Director of the Office of Thrift Supervision, U.s.department of Treasury, Plaintiff-appellant, v. Pedro R. Lopez, Teresa Saldise, Ramon Lopez, Defendants-appellees, 960 F.2d 958 (11th Cir. 1992)

The Director of the Office of Thrift Supervision, United States Department of the Treasury (the "OTS"), appeals the district court's order denying its application for a preliminary injunction to freeze the assets of Pedro Lopez, Teresa Saldise and Ramon Lopez (referred to individually or collectively as the "Lopezes"). The OTS acted pursuant to section 8(i) of the Federal Deposit Insurance Act, as amended by section 2521(b) (1) of the Comprehensive Thrift and Bank Fraud Prosecution and Taxpayer Recovery Act of 1990, Pub. L. No. 101-647, 104 Stat. 4864 (1990) (the "Bank Fraud Act"), codified at 12 U.S.C. § 1818(i) (4) (B) (1991); see also H.R.Rep. No. 101-681(I), 101st Cong. 2nd Sess., reprinted in 1990 U.S.C.C.A.N. 6472, 6585.¹  For the reasons which follow, we reverse.

Pedro Lopez was chairman of the board of General Bank, a federal savings bank headquartered in Miami, Florida. Teresa Saldise, his spouse, was also a General Bank director. In August 1982, General Bank converted from mutual to stock ownership. At that time, Pedro Lopez and Teresa Saldise jointly purchased an 8,718-share block of General Bank stock equal to 4.9 percent of General Bank's outstanding shares. Ramon Lopez, the father of Pedro Lopez, purchased an identical block. In 1985, Pedro Lopez and Teresa Saldise acquired more General Bank stock, increasing their disclosed holdings to approximately 24.8 per cent of General Bank's outstanding stock. In November of 1989, the OTS appointed the Resolution Trust Corporation (the "RTC") as conservator of General Bank. Soon thereafter, the RTC removed Pedro Lopez and Teresa Saldise as directors of General Bank.

On May 3, 1991, the OTS issued a Notice of Assessment of Civil Money Penalty (the "Notice") against the Lopezes.²  In the Notice, the OTS charged the Lopezes with acquiring more General Bank stock than was legally permissible. Specifically, the OTS alleged that Pedro Lopez and Teresa Saldise wrongfully acquired more than five percent of the total shares offered by General Bank when it converted from mutual to stock ownership, in violation of 12 C.F.R. § 563b.3 (the "Conversion Regulations").³  The OTS further alleged that Pedro Lopez and Teresa Saldise illegally obtained control of General Bank by acquiring more than 25 percent of its stock without regulatory approval, in violation of the Savings and Loan Control Act, 12 U.S.C. § 1730(q) (1982) (the "Control Act")⁴  and the regulations⁵  promulgated thereunder. The OTS alleged that the illegal stock acquisitions enabled Pedro Lopez and Teresa Saldise to exercise secret control of General Bank in a manner which caused millions of dollars in losses to General Bank. The Notice informed Pedro Lopez and Teresa Saldise that the OTS sought $27,772,500 in civil money penalties in connection with their alleged wrongdoing.

The Notice also alleged that Ramon Lopez violated the Conversion Regulations by secretly acquiring more than five per cent of General Bank's stock when it converted from mutual to stock ownership. The OTS sought $1,322,500 in civil money penalties from Pedro Lopez based on that alleged conversion violation.⁶ 

Central to the OTS' charges was the allegation that the Lopezes hid improper stock acquisitions through a fraudulent scheme involving nominee shareholders. The OTS alleged that the Lopezes surreptitiously bought General Bank stock and then registered it in the names of nominee shareholders.

The Lopezes requested an administrative hearing, and the matter is now pending before the OTS.

The OTS brought suit in district court under 12 U.S.C. § 1818(i) (4)⁷  for a preliminary injunction to freeze the Lopezes' assets pending the administrative hearing. The district court granted an ex parte order freezing the Lopezes' assets the next day. The district court held a hearing and, thereafter, vacated the asset freeze as to Ramon Lopez. The district court extended the freeze for ten days as to Pedro Lopez and Teresa Saldise. It then referred the case to a United States magistrate judge who conducted a two-day preliminary injunction hearing. The magistrate judge's Report and Recommendation concluded that the OTS failed to establish a prima facie case against the Lopezes and recommended denial of OTS' request for prejudgment attachment. The district court adopted the magistrate judge's report and dismissed the action. This appeal followed.

The Bank Fraud Act authorizes district courts to grant an OTS request for prejudgment attachment upon a prima facie showing of illegality. 12 U.S.C. § 1818(i) (4) (B); see Commodity Futures Trading Com. v. Muller, 570 F.2d 1296, 1300 (5th Cir. 1978). We review a district court's denial of a request for prejudgment attachment under 12 U.S.C. § 1818(i) (4) (B) for abuse of discretion. 12 U.S.C. § 1818(i) (4) (B); Muller, 570 F.2d at 1300.⁸  However, whether a plaintiff has made out a prima facie case is a question of law, subject to plenary review. See Hill v. Metropolitan Atlanta Rapid Transit Auth., 841 F.2d 1533, 1538 (11th Cir. 1988).

The district court denied the requested injunction because it found that the OTS had failed to make out a prima facie case of illegality. We disagree.

Section 8(i) of the Bank Fraud Act provides that in actions where the OTS seeks prejudgment attachment, the district court shall issue an order of attachment "upon a prima facie showing that money damages, restitution, or civil money penalties as sought by [the] agency is appropriate." 12 U.S.C. § 1818(i) (4) (B). A prima facie case is established if the evidence presented is sufficient to withstand a motion for a directed verdict. See Madara v. Hall, 916 F.2d 1510, 1514 (11th Cir. 1990). A directed verdict is permissible only when, without weighing witness credibility, the facts and inferences point so strongly and overwhelmingly in favor of one party that a reasonable trier of fact could have but one conclusion. Johns v. Jarrard, 927 F.2d 551, 557 (11th Cir. 1991); American Sav. & Loan Assn. v. Pembroke Lakes Regional Center Assoc., Ltd, 908 F.2d 885, 888 (11th Cir. 1990). The court must view the evidence "in the light and with all reasonable inferences most favorable to the party opposed to the motion." Jarrard, 927 F.2d at 557. In so doing, the court may not weigh the evidence presented, but instead must determine whether any credible evidence has been proffered by the non-moving party. Id.

The crux of this action rests on the OTS' charges that (1) in 1982, the Lopezes acquired more than five percent of General Bank's stock, in violation of the Conversion Regulations, and (2) in 1985, Pedro Lopez and Teresa Saldise acquired more than 25 percent of General Bank's stock, in violation of the Control Act. The OTS asserts that after purchasing permissible amounts of stock, the Lopezes purchased additional stock surreptitiously by registering it in the names of nominee shareholders, thereby contravening federal statutes and regulations.

To support these charges, the OTS introduced the following evidence forming the gravamen of its case. OTS Federal Thrift Regulator Albert Reyes ("Reyes") testified as to his examination of General Bank's records. Evidence introduced through his testimony included (1) a General Bank stock ledger listing the names of the alleged nominee shareholders; (2) Reyes' testimony that Teresa Saldise had asked permission to use her sister's name to purchase stock; and (3) a series of checks written on accounts allegedly controlled by the Lopezes in payment for General Bank stock.

The General Bank stock ledger contained the names of all General Bank stockholders, the amounts of stock purchased, and the price paid for the stock. Reyes testified that the ledger sheet aroused his suspicion because the last page contained a segregated list of stockholders, most of whom had purchased identical 8,718-share blocks on the same day, August 20, 1982. Each block equalled 4.9 percent of all General Bank stock and cost $50,128.50. The list included the names of the Lopezes, and indicated that Pedro Lopez and Teresa Saldise, jointly, and Ramon Lopez, individually, bought identical 8,718-share blocks of General Bank stock.

The list further indicated that Amie Behar ("Behar"), the sister of Teresa Saldise, also bought an 8,718-share block of General Bank stock for $50,128.50. However, Reyes testified that in March of 1990, Behar told him she was not a General Bank stockholder and that Teresa Saldise had asked for permission to use Behar's name to purchase stock. Reyes testified as follows:

THE COURT: All right. Mr. Reyes, the conversation you had with Miss Behar, would you relate to the Court the circumstances under which it occurred, please.

THE WITNESS [Examiner Reyes]: Sure. I was basically--at the time I was having a change, personal change in my insurance policy. Miss Behar handled [my] account ...

* * * * * *

Q. By Mr. Levin [OTS counsel]: All right. You were working in March of 1990 ... at General Bank?

A. Yes, I was.

Q. And you had a conversation with Amy [sic] Behar at the insurance agency?

A. Yes I did.

Q. And, now, could you please recount that conversation.

A. Again, as I previously explained, I was changing over insurance.... I went in, sat down, talked to Amy [sic], went ahead and started setting up the actual insurance, the account, went through the questions, you know, your address and everything forward, at which point we came to what do you do, where are you employed and then when I expressed that I was an [OTS] examiner ... she made a side comment that, you know, I had some family members that they're in the banking business, or something to that effect, and I said, really ..., I'm working right down the street at General Bank and she said really, I have a family member and she mentioned Teresa Saldise that worked there and her husband also, Pedro Ramon Lopez.

* * * * * *

Q. And what did you do next?

A. I headed back to General Bank and then I had her business card ... and the name just rung a bell. ... [W]hen I got back to the bank and sat down, I went through the loan file to see if she had a loan there ... I had a stockholder's list also--and I went through the stockholder's list and there was Amy's [sic] name.

* * * * * *

Q. And then what did you do next, please?

A. Okay. Like I said, I went through and I saw Amy's [sic] name on there and I just found it kind of curious that she hadn't mentioned that she was a stockholder after telling me that her family was involved in the bank.

* * * * * *

I [telephoned Behar and] said, aren't you a stockholder in General Bank and she replied, "No." And she ... asked me why and I said, well, because I was looking through a stockholder's list here and ... you're listed as a stockholder at General Bank, and she says, well, no no, I'm not a stockholder.

Then if I recall right, there was a pause and she said, well, I think one time my sister [Teresa Saldise] asked me if she could use my name or something like that to purchase the stock.

Record of hearing, volume III--31, 34-36, 39-40.

The OTS also introduced a series of checks written on accounts allegedly controlled by the Lopezes in payment for General Bank stock. Reyes testified that the checks aroused suspicion for several reasons. First, two of the checks were drawn from accounts maintained by "Lopez and Saldise," a law firm wholly owned by Teresa Saldise in which Pedro Lopez had been her partner since 1979. Both checks were used to buy General Bank stock. The first was for $100,000 and was drawn from the Lopez and Saldise law firm's office account. The other check was drawn on the firm's trust account for $189,321.50. Second, several of the remaining checks were written on accounts maintained by various optical companies, including Ray Optical, Lopez Optical and Discount Optical. Reyes stated that members of the Lopez family controlled those firms, although he could not be more specific. Reyes also testified that, according to the stock ledgers, no optical companies owned General Bank stock. However, the check from Discount Optical Corporation, payable for $100,000 of General Bank stock, was signed by Ramon Lopez. Last, Reyes testified that Ramon Lopez had an ownership interest in Ray Optical in 1982, although, to what extent he could not be sure.

The above evidence, unrebutted by the Lopezes⁹ , formed the crux of the OTS' case against them.¹⁰  Viewing it in its totality and in the light most favorable to the OTS, we find it sufficient to establish a prima facie case of illegality against the Lopezes.

The OTS proved that Pedro Lopez and Teresa Saldise jointly acquired 4.9 percent of General Bank stock in 1982, and 24.8 percent by 1985. Thus, to establish its prima facie case the OTS needed only demonstrate that in 1982 Pedro Lopez and Teresa Saldise enjoyed beneficial ownership of 1/10 of one percent more stock than they admitted to owning and, as to 1985, that they beneficially owned more than 2/10 of one percent more stock than they admitted to owning.

The proffered evidence is sufficient to support these inferences. First, the bank ledger established that Behar owned 4.9 percent of general bank's stock. However, Behar told OTS investigator Reyes that she did not own General Bank stock. According to Reyes testimony, Behar stated that Teresa Saldise asked Behar for permission to buy General Bank stock in Behar's name. The Lopezes contested this evidence on hearsay grounds, but once admitted, it stood unchallenged.¹¹  This direct evidence of a fraudulent scheme to acquire stock employing nominee shareholders goes to the very core of the OTS' allegations against Pedro Lopez and Teresa Saldise.

Furthermore, equally compelling is the 1982 check drawn from the Lopez and Saldise law firm's office account in payment for General Bank stock. The check was for $100,000; yet, the stock ledger reveals that Pedro Lopez and Teresa Saldise bought only $50,128.50 worth of General Bank stock-- 1/10th of one percent less than the maximum legal amount at that time. The nearly $50,000 differential in what was paid for versus what was purportedly received leads to a reasonable inference that Pedro Lopez and Teresa Saldise paid for--and thus owned--stock not registered in their names. Moreover, this same logic applied to their 1985 acquisitions leads to the same conclusion. In 1985, Pedro Lopez and Teresa Saldise owned 24.8 percent of General Bank's outstanding shares--only 1/10th of one percent less than permitted by the Control Act. The above evidence permits the reasonable conclusion that Pedro Lopez and Teresa Saldise bought stock not registered in their names, thus taking their holdings beyond the legal threshold. Reyes' testimony about Behar supports the OTS' claim that excess stock was hidden amid the shell holdings of nominee shareholders. This evidence, taken in its totality and in the light most favorable to the OTS, leads to the reasonable inference that Pedro Lopez and Teresa Saldise employed nominee shareholders to purchase stock beyond their legal entitlement.

Ramon Lopez also acquired 4.9 percent of General Bank's stock in 1982. Thus, the OTS needed only establish that Ramon Lopez acquired subsequent beneficial ownership of 1/10 of one percent of General Bank's stock. We are persuaded that the OTS has met its burden.

One of the checks entered into evidence was drawn on the account of Discount Optical Corporation in payment for General Bank stock. That $100,000 check was signed by Ramon Lopez. While the testimony tying Ramon Lopez to Discount Optical Corporation was meager, we find that testimony, combined with Ramon Lopez's signature on the check, sufficient to support the reasonable inference that Ramon Lopez had an ownership interest in Discount Optical Corporation. As with Teresa Saldise and Pedro Lopez, the check signed by Ramon Lopez far exceeded the amount necessary to purchase the 4.9 percent of General Bank stock to which he admitted to owning. This evidence is sufficient to give a colorable inference that Ramon Lopez bought more stock than legally permissible. Moreover, an adverse inference may be drawn from Ramon Lopez's refusal to answer questions about his relationship with General Bank. While this refusal may not be used as the sole basis of a prima facie case, it may nonetheless be used in conjunction with other evidence to establish a prima facie case. See Baxter v. Palmigiano, 425 U.S. 308, 318-19, 96 S. Ct. 1551, 1558, 47 L. Ed. 2d 810 (1976) (adverse inference may be drawn against parties to civil actions when they refuse to testify). The evidence against Ramon Lopez, taken as a whole and in the light most favorable to the OTS, is sufficient to support a prima facie case against him.

The record demonstrates that the OTS met its burden of establishing a prima facie case of illegality against the Lopezes. Accordingly, we reverse the district court as to this issue. However, because the district court's finding precluded it from exercising its discretion as to the award of injunctive relief, we remand to the district court for a determination whether the requested injunction should ensue.

REVERSED AND REMANDED.