien Oil's assets. Hall contacted O'Brien to accept her offer, and they agreed to an expedited schedule to complete the transaction in time for O'Brien to leave on December 18th. Hall thereafter contacted his attorney to draw up the purchase agreement.

In the course of preparing the documents for the sale of O'Brien Oil, Hall's attorney discovered that liens had been filed against the assets which Como Oil was seeking to purchase from O'Brien Oil. *fn1 Hall telephoned O'Brien to ask her about the liens, and O'Brien told Hall that the liens had been paid off, but had not yet been removed by the creditors. Because he had experienced a similar situation in the past, wherein one of Como Oil's creditors had inadvertently failed to remove a lien after it had been paid, Hall believed O'Brien and the closing proceeded. At the closing, and in response to a question posed by Hall's attorney, O'Brien again claimed that, despite the existence of the liens, the assets of O'Brien Oil were not pledged as security for any debt. The Asset Purchase Agreement, which the parties reviewed during the closing and which O'Brien signed at that time, contained a specific provision by which O'Brien warranted that the assets of O'Brien Oil were free from any lien or encumbrance. In fact, all of the Bank's liens on the property of the O'Brien Oil company were still unsatisfied. *fn2 At the time of the sale, O'Brien Oil owed the Bank $99,000 on the line of credit, and $49,871.76 on the consolidation loan.

At the closing, and per her request, O'Brien received a cashier's check for $90,000, which she deposited into her daughter's account at a Minnesota bank. *fn3 Immediately after the sale, O'Brien moved to Florida. The $90,000 was subsequently wire transferred in increments to the account her other two daughters had in Florida. Shortly after the sale, the Bank learned that O'Brien had sold the encumbered assets of O'Brien Oil to Como Oil. *fn4 The Bank contacted Como Oil to assert its rights over O'Brien Oil's assets, and Como Oil eventually agreed to pay $72,000 to the Bank in exchange for the Bank agreeing to release its liens against O'Brien Oil's assets. Thus, the Bank absorbed the $18,000 difference between the sale price for O'Brien Oil and the settlement agreement with Como Oil as a loss.

At the time of closing, O'Brien Oil had a small amount of oil in its tanks, which it received from North Shore Oil (North Shore), its main supplier. North Shore and O'Brien Oil had an arrangement whereby O'Brien Oil paid for deliveries from North Shore within ten days of delivery. Beginning in late 1992, O'Brien Oil began to substantially increase its purchases of oil from North Shore. By December 1992, according to the testimony of Pat LeBlanc, North Shore's president, O'Brien Oil was ordering more oil from North Shore than it ever had before. In the final days before the sale of O'Brien Oil and before O'Brien left for Florida, O'Brien Oil submitted a number of checks to North Shore as payment for oil North Shore had delivered, but the Bank refused to honor these checks because O'Brien Oil was without sufficient funds to cover them. LeBlanc called O'Brien Oil to inquire about the dishonored checks, whereupon he learned that the assets of the company had been sold. North Shore Oil was never paid for many of the loads of oil it delivered to O'Brien Oil in the days prior to the sale, and it lost $40,928.83 as a result.

II. ISSUES

A. Whether the district court abused its discretion in admitting "other acts" evidence concerning fires at O'Brien Oil;

B. Whether the district court abused its discretion in declining to permit the defendant to take the stand to offer surrebuttal testimony;

C. Whether the Government presented sufficient evidence to sustain O'Brien's conviction for wire fraud; and

D. Whether the district court's calculation of the "loss" caused by O'Brien's fraud was proper?

III. DISCUSSION

A. Whether the district court abused its discretion in admitting "other acts" evidence concerning fires which occurred at O'Brien Oil?

O'Brien initially argues that the district court erred in permitting the Government to introduce "other acts" evidence in the form of testimony from Bruce Thompson (Thompson), assistant vice president of the Bank. Thompson testified that O'Brien received insurance reimbursement damage checks for fires which occurred at O'Brien Oil in early 1992 and failed to use the proceeds from those checks to replace a truck which had been lost in the fires. *fn5 She also claims that the trial judge erred in permitting a rebuttal witness to testify that O'Brien solicited him to set those fires.

1. Evidence concerning O'Brien's failure to use insurance proceeds from a fire at O'Brien Oil to replace a truck lost in that fire

Prior to trial, the Government notified O'Brien's counsel by letter of its intention to introduce four types of "other acts" evidence pursuant to Federal Rule of Evidence 404(b). *fn6 Specifically, the Government sought to introduce "other acts" evidence relating to four areas:

1) O'Brien's failure to pay North Shore Oil for the shipments of oil North Shore ...


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