United States v. John A. Kroh, Jr.

896 F.2d 1524, 29 Fed. R. Serv. 927, 1990 U.S. App. LEXIS 3002, 1990 WL 18033
CourtCourt of Appeals for the Eighth Circuit
DecidedMarch 2, 1990
Docket89-1070
StatusPublished
Cited by10 cases

This text of 896 F.2d 1524 (United States v. John A. Kroh, Jr.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eighth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States v. John A. Kroh, Jr., 896 F.2d 1524, 29 Fed. R. Serv. 927, 1990 U.S. App. LEXIS 3002, 1990 WL 18033 (8th Cir. 1990).

Opinions

LAY, Chief Judge.

John A. Kroh, Jr., appeals from his conviction on charges of defrauding three financial institutions. The indictment charged the defendant under count one with conspiracy to submit false statements to banks, 18 U.S.C. § 371 (1988); counts two through four with making false statements to banks, 18 U.S.C. § 1014 (1988); counts five through eight with causing interstate wire transmissions made in execution of a scheme to defraud, 18 U.S.C. § 1343 (1988); counts nine through twelve with causing the interstate transportation of money taken by fraud, 18 U.S.C. § 2314 (1988); count thirteen with knowingly receiving property that had crossed a state boundary after being unlawfully taken, 18 U.S.C. § 2315 (1988). Kroh was sentenced to the maximum term on each count, the longest of these being 10 years, with all sentences to run concurrently.

On appeal Kroh challenges the sufficiency of the evidence for each count, alleging the requisite intent was not established. Kroh also challenges evidentiary rulings of the district court1 in admitting the guilty plea of his brother George Kroh as a co-conspirator; and admitting evidence pertaining to a check “kiting” scheme which was not charged. Upon full review of the record we find sufficient evidence to sustain Kroh’s conviction except as to the charged conspiracy. We also find, however, in light of the insufficient evidence to sustain the conspiracy charge that George Kroh’s guilty plea was inadmissible and constitutes prejudicial error. On this basis we vacate the judgment of conviction and remand to the district court for a new trial.

BACKGROUND

Kroh Brothers Development Company (KBDC) was a Kansas City, Missouri, corporation which has been involved in commercial real estate development since 1969. KBDC developed shopping centers and office buildings which were leased to third parties. The company stock was divided equally between John (Jack) Kroh, George Kroh, and the Kroh family trust. Jack was president of KBDC and George was the chairman and executive vice-president. The division of work between the two brothers gave George responsibility for the development and leasing of a piece of land, as well as obtaining limited partners to invest in developed property. Jack operated the financial end of the business by managing corporate finances, including long-term and short-term corporate debts. The evidence is undisputed that the brothers did not get involved in each other’s sphere of, responsibility.

Many of the investments made by limited partners in KBDC-developed property were tax shelters. In 1985-86 these investments lost their appeal because of an anticipated change in the tax laws. The company’s cash flow became tight and the corporation found itself in financial difficulty. KBDC had previously experienced temporary cash shortages, as most of its profits were earned near the end of the calendar year. In the past, Jack and George obtained personal loans to help alleviate KBDC’s temporary cash shortages. The proceeds of these loans were transferred from the brothers’ personal accounts into corporate accounts.

As a result of the cash shortage in 1986, a dire need arose to borrow additional capital for the company. The company’s lines of credit, at this point, were no longer open. Personal loans, the proceeds of which were turned over to KBDC, were therefore taken out in Jack and George’s names. The number of personal loans greatly increased in 1986, however, due to the severe cash shortage. Three personal loan transactions from 1986 form the basis for the government’s prosecution.

Southwest Bank of Omaha

Jacob Mondschein was vice president of finance for KBDC and was in charge of the [1527]*1527company’s cash flow and control. On May 8, 1986, Mondschein and Jack Kroh met with Gerald Karlin, president of Southwest Bank of Omaha, to discuss the status of a corporate loan. Jack also requested personal loans of $250,000 for himself and his brother, representing the purpose of the loans as a “personal investment” with a New York investment firm. Karlin requested current financial statements from both Jack and George. Jack Kroh thereafter forwarded individual statements showing the brothers each had assets of $21 million and, according to the government, only $3.3 million in liabilities.2 The defendant signed George’s name on the statement as “George P. Kroh by J.K.”3 Mondschein subsequently returned promissory notes to Southwest Bank with the brothers’ signatures (both signed the notes), and directed the bank to wire the loan proceeds to the brothers’ personal accounts at banks in Kansas City.

The government offered evidence that Jack’s liabilities as of the date of his financial statement, May 8, 1986, were $6,948,-628 and that on the same date George had liabilities of $6,913,395. After the money was received in the personal accounts, the funds were immediately transferred into a KBDC account at United Missouri Bank of Kansas City.

Throughout 1986, the company struggled with severe cash flow problems. Mond-schein testified he regularly discussed the situation with the defendant, and was extremely distressed over Jack’s directions to conduct questionable activities. According to the government’s evidence a $7 million check kite was discovered on October 17, 1986 when United Missouri Bank presented several checks for payment to Commerce Bank.4 Jack and George Kroh, Mond-schein and other KBDC executives subsequently met with Commerce Bank officials. The bank was allegedly told that KBDC was experiencing cash flow problems that would be alleviated by several real estate deals that were expected to close before the end of the year. Commerce Bank agreed to treat the matter as simply an overdraft, rather than a kite, and considered it a loan that the defendant and George personally guaranteed.

This transaction was not the subject of an indictment but was brought out through the testimony of several witnesses. The defendant objected to its admissability, alleging its prejudicial impact far outweighed its probative value. The district court allowed the evidence, and the defendant challenges that ruling in this court. The government urges that the evidence was material and admissible under Fed.R. Evid. 404(b) as it showed intent and knowledge relevant to the charges of defrauding the other financial institutions.5

Norbank

The second charged bank transaction took place in mid-October 1986. On October 21, 1986, the defendant sought $500,-000 personal loans for himself and George from Norbank in Kansas City, representing that the money was to be used for a personal investment in the Hall Farm project.6 [1528]*1528The president of Norbank, Frank Victor, received a letter with Jack and George’s financial statements. The liabilities again were represented to be $3.3 million for each brother.

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United States v. John A. Kroh, Jr.
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Cite This Page — Counsel Stack

Bluebook (online)
896 F.2d 1524, 29 Fed. R. Serv. 927, 1990 U.S. App. LEXIS 3002, 1990 WL 18033, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-v-john-a-kroh-jr-ca8-1990.