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U.S. v. LANE

January 29, 2002

UNITED STATES OF AMERICA
V.
VINCENT LANE, DEFENDANT.



The opinion of the court was delivered by: Charles R. Norgle, Sr., U.S. District Judge.

  OPINION AND ORDER

Before the court are Defendant Vincent Lane's motions for release pending appeal and for extension of the date of surrender. On January 15, 2002, the court issued a minute order denying the motions, and stating that a full opinion would follow giving the court's reasons in accordance with United States v. Swanquist, 125 F.3d 573 (7th Cir. 1997). The reasons for the denials are outlined below.

I. BACKGROUND

In a nine count superceding indictment, Lane was charged with one count of violating 18 U.S.C. § 1344 and eight counts of violating 18 U.S.C. § 1014, all of which arose out of statements Lane made in connection with various loans he obtained. Lane's scheme involved several entities and transactions, which the court summarizes below.

At all times relevant, Lane was a one-third owner of a general partnership called LSM Venture Associates ("LSM"), which was involved in multiple real estate dealings. In the early 1980's, LSM was the general partner of several other limited partnerships involving real estate. One such undertaking was an apartment complex in Texas called Casa Bonita Apartments, which was owned by Casa Bonita Apartments, Limited and Casa Bonita Investors, Limited ("Casa Bonita entities"). LSM was the general partner of both Casa Bonita entities. In 1982, the Casa Bonita entities borrowed a large sum of money from National Income Realty Trust ("NIRT"). Lane signed a note on behalf of the Casa Bonita entities, and personally guaranteed the note.

In the mid 1980's LSM was also a general partner in an entity called Continental Commercial Partners ("CCP"). CCP had another general partner, Full Life, Inc., a corporation controlled by the Lake Region Conference Association of Seventh Day Adventists ("Seventh Day Adventists"). LSM and the Seventh Day Adventists each owned 49.5% of CCP. Lane personally owned the remaining 1% of CCP.

During the mid 1980's CCP purchased from Loyola University of Chicago ("Loyola") real estate located at 76th and Racine on the south side of Chicago for the purpose of developing a shopping center known as Continental Plaza. CCP held this property in a land trust at the American National Bank and Trust Company of Chicago ("AND").

In order to purchase the property from Loyola, CCP obtained financing from several sources, most of which was secured by mortgages on the property and by personal guarantees. The first lien on the property was held by Lloyds Bank International, Limited, whose agent in the United States was Daiwa Bank, Limited (collectively "Daiwa"). The second lien on the property was held by Drovers Bank of Chicago, which became Cole Taylor Bank (hereinafter "Cole Taylor"). Loyola, in turn, guaranteed $1,916,000.00 of the debt to Cole Taylor.

Continental Plaza opened for business in 1988, with a grocery store occupying more than 40% of the center, and acting as the anchor tenant. In order for Continental Plaza to be financially viable, it was necessary that the anchor tenant space be leased.

Also in 1988, the Casa Bonita entities defaulted on the loan from NIRT, and failed to pay the money due on the note. In September 1991, NIRT gave written notice of demand on Lane to cure the default and pay the amount due. Lane did not do so, and on January 24, 1992, NIRT sued Lane in state court in Texas seeking $1,500,000.00 in unpaid principal and $300,000.00 in interest.

In the early part of 1992, CCP was several million dollars in debt on Continental Plaza. CCP owed $3,000,000.00 to Daiwa, and $2,000,000.00 to Cole Taylor. Daiwa filed a suit in 1992 seeking to foreclose on Continental Plaza. A judgment of foreclosure was entered, and a sheriffs sale was ordered. Both Lane and the Seventh Day Adventists stood to be personally liable if the sale of Continental Plaza resulted in a shortfall on the debt owed. Cole Taylor also filed suit in 1992, seeking to enforce the personal guarantees made in connection with the financing of Continental Plaza. Cole Taylor obtained a judgment against Lane personally, and began attempts to collect on that judgment.

In late 1992, the grocery store that was the anchor tenant at Continental Plaza closed, and the anchor space became vacant. At that time, the Daiwa and Cole Taylor lawsuits were still pending against Lane. Mound that same time, unbeknownst to Lane, Loyola agreed to pay Cole Taylor $1,700,000.00 on Loyola's guaranty to Cole Taylor. In return, Cole Taylor agreed to return to Loyola 90% of any money that Cole Taylor collected from other sources. As will be seen later, Cole Taylor honored this obligation to Loyola.

In early 1993, Lane proposed a refinancing plan for Continental Plaza that would result in the dismissal of the Daiwa and Cole Taylor lawsuits, and resurrection of Continental Plaza as a viable shopping center. Lane's refinancing plan included the following elements: (1) the Seventh Day Adventists would contribute $2,500,000.00, in return for their release from all liabilities on their personal loan guarantees, and their interest in CCP would be converted to a limited partnership; (2) Daiwa would receive $2,500,000.00 as full payment on the debt CCP owed Daiwa, and dismiss its lawsuit; (3) ANB would issue a new loan for $1,900,000.00, which would be secured by a first mortgage on Continental Plaza, and further secured by an agreement from Loyola to purchase the loan if it went into default; and (4) Cole Taylor would receive $1,600,000.00 as partial payment on CCP's debt to Cole Taylor, take as security a second mortgage subordinate to ANB's lien, and dismiss its lawsuit.

When analyzing Lane's proposed refinancing, ANB determined that a viable anchor tenant was necessary to the success of both Continental Plaza and Lane's refinancing plan. In May 1993, Lane produced to ANB a copy of a lease for the anchor tenant space at Continental Plaza, which was dated May 7, 1993. Lane's proposed tenant was another grocery store called "Your Supermarket, Inc." The signatory for Your Supermarket was Mr. Franklin Searcy, who signed on behalf of Leonard Muhammad, the controlling person of Your Supermarket. Muhammad testified that he is the son-in-law of Minister Louis Farrahkan, the leader of a religious order known as The Nation of Islam. Muhammad further testified that he is employed as the chief of staff for The Nation of Islam. Your Supermarket agreed to lease the anchor space for five years at a rate of $120,000.00 per year, with no provision for a security deposit The lease indicated that the landlord was ANB as trustee. At the time, ANB had not signed the lease, and the lease was therefore not binding.

In early August 1993, Lane on behalf of CCP, and ANB signed a commitment letter for the $1,900,000.00 refinancing loan. The commitment letter outlined the following conditions that had to be met before ANB would issue the loan: (1) Loyola had to sign the loan purchase agreement; (2) CCP had to tender a fully executed version of the May 7, 1993 lease with Your Supermarket; (3) CCP had to tender an Estoppel Certificate signed by Your Supermarket, certifying that the May 7, 1993 lease was in effect; (4) CCP had to tender financial statements for Your Supermarket, or alternatively, obtain a $240,000.00 security deposit from Your Supermarket; (5) CCP had to sign a Mortgage and a Collateral Assignment of Leases and Rents as further security for the loan; and (6) Lane had to sign a personal guaranty for repayment of the loan.

The principals of Your Supermarket had little experience in grocery operations. Accordingly, in August 1993, Lane arranged for Muhammad to meet with Reverend Wilbur Daniels, who was experienced in real estate development. Reverend Daniels and Muhammad originally explored being partners in the supermarket, but that did not come to pass. Reverend Daniels decided that if Your Supermarket was to proceed, it would have to be owned primarily by him or his representatives. But, eventually Reverend Daniels and his associates discontinued discussions with Lane about opening a supermarket at Continental Plaza. As it turned out, no supermarket ever opened again at Continental Plaza. There is, however, more to be said about the $240,000.00 security deposit.

Beginning in September 1993, Lane made several statements. The Government alleged that on October 21, 1993, Lane fraudulently directed ANB, in its capacity as landlord and trustee, to: (1) execute the May 7, 1993 lease for Your Supermarket to take the anchor space at Continental Plaza; (2) execute a Mortgage on the Continental Plaza property, which Lane signed as the beneficiary on October 29, 1993; and (3) execute a Collateral Assignment of Leases and Rents, which Lane signed as the beneficiary on October 29, 1993, all for the purpose of securing the $1,900,000.00 refinancing loan.

On November 1, 1993, Lane's refinancing deal on Continental Plaza took place. The Government alleged that on that date Lane took several more fraudulent actions, many of which surround the lease for the anchor space. According to the Government, on November 1st, Lane directed ANB to execute an amendment to the May 7th lease. The amendment changed the identity of the anchor tenant from Your Supermarket to an entity called "Shoppers Lane Supermarket, Inc." The amendment also stated that Shoppers Lane adopted, ratified and confirmed the lease as if it had been entered into by Shoppers Lane, and that the amended lease was in full force and effect. In the amendment, Muhammad confirmed Searcy's authority to sign on Muhammad's behalf. Under the amended lease, the obligation to pay rent would begin on December 1, 1993, and the annual rent was increased from $120,000.00 per year to $180,000.00 per year. The amended lease also indicated that Shoppers Lane had paid a security deposit of $240,000.00 to ANB as landlord, which ANB could use for closing costs in connection with the refinancing of the shopping center.

According to the Government, both the May 7, 1993 lease and the November 1, 1993 amendment were shams and worthless because neither Your Supermarket nor Shoppers Lane were viable tenants. Thus, according to the Government, Lane's tender to ANB of the lease and amendment, the Estoppel Certificate, and the Collateral Assignment of Leases and Rents were all fraudulent because each of the documents depended on Your Supermarket/Shoppers Lane being a bona fide tenant. Moreover, the Government claimed that Shoppers Lane did not pay the $240,000.00 security deposit. Rather, Lane personally borrowed that money from Reverend Daniels and used it as the security deposit.

Also on November 1, 1993, Lane fraudulently tendered to ANB a Guaranty of Payment, stating that except as disclosed in writing, there was no action pending that might adversely affect his ability to honor his guarantee, and that he was not in default under any agreements to which he was a party. These representations were fraudulent because Lane did not disclose to ANB the NIRT lawsuit in Texas against Lane and the Casa Bonita entities.

As noted above, under the originally proposed refinancing plan, Cole Taylor was to receive $1,600,000.00 from ANB. As events came to pass, on November 1, 1993 when Lane's refinancing deal concluded, Cole Taylor accepted a lower final figure of $1,450,000.00 and dismissed its lawsuit. Then, in accordance with Cole Taylor's agreement with Loyola, of which Lane was unaware, Cole Taylor paid Loyola $1,350,000.00.

Neither Shoppers Lane nor Your Supermarket opened in the anchor tenant space at Continental Plaza. No rent was ever paid on the anchor space lease. On February 16, 1994, Lane met with ANB and its attorney to discuss the non-opening of the grocery store. The Government alleged that Lane fraudulently told ANB that he had forestalled opening Shoppers Lane because a better tenant, Cook County, had expressed interest in opening a health clinic in the anchor space.

While Lane was arranging the Continental Plaza refinancing, NIRT was moving for summary judgment against Lane in the Texas lawsuit. On February 25, 1994, the Texas state court entered judgment against Lane in the amount of approximately $2,400,000.00, which represented $1,500,000.00 in unpaid principal and $900,000.00 in unpaid interest. In addition to this debt, Lane also had an obligation to repay Reverend Daniels the $240,000.00 that Lane tendered to ANB as Shoppers Lane's security deposit on the anchor tenant space.

On December 16, 1994, Lane refinanced other existing loans with the South Shore Bank of Chicago ("South Shore"). On the original loans, South Shore held as collateral a $100,000.00 CD. Under the refinancing, South Shore would return the $100,000.00 CD to Lane, and accept in its stead Lane's interest in an office park in Springfield, Illinois known as Springfield Office Partnership. Springfield Office Partnership had a value of approximately $500,000.00. South Shore and Lane agreed that South Shore could liquidate Springfield Office Partnership, and South Shore would retain half of the proceeds as collateral and tender the other half to Lane.

The South Shore refinancing loans consisted of $350,000.00 that was to go to LSM; $165,744.39 that was to go to an entity called Urban Services and Development, Inc.; and another $100,000.00 that was also to go to Urban Services and Development, Inc. With each of these transactions, Lane tendered to South Shore Bank a Guaranty stating that he was not in default on any obligation that would affect his performance of his guarantee, and that there was no litigation pending against him that could adversely affect his performance of his guarantee. These representations were false because Lane did not disclose to South Shore the Texas state court judgment of $2,400,000.00, and related collection proceedings.

Prior to and contemporaneously with Lane's transactions with South Shore, he was also in negotiations with NIRT concerning the Texas Casa Bonita judgment. The Government claimed that Lane had promised his interest in Springfield Office Partnership to NIRT as part of a settlement agreement, but then had pledged Springfield Office Partnership to South Shore as collateral on the refinancing loans. NIRT did not learn of Lane's pledging Springfield Office Partnership to South Shore until South Shore had liquidated the property. At that time, the Government claimed that Lane did not disclose to NIRT that he had received half of the proceeds from the liquidation.

The above described events formed the basis of the charges against Lane. Count I of the Government superceding indictment alleged that on November 1, 1993 Lane tendered to ANB for the purpose of inducing ANB to issue the $1,900,000.00 refinancing loan to CCP the following documents, knowing that the documents contained false representations about the anchor tenant lease at Continental Plaza: (1) the May 7, 1993 lease; (2) the amendment to the May 7, 1993 lease; (3) the Estoppel Certificate signed by Shoppers Lane; (4) the mortgage; and (5) the Collateral Assignment of Leases and Rents, all in violation of 18 U.S.C. § 1344.

Count II of the superceding indictment alleged that on November 1, 1993, Lane violated 18 U.S.C. § 1014 when he knowingly made a false statement to ANB for the purpose of influencing ANB's actions upon the $1,900,000.00 loan to CCP. Specifically, Count II alleged that Lane falsely stated in the Amendment to Lease that the lease as defined therein was in full force and effect, when the lease was a sham and was worthless.

Count III of the superceding indictment alleged that on November 1, 1993, Lane violated 18 U.S.C. § 1014 when he knowingly made a false statement to AND for the purpose of influencing ANB's actions upon the $1,900,000.00 loan to CCP. The basis for Count III was that Lane falsely stated in the Amendment to Lease that Shoppers Lane Supermarket, Inc. had tendered a security deposit of $240,000.00 when it had not, and that Lane himself had supplied the money in question.

Count IV of the superceding indictment alleged that on November 1, 1993, Lane violated 18 U.S.C. § 1014 when he knowingly made a false statement to ANB for the purpose of influencing ANB's actions upon the $1,900,000.00 loan to CCP. Specifically, Count IV alleged that Lane falsely stated in the Collateral Assignment of Leases and Rents that all leases tendered in connection with the refinancing of Continental Plaza were in full force and effect, when the purported lease with Shoppers Lane was a sham and was worthless.

Count V of the superceding indictment alleged that on November 1, 1993, Lane violated 18 U.S.C. § 1014 when he knowingly made a false statement to ANB for the purpose of influencing ANB's actions upon the $1,900,000.00 loan to CCP. Count V charged Lane with tendering to ANB the Estoppel Certificate signed by Leonard Muhammad on behalf of Shoppers Lane Supermarket Inc., which falsely stated that the lease with Shoppers Lane Supermarket, Inc. was in full force and effect when the lease was a sham and was worthless.

Count VI of the superceding indictment alleged that on November 1, 1993, Lane violated 18 U.S.C. § 1014 when he knowingly made a false statement to ANB for the purpose of influencing ANB's actions upon the $1,900,000.00 loan to CCP. Count VI alleged that Lane falsely stated in the Guaranty of Payment that: (1) he was not in default under any agreements to which he was a party, when Lane was in fact in default on a guarantee to pay a debt of $1,500,000.00 in principal plus interest relating to the Casa Bonita entities in Texas; and (2) there was no action pending against Lane that could adversely affect his ability to honor the Guaranty of Payment, when in fact there was a collection lawsuit pending against Lane concerning the debt of $1,500,000.00 plus interest from the Casa Bonita loan from NIRT, and that Lane did not disclose this lawsuit to ANB.

Count VIII of the superceding indictment alleged that on December 16, 1994, Lane violated 18 U.S.C. § 1014 when he knowingly made a false statement to South Shore Bank for the purpose of influencing South Shore Bank's actions in considering a $165,744.39 loan to Urban Services and Development, Inc. Specifically, Count VIII alleged that Lane tendered to South Shore Bank a Guaranty falsely stating that Lane was not in default on any obligation that could affect his performance of his guarantee and that there was no litigation pending against him that could affect the performance of his guarantee, when Lane was subject to the $2,400,000.00 Texas state court judgment and related collection proceedings, which he did not disclose.

Count IX of the superceding indictment alleged that on December 16, 1994, Lane violated 18 U.S.C. § 1014 when he knowingly made a false statement to South Shore Bank for the purpose of influencing South Shore Bank's actions in considering a $100,000.00 loan to Urban Services and Development, Inc. Count IX charged Lane with tendering to South Shore Bank a Guaranty falsely stating that he was not in default on any obligation that could affect his performance of his guarantee and that there was no litigation pending against him that could affect the performance of his guarantee, when Lane was subject to the $2,400,000.00 Texas state court judgment and related collection proceedings, which he did not disclose.

Prior to trial, the Government dismissed Count I of the superceding indictment, so that the only charges remaining against Lane were the violations of 18 U.S.C. § 1014 alleged in Counts II-IX of the superceding indictment. The case proceeded to a jury trial, and the jury returned a verdict of guilty as to Counts III, VI, VII, VIII and IX, and reported that they were undecided as to Counts II, IV and V. The court declared a mistrial as to the counts on which the jury was hung, and accepted the guilty verdict on the other counts. To recap, the counts on which Lane was found guilty were: (1) Count III relating to Lane's representation to ANB that Shoppers Lane Supermarket, Inc. had provided a $240,000.00 security deposit, when in fact Lane himself provided that money; (2) Count VI concerning Lane's representation to ANB that he was not in default under any agreements to which he was a party, and there was no action pending against him that could adversely affect his ability to honor his guaranty, when he was actually in default on a guarantee to pay a debt of $1,500,000.00 in principal plus interest relating to the Casa Bonita entities in Texas and there was related collection litigation pending; (3) Counts VII, VIII and IX relating to Lane's statements to South Shore Bank that he was not in default on any obligation that could affect his performance of his guaranty and that there was no litigation pending against him that could affect the performance of his guaranty, when he was subject to the $2,400,000.00 Texas state court judgment and related collection proceedings.


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