## Facts

- Caguas Central Federal Savings Bank of Puerto Rico was a federally chartered savings institution.
- Lorenzo Muñoz-Franco served as president and CEO; Francisco Sánchez-Arán served as executive vice president and chief lending officer.
- Ariel Gutiérrez-Rodríguez, a land developer, and Wilfredo Umpierre-Hernández, an officer of related entities, obtained and managed loans from the bank through affiliated companies.
- Over nearly a decade, bank executives allegedly directed loan proceeds to uses not authorized by the bank’s board and concealed key details about renewals, restructurings, collateral arrangements, and the purposes of funds.
- The government’s evidence depicted loan transactions structured to mask borrower deterioration, recycle debt, and misstate the bank’s true exposure, thereby misleading the board and regulators.
- After a lengthy jury trial in federal district court, defendants were convicted of bank fraud, conspiracy, and related misapplication-of-funds offenses.
- On appeal, defendants challenged, among other things, the sufficiency of the evidence, the use of board and committee minutes (including reliance on missing entries), and the admission of certain testimony as lay rather than expert opinion.

## Issues

1. Whether the evidence was sufficient to sustain convictions for bank fraud, conspiracy, and misapplication of bank funds.
2. Whether the prosecution could use the absence of matters in board and executive-committee minutes as substantive evidence that the matters did not occur under Federal Rule of Evidence 803(7).
3. Whether testimony from a bank insider about what information the board “should have” had was admissible lay opinion under Federal Rule of Evidence 701 rather than expert testimony under Rule 702.

## Decision

- The First Circuit affirmed the convictions and, in all material respects, the sentences.
- The court held the evidence permitted a rational jury to find intentional deception and misuse of bank funds, not merely poor judgment or aggressive lending.
- The court upheld admission and use of the absence of entries in the minutes as evidence under Rule 803(7), given a sufficient foundation that significant matters were regularly recorded.
- The court held the challenged “should have known/should have had” testimony was admissible lay opinion under Rule 701 because it was grounded in the witness’s personal experience and participation in board processes.

## Legal Principles

- Sufficiency review requires viewing the evidence in the light most favorable to the prosecution; the verdict stands if a rational jury could find guilt beyond a reasonable doubt.
- Under Rule 803(7), the absence of an entry in business records may be admitted to prove a matter did not occur if the proponent shows the type of event would ordinarily be recorded and the recordkeeping practice is regular and reliable.
- Minutes that are summaries rather than verbatim transcripts may still support Rule 803(7) inferences when their preparation, ratification, and content show that significant actions and loan specifics are normally documented.
- Under Rule 701, a corporate insider may offer opinion testimony about what information decisionmakers would typically receive when the opinion is based on the witness’s perception and job-related experience, rather than specialized technical methodology.

## Conclusion

The First Circuit upheld wide-ranging fraud and misapplication convictions arising from concealed, unauthorized lending practices at a federally chartered bank, approving the government’s reliance on missing entries in regularly kept board minutes as Rule 803(7) evidence and allowing insider testimony about customary board information as Rule 701 lay opinion.


United States v. Muñoz-Franco, 487 F.3d 25 (1st Cir. 2007)