## Facts

- TierOne Bank, a federally regulated, publicly traded thrift, was required to file accurate reports with regulators and the SEC and to recognize loan losses through appropriate write-downs and classifications.
- Gilbert G. Lundstrom, TierOne’s CEO and board chairman, was responsible for certifying certain SEC filings and for the bank’s overall reporting and compliance posture.
- As real-estate markets deteriorated in 2007–2009, TierOne’s loan portfolio suffered increasing losses, threatening required capital ratios.
- The government alleged Lundstrom and other executives implemented a scheme to conceal the extent of loan deterioration and losses from shareholders and regulators.
- The alleged tactics included delaying or manipulating appraisals, avoiding downgrades or reclassification of troubled loans, and submitting reports that materially understated losses and overstated capital.
- Two senior executives (the bank’s president/COO and chief credit officer) pleaded guilty and testified for the government at trial.
- A jury convicted Lundstrom on 12 of 13 counts, including conspiracy, wire fraud affecting a financial institution, securities fraud, and falsifying bank entries.
- The district court imposed 132 months’ imprisonment, a fine, restitution of about $3.1 million (joint and several), and supervised release.

## Issues

1. Whether the evidence was sufficient to prove Lundstrom knowingly joined the conspiracies and acted with intent to defraud investors and regulators.
2. Whether the district court abused its discretion by denying a bill of particulars given the breadth of the charged scheme.
3. Whether the district court erred in admitting bank-regulator examination reports and related materials over hearsay objections.
4. Whether the jury instructions were erroneous, including giving a willful-blindness instruction and declining an advice-of-counsel instruction.
5. Whether the district court erred at sentencing in estimating loss under U.S.S.G. § 2B1.1, applying a leadership enhancement under § 3B1.1(a), or imposing an unreasonable sentence.
6. Whether the restitution amount was improperly calculated.

## Decision

- The Eighth Circuit affirmed the convictions, sentence, and restitution.
- The court held the trial evidence, viewed in the light most favorable to the verdict, permitted a rational jury to find knowledge and intent beyond a reasonable doubt.
- The court held denial of a bill of particulars was within the district court’s discretion because the indictment and disclosures were sufficient to inform the defense and prevent unfair surprise.
- The court upheld the challenged evidentiary rulings, including admission of examination reports under the business-records exception when supported by an adequate foundation.
- The court held the willful-blindness instruction was supported by the record and properly stated the law, and the refusal to give an advice-of-counsel instruction was proper due to insufficient proof of full disclosure to counsel and good-faith reliance on specific advice.
- The court upheld the loss methodology as a reasonable estimate and affirmed the organizer/leader enhancement based on Lundstrom’s authority and direction over others; the 132-month sentence was substantively reasonable.
- The court affirmed restitution as supported by evidence of actual losses directly caused by the offenses.

## Legal Principles

- Appellate review of sufficiency of the evidence requires viewing the evidence in the light most favorable to the verdict and affirming if any rational jury could find guilt beyond a reasonable doubt.
- A bill of particulars is not required when the indictment, discovery, and disclosures sufficiently apprise the defendant of the charged conduct and protect against unfair surprise at trial.
- Documents that may be inadmissible against a criminal defendant under the public-records hearsay limitation are not categorically barred from admission under the business-records exception if Rule 803(6)’s foundational requirements are satisfied.
- A willful-blindness instruction is permissible where the evidence supports an inference the defendant deliberately avoided confirming facts indicating unlawful conduct.
- An advice-of-counsel instruction requires evidence of full disclosure of material facts to counsel and good-faith reliance on counsel’s advice.
- Under U.S.S.G. § 2B1.1, the district court need only make a reasonable estimate of loss supported by the record; factual findings are reviewed for clear error.
- A § 3B1.1(a) leadership enhancement applies when the defendant organized or led extensive criminal activity or activity involving five or more participants.
- Restitution must be tied to actual, provable losses directly caused by the offense conduct and supported by the evidentiary record.

## Conclusion

The Eighth Circuit upheld the conviction and punishment of a bank CEO for conspiring to conceal real-estate loan losses and misstate the bank’s financial condition, concluding the evidence supported intent to defraud, the trial rulings and instructions were within the court’s discretion, the Guidelines loss and leadership findings were not clearly erroneous, and the shareholder restitution award was properly supported.


United States v. Lundstrom, 880 F.3d 423 (8th Cir. 2018)